Social Security

Caregiver Credits in France, Germany, and Sweden: Lessons for the United States

Analysts have long considered caregiver credits, or pension credits, provided to individuals for time spent out of the workforce caring for dependent children and sick or elderly relatives, as a way to improve the adequacy of retirement benefits for women in the United States. This article examines the experiences of France, Germany, and Sweden with caregiver credits, focusing particularly on the design, administration, and cost of these programs.

Next Generation of Individual Account Pension Reforms in Latin America

This article examines the recent reforms in individual account systems in Latin America, with a focus on the recent overhaul of the Chilean system and major reforms in Mexico, Peru, and Colombia. The authors analyze key elements of pension reform in the region relating to individual accounts: system coverage, fees, competition, investment, the impact of gender on benefits, financial education, voluntary savings, and payouts.

Permanent Disability Social Insurance Programs in Japan

This article examines the experience of Japan's social insurance permanent disability programs and compares its key features with the Social Security Disability Insurance program operating in the United States. It analyzes the determination and appeals processes in Japan for claiming permanent social insurance disability pensions. Trends in the number of Japanese disability program beneficiaries and benefit expenditures are also discussed.

Chile's Next Generation Pension Reform

Since its inception in 1981, Chile's system of mandatory individual retirement accounts has become a model for pension reformers around the world. A March 2008 comprehensive pension reform law made major changes that address some key policy challenges including worker coverage, gender equity, pension adequacy, and administrative fees. The cornerstone of the new law sets up a basic universal pension as a supplement to the individual accounts system.

The Evolution of Japanese Employer-Sponsored Retirement Plans

This article examines the development of Japanese voluntary employer-sponsored retirement plans with an emphasis on recent trends. Before 2001, companies in Japan offered retirement benefits as lump-sum severance payments and/or benefits from one of two types of defined benefit (DB) pension plans. One DB plan type was based on an earlier occupational pension model used in the United States. The other DB plan type allowed companies to opt out of the earnings-related portion of social security. Landmark laws passed in 2001 introduced a new generation of occupational retirement plans to employers and employees, creating three new DB plan designs and two new defined contribution types of plans. Since that time, the mix of employer-sponsored retirement plans offered in Japan has changed significantly, and overall employee coverage has declined. On balance, employer-sponsored retirement plans have remained largely DB in design.

Design and Implementation Issues in Swedish Individual Pension Accounts

Sweden's new multipillar pension system includes a system of mandatory fully funded individual accounts. The Swedish system offers contributors more than 600 fund options from a variety of private-sector fund managers. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds and thus have ended up in a government-sponsored default fund.

The Swedish system offers a number of lessons about implementing a mandatory individual account tier. Centralized administration keeps administrative costs down but requires considerable lead time. A very large number of fund options are likely to be offered unless strong entry barriers are in place. Engaging new labor market entrants in fund choice is likely to be difficult. A significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, special care must be devoted to designing a default fund and continual consumer communication.

Recent Changes to the Chilean System of Individual Accounts

Chile was the first country to replace its public pay-as you-go system with individual accounts. Since its inception in 1981, the new program has undergone a number of changes that offer workers more choices than they had before. This note describes those changes, which include an increase in the type and number of funds from which a worker may choose for an individual account, more incentives for making additional voluntary contributions, and the introduction of a separate mandatory individual account for unemployment benefits.

Social Security Reform in Central and Eastern Europe: Variations on a Latin American Theme

The Latin American model of social security reform with individual accounts has been adopted by a number of Central and Eastern European countries. That alternative to a pay-as-you-go system is sometimes advocated as a desirable model for solving problems in developed systems such as that of the United States. This article describes the Central and Eastern European systems and compares them with the Latin American systems.

The Canada Pension Plan's Experience with Investing Its Portfolio in Equities

This article examines the experience of the Canada Pension Plan (CPP) in investing its surplus funds in equities. The CPP investment policy is viewed by some experts as a possible model for increasing the investment income of Social Security. The article discusses the key features of this policy, its implementation, and results to date.

Public Pension Reform in Japan

The March 2000 pension reform in Japan focused on the long-term financial sustainability of the country's two-tiered public pension system. This article describes the prereform system, the reform process, the key changes stipulated by the reform, and the projected impact of the reform on future pension costs.

Social Security Privatization in Latin America

The new, partially privatized social security system adopted by Chile in 1981 has since been implemented, with some variations, in a number of Latin American and old-world transition economies with either a single- or multi-tier system. That alternative to a pay-as-you-go system is sometimes advocated as a desirable model for solving problems in developed systems, such as that of the United States. This article describes the new programs in Latin America, their background, and similarities and differences among them.

Retirement Income Security in the United Kingdom

This article examines the U.K. retirement income security system from the American perspective. It addresses issues that most concern U.S. analysts: how the United Kingdom has kept its future public pension costs at a manageable level, the extent to which privatization of public pensions has contributed to low pensions costs, the popular appeal of individual pension accounts, and the impact of privatization on retirement income. These issues are best understood in the context of the U.K. pension program's particular institutional structure and policies, two of which—"contracting out" of public pensions, and strong reliance on means-tested benefits—have been largely rejected in the evolution of U.S. policy to date.

