Insurance Ch 11

Question 1

SS Hurdle Amounts

Answer 1

SS Hurdle Amounts

                Married filing
                      Jointly                       All others-except MFS = 0  \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 1st hurdle        $32,000                         $25,000 

2nd Hurdle $44,000 $35,000

Question 2

SOCIAL SECURITY TAXES AND CONTRIBUTIONS

• Federal Insurance Contributions Act (FICA)
• Collected through payroll taxes

Answer 2

SOCIAL SECURITY TAXES AND CONTRIBUTIONS

• Federal Insurance Contributions Act (FICA)
• Collected through payroll taxes
• Total taxes of 7.65%
  – 6.2% up to $160,200 (2023) of compensation (OASDI).
  – 1.45% of total compensation (HIGH )

OASI Trust Fund = 5 .30% up to $160,200 (2023)
DI Trust = 0.9% up to $160,200 (2023)
HI Trust = 1.45% (all compensation)
SMI Trust = Funded by general tax revenue

Question 3

3.8% MEDICARE TAX

• Applies to the lesser of:

Answer 3

3.8% MEDICARE TAX

• Applies to the lesser of:

– Net investment income, or

– MAGI over threshold amount:

• MFJ – $250,000
• MFS – $125,000
• Single – $200,000
• Note: Threshold amounts not indexed

Question 4

HIGH INCOME MEDICARE TAX

• Additional Medicare tax equal to 0.9 percent of wages oVER ?

Answer 4

HIGH INCOME MEDICARE TAX

• Add’L Medicare tax = 0.9 % of wages or employment income OVER :

– MFJ $250,000
– MFS $125,000
– Single $200,000

• This Medicare tax is PAID BY EMPLOYEES, not employers.
• Applies to wages, compensation or self-employment income.
• Not indexed – thus, more taxpayers will be subject to the tax over time.

Question 5

HIGH INCOME MEDICARE TAX:

EXAMPLE (1 OF 2)

• Carlos, a single filer, has $130,000 in wages and $145,000 in self-
  employment income. His wages are not in excess of the $200,000
  threshold for single filers, so Carlos is not responsible for Additional
  Medicare Tax on these wages.

Answer 5

HIGH INCOME MEDICARE TAX:

EXAMPLE (1 OF 2)

• Carlos, a single filer, has $130,000 in wages and $145,000 in self-
  employment income. His WAGES are not in excess of the $200,000
  threshold for single filers, so Carlos is NOT responsible for Additional
  Medicare Tax on these wages.
• Before calculating the Additional Medicare Tax on self-employment
  income, the $200,000 threshold for single filers is reduced by his
  $130,000 in wages, resulting in a reduced self-employment income
  threshold of $70,000.

$ 200,000 Threshold
- $130,000 Wages
_________________________
$ 70,000 reduced self-employment income

$145,000 Self employment income
-$70,000 reduction of self employment income
____________
$75,000 (required to pat the Medicare tax )

• Carlos is required to pay Additional Medicare Tax (0.9%) on $75,000 of self-employment income ($145,000 in self-employment income minus the reduced threshold of $70,000).

Question 6

HIGH INCOME MEDICARE TAX:

EXAMPLE (2 OF 2)

• Dave and Dana are married and file jointly. Dave has $150,000 in wages and Dana has $175,000 in self-employment income.

Answer 6

HIGH INCOME MEDICARE TAX: EXAMPLE (2 OF 2)

• Dave and Dana are married and file jointly. Dave has $150,000 in wages and Dana has $175,000 in self-employment income.

WAGES: _____________________
* Dave’s wages are not in excess of the $250,000 threshold for joint filers, so Dave and Dana are not liable for Additional Medicare Tax on Dave’s wages.

REDUCE SELF EMPLOYMENT INCOME by WAGES: ______
* Before calculating the Additional Medicare Tax on Dana’s self-
employment income, the $250,000 threshold for joint filers is reduced by Dave’s $150,000 in wages resulting in a reduced self-employment income threshold of $100,000.
$250,000 Threshold for Jt. Files
$150,000 Daves Wages
———————————-
$100,000 Self Employment income Reduced Threshold

• Dave and Dana are liable to pay Additional Medicare Tax (0.9%) on
  $75,000 of self-employment income ($175,000 in self-employment
  income minus the reduced threshold of $100,000)$ 175,000 Self employment Income
• ## $ 100,000 Self employment Reduced Threshold$ 75,000 x .09% additional Medicare tax

Question 7

SOCIAL SECURITY BENEFICIARIES

Answer 7

SOCIAL SECURITY BENEFICIARIES

Insured Worker
Worker’s SPOUSE
Worker’s CHILDREN
Worker’s DEPENDENT PARENTS
Workers DIVORCED SPOUSE (10+ Year Married)

Question 8

SOCIAL SECURITY RETIREMENT BENEFITS

Answer 8

SOCIAL SECURITY RETIREMENT BENEFITS

• Retirement benefit payable at retirement
  – Fully Insured Retirees
  –Normal (Full) Retirement Age is increasing
• Increased benefit for delayed retirement
  –Retirement BEYOND normal retirement age
• Decreased benefit for early retirement
  – Retirement BEFORE normal retirement age

Question 9

CALCULATING THE RETIREMENT BENEFIT (1 OF 4)

Answer 9

CALCULATING THE RETIREMENT BENEFIT (1 OF 4)

• Calculate the worker’s Average Indexed Monthly Earnings (AIME).

–Convert earnings after age 21 to current dollars using an indexing
factor.

–Sum the highest 35 years.

