By Doreen Benson

The Nation’s need for a comprehensive plan to address the financial challenges of death, disability, and old age became increasingly apparent during the economic upheaval of the Great Depression. Family life changed dramatically as we moved away from our historic agricultural roots toward a more industrial and urban economy. The economic safety net of the family farm was quickly disappearing.

By executive order of President Franklin D. Roosevelt, the Committee on Economic Security was formed to study the problem of providing economic security to a changing America. Just over a year later, the Social Security Act XE "Social Security Act"  was signed into law on August 14, 1935. The first Social Security number was assigned in December of 1936, and the first FICA (the well-known acronym for the "Federal Insurance Contributions Act" ) taxes were withheld from worker’s paychecks in January 1937. Originally, Social Security covered only the contingency of retirement.

Social Security coverage was expanded in 1939 to include dependents and survivors of workers. Payments of monthly benefits began in January 1940. Social Security was expanded once again in 1960 to include disabled workers and their families. Basic health insurance for senior citizens, called MEDICARE , was signed into law in 1965.

Notwithstanding recent criticism that Social Security is insolvent and outdated, it endures as one of this county’s most successful and essential government programs. Recent projections indicate that even without any changes to the program it will remain financially solvent for at least the next three decades.

However, change is inevitable. As it has in the past, Social Security will adjust to changing economic, demographic, and political conditions and continue to meet the needs of current and future generations of American workers.

If you work long enough and meet the earnings requirements discussed in this chapter, you will be eligible for monthly Social Security retirement benefits when you retire. The amount of your benefit is based on your earnings record. You may also be entitled to benefits based on your late spouse’s earnings. Our focus will be on this aspect, called survivor benefits.

The Social Security benefits available to disabled workers and their families are beyond the scope of this chapter and therefore are not covered. Several other government entitlement programs related to Social Security, namely Medicare, Medicaid and Supplemental Security Income, are covered later in this chapter.

The following family members are eligible for survivor benefits:

1. A surviving spouse (of any age) who was married to the worker at the time of his death (or an ex-spouse that has not remarried) that is caring for a child of the deceased (whether natural, adopted, or step) who is under age 16.
2. A surviving spouse ( or an unmarried ex-spouse) caring for a disabled child, of any age, if the child is receiving Social Security benefits.
3. Unmarried child under age 18, or under age 19 if a full time high school student, (can include natural, adopted, or stepchild).
4. A child age 18 or older and severely disabled before age 22. The benefits may continue regardless of age as long as the child remains totally disabled.
5. Parents of the deceased worker, if they were dependent upon the worker for at least one-half of their support.
6. A surviving spouse age 60 or older (can be an ex-spouse).
7. A surviving spouse 50 or older who is disabled (can be an ex-spouse).
8. A $255 lump sum payment to a surviving spouse (or minor children if no spouse).

EARNINGS REQUIREMENT

To qualify for regular Social Security benefits, or survivor benefits for the worker’s family, an individual must have worked and earned sufficient "credits." Workers earn credits based on their earnings. In 2001, every $830 in earnings equals one credit, up to a maximum of four credits per year ($3,320 in annual earnings in 2001 equals the maximum four credits). The amount of money needed to earn one credit increases annually based on the cost of living (in 2000 it was $780). Generally, workers need 40 credits (10 years of work) to qualify for regular benefits. However, fewer than 40 credits are needed to qualify for survivor benefits. For the family of a deceased worker to be eligible for survivor benefits, a worker born in 1930 or later needs one credit for each year after age 21, up to the year of death. For workers born prior to 1930, one credit is needed for each year after 1950, up to the year of death.

For example: a worker born in 1950 who died in 2000 would require 28 credits (seven years of work) for survivor benefits to be payable to family members. (The worker was age 21 in 1971, and needed one credit for each year after age 21 up to the year of death -1972 through 2000 = 28 "credits").

Under any scenario, the family is eligible for a reduced survivor benefit if the deceased worker had at least six credits (one and one-half years of work) in the three years before death.

Earnings are the basis for calculating both eligibility and benefit amount. Relatively small amounts of earnings over a long period allow the worker to accrue credits. As noted above, only $3,320 was needed in 2001 to earn four of the forty credits necessary to be eligible for Social Security (regular Social Security benefits also require the worker to have reached full or early retirement age as described below).

