Thursday, January 31, 2008

New treatment might help Alzheimer's Patients

On Wednesday, Jan. 30, ABC "World News Tonight" (with Charles Gibson) presented a sensational medical story about how deep brain electrical stimulation surgery could bring back memories and is likely to improve the ability to learn. The treatment had been developed specifically for Parkinson's Disease, and was apparently being tried by the Cleveland Clinic and in Canada.

The hope is that the treatment could help restore short term memory or learning ability for patients with Alzheimer's Disease, especially in early stages. The name of the story is "Hope for Alzheimer's? Deep Brain Stimulation: Electrical Currents in the Brain May Help Patients Locate Lost Memories," link here.

Many times memory loss is related to circulation problems generating from heart problems, and not all dementia is caused by plaques as usually discussed with Alzheimer's Disease. It's unclear whether the effectiveness of this new treatment would depend on the clinical cause of the memory loss.

Wednesday, January 30, 2008

Adult children caregivers: how much help can they get with their own mobility?

Karma is a concept central to our moral thinking, something that takes the collective needs of families and communities and brings them down to figuring out the responsibilities of each individual person. An only child who does not have his own children may, given today’s demographics, find himself increasingly exposed to responsibility for parents. A childless adult in a family with siblings may be singled out for more such responsibility (more or less a premise of the 1998 film “One True Thing”). States, given financial pressures today, may start enforcing filial responsibility laws on adult children (although the remarks on LTC insurance in the last posting are relevant).

One particularly troubling problem will concern balancing work and family. Family leave laws in the United States provide only for unpaid leave of finite length in certain circumstances. Even conventional families with children have issues with this. People may feel that someone in my position should not live in another city from an aging parent(s), because of the likelihood of disruption or neglect, unless the parent is placed in assisted living (at least), entailing large financial risk that could eventually fall upon the adult child in many states. I don’t want to go into personal detail here, but I have looked again into a couple of measures to deal with this.

One is whether life alert systems really provide sufficient safety for elderly parents alone at home while adult children are away. I wrote about this on Nov. 15, 2007 on this blog. There are a number of companies offering varying levels of alert service, among which Life Alert is well known, somewhat expensive, and controversial. By the way, it’s true that this kind of service has been around a long time. In 1985, in fact, a home security system that I bought in Dallas had a medical alert feature, but the resident had to get to the security box to use it. It’s not hard to imagine technology that would make that part of a security system more portable. It’s only logical to expect the potential for this sort of home monitoring to expand with wireless technology. Life Alert says that its customers can typically delay the need for assisted living for about six years. But even Life Alert (or C. Everett Koop) does not claim that moving into assisted living or a nursing home is never necessary, or can be prevented forever.

The other issue is the usefulness of home health companies, which offer caregivers. What is typical is that caregiving can be purchased (typically $15 to $20 an hour, depending on expertise and duties) for a minimum number of days and hours per week (two days and four hours per day is typical), up to live-in arrangements. Since 9/11, caregiving companies have become much more conscientious about illegal immigration, which admittedly was becoming an issue before 9/11. Still, the availability of workers (legally) in many metropolitan areas could become an issue as people live ever longer and are frail for longer periods of time. Some companies are run by larger area churches and are faith-based, so Republican (and Bush administration) claims that government should work with faith-based organizations may be well founded with this issue.

Caregivers may simply be “home companions” or they may have training for hands-on custodial care. In 2002, I remember there were programs in Minneapolis to hire “senior home companions” for a small stipend with the companions having a minimum age of 60.

The website giving extensive links in all geographical areas is this.

Most agencies will interview the person and the caregiver. They may insist on a more frequent schedule of visits. Some clients may have short term memory problems that would hinder self-administration of medication according to schedule if no one checks every day.

Adult children used to a large measure of independence and ability to pursue their own goals in their own retirement can find themselves challenged, even on moral grounds. They can be pressured to stay in a particular area and pursue hucksterish “careers” that may not work for their value systems, because of the needs of other family members. One way to deal with this, beside the LTC concept already discussed, could be, well before retirement, to buy larger homes than they need (which places additional financial risk and strain) in order to take control of any such family responsibilities and bring them to the geographical areas in which they want to live.

It now seems remarkable how the eldercare debate, when cast in terms of individual morality they way the debate over AIDS was in the 80s, can focus attention on individual responsibility, when families used to conceive themselves as living in cohesive and loyal units.

