Social Security: The Windfall Elimination
Provision (WEP)
Alison M. Shelton
Analyst in Income Security
January 29, 2010
Congressional Research Service
7-5700
www.crs.gov18, 2011
The House Ways and Means Committee is making available this version of this Congressional Research
Service (CRS) report, with the cover date shown above, for inclusion in its 2011 Green Book website. CRS
works exclusively for the United States Congress, providing policy and legal analysis to Committees and
Members of both the House and Senate, regardless of party affiliation.
Congressional Research Service
98-35
CRS Report for Congress
Prepared for Members and Committees of Congress
Social Security: The Windfall Elimination Provision (WEP)
Summary
The windfall elimination provision (WEP) reduces the Social Security benefits of workers who
also have pension benefits from employment not covered by Social Security. Its purpose is to
remove an advantage or “windfall” these workers would otherwise receive as a result of the
interaction between the Social Security benefit formula and the workers’ relatively short careers
in Social Security-covered employment. Opponents contend that the provision is basically
imprecise and can be unfair.
This report will be updated annually or upon legislative activity.
Congressional Research Service
Social Security: The Windfall Elimination Provision (WEP)
Contents
Background ................................................................................................................................1
Who is Affected by the WEP? .....................................................................................................3
Legislative History and Rationale................................................................................................5
Arguments for the Windfall Elimination Provision ................................................................6
Arguments Against the Windfall Elimination Provision .........................................................6
The WEP’s Impact on Low-Income Workers .........................................................................6
Recent Legislation ......................................................................................................................7
Tables
Table 1. Social Security Benefit Formula in 20102011 ........................................................................1
Table 2. Monthly PIA for a Worker With Average Indexed Monthly Earnings of $1,500
and Retiring in 20102011.................................................................................................................2
Table 3. WEP Reduction Falls with Years of Substantial Coverage ..............................................3
Table 4. Number of Beneficiaries in Current Payment Status with Benefits Affected by
Windfall Elimination Provision (WEP), by State and Type of Benefit, December 2009............4
Contacts
Author Contact Information ........................................................................................................8
Congressional Research Service
Social Security: The Windfall Elimination Provision (WEP)
Background
A worker is eligible for Social Security after he or she works in Social Security-covered
employment for 10 or more years (40 or more quarters). In general, a worker’s monthly Social
Security benefit is based on his or her 35 highest-paid years of earnings in Social Securitycovered employment. The worker’s earnings are indexed to wage growth to bring earlier years of
his or her earnings up to a comparable, current basis. Average annual indexed earnings are found
by totaling the highest 35 years of indexed wages and then dividing by 35. Next, a monthly
average, known as Average Indexed Monthly Earnings (AIME), is found by dividing the annual
average by 12.
The Social Security benefit formula is designed so that workers with low average lifetime
earnings, as represented by AIME, receive a benefit that is a larger proportion of their earnings
than do workers with high average lifetime earnings. The benefit formula applies three
progressive factors—90%, 32%, and 15%—to three different levels, or brackets, of AIME.1 The
result is known as the “primary insurance amount” (PIA) and is rounded down to the nearest 10
cents. For persons who reach age 62, die, or become disabled in 2009, the PIA is determined in
Table 1 as follows:
Table 1. Social Security Benefit Formula in 2010
Factor
Average Indexed Monthly Earnings
90%
of the first $761, plus
32%
of earnings over $761 and through $4,586 plus
15%
of earnings over $4,586
Years of zero covered earnings are entered as zeros into the formula that averages the worker’s
wage history over 35 years. Some workers have short careers in Social Security-covered
employment—for example workers who have spent the majority of their careers in non-covered
federal2, state, or local government employment, or workers who have left the paid workforce for
other reasons. These workers did not pay FICA taxes during their years of non-covered
employment.
The averaging provision in the benefit formula tends to cause workers with short careers in
covered employment to have low AIMEs, similar to persons who worked for low wages in
covered employment throughout their careers. A worker’s AIME will be lowered by any zero
wage amounts that are entered into the 35-year averaging period, whether due to years of noncovered employment or years out of the workforce. Consequently, for a worker with a low AIME,
1
Both the annual earnings amounts over the worker’s lifetime, and the bracket amounts, are indexed to national wage
growth so that the Social Security benefit replaces the same proportion of wages for each generation.
