Identification Number:
RS 00605 TN 80
Intended Audience:See Transmittal Sheet
Originating Office:ORDP OISP
Title:Initial Computation of the PIA - Recomputations and Recalculations
Type:POMS Transmittals
Program:All Programs
Link To Reference:
 

PROGRAM OPERATIONS MANUAL SYSTEM
Part RS – Retirement and Survivors Insurance
Chapter 006 – Determination of PIAs and Benefit Amounts
Subchapter 05 – Initial Computation of the PIA - Recomputations and Recalculations
Transmittal No. 80, 06/07/2021

Audience

PSC: BA, CA, CCRE, CS, DE, DS, DT, IES, PETE, RECONR, RECOVR, SCPS, TSA, TST;
OCO-OEIO: BIES, BTE, CR, CTE, FCR, PETL, RECONR;
OCO-ODO: BTE, CR, CST, CTE, CTE TE, PETE, PETL;
FO/TSC: CS, CS TII, CSR, CTE, DRT, DT, FR, OA, OS, RR, TA, TSC-CSR;

Originating Component

OISP

Effective Date

Upon Receipt

Background

This transmittal does not introduce or change policy. We revised these sections to improve readability and reorganized subsections to provide clarity and ensure accurate application of the Windfall Elimination Provision (WEP).

Summary of Changes

RS 00605.360 WEP Applicability

We retitled the section.

Subsection A:

  • We moved WEP PIA calculation policy content to new 2nd level subsection in Subsection C.

Subsection B:

  • We reordered the list of definitions and streamlined to improve readability and better flow.

  • We included two definitions for types of pension plans that we refer to in other WEP policy sections.

Subsection C:

  • We retitled and revised for plain language, and reordered some subsections for readability and improve flow.

  • We moved a Note about PDB offset to this subsection from subsection D for better flow.

  • We moved policy content here from Background subsection and include the new 2nd level subsection WEP PIA calculation.

  • We provide clarification about when to recompute the PIA to apply WEP.

  • We removed erroneous language about a lump sum proration ending based on a specified period in subsection 'When WEP no longer applies.'

  • We moved the WEP Phase-in table to new Subsection E.

Subsection D:

  • We retitled and revised to improved readability.

Subsection E:

  • Created subsection to include WEP Phase-in table from Subsection C. This information is not as common as the eligibility years are over 30 years in the past.

 

RS 00605.362 Windfall Elimination Provision (WEP) Exceptions

Subsection A:

  • We updated for plain language and for clarity.

  • We retitled some subsections for plain language and revised instructions for readability.

  • We include the amount of earnings needed in 2021 to qualify for a year of coverage for WEP purposes.

  • We added a cross reference to RS 00605.360 in 2nd level subsection 3 for WEP Phase-in instructions.

Subsection B:

  • We updated for plain language.

  • We included pre-1986 pension eligibility as an exemption for clarity.

  • We revised language to clarify on when a payment from nonprofit organization is exempt from WEP.

  • We included items from Subsection E. and F for consolidation to improve flow.

Subsection C:

  • We created new Subsection C to move two items from Subsection B and included Subsection D to clarify on those payments that are not pensions for WEP, do not need to be collected as a pension, and do not require documentation as exemptions.

  • We revised language to clarify that Federal pensions based only on covered employment is not a pension for WEP.

Subsection D:

  • We retitled and revised the subsection for clarity and improve flow.

 

RS 00605.360 Windfall Elimination Provision

CITATIONS:

Social Security Act, § Sections 215(a)(7) and 215(d)(3);
20 CFR 404.213 and 404.243.

A. Background

The Social Security Amendments of 1983 (P.L. 98-21) include a provision that reduces the Primary Insurance Amount (PIA) for a numberholder (NH) who is entitled to Social Security retirement or disability benefits and a pension based in whole or in part on his or her own earnings from employment not covered by Social Security. The Windfall Elimination Provision (WEP) modifies the NH PIA, as explained in RS 00605.360C.2 in this section.

