Social Security Funds for Illegal Aliens?

“Adding millions of lawbreakers to the Social Security system would be a slap in the face to our retirees. Why should we bend over backwards for those who broke our laws to work in this country while shortchanging the needs of hardworking Americans and legal immigrants who have put money into the Social Security system for decades?  With Social Security in financial trouble, it is totally insane even to think about adding millions and millions of alien lawbreakers into the system.  Congress must act now to pass H.R. 1631 and keep this travesty from happening."
-Rep. Dana Rohrabacher (R-CA) 1

With Social Security facing projections of insolvency, a Bush Administration plan would hasten that crisis by sending hundreds of millions of dollars in Social Security payments to Mexican citizens living in Mexico—including those who have worked illegally in the United States.

Under current law, an alien who worked illegally in the U.S. can only become eligible for Social Security benefits by becoming a legal U.S. resident.  But officials at the State Department and Social Security Administration (SSA) are preparing a plan that would pay benefits to illegal aliens who have returned to Mexico.

The Bush Administration is negotiating an agreement with Mexico that Mexico has been seeking since the first such agreements were concluded more than twenty years ago.  It would gain greater U.S. Social Security benefits for Mexicans who have worked in the United States, including those who worked illegally, and for their family members.2  The agreement has not been signed yet, but the idea has already raised a firestorm of concern that may forestall it.  If it were signed, it would be submitted to Congress, which would then have 60 days for either house to reject it, or it automatically would go into effect as an executive agreement.

A totalization agreement totals together periods of work by an individual in two countries, when calculating eligibility to receive benefits.  The agreements are designed to ensure that people from one country working for years in another one do not fall through the cracks and end up ineligible for benefits in either country.  

The U.S. has twenty such treaties with other counties, nearly all with European countries with economies similar to the U.S.’s and limited numbers of beneficiaries (2,084 in the case of the U.K.).  The one proposed with Mexico would be dramatically different—not only because far larger numbers of people would be affected, but also because there are so many Mexicans who work illegally in the United States who might benefit from it.

The Mexican agreement would apply to all Mexicans who worked in the United States for a minimum of six quarters (one-and-a-half years of full-time employment) but less than 40 quarters (the amount needed to qualify for Social Security benefits without an agreement).  To receive benefits in the United States, the Mexicans would have to become legal residents, but that requirement would not apply if they applied for Social Security benefits from Mexico (i.e., former illegal aliens could apply for Social Security).

The annual cost to the U.S. of the 20 existing accords is about $183 million; the agreement with Mexico is expected to cost Social Security between $78 million at first, rising to $650 million—in the SSA estimate—and more likely many times that in the view of the General Accounting Office.

GAO Tells Congress a Mexican Agreement Could Impact the Trust Fund

While the Social Security Administration (SSA) estimated that an agreement with Mexico would not make a measurable impact on the Social Security trust fund if it applied to 50,000 Mexicans — the number of current Mexican SSA beneficiaries residing in Mexico — and if that number increased to 300,000 beneficiaries by 20503, the General Accounting Office (GAO) disagrees.

In testimony on September 11, 2003, the GAO challenged the SSA’s methodology for estimating the costs of an agreement with Mexico. The methodology failed to take into account the estimated five million illegal alien Mexican workers in the United States, Mexicans now living in Mexico who earlier worked illegally in the United States, the fact that the agreement likely would make family members living in Mexico eligible for benefits that they are not currently entitled to, and the effects of a proposed new guest worker agreement.  Also, the GAO found that there was no effort to systematically study the record keeping of the Mexican authorities who would be partners in the program to assure the validity of information received from that source.  

The GAO dismissed the validity of comparing the impact of an agreement with Mexico to the one with Canada, because of the disproportionate number of illegal alien workers from Mexico.  It also noted, “The cost estimate also inherently assumes that the behavior of Mexican citizens would not change after a totalization agreement goes into effect.  Under totalization, unauthorized workers could have an additional incentive to enter the United States to work and to maintain the appropriate documentation necessary to claim their earnings under a false identity.”

Given the questionable methodology used by the SSA to assess the impact of an agreement with Mexico, the GAO concluded that the SSA’s assessment that such an agreement would not have a measurable impact on the trust fund was not supported by the analysis, and, “Thus, for the Mexican agreement, additional analyses to assess risks and costs may be called for.”

Alternative Approaches

The SSA has been recommending, since 1999, that Congress adopt legislation to “prohibit the crediting of nonwork earnings [unauthorized earnings using a fake or restricted SSN] and related quarters of coverage for purposes of benefit entitlement.”  The operation of maintaining the suspense account — where all payments go that cannot be matched to an individuals account — and later researching and identifying wages in that account claimed by a worker who has subsequently gained legal work status is costly to the trust fund (as much as $63 million annually).4

This approach suggested by the SSA would appear to have the same effect as stipulating that periods of illegal work in the United States may not be counted toward benefits eligibility in a totalization agreement.  However, until a provision such as the SSA recommendation is enacted, no further totalization agreements should be agreed to without a provision that excludes unauthorized work.




[1] Rep. Dana Rohrabacher, letter to FAIR, April 28, 2003.

[2] At present, people residing in Mexico who receive SSA benefits must meet all of the requirements for U.S. workers, including to have paid into the SSA system for at least 40 quarters (10 years full-time).

[3] “Congressional Response Report: Social Security Administration Benefits Related to Unauthorized Work,” Social Security Administration, Office of the Inspector General, March 2003.

[4] In tax year 2001, the SSA sent 944,000 “non-match” notices to employers, but this has been scaled back, supposedly for cost reasons.  More than 500,000 people with non-valid SSN’s paid into the trust fund in 2000, according to testimony by the Senior Citizens League on September 11, 2003.  It was not until September 2002 that the SSA began verifying non-citizen immigration documents prior to issuing an SSN, according to SSA testimony on September 9, 2003.

Updated 11/03