PART II - CPP / OAS / FICA qualifications

I obviously did not understand the 30 year rule or substantial payments to
FICA to avoid a Clawback when receiving OAS / CPP from Canada . My
understanding was that the US / Canada Social Security Totalization rules
overrode the WEP but it appears I may have been incorrect. Read on if you
are going to be collecting both with les than 30 years into the FICA (US
Federal Insurance Contribution Act or Social Security), I have no time to
study or figure it out at the moment so will leave it to others. I have
received several different replies:

Andrew Nelson sent the first correction:

I guess you are not aware of the Windfall Elimination Provision (WEP)
that hits many cross-border workers.

THAT is what this person is complaining about. It really does sock
anyone who earns foreign pension (including CPP) but has less than 30
years (not 10) of SS-contributions.

As the writer states, it does result in a substantial knock down of SS,
unless the person can manage to reach the 30 year mark.

This is the SSA's equivalent of the IRS's AMT provisions, and can hurt
pretty bad.

There is a couple of pros out there (namely Keats) who have been
successful in getting the SSA to us the totalization treaty to override
WEP, but it is not simple.

Keats has a chapter on it in his latest Border Guide. Only his latest
version, since WEP is just now hitting retirees.

AGN

=====================

Mark sends the second addition


Warning: the following is wordy but I've included some details that might
be
useful in your practice. I also have a new question at the end. Hope I'm
not
stretching my luck...

Thank you for such a rapid response and for forwarding all those dialogues
with
others that pertained to my situation. I was prepared to wait several
months,
knowing you have quite a backlog.

I very much like your suggestions about H&R Block and Jim Pettinger. I'm on
his mailing list and have often thought about attending one of his seminars,
but haven't as I'm not much interested in export-import. I will definitely
give him a shout. I've also wondered about the Victoria Clipper (Seattle
company) that docks here in Victoria a block from where I live. I just
missed
an accounting job advertised by a Canadian mining company literally metres
south of the border in Blaine. They have gold mines in both countries. I'm
hoping their newly hired accountant leaves soon;) Seems to me I'd be a
perfect
fit for them to visit their mines in Alaska and B.C. & Quebec.

As to the US/Canada Social Security Agreement, my understanding is that
would
apply if I were working in Canada on a short-term basis, but I've been
resident
in Canada nearly 5 years, so I've contributed to CPP for a few years now.
As
you know, it takes nearly that long to complete the citizenship path, which
I've just done a couple weeks ago. I did pay a personal visit to Social
Security in Bellingham a couple years ago to learn more about the Windfall
Elimination Provision, and I did find out they would never deduct more than
50%
of my CPP from Social Security. Such generosity. I have 25 years worked in
the US (I'm 57 y.o.) but with 30 I would escape the WEP penalty altogether.
I
spoke with the manager of the SocSec office in B'ham so he knew my situation
and he never said the totalization agreement would apply.

See WEP info: http://www.ssa.gov/pubs/10045.html

FYI, WEP was instituted in 1983 during the Reagan presidency as
part of a package to save Social Security. For someone like me,
contributing to another country's system, it's just a tax grab
ripoff, in my humble opinion. I liken it to paying premiums on
two life insurance policies and then having the beneficiary find
out upon my demise that the 1st company won't pay because there
had been a second policy. Never mind I'd paid premiums for both.

I'm aware of the relative withholding rates for FICA vs. CPP, and I would
only
work for someone else in the US to avoid the self-employment rate. I figure

for the five years I'd work in US, it would work to my benefit to pay the
higher FICA rate as I would increase my retirement income about $200/mo.
between earning more SocSec and avoiding the WEP. I intend to live in
Canada
in retirement in spite of higher taxation because my partner is Canadian
(only)
and detests the U.S.

I won't be subject to the OAS clawback in retirement, sorry to say, though I
should approach the $60K annual income limit. Jointly, our goal is to have
about $60K income EACH so we avoid the clawback. By the way, I currently am
self-employed in Victoria as a small-time (friends & family) financial
advisor.

The current net income limits for OAS clawback, from 0-100%, are $60,806-
$98,850. (You had used a figure of $80,000+ for the upper limit in your
reply.)


ANOTHER SEPARATE (BUT RELATED) QUESTION

I wasn't going to send this to you until I heard back on the first one, but
we're already there!

I fall into Category 2 below (between the dotted lines) for a full OAS
pension.
---------------------------------------------------------------------------
Full Pension

Normally, if you meet the conditions in either of the two categories
below, you qualify for a full pension:

Category 1 - You meet the one condition below

You lived in Canada for at least 40 years after turning 18. NO

Category 2 - You meet the three conditions below

1. You were born on or before July 1, 1952. YES
2. Between the time you turned 18 and July 1, 1977, you
lived in Canada for some period of time. ???
3. You lived in Canada for the 10 years immediately before
your application was approved. YES
---------------------------------------------------------------------------

#1) I was born in 1948.
#3) I will have been resident in Canada 12 full years when I turn 65.

