ElderWeb

SOCIAL SECURITY
News Release

Monthly Social Security and Supplemental Security Income benefits for more than 52 million Americans will increase 2.7 percent in 2005, the Social Security Administration announced today.

Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year. This year's increase in the CPI-W was 2.7 percent.

The 2.7 percent Cost-of-Living Adjustment (COLA) will begin with benefits that more than 47 million Social Security beneficiaries receive in January 2005. Increased payments to 7 million Supplemental Security Income beneficiaries will begin on December 30.

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $90,000 from $87,900. Of the estimated 159 million workers who will pay Social Security taxes in 2005, about 9.9 million will pay higher taxes as a result of the increase in the taxable maximum in 2005.

It is important to note that no one's Social Security benefit will decrease as a result of the 2005 Medicare Part B premium increase, announced last month. By law, the Part B premium increase cannot be larger than a beneficiary's COLA increase. Information about Medicare changes for 2005 can be found at www.hhs.gov '“ The Internet site for the Department of Health and Human Services.

President Bush announced his plans for the future of Social Security during his address to a joint session of Congress. His proposal is to create voluntary private retirement accounts as an alternative to supplement the standard Social Security program. His proposal states that his goals for Social Security reform are that no changes be made to the benefits of current retirees, or those near retirement. He also stipulates that the Social Security surplus must only be used for the Social Security program, that Social Security taxes should not be increased, and that the government should not invest Social Security funds in private investments. Bush said he will create a presidential commission to reform Social Security which will make its recommendations by next fall.

The Social Security Administration (SSA) has posted a retirement planner and calculator that shows users how they will be affected by the earnings test if they continue working while receiving Social Security benefits. Last year the earnings test was repealed for people who are at or above the "normal retirement age", but many people are not aware that the earnings test still reduces benefits for people who take early benefits.

The SSA will also send out information to people age 55 and above about the long-term effects of taking a reduced benefit and the impact work would have on their benefit. This insert will be included in benefits statements, and is also available on the SSA web site.

The "normal retirement age" was increased in 1983 for people born in 1938 or later, and will gradually be increased from age 65 to age 67. The earnings test reduces benefits for people less than the "normal retirement age" who earn more than $10,080 in 2000 or $10,680 in 2001 while receiving Social Security benefits.

The Social Security Administration (SSA) has announced a new online application form for Social Security benefits. An applicant using the SSA web-site to apply for benefits can fill out the online application and send the information electronically to the agency, then can print and mail the form back, along with supporting documents.

The process is not entirely online, but it still should be a time-saver. Applicants will not need to make a preliminary trip to the SSA office to get the application form, and it makes it easier for people to ensure they have all the required documents and forms. The application process can be completed by mail, which eliminates the need to drive to the Social Security office. This could be a real boon for people who do not have easy access to transportation, those who have physical problems getting around, and family members who are trying to handle affairs for a relative from across the country.

The applicant must print a copy of the completed application form, sign it, and mail it or bring it to the address provided by Social Security. Along with the signed form, SSA also needs certain documents, such as a person's birth certificate, to establish eligibility for Social Security benefits. An applicant can either mail or take these items to Social Security. The electronic application will be stored on a database and automatically retrieved when Social Security receives the applicant's signed application.

Individuals must meet certain conditions in order to take advantage of the Internet retirement benefit application. For example, they must be at least 61 years and 9 months or older and plan to start receiving retirement benefits within four months.

The Social Security Administration stated that they are using the strongest commercially available encryption to ensure that an applicant's confidential information is secure as it travels over the Internet.

Kenneth S. Apfel, Commissioner of the Social Security Administration (SSA) announced cost of living (COLA) changes in Social Security payments for 2001. A 3.5% increase will begin with benefits that Social Security beneficiaries receive in January 2001. Increased payments to SSI recipients will begin on December 29.

For Social Security beneficiaries, the average monthly benefit amount for all retired workers will rise from $816 to $845. The maximum benefit will increase from $1,433 to $1,536.

The maximum federal SSI monthly payments to an individual will rise from $512 to $530. For a couple, the maximum federal SSI payment be unchanged at $769.

The earnings test that reduces Social Security for recipients who are age 65 or under also has changed. In the year the beneficiary turns 65, the earnings limit is $25,000 a year, up from the $17,000 a year limit in 2000. This limit only applies to earnings prior to the time the person turned 65. For people under age 65, the earnings limit in 2001 is $10,080, unchanged from 2000. The earnings test for people over age 65 was eliminated last year.

The maximum amount of earnings subject to the Social Security payroll tax will increase to $80,400 from $76,200.

