Many changes in social security take effect the first of the year

The start of 1984 will bring a host of changes in the social security system, which provides retirement and related benefits to 36 million Americans. Most of the changes, which include revisions in size of benefits and the taxes levied to support them, were first suggested by the bipartisan National Commission on Social Security Reform. Using the panel's recommendations as a springboard, Congress passed comprehensive social security legislation in March.

Despite the fact that many new provisions take effect on Jan. 1, the changes are not as fundamental as those in 1977, when major revisions were made in benefit calculation formulas, said Robert Brunner, a legislative expert with the American Association of Retired People, adding, ''But it is not going to look that way to most beneficiaries,'' who will be hit by a host of new policies.

Here are some key provisions of the new law which will begin affecting your pocketbook in the new year.

* The social security tax on earnings will rise.

Under the new law, both workers and employers will pay a 7 percent tax rate on covered wages, up from the current 6.7 percent rate. But in 1984 employees will be allowed a one-time tax credit equal to 0.3 percent of their covered wages.

* The amount of wages subject to social security taxes will increase. The 1983 cutoff point of $35,700 will be increased $2,100 for '84, to $37,800.

Meanwhile, to earn a quarter's coverage toward retirement under the system, the minimum quarterly wage rises from $370 this year to $390 in 1984. If an employee earns less than these minimums, he or she pays taxes but does not get any social security credit toward retirement.

* Total payroll deductions for social security will rise. As a result of the changes in the tax rate and wages subject to tax, the maximum social security tax paid by employees next year will be $2,532.60, up $140.70 from the '83 maximum.

* A cost-of-living increase for recipients, slated for July but delayed by congressional action, will appear in January social security checks.

The increase will be 3.5 percent, based on the increase in the consumer price index (CPI) from the first quarter of 1982 to the first quarter of 1983. From now on, the annual increase will be postponed from July to January and will be calculated on the CPI increase from the third quarter of the last year in which an increase was given to the third quarter of the current year.

Future cost-of-living adjustments may be calculated using a less generous formula. If the reserves in two social security trust funds drop below a specified percentage of the total assets needed for the year, the cost-of-living adjustment that year will be based on the lower of the increase in the CPI or the increase in average wages.

* A portion of social security benefits will be taxable in 1984 and thereafter as regular income for individuals and couples with relatively high retirement incomes.

Starting in January, up to one-half of social security benefits will be subject to tax for recipients whose income from all sources (including nontaxable sources like municipal bond interest) exceeds $25,000 for an individual and $32,000 for a married couple filing a joint return.

The amount of benefits included in taxable income would be the lesser of one-half of the social security benefit or one-half of the excess of the taxpayer's combined income (outside sources plus one-half of the social security benefit) over the income threshold of $25,000 for an individual or $32,000 for a couple. The funds raised from this tax will be used to build up the social security trust funds.

* Social security recipients will be able to earn more money without having their benefits reduced. On Jan. 1 the amount a beneficiary under age 65 may earn without losing his benefits will increase from $4,920 in 1983 to $5,160 in 1984. Pensioners aged 65 to 69 will be able to earn $6,960 in '84, up from $5,600 in ' 83.

* Social security coverage will become mandatory for some federal employees and all workers at nonprofit institutions.

In a bid to expand the financial support for the system, social security coverage will be extended to all new federal employees, current and future members of Congress, the president and other top federal officials, including sitting judges. Employees of the legislative branch who do not opt for the Civil Service Retirement System by Dec. 31, 1983, will also come under social security.

Meanwhile, all employees of nonprofit organizations will be required to join social security as of Jan. 1.

* Self-employed individuals will pay more for social security coverage. Until now the self-employed have paid only about three-quarters of the combined employer-employee contribution. But starting in January the self-employed will be charged the full 14 percent rate, although in 1984 they will receive a 2.7 percent tax credit, which reduces the net rate to 11.3 percent. As a result of the changes in tax rate and an increase in the taxable wage base, the maximum social security tax paid by self-employed individuals will rise by $933.45 to $4 ,271.40.

* The rules on benefit continuation after remarriage are being eased. After December 1983, benefits earned under a former spouse will be continued after remarriage for disabled widows and widowers and for divorced spouses. Previously , these individuals lost such benefits after remarriage.

* Benefits for disabled widows and widowers who retire between ages 50 and 59 will be increased to 71.5 percent of the primary insurance amount, equal to what nondisabled widowers and widows get at age 60.