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Ask Bob: How Do Social Security Totalization Agreements Work?

Jim Blair of the National Social Security Association helps a Retirement Daily reader understand how WEP and Totalization Agreements work.

Question

Before I immigrated to the United States, I worked for over a decade in Europe. Not a government job, nor non-profit. When I turned 65, I received a notification telling me that I had enough credits for about $300 per month in benefits. I was thrilled. However, the Social Security Administration informed me that this amount would be deducted from my benefits in this country because it constituted "double-dipping."

Wait a moment: I worked and paid taxes in my home country, where I resided for 30 years, and am a citizen of that country. It's not as if I am an American who goes overseas for a temporary job! If I qualify for benefits from my home country - benefits I worked for - why would the U.S. government forbid me to accept the money? It does not come out of U.S. funds! This all happened before I even contemplated coming to the States! How do you explain this?

Unfortunately, I have no family "back home" to speak to the authorities there, nor can I afford to fly to Europe, or hire a lawyer. So, basically, I worked the first 12 years of my life for nothing. After working 35 years in the United State, I only receive about $750 per month in Social Security, because I lost my full-time employment during the Great Recession of 2008-09 and could only find low-paying part-time jobs for the last 10 years. I lost 65% of my income. Should my husband predecease me, I will find myself in great financial difficulties. Having an additional $300 would have helped. Not everyone who is poor in old age is at fault or was lazy during his working years.

Answer

The issue your reader is talking about is the Windfall Elimination Provision (WEP) which is included in each totalization agreement Social Security has with about 28 countries, says Jim Blair of the National Social Security Association.

“If an individual is eligible for a pension from both the foreign country and the U.S., Social Security WEP does apply,” he says. “Under WEP there is a provision that states her Social Security cannot be reduced by any more than ½ of her pension so it should only be a $150 reduction.”

Unfortunately, says Blair, WEP is written into the law. “Based on her statement it sounds as if she would not have 30 years of substantial Social Security covered wages to offset WEP but it is worth checking,” he says.

According to Blair, WEP changes the way benefits are computed. “Social Security computes benefits to give lower-earning individuals a higher percentage return of Social Security benefits versus the higher earner,” he says.

WEP adjusts the computation to lower this percentage return. According to Blair, the maximum reduction for WEP is $480. “There is a provision that guarantees Social Security will not reduce a Social Security benefit by more than half of a low pension,” he says.

For more information on WEP you can go to the Social Security website at - https://www.ssa.gov/benefits/retirement/planner/wep.html.

A WEP factsheet is available at - https://www.ssa.gov/pubs/EN-05-10045.pdf.

A list of countries Social Security has totalization agreements with, including links to the agreements, can be found at - https://www.ssa.gov/international/agreements_overview.html.

Of note: The Government Pension Offset (GPO) applies to benefits a person receives from another individual's work record. Spousal, ex-spousal, widows, widower and surviving divorced spouse benefits are subject to GPO. The Social Security benefit is reduced by 2/3rds of the gross non-covered pension. The GPO factsheet can be found at - https://www.ssa.gov/pubs/EN-05-10007.pdf. If she survives her husband she will not be subject to Government Pension Offset (GPO) as it does not apply to foreign pensions.

Got Questions?

Email Robert.Powell@Maven.io

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Question

Before I immigrated to the United States, I worked for over a decade in Europe. Not a government job, nor non-profit. When I turned 65, I received a notification telling me that I had enough credits for about $300 per month in benefits. I was thrilled. However, the Social Security Administration informed me that this amount would be deducted from my benefits in this country because it constituted "double-dipping."

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