Canada Pension Plan/Old
Age Security You may be concerned that if you move to the US that you will lose
your Canadian government pension benefits. Nothing could be
further from the truth. If you qualify for benefits, you will
receive them no matter where you live in the world by simply applying
for them. In fact, the Canadian government can direct deposit
your CPP/QPP or OAS benefits directly into your US checking account
if desired. The exchange rates used are not the most competitive
but the convenience is tough to beat. For the taxation of
CPP/QPP and OAS in the US , see the income
tax planning section.
Qualifying for CPP/QPP - If you
have made contributions into CPP, you qualify for CPP/QPP at age
60 at the earliest (full benefits are received at age 65).
You can obtain an estimate of your future CPP/QPP benefit by asking
the Social Development Canada branch in your Province of residence
for a statement (1-800-277-9914). Be sure to tell them you
have left Canada and will no longer be making any further contributions
to CPP when calculating your benefits. The reason for this is the
normal SDC benefit calculation assumes you last year of salary will
continue till your retirement age when if fact, you will no longer
be making any contributions because you have left Canada. Unless
you tell them you are no longer making any contributions, your benefit
calculation will be overstated.
Windfall Elimination Provision -
If you move to the US , your Social Security benefits are typically
reduced if you collect CPP. To calculate your Social Security benefit,
Social Security uses a % of your average earnings over the past
35 years. Since most Canadians moving to the US have a much shorter
earning history, they qualify for a smaller Social Security benefit
(because a number of your 35 years has zero as your earning amount).
Now here's the rub . . . the smaller your average earnings are over
your 35-year history, the more Social Security aims to replace that
average earnings (the smaller your average earnings, the more Social
Security benefits will replace it). You, however, will have unusually
low average earnings for US Social Security purposes because you
did not contribute for most of the 35-year "look back" period. This
is because you were in Canada contributing to CPP and getting fully
qualified for those benefits. As a result, the Social Security administration
calls this a "windfall" and it takes into account the fact
that you are getting full CPP benefits and are not entitled to the
over generous SS benefits provided for those with lower average
earnings over the 35 year period. The "Windfall Elimination
Provision" reduces your Social Security benefits slightly to
take this into account but you still come out ahead of someone who
qualifies in either the US Social Security or Canada Pension Plan
system.
Qualifying for OAS - To qualify
for full OAS benefits at age 65, you must have lived in Canada for
at least 40 years after reaching the age of 18 (at age 58).
But what happens if you make the transition to the US before then?
To qualify for partial benefits, you must have lived in Canada for
at least 20 years after reaching the age of 18 and if you don't, the Canada/US Totalization
Agreement qualifies you for benefits. For each year you live
in the US , it counts as one year in Canada towards OAS.
However, your benefits are based only on the actual amount of time
you spent in Canada .
A totalization agreement is an executive agreement entered into
by the US with Canada on August 1, 1984 and is different from the
Canada/US Treaty because it does not require the formal approval
of Congress. The purpose of the Social Security Totalization
Agreement with Canada is to provide employers and employees with
relief from double payroll taxes and to "totalize" the payroll taxes
you paid in both Canada and the US in order to receive partial benefits
in both countries that you may not otherwise qualify for. The US
currently has totalization agreements with 17 other countries. 
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