Dear Larry,
I am a US citizen who worked in the Middle East (oil and gas industry) for most of my career. I worked for one company, but for the first third of my career (14 years) I paid FICA taxes because the company was US owned. For the remaining 27 years the company was locally owned so I was not required to (nor did I) pay FICA, except for those brief periods when on business assignments int he USA. When I retired I received a lump sum settlement in lieu of pension.

This year (2017) I reached FRA and applied for SS benefits. SSA informed me I would be subject to WEP as a result of my lump sum. From discussions with colleagues who have also filed for benefits, I have learned that a number of them with similar work histories (and less than 30 years of substantial earnings in which they paid SS taxes) have not been WEP'd. Do you believe I have grounds for an appeal?

My understanding was that the WEP was originally supposed to be applied to government pensions, not to those resulting from private foreign employment, which has no ties to the US government. It seems discriminatory to apply a WEP reduction solely on the basis that I chose to work for 27 years whether or not I paid into SS. Had I not worked, the SS benefit would not be reduced. Isn't this essentially a means test which I thought SS was not supposed to use in benefit calculations? Finally, is my WEP being applied arbitrarily as opposed my colleagues in similar circumstances that have not had their benefits reduced or are their cases likely errors from the SSA in failing to apply WEP?

Hi,

I don't have all of the facts of your case, but from what you've described it sounds like your retirement benefits would be subject to WEP (Windfall Elimination Provision). Any pension, or lump-sum in lieu of a pension, based on a person's own work that was exempt from Social Security taxes can result in a WEP reduction, not only government pensions. I don't know if you may meet an exception to WEP, however, so you'll have to make your own judgment with regard to filing an appeal.

The reasoning behind WEP is explained in this Social Security publication: https://www.ssa.gov/pubs/EN-05-10045.pdf. My guess is that if your colleagues have the same set of circumstances as you, they may not have informed Social Security of their non-covered pension (or lump sum).

Best, Jerry