Correcting your work record

Q: I work part-time as an employee for a business and receive a W-2 for those wages plus I have separate self-employment earnings that I pay taxes on when filing my taxes each year. Only the W-2 wages appear on my most recent Social Security Statement. Since I have been paying self-employment taxes, shouldn’t they be on my Social Security number earnings history as well? How do I fix this?

A: Most people who pay into Social Security work for an employer. Their employer deducts Social Security taxes from their paycheck, matches that contribution, sends taxes to the Internal Revenue Service (IRS), and reports wages to Social Security. If registered for SSA Business Services, employers can verify employee Social Security numbers online and report W-2 wage information electronically.

Self-employed people must report their earnings and pay their taxes directly to IRS. If self-employed, you report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file.

All employment earnings for a year are usually posted to your personal work record near the end of October of the following year so your total 2014 employment earnings should be posted to your record approximately the end of October 2015. This applies whether or not a person receives monthly Social Security benefits. When already receiving benefits, new earnings are automatically reviewed to see if they will increase the amount.

If earlier years are not correctly posted, your local Social Security office can help correct your record. Evidence generally needed includes proof of the earnings, such as a W-2 and 1099. For self-employment, tax return information including tax form Schedule SE and proof of tax payment is also needed.

If you received your Social Security Statement by mail, know that you can get a copy of it anytime at your convenience by creating a personal, pin and password protected, my Social Security account. More about doing this is at http://www.socialsecurity.gov/myaccount/.

Annual Trustees Report for 2015

Yesterday the Social Security Board of Trustees released its annual report for 2015 with the following news release.

The full 2015 Trustees Report is at http://www.socialsecurity.gov/OACT/TR/2015/

###

Wednesday, July 22, 2015 – For Immediate Release

Social Security Board of Trustees: Trust Fund Reserve Gains One Year for Projected Depletion Date 

The Social Security Board of Trustees today released its annual report on the long-term financial status of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2034, one year later than projected last year, with 79 percent of benefits payable at that time. The DI Trust Fund will become depleted in 2016, unchanged from last year’s estimate, with 81 percent of benefits still payable.

In the 2015 Annual Report to Congress, the Trustees announced:

  • The combined trust fund reserves are still growing and will continue to do so through 2019. Beginning with 2020, the cost of the program is projected to exceed income.
  • The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2034 – one year later than projected last year. At that time, there will be sufficient income coming in to pay 79 percent of scheduled benefits.
  • The projected actuarial deficit over the 75-year long-range period is 2.68 percent of taxable payroll — 0.20 percentage point smaller than in last year’s report.

While the projected depletion date of the combined OASDI trust funds gained a year, the Disability Insurance Trust Fund’s projected depletion year remains 2016. I agree with President Obama, we have to keep Social Security strong, protecting its future solvency. President Obama’s FY 2016 budget proposes to address this near-term Disability Insurance Trust Fund’s reserve depletion. By reallocating a portion of payroll taxes from Old Age Survivors to the Disability Trust Fund – as has been done many times in the past – would have no adverse effect on the solvency of the overall Social Security program,” said Carolyn W. Colvin, Acting Commissioner of Social Security.

We believe that Congress must take action to reallocate a portion of the payroll tax rate between the trust funds to avoid deep and abrupt cuts or delays in benefits for individuals with disabilities who paid into the system while they worked and now need the benefits they earned to support themselves and their families,” Colvin said.

Other highlights of the Trustees Report include:

  • Income including interest to the combined OASDI Trust Funds amounted to $884 billion in 2014. ($756 billion in net contributions, $30 billion from taxation of benefits, $98 billion in interest, and less than $1 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation)
  • Total expenditures from the combined OASDI Trust Funds amounted to $859 billion in 2014.
  • Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.
  • The asset reserves of the combined OASDI Trust Funds increased by $25 billion in 2014 to a total of $2.79 trillion.
  • During 2014, an estimated 166 million people had earnings covered by Social Security and paid payroll taxes.
  • Social Security paid benefits of $848 billion in calendar year 2014. There were about 59 million beneficiaries at the end of the calendar year.
  • The cost of $6.1 billion to administer the program in 2014 was a very low 0.7 percent of total expenditures.
  • The combined Trust Fund asset reserves earned interest at an effective annual rate of 3.6 percent in 2014.

