Social Security
(Old-Age, Survivors, and Disability Insurance)

The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to qualified retired and disabled workers and their dependents, and to survivors of insured workers. Eligibility and benefit amounts are determined by the worker's contributions to Social Security. Benefits are paid as an earned right to workers, their families, and their survivors. There is no means test to qualify for benefits.

At the end of December 2002, 46.4 million people were receiving benefits at a rate exceeding $37 billion each month (over $454 billion annually). According to the latest Social Security Trustees Report, these cash benefits comprised 4.4 percent of the nation's gross domestic product. During the same year, approximately 153 million employees and self-employed workers, along with employers, contributed $532.5 billion to the OASDI trust funds—through which contributions are credited and benefits are paid.

Social Security benefits are essential to the economic well-being of millions of individuals. Social Security pays benefits to more than 90 percent of those 65 or older. It is the major source of income (providing 50 percent or more of total income) for 65 percent of the beneficiaries. It contributes 90 percent or more of income for one-third of the beneficiaries and is the only source of income for 20 percent of them.

Contributions and Trust Funds

A person contributes to Social Security either through payroll taxes or self-employment taxes under the Federal Insurance Contributions Act (FICA) or the Self-Employed Contributions Act (SECA). Employers match the employee contribution, while self-employed workers pay an amount equal to the combined employer-employee contributions. (Self-employed workers receive a special tax deduction to ease the impact of paying the higher rate.) There is a maximum yearly amount of earnings subject to OASDI taxes, $87,000 in 2003. There is no upper limit on taxable earnings for Medicare Hospital Insurance. Employees whose contributions exceed the maximum taxable amount because they worked for more than one employer can receive refunds of excess FICA payments when they file their tax returns.

Taxes are allocated to the Old-Age (Retirement) and Survivors Insurance (OASI), the Disability Insurance (DI), and the Hospital Insurance (HI) Trust Funds. In addition to the taxes on covered earnings, OASI and DI trust fund revenues include interest on trust fund securities, income from taxation of OASI and DI benefits, certain technical transfers, and gifts or bequests. By law, the OASI and DI trust funds may only be disbursed for:

1. Monthly benefits for workers and their families.
2. Vocational rehabilitation services for disabled beneficiaries.
3. Administrative costs (currently less than 1 percent of expenditures).
4. The lump-sum death payment to eligible survivors.

Revenue received from FICA payments is transferred to the U.S. Treasury. FICA revenue in excess of outlays is used to purchase special interest-bearing Treasury bonds. These securities remain assets of the trust funds until needed to cover Social Security costs.

Structure and Organization

The OASDI program is administered by the Social Security Administration (SSA), which became an independent agency in 1995. The Commissioner of Social Security serves a 6-year term following appointment by the President and confirmation by the Senate. A bipartisan Social Security Advisory Board serves to review existing laws and policies and commissions studies and issues recommendations intended to anticipate changing circumstances. The President appoints three of the seven board members and Congress appoints the other four members.

The Social Security Administration is headquartered in Baltimore, Maryland. Major headquarter components include the National Computer Center that contains SSA's mainframe computers that drive our systems, much of the executive staff for policy, programs, and systems, as well as field support components. SSA's field structure is divided into 10 geographic regions containing over 1,300 field installations in communities throughout the country. Office sizes range from large urban offices with 50 or more employees to remote resident stations staffed by one or two individuals. Each region is headed by a Regional Commissioner and staffed with specialists to handle regional administrative tasks and to assist field offices with operational issues. In addition, there are teleservice centers servicing all regions. While physically located within the various regions, each teleservice center manages the public's Social Security business from throughout the nation using state-of-the-art communications systems. Seven program service centers provide service and support for the field offices in some aspects of Social Security's workloads.

Significant Program Changes

Program changes occur through legislation or (in areas where authority is delegated to the Commissioner) through regulation.

Changes are often implemented in phases and often entail recurring annual changes beyond the initial enactment date or year of first implementation. Rather recent changes with a significant and recurring impact are discussed below.

Elimination of Annual Earnings Test for Persons Reaching Full Retirement Age

Public Law 106-182, The Senior Citizen's Freedom to Work Act of 2000, enacted April 7, 2000, eliminated the earnings test beginning with the month a beneficiary attains full retirement age (FRA). Elimination of this earnings test is effective for taxable years ending after December 31, 1999.

The earnings limit that applies in the year of attainment of FRA is based on the limits previously established for persons at FRA through age 69—$30,000 in 2002, and $30,720 in 2003. Benefits are withheld at the rate of $1 for every $3 of earnings above these exempt amounts. In determining earnings for purposes of the annual earnings test under this legislation, only earnings before the month of attainment of FRA will be considered. The legislation also permits retired workers to earn delayed retirement credits for any months between the attainment of full retirement age and age 70 for which the worker requests that benefits not be paid.

Public Law 106-182 did not change the annual exempt amount for beneficiaries who are under FRA throughout the year, which continued to be pegged to increases in the average wage. This amount increased from $11,280 in 2002 to $11,520 in 2003. Withholding for beneficiaries subject to this earnings test is at $1 for each $2 of earnings over the exempt amounts. Proposed rules were published August 25, 2003.

Work Incentives Improvement Act

The Ticket to Work and Work Incentives Improvement Act, Public Law 106-170, was enacted on December 17, 1999. This legislation provides major enhancements to SSA's programs that assist disabled beneficiaries who attempt to return to work. It provides beneficiaries more choices in vocational rehabilitation and other support services and offers expanded health care for beneficiaries who are no longer eligible for cash benefits due to work. Effective October 1, 2000, the Act offers extended Medicare coverage to beneficiaries who return to work and offers buy-in for Medicaid coverage.

The Ticket to Work provisions of this legislation are being phased in over a 3-year period. The Ticket to Work will emphasize and encourage rehabilitation efforts and will pay private employment service providers for helping beneficiaries achieve specific work-related goals. These providers are called Employment Networks. Most disability beneficiaries will receive a Ticket that they may use to obtain vocational rehabilitation, job training, or other support services. Individuals may take their ticket to any of the Employment Networks that offer services in their communities, or to the State Vocational Rehabilitation Agency. During the first phase, which began in February 2002, SSA distributed tickets to beneficiaries in 13 states. In the second phase, which began in November 2002, SSA distributed tickets to beneficiaries in 20 more states and the District of Columbia. And during the third phase, which is scheduled to begin in November 2003, SSA will distribute tickets in the remaining 17 states, along with American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. Also beginning January 1, 2001, former beneficiaries may have their benefits resumed if the benefits were terminated because of work, their work activity ends within 5 years of the month their benefits stopped and they are still disabled.

Regulatory Increases in Substantial Gainful Activity and in Trial Work Period Amounts

Effective July 1, 1999, the Social Security Administration raised from $500 to $700 the amount of monthly earnings for a nonblind disabled individual to be considered engaging in substantial gainful activity (SGA). Effective January 1, 2001, the top SGA level was raised to $740 per month, with the provision that ongoing SGA levels will be automatically adjusted annually based on increases in the national average wage index. Effective January 1, 2003, the level is $800 per month.

The SGA threshold is part of the definition of disability that requires an individual to be unable to engage in substantial gainful activity to be eligible for benefits. Earnings of more than the top SGA level will ordinarily demonstrate that an individual is engaged in SGA. Earnings of less than $800 per month will ordinarily demonstrate that an individual is not engaged in SGA.

A different definition of SGA applies to blind persons receiving Social Security disability benefits. Increases in the SGA amount for blind individuals have long been pegged to increases in the national average wage index and thus were not affected by the 1999 or subsequent rule changes. The level for blind individuals increased from $1,300 in 2002 to $1,330 in 2003.

New rules also affect the trial work period (TWP). The TWP allows disability beneficiaries to test their ability to work for at least 9 months. During the TWP, beneficiaries may earn any amount and still receive full benefits. The monthly level at which earnings count toward the 9-month TWP was raised from $200 to $530 effective January 1, 2001, with future increases pegged to the national average wage index. Effective January 1, 2003, the level is $570. After completion of 9 trial work months, the SGA level is used to determine whether earnings are substantial or not. If earnings fall below the SGA level, full benefits generally continue. If earnings are higher than the SGA level, cash benefits are usually suspended while medical benefits continue.

Coverage and Financing

In 2003, about 153 million persons will work in employment or self-employment covered under the OASDI program. In recent years, coverage has become nearly universal for work performed in the United States, including American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. Approximately 96 percent of the American workforce are covered by OASDI. Workers excluded from coverage fall into five major categories:

1. Civilian federal employees hired before January 1, 1984,
2. Railroad workers (who are covered under the railroad retirement system, which is coordinated with Social Security),
3. Certain employees of state and local governments who are covered under their employers' retirement systems,
4. Domestic workers and farm workers whose earnings do not meet certain minimum requirements (workers in industry and commerce are covered regardless of the amount of earnings), and
5. Persons with very low net earnings from self-employment, generally under $400 annually.

For most employees, taxes are withheld from wages beginning with the first dollar earned. The exceptions are domestic employees, election workers, and agricultural workers. In 2003, a domestic employee must earn $1,400 from any single employer in a calendar year before FICA is withheld. Most election workers must earn $1,200 in 2003 before FICA is withheld. Most agricultural workers wages are covered if the employer pays more than $2,500 in total wages in a year or if the individual worker earns over $150 in a year from a single employer.

Employees, their employers, and the self-employed each pay taxes on earnings in covered employment and self-employment up to an annual maximum taxable amount for OASDI. There is no upper limit on taxable earnings for Medicare Hospital Insurance (HI). The OASDI maximum taxable amount—$87,000 in 2003—is updated automatically each year in relation to increases in the national average annual wage. The current FICA tax rate applicable to both employees and employers is 6.2 percent for OASDI (5.30 percent for OASI and 0.9 percent for DI) and 1.45 percent for HI.

A self-employed person pays the combined employee-employer rate of 12.4 percent for OASDI and 2.9 for HI under the Self-Employment Contributions Act (SECA). Two deduction provisions reduce the SECA and income tax liability of self-employed persons. The intent of these provisions is to treat the self-employed in much the same manner as employees and employers are treated for purposes of FICA and income taxes. The first provision allows a deduction from net earnings from self-employment equal to the amount of net earnings before the deduction, times one-half the SECA tax rate. The effect of this deduction is intended to be analogous to the treatment of the FICA tax paid by the employer, which is disregarded as remuneration to the employee for FICA and income tax purposes. The second provision allows an income tax deduction, equal to one-half of the amount of the SECA tax paid, which is designed to reflect the income tax deductibility of the employer's share of the FICA tax.

