Social Security Power Point


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  • At the height of the Great Depression, President Roosevelt was able to obtain support for the Social Security Act. Social Security legislation was passed in 1935. At that time, the program was solely a retirement program. The extremely high unemployment rate highlighted the vulnerabilities of older workers in America. During tough economic times, older workers tended to be the last hired, the first fired. The need for a social safety net became more apparent and Social Security Retirement Insurance became a reality. The basic tenets of this social insurance program are to provide: Individual Equity – You earn the benefits you receive. The more you earn, the higher your benefit will be. Social Adequacy – Social Security provides a financial foundation which protects all workers. In 1939, a year before Social Security began paying monthly retirement benefits, the social safety net expanded with the Survivors Insurance program. Again during difficult economic times, the vulnerability of widows(ers) and children became even more apparent. In 1956, the Social Security Disability Insurance Program became law. Then, as now, for most workers in America Social Security is the only comprehensive disability insurance policy that they have. The Social Security program has largely realized its goals. And almost 15 million workers and family members currently receive Social Security disability and survivors insurance benefits.
  • In 1965, Medicare was added to the Social Security legislation. This program is the medical coverage you get when you turn 65 or become disabled. In 1972, the Supplemental Security Income program was created. SSI is a program based on need for those that are 65 or older, blind or disabled. Prior to 1972, each State had its own similar program. Since Social Security had a network of offices across the country and already administered programs based on age or disability, responsibility for SSI was shifted to the Social Security Administration. Although SSI is administered by Social Security, the SSI benefit payments and the administrative costs of running the program come from general tax revenue and not Social Security taxes. In 2003, Medicare Part D legislation was passed, In 2006 Medicare Part D went into effect, helping to meet drug costs for millions of Medicare beneficiaries.
  • This graph is an overview of the number of beneficiaries that we pay. Currently, about one in every six people in America is receiving a Social Security benefit. It can be used to reflect the fact that the majority of our beneficiaries are retired. It also represents the fact that Social Security is more than is a family protection plan (almost 1/3 of the beneficiaries are disabled, dependants of disabled, or survivors).
  • The basic concept of Social Security is that of an intergenerational transfer system: the workers of today pay the benefits of current retirees and other beneficiaries. Currently, an estimated 163 million workers are paying Social Security taxes. Another factor that has a bearing on the balance between workers paying in and beneficiaries receiving checks is life expectancy. In 1940, the first year we paid a retirement check, the overall life expectancy in the U.S. was about age 64. As a matter of fact, in 1940 there was no “early retirement” provision so that workers had to be 65 to receive benefits. Reduced benefits at age 62 did not become effective for women until 1956 and men in 1961. Since people did not live as long and collect benefits, the tax rate was relatively low. The maximum tax from 1937 through 1949 remained at 1% of $3,000, or a maximum tax of $30/year. In the year 2007, a woman who is currently 65 can expect to live to be about 85 on average. The average man who is 65 can expect to live to be about 81 years old.
  • The majority of Social Security income is derived from Social Security taxes. However, a significant amount is derived from interest on the trust fund reserves. At the beginning of 2007, the trust fund balance was $2,035 billion. Currently, beneficiaries with Modified Adjusted Gross Incomes of between $25,000 and $34,000 ($32,000 and $44,000 for couples) pay federal taxes on up to 50% of their benefits. Beneficiaries with Modified Adjusted Gross Incomes above $34,000 ($44,000 for couples) pay taxes on up to 85% of their benefits. The majority of beneficiaries are not affected by the taxation of benefits. Revenues generated by the taxation of benefits are deposited in the Social Security and Medicare trust funds. (source 2007 Trustees Report)
  • By 2017, the OASDI outgo (benefits paid) will exceed the Social Security tax income. The Social Security trust funds (taxes plus trust fund interest) will peak and be sufficient to pay benefits through 2026. Taxes plus trust fund reserve principal will be sufficient to pay benefits after 2026. After 2041 we will only be collecting enough in taxes to fund about 78% of benefits. Adjustments in the program are needed. The sooner the adjustments are made the more modest the changes would need to be. Our responsibility is to help educate the public about what the program is like today, so that they can better participate in the discussions on what the program should look like in the future. Although many options are being discussed, it is important to look closely at the inherent tradeoffs with all options.
  • After 2041, only about 78% of benefits could be paid if no changes are made.
  • Another economic factor that can affect Social Security is the rate of inflation. Social Security will probably be the only source of your retirement income that is tied directly to the Consumer Price Index. This is important information for your pre-retirement planning.
  • This slide is an example of how Social Security benefits being directly tied to the Consumer Price Index offers incredible long-term protection. This slide provides the “givens” for use with the next slide. Percentages refer to percentage of combined retirement income. This assumes an annual inflation rate of 3% per year, as measured by the CPI.
  • This slide clearly shows the long-term value of Social Security benefits when compared to the value of a private pension that provides little or no inflation protection. This assumes an annual inflation rate of 3% per year, as measured by the CPI.
  • This slide provides a comparative chart of life expectancy.
  • Although we have not officially used the phrase “quarters of coverage” since 1978, many workers still refer to credits as quarters. Prior to 1978, a worker earned a quarter of coverage for any calendar quarter in which they earned $50 or more in Social Security wages. Beginning in 1978, wages were reported to Social Security on an annual basis via the W-2 form. We have no idea and it doesn’t matter when in the year the wages were earned. In 2007, when a worker earns $4,000 or more, he or she has earned their 4 credits for the year ($1,000/credit). Since a worker only needs 40 credits throughout his or her working career, it is relatively easy to become insured (vested) for a Social Security Retirement Benefit. In the year 2007, the Maximum Earnings Taxable is $97,500.
