Summary

The US operates a limited social security system which provides old age, sickness and disability insurance, plus a limited amount of post-retirement medical care.

It is a low-cost social security regime which, unusually, is payable by US nationals employed by US companies wherever they work in the world. Where individuals move abroad outside the US’s social security treaty network, this frequently leads to double charges of social security contributions.

Details

Contributions

Employers and employees each pay social security of 6.2% of annual earnings up to $184,500 (ie an annual maximum contribution of $11,439), plus an additional 1.45% on total earnings for Medicare. In addition, individuals (but not their employers) with earned income of more than $200,000 per year (or $250,000 per year for a jointly filed tax return) pay an additional 0.9% Medicare contribution.

The US system is low cost and it is usually beneficial from a cost perspective for individuals to be US insured.

Treaties

The US has 30 bilateral social security agreements, covering most of the US’s major trading partners with the exception of Mexico, China and India. These agreements determine which country has the right the levy social security contributions and prevent social security being levied twice on the same income. All bar one of the agreements allows home country coverage for five years.

US social security agreements are limited in the benefits that they cover, focussing only on the totalisation of retirement benefits.

Because of the global nature of US social security, almost all US outbound expatriates will remain liable to US social security, regardless of whether they move to a treaty or non-treaty country. US individuals hired locally abroad are not subject to US contributions. Inbound assignees to the US from most countries will be eligible for a certificate of coverage and exempt from social security, although some (from non-agreement countries) may have a double charge.

Moving to the US from a high cost, agreement country on a local or third country contract may generate significant social security savings.

US nationals working on a local hire basis outside the US are not able to pay into US social security on a voluntary basis. 

Exemptions

A small number of exemptions from US social security exist, most notably for D, F, J, M or Q visa holders There are no social security exemptions for short term visitors to the US, unless a bilateral social security agreement applies.

Administration

 US Social Security for employees can only be paid over via a US payroll, and is closely linked to the tax withholding process.  

Benefits

A pro-rata US retirement benefits entitlement is dependent on making at least 10 years’ worth of contributions to the US or a treaty partners social security system, and maximum benefits are achieved with 35 years of contributions. Medicare is a co-payment arrangement accessible only for the over 65s. Some other benefits (e.g. unemployment benefits) are payable at a state, rather than federal level.

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