MoneyPalooza Monstrosity: It Passed! More on the Multiemployer Pension Bailout

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-it-passed

Graphic:

Excerpt:

Here are the whole-number ratios if you can’t eyeball the relationships above.

The total MEP unfunded liability is 8 times that of the bailout bill amount

The total public pension unfunded liability is 22 times that of the bailout bill amount (this happens to be the same as the total American Rescue Plan Act of 2021)

The total Social Security shortfall is almost 200 times that of the MEP bailout bill

Author(s): Mary Pat Campbell

Publication Date: 8 March 2021

Publication Site: STUMP on Substack

The hopeful news for Social Security buried in the $1.9 trillion bailout

Link: https://www.msn.com/en-us/money/retirement/the-hopeful-news-for-social-security-buried-in-the-1-9-trillion-bailout/ar-BB1eht7e?ocid=BingNews

Excerpt:

Lawmakers have moved to include in the bill an unrelated $86 billion bailout for bankrupt union pension plans.

And once they’ve done that, it’s going to be even harder for them to argue that they shouldn’t bail out the stricken Social Security trust fund that is actually their responsibility. Social Security’s deficit: $16.8 trillion, or about $50,000 for every person in America.

On the other hand, if Congress tries to weasel out of fully funding Social Security in a few years’ time, this rescue of private sector union pensions is going to look like an outrage.

Author(s): Brett Arends

Publication Date: 6 March 2021

Publication Site: MSN Money

How Biden’s ‘Donut Hole’ Plan Could Undermine Social Security

Link: https://www.thinkadvisor.com/2021/02/17/how-bidens-donut-hole-plan-could-undermine-social-security/

Excerpt:

But Richard Johnson, director of the Urban Institute’s Program on Retirement Policy, argues that he has a better idea — one that would generate more tax revenue for Social Security benefits without creating a donut hole, he tells ThinkAdvisor in an interview.

“Increase the $142,800 tax max to something like $250,000 today and continue to raise it [based on] average earnings growth,” he recommends.

Part of Johnson’s reasoning is rooted in the presumption that if Social Security were to be perceived as only for low-income earners, political support for the crucial program would be diminished.

Author(s): Jane Wollman Rusoff

Publication Date:

Publication Site: Think Advisor

Saving Social Security Is a Bipartisan Issue: Survey

Link: https://www.thinkadvisor.com/2021/02/22/saving-social-security-is-a-bipartisan-issue-survey/

Excerpt:

Most Americans of both political parties agree there Is a retirement crisis ahead.

A majority of those surveyed say COVID-19 has delayed their retirement plans.

Many stated that pension plans are better than 401(k) plans.

Author(s):  Ginger Szala

Publication Date: 22 February 2021

Publication Site: Think Advisor

Reliance on Social Insurance Tax Revenue in Europe

Graphic:

Excerpt:

A recent report on tax revenue sources shows that social insurance taxes—also referred to as social security contributions or payroll taxes—are an important revenue source for European governments. Social insurance taxes, as opposed to individual income taxes, are usually levied at a flat rate. The revenue is generally used to fund specific social programs, such as unemployment insurance, health insurance, and old age insurance.

In 2019 (the most recent data available), social insurance taxes were the second largest tax revenue source in European OECD countries, at an average of 29.5 percent of total tax revenue. Only consumption taxes were on average a larger source of tax revenue, at 32.4 percent.

Author(s): Elke Asen

Publication Date: 25 February 2021

Publication Site: Tax Foundation

Windfall Elimination Provision and Government Pension Offset Updated for 2021

Link: https://www.asppa-net.org/news/windfall-elimination-provision-and-government-pension-offset-updated-2021

Excerpt:

2021 Levels. For purposes of the WEP [windfall elimination provision], the amount of substantial earnings in covered employment or self-employment needed for a year of coverage (YOC) is adjusted annually by the growth in average earnings in the economy, provided a cost-of-living adjustment is payable. In 2021, the amount of substantial earnings in covered employment or self-employment needed for a YOC is $26,550.

