Social Security 101 for CPAs: Updates and Essentials

Transcription

1 Social Security 101 for CPAs: Updates and Essentials Theresa Busher Social Security Public Affairs Specialist x33308

2 AGENDA Contacting Social Security and the mysocialsecurity account Applications and Appeals Retirement Review Spouse and Survivor Medicare Updates

3 Contacting Social Security Call Representatives from 7 a.m. to 7 p.m., Monday through Friday. Information is provided by automated phone service 24 hours a day. Visit a local office Open to the public Monday, Tuesday, Thursday and Friday from 9 a.m. to 4:00 p.m. and Wednesdays from 9 a.m. to 12:00 p.m., except Federal holidays. Apply for benefits, visit Retirement Planner, appeal a decision, get info about earnings and benefits, see popular Baby Names, and more. 3

4 Creating a mysocialsecurity Account Visit socialsecurity.gov/myaccount Select: Sign In or Create an Account Provide some personal information to verify identity Choose username and password to create account

5 mysocialsecurity Account Not on Benefits Yet? You can - View, save, and print your online Social Security Statement. Check on application status In some states (not OH yet): order a replacement Social Security card Note: the mysocialsecurity account does NOT calculate Windfall (WEP) for non-fica pension system recipients. More on that in a few moments. 5

6 mysocialsecurity Account for Beneficiaries If you get Social Security benefits, you can Get your benefit verification letter; Check your benefit and payment information and your earnings record; Change your address and phone number; and Start or change your direct deposit Get a replacement Medicare card Get a replacement

7 Applications 3 options available to apply: Online By phone At our office Note: Some Supplemental Security Income (SSI) plus all child and survivor claims can only be done by phone or in a field office (not online) at this time! 7

8 Retirement Benefits

9 2019 Retirement Updates Max. FICA taxed earnings = $132,900 In 2019, earn 1 credit for every $1,360 in covered earnings / 4 credits = $5,440 Max. benefit for someone at Full Retirement Age in 2019 = $2861/month

10 Calculating the Benefit Social Security benefits are based on lifetime earnings: Step 1 Adjust all FICA wages for changes in wage levels over time Step 2 Find monthly average of 35 highest earnings years Step 3 Benefit = percentage of average indexed monthly earnings (AIME) See for details

11 Electing Benefits Reduced benefits as early as age 62 Full benefits at age Increased benefits with Delayed Retirement Credits (DRCs) by waiting to collect until after full retirement age

12 Age You Choose to Start Receiving Benefits Note: Reduction is typically permanent.

13 Year of Birth Full Retirement Age $1000 retirement benefit taken at age 62 would be reduced by % and 2 months 25.83% and 4 months 26.67% and 6 months 27.5% and 8 months 28.33% and 10 months 29.17% %

14 When to Start Benefits Deciding the right age to retire is individual decision based upon many factors, including: Employment situation Dependent benefits may be payable Family history of longevity Health insurance options Disability May apply at same time for retirement and disability benefits Other financial resources

15 Work and Benefits 2019 If you are Under Full Retirement Age The Year Full Retirement Age is Reached Month of Full Retirement Age and Above You can make up to If you earn more, some benefits will be withheld $17,640/yr. $1 for every $2 $46,920/yr. before month of full retirement age No Limit $1 for every $3 No Limit Note: If Social Security withholds some benefits because of earnings, benefits will increase starting at Full Retirement Age (FRA) to take into account those months when benefits were withheld.

16 Disability Benefits and Retirement You can file for disability all the way through full retirement age it is not an option for those past FRA It should be considered even if person elected reduced retirement, but has become disabled Substantial Gainful Activity limits for 2019 = $1220/month in gross earnings. Note: short/long term disability payments are immaterial to SSA, as are annual personal leave, vacation/sick days, administrative leave, etc. File or see more info at

17 Online Retirement Estimator Tool Immediate and personalized benefit estimates based on actual Social Security earnings record (behind the scenes) Create What if? scenarios based on different stop work ages and earnings Safe and secure

18 Public Pensions = Windfall Elimination Provision Windfall Elimination Provision (aka WEP or Windfall) applies if you have 40 Social Security credits and a pension from a non-fica system (Civil Service, OPERS, STRS, SERS, Police/Fire, etc). In this case, you are guaranteed a benefit, but Windfall will lead to a reduction in Social Security for most public pension recipients. MySocialSecurity and the Estimator DO NOT figure the Windfall. Use the WEP calculator for an accurate estimate.

