Social Security: Alien Beneficiaries

SOCIAL SECURITY: ALIEN BENEFICIARIES (AZCHIVED--li/~l/G?! ISSVE BETEF NUKSES I E E Z 3 C 1 AUTHOR: D a v ~ eS. K O L = Z Edccation an6 Fcblic Welfare 3 i v ~ s l o n T K E LIBRARY CF CONGRESS CONGRESSIGNAL RESEARCH SERVICE KhJ3R ISSUES SYST5N CATE ORIGINATED 01/05/&2 3 6 T E U P G A T E 3 LG/18/83 Mounting concern a b o u t the payment of social security S e n e f i t s to a l i e n s living abroad resulted i n the enactment of legislation this year adding n e w restrictions o n t h e payment of benefits to certain a l i e n s , P.L. 98-21. S A C X G R O U N Z A N 3 "LICY ANALYSIS S e c e f i c ~ a r i e s Abroad Under t h e l a w prior to enactment of t h e Social Security Amendments of 1 9 8 3 fF.5. 98-21), there w e r e restrictions on the payment of social security iiowever, in practice, c e c e f ~ c sto aliens r e s i d i n g outside of the U.S. jenefits ware scspendad in only a relatively small number of c a s e s . -- a b o u t tc m o r e than 1 6 0 , 0 0 0 l , 2 0 0 in December 1 9 7 9 -- while benefits were paid aliens l i v i n g in more than 200 countries. S o m e Members of Congress expressed social security benefits abroad w a s causing a concern that payment of sigzificant drain on t h e social security system a t a time when i t was having A major a d d i t i o n a l concern was that s o m e serious financial problems. beEefizs abroad were being obtained through fraud and abuse. Yet a n o t h e r ccncern was that a l i e n s who live a n d work i c t h e U.S. legally may work here ;as? l o n g enough to earn the minimum number of q u a r t e r s of c o v e r a g e r e q u i r e d , ret2rn to their n a t i v e c o u n t r i e s , marry and have c h i l d r e n , a n d then c o l l e c t social security benefits for themselves and t h e i r d e p e n d e n t s f o r many years. In such c a s e s , bcnefits very qcickly exceed the, relatively small am0unt.s ccntributed a n d benefics a r e paid to persons w h o have no connection with the 5 . 5 . and who did nct depend O R the worker's earnings during the time he Critics a l s o . argued that s o c i a i 2::rked i n covered employment in the U.S. security i s intended to assure a d e c e n t standard of living f o r disabled an.d '-- =- -- -- r e c ? s r s o c c -7~ c c c z r ? ~S,u z z n z t some 2eneflz:zr:es n z v e Seer using :2e S e n e f l z s cc live i n corr~parazive luxury abroad ic couctries with l o w e r szandards of living. In a n Aug. 1 9 , 1 9 8 1 press ~ n t e r v i e w , social securlty C o m R ~ s s i o n e r J o h n A. Svahn stated that he had become a w a r e of ways i n whlch some o v e r s e a s 2 e n e f ~ c ; a r l e s a r e "cheac;ng the system." Among t9e problems c ~ t e d by Svahn &,ere cnrepcrzed d e a c h s , f a k e adoptions and m a r r i a g e s , and cnrep3rzed work azclvity. He sald t h a t SSA i n v e s t ~ g a t o r shad found c a s e s ;n whlch benefits were b e ~ n gpaid to people who were a e a e and for d e p e n d e n c s acqulred in "paper a 2 0 p t i o n s v who were n o t really S e ~ n g supported by t h e recipient famlly. 3enef:claries in certaln c o u n t r ~ e s ,h e malntalned, have " a higher degree of marriages, adoptions by grandparents and ocher ruses. " ?ay-December According c o S v a h n , such problems a r e particularly a c u t e in M e x l c o , I t a l y , Greece and z n e P h i i i p p l n e s , where l a r g e numbers of b e n e f ~ c l a r l e - sreslde. He also said that in s o m e couctrles " t h e r e 1 s a k ~ n daf ~ n d ~ s t r yb u ~ l t s p of -2-called claircs-f~xers w h c , fcr a percentage of the b e n e f ~ t , wlll wcrk to e sure tht s o m e ~ o d yg e t s the m a x ~ m u m b e ~ e f i t they can p c s s ~ b l y get o11z of t h e :~'~cerr. f~ In 1 9 e 1 , 313,000 soclal security beneflclarles llved abroad.... are not-U.S. Most b e n e f i c ~ a r ~ e ls i v ~ n gabroad. ci:~z.ens. Alrens accour.ced for 6 6 % of Seneflciarles llving abroad in 1981. T h e a v e r a g e allen beneflciary llving abroad i n 1961 had worked fewer years I n s o c ~ a lsecurity-covered e m p l o y m e n t , had pai2 l e s s taxes, a n d had more dependents ,,,an i = h e average ;oclal a e z s r ~ t y 3enef:c~ary . . . . Eecause the Socla; S e c u r ~ ~Act y provlaes f o r paying beneflcs to the wage earners' dependents and t h e beneflt fOrTUla provides a higher wage replacement r a t e tc the short-tern 19w-lncome wage earner, allen b e n e f i c l a r ~ e s a r e more ll.iely te receive proportionately m o r e beneflts per rax dollar pald t3an tne a v e r a g e b e n e f ~ c ~ a r y . .. 