Sunday, June 26, 2011


While policy makers in Washington debate whether to make fundamental changes to our Social Security system, the program goes on making its own significant adjustments each year.  Here are some of the important modifications that have already occurred this year - 2011.

Social Security taxes reduced for workers. As a result of the Tax Relief Act, the amount that workers pay into the Social Security trust fund has been reduced from 6.2 percent (of taxable wages up to $106,800 annually) to 4.2 percent. This one time temporary change is effective in 2011 only. Employers will continue to pay 6.2 percent of wages into the entitlement program. 

For self-employed workers, the Social Security tax rate is reduced from 12.4 percent to 10.4 percent in 2011.See the social Security Information Fact Sheet at

“Free loan” option eliminated. Retirees are no longer able to get an interest-free loan from the Social Security trust fund. The Social Security Administration announced in December 2010 that individuals are not able to begin payments at age 62, then pay back all the benefits received at age 70 without interest and reclaim at a higher rate of benefits due to delayed claiming. Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime. 

Retroactive benefit suspensions discontinued. In the past retirees were able to temporarily suspend their benefits, and then restart them later – resulting in a bigger social security check because of the time in which the payment wasn’t received. This is still allowed under the new rules.  It can be an especially important planning option for some married couples because spousal benefits can be taken only after the primary worker files for benefits.  (For example, upon reaching full retirement age a worker can file for and then suspend his benefit but thereby allowing his spouse to claim spousal benefits. However, social security recipients are no longer able to retroactively suspend their benefits, and pay back money already received in exchange for higher payments going forward. They can only suspend benefits for months when they didn’t receive payments or for future payments, beginning the month after the request is made.

Goodbye Paper checks. Effective May 1, 2011, new applicants filing for all federal payments including Social Security, Supplemental Security Income (SSI), veterans benefits and wages will receive their payments electronically, unless they qualify for one of a very few exemptions. This means retirees who first apply for Social Security benefits on or after May 1 will no longer have the option of receiving a paper check in the mail. Seniors can have their entitlement payments directly deposited into a bank or credit union account or loaded onto a prepaid debit card. Benefit recipients can sign up for direct deposit at, by calling the U.S. Treasury Electronic Payment Solution Center at (800) 333-1795, or by speaking with a bank or credit union representative. 

If recipients do not provide information to the federal payment agency regarding a bank account or prepaid card into which they want their payments electronically deposited, they will be provided the federal government-issued Direct Express card. Direct Express cards have considerable protections for recipients, including limits on fees, legal protection against unauthorized charges, and requirements for free access to funds. They are likely to be substantially less expensive than other prepaid cards. 

Recipients who were receiving their benefits prior to May 1, 2011 have until March 1, 2013 to choose an electronic payment option. After that date, no payments will be issued via check, unless the recipient qualifies and is approved for an exemption. To continue receiving paper checks, recipients must be approved by the US Treasury for one of the following exemptions:

·       Aged 90 years or older, as of May 1, 2011 (no waiver required)
·       Mentally impaired
·        Live in a remote geographic area lacking the capability to support an electronic financial transaction

"This important change will provide significant savings to American taxpayers who will no longer incur the annual $120 million price tag associated with paper checks and will save Social Security $1 billion over the next 10 years," said Richard Gregg, Treasury Fiscal Assistant Secretary.

Goodbye Annual Statements. In the past, approximately three months before their birthday each year, Social Security would mail workers age 25 and over who are not already receiving benefits a personal statement that estimated their future Social Security benefits. However, in order to save money, beginning in April 2011 the Social Security Administration (SSA) stopped the mailing of these annual statements. SSA plans to eventually resume mailing statements to people age 60 and over.
SSA does provide individuals with the ability to obtain some limited information online at The online tool does not provide all the information that appeared in the written statement, such as estimates of disability and survivor’s benefits and the worker’s complete earnings record.

No comments: