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Social Security Essentials for Ohio Public Employees

Social Security Essentials for Ohio Public Employees. Earning Credits. 40 Credits for retirement Maximum 4 credits in 1 year $1,120 earnings = 1 credit in 2011 ($4,480). Worker Reduced benefits as early as age 62 Full benefits at age 65-67

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Social Security Essentials for Ohio Public Employees

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  1. Social Security Essentials for Ohio Public Employees

  2. Earning Credits • 40 Credits for retirement • Maximum 4 credits in 1 year • $1,120 earnings = 1 credit in 2011 ($4,480)

  3. Worker • Reduced benefits as early as age 62 • Full benefits at age 65-67 • Increased benefits after full retirement age (FRA) • Wife or Husband • As early as age 62 • At any age if caring for child under age 16 or disabled • Divorced spouses may qualify if married at least 10 years • Child • Unmarried and up to age 18 or 19 if still in high school • Any age if disabled before age 22 Retirement Benefits

  4. Full Retirement Age & Age 62 Reduction Year of BirthFull Retirement Age% at Age 62 1943-1954 66 75 % 1955 66 & 2 months 74.2 % 1956 66 & 4 months 73.3 % 1957 66 & 6 months 72.5 % 1958 66 & 8 months 71.7 % 1959 66 & 10 months 70.8 % 1960 & later 67 70 % Reduction is Permanent!

  5. Benefits for Dependent Spouses • Spouse may receive up to 50% of a worker’s fullSocial Security benefit—however, • A spouse benefit is reduced by amount equal tofullretirement benefit the spouse earned on his/her own work record • Reduced if started early (before FRA)

  6. Survivor Benefits • Widow(er) • Reduced benefits as early as age 60 or, if disabled, age 50 • At any age if caring for child of worker under age 16 or disabled before age 22 • Divorced widow(er) may qualify if married at least 10 years • Remarriage @ age 60 or later does not end benefit • Benefit at full retirement age is usually the same as what worker was receiving at his death or would have received at full retirement age

  7. Survivor Benefits (cont) • Child • Under age 18 or 19 if still in high school • Any age if disabled before age 22 • Unmarried** • $255 Lump Sum Death Benefit • Surviving spouse or minor/disabled children only

  8. Social Security Benefits While Working What is work? • Wages from PERS, FICA, anywhere • May be self employment • Work is NOT income from private pensions, rental properties, investments, 401k or deferred comp, etc.

  9. Work Before Full Retirement Age • Work before full retirement age often reduces or eliminates Social Security cash benefits • Earnings from work may affect both retirement and dependent/survivor benefits • Online Retirement Earnings Test Calculator at www.ssa.gov/planners/morecalculators.htm computes how work may affect benefits • How Work Affects Your Benefit pamphlet

  10. OPERS and Social Security When your pension is from work not covered by Social Security, two laws may affect your Social Security benefit: • Government Pension Offset (GPO) • Windfall Elimination Provision (WEP)

  11. OPERS and Social Security Government Pension Offset (GPO) • Only applies to Social Security spouse/widow(er) benefits • Reduces your Social Security spouse/widow(er) benefit by 2/3 of your OPERS pension • Does not apply to OPERS survivor pensions

  12. Spouse Benefit Computation • Fred and Alice both paid FICA. Fred receives $2,366/month Social Security benefit at Full Retirement Age • Alice receives $1,400 Social Security benefit at Full Retirement Age • Spouse 50% rate = $1,183 • Alice cannot get spouse benefits because her own Social Security benefit is greater Alice’s own benefit offsets spouse benefit!

  13. GPO Example: Spouse • Tom’s Social Security benefit at Full Retirement Age is $2,366/month • Ann’s spouse benefit from Tom at her Full Retirement Age = $1,183 • 2/3 of Ann’s $2,100 OPERS = $1,400 • Ann’s Social Security spouse benefit = $ 0 Ann’s OPERS benefit offsets the spouse benefit just as her own Social Security benefit would offset the spouse benefit.