Update: Jan. 31, 2008

CNN has a major story, by Elizabeth Cohen, "Caring for Mom and Dad from afar" this evening. It mentions the particular problems for only children living afar. The link is here.

Monday, January 28, 2008

LTC partnerships: could they help relieve filial responsibility?

Recently, a visitor to my blogs provided a link for Long Term Care Insurance information, and to begin this post I thought I would repeat the link. There is a tremendous volume of varied information about the long term care issue here, one important fact that only about a third of long term claims are actually to put people in nursing homes. A large amount has to do with help with custodial care at home.

The comment mentioned activity to form LTC partnerships in a number of states, besides the six I listed in my post.

One question comes to mind. Could long term care partnerships bear any relationship to filial responsibility laws? On the surface, they do not appear to yet, but there is obviously an opportunity for synergy. A state could set up a partnership, pass a mandatory long term care insurance law for younger workers, and then say something like this to the worker: “If you take care of yourself with respect to possible future long term care claims, and then your parents become indigent, we will relieve you of the financial responsibility for them and allow them to use Medicaid and welfare services.” As public policy, that could make sense. Remember, long term care can happen to younger people, because of accidents or, rarely, congenital or genetic diseases. Karen Schiavo was relatively young and her tragic case probably started with accidental causes (check Wikipedia).

I covered the subject of filial responsibility laws or “poor laws” in some detail in July, 2007 and examined a number of states on this blog, with detailed links. (Check monthly archive links here.) I have received some email correspondence about it. So far, states have rarely enforced these except in the context of pre-Medicaid “giveaways.” As budgetary pressures increase (even more so with the subprime crisis) that could change. LTC partnerships could be a very effective policy step for states, but they may only work with people young enough and healthy enough now to qualify, apparently. They won’t work for everyone.

The major 2008 presidential candidates have remained asleep on eldercare and long term care issues. I'm surprised about this, unless they don't have any proposals, and feel that anything they say will drive away potential voters. Hillary, Barack, John (both of you), Rudy, Michael: where are you on this?

Sunday, January 27, 2008

"No Country for Old People": Washington Post Outlook today

The Washington Post Outlook Section B1 ("Commentary") has a headline "No Country for Old People?" The subtitle reads "It's a tough time for seniors these days and getting tougher as the economy slumps. How can we enrich Americans' later years?" The headline obviously "exploits" the current hit "black comedy" film and Best Picture nominee, Joel and Ethan Coen's "No Country for Old Men," actually set a generation ago in the 1980s.

There are several provocative articles. On the right-hand column, Mark Freeman has "One More Time, With Meaning," here. This discusses the attitudes of the workplace toward aging. Corporations used to "expect" people to retire in the 50s and would push them out the door with buyout packages, and encourage them to start taking social security at 62. Gradually, companies, NGOs, agencies and individuals are trying to develop the right culture for "second careers" for boomers. This is difficult to pin down. There is a strong idea in many sectors that boomers should go out and "sell things," especially to other seniors, things like annuities, financial planning or Medicare Advantage (replacements or supplements). There is also an undercurrent in becoming involved in social work or social activism. One of the obvious opportunities for career switching would be into teaching. This works well for people with the right temperament. Retired military often do very well as teachers because they have developed the right "people skills" associated with the chain of command. IBM has been working on a teacher career switching program. People who have worked in technology largely as individual contributors and who were not parents themselves (or even some who were parents but in more culturally sheltering circumstances) may not have the empathy or psychological desire to act as authority figures in the lives of other people's children. This can be an issue for older GLBT people. On the other hand, if a separate market existing for AP math and science in high school, career switches might be able to move directly into these with much less certification education and without the need for "pseudo-parenting" skills.

Another article is "The New Alone," by Elizabeth Marquardt. The link is here. While starting with the issue of longer lifespans and lower birth rates (the latter may actually be reversing itself in the United States), the writer discusses the effect of unstable family structures on adult children of seniors, who themselves may have been through cycles of divorce and remarriage, creating complications (step-parents, half-siblings, etc.) and uncertainty as to who should be responsible for eldercare.

