Chapter 11 Social Security, Medicare and Medicaid

The correct answer is c. An individual attains a quarter of coverage for earning $1,510 (2022), but the maximum quarters per year is 4. The employee earns the quarters as earning income - regardless of the earning date. Brice earns $5,000, which equates to 3 quarters of coverage.

Brice, who is a senior at Midland High School, worked at PJs Coffee House from January to mid-February this year and earned $3,000. She was unemployed until December, when she was hired by Macy's. She earned $2,000 during December. How many quarters of coverage has Brice earned for Social Security during this year? a. 1. b. 2. c. 3. d. 4.

The correct answer is c. Answer a ignores the last statement of the question. Answer b is false. Answer d is false. Answer c is correct. Many retirees find that minimum distributions increase the taxation of Social Security benefits.

Connor and Coleen are married and both subject to minimum distributions from their IRAs. They have $2,000 of muni-bond interest, $34,000 of Social Security benefits, and $3000 of preferred stock dividends. Last year, none of their Social Security benefits were taxable. However, this year, $5,000 of their benefits were taxable. Why would the taxation change from last year to this year? a. Based on their income, the benefits should not be taxable. b. The annual limits on Social Security taxation change each year, which likely resulted in the benefits being subject to taxation. c. If they had to take a minimum distribution of $20,000, then that would explain the taxation of the Social Security benefits. d. They must have filed separate returns.

The correct answer is c. Delaney's MAGI = $60,000 (pension) + $5,000 (tax exempt interest) + $1,000 (dividends) = $66,000. One half of her Social Security benefit is $14,000. Since Delaney's MAGI + ½ of the Social Security benefits received is $80,000, she will have tax on 85% of her benefits, which is the maximum (0.85 x $28,000 = $23,800).

Delaney is single, retired, and received Social Security retirement benefits of $28,000 this year. Her other income consists of her monthly $5,000 pension payment from her prior employer; $5,000 in tax-exempt municipal bond interest; and $1,000 in dividends. How much of Delaney's Social Security benefit will be subject to income tax? a. $0. b. $14,000. c. $23,800. d. $28,000.

The correct answer is b. Approximately 30% (2021) of all income of the elderly is provided by Social Security.

Elderly citizens in the United States may rely on pensions, Social Security, personal savings, and / or wages to cover expenses during retirement. What percent of income of the elderly does Social Security represent? a. 20% to 29%. b. 30% to 39%. c. 40% to 49%. d. More than 49%.

The correct answer is b. His wages are not in excess of the $200,000 threshold for single filers, so Eric is not liable for additional Medicare tax on these wages. However, Eric is liable to pay additional Medicare tax on $40,000 of self-employment income. The $200,000 limit for single filers is reduced by the wages of $140,000 resulting in a $60,000 threshold. The self-employment income exceeds the reduced threshold by $40,000. Another way to reconcile this is that his total income of $240,000 exceeds the individual threshold by $40,000.

Eric, who is single and 34 years old, has a salary of $140,000 from Florida State University and earns $100,000 in self-employment income. How much of Eric's income is subject to the additional Medicare tax? a. $0. b. $40,000. c. $140,000. d. $240,000 (all income is subject to the additional tax if the taxpayer is over the threshold).

The correct answer is c. Hiral's delayed benefit credits are 8% per year. A delay of three years equates to a 24% increase in benefits. $2,000 x 1.24 = $2,480

Hiral is 62 years old, and his full Social Security retirement age is 67. He plans on waiting to collect his benefits until he is 70 years old. If he waits until age 70, and his PIA at full retirement age is $2,000, how much can Hiral expect to receive as a monthly retirement benefit at age 70 (without regard to any COLA)? a. $1,420. b. $2,000. c. $2,480. d. $2,519.

The correct answer is c. Neither of their wages are in excess of the $200,000 threshold used for withholding. However, their combined income exceeds the married threshold by $120,000 ($370,000 - $250,000). They will owe the additional Medicare tax on $120,000.

Jack and Diane are married and file their income tax return jointly. Jack is a senior engineer with a salary and bonus of $180,000. Diane is an HR executive earning $190,000. How much of their income is subject to the additional Medicare tax? a. $0. b. $70,000. c. $120,000. d. $170,000.

The correct answer is d. Jacques' Social Security benefit will be reduced for 5/9 of 1% for the first 36 months of early retirement (representing 20% of his benefit) and 5/12 of 1% for the next 24 months of early retirement (representing a 10% reduction in benefit). 70% of $2,000 = $1,400.

Jacques is 62 years old, and his full Social Security retirement age is 67. If he retires today, and his PIA at full retirement age is $2,000, how much can Jacques expect to receive as a monthly retirement benefit? a. $2,000. b. $1,600. c. $1,500. d. $1,400.

The correct answer is d. Retirees who are already receiving Social Security at age 65 will be automatically enrolled in Medicare Parts A and B, and benefits will begin on the first day of the month in which they turn age 65. Part D requires a separate enrollment. Since Justice is not already receiving Social Security benefits, she will not be automatically enrolled. The initial enrollment period begins three months before the month in which she turns age 65, and ends three months after the month in which she turns age 65 (7 months total). If she enrolls during the three months before she turns age 65, her benefits will begin on November 1st.

