Case Studies: Social Security, WEP, and CPP

[exPenn]

formerpatriot:

6 months sounds about right.

Like most governments, US departments operate in silos that don't share information. Change of citizenship is one of the things listed in https://www.ssa.gov/pubs/EN-05-10077.pdf, page 11. To make changes on your SS profile you have to submit a form SS-5 (https://www.ssa.gov/forms/ss-5.pdf ) along with supporting documentation, i.e. a COLN and a Canadian passport.

[brianbbc]

I'm wondering about Andrews strategy of taking the smaller amount of ccp at age 60, then collecting the substantial larger ss at age 70. Obviously you have other income to support you till you get ss. I am in the same situation, little ccp but significant ss payout. Did you calculate if a greater benefit would have occurred if you waited till age 66 to begin collecting ccp ?

[nelsona]

Ive never seen any WEP runs that suggest waiting for CPP.

[MaggieA]

Dual citizen planning to retire next year. My CPP will be larger than my spouse's. I'm considering applying for CPP sharing, which would be modestly helpful for income splitting just with CRA. When applying for Social Security, is it fair to submit my shared CPP amount? That would reduce WEP a bit.

[nelsona]

You would need to declare YOUR CPP benefits, regardless of whether they are split for tax purposes or not.

[MaggieA]

Note that CPP sharing is not the same as pension splitting. In pension splitting, the pension is all paid to the spouse who earned it; a portion of the income is only attributed to the other spouse on the Canadian tax return. This is clearly just a provision for reducing taxes, not a change to anyone's pension income.

In CPP sharing, the amount paid to the pensioner by CPP is altered. From what I read, it seems to be commonly believed that WEP can be deferred by deferring CPP. Even though the pensioner is entitled to CPP now, if they elect to defer it, they tell SSA they don't have a non covered pension (for now). CPP sharing seems comparable to me. If the pensioner elects to have CPP pay part of their pension to somebody else, how is that different from deferring? If what matters is how much benefit is actually paid to the pensioner by CPP, then that would be the shared amount.

[nelsona]

You can make that argument. I don't. Besides, CPP sharing is temporary measure which you could end at any time. And its purpose IS primarily tax saving. True CPP splitting occurs as a result of divorce, THAT is a permanent change in one's CPP credits.

Let us know what the SSA thinks.

[nelsona]

WEP takes place when you collect your first month of CPP and SSA together. So deferring has no bearing on the WEP calculation; it simply isn't applied yet.

[nelsona]

on the other hand, the T4(A) YOU get shows nothing about what you gave away to your spouse, and vice versa. It only includes your income. So, I guess it depends on what information SSA gets from Service Canada, if any.

[nelsona]

This is the form you will be filling, among others:

https://www.ssa.gov/forms/ssa-308.pdf

[nelsona]

https://secure.ssa.gov/poms.nsf/lnx/0200307292

[MaggieA]

I was checking because I thought it might be considered cricket. Rules about entitlements and taxes sometimes seem odd and arbitrary, and I simply couldn't find any mention of CPP sharing + WEP anyway. I expect you are right because you are generally very knowledgeable.

[MaggieA]

Circling back here to say thanks again to exPenn for the super-informative original post. I confess I didn't follow all the details at the time, but they are correct. The projecting of the reduction back to the year one turns 62 really bites, particularly in these inflationary times. I recommend downloading SSA's detailed calculator to see all the details of the calculation with your data. Note that only the Windows version is current. https://www.ssa.gov/OACT/anypia/anypia.html

[jorivers73]

FYI, from what I understand, as of today December 19 2024, both the US congress and senate have approved a Bill that repeals WEP/GPO. The bill has to go to some procedural reviews on December 20 2024, and then would be sent to Biden for signature on the same day. This Bill would benefit americans that receive a government pension in addition to Social Security as WEP would no longer apply.....so it may also benefit Canadians who receive (or will receive) both CPP and SS.
Does anyone have more details/knowledge of this very recent development ?

[jorivers73]

Update: see link below, there is still one final vote left on the bill to repeal WEP, and this vote will take place in the senate today (Dec 20). If it passes, then the bill will go to Biden's desk.

https://www.ncpssm.org/documents/latest ... to-repeal/

From what I read, Canadians receiving CPP and SS would not be explicitely excluded, hence they would benefit if/when this bill becomes law.