Glossary of Social Security and Medicare Terms

The Social Security and Medicare programs are full of special terms, abbreviations, and acronyms. The following are the most commonly used in the NARSSA program.

Adjusted Gross Income (AGI): An individual's total gross income from all sources minus certain adjustments before the itemized or standard deductions, exemptions, and credits are taken into account.

Applicant: The person signing the application for Social Security benefits. This may be different than the claimant, such as when a parent is the applicant for a child claimant.

Approved Charge: The dollar amount that has been approved by Medicare for a medical procedure.

Auxiliary Benefits: Social Security benefits to auxiliaries, people other than the worker. These are also referred to by the terms dependent benefits, family benefits, spousal and survivor benefits.

Average Indexed Monthly Earnings (AIME): The average monthly earnings of a worker's compensation years after adjusting for inflation. AIME is used in the process of determining what each retiree's PIA will be. By indexing past earnings, the highest 35 years can be determined, and these yearly earnings are then converted to the average monthly earnings.

Average Wage Indexing (AWI) Series: The SSA uses the national average wage indexing series to index the earnings of individuals for benefit computation purposes. The series is also used to index several other amounts that are important to the operation of Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program.

Bend Point: Bend points divide the AIME into three portions that contribute varying percentages to the worker's primary insurance amount. The dollar amounts of the bend points are adjusted for inflation. Also see Primary Insurance Amount (PIA).

Beneficiary: A person receiving Social Security or Medicare benefits.

Child Benefit: A child can claim child insurance benefits on a parent's earnings record if the child is dependent on that parent, as defined by the SSA, and if the child is not married, and either under age 18, or no older than 19 and a full-time elementary or secondary school student.

Child Survivor Benefit: A dependent child is eligible for a surviving child benefit based on a deceased parent's record if the deceased parent was fully or currently insured at the time of death. The surviving child benefit is equal to 75% of the deceased parent's PIA at the time of death.

Child-in-care Spousal Benefit: A spousal benefit available to a parent, younger than age 62, who has a child in care under age 16. The benefit is available for children in care who are older than 16 if disabled prior to turning 22.

Claimant: A person for whom a Social Security claim is filed.

Coinsurance: A portion of a medical bill that must be paid by the patient, typically expressed as a percentage of the total bill.

Combined Income (CI): Consists of AGI, plus 50% of Social Security income and all tax-exempt interest. This is used in the calculation of if and how much of a taxpayer's Social Security income will be taxed. Also known as Provisional Income.

Computation Base Years: Insured workers become eligible for retirement benefits at age 62. If 2019 were the year of eligibility, SSA would divide the national average wage index for two years prior, or 2017, by the national average wage index for each year prior to 2017 in which the worker had earnings. The worker's past annual earnings are then multiplied by that year's ratio. This gives the indexed earnings for each year prior to 2017. Any earnings in or after 2017 are used at face value, without indexing. The highest 35 adjusted earnings are then used to compute the AIME, which is used to compute the worker's primary insurance amount (PIA) for 2019.

Cost of Living Adjustment (COLA): The annual adjustment to Social Security benefits. They are adjusted to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The purpose of COLA is to ensure that the purchasing power of Social Security benefits is not eroded by inflation.

Copayment: A portion of a medical bill that must be paid by the patient, typically expressed as a flat dollar amount.

Covered Earnings (Work): Earnings from employment or self-employment which is covered by Social Security and subject to Social Security taxes and posted to the earnings record. Also see Maximum Earnings.

Death Benefit: A one-time payment in addition to any monthly survivor benefits that are due to the surviving spouse. The payment is made to a child who is eligible for benefits on the deceased parent's record if there is no surviving spouse.

Deeming: The provision that states if you are eligible for more than one benefit, such as your own retirement benefit and a spousal or survivor benefit, you are deemed by law to have filed for all benefits. You will collect an amount equal to the highest of the benefits.

