Social Security and Medicare Flashcards
1
Q
What is FICA and contribution amount?
A
- The Federal Insurance Contributuion Act Tax
- Combines OASDI and Hospital Insurance (Medicare)
- FICA is 15.3%
- 7.65% for employee and 7.65% for employer
- OASDI - 6.2% (12.4%)
- Medicare - 1.45% (2.9%)
2
Q
Describe some proposals for adjusting Social Security System
A
- Raise Retirement Age
- Begin Longevity Indexing (reduces monthly payment as life expectancies increase)
- Change the Cost of Living Adjustment (replace the Urban Wage Earners index to something else)
- Means test for Social Security Benefits (based on retiree’s income and assets over a certain amount)
- Increase Payroll Tax
- Increase or Eliminate Payroll Tax Cap (SS wage base cap)
3
Q
When does a retiree become eligible for Social Security Benefits?
A
- Once they reach age 62
- Must have earned 40 credits of coverage (10 years/40 quarters)
4
Q
Social Security Disability Income - Definition
A
- To those people who can’t work because they have a medical condition that is expected to last at LEAST ONE YEAR or RESULT IN DEATH
- Not able to do any gainful work
- Very strict definition of disability
5
Q
Social Security Disability Income - Eligibility
A
- A worker must have earned AT LEAST 20 credits in the 10 years IMMEDIATELY PRIOR to becoming disabled (5/10 previous years)
- If worker is disabled before age 24:
- Must have earned 6 credits in THREE YEARS prior to becoming disabled (1.5/3 previous years)
- If worker is between age 24 and 30:
- Must have earned credits equal to 1/2 the time between 21 and the age when they became disabled
- [(Age of disability - 21) x 4] / 2
6
Q
Survivor’s Benefit - Eligibilty (For Worker)
A
- For survivor’s to get benefits:
- Worker must have earned 40 credits OR
- If young, if worker earned 6 credits in last THREE years of his/her life
7
Q
Survivor’s Benefit - Eligibilty (For Family)
A
- Widow/Widower - Full Benefits at FULL retirement age OR
- Reduced benefits as early as age 60
- Disabled Widow/Widower - Eligible for benefits at age 50
- Widow/Widower (with child)
- ANY AGE if caring for a child 16 or younger OR
- Any age if child is receiving SS benefits
- Unmarried children - under 18 or up to 19 if still in secondary school (high school)
- Disabled Children - if disabled before age of 22 and still disabled
- Dependent parents - must be 62 or older
8
Q
Average Indexed Monthly Earnings (AIME)
A
- Is calculated by indexing a worker’s earnings to account for wage increases over time, similar to inflation, but only focused on increasing wages over time
- Worker’s HIGHEST 35 years of INDEXED EARNINGS are SUMMED together and DIVIDED BY number of months in the calculation
9
Q
Primary Insurance Amount
A
- Benefit amount that a retiree will receive at FULL retirement age AND is based on AIME
10
Q
Early benefits/Delayed benefits
A
- Permanent reduction if before full retirement age
- Permanent increase if between full retirement age and age 70
11
Q
Social Security Disability Benefits - Computation
A
- Based on worker’s AVERAGE MONTHLY EARNINGS
12
Q
Social Security - Spousal Benefit
A
- Spouse can elect to receive HIGHER OF:
- Their own benefit OR
- 1/2 of other spouse’s benefit based on other spouse’s PIA at FULL RETIREMENT
- Will get reduced benefits if under full retirement
13
Q
When can is spousal benefit eligible?
A
- Other spouse MUST BE already be receiving Social Security Benefits
14
Q
Spousal Benefits - Other rules
A
- Only ONE spouse can receive the spousal benefit
- That ONE spouse has to claim SS BEFORE the other spouse can receive a spousal benefit
- Except for divorced spouses, who just have to wait until ex-spouse reaches full retirement age
15
Q
Family Benefit for Social Security
A
- If retiree has minor dependent children or a dependent disabled child, then his/her children can receive 50% of retiree’s full retirement benefit
- Max family benefit is 150-180% of retiree’s PIA amount
- Remember retiree has to be taking SS payments at this time!
16
Q
What happens when family max benefit is reached?
