The Repeal of the Windfall Elimination Provision: A Blessing for Cross-Border Retirees
The recent passage of the Social Security Fairness Act of 2023 has marked a significant victory for public service workers and cross-border retirees. Having cleared both the House of Representatives and the Senate by overwhelming, bipartisan margins, the bill is now awaiting President Joe Biden's signature before it becomes law. This historic legislation repeals the Windfall Elimination Provision (WEP), a provision that has long impacted the retirement benefits of those who have worked in both the United States and Canada, particularly those receiving Canada Pension Plan (CPP) benefits.
Understanding the Windfall Elimination Provision (WEP)
The WEP was a U.S. law that adjusted the formula for calculating Social Security benefits for individuals who also received a pension from work not covered by U.S. Social Security. It potentially reduced the amount of Social Security benefits for those who qualified based only on U.S. credits and also received a CPP/QPP benefit from Canada. This reduction was capped at 50% of the CPP/QPP benefit or a specified monthly amount, whichever was less. See our article on Social Security for more details on collecting government benefits when you worked on both sides of the border.
Impact of the Repeal on Cross-Border Clients
With the repeal of the WEP, individuals who have worked in both the U.S. and Canada will no longer see their U.S. Social Security benefits reduced due to receiving CPP/QPP benefits. This change could provide a significant increase the U.S. Social Security benefits for many cross-border retirees.
For instance, prior to the repeal, a retiree who had enough credits to qualify for U.S. Social Security benefits but also received CPP benefits may have had their Social Security benefits reduced under the WEP. Now, with the repeal, their Social Security benefits will be calculated without the WEP reduction, potentially resulting in a higher monthly benefit.
The Social Security Administration will adjust the Primary Insurance Amounts (PIAs), removing the WEP reduction, for affected individuals for months after December 2023. The repeal of the Windfall Elimination Provision under the Social Security Fairness Act of 2023 brings much-needed relief and financial security to those who have dedicated their careers to public service and have worked across the U.S.-Canada border.
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