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SHOULD THERE BE A SOCIAL SECURITY

TOTALIZATION AGREEMENT WITH MEXICO?

HEARING

BEFORE THE

SUBCOMMITTEE ON IMMIGRATION, 

BORDER SECURITY, AND CLAIMS

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

SEPTEMBER 11, 2003

Serial No. 47

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 
(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

MELISSA A. HART, Pennsylvania 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

JOHN R. CARTER, Texas 

TOM FEENEY, Florida 

MARSHA BLACKBURN, Tennessee 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON IMMIGRATION, BORDER SECURITY, AND CLAIMS

JOHN N. HOSTETTLER, Indiana, Chairman

JEFF FLAKE, Arizona 

MARSHA BLACKBURN, Tennessee 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

CHRIS CANNON, Utah 

STEVE KING, Iowa 

MELISSA A. HART, Pennsylvania 

SHEILA JACKSON LEE, Texas 

LINDA T. SA ́ NCHEZ, California 

ZOE LOFGREN, California 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan

GEORGE FISHMAN, Chief Counsel 

ART ARTHUR, Full Committee Counsel 

CINDY BLACKSTON, Professional Staff 

NOLAN RAPPAPORT, Minority Counsel 
(III)

C O N T E N T S 

SEPTEMBER 11, 2003

OPENING STATEMENT 

Page 

The Honorable John N. Hostettler, a Representative in Congress From the 

State of Indiana, and Chairman, Subcommittee on Immigration, Border 

Security, and Claims ............................................................................................ 1

The Honorable Sheila Jackson Lee, a Representative in Congress From the 

State of Texas, and Ranking Member, Subcommittee on Immigration, Border Security, and Claims ..................................................................................... 3

WITNESSES 

The Honorable Jo Anne B. Barnhart, Commissioner, Social Security Administration 

Oral Testimony ..................................................................................................... 7

Prepared Statement ............................................................................................. 8

Ms. Barbara D. Bovbjerg, Director, Education, Workforce and Income Security, General Accounting Office 

Oral Testimony ..................................................................................................... 11

Prepared Statement ............................................................................................. 13

Mr. Joel Mowbray, Investigative Journalist 

Oral Testimony ..................................................................................................... 31

Prepared Statement ............................................................................................. 32

Mr. Ken Apfel, Former Social Security Administration Commissioner 1997–

2001, Clinton Administration 

Oral Testimony ..................................................................................................... 35

Prepared Statement ............................................................................................. 36

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement by the Honorable Sheila Jackson Lee, a Representative 

in Congress From the State of Texas ................................................................. 55

Prepared Statement by the Honorable Steve King, a Representative in Congress From the State of Iowa .............................................................................. 56

Follow-up questions from Chairman Hostettler to Social Security Commissioner Barnhart .................................................................................................... 58

SSA Responses to Questions raised at July 22 briefing on Totalization Agreements ..................................................................................................................... 63

Prepared Statement by TREA Senior Citizens League ........................................ 68

U.S. Border Control Testimony for the record ...................................................... 69

U.S. Border Control Press Release ......................................................................... 78

(1)

SHOULD THERE BE A SOCIAL SECURITY 

TOTALIZATION AGREEMENT WITH MEXICO? 

Thursday, September 11, 2003

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON IMMIGRATION, BORDER SECURITY, AND CLAIMS, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:40 a.m., in Room 

2237, Rayburn House Office Building, Hon. John Hostettler [Chairman of the Subcommittee] presiding. 

Mr. HOSTETTLER. This Subcommittee will come to order. 

Before I begin my opening statement, I would like to thank the 

witnesses for allowing your schedule to be so flexible. We have 

scheduled and postponed this hearing prior, and I apologize for 

that inconvenience; and the Chair very much appreciates your ability to stay flexible in your plans. I would like to also—likewise 

thank Members of the Subcommittee for being here on such a very 

important day in our Nation’s history of commemoration and doing 

this important work. 

The purpose of this hearing is to inquire into the potential costs 

and benefits of a pending agreement between the United States 

and our southern neighbor, Mexico. This agreement will dramatically reverse the current prohibition of providing Social Security 

benefits to illegal immigrant workers from Mexico. 

Section 2029(y) of the Social Security Act requires aliens in the 

United States to be, quote, ‘‘lawfully present,’’ end quote, in order 

to receive benefits. However, there are important exceptions. One 

of those exceptions in the Social Security Act states that an alien 

may receive payments outside the United States, including benefits 

based on unauthorized work in the United States, if he or she is 

a citizen of a country with which the United States has a totalization agreement. 

Totalization agreements have been part of the U.S. Government’s 

international treaty environment for more than 20 years. We have 

such agreements with 20 other countries, including Canada. 

A totalization agreement with Mexico is different than with those 

other 20 countries for several reasons. First of all, none of those 

countries have public policies that encourage illegal immigration to 

the United States. 

Secondly, because these countries have sent relatively few workers to the United States over the years and very few illegal workers, illegal immigration from these countries is essentially a 

nonissue. That is, there are insignificant numbers of illegal aliens 
2

residing in the United States from such countries as Switzerland, 

South Korea, Australia, Germany, or Spain, which have had totalization agreements with the United States for many years. In general, because of the liberal social programs and strong economies 

of those countries, U.S. Citizens receive higher benefits from these 

agreements than do the foreign citizens receiving benefits from our 

system. 

According to the last estimate put out by the INS in January of 

2003, Mexico is the largest source country for illegal immigration 

to the United States. According to the INS, the unauthorized resident population from Mexico increased from about 2 million in 

1990 to 4.8 million in January of 2000. That is a rate of over 

200,000 people a year. 

Mexico’s share of the total illegal resident population increased 

from 58 percent in 1990 to 69 percent in 2000. That increase in illegal residents from Mexico came about in the same decade that 

more than a million people from Mexico received green cards 

through legal immigration, including those under amnesty programs. Using the INS report to project forward to the current day, 

it is reasonable to estimate that there are now more than 5 million 

illegal aliens from Mexico in the United States. 

Members of Congress have expressed their concerns publicly 

about how the pending totalization agreement with Mexico will accelerate the flow of illegal immigrants from Mexico. I am concerned 

about the obvious inducements to illegal workers from Mexico. Our 

country is in a recession, and our first priority should be to employ 

U.S. citizens, whether native born or legal immigrant. 

I am also concerned about the cost of this agreement. News articles earlier this year equated the balance in the Social Security Administration’s earning suspense file, sometimes referred to as the ‘‘unmatched W-2 fund account,’’ of $345 billion with the amount 

that will be due Mexican workers. 

Let me dispel a popular misconception encouraged by the advo- cates of illegal immigration. This $345 billion is not a savings account. Instead, it is a liability account, some portion of which reflects earnings by illegal aliens. By definition, the Social Security 

Administration doesn’t know who really contributed the W-2 earnings, but $350 billion is undoubtedly on the low side of what this 

totalization agreement will eventually cost the American taxpayer, 

because that $345 billion is due only to those people who have used 

someone else’s Social Security number when filling out a W-2, or 

have made up a number. 

The earning suspense account does not reflect illegal workers 

who have fraudulently obtained a valid Social Security number or 

have obtained an I-10 tax identification number from the U.S. 

Treasury, which is issued without checking whether the recipient 

is legally present in the United States or not. 

Most importantly, low-wage workers pay into Social Security 

much less than they take out, because they are more likely to qualify for lifelong disability payments and because Social Security retirement is not based on how much you paid in. 

Workers become eligible for Social Security benefits when they 

meet the requirements of the Social Security Act. And once Mexico 

has a totalization agreement with the United States, those 5 mil-
3

lion illegal Mexican residents here will be eligible. They will be eligible for disability benefits, Social Security and Medicare once they 

meet the minimum number of work quarters to qualify. 

In addition, there are potentially millions of Mexicans who 

worked in the United States 10 or 20 years ago and who have since 

returned to Mexico, who will be coming forward with old W-2 forms 

to establish their own eligibility. If the Congress and the President 

agree to provide a program for seniors to reduce the cost of drug 

prescriptions, the 5 million illegal aliens from Mexico will be eligible for that, because almost nothing is being done to remove illegal 

aliens from this country, and those 5 million Mexicans will retire 

here whether they bother to become legal, are granted amnesty or 

just remain here. 

In the meantime, looking forward, unless some dramatic steps 

are taken to stop illegal immigration from Mexico, we will continue 

to add 200,000 or more per year to the resident illegal alien population from Mexico. I think it is obvious that at this rate there will 

be 7 or 8 million illegal aliens from Mexico resident in the United 

States by 2010, which is about when many will discover they are 

eligible for the Social Security disability standards. 2010 is also 

when the first wave of the baby boom that began in 1945 will be 

eligible for Social Security at age 65. That looks like a most unfortunate coincidence for the fiscal solvency of the Social Security 

trust fund. 

Because of these concerns, this Subcommittee joined with the Social Security Subcommittee of Ways and Means to request a GAO 

investigation about the level of scrutiny that the Social Security 

Administration applied to this agreement. Today, we will learn 

what the GAO has discovered through its inquiries. 

We will also hear from the Commissioner of Social Security, the 

Honorable Jo Anne Barnhart, why the administration thought that 

the totalization agreement with Mexico is a good idea. If the totalization is concluded with Mexico, the Committee on the Judiciary 

will have an opportunity to consider it as it passes through Congress for review as a foreign treaty. 

I turn now to my colleague, Ms. Jackson Lee, for any opening 

statement she might have. 

Ms. JACKSON LEE. I thank the Chairman very much, and I too 

thank the witnesses for their presence here and, as well, the audience and Members, for this is a day that we continue to honor and 

respect those who lost their lives and those who continue to put 

their lives forward on behalf of the principles of this great Nation. 

This is an important hearing, and the last comment that the 

Chairman made, I think is even the more important statement; 

and that is the opportunity for this Committee to review any agreement that would be made. 

And might I make the point, since the Commissioner is here, we 

have had incidents before with the USTR in terms of trying to legislate on a treaty. I am delighted that you are here this morning, 

in particular, and I hope the message will go back that we are better as a nation if we collaborate on policies between the administration and the Congress. 

I think this is an important hearing, and I certainly hope that 

in this instance the Social Security Administration and the admin-
4

istration will not try to legislate on a treaty without the input, collaboration, and work of the United States Congress. 

The Social Security program provides monthly cash benefits to 

retired and disabled workers and their dependents and to the survivors of deceased workers. To qualify for benefits, they must work 

in Social Security-covered jobs for a period of time. Currently, 

workers need 40 quarters of coverage to become insured for benefits. Fewer quarters are needed for disability and survivor health 

benefits, depending on the worker’s age. 

Of course, the Social Security program is financed primarily from 

mandatory payroll taxes levied on wages and self-employment income. Most of our jobs are covered by Social Security, and approximately 96 percent of our work force is required to pay Social Security. We become eligible for Social Security benefits when they 

meet the insured status and age requirements; they become entitled to benefits when they have met all the eligibility requirements 

and filed an application. And, of course, because Social Security is 

an earned entitlement program, there are few payment restrictions 

when a worker becomes entitled to benefits. 

But there is a process. The Social Security Act does not prevent 

undocumented aliens from becoming eligible for Social Security 

benefits. However, an alien must be lawfully present in the United 

States to receive benefits. If an alien in the United States is eligible for benefits, but is not lawfully present, the benefits are suspended. There lies at least an intervention to protect against illegal 

aliens being—receiving such funds. 

The purpose of this hearing is to receive evidence on whether 

there should be a Social Security totalization agreement with Mexico. The close economic relationship between Mexico and the 

United States has resulted in an increasing number of Mexican 

citizens spending at least some portion of their working lives in the 

United States; and conversely, some United States citizens are 

spending a portion of their working lives, it seems, in Mexico. It 

seems that it is a fair equity question as to the point of these individuals working and not losing their benefits if they happen to be 

out of their respective countries. 

In many cases, people working in two countries accumulate credits toward benefits eligibility under the Social Security systems of 

both countries, but their credits may not be sufficient to qualify 

them or their family members. The United States Social Security 

Administration and Mexican Social Security Institute have had informal conversations on the possibility of signing a Social Security 

totalization agreement that will alleviate this situation. It would 

allow workers to count the work they do in both countries. This is 

called totalizing one’s credits. Employees would be able to combine 

earning credits to qualify for benefits under either or both systems. 

Currently, about 3,000 United States citizens work in Mexico, 

and their employers are paying both United States and Mexican 

Social Security taxes over the next 5 years. These United States 

citizens and their employers will pay approximately $134 million in 

Mexican Social Security taxes in addition to their contributions to 

the United States. 

A totalization program would prevent such double taxation. 

Might I say this again. A totalization programs would prevent such 
5

double taxation. I believe therein lies good news, particularly since 

we have established or seek to establish long-term relationships 

with Mexico. Employee wages would not be taxed for both the 

Mexican and United States Social Security system. 

I have heard claims that the first-year costs of an agreement with Mexico would cost about $345 billion. In fact, the $345 billion 

figure is the approximate total wages in the Social Security earnings suspense file and is not a proper basis for predicting the cost 

of Social Security trust funds of a totalization agreement. The earnings maintained in the earning suspense file represent wages that 

the Social Security Administration is not able to post to a specific 

individual’s record. That means, of course, that we might get a gift 

because we might not find those individuals. But forthrightly, we 

have an opportunity to give a gift to our corporations and other 

businesses that would not be doubly taxed. 

While a portion of the earnings suspense file can be attributed 

to the earnings of undocumented aliens, this fund also includes 

earnings of legal aliens and United States citizens. Name and security mismatches can and do occur for a number of reasons, including transcription, typographical errors, incomplete or blank names 

or Social Security numbers, and name changes that were not reported to the Social Security Administration. 

