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Disability and Your Finances for Target Employees

'For Target employees, personal disability insurance is a vital financial protection that provides a stable source of income to replace lost earnings due to a disabling injury or illness, unless government programs are unavailable.'

'Given the recent changes in the government disability benefits, it is important for Target employees to purchase personal disability insurance to cover their needs in case of disability due to health problems.'

In this article we will discuss:

1. The need for personal disability insurance as an alternative to government benefits.

2. Workers' compensation and personal disability insurance: What are the differences?

3. The benefits of individualizing disability insurance coverage for the needs of each person.

As a Target employee, you should be aware that the Social Security Disability Insurance program paid out $143.7 billion in benefits in 2018. However, the number of applicants every year means that the fund is expected to be exhausted by 2034 unless the government acts. Instead of turning to the government's program to help them meet their financial needs during a disability, many people protect themselves with personal disability insurance.

Disability insurance helps by paying between 50% and 70% of your salary if you become disabled due to an injury or illness. Because disability can result in two forms of financial burden, this type of coverage may be very useful. Disabled people are usually unable to work and face other costs related to their condition.

What About Workers' Comp? Most people think that workers' compensation is a kind of disability insurance. However, workers' compensation is only available to workers who are disabled in the course of their employment. If your disability was caused by a car accident or other non-work related incident, you may not be eligible for workers' compensation. We would like to remind our Target clients that every state regulates its own workers' compensation laws and payments, which means that the availability of the coverage can be very different. Especially if you have a hazardous job, you may want to find out what your state offers and then make up for the shortage. Similarly, if any of our Target clients have an active pastime that may lead to disability, it may be wise to seek additional protection.

Private disability insurance can be purchased to pay weekly or monthly amounts during a period of disability. Provided you have paid up your premiums, the benefits are not taxable income. When buying a policy you may be able to adjust coverage to suit your needs. For example, you might be able to change the benefits or the elimination period. You may decide on general protection or decide to define coverage more specifically. Some policies also provide partial disability benefits, cost of living adjustments, residual benefits, death benefits, and pension benefits.

Because the purpose of insurance is to replace income, almost everyone decides to buy coverage only during their working years. Despite reforms being made to the federal disability programs, they usually provide only a small amount of money, and one must qualify for it. For the Target employees who do not want to depend on the government for funds in the case of an accident or illness, disability insurance can be a good way to secure their income and assets.

Out of Commission:

The unemployment rate of working-age disabled Americans is 19.6%. Chart Source: ACLI Life Insurers Fact Book 2018 Administration of Social Security, 2019 Policy coverage is written by participating insurance companies. Not all states offer all policy categories and product features. Any obligations are dependent on the insuring insurance company's ability to pay claims. This information is not intended to serve as tax or legal advice. It is prohibited from use to evade federal tax penalties. After-tax investment returns could be influenced by changes in federal and state laws and regulations. Contact a tax professional or an attorney for information that is applicable to your situation.

Added Fact:

According to the Harvard Business Review, the average length of a long term disability claim is 34.6 months. This means that if a Target employee was to get a disabling injury or illness, they could be out of work for over two and a half years without income. This is the reason why it is crucial to consider the need for personal disability insurance for Target employees to ensure that they are financially secure in the event of a disability. This way, they can have peace of mind knowing that they have a safety net to turn to in the event of a disability.

(Reference: Harvard Business Review, 'The Disability Disconnect: The Workers' Compensation System Fails to Protect All Workers,' March-April 2019)

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There is no protection for disability risks if one has no financial preparation. It is, therefore, not recommended to walk the tightrope without a safety net. As Target employees, you have strived to achieve financial freedom but a disability can undo all your efforts. As a tightrope walker, the safety net gives him confidence and security, personal disability insurance gives financial security. It guarantees that if you are unable to work due to a disability, you will not be left financially vulnerable. Disability insurance provides support, which means that it helps you by paying you a certain amount of money to help you sustain your financial status. It is therefore important to take disability insurance to ensure that in case you are unable to work due to an injury or illness, your financial future is secure.

Sources:

1. Social Security Administration. Annual Statistical Report on the Social Security Disability Insurance Program, 2018 . Social Security Administration, 2019, www.ssa.gov/policy/docs/statcomps/di_asr/2018/di_asr18.pdf .

2. Fort Pitt Capital Group. 'Should You Carry Disability Insurance Beyond Age 65?' Fort Pitt Capital Group , 24 Sept. 2020, www.fortpittcapital.com/blog/disability-insurance-in-retirement .

3. Special Needs Alliance. 'An Introduction to Private Disability Insurance.' Special Needs Alliance , 2021, www.specialneedsalliance.org/the-voice/private-disability-insurance-2 .

4. Guardian Life. 'Long Term Disability Insurance vs. Social Security.' Guardian Life , 2021, www.guardianlife.com/disability-insurance/long-term/vs-social-security .

5. MassMutual. 'Disability Income Insurance Policies for Individuals.' MassMutual , 2021, www.massmutual.com/insurance/disability-income-insurance .

What are the key benefits provided by Target Corporation's Personal Pension Account and Traditional Plan for employees approaching retirement, and how do these plans ensure financial security during retirement years? Understanding the synergy between these two plans is essential for retirees, as they work together alongside Social Security and personal savings to replace a portion of an employee's paycheck after retirement.