Insured Status

To become eligible for his or her benefit and benefits for family members or survivors, a worker must earn a minimum number of credits based on work in covered employment or self-employment. These credits are described as quarters of coverage. In 2003, a quarter of coverage (QC) is credited for each $890 in annual covered earnings, up to a maximum of four QCs for the year. Earnings of $3,560 or more in 2003 will give the worker four QCs regardless of when the money is actually earned or paid during the year. The amount of earnings required for a QC is adjusted automatically each year in proportion to increases in the average wage level.

Fully Insured

Eligibility for most types of benefits requires that the worker be fully insured. To be fully insured a worker must have a number of QCs at least EQUAL to the number of calendar years elapsing between age 21 (or 1950 if later) and the year in which he or she reaches age 62, becomes disabled, or dies—whichever occurs first. Under this requirement, workers who reach age 62 in 1991 or later need the maximum number of 40 QCs to be fully insured. For workers who become disabled or die before age 62, the number of QCs needed for fully insured status depends on their age at the time the worker becomes disabled or dies. A minimum of 6 QCs is required regardless of age.

Currently Insured

If a worker dies before achieving fully insured status, benefits can still be paid to qualified survivors if the worker was "currently insured" at the time of death. Survivors benefits are potentially payable to a worker's children and to a widow(er) with the deceased worker's children in care.) To be currently insured, the worker must have earned 6 QCs in the 13 quarters ending with the quarter of death (that is, 6 of the last 13 quarters, including the quarter in which death occurred).

Disability Insured

To qualify for disability benefits, a nonblind worker must have recent work activity as well as being fully insured. Under the test involving recent work experience, a nonblind worker who becomes age 31 or later must have earned at least 20 QCs among the 40 calendar quarters ending with the quarter in which the disability began. In general, workers disabled at ages 24 through 30 must have earned QCs in one-half of the calendar quarters elapsing between age 21 and the calendar quarter in which the disability began. Workers under age 24 need 6 QCs in the 12-quarter period ending with the quarter of disability onset. Workers who qualify for benefits based on blindness need only be fully insured. Special rules may apply if the worker had a prior period of disability.

International Agreements

The President is authorized to enter into international Social Security agreements (also called "totalization" agreements) to coordinate the U.S. Old-Age, Survivors, and Disability Insurance (OASDI) program with comparable programs of other countries. The United States currently has Social Security agreements in effect with 20 countries.

International Social Security agreements have two main purposes. First, they eliminate dual Social Security coverage, the situation that occurs when a person from one country works in another country and is required to pay Social Security taxes to both countries on the same earnings. Each agreement includes rules that assign a worker's coverage to only one country.

The second goal of the agreement is to help fill gaps in benefit protection for workers who have divided their careers between the United States and another country. Such workers may fail to qualify for Social Security benefits from one or both countries because they have not worked long enough to meet minimum eligibility requirements. Under an agreement, these workers and their family members may qualify for a partial U.S. benefit based on "totalized" (that is, combined) credits from both countries. Similarly, workers may qualify for partial benefits from the foreign country based on totalized credits.

Benefit Computation and Automatic Adjustment Provisions

PIA Computation

The primary insurance amount (PIA) is the monthly benefit amount payable to the worker upon retirement at full retirement age or upon entitlement to disability benefits. The PIA is also the base figure from which monthly benefit amounts payable to the worker's family members or survivors are determined. The PIA is derived from the worker's annual taxable earnings, averaged over a period that encompasses most of the worker's adult years. Until the late 1970s, the average monthly wage (AMW) was the earnings measure generally used. For workers first eligible for benefits after 1978, average indexed monthly earnings (AIME) have replaced the AMW as the usually applicable earnings measure. The PIA computation based on AIME currently involves the following three steps:

1. Indexing of earnings. The worker's annual taxable earnings after 1950 are updated, or indexed, to reflect the general earnings level in the indexing year--the second calendar year before the year in which the worker is first eligible; that is, first reaches age 62, becomes disabled, or dies. Earnings in years after the indexing year are not indexed but instead are counted at their actual value. A worker's earnings for a given year are indexed by multiplying them by the following ratio (indexing factor): The average wage in the national economy for the indexing year, divided by the corresponding average wage figure for the year to be indexed.

   Table 2.A8 shows the indexing factors applicable to the earnings of workers who were first eligible in 1990–2003. Table 2.A9 shows indexed earnings for workers first eligible in 1996–2003 who had maximum taxable earnings in each year after 1950. For a detailed description of an AIME computation, see Appendix D, "Computing a Retired-Worker Benefit."

2. Determining AIME. The period used to calculate AIME equals the number of full calendar years elapsing between age 21 (or 1950, if later) and the year of first eligibility, usually excluding the lowest 5 years. Workers disabled before age 47 have from zero to 4 excluded years from the computation. At an absolute minimum, 2 years are used to compute AIME. The actual years used in the computation (the "computation years") are the years of highest indexed earnings after 1950, including any years before age 22 or after age 61 as well as the year of disability or death. AIME is calculated as the sum of indexed earnings in the computation period, divided by the number of months in that period.

   Table 2.A10 provides a historical outline of provisions related to AIME and AMW and describes variations in the number of dropout years. Tables 2.A15 and 2.A16 describe AMW benefit computations based on the worker's nonindexed earnings after 1936 and 1950, respectively. (Very few persons currently being awarded benefits have PIAs computed under these old-start or new-start computation methods. These methods, particularly the new-start method shown in Table 2.A16, are more frequently applicable in earnings recomputations for workers who reached age 62 before 1979.)

3. Computing the PIA. The formula used to compute the PIA from AIME is weighted to provide a higher PIA-to-AIME ratio for workers with comparatively low earnings. The formula applies declining percentage conversion rates to three AIME brackets. For workers who reach age 62, become disabled, or die in 2003, the formula provides a PIA equal to the sum of:

   90 percent of the first $606 of AIME, plus
   32 percent of the next $3,047 of AIME, plus
   15 percent of AIME over $3,653.
   
   
   Beginning with the first year of eligibility, the PIA is increased by cost-of-living adjustments (COLAs).
   Table 2.A11 shows the PIA formula and first applicable COLA for workers first eligible in 1979 or later.

The dollar amounts defining the AIME brackets are referred to as "bend points." These bend points (as described in Table 2.A11) are updated automatically each year in proportion to increases in the national average wage level. This automatic adjustment ensures that benefit levels for successive generations of eligible workers will keep up with rising earnings levels, thereby assuring consistent rates of earnings replacement from one generation of beneficiaries to the next.

The benefit formula applicable to a worker depends on the year of eligibility (or death) rather than on the year benefits are first received. Thus the PIA of a worker retiring at FRA in 2003 is calculated using the benefit formula that applies to all workers first eligible in 2000 (the "year of attainment" of age 62). The PIA derived from that formula is then increased by the COLAs effective for December, 2000, 2001 and 2002 to obtain the PIA effective at FRA. Subsequent recomputations of the worker's benefit, including additional earnings not originally considered, delayed retirement credits or additional COLA increases, all refer to the basic computation that originally applied, based on the year of attainment.

Beginning in 1981, benefits have been rounded to the next lower ten cents at each step in the computation. The final benefit payment is rounded to the next lower dollar amount (if not already an even dollar). Prior to 1981, benefits were paid in ten-cent increments after rounding up to the next dime in each computation step.

A cost-of-living increase in benefits generally is established each year if the consumer price index for urban wage earners and clerical workers (CPI-W), prepared by the Department of Labor, indicates a percentage increase (after rounding) of at least 0.1 percent between two specified quarters. The arithmetical mean of the CPI-W for July, August, and September in the year of determination is compared with the arithmetical mean of the CPI-W for the later of (a) July, August, and September in the year in which the last effective cost-of-living increase was established or (b) the 3 months of the calendar quarter in which the effective month of the last general benefit increase occurred. The percentage increase in the CPI-W, rounded to the nearest 0.1 percent, represents the size of the increase in benefits, effective for December of the year in which the determination is made.

Under certain conditions, depending on the size of the combined OASDI trust funds relative to estimated disbursements, the applicability and size of a cost-of-living adjustment may be determined under an alternative method, called the "stabilizer provision." In no case, however, are benefits reduced below the level of benefits in the year of determination. Historically, this provision has never been triggered.

Alternative PIA Computation Provisions

Special minimum PIA. Workers with low earnings but steady attachment to the workforce over most of their adult years may qualify for monthly benefits based on the special minimum PIA computation. This computation does not depend on the worker's average earnings, but on the number of coverage years—years in which the worker had earnings equal to or above a specified amount. The level of the special minimum PIA is the same for workers having the same number of coverage years, regardless of age or year of first eligibility. Increases in the special minimum PIA are linked to cost-of-living adjustments (COLAs).

Windfall Elimination Provision (WEP). The WEP affects persons who receive a pension based on noncovered work after 1956 and Social Security benefits. First eligibility for the noncovered pension and Social Security benefits must be after December 31, 1985 for WEP to apply. WEP reduces the Social Security PIA upon which OASDI benefits are based and affects all benefits paid on that record, except survivors. The WEP reduction ceases when entitlement to the pension payment ends, the wage earner dies, or the wage earner earns a total of 30 years of substantial Social Security earnings. The WEP reduction amount is never more than one-half of the noncovered pension.

A WEP PIA is generally based on 40 percent of the first bend point instead of 90 percent as with the regular PIA:

If a worker has more than 20 years of substantial covered earnings, the WEP PIA begins to increase. With the 21st year of substantial covered earnings, the first bend point percentage is increased by 5 percentage points. This rate of increase applies for each additional year of substantial covered earnings, through the 30th year of substantial earnings at which point WEP no longer applies. After 23 years of substantial coverage, for example, the first bend point percentage would be 55 percent. Thirty years of substantial earnings would yield a first bend point percentage of 90 percent (the normal percentage of the first bend point).

Examples of pensions subject to WEP are U.S. Civil Service Retirement System annuities, retirement benefits based on foreign earnings, and state and local pensions based on noncovered earnings.

Family maximum provisions. Monthly benefits payable to the worker and family members or to the worker's survivors are subject to a maximum family benefit amount. The family maximum level for retired-worker families or survivor families usually ranges from 150 percent to 188 percent of the worker's PIA. The maximum benefit for disabled-worker families is the smaller of (1) 85 percent of AIME (or 100 percent of PIA, if larger) or (2) 150 percent of the PIA.

Like the formula for determining the PIA, the maximum family benefit formula applicable to a worker depends on the year of first eligibility (that is, the year of attainment of age 62, onset of disability, or death). Once the worker's maximum family benefit amount for the year of first eligibility is determined, it is updated in line with the COLAs.

