If you’re among the dwindling minority of Americans who can rely on a pension when you retire, you might wonder whether you’ll be able to collect your full social security retirement benefit, too. For most people, the answer to this question is “yes”, but it depends on whether you’ve always worked for an employer that participates in the social security system.
There are certain government agencies, nonprofits, and foreign employers that don’t pay Social Security tax on behalf of their employees. If you’re entitled to a pension from one of these employers, but you also spent part of your career working for an employer that does pay into the social security system, then you stand to have your social security retirement benefits reduced, courtesy of the Windfall Elimination Provision.
The provision was enacted in 1983 as a cost-cutting measure for the Social Security Administration. Before the Windfall Elimination Provision was enacted, some retirees got the maximum social security benefit allowed, plus their full pension benefit, even though their employers had not paid as much into the social security system as did other recipients’ employers.
So, if you’ve worked for a combination of employers, how do you know if – and how much – your social security benefit will be reduced? Unfortunately, the answer is not on the annual statement you receive from the Social Security Administration letting you know what benefits you’re entitled to. The reason for this is that the Administration does not have relevant information for the years you worked for a non-participating employer, so the true amount of your benefit won’t be reflected in your statement.
Instead, to find out whether your social security benefits will be affected by the Windfall Elimination Provision, you can use the Social Security Administration’s online calculator.