WEP 75% Reduction

[bc075259]

MaggieA wrote:
> Sorry, after adding my comment I noticed that the OP, bc07529, already
> confirmed with the AnyPIA calculator.
>
> The point is, WEP is not calculated based on FRA, but on ELY. SSA says so
> (on the page I linked in previous post) and the calculator confirms it.
>
> So those intelligently claiming SS at age 62 see a reduction of SS equal to
> at most 50% of their CPP/QPP as they expect. But those claiming at FRA or
> later, like OP or me, are apt to be dinged a lot more, because we lose all
> the COLA increases on the reduction amount, for all years since ELY.

Thanks for the reply, I had read through the exPenn post before but I thought he just excepted it because the reduction amount was not worth the effort. I have used the calculator, I actually was using it while on the phone with the SSA agent and we were getting the exact same result. I have also much of the SSA WEP info over the years but never noticed the "In most cases,we won’t reduce ... by more than ½ of your pension" line. Has that always been there and I just missed it? If I had noticed it previously, I may have change my strategy.

Meanwhile, it's been over 6 months and SSA still says it's reviewing my "Request for Consideration", I'm not anticipating anything changing however. It seems like that at the very least, SSA should clarify this and indicate on the WEP web site that the reduction could result in more than 100%, as in our case. Do you know if anyone else has appealed based on the 50% rule?

Cheers,
Brian

[MaggieA]

Brian, the calculation is so confusing I suspect we all don't bother delving into the details unless and until we are unhappy with the outcome. Every place I've seen mention of WEP online, they just say "not more than 50% of the uncovered pension". I believed that too, but now I think that the frequent repetition doesn't make it true, or not in the way a reader naturally assumes. If you read that SSA page I linked, and more usefully, study the details in the AnyPIA calculator output, the unpleasant details are clear. What the calculation does is figure out the monthly SS pension you were entitled to at ELY i.e. the year you turned 62. They take that number and then subtract from it up to half your uncovered pension as of the first month you start collecting both. (It's "up to" half because there is a cap on the amount they subtract. The cap changes from year to year and is given in the table at the bottom of that SSA page I linked). So that's where they never subtract more than half of your other pension(s). It's true, but it's not subtracted from the SS you are entitled to TODAY as you would think, but from your entitlement effective back when you turned 62. Then they take that reduced amount and apply their normal adjustments to bring it to the date at which you are applying to start collecting benefits. So that means reducing it by a percentage if you are starting benefits before FRA, otherwise, applying the annual COLA increases up to the year in which you start benefits, also the extra for deferring, if you're starting late.

The problem with this method is that because it reduces your entitlement at ELY, it reduces the base amount to which the COLA and deferral increases are applied, so if you don't start your SS at ELY, the amount you get later on is reduced by MORE than half the uncovered pension (CPP and/or whatever), compared with what you would otherwise get.

In my case I started SS at my FRA, which was in 2022, and then I started CPP in 2023, and the result of the calculation, for me, means that my 2023 SS is reduced by 62% of my 2023 CPP. Like you, I also have a spouse collecting half my SS, so he loses another 31%. Thus as a family, our total SS is reduced by 93% of my CPP. Displeasing, since I had expected the figure to be 75% at most. I'm relieved it's not more than 100%.

We moved back to Canada from the US when I was 60, so all my SS earnings occurred before I was 62. I do not know how this works for people who have SS eligible earnings after ELY. I expect the AnyPIA calculator can be used to figure this out, if any reader needs to know.

[formerpatriot]

My wife recently applied for and started to received her SS benefits.
The WEP was applied due to her monthly QPP of about 625 CAD.
We have no idea what exchange rate was used for this 625 CAD.
We have no idea how much her SS monthly benefit would have been without WEP.
We have no idea how much WEP reduction was applied.
The only thing that I know is that her monthly SS benefit is slightly higher than what I was able to estimate using available online info.

[bc075259]

formerpatriot wrote:
> My wife recently applied for and started to received her SS benefits.
> The WEP was applied due to her monthly QPP of about 625 CAD.
> We have no idea what exchange rate was used for this 625 CAD.
> We have no idea how much her SS monthly benefit would have been without
> WEP.
> We have no idea how much WEP was applied.
> The only thing that I know is that her monthly SS benefit is slightly
> higher than what I was able to estimate using available online info.
So her yearly SS statement should have indicated the estimated pre-WEP benefit amounts at various ages and she would have had to enter the QPP amount in US dollars on her SS application for them to apply WEP. If she indicated the QPP amount in CAD, I believe SS would have used one the currency converter websites that they have links for on their website.