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Miami

Cypen & Cypen
NEWSLETTER
for
April 23, 2020

Stephen H. Cypen, Esq., Editor

1. WHAT YOU NEED TO KNOW; IMPACT OF THE CARES ACT ON 2020 RETIREMENT PLAN REQUIRED MINIMUM DISTRIBUTIONS:
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, to address the economic fallout caused by the coronavirus (COVID-19) pandemic and to provide financial relief to those impacted by the health crisis. One element of the legislation targets retirement plans like IRAs, 401(k)s, and 403(b)s. Specifically, with respect to those plan participants and beneficiaries, the CARES Act suspends required minimum distributions for 2020.
 
So how might this impact you? If in 2020 you would otherwise be required to take an annual distribution from a retirement plan, that requirement is waived for this year. You do not need to take the distribution. Furthermore, for those lucky individuals who turned 70 ½ last year and chose to defer their first payment to April 1, 2020, they are no longer required to take that first payment this year or their regular 2020 distribution!
 
For those who have yet to take their 2020 required minimum distributions, this may be good news. But what if you already took some or all of your 2020 distribution? If you would have preferred to keep that money inside your plan, hope is not lost—at least so long as you are not dealing with an inherited retirement plan! If fewer than 60 days have passed since the distribution and you are the participant, you can likely roll the distribution back into the account it came from or another eligible retirement account, particularly if you have not previously rolled over a distribution and you did not take your 2020 distribution in installments. This rollover option essentially allows you to reverse the distribution and proceed as though you never received it (although this is slightly trickier if taxes were withheld on the initial distribution).
 
What if more than 60 days have passed since you took the distribution? The answer here is less clear. When required minimum distributions were last suspended in 2009, the IRS extended the 60-day rollover period, so there is hope that they will do so again this time around; however, to date the rollover period remains capped at 60 days. In the event that the IRS does not extend the eligible rollover period, there may be other options under the CARES Act for mitigating the tax impact of having received a distribution; however, those options depend on how the pandemic has personally impacted you and, as such, are very fact specific.
 
But what if the required distribution you already received came from an inherited IRA? With very few exceptions, which are available only to surviving spouses, under this scenario you are stuck with the distribution. There is no way it can be undone by rolling it back into a plan. That said, there is still some good news specific to those beneficiaries receiving distributions from an inherited plan. If your distributions are subject to the 5-year payout period (e.g., the deceased participant’s plan paid to his or her estate), the CARES Act tacks an additional year on to the payout period. Now you have six years, rather than five, to withdraw all the retirement funds. Note, however, that this extended payout period will not apply to retirement accounts of individuals who pass away this year.
 
For those who can afford to do so, the CARES Act offers plan participants and beneficiaries a helpful reprieve from withdrawing retirement funds from accounts that have presumably been hard hit by the recent market volatility. By opting not to take their 2020 required minimum distributions, those individuals in turn have the added benefit of deferring the receipt of taxable income that would have otherwise been recognized. These individuals should be sure to confer with their plan administrators to ensure that appropriate steps are taken so as to avoid any inadvertent 2020 distributions. Those who have already received a 2020 distribution should consult with their legal, tax, and financial advisors to explore what options may be available to undo the distribution. Stephanie A. Bruno and Lawrence B. Cohen, Nixon Peabody, www.nixonpeabody.com, April 13, 2020.
 
2. THE CARES ACT; HELPING YOUR 401(K) PARTICIPANTS DURING THE CORONAVIRUS CRISIS:
Our first article discussed CARES Act provisions designed to help your 401(k) participants with temporary loan enhancements.  Here we discuss a second provision of the Act that can help participants who are affected by the coronavirus (called “qualified individuals”*).  This is a special coronavirus-related distribution (a CRD).  Though we discuss this in the context of 401(k) plans, the CRD provision applies to all qualified plans, 403(b) plans and IRAs as well.
 
The following chart compares the CRD to other “distributable events.” 
 


Pre-CARES Act Distributions

 

CRDs


Require a “distributable event” (such as death, disability, termination of employment or termination of a plan).  Alternatively, 401(k), 403(b) and 457(b) plans may permit “hardship” distributions.

 

 

Require that the participant be a qualified individual and that the distribution be made in 2020.



 

Hardship distributions of deferrals require a participant to meet criteria showing that they are experiencing an “immediate and heavy” financial need.  However, most plans also apply the hardship standard to other contributions sources.

 

 

No financial hardship is required beyond a self-certification that the participant is a qualified individual.




 

The amount of a hardship distribution may not exceed the amount needed to satisfy the need plus the taxes or penalties that may result from the distribution.



 

 

A qualified individual may take a CRD of up to $100,000.

Further, a CRD may be taken from IRAs and retirement plans other than 401(k), 403(b) and 457(b) plans.

