Canadian working in US - Windfall Elimination Provision

> I have an opportunity to work as an employee in the us for the next 7 to
> 10 years. I am 53. What is the impact on CPP and what can I expect form
> Social Security if I work for 1) 7 years or 2) 10 years. I have paid the
> max CPP since 1977 and expect to pay the max FICA.
> -------------------------------------------
> david ingram replies:
> You will receive approximtely 30/40th's of your CPP but it will not be
> based upon a lower earnings level than if you were still in Canada for
> the last ten years.
> However, if you do not work a full 10 years (40 quarters) you will not
> qualify for medical in retrirement if you do decide to stay in the US
> (i.e. get a green card).  You can qualify at 7 years but have to pay a lot
> more. (less at 8 years, even less at 9 years and the least at ten years or
> more).
> You will receive 7 or 10/40th's of the max FICA
> (Social security) less a claw back for what is called the Windfall
> Elimination Provision.  You can find out more about the WEP  by reading
> these older questions
> ------------------------------------------------
> Thanks to Andrew for adding to this subject. - the original question and
> answer are at the bottom. david
> ------------------------------------
> David, any totalization request made to SSA to include CPP contributions
> will NOT affect one's CPP, which is fixed SOLELY on the basis of CPP
> contributions.
> One's SS will of course be smaller if totalization is used, than one who
> worked a full 40 quarters, and one's SS will be reduced marginally by
> one collecting CPP as well as SS (by Pension Windfall provisions of
> SS). But neither collecting SS, nor using totalization will in ANY WAY
> affect CPP payout.
> One will indeed collect from BOTH SS and CPP when totalization is used.
> Remember too that the poster will be eligible for a portion of his OAS
> as well.
> -----Original Message-----
> Sent: Friday, October 24, 2003 16:15
> Subject: [CEN-TAPEDE] Returning to Canada early because of heart
> disease.
> I was born Dec 22/39 in Canada. I worked in Canada until Feb of 1997,
> moved to the US and presently work with a TN1 visa.
> I developed heart disease and have had two attacks since '01
> I would like to return to Canada and retire there near my family before
> it's too late.
> I understand I have to work in the US for 40 quarters to get their
> Social Security, I only have 27.
> I assume I cannot collect from both, but what is the result of applying
> the US/Canada treaty to my case?? Do I apply it to the Canadian or US
> fund and which one is more advantageous.
> =================================================
> david ingram replies:
> You will want to apply Canadian Earnings to the US Social Security to
> make up your time if they will allow it.  With 27 quarters, they likely
> will and it will be to your advantage to get eh higher US money for two
> reasons.
> One it is a higher pension on a pro rata basis.  Two - when received in
> Canada, only 85% is taxable.
> You will then receive a smaller CPP which will be more than made up by
> what you receive from the US Social Security.
> Your biggest problem is medical in the US. If you cannot see yourself
> continuing to work in the US, there is no sense but if you can get
> another 5 quarters in (up to 32) you can then buy your US social
> security medical and if you keep on working and putting in more
> quarters, you will get to the point where the full medical is free and
> you will have your 40 quarters. Remember, it is only 3 1/3 more years
> and you only need to earn $4,000 a year to qualify for four quarters a
> year.
> Perhaps, you could continue on a part-time basis for instance. I do
> notice that none of your company's three locations appear to be near the
> border but if you are filling a needed function, perhaps you could
> telecommute and live in Blaine, Washington, Pembina, North Dakota,
> Niagara Falls, or Calais, Maine (all US border towns), fill up your
> Social Security and be close enough to your Canadian Family to get the
> best of both.
> ------------ and other older questions
> My_question_is: Applicable to both US and Canada
> Subject:        Pensions
> Expert:         [email protected]
> Date:           Sunday January 14, 2007
> Time:           01:56 PM -0500
> Can an American Citizen ,living in Canada as a Permanent Resident married
> to
> a Canadian Citizen and having worked in the U.S. and Canada collect both
> Pensions as he  paid into both pensions and lived and worked in the
> U.S.first for twenty years and another twenty years in Canada.Does he have
> to report the U.S. Pension in Canada and the Canadian in U.S. He has
> aU.S.passport for entry into the U.S. and a Permanent Resident Card for
> entry to Canada.
> --------------------------------------
> david ingram replies;
> Under Article XVIII(5) of the US / Canada Income Tax Convention, he or she
> is only taxable on the pensions in the country in which he or she lives.
> He or she does qualify for both pensions but only half of the CPP (20 out
> of
> 40 years) and less than half of Social Security because of a clawback
> provision called the Windfall Elimination Provision when he or she has not
> put a total of 30 years into US Social Security.
> You can find US Government explanations of the WEP at
> and
> and
> The following older Q & A might help -
> [email protected]: Please see bottom of message if you wish to unsubscribe.