  14. GPO Example: Widow(er) • Tom dies • Ann’s widow benefit = $2,366 • 2/3 of Ann’s $2,100 OPERS = $1,400 • Ann’s Social Security widow benefit = $ 966 • If OPERS pension is $4,685 or more, 2/3 is • more than highest possible spouse/widow benefit

  15. OPERS and Social Security Windfall Elimination Provision (WEP) • If you have 40 credits, you will receive a monthly Social Security benefit • Social Security benefit will likelybe computed using a modified formula due to OPERS pension

  16. Calculating Benefits • Lifetime Social Security earnings adjusted for wage inflation • Add together highest 35 years • Divide total by 420 months (35 years x 12) to calculate monthly average • Benefit reflects a percentage of lifetime average monthly earnings figure

  17. Calculating Benefits • The higher your average lifetime Social Security earnings, the higher your benefit • Lower-paid workers receive larger benefits in relation to their earnings than higher-paid workers

  18. Replacement Rates (Approximate) Low Income Worker • $20,800annual avg. ($10/hr) • $989/month benefit at full age • Middle Income Worker • $41,600 annual avg. ($20.00/hr) • $1,543/month benefit at full age • Higher Income Worker • $84,032annual avg. ($40.00/hr) • $2,241/month benefit at full age 57% 44.5% % of earnings 32%

  19. Why Windfall Provision? • Years with 0 earnings under Social Security reduce average lifetime earnings figure • The result: Your average FICA earnings are low and you look like a low-income worker even if your PERS earnings are high(er) • Windfall reduces the higher replacement % intended for low income workers

  20. Windfall Rules • Recognizes the more years a worker has paid Social Security taxes on substantial earnings, the closer that person should be to the standard benefit formula. • 30+ years = WEP doesn’t apply • 21-29 years = modified WEP • 20 or fewer years = full WEP

  21. WEP & Your Benefit Estimate • Your Social Security Statement estimates don’t figure WEP • If your full benefit estimate in 2011 is • - $750/month or more, subtract $374 • - $749/month or less, multiply by .445 • Online WEP Calculator and chart atwww.socialsecurity.gov/gpo-wep

  22. Social Security Benefits & Income Tax • Are Social Security benefits taxable? Maybe • If the sum of other income and Social Security benefits exceeds: • - $25,000 for an individual • - $32,000 for a married couple Then you may have to pay income tax on part of your Social Security benefits. For more information, call 1-800-829-3676 or visit www.irs.govIRS Pub. 915

  23. Medicare • 65 and older • Receiving Social Security Disability benefits at least 24 months (exception: Lou Gehrig’s disease) • Permanent kidney failure

  24. Medicare Part A • Part A (Hospital Insurance) • Covers most inpatient hospital expenses • No premium (with 40 credits) • 2011 deductible = $1,132

  25. Medicare Coverage • Part B ( Supplemental Medical Insurance) • Covers 80% doctor bills and outpatient medical expenses after $162 calendar year deductible • 2011 Monthly Premium = $115.40** • Defined Enrollment Periods (or penalties!)

  26. Filing for Medicare • Automatic if you are getting Social Security benefits at 65 • Contact SSA at age 65 if you are not getting benefits • May apply on own Social Security record (many OPERS employees pay Medicare tax) or the record of a spouse -living, deceased, disabled, or divorced • May file even if deferring cash payments

  27. Paying the Part B Premium • Deducted from SS benefits - always • Monthly/Quarterly billing if not entitled to benefits or benefits less than premium • - Pay by check or credit card • - Medicare EasyPayMonthly Direct Debit • - Request by calling 1 800 Medicare

  28. Medicare Resources • 1-800-Medicare • www.medicare.gov • Ohio Senior Health Insurance Information Program (OSHIIP) • 1-800-686-1578 • www.insurance.ohio.gov

  29. How to File • Via the Internet at www.socialsecurity.gov • In the office or over the telephone • For an appointment, call 1-800-772-1213 • When to Contact Social Security • Up to 3 months before you retire or attain age 62 • If over age 62, review your work plans before Feb. 1 to determine when benefits could start Filing for Benefits

  30. Online Services for Beneficiaries • Change Address and Telephone* • Request Replacement Medicare Card • Request Benefit Verification Letter • Request new 1099 for taxes • Request Direct Deposit* • *Request Password

  31. Government Employees

  32. Thank You ! 34

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