Social Security

1. Social Security

2. http://nationalpriorities.org/budget-basics/federal-budget-101/revenues/http://nationalpriorities.org/budget-basics/federal-budget-101/revenues/

3. Social Welfare • Welfare is the provision of a minimal level of financial support for all citizens, sometimes referred to as public aid – 43% of the budget (social security, Medicare Medicaid) • Also provided by nonprofit groups; charitable, educational, informal social groups, religious groups, and inter-governmental organizations • Financial support given to a targeted segment of the population – low income, homeless, veterans, American-Indians, WIC participants, schoolchildren (nutrition) – safety net programs – 12% of budget Poverty in the United States: 2012 (CRS, Nov. 13, 2013

4. Social Security (Wikipedia) The original Social Security Actwas passed in 1935 The current – amended version – 42 USC chapter 7 – includes several programs • Social Security – retirement and other programs • Medicare • Medicaid • Children’s Health Insurance Program (CHIP) • Programs that provide aid to individuals and families facing hardship. 

5. Social insurance Any government-sponsored program with the following four characteristics • theprogram defined by statute - benefits, eligibility requirements, and premiums defined by statute; • explicit provision is made to account for the income and expenses (often through a trust fund); • funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and • the program serves a defined population, and participation is either compulsory or the program is subsidized heavily enough that most eligible individuals choose to participate. Social Insurance Actuarial Standards of Practice No. 32 (Actuarial Standards Board, 1998)

6. Social Security is funded through payroll taxes - Federal Insurance Contributions Act tax (FICA) - and/or Self Employed Contributions Act Tax (SECA) – and apprpriations from Congress Monies collected by the Internal Revenue Service (IRS) and placed in the Social Security Trust Funds administered by the Department of the Treasury • Federal Old-Age and Survivors Insurance Trust Fund • Federal Disability Insurance Trust Fund • Federal Hospital Insurance Trust Fund - This trust fund is part A of Medicare, the United States' health insurance program for people age 65 and older and certain disabled persons • Federal Supplementary Medical Insurance Trust Fund – Part B and D

7. Financing Social Security • Social Security taxes • pay on your earnings up to a certain amount in 2013 that was $113,700 • Medicare taxes • pay on all of your wages or net earnings from self-employment Beginning 2013 workers will pay an additional 0.9 percent Medicare tax on income exceeding certain thresholds

8. Debt held in federal accounts money that the Treasury has borrowed from itself – 1/3 of the total Some federal tax revenues can only be used for certain programs and accumulated in dedicated trust funds When trust fund accounts run a surplus, the Treasury takes the surplus and uses it to pay for other kinds of federal spending Of course the Treasury must pay that borrowed money back to the trust fund at a later date Airport and Airway Trust Fund Civil Service Retirement and Disability Fund Commodity Credit Corporation Fund Federal Employees and Retired Employees Health Benefits Funds Employees Life Insurance Fund Highway Trust Fund Land and Water Conservation Medicare (Hospital Insurance and Supplemental Medical Insurance) Military Retirement Fund Nuclear Waste Fund Postal Service Fund Strengthening Markets, Income, and Supply Social Security Tennessee Valley Authority Fund Unemployment Insurance Fund Universal Service Fund

9. Reports From The Board Of Trustees • 2013 Annual Report of the Board of Trustees of the federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds Actuarial Studies

10. With a few exceptions all salaried income has a FICA and/or SECA tax collected on it • With few exceptions all legal residents working in the United States now have an individual Social Security card number • Nearly all working (and many non-working) residents since Social Security's 1935 inception have had a Social Security number since it is required to do a wide range of things from paying the IRS to getting a job

11. Total Social Security expenditures in 2013 were $1.3 trillion • 8.4% of the $16.3 trillion GNP (2013) and • 37% of the Federal expenditures of $3.684 trillion Status of the Social Security and Medicare Programs (Social Security Administration) Historical Tables (Office of Management and Budget) Income derived from Social Security is currently estimated to keep approximately 20% of all Americans - age 65 or older - above the Federally defined poverty level