Once eligibility is established, the amount of the monthly benefit must be determined. Social Security survivor benefits are based on the deceased worker's date of birth, date of death, and earnings. Earnings are adjusted for inflation and then averaged over the worker's lifetime to reflect average adjusted monthly earnings. Average adjusted monthly earnings are then multiplied by percentages prescribed by law. The product is the deceased worker's base benefit amount.

The worker’s base benefit amount is then multiplied by a percentage determined by the age of the beneficiary and the beneficiary’s relationship to the deceased:

1. A surviving spouse age 65 or older when entitlement begins: 100 percent.
2. A surviving spouse age 60 to 64 when entitlement begins: a sliding scale ranging from 71 to 94 percent.
3. A surviving spouse (any age) caring for a child under age: 16 -75 percent.
4. Children: 75 percent.

The higher the lifetime earnings of the deceased worker, the greater the potential benefits for the family. In 2001, the average monthly Social Security benefit for a surviving spouse and two children was $1,696. For a widow or widower living alone, the average monthly benefit was $811.

There is a limit, called a “family maximum,” on the amount of survivor benefits that can be paid to the family of a worker. The limit is generally equal to somewhere between 150 to 180 percent of the deceased worker's base benefit amount. If several family members are eligible for survivor benefits, and their aggregate benefit exceeds the maximum, their individual benefits will be reduced proportionately.

For example, if a worker's base benefit was $500, a 75 percent benefit (generally due a surviving spouse or child) would be $375. However, if the worker was survived by a surviving spouse and four minor children, each family member would not receive the full 75 percent benefit (the adjusted benefit for children and surviving spouses age 60-64), as this would exceed the family maximum of $750 (150% of the base amount). To determine the proper benefit amount in a family maximum case, the maximum benefit payable would be divided equally among the family members. For example, a family of five (surviving spouse and four minor children) would each receive $150 a month, or one-fifth of the $750 family maximum. As the oldest child matures and stops receiving Social Security, his or her benefit would be divided and shared equally by the remaining family members. The family maximum rule generally comes into play in survivor claims of younger families (a surviving spouse with young children) and can become complicated when there are ex-spouses with children of the deceased worker.

The Social Security Administration will make an official determination of the survivor benefit amount when the claim is finally adjudicated, but can provide a benefit estimate at the time of application.

You may be eligible for survivor benefits as well as benefits earned from your own work record. The rules that apply when choosing between the two can be confusing.

Both spouses must meet the age requirements to receive a monthly benefit. If a worker elects early retirement benefits at age 62, and his spouse is age 55, she would have to wait until age 62 to begin receiving benefits (or age 60 if her husband dies).

As noted above, in the event of a worker’s death, the surviving spouse must be at least age 60 to receive survivor’s benefits (or earlier if the survivor is disabled or caring for minor children of the deceased). If the surviving spouse is only age 55 at the time of the worker’s death (and not disabled or caring for minor children of the deceased), she must wait until age 60 to qualify for survivor’s benefits (although his children under age 19 may qualify directly). At age 60, the surviving spouse could begin receiving surviving benefits (unless he or she remarried).

Such survivor benefits are permanently reduced for age. To receive the full amount of the deceased spouse’s benefit, the survivor would have to wait until she attained full retirement age (age 65 for people born in 1937 or earlier).

If you elect to receive survivor’s benefits, you may elect to take you own benefit when you attain early retirement age (62) or full retirement age (age 65 for people born in 1937 or earlier) based on your own work and earnings if it would result in a higher monthly benefit.

Where both spouses worked and both are receiving retirement benefits one spouse dies, the survivor would be eligible for whichever benefit is greater.

A different set of rules apply when one spouse worked outside the home and other did not (or on a very limited basis). If both spouses were at least age 65 when the worker spouse began receiving full retirement benefits, the non-working spouse would receive a benefit equal to one-half of the working spouse’s benefit.

If the working spouse then dies, the surviving spouse receives the deceased spouses full benefit and must relinquish her one-half benefit.