2
Generally, employees of the federal government hired before 1984 are covered by the Civil Service Retirement
System (CSRS) and are not covered by Social Security. Most federal workers first hired into federal service on or after
January, 1984, participate in the Federal Employees’ Retirement System (FERS), which includes Social Security
coverage.
Congressional Research Service
1
Social Security: The Windfall Elimination Provision (WEP)
whether as a result of low career earnings or a short career in covered employment, the benefit
formula replaces more of covered earnings at the 90% rate than if this worker had spent his or her
full 35-year career in covered employment at the same wage level. The higher replacement rate3
for workers who have split their careers between Social Security-covered and non-covered jobs is
sometimes referred to as a “windfall.”4
A different Social Security benefit formula, referred to as the “windfall elimination provision”
(WEP), applies to many workers who also are entitled to a pension from work not covered by
Social Security (e.g., individuals who work for certain state and local governments, or under the
Federal Civil Service Retirement System). 5 Under these rules, the 90% factor in the first bracket
of the formula is replaced by a factor of 40%. The effect is to lower the proportion of earnings in
the first bracket that are converted to benefits. Table 2 illustrates how the regular and WEP
provisions work in 2010.
Table 2. Monthly PIA for a Worker With Average Indexed Monthly
Earnings of $1,500 and Retiring in 2010
Regular Formula
Windfall Elimination Formula
90% of first $761
$684.90
40% of first $761
$304.40
32% of earnings over $761 and
through $4,586
$236.48
32% of earnings over $761 and
through $4,586
$236.48
15% over $4,586
Total
0.00
$921.38
15% over $4,586
Total
0.00
$540.88
Thus, under the windfall elimination formula the benefit for the worker is $380.50 ($921.38 –
$540.88) less per month than under the regular formula. Note that the WEP reduction is limited to
the first bracket in the AIME formula (90% vs. 40%), so that for AIME amounts that exceed the
first threshold of $761 the amount of the WEP reduction remains a flat $380.50 per month. This is
because the 32% and 15% factors for the second and third levels are the same as in the regular
formula. For example, if the worker had $2,000 of average indexed monthly earnings instead of
$1,500, the windfall reduction would again be $380.50 per month.
A worker’s WEP reduction cannot exceed more than one half of the pension based on the
worker’s non-covered work: this “guarantee” is designed to help protect workers with low
pensions. Therefore, the WEP can never eliminate a person’s Social Security benefit. The WEP
also exempts workers who have 30 or more years of “substantial” employment covered under
3
A worker’s replacement rate is the ratio of his or her Social Security benefit to pre-retirement income.
4
2010............4
Congressional Research Service
Social Security: The Windfall Elimination Provision (WEP)
Background
The Social Security benefit formula is designed so that workers with low average lifetime
earnings in Social Security-covered employment receive a benefit that is a larger proportion of
their earnings than do workers with high average lifetime earnings. The benefit formula does not
distinguish, however, between workers who have low average earnings because they worked for
many years at low wages in Social Security-covered employment and workers who have low
average earnings because they worked briefly in Social Security-covered employment. The
generous benefit that would be provided to workers who have split their careers between Social
Security-covered and non-covered employment is sometimes referred to as a “windfall” that
would exist in the absence of the windfall elimination provision (WEP). The WEP reduces the
Social Security benefits of workers who also have pension benefits from employment not covered
by Social Security.
A worker is eligible for Social Security after he or she works in Social Security-covered
employment for 10 or more years (40 or more quarters). The worker’s earning history is indexed
to wage growth to bring earlier years of his or her earnings up to a comparable, current basis.
Average indexed earnings are found by totaling the highest 35 years of indexed wages and then
dividing by 35. Next, a monthly average, known as Average Indexed Monthly Earnings (AIME),
is found by dividing the annual average by 12.
