Social Security & Medicare PDF

Social Security ○ A federal program that provides retirement benefits, survivors’ benefits, and disability insurance Question: Yong is employed by Fickle Corp, Who pays into the social security system to make sure Yong is eligible to receive bene...

Social Security ○ A federal program that provides retirement benefits, survivors’ benefits, and disability insurance Question: Yong is employed by Fickle Corp, Who pays into the social security system to make sure Yong is eligible to receive benefits when he is 67? Both Yong and Fickle Corp ○ Yong both paid in and was 67 years old ○ How is it funded? FICA (Federal Insurance Contributions Act) Mandatory contributions: ○ Both employers and employees must contribute ○ Self-employed persons must also pay the tax Funded: Employees ○ Paycheck is Taxed at 6.2% Maximum taxable earnings cap: $168,600 Wage base for 2024 Employer ○ Matches the tax paid by the employee This means the tax is technical 12.4% but it is just split) Self-Employed ○ Must pay self-employment tax to fund SS ○ 12.4% tax on all earnings up to “wage base” ○ Eligibility: You must earn credits The number of credits required for eligibility varies with age and type of benefit, but MOST people need 40 credits to qualify for Social Security benefits and be 67 years old As of 2024, every $1,730 in earnings earns one credit. You can earn a maximum of 4 credits per year. Medicare ○ Federal Health Insurance program and need 40 credits and be 65 years old ○ Eligibility: If you or your spouse is eligible to receive Social Securit benefits AND you are 65 years or older OR Under 65 if you have certain disabilities Additional categories (not covered in this class) ○ How is it funded: Both employee and employer must contribute 1.45% and 2.9% if you are self-employed  No cap ceiling for wages taxed - your entire modified adjusted gross income (MAGI) is taxed High-income earners must pay an additional tax on all earnings over $200,000 (employer DOES NOT PAY this) ○ Basic Programs Part A: Hospital Insurance Automatic for most people if individual or spouse worked (paid by the medicare taxes) Part B: Medical Insurance: Must pay premium Part C: Medicare Advantage Permits you to opt to receive all your healthcare services through a provider organization You must opt-in, and most plans require you to PAY Part D: Prescription Drug Coverage You must opt-in; plans are paid for by monthly premiums Total Contributions by each for Social Security tax and Medicare ○ Employee Contribution is Basic: 7.65% PLUS additional tax on all income above $200,00 wage base ○ Employer Contribution is Basic: 7.65% ○ Self-Employed Pays: 15.3% for basic plus additional tax on all income above $200,000 wage base ( 12.4% for ss and 2.9$ for medicare and the additional tax on earnings above $200,000) Medicaid ○ State program (rule vary) ○ Eligibility: generally for low-income individuals (below the poverty line) Question: True or False: All employers are required to provide retirement plans ○ False Private Retirement Plans ○ Employers are NOT required to establish private retirement plans (like pension plans, 401 (k) plans, etc.) but if an employer establishes a private retirement plan, the plan must comply with a federal act (law) called ERISA (Employee Retirement Income Security Act) ○ ERISA = Management standards for private retirement plans Record keeping Investment fo funds Vesting (most common rules are below) Employee contributions vest immediately Employer contributions vest after 5 years Pension Benefit Guaranty Corporation Private Pension Plans ○ Pension Benefit Guaranty Corporation (PBGC) Independent federal agency created through ERISA legislation  Goal: to provide “timely and uninterrupted” payment of private pension plan benefits HOW? PBGC collects annual insurance premiums paid by the pension plans Insurance pays benefits IF the plan becomes unable to pay Unemployment insurance ○ Is a system created by the FUTA (Federal Unemployment Tax Act) administered by the states ○ Benefits, eligibility requirements, and length of time during which you can collect benefits vary by state ○ Generally who is eligible Those who have lost jobs due to no fault of their own Loay offs, office closure, termination of your position Must meet requirements for wages earned or time worked during the one-year period Must claim benefits within x months of loss of job Must remain willing, able, and available to work You must actively search for work or pursue education or training Resumes, Linkedin, actively in search ○ Where does that insurance money come from? Employers that are covered are taxed To pay the tax, your employer will deduct a portion of the tax from your paycheck Self-employed individuals are usually not entitled to unemployment benefits unless their business paid employment taxes ○ COBRA Entitles employee who have lost jobs to continue health care coverage under the employer’s health plan for up to 18 months The employee is eligible if he is fired OR if he quits UNLESS the employee is fired for “gross misconduct” Employees must pay ALAL health plan premiums Use to pay half and employer pay half - now you pay full Employer-sponsored group Health plans and HIPAA (Health Insurance Portability and Accountability ACT) ○ Establishes administrative requirements employer health care plans must meet ○ Mandatory policies and procedures to protect the privacy and security of employee's private health information ○ Employer failure to comply with HIPAA Civil penalties: up to $25,000/year Criminal Penalties: Up to $250,000 in fines Imprisonment for up to 10 years Employee Privacy Rights ○ More than 50% of all employers engage in employee surveillance ○ Reasonable Expectations of Privacy:  Balancing Test On one end Employer’s Interest in Monitoring and Employee’s Reasonable Expectation of Privacy on the other ○ EPCA (Electronic Communications Privacy At) Prohibits interception and disclosure of wire, oral, or electronic communications without employee CONSENT Bust the Business Extension Exception to the ECPA states that the act Does not apply to any communications through devices owned or provided to the employee for business use Notice required (not consent) ○ An employer may monitor communications through employer-owned/provided devices without employee consent as long as employer notifies the employee of monitoring First amendment free speech protection - only applies to government employees Other types of monitoring Lie detector tests Drugs tests ○ Lie detector tests (Employee Polygraph Protection Act (EPPA) Most Private employers with 2+ employees and $500,000 in business: Not permitted to require or request that employee or applicant take a lie detector tests Private companies exempt: Security companies Manufacture and contribute controlled substances Investigating threats (including embezzlement and theft of trade secrets) All public employers are exempt from EPPA and my require lie detector tests ○ Drug testing Private employers Is governed by state law Generally, testing must simply be “reasonable” random tests are ok Public Employers: Fourth amendment to the US constitution applies and prohibits “unreasonable searches”, so drug testing is limited By federal statute, drug test ing is permitted in limited circumstances including: ○ Transportation industris ○ If drug use in a particular job may threaten public safety ○ If there is a “reasonable basis” to suspect the government employee is using drugs