Frances Michener v. Kilolo Kijakazi ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FRANCES MICHENER, No. 20-16834
Plaintiff-Appellant,
D.C. No.
v. 5:19-cv-04377-
SVK
KILOLO KIJAKAZI, Acting
Commissioner of Social Security;
SOCIAL SECURITY ADMINISTRATION, OPINION
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Susan G. Van Keulen, Magistrate Judge, Presiding
Argued and Submitted October 19, 2021
San Francisco, California
Filed December 30, 2021
Before: Paul J. Watford and Andrew D. Hurwitz, Circuit
Judges, and M. Miller Baker, * Judge.
Opinion by Judge Hurwitz
*
The Honorable M. Miller Baker, Judge for the United States Court
of International Trade, sitting by designation.
2 MICHENER V. KIJAKAZI
SUMMARY **
Social Security
The panel affirmed the district court’s summary
judgment in favor of the Social Security Administration in a
putative class action alleging that reducing the Social
Security benefits of class members based on the receipt of a
foreign social security pension violated the Windfall
Elimination Program, its implementing regulation, and the
Agreement Between the Government of the United States of
America and the Government of Canada with Respect to
Social Security.
Plaintiff Frances Michener is a citizen of both the United
States and Canada, as was her late husband, Dr. Steven
Rosell. From 1976 to 1990, they lived in Canada where
Rosell worked and participated in the Canada Pension Plan.
During that period, Rosell did not contribute to the Social
Security system. In 1990, Rosell and Michener moved to the
United States where Rosell paid Social Security taxes on his
earnings until becoming disabled in 2012. Rosell then began
receiving Social Security disability benefits, in addition to
benefits under the Canada Pension Plan, and Michener later
began receiving Social Security spousal benefits.
In June 2015, the Social Security Administration notified
Rosell and Michener that their benefits would be reduced
under the Windfall Elimination Program (“WEP’) because
Rosell “received a pension based on work not covered by
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
MICHENER V. KIJAKAZI 3
Social Security taxes,” and sought the return of $7,194.00
for past overpayment of benefits. After seeking
reconsideration and review by an administrative law judge,
plaintiffs filed this putative action in federal court.
WEP reduces the Social Security benefits of individuals
who receive a pension for work not covered by the Social
Security system. 42 U.S.C. § 415(a)(7). Under the WEP
implementing regulation, noncovered employment includes
“employment outside the United States which is not covered
under the United States Social Security system.” 20 C.F.R.
§ 404.213(a)(3). The statute allows service in other
countries, which ordinarily would not be covered by the
Social Security system, to be designated as “employment”—
and thereby excluded from the WEP—pursuant to a
”totalization arrangement” agreement entered into under
42 U.S.C. § 433 between the Social Security system and the
corresponding system of a foreign country. Under a section
433 agreement, employment or service may result in a
“period of coverage” under either the Social Security system
or the foreign country’s system, “but not under both.” Id.§ 433(c)(1)(B)(i). The United States and Canada have a
section 433 agreement.
The panel determined that nothing in the U.S.-Canada
Agreement designated Rosell’s Canadian service as
employment for purposes of the Social Security Act or
recognized it as the equivalent of U.S. employment. The
panel noted that plaintiffs’ reading of the Agreement would
entitle a recipient to receive credit for service under both the
U.S. and the Canadian social security systems for the same
period of service, which is expressly prohibited under the
Social Security Act. Likewise, if any service considered
“employment” in Canada was also “employment” for
purposes of U.S. Social Security, that service would be
4 MICHENER V. KIJAKAZI
subject to Social Security taxes. See 26 U.S.C. § 3121(b).
Rosell’s service was not. The panel concluded that the WEP
applies to a Social Security beneficiary who receives
benefits under the Canada Pension Plan. Because Rosell’s
Canadian pension was based at least in part on his earnings
for noncovered service, the agency correctly reduced the
couple’s Social Security benefits.
