Vous êtes sur la page 1sur 15

U.S.

Social Security Totalization Agreements
and the proposed U.S.-Danish Agreement
Frequently Asked Questions (FAQs)
1)

What is a totalization agreement? Why are these
agreements desirable?
Totalization agreements are a means of protecting the benefit rights of
workers who divide their working career between two or more countries.
They also help to eliminate situations in which workers or employers are
required to pay Social Security taxes to two countries on the same earnings.
In addition, totalization agreements remove legal obstacles that prevent a
person who has earned benefits in one country from receiving those benefits
while residing in the other country.

The United States currently has totalization agreements in force with 21
countries: Australia, Austria, Belgium, Canada, Chile, Finland, France,
Germany, Greece, Ireland, Italy, Japan, Korea (South), Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the
United Kingdom.

Totalization agreements allow for more equitable treatment of workers and
employers on a reciprocal basis. The prospect of double Social Security
taxation and serious gaps in a worker's Social Security record can act as
disincentives for employers to assign workers where they are needed most

The Social Security agreement with Denmark would remove these obstacles.Page 2 and for employees to accept such assignments. .

• Currently.-Danish agreement) could be exempted from Danish Social Security tax. the agreements with Denmark would eliminate this dual Social Security taxation by assigning a worker's Social Security coverage to just one country.S. U.S. citizens who are employed in Denmark for even very short periods by U.S.Page 3 2) What would be the benefits of the totalization agreement with Denmark? Benefits for U.S.S. Like earlier U. along with their employers. Social Security system. a worker from one country who works in the other country may be required to pay Social Security taxes to both countries on the same earnings.S.S. employees who are sent from the United States to work in Denmark temporarily (5 years or less is considered temporary under the proposed U. Under the agreement. • Employees who are working in a country with which we have a totalization agreement and in which they were hired or who have been assigned to a country on a permanent basis (more than 5 years) would be covered only by the country in which they are working. companies must pay U. and would pay only into the U. workers? Benefits for Danish workers? Would survivors and dependents also be affected by an agreement? • Totalization agreements are designed to coordinate Social Security taxation and benefits for people who divide their careers between the United States and another country. . The employer may likewise have to pay to both countries. • Without an agreement. agreements. Social Security taxes as well as Danish Social Security taxes.

S. • An agreement would not only allow each country to consider a worker's combined U. An agreement would allow each country to count a worker's Social Security credits in the other country when determining benefit eligibility. and Danish coverage periods to establish entitlement to retirement or disability benefits for the worker.Page 4 • The proposed agreement with Denmark would also fill gaps in benefit protection for workers who have divided their careers between the United States and Denmark. for more than 6 months unless they previously resided in the U.S. for at least 5 years during which they were related to the worker. Benefits would then be paid on a prorated basis. This requirement would no longer apply once an agreement entered into force. The United States. it would also allow the countries to determine benefit entitlement for a worker's dependents and survivors based on the worker's combined coverage. . currently will not pay dependent and survivor benefits to Danish citizens who have been outside the U. for example.S. it would remove restrictions that either country imposes on benefit payments to workers and their dependents and survivors when they live in the other country. Such workers may fail to qualify for Social Security benefits from one or both countries because they have not worked long enough to meet minimum eligibility requirements. In addition.

These tax reimbursements are frequently considered to be taxable income in the host country. citizen or a U. By exempting employees on temporary assignments from host country Social Security taxes. company assigns a U. the employer and employee would pay Social Security taxes only to the United States.S. employees who were hired locally in Denmark or sent there for a long-term or permanent assignment would be covered under the Danish system only.Page 5 3) How would agreements benefit employers in each country? • The proposed agreement would help employers avoid situations in which they have to pay Social Security employment taxes to both the United States and Denmark for their employees. his tax bill can pyramid significantly.S. On the other hand. if the employee were hired in the United States and assigned only temporarily to Denmark. . • In addition. This can happen now. Under the agreement.S. an agreement would indirectly help employers save substantial amounts in income tax when they send employees from one country to the other. for example. resident alien to work temporarily in Denmark. When the employer reimburses the additional income tax that results. It is a common practice for employers to reimburse employees for any additional income or employment taxes they are required to pay as a result of their foreign assignments. the agreement would also relieve their employers from the host country income tax they would otherwise have to pay. when a U.

5 4 11 14 30. • The law requires that before an agreement can enter into force. Estimated Additional Costs to the U.5 Financial Effects for the Social Security system of Denmark: Increase in Danish OASDI benefit payments Reduction in Danish OASDI tax contributions TOTAL . the President must send it to Congress for a 60-session-day review period together with a report on the estimated cost of the agreement and the number of people it will affect.Page 6 4) How much would this cost and how many people would be affected by the proposed agreement? • Every Totalization agreement has a cost for each country because it results in additional benefit payments based on combined credits and the elimination of benefit payment restrictions for people residing in the other country. Social Security system: Increase in OASDI benefit payments $ 2 Reduction in OASDHI tax contributions TOTAL $ 5 5 7 20. and also because of the elimination of dual Social Security taxes.S.5 25.S.5 $ 7 $16. • The estimated costs for the United States and Denmark are displayed in the following table. and Danish Social Security Systems under the Proposed Totalization Agreement Fifth Year Years 1 – 5 (cumulative) (in Millions) (in Millions) Financial Effects for the U.