19 Estimating with WEP Step 1: Get your benefit estimate with the mysocialsecurtiy account. Note the Estimator and mysocialsecurity do NOT figure WEP. Step 2: Use the online WEP calculator at click on Calculators Quick method for 2019 using your Full Retirement Age benefit estimate: $927 or more, subtract $463 $926 or less, multiple by.445

20 Spouse and Survivor

21 Dependents = Living Spouse and Childen Child Not married and younger than 18 (or up to 19 if still in high school) Not married and disabled before age 22 Dependent Spouse At age 62 At any age if caring for retired worker s child younger than 16 or disabled Worker must be at least age 62 AND receiving a Social Security benefit

22 Divorced Spouse Benefits Couple must have been married at least 10 years Both husband and wife must be at least 62 Divorced spouse must be unmarried at time of filing If divorced for at least two years- it doesn t matter if ex-spouse is receiving Social Security, just has to be age 62 Ex-spouse benefit has no effect on worker or other spouse Reminder earnings limitations apply!

23 How Much Does a Spouse Receive? If husband and wife both worked in Social Security-covered employment, each benefit is calculated independently Maximum benefit = 50% of worker s unreduced benefit Worker and spouse must both be at least age 62 (some exceptions) Worker must have filed for Social Security benefit for spouse to collect Spouse is paid higher amount off of two records not BOTH Again - earnings limit chart applies!

24 Spouse Benefit Calcuation If spouse collects benefits before full retirement age, monthly amount is reduced If full retirement age = 66, spouse benefit at Age 65 = 46% Age 64 = 42% Age 63 = 37.5% Age 62 = 35% Exception: Spouse benefit = 50% of worker s full benefit if spouse is taking care of retired worker s child younger than 16 or disabled and receiving benefits.

25 Spouse Benefit with Government Pension Offset GPO reduces Social Security spouse benefit by 2/3 of non-fica monthly pension Example without GPO: Fred gets Social Security at FRA = 2300/month Ann is spouse 50% of Fred = 1150/month Ann s own Social Security = 1400/month What does Ann receive? 1400/month Same example with GPO: Ann spouse amount on 50% Fred = 1150/month Ann OPERS pension is 3000 gross/month. 2/3 of OPERS = 2000/month Ann is offset, will not receive from Fred s Social Security If person doesn t get monthly pension, Social Security will figure monthly annuity based on employment date and account contributions

26 Reminder: Spouse Changes from 2016 File/Suspend for dependents ended 4/30/16. A person can still suspend benefits at FRA and beyond, but dependent benefits are suspended as well. Spouse Claiming Strategies rules changed in 2016: If you turned age 62 before 2016: if you wait until full retirement age to collect Social Security, you may be able to receive a spouse benefit while earning delayed credits on your own record. Not an option for those age 62 on or after 01/02/16. You receive whatever amount is more, on own record or spouse. So after 01/02/2020 this is no longer available

27 Survivor Benefits

28 Survivor Benefits Child Younger than 18 (or up to 19 if still in high school) Not married Disabled Child Beyond age 18 if disabled before 22 Not married Widow(er) Reduced benefits as early as age 60; if disabled, as early as age 50 Unreduced benefits if s/he waits until FRA At any age if caring for child younger than 16 or disabled Divorced widow(er) may qualify Remarriage after age 60 (50 if disabled) will not affect benefits

29 Survivor Benefit Computation Amount based on 100% of what worker was receiving at death or would have received at FRA As with a living spouse, you receive the higher benefit amount on your own record or the deceased spouse record Reduced benefits at age = 71.5% of worker s full benefit amount You can switch-ie start widow(er) benefits at 60, then move to unreduced benefit on own work record at FRA Earnings limits apply, GPO applies

30 Survivor Benefit with Government Pension Offset GPO reduces Social Security spouse benefit by 2/3 of non-fica monthly pension Living Spouse Example with GPO Ann spouse amount on 50% Fred = 1150/month Ann OPERS pension is 3000 gross/month. 2/3 of OPERS = 2000/month Ann is offset, will not receive from Fred s Social Security Deceased Spouse Example with GPO Ann widow amount on 100% Fred = 2300/month Ann OPERS pension is 3000 gross/month. 2/3 of OPERS = 2000/month Ann is offset, but will receive $300 widow amount from Fred s Social Security Reminder: If person doesn t get monthly pension, Social Security will figure monthly annuity based on employment date and account contributions

31 Spouse (Living) Can start from age 62 to Full Retirement Age (FRA) 50% at FRA or less if you start prior to FRA (reduction for each month you take it early) Divorced spouses qualify if marriage lasted at least 10 years and other conditions are met Survivor (Widow/er) Can start from age 60 to Full Retirement Age (FRA) 71.5% at age 60 and increases each month you wait, up to 100% if you start at FRA Divorced spouses qualify if marriage lasted at least 10 years and other conditions are met

32 Application Reminders You can apply for benefits three months before you want your payments to start. Benefits are paid the month after they are due. Apply online at It is the most convenient way to apply; or Call Social Security to schedule an appointment for survivor benefits

