CRR Releases Update on Medicare Finances in 2023

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CRR Releases Update on Medicare Finances in 2023

Recently, the Center for Retirement Research (CRR) at Boston College released its issue brief, Medicare Finances: A 2023 Update. The brief summarizes: 1) the current state of Medicare’s finances; 2) the 2023 Medicare Trustees Report projections under current-law assumptions; 3) compares the current-law projections to the Medicare Office of the Actuary’s alternative scenario; and 4) examines potential reasons for high Medicare expenses.

Although the 2023 Medicare Trustees’ Report focused on the impending financial concerns of the program, the brief indicated that there have been modest improvements in 2023. In addition, it finds that the outlook for Medicare is better than projected a decade ago, even under assumptions that policymakers limit some cost controls. However, Medicare continues to face significant challenges operating in the costly U.S. health care system and handling benefit gaps in insurance coverage.

The report is available here.

GAO Releases Report on Social Security’s Dilemma

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GAO Releases Report on Social Security’s Dilemma

On May 18, 2023, the United States Government Accountability Office (GAO) released the first report in a series, Social Security, Part 1: The Dilemma. The three-part report series focuses on Social Security and each report will cover one of the following topics: 1) Social Security’s financial challenges; 2) criteria for evaluating options for reforming Social Security; and 3) types of proposed Social Security reforms.

The first report in the series discusses the financial challenges of the Social Security program. It is based on GAO’s past work examining Social Security and the fiscal health of the U.S. as well as on data and projections from the 2023 Social Security Trustees Report.

As of January 2023, Social Security provides benefits to over 66 million retirees, individuals with disabilities, and others. For many retirees, their Social Security benefits comprise a significant portion of their monthly retirement income, especially those with relatively low career earnings.

Significant financial challenges threaten the long-term ability of the Social Security Administration (SSA) to continue to pay the full benefits for retirees and other beneficiaries. The GAO highlighted that the costs to pay SSA benefits from the Old-Age and Survivors Insurance (OASI) Trust Fund have exceeded the money received in taxes since 2010. At the current rate, the fund’s trustees estimate that the reserves will be exhausted in 2033 when it be unable to pay full scheduled benefits. The GAO urged that when timely actions are taken to address the financial challenges, the more gradually changes can be phased in so that workers would have more time to adjust and plan ahead for any changes needed for their retirement.

The report is available here.

CRS Updates Social Security Primer

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CRS Updates Social Security Primer

On May 16, 2023, the Congressional Research Service (CRS) published its updated report, Social Security Primer. The CRS report provides an overview of Social Security financing and benefits under current law. The report also includes information regarding: 1) the origins and a brief history of the program; 2) Social Security financing and the taxation of benefits; 3) status of the trust funds; 4) Social Security reform debate; 5) Social Security benefit rules and how benefits are computed; and 6) information about Social Security beneficiaries. 

According to CRS, there were about 66.2 million Social Security beneficiaries as of February 2023. Of those, 51.6 million (78%) were retired workers and family members, 8.8 million (13%) were disabled workers and family members, and 5.8 million (9%) were survivors of deceased workers.  

The report is available here. 

National Organizations Urge Treasury/IRS to Recognize Governmental Plans’ Unique Legal Constructs When Issuing SECURE 2.0 Guidance

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National Organizations Urge Treasury/IRS to Recognize Governmental Plans’ Unique Legal Constructs When Issuing SECURE 2.0 Guidance

On May 11, 2023, several national organizations that represent state and local governments, elected officials, finance officers, employee organizations and retirement systems jointly submitted comments to the U.S. Treasury Department (the Treasury) regarding pending regulatory guidance on retirement provisions under the SECURE 2.0 Act. Collectively, the organizations urged the Treasury and the Internal Revenue Service (IRS) to recognize the state and local statutory and regulatory governance structures for public retirement plans related to regulations impacted by the new law.

In the comment letter, they cautioned that governmental plans may need additional time to amend state and local statutes to establish operational compliance with some of the recently-enacted provisions. Since governmental plans are exempt from ERISA, they stated that those plans “should be afforded reasonable, good-faith compliance with applicable state and local statutes, regulations and definitions.” 

The organizations that submitted the joint comments included the National Council on Teacher Retirement (NCTR), National Conference of Public Employee Retirement Systems (NCPERS), National Association of State Retirement Administrators (NASRA), National Conference of State Legislatures (NCSL), National Association of Counties (NACo), United States Conference of Mayors (USCM), National League of Cities (NLC), International City/County Management Association (ICMA), National Association of State Treasurers (NAST), Government Finance Officers Association (GFOA), National Association of State Auditors Comptrollers and Treasurers (NASACT), International Association of Fire Fighters (IAFF), National Association of Police Organizations (NAPO), and National Association of Government Defined Contribution Administrators (NAGDCA).

