"Social Security Facts." By James D. Agresti and Stephen F. Cardone. Just Facts, January 27, 2011. Revised 4/5/13. http://justfacts.com/socialsecurity.asp

 

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» This research contains detailed facts about Social Security. For basic facts, click here.   » Click on the footnote numbers for meticulous documentation of each fact.   » Quick Click to: • Overview • Taxes • Benefits • Financial Status • Accountability • Popular Perceptions • Impact on National Debt • Personal Ownership • Privacy

A major source of information for this research is the 2012 Social Security Trustees Report.[1] This report was published in April 2012 and uses data from 2011 as a baseline. Thus, unless otherwise stated, all future dollar figures are indexed for inflation to produce numbers that are consistent in terms of the years 2011/2012.

Whenever the word "projections" is used, this refers to projections made by the United States Social Security Administration. The process of making projections is not an exact science, and actual outcomes often differ from those predicted (see Accuracy of Projections). The Social Security Trustees Report contains high, low, and intermediate projections. Unless otherwise stated, the intermediate figures are cited because these "reflect the Trustees' best estimates of future experience."[2]

 

Overview

* In 1935, Congress passed and Democratic President Franklin D. Roosevelt signed into law the "Social Security Act." This law created "a system of Federal old-age benefits" for workers and their families. In 1956, the law was amended to also provide disability benefits.[3] [4]

* Social Security is composed of two separate entities: The "Old-Age and Survivors Insurance" program and the "Disability Insurance" program. Each program has separate finances handled through two separate trust funds. For the purpose of simplicity, the figures shown below reflect the combination of both programs unless otherwise stated.[5] [6]

* The Supplemental Security Income (SSI) program provides benefits for aged, blind, and disabled people without regard to prior workforce participation. It is administered by the Social Security Administration, but it is not funded by Social Security taxes. Unless otherwise stated, this program is not covered in this list of facts.[7]

* As of June 30, 2011, 54.8 million people or 17.6% of the U.S. population were receiving monthly Social Security benefits.[8]

* Certain groups of workers were originally exempt from Social Security including government employees, railroad workers, the self-employed, farm workers, domestic help, and employees of nonprofit organizations. In 1950 and 1983, the law was changed to require most of these individuals to participate in the program, although about 25% of state and local government workers are still exempted.[9] [10] Also, under certain conditions, some members of the clergy and religious groups are not required to participate.[11]

 

Taxes

* Payroll taxes are taxes that are levied on the gross wages of workers.[12] From the inception of the Social Security program through 2010, payroll taxes have constituted 98% of all income to the Social Security program (except interest on the Trust Fund).[13]

* Social Security and Medicare payroll taxes are sometimes called FICA taxes or SECA taxes. The acronym FICA stands for the "Federal Insurance Contributions Act," and SECA stands for the "Self-Employment Contributions Act."[14]

* The SECA tax rates for people who are self-employed are as follows:

[15]

* The FICA tax rates for people who are employees are as follows:

[16]

* The FICA tax amounts shown on paychecks generally do not account for the taxes that employers pay.[17] FICA taxes levied on employers are predominately borne by employees in the form of reduced wages (for more detail, see Just Facts' research on tax distribution).[18] [19] [20]

* Social Security FICA/SECA taxes are restricted to a "taxable maximum" or "wage threshold." Earnings above the threshold are not subject to these taxes. For 2013, the threshold is $113,700.[21]

* Previously, Medicare FICA/SECA taxes were restricted to the same wage threshold as Social Security. In 1993, the 103rd Congress and Democratic President Bill Clinton passed a law removing the taxable maximum for Medicare, thus making all earnings subject to these taxes.[22] [23]

* The Social Security Act of 1935 set the taxable maximum at $3,000. Income earned above this amount was not subject to Social Security taxes. This threshold was a fixed amount that was not indexed for inflation or wage levels.[24]

* Between 1950 and 1971, various Congresses and Presidents passed six laws increasing the taxable maximum by a total of 200%.[25]

* In 1972 and 1973, the 92nd and 93rd Congresses and Republican President Richard Nixon passed laws

• increasing the taxable maximum for 1973 and 1974 by a total of 47%.

• indexing the taxable maximum for 1975 and annually thereafter based upon changes in average wage levels.[26]

* In 1977, the 95th Congress and Democratic President Jimmy Carter passed a law increasing the taxable maximum faster than average wage levels in 1979, 1980, and 1981 by a total of 68%.[27] [28]

* Since 1982, the taxable maximum has been annually indexed roughly based upon average worker compensation levels.[29] [30] [31] [32] [33] [34] [35]

* Between 1990 and 2010, the taxable maximum was increased by 108%.[36] During the same period, average worker compensation increased by 98%, and median worker compensation increased by 82%.[37]

* Adjusting for inflation, the taxable maximum has been increased by a factor of 3.8 times between 1950 and 2012.[38]

* The Social Security Act of 1935 set the initial tax rate at 2% (employee and employer combined) and specified increases that would bring this rate to 6% by 1949.[39]

* Various Congresses and Presidents postponed the tax rate increases scheduled in the original Social Security Act so that the 6% rate planned for 1949 did not take effect until 1960.[40] [41]

* Between 1950 and 1977, various Congresses and Presidents passed ten laws increasing the Social Security payroll tax rate above the 6% level specified in the original Social Security Act.[42]

* In 1983, the 98th Congress and Republican President Ronald Reagan accelerated the timeframe for previously enacted payroll tax rate hikes and increased the rate for "the self-employed to equal the combined employee/employer rate but with partially offsetting credits and deductions."[43]

* In 2010 and 2011, the 111th and 112th Congresses and Democratic President Barack Obama passed three laws that temporarily decreased the Social Security payroll tax during 2011 and 2012 by two percentage points (from 12.4% to 10.4%). These laws also required that monies equivalent to the decreased payroll taxes be transferred to the Social Security program from the general fund of the U.S. Treasury, which is funded by individual income taxes, corporate income taxes, some excise taxes, estate taxes, and other miscellaneous receipts.[44] [45] [46]

* Payroll tax rate history:

[47]

* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following about Social Security taxes:

* Accounting for inflation, this promise equates to a maximum tax collection of $1,741 per person.[49]

* For 2013, the maximum payroll tax collection per person is $14,099 or eight times the promised maximum.[50]

* This figure does not include other taxes that are now used to fund Social Security, such as the tax on Social Security benefits (detailed here).

 

Benefits

NOTE: The following projections are based upon what the current law specifies. This does not imply that the Social Security program will have enough money to pay for these benefits. Information concerning the financial stability of the Social Security program is contained in the next section.

* In general, to qualify for old-age benefits, a person must work for ten years while earning at least $4,520 per year.[51]

* Old-age benefit amounts are generally related to the amount of Social Security payroll taxes paid by workers over the course their lifetimes.[52] The Social Security Administration has an Online Calculator that provides an estimate of monthly old-age benefits based upon your earnings, birth date, and expected retirement age. The results can be delivered in either today's dollars or in future (inflated) dollars.[53]

* People with lower incomes receive higher ratios of annual benefits to taxes.[54] The graph below compares annual old-age benefits to lifetime payroll taxes for 23-year-olds who will work until the age of 67 while earning constant incomes:

[55]

* Examples from the graph above:

1) a person who earns $15,000/year will pay $86,000 in payroll taxes (employer and employee combined) over 44 years of work. When he retires, his annual benefit will be $10,128 or 11.8% of his lifetime payroll taxes.

2) a person who earns $50,000/year will pay $285,000 in payroll taxes over 44 years of work. When she retires, her annual benefit will be $21,324 or 7.5% of her lifetime payroll taxes.

3) a person who earns $110,000/year will pay $627,000 in payroll taxes over 44 years of work. When he retires, his annual benefit will be $31,260/year or 5.0% of his lifetime payroll taxes.[56]

* For workers who earned average wages and retired at the age of 65 in 1980, it took 2.8 years of receiving old-age benefits to recover the value of their payroll taxes (including interest). For workers who retired in 2003, it will take 17.4 years. For workers who will retire in 2020, it will take 21.6 years.[57] This assumes Social Security will have enough money to pay scheduled benefits for this entire period, which it is not projected to have.[58]

* Old-age benefits are generally increased each December based upon the rate of inflation in the previous year. The benefit increase for 2007 was 2.3%; for 2008, 5.8%; for 2009, 0.0%; for 2010, 0.0%; and for 2011, 3.6%.[59]

* The age at which a worker receives full Social Security old-age benefits is referred to as the "full retirement age." A person's full retirement age can be between 65 and 67 years old, depending upon his or her year of birth. For those born after 1959, the full retirement age is 67 (more details in footnote).[60]

* Workers have the option to start receiving Social Security benefits at the age of 62, but the benefits are reduced (more details in footnote).[61] Workers also have the option to start receiving benefits later than their full retirement age, and the benefits are increased (more details in footnote).[62]

* Family members of workers who are receiving old-age benefits may also be eligible for benefits, even if they have not worked (more details in footnote).[63]

* When Social Security first began, beneficiaries could take their benefits as a lump sum.[64] The earliest reported applicant for a lump sum Social Security benefit was Ernest Ackerman of Cleveland, OH. Mr. Ackerman retired one day after the program began and paid $0.05 in Social Security taxes. He received a lump sum payment of $0.17 or a 240% return.[65]

* The statement issued by the Social Security Administration to all participants states the following:

* According to the Social Security Administration, "Social Security replaces about 40 percent of an average wage earner's income after retiring…."[67]

* In 2011, 23% of elderly married Social Security beneficiaries received 90% or more of their income from Social Security. Among unmarried beneficiaries, 43% received 90% or more of their income from Social Security.[68]

* As of 2012, Social Security pays an average of $14,748/year to retired individuals.[69] In 2011, the U.S. Census Bureau's poverty threshold for individuals over 65 years of age was $10,788.[70]

* As of 2012, Social Security pays an average of $23,928/year to retired couples.[71] In 2011, the U.S. Census Bureau's poverty threshold for couples over 65 years of age was $13,610.[72]

* Family members of workers who are receiving old-age benefits may also be eligible for benefits, even if they have not worked (more details in footnote).[73]

* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to old-age benefits:

* Recipients of old-age benefits with incomes of more than $25,000/year and couples with incomes of more than $32,000/year must pay income taxes on up to 50% of their old-age benefits. Half of an individual's or couple's old-age benefits are counted as income when determining if they meet these $25,000 and $32,000 thresholds.[75] [76] These income taxes on Social Security benefits are used to fund Social Security.[77]

* Recipients of old-age benefits with incomes of more than $34,000/year and couples with incomes of more than $44,000/year must pay income taxes on up to 85% of their old-age benefits. Half of an individual's or couple's old-age benefits are counted as income when determining if they meet these $34,000 and $44,000 thresholds.[78]

* The thresholds at which people are required to pay income taxes on their old-age benefits are not automatically indexed to account for inflation or wage growth.[79]

* Social Security pays benefits to the families of workers who die and leave behind spouses, children under the age of 20, and sometimes other relations such as parents and ex-spouses (more details in footnote).[80]

* Each dependent receives about 75% to 100% of the deceased worker's basic Social Security benefit. However, as per the Social Security Administration, "there is a limit to the amount of money that can be paid each month to a family. The limit varies, but is generally equal to about 150 to 180 percent of your benefit rate."[81]

* In general, to qualify for disability benefits, there are two criteria that must be satisfied:

1. A "recent work" test based on your age at the time you became disabled; and

2. A "duration of work" test to show that you worked long enough under Social Security (more details in footnote).[82]

* In general, recipients begin to receive disability benefits after they have been disabled for five full months.[83]

* Disability benefits are calculated based upon a formula that takes into account the Social Security payroll taxes paid over the course of workers' lifetimes.[84]

* Disability benefits are generally increased once per year based upon the rate of inflation.[85]

* Family members of workers who are receiving disability benefits may also be eligible for benefits, even if they have not worked (more details in footnote).[86]

* Distribution of benefits in 2011:

[87]

* The Social Security Administration's website enables individuals to receive estimates of their benefits and a list of their lifetime earnings according to Social Security's records. This web-based utility replaces the paper statements that Social Security used to send to individuals each year.

* The Social Security Administration still sends paper statements to workers in the year they reach age 25 and when they are 60 and older (if they are not already receiving Social Security benefits).[88]

 

Financial Status

* The Social Security program has an independent budget that is separate from the rest of the federal government.[89]

* Social Security's sources of income include its dedicated taxes (payroll taxes and taxes on Social Security benefits), interest on the Social Security Trust Fund, and transfers from the general fund of the Treasury (like those required under the 2011 and 2012 payroll tax holidays).[90] [91]

* When Social Security's sources of income exceed its expenses, the resultant surpluses must be loaned to the general fund of the U.S. Treasury. By law, the Treasury must pay this money back to the Social Security program with interest. [92] [93] [94]

* The money owed by the Treasury to the Social Security program is referred to as the "Social Security Trust Fund," and at the close of 2011, it had a balance of $2.7 trillion.[95]

* This $2.7 trillion debt that the Treasury owes to Social Security amounts to $8,734 for every person living in the U.S. or $23,046 for every household in the U.S.[96] (Facts about the ability of the Treasury to service this debt are detailed below in the section entitled Impact on National Debt.)

* From 1985 through 2009, Social Security's dedicated taxes exceeded its expenses. In 2010, this situation reversed, and expenses exceeded dedicated taxes.[97] This state of affairs continued in 2011 and is projected to continue every year into the foreseeable future.[98]

* Despite the interest payments that Social Security receives on the Trust Fund, the Social Security Administration projects that the Trust Fund will start declining in value in 2013, which is six years earlier than what was projected in 2011 and eight years earlier than what was projected in 2010.[99] [100] [101] (As explained in the Introductory Notes, all future dollar figures are indexed for inflation. If inflation is not considered, the Trust Fund is projected to begin declining in 2021.[102])

* After 2013, the Social Security Trust Fund is projected to decline by a greater amount each year until becoming exhausted in 2033.[103])

* After 2033, Social Security is projected to run deficits every year into the foreseeable future.[107] To cover these deficits, it is projected that payroll taxes would need to be increased by 32.8% starting in 2033, rising to a 36.4% increase by 2086.[108] These shortfalls could also be covered by reducing benefits by 23.6% starting in 2033, rising to a 25.3% reduction by 2086.[109]

* There are several other ways to quantify Social Security's projected deficits. The measure commonly cited by the Social Administration[110] and the press[111] involves calculating how much money must be immediately added to the Trust Fund so that the principle and interest would cover projected shortfalls for the next 75 years. This is referred to as the "75-year open group unfunded obligation," and it currently amounts to $8.6 trillion.[112] [113] This is equivalent to 10.7 times the total income for Social Security in 2011 or an additional $54,500 from every person who paid Social Security payroll taxes in 2011.[114] [115]

* According to the U.S. Treasury's "Financial Report of the United States Government," the 75-year open group unfunded obligation "understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them."[116] A measure that accounts for this is called the "closed group unfunded obligation." This involves calculating how much money must be immediately added to the Trust Fund to cover the projected shortfalls for all current taxpayers and beneficiaries in the Social Security program.[117] As of January 1, 2012, this amounts to $21.6 trillion or an additional $136,900 from every person who paid Social Security payroll taxes in 2011.[118] [119] This measure approximates the method by which publicly traded companies are required by law to report the finances of their pension and retirement plans.[120] [121] [122]

* Another way to quantify the projected deficits of Social Security is to calculate the total debt the program will accumulate if corrective action is not taken and money is borrowed to cover the shortfalls of the next 75 years. This debt (including interest) would amount to $65 trillion or an additional $276,000 (in 2012 dollars) for every person expected to be paying Social Security taxes in 2086.[123] [124]

* According to the Social Security Trustees' report, relying too heavily on a 75-year projection "can lead to incorrect perceptions and policies that fail to address financial sustainability for the more distant future." To address this shortcoming, the Trustees Report calculates how much money must be placed in the Social Security Trust Fund right now in order to finance projected deficits for the infinite horizon. This amounts to $20.5 trillion, which is comprised of 8.6 trillion to cover the shortfalls from 2012-2086 (as explained above) and another 11.9 trillion to cover the shortfalls for 2087 and beyond.[125]

* Projected financial status of the Social Security program:

* The Social Security Trustees Report states that the future finances of the program depend upon

* The report also states that "significant uncertainty" surrounds the "best estimates" of future circumstances.[127]

* The graph below compares Social Security's yearly incomes to costs. The starting point of each curve is an actual outcome. The rest of each curve shows projections using data from the 2001, 2008, and 2012 Trustees Reports.

[128]

* Examples from the graph above:

• The 2001 Trustees Report projected that Social Security would have $1.38 in income for every dollar it spent in 2011. The actual figure turned out to be $1.09.

• The 2008 Trustees Report projected that Social Security would have $1.31 in income for every dollar it spent in 2011. The actual figure turned out to be $1.09.

* The graph below shows how much Social Security payroll taxes would need to be decreased or increased to make total taxes plus transfers from the Treasury equal to the costs of the program. Note that the values on the vertical axis are inverted so that upward = "good news" and downward = "bad news."

[129]

* Examples from the graph above:

• The 2001 Trustees Report projected that in 2011, Social Security would collect 9.8% more in payroll taxes than the program needed to keep total taxes plus transfers equal to costs. In actuality, the program collected 8% less in payroll taxes than what was needed to keep total taxes plus transfers equal to costs.

• The 2012 Trustees Report projects that in 2080, payroll taxes will need to be increased by 34.7% to keep total taxes plus transfers equal to costs. The 2001 Trustees Report placed this figure at 51.3%.

