The Social Security Administration’s definition of a “pension” benefit is a broad term that is focused more on the retirement income being received than the technical benefit design provisions. That means the WEP could affect more people than just those public employees enrolled in traditional defined benefit plans.

In 25 states plus the District of Columbia there are public employees who are automatically enrolled in or have the option to join a primary defined contribution plan, guaranteed return plan, or a hybrid retirement plan. Workers enrolled in any of these may be subject to the WEP if their employer does not participate in Social Security.

The government classifies any primary retirement plan as a “pension” for WEP purposes if:

  • The retirement plan receives contributions from both the employer and the employee, or
  • The retirement plan is considered the employer’s primary retirement plan, whether or not the only contributions into the plan are from the employee or employer alone.

If an employee is enrolled in a supplemental defined contribution plan to which the employer does not contribute, such as a 457 deferred compensation plan, it is not considered a pension.

Importantly, neither the WEP nor GPO applies until the employee withdrawals money from the plan. The amount used to calculate the maximum WEP is pro-rated based on the employee’s age and the date of the withdrawal.[1]


Learn more about the Windfall Elimination Provision and Government Pension Offset here.

[1] Social Security counts any primary defined contribution plan or primary cash balance plan as a “pension” for the purposes of the WEP and GPO. The monthly income that they use to calculate any reduction under the GPO is complicated, but, in effect, translates the lump sum balance of the individual account (whether defined contribution or cash balance) and uses an actuarial table (considering retirement age) to determine an equivalent monthly annuitized rate. The specific form that you take distributions does not matter, though a lump sum withdrawal (a taxable event) to reduce the overall balance may influence the GPO reduction amount. See Social Security Administration, “RS 00605.364 Determining Pension Applicability, Eligibility Date, and Monthly Amount,” Effective Date November 12, 2020.