Canadian Pensions & US Social Security -

Sent: Wednesday, January 31, 2007 3:15 PM
To: [email protected]
Cc: [email protected]
Subject: Canadian Pensions & US Social Security

The following is not really a tax problem, but still quite taxing. (Your colleague, Gary Gauvin has resolved my Canadian & IRS tax situations.)

My current problem is with the Social Security Administration and how my early retirement was reduced by an annuity I am getting after working for about 5 years at York University (in Toronto) Apparently they are applying Government Pension Offset / Windfall Elimination Provision to reduce my payments because of the annuity.

While in Toronto, I think I was paying into the Canadian equivilant to Social Security, and it is my understanding the existing treaty between our countries, addresses some of the implications - particularly insuring that applicants who worked in both countries can count the contributions (quarters) to qualify for one or the other systems.

When I questioned SSA about this, claiming that the annuity was not from OAP nor CPP, but from the equivilant to a company like TIAA-CREF (I also have a pension from them for work at several institutions  in the US.)  they only answered  'the source doesn't matter'

I have recently asked for a detailed statement on the calculations, with reference to (quoting) regulations, the legislation on which they are based, and any treaties involved.

If you can direct me to any further information, particularly available on the web, I would greatly appreciate it. 


david ingram replies:

If the York pension reduces when you start collecting CPP as I believe it does, it is taken into account under the WEP.

The same thing happens if a high school teacher moves from Florida to Oklahoma where there some sort of teachers pension offset against Social Security.

Good luck on your endeavours.  There are some people who seem to get away with it and others who are caught under WEP and truthfully, I have not been able to get any sort of definitive answer from anybody but then I have not spent much time at it either and every state and every pension and every client is different.

The following is a couple of other answers


[email protected]: Please see bottom of message if you wish to unsubscribe.
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
a U.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
[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

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


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.


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 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
>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, 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
>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 altogether.
>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 have
>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, but
>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 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:
>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
>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:
> > 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
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