– Divide sum by 420 month

Question 10

CALCULATING THE RETIREMENT BENEFIT (2 OF 4)

Answer 10

CALCULATING THE RETIREMENT BENEFIT (2 OF 4)

• Calculate the worker’s Primary Insurance Amount (PIA).
  – PIA is amount the worker receives if he or she retires at full
  retirement age and is the amount that family benefits are based on.

– Sum of three separate percentages of the AIME:
* 90% of the first $1,115 (2023), plus
* 32% of the AIME over $1,115 and less than $6,721 (2023), plus
* 15% of the AIME that exceeds $6,721 (2023).

– Maximum PIA = $ 3,637 (2023)

Question 11

CALCULATING THE RETIREMENT BENEFIT (3 OF 4

Answer 11

CALCULATING THE RETIREMENT BENEFIT (3 OF 4

Tier 1 90% x $1,115 = $1,003.50
Tier 2 32% x ( $6,721-$1,115) = $1,793.92
Tier 3 15% x ($7,000-$6,721) = $41.85
——————————————————————–
PIA per month = $2,839.27

Question 12

CALCULATING THE RETIREMENT BENEFIT (4 OF 4)

Answer 12

CALCULATING THE RETIREMENT BENEFIT (4 OF 4)

• Worker retiring at full (normal) retirement age receives FULL PIA.

– Eligible beneficiary of the worker may receive a percentage of the PIA (usually 50%)

Question 13

RETIREMENT EARNINGS LIMITATION TEST (3 OF 3)

• Special calculation of earnings test in the first year of retirement (prior to full retirement age):

Answer 13

RETIREMENT EARNINGS LIMITATION TEST (3 OF 3) TEST

• Special calculation of earnings test in the first year of retirement (prior to full retirement age):

–Earnings prior to retirement are not counted.

– Beginning with the month of retirement, for any month in which
earning are below 1/12 of the annual amount ($21,240 (in 2023) / 12

= $1,770), the SS benefit amount is not reduced.

– Only applies in the first year of retirement; after the first year, the
annual test will apply

Question 14

TAXATION OF SOCIAL SECURITY (ALTERNATE METHOD)

Answer 14

TAXATION OF SOCIAL SECURITY (ALTERNATE METHOD)

• A = Excess of MAGI + ½ SS benefit over first hurdle
• B = Excess of MAGI + ½ SS benefit over second hurdle
• Taxable amount is lesser of the three formulas:
  –50% (A) + 35% (B)
  –85% of Social Security benefit
  –50% of Social Security benefit + 85% (B)

Question 15

EXAMPLES (1 OF 2)
* Assume: Beth & Bill have regular income of $35,000, muni income of $5,000 and receive Social Security benefits of $30,000.

• Taxable portion of Social Security Benefits:

Answer 15

EXAMPLES (1 OF 2) ?????
* Assume: Beth & Bill have regular income of $35,000, muni income of $5,000 and receive Social Security benefits of $30,000.

• MAGI + ½ SS Benefit:
• Taxable portion of Social Security Benefits:
  ____________________________________________________________________
• MAGI + ½ SS Benefit: $35k + $5k + $15k = $55k
• Taxable portion of Social Security Benefits:
• A = MAGI + ½ SS Benefit > $32k = $23k;
  B = MAGI+ ½ SS Benefit > $44k = $11k

1. 50% (A) + 35% (B) = $11.5k + $3.85k = $15.35k
2. 85% SSB = $25.5k
3. 50% SSB + 85% (B) = $15k + $9.35k = $24.35k

Question 16

FAMILY BENEFITS

• Benefit payable to family members of worker receiving retirement benefits or Disability

Answer 16

FAMILY BENEFITS

• Benefit payable to family members of worker receiving retirement benefits or disability benefits.
  ____________________________________________________________________
  – Spouse (including divorced spouse if married at least 10 years)
• Age 62 and older, or
• Any age and caring for a child under age 16, or
• Caring for a child who was disabled before age 22.
  – Unmarried Child
• Under 18, or
• Under age 19 and in high school, or
• Age 18 or older and disabled before age 22.
• With Exception of divorced spouse, NO family member may begin receiving benefits until the worker begins receiving benefits.
• Worker must be at least age 62 for divorced spouse to receive benefits

Question 17

SURVIVORS BENEFITS: SURVIVING SPOUSE (1 OF 2)

Answer 17

SURVIVORS BENEFITS: SURVIVING SPOUSE TEST

• Elect widow(er) benefit beginning at age 60, while
  delaying OWN benefit to between full retirement age (FRA) and age 70, to receive delayed retirement credits (DRCs).
  –Can switch to own benefit if higher any time between age 62 and 70.
• A widow(er) who remarries after age 60 may still collect survivor benefits based on the deceased spouse’s earnings.
  – Remarriage before age 60 will cause a disqualification as long as that marriage lasts.