4- S p e c i f i c a l l y , with respect to dependents, G A O f o u ~ dthat: Allen depencenzs o u ~ n u m b e rwage earners by 160 co i S C , ic marked c c n ~ r a s ttc 5C 2ependents per 1 3 C wage earners :n the overall beneflciary populaticn .... ...a b o u t 56,OOC (or 34%) of t h e 1 5 4 , 0 0 0 d e 3 e n d e n t s l i v ~ n gabroad ln 1 9 6 1 were added t o the benefrt r o i l s a f t e r the wage earner began receiving b e n e f ~ t s . Of t h e dependents a d d e d , a b o u t 51,000 w e r e hllens. We estimate that a b o u t 91% of a l l dependents abroad whc were added to tne rolls after a wage earner's retlrernent were allens. And a b c u t 52% o f . t h c s e allens were added a s a result o f the wage earner's qetting marrlea or h a v i n g or adoptlng c h ~ l d r e nafter retlrement. T h e r e m a l n d e r were added primarily becacse the spouse reac3ed r e t ~ r e m e n ta g e after the retired wage earner or became a n eligi3le wldow. SSA statisclcs c o n f ~ r mthaz a m o n g the o v e r s e a s beneflcrary p o p u l a t ~ o n ,t h e percentage of retired or dlsabled workers I S s m a l l e r , a n d t h e perceRtage of DGDL-Z::-X - ss Zs?ender=s a n 3 sur-;;vors 2 s l z r q e r , ' c o n a m c r g :ne >enef:z:ar-? - Deneficlary a s of 3ecern9er wnoie. The c ? . l s ~ r i ~ u = lof o n ~ e n e f l r so y type , ; 1381 w a s a s follows: r. Benefic4aries abroad T o t a l beneficiaries Retired cr eisabied workers Dependents and Sur-JiVors Iilegai Allens Another ccrcern i s that the l a r g e n:~,Ser of u n d o c ~ n e n t e C z l i e n s z z r r e n t l y k'9rking in the United States cocld lead to l a r g e increases i n f u t u r e S e E e f i t s r e t i r e e s in Mexico -{:ayments abroad. Recent increases in the number cf f r c m 10.6% of rhe beneficiary akrczd popclation in 1971 L O 15.2% 12 3ec2zSer e this possikillty. riP.e ,~ o s t frequently :.9Sl -- pr3vided s o n e e v i d e ~ ~ c of .:ited e s t i ~ ~ a t ecf s the illegal a;is?-, p o p ~ l a t i o r . ir. ~ " 1 sz32ntr:~ ranqe f r o r . 3 CRS- 3 IB82001 UPDATE-l~/18/83 t o 6 million. T h e r e a r e n o statistics on t h e number of illegal5 w h o a r e currently working and contributing to the social security s y s t e m , thereby potentially gaining entitlement to benefits, nor on t h e number who worked in the United S t a c e s illegally i n the past and a r e n o w receiving benefits. X o w e v e r , t h e S o c i a l Security Administration has stated that t h e n u m b e r of i l l e g a l alien workers earning social security coverage should decrease i n the f u t u r e a s a r e s u l z of the stricter regulations for o b t a i n i n g social security n u m b e r s promulgated by SSA i n 1978. A 1 9 8 0 study by D a v i d North of t h e New Transcentury Foundation reported some evidence indicating that these stricter roqclacions D a y have reduced t h e nnmcer 2f social securicy nzmbers issued t 3 million new newly arrived illegai migrants. in 1 9 7 8 a n d 1 9 7 9 , only about 5 in 1977. n u m b e r s were issued each y e a r , a s compared to more than 7 million [ s o u r c e : North, DavlC S. Immigration and income transfer policies i n the Washington, D.C., New United S;aces: analysis of a non-reiationship. TransCeritury ~ o u n d a t i o n ,1982.1 T h e amounc of s o c ~ a lsecurity taxes paid by iilegal a l i e n s nor known. While not directing i t s findings specifically a t w o r k e r s , the G A O report stated that: . each y e a r i s illegal a l i e n T h e average a l i en Seneficiary llvrng a b r o a d i n 1 9 8 1 had earned about 3 9 quarters o f social security credits S e f O r e r e c i r e m e n Z . o r onset of disability. This is equivalent K O 9.8 y e a r s of social security-covered employment. T h e a v e r a g e social secnrity beneficiary i n 1 9 7 8 k a c earned 8 2 quarters of social security credits, o r a n equivalent of 20.5 years of employment . . . . T h e skorter a v e r a g e work history in social security-covered employmenc i s partly reflected in the a l i e n s ' lower a v e r a g e FICA tax payments'. Aliens on the r o l l s in 1 9 8 1 , on t h e average, paid an estimated $ 1 , 2 3 2 i n taxes before they began receiving social security benefits, compared to a n average of $ 2 , 1 7 0 for a l l beneficiaries. T h e amount of benefits a l i e n s have received relative to their FICA t a x payments has been substantial. We ? a C received esciraz?c zna: 72s ~ v e r a c erl;ez fap,::? - . a S O u = 5 2 4 i n Bene;irs for every $1 in FICA taxes paid before retirement. It a l s o h a s been suggested, however, t h a t ~ l l e g a l a l l e n s may contrlSuce m o r e to tae system than they t a k e from it. F o r ~ n s t a n c e , t h e North study estimateC tnat ~ l l e g z la l i e n s contribgte f r o m $ 5 9 C million to $ 1 . 