OASDI
For retired workers and their dependents, age is an additional qualifying criterion; for disabled workers, disability is an additional qualifying element.
Those who meet the requirements for benefits under the OASDI and SSI programs receive monthly cash payments from the “Social Security Administration” (SSA). The monthly benefit amount that is paid to the worker upon first entitlement at ‘full retirement age’ (FRA) or upon “entitlement to unreduced disability benefits” is known as the Primary Insurance Amount (PIA).
Two components make up the OASDI program:
- Under the “Old-Age and Survivors Insurance” (OASI) program, monthly benefits are provided to retired workers, their families, and ‘survivors of deceased one.’
- Under the “Disability Insurance” (DI) program, monthly benefits are provided to disabled workers and their families.
The Board of Trustees was created by the Social Security Act to supervise the ‘OASI and DI’ Trust Funds’ financial activities.
Under the “Federal Insurance Contributions Act” (FICA) or the “Self-Employment Contributions Act” (SECA), an individual makes contributions to Social Security through ‘payroll taxes or self-employment taxes.’ When they file their tax returns, employees who earned more than the “taxable maximum” due to working for many employers can get their excess FICA payments refunded.
There are now 30 countries with which the United States has ‘Social Security’ agreements in place. Firstly, the scenario where a citizen working in another country has to pay Social Security taxes to both nations on the same wages, is eliminated by the ‘International Social Security’ agreement. Second, depending on “totalized, or combined,” credits from both nations, workers who have ‘divided’ their careers may be eligible for a partial benefit from both nations, under the agreement.
Not included in OASDI -
There are five main categories, workers from them are not “covered”:
- People with extremely ‘modest’ net self-employment earnings — typically less than $400 per year;
- Several ‘state and local’ government workers who are enrolled in “retirement plans” offered by their employers;
- Workers in “domestic, electoral, and agricultural” labor whose pay falls short of a set minimum threshold (‘industry and commerce’ workers are covered regardless of pay level);
- Employees of “railroads” who are covered by the ‘Social Security-coordinated’ railroad retirement scheme; and
- ‘Civilian federal’ workers employed prior to January 1, 1984.
Annual Earnings Test -
Individuals’ benefits may be lowered by the OASDI legislation, if their wages above specific thresholds. Beneficiaries who are younger than their FRA and whose earnings exceed specific exempt amounts, may be subject to have ‘all or part’ of their benefits withheld under the Social Security Act’s annual earnings test provisions.
The month a beneficiary reaches FRA, the ‘earnings test’ is no longer applicable on or after. Whatever the level of wages, no benefits are withheld at FRA because of earnings.
The ‘annual earnings test’ exempt amount for those ‘who achieve FRA after 2024’ is $22,320 in 2024. The ‘annual earnings test’ exempt amount for those ‘who achieve FRA in 2024’ is $59,520, for the months leading up to FRA. Check out the page “ssa.gov/OACT/COLA/rtea.html” for further information.
OASDI Tax Limit -
The amount of wages/earnings liable to taxes in a given year is limited by Social Security’s “Old-Age, Survivors, and Disability Insurance” (OASDI) program. When the wages are factored into the calculation of benefits, this “annual tax limit/cap” from Social Security is also taken into account. Every year, this limit/cap is adjusted to reflect changes in the ‘national average wage index.’ The term “taxable maximum” or “contribution and benefit base” is also frequently used to describe this limit/cap.
The base for wages/earnings in 2024 is $168,600.
Contribution and benefit bases -
| Year | Amount (in $) |
|---|---|
| 2024 | 168,600 |
| 2023 | 160,200 |
| 2022 | 147,000 |
| 2021 | 142,800 |
| 2020 | 137,700 |
Note: – Amounts are calculated in accordance with the Social Security Act’s “automatic adjustment provisions.”
