Social security to folks in Mexico?

Just saw a bit on the news about a treaty about to go into effect by which Social Security benefits would be given to people from Mexico who worked, legally or illegally, in the US for as little as 18 months. If one googles, one gets lots of hits, but astonishingly very few from the major news sources. Apparently, this will go into effect soon unless our Senators or Congress pass a resolution of disapproval. So why aren’t we hearing about this? Apparently Bush has already signed it. So what’s the straight dope on this? I put it here in great debates instead of general questions, because I’m sure there’s a debate in the offing. The only news source I could find is 2 and a half years old. So what gives with the deafening silence? I should think this is a trifle more important than what Kerry did or didn’t do 40 years ago, and yet hardly a peep from the news. Does anyone know what’s going on? Where are the parties and candidates aligning on this?

Here’s the old link from the Washington Post:
http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A9342-2002Dec18&notFound=true

Apparently, this is about to be come a done deal. Any thoughts?

Another link:

This may be different in scope, but not different in kind from what has been S.O.P. for years. From your own cite:

Part of the confusion might also arise from this kind of thinking (from the same cite):

While it might be true that the workers paid into Social Security, that system is not a pension for people funded by their own contributions, but a retirement fund paid for by current workers.

Seems like there should be ***some ** * money available to foreign workers if they paid into the system, but it’s unclear what Americans have to gain by this. Are there many Americans who will get paid from a Mexican fund for time spent working in Mexico?

Keep in mind that a totalization agreement would also affect people *legally *employed in the U.S. for part of their adult lives, but who return to Mexico after retirement. It isn’t just about whether the U.S. should give Social Security credits to people who work in the U.S. illegally.

As it stands now, I don’t believe there is any mechanism for people who worked and paid into the Social Security system, but never gained legal immigration status, to get any pension credit or refund whatsoever.

I’m not quite sure why you think it’s such a big deal in terms of debate (implying there is some controversy.) The U.S. has similar social security treaties (usually called “totalization agreements” with most of Europe, some of them going back several decades, and with Canada.

Example: A person from Country X comes to work in the U.S. He works here for nine years, contributing into U.S. social security, and his employer does likewise.

Then he goes back to Country X, and works there the rest of his career, say another 30 years, contributing to Country X’s social security. At retirement age, he applies to Country X for benefits. They say, well, OK, but you only worked 30 years in our country, and contributed to our social security for 30 years, so you don’t get full benefits – full benefits are based on (let’s say) 35 years, so you only get 30/35ths of the full benefits. That’s reasonable, since he gets a benefit based on his contribution.

So, he writes to U.S. social security saying, I worked in the U.S. and I paid into U.S. social security for nine years, do I get a pro-rata benefit?

Without the treaty, U.S. social security says: No way. For benefit eligibility, you need 40 covered quarters (approx ten years), and you have only 9 x 4 = 36 covered quarters. You therefore aren’t eligible for benefits. So, all that money that you and your employer contributed for nine years, thanks very much, but you get zip.

Employees (and employers) consider that they were screwed, paying taxes/contributions but not alowed to get a benefit. Thus, U.S. companies have been pressuring the U.S. government to set up social security treaties.

Most U.S. treaties work as follows. Let’s use the same example, but now say there IS a social security treaty between the U.S. and Country X. When he applies for benefits in the U.S., two things happen:
(a) The U.S. will count all his years of contribution to Country X social security towards the eligibility. So, he will have 36 covered quarters in the U.S. plus 30 years in Country X. That says he will be eligible for a benefit from the U.S.
(b) The benefit will be calculated based on the amount of contributions actually made into U.S. social security. So, he won’t get a full (maximum) benefit, he’ll get (roughly) a pro-rata amount.

Thus, he’ll wind up with benefits from both U.S. and X social security systems.

This is basically considered fair, under any interpretation you can come up with.

And, please note, the reverse will happen as well. An American goes to Country X and works there for 5 years, say, contributing into their very expensive social security system. (U.S. rates are fairly low compared to most of the rest of the developed world.) When she gets to retirement, she applies to Country X for benefits and is told, sorry, in our country, you need 7 years of coverage to be eligible for a benefit and you don’t have it. So, you don’t get any benefits, thanks a lot for the taxes/contributions. She says, AHA! There’s a treaty between the U.S. and Country X! They say, oh, so there is, in that case, yes, you get the prorata benefit of 5/35ths (or whatever.)

