Providing guidance and assistance to the American public in making decisions on their Social Security eligibility and continuing Social Security issues. Stan Fromuth & Joe Olenski

Qualifications – Stan Fromuth & Joe Olenski Former employees of the Social Security Administration Retired with 76+ years of service with agency Regarded as program and policy experts on Social Security issues Both involved in writing and interpreting Social Security policies and procedures Both spent many years as District Managers working directly with public on Social Security issues and problems

Why do people need assistance and guidance in making decisions related to Social Security? 1.Social Security programs are very complex 2.Avalanche of baby boomers becoming eligible for Social Security benefits is overwhelming the Social Security Administration 3.Changes in Social Security Regulations make it more difficult for applicants/beneficiaries to amend their decisions 4.YOU MAY LOSE A SIGNIFICANT AMOUNT OF MONEY IF YOU FAIL TO MAKE THE BEST DECISIONS

Computation of Benefits

Types of Social Security Benefits Retirement Benefits Disability Benefits Spouses/Divorced Spouses Benefits Widows/Widowers and Divorced Widows/Widowers Benefits Mothers/Fathers and Divorced Mothers/Fathers Benefits Childrens Benefits Parents Benefits Lump Sum Death Benefit

Computation of Benefits All Social Security benefits that are paid are based on the primary insurance amount or PIA. Amount of the benefit depends on how much you contributed to Social Security during your lifetime. Although there are a number of different methods to compute a PIA, the vast majority of beneficiaries have their benefits computed using the 1978 New Start method. This method creates an Average Indexed Monthly Earnings (AIME) amount from which the actual PIA is derived. This method applies to individuals who attain age 62, become disabled, or die after 1978.

Computation of Benefits, cont. The AIME computation is based on averaging earnings over a fixed number of years after Earnings are indexed to reflect current earnings levels. Actual wages are adjusted or “indexed” to account for changes in average wages since the year the earnings were received to make them comparable to earnings that are more current. To compute the AIME PIA, the following must be determined: elapsed years, base years, computation years, eligibility year and divisor months.

Computation of Benefits – Elapsed Years Retirement Benefits Count the years after 1950 up to the year the number holder (NH) attains age 62. Disability Benefits Count the years after 1950 up to the earlier of: the year of attainment of age 62 or the year the waiting period begins. Survivor Benefits Count the years after 1950 up to the earlier of: the year of attainment of age 62 or the year of death. Elapsed year exclusions Exclude the years before the year of attainment of age 22. Exclude the years wholly or partially in a period of disability that is not disregarded.

Computation of Benefits – Base Years The available years from which the earnings to be used in computing a PIA are selected. Retirement and Disability Benefits Initial computation - years after 1950 up to the year in which the first month of entitlement to benefits occurs. Recomputations - year in which the first month of entitlement occurs and later years.

Computation of Benefits – Base Years, Cont. Survivor Benefits Years after 1950 through the year of death. Base Year Exclusions Years wholly within a period of disability may or may not be used, depending on whether the period of disability is disregarded for computation purposes; i.e., a freeze (exclusion) or nonfreeze (nonexclusion) computation.

Computation of Benefits – Computation Years The base years having the highest indexed or unindexed earnings and equal in number to the elapsed years less drop-out years. Where the result is less than 2, it must be raised to 2.

Computation of Benefits –Drop Out Years Drop Out Years For all retirement and survivors benefits, the number of drop out years equals 5. For disability benefits: a.Determine the number of elapsed years. b.Divide the number by five, dropping any remainder. c.Select the smaller of: the result in b. or 5. This is the dropout years. Subtract the number of dropout years from the elapsed years to equal the computation years.

Computation of Benefits – Indexing Year The indexing year is the second year before the eligibility year. Eligibility year is the year an individual first becomes eligible for benefits. The eligibility year is normally called the benchmark year by SSA. Example If the benchmark year is 1992, the indexing year would be 1990.

Computation of Benefits – Divisor Months The number of months in the computation years.

