WEP from working overseas?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
VT1964
Posts: 13
Joined: Fri Sep 09, 2016 2:37 pm

WEP from working overseas?

Post by VT1964 » Thu Nov 14, 2019 11:07 am

I was unpleasantly surprised to find out that because I lived and worked in Europe, I will be penalized now in my ss?

I don't understand why! I already got 'penalized' by having those years averaging in as zeros. PLUS I paid to the French government SS taxes while working there. I have earned that small social security payment from France, but the US SS office will take half of my French social security. Any workarounds?

I feel robbed!

User avatar
samsoes
Posts: 1360
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

Re: WEP from working overseas?

Post by samsoes » Thu Nov 14, 2019 11:09 am

What does "WEP" mean?
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

User avatar
dm200
Posts: 22321
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: WEP from working overseas?

Post by dm200 » Thu Nov 14, 2019 1:12 pm

VT1964 wrote:
Thu Nov 14, 2019 11:07 am
I was unpleasantly surprised to find out that because I lived and worked in Europe, I will be penalized now in my ss?
I don't understand why! I already got 'penalized' by having those years averaging in as zeros. PLUS I paid to the French government SS taxes while working there. I have earned that small social security payment from France, but the US SS office will take half of my French social security. Any workarounds?
I feel robbed!
It seems to me that your situation is about the same as if you had worked in the US for an employer where such employees are not required to pay into the SS Retirement system.

I believe that you are being "penalized" is due to the nature and structure of the relationship between income received that is "taxed" by SS retirement and the SS retirement benefits received.

Unlike many other types of retirement plans, the US Social Security Retirement system is weighted (perhaps heavily) towards lower income folks. So, for example, a minimum wage worker receives a bigger (percentage wise) SS retirement monthly payment than a higher (even middle income) income person. So, just looking at your US Social security taxed income - you would appear to be a lower income individual than your total income really was.

This WEP helped close a "loophole" that existed (and some folks took advantage of) many years ago. Here is the example:

- Many years ago, US Federal Government employees did not pay SS taxes - and many were middle to high income folks. So, what some of these folks did was to find some kind of very part-time "job" that was taxed by Social Security retirement. They would work (and be paid/taxed) this part-time job for some small number of hours every three months (calendar quarter). To be eligible for SS retirement benefits, a person must have been covered/taxed for at least 40 quarters. By doing this "job" for 40 (or more) quarters, they would then (at SS retirement age) qualify for the minimum SS retirement amount. While this was (in dollar terms) small - that amount was big as a percentage of what they paid in. To the SS system, at that time, such folks appeared to be the "poorest of the poor" - and got more money from SS retirement as a result. In fact, many of such folks were high income individuals. While federal employees (those hired in the last 30 or so years) now pay into the SS retirement system - there are still some employers (usually local government or educational systems) that do not pay SS retirement taxes.

- The WEP helped eliminate this (perfectly legal at the time) loophole.

So - I do not believe that you are being "robbed" at all.

User avatar
dm200
Posts: 22321
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: WEP from working overseas?

Post by dm200 » Thu Nov 14, 2019 1:14 pm

samsoes wrote:
Thu Nov 14, 2019 11:09 am
What does "WEP" mean?
Windfall Elimination Provision (WEP) If you work for a federal, state, or local government agency, a nonprofit organization or in another country, you may be eligible for a retirement or disability pension based on earnings not covered by Social Security.

Topic Author
VT1964
Posts: 13
Joined: Fri Sep 09, 2016 2:37 pm

Re: WEP from working overseas?

Post by VT1964 » Fri Nov 15, 2019 6:26 am

Thank you dm200.

Your example makes sense and I can understand the intent of this rule in the case of a govt worker making $3,000 or more/month in pension. In my case, my total combined payment from both countries is less than the maximum amount that you can earn in the US social security. If in theory I worked in the US for the time I was in France, and paid into the system here, it would only have increased my ss payment by ~$125, still not pushing me over the maximum. So I am reaping no added benefit. But I reap the penalty. (I hope I am expressing this clearly!)

I am not making that much in ss as I am not a high earner, and my social security from France is only about $125/month, of which the US govt is taking 1/2. Not a big amount of money, but I need all I can get. I paid SS on those earnings (to France) and they are paying back to me. I also paid SS to US govt and my ss payment is based on my earnings here.

ivk5
Posts: 985
Joined: Thu Sep 22, 2016 9:05 am

Re: WEP from working overseas?

Post by ivk5 » Fri Nov 15, 2019 7:07 am

VT1964 wrote:
Fri Nov 15, 2019 6:26 am
Thank you dm200.

