USVI Public Records

Document text

STAT ” TAT STAT ee | a al Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 oe 7" MEMORANDUM FOR: Joe, and I briefed D/Pers and DD/Pers on the Social Security issue and the taxing of these benefits. D/Pers is onboard and likes the solution better than the previous one. Presume OGC will send us a copy of what goes forward. eb we, A FORM 101 USE PREVIOUS 5-75 EDITIONS Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R000900110002-2 . tian ag ag - steel ey tree eae oe . Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 SOCIAL SECURITY INCORPORATING CHANGES TO DECEMBER 31, 1984 Summary of Old-Age, Survivors and Disability Insurance Benefits — Explanation of How to Compute Benefits — Maximum Old-Age, Death and Disability Benefits — Examples of Future Replacement Ratios and Summary of Medicare Benefits Providing Health Insurance for the Aged and the Disabled HAYHUGGINS MEMBER OF THE HAY GROUP 229 South 18th Street Philadelphia, PA 19103 EMPLOYEE BENEFITS @ ACTUARIAL SERVICES EMPLOYEE COMMUNICATIONS Booklet No. 24 in a Series (since 1950) Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 lias AU Pa, beat ett eye I, es inde tale EA So come ree Copy Cee for Release 2011/01/11 : CIA-RDP89- 00066R0009001 10002-2 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 | a Maal? Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 SOCIAL SECURITY INCORPORATING CHANGES TO DECEMBER 31, 1984 Table of Contents Old-Age, Survivors, and Disability Insurance po Summary of Benefits and Eligibility Requirements ....................00000, 2 Adjustments tOIBene|frtS. eva pair cou od Gy ed ated s Aare is ges ile talons 3 Federal Taxability of Benefits «2.0.0... 00.022 ee 4 Special Provisions for Self-Employed ...........0.0 0000 cee cece eee eee eee 4 Covered“ Workels: -x.ccce-eaaeliey ohh aloe eal chat wt teks eet da Se 5 Covered Wages and Self-Employment Income ............00.0 000000 s ee eeee 5 Requirements for Insured Status’ 2.2... 0.0. eee eee eee 6 Quarters of Coverage Needed for Fully Insured Status .........0.0.0...0000.. 7 Computation of Primary Insurance Amount (PIA) and Family Maximum Benefit (FMB) .......... 000.0000: 0c cece eee eeen 8 Worksheet for Computing Primary Insurance Amount ...2...........0000 0005 10 DeNMItlONS:-: aces Wher eee dat, ahoerd onttey aa dhs Gusti bite Gee Pails boas 12 Covered Compensation ........0.00.000 0.0 c ccc cece cee cece ete ee eens 13 Primary Insurance Amounts and Family Maximum Benefits for Each Average Monthly Wage (for PIA Method and Transitional Guarantee Method) ........0..0 0.0.0 ccc cee cece eve eeee 14 Representative Projected Retirement Benefits ............0. 0000.0. e eve eens 16 Representative Projected Death Benefits .................00 00000 eee 17 Representative Projected Disability Benefits ................ 0.00 cece eee, 17 Examples of Replacement Ratios ....... 2... 0. ccc ccc eae 18 Medicare Scope of Coverage, and Excluded Services ...........00.0.0000 0.00 e cee eeee 19 Part A— Basic Plan of Hospital Insurance ............ 000.0 cece cece ee eee 19 Part B— Voluntary Supplementary Medical Insurance Plan ................... 20 Financing Financing of Social Insurance Programs ...............00. 000s cece eee eee 22 Taxes History of Taxes and Scheduled Taxes in Future Years ..........0......000005 24 © Copyright 1984 by Hay/Huggins Company, Inc., 229 South 18th Street, Philadelphia, PA 19103 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 SUMMARY OF BENEFITS AND ELIGIBILITY REQUIREMENTS FOR OLD-AGE SURVIVORS, AND DISABILITY INSURANCE Eligibility Requirements Percent of PIA At Worker's Full Retirement Age Recipient's Age Insured (See Adjustments Type of Benefit Requirement Status for Age) For Insured Old-Age Age 62 or older Fully 100% Workers Disability None Fully and 100% Disability For Dependents of Spouse; and/or eligible divorced Age 62 or older Fully 50% Retired or spouse, not married when Disabled Workers applying for benefit Spouse caring for unmarried None Fully 50% child, under age 16, or disabled before age 22 while unmarried Each eligible child Unmarried and either Fully 50% under age 18 or full-time high school student under age 19, or disabled before age 22 while unmarried For Survivors of —§ Widow and widower; and/or Age 60 or older, or Fully 100% Insured Active or _ eligible surviving divorced disabled and at least Retired Workers spouse, not married when age 50 applying for benefit Unmarried surviving spouse or None Fully or 75% eligible surviving divorced Currently spouse caring for unmarried child, under age 16, or disabled before age 22 while unmarried Each eligible child Unmarried and either Fully or 75% under age 18 or full-time Currently high schoo! student under age 19, or disabled before age 22 white unmarried Dependent parent Age 62 or over’ Fully 82%2% (150% maximum for two) Lump-sum to spouse None Fully or $255 (or if none, shared by Currently (dollar amount) Full Retirement Age Year of Birth eligible children) Age for Unreduced Benefits Year of Birth 1937 and earlier 1939 1940 1941 1942 1943-1954 65 years 1955 65 years, 2 months 1956 65 years, 4 months 1957 65 years, 6 months 1958 65 years, 8 months 65 years, 10 months 66 years [2] 1959 1960 and later Age for Unreduced Benefits 66 years, 2 months 66 years, 4 months 66 years, 6 months 66 years, 8 months 66 years, 10 months 67 years 77 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 Sanitized Copy Approved for Release 201 ADJUSTMENTS FOR AGE | ADJUSTMENTS TO BENEFITS (a) Reduction if Benefit Is Claimed Earlier Than Full Retirement Age Type of Benefit Reduction Per 4/01/11 - CIA-RDP89-00066R000900110002-2 Maximum Reduction Month Early Through Ultimate 1999 (2022 and on) Worker’s Old Age 5/9% for each of first 36 20% 30% months; 5/12% per month in excess of 36 Spouse/Divorced Spouse of 25/36% for each of first 36 25% 35% Retired or Disabled Worker months; 5/12% per month in excess of 36 Surviving Spouse/Divorced Uniform reduction of 19/40%7 28.5% 28.5% Spouse of Insured Active or per month up to 60 months Retired Worker tPercent will be reduced as full retirement age rises. to maintain maximum reduction at 28.5%. (b) Increase if Benefit Is Claimed Later Than Full Retirement Age (Up to Age 70) Worker’s Year Increase per Worker’s Year Increase per Of Birth Month Later Of Birth Month Later 1916 and earlier 1/12% 1933-1934 11/24% 1917-1924 1/4% 1935-1936 1/2% 1925-1926 7124% 1937-1938 13/24% 1927-1928 1/3% 1939-1940 TN2% 1929-1930 9/24% 1941-1942 15/24% 1931-1932 5/12% 1943 and later 213% BENEFIT REDUCTIONS AND ADJUSTMENTS (a) Family Maximum Benefit If total monthly benefits to workers and dependents or to survivors. calculated on the basis of the earnings record of one insured worker, are greater than the Family Maximum Benefit (FMB), such total is reduced to FMB. The insured worker's benefit is paid in full; all other monthly benefits are reduced proportionally, Benefits paid to a divorced spouse do not count toward FMB. (Computation of FMB is shown with PIA computation on page 8.) (b) Earnings Test ; * A beneficiary age 70 or older can earn any amount in covered or non-covered employment without loss of benefits. A beneficiary between the ages of 65 and 70 can earn up to $7,320 in 1985 in any employment, covered or noncovered, without loss of benefits. A beneficiary under age 65 can earn $5,400 in 1985 without loss of benefits. The annual exempt amount will be automatically adjusted in proportion to any increase in the average total wages of all workers (see page 10)— from the third to the second preceding year — rounded to the nearest $120. For each $2 of covered or noncovered earnings in excess of the allowable amount in a year, $1 of benefit is withheld. Exception: during the initial year of entitlement (the year in which the worker first received a monthly benefit which was not reduced because of the earnings test), no benefits will be withheld for any month in which the worker does not receive wages in excess of “> of the annual exempt amount or render substantial services in self-employment. As to workers at or above the full retirement age, beginning in 1990, the reduction is liberalized to a $1-for-$3 basis. (c) Adjustment in Widow, Widower or Surviving Divorced Spouse Benefit In the case of a deceased retired worker who received benefits before age 65, the widow, widower or surviving divorced spouse benefit cannot exceed the larger of the deceased retired worker's benefit or 822% of his PIA. (d) Disability Benefit Limitation Social Security disability benefit (including benefits for dependents) combined with workers compensation and certain governmental disability benefits cannot exceed 80% of the highest of AMW (see page 12), high-5-year average carnings, or highest year’s earnings in the last 6 years of covered employment. (e) Remarriage Dependent and survivor benefits terminate on remarriage with the following exceptions. Widows, widowers or surviving divorced spouses age 60 or over, or at least 50 and disabled, may remarry without affecting their benefits. Termination is also waived if the person whom the beneficiary is marrying is a recipient of divorced spouse's, widow's or widower’s, parent's, or disabled child’s benefits. A beneficiary with an eligible child may remarry a retired or disabled worker without loss of benefits. 13] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R000900110002-2 rae ae ips Lipase 2 ee | eel a] een fr Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 AUTOMATIC BENEFIT ESCALATOR All benefits are increased each December by the amount of increase in the Consumer Price Index, subject to the limitations described on page 12. OFFSETS FOR BENEFITS RECEIVED FROM NONCOVERED EMPLOYMENT (a) Retired Workers The following reduction in the PIA formula will apply to persons who receive Social Security based on less than 30 years of coverage and who also receive pensions from noncovered employment. Years of Covered Employment or Year of Initial Eligibility for Old-Age or Disability Benefits (Whichever is More Favorable) Year of Initial Eligibility for PIA Formula Years of Covered Old-Age or Disability For Lowest Band Employment Benefits of AIME 30 1985 90% 29 1986 80% 28 1987 10% 27 1988 60% 26 1989 50% 25 or less 1990 or later 40% In no case will the resulting PIA be any less than the regular PIA minus 50% of the pension from noncovered employment after 1956. Exceptions for Certain Nonprofit Employees and Top Federal Officeholders: This special computation procedure does not apply to employees who were brought under coverage on January 1, 1984, provided that the employer did not participate in Social Security at any time in the past (see ‘‘Covered Workers,” next page). (b) Dependents and Survivors Benefits of spouses and surviving spouses (with or without eligible children) are reduced by 2/3 of the amount of any public (federal, state, or local government) retirement benefit payable to the spouse based on the spouse’s own work in noncovered public employment. This provision applies to all spouse-beneficiaries who become eligible for a public pension after June 1983, without regard to financial dependency on the primary Social Security beneficiary. Previously, the Social Security benefit was offset by the full amount of public pension, but no offset applied under the following circumstances: (1) the spouse was entitled to OASDI benefits before December 1977; (2) a wife/divorced wife (or financially dependent husband/divorced husband) was first eligible for a public pension prior to December 1982; or (3) a financially dependent spouse of either sex was first eligible for a public pension from December 1982 through June 1983. FEDERAL TAXABILITY OF BENEFITS Benefits are subject to federal income tax if the combined total of one-half of Social Security plus modified adjusted gross income (see page 12) exceeds $25,000 for an individual and $32,000 for a married couple. The taxable amount is the lesser of (a) one-half of the Social Security benefit, or (b) half of the excess above $25,000 or $32,000. whichever applies. SPECIAL PROVISIONS FOR SELF-EMPLOYED Self-employed individuals are permitted a credit against the Social Security tax equal to 2.7% of net self-employment income in 1984; 2.3% in 1985; and 2% in 1986-89. After 1989, the self-employed may (a) reduce net earnings from self-employment by half of the Social Security tax which would apply without this provision and figure their SECA liability based on this reduced amount, and (b) deduct half of the tax against income as a business expense. 14] | |" ~Sanitized Copy Approved for Release 2011/01/11 - CIA-RDP89-00066R000900110002-2 Sanitized Copy Approved for Release 201 4/01/14 - CIA-RDP89-00086R0009001 10002-2 GENERAL EXTENT OF COVERAGE EMPLOYEES EXCLUDED FROM COVERAGE COVERED WAGES SELF- EMPLOYMENT INCOME EXCLUSION OF INCIDENTAL WAGES OR SELF- EMPLOYMENT INCOME Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 ie Stell esis al COVERED WORKERS With the 1983 changes in the Social Security law, coverage of employces of United States employers is almost “universal.” The primary changes in the law leading to this universal coverage are inclusion of federal employees hired after December 31. 1983, mandatory coverage of employees of nonprofit organizations, and removal of the right of state and local governments to drop out of Social Security once they have joined. All employment. except when specifically excluded. in the 50 states, the District of Columbia. American Samoa. Guam, Puerto Rico and the Virgin Islands is covered regardless of citizenship. Work performed elsewhere by American residents employed by an American employer is also covered. Also, coverage is extended under certain conditions to employment on American ships and aircraft outside the United States. (1) State and local government employees covered by a retirement system unless the employees have elected to be covered and the state has entered into a noncancellable agreement with the federal government. Employees (except policemen in some states and individuals in certain limited employment statuses) elect to be covered by a referendum in which a majority of the eligibles vote in favor of participation. Federal civilian employees hired before January |, 1984 who are covered by a retirement system established by a law of the United States, except as follows: members of a few such systems (e.g., Tennessee Valley Authority employees); the President, Vice President, mem- bers of the Congress, political appointees, and judges, even if they assumed office before January 1, 1984. (3) Certain students performing domestic service, relatives working for members of family, student nurses and newsboys under [8. (4) Workers who make less than the minimal amounts listed under ““Covered Wages.” (5) Employees covered by the Railroad Retirement Act are technically not covered by Social Security. However, the operations of the financial interchange arrangements between Social Security and the Railroad Retirement Act result in defacto coverage for railroad employees. (6) Ministers and members of religious orders are covered as self-employed unless they opt out on the grounds of conscience or religious principle. (2 ~— COVERED WAGES AND SELF-EMPLOYMENT INCOME All earnings of covered workers are taxed up to the maximum taxable wage base of $39,600 in 1985 (see definition on page 12 and complete history on page 24). All remuneration for employ- ment is subject to tax (including the cash value thereof when not paid in cash), including: (1) Sick pay during the first six months of disability. (2) Stand-by pay when it is expected that services will be rendered at some later time. (3) Salary reduction contributions under Sections 401(k), 403(b), 414(h), and 457 of the Internal Revenue Code; and income deferred under a nonqualified deferred compensation agreement, ~ when there is no longer a substantial risk of forfeiture. (4) Cash tips of at least $20 a calendar month taxed to employee (no employer taxes are payable thereon, except tips deemed to be wages under the Fair Labor Standards Act). (5) Basic pay for active military duty taxed as wages since 1957; military personnel also receive a tax-free wage credit of up to $1200 per year to reflect other forms of remuneration. (Prior to 1957, military pay was not taxed, but members received a wage credit of $160 for each month of active duty from September 16, 1940 through December 31, 1956.) Income from self-employment is treated the same as other covered income for benefit purposes. but the tax paid by self-employed individuals equals the combined employee-employer tax on wages (before any tax credit). ‘‘Self-employment income” is broadly defined as the net earnings derived by operating an unincorporated trade or business. as reported in the income tax return. After counting income from other sources as an employee, self-employment income is taxed at the rate shown on page 24, up to a total combined income of the maximum taxable wage base. The following income is not taxed: (1) Rentals from real estate (unless part of a business). (2) Dividends on stock and interest on bonds (unless part of a business). (3) Capital gains or losses. (4) Distributive share of income (or loss) from a partnership received by a limited partner. The following incidental wages or self-employment income are excluded from tax: (1) Less than $150 per year to farm employees. (2) Less than $50 per quarter to non-farm domestic employees. (3) Less than $100 per year for other casual work. (4) Net earnings of less than $400 per year from self-employment (optional methods of calcu- lating net earnings available to maintain coverage in years with low income or net losses). 15] lt FULLY INSURED CURRENTLY INSURED DISABILITY INSURED QUARTER OF COVERAGE Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 REQUIREMENTS FOR INSURED STATUS At least | quarter of coverage for each calendar year elapsing after 1950 or after age 21, whichever is later, but before the earliest of age 62, death or disability, with a minimum of 6 quarters of coverage. If a year includes a period of disability, it is not counted as an elapsed year. (See page 7 for table showing quarters of coverage needed.) At least 6 quarters of coverage during the |3-quarter period ending with quarter of death, entitlement to old-age insurance benefits or most recent onset of disability, not counting as part of such 13- quarter period any quarter any part of which was included in a period of disability unless such quarter was a quarter of coverage. (1) Fully insured and (2) at least 20 quarters of coverage in the last 40 quarters through the quarter of disability occurrence. Reduced requirements for disabilities before age 31; also for workers disabled before 31 who subsequently recover and become disabled again at 31 or after. Requirement (2) is eliminated for blind workers. Before 1978, as follows: (a) Quarter of a year in which worker received at least $50 in covered wages (other than farm wages). Worker receiving $100 or more in covered farm wages in a year credited with | quarter for each $100 up to 4 quarters for $400 or more. Self-employed individual credited with 1 quarter for each calendar quarter in which he earned at least $100, provided that his net earnings from self-employment were at least $400 for the year. (b) If (a) is not satisfied, credit will nonetheless be given for 4 quarters in any calendar year in which combined wages and/or self-employment income are equal to the maximum taxable wage base (see page 24). 1978 and after: Wages or Self-Employment Income Calendar Constituting 1 Quarter of Coverage Year (to Maximum of 4 Quarters) 1978 $250 1979 260 1980 290 1981 310 1982 340 1983 370 1984 390 1985 410 . Thereafter Equals $250 multiplied by ratio of (a) average total wages of all workers two years earlier to (b) $9226.48; rounded to nearest multiple of $10. [6] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 ae 2 i Wares Mask: 1 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 QUARTERS OF COVERAGE NEEDED FOR FULLY INSURED STATUS“ RETIREMENT DEATH OR DISABILITY Born Before Jan. 2, 1929** Born Jan. 2, 1929 or Later Quarters Quarters Quarters needed Age on birthday needed needed for fully in year for fully for fully Year of death insured of death insured Date of birth insured status or disability status or disability status Jan. 2, 1913 to Jan. 1, 1914 24 1984 33 28 or younger 6 Jan. 2, 1914 to Jan. 1, 1915 25 1985 34 29 7 Jan. 2, 1915 to Jan. 1, 1916 26 1986 35 30 8 Jan. 2, 1916 to Jan. 1, 1917 27 1987 36 31 9 Jan. 2, 1917 to Jan. 1, 1918 28 1988 37 32 10 Jan. 2, 1918 to Jan. 1, 1919 29 1989 38 33 11 Jan. 2, 1919 to Jan. 1, 1920 30 1990 39 34 12 Jan. 2, 1920 to Jan. 1, 1921 31 1991 or later 40 35 13 Jan. 2, 1921 to Jan. 1, 1922 32 36 14 Jan. 2, 1922 to Jan. 1, 1923 33 37 16 Jan. 2, 1923 to Jan. 1, 1924 34 38 16 Jan. 2, 1924 to Jan. 1, 1925 35 39 17 Jan. 2, 1925 to Jan. 1, 1926 36 40 18 Jan. 2, 1926 to Jan. 1, 1927 37 41 19 Jan. 2, 1927 to Jan. 1, 1928 38 42 20 Jan. 2, 1928 to Jan. 1, 1929 39 43 21 Jan. 2, 1929 or later 40 44 22 45 23 Special provision for employees of nonprofit 46 24 organizations*** 47 95 Quarters needed for 48 26 Date of birth fully insured status 49 27 Jan. 1, 1924 or earlier 6 50 28 Jan. 2, 1924 to Jan. 1, 1925 8 51 29 Jan. 2, 1925 to Jan. 1, 1926 12 52 30 Jan. 2, 1926 to Jan. 1, 1927 16 53 31 Jan. 2, 1927 to Jan. 1, 1929 20 54 32 Jan. 2, 1929 or later 40 55 33 56 34 57 35 58 36 59 37 60 38 61 39 62 or older 40 “For periods of established disability, reduce quarters needed by one for each year which partly or fully falls within a period of disability. **If a worker is age 62 or older, use the lesser of quarters needed for Retirement and quarters needed for Death or Disability. “**Applies to older employees of nonprofit organizations who were brought into Social Security by the 1983 Amendments; liberalized requirement must be fully satisfied by employment after December 31, 1983. 17} Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 au eo tke ol yo. bo mn dear od | wl Fi re ee ) Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 COMPUTATION OF PRIMARY INSURANCE AMOUNT (PIA) AND FAMILY MAXIMUM BENEFIT (FMB) The Primary Insurance Amount (PIA) is determined by the method indicated below, unless the Minimum, Special Minimum, or Old Start Method produces a higher PIA. The method used to determine the PIA also states how the Family Maximum Benefit (FMB) is determined. Selection of Benefit Computation Method Year of Attainment of Age 62 or Year of Death or Disability if Benefit Earlier Computation Method Old-Age Before 1979 ...................... PIA Table Method 1979 through 1983 ................ Transitional Guarantee Method After 1983 2.0... Decoupled Formula Method Disability or Before 1979 ............ 0.2... PIA Table Method Survivor After 1978 ...........0....022.05. Decoupled Formula Method Description of Principal Benefit Computation Methods PIA Table Method An Average Monthly Wage (AMW) is calculated and the corresponding PIA and FMB are found in the December 1978 PIA table on pages 14 and 15. The initial PIA and FMB are increased by all general benefit increases after 1978. Decoupled Formula Method An Average Indexed Monthly Earnings (AIME) is calculated and a benefit formula is applied to the AIME to produce the initial PIA. The formula used depends on the year of eligibility (see page 12). For workers becoming eligible in 1985, the PIA formula is: 90% of the first $280 of AIME, plus 32% of AIME between $280 and $1691, plus 15% of AIME in excess of $1691. The Family Maximum Benefit (FMB) is calculated using a benefit formula applied to the initial PIA. Again, the formula used depends on the year of eligibility. The FMB formula for workers becoming eligible in 1985 is: 150% of the first $358 of PIA, plus 272% of PIA between $358 and $517, plus 134% of PIA between $517 and $675, plus 175% of PIA in excess of $675. NOTE: The initial PIA and FMB are increased by applying in sequence all general benefit increases in the year of eligibility and thereafter. The FMB of a worker who becomes entitled to a disability benefit after June 1980 will be the smaller of (a) 85% of his AIME (or 100% of PIA, if larger) and (b) 150% of his PIA. History of Decoupled Formula Bend Points Year of PIA Bend Points FMB Bend Points Eligibility Lower Upper Lower Mid Upper 1979 $180 $1085 $230 $332 $433 1980 194 1171 248 358 467 1981 211 1274 270 390 508 1982 230 1388 294 425 554 1983 254 1528 324 468 610 1984 267 1612 342 493 643 1985 280 1691 358 517 675 Future Adjustments to Decoupled Formula Bend Points The PIA formula bend points and the FMB formula bend points are adjusted each January 1 by comparing the average total wages of all workers for the second preceding year with the comparable figure for 1977, and applying the resulting ratio to the 1979 bend points. The updated bend points are rounded to the nearest whole dollar. [8} ... Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 1. Seal es Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 Transitional Guarantee Method The PIA is the higher of (a) the benefit derived under the Decoupled Formula Method and (b) the benefit derived under the PIA Table Method, except that under the PIA Table Method: (1) no earnings in the year of attainment of age 62 or later are used to compute the AMW, (2) the PIA is found in the December 1978 PIA table on pages 14 and 15, and (3) all general benefit increases after the later of December 31, 1978 and year of attainment of age 61 are applied. The FMB is computed under the Decoupled Formula Method. Minimum Benefit Regardless of other considerations, a worker who attained age 62, died, or became disabled before January 1, 1982, is eligible for a minimum PIA of $122 and a minimum FMB of $183. These figures are adjusted for all peut increases after the earlier of (a) year of entitlement, and (b) year of attainment of age 65. Exception: embers of a religious order who have taken a vow of poverty can become eligible for the minimum benefit through 1991, provided they were covered by Social Security before December 29, 1981. Special Minimum The Special Minimum PIA equals $11.50 per month times the number of years of coverage in excess of 10, with maximum of 20 such excess years used. The resulting amount is subject to all general benefit increases after May 1979. A “year of coverage” is a year in which the worker has covered earnings of at least one-quarter of the old-law maximum taxable wage base (see table on page 13). The FMB for the Special Minimum PIA is the amount in effect on January 1, 1979 adjusted for all general benefit increases after May 1979. The FMB must be no less than 150% of the PIA. Special Minimum PIA Special Minimum FMB Years of (including (including Coverage December 1984 increase) December 1984 increase) it $ 18.70 $ 28.10 12 37.00 55.60 13 55.50 83.50 14 74.00 111.10 15 92.40 138.70 16 111.00 166.60 17 129.40 194.10 18 148.00 222.00 19 166.40 249.60 20 184.70 277.20 21 203.30 305.20 22 221.80 332.80 23 240.40 360.80 24 258.80 388.30 25 277.20 415.90 26 295.90 444.00 27 314.30 471.60 28 332.70 499.20 29 351.10 526.90 30 or more 369.50 554.50 Old Start Method The old-start formula uses earnings before 1951 to compute an old-start AMW. Its use is extremely rare. Rounding to Multiple of $.10 If the year of eligibility is before 1982: the initial PIA calculation and all pre-1982 increases are rounded up to a multiple of $.10; and increases for 1982 and later are rounded down to a multiple of $.10. If the year of eligibility is 1982 or later, the initial PIA calculation and all general benefit increases are rounded down to a multiple of $.10, This rounding procedure is also followed for any calculations which depend upon the PIA — for instance, early retirement or dependents’ benefits. Final Rounding to Lower Dollar The Medicare Part B premium, if any, is subtracted from the total benefit check, and the resulting amount is reduced to a multiple of $1, if not already a multiple of $1. Initial Recomputation of Benefits Earnings related to the year of retirement or disability are not recognized in the initial determination of benefits; however, a recomputation recognizing these earnings is made in the following year retroactive to January 1. Frequently, earnings in the year immediately preceding year of entitlement are not taken into account in the initial social security calculation; however, a recomputation recognizing those earnings is made later in the year of entitlement, retroactive to date benefits commenced. DEFINITIONS See Page 12. [9] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 [cm Se rere ee of ba 4 bate | l 1 lng 3 hg ee Nt pk ye Sanitized Copy ieniet for Release 2011/01/11 : CIA-RDP89-00066RO0009001 10002-2 WORKSHEET FOR COMPUTING (Reflecting General Benefit Increases through December 1984 (a) Year of Eligibility: year attaining age 62 (or year of death or disability, if earlier) ................... (a) (b) Number of years after 1950 (or after year of attaining age 21, if later) and before year (a) ............ (b) (c}) Number of years included in calculation: for retirement, greater of 5. or ((b) — 5); for death, greater of 2, or ((b) — 5); for disability, greater of 2. or ((b) — dropout years*) «0.0.0... 6 6c eee eee (c) (d) Months in averaging period equals 12 X (C) .. 2... ccc ce een eee ee (d) (€): Near-(ay 3 2) 26s. nanan eae ae ial ad bedhd Sod tee Shwe whee pene NEES Dh aae AA h Oee (e) (f) Figure in Column (4) of table below for year (e) (Omit for PIA Table Method) ..................... (f) (g) Complete following table: (Column (5) of table should not be completed if using PIA Table Method) icted ndexe Enter Covered Enter Average Total Earnings Calendar Wages Maximum Taxable Smaller of Wages of All [(f) x (3) + Year for Year Wage Base (1) and (2) Workers** (4)tt (1) (2) (3) (4) (5) 1951 ee $ 3,600 nee $ 2,799.16 $ 1952 Sb 3,600 i —— 2,973.32 1953 i 3,600 ee 3,139.44 1954 a 3,600 ————————— 3,155.64 1955 a oer 4,200 ————————— 3,301.44 1956 pe 4,200 eT 3,532.36 1957 Fe 4,200 SS 3,641.72 1958 St 4,200 eee 3,673.80 1959 —— 4,800 eS 3,855.80 1960 eres 4,800 ———— 4,007.12 1961 ———— 4,800 ese ee 4,086.76 1962 ee: 4,800 Se, 4,291.40 1963 — 4,800 ee he 4,396.64 1964 <= 4,800 ——— 4,576.32 1965 a es 4,800 oe 4,658.72 1966 ee eee 6,600 ———— 4,938.36 1967 eet 6,600 es 5,213.44 1968 ——— es 7,800 SE 5,571.76 1969 es 7,800 ——<—— 5,893.76 1970 _—————aeee 7,800 oo 6,186.24 1971 ———es 7,800 ——— 6,497.08 1972 ————————————— 9,000 ———— 7,133.80 1973 ee 10,800 ————— 7,580.16 1974 or 13,200 =. 8,030.76 1975 tan 14,100 ere 8,630.92 1976 ee 15,300 S24 9,226.48 1977 a 16,500 ————— 9,779.44 1978 SS 17,700 ———SSSa5 10,556.03 1979 ————— 22,900 SO 11,479.46 1980 es, 25,900 —— 12,513.46 1981 ———— 29,700 —_ 13,773.10 1982 ea 32,400 ere ee en 14,531.34 1983 —— 35,700 a 15,239.24 1984 ——— 37,800 eS a 1985 SS 39,600 ——————— + * Dropout years for disability depend on age, as follows: Age at disability 47 and over 42-46 37-41 32-36 27-31 Under 27 Dropout years 5 4 3 2 | 0 For disability benefits starting or continuing after June 1981, additional dropout years may be counted. These are years when the worker had no earnings and lived with a child under age 3. Inclusion of such additions may not cause dropout years to exceed 3. ** This column applies only through year (e). Thereafter, use same figure as shown for year (e). +t Rounding to nearest cent. [ 10} - Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 pete, A Se be ee Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 PRIMARY INSURANCE AMOUNT and General Wage Increases through 1983) PIA TABLE METHOD (Complete if (a) is 1978 or earlier) (h) Total of highest entries in Column (3), counting only that number of entries stated in(c) ............. (h) (i) Average Monthly Wage (AMW) = (h) = (d), dropping cents ......... 