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Social Security Act of 1935
Transcript of Social Security Act of 1935
Materials compulsory payroll tax—An automatic tax collected from employers and employees to finance specific programs.
Federal Insurance Contributions Act (FICA) tax—Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax.
withholding (“pay-as-you-earn” taxation)—Money, for example, that employers withhold from employees' paychecks. This money is deposited for the government. (It will be credited against the employees’ tax liability when they file their returns.) Employers withhold money for federal income taxes, Social Security taxes, and state and local income taxes in some states and localities. Students will be able to • describe what Social Security is and whom it is intended to help. • explain the purpose of the FICA tax. Social Security is a set of government programs that provide a regular income to retired, unemployed, and disabled workers. Social Security is funded by a compulsory payroll tax. This payroll tax is called the Federal Insurance Contributions Act (FICA) tax. This mandatory tax is withheld from workers’ paychecks. Withholding means that a set amount of money is deducted each pay period and turned over to the government. This system is known as “pay-as-you-go” or “pay-as-you-earn.” Workers’ earnings support those who currently receive Social Security benefits. Today, approximately 160 million people work and pay Social Security taxes By 1935, the Great Depression had been going on for six years. Millions were unemployed, and few jobs were available. As part of President Franklin D. Roosevelt’s New Deal, the federal government created jobs for the unemployed. However, the elderly could not work, and many were living in poverty. Frances Perkins, the first female presidential Cabinet member, was charged with developing an “old-age” insurance program. The result was the Social Security Act of 1935, designed to provide elderly retired workers with pensions. At first, Social Security deductions were considered “contributions,” not taxes. The program appeared to be self-funded because only those who contributed would receive credits toward retirement benefits. However, far too many people needed help, so the program was expanded to include the families and survivors of retired and disabled workers, the unemployed, and federal workers. 1935: The Social Security Act is passed by Congress and signed into law by President Roosevelt. 1937: First Social Security benefits are paid. Early Social Security checks are one-time payments. 1939 The Social Security program is expanded to include dependents and survivors of workers who retire, are disabled, or die prematurely. 1940 Monthly Social Security payments begin. Ida May Fuller was the first person to receive a monthly Social Security check. She would live to be 100 and collect about $22,000 over her lifetime. 1956 The Social Security program is expanded to cover the disabled children of workers. 1950 The first cost-of-living adjustment (COLA) is made by Congress. Social Security payments are increased by 77 percent. 1961 Social Security Amendments lowers the retirement age to 62. 1975 Automatic cost-of-living adjustments to Social Security are approved. Now COLAs are based on the rise and fall of consumer prices. 1983 Because of a funding crisis, Social Security benefits are reduced. Benefits are taxed as income for the first time. 1999 Welfare reform affects Social Security. Efforts are made to ease disabled workers into the workforce. What do you already know about Social Security? What are the benefits and disadvantages of paying into a program that helps older or disadvantaged citizens? What do you think about a program that requires you to participate or pay now, even though you will not receive benefits for many years? Social Security Numbering Each Social Security number is made of nine digits. The first three digits are the area number The middle two digits are the group numbers. The last four digits are called the serial numbers Assigned by geographical region Assigned by the order in which SSN are issued in an area and range from 01-99 Assigned in chronological order within each area and group number as the applications are processed Fields with all zeros are never assigned Any SSN that has a field with all zeros is invalid Examples: