Retirement: 1-5 Social Security and Medicare

Question 1

Retirement: 1-5 Social Security and Medicare

There are two alternatives: (1) 40 quarters of coverage (10 years of covered work); or (2) if fewer than 40 quarters, one quarter of coverage for each year after 1950 (or after age 21, if later) and before the earliest of the year worker dies, the year the worker is disabled, or the year the worker turns age 62; the minimum required is six quarters.

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 1

c. fully insured status

Question 2

Retirement: 1-5 Social Security and Medicare

Self-employed persons and employees receive one quarter of coverage for each $ 1,260 (for 2016) of covered annual earnings, to a maximum of four quarters per calendar year.

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 2

b. a quarter of coverage this year

Question 3

Retirement: 1-5 Social Security and Medicare

This requires at least 6 quarters of coverage in the 13 quarter period that ends with the quarter of death, disability, or entitlement to retirement benefits.

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 3

d. currently insured status

Question 4

Retirement: 1-5 Social Security and Medicare

The 3 month period ending March 31st, June 30th, September 30th, or December 31st

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 4

a. a quarter

Question 5

Retirement: 1-5 Social Security and Medicare

It is the basis for determining the primary insurance amount (PIA). It expresses a worker’s covered earnings over his or her working life in terms of current dollar value.

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 5

e. AIME (Average Indexed Monthly Earnings)

Question 6

Retirement: 1-5 Social Security and Medicare

It is the basic unit used to determine the amount of each monthly benefit; it is determined by applying a formula to AIME

a. a quarter
b. a quarter of coverage this year
c. fully insured status
d. currently insured status
e. AIME
f. PIA

1-5

Answer 6

f. PIA

Question 7

Retirement: 1-5 Social Security and Medicare

End of disability; attainment of full retirement age or death prior to full retirement age

a. definition of disability
b. required insured status
c. required age for eligibility
d. waiting period
e. events triggering benefit termination

1-5

Answer 7

e. events triggering benefit termination

Question 8

Retirement: 1-5 Social Security and Medicare

Five months

a. definition of disability
b. required insured status
c. required age for eligibility
d. waiting period
e. events triggering benefit termination

1-5

Answer 8

d. waiting period

Question 9

Retirement: 1-5 Social Security and Medicare

Any age under FRA; benefits change to requirements benefits at FRA

a. definition of disability
b. required insured status
c. required age for eligibility
d. waiting period
e. events triggering benefit termination

1-5

Answer 9

c. required age for eligibility

Question 10

Retirement: 1-5 Social Security and Medicare

Inability to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment that is expected to result in death or that has lasted or can be expected to last for a continuous period of at least 12 months

a. definition of disability
b. required insured status
c. required age for eligibility
d. waiting period
e. events triggering benefit termination

1-5

Answer 10

a. definition of disability

Question 11

Retirement: 1-5 Social Security and Medicare

Must be fully insured and covered for at least 20 of the 40 quarters (5 of the 10 years) ending with quarter disability begins or, if under age 31 at disability, covered for at least one half of quarters after age 21 and before disabled (not less than 6 quaters

a. definition of disability
b. required insured status
c. required age for eligibility
d. waiting period
e. events triggering benefit termination

1-5

Answer 11

b. required insured status

Question 12

Retirement: 1-5 Social Security and Medicare

Identify the Social Security disability benefits that would be paid in the following situations. Express the benefit amount as a percentage of the worker’s PIA.

50% (subject to family maximum)

a. disabled worker
b. spouse of disabled worker
c. child or children of disabled worker

1-5

Answer 12

c. child or children of disabled worker

Question 13

Retirement: 1-5 Social Security and Medicare

Identify the Social Security disability benefits that would be paid in the following situations. Express the benefit amount as a percentage of the worker’s PIA.

100%

a. disabled worker
b. spouse of disabled worker
c. child or children of disabled worker

1-5

Answer 13

a. disabled worker

Question 14

Retirement: 1-5 Social Security and Medicare

Module Check Summary

4. How are Social Security benefits funded?
   a. Liability is calculated, and FICA taxes are assessed as if Social Security were a defined benefit plan.
   b. Special taxes are collected from workers and used to pay benefits to those workers who are retired.
   c. Special taxes are collected and deposited to a trust fund that disperses the benefits.
   d. Benefits are paid by income taxes, which are increased to offset shortfalls.

