Loaded4th

Not sure if this is covered in this long thread, but here are some notes I put together...

There are three segments that make up the Social Security retirement benefit calculation; these are called bend points. Bend Points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They are called bend points because they represent points on a graph of your AIME in calculating the PIA (Primary Insurance Amount), and they actually bend.
For people not subject to the WEP (Windfall Elimination Provision), the first amount, or segment, is multiplied by 90%, the second amount is multiplied by 32% and the remainder by 15%.
For people who are subject to the WEP, the first amount, or segment, is multiplied by 40 to 90% depending upon how many years of substantial earnings they have accumulated. The second amount is still multiplied by 32% and the remainder by 15%. In my case I have 20 or less years of substantial earnings, which makes my first percentage 40%

Loaded4th

Lin_NJ, Do you have any further information regarding this case of Rabanal v. Colvin and if anyone else has been similarly successful? I see that the case is listed at: https://www.cod.uscourts.gov/Documen...-01569-REB.pdf

I found also: http://www.orng-vet.org/retirement/i...A%204-2012.pdf

nun

I (and I think the SSA) have always read the WEP rules as not being applied to any voluntary contribution or citizenship based pension, ie those that are not due to non SS earned income. So the WEP amount would only be that fraction of the pension that was from non-SS earnings.

For example as a teenager in the UK I got 3 years of NI for being in Sixth Form College and have made 27 years of voluntary Class 2 NI, so none of my UK state pension will be applicable to WEP. If I had a single year of UK Class 1 NI I would declare 1/35th of my UK pension for WEP.....assuming I get the new UK pension. If you collect under the old rules that have some earnings component the calculation would be more complicated.

Lin_NJ

Today I examined whether Rabanal v. Colvin had developed. First, it has not been appealed to a higher court, which would be the U.S. Court of Appeals for the Tenth Circuit. Therefore it remains unchallenged decisional law. Second, as far as I can determine the case has not been cited in any other case anywhere in the United States. That means no other court is relying on it. But that could simply mean that no other case on similar facts has presented itself. Nun notes that the SSA is aware that it cannot include any voluntary contributions people like us make to our UK state pension entitlement. The court's decision in the Rabanal went much further and disallowed application of WEP where the other pension was ALSO based on residency or citizenship, quoting the actual regulation which provides that a foreign pension subject to the WEP inncludes "pensions from social security systems that base benefits on earnings BUT NOT on residence or citizenship..." The Court read that language to exclude in total any foreign state pensions that in any way occur because of residency or citizenship, regardless of whether they are also based on earnings. The SSA in Rabanal had determined that the claimant's pension from Spain was based on "his work as a Spanish citizen in Spain", and therefore under the Court's reasoning that citizenship element meant the WEP could not be applied. Would or could the same approach be applied to me? Who knows! I am a US citizen, but I was brought up in England and worked there for many years. When I returned to the US I continued to make voluntary contributions to my UK pension. I was certainly resident in the UK. Does that mean my UK state pension is also based on "residency" so as to arrive at the same conclusion as the Court arrived at in Rabanal? I do not know how a court would rule on the issue in my distict of New Jersey. But if I was going to challenge the WEP I would certainly be using that Rabanal decision as the basis for my argument. (Note I am still some years from claiming either US or UK pensions and will delay as long as possible to take advantage of the delay-increases which are quite hefty in the US social security system, about 8% per year).

The decision in the VETs case that you noted rests on different facts, there the claimant was determined to have been in the armed services, apparently the rules obviate application of the WEP in those circumstances.

robin1234

nun, I'm going to begin the process of applying for my SS online. When I fill out the section about other pensions earned that were not SS income, do I just do my own calculation about what proportion of my British state pension will be due to voluntary contributions, or do I have to get some confirmation from the authorities in the UK? I'm planning to begin my British state pension a bit later, age 66 or later..

nun

I'd give the SSA a call and ask, but my inclination would be to just do the calculation myself and enter the portion of any foreign pension that is due to non-SS earnings.

Loaded4th

Thanks for the update! Seems there are two main issues, payments made voluntarily or mandatory as well as payments made as a foreign national? I think I will pursue this and post any relevant info...

nun

In the Spanish case the distinction is made between "work" and "earnings". So if any part of your foreign pension is earnings related ie the old UK system or a private pension then WEP will apply. Interestingly as the UK has now instituted a state pension that is not connected to earnings and is based only on the number of years of contributions you make I think it could be argued that that pension would not fall under the WEP rules.

If you earned money in the UK, and no US SS tax was paid on that money, then any UK private pension and UK state pension that is earnings related will be included in WEP (IMHO). If you are retiring after 2016 and will come under the new UK pension rules (again IMHO) the new flat rate pension should not be used in WEP as it is not based on earnings and is only based on the number or years of contributions you have made.

Loaded4th

Was the "old" UK system prior to when one could opt-out and focus on an employer system? Are you saying that the "old" system was voluntary?

nun

No, just saying that the old system had an earnings related component. You might argue that the basic state pension that everyone got with a full NI record would not count towards WEP, just the second and supplementary state pensions and any UK private pensions that were earnings related. The new state pension is not earnings related.

robin1234

Hang on though, under the old UK system, didn't you get years of credit for non-work situations like unemployment, disability, maybe even for being a carer for a family member? Not sure about that last one. But I think my wife had lengthy periods of unemployment in the late 1980s and she got NI credit for them??

Should such NI years not be subject to WEP either?

Lin_NJ

I agree that the Rabanal opinion does have a discussion about how earnings and work are not necessarily the same thing. However the judge seemed to base his decision on the residency or citizenship language of the SSA regulations. It is an interesting turn of events. I take your point, Nun, regarding the recent changes in the UK system that might also have an impact on whether WEP is applied. I will definitely be coming in under the new UK rules and I am waiting to hear whether I have to make a dew more top-ups. It may well be that as we globalized pensioners begin to hit the system in greater numbers there will be further US court rulings as to the issue. I am certainly keeping a weather eye on it.

hutchiebug

Nun - thank you for this info. I will be applying for my SS next August when I turn 66. I was unsure about how to highlight my 10 years of UK employment from my 17 years of voluntary payments, and five years of deferral.

Thanks, Nun!

Lin_NJ

Hutchiebug- have a look at the Social Security Programs Operations Manual, for instance GN 00307.290 which guides the SSA on how it should apply the WEP and that voluntary contributions are excluded from the calculation. It us available online just plug that reference into Google and it will pop up.

Pulaski

I received my approval to pay Class 2 NI a couple of days ago. ..... I can pay the current and 7 preceding years.

For some most peculiar reason my NI statement and approval to pay Class 2 was mailed from Malta.