0. ccc cece cece cece ceeees (i) (j) Initial PIA equals December 1978 amount shown on pages 14 and 15, based on AMW in (ited tie GQ) *Enter this figure on first line of column (w) below. DECOUPLED FORMULA METHOD (Complete if (a) is 1979 or later) (k) Total of highest entries in Column (5), counting only that number of entries stated in(c) ............. (k) (m) Average Indexed Monthly Earnings (AIME) equals (k) + (d), dropping cents ..................005. (m) (n) Lower PIA bend point for year (a)... 2. ccc cence tent ee ten tn tence bebbecees (n) If year (a) is 1979 1980 1981 1982 1983 1984 1985 Lower PIA bend point is $180 $194 $211 $230 $254 $267 $280 (p) Upper PIA bend point for year (a) 2. ce een ener eevee eueeeees (p) If year (a) is 1979 1980 1981 1982 1983 1984 1985 Upper PIA bend point is $1085 SII71 $1274 $1388 $1528 $1612 $1691 (q) Amount by which (p) exceeds (nm): (p) — (N) oo... ccc cece ccc cbc eee ees (q) (r) PIA under new formula: i 9 X lesser of (n) and (Mm) 2.2.0... ccc cece cence ene b ence eben eee (r) (1) .32 X lesser of (q) and [(m) — (n)], but not less than zero... .,....... 00.0... ee eee (r) (2) 1S X [(m) — (p)], but not less than zero 2c ccc cece ene (r) (3) Initial PIA equals (r) (1) + (r) (2) + (1) (3), rounded down to multiple of $.10 if year (a) is 1982 or later; rounded up to a multiple of $.10 if year (a) is earlier than 1982 ............. (r) Total **Enter this figure on line of column (w) below which corresponds to year (a), or else proceed with Transitional Guarantee Method, if applicable. TRANSITIONAL GUARANTEE METHOD (Complete for old-age calculations if (a) is 1979 through 1983, or if death occurs at or after age 62 for those attaining age 62 in 1979-83) (s) Total of highest entries in Column (3) before year (a) (through year (a) for survivor cases), counting only that number of entries stated in (C) 2.0.0.0... cece cece eee c cece beecevecnecs (s) (t) Average Monthly Wage (AMW) equals (s) + (d), dropping cents ........0.0.0 000.0 cece cee eeeeves (t) (u) December 1978 PIA taken from pages 14 and 15, based on AMW in(t) ........... 00.00 ccc cece cece (u) (v) Resulting PIA equals greater of (r) Total and (U) «2.02... cece cee ec cece eee eee (v) en ***Enter this figure on line of column (w) below which corresponds to year (a). CALCULATION OF CURRENT PIA (With Adjustment for General Benefit Increases) PIA before Increase Increase PIA after Increase RoundedV (w) (x) {y) 1979 or earlier 1.099 up 1980 1.143 up 1981 1.412 up 1982 1.074 down 1983 1.035 down 1984 1.035+ ii Enter result into (w) of next line and repeat step i; repeat process until answer is contained in box. See page 9 for further rounding of all benefits to a multiple of $1, and for Minimum and Special Minimum rules. V To multiple of $.10. + Effective with benefit check for December 1984 (payable in January 1985). Use 1.000 for months before December. i Multiply figure in (w) by increase in (x) and enter result in (y). [11] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 DEFINITIONS Average Monthly Wage (AMW): the average monthly wage is the quotient of (a) the number of months in the benefit computation years divided into (b) the highest total of covered earnings during a like number of years chosen out of the computation base years. Any fractions of $1 are ignored. Average Indexed Monthly Earnings (AIME): the average indexed monthly earnings is the quotient of (a) the number of months in the benefit computation years divided into (b) the highest total of covered indexed earnings during a like number of years chosen out of the computation base years. Any fractions of $1 are ignored. Average Total Wages of All Workers: number published by the Social Security Administration before each November 1 for the preceding calendar year. Average total wages of workers shown for calendar years 1951 through 1983 on page 10, column (4). Benefit Computation Years: the years with highest earnings which are actually used in calculating the primary insurance benefit. In most cases, the number of benefit computation years equals the computation base years minus five, with a minimum of two years (five for a retirement benefit). Special dropout rules apply if the benefit is for disability before age 47 (see footnote on page 10). Computation Base Years: the computation base years are the calendar years atter 1950 (or attainment of age 21, if later) and prior to the year in which the individual became entitled to old-age or disability benefits or through the year of death. Computation base years may not include any calendar year all of which was included in a period of disability. Employee: an individual who performs services for another under the usual common law rules defining employer-employee relationships. For Social Security tax purposes, the term also includes public officeholders, agent- or commission-drivers, full-time life insurance sales people, industrial home workers, and full-time wholesale sales people. (Not all employees are covered workers: see page 4.) Disability: inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months. For blind workers, inability to engage in the usual occupation. For surviving spouse, inability to engage in any gainful activity. First Month of Eligibility: the first month throughout all of which the individual is 62. For Social Security purposes, age 62 is attained on the day before the actual birthday; therefore, only those born on the first or second day of a month are eligible for benefits for the birthday month. This provision also applies to dependents’ benefits. General Benefit Increases: a general benefit increase applies for December of any year after Consumer Price Index (CPI- W) has increased at least 3% from (a) the third quarter of a year in which benefit was last automatically increased to (b) the third quarter of year under consideration, except that an automatic increase would be superseded by any raises in benefits enacted by Congress. The general benefit increase is equal to the percent increase in average CPI for the quarters in question, rounded to the nearest 0.1%. General Benefit Increases Since 1978 June 1979— 9.9% June 1982— 7.4% June 1980 — 14.3% December 1983— 3.5% June 1981— 11.2% December 1984— 3.5% Special rules apply if the Social Security OASDI trust fund ratio (the ratio of the fund balance at the beginning of the year to estimated benefits payable that year) falls below a specified level. The general benefit increase is then based on the tower of the CPI increase and the increase in average wages from the previous calendar year over the second preceding year. The fund ratio level that triggers this change is 15% through 1988, and 20% thereafter. {f the fund ratio later rises above 32%, any loss in the general benefit increase is restored prospectively, but only to the extent that the fund ratio remains at 32% or more. Indexed Earnings: a worker's covered wages multiplied by the ratio of average total wages of all workers in the second year before the year of eligibility to the average total wages of all workers in the year being updated. Example: {f a worker earned $4500 in 1959 and retired at age 62 in 1981, the $4500 is multipled by the ratio of average total wages in 1979 ($11479.46) to average total wages in 1959 ($3855.80) as follows: $4500 x ee = $13,397.37 = Indexed earnings. The answer is rounded to the nearest cent. Maximum Taxable Wage Base: the amount subject to Social Security tax in any given year. Established at $3000 annually for 1937, the maximum taxable wage base has grown to $39,600 for 1985. (See complete history on page 24.) Future increases are determined by an automatic escalator, which becomes effective for the year following a general benefit increase. The maximum taxable wage base is then computed by multiplying the maximum taxable wage base for the previous year by the ratio of (1) the average total wages of all workers (see page 10) for the second preceding year to (2) the corresponding amount for the third preceding year, with the result rounded to the nearest multiple of $300. Modified Adjusted Gross Income: adjusted gross income plus tax-exempt interest, with the following deductions and exclusions added back — deduction for two-earner married couple; exclusion for foreign earned income; exclusion for Puerto Rican income (for residents of Puerto Rico). Period of Disability: a continuous period of at least 5 full calendar months of disability, as defined above. Year of Eligibility: the year of attainment of age 62 or the year of death or disability, if earlier. Year of Entitlement: the year a worker meets the age and insured status requirements and files a claim (including retroactive claims). See also “First Month of Eligibility,” above. [12] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 he ete eer ns ree 4 earners Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 COVERED COMPENSATION Pension plans integrated with Social Security by the excess or step-rate methods may use covered compensation as the integration level. An individual's covered compensation is the average of the maximum taxable wage bases for each year after 1958 (or year of attainment of age 30, if later) and through the year he reaches age 64. Covered compensation may be the exact amount of average Social Security wages (Table II), or an approximation, rounded to the nearest $600 (Table 1). CALENDAR YEAR OF 65th BIRTHDAY TABLE | TABLE II 1985 $13,800 $13,808 1986 15,000 14,763 1987 15,600 15,650 1988 . 