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Indo-US social security talks likely next year

Indo-US social security talks likely next year
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First Published: Wed, Jul 15 2009. 10 54 PM IST

Updated: Wed, Jul 15 2009. 10 54 PM IST
India and the US are expected to resume talks on social security early next year, in the run-up to the possible closure of a deal that will exempt expatriate workers of both nations from making social security contributions in the country where they are based if they cannot draw benefits.
For instance, currently, Indians working in the US contribute to the American social security system, but cannot automatically bring the money back to India when they return. A note by the ministry of overseas Indian affairs says that Indian workers, mostly in tech companies and projects in the US, contribute around $1 billion (around Rs4,870 crore) a year to the US social security system. Many of these workers are on short-term visas.
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India and the US have tentatively scheduled for January a meeting between officials of the ministry of overseas Indian affairs and representatives of the US social security administration to discuss a so-called totalization agreement, which deals with the ability to comprehensively add social security contribution in both the countries. The US side is yet to confirm the visit, said an Indian government official who didn’t want to be identified.
Vayalar Ravi, minister for overseas Indian affairs, said he is keen to take the social security negotiations forward. “We have to negotiate (on social security) and they (the US) have to come forward for negotiations,” he said in a recent interview.
If the January meeting takes place on schedule, it will be the third round of talks between the two countries. Indian workers continue to lose out on refunds of social security contributions due to a mismatch between the number of years temporary visas, such as H-1B ones, are granted for and the number of years the US mandates a foreign employee has to work in the country to be able to do this.
H-1B visas are granted for six years, but to qualify for social security refund, expatriates have to continuously work in the US for 40 quarters, or 10 years.
Last year, India introduced similar rules for international workers, which could give India some currency to bargain with. Foreign nationals employed in India have to work for 10 years before they can access social security (contributions made to the employees’ provident fund) benefits. The regulation does not apply to emigrants of a country with which India has signed social security pacts.
Bilateral talks between India and the US were held in Washington last year, but remained inconclusive, said the same government official. The first round of talks was held in India way back in 2002, a decade after the Indian government raised the issue for the first time in 1994.
For years, the US has held that India does not meet its criteria of social security and that, under its law, it can’t enter into an agreement with a country when it does not offer benefits for old age, death or disability to a majority of the labour force.
India has always maintained that it has multiple social security plans for workers in both the organized and so-called informal sectors, as well as welfare benefits extended through large-scale social security instruments or programmes such as the Employees’ Provident Fund and the National Rural Employment Guarantee Scheme.
India sees the US stand on expatriate workers as restrictive in a global marketplace which is built around free mobility of capital, technology and services.
“The US law is harsh to expatriate workers because they can never qualify for benefits on account of long minimum contribution period,” says a note prepared by the ministry of overseas Indian affairs and reviewed by Mint.
It adds that Indian workers could be alternatively covered under Indian rather than US legislation.
Last year, India signed social security agreements with Belgium and France and with Germany. It is also close to finalizing agreements with the Netherlands, the Czech Republic, Luxembourg and Switzerland.
The pacts variously allow avoidance of payment of double social security and “totalization” of the contribution periods to assess the eligibility for social security benefits and repatriation of pension benefits in case a worker decides to relocate.
National Association of Software and Service Companies, or Nasscom, India’s software lobby, has been supporting the dialogue between the two countries. “Since 60% of India’s IT exports is with the United States, the totalization agreement is high priority for us,” said Ameet Nivsarkar, Nasscom’s vice-president.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Wed, Jul 15 2009. 10 54 PM IST