1-5

Answer 14

b. Special taxes are collected from workers and used to pay benefits to those workers who are retired.

Social Security and FICA taxes are withheld by the employer. The total is 15.3% of payroll in 2016; the employer pays 7.65% and the employee pays 7.65%.

Unlike a defined benefit plan, Social Security and FICA taxes are withheld (and matched) by employers. There is no trust fund. Monies are deposited into the general account, and benefits are paid out of the general account. Benefits are not paid by income taxes. They are paid from a general account funded by payroll deductions and employer matching.

Question 15

Retirement: 1-5 Social Security and Medicare

Bill Baker turns 62 in May of this year and will begin benefits then. His FRA is age 66, since he was born in 1953. His PIA is $1,660, making his benefit:

a. $1,345
b. $1,445
c. $1,245
d. $1,145

1-5

Answer 15

c. $1,245

(100% - 20% - 5%) * $1,660

66
- 62
= 4 years

  5
/ 9
= 0.5556
* 36
= 20%

  5
/ 12
= 0.4167
* 12
= 5%

(100% - 20% - 5%) * $1,660

Retirement benefits that begin at the worker’s age 62 will be reduced by a maximum of 30% for age 67 FRAs (5/9 of 1% per month for the first 36 months plus 5/12 of 1% per month for periods greater than 36 months)

Question 16

Retirement: 1-5 Social Security and Medicare

George Kellerman was born in 1954. He plans to work until age 70 then retire and begin his benefit. His PIA is $1,150. What is his retirement benefit

a. $1,618
b. $1,418
c. $1,718
d. $1,518

1-5

Answer 16

d. $1,518

His FRA is 66 and he will wait for 4 years.

4 years
* 8% increase
= 32%

$1,150
+ 32%
= $1,518

Question 17

Retirement: 1-5 Social Security and Medicare

The Social Security Act was passed in which year?

1929

1932

1935

1939

(LO 1-5)

Answer 17

1935

Question 18

Retirement: 1-5 Social Security and Medicare

Sick pay during first six months

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 18

b. Income Exempt From Social Security Tax

Question 19

Retirement: 1-5 Social Security and Medicare

Employer payments for medical or hospital expenses

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 19

b. Income Exempt From Social Security Tax

Question 20

Retirement: 1-5 Social Security and Medicare

Employer-paid premiums for group term life insurance coverage in excess of $50,000

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 20

a. Income Subject to Social Security Tax

Question 21

Retirement: 1-5 Social Security and Medicare

Value of employer provided meals and lodging

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 21

a. Income Subject to Social Security Tax

Question 22

Retirement: 1-5 Social Security and Medicare

Employer-paid premiums for group term life insurance coverage not in excess of $50,000

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 22

b. Income Exempt From Social Security Tax

Question 23

Retirement: 1-5 Social Security and Medicare

Employer contributions to qualified retirement plans on behalf of employees

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 23

b. Income Exempt From Social Security Tax

Question 24

Retirement: 1-5 Social Security and Medicare

Amounts deferred under non-qualified deferred compensation plans, as long as such amounts are subject to substantial risk of forfeiture or the employer’s creditors

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 24

b. Income Exempt From Social Security Tax

Question 25

Retirement: 1-5 Social Security and Medicare

Social Security is not sustainable in its current form, particularly when millions of baby boomers move from the workplace to retirement and begin drawing on their Social Security benefits while, at the same time, stopping the flow of their payments into the system. The impact of this monumental demographic shift will deplete the trust funds by _____ if no changes are made.

a. 2033
b. 2043
c. 2053
d. 2063

1-5

Answer 25

a. 2033

Question 26

Retirement: 1-5 Social Security and Medicare

According to the 2013 Social Security Trustees’ Report, Social Security expenditures exceeded non-interest income in both 2012 and 2013 and the Trustees project this trend will continue for at least years.

a. 55
b. 65
c. 75
d. 85

1-5

Answer 26

c. 75

Question 27

Retirement: 1-5 Social Security and Medicare

The social security trust fund are not a horde of cash or a reserve fund, but as an accounting entity in the federal government. In the meantime, the government uses the funds received from the sale of the _____ to the Social Security account as general revenue. So although there is not a cash reserve, there is a fund allocation and tracking system for Social Security.

a. Treasury Notes
b. Treasury Bills
c. Treasury Bonds

1-5

Answer 27

c. Treasury Bonds

Question 28

Retirement: 1-5 Social Security and Medicare

Like any other U.S. Treasury bond, the government has access to the principal to use for current government operations. Social Security money was invested in government bonds in exchange for the government’s promise to redeem those bonds as they come due. Like other T-bonds, the government pays interest back to the lender, in this case

a. American taxpayers
b. Social Security or SSA (Social Security Administration).