7 blllion to = h e s a c ~ a 1securlty system each year I.Source: b i d . p. 27-28]. bccord~ng ;o S S A , it 1 s reasonacle to a s s u m e that a s a g r o u p , u ~ d o c u m e n c e d a l i e n s w o r k i n g in t h l s country 11iegal;y may S e contrrbutlng more z o t h e program t h a n they wlll receive ln beneflcs because: (1) many - 1 1 1 e g a l a l l e n s a r e y o u n g , work h e r e f o r a whlle and pay soclal securlty t a x e s , but do n o t work (2) many probably use l o n g enough to become ellgible for benefits, and f r a U C u l e r t social security numbers belonging to someone else so that they d o R O C receive earnings c r e d ~ t sin SSA's r e c o r d s for the taxes the-y pay. Even c h o s e W i ~ hl e g l t ~ c a t enumbers m ~ g k tnot c l a ~ r n Senefits becadse of f e a r of 5 S l i n g wlch a government agency. .Another stuCy conducted f o r the Select Commission oc Immigration and r e f u g e e P c l i c y , bihich issued i t s fir,&: r e p o r t in 1 9 8 1 , exznined d a ~ a from a 1 . 2 7 6 Censcs Bureac survey o f ' t ~ eIncorce of and use of social s e r v i c e s b y over L S G , 0 0 0 f a s i l i a s , includizq &bsct 1 5 , S C 3 immiqrant f a c i l : ~ ~ . T h e r e s e a r c h e r s - concladed frort? toe d a t a t h a t , g e n e r a l l y , "immigrants contribute m o r l to the public coffers than they take." [ S o n r c e : Simon, J n l i a n L. What immigrants Select C o m m i s i o n on take f r o m , and give t o , t h e public coffers. In U.S. Immigration and Refugee P ~ l i c y . 3.S. Immigration a n d the National Interest; P a p e r s on Legal Immigration to the United States, Appendix D to the Staff 1 9 6 1 , pp. 224-2261. Report. (Washington, D . C . ! Arguments Kade Against Further Benefit Restrictions Legislation rescrlcting the e i i g l b i i ~ z y of a l i e n s for s o c i a l securzty becefits because they l i v e ontsi2e t h e U.S. has been opposed by some o n several grounds. F i r s c , it is sometimes viewed a s unfair to restrict t h e .-A-,,mstances under which jenefics a r e paid to certain wcrkzrs acd :heir iamily members when those workers w e r e reqcired to pay the social security . T h e y a r g u e c3at workers who a r e required to pay the t a x ckroughont zheir careers i n t h e U.S. s h o u l d . b e eligible to r e c e i v e monthly Seneiits withou: regard to citizenship, legal s t a t u s in the U.S., o r a b s e n c e from t h e U.S. P r o p o n e n t s of t h i s "earned r i g h z " principle a r e particularly concerned a o c u z protecting t h e S e n e f i c rights of persons who lived and worked i c t h e 5 s . for mazy years and whc made plans fcr reziremen: Sased on expeczea social security benefits. 7.: -3.. A second major objection to a d d i n g n e w r e s t r i c t i o ~ son t h e circumstances in xhich benefits can be paid to a l i e c s living a b r o a b i s t h a t they couid :3rompt other nations t o retaliate Sy imposing r e s t r i c t i o ~ s on t h e eligibility sf U.S. citizens living abroaC f o r benefits paid u n d e r - f c r e i q n social 3ecurizy systeas. Other nations could retaliate by cutting off S e n e f i t s to ~ e r s o n slivinq in the U.S. who presently receive benefits provided under f c r e i g c social security systems. Although 2omplete d a t a i s n 9 t a v a i l a b l e , the f o l l o w i n g statistics for selected countries show t h a t c o n s i d e r a b l e s u m s .;f mcney a r e paid b y ' f o r e i g n s y s t e ~ ~to s persons l i v i n g in the U.S. (See ..?aSleI.) T a b l e 1. Social Security/?ension Benefits Paid in i h e U.S. by Seleczed Foreign Couctries Beneficiaries country D c l l a r s (annual) Austria 1 / Canada 316 -&qe 3sccr:;:Canadian ?ensiol ?;an Quebec Pension T i a n West GerKany 2 / -, ,/ I Poland 2 / UnizeC Klcqdom / F/ TOTAL: i - / Figures f o r 1985. 137,933-143,177 $364,583,353 ,' F ~ g u r e sf3r 19e1. Source: O f f i c e c f l o l ~ c y ,Soclal Securlty A d m i n l s t r a t l o n , March 1962. 2 - CRS- 6 As American business expands overseas to become part of a n international market a n C a s the i n v o l v e m e n t of foreign businesses i n t 3 e U.S. economy g r o w s , more and more individual workers will h a v e spent part of their careers i n the U.S. and part of their careers in o n e or more other countries. In this c o n t e x t , some o k s e r v e r s believe t h a t it i s more constructive to pursue efforts to coordinate benefits and coverage a m o n g social security systems than to impose new unilateral restrictions on U.S. benefits paid abroad. -n -.,rcucR zroacies c frisnds.?