OK people. I also am getting a little bored with this, but here we go.
Ron Kessler’s Free Choice “group” (which really sounds like Ron, “Kaj” and maybe 15 other people — but hey, Jesus only had 12) are continuing their publicity stunts about enrolling or not enrolling in the Japanese health insurance system. They don’t say much about the pensions, but usually it’s part and parcel. People who don’t sign up for insurance, usually don’t sign up for pension, either.
As I mentioned yesterday, the latest out of the Choicers site is this:
Ron’s “group” (it’s probably Ron himself) is telling you that, if you are an American, not only do you not have to sign up for the Japanese health insurance and pension, but that it’s required that you get private insurance.
That’s just plain wrong. In fact, it’s the opposite.
As I mentioned yesterday, at the bottom of the post, the Japanese require that you sign up, in Japan, for pension and health insurance. That is the requirement. As the asterisk in the title suggests, however, there is one exception for you. And that is this:
1. you, here “short-term”, (or you–employer who sent you here short-term) certify that you are participating in the U.S. social security system, which means you and your employer each pay the 7.65% taxes on your compensation up to $106,000+. “Short term” is defined as being sent here for less than five years, or moving your business here for less than five years. (Be prepared to show how you were teaching English in America, if you’re doing it self-employed here . .. )
2. you (yourself or through your employer) carry a private health insurance policy AND you agree that you will not use the Japanese health insurance system AT ALL.
The evidence of this that the Japanese will accept is a certificate that comes from the U.S. Social Security Administration in Maryland, called a “USA / J – 6”. (yoo ess ehhh, jay six.) Note that the USA is first, the J second. Plus the “six’.
If you have this, then everyone will acknowledge that your private policy is “good”, in a sense, and that you (self-employed) or your employer (if not self-employed) are paying the 15.3% or 7.65%, respectively, into the U.S. social security system, either as FICA withholding or as what is colloquially known as “SE tax” (self-employment tax).
By the way, SE tax is 15.3% on [almost] the first dollar of self-employment income.
But only if your self-employment income is under $400 are you exempt. (That is to say, you are not getting around that tax.)
Ron or his site doesn’t tell you this. I just did. Or you can hear it from the Social Security Administration themselves, at this link.
Now, not only is Ron’s group’s site wrong, but they set you up to have to pay into U.S. social security on your compensation (earned income) in Japan. Because if you make a stink with the Japanese about how you’re covered under the private health insurance policy, there is no stopping anyone from reporting that fact to the IRS (since the Japanese and U.S. have a treaty on tax evasion as well, and the American pension insurance contribution is defined as a tax).
And without your exemption (which I’ll talk about in a minute) from the U.S. social security system, you’re screwed. You just have the “USA/J – 6″, which allows you a private health insurance policy, but also commits you (and your employer) to pay into U.S. social security on your 1040 (which, of course, you are filing each year.)
You maybe saved on health insurance, but now you potentially will have the IRS on your butt for SE tax if you don’t pay up. And remember, if you don’t file, you don’t close the year. So they can come at you 10, 20 years later, since you were a non-filer. (Otherwise, it’s normally just three.)
Now, if you are in the Japanese pension and health insurance system, you can obtain a different exemption form, called the ” J / USA – 6″ (notice that the “J”, for Japan is first.)
What the J/USA-6 enables you to do is avoid the U.S. social security or self-employment tax. The U.S. doesn’t care about whether you have health insurance or not, but since you agreed to the Japanese system, you have it from the Japanese. And if you want an additional gap policy, you can go and get that, too.
I, of course, got my J-USA/6. So on self-employment income, if and when I have it, I do not owe Uncle Sam (for SE tax).
(Do you have your J-USA/6? Do you think American Ron Kessler has his?)
Now, the J-USA/6 only came to be of any kind of usefulness after October 1, 2005 (the date that the U.S.-Japan totalization treaty became effective). So maybe the word has not gotten around in the last four years? But anyway, every American who works in Japan and should be covered by the Japanese systems should obtain this certificate of compliance, from the Japanese, unless they meet that very tight restriction to be covered back in America and not use the hospitals here.
I would not want to live in a country where I agreed not to use the medical system there.
I doubt the Japanese totally shut you out, if you show up in the emergency room. And maybe your private brand health insurer will cover the bill after you pay it. But in theory, the Japanese can charge you what they like. You’re not in their system. (Oh oh oh! And the Japanese can arguably say that you agreed not to be in their system!)
Please read up on the “J/USA-6” and whether you should have one. If you want one, you must be enrolled in Japanese pension and social security.
Thanks for pointing the totalization treaty out again, Ron!
[Update 5/11/12: The social security administration screenshot.