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WEP and the SSA

WEP and the SSA

Old Sep 10th 2016, 8:16 pm
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Default WEP and the SSA

Hello All,

This is my first post, and I'm sorry it is so long, but I’m hoping that some of you might have some suggestions on how to go about dealing with the WEP (and the Social Security Administration). I searched for some of this on the forum, but I can’t find exactly what I’m looking for. First off, below is an excerpt from a letter I sent the Social Security Administration back in May. Yesterday, they responded simply with a copy of their Windfall Elimination Provision form and no cover letter or any attempt to provide any answers, which was disappointing and frustrating.

This what I sent (after being unable to reach them by phone)

“I am a U.S. citizen, and my SSN is ___________. Prior to becoming a citizen, I lived and worked for a number of years in the United Kingdom as a British subject, and I qualified for 42 % of a British State Pension. Upon marrying an American and moving to the United States, I made voluntary National Insurance contributions to my British pension credits for 23 years to bring them to the level required to collect the British State Pension, which I will begin to collect in 2017. These contributions were made using funds from my husband's and from my earnings, upon which U.S. Social Security taxes were paid. We have complete documentation of all such payments and have copies of all correspondence with the British government regarding the pension.


I have also gained enough Social Security credits while employed in this country to qualify for U.S. Social Security benefits, and realizing that the Windfall Elimination Provision will affect these benefits. I would like to understand exactly how they will be affected. I would also like to know how the effects of my British pension on U.S. benefits will be prorated, in view of the fact that U.S. Social Security taxes were paid on more than half of the credits used to qualify for the British pension. Lastly, I’d like to know whether the Totalization Agreement between the U.S. and the UK pertains to my case.

We reside in the greater Washington D.C. area, so if scheduling an appointment with the Office of International Operations were possible, we could readily come to Baltimore.”


So . . . were my questions unreasonable or not clearly stated? Has anyone of you dealt with the situation I describe above of making voluntary contributions to qualify for a British pension using funds for which U.S. Social Security taxes had been paid?

In advance, thanks for any answers or advise you can provide. The SSA certainly hasn’t been helpful!

Sandra
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Old Sep 11th 2016, 12:24 am
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Default Re: WEP and the SSA

All this is detailed in the previous threads on the subject, if you need more comprehensive information to that below.

If you have paid 30 years of contributions into SS, WEP does not apply.

If you do not have 30 years of contributions in SS, that part of your UK State pension which is derived from the voluntary contributions is not taken into account when the WEP is calculated.

Last edited by lansbury; Sep 11th 2016 at 12:31 am.
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Old Sep 11th 2016, 12:55 am
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Default Re: WEP and the SSA

Sorry, your letter seems a bit long-winded, and even having read it twice I am not sure what you expected the SS Administration to do with it.

You need to identify the key numbers that the SSA uses to calculate WEP - telling them that you had earned "42% of a British state pension" and you "paid for 23 years of voluntary contributions" makes no sense to the SSA, and even if I was going to do anything with them I would need hard numbers, in dollars, and it would take quite a bit of digging to get from your information to get the numbers to do the calculation to get to the numbers the SSA needs.

So, how much is your state pension, ..... in dollars?

How much is WEPable (the 42% presumably), .... in dollars?

How many years of "substantial" earnings did you have, for the purposes of receiving Social Security?

With those numbers you should be able to calculate WEP for yourself.

Further to Lansbury's comment - if you paid 23 years of voluntary NI contributions, how many years of "substantial" earnings do you have, because if you have thirty years of SS'able earnings, you escape WEP entirely.