COUNSEL
Thomas F. Allen, Jr. (argued), Frost Brown Todd LLC,
Dallas, Texas; Aaron M. Bernay, Frost Brown Todd LLC
Cincinnati, Ohio; William F. Murphy, Dillingham &
Murphy, LLP, San Francisco, California; Jonathan M.
Bruce, Law Office of Jonathan Bruce, LLC, Olathe, Kansas;
for Plaintiff-Appellant.
Sushma Soni (argued) and Sharon Swingle, Appellate Staff;
Stephanie Hinds, Acting United States Attorney; Brian M.
Boynton, Principal Deputy Assistant Attorney General;
Civil Division, United States Department of Justice,
Washington, D.C.; Royce Min, General Counsel; Stacey W.
Harris, Attorney; Office of Program Law, Office of the
General Counsel, Social Security Administration,
Washington, D.C.; for Defendants-Appellees.
MICHENER V. KIJAKAZI 5
OPINION
HURWITZ, Circuit Judge:
The Windfall Elimination Program (“WEP”) reduces the
Social Security benefits of individuals who receive a pension
for work not covered by the Social Security system. 42
U.S.C. § 415(a)(7). The question for decision is whether the
WEP applies to a Social Security beneficiary who receives
benefits under the Canada Pension Plan. The Social Security
Administration (“SSA”) concluded that it does, and the
district court upheld the agency determination. We agree.
I.
Frances Michener is a citizen of both the United States
and Canada, as was her late husband, Dr. Steven Rosell.
From 1976 to 1990, they lived in Canada where Rosell
worked and participated in the Canada Pension Plan. During
that period, Rosell did not contribute to the Social Security
system. In 1990, Rosell and Michener moved to the United
States where Rosell paid Social Security taxes on his
earnings until becoming disabled in 2012. Rosell then began
receiving Social Security disability benefits, in addition to
benefits under the Canada Pension Plan, and Michener later
began receiving Social Security spousal benefits.
In June 2015, SSA notified Rosell and Michener that
their benefits would be reduced under the WEP because
Rosell “received a pension based on work not covered by
Social Security taxes,” and sought the return of $7,194.00
for past overpayment of benefits. Rosell and Michener
sought reconsideration by SSA, and review by an
Administrative Law Judge and the Appeals Council, each of
whom held that the couple’s Social Security benefits were
subject to reduction under the WEP.
6 MICHENER V. KIJAKAZI
Rosell and Michener then filed this putative class action
in federal court; after Rosell’s death in December 2018,
Michener became the lead plaintiff. The complaint alleged
that reducing the Social Security benefits of class members
based on the receipt of a foreign social security pension
violated the WEP, its implementing regulation, and the
Agreement Between the Government of the United States of
America and the Government of Canada with Respect to
Social Security (the “U.S.-Canada Agreement”), Can.-U.S.,
Mar. 11, 1981, 35 U.S.T. 3405. The district court granted
summary judgment to the agency and denied a motion for
class certification as moot. Michener v. Berryhill, No. 19-
cv-04377-SVK, 2020 WL 4810693, at *8 (N.D. Cal. July 24,
2020). This timely appeal followed.
II.
We review the district court’s judgment de novo, Larson
v. Saul, 967 F.3d 914, 922 (9th Cir. 2020), and the starting
point for that review is the statutory framework. The Social
Security Act “provides old-age, survivor, and disability
benefits to insured individuals irrespective of financial
need.” Bowen v. Galbreath, 485 U.S. 74, 75 (1988) (citing
42 U.S.C. §§ 403, 423)). Individuals with 40 quarters of
coverage are entitled to retirement and disability benefits. 42
U.S.C. § 414(a)(2). The period of “coverage” credited
depends on the amount of time spent in “covered” service—
service for which individuals “pay social-security taxes and
are entitled to social-security retirement benefits on their
earnings.” Larson, 967 F.3d at 918. The system is
progressive, so participants with lower career earnings
receive a greater percentage of their earnings in Social
Security benefits than those with higher career earnings. Id.