The Social Security Administration’s actuaries estimate that an 

agreement with Mexico would cost the Social Security trust funds 

approximately 78 million in the first year, rising to approximately 

138 million by 2008, for an average cost of $110 million a year over 

the first 5 years. 

I do want to emphasize that aliens who work a very short time 

in the United States would not receive full United States Social Security benefits under a totalization agreement. Benefits paid under 

a totalization agreement that are based on combined credits are 

prorated to reflect the length of time the employee was covered 

under the paying country’s system. Full security—United States 

Social Security benefits would not be paid unless a person has 

worked long enough in the United States to qualify for benefits. 

I always view this Committee as a problem-solving Committee; 

and I hope the Chairman and Members of our Committee will listen intently as we move to understand this process and to work 

along to get the best solution possible. 

I would also offer a slight apology. We are doing a tribute on the 

floor, and I may step away for a moment and will be back to join 

the very distinguished panel. And we thank you very much for your 

presence here this morning. 

Mr. HOSTETTLER. I thank the gentlelady. 

Does any Member have an opening statement? Any other Member? Without objection, all Members’ opening statement will be included in the record. 

I would like to now introduce the members of our panel. Ms. Jo 

Anne Barnhart is the 14th Commissioner of Social Security, filling 

a 6-year term of office that will run through January 19, 2007. She 

was nominated by President George W. Bush on July 17th and confirmed by the United States Senate on November 2, 2001. As head 

of the Social Security administration, she has responsibility for administering the Social Security programs—retirement, survivors, 
6

and disability—as well as the Supplemental Security income, or 

SSI, program. 

During her career, Ms. Barnhart has served as Senator William 

V. Roth, Jr.’s legislative assistant and as his campaign manager, 

and managed her own political and public policy consulting firm. 

A graduate of the University of Delaware, Commissioner Barnhart 

was born in Memphis, Tennessee. She lives in Virginia with her 

husband and son. 

Thank you for being here. 

Barbara Bovbjerg is the Director for Education, Workforce and 

Income Security issues at the United States General Accounting 

Office. In that capacity, she oversees work on retirement income 

policy issues, including Social Security and private pension programs and operations and management of the Social Security Administration, Pension Benefit Guaranty Corporation, and the Employee Benefit Security Administration of the Department of Labor. 

Previously, Ms. Bovbjerg was Assistant Director for Budget 

Issues for GAO, where she managed a variety of budget policy 

work including studies on the long-term effects of budget deficits. 

Before joining GAO, she led the citywide analysis unit of the District of Columbia’s Budget Office and analyzed State and local government finance issues for the Urban Institute. Ms. Bovbjerg holds 

an MRP from Cornell University and a BA from Oberlin College. 

Kenneth Apfel joined the faculty of the LBJ School of Public Affairs at the University of Texas at Austin in January of 2001. His 

major teaching and research interests are in the areas of social policy and public leadership and management with a particular focus 

on aging, health care, and retirement issues. 

Prior to his academic appointment, Apfel served as Commissioner of the Social Security Administration from 1997 until his 

term ended in January 2001. He was the first Senate-confirmed 

Commissioner of Social Security after SSA became an independent 

agency and the Cabinet-level position was authorized by Congress. 

Apfel received his bachelor’s degree from the University of Massachusetts at Amherst in 1970, a master’s degree in rehabilitation 

counseling from Northeastern University in 1973, and a master’s 

degree in public affairs from the LBJ School of Public Affairs in 

1978. He is a Principal in the Council for Excellence in Government, an elected Fellow of the National Academy of Public Administration and the National Academy of Social Insurance. 

Joel Mowbray, an investigative journalist and a nationally syndicated columnist, is best known for his exposes of the State Department which led to the end of Visa Express in Saudi Arabia and 

the subsequent resignation of the Assistant Secretary of State for 

Consular Affairs, Mary Ryan. Joel was also the first journalist in 

America to review the visa application forms of the 9/11 terrorists, 

and he uncovered the fact that all 15 of the applications should 

have been denied on their face by the U.S. Embassy in Saudi Arabia. 

A graduate of the University of Illinois, with a degree in economics, and the Georgetown Law School, Joel worked on Capitol Hill 

for former Representative Mark Sanford of South Carolina, where 

he primarily handled Social Security privatization. Earlier, he 
7

spent 2 years working for pioneer studies under now-Fox News reporter Heather Nauert. 

I thank the witnesses once again for being here today, adjusting 

your schedules to meet our needs. You each have 5 minutes for an 

opening statement, And without objection, your written testimony 

will be included in the record. 

And Ms. Barnhart, if you would begin. 

STATEMENT OF JO ANNE BARNHART, COMMISSIONER, SOCIAL 

SECURITY ADMINISTRATION 

Ms. BARNHART. Mr. Chairman and Members of the Subcommittee, thank you very much. I appreciate the opportunity to 

appear before you today to discuss international Social Security 

agreements, commonly referred to as totalization agreements. 

Totalization agreements protect the benefits of workers who pay 

into the Social Security systems of two countries, but don’t earn 

enough credits to receive full benefits for one or both of those countries. These agreements also eliminate dual Social Security taxation of citizens of one country who are sent by their employer to 

temporarily work in another country. As a result of existing totalization agreements, U.S. workers and employers are currently saving approximately $800 million annually in foreign taxes that they 

do not have to pay. 

There has been a good deal of misinformation about totalization 

in the media in recent months, and I would like to spend the majority of my 5 minutes addressing what I call the myths of totalization. I have specifically identified five myths largely related to 

Mexico, and I want to specifically address each one of these at this 

time. 

Myth number one: A totalization agreement with Mexico would 

change existing immigration policy. The truth is that totalization 

agreements do not address immigration laws. The Social Security 

Administration does not set immigration policy, and the totalization authority, as passed by Congress in 1977, has nothing to do 

with immigration policy. A totalization agreement only deals with 

Social Security. 

Myth number 2: One result of a totalization agreement with 

Mexico will be to begin to pay benefits to undocumented or illegal 

aliens. As is the case with existing agreements that we have, a totalization agreement with Mexico would not alter current law on 

this issue. Totalization agreements do not have any effect on the 

prohibition against payment of benefits to illegal aliens residing in 

the United States. 

Myth number 3: A totalization agreement with Mexico will cost 

the United States $345 billion. $345 billion is the approximate 

amount of the total wages since 1937 for all workers in what we 

call the earning suspense file. It has no relationship to the cost of 

totalization agreements, because the $345 billion represents the 

wages the individuals earned, not the taxes that were paid into the 

system. SSA actuaries estimate the cost of a possible totalization 

agreement with Mexico to be about $78 million in its first year, rising to $138 in the fifth year, for an average cost of $110 million 

over the first 5 years. 
8

Myth number 4: All of the earnings in the earning suspense file 

came from undocumented or illegal aliens. Earnings in the ESF 

represent wages that we were not able to post to a specific individual’s earnings record because the name and the Social Security 

number don’t match. Now, name and Social Security number 

mismatches can occur for a number of reasons, including transcription errors, typographical errors, name changes due to marriage or divorce, and an incomplete or even a blank name or Social 

Security number. 

Myth number 5: Totalization agreements enable noncitizens who 

work in the United States for a very short period of time to receive 

full American Social Security benefits. Totalization agreements provide that the United States will pay prorated benefits to those 

workers who qualify under the agreement. 

In 1977, Congress enacted the provisions that authorize the 

United States to enter into totalization agreements for two reasons, 

first of all, and importantly, to ensure fairness and equity by providing social insurance for those who, because they have split their 

careers between the United States and another country, might otherwise end up with insufficient credits to become entitled to a benefit from either country; and second, to protect American workers 

in businesses that are involved in international trade and commerce from double taxation and thus enhance trade with foreign 

nations. 

I want to thank the Subcommittee for inviting me here today. I 

welcome the opportunity to clear up some of the misinformation 

that has been circulating about how totalization agreements work 

as well as the cost impact of totalization agreements. 

And, at the conclusion of the comments of the other panelists, I 

will be very happy to try and answer any questions that you may 

have. 

Mr. HOSTETTLER. Thank you. 

[The prepared statement of Ms. Barnhart follows:]

PREPARED STATEMENT OF JO ANNE B. BARNHART

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to appear before the Subcommittee to discuss international Social Security agreements, commonly referred to as ‘‘totalization’’ agreements. In my testimony today I will:

• Provide an overview on totalization agreements including the process for approval;

• Dispel some of the myths and correct misinformation that has appeared in 

the media in recent months concerning what Social Security totalization 

agreements are and do, as well as what they do not do;

• Bring you up-to-date on the status of ongoing negotiations regarding a possible totalization agreement with Japan; and

• Provide a status report on our discussions with Mexico.

FIRST, WHAT ARE TOTALIZATION AGREEMENTS?

Totalization agreements protect the benefits of workers who pay into the social 

security systems of two countries but do not earn sufficient credits to receive full 

benefits from one or both countries. Workers are deemed eligible for pro-rated benefits based on the amount of contributions made to the system of each country. 

United States totalization agreements include all OASDI programs. 

Totalization agreements eliminate dual social security taxation of citizens of one 

country who are sent by their employer to temporarily work in another country. In 

addition to Social Security taxes, foreign workers can be exempted from Medicare 
9

contributions and U.S. workers can also be exempted from health insurance and 

other taxes related to employment imposed by a foreign country in which they temporarily work. Individuals from a foreign country who are hired in the United States 

or were sent to the United States for more than a temporary period would continue 

to pay FICA taxes. 

Without totalization, the combined Social Security tax rate that U.S. employers 

and employees working in foreign countries must pay often approaches 40% or more 

of total payroll. Under existing agreements, the annual foreign tax savings of U.S. 

workers and their employers total more than $800 million. In contrast, the annual 

U.S. tax savings of foreign workers in the United States and their employers total 

only about $200 million. 

The US has totalization agreements with 20 countries, including Canada and 

most Western European countries. 

MYTHS: 

As I mentioned earlier, there has been a good deal of misinformation about totalization agreements in the media in recent months. Specifically, I have identified 

what I call ‘‘myths’’ about totalization agreements—largely related to Mexico—that 

have appeared in the media over the last few months. I want to specifically address 

each of these ‘‘myths’’.

• Myth #1: A totalization agreement with Mexico would change existing immigration policy. 

The truth is a totalization agreement does not address immigration laws. 

The Social Security Administration does not set immigration policy—and the 

totalization authority as passed by Congress in 1977 has nothing to do with 

immigration policy. A totalization agreement only deals with 1) Social Security payroll taxes and other employment-related taxes associated with work 

performed by U.S. workers hired in the U.S. and sent to work in a foreign 

country and foreign workers sent to work in the U.S. 2) workers with insufficient work credit earned to become eligible for full benefits in one or both 

countries.

• Myth #2: One result of a totalization agreement with Mexico will be to begin 

to pay benefits to undocumented or illegal aliens. 

As is the case with our existing agreements, a totalization agreement with 

Mexico would not alter current law on this issue. Totalization agreements do 

not have any effect on the prohibition against payment of benefits to illegal 

aliens in the United States.

• Myth #3: A totalization agreement with Mexico will cost the United States 

$345 billion. 

$345 billion is the approximate amount of total wages for all workers in 

the Earnings Suspense File (ESF) since 1937 and has no relationship to the 

cost of totalization agreements. SSA actuaries estimate the cost of a possible 

totalization agreement with Mexico to be $78 million in its first year rising 

to $138 million in its 5th year—for an average cost of $110 million a year.

• Myth #4: All of the earnings in the suspense file came from undocumented—

or illegal—aliens. 

Earnings in the ESF represent wages we are not able to post to a specific 

individual’s earnings record because the name and Social Security number do 

not match. Therefore, the suspense file is made up of all earnings that for 

whatever reason can not be credited correctly to a specific Social Security 

record. 

Name and SSN mismatches can occur for a number of reasons including 

transcription or typographical errors, name changes due to marriage or divorce, and incomplete or blank name or SSN. While a portion of the ESF represents earnings by undocumented aliens, it also includes earnings from legal 

aliens and U.S. citizens.

• Myth #5: Totalization agreements enable non-citizens who work in the United 

States for a very short period of time to receive full American Social Security 

benefits. 

False. Totalization agreements provide that the United States will pay prorated benefits to those workers who have: (1) between 6 and 39 quarters of 

coverage with the U.S. system; and (2) a combined work record of at least 

10 years in the United States and a partner country. Again, I emphasize, the 

benefits are paid on a pro-rated basis. 
10

WHY ENTER INTO TOTALIZATION AGREEMENTS

In 1977, Congress enacted the provisions that authorized the United States to 

enter into totalization agreements for two basic reasons:

• To ensure fairness and equity by providing social insurance for those who—

because they have split their careers between the United States and another 

country—might otherwise end up with insufficient credits to become entitled 

to a benefit from either country.

• And to protect American workers and businesses involved in international 

trade and commerce from double taxation and thus enhance trade with foreign nations.

The United States has had a totalization agreement with Canada, our largest 

trading partner, since 1984. As you know, Mexico—our other NAFTA partner—and 

Japan are our second and third largest trading partners. 

TOTALIZATION AGREEMENT WITH JAPAN: 

SSA has been discussing the possibility of a totalization agreement with Japan 

for many years. Talks bogged down because Japan insisted that U.S. workers temporarily living in Japan pay into the Japanese national health insurance system 

(currently a tax equal to 8.5 percent of payroll and expected to more than double 

in the coming years). Negotiations with the Japanese Government were successfully 

concluded on August 1 of this year. I am happy to report that the United States 

obtained important concessions from the Japanese Government on a number of 

issues including an exemption for U.S. workers and their employers from paying 

into Japan’s health insurance system. Following an internal legal review, I expect 

to transmit the draft agreement to the State Department by the end of this calendar 

year and would expect that it would be implemented sometime early in calendar 

year 2005. 

