# International Social Security Agreements > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR41009 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** January 11, 2010 - **Citation:** R41009 ## Text International Social Security Agreements name redacted Specialist in Income Security January 11, 2010 Congressional Research Service 7-.... www.crs.gov R41009 CRS Report for Congress Prepared for Members and Committees of Congress International Social Security Agreements Summary International Social Security agreements are bilateral agreements primarily intended to eliminate dual Social Security taxation based on the same work and provide benefit protection for workers who divide their careers between the United States and a foreign country. Most jobs in the United States are covered by Social Security. In addition, the Social Security Act extends Social Security coverage to U.S. citizens and resident aliens who are employed abroad by U.S. companies as well as those who are self-employed in a foreign country. Generally, a U.S. worker abroad and his or her employer would be required to contribute both to the U.S. Social Security system and the Social Security system of the country where the work is performed based on the same work. International agreements eliminate dual Social Security taxation in these circumstances by allowing workers and their employers to contribute to only one Social Security system (either the U.S. or the foreign system depending on the terms of the agreement). In addition, international agreements allow workers who divide their careers between the United States and a foreign country to fill gaps in Social Security coverage by combining work credits under each country’s system to qualify for benefits under one or both systems. If a worker qualifies for benefits based on combined (totalized) work credits, the benefit payable under either system is prorated to take into account the actual period during which the worker was covered by that system. By eliminating dual Social Security taxation, international agreements reduce the cost of doing business abroad. As a result, they can affect the competitiveness and profitability of U.S. companies with foreign operations and promote investment in the United States by foreign companies. In addition, international agreements affect the application of certain provisions of the Social Security Act, including the alien nonpayment provision. The alien nonpayment provision places restrictions on the payment of U.S. Social Security benefits to noncitizens who reside outside the United States, with broad exceptions. These payment restrictions may be waived for beneficiaries who are residents of a country with which the United States has an agreement. Since 1977, the President has had the authority to negotiate Social Security agreements with foreign countries. Currently, there are 24 Social Security agreements in force. Another agreement (with Mexico) has been signed, but is not in force. In December 2007, about $28 million was paid in monthly benefits to about 146,200 recipients under U.S. Social Security agreements. Many observers agree that international Social Security agreements can be beneficial for U.S. companies and workers. However, some policymakers have expressed concerns about the agreements. Because the agreements impose a cost to the U.S. Social Security system, some policymakers point to the need for greater assurances that the data relied upon by the United States to administer the agreements are complete and accurate, a condition necessary to protect the Social Security trust funds from improper payments. In addition, they point to concerns about the role of Congress in the approval process for potential agreements, as well as the need for enhanced reporting requirements and periodic evaluation of agreements in force. These and other concerns are reflected in legislative proposals such as S. 42 and H.R. 132 in the 111th Congress. This report provides an overview of the purpose and operation of international Social Security agreements. In addition, it provides a discussion of the effects of agreements on selected provisions of the Social Security Act and concerns raised by some policymakers about the agreements. This report will be updated to reflect legislative activity or other developments. Congressional Research Service International Social Security Agreements Contents Introduction ................................................................................................................................1 Main Purposes ............................................................................................................................1 Eliminating Dual Social Security Taxation ............................................................................1 Filling Gaps in Social Security Coverage ..............................................................................5 Other Goals...........................................................................................................................6 Negotiation, Congressional Review, and Implementation ............................................................7 Nature and Authority.............................................................................................................7 Legislative History of Section 233 of the Social Security Act ..........................................8 Selection of Partner Countries ............................................................................................. 11 Negotiation and Conclusion of Agreements ......................................................................... 12 Congressional Review of Agreements ................................................................................. 13 Implementation of Agreements............................................................................................ 15 Changes and Termination of Agreements............................................................................. 15 Current Social Security Agreements .......................................................................................... 16 Totalization Benefits ................................................................................................................. 19 Benefit Application Process ................................................................................................ 19 Computation of Benefits ..................................................................................................... 20 Monitoring of Beneficiaries ................................................................................................ 22 Effects of Agreements on Selected Provisions of the Social Security Act ................................... 24 Waiver of the Alien Nonpayment Provision ......................................................................... 24 Legislative History of Payment Rules for Noncitizens ................................................... 27 Exemption from the Windfall Elimination Provision ........................................................... 29 Application of a Work Test.................................................................................................. 29 Qualification for Medicare Hospital Insurance..................................................................... 30 Issues and Concerns .................................................................................................................. 31 Assessing Risks Associated with Future Agreements ........................................................... 31 Determining Eligibility for Benefits Under an Agreement ................................................... 32 Related Testimony by GAO and SSA in 2006................................................................ 33 Status of SSA Initiatives in 2009 ................................................................................... 34 The Role of Congress.......................................................................................................... 35 Legislation in the 111th Congress ............................................................................................... 36 Conclusion................................................................................................................................ 37 Tables Table 1. Basic Rules of Coverage Under International Social Security Agreements......................4 Table 2. U.S. Social Security Agreements in Force .................................................................... 17 Table 3. Number of Beneficiaries and Average Monthly Benefit Under U.S. Social Security Agreements, December 2007 .................................................................................... 18 Table 4. Exceptions to the Alien Nonpayment Provision for Workers and Dependents/Survivors ............................................................................................................ 26 Congressional Research Service International Social Security Agreements Table 5. Additional Residency Requirement for Alien Dependents and Survivors Outside the United States .................................................................................................................... 27 Table 6. Exceptions to the Additional Residency Requirement for Alien Dependents and Survivors Outside the United States ....................................................................................... 27 Appendixes Appendix A. Computation of the Social Security Primary Insurance Amount ............................ 38 Appendix B. Exception Countries ............................................................................................. 40 Contacts Author Contact Information ...................................................................................................... 41 Acknowledgments .................................................................................................................... 41 Congressional Research Service International Social Security Agreements Introduction International Social Security agreements are bilateral agreements primarily intended to eliminate dual Social Security taxation based on the same work and provide benefit protection for workers who divide their careers between the United States and a foreign country. By eliminating dual Social Security taxation, the agreements reduce the cost of doing business abroad. In turn, they can affect the competitiveness and profitability of U.S. companies with foreign operations as well as promote investment in the United States by foreign companies. Social Security agreements also affect the application of certain provisions of the Social Security Act, such as the alien nonpayment provision which places restrictions on the payment of U.S. Social Security benefits to noncitizens residing outside the United States, with broad exceptions.1 Since 1977, the President has had the authority to negotiate Social Security agreements with foreign countries (pursuant to Section 233 of the Social Security Act). Currently, there are 24 Social Security agreements in force (see Table 2 for a list of U.S. Social Security agreements in force). Another agreement (with Mexico) has been signed, but is not in force. This report provides an overview of the purpose and operation of international Social Security agreements.2 It also provides a discussion of the effects of agreements on selected provisions of the Social Security Act and concerns raised by some policymakers about the agreements.3 Main Purposes Eliminating Dual Social Security Taxation One of the main purposes of international Social Security agreements is to eliminate dual Social Security taxation. Dual Social Security taxation occurs when a worker from one country is employed or self-employed in another country and both countries require that contributions be paid on the same work. In the United States, Social Security-covered workers and their employers each pay 6.2% of earnings up to $106,800 (in 2010) in Social Security payroll taxes.4 Workers who are self-employed pay 12.4% of net self-employment income up to $106,800, and they may deduct one-half of payroll taxes from federal income taxes. 1 The terms “alien” and “noncitizen” are used interchangeably in this report. The Immigration and Nationality Act (P.L. 82-414, 1952) defines an alien as “any person not a citizen or national of the United States.” 2 Much of the information in this report is based on the Social Security Administration’s (SSA) Program Operations Manual System (POMS) available on the web at https://secure.ssa.gov/apps10/poms.nsf/aboutpoms. This is a public version of the POMS used by SSA employees to process claims for Social Security benefits. The information in this report is intended to provide an overview of international Social Security agreements. It is not intended to encompass all of the detailed rules and policies related to such agreements. 3 In the United States, the agreements are also known as totalization agreements. Terms such as “international Social Security agreement” and “totalization agreement” are used interchangeably in this report. 4 The limit on wages subject to the Social Security payroll tax is indexed annually to average wage growth (if a Social Security cost-of-living adjustment is payable). Congressional Research Service 1 International Social Security Agreements Most jobs in the United States5 (whether performed by U.S. citizens or noncitizens) are covered by Social Security.6 The Social Security Administration (SSA) estimates that 94% of workers in paid employment or self-employment in the United States are covered by Social Security. 7 Workers who are not covered by Social Security include (1) state and local government workers participating in alternative retirement systems; (2) election workers earning less than $1,500 in 2010; (3) ministers who choose not to be covered and certain religious sects; (4) federal government workers hired before 1984 (elected office holders, political appointees and judges are mandatorily covered regardless of when their service began); (5) college students working at their academic institutions; (6) household workers earning less than $1,700 in 2010, or those under age 18 for whom household work is not their principal occupation; (7) self-employed workers with annual net earnings below $400; (8) foreign students and exchange visitors who hold F-1, J-1, M-1, Q1 and Q2 visas if the work is performed in connection with their studies or for the purpose of their visit to the United States (J-1 visa holders who are in the United States for 18 months or longer are required to pay Social Security payroll taxes); and (9) foreign agricultural workers who hold H-2A visas. The Social Security Act also extends Social Security coverage to U.S. citizens and residents who are employed abroad by U.S. companies (such as in a branch office located in a foreign country). 