Stan Fromuth & Joe Olenski

1. Providing guidance and assistance to the American public in making decisions on their Social Security eligibility and continuing Social Security issues. Stan Fromuth & Joe Olenski

2. Qualifications – Stan Fromuth & Joe Olenski • Former employees of the Social Security Administration • Retired with 76+ years of service with agency • Regarded as program and policy experts on Social Security issues • Both involved in writing and interpreting Social Security policies and procedures • Both spent many years as District Managers working directly with public on Social Security issues and problems

3. Why do people need assistance and guidance in making decisions related to Social Security? • Social Security programs are very complex • Avalanche of baby boomers becoming eligible for Social Security benefits is overwhelming the Social Security Administration • Changes in Social Security Regulations make it more difficult for applicants/beneficiaries to amend their decisions • YOU MAY LOSE A SIGNIFICANT AMOUNT OF MONEY IF YOU FAIL TO MAKE THE BEST DECISIONS

4. Computation of Benefits

5. Types of Social Security Benefits Retirement Benefits Disability Benefits Spouses/Divorced Spouses Benefits Widows/Widowers and Divorced Widows/Widowers Benefits Mothers/Fathers and Divorced Mothers/Fathers Benefits Childrens Benefits Parents Benefits Lump Sum Death Benefit

6. Computation of Benefits • All Social Security benefits that are paid are based on the primary insurance amount or PIA. • Amount of the benefit depends on how much you contributed to Social Security during your lifetime. • Although there are a number of different methods to compute a PIA, the vast majority of beneficiaries have their benefits computed using the 1978 New Start method. • This method creates an Average Indexed Monthly Earnings (AIME) amount from which the actual PIA is derived. • This method applies to individuals who attain age 62, become disabled, or die after 1978.

7. Computation of Benefits, cont. • The AIME computation is based on averaging earnings over a fixed number of years after 1950. • Earnings are indexed to reflect current earnings levels. • Actual wages are adjusted or “indexed” to account for changes in average wages since the year the earnings were received to make them comparable to earnings that are more current. • To compute the AIME PIA, the following must be determined: elapsed years, base years, computation years, eligibility year and divisor months.

8. Computation of Benefits – Elapsed Years Retirement Benefits Count the years after 1950 up to the year the number holder (NH) attains age 62. Disability Benefits Count the years after 1950 up to the earlier of: the year of attainment of age 62 or the year the waiting period begins. Survivor Benefits Count the years after 1950 up to the earlier of: the year of attainment of age 62 or the year of death. Elapsed year exclusions Exclude the years before the year of attainment of age 22. Exclude the years wholly or partially in a period of disability that is not disregarded.

9. Computation of Benefits – Base Years The available years from which the earnings to be used in computing a PIA are selected. Retirement and Disability Benefits Initial computation - years after 1950 up to the year in which the first month of entitlement to benefits occurs. Recomputations - year in which the first month of entitlement occurs and later years.

10. Computation of Benefits – Base Years, Cont. Survivor Benefits Years after 1950 through the year of death. Base Year Exclusions Years wholly within a period of disability may or may not be used, depending on whether the period of disability is disregarded for computation purposes; i.e., a freeze (exclusion) or nonfreeze (nonexclusion) computation.

11. Computation of Benefits – Computation Years The base years having the highest indexed or unindexed earnings and equal in number to the elapsed years less drop-out years. Where the result is less than 2, it must be raised to 2.

12. Computation of Benefits –Drop Out Years Drop Out Years For all retirement and survivors benefits, the number of drop out years equals 5. For disability benefits: a. Determine the number of elapsed years. b. Divide the number by five, dropping any remainder. c. Select the smaller of: the result in b. or 5. This is the dropout years. Subtract the number of dropout years from the elapsed years to equal the computation years.

13. Computation of Benefits – Indexing Year The indexing year is the second year before the eligibility year. Eligibility year is the year an individual first becomes eligible for benefits. The eligibility year is normally called the benchmark year by SSA. Example If the benchmark year is 1992, the indexing year would be 1990.

