My_question_is: Applicable to both US and Canada
Subject: Canadian Old Age Pension
Expert: taxman at centa.com
Date: Wednesday December 15, 2004
Time: 10:54 AM -0800
QUESTION:
For a Canadian who also holds American citizenship and resides in the US,
and who has paid into the pension system of Canada, is he eligible to
receive the Canadian Old Age Pension? Thanks
======================
David Ingram Replies:
Canada has two retirement pensions.
The Old Age pension is considered a non-contributory pension (although there
was a 2% figure to pay into it in the 60's) and you get it whether you
worked or not, paid tax or not. The requirements for a full pension is that
you had to have lived in Canada for 40 years AFTER you turn 18.
To qualify for "any" pension, you have to have lived in Canada for 10 full
years. If so the number of years you lived in Canada after age 18 is
divided by 40 and multiplied by the amount of the pension.
The next rule is that to collect the pension in another country, you have to
have lived in Canada for 20 years.
The following is from my 1990 income tax guide which you can find on line at
www.centa.com click on Tax Guide on the left hand side and then on pension
income.
Please note that the amounts Have changed (the $50,000 in the first sentence
is now about $57,000) but the principles are the same.
====================
LINE 113 - OLD AGE SECURITY PENSION
Please note ... In 1989 and 1990, if your Net Income BEFORE adjustments
(line 234) is over $50,000, you will have to pay back part of your OAS. See
LINE 235 section for worksheet.
This line refers to the Old Age Pension which is given to almost all
Canadians at the age of 65. There are no qualifying tests other than
residence and age. Enter the amount from Box (F) if you received a T4A (OAS)
slip or the amount in Box (K) if you received a T4(P) slip. Do NOT report
any Guaranteed Income Supplement or spouse's allowance received. GIS and
spouse's allowances are not taxable BUT if your spouse received either, you
must take them into account for net income purposes if you wish to claim
your spouse as a dependent on line 303, Page 2 or Line 326 if you try and
transfer deductions from your Spouse on Schedules 7 and 8 for 1988 and
Schedules 7 and T1C and the new GST form for 1989 and 1990.
Please note again! Guaranteed Income Supplement payments do not go in this
space. The amount on line 113 should never exceed THE BASE MONTHLY PENSION
TIMES THE NUMBER OF MONTHS YOU RECEIVED THE PENSION UNLESS a retroactive
payment for 1989 pension was paid in 1990, or 1987 in 1988, or 1988 in 1989.
etc. If this was the case, it is important to make sure that the retroactive
amount was also not included on the 89, 87 or 88 tax return.
The most important requirement before collecting the pension is that you
must have reached the age of 65. Health and Welfare Canada requires that you
prove this by filing certain documents. They prefer a birth or baptismal
certificate, but they understand that many people were born in circumstances
where proper records were not kept, so other suitable documents will be
accepted. If you have difficulty in securing these documents, do not delay
your application because of this. Merely indicate in your application that
the proof of age will follow.
To qualify for an Old Age Security Pension you must have fulfilled certain
residence requirements. Since July 1, 1977, there are two separate sets of
rules that apply in this area. The new rules are being phased in over a
40-year period, but effectively for all people turning 65 before July 1,
1987 the more favorable set of rules will apply.
Under the old rules the Old Age Security Pension is an all or nothing
payment. There are three ways to qualify under these rules:
1. By having lived in Canada for any full 40 years since your 18th birthday;
2. By having lived in Canada continuously for the last 10 full years, or;
3. By having lived in Canada for the last full year before making the
application and by making up any absences from Canada in the last ten years
with three times that amount of time in Canada in the preceding period since
your 18th birthday. As an example of using this last method if you made up
your last year of residence with July, 1978 at age 68, and had previously
spent all of 1970, 1971 and 1973 and no other time in Canada in the last ten
years, your period of absence in that ten years would be 10 - 4 = 6 years
and would have needed 6 x 3 = 18 years in Canada between your 18th birthday
and July 1968.
Obviously if you can qualify under these rules you will have them applied
since they will give you the full pension. In determining the amount of time
absent from Canada short periods of temporary absence such as for vacation
or going to school are not counted.
Under the new residence rules all that is needed to qualify you for a
pension is 10 full years of residence in Canada since your 18th birthday.
The full amount of Old Age Security Pension is then multiplied by the number
of full years spent in Canada since your 18th birthday and divided by 40. If
you have resided more than 40 years in Canada you would of course receive
the full pension. The new rules apply whenever you cannot qualify under the
old ones.
