Do people who never paid FICA taxes get paid Social Security when they retire?

Question

From @Chad's comment:

It is how SSI works. There are some exceptions for people with disabilities where they receive money based on what they could have contributed, but yes you have to contribute to be eligible for SSI at retirement

This seems strange to me, for at least 2 situations. I'd like clarification on whether people in those situation indeed get no Social Security benefits, or if they do, how does that square with @Chad's comment:

1. Do elderly people who weren't around to pay FICA tax (e.g. recent legal immigrants) get Social Security benefits?

2. What happens to someone when they were on welfare all their life, or made too little income to have paid FICA tax otherwise? Do they get no Social Security benefits?

Answer 1

No you can not: SOURCE

Everyone born in 1929 or later needs 40 Social Security credits to be eligible for retirement benefits. You can earn up to four credits per year, so you will need to work at least 10 years to become eligible for retirement benefits.

During your working years, earnings covered by Social Security are posted to your Social Security record and you earn credits based on those earnings.

Each year the amount of earnings needed for a credit rises as average earnings levels rise. In 2010, you receive one credit for each $1,120 of earnings, up to the maximum of four credits per year.

You will need to work for at least 10 years to collect Social Security. And qualified earnings are those earning where you paid social security employment tax. Any income that is not subject to SSI Tax (like capitol gains) is not qualified earnings.

If you become disabled there is a schedule linked on the source page that explains the requirements to collect the Social Security Disability benefits.

Totalization agreements are an exception. If a worker has a total of 10 years between their home country and the US then they can qualify for a partial payment of Social Security benefits. With respect to Mexico if a worker has at least 6 credits in the US and can show that they have a combined total of 40 quarters of contributions to the US and Mexican Social Security systems, then the worker can draw a prorated benefit payment from both systems. Source (p7-9)

Answer 2

1. Do elderly people who weren't around to pay FICA tax (e.g. recent legal immigrants) get Social Security benefits?

2. What happens to someone when they were on welfare all their life, or made too little income to have paid FICA tax otherwise? Do they get no Social Security benefits?

1. Elderly recent legal immigrants are often entitled to social welfare benefits from the country where they spent their working years. For example, if someone works until retirement age in Germany, then moves to Chicago as a legal immigrant to live with an adult child, that elderly immigrant will usually continue to receive Germany social insurance benefits.

Also, work in the U.S. while a legal immigrant who is not a citizen still counts towards Social Security eligibility. Many illegal immigrants pay FICA taxes without receiving the eligibility benefits of Social Security because their taxes are not paid for their own Social Security numbers.

2. As noted in other posts, there are also "Totalization" agreements with Mexico and some other countries allowing someone to receive some Social Security benefits despite working less than the required 40 quarters in the U.S., if they have worked enough years in their home country.

3. A legal immigrant must have a sponsor in the U.S. who assumes financial responsibility for them. This can provide a source of support.

In practice, few people immigrate to the U.S. after their working years are done and without having secured eligibility for pension benefits or social insurance in their home country, so this comes up mostly in the case of refugees migrating in old age with their families because the country that they have left behind has imploded.

In these cases, adult children living and working in the U.S. as refugee immigrants often live with and economically support their elderly parents. It also wouldn't be uncommon for the elderly parent to marry someone in the U.S. who can support them.

If the sponsor of an immigrant to the U.S. is a spouse and the marriage ends but the spouse is still a legal immigrant or U.S. citizen, but has not been married long enough to be eligible for ex-spouse benefits under Social Security, usually, there will be a maintenance award in a divorce or a significant inheritance from a spouse following the spouse's death.

4. If someone has a U.S. spouse of someone eligible for Social Security, or someone is a minor child of a person entitled to Social Security, that person can receive survivor's benefits, without having personally paid any FICA or self-employment taxes (which are paid in lieu of FICA taxes by self-employed persons). Almost 10% of Social Security beneficiaries (about 6 million people) receive Survivor's Benefits.

5. Another 3 million people (about 5% of beneficiaries) are spouses or children of retired workers who are not receiving Social Security retirement benefits on their own behalf. If you were married for at least ten years to someone entitled to Social Security benefits, you can receive social security benefits based upon their earnings, even if you are no longer married due to death or divorce.

6. Many other people who don't work 40 quarters may qualify for Social Security Disability Benefits. About one in six Social Security beneficiaries (about 10.6 million people) receive Social Security disability benefits either on their own behalf or because they have a disabled parent or spouse. Of those, about 1.8 million people are spouses or children rather than workers, who are not receiving benefits on their own behalf.

All told between the programs described in (4), (5) and (6) above, about 10.8 million Social Security beneficiaries receive benefits earned by a spouse or parent rather than from their own earnings.

7. Keep in mind that 40 quarters is only 10 years over a lifetime and not much needs to be earned in each of the quarters to qualify. For people who barely qualify for Social Security working only low wage jobs intermittently and part-time, they will still qualify for Social Security benefits and the minimum benefit is much larger than a return on what was paid into the system.

Cash welfare benefits are not social security earnings and are not subject to FICA taxation. Unemployment insurance benefits are taxable income for income tax purposes but are not subject to FICA taxation or self-employment taxation. Self-employed people pay self-employment taxes together with their income taxes in lieu of FICA taxation on their self-employment income.

8. There is also a means tested part of the Social Security program called SSI (Supplemental Security Income).

WHO IS ELIGIBLE FOR SSI?

Anyone who is:

• aged (age 65 or older);
• blind; or
• disabled.