Question 18

SS DEATH BENEFIT

Answer 18

SS DEATH BENEFIT TEST

• One-time $255 death benefit payment

– Paid to deceased worker’s surviving spouse, or minor child (if no spouse)

Question 19

MAXIMUM FAMILY BENEFIT
* Limit on the amount of monthly Social Security benefits paid to the family of a deceased worker

Answer 19

MAXIMUM FAMILY BENEFIT

• Limit on the amount of monthly Social Security benefits paid to the family of a deceased worker
  – Based on the deceased worker’s PIA
  – Generally, 175% of PIA

Question 20

MEDICARE BENEFIT
* Federal health plan for:

Answer 20

MEDICARE BENEFIT

• Federal health plan for:
  – People age 65 and older
  – Disabled individuals
  – Individuals with permanent kidney failure
• Consists of:
  – Hospital Insurance - Medicare Part A
  –Medical Insurance - Medicare Part B
• Alternative to Parts A and B (Traditional/Original Medicare)
  a Medicare beneficiary may elect Part C (Medicare Advantage).
  – Prescription Drug - Medicare Part D

Question 21

HOSPITAL INSURANCE: MEDICARE PART A

Covers

Deductible

Answer 21

HOSPITAL INSURANCE: MEDICARE PART A

• Covers
  – Hospital Coverage,
  – Skilled Nursing Care
• Deductible
  –$1,600 for 2023 per benefit period for the first 60 days, and
• Daily Coinsurance Amounts
  – $400 for 2023 per day for days 61-90, and
  – $800 for 2023 per day for days in excess of 90 (up to 60 days during
  lifetime).
• Skilled nursing care coinsurance $200.00 for 2023 per day for 21st day to 100th day.
• Deductible and coinsurance applies per benefit period.

Question 22

Medicare Inpatient Time Line

Answer 22

Medicare Inpatient Time Line

—————>————————–>————————————>
Deductible Coinsurance of Coinsurance of
$1,600 for $400/day for $800/day for
0 - 60 days* 61- 90 91 - 150
“Lifetime Reserve”

*After a break of at least 60 consecutive days

Question 23

MEDICAL INSURANCE: MEDICARE PART B

Answer 23

MEDICAL INSURANCE: MEDICARE PART B

• Standard Part B premium is $170.10 in 2023
  –Premiums go up with income
• Covers 80% of:
  – Doctor’s Services
  –Ambulance Transportation
  – Diagnostic Tests
  – Outpatient Therapy Services
  – Outpatient Hospital Services
  – Medical Equipment and Supplies
• $226 deductible for 2023 per year

Question 24

MEDICARE PART A: EXCLUSIONS
* Part A excludes:

Answer 24

MEDICARE PART A: EXCLUSIONS

• Part A excludes:
  –Coverage for hospital stays beyond 90 days (unless lifetime reserve
  days are still available)
  – Services provided outside the U.S.
  –Coverage for more than 100 days of skilled nursing care
  –Coverage for custodial care
  –Coverage for the first three pints of blood if a transfusion is needed

Question 25

MEDICARE PART B: EXCLUSIONS
* Part B excludes:

Answer 25

MEDICARE PART B: EXCLUSIONS

• Part B excludes:
  –Prescription drugs not administered by a doctor
  –Services provided outside the U.S.
  – Routine eye exams and eyeglasses
  –Dental care
  – Hearing aids
  –Coverage for the first three pints of blood if a transfusion is needed
• Medigap insurance can be used to fill in some of the gaps left from these exclusions.

Question 26

MEDICARE ADVANTAGE: MEDICARE PART C

• Medicare Advantage (Part C) managed care plan

Answer 26

MEDICARE ADVANTAGE: MEDICARE PART C

• Medicare Advantage (Part C) managed care plan
  –HMO, PSO, or PPO.
• Provides same benefits as Part A & B and may provide additional benefits
• Nearly 30% of enrollees choose Part C
• Enrollees can switch from A & B to C during the Medicare Open
  Enrollment Period (OEP).
  – October 15 – Dec 7; coverage effective Jan 1

Question 27

PRESCRIPTION DRUG: MEDICARE PART D

Answer 27

PRESCRIPTION DRUG: MEDICARE PART D

• Insurance coverage for prescription drugs
• Participant must enroll and pay a monthly premium and a portion of each prescription.
  – Enrollment in Part D is separate from enrollment in Traditional
  Medicare or Medicare Advantage.
• Must have Part A or B, or Part C, to be eligible.
• Four phases of coverage:
  –Deductible
  –Copayment
  – Coverage gap
  – Catastrophic phase

Question 28

MEDICARE ENROLLMENT PERIODS (1 OF 2)

Answer 28

MEDICARE ENROLLMENT PERIODS (1 OF 2)

• Those receiving SS benefits are automatically enrolled in Parts A & B at age 65.
  –Will receive Medicare Insurance card in the mail three months before turning age 65
• Those not yet receiving SS benefits at age 65 must enroll during the Initial Enrollment Period.
  – Begins 3 months before the month of the 65th birthday
  – Ends 3 months after the month of the 65th birthday
  –Total 7 months

Question 29

MEDICARE ENROLLMENT PERIODS (2 OF 2)

Answer 29

MEDICARE ENROLLMENT PERIODS (2 OF 2)

• If enrollment in Part B is delayed beyond the IEP, premiums will increase by 10% for each 12-month period that the person was eligible and did not enroll.
  – No premium increase if continuous coverage under a creditable employer plan.
• And enroll during the Special Enrollment Period (SEP), which is the
  eight months following termination of employment resulting in loss of group coverage (no extension if COBRA is elected)

Question 30

SUPPLEMENTAL SECURITY INCOME

• Monthly payments to individuals with low income and few assets:

Answer 30

SUPPLEMENTAL SECURITY INCOME

• Monthly payments to individuals with low income and few assets:
  – 65 and older
  – Disabled
  – Blind
• Single: $914 per month for 2023
• Married: $1,371 per month for 2023