8 As a result, a U.S. worker and his or her employer generally would be required to contribute both to the U.S. Social Security system and the Social Security system of the country where the work is performed. In addition, U.S. citizens and residents who are employed by a foreign affiliate of a U.S. company are subject to dual taxation if the company has entered into an agreement with the U.S. Department of the Treasury, Internal Revenue Service, under Section 3121(l) of the Internal Revenue Code to provide U.S. Social Security coverage for employees of a foreign affiliate. In some cases, a U.S. company that sends an employee to work in a foreign country may agree to pay both the employee’s and the employer’s shares of the Social Security tax under the foreign system. Payment of the employee’s share of the Social Security tax by the employer may be considered taxable compensation to the employee, thereby increasing the employee’s income tax liability. The employer may also agree to pay the additional income taxes on behalf of the 5 For purposes of the Social Security program, the United States is defined as a geographic area that includes the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands and American Samoa. 6 For purposes of the Social Security program, employment is defined in Section 210 of the Social Security Act and self-employment is defined in Section 211 of the Social Security Act. 7 Social Security Administration, 2009 Social Security/SSI/Medicare Information, May 14, 2009, available at http://www.socialsecurity.gov/legislation/2009%20factsheet.pdf. 8 Section 210 of the Social Security Act. Congressional Research Service 2 International Social Security Agreements employee. SSA estimates that, in some countries, an employer’s foreign Social Security costs can be as much as 65% to 70% of the employee’s salary when foreign Social Security taxes and additional income taxes paid by the employer on behalf of the employee are taken into account.9 In addition, the Social Security Act extends Social Security coverage to U.S. citizens and residents who are self-employed in a foreign country. As a result, self-employed workers abroad are also affected by dual Social Security taxation. International agreements eliminate dual taxation on the same earnings by requiring workers and their employers to contribute to only one Social Security system based on the coverage provisions of the agreements. Each agreement includes coverage rules that determine whether a person’s work is covered under the Social Security system of the sending country or that of the foreign country.10 Under the agreements, there are basic rules of coverage that apply to workers who are sent by an employer to work abroad as well as self-employed workers (see rules regarding the self-employed). In addition, there are special rules and exceptions that apply allowing for variation in the rules of coverage under each agreement.11 The basic rule of coverage under international agreements is the territoriality rule, which specifies that a worker is covered under the Social Security system of the country where the work is performed, unless the agreement provides for one or more exceptions. Generally, exceptions are provided to “ensure that a worker is covered under the system of the country to which he or she has the more direct connection.”12 A primary exception to the territoriality rule is the detached worker rule. Under this rule, a person who is sent by an employer to work in a foreign country on a temporary basis (generally five years or less) would continue to be covered under the sending country’s system and would be exempt from coverage under the foreign system. Conversely, a person who is sent by an employer to work in a foreign country for more than five years would be covered under the foreign system and would be exempt from coverage under the sending country’s system. The basic rules of coverage are summarized in Table 1. 9 Social Security Administration, U.S. International Social Security Agreements, available at http://www.socialsecurity.gov/international/agreements_overview.html. 10 The worker is issued a certificate of coverage by SSA or an authorized agency of the foreign country. The purpose of the document is to certify that the worker is subject to Social Security coverage in the issuing country and exempt from coverage in the other country. 11 The focus of this report is on general coverage rules, rather than specific rules under each agreement. For details on the rules of coverage under each agreement, see the information available from the SSA at http://policy.ssa.gov/poms.nsf/links/0302001000. 12 For example, see the description of coverage rules under the agreement with Denmark at http://policy.ssa.gov/poms.nsf/links/0302002110. Congressional Research Service 3 International Social Security Agreements Table 1. Basic Rules of Coverage Under International Social Security Agreements Rule Brief Description Territoriality Rule A person is covered under the Social Security system of the country in which the work is performed. Detached Worker Rule A person sent by an employer to work in a foreign country on a temporary basis (generally 5 years or less) will continue to be covered under the sending country’s Social Security system and will be exempt from coverage under the foreign system. Conversely, a person sent by an employer to work in a foreign country for more than 5 years will be covered under the foreign system and will be exempt from coverage under the sending country’s system. Nationality Rule A person is covered under the Social Security system of his or her country of nationality. This coverage rule applies only under the agreement with Italy. Residence Rule A person is covered under the Social Security system of the country in which he or she resides. This coverage rule generally applies to self-employment. Source: Information based on the Social Security Administration’s Program Operations Manual System (POMS), Section RS 020 (Coverage Under International Agreements), available at http://policy.ssa.gov/poms.nsf/links/0302000000. Notes: Special exceptions may apply under some agreements and rules of coverage may differ for government employees and other categories of workers. For example, if a U.S. worker is sent by an employer to work in Canada and the assignment is expected to last five years or less, he or she would remain covered under the U.S. Social Security system. The worker and his or her employer would be required to contribute only to the U.S. system. Alternatively, if a U.S. worker is sent by an employer to work in Canada and the assignment is expected to last for more than five years, he or she would be covered only under the Canadian Social Security system. The worker and his or her employer would be required to contribute only to the Canadian system. Thus, the detached worker rule allows workers and their employers to avoid paying Social Security payroll taxes under two systems based on the same earnings and minimizes disruptions in Social Security coverage for workers who are transferred abroad on temporary assignments. The agreement with Italy is unique in that the primary exception to the territoriality rule is the nationality rule, which specifies that a worker is covered under the Social Security system of his or her country of nationality.13 For example, if an Italian worker is sent by an employer to work in the United States, he or she would remain covered under the Italian Social Security system, regardless of the period of employment in the United States.14 13 The agreement with Italy, which was the first agreement to be signed, is the only agreement that does not include a detached worker rule. 14 If the worker is a national of a country other than Italy or the United States, however, the territoriality rule would apply (i.e., the worker would be covered under the system of the country where the work is performed). Congressional Research Service 4 International Social Security Agreements Generally, different coverage rules apply to self-employed workers. Under most agreements, the general rule of coverage for self-employed workers is the residence rule, which specifies that a person is covered under the Social Security system of the country in which he or she resides. For example, under the agreement with Switzerland, a Swiss citizen who resides in the United States and is self-employed is covered under the U.S. system and exempt from coverage under the Swiss system. Some agreements, such as those with Belgium, France, Germany, Italy and Japan, use other primary rules of coverage for self-employment. For example, under the agreement with Belgium, a self-employed worker is subject to the territoriality rule if he or she conducts business in only one country and the residence rule if he or she conducts business in both countries.15 Under the agreement with Germany, the basic rule of coverage for both employees and self-employed workers is the territoriality rule, with exceptions provided, such as those under the detached worker rule. 16 Filling Gaps in Social Security Coverage The second main purpose of international Social Security agreements is to allow workers who divide their careers between the United States and a foreign country to fill gaps in Social Security coverage by combining work credits under each country’s system to qualify for benefits under one or both systems. In the United States, a worker must have at least 6 quarters of coverage under the U.S. system (the person must have worked in the United States in Social Securitycovered employment for at least 1½ years) to combine U.S. and foreign work credits.17 This feature of international agreements allows workers who do not meet the minimum coverage requirements under either country’s system potentially to qualify for partial benefits under one or both systems. If a worker qualifies for benefits based on combined (totalized) work credits, the benefit payable under either system is prorated to take into account the actual period during which the worker was covered by that system. 18 For example, under the U.S. system, a worker generally needs 40 quarters (10 years) of Social Security-covered employment to be eligible for retirement benefits.19 Because the United States and Canada have entered into an agreement, a U.S. worker who has five years of coverage under the U.S. system and five years of coverage under the Canadian system can meet the minimum 15 SSA POMS, Section RS 02001.270, Exceptions to the General Coverage Rule—U.S. Belgian Agreement, available at http://policy.ssa.gov/poms.nsf/links/0302001270. 16 SSA POMS, Section RS 02001.110, General Coverage Rule Under the U.S.-German Agreement, available at http://policy.ssa.gov/poms.nsf/links/0302001110; and Section RS 02001.115, Detached Worker Rule Under the U.S.German Agreement, available at http://policy.ssa.gov/poms.nsf/links/0302001115. 17 A worker must have at least 6 quarters of coverage and no more than 39 quarters of coverage under the U.S. system to qualify for a totalization benefit. If a worker has 40 or more quarters of coverage under the U.S. system, he or she would qualify for a regular benefit. 18 A U.S. totalization benefit is prorated to reflect the proportion of the worker’s coverage lifetime completed under the U.S. system. A coverage lifetime is defined in the regulations as the worker’s benefit computation years (the number of years used to determine the worker’s average indexed monthly earnings) under the regular benefit computation process (for example, 35 years in the case of a retirement benefit). For more information, see the section of this report titled Computation of Benefits. The Social Security contributions paid under a foreign system do not affect the amount of a U.S. totalization benefit. The amount of any benefit payable under a foreign system would depend on the foreign country’s program rules and benefit computation methods. 19 Fewer quarters of coverage may be required for disability and survivor benefits. Congressional Research Service 5 International Social Security Agreements coverage requirement for a U.S. Social Security retirement benefit based on combined coverage credits from the U.S. and Canada. The benefit would be prorated to reflect that the worker contributed to the U.S. system for only five years. In the absence of an agreement between the United States and Canada, the worker in this example would not be able to qualify for a retirement benefit under the U.S. system (nor would a U.S. citizen who had worked in Canada be eligible for benefits under the Canadian system). Workers may also qualify for Social Security Disability Insurance (SSDI) benefits based on combined work credits. To qualify for SSDI benefits under the U.S. system, a worker must meet the definition of disability, 20 as well as a recent work test and a duration of work test. Under the recent work test, a worker must have earned a certain number of work credits within a specified period. The requirements vary depending on the age of the worker at the time he or she became disabled. For example, a worker who becomes disabled before the age of 24 must have 1½ years of Social Security-covered employment during the three-year period before the disability began. By comparison, a worker who becomes disabled at the age of 31 or later must have five years of Social Security-covered employment during the 10-year period before the disability began. Under the duration of work test, a worker must have a certain number of total work credits, which may have been earned at any time. The requirements vary depending on the age of the worker at the time he or she became disabled. For example, a worker who becomes disabled before the age of 28 must have a total of 1½ years of Social Security-covered employment, while a worker who becomes disabled at the age of 60 must have a total of 9½ years of Social Security-covered employment. 21 In any case, a worker must have at least 6 work credits (1½ years of Social Security-covered employment) to qualify for SSDI benefits, the same minimum number of credits needed under the U.S. system to combine U.S. and foreign work credits under the terms of an international agreement. The ability to combine coverage credits under the U.S. system and a foreign system provides workers (and their family members) an opportunity to qualify for benefits under one or both systems that would not be payable otherwise because the worker did not work long enough or recently enough to meet the minimum coverage requirements. In this way, a worker’s Social Security contributions are not “lost” to the system.22 Other Goals By eliminating dual Social Security taxation, international agreements reduce the cost of doing business abroad. In doing so, they can affect the competitiveness and profitability of U.S. companies with foreign operations and promote investment in the United States by foreign 20 Section 223(d) of the Social Security Act defines disability as the inability to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment expected to result in death or last at least 12 months. 