Articles Posted in Finance

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The coronavirus has devastated many individual’s health and economic security. There have been 36 million new claims for unemployment benefits since the beginning of the pandemic. It is critical to address how this economic downturn has impacted Social Security’s finances. First, many Americans have lost jobs over the last few months, which has decreased the payroll tax revenues. The payroll tax is critical in funding Social Security; in 2018, the $885 billion of the $1 trillion collected for Social Security came from payroll taxes. The longer the recession lasts, the greater impact it will have.

Second, lower interest rates decrease the income in the Trust Fund, financial accounts in the U.S. Treasury. Lastly, a recession leads to a low inflation rate, which reduces salaries for all workers. This also decreases the Trust Fund’s tax revenues.

A likely impact of this financial situation is a reduced cost-of-living adjustment (COLA), annual increases in Social Security to compensate for inflation. The depletion date of Social Security funds is currently 2036. If the COVID-19 related unemployment rate increases, that date is expected to be brought forward to 2034. A slower recovery could move the depletion date back to 2032.

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For individuals with disabilities able to work, there are often many obstacles to being employed. With an unemployment rate of 3.7% for the general population, the rate for those with disabilities is 6.3%. However, some companies are working hard to reverse this troubling statistic, including Microsoft, Walgreens, and Voya. These companies are reviewing their hiring procedures to incorporate best practices in supporting employees with physical, emotional, and neurological disabilities.

It is not only the right thing for these companies to do, but it also is beneficial for the economy. A study released in October 2018 showed that America’s GDP could increase by up to $25 billion if the number of employed Americans with disabilities increased by 1%. Laurie Henneborn, research managing director for Accenture, said “[t]he conversation is absolutely evolving from philanthropic and charitable to one that is foundational to the business.” In 2017, 4.5% of Accenture’s employees reported having a disability.

It is not only important that individuals able to work are hired, but that they can maintain their health at the same time. Amongst the 61 million U.S. adults with a disability, 62% report their disability as “invisible,” meaning that colleagues don’t recognize their disability until told. Those with disabilities must be able to take time off to see doctors or for health-related reasons, making paid sick leave critical.

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Three former heads of the Social Security Administration (SSA) have called on lawmakers to make budgeting fixes to help resolve the worsening customer service issues plaguing the agency since budgeting cuts went into effect. The letter by the three former Commissioners – Ken Apfel, Jo Anne Barnhart, and Carolyn Colvin – was recently delivered to Congressional delegates. The letter calls on lawmakers to remove the SSA from caps imposed by the 2011 Budget Control Act. This law has required the SSA to compete with other federal agencies for funding.

The cap has worsened the deteriorating backlog crisis at the agency. The letter emphasizes that in 2018 as many as 858,000 Americans were waiting for their appeals hearings. The backlog at the agency’s processing centers is expected to cross 2.9 million cases this year.

Also, the cap has increased wait times for persons who call the agency’s toll-free number. In 2018, the average Social Security applicant spent 24 minutes waiting to speak with an SSA employee.  Applying for and receiving Social Security disability benefits is not an easy or simple task, by any means. Wait times can be very lengthy, and most claims are denied the first time around. It’s always best to work with an attorney to maximize your chances of filing a claim that will help you recover the benefits you are eligible for.

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New tax reform laws that were announced last year have some unexpected good news for Social Security disability beneficiaries. They expand the advantages of holding an ABLE (Achieving a Better Life) account for beneficiaries and also extend credits on some accounts. An ABLE account can help a person with disabilities manage their finances better. It helps them save money for expenses that are related to their disability, including housing, education, health, transportation, and assistive aids.

The Tax Cuts and Jobs Act of 2017 helps persons who own ABLE accounts by allowing them to have more money in their account. Earlier, annual deposits into this account were limited to $15,000 per person. Now, however, under the new laws, individuals will be able to deposit all or part of their income into their ABLE account. This will be a significant help to account holders with disabilities.

The new laws allow for funds from a 509 to be rolled over into the ABLE account. Also, starting from this year, ABLE account holders may also be eligible for a Savers Credit, and up to $2,000 of the person’s deposits may be eligible for these credits.

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