The Social Security benefit formula is designed to provide a progressive benefit. The benefit
formula applies three progressive factors—90%, 32%, and 15%—to three different levels, or
brackets, of AIME.1 The result is known as the “primary insurance amount” (PIA) and is rounded
down to the nearest 10 cents. For persons who reach age the age of 62, die, or become disabled in
2011, the PIA is determined in Table 1 as follows:
Table 1. Social Security Benefit Formula in 2011
Factor
Average Indexed Monthly Earnings
90%
of the first $749, plus
32%
of AIME over $749 and through $4,517 plus
15%
of AIME over $4,517
The averaging provision in the benefit formula tends to cause workers with short careers in Social
Security-covered employment to have low AIMEs, similar to persons who worked for low wages
in covered employment throughout their careers. This is because years of zero covered earnings
are entered as zeros into the formula that averages the worker’s wage history over 35 years. For
example, a person with 10 years in Social Security-covered employment would have an AIME
that reflects 25 years of zero earnings.
Consequently, for a worker with a low AIME because she split her career between covered and
non-covered employment, the benefit formula replaces more of covered earnings at the 90% rate
1
Both the annual earnings amounts over the worker’s lifetime and the bracket amounts are indexed to national wage
growth so that the Social Security benefit replaces the same proportion of wages for each generation.
Congressional Research Service
1
Social Security: The Windfall Elimination Provision (WEP)
than if this worker had spent his or her full 35-year career in covered employment at the same
wage level. The higher replacement rate2 for workers who have split their careers between Social
Security-covered and non-covered jobs is sometimes referred to as a “windfall.”3
A different Social Security benefit formula, referred to as the “windfall elimination provision,”
applies to many workers who are entitled to Social Security as well as to a pension from work not
covered by Social Security (e.g., individuals who work for certain state and local governments, or
under the Federal Civil Service Retirement System). 4 Under these rules, the 90% factor in the
first bracket of the formula is replaced by a factor of 40%. The effect is to lower the proportion of
earnings in the first bracket that are converted to benefits. Table 2 illustrates how the regular and
WEP provisions work in 2011.
Table 2. Monthly PIA for a Worker With Average Indexed Monthly
Earnings of $1,500 and Retiring in 2011
Regular Formula
Windfall Elimination Formula
90% of first $749
$674.10
40% of first $749
$299.60
32% of earnings over $749 and
through $4,517
$240.30
32% of earnings over $749 and
through $4,517
$240.30
15% over $4,517
Total
0.00
$914.40
15% over $4,517
Total
0.00
$539.90
Under the WEP formula, the benefit for the worker is reduced by $374.50 ($914.40 - $539.90) per
month relative to the regular benefit formula. Note that the WEP reduction is limited to the first
bracket in the AIME formula (90% vs. 40% formula rates), while the 32% and 15% factors for
the second and third brackets are the same as in the regular benefit formula. As a result, for AIME
amounts that exceed the first threshold of $749, the amount of the WEP reduction remains a flat
$374.50 per month. For example, if the worker had an AIME of $2,000 instead of $1,500, the
WEP reduction would again be $374.50 per month.
A “guarantee” in the WEP provision ensures that a worker’s WEP reduction cannot exceed more
than one half of the government pension based on the worker’s non-covered work. This
“guarantee” is designed to help protect workers with low non-covered pensions and also ensures
that the WEP can never completely eliminate a worker’s Social Security benefit. The WEP also
exempts workers who have 30 or more years of “substantial” employment covered under Social
Security, with lesser reductions for workers with 21 through 29 years of substantial covered
employment, as shown in Table 3.5
2
A worker’s replacement rate is the ratio of his or her Social Security benefit to pre-retirement income.
The WEP is sometimes confused with the Government Pension Offset (GPO), which reduces Social Security spousal
benefits of a worker who also has a government pension based on work that was not covered by Social Security. For
more information on the GPO, please refer to CRS Report RL32453, Social Security: The Government Pension Offset
(GPO), by Alison M. Shelton.
54
Social Security Act §215(a)(7). Federal service where Social Security taxes are withheld (Federal Employees’
Retirement System or CSRS Offset) is not affected by the WEP.
Congressional Research Service
2
Social Security: The Windfall Elimination Provision (WEP)
Social Security, with lesser reductions for workers with 21 through 29 years of substantial
covered employment, as shown in Table 3.6
5
For determining years of coverage after 1978 for individuals with pensions from non-covered employment,
“substantial coverage” is defined as 25% of the “old law” (i.e., if the 1977 Social Security Amendments had not been
(continued...)
