April 9, 2020

Returning Retiree Healthcare Workers Need My Flexible Social Security Proposal

Returning Retiree Healthcare Workers Need My Flexible Social Security Proposal

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Back in December — which seems like ages ago now — I touted one of the winners of the Social Security Policy Innovations Challenge sponsored by the National Academy of Social Insurance (NASI), a proposal to update Social Security’s benefits to provide greater flexibility. The proposal would, in a completely cost-free actuarially-equivalent manner, allow workers to collect only partial Social Security benefits initially, while working part-time or at a lower-paying job, to maximize their ultimate benefit when they finally start full benefits; in addition, it would allow workers who may have started Social Security due to unemployment, to stop benefits when they’ve found a job later, and restart again without penalties. And it would have eliminated the existing benefit reductions for early retirees who continue to work, since, in principle, after all, they are “paid back” afterwards in any case, but this “repayment” mechanism is poorly understood so that the reductions are perceived of as pure penalty.

Yes, this was my own proposal.

And, it turns out, it’s newly relevant. Here’s an article from the Syracuse Post-Standard:

“Joe Huppman didn’t hesitate to answer the urgent plea last month for retired doctors and nurses to help New York fight the coronavirus pandemic in hospitals stretched thin by a surge in patients.

“Huppman, 64, of Camillus, volunteered to return to the Syracuse VA Medical Center where he worked as a nurse for 17 years until retiring in 2017. He’s now on standby to help if needed.

“If he’s called to duty, Huppman and other retired medical personnel like him will be asked to make a financial sacrifice: The Social Security Administration will cut their benefits if they work too many hours, a penalty for exceeding annual earnings limits.”

In response, on April 3rd, Reps. John Katko (NY) and Harley Rouda (D, CA) introduced legislation that would suspend the earnings test, and the resulting benefit reductions, for early retirees who have returned to work in healthcare and first-responder fields due to the COVID-19 pandemic, the Health Care Worker and First Responder Social Security Beneficiaries Choice Act.

But given the scale of the economic disruption, why limit the change merely to the relaxation of early retirement reductions, and merely to healthcare workers? Yes, I know that the boosted unemployment benefits aim, among other things, to prevent workers from taking Social Security early, but we don’t know what the economy will look like on the other side of the lockdowns, until those lockdowns are lifted, and we don’t know how that will affect Social Security and workers’ needs. The Flexible Social Security proposal is designed to be bipartisan and without cost, but it’s not necessarily flashy or dramatic enough to inspire free-standing legislation. And, again, the other day, in the context of multiemployer pensions, I expressed my support for seemingly-irrelevant bits and pieces added to larger legislation, in those circumstances when there is bipartisan support. So why not make this small but meaningful change alongside the more ambitious ones?

As always, you’re invited to comment at JaneTheActuary.com!

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