21 Other eligibility requirements may apply for receipt of SSDI benefits. For more information, see CRS Report RL32279, Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), by Scott Szymendera. 22 All Social Security agreements allow foreign work credits to count toward the minimum coverage requirement for a U.S. Social Security benefit. Conversely, some agreements allow U.S. work credits to count toward the minimum length-of-work requirement for a foreign benefit. Other agreements, however, do not require U.S. work credits to count toward qualifying for a foreign benefit. Rather, the length-of-coverage requirement for the foreign benefit is reduced. For more information, see SSA POMS, Section GN 01701.100, Overview of Totalization Benefits, available at http://policy.ssa.gov/poms.nsf/links/0201701100. Congressional Research Service 6 International Social Security Agreements companies. In addition, international agreements affect the application of certain provisions of the Social Security Act, including the alien nonpayment provision. The alien nonpayment provision places restrictions on the payment of U.S. Social Security benefits to noncitizens who reside outside the United States, with broad exceptions. These payment restrictions may be waived for beneficiaries who are residents of a country with which the United States has a Social Security agreement.23 Supporters of international Social Security agreements point out that the waiver of residency requirements increases the portability of Social Security benefits for U.S. citizens and foreign nationals. Negotiation, Congressional Review, and Implementation Nature and Authority International Social Security agreements are conducted and approved using the executive agreement method rather than the treaty process. Under U.S. law, there are four types of international agreements: (1) treaties, (2) sole executive agreements, (3) agreements pursuant to treaty, and (4) congressional-executive agreements.24 Congressional-executive agreements are those that are authorized or approved by Congress, or both. International Social Security agreements fall into the fourth category because they are authorized by Congress in the Social Security Act. In addition, Congress has established in the statute a role for itself in reviewing these agreements. The Congressional Record does not provide a discussion of why Congress chose the congressional-executive method over the treaty method for totalization agreements in 1977. However, some discussion of the approval method for totalization agreements occurred during a 1976 hearing before the House Ways and Means Social Security Subcommittee on H.R. 14429, the International Social Security Agreements Act, as described in the next section. A discussion of the characteristics of congressional-executive agreements may shed additional light on the matter. One feature of congressional-executive agreements is that they rely on an ex ante authorization by Congress, in which Congress has the opportunity to establish by law certain terms related to such agreements. With respect to Social Security agreements, Section 233 of the Social Security Act authorizes the President to enter into such agreements with foreign countries, establishes the congressional review process for the agreements and specifies reporting requirements. In addition, congressional-executive agreements usually contain an ex post approval mechanism that provides an opportunity for both houses of Congress (not just the Senate) to approve or reject an agreement. With respect to Social Security agreements, Section 233(e)(2) of the Social Security Act specifies that an agreement shall become effective after a period of 60 days during which the House of Representatives or the Senate is in session (i.e., a period of 60 session days) after an 23 For more information, see the “Waiver of the Alien Nonpayment Provision” section of this report. For a discussion of the different types of executive agreements and a comparison with treaties, see the CRS study prepared for the Senate Committee on Foreign Relations, Treaties and Other International Agreements: The Role of the United States Senate, S. Prt. 106-71, January 2001, available at http://www.senate.gov/reference/common/faq/ Treaties.htm. In addition, see U.S. Department of State Foreign Affairs Manual Volume 11—Political Affairs, 11 FAM 723, Exercise of the International Agreement Power, available at http://www.state.gov/documents/organization/ 88317.pdf. 24 Congressional Research Service 7 International Social Security Agreements agreement is transmitted to Congress unless the House of Representatives or the Senate adopts a resolution of disapproval. 25 Legislative History of Section 233 of the Social Security Act According to congressional testimony by the Commissioner of Social Security in 1976, initial efforts in the United States toward totalization agreements with foreign countries can be found in the Supplementary Agreement to the 1948 Treaty of Friendship, Commerce and Navigation between the United States and Italy. In his statement, Commissioner James B. Cardwell indicated: Under the Supplementary Agreement, which became effective in 1961, both countries declared their adherence to a policy of preventing gaps in social security protection by permitting periods of social security coverage in both countries to be counted in determining benefit rights in both countries.26 The Supplementary Agreement was signed by the United States and Italy in 1951 and ratified by the U.S. Senate in 1953.27 While the Supplementary Agreement provided for the negotiation of a totalization agreement between the parties (referred to in the Supplementary Agreement as an “arrangement”), the Senate ratified the Supplementary Agreement on the condition that any such agreement would be made by the United States “only in conformity with provisions of statute.”28 In May 1973, a totalization agreement between the United States and Italy was signed by both countries. Later that year, an attempt was made to enact legislation providing the statutory authority for totalization agreements as required by the Senate in 1953. In November 1973, the Senate approved H.R. 3153 (93rd Congress), a Social Security bill passed by the House in April 1973, adding a provision authorizing the President to enter into totalization agreements with foreign countries and specifying other terms related to such agreements. 29 The version of the bill approved by the House of Representatives did not include a provision relating to totalization agreements. A conference to resolve differences between the House- and Senate-approved versions of the bill was never held and the legislation was not enacted.30 The provision in H.R. 3153 (93rd Congress) relating to totalization agreements added by the Senate in 1973 was similar to current law (Section 233 of the Social Security Act), with some notable differences. For example, it provided for a longer period of congressional review. The Senate provision specified that “such an agreement shall become effective on any date provided in the agreement following 90 calendar days of continuous session of the Congress after the date 25 For more information, see the “Congressional Review of Agreements” section of this report. U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, International Social Security Agreements Act, hearing on H.R. 14429, 94th Cong., 2nd sess., August 4, 1976, p. 2 (hereinafter referred to as 1976 Hearing on International Social Security Agreements Act). 27 U.S. Congress, House, International Agreement with Italy on Social Security, House Document No. 95-297, 95th Cong., 2nd sess., February 28, 1977, p. 24 (hereinafter referred to as House Document No. 95-297). 28 House Document No. 95-297, p. 27. There were no relevant provisions of statute at the time (i.e., the requirement pre-dates the addition of Section 233 to the Social Security Act). 29 H.R. 3153 (93rd Congress) made a number of technical and conforming amendments to the Social Security Act that had been omitted in drafting the conference agreement on the Social Security Amendments of 1972 (P.L. 92-603). 30 For more information on the legislative history of H.R. 3153 (93rd Congress), see CRS Report RL30920, Major Decisions in the House and Senate on Social Security: 1935-2006, by (name redacted). 26 Congressional Research Service 8 International Social Security Agreements on which the agreement is transmitted ... ”31 In addition, the Senate provision did not specify what action by Congress would be required to stop an agreement from taking effect. In 1976, the House Ways and Means Committee, Subcommittee on Social Security, held a hearing on the International Social Security Agreements Act (H.R. 14429, 94th Congress), which reflected a proposal supported by the Administration. In contrast to the provision added by the Senate to H.R. 3153 in 1973, H.R. 14429 would have required only that Congress be notified of an international Social Security agreement. Under H.R. 14429, Social Security agreements, like other types of international agreements, would have been reported to Congress after (rather than before) entering into force. During the hearing on H.R. 14429, the discussion turned to an alternative “report and wait” provision similar to the one added by the Senate to H.R. 3153 in 1973.32 The Commissioner of Social Security, James B. Cardwell, indicated that the agency had been advised that the Administration would not object to an arrangement in which Congress would be presented with a proposed Social Security agreement and would have 60 days in which to advise the Administration of their position or otherwise the agreement would become effective. Upon questioning by members of the Social Security Subcommittee, Commissioner Cardwell stated that the agency did not have details on how the process would work. However, the Commissioner indicated that it was his opinion that any objection to an agreement would have to come from Congress, and not from a subcommittee or committee or even one House.33 Commissioner Cardwell offered to seek clarification on the Administration’s position with respect to an appropriate process for congressional review of Social Security agreements. In a follow-up letter to Honorable James Burke, the Chairman of the Social Security Subcommittee, Commissioner Cardwell expressed the Administration’s support for a provision similar to the one added by the Senate to H.R. 3153 in 1973, except with a shorter period of congressional review. The Commissioner stated that the Administration would not object to an arrangement in which a negotiated totalization agreement could not become effective until after 60 days of continuous session of Congress following transmittal to Congress by the President. Under the Administration’s provision, if Congress approved of a proposed agreement, no action by Congress would be needed and the agreement would take effect at the end of the specified review period. If Congress disapproved of a proposed agreement, or wanted to alter any of its provisions, Congress would be required to enact a statute to that effect.34 In 1977, the statutory authority relating to totalization agreements (Section 233 of the Social Security Act) was established under the Social Security Amendments of 1977 (P.L. 95-216). The provision enacted in 1977 was similar to current law, with some notable differences. For example, under a totalization agreement, an individual may qualify for a benefit from both the United States and the foreign country party to the agreement. The 1977 law specified that, with respect to persons who qualify for benefits under both countries’ systems, a totalization agreement could provide that the United States would supplement the total benefit amount (U.S. and foreign benefit combined) payable to a U.S. resident35 to increase it to the amount he or she would have 31 The Senate provision further specified that for this purpose: “The continuity of a session is broken ... only by an adjournment of the Congress sine die. The days on which either House of the Congress is not in session because of an adjournment of more than 3 days to a day certain shall be excluded in the computation of the 90-day period.” 32 1976 Hearing on International Social Security Agreements Act, p. 54. 33 1976 Hearing on International Social Security Agreements Act, p. 55. 34 1976 Hearing on International Social Security Agreements Act, p. 55. 35 P.L. 95-216 specified that the supplement would apply to “an individual who legally resides in the United States.” Congressional Research Service 9 International Social Security Agreements qualified for under the U.S. system based on the minimum Primary Insurance Amount (PIA) available under current law at the time. 36 In addition, the 1977 law provided for a longer period of congressional review than that supported by the Administration. Specifically, it provided that an agreement would go into effect unless the House of Representatives or the Senate adopted a resolution of disapproval within the period following transmittal to Congress “during which each House of the Congress has been in session on each of 90 days.”37 The House of Representatives and the Senate initially approved different provisions relating to totalization agreements in considering the 1977 legislation. The provision approved by the House of Representatives specified that each agreement would have to be transmitted to Congress and could not go into effect until after at least one House of Congress has been in session for 90 days. During that period, an agreement could be rejected by action of both Houses of Congress enacting legislation. The provision approved by the Senate specified that (1) each agreement must be transmitted to Congress with a report on the estimated cost and number of individuals affected; (2) an agreement must not be inconsistent with the provisions of Title II of the Social Security Act; and (3) an agreement could not go into effect until after each House of Congress has been in session for 90 days, during which period an agreement could be rejected by action of either House of Congress. The conference agreement followed the Senate provision.38 In 1981, the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) struck the provision in Section 233 of the Social Security Act permitting an agreement to provide that the United States would supplement a U.S. resident’s total benefit amount (U.S. and foreign benefit combined) under an agreement if the total benefit amount was less than the minimum benefit he or she would have qualified for under the U.S. system. 