By Rusty Gloor, National Social Security Advisor at the AMAC Foundation, the non-profit arm of the Association of Mature American Citizens
Dear Rusty: I am a 62 year old Canadian holding a green card and I have lived in the US for nearly twenty-three years. For 19 years prior I contributed to the Canada Pension Plan (CPP) which is the equivalent of US Social Security. I am contemplating retirement in the US and have been told that I can draw my old age pension from either the US, or from Canada, but I cannot draw from both.
My 19 years of contributions to the Canadian Pension Plan are not accounted for in the calculation of my U.S. SS benefits. Conversations with the U.S. Social Security office suggested that my contributions to the CPP would “probably” be applied to my U.S. pension upon application for benefits. However, the individual I spoke with was not sure how that would work. Do you know the process for having my Canadian earnings transferred to my U.S. SS account and how I might find out what my combined benefits will be? Signed: Retiring Canadian
Dear Retiring Canadian: Allow me to clarify how things work under the bi-lateral agreement between the U.S. and Canada. Although you worked and contributed to CPP while living in Canada, your earnings in Canada do not count when computing your U.S. Social Security benefits (nor do your U.S. earnings contribute to your CPP benefit entitlement). Although the bi-lateral US/Canada agreement permits earnings credits from both countries to be combined to gain eligibility for benefits, computation of benefit amounts in each country uses only dollars earned in-country. Thus, your U.S. entitlement is based only on your U.S. earnings.
Because of your years contributing to the Canadian program, you are also eligible to separately collect a CPP pension, and you can apply for your CPP pension through your local U.S. Social Security office by submitting SSA form CDN-USA1. Your local SS office can provide the correct form and needed guidance to apply for your CPP benefits. You should be aware, however, that collecting your CPP pension will impact the amount of your U.S. benefit because of a U.S. regulation known as the Windfall Elimination Provision (WEP). WEP reduces the U.S. Social Security benefit for anyone who has a pension earned separately without contributing to Social Security (that includes some U.S. state & local government employees, as well as those who have a pension from another country).
Your U.S. benefit will be computed using a special WEP formula which considers the number of years you contributed to the U.S. program from “substantial earnings.” Assuming you have 23 years of substantial U.S. earnings from which you contributed to the U.S. SS program, your U.S. benefit will be reduced by approximately 35%. Your CPP pension will cause WEP to apply, which will reduce your U.S. pension, but it cannot reduce it by more than 50% of your CPP benefit amount.
FYI, WEP and international benefits are complex topics, and it’s not especially unusual that SS representatives you first encounter (e.g., on the phone) aren’t fully versed in how those benefits work. You may wish to make an appointment to apply for your CPP benefits in person at your local Social Security office and at the same time obtain more specific information on how WEP will affect your U.S. Social Security benefits. That may require speaking with a senior person who is well versed in WEP and international pensions.
Finally, be aware that at age 62 your U.S. benefit will be further reduced because you haven’t yet reached your full retirement age (which is 66 years and 10 months). Be aware, too, that until you reach your full retirement age, you’ll be subject to Social Security’s earnings test, which limits how much you can earn before some benefits are taken away.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.