/General/General%201.png?width=1280&height=853&name=General%201.png)
Given the fiscal challenges facing Social Security, Alcoa employees must plan for retirement - and have a strategy that supplements Social Security benefits - to ensure long-term financial security, 'he said.
But Alcoa employees need to assess their retirement goals now and take advantage of tax-advantaged savings as future adjustments to Social Security benefits could affect their retirement income.'
In this article, we will discuss:
1. Social Security finances are changing because of demographic changes.
2. Solving Social Security's long-term funding shortfall.
3.Impact of COVID-19 pandemic on Social Security and increased benefits.
Social Security is pay-as-you-go; meaning today's workers are paying taxes on today's retirees' benefits. Yet demographic trends like lower birth rates, higher retirement rates, and longer life spans in your area create long-term fiscal challenges. And there are simply not enough U.S. workers to help the growing beneficiaries. Social Security is not collapsing, but the clock is ticking on whether the program can pay full benefits - something Alcoa employees and retirees need to know.
The Trustees of the Social Security Trust Funds annually report to Congress on the program's financial health and outlook. The Trustees estimated in the latest report, released August 2021, that the retirement program will have funds to pay full benefits only through 2033 unless Congress acts to shore up the program. Those days of reckoning are expected one year earlier than originally anticipated, thanks to the economic fallout of the COVID-19 pandemic.
Report Highlights
Social Security has two programs, each with a trust fund in which are deposited payroll taxes collected to pay benefits. Older workers, their families, and Survivors of Workers receive monthly benefits through the Older Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly Disability benefits through the Disability Insurance (DI) program. The combined programs are called OASDI.
Combined OASDI costs are expected to exceed total income (interest included) by 2021, and the Treasury will tap reserves to pay benefits. Trustees project that combined reserves will be exhausted by 2034. Afterwards, payroll tax revenue alone should cover about 78% of scheduled benefits. OASDI projections are hypothetical because the OASI and DI Trusts are separate entities, and generally, the taxes and reserves of one program cannot fund the other program.
If treated separately, the OASI Trust Fund would be drained by 2033. Payroll tax revenue alone would then cover 76% of OASI benefits.
The DI Trust Fund will be exhausted by 2057 - eight years earlier than estimated in last year's report. When that trust fund runs dry, payroll taxes alone would pay 91% of scheduled benefits.
We remind Alcoa employees and retirees that all projections are based on current conditions, which are subject to change and may not occur.
Proposed Fixes
Trustees want Congress to act soon on the financial problems these programs face so solutions can be less drastic and can be phased in gradually to minimize public impact. Combining some of the following solutions may also soften the effect of one solution.
Raise the existing Social Security payroll tax rate of 12.4%. The employee pays half and the employer pays half (self-employed pay the full 12.4%). An immediate and permanent payroll tax increase of 3.36 percentage points to 15.76% would be needed to meet the long-range revenue shortfall (4.20 percentage points to 16.60% starting in 2034).
Placing a ceiling on wages subject to Social Security payroll taxes (USD 142,800 in 2021) or raising it to zero (USD 142,800 in 2021).
The full retirement age should be raised to 67 for anyone born 1960 or later.
Reducing future benefits. For the long-term revenue shortfall, scheduled benefits would have to be cut by about 21% for all current and future beneficiaries - or by about 25% if reductions were made only for those first becoming eligible for benefits in 2021 or later - immediately and permanently.
The benefit formula that is used to calculate benefits should be changed.
The annual cost-of-living adjustment for benefits is calculated differently.
Pandemic Impact
The 2021 Trustees Report says the pandemic and the severe but short-lived recession in 2020 threw a wrench into Social Security's short-term finances. Employment, earnings, interest rates, and GDP [gross domestic product] all dropped sharply in the second calendar quarter of 2020 and are assumed to rise gradually thereafter towards a recovery by 2023, with worker productivity and thus GDP to be permanently lowered by 1%. Projections also included higher mortality rates for 2020-2023 and delays in births and immigration. Because payroll taxes are rebounding rapidly, the program was not as badly damaged as many feared.