~p, commerce and navi7ation and thr3ugh U.S. has formally a g r e e d to pay social "=o=aiizac:on" a g r e e m e n t s , :he securicy benefits to the nationals of seven countries o n t h e ' s a m e terms that they are paid to our o w n citizens. In r e t n r n , these nations have agreed to 2 r o v i d e eqcal t r ~ a c n e n tto U.S. citizens and rheir citizsns. Additional acreemencs a r e in process with c i n e countries and two of those a g r e e m e n t s (with Canaaa and Selgium) a r e expected c o be i n effect in the near future. In a d d i t i c n , aithocgh n o fornai reciprocity a g r e e m e n t e x i s t s , a b o u t 40 other CounCries pay pension benefits to U.S. citizens who h a v e earned them no matter w5ere they live. T h e s e countries i n c l u d e C a n a C a , M e x i c o , , and t h e Phil~ppines. i .kith ... r e s p e c t co restrictions on social security benefits paid to illegal alie~.s living in t h e U.S., the primary objection seems tc be the imposition o n the Social Security Administration of a n c c h e r major administrative task which i s perhaps better performed by = h e immigration authorities Other ider.tifying a n d taking l e g a l action a g a i n s t illegal a l i e n workers. cci!cerns have to do with t h e fairness and/or constitutionality of ccllecting = a x e s from z h e n e w o r k e r s , but denying them benefit eligibility. -- LZGISLAYON Nh' TEE 9 6 T X CONGRSSS T n e major soczal s e c u r ~ t yflnanclng leglslaclon enacted ;n Aprll 1963 9e-2i), t h e S o c l a l Securlty Amendments of 1 9 8 3 , lncluded several provlslons affecting allens. As parr of the provlslon t o tax a porclon of - - - - - ; e c ~ r r z y - o ? e f - t s , 3 G ? = f s?e-talf s f 3 ~or.res:zer!z =,,-=l 21-29'5 s ~ c ~ a l secnrlcy D e n e f i ~wi;l D e w ~ t h c e l d beglnnlnq ~n 1954. T n e r e a i s o was a ?rovrslon r e s t r l c t ~ n g the ellglbility of certaln nonresident a l l e n s seeklng soclal securlty benefits a s depecdents or a s survrvors of a n lnsured worker. Allen wcrkers s e e k ~ n gbeneflts based on their own U.S. work r e c o r d s w e r e n o t Sy the n e w law. (?.;. lssce 2 5 e l ~ g i b ~ l ~ cofy a l i e n s fcr benefits Leqislative a c t ~ o nO R E'Z ,legan ln the S e ~ a t eF ~ n a n c eCornKlttee which adopted a n a m e n d m e n t to S. 1 (the S e z a t e version of the social securlty f z n a n c l n g package) to restrict the survivors r a y m e n t of beneflts to allen workers and to their dependents and ;ho reslded a ~ r o a dfor more than 6 mcnths. Under the F l n a n c e C O m m l t t e e t s m s a s u r e , beneflts were to be pald only ~f t h e worker w a s a cltlzen of a courtry wlth whlch the United states had a treaty or t o t a l l z a t ~ o n agreement. F k r t h e r , even under these circumstances, benefits were to be paid to the wage earner and dependents only untli they eqnalleC the a m o b n t of social securlty taxes payable by the wage earner ?lus ~ n t e r e s t . T n ~ sprovision was to apply ~o persons becomlnq newly ellql2le for benefics on or afcer Jan. 1 , 1985. ,. addltlon to z h e s e r n e a s ~ r e s ,a floor a m e n d m e n t ~y Senator Klckles was z ~ ~ p z eproviding d that wnere Deceflciaries were cnCer finai c r d e r s of C':C~LS:=" 3r dfportat:oz, cr k a C a g r e e 2 :o vclcnzary Cepart-ire 12 I i e c cf T de?ortation from t h e U.S., and it could be shown by t h e Attorney G e n e r a l thac they earned social security credits durirg periods of illegal w o r k , t h e earnings cre6itS from t h a t Work could not be used i n computing social security benefits, thereby potential eliminaticg benefits. T h e provision further prohiSited t h e payment of s o c i a l security benefits for to noncicizens who were unable = o establish at the t i m e they applied benefits that t9ey had ever been legally admitted t o work in t h e Ucited States. - h e s e ; i m ~ = a t i o n s were lnclnded in X . 2 . 1900 a s p a s s e s by = n e Secate o n 1 a s reported o u t of the Flnance Mar. 23, 1983 (the provisions of S. CoKmrttef were s u b s t ~ t u t e d early ln = h e Senate floor a c t i o n for those in t h e L LA.^ :<scse-passed. versloz of E.2. 19.00 w2en ~t was taKen c p on h e floor). Ycuse-passed v e r s ~ o n of H.R. 1900 has no sirr.ilar restricclons. 