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State pensions can affect Social Security benefits

Employees of some States may get a surprise when they evaluate whether they’re entitled to Social Security benefits.  Certain States do not withhold Social Security taxes from their employee’s earnings but rather fund an employee’s retirement through a State pension plan. Even if a State employee has worked another job which did withhold FICA taxes entitling them Social Security benefits, that employee’s State pension plan would make them subject to Social Security’s Windfall Elimination Provision (WEP), which could drastically reduce the amount of their Social Security benefit.  In this USA Today Q&A piece by Robert Powell, the effect of WEP on Social Security benefits, including survivor benefits, is explored.  Click here to read more.

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