16,200 16,476 1989 17,400 17,247 1990 18,000 17,968 1991 18,600 18,644 1992 19,200 19,279 1993 19,800 19,876 1994 20,400 20,440 1995 21,600 21,434 1996 22,200 22,429 1997 23,400 23,423 1998 24,600 24,417 1999 25,200 25,411 2000 26,400 26,406 2001 27,600 27,400 2002 28,200 28,343 2003 29,400 29,286 2004 30,000 30,194 2005 31,200 31,103 2006 31,800 32,011 2007 33,000 32,920 2008 33,600 33,794 2009 34,800 34,617 2010 35,400 35,371 2011 36,000 36,100 2012 36,600 36,794 2013 37,200 37,454 2014 37,800 38,080 2015 38,400 38,557 * 2016 39,000 38,949 2017 39,000 39,231 2018 39,600 39,437 2019 39,600 39,549 2020 39,600 39,600 2021 39,600 39,600 MAXIMUM TAXABLE WAGE BASE COMPARISON The old-law maximum taxable wage base is the wage base as it would have been without regard to the legislated increases in the 1977 Social Security Amendments. It is used to determine eligibility for the Special Minimum benefit (see page 9), and to make cost-of-living adjustments to the maximum guaranteed benefit under ERISA Section 4022(b)(3)(B). (The adjusted maximum guaranteed benefit equals $750 times the ratio of the old-iaw maximum to $13,200.) YEAR ACTUAL MAXIMUM OLD-LAW MAXIMUM 1979 $22,900 $18,900 1980 25,900 20,400 1981 29,700 22,200 1982 32,400 24,300 1983 35,700 26,700 1984 37,800 28,200 1985 39,600 29,700 [13] Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 ol pe a ses Pe nd ie ad dS | Pe is Faas ee Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 DECEMBER 1978 PIA TABLE PRIMARY INSURANCE AMOUNTS AND FAMILY MAXIMUM BENEFITS FOR EACH AVERAGE MONTHLY WAGE Average Primary Family Average Primary Family Average Primary Family Monthly Insurance Maximum Monthly Insurance Maximum Monthly Insurance Maximum Wage Amount Benefit Wage Amount Benefit Wage Amount Benefit Up to $76 7 : $250-253 $251.80 $384.90 $483-487 $380.70 $701.60 77-18 $123.70 $185.60 254-258 254.30 392.50 488-492 383.10 705.40 79-80 126.60 189.90 259-263 256.50 400.00 493-496 385.50 708.40 81-81 128.90 193.50 264-267 259.60 406.00 497-501 388.20 712.10 82-83 131.20 196.80 268-272 262.10 413.70 502-506 390.50 715.80 84-85 134.00 201.00 273-277 264.90 421.20 507-510 392.90 719.00 86-87 136.50 204.80 278-281 267.40 427.20 511-515 395.30 722.80 88-89 138.60 207.90 282-286 270.00 434.90 516-520 398.00 726.70 90-90 141.40 212.10 287-291 272.90 442.60 521-524 400.30 729.50 91-92 143.80 215.70 292-295 275.10 448.50 525-529 402.70 733.40 93-94 146.20 219.30 296-300 278.10 456.10 530-534 405.60 737.10 95-96 148.50 222.80 301-305 280.70 463.80 535-538 407.70 740.20 97-97 151.30 227.00 306-309 283.10 469.80 539-543 410.20 744.10 98-99 153.70 230.60 310-314 286.00 477.40 544-548 412.80 747,80 100-101 156.70 235.10 315-319 288.30 485.10 549-553 | 415.30 751.60 102-102 158.90 - 238.50 320-323 291.00 491.10 554-556 417.60 753.90 103-104 161.60 242.40 324-328 293.80 498.70 557-560 419.60 756.90 105-106 164.60 246.90 329-333 296.20 506.20 561-563 421.90 759.30 107-107 167.30 251.00 334-337 299.30 512.50 564-567 424.10 762.30 108-109 169.80 254.80 338-342 301.40 519.90 568-570 426.50 764.50 110-113 172.50 258.80 343-347 304.20 527.50 571-574 428.50 767.50 114-118 174.90 262.40 348-351 307.10 533.60 575-577 430.70 769.90 119-122 177.60 266.50 352-356 309.40 541.20 578-581 432.70 772.80 123-127 180.40 270.60 357-361 312.40 548.80 582-584 435.00 775.20 128-132 183.00 274.60 362-365 314.90 554.90 585-588 436.90 778.20 133-136 185.50 278.30 366-370 317.30 562.50 589-591 439.50 780.50 137-141 188.00 282.10 371-375 320.20 569.90 §92-595 441.60 783.50 142-146 190.80 286.20 376-379 322.90 576.30 §96-598 443.80 785.60 147-150 193.60 290.40 380-384 325.00 583.90 §99-602 446.00 788.90 151-155 195.90 293.90 385-389 328.00 591.30 603-605 448.10 791.10 156-160 198.70 298.10 390-393 330.50 597.40 606-609 450.30 794.00 161-164 201.30 302.00 394-398 333.40 605.10 610-612 452.60 796.50 165-169 203.90 305.90 399-403 336.00 612.70 613-616 454.70 799.50 170-174 206.70 310.10 404-407 338.90 618.60 617-620 456.80 _ 802.50 175-178 209.10 313.70 408-412 341.10 626.30 621-623 459.10 804.80 179-183 211.90 318.00 413-417 343.50 633.80 624-627 461.20 807.90 184-188 214.40 321.70 418-421 346.00 639.90 628-630 463.40 810.70 189-193 217.20 326.00 422-426 348.70 647.50 631-634 465.60 814.70 194-197 219.90 329.90 427-431 351.10 655.10 635-637 467.80 818.50 198-202 222.40 333.60 432-436 353.20 662.70 638-641 470.10 822.40 203-207 225.30 338.00 437-440 356.20 665.70 642-644 472.10 826.10 208-211 228.00 342.00 441-445 358.40 669.70 645-648 474,40 830.10 212-216 230.10 345.20 446-450 360.80 673.40 649-652 476.50 833.70 217-221 233.00 349.50 451-454 363.50 676.30 653-656 477.80 836.10 222-225 235.60 353.40 455-459 365.90 680.10 657-660 479.20 838.40 226-230 238.50 357.80 460-464 368.30 683.80 661-665 480.90 841.50 231-235 241.10 361.70 465-468 370.60 687.10 666-670 482.60 844.50 236-239 244.00 366.10 469-473 373.50 690.80 671-675 484.40 847.40 240-244 246.30 371.10 474-478 375.60 694.60 676-680 486.10 850.50 245-249 248.70 378.80 479-482 378.00 697.70 681-685 487.80 853.50 eT ——_— Underlying Approximate Formula 455.38% of first $110 of AMW, plus 56.51% of next $290 thereof, plus 52.80% of next $150 thereof, For Primary Insurance Amount plus 62.09% of next $100 thereof, plus 34.53% of next $100 thereof, plus 28.78% of next $250 thereof, based on Average Monthly Wage. plus 25.92% of next $175 thereof, plus 94.01% of next $100 thereof, plus 22.56% of next $100 thereof, plus 21.3% of next $100 thereof, plus 20% of next $433 thereof. * If the Average Monthly Wage is under $77, the PIA and FMB can be approximated by multiplying $123.70 and $185.60, respectively, by the ratio of the Average Monthly Wage to $77.50. [14] | 1 | | i | |. Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R000900110002-2 ~— af | aes Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 DECEMBER 1978 PIA TABLE PRIMARY INSURANCE AMOUNTS AND FAMILY MAXIMUM BENEFITS FOR EACH AVERAGE MONTHLY WAGE Average Primary Family Average Primary Family Average Primary Family Monthly Insurance Maximum Monthly Insurance Maximum Monthly Insurance Maximum Wage Amount Benefit Wage Amount Benefit Wage Amount Benefit $686-690 $489.70 $ 856.40 $ 951-955 $569.30 $996.10 $1216-1220 $638.30 $1117.00 691-695 491.20 859.60 956-960 570.80 998.60 1221-1225 639.50 1119.00 696-700 492.90 862.60 961-965 572.30 1001.00 1226-1230 640.80 1121.20 701-705 494.70 865.60 966-970 573.40 1003.60 1231-1235 641.90 1123.20 706-710 496.40 868.60 971-975 574.90 1006.20 1236-1240 643.10 1125.40 711-715 498.20 871.50 976-980 576.40 1008.50 1241-1245 644.40 1127.50 716-720 500.00 874.60 981-985 577.90 1011.10 1246-1250 645.50 1129.60 721-725 501.70 877.60 986-990 579.20 1013.60 1251-1255 646.70 1131.60 726-730 503.40 880.70 991-995 580.70 1016.20 1256-1260 647.90 1133.80 731-735 505.10 883.80 996-1000 582.20 1018.60 1261-1265 649.20 1135.90 736-740 506.90 886.70 1001-1005 583.50 1020.70 1266-1270 650.30 1138.00 741-745 508.50 889.90 1006-1010 584.60 1023.20 1271-1275 651.50 1140.00 746-750 510.10 892.70 1011-1015 586.00 1025.30 1276-1280 652.70 1142.20 751-755 511.70 895.40 1016-1020 587.40 1027.80 1281-1285 653.70 1144.10 756-760 513.20 897.80 1021-1025 588.60 1029.90 1286-1290 654.90 1146.10 761-765 514.70 900.40 1026-1030 589.80 1032.20 1291-1295 656.10 1148.00 766-770 516.00 903.00 1031-1035 591.20 1034.50 1296-1300 657.20 1150.00 711-775 517.40 905.40 1036-1040 592.40 1036.70 1301-1305 658.30 1152.00 766-780 518.90 907.90 1041-1045 593.80 1039.10 1306-1310 659.40 1154.00 781-785 520.40 910.40 1046-1050 595.20 1041.30 1311-1315 660.60 1155.90 786-790 521.70 912.90 1051-1055 596.20 1043.40 1316-1320 661.70 1157.90 791-795 523.10 915.40 1056-1060 597 60 1045.90 1321-1325 662.80 1159.80 796-800 524.60 918.00 1061-1065 599.00 1048.00 1326-1330 664.00 1161.90 801-805 526.20 920.50 1066-1070 600.30 1050.50 1331-1335 665.00 1163.80 806-810 527.50 923.00 1071-1075 601.60 1052.60 1336-1340 666.20 1165.80 811-815 529.00 925.60 1076-1080 602.80 1054.90 1341-1345 667.40 1167.70 816-820 530.40 928.00 1081-1085 604.20 1057.10 1346-1350 668.40 1169.70 821-825 531.90 930.60 1086-1090 605.40 1059.40 1351-1355 669.60 1171.70 826-830 533.30 933.10 1091-1095 606.80 1061.70 1356-1360 670.70 1173.70 831-835 534.70 935.70 1096-1100 608.20 1064.00 1361-1365 671.90 1175.60 836-840 536.10 938.10 1101-1105 609.20 1066.10 1366-1370 672.90 1177.70 841-845 537.60 940.80 1106-1110 610.60 1068.50 1371-1375 674.10 1179.60 846-850 538.90 943.00 1111-1115 612.00 4070.70 1376-1380 675.20 1181.60 851-855 540.50 945.70 1116-1120 613.20 1073.10 1381-1385 676.20 1183.40 856-860 541.90 948.10 1121-1125 614.60 1075.30 1386-1390 677.30 1185.30 861-865 543.40 950.70 1126-1130 615.80 1077.60 1391-1395 678.30 1187.10 866-870 544.80 953.20 1131-1135 617.10 1079.70 1396-1400 679.40 1189.00 871-875 546.30 955.70 1136-1140 618.40 1082.20 1401-1405 680.50 1190.80 876-880 547.60 958.20 1141-1145 619.80 1084.40 1406-1410 681.50 1192.70 881-885 549.10 960.80 1146-1150 621.10 1086.70 1411-1415 682.60 1194.60 886-890 550.40 963.20 1151-1155 622.20 1088.80 1416-1420 683.70 1196.50 891-895 551.90 966.00 1156-1160 623.60 1091.10 1421-1425 684.70 1198.30 896-900 553.40 968.30 1161-1165 624.90 1093.40 1426-1430 685.80 1200.20 901-905 554.90 970.90 1166-1170 626.20 1095.80 1431-1435 686.90 1202.00 906-910 556.30 973.50 41794-1175 627.50 1098.00 1436-1440 687.90 1203.90 911-915 557.80 976.00 1176-1180 628.70 1100.20 1441-1445 589.00 1205.70 916-920 559.30 978.30 1181-1185 629.90 1102.20 1446-1450 690.10 1207.70 921-925 560.60 981.00 1186-1190 631.20 1104.30 1451-1458 691.10 1209.50 926-930 561.90 983.40 1191-1195 632.30 1106.50 1456-1460 692.20 1211.40 931-935 563.40 985.90 1196-1200 633.50 1108.60 1461-1465 693.30 1213.30 936-940 564.90 988.50 1201-1205 634.70 1110.60 1466-1470 694.30 1215.10 941-945 566.30 991.00 1206-1210 636.00 1112.90 1471-1475 695.40 1216.90 946-950 567.70 993.50 1211-1215 637.10 1114.90 Underlying Approximate Formula 155.38% of first $110 of AMW, plus 56.51% of next $290 thereof, plus 52.80% of next $150 thereof, For Primary Insurance Amount plus 62.09% of next $100 thereof, plus 34.53% of next $100 thereof, plus 28.78% of next $250 thereof, based on Average Monthly Wage. plus 25.92% of next $175 thereof, plus 24.01% of next $100 thereof, plus 22.56% of next $100 thereof, plus 21.3% of next $100 thereof, plus 20% of next $433 thereof. (15) Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 REPRESENTATIVE PROJECTED RETIREMENT BENEFITS IN 1984 DOLLARS For Maximum Covered Wages Retired Worker Retired Worker and Spouse Year of Full Retirement Both Full BTR os AE OER. _ st Hetirorment Age, ____, ~ Batlbe 1919 $704 $1056 1920 693 1040 1921 713 1070 1922 730 $559 1095 $ 821 1923 745 571 1118 839 1924 748 574 1122 843 ( 1925 753 580 1130 852 1926 764 588 1146 864 1927 779 601 1169 883 1928 794 614 1191 902 : 1930 829 641 1244 941 1940 1,017 765 1525 1123 1950 1,215 890 1823 1306 One-Half Maximum Taxable Wage Base Retired Worker Retired Worker and Spouse Year of Full Retirement Both Full Birth Age Age 62 Retirement Age Both 62 1919 $455 $683 1920 449 674 1921 463 695 1922 476 $354 714 $520 1923 488 364 732 535 1924 492 368 738 541 1925 497 373 746 548 1926 505 380 758 558 1927 517 390 776 573 1928 528 399 792 586 1930 555 420 833 617 1940 . 