S. citizens residing outside of Denmark. citizens. • Section 202(t) also dictates that we pay non-citizen dependents and survivors if the beneficiaries maintained at least 5 years of U. residency during the period when they were related to the insured worker.Page 7 5) Does the Social Security Administration currently pay benefits to anyone in Denmark? Yes. SSA already pays Social Security benefits to Danish citizens anywhere in the world without restriction.S. Here is a summary of the payments issued by benefit type: • 556 payments to retired workers ($387. The combination of these statutory provisions has resulted in the following numbers of individuals living in Denmark who are in current pay status: In March 2007.211. citizens if they are citizens of a country that has a Social Security system that pays benefits to U.S. Of the total beneficiaries (those receiving benefits and those in suspense status) 332 are U. • Section 202(t) of the Social Security Act authorizes the payment of benefits to non-U. SSA paid a total of $592.50 to 880 beneficiaries in Denmark.002) . citizens anywhere in the world without restriction.S.S. Since Denmark pays social security benefits to U. There are also 29 beneficiaries in Denmark whose benefits have been suspended.249) • 97 payments to spouses ($33.117) • 17 payments to disabled workers ($15.

195) • 177 payments to surviving spouses ($134.586) .Page 8 • 33 payments for children ($22.

we believe the agreement could become effective in late 2007. . This would be 3 months after the two sides have completed their respective legislative review procedure. Barring any unforeseen delays.Page 9 6) When would the agreements be effective? The proposed agreement specifies when it will enter into force.

Page 10 7) Will the U. Congress and the Danish Parliament have to approve the agreements? How long will that take? Once the proposed agreement is signed. . it will be transmitted to Congress for review. The agreement would then become effective on the first day of the third month following the month we exchange diplomatic notes. How long this would take can vary depending on the frequency of days that Congress is in session. After the U.S. The Danish authorities will likewise submit the agreement to the Danish Parliament for review. based on experience with other agreements. However. we would then exchange diplomatic notes saying we have completed our legal requirements and are prepared to implement the agreement. and Denmark have completed their review requirements. it takes about 5 months to complete the review. An agreement must lie before Congress for 60 session days.S.

. would prevent them from concluding a totalization agreement with the United States. Now. Danish authorities indicated that legal and policy obstacles. Why has it taken so long to get an agreement with Denmark? For many years. has had this kind of agreement in place with most of Western Europe for years. however. the deepening ties between the two countries clearly underscore the need for this agreement.Page 11 8) The U. specifically the potential cost for Denmark.S.

. including the Medicare portion.S.S. and Danish coverage. An agreement with Denmark would not include any provision affecting these requirements. law.Page 12 9) • Does totalization affect Medicare eligibility? Under U. a person generally becomes eligible for free Medicare hospital insurance if the person is age 65 or older and is eligible for monthly Social Security benefits or is under age 65 and has been entitled to disability benefits for more than 24 months. Thus. workers and employers who are exempt from U. eligibility for a benefit based on combined coverage could not be used to qualify for Medicare hospital insurance. Although a person could become eligible for monthly Social Security benefits from the United States based on combined U. an agreement would apply to the portion of the U.S.S. • On the other hand. Social Security tax based on the agreement can be exempt from the entire tax. Social Security tax that finances Medicare hospital insurance.

Additional Information • When a worker qualifies for benefits based on combined coverage. • For example. the individual must have at least 40 quarters of U. retirement benefit? • To receive a partial totalized benefit under all of our agreements. an individual must have accumulated at least 6 quarters of U. Social Security system to qualify for retirement benefits. . the individual’s combined work in both the United States and the other country must yield 10 years of coverage. coverage and must have at least 40 quarters (10 years) of cumulative coverage between the countries with which we have an agreement. If this is the case.S. the amount payable is a "prorated benefit. if an individual does not have the required 10 years’ coverage in the U.S..S." • To receive a full social security retirement benefit. what would the minimum work credit requirements be to receive either a partial totalized retirement benefit under an agreement or a full U. a totalization agreement would have no impact on the benefits paid to workers by SSA. the amount payable would be a "pro-rated benefit. one that is proportional to the number of credits earned in the United States." i.Page 13 10) If the United States enters into a totalization agreement with Denmark.S. However. coverage.e.

.Page 14 • Totalization agreements can also be used to meet insured status requirements for U. which in some cases can be fewer than 40 quarters.S. disability and survivors benefits.

including Latin America. With increases in U. Eastern Europe and Asia. as well as Canada.S. however.S. citizens and employers. • A proposed new agreement with the Czech Republic may be ready for signing later this year.Page 15 11) What are the prospects for totalization agreements with other countries? • SSA has sought to focus its totalization agreements program on agreements that will benefit the greatest number of U. . business operations in countries outside the North Atlantic region. Chile. we believe that totalization agreements with these countries will become more desirable. and discussions on a new agreement with Poland have already taken place. Over that period. have become increasingly important trading partners for the United States. Over the past 30 years. the United States has negotiated agreements with nearly all the countries of Western Europe. • Agreements with Australia. Japan and South Korea have all been implemented over the past several years. countries in other parts of the world.