Computation of Benefits – Indexing the Earnings The PIA is determined on the basis of the earnings record after the posted and corrected earnings up to the maximum creditable amounts have been adjusted or “indexed” to reflect earlier earnings in terms of the current dollar value in the “indexing year”. Earnings in and after the indexing year are not indexed. Earnings in or after the indexing year are used as posted and, unlike earnings after indexing, are limited by the maximum creditable amounts

Computation of Benefits – Indexing the Earnings Multiply the posted earnings up to the maximum creditable for each year after 1950 up to the indexing year by the average wages of all workers for the indexing year; and Divide the result by the average earnings of all workers for the year being indexed. Carry to three decimal places and round to the nearest cent; i.e., if third decimal place is 4 or less, round down; if 5 or more, round up.

Computation of Benefits – Indexing the Earnings Use the following formula for indexing earnings: Indexed earnings for Given Year = Actual Earnings for Given Year × Average Earnings for Indexing Year Average Earnings for Given Year

Computation of Benefits – Average Yearly Wages The following lists the national average wage for each year after YearAverage EarningsYearAverage Earnings 1951$2, $3, $2, $3, $3, $3, $3, $4, $3, $4, $3, $4, $3,855.80

Computation of Benefits – Average Yearly Wages, Cont. YearAverage EarningsYearAverage Earnings 1963$4, $6, $4, $6, $4, $7, $4, $7, $5, $8, $5, $8, $5, $9,226.48

Computation of Benefits – Average Yearly Wages, Cont. YearAverage EarningsYearAverage Earnings 1977$9, $16, $10, $16, $11, $17, $12, $18, $13, $19, $14, $20, $15, $21,027.98

Computation of Benefits – Average Yearly Wages, Cont. YearAverage EarningsYearAverage Earnings 1991$21, $28, $22, $30, $23, $32, $23, $32, $24, $33, $25, $34, $27, $35,648.55

Computation of Benefits – Average Yearly Wages, Cont. YearAverage EarningsYearAverage Earnings 2005$36, $41, $38, $42, $40, $44, $41, $44, $40,711.61

Computation of Benefits – Determining the AIME Determine the base years Select years of highest earnings from the indexed earnings record to be used as computation years. These years may contain both indexed and non-indexed earnings. An unindexed year, (one that occurs after the indexing year), can be a high year and, therefore, a computation year. Add the highest earnings in the computation years for the dividend. Divide the dividend by the divisor month to determine the AIME. Round the AIME down to the whole dollar.

Computation of Benefits – Determining the AIME PIA Take the sum of: 90 percent of the AIME through the first bend point. 32 percent of the AIME through the second bend point. 15 percent of the AIME in excess of the second bend point. Round the result to the lower dime. This is the RAW PIA as of January of the eligibility year. Add applicable COLA's to the RAW PIA beginning with the year of eligibility through the month of entitlement.

Computation of Benefits – Bend Points YearAIMECalculations of PIAYearAIMECalculations of PIA 1979Up through percent of AIME1984Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1985Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1986Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1987Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1988Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of 1922

Computation of Benefits – Bend Points, Cont. 1989Up through percent of AIME1994Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1995Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1996Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1997Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of Up through percent of AIME1998Up through percent of AIME plus 32% of excess of plus 32% of excess of or higher plus 15% of excess of or higher plus 15% of excess of 2875

Computation of Benefits – Bend Points, Cont. 1999Up through percent of AIME2004Up through 61290% of AIME , plus 32% of excess of , plus 32% of excess of 612 3,044 or higher1, plus 15% of excess of 3,0433,690 or higher1, plus 15% of excess of 3, Up through 53190% of AIME2005Up through 62790% of AIME , plus 32% of excess of , plus 32% of excess of 627 3,203 or higher1, plus 15% of excess of 3,2023,780 or higher1, plus 15% of excess of 3, Up through 56190% of AIME2006Up through % of AIME , plus 32% of excess of , plus 32% of excess of 656 3,382 or higher1, plus 15% of excess of 3,3813,956 or higher1, plus 15% of excess of 3, Up through 59290% of AIME2007Up through 68090% of AIME , plus 32% of excess of , plus 32% of excess of 680 3,568 or higher1, plus 15% of excess of 3,5674,101 or higher1, plus 15% of excess of 4, Up through 60690% of AIME2008Up through 71190% of AIME , plus 32% of excess of , plus 32% of excess of 711 3,654 or higher plus 15% of excess of 3,6534,289 or higher1, plus 15% of excess of 4,288

