How to Beat the Windfall Elimination Provision

Louis Horkan, writer

By

Louis Horkan

Reviewed by Nathan Kattner

Table Of Contents

    Beating WEP boils down to understanding what it is, how it worked, what’s occurring with the Social Security Fairness Act right now, and recognizing that the bigger issue is that of maintaining the most of your Social Security benefits (and money) going forward.

    Key Takeaways

    There has been a lot in the news this year about the Social Security Fairness Act (SSFA), a bipartisan bill signed into law the start of 2025 by then President Biden.

    It was created to deal with previous law that was targeted to a specific subset of U.S. workers (and their spouses or survivors) who had earned government pensions and Social Security benefits.

    The new law struck down the Windfall Elimination Provision (WEP), which was originally enacted back in 1983 to limit the Social Security benefits paid to workers who earned both government pensions and social security benefits. It also struck down the Government Pension Offset (GPO), which was enacted in 1977 to limit the spousal or survivor benefits of people who were associated with workers who earned both government pensions and social security benefits.

    Today we will review WEP, its impact on individuals in the targeted group, the SSFA and where things stand now, and the big picture implications for Social Security recipients in the U.S.

    WEP and how it worked

    WEP is a provision that was enacted to prevent individuals from receiving a windfall benefit of garnering full social security benefits (taxed) that were earned for work provided for a private sector employer, on top of non-covered pension benefits (not taxed) earned from certain government employers.

    A classic example might be a person who was a cop or firefighter for their local department who worked 20 years earning a “non-covered” pension and then retired. That person, who would likely still be relatively young, then decided to work for a private employer who each year collected Social Security taxes for the employee’s benefit.

    Federal legislators decided in 1983 that such a worker should only receive a portion of the Social Security benefits they had earned working in the private sector, despite the fact those earnings had been taxed.

    To that end, the Social Security Administration created a process to eliminate such a windfall. Since enactment of WEP its been used to adjust the benefits one would be entitled to if they earned “covered” renumeration from an employer that would normally qualify for Social Security (taxes withheld), in addition to that of a non-covered pension.

    For clarity, let’s first look at the normal process for determining a person’s SS benefits. The SSA determines the benefits of an individual using their lifetime average-indexed monthly earnings (AIME).

    Those benefits are referred to as the Primary Insurance Amount (PIA) that you would receive if you began benefits at your full retirement age (FRA), which for those born in 1960 or after is age 67.

    They would then apply their PIA formula (broken into percentages) to your AIME. They then sum those numbers to ascertain your monthly benefit. According to the SSA, for most people PIA is calculated as follows:

    • 90-percent of the first $1,174 of AIME, plus
    • 32-percent of AIME over $1,174 and through $7,078, plus
    • 15-percent of AIME over $7,078

    According to the SSA, for most people PIA is calculated as follows

    To determine the amount of Social Security reduction for an individual within the targeted WEP group the SSA created the WEP PIA. It worked the same as PIA, but scaled from 90-percent of AIME down to 40-percent for the first percentage utilized, broken into five-percent increments.

    In addition, they factor in years of coverage (YOCs) to make the WEP PIA calculation. If your YOC was 30 years or more, your first percentage factor would remain 90-percent. If instead your “covered” employment fell between 21 to 29 years, your first PIA factor would be reduced between 45 to 85-percent. Finally, if your YOC was 20 or fewer years, your PIA factor would be 40-percent. You can view a detailed example of how this works in the SSA’s Program Explainer.

    There is also an important additional provision known as the WEP “Guarantee.” This limits the difference between the normal and WEP PIA to no more than half of the monthly non-covered pension, which in application reduces the amount of the reduction that might normally be applied.

    In practice this means your Social Security benefit can’t be reduced by more than 50-percent of your non-covered pension. An example of how this would work is the following:

    WEP Reduction Example

    Oak Harvest Founder and CEO Troy Sharpe, CFP®, CPWA®, CTS®, broke down all of this in his video Social Security Fairness Act Explained: What It Means for Your Retirement.