Question 31

EFFECTS OF MARRIAGE OR DIVORCE ON BENEFITS

Answer 31

EFFECTS OF MARRIAGE OR DIVORCE ON BENEFITS

• Worker receiving benefits based on his or her own earnings
  – Benefits continue regardless of divorce
• Individual receiving benefits based on spouse’s earnings
  –Benefits cease at divorce, unless individual is 62 or older and was
  married longer than 10 years
• Widows and Widower benefits
  – Benefits cease at remarriage unless the marriage is at age 60 or older

Question 32

BENEFICIARIES LEAVING THE UNITED STATES

Answer 32

BENEFICIARIES LEAVING THE UNITED STATES

• Beneficiaries may travel and live-in other countries, but Social Security checks will not be mailed to Cuba and North Korea.
• Beneficiaries should inform Social Security Administration of their plans to go outside the U.S. for a trip that lasts 30 days or more

Question 33

How social security benefits are reduced

• Early retirement
  –Permanent
• Earning too much
  – Temporary
• Taxation of benefits

Answer 33

How social security benefits are reduced Test 3/3

• Early retirement
  –Permanent
• Earning too much
  – Temporary
• Taxation of benefits

Question 34

SURVIVORS BENEFITS: SURVIVING SPOUSE (2 OF 2)

Answer 34

SURVIVORS BENEFITS: SURVIVING SPOUSE (2 OF 2)

• Surviving spouse under age 60 and caring for a qualifying child will
  receive SS benefits until the youngest child reaches age 16.
  – Spousal benefits then cease until age 60 (50 if disabled).
• At surviving spouse’s own FRA, he or she replaces the participant at
  100%.
  – Benefit reduced below PIA if deceased worker retired before FRA,
  and benefit above PIA due to DRCs if worker delayed retirement
  beyond FRA.
  –Benefits for other beneficiaries continue to be based on a percentage
  of PIA.

Question 35

Which of the following concerning the Social Security system is correct?

Answer 35

SSI benefits are funded by the Treasury,

not Social Security taxes, as are the other benefits.

Question 36

A worker’s AIME:

Answer 36

Must be determined by converting actual earnings into current dollars through an indexing factor.

Is determined from wage information over prior years’ work.

Uses the highest 35 years of indexed earnings (for workers that worked at least that long).

Yields an average amount of monthly earnings for all indexed years.

All of the above are correct.

Answer 37

A person who is already receiving Social Security benefits when they reach age 65 will be

automatically enrolled for Medicare
unless they sign a form electing not to be covered.

If a person enrolls in Part A, the person can enroll later in Part B, but only during specified periods each year. If a person enrolls during one of the general enrollment periods (January to March each year), coverage will become effective in July of that year. The premiums will increase for delayed enrollment.

Answer 38

individuals who first become eligible for retirement benefits or disability insurance benefits in 2022 or who die in 2022 before becoming eligible for benefits, their PIA will be the sum of:

90 percent of the first $1,024 of their AIME, plus
32 percent of their AIME over $1,024 up to $6,172, plus
15 percent of their AIME that exceeds $6,172
(Maximum PIA for 2022 is $3,357.60)

Answer 39

Workers entitled to retirement benefits can currently take early retirement benefits beginning at age 62. Family members of an individual who is receiving retirement or disability benefits include a spouse if the spouse is at least 62 years old or under 62 but caring for a child under age 16. Generally, individuals who are age 65 or over and receive Social Security benefits automatically qualify for Medicare

Question 40

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age (normal retirement age) for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel throughout America and back to his homeland. If his benefit at age 66 is $1,000 per month, how much will he receive in Social Security retirement benefits if he begins receiving benefits at age 63?

Answer 40

800.00.
Rationale

The benefit reduction for early retirement is 5/9ths of 1% for the first 36 months. If Antoine retires 3 years early at age 63, then his retirement benefit will be reduced by 20% to $800 per month

Question 41

Which of the following statements concerning Medicare benefits available to those over 65 are true?

1. Medigap coverage is available to cover costs not paid for by Medicare, but only under federal guidelines.
2. A patient pays deductibles for hospital stays, but nothing for doctor visits.
3. Part A of Medicare coverage is optional for those covered by Social Security and requires a monthly premium

Answer 41

1 only.
Rationale

Part A (hospital coverage) covers all those eligible for Social Security, without any payment of premiums.

Part B is optional and requires the payment of premiums.

Medigap coverages come in only a limited number of combinations, mandated by federal regulations. These plans pay for various costs not covered by Medicare, such as copayments and the Part A deductible.

Part A does require a deductible for hospital stays, but Part B does not fully cover routine doctor visits (other than a one-time “Welcome to Medicare” wellness visit and one annual wellness visit

Question 42

AIME

Answer 42

AIme

(Average Indexed Monthly Earnings) -

A worker’s highest 35 years of earnings adjusted for inflation and averaged on a monthly basis. AIME is used as the basis for the PIA calculation.

Question 43

Disability Insurance (DI) Trust Fund -

Answer 43

Disability Insurance (DI) Trust Fund -

The trust fund that pays benefits to workers with disabilities and their families. It is funded by 0.90 percent of an individual’s taxable earnings up to $137,700 (2020)

Question 44

Modified Adjusted Gross Income (when calculating taxable Social Security) -

Answer 44

Modified Adjusted Gross Income (when calculating taxable Social Security) =

individual’s adjusted gross income

+ tax exempt interest,

+ interest earned on savings bonds used for higher education;

+amounts excluded from the taxpayer’s income for employer provided adoption assistance;

+ amounts deducted for interest paid for educational loans;

+ income earned in a foreign country, a U.S. possession, or Puerto Rico that is excluded from income

Question 45

Benefit collected by a worker retiring at age 62 with an NRA (normal full retirement age) of 65.