* In 1977, after nearly three years of Social Security deficits,[130] the 95th Congress passed and Democratic President Jimmy Carter signed a bill that increased Social Security taxes and changed the formula governing benefit increases.[131] Carter termed it "the most important Social Security legislation since the program was established," and at the signing ceremony, he stated:

* The bill was passed on December 20, 1977, and the Social Security program ran deficits every year for the next four years (not accounting for inflation).[133] Accounting for inflation, the Social Security Trust Fund declined in value every year from 1973 to 1983,[134] at which time, the 98th Congress and Republican President Ronald Reagan increased taxes, raised the retirement age, and made other changes to keep the program solvent.[135]

* Six days after the 2010 Social Security Trustees Report was published, Nobel Prize-winning economist Paul Krugman wrote in his New York Times column that Social Security

* In addition to "intermediate" projections predicting that the Trust Fund will be depleted in 2037, the 2010 Trustees Report included "high-cost" projections predicting that the Trust Fund will be depleted in 2029 and "low-cost" projections predicting that the program will "be able to cover cost for the foreseeable future."[137]

* Regarding these projections, the report states:

* The report also states that

* In an appendix to this report, there is an analysis that "estimates a probability distribution of future outcomes" that "should be interpreted with caution and with an understanding of the inherent limitations." According to this analysis, there is a 97.5% chance that the Trust Fund will be depleted no later than 2055 and the same chance that the Trust Fund won't be depleted any earlier than 2030.[140]

* A primary cause of the projected Social Security deficits is that the number of workers paying taxes compared to the number of people receiving benefits has fallen and is projected to fall further:

[141]

* Factors contributing to the falling ratio of people paying taxes compared to people receiving benefits:

1) Increase in life expectancy without a comparable increase in the retirement age:

• From the inception of the Social Security program through 2002, the full retirement age of 65 was not changed. A law passed in 1983 requires that it be incrementally increased to the age of 67 between the years 2003 and 2027.[142] [143]

• When Social Security began paying benefits in 1940, the average 65-year-old male had a period life expectancy of 11.9 years. By 2011, this figure had increased to 17.7 years, while the retirement age had increased by 1.0 year. This amounts to a 40% increase in the time spent collecting old-age benefits.[144] [145]

• When Social Security began paying benefits in 1940, the average 65-year-old female had a period life expectancy of 13.4 years. By 2011, this figure had increased to 20.0 years, while the retirement age had increased by 1.0 year. This amounts to a 42% increase in the time spent collecting old-age benefits.[146] [147]

• Benefits and taxes are automatically indexed on an annual basis to compensate for inflation and wage growth. The retirement age is not automatically indexed to compensate for increased life expectancy.[148]

2) The higher birth rate of the baby boom generation compared to other generations:

• The baby boom generation was born between 1946 and 1965.[149] In 1957, the average birth rate per woman reached a high of 3.68.[150]

• By 1976, the average birth rate fell to a low of 1.74. In 2006, it was 2.12.[151]

• In 2011, the first wave of baby boomers turned 65 years of age.[152] Between 2011 and 2030, it is projected that the number of people eligible for old-age benefits will increase by 65%, while the number of people paying Social Security taxes will increase by 15%.[153]

3) The increasing number of people receiving disability benefits:

• Between 1965 and 2011, the U.S. population grew by 56%. During the same period, the number of people receiving disability benefits increased by 510%.[154]

[155]

 

Accountability

* In 2011, the administrative costs of the Social Security program were $6,405,000,000. This was equal to 0.87% of all Social Security outlays for the year or enough to pay 434,296 retired workers the average annual old-age benefit of $14,748 for 2012.[156] [157]

* The figures above do not include the administrative costs borne by employers, which, according to Congressional Budget Office, are "probably substantial" but "difficult to assess." The same report states that employers "bear the burden of the collection costs" of Social Security taxes and "are also responsible for transmitting substantial amounts of information to the SSA [Social Security Administration] and the IRS."[158]

* In 2010, Social Security made roughly $2,722,000,000 in improper overpayments. This was equal to 0.39% of all Social Security benefit payments for the year or enough to pay 194,874 retired workers the average annual old-age benefit of $13,968 for 2010.[159] [160]

* Between January 2004 and April 2007, the Social Security Administration made 44,000 corrections for instances in which it had erroneously listed individuals as deceased. This required face-to-face interviews with each person and the subsequent processing of "resurrection transactions" to remove individuals from the "death master file."[161]

* Under the "2009 American Recovery and Reinvestment Act" (a.k.a., "stimulus"), the Social Security Administration was required to administer the payment of $250 checks to Social Security and Supplemental Security Income beneficiaries. The Social Security Administration identified and certified about 52,000,000 people as eligible for the checks, to whom the U.S. Treasury sent a total of $13,000,000,000.[162]

* A 2010 report by the Inspector General of the Social Security Administration found that 71,688 of these checks (totaling $18,000,000) were sent to people who were deceased and thus ineligible to receive the payments. This included:

• 63,481 people whose deaths had been reported to the Social Security Administration.[163]

• roughly 8,000 dead people who were born before the oldest living person in the United States.[164]

• a deceased person who was born in 1873 and was supposedly 136-years-old.[165]

• a man who had been deceased for 34 years, left the United States before the Social Security Act was passed, and had never participated in the program.[166] [167]

* A random audit of 50 such cases found that 26 of the payments had been returned. The stimulus act did not provide authority to reclaim payments issued to the deceased, and thus, the Social Security Administration or Treasury did not pursue collection of unreturned payments.[168]

* In 2010, the Government Accountability Office released the results of an investigation of federal employees and commercial drivers who were receiving disability benefits administered by the Social Security Administration.[169] The investigators reported that:

• the Social Security Administration does not cross-check disability payments with federal payroll data or Department of Transportation records to prevent improper payments. Instead, the Social Security Administration uses IRS data, which is typically 12 to 18 months old, thus making "some overpayments inevitable."[170]

• across the government, "once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar."[171]

• roughly 7,000 federal employees received disability benefits in 2008 while also receiving wages from federal jobs. The Government Accountability Office estimated that roughly 1,500 of these individuals "may have improperly received benefits" based upon their wages exceeding maximum income thresholds.[172]

• in 12 selected states, "62,000 individuals received or renewed commercial driver's licenses after the Social Security Administration had determined that these individuals were eligible for full disability benefits. … [E]ach case would require an investigation to determine whether there were fraudulent payments, improper payments, or both."[173]

* Out of the cases identified above, the Government Accountability Office selected and investigated a nonrandom sample of 20 individuals based upon factors such as "higher overpayment amounts, the types of employment, and the locations of employment."[174] The investigators found that:

• all of the 20 individuals were ineligible for the disability benefits they had received.[175]

• the Social Security Administration stopped making improper payments to 10 of the 20 individuals before the report was released.[176]

• 18 of the 20 received a $250 "stimulus" check.[177]

• because disability payment levels are tied to lifetime earnings, 10 of the 20 received disability benefit increases as a result of receiving raises in the very jobs that made them ineligible for disability benefits. In one case, a U.S. postal worker received three separate benefit increases over four years due to raises he received on his postal service job.[178]

• one of the 20 received improper Social Security disability benefits while simultaneously working for the Social Security Administration as a legal secretary.[179]

• one of the 20 received $108,000 in improper disability benefits while working as a security screener for the Transportation Safety Administration. As of 2010, the person was living in a house listed for sale at $1.8 million.[180]

• the Social Security Administration "has the authority to charge interest and penalties" to people who have improperly taken disability benefits but had not done so in any of these 20 cases. Instead, several of the individuals "were placed in long-term, interest-free repayment plans." For example, a psychology aide who worked for the Department of Veterans Affairs while taking $33,000 in improper benefits was placed on an interest-free repayment plan entailing $20 monthly installments. This will take 130 years to repay, thus exceeding the man's life expectancy.[181]

* Once the Social Security Administration mistakenly overpays a beneficiary for more than four years, it does not correct the error if discovered, except in cases of fraud.[182] This policy is called "administrative finality," and it is governed by regulations issued by the Commissioner of Social Security,[183] who is appointed by the U.S. President once every six years.[184]

* In 2007, the Inspector General of the Social Security Administration released the results of an audit that found 77,969 Social Security beneficiaries "whose benefit records indicated that administrative finality was involved."

* In a random sample of 275 of these beneficiaries,[185] the investigators found that:

• 57% were paid more in Social Security benefits "than they otherwise would have been paid because of administrative finality."

• 36% "may" have been overpaid because of administrative finality, but the investigators "were unable to quantify the amount because there was insufficient information available."

• 7 percent "were unaffected by administrative finality."[186]

* Based on the overpayment amounts of this survey group, the Office of the Inspector General estimated that as of June 2005, 44,230 active beneficiaries had their benefits

* In the "Conclusion and Recommendation" section of the audit report, the Inspector General wrote that Social Security

* The Commissioner of Social Security rejected this suggestion and responded in part:

 

Popular Perceptions

* Perception about Social Security benefits:

* All taxes that have been paid into the Social Security system since its inception have already been (1) spent to pay for benefits, (2) spent to fund the administrative overhead of the program, or (3) loaned to the federal government.[192] [193] [194] [195]

* The website of United States Social Security Administration states:

* In 1960, the Supreme Court ruled that entitlement to Social Security benefits is not a contractual right.[197]

_______

* Perception about Social Security's finances:

* No money has been taken from the Social Security program.[200] [201] By law, Social Security surpluses must be loaned to the federal government,[202] [203] which is a requirement that was established in the original Social Security Act of 1935.[204] [205] [206] [207] The federal government is legally required to pay back this money to the Social Security program with interest,[208] and it has never failed to do so.[209] [210]

* The assets of the Social Security program include all of the money it has loaned to the federal government.[211] [212] Even if this money is repaid with interest, it is projected that the Social Security Trust Fund will become exhausted in 2033,[213] and the program will have deficits every year thereafter into the foreseeable future.[214]

* If extra money had not been added to the Social Security program by increasing tax rates above the levels specified in the original Social Security Act, the program would have been unable to pay full benefits since before 1980.[215]

 

Impact on National Debt

NOTE: For an essay on this topic, visit our article The Impact of Social Security on the National Debt.

* The Social Security program has an independent budget that is separate from the rest of the federal government.[216]

* When the Social Security program collects more in taxes than it spends, it generates surplus money. By law, the only thing that the Social Security program can do with surplus money is loan it to the U.S. government.[217] [218]

* The money that the federal government owes to the Social Security program is held in the form of securities issued by the United States Treasury. These securities are analogous to U.S. savings bonds, except that they can be redeemed before maturity without suffering a loss or enjoying a gain due to market forces. These securities cannot be purchased by the general public.[219]

* Bonds that represent the debt that the U.S. government owes to Social Security are located in a file cabinet at the Bureau of Public Debt in Parkersburg, West Virginia. Below is a photo of President George W. Bush inspecting the documents along with Susan Chapman of the Office of Public Debt Accounting.[220] [221]

* When the Social Security program loans money to the U.S. government, the government is obligated by law to pay this money back to the Social Security program with interest. This money becomes a part of the national debt.[222] [223]

* The U.S. Treasury Department publishes a "Monthly Statement of the Public Debt" that details the components of the national debt, which includes the amounts owed to the Social Security program.[224]

* In 2011, the U.S. government paid an effective annual interest rate of 4.4% on the debt that it owed to the Social Security Trust Fund.[225]

* The U.S. government divides the national debt into two categories:

1) Money that it owes to federal entities such as the Social Security program and federal employee retirement funds.

2) Money that it owes to non-federal entities such as individuals who have purchased U.S. savings bonds.[226] [227]

* The federal law that governs the repayment of the national debt draws no distinction between the debt owed to federal and non-federal entities. Both must be repaid with interest.[228]

* As of December 31, 2011, the national debt consisted of:

[229]

* In February of 2001, while addressing Congress, Republican President George W. Bush stated:

* The debt that President Bush referred to in this statement excludes the debt that is owed to federal entities such as Social Security.[232]

* The following information was not included in Bush's speech to Congress. It was found on page 201 of his budget proposal:

• The reduction in the debt owed to non-federal entities was offset by an increase in debt owed to federal entities such as Social Security.[233]

• Under Bush's budget proposal, the national debt was due to increase by 1.5 trillion dollars over the subsequent ten years.[234]

* When the Social Security program loans money to the U.S. government, the government can use this money to pay down the debt that it owes to other entities. This leaves the national debt unchanged because the government must still pay back this money to the Social Security program. Some politicians have referred to this action as, "Putting Social Security into a lockbox."[235] [236]

* When the Social Security program loans money to the U.S. government, the government can also spend this money on other government programs. This increases the national debt because the government has spent the money it has borrowed from Social Security. Some politicians have referred to this action as, "Raiding the Social Security Trust Fund."[237] [238]

* When the U.S. government takes either of the above actions, the finances of the Social Security program are not affected. In both cases, the law requires the government to pay back the money to the Social Security program with interest.[239] [240]

* The impact of one action as opposed to the other is whether or not the national debt increases.[241] [242] [243] The national debt is not paid for with Social Security taxes but with money from the general fund of the U.S. Treasury,[244] [245] [246] which comes from income taxes (66%), corporate income taxes (23%), excise taxes (5%), and other miscellaneous taxes (6%) [percentages current as of 2006].[247]

* In 1999, Republican Congressman Wally Herger sponsored a "lockbox" bill in the House of Representatives. This law would have restricted Congress from using money borrowed from the Social Security program to spend on other government programs. It passed the House by a vote of 416 to 12.[248]

* Senate rules allow for a "filibuster," in which certain votes can be blocked unless 60 of the Senate's 100 members agree to let it take place.[249] [250] In the Senate, Republicans attempted to bring this bill up for a vote, and it was blocked by a filibuster conducted by Democrats. All 55 Republicans voted to allow the bill to move forward. All but one of 45 Democrats voted to block the bill, and one Democrat did not vote.[251]

* As of December 31, 2011, the U.S. government owes $2,679 billion to the Social Security Trust Fund. This equates to $8,565 for every man, woman, and child living in the United States or $22,572 per household.[252] [253] [254]

* The Social Security program started drawing money from the Trust Fund in 2010 and is projected to keep drawing this money every year until the Trust Fund is exhausted in 2033.[255] [256] [257]

* The Clinton administration's 2000 budget proposal states that the Social Security Trust Fund does

* A 2010 Congressional Budget Office report on "Debt and Interest Costs" states that the monetary resources needed to pay back the Social Security Trust Fund

* At the close of the federal government's 2012 fiscal year, the federal government had $67.7 trillion in debts, liabilities, and unfinanced obligations for current Social Security and Medicare participants. This equates to $215,311 for every person living in the U.S. or $559,331 per household.[260]

 

Personal Ownership

* Social Security Administration publication number 05-10024 states:

* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to Social Security benefits:

* Three years later in 1939, Congress and Democratic President Franklin D. Roosevelt eliminated a lump-sum benefit payment for the survivors of workers who died before the age of 65.[263]

* The original Social Security Act of 1935 states:

* The Social Security Administration's web site states:

* For those planning to collect Social Security after 2033, it is projected that the Trust Fund will be depleted and all benefits will be paid solely by workers who pay Social Security taxes at that time.[266] [267] It is also projected that Social Security taxes will be sufficient to pay 76% of scheduled benefits at that time.[268]

* Proposals have been made to give workers the option to change part of their Social Security involvement from a benefit program to a savings plan. These savings would be the personal property of each person who chose to participate. In turn, their Social Security benefits would be reduced to correspond with the amount of taxes they paid to the program.[269]

* Proposals to give Social Security an element of personal ownership are generally structured to improve the program's finances. Typically, there are transition costs to cover the lowered taxes of those who opt to have personal accounts, but these costs are more than offset by the savings of not paying these individuals full benefits. For example, a proposal made in 2008 would eliminate $4.3 trillion in deficits but add $4.1 trillion in transition costs, thus equating to about $200 billion in savings.[270] [271]

* To restrict speculation, personal ownership plans typically regulate the types of investments that can be made. Examples include restricting investments to broad-based funds or requiring that assets be moved to lower-risk investments as individuals approach retirement age. For instance, a personal ownership bill introduced by Republican Senator Jim DeMint restricts investments to federal bonds and private investment funds similar to those in the federal Thrift Savings Plan (described next).[272] [273] [274]

* Federal employees have access to a program called the Thrift Savings Plan in which the federal government and its employees invest part of their compensation in funds with varying mixes of investments.[275] At the end of 2011, approximately 4.5 million federal employees were enrolled,[276] and the plan had $298 billion in net assets.[277] This program has the following attributes:

• The federal government automatically contributes an additional 1% of each employee's pay into the fund. The federal government also matches employee contributions at a rate of a dollar-for-dollar up to 3% of their pay and then at 50 cents on a dollar for the next 2% of their pay.[278] [279]

• Each participating worker has an individual account into which his or her contributions are deposited.[280] If employees die, their assets are distributed to the people and/or entities they have chosen.[281]

• Workers are given a choice of ten government-approved investment funds managed by the private-sector firms BlackRock (formerly Barclays) and Mercer Investment Consulting.[282] [283] [284]

* From 1926 through 2009, large company stocks (i.e., the S&P 500) appreciated by an average of 6.6% per year above the rate of inflation. This figure is called the total annual real geometric mean return (hereafter referred to as "annual real return").[285] From 1926 through 2009, the lowest annual real return for any 45-year period in the S&P 500 was 4.5%, and the highest was 8.6%.[286]

* For other classes of investments, the annual real returns from 1926 through 2009 were as follows:

[287]

* The administrative costs associated with pension plans include "collecting funds, keeping records, managing assets, calculating and paying benefits, overseeing and enforcing rules, and (in some cases) marketing and selling the plans."[288] [289]

* Factors affecting administrative costs include the number of individual accounts, the variety of services provided, the range of investments from which individuals are able to choose, the degree to which the system is centralized, and the amount of competition involved.[290] [291]

* Administrative overhead in pension systems is often expressed in terms of annual administrative costs divided by total assets.[292] [293] Hence, for a personal ownership system with annual administrative costs of $5 billion and total assets of $1 trillion, the annual administrative overhead would be $5/$1,000 or 0.50%.[294]

* In the context of Social Security personal ownership proposals, total administrative costs are typically unaffected by account balances. This is because the administrative cost per account is about the same, regardless of its value. Thus, proposals that allow individuals to save more of their payroll taxes generally have lower administrative costs as a percentage of assets.[295] [296] [297]

* In 2003, the chief actuary of the Social Security Administration estimated that the annual administrative costs of a personal ownership proposal that would allow individuals to save half of their payroll taxes would be about 0.25% of assets.[298]

* In 2004, Democratic Congressman Charles Stenholm and Republican Congressman Jim Kolbe introduced a personal ownership bill that would require individuals to save 18% of their payroll taxes. This bill duplicates features of the personal accounts in the federal Thrift Savings Plan,[299] [300] which in 2009, had administrative costs of about 0.03% of assets.[301] [302]

* Under the current system, a 22-year-old who works for the next 45 years earning $50,000/year will contribute $279,000 to Social Security.[303] When she turns 67 years-old, it is projected that all of the money she has contributed to the program will be spent. Hence, any old-age benefits she receives will be derived from taxpayers who contribute to Social Security at that time.[304] [305]

* If this same person were allowed to save and invest 25% of her payroll taxes in the S&P 500, and the rates of return and administrative costs varied based upon the facts cited above, she would accumulate the following assets:

[306]

* If this same person were allowed to save and invest 50% of her payroll taxes in the S&P 500, and the rates of return and administrative costs varied based upon the facts cited above, she would accumulate the following assets:

[307]

* If this same person were allowed to save and invest 75% of her payroll taxes in the S&P 500 for the first 30 years and then progressively move all of these assets into intermediate-term government bonds over the last 15 years, and the rates of return and administrative costs varied based upon the facts cited above, she would accumulate the following assets:

[308]

* In general, for Social Security participants who are single and have no children under the age of 20, their benefits (or projected benefits) terminate when they die regardless of how much they have paid in Social Security taxes. There is no heritability in these cases except for a one-time death payment of $255 under certain circumstances.[309] [310]

* For workers who are 40-years-old, their full retirement age is 67.[311] The following table shows their life expectancies beyond this age:

[312]

* Personal ownership allows individuals to pass their Social Security savings to their heirs upon death.[313]

* During the 110th Congress (2007-2008), two bills were introduced that would have given workers the option to save and invest a portion of their Social Security payroll taxes. Another bill was introduced that would have made this mandatory for all workers below 66 years of age, and another bill was introduced that would have made this optional for workers aged 22-54 and mandatory for younger workers. All of these bills were sponsored by Republicans. No Congressional action was taken on any of them.[314] [315]

* The 2008 Republican Party Platform supports giving workers "control over" their Social Security contributions.[316]

* The 2008 Democratic Party Platform and President Barack Obama oppose "privatization" of Social Security.[317] [318] [319]

* Since 1980, at least 28 countries have added an element of personal ownership to their social security systems.[320] The map below is reproduced with permission from Josι Piρera, the architect of the personal ownership system in Chile, which was the first country to introduce such a plan. Clicking on this map will bring you to an interactive map on Dr. Piρera's site that provides an overview (in Spanish) of the system in each of these 28 countries.

