Order Code RL32004
CRS Report for Congress
Received through the CRS Web
Social Security Benefits for Noncitizens:
Current Policy and Legislation
Updated July 22, 2004January 21, 2005
Dawn Nuschler and Alison Siskin
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress
Social Security Benefits for Noncitizens:
Current Policy and Legislation
Summary
Concerns about the number of unauthorized (illegal) aliens residing in the
United States and the recently signed totalization agreement with Mexico have
fostered considerable interest in the eligibility of noncitizens for U.S. Social Security
benefits. The Social Security program provides monthly cash benefits to qualified
retired and disabled workers, their dependents, and survivors. Generally, a worker
must have 10 years of Social Security-covered employment to be eligible for
retirement benefits (less time is required for disability and survivor benefits). Most
jobs in the United States are covered under Social Security. Noncitizens (aliens) who
work in Social Security-covered employment must pay Social Security payroll taxes,
including those who are in the United States working temporarily and those who may
be working in the United States without authorization. There are some exceptions.
Generally, the work of aliens who are citizens of a country with which the United
States has a “totalization agreement” is not covered by Social Security if they work
in the United States for less than five years. A totalization agreement coordinates the
payment of Social Security taxes and benefits for workers who divide their careers
between two countries. In addition, by statute, the work of aliens under certain visa
categories (e.g., H-2A agricultural workers) is not covered by Social Security.
On March 2, 2004, the President signed into law Thethe Social Security Protection
Act of 2004 (P.L. 108-203), under which an alien whose application for benefits is
based on a Social Security Number (SSN) issued January 1, 2004, or later is required
to have work authorization at the time an SSN is assigned, or at any later time, to
gain insured status under the Social Security program. Aliens whose applications are
based on SSNs issued before January 1, 2004, would have all Social Security-covered
earnings count toward insured status, regardless of their work authorization status.
In addition, the Social Security Act prohibits the payment of benefits to aliens in the
United States who are not “lawfully present,” but under certain circumstances, alien
workers and dependents/survivors may receive benefits while residing outside the
United States (including benefits based on unauthorized work in the United States).
On June 29, 2004, the United States and Mexico signed a totalization
agreement, the effects of which depend on the specific terms and language of the
agreement. The agreement has not been transmitted to Congress for review or
otherwise made publicly available. Currently, since Mexico meets the “social
insurance country” definition, a Mexican worker may receive U.S. Social Security
benefits outside the United States. Family members of the Mexican worker must
have lived in the United States for at least five years to receive benefits in Mexico,
but typically under a totalization agreement, this requirement is waived allowing the
payment of benefits to alien dependents and survivors who have never lived in the
United States. The Social Security Administration reports that the projected cost of
the agreement would average $105 million annually over the first five years. In
September 2003, the Government Accountability Office reported that “the cost of a
totalization agreement with Mexico is highly uncertain” because of the large number
of unauthorized immigrants from Mexico estimated to be living in the United States.
This report will be updated as legislative activity occurs or other events warrant.
Contents
Current Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Social Security-Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Social Security Payment Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Social Security Protection Act of 2004 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Special Payment Rules for Noncitizens . . . . . . . . . . . . . . . . . . . . . . . . . 4
Legislative History of Payment Rules for Noncitizens . . . . . . . . . . . . . 7
Tax Treatment of Social Security Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Totalization Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Perceived Disparate Treatment Under Social Security and
Immigration Immigration
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Totalization Agreement with Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Government AccountabilityGeneral Accounting Office Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SSA Comment on the GAO Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
No-Match Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
H.R. 743: “Social Security Protection Act of 2004” . . . . . . . . . . . . . . . . . . 19
H.R. 489: “Social Security for Americans Only Act of 2003” . . . . . . . . . . 19
H.R. 1631: “No Social Security For Illegal Immigrants Act of 2003” . . . . 20
Legislation in the 109th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
H.R. 98: “Illegal Immigration Enforcement and Social Security
Protection Act of 2005” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Appendix A: Exception Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Social Insurance or Pension System Countries . . . . . . . . . . . . . . . . . . . . . . 22
Treaty Obligation Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Totalization Agreement Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Appendix B: Definition of Lawfully Present . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
List of Tables
Table 1. Exceptions to the Alien Nonpayment Provision for Workers
and Dependents/Survivors and
Dependents/Survivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Additional Residency Requirement for Alien Dependents/Survivors
Outside the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 3. Exceptions to the Additional Residency Requirement for Alien
Dependents/Survivors Outside the United States . . . . . . . . . . . . . . . . . . . . . 6
Social Security Benefits for Noncitizens:
Current Policy and Legislation
Current Policy
Background
The Social Security program provides monthly cash benefits to retired and
disabled workers and their dependents, and to the survivors of deceased workers.1
To qualify for benefits, workers (whether citizens or noncitizens2) must work in
Social Security covered jobs for a specified period of time. Generally, workers need
40 quarters of coverage (QCs) to become “insured” for benefits (fewer QCs are
needed for disability and survivor benefits, depending on the worker’s age). In 2004,
a worker earns one QC for each $900 in earnings, up to a maximum of 4 QCs for the
year (annual earnings of $3,600 or more).
Social Security-Covered Employment
The Social Security program is financed primarily by mandatory payroll taxes
levied on wages and self-employment income. Most jobs in the United States are
covered under Social Security (about 96% of the work force is required to pay Social
Security payroll taxes). In 2004, Social Security-covered workers and their
employers each pay 6.2% of earnings up to $87,900 (this amount is indexed to
average wage growth). The self-employed pay 12.4% on net self-employment
income up to $87,900, and they may deduct one-half of payroll taxes from federal
income taxes. The following workers are exempt from Social Security payroll taxes:
!
!
!
!
State and local government workers who participate in alternative
retirement systems,
Election workers who earn $1,200 or less per year,
Ministers who elect not to be covered, and members of certain
religious sects,
Federal workers hired before 1984,
1
The Social Security program is administered by the Social Security Administration (SSA).
SSA also administers the Supplemental Security Income (SSI) program, a means-tested
entitlement program. Eligibility requirements for noncitizens differ under Social Security
and SSI. For more information on noncitizen eligibility for SSI, see CRS Report RL31114,
Noncitizen Eligibility for Major Federal Public Assistance Programs: Policies and
Legislation, by Ruth Ellen Wasem and Joe Richardson.
2
An alien is “any person not a citizen or national of the United States” and is synonymous
with noncitizen. Aliens/Noncitizens includes those who are legally present and those who
are in violation of the Immigration and Nationality Act (INA).
CRS-2
!
!
!
College students who work at their academic institutions,
Household workers who earn less than $1,400 per year, or for those
under age 18, for whom household work is not their principal
occupation, and
Self-employed workers who have annual net earnings below $400.
In 2002, an estimated 11.3 million noncitizens were in the U.S. labor force
comprising approximately 7.9% of the labor force.3 Aliens who work in Social
Security-covered employment must pay Social Security payroll taxes, including those
who are in the United States working temporarily and those who may be working in
the United States without authorization.4 There are some exceptions. Generally, the
work of aliens who are citizens of a country with which the United States has a
“totalization agreement” (see below) is not covered by Social Security if they work
in the United States for less than five years. In addition, by statute, the work of aliens
under certain visa categories (such as H-2A agricultural workers, F and M students)5
is not covered by Social Security.
Currently, there are no official published data on the amount of money paid into
the Social Security system by aliens, either legal or unauthorized. An alien may be
authorized to be in the United States, but not authorized to work. Thus, an alien
without employment authorization is not technically an illegal alien.6 The Social
Security Administration (SSA) maintains an “earnings suspense file” that contains
an estimated $421 billion in wage credits that cannot be allocated to names and
Social Security Numbers (SSNs) in SSA’s database.7 Although some use the
earnings suspense file to estimate contributions to Social Security by alien workers,
3
Calculations performed by the Congressional Research Service (CRS) using the average
of the monthly Current Population Surveys (CPS’s) for 2002. The CPS does not include a
variable on immigration status.
