Since the late 1970’s, the U.S. has established international social
security agreements that coordinate the U.S. Social Security program with
the comparable programs of other countries.
These international social security agreements are called “totalization
agreements” and have two main purposes:
Eliminate dual social security taxation that occurs when a worker from
one country works in another country and is required to pay social security
taxes to both countries on the same earnings. As a result of existing
totalization agreements, U.S. workers and employers currently are saving
about $800 million annually in foreign taxes they do not have to pay.
Help fill gaps in benefit protection for workers who have divided their
careers between the U.S. and another country, but who have not worked
long enough in one or both countries to qualify for social security
benefits. With totalization, workers are allowed to combine work credits
from both countries to become eligible for benefits. The benefit amount
paid is proportional to the amount of credits earned in the paying country.
An agreement with Mexico
An agreement with Mexico would save U.S. workers and their employers about
$140 million in Mexican social security and health insurance taxes over
the first 5 years of the agreement.
An agreement would also fill the gaps in benefit protection for U.S. workers
who have worked in both countries, but not long enough in one or both countries
to qualify for benefits.
Mexico is the second largest trading partner with the U.S. Agreements are
already in effect with Canada, the largest trading partner with the U.S.,
and 19 other countries.
- With Mexico, the U.S. now has signed agreements with eight of its top ten
trading partners. Many of these agreements have been in effect for nearly
two decades. The two exceptions are China and Taiwan. By law, the U.S. could
not enter into agreements with these two countries because they do not have
generally applicable social security systems that pay periodic benefits or
the actuarial equivalent.
Costs of an agreement with Mexico
Social Security actuaries estimate that a totalization agreement with Mexico
would have a negligible long-range effect on the Trust Funds.
Costs to the U.S. Social Security system are estimated to average about
$105 million per year over the first five years. These costs are for additional
benefits to eligible U.S. and Mexican workers and reduced Social Security
tax contributions under the dual taxation exemption.
To put this in perspective, in 2002, costs to the U.S. system for the existing
agreement with Canada were about $197 million.
Effective date of an agreement with Mexico
In the United States, once the agreement is signed, the President will
submit the agreement to Congress where it must sit in review for 60 session
days. If Congress takes no action during this time, the agreement can move
In Mexico, once the agreement is signed, the Mexican Senate must approve
Countries already having totalization agreements with the U.S.
The United States currently has Social Security agreements with Canada,
Chile, South Korea, Australia and most of Western Europe.
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More detailed information about these totalization agreements can be found at http://www.socialsecurity.gov/international/.