Social Security benefits are not paid automatically. Claimants must file an application for benefits with the nearest Social Security Office.
A fully insured employee is eligible to receive monthly retirement benefits as early as age 62, but at a reduced rate. Employees receive the full benefits rate if they wait until age 65 before filing for benefits. Under the Social Security Amendments of 1983, the retirement age gradually rises to age 66 by the year 2005 and age 67 by the year 2027. The law does not affect the availability of reduced benefits at age 62. If workers meet the eligibility requirements, Social Security retirement payments are also made to their dependents. Contact SSA for an explanation of which dependents are eligible for benefits.
To receive disability benefits under the Social Security Program, an individual must provide proof from a doctor, hospital, or clinic providing treatment, attesting to the worker’s inability “to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that has lasted or is expected to last 12 months or to result in death.” Additionally, the impairment must preclude an individual’s ability to engage “in any kind of substantial gainful activity which exists in the national economy, regardless of whether such work exists” in the immediate area of residence.
After a 5–month waiting period, a worker who becomes disabled is eligible to receive disability payments provided that the individual is both fully and disability insured. In addition to being “fully insured,” workers disabled at age 31 or older must have had 5 years (twenty quarters) of coverage in the last 10 years prior to becoming disabled. A delay of over 12 months in making application for disability benefits may result in losing benefits; however, there are special conditions which warrant an extension.
Disability payments are also made to disabled worker’s dependents. The disabled worker may contact the SSA for an explanation of necessary eligibility requirements for disability benefits.
Benefits are payable to the family upon a covered worker’s death at any age provided that the worker is fully or currently insured. Eligible survivors of a fully insured worker will be determined by SSA.
Medicare consists of two health insurance programs:
- Hospital insurance (Part A) is a basic plan which provides payments for inpatient hospital care, posthospital extended care service, posthospital home health–care services, outpatient hospital diagnostic services, and hospice care. Federal and postal employees contribute FICA taxes through payroll deductions for Part A coverage.
- Medical insurance (Part B) is a voluntary supplementary plan which provides payments for medically necessary doctor’s services, outpatient hospital services, medical services and supplies, home health services, outpatient physical therapy, and other home health–care services. Part B is financed through monthly premiums paid by the enrollee with the federal government paying a like amount.
The following provisions apply:
- General. Practically everyone 65 or older is eligible for Medicare. Employees are not required to retire in order to attain Part A hospital insurance protection at age 65.
- Automatic Enrollment. Persons entitled to Social Security retirement or disability benefits will automatically be enrolled at age 65 in both the basic hospitalization plan (Part A) and the voluntary supplementary medical insurance plan (Part B). Those eligible for automatic enrollment must be given an opportunity to decline the Part B coverage.
- Enrollment by Application. Federal and postal employees who are eligible for Medicare, Part A, on the basis of federal/postal employment and who are not otherwise entitled to Social Security retirement and disability must apply for hospital insurance in order for it to begin at 65. Employees who continue to work after age 65 also must file an application for Part A Medicare coverage to begin at age 65. Those eligible should file an application for Part A coverage about 3 months before their 65th birthday.
- Anyone eligible for Part A who is not automatically enrolled in Part B may apply for the Part B medical insurance coverage. No Social Security or federal/postal work credits are needed to become enrolled in Part B, but a monthly premium is required.
- The initial Part B enrollment period for each person is the 7–month period beginning with the first day of the third month before the month in which age 65 is attained or, for the disabled, the first month of eligibility for Part A coverage.
- The employee may also sign up for Part A any time after the initial enrollment period, but if the employee does not sign up for Part B during the initial enrollment period, the premiums increase.
The following people under 65 are eligible:
- Disabled people who have been receiving (or who are entitled to) Social Security disability benefits for 2 consecutive years or more.
- People insured under Social Security (and their spouses and children) who need dialysis treatment or kidney transplants because of chronic kidney disease.
An employer must offer workers age 65 or older the same health benefits under the same terms and conditions as those offered to workers under 65. An employee who continues to work after 65 has the option to accept or reject coverage under the Federal Employees Health Benefits Program (FEHBP).