Benefit Types and Levels

Retired and Disabled Workers

The full retirement age (FRA) is the earliest age at which an unreduced retirement benefit is payable (sometimes referred to as the "normal retirement age"). The age for full retirement benefits is scheduled to rise gradually from age 65 to age 67, with the first incremental increase affecting workers who reached age 62 in the year 2000. Workers over age 62 who retire before FRA can receive reduced benefits. The monthly rate of reduction from the full retirement benefit (that is, the PIA) is 5/9 of 1 percent a month for the first 36 months immediately preceding FRA. The reduction rate is 5/12 of 1 percent a month for any additional months. The maximum overall reduction for early retirement will have risen from 20 percent to 30 percent by 2022, when age 67 becomes the full retirement age.

If a disabled worker receives a reduced retirement benefit for months before disability entitlement, the disability benefit is reduced by the number of months for which he or she received the reduced benefit.

For workers who postpone their retirement beyond the full retirement age, benefits are increased for each month of nonpayment beyond that age and age 70. This increase is called a "delayed retirement credit," and is potentially available for any or all months following attainment of the full retirement age (maximum of 60 months for persons who attained age 65 prior to 2003). The annual rate of increase for delayed retirement credits is 7 percent for workers who reach age 62 in 2002, and 7½ percent for workers who reach age 62 in 2003 and 2004. The rate will rise to 8 percent for workers reaching age 62 in 2005 or later.

Spouses and Children of Workers

Spouses receive 50 percent of the worker's PIA (regardless of the worker's actual benefit amount), if the spouse has attained the full retirement age at entitlement to spousal benefits. The spouse of a retired or disabled worker can elect monthly benefits as early as age 62. These benefits are reduced at the rate of 25/36 of 1 percent a month for the first 36 months immediately preceding FRA and 5/12 of 1 percent for each additional month. The maximum overall reduction for early retirement will have risen from 25 percent to 35 percent by 2022, when age 67 becomes the full retirement age (FRA) for spouses attaining age 62 in that year.

Children of retired or disabled workers are also eligible to receive monthly benefits. The term "child" refers to a child under the age of 18, a child aged 18–19 attending elementary or secondary school full time, or to an adult child, aged 18 or older, who was disabled prior to age 22. In addition, young spouses (that is, those under the age of 62) who care for a worker's entitled child may also be eligible. For purposes of defining young spouses' benefits, the term "child" refers to a child under age 16, or to an adult child of the worker who was disabled prior to age 22. Children of retired or disabled workers can receive up to 50 percent of the worker's PIA, as can young spouses. (The benefit of a young spouse is not reduced for age.) Monthly benefits payable to the spouse and children of a retired or disabled worker are limited to a family maximum amount, as discussed earlier.

Benefits are payable to unmarried divorced spouses of retirement age who were married at least 10 years to the worker. A divorced spouse benefit is excluded from family maximum provisions. Divorced spouses age 62 or older and divorced for 2 or more years (after marriage of 10 or more years) may be independently entitled on the record of the ex-spouse if the ex-spouse could be entitled if he or she applied.

Survivors Benefits

Widows and widowers of fully insured workers are eligible for unreduced benefits at full retirement age (FRA). As with retired workers and spouses, widow(er)s' FRA will gradually increase to age 67. Widows and widowers can elect reduced monthly benefits at age 60 or, if disabled, as early as age 50. Surviving divorced spouses can also receive benefits if married to the worker for at least 10 years and not remarried before age 60 (age 50 if disabled).

For survivors whose full benefit retirement age is 65, the monthly rate of reduction for the first 60 months immediately preceding FRA is 19/40 of 1 percent of the worker's PIA, with a maximum reduction of 28.5 percent at age 60. For survivors whose full benefit retirement age is over 65, the amount of reduction for each month prior to FRA is adjusted accordingly to ensure that the maximum reduction at age 60 remains 28.5 percent of the worker's PIA.

Benefits for widows and widowers are increased if the deceased worker delayed retirement beyond the FRA. In these cases, the survivor benefits include any delayed retirement credits the deceased worker had earned. Conversely, if the worker had elected early retirement, widow(er)s' benefits are limited for widow(er)s first entitled to survivors benefits at age 62 or later. For these beneficiaries, the benefit is the higher of 82.5 percent of the worker's PIA or the amount the worker would be receiving if still alive. Disabled widow(er)s ages  50–60 receive the age 60 widow's rate (71.5 percent of PIA) regardless of their age at the time of entitlement.

Children of deceased workers and mothers and fathers under FRA are eligible to receive monthly benefits up to 75 percent of the worker's PIA if the worker died either fully or currently insured. Mothers and fathers must be caring for the worker's entitled child who is either under age 16 or disabled. A dependent parent aged 62 or older is eligible for monthly benefits equal to 82.5 percent of the worker's PIA. Each of two dependent parents can qualify for benefits equal to 75 percent of the deceased worker's PIA. Monthly benefits payable to survivors are reduced to conform to the family maximum benefit payable on the deceased worker's account. Benefits for a surviving divorced spouse, however, are disregarded when computing the maximum family benefit.

Provisions for Railroad Retirement Board Beneficiaries

The OASDI tables do not include a number of persons receiving Railroad Retirement benefits who would be eligible for Social Security benefits had they applied. The reason they have not applied is that receipt of a Social Security benefit would reduce their Railroad Retirement benefit by a like amount. The number of persons is not available but is estimated to be less than 100,000.

The Railroad Retirement Act of 1974, effective January 1, 1975, provided that the regular annuity for employees with 10 or more years of railroad service who retired after December 31, 1974, will consist of two components.

Public Law 107-90 (the 2001 amendments to the Railroad Retirement Act of 1974) effective January 1, 2002, revised the railroad service work requirement. The railroad service work requirement is 10 or more years of railroad service or, effective January 1, 2002, at least 5 years of railroad service after December 31, 1995. The two components are unchanged:

• Tier 1. A basic Social Security level component equivalent to what would be paid under the Social Security Act on the basis of the employee's combined railroad and nonrailroad service, reduced by the amount of any monthly benefit under OASDI actually paid on the basis of nonrailroad work; and
• Tier 2. A "private pension" component payable over and above the Social Security equivalent, calculated on the basis of the number of years of railroad service.

Effect of Current Earnings on Benefits

Beneficiaries under the full retirement age (FRA) with earnings in excess of certain exempt amounts may have all or part of their benefits withheld as a result of the annual earnings test (AET) provisions of the Social Security Act. For those at or above FRA, however, there have been recent changes to AET provisions. Amendments in 1996 eased the impact of AET provisions, while changes in 2000 removed the AET altogether for beneficiaries FRA or older. Public Law 104-121, enacted March 29, 1996, substantially raised the exempt amounts under the annual earnings test for persons who have reached full retirement age. These amounts are $12,500 in 1996; $13,500 in 1997; $14,500 in 1998; $15,500 in 1999; $17,000 in 2000; $25,000 in 2001; and $30,000 in 2002. After 2002, the annual exempt amount is indexed to the growth in average wages. In 2003, the indexed amount is $30,720. Benefits are withheld at the rate of $1 in benefits for every $3 of earnings above the FRA exempt amount. Public Law 106-182, enacted April 7, 2000, eliminated the earnings test beginning with the month a beneficiary reaches FRA. In determining annual earnings for purposes of the annual earnings test, only earnings before the month of attainment of FRA will be counted.

Public Laws 104-121 and 106-182 did not change the annual exempt amount for beneficiaries who are under FRA throughout the year. This annual amount continues to be pegged to increases in average wages. The amount was $11,280 in 2002 and is $11,520 in 2003. When the annual earnings limit affects working beneficiaries under FRA, benefits are withheld at the rate of $1 for every $2 of earnings above the exempt amount.

Individuals have the option to receive reduced benefits under a monthly earnings test if it is to their advantage to do so. This option is usually exercised in the first year of retirement, because in that year the monthly test permits payment for some months even if the annual earnings limit is greatly exceeded. Under the monthly test, beneficiaries receive a full monthly benefit for months in which they do not earn over an amount equal to 1/12 of the annual earnings limit. The monthly earnings test is applied to the self-employed based on hours they work instead of monthly earnings. Generally, beneficiaries are eligible for the monthly earnings test in only one year.

Beneficiaries entitled on the basis of their own disability—disabled workers, disabled adult children, and disabled widow(er)s—are not subject to the earnings test. Substantial earnings by disabled beneficiaries, however, may indicate that they are able to do work that constitutes substantial gainful activity (SGA) and are therefore no longer disabled. Although other factors are considered, numerical earnings thresholds are used in a determination of SGA.

Taxation of Benefits

Up to 85 percent of Social Security benefits may be subject to federal income tax depending on the beneficiary's income, marital status, and filing status. The definition of income for this provision is as follows: Adjusted gross income (before Social Security or Railroad Retirement benefits are considered), plus tax-exempt interest income, with further modification of adjusted gross income in some cases involving certain tax provisions of limited applicability among the beneficiary population, plus one-half of Social Security and Tier 1 Railroad Retirement benefits.

For married beneficiaries filing jointly with adjusted gross income under $32,000 a year, no Social Security benefits are subject to taxation. If adjusted gross income exceeds $32,000 but is under $44,000, the amount of benefits included in gross income is the lesser of one-half of income over $32,000. If a couple's adjusted gross income exceeds $44,000, the amount of benefits included in gross income is 85 percent of income over $44,000 plus the lesser of $6,000 or one-half of benefits. However, no more than 85 percent of benefits are subject to income tax. The income thresholds for single beneficiaries are $25,000 and $32,000.

If members of a married couple are filing separately, they do not have a minimum threshold if they lived together any time during the tax year. The amount of benefits included in gross income is the lesser of 85 percent of Social Security or Tier 1 Railroad Retirement benefits, or 85 percent of all income as defined above. Like all matters dealing with tax liability, taxation of Social Security benefits fall under the jurisdiction of the Internal Revenue Service.

CONTACT: Curt Pauzenga (410) 965-7210 or Joseph Bondar (410) 965-0162.

Supplemental Security Income

Program Overview

The Supplemental Security Income (SSI) program provides income support to persons aged 65 or older, blind or disabled adults, and blind or disabled children. Eligibility requirements and federal payment standards are nationally uniform. The 2003 federal SSI benefit rate for an individual living in his or her own household and with no other countable income is $552 monthly; for a couple (with both husband and wife eligible), the SSI benefit rate is $829 monthly.

