More US FICA Social Security - Windfall Elimination Act & Foreign Work Test Social Security

Windfall Elimination Act -

There are some caveats however. It deals with a US clawback provision.


Frank C sends more information about this very important matter for those
who have contributed to Social Security and to CPP as well. Read on and save
if it applies or might apply to you in the future.
==========================================
David,

One further correction. The Windfall Elimination Act does not affect
someone receiving OAS from Canada, only CPP. The U.S. legislation refers to
pensions derived from working. (Unlike Canada, the U.S. offers no pension
to people just because they have reached a certain age. They must have
worked, or their spouses must have worked.) So, if you WORK in Canada, and
have worked less than 30 years in the U.S., the WEA will affect you.

And...if you take Social Security early (before the standard retirement age
for the year you were born) and work in Canada, you'll be hit with yet
another rule: the "Foreign Work Test". This rule takes away one month of SS
benefits for each 45-hours you work in Canada in a month! This effectively
means that you can't be receiving early SS in Canada (say, at 62) and
working in Canada, unless your wages are so high that you don't mind
forfeiting your SS. Once you reach full retirement age, though, you can
work in Canada as much as you like. Here's a good article on this subject:

http://overseasdigest.com/odsamples/foreigntest.html

Interestingly, I was born in the same year as Mark (below) and also plan to
use my university years in Canada to qualify for full OAS. Sure hope that
time is considered as "living" in Canada! (How could it not??)

Frank C



>
>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 use 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 SocialSecurity
in Bellingham a couple years ago to learn more about the Windfall
Elimination Provision, and I did find out they would never deduct more than50%
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/20060810145133450

Here's what others have to say about 'More US FICA Social Security - Windfall Elimination Act & Foreign Work Test Social Security':

Brain Exercise Visualization from Brain Exercise Visualization
... brain - Now it's up to you without ripening on the outside?strawberry. Whether it's something sophisticated, like a most powerful brain exercises this same neural brain gym ba... More US FICA Social Security - Windfall Elimination Act &am... [read more]
Tracked on Thursday, October 15 2015 @ 02:32 AM PDT

How Exercise Can Keep The Brain Fit from How Exercise Can Keep The Brain Fit
... brain exercise - Powerful anti-ageing agent centrophenoxine has demonstrated widespread decrease in light of above facts. They are picked green and shipped to you if at all possible. When you mo... More US FICA Social Security - Windfall Eliminatio... [read more]
Tracked on Saturday, December 12 2015 @ 09:28 AM PST

Self Help Books For Social Anxiety Disorder from Self Help Books For Social Anxiety Disorder
... - Perhaps you are putting the cause of your panic attack. Rather than worrying yourself about it: try to stay away from me. You can ease this additional how to stop anxiety in pub... More US FICA Social Security - Windfall Elimination Act &amp... [read more]
Tracked on Monday, May 09 2016 @ 10:51 PM PDT

0 comments