Social Security and Medicare

Question 1

Paying Into the System

Answer 1

• social security benefits are paid from the 6.2% tax on each employees wages (matched by employers) and the 12.4% tax on self employment earnings.
• These FICA taxes are imposed on a maximum of $127,000 in wages for 2017.
• 1.45% is paid by both employees and employers on wages for medicare
• employees pay an additional .9% medicare surtax on wages and self-employment income over $200,000

Question 2

Who is not covered by OASDI

Answer 2

• Federal employees hired before 1984
• Railroad Employees
• family employment
• ministers, members of religious orders, and christian science practitioners, only if claiming an exemption
• student nurses
• newspaper delivery persons under the age of 18
• students working for a college or club

Question 3

Family Employment Rules

Answer 3

There is no coverage for the following family employees:

• a child under the age of 18 hired by a parent
• a child 18 to 21 years of age employed by a parent to perform work that is not in the parent’s trade or business
• A person employed by a spouse to perform work that is not in the spouse’s trade or business
• A parent employed by a child to perform work not in the child’s trade or business

Question 4

Eligibility

Answer 4

• to earn one credit, a worker must earn $1,300 in 2017 in covered wages or self-employment income
• a worker can earn a maximum of 4 credits per year.
• earnings not subject to FICA taxes do not count
• workers are eligible once they earn 40 credits.

Question 5

Averaged Indexed Monthly Earnings (AIME)

Answer 5

• the highest 35 years of earnings where FICA taxes were applied are taken and indexed for inflation and then added together.
• the sum of that is divided by 420 (the number of months in 35 years)

Question 6

Primary Insurance Amount (PIA)

Answer 6

• the AIME is multiplied by a reduced percentage to determine the benefit amount.
• If AIME is less than $885, then AIME x 90% = monthly benefit
• If AIME is greater than $885 but less than $5,336, then $796.50 plus 35% of the amount over $885 = monthly benefit
• If AIME is greater than $5,336, then $2,221 plus 15% of the amount over $5,336 = monthly benefit

Question 7

Early Retirement

Answer 7

-benefits are reduced by 5/9 of a percent for every month that a worker begins receiving benefits before full retirement age for the first 36 months prior to retirement.

Question 8

Disability Benefits

Answer 8

• if a client is able to earn $1,170 per month on average in 2017, he or she is considered to be engaging in substantial gainful activity and will not be eligible.
• If disability begins before age 24, six credits earned during the three prior years before becoming disabled are needed.
• If disability begins between ages 24 and 30, credits for half the time between age 21 and the onset of disability are needed
• as you get older, the more credits are needed to qualify.

Question 9

Survivor’s Benefits

Answer 9

• the surviving spouse must be at least 60 years of age or 50 if disabled.
• the surviving spouse will receive 100% of the deceased worker’s PIA if the survivorship benefits begin at the spouse’s full retirement age
• a surviving child is entitled to 75% of the deceased workers PIA. Must be under 18. A child who is over 18 and disabled before age 22 will be eligible after age 18.
• A spouse who is caring for a child under age 16 is entitled to benefits that are 75% of the PIA.

Question 10

Death Benefit

Answer 10

-a death benefit of $225 is payable at the death of the covered worker.

Question 11

Divorced Spouse

Answer 11

-beginning at age 62 they are entitled to 50% of PIA when the marriage lasted at least 10 years and the divorced spouse has not remarried.

Question 12

The Blackout Period

Answer 12

-a surviving spouse will receive benefits until the youngest child reaches age 16, benefits will then cease until the spouse turns age 60 (50 if disabled)

Question 13

Working After Retirement - the Earnings Test

Answer 13

• if full retirement age has been reached then no amount of income will reduce benefits
• if under full retirement age benefits will be reduced by $1 for every $2 by which earned income exceeds $16,920. Reduced $1 for every $3 over $44,880

Question 14

Windfall Elimination and Government Pension Offset (WEP)

Answer 14

-applies to those who earned a pension in a job where no security taxes were paid, but also worked in other jobs long enough to qualify for Social Security/Disability benefits.

Question 15

Medicare Program

Answer 15

• Part A - coverage is for hospitalization
• Part B - doctors services and many other services
• Part C - medicare advantage plan offered by private companies as an HMO or PPO option. It is an alternative to parts A/B
• Part D - provides prescription drug coverage