Linda Yelverton Angie Dowdy Social Security Program DirectorAnalyst (225) 342-0026(225) 342-0295...
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Linda Yelverton Angie Dowdy Social Security Program Social Security Program Director Analyst (225) 342-0026 (225) 342-0295 John Neely Kennedy State Treasurer and State Social Security Administrator The Who, What and Why of Withholding GFOA Fall Conference
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Transcript of Linda Yelverton Angie Dowdy Social Security Program DirectorAnalyst (225) 342-0026(225) 342-0295...
Linda Yelverton Angie Dowdy
Social Security Program Social Security Program
Director Analyst
(225) 342-0026 (225) 342-0295
John Neely Kennedy State Treasurer and State Social Security Administrator
The Who, What and Whyof Withholding
GFOA Fall Conference
2
History of Section 218
Role of State Social Security Administrator
Majority and Divided Vote Referendums
Mandatory Medicare
WEP and GPOOctober 2, 2013
I will discuss…
3
History of Section 218… 1935 Original Social Security Act provided
NO coverage for state and local government
1951 Section 218 allowed voluntary coverage of Non-retirement system positions
1952 Louisiana entered into a Section 218 Agreement with SSA
1955 Coverage of retirement system positions by majority vote referendum
2004 Coverage of retirement system positions by divided vote referendumOctober 2, 2013
4
History of Section 218… Each state has entered into a
“Section 218 Agreement” with the Social Security Administration(Including Puerto Rico and the Virgin Islands)
State enabling legislation determined how each state wanted to apply the Social Security Act
(within Federal guidelines)
October 2, 2013
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Role of State Administrator… Administers the Section 218
Agreement Negotiates modifications to the
Agreement Conducts Referenda Resolves coverage and taxation issues
with the Social Security Administration and Internal Revenue Service
Provides information to state and localgovernment agencies October 2, 2013
6
Obtaining Social Security or Medicare-Only coverage
October 2, 2013
7
Absolute Coverage…
October 2, 2013
Non-Retirement System Group
No referendum necessary
8
Majority Vote Referendum… If a majority of eligible members of
the retirement system/plan vote in favor of coverage, ALL eligible employees and all future employees would be covered
Even those that voted “NO” October 2, 2013
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Divided Vote Referendum… Each eligible member of the
retirementsystem/plan, on the date the referendum is held, may make an individual choice as to whether or not he/she elects to be covered. The members who vote “YES” are covered and all future members
Those that vote “NO” are not covered
October 2, 2013
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Mandatory Medicare…
1986 Congress mandated Medicare coverage of all employees hired, re-hired or elected after March 31, 1986
(Medicare tax withholding)
October 2, 2013
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Medicare eligibility…
Generally individuals are eligible for premium free Medicare “Part A” if they, their spouse, divorced spouse or deceased spouse worked for at least 10 years (40 or more credits) in Medicare-Only or Social Security covered employment and are age 65.
October 2, 2013
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Medicare Premiums…Individuals who do not qualify for premium free “PART A” can purchase Medicare.
2013 MONTHLY PREMIUMS(based on Timely Enrollment)
Purchaser has credits: at least 30-39 less than 30
Part A $243.00 $441.00
Part B-everyone pays 104.90 104.90
TOTAL Monthly Premium $347.90
$545.90
2013 – SOCIAL SECURITY WORK CREDITS/QUARTERSEarnings required (currently are defined as follows):
One credit = $1,160 Four credits = $4,640 wages in a calendar year
(Four credits is the maximum per year)
October 2, 2013
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How does all this affect me?
