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The Windfall Elimination Provision (WEP) is a U.S. federal law that modifies the calculation of Social Security benefits for individuals who receive pensions from employment not covered by Social Security. The provision was enacted in 1983 as part of the Social Security Amendments of that year and is commonly known as the Windfall Elimination Act (WEA).
Under normal circumstances, Social Security benefits are calculated based on a formula that replaces a higher percentage of pre-retirement earnings for lower-income workers compared to higher-income workers. However, the WEP modifies this formula for individuals who receive a pension from a job where they did not pay Social Security taxes, such as certain government employment or work in foreign countries.
The purpose of the WEP is to prevent what is seen as a "windfall" in Social Security benefits for individuals who have not contributed as much to the program due to their work in non-Social Security-covered employment. The WEP affects individuals who have fewer than 30 years of substantial earnings covered by Social Security and also receive a pension from a job not covered by Social Security.
Under the WEP, the Social Security benefit formula is adjusted in a way that generally reduces the monthly benefit amount for affected individuals. The precise reduction depends on the number of years of substantial earnings covered by Social Security, but the maximum reduction is capped at a certain percentage of the individual's non-Social Security pension.
An individual who maybe effected by the WEP should investigate if they are eligible for any social security income and not assume they will not receive any benefit. In all cases, one should investigate their eligibility for benefits.