Even if an individual has sufficient funds to cover living expenses without Social Security, some practitioners advise clients to begin receiving benefits as soon as possible. For 2013, the retirement benefits received at age 62 are reduced by 25% of what they would be at age 66, i.e., the full retirement age (“FRA”), but the individual receives more Social Security checks if benefits are drawn early. In addition, drawing early Social Security benefits may allow the individual to leave tax-deferred retirement accounts untouched and growing for longer periods.

For example, Curt is single and plans to begin receiving Social Security benefits on his 62nd birthday when his PIA is $2,000; he will receive monthly payments of 75% of his PIA, or $1,500. When he reaches age 66 (his FRA), he will have received 48 benefit checks of S1,500 each (not considering annual inflation adjustments), or a total of S72,000.

If Curt waits until age 66 to start receiving benefits, his monthly payment will be S2,000; it will take 12 years before the additional S500 per month (S2,000 – S1,500) equals the S72,000 he can receive between ages 62 and 66.

Curt makes his decision because he wants to receive 16 years of benefits beginning at age 62 (S1,500 x 192 months = S288,000) before he would otherwise receive the same amount if payments start at age 66 (S2,000 x 144 months = S288,000).

If an individual waits until his or her FRA to draw benefits (and the PLA remains the same), it will take 12 years to reach the break-even point, compared to the time it would take if he or she began taking benefits at age 62 (ignoring other factors such as inflation, taxes and investment returns). Therefore, if an individual does not expect to live past age 78, more benefits will be received by taking the reduced preFRA monthly payment.

If the present value of future Social Security benefits is considered, it may be more favorable to start benefits as soon as possible. However, if early Social Security benefits replace a similar amount of earned income, i.e., if the individual stops working and receives Social Security benefits instead, the short-term financial position may not be improved and the long-term outlook could suffer.

It is also important to note that, while individuals have the option of receiving Social Security benefits as early as age 62, the eligibility age for Medicare remains 65. So, although they may be able to replace a sufficient amount of their earned income with Social Security benefits beginning at age 62, individuals may not be able to adequately replace their employer-provided health 1 Sal Co.

Advantages of Taking Delayed Benefits after Reaching FRA Workers born in 1943 or later receive a credit of 8% per year for each year they delay receiving benefits after reaching their FRA, up to age 70. This delayed retirement credit can have a significant impact; not only are benefits higher, but the worker’s retirement period is shorter and the spouse’s survivor’s benefits are greater. However, higher earnings after reaching FRA won’t increase the worker’s PIA by replacing lowerwage years.

The following strategies can be used by married couples to help maximize the benefit amounts for which they are eligible.

Switching from One Type of Benefit to Another

A married individual who has reached FRA but wants to earn delayed retirement credits may claim a spousal benefit for several years, then switch from spousal benefits to benefits based upon his or her own PLA when he or she has earned the desired number of additional credits

For example, Maurice and Jo have both reached their FRAs at age 66. Maurice wants to retire and start receiving his benefit of S1,800 per month. Jo’s benefit (based on her earnings record) is S800 per month. Jo chooses to receive the higher spousal benefit, equal to half of Maurice’s benefit (S900) and delay receipt of her own benefits. She earns delayed retirement credits until age 70, at which point she is eligible for a retirement benefit of at least S1,056 based upon her own earnings record (S800 + (8% delayed retirement credit x 4 years x S800)), which is higher than her spousal benefit (S900).

Suspension of Benefits

Occasionally, a worker wants to delay benefits to take advantage of the delayed retirement credit, while his or her spouse wants to start spousal benefits immediately. Since spousal benefits cannot be received until the working spouse has begun drawing benefits, this can create a problem.

One solution is for the worker to file for benefits at FRA, allowing the spouse to file for spousal benefits, and then immediately suspend benefits to earn the delayed retirement credit. The worker can also request to “restrict his claim to spousal benefits only” to achieve the same result.

