The detached house rule may apply if the U.S. employer transfers a worker to work at a foreign branch or in one of its foreign subsidiaries. However, in order for U.S. coverage to continue when a transferred employee works for a foreign subsidiary, the U.S. employer must have entered into a Section 3121 (l) agreement with the U.S. Treasury Department with respect to the foreign subsidiary. The agreements also have a positive effect on the profitability and competitive position of companies operating abroad by reducing their business costs abroad. Companies with staff stationed abroad are encouraged to use these agreements to reduce their tax burden. The following table outlines the different types of social security benefits payable under the U.S. and Netherlands system and briefly outlines the eligibility requirements normally applicable to each type of benefit. If you do not meet the normal conditions for these benefits, the agreement can help you qualify (see “How Benefits Can Be Paid”). The agreement includes social security contributions (including Medicare`s U.S. share) as well as Social Security, Disability and Survivor Pension Benefits.
It does not cover benefits under the U.S. Medicare program or the security supplement. A simple explanation is given below, where workers may be exempt from coverage in a contracting country, even if they have not been transferred directly from the United States, in accordance with the U.S. Social Security Agreement (also known as the Totalization Agreement). For example, if a U.S. company sends an employee to its New York office to work for 4 years in its Hong Kong office, and then re-opens the employee for an additional 4 years in its London office, the employee may be a member of Social Security under the U.S.U.K. agreement. The rule for the self-employed applies in cases such as this, provided the worker has been seconded from the United States and is under U.S. Social Security for the entire period prior to the transfer to the contracting country.
Despite the fact that the agreements aim to allocate social security to the country where the worker is most attached, unusual situations occasionally arise, where strict enforcement of the rules of agreement would result in unusual or unjustified results. For this reason, each agreement contains a provision allowing the authorities of both countries to grant exemptions from the normal rules if both parties agree.