Ask Rusty – Canadian Expat Angry About His Reduced U.S. Social Security

Dear Rusty: I am a 62-year old Canadian expat who has lived in the U.S. for the last 30-years. I worked in both Canada and the U.S. throughout my career. I came to this country, worked hard and contributed faithfully to the tax base, but I am being cheated for what is rightfully owed to me. Everyone else’s Social Security calculation is based on lifetime earnings; mine should be calculated using the same parameters, with the only difference being that some of my earnings were in Canada. I have filed an appeal to that end, but the end result is that I get taken to the cleaners. Why would they intentionally put in place a Totalization scheme with Canada which results in me receiving thousands of dollars per year less than someone who has the same lifetime earnings? This is just wrong and terribly unfair. Is there any legal recourse for me? Signed: Angry Ex-Pat

Dear Angry Ex-Pat: The so-called “Totalization Agreement” between Canada and the U.S. isn’t “unfair” – rather it is a way for those who don’t independently earn full Social Security eligibility in one country to still get benefits in that country using credits (not earnings) from the other country to gain eligibility. It also allows a citizen of one country to work in another country without paying Social Security taxes in their home country on those foreign earnings. If you have worked in the U.S. long enough to become eligible for U.S. Social Security on your own U.S. work record, the Totalization Agreement between the U.S. and Canada doesn’t apply to you nor affect your U.S. Social Security benefits. Overall, the Totalization Agreement is there to help those who work in both countries but aren’t fully eligible for benefits. So, it’s likely not the Totalization Agreement you take issue with – rather, it is a U.S. Social Security provision called the Windfall Elimination Provision (WEP).

WEP reduces the Social Security retirement benefit of anyone who has a pension earned while not contributing to the U.S. Social Security program. That includes those with foreign pensions, as well as retirees with pensions from US employers who do not participate in the US Social Security program, including older US Federal retirees as well as state-retirees from any of the 26 U.S. state governments which have chosen to exempt their employees from paying into the national Social Security program.

Without getting into the details of how the WEP reduction is computed, suffice to say your US Social Security benefit is based only on your earnings from working in the United States but, because you also have a Canadian pension earned without contributing to U.S. Social Security, and you apparently have less than 30 years of U.S. earnings, WEP reduces your U.S. benefit – just as it does for nearly 2 million U.S. citizens who also have a non-covered pension. Legislation for WEP reform (or repeal) has been introduced in just about every U.S. Congress since WEP became law in 1983, but no such reform legislation has ever been enacted. Most in Congress understand that, although the formula isn’t perfect, WEP better equalizes benefits paid to all Social Security recipients, thus helping to fulfill Social Security’s original purpose – to mitigate poverty in our elderly population.

Do you have any legal recourse? If you mean recourse that will exempt you from WEP or change the U.S. benefit formula to include both your U.S. and Canadian earnings when computing your US Social Security benefit, I do not believe you do. Many U.S. unions representing WEP-affected retirees have been wrestling with this issue for decades, to no avail. WEP can only be changed by an act of Congress, and Congress – for nearly 40 years – has been unwilling to change it. So, while I fully understand your frustration and respect your opinion, unfortunately I cannot be optimistic that your current appeal, nor any legal action you might take, will be successful.

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.org.