4
For Social Security payroll taxes to be withheld from wages, a worker must provide a
Social Security Number (SSN) to his/her employer. An alien who is working in the United
States without authorization (1) may have an SSN because he/she worked in the United
States legally and then fell out of status; or (2) may have obtained an SSN fraudulently.
5
Most of these nonimmigrant visa categories are defined in §101(a)(15) of the INA. These
visa categories are commonly referred to by the letter and numeral that denotes their
subsection in §101(a)(15), e.g., B-2 tourists, E-2 treaty investors, F-1 foreign students, H-1B
temporary professional workers, J-1 cultural exchange participants, or S-4 terrorist
informants.
6
For example, an alien present in the United States on a B-2 tourist visa may remain in the
United States for six months, but is not legally permitted to work. In addition, the spouses
of most temporary noncitizen workers do not have employment authorization. For more
information on which categories of noncitizen are entitled to work in the United States, see
CRS Report RL31381, U.S. Immigration Policy on Temporary Admissions, by Ruth Ellen
Wasem.
7
Annually, SSA reviews W-2 forms and credits Social Security earnings to workers. If a
name or SSN on a W-2 wage form does not match SSA’s records, the earnings credits go
into an earnings suspense file while SSA attempts to reconcile the discrepancy. The figure
shown here represents the amount in the earnings suspense file through the year 2001, as of
Oct. 31, 2003.
CRS-3
the mismatched information may be due to clerical errors (such as a name misspelled
on a form or an individual’s failure to report a new married name to SSA) or to aliens
who are working in the United States illegally with fraudulent Social Security
Numbers. There is no reliable estimate of the amount of money in the earnings
suspense file that is attributable to aliens working in the United States illegally.
Social Security Payment Rules
Workers become eligible for Social Security benefits when they meet the
insured status and age requirements specified in the Social Security Act.8 They
become entitled to benefits when they have met all of the eligibility requirements and
filed an application for benefits. Because Social Security is an earned entitlement
program, there are few restrictions on benefit payments once a worker becomes
entitled to benefits. The Social Security Act does prohibit the payment of benefits
to: individuals residing in certain countries;9 individuals confined to a jail, prison,
or certain other public institutions for commission of a crime; most individuals
removed from the United States (i.e., deported);10 aliens residing in the United States
unlawfully; and, in some cases, aliens residing outside the U.S. for more than six
months at a time.
Social Security Protection Act of 2004. On March 2, 2004, the President
signed into law The Social Security Protection Act of 2004 (P.L. 108-203, H.R. 743).
Among other changes, P.L. 108-203 restricts the payment of Social Security benefits
(retirement, survivors, and disability benefits) to certain noncitizens who file an
application for benefits based on an SSN assigned on or after January 1, 2004.
Specifically, a noncitizen who files an application for benefits based on an SSN
assigned on or after January 1, 2004, is required to have work authorization at the
time an SSN is assigned, or at some later time, to gain insured status under the Social
Security program. If the individual had work authorization at some point, all of
his/her Social Security-covered earnings would count toward insured status. If the
individual never had authorization to work in the United States, none of his/her
earnings would count toward insured status and Security benefits would not be
payable on his/her work record (i.e., benefits would not be payable to the worker or
to the worker’s family).11
A noncitizen who files an application for benefits based on an SSN assigned
before January 1, 2004, is not subject to the work authorization requirement under
8
In the case of disability benefits, a worker is eligible for benefits when he/she has met
insured status requirements and established a period of disability.
9
U.S. Treasury Department regulations or Social Security restrictions prohibit payments to
individuals living in Cuba, Democratic Kampuchea (formerly Cambodia), North Korea,
Vietnam and areas in the former Soviet Union (excluding Armenia, Estonia, Latvia,
Lithuania and Russia).
10
One exception is aliens who are removed on status violations (i.e., aliens who are removed
from the U.S. because they are illegally present, not because they have committed a crime).
11
Before enactment of P.L. 108-203, all Social Security-covered earnings would count
toward insured status regardless of an alien’s work authorization status.
CRS-4
P.L. 108-203. All of the individual’s Social Security-covered earnings would count
toward insured status, regardless of his/her work authorization status. The new law
provides exceptions to the work authorization requirement for certain noncitizens,
however, it is not clear how many individuals potentially could come under the
exception. Regulations, which will provide additional information on the
implementation of this provision, have not yet been issued.12
Special Payment Rules for Noncitizens. Section 202(y) of the Social
Security Act requires noncitizens in the United States to be “lawfully present” to
receive benefits.13 If a noncitizen is entitled to benefits, but does not meet the lawful
presence requirement, his/her benefits are suspended. In such cases, a noncitizen
may receive benefits while residing outside the United States (including benefits
based on work performed in the United States without authorization) if he/she meets
one of the exceptions to the “alien nonpayment provision” under Section 202(t) of
the Social Security Act. Under the alien nonpayment provision, a noncitizen’s
benefits are suspended if he/she remains outside the United States14 for more than six
consecutive months,15 unless one of several broad exceptions is met. For example,
an alien may receive benefits outside the United States if he/she is a citizen of a
country that has a social insurance or pension system that pays benefits to eligible
U.S. citizens residing outside that country (a “social insurance country”), or if he/she
is a citizen or resident of a country with which the United States has a totalization
agreement (see Table 1). If an alien does not meet one of the exceptions to the alien
nonpayment provision, his/her benefits are suspended beginning with the seventh
month of absence and are not resumed until he/she returns to the United States
lawfully for a full calendar month.
In addition, to receive payments outside the United States, alien dependents and
survivors must have lived in the United States for at least five years previously
(lawfully or unlawfully), and the family relationship to the worker must have existed
during that time (see Table 2). The law provides several broad exceptions to the
five-year U.S. residency requirement for alien dependents and survivors. For
example, an alien is exempt from the five-year U.S. residency requirement if he/she
is a citizen of a “treaty obligation” country (i.e., if nonpayment would be contrary to
a treaty between the U.S. and the individual’s country of citizenship), or if he/she is
12
For information on P.L. 108-203, see CRS Report RL32089, The Social Security
Protection Act of 2004 (H.R. 743).
13
The definition of “lawfully present” is provided in Appendix B. The lawful presence
requirement was added by Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 (P.L. 104-193) and Illegal Immigration Reform and Immigrant Responsibility
Act of 1996 (P.L. 104-208). For more information, see “Legislative History of Payment
Rules for Noncitizens” below.
14
“Outside the United States” means outside the territorial boundaries of the 50 States, the
District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana
Islands and American Samoa.
15
The six-month period of absence begins with the first full calendar month following the
period in which the individual has been outside the United States for more than 30
consecutive days. If the individual returns to the United States for any part of a day during
the 30-day period, the 30-day period starts over.
CRS-5
a citizen or resident of a country with which the United States has a totalization
agreement (see Table 3).
Table 1. Exceptions to the Alien Nonpayment Provision
for Workers and Dependents/Survivors
An alien’s benefits are suspended if he/she is outside the United States for more than six
consecutive months, unless one of the following exceptions is met:
— the individual is a citizen of a country that has a social insurance or pension system
under which benefits are paid to eligible U.S. citizens who reside outside that country
(for example, Brazil, Finland, Mexico, Philippines and Turkey) (see Appendix A for
a complete list of countries)
— the individual is entitled to benefits on the earnings record of a worker who lived in
the United States for at least 10 years or earned at least 40 quarters of coverage under
the U.S. Social Security system (exception does not apply if the individual is a citizen
of a country that does not provide social insurance or pension system payments to
eligible U.S. citizens who reside outside that country)
— the individual is entitled to benefits on the earnings record of a worker who had
railroad employment covered by Social Security
— the individual is outside the United States while in the active military or naval
service of the United States
— the individual is entitled to benefits on the earnings record of a worker who died
while in the U.S. military service or as a result of a service-connected disease or injury
— the nonpayment of benefits would be contrary to a treaty obligation of the United
States in effect as of August 1, 1956 (i.e., the individual is a citizen of a treaty
obligation country) (see Appendix A for a list of countries)
— the individual is a citizen or resident of a country with which the United States has
a totalization agreement (see Appendix A for a list of countries)
— the individual was eligible for Social Security benefits as of December 1956
Source: Section 202(t) of the Social Security Act.
