TN 10 (03-04)

A. Introduction

Beginning January 1995, a foreign pension that is based on a Totalization agreement with the United States will not cause the WEP to apply in the computation of a non-Totalization U.S. benefit. This section provides instructions for determining whether a foreign pension is based on a Totalization agreement with the United States.

B. Policy

A foreign pension is “based on a Totalization agreement with the United States” if entitlement to the pension is established as a result of the Totalization agreement between the United States and that country. A foreign pension is not based on the agreement if the beneficiary met the normal entitlement requirements of the other country’s laws and did not rely on the agreement to establish entitlement. The decision as to whether the foreign pension is based on the agreement is made as of the first month the beneficiary is concurrently entitled to the foreign pension and a U.S. benefit.

While most agreements provide for adding U.S. and foreign credits together, if necessary, to establish entitlement to a foreign benefit, not all do. Certain agreements (e.g., the Swiss agreement) establish alternative eligibility requirements for foreign benefits that do not involve adding U.S. and foreign credits. When entitlement to the foreign benefit is established under such alternative requirements, the foreign pension is considered to be a pension based on an agreement with the United States.

C. Example

Under Swiss law, citizens or residents of Switzerland can normally qualify for a Swiss retirement pension with as little as 1 year of Swiss coverage. However, a non-Swiss citizen who does not reside in Switzerland would normally need 10 years of Swiss coverage to qualify for a Swiss retirement pension. The U.S.-Swiss agreement modifies Swiss law so that U.S. citizens can receive a Swiss Pension with as little as 1 year of Swiss coverage even if they don’t reside in Switzerland. Thus a U.S. citizen living in the United States who qualifies for a Swiss pension with less than 10 years of Swiss coverage would receive a Swiss pension that is based on the agreement. A U.S. citizen who resides in Switzerland or a U.S. citizen with 10 or more years of Swiss coverage, regardless of where he or she resides, would not receive a Swiss pension that is based on the agreement.