The Windfall Elimination Provision (WEP)

The Windfall Elimination Provision (WEP) reduction has been effective since it was first enacted in 1983. However, it’s important to note that recent legislation has repealed the WEP. The Social Security Fairness Act, signed into law on January 5, 2025, ends the WEP effective December 2023.

The Windfall Elimination Provision (WEP) can indeed affect clergy who have opted out of Social Security. Here’s how it works:

How WEP Affects Clergy:

1. WEP Reduction: If a clergy member has opted out of Social Security and also has other employment covered by Social Security, their benefits may be reduced by the WEP. This reduction is because they are receiving a pension from non-covered earnings (their earnings as clergy).
2. Calculation Impact: The WEP affects the calculation of Social Security benefits by reducing the percentage of average indexed monthly earnings (AIME) used in the benefit formula. This results in a lower Social Security benefit than one might expect based on the statement provided.
3. Requirements: To be subject to WEP, the clergy member must have less than 30 years of substantial earnings under Social Security. The more years of substantial earnings they have, the smaller the WEP reduction.

However, the Social Security Fairness Act recently passed, repeals the WEP. This change means higher Social Security benefits for many, especially those who were previously impacted by the WEP

Here’s an example of how the WEP might impact a clergy  who has opted out of Social Security:

Scenario: Let’s consider Reverend Mark, clergy who opted out of Social Security in his early years of ministry through a conscientious objection.

Background: Mark has worked as a pastor for 25 years and has not paid into Social Security as part of his ministerial earnings. However, before entering the ministry, Mark worked for 10 years in various jobs where he paid Social Security taxes.

Situation: When Mark reaches retirement age, he applies for Social Security benefits based on his 10 years of covered employment. Even though he has gained a pension from his church for his years of service, WEP will adjust his Social Security benefits due to his non-covered earnings as clergy.

Impact: If Mark’s original Social Security benefit would be $900 per month, the WEP might reduce it by approximately $450, leaving him with $450 per month instead. This reduction occurs because he has fewer than 30 years of substantial earnings covered by Social Security.

However, with the recent repeal of WEP, Mark’s benefits will be recalculated to provide him his full benefits based on his Social Security-covered earnings starting January 2025.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com