14. Computation of Benefits – Divisor Months The number of months in the computation years.

15. Computation of Benefits – Indexing the Earnings The PIA is determined on the basis of the earnings record after the posted and corrected earnings up to the maximum creditable amounts have been adjusted or “indexed” to reflect earlier earnings in terms of the current dollar value in the “indexing year”. Earnings in and after the indexing year are not indexed. Earnings in or after the indexing year are used as posted and, unlike earnings after indexing, are limited by the maximum creditable amounts

16. Computation of Benefits – Indexing the Earnings Multiply the posted earnings up to the maximum creditable for each year after 1950 up to the indexing year by the average wages of all workers for the indexing year; and Divide the result by the average earnings of all workers for the year being indexed. Carry to three decimal places and round to the nearest cent; i.e., if third decimal place is 4 or less, round down; if 5 or more, round up.

17. Computation of Benefits – Indexing the Earnings Use the following formula for indexing earnings: Indexed earnings for Given Year = Actual Earnings for Given Year × Average Earnings for Indexing Year Average Earnings for Given Year

18. Computation of Benefits – Average Yearly Wages The following lists the national average wage for each year after 1950. Year Average Earnings Year Average Earnings 1951 $2,799.16 1957 $3,641.72 1952 $2,973.32 1958 $3,673.80 1953 $3,139.44 1959 $3,855.80 1954 $3,155.64 1960 $4,007.12 1955 $3,301.44 1961 $4,086.76 1956 $3,532.36 1962 $4,291.40 • $3,855.80

19. Computation of Benefits – Average Yearly Wages, Cont. Year Average Earnings Year Average Earnings 1963 $4,396.64 1970 $6,186.24 1964 $4,576.32 1971 $6,497.08 1965 $4,658.72 1972 $7,133.80 1966 $4,938.36 1973 $7,580.16 1967 $5,213.44 1974 $8,030.76 1968 $5,571.76 1975 $8,630.92 1969 $5,893.76 1976 $9,226.48

20. Computation of Benefits – Average Yearly Wages, Cont. Year Average Earnings Year Average Earnings 1977 $9,779.44 1984 $16,135.07 1978 $10,556.03 1985 $16,822.51 1979 $11,479.46 1986 $17,321.82 1980 $12,513.46 1987 $18,426.51 1981 $13,773.10 1988 $19,334.04 1982 $14,531.34 1989 $20,099.55 1983 $15,239.24 1990 $21,027.98

21. Computation of Benefits – Average Yearly Wages, Cont. Year Average Earnings Year Average Earnings 1991 $21,811.60 1998 $28,861.44 1992 $22,935.42 1999 $30,469.84 1993 $23,132.67 2000 $32,154.82 1994 $23,753.53 2001 $32,921.92 1995 $24,706.66 2002 $33,252.09 1996 $25,913.90 2003 $34,064.95 1997 $27,426.00 2004 $35,648.55

22. Computation of Benefits – Average Yearly Wages, Cont. Year Average Earnings Year Average Earnings 2005 $36,952.94 2010 $41,673.83 2006 $38,651.41 2011 $42,979.61 2007 $40,405.48 2012 $44,321.67 2008 $41,334.97 2013 $44,888.16 2009 $40,711.61

23. Computation of Benefits – Determining the AIME Determine the base years Select years of highest earnings from the indexed earnings record to be used as computation years. These years may contain both indexed and non-indexed earnings. An unindexed year, (one that occurs after the indexing year), can be a high year and, therefore, a computation year. Add the highest earnings in the computation years for the dividend. Divide the dividend by the divisor month to determine the AIME. Round the AIME down to the whole dollar.

24. Computation of Benefits – Determining the AIME PIA Take the sum of: 90 percent of the AIME through the first bend point. 32 percent of the AIME through the second bend point. 15 percent of the AIME in excess of the second bend point. Round the result to the lower dime. This is the RAW PIA as of January of the eligibility year. Add applicable COLA's to the RAW PIA beginning with the year of eligibility through the month of entitlement.

