tricky WEP question
 

Here’s a tricky question. I worked in the US and paid into Social Security for 28 years. Previously I worked in the UK for 11 years and paid another 14 years of voluntary Class 2 NICs while in the US. Since I had less than 30 years in the US, I would be subject to WEP. Under the US/UK agreement, would my 11 UK years be combined with my 28 US years to put me over 30 and therefore cancel WEP? Conversely, could these years be combined to give me 35 years in the UK and qualify for a full pension? If I’m subject to WEP, am I correct in understanding that only my 11 years would be included in the calculation and not the 12 years of voluntary payments? Thanks in advance.

Re: tricky WEP question
 

The totalization agreement between the US and UK, AFAI understand it, is designed to qualify you for "something", when otherwise you would get nothing, and does not allow you to increase the amount you qualify for.

And yes, only pensions paid for with "income "not chargeable for SS contributions" (non-US state pensions, non-US company and private pensions, and US pensions on jobs that do not participate in the federal SS scheme e.g. federal government workers, some state governmentworkers, etc.) are used in thr WEP calculation - the fraction paid for with additional contributions while you were working in the US are not included in the WEP calculation.

If you haven't yet retired in the UK, are there any years from 2006-2007 forward that you haven't made voluntary contributions for? There may be an opportunity for you to make additional contributions for those years, upto July 2023.

Re: tricky WEP question
 

You will be subject to WEP but it shouldn’t be too much since it starts to decline after 20 years and goes to zero at 30 years of SS contributions. Only the 11 years worth of your UK OAP due to work will be counted towards the WEP calculation.

Re: tricky WEP question
 

Thanks Mr. Pulsaki. People on this board are so helpful but you in particular always come through! I'm retiring this year but still can chalk up one more payment before I do. Much appreciated.

Re: tricky WEP question
 

Thanks Durham lad, that's good to know.

Re: tricky WEP question
 

Is a UK company pension income subject to WEP or only UK Government pension income. I am getting ready to make up the maximum years of Class 2 NIC before the deadline and happy to see they wont be used in a WEP calculation.

Re: tricky WEP question
 

Yes, company pensions and personal pensions can trigger WEP - it is basically any pension "paid for out of income that was not chargeable for SS contributions", which means any/all pensions resulting from working outside the US, plus pensions from certain US government jobs that have their own pension scheme instead of contributing to Social Security.

Re: tricky WEP question
 

Exactly. I have 2 private UK pensions plus UK OAP so will be WEP’ed on all of them, but will have 28 years of SS contributions so it won’t be too bad.

Re: tricky WEP question
 

Can’t really understand this WEP. As I will only have 23 years of SS contributions,( many were below the maximum annual limit) I will obviously not be eligible for full SS payment. I have 14 yrs of Uk contributions and I have applied to make up the payments this year. Why is the US penalizing me with WEP when they would have to pay me considerably more if those 14 years had been in the US. It’s not like I am asking the US to pay me for the years I was in the UK .

Re: tricky WEP question
 

WEP is a result of the peculiar way in which Social Security payments are calculated, and that they are a function of how much you paid in to the system, not a flat rate like a UK state pension.

US Social Security is extremely generous to those who are on poverty level pay - people on very low income will literally get Social Security payments of 90% of their pre-retirement pay. At higher, but below average pay, people still get Social Security payments that are a fairly high percentage of their pre-retirement pay.

The problem is that the maths underpinning the calculations of your Social Security payments cannot distinguish between someone who is genuinely low paid, and somone who has only paid into Social Security for a few years. This would mean that someone who has worked much of their life outside of the Social Security system, either outside the US, or in a US government job that funds a retirement plan outside of the Social Security system, would be unjustly enriched if, on top of whatever other pensions they had funded, if they also received the high or very high percentage (of pre-retirement pay) from Social Security that is intended to go to the genuinely poor. .... Hence WEP, that reduces that "excess payment" by looking at the extent to which you have other pension entitlements.

And to your specific point, if you had worked in the US for 14 more years you, and your employer, would have made 14 additional years contributions, and hence you would be entitled to a higher payout from the Social Security system, and not be subject to WEP.

Re: tricky WEP question
 

Thank you for the excellent explanation. So the calculation uses total SS contributions over your lifetime without regard to number of years of contributions, makes sense to me know. Cheers.

Re: tricky WEP question
 

Correctly me if I am wrong, but it is still worth making up missed NI contributions even though my SS will be reduced due to the increased UK pension.

Re: tricky WEP question
 

Absolutely yes, additional years are very worthwhile, AND those additional years are NOT subject to WEP. So in your case, if you had 14 years of NI contributions before you left the UK and make another 14 years of voluntary contributions to bring your UK state pension up to 28/35 of a full pension, then 50% of your state pension can/should be excluded from the WEP calculation because the years of voluntary contributions were funded from income that has been subject to Social Security deductions.