7 7 eocferees from the X o u s e and Senaie agreed on a f i n a l version of E.R. 1 9 0 0 recommendations, a compromise on Mar. 24, 1 9 8 3 , including among i t s many provision t h a t callee f o r suspending t h e payment of benefits to a n y a l i e n receiving benefizs a s a dependent o r survivor of a n i n s u r e d worjrer (whecher c r not t?ie worker is a 2.S. citizen) wten = h e allen Seceficiary has j e e n outside the U.S. for s i x consecutive calendar months. Alien auxiliary jeneficiaries whs could prove thak they iived in the U.S. for a tctal of a t least f i v e years dcring which their relationship with the worker w a s the same a s = h e relationship upon wh-ich eligibility for S e n e f i t s was based' (e.g., spouse, child, parent) would be exempt from the suspension of benefits. ,.,-dren would be deemed t o meet the 5-year residence r e q u i r e m e n t if the residence requirement could S e met by their parents. - The cocference a g r e e m e n t was a g r e e C to by 30th H o u s e s o n the same Cay. Idas signed i n t o law by President Reagan on kpr. 2 5 , 1 9 8 3 ( P . L . 98-2i). . . - 4 Q F . - l . F % - a F - w- , -. 2 - . ,,,=rzensr.-=! .- IS ?cz T~UL:T?~ 12r ~ O C P L Z E It '3: ?nefits unaer =fie G l d A g e , 3crvivor.s a n d ~ ~ S ~ C L -Ixscrance L L ~ prograE. Ar,y ,.-I~en1i-i the U . S . -- wnether ln t h e United States legally or i l l e g a l l y , o r a s a permanent o r temporary resldent -- 1 s ellgible for benefits provlded he h a s engaged ln covered employment and otherwise meets the eligibility -equlrements (i.e., a g e , disabrlrty, m i n ~ m u m quarters of c o v e r a g e , etc.). , s p e c d e ~ t s a n 8 s ~ r v ~ v o rasr e also e l l g i S l e fcr benefits regardless of thelr ..nK;qrat;on scatus or that of c3e r n s u r e e w c r ~ e r . m- h e ~ n i y e x c e p t i o n s : c - h ~ s general r ~ l ea r e f o r three categories of nonimmlgrant allens: foreign -t;dents, exchange visitors, and temporary foreign a g r l c ~ l t u r a i w o r k e r s ( P I , ( J ? , and H , r e s p e c t r v e l y , of the -l5rnltted under subparagrapns ' , ~ . ? l i g r a t ~aonne Natlonallty A c t , who a r e specifically excluded from c o v e r a g e ( ' 5 U.S.C. 3121(5)). T h e s e workers d c n o t pay the s o c i a l security tax a n d + > - f Rot ellgible for benefits. Nc daca a r e m a r n c a ~ n e d on t h e number of ailen soclal senur~ty ?cneflCiarres reszd.;ng l n the 'Jnlted States. L r k e w i s e , no data a r e a v a i l a 5 l e tke number. of aller,s, whetker l e g a l or ~ l l e g a l ,w h o a r e worklng ln = h e ::eC States &nC paying ~ n t oz h e system. I CRS- 6 IB82001 U?DATE-LC/~~/~ persons o u t s i d e t h e United States who a r e not U.S. citizens or nationals. Under Section 202(t) of the Social Security A c t , enacted i n 1 9 5 6 , benefits This a r e not payable to a l i e n s living abroad f o r 6 months or more. restriction on t h e payment of benefits a p p l i e s to a n insured worker w h o i s a n a l i e n , a s well a s to a n y of his dependents or survivors who a r e aliens. T h e r e a r e several broad exceptions to this restriction, h o w e v e r , that r e s u l t i n i t s affecting only a small number of a l i e n s and their dependents. As a result of t h e most recent social securlty amendments (March 1 9 8 3 1 , s ~ r o a d who aca1:fy Ancer these Seneflzs r e 3apendenzs of a l ~ e c s 1:-~:ng exze?trons a r e s u b j e c t to a n e w restrlztion. Dependents' beneflzs cannot be paid for more zhan 6 months under a n y circumstances unless i t can S e shown tnat (1) the dependent haS liveC ~ n r,Pe U.S. f c r a t least 5 years and (2) his cr her relaLi0nsk:p With z h e ~ n s u r e d worker during tnat perlod was z h e same a s the relationship cn whlch the depenaent's beceflts a r e belng pursued. seeking benef:ts on the lnsured worker's (For i n s z a n c e , if a spouse IS r e c o r d , t h e spouse had to D e marrled L O che worker for a t l e a s t 5 years w h l l e he or she reslded ~ n the U.S.) If child's beneflts a r e belng pursueC, t h e ehlld a l s o must meet the 5-year residency r e a u l r e m e n t , except where the parents can meet ~ t (bozh musc meet it if there a r e two). F u r t h e r , lf t h e LF.:lC :s a a c p t e Z o u z s i d e of the U.S., n o benefits can be pale. These res;rlctlons a p p l y t o those becoming ellglble l n 1 9 8 4 or later. rn A l s o , under t h e n e w l a w , 30% of one-half of t h e social security benefits sf nonresident a l i e n s will be withheld beginning i n 1984. T h i s i s in conformity with a n existing provision of t h e t a x code. Under section 6 7 1 of the Ixternal Revenue C o d e , the U.S. income of all nonresident a l i e n s i s suSjezt to income t a x a t a flat r a t e of 3 C % , unless a lower r a t e i s fixed b y zrezcy. To c a p t u r e tax that otherwise would not be paid -- because n - n r e s i d e n t a l i e n s ordinarily don't f i l e tax r e t u r n s -- t h i s t a x i s withheld from every dollar o f the individual's U.S. incsme. Because t h e U.S. 