Opinion ID: 4573539
Heading Depth: 2
Heading Rank: 2

Heading: Social Security Statutes and Regulations

Text: In dispute is the application of three interrelated statutes. First: The windfall elimination provision (“the provi‐ sion”), 42 U.S.C. § 415(a)(7)(A)(ii), states in part that an indi‐ vidual who becomes eligible for a monthly periodic payment “which is based in whole or in part upon his or her earnings for service which did not constitute ‘employment’ as defined in [42 U.S.C. § 410] … (hereafter in this paragraph … referred to as “noncovered service”)” shall have their benefits recom‐ puted. The provision excludes in part “a payment by a social security system of a foreign country based on an agreement between the United States and such foreign country pursuant to [42 U.S.C. § 433].” Under the provision the agency reduces Social Security retirement benefits for U.S. citizens who also receive monthly periodic payments based on work not subject to Social Security taxes, including foreign work. See Social Se‐ curity Admin. pub. no. 05‐10045, Windfall Elimination Provi‐ sion, https://www.ssa.gov/pubs/EN‐05‐10045.pdf (Jan. 2020). Some context for the provision is helpful. Under the Social Security Act (“the Act”), “workers in the United States are taxed to support the payment of [S]ocial [S]ecurity benefits to the retired … .” Eshel v. Comm’r, 831 F.3d 512, 514 (D.C. Cir. 2016). A retired worker in the United States is entitled to Social Security benefits based on the number of calendar 4 No. 19‐2099 quarters she worked subject to Social Security contribution re‐ quirements over the course of her career, provided that she has accrued a minimum number of quarters of coverage. See 42 U.S.C. §§ 402(a), 414(a). Upon retiring, the worker receives monthly Social Security retirement benefits equal to a per‐ centage of her “average indexed monthly earnings,” 42 U.S.C. § 415(a)(1), an amount roughly equal to the employee’s aver‐ age monthly earnings in employment on which she paid So‐ cial Security taxes over her lifetime. Originally the Act would have allowed a retired employee who divided her career between employment on which she paid Social Security taxes (“covered employment”), and em‐ ployment exempt from such taxes (“noncovered employ‐ ment”)—such as jobs in foreign countries for foreign employ‐ ers—to receive a total retirement income greater than a worker with similar earnings on which Social Security taxes were paid: a so‐called “windfall.” To address this discrep‐ ancy, Congress enacted the provision. Second: “Employment” is defined at 42 U.S.C. § 410(a), in‐ cluding at subsection (C) as “any service performed … if it is service, regardless of where or by whom performed, which is designated as employment or recognized as equivalent to em‐ ployment under an agreement entered into under [42 U.S.C. § 433] … .” Third: Workers who divide their careers between diﬀerent countries, and between covered and noncovered employment present certain challenges under the Social Security system, including double taxation, incomplete coverage, or loss of continuity of coverage. To address these issues, Congress amended the Act to authorize the President to enter into international agreements that establish totalization No. 19‐2099 5 arrangements, under which the signatory governments coor‐ dinate benefits under their pension systems. This includes the grant of retirement benefits to persons who split their careers among two or more countries. See https://www.ssa.gov/inter‐ national/agreements_overview.html (last visited Oct. 5, 2020). Totalization agreements must contain certain terms, in‐ cluding that:  work will result in a period of coverage under either the Social Security system or the foreign country’s sys‐ tem “but not under both,” § 433(c)(1)(B); and  a worker whose periods of coverage are combined (or “totalized”) to qualify for coverage under the Social Se‐ curity system will receive a pro‐rated Social Security benefit amount based on the proportion of his U.S. pe‐ riods of coverage, § 433(c)(1)(C). A payment to an individual from a foreign pension system based on a totalization agreement under this section is exempt from the provision. The United States and Canada have been parties to a totalization agreement since 1984. See Social Secu‐ rity Admin. pub. no. 05‐10198, Agreement Between the United States and Canada, https://www.ssa.gov/interna‐ tional/Agreement_Pamphlets/canada.html (Aug. 2017).1 Also pertinent to this case is a regulation implementing the provision. Under 20 C.F.R. § 404.213, the provision applies if the retired employee is entitled to a monthly pension “based 1 The United States entered into separate totalization agreements with Canada and the province of Québec. Those agreements do not differ ma‐ terially for our purposes, so they are referred to here as “the totalization agreement.” 6 No. 19‐2099 in whole or in part on [her] earnings in employment which was not covered under Social Security.” The regulation con‐ tinues: Noncovered employment includes employment outside the United States which is not covered under the United States Social Security system. Pensions from noncovered employment outside the United States include both pensions from social insurance systems that base benefits on earnings but not on residence or citizenship, and those from private employers. 20 C.F.R. § 404.213(a)(3).