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Module II Bootcamp
Advanced Topics
“Non-Covered” Pensions
A pension from work in which Social Security taxes were not withheld
• A Non-Covered Pension
• Retirement or Disability Benefit
• Changes the PIA calculation
• Can’t reduce benefits by more than half of the
pension amount
• Foreign pensions included
Windfall Elimination
Provision (WEP)
• A Non-Covered Pension
• Spousal or Survivor Benefit
• Reduces benefits by 2/3 of pension amount
• Can eliminate the benefit
• Foreign pensions not included
Government Pension
Offset (GPO)
Windfall Elimination Provision Example
Years of
Substantial
Earnings
Percentage
30 or more 90 Percent
29 85 Percent
28 80 Percent
27 75 Percent
26 70 Percent
25 65 Percent
24 60 Percent
23 55 Percent
22 50 Percent
21 45 Percent
20 or less 40 Percent
Allen’s Age: 62
Marital Status: Single
Working Career:
(Teacher) 25 Years
• Did not pay into Social
Security
• Non-Covered Earnings
(Engineer) 18 Years
• Paid into Social Security
• Covered Earnings
Bend Point Portion Multiplier Amount
$0 - $1,024 $1,024 X 90% = $922
$1,025 - $6,172 $3,123 X 32% = $999
>$6,173 $0 X 15% = $0
Primary Insurance Amount (PIA): $1,921
Bend Point Portion Multiplier Amount
$0 - $1,024 $1,024 X 40% = $410
$1,025 - $6,172 $3,123 X 32% = $999
>$6,173 $0 X 15% = $0
Primary Insurance Amount (PIA): $1,409
Government Pension Offset Example
Scenario Amount
Jon Claimed Benefit at Full Retirement Age $3,000
Betty Files for Survivor Benefits at 67 $0
2/3 of Betty’s Pension $3,333
2/3 of Betty’s Pension is Subtracted From Benefit $-333
Total Monthly Benefits $0
Receiving Government Pension: $5,000 Per Month
If Jon Claimed at Age 70: $3,720-3,333= $387 Survivor Benefit
Betty’s Age: 67
Marital Status: Widow
Working Career:
Government Official (40 Years)
Social Security:
Not Enough Credits
Federal Social Security Taxation
Combined Income Formula
The Combined Income Formula determines if and how much of Social Security
benefits may be taxable.
Adjusted Gross Income, AGI (line 7, Form 1040)*
+ 50% of Social Security Income
+ Tax-Exempt Interest
= Combined Income
* Before Social
Security Benefits
Income Thresholds
Once combined income and taxation thresholds have been evaluated to determine if a retiree’s Social Security income may be
taxed, a three-part test is used to determine the actual amount of income that is subject to tax.
 #1 – 85% of Social Security benefits
 #2 – 50% of Social Security benefits
+85% of combined income over the 2nd threshold
 #3 – 50% of combined income over the 1st threshold
+35% of combined income over the 2nd threshold
State Social Security Taxation
Twelve states additionally tax their residents’ Social Security Benefits
• Colorado
• Connecticut
• Kansas
• Minnesota
• Missouri
• Montana
• Nebraska
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia
Social Security Disability Work Requirements
-Requires workers have from 1 ½ to 10 years of work paying into Social Security
-Generally, the same 40 credits as are required for retirement benefits
-Younger workers, however, may qualify with fewer credits
Substantial Lifetime Work Standard & Recent Work
Age Quarters of Coverage Years
24-31 ½ of time since 21 1.5-5
31-42 20 5
44 22 5.5
46 24 6
48 26 6.5
50 28 7
52 30 7.5
54 32 8
56 34 8.5
58 36 9
60 38 9.5
62 or > 40 10
Social Security Disability Medical Requirements
Social Security's Definition of Disability is Very Strict
The inability to engage in any Substantial Gainful Activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death, or which has lasted or can be expected to
last for a continuous period of not less than 12 months.
