Lesson 8 Review
Social Security's purpose is to provide for the general welfare of those U.S. citizens who are 65 years of age and over.
FICA taxes are applied to employees' incomes up to certain limits, called the taxable wage base. A portion of the FICA tax is allocated to OASDI (Old Age, Survivor and Disability) benefits; the other portion is allocated to Medicare benefits. The 2012 OASDI taxable wage base is $110,100. There is no CAP on earnings for the Medicare portion.
6.20% of FICA tax is allocated to OASDI and 1.45% is allocated to Medicare for a total of 7.65%. The 2011/2012 tax rate for self-employed persons is 15.3%.
For an individual to be considered "fully" insured, the individual must have 40 quarters of participating contribution. For an individual to be considered "currently" insured, the individual must have 6 credits within the last 13 quarters prior to death. Each credit equals $1,130 annual FICA taxed earnings. (2012)
Social Security benefits were computed on a worker's average monthly wage (AMW) if the person became eligible for benefits before 1979. Since 1979, the calculation has been based on the worker's average indexed monthly earnings (AIME).
Social Security pays the spouse or children of a deceased worker a one-time lump sum death benefit equal to three times the worker's PIA with a CAP of $255.
A disabled worker must be unable to perform any substantial, gainful work in order to be qualified for Social Security disability benefits. Benefits are eligible to begin after a waiting period of five consecutive months (150 days) during which time the person must remain disabled. Benefits can be paid retroactively up to 12 months (minus the waiting period).
The information contained in Unit 12 of the Florida study manual has been presented in Lesson 8 of the online course.
