Protecting Public-Service Retirees’ Pension Plan a Priority

NCRGEA Staff on May 7, 2021

By N.C. Treasurer Dale R. Folwell, CPA

One of the things I enjoy the most about my job as keeper of the public purse is the opportunity to meet retired public-service employees whose years of hard work provide the backbone of our state and local governments. Their dedicated service might have been unheralded, but it hasn’t gone unnoticed.

That’s why I take my obligation to preserve and protect the state pension plan for this and future generations very seriously. North Carolina Retired Governmental Employees Association members and other public-service retirees deserve no less in their Golden Years.

So I’m pleased to tell you about recent landmark changes to the state and local government pension systems designed to eliminate $18.4 billion in unfunded liabilities over the next 12 years. These essential and long-overdue steps will ensure we have enough money in the pension plan to cover the monthly retirement checks we have promised to deliver without fail.

The governing boards of the Teachers’ and State Employees’ Retirement System and the Local Governmental Employees’ Retirement System voted unanimously on Thursday, Jan. 28, to reduce the assumed rate of return on investments from 7% annually to 6.5%, which more accurately reflects actual earnings.

What is important to know is that when the assumed rate of return is set higher than the earnings that are achieved, the deficit increases between pension plan assets and what is needed to pay future retiree benefits.

It is particularly critical to narrow that gap now because people are retiring earlier and living longer, in many cases being retired longer than they actually worked. Retirees collecting from the pension system now outnumber the active employees paying into the plan. That puts additional pressure on fulfilling payment obligations.

You might be shocked to learn that the unrealistically high rate of return assumption hasn’t been achieved on average for the past 20 years. Lowering that goal to a more realistic expectation is part of my administration’s transparent strategy to eliminate unfunded liabilities — that gap between assets available and promises made.

At present the pension plan has more than $118 billion in assets, making it the ninth largest pool of public money in the country and one of the best funded despite having $18 billion in unfunded liabilities we’re working hard to wipe out.

Meanwhile, many public pension plans are fragile or distressed. Some estimates show they have accumulated a $1.55 trillion funding shortfall in 2020. Their average funded ratio is just 69.4%, with some much worse, compared to North Carolina’s 87.4% funded level.

Because funded status reflects the solvency of a pension fund, you can see that our pension plan is in very good shape compared to most. I don’t intend to see that status erode on my watch. That’s why I led the effort to lower the assumed rate of investment return three times since I have taken office. I am only the second treasurer to reduce the rate in more than 60 years.

Lowering rates of return has now become a national trend, and we are in the forefront. One recent study shows more than 50% of pension plans reduced their investment return assumption since fiscal year 2018.

Lowering the projection on investment earnings will require state and local government contributions to the pension plan to be higher than they would have otherwise been. But not lowering the assumed rate of return only kicks the can down the road, costing taxpayers more in the long run. So, government employers are in a situation where they either make increased contributions now or pay even more later because the unfunded liabilities will continue increasing.

At the Department of State Treasurer we are committed to taking strong and necessary action now so we will be able to continue delivering $554 million a month in richly deserved pension checks to more than 950,000 teachers, state and local government employees, firefighters, police officers and other public workers who are members of the N.C. Retirement Systems.

Bringing Humana to You (BH2U) Online Events  

NCRGEA Staff on April 22, 2021

Humana Medicare Advantage PPO Plan Members

Bringing Humana to You (BH2U) Online Events 

State Health Plan Humana plan members, please join Humana for the Bringing Humana to You (BH2U) webinar events! These online events will be held April-June and will help you learn about how you can improve your health and well-being through education events, Humana resources, and how to get involved in activities.

Humana representatives will share information about steps you can take to become the best version of yourself. The Bringing Humana to You (BH2U) online events are broken up into three categories.

Get Involved Events (Tuesdays) allow you to participate in events and activities that encourage you to develop your overall well-being through Virtual Volunteering, Cooking Demonstrations, and Virtual Craft events.

