Article by Patricia L. Burris, CFP®
A lot has changed for all of us during the COVID-19 pandemic and Social Security is no exception. Effective Tuesday, March 17, 2020 all the Social Security field offices closed to in-person service and remain closed as of August 25th, 2020.
Currently, folks needing assistance with Social Security or Medicare have the option of calling the SS ‘hot line’ (1-800-772-1213). However, the ‘hot line’ has become so hot that wait times to get a SSA representative on the line have been as long as two hours.
Fortunately, SSA has added more representatives to answer all the calls, and they have updated their website with some additional features. Below are some of the changes in Social Security that have occurred since the start of the Pandemic.
New SSA.gov Online Tool – Advance Designation of Representative Payee
The Social Security Administration has added a new feature to the SSA website. This feature allows individuals with a “My Social Security account” to designate up to three individuals who can serve as their representative payee, in the event they are not able to manage their own affairs.
Prior to the addition of this tool, SSA would only allow individuals to apply for a representative payee via completion of their Form SSA-11, and this was typically through a face-to-face meeting at the SSA office only. Even if you already have a legal Power of Attorney (POA) in place to handle your financial affairs, the Social Security Administration does not accept your POA when establishing a representative payee with them. Therefore, folks who already have a POA prepared by their attorney should update their “My Social Security account”, adding their desired representative payee information.
COVID-19 and other ailments or accidents can impact young and old alike, therefore everyone, even those not yet on Social Security or Medicare, should establish a “My Social Security” account and complete their representative payee information.
Stimulus Checks, Social Security Taxability and Retroactive Lump Sum Payments
Depending on your income level, your Social Security benefits are taxable. The good news is that any stimulus check you received this year is not considered taxable income, so it will not have an impact on your provisional income that is used to determine if your Social Security benefits are taxable.
In addition, prior to the pandemic, recipients who filed for benefits past their Full Retirement Age [FRA] could request a retroactive lump sum payment of monthly benefits of up to six months, but not sooner than their FRA. This would then make their monthly benefit equate to what their benefit would have been if they would have filed six months ago.
For example, if someone whose FRA is age 66, at which time entitled to a monthly benefit of $2,000 per month, was filing at their age 66 and six months, they could request a retroactive start date six months prior, at their age 66. This would give them a lump sum benefit of $12,000 (6 x $2,000) and their monthly benefit going forward of $2,000 per month.
Until the Social Security Administration field offices reopen, allowing supervisory level senior SSA staff to review retroactive lump sum payment requests, the SSA has temporarily stopped processing retroactive payment requests.
0% Social Security but 6.7% Medicare Part B Premium 2021 COLA
Although not solely due to the pandemic, this year’s economic conditions will have a significant impact on 2021 Social Security and Medicare Part B premium Cost of Living Adjustments [COLA]. The 2021 SS COLA won’t be announced until Oct 13, 2020, but projections are there will not be one.
The CPI-W is used to determine the annual COLA, or lack thereof. The formula for determining the annual SS COLA is the average monthly CPI-W for July, August and September for the current year as compared to the same average for the prior year.
For example, the 1.6% 2020 COLA was determined by subtracting the 2018 CPI-W July / August / September average of 246.352 from the 2019 average of 250.200 and dividing by the 2018 average ((250.2 -246.352)/246.352) = 1.6%.
The 2020 Medicare Part B base premium is $144.60/per month. The amount of Medicare premium you pay is based on your tax return two years ago, so 2020 premiums are based on your 2018 tax return*. Married filling joint taxpayers whose 2018 Modified Adjusted Gross income, MAGI, (line 7 + 2a of IRS Form 1040) was more than $174,000 and single filers whose MAGI was more than $87,000 pay an additional amount, know as Income Related Monthly Adjusted Amount (IRMAA).
Medicare Trustees preliminary projections are a 6.3% increase in the $144.60 base premium, or $9.10 per month, for 2021. The good news for approximately 70% of Social Security beneficiaries, who are also on Medicare paying the $144.60 base premium, is that there is a hold-harmless provision. This means that your Medicare premium cannot go up more than your SS COLA. Therefore, if you do not receive an increase in Social Security benefits in 2021, you will not have to also pay the $9.10 increase in Medicare Part B premium.
The hold-harmless provision, however, does not apply to individuals paying IRMAA Medicare premiums. Medicare Part B premiums for folks subject to IRMAA will more than likely go up more than 6.3% to cover the deficit for those not receiving an increase – because they are covered under the hold-harmless provision.
It is important to note that you must already be receiving Social Security to be covered under the hold-harmless provision. For example, both husband and wife may be on Medicare paying Part B premiums of $144.60/per month. If the husband is also receiving Social Security but the wife is not, the husband will be covered under the hold-harmless provision. However, the wife will be subject to the $9.10 Part B premium increase.
Those who have a “Life-Changing Event”, such as work reduction or stoppage, you can appeal an IRMAA premium using Form SSA-44. Contact me at Meld Financial for more information about this process.
Social Security Trust Fund Projected to be Depleted Sooner
Every year the Social Security Trustees publish a report which includes a projection of the date at which payment of full benefits will be sustainable. The report published at the end of 2019 projected a sustainable date of 2035. Because of the significant loss in payroll and related payment of Social Security taxes because of COVID-19, as well as lower interest income, early projections are the Trust fund could be depleted as soon as 2029 at which time payment of benefits to all Social Security recipients would have to be significantly reduced.
As is the case during the last several Presidential elections, both sides of the political campaign have or will propose ways to resolve this Social Security dilemma. However, to date, we have not seen any concrete actions and time will tell what will happen with the next election. The only thing concrete so far is that time is running out faster because of the pandemic.
Social Security Webinar – Presented by Meld University
For more information about these changes and Social Security in general, join us for our next educational webinar, “Social Security Planning: What You Need to Know to Maximize Your Retirement Income” on Tuesday, September 22nd at 3:00 PM, or contact me at firstname.lastname@example.org or 205-967-4200.
There is no cost to register, but attendance is limited. So, be sure to reserve your place today.
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