100% of PIA
70% of PIA
Zero
80% of PIA
15.3%

Answer 45

: The correct answer is D.

5/9 of 1% = .005556 x 36 = .20 or 20% reduction.

For each month of early retirement, workers will receive a reduction in their monthly retirement benefit of 5/9 of one percent for up to the first 36 months. For subsequent months of early retirement, the permanent reduction percentage is 5/12 of one percent per month

Question 46

Benefit collected by a worker retiring at age 62 with a FRA (full retirement age) of 67.

100% of PIA
70% of PIA
Zero
80% of PIA
15.3%

Answer 46

Solution: The correct answer is B.

5/9 of 1% = .005556 x 36 = .20

5/12 of 1% = .004167 x 24 = .10

total .20 + .10 = .30 or 30% reduction.

For each month of early retirement, workers will receive a reduction in their monthly retirement benefit of 5/9 of one percent for up to the first 36 months. For subsequent months of early retirement, the permanent reduction percentage is 5/12 of one percent per month.

Question 47

Disability benefit collected by a worker (age 24) with 2 years of covered work.

100% of PIA
70% of PIA
Zero
80% of PIA
15.3%

Answer 47

Solution A. 100% PIA

For ages 24 through 30, a disabled worker must be covered for half of the available quarters after age 21 to qualify for 100%

min of 6 quarters

Question 48

Total percent of wages collected to fund OASDI & Medicare Part A.

100% of PIA
70% of PIA
Zero
80% of PIA
15.3%

Answer 48

15.3 %

Question 49

All of the following statements concerning the Social Security system are correct except:

a. If a worker receives retirement benefits based on his or her own earnings record, the worker’s retirement benefits will continue whether married or divorced.

b Widows and widowers, whether divorced or not, will continue to receive survivors benefits upon remarriage if the widow or widower is age 60 or older.

C. By providing the name of a country or countries to be visited and the expected departure and return dates, the Social Security Administration will send special reporting instructions to the beneficiaries and arrange for delivery of checks while abroad.

D. A special one-time payment of $1,100 may be made to a deceased worker’s spouse or minor children upon death.

Answer 49

D. A special one-time payment of $1,100 may be made to a deceased worker’s spouse or minor children upon death.

A special one-time payment of $255 may be made to a deceased worker’s spouse or minor children upon death.

Question 50

All of the following statements concerning Social Security benefits are correct except:

A> In order to obtain SSI benefits, an individual must either be age 65 or older OR must be disabled.

B. The number of days that Medicare covers care in hospitals and skilled nursing facilities is measured in what is termed benefit periods.

C. The definition of disability is that the individual is unable to engage in any substantial gainful activity due to a physical or mental problem expected to last at least a year or expected to result in death.

D. Benefits are payable at any age to workers who have enough Social Security credits and who have a severe physical or mental impairment that is expected to prevent them from doing “substantial” work for a year or more or who have a condition that is expected to result in death.

Answer 50

a. In order to obtain SSI benefits, an individual must be age 65 or older and must be disabled.

Rationale

In order to obtain SSI benefits, an individual must either be age 65 or older OR must be disabled.
The number of days that Medicare covers care in hospitals and skilled nursing facilities is measured in what is termed benefit periods.
The definition of disability is that the individual is unable to engage in any substantial gainful activity due to a physical or mental problem expected to last at least a year or expected to result in death.
Benefits are payable at any age to workers who have enough Social Security credits and who have a severe physical or mental impairment that is expected to prevent them from doing “substantial” work for a year or more or who have a condition that is expected to result in death.

Question 51

ALL of the following statements concerning Social Security benefits are correct except:

a. The maximum family benefit is determined through a formula based on the worker’s PIA.

b. If a worker applies for retirement or survivors’ benefits before his or her 65th birthday, there is no need to file a separate application for Medicare.

C. People who are disabled or have permanent kidney failure can get Medicare at any age.

D. The Social Security Administration is concerned with beneficiaries’ combined income, which, on the 1040 federal tax return, includes adjusted gross income and nontaxable interest income.

Answer 51

If a worker applies for retirement or survivors’ benefits before his 65th birthday, he must also file a separate application for Medicare.
Rationale

If a worker applies for retirement or survivors’ benefits before his or her 65th birthday,

• there is no need to file a separate application for Medicare.

Question 52

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel in America and back to his homeland. Antoine sold his restaurant for $150,000 and was retained by the acquiring company as a consultant for a one-year period. His consulting fee this year will be $50,000 and the benefit he expects to receive from Social Security is $2,000 per month. Which of the following statements is correct?

A> Antoine should delay receiving Social Security retirement benefits until after this year because he will be in a high tax bracket due to the sale of his business.

B. Antoine should delay receiving Social Security retirement benefits until after this year because there will be such a large reduction in benefits due to his consulting income and the sale of the business.

C. Antoine should begin receiving Social Security benefits today because, although there is a reduction in benefits today, there will be an increase after full retirement age.

D. Antoine would be better off beginning Social Security benefits next year.

Answer 52

Antoine would be better off beginning Social Security benefits next year.

Rationale

Option a is not the best answer - however, Antoine is likely to be in a higher tax bracket because of the sale and the consulting income.

Option b is not correct because the sale of the business is not earned income and will not cause in a reduction of benefits. His consulting income is earned income.

Option c is not correct - benefits reduced due to retirement before FRA are permanently reduced, although any benefit reduction due to the earnings test will be offset by an increase in benefits after full retirement age.