Resource Spotlight (Wednesdays) takes a deeper look into the resources available with your Humana Medicare Advantage PPO plan at no extra cost to you. Each session will highlight a specific Humana resource such as Pharmacy, Humana Neighborhood Centers, Go365, SilverSneakers, and more.

Education Workshops (Thursdays) focus on educational topics such as the health benefits of getting a good night’s sleep, simple steps to boost your immunity, how to decompress from stress, foods to boost your brainpower, and cooking for one, just to name a few.

Be on the lookout for a postcard that will be mailed to your home that will include registration instructions. Information about these events is also available on the custom Humana State Health Plan website here.

You may also register today for one of the webinars: http://huma.na/BH2U

After registering for a webinar, you will receive a registration confirmation email with instructions on how to log into the webinar on the day of the event.

Have you claimed Social Security and then gone back to work?

NCRGEA Staff on April 21, 2021

https://www.msn.com/en-us/money/retirement/have-you-claimed-social-security-and-then-gone-back-to-work/ar-BB1fEdsE

If you’ve claimed your Social Security retirement benefits and continue working or return to work before you reach your full retirement age (FRA), you need to be aware of the earnings test.

As more baby boomers are working longer, they may encounter the Social Security earnings test without knowing it. Say you’ve claimed your Social Security at 62 or soon thereafter, and either continue working or return to work at a significant salary at 65. Since you haven’t yet reached your FRA of between 66 and 67, you’ll face the earnings test.

If you earn more than a certain amount, report your anticipated earnings to the Social Security Administration right away.

“There’s a limit until you are full retirement age,” says Nancy Altman, president of Social Security Works, a nonprofit advocacy group. She is the author of several books, including The Truth About Social Security.

For 2021, that limit is $18,960 for those under their FRA. During the year you reach your FRA, the limit on earnings is $50,520 for 2021, up until the month of the birthday when you turn your FRA. If you’re earning more than you expected at work, let the Social Security Administration (SSA) know immediately by calling 1-800-772-1213. This cannot be done online.

If you are receiving Social Security retirement benefits and also earn more than the certain threshold cited above from working, Social Security will withhold some of your Social Security retirement benefits, but will credit them to you later.

In addition, if you are earning a lot more than the allowed amount before you reach your FRA and you fail to notify the SSA so your benefits can be adjusted, you will be required to return the overpayment. If that happens, you will receive a letter from the SSA detailing how much you owe. If you don’t pay it back, it can be withheld from your future Social Security retirement benefits. “Whenever you get any official letter and you owe money, if you don’t have that money in your bank account it can be very scary,” Altman says.

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(However, if you have claimed Social Security and then changed your mind, you can also suspend your Social Security retirement benefits as long as you have reached your full retirement age and are younger than 70. You’ll earn delayed retirement credits for each month your benefits are suspended, and that will result in a higher benefit payment to you.)

Here’s the main rule for the earnings test: If you haven’t yet reached your FRA, the Social Security Administration will withhold $1 for every $2 in earnings you have above the annual limit, which is $18,960 for 2021. In the year you reach your FRA, the SSA will withhold $1 for every $3 you earn over the annual limit of $50,520, the limit for the year 2021 until the month you reach your FRA.

It’s important to know what your full retirement age is. If you were born between 1943 and 1954, full retirement age is 66. If you were born after 1954, your full retirement age increases to between age 66 and 67.

• If you were born in 1955, your FRA is 66 and 2 months.
• If you were born in 1956, your FRA is 66 and 4 months.
• If you were born in 1957, your FRA is 66 and 6 months.
• If you were born in 1958, your FRA is 66 and 8 months.
• If you were born in 1959, your FRA is 66 and 10 months.
• If you were born in 1960 or later, your FRA is 67.

If you are employed, only your wages from work count toward Social Security’s earnings limits. If you are self-employed SSA only counts your net earnings. SSA does not count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.

