International social security

Transcription

1 The essential guide October 2013

2 Disclaimer EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Ernst & Young LLP is a clientserving member of Ernst & Young Global Limited in the US. This presentation is 2013 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party. The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP or its professionals. Page 2

3 Discussion points Page 3

4 Discussion points Regional/country updates: Ibero-American agreement EU: Extended membership Current challenges Retrospective totalizations India Sweden and Hungary policy challenges: Benefit protection Management of assignment health care costs Cost optimization: Current opportunities Page 4

5 Regional/country updates Page 5

6 Ibero-American Agreement Page 6

7 Ibero-American Agreement Andorra Argentina Bolivia Brazil Chile Columbia Costa Rica Cuba Dominican Republic Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Portugal Spain Uruguay Venezuela Page 7

8 Ibero-American Agreement Is the agreement actually active? Which takes precedence in the case of a move? Bilateral agreements Mercosur Ibero American What are the practicalities? Page 8

9 EU extending membership Page 9

10 EU extending membership For social security purposes, now 28 members (plus four from European Free Trade Association) Croatia joined with effect from 1 July 2013 Matters to consider: Impact on legacy expatriates contribution liability and benefit entitlements Impact on new moves EU continued expansion Page 10

11 EU current challenges Validity of certification when can you depend on a certificate of coverage? Ryanair case alleged 8.9m liability in France Herbosche Kiere case Best practice what companies should be doing to minimize risk Page 11

12 Retrospective totalizations Page 12

13 Retrospective totalizations Background: Very uncommon until recently Why this is occurring Potential challenges Examples: France/Argentina Backdated effective 1 November 2012 Current issues India/Hungary Backdated effective 1 April 2013 Current issues Brazil/Germany Backdated effective 1 May 2013 The future Current issues Page 13

14 India Page 14

15 India Totalization network In force (effective date) Belgium (1 September 2009) Germany (1 October 2009) Switzerland (29 January 2011) Denmark (1 May 2011) Luxembourg (1 June 2011) France (1 July 2011) Korea (1 November 2011) Netherlands (1 December 2011) Hungary (1 April 2013) Signed (Date signed) Hungary (3 February 2010) Czech Republic (8 June 2010) Norway (29 October 2010) Finland (12 June 2012) Canada (6 November 2012) Sweden (November 2012) Japan (November 2012) Austria (February 2013) Portugal (March 2013) Further potential totalizations: Australia, Bulgaria, Cyprus, Greece, Italy, UK and US Page 15

16 India Potential refunds of Provident Fund (PF) Background: Indian PF is due in relation to all inbound expats without a home country certificate of coverage (i.e., non-totalization). Refund opportunity: Once a totalization becomes active, a home country certificate is normally available to exempt expat from ongoing Indian liabilities. However, Indian authorities will now also allow for the refund of previous Indian liabilities paid in respect of that expat up to the date the totalization became active. Page 16

17 India Refund of Indian PF available Exemption from Indian PF 1 November 2008 Introduction of international worker legislation 1 December 2011 India/Netherlands SSA becomes active Refund of Indian PF available 1 January 2014 What if US/India becomes active in 2014? Exemption from Indian PF Page 17

18 India Assigning Indian nationals back to India: Indian PF due in relation to all inbound expats without a home country certificate of coverage (i.e., non-totalization) Is payroll automatically treating the individuals as international workers? Refund opportunity: May be possible to reclassify assignee as a local employee or an excluded worker depending on PF status Page 18

19 Sweden and Hungary Page 19

20 Country updates Sweden New reporting for nonthird- country nationals Effective 1 August 2013 Hungary The 2011 tax bill: abolished the unlimited exemption available to certain expats and replaced it with a maximum of 24 months The 24-month clock : 1 January 2012 start date Unofficial information: possible new start date of 1 January 2013 Opportunities Page 20

21 ISS policy issues Page 21

22 ISS policy issues Expat benefit protection if expat falls out of home country coverage: Voluntary contributions International pension plan Compensatory payments Other Health care cost while on assignment Fully private funded versus use of state coverage Page 22

23 ISS cost optimization Page 23

24 ISS cost optimization Background Significant opportunities to reduce ongoing program costs and to obtain refunds of social security paid due to: Continuing use of historic home country ISS policy approach General application of social security withholding without consideration of potential exemptions No process supporting refunds of social security paid postassignment cessation Page 24

25 ISS cost optimization Example 1: use of exemptions for inbound assignees Example 2: obtaining refunds after departure ISS Optimized Mobility Program Example category 1: country combinations where there is no overall loss in employee benefits Example category 2: country combinations where any potential overall loss can be protected against Page 25

26 ISS cost optimization Process optimization Proactive use of host country exemptions Proactive use of refund opportunities in the host country Host exemptions Example opportunity locations: Argentina Belgium Chile Hungary Host refunds Example opportunity locations: Brazil China India Switzerland Page 26

27 ISS process optimization Recent project example Feasibility project agreed with client Sample expat cases chosen covering moves between 53 home/host country combinations EY recommendations provided: Future proactive use of host country exemptions Specific refunds available to client Refund scenario Refund identified for sample population Potential refund if extrapolated across relevant population UK to non-totalization $340k $1.45m Totalization moves $650k $19.7m Page 27

28 ISS cost optimization Policy optimization ISS Optimized Mobility Program Example category 1: country combinations where there is no overall loss in employee benefits Example category 2: country combinations where any potential overall loss can be protected against Page 28

29 ISS policy optimization Client project example Feasibility project agreed with client and commenced in February 2013 To consider a move away from a default compulsory home country position Seven expat VIP sample cases chosen: Optimization scenario Potential savings (after deduction of voluntary home country contributions) UK to US (3 moves) $865k France to US (2 moves) $975k France to UK (1 move) $63k UK to non-totalization (1 move) $45k Page 29

30 Summary Increasing speed of change in social security legislation will continue to provide challenges in relation to mobility programs from both a risk and cost perspective Various strategies to minimize ongoing social security costs while protecting against any individual employee loss Page 30