Perhaps you have seen the news that President Donald Trump declared a Social Security payroll tax deferral through the end of 2020. It went into effect on 1 September which means the 6.2 percent of your pay that is normally withheld will show up in your paycheck.
However, that doesn't mean it is free money. You will be required to pay it back beginning 1 January 2021 when twice the 6.2 percent will be withheld to reimburse Social Security.
The employer half of the withholding remains in effect.
Of course, it is not as simple as I have explained. You see, participation is up to employers, many of whom have complained that it is too complicated to rearrange their systems for the deferral. Some others say they will delay implementing the deferral to take time to ask employees if they want to participate.
This causes additional difficulties, as CNBC explained:
”While it may be easy for a small shop with five employees to determine whether workers would be onboard with a deferral, larger firms with thousands of employees may ask each one whether they want to participate.
“In that sense, it may be easier for larger firms to either skip the deferral altogether or default all workers into it — as opposed to asking each employee what they want to do.”
Federal workers have no choice – they will have their payroll tax deferred.
As CNBC further points out, it would be wise for employees who opt in or whose employers do, to stash away the extra money so that the double-dipping to pay it back in January won't hurt so much.
In that case, obviously, the deferral makes no difference to employees, and it is, of course, useless to the 30-odd million unemployed Americans.
Which leaves one wondering what in the world the president was thinking when he dreamed up the deferral. Some fear his goal is to kill Social Security and according to Nancy Altman, that would be easier than you might think.
Altman, who has a 40-year background in the areas of Social Security and private pensions, is president of Social Security Works and Chair of the Strengthen Social Security coalition and campaign, explains in a 1 September 2020 CNN piece how that could happen:
”According to estimates from the independent chief actuary of the Social Security Administration, if all Social Security contributions from payroll tax stopped on Jan. 1, 2021, the nearly 10 million people today getting Social Security Disability Insurance benefits, which averages about $1,125 every month, would see them stop abruptly in the middle of 2021.
“Those 55 million receiving Social Security Old-Age and Survivors Insurance benefits, which average around $1,440 a month, would see them disappear two years later. Social Security would be without money to pay benefits by 2023 (Congress could only stop Trump by enacting veto-proof legislation, a highly unlikely proposition).
“Section 7508A of the Internal Revenue Code allows deferrals for up to one year, long enough to stop the disability insurance payments.
“Killing off the rest of Social Security takes two years longer, but a newly elected President Trump could interpret the statute to permit an additional 12-month deferral with the declaration of a new disaster.
“All benefits could be stopped with just two new disaster declarations. Concerningly, the Supreme Court has found that President Trump has 'broad discretion' in making findings.”
This is terrifying.
THE ALEX AND RONNI SHOW
My former husband, Alex Bennett, and I sat down for another cyber-chat from opposite ends of the country. Of course, Trump came up but we also discussed house cleaning, the virus, magic mushrooms and more.
You can check out Alex's online talk show here.