updated 2:28 PM CEST, May 24, 2023

Proposed legislation would address the ‘Expat Retirement Surprise’, but some say SS solvency concerns could keep it from passing

…and just-revealed setback to bill’s progress has sparked calls for a write-in campaign by American Citizens Abroad

“Lois” – not her real name – is an American who has lived in Paris for more than 20 years, but, like many expats, she spent the first half of her career working in the U.S., and building up a U.S. Social Security pot for her eventual retirement...

When she was in her late 30s, Lois’s employer moved her to France, and, once there, she began contributing to a French pension plan.

After turning 50, Lois began planning for her retirement, calculating her projected total retirement income based in part on annual statements from the U.S. Social Security Administration, which indicated how much she was due to receive, depending on the age at which she chose to begin receiving her payments.

When, in her early 60s, she finally sat down and began the process of formally applying to receive her Social Security payments, Lois was suddenly hit with one of those U.S. expat “OMG moments”, as she was told that, owing to a U.S. government formula that’s said to be designed to ensure that U.S. Social Security payments make allowances to benefit those who earned less during their working years than others, her Social Security income would actually be almost US$500 a month less than what she had been told, until this point, that it would be.

Which is to say, almost US$500 a month less than what she had been counting on in her retirement planning over the previous decade or more.

WEP – the ‘Retirement
Surprise’ for many expats

Windfall Elimination Provision acronymsThe formula being applied to Lois’s Social Security pot is formally known as the Windfall Elimination Provision, or WEP, and dates back to 1983, when it was introduced by the U.S. government in an effort to introduce an element of payments being based not only on the years someone had worked, but also on need.

The “windfall” in question refers to the way that that the amount of Social Security a person receives when they retire has, since the first monthly check was issued in 1940, been subsidized for those recipients who had lower incomes than average throughout their working life.

While not a windfall for low-earning recipients, this automatic benefits subsidy was deemed to be so for those who were well-paid outside of the Social Security system (ie., who therefore were in receipt of a pension based on work not covered by Social Security, such as, in the U.S., a state or local government or other public sector job).

Many expats have found themselves in this situation (WEP-affected, or “WEPT”) as well, as their work abroad could typically see them contributing to a non-U.S. government pension with Social Security-like benefits, instead of the U.S. Social Security pot.

Perhaps not surprisingly, given the way it often significantly reduces certain individuals' pension payments, the WEP has long been unpopular with those at home, as well as abroad, who have been affected by it.

However, the reaction to learning about it is thought to be significantly more dramatic among expats because – unlike Homeland Americans – they are often not told early-on that it exists. (In the U.S., state and local government employers are required by law to disclose the effect of WEP to new employees.)

Although some U.S. expats do find out earlier – often from their tax adviser, wealth manager, or older expat friends  – many others, like Lois, still aren’t getting told that their monthly Social Security payments on retirement will be much less than they were expecting to receive until they are nearing or at retirement age, and formally begin to apply to receive their benefits.

Doris Speer, president of the Paris-based Association of Americans Resident Overseas (which believes WEP should be repealed) and the one who introduced “Lois” to her fellow American expats in a 2021 article on AARO’s website, says that since she wrote that piece, much has changed.

One of several bills aimed at reforming or repealing the Windfall Elimination Provision – the Social Security Fairness Act (H.R.82)  – at last count had 305 co-sponsors (211 Democrats and 94 Republicans), and predictions had been, until recently, that it would make it to the House floor for a vote this fall.

A Senate companion bill, S. 1302, has 42 co-sponsors (36 Democrats, two independents and four Republicans), though it needs 60.

What's more, although previous anti-WEP bills haven’t mentioned expats, these two do, sources say.

However, in the last week of September, the House bill “was pulled out of the Consensus Calendar – which would have sent it to [be voted on] the House” – and sent instead to the House Ways and Means Committee for “mark-up,” the Washington, DC-based American Citizens Abroad has revealed.

According to ACA executive director Marylouise Serrato, in order to get the bill back onto the calendar for a House vote, a “discharge petition” has been filed, which the Washington, DC-based ACA noted “needs 218 votes to pass.” (Currently, according to a website page which tracks the progress of this petition, the petition has just 24 signatures.) 

