SSR 80-15: Title II: International Social Security ("Totalization") Agreements
To state principles for the negotiation and administration of international social security agreements. These principles cover (1) general provisions, (2) benefits, (3) coverage, (4) computations, (5) applications, (6) evidence, (7) appeals, (8) effect of the alien nonpayment provision, (9) overpayments, and (10) disclosure of information.
Section 317 of Public Law 95-216 (Social Security Amendments of 1977); Section 233 of the Social Security Act; Regulations No. 4, Subpart T, 44 Fed. Reg. 42961-42968 (July 23, 1979) (to be codified in 20 CFR §§404.1901-404.1930).
Section 317 of the Social Security Amendments of 1977 (Public Law 95-216) added section 233 to the Social Security Act (the Act). It authorizes the President to enter into bilateral agreements with other countries to provide for coordination between the social security systems of the U.S. and of other countries. These agreements are properly entitled "international social security agreements," and are informally referred to as "totalization agreements."
Before the enactment of Public Law 95-216, there was no statutory authority for agreements with foreign countries to provide for coordination between the social security systems of the U.S. and those countries. As a result, several things have occurred: (1) many U.S. citizens employed by U.S. employers in foreign countries are subject to the social security taxes of both the U.S. and the foreign countries; (2) those U.S. citizens frequently get little if any return for these taxes because social security eligibility requirements are usually stricter under foreign systems, and most of them do not work long enough under the foreign system to meet these requirements; (3) other U.S. citizens who work in foreign countries for a number of years and have separate (as opposed to overlapping) periods of coverage under two or more social security systems may not qualify for benefits under any system when they retire, become disabled, or die; (4) some may receive social security benefits, but the benefits are not in proportion to the work they performed during their lifetime because all of their periods of coverage cannot be considered to determine these benefits; and (5) some workers get dual benefits based on the same work.
The Social Security Administration (SSA) estimates that there should be a net gain to the U.S. balance of payments under totalization agreements because of the social security benefits that would become payable by foreign countries to U.S. residents (both citizens and noncitizens). More U.S. residents are likely to receive benefits under totalization agreements than residents of other countries which are parties to these agreements because, in general, more immigrants remain in the U.S. than return to their native countries, and most U.S. citizens who work abroad eventually return to the U.S.
International social security agreements are common among European countries. They have an advantage over other approaches to coordination in that the agreements are designed to allow each country to carry out its responsibilities virtually independently. The countries would exchange information on covered earnings and earnings credit and provide other administrative assistance; but otherwise, each country would make its determinations and computations independently and would pay benefits directly, without any need for an exchange of funds or balancing of amounts paid as benefits.
ISSUES AND OPTIONS:
In developing rules and regulations for the negotiation and administration of international social security agreements, SSA could have adopted inflexible rules, instead of general principles. This would have restricted accommodation to significantly different systems of foregoing countries that might wish to enter into an international social security agreement with the U.S. Under the regulations adopted by SSA, flexibility is retained. Further, SSA could have adopted special rules on such matters as applications, submittal of evidence, the conduct of appeals, general procedures, etc., different from those in the U.S. social security program. However, since a basic program objective is to retain rules in the current systems, to the extent possible, SSA rejected options that would not be consistent with the administration of the current programs outside the context of international social security agreements.
In developing a general framework within which bilateral agreements would be negotiated and administered, SSA did consider and resolve a number of specific issues. Among the more significant were the following.
- Establishing Coverage
Although a report made by the U.S. House of Representatives before the enactment of Public Law 95-216 indicated that under section 233(c)(1) (B)(ii) of the Act a totalization agreement could under certain circumstances include provisions for establishing coverage which did not exist under either system, SSA determined that this could result in the coverage of systems which would be contrary to provisions of title II. Furthermore, if new U.S. coverage situations were to be created under an agreement, the U.S. would have no statutory authority for imposing taxes on such services. SSA decided that agreements should refrain from providing coverage where it does not exist under the law of either country party to the agreement.
- Awarding Benefits Under More Than One Agreement
Section 233 of the Act and its legislative history contemplate bilateral agreements. Therefore, when a person has U.S. quarters of coverage and periods of coverage under the social security system of more than one foreign country with which the U.S has an agreement, the person will receive benefits only under the agreement affording the most favorable treatment. Absent evidence to the contrary, the agreement providing the higher benefit will be considered as affording the most favorable treatment.
- Restricting the Use of Information Furnished Under An Agreement
SSA cannot pledge absolute confidentiality of information it may receive in implementing and administering international social security agreements. Both the Social Security Act and the Freedom of Information Act provide for disclosures from SSA records under certain circumstances. These statutes on confidentiality and disclosure would not be overridden by an international social security agreement. SSA decided, therefore, that the use of information furnished under an agreement should be governed by the national statutes on confidentiality and disclosure of information of the country that has been furnished the information.
