Mountains that rise up to the sky, imposing, that seem to touch the clouds. A glacier surrounded by millenary glaciers that sculpt a dreamlike landscape with mighty rivers that wind through green valleys and lush forests that shelter a unique fauna. Sounds like an ideal time to retire, right? That state, considered the last frontier where the northern lights that adorn the sky are illuminated, is the place of more than 2 million Social Security beneficiaries, not only retirees but in all of their programs. This is the state of Alaska, which is seeking to eliminate a rule that reduces Social security payments for some workers.
That rule is known as the Windfall Elimination Provision (WEP), and it affects workers who receive a pension from a job that doesn’t collect Social Security taxes. Under the WEP, the payments of these people can be significantly reduced depending on their income from previous work.
2.1M Alaskans to Benefit From This Potential Social Security Increment
Alaska’s idea is to change that to help about 2.1 million people improve their income. This group of people represents almost 3% of the total number of social security beneficiaries nationwide. The main beneficiary group are public employees such as teachers, who could receive higher Social Security checks.
In fact, the state has already made progress in approving a resolution urging the state Congress to eliminate the WEP rule for these workers and thus help them have better incomes. However, for now it is unclear whether Congress will make progress on measures in the midst of a complicated and confusing election year for citizens. Alaska made a similar request in 2022, but the WEP was not modified and everything remained as it was.
Some experts believe that the way Alaska would move forward is to try to address the problem at the state level by modifying only the WEP rule in its territory. Others believe that the state will seek to make a paradigm shift at the federal level. If the change is approved, teachers and other public employees in Alaska could have a substantially higher retirement income.
Learn More: The 2025 Social Security COLA Could Be Smaller That Previously Projected
Other Workers Affected by the Social Security WEP Rule
The Windfall Elimination Provision (WEP) is part of Social Security regulations and reduces monthly retirement benefits for certain workers. As stipulated, it addresses a specific scenario: when someone receives two sources of retirement income.
- Social Security benefits: Based on social security taxes paid during your working career.
- Pension from a job that doesn’t pay Social Security taxes: This could include certain government or nonprofit jobs.
The logic or “spirit” behind the WEP rule is the idea of fairness. If someone receives both social security benefits and a pension from a job that did not contribute to social security, they could end up with a higher retirement income than someone who only relied on and contributed to social security.
The WEP tries to level the playing field by slightly reducing the benefits for these people achieved, in order to equalize them with other people in another situation.
In the worst case, and only in the worst and most extreme case, the WEP could reduce your social security benefits to half the amount of a monthly pension. However, this is extremely rare and only happens if most of your career did not contribute to Social Security.
The Social Security WEP Works by a Formula That Analyzes Two Key Factors
- Number of years with “substantial income”: The WEP considers the years in which you had income high enough to qualify for the maximum Social Security benefit. Generally, the longer you have had substantial income without contributing to Social Security, the greater the reduction in your benefits.
- Calculated Social Security benefit: The WEP applies to a portion of your calculated social security benefit, not all of it. The exact amount varies depending on your years with substantial income covered by the WEP.
Other workers besides teachers who are affected are firefighters, policemen, and employees of certain government agencies. The Social Security Administration (SSA) will send you a notice if the WEP will affect your benefits. You can also use the benefit estimation tool on the SSA website: https://www.ssa.gov/OACT/quickcalc/ to get a general idea.