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.