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Linda Yelverton Angie Dowdy Social Security Program Social Security Program

GFOA Fall Conference. The Who, What and Why of Withholding. John Neely Kennedy State Treasurer and State Social Security Administrator. Linda Yelverton Angie Dowdy Social Security Program Social Security Program Director Analyst (225) 342-0026 (225) 342-0295 .

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Linda Yelverton Angie Dowdy Social Security Program Social Security Program

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  1. GFOA Fall Conference The Who, What and Why of Withholding John Neely Kennedy State Treasurer and State Social Security Administrator Linda Yelverton Angie Dowdy Social Security Program Social Security Program Director Analyst (225) 342-0026 (225) 342-0295

  2. I will discuss… • History of Section 218 • Role of State Social Security Administrator • Majority and Divided Vote Referendums • Mandatory Medicare • WEP and GPO

  3. History of Section 218… • 1935 Original Social Security Act provided NO coverage for state and local government • 1951 Section 218 allowed voluntary coverage of Non-retirement system positions • 1952 Louisiana entered into a Section 218 Agreement with SSA • 1955 Coverage of retirement system positions by majority vote referendum • 2004 Coverage of retirement system positions by divided vote referendum

  4. History of Section 218… • Each state has entered into a “Section 218 Agreement” with the Social Security Administration • (Including Puerto Rico and the Virgin Islands) • State enabling legislation determined how each state wanted to apply the Social Security Act • (within Federal guidelines)

  5. Role of State Administrator… • Administers the Section 218 Agreement • Negotiates modifications to the Agreement • Conducts Referenda • Resolves coverage and taxation issues with the Social Security Administration and Internal Revenue Service • Provides information to state and local • government agencies

  6. Obtaining Social Security or Medicare-Only coverage

  7. Absolute Coverage… • Non-Retirement System Group • No referendum necessary

  8. Majority Vote Referendum… • If a majority of eligible members of the retirement system/plan vote in favor of coverage, ALL eligible employees and all future employees would be covered • Even those that voted “NO”

  9. Divided Vote Referendum… • Each eligible member of the retirement • system/plan, on the date the referendum is held, may make an individual choice as to whether or not he/she elects to be covered. The members who vote “YES” are covered and all future members • Those that vote “NO” are not covered

  10. Mandatory Medicare… • 1986 Congress mandated Medicare coverage of all employees hired, re-hired or elected after March 31, 1986 • (Medicare tax withholding)

  11. Medicare eligibility… • Generally individuals are eligible for premium free Medicare “Part A” if they, their spouse, divorced spouse or deceased spouse worked for at least 10 years (40 or more credits) in Medicare-Only or Social Security covered employment and are age 65.

  12. Medicare Premiums… Individuals who do not qualify for premium free “PART A” can purchase Medicare. 2013 MONTHLY PREMIUMS (based on Timely Enrollment) Purchaser has credits: at least 30-39less than 30 Part A$243.00 $441.00 Part B-everyone pays 104.90 104.90 TOTAL Monthly Premium $347.90 $545.90 2013 – SOCIAL SECURITY WORK CREDITS/QUARTERS Earnings required (currently are defined as follows): One credit = $1,160 Four credits = $4,640 wages in a calendar year (Four credits is the maximum per year)

  13. How does all this affect me?

  14. Town of G… • Town of G extended Section 218 coverage to the Non-RetirementSystem Group effective 1/1/53 (with certain optional exclusions) • Town of G had NO retirement systems, therefore, ALL employees are covered for Social Security under Section 218

  15. Town of F… • Town of F extended Section 218 coverage to the Non-RetirementSystem Group effective 1/1/74 (with certain optional exclusions) • Town of Fparticipated in Municipal Employees’ and Municipal Police Employees’ Retirement Systems, only employees in positions NOT covered by either MERS or MPERS are covered for Social Security under Section 218

  16. Town of O… • Town of O never extended Section 218 coverage • Governed by Mandatory Medicare and Mandatory Social Security

  17. Town of A… • Town of A terminated their Section 218 coverage • Governed by Mandatory Medicare and Mandatory Social Security