Payments under SSI began in January 1974. It replaced the former federal-state adult assistance programs in the 50 states and the District of Columbia. Under SSI each eligible person is provided a monthly cash payment based on a statutory federal benefit rate. Since 1975, these rates have been increased by the same percentage, as the cost-of-living increases in OASDI benefits. If an individual or couple is living in another person's household and is receiving both food and shelter from the person in whose household they are living, the federal benefit rate is reduced by one-third. This is done instead of determining the actual dollar value of the in-kind support and maintenance.

For institutionalized persons, the eligibility requirements and payment standards depend on the type of institution. With some exceptions, inmates of public institutions are ineligible for SSI. For persons institutionalized for a complete calendar month, a maximum federal SSI payment of $30 per month applies where (1) the institution receives a substantial part of the cost of the person's care from the Medicaid program, or (2) the institution receives payments from private health insurance on behalf of a recipient under age 18. Other eligible persons in institutions may receive up to the full federal benefit rate.

The federal payment is based on the individual's countable income. The first $20 monthly in OASDI benefits or other earned or unearned income is not counted. Also excluded is $65 monthly of earnings plus one-half of any earnings above $65. For example, a person living in his or her own household, whose sole income is a $200 monthly OASDI benefit, would receive $372 in federal SSI payments:

A person whose income consists of $500 in gross monthly earnings would receive $344.50 in federal SSI payments:

Individuals generally are not eligible for SSI if they have resources in excess of $2,000 (or $3,000 for a couple). Certain resources are excluded, most commonly a home, an automobile, and household goods and personal effects of reasonable value. States have the option to supplement the federal SSI payment for all or selected categories of persons, regardless of previous state program eligibility.

CONTACT: Paul S. Davies (410) 966-0299.

SSI: History Of Provisions

Basic Eligibility Requirements

1972 (Public Law 92-603, enacted October 30). An individual may qualify for payments on the basis of age, blindness, or disability.

Aged: Any person aged 65 or older.

Blind: Any person with 20/200 or less vision in the better eye with the use of correcting lenses, or with tunnel vision of 20 degrees or less. An individual transferred from a state Aid to the Blind (AB) program is eligible if he/she received such state aid in December 1973 and continues to meet the October 1972 state definition of blindness.

Disabled: Any person unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or that has lasted or can be expected to last for a continuous period of at least 12 months. For a child under age 18, eligibility is based on disability of severity comparable with that of an adult. An individual transferred from a state Aid to the Permanently and Totally Disabled (APTD) program to SSI is also eligible if he/she received such state aid in December 1973 and continues to meet the October 1972 state definition of disability.

1973 (Public Law 93-233, enacted December 31). Only persons who had received APTD before July 1973 and were on the rolls in December 1973 may receive SSI on the basis of the state definition of disability; those who became eligible for state aid from July to December 1973 must meet the federal definition of disability.

1980 (Public Law 96-265, enacted June 9). A disabled recipient who loses federal SSI eligibility because of earnings at the substantial gainful activity level may continue to receive a special benefit under section 1619 and retain eligibility for Medicaid under Title XIX of the Social Security Act. This special benefit status may continue as long as the recipient has the disabling impairment and meets all nondisability SSI eligibility criteria. states have the option of supplementing this special benefit.

This provision of the law was in effect from January 1, 1981, through December 31, 1983. Beginning in January 1984, under a 1-year demonstration project, this provision was continued for persons already eligible for either regular SSI payments or special monthly benefits.

1984 (Public Law 98-460, enacted October 9). The special benefit and Medicaid provisions of the 1980 legislation were extended through June 30, 1987 (retroactive to January 1, 1984).

1986 (Public Law 99-643, enacted November 10). The special benefit and Medicaid provisions of the 1980 amendments are made permanent. The provisions were amended effective July 1, 1987, with significant modifications to simplify administration and to allow free movement between regular SSI disability payments and either the special cash benefit or Medicaid eligibility under section 1619. The distinction between a disabled person eligible for regular SSI payments and one eligible for 1619(a) is that the latter has several months with gross earnings above the SGA level. Previously, section 1619(a) status required completion of a trial work period and the determination that the work was SGA.

1996 (Public Law 104-193, enacted August 22). For individuals under age 18, the "comparable severity" standard is eliminated and replaced with a requirement that a child be considered disabled if he/she has a medically determinable impairment that results in "marked and severe functional limitations," and meets the existing statutory duration requirement. The law also eliminates references to "maladaptive behaviors" in the Listing of Impairments for children, and discontinues the use of individualized functional assessments for children.

SSI eligibility is prohibited for an individual in any month during which such an individual is a fugitive felon, fleeing prosecution, or violating state or federal conditions of probation or parole. In addition, SSI eligibility is prohibited for 10 years for those convicted of fraudulently claiming residence to obtain benefits simultaneously in two or more states.¹

Other Eligibility Provisions

Citizenship and Residence

1972 (Public Law 92-603, enacted October 30). The individual must reside within one of the 50 states or the District of Columbia and be a citizen or an alien lawfully admitted for permanent residence or permanently residing in the United States under color of law. Persons living outside the United States for an entire calendar month lose their eligibility for such a month.

1976 (Public Law 94-241, enacted March 24). Eligibility for SSI is extended to residents of the Northern Mariana Islands, effective January 9, 1978.

1980 (Public Law 96-265, enacted June 9). The income and resources of the immigration sponsors of aliens applying for SSI are considered in determining eligibility for and the amount of payment. After allowances for the needs of the sponsor and his/her family, the remainder is deemed available for the support of the alien applicant for a 3-year period after admission to the United States for permanent residence. This provision does not apply to those who become blind or disabled after admission, to refugees, or to persons granted political asylum. (See section "Deeming of Income and Resources" for subsequent changes to sponsor-to-alien deeming provisions.)

1989 (Public Law 101-239, enacted December 19). SSI eligibility is continued for a disabled or blind child who was receiving SSI benefits while living in the United States and is now living with a parent who is a member of the U.S. Armed Forces assigned to permanent duty ashore outside the United States, but not where the parent is stationed in Puerto Rico or the territories and possessions of the United States.

1993 (Public Law 103-66, enacted August 10). Above provision made applicable where the parent is a member of the U.S. Armed Forces and stationed in Puerto Rico or the territories and possessions of the United States.

1996 (Public Law 104-193, enacted August 22). Prohibits SSI eligibility for anyone who is not a U.S. citizen or national unless they are in a "qualified alien" category and meet one of certain exceptions such as lawful permanent residents who earn or can be credited with 40 qualifying quarters of earnings, certain refugee type categories eligible for up to 5 years of time limited eligibility, or active duty U.S. military or veterans and their spouses and children. Extends eligibility for aliens receiving SSI as of August 22, 1996 (the enactment date of the law) for 1 year after the enactment date for those aliens found ineligible under the new standards.

(Public Law 104-208, enacted September 30). Amends Public Law 104-193 to add to the list of "qualified aliens" certain noncitizens (and their children) who have been battered or subjected to extreme cruelty by a spouse or parent or a member of the spouse's or parent's family living in the same household.

1997 (Public Law 105-18, enacted June 12). Extends eligibility for aliens receiving SSI as of August 22, 1996, until September 30, 1997, for those found ineligible under the new alien standards of Public Law 104-193.

(Public Law 105-33, enacted August 5). Further amends Public Law 104-193 to add Cuban and Haitian entrants, and the child of a parent who has been battered or subjected to extreme cruelty, to the list of qualified aliens. Provides that Cuban and Haitian entrants and Amerasian immigrants qualify for time limited eligibility, and increases the time limit from 5 to 7 years for all time-limited categories. Additional exceptions are added for qualified aliens: (1) lawfully residing in the United States and receiving SSI benefits on August 22, 1996; and (2) lawfully residing in the United States on August 22, 1996 and meeting the definition of blind or disabled in the Social Security Act.

Certain noncitizen American Indians are excepted from the alien nonpayment provisions of Public Law 104-193.

Extends eligibility for "nonqualified aliens" receiving SSI as of August 22, 1996, until September 30, 1998.

1998 (Public Law 105-306, enacted October 28). Permanently extends eligibility of all remaining "nonqualified aliens" who were receiving SSI benefits when Public Law 104-193 was enacted on August 22, 1996.

2000 (Public Law 106-386, enacted October 28). Noncitizens, regardless of their immigration status, may be eligible for SSI to the same extent as refugees, if they are determined to be victims of "severe forms of trafficking in persons."

Other Benefits

1980 (Public Law 96-272, enacted June 17). SSI applicants and recipients are not required as a condition of eligibility to elect to receive Veterans Administration pensions under the Veterans and Survivors' Pension Improvement Act of 1978 if the state of residence lacks a medically-needy program under Title XIX.

Drug Addiction and Alcoholism (DA&A)

1972 (Public Law 92-603, enacted October 30). Any disabled individual who has been medically determined to be an alcoholic or drug addict must accept appropriate treatment, if available, in an approved facility and demonstrate compliance with conditions and requirements for treatment.

SSI payments are required to be made through a representative payee—another person or public or private agency designated by SSA to manage the recipient's benefit on his/her behalf.

1994 (Public Law 103-296, enacted August 15). Any individual who is receiving SSI based on a disability where drug addiction or alcoholism is a contributing factor material to the finding of disability must comply with the DA&A treatment requirements. The individual must accept appropriate treatment when it is available and comply with the conditions and terms of treatment. Instances of noncompliance with the requirements result in progressively longer payment suspensions. Before payments can resume, the individual must demonstrate compliance for specific periods; 2 months, 3 months, and 6 months, respectively, for the first, second, third, and subsequent instances of noncompliance. An individual who is not in compliance with the DA&A treatment requirements for 12 consecutive months shall not be eligible for payments; however, this does not prevent such individuals from reapplying and again becoming eligible for payments.

SSI disability payments based on DA&A are also limited to a total of 36 benefit months (beginning March 1995) regardless of whether appropriate treatment is available. Months for which benefits are not due and received do not count towards the 36-month limit.

Payments based on DA&A must be made to a representative payee. Preference is required to be given to community based nonprofit social service agencies and federal, state, or local government agencies in representative payee selection. These agencies when serving as payees for individuals receiving payments based on DA&A may retain the lesser of 10 percent of the monthly benefit or $58 (indexed to the consumer price index (CPI)) as compensation for their services.

Establishment of one or more referral and monitoring agencies for each state is required.

1996 (Public Law 104-121, enacted March 29). An individual is not considered disabled if DA&A is a contributing factor material to a finding of disability.

Applies DA&A representative payee requirements enacted under Public Law 103-296 to disabled SSI recipients who have a DA&A condition and are incapable of managing their benefits. In addition, these recipients shall be referred to the appropriate state agency administering the state plan for substance abuse treatment.