- General Provisions.
An agreement may only be negotiated with the national government of a foreign country that has a social security system of general application in that effect. SSA will consider a system in effect if it is collecting social security taxes or paying social security benefits, or both. The provisions of the social security system of each country will apply equally to the nationals[*] of both countries (regardless of where they reside). Refugees, stateless persons, and other nonnationals who derive benefits right from nationals, refugees, or stateless persons may be treated as nationals if they reside within one of the countries. An agreement will become effective on any date, provided in the agreement, which occurs after the President has transmitted the agreement to the Congress and each House of Congress has been in session thereafter on each of 90 days, unless one of the Houses of Congress adopts a resolution of disapproval within the 90-day period. Each agreement will contain provisions for its possible termination and assurances that rights regarding entitlement to benefits and coverage acquired by an individual before termination shall be retained. The agreement will provide for notification of termination to the other party and the effective date of termination.
(a) As a result of an international social security agreement, a person who has at least 6 quarters of coverage (QCs) under the U.S. system may have foreign periods of coverage (acquired after December 31, 1936) combined with U.S. coverage to determine entitlement to and the amount of benefits payable under the U.S. system.
(b) Generally, a person will be credited with a QC for every 3 months (or equivalent period), or remaining fraction of 3 months, of coverage in each reporting period certified by the foregoing system. A reporting period used by a foreign country may be one calendar year or some other period of time. Quarters of coverage based on foreign periods of coverage may be credited only to calendar quarters not already QCs under the U.S. system. The QCs will be assigned chronologically beginning with the first calendar quarter (not already a QC under the U.S. system) within the reporting period and continuing until all the QCs are assigned, or the reporting period ends.
(c) A person may fail to meet the requirements for a currently insured status or the insured status needed to establish a period of disability solely because of the assignment of QCs based on foreign coverage to calendar quarters on a chronological basis. If this occurs, the QCs based on foregoing coverage may be assigned to different calendar quarters (not already QCs under the U.S. system) within the beginning and ending dates of the reporting period certified by the foreign country.
(d) Periods of coverage under more than two social security systems may not be combined. If a person qualifies for benefits under more than one agreement, the person will receive benefits from the U.S. only under the agreement affording the most favorable treatment. In the absence of evidence to the contrary, the agreement that provides the higher benefit will be considered as affording the most favorable treatment.
(e) Periods of coverage under the U.S. system may not be combined with those under the foregoing system to entitle a person to hospital insurance benefits or to the special provisions relating to coverage under the Medicare program for end stage renal disease. A person, however, may become entitled to hospital insurance benefits if he or she meets the requirements based solely on U.S. coverage.
(a) An agreement will contain provisions precluding dual coverage. Employment or self-employment (or service recognized as equivalent under the U.S. system or the foregoing system) will, on or after the effective date of the agreement, result in a period of coverage under either the U.S. or the foreign system, but not under both. Methods will be described in the agreement for determining under which system the employment, self-employment, or other service will result in a period of coverage.
(b) Although an agreement may modify coverage provisions of title II of the Act, coverage should not be extended unless there is authority to collect social security taxes on these services. Generally, any modification to the title II coverage provisions should be done by exemptions from coverage rather than by extensions of coverage.
(c) If the work would otherwise be covered by both countries, an agreement will exempt it from coverage by one of the countries.
(d) Generally, an agreement will provide that a worker will be covered by the country in which he or she is employed and will be exempt from coverage by the other country. An agreement may provide exceptions to this principle so that a worker will be covered by the country to which he or she has the greater attachment.
(e) Generally, if a national of either country resides in one country and has self-employment income that is covered by both countries, an agreement will provide that the person will be covered by the country in which he or she resides and will be exempt from coverage by the other country.
(f) Agreements may provide for variations from the general principles for precluding dual coverage to avoid inequitable or anomalous coverage situations for certain workers. However, in all cases, coverage must be provided by one of the countries.
(g) An agreement may require proof that an individual is covered under one social security system before the individual may be exempt from coverage under the other system. Requests for certificates of coverage under the U.S. system may be submitted by the employer, employee, or self-employed individual to SSA.
(h) An agreement will contain provisions precluding dual payment of contributions or taxes, beginning on or after the effective date of an agreement.
(a) An agreement will contain a provision regarding the method of computing the benefits payable under the U.S. system if entitlement is established based on combined periods of coverage under the U.S. system and under the foreign system. The benefit payable under the U.S. system will be based on the proportion of the person's periods of coverage credited under the U.S. system.
