ביטוח לאומי provides financial protection against the risks of old age. It is one of the largest categories in ESSPROS, accounting for around a quarter of total spending on social protection in 2014.
Most State and local government employees are covered by Social Security through their agencies’ public pension programs. Others are covered by Social Security through credits earned for work in Social Security-covered jobs.
State and Local Employees
While pension plans are disappearing in the private sector, they continue to cover seven in eight full-time State and local government employees. These defined benefit pensions offer lifetime retirement benefits based on service years and final average salary, and provide security for public agency workers who devote their entire careers to their jobs.
However, pension reforms designed to cut costs have generally required new hires to work longer before their future employer-financed pension benefits begin to exceed the value of their required plan contributions. In fact, in this hypothetical plan – which represents a typical new hire age 25 enrolled in the average plan – workers must work nearly 25 years before their future pension benefits are worth more than their required contributions (figure 1).
In contrast, the value of retirement assets accumulates rapidly over the course of an employee’s career under alternative benefit designs like cash balance plans, which provide a guaranteed rate of return on contributions and account balances, regardless of whether the economy is doing well or not. This enables State and local government employers to meet their obligations without forcing new hires to work more years than needed to reach their retirement goals.
Workers covered by Social Security pay into the program and are automatically covered under Medicare unless excluded from coverage by law. State and local government workers are covered if they are employed by a public agency of the United States or any State, political subdivision of a State, or interstate governmental agency, or covered under a Section 218 Agreement.
Private Sector Employees
Many private sector employees have access to employer-sponsored retirement and health benefits. Most of these benefits are provided under the Employee Retirement Income Security Act (ERISA), which sets minimum standards for most voluntarily established pension and health plans in the private sector. ERISA also provides rights, protections and remedies for plan participants. SSA’s Employee Benefits Security Administration (EBSA) enforces ERISA through 15 field offices nationwide and the national office in Washington, D.C.
For most people, the simplest way to qualify for Social Security is to work and have your earnings reported to us. Your benefits depend on the net amount you earn during a given tax year and how long you’ve worked. Generally, you need to earn at least 400 hours during a 12-month period to be eligible for most benefits.
Wages are all compensation paid for services performed for an employer, unless the payment is specifically excluded by law. This includes cash, checks, and money orders, as well as gifts and loans, even if they are not in the form of cash.
In the past, CBO has found that on average, federal employees receive higher wages than their private-sector counterparts with similar observable characteristics, mainly because of their participation in a multiemployer union-connected pension plan. The American Rescue Plan protects the earned pensions of 2 million union workers and retirees in these multiemployer pension plans, and a number of financially distressed multiemployer pension plans that receive Special Financial Assistance are projected to remain solvent through 2051.
The unadjusted prevalence of having no health insurance coverage in 2013 and 2014 declined among workers with various occupational groups (Table 1). However, important differences persist by occupation. Several factors could explain these differences. For example, the availability of private health coverage varies by occupational group and, in addition, some jobs may have less favorable employment conditions for the acquisition of health insurance coverage.
Full-time, year-round workers have the highest rates of private health coverage, especially among those working in professional, managerial, and technical occupations. Conversely, part-time and temporary workers have lower rates of private health coverage and are more likely to be uninsured than those employed in full-time, year-round work. Policies addressing the COVID-19 public health emergency have increased the availability of public coverage for all types of workers and are one factor contributing to these changes.
Social Security provides retirement, disability and survivor benefits based on a person’s past earnings. Most employers deduct Social Security taxes from employees’ paychecks to pay for these benefits. People can check their Social Security eligibility by requesting a Personal Earnings Statement online, which shows the amount of Social Security contributions made to their account and estimates of retirement, survivors and disability benefits they are eligible for. They can also request a Medicare Summary Notice, which shows their current prescription drug coverage.
For retirees, any income from a pension or annuity payment that is not a lump sum distribution may be taxable. The tax treatment of these payments depends on whether you are married and filing a joint return or if you are single. Generally, a payer figures the amount of federal income tax to be withheld from periodic payments (generally, monthly pension or annuity payments) using Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, and the tables and methods in Publication 15-T, Federal Tax Withholding Tables.
Payees also report withholding from IRA distributions, 403(b) plans, governmental section 457(b) plans and 401(k) plans on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, Individual Retirement Accounts and Other Qualified Tuition Reimbursement Plans. In some cases, you can elect not to have federal income tax withheld from certain periodic payments. This election remains in effect until you revoke it.
Retirees can change their tax withholding online in their secure myASRS account by selecting the link titled Taxes from the left-hand menu. The changes will take place on the next payroll. If you have a question about your taxes, we encourage you to consult with a qualified tax professional.