For example, Al and his wife, Rochelle, both reach their FRA. Al’s PLA is S2,000, but he intends to keep working and earn delayed retirement credits until age 70. Rochelle wants to retire, and her PLA is S500. Since Al is not going to begin receiving benefits, Rochelle is not eligible for her S1,000 ($2,000 x 50%) spousal benefit based upon Al’s earnings.

Al and Rochelle’s practitioner advises Al to file for benefits so Rochelle can claim her higher spousal benefit. Then, Al immediately suspends his benefit claim and continues working Rochelle is permitted to receive her S1,000 spousal benefit, and Al continues to accrue delayed retirement credits.

The increase in benefits resulting from the delayed retirement credit does not increase the PIA and does not affect benefits paid to family members other than the worker and, eventually, the surviving spouse. In addition, even after beginning to receive Social Security benefits, a worker can earn a delayed retirement credit for any month that suspension of benefits is requested. This option only applies to the period beginning with the month in which the worker reaches FRA and ending with the month prior to reaching age 70.

Social Security benefit amounts are calculated by reference to a worker’s PIA. The calculation is complicated, and many of the factors involved change annually. Workers car access an estimate of their retirement benefits based upon the Social Security earnings record by visiting the Social Security website (www.ssa.gov) and creating a “My Social Security” account.

Conclusion

A worker can begin receiving Social Security benefits at any time between age 62 and 70, and selecting the best time is a personal decision. A number of considerations must be weighed including life expectancy, inflation adjustments and more. Tax and legal professionals who work with clients nearing retirement age should be familiar with the factors involved so they can pro vide guidance that best fits each client’s circumstances.

The post Deciding When to Start Receiving Social Security Benefits (Part 2) appeared first on Leventry, Haschak, & Rodkey, LLC.

Nuisance ordinances often forbid property owners to keep abandoned or junked vehicles on their property. The ordinances can require the cleanup and removal of junk, debris, trash, and burned buildings. Municipalities sometimes define abandoned or junked vehicles to include any vehicle that is not registered and insured.

In a recent case, a borough ordered several homeowners to remove unregistered, un inspected, and uninsured vehicles from their residential properties. The homeowners refused. On appeal to the commonwealth court, the home owner’s won.

The commonwealth court noted that the borough and the home owners agreed that the properties were well maintained, regularly mowed, and neat. But one homeowner had five junk vehicles on his residential property; the other had 15 vehicles on his residential property. The borough insisted that the presence of the vehicles constituted a public nuisance.

The borough conceded that the homeowners had hired an inspector who issued a report that both properties were free of “vermin and noxious pests.’ In addition, a certified mechanic hired by the homeowners had inspected the vehicles and issued a report that none was leaking any substances or otherwise creating any environmental hazards. The borough also conceded that it had no proof of any actual danger caused by the vehicles, But because the vehicles were unregistered and uninsured, the borough insisted that they were nuisance vehicles and had to be removed.

The commonwealth court found that Pennsylvania law on nuisances has long required that municipal ordinances may not declare conditions to be automatic nuisances. Instead, all municipalities must prove actual danger, public harm, or health risks arising from claimed nuisances. Ordinances can define nuisance vehicles as any vehicles that are not registered and insured. But in order to demand that a homeowner remove such vehicles from his or her property, municipalities must prove that an actual nuisance exists. Where the abandoned vehicles include broken parts, harbor animals, or have attracted children, the municipality may be entitled to demand removal. Likewise, outdoor junk, debris, or burned-out structures are subject to local municipal enforcement if they cause actual dangers.

If you are concerned about a neighbor’s property that is unsightly, you won’t succeed in enforcing local nuisance ordinances unless you can prove the existence of an actual nuisance.  If you keep an abandoned vehicles or a large collection of personal property outdoors on your property, or if you have dilapidated buildings on your property, you are obliged to prevent the development of dangerous conditions.

