Totalization Agreement

I understand that you can apply for a certificate of coverage, so as to pay NI in the U.K and no SS tax to the U.S.
What I’m trying to achieve is to NOT apply for a certificate of exemption and thus pay SS/Medicare tax as a SE person in the U.S AND NI & PAYE in the U.K. as a SE person too.
Is applying for the certificate of exemption mandatory?
Reasoning for this: Social Security qualifying years via SE and also NI credits to HMRC for OAP. Trying to do this via FICA is not going anywhere.
Any ideas?
Thanks

Don’t worry about the qualifying years; that’s what the totalizing agreement is for.

For example: my wife worked many years in countries without the agreement so she was at social security 0.

We moved to New York - she got credits but not enough

We moved to London - she got NI credits but retired before having enough

At social security age, she applied and got her NI credits to get her over the top (for social security but not Medicare)

The next year, she applied for a national pension in the Uk and got her US credits applied to put her over the top.

Admittedly because of her early history outside both systems the amounts are small, but added together it is nice.

I’m her toy boy (by five years) so when it’s my turn she’ll get the US spousal benefit and will get Medicare off my account.

As far as I know, the only way in which you’d pay social security outside of the us is on self employed income - ie get a side hustle. When I was Freelance in asia I had to pay both ends of social security : employer portion plus personal portion.


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Are you trying to meet the 10 years minimum to qualify for something, or getting more credits to get more?

The totalization agreement will let you use credits from one system to push you over the top to qualify for more than zero.

But if you're trying to build up credits in both programs, your approach works fine, it's what we do for my wife. She gets NI credits through child benefit (and at some point her self employment may be enough to pay some NI tax too), and we pay SS tax through self-employment. We could use a certificate of exemption to avoid the SS tax, but her earnings history in the US is small enough that she's well below the 90% bend point, so it's actually a very good return on investment for her to pay a small amount of SS tax to continue building up credits and earnings history.

She's older enough than me that this could let us have her take SS at 62 and me delay to 70, so that'd be about 12 years of her SS before I take mine and then she gets spousal benefit (likely a similar amount to her age 62 benefit). But those numbers get fuzzy fast, lots of assumptions and we're far enough off. To me, it's a small price to pay for optionality - but her SE taxes are truly small, a few hundred bucks a year. Might be different if it was thousands!

To clarify. I have 20 years of substantial SS  and just a few years short of enough credits for OAP. My main aim is to lower the WEP penalty while being in the U.K. By being SE, perhaps even working for as SE for a U.K company could provide a method to chip away at the WEP. Wouldn’t it be nice if you could just pay voluntary SS contributions as you can for your OAP…

[[[I deleted my comment - my apologies: I was generalizing from a sepecific set of facts that I didn't realize weren't more broadly applicable. My bad.]]]

I‘m neither a lawyer nor accountant, but the social security web site says clearly: „ Your foreign pension will not cause WEP to apply to your U.S. Social Security benefit.“
https://www.ssa.gov/international/wep-no1.html

I will very much be affected by WEP. (Foreign employment with no SS tax taken - NI contributions Class 1).

I‘m neither a lawyer nor accountant, but the social security web site says clearly: „ Your foreign pension will not cause WEP to apply to your U.S. Social Security benefit.“
https://www.ssa.gov/international/wep-no1.html

That link is to a Q&A site to determine if you will be subject to WEP.  I answered all the questions and for me it said that I would be subject to WEP.

WEP WILL APPLY TO YOUR U.S. SOCIAL SECURITY BENEFIT.

TO ESTIMATE YOUR SOCIAL SECURITY BENEFIT, CLICK ON THE LINK BELOW:

My wife started receiving SS last year and it is reduced through WEP because of her receiving her UK OAP,  the portion that was due to her UK employment. The SS agent asked all the questions in the link above.

I will not be subject to WEP even though I am receiving UK private pensions as well as my OAP because when I apply in a few years at age 70 I will have reached 30 years of SS contributions as I'm paying FICA now through an unqualified US pension. (The amount of WEP applied begins to decline at 20 years and reaches zero at 30 years).

I will very much be affected by WEP. (Foreign employment with no SS tax taken - NI contributions Class 1).

I think your idea of generating some SE income to pay FICA is a good one.

When I look at my SS record it states that in 2011 I paid FICA on $3,727 but I can't find anywhere that indicates if this was "substantial" earnings to count as a year towards SS. If it doesn't count as a year towards SS then I will only have 29 years at age 70 so will get a slight reduction due to WEP. 

That 2011 sum was the year after I retired and I received a partial bonus payment on my 2010 earnings. The bonus was paid and reported on a W2 hence subject to FICA.

I think your idea of generating some SE income to pay FICA is a good one.

When I look at my SS record it states that in 2011 I paid FICA on $3,727 but I can't find anywhere that indicates if this was "substantial" earnings to count as a year towards SS. If it doesn't count as a year towards SS then I will only have 29 years at age 70 so will get a slight reduction due to WEP. 

That 2011 sum was the year after I retired and I received a partial bonus payment on my 2010 earnings. The bonus was paid and reported on a W2 hence subject to FICA.

You’re good on the 4 quarters for that year, but sadly fall short of a ‘Substantial Year’ take a look at this SSA chart that list those earnings over the years’ for 2022 you’d need $27k to qualify, but hey 29 years is a good place to be…

https://www.ssa.gov/pubs/EN-05-10045.pdf

You’re good on the 4 quarters for that year, but sadly fall short of a ‘Substantial Year’ take a look at this SSA chart that list those earnings over the years’ for 2022 you’d need $27k to qualify, but hey 29 years is a good place to be…

https://www.ssa.gov/pubs/EN-05-10045.pdf

Thanks for that, I had looked and couldn't find!

As you say, 29 years is still a good place to be...

I managed 30 years with OAP,  thanks to lots of voluntary NI's and missed out on 35 years because I timed it for 30 years and when they changed it up to 35 they did give those close to retirement age a chance to do catch-ups for the extra 5 years but I was 7 weeks too young so had to settle for 30!!  My wife is 9 months younger than me and she made 31 years by virtue of her birthday being after April 5th so got in an extra year of contributions.

Thanks for that, I had looked and couldn't find!

As you say, 29 years is still a good place to be...

I managed 30 years with OAP,  thanks to lots of voluntary NI's and missed out on 35 years because I timed it for 30 years and when they changed it up to 35 they did give those close to retirement age a chance to do catch-ups for the extra 5 years but I was 7 weeks too young so had to settle for 30!!  My wife is 9 months younger than me and she made 31 years by virtue of her birthday being after April 5th so got in an extra year of contributions.

NICO had also stopped my DD at 30 years which did present a slight problem in as much as I had contracted out (SERP) and needed an additional 4 years of payments on top of 35 years to receive full OAP, I’ll make this though. I’m sure I had read that you could backdate contributions more then 6 years in some cases, but can’t remember all the qualifications you’d need. I’m sure you’ve contacted Longbenton about this, if not a phone call would be the way forward. An ability to backdate and pay those 5 years maybe beneficial, despite the large initial outlay. Even being in receipt of OAP, I don’t think would preclude you in funding additional years, until the system would age out for you of course.