* At a Presidential news conference on March 16, 2005, NBC reporter David Gregory said to George W. Bush:

* The day before this news conference, the Washington Post released the results of poll that asked among other questions,

The results were 56% support, 41% oppose, and 3% no opinion.[322] In the previous eight Washington Post polls in which this question was asked, the range of support varied from 52% to 64%.[323]

* In a front page Washington Post article about this poll entitled "Skepticism of Bush's Social Security Plan Is Growing," the author, Jonathan Weisman, did not report the results of the question above.[324]

* In February of 2001, the New York Times published an article written by Robert Pear entitled:

The article stated:

* This study compared the disability benefits produced by several personal ownership proposals to the disability benefits specified by current law. To pay the disability benefits specified by current law, the Social Security tax rate needed to be increased over time by 49%.[326]

* This information appeared on page 44 of the General Accounting Office study and nowhere in the New York Times article.

* When this study compared the personal ownership proposals to the current Social Security system using the same tax rate for both plans, in the majority of cases, the personal ownership systems produced higher disability benefits than the current Social Security system.[327]

* This information appeared on page 36 of the General Accounting Office study and nowhere in the New York Times article.

* The New York Times article also stated that George W. Bush "has championed the rights of people with disabilities," yet he "wants to let workers put some of their Social Security payroll taxes into personal investment accounts," which "would reduce benefits for people with disabilities."[328]

* Bush's then-current plan did not propose any changes to the disability component of Social Security.[329] When Bush's Social Security commission released a formal report later that year, it stated:

 

Privacy

* Starting in 1946, Social Security cards had the following sentence imprinted on them:

* Since 1961, various Congresses and Presidential administrations have enacted more than 40 laws, regulations, and policies requiring the use of Social Security numbers for identity-related functions.[332]

* Starting in 1972, the sentence reading "For Social Security Purposes -- Not For Identification" was removed from all newly issued Social Security cards.[333]

* In 1994, Democratic Congressman Dick Gephardt sponsored a law called the "Uruguay Round Agreements Act" that passed Congress with 67% of Democrats and 70% of Republicans voting for it. Democratic President Bill Clinton signed it into law. This legislation contains a section entitled:

The law requires that parents submit Social Security numbers for their children with their tax return in order to obtain a tax exemption for their children.[335]

* The web site of the U.S. Social Security Administration states:

* It goes on to state that "specific laws require a person to provide his/her number for certain purposes" and provides 15 examples of such including:

• Internal Revenue Service for tax returns

• Employers for wage and tax reporting purposes

• Banks for monetary transactions

• States to administer any tax, general public assistance, motor vehicle or drivers license law within its jurisdiction

• States for Medicaid

• U.S. Treasury for U.S. Savings Bonds

It is also states:

 

Footnotes

[1] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

[2] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 7: "The intermediate demographic and economic assumptions shown in table II.C1 reflect the Trustees' best estimates of future experience, and therefore most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain. For this reason, alternatives I (low-cost) and III (high-cost) are included to provide a range of possible future experience."

Page 15: "Uncertainty of the Projections … Significant uncertainty surrounds the intermediate assumptions."

[3] "The Social Security Act of 1935."  United States Social Security Administration. http://www.ssa.gov/history/35act.html

The Social Security Act (Act of August 14, 1935) [House Resolution 7260]

An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.

[4] Report: "Major Decisions in the House and Senate on Social Security." By Geoffrey Kollmann and Carmen Solomon-Fears. Domestic Social Policy Division, Social Security Administration, March 26, 2001. http://www.ssa.gov/history/reports/crsleghist3.html

[House Resolution] 7225, the Social Security Amendments of 1956, was signed by President Eisenhower on August 1, 1956. The amendments provided benefits, after a 6-month waiting period, for permanently and totally disabled workers aged 50 to 64 who were fully insured and had at least 5 years of coverage in the 10-year period before becoming disabled; to a dependent child 18 and older of a deceased or retired insured worker if the child became disabled before age 18; to women workers and wives at the age of 62, instead of 65, with actuarially reduced benefits; reduced from 65 to 62 the age at which benefits were payable to widows or parents, with no reduction; extended coverage to lawyers, dentists, veterinarians, optometrists, and all other self-employed professionals except doctors increased the tax rate by 0.25% on employer and employee each (0.375% for self-employed people) to finance disability benefits (thereby raising the aggregate tax rate ultimately to 4.25%); and created a separate disability insurance (DI) trust fund. The Social Security program now consisted of old-age, survivors, and disability insurance….

[5] "2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 131: "The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds."

[6] Report: "Social Security Policy Options." Congressional Budget Office, July 2010. http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

"Revenues from payroll taxes and from taxes on benefits, along with intragovernmental interest payments, are credited to the two Social Security trust funds—one for OASI [Old-Age and Survivor's Insurance] and one for DI [Disability Insurance]. The program's benefits and administrative costs are paid from those funds. Legally, the two funds are separate, but they often are described collectively as the OASDI trust funds."

[7] Report: "Charting the Future of Social Security's Disability Programs: The Need for Fundamental Change." Social Security Advisory Board, January 2001. http://www.ssab.gov/Publications/Disability/disabilitywhitepap.pdf

Page 2 (in pdf): "[The] Social Security Advisory Board [is] an independent, bipartisan Board created by the Congress and appointed by the President and the Congress to advise the President, the Congress, and the Commissioner of Social Security on matters related to the Social Security and Supplemental Security Income programs."

Page ii: "SUPPLEMENTAL SECURITY INCOME (SSI) is a means-tested income assistance program for aged, blind, and disabled individuals (regardless of prior workforce participation) and is funded from general revenues of the Treasury."

[8] Calculated with data from:

a) "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Pages 53-54: "Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090 … 2011 beneficiaries^b = 54,816,000 … ^b Beneficiaries with monthly benefits in current-payment status as of June 30."

b) "Monthly Population Estimates for the United States: April 1, 2010 to March 1, 2012." U.S. Census Bureau, Population Division, April 2012. http://www.census.gov/popest/data/national/totals/2011/index.html
"Resident Population … July 1, 2011 [=] 311,591,917"

CALCULATION: 54,816,000 beneficiaries / 311,591,917 people = 17.6%

[9] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 1-2: "THE SOCIAL SECURITY ACT OF 1935 … Nearly all workers in commerce and industry under age 65, or about 60% of the work force, were required to participate in the Old-Age Insurance program. Principal groups excluded from the program were government workers, railroad employees, the self-employed, farm and domestic workers, and employees of nonprofit organizations."

Page 4:

1950 Amendments

The 1950 amendments substantially expanded the scope of the Old-Age and Survivors Insurance (OASI) program by extending coverage to about 10 million additional workers. …

Covered regularly employed farm and domestic workers, self-employed workers (except farmers and professionals), federal civilian employees not under a federal civil service retirement system (e.g., temporary employees), Americans employed outside the United States by American employers, and workers in Puerto Rico and the Virgin Islands. Not-for-profit organizations could elect coverage for their employees (except ministers). State and local governments could elect coverage for their employees not under public employee retirement systems.*

Pages 16-17:

1983 Amendments

• Coverage of federal civilian employees hired after December 31, 1983, and most current executive level political appointees and elected officials (including Members of Congress, the President, and the Vice President) and Federal judges, effective January 1984.

• Compulsory coverage of all employees of nonprofit organizations effective in January 1984 and a ban on the termination of coverage of nonprofit organization and state and local government employment after 1982.

* NOTES:

- "Unlike nearly all private-sector workers and federal employees, some workers employed by state and local governments—about 25 percent—are not covered by Social Security." [Report: "Reducing the Deficit: Spending and Revenue Options." Congressional Budget Office, March 2011. http://cbo.gov/ftpdocs/120xx/doc12085/03-10-ReducingTheDeficit.pdf]

- For example, Illinois's "teachers and certain other workers do not participate in Social Security…." [Article: "The Illusion of Pension Savings." By Mary Williams Walsh. New York Times, September 17, 2010. http://www.nytimes.com/2010/09/18/business/18pension.html?hpw]
 

[10] Report: "Annual Statistical Supplement to the Social Security Bulletin, 2003." Social Security Administration, Office of Research, Evaluation, and Statistics, July 2004. http://www.ssa.gov/policy/docs/statcomps/...

NOTE: Table 2.A1 in this report provides detailed information on "Covered employment and self-employment provisions, by year enacted." This table is available at http://www.ssa.gov/policy/docs/statcomps/...

[11] Web page: "Religious groups exempt from Social Security. " United States Social Security Administration. Updated April 22, 2010. http://ssa-custhelp.ssa.gov/app/answers/detail/...

Members of certain religious groups may qualify for an exemption from the Social Security tax. To do so, they must:

• Waive their rights to all benefits under the Social Security Act, including hospital insurance benefits; and

• Meet the following requirements:

1. Be a member of a recognized religious sect conscientiously opposed to accepting benefits;.

2. Be a member of a religious sect that makes a reasonable provision for its dependent members and has done so continuously since December 31, 1950.

3. Have never received or been entitled to any benefits payable under Social Security programs…

[12] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 216: "Payroll taxes. A tax levied on the gross wages of workers."

[13] Calculated with the dataset: "Old-Age and Survivors Insurance Trust Fund Receipts [In millions]." United States Social Security Administration, Office of the Chief Actuary, July 18, 2011. Accessed 6/13/12 at http://www.socialsecurity.gov/OACT/STATS/table4a3.html#income

NOTE: An Excel file containing the data and calculations is available upon request.

[14] Report: "Overview of the Federal Tax System as in Effect for 2012." U.S. Congress, Joint Committee on Taxation, February 24, 2012. https://www.jct.gov/publications.html?func=startdown&id=4400

Page 14:

Social security benefits and certain Medicare benefits are financed primarily by payroll taxes on covered wages. The Federal Insurance Contributions Act ("FICA") imposes tax on employers based on the amount of wages paid to an employee during the year. The tax imposed is composed of two parts: (1) the old age, survivors, and disability insurance (“OASDI”) tax equal to 6.2 percent of covered wages up to the taxable wage base ($110,100 in 2012); and (2) the Medicare hospital insurance (“HI”) tax amount equal to 1.45 percent of covered wages.²⁰ In addition to the tax on employers, each employee is subject to FICA taxes generally equal to the amount of tax imposed on the employer. The employee level tax generally must be withheld and remitted to the Federal government by the employer. …

As a parallel to FICA taxes, the Self-Employment Contributions Act ("SECA") imposes taxes on the net income from self-employment of self-employed individuals. The rate of the OASDI portion of SECA taxes is equal to the combined employee and employer OASDI FICA tax rates and applies to self-employment income up to the FICA taxable wage base. Similarly, the rate of the HI portion is the same as the combined employer and employee HI rates and there is no cap on the amount of self-employment income to which the rate applies.<sup>21

20</sup> Since 1994, the HI payroll tax has not been subject to a wage cap.

²¹ For purposes of computing net earnings from self-employment, taxpayers are permitted a deduction equal to the product of the taxpayer’s earnings (determined without regard to this deduction) and one-half of the sum of the rates for OASDI (12.4 percent) and HI (2.9 percent), i.e., 7.65 percent of net earnings. This deduction reflects the fact that the FICA rates apply to an employee’s wages, which do not include FICA taxes paid by the employer, whereas a self-employed individual’s net earnings are economically equivalent to an employee’s wages plus the employer share of FICA taxes.

[15] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 180: "Table VI.F1.—Contribution Rates for the OASDI [Social Security] and HI [Medicare Hospital Insurance] Programs"

Page 215: "Medicare consists of two separate but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI)."

NOTE: Hospital Insurance is financed via a payroll (FICA) tax. Supplemental Medical Insurance is not funded via a payroll tax.

Page 172: "Estimates for the Supplementary Medical Insurance (SMI) program are not included in this appendix because adequate financing is guaranteed in the law, and because the SMI program is not financed through a payroll tax."

[16] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 180: "Table VI.F1.—Contribution Rates for the OASDI [Social Security] and HI [Medicare Hospital Insurance] Programs"

Page 215: "Medicare consists of two separate but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI)."

NOTE: Hospital Insurance is financed via a payroll (FICA) tax. Supplemental Medical Insurance is not funded via a payroll tax.

Page 172: "Estimates for the Supplementary Medical Insurance (SMI) program are not included in this appendix because adequate financing is guaranteed in the law, and because the SMI program is not financed through a payroll tax."

[17] Determined by examining varied paychecks.

[18] "Data on the Distribution of Federal Taxes and Household Income." Congressional Budget Office, April 2009. http://www.cbo.gov/publications/collections/taxdistribution.cfm

Methodology (http://www.cbo.gov/publications/collections/tax/2009/methodology.pdf):

Who Pays Taxes?

CBO’s analysis of effective tax rates … assumes—as do most economists—that employers’ share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid. Therefore, the amount of those taxes is included in employees’ income, and the taxes are counted as part of employees’ tax burden.
 

[19] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 33:

[U]nder these new laws, a combination of federal subsidies for individual insurance through the health benefit exchanges, penalties for being uninsured or not offering coverage, an excise tax on employer sponsored group health insurance cost, and anticipated competitive premiums from health benefit exchanges are expected to slow the rate of growth in the total cost of employer-sponsored group health insurance. Most of this cost reduction is assumed to result in an increase in the share of employee compensation that will be provided in wages that will be subject to the Social Security payroll tax.

NOTE: To summarize the above, because the cost of health insurance is part of employers' cost of compensating employees, if the cost of health insurance is decreased, "most" of the cost savings will be redirected to other forms of employee compensation such as salary. This is because employee compensation is generally driven by laws of supply of demand (with the notable exception of minimum wage laws). Likewise, because employer payroll taxes are a direct outcome of employers paying employees, most of this cost is redirected from other forms of employee compensation.

[20] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 11: "The [Social Security] administrative costs discussed above do not include the burden on the private sector. Costs to firms and individuals in the form of time and increased paperwork are probably substantial. … Evidence about the operation of labor markets indicates that workers are likely to bear most of that burden in the long run."

[21] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 16, 2012. http://www.ssa.gov/oact/cola/cbb.html

"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. For earnings in 2013, this base is $113,700."
 

[22] Web page: "History of SSA-related Legislation: 103rd Congress." United States Social Security Administration. Accessed October 31,2008 at http://www.socialsecurity.gov/legislation/history/103.htm

"PL 103-66 The Omnibus Budget Reconciliation Act of 1993 (enacted 8/10/93). Section 13207 repeals the limitation on the amount of earnings subject to the HI [Medicare Hospital Insurance] tax beginning in 1994."

[23] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"For Medicare's Hospital Insurance (HI) program, the taxable maximum was the same as that for the OASDI [Social Security] program for 1966-1990. Separate HI taxable maximums of $125,000, $130,200, and $135,000 were applicable in 1991-93, respectively. After 1993, there has been no limitation on HI-taxable earnings."

[24] "Social Security Act of 1935." United States Social Security Administration. http://www.ssa.gov/history/35act.html

SEC. 811. When used in this title- (a) The term wages means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include that part of the remuneration which, after remuneration equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such individual by such employer with respect to employment during such calendar year.

[25] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 4-5: "1950 Amendments … Set the earnings base (the minimum yearly amount of earnings on which Social Security taxes are paid and which is creditable for benefits) at $3,600 for 1951 and thereafter."

Pages 5-6: "1954 Amendments … Raised the earnings base from $3,600 to $4,200 a year, effective in 1955…."

Page 7: "1958 Amendments … Raised the earnings base from $4,200 to $4,800."

Page 9: "1965 Amendments … Increased the earnings base from $4,800 to $6,600, beginning in 1966."

Pages 10-11: "1967 Amendments … Increased the earnings base from $6,600 to $7,800, beginning in 1968.

Page 11: "The 1971 amendments increased … the earnings base to $9,000, effective January 1972."

CALCULATION: ($9,000 - $3,000) / $3,000 = 2.0

[26] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Page 11: "1972 Amendments … effective in 1975, the earnings base and the exempt amount under the earnings test would be adjusted automatically to keep pace with changes in wage levels. The base was increased in the meantime to $10,800 for 1973 and $12,000 for 1974."

Pages 12-13: "1973 Amendments … [T]he amendments increased the earnings base in 1974 to $13,200…."

CALCULATION: ($13,200 - $9,000) / $9,000 = .47

[27] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 13-14: "1977 Amendments … Increased the earnings base, on an ad hoc basis, to $22,900 in 1979, $25,900 in 1980, and $29,700 in 1981."

[28] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

CALCULATION: ($29,700- $17,700) / $17,700 = .68

[29] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 13-14: "1977 Amendments … After 1981, the base would be adjusted automatically to keep up with average wages as under the prior law."

[30] Actuarial Note: "Average Wages for Indexing Under the Social Security Act and the Automatic Determinations For 1979-81." By Eli N. Donkar. United States Social Security Administration, Office of the Chief Actuary, May 1981. http://www.ssa.gov/OACT/NOTES/note1980s/note103/...

"The amended Act requires the use of an average wage for indexing described in various sections of the law as "the average of the total wages (as defined in regulations of the Secretary. . .)." Such general language leaves a wide range of possibilities for a definition of such a wage series."

[31] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. … This limit generally increases each year with increases in the national average wage index. We call this annual limit the contribution and benefit base."