Last edited by Pulaski; Sep 11th 2016 at 1:15 am.
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Old Sep 11th 2016, 1:13 am
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Default Re: WEP and the SSA

There isn't any need to write to them to work the WEP amount out, just use the online WEP calculator.

https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

Last edited by lansbury; Sep 11th 2016 at 2:00 am.
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Old Sep 11th 2016, 1:37 pm
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Default Re: WEP and the SSA

The WEP'able fraction of your UK state pension will be 12/35ths (assuming you have paid 35 years of NI in total).
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Old Sep 11th 2016, 7:42 pm
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Default Re: WEP and the SSA

Originally Posted by lansbury View Post
There isn't any need to write to them to work the WEP amount out, just use the online WEP calculator.

https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

Useful, thank you for posting.

Is there any way one can work out the effect of a lump sum withdrawal from one's pension?
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Old Sep 11th 2016, 7:51 pm
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
Useful, thank you for posting.

Is there any way one can work out the effect of a lump sum withdrawal from one's pension?
The value of the annuity you can purchase will be reduced by exactly the same percentage as the lump sum you draw. So if you could use the full value of your pension fund to buy an annuity of £1,000/mth, but instead drew a lump sum of 20% of the fund, the annuity you could buy would be 20% less, being £800/mth.
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Old Sep 11th 2016, 8:41 pm
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Default Re: WEP and the SSA

Originally Posted by Pulaski View Post
The value of the annuity you can purchase will be reduced by exactly the same percentage as the lump sum you draw. So if you could use the full value of your pension fund to buy an annuity of £1,000/mth, but instead drew a lump sum of 20% of the fund, the annuity you could buy would be 20% less, being £800/mth.
I was thinking of the WEP reduction in SS from reporting a lump sum withdrawal to SSA. Entering an amount for monthly pension in Lansbury's table shows the reduction in SS. I was wondering if there's a similar table where one can enter a lump sum withdrawal and see how much it would reduce one's SS. Or if there isn't one, how does SSA work out the WEP reduction in your SS when you report a lump sum withdrawal to them? Suppose I withdraw 20,000 pounds from my pension, is there any way I can estimate how much that would reduce my SS through WEP?
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Old Sep 11th 2016, 8:56 pm
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
I was thinking of the WEP reduction in SS from reporting a lump sum withdrawal to SSA. Entering an amount for monthly pension in Lansbury's table shows the reduction in SS. I was wondering if there's a similar table where one can enter a lump sum withdrawal and see how much it would reduce one's SS. Or if there isn't one, how does SSA work out the WEP reduction in your SS when you report a lump sum withdrawal to them? Suppose I withdraw 20,000 pounds from my pension, is there any way I can estimate how much that would reduce my SS through WEP?
One is linked directly to the other - if you take a 10% lump sum your pension will be 10% less, then put that figure into the WEP calculator. ..... It's a two step process (i) reduce your pension by the percentage of the lump sum, then (ii) put the reduced pension figure in the WEP calculator.

The SSA has no interest in your lump sum withdrawals - WEP is based on pension payments, and you need to calculate your post lump sum pension.

Last edited by Pulaski; Sep 11th 2016 at 8:59 pm.
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Old Sep 11th 2016, 10:08 pm
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
I was thinking of the WEP reduction in SS from reporting a lump sum withdrawal to SSA. Entering an amount for monthly pension in Lansbury's table shows the reduction in SS. I was wondering if there's a similar table where one can enter a lump sum withdrawal and see how much it would reduce one's SS. Or if there isn't one, how does SSA work out the WEP reduction in your SS when you report a lump sum withdrawal to them? Suppose I withdraw 20,000 pounds from my pension, is there any way I can estimate how much that would reduce my SS through WEP?
Are you talking about a lump sum from UK state pension or a UK private pension? Make sure you understand the difference interpretation of "lump sum" in the UK and US as it might change how you are taxed.

