8 answers to introductory Social Security questionsBlog added by National Underwriter on April 18, 2013
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National Underwriter

Joined: April 22, 2011

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When helping your clients plan and prepare for retirement, you're bound to answer all sorts of questions. Here are eight introductory questions and answers about the Social Security Act, what and who is covered, how and when benefits are received, and the federal tax implications.

Gain access to the full 2013 Social Security & Medicare Facts content here.


1. What is the Social Security Act?

The Social Security Act has established numerous programs which provide for the material needs of individuals and families, protect aged and disabled persons against the expenses of illnesses that could otherwise exhaust their savings, keep families together, and give children the opportunity to grow up in health and security.

Congress passed the Social Security Act in 1935 and the retirement benefits program went into effect on January 1, 1937. The law has been amended many times since its original enactment.

There have been many changes in Social Security and the United States since 1935. First, in 1935 the life expectancy was only age 60, while today it is 78. Therefore in 1935 most people would not have lived long enough to collect Social Security retirement benefits. While today, many retirees are concerned they will outlive their retirement savings.

In 1935 Social Security was designed to supplement a retiree’s retirement income. Today, Social Security provides about 40% of the average retiree’s income.

In 1935, the worker/retiree ratio was about 160:1. Today it is about 3:1. When the program began, Social Security paid out about $35 million in benefits annually. Today it pays out over $675 billion annually.

Finally, in 1935, the poverty rate for seniors exceeded 50%. Today the poverty rate for Seniors is less than 9.5%.

Approximately 35% of Americans over the age of 65 rely almost entirely on Social Security payments alone.


2. What programs are covered by the Social Security Act?

The following programs are covered by the Social Security Act:
  • Social Security (retirement, survivors, and disability insurance).

  • Medicare (hospital and medical insurance for the aged, the disabled, and those with end-stage renal disease).

  • Unemployment insurance.

  • Black lung benefits.

  • Supplemental Security Income (SSI).

  • Public assistance and welfare services, including aid to needy families with children, medical assistance, maternal and child health services, child-support enforcement, family and child welfare services, food stamps, and energy assistance.
Social Security and Medicare Facts provides the reader with a description of Social Security, Medicare, benefits for federal government employees, benefits for service members and veterans, and benefits for workers covered under the Railroad Retirement System.

Social Security is administered by the Social Security Administration and provides old age, survivors, and disability benefits. Medicare provides hospital and medical insurance for the aged and disabled and is administered by the Centers for Medicare & Medicaid Services.

The original Social Security Act provided only retirement benefits for wage and salary earners. In 1939, benefits were added for family members after the worker’s death or retirement. Most amendments have expanded the scope of the Social Security program – by extending coverage to more groups of persons, by increasing benefits, by creating new benefits (such as disability), by liberalizing requirements for benefits, or by increasing the wage base for taxes and benefits.


3. In general, who can receive Social Security benefits?
  • A disabled insured worker under age 65.

  • A retired insured worker at age 62 or over.

  • The spouse of a retired or disabled worker entitled to benefits who: (1) is age 62 or over or (2) has in care a child under age 16 (or over age 16 and disabled), who is entitled to benefits on the worker’s Social Security record.

  • The divorced spouse of a retired or disabled worker entitled to benefits if age 62 or over and married to the worker for at least 10 years.

  • The divorced spouse of a fully insured worker who has not yet filed a claim for benefits if both are age 62 or over, were married for at least 10 years, and have been finally divorced for at least two continuous years.

  • The dependent, unmarried child of a retired or disabled worker entitled to benefits, or of a deceased insured worker if the child is: (1) under age 18, or (2) under age 19 and a full-time elementary or secondary school student, or (3) age 18 or over but under a disability that began before age 22.

  • The surviving spouse (including a surviving divorced spouse) of a deceased insured worker if the widow(er) is age 60 or over.

  • The disabled surviving spouse (including a surviving divorced spouse in some cases) of a deceased insured worker, if the widow(er) is age 50-59 and becomes disabled within a specified period.

  • The surviving spouse (including a surviving divorced spouse) of a deceased insured worker, regardless of age, if caring for an entitled child of the deceased who is either under age 16 or disabled before age 22.