The most disturbing article may be "A Hidden Crime," by Marie-Therese Connolly, link here. The author will do a Q&A session for the Washington Post on Monday, Jan. 28, at 1 PM, link here.
The article deals with crimes against the elderly, sometimes by relatives or live-in boarders, as well as the extreme neglect in some nursing homes and retirement homes, which may have trouble hiring dependable help. She refers to Bette Davis 's quote "old age ain't for sissies" ("Whatever Happened to Baby Jane?") She makes the point that our society has focused on increasing longevity without a corresponding prolongation of vigor. The elderly live longer but become increasingly frail and dependent for a longer number of years. She calls this "the longevity paradox." This can have serious implications for adult children, especially in small families, and would lead to concerns about filial responsibility already discussed on this blog.

The January/February 2008 issue of Foreign Policy has, on p. 82, an argument by John B. Shoven: "New Age Thinking: The aging of the world's baby boomers won't be the crisis we fear: What we consider "old" has become old-fashioned," link here. Shoven argues that what really matters is morality at a particular age, and expected life span at any age increases relative to what it was in the past. The problem is, as Connolly's article (above) points out, the number of years of frailty and adaptive dependence may increase, and the number of years where one consumes and cannot produce or contribute in the competitive economic system seems to increase, raising moral issues about family responsibility.

Tuesday, January 22, 2008

Personal debriefing on long term care insurance

I did debrief a specialist in Long Term Health Care insurance today. Several interesting points came out. I want to keep them general, and some of them will need to be filled in with more details as time goes by.

First, long term care is itself a complicated and evolving concept. Therefore companies don’t publish a lot of committal information about it, and like to set up in person interviews with potential customers. That makes it hard for the public to fully understand the problem, and for policymakers to deal with it. We have not seen the 2008 presidential candidates discuss it as much as we would expect, because the subject is mysterious and filled with potential political and social traps. Furthermore, the business of selling long term coverage requires professionals with strong and extremely patient “people skills” and social facility, beyond the analytic nature of the job, and it may not suit the temperament of many retirees who (like me) might have the technical knowledge for the job. The actual underwriting decisions are made in corporate offices, not by the agent making the presentations, although the agent can do some preliminary screening for customer eligibility.

One development is that a few states are exploring the concept of Medicaid “partnerships” with the long term care insurance industry. The states include Idaho, Florida, California, Utah, New York, and (as of fall 2007) Virginia. The programs may allow asset protection in conjunction with LTC insurance should the LTC be exhausted and the person go on Medicaid. Other states, like Massachusetts, seem to be looking into this, along with the possibility of mandatory LTC insurance for much younger workers, as is happening abroad (previous post).

Typically, companies offering LTC insurance have a maximum age, which may range from 79-83. Policies tend to offer a fixed pool of benefit money (in the hundreds of thousands) that may be indexed for inflation in some policies. There may be a deductible or a per-day copay, but the need for LTC care is viewed as a one-time event, and deductibles typically do not have to be repeated (as with normal medical insurance). Premiums do not continue to be paid once benefits start, unlike the case with medical insurance. Companies have very strict underwriting standards based on medical evaluation and medical records. Applicants might have to agree to some continuous monitoring. One question that remains is whether, in time, insurance companies will work out deals with LTC providers to offer care at discounted or preferred rates, which is generally the case with medical care contracts. The process can take some months.

It seems that someone in my situation (age 64) might be able to get a meaningful policy for $100 a month, but it would provide a very limited total potential amount of protection. State partnership rules (mentioned above) are strict about who can be considered to join them.

A number of large insurance companies offer LTC. AARP works with Genworth Financial, which has some distant connection to General Electric, which owns NBC.

A possible place to start looking for coverage in the DC area is Valltci.

Sunday, January 20, 2008

Overseas, some countries make LTC an entitlement or require insurance: Mass proposes mandatory LTC insurance

While politicians in both parties talk about making purchasing health insurance mandatory (and some states are doing this or are trying to do it), few politicians have seriously talked about making Long Term Care insurance mandatory.

One reason could be that insurance companies right now are so picky about who they take. But a (Republican, probably) case could be made for making people under a certain age (say 40) start paying for it with pre-tax dollars, and for not allowing companies to exclude anyone for pre-existing conditions, genetics, family history, etc. When started early in life, premiums would be easily affordable. Some diseases that cause the need for custodial care can occur much earlier, as can, of course, catastrophic civilian, non workplace injuries. Such a measure could be a major counterweight to the likelihood that many states will start enforcing their filial responsibility law on adult children.

