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UNITED STATES/JAPAN TOTALIZATION AGREEMENT

February 2004 (Printer Friendly Version)
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Totalization

  • 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 Japan

  • An agreement with Japan would save U.S. workers and their employers about $632 million in Japanese 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.

  • Japan is the fourth 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.

Costs of an agreement with Japan

  • Social Security actuaries estimate that a totalization agreement with Japan would have a negligible long-range effect on the Trust Funds.

  • Costs to the U.S. Social Security system are estimated to average about $136 million per year over the first five years. These costs are for additional benefits to eligible U.S. and Japanese 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 Japan

  • 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 forward.

  • In Japan, once the agreement is signed, both chambers of the Japanese Diet must vote to approve the agreement.

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.

    Country

    Effective Date 

     

    Country

    Effective Date 

    Italy

    November 1, 1978

     

    Portugal

    August 1, 1989

    Germany

    December 1, 1979

     

    Netherlands 

    November 1, 1990

    Switzerland

    November 1, 1980

     

    Austria

    November 1, 1991

    Belgium

    July 1, 1984

     

    Finland

    November 1, 1992

    Norway

    July 1, 1984

     

    Ireland

    September 1, 1993

    Canada

    August 1, 1984

     

    Luxembourg 

    November 1, 1993

    United Kingdom 

    January 1, 1985

     

    Greece

    September 1, 1994

    Sweden

    January 1, 1987

     

    South Korea 

    April 1, 2001

    Spain

    April 1, 1988

     

    Chile

    December 1, 2001

    France

    July 1, 1988

     

    Australia

    October 1, 2002

  • More detailed information about these totalization agreements can be found at http://www.socialsecurity.gov/international/.
 
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