B. Definitions

1. Eligible

Eligible for a pension means that a person meets all requirements for the pension except for stopping work or filing an application. For more information about pension eligibility, see RS 00605.364B.

2. Entitled

Entitled to a pension means a person has applied for a pension and has proven his or her rights to benefits for a given period.

3. Pension

A pension is a periodic or lump sum payment from an employer's retirement or disability plan based in whole or in part on non-covered earnings. The payment can be from a defined benefit (DB) or defined contribution (DC) plan (e.g., 401(k), 403 (b), or 457).

4. Defined benefit plan

A plan funded by an employer (or employer and employee) providing a specific retirement or disability benefit based on a general formula that considers salary, age, and years of service.

5. Defined contribution plan

A plan funded by an employer (or employer and employee) that provides a benefit based solely on the amount contributed to the account, plus interest income earned and any gains or losses allocated to the account.

6. Years of Coverage (YOCs)

YOCs are substantial years of Social Security earnings. See chart in RS 00605.362A.1.

C. WEP application

1. When WEP applies

WEP applies when:

  1. a. 

    A worker becomes eligible for old-age retirement insurance benefits (RIB) after 1985; or

  2. b. 

    A worker becomes eligible for disability insurance benefits (DIB) after 1985; and

  3. c. 

    For the same months after 1985, the worker is entitled to RIB or DIB, the worker also becomes entitled to a monthly pension(s) for which the worker first became eligible for after 1985, and the pension is based in whole or in part on earnings in employment which were not covered by Social Security.

NOTE: If the worker is entitled to spouse’s benefits on another social security number, the Government Pension Offset (GPO) may apply. For more information about GPO, see GN 02608.100.

NOTE: An individual receiving disability benefits may also be subject to the Public Disability Benefit (PDB) Offset in addition to WEP. For more information about PDB Offset, see DI 52101.001.

2. WEP PIA calculation

We base Social Security benefits on the monthly average of a worker's lifetime earnings. We split the average monthly earnings into portions and multiply each portion by a constant percentage. For more information about the computation of the PIA, see RS 00605.021.

In the basic formula for figuring the retirement or disability PIA, we multiply the average monthly earnings according to the following:

  1. a. 

    Multiply the first part of the average earnings by 90 percent;

  2. b. 

    The second part of the average earnings by 32 percent; and

  3. c. 

    Any part of the remaining average monthly earnings, multiply by 15 percent.

For the WEP PIA calculation, for workers who reach 62 or become disabled in 1990 or later, we replace only the 90 percent factor by a factor ranging from 85 to 40 percent, depending on the number of substantial earnings years or YOCs the NH has. For information about substantial earnings or YOCs, see RS 00605.362A.

For workers who reached age 62 or became disabled between 1986 and 1989, see RS 00605.360E.

For more information about computing the WEP PIA, see RS 00605.369.

3. How the WEP PIA is used

The WEP PIA determines:

  1. a. 

    Benefit amounts for all beneficiaries on the NH record,

  2. b. 

    The family maximum payable,

  3. c. 

    NH eligibility for auxiliary or survivor benefits on a different record,

  4. d. 

    The independently entitled divorced spouse (IEDS) benefit when the NH is not yet entitled to Social Security benefits. For more information on an IEDS and WEP involvement, see RS 00202.100B.5.

The WEP PIA does not apply when the special minimum PIA method is used.

4. When to recompute the PIA to apply WEP

Recompute the PIA to apply WEP if the NH becomes entitled to an applicable pension after entitlement to RIB or DIB, if the PIA is not already in WEP status. Apply WEP in the first month of the pension entitlement. For more information about recomputation of the PIA, see RS 00605.366B.

Do not recompute a PIA already in WEP status, due to changes, such as yearly increases in the money amount of the pension, or for entitlement to additional pensions. For more information about pension changes, see RS 00605.364D.

5. When WEP no longer applies

The WEP PIA no longer applies when:

  1. a. 