[32] Web page: "National Average Wage Index." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/AWI.html

We use the average wage indexing series to update several amounts that are important to the operation of Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program.

• OASDI contribution and benefit base (also known as the taxable maximum)…

[33] Web page: "Average Wage Index (AWI)." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/awidevelop.html

"We use the term 'wages' to refer to net compensation."

[34] Web page: "Definition of Net Compensation." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday Oct 29, 2010. http://www.ssa.gov/OACT/cola/netcomp.html

In keeping with the legal term "national average wage index," we often loosely refer to the basis for the index as average wages. To be more precise, however, the index is based on compensation (wages, tips, and the like) subject to Federal income taxes, as reported by employers on Form W-2.

Beginning with the AWI [average wage index] for 1991, compensation includes contributions to deferred compensation plans, but excludes certain distributions from plans where the distributions are included in the reported compensation subject to income taxes. We call the result of including contributions, and excluding certain distributions, net compensation.

[35] NOTE: As shown in the next four footnotes, Just Facts compared the percentage increases in all available years for (1) the taxable maximum (2) average worker compensation and (3) the Social Security Administration's "national average wage index." The latter two of these parameters concurred perfectly, but the tax threshold did not align with the others. Thus, we use the term "roughly." An Excel file containing the data and calculations is available upon request.

[36] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified March 8, 2012. http://www.ssa.gov/oact/cola/cbb.html

CALCULATION: ($106,800- $51,300) / $51,300 = 1.08

[37] Web page: "Measures of Central Tendency for Wage Data." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified November 1, 2010. http://www.ssa.gov/OACT/cola/central.html

NOTE: The cumulative increase in average net compensation between 1990 (the earliest year shown) and 2010 (the latest) is 98.09%. The cumulative increase in median net compensation between 1990 and 2010 is 81.83%.

[38] Calculated with data from:

a) Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified March 8, 2012. http://www.ssa.gov/oact/cola/cbb.html

"1950 [=] $3,000 … 2012 [=] $110,100"

b) Web page: "CPI Inflation Calculator." United States Department of Labor, Bureau of Labor Statistics. Accessed June 2, 2012. http://www.bls.gov/data/inflation_calculator.htm

"The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used."

CALCULATIONS: Using the above-cited inflation calculator, $3,000 in 1950 is equivalent to $28,641.29 in 2012. Hence, $110,100 / $28,641 = 3.84

[39] "Social Security Act of 1935." United States Social Security Administration. http://www.ssa.gov/history/35act.html

SEC. 801. In addition to other taxes, there shall be levied, collected, and paid upon the income of every individual a tax equal to the following percentages of the wages (as defined in section 811) received by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:

(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.

(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1 per centum.

(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.

(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 per centum.

(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

SEC. 804. In addition to other taxes, every employer shall pay an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 811) paid by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:

(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.

(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1 per centum.

(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.

(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 per centum.

(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

[40] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 2-4: "1939 Amendments … Postponed the increase in the tax rate, scheduled for 1940, until 1943. (Subsequent amendments during the 1940s kept postponing the increase so that it did not take effect until 1950.)"

[41] Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Wednesday June 30, 2010. http://www.ssa.gov/oact/ProgData/taxRates.html

[42] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 4-5: "1950 Amendments … Raised payroll taxes, so that the employee/employer share would gradually rise to an ultimate rate of 3.25% in 1970. The tax for the self-employed was set at 1 & 1/2 times the employee rate."

Pages 5-6: "1954 Amendments … Raised … the ultimate tax rate to 4.0% for employers and employees, each, effective in 1975."

Pages 6-7: "1956 Amendments … To finance the new benefits, the legislation established a Disability Insurance (DI) trust fund to which an additional .25% of contributions from employers and employees and .375% from the self-employed were allocated, raising the total employee/employer tax rate to 2.25% in 1957 and ultimately to 4.25% in 1975."

Pages 8-9: "1961 Amendments … Increased the tax on employers and employees by one-eighth of 1% and by three-sixteenths of 1% for the self-employed."

Page 9: "1965 Amendments … In addition, the contribution schedule for OASDI [Social Security] was increased, raising the tax rate on employers and employees from 3.625% to 3.85%, and on self-employed persons from 5.4% to 5.8% beginning in 1966."

Pages 10-11: "1967 Amendments … The tax rates were increased, rising from an ultimate rate of 5.65% in 1987 to 5.9% for employees and employers, each, and from 7.8% to 7.9% for the self-employed."

Page 11: "1971 Amendments … The tax rate was increased, rising from 5.9 to 6.05% in 1987 for employers and employees, each. The self-employed tax rate was not changed."

Pages 11-12: "1972 Amendments … Raised payroll taxes, effective in 1978…."

Pages 12-13: "1973 Amendments … raised payroll taxes, effective in 1981…."

Pages 13-14: "1977 Amendments … Increased tax rates slightly in 1979 and 1980, and more significantly in 1981 and later…."

[43] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 16-17: "1983 Amendments … Acceleration of scheduled tax increases for employees and employers, with an offsetting tax credit for employees for 1984; increase in the rates for the self-employed to equal the combined employee/employer rate but with partially offsetting credits and deductions."

[44] Public Law 111-312: "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010." 111th U.S. Congress. Signed into law by Barack Obama on December 17, 2010. http://thomas.loc.gov/

Title VI, Section 601:

Temporary Employee Payroll Tax Cut.

(a) In General- Notwithstanding any other provision of law--

(1) with respect to any taxable year which begins in the payroll tax holiday period, the rate of tax under section 1401(a) of the Internal Revenue Code of 1986 shall be 10.40 percent, and

(2) with respect to remuneration received during the payroll tax holiday period, the rate of tax under 3101(a) of such Code shall be 4.2 percent (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1) of such Code). …

(c) Payroll Tax Holiday Period- The term 'payroll tax holiday period' means calendar year 2011. …

(e) Transfers of Funds-

(1) TRANSFERS TO FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND- There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted. …

Public Law 112-078: "Temporary Payroll Tax Cut Continuation Act of 2011." 111th U.S. Congress. Signed into law by Barack Obama on December 23, 2011. http://www.gpo.gov/fdsys/pkg/PLAW-112publ78/...
 

SEC. 101. EXTENSION OF PAYROLL TAX HOLIDAY.

(a) IN GENERAL.—Subsection (c) of section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (26 U.S.C. 1401 note) is amended to read as follows: "(c) PAYROLL TAX HOLIDAY PERIOD.—The term 'payroll tax holiday period' means—

"(1) in the case of the tax described in subsection (a)(1), calendar years 2011 and 2012, and
"(2) in the case of the taxes described in subsection (a)(2), the period beginning January 1, 2011, and ending February 29, 2012.".

Public Law 112-96: "Middle Class Tax Relief and Job Creation Act of 2012." 112th U.S. Congress. Signed into law by Barack Obama on February 22, 2012. http://www.gpo.gov/fdsys/pkg/PLAW-112publ96/...
 

SEC. 1001. EXTENSION OF PAYROLL TAX REDUCTION.

(a) IN GENERAL.—Subsection (c) of section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (26 U.S.C. 1401 note) is amended to read as follows:

"(c) PAYROLL TAX HOLIDAY PERIOD.—The term 'payroll tax holiday
period' means calendar years 2011 and 2012.".

[45] "Internal Revenue Manual." Internal Revenue Service. Accessed January 11, 2011 at http://www.irs.gov/irm/index.html

Part 1, Chapter 34, Section 1 (http://www.irs.gov/irm/part1/irm_01-034-001.html): "The main financing component of the Federal funds group is referred to as the General Fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program and consists of all collections not earmarked by law to finance other funds."

[46] The Encyclopedia of Taxation & Tax Policy. Edited by Joseph J. Cordes and others. Urban Institute Press, 2005.

Page 469: "Spending from the general fund is financed by general revenues, which include the individual and corporation income taxes, some excise taxes, estate and gift taxes, tariffs, and miscellaneous receipts."

[47] Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Wednesday June 30, 2010. http://www.ssa.gov/oact/ProgData/taxRates.html

[48] "The 1936 Government Pamphlet on Social Security." United States Social Security Administration. http://www.ssa.gov/history/ssn/ssb36.html

[49] Web page: "CPI Inflation Calculator." United States Department of Labor, Bureau of Labor Statistics. Accessed January 12, 2013 at http://www.bls.gov/data/inflation_calculator.htm

"The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used."

CALCULATIONS:

6% of $3,000 = $180

Using the above-cited inflation calculator, $180 in 1949 is equivalent to $1,741.17 in 2012, which is the latest available year.

[50] Calculated with data from the footnote above and:

a) Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified March 8, 2012. http://www.ssa.gov/oact/ProgData/taxRates.html

"1990 and later … OASDI [Social Security] 12.4[%]"

b) Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 16, 2012. http://www.ssa.gov/oact/cola/cbb.html
"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. For earnings in 2013, this base is $113,700."

CALCULATIONS:

$113,700 Χ 12.4% = $14,099
$14,099 / $1,741 = 8.1

[51] Publication No. 05-10072: "How You Earn Credits." U.S. Social Security Administration, January 2012. http://www.ssa.gov/pubs/10072.pdf

Page 2:

The credits are based on the amount of your earnings. We use your work history to determine your eligibility for retirement or disability benefits or your family’s eligibility for survivors benefits when you die.

In 2012, you receive one credit for each $1,130 of earnings, up to the maximum of four credits per year.

Each year the amount of earnings needed for credits goes up slightly as average earnings levels increase. The credits you earn remain on your Social Security record even if you change jobs or have no earnings for a while.
 

Page 4:

How long you must work to qualify for Social Security
The number of credits you need to be eligible for benefits depends on your age and the type of benefit.

Retirement benefits
Anyone born in 1929 or later needs 10 years of work (40 credits) to be eligible for retirement benefits. People born before 1929 need fewer years of work.
 

[52] Publication number 05-10070: "Your Retirement Benefit: How it is Figured." United States Social Security Administration, January 2010. http://www.socialsecurity.gov/pubs/10070.html

Many people wonder how their benefit is figured. Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or "primary insurance amount" (PIA). This is how much you would receive at your full retirement age—65 or older, depending on your date of birth.

NOTE: The above statement is imprecise because it states that "benefits are based on your lifetime earnings," when in fact, benefits are based on lifetime taxable earnings, which may be lower than lifetime earnings due to the wage threshold.* Since lifetime taxable earnings are taxed at a flat rate,† lifetime taxable earnings are directly proportional to Social Security taxes paid.

* Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation."

† Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Wednesday June 30, 2010. http://www.ssa.gov/oact/ProgData/taxRates.html

[53] Web page: "Online Calculator." United States Social Security Administration, December, 2011. http://www.socialsecurity.gov/retire2/AnypiaApplet.html

[54] Web page: "Automatic Increases: Primary Insurance Amount." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/OACT/COLA/piaformula.html

PIA definition

The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

PIA formula bend points

The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.

For 2011 these portions are the first $749, the amount between $749 and $4,517, and the amount over $4,517. These dollar amounts are the "bend points" of the 2011 PIA formula. A table shows bend points, for years beginning with 1979, for both the PIA and maximum family benefit formulas.

PIA formula

For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2011, or who dies in 2011 before becoming eligible for benefits, his/her PIA will be the sum of:

(a) 90 percent of the first $749 of his/her average indexed monthly earnings, plus

(b) 32 percent of his/her average indexed monthly earnings over $749 and through $4,517, plus

(c) 15 percent of his/her average indexed monthly earnings over $4,517.

NOTE: The above PIA formula weights lower earnings (and thus lower taxes paid) more than greater earnings (and thus higher taxes paid).

[55] Constructed with data from:

a) Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Wednesday March 8, 2012. http://www.ssa.gov/oact/ProgData/taxRates.html

NOTE: For 1990 and later, the payroll tax rate for employees/employers combined or for self-employed persons is 12.4%. This does not account for the payroll tax holidays in 2011 and 2012, which are financed by general revenues. General revenue taxes are progressive so that higher-income households pay higher tax rates: http://www.justfacts.com/healthcare.asp#general_revenues.

b) Web page: "Online Calculator." United States Social Security Administration, December 2011. http://www.socialsecurity.gov/retire2/AnypiaApplet.html

NOTES:

- On June 12, 2012, the following data was entered into the Online Calculator:

• An individual born December 29, 1989.

• First year of work is 2012 (works the full year).

• Retirement date of December 29, 2056 (67 years old).

• Projected benefits to be quoted in today's (2012) dollars.

 - An Excel file containing the data and calculations is available upon request.

[56] See previous footnote.

[57] Report: "Social Security Reform: Current Issues and Legislation." By Dawn Nuschler. Congressional Research Service, September 14, 2010. http://aging.senate.gov/crs/ss6.pdf

Pages 13-14:

Until recent years, Social Security recipients received more, often far more, than the value of the Social Security taxes they paid. However, because Social Security payroll tax rates have increased over the years and the full retirement age (the age at which unreduced benefits are first payable) is being increased gradually, it is becoming more apparent that Social Security will be less of a good deal for many future retirees. For example, for workers who earned average wages and retired in 1980 at the age of 65, it took 2.8 years to recover the value of the retirement portion of the combined employee and employer shares of their Social Security taxes plus interest. For their counterparts who retired at the age of 65 in 2003, it will take 17.4 years. For those retiring in 2020, it will take 21.6 years.

[58] The Social Security Trust Fund is projected to be depleted in 2033,* after which, the program will be unable to pay full benefits. For more information, see the section on Financial Status.

[59] Web page: "Cost of Living Adjustments." United States Social Security Administration. Last reviewed or modified October 19, 2011. http://www.socialsecurity.gov/OACT/COLA/colaseries.html

Since 1975, Social Security general benefit increases have been cost-of-living adjustments or COLAs. The 1975-82 COLAs were effective with Social Security benefits payable for June in each of those years; thereafter COLAs have been effective with benefits payable for December. …

The first COLA, for June 1975, was based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the second quarter of 1974 to the first quarter of 1975. The 1976-83 COLAs were based on increases in the CPI-W from the first quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective. After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective.

[60] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

For those born before 1938, the full retirement age to qualify for Social Security benefits is 65 years old.

For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart:

For those born after 1959, the full retirement age to qualify for Social Security benefits is 67 years old.

[61] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

You may start receiving benefits as early as age 62. However, if you start your benefits early, your benefits are reduced permanently. Your benefit is reduced about one-half of one percent for each month you start your Social Security before your full retirement age. For example, if your full retirement age is 66 and you sign up for Social Security when you are 62, you would only get 75 percent of your full benefit.

NOTE: The reduction will be greater in future years as the full retirement age increases.

[62] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

If you choose to delay receiving benefits beyond your full retirement age, your benefit will be increased by a certain percentage, depending on the year you were born. The increase will be added in automatically from the time you reach full retirement age until you start taking benefits or reach age 70, whichever comes first. If, for example, you were born in 1940, your benefit would increase 7 percent for each year, between your full retirement age and age 70, that you do not get retirement benefits.

[63] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

NOTE: Family members include a spouse, children under the age of 19, and adult children who are disabled. Each family member may be eligible for benefits equal to 50% of the worker's benefit, but there is a limit on the amount of benefits that a single family can receive.

[64] Publication No. 21-059: "Social Security: A Brief History." United States Social Security Administration, October 2007.

http://www.socialsecurity.gov/history/pdf/2007historybooklet.pdf

Page 5: "Under the 1935 law, monthly benefits were to start in 1942. From 1937 until 1942, Social Security was to pay benefits to retirees in the form of a single, lump-sum refund payment."

[65] Publication No. 21-059: "Social Security: A Brief History." United States Social Security Administration, October 2007.

http://www.socialsecurity.gov/history/pdf/2007historybooklet.pdf

Page 5:

Under the 1935 law, monthly benefits were to start in 1942. From 1937 until 1942, Social Security was to pay benefits to retirees in the form of a single, lump-sum refund payment. The earliest reported applicant for a lump-sum refund was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman's pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents.

[66] Web page: "Your Social Security Statement." United States Social Security Administration, August 16, 2010. http://www.socialsecurity.gov/mystatement/currentstatement.pdf

[67] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, March 2012. http://www.ssa.gov/pubs/10024.html

Page 4: "Social Security replaces about 40 percent of an average wage earner's income after retiring, and most financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably."

[68] "Fiscal Year 2011 Performance and Accountability Report." United States Social Security Administration, November 7, 2011. http://www.ssa.gov/finance/2011/Full FY 2011 PAR.pdf

Page 7: "Among elderly Social Security beneficiaries, 23 percent of married couples and 43 percent of unmarried individuals rely on Social Security for 90 percent or more of their income."

[69] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, March 2012. http://www.ssa.gov/pubs/10024.pdf

Page 21: "Average 2012 monthly Social Security benefits … Retired worker: $1,229"

CALCULATION: $1,229/month Χ 12 months/year = $14,748/year
 

[70] Dataset: "Preliminary Estimates of Weighted Average Poverty Thresholds for 2011." United States Census Bureau. January 30, 2012. http://www.census.gov/hhes/www/poverty/data/threshld/index.html

[71] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, March 2012. http://www.ssa.gov/pubs/10024.pdf

Page 21: "Average 2012 monthly Social Security benefits … Retired couple: $1,994"

CALCULATION: $1,994/month Χ 12 months/year = $23,928/year
 

[72] Dataset: "Preliminary Estimates of Weighted Average Poverty Thresholds for 2011." United States Census Bureau. January 30, 2012. http://www.census.gov/hhes/www/poverty/data/threshld/index.html

[73] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

When you start receiving Social Security retirement or disability benefits, other family members also may be eligible for payments. For example, benefits can be paid to your husband or wife:

• If he or she is age 62 or older; or

• At any age if he or she is caring for your child (the child must be younger than 16 or disabled and entitled to Social Security benefits on your record).

Benefits also can be paid to your unmarried children if they are:

• Younger than 18;

• Between 18 and 19 years old, but in elementary or secondary school as full-time students; or

• Age 18 or older and severely disabled (the disability must have started before age 22).

If you become the parent of a child (including an adopted child) after you begin receiving benefits, let us know about the child, so we can decide if the child is eligible for benefits.

How much can family members get?

Each family member may be eligible for a monthly benefit that is up to half of your retirement or disability benefit amount. However, there is a limit to the total amount of money that can be paid to you and your family. The limit varies, but is generally equal to about 150 to 180 percent of your retirement or disability benefit.

[74] "The 1936 Government Pamphlet on Social Security." United States Social Security Administration. http://www.ssa.gov/history/ssn/ssb36.html

"The checks will come to you as a right. You will get them regardless of the amount of property or income you may have. They are what the law calls "Old-Age Benefits" under the Social Security Act."