25. Computation of Benefits – Bend Points Year AIME Calculations of PIA Year AIME Calculations of PIA 1979 Up through 180 90 percent of AIME 1984 Up through 267 90 percent of AIME 181 - 1085 162.00 plus 32% of excess of 180 268 - 1612 240.30 plus 32% of excess of 267 1086 or higher 451.60 plus 15% of excess of 1085 1613 or higher 670.70 plus 15% of excess of 1612 1980 Up through 194 90 percent of AIME 1985 Up through 280 90 percent of AIME 195 - 1171 174.60 plus 32% of excess of 194 281 - 1691 252.00 plus 32% of excess of 280 1172 or higher 487.24 plus 15% of excess of 1171 1692 or higher 703.52 plus 15% of excess of 1691 1981 Up through 211 90 percent of AIME 1986 Up through 297 90 percent of AIME 212 - 1274 189.90 plus 32% of excess of 211 298 - 1790 267.30 plus 32% of excess of 297 1275 or higher 530.06 plus 15% of excess of 1274 1791 or higher 745.06 plus 15% of excess of 1790 1982 Up through 230 90 percent of AIME 1987 Up through 310 90 percent of AIME 231 - 1388 207.00 plus 32% of excess of 230 311 - 1866 279.00 plus 32% of excess of 310 1389 or higher 577.56 plus 15% of excess of 1388 1867 or higher 776.92 plus 15% of excess of 1866 1983 Up through 254 90 percent of AIME 1988 Up through 319 90 percent of AIME 255 - 1528 228.60 plus 32% of excess of 254 320 - 1922 287.10 plus 32% of excess of 319 1529 or higher 636.28 plus 15% of excess of 1528 1923 or higher 800.06 plus 15% of excess of 1922

26. Computation of Benefits – Bend Points, Cont. 1989 Up through 339 90 percent of AIME 1994 Up through 422 90 percent of AIME 340 - 2044 305.10 plus 32% of excess of 339 423 - 2545 379.80 plus 32% of excess of 422 2045 or higher 850.70 plus 15% of excess of 2044 2546 or higher 1059.16 plus 15% of excess of 2545 1990 Up through 356 90 percent of AIME 1995 Up through 426 90 percent of AIME 357 - 2145 320.40 plus 32% of excess of 356 427 - 2567 383.40 plus 32% of excess of 426 2146 or higher 892.88 plus 15% of excess of 2145 2568 or higher 1068.52 plus 15% of excess of 2567 1991 Up through 370 90 percent of AIME 1996 Up through 437 90 percent of AIME 371 - 2230 333.00 plus 32% of excess of 370 438 - 2635 393.30 plus 32% of excess of 437 2231 or higher 928.20 plus 15% of excess of 2230 2636 or higher 1096.66 plus 15% of excess of 2635 1992 Up through 387 90 percent of AIME 1997 Up through 455 90 percent of AIME 388 - 2333 348.30 plus 32% of excess of 387 456 - 2741 409.50 plus 32% of excess of 455 2334 or higher 971.02 plus 15% of excess of 2333 2742 or higher 1141.02 plus 15% of excess of 2741 1993 Up through 401 90 percent of AIME 1998 Up through 477 90 percent of AIME 402 - 2420 360.90 plus 32% of excess of 401 478 - 2875 429.30 plus 32% of excess of 477 2421 or higher 1006.98 plus 15% of excess of 2420 2876 or higher 1196.66 plus 15% of excess of 2875

27. Computation of Benefits – Bend Points, Cont. 1999 Up through 505 90 percent of AIME 2004 Up through 612 90% of AIME 506 - 3,043 454.50 plus 32% of excess of 505 613-3,689 550.80 plus 32% of excess of 612 3,044 or higher 1,266.66 plus 15% of excess of 3,043 3,690 or higher 1,535.44 plus 15% of excess of 3,689 2000 Up through 531 90% of AIME 2005 Up through 627 90% of AIME 532 - 3,202 477.90 plus 32% of excess of 531 628-3,779 564.30 plus 32% of excess of 627 3,203 or higher 1,332.62 plus 15% of excess of 3,202 3,780 or higher 1,572.94 plus 15% of excess of 3,779 2001   Up through 561 90% of AIME 2006 Up through 656 90 % of AIME 562 - 3,381 504.90 plus 32% of excess of 561 657 - 3,955 590.40 plus 32% of excess of 656 3,382 or higher 1,407.30 plus 15% of excess of 3,381 3,956 or higher 1,646.08 plus 15% of excess of 3,955 2002   Up through 592 90% of AIME 2007 Up through 680 90% of AIME 593 - 3,567 532.80 plus 32% of excess of 592 681 - 4,100 612.00 plus 32% of excess of 680 3,568 or higher 1,484.80 plus 15% of excess of 3,567 4,101 or higher 1,706.40 plus 15% of excess of 4,100 2003 Up through 606 90% of AIME 2008 Up through 711 90% of AIME 607 - 3,653 545.40 plus 32% of excess of 606 712 - 4,288 639.90 plus 32% of excess of 711 3,654 or higher 1520.44 plus 15% of excess of 3,653 4,289 or higher 1,784.54 plus 15% of excess of 4,288