  • If a spouse is caring for a child under age 16 of the worker, the spouse could qualify regardless of age. When the youngest child turns 16, the spouse’s benefit will stop, even though the child’s benefit will continue. A divorced spouse could receive a benefit as long as he or she was married at least 10 years. It is possible that more than one spouse could receive a benefit, without penalty or reduction.
  • The increase in full retirement age was the result of the 1983 Amendments. Full retirement age increases apply to all Retirement Benefits and to Survivors Benefits. Although, we at Social Security have always used the term “full” retirement age, you may find that some people now refer to “full retirement age” as “Normal Retirement Age”. The Medicare eligibility age of 65 has not changed. Regardless of your full retirement age, reduced benefits can still be paid as early as age 62.
  • This slide provides an overview of the first step that we use in computing a benefit. We are looking for the highest 35 years during a worker's lifetime of earnings, regardless of when earned. This formula also makes clear how a worker who qualifies for a retirement benefit with just 10 years of work would have a low benefit payment. Since we are looking for their highest 35 years, in this example, we would be adding in 25 zero years. Needless to say, this worker would be receiving a lower benefit. There is, however, no such thing as a minimum benefit.
  • An underlying principal is that Social Security provides a weighted benefit formula that is consistent with the basic tenet of social adequacy. More information on earnings replacement can be obtained from the 2007 Trustees Report.
  • Prior to the 1983 Amendments when workers spent most of their careers in government jobs where they did not pay Social Security taxes (non-covered employment), they received the equal benefits of the weighted benefit formula. These workers, based on their Social Security earnings record, appeared to be low wage earners; primarily because the majority of their wages were not covered for Social Security purposes. These federal, state, or local employees effectively were receiving a windfall from Social Security. The 1983 Amendments rectified this windfall. Since they had their 40 credits, they will continue to be eligible for a Retirement benefit, but their benefit will be computed differently. The benefit formula is identical to the normal computation with the exception of the first level of the formula. Instead of receiving 90% of the first level, they will receive 40%. A simple rule to use to determine if WEP will apply to someone is to ask, “Is any part of your government pension based on wages not covered by Social Security?” If the answer is yes, then WEP will apply. WEP only applies to Retirement and Disability Benefits. Survivor’s Benefits are not affected by WEP. Government employees who may be affected by WEP must be reminded that the benefit estimates that they receive on their Social Security Statement might be in error because the formula used in the estimate computation does not take into consideration WEP. Additionally, when completing a request for a Statement, government workers must be careful not to include on their estimated current or future wages, non-covered wages. WEP applies to the workers benefits. Any auxiliary benefits payable on the worker's record would also be affected.
  • This chart is a simple reflection of the major exception to WEP and its variables. A government worker with 21 to 30 years of significant (substantial) years of Social Security wages will have a different percentage factor used in the first level of their benefit computation.
  • This protects those who have a relatively low non-covered pensions. They have worked in a job where they did not pay into Social Security, but their earnings in that job were very low for most years that they worked in that job. WEP is not designed to reduce the benefits of low wager earners, but those who have worker at moderate or high earnings in a job where they didn’t pay into Social Security as well as having a small Social Security check where the work was just enough to receive a benefit.
  • The Government Pension Offset (GPO) affects people who earned a pension while working in non-covered government employment. Unless a federal worker switched to FERS and worked under FERS for at least 5 years, GPO will affect the amount of the wife’s/husband’s or widow’s(er’s) benefits payable to them. Generally, the concept of spouse’s benefits have the inherent concept of dependency. The notion that a spouse is working in non-covered employment and thereby earning a pension from that employment argues against the notion of dependency. As a result, GPO was passed as part of the 1983 Amendments. The fact sheet, "Government Pension Offset," provides a detailed overview of GPO and all of the exceptions. Understanding WEP and GPO by themselves is not a problem. Many people become confused when they mix the principles of each together. It is possible for a worker to be affected by WEP on their own work record due to their government pension and to have any potential spousal benefit payable to them affected by GPO.
  • In the year that individuals reach full retirement age, they are subject to a different annual earnings test. In that year, for the months prior to attaining full retirement age, individuals can earn up to $36,120/year ($3,010/mo.) without affecting their benefits. For every $3 in earnings above the limit, one dollar in benefits will be withheld. At full retirement age, there is no limit on the amount beneficiaries can earn without affecting their benefit payments. The annual retirement earnings test exempt amounts are increased annually by the average increase in wages in the U.S.
  • This slide allows us to remind all potential applicants that we need to see the appropriate proofs when they actually file their claims.
  • You may wish to explain how a widow or widower can receive a survivors benefit at age 60 and then switch to a benefit on his or her own work record at age 62. Or, how a widow or widower could receive a reduced survivors benefit at age 60 and then file for an unreduced benefit on his or her own work record at full retirement age. Regardless of the change in full retirement age, a widow(er) can still receive 71-1/2% at age 60
  • Although parents’ benefits are included, the number of parent beneficiaries is negligible. The description of eligibility for the LSDP is rather direct. This could be used as an opportunity to address the misleading advertising used by some insurance companies that imply that the only benefit payable is the LSDP, without regard to the monthly widow’s(er’s) benefits.
