Social Security Flashcards
In 1935, President Franklin D. Roosevelt signed into law the ____________________.
Social Security went into effect in _____ .
What does OASDI mean?
Under Medicare, workers are entitled to medical care benefits once they reach age ____ .
In 1935, President Franklin D. Roosevelt signed into law the Social Security Act. This program addresses the problems and vulnerability of economic security for the aged. These problems were painfully exposed in the Great Depression.
Social Security went into effect in 1937. Over the years, it has been changed to embrace a variety of programs for eligible workers and their families.
Currently, its two main programs are the Old Age, Survivors, and Disability Insurance (OASDI) Program and the Medicare Program. Under OASDI, eligible workers and their families are entitled to
- monthly retirement benefits upon reaching a certain age;
- monthly income payments if a covered worker dies;
- and monthly income payments if a covered worker becomes disabled.
Under Medicare, workers are entitled to medical care benefits once they reach age 65. Insurance producers can be actively involved in helping their clients secure a financially sound retirement. Knowledge of Social Security lets producers coordinate their products and services with benefits provided by Social Security.
How Social Security Is Funded?
Currently, the FICA tax is ______ percent, which is allocated between OASDI and Medicare.
The tax is _____ between the worker and employer.
Social Security benefits are funded through payroll taxes. Workers and their employers (as well as the self-employed) pay a portion of the workers’ wages into the Social Security program. These payroll taxes are known as “FICA” taxes. The benefits to which a worker is entitled under Social Security largely depend on how much he or she paid into the system through FICA taxes.
Currently, the FICA tax is 15.3 percent, which is allocated between OASDI and Medicare. The tax is split between the worker and employer. Workers pay 7.65 percent of their wages into Social Security, as do their employers.
NOTE: Self-employed individuals pay the full 15.3 percent themselves.
Taxable Wage Base
As a social safety net, Social Security retirement and disability benefits are limited. Put simply, there is a cap on the maximum amount of benefits a worker may receive. Accordingly, there is a cap on the amount of wages that are subject to the OASDI portion of the FICA tax. The amount that is subject to OASDI tax is known as the taxable wage base. Any earnings over the taxable wage base are not subject to OASDI taxes. (The taxable wage base is subject to change every year and has historically increased every year.)
The Medicare portion of the tax is applied to all of a worker’s earnings, no matter what the amount.
Social Security Benefit Eligibility
As they pay OASDI taxes, workers earn quarters of coverage, or _____ (also called Social Security credits).
In 2018, for example, a worker is credited with one credit for each $______ earned, up to a maximum of ____ quarters of coverage.
It is ____ necessary to work a full calendar year to earn four credits.
Whether or not workers qualify for Social Security benefits is determined by their eligibility status. As they pay OASDI taxes, workers earn quarters of coverage, or QCs (also called Social Security credits). Social Security benefit eligibility is based on the number of credits a worker has earned.
In 2018, for example, a worker is credited with one credit for each $1,320 earned, up to a maximum of four quarters of coverage. It is not necessary to work a full calendar year to earn four credits. A quarter of coverage is earned as soon as the required earnings amount has been reported and taxed. (In 2018, for example, a worker will have earned four credits as soon as he or she earns—and pays OASDI taxes on—$5,280.) As they earn credits, workers first become currently insured and then, eventually, fully insured. Their insured status determines the type of Social Security benefits to which they and their survivors are entitled.
Currently Insured Status
To be considered currently insured, a worker must have ___ credits in the ___-quarter period before he or she
- Dies;
- Becomes entitled to disability benefits; or
- Becomes entitled to old-age insurance benefits.
Workers who are currently insured are eligible for survivor death benefits. That is, their survivors are eligible for certain benefits upon the worker’s death.
To be considered currently insured, a worker must have 6 credits in the 13-quarter period before he or she
- Dies;
- Most recently becomes entitled to disability benefits; or
- Becomes entitled to old-age insurance benefits.
Fully Insured Status
To be considered fully insured a worker must have
- At least ___ quarter of coverage for each year since 1950 or since reaching age ___ and the year before dying or reaching age 62; or
- ___ quarters of coverage.
Practically speaking, this means a worker must work a minimum of ___ years
Fully insured status entitles a worker to full OASDI benefits under Social Security. To be considered fully insured a worker must have
- At least one quarter of coverage for each year since 1950 or since reaching age 21 and the year before dying or reaching age 62; or
- 40 quarters of coverage.
Practically speaking, this means a worker must work a minimum of ten years. In any case, no one can be fully insured with less than six credits. Fully insured workers are eligible for:
- disability benefits (after meeting additional requirements)
- retirement benefits
- survivor benefits at the worker’s death
- Medicare Part A benefits without paying a premium
Key Points
- As they pay OASDI taxes, workers earn quarters of coverage, or QCs (also called Social Security credits). Social Security benefit eligibility is based on the number of QCs a worker has earned.
- Workers who are currently insured are eligible for survivor death benefits. To be considered currently insured, a worker must have 6 QCs in the 13-quarter period before death.
- Fully insured status entitles a worker to full OASDI benefits under Social Security. To be considered fully insured a worker must have 40 quarters of coverage.
