WEP and GPO Repealed: Expats With Foreign Pensions Win

Starting in February 2025, the Social Security Administration began sending lump-sum payments averaging $6,710 to 3.1 million beneficiaries. By July 7, 2025, SSA had paid out $17 billion in retroactive benefits — five months ahead of schedule. The cause: Congress finally repealed two provisions that had quietly cut Social Security benefits for Americans with foreign pensions for over 40 years.

The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) were the hidden reduction rules that shaved $100 to $500 per month off the Social Security checks of Americans who also received pensions from non-US employment. The Social Security Fairness Act (Pub. L. 118-277), signed January 5, 2025, eliminated both. For US expats with foreign pension income, the change is significant — but so is the tax bill that comes with it.

What WEP and GPO Were — and Why They Hit Expats Hard

The WEP and GPO were enacted in 1983 to prevent what Congress called a "windfall" for workers who earned Social Security credits in covered US employment but also received pensions from jobs where no US Social Security taxes were withheld. The logic was that the SS benefit formula is progressive — it replaces a higher percentage of wages for lower earners — and that workers with a pension from non-covered employment effectively appeared to have low lifetime earnings when they didn't.

How WEP Worked

WEP applied when you had both of these:

1. A pension from employment not covered by US Social Security (most foreign employment, certain state and local government jobs)
2. At least 40 Social Security credits (roughly 10 years of covered US work)

WEP reduced the SS benefit using a modified formula that replaced less of your pre-retirement earnings with Social Security. The maximum reduction was $587 per month in 2024. The reduction was smaller if you had 20 or more years of substantial earnings in covered employment.

For expats: most foreign employment does not pay into US Social Security. An American who spent 10 years in the US workforce, then 20 years working in Germany, France, the UK, or any country with its own pension system, would have a foreign pension based on that 20-year career — and WEP would have reduced their US Social Security benefit as a result.

How GPO Worked

GPO hit spouses and survivors. If you received a pension from non-covered employment (including a foreign pension), your Social Security spousal or survivor benefit was reduced by two-thirds of your non-covered pension amount. With a large enough foreign pension, the GPO could eliminate the spousal benefit entirely.

The effect was particularly severe for surviving spouses: a widow or widower with a foreign government pension could find their entire survivor benefit wiped out by the two-thirds offset.

What the Social Security Fairness Act Changed

Provision	Before January 2024	After January 2024 (Repeal)
WEP — own benefit	Reduced SS retirement/disability benefit by up to $587/month if you had a non-covered pension	No reduction. Full SS benefit calculated using the standard formula.
GPO — spousal benefit	Reduced SS spousal benefit by 2/3 of non-covered pension; could reduce to zero	No offset. Full spousal benefit paid regardless of foreign pension income.
GPO — survivor benefit	Reduced SS survivor benefit by 2/3 of non-covered pension; could reduce to zero	No offset. Full survivor benefit paid regardless of foreign pension income.
Retroactive period	—	Benefits recalculated from January 2024; difference paid as one-time lump sum

The repeal applies to benefits payable for months after December 2023. The SSA recalculated benefits for all affected recipients and paid the retroactive difference as a one-time payment. No action was required from most beneficiaries — the SSA identified affected records and processed changes automatically.

Who Benefits Most Among US Expats

WEP and GPO affected a specific intersection of Americans: those who had significant working years in both US-covered employment and non-covered foreign employment. The typical profiles among expats:

• Expat retirees with foreign government pensions: Americans who worked for foreign government entities (non-US military, foreign civil service, international organizations) often had their SS significantly reduced by WEP. Many also worked some US years and had both a foreign pension and SS credits.
• Dual-career Americans abroad: Someone who started their career in the US, moved abroad for 15-20 years of work under a foreign pension system, then returned to the US for more US-covered work before retirement — a very common expat pattern.
• Spouses and survivors of workers: Non-working or lower-earning spouses who expected SS spousal benefits were sometimes entirely cut off by GPO when their own pension (or the deceased spouse's pension) came from non-covered employment.
• Teachers and public employees who worked abroad: Some US state and local government pensions also triggered WEP/GPO — the repeal benefits both domestic public sector workers and expats.

Who was NOT typically affected by WEP: Americans whose foreign pensions come from a country with a US Totalization Agreement, if the pension is based solely on that country's credits. Under some agreements, those foreign pensions were already exempt from WEP treatment. Check the specific Totalization Agreement rules for your country of employment to understand how your situation was classified.

The Retroactive Payment — What to Expect

The SSA began sending retroactive lump-sum payments on February 25, 2025. The average payment was approximately $6,710, representing roughly 13 months of benefit increases (January 2024 through February 2025). SSA completed payments to all eligible beneficiaries by July 7, 2025.

Recipients who had direct deposit received the funds automatically. Those receiving paper checks needed to update their address if they had moved — the same address on file for regular SS payments.

Some beneficiaries received increases staggered over several months rather than a single lump sum. The SSA processed claims in batches based on record type and did not send all retroactive amounts simultaneously.

The Tax Trap With the Lump Sum

Here is where expats need to pay close attention. The retroactive payment received in 2025 is income in 2025 — the year you received it, not the years it covers. This can trigger a cascade of tax consequences in your 2025 federal return.

How Social Security Benefits Are Taxed

Under US federal tax law, up to 85% of Social Security benefits are taxable depending on your "combined income" — your adjusted gross income plus tax-exempt interest plus one-half of your total Social Security benefits.