Re: tricky WEP question
 

Excellent, thank you 👍

Re: tricky WEP question
 

You're very welcome. :)

Re: tricky WEP question
 

Additional clarifications help on WEP.
I have an expat pension of 29 years 14 of which, I was in the USA so I paid social security on that pension the remaining years I was in remote locations eg russia, Nigeria etc. how is this treated in determining WEP is this a covered pension, partly covered pension or not covered?

Also for one of those years I worked in USA and uk for around 6 months each and paid Social security and NI to uk and us. How would this be treated. As I managed to pay into my expat employer pension, uk employer pension, social security and NI in the same year. Is that year, going to be covered?

Re: tricky WEP question
 

Ugh, that was a new one on me, I realised my UK NI state pension would generate some WEP but not my UK work pensions as well - maximum WEP here I come! (I only had 42 quarters of SS payment).

Re: tricky WEP question
 

I mentioned that fact above, and I have done the WEP calculations and my UK private pensions WEP me to the max, for me, before I even get to the OAP.

The calculator below is very good. You just need your latest statement from SSA showing all your years. It doesn’t take long to type in 25 figures or so.

https://www.ssa.gov/benefits/retirem...iaWepjs04.html

Re: tricky WEP question
 

But if I delay my private pension to age 67 and take my SS at 62 it looks like I’ll get 5 years of no WEP before the UK state pension kicks in.

Re: tricky WEP question
 

I believe that is correct. You will be asked when you expect to receive private pensions and as long as you don’t delay beyond your full retirement age (FRA) I don’t believe you’ll have a problem. If you delay beyond FRA then I think WEP will be applied based on the value of your pension at FRA, not when you actually receive it.

Re: tricky WEP question
 

I don't know if your circumstances would allow it (it would depend on what sort of private pension you have, and the value of it), but have you considered drawing down your UK private pension and living entirely off that, i.e. depleteing the fund entirely, before claiming your US SS? This is now possible as, to the best of my understanding, private pensions in the UK are no longer required to be used to purchase an annuity, and can be drawn down and spent piecemeal at the owner's discretion.

So although this would be foolish for most people under most circumstances, in your case*, it might make sense to use up your pension fund before claiming US SS, thereby dodging WEP at least on your private pension. If the value is sufficient, you may even have the option to defer claiming SS beyond your 67th birthday and actually get an increase to your SS - and of course you'll get substantially more each month just by deferring claiming SS until you reach the age of 67.

* Please note, I am not a financial advisor and I am not offering you financial advice.

Re: tricky WEP question
 

correct.

This is how it works these days plus the first 25% of the drawdown is UK tax free. My wife’s brother is doing this right now. He took his 25% and invested it and is drawing it down. When that is depleted he will move onto the tax deferred investments.

Re: tricky WEP question
 

There are so many factors to take into account. We have been considering the same approach but I believe with a full state pension (all from employment) and less than 20 years SS - we will be close to full WEP anyway regardless of any early distributions from a small private pension. I will need to plug in some scenarios into the calculator but have been deferring this project in the hope that the rule will be abolished in the next few years!

However, One question I cannot seem to find the answer. My husband will have a much higher SS pension than me but will probably be subject to the full 50% WEP. Although I do qualify for SS, under normal (non WEP) circumstances, I would have claimed under his SS (50%). However I am not sure if the spousal SS benefit I could receive is calculated pre or post his WEP adjustment? Then, as I would also be in receipt of the state pension, would my SS pension would be WEP'd again!

Re: tricky WEP question
 

My wife and I are in a similar situation and this is how it is playing out for us. Firstly, to be clear, the max amount that can be WEP reduced is 50% of SS up to the first "bend point" and that max for 2023 is $557/month, so if your monthly SS works out to be $2,000/mo and the max WEP is applied it will go down to $1,443/mo.

My wife started taking her SS payments in 2021 and they were reduced by WEP by her OAP.

I will start taking my SS at age 70 in 2025 and it will get reduced by WEP by about $400/mo (I have more than 20 years contributions but less than 30). At that point my wife's SS will be boosted up to half my SS since she is receiving less than half now, and started her SS benefits at full retirement age.

www.ssa.gov/pubs/EN-05-10044.pdf

I am not certain but think that her SS will be boosted to half of mine less her own WEP amount that has already been applied. If her WEP amount that was applied in 2021 was a reduction of $350/month then that will stay the same, it won't increase. I THINK

Re: tricky WEP question
 

Thanks Durham Lad for the detailed response as ever.
Just to clarify, and apologies it helps me to use real numbers! If your SS is for example $2k /mth and reduced by $400 WEP to $1600/mth, would the 50% spousal pension be $1k or $800/mth? Following on, if her WEP stays as $350 - are you expecting her boosted SS pension to be $650/mth or $450/mth? Hope this makes sense.

Re: tricky WEP question
 

I don’t know the answer but I THINK her SS would be boosted to 50% of $2k/mo and her WEP will stay the same at at $350/mo leaving her with $650/mo.

I’ll know for sure in about 18 months.

Re: tricky WEP question
 

As I understand WEP only applies if you have less than 40 qualifying years?