For people with 20 or fewer YOCs who become eligible for benefits in 2021, the WEP reduces the first factor from 90% to 40%, resulting in a maximum reduction of $498 (90% of $996 minus 40% of $996). For each year of substantial earnings in covered employment or self-employment in excess of 20 years, the first factor increases by 5%. For example, the first factor is 45% for those with 21 YOCs. The WEP factor reaches 90% for those with 30 or more YOCs and at that point is phased out.

Author(s): JOHN IEKEL

Publication Date: 3 February 2021

Publication Site: ASPPA

Annual Statistical Supplement, Social Security

Link: https://www.ssa.gov/policy/docs/statcomps/supplement/2020/index.html

Preface:

The Supplement is a major resource for data on programs administered by the Social Security Administration—the Old-Age, Survivors, and Disability Insurance program, known collectively as Social Security, and the Supplemental Security Income program. The Supplement also includes program summaries and legislative histories that help users of the data understand these programs. Please note that additional disability tables and statistics can be found in the SSI Annual Statistical Report and the Annual Statistical Report on the Social Security Disability Insurance Program.

The Supplement has been published annually since 1940. Decisions affecting the future of Social Security are facilitated by the availability of relevant data over a long period. The data provide a base for research, policy analysis, and proposals for changing the programs. In addition to meeting the Social Security Administration’s information needs, the Supplement strengthens the agency’s ability to respond to requests for program data from congressional committees, government agencies at all levels, and the research community.

The Supplement is prepared by Social Security Administration staff from various components throughout the agency. I would like to express my thanks to them for their contributions.

Katherine N. Bent
Acting Associate Commissioner for Research, Evaluation, and Statistics
February 2021

Date Accessed: 24 February 2021

Publication Site: Social Security Administration

What Raising Retirement Age Does to Retirement Rates

Excerpt:

The most popular age at which to start claiming Social Security benefits is the minimum of 62, according to the Bipartisan Policy Center, even though most financial professionals will encourage their clients to hold off on claiming as long as they can, barring any exigent circumstances. A paper from the Center for Retirement Research at Boston College quantifies the impact that raising the age has on retirement behaviors.

Increasing the full retirement age for Social Security decreased the early retirement rate by about 30% for men and 20% for women, according to the paper published in January. The paper, “The Effect of Early Claiming Benefit Reduction on Retirement Rates,” was written by Damir Cosic, senior research associate, and C. Eugene Steuerle, fellow and the Richard B. Fisher chair, at the Urban Institute. They used data from the Current Population Survey to compare the effect of FRA reforms on early retirement rates.

Author: Danielle Andrus

Publication Date: 3 February 2021

Publication Site: 401k Specialist

THE CONSEQUENCES OF CURRENT BENEFIT ADJUSTMENTS FOR EARLY AND DELAYED CLAIMING

Link: https://crr.bc.edu/wp-content/uploads/2021/01/wp_2021-3_.pdf

Abstract
Workers have the option of claiming Social Security retirement benefits at any age between 62 and 70, with later claiming resulting in higher monthly benefits. These higher monthly benefits reflect an actuarial adjustment designed to keep lifetime benefits equal, for an individual with average life expectancy, regardless of when benefits are claimed. The actuarial
adjustments, however, are decades old. Since then, interest rates have declined; life expectancy has increased; and longevity improvements have been much greater for high earners than low earners. This paper explores how changes in longevity and interest rates have affected the
fairness of the actuarial adjustment over time and how the disparity in life expectancy affects the equity across the income distribution. It also looks at the impact of these developments on the costs of the program and the progressivity of benefits.


The paper found that:
• The increases in life expectancy and the decline in interest rates argue for smaller reductions for early claiming and a smaller delayed retirement credit for later claiming.
• Specifically, the benefit at 62 should equal 77.5 percent, as opposed to 70.0 percent, of the full age-67 benefit, and the benefit at 70 should equal 119.9 percent, instead of 124.0 percent, of the full benefit.
• The outdated actuarial adjustments are a modest moneymaker for the program – about $1.9 billion in 2018, with most of the gains coming from those claiming at 62, who are typically lower earners. Surprisingly, the correlations between earnings and life expectancy and between earnings and claiming behavior have only modest implications for both the cost and progressivity of Social Security benefits.
• Finally, the cost and distributional effects of earnings-related life expectancy and claiming cannot be addressed through the actuarial adjustments for early and late claiming. They reflect the fact that high earners get their large benefits for a long time and low earners get their more modest benefits for a shorter time.