Before 1983, a pension received from noncovered
employment did not affect a participant’s Social Security
MICHENER V. KIJAKAZI 7
benefits. Id. “Consequently, an individual who worked for
both covered and noncovered wages would receive a
windfall absent the WEP because he would be eligible for
both social security retirement benefits and [other] pension
payments.” Das v. Dep’t of Health & Hum. Servs., 17 F.3d
1250, 1253 (9th Cir. 1994); see also Federal Old-Age,
Survivors and Disability Insurance; Effect of Pension From
Noncovered Employment, 52 Fed. Reg. 47,914, 47,915
(Dec. 17, 1987) (“[T]he worker with a low earnings history
but not pension from noncovered work receives a relatively
high replacement of former earnings when compared to the
worker with a history of high covered earnings. This is what
Congress intended. But where a worker with low earnings
because of minimal covered employment also receives a
pension from noncovered employment, the result is the
unintended windfall of Social Security benefits.”). Congress
addressed this issue by adding the WEP, 42 U.S.C.
§ 415(a)(7), to the Social Security Act. Pub. L. No. 98-21,
§ 113, 97 Stat. 65, 76–79 (1983). When applicable, the WEP
formula reduces Social Security benefits by no more than
“one-half of the portion of the monthly periodic payment
which is attributable to noncovered service.” 42 U.S.C.
§ 415(a)(7)(B)(i). The WEP applies to
an individual whose primary insurance
amount would be computed under [the
standard formula], who . . . becomes eligible
after 1985 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
section 410 of this title for purposes of this
subchapter (hereafter in this paragraph and in
subsection (d)(3) referred to as “noncovered
service”).
8 MICHENER V. KIJAKAZI
Id. § 415(a)(7)(A)(ii). Under the WEP implementing
regulation, noncovered employment includes “employment
outside the United States which is not covered under the
United States Social Security system.” 20 C.F.R.
§ 404.213(a)(3).
The WEP expressly adopts the definition of
“employment” in 42 U.S.C. § 410(a), as
any service, of whatever nature, performed
after 1950 (A) 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
. . . or (B) outside the United States by a
citizen or resident of the United States as an
employee (i) of an American employer (as
defined in subsection (e) of this section), or
(ii) of a foreign affiliate (as defined in section
3121(l)(6) of the Internal Revenue Code of
1986) of an American employer during any
period for which there is in effect an
agreement, entered into pursuant to section
3121(l) of such Code, with respect to such
affiliate, or (C) if it is 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.
(emphasis added). A participant’s “employment” is used to
determine “wages,” id. § 409(a) (“remuneration paid . . . for
employment”), and wages in turn determine periods of
MICHENER V. KIJAKAZI 9
coverage for Social Security eligibility, id.
§ 413(a)(2)(A)(ii) (awarding quarters of coverage based on
“the total of the wages paid . . . in a calendar year”). The
definition of employment in § 410(a) is also materially
identical to the definition in the Internal Revenue Code, 26
U.S.C. § 3121(b), identifying service subject to Social
Security taxation. See also 26 U.S.C. § 3101(a) (authorizing
Social Security taxes on “wages . . . received by the
individual with respect to employment (as defined in section
3121(b))”).
An agreement “entered into under section 433” is a
“totalization arrangement” between the Social Security
system and the corresponding system of a foreign country.
42 U.S.C. § 433(a). The purpose of a totalization
arrangement is to establish how periods of coverage accrued
under two countries’ systems are treated by each to establish
eligibility for benefits. Id.; see also Eshel v. Comm’r, 831
F.3d 512, 514 (D.C. Cir. 2016) (explaining that section 433
agreements permit “workers who divide their careers among
and pay taxes to multiple countries” to “combine periods of
payment into different countries’ social security systems to
eventually become eligible to receive benefits under a
signatory country’s system”). A “period of coverage” is
defined as “a period of payment of contributions or a period
of earnings based on wages for employment or on self-
employment income, or any similar period recognized as
equivalent thereto under this subchapter or under the social
security system of a country which is a party to an agreement
entered into under this section.” 42 U.S.C. § 433(b)(2).
