Retirement Matters
May 2021
Stay informed on federal issues impacting Michigan retirees including Social Security, Earned Income Tax Credit, and Paid Family Leave.
SOCIAL SECURITY AND MEDICARE
Senator Mitt Romney (R-UT) reintroduced the “Trust Act” bill on April 15, 2021. This bill makes it easier to cut earned Social Security and Medicare benefits by establishing congressional “Rescue Committees.” Reductions could affect the entire Social Security program, including retirement and disability benefits. Social Security is completely self-funded and separate from other federal spending. So, cutting Social Security doesn’t resolve the federal deficit issue. The Trust Fund bill can fast-track committee recommendations within the House and Senate. Members can’t offer amendments to legislation that comes out of the Rescue Committees. Nowhere can you make changes or improvements. Reducing benefits runs counter to the Congressional Budget Act and the Byrd Rule which specifically prohibit changes to Social Security through the budget reconciliation process where it’s easier to gain approval given a simple majority of votes.
Benefits are not protected by the Trust Fund. Social Security and Medicare Part A (Hospital Insurance) funding could run low by 2035 without Congressional action. Common sense solutions have already been proposed that do not reduce benefits. For example, more revenue could be raised if the wealthy contributed a greater share of Social Security payroll taxes. Improving solvency could be addressed while also protecting the benefit adequacy. Some retirees may need expanded benefits, not less, to stay healthy and out of poverty. Research indicates that tomorrow’s retirees will rely on these programs even more. Polls show tremendous support for these programs and opposition to benefit cuts.
RETIRED AND WORKING
Many retirees receiving pensions are still working as they need the supplemental income. More than half of Michigan’s State retired employees received pensions of $20,000 or less in 2019. This Credit May Help! The American Rescue Plan Act (ARPA) expanded the childless worker provision of the Earned Income Tax Credit (EITC) for 2021 only. Seniors are now included because the new law makes “no dependent” taxpayers, even those 65 and older, eligible for the EITC. The maximum credit for childless workers in 2021 is $1,502. Single filers with incomes up to about $21,000 are eligible. Joint filers with income up to about $27,000 are eligible. The credit applies only to earned income. The EITC is phased out at higher income levels. All of these changes are set to expire at the year end. However, President Biden’s American Families Plan, not yet law, would make these expansions permanent.
ARPA IN MICHIGAN
Michigan’s share of the ARPA, enacted in March 2021, built a stronger foundation for seniors that were hurt most by the pandemic. Nearly $400 billion nationally will be spent on family’s home health care needs. Michigan’s need for these funds was illustrated by U.S. Census data from March 2021 showing that 30 percent of Michiganders had difficulty paying for household expenses, 18 percent were behind on rent, and 10 percent did not have enough food. The ARPA provides Michigan with nearly $18.8 billion in increased federal funds. Michigan’s allocation for selected programs benefiting the elderly include:
- Congregate and home delivered meals — $23,721,400.
- Ongoing Home and Community-Based Supportive Services (HCBSS) — $14,471,600 plus funds to address social isolation and facilitate COVID-19 vaccinations. Nursing homes with COVID cases will receive funds for “strike teams” to provide clinical care and infection control.
- A higher federal matching rate, up 7.35 percentage points, for HCBSS supplemental programs.
- Family Caregivers — $4,477,400 to support family caregivers at home, including counseling, training, respite care, and supplemental services.
- Long-term care ombudsman — $315,700.
- Disease prevention and health promotion — $1,389,100.
PAID LEAVE
Today nearly four out of five private sector workers have no access to paid leave. ARPA ensures that workers receive partial wage replacement for the leave time needed to help their families. It extended the tax credits already enacted until September 30, 2021. Covered wages are increased to $12,000 per worker. The self-employed are covered up to 60 days. Employees may receive up to 80 hours of paid sick leave for personal health needs or to care for others. This paid leave will provide substantial stimulus for local economies.
Finally, the American Families proposal, not yet enacted, goes further to create the National Family and Medical Leave Program. It provides family workers with partial wage replacement to take time to care for a seriously ill loved one, heal from their own serious illness, deal with the death of a loved one, and more. It guarantees 12 weeks of paid parental, family, and personal illness/safe leave by year 10. It provides three days of bereavement leave per year. Workers are provided up to $4,000 a month, with a minimum of two-thirds of average weekly wages replaced, rising to 80 percent for the lowest wage workers. The estimated nationwide cost is $225 billion over a decade.
Retiree’s Family — Paid leave is a very significant improvement for retirees because it will lower their family’s cost of care. Women are more likely to be the caregivers for the elderly. When they leave jobs to care for family, they receive lower Social Security or pension benefits than they would have otherwise collected if they were paid. Most agree that it’s a priority to help older adults stay in their own homes as long as possible. Yet, middle-income seniors usually wouldn’t qualify for the low-income programs. However, they could benefit from the proposed larger supply of better paid and trained caregivers.
Employers Gain — Paid leave sets a national standard that makes it easier for multi-state employers and human resource managers to administer. They benefit from improved employee retention, reduced turnover costs, and increased women’s labor force participation. Employers receive a better work force plus tax credits to partially compensate them for the paid leave while some restrictions apply. These changes will potentially impact Michigan retirees.
Editor’s note: Joanne Bump currently serves as feature columnist for “Retirement Matters.” Joanne can be contacted by phone at (517) 896-2729 or by e-mail at joannebump@gmail.com.
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