CRS-6
Table 2. Additional Residency Requirement for Alien
Dependents/Survivors Outside the United States
In addition to the requirements in Table 1, to receive payments outside the United States,
an alien dependent/survivor must have lived in the U.S. for at least five years (lawfully
or unlawfully) under one of the following circumstances:
A spouse, divorced spouse, widow(er), surviving divorced spouse, or surviving
divorced mother or father:
— must have resided in the United States for at least five years and the spousal
relationship to the worker must have existed during that time
A child:
— must have resided in the U.S. for at least five years as the child of the worker; or
— the worker and the child’s other parent (if any) each must have either resided in the
United States for at least five years or died while residing in the United States
An adopted child:
— must have been adopted in the United States; and
— lived in the United States with the worker; and
— received at least half of his or her support from the worker in the year before the
worker’s entitlement or death
Source: Section 202(t) of the Social Security Act.
Table 3. Exceptions to the Additional Residency Requirement
for Alien Dependents/Survivors Outside the United States
An alien dependent/survivor living outside the United States is not subject to the
five-year U.S. residency requirement if one of the following exceptions is met:
— the individual was eligible for Social Security benefits before January 1, 1985
— the individual is entitled to benefits on the earnings record of a worker who died
while in the U.S. military service or as a result of a service-connected disease or injury
— the nonpayment of benefits would be contrary to a treaty obligation of the United
States in effect as of August 1, 1956 (i.e., the individual is a citizen of a treaty
obligation country) (see list of countries in Appendix A)
— the individual is a citizen or resident of a country with which the United States has
a totalization agreement, unless otherwise specified in the agreement (see list of
countries in Appendix A)
Source: Section 202(t) of the Social Security Act.
Note: Aliens who live abroad may not receive payments in countries to which the U.S. Treasury
Department is prohibited from mailing benefit checks. See Your Payments While You Are Outside the
United States (updated April 2004) on the SSA website at [http://www.ssa.gov/pubs/10137.html].
CRS-7
Legislative History of Payment Rules for Noncitizens. When the
Social Security program began paying benefits in 1940, there were no restrictions on
benefit payments to noncitizens. In 1956, amid concerns that noncitizens were
working in the United States for relatively short periods and returning to their native
countries where they and their family members would collect benefits for many years,
Congress enacted restrictions on benefits for alien workers living abroad (restrictions
did not apply to alien dependents and survivors). The Social Security Amendments
of 1956 (P.L. 84-880) required noncitizens to reside in the United States to receive
benefits and suspended benefits if the recipient remained outside the United States
for more than six consecutive months, with broad exceptions (see Table 1).
In 1983, Congress placed restrictions on benefit payments to alien dependents
and survivors living abroad. The Social Security Amendments of 1983 (P.L. 98-21)
made dependents and survivors subject to the same residency requirement as workers
(described above) and further required that they (or their parents, in the case of a
child’s benefit) must have lived in the United States for at least five years, with broad
exceptions (see Tables 2 and 3).
Several factors led to the enactment of tighter restrictions on benefit payments
to alien dependents and survivors living abroad in 1983, including the large number
of dependents that were being added to the benefit rolls (in some cases under
fraudulent circumstances) after workers had returned to their native country and
become entitled to benefits, and difficulties associated with monitoring the continued
eligibility of recipients living abroad.
At the time, the Government Accountability Office (formerly named the General
AccountingGeneral Accounting Office (now named the Government
Accountability Office) estimated that, of the 164,000 dependents living abroad in
1981,
56,000 were added to the benefit rolls after the worker became entitled to
benefits.
Of that number, an estimated 51,000 (or 91%) were noncitizens.16 Two
years earlier,
the Social Security Commissioner stated that SSA investigators had
found evidence
that some recipients living abroad were faking marriages and
adoptions and failing
to report deaths in order to “cheat the system.” At the time, the
commissioner stated
that such problems were particularly acute in Greece, Italy,
Mexico and the
Philippines where large numbers of beneficiaries were residing. He
stated further
that, in some countries, “there is a kind of industry built up of so-called
claims-fixers
who, for a percentage of the benefit, will work to ensure that somebody
gets the
maximum benefit they can possibly get out of the system.”17
In 1996, Congress enacted tighter restrictions on the payment of Social Security
benefits to aliens residing in the United States. The Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (PRWORA)18 prohibited the payment
of Social Security benefits to aliens in the United States who are not lawfully present,
16
Government Accountability Office, Issues Concerning Social Security Benefits Paid to
Aliens, GAO/HRD-83-32, Mar. 24, 1983.
17
CRS Issue Brief IB82001, Social Security: Alien Beneficiaries, by David Koitz (archived;
available from Dawn Nuschler or Alison Siskin on request).
18
P.L. 104-193, §401(b)(2).
CRS-8
unless nonpayment would be contrary to a totalization agreement or Section 202(t)
of the Social Security Act (the alien nonpayment provision).19 This provision became
effective for applications filed on or after September 1, 1996. Subsequently, the
Illegal Immigration Reform and Immigrant Responsibility Act of 199620 added
Section 202(y) to the Social Security Act. Section 202(y) of the act, which became
effective for applications filed on or after December 1, 1996, states:
Notwithstanding any other provision of law, no monthly benefit under [Title II
of the Social Security Act] shall be payable to any alien in the United States for
any month during which such alien is not lawfully present in the United States
as determined by the Attorney General.
Tax Treatment of Social Security Benefits
Noncitizens who reside outside the United States are subject to different rules
regarding federal income tax treatment of Social Security benefits. U.S. citizens and
resident aliens21 pay federal income tax on a portion of their benefit if their income
exceeds specified thresholds. Specifically, they pay federal income tax on up to 50%
of their benefit if their modified adjusted gross income (adjusted gross income (AGI)
plus tax-exempt interest income plus 50% of Social Security benefits) is more than
$25,000 but no more than $34,000 for a single person, or more than $32,000 but no
more than $44,000 for a married couple filing jointly. They pay federal income tax
on up to 85% of their benefit if their modified AGI is more than $34,000 for a single
person or more than $44,000 for a married couple filing jointly. These thresholds do
not apply to married couples who live together and file separate returns. Currently,
about one-third of Social Security recipients pay federal income tax on their benefits.
Noncitizens who live outside the United States pay federal income tax on their
benefits without regard to these thresholds. Section 871 of the Internal Revenue
19
Also, under PRWORA, federal agencies that administer “federal public benefits” are
required to report to the Department of Homeland Security (DHS) information on any alien
that is known to be unlawfully present in the United States. (P.L. 104-193, §404).
Nonetheless, this requirement does not apply to SSA with respect to Title II of the Social
Security Act (Old-Age, Survivors and Disability Insurance Program). Federal Register, vol.
65, no. 189, Sept. 28, 2000, pp. 58301-58302.
20
21
P.L. 104-208, §503(a).
Resident alien is a term used in tax law. An alien is considered to be a U.S. resident for
income tax purposes if he/she (1) is a lawful permanent resident of the U.S. at any time
during the calendar year; (2) meets the requirements of the “substantial presence” test; or
(3) makes the first-year election under 26 U.S.C. 7701(b)(4) and 26 C.F.R. §301.7701(b)4(c)(3). An alien individual meets the substantial presence test if: (1) the alien is present
in the U.S. for at least 31 days during the calendar year and (2) the sum of the number of
days on which such individual was present in the U.S. during the current year and the 2two
preceding calendar years (when multiplied by the applicable multiplier — one for the
current year, one-third for the first preceding year, and one-sixth for the second preceding
year) equals or exceeds 183 days. Even though an alien individual otherwise meets the
requirements of the substantial presence test, there are circumstances when an alien will not
be considered a resident of the U.S. An alien who does not qualify under either of these tests
will be treated as a nonresident alien for purposes of the income tax. [26 U.S.C. 7701(b)]
CRS-9
Code imposes a 30% rate of tax withholding on the U.S. income of noncitizens who
live outside the country (unless a lower rate is established by treaty) because there is
no practical way for the U.S. government to determine the income of such persons.
