Let's look at a case study. Suppose you have a client who has worked for a federal, state or local government, employment which was covered by pension benefits but not Social Security. Now, suppose this same client worked in a job that was covered by Social Security. Writing for USA Today, Amanda Alix observes, "If this is the case, [your client] will have Social Security benefits reduced based on the SSA's formula, which takes your inflation-adjusted average monthly earnings and divides them into three brackets: in approximate terms, the first $800, the next $3,300 and the amount above $4,100. The first amount is multiplied by 90 percent, the second by 32 percent and anything remaining by 15 percent. Adding them together gives you your monthly benefit; it's that 90 percent bracket that the WEP uses to reduce your benefit."
Alix goes on to note several circumstances under which clients may be exempted from the WEP, and adds that all of these factors can impact spousal benefits, too. As clients move toward retirement, understanding these rules can help them maximize benefits and make the right decision on when to retire.