 


Hardship distributions are subject to income tax in the year of distribution, a 10% excise tax if the participant is under age 59-1/2 and may not be repaid to the plan.














 

 

A CRD may, at the election of the participant, be taxed over a period of up to three years and is not subject to the 10% excise tax.

Alternatively, a CRD may be repaid to the plan from which it came, to another qualified plan or to an IRA.  Repayment may be made over a three-year period.

A qualified individual may elect a combination of taxation and repayment.

Comment: As a result of this flexibility, a CRD could be a more attractive option for participants because of the flexibility to take it into income or repay it to a plan or IRA.
 

If a participant takes a loan instead of a distribution, the participant must repay the loan, with interest, in substantially equal quarterly installments, over no more than five years.







 

 

CRDs may be repaid without interest, but the repayment period is limited to three years. There are no specified installment payments requirements, so it appears the CRD could be repaid in a lump sum at the end of the three-year period.

Comment:  In this respect, a CRD that a participant expects to repay may be somewhat less attractive, especially in light of the extension on repayment of a participant loan provided for under the CARES Act.


We anticipate that Treasury or the IRS will issue guidance on the circumstances and timing of when taxes will have to be paid.  If a plan is administered in a manner consistent with this special distribution rule, it will not need to be amended until the first plan year beginning after January 1, 2022.  Thus, the availability of CRDs from your plan may be adopted administratively, but the plan will need to be amended to provide for this distribution, just not right now.
 
Note that your decision on whether or not to adopt the CRD is a “settlor” (i.e., plan sponsor) decision, not a fiduciary one.  That said, implementation of the decision will be a fiduciary act.
 
As noted earlier, this special CRD provision is temporary; it applies only during 2020.  Plan sponsors will need to decide whether to implement this provision.  Most recordkeepers have or will be sending out a notice that the plan will be administered to provide for CRDs (and other CARES Act changes) unless you opt out (though we are also aware of some recordkeepers that require an opt in if the plan document is not using the recordkeeper’s pre-approved form).  In the opt out scenario, you will be deemed by the recordkeeper to have approved this change to your plan if you do not opt out.
 
In any event, you should consult with the plan recordkeeper and your advisor on a number of issues: 

  • How will participants be notified that CRDs are available? The Act does not include a requirement for notice to your participants, but plan sponsors should consider doing so and coordinate with the recordkeeper.
  • Will the recordkeeper accept and implement the self-certification that participants are qualified individuals?*
  • Assuming the recordkeeper will administer the distributions, will it charge for them? (We have learned that several recordkeepers will be waiving charges for CRDs.)
  • If the plan is using a preapproved document, will the recordkeeper take care of the amendment before the deadline?

The coronavirus pandemic has created severe hardships for millions of employees throughout the country.  The CARES Act is attempting to provide relief to those hardest hit.  Fred Reish, www.FredReish.com, April 13, 2020.

3. RETIREMENT PLAN CHANGES DURING COVID-19; STEPS PUBLIC AGENCIES SHOULD FOLLOW:
Although many employers plan to make changes to their retirement plans to take advantage of employee-friendly CARES Act provisions, public agencies should not blindly adopt recommended changes without thinking about the steps involved.
 
The last Focus on Public Benefits post described the availability of coronavirus-related distributions and the fact that employers need to decide whether to make these available. A number of recordkeepers and third party administrators for public sector-defined contribution plans (typically, 457(b), 401(a) and 403(b)) indicate to us that they are in the process of issuing CARES Act guidance and asking customers if they want to amend plans to offer some or all of the CARES Act provisions. There are many considerations in determining whether or not to amend these plans — including that the extra work you take on is meant to ultimately assist your employees in need. Things to consider:

  • Are these plan changes subject to “meet and confer” requirements? In California, public agencies with MOUs are required to at least offer to their union partners the opportunity to meet and confer over employee benefit changes, even if the changes are all more favorable to the affected employees. Have you consulted with your labor attorney to make sure you have complied with applicable requirements?  
  • Who has the authority to amend your plan? Although your plan recordkeeper is reaching out to its contact within your organization – typically, a payroll or HR manager – and asking them to complete an “election” form that will effectively notify the recordkeeper of your organization’s decision to amend its plan, does that person have the authority to make a plan amendment or a plan design change? Almost all plan documents contain boilerplate language stating that the employer has the right to amend or terminate the plan. Generally, this means your agency’s governing body has to approve plan amendments, unless it has explicitly delegated some amendment authority to another, such as the city/agency manager or the plan administrator. As a result, most of the CARES Act and SECURE Act changes will need your governing body’s approval. Ideally, this should occur before any plan changes are implemented.  
  • Have you analyzed the administrative burdens associated with these changes? Many employers will want to make these changes to help their employees through these difficult times. However, employers should not change the operation of their retirement plans, unless they are capable of managing the new and additional plan administration requirements associated with such changes. Even with the help of your plan’s recordkeeper, you may need to reach out to participants, obtain and maintain their new elections (e.g., to request a CRD), and keep adequate records of administrative changes relating to these requests (e.g., new deferred payment dates for participant loans). Many municipalities are extremely busy dealing with keeping critical city services up and running. So, plan sponsors need to carefully weigh whether now is the time to complicate their HR functions.  
  • Many of the new rules are much harder to administer if you have multiple plans. Both the new CRD rules and the new liberalized limits and repayment rules for participant loans include plan aggregation rules that require the plan administrator (essentially, your agency) to aggregate and monitor the total amounts of CRDs or loans that an employee has taken or has requested to take from the plans. In many cases, a city’s multiple 457(b) plans are record kept by different vendors who may not be communicating with one another – and may not be coordinating limits. If you are in this situation, it will be up to you, the employer, to keep track of the overall limits to make sure that a given employee is not withdrawing or borrowing too much from his or her various plan accounts.  
  • You’ll need to revisit plan policies, prior loans and withdrawals, and current plan provisions. You may have already made several 457(b) plan distributions based on the pre-existing unforeseeable emergency hardship rules. If so, these distributions, if made in 2020, may be eligible for treatment as CRDs. It might also be possible to treat them separately – under the old rules and under the new rules. We will need further guidance on this issue. If you have already been making participant loans, certain outstanding balances will have to be counted against the new CARES Act limit. You also will need to revisit your loan policies (and perhaps revise them), particularly if they limit the number of loans to one. As mentioned above, the new CARES Act loan limits generally apply to all loans taken by an employee from all of your plans. Finally, changes such as the new participant loan rules under the CARES Act will require you to add a participant loan provision or feature to your plan this year, if your plan currently does not provide for loans.  

Many public agencies will be in a rush to make changes in their retirement plans to give their employees greater access to their retirement savings. Because each agency may have different requirements and conditions for adopting plan amendments and plan operational changes, care should be taken so that any changes are made properly.  Jeff Chang, www.focusonpublicbenefits.com, April 14, 2020.
 
4. NASRA ISSUE BRIEF; STATE AND LOCAL GOVERNMENT CONTRIBUTIONS TO STATEWIDE PENSION PLANS - FY 18:
Pension benefits for employees of state and local governments are paid from trust funds to which public employers and employees contribute during employees’ working years. Timely contributions are vital to both adequate funding and the sustainability of these plans: failing to pay required contributions results in higher future costs due to foregone principal and investment earnings that the contributions would have generated. 

According to the US Census Bureau, on a national basis, contributions made by employers—states and local governments—in 2018 accounted for nearly three-fourths of all contributions received by public pension plans. The remaining contributions were paid by public employees. A 2019 NASRA issue brief finds that contributions made by state and local governments to pension trust funds in recent years account for just less than five percent of all spending.
 
This brief describes how contributions are determined; the recent public employer contribution experience; and trends in employer contributions over time.  NASRA, www.nasra.org, April 2020.
 
5.   IMPLEMENTING A CORONAVIRUS DISTRIBUTION PROGRAM IN YOUR DB PLAN:
Most of the focus on the new CARES Act 2020 retirement plan liquidity provisions – liberalized withdrawal rules, waiver of the 10% early withdrawal tax, and 3-year income tax recognition/rollover – has been on 401(k) plans. But the temporary relief also applies to defined benefit plans, and DB plans may serve as an indispensable resource for certain plan participants experiencing financial stress in the current crisis. There may also be other reasons for DB sponsors to consider offering such distributions.  In this article we review the issues presented by DB Coronavirus related distributions.
 
The CARES Act 2020 retirement plan withdrawal rules generally apply to DB plans in the same way they do to DC plans. Here’s a recap (with a focus on a couple of specific DB plan issues):
 
What distributions are allowed from a DB plan? The CARES Act does not change when a distribution may be made to a DB participant. The short version is that lump sum distributions to terminated vested participants are allowed, subject to participant (and, where applicable, spousal) consent where the present value of the benefit is greater than $5,000. For other participants, including those “furloughed” (but not permanently “separated from employment”) by the sponsor in the Coronavirus crisis, active employees over age 59 1/2, and retirees, the answer is more complicated – sponsors will want to review these issues with counsel if they are interested in making 2020 lump sum distributions to one or more of these groups.
 
What special tax incentives apply? CARES provides several provisions that make taking a lump sum Coronavirus related distribution in 2020 more attractive to participants than taking a “regular” lump sum would be at other times: (1) The 10% early withdrawal tax does not apply. (2) These distributions may be included in taxable income ratably over three years. And (3) they may be rolled over during that three-year period, if desired.
 