TOTALIZATION AGREEMENT WITH MEXICO: 

SSA has had informal discussions with Mexico over the last two years regarding 

a potential totalization agreement. Last year, I asked Deputy Commissioner Martin 

Gerry to visit Mexico with a team of senior SSA officials in order to determine 

whether Mexico was prepared to administer a totalization agreement. 

The team met with counterparts in the Mexican government; was briefed extensively on Mexican social security operations, data collection and storage systems; 

and visited Mexican social security field offices. Based on this visit and on followup discussions, the team concluded that Mexico was prepared to administer a totalization agreement, including the ability to provide the records necessary for SSA to 

determine the eligibility of individuals to totalized benefits. 

THE PROCESS AFTER AN AGREEMENT IS NEGOTIATED: 

After a totalization agreement is negotiated, the first step is for SSA’s General 

Counsel to review the draft agreement to ensure that it is fully consistent with 

American law. Second, the State Department reviews the draft agreement in terms 

of its consistency with overall American interests. If the draft is cleared by the State 

Department, and the White House, the agreement is then formally signed by representatives of the two governments. 

The Secretary of State then transmits the signed agreement to the President who, 

in turn, transmits it to the Congress where it sits in review for 60 session days. 

Once the Congressional review is completed and the partner country has completed 

all of its necessary clearances, notes are exchanged between the two governments 

indicating their readiness to implement the agreement. 

Typically, the agreement calls for it to take effect about 3 to 4 months following 

the exchange of notes; in practice most agreements have become effective about 12 

months following submission to Congress. Congress has never voted to disapprove 

a totalization agreement. 

COST OF THESE AGREEMENTS: 

SSA’s independent actuaries have produced estimates for each of these potential 

agreements based on assumptions of how each might look when drafted, including 

estimates of the number of individuals affected by each agreement and its cost impact on Social Security trust funds. Based on the actuary’s estimates, over the first 

5 years, U.S. workers and their employers would be relieved from paying $134 million in taxes to Mexico and $634 million in taxes to Japan. United States workers 
11

and their dependents would be paid additional benefits because of the agreement 

in the amount of $29 million from Mexico and $130 million from Japan. 

The cost impact on Social Security trust funds would be negligible over a 75-year 

period in both cases. Expressing the cost in this manner—‘‘over a 75 year period’’—

is consistent with the manner in which the actuarial condition of the Social Security 

program is presented in the reports of the Social Security Trust Funds. 

As I mentioned, the cost to the Social Security trust funds of a totalization agreement with Mexico would be $78 million in its first year rising to $138 million in 

its 5th year, an amount significantly lower than the current annual cost of our 

agreement with Canada (about $200 million). 

The costs of a totalization agreement with Japan are estimated to rise from $82 

million in year one to $130 million in its 5th year—very similar to those estimated 

for Mexico. 

CONCLUSION

I want to thank the Subcommittee for inviting me here today. I welcome the opportunity to clear up some of the misinformation that has been circulating about 

how totalization agreements work as well as the cost impact of totalization agreements. 

I would be happy to answer any questions you may have.

Mr. HOSTETTLER. Ms. Bovbjerg. 

STATEMENT OF BARBARA D. BOVBJERG, DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES, GENERAL ACCOUNTING OFFICE 

Ms. BOVBJERG. Mr. Chairman, Members of the Subcommittee, 

thank you again for inviting me here today to discuss Social Security totalization agreements. Totalization agreements are intended 

to address Social Security tax and benefit issues across nations. 

And since 1977, as the Commissioner said, the United States has 

entered into 20 such agreements. 

You have asked me here today to explain how these agreements 

work and, in particular, the potential impacts of such an agreement with Mexico. My testimony is in three parts: first, a description of the SSA’s processes for developing the proposed agreement 

with Mexico; second, an explanation of how the agreement might 

affect benefits to Mexican citizens; and third, an assessment of the 

agreement’s costs. 

My testimony is based on our review of the available documentation associated with this and other totalization agreements and 

interviews with SSA and State Department staff. It is drawn from 

work in progress for the Chairs of the Judiciary Committee and the 

Subcommittee on Social Security, and that work will be completed 

at the end of this month. 

First, the processes for developing the agreement. SSA officials 

told us that this process was informal and is the same as for prior 

agreements with other countries. The steps SSA took were not well 

documented, however, so we don’t know a lot of detail about the 

work that SSA did to evaluate this particular agreement or the 

others before it. 

What we do know is that senior officials visited Mexico for 2 days 

in August 2002, and during this visit, officials toured the Mexican 

Social Security facilities, observed Mexico’s automated Social Security systems, and identified the types of data maintained on Mexican workers. Because totalization agreements, whether with Mexico or with other countries, represent a potential financial commitment with real implications for the U.S., a reasonable level of as-
12

sessment is necessary to protect against undue risk. However, SSA 

officials provided no evidence that they had examined key elements 

of Mexico’s program, such as its control over the posting of earnings or its processes for obtaining key birth and death information. 

This is information that the U.S. would rely on in paying benefits; 

indeed, this relatively brief visit suggests only a limited review of 

the system’s features. 

Let me turn now to my second point, which is how the agreement 

would affect Mexican citizens. The agreement would increase the 

number of Mexican workers who would be paid U.S. Social Security 

benefits by making it easier for them to qualify for such benefits. 

Mexicans with fewer than 40 coverage credits in the U.S. will be 

permitted to combine their earnings recorded in Mexico with any 

U.S. credits that they have; and if the combined total equals the 

40 credit threshold, they will receive at least partial benefits from 

the U.S. program. 

In addition, totalization agreements generally override provisions 

in law that prohibit benefit payments to noncitizen dependents and 

survivors residing outside the U.S. This means that more Mexican 

workers’ family members are likely to become eligible for benefits. 

Of course, all such potentially eligible workers and their families 

would have to provide documentation of their U.S. work, and that 

is something that could prove difficult if that work was unauthorized and if any of the Social Security credits were reported under 

false names or false SSNs. 

Finally, let me turn to the question of cost. SSA has prepared a 

long-term actuarial estimate that suggests the cost of this agreement would not have a measurable impact on the Social Security 

trust funds. However, the assumptions on which the estimate are 

based are not directly related to the estimated millions of current 

and former unauthorized immigrants in Mexico. Instead, the estimate is based on the 50,000 people currently living in Mexico and 

receiving Social Security benefits from the U.S. This figure appears 

relatively small in comparison with the government estimates of 

about 5 million unauthorized Mexicans in the U.S. in the year 

2000, and it is this population of unauthorized immigrants that 

makes estimating the agreement’s costs so problematic. 

According to SSA’s sensitivity analysis, it would take only a 25 

percent increase in the number of Mexican beneficiaries, only 

13,000 more people, to have a measurable impact on the trust 

funds. Our analysis of prior agreements’ costs suggests that a difference like this is common, given the difficulty of estimating 

agreements’ costs. Past experience in the additional uncertainties 

inherent in this particular agreement seem to elevate the risks associated with any cost estimate. 

In conclusion, though totalization agreements may bring economic and diplomatic benefits to the U.S., they also represent potential financial costs. An agreement with Mexico presents unique 

and difficult challenges because of long-standing unauthorized immigration and how little is known about that population, factors 

that could make this agreement far more costly than any other. 

Better information and more diligent evaluation of potential agreements would help, and we plan to make recommendations to SSA 

as we complete our work. 
13

That concludes my statement, Mr. Chairman. I thank you for 

your attention. And I, too, am here to answer questions. 

Mr. HOSTETTLER. Thank you, Ms. Bovbjerg. 

[The prepared statement of Ms. Bovbjerg follows:]

PREPARED STATEMENT OF BARBARA D. BOVBJERG
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Mr. HOSTETTLER. Mr. Mowbray. 

STATEMENT OF JOEL MOWBRAY, INVESTIGATIVE 

JOURNALIST 

Mr. MOWBRAY. Thank you for inviting me to testify here today. 

When news report about a pending totalization agreement with 

Mexico surfaced late last year, the cost of such a deal was said to 

be relatively low. The pact’s supposed price tag of ‘‘just’’ hundreds 

of millions of dollars would be a pittance, the news report said, in 

an annual Federal budget that is measured in the trillions of dollars. 

But the hundreds of millions of dollars figure, it turns out, is a 

pittance compared to how much a poorly structured totalization 

agreement with Mexico would actually cost taxpayers. 

When I first analyzed the issue, the cost of totalization turned out to be as high as $345 billion or more over the next two decades. 

The taxpayers could actually be on the hook for even more than 

that if fraud becomes rampant and is not reined in, a distinct possibility, looking at the current state of affairs, particularly in Social 

Security’s disability insurance program. 

Now, this is not to say that I oppose a properly structured totalization agreement with Mexico. I do not. Considerations of fairness 

alone dictate that a deal with Mexico would allow people who play 

by the rules and who legally split their careers between the two 

countries to avoid double taxation and receive fair compensation 

upon retirement. 

This is the essence of totalization agreements that the U.S. has 

with some 20 other countries. Foreign workers in the U.S. or American workers in the foreign countries under the agreements pay 

just one Social Security tax and then receive a harmonized retirement benefit. The details of the pending deal with Mexico, however, need to be scrutinized very closely to ensure that such a pact 

does not become a boondoggle. 

Today, people who work in the United States illegally can earn 

credits under the system, but can only receive Social Security benefits if they become legal residents or citizens. The totalization 

agreement, at least as it was initially structured with Mexico, 

would lift this requirement for illegal aliens from Mexico. 

In a October 2002 Social Security Administration memo after 

stating current law, explains that illegal aliens would, in fact, be 

covered by a totalization agreement. Here is the relevant passage, 

quote, ‘‘Thus, regardless of a totalization agreement, Mexican nationals working illegally in the U.S. Can currently become entitled 

to benefits if they have made payments to the trust fund that meet 

the vesting requirements. The totalization agreement would include this population of the Mexican workers within the overall 

population of workers covered by the agreement.’’ . 

That illegal aliens would be covered under totalization actually 

makes sense, inasmuch as they would seem to be covered unless 

explicitly excluded. As mentioned earlier, illegal aliens can already 

earn credits in the current law under the Social Security system 

while working in the U.S. Illegally. What they need to do in order 

to collect benefits, again is to become ‘‘normalized’’ under the law. 

Currently, the only way to do that is to become a legal, permanent 
32

resident or a naturalized citizen. But if all Mexican citizens are 

able to take advantage of the U.S. Social Security system without 

first becoming U.S. residents or citizens, which is the essence of a 

totalization agreement, then simply being a Mexican citizen would 

make one who has worked in the U.S. illegally eligible to collect Social Security benefits. 

So to keep Mexican illegals from receiving benefits under a totalization agreement, the pact would have to explicitly exclude Mexican nationals who worked illegally in the U.S. And have not become U.S. permanent residents or naturalized citizens. Otherwise, 

the floodgates would be opened. 

Most mainstream estimates hold that there are anywhere from 

7 to 11 million illegal aliens in the United States, more than half 

of which come from Mexico. The best indicator of how much Mexican illegals will receive is how much they have paid in Social Security taxes. Since 1990, the amount of Social Security taxes paid by 

illegal aliens has been increasing rapidly. More than $300 billion 

has been paid under bogus Social Security numbers since that 

time. That figure is tracked by the earnings suspense file, which 

is an accounting of all Social Security taxes paid to fraudulent, 

bogus, or incorrect Social Security numbers. As of 2000, the ESF 

has $345 billion in credits. 

Although some of the taxes credited to the ESF, as the Commissioner noted earlier, come from clerical errors, most is the result 

of taxes paid on illegal aliens who do not provide employers with 

valid SSNs. Testifying before the Social Security and Immigration 

Subcommittees last September, Social Security Administration Inspector General Jim Hughes said that illegal work was, quote, ‘‘the 

primary cause,’’ end quote, of the growth in the ESF over the past 

decade. So, this is not my contention; this comes from the Social 

Security Administration itself. 

The empirical evidence suggests the same. As the illegal population in the U.S. has soared—the INS estimates the number of 

illegals has doubled from 1990 to 2000—so did the amount of taxes 

being credited to the ESF. SSA’s own statistics show that the ESF 

has grown by a net of $49 billion in the past year alone. 

And I see that my time is up, but I will be available for further 

questions after this. Thank you. 

Mr. HOSTETTLER. Thank you, Mr. Mowbray. 

[The prepared statement of Mr. Mowbray follows:]

PREPARED STATEMENT OF JOEL MOWBRAY

When news reports about a pending ‘‘Totalization’’ agreement with Mexico surfaced late last year, the cost of such a deal was said to be relatively low. The pact’s 

supposed price tag of ‘‘just’’ hundreds of millions of dollars would be a pittance in 

an annual federal budget that is measured in the trillions of dollars. 

But the hundreds of millions of dollars figure, it turns out, is a pittance compared 

to how much a poorly-structured Totalization deal with Mexico could cost taxpayers. 

When I first analyzed the issue, the cost of Totalization appeared to be as high as 

$345 billion—or more—over the next two decades. But taxpayers could actually be 

on the hook for even more money if fraud becomes rampant and is not reined in—

a distinct possibility looking at the current state of affairs, particularly in Social Security’s disability insurance program. 

This is not to say that I oppose a properly-structured Totalization agreement with 

Mexico. I don’t. Considerations of fairness alone would seem to justify a deal with 

Mexico that would allow people who play by the rules and legally split their careers 

between Mexico and the United States to avoid double taxation and receive fair 
33

compensation upon retirement. This is the essence of ‘‘Totalization’’ agreements that 

the U.S. has with twenty other countries. Foreign workers in the U.S. or American 

workers in the foreign countries, under the agreements, pay just one Social Security 

tax and then receive a harmonized retirement benefit. The details of the pending 

deal with Mexico, however, need to be scrutinized very closely to ensure that such 

a pact does not become a boondoggle. 

