The present document constitutes an introduction to Social Security Coordination for the ‘A-Z on Social Security Coordination’. It describes the basic philosophies on which social security coordination is based, especially the aims of social security coordination, the objectives and how they are achieved. It also provides an overview of the principles and basics of coordination. For specific questions and detailed answers concerning social security coordination, the reader is further referred to the ‘Keywords’ of the A-Z.
1. LEGAL FRAMEWORK
1.1 LEGAL INSTRUMENTS
The European Treaty provides since its inception in 1958 that the Council of Ministers (later joined by the European Parliament), with unanimity of votes, must take the measures that are necessary in the field of social security for improvements of the free movement of persons. The Council of Ministers did so as one of the first measures ever taken by the European Community were Regulations No. 3 and 4 on social security for migrant workers, which entered into force on 1 January 1959.
On 1 October 1972 these regulations were completely revised and replaced by Regulation 1408/71 and its Implementing Regulation 574/72. Since 1971 these Regulations were the subject of several amendments in order to accommodate trends in national legislation and progress resulting from the rulings of the Court of Justice. On 1 May 2010, a new set of Regulations, Regulation 883/2004 and
its implementing Regulation 987/2009 became applicable. The latest Regulations modernized and, in some cases, also simplified the EU framework for social security coordination.
1.2 OBJECTIVES
The overall objective of these Regulations is to install a coordination of the various social security systems in the European Union. Rather than to harmonize the different national legislations – which would amount to the creation of a common European system of social security – the Regulations build bridges between the different national social security schemes by linking them together. The main aim is to prevent people moving within the European Union from losing out on their social security rights by the mere decision of moving. Therefore, this multilateral instrument replaced the existing bilateral social security agreements, which Member States concluded between themselves.
As a consequence, the Regulations leave intact the competences of the Member States to determine the principles and rules of their own national social security schemes. National legislators remain competent to determine who is insured, which benefits are provided and under which conditions, how benefits are calculated, and how long they are provided; as long as there is no discrimination between citizens of the European Union. National rules will, in principle, not be substituted by European rules in these domains. For example, the level of pensions, pensionable age or the determination of invalidity remain firmly within the competence of the Member States.
Important to note is that these coordinating instruments only apply in situations where there is a cross-border element. Indeed, the coordination is only aimed at guaranteeing that someone who moves to another Member State does not lose his/her social security rights due to provisions applying in other social security systems. In addition, its goal is to prevent migrant workers from being treated unfairly in the field of social security in comparison with persons who have worked all their lives in one and the same Member State. Conversely, coordination (and European internal market law in general) does not apply in situations which are wholly confined within a single Member State. Thus, movement within a single Member State (e.g. between two regions in one Member State) is not enough to fall under the scope of EU social security coordination.
2. PERSONAL SCOPE
Regulation 883/2004 applies to persons who are nationals of an EU Member State or who are stateless persons and refugees, if they reside in a Member State and if they are or have been subject to the social security legislation of one or more Member States. This means that, if you are a Union citizen who resides in the EU and who is insured in a Member State, the Regulation will be applicable (on the condition that the person is moving or has moved between different Member States). These persons are referred to as primary insured persons which are either professionally active people, people who have been professionally active or people who are on benefit right now. A further distinction is made between different professional categories (employed persons / self-employed persons / civil servants) for which diverging coordination rules apply. The family members and the survivors of the persons in the previous category are also covered, irrespective of their nationality (i.e. also third country nationals). For the definition of family member, reference is made to the national legislation applicable. If the national legislation does not distinguish between family members and other persons to whom it is applicable, the spouse, minor children, and dependent children who have reached the age of majority are considered to be family members (dependent upon the primary insured). Since June 2003, third country nationals as well as members of their families and their survivors can also rely on the EU provisions on coordination of social security, provided they are legally resident in the territory of a Member State and are in a situation which is not confined in all respects within a single Member State (in accordance with Regulation 1231/2010 extending Regulation 883/2004 and Regulation 987/2009 to nationals of third countries who are not already covered by these Regulations solely on the ground of their nationality) .
