The U.S.- Mexico Totalization Agreement

January 2007:

On June 29, 2004, the U.S. Commissioner of Social Security and the Director General of the Mexican Social Security Institute signed a "totalization" agreement which would coordinate the Social Security programs of both countries. No further action has been taken to finalize the agreement during the intervening 2 ½ years.

Totalization agreements eliminate the need to pay social security taxes in both countries when companies in one country send workers to the other country, and they protect benefit eligibility for workers who divide their careers between the two countries. The United States currently has totalization agreements with 20 countries, including Canada, Chile, South Korea, Australia and most of Western Europe.

Current law requires the White House to review totalization agreements and forward them to Congress upon approval. Congress will then have 60 "legislative" days for its review. During this period, current law authorizes either Chamber to pass a Resolution of Disapproval regarding the agreement, or it will take effect automatically at the end of the 60-day period. In addition, the Mexican Senate must affirmatively approve the totalization agreement.

Social Security Benefits for Illegal Aliens

U.S. law bars aliens living here illegally from receiving social security benefits. However, until 2004, the law permitted aliens to claim credit for work performed while here illegally if the aliens either left the United States or obtained legal status in the United States. If such work - either alone or in combination with work performed while here legally - amounted to the 40 quarters of work required to become eligible for social security benefits, these aliens (and their spouses and dependents) would receive full benefits.

In February 2004, Congress passed H.R. 743, the Social Security Protection Act, which includes a provision authored by Senator Grassley (R-Iowa), Chairman of the Senate Finance Committee, that prohibits aliens (and their spouses and dependents) from claiming social security credit for work performed while in the United States illegally unless the alien obtains legal status at some point. Although this represents a major improvement in the law, it does not entirely close the loophole that permits benefits to be paid on the basis of work performed by illegal aliens. As noted in the Senate Finance Committee's report on H.R. 743, "individuals who begin working illegally and later obtain legal status could still use their illegal earnings to qualify for Social Security benefits" despite this new provision (Senate Rpt.108-176, p. 24).

This law applies to aliens of all nationalities, regardless of the existence of totalization agreements. The agreements compound the problem, however, by increasing the pool of foreign workers who can qualify for U.S. social security benefits on the basis of work performed while here illegally. Under totalization agreements:

• Foreign workers can qualify with as few as 6 quarters of work, rather than 40 quarters (benefits would be prorated to reflect only credits earned in the United States); and
• More family members of workers are entitled to benefits, because the agreement waives rules that restrict certain payments to non-citizen dependents living outside the United States. Under current law, non-citizen spouses and children must have lived in the United States for at least five years (lawfully or unlawfully), and the family relationship to the worker must have existed during that time in order for them to receive benefits while outside the United States. A totalization agreement overrides this requirement.

What Makes the Mexico Agreement Different from the Others?

While the text of the agreement with Mexico has not yet been made publicly available, it is likely to be virtually identical to the 20 other agreements. The impact of the Mexico agreement is likely to be significantly different, however, because there are critical differences between Mexico and the other countries with which the United States has totalization agreements, including:

1. The economic disparity between the United States and Mexico, combined with the fact that our countries share a land border, has generated migration from Mexico to the United States at levels not comparable to any of the other 20 countries; and
2. The Department of Homeland Security estimates that Mexicans represent almost 70 percent of the 10 million illegal aliens currently residing in the United States. Among the other 20 countries, South Koreans and Canadians comprise the next largest shares - 0.07 percent each -- of the illegal population

The Costs of the Mexico Agreement

The Social Security Administration (SSA) estimates that a totalization agreement with Mexico would:

• Result in 50,000 additional Mexicans qualifying for social security benefits during the first five years;
• Cost the U.S. social security system $525 million over the first five years;
• Cost $650 million per year by 2050;
• Have a "negligible long-range effect" on the Social Security Trust Fund; and
• Save 3,000 U.S. workers and their employers about $140 million in Mexican social security and health insurance taxes over the first five years of the agreement

In a review requested by Congress, the GAO found that :

• SSA's cost estimate does not account for any of the millions of Mexicans living and working here illegally who may become eligible for benefits;
• SSA "assumes that the behavior of Mexican citizens would not change and does not recognize that an agreement would create an additional incentive for unauthorized workers to enter the United States;"
• The agreement with Mexico involves "highly uncertain" costs and would affect the long-term solvency of the Social Security Trust Fund if SSA has underestimated the number of beneficiaries by more than 25 percent (or 16,000 additional beneficiaries).

DHS statistics show that more than 28,000 Mexicans who had entered the United States illegally at some point were granted legal permanent resident status in 2002. Another 121,000 Mexicans who were already living here were granted legal permanent resident status in 2002, despite the fact that DHS had no record of them being lawfully admitted to the country. Under current law, these immigrants can claim credit for any work they performed while here illegally, in addition to work the perform after obtaining legal status. And these numbers reflect only one year.

Can the U.S.-Mexico Totalization Agreement Be Stopped?

Once the President submits the agreement to Congress, which was expected to happen after the elections in November (but has not yet happened), it goes into effect automatically unless the House of Representatives or the Senate adopts a resolution of disapproval within
60 legislative days. According to the Congressional Research Service, however, the resolution of disapproval mechanism currently in the Social Security Act is an unconstitutional legislative veto, based on the Supreme Court's decision in INS v. Chadha (462 U.S. 919 (1983)), in which the Supreme Court struck down a similar provision in the Immigration and Nationality Act.

Since Congress has never rejected a totalization agreement, the fact that the mechanism for disapproval is unconstitutional has not been an issue. Unless the law is changed, though, it is likely that passage of a resolution of disapproval would give rise to a judicial challenge, potentially resulting in a determination that the agreement is effective.

Following in the footsteps of concerned members of the 109th Congress, Sen. John Ensign (R-Nev.) introduced legislation (S. 43) in the 110th Congress that would change the way that Totalization Agreements are considered and finalized. The bill, which is called the “Social Security Totalization Agreement Reform Act” or “STAR Act,” would require all Social Security totalization agreements to be treated as bilateral trade agreements, thus requiring both houses of Congress to pass a resolution approving such an agreement before it could take effect; and would shift the burden to the advocates of a totalization agreement to prove its merits, as opposed to gridlock resulting in an agreement becoming operative (i.e., current law states that agreements go into effect automatically within 60 days after the President submits the agreement to Congress unless either chamber passes a resolution disapproving the agreement).

House members introduced several bills concerning totalization agreements. Rep. Barbara Cubin (R-Wyo.) introduced H.R. 279, which is similar to Sen. Ensign’s bill. It also would treat totalization agreements like bilateral trade agreements and make the advocates prove the merits.

Rep. Ron Paul (R-Texas) introduced H.R. 190, which also would prohibit an individual who is not a U.S. citizen or national, for purposes of Social Security benefits, from being credited for income earned while he/she was not a citizen or national. Furthermore, it would require all totalization agreements to take that prohibition into account.

H.Res. 18, sponsored by Rep. Virgil Goode (R-Va.), and H.Res. 22, sponsored by Rep. Steve King (R-Iowa), would express disproval of the U.S.-Mexico Totalization Agreement, effectively killing the Agreement if passed.