Social Security Flashcards
What is the actual name of SS and what is its beginnings?
Old Age, Survivors and Disability Insurance (OASDI) which was born from the Great Depression and put into law 1935.
What funds SS?
Payroll taxes
-Federal Insurance Contributions Act (FICA) EE and ER each pay 7.65% for total of 15.3%. Of the 7.65%, 6.2% is SS and 1.45% is Medicare.
What are the major exceptions to those covered by SS?
-Federal Civil Retirement System (1983)
-~25% state and local government EEs who have not elected SS
-Workers covered under the Railroad Retirement
What are some of the other special circumstances where people might be covered by SS?
-Household EEs: if paid above a certain amount, must have SS and Medicare taxes withheld
-Ag workers: if paid $150 a year, is covered
-Family workers: if a taxpayer is SE and hires a family member, they are covered.
-Clergy: they can opt out of SS if they are religiously opposed to receipt of government insurance benefits.
To be eligible, what are the funding minimums to SS?
1 credit per year since age 21(max 4 credits earned per year) with a minimum of 6 credits and maximum of 40
What SS benefits do you get if you are fully insured (40 credits)?
-Retirement
-Spouse retirement
-Surviving spouse benefit (60+)
-Surviving spouse caring for child dependent under 16
-Dependent benefit
-Dependent parent benefit
-Lump-sum benefit of $255
What SS benefits do you get if you are currently insured (6 credits)?
-Survivor spouse caring for dependent child
-Dependent benefit
-Lump-sum death benefit $255
What qualifies someone for SS disability benefits?
They are so disabled, that they cannot perform any work generating meaning income. Also the disability must be expected to last more than 12 months or result in death. Disability cannot be drug or alcohol related.
What is the credit requirement for SS disability when the person is 31-42?
40 credits AND 20 of the 40 must have come from when you were age 31-42 showing a connection to the workforce. Less credits needed for younger EEs and more for older EEs.
What is a quick way to determine the number of credits someone needs if they’ve been working since 21?
Subtract 22 from their age. If less than 6, then 6. If more than 6, then go with the answer.
What is the requirement to be currently covered by SS?
Achieved if the worker has earned 6 credits during the 13 calendar quarters leading up to the death or disability.
What is the average indexed monthly earnings (AIME)?
This is what is used to determine a workers primary insurance amount (PIA)
How is AIME calculated?
Add the 35 highest inflation adjusted years and divide by 420
How is the PIA reduction calculated for the worker?
PIA x 20% (for first 36 months), 5% per 12 months after.
If one waits until 70, what is the formula?
For a worker born in 1943 or later, the annual increase is 8% per year.
Who can get the SS retirement benefits?
-A retiree
-The spouse - 50% if wait until FRA, otherwise reduced
-Divorced spouse age 62+, married to the worker 10 years and is unmarried
-Unmarried child under 18 or disabled before 22
-Spouse, taking care of dependent child under 16
-A parent taking care of a disabled child under 22
What is the two-step process for SS survivor benefits?
1) the SS benefit is what it is at death - if the worker waited, the benefit increased. Took early, the benefit decreased. The survivor gets what the worker got.
2) Permanently lower the benefits if taken early as compared to the special survivor FRA.
Who are eligible survivors?
Spouse
Disable widow(er)
Surviving spouse taking care of dependent 16-
Unmarried dependent under 18 or disabled before 22
A dependent parent
Divorced spouse, married to worker for 10 yrs and unmarried.
Who can get disability benefits?
The worker
The spouse
An unmarried child under 18 or who becomes disabled before 22
The divorced spouse, married to worker for 10 yrs and still unmarried
What is the maximum family benefit?
A family cannot go above a certain total percentage. In that case, the payments are reduced to prevent overpaying a family
What is the purpose of the Windfall Elimination Provision (WEP)?
To reduce or eliminate higher or excess SS benefits for those who may not have paid into SS by taxes. Overall benefit can’t be less than 50%
What are the reduction percentages for spouses taking the workers SS early?
Start with 50% of PIA
25% for first 36 months
5% every 12 months after
What is the percentage for SS delayed credit?
8% per year
What is the Windfall Elimination Provision (WEP)?
A provision that eliminates or reduces SS benefits where the worker looked poor to SS, but in fact it is only because the worker didn’t contribute to SS.