    Where things stand now with WEP?

    When the Social Security Fairness Act was passed in early 2025, one of the biggest issues was that of how the SSA would go about implementing the new legislation and how long it would take for the agency to do so.

    By any measure, the SSFA was a big endeavor. In its 2024 report, Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), Congress estimated that nearly 3 million people had been affected by WEP and GPO combined, with approximately 2.1 million having had their benefits impacted by WEP alone.

    Implementation would require the SSA to determine how to compensate those that had been affected by WEP and GPO in 2024. The agency was tasked with determining what each individual would have to be paid back dating to January 2024.

    Additionally, they would have to determine what the updated current benefits would be for each individual, factoring in the elimination of WEP and GPO. Overall, they were given until late in 2025 to make the back payments and get on tract with current payments for those affected.

    That process started in February 2025, when the SSA began using an automated process to pay retroactive benefits and increase monthly benefit payments to people whose benefits had been affected by WEP and GPO.

    According to the SSA’s Social Security Fairness Act: Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) Update (last updated May 5, 2025), the agency has been able to clear much of the backlog. They are currently working on more complex cases that must be manually processed, with an expectation they will have all beneficiary records updated by November 2025.

    Safe to say the elimination of WEP is well on its way to having been accomplished, which for those who have been long-affected is a welcome development.

    Now for the hard part…

    Who pays the bill?

    The good news is that the SSFA is helping those who had previously had their SS benefits reduced – those benefits are now upwardly adjusted or are in that process. Many retirees will see changes to their Social Security benefits as a result of WEP’s repeal.

    And the actual dollar impact is no small deal. The SSA estimates that while some people’s benefits will increase very little, some individuals may see increases in their monthly benefits, depending on their circumstances. That’s going forward and doesn’t include the retro payment for 2024.

    This marks a meaningful change for many affected retirees.

    But there remains a bigger issue for those people, as well as all other Americans who pay into the Social Security system in the U.S.

    Namely, who pays the bill for making WEP go away and how this will impact the future of Social Security.

    But, there remains a bigger issue for those people

    To better assess the total price tag for SSFA, the Congressional Budget Office released its H.R. 82, Social Security Fairness Act of 2023 Cost Estimate. In their view, the combined cost off eliminating WEP and GPO over the 2024 to 2034 period will be more than $211 billion.

    As Sharpe mentions in his video, Washington has a propensity for underestimating costs, so it’s conceivable that the price for SSFA could easily double. So the actual price tag for the new legislation will run somewhere between $200 to $400 billion.

    With all the laid bare, the big question (and real problem) becomes where that money comes from?

    And the answer is…

    The trust funds administered by the SSA – the Old-Age and Survivors Insurance (OASI) Trust Fund, from which the SSA pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund, from which they pay disability benefits.

    The trusts are largely funded by the Federal Insurance Contributions Act (FICA) taxes that are withheld from our paychecks each month.

    Unfortunately, there is a big problem in terms of the financial condition of those  trust funds. In their August 2024 report, “CBO’s 2024 Long-Term Projections for Social Security,” the Congressional Budget Office estimates that the two trust funds are expected to be exhausted in fiscal year 2034. And there are estimates this could happen sooner.

    It goes without saying that an additional outlay of $200 to $400 billion over the next 10 years due to the elimination of WEP and GPO could pull that date forward.

    In the past the Social Security “problem” was viewed as a future issue by most. Well, it’s 2025 and the problem is no longer an abstract issue that will eventually hit home.

    It could hit during the current administration. And if not then certainly within the following administration, which will run through 2032. That is beyond the CBO’s current estimated date for the trust funds becoming insolvent – unable to fully pay their obligatory bills to beneficiaries.

    Translated that equates to something will have to give. Which is a potential problem for all Social Security beneficiaries.

