COVID-19 Pandemic: Impact on Social Security

School of Social Security & Medicare

Social security card lying on top of a pay stub listing payroll taxes such as Medicare and Social Security – indicating changes to Social Security Benefits due to COVID-19

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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.

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. Another option that may result in a quicker way to reach the SSA is to call your local office.  To obtain the phone number for your local office, simply enter your zip code in the Social Security Office Locator tool on their website at:  https://secure.ssa.gov/ICON/main.jsp.

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”, who are also receiving Social Security benefits, 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 already receiving, or when applying for Social Security retirement or disability benefits, should log onto their “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 is not considered taxable income for Federal Income Tax purposes. Therefore, 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, previously they could request a retroactive start date six months prior, at their age 66. This would have given 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.

Social Security and Medicare Part B Premium 2021 COLAs

Although not solely due to the pandemic, 2020 economic conditions had a significant impact on 2021 Social Security and Medicare Part B premium Cost of Living Adjustments [COLA]. The SS COLA effective January 1, 2021 was only 1.3%, compared to 1.6% and 2.8% for the prior two years.

In the summer of 2020, due to the increased Medicare spending for COVID-19 patient care, Medicare Trustees preliminary projected a 6.3% or more increase in the 2020 base Medicare Part B premium for 2021.  Fortunately, as part of a short-term government funding bill signed into law by President Trump on October 1, 2020, a provision was included to cap any increase in Part B premiums to 25% of what it would otherwise be.  As a result, the Part B premium increase effective January 1, 2021 was only 2.3%, or $3.60 per month, making the 2021 base Medicare Part B premium $148.50.

The amount of Part B premium you pay is based on your tax return two years ago, so 2021 premiums are based on your 2019 tax return. Married filling joint taxpayers whose 2019 Modified Adjusted Gross income, MAGI, (line 7 + 2a of IRS Form 1040) was more than $176,000 and single filers whose MAGI was more than $88,000 pay an additional amount, known as Income Related Monthly Adjusted Amount (IRMAA).  IRMAA premiums can be as much as $433.50 per person.

If you have had 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. 

Although included in his campaign President Biden proposed a plan for changes to Social Security, the changes would not resolve the long-term solvency of the trust fund.  Under Biden’s plan, the trustees project a 2040 sustainable date for the trust fund, only five years more than the 2019 projection.  However, the President’s priority is the COVID-19 pandemic and to date, we have not seen any concrete actions regarding Social Security or Medicare and time will tell what will happen and when. The only thing concrete so far is that time is running out faster because of the pandemic.

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