In 1984, the U.S. and Canada finalized an agreement that allows a person to qualify for both U.S. Social Security and Canadian retirement benefits. This made it easier for people who worked in both countries to qualify for retirement benefits when they may not have been able to without the agreement. In the process, they have also thoroughly confused anybody trying to figure out what benefits they actually qualify. This post is meant to break down the U.S. and Canada retirement benefits for people who have worked in both countries.
The social security department actually does a nice job of breaking down the different benefits and eligibility here.
First, a basic rundown of the different retirement accounts in both countries.
U.S. social security
This U.S. retirement benefit is based on total wages earned and amount of years worked. The more you earn and work, the higher your benefit. A person can start social security as early as age 62, but your benefit increases each year that you delay taking it until age 70.
Medicare is the U.S. national health insurance for those over age 65. Medicare starts as early as age 65, for those who qualify. In 2018, basic Medicare costs $134 per month, although supplemental plans can cost extra.
Canadian Pension Plan (CPP)
The CPP is Canada’s version of U.S. social security. Like social security you can start drawing early, age 60, but receive a higher benefit if you delay. The CPP is also based on earnings and contributions made into the system by employee and employer. The more you earn and longer you work, the higher the benefit. However, the CPP does tend to be lower than social security.
Canadian Old Age Supplement (OAS)
Unlike social security and CPP, the OAS is not based on wages earned, or how much you paid into the system. OAS is available to Canadian citizens that have lived in Canada for a certain amount of time and earn under a certain amount of money. In 2018, the maximum OAS benefit is $601 and your individual income must be less than $123,386. To receive the maximum OAS benefit however, you would have had to have lived in Canada for 40 years after the age of 18. You can start collecting your OAS at age 65, but you can defer up to age 70, and receive a higher payment.
Below is a chart that shows how to be eligible for the different benefits without relying on totalization agreement. This does not include eligibility based on any spousal or disability benefits, which may be an option in certain cases.
|Retirement Benefit||Non-Totalization Eligibility|
|Social Security||40 quarters (10 years) of covered employment paying into Social Security. Must have earned over $1,320 (in 2018) for a quarter to count towards your eligibility.|
|Medicare||Same requirement as Social Security.|
|CPP||Worker must have contributed to the CPP for at least one year to get coverage.|
|OAS||Must be resident of Canada for at least 10 years after age 18.|
As you can see above, a U.S. worker may have worked in the U.S. for 9 years, his job moved to Canada, and receive no social security benefits. However, the agreement in 1984 allows credits earned in Canada to apply to U.S. social security. Below is the eligibility breakdown if you have worked in both the U.S. and Canada.
|Retirement Benefit||Totalization Eligibility|
|Social Security||Can use work done in Canada to help you reach the 40 quarters needed to be eligible for social security. However, you need to have earned at least 6 quarters (1 ½ years of work) in the U.S. to be eligible for social security. The more quarters you have worked in the U.S., the higher the benefit.|
|Medicare||The totalization agreement does not apply to Medicare. You need to work in the U.S. for 40 quarters earning at least $1,320 per quarter for Medicare eligibility.|
|CPP||Worker must have contributed to the CPP for at least one year to get coverage. The totalization agreement does not help you out much here, but the requirement of only having to work 1-year is minimal. However, the CPP is based on earnings and years of work, so the more you work in Canada, the higher your benefit.|
|OAS||Canada will consider your U.S. Social Security credits earned after 1951 and after age 18, along with periods of residence in Canada after 1951 and after age 18, to meet the OAS residence requirements. However, to be eligible to have your U.S. credits counted, you must have resided in Canada for at least one year after 1951 and after age 18.
Also, the OAS benefit is only paid to people living outside of Canada for more than 6 months, if they have at least 20 years of Canadian residency after age 18.
There is a lot to unpack here but the bottom line is this: There is a very good chance that if you worked in both the U.S. and Canada you will have a combination of benefits that consist of social security, CPP, and OAS. However, as I have written here, there is a very good chance that your CPP will actually reduce your social security benefit. If you have worked in the U.S. and Canada, you should be thankful for the Totalization Agreement. That doesn’t mean you have to necessarily understand it.