Employee Benefits Required by Law Employee Benefits Required by Law The legally required employee benefits constitute nearly a quarter of the benefits package that employers provide. These benefits include employer contributions to Social Security, unemployment insurance, and workers compensation insurance. Altogether such benefits represent about twenty-one and half percent of payroll costs. Social Security Social Security is the federally administered insurance system. Under current federal laws, both employer and employee must pay into the system, and a certain percentage of the employees salary is paid up to a maximum limit.
Social Security is mandatory for employees and employers. The most noteworthy exceptions are state and local government employees. The Social Security Act was passed in 1935. It provides an insurance plan designed to indemnify covered individuals against loss of earnings resulting from various causes. This loss of earnings may result from retirement, unemployment, disability, or the case of dependents, the death of the person supporting them.
Social Security does not pay off except in the case where a loss of income through loss of employment actually is incurred. In order to be eligible for old age and survivors insurance (OASI) as well as disability and unemployment insurance under the Social Security Act, an individual must have been engaged in employment covered by the Act. Most employment in private enterprise, most types of self-employment, active military service after 1956 and employment in certain nonprofit organizations and governmental agencies are subject to coverage under the Act. Railroad workers and United States civil service employees who are covered by their own systems and some occupational groups, under certain conditions, are exempted form the Act. The Social Security Program is supported by means of a tax levied against an employees earnings which must be matched buy the employer. Self-employed persons are required to pay a tax on their earnings at a rate, which is higher than that paid by employees but less than the combined rates paid by employees and their employers.
In order to receive old age insurance benefits, a person must have reached retirement age and be fully insured. A full-insured person is one who must have earned at least $50 in a quarter for a period of 40 quarters. It is possible for an individual who dies or becomes totally disabled at an early age to be classified as fully insured with less than 40 quarters. To receive old age insurance benefits, covered individuals must also meet the test of retirement. To meet this test, persons under 70 cannot be earning more than an established amount through gainful employment. This limitation of earnings does not include income from sources other than gainful employment such as investments or pensions.
Social security retirement benefits consist of those benefits which individuals are entitled to receive in their own behalf, called the primary insurance amount, plus supplemental benefits for eligible dependents. These benefits can be determined from a prepared table. There are also both minimum and maximum limits to the amount that individuals and their dependents can receive. The Social Security program provides benefit payments to workers who are too severely disabled to engage in gainful employment. In order to be eligible for such benefits, an individuals disability must have existed for at least 6 month and must be expected to continue for at least 12 months.
Those eligible for disability benefits must have worked under Social Security for a t least 5 out of the 10 years before becoming disabled. Disability benefits, which include auxiliary benefits for dependents, are computed on the same basis as retirement benefits and are converted to retirement benefits when the individual reaches the age of 65. The survivors insurance benefits represent the form of life insurance that is paid to members of a deceased persons family who meet the requirements for eligibility. As in the case of life insurance, the benefits that the survivors of a covered individuals receive may be far in excess of their cost to this individual. Survivors of individuals, who were currently insured, as well as those who were fully insured at the time of death, are eligible to receive certain benefits, provided that the survivors meet other eligibility requirements.
A currently insured person is one who has been covered during at least six out of the thirteen quarters prior death. Many people think of Social Security as a retirement program. But, retirement benefits are just one part of the Social Security program. Some of the Social Security taxes person pays go toward survivors insurance. In fact, the value of the survivors insurance he/she has under Social Security is probably more than the value of his/her individual life insurance.
When someone who has worked and paid into Social Security dies, survivor benefits can be paid to certain family members. These include widows, widowers, children, and dependent parents. Anyone earns survivors insurance by working and paying Social Security taxes. When someone dies, certain members of his/her family may be eligible for survivors benefits if the person worked, paid Social Security taxes and earned enough credits. You can earn a maximum of four credits each year.
The number of credits you need depends on your age when you die. The younger a person is, the fewer credits he or she needs to have family members be eligible for survivors benefits. But nobody needs more than forty credits to be eligible for any Social Security benefits. Under a special rule, benefits can be paid to your children and your spouse, who is caring for the children, even if you do not have the number of credits needed. They can get benefits if you have credit for one and one-half years of work in the three years just before your death.
When you die, Social Security survivors benefits can be paid to your: (a) Widow or widower – full benefits at age 65 or older (if born before 1938) or reduced benefits as early as age 60. A disabled widow or widower can get benefits at 50 60. The surviving spouses benefits may be reduced if he or she also receives a pension from a job where Social Security taxes were not withheld. Widow or widower – at any age if he or she takes care of your child under age 16 or disabled who get benefits. (b) Unmarried children under age 18 or up to age 19 if they are attending elementary or secondary school full time.
Your child can get benefits at any age if he or she was disabled before age 22 and remained disabled. Under certain circumstances, benefits also can be paid to you stepchildren, grandchildren, or adopted children. (c) Dependent parents at 62 or older. Some people find Social Security taxes an unwelcome deduction from the familys earnings. They are thinking about how they could use the money to pay bills or plan for their children’s college education.
