Social Security Agreement Reached with Mexico on Cross Border Workers

GUADALAJARA, Mexico (By Morgan Lee, AP) June 29, 2004 - Mexican and U.S. officials signed an agreement Tuesday to eliminate double Social Security taxation, providing relief to thousands of people who work in both countries.

U.S. Social Security Commissioner Jo Anne Barnhart and Mexican Social Security Institute Director Santiago Levy signed the agreement at an economic development workshop here.

Workers also can count their work history in a foreign country to qualify for retirement benefits in one system, under the agreement. The pact still must be approved by the Mexican Senate and reviewed by the U.S. Congress.

"This agreement eliminates a serious and unnecessary impediment to American and Mexican businesses and their employees," said Social Security Commissioner Jo Anne Barnhart. "Just as important, it promotes equity and fairness for workers who divide their careers between our two countries."

U.S. companies that employ U.S. citizens in Mexico currently are required to contribute to both the U.S. and Mexican social security systems, as do Mexican companies employing Mexicans in the United States. The changes would apply to about 3,000 U.S. citizens and about 10,000 Mexicans working abroad, the Social Security Administration reported.

The changes could cost the U.S. retirement system about $105 million a year, the Social Security Administration estimated.

Nearly 47 million Americans received about $470 billion in Social Security benefits last year.

The cost of the agreement "is barely a rounding error for a program that takes in and sends out almost $500 billion a year," said Derrick Max, executive director of Americans for Worker Retirement Security, which advocates shoring up the system by creating private investment accounts. "This should not be viewed as a solvency issue."

The United States currently has similar so-called totalization agreements with 20 countries -- including most of Western Europe, Canada, Chile, South Korea and Australia. The agreement will let workers and their families qualify for prorated U.S. or Mexican benefits based on combined credits from both countries.

The new credits are likely to have a larger impact on Mexican workers, who must wait longer to receive benefits.

The Social Security Administration estimates that 50,000 U.S. and Mexican workers could receive benefits after five years as a result of the agreement.

Mexican President Vicente Fox hailed the agreement as good news for Mexican workers and for business.

"By avoiding this double taxation, we reduce the cost of investment and support the competitiveness of North America," Fox said.

The agreement does not address Mexicans working illegally in the United States, according to Jim Courtney, a press officer with the Social Security Administration.

"There are provisions of law that prevent us from paying undocumented aliens," Courtney said.

About 750 business and government officials attended the Guadalajara workshops, part of the Partnership for Prosperity initiative designed to encourage development in the areas of the Mexican countryside with high migration rates.