Sharp increases in consumer prices in July and August suggest beneficiaries could face the highest annual benefit increase since 1983 beginning in January 2022. Social Security Administration chief actuary estimates that the 2022 cost-of-living adjustment (COLA) will be close to 6.0% (The official COLA had not been announced as of this writing).
So what's at risk for you?
In all, COVID-19 may have forced some 2.8 million Americans older than expected to file for Social Security benefits earlier than expected because of older workers at Alcoa companies losing their jobs or having health issues, the Census Bureau estimated.
If you regret starting Social Security benefits earlier than expected, you can withhold your application within 12 months of your original claim and reapply later. But you can do this only once, and you must repay all benefits you received. Or if you're fully retired, you can suspend benefits and restart them later voluntarily. Either of these moves would produce a higher future benefit.
Even if you won't need Social Security to live, the benefits could be a good chunk of your retirement income. A rough estimate of your monthly retirement benefit is available on your Social Security Statement - accessible through my Social Security account on SSA.gov - or by registering for my Social Security account. You should start receiving an annual statement by mail if you aren't receiving benefits and haven't registered for an online account.
No matter what Social Security's future holds, you still control your Alcoa retirement destiny. But now may be the time to save more for your Alcoa retirement while you work at a Alcoa company. Wait until you step out the door to think about your retirement income strategy. All information is from the 2021 Social Security Trustees Report except:
Featured Video
Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Sources:
1. Munnell, Alicia H. Social Security's Financial Outlook: The 2021 Update in Perspective . Center for Retirement Research at Boston College, Sept. 2021, crr.bc.edu/wp-content/uploads/2021/09/IB_21-15_.pdf .
2. Van de Water, Paul N. What the 2021 Trustees' Report Shows About Social Security . Center on Budget and Policy Priorities, Aug. 2021, cbpp.org/research/social-security/what-the-2021-trustees-report-shows-about-social-security .
3. An Actuarial Perspective on the 2021 Social Security Trustees Report . American Academy of Actuaries, Sept. 2021, actuary.org/sites/default/files/2021-09/2021_SocSec_TrusteeReport.pdf .
4. Johnson, Richard W., and Karen E. Smith. If Social Security Runs Out of Money, Poverty among Older Adults and People with Disabilities Will Soar . Urban Institute, July 2024, urban.org/urban-wire/if-social-security-runs-out-money-poverty-among-older-adults-and-people-disabilities .
5. Wikipedia contributors. Social Security Trust Fund . Wikipedia, last updated Feb. 2025, en.wikipedia.org/wiki/Social_Security_Trust_Fund .
What are the key eligibility requirements for employees to participate in the Pension Plan for Certain Hourly Employees of Alcoa USA Corp, and how do these requirements change if an employee is hired or rehired after April 1, 2022? This question aims to explore the specific criteria that must be met for participation in the plan, providing clarity on both the general eligibility for new employees and any exceptions for those previously employed.
Eligibility Requirements: Employees are automatically eligible for the Pension Plan for Certain Hourly Employees of Alcoa USA Corp if they were hired or rehired before April 1, 2022, have reached age 21, and completed one year of vesting service. Employees hired or rehired on or after April 1, 2022, are not eligible for this pension plan(Alcoa USA Corp_Pension …).
How is the vesting service calculated in the context of the Alcoa USA Corp pension plan, and what implications does it have for an employee considering retirement? Understanding the nuances of how vesting service is accrued and the minimum time required to become vested can significantly impact an employee's retirement planning.
Vesting Service Calculation: Vesting service determines when an employee becomes eligible for pension benefits. Employees become vested after completing five years of vesting service, which includes both periods of pension service and non-pension service such as absences not counted towards pension service. This is crucial for retirement planning, as it ensures employees are entitled to pension benefits even if they leave the company after becoming vested(Alcoa USA Corp_Pension …).
What various retirement options are available to employees of Alcoa USA Corp, and how do these options affect the benefits and payout structure for retiring employees? This question addresses the multiple choices employees face when planning their retirement, including the differences between normal retirement, early retirement, and disability retirement benefits.
