Windfall Elimination Provision

cross-borderContributed by Dale Walters, CPA, PFS,CFP® The Windfall Elimination Provision (WEP) a provision of the US Social Security Act and applies to people who have earned pensions working for an employer that did not withhold social security taxes and who also worked for other employers that did withhold social security taxes long enough to qualify for social security benefits.

Nearly every American and Canadian that has worked in both countries and have applied for benefits during the last ten years have found one government or the other wanting to reduce their social security benefit by as much as 60%.  The purpose of the WEP was intended to prevent federal workers and certain union workers from qualifying for social security benefits when they had not paid into social security

We at KeatsConnelly believe that both governments are incorrectly applying the WEP and inappropriately reducing benefits in most of the cases.  Here are some of the reasons why the government application of the WEP is incorrect.

The problem at its most basic level is that the people administering the rules are using only the statutory laws of the Social Security Administration and are not aware that the US-Canada Agreement on Social Security (aka Totalization Agreement) exists, and therefore does not apply the rules that could exempt many people from the WEP.

  • Section 404.213(e)(8) of the social security regulation states “For benefits payable for months after December 1994, the computations in paragraph (c) (the WEP calculation) do not apply in the case of an individual whose entitlement to the social security benefits results from a Totalization Agreement between the United States and a foreign country.”
  • If a person has at least 30 years of covered earnings from employment or self-employment in either country, the person is exempt from the computations in paragraph (c).  Per the Totalization Agreement, periods of coverage in one country is equivalent to that of the other country, so work in each country can be added together to reach the 30 years of covered earnings.  This also comes from Section 404.213(e)(8) of the social security regulation.
  • We also believe that if a person is “fully insured” (40 quarters of coverage in the US) and thus there is no need to rely on the Totalization Agreement to qualify for benefits, the WEP computations would be inappropriate.

There have been a number of cases that won at the Administrative Law Judge level, so for those of you with the patience and determination to plead your case there is hope.

While we cannot help directly, it is our sincere desire that you will be able to take this information and get the benefits you deserve.

 From the SSA http://www.ssa.gov/pubs/EN-05-10045.pdf

Tagged with: , , ,
Posted in Cross-Border Blog
Cross-Border Series
The Border Guide
Now available in its 11th edition, The Border Guide has sold over 80,000 copies and is considered the definitive cross-border financial tool for Canadians living, working and investing in the United States.
A Canadian's Best Tax Haven
This book will show you how to realize your dream of living a lifestyle in a climate that allows for year-round golfing and sandy beaches while lowering your taxes and cost of living.
Taxation of Canadians in America
This book addresses individual US taxation and estate planning issues you will face as a Canadian living in the US.
Taxation of Americans in Canada
US citizens and green card holders are subject to US tax regardless of where they reside in the world. Are YOU at risk?

Crossing the Border?
TRY OUR CROSS-BORDER FORUM »
Get Updates from Us
SIGN UP FOR E-UPDATES »