Justice will be turning age 65 on November 15, 2022. Justice has not started receiving Social Security benefits. Which of the following is correct regarding her enrollment in Medicare? a. Justice will be automatically enrolled in Medicare Parts A, B, and D without the need to take any action, and her benefits will begin on November 1st. b. Justice will be automatically enrolled in Medicare Part A without the need to take any action; however she must actively enroll in Parts B and D within the three months prior to November for her benefits to begin on November 1st. c. Justice will not be automatically enrolled in Medicare. If she does not elect to enroll by November 15th (her 65th birthday), she will have to wait until the next general enrollment period to enroll. d. Justice will not be automatically enrolled in Medicare. If she elects to enroll during the month of October, her benefits will begin on November 1st.

The correct answer is b. The look-back period is five years, and Sandy has made $55,000 of gifts during that time. The Medicaid look-back penalty period, therefore, is 11 months ($55,000/$5,000 average cost of care in the state). Sandy must spend down her assets to $2,000 before otherwise becoming eligible for Medicaid. $154,000/$5,500 = 28 months. At that point, the penalty period will be imposed, resulting in a total of 39 months before Medicaid will pay.

Sandy, who is a widow, made gifts of $11,000 to each of her five children two years ago. Since then, Sandy's physical health has deteriorated rapidly and she needs to enter a nursing home. She currently has $156,000 in countable assets and will be entering a nursing home that costs $5,500 per month. The average monthly cost of nursing home care in her state is $5,000 per month. How many months must Sandy be in the nursing home before Medicaid will pay for her care? a. 11 months. b. 39 months. c. 42 months. d. 60 months.

True

True or False

True

True or False "Fully Insured" means that a worker has earned a certain amount of number of quarters [generally 40] of coverage under the Social Security system.

False - There will be a permanent increase in premium if you fail to enroll during a special enrollment period.

True or False A healthy individual need not enroll in Medicare Part B upon reaching age 65 since enrollment is permitted at any time without an increase in premium.

False - 8% a year or 24% increase.

True or False A worker, who reaches full retirement age at age 67, can increase their benefits, without regard to COLA, by 32% by delaying benefits until age 70.

False - one must qualify financially for Medicaid.

True or False Because everyone qualifies for Medicaid, long-term care insurance is only for those who want more choices in long-term care than Medicaid offers.

False - Full retirement age for Social Security is increasing because of increasing life expectancy.

True or False Full retirement age for Social Security is decreasing because of the trend of individuals retiring early.

True

True or False If Tito had a home worth $300,000 it is possible, he could qualify for Medicaid.

False - must be 65 or older, disabled or blind.

True or False In order to obtain Supplemental Security Income [SSI], the individual must be 62, disabled, or blind.

False - LTCI does cover nursing homes, home health, and Hospice

True or False Long-term care insurance does not cover Hospice.

True - Part A Hospital and Part B Medical Insurance [doctor visits, ambulance, diagnostics, outpatient therapy, emergency room visits, x-rays and lab services, etc.]

True or False Medicare Part A generally pays for "places" while Part B pays for "services".

False - Part D covers drugs Part C is Medicare Advantage with or without prescription drug coverage.

True or False Medicare Part C is optional and provides prescription drug coverage when purchased with Parts A and B.

False - If married to the worker for more than 10 years they can still receive benefits on the worker's record.

True or False Once divorced, non-working ex-spouses will not receive Social Security benefits.

False - LTCI is a good product for those who can afford it.

True or False Paying for long-term care services out of pocket is not a wise choice for anyone.

True - checks will not be sent to Cuba or North Korea

True or False Social Security beneficiaries who are United States citizens may live in most foreign countries without affecting their eligibility for Social Security benefits.

False - The Social Security retirement benefit is based on the worker's PIA. A worker's PIA is based on the worker's average indexed monthly earnings during the 35 years in which the worker earned the most.

True or False Social Security benefits are based on the average of the three highest paid years for a covered worker.

False - Reduced benefits are available as early as 62

True or False Social Security benefits are not payable until an individual reaches full retirement age?

True

True or False Social Security benefits can be paid to the dependent parents of a deceased insured worker at age 62.

False - OASI {Old Age and Survivors Insurance}, DI {Disability Insurance}, HI {Hospital Insurance}, and SMI {Supplemental Medical Insurance}

True or False Social Security contributions are placed in the following trust funds: OASI, DI, and SMI

True

True or False Surviving spouses are entitled to 100 percent of the deceased worker's benefits after the worker dies.

True

True or False The maximum family benefit establishes a limit on the benefits that can be received by one family.

False - Traditional Medicare does not have a maximum out of pocket amount [some Medigap aka Medicare Supplement policies and some Medicare Advantage plans do offer a maximum out of pocket]

True or False Traditional Medicare coverage includes deductibles, coinsurance payments, and a maximum out of pocket provision.

True

True or False Up to 85% of an individual's Social Security benefits may be included in their taxable income.