And, who:

• has limited income; and
• has limited resources; and
• is a U.S. citizen or national, or in one of certain categories of aliens; and

NOTE In general, an alien who is subject to an active warrant for deportation or removal does not meet the citizenship/alien requirement.

• is a resident of one of the 50 States, the District of Columbia, or the Northern Mariana Islands; and
• is not absent from the country for a full calendar month or for 30 consecutive days or more; and
• is not confined to an institution (such as a hospital or prison) at the government's expense; and
• applies for any other cash benefits or payments for which he or she may be eligible, (for example, pensions, Social Security benefits); and
• gives SSA permission to contact any financial institution and request any financial records about you; and
• files an application; and
• certain other requirements.

9. Finally, many state governments have a limited welfare program to pay cash benefits to elderly people who don't qualify for Social Security benefits often called something like "General Relief". Twenty-six states have such programs and eligibility for these programs varies widely.

The percentage of people who don't qualify for any form of Social Security benefits is quite small, however, so General Relief programs are usually not very expensive for state governments.

In particular, it usually isn't possible to receive cash welfare benefits all of your life without being disabled, in which case you are usually going to be eligible for Social Security Disability payments or SSI. Most people who don't pay enough FICA taxes to qualify are either spouses of someone who is covered and entitled to benefits that way, or are government employees who may be eligible for a pension benefit from their government employer (even if they don't qualify for a defined benefit government pension, they will usually receive the governmental equivalent of a defined contribution 401(k) plan).

About 10% of seniors are under the official poverty line in the U.S. and many of them have some significant assets to support themselves even if they lack income. Seniors have a lower poverty rate than any other age group in the United States, but it isn't zero either. Many of the seniors in poverty still qualify for some Social Security or SSI benefits, but not enough to keep them out of poverty.

Answer 3

tl;dr It depends upon what you mean by "didn't pay I to the system." The non-partisan Government Accountibility Office (GAO) has released several reports, and there seems to be a wide range ($0 to as few as 18 months) of how much you have to pay into FICA to begin collecting Social Security checks.

As a government employee, you might pay as little as $0. In the GAO 2010 report, SOCIAL SECURITY ADMINISTRATION Management Oversight Needed to Ensure Accurate Treatment of State and Local Government Employees noted:

At present, SSA and IRS managers do not know the extent to which wages are reported accurately or to which Social Security taxes are paid in accordance with program rules

State and federal officials found that, over decades, [...] in hundreds of districts, [...] some teachers were incorrectly paying Social Security taxes when they were not eligible to receive Social Security coverage. Others were not paying Social Security taxes although they were covered by Social Security.

Since IRS did not collect any back taxes from audited school districts, SSA and IRS officials told us that the U.S. Treasury and Social Security Trust Funds would effectively bear the cost of any long-standing coverage errors and FICA taxes that school districts and employees did not pay.

You might argue that those we're clerical errors, and shouldn't count, just because the mistakes occurred to long ago for the IRS to correct the error. There are other cases of government employees working only a single day, paying as little as $3 in FICA and collecting thousands in annual social security checks, fully following the law.

In 2004, Congress closed the loophole with legislation requiring public employees be employed for five years in a job covered by Social Security in order to be eligible for full spousal benefits.

The GAO report, SOCIAL SECURITY Congress Should Consider Revising the Government Pension Offset "Loophole" notes:

Social Security’s Government Pension Offset (GPO) exemption [...] prevents workers from receiving a full Social Security spousal benefit on top of a pension earned from government employment not covered by Social Security. However, the law provides an exemption from the GPO if an individual’s last day of state/local government employment is in a position that is covered by both Social Security and their state/local pension system. In these cases, the GPO will not apply, and Social Security spousal benefits will not be reduced> In 2002, one-fourth (or 3,521) of all Texas public education retirees took advantage of this exemption.

In most schools, teachers typically worked a single day [...] the Social Security contributions deducted from their pay would total about $3 for the day. We estimate that the average annual spousal benefit resulting from these last-day transfers would be about $5,200.

So, before 2004 you could work as little a one day, and your spouse would be entitled to full spousal benefits. After 2004, as a government employee you only need to work five years instead of the typical ten years.

Illegal aliens are also entiltled to Social Security benefits, even if they weren't working in the U.S. legally at the time. In fact, the Totalizaion agreement with Mexico encourages them to do so, because they are entilted to benefits from working as few as 18 months, to as much as 9.75 years, even under a stolen identity. The 2003 GAO report SOCIAL SECURITY - Proposed Totalization Agreement with Mexico Presents Unique Challenges notes:

SSA provided no information showing that it assessed the reliability of Mexican earnings data and the internal controls used to ensure the integrity of information that SSA will rely on to pay social security benefits.

Mexican workers [...] could qualify for partial social security benefits with as few as 6 coverage credits. In addition, under the proposed agreement, more family members of covered Mexican workers would become newly entitled

Under the Social Security Act, all earnings from covered employment in the United States count towards earning social security benefits, regardless of the lawful presence of the worker, his or her citizenship status, or country of residence.

Answer 4

Yes. People collect SS without paying in one cent. A spouse who never worked a day in their life can collect 1/2 of their working spouse plus the working spouse gets all of theirs. Example; John collects $2,000 SS per month. His spouse never worked but collects $1,000 SS per month and John get his $2,000. That means $1,000 is paid from the fund even though no payment was paid into the fund by the spouse. And we wonder why SS is almost broke.