• AIDS
• Back Injuries
• Cancer
• Coronary Disease
• Loss of Limb
• Psychiatric Disorders
Key Takeaways
• 5 Step Process to determine disability
• Strict disability laws
• Process can take 3-5 months
• Amount is usually equals workers PIA
• Work Incentive Programs
• Children can receive SSI and DAC
Conditions to Review
Medicare Parts
 Medicare Part A is called hospital insurance. This helps pay for room, board, and inpatient care in a hospital or
skilled nursing facility if it follows a hospital stay.
 Medicare Part B is known as medical insurance. Part B helps pay for medical services from doctors and other
health care providers, outpatient care, home health care, durable medical equipment, and some preventive
services.
 Medicare Part C consists of Medicare Advantage plans. These are private insurance plans that replace the
benefits and services covered under Part A and Part B above.
 Medicare Part D consists of prescription drug plans (PDPs) and helps cover the cost of prescription medicines.
AGE Disability Before 65 End Stage Renal Disease
Lou Gehrig’s Disease
The Four Eligibility Criteria
Medicare Premiums
Part A Premiums
• Premium-free if the work requirement is met
• Medicare Part A coverage can be purchased for a premium if the work requirement is not met
Part B Premiums
• Part B does not have a work requirement
• The 2023 standard premium is $164.90.
• Higher modified adjusted gross income = Higher Premium
Part C Premiums
• Most plans have a monthly premium.
• Required to include benefits and services under Part A & B
• Includes benefits to reduce out-of-pocket expenses
Part D Premiums
• Part D deductible is what you pay for your prescription drugs before your plan begins to help
• In 2023, the Medicare Part D deductible cannot be greater than $505, and some plans do not have a deductible.
Medicare Premiums
Medicaid:
a separate state-run program that
provides hospital and medical
coverage for people with low
income. Each state has its own
rules for who is eligible for
Medicaid.
The hold harmless provision:
protects a person from having
their previous year’s Social
Security benefit level reduced by
an increase in the Medicare Part B
premium if criteria is met
There are three opportunities to enroll in Medicare:
First is the initial 7-month enrollment period for those
who retire at or before their 65th birthday.
The second, or special enrollment period, applies to
those still working and receiving healthcare
coverage from their employer or a spouse’s
employer.
The third enrollment period is late enrollment.

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Module II Bootcamp

  • 2. “Non-Covered” Pensions A pension from work in which Social Security taxes were not withheld • A Non-Covered Pension • Retirement or Disability Benefit • Changes the PIA calculation • Can’t reduce benefits by more than half of the pension amount • Foreign pensions included Windfall Elimination Provision (WEP) • A Non-Covered Pension • Spousal or Survivor Benefit • Reduces benefits by 2/3 of pension amount • Can eliminate the benefit • Foreign pensions not included Government Pension Offset (GPO)
  • 3. Windfall Elimination Provision Example Years of Substantial Earnings Percentage 30 or more 90 Percent 29 85 Percent 28 80 Percent 27 75 Percent 26 70 Percent 25 65 Percent 24 60 Percent 23 55 Percent 22 50 Percent 21 45 Percent 20 or less 40 Percent Allen’s Age: 62 Marital Status: Single Working Career: (Teacher) 25 Years • Did not pay into Social Security • Non-Covered Earnings (Engineer) 18 Years • Paid into Social Security • Covered Earnings Bend Point Portion Multiplier Amount $0 - $1,024 $1,024 X 90% = $922 $1,025 - $6,172 $3,123 X 32% = $999 >$6,173 $0 X 15% = $0 Primary Insurance Amount (PIA): $1,921 Bend Point Portion Multiplier Amount $0 - $1,024 $1,024 X 40% = $410 $1,025 - $6,172 $3,123 X 32% = $999 >$6,173 $0 X 15% = $0 Primary Insurance Amount (PIA): $1,409
  • 4. Government Pension Offset Example Scenario Amount Jon Claimed Benefit at Full Retirement Age $3,000 Betty Files for Survivor Benefits at 67 $0 2/3 of Betty’s Pension $3,333 2/3 of Betty’s Pension is Subtracted From Benefit $-333 Total Monthly Benefits $0 Receiving Government Pension: $5,000 Per Month If Jon Claimed at Age 70: $3,720-3,333= $387 Survivor Benefit Betty’s Age: 67 Marital Status: Widow Working Career: Government Official (40 Years) Social Security: Not Enough Credits
