How Does Social Security Round-Off Deposits?

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How Does Social Security Round-Off Deposits?

Postby sscritic » Thu Feb 17, 2011 12:48 pm

I could probably find the answer if I spent enough time in the POMS, but I figure someone here has more experience (polite word for "older") and would know.

Yesterday, I got my first social security check with medicare withheld (including IRMAA). I also have federal income tax withheld. The benefit is a whole dollar amount and the deposit was a whole dollar amount. However, medicare is not a whole dollar amount, but I have a letter saying my withholding will be a whole dollar amount. There is a missing 70 cents that I thought would have been reflected in the deposit.

I called social security, but was told "our system is down right now" and "they round-up." I believe the former, but doubt the latter. :)

If the withholding is really a whole dollar amount, then I was not charged the last 70 cents for medicare. I could save $8.40 over the year! Whoopee!
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Postby Penguin » Thu Feb 17, 2011 3:17 pm

sscritic,
I don't know the answer to your question. Nonetheless, I wanted to know that I appreciate the service you provide on this forum with clear answers to difficult questions. I want you to know that I actually tried to figure out the answer to your question by reviewing the social security regulations, but I was unsuccessful.
Here is my guess. Is it possible that your social security payment is a whole dollar amount and your medicare deduction is not a whole dollar amount so your income tax withholding is adjusted to result in a whole dollar amount? In other words the total withholding (medicare plus income tax) is a whole dollar amount.
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Postby sscritic » Thu Feb 17, 2011 3:56 pm

That was what I thought they would do, but they always send you a letter when any changes are made. I first got the "you will be on medicare and your withholding will be and your deposit will be" letter, but then I got the (actually two) "you will be paying the IMRAA and so your withholding will be and your deposit will be" letter. That's why I am looking for verification from someone who has being doing withholding post medicare.

Before medicare, my benefit was a whole dollar, my withholding was a half dollar so my deposit was a half dollar. Everything added up. Now it doesn't, and social security doesn't sent you a "pay stub" showing the breakdown. All I have are the letters with numbers that don't add up.

If you are someone who had both medicare and withholding in 2010, what did your letter for 2010 say and what was the actual withholding on your 1099-SSA? Did they match?
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Postby Rosebud » Thu Feb 17, 2011 4:42 pm

sscritic wrote:That was what I thought they would do, but they always send you a letter when any changes are made. I first got the "you will be on medicare and your withholding will be and your deposit will be" letter, but then I got the (actually two) "you will be paying the IMRAA and so your withholding will be and your deposit will be" letter. That's why I am looking for verification from someone who has being doing withholding post medicare.

Before medicare, my benefit was a whole dollar, my withholding was a half dollar so my deposit was a half dollar. Everything added up. Now it doesn't, and social security doesn't sent you a "pay stub" showing the breakdown. All I have are the letters with numbers that don't add up.

If you are someone who had both medicare and withholding in 2010, what did your letter for 2010 say and what was the actual withholding on your 1099-SSA? Did they match?


I do not do withholding through Social Security (use pension because it is really easy to change withholding amounts online); however, I just checked my records and noticed something interesting:

When I applied for Social Security, I was given a whole dollar amount for Social Security and then $110.50 for Medicare. When I received my first payment it was for a whole dollar amount that was $.50 less than if they had used the figures they had provided me. This year I received a statement that now revises my total Social Security to an amount that is $.50 less than what I was told originally, but conveniently arrives at that lower, whole dollar amount when the $110.50 is subtracted.

I can't bear to talk to them about it, so am just letting it go.

I also want to once again thank you for all of your very detailed research and willingness to time and time again answer questions about Social Security. Keep us updated if you learn anything more about the possible rounding-up issue.
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Postby Parthenon » Fri Feb 18, 2011 12:10 pm

Last year I started collecting Social Security after reaching full retirement age based on my wife's work record. My benefit was $469.50 and with a $110.50 Medicare payment I would net $359.00 every month.

This year I received a letter from the Social Security Administration indicating that "... As a result , your benefits will not increase in 2011." Then they proceeded to list out my monthly benefit at $470.40 with a Medicare payment of $111.40 and mathematically I still netted the same $359.00.

I let it go but then got curious how there would be no increase but their figures were higher this year than last even thought the net was the same. After calling the Social Security Administration (I should have taped the conversation)and hearing their answer I realized I was ill equipped to understand because they have a unique way of doing math.

The best I could determine was that the rounding of Medicare payments had an effect on the base amount of Social Security benefits.

I don't even want to get into the detailed explanation of how they processed an overpayment last year of one of my Medicare payments. The bottom line is that if you overpay, and authorize withholding for federal income tax from your Medicare benefits, when they return an overpayment they withhold a portion of the overpayment by whatever percentage you use for federal withholding.

