The U.S.-Japan Totalization Agreement and U.S. Social Security Benefits
December 20, 2023
To qualify for social security benefits, you typically need to meet the full requirements set out by the country that will be paying benefits. However, the US-Japan totalization agreement allows workers to claim benefits based on credits earned across both countries. Before the agreement, employees, employers, and self-employed people could, under certain circumstances, be required to pay Social Security taxes to both the United States and Japan for the same work or fail to be eligible for benefits despite meeting the total number of working years required to qualify.
The U.S.-Japan Social Security Agreement, which went into effect October 1, 2005, improves Social Security protection for people who work or have worked in both countries. It helps many people who, without the agreement, would not be eligible for monthly retirement, disability, or survivor benefits under the Social Security system of one or both countries. It also helps people who would otherwise have to pay Social Security taxes to both countries on the same earnings.
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.
If you contribute to the wrong system, it may jeopardize your future benefit in both countries. We have seen some law firm partners working in Japan continue to contribute to the US system even though they should be technically required to contribute to the Japan system. In the worst-case scenario, these contributions would not be recognized by the US, while at the same time, the taxpayer would not get the credit from Japan for that period as proper contributions have not been made.
To remedy the situation, the taxpayer should start contributing to the Japan system as soon as possible. After that, a Certificate of Coverage can be applied with the Japan Pension Office to serve as proof of exemption from US Social Security taxes on the same earnings. This procedure does not only put a taxpayer in the right filing position but may also help them in generating current tax savings. We therefore strongly suggest you to discuss with your tax advisor if you believe you have been contributing to the wrong system.
You may have some Social Security credits in both the United States and Japan but not have enough to be eligible for benefits in one country or the other. The agreement makes it easier to qualify for benefits by letting you add together your Social Security credits in both countries. Even if you worked in the U.S. for less than 10 years, you may be eligible for benefits in accordance with the U.S.-Japan Social Security Totalization Agreement.
If you worked in the U.S. for less than 10 years and believe you are eligible for social security benefits, follow these basic steps to apply:
- Contact the nearest Japan Pension Service office (Nihon Nenkin Kikou) for an initial interview regarding your eligibility.
- If the Pension Service office determines that you may be eligible, they will forward your information. Your case will be reviewed, and they will contact you directly for processing.
- A Representative will contact you directly to process your claim and answer any questions or concerns at this time.
- After submitting your application, you may receive a letter indicating that you “do not qualify for benefits … based only on credits under the U.S. Social Security program” and that “We are asking Japan to furnish us information about your coverage under its social insurance program.” If you have received such a letter, do not be concerned – all this means is that the U.S. Social Security Administration is contacting the Japan Pension Service to see if your combined work credits between the U.S. and Japan will qualify you for social security eligibility. You can expect a follow-up letter from the Social Security Administration within three months from the time you received the current letter. There is no need to take any further action.
- Once the Social Security Administration has completed reviewing your materials and has decided regarding your benefits eligibility, they will send you a benefits notification letter.
The Federal Benefits Unit at the U.S. Embassy in Tokyo is the primary point of contact for all Social Security-related matters in Japan. Please direct all inquiries related to Social Security and Social Security benefits online or by calling (03) 3224-5000 (Tuesdays and Thursdays 9 am to 12 pm).
You can find more information about the Japan pension service here.
DISCLOSURES
The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to this information’s accuracy, completeness, or reliability. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth nor the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.
This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results. Not associated with or endorsed by the Social Security Administration or any other government agency.