On the international level, there is talk that long term care could become another entitlement. Japan implemented this in 2000. Naoki Ikegami has an article on AARP dated September 2005, “Design and Impact of Public Long-Term Care Insurance in Japan,” here. The first subheading reads “Making long term care an entitlement.” The article says “Neither the willingness and/or ability of family and friends to provide care, nor income is taken into consideration. The benefits are in the form of institutional or community-based services, not cash, with a 10 percent co-payment.” Japan as a country, even though densely populated with a high standard of living, has had particularly severe demographic problems with an aging population and lower birth rates.

The AARP Global Aging Program home page is here.

Germany also has a mandatory LTC program, as described in BNET, “Germany's long term care insurance model: Lessons for the United States, from Journal of Public Health Policy, 2002 by Harrington, Charlene A, Geraedts, Max, Heller, Geoffrey V. (The link rates yellow on McAfee, so I didn't provide it.) A couple of quotes: “The German LTC program consists of a mandatory system in which employees and their employers make equal contributions to the LTC insurance program. Everyone with an income below the "income limit for mandatory health and LTC insurance" … Those with an income exceeding the income limit can opt either to belong to the social insurance system or to buy private insurance.”

I was told about the program in Germany by a woman living there in a heated debate this afternoon in a chat room, in which there was considerable disagreement over the “moral question” of family responsibility, and whether adult children could be compelled to support parents (or even other family members) when they didn’t ask to be born. It is not possible to resolve that, as it stirs heated emotions. (The language stayed civil enough.)

The practical point is that other countries are addressing the long term custodial care problem with structured programs ranging from entitlements to mandatory insurance, and that a mandatory program might work as part of the total solution to health insurance in the United States, with an emphasis on mandatory pre-tax premiums started early in one’s working life, with supplements for low income persons. Certainly if adults take care of themselves, their adult children or siblings won’t have to. (A quote in a CW "Supernatural" episode from Sam (Jared Padalecki) “I’m a big boy now. I can take care of myself.”) Now, while filial responsibility may well come up in connection with assisted living or nursing home placement, it's possible to come up in general (if a senior is living alone but on welfare and Medicaid).

In fact, a site called PrepSmart discusses a proposal to require Long Term Care Insurance in Massachusetts (which does have a filial responsibility law: check my entry here: The article is called *Massachusetts – Long Term Care Insurance: A Must? No Way Jose., link here. The author suggests creating a trust fund similar to social security.

The Robert Wood Johnson Foundation reports “New York Program to Promote Long-Term Care Insurance for the Elderly Offers Full Asset Protection in Exchange for Mandatory Insurance, “ url here.

In conversations, I find that many people are not very aware of the significance of the demographic changes (fewer children, longer lifespans) or of the potential legal issues with filial responsibility. The problem has developed very quickly, with unprecedented situations occurring for some people. The mainstream media does not present this problem fully, so people tend not to understand it "until it happens to them." It has the log term potential to turn our notions about responsibility v. parenthood upside down.

Visitors may enjoy this somewhat cutting poem by Phillip Larkin, mentioned in the chat room. No, you can't morally just "divorce" your parents unless you were abused or neglected. There is a legal process called "emancipation" which was dramatized with the character Nathan (James Lafferty) in the CW program "One Tree Hill."

Saturday, January 19, 2008

Social Security Trust Fund hits several breakpoints: beneficiaries need an actuary to explain them

Justin Fox has an important and educational column “The Curious Capitalist” titled “The Boomers Hit 62” on p. 57 of the Jan. 14, 2008 issue of Time Magazine. The subtitle reads “Yes, they’ll drain Social Security by 2041. But the money problems will begin long before that.” He has a blog about this on CNN here: and the original article is here.

There are a couple of breakpoints here. In 1983, he writes, Congress mandated some additional payroll taxes, put some federal employees in the system, pushed up full retirement age to 67 for younger people, and allowed certain social security benefits to be taxed in some cases. This helped social security run a surplus.