In the October 9 issue of Business Week, Howard Gleckman and Rich Miller analyze a little-known dilema -- the Social Security trust fund most likely will have to be invested in corporate securities within the next 15 years, regardless of the outcome of the current debate about "privatizing" Social Security. Oddly enough, the dilema will be a result of something policy-makers have been trying hard to do -- eliminate the national debt. Gleckman and Miller build on arguments developed by former Congressional Budget Officer Robert D. Reischauer and Barry Bosworth of the Brookings Institute to point out that if the national debt is eliminated within the next 15 years, as is currently predicted, the Social Security trust fund will no longer have the option of buying treasury securities. This is because those treasury securities are issued against the debt, and will no longer be needed if the debt has been eliminated. The authors point out that this fact has been largely ignored in the debate about the wisdom of allowing the federal government to buy corporate equities. They suggest that rather than debate whether or not the government should purchase corporate equities, policy-makers should begin discussing how the government can start to do so without unnecessarily influencing stock prices or injecting the government into corporate governance.

The Social Security Administration (SSA) has created a special web site to help consumers and providers set up and use electronic transfer accounts (ETAs). ETAs are low-cost bank, credit union, or savings and loan accounts set up specifically so that consumers who don't have another bank account can still take advantage of electronic deposits of Social Security and other federal payments. The need for this service grew out of the fact that many recipients of Social Security and other payments have insufficient income to set up and maintain ordinary checking accounts. Without bank accounts, direct deposit of payments is not possible. Since mailed checks could be lost or stolen and some recipients were paying significant fees to convert their checks into cash each month, this created unnecessary hardships for this audience.

An ETA provider is required to open an ETA for any recipient of a Federal benefit, wage, salary or retirement payment regardless of credit history, unless the financial institution is aware that the individual previously held an ETA that was closed because of fraud at any financial institution, or the institution previously closed an ETA held by the individual at that institution because of fraud or misuse. ETA providers guarantee that monthly charges for ETA accounts will not exceed $3 a month, and they must allow their ETA customers a minimum of four free withdrawals per month. ETA accounts do not have check-writing privileges, but may provide for ATM withdrawals.

The House passed HR 4865, the Social Security Benefits Tax Relief Act of 2000, by 265-159 votes. This bill would repeal the current tax on Social Security benefits for higher income beneficiaries. Currently, individuals with annual incomes between $25,000 and $34,000 and couples with incomes between $32,000 and $44,000 pay taxes on up to 50% of their Social Security benefits, and individuals with incomes over $34,000 and couples with incomes over $44,000 also pay a "second tier" tax on up to 85% of their Social Security benefits. HR 4865 would repeal that second tier tax.

The White House does not like this proposal, and President Clinton has vowed to veto it if it should come across his desk.

Monthly payments for Canadian Old Age Security pensions, Guaranteed Income Supplements, Spouse's Allowances and Widowed Spouse's Allowances increased by 0.9% on July 1st.

The United Kingdom's Department of Social Security has issued its annual report, titled "Life Begins at 50." This report summarizes many of the programs available to older persons, including both financial and medical assistance. The report also talks about upcoming government white papers on long term care issues.

The age at which Americans can receive regular Social Security benefits is gradually increasing from age 65 to age 67. This change affects people born in 1938 or later, so the year 2000 is the first year when people must start considering the financial impact of taking early benefits at age 62, or delaying benefits until a later year. The Social Security Administration (SSA) has posted an online calculator which allows you to input a birth year to find out at what age you will be eligible for regular benefits. The site also includes information on how much benefits will increase if retirement is delayed until age 72.

The General Accounting Office (GAO) and the Social Security Administration Office of the Inspector General (OIG) presented testimony on the misuse of Social Security numbers to the House. The OIG reported that more than 60,000 allegations of misuse of Social Security numbers was reported to his office in 1999. About half of those cases were attempts to defraud the Social Security Administration (SSA) by collecting excess benefits or misrepresenting wages and earnings that established eligibility for benefits. The other cases involved fraud in the private sector, where Social Security numbers were used in identity theft and other fraudulent activity. The GAO reported that there is no law restricting the use of Social Security numbers by private businesses for identification purposes, which makes it much easier to obtain these numbers.

SSA has stated that the expanded use and misuse of SSNs poses an administrative burden for the agency, since widespread use of SSNs as identifiers requires SSA to meet more requests for SSN verification from employers and government agencies, and the disclosure of SSNs increases those instances in which the agency must issue individuals new SSNs when the old ones are being misused by another party. To reduce the opportunities for fraud, the OIG recommended that the SSA stop mailing Social Security cards to post office boxes, ask for independent verification when non-residents request Social Security cards, and stiffen fines for the sale or other misuse of Social Security numbers.

About 6.5 million recipients of Social Security and Supplemental Security Income benefits must have help managing their money, including more than 750,570 beneficiaries which have an organization handling their monthly checks. These organizations include social service agencies, banks and hospitals.

Since Fiscal Year 1998, The Social Security Administration Office of the Inspector General (OIG) has investigated 1,352 representative payee cases, leading to 313 convictions and identification of fraud losses totaling over $7,500,000.

