What Public Employees Should Know About Social Security & Medicare

Transcription

1 What Public Employees Should Know About Social Security & Medicare

2 Agenda my Social Security account Overview of benefits Social Security benefits while working How government pensions affect Social Security Filing for benefits Other online services Medicare

3 Services with a my Social Security Account If you receive Social Security benefits you can: Get instant benefit verification letter Change address/phone number Add or change direct deposit Check benefits If you don t get benefits you can: View, save and print your online Social Security Statement

4 Create My Social Security Account to Access Online Statement To get your online Social Security Statement, you must first create a my Social Security account. Once you have an account, you can view your Statement at any time. Make a habit to review it every year.

5 Earning Credits Worker must have 40 credits to earn a Social Security retirement benefit. 1 credit = $1,220 in FICA earnings in 2015 Maximum 4 credits in 1 year $4,880 in FICA earnings in

6 Ohio Has Many Non-Covered Government Workers Ohio Public Employees Retirement System (OPERS) State Teachers Retirement System (STRS) School Employees Retirement System (SERS) Ohio Police & Fire Pension Fund Civil Service Retirement System (CSRS)

7 Statement If You Have Non-Covered Pension If you have 40 credits, Statement lists retirement benefit amounts. If you don t have 40 credits, Estimated Benefits line will read Not available.

8 Number of credits are shown under Estimated Benefits tab.

9 Retirement Benefits Worker Reduced benefits as early as age 62 Full benefits at age Increased benefits after full retirement age Dependent Spouse (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

10 Taking Benefits Early The earlier you take Social Security benefits, the greater the reduction Benefit amount is reduced for each month taken before full retirement age If born and benefits start at: Age 62 Reduced 25% Age 63 Reduced 20% Age 64 Reduced 13.3% Age 65 Reduced 6.7% Reduction may be permanent!

11 Full Retirement Age & Age 62 Reduction Year of Birth Full Retirement Age % at Age % & 2 months 79.2% & 4 months 78.3% & 6 months 77.5% & 8 months 76.7% & 10 months 75.8% % & 2 months 74.2% & 4 months 73.3% & 6 months 72.5% & 8 months 71.7% & 10 months 70.8% 1960 & later 67 70%

12 Benefits for Dependent Spouses Social Security pays spouse/surviving spouse benefits to those who are financially dependent on the worker because they have no pension or a small pension from their own work.

13 How Spouse Benefits are Determined If husband and wife both work under Social Security, each benefit is calculated independently If spouse waits to collect until full retirement age, spouse benefit = 50% of worker s unreduced benefit If spouse s own benefit is less than 50% of worker s, spouse is paid higher amount off two records.

14 If You or Your Spouse are File and Suspend Full Retirement Age Restrict Scope of Application

15 Survivor Benefits Widow(er) Reduced benefits as early as age 60 As early as age 50 if disabled At any age if caring for a child of worker under age 16 or disabled before age 22 Divorced widow(er) may qualify if married at least 10 years Child Unmarried child under age 18 or 19 if still in high school Any age if disabled before age 22 $255 Lump Sum Death Benefit Surviving spouse or minor/disabled children only

16 How Widow(er) Benefits are Determined Age Percentage % % % If surviving spouse waits until full retirement benefit to draw, benefit amount is generally the same as what worker was receiving at time of death or would have received at full retirement age.

17 Social Security Benefits While Working What is work? Wages from non-covered government employment, under FICA, anywhere May be self employment Work is NOT income from private pensions, rental properties, investments, 401k or deferred comp, etc.

18 Work Before Full Retirement Age Work before full retirement age is subject to earnings limit that may cause withholding of some or all Social Security cash payments. True for benefits on your own record, or spouse/widow(er) benefits. Use the online Earnings Test Calculator at to estimate how work will affect your benefits.

19 You Can Work and Receive Benefits If You Are You Can Make Up To If You Make More, Some Benefits Will Be Withheld Under Full Retirement Age $ 15,720/yr. ( $ 1,310/mo.) $ 1 for every $ 2 The Year Full Retirement Age is Reached Month of Full Retirement Age and Above $ 41,880/yr. ( $ 3,490/mo.) No Limit $ 1 for every $ 3 No Limit Note: If some of your retirement benefits are withheld because of your earnings, your benefits will be increased starting at full retirement age to take into account those months when benefits were withheld.

