Here are some common questions that get asked, and here are a few answers to help you get started.
How should FSMSSA handle the problem of retirees or claimants who take jobs abroad??
First, when a retiree goes back to work, an earning test is applied which frequently reduces the amount of the monthly pension payment. When retirees take jobs abroad, e.g. in Guam, Saipan, Hawaii or the mainland, a question arises as to whether the earning test should be applied even if the retirees are no longer paying into the FSMSSA system.
Title 53 F.S.M.C. 603(6) states that an earning test to reduce the pension amount is to be applied to any retiree who goes to work in “covered or non-covered employment.” The SS Administration’s legal interpretation is that any and all employment should be considered, whether it is earned within the FSM or abroad.
As provided under section 203 of the FSM Public Law 2-74 (Social Security Act), any claimant whose application for benefits is denied by the Administration or the Administration takes action to reduce or stop previously authorized benefits has the right to appeal the decision to the FSM Board of Trustees.
The SS tax rate is scheduled for a statutory increase effective January 01, 2013 from 7% to 7.5%. Why is the 0.5% increase necessary??
The statutory SS tax rate increase would increase the employee’s share of contributions from 7% to 7.5% of taxable wages and would also increase the employer’s matching contribution by the same rate, for a total of 2% increase in the combined SS tax rate (15%). This increase is actuarially determined to balance the benefit formula.
Will this increase affect the retirement pensions of employees? If so, how?
This increase in contribution rate would not affect the amount of the current benefit payments. Rather, this increase would maintain the financial soundness of Social Security thereby securing the benefits that current employees will be entitled to receive in the future.
How will I know if my employer has contributed to Social Security??
Employees are urged to check with Social Security branch office in their home state and request for Individual Wage History report. This contains all the quarters of coverage and wages reported to Social Security by your employer. If you are missing some wages and quarters, Social Security will help you locate them and if they are not found, chances are your employer has not remitted your contributions to Social Security. If employers do not report their employees’ wages and pay their shares, the employees may lose benefits.
How will I know if the records provided by the employer is correct and accurate?
The only way to find out is for the employee to contact the Social Security Branch Office nearest you. The most important data that you should check are:
- Spelling of your name (first name, middle initial & last name);
- Your date of birth;
- You must be consistent in using the same date of birth in all your legal documents and transactions. Using different dates of birth may cause you to lose benefits when you’re ready to retire.
May I select my beneficiaries under social security?
No. The order of beneficiaries is established by law:
- If no spouse, dependent children in equal shares;
- Parents in equal shares;
- Legal representatives.
How long will I receive a monthly retirement benefit?
As long as you live, subject to the earnings test if you return to work. If you do not notify Social Security as soon as you return to work, future benefits may be stopped until overpayments are repaid.
As provided under sections 804,901 and 902, FSM Public Law 16-10 incorporated two new provisions into the system for sustainability; Increase in SS Taxes from 7% to 7.5% for employee contribution,and from 7% to 7.5% for employer contribution (15% in total) became effective January01, 2013. Moreover, the new retirement age scheme defined that fully insured wage earners (covered and non- covered) that turn 60 years old by January 01, 2011 will be entitled to 50% of their retirement benefits with the option of continued employment excluding earnings test adjustment. Moreover, as these new retirees reach 65 years old, they will become entitled to 100% of their benefits subject to earnings test if they are still working. Documents of birth (at least two kinds) are required for filing for retirement benefits, and earnest notification of continuance for employment at age 65 for earnings test readjustments.
I’m a foreigner presently working in the FSM on a two-year contract. Is it possible to get a refund on my SS tax contributions when I return to my country?
No. In a social security system such as the FSM, current contributions are used to pay the current beneficiaries. The Social Security taxpayer does not build up his or her own separate account. The FSM Congress intends to equitably distribute the responsibility for SS tax contributions to all employees (with few exceptions) regardless of citizenship. In return, the FSM Social Security continues to pay benefits to qualified beneficiaries regardless of where they reside, provided of course, that the country of origin has an equivalent social security insurance program.
I am a government worker who owns a private business. Since SS tax is being deducted from my paychecks, I do not include myself when I file for SS tax for my employees. Am I correct in doing this?