So, it works to the mutual advantage of employees who are transferred between countries, or citizens of one country who work temporarily in the other country. It works to the advantage of the companies who pay half the social security taxes. Both the Country X and U.S. social security system pay some benefits that they otherwise wouldn’t have paid.

It’s part of the positive process of globalization.

There are tax treaties, by the way, as well, so that a U.S. citizen who works in a country with a treaty arrangement won’t be double-taxed… taxed by Country X and taxed by the U.S., on the same income. We have tax treaties with most of the world, but social security treaties with only a comparative handful of countries.

I think the main reason of the OP is that foreignors would be able to access the US Social Security system under an entirely different set of rules than for American workers.
As all us American workers know, we must pay into SS for at least 10 years before getting full benefits. This contrasts with the new proposed law for foreign workers whereas they would only have to put in for a year and a half before they get eligible for full bennies. Thats the crux of this whole post.

Not only that, but we know damn well that the typical American workers usually paying into SS for a good 30-40 years. Yep, the government keeps on taking and taking and taking, long after the worker has qualified for full benefits. So an American worker who has paid into SS for 40 years will get the same SS benefits that a foreign worker who only lived here 2 years and only worked here 18 months will get.

Eva Luna writes:
Keep in mind that a totalization agreement would also affect people legally employed in the U.S. for part of their adult lives, but who return to Mexico after retirement. It isn’t just about whether the U.S. should give Social Security credits to people who work in the U.S. illegally.

Yep, that who I was referring to, Eva. Why should a foreign national who worked here for a few years get the exact same retirement as an American citizen who had SS deductions taken from them their entire working lives? Like I said before, it only takes 10 years to qualify for full SS, most working Americans have SS taken from their checks for 30-40 years.

As it stands now, I don’t believe there is any mechanism for people who worked and paid into the Social Security system, but never gained legal immigration status, to get any pension credit or refund whatsoever

Eva, I presume you are referring to illegal aliens. Illegal aliens are breaking the law by their presence in this country. They also are not permitted to work here. FYI.

If I’m understanding this correctly, they’re not. They’re getting a pro-rated benefit. If they only worked 5 years, they would get a 50% benefit. You’re also forgetting that the benefit is based on their income at the time. Every year I make more money increases my future benefit. At least until I max out for ten years. If my future benefit was based on, and frozen on, my income from ages 18-27, I’d be in even worse shape than I expect to be.

Oh, and by the way. Eva Luna has credentials in this field. You may pretty much trust what she says in regard to alien issues, unless you can prove she’s mistaken.

Yes, I am certainly aware of Evas credentials:

As it stands now, I don’t believe there is any mechanism for people who worked and paid into the Social Security system, but never gained legal immigration status, to get any pension credit or refund whatsoever

Eva, I presume you are referring to illegal aliens. Illegal aliens are breaking the law by their presence in this country. They also are not permitted to work here. FYI.
No

I personally don’t see the problem with someone from another country coming here to work for 5 years and getting nothing for the SS taxes. I as an American could work here for 9 years and get nothing for my SS taxes, no? I must have 10 years in to qualify. This makes no sense to me, especially since Mr. Greenspan gave another statement today that benefits need to be cut for us baby boomers, who will have put into the system for 45 years or so, before we bankrupt the system when we all retire. (Tongue buried firmly in cheek). And yet on the other hand the system is doing so well it can afford to pay out to people from other countries for working here for as little as 18 months? Are they TRYING to bankrupt the system or what? I think it sucks.

To those posters who take issue with the ability of people who work in the U.S. illegally to get either pro-rated credit for SS taxes paid, or a refund of SS taxes paid, would you feel differently about a totalization agreement that only applied to those legally employed?

It does happen, you know - agricultural workers can work legally on H-2B visas, intracompany transferees can work legally on L-1 visas (and the past couple of years, their sposues can work legally in L-2 status if they apply for employment authorization), all kinds of professionals can work on H-1B visas, research scholars and professors can work legally on J-1 visas…the list continues.