  • The actual disability definition makes the clear distinction between SSA’s disability requirements compared to other disability programs, such as Veterans and Workman’s Compensation.
  • The discussion of factors of entitlement is rather direct. SSA’s disability definition is based on your medical condition and the fact that you are not expected to be able to do any work for at least 12 months or your condition is terminal. This work determination is based on your age, education and work experience. For people that pay into Medicare only (e.g., CSRS employees), and not Social Security, it is important to remember that they should file for a Social Security disability decision, since they could become eligible for Medicare 25 months after we otherwise could have paid them a cash benefit. After becoming eligible for a disability benefit, the law requires us to review the continuing disability (CDRs) generally every 3 to 7 years, depending on the severity of the disability.
  • The children’s category is offered here as in the Retirement and Survivors Benefits Sections.
  • You may wish to remind your audience that although the full retirement age has been increased above age 65, Medicare eligibility is still age 65.
  • The Initial Enrollment Period starts 3 months before the month that you turn age 65 and extends 3 months past the month that you turn 65. If you are not receiving benefits, you should inquire about filing for Medicare 3 months prior to turning age 65 so that your coverage can start the month you turn 65. If you are receiving benefits, you will receive your Medicare card generally about a month before turning age 65, reflecting your Part A and Part B coverage (most people choose Part B, even though it's optional). The Special Enrollment Period is for people (and their spouses) who continue to work past age 65. Since Medicare pays second after their employer group health plan pays first, they are not required to file for Part B. Since Medicare pays second there may be no need for Part B coverage. It is extremely important for workers to check with their employer group health plan for specific guidance. For this reason, they are offered a special period in which to file for Medicare. As a general rule, we can recommend that people file for Part A 3 months prior to turning age 65, and then on the day they stop working call SSA to file for Part B. The General Enrollment Period is for those people who missed their Initial or Special Enrollment Periods. The window to file is January to March with coverage not beginning until July. Anyone filing in the General Enrollment Period will be assessed a 10% penalty for each year after the Initial period.
  • You may wish to remind your audience that there is no monthly premium for Part A if they are insured for retirement benefits. Many people question the need to file for Part B of Medicare. They should be reminded that their health insurance when they retire will pay only after Medicare pays. Many supplemental plans actually require people to file for Part B. The Medicare premium that beneficiaries pay represents 1/4 of the actual cost; the federal government covers the balance of the cost. Part D Medicare Prescription Drug Plan covers a major portion of prescription drug costs for Medicare beneficiaries. Average monthly premium $27.93.
  • It is important to remind all people over the age of 62 to contact us before January about filing for benefits. Since there is no retroactivity, if “charge off” months are involved, they may have to file in January, even if they plan to stop working some months after January. Based on their estimate of earnings, we will be able to advise them exactly when they should file. All new applicants will be paid their benefit on the 2nd, 3rd, or 4th Wednesday of the month, depending on the number holder’s birthday. Social Security beneficiaries who retire abroad or who receive both Social Security and Supplemental Security Income (SSI) payments will receive their Social Security payments on the third of each month, as under prior practice.
  • Depending on your audience, you may wish to briefly describe the quick calculator, online calculator and the detailed estimate. What You Can Do Online @ Apply for Social Security retirement/spouse’s benefits Apply for Social Security disability benefits Apply for extra help with your Medicare prescription drug costs Check the status of your online application Find out what benefits you can apply for Find out if you can get extra help with your Medicare prescription drug costs Use our benefit planners to calculate your retirement, disability and survivors benefits Request a Social Security Statement Change your address or telephone number Get a replacement Medicare card Request a Proof of Income letter Get a Form 1099/1042S—Social Security Benefit Statement Get a password Check your information and benefits Change your address or telephone number Start or change direct deposit
  • This slide can serve as an introduction for the Statement .
  • This can be used to reinforce the fact that Social Security is more than retirement. You can also use this slide to remind your audience that the Social Security estimates are all based on reported wages.
  • This slide is offered as a summary piece to your presentation
  • Social Security Power Point

    1. 1. Social Security Benefits America
    2. 2. Some Housekeeping Notes
    3. 3. <ul><li>You may wish to do additional research at our website about how Social Security benefits are affected by non-covered pensions: </li></ul><ul><li> . </li></ul>
    4. 6. <ul><li>Frequently Asked Questions about how Social Security benefits are affected by </li></ul><ul><li>non-covered pensions are available by clicking on “More” in the left hand column </li></ul><ul><li>under Windfall Elimination Provision at </li></ul><ul><li> . </li></ul><ul><li>2 calculators to compute how your non-covered pension will affect your benefit are available at: </li></ul><ul><li>ww </li></ul>
    5. 7. <ul><li> </li></ul><ul><li>Information about 218 agreements and </li></ul><ul><li>Coverage can be answered by the State </li></ul><ul><li>Social Administrator: Richard Beckstead </li></ul>
    6. 8. 1935 Retirement Insurance History - Social Security’s Programs 1956 Disability Insurance 1939 Survivors Insurance
    7. 9. Other Programs 1965 Medicare 2003 Medicare Part D
    8. 10. 50 million people Who Gets Benefits from Social Security? 31.5 million Retired Workers 2.9 million Dependents 7.1 million Disabled Workers, 1.8 million Dependents 4.6 million Widows/ Widowers 1.9 million Children of Deceased Workers 2/2008
    9. 11. Payments to Beneficiaries Workers & Employers Who Pays for Social Security?
