Social security within the EU

EU REGULATIONS FOR THE COORDINATION OF SOCIAL SECURITY

Why is the coordination of social security systems necessary?

The free movement of persons is one of the fundamental rights of the European Union. In order to ensure social security for persons migrating within the European Union, regulations on the coordination of social security systems have been adopted, namely Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems and Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004. These Regulations replaced Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, self-employed persons and their family members moving within the Community and Council Regulation (EEC) No 574/72 of 21 March 1972 establishing the procedure for implementing Regulation (EEC) No 1408/71.

Social security systems vary widely from one country to another, but regulations do not seek to harmonise them. The main objective is to coordinate social security systems in such a way as to remove obstacles to the free movement of persons by ensuring the social security of migrants. Social security coordination regulations are directly applicable and therefore do not need to be transposed into national legislation, but prevail over national legislation.

To whom the EU social security coordination regulations apply?

The application of Regulations (EC) No 883/2004 and No 987/2009 has been extended to all EU citizens, i.e. the new coordination rules apply not only to employed or self-employed persons and members of their families, but also to inactive EU citizens. 

These Regulations became applicable from 1 April 2012 in relations with Switzerland and from 1 June 2012 in relations with the Member States of the European Economic Area (Norway, Liechtenstein, Iceland). 

Third-country nationals are subject to the EU social security coordination regulations if they are legally resident in the territory of a Member State and are insured under the laws of that country. However, third-country nationals are not subject to Regulations (EC) No 883/2004 and No 987/2009 in their relations with Denmark. Regulations (EEC) No 1408/71 and 574/72 will remain in force in relations with the United Kingdom for third-country nationals.

Persons who do not belong to any of the above categories shall not be subject to the provisions of the Regulations. These are mostly unemployed people who are not covered by social security.

What social security benefits are co-ordinated?

 All key areas of social security are coordinated at EU level. Regulation (EC) No 883/2004 shall apply to:

• sickness, maternity and paternity benefits;
• disability (loss of capacity for work) pensions, including those designed to preserve or regain capacity for work;
• pre-retirement benefits;
• old-age pensions;
• pensions for survivors;
• benefits in respect of accidents at work and occupational diseases;
• death grants;
• unemployment benefits;
• family benefits.

Regulation (EC) No 883/2004 does not apply to social and medical assistance, compensation schemes for victims of war or its consequences.

What are the basic principles of social security coordination?

Basic principles of social security coordination

1. Onlyone country’s socialinsurancelegislationmayapplytoaperson, i.e. a person may be covered by social insurance in only one country at a time.
2. Theprincipleofequal treatment. The Regulations prohibit discrimination on grounds of nationality. Persons covered by Regulation (EC) No 883/2004 are subject to the same obligations under the legislation of any Member State and are eligible to the same benefits as nationals.
3. Theprincipleofretentionofacquiredrights, i.e. the possibility to export allocated social security benefits.
4. The principleofaggregationofsocialinsuranceperiods. Regulation (EC) No 883/2004 allows for the aggregation of periods of work, social security and residence in accordance with the laws of various Member States. These periods shall be taken into account when it is necessary to determine whether a person is entitled to a social security benefit. For example, an employee who has worked in Lithuania for 14 years and in Germany for 4 years applies for an old-age pension, but does not have the required minimum length of service under Lithuanian or German legislation (15 years in Lithuania and 5 years in Germany). Apart from the aggregation principle, such person would not be entitled to an old-age pension, although he would be insured for 18 years in general. In accordance with Regulation (EC) No 883/2004, each country will pay an old-age pension for the period of social security acquired there.

In which country is the person covered by social insurance?

Regulation (EC) No 883/2004 establishes the basic rule that a person is insured according to his place of employment, so called the lexlocilaboris principle. However, this rule has some exceptions.

In accordance with the provisions governing the posting of workers to work temporarily abroad, an employee employed in Lithuania who is posted by the employer to work temporarily for his benefit in another EU or EEA Member State or Switzerland remains covered by social insurance in Lithuania, provided that the worker is not posted to replace other employees whose posting period has expired and the posting company carries out significant activities in Lithuania. There must be a direct link between the Lithuanian employer and the employee throughout the period of posting to work abroad. This means that the employer posting the worker abroad retains all duties and obligations under the employment contract. This includes the employer’s obligation to pay the salary and social security contributions to the posted worker and the right to direct and supervise the work, although in practice the work can be managed by a foreign company. The period of posting may not exceed 24 months.

The same rules apply in Lithuania to self-employed persons who are temporarily employed in another Member State.

A person who is employed in one Member State and self-employed in another will be covered by social security in the Member State where he has an employment contract.

Seafarers working on a ship flying the flag of a Member State are covered by social security in that Member State, even if they reside in another country.

How are pensions paid?

Old-age pension. The insurance record shall be maintained in each Member State in which the person was insured. In other words, the contributions paid are neither transferred to another country nor paid to a person if the person’s insurance in that country ceases. Each country where a person has been insured for at least one year will have to pay an old-age pension once the person reaches retirement age. The pension will be calculated on the basis of the person’s insurance record in that country. When determining a person’s entitlement to an old-age pension, the length of service acquired in another Member State shall be taken into account.

Disability (incapacity for work) pension. In the EU Member States, Level A and Level B schemes exist. The Level A scheme contains one condition for the granting of a work incapacity benefit, i.e. the pension is granted if the person is insured at the time of the establishment of the incapacity for work. In this case, he will always be entitled to a full pension, even if he has been insured in that country for a short period of time. Such a system applies in Belgium, France, Spain and the Netherlands.

