7th Circuit splits in dual citizen’s challenge to reduction of U.S. Social Security benefits

A split 7th Circuit Court of Appeals panel affirmed a grant of summary judgment to the Social Security Administration on Monday in a class-action suit brought by a Canadian woman with dual citizenship who alleged her U.S. Social Security benefits were wrongly reduced based on similar benefits she receives from Canada.

Lorraine Beeler, a dual citizen of Canada and the United States, has established nearly 20-year careers in both countries and receives monthly retirement benefits from the Canada Pension Plan, that country’s equivalent to U.S. Social Security. She also worked at jobs on which she paid Social Security taxes in the United States.

Beeler’s earnings in Canada were not subject to Social Security taxes, and her earnings in the United States were not subject to Canada Pension Plan taxes. But Beeler ran into a problem after she alleges her Social Security benefits were wrongly withheld. She then sued the Social Security Administration in the U.S. District Court for the Southern District of Indiana in the class action case of Lorraine Beeler v. Andrew M. Saul, 19-2099. 

There, Beeler asserted that the reduction of her U.S. benefits is a violation of two Social Security provisions: The Windfall Elimination Provision and the U.S.-Canada totalization agreement. The class claims that both the statutory language of the WEP and the terms of the agreement prohibit the reduction of Beeler’s benefits.

But Senior Judge Sarah Evans Barker of the Southern District Court in a merits ruling granted summary judgment to the Social Security Administration after considering whether the provision applies given plaintiffs’ Canada or Quebec Pension Plan payments, and if so whether those benefits are specifically excluded from the provision.

The district court examined the Act’s definition of “employment” under § 410(a)(C), but rejected Beeler’s argument that the totalization agreement designates paid work in either country as covered employment or equivalent to covered employment in both countries. It also rejected the plaintiffs’ argument that application of the provision based on their receipt of Canada or Quebec Pension Plan benefits violates the totalization agreement because Canada does not reciprocally reduce plaintiffs’ Social Security benefits.

Finally, the district court concluded that Beeler’s Canada or Quebec Pension Plan benefits do not fall within an exclusion to the provision because plaintiffs receive them independently and the benefits are not based on the totalization agreement.

The 7th Circuit Court of Appeals split in affirming the district court’s decision, with the majority concluding the agency correctly ruled that plaintiffs’ Canadian employment was noncovered under the Social Security Act, and thus the provision applied to reduce their Social Security benefits.

The plaintiffs asserted three arguments on appeal: the provision does not include Canada or Quebec Pension Plan benefits within its scope, so plaintiffs’ Social Security benefits should not have been reduced; the provision’s implementing regulation exempts Canada or Quebec Pension Plan benefits because they are based on citizenship or residence; and applying the provision violates the U.S.-Canada totalization agreement.

As to the first issue, the majority of judges Michael Brennan and Frank Easterbrook found that because plaintiffs’ work in Canada is not considered “employment” under § 410, the provision of § 415 applies and reduces plaintiffs’ Social Security benefits.  Moving to the plaintiffs’ second point, the 7th Circuit concluded that the agency’s interpretations of the provision and its implementing regulation were permissible, as was its application of the provision to reduce plaintiffs’ Social Security benefits.

Finally, the 7th Circuit ruled for the agency on the plaintiffs’ contention that the provision should not apply because their Canada or Quebec Pension Plan benefits are “payment[s] by a Social Security system of a foreign country based on an agreement concluded between the United States and such foreign country pursuant to section 433 of this title …”

“But plaintiffs’ foreign pension benefits are based on their employment in Canada, not on the totalization agreement,” the majority noted. “… Plaintiffs cannot have it both ways. Either their Canada or Quebec Pension Plan benefits are merely a creation of the agreement between the United States and Canada (a conclusion that would have significant consequences moving forward), or they are established based on their years of service to their foreign employers, independent of any international agreements. We conclude they are the latter, and therefore neither ‘based on’ the totalization agreement nor exempt from application of the provision. Because plaintiffs’ Canada or Quebec Pension Plan benefits are not based on the agreement, plaintiffs’ employment in Canada does not qualify as covered employment under the Act, and the agency correctly applied the provision to the Social Security benefits.”

But Circuit Judge Amy St. Eve dissented from the majority’s opinion, finding that its analysis “rests on an unsupported premise to exclude Beeler’s work from the definition of employment.

“… There may be other arguments, including ones based on the regulations, for reducing Beeler’s benefits and avoiding her windfall,” St. Eve wrote in dissent. “The majority, though, accomplished this goal only by equating coverage with employment while outright ignoring Beeler’s argument for why the two concepts can be separated in the international sphere. Because I agree with Beeler that employment is not necessarily covered employment, the majority’s reasoning does not convince me that affirmance is appropriate. I therefore respectfully dissent.”