The post If it’s Not Dangerous, It May Not Be a Nuisance appeared first on Leventry, Haschak, & Rodkey, LLC.

When an employer sets the time, the place, and the manner of job performance, the court concluded the worker will almost always be consid. ered at law to be an employee,

challenge, and was then entitled to the back payments for unemployment contributions the employer owed for the previous three years.

All businesses that employ workers must contribute to the state unemployment fund, must pay workers’ compensation insurance, and must comply with federal and state wage-withholding and Social Security regulations. But when a business hires an independent contractor, the business simply pays the independent contractor directly, and the business has no obligations for unemployment, workers’ compensation, or Wage tax withholding.

In the case of the insulation installation company, it placed numerous workers at various job sites where the company had contracts to install insulation. The company provided no clothing, tools, or protective gear for the Workers; they had to supply their own. The company did supply some equipment, including scaffolding, and supplied all the materials needed to complete the work.

The company paid each worker per square foot of insulation the worker installed. The amount paid to each worker per square foot varied at each job site; the company kept a portion of the contract price at each site and then divided the remainder of the contract price among all the workers based on the square footage installed by each worker. Thesize of each project was the main factor in how many workers were sent to each site. The company required each worker to sign an independent contractor agreement for each project. When workers worked at multiple projects, they signed one agreement for each site.

In finding that the workers were employees and not independent contractors, the court noted that the agreement required that the workers”may not leave the job site without permission’ from the company. The agreement also set work hours commencing at 8 a.m. and concluding at 5 p.m. and prohibited the Workers from giving their name or information about their services to any other business while working for the company.

The owner testified that workers were free to come and go, Setting their own hours, but the court found that the agreement had been enforced and the actual practice was that employees worked a schedule set by the company.

The court noted that Pennsylvania labor law presumes that all workers are employees. A company that claims its workers are independent contractors has the burden to prove that status. The “key element” is whether the employer has the right to control the work to be done and the manner in which it is performed. Other important factors are the terms of any contract between the parties, the nature of the worker’s skill or occupation, whether payment is by the hour or by the job, and whether the worker can or does work for other companies or individuals.

The court emphasized that a worker’s status is unique to each case and is based on the actual history of how the work was controlled and by whom. When an employer sets the time, the place, and the manner of job performance, the court concluded, the worker will almost always be considered at law to be an employee. In the case involving the insulation installation company, the court found “persuasive’ the fact that the workers did not set their own rates of pay, nor were they guaranteed any amount of pay. Instead, their compensation varied depending on how many workers the company used at each job site and how much the company was paid in gross contract payment.

The law relating to independent contractors is complex, Companies and individuals who treat workers as independent contractors are best protected when the independent contractor is engaged in a distinct occupation or business, provides regular services to other individuals or companies, and has broad control of the time and manner of the work provided.

The post Employee of Independent Contractor? appeared first on Leventry, Haschak, & Rodkey, LLC.

The victim was an independent contractor who regularly worked for Amtrak. At the sentencing hearing, the victim produced extensive documentation of his income from Amtrak. The S2,800 lost wages accrued over the two-month period of the victim’s recovery. The appeal court upheld the trial judge’s order of restitution to the victim for lost wages.

Pennsylvania law requires that sentencing judges include “full restitution’ in their sentencing orders, “regardless of the current financial resources of the defendant.’ The goal of restitution is to “provide the victim with the fullest compensation for the loss.” The Pennsylvania statute does not permit reduction of a restitution award if the victim receives insurance coverage or government benefits that pay some of his or her losses. If such payments are made, the convicted criminal must then reimburse the insurance company or the governmentagency,

Pennsylvania operates a Crime Victim’s Compensation Fund that provides benefits to some victims of crime. Local law enforcement authorities regularly assist victims in applying for Crime Victim’s Compensation Fund benefits. If you suffer any losses directly as the result of the commission of a crime, be sure to provide full documentation of your losses to the law enforcement authorities involved in the prosecution. You may be able to collect benefits or restitution for your losses.