Institutionalization

1972 (Public Law 92-603, enacted October 30). An individual who is an inmate of a public institution is ineligible for SSI payments unless the institution is a facility approved for Medicaid payments and is receiving such payments on behalf of the person. Under regulations, the Medicaid payment must represent more than 50 percent of the cost of services provided by the facility to the individual.

1976 (Public Law 94-566, enacted October 20). An inmate of a publicly operated community residence serving no more than 16 persons may, if otherwise eligible, receive SSI.

1983 (Public Law 98-21, enacted April 20). Payments may be made to persons who are residents of public emergency shelters for the homeless for a period of up to 3 months in any 12-month period.

1986 (Public Law 99-643, enacted November 10). Effective July 1, 1987, disabled or blind recipients who were receiving special SSI payments or had special SSI recipient status under section 1619 in the month preceding the first full month of institutionalization, may receive payments based on the full federal benefit rate for the initial 2 full months of institutionalization, if they reside in certain public medical, psychiatric, or Medicaid facilities or in private Medicaid facilities.

1987 (Public Law 100-203, enacted December 22). Effective January 1, 1988, payments may be made to persons who are residents of public emergency shelters for the homeless, for up to 6 months in a 9-month period.

Effective July 1, 1988, continued payment of SSI benefits for up to 3 months is permitted, at the rate that was applicable in the month prior to the first full month of institutionalization, for individuals whose expected institutional stay on admission is not likely to exceed 3 months, as certified by a physician, and for whom the receipt of benefits is necessary to maintain living arrangements to which they may return.

1996 (Public Law 104-193, enacted August 22). Effective December 1996, institutionalized children under age 18 whose private health insurance is making payments to the institution may receive no more than $30 per month in federal SSI.

Vocational Rehabilitation and Treatment

1972 (Public Law 92-603, enacted October 30). Blind or disabled individuals receiving federal SSI benefits who are under age 65 must be referred to the state agency providing services under the Vocational Rehabilitation Act and must accept the services offered. States are reimbursed for the cost of services.

1976 (Public Law 94-566, enacted October 20). Blind or disabled children under age 16 must be referred to the state agency administering crippled children's services or to another agency designated by the state. States are reimbursed for the cost of services.

Of funds provided for these services, at least 90 percent must be used for children under age 6 or for those who have never attended public schools.

1980 (Public Law 96-265, enacted June 9). Disabled SSI recipients who medically recover while enrolled in approved vocational rehabilitation programs of state VR agencies may continue to receive benefits during their participation in such programs if the Commissioner of Social Security determines that continuation in the program will increase the probability that they leave the rolls permanently.

1981 (Public Law 97-35, enacted August 13). Funding no longer provided under Title XVI for medical, social, developmental, and rehabilitative services to disabled or blind children.

Reimbursement for the cost of rehabilitation services will only be made if the services result in the recipient's return to work for a continuous period of 9 months. The work must be at the substantial gainful activity earnings level.

1984 (Public Law 98-460, enacted October 9). Authorizes the reimbursement of states for the cost of VR services provided to individuals who (1) continue to receive benefits after medical recovery because they are participating in a state VR program or (2) refuse, without good cause, to continue in or cooperate with the VR program in which they had been participating.

1987 (Public Law 100-203, enacted December 22). Extends the provision for continuation of payments to disabled SSI recipients who have medically recovered while enrolled in an approved vocational rehabilitation program to include blind SSI recipients.

1990 (Public Law 101-508, enacted November 5). Reimbursement authorized for the cost of vocational rehabilitation services provided in months in which the individual was not receiving federal SSI payments, if:

• SSI recipient status for Medicaid eligibility purposes was retained under work incentive provisions, or
• Benefits were in suspense ² status (for a reason other than cessation of disability or blindness), or
• Federally administered state supplementation was received.

1999 (Public Law 106-170, enacted December 17). Establishes a Ticket to Work and Self-Sufficiency program that will provide SSI (and OASDI) disability beneficiaries with a ticket that can be used to obtain vocational rehabilitation services, employment services, or other support services, from an employment network (EN) of their choice.

An EN chooses one of the two EN payment options at the time it submits an application to SSA to become an EN. The chosen payment system will apply to all beneficiaries served. An EN can elect to receive payment under the:

• Outcome payment system, under which it can receive payment for up to 60 outcome payment months; or
• Outcome-milestone payment system, under which it can receive payment for up to four milestones in addition to outcome payments. These milestones must occur before the EN enters the first month for which it is eligible for an outcome payment. Four milestone payments plus 60 months of reduced outcome payments equal 85 percent of the total that would be available if the EN chose the outcome payment system.

Continuing Disability Reviews and Eligibility Redeterminations

1994 (Public Law 103-296, enacted August 15). During each of fiscal years 1996, 1997, and 1998, requires SSA to conduct continuing disability reviews (CDRs) on a minimum of 100,000 SSI recipients. In addition, during the same period, requires SSA to redetermine the SSI eligibility of at least one-third of all child SSI recipients who reach age 18 after April 1995 during the 1-year period following attainment of age 18. Redeterminations for persons turning age 18 could count toward the 100,000 CDR requirement.

1996 (Public Law 104-193, enacted August 22). Repeals the requirement that SSA redetermine the eligibility of at least one-third of all child SSI recipients who reach age 18 after April 1995 during the 1-year period following attainment of age 18.

Requires a CDR:

• At least once every 3 years for SSI recipients under age 18 who are eligible by reason of an impairment that is likely to improve, and
• Not later than 12 months after birth for recipients whose low birth weight is a contributing factor material to the determination of their disability.

Requires eligibility redetermination for all child SSI recipients eligible for the month before the month in which they attain age 18.

Requires redetermination of eligibility for children considered disabled based on an individual functional assessment and/or consideration of maladaptive behavior.

Requires the representative payee of a child SSI recipient whose continuing eligibility is being reviewed to present evidence that the recipient is receiving treatment that is considered medically necessary and available for the condition which was the basis for providing SSI benefits.

1997 (Public Law 105-33, enacted August 5). Modifies provision of Public Law 104-193 to extend from 12 to 18 months the period for redetermining the disability of children under age 18 under the new childhood disability standard.

Modifies provision of Public Law 104-193 to permit SSA to schedule a CDR for a disabled child for whom low birth weight is a contributing factor material to the determination of disability, at a date after the child's first birthday if the Commissioner determines the impairment is not expected to improve within 12 months of the child's birth.

Modifies provision of Public Law 104-193 to provide SSA the authority to make redeterminations of disabled childhood recipients who attain age 18, more than 1 year after the date such recipient attains age 18.

1999 (Public Law 106-170, enacted December 17). Prohibits the initiation of a CDR during the period that a recipient is "using a ticket" under the Ticket to Work program.

Deeming of Income and Resources

1972 (Public Law 92-603, enacted October 30). Deeming occurs when the income and resources of certain family members living in the same household with the SSI recipient are considered in determining the amount of the SSI payment. These family members are the ineligible spouse of an adult recipient and the ineligible parents of a child recipient under age 21.

After deduction of personal allocations for the spouse (or parents) and for ineligible children in the home, and after application of income exclusions, any remaining income of the spouse (or parents) is added to the income of the eligible person.

1980 (Public Law 96-265, enacted June 9). Children aged 18 or older are not subject to parental deeming.

Sponsor's income and resources deemed to an alien for 3 years.

1989 (Public Law 101-239, enacted December 19). Disabled children receiving home care services under state Medicaid programs, who are ineligible for SSI because of deeming of parental income, and who received SSI benefits limited to $30 while in a medical treatment facility, may receive the $30 monthly allowance that would be payable if the recipient were institutionalized.

1993 (Public Law 103-152, enacted November 24). Sponsor-to-alien deeming period extended from 3 years to 5 years, effective January 1, 1994, through September 30, 1996.

Considers an ineligible spouse or parent who is absent from the household due to active military service to be a member of the household for deeming purposes.

1996 (Public Law 104-193, enacted August 22). Deeming of income and resources from an immigration sponsor to a noncitizen continues until citizenship, with exceptions for those who earn, or can be credited with, 40 qualifying quarters of earnings. Effective for those whose sponsor signs a new legally enforceable affidavit of support.

(Public Law 104-208, enacted September 30). Amends Public Law 104-193 to add two exceptions to the sponsor-to-alien deeming:

• Provides that if the noncitizen is indigent and would be unable to obtain food and shelter without SSI benefits even after receiving support from the sponsor, then only the amount of income and resources actually provided by the sponsor will be counted for a 12-month period after a determination of indigence; and
• Provides that in certain cases, deeming would not apply for a 12-month period (with some options for extension) if the noncitizen (or his/her children) has been battered or subjected to extreme cruelty by family members.

1997 (Public Law 105-33, enacted August 5). Amends Public Law 104-208 to add an additional exception to sponsor-to-alien deeming when the parent of a noncitizen has been battered or subjected to extreme cruelty by family members.

Federal Benefit Rates

Basic benefit standards are used in computing the amount of federal SSI payments. Benefit levels differ for individuals and couples living in households and for persons in Medicaid institutions. Individuals or couples living in their own households receive the full federal benefit. If an individual or couple is living in another person's household and receiving support and maintenance there, the federal benefit is reduced by one-third. The federal benefit rates for persons in households are increased annually to reflect increases in the cost of living. Legislation affecting the level of federal benefit rates since the inception of the SSI program are summarized in Table 2.B1.

Windfall Offset

1980 (Public Law 96-265, enacted June 9). Offset (by reduction of retroactive Social Security benefits) to prevent persons whose initial OASDI payment is retroactive from receiving more in total benefits than if they were paid the benefits when regularly due.

1984 (Public Law 98-617, enacted November 8). Offset provision expanded to allow for reduction of retroactive SSI benefits and to apply in cases of OASDI benefit reinstatement.

Proration of Benefit

1982 (Public Law 97-248, enacted September 3). Benefit for first month of eligibility to be prorated by the number of days in the month for which an application has been filed and there is eligibility.

1996 (Public Law 104-193, enacted August 22). Changes the effective date of an SSI application to the first day of the month following the date on which the application was filed or on which the individual first becomes eligible, whichever is later. This, in effect, eliminates prorated payments in initial claims.

Retrospective Monthly Accounting

1981 (Public Law 97-35, enacted August 13). Changes the method of computing the SSI benefit to one under which the benefit amount is computed on a monthly basis and is based on income and other characteristics in the previous (or second previous) month.

1984 (Public Law 98-369, enacted July 18). Changes the method of computing the SSI benefit to persons receiving Title II payments. The effect of the increased Title II income at the time of the cost-of-living increase is not delayed as it otherwise would be.

