If your client or their spouse was ever employed by an organization that did not pay into Social Security and are entitled to a pension from that employment, their Social Security benefits may be reduced.
If a client or their spouse:
- Was ever employed by an organization that did not pay into Social Security (such as some government agencies) and
- They are entitled to a pension from that employer,
Then, their pension is considered a non-covered pension. The Social Security Administration may reduce potential benefits based on their monthly non-covered pension amount.
Two Social Security laws may result in someone’s benefits being reduced due to having a non-covered pension:
Windfall Elimination Provision (WEP)
For a worker who receives a pension from employment where Social Security taxes were not paid, reached initial eligibility in 1985 or later, and worked fewer than 30 years in a job where Social Security taxes were paid, a reduction in their primary insurance amount (PIA) of up to half their monthly government pension amount may apply. This adjustment also affects dependent benefits such as spousal benefits but does not affect survivor benefits. More details on the WEP and the rules surrounding it (including some exemptions) are available at http://www.ssa.gov/pubs/EN-05-10045.pdf.
Government Pension Offset (GPO)
For a spouse or widow(er) receiving spousal or survivor benefits on another worker’s record and who gets a pension from government employment, their benefit is typically reduced by 2/3 of the monthly pension amount and may even be eliminated. More details on the rules regarding the GPO can be found at http://www.ssa.gov/pubs/EN-05-10007.pdf.
How to Enter Non-Covered Pension Information into Social Security+
When entering a new case or editing an existing one, input the estimated monthly pension amount into Social Security+, and the tool will apply the reduction factors to the benefit estimates. See the illustrations below.
If you have any additional questions on how a non-covered pension will affect benefits, please get in touch with support@lifeyield.com for more information.