What is a Coronavirus-related distribution? The rules here are the same as they are for DC plans: a “coronavirus-related distribution” means any distribution from a tax-qualified retirement plan made on or after January 1, 2020, and before December 31, 2020, to an individual: 

  • Who is diagnosed with a disease designated as coronavirus by a test approved by the Centers for Disease Control and Prevention; 
  • Whose spouse or dependent is so diagnosed; or 
  • Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to the coronavirus, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. 

For this purpose, the plan administrator may rely on an employee certification.
 
Reasons participants may wish to take a Coronavirus related distribution from a DB plan

  • First (and most obviously), the participant may (indeed, given the requirements, probably is) experiencing adverse financial consequences because of the current crisis. 
  • Second, adverse taxation (both the 10% additional tax and income “bunching”) may be one of main reasons a terminated vested participant hasn’t already taken a lump sum – the one-time relief from these rules presented by the CARES Act may be a significant motivator.
  • Third, “liquidating” a traditional DB or cash balance benefit may make more sense, from a portfolio management standpoint, than liquidating the participant’s position in her 401(k) plan.

Effect on plan sponsor.  Each year we provide an article discussing the economic advantages/disadvantages of paying lump sums to terminated vested participants. (Our 2020 article is here.) Generally (and summarizing), de-risking/lump summing-out a terminated vested participant reduces the cost of paying ongoing Pension Benefit Guaranty Corporation premiums. 
 
When to provide a lump sum option depends, in part at least, on the sponsor’s view of the interest rate trend. We are following interest rate activity closely (see, e.g., our recent article Markets 2020 – effect on PBGC variable-rate premiums and strategies to reduce them). In the current context, we would observe, first, that probably the most important issue for a sponsor is its view of the trajectory of future interest rates. And, second, that that trajectory may depend on the relative balance between a crisis-driven decline in demand and extraordinary federal fiscal and monetary stimulus efforts.
 
Finally, because of complications presented by partial withdrawals, sponsors may wish to limit distributions to those who have benefits of $100,000 or less.  October Three, www.octoberthree.com, April 14, 2020. 
 
6. NEW FIDELITY FEE DECISION ADDRESSES SEVERAL IMPORTANT ISSUES FOR PLAN FIDUCIARIES:
On March 27, 2020, the District of Massachusetts issued a decision finding that Fidelity breached its fiduciary duties to its own 401(k) Plan by failing to monitor investments and administrative expenses.  Although the decision involved unique facts relating to the implementation of a settlement of a prior case brought against Fidelity, the court’s 67-page opinion addresses several significant legal issues.  These issues include a plan fiduciary’s obligations with respect to self-directed brokerage accounts and the consideration of collective investment trusts and separate accounts as alternatives to mutual funds.  The court also ruled that relief may be available against Fidelity even if Fidelity’s breach caused no harm to the Plan and did not result in any profit to Fidelity. While the court’s decision applies to a financial services company-sponsored plan that included its own proprietary mutual funds as investment options in the plan, we note that the court’s analysis and conclusions will be of interest to all types of plan sponsors and fiduciaries.
 
In October 2014, Fidelity settled an earlier class action alleging breach of fiduciary duty.  Under the terms of the settlement, Fidelity was required to: (i) provide a “Revenue Credit” to the Plan every year that “matches or exceeds the management fees and revenue generated by Fidelity pursuant to its role administering the various funds, which includes the cost of recordkeeping;” and (ii) have certain “designated investment alternatives” “undergo full fiduciary monitoring.”
 
Fidelity was sued again in October 2018, with plaintiffs alleging that Fidelity breached its fiduciary duties by failing to monitor hundreds of Fidelity mutual funds offered to participants, failing to investigate alternatives to mutual funds (e.g., separate accounts and collective investment trusts), and failing to monitor recordkeeping expenses.  Fidelity acknowledged that it “did not monitor these administrative costs, on the grounds that all administrative expenses paid to Fidelity would be credited back to the Plan” through the Revenue Credit and argued that the hundreds of Fidelity mutual funds offered in addition to the Plan’s “designated investment alternatives” were “the equivalent of a self-directed brokerage account” and therefore need not be monitored.
 
Although the court concluded that Fidelity violated its duty of prudence by failing to monitor investments and administrative expenses, it held that Fidelity did not violate its duty of loyalty.  Not only could plaintiffs not show that Fidelity acted with the “subjective motivation” to benefit itself at the expense of the Plan, but the court made clear that “[i]t is not enough for a plaintiff to identify a potential conflict of interest from the defendant’s investments in its own proprietary funds.”  The court also rejected plaintiffs’ argument that Fidelity engaged in a prohibited transaction, finding that the conditions of Prohibited Transaction Exemption 77-3 – which allows in-house plans of financial companies to invest in affiliated funds – were satisfied.
 