    10. 12. Where Does the Money Come From? Payroll Tax 84% Trust Fund Interest 14% Taxation of Benefits 2% Social Security Trust Fund 2008
    11. 13. In 2016, Social Security Will Begin Paying More in Benefits than is Collected in Taxes
    12. 14. In 2016, Social Security Will Begin Paying More in Benefits than is Collected in Taxes At exhaustion in 2036, only about 78% of benefits could be paid.
    13. 15. Social Security Cost-of-Living Adjustments Effective Date Amount June 1975 8% June 1976 6.4% June 1977 5.9% June 1978 6.5% June 1979 9.9% June 1980 14.3% June 1981 11.2% June 1982 7.4% Dec 1983 3.5% Dec 1984 3.5% Dec 1985 3.1% Dec 1986 1.3% Dec 1987 4.2% Dec 1988 4% Dec 1989 4.7% Dec 1990 5.4% Dec 1991 3.7% Effective Date Amount Dec 1992 3% Dec 1993 2.6% Dec 1994 2.8% Dec 1995 2.6% Dec 1996 2.9% Dec 1997 2.1% Dec 1998 1.3% Dec 1999 2.5% Dec 2000 3.5% Dec 2001 2.6% Dec 2002 1.4% Dec 2003 2.1% Dec 2004 2.7% Dec 2005 4.1% Dec 2006 3.3% Dec 2007 2.3% Dec 2008 5.8%
    14. 16. Example: Worker with average pre-retirement income of $ 30,000 (Retiring at age 66 in 2009) 1st Year of Retirement Pension $ 13,000/ 50% Social Security $ 13,000/50% Inflation 3% per year Value of Inflation Protection
    15. 17. Value of Inflation Protection example continued: Worker with average pre-retirement income of $ 30,000 5 th Year of Retirement Pension $ 13,000/47% Social Security $ 14,632/53% 10 th Year of Retirement Pension $ 13,000/43% Social Security $ 16,962/57% 20 th Year of Retirement Pension $ 13,000/36% Social Security $ 22,796/64%
    16. 18. Life Expectancy for Those Age 65 Today Men Women U.S. Population 81 85 White 80 84 African Americans 79 83 Hispanic 85 88 Asian 84 88 American Indians 84 88
    17. 19. You Need to Work to Earn Social Security Credits <ul><li>Each $ 1,090 in earnings </li></ul><ul><li>gives you one credit </li></ul><ul><li>You can earn a maximum </li></ul><ul><li>of 4 credits per year </li></ul><ul><li>Example: To earn 4 credits in 2009, you must earn at least $ 4,360. Earning 40 credits throughout your working life will qualify you for a retirement benefit. </li></ul>
    18. 20. Your Age When You Retire Affects Your Benefits <ul><li>If You’re a Worker and Retire </li></ul><ul><ul><li>At age 62, you get a lower monthly payment permanently </li></ul></ul><ul><ul><li>At your full retirement age, you get your full benefit </li></ul></ul><ul><ul><li>You get an even higher monthly payment if you work past your full retirement age </li></ul></ul>
    19. 21. In Addition to the Retiree, Who Else Can Get Benefits? <ul><li>Your Spouse </li></ul><ul><li>At age 62 </li></ul><ul><li>At any age if caring for child under 16 </li></ul><ul><li>or disabled </li></ul><ul><li>Divorced spouses may qualify </li></ul><ul><li>Your Child </li></ul><ul><li>Not married under 18 </li></ul><ul><li>(under 19 if still in high school) </li></ul><ul><li>Not married and disabled before age 22 </li></ul>
    20. 22. Full Retirement Age Year of Birth Full Retirement Age 1937 or earlier 65 1938 65 & 2 months 1939 65 & 4 months 1940 65 & 6 months 1941 65 & 8 months 1942 65 & 10 months 1943 – 1954 66 1955 66 & 2 months 1956 66 & 4 months 1957 66 & 6 months 1958 66 & 8 months 1959 66 & 10 months 1960 or later 67
    21. 23. How Social Security Determines Your Benefit Social Security benefits are based on earnings Step 1 Your wages are adjusted for changes in wage levels Step 2 Find the monthly average of your 35 highest earnings years Step 3 Result is “average indexed monthly earnings”
    22. 24. If your average monthly earnings are = $ 5,200 Then your monthly benefit would be = $ 1974 Average Monthly Earnings $ 5,200 90% of First $ 744 = $ 670 32% of Earnings over $ 744 through $ 4,483 $ 3,739 = $ 1,196 ( $ 4,483- $ 744= $ 3,739) 15% of Earnings over $ 4,483 $ 717 = $ 108 ( $ 5,200- $ 4,483= $ 717) $ 5,200 $ 1974 Retirement Benefit Computation Example
    23. 25. What You Can Expect at Full Retirement Age % of Earnings Low Earner Average Earner High Earner 56% 41% 34%
    24. 26. Two Provisions Affecting Benefits <ul><li>WEP – Reduces Your Own Benefit </li></ul><ul><li>GPO – Reduces Any Benefit You Might Be </li></ul><ul><li>Due on Your Spouse’s Social Security </li></ul><ul><li>Record </li></ul><ul><li>Understanding Why These Laws Were Enacted Helps Understand How They Work </li></ul>
    25. 27. Points to Remember <ul><li>If you have 40 work credits, you will be eligible for a monthly Social Security retirement benefit </li></ul><ul><li>If you have paid Social Security taxes on 30 or more “substantial” years of earnings, your benefit will not be reduced </li></ul>
