Lorraine Beeler v. Andrew M. Saul ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19‐2099
LORRAINE BEELER, et al.,
Plaintiffs‐Appellants,
v.
ANDREW M. SAUL, Commissioner of Social Security, et al.,
Defendants‐Appellees.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:15‐cv‐01481 — Sarah Evans Barker, Judge.
____________________
ARGUED MAY 19, 2020 — DECIDED OCTOBER 5, 2020
____________________
Before EASTERBROOK, BRENNAN, and ST. EVE, Circuit Judges.
BRENNAN, Circuit Judge. The plaintiffs in this class action,
dual citizens of the United States and Canada, receive
monthly Canadian pension benefits. They also applied for
and receive U.S. Social Security benefits. But those Social Se‐
curity benefits were reduced under a statutory “windfall
elimination provision” which decreases workers’ payments
when they split their career between employment requiring
2 No. 19‐2099
payment of Social Security taxes (such as in the U.S.) and em‐
ployment exempt from such taxes (such as in Canada).
The plaintiffs challenge the reductions as unlawful, con‐
tending the provision does not apply to them. The district
court upheld the application of the provision by the Social Se‐
curity Administration (“the agency”) to plaintiffs and granted
summary judgment to the agency. Correctly interpreted, the
provision and related statutes apply to these plaintiffs and re‐
duce their benefits, so we affirm.
I
A. Factual Background
Lorraine Beeler, a dual citizen of Canada and the United
States, previously lived and worked in Canada and receives
monthly retirement benefits from the Canada Pension Plan,
that country’s equivalent to U.S. Social Security. (Virtually all
employees in Canada are enrolled in this government‐admin‐
istered pension plan, or for employees who live in Québec,
the Québec Pension Plan.) Beeler worked in Canada for 19
years and contributed to the Canada Pension Plan through
payroll deductions from her earnings. In 1989 Beeler moved
to the United States. From 1994 until she retired in 2013, she
worked at jobs on which she paid Social Security taxes.
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. Beeler has received monthly
Canada Pension Plan benefits since September 2013. The other
class members had work and tax payment histories similar to
Beeler.
In 2013, Beeler applied for Social Security retirement ben‐
efits based on her years of employment in the United States.
No. 19‐2099 3
She was awarded those benefits, but the agency granted her a
reduced amount because she was also entitled to monthly
Canada Pension Plan benefits based on work not covered by
Social Security taxation. This reduction is pursuant to a num‐
ber of laws, the interpretation of which determines the out‐
come of this case.
B. Social Security Statutes and Regulations
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).
C. Procedural Background
Relying on the provision and based on plaintiffs’ receipt
of monthly Canadian pension benefits, the agency reduced
the Social Security retirement benefits of Beeler and the other
class members. Beeler requested a hearing before an adminis‐
trative law judge who found that the agency properly applied
the provision. In 2015, Beeler sought review of the ALJ’s deci‐
sion by the agency’s Appeals Council but was denied, render‐
ing the ALJ’s decision final. Before seeking review from the
Appeals Council, though, Beeler had sued the agency in fed‐
eral district court on behalf of herself and eleven other simi‐
larly situated Canadian Americans.
The plaintiffs alleged the agency’s application of the pro‐
vision to them violated its plain language, its implementing
regulation, and the U.S.–Canada totalization agreement.
Plaintiffs sought declaratory relief that the agency’s interpre‐
tation of the provision, its related regulation, and the totaliza‐
tion agreement were unlawful. They also sought injunctive
No. 19‐2099 7
relief preventing the agency from applying the provision
based on receipt of Canada and Québec pension plan benefits,
as well as recalculation of their retirement benefits and back‐
pay.
The agency filed a motion to dismiss, or in the alternative
for summary judgment, for failure to exhaust administrative
remedies.2 The district court denied the agency’s motion, con‐
cluding that exhaustion was futile because the agency ad‐
hered to its own policies. The court ruled that plaintiffs’
claims were collateral to their individual claims for benefits
on two grounds: their claims constituted a facial challenge to
the agency’s policy to reduce Social Security benefits of dual
citizens, and the agency had already determined the merits of
plaintiffs’ benefit claims based on their individual contribu‐
tions. Still, the court concluded that plaintiffs would suffer ir‐
reparable harm if not allowed to proceed, so it certified a class
consisting of dual citizens whose Social Security benefits were
reduced under the provision based on their or their spouses’
receipt of Canada or Québec Pension Plan payments.
On the merits, the district court considered whether the
provision applies given plaintiffs’ Canada or Québec Pension
Plan payments, and if so whether those benefits are specifi‐
cally excluded from the provision. The court examined the
Act’s definition of “employment” under § 410(a)(C), but re‐
jected plaintiffs’ argument that the totalization agreement
designates paid work in either country as covered employ‐
ment or equivalent to covered employment in both countries.
2 None of the eleven additional plaintiffs had exhausted administra‐
tive remedies or sued within the 60‐day requirement of 42 U.S.C. § 405(g)
at the time Beeler’s complaint was filed.
8 No. 19‐2099
“In fact,” the court stated, “the Totalization Agreement lays
down exactly the opposite rule: ‘covered’ in one country ipso
facto means ‘noncovered’ in the other.” The court continued:
“Plaintiffs overlook or misunderstand the statutory command
that ‘employment’ under any totalization agreement
‘shall … result in a period of coverage’ under either the for‐
eign or the domestic Social Security system, ‘but not under
both.’” (quoting § 433(c)(B)(i)).
The district court also rejected plaintiffs’ argument that
application of the provision based on their receipt of Canada
or Québec Pension Plan benefits violates the totalization
agreement because Canada does not reciprocally reduce
plaintiffs’ Social Security benefits. To the court, “Article IV [of
the agreement] says that the United States may not discrimi‐
nate in the payment of Social Security benefits in favor of its
own citizens against Canadians,” and there is no evidence
“that [the agency] applies the [provision] to Canadians … in
circumstances where it would not also apply the [provision]
to Americans.”
The district court further concluded that plaintiffs’
Canada or Québec Pension Plan benefits do not fall within an
exclusion to the provision because plaintiffs receive them in‐
dependently and the benefits are not based on the totalization
agreement. So summary judgment was granted to the
agency.3
3Because the district court held that the application of the provision
was “lawful as a matter of the unambiguous text” of the Social Security
Act and the totalization agreement, it declined to address whether the
agency’s interpretation of the Act was entitled to deference under Chevron
U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), or whether its interpretation of
No. 19‐2099 9
Plaintiffs appeal the district court’s grant of summary
judgment, which we review de novo, Arwa Chiropractic, P.C.
v. Med‐Care Diabetic & Medical Supplies, Inc., 961 F.3d 942, 946
(7th Cir. 2020), as we do the questions of statutory interpreta‐
tion in this case. In re I80 Equipment, LLC, 938 F.3d 866, 869
(7th Cir. 2019).