The Board of Trustees comprises six members. Four serve by virtue of their positions with the federal government: Jacob J. Lew, Secretary of the Treasury and Managing Trustee; Carolyn W. Colvin, Acting Commissioner of Social Security; Sylvia M. Burwell, Secretary of Health and Human Services; and Thomas E. Perez, Secretary of Labor. The two public trustees are Charles P. Blahous, III and Robert D. Reischauer.

View the 2015 Trustees Report at www.socialsecurity.gov/OACT/TR/2015/.

###

 

 

Same-sex marriage update

On June 26, 2015, the Supreme Court issued a decision in Obergefell v. Hodges, holding that same-sex couples have a constitutional right to marry in all states. As a result, more same-sex couples will be recognized as married for purposes of determining entitlement to Social Security benefits or eligibility for Supplemental Security Income (SSI) payments.

The Social Security Administration is working with the Department of Justice to analyze the decision and provide instructions for processing claims. Local offices are receiving updated instructions for different states on a flow basis.

Information for same-sex couples is on the Social Security website at http://www.socialsecurity.gov/people/same-sexcouples/.

A  direct link to this section is at the bottom of the SSA website homepagesame-sex website

Survivor benefits go to official widow or widower

Q: After the children were grown, my husband and I separated but remained married even though he was living with another woman for the last decade. He died recently. Can I receive Social Security benefits as his widow even though we have been apart for years?

A: If monthly Social Security survivor benefits are payable, they would be paid to you as the legal widow.

Since you were not living together, usually a one-time payment of $255 originally intended to help offset funeral costs would not be paid to you or the other woman.

Survivor benefits based on your age can begin as early as age 60. For younger widow or widowers with a severe disability, survivor benefits can begin as young as age 50. They are also payable at any age if eligible children are involved. More information is here.

Have you worked enough to be eligible for Social Security retirement on your own work record? If so, you have options to consider. For example, you can start the smaller benefit first at a reduced for age amount and switch to the larger one when you are older and past age reductions for the benefit involved. Discuss your options with a SSA representative.

When eligible for two different types of Social Security benefit, such as your own retirement and as a widow or widower, you receive up to the larger amount, not all of one plus all of the other.

Always contact Social Security about possible benefits when there is a death in the family. You cannot report a death or apply for survivors benefits online. Call the Social Security national toll-free number, 1-800-772-1213 (TTY 1-800-325-0778) from 7:00am – 7:00pm local time or contact your local SSA office.

 

 

Are SSA amounts based on where you live?

Q: Do Social Security retirement amounts change based on what state you live in?

A: No. Your retirement amount is based on your personal work history over many years and your age when starting benefits, not on where you live. It will not change if you move to a different state.

Your best 35 years of work are key when your retirement benefit is computed. These best 35 years, often including years immediately before retirement but selected from your full work history, are weighted for inflation and used to compute your Social Security retirement amount as if you were full retirement age (FRA). If you do not have 35 years of work, zeros are added in to reach 35 years.

When your full retirement age amount is known, the specific amount for the month you are starting Social Security is determined by reducing or increasing the FRA amount, depending on if you are younger or older than FRA for the month when benefits start. Go to the SSA Retirement Planner section to estimate your own Social Security retirement amount.

Once receiving Social Security benefits, any cost-of-living increase is computed nationally based on changes in a consumer price index from one year to the next, not where you live.

In a related manner, benefits to you if disabled or survivors benefits to your family if you die are also based on your personal work history and not where you live.

Your Social Security work record is based on employer W-2 reports or your Schedule SE tax return if self-employed. Check it for accuracy by creating a personal my Social Security account at http://www.socialsecurity.gov/myaccount/ and viewing your SSA Statement.

