Friday, February 28, 2014

Social Security Pension, CPP, QPP, and OAS From Canada and USA

If you worked in Canada and the USA and paid into government pension schemes (Canada Pension Plan, Quebec PP, and US Social Security), you should know that these governments coordinate their retirement pensions for your benefit.  There is a treaty that governs this coordination and how you are taxed on the payments.

This means that:

  • Each country gives you credit for your years or quarters of work when looking at pension entitlement.  This means that you could get a partial US social security pension, even if you worked less than the 40 quarters required for Social Security.
  • You could get pension payments from both governments, say your CPP and a US social security pension.
  • You could get Canadian Old Age Security (OAS) on top of your CPP.  This is especially advantageous if you live in the USA as the treaty does not allow the Canadian government to claw back OAS if you live in the USA.
  • If you live in the USA, your CPP and OAS will not be taxed by Canada and may get the same advantageous tax treatment as US social security. 
  • On the downside, your Canadian work experience does not count towards US Medicare once you turn 65.  If you and your spouse do not meet the strict rules for government-paid Medicare, you will have to purchase it from the government or find other medical insurance.
  • Another downside is that you have to deal with varying exchange rates, the governments are not going to make you whole if one currency or the other gets devalued.
How do you go about getting your US and Canada pensions?  You need to apply to both US Social Security and Canadian CPP and OAS, and make sure you fill out the sections on working in the other country.  Keep copies and send in your forms as instructed.  Following the general theme of their respective governments, as mentioned previously:
  1. The US process will be long and the civil servants will not be sure how to help you.  It may take over a year for them to figure out how much to pay you.  Remember, in the US, we do not like to fund our government services with taxes and it shows in the service you get.
  2. The Canadian process will be quick and the civil servants will be well trained on how to handle your claim.  You can even get direct deposit to a US bank.  Recall that Canadians pay heavy taxes and government services are a priority to Canadians.
I hope this helps you get all the benefits that you earned over your lifetime.

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