Dear Rusty: Hypothetically, if I plan to sign up for Social Security at age 70 and pass away before that, I will get nothing. My spouse would still get a boost in the amount she receives because I made more, but everything I put into the program vanishes. I haven’t reached my full retirement age yet and I still have income, but if I sign up now at age 63 my benefits will be withheld due to my income. Then at full retirement age (presuming I elected to claim earlier) a re-calculation will take place and my monthly amount would be adjusted. Well, what happens if I decide to wait until age 70 but pass away before I claim? Are my contributions repaid in a lump sum, or will I (or someone else) still lose everything?

Signed: Uncertain About My Future

Dear Uncertain: You are correct that if you pass away before collecting your earned Social Security benefits you won’t personally get anything. Social Security has, since inception, been a “pay as you go” program where those currently working and contributing to Social Security pay benefits for those currently receiving Social Security. That means that if you die before collecting, the monies you contributed will have already been used to pay other recipients, but the contributions you made may still entitle your dependents to benefits on your record. For those who are in their early 60s, average longevity is the mid-80s, meaning your spouse would likely collect benefits on your record for more than two decades, any minor children could collect until they are adults, and any permanently disabled child you may have would get benefits from your record for the rest of their life as well. 

The Social Security payroll taxes you contributed were not put into a private account in your name. And, on average, it is to the beneficiary’s advantage the program doesn’t work that way because that personal account would be depleted fairly quickly after you claim — rather than getting benefits for the rest of your life, you would only get benefits (plus interest) from your personal account, which would run dry pretty fast. FYI, we have researched this carefully and found that, on average, all payroll taxes contributed to Social Security by an individual will be recovered within about five years of starting benefits. The actual length of time to recoup one’s contributions varies somewhat depending on lifetime earnings and contributions made, but lower-earning beneficiaries will recover everything contributed through payroll taxes within about three years, while it could take as much as five years for higher earners to get back everything they have paid into the program. And for clarity, since self-employed individuals pay both the employee and employer portion of the payroll tax, it does take longer for those who own their own business to recoup what they have contributed. Nevertheless, on average, most who claim benefits will get considerably more from the program than they paid in Social Security payroll taxes.

 As to your specific question, if you die before collecting, the contributions you made weren’t deposited in a personal account for you and won’t be paid out in a lump sum. Rather, the payroll taxes you paid while working were used to pay benefits to beneficiaries receiving at the time, and those working and contributing after you die will fund the benefits paid to your spouse or disabled adult child until they die, or to your minor children until they are adults. The Social Security benefits you earned aren’t just for you — your eligible dependents will also benefit from your record.        

Russell Gloor is a national Social Security advisor at the AMAC Foundation, the nonprofit arm of the Association of Mature American Citizens (AMAC). The 2.4-million-member AMAC says it is a senior advocacy organization. Send your questions to: ssadvisor@amacfoundation.org.

Author’s note: This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). The NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity.

In a recent decision, the Second Circuit Court of Appeals overturned a district court’s ruling that an employer was not subject to the Worker Adjustment and Retraining Notification Act and New York Labor Law § 860 (the WARN Acts) when it closed a buffet restaurant and laid off more than 100 employees. 

In Roberts v. Genting New York, LLC, No. 21-833, the Second Circuit held that a reasonable factfinder could conclude that for purposes of the WARN Acts, the buffet was an operating unit and, therefore, defendants were subject to the written notice requirements as prescribed by law.

Background

The defendants in Roberts owned Resorts World Casino located in Queens, New York. The casino was home to more than 30 food and beverage options including the Aqueduct Buffet, an all-you-can-eat restaurant located on the property. On Jan. 6, 2014, the defendants closed the Aqueduct Buffet, and without notice, laid off 177 employees. In certain circumstances, the federal WARN Act requires that employers with 100 or more full-time employees must provide written notice at least 60 calendar days in advance of covered plant closings and mass layoffs. A plant closing for purposes of the law is defined as “the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment.” The New York WARN Act is comparable to the federal WARN Act with a few insignificant differences.

In response to the layoffs, the plaintiffs filed a putative class action alleging that the defendants violated the WARN Acts by failing to provide notice in advance of the layoffs. The parties then filed cross-motions for summary judgment on the issue of notice. In March 2021, the district court granted the defendant’s motion, agreeing that the buffet was not an “operating unit” as defined by the WARN Acts.

On appeal, the plaintiffs maintained that the buffet was both organizationally and operationally distinct to constitute an operating unit such that WARN Act notice was required.

Second Circuit’s decision

In a 2-1 ruling, the Second Circuit agreed in part with the plaintiffs’ appeal, stating that “a reasonable fact-finder could determine that the Buffet was an operating unit” and, therefore, neither party was entitled to summary judgment. Under the WARN Acts, an operating unit is defined as “an organizationally or operationally distinct product, operation, or specific work function within or across facilities at the single site.” Importantly, the Second Circuit cautioned that the term operating unit requires a fact-intensive inquiry which defies a one-size-fits-all, bright line rule.

In holding that the buffet may qualify as an operating unit, the court reasoned that limiting the term to “encompass only entities that could exist independently” severely undermined the statute’s purpose. Furthermore, the buffet’s use of centralized services, which was a focus of the district court’s analysis, was not dispositive on the issue of whether the restaurant was operationally and organizationally distinct. Rather, the Second Circuit considered the totality of the circumstances, including facts such as the buffet’s physical location in the casino, its unique all-you-can-eat model, whether foods were served exclusively at the buffet, where food preparation took place, as well as staffing agreements, management structure, and the hiring process. Interestingly, even the collective-bargaining agreement, which failed to identify the buffet as a separate department, division, or unit, was insufficient evidence in this court’s view to support the defendants’ argument that the buffet was not an operating unit. Thus, the Second Circuit has set a relatively low bar for a party contesting the applicability of the WARN Acts to satisfy the reasonable factfinder standard and defeat a motion for summary judgment.

Circuit Judge Richard Sullivan dissented and agreed with the district court that the Aqueduct Buffet was not an operating unit because the meaning of the word distinct required that the buffet was “discernably separate from the operation of the rest of Resorts World.” Thus, Judge Sullivan opined that the buffet was not discernably separate, nor operationally distinct given its centralized activities, hiring schemes, organizational structure, and collective-bargaining agreement.

While the Second Circuit’s decision may have created more questions than it answered, the key takeaway for employers is to use caution in the setting of plant closings and mass layoffs, especially when the number of employees affected falls within the scope of the law.                

Kali R. Schreiner is an associate attorney in the Syracuse office of Bond, Schoeneck & King PLLC. She assists clients in a wide range of labor and employment matters, including counseling clients on employment related matters, defending employers in various phases of litigation and conducting policy and handbook reviews. Contact Schreiner at kschreiner@bsk.com.