    26. 28. If any part of your government pension is based on work not covered by Social Security, you may be affected by the Windfall Elimination Provision. Windfall Elimination Provision
    27. 29. What’s Social About Social Security? <ul><li>One goal of Social Security is to raise the standard of income for lower income workers </li></ul>
    28. 30. How Do We Do This? <ul><li>A weighted benefit formula </li></ul><ul><li>A lower income worker receives a higher rate of return </li></ul>
    29. 31. If your average monthly earnings are = $ 5,200 Then your monthly benefit would be = $ 1,974 Average Monthly Earnings $ 5,200 90% of First $ 744 = $ 670 32% of Earnings over $ 744 through $ 4,483 $ 3,739 = $ 1,196 ( $ 4,483- $ 744= $ 3739) 15% of Earnings over $ 4,483 $717 = $ 108 ( $ 5,200- $ 4,483=$717) $ 5,200 $ 1,974 Computing Your Benefit
    30. 32. Function of Weighted Formula <ul><li>The formula gives proportionately higher </li></ul><ul><li>benefits to a worker with a low lifetime earnings. </li></ul><ul><li>A worker with a substantial period of non- </li></ul><ul><li>covered work during his lifetime appears to have </li></ul><ul><li>lower lifetime earnings than he actually does. </li></ul><ul><li>By adjusting the formula, WEP prevents workers </li></ul><ul><li>who receive a public pension based on </li></ul><ul><li>noncovered work from receiving an unintended </li></ul><ul><li>advantage from the formula. </li></ul>
    31. 33. Windfall Elimination Provision (WEP) - 2009 Normal Computation WEP Computation 90% of the First $ 744 40% of the First $ 744 32% of the Next $ 3739 32% of the Next $ 3739 15% of the Remainder 15% of the Remainder
    32. 34. Windfall Elimination Provision <ul><li>The modified formula applies to you </li></ul><ul><li>if you reach 62 after 1985 and first </li></ul><ul><li>become eligible after 1985 for a </li></ul><ul><li>monthly pension based in whole or in </li></ul><ul><li>part on work where you did not pay </li></ul><ul><li>Social Security taxes. </li></ul>
    33. 35. Exception to the Windfall Elimination Provision % of First Factor Years of Coverage in Benefit Formula 30 or more 90 29 85 28 80 27 75 26 70 25 65 24 60 23 55 22 50 21 45 20 or less 40
    34. 36. Year Substantial Earnings 1937-50 $900 1951-54 $900 1955-58 $1,050 1959-65 $1,200 1966-67 $1,650 1968-71 $1,950 1972 $2,250 1973 $2,700 1974 $3,300
    35. 37. 1975 $3,525 1976 $3,825 1977 $4,125 1978 $4,425 1979 $4,725 1980 $5,100 1981 $5,550 1982 $6,075 1983 $6,675 1984 $7,050
    36. 38. 1985 $7,425 1986 $7,785 1987 $8,175 1988 $8,400 1989 $8,925 1990 $9,525 1991 $9,900 1992 $10,350 1993 $10,725 1994 $11,250
    37. 39. 1995 $11,325 1996 $11,625 1997 $12,150 1998 $12,675 1999 $13,425 2000 $14,175 2001 $14,925 2002 $15,750 2003 $16,125 2004 $16,275
    38. 40. 2005 $16,725 2006 $17,475 2007 $18,150 2008 $18,975 2009 $19,800
    39. 41. Where to Find the Chart <ul><li>Our Electronic Fact Sheet – Windfall Elimination Provision </li></ul><ul><li> </li></ul>
    40. 42. Modified Formula $744 $744 X 90% X 40% $670 $298 $372
    41. 43. Largest Amount of Reduction in 2009 <ul><li>The greatest amount of reduction in the Social </li></ul><ul><li>Security check if you are 62 in 2009 will be </li></ul><ul><li>$372 per month </li></ul>
    42. 44. WEP Guarantee <ul><li>The WEP Guarantee limits </li></ul><ul><li>reductions in the Social </li></ul><ul><li>Security check to no more than ½ </li></ul><ul><li>the amount of the non- covered </li></ul><ul><li>government pension. </li></ul><ul><li>The guarantee helps government workers </li></ul><ul><li>who had low earnings on their government </li></ul><ul><li>job. </li></ul>
    43. 45. Pension Based on Covered and Non-Covered Earnings <ul><li>If the non-covered pension is based on both covered and non-covered service, the amount to be used is calculated by prorating the pension to the number of non-covered service months. </li></ul><ul><li>The WEP guarantee amount is compared to the modified formula amount. </li></ul><ul><li>The smaller reduction applies. </li></ul>
    44. 46. Prorating the Pension <ul><li>Pension amount Multilpied by months of </li></ul><ul><li>non-covered work Divided by total months </li></ul><ul><li>of work used to compute the pension </li></ul><ul><li> </li></ul><ul><li>f/subc hapterlisthapterlist!openview&res </li></ul><ul><li>tirctedcategory=3006 </li></ul>