Delayed Retirement Credits (DRC): For retirees who delay taking their retirement benefit past their full retirement age (FRA), monthly benefits will rise by 8% a year plus the COLA.

Disability: A medical condition which prevents, or will prevent, the performance of Substantial Gainful Activity for at least 12 months or until death.

Disability Insurance (DI): Benefits paid to a worker based on his or her own earnings record.

Disabled Child Insurance Benefit: Benefits paid for children whose parents (one or both) have worked and earned enough Social Security credits and are entitled to Social Security retirement or disability benefits, or the parent(s) is deceased. A child must be unmarried, dependent on the parent, and either younger than 18, 18-19 years old and a full-time student (no higher than grade 12), or 18 or older with a disability that began before age 22.

Divorced Spouse's Insurance Benefit: Benefits paid to divorced spouses of workers who are eligible to receive Social Security benefits. Claimants must be at least 62 years old, not currently married, divorced from a person who is at least 62 years old and has enough work credits to get Social Security benefits, have been married to that person for at least 10 years and divorced for at least 2 continuous years, and not be entitled to an equal or higher Social Security retirement benefit or disability benefit based on their own work.

Divorced Widow(er)'s Insurance Benefit: Benefits paid to the divorced spouse of a deceased worker who had earned enough work credits. The divorced spouse must be at least age 60, divorced from the deceased worker, have been married to the deceased worker for at least 10 years, not be entitled to an equal or higher Social Security benefit on their own work record, and be unmarried or remarried after age 60.

Dual Entitlement: Being simultaneously entitled to benefits on two different work records, as a worker and as the spouse or survivor of another worker.

Early Retirement Reductions: In the case of early retirement, a benefit is reduced 5/9 of one percent for each month before FRA, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month. These monthly reductions amount to a 5%-7% reduction annually between ages 62 and FRA.

Earnings Record: The record of all covered earnings (work) performed by a worker.

Earnings Test: The retirement earnings test applies only to people below FRA who are collecting benefits and have earned income. The SSA withholds benefits if those earnings exceed certain levels, called the retirement earnings test exempt amounts. One of two different exempt amounts apply – a lower amount in years before the year a worker attains FRA, and a higher amount in the year FRA is attained. These exempt amounts generally increase annually with increases in the national average wage index. Note that any benefits withheld while continuing to work are not "lost". Once a retiree reaches FRA, the monthly benefit is increased permanently to account for months in which benefits were withheld.

Eligible: Meeting all the legal factors of entitlement except for filing a valid claim. A person may be eligible for payment, but not entitled, because they have not yet filed for benefits.

Enrollment Periods: Specified time periods for enrolling in Medicare or supplemental insurance.

Entitled: The person who meets all legal requirements for benefit payments, including filing a valid claim.

Family Benefits: Payments made to a living spouse, former spouse, or child on the work record of a living worker.

Family Maximum Benefit (FMB): The maximum payment amount available to an immediate family under one earnings record. This apples to both family benefits and survivor benefits for Social Security and disability.

Federal Insurance Contributions Act (FICA): The tax withheld from employee paychecks for Social Security and Medicare. Currently 6.2% of wages, up to the maximum taxable earnings, is paid to Social Security and 1.45% of total earnings is paid to Medicare. This amount is also paid by the employer, for a total of 12.4% to Social Security and 2.9% to Medicare.

Full Retirement Age (FRA): The age at which a person is entitled to full or unreduced retirement benefits. No matter what a retiree's full retirement age is, they may start receiving benefits as early as age 62 or as late as age 70. FRA is age 66 for those born 1943-1954 and increases by 2 months each year for those born between 1955 and 1960, when FRA is age 67. Also known as Normal Retirement Age.

Full Retirement Benefit: The retirement benefit available to a worker based on his or her own work history, assuming the worker applies for a retirement benefit at their FRA. This is also known as the Primary Insurance Amount (PIA).

