{"id":500027,"date":"2025-01-10T16:51:37","date_gmt":"2025-01-10T21:51:37","guid":{"rendered":"https:\/\/www.investmentexecutive.com\/?p=500027"},"modified":"2025-01-10T17:07:11","modified_gmt":"2025-01-10T22:07:11","slug":"u-s-elimination-of-wep-is-good-news-for-cross-border-pensioners","status":"publish","type":"post","link":"https:\/\/www.investmentexecutive.com\/news\/industry-news\/u-s-elimination-of-wep-is-good-news-for-cross-border-pensioners\/","title":{"rendered":"U.S. elimination of WEP is good news for cross-border pensioners"},"content":{"rendered":"

Clients who worked stateside long enough to qualify for U.S. social security will now get the benefits they\u2019re entitled to, with no reduction based on their Canadian pension benefits.<\/p>\n

This week, the U.S. Social Security Fairness Act was officially signed into law, removing the windfall elimination provision (WEP), in place since 1983. From a Canadian perspective, the WEP often lowered the U.S. social security benefits of cross-border workers, given their Canada Pension Plan (CPP) or Quebec Pension Plan benefits.<\/p>\n

With the WEP gone, U.S. social security benefits will be restored retroactively as far back as January 2024, for those eligible.<\/p>\n

\u201cYou\u2019re going to get what you\u2019re entitled to,\u201d said Carson Hamill, an associate portfolio manager with Snowbirds Wealth Management, Raymond James Ltd., in Coquitlam, B.C. \u201cYou\u2019re not going to be handcuffed.\u201d<\/p>\n

To collect U.S. social security, taxpayers require 40 credits, which generally translates to 10 years of working in the States.<\/p>\n

The WEP elimination is also expected to increase the U.S. social security benefits of about three million Americans with private or other pension benefits.<\/p>\n

A KPMG article<\/a> noted that the new legislation is controversial, because of the risk it presents to U.S. social security\u2019s solvency. \u201cCongress will likely need to expedite reform efforts in the wake of the law being enacted,\u201d the article said.<\/p>\n

A projected shortfall for U.S. social security is based on demographics, said Andrea Thompson, a financial planner and founder of Modern Cents in Mississauga, Ont. U.S. social security predominantly relies on payroll deductions from the existing workforce to fund benefits. While CPP operates under a different system, clients can still be concerned that demographic shifts will affect those benefits, she said.<\/p>\n

To address that requires \u201cunderstanding the nature of the types of pensions and how they’re structured and whether or not [clients\u2019] concerns are founded,\u201d Thompson said. \u201cThat’s something we discuss with our clients.\u201d<\/p>\n

When planning for clients, she is reducing annual U.S. social security benefits by 21%, based on U.S. research including projections from the Congressional Budget Office<\/a>.<\/p>\n

Hamill said people are eager for details about the WEP elimination. \u201cSome of our clients, even prospects, are calling me saying, \u2018When can I expect my additional money?\u2019\u201d he said.<\/p>\n

The U.S. government is evaluating how to implement the act.<\/p>\n

Thompson said an unknown is whether the rules will be different for U.S. residents versus non-residents. \u201cThat hasn\u2019t been clarified yet,\u201d she said.<\/p>\n

She added that more social security changes could be on the way. For example, Trump campaigned on eliminating taxation of social security.<\/p>\n

\u201cThat would be costly \u2026 for the U.S.,\u201d Thompson said. \u201cFrom a Canadian perspective, it’s unclear whether that change would impact Canadians or whether the [Canada Revenue Agency] would continue to tax [social security benefits].\u201d<\/p>\n

Currently, under the Canada-U.S. tax treaty, taxpayers can claim a deduction of 15% of U.S. social security benefits.<\/p>\n

\u201cYou would hope that if the U.S. makes any major changes, that based on our tax treaty [with the U.S.] we would follow suit,\u201d Thompson said. \u201cBut we really don’t know.\u201d<\/p>\n

“From a planner’s perspective, there are so many changes,” she said, referring to evolving taxation and legislation. As a result, financial planning must be ongoing.<\/p>\n","protected":false},"excerpt":{"rendered":"

Eligible Canadians with a U.S. work history will get their social security benefits restored<\/p>\n","protected":false},"author":145539,"featured_media":495495,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2318,2312],"tags":[3270,2803,2601,3859],"yst_prominent_words":[5314,49273,36476,35751,23065,7450,7440,6878,5323,5320,1384,2170,2141],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500027"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/145539"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=500027"}],"version-history":[{"count":6,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500027\/revisions"}],"predecessor-version":[{"id":500071,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500027\/revisions\/500071"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media\/495495"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=500027"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=500027"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=500027"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=500027"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}