II
The parties agree that the statutory and regulatory lan‐
guage at issue here is plain, but each side argues that plain
language supports their position on whether the provision
applies. They do not debate whether certain statutory terms
have different meanings. Rather, they read the structure of the
applicable statutes and their interplay differently.
“We interpret statutes as a symmetrical and coherent reg‐
ulatory scheme, and fit, if possible, all parts in an harmonious
whole.” Owner‐Operator Indep. Drivers Assoc., Inc. v. U.S. Dept.
of Transp., 840 F.3d 879, 888 (7th Cir. 2016) (internal quotation
marks omitted) (citation omitted). The “whole text” canon of
statutory interpretation also “calls on the judicial interpreter
to consider the entire text, in view of its structure and the
physical and logical relation of its many parts.” ANTONIN
SCALIA & BRYAN A. GARNER, READING LAW: THE
INTERPRETATION OF LEGAL TEXTS 167 (2012). So we approach
this project considering the language and design of the provi‐
sion as a whole and the statutes it references. See Our Country
the regulation implementing the windfall elimination provision was enti‐
tled to deference under Auer v. Robbins, 519 U.S. 452 (1997). We also con‐
clude that the relevant text is unambiguous, so we need not consider the
question of agency deference.
10 No. 19‐2099
Home Enter., Inc. v. Comm’r of Internal Revenue, 855 F.3d 773,
785 (7th Cir. 2017).
On appeal, plaintiffs offer elaborate arguments that can be
summarized into three contentions: (A) the provision does not
include Canada or Québec Pension Plan benefits within its
scope, so plaintiffs’ Social Security benefits should not have
been reduced; (B) the provision’s implementing regulation
exempts Canada or Québec Pension Plan benefits because
they are based on citizenship or residence; and (C) applying
the provision violates the U.S.–Canada totalization agree‐
ment.
A
First up are the parties’ differing interpretations of the
statutes. Each side offers detailed arguments that are
abridged here.
Plaintiffs admit the provision applies to workers who re‐
ceive foreign pension payments from foreign governments
for services that do not constitute employment. Plaintiffs read
language in the provision at § 415—“which is based … upon
… earnings for service which did not constitute employment
as defined in [§ 410] … (hereafter in this paragraph … referred
to as “noncovered service”)“—to define the noncovered ser‐
vice to which the provision applies. In contrast, the provision
should not apply to foreign pension payments arising from
service that is employment, in which they argue they en‐
gaged.
To ascertain whether their benefits fit within that language
from § 415, plaintiffs look to § 410(a)(C), which defines em‐
ployment as “service, regardless of where or by whom per‐
formed, which is designated as employment or recognized as
No. 19‐2099 11
equivalent to employment under an agreement entered into
under [§ 433].” This leads the plaintiffs to the totalization
agreement between the United States and Canada, enacted
under § 433, to resolve whether their services in Canada
would be designated as, or recognized as equivalent to, em‐
ployment.
From plaintiffs’ review of certain passages in the totaliza‐
tion agreement—including Article I subsection 6 (recognizing
employment earnings as a “period of coverage”), Article
II(1)(b)(ii) (recognizing the Canada Pension Plan as one of the
“applicable laws” for the totalization agreement), and Article
V (which states “coverage” includes an employed person who
works in either country)—they conclude that their service in
Canada meets the definition of employment. So, they con‐
tend, the provision does not apply to reduce their Social Se‐
curity benefits.
The agency reads the provision’s language and related
statutes otherwise. The plaintiffs’ work in Canada was non‐
covered service on which no Social Security taxes were paid,
argues the agency, so the provision applies to reduce their So‐
cial Security benefits.
To the agency, the provision’s language at
§ 415(a)(7)(A)(ii) equates “service which did not constitute
‘employment’ as defined in [§ 410]” with noncovered service.
The agency maintains this interpretation is consistent with the
letter of § 410, and courts have routinely construed “employ‐
ment” under § 410 as consistent with “covered employment,”
that is, work on which Social Security taxes were paid. Plain‐
tiffs’ work in Canada for Canadian employers on which they
did not pay U.S. Social Security taxes should be viewed as
12 No. 19‐2099
noncovered employment under § 410, per the agency, and
therefore the provision applies to reduce plaintiffs’ benefits.
The agency disagrees with the plaintiffs that the totaliza‐
tion agreement informs the interpretation of these statutes.
The Act’s definitions of “employment,” “coverage,” and “pe‐
riod of coverage” apply for all purposes, according to the
agency, including application of the provision. To the agency,
if plaintiffs’ work fell within § 410(a)(C), their work would
have been subject to Social Security taxes. That statute encom‐
passes services in Canada where the two countries agree
those services should be subject to U.S. Social Security taxes,
not services performed in Canada never subject to those taxes.
We conclude that the provision’s text at § 415(a)(7)(A)(ii)
is properly read as matching “service which did not constitute
‘employment’ as defined in section 410” with “noncovered
service” on which Social Security taxes were not paid. The
provision’s reference to “employment” and § 410 is clear and
unambiguous, and its context does not counsel otherwise.
While § 410 does not expressly define “covered employment,”
case law recognizes that phrase includes service performed
for an American employer either within or outside the United
States, and that “noncovered employment” includes service
not subject to Social Security taxes which provides the retired
employee pension benefits. See, e.g., Stroup v. Barnhart, 327
F.3d 1258, 1259 (11th Cir. 2003) (Cudahy, J., sitting by desig‐
nation) (noting that Congress enacted the provision to elimi‐
nate “’double dipping’ that accrued to workers who split their
careers between employment taxed for Social Security
No. 19‐2099 13
benefits (‘covered’) and employment exempt from Social Se‐
curity taxes (‘noncovered’)”).4
Plaintiffs (or their spouses) were employed by non‐Amer‐
ican employers in Canada or Québec for some period during
their careers. These non‐American employers provide plain‐
tiffs with monthly Canada or Québec Pension Plan benefits.