Retirement Options: The plan offers normal retirement (at age 65 with five years of vesting service), 60/10 retirement (for employees between 60 and 62 with 10 years of vesting service), and 62/10 retirement (for employees between 62 and 65 with 10 years of vesting service). Disability retirement is also available for those permanently incapacitated with 10 years of vesting service(Alcoa USA Corp_Pension …).
Can you elaborate on the survivor benefits provided under the Alcoa USA Corp pension plan, and what steps need to be taken to ensure that a spouse or partner is eligible for these benefits upon the employee's retirement? This question seeks to examine the protections and financial security afforded to survivors, alongside the required documentation and choices available to employees.
Survivor Benefits: The pension plan provides automatic surviving spouse coverage unless waived by the employee and spouse. Surviving spouse pensions are payable if the employee dies while actively employed and vested in the plan, after retirement, or while receiving a deferred vested pension. The spouse must submit a written application to claim benefits(Alcoa USA Corp_Pension …)(Alcoa USA Corp_Pension …).
What are the specific methodologies used to calculate the regular monthly pension for employees retiring under the Alcoa USA Corp pension plan, and how might these calculations vary based on an employee's age and years of service? This question looks at the complex actuarial factors that influence pension benefits, enhancing employees' understanding of how their retirement income is determined.
Pension Calculation: The regular monthly pension is calculated using a formula based on the employee's pension service and a pension factor in effect when pension service ends. For example, if an employee retires at 65 with 10 years of service, the pension factor might be $57 per year of service. The pension is adjusted based on age and service length(Alcoa USA Corp_Pension …).
In the event of a disability, how does the Alcoa USA Corp pension plan provide support to affected employees, and what are the requirements to qualify for disability retirement benefits? This question emphasizes the importance of understanding disability provisions, ensuring employees are aware of their rights and the circumstances under which they might qualify for benefits.
Disability Retirement: Employees under 62 who are permanently incapacitated with at least 10 years of vesting service qualify for disability retirement. They must be deemed permanently disabled and unable to return to work in a bargaining unit occupation. A medical examination may be required to confirm ongoing eligibility(Alcoa USA Corp_Pension …).
What steps must Alcoa USA Corp employees take to apply for retirement benefits, and what timelines are involved in the processing and payout of these benefits? This question delves into the procedural aspects of retirement applications, aiming to prepare potential retirees for the necessary actions they must undertake.
Retirement Application Process: Employees must file a retirement application with the plan administrator before their desired retirement date. The application can be filed up to 90 days before retirement, and the process typically includes receiving benefit explanations and payment elections within this timeframe(Alcoa USA Corp_Pension …).
How does the Pension Benefit Guaranty Corporation (PBGC) influence the pension benefits received by employees of Alcoa USA Corp, particularly in the context of plan terminations or financial challenges? This question explores the security provided by the PBGC, focusing on its role as a backup for employees’ pension benefits.
Pension Benefit Guaranty Corporation (PBGC): The PBGC provides a safety net for pension benefits in the case of plan termination or financial distress. If the pension plan is underfunded, the PBGC ensures employees still receive pension benefits, although certain limitations may apply(Alcoa USA Corp_Pension …).
What resources and support does Alcoa USA Corp provide to its employees for understanding their pension plan, and how can employees reach out for assistance regarding their retirement options? This question emphasizes the resources available to employees for further education and guidance, ensuring they know where to turn for help.
Resources for Understanding the Plan: Employees can access information about their pension plan and retirement options through the Alight Worklife™ website or by calling the Alcoa benefits helpline. These resources offer guidance on applying for retirement and understanding plan benefits(Alcoa USA Corp_Pension …).
How can employees of Alcoa USA Corp contact the benefits management team to learn more about their specific pension plan details, and what channels are available for inquiries? Understanding the communication channels can empower employees to seek the information they need, facilitating a smoother transition into retirement.
Contacting Benefits Management: Employees can reach out to the benefits management team through the Alight Worklife™ website or by phone at 1-844-31ALCOA. This service provides assistance with pension-related inquiries and retirement applications(Alcoa USA Corp_Pension …).
-2.png?width=300&height=200&name=office-builing-main-lobby%20(52)-2.png)
.webp?width=300&height=200&name=office-builing-main-lobby%20(27).webp)
-2.png)
.webp)