The negotiations with Mexico on a Totalization agreement first came to my attention late last year, as I was looking into other State Department issues. Multiple 

sources approached me with concern about the fine print of a pact that was being 

fast- tracked. Internal State Department and Social Security Administration (SSA) 

memos I obtained revealed that officials at those agencies were attempting to complete an agreement with Mexico in early 2003. One of those memos also validated 

the concerns of my sources, that illegal aliens from Mexico would become eligible 

for Social Security benefits under the terms being finalized. 

Today, people who work in the U.S. illegally can earn ‘‘credits’’ under the system, 

but can only receive Social Security benefits for that period if they become citizens 

or permanent legal residents. The Totalization agreement—at least as it was initially structured—would lift this requirement for Mexican illegals. An October 2002 

SSA memo, after stating current law, explains that illegal aliens would be covered 

by a Totalization agreement. Here is the relevant passage: ‘‘Thus, regardless of a 

Totalization Agreement, Mexican nationals working illegally in the U.S. can currently become entitled to benefits if they have made payments to the Trust Fund 

that meet the vesting requirements. The Totalization Agreement would include this 

population of Mexican workers within the overall population of workers covered by 

the Agreement.’’

That illegal aliens would be covered under Totalization makes sense, in as much 

as they would seem to be covered unless explicitly excluded. As mentioned earlier, 

illegal aliens already earn credits under the Social Security system while working 

in the U.S. illegally. What they need in order to collect benefits based on those credits is to become ‘‘normalized’’ under the law. Currently, the only way to do that is 

to become a legal permanent resident or a naturalized citizen. But if all Mexican 

citizens are able to take advantage of the U.S. Social Security system without first 

becoming U.S. residents or citizens, then simply being a Mexican citizen would 

make one who has worked illegally in the U.S. eligible to collect Social Security benefits. 

So to keep Mexican illegals from receiving benefits under a Totalization agreement, the pact would have to explicitly exclude Mexican nationals who worked illegally in the U.S. and have not become U.S. permanent residents or naturalized citizens. Otherwise, the floodgates would be opened. 

Most mainstream estimates hold that there are anywhere from 7 to 11 million illegal aliens in the United States, more than half of which came here from Mexico. 

The best indicator of how much Mexican illegals will receive is how much they have 

paid in Social Security taxes. Since 1990, the amount of Social Security taxes paid 

by illegal aliens has been increasing rapidly. More than $300 billion has been paid 

under bogus Social Security numbers (SSNs) since that time. The figure is tracked 

by the Earnings Suspense File (ESF), with is an accounting of all Social Security 

taxes paid to fraudulent, bogus, or incorrect SSNs. As of 2000, the ESF has $345 

billion in credits. Although some of the taxes credited to the ESF—which is an accounting file that contains no actual funds—come from clerical errors, most are the 

result of taxes paid on illegal aliens who do not provide employers with valid SSNs. 

Testifying before the Social Security and Immigration subcommittees last September, SSA’s Inspector General Jim Huse said that illegal work was the ‘‘primary 

cause’’ of the growth in the ESF over the past decade. The empirical evidence suggests the same. As the illegal population in the U.S. has soared—the INS estimates 

the number of illegals doubled from 1990 to 2000—so did the amount of taxes being 

credited to the ESF. SSA’s own statistics show that the ESF grew by a net of $49 

billion in the year 2000 alone. As the years pass, the ESF will continue to grow—

increasing the amount of money that would be paid out to illegal aliens as a result 

of the Totalization agreement. But this would cause severe damage to Social Security, since SSA’s number-crunchers are already projecting the collection of Social Security taxes from illegal aliens—but they’re not including in projections illegal aliens 

getting untold billions of dollars. 

And because of the progressive nature of Social Security, the Totalization agreement would allow illegal aliens from Mexico to get back significantly more money 

than the taxes they paid. This could devastate the solvency of Social Security, adding the weight of several hundred billion dollars to a system that is already going 

to go into the red next decade. 
34

Assuming no fraud—a big assumption—the Totalization agreement would still 

cost taxpayers an enormous sum of money. In an internal October 2002 memo, SSA 

estimated that the Totalization agreement would have a five-year price tag of $336 

million, with the annual cost being nearly $100 million in the fifth year. But those 

estimates dramatically understate the number of workers who would qualify under 

the pact. A State Department memo states that SSA’s ‘‘Office of the Chief Actuary 

has projected that nearly 37,000 new claims will be filed during the first year of 

implementation. By the fifth year, that figure is projected to drop to 28,000 new 

claims.’’ In other words, SSA estimated its cost projections assuming only 37,000 Mexicans 

total would sign up during the first year, decreasing to 28,000 new people added 

to the system in the fifth year, for a total of 160,000 people overall. But a Congressional Research Service report dated July 18, 2003, states that there are 4.2 million 

Mexican nationals currently working in the United States. Analyzing statistics provided by the Current Population Survey, Stephen Camarota of Center for Immigration Studies estimates that there are roughly 3.8 million illegal aliens from Mexico 

in the U.S. workforce. And that figure does not include the millions of Mexicans who 

have worked for a time in the United States, but who have since returned to their 

homeland. Considering the Mexicans currently working in the U.S. and those who 

have worked in the U.S. but now live in Mexico, the SSA estimate could be off by 

a factor of twenty or more. That would make the real cost of the Totalization agreement with Mexico, in the first five years alone, over $6 billion. The cost of the deal 

for taxpayers will mushroom as more and more illegal aliens from Mexico reach retirement age. 

The price tag of the deal could be even higher if work and residence requirements 

are modified or scrapped altogether. Under current law, someone must work for 10 

years to qualify for retirement benefits under Social Security. The Totalization 

agreement, however, could lower that threshold to say, four years, meaning a Mexican citizen would only need to work in the U.S. for four years to become eligible 

for Social Security retirement benefits. Also under current law, spouses or dependents must live in the country with the worker for at least five years (during the 

time of employment in the U.S.) in order to qualify for benefits. The Totalization 

agreement, as originally structured, would eliminate that residency requirement. 

The part of the Totalization agreement that could be the costliest, though, is fraud 

associated with Disability Insurance. According to many reports over the years, Social Security’s DI program is wracked with fraud. Making millions of illegal aliens 

from Mexico eligible to claim Social Security benefits without first becoming citizens 

or legal residents will only exacerbate the problem. The incentive to commit fraud 

will be great, too. 

Consider the following hypothetical example of what could happen under the Totalization agreement. If a 24-year-old Mexican national who has worked illegally in 

the U.S. for three years is able to present documents from a friendly doctor and either a W-2 or pay stubs that indicate $12,000 in annual earnings, he will be eligible 

for the following: nearly $8,000 per year in disability income (adjusted for inflation), 

until age 65, at which point he would receive the same amount as retirement pay. 

(If he manages to get an under-the-table job in the U.S. or Mexico, he will be able 

to double-dip for a second income stream.) If he is survived by his wife or dependents, his family would be able to receive up to almost $12,000 annually. If he dies 

at 60, and his widow lives to 85, U.S. taxpayers will be on the hook for nearly a 

half-million dollars. That’s for one worker brought into Social Security by the pact 

after three years of working illegally in the United States. (The ten-year requirement does not apply to disability insurance.) 

The incentive for disability insurance fraud is strong, but the ability of SSA to 

prevent it is not. Because illegals, by necessity, must give employers phony Social 

Security numbers (SSNs), SSA allows people to claim benefits for work histories 

with different SSNs from the one presently used by the now-legal immigrant. This 

means that if someone named Fred Jones walks into a Social Security office with 

a green card in his name and a W-2 for someone named Joe Smith, the SSA employee would likely allow Mr. Jones to claim benefits based on the work history of 

‘‘Joe Smith.’’ But according to government sources, SSA does not track which work 

histories have been claimed for benefits—so someone could recycle W-2s or pay 

stubs used by someone else the week before, and SSA would be none the wiser. SSA 

only checks to make sure two different people aren’t using the same current number 

while receiving benefits, not which numbers were used to claim the benefits. 

Regardless of fraud, though, the central point remains that including illegal aliens 

in a Totalization agreement would cost taxpayers hundreds of billions of dollars over 

time. I am an avid free-trader and I agree that we need strong relations with Mexico, but giving billions of dollars to illegal aliens is not the answer. A deal with Mex-
35

ico that rewards those who play by the rules and explicitly excludes illegal aliens 

can—and should—be struck. Allowing millions of illegal aliens from Mexico to collect hundreds of billions of dollars would not just reward illegal behavior, but more 

important, it would wreak havoc on the already-beleaguered Social Security system. 

That is something we can ill-afford. 

I would be happy to answer any further questions you may have.

Mr. HOSTETTLER. Mr. Apfel. 

STATEMENT OF KENNETH S. APFEL, LBJ SCHOOL OF PUBLIC 

AFFAIRS, THE UNIVERSITY OF TEXAS AT AUSTIN 

Mr. APFEL. Mr. Chairman, I am very pleased to have the opportunity to testify before the Subcommittee today. From 1997 to 

2001, I served as the Commissioner of the Social Security Administration, and late in my term I directed Social Security staff to open 

up serious discussions with the U.S. State Department and the 

Mexican Government to assess the full implications of establishing 

a totalization agreement with Mexico. I understand that work has 

continued on this endeavor under the direction of Commissioner 

Barnhart and her excellent staff. 

By way of background, work on totalization agreements has generally been nonpartisan in nature with negotiations spanning both 

Republican and Democratic administrations. As examples, agreements which became effective during the Bush administration with 

South Korea and Australia and Chile were negotiated in part during the Clinton administration, and agreements which became effective during the Clinton administration with Ireland and with 

Greece were negotiated, in part, during the first Bush administration. 

Why do I believe that a totalization agreement with Mexico is in 

the best interest of the United States? Four reasons: 

One, fairness to workers and employers. For the sake of the 

workers and employers doing business and working in other countries, we need to eliminate double taxation and establish a framework to blend benefit coverage. Currently, many workers pay both 

U.S. and Mexican Social Security taxes, and many are not eligible 

for benefits or for reduced benefits. It is not fair to workers, it is 

not fair to their employers. 

Second, strengthening our interconnected economies. The U.S. is 

increasingly connected to Mexico. U.S. trade policy is consistent, in 

terms of NAFTA. Totalization agreements could also facilitate the 

growing trend toward economic interdependence. In the future, 

more American workers will spend part of their years in the labor 

force working outside of the United States and more foreign workers will be working in the United States. Just as we have established an agreement with our neighbor to the north, Canada, we 

should do so with our neighbor to the south. These are indeed our 

two largest trading partners. 

Third, we now have the technical capabilities to establish an 

agreement with countries such as Mexico. Early totalization agreements were entered into with countries that had social insurance 

systems that are more aligned with U.S. systems, but there has 

been work done, excellent work by the Social Security Administration, to establish systems with Chile and South Korea. The Mexican system is similar in many respects to the system of Chile. So, 

with the Mexican Social Security system similar to Chile, we ought 
36

to be able to work out the details with a country such as Mexico, 

as we have with Chile. 

Fourth, the costs of such an agreement with Mexico are manageable. There will likely be added costs to the U.S. if we entered into 

a totalization agreement with Mexico, but the long-term costs of 

such an agreement to Social Security are modest—it is likely that 

an agreement with Mexico would have a negligible long-range effect on the Social Security trust fund. And I also do not believe that 

each and every agreement that we enter into must be a cost winner 

to the United States and a cost loser for other countries. 

Key point: The 20 totalization agreements that are now in effect 

are a net gain to the United States of hundreds of millions of dollars a year. And while an agreement with Mexico would increase 

U.S. costs, these added costs would only amount to a fraction of the 

net gains from our other 20 totalization agreements. 

Lastly, I know that there are concerns that establishing a totalization agreement with Mexico would somehow change our immigration laws or allow undocumented immigrants to get Social Security benefits. A totalization agreement with Mexico would not authorize payments to undocumented workers. Indeed, none of the 20 

totalization agreements now in effect altered our immigration laws 

or provided benefits to undocumented workers. I am sure that the 

U.S. continues to have bilateral discussions regarding legal and illegal immigration with a number of countries that have totalization 

agreements, such as Ireland or Korea; but to the best of my knowledge, immigration issues did not dominate the internal discussions 

or the U.S. debate on these totalization agreements. And I certainly 

hope that immigration issues do not undermine support for this 

valuable agreement with Mexico. 

In closing, it is my sincere hope that the negotiations between 

the United States and Mexico lead to a totalization agreement that 

moves us one step closer to strengthening worker protections, 

eliminating duplicative taxes, and fostering economic growth. 

Thank you for this opportunity to testify before you today. 

Mr. HOSTETTLER. Thank you, Mr. Apfel. 

[The prepared statement of Mr. Apfel follows:]

PREPARED STATEMENT OF KENNETH S. APFEL

Mr. Chairman, I am very pleased to have this opportunity to testify before this 

Subcommittee today on an important issue that I understand is receiving considerable attention by the US government—the possible establishment of a ‘‘totalization 

agreement’’ between the United States and Mexico to coordinate Social Security benefits and taxes between the two countries. The United States has established similar agreements with 20 other countries, and I believe there is much merit in establishing such an agreement with Mexico. 

From 1997 to 2001, I served as the Commissioner of the Social Security Administration. Late in my term, I directed the Social Security staff to open up serious discussions with the US State Department and the Mexican government to assess the 

full implications of establishing a totalization agreement with Mexico. I understand 

that work has continued on this endeavor under the direction of Commissioner 

Barnhart and her excellent staff. According to press accounts, a totalization agreement may be nearing fruition. 

