Retirement and Survivors Insurance

A worker gains RSI coverage by performing covered employment for a given length of time. The term "covered employment" insures most types of workers, including full- or part-time wage or salaried workers, self-employed persons, farm workers, members of the United States Armed Services, employees of private nonprofit organizations, most domestic workers and most federal, state and local government employees. The only major exceptions are for federal workers hired before 1984, certain religious workers, employees of certain religious sects and railroad employees covered by the Railroad Retirement System (RRS). The rules of eligibility and benefit amounts for retirees are quite complex. Limited coverage is also provided for spouses, children and other survivors.

The usual age for commencement of RSI benefits is 65; however, a worker has the option of receiving benefits as early as age 62. All benefits are based on what is referred to as the primary insurance amount (PIA) - the amount a worker is entitled to if he or she retires exactly at age 65. The amount of each monthly check varies depending on how much the worker earned during his or her working years. The higher his or her pay, the higher the benefits, up to a maximum dollar amount. Initiating benefits at age 62 involves a permanent 20 percent reduction of the monthly amount. Thus, the permanent reduction amounts to approximately seven percent of the PIA for each year that a person commences retirement before age 65. Postponing the receipt of benefits until after age 65 can entitle a worker to receive permanently increased monthly amounts based on his or her PIA. Cost-of-living increases are built into the system so that monthly checks automatically increase each year as the national cost of living rises. Workers under age 70 are subject to a reduction in their benefit checks if they earn income greater than a specified amount. After age 70, workers' benefits remain the same regardless of how much they earn.

The spouse of an eligible worker can usually draw spousal benefits on the worker's account if he or she is at least 62 years old. The spousal retirement benefit (if commencing at age 65) is usually equal to one-half the worker's PIA. A divorced spouse can still receive spousal benefits if he or she was married to the insured worker for at least ten continuous years and has not remarried. A child or grandchild of a fully insured worker can draw benefits if he or she was dependent on the worker when benefits began, is unmarried and is either (1) 18 years or younger or (2) is older than 18 years but became disabled before reaching age 22. A surviving widow or widower of a fully insured worker can draw full benefits on the worker's account at age 65 and reduced benefits at age 60. If the surviving widow or widower is disabled, benefits may be payable at age 50. A one-time death benefit is also available to the survivor of a fully insured worker.

As a general rule, an eligible individual must formally apply for RSI benefits in order to receive them. It is wise to apply at least two months in advance to allow for paperwork to be completed. Failure to apply for benefits as soon as one is entitled to them can result in a forfeiture of benefits. In limited circumstances, an applicant is entitled to receive benefits for up to six months preceding the application. Benefits before that time may be permanently lost. Anyone interested in learning how much he or she is likely to receive in RSI benefits can visit a local Social Security district office and request an estimate of future benefits based on past earnings.

Railroad Retirement System

The Railroad Retirement System (RRS) is a federal income insurance program specifically for workers in the railroad industry. RRS originally existed independent of the Social Security Administration, but in 1974 its provisions were substantially integrated into the Social Security Administration. The integration has not been entirely a smooth one, however, and the combination of the two programs has led to complex and confusing rules which are often the source of errors in awarding benefits.

Most of the rules for RRS closely parallel those for RSI. A retired railroad worker is eligible for monthly benefits if he or she worked for a railroad for at least ten years before reaching age 65. As with RSI, a worker can opt to retire at age 62 but will receive reduced benefits. Anyone with fewer than ten years of employment in the railroad industry is ineligible for railroad benefits, but the years of railroad employment can be added to years of nonrailroad employment for purposes of calculating RSI benefits. Some railroad workers who retired before January 1, 1975, are entitled to draw full RSI benefits and full RRS benefits. Most other workers, however, will have RSI benefits reduced by the amount of RRS benefits.

