Social Security Seminar

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Social Security Seminar

• For California
• Public Employees

Bob Hartnett, Public Affairs Specialist
Social Security Administration
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20 minutes from now, youll know the answers

• Will it even be there?
• How do I qualify for Social Security?
• How are benefits figured?
• What about Medicare?

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And those darn offsets!!!!

• One reduces your own benefit
• The other offsets any benefits you might be due
  on your spouses Social Security record
• And I know you wont believe this, but Im going
  to try to convince you they are fair!!

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SOCIAL SECURITYS IMPACT ON AMERICA

• IT HAS MADE AN ENORMOUS DIFFERENCE IN THE LIVES
  OF MILLIONS OF AMERICANS.
• IT HAS ALLOWED FAMILIES TO STAY TOGETHER AFTER
  TIMES OF CRISIS.
• IT HAS RAISED THE STANDARD OF LIVING FOR LOWER
  INCOME AMERICANS.

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Will it even be there?

• Of course! A better question to ask How will
  Social Security change?
• Major Social Security reforms will be long-range
  and phased in over decades (i.e. affect young
  rather than old)
• Reforms may include universal coverage

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Low Income Americans Get A Higher Replacement Rate

• Donald Trump will collect Social Security too,
  but only about 24 of taxed earnings.
• His chauffeur will get a benefit thats closer to
  90 of his taxed earnings.
• You and I (and every other average American) will
  get about 40 of taxed earnings.

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Will you get something?

• Must have 40 credits (formerly called quarters)
• That means roughly 10 years of Social Security
  taxed work (not consecutive)
• In 2005, earn 1 credit for each 920 earned, but
  no more than 4/year

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HOW YOUR RETIREMENT BENEFIT IS COMPUTED

• STEP 1
• Wages are adjusted for inflation
• STEP 2
• Your highest 35 years of earnings are added
  together and divided by 420 months.
• The result is the Average Indexed Monthly
  Earnings (AIME)

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• STEP 3
• The benefit is computed by applying a three tier
  computation to the AIME--EFFECTIVE 01/2005
• 
  
• 90 of first 627
• 32 of next 3152
• 15 of remainder
  

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Example

• AIME 3883
• 90 X 627 564.30
• 32 X 3152 1008.64
• 15 X 104 15.60
• Primary Insurance Amount 1588.00

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Public employees look poor

• The addition of all those zero years gives them
  an artificially low average wage
• So our computer thinks youre poor and gives you
  the 90 rate of return

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But youre not poor

• A public employee is not the kind of low-income
  worker the weighted benefit formula is trying to
  compensate
• Youre an average paid worker and should get rate
  of return for average Americans

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WINDFALL ELIMINATION PROVISION

• WEP Computation
• 40 of first 627
• 32 of next 3152
• 15 of remainder

• Standard Computation
• 90 of first 627
• 32 of next 3152
• 15 of remainder

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Example

• AIME 3883
• 90 X 627 564.30
• 32 X 3152 1008.64
• 15 X 104 15.60
• Primary Insurance Amount 1588.00

250.80
40
1275.00
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EXCEPTION TO THE WINDFALL FORMULA

• Years of Coverage
  Formula
• 30 or more
  90
• 29
  85
• 28
  80
• 27
  75
• 26
  70
• 25
  65
• 24
  60
• 23
  55
• 22
  50
• 21
  45

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If you will receive a non-covered pension, your
benefit estimate is WRONG!

• If estimate is 564 or greater
• -- subtract 314
• If estimate is 563 or less
• -- multiply by 4
• -- divide by 9
• and drop the cents

AMOUNT OF REDUCTION CAN NEVER EXCEED ONE HALF OF
THE PUBLIC PENSION AMOUNT
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www.socialsecurity.gov
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www.socialsecurity.gov
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Two Important Points

• If you have 40/more credits (quarters) you will
  definitely get a SS check
• But if you have paid SS taxes for fewer than 30
  years, your benefit will be cut (and your Soc Sec
  statement is wrong)

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GOVERNMENT PENSION OFFSET

• Applies to Spouses and Widow(er) benefits only
• Two thirds of the amount of the government
  pension will be used to reduce the Social
  Security Spouses/Widow(er) benefit
• Example
• 2/3 of a 900 government pension 600
• If spouses benefit
  500
• No cash benefit payable

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Key to understanding GPO

• Understanding that dependents benefits should
  be paid to someone who is dependent
• consider history of spouses benefits under
  Social Security

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Before GPO ...

• Tom Sue paid SS
• Tom gets 1000 SS
• Sue gets 1500 SS
• Sue cant get wifes benefit because her own SS
  offsets it
• Law recognizes that Sue was not dependent on Tom

• Al paid SS Ann was a teacher
• Al gets 1000 SS
• Ann gets 1500 STRS
• We also paid Ann 500 in SS wifes benefits!
• Old law didnt see Ann not dependent

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GPO ensures fairness ...

• It treats Ann, the teacher, the same way we treat
  Sue, the non-teacher
• It says you cant get a dependents benefit
  unless you truly are dependent

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So, why dont these provisions affect the
wealthy, retired corporate execs?

• Theyve always paid Social Security taxes.
• They get a smaller percentage of taxable earnings
  replaced than we do.
• They have a dollar for dollar offset on any
  spousal benefit.

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One final important point

• Neither the WEP nor the GPO provisions adversely
  affect our spouse.
• The WEP dies with the worker.
• The surviving spouse isnt subject to an offset
  for a survivors annuity because its not based
  on that spouses own work.

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Medicare Public Employees

• Even if not paying Social Security tax, some of
  you are paying Medicare tax.
• If SS reduced (WEP), Medicare is not
• Those who dont pay Medicare tax may get it on a
  spouses SS record
• You will get Medicare on spouses record even if
  your cash benefit is offset (GPO)

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The Two Parts of Medicare

• Hospital (Part A)
• Paid for by taxes while still working
• Pays 100 of covered inpatient costs
• Very limited nursing home coverage

• Doctors (Part B)
• Paid by premiums deducted from SS check
  (78.20/mth)
• Covers 80 of doctor/bills.
• May not need part B if still working or have
  other coverage

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Medicare Enrollment Periods

• IEP - Initial Enrollment Period
• GEP - General Enrollment Period
• SEP - Special Enrollment Period

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And Now Theres Part D!

• When you become eligible for Medicare, you can
  purchase Part D (Prescription Drug Plans).
• You want to sign up when first eligible, or you
  will pay more.
• Program is voluntary.

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How To File For Social Security

• Call 800-772-1213 for appointment about 2-3
  months before retirement
• ORWWW.SOCIALSECURITY.GOV
• Check ahead to see if due early retirement
• Bring certified copy of birth certificate
• Bring last W-2 form or tax return

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Social Security Seminar

• for California
• Public Employees

Bob Hartnett, Public Affairs Specialist
Social Security Administration