U.S. and Japan Sign Bilateral Social Security Agreement

February 20, 2004

This Social Security Administration press release is repeated by U.S. Embassy, Tokyo for your information.

On February 19, 2004, the Governments of the United States and Japan signed a bilateral Social Security Agreement in Washington, D.C.

The Social Security Agreement is good news for U.S. citizens working in Japan for U.S. companies and their employers - as well as for Japanese citizens working in the United States for Japanese companies - because it eliminates significant social insurance taxes and makes it easier to qualify for benefits in each country when a person has divided his or her career between the United States and Japan. The agreement is also good for direct investment, trade and business between the United States and Japan. U.S. Ambassador to Japan Howard H. Baker, Jr. has said: "The U.S.-Japan Social Security Agreement is not only good for U.S. business in Japan, it will also have a salutary effect on Japanese direct investment in the United States because it reduces a significant cost of doing business in our country."

The U.S.-Japanese Social Security Agreement provides for the elimination of dual coverage of the same work under the social security systems of the United States and Japan, and for combining credits earned by a worker under the two systems for benefit eligibility purposes.

In principle, employees who are temporarily transferred by their employer in one country to work in the other country for a period of five years or less would be covered only in their home country. In all other cases, the employee, in principle, would be covered only in the country where the work is performed. Thus, a person working for a U.S. employer who is temporarily transferred by that employer to Japan would only be covered under and pay contributions to the U.S. program. The employer and employee would be relieved of the additional burden of paying social security contributions to the Japanese program.

In addition to eliminating dual coverage, the agreement will help prevent situations where workers suffer a loss of benefit rights because they have divided their careers between the United States and Japan.

Under the rules that apply to the United States, if a person has credit for at least six quarters of coverage under the U.S. Social Security system but not enough credits to qualify for a retirement, survivors or disability benefit, the person's coverage credits from both the United States and Japan could be totalized (i.e., combined) to permit him or her to qualify for a partial U.S. benefit. The benefit amount payable to a person who qualifies based on totalized credits would be proportional to the amount of coverage completed in United States.

Under the agreement, if a worker has earned some Japanese coverage, but not enough to qualify for Japanese benefits, Japan would add U.S. quarters of coverage to periods of Japanese coverage to determine whether a worker meets the applicable coverage requirements for retirement, survivors or disability benefits under the Japanese social security system. The benefit amount of a person who qualifies based on totalized credits would be proportional to the amount of coverage completed in Japan.

The agreement must now be reviewed by the legislatures of both countries. Assuming no delays during the review process, the Social Security Administration estimates that the agreement could enter into force by the end of 2005. Copies of the agreement will be available on the SSA website once it is submitted to the U.S. Congress for review.