Earnings for 2014 will not show on your record until approximately October 2015. It is very important for your future benefits that your work record be accurate. If it has an error, contact your local office to correct it.

When did SSA retirement at age 62 begin?

Are you thinking of starting Social Security retirement at age 62, or at any time when younger than your full retirement age (FRA)? Did you know that this option was not always available?

Early retirement was not part of the original 1935 Social Security Act. At that time, SSA retirement could not start before age 65. No option for reduced retirement benefits existed.

The ability to start Social Security reduced retirement at age 62 came in later years and at different times for women and men. Signed by President Eisenhower in August 1956, the Social Security Amendments of 1956 provided women the option of starting reduced retirement at age 62. The Social Security Amendments of 1961, signed by President Kennedy on June 30, 1961, extended the option of starting early retirement at age 62 to men.

Whether you are considering retirement at age 62 or later, go to the SSA Retirement Planner website to estimate your Social Security retirement amount.

August 14 is the 80th anniversary of the signing of the historic Social Security Act in 1935 by President Franklin D. Roosevelt. To help commemorate this date and engage the public in this milestone, the Social Security Administration has launched a commemorative 80th anniversary website at www.socialsecurity.gov/80thanniversary/.

Social Security and your other pensions – GPO

Pensions generally do not reduce the amount of your Social Security but a pension based on earnings not covered by Social Security can do so.

The previously mentioned Windfall Elimination Provision (WEP) could affect the amount of your own Social Security retirement if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security.

What if you do not have enough Social Security covered employment to receive your own retirement benefit but you are eligible for Social Security benefits as a spouse or widow / widower? Then, if you will receive a pension from work not covered by Social Security, the Government Pension (GPO) will likely interest you.

Unlike the WEP, which involves a changed method of computing benefits, the Government Pension Offset (GPO) is a direct reduction of the SSA benefit amount as described on the SSA website, in part shown below. Some GPO exemptions apply. More about these exemptions are on the website.

From the website:

“If you receive a pension from a government job in which you did not pay Social Security taxes, some or all of your Social Security spouse’s, widow’s or widower’s benefit may be offset due to receipt of that pension. This offset is referred to as the Government Pension Offset, or GPO. 

The GPO will reduce the amount of your Social Security spouse’s, widow’s or widower’s benefits by two-thirds of the amount of your government pension. For example, if you receive a monthly civil service pension of $600, two-thirds of that, or $400, must be used to offset your Social Security spouse’s, widow’s or widower’s benefits. If you are eligible for a $500 spouse’s benefit, you will receive $100 per month from Social Security ($500 – $400 = $100).”  

Go here for more about the Government Pension Offset (GPO).

Just like the Windfall Elimination Provision, the Government Pension Offset is not new. Both date back to the Social Security Amendments of 1983, signed into law by President Reagan on April 20, 1983. Designed to resolve short-term funding problems faced at the time, that legislation made significant changes to the Social Security and Medicare programs.

GPO

 

More about the WEP

Today continues the Windfall Elimination Provision (WEP) topic started this week.

To recap, pensions generally do not reduce your Social Security retirement. The Windfall Elimination Provision (WEP) is an exception to this general rule. In very limited cases, mainly involving people who have had government employment, your pension can result in a lowered Social Security retirement amount based on your own work record.

The WEP could involve you if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security. A pension based on earnings not covered by Social Security can affect the amount of your own Social Security retirement.

Key here is that the employment was not covered by Social Security. Most pensions are based on employment that is covered by Social Security. If you pay Social Security tax on your wages or self-employment, you are in covered employment.

For government employment, note that any level of government from federal to local can be involved. Here are some examples:

  1. Federal employment: people who began working for the Federal government in 1984 or later are covered by Social Security. Before then, Federal employees were covered by the old Civil Service Retirement System (CSRS) and did pay into Social Security. The Windfall Elimination Provision (WEP) affects CSRS retirees.
  2. State employment: sometimes a specific type of state employee, such as law enforcement, is not covered by Social Security. If so, the WEP can apply.
  3. Local government: do you work for a city government? City government employees are usually covered by Social Security. If not, the WEP can apply.
  4. School Districts: school districts are local government entities. Many, but not all, school district employees are covered by Social Security. As with the other examples, if not covered, then the WEP can apply.