'Gsvernxent does not k n o w the a m o u n t of other i n c o m e of t h e s e individuals .on .. ~nicr! to base a tax rate., an arbitrary r a t e cf tax (i.e., 30%) was set. Z e f o r e P.L.. 9 6 - 2 1 , social security was not included in t h e definition of income under t h i s provision because S S benefits were n o t taxable. The new cf social secnr;zy 2eeef;rs rc =zxa:;oz z n e r d z e n t s s 2 5 J e c z L? = o one-?.a:: caginning ic 1 5 8 4 , so hereafter social security Seneflts will be treated in a nanner similar to other pension i n c o m e paid to nonresident aliens. However, for everycne besides nonresident a l i e n s , social security benefits a r e t a x a b l e only if the recipient's other income plus one-half of social security S e n e f i t s exceed 'certain amounts ($25,000 f o r s i n g l e i n d i v i d u a l s , $ 3 2 , 0 0 0 f o r -d,'ples). ,- ,, These t h r e s h o l e amounts a r e not applicable to nonresident aliens.. -- h e net effect of P.L. 9 8 - 2 1 , t h e r e f o r e , i s simply tc cct benefits z c XcnreSiCent aliens b y a total of 1 5 % (3C% of half their Senefits). - T k e reason Congress excluded nonresident a l i e n s from t h e thresholds was ciat there is no practical way to determine their income -thus, it w a s decided that the best way to ensure that nearly all the tax that should be ? d i e will be paid w a s to withhold from t h e f i r s t dollar of benefits. A n i s s a e raised E y = h i s provision i s kihether it i s equitable tc treat :,.onresident aliens in t3is manner. For everyone e l s e , initially only "high" - n e o m e w individuals a r e taxed. Nonresident a l i e n s , some of whom may in f a c t r d v e l i t t l e or no cther i n c o m e , a r e taxed from the first dollar of benef,its. --;:b?ever, the s l t e r n a t i v e i ~ most c a s e s would have been to a s s u m e that all '.-iens 1ivir.g o u t s i d e the L'.S. have incomes S e l o w the thresholds (effectively .: 7 .-..,-, ,-;., theX f r c ~the taxaticc ~ r c v s i c n j , a n err52eccs assumptlcc a n C 7.--1 1. A CRS- 9 I382001 ~ ~ ~ ~ ~ ~ - 1 3 / 1 8 obviously unfair to other social securities beneficiaries who must pay t a x on their benefits. Exceptions to Restrictions An alien w h o 1 s a cltlzen of a f o r e ~ g ncountry that h a s a social inscrance s y s t e m , under which benefits a r e payable wlthout restrict lo^ to eligible U.S. c ~ t l z e n swho a r e outslde chat c o u n t r y , can receive b e n e f l t s beyond 6 months. ; ._ ~ c r s l s s :i z a c z z r ~ s st f i z t a e e t -5:s "socral insurance e x c e p z l o n n a r e Canada, Z r a n c e , M P X ~ C O ,t n e P h i l ~ p p l n e s ,a n d z n e United Kingdom. Thls e x c e p t ~ o n , however, d o e s no= pertaln t o dependent's benefits -- t h e 6 month l ~ m l t s t ~ l i a??lres. -- S e n e f i t s a l s o a r e not withheld (either from f h e w o r k e r or his dependents) where such withholeing would be concrary to a treaty obligation i n existence cn Bug. 1 , 1 9 5 6 , Setween t h e United States and t h s country of which the T h e s e countries are t h e F e d e r a l beneficiary i s a cicizen o r nationai. Ze?ublic of G e r m a n y , G r e e c e , I r e l a n d , I s r a e l , I t a l y , Japan and Nicaragua ( a n d , for survivors' benefits o n l y , the Netherlands). T h i s exception a l s o the 5.S. has social. securizy pertains geLerally 2 0 countries with wliom totalization a g r e e m e c t s (currently, G e r m a n y , Italy a n 8 Switzerland). If t h e a l i e n worker has z total of a t l e a s t 40 q u a r t e r s of s o c i a l security c o v e r a g e , c r resieed i n the United States for 1 0 y e a r s o r m o r e , benefi5s CoErinue even if the alien beneficiary remains o u t s i d e t h e United S t a t e s for 6 months or more. However, if t h e beneficiary i s a ci';,,zen of a country t h a t djes not provide for f u l l social insurance payments to eligible U.S. citiqens who a r e o u t s i d e that country, the nonpayment provision applies r e g a r d l e s s cf residence. Examples of such the 4 0 q c a r t e r s of coverage or 10-year U.S. c ~ u n t r i e si n c l u d e Eungary, I c e l a n d , L i b y a , New Z e a l a n d , R u m a n i a , Union of Soviet Socialist R e p u S l i c s , . U r u g u a y , and ZamSia. , F u r t h e r m o r e , n o