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Entitlement. Social Security is an entitlement program, as most people are aware. This month’s newsletter will provide a few basic guidelines, some of which might surprise you. The program is much more complex than the normal retirement benefits that eligible workers look forward to. “Entitlement” means that the program is not means tested. Benefits are determined by the number of “work credits”, which are currently defined as $970 earned in a quarter of a calendar year. The number of work credits required for benefits may vary according to the particular Social Security program.
Benefits are paid to the insured worker and members of the worker’s family and are often defined as “retirement, disability and survivor” programs.
Retirement. Social Security sends all eligible workers periodic notices with a summary of their accounts and estimated retirement benefits (Primary Insurance Amount or “PIA”). PIA is determined by the best 35 years of earnings and is adjusted January 1 of each year for inflation. Ten years of participation is the minimum amount required. For 2006, the full retirement age is 65 years 8 months. This becomes age 66 in 2009.
Early retirement at age 62 has not been delayed. As most seniors are aware, there are earnings limits for those taking benefits at age 62. The limits were taken off for beneficiaries who have achieved full retirement. However, those earnings are themselves subject to FICA taxes, even though the worker is receiving full or partial benefits.
Disability. Social Security Disability Income or “SSDI” can be paid to a:
(1) worker
(2) unmarried disabled widow age 50 and over
(3) a child disabled before age 22, if the worker is retired, disabled or deceased
(4) some disabled former spouses of a deceased worker
The determination of disability itself has special rules and is beyond the scope of this summary. Needless to say, there are disputes and the representation of disability claimants is a legal specialty in itself. Proof of continuing disability can also be a problem and the subject of disputes.
MEDICARE is available for recipients of SSDI after 24 months. Again, SSDI is not means tested and all benefits are entitlements under the scope of the Social Security Program.
Dependent’s Benefits. Dependents of eligible workers are entitled to dependent benefits. In the case of a retired or disabled worker, spouses and dependent children receive separate benefits. A spouse age 62 or older can collect a spousal benefit and can collect at a younger age if caring for a child under the age of 16, or a child disabled before age 22 (usually developmentally disabled children).
Divorced spouses, if married over ten years, can collect a dependent benefit at age 62 or over. Remarriage of the divorced spouse can terminate benefits.
Minor children under the age of 18, or under the age of 19 and still in high school, can collect benefits so long as they are unmarried.
If the worker provided care for step-children or grandchildren, these individuals can collect dependent benefits on a retired or disabled worker.
Survivor Benefits. Benefits for family members of a deceased worker, receive benefits which are often more generous than Dependent Benefits. Some of those Survivor Benefits include:
(1) A survivor’s spouse, age 60 or more. Remarriage prior to age 60 nullifies this benefit. Thus a widow or widower who wishes to remarry, should wait until after age 60.
(2) A divorced former spouse over age 60, if the marriage lasted ten years and if there was no remarriage before age 60. Thus, there may be multiple former spouses claiming on the account of the same deceased worker.
(3) A surviving unmarried minor child collects survivor benefits. Similarly, a surviving disabled child can collect if the child was disabled before age 22.
(4) A spouse or divorced former spouse under age 60 can collect if caring for a worker’s minor or disabled child and not remarried.
(5) Parents of the worker can collect if either or both were dependent on the worker for at least half of their support.
Conclusion. This summary does not include Supplemental Security Income (“SSI”). SSI is a needs based program for which eligibility is determined much like Medicaid and for which the payments are substantially lower than the benefits described above. As you can see from this brief summary, the Social Security Program is much broader in its scope than most people realize. Many eligible individuals are unaware that they may qualify for social security benefits. Often it is possible to qualify for both SSDI and SSI (the needs based program) and thus be eligible for both Medicare and Medicaid. This can be important, for example, where an individual under Medicare has limited income and falls in the “doughnut” under the Plan B Drug Program, where there is no reimbursement for medications.
Often planning for social security benefits gets involved with estate planning and applications for Medicaid. All financial advisors should be alert to the possibility of Social Security benefits. The Social Security Administration is very helpful in this regard. If you have clients that may have legal issues in this area, please contact Jim Modrall at (231) 941-9660 or any of the other attorneys listed below.
Donald A. Brandt, Joseph C. Fisher, Thomas R. Alward, Edgar Roy, III, Matthew D. Vermetten, Thomas A. Pezzetti, Jr., John M. Grogan, Vicki P. Kundinger, Susan Jill Rice, Gary D. Popovits, Lawrence K. Kustra, H. Douglas Shepherd, Jonathan J. Siebers and Karin Church at (231) 941-9660
©BRANDT, FISHER, ALWARD & ROY, P.C.
This newsletter is provided for informational purposes and should not be acted upon without professional
advice.
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| Brandt, Fisher, Alward & Roy, P.C. Attorneys at Law |
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November 2006 SOCIAL SECURITY - WHAT A DEAL! by James R. Modrall III, J.D., C.P.A. |