[To me this is like returning a purchase but they don't give you back your sales tax until you file your state income tax for that year.]

I just hung up and hope I never have to deal with them again.

Ed
"What am I gonna do if I run out of money?"
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Postby sscritic » Fri Feb 18, 2011 12:33 pm

Parthenon wrote:Last year I started collecting Social Security after reaching full retirement age based on my wife's work record. My benefit was $469.50 and with a $110.50 Medicare payment I would net $359.00 every month.

This year I received a letter from the Social Security Administration indicating that "... As a result , your benefits will not increase in 2011." Then they proceeded to list out my monthly benefit at $470.40 with a Medicare payment of $111.40 and mathematically I still netted the same $359.00.

So next January look at your 1099-SSA to see if you they report social security benefits of 12 x 469.50 = $5,634 or 12 x 470.40 = $5,644.80.

If 85% of your SS is taxed and you are in the 25% bracket, that extra $10.80 is going to cost you $2.30 in extra tax.

Did your 1099-SSA for 2010 match your $469.50 figure?

P.S.If your wife was still working in 2009, her PIA could have gone up when those earnings were included in her calculation. You didn't get a COLA, but your 1/2 of her PIA might be higher this year. That doesn't explain the medicare premium changing though.

P.P.S. $111.40 is not a medicare premium that I know, unless you are in a medicare advantage plan that has a $0.90 premium above and beyond the standard Part B rate, and that amount is being withheld from your social security on top of the $110.50.
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Postby Parthenon » Fri Feb 18, 2011 1:05 pm

sscritic wrote:So next January look at your 1099-SSA to see if you they report social security benefits of 12 x 469.50 = $5,634 or 12 x 470.40 = $5,644.80.

Yes, that will be an interesting test to see which figure they report as my total benefits for the year.

sscritic wrote:Did your 1099-SSA for 2010 match your $469.50 figure?

Yes, they were right on for my 2010 benefits.

sscritic wrote:P.S.If your wife was still working in 2009, her PIA could have gone up when those earnings were included in her calculation. You didn't get a COLA, but your 1/2 of her PIA might be higher this year. That doesn't explain the medicare premium changing though.

She hasn't worked since 1976 but because she is older than myself, started taking reduced benefits at age 62 in 2003.

sscritic wrote:P.P.S. $111.40 is not a medicare premium that I know, unless you are in a medicare advantage plan that has a $0.90 premium above and beyond the standard Part B rate, and that amount is being withheld from your social security on top of the $110.50.


I am in a medicare advantaged plan so that must be the reason for the $111.40 premium but I was in the same plan last year, an employer sponsored retirement medical plan.

Ed
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Postby HueyLD » Fri Feb 18, 2011 4:17 pm

Social Security MATH problems:
http://www.youtube.com/watch?v=QWzxVYwUDjo
:lol:
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Postby sscritic » Fri Mar 11, 2011 9:16 pm

I know most people won't be interested, but I have found out more about how social security rounds. Here is what happens to my check:

PIA = $xxxx.c0 (next lowest dime)
Adjustment for starting early or late (percentage)
Medicare Part B = $zzz.e0
Net = wwww.f0 (rounded down to next lowest dime)

This net is what is rounded down to the next dollar.
After that, federal withholding and any Medicare Part D premiums are withheld.

In my case, the sequence is

PIA = xxxx.40
adjustment yyy.50
medicare Part B zzz.70
Net wwww.20
Rounded Down $wwww.00
This is my pre-withholding pre-medicare Part D benefit, which I will refer to as my "Benefit" with a capital B.
The withholding is now computed as the percent you have chosen, rounded off (I think) to the nearest dime (the dime part is correct).
The medicare Part D premium is also a multiple of a dime.

My deposit is then the Benefit minus withholding minus Part D premium.

This gives me the correct answer for the three different deposits* I will receive in the first four months of being in medicare, as well as for the month before medicare.
2. When to round the final monthly benefit
Consider the following before rounding the final monthly benefit
    the family maximum;
    age (including reduction by a fixed money amount or consideration of the Retirement Insurance Benefit (RIB) limitation);
    ...
    Deduction for supplementary medical insurance (SMI) premium for which the claimant is liable [this is Part B]
    other stuff
4. Adjustments applicable after lower dollar rounding

The following deductions or adjustments are made after lower dollar rounding:
    Recovery of a prior overpayment (including SSI offset) and repayment of excess overpayment refunds;
    Attorney fee withholding and repayment of excess attorney fees withheld;
    Garnishment;
    Deduction for Part D premium;
    other stuff
https://secure.ssa.gov/apps10/poms.nsf/lnx/0300601020

* They forgot the IRMAA for Part D the first two months, so they are charging me 3 premiums in month three and 1 premium in month four.
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