    45. 47. 401(k) and WEP <ul><li>WEP is applied to the payments received from </li></ul><ul><li>defined contribution plans (e.g. 401 (k), 403(b), or 457 plans) based on non-covered employment if the plan is the PRIMARY retirement plan. </li></ul><ul><li>If the plan is a secondary plan, WEP applies only if funds contain employer contributions. </li></ul><ul><li>Payments from optional or voluntary savings plan not subject to WEP. </li></ul>
    46. 48. Example <ul><li>Jake Oldham, born on 2/10/1947 has been receiving a non-covered pension since 1/04. In 3/09 he filed for Social Security retirement benefits. His gross non-covered pension amount is $2000 based on his work for the government from 1/76 through 12/03 (336 months). After averaging together his highest 35 years of earnings, his Average Indexed Monthly Earnings provides a monthly amount of $1000. </li></ul>
    47. 49. Example Continued <ul><li>He has 17 years of “substantial” Social Security earnings. </li></ul><ul><li>After the Average Indexed Monthly Earnings figure is put into the replacement formula, his full benefit amount would be $751.00. </li></ul><ul><li>After using the chart of “substantial” earnings, Jake has 20 or fewer years of substantial earnings, so he will only receive 40% of the first $744 in the formula, not the standard 90%. </li></ul>
    48. 50. Let’s Do The Math <ul><li>Step 1 744 x .40 = 297.60 </li></ul><ul><li>Step 2 1000 – 744 = 256.00 </li></ul><ul><li>Step 3 256.00 x .32 = 81.92 </li></ul><ul><li>Step 4 297.60 + 81.92 = 379.50 </li></ul><ul><li>Step 5 Round Down to $379.00 </li></ul><ul><li>751 </li></ul><ul><li>- 372 </li></ul><ul><li>379 </li></ul>Greatest Amount of WEP Reduction in 2009
    49. 51. Between 20 and 29 Years of Substantial Earnings <ul><li>Let’s say Jake Oldham has 23 years of “substantial” earnings instead of 17. </li></ul><ul><li>Step 1 744 x .55= 409.20 </li></ul><ul><li>Step 2 1000 – 744 = 256.00 </li></ul><ul><li>Step 3 256 x .32 = 81.92 </li></ul><ul><li>Step 4 409.20 + 81.92 = 491.12 </li></ul><ul><li>Step 5 Round Down to $491.00 </li></ul><ul><li>Because he had 6 more years of “substantial” earnings </li></ul><ul><li>in this example, he receives $112 per month more each </li></ul><ul><li>month. </li></ul>
    50. 52. WEP Guarantee <ul><li>Figured by comparing the regular Social Security amount and reducing it by half of the non-covered pension </li></ul><ul><li>If this amount is higher than the amount obtained by using the “modified” amount computed in the previous example, the higher amount is paid. </li></ul>
    51. 53. Guarantee Example <ul><li>June Fisher’s regular Social Security retirement amount is $540.00 </li></ul><ul><li>Her non-covered pension is $900 </li></ul><ul><li>Under the guarantee, her Social Security cannot be reduced more than $450.00 (1/2 of her non-covered pension) </li></ul><ul><li>Social Security compares whether the “modified” formula or the “guarantee” provides the higher benefit </li></ul>
    52. 54. Type of Benefits Affected by WEP <ul><li>Social Security Retirement </li></ul><ul><li>Social Security Disability </li></ul>
    53. 55. Will WEP Affect Me? <ul><li>1. Is the type of benefit you will be filing for either Social Security retirement or disability benefits? </li></ul><ul><li>If Yes, Go to Step 2 </li></ul><ul><li>If No, WEP does not apply (WEP does </li></ul><ul><li>not apply to survivors benefits) </li></ul>
    54. 56. Continued <ul><li>2. Will you first be eligible after 1985 for the Social Security retirement or disability benefit? </li></ul><ul><li>If Yes, go to step 3 </li></ul><ul><li>If No, WEP does not apply (Those eligible for Social Security retirement or disability before 1985 will not be subject to WEP) </li></ul>
    55. 57. Continued <ul><li>3. Will you be entitled to a pension that is based in whole or in part on non-covered employment after 1956? </li></ul><ul><li>If Yes, go to Step 4 </li></ul><ul><li>If No, WEP does not apply (WEP would not apply to pensions based on earnings before 1956) </li></ul>
    56. 58. Continued <ul><li>Using the “substantial” earnings table and your Social Security Statement, count up how many years of “substantial” earnings you have. Do you have 30 or more years? </li></ul><ul><li>If Yes, WEP does not apply </li></ul><ul><li>If No, WEP will apply. Use the chart that shows what the percentage that will be used will be (e.g. 29 years – 85%, 24 years – 60%, 20 years or less 40%) in your computation of Social Security retirement or disability benefits. </li></ul>
    57. 59. Spouse’s Benefits
    58. 60. Government Pension Offset (GPO) If you receive a government pension based on work not covered by Social Security, your Social Security spouse’s or widow(er)’s benefits may be reduced.
