The coordination of social security systems is necessary to support the free movement of people within the territory of the EU. Until recently, two regulations adopted in 1971 and 1972 governed the regime applicable to employees and other categories of persons residing lawfully on the territory of a Member State. A fundamental reform modernising the whole legislative system has, however, been in force since May 2010, and further legal acts have improved the protection of workers’ rights when they avail themselves of their free movement rights.
Articles 48, 153, 156 and 352 of the Treaty on the Functioning of the European Union (TFEU).
The basic principle enshrined in the Treaty of Rome is the removal of obstacles to the free movement of persons between the Member States (2.1.3 3.1.3). To achieve this, it is necessary to adopt social security measures which prevent EU citizens who are working and residing in a Member State other than their own from losing some or all of their social security rights.
In 1958, the Council issued two regulations on social security for migrant workers which were subsequently superseded by Regulation (EEC) No 1408/71, supplemented by an implementing regulation (Council Regulation (EEC) No 574/72). Nationals of Iceland, Liechtenstein and Norway are also covered by way of the European Economic Area (EEA) Agreement and Switzerland by the EU–Swiss Agreement. In 2004, the coordination regulation (Regulation (EC) No 883/2004) was adopted to replace and extend Regulation (EEC) No 1408/71. It was supplemented by an implementing regulation (Regulation (EC) No 987/2009).
Given that each Member State remains free to design its social security system independently, the coordination regulation serves to determine under which country’s system an EU citizen should be insured where two or more countries are involved. Generally speaking, social security cover is to be provided by the country of employment, or, in the absence of employment, by the country of residence. The coordination regulation thus replaced all pre-existing social security agreements between Member States covering the same scope. The coordination regulation relies on the following four main principles.
Workers and self-employed persons from other Member States must have the same rights as the host state’s own nationals. For the principle of equal treatment to apply, three conditions must be met: equivalence of facts, aggregation of periods and retention of rights. The right to equal treatment applies unconditionally to any worker or self-employed person from another Member State having resided in the host state for a certain period of time, although this is one of the points currently under discussion in advance of the UK referendum on UK membership of the European Union.
This principle applies where, for example, national legislation requires a worker to have been insured or employed for a certain period of time before he or she is entitled to certain benefits. The aggregation principle means that the competent Member State must take account of periods of insurance and employment completed under another Member State’s legislation in deciding whether a worker satisfies the requirements regarding the duration of the period of insurance or employment.
This principle is intended to prevent anyone from obtaining undue advantages from the right to freedom of movement. Contributing to compulsory social security systems in two or more Member States during the same period of insurance does not confer the right to several benefits of the same kind.
This principle means that social security benefits can be paid throughout the Union and prohibits Member States from reserving the payment of benefits to people resident in the country, but it does not apply to all social security benefits. Special rules apply to the unemployed, for example. The exportability of child benefits is also one of the points being discussed in advance of the UK referendum.
Originally, Regulation (EEC) No 1408/71 only covered workers but, with effect from 1 July 1982, its scope was extended to cover the self-employed too. This regulation also covered members of workers’ and self-employed persons’ families and their dependants, as well as stateless persons and refugees. Through Council Regulation (EC) No 1606/98 of 29 June 1998, the Council extended the scope of Regulation (EEC) No 1408/71 in order to set civil servants on an equal footing with the rest of the population as regards the general statutory pension rights provided for in the Member States. Council Regulation (EC) No 307/1999 of 8 February 1999 further extended its scope to include all insured persons, particularly students and persons not in gainful employment. Council Regulation (EC) No 859/2003 of 14 May 2003 again extended the scope of Regulation (EEC) No 1408/71 to cover nationals from third countries, provided they are legally resident on EU territory.
The most recent legal act, Regulation (EU) No 1231/2010, which has been in force since January 2011, extended these modernised EU social security coordination rules to third-country nationals legally resident in the EU and in a cross-border situation (who were not already covered by these rules solely on the grounds of their nationality). The cover now also applies to their family members and survivors if they are in the EU.