Option d is correct as his earned income will be lower and his tax bracket will likely be lower.

Question 53

Which of the following statements are true as to Supplemental Security Income (SSI) benefits?

1. Supplemental Security Income makes monthly payments to individuals with low income and few assets.
2. The basic monthly benefit for Supplemental Security Income in 2022 is $841 for one person and $1,261 for married couples.
3. The asset determination for Supplemental Security Income eligibility does not include the value of one’s home or car.
4. The definition of disability is satisfied when the individual is unable to engage in any substantial gainful activity due to a physical or mental problem expected to last at least three years or expected to result in death

Answer 53

1, 2 and 3.
Rationale

All of the statements are true except statement 4. Statement 4 is in reference to Social Security Disability Income (SSDI), and would be correct (for SSDI) if the disability was expected to last at least one year, not three years as provided

Question 54

Medicare Part A provides hospital coverage. Which of the following persons is not covered under Part A?

A. A person 62 or older and receiving railroad retirement.

B, Disabled beneficiaries regardless of age that have received Social Security for two years.

C. Chronic kidney patients who require dialysis or a renal transplant.

D. A person 65 or older entitled to a monthly Social Security check

Answer 54

A. A person 62 or older and receiving railroad retirement.
Rationale

Medicare Part A requires a person to be age 65. People who are disabled or have permanent kidney failure are entitled to Medicare at any age

Question 55

Kathryn taught at Fun Academic University for 25 years and is filing for Social Security retirement benefits this year, when she turns age 72. Her PIA is $1,000 per month as adjusted for inflation. How much in benefits will she receive assuming her full retirement age was 66?

a. 1320

b 1360

c 1480

d.

Answer 55

1,320.
Rationale

DELAYED BENEFITS WILL INCREASE 8% PER YEAR OF Delay up until age 70.

Therefore, her benefit will be 32% higher than her PIA. She has no increase for delaying beyond age 70 and the 8% increase is not compounded

Question 56

Social Security is funded through all of the following except:
Employee payroll tax.
Employer payroll tax.
Sales tax.
Self-employment tax.

Answer 56

SALES TAX

Question 57

Robin Elizabeth qualifies for a retirement benefit of $250 and a spouse’s benefit of $400. At her full retirement age, she will receive which of the following?

A. Both $250 and $400.
B. The higher of her benefit or her spouse’s benefit.
C. Her spouse’s benefit of $400.
D. Her benefit of $250 plus $150 from her spouse’s benefit.
Rationale

Answer 57

Her benefit of $250 plus $150 from her spouse’s benefit.

Rationale

She will receive her benefit plus an additional amount due to the higher spousal benefit.

Question 58

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel in America and back to his homeland. After contacting the Social Security administration, they informed him that his benefit at age 63 would be $1,200 per month. Just prior to retiring, he sold his business for $100,000. Which of the following statements is correct?

Answer 58

tHE sale of the business will not impact the amount of his retirement benefits from Social Security.

Rationale

Option b is false. The sale is not earned income. Therefore, it will not result in a reduction of benefits. Option c is false because it might not increase the portion of the benefit subject to taxation ($100,000 is the sale price, not the taxable gain). 85 percent of his Social Security benefit may already be subject to taxation. Option d is false, as he would not receive Medicare until age 65; however, it is possible that his Medicare premium at age 65 will be increased due to the two year look-back for income.

Question 59

A person receiving Social Security benefits under full retirement age can receive earned income up to a maximum threshold without reducing Social Security benefits by the earnings test. Which of the following count against the earnings threshold?

Dividends from stocks.
Rental income.
Pensions and insurance annuities.
Self-employment income.

Answer 59

SELF EMPLOYMENT INCOME

Answer 60

SOCIAL SECUIRTY TEST

• Definition of DISABILITY -NO gainful employment w/i at least 12 mn result in death
• Types of benefits
  
  • Retirement
  • Survivorsship
  • Disability
• How to qualify for Medicare
  –Attain age 65 - AUTO enroll if GETTING SS
  – Disability benefits for two years
• Definition of fully insured
• How to earn quarters of coverage - 40 qrts total. Get 4 qrt /yr max

Question 61

Social security

Types for benefits

How to quality for Medicare

Definition of fully insured

Answer 61

• Social Security TEST

–Disability - Social Security benefit available to recipients who have a “ severe physical or mental impairment that is expected to prevent them from performing “substantial” work for at least a year or result in death. To qualify for these benefits, the recipient must have the sufficient amount of Social Security credits.

• Types of benefits
  – Retirement
  –Survivorship
  – Disability -
• How to Qualify for Medicare
  – Age 65
• Spouses age 65 or over who are eligible for SS based on Spouses
  earnings qualify
  –Disability benefits for2 years automatically qualify
• Definition of fully insured
  — 40 quarters of coverage

Question 62

BENEFITS AVAILABLE

Answer 62

BENEFITS AVAILABLE TEST

R etirement Benefits
D isability Benefits
F amily Benefits
S urvivors’ Benefits
M edicare
S upplemental Security Income

Question 63

Social Security Summary Chart

                              Retirement & Disability       Survivor Fully Insured  ---------------------------------------------------------------------------------------------- Worker                           based on PIA                                  Deceased

Answer 63

Social Security Summary Chart TEST

                              Retirement & Disability       Survivor Fully Insured  ---------------------------------------------------------------------------------------------- Worker                           based on PIA                                  Deceased  --------------------------------------------------------------------------------------------- Spouse -includes divocered/ married  10 year     @ own FRA                   50%                                             100%    @ age 62                      33.96%                                         81%    @60(50 if disabled)     NOT Avail                                    71.5% \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ CHild  < 18 (19 if in HS)            50% each                                    75% each   disabled before 22       50% each                                     75% each \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Disabled Parent             NOT avail.                                 75% each for 2 
                                                                                         82.5% for 1