A
- Then amount is averaged to the family
- Surviving DIVORCED spouse is eligible for the same benefit, but this benefit DOES NOT count toward family maximum
17
Q
Surviving Divorce Spouse - Benefits
A
- Surviving divorced spouse must have been:
- Married to decendent for AT LEAST 10 years AND
- Cannot remarry before age 60
18
Q
File and Suspend - Although not available anymore
A
- Where one spouse claims SS benefits but doesn’t receive any cash payments
- Allows other spouse to receive spousal benefits
19
Q
Restricted Filing
A
- One spouse is already receiving benefits
- The other spouse applies for a restricted application at full retirement age
- Allows them to receive the spousal benefit WHILE allowing his/her own benefit to grow at 8%/year
- Then the spouse applies for his/her OWN benefit at age 70 after it at grown a lot (then 8% interest growth stops)
- Allows them to receive the spousal benefit WHILE allowing his/her own benefit to grow at 8%/year
20
Q
Windfall Elimination Provision (WEP)
A
- Workers most likely hit from this are:
- Nonprofit
- Government
- Those who worked in foreign country
- Pretty much those who did not pay into Social Security
21
Q
WEP Calculation
A
- Gradually reduces the percentage rate applied to the first tier of averaged indexed monthly income from 90% to 40% based on the Social Security’s Substantial Earnings Test
- If worker attain 30 substantial years of earnings, SS benefit they receive from SS wages WILL NOT BE REDUCED
22
Q
Government Pension Offset
A
- Applies to spousal and surviving spouse’s benefits if:
- The spouse is receiving a pension from a government pension plan AND
- He/she did NOT pay SS taxes while working at that government job
- SS benefits are reduced by 2/3 of government pension
23
Q
SSI - Supplemental Security Income Taxation
A
- Never taxed
24
Q
Social Security - Taxation
A
- To determine if it is taxable:
- MAGI + 1/2 of Social Security Income
25
Q
Married filing separately spouses - Taxation of SS benefits
A
- 85% of Social Security benefits are AUTOMATICALLY included in taxation
26
Q
Earnings test - SS
A
- ONLY applies to people BELOW full retirement age
- SS withholds benefits if earnings EXCEED a certain level
27
Q
Medicare - Eligiblity
A
- A person must:
- Worked 40 quarters in Medicare-eligible work
- Be 65 years or older, be disabled, or have end-stage renal disease
- Be a US citizen, permanent resident, or legal resident of the US for 5 or more years
28
Q
Medicare - Part A
Benefits
Common out-of-pocket costs
A
- Also known as Hospital Insurance
- Covers:
- Hospital
- Skilled nursing facility care (limited)
- Nursing home care (in some situations)
- Hospice
- Home health services (limited)
- Costs:
- No premium cost if fully insured (40 credits)
- Hospital - coverage per benefit period
- Benefit period - the day the person entered the hospital/skilled nursing facility to 60 days after leaving
- Insured pays:
- Deductible for first 60 days
- Coinsurnace for next 30 days
- Coinsurance for next 60 days (more expensive)
- Full cost after day 150
- Skilled nursing care
- Daily coinsurance for days 21-100
- None for first 20 days
- Home medical services
- 20% coinsurance
29
Q
Medicare - Part B
Benefits
Common out-of-pocket costs
A
- Insurance for:
- Doctor vists
- Outpatient surgery
- Outpatient therapy
- Ambulance
- Durable medical equipment
- Costs:
- Covers 100% of preventive services
- 80% of other services
- Patient covers the remaining 20%
- Has max annual deductible
- Has monthly premium based on when patient signed up and his/her income
- Hold-harmless provision - protects insured from paying premiums that have become unaffordable
30
Q
Medicare - Part C (Medicare Advantage Plans)
Benefits
Common out-of-pocket costs
A
- Offered by private insurance comapnies
- Essentially combines Part A, B, and D into one policy
- May also include benefits not covered by traditional Medicare plans
- Person CANNOT be enrolled in Medicare Advantage plan and also purchase Medigap policy
31
Q
Medigap
A
- Medicare supplemental insurance to cover what A and B DO NOT COVER
- Offered through private insurance companies
- These plans work with Medicare and cover the gaps in Medicare
- Goes from A-plan to N-plan…. with each rising letter providing more benefits
- DOES NOT INCLUDE DRUG COVERAGE
- CANNOT purchase C plans if you get this coverage
32
Q
Part D
A
- Prescription drug benefit
- Monthly premiums, deductible, coinsurnace, and copay
33
Q
Medicare Deadlines
A
- Initial enrollment period
- 7-month period beginning three months before the month of the person’s 65th birthday and ending three months after
- General Enrollment period
- January 1 - March 31 for Medicare
- Special Enrollment Period
- For people over age 65 and losing qualified medical coverage through work/spouse
- Eight-month period beginning from loss of coverage
- Open Enrollment Period
- For Part D and Advantage Plans (C)
- October 15 - December 7
- For Part D and Advantage Plans (C)
34
Q
Penalty for Medicare Late Sign Up
A
- If someone over age 65 does not sign up in time, he/she could face permanent increase in PART B PREMIUM of 10% for each 12-month period when the person could have signed up but didn’t