The post Restitution for Victims of Crime appeared first on Leventry, Haschak, & Rodkey, LLC.

Pennsylvania estate lanw provides that divorce automatically nullifies the designation of an ex-spouse as the beneficiary of a life insurance policy.

Pennsylvania estate law provides that divorce automatically nullifies the designation of an ex spouse as the beneficiary of a life insurance policy. Only if the parties’ settlement agreement or a court order clearly provides that the ex-spouse shall continue as the beneficiary can an ex-spouse remain entitled to a life insurance benefits designation signed before the divorce. Thus, when a divorce is finalized without any agreement or court order that directs existing life insurance to an ex-spouse, Pennsylvania estate law mandates that each ex-spouse forfeits all claims to collect existing life insurance left by the other spouse.

In a recent case, a collision of this Pennsylvania estate law and federal law regulating employment benefits produced a surprising result. In the case, a man had named his wife as the primary beneficiary of a S40,000 life insurance policy provided to him by his employer. He named his nephew as the contingent beneficiary-the person who would be paid the $40,000 if the wife were deceased or otherwise legally barred from receiving the money.

The man and his wife/beneficiary divorced and the man died three months after the issuance of the final decree of divorce. Despite the divorce, the man had not removed his ex-wife as the primary beneficiary on the life insurance policy.

Following his death, the man’s estate executor petitioned the court to permit the estate to pay the life insurance to the nephew, noting that upon the divorce the designation of the ex-wife was null. But the ex-wife disputed the application of Pennsylvania estate law, because employee benefit plans are strictly regulated by federal law only. Federal law requires that benefit payments be made based on the plan documents, in this case the original beneficiary designation form that still named the ex-wife as the primary beneficiary.

The dispute was litigated all the way to the Pennsylvania Supreme Court, and the ex-wife Won. The Supreme Court reviewed the federal law and concluded that Congress passed the federal Employee Retirement Income Security Act (ERISA) in 1974 to establish a national, uniform body of law relating to employee retirement and benefit plans. The court ruled that ERISA law clearly requires that each employee’s insurance plan documents control the identity of the employee’s beneficiaries.

Noting that an employer may operate in multiple states and that an employee may live in one state and the employee’s ex-spouse and other beneficiaries may live in yet several other states, the Pennsylvania Supreme Court recognized that one divorced employee’s benefits could be affected by the divorce and estate laws of multiple states. Acknowledging the importance of ERISA’s prevailing over potentially conflicting state laws on the administration of employee benefit plans in divorce cases, the court found ERISA law controlling.

The court also noted that a key purpose stated in ERISA is that the administration of all employee benefit plans must be uniform as to all employees in the plan; with national employers operating in multiple states, the administration of benefits simply would not be uniform for all employees if various state divorce laws were applied to one plan.

Ruling that ERISA has a “vast reach,” the Pennsylvania Supreme Court held that the ex-wife Was entitled to the $40,000 payment. The court’s decision would have been completely differentif the insurance policy had been a private policy, purchased by the deceased man from an insurance company or agent, Private insurance policies are not subject to any ERISA regulation.

Had the deceased man’s life insurance been payable on a private policy unrelated to his employment benefits, Pennsylvania law automatically nullifying the ex-wife’s beneficiary status upon divorce would have been controlling and the policy payment would have gone to the man’s nephew.

If you have any employment benefits, whether pension, retirement savings, or life insurance, all death benefits on the plans will be paid according to the last beneficiary designation you provided to your employer before your death. If you are divorced or divorcing review your plan documents, and make any appropriate changes that are supported by your settlement agreement or court orders.

If you plan to leave private life insurance to your ex-spouse, it is best to reissue a new beneficiary designation after the issuance of the divorce decree to be sure that your intentions are clear and are followed by your private insurance provider.

The post Life Insurance, Beneficiaries, and Divorce appeared first on Leventry, Haschak, & Rodkey, LLC.