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Old 08.07.2014, 15:01
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US Social Security v Pillar 1 : Totalization?

Just curious if anyone here has any experience with Totalization ( specifically US citizens). My understanding is that for those US Citizens in Switzerland for <5 years we essentially have the "option" to be exempt from the Swiss "pillars" in favor of contributing to US Social Security by:

-US affiliate filing IRS form declaring its foreign-based US Citizens are covered in US
-Employee obtaining a certificate of coverage from the SSA

I was curious why I haven't heard more about it - it seems logical to exempt yourself from the Swiss system if you plan on leaving after a few years. Are there any pitfalls that I'm not thinking of?

Thanks!
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Old 08.07.2014, 15:25
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Re: US Social Security v Pillar 1 : Totalization?

The first hurdle is that the canton must approve.

This is only available in limited circumstances. For instance, the common scenario is an employee on a designated expat assignment as an internal transfer, paid in US dollars out of the US office, with a limited time contract, duties specific to that assignment. The limit is 5 years - after that one must transfer to a local contract and must therefore pay Swiss AHV.

One pitfall is that this covers the employee's contribution to Switzerland/the US - but not the spouse. Unlike the US, in Switzerland a non-working spouses must pay AHV. Most folks never notice, as if one spouse is paying at least twice the AHV minimum (ca CHF 900) that covers the non-working spouse. But if the working spouse is not paying AHV - can o' worms.

Do remember that your AHV payout will be based on years of contributions, 44 years being a full pension. What will the impact be on your Swiss pension if you are missing those 5 years? (Yes, I know that you said you only plan to be here a few years. But the best laid plans o' mice and men... OH was sent here for a one year, max two, assignment. That was 15 years ago...)

My understanding is that the employer must apply for the exemption, but I could be wrong.

---

If one is a US citizen and plans to retire to the US - do be aware of a further complication: the US WEP, Windfall Elimination Program, designed to reduce your US benefits by a portion of the amount received from a foreign pension program. One should calculate one's expected returns from each system to decide which it makes most sense - for now* - to pay into.


* Who knows how the rules will have changed by the time retirement rolls around?
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Old 08.07.2014, 15:40
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Re: US Social Security v Pillar 1 : Totalization?

Interesting - I wasn't aware that the Canton had to approve. Is that in the form of a ruling, or is it a separate process altogether?

Understood about the "best laid plans" - Our goal here in Switzerland is to get up and operational, then phase out most of the expat employees and leave behind a EU workforce - hence my preference for the exemption.

I will be on a local contract - paid in CHF - but obviously still file my US return. I would think that the exemption should be fairly straightforward - given the totalization agreement in place. I guess I'll go to the tax authority and let them know my intentions - and see what shakes out!
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Old 08.07.2014, 15:59
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Dual US/Swiss Citizen has made some interesting contributions
Transfer US Social Sec credits to 1st Pillar?

Have a question with a different aspect of US/AHV totalization. I’ve searched this issue but it remains unclear.
Worked first 5 years in the US, the past 23 in CH and plan to continue to work here in CH.
Does anyone have any experience in transferring US Social security credits into the AHV? I read once that you have to have 40 US credits for a ‘stand-alone’ US benefit but if you have a bit less, can this be done?
If it can be done, is this handled by the AHV office in Geneva or would I have to contact the US social security unit myself (i.e., embassy in Frankfurt)?
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Old 08.07.2014, 16:59
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Re: US Social Security v Pillar 1 : Totalization?

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One pitfall is that this covers the employee's contribution to Switzerland/the US - but not the spouse. Unlike the US, in Switzerland a non-working spouses must pay AHV. Most folks never notice, as if one spouse is paying at least twice the AHV minimum (ca CHF 900) that covers the non-working spouse. But if the working spouse is not paying AHV - can o' worms.
This is news to me. Odd, too, that the Lohncomputer take home salary calculator actually bumps your net pay when you add a spouse. That said, I didn't look at the assumptions used in the calculator, if any are offered.

question, I do not see AHV mentioned, only ALV. What is the former?
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Old 11.06.2015, 11:25
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Re: US Social Security v Pillar 1 : Totalization?

An accountant I was talking to mentioned that I would only get US Social Security benefits if I was working for a US company (even though I still pay US social security tax on my world-wide income?) *Confused* . Does anyone know if:

1. We receive US social security credits while paying into the AHV?
2. or Do we only receive credits if we're working with a US corporation?
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Old 11.06.2015, 11:56
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Re: US Social Security v Pillar 1 : Totalization?

What are you paying on your salary, Swiss AHV, or US Soc Sec?
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Old 11.06.2015, 12:07
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Re: US Social Security v Pillar 1 : Totalization?

(It will be) Swiss AHV.

