Data and Research April 7, 2021

Near-Retirees Flummoxed by Social Security Benefits

Respondents to a survey by MassMutual revealed certain topics they have questions about.

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Thirty-five percent of near-retirees, those between the ages of 55 and 65, failed a basic knowledge quiz about Social Security benefits that MassMutual administered. Another 18% earned a D on the graded quiz, and mere 3% got an A+ by answering all 12 true/false statements correctly.

MassMutual also found that 26% of respondents between the ages of 60 and 65 do not know when their full retirement age is.

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On the bright side, however, 83% understand the consequences of taking Social Security benefits before full retirement age, and 94% realize that if they do this, their benefits will be reduced. Another 86% know that if they begin taking their benefits before full retirement age and continue to work, their benefits may be reduced based on how much they make.

“Today, Social Security is the primary guaranteed retirement income stream for Americans, besides pensions and annuities,” says Paul Lapiana, head of MassMutual U.S. product. “For those looking to maximize their retirement income stream, one option is to depend on an annuity to fill the gap and hold off filing for Social Security to grow delayed retirement credits and receive the largest possible benefit for life.”

During the COVID-19 pandemic, people expressed interest in a variety of Social Security topics, including survivor benefits. But even with the increase in interest, 22% thought that if a spouse passes away, a recipient can receive both their and their spouse’s full benefits, which is not true.

Many near-retirees were also wondering about the impact of a divorce on Social Security retirement benefits. Thirty percent didn’t know that a divorced person may be able to collect Social Security benefits based on an ex-spouse’s earnings history.

Another impact of the pandemic is that layoffs, furloughs or pay cuts could negatively affect Social Security benefits, as they are based on the top 35 years of earnings.

“As with most things in life, knowledge is power, and choices should be made on purpose and not by accident,” says David Freitag, a financial planning consultant with MassMutual. “With Social Security, there are a lot of options to consider. Make the wrong choice, and you will be leaving money on the table—for the rest of your life.”

MassMutual commissioned the survey, which PSB Research conducted between March 1 and March 9 among 1,500 Americans between the ages of 55 and 65 who have not yet filed for Social Security benefits.

Compliance April 7, 2021

PBGC Simplifies Withdrawal Liability Calculation for Multiemployer Pension Plans

The agency expects the changes will reduce actuarial fees paid by multiemployer plans, but it admits the simplified methods might not reduce the withdrawal liability assessed on employers.

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The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule regarding methods for computing withdrawal liability under the Multiemployer Pension Reform Act of 2014 (MPRA).

The agency says it expects that the final rule will reduce the actuarial fees historically paid by financially troubled multiemployer plans when calculating withdrawal liability. However, it admits that the withdrawal liability assessed on employer members of multiemployer pension plans that withdraw from a plan could go up or down with the simplified calculations.

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The final rule amends PBGC’s regulations on “Allocating Unfunded Vested Benefits to Withdrawing Employers” and “Notice, Collection, and Redetermination of Withdrawal Liability.” The amendments implement statutory changes affecting the determination of an employer’s withdrawal liability and annual withdrawal liability payment amount. They provide simplified methods for a plan sponsor to:

  • Disregard reductions and suspensions of nonforfeitable benefits in determining the plan’s unfunded vested benefits for purposes of calculating withdrawal liability;
  • Disregard certain contribution increases if the plan is using the presumptive, modified presumptive or rolling-five method for purposes of determining the allocation of unfunded vested benefits to an employer; and
  • Disregard certain contribution increases for purposes of determining an employer’s annual withdrawal liability payment.

A plan sponsor may—but is not required to—adopt any one or more of the simplified methods to use in the calculation of determining and assessing withdrawal liability. But plan sponsors must follow the statutory withdrawal liability rules for all other aspects.

The final rule applies to employer withdrawals from multiemployer plans that occur in plan years beginning on or after February 8.

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