In response, ACA has launched a write-in campaign  calling for the repeal of WEP,” in order to help get the needed signatures for the discharge petition in time to ensure a House vote can go ahead.

(The deadline to sign the petition, which may be found on ACA’s website by clicking here, is Nov. 10.)

'Benefits can be reduced by up to 50%'

In an article on its website,  ACA notes that the Windfall Elimination Provision can reduce individuals’ Social Security benefits “by up to 50% of their foreign pension benefits”.

It adds: “The WEP impact is reduced by the number of years an individual has contributed to Social Security, and only applies to individuals with foreign pensions who have contributed for between 10 and 29 years to Social Security, with the maximum monthly reduction (2016) being the lower of US$428 and 50% of your foreign pension benefit.

“Self-employed Americans living abroad often must pay SECA [Self Employed Contributions Act] tax in addition to the social security taxes they pay in their country of residence.

“No voluntary program exists for non-self-employed Americans to contribute to the Social Security system.”

Also advocating for the repeal of WEP, it should be noted here, has been the Democrats Abroad, which has raised the issue at expat events for years, and in August, posted an update of its efforts on its website.  

A survey of a cross-section of U.S. expatriates that DA carried out in 2019, meanwhile, found that one in six (16.7%) of those surveyed who at that time were in receipt of their U.S. Social Security benefits reported that they had been affected by WEP.

Some expats are affected more than others: for example, Americans living in the UK, who worked in the U.S. and contributed to Social Security for 30 years or longer before coming abroad, won't be affected by WEP when they retire, experts say; similarly, those who have more than 20 years of "substantial" earnings in the U.S., during which they paid into the system, will be affected less than others.

One thing everyone agrees, though is that expats who have made Social Security contributions while working in the U.S. shouldn't wait until they're about to retire to begin looking into how, if at all, the Windfall Elimination Provision is likely to affect them.

'Better support needed'

This is why ACA, like many other critics of the current WEP arrangement as it’s applied to expats, argues that as long as the WEP remains in force, the Social Security Administration should at least be giving better support to Americans overseas, providing such things as “on-line viewing of their accounts, assistance for first-time applications for Social Security numbers, and a dedicated out reach for overseas Americans with questions and problems.”

And especially, critics of the current system say, say, the current system of sending eroneous mailings to expats that purport to tell them how much they can expect to receive in Social Security benefits urgently needs fixing, so that millions won't continue to be routinely misled about their retirement income, the way so many apparently are. 

London-based IRS Enrolled Agent Liz Zitzow, for example, who founded her tax preparation and advice company, British American Tax, in 2005, says most of her clients “don’t even have a clue” that their Social Security pots will be reduced when they eventually begin to receive the payments, as a result of their non-U.S. pension arrangements, “until I inform them of it.”

Typically they react with “surprise and anger,” she adds, when told “that the slip of paper they keep getting that says they’re going to be getting US$1,000 a month turns out to [be wrong, and they’ll only be getting] US$500 a month.”

The Social Security Administration's press office didn't immediately reply to a request for comment, but the American Expat Financial News Journal will continue to ask for one.

Totalization agreements

WEP experts note that some individuals are able to obtain exemption from WEP if they need to initiate a "Totalization agreement" in order to obtain a pension in the country in which they are currently living and working.

Such totalization agreements were introduced in the 1970s (before the WEP was brought in) to help "eliminate dual Social Security taxation" while also helping to "fill gaps in benefit protection for workers who have divided their careers between the United States and another country."

One WEP expert explains the way it works as follows: "If you need Totalization to get a foreign pension, you'll be exempted from the WEP. If you don't need it to get your foreign pension, you won't be exempted."

Five decades on, though, such agreements are only in force so far between the U.S. and some 30 other countries, mostly in Europe, and their effectiveness is said to be limited. (The list of these countries and other information about Totalization may be found by clicking here.

The WEP numbers, as officially crunched

If the SSA isn’t prioritizing expats currently, one likely reason (some say) may be found in the official data showing how many of the total number of Americans currently said to be affected by the Windfall Elimination Provision are expats.

According to a Congressional Research Service report on the subject of WEP that was published just last month, as of December 2021, the total number of those affected by WEP is estimated to be around 2 million – or only around 3% of all Social Security beneficiaries.

