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The Windfall Elimination Provision may affect SSD-Part II


The previous blog post discussed some of the basics pertaining to the Social Security Administration's Windfall Elimination Program. It discussed how Social Security disability benefits may be reduced and some of the exceptions. This blog post will explain how this provision works and how the SSA calculates the reduction in benefits for those cases where the provision applies.

As New Jersey residents know, SSD benefits are meant to replace some of the disabled worker's pre-disability earnings. Therefore, SSD benefits are based on that disabled worker's monthly earnings prior to their disability and it is adjusted for inflation from time to time. To reach a final figure in cases where the Windfall Elimination Provision is applicable, the SSA separates earnings into three parts and multiplies those parts with three factors in order to determine the final SSD benefits amount.

For example, let's take a worker who is disabled at the age of 62 years in 2015 and cannot work anymore. For that worker, the first $826 in average monthly earnings is multiplied by 90 percent, the next $4,980 in average monthly earnings is multiplied by 32 percent and whatever earnings remains after that are multiplied by 15 percent. By applying this provision, the SSA is able to provide an average wage replacement rate of 25 percent for high-wage earners and 55 percent for low-wage earners.

The purpose of the Windfall Elimination Provision is to remove the disparity between workers who retired before and after 1983. In those days, many workers did not pay Social Security taxes but later, started receiving SSD benefits based on the calculation that was used for long-term low-wage earners in addition to their employer's pension. This resulted in SSD benefits that were exceptionally high.

Understanding the Windfall Elimination Provision may answer the questions of many SSD benefits recipients. However, there may be many other issues that they face when it comes to SSD benefits. Therefore, it may be helpful to consult with a lawyer who can explain all the rules and also help recipients resolve some of the most complicated SSD benefits issues.

Source: Social Security Administration, "Windfall Elimination Provision," Accessed on May 29, 2015

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