Government Pension Offset (GPO): The rule that applies to a spouse or survivor who is receiving Social Security benefits and a retirement or disability pension from a federal, state, or local government based on their own work for which they did not pay Social Security taxes. The GPO reduces the amount of the Social Security spouse's or widow(er)'s benefits by two-thirds of the amount of the government pension.

Hospital Insurance (HI): This means the same as Medicare Part A. It also refers to Health Insurance when used with the acronym OASDHI.

Health Maintenance Organization (HMO): A pre-payment medical practice providing medical services through its own (or contracted) hospitals, clinics, etc. Services typically require a flat copayment.

Indexing: Adjusting for inflation. Workers' wages are indexed, or adjusted, for inflation in the process of determining Social Security and disability benefits.

Insured Status: A worker's status of meeting or not meeting the work requirements for receiving payments as measured in credits or quarters of coverage.

Life Expectancy (LE): An important component of Social Security and retirement planning is to consider maximum life expectancy to help avoid longevity risk of running out of money later in life.

Long Term Care (LTC): Refers to custodial care given at home or in an institution such as an adult family home or assisted care facility. LTC can also include respite or other supplementary care. The term often refers to the insurance that pays for such care.

Maximum Earnings: The maximum amount of earnings subject to Social Security taxes, also known as taxable earnings ceiling. The SSA adjusts this limit each year based on changes in the national average wage index. It is also referred to as the contribution and benefit base.

Medicaid: A medical program for low-income individuals which is part of the public assistance program. It is included with Supplemental Security Income (SSI) entitlement.

Medicare Card: A card issued by Medicare indicating entitlement to Medicare Part A and/or Part B. It provides your claim number for processing medical claims.

Medicare Part A: The hospital insurance portion of Medicare, primarily covering hospital and skilled nursing care.

Medicare Part B: The medical insurance portion of Medicare, covering physicians' services and other medical bills. Also known as Supplemental Medical Insurance (SMI).

Medigap Insurance: Private medical insurance intended to supplement Medicare's coverage, or filling Medicare's "gaps".

Modified Adjusted Gross Income (MAGI): Adjusted gross income plus non-taxable income such as untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. For many people, MAGI is identical to adjusted gross income.

Monthly Earnings Test: A retirement earnings test used in the first year of retirement, which considers the retiree's earnings month by month rather than annually. See Earnings Test.

Old-Age, Survivors, and Disability Insurance (OASDI): The official name of Social Security. OASDI includes the two trust funds, the Social Security trust fund and the disability trust fund.

Primary Insurance Amount (PIA): The monthly benefit a person will receive if he/she elects to begin collecting retirement benefits at his/her FRA. If collecting prior to FRA, PIA is reduced each year by about 7.5%, or up to a 25% reduction at age 62. If retirees choose to wait to collect benefits until after FRA, those benefits increase by 8% each year, up to a 32% increase at age 70. The difference therefore between collecting at age 62 and age 70 is an increase of about 76%.

Provider: As used by Medicare, a hospital, nursing facility, physician or other entity providing medical services.

Quarter of Coverage (QC): A legal term, also known as Social Security credit, work credit, or just credit. A QC is the basic unit – expressed as an amount of earnings – for determining whether a worker is insured under the Social Security program. No matter how high your earnings may be, you cannot earn more than 4 QCs in one year. See Work Credit.

Recomputation of Benefits: The SSA recalculates earnings and benefits each year after receiving tax returns and automatically increases benefits if warranted beginning in the year after the earnings were generated. This is usually due to continued wage earnings after age 60 that become one of the retiree's highest 35 years that benefits are based on. It can take as long as two years for the SSA to receive tax returns and calculate recomputations.

Required Minimum Distribution (RMD): The amount that traditional, SEP or SIMPLE IRA owners and qualified retirement plan participants must withdraw from their retirement accounts by April 1 following the year they reach age 70½. Withdrawals may be taken sooner, but at this age a minimum amount is required to be withdrawn. RMD amounts must be distributed each subsequent year based on the current RMD distribution calculation amounts.