Disability Benefits

The federal government has two disability benefit programs administered by the Social Security Administration for qualified applicants - Disability Insurance Benefits (DIB) and Supplemental Security Income (SSI). These two programs are governed by many of the same rules. An individual whose earnings were quite low may receive benefits from both programs simultaneously.

DIB provides benefits for workers with a substantial work history in "covered employment" who are unable to continue work because they have become disabled before reaching their 65th birthday. Covered employment includes most types of work and must occur within a specified period before becoming disabled. Dependents of DIB recipients are usually eligible for children's benefits.

Supplemental Security Income

SSI is a nationwide income maintenance program designed to help disabled, certain elderly or blind persons with limited income and assets. Although SSI is administered by the Social Security Administration, it is not funded by Social Security taxes. SSI differs from DIB and RSI because it is based solely on financial need; a person's past work record is entirely ignored in determining eligibility for SSI. For example, a disabled person under age 65 who has insufficient covered employment to qualify for DIB may be eligible to receive SSI.

When the federal government created SSI, it replaced many state-administered welfare programs for the elderly, blind and disabled. The State of Minnesota chose to continue its own programs. These programs are known as Minnesota Supplemental Aid (MSA) and Minnesota General Assistance (MGA). MSA provides monthly checks to qualified elderly, blind and disabled persons. The eligibility requirements for MSA are very similar to those for SSI but also take into consideration the applicant's living expenses in determining eligibility and benefit levels. The purpose of MGA is to help poor Minnesotans who are elderly or unable to work but whose needs are not sufficiently met by other federal or state programs. Many elderly or disabled Minnesotans will not qualify for MGA because the receipt of RSI, SSI and/or MSA would disqualify them.

Both DIB and SSI programs define disability as the "inability to engage in any substantial gainful activity 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." The disability can be either physical or mental (or a combination thereof) and must be "of such severity" that an applicant is no longer able to engage in any substantial gainful work given his or her age, education and work experience.

The applicant for either DIB or SSI has the burden of establishing the disability by medical evidence. Applicants for DIB must be disabled for five months before their benefits begin. SSI applicants can collect benefits commencing the month following the month of application. Each recipient's case is reviewed periodically to determine whether his or her condition has improved to the point where he or she is able to resume working.

Recently enacted legislation provided for termination on January 1, 1997, of DIB and SSI recipients who were on the disability rolls due to drug or alcohol addiction. Moreover, in determining future entitlement to DIB or SSI, drug or alcohol addiction will not be considered to constitute a medical impairment. In addition, DIB and SSI recipients addicted to drugs or alcohol are required to receive their payments through a representative payee.

Medicare

Medicare is a federal program administered by the Social Security Administration and designed to cover a portion of the basic medical and health care costs of individuals over age 65 or are DIB recipients who have received such benefits for more than two years. Medicare has become an enormous federal program, providing billions of dollars in coverage every year.

Medicare should not be confused with Medicaid. Medicaid is a government program which pays the medical expenses of individuals with limited income and assets. Unlike Medicaid, Medicare benefits are available to qualified individuals regardless of financial need.

Medicare Parts A and B

Medicare has two primary components, Part A and Part B. Medicare Part A, commonly known as Hospital Insurance, covers medically necessary hospital and related health care. Included in Part A are costs for such expenses as inpatient hospital care necessitated by acute illness, skilled nursing home care, certified hospice care for the terminally ill and care in the home by a certified home health care provider. Medicare Part B, commonly known as Supplemental Medical Insurance, is a voluntary health insurance program designed to apply to costs not covered by Medicare Part A, such as outpatient hospital services, outpatient physical therapy, speech pathology services, necessary ambulance services and medical equipment. Unlike Part A, which is paid for out of Social Security taxes and is free to anyone qualifying for it, Part B is an optional program that carries small monthly premiums.

