CPF, US taxation, and Social Security WEP for PR

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CPF, US taxation, and Social Security WEP for PR

Post by Sunny1123 » Sun, 24 May 2015 5:13 pm

Looking into tax consequences of a US citizen getting SG PR, here's what I've gathered:

1. Both employee and employer CPF contributions are not taxable for SG. They are taxable for US and not considered foreign earned income, so they can't be excluded under FEIE. They also can't be considered for foreign tax credit/deduction because they aren't taxable by SG. So, you pay your US marginal rate. This was discussed in another thread here (http://forum.singaporeexpats.com/viewtopic.php?t=106274).

2. Interest earned on your CPF account during a given year gets taxed the same as #1 (http://intltax.typepad.com/intltax_blog ... plans.html).

3. CPF withdrawals in the future will presumably not be taxed by the US, as #1 and #2 mean all contributions and earnings were already taxed. They are also not taxed by SG.

4. CPF counts as "a pension based on earnings not covered by Social Security" and triggers the Windfall Elimination Provision (http://socialsecurity.gov/planners/retire/wep.html) for US Social Security benefits. In 2015 USD, WEP would reduce base monthly Social Security benefit (primary insurance amount) by up to $413.

5. There's an article directed at teachers (http://www.nea.org/home/17745.htm) which says you can avoid WEP by "withdrawing your contributions and interest before you are eligible to receive such a pension," and that "the Social Security Administration (SSA) deems you to be "entitled to a pension" when you file an application for the pension and a benefit is payable."

Now for the questions:

How do these WEP-related definitions apply to CPF? Does a withdrawal between 55 and 65 (Payout Eligibility Age, PEA) count as "a benefit," or is it only the monthly CPF LIFE payments from the annuity purchased using retirement sum funds in the RA which count (those can't start until at least PEA)?

I see CPF offers two exemption options (http://mycpf.cpf.gov.sg/Members/Gen-Inf ... mumSum.htm) which would allow withdrawal of the full RA: first is an annuity bought with cash or CPFIS that has monthly benefit above the full CPF payout, and second is to be a "pensioner" with monthly pension above the full CPF payout. Would qualifying for an exemption and withdrawing the full RA before PEA eliminate the "benefit" from the SSA perspective and allow one to avoid the WEP? If so, does US Social Security count as a "pension" for purposes of the CPF exemption, or is that only for a Singapore-based pension?

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