12. Social Security reaches almost every family, and at some point will touch the lives of nearly all Americans • Social Security helps not only older Americans, but also workers who become disabled and families in which a spouse or parent dies • Today, about 161 million people work and pay Social Security taxes and about 57 million people receive monthly Social Security benefits

13. Social Security Administration • Retirement • Disability - benefits to you and certain members of your family if you have worked long enough and have a medical condition that has prevented you from working or is expected to prevent you from working for at least 12 months or end in death • Medicare • Survivors • Supplemental Security Income Minnesota Social Security Offices • Minneapolis Social Security Office • St Paul Social Security Office

14. Retirement The original Social Security Act of 1935 set the minimum age for receiving full retirement benefits at 65 The 1983 Amendments phased in a gradual increase in the age for collecting full Social Security retirement benefits The retirement age is increasing from 65 to 67 over a 22-year period, with an 11-year hiatus at which the retirement age will remain at 66 Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age Since the program first began paying monthly Social Security benefits in 1940 average life expectancy • for men reaching age 65 has increased to age 84 • for women reaching age 65, has increased to age 86

15. Retirement • Most of beneficiaries are retirees and their families—about 40 million people • Social Security was never meant to be the only source of income for retired people • Social Security replaces about 40% of an average retirees income • Most financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably • For this they will need private pensions, savings and investments

16. Medicare • The Medicare Program is the second-largest social insurance program in the U.S., with 50.7 million beneficiaries and total expenditures of $574 billion in 2012. • Health insurance program for people age 65 or older • Certain people younger than age 65 can qualify for Medicare including those who have disabilities including permanent kidney failure or amyotrophic lateral sclerosis (Lou Gehrig’s disease) • The program does not cover all medical expenses or the cost of most long-term care • Many individuals buy a Medicare supplement policy from a private insurance company to cover some of the costs that Medicare does not cover • It is financed in part by monthly premiums deducted from Social Security checks The Centers for Medicare & Medicaid Services administers the Medicare program

17. Medicare Trust Fund's Life Extended, But What Does It Really Mean? (PBS Newshour May 31, 2013) • Trustees: Medicare fund will run out in 2026 (CBS News May 31, 2013)

18. Disability • Studies show that a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching full retirement age • Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death • Federal law has a very strict definition of disability • Disability-Claim Judge Has Trouble Saying ‘No’(The Wall Street Journal May 19, 2011)

19. Supplemental Security Income • Payments to people with low income who are age 65 or older or are blind or have a disability • Understanding Supplemental Security Income (SSI) 

20. Survivors benefits • Social Security can help your family if you have earned enough Social Security credits through your work • Social Security helps families cope with the financial loss of the family wage earner by providing income for the families of workers who die • 98 of every 100 children could get benefits if a working parent dies • Social Security pays more benefits to children than any other federal program Survivors Benefits

21. Medicaid • Medicaid and CHIP (Children’s Health Insurance Program) provide health coverage to nearly 60 million Americans, including children, pregnant women, parents, seniors and individuals with disabilities • In order to participate in Medicaid, Federal law requires States to cover certain population groups (mandatory eligibility groups) and gives them the flexibility to cover other population groups (optional eligibility groups) • States establish and administer their own Medicaid programs, and determine the type, amount, duration, and scope of services within broad federal guidelines. States are required to cover certain “mandatory benefits,” and can choose to provide other “optional benefits” including prescription drugs • States receive federal matching funds to provide these benefits

22. The Center for Medicaid and CHIP Services (CMCS) is one of six Centers within the Centers for Medicare & Medicaid Services, an agency of the U.S. Department of Health and Human Services (HHS) • CMCS serves as the focal point for all national program policies and operations related to Medicaid and the Children’s Health Insurance Program (CHIP).