Authors: Andrew G. Biggs, Anqi Chen, and Alicia H. Munnell

Publication Date: January 2021

Publication Site: Center for Retirement Research at Boston College

Social Security COLA: What’s Working, What’s Not

Link: https://www.thinkadvisor.com/2021/01/12/social-security-cola-whats-working-whats-not/

Excerpt:

The only remaining provider of inflation-protected annuities in the United States is the federal government through Social Security. Retirees today can buy more of this income by waiting until age 70 to claim Social Security, thereby boosting their inflation-protected income by 30% over their full retirement age.


For healthy, higher-income retirees who have seen the largest improvements in longevity in recent decades, this increase in lifetime inflation-protected income appears to be a bargain.

Authors: Jason Fichtner and Michael Finke

Publication Date: 12 January 2021

Publication Site: Think Advisor

The Consequences of Current Benefit Adjustments for Early and Delayed Claiming

Abstract:

Workers have the option of claiming Social Security retirement benefits at any age between 62 and 70, with later claiming resulting in higher monthly benefits.  These higher monthly benefits reflect an actuarial adjustment designed to keep lifetime benefits equal, for an individual with average life expectancy, regardless of when benefits are claimed.  The actuarial adjustments, however, are decades old.  Since then, interest rates have declined; life expectancy has increased; and longevity improvements have been much greater for high earners than low earners.  This paper explores how changes in longevity and interest rates have affected the fairness of the actuarial adjustment over time and how the disparity in life expectancy affects the equity across the income distribution.  It also looks at the impact of these developments on the costs of the program and the progressivity of benefits.

The paper found that:

The increases in life expectancy and the decline in interest rates argue for smaller reductions for early claiming and a smaller delayed retirement credit for later claiming.

Specifically, the benefit at 62 should equal 77.5 percent, as opposed to 70.0 percent, of the full age-67 benefit, and the benefit at 70 should equal 119.9 percent, instead of 124.0 percent, of the full benefit.

The outdated actuarial adjustments are a modest moneymaker for the program – about $1.9 billion in 2018, with most of the gains coming from those claiming at 62, who are typically lower earners. Surprisingly, the correlations between earnings and life expectancy and between earnings and claiming behavior have only modest implications for both the cost and progressivity of Social Security benefits.

Finally, the cost and distributional effects of earnings-related life expectancy and claiming cannot be addressed through the actuarial adjustments for early and late claiming. They reflect the fact that high earners get their large benefits for a long time and low earners get their more modest benefits for a shorter time.

The policy implications of the findings are:

Increases in life expectancy and the decline in interest rates suggest smaller reductions for early claiming and a smaller delayed retirement credit for later claiming.

Accounting for differential mortality would involve changing benefits, and is not a problem that can be solved by tinkering with the actuarial adjustments.

PDF link to full paper: https://crr.bc.edu/wp-content/uploads/2021/01/wp_2021-3_.pdf

Authors: Andrew G. Biggs, Anqi Chen, Alicia H. Munnell

Publication Date: January 2021

Publication Site: Center for Retirement Research at Boston College

Biden has promised to reform Social Security — some changes could come as soon as this year

Link: https://www.cnbc.com/2021/01/23/president-biden-could-make-big-social-security-changes-this-year.html

Excerpt:

KEY POINTS
As President Joe Biden takes office, helping the nation through Covid-19 is a top priority.
Social Security will take a back burner for now, yet some experts say that may not be for long.
If successful, big changes to fix the program could secure his presidential legacy, one expert says.

Author: Lorie Konish

Publication Date: 23 January 2021

Publication Site: CNBC