Under the plain language of § 433(c)(1)(B), plaintiffs are enti‐
tled to receive Social Security benefits from the country to
which they paid taxes during their employment. That means
plaintiffs may receive Canada or Québec Pension Plan bene‐
fits based on their time of service to an employer there (which
they do), and from the United States based on their time of
service to an American employer (which they also do). And
because plaintiffs’ work in Canada was subject to Canada or
4 Other federal courts recognize this same “covered” versus “noncov‐
ered” distinction when interpreting the provision, albeit while construing
a different exception to it, § 415(a)(7)(A)(ii)(III). See Larson v. Saul, 967 F.3d
914, 918–19 (9th Cir. 2020) (concerning uniformed services and its appli‐
cation to retired dual‐status military technicians who are also federal ci‐
vilian employees). While the circuits differ in their interpretation of that
exception, all of those courts recognize and respect the “covered” versus
“noncovered” distinction while interpreting the provision. Id. at 920–21
(reviewing cases from the Sixth, Eighth, Tenth, and Eleventh Circuits). So
we can conclude this distinction is integral to interpretation of the provi‐
sion.
The dissent argues Stroup and Larson are examples of cases describing
service that is not employment (covered or noncovered), not employment
as noncovered. Dissent at n. 2. That confuses the application of the defini‐
tion with its recognition. Both decisions (and the numerous cases cited in
Larson, 967 F.3d at 920–21) recognize, for the provision, the distinction be‐
tween “covered employment” as service subject to Social Security taxes,
and “noncovered employment” as service exempt from those taxes.
14 No. 19‐2099
Québec Pension Plan taxes, but not Social Security taxes, their
work in Canada constitutes noncovered service under the
Act.
Plaintiffs argue their work in Canada falls within the defi‐
nition of § 410(a)(C) as “service, regardless of where or by
whom performed, which is designated as employment or rec‐
ognized as equivalent to employment under an agreement en‐
tered into under section 433 of this title.” To plaintiffs, the
U.S.–Canada totalization agreement, authorized by § 433, rec‐
ognizes paid work in both countries as equivalent to employ‐
ment. Under this expansive view, plaintiffs assert that failure
to recognize their work as employment under the totalization
agreement violates its terms.5
If plaintiffs’ work fell within § 410(a)(C), then it would
have been subject to Social Security taxes under the totaliza‐
tion agreement. This subsection allows Social Security taxes
on work performed by foreign citizens in a foreign country,
when the United States and the foreign country have agreed
under the totalization agreement that the work should be sub‐
ject to taxes only under the U.S. system. So this subsection
would include services performed in Canada when that coun‐
try and the United States agree those services should be sub‐
ject to Social Security taxes. This subsection would not apply
to services performed in Canada that were never subject to
Social Security taxes, such as plaintiffs’ work here. If
5Like statutory interpretation, we “‘ascertain the intent of the parties’
[to an international agreement] by looking to the document’s text and con‐
text.” Lozano v. Montoya Alvarez, 572 U.S. 1, 11 (2014) (quoting United States
v. Choctaw Nation, 179 U.S. 494, 535 (1900)). Totalization agreements estab‐
lished under section 433 of the Act are interpreted the same way. Eshel, 831
F.3d at 518.
No. 19‐2099 15
plaintiffs’ position was correct—that the totalization agree‐
ment recognizes paid work in both countries as “employ‐
ment”—then plaintiffs’ work in Canada would have been
subject to Social Security taxes. It was not, as plaintiffs do not
dispute.
Plaintiffs’ arguments that the totalization agreement sets
the definitions of “employment,” “coverage,” and “period of
coverage” are hysteron proteron: they reverse the logical order.
Neither § 433 nor any sections in the agreement purport to
define these terms or change their meaning under the Act. The
agreement says nothing about the meaning of “employment”
in § 410, or that paid work in both countries is equivalent to
“covered employment.” The agreement does not change ei‐
ther country’s definitions of key terms under their respective
retirement systems. The opposite is true: Article I subsection
11 of the agreement states that “[a]ny term not defined in this
Article has the meaning assigned to it in the applicable laws,”
which according to Article II of the agreement are the Social
Security Act and the Canada or Québec Pension Plans.
As an instance supporting their position, plaintiffs con‐
tend the totalization agreement’s definition of “period of cov‐
erage” in Article I designates employment or its equivalent to
include what takes place in both Canada and the United
States. But plaintiffs’ reading cannot be reconciled with the
text of § 433, which in setting out totalization agreements pro‐
vides that employment (or its equivalent) in the Social Secu‐
rity system or system of a foreign country that is party to a
totalization agreement “shall … result in a period of
16 No. 19‐2099
coverage” under either country’s system, “but not under both.”
See 42 U.S.C. § 433(c)(1)(B)(i) (emphasis added).
Other examples the plaintiffs offer from the totalization
agreement also do not support the conclusion that their work
in Canada was covered service. The agreement’s definition in
Article I subsection 6 of “period of coverage” relates to cover‐
age of a spouse or dependent under U.S. law, and for other
articles which govern when and how a worker’s services
should be totalized to establish benefit eligibility in the United
States or Canada. In limited circumstances under this defini‐
tion a certain period of coverage in one country may count as
coverage in the other, but nothing in the agreement states as
a general rule that a period of coverage in Canada is identical
to or equivalent with a period of coverage in the United
States.
The same is true with Article II(1)(b)(ii) of the totalization
agreement, which recognizes the Canada Pension Plan as one
of the “applicable laws” for the agreement, but which does
not redefine “employment” or “coverage.” Just so with Arti‐
cle V of the agreement, which focuses on the place of employ‐
ment to determine which country’s laws govern: “Except as
otherwise provided … an employed person who works in the
territory of one of the Contracting States shall … be subject to
the laws of only that Contracting State.” This definition is spe‐
cific to the agreement’s explanation of when and where an
employee’s services should be totalized to establish benefit el‐
igibility. Based on that section, an employee working in Can‐
ada accrues coverage subject to Canada’s pension laws, and
No. 19‐2099 17
an employee working in the United States accrues coverage
subject to the Act and its implementing regulation.
None of these sections in the totalization agreement estab‐
lish that “employment” includes plaintiffs’ work in Canada.
Each is for a limited purpose under the agreement, not for all
purposes under the Act.
The totalization agreement is intended to aid in the coop‐
eration between two countries who have their own laws and
pension systems. It helps coordinate between the Social Secu‐
rity system and the Canada Pension Plan at points of intersec‐
tion—for example, to avoid problems with dual taxation, or
with continuity of benefits—but not for all purposes. The
agreement does not work backward to alter the meaning of
the terms in the Act, nor does it upend the fundamental defi‐
nition of “covered employment” recognized by so many
courts that have interpreted the provision, which in turn
would affect whether the provision applies to plaintiffs.
