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WEP & GPO From a Financial Advisor’s Perspective
Financial Advisors frequently deal with questions and concerns from clients regarding their public-service pensions and how they might be impacted by Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). And with the current push for repeal of these two controversial Social Security rules so prevalent in the news these days, small wonder. So, Financial Advisor’s Alyson Dorosky offers a piece that clarifies, from an Advisor’s viewpoint how these provisions work. But in addition to providing advice to advisors, the WEP and GPO explanations are basic enough to be informative to those affected. Read Ms. Dorosky’s post fa-mag.com here.
Much has been written about these two sections of Social Security, and many legislative attempts have been made to fully repeal both WEP and GPO, with no action taken on either. The issue is controversial, to be sure, and there are two sides to the argument. For this reason, the AMAC Foundation has heavily researched the origin of these two troublesome provisions, concluding that the purpose behind their design is often not clearly understood, nor is the way the math works in support of the original purpose. The Foundation offered this publication (WEP and GPO: To Repeal or Not?) to help clarify the matter, and conducted a public webinar presenting thoughts on the subject. A recording of the webinar can be viewed on the Foundation website here.
There is a point in Alyson Dorosky’s piece on WEP/GPO which should be corrected: she says that if you take your non-covered pension as a lump sum annuity you will be affected by the WEP. This is not necessarily true. If you take it as a lump sum BEFORE YOU ARE VESTED, WEP will not apply. This is an important point. Can you please let her know? There is literally no way to contact here on the fa-mag website. Thank you
Karen,
Ms. Dorosky’s comment regarding how Social Security deals with lump sum annuity payouts is correct, in context. If someone with a non-covered pension takes that pension as a lump sum, SSA will use the person’s life expectancy to arrive at a monthly equivalent amount and use that calculated monthly amount for WEP purposes. But you are also correct – if someone withdraws their personal contributions (plus interest) to the non-covered pension plan prior to vesting or retiring, that withdrawal will not cause WEP to reduce their Social Security benefits. The key is whether the withdrawal includes any contributions made to the pension plan by the employer. If so, WEP will apply. See this: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364.
Russell Gloor
National Social Security Advisor
The AMAC Foundation