09 524 1063 770 1950 871 630 1307 925 ASSUMPTIONS: Worker earns the maximum taxable wage base or half of the maximum taxable wage base, as stated, in each year from age 22 through the year preceding the year of retirement (no wages in the year of retirement). Projected benefits are based on estimates of future wage levels and general benefit increases in the 1984 Report of the Board of Trustees of the Social Security Funds. Resulting amounts have been restated in 1984 dollars, using estimated rates of future inflation from the same source. [ 16 ] __ Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 \ | Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 REPRESENTATIVE PROJECTED DEATH BENEFITS IN 1984 DOLLARS FOR SPOUSE OF COVERED WORKER For Maximum Covered Wages Year of Birth 1985 Year of Death soe? 1988 bubs a9? 2000 1929* $714 $718 $767 — — 1930 716 720 769 $829 _ 1940 750 755 807 897 $ 996 1950 817 821 870 957 1054 1960 878 877 911 985 1077 For One-Half Maximum Covered Wages Year of Death Year of Birth 1985 1986 1990 1995 2000 1929* $455 $460 $499 — —_ 1930 457 461 501 $555 = 1940 493 499 542 609 $ 682 1950 565 570 609 673 743 1960 630 630 653 703 768 REPRESENTATIVE PROJECTED DISABILITY BENEFITS IN 1984 DOLLARS FOR COVERED WORKER ONLY For Maximum Covered Wages Year of Disability Year of Birth 1985 . 1986 1990 1995 2000 1929" $714 ' $718 $767 — _ 1930 716 720 769 $829 — 1940 745 750 807 897 $ 996 1950 795 800 857 951 1054 1960 867 865 904 984 1077 For One-Half Maximum Covered Wages Year of Disability Year of Birth 1985 1986 1990 1995 2000 1929" $455 $460 $499 _ _ 1930 457 461 501 555 — 1940 488 493 542 609 $ 682 1950 542 547 594 666 743 1960 618 618 645 701 768 "1929 figures apply to everyone born before January 2, 1930 if death or disability occurs before age 62. ASSUMPTIONS: Worker earns the maximum tax: each year from age 22 through the year precedi of the year). Projected benefits are based on Report of the Board of Trustees of the Sociai using estimated rates of future inflation from the same so ng the year of death or disabilit estimates of future wage level | Security [17] able wage base or half of the maximum taxable wage base, as stated, in y (death or disability occurs at the beginning Ss and general benefit increases in the 1984 Funds. Resulting amounts have been restated in 1984 dollars, urce. Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 een am Pe i 0 RUN J CEN lever vere FOR Wars er Gye mew FOr eT) Eo as Uae Ct tod Spad|ted i a eee : i i ! a Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 REPLACEMENT RATIOS (Annual Primary Insurance Amount expressed as a percentage of wages in the year immediately preceding retirement) A measure of Social Security's effectiveness in providing for retirement needs is the ‘replacement ratio.”’ It equals the annual primary Social Security benefit for retirement at the beginning of the year divided by wages in the year immediately preceding retirement (including, where applicable, wages above the maximum taxable wage base). The following table illustrates how future increases in maximum taxable wage base, covered wages and CP! will affect replacement ratios under present law. Illustrations of Replacement Ratios for Future Retirements at Full Retirement Age Based on the Following Assumed Future Annual Increases: Covered Wages 7%; Maximum Taxable Wage Base 7%; CPI5% 1985 Wages* YEAR OF ; RETIREMENT $10,000 $15,000 $20,000 $25,000 $30,000 $39,600 1985t .49 43 40 35 .30 23 1990 49 43 40 35 30 24 1995 49 43 39 35 30 24 2000 49 43 .39 35 31 25 2005 49 43 39 35 31 26 2010 49 43 .39 36 32 27 2015 .49 42 39 .36 32 27 2020 49 42 39 35 32 27 2025 .49 42 39 35 32 27 Based on the Following Assumed Future Annual Increases: Covered Wages 0%; Maximum Taxable Wage Base 0%; CPI 0% Se he ee — YEAR OF : RETIREMENT $10,000 $15,000 $20,000 $25,000 $30,000 $39,600 1985t 49 43 40 35 .30 23 1990 50 45 1 35 .30 24 1995 51 45 41 35 31 .24 2000 51 45 42 36 31 .26 2005 51 45 42 36 32 27 2010 51 45 42 37 33 28 2015 51 45 42 .37 33 28 2020 51 45 42 37 33 29 2025 1 45 42 37 33 .29 Based on Assumed Future Annual Increases in Covered Wages, Maximum Taxable Wage Base, and CPI contained in Table 10, Alternative II-B of 1984 Report of the Board of Trustees of the Social Security Funds. wg eS 2 a ee YEAR OF RETIREMENT $10,000 $15,000 $20,000 $25,000 $30,000 $39,600 1985+ 49 43 .40 35 30 23 1990 49 42 39 34 .30 24 1995 .49 42 39 35 30 24 2000 49 42 39 35 31 .25 2005 49 42 39 35 31 26 2010 49 42 39 35 32 7 2015 .49 43 39 36 32 27 2020 AQ 43 39 36 32 .28 2025 49 43 39 36 32 28 * Wages prior to 1985 were assumed to decrease by the same percentage as the average total wages of all workers. + Benefit under Transitional Guarantee Method. [18] - Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R000900110002-2 - -~- guvcel, as dost eo DS, Re cect Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 MEDICARE Scope of Coverage Title XVIII of the Social Security Act provides two health insurance programs for eligible persons: A—A basic plan (Part A) providing benefits to cover the cost of hospital and related care (see below). B—A voluntary supplementary plan (Part B) providing benefits to cover the cost of physicians’ services and certain other medical and health services not covered by the basic plan (see pages 20-21). Excluded Health and Medical Services Regardless of other considerations, there are certain health and medical services which are not covered under the basic hospital insurance plan (Part A) or the voluntary supplementary medical insurance plan (Part B) as follows: 1. Health services that are not reasonable and necessary for the treatment or diagnosis of illness or injury. An example is a private room in a hospital unless required for medical reasons, or a private duty nurse 2. Items and services furnished to a worker, if the worker does not have a legal obligation to pay for or provide the services. An example would be charges made by a doctor who is a member of the patient’s family 3. Items and services paid for by a governmental entity (such as the Veterans Administration) 4. Items and services provided outside the United States (except for certain emergency hospital services in Canada, hospital insurance benefits for railroad retirement beneficiaries in Canada and cases where the foreign hospital is closer to the U.S. residence of a U.S. citizen than the nearest suitable US. hospital) 5. Ordinary dental services and dentures 6. Service required as a result of war occurring after the effective date of a worker’s coverage 7. Expenses for routine physical examinations 8. Eyeglasses, hearing aids, orthopedic shoes or the expenses incurred in connection with their fitting or purchase 9. Immunizations 0. Cosmetic surgery, except where required immediately as a result of accidental injury 11. Custodial care 12. Items and services to the extent they are covered under Workers Compensation laws 13. Certain routine foot care and orthopedic shoes 14. Personal comfort items such as TV, telephone charges, etc. 15. Out-of-hospital drugs PART A— BASIC PLAN OF HOSPITAL INSURANCE ELIGIBILITY 1. All persons who would be entitled to either Social Security benefits or Railroad Retirement annuities are covered if they are age 65 or older, even though they may not in fact have retired, Medicare is the secondary payer (after the employer’s health plan, if any) for active workers age 65-69 and the spouse age 65-69 of a worker under age 70, unless they elect otherwise. Medicare is also the secondary payer when medical care costs are payable under a liability policy. 2. Disability beneficiaries are covered after entitlement to disability benefits for not less than 24 consecutive months. Those covered include disabled workers at any age; disabled widows and widowers between ages 50 and 65: disabled beneficiaries age 18 or older who were disabled prior to age 22; and disabled qualified railroad retirement annuitants. 3. Persons under age 65 (whether fully or currently insured, a monthly beneficiary, or a spouse or dependent child of an insured person or monthly beneficiary) with chronic renal disease. requir- ing dialysis or renal transplant. are covered under Part A beginning with the third month after the month in which course of treatment began and ending with the twelfth month after the month of transplant or after dialysis terminates. Medicare is the secondary payer (after private insur- ance) during the first 12 months. 4. Persons age 65 and over not eligible for Part A coverage can enroll voluntarily by paying a premium which approximates the full cost; however. enrollment in Part B is required as a condition for such coverage under Part A. [19] ‘Sanitized Copy Approved for Release 2011/01/11 . CIA-RDP89-00066R000900110002-2 poems ooh Lib dd doe ag def sd . Hl ren pie Jd i Jt Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 BENEFITS PROVIDED DEDUCTIBLES AND COINSURANCE 1. Inpatient Hospital Care for up to 90 days of care in a hospital for a single spell of illness (**spell of illness’? means a period beginning with the first day of hospitalization and ending after the patient has been out of a hospital and a skilled nursing facility for 60 consecutive days) but with a deductible payable by the patient of $400 for the first 60 days plus $100 for each day between the 60th and 90th. Each beneficiary is also provided with a lifetime reserve of 60 days of added coverage after the 90 days have been exhausted. This reserve is subject to coinsurance of $200 per day. Hospital benefits include room and board in rooms containing from 2 to 4 beds, ordinary nursing services of medical and dental interns and residents serving the hospitals under an approved teaching program, drugs, supplics, and equipment normally furnished for treatment and the cost of blood or equivalent quantities of packed red blood cells in excess of the first 3 pints furnished to a patient in a spell of illness. These hospital services exclude private duty nursing and hospital services of physicians or other medical specialists employed by or working through the hospital. The law detines hospitals for purposes of the Part A coverage and includes Christian Science sanatoriums, TB hospitals and psychiatric hospitals. Under certain conditions coverage will be provided for emergency treatment in non-participating hospitals. The coverage in a psychiatric hospital is limited to a maximum of 190 days during the lifetime of the patient. 