Plaintiffs maintain they do not claim entitlement to Social
Security retirement benefits based on their Canadian employ‐
ment. But if so long as a totalization agreement is in place and
work performed in a foreign country constitutes “employ‐
ment” under the Act, then workers can claim benefits from a
sovereign that did not tax them to fund those benefits. The
district court correctly reasoned that such a result would fol‐
low if a totalization agreement—for all purposes—made
Canadian employment subject to Canadian pension taxes
equivalent to U.S. employment subject to Social Security
taxes.
Under plaintiffs’ reading of the statutes and totalization
agreement, all periods of coverage under the foreign pension
18 No. 19‐2099
system would translate into periods of coverage under the
Act. Plaintiffs say their interpretation does not create a wind‐
fall. But if not a windfall, plaintiffs’ position would at least
give them a significant advantage by granting benefits for em‐
ployment on which Social Security taxes were not paid. That
would also erase the distinction between work performed in
a foreign country and work in the United States. Then there
would be no need to totalize—to combine periods of coverage
to establish a workers’ eligibility for benefits, or to prevent
double taxation—the very reason for a totalization
agreement. Such an interpretation would also violate the pre‐
sumption against ineffectiveness: a textually permissible
interpretation that furthers rather than obstructs a text’s pur‐
pose should be favored. See SCALIA & GARNER, READING LAW
63–65.
Also under plaintiffs’ reading, if “employment” does not
mean “covered employment,” it would mean any compen‐
sated services. Separation of powers problems would then
arise, as the totalization agreement would be setting the Act’s
definitions for purposes of awarding benefits, with the Presi‐
dent through an international agreement obligating the U.S.
Treasury, notwithstanding Congress setting those definitions
under the Act. In effect, the U.S. would be setting its Social
Security payments based on another country’s definition of
“employment”—a step too far.
Our dissenting colleague’s interpretation suffers from the
same failings as the plaintiffs’, reasoning backward from the
totalization agreement to determine applicability of the pro‐
vision. Maintaining there is a distinction between “coverage”
and “employment,” the dissent reads the agreement as “allo‐
cating” or “assigning coverage of work that is already
No. 19‐2099 19
predesignated as employment by the local laws of either coun‐
try.” Dissent at 8. Borrowing Canada’s definition of “employ‐
ment,” the dissent reads § 410(a)(C) as recognizing a hypo‐
thetical detached worker’s services as qualifying as employ‐
ment under the U.S. Social Security Act. Id. at 8. So according
to the dissent, the detached worker’s (and Beeler’s) employ‐
ment is “not ‘noncovered service’ that triggers the Provision.”
Id. at 11.6
The dissent’s construction is awkward for a number of
reasons. Rather than “coverage” and “employment” as sepa‐
rate concepts, the statutes under interpretation do address the
relation between them. The provision at § 415 references § 410
(which is titled and defines “employment”) as part of its def‐
inition of “noncovered service.” And § 433(a)(1)(B)(i) speaks
to when “employment … shall … result in a period of cover‐
age … .” Even more, § 433 expressly states that coverage can
be under the Act or the laws of the foreign country “but not
under both.” To say the agreement defines coverage but the
Act does not is to ignore this federal statutory requirement
which speaks directly to coverage. The same problems dis‐
cussed above with the plaintiffs’ interpretation afflict the dis‐
sent’s reading. Contradictions arise, such as the statement
that “’noncovered service,’ … does not mean service that is
not covered.” Dissent at 2. At bottom, such a reading is cer‐
tainly not the symmetrical, coherent, and harmonious whole
6 Unlike the hypothetical detached worker described in the dissent,
who is not a U.S. citizen, Beeler has dual American and Canadian citizen‐
ship.
20 No. 19‐2099
which is the goal when interpreting statutes. Owner‐Operator
Indep. Drivers Assoc., 840 F.3d at 888.
Our textual analysis controls, as few cases involve the ap‐
plication of the provision based on foreign pension pay‐
ments.7 Plaintiffs cite two decisions, Eshel v. Comm’r of Internal
Revenue, 831 F.3d 512 (D.C. Cir. 2016), and Erlich v. United
States, 104 Fed. Cl. 12 (Ct. Cl. 2012), as cases that recognize the
bilateral nature of totalization agreements under which em‐
ployment in one country is equivalent to employment in the
other. But these decisions are distinguishable from the facts
here. Neither involves the provision. They also conclude that
under a totalization agreement the purposes for which em‐
ployment in one country is treated as employment in another
are limited, like avoiding dual taxation or calculating benefit
eligibility, and not for all purposes. Eshel, 831 F.3d at 514;
Erlich, 104 Fed. Ct. at 17–18.
In summary, the provision modifies the standard Social
Security benefit formula for an individual who also receives a
monthly periodic payment based on earnings for service
which did not constitute employment as defined in § 410, re‐
ferred to as noncovered service. See § 415(a)(7)(A). The
7 In unpublished orders involving similar circumstances, this court
has affirmed the agency’s reliance on the provision to reduce a claimant’s
Social Security retirement benefits. Kamyk v. Berryhill, 695 F. App’x 947,
947–49 (7th Cir. 2017) (affirming agency’s decision relying on provision’s
plain language to reduce a dual citizen’s Social Security benefits due to
her receipt of Polish retirement benefits); Hawrelak v. Colvin, 667 F. App’x
161, 162–63 (7th Cir. 2016) (affirming agency’s decision to reduce a dual
citizen’s Social Security benefits due to her receipt of Canada Pension Plan
benefits).
No. 19‐2099 21
totalization agreement does not designate work in Canada on
which no Social Security taxes are paid as employment or
equivalent to employment. Because plaintiffs’ work in Can‐
ada is not considered “employment” under § 410, the provi‐
sion of § 415 applies and reduces plaintiffs’ Social Security
benefits.
Finally on this point, in support of their positions the par‐
ties offer various arguments from the legislative history. In in‐
terpreting statutory language, the court adopts an agency’s
interpretation if it is “based on a permissible construction of
the Act.” Barnhart v. Walton, 535 U.S. 212, 218 (2002). The
agency’s interpretation here meets that standard. When text
is clear and unambiguous, “the court must give it effect and
should not look to extrinsic aids for construction.” In re Rob‐
inson, 811 F.3d 267, 269 (7th Cir. 2019). Because the plain
meaning of these statutes resolve this question, we need not
look beyond the text to consult legislative history. See Conroy
v. Aniskoff, 507 U.S. 511 (1993); see generally United States v.
Rodriguez, 460 F. Supp. 2d 902, 909–10 (S.D. Ind. 2006) (noting
courts will look beyond text of a statute only when its mean‐
ing is not plain, statutory context or structure as a whole re‐
veals ambiguity, or giving effect to plain meaning will lead to
illogical and absurd results).
