Tuesday, April 26, 2011

My own "main employer" admits to lower levels of funding of defined benefits pensions for retirees

As an indication of the health of defined benefit pension plans still paying out, at least according to inductive reasoning, I note an annual notice of the funding status of my own plan with ING (retired as of Jan. 2002).
It’s a little disturbing. There is a number “Funding Target Attainment Percentage” which appears to be Net Plan Assets to Plan Liabilities. There is some arithmetic with the Funding Standard Carryover Balance. As of January 1, 2009, the ratio had been 94/8% (and improvement from 88.5% as of 1/1/2008, despite the events in late 2008); as of 1/1/2010, it was “just” 80.0%. I don’t know if that’s considered healthy enough or not. There is an essay paragraph that suggests that the royal percentage on Dec. 31, 2010 was 80.9%, little change.

As for the “80%” I remember a joke in a freshman college calculus class. A test had 5 problems.  Miss one, “B-“  (80%).  Miss two, “D-“.

The letter does go over how PBGC works.  It guarantees “basic benefits” earned before any plan is terminated, for (1) benefits at normal retirement age (2 most early retirement benefits, with some maximum reduction in guarantee  (3) annuity for survivors of plan participants and (4) certain disability benefits. 

Tuesday, April 19, 2011

New report on detecting Alzheimers in earlier stages

Robert Bazell reported on NBC Nightly News tonight about a new view of Alzheimer’s, as a three stage process. Stage 1 has few symptoms but lesions that could be seen with special tests. Stage 2 is “mild cognitive impairment”, or MCI, with about 5 million Americans affected. Stage 3 is major cognitive loss, again with 5 million Americans. Almost 15 million Americans are involved in giving care to Alzheimer’s patients. 

One in eight people over 65 in the US have some Alzheimer’s symptoms, and 5% of cases start before 65, and there may be a different genetic explanation for early onset. The Mayo Clinic has a writeup on early onset here

Sunday, April 17, 2011

Columnist proposals a "recall" on the estate tax

The Sunday Washington Examiner, on p 39, ran a syndicated editorial by Jack Fitzgerald, CEO of an Auto Mall chain in the East, “Time for a recall” (online), and “Americans: it’s time for a recall of the estate tax” in print.

Futzgerald makes the interesting point that inherited wealth is socially productive when it is used to employ people, as in a small, family-held business or even invested in productive enterprise. It’s a different matter when just consumed or held, which helps with the understanding of the Far Left’s outrage at “inherited wealth” (I certainly recall that from the People’s Party of New Jersey back in the early 1970s).

Fitzgerald suggests rollback of estate tax (to what level I’m not sure) and replacing with a surtax on all gross incomes of over $1 million (he’s more concerned about income than accumulated assets, however  -- something that could get sticky in the means testing debate, for example).  As capital gains tax revenue increased from the sale of assets, the surtax would be phased out.

Remember, there are special rules for estates of people who died in 2010: a choice of using “2010 no-estate tax rules” or a 2011 “$5 million exemption”” (Kiplinger’s Personal Finance, March 2011, p. 60, requires subscription, link). 

Friday, April 08, 2011

We can't rule out partial Social Security means testing even for current beneficiaries, if we're in "that much" trouble over the debt and deficit

It would be President Obama’s Blackberry that would ring with the news of “Deal or No Deal”, not mine (which Verizon tells me is the same model as his).

Some aspects of the budget standoff are obvious. Yes, our current course of deficit spending is unsustainable. Yes, there will be sacrifice. Yes, we could tax the rich more. Yes, oil companies could pay more royalties, although they might pass these onto consumers.   

The biggest question for me, or for any private citizen, is what sacrifice could be demanded of me, given my circumstances relative to that of others.  In times of peril, communities have to do this with their members.  To an extent, the proposals for demands from others (or extraneous matters like Planned Parenthood) have no bearing. We must remember that the biggest chunk of the federal budget still comes from defense and “entitlements” including Social Security and Medicare (and Medicaid), not the smaller programs at the margins.