Under a section 433 agreement, employment or service may
result in a “period of coverage” under either the Social
Security system or the foreign country’s system, “but not
under both.” Id. § 433(c)(1)(B)(i). The United States and
10 MICHENER V. KIJAKAZI
Canada have a section 433 agreement. See Beeler v. Saul,
977 F.3d 577, 583 (7th Cir. 2020) (describing agreement).
III.
The dispositive issue in this case is whether the U.S.-
Canada Agreement designates Rosell’s Canadian service as
employment under the Social Security Act. If so, Rosell’s
Canadian pension would be based on earnings for service
that did constitute employment, and the WEP would not
apply.
The WEP provides that service which is not employment
is “hereafter in this paragraph and in subsection (d)(3)
referred to as ‘noncovered service.’” 42 U.S.C.
§ 415(a)(7)(A)(ii). The district court correctly held that the
statute thus “equates ‘service which did not constitute
“employment” as defined in section 410’ with ‘noncovered
service’ on which no Social Security taxes were paid.”
Michener, 2020 WL 4810693, at *5. Indeed, in other
contexts, courts have “routinely construed ‘employment’
under § 410 as consistent with ‘covered employment,’ that
is, work on which Social Security taxes were paid.” Beeler,
977 F.3d at 586; see also Flemming v. Nestor, 363 U.S. 603,
608 (1960) (“Broadly speaking, eligibility for benefits
depends on satisfying statutory conditions as to
(1) employment in covered employment or self-
employment . . .”).
However, the statute also provides that the WEP does not
apply to pensions received because of service “designated as
employment or recognized as equivalent to employment” in
a section 433 agreement. 42 U.S.C. § 410(a)(C). Thus, the
statute allows service in other countries, which ordinarily
would not be covered by the Social Security system, to be
designated as “employment”—and thereby excluded from
MICHENER V. KIJAKAZI 11
the WEP—through a section 433 agreement between the
United States and another country. Michener argues that the
U.S.-Canada Agreement does so for Rosell’s work in
Canada.
Michener’s argument rests on a general provision of the
Agreement, which provides that “[a]ny term not defined in
this Article has the meaning assigned to it in the applicable
laws.” U.S.-Canada Agreement, Art. I ¶ 11. The Agreement
later defines “applicable laws” as U.S. Social Security laws
(Title II of the Social Security Act and related regulations,
and Chapters 2 and 21 of the Internal Revenue Code and
related regulations), Canada’s social security laws (the Old
Age Security Act and related regulations), and the Canada
Pension Plan (and its regulations). Id., Art. II ¶ 1. Michener
contends that because “employment” is not defined in the
Agreement, the term includes “employment” as defined in
Canadian law, and therefore Rosell’s Canadian service is
“employment” excluded from the WEP.
We disagree. Michener misconstrues both the function
of section 433 agreements and the U.S.-Canada Agreement
itself. The relevant provision of the Social Security Act
defines “employment” as service that “is designated as
employment or recognized as equivalent to employment” by
a section 433 agreement. 42 U.S.C. § 410(a)(C) (emphasis
added). Nothing in the U.S.-Canada Agreement designates
Rosell’s Canadian service as employment for purposes of the
Social Security Act or recognizes it as the equivalent of U.S.
employment. Rather, the definitional section on which
Michener relies simply acknowledges that each country has
defined employment in its own laws. It does not follow that
any work in Canada subject to Canadian laws, such as
12 MICHENER V. KIJAKAZI
Rosell’s Canadian service, is “designated as employment”
by the U.S.-Canada Agreement. 1
Indeed, when the drafters of the Agreement wanted to
make work performed in Canada “subject to” the Social
Security Act, they did so explicitly. For example, Article V
¶ 2(a) provides:
Where a person who is normally employed in
the territory of one Contracting State and who
is covered under its laws in respect of work
performed for an employer having a place of
business in that territory is sent by that
employer to work for the same employer in
the territory of the other Contracting State,
the person shall be subject to the laws of only
the first Contracting State in respect of that
work, as if it were performed in the territory
of the first Contracting State.