Filing Status	Combined Income	SS Benefits Taxable
Single	Under $25,000	0%
Single	$25,000 – $34,000	Up to 50%
Single	Over $34,000	Up to 85%
Married filing jointly	Under $32,000	0%
Married filing jointly	$32,000 – $44,000	Up to 50%
Married filing jointly	Over $44,000	Up to 85%

These thresholds have not been adjusted for inflation since 1984. Nearly every retiree with any meaningful income pays tax on 85% of their SS benefits.

The Lump-Sum Election — IRS Form 1040, Schedule D

The IRS allows a lump-sum Social Security election for back payments covering prior tax years. Under this election (detailed in IRS Publication 915), you calculate the tax as if the back payments had been received in the years they were earned, then compare that amount to the tax you would owe treating the full amount as 2025 income. You pay whichever is lower.

This election is particularly valuable for beneficiaries who received a large retroactive lump sum in 2025 that temporarily pushed combined income into the 85% taxable tier or into a higher marginal bracket. The election does not require amending prior-year returns — it is calculated on the current-year return using Worksheets 1 and 2 in Publication 915.

Ongoing Higher Monthly Benefit — Tax Impact Going Forward

The average ongoing monthly increase is approximately $360 per month after the repeal. For an expat receiving $1,200/month previously, the new benefit is around $1,560/month. This $360 increase, multiplied by 12, adds $4,320 to annual SS income.

If this pushes your combined income above the $34,000 single or $44,000 joint threshold, more of your total SS benefit becomes taxable. Model the change in your annual tax calculation.

For expats living in countries where SS benefits are NOT taxed under a US tax treaty: check your specific treaty. Some treaties (including the UK-US and Germany-US treaties) have provisions about Social Security taxation. These can affect how the increased benefit is taxed — or not — in your country of residence.

The Foreign Earned Income Exclusion does not apply to Social Security benefits. SS is not "earned income" under IRS rules, so it cannot be excluded under the FEIE regardless of where you live. The Foreign Tax Credit may apply if your country of residence taxes your SS benefits and the treaty allows a credit. See the FEIE vs. Foreign Tax Credit guide for how these interact with your overall expat tax position.

Totalization Agreements and the Foreign Pension Question

The US has Totalization Agreements with approximately 30 countries, including the UK, Germany, Canada, Australia, France, Japan, Italy, and others. These agreements prevent dual Social Security taxation for workers who earn credits in both countries.

Under most Totalization Agreements, when your pension comes from credits earned under that agreement, the WEP had specific treatment rules. Some agreements explicitly stated that the foreign pension would be exempt from WEP. Now that WEP is repealed, this distinction is moot — but it does explain why not every expat with a foreign pension was affected by WEP to the same degree.

What totalization agreements still affect: eligibility. If you spent years working in a totalization agreement country and accumulated credits under that country's system, those credits can combine with your US credits to make you eligible for US Social Security, even if you did not reach the 40 US credit minimum on your own. The totalization agreements guide covers which countries participate and how to claim combined credits.

What to Do Now — Planning Checklist

1. Verify you received the retroactive payment. Check your bank account for a deposit from "Social Security Administration" in the February–July 2025 period. Log in to my Social Security at ssa.gov/myaccount to review your payment history.
2. Calculate the lump-sum election before filing your 2025 return. Run Worksheets 1 and 2 from IRS Publication 915 to determine if the election saves tax. Your tax software may do this automatically — verify it ran the comparison.
3. Model your new ongoing monthly benefit against your combined income threshold. If the higher monthly payment pushes more of your SS into the 85% taxable tier, update your estimated quarterly tax payments to avoid underpayment penalties.
4. Check your country's tax treaty. If you live in a country with a US tax treaty that covers Social Security benefits, confirm whether the treaty exempts them from local taxation and how the increase interacts with your local return.
5. Review your retirement income plan. A $360/month ongoing increase (~$4,320/year) meaningfully changes projected retirement cash flow. Update projections in your retirement account planning.
6. Contact SSA if you believe you were affected but received nothing. The SSA may not have had you correctly flagged as WEP- or GPO-affected. You can file a request for reconsideration or contact the Federal Benefits Unit at your nearest US embassy abroad.

A 40-Year Penalty Removed

The WEP and GPO were controversial from the start — critics called them poorly targeted, complex, and punitive toward workers who had done nothing wrong by working in jobs not covered by US Social Security. After decades of bipartisan support for repeal, the Social Security Fairness Act passed both chambers with large margins and was signed in January 2025.

For US expats who built careers across multiple countries, this is a meaningful financial improvement. The average $360/month increase over a 20-year retirement represents roughly $86,400 in additional lifetime benefits. Combined with the retroactive payment, many affected expats have already received tens of thousands of dollars they did not expect.

The tax side requires attention, especially for anyone who received a substantial lump sum. Use the lump-sum election, review your combined income thresholds, and confirm your ongoing quarterly estimated taxes reflect the new benefit level. The money is real — the planning around it should be too.

Data note: The Social Security Fairness Act (Pub. L. 118-277) was signed January 5, 2025 and is effective for benefits payable for months after December 2023. SSA retroactive payment data reflects SSA completion announcement of July 7, 2025. Tax treatment per IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits). WEP maximum reduction figure reflects the 2024 amounts prior to repeal. Verify current SSA payment status through the my Social Security online portal.

Sources Checked

• Social Security Administration — Social Security Fairness Act (WEP and GPO update)
• Social Security Administration — WEP and Foreign Pensions
• IRS Publication 915 — Social Security and Equivalent Railroad Retirement Benefits
• Congress.gov — H.R. 82, Social Security Fairness Act of 2023

Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or tax advice. Social Security benefits and their tax treatment depend on individual circumstances, treaties, and income levels. Consult a qualified international tax advisor for guidance specific to your situation.