3
Congressional Research Service
2
Social Security: The Windfall Elimination Provision (WEP)
Table 3. WEP Reduction Falls with Years of Substantial Coverage
Years of Social Security Coverage
First factor in
formula
Maximum
dollar
amount of
monthly
WEP
reduction in
2010a
a.
20
21
22
23
24
25
26
27
28
29
30
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
$380.5
$342.5
$304.4
$266.4
$228.3
$190.3
$152.2
$114.2
$76.1
$38.1
$0
WEP reduction may be lower than the amount shown because the reduction is limited to one-half of the
worker’s pension from non-covered employment. Source: Social Security Administration, How the Windfall
Elimination Provision Can Affect Your Social Security Benefit,
Washington, DC, http://www.socialsecurity.gov/
retire2/wep-chart.htmretire2/wep-chart.htm.
a.
WEP reduction may be lower than the amount shown because the reduction is limited to one-half of the
worker’s pension from non-covered employment.
The WEP does not apply to (1) an individual who on January 1, 1984, was an employee of a
government or nonprofit organization and to whom Social Security coverage was mandatorily
extended by the 1983 amendments to the Social Security Act (e.g., the President, Members of
Congress in office on December 31, 1983); (2) benefits for survivors; (3) workers who reached
agethe age of 62, became disabled, or were first eligible for a pension from non-covered
employment,
before 1986; (4) benefits from foreign Social Security systems that are based on a
“totalization”
agreement with the United States; and (5) people whose only non-covered
employment that
resulted in a pension was in military service before 1957 or is based on railroad
employment.
Who is Affected by the WEP?
According to the Social Security Administration (SSA), as of December 20092010, about 1.23 million
Social Security beneficiaries were affected by the WEP (about 3.3% of retired workers). Of these,
approximately 64% were men.
6
For determining years of coverage after 1978 for individuals with pensions from non-covered employment,
“substantial coverage” is defined as 25% of the “old law” (i.e., if the 1977 Social Security Amendments had not been, as shown in Table 4. About 1.2 million
persons affected by the WEP were retired workers (about 3.4% of retired workers). Of retired
workers affected by the WEP, approximately 63% were men. 6
(...continued)
enacted) Social Security maximum taxable wage base for each year in question. In 20102011, the “old-law” taxable wage
base is equal to $79,200, therefore to earn credit for one year of “substantial” employment under the WEP a worker
would have to earn at least $19,800 in Social Security-covered employment.
6
Social Security Administration, Office of Research, Evaluation and Statistics, January 2010, unpublished table W01.
Congressional Research Service
3
Social Security: The Windfall Elimination Provision (WEP)
Table 4. Number of Beneficiaries in Current Payment Status with
Benefits Affected by Windfall Elimination Provision (WEP),
by State and Type of Benefit, December 20092010
State
Total
Total
Retired
Workers
Disabled
Workers
Spouses and
Children
1,197,020
1,092,562
16,307
88,151
Alabama
15,557
13,892
306
1,359
Alaska
6,139
5,744
95
300
Arizona.
22,095
20,303
293
1,499
Arkansas
8,935
8,182
203
550
California.
