Blog post

For years, the Windfall Elimination Provision (WEP) has caused frustration for Americans living in Canada who receive both U.S. Social Security and Canada Pension Plan (CPP) benefits. The WEP reduced Social Security benefits for individuals with pensions from non-covered employment—a category that includes CPP. However, recent legislation signed by President Biden eliminates the WEP, offering much-needed relief for affected retirees. Let’s explore the history of the WEP, what this legislative change means for Americans in Canada, and how it will impact your retirement benefits.

A Brief History of the WEP

The WEP was introduced in 1983 as part of broader Social Security reforms aimed at ensuring the program’s solvency. Its purpose was to adjust the Social Security benefit formula for individuals who also received pensions from jobs that didn’t contribute to Social Security. The WEP was designed to prevent these individuals from appearing to have low lifetime earnings, which would otherwise entitle them to disproportionately high benefits under Social Security’s progressive formula.

For Americans living in Canada, the WEP frequently applied to those who worked in Canada long enough to qualify for CPP benefits. The reduction could be significant, with a maximum reduction in 2025 of $557.50 per month.

What the New Legislation Changes

President Biden’s recent legislation, signed into law in early 2025, eliminates the WEP. This change marks a significant victory for retirees who have spent years advocating for its removal. Here’s what you need to know:

Increased Benefits

With the elimination of the WEP, Social Security benefits will now be calculated using the standard Primary Insurance Amount (PIA) formula, without the reduction previously applied under the WEP. For many retirees, this means a significant increase in their monthly Social Security benefits.

• How much more can you expect?
  • Individuals previously affected by the full WEP reduction could see their monthly Social Security benefit increase by up to $557.50.
  • The exact increase will depend on your earnings history and the amount of your CPP benefits.

Retroactive Payments

The legislation includes a provision for retroactive payments to those who have been affected by the WEP. Social Security recipients will receive back payments for benefits reduced under the WEP, dating back to 2024 when the provision was initially set for elimination.

• How much will you receive retroactively?
  • Retroactive payments could amount to as much as $6,690 if you received reduced benefits for all of 2024.
  • Social Security will notify eligible recipients with details about their adjusted benefits and retroactive amounts.

What This Means for Americans in Canada

Simplified Retirement Planning

The elimination of the WEP removes a significant source of uncertainty for cross-border retirees. Previously, many Americans in Canada found it challenging to calculate their expected Social Security benefits due to the complex WEP formula and future CPP payments.

Boost to Monthly Income

For many retirees, the additional income from higher Social Security benefits will provide greater financial stability. This change is particularly impactful for those who rely on both Social Security and CPP to fund their retirement.

Potential Risks with a New Administration

While the elimination of the WEP is a positive development, it’s important to remember that a new U.S. administration will take office soon. Changes to Social Security laws could be revisited, depending on the priorities of the next administration. Retirees should remain informed and proactive about potential legislative shifts.

What’s Next?

If you’re an American living in Canada and currently receiving Social Security and CPP benefits, here’s what you should do:

1. Watch for Communication from Social Security: The Social Security Administration (SSA) will send notices to affected recipients, outlining updated benefit amounts and retroactive payments.
2. Plan for the Increase: Consider how the additional income can enhance your retirement planning. Whether it’s saving, investing, or budgeting for new goals, this increase provides an opportunity to reevaluate your financial strategy.
3. Stay Informed: As new legislative developments occur, ensure you’re up-to-date on changes that could affect your benefits. Consulting with a cross-border tax and financial advisor can help you navigate the complexities of retirement planning.

Final Thoughts

The elimination of the WEP is a major win for Americans in Canada, ensuring fairer treatment for those who have contributed to both U.S. Social Security and Canada’s CPP. While the changes bring immediate financial benefits, it’s crucial to remain vigilant about potential shifts in Social Security policy with a new administration on the horizon.

If you have questions about how these changes impact your retirement benefits or need help optimizing your cross-border financial plan, contact us at Beacon Hill Wealth Management. We specialize in helping Americans in Canada navigate the complexities of cross-border tax and investment planning.

Need help planning your cross-border financial future? Take advantage of our complimentary consultation (some limitations apply) here: Beacon Hill Cross-Border Consultation.