By way of background, the Social Security Act authorizes the President to enter 

into totalization agreements with other countries. The process is often a very complex and lengthy one. Work on totalization agreements has generally been non-partisan in nature, with negotiations spanning both Republican and Democratic administrations. As examples, agreements signed by the Bush administration in 2001 with 

South Korea and Chile were both negotiated in part during the Clinton administra-
37

tion, and agreements signed in 1993 by the Clinton administration with Ireland and 

Greece were both negotiated in part during the first Bush administration. 

What are the purposes of these international agreements? First, the agreements 

eliminate dual Social Security taxation, which saves workers and their employers 

from having to pay duplicative taxes. Often, an individual working overseas has to 

pay his or her home country’s Social Security taxes as well as the Social Security 

taxes imposed by the foreign country. This imposes steep costs on both employees 

and employers. And second, the agreements help to fill gaps in benefit protection 

for individuals who have worked parts of their careers in the US and part in another country, but who haven’t worked enough in either or in both to qualify for 

benefits. Workers may combine earnings credits to qualify for benefits under either 

or both systems, with benefits prorated to reflect the number of years that workers 

paid into each system. 

Frankly, there would not be much of a need for totalization agreements in a world 

where each nation relied on itself for all of its goods and services. But that certainly 

doesn’t describe the United States or the rest of the world in the 21st Century. 

Workers move with growing frequency, as do markets. In an increasingly interdependent and interrelated world, the need for totalization agreements only grows. 

Why do I believe that a totalization agreement with Mexico is in the best interests 

of the United States? Four reasons:

• First, fairness to workers and to employers. For the sake of workers and employers doing business and working in other countries, we should eliminate 

double taxation and establish a framework to blend benefit coverage. Currently, many US workers pay both US and Mexico Social Security taxes and 

many are eligible to receive only limited coverage based on their years of payments into the systems. That’s not fair to workers or their employers.

• Second, strengthening our interconnected economies. The US economy is increasingly interconnected with Mexico, and US policy—I think correctly—is 

aimed at expanding trade and opportunities between our countries. NAFTA 

is certainly one important way to strengthen these ties, but other steps can 

be taken to strengthen ties. Totalization agreements also serve to facilitate 

the growing trend toward economic inter-dependence. In the future, more 

American workers will spend part of their years in the labor force working 

outside of the United States. And more foreign workers will be working in the 

US. Just as we have established an agreement with our neighbor to the 

North—Canada—we should now do so with our neighbor to the South. Indeed, Mexico and Canada are our two largest trading partners.

• Third, we now have the technical capabilities to establish an agreement with 

countries such as Mexico. Early totalization agreements that were entered 

into in the late 1970’s and 1980’s were established with nations that had Social Security systems very similar in design to the US system—in countries 

such as Germany and France. But more recent work by Social Security Administration staff has proven that totalization agreements are also workable 

with countries that have social security systems that are considerably different than the US system. Chile and South Korea have adopted, to a greater 

or lesser extent, a ‘‘privatized’’ social security system, and the US has established agreements with both countries. The Mexican social security system is 

similar in many ways to the Chilean system. Since we have been able to work 

out the complex details with countries such as Chile, we should now do so 

with Mexico.

• Fourth, the costs of such an agreement with Mexico are certainly manageable. 

There will very likely be added costs to the US if it entered into a totalization 

agreement with Mexico, but the long term costs of such an agreement to Social Security are modest—it is likely that an agreement with Mexico would 

have a negligible long-range effect on the Social Security Trust Fund. And I 

do not believe that each and every agreement that we enter into must be a 

cost ‘‘winner’’ for the US and a cost ‘‘loser’’ for the other country. The twenty 

totalization agreements that are now in effect are a net gain to the United 

States of hundreds of millions of dollars a year, and while an agreement with 

Mexico would increase US costs, these added costs would only amount to a 

fraction of the net gains from our other twenty agreements.

• Lastly, I know that there are concerns that establishing a totalization agreement with Mexico would somehow change our immigration laws or allow undocumented immigrants to get Social Security benefits. A totalization agreement with Mexico would not authorize payments to undocumented workers. 

Indeed, none of the twenty totalization agreements now in effect altered our 
38

immigration laws or provided benefits to undocumented workers. I am sure 

that the Unites States continues to have bilateral discussions regarding legal 

and illegal immigration with a number of countries that have totalization 

agreements, such as Ireland and Korea; but to the best of my knowledge immigration issues did not dominate the internal discussions or the US debate 

of these totalization agreements. I certainly hope that immigration issues do 

not undermine support for this valuable agreement with Mexico.

Before closing, I should point out that I have not seen any of the specific terms 

and language or the particular points of contention relating to the Mexico totalization agreement. I have not discussed the negotiations with anyone within the US 

or the Mexican governments, and I would not consider it appropriate for me to comment at this time on the specifics or to second-guess what the specific terms of an 

agreement should look like. I understand that these negotiations are often lengthy 

and very complex and it is impossible to ‘‘handicap’’ the agreement without an understanding of all issues. But this I can and will say: it is my sincere hope that at 

the conclusion of these negotiations that the US and Mexico will establish a totalization agreement that moves us one step closer to strengthening worker protections, eliminating duplicative taxes and fostering economic interdependence. 

Thank you for this opportunity to testify before you today.

Mr. HOSTETTLER. We will now move into a round of questions by 

Members of the Subcommittee for 5 minutes, beginning with the 

Chair. 

Ms. Barnhart, are you satisfied with the cost estimates prepared 

by your actuary for the Mexico totalization agreement? 

Ms. BARNHART. Our actuary went through several iterations, Mr. 

Chairman, recognizing how important this issue was in considering 

an agreement with Mexico; and I feel very confident in the ability 

of our actuaries to make accurate projections. 

If you look over the history of our actuaries’ experience in projecting costs of totalization agreements, what you would find is that 

for the agreements that we have done in the last 10 or 12 years, 

they have been within 3 percent in the aggregate of estimating the 

number of individuals that would participate in totalization agreements, and I think that is an impressive accomplishment. 

I was very much aware of the way that they did their estimates. 

They used the best available information that we have, using their 

best judgment. And I would point out that the actuaries are independent actuaries whom we entrust with the responsibility for determining each year the status of the Social Security trust funds 

for the Social Security board of trustees and the American people. 

So I think they are eminently well qualified to make a determination about totalization agreements. 

Mr. HOSTETTLER. Thank you. 

Ms. Bovbjerg, the actuaries’ office used the numbers from the totalization agreement with Canada to estimate the number of initial 

beneficiaries under the agreement with Mexico. INS said back in 

January, as I said earlier, that there are roughly 5 million illegal 

Mexican workers at present in the U.S. . 

Has Canada ever had, to your knowledge, a large number of illegal workers here that can benefit under a totalization agreement, 

to the best of your knowledge? 

Ms. BOVBJERG. Well, of course, the issue with a lot of this is, 

there isn’t great knowledge out there about how many people are 

undocumented. What I understand to be true is that the percentage of the 7 million unauthorized people in this country is in the 

single digits from Canada, whereas it is almost 70 percent from 

Mexico. 
39

I mean, we understand that the U.S. and Canada have a common border and, like Mexico, Canada is our trading partner 

through NAFTA, and so there are some similar reasons to want to 

apply similar types of agreements to the two countries. But the economic relationships are, of course, quite different. 

Mr. HOSTETTLER. And let me just say, from the Chair’s point of 

view, that a totalization agreement with Mexico, I think, is very 

appropriate and necessary. The concern that this Subcommittee 

has is with regard to the impact on immigration. 

Without immigration, there would not be a need for a totalization 

agreement. So immigration is at the foundation for all totalization 

agreements. The people come here to work, citizens from the 

United States go to other countries to work. And so it is fundamentally a question of immigration. 

Mr. Mowbray, you are an investigative writer, but I understand 

you once worked on the Hill and have an in-depth knowledge of Social Security issues. Would you offer your opinion on how senior 

citizens receiving Social Security retirement and those people now 

approaching retirement will react to this totalization agreement 

with Mexico and the potential that illegal immigration would have 

on that agreement? 

Mr. MOWBRAY. Well, I don’t have to speculate, actually, because 

I was deluged with e-mails and handwritten letters. Senior citizens 

are the only ones who still do that; and they were furious. 

And, again, a properly structured deal, I think, as you and I both 

agree, would be fine; but the problem is, this is not. And as you 

said, the impact on immigration policy doesn’t actually change the 

policy. What it does is, it creates a greater incentive for people to 

come here illegally, because if they can come here illegally, work 

for 5 years—or not even work for 5 years, but have W-2s that say 

they worked here for 5 years—and then go back down to Mexico; 

having never become legal or normalized under U.S. law, they 

could then collect U.S. Social Security benefits down in Mexico. 

And a huge problem—and I didn’t get into this in my oral testimony—is with fraud, which ramps up the incentive if it is not 

reined in, because at present, according to government sources with 

knowledge of this, the Social Security Administration does not keep 

track with which work histories are claimed. So someone named 

Fred Smith could walk in with, say, Joe Jones’s W-2s, could submit 

them and say, Well, you know, because illegal aliens, by definition, 

are undocumented at the time they are working, they don’t usually 

work under their actual names or real numbers; so the Social Security Administration does have to accept people who earn credits 

under different names if you have people who were illegal under 

present law who earn credits. 

But the problem is, I could walk in the next day with the same 

set of W-2s and the same paperwork and get benefits under my 

name, and the Social Security Administration would be none the 

wiser because they do not track which work histories have been 

claimed; they only track which people are receiving benefits. 

Ms. BARNHART. Mr. Chairman. 

Mr. HOSTETTLER. Ms. Barnhart, you have a desire to respond? 

Ms. BARNHART. Yes. I feel compelled to interject at this point in 

time. 
40

Mr. Mowbray wasn’t here when I gave my opening statements, 

and in my opening comments—and some of the information he included in his opening statement referred to the earnings suspense 

file and represented a misunderstanding of that because it referred 

to the $345 billion as taxes that were paid. As I pointed out in my statement, $345 billion is the amount of 

wages that are paid, not taxes. And so it is not a pot of money that 

anybody is going to get the $345 billion; And I feel that is important, particularly in light of comments that he just made. 

The fact of the matter is, the reason that the earnings suspense file exists, the $345 billion, is precisely because we do what we call 

‘‘unscramble earnings’’ when people bring in their W-2s and their 

history of work. And then, quite contrary to Mr. Mowbray’s understanding of the situation, the issue is that an individual must bring 

in a W-2, prove in fact that they are that person, that it is their 

Social Security number, and then we actually go into the earnings 

suspense file and remove those earnings from that particular— from that particular—where they are recorded, and post them to 

that individual. 

Actually, it is because that we go into meticulous detail and have 

quite an elaborate process for ensuring that wages are credited appropriately that we have such a large earning suspense file. It is 

the difficulty inherent in unscrambling them because of the procedures that we go through. 

So I really felt that is very important to make that point, because 

what you just suggested is that people sort of willy-nilly come in 

and claim they work for this place and that place and we absolutely post to their account. Absolutely not the situation. 

First of all, the wages are reported by the employer, and we 

would match whatever W-2 an individual brings in to the postings 

that were done based on the employer’s report. 

Mr. MOWBRAY. If I may respond, Mr. Chairman. 

Mr. HOSTETTLER. We are not going to be debating—— Mr. MOWBRAY. I know and I understand. Just a few quick points. 

As for the earnings suspense file, I understand what the Commissioner is saying, but I am basing my understanding of this primarily upon what the Inspector General of the SSA said about this 

issue, which is that the primary source of the growth in the earnings suspense file, particularly since 1990—and it tracks perfectly 

statistically with the growth in illegal immigration. 

So I do understand that you do have other reasons for it, but the 

primary source—again, not my words, the Social Security Administration’s words—comes from the growth in illegal immigration. And 

one of the things I have often found investigating government is 

not that the policies are the problem but the implementation or the 

enforcement of those policies. 

So I understand what the Commissioner says about the policy of 

unscrambling and going in and pegging work histories and removing from the earnings suspense file. The problem is, according to 

government sources with knowledge of this, with intimate knowledge of this, this in fact is not the practice. That is the problem. 

And any number of independent people who have looked at Social 

Security—this is a problem since when I was on the Hill and still 

remains today. Disability insurance is rife with fraud, and that 
41

would not change when you open up the floodgates of people who 

do not even have to prove they are normalized under U.S. Law who 

then could collect. So we have a wider number of people who would 

be able to commit fraud easier than they would today. That is the 

problem. 

Mr. HOSTETTLER. The Chair now recognizes the gentleman from 

Arizona for 5 minutes. 

Mr. FLAKE. I thank the Chair and thank the panelists. 

Getting back to this earnings suspense file, $345 billion or so in 

there since 1990? 

Mr. MOWBRAY. Most of it——

Ms. BARNHART. Excuse me. The earnings suspense file was created in 1937, and it was created because all earnings could not be 

posted due to a mismatch between the name and Social Security 

number for a number of reasons I mentioned—divorce, marriage, 

whatever. And it is true—absolutely, it is true that undocumented 

workers contribute to the earnings suspense file, but the $345 billion since 1937, it is not taxes paid, it is the wages that the individuals earned that we were unable to post against——

For example, if Ken Apfel earned $10,000 and Mr. Mowbray 

earned $5,000 and Ms. Bovbjerg earned $20,000 but for whatever 

reason we were unable—the Social Security number submitted for 

each of them were not—Mr. Mowbray is making a point to the fact 

that I gave him only $5,000. 

I assure you that has nothing to do with the issues that you have 

been discussing here. 

Mr. MOWBRAY. No, you have made it sound accurate, and you 

are——

Ms. BARNHART. The situation is those wages need to be posted 

so that when they retire we can go back and look at their earnings 

history and calculate the benefit. They pay a percentage, 12.4 percent, between the employer-employee of that in taxes. 

Mr. FLAKE. So the 345 is wages paid, not how much is accrued 

in the Social Security trust fund? 

