Social Security: Proposed Totalization Agreement with Mexico Presents Unique Challenges
GAO-03-993
Published: Sep 30, 2003. Publicly Released: Sep 30, 2003.
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Highlights
Totalization agreements foster international commerce, protect benefits for persons who have worked in foreign countries, and eliminate dual social security taxes that employers and their employees pay when they operate and reside in countries with parallel social security systems. Because Mexicans are believed to represent a large share of the millions of unauthorized workers present in the United States, a totalization agreement with Mexico has raised concerns that they would become newly eligible for social security benefits. To shed light on the possible impacts, GAO was asked to (1) describe the Social Security Administration's (SSA) processes for developing the agreement with Mexico, (2) explain how the agreement might affect the payment of benefits to Mexican citizens, and (3) assess the cost estimate for such an agreement.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Social Security Administration | In light of the potential impact of totalization agreements on the Social Security Trust Funds, the Commissioner of Social Security should establish a formal process to identify and assess the major risks associated with entering into agreements with other countries. Such a process should include mechanisms to assess the integrity of a country's retirement data and records, as well as a means for documenting the range of analyses conducted by SSA. |
Closed – Implemented
SSA returned to Mexico and conducted the additional studies of the Mexican social security program that GAO felt was lacking. The agency also developed several initiatives to identify risk associated with totalization agreements, including conducting vulnerability assessments to detect potential problems with foreign countries' documents and data. This has allowed SSA to thoroughly assess the risks involved and to resolve major issues.
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| Social Security Administration | In light of the potential impact of totalization agreements on the Social Security Trust Funds, the Commissioner of Social Security should enhance future reports to the Congress for proposed totalization agreements with other countries by making them more consistent and informative. Such reports should include consistent time periods for estimating both the short- and long-term effects on the trust fund and, as appropriate, include data on how alternative assumptions or sensitivity analyses could affect costs and potential beneficiaries. |
Closed – Implemented
SSA provides both short- and long-range projections on the costs of future totalization agreements. These estimates, made by the Office of the Actuary (OCACT), consistently reflected expected changes in cost and income over the first 5 years after implementation. OCACT produced estimates that would extend through the short-range (10-year), as well as estimates for the potential effects through the long-range (75-year) projection period. OCACT will continue to provide short- and long-range estimates for future potential agreements. In addition, OCACT developed methods for providing illustrations of potential variation in cost estimates for future potential totalization agreements.
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| Social Security Administration | In light of the potential impact of totalization agreements on the Social Security Trust Funds, the Commissioner of Social Security should work with the Office of the Chief Actuary to establish a regular process that examines original projected costs and beneficiaries affected versus what actually transpired over time and use this information, as appropriate, to adjust future estimating methods for totalization agreements. |
Closed – Implemented
SSA's Office of the Chief Actuary (OCACT) is now basing its estimates on relationships between data that are known before an agreement is implemented and the actual effects after implementation of agreements put into effect in past years. OCACT used information from actual experience to expand the base of data available to update and improve estimating methods that have sharpened its projections.
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Topics
BeneficiariesImmigration and naturalization lawSocial security benefitsSocial security taxesTrust fundsFederal social security programsInternational economic relationsProgram beneficiariesEmbassy securityCost estimates