Latest news with #FICA
The Hill
24-06-2025
- Business
- The Hill
Social Security's dirty little secret: A Game of borrowing
The Social Security trustees have released their annual report highlighting 'the current and projected financial status' of the Social Security trust fund. And the media duly reported on the fund's declining prospects. But neither the trustees nor the media revealed, or typically even acknowledged, the trust fund's dirty little secret. First, a short explanation of how Social Security works. Social Security is a pay-as-you-go system. The FICA payroll tax (12.4 percent) is taken from current workers and employers and deposited into the Social Security trust fund. The government then uses that trust-fund money to pay current retirees. Money in, money out. For most of Social Security's history, current workers were paying in more than was needed to pay retiree benefits, leaving annual trust-fund surpluses. This is why, today, the trust fund boasts some $2.5 trillion in assets, which leaves the impression that there is something like a savings account that can be used to pay Social Security benefits. Unfortunately, however, since 2010 the government has spent more paying benefits that it has received from workers' payroll taxes each year. The government has had to draw upon the trust fund surplus to make up the difference. According to what the trustees call their 'best estimates,' 'The Old-Age and Survivors Insurance (OASI) Trust Fund [that is, Social Security] will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits.' The key thing to notice is the claim that by 2033 'the fund's reserves will become depleted.' But what if the trust fund is already essentially, if not technically, depleted? The trustees report that the OASI trust fund had $2.641 trillion at the end of 2023. The trust fund received $1.106 trillion in payroll taxes in 2024, plus $54 billion from taxes collected on Social Security benefits and $64 billion in interest. That's a total income of $1.224 trillion. However, Social Security paid out $1.327 trillion in 2024 — more than it received — meaning it had to withdraw $103 billion from the trust fund, leaving $2.538 trillion. And then here's the dirty little secret about the trust fund: That $2.5 trillion isn't invested in stocks or bonds or loaned out to interest-paying banks or companies. The federal government has borrowed that money and spent it, writing itself interest-bearing IOUs. As the Peter G. Peterson Foundation explains, 'As with other trust funds, Social Security's surpluses are credited with securities issued by the Treasury; that excess income is used to reduce the amount of new federal borrowing necessary to finance governmental activities.' Consider this situation in a family context. Suppose a family's income is usually enough to pay the bills each month. But an unexpected debt — perhaps a car repair bill, a hospital visit, home repair, etc. — arrives, and it's more than the family's normal budget. If the family has other real assets, it can withdraw funds from a savings account or perhaps a brokerage account and pay the debt. Problem solved. But if the family doesn't have other real assets available, it might have to borrow the money to pay the debt — creating new debt to pay old debt. When the trustees speak of drawing down the 'fund's reserves,' it sounds like the government is doing what the family did when it tapped other assets to pay the unexpected debt. But that's not what's really happening. If the government's general account had a budget surplus in 2024, then the government could just transfer $103 billion from the general account to the trust fund. But the federal government had a $1.8 trillion deficit in 2024. So, in order to cover that $103 billion trust fund shortfall to pay current retirees, the government had to borrow the money. Creating new debt to pay old debt. It's even borrowing money at interest to pay the trust fund interest. Whenever anyone exposes this borrowing shell game, defenders of Social Security's pay-as-you-go system — usually Democrats — vigorously respond by saying the federal government has never defaulted on its debt. But that misses the point. The trust fund's assets are just an entry on paper. If the Social Security trust fund wants to redeem some of its IOUs, the government must borrow the money to pay it. So, when the trustees warn that by 2033 Social Security won't have the money to pay retirees' full benefits, it would be more accurate to say it already doesn't have the money to pay full benefits now. Merrill Matthews is a public policy and political analyst and the co-author of 'On the Edge: America Faces the Entitlements Cliff.'.
