How to manage the risk of Anna Rappaport SOA Ret Risk Working in Retirement

How to manage the risk of Anna Rappaport SOA Ret Risk Working in Retirement

The Windfall Elimination Provision - WEP - Can Reduce Social Security Retirement Benefits

Financial adviser Matthew Allen explains how Social Security's government pension offset or GPO is often "wrongly applied" and helps our reader learn how to deal with an "overpayment notice."
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Question

My parents both have been receiving Social Security for 20 years based on 30 years of working in the U.S. before retiring, plus they received a German pension similar to Social Security for some time worked there before immigrating to the U.S. in the early 60s.

Recently my father passed away and the Social Security Administration (SSA) has asked for documentation on all the German payments to my mom before she can receive survivors benefits from his Social Security.

It was disclosed over 20 years ago, when they applied for their U.S. Social Security benefits, that they would also be receiving some retirement income for the time they worked in Germany. At that time the SSA told them that wouldn’t be needed for their U.S. benefits payments. For my late father, neither his prior benefits nor the survivors benefit seem to be a question.

On the other hand, the SSA is saying my mother may owe back Social Security since she didn’t meet the minimum U.S. contributions for all 30 years of work in the U.S. as she took time to raise a family. The SSA says that before she can receive his survivors benefits they need to send all the German documentation off for translation and currency adjustment and see what adjustments need to be made based on her smaller payments. The implication is she would owe back some of her own Social Security benefits for 20+ years of payment, even though she disclosed this and has notes on whom she spoke with when she applied for U.S. benefits.

The SSA has discontinued my father’s payments although my mother continues to receive only her much smaller monthly payment. The SSA has suggested the process to get survivor benefits may take a long time.

Is this reasonable to withhold survivor benefits for “a lengthy review time” and possible they can ask for some portion of 21 years of benefits back due to different income and benefits in a different country for a time period from over 50 years ago?

Answer

There are two main Social Security rules involved when dealing with a non-covered pension, says Matthew Allen, co-founder and CEO of Social Security Advisors.

A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments or non-U.S. employers.

The first rule is the windfall elimination provision or WEP (which applies to one’s own benefits) and the second main rule is the government pension offset or GPO (which applies to spousal benefits or survivor benefits).

When someone works in the U.S. and earns enough credits in the United States (10 years of work or 40 quarters of coverage), any U.S. Social Security benefit that is received based on one’s own work record can be offset by a non-covered pension; for instance, a foreign pension from another country as is the case with the German pensions in this case, he says.

“In short, both your mother’s and father’s U.S. Social Security benefits should have been reduced when the German pensions began due to the WEP unless they qualified for one of the few exemptions available,” explains Allen.

(Read about the exemptions here.)

So, if the SSA did not properly adjust for these originally, this can result in an overpayment notice being received alleging that Social Security paid the recipient too much money and that some of that money needs to be repaid.

“If an overpayment notice is received,” says Allen, “the recipient of that notice should seek professional guidance and advice immediately from a Social Security adviser in regards to how to handle the matter.”

Read Overpayments.

Allen goes on to say that first, it is important to determine if the SSA is correct in alleging the overpayment (mistakes often do occur) and second, if the SSA is correct in alleging the overpayment, it is possible in some cases to seek a waiver of overpayment so that the funds do not need to be repaid.

At a minimum, there are provisions within the Program Operations Manual System (POMS for short—which is Social Security’s rule book) that allow, under almost all circumstances, to have the alleged overpayment reduced through a compromise offer.

“So, yes, for your mother and father, it seems based on your description that the WEP should have been applied,” says Allen, although in what amounts and whether this was done correctly would require professional analysis.

“On the matter of your mother’s Social Security survivors benefit, the GPO rule often comes into question and is wrongly applied,” says Allen. “Importantly, survivors benefits are exempt from being impacted by the GPO rule when the non-covered pension is a foreign pension, as it is in this case with your mother’s German pension.”

(Read more on this exemption in this section of POMS.) The conclusion on this point is that the SSA should not be reducing due to the German pension any U.S. Social Security survivors benefit that your mother is otherwise eligible to receive.

“In terms of the SSA’s request for extensive documentation, properly addressed, your mother can force the SSA to help her gather this information if they are requiring it,” says Allen. That provision is listed in POMS.

Last but not least, as per POMS, if an alleged overpayment notice is replied to timely, the Social Security Administration is not allowed to withhold her benefits until the matter is resolved and indeed, can be forced to return amounts withheld while the matter is being further evaluated, notes Allen.

“All too often Social Security beneficiaries are short-changed because of a misapplication of the rules and it is critical that anyone facing a more advanced situation like your mother seek the knowledge and support of a professional Social Security advisor with extensive experience in these matters,” he recommends.

Got Questions? Get Answers.

Got questions about Social Security, Medicare, retirement, investments, or money in general? Want to be considered for a Money Makeover? Email Robert.Powell@maven.io. Kim McSheridan assisted with this report.

Question

My parents both have been receiving Social Security for 20 years based on 30 years of working in the U.S. before retiring, plus they received a German pension similar to Social Security for some time worked there before immigrating to the U.S. in the early 60s.

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