Your Retirement Income: Will WEP be Repealed?

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By on August 2, 2019 in Retirement with 0 Comments

Close up of two Social Security cards on top of a spread of cash

The fact that Representative Kevin Brady (R-TX) on July 24th introduced a bill to modify the Windfall Elimination Provision (WEP) was in the news this week. As of August 1st, no text for the bill was available on www.congress.gov, but its purpose can be derived from its title. H.R. 3934 is titled To amend title II of the Social Security Act to replace the windfall elimination provision with a formula equalizing benefits for certain individuals with non-covered employment, and for other purposes. Therefore, we can assume that the bill will not eliminate the adverse effects of the WEP, but will ameliorate them somewhat.

What is the Windfall Elimination Provision?

The WEP affects CSRS retirees and can also apply to CSRS Offset and FERS Transferee retirees. It does not eliminate the Social Security benefit to which an affected retiree is entitled on their own earnings record. However, it generally drastically reduces it. It was introduced in the 1980′s in an early attempt to shore up the Social Security system and public employee supporters in Congress have been trying (with absolutely no success) to repeal or revise it ever since then. 

Here’s a short description of the WEP, derived from an earlier FedSmith article on the same topic:

The WEP affects only Social Security benefits to which an affected retiree is entitled based on their own earnings record. As long as an individual has earned 40 credits (formerly known as quarters of coverage) they will receive some kind of Social Security benefit.

The Social Security System has a need-related component that is designed to replace a much greater portion of a low wage earner’s income than that of the high wage earner. CSRS employees, and others who have earned a retirement benefit based on work that was not covered by Social Security, most likely have many years in their Social Security earnings record where they had little or no employment covered by Social Security. They would look like a low wage earner to the Social Security system, even though they had been working at a good job and earning a pension the entire time.

Social Security benefits are based on your lifetime earnings. The following is how they are computed in 2019.

  • Your lifetime earnings are indexed for inflation.
  • The highest 35 inflation indexed years are added together.
  • The total is divided by 420 (the number of months in 35 years) to arrive at average indexed monthly earnings (AIME)
  • AIME is multiplied by:
    • 90% x the first $926
    • 32% x $927 to $5,583
    • 15% of the amount over $5,583 up to the Social Security tax cap

If one is affected by the WEP, the multiplication factor for the first “bend point” above will be less than 90%. It can be changed to as low as 40%, though an individual with more than 20 years of substantial earnings under Social Security could have a higher percentage.

What are the Chances of Eliminating the WEP?

Don’t hold your breath waiting for changes to the WEP. Previous bills that were designed to repeal the Windfall Elimination Provision garnered tons of co-sponsors in the House of Representatives. In some years more than half the House (including more than half of the powerful Ways and Means Committee) signed on as co-sponsors, yet the bill never made it out of committee. Expect no more this time.

While I don’t doubt Representative Brady’s sincerity and his desire to help federal employees, it is a commonly known fact that politicians can be disingenuous. Many representatives and senators have actually voted against bills they have co-sponsored. Co-sponsoring a bill can be as much about “show” as about support. A representative who co-sponsors a bill like HR3934 can hold themselves out to the federal employees in their district and never have to vote for or against the bill because (as in the past) the bill dies in committee.

Let’s remember the lessons we had in civics class about “how a bill becomes a law” . Let’s be sure not to hold our breath waiting for this bill be enacted.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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