Particular use is made of recently available data on coverage rates for public and private pension programs over the total working population and administrative records on inactive personal pension accounts.

Retirement Income Security in the United Kingdom

This study examines the United Kingdom's retirement income security system from the American perspective. It addresses issues that most concern U.S. analysts: how the United Kingdom has kept its future public pension costs at a manageable level, the extent to which privatization of public pensions has contributed to these savings, the popular appeal of individual pension accounts, and the impact of privatization on retirement income. These issues are best understood in the context of the U.K. pension program's particular institutional structure and policies, two of which—"contracting out" of public pensions and strong reliance on means-tested benefits—have been largely rejected in the evolution of U.S. policy to date.

Particular use is made of recently available data on coverage rates for public and private pension programs over the total working population and administrative records on inactive personal pension accounts.

Income Security in Transition for the Aged and Children in the Soviet Union and in the Russian Federation

Social Security Reform Proposals in the United Kingdom: The White Paper

Proposals for Social Security Reform in the United Kingdom

Proposed Pension Reform in United Kingdom, 1972

Recent Changes in Russian Social Security

Outcome Variation in the Social Security Disability Insurance Program: The Role of Primary Diagnoses

This article investigates the role that primary impairments play in explaining heterogeneity in disability decisions. Using claimant-level data within a hierarchical framework, the author explores variation in outcomes along three dimensions: state of origin, adjudicative stage, and primary diagnosis. The findings indicate that the impairments account for a substantial portion of claimant-level variation in initial allowances. Furthermore, the author finds that the predictions of an initial and a final allowance are highly correlated when applicants are grouped by impairment. In other words, diagnoses that are more likely to result in an initial allowance also tend to be more likely to receive a final allowance.

Longitudinal Patterns of Medicaid and Medicare Coverage Among Disability Cash Benefit Awardees

This article analyzes the effect of longitudinal interactions between the Disability Insurance (DI) and Supplemental Security Income (SSI) programs in providing access to Medicare and Medicaid, using a sample of administrative records spanning 84 months. Our study is the first effort to link and analyze record data on participation in all four of these major, and highly interrelated, public benefit programs in the United States. We find that SSI facilitates high levels of Medicaid coverage for SSI awardees overall and provides access to Medicaid for many DI awardees during the 24-month Medicare waiting period. Many people who exit SSI retain their Medicaid coverage, but the gap in coverage between continuing SSI participants and those who leave the program increases over time. After Medicare kicks in, public health insurance coverage is virtually complete among awardees with some DI involvement, including dual Medicaid and Medicare coverage for some.

Managing Independence: The Governance Components of the National Railroad Retirement Investment Trust

This article reviews the management components of the National Railroad Retirement Investment Trust (NRRIT) and their relationship to political independence. Centralized equity investment is sometimes proposed as a method for improving Social Security program financing and, echoing the debate over the NRRIT, politicized investment decisions are seen as one potential obstacle to the policy's success. This article does not advocate for or against investing Social Security's trust fund assets in equities, but examines the NRRIT's structure and experience to provide background information for policymakers.

Permanent Disability Social Insurance Programs in Japan

This article examines the experience of Japan's social insurance permanent disability programs and compares its key features with the Social Security Disability Insurance program operating in the United States. It analyzes the determination and appeals processes in Japan for claiming permanent social insurance disability pensions. Trends in the number of Japanese disability program beneficiaries and benefit expenditures are also discussed.

A Legislative History of the Social Security Protection Act of 2004

The Social Security Protection Act of 2004 (SSPA), with its administrative remedies and program protections, can be seen as another incremental step in the development of a social insurance program that best meets the evolving needs of American society. This article discusses the legislative history of the SSPA in detail. It also includes summaries of the provisions and a chronology of the modification of these proposals as they passed through the House and Senate, and ultimately to the president's desk.

Benefit Adequacy Among Elderly Social Security Retired-Worker Beneficiaries and the SSI Federal Benefit Rate

The federal benefit rate (FBR) of the Supplemental Security Income program provides an inflation-indexed income guarantee for aged and disabled people with low assets. Some consider the FBR as an attractive measure of Social Security benefit adequacy. Others propose the FBR as an administratively simple, well-targeted minimum Social Security benefit. However, these claims have not been empirically tested. Using microdata from the Survey of Income and Program Participation, this article finds that the FBR is an imprecise measure of benefit adequacy; it incorrectly identifies as economically vulnerable many who are not poor, and disregards some who are poor. The reason for this is that the FBR-level benefit threshold of adequacy considers the Social Security benefit in isolation and ignores the family consumption unit. The FBR would provide an administratively simple but poorly targeted foundation for a minimum Social Security benefit. The empirical estimates quantify the substantial tradeoffs between administrative simplicity and target effectiveness.