One example is the Aurora Foundation case, which was the subject of a television news magazine segment in January 2000, entitled "When Nobody's Looking." Aurora Foundation an organizational representative payee for over 140 disabled individuals in West Virginia. An investigation revealed that the head of the Aurora Foundation, Gregory Gamble, had embezzled over $300,000 between April 1995 through May 1999. The majority of these diverted funds were SSA benefit payments.

Another example of mismanagement was Ivy's Social Services, Incorporated (Ivy's), a fee-for-service rep payee located in Phoenix, Arizona and Denver, Colorado. An OIG investigation revealed that Ivy's was an organizational rep payee for 330 individuals from March 1996 to May 1997. During this short period of time, the head of Ivy's spent approximately $274,000 of the beneficiaries' money to make personal purchases. In addition to paying off $65,000 in personal credit card debt, the subject of the investigation also used the funds to furnish, and pay the rent for, three personal residences.

On April 7, President Clinton signed into law HR 5, Senior Citizen?s Freedom to Work Act of 2000. This law repeals the earnings test for Social Security Benefits for people age 65-69. Beneficiaries aged 62-65 will still be subject to the earnings test, and those age 70 and above were already exempt from the test. The earnings test reduced benefits by $1 for every $3 the beneficiary earned over $17,000. The legislation is back-dated to January 1, 2000, so about 800,000 workers and 100,000 spouses and dependents who have had benefits withheld this year will have them returned in full in their May Social Security checks.

The Social Security Administration (SSA) has unveiled a new online Social Security Retirement Planner. This planner allows users to compute estimates of future Social Security benefits online. Because of privacy concerns, the planner is not linked to the active SSA databases, but requires users to input salary information used for its calculations. The calculator then computes the estimated monthly benefit for early retirement at age 62, for retirement at the "Normal Retirement Age" (65-67, depending on the year of birth), and if retirement is postponed until age 70. Benefits can be calculated either in current or future dollars.

There are three versions of the calculator. A "Quick" version computes future benefits from current earnings, by making an assumption that earnings will stay at that level long enough to qualify for benefits. An "Online" version allows the user to input actual historical salary amounts for each year for a more accurate estimate. A "Detailed" version allows the user to download a program which can make the most accurate predictions, including disability and death benefits.

The repeal of the earnings test for Social Security benefits now awaits President Clinton's signature, since the House voted unanimously last night to affirm amendments made by the Senate to the bill initiated in the House. This bill will repeal the earnings test for Social Security beneficiaries between the ages of 65 and 70. The "earnings test" reduced Social Security benefits by $1 for every $3 of earned income over $17,000 for beneficiaries under the age of 70.

Because the repeal is retroactive to January 1, about 415,000 working seniors or dependents will get refunds for the money already deducted this year from their Social Security checks. This will total $1.4 billion, or an average of $3,500 per person. The repeal directly affects 800,000 Social Security recipients who are working this year and another 100,000 who haven't sought benefits because they have jobs.

Social Security Commissioner Kenneth Apfel said that if Clinton signs the bill by mid-April, the checks should be sent by early May, and monthly benefits adjusted by June. He said each of beneficiary will receive an average of $6,700 in additional Social Security this year, due to the elimination of the earnings test.

Special Note: The amended bill states that the repeal of the earnings test applies only to people who have reached the "normal retirement age" (NRA) and beneficiaries who start receiving Social Security benefits prior to their normal retirement age will still be subject to the earnings test until they reach NRA. The NRA is age 65 for most people currently receiving Social Security benefits, but that age is gradually being increased to age 67 for current and future retirees.

The Social Security Administration (SSA) has created an email newsletter to keep beneficiaries and professionals up-to-date on Social Security news. They include news about changes in laws and regulations, Medicare, retirement benefits, survivors benefits, disability benefits, and more.

The Senate today unanimously passed HR 5, the Social Security Act Earnings Bill. It now goes to Clinton for approval, and he has promised to swiftly do so. This bill will eliminate the earnings test which currently reduces Social Security benefits for beneficiaries age 65-69 who earn $17,000 a year or more, so that they lose $1 in benefits for every $3 in earnings. Once signed, the bill will immediately become effective, and will retroactively apply back to the beginning of this year. This means that no Social Security benefits will be lost this year by beneficiaries who have stayed in the work force.

HR 5, The Social Security Earnings Test Elimination Bill, is on a fast-track through Congress. It has been unanimously approved in the House and will now be considered by the Senate. President Clinton has also indicated his support for the legislation. This bill would repeal the Social Security earnings test which currently results in the loss of $1 of benefits for every $3 of earnings over $17,000 a year for Social Security beneficiaries aged 65-69. This repeal would mean all Social Security beneficiaries could work after retirement without any concern about losing some of their Social Security benefits.

An Ohio resident has been trying to convince the government he's still alive. He was declared dead in the Social Security records on August 16. After that, the Social Security Administration took more than $2,600 from his bank accounts to recoup payments made after his "death", and Medicare declined coverage to in January because computer records showed he was deceased. He had to meet a Social Security employee in person and show photo identification to prove he was still alive, although the agency apparently didn't need a death certificate to declare him dead!