Old-Age, Survivors, and Disability Insurance

AuthorJeffrey Lehman, Shirelle Phelps

Page 310

The federal Old-Age, Survivors, and Disability Insurance (OASDI) system was developed pursuant to the federal Social Security Act of 1935 (42 U.S.C.A. § 301 et seq. [1935]) to provide government benefits to eligible retirees, disabled individuals, and surviving spouses and their dependents.

OASDI benefits are monthly payments made to retired people, families whose wage earner has died, and workers who are unemployed because of sickness or accident. Workers qualify for such protection by having been employed for the mandatory minimum amount of time and by having made contributions to SOCIAL SECURITY. There is no financial need requirement. Once a worker qualifies for protection, his or her family is also entitled to protection. The OASDI program is geared toward helping families as a matter of social policy.

The OASDI program is funded by payroll taxes levied on employees, their employers, and the self-employed. The rate of the contributions is based upon the employee's taxable income, up to a maximum taxable amount, with the employer contributing an equal amount. The self-employed person contributes twice the amount levied on an employee. In 1996 a tax rate of 6.2 percent was levied on earned income up to a maximum of $62,887 to fund OASDI.

Old-Age Benefits

Old-age benefits were the cornerstone of the original SOCIAL SECURITY ACT, which was passed in 1935. More than 25 million Americans receive old-age benefits each month, and those payments amount to almost $20 billion a year. Because of the increasing median age of the adult population, these figures are constantly increasing.

To be eligible for Social Security old-age benefits, a person must have worked a minimum number of calendar quarters, which increases with the worker's age. Forty quarters is the maximum requirement. Once a person earns credit for the required number of calendar quarters, she or he is insured. Workers born before 1950 can retire at age 65 with full benefits based on their average income during working years. For those workers born between 1950 and 1960, the retirement age has increased to age 66. Workers born in 1960 or later will be awarded full benefits for retirement at age 67. A person may retire at age 62 and receive less than full benefits. A worker's spouse who has not contributed to Social Security receives, at age 65, 50 percent of...

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