Social Security is based on the concept that while you work, you contribute taxes into a system to help pay for your retirement, disability and survivor benefits.
A comprehensive protection package should complement social assistance with insurance that, subsidized for the poorest, provides coverage against impoverishing losses and consumption smoothing. This would require disentangling redistribution from mandated savings and reducing labor costs.
The Social Security program provides monthly benefits for people when they retire or become severely disabled. These benefits are based on earnings in Social Security covered employment. Each year, the individual receives a personal Social Security Statement that shows his or her year-by-year earnings. The Statement also provides estimates of retirement, survivors and disability benefits that he or she may be eligible for now and in the future.
The two primary types of retirement plans are defined benefit plans and defined contribution plans. Defined benefit plans promise a specific amount of retirement income for life based on a formula (such as a percentage of average salary plus years of service) or a set dollar amount. Most defined benefit plans are guaranteed by the federal Pension Benefit Guaranty Corporation.
In a defined contribution plan, the employee and/or employer make contributions to an account that is invested on his or her behalf. The balance in the account fluctuates based on investment gains or losses. Many State and local government employees have defined contribution plans.
When an individual inherits a retirement account, the beneficiaries must follow rules that govern how those assets are treated. Generally speaking, if the beneficiary of the retirement account is receiving means tested government benefits such as SSI and/or Medicaid the distributions from the inherited account will reduce or eliminate those benefits. However, if the funds are left to a special needs trust, those distributions can be stretched out over the beneficiary’s life expectancy to preserve the favorable tax treatment.
If a disability prevents you from doing the kind of work you used to do, you can apply for benefits. The two main disability programs are SSDI and SSI. Both involve payment of monthly cash benefits to disabled adults and children with limited income and resources. To qualify for either program, you must have paid enough Social Security taxes based on taxable work to achieve “insured status.” (See Insured Status Requirements)
During a CDR, SSA asks several questions about your condition, your ability to perform different kinds of work, and your medical treatment. You must respond accurately. In addition, you should consider getting a medical opinion report from the physician(s) most familiar with your condition that addresses how it affects your abilities to work and explains how long you anticipate it taking you to recover. See Documenting Disability for more information.
In some cases, SSA might decide that your disability has not improved and it can stop your benefits. Then, if you want to resume your benefits, you must submit proof that you meet its current standards of disability. For example, if you are receiving SSI, SSA must see that your disabilities are severe and that they will likely keep you from working at a substantial gainful level for 12 months or longer. If you are receiving SSD, SSA must see that your disability meets its “Listing of Impairments,” which is available on its website.
The benefits you pay into Social Security are not just for your retirement, they’re also for your family if you die. Survivors benefits are designed to help your spouse, children and other dependents. In addition to the monthly benefit, survivors may be entitled to state-sponsored health insurance and educational assistance.
The Survivor Benefit Plan (SBP) pays an annuity to your spouse in the event of your death before or after retirement, as a percentage of your retired pay. You can opt in for SBP when you elect to retire or at the end of your 20-year qualification period. The maximum SBP annuity is based on 55 percent of your retired pay (or, in the case of REDUX retirees, the amount you would have received under the high-three retirement system). Eligible children can be added to your spouse coverage. They receive an annuity equal to 20% of your base annuity until they reach age 18 (or 22 if enrolled as a full-time student), marry or are no longer disabled.
Prior to 2023, Spouse SBP annuitants whose spouses were also receiving DIC payments had their SBP annuity reduced by the amount of DIC. That changed with the implementation of Public Law 116-92, National Defense Authorization Act for Fiscal Year 2020. Beginning February 1, 2023, surviving spouses will be able to receive the full SBP annuity without the offset due to receipt of DIC.
Supplemental benefits are additional financial resources that can help a person pay for expenses related to their disability. They are intended to supplement other forms of income such as ביטוח לאומי payments and earnings from work. A person can use supplemental benefits to pay for items such as food, housing, transportation and utilities. Supplemental insurance policies can also be used to cover copays and deductibles.
Medicare Advantage plans have been permitted since 2019 to offer a broader array of “primarily health-related” supplemental benefits, including services like meal delivery, transportation and in-home support services. However, the number of MA plans offering these services has been relatively small in the first year that they were available.
People with disabilities who receive SSI can get supplemental benefits to help them purchase needed goods and services, such as food and housing. Some SSI recipients who are students can receive supplemental benefits to pay for their school expenses. But they must be careful to use these funds wisely because they may affect the amount of SSI they receive.
Employers can also provide supplemental benefits for their employees. For example, an employer can allow employees to draw from their bank of paid time off (PTO) and use it as a way to “top-off” their benefit payment. It’s important to make sure that employers are clear with their employees that supplemental benefits should not be reported on the employee’s weekly claim as doing so will reduce the amount of their Social Security benefit.