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Receiving USA Social Security payments

Receiving USA Social Security payments

Old Dec 4th 2016, 8:52 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by Pulaski View Post
The reason for the reduction of US Social Security payments is because it is much more generous to those who retire from very low paid jobs, and relatively generous to those who retire from modestly paid jobs. If your pay is very low then SS is paid to cover 90% of your pre-retirement income!

The WEP process is designed to differentiate between those who have low SS payments because they were poorly paid and those who have low SS payments because they had other employment and other pensions.

The background is that in the US most local government employees do not pay into the general Social Security system, there are other funds, both state and federal, that pay pensions for government workers. WEP was designed to stop someone who's career was split between government jobs and private sector employment from being paid pensions from both the government pension fund and Social Security as if they were poor and on low income.
Some local government employees - not most, I think. See the map in this blog post for instance. Admittedly, in this case it's just talking about teachers, not all state employees. Why Aren’t All Teachers Covered By Social Security? | TeacherPensions.org

In Massachusetts, all state and local government employees have non-SS schemes. But in New York, all state and local government employees, as far as I know, do contribute to social security.
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Old Dec 4th 2016, 9:04 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by J.JsOH View Post
WEP is fixed forever (unless you later receive another reportable non-US pension) on the date you report the foreign income, if that is what you are asking. So if you can time the commencement date of reportable non-US pension then bear in mind the implications of the exchange rate at that time.

You mention another non-US pension so presumably that is also true if someone is working, so it would be advantageous for me to wait until I am no longer earning from my current UK employment to claim the US SS pension ?
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Old Dec 4th 2016, 9:11 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by peaenjay View Post
You mention another non-US pension so presumably that is also true if someone is working, so it would be advantageous for me to wait until I am no longer earning from my current UK employment to claim the US SS pension ?
WEP applies to pension and pension-like income only, not earned income.
Originally Posted by J.JsOH View Post
WEP is fixed forever (unless you later receive another reportable non-US pension) on the date you report the foreign income, if that is what you are asking. So if you can time the commencement date of reportable non-US pension then bear in mind the implications of the exchange rate at that time.
Someone else, whose name escapes me, post a couple of weeks ago here on BE, that you are obligated to tell the SSA if your foreign pension increases for reasons including a change in the FX rate and WEP will be increased, and it is common sense to report a fall in the value so that WEP can be reduced, so no, WEP isn't fixed for life.

Last edited by Pulaski; Dec 4th 2016 at 9:15 pm.
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Old Dec 4th 2016, 9:24 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by RollTide View Post
Can I please ask a question similar to the original posted.....I too am a permanent resident but recently was divorced from my USC spouse. I understand that I will be eligible for 50% of his Social Security payment due to the length of marriage (19 years) and the fact that I was a stay-at-home mum for 17 years. Does anyone know if WEP will apply, there has been more than 30 years of SS payments made.

Many thanks
You are OK on two counts. Your spouse has 30 years of contributions, and a spouse pension is not subject to WEP. Only the primary pension is subject to WEP, which in this case it wouldn't be.
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Old Dec 5th 2016, 12:35 am
  #20  
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Default Re: Receiving USA Social Security payments

Originally Posted by peaenjay View Post
You mention another non-US pension so presumably that is also true if someone is working, so it would be advantageous for me to wait until I am no longer earning from my current UK employment to claim the US SS pension ?
Not for the purposes of WEP, but if you claim SS before your full retirement age and are still working, SS will be reduced if you earn more than $15,720 (in 2016 - that figure is indexed).
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Old Dec 5th 2016, 8:10 am
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Default Re: Receiving USA Social Security payments

Originally Posted by Pulaski View Post
It depends on how many years of SS contributions you made - the more years of SS contributions you made, the less the WEP deduction. If you made 30+ years of SS contributions then WEP is zero, and I think it is only a small percentage (of the foreign or goverment pension) if you have made 25-30 years of SS contributions. Maximum WEP is 50% of the foreign or goverment pension.
Well in my case then that is good news as I think I have at least 25 years.
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Old Dec 5th 2016, 12:34 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by peaenjay View Post
It seems likely that I will use the UK treaty with the USA and include the French pension in my UK earnings. Is that what you did ?
I will also probably revoke my green card since I no longer have a need for it and do not want the burden of US tax returns for the rest of my life.
Sorry peaenjay, after all my questions I've been remiss in answering your question.

There are 3 or 4 different ways of handling the French pension(s) on a US tax return when (physically) resident in the UK. None seem to be any more correct than the others (which is often the way for IRS returns). Since you are not a USC, the return of the Green Card would be an effective way of avoiding future problems.

