Social Security: Disabled Worker Benefits at Age 62

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Below is an interesting Q&A about Social Security’s treatment of disabled workers once they reach age 62. It appeared in a PBS column by Larry Kotlikoff, author of  Social Security original 34 “secrets”, his additional secrets, his Social Security “mistakes” and his Social Security gotchas.

Dear Larry,

You told me recently about the nuances of disability benefits. A lot of questions on this page come from people on SSDI — Social Security Disability Insurance. Furthermore, as I was amazed to discover when responding to a question about the minimum wage reducing the welfare rolls, some 14 million Americans depend on disability payments from SS, which dwarfs the 4.3 million getting welfare checks.

Would you please share your discoveries about details of disability benefits that may escape notice?

Larry Kotlikoff: Paul, Social Security has a separate set of equally Byzantine provisions governing disabled workers as it does non-disabled workers.

I want to point out a couple of features of Social Security’s treatment of disabled workers once they reach age 62. I’m answering your question in order to assist those who have a hard enough time as it is. (Full disclosure: I’ve been helped enormously on this column by Jerry Lutz, a former technical expert on Social Security.)

Let me illustrate the options available only to the disabled by considering a disabled worker I’ll call “Joe,” about to turn 62.

First, Joe can continue to collect his disability benefit through full retirement age (66 in Joe’s case) with no reduction in the amount. In contrast, non-disabled workers who apply for their Social Security retirement benefits between age 62 and their full retirement age are forced to take permanently reduced benefits.

Once Joe reaches full retirement age, his disability benefit automatically converts to his full retirement benefit. So disabled workers are, in effect, given their full retirement benefit starting four, gradually rising to five, years before they reach full retirement age. That’s 25 percent more than the non-disabled can get. Like you Paul, I’m all for helping the disabled, and I’m glad this feature is in the law.

Second, if Joe has been married for at least one year and his wife is collecting a retirement benefit or she has applied for a retirement benefit, but suspended its collection, Joe can receive an excess spousal benefit between age 62 and 66, though it will be reduced because he’s taking it before his full retirement age of 66.

The excess spousal benefit is calculated as the difference between 50 percent of Joe’s wife’s full retirement benefit and his own full retirement benefit. Assuming this excess is positive, Joe gets 70 percent of this amount starting at the tender age of 62.

If Joe is divorced, but was married for at least 10 years, he can collect a spousal benefit from 62 to 66 even if his ex is already collecting her retirement benefit or has suspended its collection. Moreover, if she hasn’t started collecting or hasn’t suspended, he can still collect an excess spousal benefit on her earnings history if she is over age 62 and they have been divorced for at least two years. (I keep telling you the rules are Byzantine, Paul, which is why answers like these can be so hard to write — and to follow.)

By the way, unlike a non-disabled worker, Joe isn’t automatically required to apply for his excess spousal benefit. Social Security calls such applications “deeming.” There is, however, no deeming for the disabled. This is important because, as I’ll explain in a moment, it might be better for Joe not to apply for his excess spousal benefit. Danger lurks.

When Joe reaches 66, he can tell Social Security he doesn’t want to take his own retirement benefit. In SS lingo, he will ask to “withdraw” his own benefit. If he doesn’t do so, his disability benefit will automatically be converted to a retirement benefit.

But if he “withdraws” his retirement benefit, Joe’s reduced excess spousal benefit will flip to a reduced full spousal benefit: 50 percent of his spouse’s full retirement benefit, no matter if she’s his wife or his ex. And if he hasn’t taken an excess spousal benefit by age 66, he’ll can still request his full spousal benefit.

Now for that danger-lurks moment. If Joe took his excess spousal benefit starting at 62, the 70 percent reduction factor would be applied to his full spousal benefit. That would mean getting 70 percent of 50 percent of his wife’s or ex-wife’s full retirement benefit.