Design and Implementation Issues in Swedish Individual Pension Accounts

Sweden's new multipillar pension system includes a system of mandatory fully funded individual accounts. The Swedish system offers contributors more than 600 fund options from a variety of private-sector fund managers. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds and thus have ended up in a government-sponsored default fund.

The Swedish system offers a number of lessons about implementing a mandatory individual account tier. Centralized administration keeps administrative costs down but requires considerable lead time. A very large number of fund options are likely to be offered unless strong entry barriers are in place. Engaging new labor market entrants in fund choice is likely to be difficult. A significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, special care must be devoted to designing a default fund and continual consumer communication.

Workers' Compensation: A Background for Social Security Professionals

This article provides a brief history and background of workers' compensation programs for occupationally injured and ill workers in the United States. It presents the basic principle involved in workers' compensation and briefly discusses the disability benefits to which workers are generally entitled. It also discusses why there are settlements in this disability program and the availability of information about the amounts paid in workers' compensation cases for obtaining an offset for Social Security Disability Insurance benefits paid to the worker. Finally, the article explains the rationale behind the public policy on coordination of Disability Insurance and workers' compensation in the new paradigm of disability and return to work.

Does Retirement Education Teach People to Save Pension Distributions?

Education about retirement affects how employees use distributions from their defined contribution pension plans. Retirement education substantially increases the probability that participants age 40 and under will save a distribution but decreases the probability that college graduates and women will save one. These important differentials are concealed by estimates of the effect of retirement education on participants generally.

SSA's Estimates of Administrative Costs Under a Centralized Program of Individual Accounts

Over the past several years, a number of policymakers have proposed creating national individual accounts (IAs) for retirement whose assets would be individually owned and directed among investment options. Some proposals would create an IA program outside Social Security; others would integrate IAs into the Social Security program itself. All IA proposals, however, would entail administrative functions, costs, and considerations. Identifying and recognizing those administrative elements are important steps in assessing the desirability, feasibility, and optimal design of IAs.

This paper summarizes the administrative operation of Social Security today; provides SSA's estimated administrative costs for two hypothetical IA programs (that is, only the costs that SSA could experience, not those that employers, other agencies, and other parties could incur); and highlights major considerations raised by IA administrative costs and choices.

What Stock Market Returns to Expect for the Future?

High stock prices, together with projected slow economic growth, are not consistent with the 7.0 percent return that the Office of the Chief Actuary has generally used when evaluating proposals with stock investments. Routes out of the inconsistency include assuming higher GDP growth, a lower long-run stock return, or a lower short-run stock return with a 7.0 percent return on a lower base thereafter. In short, either the stock market is overvalued and requires a correction to justify a 7.0 percent return thereafter, or it is correctly valued and the long-run return is substantially lower than 7.0 percent (or some combination of the two). This article argues that the former view is more convincing, since accepting the "correctly valued" hypothesis implies an implausibly small equity premium.

State and Local Pension Plans' Equity Holdings and Returns

This article examines the recent trends in the size and performance of the equity investments of state and local pension plans. It also provides a context for the discussion about investing some portion of the Social Security trust fund reserves in private equities.

Participation in Voluntary Individual Savings Accounts: An Analysis of IRAs, 401(k)s, and the TSP

This article compares participation rates in three existing voluntary individual account-type plans—individual retirement accounts (IRAs), 401(k)s, and the federal Thrift Savings Plan (TSP)—in an effort to analyze who might participate in a voluntary individual account system.

Summary of Legislation of Interest to SSA Enacted During the 103rd Congress

During the 103rd Congress, some 400 bills of interest to SSA were introduced. Of these, nine that affect SSA programs were enacted. This note covers these enactments.

Ten Years of Social Security Administration in the Southwest

Modeling Behavioral Responses to Eliminating the Retirement Earnings Test

The retirement earnings test (RET) is an often-misunderstood aspect of the Social Security program. Policymakers have proposed reforming the RET as a way to encourage working at older ages. However, this could also cause earlier benefit claiming. We use Modeling Income in the Near Term data to analyze the complete repeal of the earnings test for beneficiaries aged 60 or older, first assuming no behavioral responses to repeal and secondly assuming changes to benefit claiming and workforce participation behaviors. Our lifetime results show that the assumed behavioral response—particularly the benefit claiming change—has a bigger effect than the RET policy change itself.

Mortality Differentials by Lifetime Earnings Decile: Implications for Evaluations of Proposed Social Security Law Changes

Under current law, the link between earnings and benefit levels and the equal application of age-of-entitlement rules, regardless of earnings levels, means that a worker is never penalized for additional work or thrift. This article finds that the Social Security–insured population does not fall neatly into a low-earnings poor health group and a remaining good health group. Attempts to target a subset of badly disadvantaged workers by altering the benefit rules that apply equally to everyone could both miss the intended target and introduce work disincentives into a program currently designed to reward work.