In the event of the death of a spouse where both are older than the full retirement age (65 if born in 1937 or earlier) and each are receiving their own monthly benefit based on their own work history, the survivor is entitled to the higher benefit (not both) upon the death of their spouse.

REMARRIAGE

Generally, you will not be eligible for Social Security survivor benefits if you remarry prior to age 60. After age 60, or age 50 if disabled, remarriage will not terminate survivor benefits on your late spouse’s record. Keep in mind that if you remarry on or after attaining age 62, you may be eligible for a different, and possibly higher, benefit on the account of your new spouse.

You should contact the Social Security Administration and apply for benefits as soon as possible after your spouse’s death. You may apply in person at your local SSA office, by telephone (1-800-772-1213), or by visiting their website at http://www.ssa.gov.

If you call, representatives are available to speak with you weekdays from 7 a.m. to 7 p.m. The SSA recently unveiled http://www.ssa.gov/women, a website for women, providing basic social security retirement, survivors benefits, disability, and Supplemental Security Income benefit information pertinent to women.

The best times to call are later in the day, later in the week, and later in the month. If you don’t mind voice mail option menus, there is an after-hours voice mail system to handle a variety of questions and concerns. A word to the wise: keep a record of the name of the Social Security officials you speak with, the dates of your calls, and the subject of your conversations. This information may be useful in the future if your application cannot be located or you receive contradictory information.

The application process generally takes less than 30 minutes. You will be asked several questions, to determine your eligibility for Social Security and other government benefits.

You will be required to submit evidence to substantiate your entitlement including:

1. Evidence of relationship (marriage certificate, divorce judgment, etc.);
2. Birth certificates for all benefit applicants;
3. Proof of death (death certificate);
4. Recent wage information for the deceased;
5. Social Security numbers for all family members applying for benefits; and
6. Bank account information to initiate direct payment of your benefits to the financial institution of your choice.

The above list is not inclusive. The evidence required may vary depending on your individual circumstances. Photocopies of requested documents are not accepted. Original documents (or certified copies from the official agency that issued the original document) are required. Certified documents are usually available through the city or county clerk where the event occurred, and generally must have a raised seal of the issuing agency for identification purposes.

Original documents will be returned to you at the end of the application process. Do not delay filing your survivor claim simply because you don’t have the requested documents. SSA can assist you in obtaining any evidence necessary to process your application for benefits.

The SSA will usually make a determination as to your eligibility and monthly entitlement within thirty days of receiving your application and supporting documents. When benefits are approved, an award letter will be sent to you. The letter notifies you of your date of entitlement to benefits, payment due date, and benefit amount. The letter is an important document, and should be saved with your other important papers.

As a courtesy, funeral directors often notify the SSA of a worker’s death. Their call, however, does not constitute an application for benefits.

You must still make application as soon as possible to report your spouse’s death and indicate your intent to file a claim. Benefits are not retroactive! If you wait to apply, you may lose out.

LUMP SUM PAYMENT AT DEATH

A lump sum death payment in the amount of $255 is made to the worker’s surviving spouse or his minor children if there is no surviving spouse. Prior to 1983, this payment was referred to as a “burial benefit,” as it was paid directly to the funeral home at the family’s request. This is no longer true. For working couples, the lump sum payment is only paid on the death of the first spouse unless there are minor children.

MEDICARE

Medicare is the federal government health insurance program for seniors (age 65 and older), the disabled (under age 65), and individuals (any age) who have permanent kidney failure. Medicare provides basic health care coverage for approximately 80 percent of allowable medical charges (after specific annual deductible expenses are met). It does not cover every medical expense, or the cost of long-term care (except in limited circumstances described in “Medicare” in Chapter Twelve).

Medicare consists of two parts:

Part “A” covers inpatient hospital care as well as a portion of the first 100 days of a patient’s stay in a skilled nursing facility (or home health care) following a hospital stay, and hospice care.

Part “B” of Medicare covers doctor’s services, medical services, supplies, and other services not covered by Part “A.” While Part A is free to eligible workers, Part B coverage requires that you pay a monthly premium (for 2001, the basic Part “B” premium is $50 per month), which is automatically deducted from your monthly Social Security check if you receive benefits.

