GBA 2, Assignment 10 Social Insurance Concept
7) Employees covered under SS program's OASDI (10)
a. Applies to more than 90% of total US workforce. Majority affected on a mandatory or compulsory basis. OASDI coverage applies to employees both salary and wage, self-employed, members of armed forces (compulsory), church (compulsory), employees of nonprofit charitable and educational institutions (compulsory), employees of state and local gov that don't have retirement systems (compulsory), and American residents working abroad for American corps (Compulsory)
1) Unemployment Insurance (UI) Provisions(10)
a. Created by Social Security Act of 1935 (SSA) and Federal Unemployment Tac Act of 1939 (FUTA) b. SSA authorizes federal grants to states for administration of unemployment programs, and established the Unemployment Trust Fund (UTF). Act also provides for loans and advances to insolvent state programs c. Act has been amended many times, but with exception of "extended benefit durations during recessions", has remained intact d. UI program created by federal law, and administered by 53 states (50 states, DC, Puerto Rico, Virgin Islands)
8) Eligibility for OASDI Retirement benefits (10)
a. Depends on having certain number of quarters of coverage (CQs), sometimes referred to as "credits", varying with year of birth or expressed in another manner, depending on year of individual's attainment of age 62 (LG pg10.38) b. Originally developed as a retirement benefits, but then added auxiliary/dependents and survivor benefits, and then added disability benefits. c. Minimum retirement age set at 62, benefit amounts are reduced when claimed before NRA (65) is reached, and increased when claim is delayed beyond NRA
3) UI program eligibility requirements (10)
a. Even though States have considerable discretion on setting eligibility, there are some common requirements b. Workers unemployed through no fault of their own who are ready willing and able to work and are actively seeking work are entitled to unemployment benefits c. Benefits limited to "job losers" who lost job involuntarily and through no fault of their own d. Benefits not available to "job leavers" who quit without good cause or were fired for gross misconduct on job e. Benefits not available to new entrants and reentrants since they do not have significant recent attachment to labor force f. Federal law mandates benefits may not be denied solely on basis of pregnancy or termination of pregnancy, and may not be paid to professional athletes between seasons or educators between terms if there is reasonable expectation of being reemployed g. UI benefits reduced by SS benefits and pension benefits funded by a "base period" employer. Base period refers to employer whose account is charged for UI benefits received by individual
13) Financing OASDI Program (10)
a. Financed through 4 separate trust funds: the Federal Old Age and Survivors Insurance (OASI) Trust Fund, the Federal Disability Insurance (DI) Trust Fund, The Federal Hospital Insurance (HI) Trust Fund of Medicare, and the Federal Supplementary Medical Insurance (SMI) Trust Fund of Medicare b. Two instances of general revenue financing: OASI and DI financed entirely by payroll taxes with minor exceptions. Thus on ongoing bases, no payments from general revenues are available to the OASDI system. General Fund of the Treasury does pass on to trust funds (OASI and DI) the proceeds of federal income tax on part of monthly OASDI benefits for upper-middle-income and high income persons. Fed gov does not guarantee payments of benefits. If trust fund were to be depleted, it could not obtain grants or loans from General Fund of Treasury. c. Payroll tax rate is a combined one for OASI, DI, and HI, but is allocated among the 3 trust funds. Employer and employee rates are equal. PPACA imposes additional tax on high-income individuals. Self-employed pay combined employer-employee rates. Until 1991, max taxable earnings base had been same for all 3, but in 94 limit was eliminated for HI making all earnings taxable for HI purposes d. SMI financed by monthly premiums charged to beneficiaries and by payments from general revenues. In aggregate, persons over 65 pay only 25% of cost, and disabled pay only 20%.
