U.s. Social Security (Totalization) Agreement


    As U.S. commercial and commercial interests have spread around the world, the list of major trading partners increasingly includes countries that do not have a system that meets all U.S. legal requirements. This may penalize U.S. companies, workers and potential social security beneficiaries abroad who could benefit from such agreements. These exceptions, based on the country of nationality or nationality of the worker, are provisions of the Social Security Act. In most cases, totalization agreements expand the ability of benefits to be nsogability based on their residence. Although totalization agreements vary according to the partner country`s social security system, Table A-1 summarizes some common coverage situations for U.S. workers posted abroad to work. As a general rule, a worker is covered by the social security system of the country in which he works. However, totalization agreements indicate exceptions for certain categories of U.S. workers. Since totalization agreements are inherently reciprocal, these waivers apply equally to foreign workers in the United States.

    The goal of all U.S. totalization agreements is to eliminate dual social security and taxation, while maintaining coverage for as many workers as possible under the country where they are likely to have the most ties, both at work and after retirement. Any agreement aims to achieve this objective through a series of objective rules. The detached house rule may apply if the U.S. employer transfers a worker to work at a foreign branch or in one of its foreign subsidiaries. However, in order for U.S. coverage to continue when a transferred employee works for a foreign subsidiary, the U.S. employer must have entered into a Section 3121 (l) agreement with the U.S. Treasury Department with respect to the foreign subsidiary. The agreements allow sSA to add U.S. and foreign coverage credits only if the worker has at least six-quarters of U.S. coverage.

    Similarly, a person may need a minimum amount of coverage under the foreign system to have U.S. coverage accounted for in order to meet the conditions for granting foreign benefits. The United States has agreements with several nations, the so-called totalization conventions, in order to avoid double taxation of income in relation to social contributions. These agreements must be taken into account in determining whether a foreigner is subject to the U.S. Social Security Tax/Medicare or whether a U.S. citizen or resident alien is subject to the social security taxes of a foreign country. The table below shows the different types of social security benefits to be paid in the United States.