  • 5. Federal Social Security Taxation Combined Income Formula The Combined Income Formula determines if and how much of Social Security benefits may be taxable. Adjusted Gross Income, AGI (line 7, Form 1040)* + 50% of Social Security Income + Tax-Exempt Interest = Combined Income * Before Social Security Benefits Income Thresholds Once combined income and taxation thresholds have been evaluated to determine if a retiree’s Social Security income may be taxed, a three-part test is used to determine the actual amount of income that is subject to tax.  #1 – 85% of Social Security benefits  #2 – 50% of Social Security benefits +85% of combined income over the 2nd threshold  #3 – 50% of combined income over the 1st threshold +35% of combined income over the 2nd threshold
  • 6. State Social Security Taxation Twelve states additionally tax their residents’ Social Security Benefits • Colorado • Connecticut • Kansas • Minnesota • Missouri • Montana • Nebraska • New Mexico • Rhode Island • Utah • Vermont • West Virginia
  • 7. Social Security Disability Work Requirements -Requires workers have from 1 ½ to 10 years of work paying into Social Security -Generally, the same 40 credits as are required for retirement benefits -Younger workers, however, may qualify with fewer credits Substantial Lifetime Work Standard & Recent Work Age Quarters of Coverage Years 24-31 ½ of time since 21 1.5-5 31-42 20 5 44 22 5.5 46 24 6 48 26 6.5 50 28 7 52 30 7.5 54 32 8 56 34 8.5 58 36 9 60 38 9.5 62 or > 40 10
  • 8. Social Security Disability Medical Requirements Social Security's Definition of Disability is Very Strict The inability to engage in any Substantial Gainful Activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months. • AIDS • Back Injuries • Cancer • Coronary Disease • Loss of Limb • Psychiatric Disorders Key Takeaways • 5 Step Process to determine disability • Strict disability laws • Process can take 3-5 months • Amount is usually equals workers PIA • Work Incentive Programs • Children can receive SSI and DAC Conditions to Review
  • 9. Medicare Parts  Medicare Part A is called hospital insurance. This helps pay for room, board, and inpatient care in a hospital or skilled nursing facility if it follows a hospital stay.  Medicare Part B is known as medical insurance. Part B helps pay for medical services from doctors and other health care providers, outpatient care, home health care, durable medical equipment, and some preventive services.  Medicare Part C consists of Medicare Advantage plans. These are private insurance plans that replace the benefits and services covered under Part A and Part B above.  Medicare Part D consists of prescription drug plans (PDPs) and helps cover the cost of prescription medicines. AGE Disability Before 65 End Stage Renal Disease Lou Gehrig’s Disease The Four Eligibility Criteria
  • 10. Medicare Premiums Part A Premiums • Premium-free if the work requirement is met • Medicare Part A coverage can be purchased for a premium if the work requirement is not met Part B Premiums • Part B does not have a work requirement • The 2023 standard premium is $164.90. • Higher modified adjusted gross income = Higher Premium Part C Premiums • Most plans have a monthly premium. • Required to include benefits and services under Part A & B • Includes benefits to reduce out-of-pocket expenses Part D Premiums • Part D deductible is what you pay for your prescription drugs before your plan begins to help • In 2023, the Medicare Part D deductible cannot be greater than $505, and some plans do not have a deductible.
  • 11. Medicare Premiums Medicaid: a separate state-run program that provides hospital and medical coverage for people with low income. Each state has its own rules for who is eligible for Medicaid. The hold harmless provision: protects a person from having their previous year’s Social Security benefit level reduced by an increase in the Medicare Part B premium if criteria is met There are three opportunities to enroll in Medicare: First is the initial 7-month enrollment period for those who retire at or before their 65th birthday. The second, or special enrollment period, applies to those still working and receiving healthcare coverage from their employer or a spouse’s employer. The third enrollment period is late enrollment.