The United States did not immediately begin to conclude similar social security agreements; Instead, it entered into a series of friendship, trade and shipping (FCN) contracts with close allies and trading partners. Many fcn contracts provide that each country treats the nationals of the other country as it treats its own nationals when they are entitled to social benefits.11 However, it soon became clear that these FCN contracts did not adequately protect the social benefits rights of American emigrants and that many American workers sent abroad and their employers were forced to pay double social security contributions for the same income. The labour shortage in Europe, just after the Second World War, led to an unprecedented period of labour immigration. As a result, many workers have found themselves in an unusual position to divide their careers between two countries, often with ambiguous rules on tax debt. In many cases, workers and their employers have been forced to pay double taxes on social security in order to avoid gaps in coverage that would otherwise prevent these displaced workers from receiving benefits when they retire. As a result, Western European countries have begun to conclude bilateral agreements that would clarify the tax obligation of social security and protect workers` welfare rights. A list of countries with which the United States currently has totalization agreements and copies of these agreements can be accessed under U.S. international social security agreements. This agreement may be amended by endorsements considered to be an integral part of this agreement. Most TOTALization partners in the United States have more social security agreements in force than the United States with their 28 as of November 2018. By comparison, in 2014, Canada, France, Germany and the United Kingdom – which enter into treaty-to-treaty totalization agreements, thus avoiding some of the legal constraints of the U.S. process – had 57, 80, 50 and 53 agreements respectively (Leeuwenhaag 2014). As has already been said, the removal of double taxation of income in other countries could lead to greater foreign direct investment in the United States.
In addition, thousands of beneficiaries who are not currently eligible for a pension from one or both countries could benefit from an extensive totalization program. To qualify for benefits under the U.S. Social Security program, a worker must have earned enough work credits, known as insurance quarters, to meet the “insurance status requirements” specified. For example, a worker who turns 62 in 1991 or later generally needs 40 calendar terms to be insured for old age pensions. As part of a totalization agreement, SSA accounts for periods of coverage acquired by the worker under the social security program of a contracting country when a worker has some U.S. insurance coverage but is not sufficient to qualify for benefits. Similarly, a country that is a party to an agreement with the United States takes into account a worker`s coverage under the U.S. program when it is required for that country`s social security benefits. If the combined credits in the two countries allow the worker to meet the eligibility requirements, a partial benefit may be paid depending on the proportion of the worker`s total career in the paying country. The detached house rule may apply if the U.S. employer transfers a worker to work at a foreign branch or in one of its foreign subsidiaries.