Letter: Social Security provision eliminates windfall

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I agree with most of Al Diamon’s arguments as to why it is reasonable in some situations for an employee to be collecting both a pension and a salary (Politics & Other Mistakes: “Pension Tension”). However, his last reason reflects a common misunderstanding of the Social Security system. The Windfall Elimination Provision is not a penalty, but is just what the name implies.

The formula used to determine your monthly benefit is based on your average monthly earnings over a 35-year period, adjusted for inflation. Your benefit is a percentage of that amount, with the percentage on a sliding scale. So low-income workers receive a larger percentage of their average monthly earnings. However, only income that is subject to Social Security tax is counted in determining average monthly earnings.

So for years in which the individual worked in public employment, the amount reflected is zero. If someone teaches for 30 years and then works 10 years in the private sector, the income for those 10 years is averaged with 25 years of zero income, resulting in very low average monthly earnings, even though the individual was, in fact, earning income, and pension benefits, during those 25 years. If the benefit were based on the standard formula, it would indeed be a windfall for that individual. Beginning in 1983, the WEP was applied to replace the 90 percent factor with a lower percentage, thus eliminating the windfall.

Rick Diamond