As he explains, the surplus was invested in United States bonds, and now these “IOU’s” on future tax revenues come due. That all means that Social Security starts running a deficit in 2011 (I will be 68). It runs out of money in 2041 (I’ll be 98 and hopefully able to learn the truth about life in other places in the universe). He notes that Baby Boomers are likely to put in more in FICA taxes than they pull out, and than people born before 1937 effectively have wealth redistributed to them. This all had started, remember, as an FDR welfare program; it became a “retirement” program only later. But, in the grandest sense, Social Security is like a out-of-home sales pyramid, because the first to get in get the most out of it relative to what they put in; hence the term “Ponzi scheme”.

Over time, as people live longer, we expect them to work longer; employers have not always gone along with this, and seem to want the riskiest employees out the door in their 50s, unless then have unusual skills. One way to change that trend (as noted on my main “issues blog” Jan 17) is to stop depending on employers to provide health insurance (a practice started during and after WWII when they needed workers badly) and provide some portable way for people to save, tax-free, for health care (or buy premiums tax-free) over a lifetime, with insurance really for catastrophes.

Employers have created another controversy, but telling older employees that they should begin social security payments at 62, and by designing pension social security bridges and offsets around that idea; as recent media reports (particularly in USA Today) note, that is not necessarily a good idea and could lead to poverty in extreme old age for people who live long enough (especially women or surviving spouses).

Social security payments depend on lifelong work-eligible history (at least 40 quarters, which extend benefits to legal spouse and sometimes minor children), and poverty sometimes means that claimants have less work history to base claims on. This can lead to the indigent parent issue and the future prospect that some states could start enforcing filial responsibility laws on adult children as demographic and fiscal pressures increase.

Picture: Old Masonic Building near African-American Civil War Memorial, U St NW, Washington DC

Friday, January 18, 2008

What about pensions and working for a competitor?

Sometimes a question comes up whether an former employee can lose his pension if he or she goes to work for a competitor. There seem to have been some cases like this with insurance agents. There was a case Bilec et al. v. Auburn & Associates, Inc. et al., 588 A. 2d 538 (Pa. Super. 1991) where an agent had agreed to a non-competition pension forfeiture clause. However, the former employer apparently terminated business, and an eventual appeals court rulingfound the non-competition clause violated "public policy" in Pennsylvania.

There have been a few news stories like this over the years, but relatively little shows up on the issue with search engines. It seems that there may be a bigger issue where the pension was based on some sort of matched contribution program than a flat pension. It seems that with most cases of straightforward employment, this does not become a problem.

When a person goes back to work for the same employer (or an employer who bought the company) it may be a different matter. The pension may be stopped, and in some cases the person going back to work should make sure that his compensation package, however it is structured, takes this into consideration. If the employer needs his skills because of their specificity, the employee might have the upper hand in negotiating.

If a visitor knows of some more specific cases, I would appreciate detailed comments.

Thursday, January 17, 2008

Early retirees struggle with health insurance; At 65 many employers limit coverage to Part D once Medicare eligibility starts

“Reactions to changes on changes to retiree health benefits rule” in USA Today Jan 11, by Stephanie Armour, story here, is an article that discusses the recent EEOC (Equal Employment Opportunity Commission, which often does what it wants) rules changes that allow employers to provide fewer health benefits to those over 65, once these employees become eligible for Medicare. Now this practice will not be viewed as illegal benefits discrimination based on age. Conservatives argue that this change allows employers to provide better bridge benefits to those under 65.

Many retiree health plans convert over to a “Prescription Drugs” only once the employee reaches 65, sometimes at prices higher than what the employee could find in the market. Prescription drugs are a big complicated topic with Medicare Part D, the topological “doughnut hole,” etc. Some retirees will not find keeping this coverage economical. A common blood pressure medication, Atenolol, typically costs relatively little (generic) out of pocket and would not be worth a premium. Competition among drug companies for medications for widely treated conditions can lower costs.

Sandra Block has a big story today in USA Today, Jan. 16, “Early retirees try to fill the cap in health coverage,” link here.

Wednesday, January 16, 2008

Long term care insurance: Forthcoming visit from the underwriter

Recently, a representative from AARP called me regarding a question I had asked about Long Term Care Insurance on their website. Or it may be in response to a mail-in form from October, which I wrote about in this blog in October, here.

The caller indicated that it is impossible to give quotes over the phone, and that over a certain age, persons wishing to apply for insurance must have a personal interview. I did schedule one. There will be questions about medical history, and the insurance company will review medical records, presumably to prevent anti-selection.

