What Is the Best Way to Advise Non-US Citizens on Their Social Security Benefits?

Advising clients on Social Security issues is complicated enough. With the added complexity of a non-US citizen as a client, the advice you give as a financial advisor must be even more specific. Financial advisors are serving a growing number of non-citizen clients and it is critical they have the skills to do so. Here are a few issues for financial advisors to be aware of when helping clients.

Key Takeaways:

  • Non-citizens must meet the criteria outlined by the Social Security Administration to qualify for social security benefits.
  • Foreign workers must be classified as a “qualified alien,” have a Social Security number, and have authorization to work in the United States.
  • Non-U.S. citizens who are living legally in the United States and who have earned benefits can collect Social Security under several conditions.
  • Non-resident aliens may have money withheld from their benefit checks by the Social Security Administration.
  • Non-citizen clients may be eligible to receive retirement benefits similar to Social Security from their home counties.

Understanding Immigration Status

For non-citizens to be eligible for benefits, they must meet the criteria outlined by the Social Security Administration (SSA). Clients must be classified as a “qualified alien” and meet one or more of the classifications as a qualified alien that will allow them to collect a benefit.

Foreign workers need to obtain a Social Security number and authorization to work in the United States.

Non-Citizens Living in the United States

Non-U.S. citizens who are living legally in the United States and who have earned benefits can collect Social Security. There are also provisions if some of the 40 quarters of work required to qualify for supplemental security income (SSI) benefits were from work done by a spouse or parent. Your client may be eligible to collect Social Security benefits as a non-citizen residing in the United States under several conditions. They include the following:

  • Your client was receiving Social Security and legally residing in the United States as of August 22, 1996.
  • Your client was considered Lawfully Admitted for Permanent Residence (LAPR) and have completed 40 quarters of qualifying work. In some cases, work done by a spouse or a parent can count towards the 40 quarters.
  • Your client is currently on active military duty, or the client was honorably discharged, and that discharge was not due to their alien status. This status might also apply to spouses or dependents of U.S. military personnel.

Other conditions and rules may apply, so your client should investigate their unique situation and determine their eligibility.

Non-Citizens Who Leave the United States

When some non-citizens leave the United States for six months or more, their benefits stop. To resume receiving benefits, they must return to the United States for at least a month. There may be additional rules pertaining to those receiving Social Security benefits as a surviving spouse or a dependent.

Eligible workers who are citizens of most European countries, Canada, Israel, Japan, and South Korea can receive benefits wherever they live. The Social Security Administration lists specific countries to which this applies.

There are several countries to which the U.S. Treasury rules prohibit sending payments. These countries currently are Cuba and North Korea.

Non-Citizen Spouses of U.S. Expatriates

For U.S. citizens living abroad who are married to non-citizens, the rules regarding Social Security benefits for the non-citizen spouse can be complicated and depend on whether the United States has an international agreement with either the non-citizen’s country of residence or the country of citizenship.

An alternative is if the non-citizen becomes a legal U.S. resident for at least five years while married. In this case, neither the future country of residence for the couple nor the citizenship of the foreign spouse are relevant.

Tax Issues

Your non-citizen clients who are non-resident aliens will have money withheld from their benefit checks by the SSA as part of a broader set of rules governing payments to non-resident aliens. The SSA is required to withhold up to 30% of the maximum amount of the non-resident alien’s Social Security benefit that would be taxable under the rules, currently 85% of their benefit. This equates to your non-resident alien clients seeing 25.5% of their benefit withheld.

Any clients in this situation will need your advice and guidance. In some cases, they may be able to receive a refund of some or all of this withheld money by filing a U.S. tax return.

Special Considerations Regarding the Impact of Foreign Benefits

Non-citizen clients may be eligible to receive retirement benefits similar to Social Security from their home counties. These benefits may trigger the Windfall Elimination Provision of the Social Security rules. This provision can result in reduced Social Security benefits under these circumstances. However, the Government Pension Offset provision of the Social Security rules typically does not reduce benefits for non-citizen spouses of dependents who have earned retirement benefits in their home countries.