  • The dependent parents of a deceased insured worker at age 62 or over.
In addition to monthly survivor benefits, a lump-sum death payment is payable upon the death of an insured worker. For explanation of these benefits and eligibility requirements, see RETIREMENT AND DISABILITY BENEFITS, Q 20 to Q 125.


4. How can a person check on his Social Security earnings record and receive an estimate of future Social Security benefits?

By filling out Form SSA-7004 (Request for Social Security Statement). The form is available at any Social Security office or by calling the Social Security Administration’s toll-free number, 1-800-772-1213. It is also available at the Social Security Administration’s website at www.ssa.gov. A statement of total wages and self-employment income credited to the earnings record and an estimate of current Social Security disability and survivor benefits and future Social Security retirement benefits will be mailed to the individual.

Also, persons with Internet access can request and receive an estimate of their future Social Security benefits. This version of the online benefit information request will include a benefit estimate and general information on eligibility. Other information, such as earnings and payroll tax information, normally included in the Request for Earnings and Benefit Estimate Statement, will be mailed to the Internet user upon request but will not be a part of the online statement. Delivery of information will be available only to those who have a registered electronic mail account, such as one with an employer or Internet service provider. Users will be required to provide five authenticating elements: name as it appears on their Social Security card, Social Security number, date of birth, state of birth, and mother’s maiden name.

If all earnings have not been credited, the individual should contact a Social Security office and ask how to correct the records. The time limit for correcting an earnings record is set by law. An earnings record can be corrected at any time up to 3 years, 3 months, and 15 days after the year in which the wages were paid or the self-employment income was derived. “Year” means calendar year for wages and taxable year for self-employment income. An individual’s earnings record can be corrected after this time limit for a number of reasons, including to correct an entry established through fraud; to correct a mechanical, clerical, or other obvious error; or to correct errors in crediting earnings to the wrong person or to the wrong period.

The Social Security Administration must provide individuals, age 25 or older, who have a Social Security number and have wages or net self-employment income, with a Social Security account statement upon request. These statements must show: (1) the individual’s earnings, (2) an estimate of the individual’s contributions to the Social Security program (including a separate estimate for Medicare Part A Hospital Insurance), and (3) an estimate of the individual’s current disability and survivor benefits and also future benefits at retirement (including spouse and other family member benefits) and a description of Medicare benefits.

Earnings and benefit estimates statements are automatically mailed on an annual basis to all persons age 25 or over who are not yet receiving benefits.

This earnings and benefit estimates statements contain the following information:

(1) The individual’s Social Security taxed earnings as shown by Social Security Administration records as of the date selected to receive a statement.

(2) An estimate of the Social Security and Medicare Part A Hospital Insurance taxes paid on the individual’s earnings.

(3) The number of credits (i.e., quarters of coverage, not exceeding 40) that the individual has for both Social Security and Medicare Hospital Insurance purposes, and the number the individual needs to be eligible for Social Security benefits and also for Medicare Hospital Insurance coverage.

(4) A statement as to whether the individual meets the credit (quarters of coverage) requirements for each type of Social Security benefit, and also whether the individual is eligible for Medicare Hospital Insurance coverage.

(5) Estimates of the monthly retirement, disability, dependents’ and survivors’ insurance benefits potentially payable on the individual’s record if he meets the credits (quarters of coverage) requirements. If the individual is age 50 or older, the estimates will include the retirement insurance benefits he could receive at age 62 (or his current age if he is already over age 62), at full retirement age (currently age 66 to 67, depending on year of birth) or at the individual’s current age if he is already over full retirement age, and at age 70. If the individual is under age 50, the Social Security Administration may provide a general description, rather than estimates, of the benefits that are available upon retirement.

(6) A description of the coverage provided under the Medicare program.

(7) A reminder of the right to request a correction in an earnings record.

(8) A remark that an annually updated statement is available upon request.


5. When does a Social Security beneficiary receive a monthly benefit check?

For persons who started receiving benefits on or before May 1, 1997, Social Security checks are usually dated and delivered on the third day of the month following the month for which the payment is due. For example, checks for January are delivered on February 3rd. Checks usually arrive about the same day each month.

If the third day of the month falls on a weekend or federal holiday, checks are dated and delivered on the first day preceding the third of the month that is not a Saturday, Sunday, or federal holiday. For example, if the third is a Saturday or Sunday, checks are delivered on the preceding Friday.