USA Today
23-06-2025
- Business
- USA Today
The hidden risks of Social Security privatization, according to experts
Social Security privatization refers to a proposal that would switch the current U.S. Social Security system to one that allows individuals to invest a portion of their payroll taxes in private investment accounts. While the subject produces a lot of excitement, here's what experts say could go wrong. Individual investors would have to deal with market volatility The stock market can produce dizzying fluctuations. While the ups and downs are as natural as the sun rising in the East, they may make less experienced investors quite nervous. For example, when a bear market arrives (another regular, natural part of the economic cycle), individual investors may get spooked and pull their money from the market, a move that can ultimately lead to financial loss. Unpredictable income in retirement While there are flaws in the current "pay into FICA" system, the upside is knowing how much you can expect to receive each month in Social Security benefits. Privatizing Social Security means some people will invest poorly or not know what to do when market fluctuations hit, potentially leaving them without a stable income in retirement. An uneven playing field Some people grow up learning about money management while others do not. Privatization may disadvantage those who have limited financial literacy and limited access to advisors who can help them understand the basics. Those who can afford to hire a financial advisor are likely to do so, giving them a significant advantage over those who cannot afford to work with a professional. Access to resources The wealthier a person is, the more they can afford to take risks and diversify their portfolios. Those with limited income are likely to have fewer options, a reality experts fear will lead to wider gaps in retirement security. In addition, the wealthier a person is, the easier it is to weather market losses and stick with an investment plan. Single-parent families and caregivers For the parent or caregiver who must take time off work to meet caregiving responsibilities, it will be more challenging to work the hours needed to accumulate the money required to build a sufficient retirement nest egg. It's natural that some of these people will reach retirement age with little savings to fall back on. Time requirements Solo investing requires a time commitment. For someone without a financial background, there's a huge learning curve as they navigate a complex array of investment options — and not everyone has that time. For example, a person focused on building a business, advancing in their career, or spending all their free time caring for others may not have the time necessary to immerse themselves in investment knowledge. Loss of a social safety net From its inception in 1935, Social Security was meant to provide economic security for Americans, particularly retirees. The idea was to ensure all Americans have some source of retirement income. Privatization could undermine that social safety net and leave the most vulnerable populations without the support they need in retirement. Experts fear that those who aren't skilled at investing may fall into poverty in retirement without guaranteed benefits to help lift them out of it. The same is true of those who cannot afford to invest adequately or who experience unexpected financial hardship. As attractive as some people find Social Security privatization, it's difficult to ignore the number of Americans who might fall through the cracks, ultimately entering retirement with little to no money. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
USA Today
20-06-2025
- Business
- USA Today
Could you invest your own FICA taxes? The new Social Security proposal explained
As Elon Musk took a figurative chainsaw to the Social Security Administration earlier this year, there were those, like U.S. Rep. John B. Larson (D-Connecticut), who suspect the move had a lot to do with a desire to privatize Social Security. Social Security privatization refers to transforming the current Social Security system, primarily a government-run program, into a system that allows Americans to invest their Social Security contributions into private accounts rather than paying into the federal program. The challenge If you've ever looked at a paycheck and wondered what FICA stands for, it's the Federal Insurance Contributions Act. Of your gross wages, 6.2% goes into FICA to pay for Social Security and another 1.45% goes toward covering Medicare. Your employer matches both amounts, resulting in a total contribution of 15.3% of your wages. Contributions made today support benefits for retirees, people with disabilities, and survivors of workers who have died. Think of it as today's employees helping fund the benefits of today's retirees. Since Social Security was first established in 1935, the understanding has been that each generation of retirees will be supported by younger workers still on the job. A perfect storm of demographic changes in the United States put the Social Security system in a vulnerable position. Between the declining fertility rate and increased life expectancies, there are fewer workers to support an ever-growing group of retirees. As of this year, 12% of the total population is 65 or older. By 2080, it will be 23%. In other words, the worker-to-beneficiary ratio is expected to drop dramatically, potentially impacting the SSA's ability to fulfill promised benefit payments. A move away from FICA? Among the proposals being made is the suggestion that Americans retain the 6.2% of their wages currently allocated toward FICA. Instead, they can invest it in private investment vehicles and decide how the money should be allocated. Supporters of Social Security privatization argue that the change would give individuals greater control over their retirement savings and potentially allow them to earn