In addition to offering individual investment options to participants, many plans offer participants with the option to utilize a self-directed brokerage account (sometimes referred to as a “brokerage window”).  Through the brokerage window, plan participants may select from potentially thousands of additional investment options.  The court devoted seven pages of its opinion to the question of whether the “general duty under ERISA continuously to monitor investments and remove those that are imprudent” also applies to brokerage windows.  But the court did not provide an answer.  Instead, the court concluded that “there is significant lack of clarity regarding the duties a fiduciary owes with regard to the funds within a brokerage window,” and held that a definitive resolution of the question was unnecessary because Fidelity’s offering of hundreds of its own funds could not be treated as the “equivalent” of brokerage window (in part because only Fidelity’s own proprietary funds were offered).  Accordingly, the court concluded that Fidelity was responsible for monitoring each of those hundreds of funds.
 
The court’s discussion is unlikely to add any clarity to the issue of a fiduciary’s duties with respect to brokerage windows, and may further embolden similar challenges in other cases.  Although the court noted that it was “perhaps unrealistic for a fiduciary to monitor . . . all” of the “hundreds or thousands of investments” available through a brokerage window, the court questioned whether holding there was no duty to monitor would be consistent with ERISA and DOL regulations.  Yet, the court also noted that “[r]egulators have declined to weigh in on this question,” and that DOL “withdrew” previous guidance on the subject.
 
Most investment options in retirement plans are mutual funds, which generally hold a pool of investments and are subject to regulation and oversight by the Securities and Exchange Commission.  An increasing number of lawsuits in recent years have alleged that plans should have used other pooled investment vehicles instead of mutual funds, such as separate accounts and collective investment trusts.
 
The court rejected this theory, holding that “that there is no fiduciary duty to investigate alternatives to mutual funds,” including “[s]eparate accounts” and “collective trusts.”  Specifically, the court explained that “[t]hese non-mutual fund vehicles differ so much from mutual funds . . . in terms of their regulatory and transparency features that other courts have found it impossible to make an ‘apples-to-oranges’ comparison of the two.”
 
The court agreed with Fidelity that – with respect to recordkeeping expenses – there was “no net loss to the Plan” and Fidelity did not “receive gains or profits as a result of the breach” because “100% of the money collected for recordkeeping expenses was returned to the Plan.”  But since the Revenue Credit provided to the Plan was allocated only to current Fidelity employees, former Fidelity employees who remained participants could have still been harmed.  The court held that “[e]quitable relief is an available remedy for individuals even when the Plan as a whole has not suffered losses.”  Groom Benefits Brief, www.groom.com, April 13, 2020.
 
7. EMPLOYMENT AT OLDER AGES AND SOCIAL SECURITY BENEFIT CLAIMING, 1980–2018:
A retired worker's Social Security benefit depends in part on the age at which he or she claims benefits. Working longer and claiming benefits later increase the monthly benefit. Information about trends in employment at older ages and the age at which individuals claim Social Security benefits can help policymakers assess the effectiveness of current policies in influencing the timing of retirement and benefit claims. Both the labor force participation rate (LFPR) among older Americans and the age at which they claim Social Security retirement benefits have risen in recent years. For example, from 2000 through 2018, the LFPR among individuals aged 65–69 rose from 30 percent to 38 percent for men and from 19 percent to 29 percent for women. Since 2000, the proportion of fully insured men and women who claim retirement benefits at the earliest eligibility age of 62 has declined substantially.
 
The Aging U.S. Population.  Over the next 20 years, the proportion of Americans who are aged 65 or older will rise substantially. The Census Bureau projects that while the total U.S. population will increase from 333 million in 2020 to 374 million in 2040—an increase of 41 million—the number of people aged 65 or older will increase from 56 million to 81 million—an increase of 25 million. As a result, the proportion of the population that is aged 65 or older is projected to rise from 16.8 percent in 2020 to 21.7 percent in 2040 (Census Bureau 2017). The rise in the number of older Americans will result in higher expenditures for Social Security, Medicare, and Medicaid, and will affect the amounts and sources of income for tens of millions of individuals and families.
 
The projected growth in the proportion of the population that is aged 65 or older over the next 20 years will reflect long-term demographic trends, especially the rise and subsequent fall in birth rates in the second half of the 20th century. Changes in birth rates and death rates typically occur over long periods, and they can take decades to affect the age profile of a nation's population. By contrast, trends in retirement age—and in the age at which individuals claim Social Security benefits—can change substantially in a short time. Choices about retirement and Social Security benefit claiming can affect individuals' retirement income many years into the future. By delaying retirement, for example, workers can continue to accumulate savings instead of beginning to draw those savings down to pay their living expenses. Additionally, workers who delay claiming their Social Security benefits until after the earliest age of eligibility receive larger monthly benefits for life.
 