Computation of Benefits – Bend Points, Cont. 2009Up through 74490% of AIME2013Up through 79190% of AIME , plus 32% of excess of , plus 32% of excess of 791 4,484 or higher1, plus 15% of excess of 4,4834,769 or higher1, plus 15% of excess of 4, Up through 76190% of AIME2014Up through 81690% of AIME , plus 32% of excess of — plus 32% of excess of 816 4,587 or higher1, plus 15% of excess of 4,5864,918 or higher2, plus 15% of excess of 4, Up through 74990% of AIME2015Up through 82690% of AIME , plus 32% of excess of — plus 32% of excess of 826 4,518 or higher1, plus 15% of excess of 4,5174,981 or higher2, plus 15% of excess of 4, Up through 76790% of AIME , plus 32% of excess of 767 4,625 or higher1, plus 15% of excess of 4,624

Computation of Benefits - Amounts RetirementPIA (subject to reduction for age or increase for delayed retirement) DisabilityPIA Spouse½ PIA (subject to reduction for age, family maximum and/or own benefit) Div. Spouse ½ PIA (subject to reduction for age, and/or own benefit. Not affected by family maximum). Spouse w/ ½ PIA (subject to reduction for family maximum and/or own child-in-care benefit)

Computation of Benefits - Amounts Child½ PIA (for life cases subject to family maximum) Child¾ PIA (for death cases subject to family maximum) Widow(er)Deceased’s PIA (subject to reduction for age, deceased’s benefit reduced for age. May also be increased because of deceased’s delayed retirement. Subject to family maximum and own benefit). Mother/¾ PIA (subject to reduction for family maximum). FatherMust have child-in-care). Parent82 ½%/75% PIA (One parent 82 ½%; two parents 75% each. Subject to family maximum and own benefit). LSDP$255 (multiple of minimum PIA, since 1981

When to File for Benefits Can file up to 4 months before the date you want your benefits to start No retroactivity in most cases

How to File On-line at benefits Face to face interview at your local Social Security office Telephone interview

How to File (cont.) MAKE AN APPOINTMENT TO FILE!!!!!! Call Social Security’s toll free number – 1(800) Pick a date and time (options limited to available appointment slots) Protective filing

Documentation Needed Proof of your age – Birth Certificate Proof of citizenship or lawful immigration status if not born in the USA Most recent w-2 form or if self employed, most recent tax return

Documentation Needed (cont.) Checkbook or bank account statement Social Security Card Proof of earnings if earnings not posted on your earnings record If filing for spouses benefits, proof of marriage and proof of divorce if applicable

2016 Social Security Changes Because there is no COLA, by law these amounts remain unchanged in 2016: Tax rate – 7.65% for employees and 15.3% for self employed Maximum taxable earnings - $118,500 Retirement Test – Under retirement age is $15,720, year of FRA is $41,880

2016 Social Security Changes (cont.) Items that will change in 2016: Amount needed for a quarter coverage increased from $1,220 to $1,260. Part B Medicare premium increased from $ to $ Hold harmless provision still applies.

2016 Social Security Changes (cont.) Estimated average monthly benefit for retired workers increases from $1,328 to $1,341. Maximum retirement benefit for workers retiring at full retirement age in 2016 is $2,639. This is lower than the maximum retirement benefit of $2,663 for workers retiring at full retirement age in 2015

SSRC & Q A