Key Benefits of the Personal Pension Account and Traditional Plan: Target Corporation's pension plan includes two components: the Personal Pension Account and the Traditional Plan. These plans work in tandem to replace a portion of an employee's paycheck during retirement. The Personal Pension Account provides pay credits and interest that accumulate over time, while the Traditional Plan uses a final average pay formula. Together with Social Security and personal savings, these plans help ensure financial security in retirement(Target Corporation_Dece…).

How can employees elect different payment options, such as the Single Life Annuity or the Joint and Survivor Annuities, within Target Corporation's pension plans? It is crucial for employees to grasp not only the financial implications of these choices but also the necessary spousal consent required when designating a joint annuitant, particularly if the chosen joint annuitant is not the employee's spouse.

Payment Options and Spousal Consent: Employees can elect different payment options, including the Single Life Annuity, which provides the highest monthly benefit and ceases at the retiree’s death, or the Joint and Survivor Annuity, which continues payments to a surviving spouse. To elect a non-spouse as a joint annuitant, spousal consent is required, and this must be notarized to ensure compliance with plan rules(Target Corporation_Dece…).

In what circumstances might benefits not be paid under the Traditional Plan, and what steps can employees take to ensure they remain eligible for their pension benefits upon termination of employment? Target Corporation's policy outlines several scenarios where benefits could be denied, making it necessary for employees to be proactive in understanding their rights and responsibilities concerning plan participation.

Circumstances for Denial of Benefits under the Traditional Plan: Benefits under the Traditional Plan may not be paid if an employee leaves before becoming vested (less than three years of service). Employees should ensure they meet the vesting requirements and maintain eligibility by avoiding termination before they reach the minimum service period(Target Corporation_Dece…).

What procedures should employees follow to report changes in marital status, address, or beneficiaries to ensure compliance with the requirements of Target Corporation's pension plan? Employees must understand the importance of timely reporting these changes to avoid potential issues with their retirement benefits and ensure that their pension plan information remains up-to-date.

Reporting Changes in Marital Status or Beneficiaries: Employees must promptly report changes in marital status, address, or beneficiaries to Target's Benefits Center to ensure their pension records remain up-to-date. Failing to do so can lead to delays or issues in processing pension benefits(Target Corporation_Dece…).

How does Target Corporation determine the final average pay used to calculate retirement benefits under its pension plans, and what factors may affect this calculation? Employees nearing retirement should be fully informed about how their compensation is considered in determining their pension benefits, including aspects such as bonuses and overtime that may influence their final average pay calculation.

Final Average Pay Calculation: Target Corporation calculates final average pay based on the five highest years of earnings out of the last 10 years of service. This includes regular pay, overtime, bonuses, and commissions but excludes items like workers' compensation or long-term disability payments(Target Corporation_Dece…).

How can employees begin the process of rolling over their Target 401(k) accounts into the Pension Plan, and what advantages does this Pension Purchase Program offer? Understanding this rollover option is vital for maximizing retirement benefits, as it can provide employees with a stable income stream while avoiding unnecessary fees typically associated with purchasing annuities outside the plan.

Rolling Over 401(k) into the Pension Plan: Employees can roll over their 401(k) accounts into the Pension Plan using the Pension Purchase Program. This option offers several advantages, including avoiding fees associated with purchasing annuities outside the plan and receiving a stable income stream during retirement(Target Corporation_Dece…).

What are the implications of a participant's age and joint annuitant's age on the payment amounts under the various Joint and Survivor Annuity options at Target Corporation? Employees should be aware of how age differences can impact their pension payouts, as the specific percentages payable under these options may vary based on the ages of both the participant and their designated joint annuitant.

Effect of Participant and Joint Annuitant’s Age on Payments: The Joint and Survivor Annuity options are influenced by the ages of both the participant and the joint annuitant. The younger the joint annuitant, the lower the monthly payout due to actuarial adjustments. Employees should consider these factors when selecting an annuity option(Target Corporation_Dece…).

How are retirement benefits managed during potential plan terminations or amendments at Target Corporation, and what protections are in place for employees in these scenarios? Employees should be well-informed regarding their rights in the event of changes to the pension plan, including how benefits would be distributed and under what circumstances they may remain fully vested.

Plan Terminations or Amendments: In case of plan terminations or amendments, vested benefits are protected, and employees will receive their earned pension. If the plan is amended or terminated, Target ensures that vested benefits are distributed according to the plan's terms(Target Corporation_Dece…).

For employees retiring or leaving Target Corporation, what options are available with respect to unused vacation time and how might this be factored into pension calculations? Understanding how accrued time off translates into benefits could have a significant impact on an employee's financial positioning upon retirement.

Unused Vacation Time and Pension Calculations: Unused vacation time does not directly affect pension benefits but can be included in eligible earnings calculations that determine final average pay. Employees nearing retirement should consult with Target’s Benefits Center to understand how unused time may impact their overall benefits(Target Corporation_Dece…).

How can employees contact Target Corporation for assistance with their retirement benefits to address any questions or concerns they may have about their pension plans? Accessing the right resources and support is essential for employees to navigate their retirement benefits effectively. They can reach out to the Target Benefits Center at 800-828-5850 for more specific inquiries related to their personal circumstances. These questions aim to enhance employees' understanding of their retirement benefits, ensuring they are well-prepared for their transition into retirement.

Contacting Target for Pension Assistance: Employees can contact the Target Benefits Center at 800-828-5850 for assistance with their retirement and pension plans. This center provides support with any questions related to pension options, payments, and administrative requirements(Target Corporation_Dece…).

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For more information you can reach the plan administrator for Target at 10 South Dearborn Street 48th Floor Chicago, IL 60603; or by calling them at 1-800-440-0680.