Question 64

QUALIFYING FOR SOCIAL SECURITY BENEFITS

• ## Fully Insured

Answer 64

QUALIFYING FOR SOCIAL SECURITY BENEFITS TEST

• Fully Insured
  – 40 quarters of coverage
• 1 quarter of coverage = $1,640 for 2023 of earnings
• Maximum accrual of 4 quarters per year
• Currently Insured for Survivor’s Benefit
  –6 quarters of coverage out of the previous 13 quarters

Question 65

EARLY RETIREMENT

• May begin at age ?
• Permanently reduced benefit: ?

Answer 65

EARLY RETIREMENT TEST TEST
________________________________________________________________
* May begin age 62 PERMANENT REDUCTION

• Permanently reduced benefit:
  – 1/180 for each month of early retirement up to 36 months early
  – 1/240 for each month of early retirement greater than 36 months
  up to 24 months

Note: Formula for reduced benefits is different for the spouse

Assume Robin begins receiving benefits at the earliest possible age, which is age 62. Then, the benefit amount for Robin is reduced for 48 months of retirement before Robin’s normal retirement age, which is 66 years. Assume Robin’s PIA before reduction is $1,421.90. The PIA is thus reduced to a monthly benefit of $1,066.43 (rounded to $1066.40).

PIA $1,421.90
5/9 x 1% x 36 months Less 20% reduction
5/12 x 1% x 12 months Monthly Benefit Less 5% reduction
—————————————————————————————-
$1,066.43

Question 66

DELAYED RETIREMENT

Answer 66

DELAYED RETIREMENT TEST

• Begin retirement distributions after normal retirement age
• Permanent increased benefit
  —Increases the benefit by 3% to 8% for each year of delayed retirement to age 70

DELAYED BENEFITS WILL INCREASE 8% PER YEAR OF Delay up until age 70.

• Based on normal retirement age
  — 8% / year increase for those born in 1943 or later

Question 67

RETIREMENT EARNINGS LIMITATION TEST

• Before normal retirement age:

Answer 67

RETIREMENT EARNINGS LIMITATION TEST
( Earning TOO much before FRA )

-TEMPORARY

• Before normal retirement age:
  –$1 reduction for every $2 of earnings above $21,240 for 2023
• In year retiree reaches normal retirement age:
  –$1 reduction for every $3 of earnings above $56,520 for 2023
  – Only applies to earnings in the months before attaining normal
  retirement age

*EARNINGS INCLUDE
–Wages
– Self-Employment Income

• NOT included Earnings
  –Pension Income
  –Investment Income
  – Capital Gains
  – 401(k) and IRA withdrawals
• AFTER NORMAN RETIREMENT age $ 0 reduction

Question 68

RETIREMENT EARNINGS LIMITATION TEST

   ( Earning TOO much before FRA    Temporary up to FRA )

Answer 68

RETIREMENT EARNINGS LIMITATION TEST

   ( Earning TOO much before FRA    Temporary up to FRA )

example:
Matthew is 64 years old and despite being retired from his occupation as an attorney, earned $20,000 in 2020 while working as a golf instructor at a local golf course. Matthew’s monthly retirement benefit from Social Security is normally $1,200, which totals $14,400 for the entire year. Because Matthew exceeded the retirement earnings limitation, how much money will be reduced from Matthew’s Social Security retirement benefit for 2020?

Matthew’s total earnings in 2020 $20,000
Earnings limitation - ( 18,240 ) see chart indexed
Remainder excess 1,760 – went over the limit
One-half deduction / 2
Benefits reduced by: $880

Question 69

TAXATION OF SOCIAL SECURITY BENEFITS (1 OF 3)

• Applies to retirees with substantial income in addition to Social Security benefits

Answer 69

TAXATION OF SOCIAL SECURITY BENEFITS (1 OF 3) TEST

• Retirees with substantial income in addition to Social Security benefits
  – Up to 85% of the Social Security benefits may be taxableAGI
  + Foreign Income excluded
  + Adoption Assistance excluded
  + Student Loan Interest Deduction
  +Tax Exempt Bond Interest
  ————————————————–
  Modified AGI (MAGI)

– “Combined” or PROVISIONAL INCOME = MAGI + ½ S.S. Benefit

                                    MFj                     SINGLE  ------------------------------------------------------------------ 1st Hurdle                    $ 32,000               $ 25,000 

2nd Hurdle $ 44,000 $ 34,000

Question 70

Formulas to determine how much SS is taxable Income

Answer 70

TAXATION OF BENEFITS - at any time TEST

Formulas to determine how much SS is taxable Income
______________________________________________________________
MAGi + .50 SS exceeds FIRST HURDLE
, but NOT 2nd Hurdle then:
the taxable amount of SS is the lessor of:

50% of SS

or

.50 [ MAGI + .50 ( SS ) - Hurdle 1 ]
_________________________________________________________________
EX:
A married couple has income of $30,000 and Social Security benefits of $20,000. What amount of their Social Security benefits must be included in their taxable income?
MAGI $30,000 + .50 of SS = $ 40,000

Lesser of:
* 0.50($20,000) = $10,000, or

*0.50 [30,000 + 0.50 (20,000) - 32,000] = $4,000
They would have $4,000 of Social Security benefits included in taxable income

Question 71

Formulas to determine how much SS is taxable Income

Answer 71

TAXATION OF BENEFITS - at any time TEST

Formulas to determine how much SS is taxable Income
___________________________________________________________________
If MAGI + .50 of SS exceeds the 2nd HURDLE
the taxable amount of SS benefits is the lesser of:

• 85% Social Security Benefits, or
• 85% [MAGI + 0.50 (Social Security Benefits) - Hurdle 2],
  PLUS THE LESSOR OF :$6,000 for MFJ or $4,500 for all other taxpayers,
  or
  Taxable $ calculated w/ 50% formula & only considering Hurdle 1.

