Ask the Expert: Social Security and pensions

When my husband and I retired in 1999 after decades of service in a school district, we were told we'd receive less Social Security because we were getting a New York State pension. It doesn't seem right to be penalized on Social Security just because we have a pension from another source. Can you shed some light on this?

Yes. You're subject to the 1983 Windfall Elimination Provision, a rule that affects teachers, policemen, firefighters and other workers who receive pensions from government jobs in which they weren't required to pay Social Security taxes. The Social Security Administration uses a special formula to calculate your benefits. The goal isn't to penalize you, but to eliminate an unfair advantage you'd otherwise enjoy over nongovernment workers.

Under the standard Social Security formula, lower-paid workers receive a bigger percentage of their pre-retirement earnings than higher-paid people. For example, a lower-paid worker's Social Security benefit can equal 55 percent of his pre-retirement earnings, while a highly paid worker's benefit, on average, equals only 25 percent of his pre-retirement earnings. When this formula was used to calculate the benefits of people who worked mainly in jobs not covered by Social Security, it treated them as if they were long-term, low-wage workers in nongovernment jobs. The result: They got the advantage of a Social Security benefit that represented a higher percentage of their pre-retirement earnings, plus a pension from a job where they didn't pay Social Security taxes.

The Windfall Elimination Provision formula is designed to eliminate that advantage without penalizing you. The reduction in your Social Security benefit can't exceed 50 percent of the amount of your pension that's based on post-1956 earnings on which you didn't pay Social Security taxes.

The bottom line If you worked mostly in jobs not covered by Social Security, your benefit is reduced.

Websites with more information 1.usa.gov/145XxZY and bit.ly/14echk9

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