28. Computation of Benefits – Bend Points, Cont. 2009 Up through 744 90% of AIME 2013 Up through 791 90% of AIME 745 - 4,483 669.60 plus 32% of excess of 744 792 - 4,768 711.90 plus 32% of excess of 791 4,484 or higher 1,866.08 plus 15% of excess of 4,483 4,769 or higher 1,984.54 plus 15% of excess of 4,768 2010 Up through 761 90% of AIME 2014 Up through 816 90% of AIME 762 - 4,586 684.90 plus 32% of excess of 761 817 — 4917 734.40 plus 32% of excess of 816 4,587 or higher 1,908.90 plus 15% of excess of 4,586 4,918 or higher 2,046.72 plus 15% of excess of 4,917 2011 Up through 749 90% of AIME 2015 Up through 826 90% of AIME 750 - 4,517 674.10 plus 32% of excess of 749 827 — 4980 743.40 plus 32% of excess of 826 4,518 or higher 1,879.86 plus 15% of excess of 4,517 4,981 or higher 2,072.68 plus 15% of excess of 4,980 2012 Up through 767 90% of AIME 768 - 4,624 690.30 plus 32% of excess of 767 4,625 or higher 1,924.54 plus 15% of excess of 4,624

29. Computation of Benefits - Amounts Retirement PIA (subject to reduction for age or increase for delayed retirement) Disability PIA Spouse ½ PIA (subject to reduction for age, family maximum and/or own benefit) Div. Spouse ½ PIA (subject to reduction for age, and/or own benefit. Not affected by family maximum). Spouse w/ ½ PIA (subject to reduction for family maximum and/or own child-in-care benefit)

30. Computation of Benefits - Amounts Child ½ PIA (for life cases subject to family maximum) Child ¾ PIA (for death cases subject to family maximum) Widow(er) Deceased’s PIA (subject to reduction for age, deceased’s benefit reduced for age. May also be increased because of deceased’s delayed retirement. Subject to family maximum and own benefit). Mother/ ¾ PIA (subject to reduction for family maximum). Father Must have child-in-care). Parent 82 ½%/75% PIA (One parent 82 ½%; two parents 75% each. Subject to family maximum and own benefit). LSDP $255 (multiple of minimum PIA, since 1981

31. When to File for Benefits • Can file up to 4 months before the date you want your benefits to start • No retroactivity in most cases

32. How to File • On-line at www.socialsecurity.gov/applyfor benefits • Face to face interview at your local Social Security office • Telephone interview

33. How to File (cont.) MAKE AN APPOINTMENT TO FILE!!!!!! • Call Social Security’s toll free number – 1(800) 772-1213 • Pick a date and time (options limited to available appointment slots) • Protective filing

34. Documentation Needed • Proof of your age – Birth Certificate • Proof of citizenship or lawful immigration status if not born in the USA • Most recent w-2 form or if self employed, most recent tax return

35. Documentation Needed (cont.) • Checkbook or bank account statement • Social Security Card • Proof of earnings if earnings not posted on your earnings record • If filing for spouses benefits, proof of marriage and proof of divorce if applicable

36. 2016 Social Security Changes Because there is no COLA, by law these amounts remain unchanged in 2016: • Tax rate – 7.65% for employees and 15.3% for self employed • Maximum taxable earnings - $118,500 • Retirement Test – Under retirement age is $15,720 , year of FRA is $41,880

37. 2016 Social Security Changes (cont.) Items that will change in 2016: • Amount needed for a quarter coverage increased from $1,220 to $1,260. • Part B Medicare premium increased from $104.90 to $121.80. Hold harmless provision still applies.

38. 2016 Social Security Changes (cont.) • Estimated average monthly benefit for retired workers increases from $1,328 to $1,341. • Maximum retirement benefit for workers retiring at full retirement age in 2016 is $2,639. This is lower than the maximum retirement benefit of $2,663 for workers retiring at full retirement age in 2015

39. SSRC Q & A