EXample:______________________________________________________________
A married couple has income of $60,000 and Social Security benefits of $20,000. What amount of their Social Security benefits must be included in their taxable income?

1. 0.85 ($20,000) = $17,000
2. 0.85 [$60,000 + 0.50 ($20,000) - $44,000] = $22,100
   plus the lesser of:
   * $6,000, or—————————————————–> $6,000
   * 0.50 ($20,000) = $10,000, or
   * 0.50 [$60,000+0.50($20,000)-$32,000] = $19,000
   —————–
   $28,100

Therefore, $17,000 must be included in their taxable income

Question 72

TAXATION OF SS BENEFITS BETWEEN 1st & 2ND HURDLE

• If combined (PROVISIONAL) income IS BETWEEN 1st & 2nd HURDLE, the taxable amount of the Social Security Retirement benefits is the lesser oF:

Answer 72

TAXATION OF SS - BETWEEN 1st & 2nd HURDLE ++

• If combined (PROVISIONAL) income IS BETWEEN 1st & 2nd HURDLE, the taxable amount of the Social Security Retirement benefits is the lesser of

– 50% of Social Security Benefits,
or
– 50% [MAGI + 0.50 (Social Security Benefits) less Hurdle 1 Value]

Question 73

TAXATION OF SS BENEFITS - GREATER than 2nd HURDLE

• If combined income (PROVISIONAL) is greater than 2ND hurdle,
  the taxable amount of the Social Security benefits is the lesser of:

Answer 73

TAXATION OF SS - GREATER than 2nd HURDLE +++

• If COMBINED INCOME is GREATER than 2nd HURDLE,
  the taxable amount of the Social Security benefits is the LESSER of:

–85% of Social Security Benefits,

OR

– 85% [MAGI + 50% (Social Security Benefits) less Hurdle 2], plus the
lesser of:
* $6,000 for MFJ, or $4,500 for all other taxpayers, OR
* 50 % ( ss benefit ) OR
* The taxable amount calculated based on the 50% formula and
only considering Hurdle 1.
50% [MAGI + 0.50 (Social Security Benefits) less Hurdle 1 Value]

Question 74

Emile is single and received $28,000 of dividend income during the year. He also received $18,000 of Social Security benefits. What portion of his Social Security benefits are taxable?

Answer 74

$7,050.

Rationale

The lesser of:
85% of $18,000 = $15,300
or
0.85 [$28,000 + 0.5 ($18,000) - $34,000] = $2,550
plus $4,500 ( FOR ALL TAX PAYERS)
equals $7,050

Question 75

joyce and Melvin have been married for 30 years. In 2020, they received $22,000 of Social Security benefits and had $12,000 of interest income. What portion of the Social Security benefit is taxable?

Answer 75

$0.
Rationale

The lesser of:

50% of $22,000 = $11,000
or
0.5 [$12,000 + 0.5 ($11,000) - $32,000] < 0

Since the answer calculated is less than $0, none of the Social Security benefits received by Joyce and Melvin are taxable.

Question 76

DISABILITY BENEFITS

• Benefits payable to workers with:

Answer 76

DISABILITY BENEFITS TEST

• Benefits payable to workers with:
  – Severe physical or mental impairments which prevents them from
  performing “substantial work” ($1,470+ per month in 2023)
  at least 12 months or result in death
• must be fully insured FOR DISABILITY
• Fully insured w/ 20 quarters of coverage in the last 40 quarters
• 5 MONTH WAITING PERIOD
  – Benefits begin in the 6th month of disability
• PAYABLE AT ANY AGE (below retirement age) if required number of
  quarters are accumulated
• in ability to engage in previous work AND cannot do any other job in the economy
• DISABLED PRIOR TO AGE 31 must have 1/2 of qrts that \have lapsed since age 21 . Min of 6 qtrs required

Question 77

SURVIVORS BENEFITS

• Benefits payable to family members of deceased individuals who were entitled to benefits.

Answer 77

SURVIVORS BENEFITS TEST

• Benefits payable to family members of deceased individuals who were entitled to benefits.

– Widow or Widower
* 60 and older
* 50 or older and disabled
* Caring for a child under age 16
* Caring for a child who was disabled before age 22
- Unmarried Child
* Under 18
* Under age 19 and in high school
* Age 18 or older and disabled before age 22
– Dependent parents of the deceased worker

Surviving spouse under age 60 will receive Social Security benefits until the youngest child reaches age 16.
Spousal benefits will then cease until the spouse turns age 60 (50 if disabled).

Question 78

The years without benefits before age 60 are often referred to as the “——————–” for the surviving spouse.

Answer 78

The years without benefits before age 60 are often referred to as the

“blackout period”

for the surviving spouse.

Answer 79

EARLY SS BENEFITS

Answer 80

SS -WORKING BEFORE FRA AND EARNINGS TEST

Answer 81

SS TAXATION AT ANYTIME