Mind the Gap: The Distributional Effects of Raising the Early Eligibility Age and Full Retirement Age

Policymakers have proposed increases to the early eligibility age (EEA) and/or full retirement age (FRA) to address increasing life expectancy and Social Security solvency issues. This analysis uses the Social Security Administration's Modeling Income in the Near Term (MINT) model to compare three retirement-age increases suggested by the Social Security Advisory Board: (1) increase the FRA alone, (2) increase both the EEA and FRA to maintain a 4-year gap between them, and (3) increase both the EEA and FRA to maintain a 5-year gap between them. This distributional analysis shows the impact these varying reforms would have on Social Security beneficiaries in the future.

Longitudinal Patterns of Medicaid and Medicare Coverage Among Disability Cash Benefit Awardees

This article analyzes the effect of longitudinal interactions between the Disability Insurance (DI) and Supplemental Security Income (SSI) programs in providing access to Medicare and Medicaid, using a sample of administrative records spanning 84 months. Our study is the first effort to link and analyze record data on participation in all four of these major, and highly interrelated, public benefit programs in the United States. We find that SSI facilitates high levels of Medicaid coverage for SSI awardees overall and provides access to Medicaid for many DI awardees during the 24-month Medicare waiting period. Many people who exit SSI retain their Medicaid coverage, but the gap in coverage between continuing SSI participants and those who leave the program increases over time. After Medicare kicks in, public health insurance coverage is virtually complete among awardees with some DI involvement, including dual Medicaid and Medicare coverage for some.

The Sensitivity of Proposed Social Security Benefit Formula Changes to Lifetime Earnings Definitions

Several Social Security proposals have included benefit formula changes that apply to earners above a specified percentage of the combined male and female (unisex) lifetime earnings distribution. This study finds that if Social Security's median unisex average indexed monthly earnings (AIME) amount is used to define an earnings threshold below which benefits will be held unreduced, the percentage of fully insured men subject to benefit reductions (70 percent) will exceed the unisex estimate of the population subject to benefit reductions (50 percent) by 20 percentage points. If policymakers wish to adjust future benefits and focus benefit reductions on middle or high primary or full-time wage earners in a household, the male, rather than unisex, AIME would come closer to achieving such a goal.

The Growth in Social Security Benefits Among the Retirement-Age Population from Increases in the Cap on Covered Earnings

This article investigates how raising the maximum level of earnings subject to the Social Security payroll tax leads to the "leakage" of portions of the additional revenue into higher benefit payments. Using data from the Health and Retirement Study, the authors simulate the effects of changes in maximum taxable earnings for cohorts approaching retirement age over a 24-year period. They find, roughly, that almost half of the additional tax revenue from having raised the maximum earnings subject to the payroll tax has leaked into higher benefits.

Distributional Effects of Accelerating and Extending the Increase in the Full Retirement Age

This policy brief compares two options set forth by the Social Security Advisory Board to increase the full retirement age (FRA), the age at which claimants may receive unreduced Social Security old-age benefits. One option would raise the FRA from the current target of 67 years to 68 years; the other would raise the FRA to 70 years. The brief examines the effects of both options on the level of benefits of Social Security beneficiaries aged 62 or older in 2070 using Modeling Income in the Near Term (MINT) projections, and on Trust Fund solvency using estimates from the Social Security Administration's Office of the Chief Actuary. The brief finds that both options would reduce benefits, improve solvency, and slightly increase the poverty rate. Within each option, effects on benefits are relatively uniform across beneficiary characteristics, although some surviving spouse and disabled beneficiaries would be shielded from benefit reductions.

Distributional Effects of Price Indexing Social Security Benefits

This policy brief compares five options (four progressive price indexing and one full price indexing option) set forth by the Social Security Advisory Board to index initial benefits to price growth. It examines the distribution of benefits of Social Security beneficiaries aged 62 or older in 2030, 2050, and 2070 using Modeling Income in the Near Term (MINT) model projections. The brief finds that the full price indexing option Shield 0% would more than achieve long-term solvency by reducing benefits by about 35 percent in 2070 and would increase the aged poverty rate compared with scheduled levels. The four progressive price indexing options (Shields 30%, 40%, 50%, 60%) would produce smaller benefit reductions by exempting varying proportions of lower earners from price indexing. Those options would not increase poverty above scheduled levels, but would reduce benefits for some low earners because their auxiliary benefits come from the reduced benefits of a higher-earning spouse. The progressive price indexing options would make Social Security more progressive compared with scheduled and payable benefits, both when looking at household benefit reductions by household income in a given year and when examining the distribution of lifetime taxes and benefits.

Distributional Effects of Reducing the Social Security Benefit Formula

A person's Social Security benefit, or primary insurance amount (PIA), is 90 percent of the lowest portion of lifetime earnings, plus 32 percent of the middle portion of lifetime earnings, plus 15 percent of the highest portion of lifetime earnings. This policy brief analyzes the distributional effects of three options (the three-point, five-point and upper) discussed by the Social Security Advisory Board to reduce the PIA. The first option would reduce the PIA by 3 percentage points; the second would reduce it by 5 percentage points; and the third would reduce the 32 and 15 percentages of the PIA to 21 and 10 percent, respectively. The third option would exempt about one quarter of the lowest earning beneficiaries, while reducing benefits by a median average of 19 percent in 2070. None would eliminate Social Security's long-term fiscal imbalance, although the third option would eliminate more (76 percent) of the deficit than the three-point (18 percent) and five-point (31 percent) options.

