Social Security, pensions and the US-Denmark totalization agreement

Working in Denmark raises two retirement questions for Americans. First, do you pay into US Social Security, the Danish system, or both? Second, what happens to the credits you build in each country when you retire? The answer to both runs through the Social Security agreement between the United States and Denmark. This guide explains what the agreement covers, based on the Social Security Administration's (SSA) Denmark pamphlet and related official pages.

The agreement in brief

The US-Denmark agreement was signed in Copenhagen on 13 June 2007 and entered into force on 1 October 2008. Agreements like this, often called totalization agreements, do two things. They prevent you from paying social security contributions to both countries on the same work, and they let you combine credits from both countries to qualify for benefits if you do not have enough in one of them.

For Denmark, the SSA says the agreement covers the Social Pension (folkepension) and the Labour Market Supplementary Pension (ATP).

Which country you pay into

The general rule is that you pay into the system of the country where you work. If a Danish company hires you locally, you are covered by the Danish system and pay Danish contributions, not US Social Security tax.

The main exception is for people sent abroad by their employer. A US employer that sends you to work in Denmark temporarily can keep you in the US system for a limited period, if it requests a certificate of coverage from the SSA. The SSA pamphlet also notes that employees transferred from Denmark to the United States for three years or fewer keep Danish coverage.

The SSA says employers and self-employed workers must request the certificate of coverage to establish an exemption. A US employer should keep the certificate in case of an IRS audit and should not send it to the IRS unless asked.

Self-employed Americans

For self-employment, the agreement assigns coverage by residence. The SSA states that self-employed workers living in the United States are covered by the US system, and self-employed workers living in Denmark are covered by the Danish system. If you freelance from Denmark, you will generally fall under Danish coverage, and you can attach a certificate of coverage to your US tax return each year as proof that you are exempt from US self-employment tax.

How Danish pensions work

The SSA describes Denmark's system as two tiers:

• Folkepension (social pension). A flat-rate benefit based on years of residence, not earnings. The SSA says a full basic pension requires 40 years of residence between ages 15 and 65. A non-Danish national must generally have lived in Denmark for at least 10 years between those ages, including the five years immediately before entitlement, to qualify for social benefits.
• ATP. An earnings-related supplementary pension. The SSA says wage earners in Denmark aged 16 to 65 who work more than nine hours a week pay ATP contributions, and the pension is paid at retirement age to anyone who contributed.

The SSA also notes that since 1 January 2022, Denmark has an early (tidlig) pension that can start one to three years before full retirement age, subject to income limits and years of ATP-covered work.

Many Danish employees also have a workplace pension under a collective agreement. These are private schemes, outside the agreement.

Combining credits

If you do not have enough US work credits to qualify for a US benefit, the agreement lets the SSA count your periods of Danish coverage. The SSA explains that you can earn up to four US credits per year, depending on covered earnings. Its Denmark pamphlet lists 1.5 to 10 years of US work credits as the requirement for a retirement benefit, depending on age, with 10 years for anyone who turned 62 in 1991 or later. Danish credits are counted in months. Each country still pays only a benefit based on the coverage you have in that country, so a combined record does not double your payments.

Receiving US benefits in Denmark

The SSA's Payments Abroad Screening Tool tells you whether your retirement, disability or survivor payments continue while you live outside the United States. US citizens living in Denmark can generally continue to receive Social Security payments; use the tool to confirm your own case and to see how to report changes.

Medicare and Danish healthcare

Medicare generally does not pay for care outside the United States. Medicare's own coverage page sets out the narrow exceptions. Once you are a Danish resident with a CPR number, you are covered by the Danish public health system.

Disability benefits

The SSA describes Denmark's disability coverage under the folkepension as the anticipatory pension (førtidspension). It is means-tested and plays the role that disability and survivors pensions play in many other countries. The SSA lists foreigners with 10 years of residence between ages 18 and 65, five of them in the last 10 years, among those who may be eligible. ATP does not pay disability benefits. On the US side, disability benefits require 1.5 to 10 years of work credits depending on your age when the disability began, plus some recent credits unless you are blind. The agreement can help you meet the US requirement by counting Danish periods.

Survivors

The SSA says ATP pays lump-sum survivor benefits rather than a monthly pension. If the member paid ATP contributions after 31 December 2001, a surviving spouse or registered common-law spouse and children under 21 may qualify for a lump sum, provided the member contributed for at least two years. A common-law spouse is only entitled if the couple registered with ATP, which is worth doing if you are not married. The lump sum for a surviving spouse is reduced if the member dies between 66 and 70 and is not paid if the member dies after 70.

Planning around the residence rule

Because the folkepension depends on years of residence in Denmark rather than contributions, an American who works in Denmark for a few years and then returns to the US usually builds ATP rights but not folkepension rights. Count your realistic years in Denmark before you plan on Danish state pension income.

What to keep

• Copies of every certificate of coverage.
• Your US earnings record from your my Social Security account.
• Your ATP statements, available through Danish self-service with MitID.
• Records of your Danish residence dates, which determine folkepension eligibility.

Common questions

Do Americans working in Denmark pay US Social Security tax? Not usually if a Danish employer hires them locally; they pay into the Danish system. A US employer sending staff temporarily can keep them in the US system with a certificate of coverage from the SSA.

Which Danish benefits does the agreement cover? The SSA says the agreement covers the Social Pension (folkepension) and the Labour Market Supplementary Pension (ATP).

Can a non-Danish citizen get the Danish folkepension? Per the SSA, a non-Danish national generally must have lived in Denmark at least 10 years between ages 15 and 65, including the five years just before entitlement.

Can I get US Social Security while living in Denmark? US citizens can generally receive payments in Denmark. The SSA's Payments Abroad Screening Tool confirms whether your payments continue.