This research and statistics note updates Purcell (2016). It presents new data on trends in the LFPR of older Americans, in the age at which people claim Social Security retired-worker benefits, and in the proportion of men and women aged 62 or older who receive disabled-worker or retired-worker benefits. The data are summarized in six charts, available here
 
Growth in the Population That Is Fully Insured for Retired-Worker Benefits.  A worker becomes insured for retirement benefits through employment that is subject to Social Security payroll taxes, called “covered employment.” To be fully insured for retired-worker benefits, a worker must accumulate 40 credits (requiring at least 10 years) of Social Security–covered employment. The amount of earnings needed to earn one credit can change slightly each year depending on the change in national average earnings. A worker can earn up to four credits in a year, and because earnings determine credits, four credits can be earned in fewer than four calendar quarters of covered employment.
 
From 1980 through 2018, the number of men aged 62–66 who were fully insured for retired-worker benefits more than doubled, rising from 4.2 million to 8.8 million. However, the percentage of men aged 62–66 who were fully insured increased by only 1 percentage point, from 93 percent to 94 percent. The percentage of men who are fully insured for retired-worker benefits is unlikely to rise much above 94 percent because about one-fourth of state and local government workers are not covered by Social Security, some individuals are disabled throughout their adult lives, and some older immigrants never accumulate 40 credits of Social Security–covered employment. Going forward, these circumstances are unlikely to change substantially.
 
Because of a long-term rise in the LFPR among women of all ages, both the number and the proportion of women who are fully insured for Social Security retired-worker benefits have increased. From 1980 through 2018, the number of women aged 62–66 who were fully insured rose from 3.4 million to 9.0 million and the proportion of women aged 62–66 who were fully insured increased from 65 percent to 89 percent. In 2018, the number of women aged 62–66 who were fully insured for retirement benefits (9.0 million) exceeded the number of men the same age who were fully insured (8.8 million). Nevertheless, the percentage of women in this age group who were fully insured (89 percent) remained lower than the percentage of men who were fully insured (94 percent).
 
Social Security Retired-Worker Benefit Claims by Age.  Workers who have earned at least 40 credits of Social Security–covered employment are fully insured for retired-worker benefits. The earliest eligibility age for claiming a retired-worker benefit is 62; however, a worker who claims benefits before attaining full retirement age (FRA) receives permanently reduced monthly benefits. FRAs differ depending on year of birth. For people who attained age 62 before 2000 (born in 1937 or earlier), the FRA is 65. For individuals who turn 62 in 2020 (born in 1958), the FRA is 66 and 8 months. The FRA for individuals who will attain age 62 in 2022 or later is 67. You can learn more about the FRA here.
 
Delayed retirement credits (DRCs) permanently increase the monthly Social Security benefit for workers who claim after reaching FRA.  DRCs accumulate with each month that a worker defers claiming until age 70. DRCs do not accumulate after age 70.
 
Conclusion.  This research and statistics note highlights several important trends in labor force participation among older Americans and in the age at which people claim Social Security retirement benefits, including the following:

  • Older Americans are working longer. From 1980 through 2018, the LFPR among individuals aged 65–69 rose from 29 percent to 38 percent for men and from 15 percent to 29 percent for women.
  • Between 1980 and 2018, the percentage of men aged 62–66 who were fully insured for Social Security retirement benefits rose by just 1 percentage point, from 93 percent to 94 percent. Because not all jobs are covered by Social Security, this percentage is unlikely to rise much in the future. Over the same period, the proportion of women aged 62–66 who were fully insured for Social Security retirement benefits increased from 65 percent to 89 percent, reflecting the long-term increase in women's employment rates.
  • After 2000, the proportion of fully insured men and women who claimed retirement benefits at age 62 declined substantially. From 2000 through 2004, 40 percent of fully insured men claimed retirement benefits at 62. From 2015 through 2018, 22 percent of fully insured men claimed retirement benefits at 62. From 2000 through 2004, 44 percent of fully insured women claimed retirement benefits at 62. From 2015 through 2018, 25 percent of fully insured women claimed retirement benefits at 62.
  • From 1985 through 2004, an annual average of 39,000 men and 21,000 women claimed retired-worker benefits at age 66. From 2010 through 2018, after the FRA had increased to 66 for all persons who attained age 66 in 2009 or later, an annual average of 334,000 men and 236,000 women claimed retired-worker benefits at age 66.
  • From 2000 through 2018, the proportion of fully insured men aged 62–64 who received retired-worker benefits declined from 46 percent to 24 percent. Over the same period, the proportion of men aged 62–64 who received DI benefits rose by 2 percentage points, from 14 percent to 16 percent. The proportion of fully insured women aged 62–64 who received retired-worker benefits declined from 48 percent in 2000 to 26 percent in 2018. Over the same period, the proportion of women aged 62–64 who received DI benefits rose by 3 percentage points, from 11 percent to 14 percent.  

