Social Security and Pensions Flashcards

Social Security delayed retirement credits (DRCs) accrue at what rate per month past full retirement age for those born after 1942?

Answer: 2/3 of 1%

For those born after 1942, DRCs accrue at 2/3 of 1% per month (8% per year) past full retirement age up to age 70.

Under ERISA, what is the maximum period a defined benefit plan may use for final average pay calculations?

Answer: 5 consecutive years

ERISA limits final average pay formulas to the highest 5 consecutive years of compensation to prevent benefit manipulation.

A client born in 1960 wants to know their Social Security full retirement age. What is it?

Answer: 67 years

For individuals born in 1960 or later, the full retirement age is 67 under current Social Security law.

Which type of pension plan requires actuarial assumptions and places the investment risk on the employer?

Answer: Defined benefit plan

Defined benefit plans require actuarial assumptions and obligate the employer to fund promised benefits regardless of investment returns.

A Social Security claimant has both earned income from wages and receives benefits before FRA. The 2026 annual earnings test exempt amount is $22,320. If she earns $30,320, how much is her benefit withheld?

Answer: $4,000

Earnings over the exempt amount ($30,320 - $22,320 = $8,000) are reduced $1 for every $2, so $4,000 is withheld.

What does the term 'normal cost' mean in the context of defined benefit pension funding?

Answer: Cost attributed to the current year's benefit accruals

Normal cost represents the present value of pension benefits earned by employees during the current plan year.

A surviving divorced spouse wants to claim Social Security survivor benefits. What is the minimum duration the marriage must have lasted?

Answer: 10 years

A divorced spouse must have been married to the deceased worker for at least 10 years to qualify for survivor benefits.