Now Hear This - June 2011

June 2011 - Navy
By CAPT Tom McAtee

Have you had a name change? IRS and Social Security need to know.

If you changed your name as a result of a recent marriage or divorce, you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration (SSA). A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund. Here are five tips from the IRS for recently married or divorced taxpayers who have had a name change:

• If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.
• If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
• Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
• Form SS-5 is available on the SSA Web site at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
• If you adopted your spouse’s children after getting married, you’ll want to make sure the children have a SSN. Taxpayers must provide a SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number by filing Form W-7A.

Military retirement under review

With a budget problem, DoD is once again considering changes to the long-established 20-year retirement plan. Longer life expectancy has created a $20 billion hole in the Defense Department’s retirement pension fund and is driving officials once again to reexamine the traditional system of a 20-year retirement. The retirement system review, quietly launched in November, aims to provide ideas that can “enable the system to be fiscally sustainable while recruiting and retaining the highest performing personnel,” according to a board memorandum.

One major consideration will be recent studies showing that a decade of generous increases in military pay and non-cash compensation such as housing allowances has put the overall income of troops on par with, or even above, that of civilians with similar education levels. Among the ideas discussed in the 10th Quadrennial Reviews of Military Compensation, released in 2008 are calls for:

• Delay pension checks. Several proposals would not provide any pension checks until veterans reach a set retirement age, such as 57, 60 or 62.
• End the 20-year vesting model. Alternatives would base pension checks on the number of years served, even if less than 20. That would allow troops to leave the service earlier but still qualify for lesser pension benefits.
• Two-tiered annuity option. This would give retiring troops a choice of accepting a pension pay level available immediately after retirement or a larger monthly check if they postpone drawing the pension until age 62.
• Defined contributions. The military could contribute up to 5 percent of annual base pay into a retirement fund for the service member to own and control upon leaving the service.
• Gate pays. The services could offer lump sums payable at specified time-in-service milestones. This would provide personnel planners with an effective retention and force management tool.

House signals a 1.6 percent pay increase for military in FY 2012

A House Armed Services Subcommittee says it will include a 1.6 percent pay raise for military members in its version of the FY 2012 Defense Authorization Bill. This is slightly more than the President’s FY 2011 request of 1.4 percent. The two-year pay freeze for civilian federal workers does not apply to service members. Under a 2004 law, military salaries must be increased annually at a rate equal to the change in the Employment Cost Index for private sector wages. From September 2009 to September 2010, the change in the ECI was 1.6 percent.