1987 (Public Law 100-203, enacted December 22). Provides an exception to retrospective monthly accounting so that amounts received under Aid to Families with Dependent Children (AFDC), foster care, refugee cash assistance, Cuban-Haitian entrant assistance, or general and child welfare assistance provided by the Bureau of Indian Affairs are counted only in the month received.

1993 (Public Law 103-66, enacted August 10). Changes the method of computing the SSI benefit to persons receiving the value of the one-third reduction. The effect of the increased value at the time of the cost-of-living increase is not delayed as it otherwise would be. Effective January 1995.

Uncashed Checks

1981 (Public Law 97-35, enacted August 13). States that have federally administered supplements to be credited their share of SSI checks that remain unnegotiated for 180 days.

1987 (Public Law 100-86, enacted August 10). SSI checks now unnegotiable after 1 year. States are credited their share of SSI checks after 1 year rather than 180 days.

Rounding of Payment Amounts

1982 (Public Law 97-248, enacted September 3). Cost-of-living adjustments in the federal SSI benefit and income eligibility levels are to be rounded to the next lower whole dollar, after the adjustment is calculated. Subsequent cost-of-living adjustments will be calculated on the previous year's benefit standard before rounding.

Penalties Resulting in Nonpayment of Benefits for False or Misleading Statements

1999 (Public Law 106-169, enacted December 14). Provides for the nonpayment of OASDI and SSI benefits (6, 12 and 24 months, respectively, for the first, second, and third or subsequent violations) for individuals found to have knowingly made a false or misleading statement of material fact for use in determining eligibility for benefits.

Exclusions from Income

General Exclusions

1972 (Public Law 92-603, enacted October 30). The first $60 of earned or unearned income per calendar quarter for an individual or couple; the next $195 and one-half the remainder of quarterly earned income. Unearned income includes Social Security benefits, other government or private pensions, veterans' benefits, and workers' compensation.

1981 (Public Law 97-35, enacted August 13). The first $20 of earned or unearned income per month for an individual or couple; the next $65 and one-half the remainder of monthly earned income. Unearned income includes Social Security benefits, other government or private pensions, veterans' benefits, and workers' compensation.

2000 (Public Law 106-554, enacted December 21). Earnings of persons defined as Social Security statutory employees are treated as self-employment income for SSI purposes.

Special Exclusions

1972 (Public Law 92-603, enacted October 30). Any amount of tax rebate issued to an individual by any public agency that is based on either real property or food purchase taxes.

Grants, scholarships, and fellowships used to pay tuition and fees at an educational institution.

Income required for achieving an approved self-support plan for blind or disabled persons.

Work expenses of blind persons.

For blind persons transferred from state programs to SSI, income exclusions equal to the maximum amount permitted as of October 1972 under the state programs.

Irregularly or infrequently received income totaling $60 or less of unearned income and $30 of earned income in a calendar quarter.

Payment for foster care of ineligible child residing in recipient's home through placement by a public or private nonprofit child care agency.

One-third of any payment received from an absent parent for the support of a child eligible for SSI.

Certain earnings of a blind or disabled child under age 22 regularly attending an educational institution.

State or local government cash payments based on need and designed to supplement SSI payments.

1976 (Public Law 94-331, enacted June 30). Disaster assistance from income for 9 months and application of one-third reduction for 6 months for certain victims of disasters occurring between January 1, 1976, and December 31, 1976.

(Public Law 94-566, enacted October 20). Any assistance based on need (including vendor payments) made to or on behalf of SSI recipients, which is paid and wholly funded by state or local governments.

The value of assistance provided under certain federal housing programs.

1977 (Public Law 95-113, enacted September 29). Food stamps, federally donated food, and the value of free or reduced price food for women and children under the Child Nutrition Act and National School Lunch Act.

(Public Law 95-171, enacted November 12). Provisions for exclusions for support and maintenance under the Disaster Relief and Emergency Assistance Act of 1974 extended on a permanent basis. Effective January 1, 1978.

1980 (Public Law 96-222, enacted April 1). Earned income tax credit treated as earned income (temporarily excluded from 1975 through 1980).

(Public Law 96-265, enacted June 9). Remunerations received in sheltered workshops and work activity centers are considered earned income and qualify for earned income exclusions.

Impairment-related work expenses paid by the individual (including cost for attendant care, medical equipment, drugs, and services necessary to control an impairment) are deducted from earnings when determining if an individual is engaging in substantial gainful activity. Impairment-related work expenses are excluded in calculating income for benefit purposes if initial eligibility for benefits exists on the basis of countable income without applying this exclusion.

1981 (Public Law 97-35, enacted August 13). Modifies provision under which irregularly or infrequently received income is excluded to conform to change from quarterly to monthly accounting; amounts excludable: $20 or less of unearned income and $10 of earned income in a month.

1982 (Public Law 97-377, enacted December 21). From December 18, 1982, to September 30, 1983, certain home energy assistance payments are excluded if a state agency certified that they are based on need.

1983 (Public Law 97-424, enacted January 6). Support or maintenance assistance (including home energy assistance) provided in kind by a nonprofit organization or in cash or in kind by certain providers of home energy is excluded if the state determines that the assistance is based on need. Provision is applicable through September 1984.

Certain home energy assistance payments are excluded if a state agency certified that the assistance is based on need. Provision is applicable through June 1985.

1984 (Public Law 98-369, enacted July 18). The 1983 provisions for support and maintenance and home energy assistance continue to October 1, 1987.

1986 (Public Law 99-498, enacted October 17). Educational assistance used for educational expenses under the Higher Education Act of 1965 as amended.

1987 (Public Law 100-203, enacted December 22). The 1983 provisions for support and maintenance and home energy assistance made permanent.

Excludes death payments (for example, proceeds from life insurance) from SSI income determinations to the extent they were spent on last illness and burial.

Modifies the 1982 resource exclusion for burial funds to extend the exclusion to any burial fund of $1,500 or less maintained separately from all other assets, thereby allowing interest to be excluded from income if retained in the fund.

1988 (Public Law 100-383, enacted August 10). Restitution payments made to Japanese internees and relocated Aleutians.

1989 (Public Law 101-239, enacted December 19). Interest on agreements representing the purchase of an excluded burial space.

Payments from the Agent Orange Settlement.

Value of a ticket for domestic travel received as a gift and not cashed.

1990 (Public Law 101-508, enacted November 5). Earned income tax credit (including the child health insurance portion).

Payments received from a state-administered fund established to aid victims of crime.

Impairment-related work expenses excluded from income in determining initial eligibility for benefits.

Payments received as state or local government relocation assistance.

Payments received under the Radiation Exposure Compensation Act.

Redefines as earned income, royalties earned in connection with any publication of the individual's work and honoraria received for services rendered (previously defined as unearned income).

1993 (Public Law 103-66, enacted August 10). Hostile fire pay to members of the uniformed services.

Payments received as state or local government relocation assistance made permanent.

1994 (Public Law 103-286, enacted August 1). Payments to victims of Nazi persecution.

1998 (Public Law 105-285, enacted October 27). Funds made available to an SSI recipient by a state or local government or a nonprofit organization as part of the Individual Development Account demonstration project.

(Public Law 105-306, enacted October 28). In-kind gifts to children with life-threatening conditions by tax-exempt organizations not converted to cash.

The first $2,000 annually of cash gifts by tax-exempt organizations to, or for the benefit of, individuals under age 18 with life-threatening conditions.

(Public Law 105-369, enacted November 12). Payments made under the Ricky Ray Hemophilia Relief Fund Act of 1998.

2000 (Public Law 106-554, enacted December 21). Interest on funds deposited in an individual development account.

Any adjustments made to prior payments from other federal programs to account for the error in the computation of the consumer price index during 1999.

2001 (Public Law 107-16, enacted June 7). The refundable child tax credit is excluded in determining eligibility for means-tested programs, including SSI.

Resources

1972 (Public Law 92-603, enacted October 30). Countable resources limited to $1,500 or less for an individual and to $2,250 or less for a couple.

1984 (Public Law 98-369, enacted July 18). Limit on countable resources raised by $100 a year for individuals and $150 a year for couples, beginning in calendar year 1985 through 1989. The respective limits would become $2,000 for an individual and $3,000 for a couple in 1989 and thereafter.

1999 (Public Law 106-169, enacted December 14). Includes generally in the countable resources of an individual the assets of a trust which could be used for the benefit of the individual or spouse.

General Exclusions

1972 (Public Law 92-603, enacted October 30). A home of reasonable value—established by regulation as not exceeding a fair-market value of $25,000 ($35,000 in Alaska and Hawaii).

Personal effects and household goods of reasonable value established by regulation as not exceeding a total market value of $1,500.

An automobile of reasonable value—established by regulation as not exceeding a market value of $1,200.

An automobile may be excluded, regardless of value, if the individual's household uses it for employment or medical treatment or if it is modified to be operated by or for transportation of a handicapped person.

Life insurance with face value of $1,500 or less.

1976 (Public Law 94-569, enacted October 20). The recipient's home, regardless of value, is excluded from consideration in determining resources.

1977 (Public Law 95-171, enacted November 12). Assistance received under the Disaster Relief and Emergency Assistance Act of 1974 for 9 months following receipt.

1979. Reasonable value for an automobile increased by regulation to $4,500 of current-market value; personal goods and household effects increased to $2,000 of equity value.

1982 (Public Law 97-248, enacted September 3). The value, within prescribed limits, of a burial space for the recipient, spouse, and immediate family is excluded. In addition, $1,500 each (less the value of already excluded life insurance and any amount in an irrevocable burial arrangement) may be set aside for the burial of the recipient and spouse.

1984 (Public Law 98-369, enacted July 18). The unspent portion of any retroactive Title II or Title XVI payment is excluded for 6 months following its receipt, and the individual must be given written notice of the time limit on the exclusion.

1985. Regulations permit exclusion, regardless of value, of an automobile needed for essential transportation or modified for a handicapped person. The $4,500 current market value limit applies only if no automobile could be excluded based on the nature of its use.

1987 (Public Law 100-203, enacted December 22). Provides for suspension of the 1980 transfer of assets provision, in any month that it is determined that undue hardship would result.

Real property that cannot be sold for the following reasons: it is jointly owned; its sale would cause the other owner(s) undue hardship due to loss of housing; its sale is barred by a legal impediment; or the owner's reasonable efforts to sell have been unsuccessful.

Temporarily extends the 1984 exclusion of retroactive Title II and Title XVI benefits from 6 months to 9 months (the longer exclusion applies to benefits paid in fiscal years 1988 and 1989).