Unfortunately, no. As an employee, your employer (the Government) is required by law to deduct your SS tax contribution from your wages. At the same time, as an employer, you are required to report your self-employment wages at twice the wages of your highest paid employee, subject to the maximum taxable wages ($7,000). At the end of the calendar year, you (as an employee) are entitled to a refund for any overpayment you made.
Why should I resign in order to qualify for FSM Social Security disability benefits?
A person is truly disabled according to the FSMSSA if they have the inability to engage in any substantial gainful employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. Therefore, still working means you are not disabled. By definition, if you are disabled, you are not working.
What is family employment?
‘Family employment’ means employment of a worker by a member of the household, a parent or a son or daughter. As mandated by law, the FSMSSA does not tax wages earned in family employment. However, the law also states that the worker may apply to the Board for a determination that such employment is bona fide covered employment. This way, a person can earn quarters from family employment by paying taxes based on those earnings and thus earning the right to receive benefits based on the same earnings.
Is there or can there be a pension element in the FSMSSA?
Currently, no. If a pension element is to be implemented, additional taxes will have to be imposed on the workers, which at this time in this economic climate, is not feasible. Ten or so years ago, an act to introduce a pension element into the system was proposed to congress, but it was not passed at the time because more taxes were necessary. This holds true today. The new compact, we hope, will help the economy grow which is necessary for the system to stay alive and hopefully allow such an element to be implemented.
I am a retiree who is receiving surviving spouse benefits. According to the law, I can’t collect retirement benefits based on my earnings because the calculated benefit amount is less than the survivor benefit that I am receiving. Can the law be changed so I can receive benefits based on my earnings?
Yes and it has been changed. Public Law 14-37 became effective on November 8, 2005, and introduced a new provision that allows you to lump sum the lesser benefit at 4% of the cumulative covered earnings.. Your scenario is like that of surviving children. The previous law mandated that if both parents are deceased, the children will only receive the larger calculated benefit from the two deceased parents. The aforementioned new allows these children to lump sum the lesser benefit at 2% of the cumulative covered earnings while still receiving the larger benefit monthly.
Some people are not fully insured when they reach retirement age even though they actually worked more than the required number of quarters. Will this happen to me?
This happens because employers are not reporting a person’s wages or the ss number provided by the employer is wrong. In the latter case, his/her wages will be reported to another person’s records. Because of this, you are encouraged to periodically visit our offices and ask our staff to produce your wage history. This document will tell you how many quarters you have worked and where and when you earned them. This way, you will know if you are being credited for quarters that you work.
What are quarters?
The FSMSSA tracks a person’s earnings through tax payments made by an employer on behalf of an employee. Tax payments for social security in the FSMSSA happens quarterly. Therefore, if you work for a quarter and your employer reports your earnings, those earnings are recorded as a quarter. Today, you will need 50 quarters in order to be fully insured for benefits when you retire. Quarters only determine eligibility for benefits. Benefit amount is not determined by how much tax you pay or how many quarters you earn. It is computed from your total taxable wages.
What are taxable wages?
The FSMSSA utilizes what is called a “maximum taxable wage base”. Currently the maximum quarterly taxable wage base is $7,000. Let’s say you earn $8,000 in a quarter. The FSMSSA will only tax $7,000 of that $8,000. So, taxable wages are the part of your wages that is taxed.
What happens if I am not qualified for benefits when I retire?
If your records are correct and you are in fact short of the required number of quarters to qualify for benefits, you can continue working until you reach the required number of quarters or you can opt for an optional lump sum benefit. This is a one-time payment that will be 4% of your cumulative covered earnings. However, you should know that once you agree to receive this optional lump sum and the payment is made, you will lose credit for all the quarters you’ve earned up to that point. So, if you return to work after choosing the lump sum payment, your earned quarter count will restart at zero. Furthermore no additional benefits may be collected based on the quarters used for the lump sum payment.
How is disability determined?
If you become disabled, you should immediately apply for benefits. All the necessary documents that you are required to provide will be detailed in the application. These are usually medical records proving your condition. Social security staff at the offices will help you package your claim. Once all the required documents have been gathered, the claim is sent to the Disability Examiner for review and recommendation.