[75] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

"You will have to pay taxes on your benefits if you file a federal tax return as an 'individual' and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000."

[76] Publication No. 915: "Social Security and Equivalent Railroad Retirement Benefits for Use in Preparing 2010 Returns." United States Department of the Treasury, Internal Revenue Service, Nov 16, 2010. http://www.irs.gov/pub/irs-pdf/p915.pdf

Page 2:

Are Any of Your Benefits Taxable?

To find out whether any of your benefits may be taxable, compare the base amount (explained later) for your filing status with the total of:

1. One-half of your benefits, plus

2. All your other income, including tax-exempt interest.

When making this comparison, do not reduce your other income by any exclusions for:

• Interest from qualified U.S. savings bonds,

• Employer-provided adoption benefits,

• Foreign earned income or foreign housing, or

• Income earned by bona fide residents of American Samoa or Puerto Rico.

Page 6:

How Much Is Taxable?

If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.

Maximum taxable part. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.

• The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).

• You are married filing separately and lived with your spouse at any time during 2007.

[77] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 136: "Under present law, the OASI [Old-Age and Survivors Insurance] and DI [Disability Insurance] Trust Funds are credited with the additional income taxes attributable to the taxation of up to the first 50 percent of OASI and DI benefit payments. (The remainder of the income taxes attributable to the taxation of up to 85 percent of OASI and DI benefit payments is credited to the HI [Hospital Insurance, which is part of Medicare] Trust Fund.)"

[78] See three footnotes above.

[79] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 47: "The projected income from the taxation of benefits, expressed as a percentage of taxable payroll, is expected to increase for two reasons. First, benefits are rising faster than payroll. Second, the benefit taxation threshold amounts are not indexed, so that an increasing share of benefits will be subject to tax."

[80] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

Survivors benefits

When you die, your family may be eligible for benefits based on your work.

Family members who can collect benefits include a widow or widower who is:

• 60 or older; or

• 50 or older and disabled; or

• Any age if he or she is caring for your child who is younger than 16 or disabled and entitled to Social Security benefits on your record.

Your children can receive benefits, too, if they are unmarried and:

• Younger than 18 years old; or

• Between 18 and 19 years old, but in an elementary or secondary school as full-time students; or

• Age 18 or older and severely disabled (the disability must have started before age 22).

Additionally, your parents can receive benefits on your earnings if they were dependent on you for at least half of their support.

Payment after death

If you have enough credits, a one-time payment of $255 also will be made after your death. This benefit may be paid to your spouse or minor children if they meet certain requirements.

If you are divorced

If you are divorced, your ex-spouse may be eligible for survivors benefits based on your earnings when you die. He or she must:

• Be at least age 60 years old (or 50 if disabled) and have been married to you for at least 10 years; or

• Be any age if he or she is caring for a child who is eligible for benefits based on your earnings; and

• Not be eligible for an equal or higher benefit based on his or her own work; and

• Not be currently married, unless the remarriage occurred after age 60 or after age 50 if disabled.

Benefits paid to an ex-spouse will not affect the benefit rates for other survivors receiving benefits on your earnings record.

NOTE: If you are deceased and your ex-spouse remarries after age 60, he or she may be eligible for Social Security benefits based both on your work and the new spouse's work, whichever is higher.

[81] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

How much will your survivors get?

Your survivors receive a percentage of your basic Social Security benefit—usually in a range from 75 to 100 percent each. However, there is a limit to the amount of money that can be paid each month to a family. The limit varies, but is generally equal to about 150 to 180 percent of your benefit rate.

[82] Publication No. 05-10029: "Disability Benefits." United States Social Security Administration, August 2010. http://www.ssa.gov/pubs/10029.pdf

Page 5:

 

Rules for work needed for the "recent work" test
In or before the quarter you turn 24.	1.5 years of work during the three-year period ending with the quarter your disability began.
In the quarter after you turn age 24 but before the quarter you turn 31.	Work during half the time for the period beginning with the quarter after you turned 21 and ending with the quarter you became disabled. Example: If you become disabled in the quarter you turned age 27, then you would need 3 years of work out of the six-year period ending with the quarter you became disabled.
In the quarter you turn age 31 or later.	Work during five years out of the ten-year period ending with the quarter your disability began.

Page 6:

 

Examples of work needed for the "duration of work" test
If you become disabled	Then you generally need:
Before age 28	1.5 years of work
Age 30	2 years
Age 34	3 years
Age 38	4 years
Age 42	5 years
Age 44	5.5 years
Age 46	6 years
Age 48	6.5 years
Age 50	7 years
Age 52	7.5 years
Age 54	8 years
Age 56	8.5 years
Age 58	9 years
Age 60	9.5 years

[83] Publication No. 05-10029: "Disability Benefits." United States Social Security Administration, August 2010. http://www.ssa.gov/pubs/10029.pdf

Page 12: "When do my benefits start? If your application is approved, your first Social Security disability benefits will be paid for the sixth full month after the date your disability began."

[84] Publication No. 05-10029: "Disability Benefits." United States Social Security Administration, August 2010. http://www.ssa.gov/pubs/10029.pdf

Page 12: "How much will my benefits be? The amount of your monthly disability benefit is based on your average lifetime earnings. The Social Security Statement that you receive each year displays your lifetime earnings and provides an estimate of your disability benefit."

NOTE: The above statement is imprecise because it states that benefits are based on "average lifetime earnings" when in fact benefits are based on lifetime taxable earnings, which may be lower than lifetime earnings due to the wage threshold.* Since lifetime taxable earnings are taxed at a flat rate,† lifetime taxable earnings are directly proportional to Social Security taxes paid.

* Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation."

† Web page: "Social Security & Medicare Tax Rates." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Wednesday June 30, 2010. http://www.ssa.gov/oact/ProgData/taxRates.html

[85] Web page: "Cost of Living Adjustments." United States Social Security Administration. Last reviewed or modified October 29, 2010. http://www.socialsecurity.gov/OACT/COLA/colaseries.html

Since 1975, Social Security general benefit increases have been cost-of-living adjustments or COLAs. The 1975-82 COLAs were effective with Social Security benefits payable for June in each of those years; thereafter COLAs have been effective with benefits payable for December. …

The first COLA, for June 1975, was based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the second quarter of 1974 to the first quarter of 1975. The 1976-83 COLAs were based on increases in the CPI-W from the first quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective. After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective.

[86] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

When you start receiving Social Security retirement or disability benefits, other family members also may be eligible for payments. For example, benefits can be paid to your husband or wife:

• If he or she is age 62 or older; or

• At any age if he or she is caring for your child (the child must be younger than 16 or disabled and entitled to Social Security benefits on your record).

Benefits also can be paid to your unmarried children if they are:

• Younger than 18;

• Between 18 and 19 years old, but in elementary or secondary school as full-time students; or

• Age 18 or older and severely disabled (the disability must have started before age 22).

If you become the parent of a child (including an adopted child) after you begin receiving benefits, let us know about the child, so we can decide if the child is eligible for benefits.

How much can family members get?

Each family member may be eligible for a monthly benefit that is up to half of your retirement or disability benefit amount. However, there is a limit to the total amount of money that can be paid to you and your family. The limit varies, but is generally equal to about 150 to 180 percent of your retirement or disability benefit.

[87] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 32: "Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2010 and 2011 (Amounts in millions) … 2011 … Total OASDI benefit payments [=] 725,148 … Retired workers and auxiliaries [=] 489,699 … Survivors of deceased workers [=] 106,310 … Lump-sum death payments [=] 204 … DI benefit payments, total [=] 128,935"

NOTE: Total may not add to 100% due to rounding.

CALCULATIONS:
489,699 Retired workers and auxiliaries / 725,148 = 0.6753
(106,310 Survivors of deceased workers + 204 Lump-sum death payments) / 725,148 = 0.1468
128,935 DI benefit payments / 725,148 = 0.1778
 

[88] News release: "Social Security Statement Now Available Online at www.socialsecurity.gov." Social Security Administration, May 1, 2012. http://www.ssa.gov/pressoffice/pr/ss-online-statement-pr-alt.pdf

Michael J. Astrue, Commissioner of Social Security, today announced an online version of the Social Security Statement is now available at www.socialsecurity.gov. The new online Statement provides eligible workers with secure and convenient access to their Social Security earnings and benefit information. …

In February 2012, Social Security resumed mailing paper Statements to workers age 60 and older if they are not already receiving Social Security benefits. Later this year, the agency plans to mail paper Statements to workers in the year they reach age 25.
 

[89] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 138: "The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds."

[90] Dataset: "Old-Age and Survivors Insurance Trust Fund Receipts [In millions]." United States Social Security Administration, Office of the Chief Actuary, July 18, 2011. Accessed 6/13/12 at http://www.socialsecurity.gov/OACT/STATS/...

" Total receipts … Net payroll tax contributions … Income from taxation of benefits … General fund reimbursements … Net interest"

[91] Public Law 111-312: "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010." 111th U.S. Congress. Signed into law by Barack Obama on December 17, 2010. http://thomas.loc.gov/

Title VI, Section 601:

Temporary Employee Payroll Tax Cut.

(a) In General- Notwithstanding any other provision of law--

(1) with respect to any taxable year which begins in the payroll tax holiday period, the rate of tax under section 1401(a) of the Internal Revenue Code of 1986 shall be 10.40 percent, and

(2) with respect to remuneration received during the payroll tax holiday period, the rate of tax under 3101(a) of such Code shall be 4.2 percent (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1) of such Code). …

(c) Payroll Tax Holiday Period- The term 'payroll tax holiday period' means calendar year 2011. …

(e) Transfers of Funds-

(1) TRANSFERS TO FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND- There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted. …

Public Law 112-078: "Temporary Payroll Tax Cut Continuation Act of 2011." 111th U.S. Congress. Signed into law by Barack Obama on December 23, 2011. http://www.gpo.gov/fdsys/pkg/PLAW-112publ78/...
 

SEC. 101. EXTENSION OF PAYROLL TAX HOLIDAY.

(a) IN GENERAL.—Subsection (c) of section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (26 U.S.C. 1401 note) is amended to read as follows: "(c) PAYROLL TAX HOLIDAY PERIOD.—The term 'payroll tax holiday period' means—

"(1) in the case of the tax described in subsection (a)(1), calendar years 2011 and 2012, and
"(2) in the case of the taxes described in subsection (a)(2), the period beginning January 1, 2011, and ending February 29, 2012.".

Public Law 112-96: "Middle Class Tax Relief and Job Creation Act of 2012." 112th U.S. Congress. Signed into law by Barack Obama on February 22, 2012. http://www.gpo.gov/fdsys/pkg/PLAW-112publ96/...
 

SEC. 1001. EXTENSION OF PAYROLL TAX REDUCTION.

(a) IN GENERAL.—Subsection (c) of section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (26 U.S.C. 1401 note) is amended to read as follows:

"(c) PAYROLL TAX HOLIDAY PERIOD.—The term 'payroll tax holiday
period' means calendar years 2011 and 2012.".

[92] Web page: "Trust Fund FAQs." United States Social Security Administration. Last reviewed or modified Thursday Aug 5, 2010. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

"By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are 'special issues' of the United States Treasury. Such securities are available only to the trust funds."

[93] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt. Last updated August 5, 2004. Last Updated October 10, 2008. http://www.treasurydirect.gov/news/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."
 

[94] United States Code Title 31, Subtitle III, Chapter 31, Subchapter II, Section 3123: “Payment of obligations and interest on the public debt.” Accessed April 7, 2011 at http://www4.law.cornell.edu/uscode/31/3123.html

Section (a): "The faith of the United States Government is pledged to pay, in legal tender, principal and interest on the obligations of the Government issued under this chapter."

[95] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 6: "Table II.B1.—Summary of 2011 Trust Fund Financial Operations (In billions). … OASDI … Assets at the end of 2011 … $ 2,677.9"

[96] Calculated with data from the footnote above and:

a) Dataset: "Monthly Population Estimates for the United States: April 1, 2010 to March 1, 2012." U.S. Census Bureau, Population Division, April 2012. http://www.census.gov/popest/data/national/totals/2011/index.html
"Resident Population … March 1, 2012 [=] 313,104,674"

b) Dataset: "Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2011." U.S. Census Bureau, November 2011. http://www.census.gov/population/www/socdemo/...
Total households = 118,682,000

CALCULATIONS:
$2,735,200,000,000 / 313,104,674 people = $8,736/person
$2,735,200,000,000 / 118,682,000 households = $23,046/household

[97] Calculated with the dataset: "Old-Age, Survivors, and Disability Insurance Trust Funds, 1957-2010 [In millions]." United States Social Security Administration, Office of the Chief Actuary, July 18, 2011. Accessed 6/13/12 at http://www.socialsecurity.gov/OACT/STATS/table4a3.html

NOTE: An Excel file containing the data and calculations is available upon request.

[98] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 2:

In 2011, Social Security’s cost continued to exceed both the program’s tax income and its non-interest income, a trend that the Trustees project to continue throughout the short-range period and beyond. The 2011 deficit of tax income relative to cost was $148 billion, and the projected 2012 deficit is $165 billion. The sizes of these deficits are largely due to a temporary reduction in the Social Security payroll tax for 2011 and 2012. The legislation establishing the payroll tax reduction also provided for transfers from the General Fund of the Treasury to the trust funds to “replicate to the extent possible” revenues that would have occurred in the absence of the payroll tax reduction. Including these general revenue reimbursements, the 2011 deficit of non-interest income relative to cost was $45 billion, and the projected 2012 deficit is $53 billion.

Page 4: "Under the long-range intermediate assumptions, the Trustees project that annual cost for the OASDI [Social Security] program will exceed non-interest income in 2012 and remain higher throughout the remainder of the long-range period."
 

[99] Calculated with data from Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

NOTES:

- The "combined OASI and DI Trust Funds" comprise the "Social Security Trust Fund."

- An Excel file containing the data and calculations is available upon request.

[100] Calculated with data from Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in Constant 2011 Dollars, Calendar Years 2011-86 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified May 13, 2011. http://www.ssa.gov/OACT/TR/2011/lr6f7.html

NOTES:

- The "combined OASI and DI Trust Funds" comprise the "Social Security Trust Fund."

- An Excel file containing the data and calculations is available upon request.

[101] Calculated with data from Table VI.F7: “Operations of the Combined OASI and DI Trust Funds, in Constant 2010 Dollars, Calendar Years 2010-85 [In billions].” United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/TR/2010/lr6f7.html

NOTES:

- The "combined OASI and DI Trust Funds" comprise the "Social Security Trust Fund."

- An Excel file containing the data and calculations is available upon request.

[102] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 3: "The Trustees project that annual cost will exceed non-interest income throughout the long-range period under the intermediate assumptions. The dollar level of the combined trust funds declines beginning in 2021 until assets are exhausted in 2033."

[103] Calculated with data from Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

"2032 ^{b … b} The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions and in 2027 under the high-cost assumptions, so estimates for later years are not shown."

NOTES:

- The "combined OASI and DI Trust Funds" comprise the "Social Security Trust Fund."

- An Excel file containing the data and calculations is available upon request.

[107] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 11: "Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll [Under Intermediate Assumptions]"

NOTE: The "Cost" curve in Figure II.D2 exceeds the "Expenditures" curve for all years starting in 2033. This graph ends in 2090. For the years beyond this, see the following excerpt from the same report.

Pages 15-16: "Extending the horizon beyond 75 years increases the measured unfunded obligation. Through the infinite horizon, the unfunded obligation, or shortfall, equals $20.5 trillion in present value, which represents 3.9 percent of future taxable payroll or 1.3 percent of future GDP. The summarized shortfalls for the 75-year period and through the infinite horizon both reflect annual cash-flow shortfalls for all years after trust fund exhaustion."
 

[108] Calculated with data from Table 8 Alt2: "Trust Fund Operations in Current Dollars, 2012-2090, Intermediate Assumptions, 2012 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on May 14, 2012.

NOTE: An Excel file containing the data and calculations is available upon request.

[109] Calculated with data from Table 8 Alt2: "Trust Fund Operations in Current Dollars, 2012-2090, Intermediate Assumptions, 2012 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on May 14, 2012.

NOTE: An Excel file containing the data and calculations is available upon request.

[110] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Pages 63-64: "Consistent with practice since 1965, this report focuses on the 75-year period (from 2010 to 2084 for this report) for the evaluation of the long-run financial status of the OASDI program on an open group basis (i.e., including taxes and cost for past, current, and future participants through the year 2084)."

[111] Based upon reading dozens of articles and editorials by leading publications, Just Facts found that the press almost always cites the 75-year open group unfunded liability when discussing Social Security's shortfalls, often without providing a substantive explanation of what it means or what the implications may be.

[112] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 63: "The present value of future cost less future non-interest income over the long-range period, minus the amount of trust fund assets at the beginning of the projection period, amounts to $8.6 trillion for the OASDI [Social Security] program. This amount is the 75-year 'open group unfunded obligation'…."

Page 230 (Appendix):

Unfunded obligation. A measure of the shortfall of trust fund income to fully cover program cost through a specified date after exhaustion of trust fund assets. This measure is computed as the excess of the present value of the projected cost of the program through a specified date over the sum of:
(1) the value of trust fund assets at the beginning of the valuation period; and
(2) the present value of the projected non-interest income of the program through a specified date, assuming scheduled tax rates and benefit levels. This measure can apply for all participants through a specified date, i.e. the open group, or be limited to a specified subgroup of participants.
 

[113] Report: "Social Security and Medicare Trust Funds and the Federal Budget." By James Duggan and Christopher Soares. U.S. Department of Treasury, Office of Economic Policy, March 2008. http://www.treas.gov/offices/economic-policy/...

Page 16:

Present values recognize that a dollar next year is worth less than a dollar today, because a dollar today could be saved and earn a year's-worth of interest. To create a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows.

[114] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 6: "Table II.B1.—Summary of 2011 Trust Fund Financial Operations (billions $) … Total income in 2011 [=] 805.1"

CALCULATION: $8,600 billion shortfall / $805.1 billion income = 10.68
 

[115] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Pages 53-54: "Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090 … Covered workers^a (in thousands) … 2011 [=] 157,736 … ^a Workers who are paid at some time during the year for employment on which OASDI taxes are due."

CALCULATION: $8,600,000,000,000 shortfall / 157,736,000 workers = $54,521/worker

[116] "2010 Financial Report of the United States Government." U.S. Department of the Treasury, December 21, 2010. http://www.fms.treas.gov/fr/10frusg/10frusg.pdf

Page 1: "The fiscal year (FY) 2010 Financial Report of the United States Government (Report) provides the President, Congress, and the American people with a comprehensive view of the Federal Government's finances, i.e., its financial position and condition, its revenues and costs, assets and liabilities, and other obligations and commitments."