Ms. BARNHART. That is correct. In fact, if you look at that number, sir, it is about $51 billion in the old age and survivor and disability insurance fund since 1937. 

Mr. FLAKE. How much of that is since 1990? 

Ms. BARNHART. Since 1990, I could actually probably provide 

that for you or come very close. Let us see. 

Mr. FLAKE. Rough estimate. 

Ms. BARNHART. I am looking at it here. Well, let us see. Since 

1990, it is a large amount; and I would be happy to have someone 

calculate while we are sitting here and give it to you later. 

Mr. FLAKE. Provide it at the end of the hearing. 

Ms. BARNHART. What I have is by year the amounts, but I could 

give it to you by the end of the hearing or give it to my staff and 

have them look at it now and add it so we can get it. 

Mr. FLAKE. That would be great. 

A follow-up question on that. If an individual pays into a fraudulent account or a different Social Security account, they then become a legal citizen, LPR and then citizen, whatever. Is there any 

way for them to go back and say, well, these taxes were paid under 
42

this number? Would they have claim to credits paid on the basis 

of that? I think that is the relevant question here. 

Ms. BARNHART. Maybe it would help if I explained the situation 

today as current law stands. 

The Social Security and the IRA statutes provide that wages that 

are paid to people and cover employment, meaning covered by Social Security, are subject to payroll taxes, and we are to consider 

those wages in determining an individual’s benefit into Social Security. Until 1996, the statute was silent on the issue of immigration 

status as it related to payments. There was no mention of one’s 

status. In 1996, Congress established the requirement that to receive benefits in the United States a person must be lawfully 

present to receive benefits; and the Attorney General provided to 

the Social Security Administration at that time a list of the law 

statuses or whatever, for lack of a better word, that would qualify 

and meet that requirement. As a result, when an individual comes 

in to apply for Social Security benefits in our district offices all over 

the country we do make them prove their lawful status at that 

point in time before processing the benefit. 

Mr. FLAKE. My question is, can they receive—do they receive any 

credits if it can be determined that they actually paid into a fraudulent account and they say, well, I actually paid into that account; 

I should get credits based on what I paid into a fraudulent account? 

Ms. BARNHART. When you say a fraudulent account, are you talking about a Social Security number that is a fraudulent Social Security number or that they are undocumented workers? 

Mr. FLAKE. Well, I am assuming that they were undocumented 

and in order to keep a job or to get a job they gave a false Social 

Security number. 

Ms. BARNHART. One of the things that makes this such a really 

difficult and complicated area—and you are really hitting all the 

right points here in your questions, obviously—is that nothing is 

quite so clean and simple as that. In fact, many people who come 

into this country, their status changes. They may come in with a 

legal status and their visa or their work—their ability to work legally may expire. So during the time they have the legal ability to 

work they get a Social Security number and they pay into—they 

and their employer pay into the system. When it expires, we have 

no way of knowing that. 

Further, employer’s report wage information only annually, once 

a year. So let us say someone came in and they were here for 5 

years working legally and in March it expired. We have no way of 

knowing that it expired, and the employer certainly when they report the wages don’t report that the person was legal through 

March and then became illegal. 

It can work the opposite way, obviously, too. People come in legally. They get Social Security numbers for nonwork purposes. 

They go to work. They pay into the system, and then they become 

legal after that. 

Mr. FLAKE. My time is up, but it would seem that the questions 

that the other panelists raised about the accuracy of the estimates 

going forward are really in question here then. We don’t have time, 

but if you could submit to my office answers to those questions. 
43

Take a few scenarios—I realize it may take a few, but the ones 

that I have asked, those are important, and those could take the 

figures one way or another quite a ways. 

Ms. BARNHART. I would be happy to do that. 

Mr. MOWBRAY. Mr. Flake, I do have—the percentage of the accrued amounts in the earnings suspense file since 1990 is over 85 

percent of the total. So it is the vast majority. And that—I am basing, actually, the table I received from the Social Security Administration. 

Ms. BARNHART. Let me say I have the table, and we have just 

done an the calculation, and it is actually two-thirds of the amount 

through 2001, not 85 percent. I have the exact numbers right here 

that were posted each year. 

Mr. MOWBRAY. I have the table as well, so——

Ms. BOVBJERG. May I jump in? This is not a substantive jumpin, but I just wanted to say that we have work under way for the 

Judiciary Committee on the earnings suspense file. We suspended 

it briefly to turn to the totalization question, but we will be back 

to it shortly and will be looking at some of the questions about the 

size and the rate of growth and numbers that are used repetitively. 

Mr. FLAKE. It seems very much related to the totalization. 

Ms. BOVBJERG. Yes, it does. That is why that team was working 

on this. 

Mr. HOSTETTLER. With unanimous consent, the Chair recognizes 

the gentleman, Mr. Apfel, to respond. 

Mr. APFEL. Thank you, Mr. Chairman. 

I just wanted to make a point about the actuaries’ estimates. 

There is always uncertainty in estimates, but there is enormous respect throughout Washington to the deep knowledge they have in 

these areas and the nonpartisan nature of their assessments. 

I point out just a key fact to think about in this estimate. There 

are about 60,000 Canadians now living in Canada getting Social 

Security insured benefits. In other words, they have worked about 

10 years, fully 10 years to get the full Social Security benefit, 

60,000, and about 34,000 receive totalized agreements, which 

means they spent less than 10 years working in the U.S. So it is 

a subset. It is a smaller number than those that have been here 

for over 10 years. 

In Mexico today, there are about 50,000 Mexicans living in Mexico receiving insured benefits, and the estimates are quite a bit 

higher, somewhere around 50,000, with considerable growth predicted in the future. 

From looking at those assessments—and I spent some time the 

last couple of days looking through this, and I have spent a fair 

amount of time over the years working with the actuaries—it 

seems to me that those are very realistic, pragmatic estimates 

based upon the best information available; and it could be 20 percent or so higher, which is what GAO also looked at, about whether 

there was a 25 percent bound to those estimates. It might be 25 

percent higher. Maybe it is 25 percent lower. 

But all in all I just wanted to point out that the scrupulous work 

that they do—and when we start seeing $350 billion numbers, it 

tends to cloud what is considered to be exceptional work to try to 

arrive at the overall costs. 
44

Mr. HOSTETTLER. Thank you, Mr. Apfel. 

The Chair now recognizes the gentlewoman from Texas, Ms. 

Jackson Lee, for 5 minutes for questions. 

Ms. JACKSON LEE. First of all, as I said, there is a shiny lining—

I was trying to get my metaphors together—silver lining, because 

I think it is important to recognize that some process is occurring 

and it can—may be somewhat broken if you are doing a double taxation, and there is a sense of ability to regulate this process. So I 

would like the Commissioner to—and I thank you very much for 

visiting me in Houston and being a problem solver there, and we 

are going to call you back. 

Ms. BARNHART. Thank you. 

Ms. JACKSON LEE. If as you engage in this totalization agreement 

with Mexico and you are in negotiations, can you assure us that 

no immigration laws will be changed? 

I might add my additional footnote and that is the interest of the 

administration to work with Congress and to be sensitive to legislating and changing immigration laws through this treaty process 

and indicating today that that would not occur or you would not 

be working to change immigration laws. 

Ms. BARNHART. Yes. Thank you very much for that question. Because the fact of the matter is I would have no authority under the 

law as constituted by the Congress to change immigration laws, as 

I said in my statement; and I appreciate having this opportunity 

to emphasize that fact. Totalization agreements have never affected 

immigration laws. 

We do not have the authority. The totalization statute is actually 

in the Social Security Act, not in the immigration statute. So, 

therefore, I can assure you that any totalization agreement that 

would be designed with Mexico would not include anything to do 

with immigration. It would be focused solely on the issue of making 

sure that individuals who have split earnings in their careers in 

different nations would be able to receive benefits from each of the 

nations. 

Secondly, with regard to your concern about working with Congress, perhaps it would be helpful if I just spent a moment to describe the approval process for totalization agreements. 

If we move to formal negotiations with Mexico and actually craft 

a totalization agreement, the process calls for me, as the Commissioner of Social Security, to notify the State Department and transmit it to them, the State Department to review it, transmit it to 

the President, and then the President to transmit it to the Congress where it must stay for 60 days of session in either House before it goes into effect. The Congress during that 60 days of session 

days, 60 session days, has the opportunity, either House, to vote on 

the agreement. 

If you look at what has happened over time—anticipating that 

there would be interest in what an approval process would look 

like, I asked my staff to give me some information related to how 

long such approvals have taken in the past—and in an average of 

5 months the agreements have sat before Congress in order to meet 

that 60-session-day requirement, and Congress has never voted to 

disapprove the totalization agreement. 
45

Ms. JACKSON LEE. I thank you. My time is short, but I appreciate 

the process. 

Let me quickly ask, is Medicare included in this? 

Ms. BARNHART. No, Medicare is absolutely not. 

Ms. JACKSON LEE. And are you comfortable with your cost estimates? 

Ms. BARNHART. I am very comfortable with our cost estimates. 

Ms. JACKSON LEE. So, in essence, my opening remarks suggesting that the suspense fund has many, many dollars for many, 

many different reasons and not necessarily all totally attributable 

to a relationship that might be established with the totalization 

agreement, is that correct? 

Ms. BARNHART. That is absolutely correct. It is attributable, as 

you said, to change of name. There is no question——

Ms. JACKSON LEE. So that is not a $345 billion check given to 

Mexico? 

Ms. BARNHART. No, absolutely not. 

Ms. JACKSON LEE. Thank you. 

And let me thank you, Commissioner, for your service as well. 

You hail from the great State of Texas, and it warms me all over 

to have you here this morning, and I thank you very much. 

Mr. APFEL. Thank you. 

Ms. JACKSON LEE. You obviously experienced at least these questions as process and if you can share your thoughts—as I said, I 

apologize. We were engaged in a matter on the floor that I was involved in. But if you could create a new totalization process, what 

changes would you make in the role that Congress plays and how 

would you make those comfortable that surmise that we be legislating on a treaty and, of course, changing immigration laws and 

giving a blank check to the country of Mexico? 

Mr. APFEL. I think that the current process with hearings and 

consultation that goes forward I think is critical as we move forward on these issues, and this particular totalization agreement 

clearly has more—I don’t think there would be very many hearings 

on any of the other 20. This is the first one that has been at all 

terribly controversial. 

So having hearings I think is an important part of that process, 

and that is good. The consultation that goes on I think is appropriate. 

The other things that need to be thought of within the Social Security Administration, each one of these totalization agreements is 

somewhat unique. I am not here to either handicap the work that 

has been done within the Social Security Administration or to second guess any of the efforts that have gone on, but clearly examining some of the internal controls that exist within Mexico and 

with the United States with these issues is part and parcel of the 

responsibility of the Administration to do so, and I would fully expect that those would be the type of issues that would be examined 

carefully in terms of Mexican/U.S. Agreements. 

So it is my belief that the administration should consult with the 

Congress, which it is doing, but also that it needs to assure that 

the internal controls are in place for this unique agreement, and 

it would—I believe that those type of steps would be appropriate, 

and I believe they are—my guess is that they are taking place. 
46

Ms. BARNHART. If I could just add that, in fact, those would be 

precisely the kinds of things, as Mr. Apfel points out, that we 

would deal with in an administrative agreement which is always 

required as part of a totalization agreement. There is always an administrative agreement negotiated between the two nations that 

gets into exactly those kinds of things, and one of my reactions to 

Ms. Bovbjerg’s comments was precisely that. Some of the concerns 

that GAO has would in fact be worked out through such agreements when an agreement were structured. 

Ms. JACKSON LEE. You would not find it helpful for a legislative 

intervention to the extent of barring the participation in the totalization agreement? Just a flat-out bar? Cannot do it? 

Ms. BARNHART. I think barring totalization agreements would 

certainly work against the interest of American businesses. Because, as you pointed out in your opening statement and Ken and 

I both have said, the net gain to the American economy is $600 

million a year as a result of the 20 agreements that we have because of taxes that we don’t have to pay, our employers don’t have 

to pay to foreign nations; and, conversely, we only lose $200 million 

a year into our trust fund. So it is a $600 million net gain that will 

only grow over time. 

I would also take this opportunity to say I share Ken’s belief that 

the consultation with Congress is important. In fact, it is precisely 

for that reason that prior to your summer recess I actually invited 

all the Members of this Committee and the Ways and Means Committee on the House side and the Finance Committee and Judiciary 

Committee on the Senate side and Appropriations Committee to attend a briefing on where we were with Mexican totalization because I really wanted to make sure that I was hearing the concerns 

of Congress and able to address them to the extent possible in the 

discussions that we are having with Mexico. 

Ms. JACKSON LEE. Mr. Chairman, if you will indulge me, I think 

Mr. Mowbray—and I want to thank him for the work that he has 

done and I think hopefully we can give him comfort by putting in 

strict regulations to avoid the possibility of fraud, but you wanted 

to comment. 

Mr. MOWBRAY. Yes, just a couple points. I mean, estimates are 

only as good as the assumptions upon which they are based, and 

so—actually, Ken—I agree with Ken’s comment that most of the 

actuaries that I have worked with in the Social Security Administration when I worked on the Hill working on this issue are excellent. I don’t actually doubt the ability they have to crunch numbers 

and make estimates based on the assumptions they are given. So 

the quality of their work I do not dispute. 

It is the question of making sure, as you pointed out, to explicitly 

exclude Mexican nationals who do not attain legal status in the 

United States. Because, again, under present law you have to be 

lawfully present in the United States, but if a totalization agreement—again, the essence of it is that someone can be here, working here, and they can be a citizen or a legal resident of a different 

country and still receive benefits based on U.S. Taxes paid. 

