No Railroad Retirement Benefit Increase in 2010

The Railroad Retirement Board has issued the following press release:

Railroad retirement annuities, like social security benefits, will not increase in January 2010 as there was no increase in the Consumer Price Index (CPI) from the third quarter of last year to the corresponding period of the current year.

Also, because there is no cost-of-living adjustment (COLA), social security law prohibits an increase in the amounts social security and railroad retirement beneficiaries subject to earnings restrictions can earn in 2010 without having their benefits reduced.

Bank of America Shakes Up Merrill Retirement

Bank of AmericaMerrill Lynch has named three executives to run its $450 billion Merrill Retirement services business, including rehiring a former executive who left earlier this year. This measures represents the second retirement unit shake-up in three months.

NCLR: Hispanics Unprepared for Retirement

Many Hispanic workers are financially unprepared for retirement and the recession is likely to keep the fastest growing segment of the population from catching up with the rest of the workforce, according to advocacy group National Council of La Raza (NCLR).

NCLR reported last week that only one-third of Hispanics work for companies that offer retirement savings plans, are less likely than other ethnic groups to participate in the plans when available, and are more likely to take out loans against their retirement savings.

Hispanics make up 14 percent of the U.S. workforce. The Hispanic unemployment rate is 12.7 percent, according the NCLR.

Linden Ponds: 100% Refundable?

The developer of the Linden Ponds retirement community in Hingham, Massachusetts, has added more information about deposit refunds to its Web site after the state's consumer affairs chief expressed concerns about that Web site. She complained to a local newspaper that Erickson Retirement Communities' Web site was misleading and didn't comply with state advertising rules.

Unemployment among the 55 to 64 Age Group

The number of unemployed workers ages 55 to 64 has nearly tripled since the recession began. Of the 15.4 million unemployed Americans, 1.6 million are in the 55 to 64 age group. By comparison, the number of jobless workers of all ages has roughly doubled.

The share of people age 55 to 64 who are employed -- which has been trending down for the past 18 months -- sank to 59.9% in November, an eight-year low for that month.

The drop in employment for older workers follows a period of nearly three decades in which a greater share of individuals approaching retirement age had jobs. At the peak of the boom, employment among those age 55 to 64 topped out at nearly 63%. At the time, workers were seeking to keep up with the rising cost of living, while employers were more willing to hire older workers in a tight labor market.

While it is difficult to quantify just how many Americans are retiring earlier now amid weak job prospects, recent work from two Wellesley College economists, Courtney Coile and Phillip B. Levine, suggests the effect is large. In a new working paper, they estimate 378,000 workers will be pushed into retirement as a result of the weak labor market -- almost 50% more than will end up working longer because of stock-market losses.

Railroad Retirement and Taxation

The Railroad Retirement Board issued the following press release:

The amounts of compensation subject to railroad retirement tier I and tier II payroll taxes and the tier I and tier II tax rates on employees and employers remain unchanged in 2010. Railroad unemployment insurance tax rates paid by employers will continue to include a 1.5 percent surcharge in 2010.

Tier I and Medicare Tax.--The railroad retirement tier I payroll tax rate on covered rail employees and employers for the year 2010 remains at 7.65 percent. The railroad retirement tier I tax rate is the same as the social security tax, and for withholding and reporting purposes is divided into 6.20 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of an employee earnings subject to the 6.20 percent rate remains at $106,800 in 2010 but there is no maximum on earnings subject to the 1.45 percent Medicare rate.

Tier II Tax.--The railroad retirement tier II tax rate on employees will remain at 3.9 percent in 2010, and the rate on employers will remain at 12.1 percent. The maximum amount of earnings subject to railroad retirement tier II taxes remains at $79,200 in 2010. Tier II tax rates under the 2001 Railroad Retirement and Survivors Improvement Act are based on an average account benefits ratio reflecting railroad retirement fund levels. Depending on this ratio, the tier II tax rate for employers can range between 8.2 percent and 22.1 percent, while the tier II rate for employees can be between 0 percent and 4.9 percent.

Unemployment Insurance Tax.--Employers, but not employees, also pay railroad unemployment insurance taxes, which are experience-rated by employer. The basic tax rates range from a minimum of 0.65 percent to a maximum of 12 percent on monthly compensation up to $1,330 in 2010, the same compensation base as in 2009. However, the Railroad Unemployment Insurance Act also provides for a surcharge in the event the Railroad Unemployment Insurance Account balance falls below an indexed threshold amount, and such a surcharge of 1.5 percent applied in 2004-2009. Since the accrual balance of the Railroad Unemployment Insurance Account was $73.5 million on June 30, 2009, which was less than the indexed threshold of $134.4 million, a surcharge of 1.5 percent will again be added to the basic tax rates in 2010, but will not increase the maximum 12 percent rate.

The unemployment insurance tax rates on railroad employers in 2010 therefore will range from 2.15 percent (the minimum basic rate of 0.65 percent plus the 1.5 percent surcharge) to a maximum of 12 percent on monthly compensation up to $1,330.

The 1.5 percent surcharge will not apply to new employers in 2010, and new employers will initially pay a tax rate of 2.51 percent, which represents the average rate paid by all employers in the period 2006-2008.

For 77 percent of covered employers, the unemployment insurance rate assessed will be 2.15 percent in 2010.

Let’s Meet to Disagree

Canada's finance ministers are meeting this week to discuss ways to enhance Canadians’ retirement savings. The meeting is expected to end in disagreement.

Dearth of Canadian Workplace Pensions

Six of 10 Canadian workers have no workplace pensions.

Early Retirement in Corona-Norco

California’s Corona-Norco Unified School District will offer an early retirement package to teachers as it tries to cut $18 million from the 2010-11 budget. The program, which will be administered by Public Agency Retirement Services, offers a sliding scale depending on how many employees sign up.

Financial Adviser Attitudes

The Financial Planning Association has released its 2009 Financial Adviser Attitudes and Perceptions About the Retirement Income Distribution Market survey. The survey polled financial planners with clients who are in or near retirement and found that 40 percent of clients did have to make lifestyle adjustments - likely as a result of the economic downturn.

The lifestyle changes were significant: 18 percent of clients delayed their retirement and 6 percent of clients who had previously retired, returned to work because of market changes over the past year and ever-rising health care costs.