Widows and Social Security

This article provides policymakers with context for understanding past and future policy discussions regarding Social Security widow benefits. Using data from household surveys, projections from a microsimulation model, and recent research, it examines three types of benefits—those for aged widows, widows caring for children, and disabled widows.

Distributional Effects of Raising the Social Security Payroll Tax

This policy brief analyzes the lifetime tax effects of two options for addressing the Social Security system's long-range solvency by raising the Social Security payroll tax rate. The first, an immediate increase, would have raised the payroll tax rate from its current 12.4 percent to 14.4 percent in 2006; the second, a phased increase, would raise the payroll tax rate to 14.5 percent in 2020, and then to 16.6 percent in 2050. The brief also analyzes a comparative scenario in which the current tax rate is maintained through 2041 and then raised each year as needed to pay scheduled benefits. The lifetime taxes of people born 1936–2015 are analyzed using Modeling Income in the Near Term (MINT) projections. Results show that the longer a tax rate increase is delayed, the fewer workers are affected, but also the higher the increase in lifetime taxes for later generations. The results also show that both options reduce the cross-cohort variability in the ratio of benefits received to taxes paid.

The Research Contributions of the Center for Retirement Research at Boston College

This article reviews the research contributions of the Center for Retirement Research at Boston College over its 10-year history and their implications for Social Security and retirement income policy in three major areas: (1) Social Security's long-term financing shortfall, (2) the adequacy of retirement incomes, and (3) labor force participation at older ages as a means to improve retirement income security. The center has received substantial funding support from the Social Security Administration (SSA) in each area and has also successfully leveraged SSA's investment by attracting funding from other sources.

Distributional Effects of Raising the Social Security Taxable Maximum

As of 2009, Social Security's Old-Age, Survivors, and Disability Insurance program limits the amount of annual earnings subject to taxation at $106,800, and this value generally increases annually based on changes in the national average wage index. This brief uses Modeling Income in the Near Term (MINT) projections to compare the distributional effects of four options for raising the maximum taxable earnings amount beyond its scheduled levels. Two of the options would raise this value so that it covers 90 percent of all covered earnings and two would remove the maximum completely. Within each set of options, the proposals are differentiated by whether the new taxable amounts are used in computing benefits. Most workers would not be affected by these proposals, but some higher earners would experience a substantial increase in taxes. Correspondingly, benefit increases are largely isolated to higher earners, although the return in benefits for taxes paid would also decline. Because the proposals are targeted toward high earners, Social Security's progressivity would increase.

Earnings Sharing in Social Security: Projected Impacts of Alternative Proposals Using the MINT Model

Earnings sharing is an alternate method of calculating Social Security retirement benefits whereby earnings are assumed to be shared by married couples. This article presents a microsimulation analysis to estimate the impact of three earnings sharing proposals on the aged population of married, divorced, and widowed men and women in 2030. The impact of earnings sharing differs by marital status and sex, as measured by the percentage change in benefits and by the percentage of beneficiaries with increased and reduced benefits.

A Progressivity Index for Social Security

Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper analyzes the progressivity of the Old-Age, Survivors and Disability Insurance (OASDI) program for current and future retirees. It uses a progressivity index that provides a summary measure of the distribution of taxes and benefits on a lifetime basis. Results indicate that OASDI lies roughly halfway between a flat replacement rate and a flat dollar benefit for current retirees. Projections suggest that progressivity will remain relatively similar for future retirees. In addition, the paper estimates the effects of several policy changes on progressivity for future retirees.

The Effects of Wage Indexing on Social Security Disability Benefits

Researchers David Autor and Mark Duggan have hypothesized that the Social Security benefit formula using the average wage index, coupled with a widening distribution of income, has created an implicit rise in replacement rates for low-earner disability beneficiaries. This research attempts to confirm and quantify the replacement rate creep identified by Autor and Duggan using actual earnings histories of disability-insured workers over the period 1979–2004. The research finds that disability replacement rates are rising for many insured workers, although the effect may be somewhat smaller than that suggested by Autor and Duggan.

Alternate Measures of Replacement Rates for Social Security Benefits and Retirement Income

Replacement rates are common and useful tools used by individuals and policy analysts to plan for retirement and assess the sufficiency of Social Security benefits and overall retirement income. Because the calculation and meaning of replacement rates differs depending on the definition of preretirement earnings, this article examines four alternative measures: final preretirement earnings, constant income payable from the present value of lifetime earnings (PV payment), wage-indexed average of lifetime earnings, and inflation-adjusted average of lifetime earnings (CPI average). The article also calculates replacement rates for Social Security beneficiaries aged 64–66 in 2005.