But the illness or injury–or even the death–of a parent in a family with young children can suddenly make Social Security a very important part of the family’s survival. Those paycheck deductions for Social Security taxes could make it possible for the family to stay together. For example, some families can get as much as $2,000 a month when the worker is disabled. This fact sheet focuses on benefits paid to the children when one or both parents become disabled, retire or die. When people think of Social Security benefits, they usually think of older men and women who are retired or who are widows or widowers.
If you find it difficult to picture a small child as a Social Security beneficiary, you may be surprised to learn that 3.8 million children receive approximately $1.4 billion each month because one or both of their parents are disabled, retired or deceased. Those dollars are helping provide the necessities of life for the family members and helping make it possible for those children to complete high school. When a parent becomes disabled or dies, Social Security benefits help stabilize the young family’s financial future. The child can be the worker’s biological child, adopted child or stepchild. The child also could be a dependent grandchild.
To get benefits, a child must have a parent(s) who is disabled or retired and entitled to Social Security benefits, or have a parent who died after having worked long enough in a job where he or she paid Social Security taxes. The child also must be under age 18; be 18-19 years old and a full-time student (no higher than grade 12); or be 18 or older and disabled. The disability must have started before age 22. Normally, benefits stop when the child reaches age 18 unless he or she is disabled. Five months before the beneficiary’s 18th birthday, we send the child a notice that benefits will end at age 18, unless he or she is a full-time student at a secondary (or elementary) school.
If the beneficiary is under age19 and still attending a secondary or elementary school, he or she must notify us by completing a statement of attendance. The benefits then will continue until he or she graduates or until two months after becoming age 19, which ever comes first. If a child who is receiving Social Security benefits is in the mother’s (or father’s) care, the parent may be able to receive benefits until the child reaches age 16. The child’s benefits continue, but the parent’s benefits stop unless he or she is age 60 or over and is receiving benefits as a widow or widower or is age 62 or older and receiving retirement benefits. Within a family, each child may receive up to one-half of the worker’s full retirement or disability benefit, or 75 percent of the deceased parent’s basic Social Security benefit. However, there’s a limit to the amount of money that can be paid to a family.
The family maximum payment is determined as part of every Social Security benefit computation and can be from 150 to 180 percent of the worker’s full benefit amount. If the total amount payable to all family members exceeds this limit, each person’s benefit is reduced proportionately (except the worker’s) until the total equals the maximum allowable amount. As an example of monthly benefits, let’s say Tom Brown earns $30,000 a year, is age 35, married and has one child. Tom is severely injured in a car accident and is found to be eligible for Social Security disability benefits. Tom, his wife and their child receive $1,640 each month.
As another example of how Social Security benefits can help the young family, Sara was age 45 and earning $50,000 when she died, leaving her husband and two children. The husband and children receive $2,370 each month based on Sara’s earnings record. If you were like most people, you would rather work than stay home. But working is a big step for a person with a disability. Social Security and SSI have special rules called “work incentives” to help you overcome some problems. These work incentives include cash benefits while you work; Medicare or Medicaid while you work; help with any extra work expenses you may have as a result of your disability; and help with education, training and rehabilitation to start a new line of work. Social Security disability insurance benefits are paid to people with disabilities or to individuals who are blind who have worked under Social Security and to their dependents.
SSI disability benefits are paid to people with disabilities or to individuals who are blind who have little income and few resources. Social Security beneficiaries with low income and few resources also may qualify for SSI. Although there are differences between Social Security and SSI, the work incentives under both programs are designed to accomplish the same objective: to provide support and assistance while you attempt to return to work or as you enter the workforce for the first time. The disabled individual will receive his or her full monthly Social Security benefit for a year after the individuals return to work. If he or she continues to work beyond that while still disabled, the persons eligibility for monthly cash benefits will continue for at least another 36 months. The person usually can have a trial work period of nine during which his or her benefits will not be affected by your earnings regardless of how much you earn.
A trial work month is any month in which his or her total earnings are more than $200 or, if he or she are self-employed, the person will earn more than $200 (after expenses) or spend more than 40 hours in the persons own business. Before the person will start loosing benefits he or she can earn more than $500 a month. Nearly every American–man, woman and child–has Social Security protection, either as a worker or as a dependent of a worker. Most women did not work outside the home. Today, the role of women is far different.
Nearly 60 percent of all women are in the nation’s workforce. Many women work throughout their adult lives. Although Social Security always has provided benefits for women, it has taken on added significance. More women work, pay Social Security taxes and earn credit toward a monthly income for their retirement. Working women with children earn Social Security protection for themselves and their families.
This could mean monthly benefits to a woman and her family if she becomes disabled and can no longer work. If she dies, her survivors may be eligible for benefits. Although some women choose lifetime careers outside the home, many women work for a few years, leave the labor force to raise their children, and then return to work. Some women choose not to work outside their homes. They usually are covered by Social Security through their husband’s work and can receive benefits when he retires, becomes disabled or dies. Whether a woman works, has worked or has never worked, it is important that she knows exactly what Social Security coverage means to her.