There is a catch here! Once you have begun receiving a partial pension any
further time spent in Canada cannot be used to increase your pension. If you
aren't careful this could have a drastic affect. Let's look at an extreme
example. You became a landed immigrant to Canada for the first time in 1977
and spent one full year here at that time. Then, because of a very good job
opportunity, you went overseas and did not return to Canada until late March
1981. In April, 1990 (having some time earlier reached your 65th birthday)
you fulfill the minimum 10-year requirement for receiving a partial pension
of 10/40 of the full amount, but you cannot increase this later. If you
forego your application for a further 8 months you will give up 8 months of
partial pension at 1/4 of the full amount (the dollar equivalent of two
months of full pension) in order to be eligible for the full amount of the
pension for the rest of your life.
Finally, in order to have the Old Age Security Pension continue being paid
to you for more than 6 months when you are out of the country, you must have
had at least 20 years of residence in Canada since your 18th birthday. This
is not affected by the date on which you began the pension, so that if you
qualified for the pension with 19 years of residence, then after one more
year of residence, you could apply for the pension to be paid to you
anywhere in the world.
HOW AND WHEN TO APPLY
An Old Age Security pension cannot be paid until an application has been
made and approved. Application forms are available at all Post Offices, Old
Age Security, and Canada Pension Plan offices in Canada. All questions on
the form should be answered fully. When you have completed the application
form, mail it in the envelope provided, to the Regional Old Age Security
Office in the capital of the province in which you live; if you no longer
live in Canada, mail it to the regional office in the province in which you
last resided. If possible, a copy of proof of age should be sent in with the
application form. If you have not yet obtained proof of age documents, your
application should not be delayed because of this. Proof of age can be
obtained and mailed later.
You should apply six months before becoming eligible for the pension. This
will allow time for proof of age to be obtained, if necessary, and for your
history of residence to be confirmed.
If any person cannot make an application because of infirmity, illness, or
any other good reason, someone else may apply on his or her behalf.
ASSISTANCE IN APPLYING FOR AN OLD AGE SECURITY PENSION
If you require assistance in completing an application for the Old Age
Security pension, you should get in touch with the Old Age Security office
in your province or the nearest Canada Pension Plan office. Representatives
of these offices will make home visits when necessary.
If there is a CEN-TA Group office near you, the consultant there will be
pleased to help you with the application.
PLEASE NOTE. 1989 WAS THE LAST YEAR THAT THE GROSS AMOUNT OF OAS AND CPP MAY
BE TRANSFERRED TO AN RRSP. HOWEVER FOR 1991, you will be able to roll over
$6,000 into a Spousal plan. Also for 1990 and 1991, you must transfer any
RRSP or Pension monies DIRECTLY from plan to plan. You may no longer take
the money into your possession for a couple of months, and then redeposit it
into another plan after using it for an intermediate purpose.
Old Age Security payments were $337.04 a month in Jan 1989 and went to
$340.07 in 1990 and $354.92 in 1991. They can be changed every three months
with indexing to the (excess over 3%) CPI (Consumer Price Index).
LINE 114 - CANADA OR QUEBEC PENSION PLAN BENEFITS
Simply fill in the amount shown on the orange or brown slip T4A(CPP) which
you received from the Canada Pension people. If the amount is incorrect or
you don't receive the slip, contact your nearest Canada Pension Plan office.
For want of a better place to put this, I shall now outline some facts about
the Canada Pension Plan which every Canadian should know.
The Canada Pension Plan is not just a retirement plan that one receives at
the age of 65. Under the CPP umbrella are: death benefits; retirement
benefits; benefits for orphans of deceased contributors; widows' and
widowers' benefits; disability benefits; and also benefits for children of
disabled contributors.
RETIREMENT BENEFITS
Contributions must have been paid in for one year. This does not mean a
whole year; it could have been paid in for only one month's work if you
earned over the annual minimum below:
Low earnings would not qualify you for a large pension, but there would be
something and you should apply for it. If the amount is very low it will be
paid in quarterly or annual amounts. The maximum retirement benefit for 1988
was $543.06 per month, for 1989, it was 556.25 per month, for 1990 it was
$577.08 per month and for 1991 it is $604.86 per month reducing by .05% for
each month it is taken out prior to age 65, because, yes, you may now take
it out at age 60. (As a matter of interest, in 1984, it was $387.50 per
month - inflation helps.)
=======================
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