ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $160, 200 (in 2023), while the self-employed pay 12.4 percent.

Detailed explanation-2: -Social Security benefits are typically computed using “average indexed monthly earnings.” This average summarizes up to 35 years of a worker’s indexed earnings. We apply a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual.

Detailed explanation-3: -Social Security replaces a percentage of a worker’s pre-retirement income based on your lifetime earnings. The amount of your average wages that Social Security retirement benefits replaces depends on your earnings and when you choose to start benefits.

Detailed explanation-4: -Out of the employer’s contribution of 12%, an amount equal to 8.33% of salary (salary capped at INR 15, 000 per month in respect of Indian employees) is allocated to the pension fund of the employee.

Detailed explanation-5: -The Employees’ Provident Fund (EPF) Scheme is contributed to by the employer (1.67-3.67 percent) and the employee (10-12 percent). The Employee Pension Scheme (EPS) is contributed to by the employer (8.33 percent) and the government (1.16 percent), but not the employee.