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1

Retirement: 1-5 Social Security and Medicare

There are two alternatives: (1) 40 quarters of coverage (10 years of covered work); or (2) if fewer than 40 quarters, one quarter of coverage for each year after 1950 (or after age 21, if later) and before the earliest of the year worker dies, the year the worker is disabled, or the year the worker turns age 62; the minimum required is six quarters.

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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c. fully insured status

2

Retirement: 1-5 Social Security and Medicare

Self-employed persons and employees receive one quarter of coverage for each $ 1,260 (for 2016) of covered annual earnings, to a maximum of four quarters per calendar year.

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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b. a quarter of coverage this year

3

Retirement: 1-5 Social Security and Medicare

This requires at least 6 quarters of coverage in the 13 quarter period that ends with the quarter of death, disability, or entitlement to retirement benefits.

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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d. currently insured status

4

Retirement: 1-5 Social Security and Medicare

The 3 month period ending March 31st, June 30th, September 30th, or December 31st

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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a. a quarter

5

Retirement: 1-5 Social Security and Medicare

It is the basis for determining the primary insurance amount (PIA). It expresses a worker's covered earnings over his or her working life in terms of current dollar value.

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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e. AIME (Average Indexed Monthly Earnings)

6

Retirement: 1-5 Social Security and Medicare

It is the basic unit used to determine the amount of each monthly benefit; it is determined by applying a formula to AIME

a. a quarter

b. a quarter of coverage this year

c. fully insured status

d. currently insured status

e. AIME

f. PIA

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f. PIA

7

Retirement: 1-5 Social Security and Medicare

End of disability; attainment of full retirement age or death prior to full retirement age

a. definition of disability

b. required insured status

c. required age for eligibility

d. waiting period

e. events triggering benefit termination

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e. events triggering benefit termination

8

Retirement: 1-5 Social Security and Medicare

Five months

a. definition of disability

b. required insured status

c. required age for eligibility

d. waiting period

e. events triggering benefit termination

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d. waiting period

9

Retirement: 1-5 Social Security and Medicare

Any age under FRA; benefits change to requirements benefits at FRA

a. definition of disability

b. required insured status

c. required age for eligibility

d. waiting period

e. events triggering benefit termination

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c. required age for eligibility

10

Retirement: 1-5 Social Security and Medicare

Inability to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment that is expected to result in death or that has lasted or can be expected to last for a continuous period of at least 12 months

a. definition of disability

b. required insured status

c. required age for eligibility

d. waiting period

e. events triggering benefit termination

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a. definition of disability

11

Retirement: 1-5 Social Security and Medicare

Must be fully insured and covered for at least 20 of the 40 quarters (5 of the 10 years) ending with quarter disability begins or, if under age 31 at disability, covered for at least one half of quarters after age 21 and before disabled (not less than 6 quaters

a. definition of disability

b. required insured status

c. required age for eligibility

d. waiting period

e. events triggering benefit termination

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b. required insured status

12

Retirement: 1-5 Social Security and Medicare

Identify the Social Security disability benefits that would be paid in the following situations. Express the benefit amount as a percentage of the worker’s PIA.

50% (subject to family maximum)

a. disabled worker

b. spouse of disabled worker

c. child or children of disabled worker

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c. child or children of disabled worker

13

Retirement: 1-5 Social Security and Medicare

Identify the Social Security disability benefits that would be paid in the following situations. Express the benefit amount as a percentage of the worker’s PIA.

100%

a. disabled worker

b. spouse of disabled worker

c. child or children of disabled worker

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a. disabled worker

14

Retirement: 1-5 Social Security and Medicare

Module Check Summary

4. How are Social Security benefits funded?

a. Liability is calculated, and FICA taxes are assessed as if Social Security were a defined benefit plan.

b. Special taxes are collected from workers and used to pay benefits to those workers who are retired.

c. Special taxes are collected and deposited to a trust fund that disperses the benefits.

d. Benefits are paid by income taxes, which are increased to offset shortfalls.

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b. Special taxes are collected from workers and used to pay benefits to those workers who are retired.

Social Security and FICA taxes are withheld by the employer. The total is 15.3% of payroll in 2016; the employer pays 7.65% and the employee pays 7.65%.

Unlike a defined benefit plan, Social Security and FICA taxes are withheld (and matched) by employers. There is no trust fund. Monies are deposited into the general account, and benefits are paid out of the general account. Benefits are not paid by income taxes. They are paid from a general account funded by payroll deductions and employer matching.