20 Work After Full Retirement Age Once you reach Full Retirement Age (FRA), there is no earnings limit True for both non-covered and FICA wages Starts the month you reach FRA

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

22 Government Pension Offset (GPO) Only affects Social Security spouse/widow(er) benefits Reduces Social Security spouse/widow(er) benefit by 2/3 of non-covered government pension

23 Typical Spouse Benefit Computation Fred and Alice both paid FICA. Fred receives $1600 Social Security benefit at Full Retirement Age. Alice receives $1000 Social Security benefit at Full Retirement Age. Spouse 50% rate = $800. Alice cannot get spouse benefits because her own Social Security benefit is greater (offsets it). Law recognizes Alice is not dependent on Fred.

24 Before and After GPO Before GPO: Spouses could receive full Social Security spouse/widow(er) benefits, plus a non-covered government pension. With GPO: Non-covered government workers have spouse/widow(er) benefits calculated in a manner similar to that of the American public.

25 GPO Example: Spouse Tom receives $1600 Social Security benefit at Full Retirement Age Ann s potential spouse benefit from Tom at Full Retirement Age = $ 800 2/3 of Ann s $1500 non-covered government pension = $1000 Ann s Social Security spouse benefit = $0

26 GPO Example: Widow(er) Tom dies Ann s potential widow benefit = $1600 2/3 of Ann s $1500 noncovered government pension = $1000 Ann s Social Security widow benefit = $ 600

27 Windfall Elimination Provision (WEP) If you have 40 credits, you will receive a monthly Social Security retirement benefit. Since you are also receiving a noncovered government pension, Social Security benefit will be computed using a modified formula.

28 Calculating Benefits Adjust lifetime of Social Security earnings for wage growth Add together highest 35 years Divide total by 420 months (35 years x 12) to calculate monthly average Benefit reflects a percentage of average monthly indexed earnings figure

29 Relationship Between Benefits & Lifetime Earnings The higher your average lifetime Social Security earnings, the higher your monthly payment. Lower-paid workers receive larger payments per dollar paid into Social Security system.

30 % of earnings What You ll Get at Full Retirement Age 55% 41% 27% Low Earner Average Earner High Earner

31 Windfall Rules Recognizes the more years a worker has paid Social Security taxes on substantial earnings, the closer that person should be to standard benefit formula. 30+ years years = WEP doesn t apply = modified WEP 20 or fewer years = full WEP

32 What are Substantial Earnings? 30 years of Social Security earnings 30 years of substantial earnings Substantial earnings defined on reverse of WEP fact sheet However earnings that are not substantial may still increase Social Security benefit

33 Estimating Social Security Benefit with WEP Social Security Statement estimates don t figure WEP In 2015, if Full Retirement Age benefit estimate = $826 or more, subtract $413 $825 or less, multiply by.445 Online WEP Calculator at

34 WEP Guarantee If you receive a relatively low noncovered pension, you are protected. Reduction in your Social Security benefit cannot be more than ½ of government pension.

35 Important Points about WEP/GPO Estimated benefit amounts on Social Security Statement and online Retirement Estimator may not be accurate. If you are affected by GPO, contact SSA when you receive annual COLA to avoid overpayments. Social Security benefit is not reduced until you collect both Social Security and government pension. If a widow(er) receives survivor benefit from deceased worker s non-covered work, Social Security benefits are not reduced.

36 What You Need to Do to Prevent Overpayments If you receive a Social Security benefit, you must notify Social Security when you start to collect your public pension to avoid being overpaid. Mail or fax statement with non-covered pension amount and date pension is scheduled to begin so SSA can reduce Social Security amount. Find local office address at: Enter residential zip code. No proof that pension has begun? Call

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39 Common Questions About WEP and GPO Can I escape the effects of WEP and GPO if I withdraw my contributions as a lump sum? If my benefit is reduced due to WEP, will benefits to my dependents be reduced? What if I am a UC employee and am in the grandfathered TIAA-CREF? What if I left OPERS years ago, cashed out, returned to OPERS, but did not buy back my time? How will that affect my benefit computation? Can I be affected by both WEP and GPO?