153,504
141,292
1,894
10,318
Colorado
35,327
32,810
431
2,086
Connecticut
11,454
10,818
155
481
Delaware
2,747
2,547
41
159
District of Columbia
6,835
6,447
128
260
Florida
68,727
63,005
816
4,906
Georgia
34,230
31,848
467
1,915
Hawaii
7,575
6,908
81
586
Idaho
5,252
4,811
70
371
Illinois
61,403
57,748
548
3,107
Indiana
12,050
11,033
228
789
Iowa
6,680
6,180
75
425
Kansas
7,157
6,629
100
428
Kentucky
15,439
14,149
312
978
Louisiana
23,372
20,862
543
1,967
Maine
10,894
10,141
160
593
Maryland
36,458
33,886
459
2,113
Massachusetts
41,348
38,965
600
1,783
Michigan
14,998
13,640
263
1,095
Minnesota
13,901
12,924
162
815
Mississippi
7,750
7,010
153
587
Missouri
25,196
23,620
357
1,219
Montana
4,387
4,020
64
303
Nebraska
4,350
4,046
44
260
Nevada
16,558
15,581
221
756
New Hampshire
5,345
4,959
108
278
New Jersey
17,637
16,170
324
1,143
New Mexico
10,253
9,128
176
949
New York
25,199
22,997
440
1,762
State
Total282,786
1,174,743
17,136
90,907
16,228
14,549
331
1,348
Alaska
6,735
6,344
90
301
Arizona
23,694
21,873
299
1,522
Arkansas
9,342
8,577
213
552
California
167,438
154,652
2,009
10,777
Colorado
38,430
35,814
510
2,106
Connecticut
12,513
11,815
180
518
Delaware
2,943
2,739
44
160
District of Columbia
7,104
6,721
132
251
Florida
73,098
67,214
851
5,033
Georgia
36,913
34,485
480
1,948
Hawaii
8,018
7,342
80
596
Idaho
5,625
5,153
75
397
Illinois
65,927
62,098
579
3,250
Indiana
12,850
11,829
235
786
Iowa
6,942
6,446
80
416
Kansas
7,466
6,949
103
414
Kentucky
16,600
15,279
328
993
Louisiana
25,322
22,764
565
1,993
Maine
11,739
10,984
156
599
Maryland
38,518
35,924
504
2,090
Massachusetts
45,128
42,572
658
1,898
Michigan
16,076
14,683
269
1,124
Minnesota
14,536
13,579
159
798
Mississippi
8,134
7,392
161
581
Missouri
27,099
25,478
394
1,227
Montana
4,731
4,343
67
321
Nebraska
4,556
4,254
43
259
18,408
17,378
228
802
5,810
5,395
122
293
New Jersey
18,639
17,095
344
1,200
New Mexico
10,817
9,661
187
969
New York
26,596
24,300
454
1,842
Alabama
Nevada
New Hampshire
Congressional Research Service
4
Social Security: The Windfall Elimination Provision (WEP)
Total
Retired
Workers
Disabled
Workers
Spouses and
Children
North Carolina
21,837
20,127
326
1,38423,222
21,517
331
1,374
North Dakota
2,072
1,900
18
154
Ohio
86,065
79,760
1,036
5,269
Oklahoma
14,547
13,093
309
1,145
Oregon
11,825
10,892
164
769
Pennsylvania
27,944
25,468
504
1,972
Rhode Island
3,787
3,513
79
195
South Carolina
13,657
12,483
202
972
South Dakota
3,077
2,868
37
172
Tennessee
15,351
13,995
227
1,129
Texas
102,033
93,655
1,389
6,989
Utah
10,365
9,292
123
950
Vermont
2,010
1,849
21
140
Virginia.
38,455
35,192
422
2,841
Washington
22,831
20,567
297
1,967
West Virginia
5,046
4,461
127
458
Wisconsin
9,542
8,859
101
582
Wyoming
1,922
1,776
28
118
Outlying areas and foreign countries
65,902
50,517
580
14,805
State140
1,974
18
148
Ohio
92,301
85,858
1,069
5,374
Oklahoma
15,114
13,695
309
1,110
Oregon
12,672
11,729
164
779
Pennsylvania
29,641
27,124
531
1,986
Rhode Island
4,086
3,807
79
200
South Carolina
14,457
13,272
222
963
South Dakota
3,275
3,060
37
178
16,183
14,806
239
1,138
Texas
110,408
101,641
1,435
7,332
Utah
10,897
9,806
136
955
Vermont
2,148
1,988
22
138
Virginia.
40,334
37,030
436
2,868
Washington
24,358
22,030
301
2,027
5,328
4,719
132
477
Wisconsin
10,077
9,371
121
585
Wyoming
2,023
1,874
29
120
70,147
53,761
595
15,791
State
Tennessee
West Virginia
Outlying areas and foreign countries
Source: Social Security Administration, Office of Research, Evaluation and Statistics, January 2010, unpublished
table B.
