If you ever worked for a company or organization outside of the Social Security pension system, you may have earned a non-covered pension that may impact the amount of your monthly Social Security benefit.
This is called the Windfall Elimination Provision. You can refer to this article for more information about how it’s calculated and how it impacts the worker’s Social Security benefit.
In this article we’re going to talk about how the Windfall Elimination Provision can impact the spouse of that individual.
In certain circumstances the spouse of the worker who is impacted by the Windfall Elimination Provision will want to take a spousal benefit on the working record of that individual.
It would seem that the spouse who did not work earning a non-covered pension should not be negatively impacted, but unfortunately that is not the case. This is due to do with the way that the spousal benefit is always calculated.
At full retirement age a spouse can take up to 50% of the Primary Insurance Amount of the opposite spouse (once that opposite spouse has started their own benefit). The Primary Insurance Amount is the amount that a worker would receive at their own Full Retirement Age.
In a circumstance of a worker who is impacted by the Windfall Elimination Provision, their own Primary Insurance Amount is first reduced by the Windfall Elimination Provision before making the calculation for their Social Security benefit. Therefore their own Social Security benefit (calculated by using their Primary Insurance Amount minus Windfall Elimination Provision) is generally reduced (unless they have 30 or more years of covered Social Security employment). Unfortunately, the spousal benefit is also calculated using the Primary Insurance Amount minus Windfall Elimination Provision, even though that spouse may have never earned a non-covered pension benefit.
Although it is unfortunate that the spousal benefit is reduced by the Windfall Elimination Provision, the good news is that if the worker who is impacted by the Windfall Elimination Provision passes away, the surviving spouse’s Social Security benefit becomes the workers full Primary Insurance Amount without the Windfall Elimination Provision reduction.
If you have any questions with regards to Windfall Provision please contact me here