The Windfall modifies the formula used to figure your SS benefits, reducing the amount that you will receive each month. The modified formula applies to you if both of the following conditions are met: you reach age 62 after 1985 and first become eligible after 1985 for your monthly public pension.

You are considered eligible to receive a pension if you meet the requirements for a pension, even if you continue to work (i.e., 20/more yrs. of service under age 55; 10 or more yrs. over age 55). If you were eligible for your public pension before 1986, then the Windfall does not apply to you.

SS benefits are based on the retiree’s average monthly earnings adjusted for inflation. Under the formula, your average earnings are separated into three amounts and each amount is multiplied by using three different factors. For example, for a retiree who was eligible for his pension before 1986, the first $477 of his average monthly earnings is multiplied by 90 percent; the next $2,398 is multiplied by 32 percent; and the remainder by 15 percent.

The 90 percent factor is reduced in the Windfall’s modified formula and phased in for retirees who reached age 62 between 1986 and 1989 and not eligible for their pensions before 1986. For those who reach 62 in 1990 or later and not eligible for their pensions before 1986, the 90 percent facto is reduced to 40 percent.

There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of "substantial" earnings (as defined by Social Security) in a job where you paid SS taxes. If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to somewhere between 45 and 85 percent.

Retirees with relatively low pensions are protected because the reduction n the SS benefits under the modified formula cannot be more than on-half of that part of the public pension attributable to earnings after 1956.