beneflts may be pale to i?dlv;duals w h o reslde a a r o a d i n a :ountry that h a s been designated by the Secretary o f . t h e Treasury a s a Country to w h ~ c hpayment of beneflts must be w ~ t h h e l d because there 2 s " n o 3 r n ? r c?ec% a n 5 3 e z z l e r2ascnasle z s s ~ r z z z e :": a rerscr w o ; l 2 r e c e ~ v e2:s L O negotiate ~ t a c f s l l value." Mcst of these c o u n t r ~ e s have C o m m c n i s r governments a n C they ~ n c l u d eA l ~ a n i a ,Z a s t G e r m a n y , North Korea a n d Vletnam. Reporting Requirements f o r Beneficiaries A b r o a e SSA requzres eac? S e n e f i c ~ a r yabroad to complete a questio?.na:re cnce a gear t e s z l f y ~ n g tc f a c t s bearing on z h e benefic-ary's contlnulng e l i g i S i l ~ t y --or benefits. T h e ~ e n e f i c i a r y must slgn the q u e s t l o n n a ~ r e ~ n the p r e s e n c e of an Amerlcan c o n s ~ l a rofflcial o r a responslb;e forergn o f f ~ c l a lw20, in t u r n , certifies to t h e ldentity of the signer and to the f a c t that t h e person has, as far a s t h e official k n o w s , responded truthfully to each question. 'ayments a r e terminated lf a properly completed q u e s t l o n n a l r e h a s not been s u b ~ ~ t t eord! tlme. I n a d d i t i o n , S S A , i n cooperazicn vith the C e s a r t ~ e n : of S t a c e , has a n c,lgoing Frogram of valieation surveys to deternine whether beneflts payments road a r e 5 a s e d sr, adequat-e evidence of encizlement. Validators g o t 3 oreigfi ccuntries a p e F z r e r v i e w ' a selected sample of S e ~ e f i c i ra i e s to s e e i f ,.?.y event whlc?, might a f f e c t entitlement, sczh a s marriage o r work activity, .as c c c ~ r r e d . Special f o l l o w u p investlqaticxs ard Slrecc-ma;: qcfszionnaires a r e used to obtain reports in areas or from beneficiaries where t h e surveys have indicated signifi.cant prblems of f a i l u r e to report. .SSA f i e l d agents have been stationed i n several strategic locations w h e r e l a r g e n u m b e r s of Seneficiaries reside -- Athens, R o m e , F r a n k f u r t , L o n d o n , the P h i l i p p i n e s , and Mexico. Social Security Number Requirements - -~+,t?,ouqc soc-a: ;ecl'-:=y .. ~ 2 x 2 sa r e aald o ' :he Eovernxecr a n e soc~al sscurlty Seneflts a r e paid co ~ e n e f l c ~ a r ~without es regard to a w o r k e r s ' s ~ m m l g r a t l o n s t a z u s , a l i e z status 1 s relevant for t n e pnrpose of o b t a l n x n g a s3c:al securlty number. In 1 9 7 2 , Congress amended t h e Social S e c u r ~ t yk c r t o Dar illeqa; a l l e n s 51-31?, o E ~ a i n ~ nsocra; g securlty numbers ( A c t of Oer. 33, Z n d e r r e g u l a t l o ~ . ~~ s s u e d ln 1 9 7 8 , the 1 9 7 2 ; P.L. 9 6 - 6 0 3 ; 86 Stat. 1329). Soclal Securzty A e x l c ~ s t r a z ~ o n (SSAI r e q u ~ r e s a p p i i c a n t s f o r numbers t c f u r n ~ s tdocumentazion of thelr l e g a l p r e s e n ~ e ~n t h e Cnlzed S ~ a t e s and requlres a personal lntervlew wlth all card seekers o v e r the a g e of 18. Allens who had beec rssued Soszal Seccrlty nunbers p r e v ~ o u s l y w e r e n o t afieczed. CHARACTERISTICS O F 'CREIGN EEKEFICIBRIZS A s of February 1962, approximate.ly $80.8 r~illion w a s being paid m o ~ t h i y to of all beneficiaries outside t h e Uniced S t a t e s , which r e p r e s e n t s about G.7% the totai social securicy benefits paid that month. As of F e b r u a r y 1982, approximately 313,951 social security beneficiaries resided a S r o a C -slightly l e s s than 1% of the rctal beneficiary population of some 3 6 million. According to December 1 9 7 9 statistics, 31% of these foreign beneficiaries were U.S. c i c i z e c s , 52% were non-U.S. citizens, a n d 1 7 % were of unkzown ,.-,zizenship. : 5 o w e v e r , i n several of t h e countries where l a r g e n n m b e r s of beneficiaries reside, the proportion of non-U.S. citizens is larger than the overall average: Mexico Canada Italy Phhilispines Greece Although a l m o s t haif (about 47%) of retired and disabled w o r k e r s living abroad in 1 9 7 9 were U.S. c i t i z e n s , only 35% of dependent and survivor beneficiaries were known to S e U.S. citizens. 