October 2, 2013
14 October 2, 2013
Town of G extended Section 218 coverage to the Non-Retirement System Group effective 1/1/53 (with certain optional exclusions)
Town of G had NO retirement systems, therefore, ALL employees are covered for Social Security under Section 218
Town of G…
15 October 2, 2013
Town of F extended Section 218 coverage to the Non-Retirement System Group effective 1/1/74 (with certain optional exclusions)
Town of F participated in Municipal Employees’ and Municipal Police Employees’ Retirement Systems, only employees in positions NOT covered by either MERS or MPERS are covered for Social Security under Section 218
Town of F…
16 October 2, 2013
Town of O never extended Section 218 coverage
Governed by Mandatory Medicare and Mandatory Social Security
Town of O…
17 October 2, 2013
Town of A terminated their Section 218 coverage
Governed by Mandatory Medicare and Mandatory Social Security
Town of A…
18 October 2, 2013
Conducted a majority vote referendum and extended Section 218 coverage to the employees in Employees’ Retirement System of the City of New Orleans effective January 1, 1955
The city also covered the ineligibles of Sheriffs’ Pension & Relief Fund, effective January 1, 1959
City of New Orleans…
19 October 2, 2013
NO. Since April 20, 1983, state and local governments can no longer opt out of all or part of their Section 218 Agreements with SSA
If a municipality failed to terminate it’s Section 218 Agreement coverage by
April 20, 1983, time ran out and that entity can never terminate coverage
Can you terminate Section 218…
20
WEP …
Windfall Elimination Provision:
If you didn't pay Social Security taxes on
your government earnings and you are
eligible for Social Security benefits, the
formula used to figure your benefit
amount may be modified, giving you a
lower Social Security benefit.
October 2, 2013
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Standard Calculation of benefit…
Social Security benefits are based on the worker’s average monthly earnings
adjusted for inflation.
Example: for a worker who turns 62 in 2013, the first $791 of average monthly earnings is multiplied by 90 percent; the next $4,768 by 32 percent; and the remainder by 15 percent.
The sum of the three amounts equals the total monthly payment amount.
October 2, 2013
22 October 2, 2013
Example, for a worker who turns 62 in 2013 and has AIME (Average Indexed Monthly Earning) of $6,400.00
the first $791 X 90% = $ 711.90
the next $4,768 X 32% = $ 1,525.76 and the remainder X 15% = $
126.15
The sum of the three factors equals the total monthly payment amount $2,363.81.
Example: Standard Calculation…
23
Calculation of WEP reduction… The 90 percent factor is reduced in
the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989.
For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.
The maximum WEP reduction for 2013 is: $395.50
October 2, 2013
24 October 2, 2013
Example, for a worker who turns 62 in 2013 and has AIME (Average Indexed Monthly Earning) of $6,400.00
the first $791 X 40% = $ 316.40 the next $3,768 X 32% = $ 1,525.76 and the remainder X 15% = $ 126.15
The sum of the three factors equals the total monthly payment amount $1,968.31
A reduction of $395.50
Example: WEP Calculation…
25 October 2, 2013
WEP will not reduce your Social Security benefit by more than half the amount of your non-Social-Security-covered pension.
Carl is eligible for a Social Security retirement benefit, but also receives a $400 non-Social-Security-covered pension. WEP will reduce Carl’s Social Security retirement benefit by $200 (1/2 x $400) at most.
Exception to WEP reduction…
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Exception to WEP reduction…Years of substantial First factor inearnings benefit formula 30 or more 90
29 8528 8027 7526 7025 6524 6023 5522 5021 4520 or less 40
October 2, 2013
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GPO…
Government Pension Offset:
If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced.
October 2, 2013
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Standard Calculation of benefit… Example: a woman worked and
earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife’s benefit on her husband’s Social Security record,
Social Security could not pay that wife’s benefit because her own Social Security benefit offset it.
When both spouses receive a Social Security benefit based on their own earnings, the offset is dollar for dollar.October 2, 2013
29
Calculation of GPO offset…
Your Social Security benefits will be reduced by two-thirds of your government pension.
Example: if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits.
If you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security.
($500 – $400 = $100)
October 2, 2013
30
Exceptions to GPO offset…
Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
Are receiving a government pension that is not based on your earnings
Are a state or local employee whose government pension is based on a job where you were paying Social Security taxes October 2, 2013
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Legislative Update…
Each year new legislation is introduced to eliminate WEP and GPO
Estimated cost to eliminate WEP and GPO Over $100 billion over 10
years Modifying the computation to
reduce the impact of WEP and GPO has also been proposed.
October 2, 2013
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Resources…
Social Security Administration
(800) 772-12137am-7pm Eastern Standard Time
Baton Rouge Office – Bankers Ave (866) 613-3070 Baton Rouge Office – Harding Blvd (888) 487-0143
http://www.socialsecurity.gov/
Internal Revenue ServiceIRS Publication 963
http://www.irs.gov/pub/irs-pdf/p963.pdf
October 2, 2013
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Contact Information…State of Louisiana
Department of the Treasury Social Security Division
http://www.treasury.state.la.us/default.aspx
Linda Yelverton (225) 342-0026 [email protected]
Angie Dowdy (225) 342-0295
October 2, 2013