> ------------------------------------------
> My_question_is: Applicable to both US and Canada
> Subject:        US Social Security
> Expert:         [email protected]
> Date:           Wednesday December 13, 2006
> Time:           07:38 PM -0500
> I lived and worked in the US for 5 years, and recently returned to Canada.
> I
> have worked in Canada a total of 30 years.
> Do I qualify for any SSI compensation for the 5 years there or would I
> have
> needed to work the requisite 10 years to qualify for SSI pay?
> =============================================
> david ingram replies:
> When you hit retirement age, you will fill in an application for US Social
> Security and an application for Canada Pension Plan.
> In general, The US will give you credit for five years of contributing to
> Canada Pension Plan to make up the ten years qualifying period.
> Then, because you have not contributed for 30 years, they (the Social
> Security Administration) will apply the Windfall Elimination Provision and
> send you about half of the actual Social Security benefits you earned.
> This is NOT discrimination against Canadian or other country workers
> however. The WEP also applies to US people who have worked in different
> occupations in different states.  For instance teachers in some states do
> not contribute to Social Security. If they move to a different state where
> they do, the WEP reduces their Social Security in the US because of the
> "Windfall" of the other states pension. So it is not just used against
> Canadians.
> The following older answers may help as well as they contain comments from
> other readers.
> ------------------------------------------------------------
> This was an older centapede that dealt with two other opinions about the
> Windfall Elimination provision
> david
> Social Security - Foreign Work test -
> 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:
> 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.
>>Mark sends the second addition
>>Warning:  the following is wordy but I've included some details that might
>>useful in your practice.  I also have a new question at the end.  Hope I'm
>>stretching my luck...
>>Thank you for such a rapid response and for forwarding all those dialogues
>>others that pertained to my situation.  I was prepared to wait several
>>knowing you have quite a backlog.
>>I very much like your suggestions about H&R Block and Jim Pettinger.  I'm
>>his mailing list and have often thought about attending one of his
>>but haven't as I'm not much interested in export-import.  I will
>>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
>>an accounting job advertised by a Canadian mining company literally metres
>>south of the border in Blaine.  They have gold mines in both countries.
>>hoping their newly hired accountant leaves soon;)  Seems to me I'd be a
>>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
>>apply if I were working in Canada on a short-term basis, but I've been
>>in Canada nearly 5 years, so I've contributed to CPP for a few years now.
>>you know, it takes nearly that long to complete the citizenship path,
>>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
>>of my CPP from Social Security.  Such generosity.  I have 25 years worked
>>the US (I'm 57 y.o.) but with 30 I would escape the WEP penalty
>>spoke with the manager of the SocSec office in B'ham so he knew my
>>and he never said the totalization agreement would apply.
>>    See WEP info:
>>    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
>>work for someone else in the US to avoid the self-employment rate.  I
>>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
>>in retirement in spite of higher taxation because my partner is Canadian
>>and detests the U.S.
>>I won't be subject to the OAS clawback in retirement, sorry to say, though
>>should approach the $60K annual income limit.  Jointly, our goal is to
>>about $60K income EACH so we avoid the clawback.  By the way, I currently
>>self-employed in Victoria as a small-time (friends & family) financial
>>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
>>I wasn't going to send this to you until I heard back on the first one,
>>we're already there!
>>I fall into Category 2 below (between the dotted lines) for a full OAS
>>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
>>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
>>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:
>>The difference between a partial (12/40=30%) and full OAS pension for me
>>just over $4,000/yr., not an insignificant amount in my retirement
>>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
>>The original Q & A follows:
>> > Subject:        Employment opportunities for US-Canadian dual citizen
>> > Expert:         [email protected]
>> > Date:           Tuesday November 08, 2005
>> > Time:           10:52 PM -0800
>> >
>> >
>> > I am US-born and recently became a Canadian citizen also.  I want to
>> > 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
>> > Canada Pension Plan benefit from my US Social Security benefit unless I
>> > another five years of 'substantial earnings' in the US.
>> >
>> > Are you aware of any employment agencies on either side of the
>> > 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
>> > most of my career as an accountant, that's probably not a fit for me.
>> > ideas are much appreciated.
>> > --------------------------------------------------------
>> >
>> > david ingram replies:
>> >
>> > I do not know of agencies that specifically deal with dual citizens.
>> > "we" should start one up. If you are an accountant, take the H & R
>> > Block
>> > course in Bellingham and the one in Vancouver and get into dual country
>> > 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
>> > International Market Access with warehouses in Bellingham and Richmond
>> > 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
>> > more when you apply for your CPP or FICA.
>> >
>> > If you work as an employee in the USA, you will have to contribute your
>> > to the FICA (Federal Insurance Contributions Act) at roughly 6.23% up
>> > to
>> > 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
>> > 2004 calculations by the way).
>> >
>> > As for the Old AGE Pension that Canada hands out, remember that it now
>> > 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 &
>> > 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
>> > Canada and trying to collect OAS