by Stephanie Flynt
From the Editor: Stephanie is one of the bright stars who makes up our national staff. She inspires, informs, and spreads the message of the Federation in a way that is uniquely hers, and we are the beneficiaries of her creativity and talent. She is a native of Jackson, Mississippi, and a proud graduate of Mississippi State University. Currently she works as a government affairs specialist in our Advocacy and Policy Department. She specializes in public policy areas that affect blind Americans including education, labor and employment, nonvisual accessibility, Social Security, the transportation of service animals. When she isn’t working to advance the Federation’s legislative priorities, you can find her volunteering in her local community, making a mess with a new recipe or DIY project in her kitchen, or hiking with her fiancé Ashlyn and their two dogs, Nala Belle and Bailey. What she presents here is our annual update about Social Security benefits:
It’s that time of year again when we provide you with information regarding annual adjustments to the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs. In 2021 approximately sixty-seven million Americans will see a 1.3 percent cost-of-living adjustment (COLA) increase in their benefit amounts. Thus, come January, monthly checks will be a few dollars higher.
The 2021 amounts are below along with some general concepts pertaining to the Social Security and Medicare programs, in case you want to better understand or refresh yourself about your rights. The COLA (if any) is based on the consumer price index (CPI-W), which measures the rate of inflation against the wages earned by the approximately 173 million workers across the nation over the previous four quarters starting with the third quarter of the previous year. Okay, here are the numbers.
FICA and Self-Employment Tax Rates: If you are employed, you know that you do not bring home everything you earn. 7.65 percent of your pay, for example, is deducted to cover your contribution to the Old Age, Survivors, and Disability Insurance (OASDI) Trust Fund and the Medicare Hospital Insurance (HI) Trust Fund. 6.20 percent covers OASDI, and 1.45 percent is contributed to the HI Trust Fund. Additionally, your employer is required to match this 7.65 percent for a total of 15.30 percent.
For those who are self-employed, there is no “employer” to match the 7.65 percent, which means a self-employed individual pays the entire 15.30 percent of their income. These numbers will not change in 2021 regardless of whether an individual is employed or self-employed. As of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes; this does not include the above amounts.
There is a ceiling on taxable earnings for the OASDI Trust Fund, which was $137,700 in 2020 and will jump to $142,800 in 2021. Thus, for earnings above $142,800, there is no 6.20 percent deducted for OASDI. As for Medicare, there is no limit on taxable earnings for the HI Trust Fund.
The OASDI Trust Fund is kind of like an insurance policy. You have to pay a premium to participate. Therefore, to qualify for Retirement, Survivors, or Disability Insurance benefits, an individual must pay a minimum amount of FICA taxes into the OASDI Trust Fund by earning a sufficient number of calendar quarters to become fully insured for Social Security benefits.
In 2020 credit for one quarter of coverage was awarded for any individual who earned at least $1,410 during the year, which means that an individual would need to earn at least $5,640 to be credited with four quarters of coverage. In 2021 the amount increases to $1,470 for one calendar quarter or $5,880 to earn four quarters of coverage for the year.
A maximum of four quarters can be awarded for any calendar year, and it makes no difference when the income is earned during that year. Basically, the taxes you pay into the OASDI and HI Trust Funds are your premiums to take part in the Social Security and Medicare programs.
The total number of quarters required to be eligible for benefits depends on the individual’s age. The older the individual, the more quarters are required. Furthermore, a higher average income during an individual’s lifetime means a higher Social Security or SSDI check when benefits start. Remember the above quoted numbers for quarters of coverage to become fully insured are only minimum amounts.
This concept is often misunderstood. The amount of earnings required to use a trial work month is not based on the earnings limit for blind beneficiaries but instead on the national average wage index. In 2020 the amount required to use a TWP month was only $910, and this amount will increase to $940 in 2021.
If you are self-employed, you can also use a trial work month if you work more than eighty hours in your business, and this limitation will not change unless expressly adjusted.
The earnings limit for a blind beneficiary in 2020 was $2,110 per month and will rise to $2,190 in 2021. Again, it’s important to remember this is not the amount of money an individual makes to use a trial month. This is to say that the TWP can be exhausted even if your income is well below $2,190 per month. See the above information about the TWP.
In 2021 a blind SSDI beneficiary who earns $2,191 or more in a month (before taxes but after subtracting unincurred business expenses for the self-employed, subsidized income for the employed, and impairment-related work expenses) will be deemed to have exceeded SGA and will likely no longer be eligible for SSDI benefits.
The federal payment amount for individuals receiving SSI was $783 in 2020 and will increase to $794 in 2021. For married couples, the federal monthly payment amount of SSI will rise from $1,175 to $1,191.
In 2020, the monthly amount was $1,900 and will increase to $1,930 in 2021. The annual amount was $7,670 in 2020 and will be $7,770 in 2021. The asset limits under the SSI program will remain unchanged at $2,000 per individual and $3,000 per married couple.
Signed on December 19, 2014, the ABLE Act has a significant impact on resource limits associated with the SSI and Medicaid programs for those who were blind or disabled by the age of twenty-six. Traditionally, SSI beneficiaries have been required to adhere to strict resource limits: such as a maximum of $2,000 in the bank for an individual receiving SSI benefits. Under the ABLE Act, however, the amount deposited in an ABLE Account can be much higher. ABLE Account contributions must be designated specifically for purposes such as education, housing (with a cautionary warning to follow), employment training and support, assistive technology, health, prevention and wellness, financial management, legal fees, and funeral and burial expenses. The required implementing regulations are being enacted in most states. Check with your financial institution of choice for a status of ABLE Act regulations in a specific state and to see if an ABLE account is right for you.
As to the warning about ABLE Account contributions for housing, it is important to note that SSI beneficiaries may still face the traditional $2,000 resource limit for ABLE Account funds designated for housing. Thus, SSI beneficiaries should consider the many other purposes not subject to the traditional resource limits when making ABLE Account contributions, since there are also tax advantages associated with ABLE accounts.In previous years this article has featured information pertaining to Medicare and Medicaid insurance programs. As of the date of publication, the updated adjustments have not been announced by the Center for Medicare and Medicaid services. You can rest assuredthat we will cover this topic further in January’s issue of the Braille Monitor.