Of this number, only around 109,911 (or roughly 5.5% of the WEP-affected total) were said to be located in “outlying areas and foreign countries”, with the remaining 94% living Stateside.

Nevertheless, ensuring that U.S. citizens overseas are included in any WEP repeal/reform legislation is one of the issues that such expat advocacy organizations as AARO and ACA are adamant that lawmakers need to be aware of.

“U.S. Citizens overseas [who are] receiving foreign pensions are not ‘double dipping,’ these are retirement benefits earned overseas in addition to contributing fully to U.S. Social Security,” ACA says firmly.

The elephant in the debating chamber:
the possible insolvency of the SS system

The issue that even campaigners for repeal of WEP agree is likely to derail such efforts, if nothing is done to address it, is how the solvency of the Social Security system would be ensured, were the Social Security Fairness Act to pass both houses of Congress, and be signed into law.

The co-sponsor of the bill in the house, Rep. Rodney Davis (R-IL) is adamant that although the legislation “absolutely is going to cost, when you score this on a spreadsheet” – as he told a journalist with the Federal News Network in July – but that it would be up to Congress to “ensure the long-term solvency of Social Security.”

As an article in an American publication called The National Interest noted in August, though, a Committee for a Responsible Federal Budget report in July “found that the repeal” of WEP, alongside that of another bill known as the Government Pension Offset (GPO), which reduces the Social Security benefits of spouses, widows and widowers with pensions from a federal, state or local government job, “would likely lead to earlier insolvency for Social Security” than has already been forecast.

“Unfortunately, this elimination would be quite costly,” the National Interest article quoted the Committee for a Responsible Federal Budget report as saying.

“The Social Security Administration's Chief Actuary estimates [that] the bill would cost nearly US$150 billion through 2031, and worsen Social Security's 75-year shortfall by 0.12% of taxable payroll.

“On its own, this would advance Social Security's insolvency by over a year, to early 2034 based on the Trustees' 2022 projections.”

The National Interest article ends by noting, while still quoting from the Committee for a Responsible Federal Budget report, that such a repeal “would also make Social Security less fair, not more.”

The case for not repealing WEP  

Another way of looking at the WEP issue is expressed by an American businessman who has lived abroad for more than a decade, and who became interested in the argument about whether it should be repealed, re-configured, or left as-is early-on.

This American says he thinks that those "who do not see a reason to repeal WEP" are comfortable with the way it works now, because, as they see it, it is applied "to people who have declared years or decades of US$0 earnings – [during which they've been enaged in] non-SS-covered employment – who don't contribute to Social Security on what they really did earn in those jobs, [and] who have gained a second pension on their subsequent, undeclared-to-the-SSA earnings."

Such individuals should not, this expat adds, expect to receive "the higher Social Security benefits currently attributed to true lifetime low-earners, under America's needs-based, progressive payout calculation.

"The extra help for lifetime low-earners is made possible because other, better-paid beneficiaries are getting a bit less."


Links to other articles, and sources of information on the WEP:

      *  Social Security Administration fact sheet: 
      *  Social Security Administration's Windfall Elimination Provision (WEP) Online Calculator:
      *  Social Security Administration document on the interaction between Social Security and foreign pensions
      * Congressional Research Service Report on WEP (Sept 19, 2022 updated version): 
      *  American Citizens Abroad article, “Help get H.R. 82 (eliminates the WEP for Social Security) to the House floor for a vote”: 
      *  American Citizens Abroad article, “ACA keeps pressure on Congressional Leadership for HR82 The Social Security Fairness Act”
(re letter sent in August) 
      *  AARO article from 2021, based in part on results of a survey carried out in 2020: (“My Social Security Was Reduced!”)
      *  AARO article on WEP, Sept. 16, 2022 
      *  American Expat Financial News Journal coverage of Social Security Fairness Act 
      *  Democrats Abroad’s position statement (“Progress to Repeal the Windfall Elimination Provision of Social Security Fairness Act")  
      *  Repeal WEP Facebook Group: 
      *  Federal News Network article, “Bill to end Social Security’s ‘evil twins’ that cut benefits teed up for House floor vote”
      *  The National Interest article: “Could It Pass? One Social Security Reform Bill Has Momentum”
      *  AARP.org article: “Nine Ways to Strengthen Social Security: The truth about its current status, and options for boosting its future stability”