1988 (Public Law 100-707, enacted November 23). Removes the time limit for exclusion of disaster assistance.

Special Exclusions

1972 (Public Law 92-603, enacted October 30). Assets of a blind or disabled individual that are necessary to an approved plan of self-support.

Tools and other property essential to self-support (PESS), within reasonable limits. Shares of nonnegotiable stock in regional or village corporations held by natives of Alaska.

For persons transferred from state programs to SSI, resource exclusions equal to the maximum amount permitted as of October 1972 under the state program.

1988 (Public Law 100-383, enacted August 10). Restitution payments made to Japanese internees and relocated Aleutians.

1989 (Public Law 101-239, enacted December 19). Specifies that no limitation can be placed on property essential to self-support used in a trade or business, or by an individual as an employee (including the tools of a tradesperson and the machinery and livestock of a farmer).

Payments from the Agent Orange Settlement.

1990 (Public Law 101-508, enacted November 5). Earned income tax credit excluded for the month following the month the credit is received.

Payments received from a state-administered fund established to aid victims of crime excluded for a 9-month period. Individual not required to file for such benefits.

Payments received as state or local government relocation assistance excluded for a 9-month period. (The provision expired 3 years after its effective date.)

Payments received under the Radiation Exposure Compensation Act.

1993 (Public Law 103-66, enacted August 10). Makes permanent the 9-month exclusion of payments received as state or local government relocation assistance.

1994 (Public Law 103-286, enacted August 1). Payments to victims of Nazi persecution.

1996 (Public Law 104-193, enacted August 22). Dedicated financial institution accounts required to be established for large past-due benefits for disabled individuals under age 18 with a representative payee.

1998 (Public Law 105-285, enacted October 27). Funds made available to an SSI recipient by a state or local government or a nonprofit organization as part of the Individual Development Account demonstration project.

(Public Law 105-306, enacted October 28). In-kind gifts to children with life-threatening conditions by tax-exempt organizations not converted to cash.

The first $2,000 annually of cash gifts by tax-exempt organizations to, or for the benefit of, individuals under age 18 with life-threatening conditions.

(Public Law 105-369, enacted November 12). Payments made under the Ricky Ray Hemophilia Relief Fund Act of 1998.

2000 (Public Law 106-554, enacted December 21). Funds deposited by an individual in an individual development account and the interest on those funds.

2001 (Public Law 107-16, enacted June 7). The refundable child tax credit in the month of receipt and in the following month.

Transfer-of-Assets Penalties

1980 (Public Law 96-611, enacted December 28). Assets transferred for less than fair market value for the purpose of establishing eligibility for benefits under the Social Security Act are counted as resources for 24 months after transfer.

1988 (Public Law 100-360, enacted July 1). Removes the transfer-of-assets penalty for transfers made July 1, 1988, or later.

1999 (Public Law 106-169, enacted December 14). Provides a penalty under the SSI program for the disposal of resources at less than fair market value. The penalty is a loss of benefits for up to 36 months. A formula is provided to determine the number of months.

Presumptive and Emergency Payments and Interim Assistance Reimbursement

Presumptive Payments

1972 (Public Law 92-603, enacted October 30). A person applying on the basis of disability who meets all other criteria of eligibility, and is likely to be disabled, may receive payments for 3 months pending the disability determination.

1976 (Public Law 94-569, enacted October 20). Presumptive payment provision was extended to persons applying on the basis of blindness.

1990 (Public Law 101-508, enacted November 5). Extends the period for receipt of payments to 6 months.

Emergency Advance Payments

1972 (Public Law 92-603, enacted October 30). Any applicant who can be presumed to meet the criteria of eligibility, but has not yet been determined eligible, and who is faced with a financial emergency may receive an immediate cash advance of up to $100.

1987 (Public Law 100-203, enacted December 22). Increases the maximum emergency advance payment amount to the maximum amount of the regular federal SSI monthly benefit rate plus, if any, the federally administered state supplementary payment.

1996 (Public Law 104-193, enacted August 22). Applicants who have a financial emergency may receive an emergency advance payment in the month of application, which, effective with this law, is always prior to the first month of eligibility. These advance payments are recouped by proportional reductions in the recipient's first 6 months of SSI benefits.

Interim Assistance Reimbursement

1974 (Public Law 93-368, enacted August 7). SSA may enter into agreements with the states to repay them directly for assistance payments made to an SSI applicant while his/her claim is being adjudicated. The repayment is made from the first check due to the individual. This legislation expires June 30, 1976.

1976 (Public Law 94-365, enacted July 14). The authority to repay the state for interim assistance is made permanent.

1987 (Public Law 100-203, enacted December 22). Extends interim assistance reimbursement to situations in which payments are made by states or political subdivisions to persons whose SSI payments were suspended or terminated and who subsequently are found to be eligible for such benefits. Also clarifies that the payment from which the interim assistance reimbursement is paid must be the first payment of benefits relating to the interim period.

Medicaid Eligibility

1972 (Public Law 92-603, enacted October 30). States can provide Medicaid coverage to all recipients of SSI payments. Alternatively, they can limit coverage by applying more restrictive criteria from the state Medicaid plan in effect on January 1, 1972.

States can accept SSA determination of eligibility or make their own determination.

1976 (Public Law 94-566, enacted October 20). Preserves the Medicaid eligibility of recipients who become ineligible for cash SSI payments due to the cost-of-living increases in Social Security benefits.

1980 (Public Law 96-265, enacted June 9). Blind or disabled recipients under age 65 no longer eligible for either regular or special SSI payments because of their earnings may retain SSI recipient status for Medicaid eligibility purposes under the following conditions: (1) they continue to have the disabling impairment, (2) they meet all nondisability eligibility criteria except for earned income, (3) they would be seriously inhibited from continuing employment without Medicaid services, and (4) their earnings are insufficient to provide a reasonable equivalent of SSI payments and Medicaid.

In states that do not provide Medicaid coverage categorically to all SSI recipients, qualification for Medicaid benefits depends on the state's specific eligibility and program requirements.

The Medicaid provision of the 1980 legislation was in effect from January 1, 1981, through December 31, 1983. Under a 1-year demonstration project, beginning January 1, 1984, this provision was continued for persons already eligible for regular or special SSI payments or for retention of Medicaid eligibility.

1984 (Public Law 98-460, enacted October 9). Medicaid provision of 1980 legislation extended through June 30, 1987 (retroactive to January 1, 1984).

1986 (Public Law 99-272, enacted April 7). Restores Medicaid eligibility for some disabled widow(er)s who became ineligible for SSI when their Title II benefits increased in 1984 because of a change in the Social Security disabled widow(er)s benefits reduction factor.

1986 (Public Law 99-643, enacted November 10). The SSI recipient status for Medicaid eligibility provision of the 1980 amendments is made permanent.

Effective July 1, 1987, certain expenses are excluded from earnings when determining sufficiency of earnings to establish SSI recipient status eligibility for Medicaid purposes:

• Impairment-related work expenses of disabled persons,
• Work expenses of blind persons,
• Income required for achieving an approved self-support plan, and
• The value of publicly funded attendant care services.

Effective July 1, 1987, preserves the Medicaid eligibility of recipients who become ineligible for SSI payments because of entitlement to, or an increase in, Social Security disabled adult child benefits on or after the effective date.

Effective July 1, 1987, requires all states to provide Medicaid coverage for recipients in special SSI status (either receiving special SSI payments or in the special recipient status described for 1980) if they received Medicaid coverage the month before special SSI status.

1987 (Public Law 100-203, enacted December 22). Effective July 1, 1988, restores or preserves the Medicaid eligibility of persons aged 60 or older who are eligible for Social Security benefits as widows or widowers (but not eligible for Medicare) and who become ineligible for SSI payments or state supplementation because of the receipt of old-age or survivors insurance benefits under Social Security.

1990 (Public Law 101-508, enacted November 5). Age limit for retention of SSI recipient status for Medicaid eligibility purposes (1980 and subsequent work incentive provisions, above) is eliminated.

Preserves the Medicaid eligibility of SSI recipients who become ineligible for payments when they become entitled to Social Security disabled widow(er)s benefits following the revised definition used for their disability.

1997 (Public Law 105-33, enacted August 5). Requires states to continue Medicaid coverage for disabled children who were receiving SSI payments as of August 22, 1996 and would have continued to be eligible for such payments except that their eligibility terminated because they did not meet the revised SSI childhood disability standard established under Public Law 104-193.

State Supplementation

1972 (Public Law 92-603, enacted October 30). States are given the option of providing supplementary payments both to recipients transferred from the state program and to those newly eligible for SSI.

States may either administer the payments themselves or have the Social Security Administration make payments on their behalf. When state supplementary payments are federally administered, the Social Security Administration makes eligibility and payment determinations for the state and assumes administrative costs.

"Hold harmless" protection, which limits a state's fiscal liability to its share of OAA, AB, and APTD expenditures for calendar year 1972, is provided to states electing federal administration of their supplementary plans. This provision applies only to supplementary payments that do not, on the average, exceed a state's "adjusted payment level." (The adjusted payment level is the average of the payments that individuals with no other income received in January 1972; it may include the bonus value of food stamps. Adjustments are provided for payments that had been below state standards.)

1973 (Public Law 93-66, enacted July 9). Provides for mandatory state supplementation as assurance against reduction of income for persons who received state assistance in December 1973 and were transferred to SSI. These supplementary payments must equal the difference between (1) the amount of the state assistance payment that the individual received in December 1973 plus other income and (2) his/her federal SSI payment plus other income.

1976 (Public Law 94-585, enacted October 21). After June 30, 1977, when the federal SSI payment level is increased by a cost-of-living increase, such an increase will be excluded in calculating the "hold harmless" amount.

Requires states to maintain state supplementation payments at the level of December 1976 ("maintenance of payments") or to continue to pay in supplements the same total annual amounts ("maintenance of expenditures") when the federal SSI payment level is increased and thereby pass through any increases in federal benefits without reducing state supplements.

1982 (Public Law 97-248, enacted September 3). Begins a 3-year phase out of "hold harmless" protection. Effective with fiscal year 1985, Wisconsin and Hawaii (the only remaining "hold harmless" states) assumed the full cost of their supplementary payments.

1983 (Public Law 98-21, enacted April 20). Federal pass-through law is adjusted (1) by substituting the state supplementary payment levels in effect in March 1983 for those in effect in December 1976 as the levels that states must maintain in complying with the pass-through requirements, and (2) with regard to the $20 (individual) and $30 (couple) increase in the federal SSI standard in July 1983, by requiring states to pass through only as much as would have been required if the SSI cost-of-living adjustment had been made in July 1983.