Under the withholding, noncitizens who reside outside the United States pay 30% of
the maximum taxable amount of Social Security benefits (85%) in federal income
taxes. For example, the tax withholding on an annual Social Security benefit of
$12,000 would be $3,060 [($12,000 x .85) x .30].22
Totalization Agreements
As shown in Tables 1 and 3, alien workers and alien dependents/survivors may
receive payments while living outside the United States if they are a citizen or
resident of a country with which the United States has a totalization agreement.2223
Section 233 of the Social Security Act authorizes the President to enter into a
totalization agreement with a foreign country to coordinate the collection of payroll
taxes and the payment of benefits under each country’s Social Security system for
workers who split their careers between the two countries. For example, without a
totalization agreement, an individual who is sent by a U.S. company to work in a
foreign country (and his or her employer) must contribute to the Social Security
systems in both countries, resulting in dual Social Security coverage and taxation
based on the same earnings. With one exception (Italy), totalization agreements
allow workers (and their employers) to contribute only to the foreign system if the
worker is employed in that country for five or more years, or only to the U.S. system
if the worker is employed in that country for less than five years.
Totalization agreements also allow workers who divide their careers between
the two countries to combine earnings credits under both systems to qualify for
benefits if they lack sufficient coverage under either system.2324 While a worker may
combine earnings credits to qualify for benefits under one or both systems, his/her
benefit is prorated to reflect only the number of years the worker paid into each
system. The same treatment applies to foreign workers in the United States.
Totalization agreements are subject to congressional review. Section 233(e) of
the Social Security Act requires the President to submit to Congress the text of the
agreement and a report on (1) the estimated number of individuals who would be
affected by the agreement and (2) the estimated financial impact of the agreement on
programs established by the Social Security Act. Section 233(e)(2) of the Social
Security Act specifies that a totalization agreement automatically goes into effect
2222
For more information on the taxation of noncitizens, see CRS Report RS21732, Federal
Taxation of Aliens Working in the United States, by Erika Lunder.
23
Social Security regulations (20 C.F.R. 404.1928) specify that a totalization agreement
“may provide that a person entitled to benefits under title II of the Social Security Act may
receive those benefits while residing in the foreign country party to the agreement,
regardless of the alien non-payment provision.”
2324
This applies to Social Security retirement and disability benefits. Generally, a minimum
of 40 quarters of coverage (QCs) is required to qualify for Social Security retirement
benefits. Fewer QCs are required to qualify for disability benefits, depending on the
worker’s age at the onset of the disability. In some cases, a worker may qualify for
disability benefits with a minimum of six QCs.
CRS-10
Security Act specifies that a totalization agreement automatically goes into effect
unless the House of Representatives or the Senate adopts a resolution of disapproval
within 60 session days of the agreement’s transmittal to Congress.
It should be noted that the provision of sectionSection 233(e)(2) that allows for the
rejection of a totalization agreement upon adoption of a resolution of disapproval by
either House of Congress is an unconstitutional legislative veto. This conclusion is
compelled by the holding in INS v. Chadha, where the Supreme Court struck down
a provision in the Immigration and Nationality Act that gave either House of
Congress the authority to overrule deportation decisions made by the Attorney
General.2425 The Court declared that a legislative veto constitutes an exercise of
legislative power, as its use has “the purpose and effect of altering the legal rights,
duties, and relations of persons ... outside the legislative branch.”2526 Accordingly, the
Court invalidated the disapproval mechanism, holding that Congress may exercise
its legislative authority only “in accord with a single, finely wrought and exhaustively
considered procedure,” namely bicameral passage and presentation to the President.2627
Given that the disapproval mechanism in sectionSection 233(e)(2) authorizes the exercise
of legislative authority outside the strictures of bicameralism and presentment, it is
likewise unconstitutional.2728
Congress has never rejected a totalization agreement. As a result, the fact that
the mechanism under sectionSection 233(e)(2) is unconstitutional has not been an issue.
Congressional utilization of the mechanism in sectionSection 233(e)(2) to reject a
totalization agreement could give rise to a judicial challenge, potentially resulting in
an invalidation of the disapproval mechanism and a determination that the agreement
is effective. Specifically, in considering the effect of the unconstitutional disapproval
mechanism, a reviewing court would consider whether the remainder of sectionSection 233
is valid, or whether the entire statute must be nullified. The Supreme Court has held
that “[u]nless it is evident that the Legislature would not have enacted those
provisions which are within its power, independently of that which is not, the invalid
part may be dropped if what is left is a fully operative law.”2829 In Westcott v.
Califano,
the court noted that “the existence of a broad severability clause in the Social
Security Act reflects the Congressional wish that judicial interpretation of the act
24
25
462 U.S. 919 (1983). Shortly after its decision in Chadha, the Court without opinion and
with one dissent summarily affirmed lower court opinions that had struck down a two-House
legislative veto provision of the Federal Trade Commission Improvements Act, 15 U.S.C.
§ 57a-1. See United States Senate v. Federal Trade Commission, 463 U.S. 1216 (1983);
United States House of Representatives v. Federal Trade Commission, 463 U.S. 1216
(1983).
2526
Id. at 952.
2627
Id. at 951.
2728
The unconstitutionality of legislative veto provisions is noted at 42 U.S.C. §433
(codifying §233), where it is further stated that the provisions of §233(e) are similar to those
struck down in INS v. Chadha. For a consideration of bicameralism and presentment
requirements generally, see CRS Report RL30249, The Separation of Powers Doctrine: An
Overview of its Application and Rationale, by T.J. Halstead.
2829
Buckley v. Valeo, 424 U.S. 1, 108 (1976) (quoting Champlin Refining Co. v. Corporation
Commission, 286 U.S. 210, 234 (1932).
CRS-11
Social Security Act reflects the Congressional wish that judicial interpretation of the
act leave as much of the statute intact as possible.”2930 The existence of this severability
severability clause, coupled with the fact that the operative provisions of section 233 would
Section 233
would remain fully functional absent the disapproval mechanism in subsection Subsection
(e)(2), gives
rise to the likelihood that a reviewing court would invalidate any attempt
to utilize
the disapproval mechanism, while giving effect to an otherwise properly executed
executed totalization agreement.3031
Since 1978, the United States has entered into totalization agreements with 20
countries (the effective date for each agreement is shown in Appendix A):
Australia, Austria, Belgium, Canada, Chile, Finland, France, Germany,
Greece,
Ireland, Italy, South Korea, Luxembourg, Netherlands, Norway,
Portugal, Spain,
Sweden, Switzerland, and the United Kingdom.
In addition, the United States has signed totalization agreements with Japan
(February 19, 2004) and Mexico (June 29, 2004). Once an agreement is signed it is
sent to the Secretary of State and then to the President for review. The President may
then transmit the agreement to Congress for review. To date neither agreement has
been transmitted to CongressThe agreement with Japan was
transmitted to Congress on November 17, 2004. The agreement with Mexico has not
been transmitted to Congress, and, reportedly, is undergoing review at the
Department of State.
While the specific terms of each totalization agreement may differ, the
provisions of a totalization agreement must be consistent with the Social Security
Act. Section 233(c)(4) of the Social Security Act states: “any such agreement may
contain other provisions which are not inconsistent with the other provisions of [Title
II of the Social Security Act] and which the President deems appropriate to carry out
the purposes of this section.” Currently, about $15 million is paid each month to
about 94,000 recipients under totalization agreements.31
2932
30
460 F.Supp 737 (D. Mass 1978). In Califano, the court was referring to 42 U.S.C. §1303,
which states: “[i]f any provision of this chapter, or the application thereof to any person or
circumstance, is held invalid, the remainder of the chapter, and the application of such
provision to other persons or circumstances shall not be affected thereby.”
3031
In light of the Court’s holding in Chadha, it is apparent that any congressional action
taken to restrict or control executive authority to enter into totalization agreements, or to
invalidate any such agreements, must be accomplished through bicameral passage and
presentment to the President. Accordingly, congressional options in this regard would
appear to be limited to imposing additional requirements on the adoption of totalization
agreements, restricting authority to enter into such agreements unless approved by both
Congress and the President on a case by case basis, or to pass a law disapproving a
particular agreement before or after it is finalized. See Chadha, 462 U.S. at 951.