    59. 61. GPO & Spouse’s Benefits <ul><li>Spouses benefits were intended to provide income for spouses who had little or no income. </li></ul><ul><li>If a spouse has worked and is insured for their own Social Security retirement benefit, they receive the difference between their own retirement amount and one-half of the spouse’s amount. </li></ul>
    60. 62. Spouse’s Benefits <ul><li>Before 1977, a spouse could have worked in non-covered work for a state, Federal or local government and yet receive a full Social Security spouse’s benefit. </li></ul><ul><li>Effective 12/1/77, an offset was introduced so that government workers entitled to Social Security spouse’s benefits but had their own government pensions had those benefits considered when Social Security computed their spouse’s benefits. </li></ul>
    61. 63. Purpose of GPO <ul><li>To limit the level of payment of spouse’s benefits to those who are not completely dependent upon the worker. </li></ul><ul><li>Congress believed that a person who worked long enough to become entitled to a government pension would not be completely dependent on the worker. </li></ul>
    62. 64. Example: $ 900 of government pension 2/3 = $ 600 Social Security spouse’s benefits = $ 500 No cash benefit payable by Social Security Government Pension Offset (GPO) Spouse’s Benefits 2/3 of amount of government pension will be used to reduce the Social Security spouse’s benefits
    63. 65. Comparison <ul><li>Diane (No Govt Work) Mary (GPO) </li></ul><ul><li>Own SSA Benefit $300 Govt Pension $300 </li></ul><ul><li>Spouse Benefit $600 SSA Spouse Ben </li></ul><ul><li>$600 </li></ul><ul><li>$600 - $300 = $300 $300 pension = </li></ul><ul><li>$300 Spouse + $300 Own= $300 X .6667= </li></ul><ul><li>$600 Total $200 Offset </li></ul><ul><li>$600 - $200 = $400 </li></ul><ul><li>$300 Govt Pension + </li></ul><ul><li>$400 SSA Spouse= </li></ul><ul><li>$700 Total </li></ul>
    64. 66. Exceptions to GPO <ul><li>Filed for Social Security benefits prior to April 1, 2004, or retired prior to July 1, 2004, and whose government pension is based on a job where he was paying Social Security taxes on the last day of employment. </li></ul><ul><li>After April 1, 2004 receives a government pension and had been covered under both Social Security and the government system throughout the last 60 months of service. </li></ul><ul><li>Spouse receiving a government pension not based on own work </li></ul>
    65. 67. What Type of Social Security Benefits Are Affected by GPO? <ul><li>Spouses </li></ul><ul><li>Widows </li></ul><ul><li>Widowers </li></ul>GPO Calculator:
    66. 68. FAQS About WEP & GPO <ul><li>Q: Are dependents affected by WEP? </li></ul><ul><li>A: Since dependents benefits are derived from the worker’s benefit, WEP affects dependents benefits. </li></ul><ul><li>Example: If John had 10 years of substantial coverage, his retirement amount would be $751. Since he has less than 20 years, his amount will be $379. His spouse would receive half of $379 not $751. </li></ul>
    67. 69. FAQS Continued <ul><li>Q: What is the difference between WEP & GPO? </li></ul><ul><li>A: Both affect people with pensions from noncovered employment. WEP affects the retirement or disability benefits of a person who receives a pension from noncovered work. A modified formula is used. If WEP applies, benefits are lower, but never totally eliminated. </li></ul><ul><li>GPO affects the Social Security spouse’s benefits of a person who receives a pension from noncovered work. The Social Security payment is reduced by 2/3 of the government check. Under GPO, it is possible for the benefit to be totally eliminated. </li></ul>
    68. 70. FAQS Continued <ul><li>Q: I have heard that if I am exempt from GPO, I will also be exempt from WEP. Is this correct? </li></ul><ul><li>A: No. GPO applies to Social Security spouses and survivors benefits and WEP applies to the worker’s Social Security retirement benefit. </li></ul>
    69. 71. FAQS Continued <ul><li>Q: Are the benefit estimates on my Social Security Statement accurate for government workers? </li></ul><ul><li>A: Since Social Security cannot know if you are eligible for a pension from non-covered earnings, the estimates are not adjusted to consider WEP. Use the WEP calculator to obtain an accurate estimate. </li></ul>
    70. 72. FAQS Continued <ul><li>Q: Is my Social Security retirement or </li></ul><ul><li>disability benefit reduced if my spouse receives a pension based on work not covered under Social Security? </li></ul><ul><li>A: No, your own retirement or disability check won’t be reduced because of her noncovered pension, but if you receive spouse’s benefits from her benefit record , your spouse’s benefit could be affected. </li></ul>
    71. 73. FAQS Continued <ul><li>Q: If I withdraw my contributions from the noncovered pension system, would I still be subject to WEP? </li></ul><ul><li>A: Yes. The withdrawal of contributions would be considered as a lump-sum payment and be pro-rated on a monthly basis. Only if you withdrawn all of your contributions and relinquished all rights to the pension would WEP be eliminated. </li></ul>
    72. 74. FAQS Continued <ul><li>Q: If I withdraw my contributions from the noncovered pension system and give up all rights to the pension , can I avoid GPO? </li></ul><ul><li>A: Yes. If you withdraw your contributions and give up all rights to the noncovered pension before you begin receiving payments, you can avoid GPO. </li></ul>
    73. 75. FAQS Continued <ul><li>Q: Is my Social Security survivor’s benefit </li></ul><ul><li>affected if I also receive a pension based on my deceased spouse’s noncovered work? </li></ul><ul><li>A: A pension you receive based on your deceased spouse’s noncovered work will not affect your Social Security survivor’s benefit. However, if you are entitled to a widow’s or widower’s benefit under Social Security and you are also entitled to a government pension based on your own uncovered earnings, the government pension offset will reduce your Social Security survivors benefit by up to 2/3 of your government pension. </li></ul>
    74. 76. You Can Work & Still Receive Benefits You Can If You Make More, If You Are Make Up To Some Benefits Will Be Withheld Under Full Retirement Age $ 14,160/yr. ( $ 1,180/mo.) $ 1 for every $ 2 The Year Full Retirement Age is Reached $ 37,680/yr. ($3,140/mo.) $ 1 for every $ 3 Month of Full Retirement Age and Above No Limit No Limit
    75. 77. What Will You Need When Applying for Your Social Security Benefits? <ul><li>Social Security number for each applicant </li></ul><ul><li>Proof of age (birth certificate) </li></ul><ul><li>Latest W-2 or self-employment tax return </li></ul><ul><li>Earnings estimate </li></ul><ul><li>Bank information for direct deposit </li></ul><ul><li>Information about marriages/divorces </li></ul><ul><li>Information about military or railroad service </li></ul>
    76. 78. Who Can Get Survivors Benefits? <ul><li>Widow or Widower: </li></ul><ul><li>Reduced benefits at age 60 </li></ul><ul><li>If disabled as early as age 50 </li></ul><ul><li>At any age if caring for child under 16 or disabled </li></ul><ul><li>Divorced widows/widowers may qualify </li></ul><ul><li>Your Child if: </li></ul><ul><li>Not married under age 18 (under 19 if still in high school) </li></ul><ul><li>Not married and disabled before age 22 </li></ul>
    77. 79. <ul><li>Parents </li></ul><ul><li>Age 62 and was receiving at </li></ul><ul><li>least one-half support from </li></ul><ul><li>deceased worker </li></ul><ul><li>Lump Sum Death Payment ( $ 255) </li></ul><ul><li>Most spouses or children </li></ul>Other Survivors Benefits
    78. 80. Social Security’s Disability Definition: A medical condition preventing substantial work for at least 12 months, or expected to result in death. The determination also considers age, education & work experience.