    The entitlement to the pension payment ceases. A NH who returns to work or voluntarily stops receiving benefits may not necessarily indicate entitlement to the pension ceases. Obtain evidence that entitlement to the pension has ceased. If the NH is again entitled to a pension, develop for WEP.

  2. b. 

    The NH dies (in the month of the NH's death, the PIA is recalculated without applying WEP), or

  3. c. 

    The NH meets a WEP exemption by earning 30 YOCs. The system will automatically identify additional YOCs and consider a recomputation of a WEP PIA.

D. Eligibility to RIB or DIB for WEP purposes

WEP is applicable only when the eligibility date to Social Security RIB or DIB is after 1985. If the RIB or DIB eligibility date is prior to 1986, WEP does not apply.

1. Eligible for retirement benefits

A NH is eligible for a Social Security RIB in the month he or she attains age 62.

2. Eligible for disability insurance benefits before 1986

A NH is eligible for a DIB in the month of disability onset when the claimant meets both fully and DIB insured status.

To compute DIB benefits, there are two separate computations to consider. SSA uses the computation that is more beneficial to the claimant.

  1. a. 

    If the onset date is before 1986, WEP does not apply to the disability exclusion (freeze) computation.

  2. b. 

    For the non-freeze computation, the NH is eligible in the first month of the waiting period.

EXAMPLE: If the onset date is December 15, 1985, and the first month of the waiting period is January 1986, we would compare two PIAs. The exclusion PIA would not be subject to WEP because the eligibility date is before 1986. The non-freeze computation would be subject to WEP because the eligibility date is 1986. After comparison, we pay the higher PIA.

3. Prior period of disability before 1986

A prior period of Social Security disability exempts an individual from WEP only if the individual became entitled to a disability benefit or a freeze computation before 1986 and remained so entitled in any of the 12 months immediately before attaining age 62 or the new disability onset. However, the WEP will apply in computing the PIA if this prior period of disability is disregarded, that is, it is a non-freeze computation.

For definitions of freeze and non-freeze computation, see RS 00605.220 and RS 00605.225.

E. WEP for eligibility between 1986 - 1989

The WEP was phased in for workers who were eligible for RIB or DIB and a pension from non-covered employment beginning in 1986 and ending in 1989. For information about YOCS for eligibility after 1989, see RS 00605.362A.2.

Replace the 90% factor as follows based on year of eligibility when the worker has 20 or fewer YOCs:

Eligibility Year First Factor in Benefit Formula
1986 80 percent
1987 70 percent
1988 60 percent
1989 50 percent
1990 and Later 40 percent

For eligibility year 1990 and later for 20 or fewer YOCs, replace the 90% factor with 40%.

If the NH has 21 or more YOCs, adjust the first factor in the WEP formula, according to the chart at RS 00605.362A.3.

F. References

RS 00605.362 Windfall Elimination Provision Exceptions

RS 00605.364 Determining Pension Applicability, Eligibility Date, and Monthly Amount

 

RS 00605.362 Windfall Elimination Provision Exceptions

A. Exemption based on Years of Coverage

Workers who have 30 years of coverage (YOCs) are fully exempt from the Windfall Elimination Provision (WEP). Workers with 21 to 29 YOCs are eligible for a partial exemption.

When a New Start 1978 Primary Insurance Amount (PIA) computation applies, use all wages on the earnings record, including military service wage credits from 1937 to the present to determine the total number of YOCs. When you include alleged military service, the system considers the service when calculating the YOCs. When using military service for YOC purposes, see RS 01701.000.

1. Amount of earnings needed per YOC

Use the following chart to determine the number of YOCs beginning with 1951.

To obtain the pre-1951 YOCs, divide total pre-1951 wages by $900. Drop any remainder. The total pre-1951 YOCs cannot exceed 14.