The federal government contracts with private insurance companies to handle routine claims processing, payment and other functions under Parts A and B. Private insurance companies contracted under Part A are called fiscal intermediaries. The fiscal intermediary for almost all of Minnesota is Blue Cross/Blue Shield of St. Paul. Private insurance companies contracted under Part B are called carriers. The Travelers of Bloomington is the carrier for the counties in and around the Twin Cities metropolitan area and Rochester. Blue Cross/Blue Shield is the carrier for the rest of Minnesota. The Travelers Insurance Company of Salt Lake City is the carrier for RRS beneficiaries in Minnesota.

Anyone age 65 or older not eligible for RSI or RRS benefits can still receive Medicare Part A coverage by paying a monthly premium. Medicare Part B coverage is automatically available to anyone who qualifies for Medicare Part A benefits. In fact, all recipients of Medicare Part A benefits are automatically enrolled in Medicare Part B unless they opt out of Part B coverage.

Costs Not Covered by Medicare

Medicare was never intended to provide comprehensive coverage for all medical needs of America's elderly and disabled population, but rather was intended to supplement private resources. Many health services are not covered by Medicare. For example, Medicare does not pay for:

• Custodial care that could be reasonably given by someone without medical training and is generally intended to help the patient with his or her daily living needs, such as assistance with bathing, walking, or exercising
• Dentures or routine dental care
• Eyeglasses, hearing aids and examinations to prescribe or fit them
• Nursing home care (except skilled nursing care)
• Prescription drugs
• Routine physical checkups and related tests

Other State Assistance

Many seniors seek private insurance to supplement Medicare coverage. Some seniors are able to obtain continuation or conversion coverage from group policies that they had at their workplace. Under these plans, seniors continue to be covered by the policies that were insuring them while they were working. Another popular option for seniors is to join a Health Maintenance Organization (HMO). HMO coverage is similar to continuation or conversion coverage, but many HMOs have more complicated rules for persons covered by Medicare.

Still another alternative for seniors is private insurance policies intended to cover gaps not reimbursed by Medicare, such as deductibles, copayments or noncovered procedures. These policies are commonly referred to as Medigap policies. Medigap policies have been a source of much confusion and outright fraud in Minnesota, so the state legislature has created complex methods to regulate them. The two types of Medigap policies are basic policies and extended basic policies. The State of Minnesota requires that basic Medigap coverage includes coverage for several preventive health care procedures and that extended Medigap coverage also provides 100 percent of the cost of several routine cancer screening procedures, immunizations and other preventive tests and measures. In Minnesota, most dread disease policies - policies designed to cover a particular type of illness, such as cancer or heart disease - are illegal to sell to Medicare beneficiaries. For certain indigent individuals, Medicaid is available, and therefore private insurance is not required. Seniors may also qualify for benefits, such as discounted prescription drugs, through MinnesotaCare.

Center for Public Representation, Minnesota Practice Library

Counseling the Elderly Client in Minnesota (Lynn K. Klobuchar, gen.ed., Lawyers Cooperative Publishing, Rochester, NY, 1994)

Minnesota Attorney General's Office, Consumer Protection, 1400 NCL Tower, 445 Minnesota Street, St. Paul, MN 55101, phone: (612) 296-3353 or (800) 657-3787, TDD (612) 297-7206 or (800) 657-3787 (free booklet: Seniors' Legal Rights)

Social Security Administration, 1811 Chicago Avenue, Minneapolis, MN, phone: (800) 772-1213 (free pamphlet: Understanding Social Security)

Commission on Legal Problems of the Elderly, American Bar Association, 740 Fifteenth Street NW, Washington, DC 20005, phone: (202) 662-8690

Equal Employment Opportunity Commission, 330 Second Avenue South, Suite 430, Minneapolis, MN 55401, phone: (612) 335-4040 or (800) 669-4000

Minnesota Board on Aging, 444 Lafayette Road, St. Paul, MN 55155-3843, phone: (612) 296-2770 or (800) 882-6262 (information on living wills)

Minnesota Department of Human Rights, 800 Bremer Tower, 82 Seventh Place East, St. Paul, MN 55105, phone: (612) 296-5663