33 Benefits May Be Taxable If you file federal tax return as "individual" with combined income $25,000 - $34,000, you may pay income tax on up to 50% of benefits $34,000+, up to 85% of benefits may be taxable If you file joint return, and you and spouse have combined income $32,000 - $44,000, you may pay income tax on up to 50% of benefits $44,000+, up to 85% of benefits may be taxable If you are married and file separate tax returns, you probably will pay taxes on your benefits IRS W-4V download at Must select a % withholding rate. IRS pubs 915 and 554 Tax Guide for Seniors at

34 Medicare

35 Medicare Parts A and B 65 & older 24 months after entitlement to Social Security disability benefits Amyotrophic Lateral Sclerosis (ALS, Lou Gehrig s Disease) End-Stage Renal Disease

36 Social Security is the Gateway into Medicare Part A - Hospital Insurance Covers most inpatient hospital expenses No monthly premium for almost all Americans Mandatory once you are on benefits and age 65+ Part B - Medical Insurance 2019 standard monthly premium $ * Premium is deducted from benefits Not on benefits? Premium is normally billed quarterly from CMS, or sign up for bank account debit through Medicare Easy Pay at *Higher income beneficiaries may pay more 36

37 Medicare Enrollment in Parts A and B 1. Automatic enrollment if you are receiving Social Security benefits at age 65. No appointment or application needed. You can defer Part B without a penalty only if you are covered under active group employer health insurance coverage (yours or a spouse) Special Enrollment Period aka SEP. 2. Not on Social Security at age 65? You must APPLY for Parts A/B if you are covered under retiree insurance, COBRA, Affordable Care, or are uninsured apply 3 months before age 65 at 37

38 Medicare Enrollment in Parts A and B - SEP Age 65 and working? If you are covered under your - or your spouse s - active employer group health plan, you may delay Part B past 65 without a penalty. Special Enrollment Period (SEP) = all months age 65+ when you have active group employer health insurance. SEP ends the month you or spouse stop work + following 8 months. If age 65 and not on Social Security reminder you must APPLY if you want Medicare A/B. If you have active employer group health coverage, and you like this coverage you don t have to apply until work stops! 38

39 How to Apply in the Special Enrollment Period To process Part B in the SEP, you must contact Social Security by phone or visit a local office. SSA needs to see: 1. CMS L-564 proof of employer coverage 2. CMS -40B enrollment form for Part B *Download at You can complete the Part B SEP process up to 3 months in advance of when you want Part B to begin. 39

40 Part A and HDHP/HSAs Age 65+ and on traditional old fashioned employer health insurance you can enroll in Part A at age 65 as a secondary coverage. But caution with HDHP/HSAs. After 65, Part A retroactively begins 6 months before benefits (no early than 65). Thus Social Security recommends that beneficiaries with HSAs consult with HR and tax professionals 6 months before applying for Social Security benefits or Medicare. Reminder: you cannot refuse Medicare Part A if you are age 65+ and elect to receive Social Security benefits. See IRS Pub 969 for HSA details at 40

41 Income Related Monthly Adjustment Amount Higher-income beneficiaries (85K+ single, 170K+ couple) may pay higher premiums for Part B and for Part D Based on most recent tax return (ie-2019 on ) MAGI = Modified Adjusted Gross Income = gross income + Line 8b Tax Exempted Interest 2019 Part B and D limits are found at Re-calculated annually. You may request a new decision if you have updated tax information AND a life changing event retirement, divorce, death of spouse, marriage. See form SSA-44 for evidence needed. 41

42 Income Related Monthly Adjustment Amount If your yearly income in 2017 (for what you pay in 2019) was File individual tax return File joint tax return File married & separate tax return $85,000 or less $170,000 or less $85,000 or less $ above $85,000 up to $107,000 above $107,000 up to $133,500 above $133,500 up to $160,000 above $170,000 up to $214,000 above $214,000 up to $267,000 above $267,000 up to $320,000 Not applicable $ Not applicable $ Not applicable $ You pay each month (in 2019) above $160,000 and less than $500,000 above $320,000 and less than $750,000 above $85,000 and less than $415,000 $ $500,000 or above $750,000 and above $415,000 and above $

43 Other Parts of Medicare Purchased through private companies Part C HMO/Medicare Advantage Plans or Medicare Supplements aka Medigap Part D Drug Plans ** Social Security offers assistance paying for Part D with Extra Help. 43

44 Extra Help Income and Resource Guidelines 2018 Income (gross Social Security benefit, pension, etc.) Below 150% Federal poverty level $18,456 per year for individual (about $1,538/month) Resources (savings and stocks, $1500 burial exclusion) Up to $14,100 for individuals Up to $28,150 for married couples living together

45 Medicare Resources MEDICARE ( )