B
Plaintiffs also argue that the regulation implementing the
provision, 20 C.F.R. § 404.213, exempts Canada or Québec
monthly pension benefits because they are based on citizen‐
ship or residence. Under the regulation, the provision applies
if the retired employee is entitled to a monthly pension “based
in whole or in part on [her] earnings in employment which
22 No. 19‐2099
was not covered under Social Security.” The regulation goes
on:
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 so‐
cial 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) (emphasis added).
“A statute and its implementing regulations should be
read as a whole and, where possible, afforded a harmonious
interpretation.” Carmichael v. The Payment Center, Inc., 336 F.3d
636, 640 (7th Cir. 2003). The letter of this regulation is con‐
sistent with the clear and unambiguous text of the provision,
which states it applies to payments based on “noncovered ser‐
vice.”8 Also, the provision does not draw any distinctions
based on where the noncovered service was performed.
Plaintiffs contend that the agency’s application of the pro‐
vision to their Social Security benefits violates the sentence of
the regulation emphasized above. To plaintiffs, the Canada or
Québec monthly pension benefits are based on both earnings
and residence or citizenship, so the provision should not ap‐
ply to them.
8In contrast, our dissenting colleague interprets these statutes differ‐
ently while agreeing with our interpretation of this regulation. Dissent at
n.1.
No. 19‐2099 23
But plaintiffs stretch when they argue that the Canada or
Québec Pension Plans are residence‐ or citizenship‐based.
None of the plaintiffs currently reside in Canada, and they
continue to receive Canada or Québec monthly pension ben‐
efits, which undercuts plaintiffs’ assertion. And Canada has
the Old Age Security program which is residence‐based. It
provides payments to seniors funded out of general tax reve‐
nues. Old Age Security: Overview, https://www.can‐
ada.ca/en/services/benefits/publicpensions/cpp/old‐age‐se‐
curity.html (last visited Oct. 5, 2020). This program pays ben‐
efits regardless of employment history, unlike the Canada or
Québec monthly pension benefits which depend on an
individual’s employment history. The agency’s operations
manual also reflects this distinction. See Social Security Ad‐
ministration Program Operations Manual System, GN
00307.290.C.3; see also id. C.6 (noting Canada has a two‐tiered
social security system with payments under the Old Age Se‐
curity program as residence‐based to which the provision is
not applied, in contrast with the Canada or Québec Pension
Plans which are earnings‐based and to which the provision is
applied).
To support their interpretation of the regulation, plaintiffs
cite Rabanal v. Colvin, 987 F. Supp. 2d 1106 (D. Colo. 2013), in
which a district court reversed an ALJ’s finding that the plain‐
tiff’s Spanish pension benefits were subject to reduction under
the provision. Id. at 1108. Plaintiffs point to a statement in
Rabanal that 20 C.F.R. § 404.213(a)(3) precludes application of
the provision to payments from foreign pension systems that
base benefits in part on residence or citizenship, “regardless
of whether [the pension] is also based on earnings. Id. at 1112.
To plaintiffs, this statement shows that the agency misinter‐
preted and misapplied the provision’s implementing
24 No. 19‐2099
regulation, as here plaintiffs claim their benefits are based on
citizenship.
But Rabanal is not persuasive. The statement from that case
on which plaintiffs rely is dictum; that case’s holding was that
the provision applied only to noncovered benefits on “earn‐
ings” and that the agency erred by equating “earnings” with
“work.” Id. at 1112. No court has adopted Rabanal’s dictum on
this point, and we also decline to do so because it runs con‐
trary to the plain text of the provision and the totalization
agreement. Even more, in Rabanal, the agency had conceded
that the claimant’s Spanish pension benefits were based on his
citizenship status. Id. at 1112. The agency has made no such
concession here, and points to decades of interpretation to the
contrary.
We are bound by the clear text of the Act and its imple‐
menting regulation. The regulation cannot be read to mean
that only pensions based exclusively on earnings will be sub‐
ject to the provision. Such an interpretation would be contrary
to the provision’s plain language, which would apply when a
claimant also receives a pension payment “based … in part”
on factors other than noncovered service. 42 U.S.C.
§ 415(a)(7)(A)(ii). The agency’s interpretations of the provi‐
sion and its implementing regulation were permissible, as
was its application of the provision to reduce plaintiffs’ Social
Security benefits.
C
According to plaintiffs the agency’s reduction of their So‐
cial Security benefits also violates the totalization agreement
between the United States and Canada. They contend the pro‐
vision should not apply because their Canada or Québec
No. 19‐2099 25
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 …” § 415(a)(7)(A)(II) (emphasis
added). Such benefits are exempt from application of the pro‐
vision as payments made pursuant to the countries’ express
wishes.
But plaintiffs’ foreign pension benefits are based on their
employment in Canada, not on the totalization agreement.
There is no dispute that plaintiffs are entitled to those bene‐
fits, regardless of the agreement. And even if there was no
agreement, plaintiffs would still receive their Canada or
Québec Pension Plan benefits because those benefits are inde‐
pendent of the agreement and firmly rooted in the Canada or
Québec Pension Plan systems. Those payments do not rely on
the existence of the totalization agreement for their validity.
Plaintiffs cannot have it both ways. Either their Canada or
Québec Pension Plan benefits are merely a creation of the
agreement between the United States and Canada (a conclu‐
sion that would have significant consequences moving for‐
ward), 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 Québec Pension Plan benefits are not based on the agree‐
ment, 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.
Plaintiffs also argue that applying the provision violates
the totalization agreement because Canada does not
26 No. 19‐2099
reciprocally reduce plaintiffs’ Canada or Québec Pension Plan
benefits based on their receipt of Social Security benefits. Ar‐
ticle IV of the totalization agreement provides that nationals
“who reside in the territory of either Contracting State shall,
in the application of the laws of a Contracting State, receive
equal treatment, with respect to the payment of benefits, with
the nationals of that Contracting State.” Article IV requires
that the United States give equal treatment to American and
Canadian citizens living in the United States or Canada when
paying Social Security benefits to qualified individuals. That
section of the agreement prohibits the United States from dis‐
criminating in the payment of Social Security benefits in favor
of its own citizens against Canadians or certain other non‐
Americans. But plaintiffs have presented no evidence that the
agency applies the provision to Canadians when it would not
also apply the provision to Americans. Without more, this as‐
sertion does not prevail.
Equal treatment under Article IV of the totalization agree‐
ment requires that the United States treat its citizens and
Canadian citizens the same in the payment of benefits. The
United States does that. That does not mean the United States
cannot apply the provision unless Canada has a windfall pro‐
vision of its own. That is not why countries enter into a total‐
ization agreement. There is no requirement that countries
have the same laws. Rather, Article IV prevents one country
to the agreement from discriminating against the citizens of
another country when benefits are awarded.
