Taxes With No Benefits

December 2, 2011

The IRS announced that CNMI foreign workers from Korea and the Philippines, who were previously exempt from being taxed for Social Security and Medicare benefits will now have to pay into the system. The former agreements with the Korean and Philippine governments in which the United States exempted the Korean and Filipino guest workers under the Federal Insurance Contribution Act no longer stand since the federal takeover of immigration has been implemented.

 The majority of the CNMI's foreign workers will pay these taxes and will never reap the benefits because they are "temporary" workers. Only H-2 visa holders will be exempt from the taxes.

Over the years many foreign workers have asked how they can receive benefits from Social Security and Medicare, or have the money that they have paid into FICA taxes for years or decades, reimbursed. Some foreign works paid thousands in FICA taxes, but are not eligible to receive benefits.

Millions of dollars have been taken from foreign workers for FICA taxes as a December 2004 Weekend Standard article states:

"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."
Several years ago, 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. His answer: "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."

Attorney Alexis Fallon confirmed this. She said that according to 8 USC Section 1611 and 1641 none of the workers that participated in the system after 1996 will ever receive SS benefits if they do not receive a green card and resided six months out of the year in the U.S. (includes the CNMI).

In August 2010 Attorneys Alexis Fallon and Anthony Long filed a lawsuit against the U.S. on behalf of Rifu Apparel Corp. and Hong Kong Entertainment (Overseas) Investment Ltd. and "certain of their employees."  The lawsuit filed in the U.S. District Court for the NMI seeks reimbursement of the employers' and employees' share of SS and Medicare taxes (FICA taxes) that was paid to the U.S. government between the tax years of 2003 and 2007.

Another lawsuit representing 11 former Saipan garment factories filed by attorneys Alexis Fallon and Gregory J. Koebel also seeks reimbursement of FICA taxes paid to the U.S. government. The factories that are plaintiffs in the lawsuit are American Pacific Textile Inc., Grace International Inc., Handsome Textiles (Saipan) Corp., Hansae (Saipan) Inc., Marianas Garment Manufacturing Inc., Michigan Inc., Neo Fashion Inc., Sam Kwang Saipan Corp., Top Fashion Corp., Uno Moda Corp., and U.S CNMI Development Corp. The lawsuit also seeks a refund of both the employer and employee FICA taxes.

The complaint filed July 28, 2010 states:
Each Plaintiff employed Employees who performed work for one or more of Plaintiffs in the CNMI during at least all or part of calendar tax years 2004, 2005, 2006 and/or 2007 and erroneously paid, by mistake and under threat of coercion, the Employer's FICA tax on the wages paid to said Employees during one or more of those years to the Defendant.

The Defendant wrongfully assessed and compelled payment from Plaintiffs of FICA taxes as a percentage of the wages paid to Plaintiffs' Employees in each of the years 2004 through 2007. During these years, the assessment, deduction, and payment of these FICA taxes were not required by and were contrary to law.
All of the plaintiffs filed with the Service Claims in 2008 to recover the taxes that were unfairly withheld from their employees' wages in the years between 2004 and 2007.

From the August 3, 2010 complaint:
Upon information and belief and after a reasonable investigation, each Plaintiff avers that none of said Employees has individually requested from the Service a refund of said FICA taxes paid by such Employee and no Employee has made any assignment of said Employee's right to assert such refund claims. For purposes of the identification of each Employee on whose behalf a claim is brought pursuant to this claim for relief, Plaintiffs each incorporate by reference the employee listings appended to each Plaintiff s refund request as filed with the Service. 
...Each Plaintiff is entitled to recover (for the benefit of its individual Employees) all FICA taxes withheld from the wages paid to said Employees during the tax years 2004 through 2007 and paid to the Defendant, together with interest thereon at the applicable legal rates, and together with their attorney fees, litigation expenses and court costs, as provided by law. 
Both complaints request a jury trial.

Why should the U.S. government tax foreign workers for benefits that they will never receive? In the CNMI there is presently no way for the typical temporary foreign worker with a CW visa to obtain status, and no track to U.S. citizenship.  Unless the U.S. government creates a guest worker program that stops the revolving door and establishes a program where workers are considered as future citizen rather than as replaceable foreign products, then the government should not be taxing foreign workers who will most likely never receive any Social Security or Medicare benefits.

Read The Saipan Tribune

From Pacific New Center


Jim Benedetto said...

Wendy, it's not true that workers need to be U.S. citizens to collect Social Security. I personally confirmed this with Mike Newman and Bridgett Camacho (who supervised the SSA Office in Saipan) when I was Ombudsman. Many aliens who achieved the required 40 quarters (10 years) of paying in are collecting checks in their own countries once they reach retirement age. Also, the spouses and children of workers who don't reach 40 quarters, but who die accidentally, are eligible for survivor benefits.

Wendy Doromal said...

That would be good news for the Chinese, Banglasehi and others who have been paying for years and even decades. Not so good for those just starting to have deductions (Koreans and FIlipinos) since they would need to remain in the states 10 years to qualify. That's not likely for workers without a US immediate relative or an employer who can petition them for green cards though.

Anonymous said...

I agree with Mr. Bendetto. If you have 40 units or more payments (10 years) into the system. A ex CW is entitled to SS later in life at age 65. You visit the US embassy in you home country, provide your SS card and they will indicate your monthly payment and how you go about filing for it. I checked with the SS office on Saipan and they confirmed this and they even did a check on what payments you are entitled to.

Anonymous said...

If you are a US citizen that has worked for the CNMI government most of your life and you do not have the required 40 units from the private sector. You will not be able to collect any SS.
That is terrible news for those that paid into the CNMI Government Retirement Fund as it is expected to go bankrupt in 3 years.

Anonymous said...

Well they should pay into the system. Most of them get free everything in the CNMI anyway. Everyone should start paying Federal taxes which I'm sure will happen sooner than later.

Anonymous said...

We get "free everything anyways"? What an utterly ridiculous statement. We live a much harder existence than most on the mainland, are provided few of the services of the mainland at not nearly the quality, and pay through the teeth for the most basic things. Where do you live?

Wendy Doromal said...

2:45 I didn't understand the comment from 8:46 but think it was an odd comment with "them" meaning the foreign workers. What do THEY get for free?Many aren't even paid their full wages! If employers can't afford to pay them for every hour that they work, will they be able to afford another $60 or so a month for FICA?

Green Cards for All! said...

The misguided "free everything" comment was likely an allusion to the benefits formerly provided for in the standard CNMI Foreign National Worker employment contract (such as transportation, housing, food, and medical care), if not omitted from the agreement or otherwise waived.

These contract provisions seem to have been observed mainly in the breach, and the commenter likely had rare interaction with the life realities of most contract workers.

Anonymous said...

Free housing, medical, no Fica are just a few. U.S. Citizens do not get housing, medical and pay Fica. Same job, same Pay, CW's come out way ahead. Deny that if you can.

Anonymous said...

YES, I am denying it. I am a filipino contract worker, did not get, still not getting the benefits that you are claiming that we get. The reason is,I am a Filipino Contract worker, not a Japanese contract worker. only Japanese cw get most of the benefits and not screwed up. Don't you ever wonder why these Japanese don't join other cw's outcry? It is because they are priviledged (not their fault though). They get paid higher, they get the housing, they get the insurance, they get the vacation, sick leave and other fringe benefits. They are satisfied that's why you dont hear them or hear them cry. Do you see, the discrimination here? Over the 23 years of my stay here in Saipan, I only knew one labor complaint from a Japanese contract worker. DENY THAT IF YOU CAN!