She also should know about Social Security coverage for anyone she may hire as a household worker or provider of childcare. She needs to know what to do if she changes her name. And she needs to know that if she receives a pension for work not covered by Social Security, her Social Security benefits could be affected. Unemployment Compensation Unemployment insurance provides workers, whose jobs have been terminated through no fault of their own. Monetary payments for a given period of time or until they find a new job. Unemployment payments are intended to provide an unemployed worker time to find a new job equivalent to the one lost without major financial distress. Without employment compensation many workers would be forced to take jobs for which they were overqualified or end up on welfare.
Unemployment compensation has also been justified in terms of providing the economy with consumer spending during periods of economic adjustment. Unemployment compensation is a form of insurance designed to provide funds to employees who have lost their jobs and are seeking other jobs. Title IX of the Social Security Act of 1935 requires employers to pay taxes for unemployment compensation. The law was written in such a manner as to encourage individual states to establish their own unemployment systems. If a state established its own unemployment compensation system according to prescribed federal standards, the proceeds of the unemployment taxes paid an employer go to the state.
By 1937, all states and the District of Columbia had adopted acceptable unemployment compensation plans. Employees who have been working in employment covered by the Social Security Act and who are laid off may be eligible for unemployment insurance benefits during their unemployment for a period up to twenty-six weeks. Eligible persons must submit an application for unemployment compensation with their state employment agency, register for available work and be willing to accept any suitable employment that may be offered to them. However, the term suitable permits individuals to enjoy considerable discretion in accepting or rejecting job offers. The amount of the compensation that workers are eligible to receive which varies among states, is determined by their previous wage rates and previous periods of employment. Funds for unemployment compensation are derived from a federal payroll tax based upon the wages paid to each employee, up to an established maximum.
The major portion of this tax is refunded to the individual states, which operate their unemployment compensation programs is accordance with minimum standards prescribed by the federal government. While not required by law, in some industries unemployment compensation is augmented by supplemental unemployment benefits (SUBs) financed by the employer. These benefits were introduced in 1955 when the United Auto Workers successfully negotiated a SUB plan with the auto industry which established a pattern for other industries. This plan enables an employee who is laid off to draw, in addition to state unemployment compensation, weekly benefits from the employer that are paid from a fund created for this purpose. Many SUB plans in recent years have been liberalized to permit employees to receive weekly benefits when the length of their workweek is reduced and to receive a lump-sum payment if their employment is terminated permanently.
The amount of these benefits is determined by length of service and wage rate. Employer liability under the plan is limited to the amount of money that has been accumulated within the fund from employer contributions based on the total hours of work performed by union members. In the United States, the unemployment insurance program is based on a dual program of federal and state statutes. The program was established by the federal Social Security Act in 1935. Much of the federal program is implemented through the Federal Unemployment Tax Act.
Each state administers a separate unemployment insurance program, which must be approved by the Secretary of Labor, based on federal standards. The state programs are explicitly made applicable to areas normally regulated by laws of the United States. There are special federal rules for nonprofit organizations and governmental entities. Which employees are eligible for compensation, the amount they receive, and the period of time benefits are paid are determined by a mix of federal and state law. To support the unemployment compensation systems a combination of federal and state taxes are levied upon employers. State employers are normally based on the amount of wages they have paid, the amount they have contributed to the unemployment fund, and the amount that their discharged employees have been compensated from the fund.
Any state tax imposed on employers (and certain credits on that tax) may be credited against the federal tax. The proceeds from the unemployment taxes are deposited in an Unemployment Trust Fund. Each state has a separate account in the Fund to which deposits are made. Within the fund there are also separate accounts for state administrative costs and extended unemployment compensation. During economic recessions the federal government has provided emergency assistance to allow states to extend the time for which individuals can receive benefits.
This has been accomplished by transferring money to a state from its Extended Unemployment Account by passing a temporary law authorizing the transfer. The ability of a state to tap into this emergency system is usually dependent on the employment rate reaching a designated percentage within the state or the nation. Some states provide addition unemployment benefits to workers who are disabled. Financing for the California disability compensation program comes from a tax on employees. The Railroad Unemployment Insurance Act provides unemployment compensation for workers in the railroad industry who lose their jobs.
Federal Unemployment Tax. Unemployment insurance is a Federal-State program jointly financed through Federal and State employer payroll taxes. Generally, employers must pay both State and Federal Unemployment taxes if: (1) they pay wages to employees totaling $1,500, or more, in any quarter of a calendar year; or, (2) they had one employee during any day of a week during 20 weeks in a calendar year, regardless of whether or not the weeks were consecutive. However, some State laws differ from the Federal law and you should check with your State Employment Security Agency to learn the exact requirements. Federal Unemployment Tax. The Federal Unemployment Tax (FUTA), paid to the Internal Revenue Service (Form IRS 940), covers the costs of administering the Unemployment Insurance and Job Service programs in all States. In addition, FUTA pays one-half of the cost of extended benefits and provides for a fund from which States may borrow, if necessary, to pay benefits. State Unemployment Tax.
The State Unemployment Tax, paid to State Employment Security Agencies, is used solely for the payment of benefits to workers who have lost their through no fault of their own. In addition, these taxes are used to pay one-half the cost of …