A Canadian worker of ours worked at our US facility for 7 years and we paid US social security for those seven years. As they did not work the minimum 10 years, they cannot collect US social security when they retire. The amount paid is over $30,000. The US government won't refund the 7 years of payments but they don't qualify for social security either. The Canadian government does not want to give them credit for the 7 years towards the Canadian version of social security (CPP). This means when they collect CPP in Canada they will be penalized for the missing 7 years. Is there a way that we can top up the missing three years so that they can collect US social security? At least then the money is not lost?
What should we do about a Canadian who worked in the US for 7 years and is now 3 years short for Social Security?
Answers
While the employee may not be fully resident in the US, if they are required to continue filing in the US and withholding, this may naturally solve the issue.
Steven Berniker is a Social Security atty in Sacramento whose work I'm familiar with. You might consider paying a few $ for his opinion (he is exceptionally affordable, incidentally).
By virtue of Chapter 1 Article VII of the US/Canada Social Security Agreement a Canadian national who has contributed into the US social security scheme for at least 6 calendar quarters of coverage but does not have the 40 quarters (10 years) of coverage required to receive entitlements is entitled to have periods where they have contributed into the Canada CPP taken into account in order to build up the necessary 40 quarters .
Therefore each year of contributions made into the CPP will generate 4 quarters of credit towards the 40 required. If this generates enough credits ( your employee would need 12 credits to make up the 3 year shortfall) then the employee will be entitled to receive the US benefits prorated to reflect the actual amount contributed ( 7 years).
The actual text from the US /Canada agreement can be sourced from the following link http://www.ssa.gov/international/Agreement_Texts/canada.html
best regards,
Shan
2
I have a question about how the partial social security benefit is calculated if I had to use my canaidan CPP credits to qualify the benefit in USA.
I searched the internet, all it says is that I will receive partially the SS benefit proportional to the credits that I earned in the US. Is it the amount calculated by the formular: The full SS benefit * credits earned in US / 40?
I still have several years to reach my 40 credits. But I am eager to know if it is worth to retire earlier if I get enough monthly benefit to cover my retirement life.
Thanks for your expert advise.
BTW, I have earned enough CPP credits before I was employed in US. Thanks.
Shan,
Thanks for the link. Good stuff.
It sounds like the employee will be collecting under the Canadian system. Articles VIII through X seem to cover the case in point. I'm guessing that in addition to the goal of ensuring citizens are able to benefit from the pension system even if they've worked cross-border, there is also a goal of preventing double-dipping.
The treaty creates Canadian value for the $30k paid into SSA in the US by the employee in question. The employee should probably contact the Canadian Old Age Security office to verify and to see if he has to do anything to ensure proper credit.
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Human Capital