If employer contributions or employer and employee contributions are used to determine the payment, it is generally a pension subject to the windfall elimination provision (WEP).
If only employee contributions are involved and the payment amount is based on employee contributions plus interest, i.e., a savings plan, it is subject to WEP, only if it is the primary retirement plan.
Withdrawals of the employee's own contributions and interest made before the employee is eligible to receive a pension are not pensions for WEP purposes if the employee forfeits all rights to the pension. This rule applies even if the employer paid the employee contributions.
Withdrawals of the employee's own contributions and interest made after the employee is eligible to receive a pension are considered a lump-sum pension for WEP purposes.
Any separation payment, withdrawal, or refund consisting of both employer and employee contributions is a pension; for WEP purposes whether made before or after the employee is eligible to receive a pension.
Payments received from defined contribution plans (e.g., 401(k), 403(b), or 457 plans) based on non-covered employment are considered a pension subject to WEP regardless of the source of contributions (employer only, employee only, or a combination of both), if the plan is the primary retirement plan. If the plan is a supplemental plan, the payments are subject to WEP when the plan payments contain employer or both employer and employee contributions.
Payments from optional savings plans (e.g., the Federal Thrift Savings Plan for Civil Service Retirement System (CSRS) employees) are not considered a pension for WEP. For payments to qualify for this exclusion, the savings plan must be separate from the retirement plan and yield only the amount the employee paid in (plus interest and dividends), rather than an amount calculated based upon certain conditions such as age, earnings, and length of service.
Pension payments that include voluntary employee contributions, that are separate, and in addition to, the regular pension payment are not subject to WEP.
When a pension is based on the work and earnings of another individual in addition to the work and earnings of the number holder (NH), consider only that portion of the pension attributable to the NH's non-covered earnings for WEP.
Prorate the pension to determine the portion of the pension based on the NH's non-covered earnings. Use the pension-paying agency's measuring methods (credits, months, etc.) to define the proration factors.
For pensions with partial non-covered situations, use WEP guarantee procedures RS 00605.370B.2. The numerator is the NH's non-covered service and the denominator is the total service.
An individual becomes eligible for a monthly pension or a lump sum in lieu of a monthly pension the first month they meet all requirements for payment except stopping work and applying for the payment.
The pension-paying agency, not SSA, determines pension eligibility and entitlement. Some defined benefit plans and defined contribution plans have specific requirements an individual must satisfy to be considered eligible for or entitled to a pension payout (i.e., periodic or lump sum payment). Review the plan's requirements to determine whether to apply WEP. See appropriate regional issuances for guidance on specific defined contribution plans.
Service credits that the worker purchased for the plan are included in determining the pension eligibility date regardless of when the worker purchased service credits. This includes credits for military service for a Federal pension even if the employee did not waive the military pension. (For proofs required, see RS 00605.366.)
Employment in a company or vesting in its pension plan before 1986 in itself does not constitute pension eligibility. The worker must have been eligible to receive a retirement or disability pension payment (either monthly or lump sum) from the pension plan before 1986 for the WEP exemption to apply.