OASDI Tax Rate -
‘Employers and employees’ each are paying ‘6.2 percent’ (set by statute) of their wages in OASDI taxes in 2024. Consequently, in 2024, a worker earning ‘$168,600 or more’ is paying $10,453.20 into the OASDI program, with their employer matching that amount as well. In 2024, the ‘self-employment income tax rate’ under the OASDI is 12.4%.
Percentage of taxable income for the taxes -
| Applicable to both employers and employees | Applicable to self-employed individuals | |||||
|---|---|---|---|---|---|---|
| OASI | DI | Total | OASI | DI | Total | |
| 2019 and beyond | 5.300 | 0.900 | 6.200 | 10.6000 | 1.8000 | 12.400 |
| 2016-18 | 5.015 | 1.185 | 6.200 | 10.030 | 2.370 | 12.400 |
| 2000-15 | 5.300 | 0.900 | 6.200 | 10.6000 | 1.8000 | 12.400 |
| 1997-99 | 5.350 | 0.850 | 6.200 | 10.7000 | 1.7000 | 12.400 |
Types and Levels of OASDI Benefits -
Workers in Retirement and Disability -
As early as age 62, you are eligible to begin receiving “Social Security” retirement benefits, somewhat reduced. When you do, however, reach “full retirement age” (FRA), you will be eligible for “full benefits.” Sometimes called the ‘normal retirement age,’ the ‘full retirement age’ (FRA) is the earliest age at which an unreduced retirement payment/benefit is payable.
The age at which an individual is eligible for full “retirement benefits” ranges from 65 to 67, contingent upon their year of birth. The “full retirement age” (FRA) for those born in 1960 and later is now 67. For complete age catalog, visit — “ssa.gov/benefits/retirement/planner/ageincrease.html”.
For the 36 months immediately before to the FRA, the “monthly rate of reduction” (i.e., monthly reduction factor) from the ‘full retirement benefit’ (i.e., the PIA) is ‘5/9 of 1 percent.’ PIA stands for ‘Primary Insurance Amount.’ Thus,
(5 ÷ 9) x (1 ÷ 100) = 0.55555 x 0.01 = 0.0055556
Hence, for ‘36 reduction months’ the benefits are reduced by “0.0055556 x 36 = 0.20” %. For any prior month, the “monthly rate of reduction” (i.e., monthly reduction factor) is ‘5/12 of 1 percent.’ Thus,
(5 ÷ 12) x (1 ÷ 100) = 0.41666 x 0.01 = 0.0041667
Hence, for ‘40 reduction months’ the benefits are reduced by “(0.0055556 x 36) + (0.0041667 x 4) = 0.2166667” %. To know more about how much is lowered, visit — “ssa.gov/benefits/retirement/planner/agereduction.html”.
The ‘disability benefit’ is decreased by the number of months that a worker received the reduced “retirement benefit,” when he/she started receiving benefits prior to being eligible for “disability benefits.”
For insured workers who delay their retirement after attaining the FRA, “benefit amount” will increase for ‘each month of nonpayment’ beyond the FRA, up to age of 70. SSA refer to this increment as a “delayed retirement credit.” The annual maximum credit amount for “delayed retirement credits” is 8%.
Workers’ spouses and kids -
If a spouse has reached FRA at the ‘time of entitlement to spousal benefits,’ it will receive half of the worker’s PIA (independent of the worker’s actual benefit amount). As early as age 62, the spouse of a ‘retired or disabled’ worker may choose to receive monthly payments.
For the 36 months immediately before to the FRA, the “monthly rate of reduction” (i.e., monthly reduction factor) from the ‘full retirement benefit’ (i.e., the PIA) is ‘25/36 of 1 percent.’ For any prior month, the “monthly rate of reduction” is ‘5/12 of 1 percent.’ To know more about how much is lowered, visit — “ssa.gov/benefits/retirement/planner/agereduction.html”.