So if a Mexican national comes here for several years or, worse 

yet, commits fraud and has forms indicating that he worked here 

for several years, then that person could collect benefits. And that 
47

is the real concern with something like this, because the numbers 

can add up very fast. If I may, I have an example here just, I 

think, that would make it very clear to people how much money 

you can be talking about on a case-by-case basis. 

If a 24-year-old Mexican national who has worked illegally in the 

U.S. For 3 years is able to present documents from a doctor or a 

friendly doctor, as the case may be, and needed a W-2 or pay stubs 

indicating $12,000 in annual earnings, this individual would be eligible for the following: Nearly $8,000 per year in disability income 

adjusted for inflation until age 65 at which point he would receive 

the same amount as retirement pay. If he does manage to get a job 

under the table in the U.S. Or Mexico, he would be able to double 

dip for a second income stream, and if he is survived by his wife 

or dependents, his family would be able to receive up to $12,000 

annually. If he dies at age 60 and his widow lives to age 85, U.S. 

Taxpayers would be on the hook for a total of a half million dollars. 

That is for one worker brought into the Social Security system 

under the totalization agreement after working in view in the 

United States illegally for 3 years. 

Ms. BARNHART. Let me say I realize you don’t want a debate, Mr. 

Chairman, but giving that kind of example suggests that all people 

do to receive Social Security disability is to bring a statement from 

a doctor. Also, Mr. Mowbray’s example suggests in some way we 

would cede responsibility for making disability determinations totally to the Mexican government without using the standards we 

have now. 

Let me just say totalization is but one of my responsibilities as 

Commissioner of Social Security. I have spent the bulk of these last 

2 years since I assumed this post trying to correct our disability 

system. That is one of the reasons I, in fact, was in Houston with 

Ms. Jackson Lee. 

The fact of the matter is right now the best-worse case situation 

we have for people moving through disability takes 1,153 days, and 

it is an arduous process. We have people who literally are dying 

before they get disability benefits. So to suggest that we would—

all of a sudden people from Mexico would simply on the basis of 

a letter from a doctor or one piece of documentation receive disability is really a misrepresentation of what occurs. 

Ms. JACKSON LEE. I will just conclude on this note, Mr. Chairman, and then end; and I want to thank the witnesses. But as you 

recall, tragically, the 9/11 terrorists had nonimmigrant visas that 

seemed to have been given without much consideration. We fixed 

that or we have made an effort to staunchly fix it by way of intense 

scrutiny of nonimmigrant visas. As I understand it, the Commissioner, that would be her commitment in terms of the totalization 

program, to make sure that she intensely or it is structured that 

we intensely scrutinize for fraud. 

I yield back. Thank you. 

Mr. HOSTETTLER. I thank the gentlelady. 

The Chair now recognizes the gentlewoman from Tennessee, 

Mrs. Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you so much, Mr. Chairman. I appreciate that very much. 
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I appreciate all of you coming; and, Ms. Barnhart, I can tell from 

the look on the faces of your staff that they are just dying to answer and probably don’t agree with a lot of what is being said on 

the panel. So we may submit some questions——

Ms. BARNHART. I would welcome the opportunity. 

Mrs. BLACKBURN [continuing]. For them to answer. Because I 

think it is important for all of you to realize policy does affect immigration and policy does affect cost and it is something that our 

constituents are incredibly concerned about. Every single dollar the 

Federal Government spends comes from the taxpayer, every obligation that goes on the line comes from the taxpayer, and we are 

here to represent those taxpayers, and we take that representation 

very seriously. 

Ms. Bovbjerg, I would like to come to you, if I may, please. How 

cooperative has the Social Security Administration been in getting 

the information that you need to do your analysis of the impact of 

the totalization program? 

Ms. BOVBJERG. I think we have usually quite a good working relationship. I think it has been difficult to get information on totalization in part because there isn’t much to obtain. There isn’t much 

documentation. We have also worked with the Department of State 

to try to get that information. 

I have kind of let everybody else around me talk, and one of the 

things I did want to say about our work on cost is that we really 

want to rachet it up from anecdotal information and just to think 

more about risk. What we are talking about is risk, the risk that 

the information that comes to document totalization requests isn’t 

correct, that there aren’t adequate internal controls. I know I am 

sounding like an accountant now, but there may not be adequate 

internal controls in another country’s system. 

I don’t know that that is the case, but we don’t know that they 

are adequate either. SSA really hasn’t done that work. I am reassured that that work will be done in the future, but it has not yet 

been done. With costs, the risk that the costs will be higher than 

what the actuaries have estimated—and we have a great deal of 

respect for SSA actuaries and agree that their estimate is certainly 

within the range—in fact the range of cost may be much higher 

and that is something that should be known before making a decision like this. 

Mrs. BLACKBURN. Let us talk about that for a minute. Because 

in your written testimony you state that the actuary increased the 

initial number of Mexican beneficiaries by a factor of six over the 

next 45 years for their long-range cost estimates. If you would 

speak specifically to what the thought process or the analysis process was that led to that, and also do you think that the comparison 

to Canada is a means to evaluate the reasonableness of the number 

of beneficiaries? 

Ms. BOVBJERG. Well, there are a few things that concerned us 

about the estimate. I mean, one was the 50,000 that we started out 

with. SSA had reasons for using that number, and we understand 

those reasons, and that is one way to approach it. But it does seem 

awfully small compared to the 5 million undocumented Mexicans 

in this country in the year 2000. 
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At the same time, we felt that they were also, in coming up with 

that number, not looking at some of the incentive issues and some 

of the behavior changes that might occur under such a change in 

U.S. Policy. We were not really reassured by the analysis of the Canadian experience because we really think that the Mexican agreement is quite different from all the other agreements that have 

been negotiated in the past; and to compare to Canada, where the 

number of undocumented workers is so very much smaller than the 

number from Mexico, seemed to not really be an adequate reassurance. 

Mrs. BLACKBURN. Okay, let me ask you this. My constituents 

would look at this totalization agreement and feel that this is the 

type policy that would encourage illegal immigration because people can break the law, enter the country illegally, work and then 

get benefits. So I would like to hear from you and maybe from Mr. 

Mowbray how this will not encourage illegal immigration. 

Ms. BOVBJERG. Well, I am not sure I could say that. I think that 

a totalization agreement does remove barriers to legal work, people 

who want to come here and work and don’t want to be taxed twice 

and want credit for any covered employment they were in. It also 

could encourage people working illegally who think, well, you 

know, I can get benefits for this. Might it be marginal? Yes. But 

people are going to come, I feel, on the basis of some of the experiences that we have seen with identity theft and fraud in all of our 

benefit programs and they will take the trouble either to save their 

documentation or to find some way to create it. 

Mrs. BLACKBURN. Mr. Chairman, is there time for Mr. Mowbray 

to respond? 

Mr. HOSTETTLER. Yes. 

Mrs. BLACKBURN. Thank you, sir. 

Mr. HOSTETTLER. Without objection. 

Mr. MOWBRAY. I think I share the concerns of Ms. Bovbjerg. I 

think that anytime again that you increase the compensation for 

a certain behavior—this is the economist in me coming out—you 

are going to increase the likelihood of that behavior occurring. So 

if you make it more profitable to be an illegal alien in the United 

States you are more likely to have more illegal immigration, and 

the quantity or the amount becomes—is really just a question that 

you can’t find out or predict in the beginning, something that you 

only find out over time. 

I think that if the Commissioner is making the efforts—and I 

don’t know to what extent you are making the efforts at the 

present moment—to ferret out fraud—and if you are, I applaud you 

for that, and I think that is something that has to be done, knowing that from my time on the Hill. 

So if you had a system that actually did rout out the fraud and 

was clean and you made it very difficult for people who commit 

fraud to receive benefits and if you had a system that explicitly excluded illegal aliens or people who are not lawfully present for purposes of the Mexican totalization agreement, then I think that the 

estimates provided earlier by the Social Security Administration 

probably would be in the range, in the ball park. So those are the 

concerns I have with that. 

Mrs. BLACKBURN. Thank you. 
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Mr. HOSTETTLER. The Chair will now entertain a second round 

of questions, and I would like to hold it—try my best to hold it this 

time to as close to 5 minutes. I allow the gentlelady, obviously, because she asked the question within the 5 minutes to Mr. 

Mowbray. 

But let me take a scenario that deals with a totalization agreement which is the basis for this hearing. It is not necessarily current law but a totalization agreement with Mexico. That being said, 

for an example, if a totalization agreement with Mexico said something like, notwithstanding any other provision of law, all citizens 

of Mexico who have worked in the United States and have obtained 

credits for Social Security will obtain Social Security benefits under 

this agreement, that would say that the actions of illegal immigrants working in the United States would be defined as part of 

the benefits of this package, is that not correct? 

Ms. BARNHART. I don’t have the authority to do that. We 

wouldn’t have the authority—one of the steps in the process is actually reviewing what is negotiated in the final agreement based 

on the existing laws, and that is a review that is done by the State 

Department and Social Security. So it is not a matter—we are not 

authorized to change law. We must abide by the laws that Congress has created and passed and enacted already. So you would 

not see the phrase ‘‘notwithstanding any other provision of law’’ because we don’t have the authority to do that. One of the steps of 

the approval process is making sure in fact that we have adhered 

to all the existing laws of the United States. 

Mr. HOSTETTLER. But the existing laws don’t allow for totalization. 

Ms. BARNHART. The existing law in Social Security——

Mr. HOSTETTLER. For this totalization agreement. Your totalization agreement will be a law. 

Ms. BARNHART. Right. But there is a statute that governs totalization. There is a paragraph I would be more than happy to submit for the record that makes very clear about the limitations on 

totalization agreements and exactly what latitude one has. It is 

very specific, and it does not authorize us. We would not be able 

to submit such an agreement for approval by the Congress if it did 

not adhere to the law. 

The law that Congress has passed related to illegal immigration 

status and Social Security is the one I described earlier, Mr. Chairman, which says that you must be in—you must be lawfully 

present in the United States to receive a Social Security benefit 

and is silent other than that on immigration. 

Mr. HOSTETTLER. So no money illegal immigrants pay into a Social Security account will come to that individual as a result of 

their illegal acts? 

Ms. BARNHART. I can’t say that. I can say none will as a result 

of a totalization agreement. 

The situation is there are individuals now no doubt who—because no system is perfect and there is absolutely no question that 

there are individuals who today are probably receiving Social Security benefits who worked illegally at some point in their career in 

this country. 
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One of the reasons for that is that the system that documents 

immigration status writes over their status. So, in other words, if 

you were illegal 3 years ago but at the time you apply for benefits 

you are in legal status, the only thing in the former INS system 

is the status today, the current status. It is a write-over system. 

It doesn’t do a chronological history. So administratively there is 

virtually no way for us to determine legal status looking back over 

time. 

So I want to be very clear. I don’t want to mislead the Chairman 

at all. The fact of the matter is under current statute there is no 

prohibition against people—the law is silent with respect to immigration status with the exception of saying if you are in the United 

States and apply for benefits to receive them you must be lawfully 

present. 

Mr. HOSTETTLER. That is a good question. If you are in the 

United States. What happens if you are in Mexico? 

Ms. BARNHART. If you are in Mexico and you have earned 40 

quarters——

Mr. HOSTETTLER. Legally or illegally? 

Ms. BARNHART. Again, the statute is silent on that. There is not 

a prohibition. Yes. But that is why I say, whatever the situation 

is, it would not be affected by a totalization agreement, Mr. Chairman. That is the point. We would not be changing anything in a 

totalization agreement. 

Mr. HOSTETTLER. Okay. Ms. Bovbjerg, could you comment on 

that? 

Ms. BOVBJERG. Thank you. 

As the Commissioner was saying, it is difficult to understand exactly what would change under totalization. The people who would 

be newly eligible for benefits under totalization are Mexicans who 

earn between 6 and 39 coverage credits in the United States and 

are able to make up the rest in Mexico. They are not now eligible 

for benefits because they don’t have 40. If they are not legally 

present, they can get those benefits in Mexico. Just the same as 

currently someone who has more than 40 credits and lives in Mexico can get U.S. Social Security benefits. 

The other people who would benefit are the dependents and survivors, the families. Currently they have to be living in a family relationship in the United States with the entitled worker for 5 years 

to qualify for benefits. In standard totalization agreements that 

provision is waived, and there is no reason to think that it would 

be different in this one, although we have not seen any draft language. 

Mr. HOSTETTLER. My 5 minutes are up. 

The Chair recognizes the gentlewoman from Tennessee, Ms. 

Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Ms. Bovbjerg, I want to stay right with that train of thought 

right there. So what I am understanding from you is that illegal 

immigrants and their families, their survivors, their dependents 

could be eligible or a family of someone who worked illegally in this 

country could be eligible for Social Security benefits under the totalization agreement in part because it is silent on the condition of 

being here legally or illegally? 
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Ms. BOVBJERG. You are required under the law from the Welfare 

Reform Act of ’96 to be legally present to get benefits here. How 

you earn those benefits is not relevant to the Social Security Administration’s work. If you earned them legally or illegally and you 

are legally present, you will be paid those benefits. If you are not 

legally present, you can get them if you are a Mexican citizen in 

Mexico. 

Mrs. BLACKBURN. In Mexico. 

Ms. BOVBJERG. Yes. But your family—under current law it is difficult for your family to do that, and a provision that is in current 

law is waived in the totalization agreements generally. 

Mrs. BLACKBURN. Okay, but what you are saying is the family 

could be there in Mexico, the person could have worked here, have 

been an illegal immigrant here and still draw those benefits? 

Ms. BOVBJERG. Under totalization. 

Mrs. BLACKBURN. Under totalization. So when you consider this 

and consider the 5 million undocumented workers that you all estimate are here in the U.S. And you are looking at Social Security 

and survivor benefits and widow benefits and then these have to 

be included in your compilation, your cost estimate, would you 

please give me what you think is a top range of a cost estimate for 

this? 

