The Windfall Elimination Provision (WEP) affects which bend point of Social Security benefits?

The Windfall Elimination Provision (WEP) specifically impacts the calculation of Social Security benefits for individuals who have also earned a pension from employment not covered by Social Security. The provision alters the formula used to compute the average indexed monthly earnings (AIME), particularly affecting the first bend point.

The first bend point is crucial because it determines the percentage of the first portion of a worker’s AIME that is factored into their primary insurance amount (PIA). Under normal circumstances, the formula allocates a higher replacement percentage for earnings up to the first bend point to help lower-income workers. However, because of WEP, the replacement percentage for the first bend point is reduced, resulting in lower Social Security benefits for individuals who receive a pension from non-covered employment.

Understanding this provision is important for advising individuals who may be affected, as it ensures that their expected Social Security benefits accurately reflect their work history and pension sources. The other bend points remain unaffected by WEP, which emphasizes the targeted alteration in benefit calculation.