Benefits payable on a monthly basis are also available to kids of ‘retired or disabled’ workers. A kid/child is defined as an unmarried “child under the age of 18,” child between the ages of 18 and 19 who attends ‘elementary or secondary’ school full-time, or “adult child who is ‘18 years of age or older’ and was incapacitated prior to the age of 22.”
Young spouses (those under the age of 62) who look after a worker’s “entitled child” may also qualify. In the context of determining young spouses’ benefits, a kid/child is defined as a ‘entitled child’ of the worker who is under the age of 16 or “aged 16 or older and was disabled before age 22.”
Young spouses and “children of ‘retired or disabled’ workers” may get up to 50% of the worker’s PIA. A ‘retired or disabled’ worker’s spouse and children are only eligible for monthly payments up to a “family maximum.” For “retired-worker or survivor” families, the ‘family maximum’ amount often falls between 150 and 188 percent of the worker’s PIA. Families of disabled workers are eligible for a ‘family maximum’ equal to the lesser of the two amounts: (1) 100% of the PIA, if it is more than 85% of AIME; or (2) 150% of the PIA.
Benefits are also applicable to ‘divorced unmarried spouses’ who were married to the worker for at least ten years and ‘who are at retirement age.’ The ex-spouse may be eligible for retirement benefits if they applied, divorced spouses who are ‘62 years of age or older’ and who were divorced for ‘two years or longer’ (after a marriage of ten years or longer) may be independently entitled on the record of the “ex-spouse” (who is not yet entitled to benefits). Benefits for a divorced spouse are not included in the ‘family maximum’ provisions.
Survivors Benefits -
Benefits at FRA can be obtained without reduction for ‘widows and widowers’ of workers who have ‘fully insurance.’ As early as age 60, or “age 50 if they are handicapped,” widows and widowers may choose to receive a reduced monthly income/benefit. If a survivor of a ‘divorced marriage’, was married to the worker for ‘ten years or more’ and did not remarry before the age of sixty (or fifty if incapacitated), they are also eligible to receive “widow(er) payments/benefits.”
The ‘monthly rate of reduction’ for survivors whose ‘full retirement age’ is 65 is ‘19/40 of 1 percent’ of the worker’s PIA, for the first sixty months prior to FRA, with a maximum reduction of 28.5 percent at the age 60. In the case of survivors whose FRA is beyond 65, the maximum reduction at age 60 is also kept at ‘28.5 percent’ by adjusting the ‘amount of reduction for each month’ before FRA.
If the dead employee/worker “postponed” obtaining retirement benefits past the FRA, payouts/benefits for ‘widows and widowers’ will be raised. On the other hand, widow(er)s’ benefits are restricted/limited on “widow(er)s first eligibility for survivors’ benefits at age 62 or later,” if the employee/worker had chosen an ‘early retirement.’ The benefit for these recipients is equal to the greater of “82.5 percent of the employee’s PIA”, or “the amount the employee/worker would be getting if it was still alive.” Reduction rates for “disabled widow(er)s” between the ages of ‘50 and 60’ are the same as those for widow(er)s over 60 (71.5 percent of PIA), regardless of their age at the time of eligibility.
If a worker/employee dies either ‘fully or currently’ insured, their dependents, including children and “beneficiary parents at FRA,” may get monthly benefits up to “75% of the worker’s PIA.” The worker’s entitled kid/child, either disabled or ‘under 16 years old,’ must be cared for by the parent beneficiaries. Benefits equivalent to “82.5 percent of the worker’s PIA” are available each month to “dependent parents,” who are 62 years of age or older. The monthly payout for each of the two ‘dependent parents’ who are eligible for benefits, is equivalent to 75% of the PIA of the ‘worker’ (who has passed away). Survivors’ monthly payments are lowered to match the ‘family maximum’ that is applicable on the worker’s account. However, benefits for a ‘divorced spouse’ who survives do not reduce the family’s maximum benefit.
Visit the official OASDI link for additional information: https://www.ssa.gov/policy/docs/statcomps/supplement/2023/oasdi.html.
That’s all friends.
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