The letter is available on NCPERS’ website here.

CRR Updates Brief on National Retirement Risk Index

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CRR Updates Brief on National Retirement Risk Index

On May 9, 2023, the Center for Retirement Research (CRR) at Boston College released its issue brief, The National Retirement Risk Index: Version 2.0. As discussed in this brief, the National Retirement Risk Index (NRRI) measures the percent of U.S. working households at risk of being unable to maintain their pre-retirement standard of living throughout retirement. 

Since its inception, the NRRI methodology has been updated to enhance the projections of households’ wealth and replacement rates at retirement and estimations of the target replacement rates. The latest upgrades were intended to more accurately measure the retirement preparedness of working-age households and evaluate the impact of economic and policy factors on retirement security.

The NRRI compares the projected household replacement rates (i.e., projected household retirement income as a percentage of projected pre-retirement income) with the target replacement rates needed to maintain their living standard. Generally, the retooled NRRI confirms the earlier findings that 50% of households are unprepared for retirement and will not be able to maintain their pre-retirement standard of living.

The report concludes, “The robustness of the results confirms the retirement saving issue faced by today’s working age households, and that we need to fix our retirement system so that employer plan coverage is universal. Only with continuous coverage will workers be able to accumulate adequate resources to maintain their standard of living in retirement.”

The issue brief is available here.

 

MissionSquare Finds 88% of Public Sector Workers Worry About Finances

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MissionSquare Finds 88% of Public Sector Workers Worry About Finances

Recently, the MissionSquare Research Institute (formerly the Center for State and Local Government Excellence at ICMA-RC or SLGE) published its report, Public Sector Employee Financial Wellness Program Needs and Preferences: 2022 Survey Results. The Research Institute conducted a survey to analyze the financial wellness of public service employees. The survey report indicated that although many state and local employees have financial challenges, numerous public sector employers help to strengthen the financial security of their workforce through their employee benefit offerings. About 73% of the survey respondents reported being very or somewhat satisfied with the employee benefits offered by employers, in general.

The key findings include:

  • 88% of the survey respondents worry about their finances.
  • 40% reported that their employer offers a financial literacy program.
  • The topics most often covered by those programs include planning for retirement (58%), investments (49%) and insurance (35%).
  • The preferred approaches for those currently offered a financial literacy program were webinars (51%), interactive online courses (47%) and individual in-person coaching (45%).
  • Typically, employers communicate program information through email (67%), employer website (33%) or printed materials (19%).
  • Of those that participate in their employer financial literacy program, 67% are very or somewhat satisfied.
  • Over 70% reported the importance of their employer offering a financial literacy program.

The report is available here.

 

EBRI Publishes 2023 Retirement Confidence Survey Summary Report

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EBRI Publishes 2023 Retirement Confidence Survey Summary Report

Recently, the Employee Benefit Research Institute (EBRI) published its report, 2023 Retirement Confidence Survey Summary Report. The 33rd annual survey found that the overall confidence of workers and retirees in retirement security has declined. Due to continuing inflation and the stock market decline in 2022, the confidence of American workers and retirees about their retirement prospects has been significantly impacted similar to that during the Great Recession in 2008.

About 33% of workers and 24% of retirees report being less confident with 33% of workers and 50% of retirees citing inflation and cost of living as the primary reasons for the decline in confidence. Both workers and retirees report high concerns about inflation and its effect on their savings and spending.  

According to the survey, 73% of retirees are confident in their ability to live comfortably throughout retirement, down from 77%. In addition, about 64% of workers are confident they will be able to retire comfortably, down from 73% in 2022. 

The survey indicated that only 33% of workers and 40% of retirees use a personal financial advisor for retirement planning information and advice. Notably, most workers reported not being satisfied with their workplace retirement planning information as well as the tools and resources available. About 40% of workers rely on family or friends for financial and retirement planning advice and only 20% seek information from their workplace retirement plan provider. 

About 84% of workers and 67% of retirees are concerned about rising living costs that may make it more difficult to save money. Nearly 90% of workers are concerned that inflation will remain elevated for another year, and 80% are concerned about additional interest rate increases and possibly a recession occurring in 2024.

In addition, the level of confidence among workers and retirees for Social Security continuing to offer benefits of at least equal value to those received today remains comparable with last year. However, confidence in Medicare among workers has significantly decreased to 51%, down from 57% in 2022. Overall, the survey found that about 77% of retirees and 67% of workers feel confident they will have enough money to pay medical expenses in retirement. 

The summary report is available here. 

May 2023

IN THIS ISSUE

• Impact of SECURE 2.0 on Governmental Plans

• IRS Ruling on Retiree Medical Benefits to Active Employees

• End of the COVID-19 Public Health Emergency and National Emergency

• Implications of Braidwood: The ACA Preventive Care Decision