If the excess spousal benefit is small, taking it would be a mistake for Joe because it will mean not much money before 66 and less money, potentially a lot less money, after 66. In other words, this second option makes sense of his the full retirement benefit of his wife or ex is more than double his own full retirement benefit. Since Joe is disabled, she may well have earned much higher benefits. But you can’t assume anything.

So Joe needs to be careful should well-meaning folks at SS try help him, say at age 62, to get the maximum at that age. They might also be helping him forgo higher benefits after age 66.

The advantage to Joe of withdrawing his retirement benefit, of course, is that he can then wait until 70 to collect his own retirement benefit, which will reach its maximum amount at that point, a full 32 percent higher that had he started taking it at age 66. His full spousal benefit, reduced or not depending on whether he took his excess spousal benefit prior to 66, can help facilitate the wait.

Non-disabled workers who take Social Security retirement benefits early are generally deemed to be applying for their excess spousal benefits and then are stuck with those reduced excess spousal benefits for the rest of their lives. They don’t have the ability to withdraw their retirement benefit at full retirement age and flip to their full spousal benefit.

Remember the larger purpose here: for Joe to wait until age 70 to start his retirement benefit and benefit from the Delayed Retirement Credit. At age 70, Joe will get the larger of his own retirement benefit or his full spousal benefit hit, again hit by the reduction factor that prevailed if and when he took his excess spousal benefit.

The big if here is that I’m assuming Joe has a pretty high maximum age of life – something like 85. Note that I say “maximum age of life” rather than “life expectancy.” Since Joe may make it to his maximum age of life, he should be planning to live that long. He can’t count on dying on time — at his life expectancy, that is. As Paul and I both regularly emphasize, the greatest danger is outliving your resources. That’s why waiting until 70, as I spelled out in a popular recent column, is, with some exceptions, — and with SS there are always exceptions — so important, if you can manage to wait.

Fort Lauderdale Disability Lawyer for Professionals

If you are a business or medical professional who has suffered an unexpected disability through illness or injury, contact Fort Lauderdale disability lawyer Howard Kahn if your disability benefits are at risk. We can help you understand and protect your legal rights to disability benefits. Contact us online or by phone at 954-321-0176.

Employer Disability Plans May Cut Benefits

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Corporate disability benefit policies sometimes sound good on paper, but do not always translate into expected financial payments when an employee becomes disabled.

Consider the case of Kathleen Schiano, who was employed by Wells Fargo & Company as a lead teller. One of her employee benefits was enrollment in a long-term disability plan, which appeared to promise the payment of a percentage of her monthly earnings until age 65 in the event of a disability.

Unfortunately, Ms. Schiano became unable to work as a result of many disabling health conditions, including chronic fatigue and fibromyalgia. Instead of receiving the disability benefits she expected, she was informed by the insurance company that she did not meet the definition of “disabled.” As a result, any long-term benefits were denied.

What happened was that during the course of her employment, the terms of the insurance policy were changed slightly but significantly. Originally, the policy’s definition of disability referred to a condition where the employee could not perform the duties of their regular occupation. This was subsequently changed to a much broader term, where the employee was unable to meet the substantial duties of any occupation.

Even the Social Security Administration, which did grant benefits, noted the extensive nature of her disabilities that made it impossible for her to work.

If you are a business professional who has suffered an unexpected disability through illness or injury, contact Fort Lauderdale disability lawyer Howard Kahn if your disability benefits are at risk. We can help you understand and protect your legal rights to disability benefits. Contact us online or by phone at 954-321-0176.

Miami Beach Condo Leads to Russian Lawmaker’s Resignation

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Vladimir Pekhtin, a prominent member of the United Russia party, resigned from the Russian Parliament unexpectedly after anti-Kremlin blogger Alexei Navalnyi disclosed news of the lawmaker’s Miami Beach property holdings.

Miami Beach Condo at 1500 Ocean DriveAccording to a Wall Street Journal story titled “Russia Lawmaker Exits Amid Condo Storm,” Mr. Pekhtin’s son Aleksey purchased a waterfront Miami condo in 2007 for $540,900. Father and son also bought a Miami Beach condo at 1500 Ocean Drive for $1.275 million in April 2012.