1987 (Public Law 100-203, enacted December 22). Provides for federal administration of state supplements to residents of medical institutions.

Provides for required pass through of $5 increase in federal rate for persons whose care in institutions is paid in substantial part by Medicaid.

1993 (Public Law 103-66, enacted August 10). Requires states to pay fees for federal administration of their state supplementation payments. The fees are $1.67 for each monthly supplementary payment in fiscal year 1994, $3.33 in fiscal year 1995, and $5.00 in fiscal year 1996. Fees for subsequent fiscal years will be $5.00 or another amount determined by the Commissioner to be appropriate. The Commissioner may charge the states additional fees for services they request that are beyond the level customarily provided in administering state supplementary payments.

1997 (Public Law 105-33, enacted August 5). Revises the schedule of per-payment fees for federal administration of state supplementation for fiscal years 1998 ($6.20) through 2002 ($8.50) and provides a formula for determining the fee beyond fiscal year 2002.

1999 (Public Law 106-170, enacted December 17). A state which has an agreement with SSA to administer its supplementation payments, must remit both payments and fees prior to the SSI payment date.

2000 (Public Law 106-554, enacted December 21). Changes the effective date of above provision from 2009 to 2001.

Overpayment Recovery

1984 (Public Law 98-369, enacted July 18). Limits the rate of recovering overpayments from monthly payments to the lesser of (1) the monthly payment or (2) 10 percent of a recipient's monthly income. Permits a higher or lower adjustment at the request of the recipient subject to the agreement of the Commissioner. The limit does not apply if fraud, willful misrepresentation, or concealment of material information was involved on the part of the recipient or spouse in connection with the overpayment.

Waives recovery of certain overpayments due to amount of excess resources of $50 or less.

Provides temporary authority for the recovery of overpayments from tax refunds.

1988 (Public Law 100-485, enacted October 13). Grants permanent authority to recover overpayments from tax refunds.

1998 (Public Law 105-306, enacted October 28). Authorizes SSA to collect SSI overpayments by offsetting Social Security benefits, with a maximum monthly offset of no more than 10 percent of the Social Security benefit.

1999 (Public Law 106-169, enacted December 14). Makes representative payees liable for an SSI overpayment caused by a payment made to a recipient who has died, and requires SSA to establish an overpayment control record under the representative payee's Social Security number.

Requires SSA to recover SSI overpayments from SSI lump-sum amounts by withholding at least 50 percent of the lump-sum payment or the amount of the overpayment, whichever is less.

Extends all of the debt collection authorities currently available for the collection of overpayments under the OASDI program to the SSI program.

2001 (Public Law 107-16, enacted June 7). Subjects one-time tax refund payments provided under this Act to overpayment recovery under tax refund offset provisions.

CONTACT: Paul S. Davies (410) 966-0299.

Medicare

The following are brief summaries of complex subjects. They should be used only as overviews and general guides to the Medicare and Medicaid programs. The views expressed herein do not necessarily reflect the policies or legal positions of the Centers for Medicare & Medicaid Services or the Department of Health and Human Services (DHHS). These summaries do not render any legal, accounting, or other professional advice, nor are they intended to explain fully all of the provisions or exclusions of the relevant laws, regulations, and rulings of the Medicare and Medicaid programs. Original sources of authority should be researched and utilized.³

Overview

Title XVIII of the Social Security Act, designated "Health Insurance for the Aged and Disabled," is commonly known as Medicare. As part of the Social Security Amendments of 1965, the Medicare legislation established a health insurance program for aged persons to complement the retirement, survivors, and disability insurance benefits under Title II of the Social Security Act.

When first implemented in 1966, Medicare covered most persons age 65 or over. In 1973, the following groups also became eligible for Medicare benefits: persons entitled to Social Security or Railroad Retirement disability cash benefits for at least 24 months, most persons with end-stage renal disease (ESRD), and certain otherwise non-covered aged persons who elect to pay a premium for Medicare coverage. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554) allowed persons with Amyotrophic Lateral Sclerosis (Lou Gehrig's Disease) to waive the 24-month waiting period.

Medicare has traditionally consisted of two parts: Hospital Insurance (HI), also known as Part A, and Supplementary Medical Insurance (SMI), also known as Part B. A new, third part of Medicare, sometimes known as Part C, is the Medicare+Choice program, which was established by the Balanced Budget Act (BBA) of 1997 (Public Law 105-33) and which expanded beneficiaries' options for participation in private-sector health care plans. When Medicare began on July 1, 1966, approximately 19 million people enrolled. In 2003, over 41 million people are enrolled in one or both of Parts A and B of the Medicare program, and 5 million of them have chosen to participate in a Medicare+Choice plan.

Coverage

Hospital Insurance (HI) is generally provided automatically, and free of premiums, to persons age 65 or over who are eligible for Social Security or Railroad Retirement benefits, whether they have claimed these monthly cash benefits or not. Also, workers and their spouses with a sufficient period of Medicare-only coverage in federal, state, or local government employment are eligible beginning at age 65. Similarly, individuals who have been entitled to Social Security or Railroad Retirement disability benefits for at least 24 months, and government employees with Medicare-only coverage who have been disabled for more than 29 months, are entitled to HI benefits. HI coverage is also provided to insured workers with end-stage renal disease (ESRD) (and to insured workers' spouses and children with ESRD), as well as to some otherwise ineligible aged and disabled beneficiaries who voluntarily pay a monthly premium for their coverage. In 2002, the HI program provided protection against the costs of hospital and specific other medical care to about 40 million people (34 million aged and 6 million disabled enrollees). HI benefit payments totaled $149.9 billion in 2002.

The following health care services are covered under Medicare's HI program:

• Inpatient hospital care coverage includes costs of a semi-private room, meals, regular nursing services, operating and recovery rooms, intensive care, inpatient prescription drugs, laboratory tests, X-rays, psychiatric hospitals, inpatient rehabilitation, and long-term care (LTC) hospitalization when medically necessary, as well as all other medically necessary services and supplies provided in the hospital. An initial deductible payment is required of beneficiaries who are admitted to a hospital, plus copayments for all hospital days following day 60 within a benefit period (described later).

• Skilled nursing facility (SNF) care is covered by HI only if it follows within 30 days (generally) of a hospitalization of 3 days or more and is certified as medically necessary. Covered services are similar to those for inpatient hospital but also include rehabilitation services and appliances. The number of SNF days provided under Medicare is limited to 100 days per benefit period (described later), with a copayment required for days 21–100. HI does not cover nursing facility care if the patient does not require skilled nursing or skilled rehabilitation services.

• Home health agency (HHA) care is covered by both HI and SMI. The BBA transferred from HI to SMI those home health services furnished on or after January 1, 1998, that are unassociated with a hospital or skilled nursing facility stay. HI will continue to cover the first 100 visits following a 3-day hospital stay or a skilled nursing facility stay; SMI covers any visits thereafter. Home health care under HI and SMI has no copayment and no deductible.

  HHA care, including care provided by a home health aide, may be furnished part-time by a HHA in the residence of a home-bound beneficiary if intermittent or part-time skilled nursing or certain other therapy or rehabilitation care is necessary. Certain medical supplies and durable medical equipment (DME) may also be provided, though beneficiaries must pay a 20 percent coinsurance for DME, as required under SMI of Medicare. There must be a plan of treatment and periodical review by a physician. Full-time nursing care, food, blood, and drugs are not provided as HHA services.

• Hospice care is a service provided to terminally ill persons with life expectancies of 6 months or less who elect to forgo the standard Medicare benefits for treatment of their illness and to receive only hospice care for it. Such care includes pain relief, supportive medical and social services, physical therapy, nursing services, and symptom management. However, if a hospice patient requires treatment for a condition that is not related to the terminal illness, Medicare will pay for all covered services necessary for that condition. The Medicare beneficiary pays no deductible for the hospice program but does pay small coinsurance amounts for drugs and inpatient respite care.

An important HI component is the benefit period, which starts when the beneficiary first enters a hospital and ends when there has been a break of at least 60 consecutive days since inpatient hospital or skilled nursing care was provided. There is no limit to the number of benefit periods covered by HI during a beneficiary's lifetime; however, inpatient hospital care is normally limited to 90 days during a benefit period, and copayment requirements (detailed later) apply for days 61–90. If a beneficiary exhausts the 90 days of inpatient hospital care available in a benefit period, he or she can elect to use days of Medicare coverage from a non-renewable "lifetime reserve" of up to 60 (total) additional days of inpatient hospital care. Copayments are also required for such additional days.

All citizens (and certain legal aliens) age 65 or over, and all disabled persons entitled to coverage under HI, are eligible to enroll in the SMI program on a voluntary basis by payment of a monthly premium. Almost all persons entitled to HI choose to enroll in SMI. In 2002, the SMI program provided protection against the costs of physician and other medical services to about 38 million people (33 million aged and 5 million disabled). SMI benefits totaled $111.0 billion in 2002.

The SMI program covers the following services and supplies:

• Physicians' and surgeons' services, including some covered services furnished by chiropractors, podiatrists, dentists, and optometrists. Also covered are the services provided by these Medicare-approved practitioners who are not physicians: certified registered nurse anesthetists, clinical psychologists, clinical social workers (other than in a hospital or skilled nursing facility), physician assistants, and nurse practitioners and clinical nurse specialists in collaboration with a physician.
• Services in an emergency room or outpatient clinic, including same-day surgery, and ambulance services.
• Home health care not covered under HI.
• Laboratory tests, X-rays, and other diagnostic radiology services, as well as certain preventive care screening tests.
• Ambulatory surgical center services in a Medicare-approved facility.
• Most physical and occupational therapy and speech pathology services.
• Comprehensive outpatient rehabilitation facility services, and mental health care in a partial hospitalization psychiatric program, if a physician certifies that inpatient treatment would be required without it.
• Radiation therapy; renal (kidney) dialysis and transplants; heart, lung, heart-lung, liver, pancreas, and bone marrow transplants; and, as of April 2001, intestinal transplants.
• Approved durable medical equipment for home use, such as oxygen equipment and wheelchairs, prosthetic devices, and surgical dressings, splints, and casts.
• Drugs and biologicals that cannot be self-administered, such as hepatitis B vaccines and immunosuppressive drugs (certain self-administered anticancer drugs are covered).

To be covered, all services must be either medically necessary or one of several prescribed preventive benefits. SMI services are generally subject to a deductible and coinsurance (see next section). Certain medical services and related care are subject to special payment rules, including deductibles (for blood), maximum approved amounts (for Medicare-approved physical,