Re: tricky WEP question
 

It mostly applies if you have less than 30 years. It starts going down after 20 years of "substantial earnings" and is at its lowest at year 30.

Full details are here including the substantial earnings limit year by year:

https://www.ssa.gov/pubs/EN-05-10045.pdf

Re: tricky WEP question
 

Thanks again - yes it would seem to make sense otherwise it is double WEP! I will keep my fingers crossed for you in 18 months :)

Re: tricky WEP question
 

Thanks, I will be sure to make a report somewhere on the process and results.

Re: tricky WEP question
 

Hi,

I'm finding the whole WEP thing very confusing. Presumably when one applies for the SS benefit that is when all the details need to be provided, and the calculator is just there to give you an estimate.
But in my situation I am likely to be applying for the SS benefit before I have all the details available for my other pension income. I only have about 22 years of SS contributions so will be definitely impacted by WEP.
I have two UK private pensions that are currently paying out so that bit is straightforward. I have a small third one which I was planning to leave invested, so not actually having any income at the time of applying for the SS benefit.
Also I don't plan on applying for my UK OAP until after applying for the SS benefit, so that is another pension income that I won't have a number for.

Also, is this just a one time thing - i.e. when you apply for the SS benefit, or do you have to keep changing it as/when you start bringing in the other pension income streams?

Thanks

Re: tricky WEP question
 

You may well find out that your 2 UK pensions hit the max WEP so the OAP will have no effect. Otherwise you will need to report your OAP when it starts. I played with the calculator, put all my data in including my existing 2 UK pensions and then adding an OAP estimate made no difference at all to the reduction.

Re: tricky WEP question
 

Thanks for that. I guess I'll have to try the calculator and see what happens.

Also it sounds from what you said that submitting the information for the WEP isn't just a one off thing, but they are going to want know when my circumstances change as well.
I guess I had thought that applying for the SS benefit was a single event and once it was set up it just kept going. Which I suppose it might have been if it hadn't been for the WEP.

Re: tricky WEP question
 

It is a single event if you meet that max WEP threshold and the amount of reduction never changes once applied. I’m expecting a reduction of about $400/mo and no matter how many extra pensions might start that $400 figure never changes.

Although my wife started her SS before she started her OAP it was also a single event because she applied through the US embassy in London. The agent said on the phone that the UK DWP would give them the figures once she started drawing OAP and is exactly what happened. No WEP for about 9 months until she started receiving her OAP.

Re: tricky WEP question
 

Appreciate the help. I think I understand it a lot better now. Thanks

Re: tricky WEP question
 

My time has come to start thinking about WEP
I have 35 years of UK OAP , 16 years of which was paid while paying SSI
I have a small UK company pension that I can take from age 50 no SSI $2k-$4k/year
At age 62 I will have paid maximum of 24 years SSI , I want to stop work at 60 or earlier so lets say 22 years SSI
My spouse does not have full SSI so will rely on spousal benefit(50%)
I also have defined contribution pension in the UK

My thoughts are to start collecting a reduced UK company pension of about $2k/year as soon as I can. as it will be subject to WEP.
My wife's 50% will based the SS that I get after WEP. so say I get $4k before, we will get another $2k, total 6k. If I take 3k after WEP she will get 1.5k , total 4.5k. My full UK pension is only 1100, so I would be better off not taking it and taking the extra spousal benefit.
My appointment as the SS office is beginning of May, so I have some time to think of more questions, just curious if others had similar experience.
Who ever thought retiring would be so complex

Re: tricky WEP question
 

Your spouse will only get 50% of your benefits if she applies at full retirement age. You may know that but it’s not clear from your post.

https://www.investopedia.com/ask/ans...l-security.asp



I have also believe that WEP will apply even if you don’t actually collect OAP. The fact that you can take it is what counts and WEP will apply from the day you are eligible to receive OAP. I recall that is what the FBU agent at the London Embassy told my wife when she applied for SS a couple of years ago, and in fact she received her full SS for the period up to her 66th birthday then WEP reduced it. When she applied, the telephone interview agent said that they would be contacting the UK DWP to confirm how much she would be eligible for and how many years were excluded due to voluntary contributions so she didn’t even have to to file form 309 to declare her OAP to the SSA.

Re: tricky WEP question
 

Have you checked gpo and its effect on spousal benefit?

HOW THE GPO WORKS: The GPO reduces the spousal or widow(er) benefit by two-thirds of the monthly non-covered pension and can partially, or fully, offset an individual's spousal/widow(er)benefit, depending on the amount of the non-covered pension.

Re: tricky WEP question
 

This can also definitely be an issue, but only applies to spouses of those who worked for the US government and have a pension with them.

https://www.ssa.gov/pubs/EN-05-10007.pdf

Re: tricky WEP question
 

I believe the maximum amount of WEP currently stands at $587/mth (based on 20 years SSI) so on this basis, if your SS was $4k it would be reduced to $3400 ish (not $3k) (likely more if you have over 20 years). If this is correct then taking the additional pension would not make any difference?