Owning foreign real estate is not illegal for a member of Russia’s parliament, but it must be disclosed in required financial statements. Mr. Pekhtin, who had served as the Ethics Committee Chair for the lower house, failed to make any public disclosure.

Foreign property ownership of Russian leaders is coming under scrutiny as a red flag for potential corruption, as well as luxury lifestyles hidden from the public.

South Florida Condominium and Real Estate Attorney

Contact South Florida condominium attorney Marcy Resnik to discuss your need for legal services with a condominium purchase, sale, or business dispute. You can contact Ms. Resnik online or call her at 954-321-0176.

Florida is Top State for Mortgage Foreclosure Activity

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The Miami, Fort Lauderdale, Pompano Beach metropolitan area ranked #2 in the nation in foreclosure activity in January, with one in 228 homes receiving some type of foreclosure filing during the month, according to a recent Miami Herald article titled “Florida leads nation in foreclosure activity.” The Ocala, Florida area held the unfortunate distinction of being ranked #1.

California dropped out of its first place position as the state with the largest number of foreclosures for the first time since January 2007, according to survey sponsor RealtyTrac.

Several factors contribute to Florida’s unwelcome number of January foreclosures, including:

  • Florida requires that all foreclosures are subject to court review, as opposed to less time-consuming administrative proceedings. Courts in Miami, according to the article, are becoming more aggressive in pushing larger numbers of foreclosures through the court system in order to work through the backlog.
  • Lenders are processing foreclosures more quickly in the wake of the recent regulatory settlement with five major banks and mortgage lenders. (See our earlier blog post titled, “Mortgage Foreclosure Settlement for Florida Homeowners.”)

Florida foreclosure filings tracked include default notices, scheduled auctions and bank repossessions.

Fort Lauderdale Foreclosure Defense Attorney

Choosing the best approach to protecting yourself and your family from a mortgage foreclosure involves many legal considerations. Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik to discuss how you can defend your legal rights in a foreclosure. You can contact Ms. Resnik online or call her at 954-321-0176.

ING Firms Fined $1.2 Million by FINRA for Account Violations

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Failure to retain or review millions of emails for periods ranging from two months to more than six years resulted in $1.2 million of FINRA fines for the following five indirect subsidiaries of ING Groep N.V.:

  • Directed Services, LLC
  • ING America Equities, Inc.
  • ING Financial Advisers, LLC
  • ING Financial Partners, Inc.
  • ING Investment Advisors, LLC

Brad Bennett, Executive Vice President and Chief of Enforcement, said, “As a result of broad systemic failures, these firms failed to capture and retain emails from hundreds of representatives and other associated persons, and failed to take adequate steps to ensure that their principals were fulfilling their responsibilities to review emails. Email retention and review continues to be an important regulatory responsibility and an issue of concern for FINRA.”

FINRA found that the firms failed to properly configure hundreds of employee email accounts to ensure that the emails sent to and from those accounts were retained and reviewed at various times between 2004 and 2012. In addition, four of the firms failed to set up systems to retain certain types of emails, such as emails using alternative email addresses, emails sent to distribution lists, emails received as blind carbon copies, encrypted emails and “cloud” email (emails sent through third-party systems). As a result of these failures, emails sent to and from hundreds of employees and associated persons were not retained; and because the emails were not retained, they were not subject to supervisory review.

In addition, four of the firms failed to review millions of emails that the firms’ email review software had flagged for supervisory review. At various times between January 2005 and May 2011, nearly six million emails flagged for review went unreviewed by supervisory principals because the email review software was not properly configured.

In concluding the settlement, the firms neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. FINRA found that the firms violated the recordkeeping provisions of the federal securities laws and FINRA rules, and supervisory requirements under FINRA rules.

