A European regulation and a social security agreement between the US and Belgium are among the provisions that give international workers the same pension rights as those who stay in their home country. Marieke Tavernier of Loyens explains.

Each country has full authority to determine the calculation methods and conditions for granting a national pension (in the sense of retirement benefits), the retiring age, the level of the contributions to be paid in order to fund the national pension scheme, etc.

In order to protect workers who have pursued international careers, European provisions on social security and bilateral social security agreements concluded between Belgium and third countries provide a legal framework for safeguarding acquired pension rights in each respective country of employment.

Therefore, each country is obliged to pay a pension proportionate to the insurance periods completed there.

I will focus on the impact of the European Regulation 1408/71 ("Regulation"), which applies to pension rights built up in the member states of the European Economic Area (EEA). Furthermore, reference will be made to the social security agreement between the US and Belgium ("Totalisation Agreement"), applying to pension rights built up both in the US and in Belgium.

It should be noted that both the Regulation and the Totalisation Agreement apply to employed persons as well as to self-employed persons. Furthermore, they only apply to legal pensions, not to supplementary pensions.

Applying for a pension

Under the Regulation, a person who has built up pension rights within the EEA and who also resides within the EEA at the time of application must file for his pension in his country of residence.

If the individual did not previously contributing to social security in his country of residence, the pension institution will reject his application and refer him to the pension institution of the member state where he last paid pension contributions.

If the individual resides in a country outside the EEA, he has to send his application to the pension institution of the member state where he last paid pension contributions.

Similarly, under the Totalisation Agreement, an individual living in Belgium or in the US must apply for his pension in his country of residence. If the individual does not reside in Belgium nor in the US, he must send his application form directly to the competent pension institution (ie, the Social Security Administration (SSA) for a US pension and the National Pensions Office four a Belgian pension).

In the application form, the individual must typically mention whether he has been employed abroad.

The pension institution dealing with his application will then forward it to the respective national pension institutions, which should decide on pension rights in their jurisdiction.

Each pension institution makes its decision known to the pension institution where the individual's application was filed. Subsequently, the latter will inform him about his proportionate pension entitlements in each of the respective countries.

Calculation of your pension

When an individual has spent his working life in a number of countries, it might be possible that he was not insured for a sufficient period of time in a certain country to be entitled to a pension under that country’s domestic law.

Therefore, the Regulation and the Totalisation Agreement guarantee that the insurance periods completed in other countries will also be taken into account. This is called the principle of aggregation.

The Regulation lays down special rules for calculating pensions. As soon as an individual submits a pension application in a member state of the EEA, his pension entitlements will be calculated taking into account the insurance periods fulfilled in other member states.

Each of these member states will be obliged to calculate a national pension and a pro rata pension, the higher of which will be granted to the individual.

The national pension is calculated in accordance with national rules only, taking account solely an individual's periods of work in that member state.

In order to determine the pro rata pension, two steps must be taken:

Firstly, a theoretical amount is calculated, which takes the individual's entire career into account as if the periods spent abroad had been completed in the member state concerned. Overlapping periods of work are counted only once.

Secondly, this theoretical amount is multiplied by a fraction. The numerator of this fraction represents the duration of the periods of work in the member state; the denominator represents all the periods taken into account in determining the theoretical amount.

The Totalisation Agreement provides for similar calculation rules.

Payment of a pension

Under the Regulation and the Totalisation Agreement, each country pays its respective pension.

The Regulation stipulates that pensions shall be paid wherever you reside within the EEA. In practice, the Belgian National Pensions Office pays Belgian pensions all over the world.

Under the Totalisation Agreement, pensions must be paid all over the world.

Conclusion

The Regulation and the Totalisation Agreement ensure that workers with international careers are not worse off than non-migrant workers.

Furthermore, within the EEA, pension applications are in principle centralised in the country of residence and further on, after complex calculations, each respective member state will wire the proportionate national pension to the worker, wherever he wishes to take up residency within the EEA.

Belgian-US cross boarder employment will be governed by similar rules under the Totalisation Agreement.

March 2003

Marieke Tavernier is an attorney-at-law with Loyens in Brussels.