Social Security and other Federal Benefits services for Americans residing in the Czech Republic are now processed by the Federal Benefit Unit at the American Embassy in Warsaw, Poland but all Federal Benefits cases originating in the Czech Republic need to be received and sent on to Warsaw by the Federal Benefits Unit in Prague for case tracking to Warsaw and back. Cases from the Czech Republic sent directly to Warsaw will be returned and the submitter will be asked to submit them to the US Embassy in Prague.
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- Social Security (SSA)
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How do agreements benefit employers in each country?
The agreement helps employers avoid situations in which they have to pay Social Security employment taxes to both the United States and the Czech Republic for their employees. This can happen, for example, when a U.S. company assigns a U.S. citizen or a U.S. resident alien to work temporarily in the Czech Republic. Under the agreement, if the employee were hired in the United States and assigned only temporarily to the Czech Republic, the employer and employee pay Social Security taxes only to the United States. On the other hand, employees who were hired locally in the Czech Republic or sent there for a long-term or permanent assignment are covered under the Czech system only.
In addition, the agreement indirectly helps employers save substantial amounts in income tax when they send employees from one country to the other. It is a common practice for employers to reimburse employees for any additional income or employment taxes they are required to pay as a result of their foreign assignments. These tax reimbursements are frequently considered to be taxable income in the host country. When the employer reimburses the additional income tax that results, his tax bill can pyramid significantly. By exempting employees on temporary assignments from host country Social Security taxes, the agreement also relieves their employers from the host country income tax they would otherwise have to pay.
What programs and taxes are covered under the agreement in each country?
For the United States, the Agreement applies to title II of the U.S. Social Security Act and the corresponding tax laws (the Federal Insurance Contributions Act and the Self-Employment Contributions Act of 1954). The Agreement does not apply to U.S. Medicare provisions. Persons to whom the Agreement applies who qualify independently for Medicare hospital insurance will be entitled to receive such benefits.
Although the Agreement does not apply to Medicare benefits, a worker who is subject only to Czech laws by virtue of the Agreement will be exempt not only from U.S. retirement, survivors and disability insurance contributions but also from health insurance contributions under the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act (SECA).
For the Czech Republic, the Agreement applies to the Pension Insurance Act as well as the Social Insurance Contribution and State Employment Policy Premium Act.
The Pension Insurance Act covers old-age, disability and survivors (OASDI) benefits. The Social Insurance Contribution and State Employment Policy Premium Act provides for the collection of insurance premiums including contributions for OASDI, sickness and unemployment insurance. A worker who is subject exclusively to U.S. laws under the Agreement will be exempted, together with his or her employer, from contributions for Czech OASDI, sickness and unemployment insurance taxes. Under the Czech Republic’s new Act on Public Health Insurance, every employee working for an employer based in the Czech Republic must contribute to the Czech public health insurance system. The Agreement does not change this requirement.
How do I document my exemption from social security taxes under the Agreement?
Under the Totalization agreement, social security coverage is assigned to just one country and exempts the employer and employee from Social Security taxes in the other country. The social security agencies of both countries will issue certificates of coverage according to the rules of the agreement. Certificates of coverage serve as proof that the employee and employer are exempt from Social Security taxes in the other country.
Workers who are exempt from U.S. or Czech Social Security taxes under the agreement must document their exemption by obtaining a certificate of coverage from the country that will continue to cover them. For example, a U.S. worker sent on temporary assignment to the Czech Republic will need a certificate of coverage issued by SSA to prove his or her exemption from Czech Social Security contributions. Conversely, a Czech-based employee working temporarily in the United States would need a certificate from the Czech Social Security Administration (Ceská správa sociálního zabezpecení) as evidence of the exemption from U.S. Social Security tax.
Does the Social Security Administration currently pay benefits to anyone in the Czech Republic?
Section 202(t) of the Social Security Act authorizes the payment of benefits to non-U.S. citizens if they are citizens of a country that has a Social Security system that pays benefits to U.S. citizens anywhere in the world without restriction. Since the Czech Republic pays social security benefits to U.S. citizens residing outside of the Czech Republic, SSA pays Social Security benefits to Czech citizens anywhere in the world without restriction.
Section 202(t) also dictates that SSA pay non-citizen dependents and survivors if the beneficiaries maintained at least 5 years of U.S. residency during the period when they were related to the insured worker.
The combination of these statutory provisions has resulted in the following numbers of individuals living in the Czech Republic who were in current pay status before the Agreement came into force:
In December 2008, SSA paid a total of $622,023.90 to 680 beneficiaries in the Czech Republic. There were also 76 beneficiaries in the Czech Republic whose benefits were suspended. Of the total beneficiaries (those receiving benefits and those in suspense status) 578 are U.S. citizens.
Here is a summary of the payments issued by benefit type:
- 493 payments to retired workers ($473,755)
- 44 payments to disabled workers ($47,841)
- 28 payments to spouses ($13,052)
- 41 payments for children ($22,761)
- 74 payments to surviving spouses ($64,613)
Does totalization affect Medicare eligibility?
Under U.S. law, a person generally becomes eligible for free Medicare hospital insurance if the person is age 65 or older and is eligible for monthly Social Security benefits or is under age 65 and has been entitled to disability benefits for more than 24 months. Generally, U.S. Medicare provides coverage for medical expenses incurred in the United States only.
The agreement with the Czech Republic does not include any provision affecting these requirements. Although a person could become eligible for monthly Social Security benefits from the United States based on combined U.S. and Czech coverage, eligibility for a benefit based on combined coverage can not be used to qualify for Medicare hospital insurance.