Ms. BOVBJERG. I wish I could. We looked at the actuaries’ estimates because we know that they are in the best position to provide this kind of information and we felt that, given other things, 

we knew the estimates could be on the low end of the range. I 

think what we were really looking for is what might the range be 

and how really could we think about this apparent disconnect between the number of people assumed in the estimate and the number of people that the former INS estimated in the year 2000. I 

think that is the conversation and that is the kind of analysis that 

would be helpful in thinking about a totalization agreement with 

Mexico. 

Mrs. BLACKBURN. So, in other words, what I am hearing you say 

is there is a considerable amount of analysis on these considerations that needs to take place before we have a better cost estimate of what it could possibly cost us or would possibly cost us in 

the long term? 

Ms. BOVBJERG. We believe there needs to be a range and that 

there needs to be a risk assessment. I mean, the actuaries clearly 

acknowledge the uncertainty of these estimates, and we can appreciate that it is difficult without very good data out there on which 

to base an estimate, but having a range and some assessment of 

risk and also the assessment of the systems risk I think would be 

very helpful. 

Mrs. BLACKBURN. Mr. Mowbray? 

Mr. MOWBRAY. Thank you. 

I think that, again, when it comes down to the cost there are two 

things. One, you can look at the actual range and assume that no 

illegals are to receive benefits under the pact, which I don’t think 

as presently structured would be a correct assumption, but if you 

were to assume that the Social Security Administration has been 

off by as much as I believe 600 percent on their estimates on pre-
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vious totalization agreements in terms of the number of recipients——

Right now, the Social Security Administration is projecting only 

37,000 Mexicans total would sign up during the first year, decreasing to 28,000 new people added to the system by the fifth year, for 

a total of 160,000 people overall. When you compare that to estimates of 7 to 11 million illegals in this country, some 70 percent 

of which are of Mexican origin or Mexican nationals, and they do 

on average tend to be younger by about 5 years than the average 

population, you have a higher working percentage there so you 

have a lot of people who could become eligible for this. 

Again, a properly structured deal with Mexico—I think at least 

three of the panelists here agree; maybe you agree as well—would 

be in the interest of the United States. That I have no disagreement with. It is just the key is to make sure that it is properly 

structured. 

And you can’t say that Mexico is like Canada or like any of the 

other countries we have. We have a very unique relationship with 

Mexico. They provide us with 70 percent of our illegal aliens. They 

provide us with an awful lot of our legal immigrants as well and 

make up very large communities in States such as Texas and California, and I will say my background—I am an avid free trader. I 

have often been referred to at least as pro-immigrant. I just don’t 

support illegal immigration, but I support high levels of immigration, and I think that you should have systems that are fair for immigrants who play by the rules, not for people who cheat and who 

break the law by their very presence in the United States. 

Ms. BARNHART. Mrs. Blackburn, if I may, I certainly understand 

your concern about explaining the terms of such an agreement and 

what the effects would be to your constituents and to the taxpayers 

of this country. Obviously, I have the same responsibility as Commissioner of Social Security from my perspective in that role, and 

I do think that it is critically important in making that explanation 

and then describing the effects of such an agreement that the information that is presented is as accurate and factual as possible. 

For that reason I want to go back and repeat something I said 

earlier, which is when you look at the estimates that our actuaries 

have done over time on totalization agreements, in aggregate they 

are within 3 percent of estimating correctly, within 3 percent the 

number of individuals that would be eligible for totalization and 

have in fact turned out to be eligible for totalization benefits. So 

I simply couldn’t, Mr. Mowbray, allow the 600 percent that you 

used to lie out there. 

Mr. MOWBRAY. Are you saying that that has never happened? 

Ms. BARNHART. No, what I am saying is, in aggregate——

Mr. HOSTETTLER. The gentlelady’s time has expired. 

I appreciate that, and that will be a good situation for a debate 

and op-ed columns or whatever, but I appreciate very much the attendance of all the witnesses and your input into this process. 

Without objection, all Members will have 7 legislative days to 

add additional comments or questions into the record. 

The business before the Subcommittee being completed, we are 

adjourned. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF CONGRESSWOMAN SHEILA JACKSON LEE

The Social Security program provides monthly cash benefits to retired and disabled workers and their dependents, and to the survivors of deceased workers. To 

qualify for benefits, they must work in Social Security covered jobs for a specified 

period of time. Generally, workers need 40 quarters of coverage to become insured

for benefits. Fewer quarters are needed for disability and survivor benefits, depending on the worker’s age. 

The Social Security program is financed primarily from mandatory payroll taxes 

levied on wages and self-employment income. Most jobs in the United States are 

covered under Social Security. Approximately 96% of our work force is required to 

pay Social Security payroll taxes. 

Workers become eligible for Social Security benefits when they meet the insured 

status and age requirements specified in the Social Security Act. They become entitled to benefits when they have met all of the eligibility requirements and have filed 

an application for benefits. Because Social Security is an earned entitlement program, there are few payment restrictions when a worker becomes entitled to benefits. 

The Social Security Act does not prevent undocumented aliens from becoming eligible for Social Security benefits. However, an alien must be lawfully present in the 

United States to receive benefits. If an alien in the United States is eligible for benefits but is not lawfully present, the benefits are suspended. 

The purpose of this hearing is to receive evidence on whether there should be a 

Social Security totalization agreement with Mexico. The close economic relationship 

between Mexico and the United States has resulted in an increasing number of 

Mexican citizens spending at least some portion of their working lives in the United 

States, and, conversely, some United States citizens are spending a portion of their 

working lives in Mexico. 

In many cases, people working in two countries accumulate credits toward benefits eligibility under the social security systems of both countries, but their credits 

may not be sufficient to qualify them or their family members for benefits in either 

country. The United States Social Security Administration and the Mexican Social 

Security Institute have had informal conversations on the possibility of signing a 

Social Security totalization agreement that would alleviate this situation. It would 

allow workers to count the work they do in both countries. This is called ‘‘totalizing’’ one’s credits. Employees would be able to combine earnings credits to qualify for 

benefits under either or both systems, with benefits prorated to reflect the number 

of years that employees paid into each system. 

Currently, about 3,000 United States citizens working in Mexico, and their employers, are paying both United States and Mexican social security taxes. Over the 

next five years, these United States citizens and their employers will pay approximately $134 million in Mexican social security taxes in addition to their contributions to the United States Social Security system. A totalization agreement would 

prevent such double taxation. Employee wages would not be taxed by both the Mexican and United States Social Security systems at the same time. 

I have heard claims that the first year cost of an agreement with Mexico could 

be $345 billion. In fact, the $345 billion figure is the approximate total of wages in 

the Social Security Earnings Suspense File and is not a proper basis for predicting 

the cost to the Social Security Trust Funds of a totalization agreement. The earnings maintained in Earnings Suspense File represent wages that the Social Security 

Administration is not able to post to a specific individual’s record. This problem occurs when the name and the Social Security Number on a wage report do not match 

a name and Social Security Number in Social Security records. 
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While a portion of the Earnings Suspense File can be attributed to the earnings 

of undocumented aliens, this fund also includes earnings from legal aliens and 

United States citizens. Name and Social Security mismatches can and do occur for 

a number of reasons, including transcription or typographical errors, incomplete or 

blank names or Social Security Numbers, and name changes that were not reported 

to the Social Security Administration. 

The Social Security Administration’s actuaries estimate that an agreement with Mexico would cost the Social Security Trust Funds approximately $78 million in the 

first year, rising to approximately $138 millions by 2008, for an average cost of approximately $110 million a year over the first five years. 

Finally, I want to emphasize that aliens who work a very short time in the United 

States would not receive full United States Social Security benefits under a totalization agreement. Benefits paid under a totalization agreement that are based on 

combined credits are prorated to reflect the length of time the employee was covered 

under the paying country’s system. Full United States Social Security benefits 

would not be paid unless a person has worked long enough in the United States 

to qualify for full benefits.

PREPARED STATEMENT OF CONGRESSMAN STEVE KING

Chairman Hostettler, Thank you for holding this hearing today. We must do all 

we can to make the Social Security system more sound and enforce our immigration 

laws. 

United States citizens should not be forced to serve as Mexico’s social safety net. 

I was shocked to learn of the Social Security Administration’s proposal to give Social 

Security checks to Mexican citizens, who worked illegally in the United States, 

under the guise of a totalization agreement with Mexico. 

Totalization agreements are traditionally used to allow workers to divide their careers between two countries and combine their credits under both systems to qualify 

for benefits if they lack sufficient coverage under either country’s system. Once the 

worker qualifies, the benefits are prorated. These agreements have been made with 

countries with stable economies, resulting in a net gain for both the US and the 

other country. However, an agreement with Mexico could put the American taxpayers on the hook. 

Proponents of a Totalization Agreement with Mexico claim that, according to their 

estimates, American seniors wouldn’t lose any money, but I question their actuarial 

assumptions. Estimates are only as good as the assumptions on which they are 

based. The SSA actuary used some questionable assumptions. For example, he predicted the total number of initial Mexican beneficiaries based on the numbers from 

Totalization Agreement with Canada. However, Canadian Social Security benefits 

are quite generous by comparison with Mexico’s. Canadians who work in the U.S. 

are primarily lawfully present, compared to the 5 million or so Mexicans unlawfully 

working in the U.S. In fact, Canada has asked for the assistance of the United 

States to keep Mexican illegal aliens from crossing the US-Canada border. 

I am also concerned that the Social Security Administration does not have adequate information about the financial solvency of the Social Security system of Mexico. Past agreements have been made with solvent countries with which the US exchanges professional workers, but never with a country like Mexico with such a 

large number of legal and illegal workers in the United States. The record keeping 

ability of the Mexican Social Security Administration is unproven. SSA investigators 

need to spend more time looking at the Mexican system and how they verify its’ accuracy and solvency. The question of the relative value of a fluctuating Mexican 

currency is also unresolved. With today’s technology, we have the ability to track 

each legal worker’s contribution to Social Security. Use of this data can take the 

guesswork out of a totalization agreement. 

Finally, a Totalization Agreement with Mexico will increase the level of illegal immigration from Mexico to the United States, straining our social services and communities. The United States should not enter into an agreement with Mexico that 

encourages Mexicans to violate our immigration laws. Paying benefits to foreign nationals who are not authorized to work here rewards those who violate the law. If 

a worker can get benefits regardless of whether he plays by the rules and gets a 

green card, why would he bother to obey the law? We need to tighten the loophole 

that allows illegal aliens who work in the United States and then become lawful 

immigrants to get social security benefits. People should not be rewarded for working here illegally. Illegal aliens who pay money into the Social Security program are 

not entitled to receive benefits. Illegal aliens are not entitled to keep their ill-gotten 

gains. 
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The proposed agreement with Mexico is weak and sells our seniors short. We 

must strengthen the protections for America’s seniors and pay money only to those 

who paid into the system while working legally, in proportion to their contribution. 

Thank you, Mr. Chairman.
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PREPARED STATEMENT OF TREA SENIOR CITIZENS LEAGUE

On behalf of TREA Senior Citizens, one of the largest seniors’ advocacy groups 

in the United States, I thank Chairman Hostettler and all the Members of the Judiciary Subcommittee on Immigration, Border Security and Claims for allowing me to 

submit written testimony for the record on the issue of a Social Security totalization 

agreement with Mexico. 

As the Chairman and members of the Subcommittee are well aware, totalization 

agreements - pacts between two nations to allow an employee and employer to pay 

Social Security taxes only once, rather than in both the country of origin and the 

country in which he or she is currently working - are in force between the United 

States and some twenty other nations. However, as we understand it, the proposed 

totalization agreement with Mexico may allow citizens of that nation, who have 

worked in this country illegally, to receive Social Security benefits. TSCL is concerned that allowing individuals who have worked in this country illegally with invalid Social Security numbers to collect benefits will cause great detriment to the 

Social Security Trust fund and will, in effect, place a stamp on endorsement on illegal acts. 

In its recent report to the House Ways and Means Subcommittee on Social Security, the Inspector General stated that a 1999 audit estimated invalid Social Security numbers may have already cost the Social Security Trust Fund $287 million, 

and could cost as much as $63 million annually. Over the lifetimes of persons who 

claim benefits using the invalid numbers, the cost to the Trust Fund could exceed 

$1.7 billion. In 2000 alone, earnings were reported for more than a half a million 

persons using non-valid Social Security numbers. 

The Inspector General, in its report, stressed that the policy of crediting wages 

to persons who worked illegally has great implications for the future of Social Security. TSCL supports the Social Security Inspector General’s recommendation for legislation that would prohibit the crediting of non-legal earnings and work history for 

purposes of benefit entitlement. 

Further, the existing totalization agreements are, in general, with nations that 

have close economic parity to the U.S. and where a limited number of workers are 

affected. We are concerned that in the case of Mexico—where poverty is endemic 

and where the economy is, at best, extremely fragile—a totalization agreement may 

be seen as a means for large numbers of Mexican nationals to obtain aid for their 

dependents through Social Security’s disability and supplemental programs. We 

urge the committee to also address this concern. 

Given current budgetary shortfalls and the rising cost of Iraqi freedom, TSCL believes that the payment of benefits for illegal work may impinge on the health and 

viability of Social Security trust fund and - subsequently—benefits for those individuals who have earned them through legal work. While this nation is built of principles of coming to the aid of those in need, we must not forget about our duty and 

responsibility to American citizens, including TSCL members and supporters - many 

of whom fought for the freedom of Americans during World War II. 

Our membership understands the price of freedom, and realizes that sacrifice 

must be made. However, Social Security is a promise made by the United States 

government to its people. We must work to ensure that this promise is kept. 

Again, we appreciate the Committee’s efforts in studying this matter, and thank 

you for the opportunity to submit testimony.
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