Social Security information outline
There are several concerns/facts that need to be researched to understand what is best for each individual. These are all that I have come up with.
If you decide to vote out of Social Security you will receive 6.2% of your wages for the last 3 years 3 months and 14 days in back pay. This money has already been taxed, so the government can’t tax it again. The city or district you work for that has paid the other 6.2% will receive that money in back pay upon request from the city/district. If in your contract or an MOU you get all or a portion of that money it would need to be tax sheltered or that money would be taxed as income. Most of you already know about the case law involving the employer’s portion being deemed to go to the employee, but maybe worth mentioning. Medicare is discussed later in this document.
Windfall elimination provision
To understand WEP you must first understand how to calculate your benefit. SS uses something called the AIME formula to calculate your benefit. SS takes your highest 35 years of earnings and puts them into this formula, and it spits out a number which is your base or AIME number they then put this number into the second formula. If you don’t pay into SS you get zero’s which affect that number. Let’s say your AIME formula number is $2500.
90% of first $680 $612
32% of the next $3420 $582
15% of the remainder $0
Total $1194
In the WEP formula it looks like this.
40% of first $680 $272
32% of the next $3420 $580
15% of remainder $0
Total $854
Your maximum reduction in any circumstance will be $340 due to WEP.
If you have had over 30 years of substantial earnings WEP does not apply. If you have 21-29 years of substantial earnings you are in a modified WEP listed below. That number would replace the 40% listed above.
Years of substantial earnings Percentage
30 or more 90 percent
29 85 percent
28 80 percent
27 75 percent
26 70 percent
25 65 percent
24 60 percent
23 55 percent
22 50 percent
21 45 percent
20 or less 40 percent
If you get a relatively low pension, you are protected. The reduction in your Social Security benefit cannot be more than one-half of that part of your pension based on your earnings after 1956 from which Social Security taxes were not deducted.
Government Pension Offset/Dual entitlement
Non GPO
Generally, Social Security benefits are payable to the spouses of retired,
disabled, or deceased workers covered by Social Security. Spousal benefits are
intended for individuals who are financially dependent on spouses who work in
Social Security-covered positions. Individuals who qualify for both a Social Security
worker benefit (retirement or disability) based on their own work history and a Social
Security spousal benefit based on their spouse’s work history are “dually-entitled”
and are subject to the dual-entitlement rule. The Social Security dual-entitlement rule
requires that 100% of a Social Security retirement or disability benefit earned as a
worker (based on one’s own Social Security-covered earnings) be subtracted from
any Social Security spousal benefit one is eligible to receive (based on their spouse’s
Social Security-covered earnings), and only the difference, if any, is paid as a spousal
benefit.
Regular Dual-Entitlement Formula
John Mary
Social Security retirement benefit (based on worker’s earnings
record) $900.00 $400.00
Maximum Social Security spousal benefit eligible to receive (based
on spouse’s earnings record), equal to 50% of the spouse’s Social
Security retirement benefit $200.00 $450.00
Reduction in spousal benefit due to dual-entitlement rule (equal to
worker’s own retirement benefit) $900.00 $400.00
Actual Social Security SPOUSAL benefit paid (subtract worker
benefit from spousal benefit) $0.00 $50.00
GPO
Individuals who qualify for both a government pension based on non-Social
Security-covered employment and a Social Security spousal benefit are subject to the
Government Pension Offset (GPO) provision. The GPO provision reduces Social
Security benefits that a person receives as a spouse if he or she also has a federal,
state or local government pension based on work that was not covered by Social
Security. The GPO reduction in Social Security spousal benefits is equal to two thirds
of the government pension.
GPO Formula
John Mary
Social Security retirement benefit (based on worker’s earnings record) $900.00 $0.00
Non-Social Security-covered government pension $0.00 $400.00
Maximum Social Security spousal benefit eligible to receive (based on
spouse’s earnings record), equal to 50%of the spouse’s Social Security
retirement benefit $0.00 $450.00
Reduction in Social Security spousal benefit due to GPO (equals 2/3 of
non-Social Security-covered pension) $0.00 $266.67
Actual Social Security spousal benefit paid (subtract 2/3 of non-Social
Security-covered worker’s pension from Social Security spousal
benefit) $0.00 $183.33
Disability
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
"Disability" under Social Security is based on your inability to work. We consider you disabled under Social Security rules if:
- You cannot do work that you did before;
- We decide that you cannot adjust to other work because of your medical condition(s); and
- Your disability has lasted or is expected to last for at least one year or to result in death.
The number of work credits needed for disability benefits depends on your age when you become disabled. Generally you need 40 credits, 20 of which were earned in the last 10 years ending with the year you become disabled. However, younger workers may qualify with fewer credits. 40 credits = 10 years of substantial income. You can earn up to 4 credits a year.
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Amount of earnings needed to earn one quarter of coverage
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Year
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Earnings
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1978
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$250
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1979
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260
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1980
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290
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1981
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310
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1982
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340
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1983
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370
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1984
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390
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1985
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410
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1986
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440
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1987
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460
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1988
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470
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1989
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500
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1990
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520
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1991
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540
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1992
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570
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Year
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Earnings
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1993
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$590
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1994
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620
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1995
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630
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1996
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640
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1997
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670
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1998
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700
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1999
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740
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2000
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780
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2001
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830
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2002
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870
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2003
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890
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2004
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900
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2005
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920
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2006
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970
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2007
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1,000
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Year
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Earnings
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2008
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$1,050
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2009
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1,090
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2010
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1,120
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Survivor benefits
Dependant benefits are not changed by WEP or GPO. They would be affected by how much you put into SS. As you work and pay Social Security taxes, you earn credits toward your Social Security benefits. The number of years you need to work for your family to be eligible for Social Security survivors benefits depends on your age when you die. The younger you are, the fewer years you need to work. But no one needs more than 10 years of work to be eligible for any Social Security benefit. There is a one-time payment of $255 that can be made when you die if you have worked long enough. This payment can be made only to your spouse or child if they meet certain requirements. For more specific information see this site on SS http://www.socialsecurity.gov/survivorplan/onyourown5.htm
Medicare
Medicare is not affected if you were hired at your department after April 1st 1986. However, if you were hired before that date You will be forced out of Medicare with social security. As long as you have paid into SS/Medicare for 10 years/40 quarters of substantial income you will not lose the Medicare benefit and you will receive back pay on the 1.45% paid for the previous 3 years 3 months and 14 days.
Persi
Your PERSI retirement is not affected by your decision to stay in or vote out of SS.
Retirees
The Social Security office stated that if you are retired and collecting benefits those individuals are not affected.
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