III
The agency correctly ruled that plaintiffs’ Canadian em‐
ployment was noncovered under the Social Security Act, and
thus that the provision applied to reduce their Social Security
No. 19‐2099 27
benefits. The district court properly granted summary judg‐
ment to the agency, so we AFFIRM.
28 No. 19‐2099
ST. EVE, Circuit Judge, dissenting. The Social Security Com‐
missioner and the majority hang their hat on a simple propo‐
sition: when the Social Security Act (the Act) refers to employ‐
ment, it means “covered employment.” Lorraine Beeler con‐
tends that her work in Canada was “employment,” as defined
in 42 U.S.C. § 410(a), but she concedes that it was neither cov‐
ered by the Act nor taxed by the United States. The majority
and the Commissioner dismiss her argument as essentially a
contradiction, but nothing in the text of § 410(a) defines em‐
ployment in terms of coverage or taxation. Instead the Act
does the opposite, defining coverage and taxation in terms of
employment. Because the majority’s analysis rests on an un‐
supported premise to exclude Beeler’s work from the defini‐
tion of employment, I respectfully dissent.
The facts are straightforward. Between 1970 and 1989,
Beeler was a Canadian citizen who worked in Canada and ac‐
crued benefits under the Canada Pension Plan. She then
moved to the United States, where she eventually became a
U.S. citizen. While in the United States, she worked and ob‐
tained sufficient quarters of coverage under the Act so that
she became entitled to Social Security benefits based solely on
her work in the United States. In other words, she did not
need to “totalize” her Canadian and U.S. contributions under
the Canadian‐American Totalization Agreement (the Agree‐
ment). When she retired and sought her Social Security bene‐
fits, though, she received less money than she expected. The
Social Security Administration had reduced her benefits un‐
der the Windfall Elimination Provision (the Provision), 42
U.S.C. § 415(a)(7)(A), because her work that contributed to the
Canada Pension Plan was not covered by the Act.
No. 19‐2099 29
The dispute in this appeal centers on the relationship be‐
tween two closely related concepts in Social Security law: em‐
ployment and coverage. Beeler admits that the Act did not
cover her work in Canada and that she did not pay U.S. taxes
on wages earned through that work, but she argues that this
work was nevertheless “employment” within the meaning of
the Act. The Commissioner contends, and the majority agrees,
that employment means covered employment. They then
work backwards from their proof of the indisputable (and un‐
disputed) fact that Beeler’s work in Canada was not covered
or taxed to reason it must, therefore, not have been employ‐
ment. If these two concepts are not indelibly linked, though,
this reasoning crumbles. None of the majority’s concerns
would result from Beeler’s work being employment but not
covered. No one would receive benefits without paying taxes
and totalization agreements would not be made pointless be‐
cause coverage—not employment—determines benefits, 42
U.S.C. § 415(a), and totalization agreements combine periods
of coverage not periods of employment. Id. § 433(c)(1)(A).
The Provision is different. Although its benefit‐reduction
formula applies to those who receive payments based on
earnings from “noncovered service,” that phrase does not
mean service that is not covered. Instead, Congress explicitly
defined noncovered service to mean service that “did not con‐
stitute ‘employment.’” 42 U.S.C. § 415(a)(7)(A) (emphasis
added). So, if Beeler is correct that her service in Canada was
employment, even if not covered, then her Canada Pension
Plan benefits do not trigger the Provision by its plain terms.1
1 The regulations implementing the Provision, though, do apply it to
“[n]oncovered employment,” which includes “employment outside the
30 No. 19‐2099
When the Commissioner and majority respond that em‐
ployment means covered employment, they gloss over how
the Act really works. 42 U.S.C. § 410 provides a specific defi‐
nition of employment. Then, 42 U.S.C. § 409 defines wages to
mean “remuneration … for employment.” Finally, anyone
who earns a certain amount of wages in a year obtains a quar‐
ter of coverage under 42 U.S.C. § 413. (An identical logic plays
out under the Federal Insurance Contributions Act (FICA) to
collect taxes to pay for social security benefits. See I.R.C.
§§ 3101, 3121(a)–(b).) This is a causal chain. Employment
leads to wages leads to coverage and taxation. It is not, as the
majority concludes, coverage and taxation that make service
qualify as employment, such that anything that is not taxed is
not employment.2
United States which is not covered.” 20 C.F.R. § 404.213(a)(3). This ex‐
cludes Beeler even under her argument. (The majority rightly rejects her
contrary interpretation of this regulation.) The Commissioner, though,
does not argue that any part of the Provision, let alone its clear definition
of “noncovered service” is ambiguous such that we should defer to this
regulatory shift in language. All the regulation does, then, is concede that
“noncovered employment” exists, undermining the supposed contradic‐
tion Beeler falls into by insisting her work was employment but not cov‐
ered. Indeed, if the majority is right that employment means only covered
employment, it is the agency that contradicts itself with regulations ad‐
dressing “noncovered covered employment.”
2The majority’s examples of cases referring to employment as “non‐
covered” are really describing service that is not employment, covered or
otherwise. See Stroup v. Barnhart, 327 F.3d 1258, 1259 (11th Cir. 2003) (state
police officer, excluded from employment definition under 42 U.S.C.
§ 410(a)(7)); Larson v. Saul, 967 F.3d 914, 920–21 (9th Cir. 2020) (collecting
cases about inactive military duty not included in employment definition
under § 410(l)(1)(B)).
No. 19‐2099 31
The majority and the Commissioner reach their conclusion
by emphasizing that work, that like Beeler’s is covered by the
Canada Pension Plan, cannot be covered by the Act. Beeler,
though, does not argue otherwise. She readily admits that this
result follows explicitly from the text of the Act:
[E]mployment or self‐employment, or any service
which is recognized as equivalent to employment or
self‐employment under this subchapter or the social
security system of a foreign country which is a party to
such agreement, shall, on or after the effective date of
such agreement, result in a period of coverage under
the system established under this subchapter or under
the system established under the laws of such foreign
country, but not under both.
42 U.S.C. § 433(c)(1)(B)(i). (The same thing again happens on
the tax side, as wages are exempt from FICA taxes if coverage
is assigned to another country under a totalization agreement.
See I.R.C. § 3101(c).) This rule means service can finish the
causal chain and lead to coverage in only one system, but
nothing in the text of these sections prevents services from be‐
ing employment under both systems.