Employees and their spouses age 65 or older must be provided with a written explanation of all available health plans and of their options under these plans. Specifically, this written explanation must include information about the consequences of electing coverage under FEHBP and the effects of such a choice on Medicare coverage.
Employees must also be given an opportunity to make an election in writing. If the employee accepts the FEHBP coverage, Medicare will become the secondary health insurance payer. But, if the FEHBP is rejected, Medicare will remain the primary health insurance payer. As indicated in 575.221c any employee who will continue to work after age 65 must file an application for Part A in order for Medicare protection to begin at age 65.
Benefit payments will be affected if a retiree under age 70 returns to work and earnings exceed the annual exempt amount. A total annual exempt amount is determined each year for people 65 or over, and another for people under 65. In future years, the annual exempt amounts will increase automatically according to the rise in the level of average wages. If earnings exceed the annual exempt amount, $1 is withheld in benefits for each $2 of earnings above the limit. Starting in 1990, $1 in benefits will be withheld for each $3 in earnings above the limit for people in the 65 to 69 age group. Beginning in 2000, the age at which this withholding rate applies will increase as the retirement age increases.
If an employee has Medicare hospital insurance because of entitlement to Social Security benefits on a spouse’s work record, the protection will end if entitlement to benefits ends. If hospital insurance is obtained as the spouse of a federal employee, the protection will end if the employee and spouse divorce before the marriage has lasted 10 years. If hospital insurance is based on the employee’s own Social Security work record or own federal/postal employment, the protection will continue for life.
The 1983 amendments to the Social Security law provide for a modified benefit formula (MBF) designed to eliminate windfall Social Security benefits. The Social Security benefit computation formula has always been weighted to replace a higher portion of preretirement earnings for workers with low earnings than for workers with substantial earnings under Social Security. Although this weighted formula is intended to benefit workers with a history of low earnings, it also works to the advantage of persons who had substantial income from jobs not covered by Social Security. The MBF eliminates the excess benefit provided to such persons by using a less heavily weighted benefit formula to calculate benefits. Also, the provisions of the MBF guarantee that the reduction in the Social Security benefit cannot exceed one–half of that part of the pension based on noncovered employment after 1956.
The modified formula applies when a worker is first eligible, after December 31, 1985, for both a Social Security retirement or disability benefit (excluding Railroad Retirement) and a pension from employment not covered by Social Security. However, the formula will not apply to workers who have 30 years of Social Security coverage, and it will have a lesser effect on workers with 26 to 29 years of coverage under Social Security. Also, employees hired on or after January 1, 1984, who became mandatorily covered by Social Security are not subject to the modified computation provisions.
Retirement benefits are generally computed using a worker’s yearly earnings beginning with 1951 (or with attainment of age 22, if later) up to the year the employee reaches age 62. Only earnings up to the maximum creditable under Social Security for each year may be used. The yearly amounts are indexed to account for increases in coverage earnings in the economy since the time they were earned. By adding the indexed earnings and dividing by the total months in the years used, excluding up to 5 years of low or no earnings, the Average Indexed Monthly Earnings (AIME) is determined. In disability cases, the AIME is computed using earnings up to the year the disability begins. With both retirement and disability claims, up to 5 years of low or no earnings may be dropped from consideration in computing the AIME.
A Social Security benefit is weighted by dividing the AIME into three tiers or levels (see 575.53). The dividing points change each year for newly eligible workers as average earnings levels change. The monthly benefit is computed by taking 90 percent of first–tier earnings, 32 percent of second–tier earnings, and 15 percent of third–tier earnings. Thus, workers with low average earnings receive a higher percentage of their earnings. The results are added to obtain the basic benefit rate which is the Primary Insurance Amount (PIA). This amount is then rounded to the next lower multiple of $.10 if it is not already a multiple of $.10. The benefit is actuarially reduced if retirement benefits are paid before age 65.