16) Eligibility for OASDI Disability Benefits (10)
a. Individuals must be fully insured and disability insured. Latter requires certain number of QCs or credits to have been earned in period ending with quarter in which disability occurs. b. Disabled worker received benefit equal to 100% of PIA and deps each receive 50% of PIA, subject to family maximums
12) Eligibility requirements for OASDI survivor benefits (10)
a. Individuals must have either fully insured status or currently insured status. The latter requires limited number of QCs or credits to have been earned in period ending with quarter in which death occurs. (pg. 521) b. Monthly survivor benefits bases on PIA and then adjusted to reflect max family benefit (pg 522) c. Marriage or remarriage of survivor beneficiary terminates benefit rights unless remarriage of widow after 60 d. The same earning or retirement test applies to survivor beneficiaries as applies to retirement benefits for retirees who are under NRA. Earnings of one ben do not after other bens in family e. List of survivors who can receive OASDI: i. Surviving spouse over 60, dep parents over 62, children under age 18 or disabled before age 22, widowed parent of eligible child under age 16 or disabled before age 22, disabled widow or surviving divorced spouse who is over 50 in certain conditions
9) OASDI beneficiary categories and corresponding benefits (10)
a. Insured workers: they can receive unreduced retirement benefits in amount of primary insurance amount (PIA) beginning at NRA, or actuarially reduced benefits beginning at earlier ages, down to age 62 b. Spouses of retired workers: They can receive benefits at rate of 50% of PIA if the claim is first made at NRA or over, and reduced rate if claimed at ages down to age 62 c. Spouses with dependent children under age 16 (or child ages 16 or over disabled before age 22): spouse receives benefits regardless of age in an unreduced amount (50% of PIA) d. Divorced spouses when marriage has lasted at least ten years: benefits amount is the same as that of undivorced spouses e. Children under age 18 (and children disabled before age 22, plus children attending high school full time at age 18: Eligible for supplemeentary7 payment at rate of 50% of PIA f. Grandchildren and great-Grandchildren can qualify as "children" if they are dependent on grandparent and if both parents of child are disabled or deceased
14) Eligibility requirements and benefits of Medicare program (10)
a. Medicare Part A i. Principal benefit provided by HI programs is for hospital services. Also includes skilled nursing facility care, home health care and hospice care. ii. All individuals aged 65 and over who are eligible for monthly benefits under OASDI are eligible for HI benefits. People eligible for OASDI benefits if they could receive them when person on whose earnings record they are eligible is deceased or receiving disability or retirement benefits, or could be receiving retirement benefits except for having substantial earnings. Thus, HI eligible include not only insured workers, but also spouses, disabled children, and survivors (widowed spouses, dep children). In addition, HI eligibility available for disabled beneficiaries who have been on benefit roll for at least 2 years. Lastly, persons under 65 with end stage renal disease who require dialysis or renal transplant are eligible for HI benefits if they meet one of a number of requirements b. Medicare Part B i. Principal SMI benefit is partial reimbursement for 4 basic benefits: Doctors services, outpatient hospital services, home health care, and other medical and health services. There are limits on SMI coverage in workers comp cases, medical care under liability policies, private group health insurance applicable to ESRD (end stage renal disease), and employer sponsored group health insurance for employees and spouses ii. Individuals over 65 can elect SMI on an individual basis regardless of whether they have OASDI insured status. Also, disabled OASDI beneficiaries eligible for HI and persons with ESRD eligibility under HI can select SMI coverage.