39 This was a conforming amendment related to the elimination of the minimum benefit provision under the same law (P.L. 97-35).40 Accordingly, there is no current law providing for any such supplemental benefit under an agreement. In 1983, the period for congressional review of Social Security agreements was shortened under the Social Security Amendments of 1983 (P.L. 98-21). The period of congressional review was changed from the period “during which each House of the Congress has been in session on each of 90 days” to the period “during which at least one House of the Congress has been in session on each of 60 days.”41 This is the same period of congressional review provided under current law. 42 36 The worker’s PIA is the basic monthly benefit amount before any adjustments are made for early or delayed retirement (for more information on the PIA, see Appendix A to this report). The minimum PIA is the smallest monthly benefit amount (before applicable reductions) payable to a worker or used to determine benefits payable to the worker’s dependents and survivors. In 1977, the minimum PIA was frozen at $122 per month for workers who became disabled or died after 1978 or who reached the age of 62 after 1983. 37 Section 317 of P.L. 95-216. 38 U.S. Congress, Conference Committees, Social Security Amendments of 1977, conference report to accompany H.R. 9346, S.Rept. 95-612, 95th Cong., 1st sess., December 14, 1977, pp. 70-71. 39 Title XXII, Section 2201(b)(12) of P.L. 97-35. 40 P.L. 97-35 eliminated the minimum PIA for persons who become eligible for benefits in January 1982 or later (an exemption for 10 years was provided for certain members of religious orders who have taken a vow of poverty). 41 Section 326 of P.L. 98-21. 42 In addition to the changes discussed here, minor technical amendments to Section 233 of the Social Security Act were included in P.L. 98-369 (1984) and P.L. 103-296 (1994). Congressional Research Service 10 International Social Security Agreements Selection of Partner Countries The Government Accountability Office (GAO), in a study conducted in 2005, found that the countries with which the United States has entered into Social Security agreements have been selected without a formal guideline or protocol. 43 SSA officials have stated that the agency has used the same major criteria for selecting partner countries since 1978. According to SSA officials, the major criteria used in selecting agreement countries include (1) whether the other country has a Social Security system of general application that pays periodic benefits on account of death, old age or disability; (2) costs to the trust funds; (3) the number of and cost savings to U.S. employers and workers who would benefit from the elimination of dual taxes; (4) the interest of the other country in negotiating an agreement; (5) the ability of the other country to administer an agreement; and (6) input from other U.S. government agencies such as the Department of State and the Office of the U.S. Trade Representative. 44 In addition, the 2005 GAO Report indicated that SSA is working on initiatives aimed at determining which countries would be suitable partners for future agreements, taking into account the reliability of a country’s data and records. According to SSA officials, the agency has sought input from the Department of State and the Department of Commerce working toward developing a more formalized process for identifying potential agreement countries. GAO also reported that SSA has developed a matrix based on 14 economic and administrative factors that may affect a country’s ability to determine an individual’s eligibility for benefits under an agreement. The purpose of the matrix is to facilitate comparisons among potential agreement countries and evaluate a country’s suitability for a future agreement. The matrix also includes factors that could be used to assess the potential impact of an agreement on the Social Security trust funds.45 With respect to SSA’s initiatives aimed at determining which countries would be suitable partners for future agreements, SSA noted in October 2009: Since 2005, SSA has made significant progress toward formalizing its processes for identifying agreement partner countries and evaluating the reliability of a foreign country’s data. These advancements include: (1) developing a standardized questionnaire to elicit information on internal controls and information security policies and procedures in force in a potential partner country to protect the integrity of earnings information and the computer network that stores such information; (2) requiring the completion of the questionnaire and a thorough and successful review by SSA experts in order to enter into formal negotiations on a potential totalization agreement; and (3) expanding the actuarial estimates of potential agreements’ impact on the U.S. Social Security Trust Funds from short-range, 5-year estimates of the effect to include both short-range (7 year) and long-range (75 year) estimates.46 43 U.S. Government Accountability Office, Social Security Administration: A More Formal Approach Could Enhance SSA’s Ability to Develop and Manage Totalization Agreements, GAO-05-250, February 2005 (hereinafter referred to as 2005 GAO Report). 44 U.S. General Accounting Office, Proposed Totalization Agreement with Mexico Presents Unique Challenges, GAO03-993, September 2003, p. 22. 45 2005 GAO Report, pp. 10-12. 46 Information provided by the Social Security Administration to the Congressional Research Service in October 2009. For more information on the SSA questionnaire, see the section of this report titled Status of SSA Initiatives in 2009. Congressional Research Service 11 International Social Security Agreements Negotiation and Conclusion of Agreements Although there are no statutes or regulations regarding the selection of potential agreement countries, SSA noted that the agency “has for more than 30 years consistently applied the compatible system, costs/benefits, taxation, practicality and consultative criteria described above in considering possible agreement partner countries.”47 In addition, the negotiation and conclusion of international agreements by SSA are governed by the “Circular 175 Procedure.” The Circular 175 Procedure refers to regulations developed by the U.S. Department of State to ensure that treaties and other international agreements are carried out within constitutional and other legal limitations, with due consideration of foreign policy implications, and with appropriate involvement of the State Department. 48 The U.S. Department of State Foreign Affairs Manual states that “[n]egotiations of treaties, or other ‘significant’ international agreements, or for their extension or revision, are not to be undertaken, nor any exploratory discussions undertaken with representatives of another government or international organization, until authorized in writing by the Secretary or an officer specifically authorized by the Secretary for that purpose.”49 After authorization is granted by the State Department, SSA officials may negotiate, but not conclude, a Social Security agreement with a foreign country. When negotiations have been completed, SSA’s General Counsel reviews the agreement to ensure that it is consistent with U.S. law. In addition, the State Department reviews the agreement to ensure that it conforms to U.S. policy priorities and treaty protocols and that any translation of the agreement is the same in both languages. Following that process, the agreement is signed by an authorized U.S. representative and an authorized representative of the foreign country. After the agreement has been signed, SSA and the foreign Social Security agency meet and address implementation issues, formulating operations procedures to be used in administering the agreement. When that process has been completed, the agreement is forwarded to the U.S. Secretary of State for review. After review at the State Department has been completed, the agreement is sent to the President for review. Finally, the President is required by law to transmit the agreement to Congress for a period of review (60 session days) before the agreement can go into effect.50 Upon transmittal to Congress, the agreement must be accompanied by a report showing the estimated number of people who will be affected by the agreement and the estimated financial impact of the agreement on programs established by the Social Security Act. 51 47 Information provided by the Social Security Administration to the Congressional Research Service in October 2009. 48 Information on the Circular 175 Procedure is available from the State Department at http://www.state.gov/s/l/treaty/ c175/. The applicable procedures are referenced in the Code of Federal Regulations (22 C.F.R. § 181.4) and in the U.S. Department of State Foreign Affairs Manual Volume 11 – Political Affairs, 11 FAM 720 (Negotiation and Conclusion), available at http://www.state.gov/documents/organization/88317.pdf. 49 U.S. Department of State Foreign Affairs Manual Volume 11—Political Affairs, 11 FAM 724.1, Authorization Required to Undertake Negotiations, available at http://www.state.gov/documents/organization/88317.pdf. 50 The agreement is subject to ratification in the foreign country as well. 51 For more information on the process for entering into an international Social Security agreement, see Statement of Martin Gerry, SSA Deputy Commissioner for Disability and Income Security Programs, Testimony Before the House Committee on Ways and Means, Subcommittee on Social Security, March 2, 2006, available at http://www.socialsecurity.gov/legislation/testimony_030206.html. Congressional Research Service 12 International Social Security Agreements Congressional Review of Agreements After a Social Security agreement has been entered into with a foreign country, the President is required to transmit the agreement to Congress for a period of review before it can be implemented. 52 There are no rules limiting the amount of time that may elapse between the signing of an agreement and its transmittal to Congress.53 Although most of the current agreements were transmitted to Congress less than one year after they were signed, there has been some variation. For example, the agreement with Denmark was signed in June 2007 and transmitted to Congress less than a year later in February 2008. The agreement with Canada, which had an additional protocol for Québec, was signed in March 1981 and transmitted to Congress almost three years later in January 1984. The pending agreement with Mexico was signed in June 2004 and has not been transmitted to Congress to date.54 Section 233(e)(2) of the Social Security Act specifies that a Social Security agreement automatically goes into effect unless the House of Representatives or the Senate adopts a resolution of disapproval within 60 session days of the agreement’s transmittal to Congress. It should be noted that Section 233(e)(2), which allows for the rejection of a totalization agreement upon adoption of a resolution of disapproval by either House of Congress is functionally identical to the legislative veto provision that was held unconstitutional in INS v. Chadha.55 In that case, the Supreme Court struck down a provision in the Immigration and Nationality Act that gave either House of Congress the authority to overrule deportation decisions made by the Attorney General.56 The Court declared that a legislative veto constitutes an exercise of legislative power, as its use has “the purpose and effect of altering the legal rights, duties, and relations of persons ... outside the legislative branch.”57 Accordingly, the Court invalidated the disapproval mechanism, holding that Congress may exercise its legislative authority only “in accord with a single, finely wrought and exhaustively considered procedure,” namely bicameral passage and presentation to the President. 58 In its decision, the Court explicitly acknowledged that its holding was not limited to the provision at issue, but would instead affect other similar laws, stating: “our inquiry is sharpened rather than blunted by the fact that Congressional veto provisions are appearing with increasing frequency in statutes which delegate authority to 52 Section 233(e) of the Social Security Act. Some international agreements enter into force upon signing. The Case-Zablocki Act (P.L. 92-403; 1 U.S.C. 112b, as amended) requires that the text of an international agreement other than a treaty be transmitted to Congress no later than 60 days after the agreement has entered into force. This requirement, however, does not apply to Social Security agreements because they do not enter into force upon signing, but after a mandatory period of review by Congress. 54 The agreement with Italy (the first agreement which was signed in 1973) and the agreement with Germany (the second agreement which was signed in 1976) were transmitted to Congress almost five years and three years, respectively, after they were signed. These agreements, however, were signed before Congress provided the statutory authority for such agreements (Section 233 of the Social Security Act) under the Social Security Amendments of 1977 (P.L. 95-216, which was signed on December 20, 1977). Subsequent to P.L. 95-216, the agreements with Italy and Germany were transmitted to Congress in 1978. 55 462 U.S. 919 (1983). 56 Id. Shortly after its decision in Chadha, the Court without opinion and with one dissent summarily affirmed lower court opinions that had struck down a two-House legislative veto provision of the Federal Trade Commission Improvements Act, 15 U.S.C. § 57a-1. See United States Senate v. Federal Trade Commission, 463 U.S. 1216 (1983); United States House of Representatives v. Federal Trade Commission, 463 U.S. 1216 (1983). 57 Chadha, 462 U.S. at 952. 58 462 U.S. at 951. 