Information on legal issues regarding section 233(e)(2) of the Social Security Act provided
by T.J. Halstead, CRS Legislative Attorney.
3132
In Dec. 2002, the average monthly benefit paid under totalization agreements was $191
for retired workers and $345 for disabled workers. SSA, Social Security Bulletin, Annual
Statistical Supplement 2003, table 5.M1.
CRS-12
Issues
Perceived Disparate Treatment Under
Social Security and Immigration Law
Some believe there is somewhat of a disconnect between how the Social
Security and immigration rules affect unauthorized aliens. Basically, immigration
policies are designed to discourage and punish those unauthorized to work in the
United States. On the other hand, under Social Security rules there are certain
circumstances when an unauthorized alien can collect Social Security benefits. As
a result of this perceived inconsistency, some oppose paying Social Security benefits
to such aliens arguing that aliens who violate immigration law should not be
rewarded by receiving Social Security benefits. Others contend that aliens who work
in Social Security-covered employment (i.e., had payroll taxes withheld from their
earnings) should be eligible for benefits whether or not they had employment
authorization.
Totalization Agreement with Mexico
On June 29, 2004, the Social Security Administration announced that a
totalization agreement with Mexico had been signed by U.S. and Mexican
government officials. In a press release and summary document, SSA reports that
the agreement would save 3,000 U.S. workers and their employers approximately
$140 million in Mexican payroll taxes over the first five years of the agreement. In
addition, SSA reports that the projected cost to the U.S. Social Security system would
average $105 million annually over the first five years.3233 To date, the totalization
agreement with Mexico has not been transmitted to Congress for review or otherwise
made publicly available.
In regard to recent legislative activity related to the totalization agreement with
Mexico, Representative Goode offered an amendment to the FY2005 Labor, Health
and Human Services and Education appropriations bill during full Committee
markup on July 14, 2004, that would prohibit the use of funds appropriated under the
bill to implement the totalization agreement with Mexico signed on June 29, 2004,
or any date thereafter. The amendment failed by a vote of 20-36. On July 15, 2004,
Representative Collins introduced a resolution of disapproval (H.Res. 720) to reject
the totalization agreement with Mexico signed on June 29, 2004, as provided for
under Section 233(e)(2) of the Social Security Act (discussed above).3334
The announcement of the agreement with Mexico has revived a debate which
began in December 2002, when reports in the media indicated negotiations were
underway on a2:59 PMa potential totalization agreement between the United States and
32
33
The SSA press release and summary document may be accessed online at SSA’s website
at [http://www.ssa.gov/pressoffice/pr/USandMexico-pr-alt.htm].
3334
H.Res. 720 has 17 co-sponsors to date.
CRS-13
and Mexico.3435 Among the approximately 5.5 million Mexican-born workers in the
U.S.
labor force in 2002, approximately 4.2 million (76%) were noncitizens35noncitizens36 and 1.3
million (24%) were naturalized citizens.3637 The effects of the totalization agreement
with Mexico signed on June 29, 2004, depend on the specific terms and language of
the agreement (as noted above, the agreement has not been publicly released).
However, unless otherwise specified in the agreement, the totalization agreement
with Mexico would waive the five-year U.S. residency requirement for alien
dependents and survivors to receive benefits outside the United States (see Tables
2 and 3). Under current law, an alien worker entitled to Social Security benefits
(based on work performed with or without authorization in the United States) may
receive benefits outside the United States if he/she is a citizen of Mexico, because
Mexico meets the definition of a “social insurance country.” An alien dependent or
survivor entitled to Social Security benefits may receive benefits outside the U.S.
only if he/she lived in the United States for at least five years previously (and the
family relationship on which benefits are based existed during that time), unless
he/she meets one of several exceptions. Generally, a totalization agreement with
Mexico would allow alien dependents and survivors in Mexico who have never lived
in the United States to receive Social Security benefits outside the United States.
Some observers express concern that, although Section 202(y) of the Social
Security Act prohibits the payment of benefits to aliens in the United States who are
not lawfully present, a totalization agreement with Mexico could allow unauthorized
aliens to receive payments in the United States, depending on how the agreement is
written.3738 They contend that a totalization agreement with Mexico may be used as
a de facto way to legalize unauthorized aliens and assert that the question remains
unresolved until the exact language of the agreement becomes available. Still others
express concern that a totalization agreement with Mexico could provide an incentive
for unauthorized workers from Mexico to come to the United States. In addition,
given the Social Security system’s long-range financing problems, some question the
feasibility of adding a potentially large number of recipients to the rolls in the
absence of structural reform.
Others argue that an agreement (that excludes payments to unauthorized aliens
in the United States) could be beneficial to the United States and that the cost could
be reasonable.3839 They argue that there could be substantial savings for certain U.S.
workers and employers by removing the burden of double taxation. For example,
without a totalization agreement, U.S. citizens and legal permanent residents
3435
For example see Jonathan Weisman, “U.S. Social Security May Reach Mexico.”
Washington Post, Dec. 19, 2002, p. A1.
3536
As discussed above, noncitizens include aliens who are legally present as well as those
who are unauthorized. The Current Population Survey (CPS) does not include a variable
on immigration status.
3637
Calculations performed by CRS using the average of the monthly CPS’s for 2002.
3738
None of the 20 totalization agreements currently in effect make such provision.
3839
Joel Mowbray, “Illegal but Paid? The Question of Social Security for Mexicans,”
National Review, Jan. 27, 2003, pp. 22-23.
CRS-14
(LPRs)3940 sent by U.S. companies to work in Mexico must contribute to both the U.S.
and Mexican Social Security systems. Moreover, some workers may not qualify for
U.S. or Mexican Social Security benefits because they do not have enough earnings
credits under either system. In addition, proponents of totalization agreements argue
that such agreements remove financial barriers to multinational companies and their
employees working in foreign countries.
Government Accountability Office40General Accounting Office Study. In February 2003, the House
Committee Committee
on Ways and Means and the House Committee on the Judiciary asked the
Government Accountability General
Accounting Office (GAO)41 to provide information to Congress on the
possible possible
effects of a totalization agreement with Mexico. In a press release dated
February 24,
2003, House Ways and Means Social Security Subcommittee Chairman
E. Clay
Shaw, Jr. and House Judiciary Committee Chairman F. James
Sensenbrenner, Jr.
expressed particular interest in the potential impact of an
agreement with Mexico on
the Social Security trust funds, given the large number of
noncitizens who may be
working in the United States without authorization.
According to the press release,
the committee asked specifically for information on
the potential effects of an
agreement on workers, beneficiaries, service delivery by
the SSA, program finances,
immigration and illegal work by noncitizens.
In September 2003, GAO presented its findings before the House Committee
on the Judiciary, Subcommittee on Immigration, Border Security, and Claims at a
hearing called “Should There Be a Totalization Agreement with Mexico?”4142 and
shortly afterward released its report to Congress — Social Security: Proposed
Totalization Agreement with Mexico Presents Unique Challenges.4243 Among the
advantages associated with totalization agreements, GAO notes that they foster
international commerce, protect benefits for workers who divide their careers
between the United States and a foreign country, allow multinational companies and
their employees to avoid paying dual Social Security taxes on the same earnings, and
enhance diplomatic relations. GAO also notes that, because such agreements
represent a cost to the U.S. Social Security system, associated risks should be
assessed and mitigated during the negotiation process. Overall, GAO found that the
procedures followed by SSA in the development of the totalization agreement with
Mexico (and all other agreements) are not well documented. GAO goes on to state:
“. . . .. SSA provided no information showing that it assessed the reliability of
Mexican Mexican
earnings data and the internal controls in place to ensure the integrity of
39 information
40
Foreign nationals may be admitted to the United States temporarily or may come to live
permanently. Those admitted on a permanent basis are known as immigrants or legal
permanent residents.
