Windfall Elimination Provision

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formerpatriot
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Windfall Elimination Provision

Post by formerpatriot » Sat Jul 28, 2018 4:12 pm

Can someone here answer the following question regarding WEP?

My wife worked in the USA before 1993 and she has accumulated the necessary 40 credits to qualify for retirement benefit without having to invoke the totalization agreement. Since 1993, she has been living and working in Canada and she has been contributing to the Quebec Pension Plan. Her last US Social Security Statement, dated August 2015, shows all her US annual income from the late 1970s to 1993. It shows 0 income from 1994 to 2014. The projected monthly SS retirement income (at full retirement age) is 971 dollars per month. Question: will this benefit be subject to the WEP?
FormerPatriot in Montreal

exPenn
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Re: Windfall Elimination Provision

Post by exPenn » Sun Jul 29, 2018 3:41 pm

Yes. The WEP calculation is complicated, but the amount of the WEP reduction to her SS is capped at 1/2 of whatever she will receive from QPP. (OAS is not included in WEP). The good news is: if you are a Canadian who has no SS benefit of your own, you can apply for a "Spousal Benefit" which would be equal to 1/2 of whatever your wife receives from SS after her WEP reduction. There is no WEP reduction to your Spousal Benefit based on your QPP. And remember both your wife's SS and your spousal benefit are denominated in big American Dollars.

formerpatriot
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Re: Windfall Elimination Provision

Post by formerpatriot » Sun Jul 29, 2018 5:17 pm

Interesting. I have 28 credits. With the totalization agreement,I should be eligible to some US SS benefit. I wonder which one is more advantageous. Getting 50% of whatever my wife will get or getting whatever I can get with my 28 credits and the totalization agreement? My 7 years of contributions to the US SS go back to 1986 to 1993. Since 1993 I have been working in Quebec and I have been contributing the maximum to the Quebec Pension Plan.
FormerPatriot in Montreal

nelsona
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Re: Windfall Elimination Provision

Post by nelsona » Mon Jul 30, 2018 9:16 am

The benefits you earned and the spousal benefits you are entitled to are separate and may give you some planning opportunities.
First, your own SS can be taken as early as 62, and are not reduced by WEP. The amount will be quite small of course compared to one who earbed for 30 years.
The spousal amount can only be taken when your spiuse takes them, and are as described by expenn

So you could for example take your SS until your spouse triggered hers and the switch to spousal, if that turns out to be more.
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exPenn
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Re: Windfall Elimination Provision

Post by exPenn » Mon Jul 30, 2018 9:50 am

According to the SS website ( https://www.ssa.gov/planners/retire/applying6.html ) if you and your spouse apply for SS at the same time, they will calculate your SS benefit based on your own work record, and the amount you would get as a spousal benefit based on your wife's work record, and automatically give you the greater one. We will be going through this process in about 6mo., so I will let you know how it works.
As far as I know, WEP would be applied to your personal SS benefit based on your QPP amount ( and possibly any other Canadian workplace pension). Combined with only 28 credits, your SS amount would probably be very small.
In the meantime, SS has a online calculator you can use to estimate your wife's and your SS benefits with and without WEP at https://www.ssa.gov/planners/retire/AnypiaApplet.html .
If you don't have your SS work record (like your wife's SS Statement), you should be able to apply for one online.

nelsona
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Re: Windfall Elimination Provision

Post by nelsona » Wed Aug 01, 2018 5:11 am

WEP does not apply to SS determined through totalization (ie using using Cdn work history to make up missing quarters). Only Those with betwee 40 and 120 credits are subject.
The planning opportunity I mentioned is for those who are not both full retirement age. One could take their earned SS early without harming their possibly bigger spousal SS later when perhaps both woukd be full retirement age)
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

formerpatriot
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Re: Windfall Elimination Provision

Post by formerpatriot » Wed Feb 20, 2019 8:30 pm

I have been reading about WEP. Here is an example:
My wife has 40+ credits.
If she had no QPP at all (and no other Quebec/Canada pension) her SS benefits would be, say, x USD per month at full retirement age.
Let's say she does have QPP which amounts to y USD per month at the time she applies for SS. Because of WEP, her SS monthly payment will now be x - (y/2) USD per month. But there are limits to the WEP. In reality her SS monthly payment will be the larger of the following 3 numbers:
x/2, x - (y/2), x - 463.
The 463 USD is for 2019 and is for people with less than 20 years of "Substancial Earnings". It is taken from the lower left corner of the WEP chart at
https://www.ssa.gov/planners/retire/wep-chart.html

Aside from QPP, she will have no other "pension" from earned income that was not subject to SS taxes. She does have a large RRSP account. I am assuming that if she takes occasional lump sums out of her RRSP/RRIF, that will not trigger a WEP negative consequence.