Article 3 of Regulation (EC) No 883/2004 lists the social security benefits covered by the regulation:
Since 1971, Regulation (EEC) No 1408/71 has been amended on numerous occasions in order to take into account developments at EU level, changes in legislation at national level and the case law of the Court of Justice.
In April 2004, the European Parliament and the Council approved Regulation (EC) No 883/2004, replacing Regulation (EEC) No 1408/71. The new coordination regulation is based on the same four principles of Regulation (EEC) No 1408/71, but its aim is to simplify the existing EU rules for the coordination of Member States’ social security systems by strengthening cooperation between social security institutions and improving the methods of data exchange between them. The requirement that administrations cooperate with one another in social security matters was improved, and movement from one Member State to another, whether for professional or private purposes, without any loss of social security entitlements, was facilitated.
The ‘modernisation coordination package’ comprising Regulation (EC) No 883/2004, as amended by Regulation (EC) No 988/2009, and the implementing regulation (Regulation (EC) No 987/2009) is the new legislative package in force since May 2010. Completing the modernisation work done by Regulation (EC) No 883/2004, the implementing regulation is intended to clarify the rights and obligations of the various stakeholders, as it defines the necessary measures for the persons covered to travel, stay or reside in another Member State without losing their social security entitlements. The following elements are covered by Regulation (EC) No 883/2004 and its implementing regulation:
European citizens who travel within the European Economic Area (EEA) may henceforth use the European health insurance card. This card facilitates access to medical care on a visit to another EEA country for personal or professional reasons.
On 16 April 2014, after years of negotiations, Directive 2014/50/EU on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights was signed. It only applies to labour market pension schemes and thus neither to voluntary contributions to individual pension schemes nor to state pensions, which are covered under the coordination regulation. Insolvency guarantee schemes and other schemes unrelated to retirement are not covered either. The directive stipulates that vesting or waiting periods should not exceed three years and that the vested pension rights of outgoing workers can remain in the scheme in which they vested (‘dormant pension rights’) or be paid out to the worker as a capital sum. Dormant pension rights must be treated in line with the value of the rights of active scheme members or benefits currently being paid out. Where an outgoing worker has not yet acquired vested pension rights when the employment relationship is terminated, the supplementary pension scheme shall reimburse the contributions paid by the outgoing worker.
The European Commission funds a network of independent experts on European social security (known as trESS from 2004 to 2013, and FreSsco since 2014), which has produced a range of useful reports on the subject. After a specific consultation on the coordination of long-term-care benefits and unemployment benefits, which has not as yet been made public, the Commission evaluated the coordination regulation and parts of the implementing regulation in 2015. Any new proposal that would be part of the upcoming Labour Mobility Package should focus in particular on a number of areas which have not been satisfactorily covered up to now, namely unemployment, the portability of health-care and long-term-care benefits. A further area which needs to be tackled relates to the way in which social security coordination rules, being based on the idea of standard employment relationships, operate so as to exclude or limit the social security rights of workers in atypical employment.
Parliament has always shown a keen interest in the problems encountered by migrant workers, border workers, the self-employed and nationals of third countries working in other Member States, and has adopted various resolutions with a view to improving their lot. Parliament has, on several occasions, deplored the persistence of obstacles to full freedom of movement and has called on the Council to adopt pending proposals, such as those intended to bring early retirement pensions within the scope of Regulation (EEC) No 1408/71, to extend the right of unemployed persons to receive unemployment benefit in another Member State, and to widen the scope of legislation to include all insured persons. Some of these demands were met by the final adoption of the modernised Regulation (EC) No 883/2004.
Since the entry into force of the Lisbon Treaty, the ordinary legislative procedure has applied and social security rights for workers have been voted by a qualified majority in the Council (Article 48). However, a Member State can ask for a draft legislative act to be referred to the European Council if it ‘declares that the draft legislative act would affect important aspects of its social security system, including its scope, cost or financial structure, or would affect the financial balance of that system’.
In its resolution of 14 January 2014 on social protection for all, including self-employed workers, Parliament called on the Commission to review legislation and monitor the implementation and coordination of social security systems so as to safeguard EU migrant workers’ entitlements to benefits.