5 Facts About Social Security, If an American citizen is going through financial troubles then he or she can be sure that under the right circumstances the US government is going to be there to support them through the Social Security scheme. This scheme is a generally used term for the omnipotent Old Age, Survivors, and Disability Insurance (OASDI) which is a federal program that is managed and administered by Social Security Administration or the SSA.
This scheme came into being when the Social Security Act was signed by then-US President Franklin Roosevelt in the year 1935. From its conception till now, the Social Security scheme has undergone a number of changes and amends to fit the need of the contemporary population. Its present form includes a number of social welfare as well as other social insurance programs.
5 Facts About Social Security
How is Social Security funded?
The US government cannot operate to finance the Social Security program on its own accord and requires the financial support of American citizens. The scheme gets basic funding through payroll taxes which are known as the Federal Insurance Contributions Act tax (FICA) or the Self Employed Contributions Act Tax (SECA).
These tax deposits are then collected by US Internal Revenue Service (IRS). Once the taxes are accumulated, they get transferred to the Trust Fund of the Federal Old Age and Survivors Insurance along with the Federal Disability Insurance Trust Fund; these are the two primary Social Security Trust Funds.
Mostly all American citizens, barring a few exceptional cases, with salaried income are supposed to pay into the Social Security payroll taxes. The taxes are dependent on a tax slab or tax rate table and the specific amount is dependent on the relevant laws. Based on the data present in 2018, the maximum amount of tax that could be levied was $128,400.
The record of these taxes and other benefits are stored and managed using the Social Security Number which each and every legal American resident is entrusted with and this number has been given to most of people since 1935 when Social Security was introduced.
This unique identification number plays a major role in the lives of US citizens as it is required by them for a wide range of businesses and to get benefits from services – both government and private.
Major programs under Social Security
The Social Security scheme does not contain just a single program of the scheme but is made of a number of varied plans that encompass a large area to positively affect as many American citizens as possible who have their own Social Security numbers. The major programs under this scheme are
Federal Old-Age (Retirement), Survivors, and Disability Insurance or the OASDI
It is a comprehensive federal program that caters to the needs of retirees, disabled people, and the family that survive them. This program helps to partially supplement or replace the income that maybe is lost as a result of old age, the demise of a spouse, or a disability.·
Temporary Assistance for Needy Families or better known as TANF Health Insurance for Aged and Disabled or Medicare
It is a program That is federally funded and is administered by Centres for Medicare & Medicaid Services or the CMS, it is basically America’s health insurance program. For a person to be eligible for it, one has to be at least 65 or older than this, must be the recipient of Social Security Disability benefits, or have some disabilities or even permanent renal/kidney failure (in this case the person can be under the age of 65)
Grants to States for Medical Assistance Programs for low-income citizens or Medicaid
It is jointly operated by federal and state governments and is meant to help cover the medical costs for people who have limited resources or income. It also includes services like a nursing home and personal care service. As of the data available in 2017, it has been providing health insurance free of cost to 74 million people with low income and also disabled people.
State Children’s Health Insurance Program for low-income citizens or the SCHIP
It is operated as a partnership among federal and state governments to provide health coverage at a low cost to those children whose family income is less but too much to be eligible for Medicaid. The basic coverage under this program includes routine medical check-ups, mandatory immunization, visits by a doctor, and also prescriptions whenever needed.·
Supplemental Security Income or the SSI
it is funded federally and is administered by the Social Security Administration; it is designed to provide financial support to disabled children and adults who may not have sufficient income or assets to support them. Some of the basic requirements to qualify for this scheme are that the person should be a legal US citizen, be visually impaired or disabled, and have limited income/resources, etc.
How the Taxes are levied on wages and self-employment income?
Apart from deriving the funds for the Social Security scheme via the taxes levied on salaried Americans, these are also paid by the wages earned by the employees as well as the self-employed people.
The employer and the employee have to contribute towards the payment of one-half of the Social Security tax wherein half of the amount is withheld from the paycheque of the employee.
The amount of tax that is collected from the employee is referred to as the “trust fund taxes”, the employer is supposed to remit this to the US government. If the person is self-employed then he or she has to contribute the whole amount of the tax.
Current Status of Social Security
The data on Social Security presented in the year 2015 projected that the expenditure under this scheme came to $750.5 billion for the OASDI and $146.6 billion for the DI. The data has revealed that the funds that have gone into this scheme have successfully been able to reduce the rate of poverty for American citizens who are 65 years old or even older and the rate was lowered from 40 percent to below 10 percent.
But in the year 2018, the trustees of Social Security estimated that the program will probably go through financial insolvency by the year 2034. Hence, the future of this scheme is quite uncertain, still, until it is present, a number of Americans can be hopeful to enjoy at least a bit of financial support.