In a letter dated September 12, 2024,1 U.S. President Joe Biden transmitted the text of the U.S.-Romania social security (“totalization”) agreement to Congress. Unlike treaties, totalization agreements enter into force pursuant to a statutory legislative procedure.2 Upon entry into force, the agreement will become the 31st such bilateral social security agreement that the United States has concluded.
WHY THIS MATTERS
The U.S.-Romania totalization agreement, like all U.S. agreements, has provisions intended to coordinate social security taxation and benefits for employers and employees where a person is required to work or reside in both two countries at some point during his or her working career. When it becomes effective, the agreement will help to assure that workers moving between the two countries are not subject to double social security tax. It also contains provisions that gives the right to partial benefits in both countries to workers who might not otherwise qualify, and removes restrictions that would normally apply to payment of U.S. social security benefits to Romanian nationals living abroad.3 This could positively affect an employee’s decision whether to take an assignment to Romania or the United States.
Moreover, the agreement serves to simplify the administration of assignments from Romania to the United States and vice versa, thereby making it easier for international companies to deploy their employees to the other country.
More Details
Process for Approval and Entry into Force
Negotiators from the U.S. Social Security Administration (SSA) held several rounds of talks with officials from the Romanian Ministry of Labor and Social Protection and the Romanian National House of Public Pensions, with the final agreement text being signed on March 23, 2023. (For prior coverage, see GMS Flash Alert 2023-068, March 30, 2023.) The Romanian Parliament ratified the agreement on January 3, 2024.
The approval process in the United States requires the president to forward the text of the agreement to Congress, accompanied by an analysis of the effects of the agreement. That having now happened, the agreement will be considered approved if, after 60 days in session, neither house of Congress has passed a resolution of disapproval. The agreement may then enter into force on the first day of the fourth month following a mutual exchange of diplomatic notes.
What It Provides For
The agreement contains rules broadly similar to many other totalization agreements. It provides for social security coverage under the laws of the country in which work is performed, subject to several exceptions. These exceptions include temporary transfers of employment or self-employment activity and special rules for various types of employment, including airline workers, seafarers, and government employees. Additionally, workers who have earned at least six U.S. quarters of coverage, but not enough to become entitled to a benefit, may combine coverage for purposes of entitlement.
Advantages of the Agreement Quantified
SSA’s Office of the Chief Actuary estimates4 that after the agreement has been in force for seven fiscal years, it will result in employers and their employees saving approximately $88 million in dual social security tax and contributions. It will also result in around 2,300 people receiving $22 million in annual benefits payments for which they would not otherwise be eligible absent the agreement.
KPMG INSIGHTS
The agreement has been in the works for many years, and this represents an important milestone in its approval. While the ultimate entry-into-force date depends largely on how frequently Congress is in session during the ongoing presidential election cycle, we do not anticipate any congressional objection to the agreement.
Barring any unforeseen delays, it will likely enter into force in the first half of 2025, and will be the first such new agreement since 2019, when agreements with Slovenia and Iceland became effective.
Additional Resources
FOOTNOTES:
1 The White House, "Letter to the Speaker of the House and President of the Senate on the Social Security Totalization Agreement With Romania," September 12, 2024.
2 Section 233(e) of the Social Security Act. See the website of the Social Security Administration on “International Agreements.”
3 See "Program Operations Manual System (POMS)" on the website of the Social Security Administration.
4 Noted in the September 12, 2024 Communication from the President of the United States transmitting the Agreement on Social Security between the United States and Romania. To access, click here.
Disclaimer
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