1-5

Answer 28

b. Social Security or SSA (Social Security Administration).

Question 29

Retirement: 1-5 Social Security and Medicare

Once the reserve is exhausted, interest income from the funds will end. The only income to the system then will be payroll taxes from current workers. The good news is that those taxes would be enough to pay __% of promised benefits after 2033

a. 67%
b. 57%
c. 77%
d. 87%

1-5

Answer 29

c. 77%

Question 30

Retirement: 1-5 Social Security and Medicare

As the group of covered workers eligible for benefits has grown, the amount of taxes required to fund these benefits also has increased. From an initial level of 2% of compensation, FICA taxes have grown to a current __% of compensation

a. 7.65%
b. 15.3%

1-5

Answer 30

b. 15.3%

Question 31

Retirement: 1-5 Social Security and Medicare

Vacation pay, severance pay

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 31

a. Income Subject to Social Security Tax

Question 32

Retirement: 1-5 Social Security and Medicare

Non-qualified stock option bargain element (upon exercise)

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 32

a. Income Subject to Social Security Tax

Question 33

Retirement: 1-5 Social Security and Medicare

Amounts deferred under non-qualified deferred compensation plans, when such amounts are no longer subject to substantial risk of forfeiture

a. Income Subject to Social Security Tax
b. Income Exempt From Social Security Tax

1-5

Answer 33

a. Income Subject to Social Security Tax

Question 34

Retirement: 1-5 Social Security and Medicare

Generally all Social Security benefits are available if a worker is _____, including retirement, disability and survivor benefits. This status is determined by meeting one of two tests:

1. 10 years of employment covered by Social Security, expressed as “40 quarters of coverage”; or
2. for those born before 1929, quarters of coverage (a minimum of six quarters is required) equal to the number of years between 1951 and the year in which the individual reached age 62 (e.g., assume an individual was born in 1925 and he or she reached age 62 in 1987; 1987 – 1951 = 36; 36 quarters of coverage would be required for this individual to achieve fully insured status).
   a. Fully insured
   b. Currently insured

1-5

Answer 34

a. Fully insured

Question 35

Retirement: 1-5 Social Security and Medicare

The full retirement age will be __ for individuals born in the period 1943–1954.

65

66

67

1-5

Answer 35

66

Question 36

Retirement: 1-5 Social Security and Medicare

The full retirement age for individuals born between 1955 and 1959 will be age 66, plus __ months for every year after 1954

a. 2
b. 3
c. 4

1-5

Answer 36

a. 2

Question 37

Retirement: 1-5 Social Security and Medicare

The full retirement age for a person born in 1958 would be age

a. 66 and 6 months
b. 66 and 8 months
c. 66 and 10 months

1-5

Answer 37

b. 66 and 8 months

The full retirement age for individuals born between 1955 and 1959 will be age 66, plus 2 months for every year after 1954

66 and 8 months—66 + (2 months × 4).

Question 38

Retirement: 1-5 Social Security and Medicare

The calculation of a worker’s _____ involves adjusting each year’s earnings total to reflect its value in the year for which eligibility is requested. A worker’s _____ expresses the worker’s covered earnings in terms of current dollar value.

a. Primary Insurance Amount (PIA).
b. Average Indexed Monthly Earnings (AIME).

1-5

Answer 38

b. Average Indexed Monthly Earnings (AIME).

