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Social Security. MGMT 4030 - Managing Employee Reward Systems. Social Security: Overview. Legally Required Benefit Provides a Basic Level of Security for Employees Other Employer Provided Benefits Give Additional Coverage
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Social Security MGMT 4030 - Managing Employee Reward Systems
Social Security: Overview • Legally Required Benefit • Provides a Basic Level of Security for Employees • Other Employer Provided Benefits Give Additional Coverage • Basic Economic Security for Retirement, Disability, Survivors and Health Care for the Aged
Funding Social Security • Equal Contributions made by Employer and Employee • OASDI tax = 6.2% up to $68,400 Annual Earnings (1998) • Medicare Tax = 1.45%; No cap on Earnings
Social Security: Retirement Benefits • Full Benefits at age 65; raised to age 67 by 2027 • Reduced Benefits (80%) at age 62 • Benefits equal aprox. 30% earnings prior to Retirement • Average Benefit Amount: $858/month. • With Spouse, benefits increased by 50% • Eligibility: 40 1/4 year periods with Min. Earnings $590/Qtr.
Social Security: Medicare • Health Insurance for Age 65 and Older • Part A = Hospital Expenses: $600-700 deductible/yr. • Part B = Medical Expenses: aprox. $40/month fee • Some Limits on Lengthy Hospital Visits, Nursing Homes
Social Security: Disability Income • No Age Limit • Total Disability for 5 Months or More • Aprox. 30% of Replacement Income Provided • Integrate with Sick Leave, WC benefits, LTD Insurance
Social Security: Survivor Benefits • Income for Survivors of Deceased Worker • Widow(er) age 60+; Child < 18 yrs. • Benefits Related to Deceased Worker’s Retirement Benefits
Problems with Social Security • Funding May Be Exhausted by 2020 Due to Demographics • Government Uses Soc.Sec. Taxes to Pay Current Debts • Long Life Spans Means more Beneficiaries to Support
Fixing Social Security - Alternatives • #1.All Social Security Funds can be Managed by Individuals: Choice of Mutual funds, Bonds, or Treasury notes. • #2. 1/3 of Social Security money can be Invested as in #1, and 2/3 of money managed by Government as is the case now. • #3. The government puts all the Social Security money in a portfolio of stocks of blue chip US companies.