(b) To determine the benefit payable under an agreement, a "theoretical" primary insurance amount (PIA) will be computed like other title II PIAs, but by combining the person's earnings amounts under both the U.S. and the foreign systems. Earnings amounts certified by the foreign system may be actual earnings amounts or deemed earnings amounts derived, for example, from amounts of contributions to the foreign system or from the national average wage under the foreign system. Foreign earnings will be added to any covered U.S. earnings only to the extent that the combined earnings do not exceed the maximum annual earnings limitation under U.S. law. Foreign earnings may be assigned to a calendar quarter only if that quarter is a quarter of coverage based on foreign coverage. A pro rate PIA will then be derived from the theoretical PIA by the following formula:
Pro rate PIA==theoretical PIA X periods of coverage credited under the U.S. system ------------------------------ Combined periods of coverage credited under both the U.S. system and the foreign system.
In deriving the pro rate PIA from the theoretical PIA, periods of coverage after the last computation base year will not be considered.
(c) Auxiliary and survivors benefit amounts will be determined on the basis of the pro rata PIA. The regular reductions for age under section 202(q) of the Act will apply to the benefits of the worker, or to those of any auxiliaries or survivors, based on the pro rate PIA. Benefits will be payable subject to a family maximum derived from the pro rata PIA. If the pro rata PIA is less than the minimum PIA, the family maximum will be 1« times the pro rata PIA.
(d) The pro rata PIA will be recomputed only if the inclusion of the additional earnings will result in an increase in both the theoretical PIA and the benefits payable by the U.S. to all persons receiving benefits on the basis of the worker's earnings, unless otherwise provided by the agreement. Subject to these limitations, the pro rata PIA will be automatically recomputed to include additional earnings under the U.S. system. An application, however, must be filed to have the pro rata PIA recomputed to include additional foreign earnings.
(e) A U.S. resident may receive benefits under an agreement from both the U.S. and from the foreign country. The total amount of the resident's two benefits, however, may be less than the amount for which the resident would qualify under the U.S. system based on the minimum PIA. An international social security agreement may provide that the U.S. will supplement the total amount to raise it to the amount for which the resident would have qualified under the U.S. system based on the minimum PIA.
SSA will consider an application (or a written statement requesting benefits) filed with the foreign system to be filed with SSA as of the date of the agreement.
(a) SSA shall consider evidence submitted to the social security system of the foreign country as evidence submitted to SSA. The SSA regulations on evidence will be used to determine if the evidence submitted is sufficient or if additional evidence is needed to prove initial or continuing entitlement to benefits under the U.S. system.
(b) If an application is filed for disability insurance benefits, SSA will consider medical evidence, if any, submitted to the foreign system as if it were submitted to the U.S. system. The SSA regulations on disability will be used to make a disability determination for purposes of initial and continuing entitlement to disability benefits under the U.S. system.
SSA will consider a request for reconsideration, hearing, or Appeals Council review of a determination made by SSA that is filed with the foreign system within the 60-day time period applicable for these requests to be timely filed with SSA. The SSA regulations on the administrative review procedure will be used to adjudicate the request.
- Effect of the Alien Nonpayment Provision.
An agreement amy provide that a person entitled to benefits under the U.S. system may receive those benefits while residing in the foreign country party to an agreement, regardless of the alien nonpayment provision.
An agreement may not authorize the adjustment of title II benefits to recover an overpayment made under the social security system of a foreign country. Where an overpayment is made under the U.S. system, the U.S. adjustment provisions will apply.
- Disclosure of Information.
The use of information furnished under an agreement generally will be governed by the national statutes on confidentiality and the disclosures of information of the country that has been furnished the information. In negotiating an agreement, consideration should be given to the compatibility of the other country's laws on confidentiality and disclosure with those of the U.S. To the extent possible, information exchanged between the U.S. and the other country should be exclusively for purposes of implementing the agreement and the laws to which the agreement pertains.
July 23, 1979
The U.S. signed international social security agreements with Italy in 1973, with the Federal Republic of Germany in 1976, and with Switzerland in 1979. The Italian agreement has been through the congressional review process and became effective on November 1, 1978. The German agreement has also been through the congressional review process and become effective on December 1, 1979. The President sent the agreement with Switzerland to Congress on February 1, 1980. The agreements entered into with Italy, the Federal Republic of Germany, and Switzerland are consistent with the rules in this Program Policy Statement. As agreements become effective, SSA will notify the public of their availability in the Federal Register.
The alien nonpayment provision, referred to in 8 of the Policy Statement, is in Regulations No. 4, section 404.460.
Claims Manual Sections 3700ff.
[*]When applied to the U.S., the term "nationals" includes both U.S. citizens and persons who, though not citizens, owe permanent allegiance to the U.S.