Not all of these people end up spending their entire careers in the U.S. - many eventually return to their home countries. And yet they pay SS taxes for which they currently receive no benefit, which means they are subsidizing the retirement of U.S. workers. Plus they are missing out on the opportunity to build up retirment credits in their home country systems, sometimes for years at a time (the typical maximum period of stay in H-1B status, for example, is 6 years if the person has not reached a certain point in the green card process). Is that fair?

Eva Luna, U.S. Immigration Paralegal

Just a question.

Most low income workers in the US get the “Earned Income Tax Credit”, or EITC. , thus, they pay no federal taxes and they also get a refund of their FICA taxes. So, in other words, they don’t pay federal taxes and they don’t pay payroll taxes.

Since they don’t pay payroll taxes, why should they qualify for SS?

Eva, I believe the whole entire US tax system needs to be changed. Its not right that someone who only puts in 10 years of FICA gets the exact same benefit of someone who put in 40 years FICA.

And I also don’t believe that anyone who didn’t contribute to the system should be able to draw out of the system. SS should return to being a retirement program, not a welfare or disability program.

Cite, please.

From this (slightly dated) site:

Works for me. YMMV.

This is simply not true. From this official site:

Learn something every day, don’t you?

This is no more relevant to this thread than your other whines, but the fact that you would deny benefits to the widow (or widower) and children of a wage earner who dies, or to someone who has become unable to work earlier than the normal retirement age, tells me something about you.

And at any rate, this thread is about people who have paid into social security. C K Dexter Haven gave an excellent explanation of why and how these treaties work. You can explain why you disagree with those treaties if you like.

First: you (as a U.S. citizen) do NOT get full benefitrs after 10 years of working in the U.S. After 10 years of contributing to U.S. social security, you are ELIGIBLE to receive retirement benefits. (Death and disability benefits have different requirements.) If you only work in the U.S. for 10 years, you will only get approx 10/35ths (about 30%) of full benefits. (Over-simplifying very complex calculations.)

Please note that the other totalization agreements do NOT say people get full benefits after a year and a half. They say that they get pro-rata benefits IF the combination of years of contribution under US social security AND German (say) social security adds up to 10 years.

Thus, if you work in the U.S. for 2 years and in Germany for 33 years, (over-simplifying), without a treaty you would get 33/35ths (94%) of full benefits from Germany and nothing from the U.S. WITH a treaty in place, you would get 2/35ths (6%) of the full U.S. benefit and 33/35th (94%) of the German full benefit.

The treaty basically says that anyone who contributes to a treaty-country’s social security system will get benefits based on what they paid into that system.

If a person only works for two years under U.S. social security, and never work again, they will NOT get any social security benefits from U.S., regardless of whether they’re a U.S. citizen.

The treaties say that both countries will combine (“totalize”) covered years of service for purposes of determining eligibility. The benefits will then be calculated based on the number of years of actual contribution.

This is a lot of hoopla over nothing.

P.S. - As my credential, I consulted on international benefits and compensation for 25 years as an actuary.

I’d just like to say that above quote contains about 4 different topics, thus it is meaningless. It is a fact, as I said, that it SS requires 40 quarters (10 years) of working in order to get the maximum amount from SS for retirement benefits.

Now, death benefits are a different story, but I have heard that SS death benefits are so paltry that few even consider them in calculations for “SS benefits” . As far as "SS disability benefits, they probably do have a different requirement, being that I know of people who did not contribute a dime to SS getting SSI payments.

Quote:
Originally Posted by Moonlight Drive
Eva, I believe the whole entire US tax system needs to be changed.** Its not right that someone who only puts in 10 years of FICA gets the exact same benefit of someone who put in 40 years FICA. **
This is simply not true. From this official site:
Quote:
Even with an estimate many people still wonder exactly how their benefit is figured. Social Security benefits are based on earnings averaged over most of a worker’s lifetime. Your actual earnings are first adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. It applies a formula to these earnings and arrive at your basic benefit, or “primary insurance amount” (PIA). This is the amount you would receive at your full retirement age, 65 or older, depending on your date of birth. This age will increase gradually each year until it reaches 67 for people born in 1960 or later.

Learn something every day, don’t you?
Please tell me how I am wrong?

Well, if you only worked for 10 years, then out of your 35 best years, your earnings in 25 of them will be nil, won’t they? And that’s going to depress the average over the 35 years quite a bit, isn’t it?