News From the CNMI

April 8, 2008

The federal minimum wage will increase by $.50 in May 2008 to $4.05 an hour. That's good news for all minimum wage earners!

However, minimum wage is not the only monetary issue guest workers are concerned about. Taxation with no representation, and with no benefits from the tax is another issue. Previously, I have sent questions to federal officials inquiring about social security benefits for guest workers. I wrote a post about the information I received:

"...I asked a Senate staffer if foreign guest workers were eligible to receive Social Security benefits or to be reimbursed for the money they paid into the fund. He was kind enough to get the answer. Here it is: "I've checked with our Soc Sec guy and the answer is that you need to be a U.S. citizen, or on track to become one, in order to be a Social Security beneficiary."

Here is information from the social security web site: "Nonresident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their non-immigrant status."

From a December 14-18, 2004 Weekend Standard ariticle:"South Korean and Filipino workers are exempt from this 7 per cent assessment by treaty, but the lack of an agreement between the US and China means Chinese labourers have paid an estimated US$270 million that they cannot recover."

There are many additional questions about federal deductions being taken from the foreign contract workers' paychecks. A guest worker asks some of those questions in this clearly written letter that I have forwarded to federal officials for answers:

Social security and nonresident workers in CNMI

The Commonwealth of Northern Mariana Island is a tropical paradise offering magnificent beaches, crystal clear blue waters, the lively bustle of nightlife, shopping, a wide range of ethnic food and culture, and a multitude of outdoor activities.

Of all the former Trust Territories entitled to decide their future political identity, the people of the Marianas were the first to decide to enter into a Commonwealth arrangement in political union with the United States. On May 28, 1986, the United Nations Trusteeship Council concluded that the United States had satisfactorily discharged its obligations to the islands. On Nov. 4, 1986 U.S. citizenship was conferred upon those people of the Northern Marianas that met the necessary qualifications. The recent history of the NMI and its relationship with the United States is in fact entwined with the events surrounding World War II. The vital role of NMI during World War II made the islands a historic place. In other words, it was only after World War II that the CNMI came into existence. Since then, it has proven to be a prime location for investors and tourists. Establishment of many industries, such as garment factories and tourism industries, play vital roles in developing NMI economic condition. The NMI local population could not supply the high demand for workers required in those industries and business enterprises and, as a result, companies and factories started hiring alien workers from different part of the world.

All documented foreign workers in the CNMI are issued Social Security numbers. Nonresident workers have been paying their Social Security (FICA S.S.) and Medicare (FICA Medical) tax since the day they started working in NMI. The employer withholds FICA S.S and FICA Medical tax from every pay. As we were told, nonresident workers do not have to be a U.S. citizen to earn Social Security and Medicare health insurance coverage if they have been lawfully admitted for work in the U.S. or U.S territories. During our working years, we paid Social Security and Medicare taxes on our earnings. Most people need at least 10 years of work at jobs where they pay Social Security taxes in order to qualify for retirement benefits. No retirement benefits can be paid until you have the required number of credit (40). Social Security is part of the retirement plan of almost every American and alien worker. Social Security benefits are paid to workers and their eligible family member when the worker retires.

Since May 12, 2007, our employer has stopped withholding our FICA S.S. and FICA Medicare taxes. We tried to find out from our employer the reason why social security and Medicare taxes and income taxes are not being withheld from our pay. We were informed by our employer that under our visa as a temporary nonresident alien, we are not subject to social security and Medicare withholding. The law was launched in 2004, however our employer continued to withhold the taxes from our pay until May 12, 2007. Thus most of employees could not complete 10 years to score the required 40 credits to be eligible for retirement benefits. Apparently, the money we paid as FICA S.S. and FICA Medicare tax is with the Internal Revenue Service. We are unable to get a refund from the employer. Alien workers are trying to find a way to get this money back and they have adopted their own ways to get their refund. Some nonresident worker have seek help from lawyers with high commission rate, which put them in the position of getting just a fraction of their refund at the end, if they are able to get the refund. A very limited number of workers have filed a claim for refund with the Internal Revenue Service with required documents attached and Form 843 “Claim for Refund and Request for Abatement.” And the remaining alien workers have either left the island, leaving the hope of getting refund, or do not know what to do to claim for refund. Most of them are perplexed. So far, no one has been successful in getting a refund either from the employer or from Internal Revenue Service.

These kinds of activities are happening in NMI without anybody's consent. Alien workers are not willing to quit as this money will bring much needed financial help and tremendous economic benefits to them as most of them are from underdeveloped countries. We were paying FICA S.S. and FICA Medicare taxes without any objection and hesitation, believing that all taxpayers with social security numbers who pay social security and Medicare tax qualify for retirement benefits. Now it is clear that foreign temporary workers in the NMI would not qualify for federal retirement benefit. How does the federal Internal Revenue Service distinguish the nonresident workers from resident workers or U.S. citizens since we are all paying the same taxes? In this regards, we would like to draw the concerned authorities' attention to grant nonresident workers justice. Nonresident workers want to either continue to pay FICA S.S. and FICA Medicare to complete the required 40 credits or get a refund of the amount we have paid to Internal Revenue Service as per federal law and regulation.

Looking forward to a favorable response from concern authorities.

Jwarhar Lal Rajbanshi


Anonymous said...

I think that it is very important for all the CNMI Contract Workers to review the Social Security Protection Act of 2004. This Act states that any foreign worker who begins paying into the system as of January 1, 2004 will be entitled to retirement benefits only if s/he works 40 quarters and retires in the United States(cnmi included) and remains 180 days a year in the US(CNMI) with a valid lawful visa status. So no longer will aliens be able to return home country and collect benefits from the US Social Security system. This is a decision that affects all aliens not just the CNMI workers.

AS for the tax treatment of CNMI Contract workers, Filipinos do not have a tax treaty with the United States on the issue of Social Security. It is an urban legend. The exemption that exists for Filipinos and Koreans was a liberal reading of a statutory provision that is in the Internal Revenue Code under Section 3121. Congress made a statutory exemption for H-2B visa holders from the PI and Korea who worked in Guam only. Over the years, the SSA office Saipan who was helped by the GUAM office just did the same as Guam with no request to legal counsel for an opinion as to how SSA was to apply to Contract workers in the CNMI.

As for the workers who participated in the SSA system prior to 2004, the law states that all you have to have is 40 quarters. In theory the 2004 Act should not prohibit the prior group from qualifying under the old system and have their retirement checks mailed to their home country with no restrictions.

The shame of all this was that the some of the CNMI contract workers had to pay this tax while others did not. All because someone did not simply ask legal counsel in the SSA whether or not CNMI contract workers had to pay FICA tax. The simple answer was no CNMI Contract worker had to pay this FICA tax. The unfairness that Filipinos and Korean CNMI Contract workers were exempt while the Chinese, Nepalese and Bangladeshis were selected out to pay tax is unfair to say the least.