Since working in more than one country has become so common, there can be cases when a person has to pay into the Social Security systems of both nations and as such qualifies for Social Security benefits from both countries. According to Social Security Administration (SSA), the U.S. already has systems in place in the form of Totalization Agreements and other rules that can be used to guide international benefits.
While American citizens can qualify for Social Security benefits in both countries, there are also specific provisions that may reduce their U.S. benefit amount, especially if they receive foreign pension as well.
Which countries have signed Totalization Agreements with the U.S.?
Before understanding exactly what a Totalization Agreement means, citizens must take note of all the 30 countries where these agreements were signed, some of the countries are:
- Canada
- United Kingdom
- Germany
- Japan
- Australia
- South Korea
- Italy
- Germany
- Switzerland
- Belgium
- Sweden
- Finland
Citizens who have spent part of their career working in another country or those who are looking to work in another country, must explore how these Social Security agreements might apply to your situation.
SSA answers about receiving Social Security benefits from two countries
According to the SSA official website, citizens who work in the U.S and another country can receive Social Security benefits from both countries provided that they meet eligibility requirements. Thus far, the U.S. has signed Totalization Agreements with 30 countries to assist workers and to help them avoid paying into two systems at once. These Totalization Agreements also helps citizens to qualify for benefits even if they didn’t work long enough in either country independently.
According to the Totalization Agreements, work credits from both countries can be combined in order for citizens to meet minimum eligibility requirements for retirement, disability, or survivor benefits. Citizens who qualify can then apply for benefits from both the U.S. and the other country, and typically, each country will pay its share of the benefit based on how long a particular citizen has worked in the system.
Problems with dual payment: WEP and dual tax
Up until the Social Security Fairness Act, citizens’ U.S. Social Security benefit was reduced under the Windfall Elimination Provision (WEP). The WEP affected mainly those individuals who earned a pension from workplaces where they didn’t need to pay into the U.S. Social Security system.
Understanding more about the WEP:
- WEP would apply to both public and private foreign pensions.
- WEP did not eliminate citizens’ benefits completely, it merely reduces the amount.
- Citizens with 30 or more years of substantial U.S. Social Security-covered earnings can be eliminated from the WEP.
While the WEP isn’t a pension that employees have to consider, the biggest upset for citizens working in America and abroad is that of dual taxes. Paying dual Social Security contributions is especially costly for Americans. The territoriality rule allows for an employee who would be covered by both U.S. and a foreign system to remain subjective exclusively to the laws of the country which he or she is working. Citizens should, however, take note of all the benefits received from Social Security.
What does not apply to foreign pensions?
Although the Social Security Fairness Act eliminated both the WEP and Government Pension Offset (GPO), it is important to know that the GPO also reduced Social Security spousal or survivor benefits if citizens received government pension based on work where citizens didn’t pay Social Security taxes. However, a sigh of relief comes from the fact that GPO never affected foreign pensions. Government jobs in other countries do not trigger the GPO.
Perhaps the Social Security Fairness Act enacted this year came in handy for Americans receiving Social Security benefits from two countries. Citizens should feel free to contact Social Security Administration or an international benefits specialist to help them navigate the process and maximize their Social Security benefits.