Amount Needed Per YOC

Year

Amount

Year

Amount

Year

Amount

1951

$900.00

1952

$900.00

1953

$900.00

1954

$900.00

1955

$1050.00

1956

$1050.00

1957

$1050.00

1958

$1050.00

1959

$1200.00

1960

$1200.00

1961

$1200.00

1962

$1200.00

1963

$1200.00

1964

$1200.00

1965

$1200.00

1966

$1650.00

1967

$1650.00

1968

$1950.00

1969

$1950.00

1970

$1950.00

1971

$1950.00

1972

$2250.00

1973

$2700.00

1974

$3300.00

1975

$3525.00

1976

$3825.00

1977

$4125.00

1978

$4425.00

1979

$4725.00

1980

$5100.00

1981

$5550.00

1982

$6075.00

1983

$6675.00

1984

$7050.00

1985

$7425.00

1986

$7875.00

1987

$8175.00

1988

$8400.00

1989

$8925.00

1990

$9525.00

1991

$9900.00

1992

$10350.00

1993

$10725.00

1994

$11250.00

1995

$11325.00

1996

$11625.00

1997

$12150.00

1998

$12675.00

1999

$13425.00

2000

$14,175.00

2001

$14,925.00

2002

$15,750.00

2003

$16,125.00

2004

$16,275.00

2005

$16,725.00

2006

$17,475.00

2007

$18,150.00

2008

$18,975.00

2009 – 2011

$19,800.00

2012

$20,475.00

2013

$21,075.00

2014

$21,750

2015–2016

$22,050

2017

$23,625

2018

$23,850

2019 $24,675

2020

$25,575

2021 $26,550

2. Benefits payable beginning January 1989 - Partial exemption for workers with 21 - 29 YOCs

Beginning with benefits payable for January 1989, workers with 21 - 29 years of coverage are eligible for a partial exemption as follows:

YOCs

First Factor In Benefit Formula

30 or more

90 percent

29

85

28

80

27

75

26

70

25

65

24

60

23

55

22

50

21

45

20 or less

40 percent

3. Benefits payable between 1986 - 1988 - Partial exemption for workers with 26 - 29 YOCs

For benefits payable between 1986-1988, the partial exemption affects workers with 26-29 YOCs as follows:

YOCs

First Factor In Benefit Formula

29

80 percent

28

70

27

60

26

50

25 or less

40 percent

When the worker qualifies for both the WEP phase-in based on age and the exception based on YOCs, use whichever yields the higher PIA. For information about the phase-in based on age, see RS 00605.360E.

B. Exemptions to the WEP

The following are exemptions to the WEP:

  1. 1. 

    Eligibility to the retirement or disability pension prior to 1986. Vesting in a pension plan before 1986 does not constitute pension eligibility. For information about pension eligibility and vesting in a pension plan, see RS 00605. 364B. For early-out offer or discontinued service prior to 1986, see RS 00605.360D in this section.

  2. 2. 

    A pension for an employee of a nonprofit organization who was exempt from Social Security coverage on December 31, 1983, and became covered for the first time effective January 1, 1984 by P.L. 98-21, unless the employee was covered under an exemption waiver certificate that had been terminated prior to December 31, 1983.

    • An employee may have worked for a the non-profit organization that waived exemption from Social Security coverage, but then terminated that waiver prior to December 31, 1983, and thus had non-covered employment prior to that same date.

    • For more information about service for non-profit organizations, see RS 01901.540.

  3. 3. 

    A pension based solely on domestic or foreign non-covered employment prior to 1957;

  4. 4. 

    A pension based on non-covered military reserve earnings from 1957-1987. For instructions on when the WEP exception applies to military reservist pensions, see RS 00605.383;

  5. 5. 

    A pension based on foreign totalized benefits. For instructions on when the WEP exception applies to pensions based on totalization agreements, see RS 00605.386.

  6. 6. 

    A pension based on earnings under the Railroad Retirement Act.

C. Payments that are not pensions for WEP

Some payments are not considered pensions for WEP purposes. It is not necessary to document an exemption for these payments.

The following payments based on the worker's employment are not pensions for WEP purposes:

  1. 1. 