Nationals from Iceland, Liechtenstein and Norway are covered via the European Economic Area Agreement. On 1 June 2002, the Agreement between the European Community and its Member State, and the Swiss Confederation on the free movement of persons was signed. This meant that the coordination rules also apply in relation to Switzerland. EU rules on social security coordination no longer apply to and in the United Kingdom as of 1 January 2021. However, the rights of persons covered by the Withdrawal Agreement concluded between the EU and the United Kingdom continue to be protected. Next to that, as of 1 January 2021, social security coordination between the EU and the UK is covered by the Trade and Cooperation Agreement concluded between the EU and the United Kingdom.
3. MATERIAL SCOPE
Regulation 883/2004 lists the social security benefits covered by the social security coordination rules. These largely correspond to the general traditional social security risks. Specific coordination rules exist for each risk:
- Sickness benefits
- Maternity and paternity benefits
- Invalidity benefits
- Old-age benefits
- Survivor benefits
- Benefits in respect of accidents at work and occupational diseases
- Unemployment benefits
- Family benefits
- Pre-retirement benefits
It is important to note that Regulation 883/2004 only covers statutory social security schemes. Occupational social security schemes, established by collective agreement, are not covered, despite some exceptions in this regard. Moreover, Regulation 883/2004 applies regardless of whether the benefits are contributory or non-contributory. At the same time, Regulation 883/2004 applies irrespective of whether the benefits are provided generally or only cover certain sectors
and/or certain categories of persons.
In general, social assistance does not fall within the scope of the Regulation. However, the exact delineation of what should be understood as ‘social assistance’ is not always straightforward. One could however conclude that a benefit qualifies as social assistance if it is discretionary or covers the risk of general need and grants a minimum income to all citizens.
4. BASIC PRINCIPLES OF SOCIAL SECURITY COORDINATION
Four basic coordination principles are used in order to protect the social security rights of migrant persons and to remedy the problems created by the territoriality and diversity of national social security systems.
4.1 DETERMINATION OF THE APPLICABLE LEGISLATION AND A SINGLE LEGISLATION APPLICABLE
In cross-border situations it could happen that a migrant person is either simultaneously subject to two legislations, or that he/she is not subject to any legislation at all. This is a consequence of the fact that the national legislators remain competent to determine the conditions under which someone is insured or not. For example, in some Member States one has to reside in order to be subject to the social security legislation. In other Member States one has to work. Without coordination, the application of these different criteria would lead to legal conflicts, positive (double insurance) or negative (no insurance).
Such legal conflicts would impede the free movement of persons and are avoided by the “one legislation applicable” principle set out in Article 11 (1) of (EC) Regulation No 883/2004. This Regulation contains conflict rules which determine the applicable legislation (general rules art. 11-16 Regulation 883/2004; more information and guidance in this regard can be found in the Practical Guide on the applicable legislation in the EU, the EEA and in Switzerland. A migrant person will be covered by the legislation of only one Member State, to the exclusion of other national legislations (‘exclusive effect’). Moreover, the designated Member State is to be competent despite any internal national rule stating otherwise (‘binding effect’). In general, an employed or self-employed person is subject to the Member State of employment (‘lex loci laboris’), even if he/she lives in another Member State. He/she will have to pay contributions in that Member State, while the institutions of that Member State will in principle pay the corresponding benefits. Of course, as to any rule, some exceptions are provided for in the Regulations.
4.2 EQUAL TREATMENT OR NON-DISCRIMINATION
A second important principle of European social security coordination law is the prohibition of discrimination between persons on the basis of nationality of an EU or EFTA (Switzerland/ Liechtenstein/ Norway/ Iceland) Member State. Migrant persons might be confronted with legislation that contain discriminatory provisions on the basis of nationality. Indeed, national legislation might provide for stricter conditions of application for foreigners. The principle of equal treatment prevents States from treating foreign nationals less favourable than their own nationals. The Regulation provides that all persons to whom it applies enjoy the same rights and have the same obligations under social security legislation of any Member State as the nationals thereof (see Article 4 Regulation 883/2004). The Court of Justice has given a broad interpretation of this principle, which not only covers overt discrimination but also covert forms of discrimination (by which a Member State does not apply directly nationality as a distinguishing criterion but in fact achieves the same result).