    79. 81. Who Can Get Disability Benefits? <ul><li>Worker </li></ul><ul><li>Must have paid into Social Security five out of last 10 years </li></ul><ul><li>Spouse </li></ul><ul><li>At age 62 </li></ul><ul><li>At any age if caring for child </li></ul><ul><li>under 16 or disabled </li></ul><ul><li>Divorced spouses may qualify </li></ul>
    80. 82. Who Can Get Disability Benefits? <ul><li>Child </li></ul><ul><li>Not married under age 18 </li></ul><ul><li>(under 19 if still in high school) </li></ul><ul><li>Not married and disabled </li></ul><ul><li>before age 22 </li></ul>
    81. 83. 65 & older -or- Receiving Social Security disability benefits at least 24 months -or- Permanent kidney failure -or- Amyotrophic Lateral Sclerosis (ALS) Who Can Get Medicare?
    82. 84. When Can I Sign Up for Medicare? <ul><li>Medicare Enrollment Periods: </li></ul><ul><ul><li>Initial - at age 65 </li></ul></ul><ul><ul><li>Special - if still working </li></ul></ul><ul><ul><li>General - January-March </li></ul></ul>
    83. 85. Medicare Coverage <ul><li>Part A Hospital Insurance </li></ul><ul><ul><ul><li>Covers most inpatient hospital expenses. </li></ul></ul></ul><ul><li>2009 Deductible $ 1,068 </li></ul><ul><li>Part B Supplementary Medical Insurance </li></ul><ul><ul><ul><li>Covers 80% doctor bills & other outpatient medical expenses after 1 st $ 135 in approved charges. </li></ul></ul></ul><ul><ul><ul><li>2009 Monthly Premium $ 96.40 </li></ul></ul></ul><ul><li>Part D Medicare Prescription Drug Plan </li></ul><ul><ul><ul><li>Covers a major portion of prescription drug costs </li></ul></ul></ul><ul><ul><ul><li>for Medicare beneficiaries. </li></ul></ul></ul><ul><ul><ul><li>2009 average Monthly Premium $ 37.00 </li></ul></ul></ul>
    84. 86. How Will the Prescription Drug Plan Affect You? <ul><li>You will pay the first $ 295 (called an “annual deductible”). </li></ul><ul><li>Medicare will pay 75% of costs above $ 295 up to $ 2,700 in drug spending. You will pay only 25% of these costs. </li></ul><ul><li>You will pay 100% of the drug costs above $ 2,700 until you reach $ 4,350 in out-of-pocket spending. Your out-of- </li></ul><ul><li>pocket spending includes the annual deductible and </li></ul><ul><li>prescription co-payments. It does not include the monthly </li></ul><ul><li>premiums you pay for your drug plan. </li></ul><ul><li>Medicare will pay about 95% of the costs after you have spent $ 4,350. </li></ul>
    85. 87. Extra Help Could Further Reduce Medicare Prescription Drug Costs Extra help is available for low income beneficiaries to pay for part of the Medicare Part D monthly premiums, annual deductibles and prescription co-payments. The extra help could be worth more than $ 3,600 per year. Go online to to apply for extra help.
    86. 88. For More Medicare Information 1-800-MEDICARE (1-800-633-4227) TTY 1-877-486-2048
    87. 89. What Should You Do to Prepare for Your Retirement? Get estimates of benefits using different retirement ages and wage estimates
    88. 90. Social Security’s Online Services <ul><li>Retirement & Disability Applications </li></ul><ul><li>Apply for Extra Help </li></ul><ul><li>Retirement/Survivors/Disability Planner </li></ul><ul><li>Request a Statement </li></ul><ul><li>Change of Address </li></ul><ul><li>Medicare Card Replacements </li></ul><ul><li>Request a Benefit Verification Letter </li></ul><ul><li>Start or Change Direct Deposit </li></ul>
    89. 97. The Social Security Statement
    90. 98. The Social Security Statement <ul><li>The Statement provides you with estimates of monthly Social Security retirement, disability and survivors benefits </li></ul><ul><li>The Statement allows you to check your earnings history for accuracy </li></ul>
    91. 99. The Social Security Statement