Question 39

Retirement: 1-5 Social Security and Medicare

Retirement benefits that begin at the worker’s age 62 will be reduced by a maximum of __% for age 67 FRAs (5/9 of 1% per month for the first 36 months plus 5/12 of 1% per month for periods greater than 36 months)

a. 25%
b. 30%
c. 35%
d. 40%

1-5

Answer 39

b. 30%

Question 40

Retirement: 1-5 Social Security and Medicare

If a worker chooses to delay retirement benefits past FRA and continues working, the benefit will be increased. The amount of increase depends on how long the worker delays beginning payments and the year of the worker’s birth, as shown below. The worker’s PIA is _____ to reflect the increased benefit; therefore, the benefit payable to other family members is _____.

a. increased
b. not increased

1-5

Answer 40

b. not increased

Question 41

Retirement: 1-5 Social Security and Medicare

Widow(er)’s benefit. A benefit of up to 100% of the deceased, fully insured worker’s PIA will be paid to a surviving spouse who is at least at FRA and was married to the worker for at least _ months.

a. 6
b. 9
c. 12

1-5

Answer 41

b. 9

Question 42

Retirement: 1-5 Social Security and Medicare

If the worker died _____ receiving Social Security retirement benefits, the surviving spouse of full retirement age is entitled to a benefit equal to 100% of the deceased worker’s PIA (plus amounts attributable to delayed retirement credits).

a. after
b. before

1-5

Answer 42

b. before

Question 43

Retirement: 1-5 Social Security and Medicare

A surviving spouse who is between ages __ and FRA (below full retirement age) will receive a reduced benefit

a. 50
b. 60
c. 62

1-5

Answer 43

b. 60

Question 44

Retirement: 1-5 Social Security and Medicare

If the worker died after Social Security retirement benefits had begun, the amount of the surviving spouse’s benefit _____ exceed the amount of the benefit being paid.

a. can
b. cannot

1-5

Answer 44

b. cannot

Thus, if the worker was receiving reduced early retirement benefits prior to death, the surviving spouse will continue to receive the same benefit (to a minimum of 82.5% of the worker’s PIA). The widow(er)’s benefit terminates at death or at eligibility for an equal or greater retirement benefit due to his or her own employment.

Question 45

Retirement: 1-5 Social Security and Medicare

The divorced spouse’s benefit is not reduced by the family maximum. To be eligible for the divorced spouse benefit, the divorced spouse must have been married to the worker for at least __ years and not be remarried.

a. 5
b. 10
c. 15

1-5

Answer 45

b. 10

Question 46

Retirement: 1-5 Social Security and Medicare

Child’s benefit. The dependent child of a fully or currently insured worker will receive a benefit of __% of the worker’s PIA (subject to the family maximum) if the child:

–is under age 18—or under age 19 if a full-time school (not college) student—or is over age 18 and has been disabled since before age 22; and

–is not married

a. 75%
b. 85%
c. 100%

1-5

Answer 46

a. 75%

Question 47

Retirement: 1-5 Social Security and Medicare

Mother’s or father’s benefit. The surviving spouse of a fully or currently insured worker is eligible to receive a benefit of __% of the worker’s PIA if he or she is caring for a child who is under age 16 or who was disabled before age 22.

a. 75%
b. 85%
c. 100%

1-5

Answer 47

a. 75%

Question 48

Retirement: 1-5 Social Security and Medicare

To be entitled to a disability benefit, a worker must wait for a _ month period before benefits can begin.

a. 2
b. 3
c. 4
d. 5

1-5

Answer 48

d. 5

Question 49

Retirement: 1-5 Social Security and Medicare

To be entitled to a disability benefit, a worker must have a physical or mental impairment that

(1) has disabled the worker from the performance of any substantial work for __ months, or
(2) is expected to disable the worker for at least __ months or result in death
a. 6
b. 12
c. 24
d. 36

1-5

Answer 49

b. 12

Question 50

Retirement: 1-5 Social Security and Medicare

To be entitled to a disability benefit, a worker must have worked in Social Security-covered employment for at least _ of the previous 10 years

a. 2
b. 3
c. 4
d. 5

1-5

Answer 50

d. 5

Question 51

Retirement: 1-5 Social Security and Medicare

Robert Johnson died last month at age 35. Surviving him are Jane, his wife, age 35; Juli, his daughter, age 6; and Bobby, his son, age 3. His PIA is $1,200 and the family maximum is $1,970.

How much of a benefit can they each receive?

a. $600
b. $656
c. $1200

1-5

Answer 51

b. $656

The benefits to Jane and her children exceeded the family maximum and were reduced as follows: 75% of Robert’s PIA of $1,200 would be $900 each, but three individuals receiving a $900 benefit would be $2,700, which exceeds the family maximum of $1,970. So each payment is proportionately reduced to $656 each.