Patrick J. Purcell, SSA Research and Statistics Note No. 2020-01, www.ssa.gov, April 2020.
 
8. FDIC TO POSTPONE EFFORT TO MODERNIZE AGENCY'S SIGNAGE & ADVERTISING REQUIREMENTS:
The Federal Deposit Insurance Corporation (FDIC) today announced it will temporarily postpone its efforts to modify its signage and advertising requirements. The agency remains committed to modernizing these rules at a future date to better reflect how banks and savings associations are transforming their business models to take deposits via physical branches, digital, and mobile banking channels.
 
On February 26, 2020, the FDIC published a Request for Information in the Federal Register seeking input regarding potential changes to its sign and advertising rules. Last month, agency extended the comment period to April 20, 2020.  FDIC Press Release, www.fdic.gov, April 16, 2020.
 
9.  IRS EXTENDS MORE TAX DEADLINES, INCLUDING FORM 990-SERIES RETURNS AND NOTICES:
To help taxpayers, the Department of Treasury and the Internal Revenue Service announced today that Notice 2020-23 (PDF) extends additional key tax deadlines for individuals and businesses.
 
Last month, the IRS announced that taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. No late-filing penalty, late-payment penalty or interest will be due.
 
Today’s notice expands this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time. This means that anyone, including Americans who live and work abroad, can now wait until July 15 to file their 2019 federal income tax return and pay any tax due.
 
Extension of time to file beyond July 15.  Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to Oct. 15, 2020, by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004. An extension to file is not an extension to pay any taxes owed. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by the July 15, 2020, deadline to avoid additional interest and penalties.
 
Estimated Tax Payments.  Besides the April 15 estimated tax payment previously extended, today’s notice also extends relief to estimated tax payments due June 15, 2020. This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.  
 
2016 unclaimed refunds – deadline extended to July 15.   For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15, 2020, date.
 
IRS.gov assistance 24/7.  IRS live telephone assistance is currently unavailable due to COVID-19. Normal operations will resume when possible. Tax help is available 24 hours a day on IRS.gov.  The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax AssistantTax TopicsFrequently Asked Questions, and Tax Trails to get answers to common questions. Those who have already filed can check their refund status by visiting IRS.gov/Refunds.  IRS Notice 2020-23, www.irs.gov, April 9, 2020.
  
10. FTC SENDS MORE WARNINGS TO SELLERS OF SCAM CORONAVIRUS TREATMENTS:
Last month, the FTC and FDA sent warning letters to seven sellers of unapproved and misbranded products, claiming they can treat or prevent the Coronavirus. Again, the FTC sent warning letters to 10 more companies.
 
The companies’ products include everything from a bundle of supplements called an “ANTI-VIRUS KIT” to “Sonic Silicone Face Brushes” and intravenous (IV) “therapies” with high doses of Vitamin C. The FTC says the companies have no evidence to back up their claims — as required by law. The 10 companies are:

  • Bioenergy Wellness Miami
  • Face Vital LLC
  • LightAir International AB
  • MedQuick Labs LLC
  • New Performance Nutrition
  • ParaTHRIVE LLC
  • Resurgence Medical Spa, LLC
  • Rocky Mountain IV Medics
  • Suki Distribution Pte. Ltd.
  • Vita Activate

Some of the FTC’s letters challenge products sold online; others challenge treatments offered in clinics or for use at home. Make no mistake: the U.S. Food and Drug Administration (FDA) continues to say there currently are no products proven to treat or prevent the virus.
 
The FTC’s letters tell the companies to immediately stop making all claims that their products can treat or cure the Coronavirus. The letters also require the companies to notify the FTC within 48 hours of the specific actions they have taken to address the agency’s concerns. The agency will follow up with companies that fail to make adequate corrections. The FTC also will continue to monitor social media, online marketplaces, and incoming complaints to help ensure that the companies do not continue to market fraudulent products under a different name or on another website.  Want more information on the latest scams we’re seeing? Sign up for our consumer alerts. See a product claiming to treat, cure or prevent the Coronavirus? Report it to the FTC at ftc.gov/complaint.  Colleen Tressler, Consumer Education Specialist, FTC, www.consumer.ftc.gov, April 14, 2020.
 
11.  FEDERAL BANKING AGENCIES TO DEFER APPRAISALS AND EVALUATIONS FOR REAL ESTATE TRANSACTIONS AFFECTED BY COVID-19:
The federal banking agencies today issued an interim final rule to temporarily defer real estate-related appraisals and evaluations under the agencies' interagency appraisal regulations. The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are providing this temporary relief to allow regulated institutions to extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19.
 
The agencies are deferring certain appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions. Transactions involving acquisition, development, and construction of real estate are excluded from this interim rule. These temporary provisions will expire on December 31, 2020, unless extended by the federal banking agencies.  The National Credit Union Administration (NCUA) will consider a similar proposal on Thursday, April 16.
 