  18. City of New Orleans… • Conducted a majority vote referendum and extended Section 218 coverage to the employees in Employees’ Retirement System of the City of New OrleanseffectiveJanuary 1, 1955 • The city also covered the ineligibles of Sheriffs’ Pension & Relief Fund, effective January 1, 1959

  19. Can you terminate Section 218… • NO. Since April 20, 1983, state and local governments can no longer opt out of all or part of their Section 218 Agreements with SSA • If a municipality failed to terminate it’s Section 218 Agreement coverage by April 20, 1983, time ran out and that entity can never terminate coverage

  20. WEP … • Windfall Elimination Provision: • If you didn't pay Social Security taxes on • your government earnings and you are • eligible for Social Security benefits, the • formula used to figure your benefit • amount may be modified, giving you a • lower Social Security benefit.

  21. Standard Calculation of benefit… • Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. • Example: for a worker who turns 62 in 2013, the first $791 of average monthly earnings is multiplied by 90 percent; the next $4,768 by 32 percent; and the remainder by 15 percent. • The sum of the three amounts equals the total monthly payment amount.

  22. Example: Standard Calculation… • Example, for a worker who turns 62 in 2013 and has AIME (Average Indexed Monthly Earning) of $6,400.00 • the first $791 X 90% = $ 711.90 • the next $4,768 X 32% = $ 1,525.76 • and the remainder X 15% = $ 126.15 • The sum of the three factors equals the total monthly payment amount $2,363.81.

  23. Calculation of WEP reduction… • The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. • For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent. • The maximum WEP reduction for 2013 is: $395.50

  24. Example: WEP Calculation… • Example, for a worker who turns 62 in 2013 and has AIME (Average Indexed Monthly Earning) of $6,400.00 • the first $791 X 40% = $ 316.40 • the next $3,768 X 32% = $ 1,525.76 • and the remainder X 15% = $ 126.15 • The sum of the three factors equals the total monthly payment amount $1,968.31 • A reduction of $395.50

  25. Exception to WEP reduction… • WEP will not reduce your Social Security benefit by more than half the amount of your non-Social-Security-covered pension. • Carl is eligible for a Social Security retirement benefit, but also receives a $400 non-Social-Security-covered pension. WEP will reduce Carl’s Social Security retirement benefit by $200 (1/2 x $400) at most.

  26. Exception to WEP reduction… Years of substantial First factor in earnings benefit formula 30 or more 90 29 85 28 80 27 75 26 70 25 65 24 60 23 55 22 50 21 45 20 or less 40

  27. GPO… • Government Pension Offset: • If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced.

  28. Standard Calculation of benefit… • Example: a woman worked and earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife’s benefit on her husband’s Social Security record, Social Security could not pay that wife’s benefit because her own Social Security benefit offset it. • When both spouses receive a Social Security benefit based on their own earnings, the offset is dollar for dollar.

  29. Calculation of GPO offset… • Your Social Security benefits will be reduced by two-thirds of your government pension. • Example: if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits. • If you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security. • ($500 – $400 = $100)

  30. Exceptions to GPO offset… • Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you: • Are receiving a government pension that is not based on your earnings • Are a state or local employee whose government pension is based on a job where you were paying Social Security taxes

  31. Legislative Update… • Each year new legislation is introduced to eliminate WEP and GPO • Estimated cost to eliminate WEP and GPO • Over $100 billion over 10 years • Modifying the computation to reduce the impact of WEP and GPO has also been proposed.

  32. Resources… Social Security Administration (800) 772-1213 7am-7pm Eastern Standard Time Baton Rouge Office – Bankers Ave (866) 613-3070 Baton Rouge Office – Harding Blvd (888) 487-0143 http://www.socialsecurity.gov/ Internal Revenue Service IRS Publication 963 http://www.irs.gov/pub/irs-pdf/p963.pdf

  33. Contact Information… State of Louisiana Department of the Treasury Social Security Division http://www.treasury.state.la.us/default.aspx Linda Yelverton (225) 342-0026 linda.yelverton@la.gov Angie Dowdy (225) 342-0295 angie.dowdy@la.gov

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