International Social Security Agreement (社会保障協定)

[glimmer]

Anyone have experience with the International Social Security Agreement (社会保障協定)? Does it partially or completely eliminate payments of Japanese pension? What paperwork does one have to submit to qualify? For reference, I'm a US national who is already paying for US Social Security. Thank you.

[adamu]

A little bit of info here with a link to the detailed info from the pension office
https://retirewiki.jp/wiki/Social_Security_Agreements

[ClearAsMud]

You are not normally able to get out of paying Japanese pension premiums on Japan-sourced income. What the U.S.-Japan Social Security Agreement allows you to do is claim an exemption from US Social Security tax on the same income:

Under the agreement, if you work as an employee in the United States, you normally will be covered by the United States, and you and your employer will pay Social Security taxes only to the United States. If you work as an employee in Japan, you normally will be covered by Japan, and you and your employer pay Social Security taxes only to Japan.

See the above page for an explanation and tables with particular cases and a PDF link, along with mention of the form you need to make the claim on your U.S. tax return: a form "J/USA 6". If you work for an employer, the employer requests the form from the JPS; if you're self-employed (as you would seem to be), you go to the pension office and apply yourself (and be prepared for the staff not to know what you're talking about). You're supposed to attach a copy of this form to your return when claiming the exemption.

Here's what the form looks like.

[captainspoke]

I'd agree with the above comments--the agreement does not allow non-payment (skipping) contributions/payments.

My take/angle on what it does is that it allows payment history on one side or the other to be used to fulfill the minimum pension requirements on one side or the other.

Eg, I don't have the minimum credits for SS (40), but can use my history here to compensate, to bring that up to the minimum level. There will then be a SS payment/benefit paid, but it's pretty trivial/minimal. And vice-versa if you've only worked only a little in japan--you'd get some benefit if you had moved to work/live in the US.

I've never explored it, but this might also affect eligibility for medicare, which it you don't have the minimum 40 quarters/credits for SS you would not be eligible for. (Eg, someone who had worked long term here, but then retired in the US.)

[captainspoke]

Found a more succinct comment than mine:

"The years worked in your home country can count as time contributing to the pension to meet the minimum requirement to receive a pension, but the pension you receive from Japan will be based solely on the pension premiums paid to Japan. Likewise, you should be eligible to receive a pension from your home country based on time worked in Japan, but the pension will be based on the amount of money contributed to the pension there. Premiums paid do not get transferred."

Also:

https://www.nenkin.go.jp/international/ ... ons01.html

https://www.nenkin.go.jp/international/ ... ion01.html

[ClearAsMud]

The totalization benefits mentioned by captainspoke are worth remembering: the periods you are enrolled in either system count toward your pension eligibility in both, with benefits received in proportion to the premiums paid (i.e., each country calculates benefits according to its own formula, and you receive them separately). Wrinkles can arise on the US side because of the Windfall Elimination Provision.

With respect to premiums, the agreement exempts you from paying both the US Social Security and Medicare portions of the FICA tax, but I believe that Medicare itself requires a minimum work history in the US in order to receive free Part A benefits (totalization does not automatically give you Medicare work credits -- its main purpose is pension elegibility rather than health coverage). US citizens who do not have sufficient work credits can apparently buy in to Part A of Medicare (hospitalization) coverage, which according to the AARP costs a maximum of $506 a month, and they can also pay for Part B (about $165 a month) and Part D under certain conditions. But Medicare doesn't pay for treatment in Japan, so you would only benefit if you live in the US.

[edit:typo fix]

[glimmer]

I apologize for my delayed reply. It's strange because my web browser was unable to load this website forum, unless I use a VPN to use a Japanese IP address as I'm in the US at the moment.

Thank you so very much to all those who responded! You guys are next level! I looked through all the links you posted. I guess the short answer is that there is no way out of being charged for Nenkin, even if paying for Social Security in your home country, and also self-employed.

@ClearAsMud, your explanation was on point. That SSA website had a very helpful table for all the possible work status circumstances. I am a US citizen who founded an Ippan Shadan Houjin in Japan, so then:
You are working in Japan > For a non-U.S. employer > Coverage and Taxes = Japan.

[t_sensei]

A question for members of the board:

The Windfall Exclusion Provision (WEP) has been set up by the U.S. social security administration as a way to mitigate the benefits of "double-dipping" for those who have qualified for benefits in both systems. Under WEP, one's U.S. payout can be curtailed by as much 40 - 50%.

In my research, I ran into a Japanese lawyer-accountant who works at this firm: https://www.cdhcpa.com/

He has set up a "nenkin support center" and argues that nenkin is a residency-based pension to which WEP doesn't apply (see: https://us7.campaign-archive.com/?u=ebd ... 7597092e70)

Elsewhere, he has cited a U.S. court case that an Israeli brought (and won), arguing that residency-based pensions should be excluded from WEP. That said, the U.S. has insisted that the Japanese system is not a similar residency-based pension and, hence, is subject to WEP. He has claimed that the court case provides precedent and can be used by those who receive nenkin as grounds for appealing any U.S. decision to impose WEP. His argument can be found here: https://www.cdhcpa.com/receiving-japans ... igger-wep/

I wonder if anyone out there has further information about this legal theory or experience contesting WEP?

Thank you in advance.

[ClearAsMud]

I wonder if anyone out there has further information about this legal theory or experience contesting WEP?

To update a topic previously discussed in the forum (see, for example, viewtopic.php?t=2318), the SSA's Program Operations Manual (POM) now explicitly states the following with respect to Japan's public pensions (GN 00307.290 - Evidence of Foreign Pensions and the Windfall Elimination Provision (WEP):

Japan: Payments made under Japan’s National Pension (JNP) are based on residency and not subject to WEP. The Employee’s Pension Insurance (EPI) is based on earnings and subject to WEP. Japan also has a pension for dependent spouses of employees covered under the EPI. This pension is not subject to WEP.

The Nenkin Support Center of America says in its September 2022 newsletter (see this page) that previous WEP determinations are to be reviewed on a case-by-case basis, and also claims that the Basic Pension portion of EPI is exempt from WEP, but although that argument has an intuitive validity, the POM does not (yet?) reflect that position.

[SLW]

The Windfall Exclusion Provision (WEP) has been set up by the U.S. social security administration as a way to mitigate the benefits of "double-dipping" for those who have qualified for benefits in both systems. Under WEP, one's U.S. payout can be curtailed by as much 40 - 50%.

Just a follow-on to this that the maximum WEP for 2023 is $557.50, so most people will not see a 40-50% reduction unless their SS benefit is unusually low. See here for some detailed analysis of how the WEP works: https://crsreports.congress.gov/product/pdf/IF/IF10203.

Cheers,
Steve