Disabled Workers and the Indexing of Social Security Benefits

This article presents the distributional effects of changing the Social Security indexing scheme, with an emphasis on the effects upon disabled-worker beneficiaries. Although a class of reform proposals that would slow the rate of growth of initial benefit levels over time—including price indexing and longevity indexing—initially appear to affect all beneficiaries proportionally, there can be different impacts on different groups of beneficiaries. The impacts between and within groups are mitigated by (1) the offsetting effect of changes in Supplemental Security Income benefits at the lower tail of the income distribution, and (2) the dampening effect of other family income at the upper tail of the income distribution. The authors present estimates of the size of these effects.

Benefit Adequacy Among Elderly Social Security Retired-Worker Beneficiaries and the SSI Federal Benefit Rate

The federal benefit rate (FBR) of the Supplemental Security Income program provides an inflation-indexed income guarantee for aged and disabled people with low assets. Some consider the FBR as an attractive measure of Social Security benefit adequacy. Others propose the FBR as an administratively simple, well-targeted minimum Social Security benefit. However, these claims have not been empirically tested. Using microdata from the Survey of Income and Program Participation, this article finds that the FBR is an imprecise measure of benefit adequacy; it incorrectly identifies as economically vulnerable many who are not poor, and disregards some who are poor. The reason for this is that the FBR-level benefit threshold of adequacy considers the Social Security benefit in isolation and ignores the family consumption unit. The FBR would provide an administratively simple but poorly targeted foundation for a minimum Social Security benefit. The empirical estimates quantify the substantial tradeoffs between administrative simplicity and target effectiveness.

Trends in Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers, by Socioeconomic Status

This article presents an analysis of trends in mortality differentials and life expectancy by socioeconomic status for male Social Security-covered workers aged 60 or older. Mortality differentials, cohort life expectancies, and period life expectancies by average relative earnings are estimated. Period life expectancy estimates for the United States are also compared with those of other Organisation for Economic Co-operation and Development (OECD) countries.

The Distributional Consequences of a "No-Action" Scenario: Updated Results

Under the Social Security program, benefits are paid to retired workers, survivors, and disabled persons out of two trust funds—the Old-Age and Survivors Insurance and the Disability Insurance (OASDI) Trust Funds. In their 2005 report, the Social Security Trustees projected that the combined OASDI trust funds would be exhausted in 2041. Because the trust funds are used to pay benefits, retirement benefits would have to be reduced somewhat in 2041 and more drastically in 2042.

If no action were taken to strengthen Social Security, the benefit reductions necessitated by the exhaustion of the trust funds would double the poverty rate of Social Security beneficiaries aged 64–78 in 2042, from 1.5 percent to 3.3 percent. However, this increased poverty rate would still be lower than the current poverty rate for beneficiaries aged 62–76, which is 4.6 percent. In addition, the trust funds' exhaustion could lead to lower returns on payroll taxes using traditional "money's-worth" measures.

Poverty-level Annuitization Requirements in Social Security Proposals Incorporating Personal Retirement Accounts

In the current discussions of Social Security reform, voluntary personal retirement accounts have been proposed. Recent research and debate have focused on several aspects of these accounts, including how such accounts would affect aggregate saving, system finances, and benefit levels. Little attention, however, has been paid to policies that would govern the distribution of account balances. This analysis considers such policies with respect to the annuitization of account balances at retirement using the Social Security Administration's Modeling Income in the New Term (MINT) model and a modified version of a recent legislative proposal to evaluate the effects of partial annuitization requirements.

The Distributional Consequences of a "No-Action" Scenario

The 2001 report of the Social Security trustees projected that the combined trust funds for the Old-Age and Survivors Insurance and Disability Insurance programs will be exhausted in 2038. This analysis explains the effects of insolvency on future retirement benefits and poverty rates of beneficiaries if no action is taken to strengthen Social Security.

Social Security's Special Minimum Benefit

Some Social Security reform proposals, such as two of the three offered by the President's Commission to Strengthen Social Security, would modify and strengthen Social Security's special minimum benefit provision, which is intended to enhance benefits for low earners and is phasing out under current law. In order to inform policymakers as they continue to deliberate the provision's future, this article presents the most recent and comprehensive history and analysis available about the special minimum benefit.

The Widow(er)'s Limit Provision of Social Security

The widow(er)'s limit provision of Social Security establishes caps on the benefit amounts of widow(er)s whose deceased spouse filed for early retirement benefits. Currently, 33 percent of Social Security's 8.1 million widow(er) beneficiaries have lower benefits because of that provision. This article describes the widow(er)'s limit provision and evaluates options for changing it.

How Raising the Age of Eligibility for Social Security and Medicare Might Affect the Disability Insurance and Medicare Program

This article considers two hypothetical scenarios—one in which the Medicare eligibility age is raised to 67 along with the scheduled increase in the normal retirement age, and one in which eligibility for both programs is raised to age 70. It then projects the effects that each of those changes would have on Social Security Disability Insurance participation, Medicare participation, and Medicare expenditures.

