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International Social Security update: A new USA/Brazil agreement

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Human Capital BulletinA Social Security agreement between United States and Brazil will go into effect Oct. 1, 2018. Businesses with employees moving between these two countries should review the implications of this new agreement. Below are answers to some common questions arising from the new pact.

What does this agreement cover?The bilateral Social Security agreement between United States and Brazil will ensure that employees and their employers are only subject to the Social Security legislation of one country.

The agreement will also allow employees on assignment from one country to the other to remain subject to the Social Security system of their home country, and exempt from the payment of contributions in the host country, providing certain conditions are met.

The agreement also allows individuals to aggregate (or “totalize”) periods of insurance in both countries for the purposes of determining eligibility for benefits. It is however important to note that contributions to certain funds may not be covered by this agreement (e.g. FGTS in Brazil).

What needs to be considered for employees assigned between the two countries?Starting Oct. 1, 2018, it will be possible to obtain a Certificate of Coverage (CoC) for employees assigned by their employer between the two countries, providing certain conditions are met. This will confirm that Social Security contributions will remain payable in the employee’s home country, and the employer and employee are exempt from paying Social Security in the host country.

A CoC can be obtained with the approval of the Social Security Administration in the United States for assignments of up to five years. For extensions beyond five years, another CoC could be obtained dependent on the mutual consent of the authorities from both countries.

Employees currently on an assignment that began prior to the agreement coming into force are also eligible to obtain a CoC. However, the five-year period for their CoCs will commence from the start date of the agreement.

How does this new agreement affect an employee’s entitlement to benefits?An employee will normally build up entitlements to benefits in accordance with the contributions paid to that country, and the local legislation governing such benefits. However, where necessary, this agreement will allow an employee to totalize periods of Social Security coverage in both countries in order to determine eligibility for certain benefits.

What actions should be taken in light of this new agreement?Businesses should review current and planned assignments and obtain CoCs where relevant. Payroll arrangements in both countries should be checked to ensure that contributions are being paid in the correct country beginning Oct. 1.

Employers should ensure the terms of assignments for any impacted employees are updated, and issue relevant communications to these employees to advise them of the impact. They should also update assignment policy documents where required to incorporate terms of the new agreement.

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