FINRA also ordered the firms to conduct a comprehensive review of their systems for the capture, retention and review of email, and to subsequently certify that they have established procedures reasonably designed to address and correct the violations.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

SEC Freezes Swiss Assets in H.J. Heinz Questionable Trades

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The SEC obtained an emergency court order to freeze assets in a Zurich, Switzerland trading account that was used to reap more than $1.7 million from trading in advance of last week’s public announcement about the acquisition of H.J. Heinz Company.

The SEC’s immediate action ensures that potentially illegal profits cannot be siphoned out of this account while the agency’s investigation of the suspicious trading continues.

In a complaint filed in federal court in Manhattan, the SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire H.J. Heinz Company in a deal valued at $28 billion, unknown traders took risky bets that Heinz’s stock price would increase.

The traders purchased call options the very day before the public announcement. After the announcement, Heinz’s stock rose nearly 20 percent and trading volume increased more than 1,700 percent from the prior day, placing these traders in a position to profit substantially.

“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information,” said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “Despite the obvious logistical challenges of investigating trades involving offshore accounts, we moved swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want their assets unfrozen.”

The SEC alleges that the unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement. The timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Overall trading activity in Heinz call options several days before the announcement had been minimal.

The emergency court order obtained by the SEC freezes the traders’ assets and prohibits them from destroying any evidence. The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the emergency relief, the SEC is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and be permanently barred from future violations.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

FINRA Warns Bond Investors on Price Fluctuation Risk

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Bonds with a low interest rate and high duration may experience significant price drops if interest rates rise, according to a new FINRA Investor Alert called Duration—What an Interest Rate Hike Could Do to Your Bond Portfolio.

FINRA issued the Alert to help investors understand the importance of duration risk. Although stated in years, duration is not simply a measure of time. The duration of a bond or a bond fund also signals how much the price of a bond investment is likely to fluctuate when interest rates move up or down.

As explained in FINRA’s Alert, a bond fund with a 10-year duration will decrease in value by 10 percent if interest rates rise 1 percent. In contrast, if a fund’s duration is two years, then a similar 1-percent rise in interest rates will result in only a 2-percent decline in the bond fund’s value.

To find your bond fund’s duration, investors should look on the fund’s fact sheet. Investors holding individual bonds should start by asking their investment professional or the bond’s issuer.

Investors should also keep in mind that just because a bond or bond fund’s duration is low, it does not mean the investment is risk-free. In addition to duration risks, bonds and bond funds are subject to inflation, call, default and other risk factors.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Breach of Contract Lawsuits Give Business Owners a Legal Remedy

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If you, or your business, have entered into a contract and believe the other side has breached that contract, you may be entitled to file a breach of contract lawsuit. Alternatively, if you are the party believed to have breached, you may have a business litigation lawsuit on your hands. It is important to note that enlisting the help of a litigation attorney for your business litigation needs is highly recommended.

Once you hire a litigation lawyer, the first thing he or she will need to do is determine if there was a valid contract in place. Generally, a contract is defined as simply an oral or written agreement, enforceable by law, to do or not do a certain thing in exchange for some sort of consideration. Moreover, a contract is valid if it is not illegal, does not restrain trade, and does not otherwise inhibit public policy.

Next, it must be proven that this contract was in effect at the time in question. Your business litigation attorney will be able to tell you exactly the steps to take to determine if you had a valid contract in place and whether that contract was in fact breached.

Once it is determined that a contract does exist, the next step the litigation lawyer will need to take is to determine whether the other side knew or should have known that the contract existed. If the other side had knowledge of certain facts and circumstances surrounding the formation of the contract which would lead a reasonable business person to know that a contract exists, that is enough to prove that the other side should have had knowledge of the contract.

Fort Lauderdale Business Litigation Attorney

Contact Fort Lauderdale business litigation attorney Howard N. Kahn, Esq. if you or someone you know has a breach of contract or business litigation dispute. He is an experienced business litigation attorney, and is available to assist business owners, board members, and corporate investors in business litigation matters. You can reach him at 954-321-0176 or online.