    A Federal pension for a Federal employee first hired on or after January 1, 1984, who is covered under Social Security based on the mandatory coverage provision in P.L. 98-21.

    • This provision extended Social Security coverage to Federal employees only. For more information about Federal civilian employment, see RS 01901.340B.

    • This does not include a Federal employee who worked under non-covered employment, participated in the Civil Service Retirement System (CSRS), and then became covered under Social Security at some point. This employee is entitled to a Federal pension based on both non-covered and covered employment and subject to WEP.

  2. 2. 

    Payments to a minister based on service as a minister. A minister's income can be self-employment for Social Security coverage purposes, as explained in RS 01802.060.

  3. 3. 

    Workers' compensation (WC) payments under Federal or State law.

    • However, pension payments that are "like" or "in lieu of" WC payments are subject to WEP.

    • For information about WEP applicability and the Federal Employee's Compensation Act, see RS 00605.372A.1.

D. Early-out or discontinued service for pension eligibility before 1986

1. Meeting the early-out or discontinued service exception

WEP does not affect workers eligible for a pension before 1986 under an early-out option offer or discontinued service if the worker meets all requirements for the pension other than having actually filed. The options must have been offered specifically to the worker. For the development required for early-out or discontinued service, see RS 00605.366D.6.

2. Deferred Retirement Option Plans (DROP)

A DROP is a retirement plan option offered to employees who are eligible to retire and receive benefits under the employer's regular defined benefit (DB) retirement plan while continuing to work. Employers determine the amount of contributions made to the employee's DROP account, how the account will gain interest, and the amount of interest the plan earns. Some employers credit the employee's DROP account with the normal retirement benefits the employee would have received from their DB retirement plan. Continuing to work does not increase the years of service and compensation used in the DB payment formula. When the employee eventually retires, the funds in the DROP account are paid to the employee, in addition to whatever benefit the employee has acquired under the DB plan, based on earlier years of service.

A DROP may or may not be a pension plan separate from the non-covered employer's DB plan. WEP may or may not apply to a worker's DROP payment if he or she meets the eligibility-before-1986 exception for that payment, including based on early-out or discontinued service, as described in RS 00605.362D.1. in this section.

  1. a. 

    If an individual receives a DROP payment, take the following actions:

  • Search the legal precedent opinions in PR POMS - Title II Regional Chief Counsel Precedents, to determine how to treat that particular DROP.

  • If a legal opinion has not been rendered on the DROP in question, request a regional Office of General Counsel (OGC) determination on whether the DROP is a separate pension plan or is part of the DB retirement plan; and

  • Forward the request and copies of the pertinent material to the Assistant Regional Commissioner (ARC), Management and Operations Support (MOS) that has jurisdiction of the state that provides the DROP in question. For additional information about legal opinions, see GN 01010.815.

b. After the regional OGC renders a determination on how to treat the DROP plan, follow instructions to apply the eligibility-before-1986 exemption for that payment as follows:

  • If the DROP is a separate pension plan, the exemption will apply only to the pension plan that the worker was eligible to receive before 1986.

  • If the DROP is a part of the DB retirement plan and not separate, payments from both plans are considered one pension for WEP purposes and the eligibility-before-1986 exemption will apply to the combined payments. To determine the combined pension amount, see RS 00605.364C.3.

  • If there is no eligibility to either the DB retirement plan or the DROP prior to 1986, WEP would apply to the combined payments.

EXAMPLE: If the worker was eligible to receive a retirement or disability payment from the defined benefit plan before 1986 and eligible to receive the DROP payment after 1985, WEP would apply based only to the DROP payment.

3. Reopening prior DROP determinations

If WEP was previously applied based on the prior policy that all DROPs were pension plans separate from the defined benefit plan and the DROP is part of the defined benefit plan, you may reopen the determination to apply WEP under the rules of administrative finality in GN 04001.000.

E. References


RS 00605 TN 80 - Initial Computation of the PIA - Recomputations and Recalculations - 6/07/2021