When applicable, the Windfall Elimination Provision affects the amount of your own Social Security retirement. This means that, in addition to the work not covered by Social Security, you also had enough other employment in work covered by Social Security to be eligible for your own SSA retirement. Depending on the amount of annual earnings, a person needs at least 10 years of work to be insured for a retirement benefit.

So, if you are not eligible for Social Security retirement on your own work record the Windfall Elimination Provision would not apply. However, the Government Pension Offset (GPO), my next topic, might.

WEPa

 

Social Security and your other pensions – WEP

His question was “Will his military retirement will reduce his Social Security retirement?” It will not as explained below but the question brings up a topic that I have not mentioned for a while, the Windfall Elimination Provision (WEP).

As a general rule, pensions are not considered in the amount of your Social Security benefit. Pensions are not counted towards annual earnings test amounts and they do not reduce your SSA retirement amount.

The Windfall Elimination Provision (WEP) is an exception to this general rule. In very limited cases, mainly involving people who have had government employment, their pension can result in a lowered Social Security retirement amount based on your own work record.

In summary, the WEP could be important to you if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security. A pension based on earnings not covered by Social Security can affect the amount of your own Social Security retirement.

Key here is that the employment was not covered by Social Security. Most pensions are based on employment that is covered by Social Security. If you pay Social Security tax on your wages or self-employment, then you are in covered employment.

Military service has been covered employment for Social Security for many years so a military retirement pension does not reduce Social Security retirement.

The WEP is not a direct reduction of your own Social Security retirement. It is a change in the formula used to compute a retirement amount that results in a lower retirement benefit. As a result, estimates of your SSA retirement amount on your Statement or from the online Retirement Estimator will not be accurate. Instead, use the WEP Calculator for your retirement estimate. The WEP Calculator is in the Retirement Planner portion of the Social Security website, www.socialsecurity.gov.

The Windfall Elimination Provision is not new. It dates back to the Social Security Amendments of 1983, signed into law by President Reagan on April 20, 1983. Designed to resolve short-term funding problems faced at the time, that legislation made significant changes to the Social Security and Medicare programs.

I will write more about the Windfall Elimination Provision later this week. Additional WEP information is here.

WEP

From wife to widow

Q: My dad died this month at age 89 and is survived by his wife, my stepmother. She is in her 80’s and her Social Security amount is less than his. What does she need to do to get his Social Security benefits?

A: Before getting to this question, two points must be emphasized.

First, always contact Social Security when there is a death in the family. Call the national SSA toll-free number at 1-800-772-1213 (TTY 1-800-325-0778) or your local office. If additional benefits are payable, action can begin to start them and, if not, other information can be given.

Second, when eligible for SSA benefits on two records, such as your own retirement and as a widow or widower, you receive the higher benefit amount and not all of one plus all the other.

Since her Social Security amount is less than his, it is probable that her amount will increase to about what his had been.

If she now receives Social Security benefits as a spouse on her husband’s record, changing to a widow’s benefit will take place automatically once his death is reported to Social Security. This is because information about her is already part of his record, including evidence of marriage.

If not yet receiving benefits as a spouse, and therefore not yet connected to his record, she will need to complete an application for survivors benefits as his widow. This is easy to do and can be completed during a telephone or personal interview however she prefers. Evidence of their marriage and his death will be requested. All documents are returned to her.

In addition to increased ongoing benefits, she will probably be eligible for a one-time Social Security benefit of $255 to help towards funeral costs. This is arranged with the monthly survivors benefits.

Your dad would not be eligible to Social Security for the month of his death. Benefits for a month are paid in the following month. If received, these are usually returned to Treasury by the bank. However, she will be eligible for the widow’s benefit for the month of death.

More about Social Security survivors benefits is at http://www.socialsecurity.gov/survivors/.