1979, Of the 2 1 7 , 5 3 6 workers living ajroad and receiving b e n e f ~ t s 12 for a t least iO 1 5 4 , 7 0 4 (or a S c u t 71%) were known = o have 1lved ir, the :.S. i7ears . fraction of total beneficiaries peaked L n 1 9 7 2 and 1 9 7 3 a t 0.93%, but dropped below .90% i n 1 9 7 6 a n d has remained lower since. O n e possible reason f o r t h e lower growth rate i s che reduced purchasing power of the U.S. dollar r e l a t i v e t o many foreign currencies over t h e last several years. T A B L E 2. Year S o c i a l Security Beneficiaries, Program T o t a l and Total ASroad: a t enC of 1960-1981 Total beneficiaries Beneficiaries abroa2 Source: David S. Nort5. Immigraticn and lncome transfer policies i n che U ~ i t e d States: An a n a l y s i s of a non-relationship. Washingco2, D.C., New TransCentury F o u n d a t i o n , 1 3 8 0 , p. 4 0 ; and Social Security Administration cata. As for i n d i v i d u a l n a t i o n s , for many y e a r s Italy had t h e most overseas beneficiaries, but i t was recently surpassed by C a n a d a and then Mexico. Although benefits are paid to persons l i v i n g in more than 200 c o u n t r i e s , about 9 0 % of beneficiaries abroad l i v e d i n 20 Countries a s of February 1982. (See T a b l e 4 . ) Table 4. Beneficiaries Residing Abroad ~n Current-Payment S t a c n s , ?eebrl~ary198:. Number Monthly amounz ( $ thousanes) Mexico Canada Itaiy ?hll;pslnes Greece Germar?y UniteC Kingdom Israel Preland Portugal Spain Norway France Yugoslavia Sweder, japan Poland Switzeriand Hong Kong ,ca:n;zan 3ewuz;:s 7. All others Source: 30,046 $ 8,607 Social Security Administration, O f f i c e of Research and Statistics. LEGISLATION P.L. 9 8 - 2 1 , H.R. 1900/S. 1 Social Security Amendments of LEGISLATION I N T H E 9 E T H CONGRESS.) 1983. (See preceding section on 3trer meascres ~ ~ t r ~ d u c:ne d= h e 9 8 t n Congress uczrn woule r s s c r : z = 3f P r D P l ~ l tS e n e i i c s z o aliens or non-resldenz allens a r e conzainec l n z n e f o l l o w i n o bills: S. 213 (Lugar), S. 595 (Nickles), H.R. 97 (Duncan), H.R. 8 0 5 (Gyados) , E.R. (Daubj , B.R. 1 2 - 2 (Whltehurst) a n e E.R. 1 5 3 8 (McEwen) . Z E P O R T S A X 3 CONGRESSiONAL D O C U M E N T S U.S. Congress. Conference C o m m i t ~ e e ,1983. The Social Security Amendments of 1 9 8 3 ; conference report. Mar. 2 4 , 1 9 8 3 ; Washingcon, 3.S. Govt. Print. Off., 1983. (98th C e n g r e s s , 1s: sesslon. Eouse. R e p o r t no. 9 s - 4 7 ) S Congress. Senate. C o m m i t t e e on Finance. T h e S o c i a l Security A C K Amendments of 1 9 8 3 , S. 1 ; - r e p o r t . Mar. l i , 1953. Wash;ngton,'-5.S. Govt. Print. Off., 1983. (98th Congress, 1 s t session. Senate. Report no. 96-22) 77 . A 3 D I T I D X A L R E F E R E K C E SOURCES F r a n c l s , David R. T h e social-securlty bind: immigrants the lC. sclution? Christian S c l e n c e monitor, July 2, 19E1: L c g a r , Zishard. Payment of social seeurlty benefits to ailens. Congresslona: record [ d a l l y ed.j v. 1 2 8 , Jan. 2 6 , 1982: S62-S63. - ; g h z s of a l l e n s zo s o c ~ a ib e c e f ~ t s . Interprezer E c r c h e c ~ ,Ted. ~ r e l e a s e s , v. 5 7 , May 3 0 , 1980: 259-265. N i c k l e s , Don. Social Security Act Amendments 0 5 . 1 9 8 3 . COngreSsiOnal record [ d a i l y ed.] v. 1 2 9 , Mar. i 8 , 1983: S3352-53362. ~ o r t h ,David S. Ircrnigration a n e income transfer pclicies rn the United Stazes: An a n a l y s i s of a n o n - r e i a t i o n s h i ~ . Washington, 7 4 p. X e w . T r a n s - C e n t u r y F o u n d a t i o n , 1982. ----- Interactlcns between ~ l l e g a lallen respondents a n d :he soclal securlty tax system: Some p r e l ~ x l n a r y f l n d ~ n g s . W a s n ~ n g t c n ,New TransCencury F o u n d a t ~ o n , 1976. 2 6 p. Khat inmigrants ta:%e f r c m , and g i v e t o , che S i z o x , ;ulian L . pcE1i.c coffers. I n U.S. Select Commission or. ;rnrr.igracFor, and R e f u g e e Policy. U.S. Immigration and t9e n a t i o n a l i L t e r e s t ; ?apers zr lega; imRigratior. to the :nitel S ~ a z e s , Arpencix D to che staff repor:. ! W a s b i n g t c c , 2.C.: 196:. G . 223-251. Sociai security g o e s abroad to the dead. Aug. 20, 198i: A23. U.S. . - -. Washington post, General Accocnting Office. issues concerning social security benefits paid to aliens. Report to t h e Congress by t h e Comptroller G e n e r a l of the United States. 25 p. Washington, U.S. Govt. Print. Off., 1983. " G A G HRD-83-32, Kar. 2 4 , 1 9 8 3 " i25rary of Congress. Congresslonal 3esear.cn Service. Alien eligiSFlity r e q u ~ r e m e n t sf o r major F e d e r a l assistance programs : b y ] Barbara ~ c ~ l u r eand , :upc~ated b y j Chariotte F . S . Esnes. Washington 1 9 E 2 . 13 ;. B e p o r t 8 2 - 9 4 EPW Weber, Ed. Bill to l i m i t social security to aliens. Extension of remarks. Congressional record [daily ed.] v. 1 2 7 , Dec. 11, 1961: E5750-E5751. S o c ~ a lsecuricy overseas Sensfic;ar;es. JtiiXeLGrs~, G. W;l;~an. ~ k t e n s i o nof remarks. Congresslonal record [ d a i l y eC.1 V . 1 2 7 , Sept. l C , 1981: E4115-E4ii6.