Just because there is an earnings limit until you reach your FRA doesn’t mean you can’t work and earn money while receiving Social Security retirement benefits. It does mean that you have to be aware of the limits. Even if some of your Social Security retirement benefits are withheld, in the long run earning more money can result in higher benefits for you once you reach your FRA.

Here is an example: Say you’re 65, and you are receiving Social Security retirement benefits of $800 a month or $9,600 a year in 2021. Meanwhile, you’re offered a job during 2021, you take it and earn $28,960, which is $10,000 more than the $18,960 limit for 2021, for those who have not yet reached their FRA.

According to SSA, your Social Security retirement benefits would be reduced by $5,000, which is $1 for every $2 you earned above the limit. In this case, you would receive $4,600 of the $9,600 you were originally eligible to receive. The calculation is $9,600 – $5,000 = $4,600.

Read: How much could proposed estate tax changes impact you and your family?

There are detailed special rules for the first year you claim benefits before you reach your FRA, says Russell Gloor, a national Social Security adviser with the AMAC Foundation. “If you’ve already reached your FRA there is no earnings limit.”

If you prefer to work, don’t let the earning test stop you. “If you want to work while receiving benefits between ages 62 and FRA, then work, says Jason Fichtner, senior lecturer, department of economics and finance, Johns Hopkins University School of Advanced International Studies. “Don’t let the RET (retirement earnings test) discourage you from working. Proactively reach out to SSA directly if you are both receiving Social Security retirement benefits and working.” Describe your particular situation, and report any earnings you expect from work. The SSA should be able to make the benefit adjustment within 30 days of your call, Fichtner says. Make sure it happens. If you believe you’re still receiving more than you’re eligible for, call again to confirm.

The key is to anticipate earnings, and report them in advance, if possible. “It’s important to note, that even if benefits get reduced due to working while receiving benefits between age 62 and FRA, you will get credit for working and those benefit amounts get included in recalculating the monthly benefit amount once you reach FRA. The reduced benefits are ‘withheld.’ The RET (retirement earnings test) is not a tax,” Fichtner says.

A final warning: Each year your employer and the Internal Revenue Service report earnings to the SSA. If you haven’t reported your anticipated earnings, once the SSA has this information and if you’ve been overpaid, you’ll receive a letter letting you know.

In short, as soon as you suspect you may be receiving too much in benefits because of your work earnings, make the phone call. It’s the best way to prevent receiving an overpayment letter from SSA in the future.

Harriet Edleson is author of the forthcoming book, “12 Ways to Retire on Less: Planning an Affordable Future” (Rowman & Littlefield, May 2021). A former staff writer/editor/producer for AARP, she writes for The Washington Post Real Estate section.

NC Department of Revenue Extends 2020 Individual Income Filing and Payment Deadline to May 17

NCRGEA Staff on March 19, 2021

NCDOR Extends Individual Income Filing and Payment Deadline to May 17 Change matches the extension of the federal tax deadline

Raleigh

The North Carolina Department of Revenue (NCDOR) announced today that it will extend the April 15 tax filing and payment deadline to May 17, 2021, for individual income tax to mirror the announced deadline change from the Internal Revenue Service.

“In order for taxpayers to have more time to navigate the tax changes during this pandemic, North Carolina will mirror the IRS change as much as possible under current state law,” said Secretary Ronald G. Penny. “The Governor and the legislative leadership have indicated their willingness to work with us to address issues that will need law changes.”

Penny, under his statutory authority, will automatically extend the time for filing North Carolina individual income tax to May 17, 2021. With the move to May 17, the NCDOR will not charge penalties for those filing and paying their taxes after April 15, 2021, as long as they file and pay their tax before May 17, 2021.

Unless state law is changed, tax payments received after April 15 will be charged interest, accruing from April 15 until the date of payment. The deadline extension only applies to individual income tax returns due April 15, 2021. It does not apply to trust taxes such as sales and use or withholding taxes or estimated tax payments due April 15, 2021.

The NCDOR will issue official notification and guidance in the near future.