U.S. Class Action Filed for Canadians Who Receive U.S. Retirement Benefits

5 mars 2019 | Dwight D. Dee

( Disponible en anglais seulement )

Persons who have lived and worked for extended periods of time in both Canada and the United States can often be eligible to receive benefits under both Canadian and U.S. government pension programs.   As an administrative practice, however, the U.S. Social Security Administration has reduced U.S. payments to such persons on the basis that they also receive benefits under the Canadian pension system.   A class action has recently been filed in the state of Indiana against the U.S. Social Security Administration claiming that a reduction of U.S. retirement and disability payments is unlawful (the “Class Action”).  Unlike in Canada and Quebec, the U.S. Social Security Administration reduces the amount of U.S. payments for eligible individuals who also receive Canadian pensions though a reduction technique called the “Windfall Elimination Provision” (the “WEP”).  The heart of the issue is whether the reduction of U.S. pension and disability benefits to individuals who also receive the same benefits in Canada is lawful.

The Plaintiffs in the Class Action are claiming that the application of the WEP to U.S. benefits payments is unlawful and presents a violation of the plain meaning of the U.S. Social Security Act, U.S. Social Security Act Regulations and the Social Security Agreement (1983-1984) between United States and Canada (the “Social Security Agreement”).  Generally, the Plaintiffs argue that the wording in the U.S. Social Security Act  specifies that employment or self-employment benefits are not to be subject to the WEP for citizens or residents of countries with which the United States entered into social security agreements. The services of persons who worked in both countries and contributed to both countries’ social systems are recognized as equivalent to employment paid work in either country and should be exempt from the application of the WEP.  Further, the Plaintiffs claim that the Canada Pension Plan and the Quebec Pension Plan are based on earnings and residence and are of general application, therefore they should be excluded from the application of the WEP. An additional basis of the Plaintiffs’ claim is that the Social Security Agreement has an equal treatment clause that is violated by the United States applying deductions to retirement benefit payments, whereas Canada and Quebec do not apply the same deduction to those receiving both Canadian and U.S. retirement benefits.

The Plaintiffs seek retroactive payment of the amounts deducted through the application of the WEP as well as a cessation of the application of the WEP going forward.  As of late February 2019, the U.S. federal court has certified a class of all persons affected by this practice and has motions before it for summary judgment which will decide the merits of the claim at the trial court level.

If you are interested in learning more about this Class Action you may contact your Miller Thomson Private Client Services lawyer who will direct you to the U.S. firms involved in the matter.

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