2) Employers covered under UI program (10)
a. Originally only private sector, now coverage expanded to almost all private and public sector jobs, most significant not-for-profit orgs (NPOs), and many Ag and domestic service workers. b. In private sector, employers are covered by FUTA if they have one or more employees on one day in each of 20 weeks in current or preceding year, or if they pay $1,500 or more in calendar quarter in current or preceding year. Given that $1,500 not indexed and nominal wages have increased, extent of coverage has increased greatly c. State/local gov employees must be covered regardless of employer size d. 96% of wage and salary workers covered e. Notable exception is railroad industry, which is covered under Railroad Unemployment Insurance Act of 1938 and administered by Railroad Retirement Board
15) Extended benefits (10)
a. Permanent federal-state extended benefits program exists that pays additional weekly benefits to unemployed workers in states with high unemployment. It provides additional 13 weeks of benefits for those who have exhausted 26 weeks. Federal gov pays one-half of cost of program. b. During recession of 2008, fed gov share of FUTA tax and loans from FUTA to state programs proved inadequate. Fed assistance had to be increased to 100% general fund financing for several extensions of Unemployment benefits
4) Variations in weekly UI benefits (10)
a. Regular UI program provides up to 26 weeks of unemployment comp in majority of states b. Many entitled to less due to insufficient covered employment or earnings in base period c. Weekly benefit amount (WBA) is function of amount of recipients covered employment and earnings during the base period. Benefits typically set at about 50% of claimants weekly earnings within certain mins and maxis d. Period of past wages used and formulas for computing benefits from past wages vary greatly across states since no federal standards for benefit amounts. Variation is partly due to differences in cost of living, industry, and occupational mix and state philosophy/tradition
11) OASDI definition of disability (10)
a. Relatively strict. Disability must be so severe that individual is unable to engage in any substantial gainful activity, and impairment must be a medically determinable physical or mental condition that is expected to continue for at least 12 months or to result in prior death. For persons with alcoholism or drug abuse problems, disability benefits are not payable unless they have another disabling condition that would qualify
10) Application of earnings test to OASDI benefits (10)
a. Retirement earnings test applies only to people below NRA, which ranges from 65-67 depending on DOB b. General underlying principle of earnings test is that retirement benefits should be paid only to persons who are substantially retired. Basic feature of test is that annual exempt amount applies, so full benefits are paid if earnings from both covered and noncovered employment are not in excess thereof. One exempt amount for earlier months in year of attaining NRA and another exempt amount applicable in years before attaining NRA. Exempt amounts both generally automatically increased annually c. Alternative test applies for initial year of retirement. Also, earnings of "retired" worker affect under earnings test, the total family benefits payable. If spouse or child beneficiary has earnings and these are sizable enough to affect earnings test, any reduction in benefits is applicable only to such individuals benefits d. Application to OASDI disability benefits i. Earnings or retirement test applies to auxiliary beneficiaries (child/spouse) of disabled workers, but not to disabled worker beneficiary. Earnings of one beneficiary do not affect benefits of another beneficiary. ii. Test does not apply to disabled worker beneficiaries because any earnings are considered in connection with whether recovery has occurred, except during trial work periods. iii. OASDI disability benefits coordinated with disability benefits payable under other gov programs, most importantly workers comp... total disability benefit cannot exceed 80% of all current earnings
5) Funding normal and extended UI benefits (LG 10.26-10.28) (10)
a. The FUTA tax together with state unemployment tax systems provides the funds for paying unemployment comp to workers who lost jobs. Only employers pay FUTA taxes, and with exception of 3 states, that is also true for state unemployment taxes i. Means UI is financed almost entirely by employer payroll taxes based on covered wages of employees b. SSA and FUTA established funding arrangements. The FUTA tax is 6.2% of first $7,000 of earnings per employee per calendar year ($434 per employee). States must adopt a wage base of at least $7,000 for programs to be approved. If states have approved program (all states do), 5.4% of employers' FUTA tax may be offset and paid to state. In general, employers pay an effective federal tax of .8% or max $56 per covered employee per year c. All Unemployment tax contributions are deposited in Federal Unemployment Trust Fund. Each state has separate account, and state's unemployment benefits are paid out of that. Covered employers typically experience rated and pay unemployment taxes based on amount of unemployment in the firm. d. Extended Benefits: Funded by Federal government during periods of high unemployment (recessions)
6) UI administration and appeal process (10)
a. UI created by federal statute, but most of program operates under 53 states Unemployment laws. Considerable variation from state to state. Fed establishes parameters in regard to coverage, funding and fairness, and administers the trust funds, pays state admin expenses, and funds extended benefits during periods of high unemployment Federal admin of UI is done largely by Office of Unemployment Insurance, Employment and Training Administration, U.S. Department of Labor. The UTF is managed and invested by the Treasury Department b. SSA mandates that each approved state program have a procedure that allows claimants denied benefits to have a fair hearing. All state programs also allow employers to challenged decisions. c. All states have 2 step review process. First step is typically a semiformal hearing with a referee, hearing office, or administrative law judge. Second step is in front of more formal board or commission. Short time limits for filing appeals. Appeal from the 2nd step of review is to state courts. Relatively few appeals rise above first step given routine nature of most claims and fact that employer's exposure limited to 26 weeks of benefits max