Lifetime Earnings Patterns, the Distribution of Future Social Security Benefits, and the Impact of Pension Reform

Policymakers have long been interested in understanding the adequacy and distribution of Social Security benefits and in predicting the effects of reform on representative workers. This article describes two new methods for estimating the career profile of earnings for representative workers. It then compares the results of those new methods with earnings profiles assumed in traditional distributional analysis of Social Security and shows the implications of the new results for evaluating Social Security reform.

Reducing Poverty Among Elderly Women

Although the Social Security program has substantially reduced poverty among older Americans, 17.3 percent of nonmarried elderly women (widowed, divorced, or never married) are living in poverty today. This paper explores several policy options designed to reduce poverty by enhancing Social Security widow(er)'s benefits, Supplemental Security Income benefits, and Social Security's special minimum benefit. Depending on the option, 40 percent to 58 percent of the additional federal spending would be directed to the poor or near poor.

Analysis of Social Security Proposals Intended to Help Women: Preliminary Results

One aspect of the current debate about changing the Social Security program concerns how new rules might affect elderly women, many of whom have low income. This paper examines three possible changes: (1) a reduction in spousal benefits combined with a change in the computation of the survivor benefit, (2) a redefined minimum benefit, and (3) a 5 percent increase in benefits for persons aged 80 or older. The paper assesses the cost, distributional consequences, and antipoverty impact of each option.

Earnings of Black and Nonblack Workers Who Died or Became Disabled in 1996 and 1997

Social Security solvency proposals may affect blacks as a group differently than those of other races because of differences in earnings, mortality, and rates of disability. To provide some background for understanding this issue, this note examines the earnings of workers by age and race, comparing those who recently died or became entitled to Social Security disability benefits with those still alive. It does not analyze any specific proposal for changing benefits.

The Distributional Effects of Changing the Averaging Period and Minimum Benefit Provisions

This study evaluates the effects of changing the averaging period used to calculate Social Security benefits from 35 years to 38 or 40 years and the introduction of a minimum benefit provision for future retirees born during the early part of the baby boom generation. Proposals to change the averaging period have been recommended by a majority of the 1994–96 Advisory Council on Social Security. Based on the Survey of Income and Program Participation (SIPP) matched to Social Security Administration earnings records, the study projects retirement benefits for different subgroups of the population under existing and proposed benefit rules. The magnitudes of the retirees' benefit changes vary by demographic group. The minimum benefit provision substantially mitigates the effects of the change to a 40-year averaging period for some groups of women.

The Galveston Plan and Social Security: A Comparative Analysis of Two Systems

This report presents a comparison of benefits under the Galveston Plan versus Social Security, based on different earner and family scenarios. These scenarios include single and married workers at the low, middle, high, and very high earnings levels.

Lifetime Redistribution Under the Social Security Program: A Literature Synopsis

This paper provides a brief overview of the more important studies of lifetime redistribution under the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) programs. Studies are categorized into two types: those that focus on redistribution across successive cohorts of workers or typical members of those cohorts, and those that focus on the distribution of results across characteristics of interest within particular cohorts of workers. A list of related studies is provided at the end for those interested in additional reading.

A Guide to Social Security Money's Worth Issues

This paper discusses some of the major issues associated with the question of whether workers receive their money's worth from the Social Security program. An effort is made to keep the discussion as nontechnical as possible, with explanations provided for many of the technical terms and concepts found in the money's worth literature. Major assumptions, key analytical methods, and money's worth measures used in the literature are also discussed. Finally, the key findings of money's worth studies are summarized, with some cautions concerning the limitations and appropriate usage of money's worth analyses.

Taxation of Social Security Benefits Under the New Income Tax Provisions: Distributional Estimates for 1994

Proposals to Modify the Taxation of Social Security Benefits: Options and Distributional Effects

Wage Averaging Rules and the Distribution of Social Security Benefits

This paper analyzes four aspects of the Social Security benefit computation—the indexing of wage histories prior to computing average indexed monthly earnings, the number of years over which wages are averaged, the particular years of wages that are eligible for inclusion in the average, and the method of adjusting for length of service in the paid labor force. It reports how particular groups of retirees—men and women, blacks and whites, high-wage and low-wage—would fare under alternative benefit computation schemes.

Estimating the First Instance of Substantive-Covered Earnings in the Labor Market

Design and Implementation Issues in Swedish Individual Pension Accounts

Sweden's new multipillar pension system includes a system of mandatory fully funded individual accounts. The Swedish system offers contributors more than 600 fund options from a variety of private-sector fund managers. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds and thus have ended up in a government-sponsored default fund.

The Swedish system offers a number of lessons about implementing a mandatory individual account tier. Centralized administration keeps administrative costs down but requires considerable lead time. A very large number of fund options are likely to be offered unless strong entry barriers are in place. Engaging new labor market entrants in fund choice is likely to be difficult. A significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, special care must be devoted to designing a default fund and continual consumer communication.