2. Posthospital Skilled Nursing Services are provided in a skilled nursing home or special wing or ward of a hospital. To be eligible the patient must be transferred from a hospital. after a stay of at least 3 days. and within a period of 30 days of hospital discharge for continued care of the same illness. although an interval exceeding 30 days is authorized for a patient whose condition does not permit immediate provision of skilled services. In addition, an extension of not more than 2 weeks beyond the 30 days is authorized where appropriate bed space is not immediately available in the geographic area. Benefits are provided for up to 100 days for the same illness with coinsurance of $50 per day after,the first 20 days of posthospital care. The extended care services covered are similar to those provided under the inpatient hospital program described above and also include physical, occupational, and speech therapy ordinarily furnished by the nursing home or hospital for its inpatients. 3. Posthospital Home Health Services by a participating home health agency (as defined in the law) for unlimited visits in the year at the patient's home. Such services are essentially for homebound persons and include visiting nurse services and various types of therapy treatment, including outpatient hospital services when equipment cannot be brought to the home. 4. Hospice Care Services for terminally ill beneficiaries with a life expectancy of six months or less. A beneficiary may elect hospice care for two periods of 90 days each. plus one additional period of 30 days. During this time, he or she must give up the right to other Medicare services related to the treatment of his condition, except services by an attending physician who is not employed by the hospice program. Coinsurance is required on outpatient prescription drugs equal to the lesser of $5 or 5%. In addition, there is 5% coinsurance on inpatient “respite’’ care. however, the total amount for a period (plus 14 days) cannot exceed the inpatient hospital deductible for the year in which the period began. Deductibles and coinsurance quoted apply to days of care beginning in 1985. They are increased each January | by a formula which depends on the trend of hospital costs since 1966. The applicable amounts are those in effect for the current year. not the year in which the spell of illness began. PART B— VOLUNTARY SUPPLEMENTARY MEDICAL INSURANCE PLAN ELIGIBILITY ENROLLMENT OF ELIGIBLE PERSONS Persons eligible for the basic hospitalization plan described in Part A above will be automatically enrolled in the voluntary supplementary medical insurance plan (Part B) except for residents of Puerto Rico and foreign countries. In addition, such residents and all other persons age 65 and over who are resident U.S. citizens or alien residents who had resided in the U.S. continuously for at least five years are eligible to enroll. Persons eligible for automatic enrollment must be given an opportunity to decline the Part B coverage. Medicare is the secondary payer (after the employer's health plan, if any) for active workers age 65-69 and the spouse age 65-69 of a worker under age 70, unless they elect otherwise. Medicare is also the secondary payer when medical care costs are paid under a liability policy. 1. The initial enrollment period for each person is the 7-month period beginning with the Ist day of the 3rd month before the month in which he attains age 65 or, for the disabled, the first month of eligibility for Part A coverage. 2. For those who miss their initial enrollment period, or who terminate their enrollment and wish to re-enroll, there is a general enrollment period in January through March each year. Coverage becomes effective the following July. { 20] '” Sanitized Copy Approved for Release 2011/01/11 - CIA-RDP89-00086R000900110002-2 Pree ea ante er a zt Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 ENROLLMENT 3. For workers and/or their spouses who receive primary health coverage under an employer group (Continued) health plan, a special enrollment period applies starting November 1, 1984: (a) the 7-month period beginning with the Ist day of the 3rd month before the month in which the individual attains age 70, or (b) the 7-month period beginning with the Ist day of the month in which the individual is no longer covered by an employer health plan, whichever period results in earlier coverage. (If an individual would have had a special enrollment period that began before November |, 1984, then the special enrollment period is deemed to begin on November 1, 1984.) Coverage becomes effective depending on when the individual enrolls. 4. There is a provision requiring an increase in monthly premiums for late enrollments or re- enrollments. The increase is 10% for cach full 12 months intervening between the end of the period when the person was first eligible for enrollment and the end of the period in which he enrolls (and for re-enrollments, counting the months when he was dis-enrolled). TERMINATION An enrollee may terminate coverage under the voluntary plan by filing notice at any time (effective PROVISIONS at the end of the next quarter) or the government may terminate coverage for non-payment of premiums for those whose premiums are not deducted from benefits. Unlimited re-enrollment is now permitted, with increased premiums as described above. BENEFIT The benefit provisions of the supplementary medical insurance plan are similar to major medical PROVISIONS coverage with an annual deductible of $75 in a calendar year and coinsurance of 20% of the recognized charge for physician and miscellaneous services, and 20% of the reasonable cost for institutional service (including service of hospital-based physician). This means that the enrollee pays the first $75 of covered expenses in cach year and 20% of the remaining covered expenses, plus all non-covered expenses. Exception: Home health services are subject to neither the deductible nor the coinsurance. All outpatient diagnostic lab tests are covered without any cost-sharing, except when performed by a physician who does not accept assignment. The expenses incurred during any year for the first 3 pints of whole blood or equivalent quantities of red blood cells, to the extent that these are not replaced, are subject to an additional deductible. Reimbursement is not made for charges that are considered not recognized (based on customary and prevailing charges as adjusted by an economic index), SERVICES |. Services of physicians and surgeons whether furnished in a hospital, clinic, office, home or COVERED elsewhere, of a dentist performing certain oral or dental surgery, of licensed chiropractors in the treatment of the spine, and certain services of podiatrists and chiropodists. These include services of physicians in the specialized fields of anesthesiology, pathology, psychiatry and radiology. 2. Services and supplies incidental to physicians’ services furnished in hospital outpatient depart- ment or in physicians’ offices. This term includes outpatient hospital diagnostic services which are ordinarily furnished by a hospital to its outpatients and also includes outpatient physical therapy services provided to an outpatient or inpatient and physical therapy provided in the therapist’s office subject to certain limits and conditions. 3. Other medical services, when provided under prescribed conditions, including: (a) Diagnostic X-ray and laboratory tests as well as diagnostic tests such as electrocardiograms, basal metabolism reading, etc. (b) X-ray, radium and radioactive isotope therapy (c) Surgical dressing, splints, casts, etc. (d) Rental of durable medical equipment such as iron lungs, oxygen tents, hospital beds and wheel chairs (or purchase, if more economical) (c) Prosthetic devices (other than dental) which replace all or part of an internal body organ (f) Braces and artifical legs, arms, eyes, etc. (g) Ambulance service if patient’s condition is such as to require it (h) Cost of supplies directly related to the care of a colostomy 4. Unlimited home health service visits during a calendar year. Such services are essentially for homebound persons and include visiting nurse services and various types of therapy treatment, including outpatient hospital services when equipment cannot be brought to the home. 5. Benefits for psychiatric treatment outside of a hospital are limited under the supplementary plan to $250 per year because only 62'4% of the first $500 of such expenses are eligible for reimbursement and the 20% co-insurance factor must then be applied. (If the $75 deductible has not been satisfied, the balance of the $75 must also be deducted from eligible expenses making the maximum benefit $212.50 a year for a person whose only expenses are psychiatric.) 6. Services of independent physical therapists up to a maximum of $500 per calendar year. [ 21] 11: CIA-RDP89-00066R000900110002-2 Sanitized Copy Approved for Release 2011/01/ ci L a at J. ran . . 5 fs oe ee i Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 FINANCING OF SOCIAL INSURANCE PROGRAMS There are four funds within the federal budget which receive contributions from employers and employees and pay benefits or reimburse expenditures to entitled beneficiaries under the Social Security and Medicare laws. These are: @ Old-Age and Survivors Insurance Trust Fund (OASI) © Disability Insurance Trust Fund (DI) @ Hospital Insurance Trust Fund (HI) ® Supplementary Medical Insurance Trust Fund (SMI) Contributions are distributed to the funds according to tax schedules or procedures set by law. Page 24 shows a history of allocations to the OASI, DI and HI funds since Social Security began in 1937, as well as a schedule for the future. The table on page 23 shows a history of adequate actuarial rates and standard monthly premiums for SMI coverage. OLD AGE The Social Security Amendments of 1983 lent stability to the OASI and DI programs. It must be ? SURVIVORS, AND recognized, however, that the two funds are still in delicate financial balance, and that adverse DISABILITY economic conditions could necessitate an additional infusion of revenues. With this in mind, the INSURANCE Amendments made provision for emergency short-term financing to cover potential intermediate deficits. Throughout 2020, the situation of OASDI is projected to be sound. During this time, the ratio of employees to retirees is considered favorable, and it is expected that the funds will actually grow. The danger then will not be insufficiency of funds, but that the apparent oversufficiency might lead to pressure for benefit increases that cannot be maintained. After 2020, according to current actuarial projections, the ratio of employees to beneficiaries will drop and OASDI will need all of the accumulated funds in addition to the scheduled contributions to avoid a long-term deficiency. Thus, the Old Age and Disability programs are believed to be adequately financed, both in the short and the long term, although without margin for adversity. HOSPITAL The Hospital