Persons who began receiving Social Security benefits after May 1, 1997, will be paid on a different monthly schedule than that described above. The payment day will be selected, based on the day of the month on which the insured individual was born. Insured individuals born on the 1st through the 10th of the month will be paid on the second Wednesday of each month. Insured individuals born on the 11th through the 20th of the month will be paid on the third Wednesday of each month. Insured individuals born after the 20th of the month will be paid on the fourth Wednesday of each month. New beneficiaries living in foreign countries will have checks delivered on the third day of the month.

If a check mailed to a United States address is not received within three days after it would normally be received or if the check has been stolen, lost, destroyed, or forged, the Social Security office should be notified promptly. The following information should be provided to the Social Security office: (1) the Social Security claim number on which the benefit is being paid, (2) the period of payment covered by the missing check, and (3) the name and address which should be shown on the check.

A change of address should be reported promptly to the Social Security office, by telephone, in writing signed by the payee, or online via the Social Security Administration’s website. Promptly reporting a change of address will avoid having the check mailed to the old address. The Social Security claim number and the person’s old address should also be given.


6. To whom is a benefit check made payable and how are benefits received?

Payment is made by check to the beneficiary, by direct deposit to a beneficiary’s account with a financial institution, or to a representative payee if the beneficiary is incapable of managing finances.

All beneficiaries with accounts in financial institutions will have their benefit checks deposited directly into these accounts instead of mailed to their homes. A financial institution may be a bank, trust company, savings and loan association, or a federal or state chartered credit union. The beneficiary continues to be responsible for notifying the Social Security Administration of any changes that affect eligibility to receive benefits. Beneficiaries without accounts in financial institutions will continue to have their benefit checks mailed directly to their homes.

A minor child (a child under 18 years of age) is ordinarily considered incapable of managing benefit payments and a representative payee (usually a parent, close relative, or legal guardian) will be selected to receive payments on the child’s behalf.

However, payment will be made directly to a child over 18, or to a child under 18 if there is no indication that the child is immature or unstable and it appears to be in the minor’s best interest to make direct payment.

Also, if alcoholism or drug addiction is a contributing factor in determining that an individual is entitled to disability benefits, the benefits must be paid through a representative payee.

A beneficiary outside the United States can have payments deposited directly into a United States bank or other financial institution. Direct deposit may be available to beneficiaries who wish to have their payments deposited into a bank or financial institution in the country where they live.


7. Are Social Security benefits subject to federal taxes?

Up to one-half of the Social Security benefits received by taxpayers whose incomes exceed certain base amounts are subject to income taxation.[1] The base amounts are $32,000 for married taxpayers filing jointly, $25,000 for unmarried taxpayers, and zero for married taxpayers filing separately who did not live apart for the entire taxable year.[2]

There is an additional tier of taxation based upon a base amount of $44,000 for married taxpayers filing jointly, $34,000 for unmarried taxpayers, and zero for married taxpayers filing separately who did not live apart for the entire taxable year.[3] The maximum percentage of Social Security benefits subject to income tax increases to 85% under this second tier of taxation.[4] (The rules listed in the paragraph above continue to apply to taxpayers not meeting these thresholds.)

After the end of the year, Form SSA-1099 (Social Security Benefit Statement) is sent to each beneficiary showing the amount of benefits received. A worksheet (IRS Notice 703) is enclosed for figuring whether any portion of the Social Security benefits received is subject to income tax.

For a detailed explanation of taxation of benefits, see TAXATION OF SOCIAL SECURITY BENEFITS , Q 197 to Q 205.

[1] .IRC Sec. 86.
[2] .IRC Sec. 86(c)(1).
[3] .IRC Sec. 86(c)(2).
[4] .IRC Sec. 86(a)(2).


8. What happens when a Social Security check is sent to a beneficiary by mistake?

A check sent to a beneficiary who is not entitled to the payment should be returned to the Regional Financial Center , Treasury Department, located in the city shown on the face of the check. If the holder of the check prefers, the check may be returned to a Social Security office. If a beneficiary is not entitled to payment and cashes the check, a refund is ordinarily required. Often the program service center will have later checks withheld to make up for the overpayment.

Gain access to the full 2013 Social Security & Medicare Facts content here.
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