U.s. Totalization Agreement

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. Workers who have shared their careers between the United States and a foreign country may not be entitled to pensions, survivor benefits or disability insurance (pensions) from one or both countries because they have not worked long or recently enough to meet minimum conditions. Under an agreement, these workers may benefit from partially U.S. or foreign benefits on the basis of combined or “totalized” coverage credits from both countries. In all cases, with the exception of one of the agreements currently in force, a “temporary” allowance may not last more than five years. The agreement with Italy allows for the duration of fixed-term contracts for an indeterminate period.

Since March 1, 2019, the United States has concluded totalization agreements with 30 countries – Australia, Austria, Belgium, Brazil, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Switzerland, United Kingdom and Uruguay. Totalization agreements relieve American workers and their employers of the burden of contributing to the social security systems of two countries. Under these agreements, U.S. employers and workers contribute to the U.S. or foreign social security system, but not both, depending on the length of their lives in the country where they work. Temporary mission abroad. Under a totalization agreement, foreign workers who work “temporarily” abroad are subject only to U.S. Social Security and Medicare taxes, as long as their compensation would be subject to these taxes if they had remained in the United States. On the other hand, the wages of workers who work “permanently” abroad are subject only to the country`s social contributions. In addition to improving the social security of working workers, international social security agreements help ensure continuity of benefit protection for people who have received social security credits under the U.S. system and another country.

Totalization agreements are popular with U.S. companies because they exempt employers from paying a dual social security tax. According to a regular study of net tax savings by the Office of International Programs of the Social Security Administration (SSA), U.S. companies and their employees save about $1.5 billion a year in foreign social taxes based on these agreements.