It’s obvious, of course, that actuarially, the younger a person starts paying premiums, the lower they will be. As filial responsibility becomes a more pressing concern because of demographics, states will feel political pressure requiring younger workers to purchase long term care insurance for themselves (to prevent a burden on adult children or on Medicaid). Perhaps they will also feel pressure to prohibit insurers from requiring genetic tests or considering family history.

I wondered what kind of a job it would be to interview people and have to make underwriting decisions about insuring them – to protect “Medicaid” or protect their adult children. These are not decisions about people that I would want to have to make in order to make a living.

Tuesday, January 15, 2008

Conventional wisdom on retiring at 62 challenged; seniors feel need to accumulate more wealth before "retiring"

USA Today on Monday, Jan. 14 had an interesting story about the common advice to start social security at 62 (with a “protective application statement”). The story, by Sandra Block, is “Boomers’ eagerness to retire could cost them: Filing for Social Security at 62 raises risk they’ll outlive their money,” link here. The USA Today website header banner above this page is “Turning 62: Day 1: The retirement book begins.”

The article goes on to note that SSA believes the “break even” lifespan for age 62 retirement is 77. But lifespans are increasing more rapidly than has ever been expected, partly because anti-cholesterol and heartbeat regulating drugs are so effective (and have often become much less expensive in generic mode), and Medicare has extended lives extensively with lifesaving surgeries (such as coronary bypass grafts), especially for women, who still outlive men. SSA benefits are supposed to be determined actuarially according to expected lifespans and “present value” formulas. It isn’t clear if they will be expanded, since there is so much concern about the eventual fiscal stability of the Social Security Trust Fund. Furthermore, many early retirees are in circumstances that, because of other income, they may pay taxes on up to 85% of their benefits. Retirees may want to consider staggering their incomes (age of beginning SSA collection, pension collection, and 401K payouts). Financial planners may have a lot of work to do in developing algorithms to maximize income. Corporations tend to plan on employees’ starting Social Security at 62 by the way they design social security bridges and offsets in their pension programs (for those companies that still have them), and this really complicates the financial strategy for the retiree. This corporate policy needs to change, too. Life insurance companies may have to reconsider how they hire agents, focusing on analytical and mathematical skills rather than just the social skills of “getting leads.”

A "Financial Futures" story on page F01 (“Business”) in the Sunday Jan. 13, 2008 Washington Post by Martha M. Hamilton reads “It Might Take 10 or 12 Times Salary for Retirement,” link here. That is, people should not retire until they have accumulated 10 times their annual income. That idea could generate the notion that more seniors go into sales activity, selling “lifestyle” (like retirement real estate or long term care insurance) to their peers. Many life insurance companies have separate subsidiaries for “high net worth individuals” because they find they can cross-sell more easily to these persons when set up this way.

Update: Jan 17, 2008

Kathy Chu in USA Today has a story "How Do You Make a Lump Sum of Your Life Savings Last?", story here.
The story mentions a proposal by Michael Huckabee to buy out current retirees with lump sums. At age 62, a typical lump sum could be around $300000. Some retirees say that they take the "protective coverage" at 62 out of a belief that they would be grandfathered if a political catastrophe cut them off. Some say that the social security tax wage base will have to be raised (over $102000) and some say that the portion of social security tax raised could raise over the 85%, and others fear that earnings limits rules on early retirement could get stricter. Another threat is that Medicare coverage could get much weaker as people live much longer and costs for heroic life-saving or life-extending treatments continue to increase.

Sunday, January 13, 2008

Many people get tripped up by SSA earnings limits that go with early retirement

Today, I got a question from someone who got tripped up by Social Security on earnings limits before full retirement age. Although I won't reproduce the person's details here, I'll write what I think is a general answer for this kind of problem. Here is how I answered it, with a little bit of generalization for a public blog.

Obviously, any claimant would need to talk to an SSA attorney oneself to take any action or to contest a SSA recoupment of a purported overpayment. Sometimes a recoupment is waived if it would "defeat the purpose" of the SSA retirement program. Here is a place to start hunting for an appropriate attorney.

The visitor had trouble getting a copy of SSA's exact rules. But the precise administrative regulations for paymnents are available online, here.

The main reference to the Social Security Manual is here. It is called the SSA Policy Information Manual System, or POMS. The specific reference for the Annual Earnings Test is here.