4041
Since this study was published, the General Accounting Office has been renamed the
Government Accountability Office.
4142
The Sept. 11, 2003 hearing document (Serial No. 47) may be accessed online at
[http://www.house.gov/judiciary].
4243
The Sept. 11, 2003 testimony (GAO-03-1035T) may be accessed online at
[http://www.gao.gov/new.items/d031035t.pdf]. The Sept. 30, 2003 GAO report (GAO-03993) may be accessed at [http://www.gao.gov/new.items/d03993.pdf].
CRS-15
information that SSA will rely on to pay Social Security benefits.”4344 Records on
which SSA
would rely to determine a worker’s (and family members’) initial and
continued continued
eligibility for benefits include birth, death and marriage records.
In addition, GAO found that a totalization agreement with Mexico would
increase the number of Mexican workers and their family members eligible for Social
Security benefits for two reasons. First, Mexican workers who otherwise would not
have enough earnings credits to qualify for benefits in the United States could
combine U.S. and Mexican credits to qualify for a partial U.S. Social Security
benefit. Second, more family members in Mexico would qualify for U.S. Social
Security benefits because a totalization agreement generally exempts dependents and
survivors residing outside the United States from the five-year U.S. residency
requirement.
In terms of the potential cost of a totalization agreement with Mexico, GAO
evaluated a March 2003 cost estimate prepared by SSA’s Office of the Chief
Actuary. SSA projects that an agreement with Mexico would cost $78 million in the
first year and $650 million (constant 2002 dollars) by 2050. The cost estimate
assumes an initial increase of 50,000 new beneficiaries in Mexico based on the
number of persons (U.S. citizens and others) in Mexico currently receiving U.S.
Social Security benefits and projects that the number of additional beneficiaries under
the agreement would increase to 300,000 over time. SSA projects that the
totalization agreement with Mexico would have a negligible effect on the long-range
actuarial balance of the Social Security trust funds.4445
GAO found that “the cost of a totalization agreement with Mexico is highly
uncertain,” even more so than for previous agreements, because of the large number
of unauthorized immigrants from Mexico estimated to be living in the United States.
According to GAO’s assessment, the base used for the number of initial new
beneficiaries in Mexico under a totalization agreement (50,000) does not take into
account the “estimated millions of current and former unauthorized workers and
family members from Mexico and appears small in comparison with those
estimates.”4546 Furthermore, GAO points out that the cost estimate does not take into
account the potential change in behavior by Mexican citizens under a totalization
agreement. GAO notes that an agreement could provide an additional incentive for
unauthorized workers from Mexico to come to the United States.
In regard to the number of unauthorized immigrants from Mexico currently
living in the United States, GAO cites a range of estimates. For example, the Pew
Hispanic Center estimates the number to be between 3.4 and 5.7 million, while the
4344
GAO-03-1035T, p. 2.
4445
SSA’s MarchMar. 2003 cost estimate of a totalization agreement with Mexico (and GAO’s
evaluation) do not incorporate the effects of P.L. 108-203 (discussed above). However, SSA
has stated that the cost estimate is still appropriate following enactment of the work
authorization requirement in P.L. 108-203. To clarify, SSA projects that an additional
50,000 workers and an additional 17,000 dependents and survivors would receive totalized
benefits under the agreement by the end of the first five years.
45
46
GAO-03-1035T, p. 2.
CRS-16
Urban Institute estimates the number to be more than 4 million. The federal
government estimates that there are about 5 million unauthorized immigrants from
Mexico living in the United States (as of January 2000) and that the number is
expected to increase by 240,000 each year. According to federal government
statistics, unauthorized immigrants from Mexico make up an estimated 69% of
unauthorized immigrants in the United States. By comparison, the number of
unauthorized U.S. immigrants from all of the other totalization countries combined
is estimated at less than 3%.
In regard to the potential number of former unauthorized workers who have
returned to Mexico, GAO points out that fewer than one-third of immigrants from
Mexico stay in the United States for more than 10 years, the minimum number of
years of Social Security-covered earnings generally needed to qualify for Social
Security retirement benefits. Given the limited information regarding the age, work
history, Social Security coverage and number of dependents of these former
unauthorized workers, the potential cost of a totalization agreement with Mexico is
considered even more difficult to predict.
As mentioned previously, the SSA cost estimate shows that a totalization
agreement with Mexico would have a negligible effect on the long-range actuarial
balance of the Social Security trust funds. However, a sensitivity analysis performed
by SSA at GAO’s request shows that a 25% or more increase in the number of initial
new beneficiaries (i.e., 13,000 or more above the base estimate of 50,000) would
result in a measurable impact on the long-range actuarial balance of the trust funds.
GAO found that error rates in estimating the number of initial new beneficiaries
under previous totalization agreements often exceeded 25%. Based on the large
number of unauthorized workers from Mexico in the United States, GAO considers
the estimated cost of a totalization agreement with Mexico more uncertain than cost
estimates for previous agreements. In its report, GAO states that “a totalization
agreement with Mexico is both qualitatively and quantitatively different than any
other agreement signed to date.”4647
SSA Comment on the GAO Report. The Social Security Commissioner
and SSA’s Office of the Chief Actuary provided written comments on a draft of the
GAO report. SSA disagreed with the GAO evaluation on a number of issues.4748
Specifically, in regard to SSA’s estimate of the number of persons who initially
would receive totalized benefits under the agreement (50,000), SSA maintains that
the estimate is “based on the best available data and includes potential benefits for
both documented and undocumented workers in the U.S. in the past.”4849 Furthermore,
SSA notes that the unprecedented six-fold increase in this number (300,000 by 2050)
takes into account recent increases in immigration and visas. SSA’s response
includes (but is not limited to) the following:
4647
GAO-03-993, p. 17.
4748
The full text of SSA’s comments are provided in Appendix II of the GAO report.
4849
GAO-03-993, p. 27.
CRS-17
!
!
!
!
!
Not all unauthorized Mexican workers work in Social Securitycovered jobs. Those who are employed on an unofficial basis (i.e.,
paid cash in the “underground economy”) do not qualify for benefits
(with or without a totalization agreement) because their earnings are
not reported for Social Security purposes. SSA notes that the
percentage of unauthorized workers who could become eligible for
benefits is more limited than GAO suggests, because GAO does not
include this group of workers in their discussion.
!
GAO found that SSA’s proxy for the number of individuals who
initially would receive totalized benefits under the agreement (i.e.,
the number of Social Security recipients currently living in Mexico)
seems low and bears no direct relationship to the estimated number
of current and former unauthorized Mexican workers in the U.S. and
United
States and their family members. SSA maintains that this is a
reasonable proxy
and points out that the 50,000 Social Security
recipients currently
living in Mexico include Mexican citizens who
qualified for benefits
based on unauthorized work in the U.S.
!
United
States.
GAO points out that the agreement could provide an additional
incentive for unauthorized Mexican workers to come to the U.S. In
SSA’s view, this type of behavioral effect would be very small.
SSA contends that most Mexican citizens who come to the U.S. to
work without authorization are young and more likely to be
motivated by current earnings than the prospect of future Social
Security retirement benefits.
!
In evaluating whether the number of Social Security recipients
currently living in Mexico is a reasonable proxy for the number of
individuals who initially would receive totalized benefits under an
agreement with Mexico, SSA used comparison data for Canada, a
country with which the U.S. has had a totalization agreement for 20
years, because it too is a NAFTA trading partner and shares a border
with the U.S. By applying the same ratio of totalized to nontotalized (fully insured) Canadian beneficiaries to the number of
current non-totalized Mexican beneficiaries, SSA came up with an
estimate of 37,000 initial new beneficiaries under the agreement and
determined that the 50,000 proxy was reasonable. According to
GAO, such comparisons between Canada and Mexico are
problematic because of the much higher estimates of illegal
immigration from Mexico. While SSA acknowledges the large
number of unauthorized Mexican citizens estimated to be in the
U.S., it contends that these individuals tend to be young and would
become eligible for totalized benefits well into the future. SSA
points out that the purpose of the Canada/Mexico comparison is to
provide a current estimate of totalized beneficiaries under an
agreement with Mexico.