In addition, the federal banking agencies, together with NCUA and the Consumer Financial Protection Bureau, in consultation with the Conference of State Bank Supervisors, issued a joint statement to address challenges relating to appraisals and evaluations for real estate-related financial transactions affected by COVID-19.
 
The interagency statement outlines other flexibilities in industry appraisal standards and in the agencies' appraisal regulations and describes temporary changes to Fannie Mae and Freddie Mac appraisal standards that can assist lenders during this challenging time. The agencies will continue to communicate with the industry, as appropriate, as this situation evolves.  FDIC, Press Release 51-2020, www.fdic.gov, April 14, 2020.
 
12. SUPPLEMENTAL SECURITY INCOME RECIPIENTS WILL RECEIVE AUTOMATIC ECONOMIC IMPACT PAYMENTS; STEP FOLLOWS WORK BETWEEN TREASURY, IRS, SOCIAL SECURITY ADMINISTRATION:
The Internal Revenue Service, working in partnership with the Treasury Department and the Social Security Administration, announced that recipients of Supplemental Security Income (SSI) will automatically receive Economic Impact Payments.
 
SSI recipients will receive a $1,200 Economic Impact Payment with no further action needed on their part. The IRS projects the payments for this group will go out no later than early May.
 
Moving SSI recipients into the automatic payment category follows weeks of extensive cooperative work between SSA, Treasury, IRS as well as the Bureau of Fiscal Services.
 
"Since SSI recipients typically aren't required to file tax returns, the IRS had to work extensively with these other government agencies to determine a way to quickly and accurately deliver Economic Impact Payments to this group," said IRS Commissioner Chuck Rettig. "Additional programming work remains, but this step simplifies the process for SSI recipients to quickly and easily receive these $1,200 payments automatically. We appreciate the assistance of SSA and the Bureau of Fiscal Services in this effort."
 
No action needed by most taxpayers.  Earlier this month, the IRS took a similar action to ensure those receiving Social Security retirement or disability benefits and Railroad Retirement benefits can receive automatic payments of $1,200. While these groups receive Forms 1099, many in this group don't typically file tax returns. People in these groups are expected to see the automatic $1,200 payments later this month.
 
Eligible taxpayers who filed tax returns for 2019 or 2018 will also receive the payments automatically. About 80 million payments are hitting bank accounts this week.
 
For benefit recipients with dependents, extra step needed to claim $500 for children.  The law provides eligible taxpayers with qualifying children under age 17 to receive an extra $500. For taxpayers who filed tax returns in 2018 or 2019, the child payments will be automatic.
However, many benefit recipients typically aren't required to file tax returns. If they have children who qualify, an extra step is needed to add $500 per child onto their automatic payment of $1,200 if they didn't file a tax return in 2018 or 2019.
 
For those who receive Social Security retirement or disability benefits (SSDI), Railroad Retirement benefits or SSI and have a qualifying child, they can quickly register by visiting special tool available only on IRS.gov and provide their information in the Non-Filers section. By quickly taking steps to enter information on the IRS website about them and their qualifying children, they can receive the $500 per dependent child payment in addition to their $1,200 individual payment. If beneficiaries in these groups do not provide their information to the IRS soon, they will have to wait until later to receive their $500 per qualifying child.
 
The Treasury Department, not the Social Security Administration, will make these automatic payments to SSI recipients. Recipients will generally receive the automatic payments by direct deposit, Direct Express debit card, or by paper check, just as they would normally receive their SSI benefits.
 
For those with dependents who use Direct Express debit cards, additional information will be available soon regarding the steps to take on the IRS web site when claiming children under 17.
 
For information about Social Security retirement, survivors and disability insurance beneficiaries, please visit the SSA website at SSA.gov.  General information about the Economic Impact Payments is available on a special section of IRS.gov.
 
Watch out for scams related to Economic Impact Payments.  The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information. Remember, go directly and solely to IRS.gov for official information.
 
More information.  The IRS will post frequently asked questions on IRS.gov/coronavirus and will provide updates as soon as they are available.  IRS Notice 2020-73, www.irs.gov, April 15, 2020.
 
13. DID YOU KNOW ALBERT EINSTEIN SAID THIS?:
"Strive not to be a success, but rather to be of value."
 
14. INSPIRATIONAL QUOTE:
"If you cannot do great things, do small things in a great way." - Napoleon Hill
 
15. TODAY IN HISTORY:
On this day in 2003, Beijing closes all schools for two weeks because of the SARS virus.
16.  PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.):  I'm supposed to respect my elders, but it's getting harder and harder for me to find one now.
17. REMEMBER, YOU CAN NEVER OUTLIVE YOUR DEFINED RETIREMENT BENEFIT.

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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