The Agreement’s implementation of § 433(c)(1)(B)(i), titled
“Provisions on Coverage,” demonstrates the distinction be‐
tween coverage and employment. Agreement with Respect to
Social Security, Can.‐U.S., 35 U.S.T. 3405, 3408
https://www.ssa.gov/international/Agreement_Texts/can‐
ada.html (emphasis added). This part of the Agreement sets
out a series of choice‐of‐law provisions, starting with a default
rule: “Except as otherwise provided in this Article, an em‐
ployed person who works in the territory of one of the Con‐
tracting States shall, in respect of that work, be subject to the
32 No. 19‐2099
laws of only that Contracting State.” Id. Art. V, § 1 (emphasis
added). Then the Article provides several exceptions. Arti‐
cle V, § 2, for example, addresses what is called a detached
worker. An “employed person” who works in one country,
covered by that country’s laws, and who is temporarily as‐
signed to work in the territory of the second country main‐
tains his coverage in the first country. Id. Art. V, § 2.3
The Agreement thus works in two sequential steps—the
employment step, governed independently by each country’s
local laws, and the coverage step, governed jointly by the
Agreement itself in compliance with § 433(c)(1)(B). Both § 1
and § 2 use the phrase “employed person” to identify those
whose coverage is assigned to one country or the other. Nei‐
ther provision defines what “employed” means, though, and
neither does any other part of the Agreement. As an unde‐
fined term, then, it “has the meaning assigned to it in the ap‐
plicable laws.” Id. Art. I, § 11. Applicable laws, in turn, mean
specified portions of the Act and the Internal Revenue Code
for the United States, and for Canada, the Canada Pension
Plan and Old Age Security Act. Id. Art. II, § 1.
That brings us to the meat of this appeal—the Act’s defini‐
tion of “employment.” Before 1983, just two definitions ex‐
isted, both of which still apply today. Definition (A) is “service
… by an employee for the person employing him, irrespective
of the citizenship or residence of either, (i) within the United
States, or (ii) on or in connection with an American vessel or
American aircraft ….” 42 U.S.C. § 410(a). Definition (B) is “ser‐
vice … outside the United States by a citizen or resident of the
3
Like the majority, I refer only to the Canadian Agreement because
the Québécois Agreement is materially identical.
No. 19‐2099 33
United States as an employee (i) of an American employer …
or (ii) of a foreign affiliate … of an American employer ….” Id.Losing some of the nuance, the two definitions simply mean
that service qualifies as employment if it was performed ei‐
ther (A) in the United States, regardless of the parties’ citizen‐
ship or residence or (B) by a U.S. citizen or resident for an
American employer, regardless of location.
The problem Congress noticed in 1983 was that these two
definitions omitted some of those who the United States had
agreed to cover under a totalization agreement. See H.R. Rep.
No. 98‐25 at 75, as reprinted in 1983 U.S.C.C.A.N. 219, 294. As
an illustration, take a hypothetical detached worker in Can‐
ada who is not a U.S. citizen or resident or who is not working
for an American employer. While working within the United
States, he accrues Social Security coverage because his service
qualifies as employment under definition (A), regardless of
his or his employer’s citizenship. His company then tempo‐
rarily assigns him to work in Canada, where he resides for
that period. This temporary placement no longer fits into def‐
inition (A) because his work is no longer “within the United
States” and definition (B) cannot apply if he is neither an
American citizen or resident nor working for an American
employer. If his service is not employment, he cannot start the
causal chain outlined above and accrue quarters of coverage
under the Act. On the Canadian side, his work is employ‐
ment, but he is not covered by the Canada Pension Plan. Arti‐
cle V, § 2 says that a detached worker is subject to the laws of
34 No. 19‐2099
only the country where he was originally employed. He is
locked out on both sides of the border.4
Beeler and the Commissioner agree that Congress solved
the problem of this detached worker by adding definition (C)
to § 410. Under this third definition, employment also means
“service, regardless of where or by whom performed, which
is designated as employment or recognized as equivalent to
employment under an agreement entered into under section
433 of this title.” 42 U.S.C. § 410(a). Beeler contends that her
work in Canada qualifies as employment under this defini‐
tion, and at least in light of the arguments presented here, she
appears to be right.
What is important for Beeler is how definition (C) fixed the
problem for the detached worker. One might assume from the
majority’s opinion that the challenge in this case is how to in‐
terpret definition (C) so that it includes Beeler. But that is
looking at only half the picture. It would be easy to exclude
Beeler just by saying that definition (C) means nothing at all.
As the Commissioner notes, the Canadian‐American Agree‐
ment does not designate anything as employment, it merely
assigns coverage, so perhaps the statute is just meaningless
(at least as applied to this one agreement). We cannot, how‐
ever, dismiss definition (C) because everyone agrees that the
detached workers have used it to receive coverage for the last
37 years. The definition must mean something, so the ques‐
tion the majority and the Commissioner really must answer is
4In reality, Article V has failsafe provisions to prevent a total lockout,
but it does so by reassigning this hypothetical worker’s coverage to Can‐
ada, contrary to the signatories’ intent. See Agreement, Art. V, §§ 8–9.
No. 19‐2099 35
how definition (C) includes the detached worker but excludes
Beeler.
Nothing in the text of § 410(a) distinguishes between them.
Take a detached worker identical to Beeler in nearly every
way: both Canadian citizens, residing in Canada, working in
Canada for a Canadian employer (indeed it could be the same
employer). All that separates the two is that Beeler started her
work in Canada, and the detached worker started in the U.S.
office before his employer temporarily transferred him to the
Canadian office. That distinction is all the difference for Arti‐
cle V’s provisions on coverage, but it does not fit anywhere in
§ 410(a)’s definition of employment.
Definition (C) includes Beeler’s and the detached worker’s
services for the same reason: their work is designated as em‐
ployment under the Agreement, as they are both “employed
person[s]” under their respective sections of Article V. This
point is far subtler than the majority gives it credit. It is not
that Article V or other references to employment in the Agree‐
ment creep in and modify the definition of employment in the
U.S. Code. Rather, the employment is designated “under” the
Agreement because the Agreement recognizes it as employ‐
ment and allocates its coverage. This follows from the funda‐
mental structure of the Agreement, which assigns coverage of
work that is already predesignated as employment by the lo‐
cal laws of either country. What definition (C) does, then, is
piggyback off Canada’s definition of employment. It recog‐
nizes that the detached worker is an “employed person” un‐
der Article V, § 2, because his work qualifies as employment
under Canadian law, and then borrows that foreign definition
to say that it is also employment under the Act. And now that
the detached worker’s services qualify as employment under
36 No. 19‐2099
the Act, he can be taxed and accrue coverage under the U.S.
system, just as Congress intended.
