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Given the fiscal challenges facing Social Security, FedEx employees must plan for retirement - and have a strategy that supplements Social Security benefits - to ensure long-term financial security, 'he said.
But FedEx 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 FedEx 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 FedEx 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 FedEx 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 FedEx retirement destiny. But now may be the time to save more for your FedEx retirement while you work at a FedEx 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:
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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 implications of the Funding Target Attainment Percentage for FedEx Corporation employees, and how does it impact the security of the pension benefits offered by FedEx Corporation? This question seeks to explore the nuances of the funding target attainment percentage as reported in the annual funding notice, examining how this metric not only reflects the financial health of FedEx Corporation's pension plan but also how it affects employee confidence in future benefit payments and retirement planning.
Funding Target Attainment Percentage: The Funding Target Attainment Percentage for FedEx Corporation indicates the degree to which the pension plan is funded. A percentage of 101.33% for 2022 suggests that the plan has sufficient assets to cover its liabilities, providing security for employees' pension benefits. This high percentage likely increases employee confidence in the stability and reliability of their future pension payouts, essential for long-term retirement planning.
How does the merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan influence the benefits currently available to FedEx Corporation employees? This question aims to delve into the practical changes that may arise due to this merger, assessing whether it aligns with employee expectations regarding their pension benefits and how the transition process is managed by FedEx Corporation.
Merger of Pension Plans: The merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan appears to have been strategically managed to maintain benefit stability. Despite increasing liabilities by 5.3%, the merger was structured to ensure no negative impact on the benefit amounts payable to participants from either plan, preserving the expected pension benefits for all affected FedEx Corporation employees.
In terms of investment strategies, what measures does FedEx Corporation implement to ensure that its pension plan investments align with the long-term liabilities expected to be paid out to retirees? This question encourages an exploration of the investment policies in place, examining the asset allocations and risk management strategies that FedEx Corporation employs to ensure sustainable funding for its pension obligations, which could potentially include detailed analyses of stocks, debts, and alternative investments.
Investment Strategies: FedEx Corporation employs a diversified investment strategy across equities, fixed income, and alternative investments, aiming to meet long-term pension liabilities. This approach, which includes both active management strategies and the limited use of derivatives, is designed to generate returns that exceed market indices, thus ensuring adequate funding of pension obligations.
What options do employees of FedEx Corporation have for accessing their pension plan statements, and how frequently are these statements generated? The focus here is to understand the communication strategies employed by FedEx Corporation regarding pension benefit statements, including technological access points and the importance of these documents for employee financial planning.
Pension Plan Statements: FedEx Corporation provides annual pension plan statements through their Retirement Service Center, available electronically each fall. Employees can access their statements online or request them if notifications are not received, ensuring transparency and aiding in personal financial planning.
How are contributions to the FedEx Corporation Employees’ Pension Plan determined, and what role do excess contributions play in the plan's overall funding strategy? This question aims to educate employees about how the company balances mandatory contribution levels with potential excess contributions, exploring how these factors interact to influence the plan's solvency and employee benefits.
Contributions to the Pension Plan: Contributions to the FedEx Corporation Employees' Pension Plan are calculated to meet at least the minimum legal requirement and potentially include voluntary excess contributions. These excess contributions can help manage the plan's funding level and ensure its solvency, benefiting overall pension security for employees.
What types of benefits are guaranteed under the Pension Benefit Guaranty Corporation (PBGC) for FedEx Corporation employees, and what limitations exist that employees should be aware of? By focusing on the guaranteed benefits, this question prompts a discussion on the security of specific benefits provided by FedEx Corporation and highlights limitations, allowing employees to understand their rights fully.
PBGC Guarantee: The Pension Benefit Guaranty Corporation guarantees certain types of benefits for FedEx Corporation employees, such as pension benefits at normal retirement age and most early retirement benefits. However, there are limitations, such as exclusions for benefits without vested rights and recently increased benefits, which employees should be aware of to fully understand their pension security.
In what ways does the FedEx Corporation plan to adjust its pension funding strategy in light of changing federal laws that impact pension obligations? Employees are encouraged to consider how legislative changes influence corporate policies surrounding retirement benefits and the proactive strategies FedEx Corporation might take to remain compliant while ensuring the security of employee pensions.
Adjustments to Funding Strategy: FedEx Corporation is likely to adjust its pension funding strategy in response to legislative changes affecting pension obligations, such as those introduced by recent acts adjusting how pension liabilities are calculated. This proactive approach aims to ensure compliance with new laws while continuing to secure the financial health of the pension plan.
What are the steps that FedEx Corporation employees must take if they are considering retirement, particularly in how to navigate the pension plan and gain access to their benefits? This question aims to provide clarity on the retirement process, ensuring that employees are equipped with the necessary information regarding required documentation, timelines, and points of contact within FedEx Corporation.
Steps for Retirement Planning: Employees considering retirement should contact the FedEx Retirement Service Center to navigate their pension plan benefits. This process involves understanding necessary documentation, timelines, and available support, facilitating a smooth transition into retirement.
How does FedEx Corporation plan to manage potential funding shortfalls in the pension plan, and what mechanisms are in place for notifying plan participants should such an event occur? Employees would need to understand the proactive measures put in place by FedEx Corporation to address funding-related challenges while also knowing what this means for their benefits.
Managing Funding Shortfalls: In the event of potential funding shortfalls, FedEx Corporation has policies in place to manage such situations, including strategic contributions to mitigate shortfalls. The company maintains transparency with plan participants about funding levels and any significant changes affecting the pension plan.
For those seeking more information about their pensions and retirement options, how can FedEx Corporation employees contact relevant departments, and what resources are available for assistance? This question provides an opportunity for employees to familiarize themselves with contact points such as the FedEx Retirement Service Center, emphasizing the importance of open communication channels for addressing inquiries related to their pensions. Feel free to consult the provided document for more in-depth exploration of these topics.
Contacting for Pension Information: FedEx Corporation employees seeking more information about their pensions or retirement options can contact the FedEx Retirement Service Center. This center provides essential resources and support, ensuring employees have access to all necessary information regarding their retirement planning.
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