Hopefully, your tax advisors will utilise the method they feel offers the best solution for your particular set of circumstances. If you have any other US based/sourced pensions in addition to US SS, it may/may not require filing of a 1040NR every year. Everything depends on the type of pension and the 'CYA tactics' of the provider.
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Old Dec 5th 2016, 12:54 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by morpeth View Post
Perhaps I phrased my question poorly. If one receives say $500 a month from a UK pension, and receiving social security ( I am not currently but deciding how many more contributions to make to UK pension), how much is the SS reduced by for the $500 per month received form UK ?

Based on your answer of between 1% and 50%, what is criteria ?
There is an element to the WEP calculations called 'Max WEP'. It's an amount set each year by the SSA and varies according to when the SS pension commences. If your foreign pension income is above this amount, the $Amount (monetary value) of the deduction is capped. Therefore, someone with a monthly foreign pension income of $2,000 will have the same $Amount deducted from their SSA payment as someone whose monthly foreign pension income is $5,000 (or more).

Your basic SS entitlement will be effected by WEP according to the amount of the basic SS pension, the $ amount of the foreign pensions, your years of qualifying contributions to SS, the amount of Max WEP for the year you commence SS payments, the amount of voluntary contributions, the exchange rate at the time of commencement, and at what point (62 to 70 years of age) you commence the SS pension.

Everything depends on your particular set of circumstances.

Last edited by theOAP; Dec 5th 2016 at 1:23 pm.
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Old Dec 5th 2016, 1:01 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by Pulaski View Post
Someone else, whose name escapes me, post a couple of weeks ago here on BE, that you are obligated to tell the SSA if your foreign pension increases for reasons including a change in the FX rate and WEP will be increased, and it is common sense to report a fall in the value so that WEP can be reduced, so no, WEP isn't fixed for life.
I believe information from the SSA, via their congressman, determined all the above 'FX rate variations' to be incorrect (BS!).

In limited circumstances, WEP may not be fixed for life, but those are specific circumstances.
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Old Dec 5th 2016, 4:26 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by morpeth View Post
Perhaps I phrased my question poorly. If one receives say $500 a month from a UK pension, and receiving social security ( I am not currently but deciding how many more contributions to make to UK pension), how much is the SS reduced by for the $500 per month received form UK ?

Based on your answer of between 1% and 50%, what is criteria ?
The maximum WEP is 50% at 20 years or less SS contributions. For every additional year of contributions the WEP is 5% less. So for 25 years contributions WEP is 25%. For 29 years contributions WEP is 5%.
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Old Dec 5th 2016, 6:25 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by lansbury View Post
The maximum WEP is 50% at 20 years or less SS contributions. For every additional year of contributions the WEP is 5% less. So for 25 years contributions WEP is 25%. For 29 years contributions WEP is 5%.
Thanks, so for 29 years payment to SS then the WEP is 5%, so SS is reduced by 5%. I am looking at UK catch up payments ( I have 9 years credit) and trying to decide whether it makes sense to catch up for past 6 years. If I look at amount to pay vs the rate of return when UK pension starts, it seems very favorable if the WEP is only 5%.
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Old Dec 5th 2016, 8:08 pm
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Default Re: Receiving USA Social Security payments

If the 9 years were from contributions from salary, and you buy another 6 years with voluntary contributions. The sum that would be used to calculate the WEP would be 9/15ths of the UK State pension you receive.
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Old Dec 5th 2016, 8:43 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by morpeth View Post
Thanks, so for 29 years payment to SS then the WEP is 5%, so SS is reduced by 5%.
The easy chart is at the bottom of this page:

https://www.ssa.gov/planners/retire/wep-chart.html
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Old Dec 5th 2016, 8:56 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by Pulaski View Post
Someone else, whose name escapes me, post a couple of weeks ago here on BE, that you are obligated to tell the SSA if your foreign pension increases for reasons including a change in the FX rate and WEP will be increased, and it is common sense to report a fall in the value so that WEP can be reduced, so no, WEP isn't fixed for life.
This takes the thread away from the original question but to respond to something that may or may not be true;
I dread to think the bureaucracy complications arising from reporting changes in FX rate fror WEP reassessment.
2.5 years ago my wife reported the commencement of a 2nd non-US pension and the consequence is still not resolved.

Last edited by J.JsOH; Dec 5th 2016 at 9:26 pm.
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Old Dec 5th 2016, 9:49 pm
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Default Re: Receiving USA Social Security payments

Originally Posted by J.JsOH View Post
This takes the thread away from the original question but to respond to something that may or may not be true;
I dread to think the bureaucracy complications arising from reporting changes in FX rate fror WEP reassessment.
2.5 years ago my wife reported the commencement of a 2nd non-US pension and the consequence is still not resolved.
Which is why effectively for FX changes it is once and done.
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