Social Security

MGMT 4030 - Managing Employee Reward Systems

Social Security: Overview

Legally Required Benefit Provides a Basic Level of Security

for Employees Other Employer Provided Benefits

Give Additional Coverage Basic Economic Security for

Retirement, Disability, Survivors and Health Care for the Aged

Funding Social Security

Equal Contributions made by Employer and Employee

OASDI tax = 6.2% up to $68,400 Annual Earnings (1998)

Medicare Tax = 1.45%; No cap on Earnings

Social Security: Retirement Benefits Full Benefits at age 65; raised to age 67

by 2027 Reduced Benefits (80%) at age 62 Benefits equal aprox. 30% earnings prior

to Retirement Average Benefit Amount: $858/month. With Spouse, benefits increased by 50% Eligibility: 40 1/4 year periods with Min.

Earnings $590/Qtr.

Social Security: Medicare

Health Insurance for Age 65 and Older

Part A = Hospital Expenses: $600-700 deductible/yr.

Part B = Medical Expenses: aprox. $40/month fee

Some Limits on Lengthy Hospital Visits, Nursing Homes

Social Security: Disability Income No Age Limit Total Disability for 5 Months or

More Aprox. 30% of Replacement

Income Provided Integrate with Sick Leave, WC

benefits, LTD Insurance

Social Security: Survivor Benefits Income for Survivors of Deceased

Worker Widow(er) age 60+; Child < 18

yrs. Benefits Related to Deceased

Worker’s Retirement Benefits

Problems with Social Security Funding May Be Exhausted by

2020 Due to Demographics Government Uses Soc.Sec. Taxes

to Pay Current Debts Long Life Spans Means more

Beneficiaries to Support

Fixing Social Security - Alternatives #1.All Social Security Funds can be

Managed by Individuals: Choice of Mutual funds, Bonds, or Treasury notes.

#2. 1/3 of Social Security money can be Invested as in #1, and 2/3 of money managed by Government as is the case now.

#3. The government puts all the Social Security money in a portfolio of stocks of blue chip US companies.