The gray area for me is condition #2, as I was a student at U. of Alberta in
1976. There is some question, even among the local OAS office personnel,
whether that qualifies as 'living' in Canada. My own opinion is that I did
not 'live' anywhere else during that time. I cannot find any definition
of 'living' or 'residence' in the OAS Act or in OAS appeal cases.

So, at long last, my question for you:

DO YOU KNOW OF ANY LAWYERS THAT WOULD HAVE EXPERTISE IN OAS ELIGIBILITY
APPEALS?

The difference between a partial (12/40=30%) and full OAS pension for me is
just over $4,000/yr., not an insignificant amount in my retirement planning.
I'd like to know what my chances are of qualifying for the full pension.

Thanks again for all your help and super-rapid response.


david ingram replies:

I do not know of anyone that specializes in OAS appeals. Does anyone else?


The original Q & A follows:

###########################################################################
Q
> Subject: Employment opportunities for US-Canadian dual citizen
> Expert: [email protected]
> Date: Tuesday November 08, 2005
> Time: 10:52 PM -0800
>
> QUESTION:
>
> I am US-born and recently became a Canadian citizen also. I want to live
in
> White Rock, or vicinity (to preserve my Canadian Old Age Security
> eligibility), and commute daily to work along the I-5 corridor between
> Blaine and Bellingham.
>
> I am caught in the trap of the US Social Security 'Windfall Elimination
> Provision' which will deduct the exchange-related equivalent of 1/2 of my
> Canada Pension Plan benefit from my US Social Security benefit unless I
earn
> another five years of 'substantial earnings' in the US.
>
> Are you aware of any employment agencies on either side of the
BC/Washington
> border that recruit dual citizens in particular? I read in one of your
> email replies that dual truck drivers are in great demand, but having
spent
> most of my career as an accountant, that's probably not a fit for me. Any
> ideas are much appreciated.
> --------------------------------------------------------
>
> david ingram replies:
>
> I do not know of agencies that specifically deal with dual citizens.
Maybe
> "we" should start one up. If you are an accountant, take the H & R Block
tax
> course in Bellingham and the one in Vancouver and get into dual country
tax
> work. I am always looking for someone who is good at that.
>
> Look for a company that works on both sides of the border.
>
> Calling Jim Pettinger at 604 273-4474 might give you some ideas. Jim
runs
> International Market Access with warehouses in Bellingham and Richmond and
> runs regular seminars on cross border issues.
>
> I would bet that he has over 100 clients who might be able to use the
> services of someone who can work on both sides of the border with no
> restrictions.
>
> With regard to the US / Canada Social Security Agreement, i do not
> understand your concern. What the agreement is set up to deal with is
> making sure that you only get one or the other of a pension for the same
> time worked.
>
> In general, if you can put into the US system, you will receive materially
> more when you apply for your CPP or FICA.
>
> If you work as an employee in the USA, you will have to contribute your half
> to the FICA (Federal Insurance Contributions Act) at roughly 6.23% up to a
> maximum of ($87,900 -400) $87500 for a total of $5449.80.
>
> At the same time you will be paying another 1.45% of the income with no
> limits so at $100,000 you would pay $1,450 and at $200,000 you would pay
> $2,900 but would still only owe the $5450.00 of Social Security (FICA).
>
> If you were self employed, you would pay both halves.
>
> Compare this with the CPP which charges employees 4.45% on a maximum of
> ($40,500 - $3.500) $37,000 or $1,831.50 and that is it. (all figures were 2004
calculations by the way).
>
> As for the Old AGE Pension that Canada hands out, remember that it now has
> an earnings test and is all clawed back by $80,000+ earnings.
>
> The best situation for an over 65 person is to have worked the last ten
> years in the US to qualify for the US social Security and Medicare A & B.
> Live in Washington state and you have medical as good as BC's and a much
> lower tax rate on your pension income.
>
> I am 99% sure that you will end up with more money that way then living in
> Canada and trying to collect OAS.

Trackback

Trackback URL for this entry: http://www.centa.com/trackback.php/20060811160258799

Here's what others have to say about ' PART II - CPP / OAS / FICA qualifications':

????? ?? ?????? from ????? ?? ??????
... - ?????? ?? ????? ??? ?????, ?? ??? ????????? ????? ????? ??????? ??????? ??? ???????? ??????? ?????. ????? ???? ????? ????? ????? ?????? ??????? ??? ????? ????? ?????, ???????? ?... PART II - CPP / OAS / FICA qualifications - CEN-TA Cross Border ... [read more]
Tracked on Thursday, July 31 2014 @ 12:35 AM PDT

What Is Fica Oas | Information
[...] Paycheck Before or After FICA? The Difference Between Allowance & Exemption;PART II – CPP / OAS / FICA qualifications – CEN-TA Cross … – I obviously did not understand the 30 year rule or substantial payments to FICA to [...] [read more]
Tracked on Saturday, October 15 2016 @ 08:36 AM PDT

0 comments