Page 171: "The 75-year horizon … is consistent with the primary focus of the Social Security and Medicare Trustees' Reports. … [W]hen calculating unfunded obligations, a 75-year horizon includes revenue from some future workers but only a fraction of their future benefits. …"

Page 172: "The shorter [75-year] horizon understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them."

[117] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 65: "[The] closed group unfunded obligation … represents the shortfall of lifetime contributions for all past* and current participants relative to the cost of benefits for them."

NOTE: * The past participants wash out of the "shortfall" calculation because all of their benefits have already been paid.

Page 209 [appendix]: "Closed group unfunded obligation. This measure is computed like the open group unfunded obligation except that individuals under the age of 15 (or not yet born) are excluded. In other words, only persons who attain age 15 or older during the first year of the projection period are included in the calculations."

[118] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 6: "Table II.B1.—Summary of 2011 Trust Fund Financial Operations (In billions). … OASDI … Assets at the end of 2011 … $ 2,677.9"

Page 67:

Table IV.B7.—Present Values of OASDI [Social Security] Cost Less Non-interest Income and Unfunded Obligations for Program Participants, Based on Intermediate Assumptions [Present values as of January 1, 2012; dollar amounts in trillions] …

[P]resent value of future cost for current participants [=] 47.9 …

[P]resent value of future dedicated tax income for current participants [=] 23.5 …

[P]resent value of future general fund reimbursements over the infinite horizon ^a [=] 0.1 …

^a Distribution of general fund reimbursements among past, current, and future participants cannot be determined.

NOTES:
- The past participants wash out of the shortfall calculation because their benefits have already been paid.

- The general fund of the U.S. Treasury is "used to carry out the general purposes of Government rather than being restricted by law to a specific program…." ["Internal Revenue Manual." Internal Revenue Service. Accessed January 11, 2011 at http://www.irs.gov/irm/index.html. Part 1, Chapter 34, Section 1 (http://www.irs.gov/irm/part1/irm_01-034-001.html)]
- Prior to 2012, the Social Security Trustees Report provided an explicit "closed group unfunded obligation" for the Social Security program. Since this figure is not provided in the 2012 Report, Just Facts has calculated it using the methodology provided in the 2011 Report ["2011 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, May 13, 2011. http://www.ssa.gov/oact/tr/2011/tr2011.pdf. Page 66: "The present value of future cost reduced by future non-interest income over the next 100 years for all current participants¹ equals $21.4 trillion. Subtracting the current value of the trust fund gives a closed group unfunded obligation of $18.8 trillion, which represents the shortfall of lifetime contributions for all past and current participants relative to the cost of benefits for them. ... ¹ Individuals who attain age 15 or older in 2011."]

CALCULATION: $47.9 present value of future cost for current participants - $23.5 present value of future dedicated tax income for current participants - $0.1 present value of future general fund reimbursements over the infinite horizon – $2.7 current value of the trust fund = $21.6 closed group unfunded obligation
 

[119] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Pages 53-54: "Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090 … Covered workers^a (in thousands) … 2011 [=] 157,736 … ^a Workers who are paid at some time during the year for employment on which OASDI taxes are due."

CALCULATION: $21,600,000,000,000 shortfall / 157,736,000 workers = $136,938/worker

[120] Report: "Enron: Selected Securities, Accounting, and Pension Laws Possibly Implicated in its Collapse." By Michael V. Seitzinger, Marie B. Morris, and Mark Jickling. Congressional Research Service, Library of Congress, January 16, 2002. http://fpc.state.gov/documents/organization/7960.pdf

Page 2:

Among the disclosures of publicly traded companies are accounting statements. Since financial information is of little use to investors unless all firms use comparable accounting methods, the securities laws give the Securities and Exchange Commission broad authority to establish standards for financial reporting. The SEC has delegated the task of writing accounting standards to private sector bodies, and since 1973 the Financial Accounting Standards Board has been charged with formulating accounting and financial reporting standards.

[121] Summary of Statement No. 106: "Employers' Accounting for Postretirement Benefits Other Than Pensions." Financial Accounting Standards Board, December 1990. http://www.fasb.org/st/summary/stsum106.shtml

This Statement establishes accounting standards for employers' accounting for postretirement benefits other than pensions…. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. …

… The Board believes that measurement of the obligation and accrual of the cost based on best estimates are superior to implying, by a failure to accrue, that no obligation exists prior to the payment of benefits. The Board believes that failure to recognize an obligation prior to its payment impairs the usefulness and integrity of the employer's financial statements. …

The provisions of this Statement are similar, in many respects, to those in FASB Statements No. 87, Employers' Accounting for Pensions, and No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. …

This Statement relies on a basic premise of generally accepted accounting principles that accrual accounting provides more relevant and useful information than does cash basis accounting. …

[L]ike accounting for other deferred compensation agreements, accounting for postretirement benefits should reflect the explicit or implicit contract between the employer and its employees.

[122] Book: Finance for Managers. By Richard Luecke and Samuel L. Hayes. Harvard Business School Press, 2002. Page 39:

In contrast to cash-basis accounting, accrual accounting records transactions as they are made, whether or not the cash has actually changed hands. Most companies of any size use accrual accounting. This system provides a better matching between revenues and their associated cost, which helps companies understand the true causes and effect of business activities. Accordingly, revenues are recognized during the period in which the sales activities occur, whereas expenses are recognized in the same period as their associated revenues.

[123] Calculated with data from:

a) Calculated with data from Table 8 Alt2: "Trust Fund Operations in Current Dollars, 2012-2090, Intermediate Assumptions, 2012 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on May 14, 2012.
"Year 2086 … Assets (end of year) = -$485,645,035,000,000"
NOTE: An Excel file containing the data is available upon request.

b) Table VI.F6: "Selected Economic Variables, Calendar Years 2011-90." United States Social Security Administration. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f6.html
"Year 2086 … Adjusted CPI^a  [=] 746.01 … ^a The adjusted CPI is the CPI-W indexed to calendar year 2012."

CALCULATION: -485.6 trillion (2086 $) / (746.01/100) = -65.1 trillion (2012 $)

[124] Calculated with data from the footnote above and Table IV.B2: "Covered Workers and Beneficiaries, Calendar Years 1945-2090." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr4b2.html

"Calendar year 2086 … Covered workers^a (in thousands) [=] 235,881 … ^a Workers who are paid at some time during the year for employment on which OASDI taxes are due."

CALCULATION: $65,100,000,000,000 / 235,881,000 = $275,987

[125] a) "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 64:

However, there are limitations on what can be conveyed using summarized measures alone. For example, overemphasis on summary measures (such as the actuarial balance and open group unfunded obligation) for the 75-year period can lead to incorrect perceptions and policies that fail to address financial sustainability for the more distant future. …

Another measure that reflects the continued, and possibly increasing, annual shortfalls after 75 years is the unfunded obligation extended to the infinite horizon. The extension assumes that the current-law OASDI program and the demographic and economic trends used for the 75-year projection continue indefinitely.

b) "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 65: "Table IV.B6 reports that the OASDI open group unfunded obligation over the infinite horizon is $20.5 trillion, which is $11.9 trillion larger than for the 75-year period. The $11.9 trillion increment reflects a significant financing gap projected for OASDI for years after 2086. Of course, the degree of uncertainty associated with estimates beyond 2086 is substantial."

[126] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 7.

[127] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 7: "The intermediate demographic and economic assumptions shown in table II.C1 reflect the Trustees' best estimates of future experience, and therefore most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain. For this reason, alternatives I (low-cost) and III (high-cost) are included to provide a range of possible future experience."

Page 15: "Uncertainty of the Projections … Significant uncertainty surrounds the intermediate assumptions."

[128] Graph constructed with data from:

a) Table 8.1 2001TR Alt2: "Trust Fund Operations in Current Dollars, Intermediate Assumptions, 2001 Trustees Report." United States Social Security Administration, Office of the Chief Actuary, February 13, 2001.

b) Table 8.1 2008TR Alt2: "Trust Fund Operations in Current Dollars, Intermediate Assumptions, 2008 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on October 16, 2008.

c) Table 8 Alt2: "Trust Fund Operations in Current Dollars, 2012-2090, Intermediate Assumptions, 2012 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on May 14, 2012.

d) "2001 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, March 19, 2001. http://www.ssa.gov/oact/tr/TR01/tr01.pdf

Page 3: "Table II.B1.—Summary of 2000 Trust Fund Financial Operations"

e) "2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 4: "Table II.B1.—Summary of 2007 Trust Fund Financial Operations"

f) "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf
Page 6: "Table II.B1.—Summary of 2011 Trust Fund Financial Operations"

NOTE: An Excel file containing all of the data cited above is available upon request.

[129] Graph constructed with data from:

a) Table 8.1 2001TR Alt2: "Trust Fund Operations in Current Dollars, Intermediate Assumptions, 2001 Trustees Report." United States Social Security Administration, Office of the Chief Actuary, February 13, 2001.

b) Table 8.1 2010TR Alt2: "Trust Fund Operations in Current Dollars, Intermediate Assumptions, 2010 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on December 20, 2010.

c) "2001 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, March 19, 2001. http://www.ssa.gov/oact/tr/TR01/tr01.pdf

Page 3: "Table II.B1.—Summary of 2000 Trust Fund Financial Operations"

d) "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 6: "Table II.B1.—Summary of 2011 Trust Fund Financial Operations"

NOTE: An Excel file containing all of the data cited above is available upon request.

[130] Dataset: "Old-Age, Survivors, and Disability Insurance Trust Funds, 1957-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a3.html

 

Calendar year	Net increase in assets during year
1975	-1,544
1976	-3,209
1977	-5,272

[131] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 13-14:

1977 Amendments

In 1973, the Social Security Board of Trustees began to project financial problems for the system in both the near and long term. The financing problem grew worse throughout the mid-seventies….

… Under the 1972 law, future benefit levels were highly dependent upon the future relationship of wage and price growth. As a result, future benefits could be lower or higher than intended, and the prevailing view in the mid-1970s was that they would be much higher than anticipated. In fact, it was projected that if the benefit computation rules were left unchanged, benefits for many individuals retiring in the future would exceed their earnings before retirement.

The 1977 amendments were enacted primarily to alleviate these financing problems. The amendments increased future revenues by raising tax rates and the earnings base [taxable maximum], but more significantly, they changed the benefit formula that was raising initial benefits too rapidly. … These actions improved the forecasts of the financial condition of the program significantly. At the time of enactment, the Social Security actuaries projected that the OASDI trust funds would be solvent for the next 50 years, although by a small margin in the late 1970s and early 1980s.

Major provisions of the 1977 amendments:

• Changed the benefit formula for those reaching age 62, becoming disabled, or dying in 1979 or later. Initial benefits would be computed using a formula that would be indexed to the growth in average wages over the years, so that they would generally maintain pace with the standard of living. …

• Increased tax rates slightly in 1979 and 1980, and more significantly in 1981 and later. The ultimate OASDHI tax rate would be 7.65% on employees and employers, each, in 1990. (Formerly, the rate in 1990 was 6.45% and the ultimate rate 7.45% in 2011.)

• Increased the earnings base, on an ad hoc basis, to $22,900 in 1979, $25,900 in 1980, and $29,700 in 1981. After 1981, the base would be adjusted automatically to keep up with average wages as under the prior law.

[132] Web Page: Presidential Statements, Jimmy Carter." United States Social Security Administration. Accessed January 4, 2011. http://www.ssa.gov/history/carterstmts.html

Social Security Amendments of 1977

Remarks at the Bill Signing Ceremony. December 20, 1977

It is never easy for a politically elected person to raise taxes. But the Congress has shown sound judgment and political courage in restoring the social security system to a sound basis. …

The most important thing, of course, is that without this legislation, the social security reserve funds would have begun to be bankrupt in just a year or two, by 1979. Now this legislation will guarantee that from 1980 to the year 2030, the social security funds will be sound. ...

Written Statement on Signing S.305 Into Law. December 20, 1977 …

Taken together, these are tremendous achievements and represent the most important social security legislation since the program was established.

[133] Dataset: "Old-Age, Survivors, and Disability Insurance Trust Funds, 1957-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a3.html

 

Calendar year	Net increase in assets during year
1978	-4,115
1979	-1,456
1980	-3,838
1981	-1,914

[134] Calculated with data from the citation above and Table V.B1.: "Principal Economic Assumptions, Calendar Years 1960-2084." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/TR/2010/lr5b1.html

NOTE: An Excel file containing the data and calculations is available upon request.

[135] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 16-17:

Although the 1977 amendments had been projected to keep Social Security solvent for 50 years, but with a fairly thin margin of safety in the early 1980s the performance of the economy was much worse than expected in the years immediately following enactment, and trust fund reserves continued to decline rapidly. As forecasts of a cash shortfall worsened, stopgap measures were enacted to buy time for Congress to assess the problem. …

1983 Amendments

To resolve OASDI's [Social Security's] financing problems President Reagan and congressional leaders formed a bipartisan panel, the National Commission on Social Security Reform. In January 1983, a majority of its members reached agreement on a compromise solution that was estimated to produce enough in additional OASDI income and benefit reductions to solve the short-range financing problem and reduce the OASDI deficit projected over the next 75 years by two-thirds.

In March 1983, Congress incorporated the Commission's recommendations, with some modifications, as well as additional provisions to resolve the remaining long-range deficit, into the 1983 Social Security Amendments. The major provisions of the amendments included:

• A gradual increase in the age of eligibility for full retirement benefits from age 65 to age 66 in 2009 and age 67 in 2027.

• Coverage of federal civilian employees hired after December 31, 1983, and most current executive level political appointees and elected officials (including Members of Congress, the President, and the Vice President) and Federal judges, effective January 1984.

• Compulsory coverage of all employees of nonprofit organizations effective in January 1984 and a ban on the termination of coverage of nonprofit organization and state and local government employment after 1982.

• A delay of the June 1983 Social Security COLA to December 1983. All future COLAS would also be effective in December.

• Acceleration of scheduled tax increases for employees and employers, with an offsetting tax credit for employees for 1984; increase in the rates for the self-employed to equal the combined employee/employer rate but with partially offsetting credits and deductions.

• Inclusion of up to 50% of Social Security benefits in the taxable income of higher income beneficiaries and transfer of projected revenues therefrom to the Social Security trust funds. The income thresholds (adjusted gross income plus one-half of Social Security benefits) were set at $25,000 for single individuals, $32,000 for couples filing jointly, and zero for couples filing separately.

[136] Editorial: "Attacking Social Security." By Paul Krugman. New York Times, August 15, 2010. http://www.nytimes.com/2010/08/16/opinion/...

[137] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 57: "Even under the high-cost assumptions, however, the combined OASI and DI funds on hand plus their estimated future income would be able to cover their combined cost for 19 years (until 2029). Under the intermediate assumptions, the combined starting funds plus estimated future income would be able to cover cost for 27 years (until 2037). The program would be able to cover cost for the foreseeable future under the more optimistic low-cost assumptions."

[138] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 15.

[139] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 57.

[140] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 173:

The Trustees Report has traditionally shown additional estimates using the low-cost and high-cost sets of specified assumptions to reflect the presence of uncertainty. These additional estimates provide a range of possible outcomes for the projections. However, they provide no indication of the probability that actual future experience will be inside or outside the range of these estimates. This appendix presents the results of a model, based on stochastic modeling techniques, that estimates a probability distribution of future outcomes of the financial status of the combined OASI and DI Trust Funds.

It should be noted that this model is subject to further development. Future improvements and refinements are expected to be more likely to expand, rather than reduce, the indicated range of uncertainty.

Page 174: "The results from this model should be interpreted with caution and with an understanding of the inherent limitations. Results are very sensitive to equation specifications, degrees of interdependence among variables, and the historical periods used for the estimates. … Substantial shifts, as predicted by many experts and as seen in prior centuries, are not fully reflected in the current model."

Page 175:

Page 178: "Table VI.E1.—Long-Range Estimates Relating to the Actuarial Status of the Combined OASDI Program … First year assets become exhausted [Footnote c] … 95-percent confidence interval … 2.5th percentile [=] 2030 … 97.5th percentile [=] 2055 … [Footnote c: For some stochastic simulations, the first year in which trust fund assets become exhausted does not indicate a permanent exhaustion of assets.]

[141] Dataset: "Covered Workers and Beneficiaries." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr4b2.html

[142] Summary of P.L. 98-21 (H.R. 1900): "Social Security Amendments of 1983." Social Security Administration, Office of Legislative and Congressional Affairs, November 26, 1984. http://www.ssa.gov/history/1983amend.html

"Raises the age of eligibility for unreduced retirement benefits in two stages to 67 by the year 2027. Workers born in 1938 will be the first group affected by the gradual increase."

[143] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

For those born before 1938, the full retirement age to qualify for Social Security benefits is 65 years old.

For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart:

For those born after 1959, the full retirement age to qualify for Social Security benefits is 67 years old.

[144] Publication No. 21-059: "Social Security: A Brief History." United States Social Security Administration, October 2007. http://www.socialsecurity.gov/history/pdf/2007historybooklet.pdf

Page 21: "[On January 31, 1940] Ida May Fuller became the first person to receive an old-age monthly benefit check."

[145] Calculated with data from:

a) Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html
"For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart … Year of Birth [=] 1943 – 1954 … Full Retirement Age [=] 66"

b) Table V.A3.: "Period Life Expectancy." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr5a3.html
"The period life expectancy at a given age for a given year represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for that year over the course of their remaining lives."

CALCULATIONS:
2011 – 65 years old = born in 1946, which means a retirement age of 66
((17.7 – 11.9) – (66-65)) / 11.9 = 40%

[146] Publication No. 21-059: "Social Security: A Brief History." United States Social Security Administration, October 2007. http://www.socialsecurity.gov/history/pdf/2007historybooklet.pdf

Page 21: "[On January 31, 1940] Ida May Fuller became the first person to receive an old-age monthly benefit check."

[147] Calculated with data from:

a) Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html
"For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart … Year of Birth [=] 1943 – 1954 … Full Retirement Age [=] 66"

b) Table V.A3.: "Period Life Expectancy." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr5a3.html
"The period life expectancy at a given age for a given year represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for that year over the course of their remaining lives."

CALCULATIONS:
2011 – 65 years old = born in 1946, which means a retirement age of 66
((20.0 – 13.4) – (66-65)) / 13.4 = 42%

[148] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

NOTE: See pages 107-114, which explain "automatically adjusted program parameters" in detail.

[149] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 208: "Baby boom. The period from the end of World War II (1946) through 1965 marked by unusually high birth rates."