15

Retirement: 1-5 Social Security and Medicare

Bill Baker turns 62 in May of this year and will begin benefits then. His FRA is age 66, since he was born in 1953. His PIA is $1,660, making his benefit:

a. $1,345
b. $1,445
c. $1,245
d. $1,145

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c. $1,245

(100% - 20% - 5%) * $1,660

66
- 62
= 4 years

5
/ 9
= 0.5556
* 36
= 20%

5
/ 12
= 0.4167
* 12
= 5%

(100% - 20% - 5%) * $1,660

Retirement benefits that begin at the worker’s age 62 will be reduced by a maximum of 30% for age 67 FRAs (5/9 of 1% per month for the first 36 months plus 5/12 of 1% per month for periods greater than 36 months)

16

Retirement: 1-5 Social Security and Medicare

George Kellerman was born in 1954. He plans to work until age 70 then retire and begin his benefit. His PIA is $1,150. What is his retirement benefit

a. $1,618
b. $1,418
c. $1,718
d. $1,518

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d. $1,518

His FRA is 66 and he will wait for 4 years.

4 years
* 8% increase
= 32%

$1,150
+ 32%
= $1,518

17

Retirement: 1-5 Social Security and Medicare

The Social Security Act was passed in which year?

1929

1932

1935

1939

(LO 1-5)

1935

18

Retirement: 1-5 Social Security and Medicare

Sick pay during first six months

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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b. Income Exempt From Social Security Tax

19

Retirement: 1-5 Social Security and Medicare

Employer payments for medical or hospital expenses

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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b. Income Exempt From Social Security Tax

20

Retirement: 1-5 Social Security and Medicare

Employer-paid premiums for group term life insurance coverage in excess of $50,000

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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a. Income Subject to Social Security Tax

21

Retirement: 1-5 Social Security and Medicare

Value of employer provided meals and lodging

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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a. Income Subject to Social Security Tax

22

Retirement: 1-5 Social Security and Medicare

Employer-paid premiums for group term life insurance coverage not in excess of $50,000

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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b. Income Exempt From Social Security Tax

23

Retirement: 1-5 Social Security and Medicare

Employer contributions to qualified retirement plans on behalf of employees

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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b. Income Exempt From Social Security Tax

24

Retirement: 1-5 Social Security and Medicare

Amounts deferred under non-qualified deferred compensation plans, as long as such amounts are subject to substantial risk of forfeiture or the employer’s creditors

a. Income Subject to Social Security Tax

b. Income Exempt From Social Security Tax

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b. Income Exempt From Social Security Tax

25

Retirement: 1-5 Social Security and Medicare

Social Security is not sustainable in its current form, particularly when millions of baby boomers move from the workplace to retirement and begin drawing on their Social Security benefits while, at the same time, stopping the flow of their payments into the system. The impact of this monumental demographic shift will deplete the trust funds by _____ if no changes are made.

a. 2033

b. 2043

c. 2053

d. 2063

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a. 2033

26

Retirement: 1-5 Social Security and Medicare

According to the 2013 Social Security Trustees’ Report, Social Security expenditures exceeded non-interest income in both 2012 and 2013 and the Trustees project this trend will continue for at least years.

a. 55

b. 65

c. 75

d. 85

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c. 75

27

Retirement: 1-5 Social Security and Medicare

The social security trust fund are not a horde of cash or a reserve fund, but as an accounting entity in the federal government. In the meantime, the government uses the funds received from the sale of the _____ to the Social Security account as general revenue. So although there is not a cash reserve, there is a fund allocation and tracking system for Social Security.

a. Treasury Notes

b. Treasury Bills

c. Treasury Bonds

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c. Treasury Bonds

28

Retirement: 1-5 Social Security and Medicare

Like any other U.S. Treasury bond, the government has access to the principal to use for current government operations. Social Security money was invested in government bonds in exchange for the government’s promise to redeem those bonds as they come due. Like other T-bonds, the government pays interest back to the lender, in this case

a. American taxpayers

b. Social Security or SSA (Social Security Administration).

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b. Social Security or SSA (Social Security Administration).

29

Retirement: 1-5 Social Security and Medicare

Once the reserve is exhausted, interest income from the funds will end. The only income to the system then will be payroll taxes from current workers. The good news is that those taxes would be enough to pay __% of promised benefits after 2033

a. 67%

b. 57%

c. 77%

d. 87%

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c. 77%

30

Retirement: 1-5 Social Security and Medicare

As the group of covered workers eligible for benefits has grown, the amount of taxes required to fund these benefits also has increased. From an initial level of 2% of compensation, FICA taxes have grown to a current __% of compensation

a. 7.65%

b. 15.3%

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b. 15.3%