Overview: Social Security covers approximately 96 percent of Americans and represents a significant retirement benefit to most retirees. Ninety percent of retirees over age 65 receive Social Security benefits. These benefits account for approximately 41 percent of those retirees' income. Railroad workers covered by the Railroad Retirement Act, federal employees hired before 1984 and some state and local government employees are not covered.
An individual becomes eligible for Social Security benefits by working long enough and earning enough to accrue 40 quarters of coverage. These quarters are totaled to determine eligibility. The quarters do not determine the benefit amount. Benefits provided under Social Security include: (i) retirement benefits; (ii) disability benefits; (iii) death benefits; and (iv) survivor benefits.
Social Security is funded by taxes paid by both the employee and the employer and is calculated as a percentage of salary up to an annual maximum.
Trends: Social Security is facing significant financial challenges and faces a somewhat tenuous future. With baby boomers reaching retirement age, the financial strain on Social Security is likely to increase.
Author: Tracy Morley, SPHR, Legal Editor
Updated to reflect 2018 FICA tax rates and benefit amounts, including a reduction in the previously announced 2018 Social Security taxable wage base.
The Social Security Administration has issued inflation-adjusted figures for 2018, including the Social Security taxable wage base, the earnings tests for retirees who return to work, and the Social Security benefits quarter-of-coverage requirement and cost of living adjustment (COLA).
This Worked Example illustrates how employers should calculate an employee's total FICA withholding for each pay period.
This section helps HR professionals understand obligations related to certain statutory benefits such as Social Security and Medicare and unemployment insurance.
Employment glossary definition of SSA.
Employment glossary definition of SSNVS.
HR guidance on federal Social Security benefits.