53 Congressional Research Service 13 International Social Security Agreements executive and independent agencies.”59 The Court has emphasized its categorical disapproval of the legislative veto in subsequent cases, noting in Printz v. United States, for instance, that “the legislative veto, though enshrined in perhaps hundreds of federal statutes ... was nonetheless held unconstitutional” in Chadha.60 The maxim delineated in Chadha, as consistently reaffirmed by the Court, is fully applicable in the current context.61 Accordingly, given that the disapproval mechanism in Section 233(e)(2) authorizes “congressional invalidation of executive action” outside the strictures of bicameralism and presentment, there is no discernible basis upon which it may be argued successfully that its utilization by Congress would withstand judicial scrutiny.62 Congress has never rejected a Social Security agreement. As a result, the apparent constitutional infirmity of Section 233(e)(2) has not been an issue. Congressional utilization of the mechanism in Section 233(e)(2) to reject a Social Security agreement could give rise to a judicial challenge, potentially resulting in an invalidation of the disapproval mechanism and a determination that the agreement is effective. Specifically, in considering the effect of the unconstitutional disapproval mechanism, a reviewing court would consider whether the remainder of Section 233 is valid, or whether the entire statute must be nullified. The Supreme Court has held that “[u]nless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is a fully operative law.”63 In Westcott v. Califano, the court noted that “the existence of a broad severability clause in the Social Security Act reflects the Congressional wish that judicial interpretation of the act leave as much of the statute intact as possible.”64 The existence of this severability clause, coupled with the fact that the operative provisions of Section 233 would remain fully functional absent the disapproval mechanism in Subsection (e)(2), gives rise to the likelihood that a reviewing court would invalidate any attempt to utilize the disapproval mechanism, while giving effect to an otherwise properly executed Social Security agreement.65 59 462 U.S. at 944-45. 521 U.S. 898, 918 (1997). See also, Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 240 (1995) (stating: “[w]e think legislated invalidation of judicial judgments deserves the same categorical treatment accorded by Chadha to Congressional invalidation of executive action.”). 61 See, e.g., Taylor v. Barnhart, 399 F.3d 891, 894 (8th Cir. 2005) (indicating applicability of the holding in Chadha to Section 233(e)(2)). 62 The unconstitutionality of legislative veto provisions is noted at 42 U.S.C.A. § 433 (2003), where it is further stated that the provisions of § 233(e) are similar to those struck down in INS v. Chadha. For a consideration of bicameralism and presentment requirements generally, see CRS Report RL30249, The Separation of Powers Doctrine: An Overview of its Rationale and Application, by (name redacted). 63 Buckley v. Valeo, 424 U.S. 1, 108 (1976) (quoting Champlin Refining Co. v. Corporation Commission, 286 U.S. 210, 234 [1932]). 64 460 F.Supp 737 (D. Mass 1978). In Califano, the court was referring to 42 U.S.C. § 1303, which states: “[i]f any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provision to other persons or circumstances shall not be affected thereby.” 65 In light of the Court’s holding in Chadha, it is apparent that any congressional action taken to restrict or control executive authority to enter into Social Security agreements, or to invalidate any such agreements, must be accomplished through bicameral passage and presentment to the President. Accordingly, congressional options in this regard would appear to be limited to imposing additional requirements on the adoption of Social Security agreements, restricting authority to enter into such agreements unless approved by both Congress and the President on a case by case basis, or passing a law disapproving a particular agreement before or after it is finalized. See Chadha, 462 U.S. at 951. Analysis of legal issues regarding Section 233(e)(2) of the Social Security Act prepared by (name redacted), CRS Specialist in American Law. 60 Congressional Research Service 14 International Social Security Agreements Before the 1983 Supreme Court Decision of INS v. Chadha, other acts had provisions similar to the legislative veto provision found in Section 233(e)(2) of the Social Security Act. In response to the Court’s holding in Chadha, legislative veto provisions in other Acts were replaced with provisions requiring Congress to adopt a joint resolution of approval or disapproval. For example, the Fishery Conservation and Management Act of 1976, as amended, specified that international fisheries agreements would enter into force after a 60-day waiting period unless Congress adopts a joint resolution of disapproval. 66 Implementation of Agreements It is the responsibility of the Social Security Administration to make rules and regulations and to establish procedures necessary to implement and administer international Social Security agreements.67 Each agreement is accompanied by an Administrative Arrangement for the Implementation of the Agreement on Social Security that may be signed when the agreement is signed or at a later time. The administrative arrangement provides general guidelines for the implementation and administration of the agreement, as well as specific rules regarding cooperation between partner countries. For example, it requires the exchange of statistics on the number of beneficiaries and the total amount of benefits paid. It also provides for the exchange of information needed to adjudicate claims filed under the agreement.68 Changes and Termination of Agreements International Social Security agreements and their administrative protocols can be amended. The agreements require that the parties involved communicate to each other any changes in their laws that could affect the application of an agreement. When changes are made to a country’s Social Security system that affect the application of an agreement, a supplementary agreement (which updates and amends the original agreement) must be signed. For example, the United States and Sweden signed a supplementary agreement in 2004 to take into account a major reform of Sweden’s Social Security system in which the defined benefit public pension system was replaced with a new system that includes mandatory individual accounts, among other features. The supplementary agreement updated and clarified several provisions of the original agreement to reflect other changes in U.S. and Swedish laws since the original agreement was signed in 1985. Social Security agreements can be terminated by one of the countries party to the agreement. If an agreement is terminated, it typically remains in effect for a 12-month period following the month in which notification is given by one of the parties. Benefits in payment at the time of termination would be retained. Individuals whose claims are in process, or those who would become entitled to benefits before the end of the 12-month period, would retain entitlement to benefits under the agreement. No agreements have been terminated to date. 66 CRS study prepared for the Senate Committee on Foreign Relations, Treaties and Other International Agreements: The Role of the United States Senate, S. Prt. 106-71, January 2001, pp. 235-238, available at http://www.senate.gov/ reference/common/faq/Treaties.htm. 67 Section 233(d) of the Social Security Act. 68 For more information, see SSA POMS, Section GN 01702.510, Disclosure of Information to Totalization Agreement Countries, available at http://policy.ssa.gov/poms.nsf/links/0201702510. Congressional Research Service 15 International Social Security Agreements Current Social Security Agreements The United States has Social Security agreements in force with 24 countries (see Table 2). In addition, the United States has a pending agreement with Mexico that was signed on June 29, 2004. As noted previously, the agreement with Mexico has not been transmitted to Congress. Reportedly, as of January 2010, the agreement remains under review at SSA (SSA has not forwarded the agreement to the State Department).69 Although the specific terms of each Social Security agreement may differ given the variation in Social Security systems in each country, the provisions of an agreement must be consistent with the Social Security Act. Section 233(c)(4) of the Social Security Act states “any such agreement may contain other provisions which are not inconsistent with the other provisions of [Title II of the Social Security Act] and which the President deems appropriate to carry out the purposes of this section.” A description and the complete text of each agreement are available on the Social Security Administration’s website. 70 In December 2007, about $28 million was paid in monthly benefits to about 146,200 recipients under U.S. Social Security agreements (see Table 3).71 69 Information provided by the Social Security Administration to the Congressional Research Service in January 2010. General information on the status of Social Security agreements is available on the SSA website at http://www.ssa.gov/ international/status.html. For more information on the Social Security agreement between the United States and Mexico, see CRS Report RL32004, Social Security Benefits for Noncitizens: Current Policy and Legislation, by (name redacted) and (name redacted). 70 This information is available at http://www.ssa.gov/international/agreement_descriptions.html. 71 In December 2007, there were about 50 million Social Security recipients. Therefore, those who received benefits under U.S. Social Security agreements represented about 0.3% of the total. SSA, Social Security Bulletin, Annual Statistical Supplement, 2008, Table 5.A1, available at http://www.socialsecurity.gov/policy/docs/statcomps/ supplement/2008/5a.pdf. Congressional Research Service 16 International Social Security Agreements Table 2. U.S. Social Security Agreements in Force Country Effective Date Australia October 1, 2002 Austria November 1, 1991 Belgium July 1, 1984 Canada August 1, 1984 Chile December 1, 2001 Czech Republic January 1, 2009 Denmark October 1, 2008 Finland November 1, 1992 France July 1, 1988 Germany December 1, 1979 Greece September 1, 1994 Ireland September 1, 1993 Italy November 1, 1978 Japan October 1, 2005 Korea, South April 1, 2001 Luxembourg November 1, 1993 Netherlands November 1, 1990 Norway July 1, 1984 Poland March 1, 2009 Portugal August 1, 1989 Spain April 1, 1988 Sweden January 1, 1987 Switzerland November 1, 1980 United Kingdom 1985/1988a Source: Social Security Administration, Status of Totalization Agreements, available at http://www.ssa.gov/ international/status.html. Note: The agreements with Austria, Belgium, Germany, Sweden and Switzerland permit an individual to receive benefits as a dependent or survivor of a worker while a resident in those countries only if the worker is a U.S. citizen or a citizen of the country of residence. a. Provisions that eliminate double taxation became effective January 1, 1985; provisions that allow persons to use work in both countries to qualify for benefits became effective January 1, 1988. Congressional Research Service 17 International Social Security Agreements Table 3. Number of Beneficiaries and Average Monthly Benefit Under U.S. Social Security Agreements, December 2007 Country Total Retired Workers Disabled Workers Wives and Husbands Widow(er)sa Children Number of Beneficiaries Overall 146,199 96,970 2,752 32,484 12,525 1,468 Australia 1,201 866 90 208 20 17 Austria 1,249 919 53 191 54 32 Belgium 752 517 6 147 68 14 Canada 47,193 29,876 1,274 9,725 5,859 459 Chile 98 77 b 17 b b Finland 271 187 16 52 11 5 France 4,498 3,206 24 824 371 73 Germany 19,926 14,785 521 3,228 1,168 224 Greece 3,371 2,311 147 598 260 55 Ireland 1,846 1,296 25 376 120 29 Italy 9,075 5,792 102 1,770 1,293 118 Japan 22,520 13,012 b 8,669 773 b Korea, S. 432 307 b 119 6 b Luxembourg 58 35 7 10 b b Netherlands 2,676 1,878 6 587 177 28 Norway 3,907 2,546 76 816 432 37 Portugal 2,009 1,308 111 318 238 34 Spain 2,531 1,592 72 516 299 52 Sweden 2,197 1,623 29 422 94 29 Switzerland 4,168 3,006 43 842 229 48 U.K. 16,221 11,831 149 3,049 1,046 146 Average Monthly Benefit (U.S. dollars) Overall $193.20 $227.54 $431.37 $84.79 $165.36 $114.49 Australia 207.73 214.39 444.33 85.57 242.30 69.35 Austria 208.22 237.64 293.88 70.93 165.14 113.50 Belgium 192.58 226.05 543.50 77.86 174.11 100.57 Canada 169.04 196.56 396.18 71.87 145.03 112.61 Chile 202.10 221.85 b 88.94 b b Finland 196.69 207.10 493.69 79.53 170.45 133.00 France 207.32 243.50 489.98 81.61 175.78 104.51 Germany 223.65 253.74 455.77 73.56 175.04 114.62 Greece 174.63 188.08 413.53 74.71 164.33 105.95 Congressional Research Service 18 International Social Security Agreements Country Total Retired Workers Disabled Workers Wives and Husbands Widow(er)sa Children Ireland 209.35 239.50 647.46 83.60 210.29 110.69 Italy 180.43 214.49 529.47 74.37 151.86 110.70 Japan 193.70 246.41 b 110.12 247.16 b Korea, S. 203.54 239.11 b 110.60 226.57 b Luxembourg 255.12 270.69 441.86 81.50 b b Netherlands 186.80 218.39 965.83 79.26 189.81 136.43 Norway 186.70 211.61 432.33 81.97 198.78 137.49 Portugal 194.07 203.04 486.24 75.91 174.75 135.74 Spain 174.56 200.47 426.10 73.09 160.79 119.25 Sweden 170.95 190.68 412.72 77.92 184.76 133.83 Switzerland 181.61 209.16 463.21 75.55 174.70 96.96 U.K. 239.19 281.83 510.31 83.40 190.29 110.92 Source: SSA, Social Security Bulletin, Annual Statistical Supplement, 2008, Table 5.M1, available at https://www.socialsecurity.gov/policy/docs/statcomps/supplement/2008/5m.pdf. Note: Three countries with which the United States has an agreement are not shown in this table (Czech Republic, Denmark and Poland) because these agreements went into effect after 2007. a. Number includes nondisabled and disabled widow(er)s, mothers and fathers, and parents. A mother’s/father’s benefit is a monthly benefit payable to a widow/widower or surviving divorced mother/father if (1) the deceased worker on whose account the benefit is paid was either fully or currently insured at the time of death and (2) an entitled child of the worker in her/his care is under age 16 or is disabled. A parent’s benefit is a monthly benefit payable to a dependent parent aged 62 or older of a deceased fully insured worker. b. Number not shown to avoid disclosure of information regarding particular individuals. Totalization Benefits Benefit Application Process Individuals living in the United States may apply for totalization benefits72 at any one of the approximately 1,300 SSA field offices in the United States.73 Individuals living outside the United States generally are required to apply for totalization benefits at a Foreign Service Post (FSP) located in a U.S. embassy or consulate, or at the social security agency in their home country.74 Initial processing of applications for totalization benefits is handled by SSA field office staff or Foreign Service Nationals in the FSP. Among other tasks, these individuals are responsible for reviewing supporting documents, such as birth and marriage certificates. After initial processing, 72 Totalization benefits are Social Security benefits based on combined (totalized) U.S. and foreign work credits. The benefit application process is described in detail in the 2005 GAO Report. 