The Social Security Administration announced a cost-of-living adjustment of 0.3 percent in 2017, an increase that will affect more than 65 million Social Security and Supplemental Security Income recipients.

Cost-of-living adjustments are automatic and are tied to increases in the Consumer Price Index determined by the federal Bureau of Labor Statistics.

The Social Security Administration also increased the maximum amount of earnings subject to Social Security tax in 2017 to $127,200 up from $118,500. The change affects approximately 12 million of the estimated 173 million Americans who will pay Social Security payroll taxes in 2017.

The combined Social Security and Medicare payroll tax rate for 2017 remains the same as it was in 2016: employees pay 7.65 percent while those self-employed pay 15.30 percent. (Individuals with earned income of more than $200,000 and married couples filing jointly who earn more than $250,000 pay an additional 0.9 percent in Medicare taxes.)

Cost-of-living adjustments were enacted by Congress in 1972 to take inflation into account, and automatic COLAS, as they are called, began in 1975.

Beneficiary forms protect dependents
By the time you read this, the TRS Annual Benefit Statement should have arrived at your home. This statement summarizes your Qualified Pension Plan and your Tax-Deferred Annuity accounts. It also includes any loan activity.

In addition, the statement will list the names of your designated beneficiaries for both the pension and the TDA. Although the majority of you have filed the appropriate papers, the Teachers’ Retirement System tells us that 26,000 UFT members have failed to return the form designating a beneficiary in the event of death.

Other members haven’t updated their forms in years. That means changes in family situations — divorce, re-marriage, children, grandchildren — are not accounted for. And that means you could be leaving money in an inequitable way or to the wrong person, from your point of view.

If you don’t have a beneficiary form on record with TRS, you essentially have forfeited your right to decide who will get benefits from the Qualified Pension Plan. For most members, that’s three times their annual salary contributions into the plan. That could be well over $300,000 for a teacher earning the maximum salary!

Same goes for the TDA, which is, for many members, the largest asset they have. State inheritance laws will determine who gets the benefits, and we’ve heard stories that would make your hair curl.

For example, if you designated one child as your beneficiary years before the birth of your other three children, your oldest child inherits the money. Or if your beneficiary is your first husband, and you haven’t changed your beneficiary to your second husband, your first husband receives the money.

Important things to know

• You must file two separate beneficiary forms: one for the pension and one for the TDA.
• Children under the age of 18 are considered minors and cannot collect death benefits from TRS. To name minor children as beneficiaries, consult an attorney versed in estate-planning matters. Setting this up in advance will save a lot of time and frustration for the children and their legal guardians.
• TRS members can now designate beneficiaries securely online at the TRS website. Or if you prefer, you can contact TRS or call your local UFT borough office to obtain the appropriate beneficiary forms.

TRS checklist

• All TRS members must file proof of their date of birth with TRS.
• TRS members now have an easier way to name a power of attorney with regard to retirement benefits. A new form, the “TRS Special Durable Power of Attorney” (code BK 750), is available on the TRS website. This form is an alternative to the statutory “Short Durable Power of Attorney document” and is specific to TRS members and TRS benefits only.

The UFT’s pension clinics are aimed at those members thinking about retirement within five years but all members are welcome to attend. These clinics are only one way the UFT educates its members about how to prepare for a financially secure retirement.