President Donald Trump signed an executive order on Saturday to extend several economic relief programs amidst the ongoing coronavirus pandemic. In his order, he called for an extension of unemployment benefits, an eviction moratorium, and a payroll tax deferment. What does that payroll tax deferment mean for Social Security, in particular? According to Market Watch, the president's executive order may not affect Social Security if the plan goes perfectly right.
Under the executive order that the president signed, employers will be able to defer employees' payroll taxes until Dec. 31 if they make $104,000 or less. Trump said that this action would take effect retroactively and would begin on Aug. 1. As a result of this order, employees could potentially see more money going towards their checks, funds that would traditionally go towards Social Security. (Market Watch noted that employers have the option to ignore this order and continue to withhold taxes as they have been doing.) However, since this is a payroll deferral, those taxes will eventually be owed. In other words, since this money will still be paid into these trust funds eventually, there shouldn't be any cause for concern for Social Security.
As of right now, it's unclear when individuals will have to pay back this money. The money could be due at the end of the year, which is when the order expires, or during tax season in 2021. "That means your tax liability accrues this calendar year and you owe all of that in a lump sum," Kathleen Romig, a senior policy analyst at the Center on Budget and Policy Priorities, said. "That is going to be a very unpleasant surprise." Romig went on to note that this executive order should not substantially impact Social Security. Although, it could lose some of the interest that it would have generated over the next few months. Of course, all of this is dependent upon this plan and whether it can be followed through.
While Social Security may not be impacted, that does not mean that Trump's executive order is without its fair share of problems. The president called for an extension to unemployment benefits with a $400 weekly supplement. States have been asked to foot $100 of the total, with the federal government's contribution capped at $300. But, as many experts have pointed out, it could take months for this initiative to even get off of the ground. When and if it does, there's a chance that the program's funding could run out in a span of only four weeks.