Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Pension - Social Security
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

DW Simpson
Actuarial Jobs

Visit our site for the most up to date jobs for actuaries.

Actuarial Salary Surveys
Property & Casualty, Health, Life, Pension and Non-Tradtional Jobs.

Actuarial Meeting Schedule
Browse this year's meetings and which recruiters will attend.

Contact DW Simpson
Have a question?
Let's talk.
You'll be glad you did.


Reply
 
Thread Tools Search this Thread Display Modes
  #21  
Old 10-04-2016, 01:53 PM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

Politics, especially in California, is a subtle and complex process. DeVore is alluding to other influences, not the transfer of funds from private sector to support public plan participants.
However, the intent of these plans is to offer another way to increase plan participation.
For many of those it targets, it is a poor choice because they are not part of the income tax pool anyway. They would be far better off to put some money away in a Roth IRA, to pay off their high interest debt, and to buy their own home (however modest it may be).
Reply With Quote
  #22  
Old 10-04-2016, 01:58 PM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

State run plans fail to recognize that the undercovered employed population is largely the same population that pays little or no income tax. Their incentive to save is better handled by Roth IRA, by paying off high interest debt, and by owning their home, however modest it may be.
Reply With Quote
  #23  
Old 10-04-2016, 08:07 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
Member
AAA
 
Join Date: May 2016
Posts: 478
Default

Quote:
Originally Posted by StillCrazed View Post
State run plans fail to recognize that the undercovered employed population is largely the same population that pays little or no income tax. Their incentive to save is better handled by Roth IRA, by paying off high interest debt, and by owning their home, however modest it may be.
Auto-enrollment payroll deduction plans are within a social locus of control, the options you listed are within an individual locus of control. What we're talking about here is getting 3% of pay plunked into some kind of asset that meets some kind of reasonable fiduciary standard. That's a very reasonable component of a life improvement plan for a large number of people. Your options are also reasonable but they are more difficult to deploy.
Reply With Quote
  #24  
Old 10-05-2016, 11:40 AM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

True that individual options are not meant to be deployed by a central authority, because they are adult decisions by individuals. But the tax aspect of these state run systems is that many lower income people get money converted to taxable funds when they retire.
Reply With Quote
  #25  
Old 10-05-2016, 11:46 AM
Kenny's Avatar
Kenny Kenny is offline
Member
Non-Actuary
 
Join Date: Jan 2003
Posts: 7,466
Default

Quote:
Originally Posted by StillCrazed View Post
True that individual options are not meant to be deployed by a central authority, because they are adult decisions by individuals. But the tax aspect of these state run systems is that many lower income people get money converted to taxable funds when they retire.
How do you come to this conclusion? But if we are already talking about people who wouldn't pay ordinary income tax on the contributions made to these types of plans, why do you conclude they fall into a higher tax bracket at retirement?
__________________
I am a scientist. I am sorry to disappoint you but I have never seen an elf or a troll. But who am I to exclude their existence? - Arni Bjoernsson
You are stupid and evil and do not know you are stupid and evil. ... Dumb students are educated stupid. - timecube.com
Usually while I'm reading, I'm actually thinking about...midgets riding toy horses - Roto


Reply With Quote
  #26  
Old 10-06-2016, 01:01 PM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

Quote:
Originally Posted by Kenny View Post
How do you come to this conclusion? But if we are already talking about people who wouldn't pay ordinary income tax on the contributions made to these types of plans, why do you conclude they fall into a higher tax bracket at retirement?
I agree with you that many will stay in low income brackets, unless they are upwardly mobile. It makes little sense to use tax-inefficient savings for those who will have higher future income, however.

Also, when discussing participation for new enrollees in 401(k) plans, low income people have expressed their concern about taxation of the money in the future.

That concern is not relevant to employer money, and these state plans are supposed to be employer money.

But my point still remains: there are more effective ways to save than these state plans, including better tax treatment and higher rates of return, plus better utility of funds. Homes, Roth IRA, and paydown of debt are all good plays for low income people.
Reply With Quote
  #27  
Old 10-16-2016, 07:58 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
Member
AAA
 
Join Date: May 2016
Posts: 478
Default

Quote:
Originally Posted by StillCrazed View Post
I agree with you that many will stay in low income brackets, unless they are upwardly mobile. It makes little sense to use tax-inefficient savings for those who will have higher future income, however.

Also, when discussing participation for new enrollees in 401(k) plans, low income people have expressed their concern about taxation of the money in the future.

That concern is not relevant to employer money, and these state plans are supposed to be employer money.

But my point still remains: there are more effective ways to save than these state plans, including better tax treatment and higher rates of return, plus better utility of funds. Homes, Roth IRA, and paydown of debt are all good plays for low income people.
Calling Roth rules better tax treatment for lower income people is highly dubious to me. See http://users.nber.org/~taxsim/taxsim-calc9/

On the working lifetime end, for a working low income individual, the contributions will be made out of income that falls into the 10% bracket and it does not appear that this affects earned income credits. On the retirement end, for an individual with a Social Security benefit in the ball park of $10,000, taxable retirement income would need to exceed $15,000 for any taxes to be payable for a single tax payer. Social Security income is not taxable unless other sources of income reach a threshold which means that at lower income levels, taxable pensions have a tax subsidy.

A very large contingent of current retirees (based on the BLS Current Population Survey microdata) rely on Social Security for the majority of their income, and generally in retirement most people settle into a consistent pattern of income=expenses after retirement. If you are looking to determine the most tax efficient way to add income to people who are currently entirely reliant on Social Security, tax deductible contributions with taxable distributions is the more efficient method.
Reply With Quote
  #28  
Old 10-17-2016, 02:33 PM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

Can anyone point out the percentage of govt employees who are not eligible for their state pension program because they don't work enough hours or because they are "contract employees"? Do they qualify for the state-run systems? I know that California schools have a cash balance type plan for their part-timers, but I don't know what the participation rates are.
Reply With Quote
  #29  
Old 10-17-2016, 04:15 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
Member
AAA
 
Join Date: May 2016
Posts: 478
Default

The California plan excludes public sector employees (local, state and federal). Including public sector employees might make compliance with federal law hairier.

Covering public employees excluded from state employee retirement systems may be complicated by existing provisions of the state's section 218 agreements. The state has a limited range of options for modifying retirement plan *coverage* for groups subject to existing 218 agreements. In this area, legacy decisions cast a long shadow.
Reply With Quote
  #30  
Old 10-17-2016, 07:10 PM
StillCrazed StillCrazed is offline
Member
ASPPA COPA
 
Join Date: Sep 2016
Posts: 111
Default

Under the Section 218 rules for CalPERS, I note this language "Certain services and positions can be excluded from Social Security coverage under the Section 218 Agreement, if requested by the state. Exclusions are limited to the services listed as optional exclusions in Section 218 of the Social Security Act. Those optional exclusions include:

Agricultural labor, but only those services that would be excluded if performed for a private employer
Elective positions
Election workers and election officials whose pay in a calendar year is less than the amount mandated by law, unless Section 218 agreement covers election workers
Part-time positions (as defined by the employer in terms of hours per week/month/year)
Positions compensated solely by fees that are subject to Self-Employment Contributions Act (SECA), unless Section 218 Agreement covers these services
Students enrolled and regularly attending classes at the school, college, or university where they are working"
So, is CalPERS required to offer a replacement for SS to those excluded (especially part-timers)?
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 02:32 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.23974 seconds with 9 queries