Friday, July 5, 2013
Specialist in Income Security
The Social Security program began in the 1930s and has been modified by Congress many times over the past seven decades. Today, Social Security provides monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Among the beneficiary population, approximately 80% are retired or disabled workers, and 20% are the family members of retired, disabled, or deceased workers. In April 2013, 57.3 million Social Security beneficiaries received a total of $66 billion in benefit payments for the month.
Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. An estimated 94% of workers in paid employment or self-employment are covered, and their earnings are subject to the Social Security payroll tax. In 2013, employers and employees each pay 6.2% of covered earnings, up to the annual limit on taxable earnings ($113,700 in 2013).
To be eligible for a Social Security retired-worker benefit, a person generally needs at least 40 earnings credits, or 10 years of Social Security-covered employment (among other requirements). Fewer earnings credits are needed for a disabled-worker benefit, depending on the worker’s age. A worker’s initial monthly benefit is based on his or her career-average earnings in covered employment. Social Security retired-worker benefits are first payable at the age of 62, subject to a permanent reduction for early retirement. Full (or unreduced) retirement benefits are first payable at the full retirement age (FRA), which is increasing gradually from 65 to 67 under a law enacted by Congress in 1983. The FRA will reach 67 for persons born in 1960 or later (i.e., persons who become eligible for retirement benefits at the age of 62 in 2022 or later).
In addition to payroll taxes, Social Security is financed by federal income taxes that some beneficiaries pay on a portion of their benefits and by interest income that is earned on the Treasury securities held by the Social Security trust funds. In 2012, the Social Security trust funds had receipts totaling $840 billion, expenditures totaling $786 billion, and accumulated assets (in the form of Treasury securities) totaling $2.7 trillion. Projections by the Social Security Board of Trustees show that, based on the program’s current financing and benefit structure, benefits scheduled under current law can be paid in full and on time until 2033. The projections also show that Social Security expenditures will exceed income by about 20% on average over the next 75 years. Restoring long-range trust fund solvency and other policy objectives have made Social Security reform an issue of ongoing congressional interest and debate.
This report is designed to provide an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age enacted in 1983; and the federal income taxation of Social Security benefits. For other CRS products on Social Security, please see Issues Before Congress (Social Policy / Social Security).
Date of Report: June 17, 2013
Number of Pages: 18
Order Number: R42035
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Posted by Penny Hill Press, Inc. at 8:35 AM