Furthermore, Article 5 of Regulation 883/2004 has reinforced the principle by guaranteeing assimilation of benefits, income, facts or events. Member States have to give the same legal effect to events which took place on the territory of another Member State while on the other hand Member States have to give the same legal effect to social security benefits or income which are provided (or granted) in another Member State.
4.3 AGGREGATION OF PERIODS
The right to obtain a benefit is usually dependent on the condition of having fulfilled a certain period of insurance, (self-)employment or residence under the legislation concerned. If a person wants to obtain a benefit, he/she should have paid contributions during a certain period in that country or have been working or residing there for a certain period. Such qualifying periods can be very detrimental for migrant workers.
The risk is that when persons move from one Member State to another, they will lose the credit they have gained for periods completed in the former Member State. Without the principle of aggregation, it could happen that someone who has worked in several Member States during his/her career would not fulfil the qualifying period in any of these States, and as such would be left without entitlements. The insurance period, which he/she has fulfilled in one of these countries would only give rights to benefits if he/she would have been insured there for the entire qualifying period.
This is especially the case for old-age pensions. To counter the negative consequences of such rules, Regulation 883/2004 provides for the aggregation of periods in Article 6, which is applicable to all risks listed in the coordination Regulation (conversely Regulation 1408/71 laid down different rules for each type of benefit). In order to obtain a right to a benefit, the institution of a Member State has to take into account periods of insurance, work or residence fulfilled in (an)other Member State(s). The periods completed in (an)other Member State are considered by the institution from which a benefit or affiliation is claimed, as if those periods had been completed under that legislation.
Through this basic principle migrant workers can obtain benefits (e.g. pensions), regardless of changes or even interruptions in their career Aggregation of periods is also combined with the so-called pro rata calculation. Each Member Sate will pay a part of the final benefit (i.e. pro rata) in the case of certain benefits..
4.4 THE EXPORTABILITY OF BENEFITS
Many national legislations require as a condition for the payment of benefits that the person resides in the territory of the Member State concerned. Such national provisions can be very detrimental, in particular for migrant workers. Consider the case of a migrant worker, who has worked all of his/her life abroad, who acquired the right to a pension and decides at the end of his/her professional life to return to his/her country of origin. In that case he/she might lose his/her acquired rights. This would imply that citizens of the European Union would be compelled to stay all their life in one and the same country if they want to get access to social security benefits. This is clearly an impediment to the free movement of persons. For this reason, the Regulation provides that “cash benefits payable under the legislation of one or more Member States or under this Regulation shall not be subject to any reduction, amendment, suspension, withdrawal or confiscation on account of the fact that the beneficiary or the members of his/her family reside in a Member State other than that in which the institution responsible for providing benefits is situated”. The case-law of the European Court of Justice has widened the scope of this provision, by determining that the free movement of persons not only requires that benefits can be “exported”, but also that one may not be denied the right to a benefit on the grounds that one is living in another State.
In that sense, residence conditions are in principle always forbidden, not only when they are a condition for the payment of the benefit, but also when they are a condition for obtaining the right to a benefit. Again, EU law does contain some exceptions to the principle of exportability of benefits, in particular with regard to unemployment benefits and special non-contributory benefits.
5. SPECIFIC COORDINATION RULES
Apart from the four principles of social security coordination, Regulation 883/2004 also contains a number of provisions that take into account specific needs of certain categories of persons, such as frontier workers and seafarers. At the same time, the Regulation has a number of provisions which consider the different characteristics and peculiarities of national legislation.
A large part of the Regulations is dedicated to specific provisions dealing with the coordination of the various branches of social security (e.g. sickness benefits, family benefits, etc.). A well-known example in the field of sickness benefits is the provision (which is relied on by millions of people each year) according to which insured persons can obtain medically necessary health care during a stay in another Member State.
All in all, the coordination rules are a difficult and technical matter and will remain so in the future. The basic reason is in particular the important number of differences between national legislations and the complexity of these national rules to be taken into account each time there is a cross-border situation.
However, the Regulations managed to take away the most important impediments for migrant persons in the field of social security and in so doing to help guaranteeing the free movement of persons. As such, these Regulations improve those aspects of national legislation that could impede cross-border movement. In this sense they guarantee for migrant workers a continuous social
protection coverage while moving in Europe.