If you receive a single large payment from a non SS pension the IRS will use standard interest rates and mortality tables to calculate an income for WEP purposes. So do the annuity calculation for the lump sum and stick that income into the WEP calculator.
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Old Sep 11th 2016, 10:10 pm
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Default Re: WEP and the SSA

Originally Posted by Pulaski View Post

The SSA has no interest in your lump sum withdrawals - WEP is based on pension payments, and you need to calculate your post lump sum pension.
Is this correct? If it is WEP could be avoided by taking the entire pension as a lump sum.
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Old Sep 11th 2016, 10:34 pm
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Default Re: WEP and the SSA

Originally Posted by nun View Post
The WEP'able fraction of your UK state pension will be 12/35ths (assuming you have paid 35 years of NI in total).
That. That right there is the info I was looking for--so it's a straight ratio of years worked in the UK over years required to qualify for the pension to determine the "WEP-able" portion of my British pension. The ratio represents the value of that portion of the pension upon which U.S. SS taxes were not paid (and, therefore subject to the WEP). The rest of the pension's value was earned through voluntary payments in the U.S., which were paid after U.S. taxes and exempt from the WEP. Now I can use the WEP calculator. Thanks so much.

BTW, Inland Revenue now requires only 30 years of National Insurance stamps payment to qualify for a pension, so my ratio is 21/30.

Thanks again, and thanks to those others who answered!

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Old Sep 11th 2016, 11:19 pm
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Default Re: WEP and the SSA

Originally Posted by nun View Post
Are you talking about a lump sum from UK state pension or a UK private pension? Make sure you understand the difference interpretation of "lump sum" in the UK and US as it might change how you are taxed.

If you receive a single large payment from a non SS pension the IRS will use standard interest rates and mortality tables to calculate an income for WEP purposes. So do the annuity calculation for the lump sum and stick that income into the WEP calculator.
I'll be making withdrawals from my UK personal stakeholder pension. I won't be getting a monthly pension because annuity rates are low so I'll be taking my pension by making withdrawals till it's finished. I received an annuity quote one or two years ago and there were many different rates (fixed, rising with inflation, choosing survivor benefit, etc), I could request a current quote but how would I know which one, if any of them, would be similar to the US's calculation that you mention. Is this interest and mortality table that you mention online so I can use it to get an estimate? There's also a complication that originally I had 2 pensions, an employment and a non-employment stakeholder pension that I continued to contribute to for 5 years after coming to the US, I closed my employment pension and transferred the proceeds to my stakeholder pension after I left my job, so I'll have to think about how to work out how much of my withdrawal originates from the employment pension which I understand is what I have to report to SSA.
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Old Sep 12th 2016, 12:49 am
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Default Re: WEP and the SSA

Originally Posted by nun View Post
Is this correct? If it is WEP could be avoided by taking the entire pension as a lump sum.
It is not correct, they workout what your pension would have been if the lump sum wasn't taken. As you outline in post #10. On the paper forms there is/was a specific question about lump sums taken. I can't remember seeing a similar question in the online application.
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Old Sep 12th 2016, 1:02 am
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
I'll be making withdrawals from my UK personal stakeholder pension. I won't be getting a monthly pension because annuity rates are low so I'll be taking my pension by making withdrawals till it's finished. I received an annuity quote one or two years ago and there were many different rates (fixed, rising with inflation, choosing survivor benefit, etc), I could request a current quote but how would I know which one, if any of them, would be similar to the US's calculation that you mention. Is this interest and mortality table that you mention online so I can use it to get an estimate? There's also a complication that originally I had 2 pensions, an employment and a non-employment stakeholder pension that I continued to contribute to for 5 years after coming to the US, I closed my employment pension and transferred the proceeds to my stakeholder pension after I left my job, so I'll have to think about how to work out how much of my withdrawal originates from the employment pension which I understand is what I have to report to SSA.
Remember the WEP is only calculated once, when you apply for SS. In your case when you are coming up to claim SS get a quote for an annunity that your UK pension fund would buy. That figure is what you base your UK pension on. Decide how much of that is from your employment and give the SS office that figure.

As long as you can show SS how that figure was obtained and that it meets the WEP rules I doubt they will dispute it. When Mrs L claimed she found them very accommodating in respect to WEP.
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