Aside from QPP/CPP what else can reduce SS monthly payments because of WEP?
FormerPatriot in Montreal

nelsona
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Re: Windfall Elimination Provision

Post by nelsona » Fri Feb 22, 2019 1:55 pm

Foreign pensions is the other WEP income. Not RRSP, not OAS

I would not be concerned about the WEP "limit". Her QPP will be very small assuming she only worked in Canada for 20 years, , so half of that will certainly be less than $400
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

exPenn
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Re: Windfall Elimination Provision

Post by exPenn » Fri Feb 22, 2019 3:43 pm

In fact, the maximum CPP payment for 2019 (which virtually no one receives) is 1,154.58 Can$, which at a exchange rate of 0.75 is 866 US$, so the maximum WEP cap of CPP/2 = $433, which is less than your $463 from the SS table. I'm not sure where you got the x/2 limit from.

formerpatriot
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Re: Windfall Elimination Provision

Post by formerpatriot » Fri Feb 22, 2019 5:29 pm

I can't remember where I got the x/2 limit. Maybe I'm wrong.
Anyway, as nelsona mentioned, QPP will be small and therefore it is the x - (y/2) formula that will apply.
According to Retraite Quebec, if she takes her QPP at age 60, the pension will be 500 CAD per month, thus the amount y will be about 375 USD per month. And according to SSA, the pre-WEP SS monthly benefit will be about 1000 USD (at age 67). Thus x - (y/2) = 1000 - (375/2) = 812.50 USD.
Minor adjustments:
- She will retire at 60 and 6 months, thus QPP will be slightly more than 500 CAD.
- By the time she is 67 years old, QPP will have grown a bit due to cost of living indexation, thus an increase of maybe 2% per year????
Bottom line: SS monthly payment in the neighborhood of 800 USD.
FormerPatriot in Montreal

exPenn
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Re: Windfall Elimination Provision

Post by exPenn » Sat Feb 23, 2019 11:35 am

Seems about right. Yes, her QPP will have increased by age 67 due to the Cost of Living Adjustment, (at 2% annually for 7 years, $500 would increase to $575), so she should still get ~800 US$, provided the exchange rate is still ~0.75. In fact, the exchange rate is the biggest variable in this projection, especially since the WEP is a one time calculation. Folks who started SS a few years ago when the Can$ was at or above par with the US$ were particularly dinged, and there doesn't seem to be any way to have the WEP recalculated.

nelsona
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Re: Windfall Elimination Provision

Post by nelsona » Sat Feb 23, 2019 5:56 pm

Here is a little tip. One way to avoid WEP is to begin collecting one before the other. I see no point waiting to collect QPP until you begin SS, as the moment you begin QPP, you will lose half of it thru WEP. I would begin taking QPP as soon as possible, so that you will get its full value in the yeas before taking SS.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Gilgamesh
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Re: Windfall Elimination Provision

Post by Gilgamesh » Mon Apr 08, 2019 2:59 pm

nelsona wrote:
> First, your own SS can be taken as early as 62, and are not reduced by WEP.
> The amount will be quite small of course compared to one who earbed for 30
> years.

Why is his SS @ age 62 not reduced by WEP?

Gilgamesh
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Re: Windfall Elimination Provision

Post by Gilgamesh » Mon Apr 08, 2019 3:23 pm

Is there no WEP if SS credit is less than 40?

nelsona
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Re: Windfall Elimination Provision

Post by nelsona » Mon Apr 08, 2019 3:53 pm

No. You are sufficiently penalized by not having the 40 quarters, that WEP is not applied to you.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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