[150] Table V.A1.: "Principal Demographic Assumptions, Calendar Years 1940-2085." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/TR/2010/lr5a1.html

"The total fertility rate for any year is the average number of children who would be born to a woman in her lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if she were to survive the entire childbearing period."

[151] Table V.A1.: "Principal Demographic Assumptions, Calendar Years 1940-2085." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/TR/2010/lr5a1.html

NOTE: Data from 2006 is cited because it is the latest available year that is not an estimate.

[152] Article: "Medicare Bound to Bust as First Boomers Hit 65." By Sharyl Attkisson. CBS, December 30, 2010. http://www.cbsnews.com/stories/2010/12/30/...

"On New Year's Day, the first baby boomers will celebrate the big 6-5, and they're not just getting older."

[153] Calculated with data from Table IV.B2.: "Covered Workers and Beneficiaries." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr4b2.html

 

Year	Covered Workers a	OASI [Old-Age and Survivors Insurance] Beneficiaries b
2011	157,736,000	44,388,000
2030	181,233,000	73,320,000

^a Workers who are paid at some time during the year for employment on which OASDI taxes are due.

^b Beneficiaries with monthly benefits in current-payment status as of June 30.

CALCULATIONS:
(73,320,000 - 44,388,000) / 44,388,000 = 65.2%
(181,233,000 - 157,736,000) / 157,736,000 = 14.9%
 

[154] Calculated with data from the footnote below:

Populations: (317,579,000 - 203,948,000) / 203,948,000 = 55.7%

Disability Beneficiaries: (10,614,000 - 1,739,000) / 1,739,000 = 510.3%

[155] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 87: "Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2090 … Population (in thousands) … Total … 1965 [=] 203,948 … 2011 [Estimated] [=] 317,579"

Page 131: "Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of Calendar Years 1960-2090 (in thousands) … Total beneficiaries … 1965 [=] 1,739 … 2011 [=] 10,614"

[156] Calculated with data from the "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 30: "Table III.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Year 2011 [In millions]. … Net administrative expenses [=] $6,405 … Total disbursements [=] $736,083"

CALCULATION: $6,405 / $736,083 = 0.87%

NOTE: The "combined OASI and DI Trust Funds" comprise the "Social Security Trust Fund." See the column labeled "Assets at end of year."

[157] Calculated with data from the footnote above and Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, March 2012. http://www.ssa.gov/pubs/10024.pdf

Page 21: "Average 2012 monthly Social Security benefits … Retired worker: $1,229"

CALCULATION: ($6,405,000,000 administrative expenses) / [($1,229 average benefit/worker/month) Χ (12 months/per year)] = 434,296 workers

[158] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 11:

The [Social Security] administrative costs discussed above do not include the burden on the private sector. Costs to firms and individuals in the form of time and increased paperwork are probably substantial. However, it is difficult to assess the administrative burden for employers in dollar values because those costs depend on the individual circumstances of each employer (for example, their use of electronic reporting and the size of their workforce). Furthermore, it is difficult to separate the cost to employers of processing payroll tax contributions from other costs, such as remitting income taxes withheld from employees. For those reasons, this analysis makes no attempt to estimate the administrative burden on the private sector. Evidence about the operation of labor markets indicates that workers are likely to bear most of that burden in the long run.

Page 9:

Employers bear the burden of the collection costs. They collect payroll taxes from employees and transfer them to the IRS together with other withheld income taxes. Most employers with $50,000 or less in total income and payroll tax payments during a four-quarter look-back period must deposit the taxes withheld from wages within a month after the wages are paid. Employers with more than $50,000 in tax payments during that period must deposit their taxes semiweekly. Any employer who accrues a total liability of $100,000 in one day must deposit all withheld taxes by the following day. The deposits can be made either at a Federal Reserve Bank branch or at a financial institution that is authorized by the IRS. The IRS determines the tax payments for the trust funds from the information provided by employers on Form 941. Moreover, tax payments on Social Security benefits are transferred to the trust funds according to the information on individual tax returns.

Employers are also responsible for transmitting substantial amounts of information to the SSA and the IRS. Employers must report the wages subject to Social Security taxes annually to the SSA. The SSA receives a copy of each W-2 form that is issued to employees for tax-filing purposes at the beginning of the year, detailing earnings and payroll taxes withheld during the previous calendar year. Moreover, employers must file form W-3, which summarizes aggregate tax withholdings, with the SSA. The IRS receives similar aggregate tax information from employers each quarter on Form 941. The self-employed do not file their earnings reports directly with the SSA. Instead, they calculate and report their Social Security tax (also called a self-employment tax) on schedule SE of the income tax return. After processing the tax form, the IRS furnishes the information about taxable earnings of the self-employed to the SSA.

[159] "Fiscal Year 2011 Performance and Accountability Report." United States Social Security Administration, November 7, 2011. http://www.ssa.gov/finance/2011/Full FY 2011 PAR.pdf

Page 194: "Table 1: OASDI [Social Security] Improper Payments Experience, FY [Fiscal year] 2008 – FY 2010 (dollars in millions) … FY 2010 … Total benefit payments [=] $695,469 … Underpayments [=] $1,788 (0.25%) … Overpayments [=] $2,722 (0.39%)"

NOTE: Pages 211-212 detail the results of overpayment collection measures used by the Social Security Administration. There is no way to calculate from this data how much of the above-cited overpayments have been collected.

[160] Calculated with data from the footnote above and Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

"Average 2010 monthly Social Security benefits … Retired worker: $1,164."

CALCULATION: ($2,722,000,000 improper overpayments) / [($1,164 average benefit/worker/month) Χ (12 months/per year)] = 194,874 workers

[161] Report: "Benefit Payments in Instances Where the Social Security Administration Removed a Death Entry From the Beneficiary's Record," United States Social Security Administration, Office of the Inspector General. June 2008. http://www.ssa.gov/oig/ADOBEPDF/A-06-07-27156.pdf

Page 2:

In instances when death reports are posted in error, SSA deletes the death entry from the DMF [death master file] ("resurrect" the record) and, when applicable, reinstates benefit payments. SSA employees may only process transactions to resurrect a record when presented with proof the original death entry was posted in error. Unless the mistake resulted from an administrative error, the resurrection transaction should not be processed before completion of a face-to-face interview with the beneficiary or recipient. To validate the integrity of these transactions, SSA requires that two employees be involved in the process. SSA also requires that employees document the events leading to and facts supporting the transaction.

Since January 2004, SSA has provided us with electronic files containing updates made to the DMF, including instances when individual records were removed from the DMF. Preliminary analysis of these files indicated that, from January 2004 through April 2007, SSA deleted more than 44,000 individuals' death entries from the DMF. SSA records indicated 20,623 of these individuals were in current payment status on or after April 27, 2007 and received approximately $17.2 million in monthly SSA benefit payments.

[162] Audit report: "Economic Recovery Payments for Social Security and Supplemental Security Income Beneficiaries." United States Social Security Administration, Office of the Inspector General, September 2010. http://www.ssa.gov/oig/ADOBEPDF/A-09-10-11017.pdf

Page 1: "ARRA [the American Recovery and Reinvestment Act] provided for a one-time ERP [Economic Recovery Payment] of $250 to certain adult Social Security and Supplemental Security Income (SSI) beneficiaries."

Page 2: "SSA [The Social Security Administration] was required to identify and certify the Social Security and SSI beneficiaries eligible for an ERP and provide the Department of the Treasury (Treasury) with the information to disburse the payments. … In April 2009, SSA identified all beneficiaries who met the eligibility criteria from its payment records. In May 2009, about 52 million beneficiaries received their $250 payments, totaling about $13 billion."

[163] Audit report: "Economic Recovery Payments for Social Security and Supplemental Security Income Beneficiaries." United States Social Security Administration, Office of the Inspector General, September 2010. http://www.ssa.gov/oig/ADOBEPDF/A-09-10-11017.pdf

Page 3:

Our review disclosed that 71,688 beneficiaries who were deceased before the payment certification date received an ERP [Economic Recovery Payment]. This included 63,481 beneficiaries whose deaths had been reported to SSA [the Social Security Administration]….

ARRA [the American Recovery and Reinvestment Act] states that an ERP shall not be issued to any individual whose date of death occurs before the date on which the individual is certified to receive a payment. SSA policy states that if a beneficiary is eligible to receive an ERP, but dies before payment, no ERP will be issued.

[164] Audit report: "Economic Recovery Payments for Social Security and Supplemental Security Income Beneficiaries." United States Social Security Administration, Office of the Inspector General, September 2010. http://www.ssa.gov/oig/ADOBEPDF/A-09-10-11017.pdf

Page 4:

The 1966 amendments to the [Social Security] Act included a provision, referred to as the Prouty amendment, that provides for special payments to individuals aged 72 and older who were too old to have worked long enough after passage of the Act to be insured for Social Security benefits.[footnote omitted]

Of the 71,688 deceased beneficiaries who received an ERP [Economic Recovery Payment], 8,207 were Prouty beneficiaries whose deaths were generally not reported to SSA [the Social Security Administration]. Based on a random sample of 50 beneficiaries, we found these individuals were, according to SSA's records, between the ages of 112 and 136 and had not received a Social Security benefit for at least 30 years. … The oldest validated living centenarian in the United States was age 114 as of November 2009.[footnote omitted]

As a result, we concluded it was unlikely that any Prouty beneficiaries were entitled to an ERP. SSA subsequently informed us there was one Prouty beneficiary who was still alive and eligible for an ERP. … When SSA determined these beneficiaries were eligible for an ERP, it considered neither the age of the beneficiaries nor the lack of contact with these individuals in over 30 years.

NOTES:

- Given that the Prouty amendment was enacted in 1966 and applies to people who were aged 72 and older at that time, the latest birth date for any worker to whom this law applies is 1894 (1966 – 72 = 1894).

- Given that the stimulus passed in 2009, the youngest of these workers would have been 115-years-old at the time (2009 – 1894 = 115), which is one year older than the oldest living person as of November 2009.

- Given that the Inspector General found someone as young as 112 years who had received a check under this law, this may be an error in Social Security's records or reflect a stipulation of the law. Thus, Just Facts cites an estimate of 8,000 people instead of the 8,207 people who posthumously received a check under this law.

[165] Audit report: "Economic Recovery Payments for Social Security and Supplemental Security Income Beneficiaries." United States Social Security Administration, Office of the Inspector General, September 2010. http://www.ssa.gov/oig/ADOBEPDF/A-09-10-11017.pdf

Page 4: "Based on a random sample of 50 beneficiaries, we found these individuals were, according to SSA's records, between the ages of 112 and 136."

NOTE: Given that the individual was 136-years-old and the law was implemented in 2009, this person was born in 1873 (2009 – 136 = 1873).

[166] Article: "Dead People Get Stimulus Checks." My Fox New York, May 14, 2009. http://www.myfoxny.com/dpp/your_money/...

Antoniette Santopadre of Valley Stream was expecting a $250 stimulus check. But when her son finally opened it, they saw that the check was made out to her father, Romolo Romonini, who died in Italy 34 years ago. He'd been a U.S. citizen when he left for Italy in 1933, but only returned to the United Stated for a seven-month visit in 1969.

… Romonini … [was] never even part of the Social Security system.

[167] "The Social Security Act of 1935."  United States Social Security Administration. http://www.ssa.gov/history/35act.html

[168] Audit report: "Economic Recovery Payments for Social Security and Supplemental Security Income Beneficiaries." United States Social Security Administration, Office of the Inspector General, September 2010. http://www.ssa.gov/oig/ADOBEPDF/A-09-10-11017.pdf

Page 2: "Finally, ARRA [the American Recovery and Reinvestment Act] did not provide the authority for SSA [the Social Security Administration] or Treasury to reclaim erroneous ERPs [Economic Recovery Payments] issued to deceased beneficiaries.."

Page 4: "[S]ince SSA could not initiate reclamation for the ERPs, it only received returned checks or credits for 26 (52 percent) of the 50 beneficiaries in our sample."

[169] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Preface:

GAO [The Government Accountability Office] was asked to (1) determine whether federal employees and commercial drivers and company owners may be improperly receiving disability benefits and (2) develop case study examples of individuals who fraudulently and/or improperly receive these benefits. To do this, GAO compared DI [Disability Insurance] and SSI [Supplemental Security Income*] benefit data to civilian payroll records of certain federal agencies and carrier/driver records from the Department of Transportation (DOT) and 12 selected states.

* Page 6: "Created in 1972, the SSI program is a nationwide federal cash benefit program administered by SSA [the Social Security Administration] that provides a minimum level of income to financially needy individuals who are aged, blind, or considered eligible for benefits because of physical or mental impairments. Payments under the SSI program … and are funded from the government's General Fund, which is financed through tax payments from the American public."

[170] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Preface: "SSA currently does not perform a federal payroll or DOT records match to identify individuals improperly receiving benefits."

Page 34 (Appendix IV, Comments from the Social Security Administration): "While SSA conducts a match of its beneficiary file to IRS data for all wage earners, it does not match its records to Federal payroll or DOT data to potentially identify persons who may be improperly receiving benefits."

Page 44 (General Accounting Office comments on the Social Security Administration's letter dated May 28, 2010): "IRS provides summary earnings data for a calendar year. We have previously reported that the IRS earnings data used by SSA in its enforcement operations are typically 12 to 18 months old when SSA first receives them, thus making some overpayments inevitable."

[171] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 44 (General Accounting Office comments on the Social Security Administration's letter dated May 28, 2010):

In the report, we identify those cases where SSA has sent an overpayment notification letter to the individual. However, we do not believe that identifying fraudulent or improper payments after dollars have been disbursed is an effective internal control. Our work across the government has shown that once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar. Preventive controls are the most efficient and effective.

[172] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Pages 7-8:

It is impossible to determine from data mining alone the extent to which beneficiaries improperly or fraudulently received disability payments. To adequately assess an individual's work status, a detailed evaluation of all the facts and circumstances should be conducted. This evaluation would include contacting the beneficiary and the beneficiary's employer, obtaining corroborating evidence such as payroll data and other financial records, and evaluating the beneficiary's daily activities. …

Our analysis of federal civilian salary data and SSA disability data found that about 7,000 individuals at selected agencies had been wage-earning employees for the federal government while receiving SSA disability benefits during fiscal year 2008. The exact number of individuals who may be improperly or fraudulently receiving SSA disability payments cannot be determined without detailed case investigations. Our analysis of federal salary data from October 2006 through December 2008 found that about 1,500 federal employees' records indicate that they may be improperly receiving payments. [Footnote 11] The individuals were identified using the following criteria: (1) DI beneficiaries who received more than 12 months of federal salary payments above the maximum SSA earnings threshold for the DI program (e.g., $940 per month for nonblind DI beneficiaries during calendar year 2008) after the start date of their disabilities[Footnote 12] or (2) SSI recipients who received more than 2 months[Footnote 13] of federal salary above the maximum SSA earnings threshold for the SSI program after the start date of their disabilities.[Footnote 14] Based on their SSA benefit amounts, we estimate that these approximately 1,500 federal employees received about $1.7 million of payments monthly. …

[Footnote 11] The actual estimate of federal employees who may be improperly receiving benefits was 1,487. …

[Footnote 16] Our estimate of federal employees with potential improper payment indicators is likely underestimated. It does not include salary payments that these individuals may have received outside of the federal government. Also, we had only the net pay amounts for federal employees disbursed by Department of the Treasury, not gross pay. For these employees the salary we used was reduced for deductions such as health insurance, income taxes, and other withholdings.

[173] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 3: "[Footnote 9] The 12 selected states were California, Florida, Illinois, Kentucky, Maryland, Michigan, Minnesota, Montana, Tennessee, Texas, Virginia, and Wisconsin. The 12 states were selected primarily based on the size of the licensed commercial driver population. These 12 selected states represented about 42 percent of all commercial driver's licenses contained in CDLIS."

Pages 9-10:

Our analysis of data from DOT on commercial drivers and from SSA on disability beneficiaries found that about 600,000 individuals had been issued CDLs and were receiving full Social Security disability benefits. The actual number of SSA disability beneficiaries with active CDLs cannot be determined for two reasons. First, states maintain the current status of CDLs, not DOT.[Footnote 17] Second, possession of a CDL does not necessarily indicate that the individual returned to work. Because federal regulations require interstate commercial drivers to be examined and certified by a licensed medical examiner to be able to physically drive a commercial vehicle once every 2 years, we selected a nonrepresentative selection of 12 states [Footnote 18] to determine how many SSA disability beneficiaries had CDLs issued after their disabilities were determined by SSA. Of the 600,000 CDL holders receiving Social Security disability benefits, about 144,000 of these individuals were from our 12 selected states. As figure 2 shows, about 62,000 of these 144,000 individuals, or about 43 percent, had CDLs that were issued after SSA determined that the individuals met the federal requirements for full disability benefits.

Page 7:

It is impossible to determine from data mining alone the extent to which beneficiaries improperly or fraudulently received disability payments. To adequately assess an individual's work status, a detailed evaluation of all the facts and circumstances should be conducted. This evaluation would include contacting the beneficiary and the beneficiary's employer, obtaining corroborating evidence such as payroll data and other financial records, and evaluating the beneficiary's daily activities.

[174] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Pages 3-4:

To illustrate actual cases of fraudulent payments and/or improper payments from our overall analysis, we nonrepresentatively selected 20 cases that illustrate the types of fraudulent and improper activity we found in SSA disability programs. The 20 cases were primarily selected based on our analysis of SSA electronic and paper files for the higher overpayment amounts, the types of employment, and the locations of employment. Because this is a nonrepresentative selection, the results of these 20 case investigations cannot be projected to other federal employees, commercial drivers, or commercial vehicle owners who received SSA disability payments.

[175] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 11: "[W]e nonrepresentatively selected 20 examples of federal employees, commercial drivers, and registrants of commercial vehicle companies who received disability payments fraudulently and/or improperly. … In each case, SSA's internal controls did not prevent improper and fraudulent payments…."

[176] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Preface: "SSA continued to improperly pay individuals who informed SSA of their employment."

Page 11: "For 10 of the 20 cases, SSA continued to pay these individuals their SSA disability benefits through October 2009 primarily because the agency had not yet identified their ineligibility for benefits. For the other cases, SSA has terminated the disability benefits and has negotiated repayment agreements for 2 of those cases."

Page 12:

Finally, our investigations found four cases with no evidence of fraud but, rather, of administrative error. In these situations, the beneficiaries told our investigators that they reported their employment to SSA and SSA had evidence in its files that such contact did occur. Thus, we concluded that SSA made improper payments to these individuals because SSA was aware of the employment but continued to make disability payments to those individuals.

NOTE: In at least one case, the SSA took action only after GAO informed them of the problem [Page 19: "The SSA Office of Inspector General opened an investigation of the employee after we informed the agency of her employment status…."].