Workers electing to defer retirement beyond age 65 may make quarterly Part B premium payments directly to the SSA. Part B should not be viewed as optional. Although your participation is elective (you must pay premiums), Part B coverage is an essential part of your personal medical plan.

Most seniors are eligible for Medicare, based on their own work record or on their spouse’s. Individuals age 65 or older are eligible for Medicare Part “A” if they:

1. Receive Social Security or railroad retirement benefits, or
2. Are not receiving benefits but have worked long enough to be eligible for them, or
3. Would be entitled to Social Security benefits based on a spouse’s (or ex-spouse’s) work record, or
4. Worked long enough in a federal, state, or local government job to be insured for Medicare coverage.

Individuals under the age of 65 are eligible for Medicare Part “A” if they:

1. Have been a Social Security disability beneficiary for 24 months, or
2. Have permanent kidney failure.

Individuals who do not qualify for Medicare Part “A” under these rules may purchase coverage (in 2001, the Medicare Part “A” premium is $300 per month).

The eligibility requirements for Part “B” are different from Medicare Part “A.” Virtually anyone who is 65 or older (or who is under age 65 but eligible for Part “A” as outlined above) is eligible to purchase Medicare Part “B” coverage.

If you are receiving Social Security, you will automatically be contacted a few months before you become eligible for Medicare (either age 65 or 24 months after disability). If you are not receiving Social Security at the time you become eligible for Medicare, you should contact the Social Security Administration (by phone at 1-800 772-1213) at least three months prior to your 65th birthday to obtain important information and determine your Medicare eligibility. Delaying Medicare enrollment may cause a delay in coverage.

Consult the Directory of Resources (“Social Security and Government Benefits”) for additional information on Medicare.

MEDIGAP INSURANCE

The coverage offered under Medicare Part A and B is somewhat limited. As noted above, Medicare covers only 80 percent of allowable medical charges after annual deductible expenses have been met. Medicare does not cover eye glasses, prescriptions, or dental care. The private sector has responded to fill the gaps in Medicare coverage by offering private health insurance that covers medical costs not covered by Medicare. For obvious reasons, these policies have come to be known as “Medigap” policies. The costs of Medigap policies vary from company to company, and according to the coverage chosen. Medigap policies typically cover the 20 percent that Medicare doesn’t pay, as well as some of the services excluded under Medicare. You may purchase a policy covering deductibles and even prescriptions. Medigap insurance is often part of the benefit package of a former employer (see “Medigap Coverage” in Chapter Four).

MEDICAID

Medicaid is a state-run health care program for low-income individuals. Medicaid also covers the cost of long-term nursing home care for people who have exhausted their assets (see “Medicaid” in Chapter Twelve).

SUPPLEMENTAL SECURITY INCOME (SSI)

Supplemental Security Income (“SSI”) is a federally funded program that offers limited financial security for people with little or no income or resources. SSI is available to individuals who are age 65 or older, and to the blind or disabled of any age (even children). Those eligible for SSI are also eligible for food stamps, Medicaid, and other social services.

SSI benefits are based on need. Eligibility is similar to that of Medicaid. To qualify, an individual must reside in the United States and be a U.S. citizen (or lawfully admitted for permanent residence), have limited income and not have more than $2,000 in resources ($3,000 for a couple), not counting their principal residence, and one car.

BENEFIT ESTIMATE

There is a special form you can use to get a “Personal Earnings and Benefit Estimate Statement.” Contact the Social Security Administration Toll free at 800 772-1213, in person at the local branch office, or visit their web site at http://www.ssa.gov for the form that will enable you to receive a free, detailed, personal estimate of Social Security benefits. The estimate is automatically mailed each year to those not receiving benefits.

DIRECT DEPOSIT

Direct deposit of Social Security checks is the fastest and most secure method of payment delivery. Checks sent through the mail are 10 times more likely to be reported lost or stolen. Direct deposit will be suggested at the time of your initial claims application, but can be elected at any time after payments begin. You must supply your bank account information, including financial institution routing number, to elect direct deposit.

FULL RETIREMENT AGE INCREASES

The traditional full retirement age of 65 is changing. For people born in 1938 and later (age 62 in the year 2000 and after), the age at which full, unreduced retirement benefits begin will gradually increase until it reaches the new “full” retirement age of 67. Review this chart to determine how the change affects you.

