Secure Your Future
Social Security benefits will go up again next year
Nov 16, 2006 12:24 PM
Monthly Social Security income benefits for more than 49 million Americans will increase 3.3 percent in 2007, the Social Security Administration has announced.
Social Security income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics Consumer Price Index. The Cost-of-Living Adjustment (COLA), which is based on the increase from the third quarter of 2005 to the third quarter of this year — 3.3 percent — will begin in January.
The Social Security program is so important to the economic life of so many Americans. It is the largest source of income for eight out of 10 Americans age 65 or older. And without the COLA, over the last 10 years recipients’ incomes would have been about 30 percent less.
Social Security pays three types of benefits. The best-known is old-age insurance (retirement), which goes to about 30.9 million retirees, to about 2.5 million spouses and to about a half-million children.
The second type is survivors’ insurance. There are more than 6.5 million survivors of deceased workers, including more than 1.8 million children, who receive benefits based on the earnings of a deceased spouse or parent.
Third, some recipients receive a benefit based on disability. Out of more than 8.5 million disability insurance beneficiaries, more than 1.6 million are children.
Most people do not realize that some 4 million children — including many of our students — receive Social Security.
This is truly an intergenerational program, not only because so many children receive benefits but because when our parents, grandparents and other family members receive Social Security benefits it saves the working generation from having to support them.
Other important Social Security changes also take place in January. Because of an increase in average wages, the maximum amount of earnings subject to FICA (contributions to pay for future Social Security) will increase to $97,500 from $94,200 in 2006. This will increase the annual maximum contribution to Social Security by $204.60. Of the estimated 163 million workers who will make Social Security contributions next year, about 11 million will pay higher taxes as a result of this increase in the taxable maximum.
Full retirement age under Social Security in 2007 will be 65 years 10 months. Teachers in New York can retire as early as age 55 but cannot collect Social Security retirement benefits until age 62. In our wonderful pension plan, age 55 is the equivalent of age 62 for most working Americans.
A Social Security recipient younger than full retirement age will have $1 in benefits withheld for every $2 in earnings above the 2007 limit of $12,960 per year ($1,080 per month).
The calendar year, but not the month, that an individual reaches full retirement age, $1 in benefits will be withheld for every $3 in earnings above $34,440 per year ($2,870 per month). But beginning the month in which a person reaches full retirement age there is no earnings limit. A person can earn any amount without having Social Security benefits reduced.
Here is the contribution rate:
Employee — 7.65 percent
Employer — 7.65 percent
Self-Employed — 15.30 percent
Note: The 7.65 percent rate is the combined rate for Social Security, for OASDI (OA — old age; S — survivors; DI — disability insurance) and Medicare Part A Health Isurance (HI). That’s 6.2 percent for Social Security up to $97,500 in earnings during the year and 1.45 percent on all earnings for the year for Medicare Part A.
Defined-benefit plans under attack
Another corporation, Tenneco Inc., a $4.4 billion auto supply manufacturer, has frozen its current defined-benefit plans (DB) and replaced them with additional contributions under defined-contribution plans for nearly all U.S.-based salaried and non-union hourly employees. Note that unionized hourly employees were spared.
The reason given by the company is millions of dollars in savings. The DB plan is vanishing in the non-unionized segment of private employment. This, of course, increases the pressure on those of us who have public employee defined-benefit pensions. The UFT will use all its resources to protect our DB plan.
TRS tidbits
Pension Protection Act of 2006 — A new federal law has an important provision for the beneficiaries of deceased tax-deferred annuity account holders. Before this law, only spouse beneficiaries were eligible to roll over distributions from the TDA to an IRA account. The new law now permits non-spouse beneficiaries to roll over distributions from the TDA. This provision is effective Jan. 1. We will provide additional information as soon as it becomes available.
This new provision also applies to members who participate in the city’s 457 Deferred-Compensation Plan.
Electronic Fund Transfer loans
A new service allows members to receive loans from the Teachers’ Retirement System via Electronic Fund Transfer (EFT). If you receive your Department of Education payroll via EFT, TRS can now deposit your loan proceeds into the same account. For security reasons, members will no longer be able to pick up loan checks at TRS.
Welcome kits
About 7,045 new members should have received welcome kits by now. Make sure you send to the TRS all the required forms plus proof of your date of birth. (See the article in the Newer Teacher section on page 39.)
Annual Benefit Statement
About 112,000 members should have received their ABS. They were mailed to home addresses. If you did not receive your ABS, contact the TRS at 1-888-8-NYCTRS.
The ABS reports the member’s:
• designated beneficiaries;
• service credit;
• account balances for the Qualified Pension Plan (QPP) and TDA as of June 30, 2006; and
• benefit estimates and projections (for members eligible to retire).
Quarterly Account Statements
These statements, which contain summaries of your QPP and TDA account balances, will be distributed to your home address sometime this month. Approximately 112,000 in-service members (and members on leave of absence for up to seven school years) will receive the QAS. It is very important that you keep the TRS informed of any address changes.
Feds announce new TDA maximum contribution
The new maximum contribution for 2007 TDA participants who have not reached their 50th birthday has been raised by the federal government by $500 to $15,500. Members age 50 and older may contribute an additional $5,000. An additional “catch up” contribution for members with 15 years of service, who have contributed an average of $5,000 or less per year, allows an additional $3,000-a-year contribution, up to a total of $15,000 over their lifetimes.
In addition, members may contribute to the city’s 457 Deferred-Compensation Plan. Check with the city plan at 1-212-306-7760 for further information.
TDA Investment Elections
If you wish to make a change in your TDA investment election you may do so online, if you have full access status, through the “My TRS Account Section” at www.trs.nyc.ny.us. Otherwise, file a hard copy TDA Investment Election Change Form (TD45). The filing deadline is Dec. 1 and changes begin on Jan. 1.
“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS. BRONX: 1-718-379-6200; BROOKLYN: 1-718-852-4900; MANHATTAN: 1-212-598-6800; QUEENS: 1-718-275-4400; STATEN ISLAND: 1-718-605-1400; Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.
