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Social Security Benefits It’s hard to overstate the importance of Social Security in improving the lives of Americans. Consider the following:
How It Works If you work for someone else, your employer withholds Social Security and Medicare taxes from your paycheck, matches that amount, sends those taxes to the Internal Revenue Service (IRS) and reports your earnings to Social Security. If you’re self-employed, you pay your own Social Security taxes when you file your tax return, and IRS reports your earnings to Social Security. You pay a rate equal to the combined employee/employer share, but there are special deductions you can take that offset your tax rate. For more information, click here! Role of Payroll Professionals In a letter from the former Commissioner of Social Security, Kenneth S. Apfel, on the occasion of National Payroll Week 1998 wrote: “I congratulate Payroll Professionals across the country for the outstanding job they perform in ensuring the accurate and timely reporting of wage and tax information to Federal and State agencies. Accurate wage reporting is Social Security’s cornerstone for determining future benefits for workers and their families. Payroll Professionals should be proud of the important role they play in the lives of each and every worker.” How You Earn Credits You qualify for Social Security benefits by earning Social Security credits when you work in a job and pay Social Security taxes. The credits are based on the amount of your earnings. The Social Security Administration uses your work history to determine your eligibility for retirement or disability benefits or your family’s eligibility for survivors benefits when you die. In 2004, you receive one credit for each $900 of earnings, up to the maximum of four credits per year. Each year the amount of earnings needed for credits goes up slightly as average earnings levels increase. The credits you earn remain on your Social Security record even if you change jobs or have no earnings for a while. For more information, click here! If You Are Self-Employed If you are self-employed, you earn Social Security credits the same way employees do (one credit for each $900 in net earnings, but no more than four credits per year). If your net earnings are $3,600 or more, you earn four credits--one for each $900 of earnings. However, special rules apply if your net earnings are less than $900. All of your earnings covered by Social Security are used in figuring the amount of your Social Security benefit. So, it’s important that you report all of your earnings up to the maximum as required by law. For more information go to http://www.socialsecurity.gov/pubs/10022.html to view the factsheet, If You’re Self-Employed (Publication No. 05-10022). For more information, click here! Special Rules SSA also has special rules about how you earn credits for other kinds of work. Some of these jobs are:
Military If you are in the military, you earn Social Security credits the same way civilian employees do. You also may get additional earnings credits under certain conditions. For more information, call SSA for a free copy of the publication, Military Service And Social Security (Publication No. 05-10017). For more information, click here! http://www.socialsecurity.gov/pubs/10072.html#special and www.socialsecurity.gov/pubs/10017.html) Social Security Benefits Social Security benefits replace a percentage of your earnings when you retire, become disabled or die. Each year, SSA sends you a Social Security Statement showing your earnings history and an estimate of the retirement, disability and survivors benefits you and your family may receive based on those earnings. When you receive your Statement, check your earnings history carefully. Make sure all of your earnings are accurate. Be sure to report any errors to SSA. That is important because your benefits will be based on your lifetime earnings. Your Statement also is useful in helping you plan your financial future. For more information, click here! Not Every Kind of Work Counts Toward Social Security Not all employees work in jobs covered by Social Security. Some of these employees are:
Types of Social Security Benefits There are five major categories of benefits paid for through your Social Security taxes: retirement, disability, family benefits, survivors and Medicare. (SSI benefits, which are not financed by Social Security taxes, are discussed in another section.) For more information, click here! Retirement Benefits are payable at full retirement age (with reduced benefits available as early as age 62) for anyone with enough Social Security credits. The full retirement age is 65 for persons born before 1938. The age gradually rises until it reaches 67 for persons born in 1960 or later. People who delay retirement beyond full retirement age get special credit for each month they don’t receive a benefit until they reach age 70. Disability Benefits can be paid to people at any age who have enough Social Security credits and who have a severe physical or mental impairment that is expected to prevent them from doing “substantial”work for a year or more or who have a condition that is expected to result in death. Generally, earnings of $800 or more per month are considered substantial. The disability program includes incentives to smooth the transition back into the workforce, including continuation of benefits and health care coverage while a person attempts to work. Family Benefits If you are eligible for retirement or disability benefits, other members of your family might receive benefits, too. These include: your spouse if he or she is at least 62 years old or under 62 but caring for a child under age 16; and your children if they are unmarried and under age 18, under 19 but still in school or 18 or older but disabled. If you are divorced, your ex-spouse could be eligible for benefits on your record. Survivors When you die, certain members of your family may be eligible for benefits if you earned enough Social Security credits while you were working. The family members include: a widow(er) age 60 or older, 50 or older if disabled or any age if caring for a child under age 16; your children if they are unmarried and under age 18, under 19 but still in school or 18 or older but disabled; and your parents if you were their primary means of support. A special one-time payment of $255 may be made to your spouse or minor children when you die. If you are divorced, your ex-spouse could be eligible for a widow(er)’s benefit on your record. Medicare There are two parts to Medicare: hospital insurance (sometimes called Part A) and medical insurance (sometimes called Part B). Generally, people who are over age 65 and getting Social Security automatically qualify for Medicare. So do people who have been getting disability benefits for two years. Others must file an application. Part A is paid for by a portion of the Social Security tax of people still working. It helps pay for inpatient hospital care, skilled nursing care and other services. Part B is paid for by monthly premiums of those who are enrolled and from general revenues. It helps pay for such items as doctors’fees, outpatient hospital visits and other medical services and supplies. Recently, a new law was enacted to bring people with Medicare more choices in health care coverage and better health care benefits. This new law preserves and strengthens the current Medicare program, adds important new prescription drug and preventative benefits, and provides extra help to people with low incomes. For more information visit the Centers for Medicare & Medicaid Services at www.cms.gov. Supplemental Security Income Benefits SSI makes monthly payments to people who have a low income and few assets. To get SSI, you must be 65 or older or be disabled. Children as well as adults qualify for SSI disability payments. As its name implies, Supplemental Security Income “supplements”your income up to various levels--depending on where you live. The federal government pays a basic rate and some states add money to that amount. Check with your local Social Security office for the SSI rates in your state. Generally, people who get SSI also qualify for Medicaid, food stamps and other assistance. SSI benefits are not paid from Social Security trust funds and are not based on past earnings. Instead, SSI benefits are financed by general tax revenues and assure a minimum monthly income for elderly and disabled persons. For more information, click here! Make Sure Your Records Are Accurate Each year your employer sends a copy of your W-2 (Wage and Tax Statement) to SSA which compares your name and Social Security number on the W-2 with its records. When SSA finds your name and number, your earnings shown on the W-2 are recorded on your lifelong earnings record. Your lifelong earnings record is what we use to figure whether you can get future benefits and the benefit amount. It is critical that your name and Social Security number on your Social Security card agree with your employer’s payroll records and W-2. If they do not agree, your employer may get a letter from Social Security. This letter does not mean that your employer should change your job, lay you off, fire you or take other action against you. You need to correct the error. It is up to you to make sure both records are correct. If your Social Security card is not correct, contact any Social Security office. Tell your employer if your name or Social Security number is incorrect on the employer’s record. For more information, click here! For more information about the Social Security Administration, check out the SSA website. Some publications you might want to take a look at:
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Founded by the American Payroll Association. |
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