EARLY BENEFIT OPTION REMAINS

“Early” reduced benefits continue to be available for workers and spouses at age 62, or as early as 60 for survivors. However, the “early” benefit reduction will be greater in the future. “Early” benefits are permanently reduced based on the number of months benefit checks are received prior to the “full” unreduced retirement age. The scheduled increases in the full retirement age described above will automatically result in additional months between “full” and “early” retirement and therefore, an increased reduction in early retirement benefits.

DELAYED RETIREMENT

If you decide to continue working beyond your Full Retirement Age, your benefit amount on your own work record will increase in two ways. Additional years of work may increase your average lifetime earnings -- the basis for benefit computations. Also, delayed retirement credits added to your record for such work can increase your benefit anywhere from three to eight percent (depending on your year of birth) annually, up to age 70. Work after age 70 will not increase your benefit.

AUTOMATIC COST OF LIVING ADJUSTMENT ( "COLA" )

Social Security benefits are adjusted annually to help keep pace with inflation. The cost of living increase is based on the Consumer Price Index from the third quarter of the previous year through the third quarter of the current year. The percentage of the COLA increase is announced each fall and benefits are increased the following January. During the last decade (from 1990 through 2000) Social Security benefits increased from a high of 5.4 percent in 1991, to a low of 1.3 percent in 1999 for an average COLA increase of 2.8 percent.

ANNUAL EARNINGS TEST

Work and earnings after entitlement may reduce your monthly Social Security benefits if you are younger than your Full Retirement Age. If you have earnings as a survivor, only your benefit is reduced, not the benefits of other family members. Work and earnings of disabled individuals and those receiving SSI payments are handled differently. If you are receiving one of these categories of payment and are working, you must report your earnings to the SSA.

Until January 2000, the Social Security retirement benefits of working recipients under the age of 70 were reduced to the extent they had earnings over the allowable limit. Now, only work and earnings before your Full Retirement Age are considered. The amount of “allowable” earnings changes annually. In 2001, the allowable earnings limit for anyone younger than “full” retirement age is $10,680. For every $2 earned over this limit, $1 is withheld from your Social Security benefit.

Special rules prorate earnings for the year a worker attains full retirement age, with only those months prior to the worker’s birth month being counted against benefits.

DIVORCED SPOUSE

If a marriage lasted at least 10 years, a former spouse may be eligible for benefits on a worker’s Social Security record. The amount of the benefit paid to the ex-spouse does not reduce the benefit paid to the worker or current spouse. This is true of both “life” cases (retirement or disability) as well as “death” cases (i.e. survivor benefits).

TAXES

Social Security benefits are taxable to the extent that one-half of your benefits when added to your other income (including investment income, dividends, and even tax-exempt interest) exceeds the Internal Revenue Service (IRS) “base amount” of $25,000 ($32,000 if married). If you have substantial income, as much as 85% percent of your benefits could be subject to income tax at your marginal rate. For additional information about taxes, contact the Internal Revenue Service at 1 800 829-3676, or visit the IRS website http://www.irs.gov

GOVERNMENT PENSION OFFSET

Receipt of a government pension based on work not covered by Social Security (federal civil service for example) may reduce or offset your Social Security survivor benefit. Additional information is available directly from the SSA. Call and ask for their special fact sheet, “Government Pension Offset.” A separate fact sheet, “A Pension from Work Not Covered by Social Security” explains the effect when a government worker is also eligible for his or her own Social Security benefit.

LEAVING THE UNITED STATES

If you are a U.S. citizen, extended travel or residency in most foreign countries does not affect your eligibility for Social Security benefits. However, Social Security benefits may not be sent to Cambodia, Cuba, North Korea, Vietnam and some of the former republics of the Soviet Union. The list may change based on world events. You should obtain current country status from Social Security prior to finalizing your plans to move abroad. Generally, Medicare does not cover health care outside of the United States.

SOCIAL SECURITY SERVICES ARE FREE

Beware of anyone charging a fee for Social Security services. There is no charge to obtain a Social Security card, change a name on a card, replace a lost card, apply for benefits, change an address, report a death, request publications or otherwise obtain information or any other Social Security transactions.