40 Filing for Benefits Internet Telephone Office

41 Social Security Office Hours Social Security field offices are open to the public: Monday, Tuesday 9 a.m. - 4 p.m. Wednesday 9 a.m. - noon Thursday, Friday 9 a.m. - 4 p.m (except federal holidays) Social Security s teleservice center is open 7-7 Monday-Friday (except federal holidays) at Automated services available 24 hours a day

42 Online Retirement Application Available It s So Easy! Takes as little as 15 minutes to complete Start-and-stop capability with application number Automates checks of SSA databases No signed paper forms necessary just hit Sign Now Provides receipt for your records Provides list of documents that are needed Sends applicant acknowledgement Permits applicant to check claims status with application number If clarification is needed or if applicant might be entitled to receive more benefits on another person s record, Social Security will contact applicant

43 Other Online Services at File for spouse benefits using retirement application File for disability benefits File for Medicare only Use Retirement Estimator (does not figure reduction due to WEP/GPO) Get answers using searchable Frequently Asked Questions database

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

45 Medicare Options Original Medicare Part A and B (Primary) + Secondary Insurance Group Health Insurance (GHI), MedSup/Medigap, or Medicaid + Rx Coverage GHI or Part D OR Medicare Advantage Plans Part C (Must have A&B with C) 1. Hospitalization 2. Medical 3. Rx coverage

46 Medicare Part A Part A (Hospital Insurance) Covers most inpatient hospital expenses Most people do not pay a premium Deductible = $1,260 per 60-day benefit period in 2015

47 Medicare Part B Part B (Supplemental Medical Insurance) Covers 80% doctor bills and other outpatient medical expenses after $147 deductible in 2015 Standard premium = $104.90/month in 2015 Higher premiums for those with higher incomes (>$85,000/$170,000) The higher your income, the higher your premium Applies to about 5% of Medicare population

48 Medicare Part C Part C (Medicare Advantage Plans) Must have Part A and Part B Offered by private companies May pay additional monthly premium for additional benefits (prescription drugs, dental, vision, hearing, health and wellness) May be restricted to network of providers Higher premiums for those with higher incomes (just like Part B)

49 Medicare Part D Part D (Medicare Prescription Drug Coverage) Voluntary insurance program with premiums, deductibles, co-payments Choice of drug plans covering different drugs May pay penalty for delayed enrollment unless you have equal or better coverage Annual enrollment period Oct. 15-Dec. 7 Higher premiums for those with higher incomes (Just like Part B) Extra help with costs for people with limited income/resources

50 Medicare Supplement Insurance, aka Medigap Private health insurance designed to supplement original/traditional Medicare Helps pay some costs that original Medicare doesn t cover: copayments, coinsurance and deductibles Standardized plans identified by letters A N, each offering the same benefits no matter which insurance company sells it Supplements original Medicare unlike a Medicare Advantage Plan, which is an alternative way to get Medicare May not need Medigap policy with retiree health insurance

51 Medicare Options Original Medicare Part A and B (Primary) + Secondary Insurance Group Health Insurance (GHI), MedSup/Medigap, or Medicaid + Rx Coverage GHI or Part D OR Medicare Advantage Plans Part C (Must have A&B with C) 1. Hospitalization 2. Medical 3. Rx coverage

52 Medicare Enrollment Periods Automatic if receiving benefits at 65 Initial at age 65 Special if still working General January March

53 Filing for Medicare Contact SSA at age 65, even if you are not getting benefits May apply on own Social Security record (many government employees pay Medicare tax) or record of living, deceased or divorced spouse May need to purchase Part A if ineligible for premium-free Part A Anyone 65 or older can buy Part B

54 Medicare-Only Online Application Application takes just 10 minutes to complete Allows you to apply for Medicare on your own work record (not spouse s work record) Must elect Medicare only and delay cash benefits Must be at least 64 and 8 months old If outside initial 7-month Medicare enrollment period, we may ask to see proof of employer group health coverage to verify no penalty for delayed enrollment Can file for both Medicare A and B or Part A only

55 How to Take Advantage of Special Enrollment Period If you already have Medicare Part A, do not use online Medicare application to apply for Part B. Instead, contact SSA or download Special Enrollment Forms from socialsecurity.gov: 1) Give CMS-L564 to employer to complete. 2) Applicant completes CMS 40B showing month you want Part B to begin. Make copies and return completed forms to local Social Security office. Will receive updated Medicare card in mail.

56 Medicare Resources Medicare (OSHIIP) Ohio Senior Health Insurance Information Program

57 Common Questions About Medicare What if I have never paid the Medicare tax? Do I have to file for Medicare at 65? If I am still working, should I enroll in Part A only? If I delay enrolling in Medicare at 65, how do I enroll in Medicare so I don t pay a penalty or have to wait for coverage?

58 Sue Denny Cincinnati Public Affairs Specialist ext (513) (fax)