Windfall Elimination Provision (WEP)
The Windfall Elimination Provision (WEP) was a Social Security formula that reduced benefits for workers who earned pensions from employment not covered by Social Security while also qualifying for Social Security benefits from other covered work. The WEP was REPEALED by the Social Security Fairness Act, signed into law on January 5, 2025, with retroactive benefits back to January 2024.
Exam Tip
WEP was REPEALED January 2025 by Social Security Fairness Act! Historically reduced the 90% bend point for workers with non-covered pensions. 30 years substantial earnings = no reduction. Know this was repealed along with GPO.
What is the Windfall Elimination Provision?
The Windfall Elimination Provision (WEP) was enacted in 1983 to prevent workers from receiving a "windfall" - receiving both a full Social Security benefit AND a pension from non-covered employment (employment where Social Security taxes were not withheld).
CRITICAL UPDATE: The WEP was REPEALED by the Social Security Fairness Act, signed by President Biden on January 5, 2025. Benefits are retroactive to January 2024.
WEP Repeal Details
| Milestone | Date/Status |
|---|---|
| Law Signed | January 5, 2025 |
| Effective Date | Retroactive to January 2024 |
| Payment Start | February 25, 2025 |
| Completion | July 2025 (3.1 million payments, $17 billion) |
Who Was Affected by WEP (Historical)
| Employment Type | WEP Applied? |
|---|---|
| State/Local Government (without SS) | Yes |
| Federal (CSRS) | Yes |
| Foreign Government Pensions | Yes |
| Some Teachers | Yes |
| Police/Firefighters (some states) | Yes |
| Federal (FERS) | No (covered by SS) |
How WEP Worked (No Longer Applies)
The WEP modified the Social Security benefit formula by reducing the 90% factor in the first bend point:
| Years of Substantial Earnings | First Bend Point Factor |
|---|---|
| 30+ years | 90% (no reduction) |
| 29 years | 85% |
| 28 years | 80% |
| 21-27 years | 45-75% |
| 20 or fewer years | 40% |
Maximum WEP Reduction (Historical)
| Year | Maximum Monthly Reduction |
|---|---|
| 2024 | $558 |
| 2025 | $613 (would have been) |
Impact of Repeal
| Category | Average Benefit Increase |
|---|---|
| All Affected | ~$360/month average |
| Range | Very small to $1,000+/month |
| Retroactive Payment | Back to January 2024 |
CFP Exam Relevance
For CFP Exam Purposes:
- The WEP has been REPEALED as of January 2025
- However, understanding the historical provision helps context:
- Affected workers with non-covered pensions
- Reduced the 90% first bend point factor
- Could be eliminated with 30 years of substantial earnings
- The Social Security Fairness Act also repealed the GPO
What CFP Candidates Should Know
| Topic | Current Status |
|---|---|
| WEP | Repealed (January 2025) |
| GPO | Repealed (January 2025) |
| Client Impact | Increased benefits for affected retirees |
| Planning | No longer need to account for WEP reduction |
Study This Term In
Related Terms
Government Pension Offset (GPO)
The Government Pension Offset (GPO) was a provision that reduced Social Security spousal or survivor benefits by two-thirds of the amount of a government pension from non-covered employment. The GPO was REPEALED by the Social Security Fairness Act, signed into law on January 5, 2025, with retroactive benefits back to January 2024.
Primary Insurance Amount (PIA)
The Primary Insurance Amount (PIA) is the monthly Social Security benefit a worker receives if they claim benefits at their Full Retirement Age (FRA). It is calculated using a progressive formula applied to the worker's Average Indexed Monthly Earnings (AIME), with three "bend points" that provide higher replacement rates for lower earners.
Full Retirement Age (FRA)
Full Retirement Age (FRA) is the age at which a person can receive full, unreduced Social Security retirement benefits - age 67 for those born in 1960 or later.