Social Security Administration representatives are supposed to follow the rules in the POMS manual "to the letter" in specific cases. They are supposed to use as little personal discretion as possible.

Generally, SSA rules are strict about earnings when you "work" for someone else. What doesn't count is income from pensions, investments, 401K withdrawals, etc. (Here is an important summary reference in "baby language", not from POMS). From the viewpoint of social policy and fairness, I don't think that the earnings limit makes any sense any more. The rules ought to be changed, but Congress would have to do that. SSA says it just has to follow the laws made by Congress. I would write my own congressman (woman) in your area and ask for his/her views on it. Most people in Congress respond to questions like this promptly and most of them have email links on their websites. The main House website is here.

Social Security has specific rules when you "retire from your own business" here.

Social Security may also question if you go to an employer (especially a previous employer) and take less money in order to receive social security before full retirement age. They will expect you to press your employer to pay you a "fair market wage" for your work, something like what you made before. This is like the "Wal-Mart Problem". They don't want companies to take advantage of social programs to pay workers less. This is a legitimate question of public policy.

Anyone who goes back to work "for someone else" after starting social security before reaching full retirement age should proceed carefully, and negotiate properly with the employer, and then notify SSA. One should be paid the full market value of one's work. It may be advantageous, even if working as a consultant for a former employer, to work for a staffing company that provides benefits and 401K matching. If it wise to consult with a union or guild (like SAG or WGA) if that is relevant to the job one is taking, to make sure one gets all compensation for which one is entitled from an employer. If the job is specific in nature and the employer needs the skills of the employee who had retired, the employer may be willing to pay more if pressed. Many jobs will pay enough that Social Security will be stopped entirely until reaching full retirement age or else retiring again, but when payments are resumed, they should be higher, to reflect actuarial factors as well as (often) a longer record of SSA FICA tax payments making the average for the best earnings years higher.

When one goes off on a new track and freelances (as a "starving artist") one generally has to report the income one actually earns, but it does not seem that SSA gets overly concerned whether one could earn more or "lowballs" because one has retired. The situation when drawing state unemployment insurance may be different, depending on the state. (I have not found any rule that would could unemployment compensation as "earnings.") People who earn commissions by sales jobs (either in "pyramids" or in more formal positions as insurance agents) -- activity that people sometimes start after "retiring" -- generally must report these as income when the work that earned the commissions (closure of sale) is completed, but it can be complicated. In life insurance both original and renewal commissions appear to "count". The most important POMS reference is here, but there are several other specialized rules there in the POMS index.

Picture: Bobbleheads for Washington Nationals 2008 season in new ballpark.

Wednesday, January 02, 2008

Defined benefit pension plans -- an old topic, but still deserves an overview

This is just a reminder note about how most older defined benefit pension programs work. Of course, many companies have frozen these as of a particular year.

A retiree who is legally married will normally be offered “life with 60 months certain” (or 5 years certain) as a default option. If the retiree dies before sixty months and the legal spouse is still alive (and was still legally married at the time of death) he or she continues receiving benefits up to sixty months from the time the retiree started receiving benefits. However, for the retiree himself or herself, the benefits continue until death. In the case of a same-sex couple, in a state where same-sex marriage is legal (Massachusetts) and where the couple used this possibility, then the pension would be treated the same way. However federal law does not give certain tax benefits to same-sex couples even when the state recognizes it, as explained in this Massachusetts Mutual document SEC info document (look for “same-sex marriage”).

Normally, a legally single person can name a beneficiary (like a domestic partner) and structure the benefit the same way. A typical example is American Airlines, here. Although maybe improbable, a few mean-spirited states could try to ban this for same-sex couples. I would expect the debate on this to continue, and further changes may happen in the law and in company plans.

A legally single person can also elect a Single Life Annuity with no period certain upon death. The liability of the company ceases upon the person’s death. The payments are slightly higher, typically about 2%.

Changing the default for a married person usually requires the permission of a spouse. (To the extent that this is driven by federal law, it’s unclear that it could be enforced in Massachusetts with a same-sex married couple, but hopefully that’s a moot point in practice.) It’s possible to lengthen the period certain (even as long as 240 months or 20 years), or it’s possible to construct a Joint and Full Survivor Annuity or Joint and Two-Thirds Survivor Annuity.

Visitors may want to check out the Fulcrum Inquiry Retirement Savings Calendar, here.