Your example makes sense and I can understand the intent of this rule in the case of a govt worker making $3,000 or more/month in pension. In my case, my total combined payment from both countries is less than the maximum amount that you can earn in the US social security. If in theory I worked in the US for the time I was in France, and paid into the system here, it would only have increased my ss payment by ~$125, still not pushing me over the maximum. So I am reaping no added benefit. But I reap the penalty. (I hope I am expressing this clearly!)

I am not making that much in ss as I am not a high earner, and my social security from France is only about $125/month, of which the US govt is taking 1/2. Not a big amount of money, but I need all I can get. I paid SS on those earnings (to France) and they are paying back to me. I also paid SS to US govt and my ss payment is based on my earnings here.
I'm in the same boat. Here's how I think about it. These schemes tend to be progressive: for example, in the US system, the incremental benefit you earn on your first dollar of lifetime earnings is higher than the incremental benefit you earn on a dollar after your inflation-adjusted lifetime earnings pass the first bend point.

Assuming for the sake of argument that France's system is similar, the same amount of lifetime earnings divided between two systems vs earned entirely in one system would earn a larger benefit (two systems = more total "space" available to you in steepest part of the curves). IOW, your French earnings may have earned you a higher benefit in France than the same earnings would have earned you in the US.

That is the windfall that's being offset by the WEP, albeit in a very imprecise way.

User avatar
dm200
Posts: 22321
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: WEP from working overseas?

Post by dm200 » Fri Nov 15, 2019 10:41 am

I'm in the same boat. Here's how I think about it. These schemes tend to be progressive: for example, in the US system, the incremental benefit you earn on your first dollar of lifetime earnings is higher than the incremental benefit you earn on a dollar after your inflation-adjusted lifetime earnings pass the first bend point.
Assuming for the sake of argument that France's system is similar, the same amount of lifetime earnings divided between two systems vs earned entirely in one system would earn a larger benefit (two systems = more total "space" available to you in steepest part of the curves). IOW, your French earnings may have earned you a higher benefit in France than the same earnings would have earned you in the US.
That is the windfall that's being offset by the WEP, albeit in a very imprecise way.
Yes - rules/regs such as the WEP cannot be extremely precise - for many reasons. The rules/regs for regular Social Security are also not "precise" either.

As best I understand, many (if not most) defined benefit plans at completely or mostly "linear" - in that if you earn twice as much money over the years - you receive twice as much in retirement. Some do have a small or modest minimum benefit calculation that can give lower income folks a bit more - but not nearly as much as the Social Security Retirement system.

As someone "in the middle - or modestly above the middle - I do not mind or object to the lower or much lower income folks getting relatively more. I believe, though, that this "subsidy" for such lower income Social Security retirement recipients should be funded by just about everyone. For those mid to higher income employees who are exempt from paying into Social Security Retirement - I do not believe they are bearing their "full share" of this "subsidy". As I posted previously - it used to be much worse. Federal government employees were not subject to Social Security retirement taxes (and benefits). There were still several loopholes where such employees could get a much larger Social Security retirement payout because they looked like low or very low income. The WEP (and some other changes) have fixed such loopholes.

Topic Author
VT1964
Posts: 13
Joined: Fri Sep 09, 2016 2:37 pm

Re: WEP from working overseas?

Post by VT1964 » Fri Nov 15, 2019 11:51 am

thank you both for taking the time to explain it this way. I feel a 'bit' better.

Wonder if it is worth it to buy a consultation from someone like socialsecurityadvisors.com.....where you input information or consult with an expert. The social security rules seem prohibitively complicated and it may be worth it to see if there is anything else I'm missing or might be doing better.

User avatar
dm200
Posts: 22321
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: WEP from working overseas?

Post by dm200 » Fri Nov 15, 2019 12:04 pm

VT1964 wrote:
Fri Nov 15, 2019 11:51 am
thank you both for taking the time to explain it this way. I feel a 'bit' better.
Wonder if it is worth it to buy a consultation from someone like socialsecurityadvisors.com.....where you input information or consult with an expert. The social security rules seem prohibitively complicated and it may be worth it to see if there is anything else I'm missing or might be doing better.
I have never dealt with Social Security "in person", but I often hear how helpful such Social Security offices and folks are very helpful. I think I would first make an appointment with your nearest Social Security office and see what they can explain. It might not be as complicated as you think - once they speak with you. I don't think doing this can hurt. I would also go into such a meeting with the attitude of just not fully understanding the calculations vs. the position that you are being "robbed". It is certainly possible that there may be errors in the SS calculations or data. They might also suggest possible ways you can, legitimately, reduce your WEP.

Post Reply