How to make sure you can still be a survivor of the Great Recession
You may have heard about the “deferred compensation” scheme, which allows some workers to receive a lump sum from a government pension scheme to help them through the recession.
The scheme has been criticized for giving workers less than they would get if they had been on a defined-contribution pension scheme, the same one the government plans to abolish.
But there are also many who say the scheme is helping workers who might otherwise not be able to afford to keep their jobs, and that the scheme doesn’t go far enough to protect workers who are forced to take job-related sickness leave.
“There is a very large amount of people who have suffered some sort of illness in their jobs and they have had to take time off to deal with it,” says Stephanie Sargent, an assistant professor at the University of North Carolina at Chapel Hill and an expert on social security.
“They are vulnerable to illness because of a lot of stressors that come along with their job.”
Sargents research has shown that the deferred compensation scheme is “extremely generous” to those workers who have been hit by the Great Depression.
For example, the scheme gives workers up to $2,000 to help with medical expenses if they suffer a “major illness” that has affected them for at least a year, while a person with a “moderate illness” can get up to a $3,000 payout.
But Sargens research found that the vast majority of people with moderate to severe illnesses were still not eligible for the scheme, and were instead receiving a lump-sum payment.
The deferral scheme is currently being used by more than half a million workers who were laid off from their jobs during the Great Crash, but the federal government is still considering ending the scheme.
In a memo last month, President Trump said he wants to “retain” the scheme for future workers.
Sargts research also found that a significant number of workers who receive the deferral payment do not qualify for the maximum $2.5 million that the plan allows them to receive in retirement, even though their income is low.
In fact, Sargs research found nearly 40% of workers in the deferred-compensation scheme were ineligible for that amount.
“A lot of workers that are receiving the deferred payment are people who are already at the bottom of the income distribution,” Sargtens told Business Insider.
“If you’re a single person who’s making $40,000, you’re not eligible.
You’re not in the top 15% of income distribution.”
But even if workers do qualify, the government says it has plans to end the scheme and it is working to do so.
The White House says that while it is “troubling” to hear that the deferment payments may not be enough to meet the needs of those workers, it is continuing to support them through a transition period of up to two years.