The US-Chile Totalization Agreement: What You Need to Know

The United States has signed Totalization Agreements with over 30 countries that help eliminate dual social security taxation of workers who divide their careers between the US and their country of origin. In the absence of such agreements, workers would have had to pay social security taxes in both the US and their home country, leading to double taxation and possible loss of benefits.

In June 2019, the US and Chile signed a Totalization Agreement that will benefit thousands of workers and their families who move between the two countries for work. The agreement, which has yet to be ratified by the US Senate, would allow workers to pay social security taxes only in the country where they are working, depending on their eligibility for benefits.

The US-Chile Totalization Agreement has been in the works for many years and was first signed in 2001. However, it was not ratified by Congress due to concerns about the long-term financial impact on the US Social Security system. Critics argued that the agreement would allow workers from Chile to qualify for US social security benefits with only a short work history in the US, which could strain the already overburdened US system.

However, supporters of the agreement argue that it would benefit both countries by promoting cross-border trade and investment, reducing administrative costs for employers, and providing greater retirement security for workers. They also point out that Chile has a well-funded social security system that is highly regarded for its efficiency and effectiveness.

Under the agreement, workers who divide their careers between the US and Chile will be able to accumulate credits for social security benefits in either country if they meet the eligibility requirements. For example, a US citizen who works in Chile for several years will be able to apply those years of work towards US social security benefits, and a Chilean citizen who works in the US for a period will be able to apply those years towards Chilean social security benefits.

The US-Chile Totalization Agreement is a significant step towards promoting greater economic cooperation between the two countries and providing greater retirement security for workers who move between them. As the agreement moves closer to ratification, it is important for workers and employers to familiarize themselves with its provisions and the potential benefits and challenges it presents.