Under the MBF, the weighting will be phased out by reducing the percentage in the first tier by 10 percent per year from 1986 to 1990. The MBF will be fully effective for workers who attain age 62 or become disabled in 1990 or later. The second– and third–tier percentages will remain unchanged.
Effective for persons first eligible for both (1) a pension based on noncovered employment and (2) a Social Security Retirement or Disability Benefit in:
The general formula for computing PIA is as follows. The dollar amount limits for each tier in the formula are as stated in Social Security Publication No. 05–10070, March 1997, and are subject to change.
Computation for a worker with an AIME of $1,200 and no noncovered (CSRS) pension benefit is shown below.
Computations for workers with AIMEs of $1,200 and noncovered (CSRS) pension benefits, becoming eligible for benefits after January 1, 1990, are shown below.
The Modified Benefit Formula provisions provide a guarantee that the reduction in Social Security benefit cannot exceed one–half of that part of the pension based on noncovered employment. To determine if the guarantee applies, a comparison of the first tier computations at 90 percent and at 40 percent is necessary.
Example 1 — Noncovered Pension Benefit of $550
As the reduction in benefits when using the MBF computation ($227.50) is not greater than 50 percent of the noncovered pension ($275.00), the guarantee does not apply and the 40 percent factor is used to compute the PIA.
Example 2 — Noncovered Pension Benefit of $250
As the reduction in benefits when using the MBF computation ($227.50) is greater than 50 percent of the noncovered pension ($125.00), the guarantee does apply and the PIA is computed as below.
The purpose of the government pension offset is to eliminate windfall payments to retired government workers who have their own pensions and who also would receive Social Security benefits as a spouse or surviving spouse. The government pension offset applies only to Social Security benefits for a spouse or surviving spouse. It does not apply to Social Security retirement or disability benefits based on a person’s own work covered by the program even if the person also receives a government pension. Social Security benefits paid to spouses and surviving spouses are offset by the amount of any public (federal, state, local) retirement benefits payable to the spouse on the spouse’s own work in noncovered public employment.
The following provisions apply:
- Employees may be exempt from the pension offset if both of these requirements are met:
- They began to receive, or were eligible to receive, a federal, state, or local government pension before December 1982. This means that the age and length–of–service requirements for the pension must have been met before December 1982 even though application for the pension was not made before then.
- They satisfy all the requirements for the spouse’s or surviving spouse’s Social Security benefits in effect in January 1977. At that time, a divorced woman’s marriage must have lasted at least 20 years rather than 10 years as required today, and a husband or widower must have received at least one–half of his support from his wife.
- Even if employees do not met these criteria, they still may be exempt from the offset beginning with Social Security benefits payable December 1982 if both of these requirements are met:
- They were receiving, or were eligible to receive, a federal, state, or local government pension before July 1, 1983.
- They were receiving at least one–half of their support from their spouse. This provision applies to men and women.
- In addition to the exceptions mentioned earlier, the offset will not apply if any one of these requirements is met:
- The government service which the pension is based on is covered by Social Security on the last day of employment; or (b) The employee is entitled to Social Security benefits as a spouse, or surviving spouse, based on an application filed before December 1977.
- The government pension that the spouse is receiving is not based on the spouse’s own earnings.
- The employee elected to transfer into FERS on or before December 31, 1987. The government offset applies only to Social Security benefits for a spouse or surviving spouse. It does not apply to Social Security retirement or disability benefits based on a person’s own work covered by the program even if the person also receives a government pension.
If the employee is not exempt from the offset, the amount of the government pension that will be used for calculating the offset against the spouse’s or surviving spouse’s Social Security benefits will depend on when the spouse first became eligible for the pension (not when the spouse actually applies for it):
- Before July 1983 — All of the pension will be used for any benefits payable for months before December 1984. Effective with December 1984, the offset amount is two–thirds of the pension.
- July 1983 or later — Two–thirds of the pension will be used.
The offset works much the same way that benefits are offset when a person is entitled to more than one type of Social Security benefit. For example, the Social Security check paid to a spouse or surviving spouse (widow, or widower) is reduced by the amount of any Social Security benefit that person earned in his or her own right.
