forbes explains why....
Issue is that social security has no visibility to your income while covered by a pension and NOT paying social security. it is about earnings. A person in the non-social security plan was prevented from taking a social security covered job for a reduce number of years and getting that income replaced at the low income rate of higher replacement.
Forbes example....Now let’s suppose you receive what’s called a “non-covered” pension, which is work where no Social Security tax is withheld. These pensions include teachers, public sector workers such as firefighters, police , state, local or county employees. Let’s also assume that you earn $84,000 in that job and have a side job subject to Social Security withholding and earn $12,000. When you apply for Social Security benefits, to Social Security you look like a “low earner”, which you are not. Social Security does not have access to information relating to your “non-covered” pension. Because of that, when Social Security calculates your benefit, you have a replacement percentage of 90%. If your Social Security benefit was calculated as if all your earnings were in the Social Security system on total earnings of $96,000, your replacement rate would be 40%, not 90%. Since you really are not a low earner because your total income is $96,000, Social Security reduces your monthly Social Security benefit by the Windfall Elimination Provision (WEP) to adjust for the higher replacement percentage which you would not be entitled to if all of your earnings were in the Social Security system.
|