Windfall Elimination Provision and Foreign Pensions | International Programs (2024)

FAQs

Does the Windfall Elimination Provision apply to foreign pensions? ›

These same US citizens may have paid into US Social Security and count on both systems when they retire. The Windfall Elimination Provision (WEP) reduces the Social Security (SS) benefits for individuals by up to 50% of their foreign pension benefits.

Exceptions to the windfall elimination provision

In some cases, the WEP won't apply to you, even if you have a noncovered pension. You may get an exception if you: Had at least 30 years of substantial earnings on which you paid Social Security taxes. Were hired as a federal worker after Dec.

If we need to count your foreign work credits, you will receive a partial U.S. benefit based on how long you worked under U.S. Social Security. Although we may count your work credits in the other country, your credits are not transferred from that country to the United States.

WEP can reduce your U.S. retirement or disability benefits if you receive a pension based on work which you, your employer, or government agency did not pay U.S. Social Security taxes on those earnings. This site contains a WEP Screening Tool for foreign pensions.

Generally speaking, the US benefit is reduced by $50 for every $100 of the foreign pension.

Foreign Pensions Are Taxable in the US

Most foreign pension plans are subject to US taxation. In fact, many of the tax rules for foreign pensions are the same as those for US-based pensions. However, there are some notable differences. Every expat should know these 25 things about US expat taxes.

The WEP does not become effective until you start to collect the non-covered government pension. A private pension has no impact on the WEP. The maximum WEP reduction in 2023 is $558.

Your benefit might be reduced if you get a pension from a government employer who wasn't required to withhold Social Security taxes. This reduction is called the “Government Pension Offset” (GPO).

The WEP reduction may be larger if family members are eligible for benefits on the same record. In most cases, we won't reduce your Social Security full retirement age benefit by more than ½ of your pension amount for earnings after 1956 on which you didn't pay Social Security taxes.

The lawmakers are already more than halfway to securing the 218 signatures required to force a vote in the U.S. House of Representatives on their bipartisan bill to eliminate the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

How much will my Social Security be reduced if I have a pension? ›

How much will my Social Security benefits be reduced? We'll reduce your Social Security benefits by two- thirds of your government pension. For example, if you get a monthly civil service pension of $3,000, two-thirds of that, or $2,000, must be deducted from your Social Security benefits.

Thus, for workers who become eligible for benefits in 2024, the maximum reduction under the WEP may be less than $587.

Moreover, since the U.S. person who contributed to the foreign plan is treated as the U.S. owner and beneficiary of a pension plan organized outside of the United States, the pension plan would generally be treated as a foreign grantor trust.

The WEP applies to most people who receive both a pension from noncovered work (including certain foreign pensions) and Social Security benefits based on fewer than 30 years of substantial earnings in covered employment or self-employment.

The GPO does not apply to foreign pensions. The GPO does not apply if an individual was covered by both eh government retirement system and Social Security throughout their last 60 months (formerly known as the 'last day' rule) of federal, state and local government service. Strategies.