Germany withholds about 18.6% of gross pay (split evenly between employer and employee) for statutory pension insurance. A German old-age pension requires just 5 years (60 months) of contributions — one of the lowest minimums in Europe — and the agreement lets U.S. credits fill any gap. Payments are based on "earnings points" accumulated each year relative to the average German wage.
U.S. retirement benefits normally need 40 quarters (10 years) of credits. If you split a career between the U.S. and Germany, you might fall short in each country alone. As long as you have at least 6 quarters of U.S. credits, the agreement lets you add your Germany credits to reach eligibility — the U.S. then pays a benefit pro-rated to your U.S. credits only.
A Certificate of Coverage is the document that proves you're exempt from one country's social security. For U.S. coverage, the employer requests it from the SSA Office of Earnings & International Operations. Germany's authority issues the equivalent when Germany covers you.
Under the U.S.–Germany agreement, a worker sent by a U.S. employer for 5 years or less normally stays under U.S. Social Security only and is exempt from Germany's system. Your employer obtains a U.S. Certificate of Coverage as proof. Beyond 5 years, coverage shifts to Germany.
Yes. If you have at least 6 quarters (about 1.5 years) of U.S. credits, the agreement lets you combine ("totalize") your U.S. and Germany credits to reach the 40-quarter (10-year) threshold for a pro-rated U.S. retirement benefit.
The agreement has been in force since 1979.
Pension taxation depends on Germany's domestic law and the separate U.S.–Germany income tax treaty (if any), not the totalization agreement. The totalization agreement only governs which country's social security system covers you and how credits combine. Confirm pension taxation with a cross-border tax advisor.
Often yes: non-EU nationals (including Americans) with fewer than 5 years of German contributions can apply for a refund of the employee share 24 months after German coverage ends. But a refund extinguishes those insurance periods forever — you can no longer use them for a German pension or totalization — so compare the refund against the future pension before deciding.