    Even without the added costs brought on by the passage of the Social Security Fairness Act, something was going to have to happen to sure up Social Security going forward.

    What might happen?

    The Committee for a Responsible Federal Budget (CRFB) estimates that upon depletion of the trust fund used for paying Social Security benefits, the SSA will be able to pay 79-percent of benefits over the next 75 years.

    In other words, if nothing is done by Congress to sure up the program, the SSA will have to slash benefits 21-percent across the board for all Social Security beneficiaries. It’s not hyperbole to say that for a large percentage of Americans who rely on Social Security now and will do so in the future, such a move would be catastrophic.

    As such, it’s safe to assume Congress will act. Fact is there are already options being floated. According to Sharpe, one such option that people need to be aware of is “means” testing.

    He talks about a scenario where those considered “wealthy” could potentially have a portion of their  Social Security forfeited at some point if means testing were to be implemented in order to help the system remain solvent into the future.

    Sound farfetched? Hardly.

    The CRFB estimates that upon depletion of the trust fund used for paying Social Security benefits, the SSA will be able to pay 79-percent of benefits over the next 75 years.

    From the point of view of Congress, such a measure would not affect the majority of Americans, an option which many politicians would obviously prefer. Instead, the implementation of a means test when determining Social Security eligibility would switch the burden of suring up Social Security to the so-called “wealthy” portion of the population.

    “It’s an easy solution where they can politically pitch it as something that’s only going to impact the wealthy, the ultra-rich,” he says. “Now, all of a sudden you’re considered one of these high-income individuals who doesn’t deserve all of their Social Security. This is part of the current options on the table for them to consider.”

    Bringing this into focus, higher-income earners and diligent savers may also be impacted by potential means testing. It’s a good bet you will be called on to help with the Social Security problem. But for those who are far from rich, who have simply saved diligently as instructed and accumulated assets for your retirement over many years, you too could find yourself lumped into the same “wealthy” boat and having your SS benefits reduced.

    In that context, the real battle isn’t beating WEP, but instead in maintaining the SS benefits you’ve earned, paying the least amount in taxes, holding onto your assets, and living securely in retirement.

    Sharpe addresses this goal in his Social Security Fairness Act video, making it clear you have to start now. Doing so will require a plan that proactively addresses your taxes and RMDS (including strategies), income needs, estate, and more.

    One such example is the use of Roth Conversions to reduce future RMDS, which could potentially lower the amount of income you would have to report, keep you in a lower tax bracket and ultimately reduce your taxes.

    There are many other measures that can be taken…but you must plan.

    Conclusion

    As detailed, much of the work is done or is being completed by the SSA currently as it pertains to the elimination of WEP. If you were part of that targeted group, the SSFA ensures that you’ve already won. If there are question or issues, you can refer to the SSA update website.

    The bigger issue for you and all other Social Security beneficiaries is that of making yourself aware of the looming problem and potential changes with Social Security that are to come.

    Bottom line, change in the Social Security system is inevitable and it’s fast approaching. To help plan for that change and all the other big issues associated with retirement, you definitely need to work with a proven team who can help you navigate your golden years.

    At Oak Harvest we’d be happy to consult with you on how the Social Security Fairness Act may impact you and your overall taxes and planning. We can look at your current retirement plan to determine if it can really meet your need and goals.

    Or we can assist you by creating a retirement plan capable of helping you do so. We can build a holistic, comprehensive retirement plan addressing relevant issues, utilizing strategies that cover your Social Security, taxes, income, spending, healthcare, legacy, and more, customized to your family’s specific needs.

    A plan created with the goal of helping you plan for the retirement you and your spouse envision..

    If you’re ready to take the next step and talk to a team of financial advisors and retirement planners who can advise on all your retirement needs, contact us to learn more about your retirement planning options.

    This does not constitute personalized financial or investment advice.

     

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