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Re: US CITIZENS: Let's stop the WEP from cutting our Social Security benefits.

Posted: Mon Oct 30, 2023 1:02 pm
by Teflon
captainspoke wrote: Fri Oct 27, 2023 11:04 pm I do understand (and very much agree with) the rationale for the WEP. I have a sister who is getting an illinois state teacher pension (a system which is separate from social security), which is very generous. Her pension is something like $100k/yr (even tho illinois is otherwise broke and near bankrupt). Most police and fire departments have their own pension systems, which are even more generous. Add in military and federal government jobs. And besides the good payouts, retirement for those professions can come much earlier than the 'normal' retirement age for SS--which means that these people could work other jobs long enough to technically qualify for social security benefits.
I will respectfully disagree with you on this point. While it's true that many government pensions are extravagant, those lucky enough to have one represent only a tiny fraction of the overall beneficiary pool. According to the SSA web site, in 2020, the WEP applied to 3 percent of all beneficiaries (1.95 million beneficiaries out of 64.85 million total beneficiaries). The WEP savings are therefore relatively modest. After subtracting the SSA administrative overhead costs for WEP enforcement, the total amount of SS saved is less than $5 billion/year out of an annual SS budget of $1.4 trillion. That's a rounding error.

Furthermore, plenty of Americans have 401k plans and -- assuming they save from their 20s onward and take matching employer contributions -- they could reasonably expect to have a 401k worth millions of dollars when they retire. Yet they can still claim their full SS benefit while those of us with only a very modest foreign pension have our SS benefit slashed because we're allegedly "double dipping".
ClearAsMud wrote: Sat Oct 28, 2023 11:30 pm A theoretical argument exists for exempting the Basic Pension portion of EPI benefits from WEP, but that determination does not appear to have been made by the SSA (perhaps captainspoke will be able to get something straight from the horse's mouth).
Wow! Please tell us more about the theoretical argument for exempting kosei nenkin from the WEP. If that argument is accepted by the SSA then it will be a very big deal!

Re: US CITIZENS: Let's stop the WEP from cutting our Social Security benefits.

Posted: Mon Oct 30, 2023 10:46 pm
by TokyoWart
Teflon wrote: Mon Oct 30, 2023 1:02 pm
captainspoke wrote: Fri Oct 27, 2023 11:04 pm I do understand (and very much agree with) the rationale for the WEP. I have a sister who is getting an illinois state teacher pension (a system which is separate from social security), which is very generous. Her pension is something like $100k/yr (even tho illinois is otherwise broke and near bankrupt). Most police and fire departments have their own pension systems, which are even more generous. Add in military and federal government jobs. And besides the good payouts, retirement for those professions can come much earlier than the 'normal' retirement age for SS--which means that these people could work other jobs long enough to technically qualify for social security benefits.
I will respectfully disagree with you on this point. While it's true that many government pensions are extravagant, those lucky enough to have one represent only a tiny fraction of the overall beneficiary pool. According to the SSA web site, in 2020, the WEP applied to 3 percent of all beneficiaries (1.95 million beneficiaries out of 64.85 million total beneficiaries). The WEP savings are therefore relatively modest. After subtracting the SSA administrative overhead costs for WEP enforcement, the total amount of SS saved is less than $5 billion/year out of an annual SS budget of $1.4 trillion. That's a rounding error.

Furthermore, plenty of Americans have 401k plans and -- assuming they save from their 20s onward and take matching employer contributions -- they could reasonably expect to have a 401k worth millions of dollars when they retire. Yet they can still claim their full SS benefit while those of us with only a very modest foreign pension have our SS benefit slashed because we're allegedly "double dipping".
I don't have a strong opinion on the fairness of WEP but I don't think it is primarily addressing situations where someone has other retirement resources. It comes about to address the "bend points" for SS payouts which favor lifetime low earners over higher earners for their SS benefits. When WEP applies a higher income earner who was not subject to FICA taxes for several years because they were working in a job not covered by SS, appears the same to the system (pre-WEP) as someone who did not contribute to SS because they were not employed. WEP is designed to preserve the progressive nature of SS payment calculations.

https://www.ssa.gov/policy/docs/ssb/v79n3/v79n3p1.html

Re: US CITIZENS: Let's stop the WEP from cutting our Social Security benefits.