Insurance (Medicare Part A) program is projected to have financial problems in the INSURANCE 1990s. In the short term, the HI fund should be sufficient to pay benefits; however. if medical costs continue to rise as they have, the designated contributions will become inadequate and interfund loans will have to be repaid and spent for benefits, and eventually the HI fund will disappear. In the very long term expenditures could well be two to three times scheduled income without corrective legislation. Thus, pressure for a significant increase in the hospital insurance tax rate, or reductions in benefits, is projected by the mid-1990s. Almost all people are automatically covered under Medicare Part A through their participation in Social Security. Those who are not covered may enroll on a voluntary basis and pay a separate monthly premium (voluntary enrollees must also sign up for Part B). A history of premiums for voluntary coverage is shown below. t a a Period For Which Effective Monthly Rate July 1973-June 1974 $ 33.00 July 1974-June 1975 36.00 July 1975-June 1976 40.00 July 1976-June 1977 45.00 July 1977-June 1978 54.00 July 1978-June 1979 63.00 July 1979-June 1980 69.00 July 1980-June 1981 78.00 July 1981-June 1982 89.00 July 1982-December 1983 113.00 January-December 1984 155.00 January-December 1985 174.00 SUPPLEMENTARY Unlike the other social insurance programs. SMI (Medicare Part B) is voluntary, and is financed MEDICAL directly by participants and the government in much the same way as private health insurance. At INSURANCE one time, participants and the government each paid half of the cost of coverage. However, a provision enacted in 1973 stated that the participant share would rise no faster than Social Security benefits. Since medical costs have been going up faster than Social Security, participants are paying less and less of the cost and the government more and more. As shown in the table on page 23, the government is now financing 75 percent of the cost for the aged and 85% of the cost for the disabled. -l Bebe eeee. aheteahi. otek Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 SUPPLEMENTARY MEDICAL INSURANCE (Continued) Since the law requires government and participant contributions to match current expenditures, there is no financing crisis as such, but with ever-increasing general revenues being allocated to SMI, the taxpayers may some day demand that benefits be trimmed to keep the costs down. Each year the government determines the cost of SMI coverage for the aged and disabled populations separately, taking into account the estimated cost of benefits and administration. The “adequate actuarial rate’’ is defined by law as one-half of the cost in each category. The standard monthly premium for the government is two times the adequate actuarial rate, less the participant’s standard monthly premium. The table below shows, according to the period for which they are applicable, the adequate actuarial rates and the standard monthly premiums paid by the participants and the government. HISTORY OF ADEQUATE ACTUARIAL RATES AND STANDARD MONTHLY PREMIUMS a ee Standard Monthly Premium Adequate Actuarial Rate U.S. Government Parti- Period Aged Disabled cipant Aged Disabled July 1966-March 1968 $ 3.00 _ $ 3.00 $ 3.00 _— April 1968-June 1970 4.00 _ 4.00 4.00 - July 1970-June 1971 5.30 _— 5.30 5.30 _ July 1971-June 1972 5.60 = 5.60 5.60 = July 1972-June 1973 5.80 — 5.80 5.80 _ July 1973 6.30 $14.50 5§.80* 6.80 $23.20 August 1973 6.30 14.50 6.10" 6.50 22.90 September 1973-June 1974 6.30 14.50 6.30 6.30 22.70 July 1974-June 1975 6.70 18.00 6.70 6.70 29.30 July 1975-June 1976 7.50 18.50 6.70** 8.30 30.30 July 1976-June 1977 10.70 19.00 7.20 14.20 30.80 July 1977-June 1978 12.30 25.00 7.70 16.90 42.30 July 1978-June 1979 13.40 25.00 8.20 18.60 41.80 July 1979-June 1980 13.40 25.00 8.70 18.10 41.30 July 1980-June 1981 16.30 25.50 9.60 23.00 41.40 July 1981-June 1982 22.60 36.60 11.00 34.20 62.20 July 1982-December 1983 24.60 42.10 12.20 37.00 72.00 January-December 1984 29.20 54.30 14.60 43.80 94.00 January-December 1985 31.00 52.70 15.50 46.50 89.90 ‘Reflects freeze under Economic Stabilization Program. *“As a result of a technical flaw in the law, the participant's standard monthly premium was continued at $6.70 per month for 12 months from July 1975. The 1983 Amendments changed the premium period to a calendar year basis, to coincide with the change in timing of the general benefit increase, so the $12.20 rate for July 1982 to June 1983 remained in effect through December 1983. In 1984 and 1985, premiums were set by law at one- half the adequate actuarial rate; this was continued for the 1986 and 1987 rates, but thereafter, any increase will be limited to no more than the percentage of the general benefit increase from the first to the second preceding year. The premiums are deducted from the monthly benefits of persons receiving Social Security, Railroad Retirement, or federal civil service retirement benefits. Other covered persons receive a premium notice, with payment to be sent to the proper servicing center. [ 23 J Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 ri moles Pie eee ed cer Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 HISTORY OF TAXES AND SCHEDULED TAXES IN FUTURE YEARS Rates of Tax" ; Maximum Tax in Year Employee and Employer (Each) Total Tax oe OaAsI?, HI® Total | Employer- Self- Wage Self- Years Employee Employed Base Employee Employed HISTORY OF TAXES FROM 1937 THROUGH 1982 1937-1949 1.00% _ _ 1.00% 2.00% = $ 3,000 $ 30.00 _ 1950 1.50 _ _ 1.50 3.00 = 3,000 45.00 a 1951-1953 1.50 = _— 1.50 3.00 2.25% 3,600 54.00 $ 81.00 1954 2.00 = _ 2.00 4.00 3.00 3,600 72.00 108.00 1955-1956 2.00 _— _ 2.00 4.00 3.00 4,200 84.00 126.00 1957-1958 2.00 0.25% _— 2.25 4.50 3.37% 4,200 94.50 141.75 1959 2.25 0.25 = 2.50 5.00 3.75 4,800 120.00 180.00 1960-1961 2.75 0.25 _ 3.00 6.00 4.50 4,800 144.00 216.00 1962 2.87% 0.25 _ 3.12% 6.25 4.70 4,800 150.00 225.60 1963-1965 3.37% 0.25 _ 3.62%2 7.25 5.40 4,800 174.00 259.20 1966 3.50 0.35 0.35% 4.20 8.40 6.15 6,600 277.20 405.90 1967 3.55 0.35 0.50 4.40 8.80 6.40 6,600 290.40 422.40 1968 3.32%2 0.47% 0.60 4.40 8.80 6.40 7,800 343.20 499.20 1969 3.72%2 0.47% 0.60 4.80 9.60 6.90 7,800 374.40 538.20 1970 3.65 0.55 0.60 4.80 9.60 6.90 7,800 374.40 538.20 1971 4.05 0.55 0.60 5.20 10.40 7.50 7,800 405.60 585.00 1972 4.05 0.55 0.60 5.20 10.40 7.50 9,000 468.00 675.00 1973 4.30 0.55 1.00 5.85 11.70 8.00 10,800 631.80 864.00 1974 4.37¥%2 0.57% 0.90 5.85 11.70 7.90 13,200 772.20 1,042.80 1975 437% 0.57% 0.90 5.85 11.70 7.90 14,100 824.85 1,113.90 1976 4.37% 0.57% 0.90 5.85 11.70 7.90 15,300 895.05 1,208.70 1977 4.37% 0.572 0.90 5.85 11.70 7.90 16,500 965.25 1,303.50 1978 4.27% 0.77% 1.00 6.05 12.10 8.10 17,700 1,070.85 1,433.70 1979 4.33 0.75 1.05 6.13 12.26 8.10 22,900 1,403.77 1,854.90 1980 4.52 0.56 1.05 6.13 12.26 8.10 25,900 1,587.67 2,097.90 1981 4.70 0.65 1.30 6.65 13.30 9.30 29,700 1,975.05 2,762.10 1982 457% 082% 1.30 6.70 13.40 9.35 32,400 2,170.80 3,029.40 1983 4.775 0.625 1.30 6.70 13.40 9.35 35,700 2,391.90 3,337.95 1984 5.20 0.50 1.30 7.00 14.00 14.00 37,800 2,646.00 5,292.00 1985 5.20 0.50 1.35 7.05 14.10 14.10 39,600 2,791.80 5,583.60 Total for 20 years (1966-1985) 260. tee 22,660.19 34,588.35 Total for 25 years (1961-1985) 00ers 23,476.19 35,807.55 Total for 35 years (1951-1985) 260 etter tenes 24,331.19 37,090.05 Total for 49 years (1937-1985) 0.6. eters 24,766.19 37,090.05 a SCHEDULED TAXES IN FUTURE YEARS 1986-87 5.20 0.50 1.45 7.15 14.30 14.30 39,600 2,831.40 5,662.80 1988-89 5.53 0.53 1.45 7.51 15.02 15.02 39,600° 2,793.96" 5,947.92") 1990-99 5.60 0.60 1.45 7.65 15.30 15.30 39,600 3,029.40" 6,056.80 After 1999 5.49 0.71 1.45 7.65 15.30 15.30 39,600° 3,029.40" 6,058.80° “Does not reflect tax credits (see page 4). ®@OASI .= Old-Age and Survivors Insurance DI = Disability Insurance OHI Hospital Insurance (Part A of Medicare) ‘Self-employment tax began in 1951. “Does not reflect possible increases in maximum taxable wage base effective after 1985. | 24 | ... Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R000900110002-2 —-- eet at wt, jet le ath Snel ahs orks, 28 noth 9 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2 THE HAY GROUP Providing comprehensive human resource services from 94 offices in 27 countries throughout the world — job analysis and evaluation @ salary planning and administration ® executive compensation ® sales incentives @ employee benefits ® actuarial services © compensation surveys @ seminars @ computer services © communications @ management assessment, development, training © management research @ organizational design @ market research and audits @ strategic planning @ organizational performance, assurance and measurement @ selection and recruitment @ employee climate surveys © management climate analyses @ career continuation World Headquarters 875-2300 229 S. 18 St. Rittenhouse Square, Philadelphia, PA 19103 (215) 893.0270 Other U.S. Locations Atlanta— 57 Executive Park South, N.E., Atlanta, GA 30329 (404) 321-4996 Boston — 5 Faneuil Hall Marketplace, Boston, MA 02109 (617) 367-7100 Charlotte — 212 South Tryon Street, Suite 450, Charlotte, NC 28281 (704) 333-1591 Chicago— One East Wacker Drive, Chicago, IL 60601 (312) 644-5700 Cincinnati — The First National Bank Center, 425 Walnut Street, Cincinnati, OH 45202 (513) 579-1180 Dallas — 12700 Park Central Place, Suite 1411, Dallas TX 75251 (214) 233-9767 Houston — 1100 Louisiana, Suite 1050, Houston, TX 77002 (713) 658-9032 Kansas City — Crown Center Suite 200, 2460 Pershing Road, Kansas City, MO 64108 (816) 842-5656 Los Angeles — Broadway Plaza Suite 2300, 700 Flower Street, Los Angeles, CA 90017 (213) 629-3921 Minneapolis — Suite 1318 TCF Tower, 121 South 8th Street, Minneapolis, MN 55402 (612) 339-0555 New York— One Dag Hammarskjold Plaza, New York, NY 10017 (212) 486-6300 Pittsburgh — One Gateway Center, Pittsburgh, PA 15222 (412) 263-2640 St. Louis — Clayton Mercantile Center, 8000 Maryland Avenue, Suite 1100 San Francisco— St. Louis, MO 63105 One Market Plaza, Suite 1018, San Francisco, CA 94105 (314) 726-1506 (415) 543-3455 San Jose — 2099 Gateway Place, Suite 110, San Jose, CA 95110 (408) 280-0333 Seattle — 110 110th Avenue, Suite 312, Bellevue, WA 98004 (206) 455-4979 Stamford — One Landmark Square, Stamford, CT 06901 (203) 324-4800 Walnut Creek — 925 Ygnacio Valley Road, Suite 100, Walnut Creek, CA 94596 (415) 945-8220 Washington, D.C.— 1110 Vermont Avenue, N.W., Suite 710, Washington, D.C. 20005 (202) 833-9250 Sanitized Copy Approved for Release 2011/01/11 : CIA-RDP89-00066R0009001 10002-2