!
GAO states that error rates associated with SSA’s projections of new
beneficiaries under previous agreements frequently have exceeded
CRS-18
25%. SSA acknowledges that for six of the 11 agreements that
became effective between 1985 and 1994, the number of individuals
receiving totalized benefits in the fifth year after implementation
CRS-18
exceeded their estimates. SSA further points out, however, that
estimates for recent agreements have been high. For example, SSA
overestimated the number of individuals receiving totalized benefits
for the four agreements that became effective between 1992 and
1994. Overall, for the 11 agreements, SSA estimates that their
projections have been within 3% of the actual number.
No-Match Letters
Over the past few years, a policy change at SSA which substantially increased
the number of “no-match” letters sent to employers has received much attention
because of the impact on unauthorized aliens. In 1993, SSA began sending no-match
letters to employers to inform them of a discrepancy between a W-2 form and SSA’s
records. Importantly, as discussed above, receipt of a no-match letter does not imply
that the employee is using a fraudulent SSN; the discrepancy could be the result of
a clerical error. For tax years 1993 through 2000, an employer only received nomatch letters if 10 or more employees had discrepancies and the number of
employees with mismatches equaled at least 10% of the employer’s workforce.4950
For the 2001 tax year, SSA implemented a new policy of sending no-match
letters to every employer with at least one employee with discrepancies on their W-2.
For tax year 2000,5051 SSA sent out approximately 110,000 no-match letters51letters52
compared to approximately 950,000 for tax year 2001.5253 Employers are not required
to respond to or act on the letters; however, under the INA employers are subject to
penalties for hiring or retaining unauthorized alien workers.5354 Additionally, the
Internal Revenue Service can penalize employers for providing incorrect information
on wage forms (W-2’s).5455
SSA sent the letters to make sure that workers would be properly credited with
their earnings, and to combat identity fraud. Due to the controversy surrounding the
increase in the number of no-match letters issued, for tax year 2002, SSA is sending
no-match letters only if 10 or more employees have discrepancies and the number of
employees with mismatches equal at least 0.5% of the employer’s workforce. As of
June 2003, SSA has sent out 110,000 no-match letters for tax year 2002.
49
Some argue that SSA should not reduce the number of no-match letters which
are sent to employers. They contend that SSA should coordinate with other agencies
to locate unauthorized alien workers, and that no-match letters can be a tool to help
50
“Social Security No-Match Letter,” Interpreter Releases, vol. 80, Apr. 7, 2003, pp. 508509.
5051
No-match letters for tax year 2000 are sent in calendar year 2001.
5152
Ibid., p.508.
5253
Sheridan, Social Security Scales Back Worker Inquiries. No-match letters for tax year
2001 are sent in calendar year 2002.
5354
INA §274A.
54
26 U.S.C. §6647.
CRS-19
Some argue that SSA should not reduce the number of no-match letters which
are sent to employers. They contend that SSA should coordinate with other agencies
to locate unauthorized alien workers, and that no-match letters can be a tool to help
55
26 U.S.C. §6647.
CRS-19
reduce the unauthorized population in the United States. Additionally, the no-match
letters may help employers who do not know that the employees’ documents are
fraudulent but would be liable if they were caught employing unauthorized aliens.
Others contend that SSA has no immigration-related enforcement powers, and
it is not SSA’s job to enforce laws. In addition, immigration advocates contend that
tens of thousands of immigration aliens left their jobs or were fired as a result of the
letters.5556 They argue that no-match letters do little to combat unlawful employment
as those who use false documents simply find employment in another company,
increasing the risk of workplace exploitation. Additionally, they contend that some
firms may have experienced a loss of revenue caused by worker shortages or by
terminated employees who do not have employment authorization moving to
competitors. The letters also raised concerns that employers were discriminating
based on alienage (i.e., that an employer who received a no-match letter for a
noncitizen would fire the noncitizen worker without ascertaining if they have
employment authorization).
Legislation in the 108th Congress
H.R. 743: “Social Security Protection Act of 2004”
On March 2, 2004, the President signed into law the Social Security Protection
Act of 2004 (P.L. 108-203). Among other changes, P.L. 108-203 requires
noncitizens to have work authorization at the time a Social Security Number is
assigned, or at any later time, to gain insured status under the Social Security
program, with exceptions. In certain cases, if a noncitizen never had authorization
to work in the U.S., benefits would not be payable on his/her earnings record. This
provision of the new law applies to benefit applications based on Social Security
Numbers assigned on or after January 1, 2004. (For more information on P.L. 108203, see CRS Report RL32089, The Social Security Protection Act of 2004 (H.R.
743).)
H.R. 489: “Social Security for Americans Only Act of 2003”
H.R. 489, introduced by Representative Paul on January 29, 2003, would
prohibit have
prohibited earnings paid to noncitizens after December 31, 2003, from being credited
for benefit computation purposes. Thus, all noncitizens — those working legally and
illegally in the United States — would not have become eligible for Social Security
benefits unless they havehad insured status as of December 31, 2003 (or were to obtain
U.S. citizenship and earn additional earnings credits under Social Security).
55
Sheridan, Social Security Scales Back Worker Inquiries.
CRS-20
H.R. 489 would also terminate
H.R. 489 would have also terminated all existing “totalization” agreements between
between the United States and foreign countries. The bill would authorize new have authorized new
“international”
agreements for the purpose of “resolving questions of entitlement to, and
and participation in, the Social Security system established by [Title II of the Social
56
Sheridan, Social Security Scales Back Worker Inquiries.
CRS-20
Security Act] and the Social Security system of such foreign country.” These
international agreements would behave been required to take into account the
limitations on
crediting earnings paid to noncitizens beginning in 2004, as specified
in the
legislation.
H.R. 489 could have had significant implications for the financial status of the
Social Security system and for workers and their families in terms of eligibility and
benefit levels. Much of the effect would depend on details that are not specified in
the legislation. Issues that warrant consideration include the following:
!
It is not clear whether noncitizen workers (and their employers)
would be exempt from paying Social Security payroll taxes. If so,
(1) what would the impact be on Social Security’s near and longterm financing?, and (2) would noncitizen workers be “cheaper” for
employers potentially displacing citizen workers? If not, (1) what
are the legal implications of requiring noncitizen workers and their
employers to pay contributions on earnings that would not be
credited for benefit computation purposes?, and (2) would it be fair
to require noncitizens to pay contributions when they would be
ineligible for benefits?
!
Noncitizens who have worked in the U.S. legally, but do not have
enough earnings credits at the end of 2003 to qualify for benefits,
would not be eligible for benefits in the future (barring continued
Social Security-covered employment as a citizen or national of the
United States). In such cases, how would contributions already paid
into the system under previous law be treated?
!
Legal permanent residents who have enough earnings credits at the
end of 2003 to qualify for benefits would be precluded from earning
a higher benefit based on continued Social Security-covered
employment. If benefit levels are inadequate for these LPRs as a
result of the restriction, what would the impact be on federal meanstested programs such as Supplemental Security Income?
!
With respect to U.S. citizens who work abroad, how might other
nations respond in terms of the treatment of U.S. workers under
foreign Social Security systems?have depended on details that were not
specified in the legislation.
H.R. 1631: “No Social Security For Illegal
Immigrants Act of 2003”
H.R. 1631, introduced by Representative Rohrabacher on April 3, 2003, would
excludehave excluded earnings of noncitizens not legally authorized to work in the United States
States from being credited under Social Security (i.e., such earnings would not be counted
CRS-21
have
been counted for benefit computation purposes).5657 The exclusion would apply have applied
to all such wages
and self-employment income earned before, on or after the date of
enactment. The
bill would requirehave required the Commissioner of Social Security to
recompute benefits to the
extent necessary to carry out such amendments. The recomputation would affect
benefits payable for months after the date of enactment.