Posted: Tue Oct 31, 2023 1:15 am
by ClearAsMud
Teflon wrote: Mon Oct 30, 2023 1:02 pm
ClearAsMud wrote: Sat Oct 28, 2023 11:30 pm A theoretical argument exists for exempting the Basic Pension portion of EPI benefits from WEP, but that determination does not appear to have been made by the SSA (perhaps captainspoke will be able to get something straight from the horse's mouth).
Wow! Please tell us more about the theoretical argument for exempting kosei nenkin from the WEP. If that argument is accepted by the SSA then it will be a very big deal!
The argument is not about exempting a broadly defined "kosei nenkin" from WEP but for exempting the Basic Pension tier of benefits received by Category 2 pensioners.

To simplify a complicated situation, you have to begin by distinguishing -- as the SSA seems to be trying to do -- between the two tiers of Japan's public pension system: the National Pension tier (kokumin nenkin, also referred to as rorei kiso nenkin or, in English, the Basic Pension) and the EPI tier (rorei kosei nenkin). Contributions to the former are mandatory for every resident of Japan between the ages of 20 and 59; both premiums and benefits are defined. Contributions to the latter are made only by company employees (with certain exceptions) and members of mutual-aid associations through the age of 69; premiums and benefits vary according to earnings. The former tier is thus residence-based, the latter earnings-based.

Ambiguity arises when the two tiers are conflated, which is easy to do in the case of Category 2 insured individuals because the two tiers have been (more or less) operationally integrated: employees pay unified premiums applicable to both tiers, and their pension benefits are generally paid in the form of a single bimonthly sum. But behind the scenes, so to speak, benefits are calculated partly on a fixed-premium, fixed-benefit basis up to the age of 59 and partly on a variable basis according to earnings up to the age of 69. Japan Pension Service statements take care to distinguish between these two tiers, even if company payslips and informal conversations do not. [Note: see the edit below]

So when the SSA (or the US Embassy) says that "Japan's National Pension" is exempt from WEP, the applicability to Category 1 (kokumin nenkin) pensioners is clear enough, but a little more precision would be helpful with respect to the treatment of benefits received by Category 2 pensioners, which derive from both the National Pension tier and the EPI tier but technically cannot both be subsumed under the term "National Pension." Shouldn't the Category 2 benefits drawn from the National Pension tier be exempt from WEP independently of any EPI benefits?

It may be that SSA is in fact planning to do just that and exempt the Basic Pension tier from WEP for all pensioners. The trouble is, it's hard to say without knowing the extent to which they are making the distinction between the National Pension and EPI. This is where captainspoke's experience should prove to be very enlightening.
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Edit: Actually, looking back over my JPS statements, I've noticed that the JPS stopped breaking down Category 2 benefits by tier on their nenkin teiki-bin postcards some time ago. Keeping things simple, I suppose, but increasing the potential for ambiguity.

For Category 2 persons to see a breakdown of their pension benefits by tier, it's probably necessary to look at the detailed information for「老齢年金の見込み額」 on your Nenkin Net page if you aren't yet eligible for a pension, or to check the relevant section of your 「国民年金・厚生年金保険 年金決定通知書・支給額変更通知書」 notice once you are. Printouts obtained from your local pension office will also include a breakdown of benefits by tier. The relevant expression for the kokumin nenkin tier is 「基礎年金」.

The separation of the tiers for Category 2 pensioners is also apparent from the choice you are asked to make -- when the time comes -- about receiving or delaying your pension benefits, which can be done separately for each tier (e.g., Category 2 persons can decide to start taking Basic Pension benefits at the same age Category 1 persons do, independently of their EPI benefits).

Re: US CITIZENS: Let's stop the WEP from cutting our Social Security benefits.

Posted: Sun Nov 05, 2023 1:38 am
by Teflon
ClearAsMud wrote: Tue Oct 31, 2023 1:15 am So when the SSA (or the US Embassy) says that "Japan's National Pension" is exempt from WEP, the applicability to Category 1 (kokumin nenkin) pensioners is clear enough, but a little more precision would be helpful with respect to the treatment of benefits received by Category 2 pensioners, which derive from both the National Pension tier and the EPI tier but technically cannot both be subsumed under the term "National Pension." Shouldn't the Category 2 benefits drawn from the National Pension tier be exempt from WEP independently of any EPI benefits?
Thank you for the in-depth explanation! This is very helpful. Let's hope that, in the future, the Category 1 and Category 2 pensions become so indistinguishable from one another that the SSA will have no choice but to leave the entire amount untouched. In the meantime, I will continue to hope that the WEP gets repealed (which is admittedly a long shot) so that we can put all this nonsense behind us once and for all.