Cost of Social Security Agreement With Mexico “Highly Uncertain”

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Cost of Social Security Agreement With Mexico “Highly Uncertain”

Because the cost of paying benefits to illegal workers was not included in government estimates, the full cost of a proposed Social Security totalization agreement with Mexico is “highly uncertain,” says Barbara Bovbjerg, of the General Accounting Office. Bovbjerg recently disputed the Social Security Administration’s (SSA) estimate of the cost of such an agreement saying initial estimates do not consider the full cost of providing benefits for an estimated five million current and former “unauthorized workers” and their families. The proposed agreement has raised concerns because many such illegal workers would become eligible for Social Security benefits at a time when the long-term trust fund solvency is threatened.

Totalization agreements allow citizens of one country to earn credit for Social Security benefits for the time they worked in another country. At retirement, the credits from both countries are “totaled” to calculate benefits, and each nation is responsible for paying part of the benefits.

According to Bovbjerg, the SSA has not done adequate research to justify the United States entering into such an agreement. Said Bovbjerg, “SSA provided no information showing that it assessed the reliability of Mexican earnings data and the internal controls used to ensure the integrity of information that SSA will rely on to pay Social Security benefits.”

The GAO found that the proposed agreement will include large numbers of illegal Mexican workers and family members and make them eligible for Social Security benefits. Mexican workers who ordinarily would not receive benefits because they lack the required 40 coverage credits for U.S. earnings, could qualify for partial Social Security benefits with as few as six coverage credits. In addition, under the proposed agreement, more family members of Mexican workers could become newly entitled because totalization agreements usually waive rules that prevent payments to the non-citizen’s dependents and survivors living outside the United States.

Ms. Bovbjerg further stated that such an agreement could create an additional incentive for unauthorized workers to enter the United States to work and maintain documentation to claim their earnings under a false identity. She said, “Under the Social Security Act, all earnings for covered employment in the United States count towards earning Social Security benefits, regardless of lawful presence of the worker, citizenship status, or country of residence. Immigrants become entitled to benefits from unauthorized work if they can prove that the earnings and related contributions belong to them.”

The treaty would not require Senate approval, but it would be invalidated if either house of Congress passes a resolution of disapproval. The House and the Senate would have 60 days to act.

TSCL is gravely concerned that this treaty, which is moving towards adoption, could create grave fiscal problems for the Social Security Trust Fund. Few people outside Washington are aware of the massive cost that Social Security would bear if the treaty is signed—or even that such a treaty is under serious discussion and that the administration is pushing for its prompt passage. In recent written testimony, the League urged Congress to look carefully into the long-term cost of the treaty and the effect it will have on the Social Security system. We urge all supporters to become familiar with this proposed treaty, discuss it with your friends and help our effort to stop it from going into effect. For more, see Rep. Tancredo’s article at http://www.tscl.org/NewContent/102051.asp.

Sources: “Social Security Proposed Totalization Agreement With Mexico Presents Unique Challenges,” Statement of Barbara D. Bovbjerg Director Education, Workforce, and Income Security Issues, General Accounting Office, September 11, 2003, FAO-03-1035T. “Mexico Benefits Accord Rapped,” Stephen Dinan, The Washington Times, September 12, 2003.

December 2003