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Social Security MGMT 4030 - Managing Employee Reward Systems.

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Presentation on theme: "Social Security MGMT 4030 - Managing Employee Reward Systems."— Presentation transcript:

1 Social Security MGMT 4030 - Managing Employee Reward Systems

2 Social Security: Overview v Legally Required Benefit v Provides a Basic Level of Security for Employees v Other Employer Provided Benefits Give Additional Coverage v Basic Economic Security for Retirement, Disability, Survivors and Health Care for the Aged

3 Funding Social Security v Equal Contributions made by Employer and Employee v OASDI tax = 6.2% up to $68,400 Annual Earnings (1998) v Medicare Tax = 1.45%; No cap on Earnings

4 Social Security: Retirement Benefits v Full Benefits at age 65; raised to age 67 by 2027 v Reduced Benefits (80%) at age 62 v Benefits equal aprox. 30% earnings prior to Retirement v Average Benefit Amount: $858/month. v With Spouse, benefits increased by 50% v Eligibility: 40 1/4 year periods with Min. Earnings $590/Qtr.

5 Social Security: Medicare v Health Insurance for Age 65 and Older v Part A = Hospital Expenses: $600-700 deductible/yr. v Part B = Medical Expenses: aprox. $40/month fee v Some Limits on Lengthy Hospital Visits, Nursing Homes

6 Social Security: Disability Income v No Age Limit v Total Disability for 5 Months or More v Aprox. 30% of Replacement Income Provided v Integrate with Sick Leave, WC benefits, LTD Insurance

7 Social Security: Survivor Benefits v Income for Survivors of Deceased Worker v Widow(er) age 60+; Child < 18 yrs. v Benefits Related to Deceased Worker’s Retirement Benefits

8 Problems with Social Security v Funding May Be Exhausted by 2020 Due to Demographics v Government Uses Soc.Sec. Taxes to Pay Current Debts v Long Life Spans Means more Beneficiaries to Support

9 Fixing Social Security - Alternatives v #1.All Social Security Funds can be Managed by Individuals: Choice of Mutual funds, Bonds, or Treasury notes. v #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. v #3. The government puts all the Social Security money in a portfolio of stocks of blue chip US companies.


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