Because H.R. 1631 would preventhave prevented aliens from gaining eligibility for Social
Social Security benefits based on unauthorized work in the United States, some argue that
that the bill would preventhave prevented individuals who violate immigration law from being
being “rewarded” for their improper behavior. They further argue that, currently,argued that potential
eligibility for Social Security benefits (for themselves and their family members)
makes illegal migration more attractive. Others contendcontended that, because Social Security
Security is an earned entitlement, workers who pay into the system should receive benefits
benefits regardless of their immigration status. Like H.R. 489 (discussed above),
H.R. 1631
could have had a significant impact on the financial status of the Social
Security system
and on individuals, including current recipients. Much of the effect would depend
would have depended on details that arewere unspecified in the legislation.
56
As discussed above, an alien may be authorized to be in the United States, but not
authorized to workLegislation in the 109th Congress
H.R. 98: “Illegal Immigration Enforcement and
Social Security Protection Act of 2005”
Introduced by Representative David Dreier on January 4, 2005, H.R. 98 would
mandate that social security cards include encrypted machine-readable electronic
identification strips, and a recent digitized photograph of the individual to whom the
card is issued. The bill would create an Employment Eligibility Database (EED) in
the Department of Homeland Security that would contain information on aliens
authorized to work in the United States. The bill would mandate that the
57
As discussed above, an alien may be authorized to be in the United States, but not
authorized to work.
CRS-21
identification strip on the Social Security card be designed so that employers could
use the strip to gain access to the EED (through a phone verification system or a cardreader system) to ascertain whether the alien has employment authorization. The bill
would create civil and criminal penalties for employers who fail to comply with the
EED verification procedures, and hire an alien without work authorization.
CRS-22
Appendix A: Exception Countries
The following country lists, which are subject to change periodically, are taken
from the Code of Federal Regulations (revised through April 1, 2002) and the Social
Security Administration’s International Program Web page.
Social Insurance or Pension System Countries
The following countries meet the “social insurance or pension system”
exception in Section 202(t)(2) of the Social Security Act:
Antigua and Barbuda, Argentina, Austria, Bahamas, Barbados, Belgium,
Belize,
Bolivia, Brazil, Burkina Faso (formerly Upper Volta), Canada,
Chile, Colombia,
Costa Rica, Cyprus, Czechoslovakia, Denmark,
Dominica, Dominican Republic,
Ecuador, El Salvador, Finland, France,
Gabon, Grenada, Guatemala, Guyana,
Iceland, Ivory Coast, Jamaica,
Liechtenstein, Luxembourg, Malta, Mexico,
Monaco, Netherlands,
Nicaragua, Norway, Panama, Peru, Philippines, Poland,
Portugal, San
Marino, Spain, St. Christopher and Nevis, St. Lucia, Sweden,
Switzerland,
Trinidad and Tobago, Trust Territory of the Pacific Islands
(Micronesia),
Turkey, United Kingdom, Western Samoa, Yugoslavia, Zaire
(20 C.F.R. 404.463)
Treaty Obligation Countries
The following countries meet the “treaty obligation” exception in Section
202(t)(3) of the Social Security Act:
Germany, Greece, Ireland, Israel, Italy, Japan, Netherlands*
(20 C.F.R. 404.463)
*Treaties between the United States and the Netherlands preclude the application of
residency requirements for noncitizens with respect to monthly survivor benefits
only.
CRS-23
Totalization Agreement Countries
The following countries meet the “totalization agreement” exception in Section
202(t)(11)(E) of the Social Security Act. The effective date is shown for each
agreement.
Australia
Austria
Belgium
Canada
Chile
Finland
France
Germany
Greece
Ireland
Italy
South Korea
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
October 1, 2002
November 1, 1991
July 1, 1984
August 1, 1984
December 1, 2001
November 1, 1992
July 1, 1988
December 1, 1979
September 1, 1994
September 1, 1993
November 1, 1978
April 1, 2001
November 1, 1993
November 1, 1990
July 1, 1984
August 1, 1989
April 1, 1988
January 1, 1987
November 1, 1980
1985/1988*
* Provisions that eliminate double taxation became effective January 1, 1985;
provisions that allow persons to use work in both countries to qualify for benefits
became effective January 1, 1988.
Note: Agreements with Austria, Belgium, Germany, Sweden and Switzerland permit
the individual to receive benefits as a dependent or survivor while a resident in those
countries only if the worker is a U.S. citizen or a citizen of the country of residence.
A description and the complete text of each agreement are available on SSA’s
website at [http://www.ssa.gov/international/agreement_descriptions.html].
CRS-24
Appendix B: Definition of Lawfully Present
The following is the definition of the term “lawfully present” aliens for purposes
of applying for Title II Social Security benefits under P.L. 104-193 (the Personal
Responsibility and Welfare Reform Act) as defined in 8 C.F.R. 103.12.
An alien who is lawfully present in the United States includes:
(1) A “qualified alien” as defined by the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (PRWORA);5758
(2) An alien who has been inspected and admitted to the United States and who
has not violated the terms of his status;
(3) An alien who has been paroled58paroled59 into the United States pursuant to Section
212(d)(5) of the act for less than one year, except: (i) Aliens paroled for deferred
inspection or pending exclusion proceedings under Section 236(a) of the act; and (ii)
Aliens paroled into the United States for prosecution pursuant to 8 C.F.R.
212.5(b)(3);
(4) An alien who belongs to one of the following classes of aliens permitted to
remain in the United States because the Attorney General has decided for
humanitarian or other public policy reasons not to initiate deportation or exclusion
5758
PRWORA created the term “qualified alien,” a term which does not exist in immigration
law, to encompass the different categories of noncitizens who were not prohibited by
PRWORA from receiving federal public benefits. Qualified aliens (noted in P.L. 104-193
§431; 8 U.S.C. 1641) are defined as:
(1) Legal Permanent Residents (an alien admitted for lawful permanent residence
(LPRs));
(2) refugees (an alien who is admitted to the United States under §207 of the
Immigration and Nationality Act (INA));
(3) asylees (an alien who is granted asylum under INA §208);
(4) an alien who is paroled into the United States (under INA §212(d)(5)) for a period
of at least one year;
(5) an alien whose deportation is being withheld on the basis of prospective
persecution (under INA §243(h) or §241(b)(3));
(6) an alien granted conditional entry pursuant to INA §203(a)(7) as in effect prior to
April 1, 1980; and
(7) Cuban/Haitian entrants (as defined by P.L. 96-422).
For a discussion of the different categories of noncitizens see, CRS Report RS20916,
Immigration and Naturalization Fundamentals, by Ruth Ellen Wasem. Additionally,
victims of trafficking (T-visa holders) are treated as refugees for the purpose of receiving
benefits.
5859
“Parole” is a term in immigration law which means that the alien has been granted
temporary permission to enter and be present in the United States. Parole does not
constitute formal admission to the United States and parolees are required to leave when the
parole expires, or if eligible, to be admitted in a lawful status.
CRS-25
proceedings or enforce departure: (i) Aliens currently in temporary resident status
pursuant to Section 210 or 245A of the INA; (ii) Aliens currently under Temporary
Protected Status (TPS);5960 (iii) Cuban-Haitian entrants, as defined in Section 202(b)
P.L. 99-603, as amended; (iv) Family Unity beneficiaries pursuant to sectionSection 301 of
P.L. 101-649, as amended; (v) Aliens currently under Deferred Enforced Departure
(DED); (vi) Aliens currently in deferred action status pursuant to Service Operations
Instructions at OI 242.1(a)(22); (vii) Aliens who are the spouse or child of a United
States citizen whose visa petition has been approved and who have a pending
application for adjustment of status;
(5) Applicants for asylum and applicants for withholding of removal under
Section 241(b)(3) of the act or under the Convention Against Torture who have been
granted employment authorization, and such applicants under the age of 14 who have
had an application pending for at least 180 days.
An alien may not be deemed to be lawfully present solely on the basis of the
Service’s decision not to, or failure to, issue an Order to Show Cause or solely on the
basis of the Service’s decision not to, or failure to, enforce an outstanding order of
deportation or exclusion
59.
60
For more information on TPS, see CRS Report RL20844RS20844, Temporary Protected Status:
Current Immigration Policy and Issues, by Ruth Ellen Wasem.