returns higher than those provided by the current system's fixed benefits. They also see it as a way to reduce the financial burden on the federal government. On the other side are those who worry that some Americans may not have the financial literacy or resources to manage investments on their own. Not everyone has experience managing assets, and it's concerning to think about throwing millions of people into the investment pool who may never have learned to manage their finances effectively. Another concern involves what happens to those who spend years investing for retirement only to hit a string of bad luck. That may mean making bad investment choices or even facing losses due to uncontrollable setbacks, like a recession or bear market. Opponents worry about what will happen to those who hit retirement age with little money put away through no fault of their own, and point out that the current Social Security system offers fixed benefits that retirees can count on. Countless issues to work through Even if Congress were able to come to a consensus and privatize Social Security, there are thorny issues that would need to be managed. For example: Partial privatization? Some supporters of Social Security privatization suggest allowing workers to invest a portion of their current Social Security contributions in private accounts, with the remainder allocated to the traditional pay-as-you-go system. While this model would lower the Social Security benefits earned by workers who choose this path, they would have a safety net of some sort to look forward to in retirement. Given how difficult it can be to get Congress to agree on anything, there's no doubt that deciding to upend the entire Social Security system will be an uphill (and long-fought) battle. In the meantime, the more immediate goal is to find a way to shore up the current system so that retirees will receive every dollar they've been promised. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
Newsweek
17-06-2025
- Business
- Newsweek
No Tax on Overtime, Tips Changed in Senate Bill: What To Know
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. President Donald Trump's no tax on tips and overtime pay policy was one of his most popular pledges during the 2024 election campaign, and lawmakers in Congress are working to make his plans a reality. The promise is included in the One Big Beautiful Bill Act, the sprawling budget bill that outlines Trump's economic agenda, which has been amended by Senate lawmakers this week. While the total removal of these income tax requirements is not on the table, Republicans have proposed letting workers deduct their reported tip and overtime income from their federal income taxes—with the House and Senate considering slightly different ways of implementing the policies. Why It Matters Nixing federal income taxes on overtime and tipped income was one of Trump's top policy promises during his 2024 election campaign, an idea that has also been embraced by Democrats. It could affect millions of workers across the U.S. What To Know The Senate Finance Committee's proposal would limit tax breaks on tipped income and overtime pay. The House version allowed deductions on income up to $160,000 annually. The Senate plan offers the same $25,000 deduction, but would begin to phase out for single filers earning, with a modified adjusted gross income, $150,000, and couples over $300,000. The list of occupations that will be permitted to deduct tips from their federal income taxes would need to be published within 90 days of the rule becoming law: it is expected to include most service workers. Stock image of money and a receipt on a restaurant table. Stock image of money and a receipt on a restaurant table. GETTY For overtime pay, Senate Republicans also propose a $12,500 deduction for single filers, doubled to $25,000 for joint tax returns. This would also phase out at the same levels as the tips policy. Both plans would still be subject to FICA taxes, which pay for Social Security and Medicare, and both would be in place from 2025 to 2028. What People Are Saying Javier Palomarez, founder and CEO of the United States Hispanic Business Council, told Newsweek the policy could "unintentionally amplify tipping fatigue." "If consumers perceive that service workers are receiving an additional government benefit, they may become less inclined to tip, or tip less, especially amid growing backlash to the seemingly common tipping prompts, e.g., at counter-service or self-checkout. Consumers' mindsets could shift, viewing the policy as a substitute for their personal responsibility to tip generously." Republican Mike Crapo, Idaho Senator and U.S. Senate Finance Committee chairman, said the bill "delivers additional tax relief to middle-class families still recovering from record inflation under the [Joe] Biden administration. "It powers the economy by permanently extending critical pro-growth provisions and introduces new incentives for domestic investment, providing certainty for American job creators to spur domestic economic activity and invest in their workers." The University of Colorado's Nicole Lazzeri, a teaching assistant professor of accounting at the Leeds School of Business, told CU Boulder Today: "When you look under the hood, it gets a little more complicated. The current version of this proposal—the one included in what's been dubbed the "Big, Beautiful Bill"—doesn't actually remove all taxes on tips. "It lets workers deduct their reported tip income from their federal income taxes, but tips would still be subject to payroll taxes—that's Social Security and Medicare, the 7.65 percent that's taken out of every paycheck. So yes, it would help some workers. But not as much as it might seem. What Happens Next If enacted, the changes would take effect from 2026 through 2028. The modified bill will first be debated by the Senate and return to the House for a final vote before Trump can sign it into law.