23. Department of Health and Human Services • Centers for Medicare and Medicaid Services • Federal Policy Guidance • Medicare.gov • Medicaid • State Resource Center • The Center for Consumer Information & Insurance Oversight

24. Unemployment Insurance US Department of Labor Employment and Training Administration • the Federal-State Unemployment Insurance Program provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined under State law), and meet other eligibility requirements of State law • benefits are intended to provide temporary financial assistance to unemployed workers • each State administers a separate unemployment insurance program within guidelines established by Federal law • in the majority of States, benefit funding is based solely on a tax imposed on employers The Minnesota Unemployment Insurance Program

25. Safety net • Government Benefits, Grants, and Financial Aid • low income,

26. Food and Nutrition Service • Supplemental Nutrition Assistance Program (SNAP) • The Special Supplemental Nutrition Program for Women Infants and Children (WIC) • Disaster Nutrition Assistance Programs • School Meals Senior Farmers' Market Nutrition Program DisasterAssistance.gov Veterans Benefits Low Income Home Energy Assistance Program Telephone Assistance Programs for Low-Income Households

27. Mortgages for Home Buyers and Homeowners • Renter's Assistance • Weatherization Assistance • Employment and Training Assistance • Youth Education and Training Assistance • Laid-Off and Dislocated Worker Assistance • Adoption Assistance • Head Start -  a federal program that promotes the school readiness of children ages birth to five from low-income families by enhancing their cognitive, social, and emotional development • Vaccines for Children

28. Native American Benefits • Refugee Resettlement Programs • Rural Assistance Center

29. Charities Charity Search • Health • Human Services – children‘s and family services, food banks, homeless services, social services • Public Benefit – civil rights, community and housing development Tax benefits of giving Eight tips for deducting charitable contributions (IRS) Tax Information for Charities & Other Non-Profits (IRS) The Future of the Charitable Deduction (New York Times Nov. 21 2013)

30. Pensions (Wikipedia) Governed primarily by federal statutory law – the Employee Retirement Income Security Act (1974) • set minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans • requires plans to provide participants with information about plan features and plan funding • provides fiduciary responsibilities for those who manage and control plan assets; • requires plans to establish a grievance and appeals process for participants to get benefits from their plans • gives participants the right to sue for benefits and breaches of fiduciary duty

31. Defined benefit plan • a pension plan in which an employer/sponsor promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age • traditionally, governmental and public entities, as well as a large number of corporations, provided defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay • the most common type of formula used is based on the employee’s terminal earnings (final salary). Under this formula, benefits are based on a percentage of average earnings during a specified number of years at the end of a worker’s career Minnesota State Retirement System Public Employees Retirement Association of MN

32. Each employee does not have a separate account in these programs, as the money to support the pensions is generally administered through a trust established by the employer • No recourse for individuals with defined benefit plan when their employers go out of business • 1974 Act passed in response to the mismanagement of funds in direct benefit plans • All employers who engage in interstate commerce and provide defined benefit plans to their employees must abide by ERISA guidelines

33. Defined contribution plan • contributions are paid into an individual account for each member • contributions are invested in the stock market, and the returns on the investment (which may be positive or negative) are credited to the individual's account • on retirement, the member's account is used to provide retirement benefits • defined contribution plans have become widespread all over the world in recent years, and are now the dominant form of plan in the private sector in many countries University of Minnesota Faculty Retirement Plan

34. Department of Labor responsible for the operation of the pension plans • Internal Revenue Service responsible for funding the plans • Pension Benefit Guaranty Corporation established to insure the pensions

35. Pension Benefit Guaranty Corporation • Federal corporation created by the Employee Retirement Income Security Act of 1974 • It currently protects (insures) the pensions of more than 44 million American workers and retirees in more than 29,000 private single-employer and multiemployer defined benefit pension plans • Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans Companies insured by PBGC A Predictable Secure Pension for Life