Dear Rusty: How Can a Foreign Company Pay to the US Social Security System? I worked in Barbados before immigrating to the US and earned a pension there. Now my US Social Security benefits have been reduced because I receive a pension from Barbados. One has nothing to do with the other and I want my money back! Signed: Angry immigrant
Dear Angry: Foreign companies don’t pay the US social security system, and neither do residents of other countries who work in their own country. But for a resident of another country who earns a pension in his own country, and who later moves to the US and earns a supplemental US Social Security pension, his US Social Security benefit will be reduced by a provision of US law called the Windfall Elimination Provision ( WE P). WEP was enacted by Congress in 1983 to end what was seen as “double dipping” – where someone with an additional pension (like your Barbadian pension earned without contributing to U.S. Social Security) would lose their U.S. Social Security (SS) benefits were calculated in the same way as a US resident who did not have such an additional “uncovered” pension. The 1983 WEP rule created a special formula for those who were entitled to both a U.S. Social Security benefit (earned by contributing to the U.S. program) and another pension earned without contributing to Social Security.
While you are determined that one has nothing to do with the other, US law says otherwise. WEP reduces the U.S. Social Security benefits of anyone with an “unfunded” (eg, foreign) pension so that their US Social Security benefits are more in line with the benefits provided to others without an additional unsecured pension. U.S. Social Security is designed to provide lower-income workers with a higher percentage of replacement income, and those with additional unsecured pensions enjoy an unfair advantage because their income appears artificially lower than it actually is. WEP was implemented by Congress to correct that unfair advantage. But just like you, almost everyone affected by WEP (which includes many officials in 27 US states, by the way) thinks it’s unfair and often complains about it to their congressional representatives.
FYI, there is now a bill in Congress proposing to abolish WEP (HR 82 – The Social Security Fairness Act of 2021). However, I must let you know that for many years a bill has been introduced in almost every Congress to eliminate or reform WEP, and no previous bill has ever survived to be introduced on the floor of the House or Senate and then to be assigned to a committee for review, where progress appears to end.
Although you want your money back, I’m afraid I can’t offer you much hope that ever will. Congress is more focused on other issues, including a much broader reform of the Social Security program to make it financially solvent again before the SS trust fund is exhausted in 2034 (which would require a 21% cut in all benefits across the board) . Whether the WEP reform will be part of the corrective action being taken to restore Social Security finances is a mystery. But registering your objection to the Windfall Elimination Provision with your congressional representative would be a step in that direction.
This article originally appeared on Devils Lake Journal: Ask Rusty – Social Security’s WEP is unfair – I want my money back!