I guess I'm concerned about not getting enough credit in either country by the time I retire?
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Old 11.06.2015, 14:23
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Re: US Social Security v Pillar 1 : Totalization?

Unless you are really young or never worked much in the US, it is nearly impossible not to get enough credits to qualify. Last I knew you needed only 40 quarters, i.e. 10 years to be fully vested in US SS. What you get out is another matter.

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(It will be) Swiss AHV.

I guess I'm concerned about not getting enough credit in either country by the time I retire?
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Old 11.06.2015, 14:27
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Re: US Social Security v Pillar 1 : Totalization?

Yeah, I guess that's the concern - I won't hit 10 years, unless the AHV credits count for US Social Security credits...
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Old 11.06.2015, 18:44
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Re: US Social Security v Pillar 1 : Totalization?

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Yeah, I guess that's the concern - I won't hit 10 years, unless the AHV credits count for US Social Security credits...
I don't know of a case where AHV counts for US Soc Sec - but I'm no expert. I'd be interested to hear from those who know more than I do.

In the case I wrote about upthread - the only one I can comment on - the employee seconded from the US to Switzerland pays into US Soc Sec but not AHV .So in this case, yes, the employee is credited for US Soc Sec contributions for that time because that's what he/she paid into..

Once the employee switches to local terms AHV is paid instead. Nothing paid to US Soc Sec, so no credits.

As above, I don't know whether there are special cases beyond the typical one of a secondment assignment.

---

But you do need to understand how the US Windfall Elimination Program, which can come into play when one has both US Soc Sec and a foreign equivalent(s), works. WEP sees having US and foreign pensions as 'double dipping' and is thus designed to reduce your US Soc Sec - situation dependent, the reduction can be significant.

(Remember that your AHV is prorated out of 44 years.)

---

Besides - do you really think that US Soc Sec will still be around in it's present form by the time you retire?

I have little faith in the health of any pension system - especially now in this era of low, no, or negative interest rates.

IMHO, the more secure way to fund your retirement is DIY. But that's probably another discussion for another thread.
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Old 11.06.2015, 19:47
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Re: US Social Security v Pillar 1 : Totalization?

So, does my vested US SS (I have 11 years, as I started working at 16) count towards my 44 years of AHV?

Tom
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Old 11.06.2015, 21:26
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Re: US Social Security v Pillar 1 : Totalization?

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So, does my vested US SS (I have 11 years, as I started working at 16) count towards my 44 years of AHV?

Tom
I wouldn't think so.



IIRC, the retirement planning estimates that OH has seen are based only on the years he worked in Switzerland as a local employee. The Swiss years on secondment from the US office, paying US soc sec, have not been counted towards his AHV total.

But again, I barely understand the bits of the system(s) as they apply to us, so don't take my word for it.

I just figure that by the time retirement rolls around retiring likely won't be an option.
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Old 12.06.2015, 04:10
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Re: US Social Security v Pillar 1 : Totalization?

If you have less than 40 quarters of US SS credits you may get them totalised (but not if you have Swiss credits for the same years). On the other hand qualifying even for a minimal pension with 40 quarters and even if you are hot with the WEP, means that you get Medicare Part A at no further cost.

Could be important. Part B and Part D are chargeable in any case. But Part A is useful even if you only visit the U.S. as a tourist and rely otherwise on Swiss med cover and travel cover.
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Old 12.06.2015, 04:15
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Re: US Social Security v Pillar 1 : Totalization?

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If you have less than 40 quarters of US SS credits you may get them totalised (but not if you have Swiss credits for the same years). On the other hand qualifying even for a minimal pension with 40 quarters and even if you are hot with the WEP, means that you get Medicare Part A at no further cost.

Could be important. Part B and Part D are chargeable in any case. But Part A is useful even if you only visit the U.S. as a tourist and rely otherwise on Swiss med cover and travel cover.
You or your tax preparer or TurboTax can contrive to get you minimum credits on schedule SE at a cost of around $600-$700 a year effectively waiving exclusion rights for that amount and recategorizing small amount of foreign earnings as self-employment (common enough anyway with diplomatic or foreign employer.)

I've seen this done several times over the years.
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Old 12.06.2015, 04:50
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Re: US Social Security v Pillar 1 : Totalization?

Hello all, I am a newbie. I am need of guidance on Social security and AVH. I understand from the Totalization agreement that As I am a US Citizen and I am employed by a Swiss Verein for charity work around the globe and I do not live in CH that I am entitled to pay into AVH. I am under contract for just under 5 years. I am happy to pay into AVH system as I have 42 years paying into USA system.

Does anyone know how I obtain a AVH number so I can accomplish this?

I have never had one before and I would rather pay into CH system as I have maxed out USA system.

I expect to be posted by this NGO in CH in 10 years time after I set up the charity in South America and North America....Any ideas?

Thanks
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