The biggest question on my own mind is my social security benefit.  Is it an annuity that I earned, or is it a social entitlement?  I have written about this debate on this blog before. In general, because of the accounting trick of double-accounting practiced by the Social Security Trust Fund, and because of the way the program began in the 1930s when original beneficiaries did not contribute, and because Congress has the specific constitutional authority to reduce benefits even now, I have to assume that is partially, perhaps up to 1/3, an entitlement, despite the structure that bases benefits largely on FICA “contributions” (with a minimum of 40 qualified quarters for “vesting”) and a policy that caps FICA payroll taxes relative to income in a manner similar to annuities. Further, remember that private employers often take “social security offsets” out of pensions and presume retirees will start social security as soon as possible.

In general, I think that Social Security ought to be converted to a sound, carefully managed “private ownership” basis, but this could not be done without some sacrifice now.  In the world of private corporate pensions insured by the PBGC, generally some portion of pension benefit is lost (up to 40%) when the PBGC takes over a pension of a bankrupt company. The same possibility could exist for social security if it really “goes broke” as the GOP insists, with some credibility, is a real risk.

Even Rep. Ryan (R-WI), as radical as his privatization proposals sound (especially for Medicare) sound, has said that they would not affect current retirees or those over 55.  Generally, politicians in Congress recognize that senior citizens vote and have a lot of political clout.

Nevertheless, it’s inevitable that one could propose means testing a portion of social security benefits (perhaps up to about 35%), even now, for current retirees, as Rep. Boehner had hinted during political campaigns in 2010. Means examination could include both income (from the 1040) and assets, from local tax records and other financial statements.  However, any such proposal would obviously become very “politicized” and divisive.  Libertarians and other progressives would be especially critical. What could be more practical is a period of “jawboning”: the President or Congressional leaders asking for a give-back, or perhaps for more community service, especially the type involving interpersonal interactions, from wealthier beneficiaries.

The “moral” dilemma may resemble that which can occur with unemployment benefits. In that environment, recipients are expected to look for work, and issues arise as to the kind of work they should be open to considering.  Conceivably, the same questions will occur with some social security beneficiaries, even in a difficult economy.  For example, if someone like me had worked in the life insurance industry as an introverted “technie” for a number of years, should he be open to the idea of a second career “selling” what he had worked on to others – should he become more “people-oriented”?

On Medicare, it’s apparent that we face a runaway problem, inasmuch as we cannot afford unlimited expenditures prolonging the lives of people who have already “had their turn”.  This is unpleasant, and I know the connotations that come up.  After one has led a productive life into the eighties or low nineties, I think it’s prudent to question some treatments and expenditures, either at public expense or even as to what is expected of families (in “socially conservative” parlance) or from adult children out of filial responsibility. I am 67, and without children, I will have to face the moral aspect of questions like this myself.

Tuesday, April 05, 2011

More on FICA and paid family caregivers

On Jan. 28, I covered the issue of FICA taxes for household members who get paid for caregiving, and gave the URL for an IRS publication that gives examples of when it would not have to be paid.

The IRS reference there presumes that the caregiver got paid by an insurance company (as with an LTC policy) or by a state agency. It didn’t talk about what happens if the pay comes from the elder’s savings through POA or a trust. My own tax advisor (HR Block) said that it perfectly legal to treat that as a “gift” and not reportable, at least if the elder is a parent.  That is what I did today with my own filing.

I can imagine “social contract” objections to getting off this way. Normally, wages (even from a family) are subject to normal income and FICA taxes, to the extent that the payee is able to live in an independent manner and pays back rent and has normal freedom.  But in my case (more details will be forthcoming later, maybe even in an e-book), there were real issues for a long time about guaranteeing the availability of other caregivers, because I could not legally leave her (Mother) alone. 

Filial responsibility and filial care is going to be an emerging area of policy and law. Stay tuned. 

Friday, April 01, 2011

Medicare policy for renal disease questioned for elderly patients

Gina Kolata has an important story in the New York Times March 31 about the use of dialysis, supported by Medicare for end stage renal disease at all ages (almost the only disease that has this attention from Medicare life long) in elderly patients.  Some physicians are saying that for elderly patients hospice and palliative care is more appropriate, because dialysis is so unsatisfactory in many elderly patients.

The Medicare ESRD law was intended to keep younger kidney patients alive and productive but the story says it has unintended consequences for the elderly.

ESRD is sometimes detected in routine physical examinations before there are major symptoms.

The (url) link to the story is here, and now will require a NYTimes “paywall” subscription.