74 Claims filed at a foreign social security agency generally are referred to a Foreign Service Post, which deals directly with the claimant. 73 Congressional Research Service 19 International Social Security Agreements application packages are sent to SSA’s Office of International Operations (OIO), which is responsible for final adjudication of claims for U.S. totalization benefits.75 For claims filed at an SSA field office (rather than a FSP), OIO requests the foreign coverage record from the foreign social security agency.76 OIO reviews the supporting documents (such as evidence of identity and citizenship), develops additional evidence if needed, and makes a final decision on the claim. 77 If the claim is for U.S. totalization disability benefits, OIO will make the determination of disability, however, Disability Determination Services may be asked to develop the medical evidence in such cases. 78 Although agreements allow for some variation in the application process for totalization benefits, 79 each of the offices involved in the process (SSA field offices, SSA’s Office of International Operations, and FSPs) maintain certain responsibilities. For individuals applying in the United States, SSA field offices are responsible for taking claims for U.S. totalization benefits, as well as claims for regular or totalization benefits from foreign countries. OIO is responsible for liaison activities with foreign countries, which include requesting foreign coverage records and providing U.S. coverage records or other information to foreign countries. In addition, OIO is responsible for final adjudication of a claim for U.S. totalization benefits. For individuals applying outside the United States, the FSPs, like the SSA field offices, are responsible for the development of benefit claims. The specific procedures vary depending on the terms of each agreement and whether the claim is filed initially at the FSP or the foreign social security agency. 80 Computation of Benefits Workers who meet the minimum coverage requirement for a U.S. Social Security benefit based on combined U.S. and foreign work credits can receive a totalization benefit (assuming all other eligibility requirements are met). A totalization benefit is prorated to reflect the number of years the worker was covered by the U.S. system. 75 SSA POMS, Section GN 01702.001, SSA’s Role in Processing Claims Under Totalization Agreements—General, available at http://policy.ssa.gov/poms.nsf/links/0201702001. 76 If a claim is filed at a Foreign Service Post, the foreign coverage record is requested before the application is forwarded to OIO. 77 2005 GAO Report, p. 8. 78 If the claim is concurrent with a claim for Supplemental Security Income, a means-tested benefit administered by the Social Security Administration, Disability Determination Services will make the determination of disability. For more information on the routing of claims for U.S. totalization disability benefits and the development of medical evidence in such cases, see SSA POMS, Section GN 01702.400 - Section GN 01702.420. For more information on SSA’s disability programs, see CRS Report RL32279, Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), by Scott Szymendera. 79 Under the agreement with Canada, for example, designated border field offices are responsible for liaison activities and final adjudication of claims for U.S. Social Security benefits, unless the claims are received by OIO directly from claimants or from other field offices. 80 SSA POMS, Section GN 01702.001, SSA’s Role in Processing Claims Under Totalization Agreements—General, available at http://policy.ssa.gov/poms.nsf/links/0201702001. For more detailed information, see SSA POMS, Section GN 01702.000, DO Development and Routing of Totalization Claims, available at http://policy.ssa.gov/poms.nsf/links/0201702000. Congressional Research Service 20 International Social Security Agreements For regular (non-totalization) benefits, the worker’s Primary Insurance Amount (PIA)81 is computed by applying the Social Security benefit formula to the worker’s Average Indexed Monthly Earnings (AIME). The AIME is computed by dividing the worker’s 35 highest years of covered earnings, adjusted for the growth in average wages over time, by the computation period (35 years or 420 months). If a worker has fewer than 35 years of covered earnings, years of zero earnings are counted in the computation of the AIME, resulting in a lower initial monthly benefit amount. For workers who reach the age of 62, become disabled, or die in 2010, the benefit formula that is applied to the worker’s AIME to compute his or her PIA is: 90% of the first $761 of AIME, plus 32% of AIME over $761 through $4,586, plus 15% of AIME over $4,586.82 As with regular benefits, the amount of a U.S. totalization benefit depends on the duration of the worker’s coverage under the U.S. system and his or her level of earnings. The process for computing a totalization benefit, however, differs from the regular benefit computation process according to the following basic steps: (1) a theoretical full-career earnings record is created based on the worker’s actual earnings under the U.S. system relative to the average earnings of all covered workers; (2) a theoretical PIA is computed based on the theoretical earnings record; (3) the theoretical PIA is multiplied by a pro rata fraction to determine the pro rata PIA;83 and (4) the monthly benefit amount is established based on the pro rata PIA (i.e., any adjustments that apply, such as a reduction for early retirement, are made to the pro rata PIA to determine the monthly benefit amount).84 Stated simply, a theoretical benefit is computed as though the individual had worked a full career (a coverage lifetime) 85 under the U.S. system at the same level of earnings he or she had during actual periods of covered employment in the United States. The theoretical benefit is prorated to reflect the proportion of the worker’s coverage lifetime completed under the U.S. system. 81 The worker’s PIA is the basic monthly benefit amount before any adjustments for early or delayed retirement. For a detailed explanation of the Social Security benefit computation, see Appendix A to this report. 83 For example, in the case of a retirement benefit, assume that the worker’s theoretical PIA is $1,000 and that he or she has seven years of work (or 28 quarters of coverage) under the U.S. system. The number of benefit computation years is 35 (or 140 calendar quarters), so the pro rata fraction applied to the theoretical PIA is 0.20 (i.e., 28 quarters of coverage divided by 140 calendar quarters). The pro rata PIA is $200 (i.e., $1,000 x 0.20). 84 For information on the detailed procedures involved in each step, see SSA POMS, Section GN 01701.200, Totalization Computations, available at http://policy.ssa.gov/poms.nsf/links/0201701200. In addition, a detailed description of the totalization benefit computation procedure is available in SSA regulations (20 C.F.R. § 404.1918); totalization benefits are computed in this manner unless otherwise specified in an agreement. 85 A coverage lifetime is defined in the regulations as the worker’s benefit computation years (the number of years used to determine the worker’s average indexed monthly earnings) under the regular benefit computation process (for example, 35 years in the case of a retirement benefit). For more information on benefit computation years, see Appendix A to this report. 82 Congressional Research Service 21 International Social Security Agreements By definition, totalization beneficiaries have fewer than 40 quarters (10 years) of Social Securitycovered employment in the United States.86 Because totalization benefits are prorated to reflect the worker’s period of coverage under the U.S. system, totalization benefits on average are lower than regular benefits. For example, in December 2007, the average monthly benefit under U.S. totalization agreements for retired workers was $227.54 (see Table 3). Among regular beneficiaries, the average monthly benefit for retired workers was $1,079.87 Based on combined (totalized) work credits, a worker may qualify for Social Security benefits under one or both country’s systems, depending on the eligibility requirements in each country. Totalization benefits are paid independently by each country (i.e., a U.S. Social Security benefit payable under a totalization agreement is paid separately from a benefit payable under a foreign system).88 In addition, a U.S. totalization benefit may be converted to a regular benefit if the beneficiary continues to work in Social Security-covered employment in the United States and obtains enough work credits to become fully insured under the U.S. system without taking into account foreign work credits.89 Monitoring of Beneficiaries The Social Security Administration monitors the continuing eligibility of Social Security beneficiaries (totalized and regular beneficiaries) living in the United States and abroad. With respect to beneficiaries living in the United States, SSA relies on data matching with states and federal agencies to identify circumstances that could affect an individual’s continuing eligibility for benefits or the proper benefit amount (such as changes in work activity) and unreported deaths. With respect to beneficiaries living outside the United States (U.S. citizens and noncitizens), SSA relies on personal questionnaires (Foreign Enforcement Questionnaires) and periodic validation surveys (i.e., visits to beneficiaries’ homes) to verify an individual’s continuing eligibility for benefits. SSA mails Foreign Enforcement Questionnaires (FEQs) to beneficiaries who live outside the United States on an annual or biennial basis, depending on factors such as the beneficiary’s country of residence, age, and whether he or she has a representative payee. 90 For example, beneficiaries with a representative payee and those who are aged 97 or older are sent a questionnaire each year. Generally, beneficiaries who receive their own benefits (i.e., those who do not have a representative payee) are sent a questionnaire every other year, unless they live in certain countries to which questionnaires are sent annually.91 The completed questionnaire must 86 A worker who has 40 or more quarters of coverage (10 or more years of covered employment) in the United States would qualify for a regular Social Security benefit (assuming all other eligibility requirements are met). 87 Social Security Administration, 2009 Social Security/SSI/Medicare Information, May 14, 2009, available at http://www.socialsecurity.gov/legislation/2009%20factsheet.pdf. 88 SSA POMS, Section GN 01701.100, Overview of Totalization Benefits, available at http://policy.ssa.gov/poms.nsf/links/0201701100. 89 SSA POMS, Section GN 01703.270, Processing Cases Where Insured Status is Acquired Based on U.S. Coverage Only, available at http://policy.ssa.gov/poms.nsf/links/0201703270. 90 A representative payee is a person, agency, organization or institution that is selected by SSA to manage the funds of a beneficiary who is determined to be unable to manage his or her own funds. 91 For more information on FEQs, including the mailing schedule for various countries, see SSA POMS, Section RS 02655.005, Preparation and Mailing Schedule—Foreign Enforcement Program (FEP), available at http://policy.ssa.gov/poms.nsf/links/0302655005. Congressional Research Service 22 International Social Security Agreements be returned to SSA within 60 days. The questionnaires are intended to provide SSA with information needed to verify the individual’s continuing eligibility for benefits and the proper benefit amount (for example, an individual’s benefit payments could be affected by changes in work activity or marital status as well as improvement of a disabling condition). The 2005 GAO Report indicated that SSA relies on foreign beneficiaries to accurately self-report the information because the agency does not conduct independent verification of the responses. Among other reasons, GAO indicated that SSA does not have the capability to verify information for foreign beneficiaries using computer database matches (as it does for domestic beneficiaries) and is unable to independently verify the death of foreign beneficiaries. GAO also pointed out, however, that SSA is developing pilot computer match projects with Italy and Germany to establish an independent, third-party mechanism for verifying beneficiaries’ continuing eligibility for benefits. 92 With respect to SSA’s computer match projects, SSA noted in October 2009 that since 2005: SSA has initiated data matching projects under current totalization agreements to support and expand its stewardship initiatives. SSA has begun automated death data exchanges with a number of totalization partner countries designed to identify deceased beneficiaries and avoid overpayment of benefits. Some of the results of these efforts are as follows: A one-way death data exchange with Germany resulted in overpayment savings of $1,792,546 (U.S. dollars). Since February 2009, SSA has implemented recurring death data exchanges with Australia. These data exchanges have resulted in overpayment savings of $128,878.70 (U.S. dollars). In 2009, SSA is working to expand the death data exchange to five additional totalization partner countries. SSA will pilot two additional automated death data exchanges before the end of 2009. SSA intends to conduct automated death data exchanges with all totalization agreement partner countries.93 In addition, SSA conducts periodic validation surveys in foreign countries (including countries with which the United States has totalization agreements) where Social Security beneficiaries live. SSA staff (from the Office of Central Operations) and foreign service staff visit beneficiaries’ homes to administer the surveys for the purpose of verifying the identity and continuing eligibility of beneficiaries. SSA conducts validation surveys in about three countries each year. The frequency of visits varies by country, depending on factors such as results of past surveys and evidence of data reliability concerns. For example, some countries may be surveyed every five years (such as Portugal) while others may be surveyed every 30 years (such as Sweden). Although validation surveys have helped SSA identify unreported deaths and overpayments, the 2005 GAO Report indicated that, according to SSA officials, the validation surveys conducted since 2000 generally verify only the identity and existence of beneficiaries. 