With Prime Minister Manmohan Singh’s government finally moving forward on the Indo-US nuclear deal, the Bush administration is also demonstrating its keenness to resolve other crucial bilateral issues in India’s interest. A long-standing Indian demand for a social security pact that allows Indian workers stationed in the US to bring back their contributions to the US Social Security system on their return to India, is close to being met.
Over $1 billion of contributions to the US Social Security Fund are made annually by an estimated 80,000 “detached workers” from India working on consultancy and onsite assignments — each one has to contribute at the rate of 15% of basic salary. However, when they return to India, these contributions are forfeited as the minimum period to qualify for pension benefits in the US is 10 years (the same is true of India as well).
After a series of meetings between Indian officials and the US Social Security Administration as well as a senior White House official in Washington last week, Indian workers’ annual donations to the US social security fund — which currently has a $4.1 trillion deficit — may finally come to an end.
“We are close to sealing the pact. Indian workers who spend three years in the US would get a refund of their contributions to the US pension system. Moreover, the pension will also be portable — once a worker completes the qualifying period of 10 years, the pension will be payable in either country,” a senior government official said.
The US has such “social security totalisation” pacts with 22 countries, whereby workers who spend three years in the US hold on to their pension benefits as the 10-year qualifying period takes into account the time spent by workers in their original country’s pension system. India has recently signed such deals with Belgium and Germany.
“If both US and India have bilaterals with a third country, the totalisation and portability principles will apply in those cases as well. So a worker could spend 4 years in India, 3 years in US and 3 years elsewhere, without losing retirement funds,” the official added. Bilateral talks on the issue had intensified after Singh and Bush issued the joint statement on July 18, 2005 to move towards a new strategic relationship. Last December, the US Social Security Secretary visited New Delhi, but little progress was made. Under Section 233 of US social security laws, international agreements may only be arrived at with countries with a “generally applicable” social insurance or pension system.
Between December 2007 and now, India has made some progress on this front which it convinced the US administration about. The Unorganised Sector Workers’ Social Security Bill has been introduced in Parliament as well as reviewed by a standing committee. The Rashtriya Swasthya Bima Yojana has also been kicked off.
“It has been an intractable wall we have been chipping away at for years, but this time, we feel they are convinced that there is a sound social security sytem in India,” the official said. If India succeeds in formalizing the pact, it will be only the second Asian country after South Korea to do so. Once signed, the US President will have to report the deal to the Congress with a report on the estimated number of individuals affected and its effect on the Social Security fund’s flows.
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