Similarly, Article VII ¶ 1 provides that when an individual
lacks the sufficient quarters of coverage to be eligible for
Social Security benefits, “periods of coverage completed
under the Canada Pension Plan shall be taken into account
to the extent they do not coincide with calendar quarters
already credited as quarters of coverage under United States
laws.” If the general reference in Article I to undefined
terms being defined under the applicable laws of each nation
were read as Michener suggests, there would be no need for
1
Michener also points to the clause in Article V ¶ 1 of the
Agreement providing that “an employed person who works in the
territory of one of the Contracting States shall, in respect of that work,
be subject to the laws of only that Contracting State.” However, the fact
that service in Canada is governed by Canadian law does not designate
that service as employment under the Social Security Act.
MICHENER V. KIJAKAZI 13
this provision; all service treated as employment under the
Canadian system would automatically count toward Social
Security eligibility. See Republic of Ecuador v. Mackay, 742
F.3d 860, 864 (9th Cir. 2014) (explaining the “cardinal rule
of statutory interpretation that no provision should be
construed to be entirely redundant”) (cleaned up).
Moreover, Michener’s reading of the Agreement would
entitle a recipient to receive credit for service under both the
U.S. and Canadian social security systems for the same
period of service. But this is expressly prohibited under the
Social Security Act. See 42 U.S.C. § 433(c)(1)(B)(i)
(providing that, regardless of the terms of a section 433
agreement, employment or service may result in a “period of
coverage” under either the Social Security system or the
foreign country’s system, “but not under both”). Likewise,
if any service considered “employment” in Canada was also
“employment” for purposes of U.S. Social Security, that
service would be subject to Social Security taxes. See 26
U.S.C. § 3121(b). Rosell’s service was not.
The WEP’s implementing regulation, 20 C.F.R.
§ 404.213, entitled “Computation where you are eligible for
a pension based on your noncovered employment,” states
that SSA will apply the WEP formula to an individual’s
Social Security benefits if he becomes eligible for another
monthly pension. Id. § 404.213(a)(3). It then provides,
parenthetically:
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
14 MICHENER V. KIJAKAZI
on residence or citizenship, and those from
private employers.
Id. Michener urges that the parenthetical phrase “base[d] . . .
on residence or citizenship” means that if residency or
citizenship plays any role in pension eligibility, that pension
is excluded from the WEP. Thus, although she
acknowledges that the amount of Rosell’s Canada Pension
Plan payment was determined in part by his Canadian
earnings, Michener argues that his pension is excluded from
the WEP under the regulation because it is available only to
Canadian citizens or residents.
Michener’s reading is not supported by the text of the
regulation, which says that a pension is from noncovered
employment, and therefore subject to the WEP, if it “base[s]
benefits on earnings”—not if pension eligibility or
entitlement is based “solely” on earnings. 20 C.F.R.
§ 404.213(a)(3) (emphasis added). Moreover, the statute
itself expressly provides that the WEP applies to a pension
“which is based in whole or in part upon [an individual’s]
earnings for service which did not constitute ‘employment’
as defined in section 410 of this title for purposes of this
subchapter.” 42 U.S.C. § 415(a)(7)(A)(ii) (emphasis
added).
IV.
The SSA and the district court properly interpreted the
WEP and the U.S.-Canada Agreement. Because Rosell’s
Canadian pension was based at least in part on his earnings
MICHENER V. KIJAKAZI 15
for noncovered service, the agency correctly reduced the
couple’s Social Security benefits. 2
AFFIRMED.
2
Our interpretation of the statutory and regulatory scheme and the
Agreement is in accord with that of the Seventh Circuit in Beeler. 977
F.3d at 581. To the extent that Rabanal v. Colvin, 987 F. Supp. 2d 1106(D. Colo. 2013), is to the contrary, we decline to follow it.