92 93 2005 GAO Report, p. 14. Information provided by the Social Security Administration to the Congressional Research Service in October 2009. Congressional Research Service 23 International Social Security Agreements They do not verify work activity or other information that could affect an individual’s benefit payments.94 Effects of Agreements on Selected Provisions of the Social Security Act Waiver of the Alien Nonpayment Provision Section 202(y) of the Social Security Act requires noncitizens in the United States to be lawfully present to receive benefits.95 If a noncitizen is entitled to benefits, but does not meet the lawful presence requirement, his or her benefits are suspended. In such cases, a noncitizen may receive benefits (which may include benefits based on work performed in the United States without authorization)96 while residing outside the United States if he or she meets one of the exceptions to the alien nonpayment provision under Section 202(t) of the Social Security Act (see Table 4). Under the alien nonpayment provision, a noncitizen’s benefits are suspended if he or she remains outside the United States97 for more than six consecutive months,98 unless one of several broad exceptions is met. 99 For example, an alien may receive benefits outside the United States if he or she is a citizen of a country that has a social insurance or pension system that pays benefits to eligible U.S. citizens residing outside that country100 (see Appendix B), or if he or she is a resident of a country with which the United States has a totalization agreement (see Table 2). If an alien does not meet one of the exceptions to the alien nonpayment provision, his or her benefits are suspended beginning with the seventh month of absence and are not resumed until he or she returns to the United States lawfully for a full calendar month. In addition, to receive payments outside the United States, alien dependents and survivors must have lived in the United States previously for at least five years (lawfully or unlawfully), and the 94 2005 GAO Report, p. 13. For the definition of “lawfully present” see Appendix C in CRS Report RL32004, Social Security Benefits for Noncitizens: Current Policy and Legislation, by (name redacted) and (name redacted). The lawful presence requirement was added by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (P.L. 104-208). In addition, see the section of this report titled “Legislative History of Payment Rules for Noncitizens.” 96 The Social Security Protection Act of 2004 (P.L. 108-203) requires an alien whose application for benefits is based on a Social Security Number (SSN) assigned on or after January 1, 2004, to have work authorization at the time an SSN is assigned, or at some later time, to gain insured status under the Social Security program. An alien whose benefit application is based on an SSN assigned before January 1, 2004, may count all covered earnings toward insured status, regardless of work authorization. For more information, see CRS Report RL32004, Social Security Benefits for Noncitizens: Current Policy and Legislation, by (name redacted) and (name redacted). 97 “Outside the United States” means outside the territorial boundaries of the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. 98 The 6-month period of absence begins with the first full calendar month following the period in which the individual has been outside the United States for more than 30 consecutive days. If the individual returns to the United States for any part of a day during the 30-day period, the 30-day period starts over. 99 For information on the alien nonpayment provision, see SSA POMS, Section RS 02610.000, Alien Non-Payment Provisions, available at http://policy.ssa.gov/poms.nsf/links/0302610000. 100 The criteria used to evaluate the social insurance or pension system of a foreign country to determine whether the exception to the alien nonpayment provision applies is available in SSA regulations (20 C.F.R. § 404.463). 95 Congressional Research Service 24 International Social Security Agreements family relationship to the worker must have existed during that time (see Table 5). The law provides several broad exceptions to the five-year U.S. residency requirement for alien dependents and survivors (see Table 6). For example, an alien dependent or survivor is exempt from the U.S. residency requirement if he or she is a citizen of a treaty obligation country (i.e., if nonpayment of benefits would be contrary to a treaty between the United States and the individual’s country of citizenship; see Appendix B), or if he or she is a citizen or resident of a country with which the United States has a totalization agreement (see Table 2). Tables 4 through 6 summarize the complex rules and exceptions that apply to the payment of benefits to noncitizens living outside the United States (payments to workers and their family members). As shown in the tables, assuming all other eligibility requirements are met, the existence of a totalization agreement between the United States and a foreign country (1) allows workers and their family members who are residents of the foreign country to receive benefits outside the United States indefinitely (i.e., the alien nonpayment provision is waived)101 and (2) may allow family members (dependents and survivors of the worker) who are citizens or residents of the foreign country to receive benefits outside the United States without having to meet the U.S. residency requirement (i.e., the five-year U.S. residency requirement that applies to alien dependents and survivors outside the United States is waived).102 These advantages of a totalization agreement are not limited to workers (and their family members) who qualify for U.S. Social Security benefits based on work performed in the United States under a formal arrangement between the United States and a foreign country under the terms of a totalization agreement. Workers (and their family members) who qualify for U.S. Social Security benefits (which may include benefits based on work performed in the United States without authorization) would be exempt from the payment restrictions that apply to noncitizens residing outside the United States (including the five-year U.S. residency requirement for dependents and survivors). This means that, depending on the specific agreement and on whether SSA has determined that the other country reciprocates under the provisions of Section 202(t) of the Social Security Act, dependents and survivors of noncitizen workers who reside outside the United States and who may never have resided in the United States could collect U.S. Social Security benefits on the worker’s record. In addition, citizens of third-party countries (countries other than the United States or a totalization agreement country) are exempt from these payment restrictions (including the five-year U.S. residency requirement for dependents and survivors) if they reside in a country with which the United States has a totalization agreement. In addition to the alien nonpayment provision, other restrictions apply to the payment of benefits to individuals residing outside the United States. U.S. Treasury Department regulations and Social Security restrictions prohibit payments from being sent to individuals residing in Cuba, North Korea, Cambodia, Vietnam, or areas that were in the former Soviet Union (excluding Armenia, Estonia, Latvia, Lithuania and Russia); in countries with Social Security restrictions in place, exceptions to the general nonpayment rule can be made for certain eligible beneficiaries.103 101 Under the agreement with Australia, the United States pays Social Security benefits to an Australian citizen who resides in the United States, Australia, or a third country with which the United States has a totalization agreement. If an Australian citizen resides elsewhere (i.e., in a non-totalization country), he or she is subject to the alien nonpayment provision. The agreement with Denmark contains a similar provision. 102 Under the agreement with Australia, Australian dependents and survivors who do not reside in the United States, Australia, or a third country with which the United States has a totalization agreement must meet the five-year U.S. residency requirement to receive payments abroad. The agreement with Denmark contains a similar provision. 103 Social Security Administration, Your Payments While You Are Outside The United States, SSA Publication No. 05(continued...) Congressional Research Service 25 International Social Security Agreements The Social Security Act also prohibits the payment of benefits to most individuals who are removed from the United States (i.e., deported).104 Table 4. Exceptions to the Alien Nonpayment Provision for Workers and Dependents/Survivors An alien’s benefits are suspended if he or she is outside the United States for more than six consecutive months, unless one of the following exceptions is met: • the individual is a citizen of a country that has a social insurance or pension system under which benefits are paid to eligible U.S. citizens who reside outside that country (see Appendix B for a list of countries) • the individual is entitled to benefits on the earnings record of a worker who lived in the United States for at least 10 years or earned at least 40 quarters of coverage under the U.S. Social Security system • the individual is entitled to benefits on the earnings record of a worker who had railroad employment covered by Social Security • the individual is outside the United States while in the active military or naval service of the United States • the individual is entitled to benefits on the earnings record of a worker who died while in the U.S. military service or as a result of a service-connected disease or injury • the nonpayment of benefits would be contrary to a treaty obligation of the United States in effect as of August 1, 1956 (i.e., the individual is a citizen of a treaty obligation country; see Appendix B for a list of countries) • the individual is a resident of a country with which the United States has a totalization agreementa (see Table 2 for a list of countries) • the individual was eligible for Social Security benefits as of December 1956 Source: Section 202(t) of the Social Security Act. a. Under the agreement with Australia, the United States pays Social Security benefits to an Australian citizen who resides in the United States, Australia, or a third country with which the United States has a totalization agreement. If an Australian citizen resides elsewhere, he or she is subject to the alien nonpayment provision. The agreement with Denmark contains a similar provision. (...continued) 10137, June 2009, available at http://www.ssa.gov/pubs/10137.html#countries; and 20 C.F.R. § 404.460 based on the Electronic Code of Federal Regulations with data current as of June 1, 2009, available at http://ecfr.gpoaccess.gov/. When a beneficiary who is a U.S. citizen or national leaves a country to which payments are restricted due to U.S. Treasury Department regulations and goes to a country where payments can be sent, receipt of benefits may resume and accrued benefits are paid. In this circumstance, accrued benefits are not paid to noncitizens. When a beneficiary, U.S. citizen or noncitizen, leaves a country to which payments are restricted due to SSA restrictions, receipt of benefits may resume and accrued benefits are paid as long as a beneficiary is eligible for the payments and goes to a country where payments can be sent. 104 One exception would be aliens who are removed on status violations (i.e., removed from the United States because they are illegally present). Congressional Research Service 26 International Social Security Agreements Table 5. Additional Residency Requirement for Alien Dependents and Survivors Outside the United States In addition to the requirements shown in Table 4, to receive payments outside the United States, an alien dependent or survivor must have lived in the United States for at least five years (lawfully or unlawfully) under one of the following circumstances: A spouse, divorced spouse, widow(er), surviving divorced spouse, or surviving divorced mother or father: must have resided in the United States for at least five years and the spousal relationship to the worker must have existed during that time A child: must have resided in the United States for at least five years as the child of the worker; or the worker and the child’s other parent (if any) each must have either resided in the United States for at least five years or died while residing in the United States An adopted child: must have been adopted in the United States; and lived in the United States with the worker; and received at least half of his or her support from the worker in the year before the worker’s entitlement or death Source: Section 202(t) of the Social Security Act. Note: The five-year period of residence in the United States does not have to be continuous (20 C.F.R. § 404.460). Table 6. Exceptions to the Additional Residency Requirement for Alien Dependents and Survivors Outside the United States An alien dependent or survivor living outside the United States is not subject to the five-year U.S. residency requirement if one of the following exceptions is met: • the individual was eligible for Social Security benefits before January 1, 1985 • the individual is entitled to benefits on the earnings record of a worker who died while in the U.S. military service or as a result of a service-connected disease or injury • the nonpayment of benefits would be contrary to a treaty obligation of the United States in effect as of August 1, 1956 (i.e., the individual is a citizen of a treaty obligation country; see Appendix B for a list of countries) • the individual is a citizen or resident of a country with which the United States has a totalization agreementa (see Table 2 for a list of countries) Source: Section 202(t) of the Social Security Act. a. Under the agreement with Australia, Australian dependents and survivors who do not reside in the United States, Australia, or a third country with which the United States has a totalization agreement must meet the five-year U.S. residency requirement to receive payments abroad. The agreement with Denmark contains a similar provision. Legislative History of Payment Rules for Noncitizens When the Social Security program began paying benefits in 1940, there were no restrictions on benefit payments to noncitizens. In 1956, amid concerns that noncitizens were working in the United States for relatively short periods and returning to their native countries where they and their family members would collect benefits for many years, Congress enacted restrictions on benefits for alien workers living abroad (restrictions did not apply to alien dependents and survivors). The Social Security Amendments of 1956 (P.L. 84-880) required noncitizens to reside Congressional Research Service 27 International Social Security Agreements in the United States to receive benefits and, under the alien nonpayment provision, suspended benefits if the recipient remained outside the United States for more than six consecutive months, with broad exceptions (see Table 4). In 1983, Congress placed restrictions on benefit payments to alien dependents and survivors living abroad. The Social Security Amendments of 1983 (P.L. 98-21) made alien dependents and survivors outside the United States subject to the same payment restrictions as alien workers. P.L. 98-21 further required that, to receive benefits outside the United States, alien dependents and survivors (or their parents, in the case of a child’s benefit) must have lived in the United States previously for at least five years (see Table 5), with broad exceptions (see Table 6). Several factors led to the enactment of tighter restrictions on benefit payments to alien dependents and survivors living abroad in 1983, including the large number of dependents that were being added to the benefit rolls (in some cases under fraudulent circumstances) after workers had returned to their native country and become entitled to benefits, and difficulties associated with monitoring the continuing eligibility of recipients living abroad. At the time, GAO estimated that, of the 164,000 dependents living abroad in 1981, 56,000 were added to the benefit rolls after the worker became entitled to benefits. Of that number, an estimated 51,000 (or 91%) were noncitizens. 