Thus, for purposes of the Canadian‐American Agreement,
the three definitions of employment under § 410 are (A) any
service performed in the United States, regardless of resi‐
dency or citizenship, (B) any service performed by an Ameri‐
can citizen for an American employer, regardless of location,
and (C) any service designated as employment by Canadian
law regardless of residency, citizenship, or location (“regard‐
less of where or by whom performed”). 42 U.S.C. § 410(a). Alt‐
hough certainly broad, the majority is wrong to say this defi‐
nition includes all compensated services, even before ad‐
dressing § 410(a)’s exclusions. This definition is derived not
from common sense, but rather from the text of the Act and
the Agreement.
The Commissioner instead insists that definition (C) in‐
cludes service performed in Canada only if the United States
and Canada agree that those services should be subject to U.S.
Social Security contributions, and the majority apparently
agrees. But where does that limitation come from? The exact
same logic applied to the detached worker works even for
someone, like Beeler, who is an “employed person” under Ar‐
ticle V, § 1. Her work is equally designated as employment by
Canadian law and its coverage is assigned to Canada “under”
the Agreement. Indeed, as she argues, effectively all work in
either of the two signatories’ systems is designated as em‐
ployment under the Agreement. The Agreement governs not
just the detached workers of the world—the hard cases that
require a tiebreaker—but also the easy cases, like a Canadian
working in Canada. This is the insight provided by Erlich v.
No. 19‐2099 37
United States, 104 Fed. Cl. 12 (2012), on which Beeler relies and
which the majority gives short shrift.
The question presented in Erlich was the interpretation of
a tax provision, I.R.C. § 1401 note, which provides that a tax‐
payer cannot receive a deduction or credit for “taxes paid …
with respect to any period of employment … which is covered
under the social security system of [a] foreign country in ac‐
cordance with the terms of a[ § 433] agreement.” Erlich, 104
Fed. Cl. at 13‐14 (quoting Social Security Amendments of
1977, Pub. L. No. 95‐216, § 317(b)(4), 91 Stat. 1509, 1540). The
taxpayers argued that taxes were paid in accordance with an
agreement only if the agreement was the tiebreaker, and their
work was (they assumed) employment only in France, and
not the United States—meaning no tie. Id. at 15. The taxpay‐
ers, like the Commissioner here with respect to definition (C),
asserted that a detached worker fit within this statute, but that
they did not because their work, like Beeler’s, would not have
been taxed by U.S. law anyway. Id.The Erlich court, however, agreed with another Commis‐
sioner (of Internal Revenue). It recognized that the French to‐
talization agreement and § 433 were not limited to situations
of conflict—or as the majority calls them “points of intersec‐
tion”—like a detached worker, but “extend[ed] to ‘employ‐
ment or self‐employment, or any service which is recognized
as equivalent to employment or self‐employment under this
subchapter or the social security system of a foreign country
which is a party to such agreement.’” Id. at 17 (quoting 42
U.S.C. § 433(c)(1)(B)(i)). The inclusive “or” made it so the
agreement governed the full Venn diagram of employment in
each country, and not just the overlapping middle. Because of
this feature, it was “plain that the French social security taxes
38 No. 19‐2099
paid by Mr. Erlich for his work in France were paid for peri‐
ods of coverage in accordance with the terms of the Totaliza‐
tion Agreement.” Erlich, 104 Fed. Cl. at 18. It was in accord‐
ance with the agreement, and the French‐U.S. equivalent of
Article V, § 1, that coverage of French employment was as‐
signed to France.5
The same reasoning applies for definition (C)’s phrase
“under an agreement.” Cf. Pereira v. Sessions, 138 S. Ct. 2105,
2117 (2018) (recognizing that “under” is a “chameleon” but
can mean “in accordance with”). Just like how the Erlich tax‐
payers’ work in France was assigned to France in accordance
with the agreement, Beeler’s work in Canada, designated as
employment by Canadian law, was assigned to the Canada
Pension Plan under the Agreement—specifically under Arti‐
cle V, § 1. That her work, unlike the detached worker’s, would
have been assigned to Canada anyway is no matter. It was still
designated as employment under an agreement, even if the
Agreement enforced what would have been the default rule.
Because it was designated as employment under an agree‐
ment, it is employment under § 410. And because it was
5 One modification to the Erlich analysis follows from Beeler’s logic.
The court there took the parties’ assumption that the taxpayers’ service in
France was not “employment” under the FICA definition, I.R.C. § 3121(b),
which tracks 42 U.S.C. § 410(a). See Erlich, 104 Fed. Cl. at 15 & n.4. I believe
it was employment under the FICA, albeit untaxed employment under the
terms of the agreement and I.R.C. § 3101(c). The court recognized this pos‐
sibility, though only hypothetically “were the tax code to be amended.”
See Erlich, 104 F.3d. Cl. at 17–18. Another way to frame this analysis is to
say that definition (C) makes all employment in a foreign country with an
agreement into a tie for the agreement to break.
No. 19‐2099 39
employment under § 410, it is not “noncovered service” that
triggers the Provision.6
I do not have any reason to believe that this was Con‐
gress’s goal when it passed the Provision or definition (C). I
doubt Congress wanted someone who works half his career
in civil service for his state government—one of the excep‐
tions to the definition of employment, 42 U.S.C. § 410(a)(7)—
to receive a smaller benefit, all else equal, than one who spent
half his career working in a foreign country. Beeler has two
explanations for this discrepancy, neither convincing. The
majority rightly rejects her first, based on the equal‐treatment
provision in the Agreement. Second, she posits that Congress
did not want to “penalize” those with foreign pensions. But
Congress’s underlying premise in enacting the Provision is
that it was not imposing a penalty, but removing a windfall.
Still, it does not matter that Congress might not have antici‐
pated Beeler keeping her windfall, when the text leads to that
result. Perhaps the Provision would work better, if instead of
asking whether service was employment, it asked whether it
had been covered and taxed like the Commission insists, but
“[o]ur job is to enforce the text on the books, not to add or
subtract qualifiers that a litigant thinks would make the stat‐
ute more sensible.” Gienapp v. Harbor Crest, 756 F.3d 527, 531
(7th Cir. 2014).
There may be other arguments, including ones based on
the regulations, for reducing Beeler’s benefits and avoiding
6 This may apply only to some of Beeler’s work in Canada. She
worked for years in Canada before either definition (C) or the Agreement
existed. Neither party addresses whether these rules should be retroactive.
40 No. 19‐2099
her windfall. 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 employ‐
ment, the majority’s reasoning does not convince me that af‐
firmance is appropriate. I therefore respectfully dissent.