International social security agreements, often referred to as „totalization agreements,” have two main purposes. First, they eliminate double taxation of social security, the situation that occurs when a worker from one country works in another country and has to pay social security taxes to both countries with the same income. Second, the agreements help fill gaps in benefit protection for workers who have shared their careers between the United States and another country. Since U.S. trade 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 of the U.S. legal requirements. This can penalize U.S. companies, workers, and potential Social Security recipients abroad who could benefit from such agreements. Suppose a worker born on January 2, 1951 applied for old-age benefits in January 2017. The worker worked for 8 years in the United States – from 1980 to 1987 – and earned each year the maximum amount subject to Social Security taxes.
The worker has therefore accumulated 32 QCs, which is not enough to qualify alone for old-age benefits covered by the United States. However, this worker also acquired coverage in Switzerland. Since the United States and Switzerland have a tabening agreement and the worker has at least 6 QC, the worker`s Swiss coverage can be credited to entitle him to a totalized benefit. The worker`s U.S. benefit is calculated according to the steps described below. The most notable exception to the territoriality rule is called the posting rule. Under this rule, a worker whose employer requires temporary relocation from one country to another to work for the same company continues to pay social security taxes and retains coverage only in the country from which he or she transferred.1 After almost all aggregation agreements, such a transfer cannot be expected – at the time of transfer, beyond 5 years. This rule ensures that workers who only work temporarily in the other country retain coverage in their home country, which remains the country of their greatest economic link2. By mutual agreement, the two countries can agree to extend the 5-year period for temporary missions abroad on a case-by-case basis, but extensions beyond two additional years are rare. 2 An exception to this rule is the agreement concluded with Italy, which allows certain transferred workers to choose the social security scheme in which they are covered. No other U.S.
tabination agreement contains a similar rule. In order to eliminate the double taxation of Social Security and Medicare taxes, the United States has entered into international agreements (known as the „taben-up agreement”) with 25 countries. Totalization agreements exempt salaries from Federal Insurance Contributions Act (FICA) taxes, including Social Security taxes and Medicare taxes, if a person`s income is subject to taxes or contributions for similar purposes under a foreign country`s social security system. . . .