Transcript GFOA - SSA Handout - Louisiana Government Finance Officers

GFOA
Fall Conference
Linda Yelverton
Social Security Program
Director
(225) 342-0026
Angie Dowdy
Social Security Program
Analyst
(225) 342-0295
John Neely Kennedy
State Treasurer and State Social Security Administrator
 History of Section 218
 Role of State Social Security Administrator
 Majority and Divided Vote Referendums
 Mandatory Medicare
 WEP and GPO
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October 2, 2013
 1935 Original Social Security Act provided NO
coverage for state and local government
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
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 referendum
October 2, 2013
 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)
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October 2, 2013
 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 local
government agencies
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October 2, 2013
Obtaining Social Security or
Medicare-Only coverage
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October 2, 2013
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
Non-Retirement System Group

No referendum necessary
October 2, 2013
 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”
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October 2, 2013

Each eligible member of the retirement
system/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
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October 2, 2013

1986 Congress mandated Medicare
coverage of all employees
hired, re-hired or elected
after March 31, 1986
(Medicare tax withholding)
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October 2, 2013
 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.
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October 2, 2013
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
104.90
104.90
TOTAL Monthly Premium $347.90
$545.90
Part B-everyone pays
2013 – SOCIAL SECURITY WORK CREDITS/QUARTERS
Earnings 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)
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October 2, 2013
How does all this affect me?
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October 2, 2013

Town of G extended Section 218
coverage to the Non-Retirement
System Group effective 1/1/53
(with certain optional exclusions)

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Town of G had NO retirement systems,
therefore, ALL employees are covered for
Social Security under Section 218
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
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October 2, 2013

Town of O never extended Section 218
coverage

Governed by Mandatory Medicare and
Mandatory Social Security
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October 2, 2013

Town of A terminated their Section
218 coverage

Governed by Mandatory Medicare and
Mandatory Social Security
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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
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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

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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
October 2, 2013
 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.
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October 2, 2013
 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.
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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% =
the next $4,768 X 32% =
and the remainder X 15% =



$ 711.90
$ 1,525.76
$ 126.15
The sum of the three factors equals the total
monthly payment amount $2,363.81.
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October 2, 2013
 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
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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
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October 2, 2013

WEP will not reduce your Social Security benefit
by more than half the amount of your non-SocialSecurity-covered pension.

Carl is eligible for a Social Security retirement
benefit, but also receives a $400 non-SocialSecurity-covered pension. WEP will reduce Carl’s
Social Security retirement benefit by $200 (1/2 x
$400) at most.
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October 2, 2013
Years of substantial
earnings
30 or more
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25
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20 or less
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First factor in
benefit formula
90
85
80
75
70
65
60
55
50
45
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October 2, 2013

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.
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October 2, 2013
 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.
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October 2, 2013
 Your Social Security benefits will be reduced by twothirds 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)
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October 2, 2013
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
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October 2, 2013
 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.
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October 2, 2013
Social Security Administration
(800) 772-1213
7am-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 Service
IRS Publication 963
http://www.irs.gov/pub/irs-pdf/p963.pdf
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October 2, 2013
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
[email protected]
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October 2, 2013