Social Security

The Department of the Treasury has announced that it will phase out paper checks for Federal government benefits by March 1, 2013. This new rule will extend the safety and convenience of electronic payments to millions of Americans. People who do not have electronic payments for their federal benefits by that time will receive their funds via a pre-paid debit card. Called the Direct Express® Debit MasterCard® card, it is issued by Comerica Bank as the financial agent of the U.S. Treasury.  And persons applying for federal benefits for the first time from six agencies on or after May 1, 2011, will receive their payments only through direct deposit to their bank or credit union account or to a Direct Express® Debit MasterCard® card. The programs affected include the Social Security Administration, Supplemental Security Income, Veterans Affairs, Railroad Retirement Board, Office of Personnel Management, and Department of Labor (Black Lung).

On October 15, the Labor Department announced that U.S. consumer prices rose 0.1% in September. For those receiving Social Security benefits that news clinched for them a second consecutive year without a cost-of-living adjustment (COLA). The Urban Institute has created a video package featuring Rudolph G. Penner as he explains and discusses the inflation measure: http://www.urban.org/publications/500190.html. The National Academy of Social Insurance offers further explanation and discussion:
Explanation: http://www.nasi.org/discuss/2010/10/why-no-social-security-cola-2011
Discussion: http://www.nasi.org/discuss

A little-known strategy that allows Social Security recipients to boost their income by repaying benefits received in earlier years and then claiming a bigger monthly check based on their greater age may soon disappear. The Social Security Administration (SSA) is moving to eliminate the do-over strategy. If the agency gets its way, the rule could take effect within months. If you or someone you know might benefit from the payback strategy, now is the time to consider it and come to a decision. Putting it off could mean letting the government make the decision for you -- by eliminating the opportunity. Retirees can collect Social Security benefits as early as age 62, but monthly payments are reduced by 25 percent compared with what they would be if claimed at full retirement age, which is 66 for those who claim benefits this year. Those who are willing to wait past age 66 can boost their benefits by 8 percent for every year they delay, up to age 70, increasing annual benefits to 132 percent of their base amount. In 2007, about 500 people -- out of more than 37 million retirees and their dependents receiving benefits -- took advantage of the payback option. By 2009, the number had nearly doubled as more retirees learned how they could repay their benefits, interest- and penalty-free, and restart them at a higher level. As a bonus, those who repay benefits can claim a tax credit or a tax deduction -- whichever results in a bigger tax break -- for any income taxes paid on the benefits as they received them.

         This situation has occurred many times over the years: a client gives me a copy of a letter from the Social Security Administration (SSA) which contains a Social Security Number (SSN) followed by the letters “A”, “B”, “E” or other letters, and then asks me to explain what type of benefit is indicated by the letter following the SSN. As this seems to be a common question, I thought that a blog post on the subject might be appropriate. So, here it is.

            FYI, the letters that come after a SSN are called “Social Security beneficiary codes.” A list of the Social Security beneficiary codes which includes the meaning of each code is located on SSA’s website at Social Security Online. By reviewing the SSA website, I found that the SSN followed by one of these beneficiary codes is referred to as a claim number. SSA assigns a beneficiary code to a SSN after an application for Social Security benefits is filed. These beneficiary codes may appear on correspondence from Social Security or on Medicare cards. However, the codes will never appear on a Social Security card. For example, if the wage earner applies for benefits and his or her SSN is 123-45-6789, then the applicant’s claim number is 123-45-6789A. This number will also be used as the wage earner’s Medicare claim number, once he or she is eligible for Medicare. If the wage earner’s spouse is female and subsequently files for benefits on the wage earner’s SSN, the spouse’s claim number is 123-45-6789B. A list of the Social Security codes and their meanings follow:

Interestingly, this list is not complete, but shows only the most common SSA beneficiary codes.