105 Two years earlier, the Commissioner of Social Security stated that SSA investigators had found evidence that some recipients living abroad were faking marriages and adoptions and failing to report deaths in order to “cheat the system.” At the time, the Commissioner stated that such problems were particularly acute in Greece, Italy, Mexico and the Philippines where large numbers of beneficiaries were residing. He stated further that, in some countries, “there is a kind of industry built up of so-called claims-fixers who, for a percentage of the benefit, will work to ensure that somebody gets the maximum benefit they can possibly get out of the system.”106 In 1996, Congress enacted tighter restrictions on the payment of Social Security benefits to aliens residing in the United States. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)107 prohibited the payment of Social Security benefits to aliens in the United States who are not lawfully present, unless nonpayment would be contrary to a totalization agreement or Section 202(t) of the Social Security Act (the alien nonpayment provision). This provision became effective for applications filed on or after September 1, 1996. Subsequently, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996108 added Section 202(y) to the Social Security Act. Section 202(y) of the Social Security Act, which became effective for applications filed on or after December 1, 1996, states: Notwithstanding any other provision of law, no monthly benefit under [Title II of the Social Security Act] shall be payable to any alien in the United States for any month during which such alien is not lawfully present in the United States as determined by the Attorney General. 105 U.S. General Accounting Office, Issues Concerning Social Security Benefits Paid to Aliens, GAO/HRD-83-32, March 24, 1983, available at http://archive.gao.gov/d40t12/120895.pdf. 106 CRS Issue Brief IB82001, Social Security: Alien Beneficiaries, by David S. Koitz. This out-of-print document is available from the author of this report upon request. 107 Section 401(b)(2) of P.L. 104-193. 108 Division C of P.L. 104-208. Congressional Research Service 28 International Social Security Agreements Exemption from the Windfall Elimination Provision Generally, under a provision of the Social Security Act known as the windfall elimination provision (WEP), individuals who receive a pension from work that was not covered by the U.S. Social Security system (a noncovered pension) are subject to a reduction in Social Security retirement and disability benefits if they have fewer than 30 years of Social Security coverage.109 Under the Social Security Independence and Program Improvements Act of 1994 (P.L. 103-296), the WEP does not apply to U.S. totalization benefits payable beginning January 1995.110 In addition, a foreign pension based on a totalization agreement with the United States does not trigger the WEP in the computation of a regular (non-totalization) U.S. benefit for benefits payable beginning January 1995 (i.e., a foreign pension may trigger the WEP only if the worker is insured based on U.S. coverage alone and the foreign pension is not based on a totalization agreement with the United States).111 Application of a Work Test Social Security beneficiaries who continue to work are subject to a limitation on earnings until they reach the full retirement age (FRA).112 There are two types of work tests: the Retirement Earnings Test and the Foreign Work Test. The Retirement Earnings Test (RET) applies to work performed by beneficiaries in the United States and to work performed by beneficiaries outside the United States if the work is covered by the U.S. Social Security program. Under the RET, Social Security benefits are subject to a withholding of $1 for every $2 of earnings above $14,160 for beneficiaries who are below the FRA and will not reach the FRA in 2010. For beneficiaries who will reach the FRA in 2010, Social Security benefits are subject to a withholding of $1 for every $3 of earnings above $37,680.113 The Foreign Work Test applies to work performed by beneficiaries outside the United States if the work is not covered by the U.S. Social Security program. Under the Foreign Work Test, Social Security benefits are withheld for each month a beneficiary below the FRA works more than 45 hours outside the United States in a job that is not subject to U.S. Social Security taxes (regardless of the amount of earnings).114 109 Examples of a noncovered pension include a state or local government pension based on noncovered employment or a foreign pension based on noncovered employment. Under the WEP, the worker’s Social Security benefit is computed using the WEP PIA formula rather than the regular benefit formula. For more information, see CRS Report 98-35, Social Security: The Windfall Elimination Provision (WEP), by (name redacted). 110 In some cases, the WEP may apply to U.S. totalization benefits payable for months before January 1995. For more information, see SSA POMS, Sections GN 01701.300 - GN 01701.320. 111 For more information, see SSA POMS, Section GN 01701.310, Foreign Pensions Based on a Totalization Agreement with the United States—Effect on the Windfall Elimination Provision (WEP), available at http://policy.ssa.gov/poms.nsf/links/0201701310. 112 The FRA is the age at which unreduced (or full) Social Security retirement benefits are payable. The FRA is increasing gradually from age 65 to age 67 (it will reach the age of 67 for persons born in 1960 or later). For more information, see The Full Retirement Age is Increasing at http://www.socialsecurity.gov/pubs/ageincrease.htm. 113 The RET no longer applies beginning with the month the beneficiary reaches the FRA. The earnings thresholds ($14,160 and $37,680 in 2010) are indexed annually to average wage growth (if a Social Security cost-of-living adjustment is payable). For more information on the RET, see Exempt Amounts Under the Earnings Test at https://www.socialsecurity.gov/OACT/COLA/rtea.html. 114 Social Security Administration, Your Payments While You Are Outside The United States, SSA Publication No. 0510137, June 2009, available at http://www.ssa.gov/pubs/10137.html#countries. Congressional Research Service 29 International Social Security Agreements The Social Security Act extends U.S. Social Security coverage to U.S. citizens and residents working abroad. However, totalization agreements modify the rules of coverage allowing work performed by U.S. citizens and residents in a foreign country to be covered under either the U.S. system or the foreign system, depending on the terms of the agreement. Therefore, totalization agreements affect whether a Social Security beneficiary working outside the United States is subject to the Retirement Earnings Test or the Foreign Work Test.115 Qualification for Medicare Hospital Insurance Medicare is a federal health insurance program for persons aged 65 or older, under the age of 65 with certain disabilities, and any age with End Stage Renal Disease (ESRD).116 Social Security beneficiaries are eligible for Medicare at the age of 65. Social Security disability beneficiaries are eligible for Medicare at any age after they have been receiving disability benefits for 24 months. ESRD beneficiaries are eligible if they have permanent kidney failure requiring dialysis or a kidney transplant.117 Totalization agreements do not extend Medicare coverage to totalization beneficiaries. Specifically, Section 233(c)(3) of the Social Security Act prohibits totalization beneficiaries from entitlement to Medicare premium-free Hospital Insurance (HI) benefits.118 However, a person who is entitled to U.S. totalization benefits may qualify for Medicare premium-free HI, but he or she must meet the requirements independently of an agreement.119 For example, a totalization beneficiary may be entitled to Medicare premium-free HI if he or she is also entitled to regular benefits on a Social Security Number (SSN) that is different from the SSN on which totalization benefits are paid. 120 In addition, a totalization beneficiary may meet the requirements for a regular benefit121 that is denied or terminated because the regular benefit would be lower than the totalization benefit. 122 In this case, the beneficiary may maintain his or her status as a totalization beneficiary to receive the higher benefit amount and may be entitled to Medicare premium-free HI. A totalization beneficiary who does not meet the requirements for premium-free Medicare HI may be able to get Medicare HI by paying a monthly premium. 123 115 SSA POMS, Section GN 01702.515, Applicability of Annual Earnings Test/Foreign Work Test, available at http://policy.ssa.gov/poms.nsf/links/0201702515. 116 U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), CMS Publication No. 10116, revised August 2008 (hereinafter referred to as CMS Publication No. 10116, August 2008). 117 CMS Publication No. 10116, August 2008. 118 Medicare HI pays for hospital bills and certain follow-up care. There is no monthly premium for Medicare HI. Medicare benefits are available only in the United States (i.e., Medicare generally does not cover health services outside the United States). 119 SSA POMS, Section GN 01701.140 (Entitlement to Hospital Insurance (HI) in Totalization Claims), available at http://policy.ssa.gov/poms.nsf/links/0201701140. 120 For example, a beneficiary may be dually entitled to a totalization benefit based on his or her own work record (a retirement or disability benefit) and a regular benefit based on the work record of a spouse (a spousal benefit). 121 A totalization beneficiary may continue to work in Social Security-covered employment and obtain enough work credits to become fully insured under the U.S. system without taking into account foreign work credits. In this case, a totalization benefit may be converted to a regular benefit. 122 While regular benefits generally are higher than totalization benefits, there could be a circumstance in which a regular benefit that is subject to reduction under the windfall elimination provision (WEP) would be lower than a totalization benefit that is exempt from the WEP. See related discussion in the section of this report titled Exemption from the Windfall Elimination Provision. 123 Section 1818 of the Social Security Act; and SSA POMS, Section HI 00801.131, Eligibility for Premium-HI, available at http://policy.ssa.gov/poms.nsf/links/0600801131. Congressional Research Service 30 International Social Security Agreements Issues and Concerns Many observers agree that international Social Security agreements can be beneficial for U.S. companies and workers. However, some policymakers have expressed concerns about several aspects of the agreements. Among these concerns are (1) SSA’s policies and procedures for assessing the integrity and reliability of foreign data and evidentiary documents to identify potential risks when entering into an agreement; (2) SSA’s ability to verify individuals’ initial eligibility for benefits under an agreement and to monitor the continuing eligibility of beneficiaries outside the United States; and (3) the role of Congress with respect to the approval process for potential agreements, as well as the need for enhanced reporting requirements and periodic evaluation of agreements once they are in force. 124 Assessing Risks Associated with Future Agreements In 2005, GAO reported concerns regarding the potential exposure of the Social Security trust funds to improper payments resulting from inaccurate or falsified foreign data and documentation (such as birth, death, marriage and divorce records). GAO reported that “Historically, SSA has conducted only limited reviews, focusing primarily on broad policy issues and systems compatibility, rather than examining the integrity and reliability of earnings data and evidentiary documents.”125 However, GAO also reported that SSA was in the process of developing new initiatives to identify risks associated with totalization agreements. GAO further stated: SSA officials told us that the agency has developed several new initiatives to identify risks associated with totalization agreements. SSA has developed a standardized questionnaire to help the agency identify and assess the reliability of earnings data in countries under consideration for future totalization agreements. In addition, SSA has undertaken two initiatives aimed at determining which countries may be suitable for future agreements. One initiative involves conducting discussions with other U.S. government agencies such as the Department of Commerce to better assess which countries may be suitable for future agreements. SSA is also developing a matrix to compare relevant factors, including data accessibility across countries where [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR41009. Public record. Not legal advice.