TN 15 (01-23)

GN 01701.301 Foreign Pensions Based on Non-covered Employment – Totalization Benefits and the Windfall Elimination Provision (WEP) for Months Payable Prior to January 1995

A. Introduction to Totalization benefits and WEP payable for months prior to January 1995

In general, WEP applies when a person is receiving pension payments from a foreign or domestic pension plan and eligibility for the payments is based on a person's earnings, from which Social Security payroll taxes were not withheld. However, foreign pensions based only on non-work factors such as residency and citizenship are not subject to WEP. For a list of foreign countries with pensions based on residency or citizenship see GN 01701.320. This section explains the special rules used to determine whether a foreign pension is considered a pension based on non-covered employment when computing Totalization benefits payable for months prior to January1995. Refer to GN 01701.310 for more information on the effect of Totalization benefits on WEP for pensions payable in months after January 1995 and GN 01701.315 for acceptable evidence of a foreign pension based on a Totalization agreement.

B. Policy for Totalization benefits and WEP payable prior to January 1995

Prior to January 1995, when the number holder (NH) is entitled to a Totalization benefit and a pension from a Totalization agreement country (i.e., a pension based on work covered by the Social Security system of that country), the foreign pension is considered to be based on U.S. covered work. As a result, entitlement to a pension (government sponsored or private) from a Totalization agreement country will not cause WEP to apply in the computation of a Totalization benefit payable for months before January 1995. This policy applies regardless of which Totalization agreement country is paying the pension (i.e., it does not have to be the country whose coverage was used to establish the NH’s entitlement to the Totalization benefit.)

 

C. Examples for applying WEP to benefits when the NH receives a foreign pension

The following are case scenarios for applying WEP to benefits when the NH receives a foreign pension.

1. Applying WEP when the NH receives a Totalization benefit prior to January 1995

Case Scenario 1

The NH receives a Totalization retirement benefit for months prior to January 1995 based on combined U.S. and German coverage. In addition, the NH receives a Social Security benefit from Germany and a private pension from a former German employer.

Solution 1

The NH’s Totalization benefits are not subject to WEP because the NH’s pension under the German Totalization agreement is considered U.S. covered work.

Case Scenario 2

The NH receives a Social Security benefit from Germany, a private pension from a former German employer, and a pension from Chile.

Solution 2

The pension from Chile would trigger WEP, thus affecting the NH’s Totalization benefits. The U.S. Chile Totalization agreement did not become effective until December 1, 2001. (See GN 01701.005 for a list of Totalization agreement countries and the agreement effective dates.) Therefore, for Totalization benefits payable prior to January 1995, the pension from Chile is considered a pension based on non-covered employment and is subject to WEP. Beginning January 1995, WEP no longer applies to the Totalization benefit (see GN 01701.300) because the NH is not insured based on U.S. coverage alone.

2. Insured based on U.S. coverage alone

Case Scenario

The NH received a social security benefit from Germany and a private pension from a former German employer but was insured based on U.S. coverage alone.

Solution

The NH’s benefits are subject to WEP for any months prior to January 1995. Since the NH is entitled to a regular U.S. benefit, a pension from a Totalization agreement country (in this case Germany) is considered a pension based on non-covered employment. However, beginning January 1995, we no longer apply WEP since the foreign pension is based on a Totalization agreement with the U.S. (see GN 01701.310B).

D. References

  • Types of Pensions in Totalization Agreement Countries Not Subject to the Windfall Elimination Provision, GN 01701.320

  • Foreign Pensions Based on a Totalization Agreement With the United States – Effect on the Windfall Elimination Provision (WEP), GN 01701.310

  • Evidence of Foreign Pensions Based on a Totalization Agreement, GN 01701.315

  • Application of the Windfall Elimination Provision (WEP) in Totalization Benefit Computations – General, GN 01701.300

  • Evidence of foreign pensions for WEP, GN 00307.290

  • List of agreement countries, GN 01701.005


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0201701301
GN 01701.301 - Foreign Pensions Based on Non-covered Employment – Totalization Benefits and the Windfall Elimination Provision (WEP) for Months Payable Prior to January 1995 - 01/23/2023
Batch run: 01/23/2023
Rev:01/23/2023