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. This can frequently, outside the US’s social security treaty network, lead to double charging of social security contributions.

Details

Contributions

Employers and employees each pay social security of 6.2% of annual earnings up to $160,200, 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 pay an additional 0.9% Medicare.

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.

US social security agreements are limited in the benefits that they cover, focusing only on the totalization 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. Inbounds 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.

Exemptions

A small number of exemptions from US social security exist – most notably for D, F, J, M or Q visa holders.

Administration

US Social Security for employees can only be paid over via a US payroll, and is closely linked to the tax withholding process. Voluntary contributions are not allowed.

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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