Comparing Replacement Rates Under Private and Federal Retirement Systems

This article presents a comparison of replacement rates for employees of medium and large private establishments to replacement rates for federal employees under the Civil Service Retirement System and the Federal Employees Retirement System. This analysis shows the possibility of replacement rates exceeding 100 percent for FERS employees who contribute 6 percent of earnings to the Thrift Savings Plan over a full working career. Private-sector replacement rates were quite similar for workers with both a defined benefit and a defined contribution pension plan.

Characteristics of Individuals with Integrated Pensions

Employer pensions that integrate benefits with Social Security have been the focus of relatively little research. Potentially this is an important omission given the current Social Security reform debate. Since changes in Social Security benefit levels and other program characteristics can affect the benefit levels and other features of integrated pension plans, it is important to know who is covered by these plans. This paper uses data from the Health and Retirement Survey to examine the characteristics of individuals who are covered under integrated pension plans by comparing them with people covered by non-integrated plans and those with no pension plan. The results show that individuals who are female, white, non-unionized, or do not have postgraduate education are significantly more likely to be in an integrated employer pension plan.

Pension Integration and Social Security Reform

Many employer-provided pension plans explicitly account for Social Security in their benefit formulas—a practice known as integration. Because integrated pensions are directly linked to Social Security, both the incidence and design of explicitly integrated plans are likely to be affected by changes in the current Social Security program. While integration has been mentioned as an important issue in discussions of Social Security reform, researchers have largely ignored the concept of pension integration. This paper provides basic information about pension integration and addresses, in general terms, the relationship between Social Security reform and pension integration.

The Future Financial Status of the Social Security Program

This article describes four concepts—solvency, sustainability, shortfalls, and solutions—as they apply to the financial status of the Social Security program as well as how Social Security financing fits in the general federal budget. The little-understood basis for future projected shortfalls is explained and detailed in relation to the possible solutions.

Social Security Research at the Michigan Retirement Research Center

The Office of Retirement and Disability Policy at the Social Security Administration created the Retirement Research Consortium in 1998 to encourage research on topics related to Social Security and the well-being of older Americans, and to foster communication between the academic and policy communities. The Michigan Retirement Research Center (MRRC) has participated in the Consortium since its inception. This article surveys a selection of the MRRC's output over its first 10 years and highlights several themes in the Center's ongoing research.

The Research Contributions of the Center for Retirement Research at Boston College

This article reviews the research contributions of the Center for Retirement Research at Boston College over its 10-year history and their implications for Social Security and retirement income policy in three major areas: (1) Social Security's long-term financing shortfall, (2) the adequacy of retirement incomes, and (3) labor force participation at older ages as a means to improve retirement income security. The center has received substantial funding support from the Social Security Administration (SSA) in each area and has also successfully leveraged SSA's investment by attracting funding from other sources.

An Empirical Study of the Effects of Social Security Reforms on Benefit Claiming Behavior and Receipt Using Public-Use Administrative Microdata

In the past few years, the Social Security Old-Age and Survivors Insurance benefit system in the United States has undergone some of the most significant changes since its inception. Using the public-use microdata extract from the Master Beneficiary Record, we are able to uncover a number of interesting trends in benefit claiming behavior and level of benefit receipt, which can help us understand how the changes in the system are shaping the retirement benefit claiming behavior of older Americans.

The Effects of Wage Indexing on Social Security Disability Benefits

Researchers David Autor and Mark Duggan have hypothesized that the Social Security benefit formula using the average wage index, coupled with a widening distribution of income, has created an implicit rise in replacement rates for low-earner disability beneficiaries. This research attempts to confirm and quantify the replacement rate creep identified by Autor and Duggan using actual earnings histories of disability-insured workers over the period 1979–2004. The research finds that disability replacement rates are rising for many insured workers, although the effect may be somewhat smaller than that suggested by Autor and Duggan.

Estimating the First Instance of Substantive-Covered Earnings in the Labor Market

Design and Implementation Issues in Swedish Individual Pension Accounts

Sweden's new multipillar pension system includes a system of mandatory fully funded individual accounts. The Swedish system offers contributors more than 600 fund options from a variety of private-sector fund managers. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds and thus have ended up in a government-sponsored default fund.

The Swedish system offers a number of lessons about implementing a mandatory individual account tier. Centralized administration keeps administrative costs down but requires considerable lead time. A very large number of fund options are likely to be offered unless strong entry barriers are in place. Engaging new labor market entrants in fund choice is likely to be difficult. A significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, special care must be devoted to designing a default fund and continual consumer communication.

Stochastic Models of the Social Security Trust Funds

The 2003 Trustees Report on the Old-Age and Survivors Insurance and Disability Insurance Trust Funds contains, for the first time, results from a stochastic model of the combined trust funds of the OASDI programs. To help interpret the new stochastic results and place them in context, the Social Security Administration's Office of Policy arranged for three external modeling groups to produce alternative stochastic results. This article demonstrates that the stochastic models deliver broadly consistent results even though they use significantly different approaches and assumptions. However, the results also demonstrate that the variation in trust fund outcomes differs as the approach and assumptions are varied.

Report of the National Commission on Social Security Reform