Business Upturn
12-06-2025
- Business
- Business Upturn
EHP Inc. Launches National Affiliate Expansion Initiative to Accelerate Employer Healthcare Innovation Under Mardy Gould's Leadership
Jacksonville, FL, June 11, 2025 (GLOBE NEWSWIRE) — EHP Inc., a leading provider of compliant, tax-efficient employee benefit programs, announced the launch of its 2025 National Affiliate Expansion Initiative, a strategic move aimed at scaling its transformative employer-focused healthcare model across the U.S. The initiative is spearheaded by Co-Founder and Managing Partner Mardy Gould, reaffirming the company's commitment to innovation, compliance, and growth through a robust partner ecosystem. Mardy Gould This newly launched initiative marks a pivotal step in EHP Inc.'s nationwide growth strategy, offering new opportunities for professionals and non-traditional partners to join the company's thriving affiliate network. With over 10,000 affiliates already active, the expansion initiative will provide additional training, real-time tools, and access to EHP's proprietary AI-powered compliance infrastructure, enabling partners to deliver the company's tax-smart, employee-first benefits model with confidence and scale. A Timely Expansion Driven by Founder-Led Vision The launch of the Affiliate Expansion Initiative comes amid increasing demand from mid-sized and large employers seeking effective ways to lower healthcare costs and improve employee engagement without overhauling their existing insurance. EHP Inc.'s structure, based on IRS Sections 125, 105, and 213(d), allows employers to reduce their FICA tax burden by $650 to $750 per employee annually while enhancing preventive healthcare access. 'This expansion initiative reflects our belief that smart growth starts with strong partners,' said Mardy Gould. 'We built EHP Inc. on the principles of compliance, transparency, and impact — and we're inviting professionals across the country to be part of a proven model that actually helps employers solve real problems.' The Employer's Choice for Modern, Tax-Advantaged Healthcare EHP Inc. stands out by offering a fully IRS-compliant model that integrates seamlessly with existing payroll systems and insurance plans. The program requires no out-of-pocket costs from employers and offers employees a suite of wellness services, including virtual primary care, care navigation, and personalized advocacy, services that are delivered in addition to any current benefits. Legal and ERISA-reviewed, the EHP structure helps employers retain talent, improve health outcomes, and achieve cost-efficiency without introducing unnecessary complexity. What Makes the 2025 Expansion Initiative Newsworthy The launch of this initiative represents a major milestone for EHP Inc. It includes: Regional Training Sessions: A calendar of in-person and virtual affiliate training sessions scheduled across major U.S. cities beginning July 2025. A calendar of in-person and virtual affiliate training sessions scheduled across major U.S. cities beginning July 2025. Enhanced Partner Tools: Access to a newly updated Affiliate Portal, with AI-powered proposal generation, real-time commission tracking, and automated compliance updates. Access to a newly updated Affiliate Portal, with AI-powered proposal generation, real-time commission tracking, and automated compliance updates. Tiered Compensation Model: A refined affiliate earnings structure designed to accelerate success for both new and experienced partners. A refined affiliate earnings structure designed to accelerate success for both new and experienced partners. Turnkey Onboarding: Streamlined onboarding powered by smart automation, ensuring that affiliates can activate quickly and compliantly. These enhancements are expected to double the company's affiliate footprint by year's end and strengthen its position as The Employer's Choice in employer-driven healthcare benefits. AI-Driven Compliance and National Infrastructure Central to the success of EHP Inc.'s model is its proprietary compliance automation platform, which governs everything from onboarding and documentation to payroll analysis and partner communications. The platform uses AI to maintain IRS and ERISA compliance while minimizing administrative burden for both employers and affiliates. 'Our infrastructure isn't just scalable; it's protective,' said Gould. 'Every piece of our system is designed to safeguard our clients, our partners, and our mission.' Leadership Continuity Fuels Nationwide Momentum Unlike many rapidly growing companies, EHP Inc. remains founder-led, with its original leadership team still driving strategic direction. Mardy Gould continues to play an active role in expanding partnerships, shaping program design, and advocating for smarter employer benefits at industry forums nationwide. 'We've never lost sight of why we started EHP,' Gould added. 'Our mission was, and still is, to give employers better choices through compliant, tax-savvy solutions. This affiliate expansion is a natural extension of that promise.' About EHP Inc. Headquartered in Jacksonville, Florida, EHP Inc. is a national employer solutions provider offering tax-advantaged, IRS-compliant benefit programs under IRS Sections 125, 105, and 213(d). The company helps businesses lower payroll tax liability and redirect those savings toward meaningful, preventive care for employees. With a strong legal foundation, AI-driven compliance, and a growing network of affiliates, EHP Inc. is redefining how companies manage cost, care, and compliance. To learn more about the 2025 National Affiliate Expansion Initiative or to become an affiliate, visit EHP The Employer's Choice Disclaimer: The above press release comes to you under an arrangement with GlobeNewswire. Business Upturn takes no editorial responsibility for the same.
