Can I Avoid WEP By Withdrawing My Contributions To My Employer Retirement Plan?

Feb 2 2017 - 7:00am

I am retiring from my County job (not paying SSI) where I have a defined contribution savings with County matching 10% of my contributions. I also have over 10 years of employment where I paid SSI. It looks like my defined contribution savings will reduce my SS benefits due to WEP. If I roll over just my contributions from the savings into a regular IRA before having the County convert the remainder into an annuity "pension" will this reduce the SSA WEP deductions from my benefit? Or will SSA just figure my IRA rollover is a lump sum pension and reduce my benefit more? Thanks for your help.

Hi,

If you withdraw only your own contributions plus interest from an employer plan before becoming eligible for a pension, then the withdrawal is not counted as a pension for purposes of the Windfall Elimination Provision (WEP). However, if you are already eligible for a pension under the plan (i.e. you meet all requirements except for stopping work and applying for payments), then a withdrawal would be counted for WEP purposes, assuming that the plan meets the definition of a pension in the first place (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364).

Before forfeiting your right to a pension, you'll want to be very sure that the action would benefit you financially. There is a WEP guarantee provision (https://www.ssa.gov/pubs/EN-05-10045.pdf) that limits the amount of reduction in Social Security retirement benefits to essentially no more than half of the amount of the non-covered pension. The maximization software available on this website is programmed to handle both WEP and GPO (https://www.ssa.gov/pubs/EN-05-10007.pdf) considerations, so you may want to use it to determine what effect your non-covered pension is likely to have on your Social Security benefit rate.

Best, Jerry