Restricted Application: A claiming strategy in which a dually entitled worker files for only one type of benefit rather than another, such as a spousal-only filing. The restricted application is being phased out due to changes in the Social Security program that were enacted with passage of the Bipartisan Budget Act of 2015. Only retirees who were 62 or older by January 1, 2016 may use the claiming strategy and it may not be used until FRA. It will be completely phased out at the end of 2019.

Retirement Insurance Benefit (RIB): A retirement payment from SSA on the work record of the claimant.

Retirement Insurance Benefit Limit (RIB-LIM): This limit applies to widow(er) benefits claimed on the earnings of spouses who filed for their retirement benefits before reaching FRA. The benefit able to be claimed is limited to the higher of either 82.5% of the deceased spouse's retirement benefit at his/her FRA, or the amount the deceased spouse was collecting at the time of death.

Self-Employment Contributions Act (SECA): The counterpart to FICA for self-employed workers. This works the same way as FICA, but the self-employed worker contributes both percentages as the employee and employer, so the total of 12.4%. However, the law does permit self-employed workers to deduct half of the self-employment tax as a business expense from their personal taxes.

Skilled Nursing Care: Nursing care providing at least 4 hours per day of highly skilled therapy such as injections or physical therapy.

Social Security Administration (SSA): The government agency which administers the Social Security and SSI programs, and eligibility and premiums for the Medicare program.

Social Security Disability Insurance (SSDI): The program providing monthly benefits to disabled workers and their eligible family members. It is supported by a separate disability insurance trust fund within the Old-Age, Survivors, and Disability Insurance program.

Spousal Benefits: When a worker files for retirement benefits, the worker's spouse may be eligible for a benefit based on the worker's earnings. The spouse must be at least age 62 or have a qualifying child in her/his care. Special rules apply for this child-in-care spousal benefit. The spousal benefit can be as much as half of the worker's PIA, depending on the spouse's age at retirement. If the worker begins receiving benefits before FRA, the spouse will receive a reduced benefit. If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then the higher retirement benefit is paid. Otherwise SSA pays the spousal benefit.

Substantial Gainful Activity (SGA): A specified threshold of work activity defining whether a medical impairment is a disability. SGA is usually measured by dollar earnings level but can also be measured by work hours.

Supplemental Security Income (SSI): A public assistance (welfare) program administered by the SSA, providing Medicaid and cash payments to needy aged, blind, and disabled individuals.

Survivor Benefits: Payments made to a living spouse, former spouse, child, or parent of a deceased worker. See Widow(er)'s Benefits.

Taxable Earnings: The amount of earnings subject to Social Security taxes. See Maximum Earnings.

Voluntary Suspension: The ability of retirees to suspend their own benefits at FRA and then reinstate them, at a later time up to age 70, in order to earn higher benefits for delaying. During a voluntary suspension, other benefits payable on the retiree's record, such as benefits to a spouse, are also suspended. And if benefits have been suspended, a retiree cannot continue receiving other benefits (such as spousal benefits) on another person's record.

Windfall Elimination Provision (WEP): The rule that applies to retirees who receive a pension and have enough credits (40 or more) to be eligible to collect Social Security retirement benefits. The WEP reduces the retiree's PIA and also the retiree dependents' benefits which are based on that PIA.

Widow(er)'s Benefits: A widow(er) can receive reduced benefits as early as age 60 or full benefits at FRA or older. If a widow(er) qualifies for retirement benefits on her/his own record, they can switch to their own retirement benefit as early as age 62. Widow(er)s can collect benefits as early as age 50 if they are disabled and their disability started before or within seven years of the deceased's death. If a widow(er) remarries after age 60 (age 50 if disabled), the remarriage will not affect their eligibility for survivor's benefits.

Work Credit: The basic unit of work used to establish eligibility for Social Security benefits. For retirement benefits 40 work credits are required for eligibility. A maximum of 4 credits per year can be posted to a worker's earnings record. See Quarter of Coverage.