Legislative History and Rationale
The Windfall Elimination Provisionwindfall elimination provision was enacted in 1983 as part of major amendments designed
to to
shore up the financing of the Social Security program. The 40% WEP formula factor was the
result of a compromise between a House bill that would have substituted a 61% factor for the
regular 90% factor and a Senate proposal that would have substituted a 32% factor for the 90%
formula.7
The purpose of the 1983 law was to remove an unintended advantage that the regular Social
Security benefit formula provided to persons who also had pensions from non-Social Securitycovered employment. The regular formula was intended to help workers who spent their lifetimes
in low paying jobs, by providing them with a benefit that replaces a higher proportion of their
earnings than the benefit that is provided to workers with high earnings. However, the formula
could not differentiate between those who worked in low-paid jobs throughout their careers and
other workers who appeared to have been low paid because they worked many years in jobs not
7
Conference Report to Accompany H.R. 1900, 98th Cong., March 24, 1983 (Washington: GPO, 1983), p. 120.
Congressional Research Service
5
Social Security: The Windfall Elimination Provision (WEP)
other workers who appeared to have been low paid because they worked many years in jobs not
covered by Social Security. Under the old law, workers who were employed for only a portion of
their careers in jobs covered by Social Security—even highly paid ones—also received the
advantage of the “weighted” formula. The windfall elimination formula is intended to remove this
advantage for these workers.
Arguments for the Windfall Elimination Provision
Proponents of the measure say that it is a reasonable means to prevent payment of overgenerous
and unintended benefits to certain workers who otherwise would profit from happenstance (i.e.,
the mechanics of the Social Security benefit formula). Furthermore, they maintain that the
provision rarely causes hardship because by and large the people affected are reasonably well off
because by definition they also receive government pensions from non-covered work. The
guarantee provision ensures that the reduction in Social Security benefits cannot exceed half of
the pension from non-covered work, which protects persons with small pensions from noncovered work. In addition, the impact of the WEP is reduced for workers
who spend 21 to 29
years in Social Security-covered work, and is eliminated for persons who
spend 30 years or more
in Social Security-covered work.
Arguments Against the Windfall Elimination Provision
Some opponents believe the provision is unfair because it substantially reduces a benefit that
workers may have included in their retirement plans. Others criticize how the provision works.
They say the arbitrary 40% factor in the windfall elimination formula is an imprecise way to
determine the actual windfall when applied to individual cases.
The WEP’s Impact on Low-Income Workers
The impact of the WEP on low-income workers has been the subject of debate. Jeffrey Brown
and Scott Weisbenner (hereinafter referred to as “Brown and Weisbenner”) point out two reasons
why the WEP can be regressive. 8 First, because the WEP adjustment is confined to the first
bracket of the benefit formula ($761 in 2010749 in 2011), it causes a proportionally larger reduction in
benefits for workers with lower AIMEs and benefit amounts.9 Second, a high earner is more
likely than a low earner to cross the “substantial work” threshold for accumulating years of
covered earnings (in 20102011 this threshold is $19,800 of Social-Security Security-covered earnings);
therefore, high earners are more likely to benefit from the provision that phases out of the WEP
for persons with between 21 and 30 years of covered employment.
Brown and Weisbenner found that the WEP does reduce benefits disproportionately for lower
earninglowerearning households than for higher -earning households. For some high-income households,
applying the WEP to covered earnings even provides a higher replacement rate than if the WEP
8
Jeffrey R. Brown and Scott Weisbenner, The Distributional Effects of the Social Security Windfall Elimination
Provision, NBER and the Social Security Administration, September 5, 2008, pp 8-13, http://www.nber.org/programs/
ag/rrc/books&papers.html.
9
For example, a worker with an AIME of $4,000 would be entitled to a PIA of $1,721.38714.40 before a WEP reduction of
$380374.50 per month, which would represent a reduction of 22% in this worker’s benefit. By contrast, the worker shown
in Table 2 with an AIME of $1,500 would be entitled to a benefit of $921.38914.40 before the WEP reduction of $380374.50,
representing a cut of 41% to this worker’s benefit (CRS calculations).
Congressional Research Service
6
Social Security: The Windfall Elimination Provision (WEP)
were applied proportionately to all earnings, covered and non-covered. Brown and Weisbenner
also found that the WEP can also lead to large changes in Social Security replacement rates based
on small changes in covered earnings, particularly when a small increase in covered earnings
carries a person over the threshold for an additional year of substantial covered earnings, leading
to a modification in the WEP formula.