Merrill Lynch Fined by FINRA Over Retention Bonuses

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Merrill Lynch failed to arbitrate retention bonus disputes with employees, according to recent charges by the Financial Industry Regulatory Authority (FINRA) that resulted in a $1 million fine.

According to a January 25, 2012 release:

“Registered representatives who participated in the bonus program had to sign a promissory note that prevented them from arbitrating disagreements relating to the note, forcing the registered representatives to resolve disputes in New York state courts.

FINRA found that Merrill Lynch, after merging with Bank of America in January 2009, implemented a bonus program to retain certain high-producing registered representatives and purposely structured it to circumvent the requirement to institute arbitration proceedings with employees when it sought to collect unpaid amounts from any of the registered representatives who later left the firm. FINRA rules require that disputes between firms and associated persons be arbitrated if they arise out of the business activities of the firm or associated person.”

Over 5,000 Merrill Lynch registered reprentatives received retention bonuses as part of the Bank of America acquisition, according to the release.

Contact Fort Lauderdale securities attorney Howard N. Kahn, Esq., if you or someone you know was a Merrill Lynch registered rep who received a retention bonus. Mr. Kahn serves as a  FINRA arbitrator.

Read the full FINRA-Merrill Lynch press release.

South Florida Farnell Brothers Sentenced for Tax Evasion

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Michael Farnell and James Farnell, residents of Boca Raton, Fla., were sentenced to prison terms last week for income tax evasion following an April indictment, according to the Justice Department and Internal Revenue Service (IRS). Judge William P. Dimitrouleas sentenced Michael Farnell to a term of 18 months in prison. His brother James Farnell was sentenced to a term of 42 months.

Michael and James Farnell sold stock in a privately held Florida-based technology company between 2004 and 2006 and failed to report the capital gains or pay taxes on the capital gains from those stock sales. In 2004, the U.S. Securities and Exchange Commission (SEC) filed suit against the Farnell brothers for securities violations at another company that they operated the year 2000. A majority of the stock sales at issue in this case violated the injunction from the SEC’s lawsuit.

According to public documents and statements made in court, the Farnell brothers held their stock in this Florida-based technology company in the name of nominee trusts. The proceeds of the stock sales were deposited into bank accounts titled in the name of these nominee trusts. Neither brother filed tax returns in 2004 and 2005. James Farnell also failed to file a 2006 tax return. As part of the sentencing, Michael Farnell and James Farnell both agreed that they failed to report additional income paid to them by this Florida-based technology in 2001 through 2003.

Michael Farnell was ordered to pay restitution of $448,128 and James Farnell was ordered to pay restitution of $434,115, both to the IRS.

Farnell Brothers Subject of 2006 SEC Litigation

Details of earlier SEC actions are outlined in SEC Litigation Release No. 19604, dated March 9, 2006, involving Securities and Exchange Commission v. Vector Medical Technologies, Inc., Michael H. Salit, James P. Farnell, Michael J. Farnell, David A. Zimmerman, and Stanley Wasser, Case No. 03-80858-CIV-HURLEY/LYNCH (S.D. Fla.).

The Securities and Exchange Commission announced that on February 1, 2006, the Honorable Daniel T.K. Hurley, United States District Court for the Southern District of Florida, adopted the Magistrate’s Report and Recommendation in full and entered Final Judgment of disgorgement and civil penalties against Vector Medical Technologies, Inc., Michael Salit, James Farnell and Michael Farnell.

On December 20, 2005, Magistrate Judge Frank J. Lynch, Jr., conducted an evidentiary hearing, and thereafter filed his Report and Recommendation. By adopting the Magistrate’s Report and Recommendation in full, the District Court entered a Final Judgment that ordered Vector Medical to pay $14,208,718 in disgorgement and prejudgment interest; Salit to pay a $486,000 civil penalty; James Farnell to pay $1,127,796 in disgorgement and prejudgment interest and a $100,000 civil penalty; and Michael Farnell to pay $715,320 in disgorgement and prejudgment interest, and a $100,000 civil penalty.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.