On the other hand, the agreement does apply to the portion of the U.S. Social Security tax that finances Medicare hospital insurance. Thus, workers and employers who are exempt from U.S. Social Security tax based on the agreement will be exempt from the entire tax, including the Medicare portion. U.S. employees working for an employer based in the Czech Republic will continue to be compulsory covered under the Czech public health insurance system.
Under the totalization agreement with the Czech Republic, what is the minimum work credit requirements to receive either a partial totalized retirement benefit under the agreement or a full U.S. retirement benefit?
To receive a partial totalized benefit under all of our agreements, an individual must have accumulated at least 6 quarters of U.S. coverage and must have at least 40 quarters (10 years) of cumulative coverage between the United States and the country with which the United States has an agreement.
For example, if an individual does not have the required 10 years’ coverage in the U.S. Social Security system to qualify for retirement benefits, the individual’s combined work in both the United States and the other country must yield 10 years of coverage. However, the amount payable would be a “pro-rated benefit.”
To receive a full social security retirement benefit, the individual must have at least 40 quarters of U.S. coverage. If this is the case, a totalization agreement would have no impact on the benefits paid to the worker by SSA.
When a worker qualifies for benefits based on combined coverage, the amount payable is a “prorated benefit,” i.e., one that is proportional to the number of credits earned in the United States.
Totalization agreements can also be used to meet insured status requirements for U.S. disability and survivors benefits, which in some cases can be fewer than 40 quarters.
How do I apply for benefits under the Agreement?
If you live in the United States and wish to apply for U.S. or Czech benefits:
Visit or write any U.S. Social Security office; or
Phone our toll-free number, 1-800-772-1213, 7 a.m. to 7 p.m., Monday-Friday. People who are deaf or hard of hearing may call our toll-free TTY number, 1-800-325-0778.
You can apply for Czech benefits at any U.S. Social Security office by completing application form CZ/USA 202.
If you live in the Czech Republic and wish to apply for U.S. or Czech benefits, contact:
The Federal Benefits Unit at the U.S. Embassy in Warsaw, Poland, (phone 48-22-504-2112) to file for U.S. benefits; or
Any Czech Social Security office to file for Czech benefits.
You can apply with one country and ask to have your application considered as a claim for benefits from the other country. Information from your application will then be sent to the other country. Each country will process the claim under its own laws– counting credits from the other country when appropriate–and notify you of its decision.
What are the prospects for totalization agreements with other countries?
SSA has sought to focus its totalization agreements program on agreements that will benefit the greatest number of U.S. citizens and employers. Over the past 30 years, the United States has negotiated agreements with nearly all the countries of Western Europe, as well as Canada. Over that period, however, countries in other parts of the world, including Latin America, Eastern Europe and Asia, have become increasingly important trading partners for the United States. With increases in U.S. business operations in countries outside the North Atlantic region, SSA believes that totalization agreements with these countries will become more desirable.
Agreements with Australia, Chile, Japan and South Korea have all been implemented over the past eight years.
A new agreement with Poland will become effective March 1, 2009, and SSA is in discussions on a new agreement with Hungary.
What is a totalization agreement? Why are these agreements desirable?
Totalization agreements are a means of protecting the benefit rights of workers who divide their working career between two or more countries. They also help to eliminate situations in which workers or employers are required to pay Social Security taxes to two countries on the same earnings.
The United States currently has totalization agreements in force with 23 countries: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea (South), Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
Totalization agreements allow for more equitable treatment of workers and employers on a reciprocal basis. The prospect of double Social Security taxation and serious gaps in a worker’s Social Security record can act as disincentives for employers to assign workers where they are needed most and for employees to accept such assignments. The Social Security agreement with the Czech Republic removes these obstacles.
What are the benefits of the totalization agreement with the Czech Republic? Benefits for U.S. workers? Benefits for Czech workers? Are survivors and dependents also affected by the agreement?
Totalization agreements are designed to coordinate Social Security taxation and benefits for people who divide their careers between the United States and another country.
Without an agreement, a worker from one country who works in the other country may be required to pay Social Security taxes to both countries on the same earnings. The employer may likewise have to pay to both countries. Like earlier U.S. agreements, the agreement with the Czech Republic eliminates this dual Social Security taxation by assigning a worker’s Social Security coverage to just one country.
Previously, U.S. citizens who were employed in the Czech Republic for even very short periods by U.S. companies had to pay U.S. Social Security taxes as well as Czech Social Security taxes, along with their employers. Under the agreement, employees who are sent from the United States to work in the Czech Republic temporarily (5 years or less is considered temporary under the U.S.-Czech agreement) can be exempted from Czech Social Security tax and pay only into the U.S. Social Security system.
Employees who are working in a country with which the United States has a totalization agreement and in which they were hired or who have been assigned to a country on a permanent basis (more than 5 years) are covered only by the country in which they are working.
The agreement with the Czech Republic will also fill gaps in benefit protection for workers who have divided their careers between the United States and the Czech Republic. Such workers may fail to qualify for Social Security benefits from one or both countries because they have not worked long enough to meet minimum eligibility requirements. The agreement allows each country to count a worker’s Social Security credits in the other country when determining benefit eligibility. Benefits are then paid on a prorated basis.
The agreement not only allows each country to consider a worker’s combined U.S. and Czech coverage periods to establish entitlement to retirement or disability benefits for the worker; it also allows the countries to determine benefit entitlement for a worker’s dependents and survivors based on the worker’s combined coverage.
In addition, it removes restrictions that either country imposes on benefit payments to workers and their dependents and survivors when they live in the other country. The United States, for example, did not pay dependent and survivor benefits to Czech citizens who had been outside the U.S. for more than 6 months unless they previously resided in the U.S. for at least 5 years during which they were related to the worker. This requirement no longer applies now that the agreement has entered into force.