SSA estimated that in 2000, 3.5% of recipients affected by the WEP had incomes below the
poverty line. For comparison purposes, at that time 8.5% of all Social Security beneficiaries ageaged
65 and older had incomes below the poverty line and 11.3% of the general population had
incomes below the poverty line. 10 A potential conclusion is that persons who are subject to the
WEP, who by definition also have pensions from non-covered employment, face a somewhat
reduced risk of poverty compared to other Social Security beneficiaries.
Recent Legislation
In the 111th Congress, Representative Howard Berman has introduced H.R. 235, the Social
Security Fairness Act of 2009. S. 484, the companion bill to H.R. 235 in the Senate, was
introduced by Senator Dianne Feinstein. H.R. 235 and S. 484 would repeal the WEP starting in
January, 2010. The Social Security Administration (SSA), in an estimate from 2007, found that
full repeal of the WEP would cost approximately $40.1 billion between 2008 and 2017. In the
long run, SSA estimates that eliminating the WEP would cost 0.05% of taxable payroll (causing
an increase in Social Security’s long-range deficit of about 3%)
Representative Kevin Brady introduced H.R. 1221, the Public Servant Retirement Protection Act
(PSRPA) of 2009.11 Senator Kay Bailey Hutchison introduced a companion bill, S. 490, in the
Senate. The PSRPA would eliminate the current-law WEP and substitute a new formula for those
first entering non-Social Security-covered employment one year after the bill’s enactment.
Individuals who had worked in non-covered employment prior to this date would receive the
higher of: (a) the current law benefit including the WEP; or (b) the benefit calculated by the new
formula. Under the new formula, a PIA would be computed using both covered and non-covered
wages, and then multiplied by the ratio of earnings worked in Social Security-covered
employment to earnings in both covered and non-covered employment (where earnings are
expressed as average monthly earnings, indexed to wage inflation). SSA’s Office of the Actuary
estimated in 2007 that a similar proposal would have cost $4.6 billion from 2008-2017 and in the
long run would have cost 0.01% of taxable payroll (causing an increase in Social Security’s longterm deficit of about 0.5%).
Representative Frank introduced H.R. 2145, the “Windfall Elimination Provision Relief Act of
2009,” which would eliminate the WEP for persons whose combined monthly income from
Social Security and a pension from non-covered employment falls below $2,500 in 2009
(adjusted for the changes in the national average wage index). The bill would phase in the WEP
10
These are the most recent estimates available. Poverty rates were calculated by David Weaver of the Social Security
Administration’s Office of Retirement Policy using the March 2001 Current Population Survey (CPS). Poverty status is
taken directly from the CPS and is thus subject to errors in the reporting of income. The sample size for the WEP
poverty rate is relatively small (230 cases) and only includes persons for whom SSA administrative records could be
matched.
11
For additional information on the PSRPA, please refer to CRS Report RL32477, Social Security: The Public Servant
Retirement Protection Act (H.R. 2772/S. 1647), by Laura Haltzel.
Congressional Research Service
7
Social Security: The Windfall Elimination Provision (WEP)
for those with combined monthly incomes of between $2,500 and $3,334. For those with
combined monthly incomes (Social Security plus pension from non-covered employment)
exceeding $3,334, the WEP would be fully applicable.
Representative Rohrabacher introduced H.R. 2286, the “Social Security Exemption Relief Act of
2009,” which would allow an employee in a position that is not currently covered by Social
Security to elect, irrevocably, to have his or her employment covered by Social Security and
subject to Social Security taxes.
Author Contact Information
Alison M. Shelton
Analyst in Income Security
ashelton@crs.loc.gov, 7-9558
Congressional Research Service
8with other Social Security beneficiaries.
10
These are the most recent estimates available. Poverty rates were calculated by David Weaver of the Social Security
Administration’s Office of Retirement Policy using the March 2001 Current Population Survey (CPS). Poverty status is
taken directly from the CPS and is thus subject to errors in the reporting of income. The sample size for the WEP
poverty rate is relatively small (230 cases) and only includes persons for whom SSA administrative records could be
matched.
Congressional Research Service
7