Social Security

Question 1

Quarter of Coverage

Answer 1

is a basic unit for determining whether a worker is insured under the Social Security program.

Question 2

Social Security Act of 1935

Answer 2

was created to provide for the general welfare of United States citizens who are 65 years of age and older. The Act was enacted by the Senate and House of Representatives of the United States to enable individual states to make more adequate provisions to furnish financial assistance to the aged, blind, dependent and crippled children, maternal and child welfare, public health, and to establish more adequate provisions for the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and to provide a basic floor of protection to all working Americans against the financial problems brought on by death, disability, and aging. In 1939 the law was changed to add survivors’ benefits and benefits for the retiree’s spouse and children. In 1956 disability benefits were added. Social Security is an entitlement program, not a welfare program. It is based on a “pay now in exchange for benefits later” system.

Question 3

FICA taxes (Federal Insurance Contributions Act)

Answer 3

are used to fund the Social Security program if a person hasn’t contributed through their payroll program, they are not eligible for benefits.

Question 4

Credits

Answer 4

are the determining factor between being classified as fully insured or currently insured. Once a person becomes fully insured, death benefits are extended to his (or her) family. In other words, the family becomes eligible for survivorship benefits. Four credits is the maximum any one person can earn in a given year; therefore, for the 40-quarter rule to apply, an individual must have been employed and have paid FICA taxes for 10 years at least.

Question 5

Fully Insured

Answer 5

is a status of complete eligibility for the full range of Social Security benefits: death benefits, retirement benefits, disability benefits, and Medicare benefits. A person must have contributed for 40 quarters of employment to be fully insured.

Question 6

Currently Insured

Answer 6

is under Social Security, a status of limited eligibility that provides only death benefits

Question 7

OASDI

Answer 7

stands for old age, survivor and disability insurance, which is more commonly referred to as Social Security. To pay for these programs, the federal government imposes a tax on earned income that must be withheld by your employer. The OASDI deduction on your paycheck shows how much was withheld.

Question 8

Primary Insurance Amount (PIA)

Answer 8

is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

Question 9

Blackout period

Answer 9

is a period following the death of a family breadwinner during which no Social Security benefits are available to the surviving spouse.

Question 10

Disability Benefit Qualifications

Answer 10

is when Social Security uses both medical disability criteria and non- medical criteria to determine whether you qualify for Social Security disability (SSDI, the program based on work credits) or Supplemental Security Income (SSI, the low-income program). First, you must be able to prove that you are medically disabled.

Question 11

Retirement Benefits

Answer 11

is when Social Security retirement benefits are only available to covered workers who are fully insured upon retirement. Benefits are paid monthly. If a covered worker retires at the normal retirement age, he or she will receive 100% of the PIA. However, if a covered worker retires early at the age of 62, the maximum Social Security benefits is 80% of the PIA. This reduction remains all through retirement. Retirement benefits pay covered retired workers, their spouses, and other eligible dependents a monthly retirement income.

Question 12

Taxation of Social Security Benefits

Answer 12

states that Social Security benefits are subject to federal income tax if the beneficiary files an individual tax return and his or her annual income is greater than $25,000. Joint filers will pay federal income tax on their Social Security benefits if their income is greater than $32,000

Question 13

Social Security

Answer 13

also known as Old Age, Survivors, and Disability Insurance (OASDI), was signed into law in 1935 by President Roosevelt as part of the Social Security Act. Social Security was established during the Great Depression to assist the masses of people who could not afford to sustain their way of life because of unemployment, disability, illness, old age, or death.

Question 14

WHO IS COVERED

Answer 14

Social Security extends coverage to virtually every American who is employed or self-employed, with few exceptions. Those not covered include:

• Most federal employees hired before 1984 who are covered by Civil Service Retirement or another similar plan
• Approximately 25% of state and local government employees who are covered by a state pension program and elect not to participate in the Social Security Program
• Railroad workers covered under a separate federal program called the Railroad Retirement System

Question 15

HOW BENEFITS ARE DETERMINED

Answer 15

A person must be insured under the Social Security program for survivors, disability, or retirement benefits to pay. Social Security benefits are based on how long a covered worker has worked throughout his life.

Question 16

Social Security Payroll Taxes

Answer 16

• Funding for Social Security is collected from FICA payroll taxes.
• Social Security payroll taxes are collected from employers, employees, and self-employed individuals.
• FICA tax is applied to an employee’s income up to a certain income amount. This amount is called the taxable wage base.
• There is a maximum amount of earnings that can be subject to Social Security tax each year. This amount is indexed each year to the national average wage index. This maximum applies to employers, employees, and self-employed individuals. Medicare Part A taxes are not subject to a maximum taxable wage cap

Question 17

Calculating Benefits

Answer 17

• Based on the individual’s average monthly wage during his working years.
• The primary insurance amount (PIA) is used to establish the benefit. It is equal to the worker’s full retirement benefit at age 65.
• If a worker retires early, for example at age 62, his retirement benefits will be 80% of his PIA and will remain lower for the covered worker’s life.
• The PIA is based on the average earnings over your lifetime.

Question 18

TYPES OF OASDI BENEFITS Survivors Benefits

Answer 18

Social Security Survivors benefits or death benefits: pay a lump-sum death benefit or monthly income to survivors of deceased covered workers.

Survivor’s benefits: include a $255 lump-sum death benefit, surviving spouse benefits, child’s benefit, and parent’s benefit.

• A surviving spouse without dependent children is eligible for Social Security survivor benefits as early as age 60.
• Survivor benefits are also available to:

o A spouse of any age who is caring for children under age 16

o Children under age 18

o Children under age 19 who are full time students

o Children at any age if disabled before age 22 and remain disabled

• A Social Security benefit of 75% of the Primary Insurance Amount (PIA) is given to an underage child of a deceased worker.

Question 19

Disability Benefits

Answer 19

• Only available to covered workers who are fully insured,as defined by Social Security, at the time of disability.
• Disability income benefits are paid to the covered worker in the amount of the PIA after a 5-month waiting period.
• Only available prior to the age of 65
• Does not pay partial disability or short-term disability benefits
• Disability must be total and expected to last 12 months or end in death
• Benefits include monthly payments to the disabled worker, spousal benefits, and child’s benefits.
• Definition of Disability: In order to be considered totally disabled, an individual has to qualify according the following requirements:

o The inability to engage in any gainful work that exists in the national economy

o The disability must result from a medically determinable physical or mental impairment that is expected to result in early death, or has lasted, or is expected to last for a continuous period of 12 months

Question 20

Retirement Benefits

Answer 20

• Benefits are only available to covered workers who are fully insured upon retirement.
• Benefits are paid monthly.
• If a covered worker retires at the normal retirement age, he will receive 100% of the PIA.
• If a covered worker retires early at the age of 62, the maximum Social Security benefit is 80% of the PIA. This reduction remains all through retirement.
• Retirement benefits pay covered retired workers at least 62 years of age, their spouses and other eligible dependents monthly retirement income.
• Retirement benefits include monthly retirement payments to the covered worker, spousal benefits, and child’s benefits.

Question 21

Black-Out Period

Answer 21

• Benefits paid to the surviving spouse of a deceased person who was receiving Social Security.
• The “black-out period” begins when Social Security survivorship benefits cease.
• This is when the youngest child turns 16 years old, or immediately if there are no children.
• The “black-out period” ends when the surviving spouse turns at least 60 years old.