Under Level B scheme, the amount of work incapacity pension depends on the length of the insurance period. These schemes generally do not require actual insurance at the time when the incapacity for work is established. This system applies in Lithuania, Latvia, Estonia, Austria, Luxembourg, Portugal, and Sweden.

Where a migrant worker has been insured only in countries covered by the Level A scheme, the work incapacity pension shall be granted by the Member State whose legislation was applicable at the time when the incapacity for work was established. Of course, the person will have to fulfil the other conditions laid down by the law of that competent country in respect of a work incapacity pension. The other countries in which the applicant was insured will not grant him a pension.

If a migrant worker has been insured only in countries where the Level B scheme applies and the amount of the work incapacity pension depends on the length of insurance periods, each Member State will pay part of the work incapacity pension for the length of service completed there.

If the migrant worker was insured as in the Member State where the Level A scheme is applied, there are different options available in the Member State where the Level B scheme applies. If incapacity for work is established at the time when the applicant was insured in the country where the amount of the incapacity for work pension is determined by his insurance record, he will receive two pensions, each corresponding to the length of his insurance periods in each competent country. If incapacity for work is established while the applicant is insured in the country where the amount of the incapacity for work pension is independent of the length of insurance, he will receive two pensions: one from the first country, taking into account periods of insurance under the legislation of that country, and the other from the country in which he was insured at the time of the determination of his incapacity for work. As a general rule, the second country has to pay a full pension. However, the amount of the pension may be reduced depending on the pension received in the first country.

Surviving spouses’ / orphans’ pension. Surviving spouses’ pensions are generally subject to the same rules as work incapacity or old-age pensions. Regardless of the widower’s or widow’s place of residence, these pensions must be paid without reduction, modification or suspension.

If the deceased was an employed or a self-employed person, the pension granted to the widow or widower shall be calculated in accordance with the principles applicable to the insured person himself. If the deceased has already received a pension, the pension awarded to the widow or widower shall be calculated in accordance with the relevant national legal acts. If a pensioner received a pension under the legislation of two or more countries, his/her widow or widower will also be entitled to the surviving spouse’s pensions under the legislation of those countries.

A person who remains an orphan after the death of the person who has been insured under the laws of only one country shall be entitled to an orphan’s benefit under the laws of that country, regardless of whether the person resides in the EU or EEA. A person who remains an orphan following the death of a person who has been insured under the laws of two or more Member States shall be entitled to the proportional benefits provided for under the laws of those countries.

How are sickness, maternity and paternity benefits paid in cash?

Sickness and maternity benefits are always paid in accordance with the legislation of the country where the person was insured at the time of the insured event, regardless of where the person resides. The amount of benefits and the length of payment depend entirely on the legislation of the country in which the person was insured. If a person entitled to a sickness or maternity benefit resides in the territory of a Member State other than the competent country, the person will receive a sickness or maternity benefit in the country where he/she resides, i.e. the awarded sickness or maternity benefit will be exported. When determining entitlement to benefit, the periods of insurance acquired in other Member States shall be aggregated. 

How are unemployment benefits paid?

The Member State under whose legislation the entitlement to unemployment benefit depends on periods of insurance shall sum up periods of insurance or employment completed in another Member State if the last period of insurance is completed in the competent country. The amount of unemployment benefit shall be calculated on the basis of social security contributions paid in the competent Member State.

Special rules are laid down for persons who have been employed and resided in different Member States (e.g. frontier or seasonal workers) at the time of their last employment.

Regulation (EC) No 883/2004 provides that an unemployed person who has gone to seek employment in another Member State may receive unemployment benefit for a certain period of time. Conditions for the payment of unemployment insurance benefits to another country:

1. A person who becomes unemployed and wants to go for a job in another country must be registered with a local labour exchange for at least four weeks.
2. Within seven days, the unemployed person must register with the employment service of another Member State.
3. The period of export shall be 3 months, but not more than until the end of entitlement to the unemployment benefit. This period may be extended for a further 3 months.
4. If the unemployed person returns to his country before the expiry of the 3-month period, he shall continue to be entitled to unemployment benefit under the legislation of that country. Otherwise, he loses his entitlement to this benefit.
5. The unemployment benefit may be exported only once between two periods of employment.

How are family benefits paid?

If family members reside in the country where the person is insured as an employed or self-employed person such country will always be competent for the payment of family benefits.

If the parents are employed in different countries and are entitled to family benefits and the child lives in one of these countries, the family benefit will be paid by the country where the child lives. However, if a family benefit is larger in another country, it will pay the difference between the benefits provided for in those countries.

Unemployed persons receiving unemployment benefits under the legislation of one Member State shall be entitled to family benefits under the legislation of that Member State.

Pensioners usually receive family benefits from the Member State that pays them a pension. Where a pensioner receives a pension from several Member States, the country where the pensioner resides shall be competent to pay family benefits. Where a pensioner does not qualify for family benefits in the country of residence, the competent country shall be the country where the pensioner has been insured for the longest period.

Where a pensioner and an employee working under an employment contract are entitled to family benefits for the same child, the competent country shall be the one in which the professional activity is carried out.

Where to apply?

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http://ec.europa.eu/social/main.jsp?catId=858&langId=en