[177] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 28: "For 18 cases, SSA sent the SSA beneficiaries and recipients the $250 economic stimulus check."

[178] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 28: "For 10 cases, SSA improperly increased the benefit amounts of the disability payments because the individuals had increases in the reported wages on which the disability benefit payments are based."

Preface: "Using a process called Automated Earnings Reappraisal Operations (AERO), SSA examined the earnings for several individuals and automatically increased these individuals' disability payments because of raises in salary from their federal employment."

Pages 12-13:

SSA has an automated process, called Automated Earnings Reappraisal Operations (AERO), that screens changes in an individual's earnings record and uses that information to compute changes in the monthly disability benefit payment.[Footnote 21] However, SSA currently does not use AERO to identify individuals who return to work and alert SSA staff to review these individuals' records for possible suspension of disability payments. As a result, SSA increased the monthly disability benefits of several individuals based on the higher wages the individuals' current employers reported to the agency but did not properly suspend the payments to those individuals.

Page 26:

Case no. 18 Details …

• The beneficiary was a mail clerk for the U.S. Postal Service who worked in New York. The estimated overpayment was about $58,000 …

• In November 2006, SSA notified the beneficiary that based on wages earned in 2005 his benefits would be increased;

• In November 2007, SSA notified the beneficiary that based on wages earned in 2006 his benefits would be increased;

• In November 2008, SSA notified the beneficiary that based on wages earned in 2007 his benefits would be increased;

• As of October 2009, SSA continued to pay the beneficiary a monthly benefit of $1,775. SSA also sent the beneficiary a $250 economic stimulus payment.

[179] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 19:

Case no. 8 Details …

• The beneficiary was a legal assistant for SSA who worked in Arizona. The estimated overpayment was about $11,000;

• SSA approved DI payments starting in 2003 for affective/mood disorders and osteoarthrosis;

• The beneficiary began working for SSA in the third quarter of 2007 …

• In November 2008, SSA notified the beneficiary that based on wages earned in 2007 her benefits would be increased;

• The SSA Office of Inspector General opened an investigation of the employee after we informed the agency of her employment status;

• According to SSA officials, SSA disability programs do not have access to SSA's payroll records to determine whether their employees are receiving disability payments and thus should be evaluated for eligibility;

[180] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 16:

Case no. 2 Details …

• The beneficiary was a Transportation Safety Administration screener who worked in California. The estimated overpayment was about $108,000;

• SSA approved DI payments starting in 1995 for mood and anxiety disorders;

• The beneficiary began full-time federal employment in 2003. …

• In November 2005, SSA notified the beneficiary that based on wages earned in 2004 her benefits would be increased …

• In November 2007, SSA notified the beneficiary that based on wages earned in 2006 her benefits would be increased….

• The beneficiary resides in a house that is currently listed for sale at about $1,800,000.

[181] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 13:

Certain individuals who claim that they are unable to immediately repay the disability benefits they improperly received can be put on long-term repayment plans that span years or decades. Although SSA has the authority to charge interest and penalties, SSA did not do so on these agreements. As a result, several individuals from our cases were placed in long-term, interest-free repayment plans for improperly accepting disability overpayments. For 1 of our 20 cases, SSA placed an individual on a repayment plan to repay approximately $33,000 in overpayments through $20 monthly installments. Based on this agreement, it will take over 130 years to repay this debt, exceeding the life expectancy for this individual.

Page 24:

• The beneficiary was a psychology aide for the Department of Veterans Affairs who worked in Florida. The estimated overpayment was about $33,000.

• SSA approved DI payments starting in 1996 for muscular dystrophy. …

• In September 2008, SSA notified the beneficiary that "your disability has ended and you are not entitled to payments." The notice stated that the trial work period ended in September 1998, 10 years prior.

• In November 2008, SSA notified the beneficiary that based on the wages he earned in 2007, it would be increasing his benefits. The agency also noted that it would send a payment of $4,478 on or about December 3, 2008, that would include the new regular monthly benefit, plus the difference between what SSA actually paid in 2008 and what it should have paid according to the wage increase.

• In January 2009, SSA notified the beneficiary that it had paid him $32,858 too much in benefits. SSA stated that he should refund this overpayment within 30 days. SSA placed the beneficiary in a repayment plan for $20 per month.

[182] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Page 2:

Once SSA [the Social Security Administration] determines the payment amount due a beneficiary, that determination may be reopened and revised later under certain conditions. The discretionary rules that SSA uses to reopen and revise determinations are known as the rules of administrative finality.[Footnote 4]

Under administrative finality, SSA will generally revise an incorrect OASDI [Social Security] payment amount if the error is discovered within 4 years. However, if the error is discovered after 4 years, the Agency will generally only revise the payment determination if it was obtained by fraud or similar fault or it was wholly or partially unfavorable to the beneficiary as a result of a clerical error or error on the face of the evidence.[Footnote 5]

If administrative finality is applied, a revision will only be made when SSA makes a new payment determination-such as when benefits are converted from disability to retirement upon a beneficiary's attainment of full retirement age. If a new determination is not made, the payment amounts will not be revised and will continue until death.

[183] Regulations at 20 CFR 416.1487 – 416.1494: "Title XVI Administrative Finality – Background." Last revised June 28, 2007. Accessed January 10, 2011 at https://secure.ssa.gov/poms.nsf/lnx/0504070001

When it has been determined that an individual is eligible for SSI payments, he/she should be able to rely on that determination. Moreover, it is a well established principle in Federal payment programs that, generally, the administrative agency should not be required to establish findings of fact after the lapse of a considerable time from the date of the events involved. …

The rules regarding administrative finality are set by regulation, not statute, under the Commissioner's rulemaking authority under Section 1631(a) (1) of the Social Security Act. The regulatory language parallels administrative finality regulations for Titles II and XVIII.

[184] United States Code Title 42, Chapter 7, Subchapter VII, Section 902: "Commissioner; Deputy Commissioner; other officers." http://www.law.cornell.edu/uscode/42/902.html

(1) There shall be in the Administration a Commissioner of Social Security (in this subchapter referred to as the "Commissioner") who shall be appointed by the President, by and with the advice and consent of the Senate. …

(3) The Commissioner shall be appointed for a term of 6 years, except that the initial term of office for Commissioner shall terminate January 19, 2001. In any case in which a successor does not take office at the end of a Commissioner's term of office, such Commissioner may continue in office until the entry upon office of such a successor. A Commissioner appointed to a term of office after the commencement of such term may serve under such appointment only for the remainder of such term. An individual serving in the office of Commissioner may be removed from office only pursuant to a finding by the President of neglect of duty or malfeasance in office.

NOTE: As per the link on this page entitled, How current is this?, "Title 42 of the US Code as currently published by the US Government reflects the laws passed by Congress as of Feb. 1, 2010, and it is this version that is published here."

[185] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Page 2: "We initiated this current review to assess the full impact of administrative finality on the OASDI program. To accomplish our objective, we identified a population of 77,969 OASDI beneficiaries who were receiving benefits as of June 2005 and whose benefit records indicated that administrative finality was involved. From this population, we selected a random sample of 275 cases for detailed analysis."

[186] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Page 2:

Of the 275 beneficiaries in our sample:

• 156 (57 percent) were paid more in OASDI benefits than they otherwise would have been paid because of administrative finality;

• 99 (36 percent) may have received more OASDI benefits because of administrative finality, but we were unable to quantify the amount because there was insufficient information available; and

• 20 (7 percent) were unaffected by administrative finality.[Footnote 9]

[187] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Page 3:

We estimate SSA identified about 44,230 beneficiaries whose benefits had been incorrectly calculated, but the Agency did not revise the amounts because of its administrative finality rules. As a result, we estimate these individuals were paid about $140.5 million more in OASDI benefits than they otherwise would have been paid had the errors not occurred. We also estimate about 25,801 of these beneficiaries will be paid an additional $49.8 million in the future because their ongoing benefits were not corrected when the Agency identified the calculation errors.

NOTE: Details on the methodology are given in Appendix C of the report.

[188] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Page 5:

CONCLUSION AND RECOMMENDATION

Based on our analysis, we estimate that SSA's administrative finality rules cost the OASDI program about $190 million. We recognize that SSA established the rules, in part, to help protect beneficiaries from hardships that could result from the correction of Agency errors. However, OASDI beneficiaries should be paid the benefits they were intended to receive based on the formulas provided in the Social Security Act. We believe that, when SSA discovers errors in the payments to beneficiaries, the Agency should correct them rather than continuing the errors in future benefit payments. By invoking administrative finality and not correcting the errors, the beneficiaries receive extra monies that cost the OASDI trust funds millions of dollars.

[189] Audit report: "Administrative Finality in the Old-Age, Survivors and Disability Insurance Program." United States Social Security Administration, Office of the Inspector General, September 24, 2007. http://199.173.225.108/oig/ADOBEPDF/A-01-07-27029.pdf

Pages D1-D3 (Appendix IV, Comments from the Social Security Administration):

Date: June 19, 2007 …

As noted above, ongoing readjudication of claims would place an administrative burden on the Agency's resources, as well as impact the public's reliance on the government's decision. Our regulations state that four years is a reasonable time limit for us to identify and correct any error on our records. Correcting a record more than four years in the past could cause undue hardship for our beneficiaries, as well as create extensive public relations issues for the Agency. We are concerned that making decisions to correct and reduce beneficiary payments beyond the four year time span may erode public trust for our Social Security programs. Any changes in the existing rules would need to be carefully weighed to determine the potential impact of any changes on both the beneficiaries and the Agency. At this time we do not agree that it would be in the Social Security program's best interest to perform ongoing OASDI benefit recalculations, as to do so would require additional administrative resources and/or the deferral of other Agency work.

Pages 6-7 (Office of Inspector General's comments on the Social Security Administration's letter dated June 19, 2007):

We are disappointed that SSA disagreed with our recommendation and, instead, decided that the Agency's administrative finality rules should remain unchanged without first conducting additional analysis. Not only is the decision to continue with the status quo inconsistent with the Agency's mantra of continuous improvement, it impedes the Agency's ability to optimize its efficiency.

According to SSA, the Agency established its 4-year administrative finality regulations in 1949 in part "due to the need to limit reopenings because of their serious impact on SSA's workloads." SSA speculated that it would "incur significant operational costs by not having administrative finality," stating that our recommendation would require the Agency to make "many additional benefit amount recalculations and readjudications." However, we note that SSA has automated much of the work that was-at the time the regulations were initially adopted-performed manually by employees. The Agency has an automated system in place which examines the earnings of every retired, disabled and deceased worker each year to determine whether the worker's primary insurance amount may be recomputed. In these situations, the actual cost to the Agency to effectuate the change in the benefit amounts after the recalculations are performed may, in fact, be insignificant.

The Agency stated that "correcting a record more than four years in the past could cause undue hardship for our beneficiaries." However, our recommendation focuses on the ongoing monthly payments and not the benefits that were paid in the past, before the payment errors were discovered. We realize that the administrative finality rules limit the circumstances under which the Agency will revise prior determinations. We believe SSA should explore the possibility of making new payment determinations-and correcting the monthly benefit amounts going forward-whenever new information comes to surface that questions the accuracy of the amount of benefits being paid, and revisions to the previously-issued payments are not possible because of administrative finality.

SSA expressed concern that changing the administrative finality rules and correcting and reducing benefit payments "may erode public trust for our Social Security programs." However, the Agency's decision to not take action to correct administrative errors when they are discovered may also have a negative impact. Because of the Agency's discretionary administrative finality rules, some beneficiaries are knowingly paid more in benefits than they were intended to receive based on the formulas provided in the Social Security Act. Public confidence in the programs may be diminished when some individuals are paid additional benefits, while others are not.

[190] Transcript: "NBC Nightly News" (6:30 PM ET). NBC, February 26, 2004.

BRIAN WILLIAMS reporting: Inside this small private elementary school in Manhattan, Mimi Baso came to work this morning thinking about retirement. She has no plans to retire but these days worries about getting back all the Social Security money she paid in.

Ms. MIMI BASO: I am entitled to the money. It's my money. I've saved it.

NOTE: Just Facts has found numerous comments of this type scattered throughout the Internet. The following footnote provides an example of imprecise rhetoric from a politician that could establish and/or reinforce such beliefs.

[191] Web Page: Presidential Statements, Jimmy Carter." United States Social Security Administration. Accessed January 4, 2011. http://www.ssa.gov/history/carterstmts.html

"Social Security Amendments of 1977 Written Statement on Signing S.305 Into Law. December 20, 1977 … Most importantly, it [the bill] … further assures today's workers that the hard-earned taxes they are paying into the system today will be available upon their retirement."

[192] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

[193] Research Note #20: "The Social Security Trust Funds and the Federal Budget." By Larry DeWitt. United States Social Security Administration, Historian's Office, March 4, 2005, Updated 6/18/07. http://www.ssa.gov/history/BudgetTreatment.html

Since the assets in the Social Security trust funds consists of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes. However, all this really means is that the trust funds hold their assets in the form of Treasury securities. …

[194] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt. Last updated August 5, 2004. Last Updated October 10, 2008. http://www.treasurydirect.gov/news/pressroom/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."

NOTE: More facts about how Social Security surpluses become part of the national debt are contained in the section: Impact on National Debt.

[195] An accounting of all Social Security tax receipts and expenditures since the program's inception is provided here.

[196] Web page: "Supreme Court Case: Flemming vs. Nestor." United States Social Security Administration. Accessed January 5, 2011 at http://www.ssa.gov/history/nestor.html

There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

[197] Ruling: Flemming v. Nestor. U.S. Supreme Court, June 20, 1960. Case 363 U.S. 603. Decided 5-4. Majority: Harlan, Clark, Frankfurter, Stewart, Whittaker. Dissenting: Black. Separate dissent: Douglas. Separate Dissent: Brennan, Warren, Douglas. http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=...

It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments. …

To engraft upon the Social Security system a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands. … It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and .. has since retained, a clause expressly reserving to it "[t]he right to alter, amend, or repeal any provision" of the Act. …

We must conclude that a person covered by the Act has not such a right in benefit payments as would make every defeasance of "accrued" interests violative of the Due Process Clause of the Fifth Amendment.

[198] Comment by "Kilfarsnar," March 12, 2009. http://cunningrealist.blogspot.com/2009/03/...

NOTE: Just Facts has found numerous comments of this type scattered throughout the Internet. The following footnote provides an example of imprecise rhetoric from a politician that could establish and/or reinforce such beliefs.

[199] Article: "Government Statistics and Lies." By Ron Paul. Campaign for Liberty, November 3, 2009. http://www.campaignforliberty.com/article.php?view=323

"I have introduced legislation to keep politicians in Washington from ever raiding the Social Security trust fund again. HR 219 The Social Security Preservation Act would assure that all monies collected by the Social Security Trust Fund would only be used in payments to beneficiaries, or be placed in interest bearing certificates of deposit."

[200] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 142: "The Social Security Act does not permit expenditures from the OASI [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI [Social Security] program."

[201] The Social Security Administration's Office of the Chief Actuary publishes annual receipts, expenditures, and assets for both of the Social Security trust funds, which are the "Old-Age and Survivors Insurance Trust Fund"* and the "Disability Insurance Trust Fund."† Just Facts has examined and recalculated this data, and in each year, trust fund assets increase or decrease by the differential between receipts and expenditures for the year.‡  Also, correspondingly, the U.S. Treasury Department publishes a "Monthly Statement of the Public Debt"§ that details the components of the national debt, which includes amounts owed to the trust funds equaling Social Security's finances.# More details as to how the trust funds affect the national debt are contained in the section: Impact on National Debt.

* Dataset: "Old-Age and Survivors Insurance Trust Fund, 1937-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a

† Dataset: "Disability Insurance Trust Fund, 1957-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a2.html

NOTE: Because the disability component of Social Security was not established until 1957, no data on the Disability Trust Fund is available prior to this year.

‡ An Excel file containing the data and calculations is available upon request. Note that in 1982, the Old-Age and Survivors Insurance Trust Fund borrowed money from the Disability Insurance Trust Fund, and repaid the borrowed amounts in 1985 and 1986.

§ Report: "Monthly Statement of the Public Debt of the United States." United States Department of the Treasury, Bureau of the Public Debt. http://www.treasurydirect.gov/govt/reports/pd/mspd/mspd.htm

# For example, the Monthly Statement of the Public Debt for December 31, 2008 (http://www.treasurydirect.gov/govt/reports/pd/mspd/...) shows that the federal government owes $215,810 million to the "Federal Disability Insurance Trust Fund" and $2,203,404 million to the "Federal Old-Age and Survivors Insurance Trust Fund" (see page 9). These figures are within one quarter of 1% of the 2008 trust fund end-of-year assets in the Social Security datasets cited above ($215,773 million for the Disability Insurance Trust Fund and $2,202,886 million for the Old-Age and Survivors Insurance Trust Fund). Such minor disparities are typically the result of slightly different accounting methodologies.

[202] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

[203] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt. Last updated August 5, 2004. Last Updated October 10, 2008. http://www.treasurydirect.gov/news/pressroom/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."

[204] "Social Security Act of 1935." United States Social Security Administration. http://www.ssa.gov/history/35act.html

Section 201(b): "It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States."

NOTE: Also, as shown in the next two footnotes, an official Social Security Trust Fund was established in 1939.

[205] Web page: "Reports & Studies, 1938 Advisory Council" United States Social Security Administration. Accessed January 6, 2011 at http://www.ssa.gov/history/reports/38advise.html

The Advisory Council on Social Security was appointed by the Senate Special Committee on Social Security and the Social Security Board in May, 1937. …[T]he recommendations of the [Social Security Advisory] Council were largely enacted into law in the 1939 Amendments. …

The following is the text of the Report issued by the Council. …

REPORT …

At the time the Social Security Act was drafted it was deemed necessary for constitutional reasons to separate legally the taxation and benefit features of the program. It is believed that in the light of subsequent court decisions such legal separation is no longer necessary. Since the taxes levied are essentially contributions intended to finance the benefit program, it is not only logical but expedient to provide for automatic crediting of tax proceeds to the old age insurance fund. It is believed by the Council that such a procedure would enhance public understanding of the contributory insurance system. Since the tax proceeds thus credited are intended for payment of benefits, it is recommended that they be deposited in a trust fund under the control of designated trustees in accordance with appropriate legal provisions. The trust fund should be dedicated to the payment of benefits and, to a restricted amount, to the costs necessary to the administration of the program. It is recommended that these funds should continue to be invested in securities of the Federal government as at present. …

December 10, 1938.

[206] Public Law 379: "Social Security Act Amendments of 1939." 76th U.S. Congress. Signed into law by Franklin Delano Roosevelt on August 10, 1939. http://www.ssa.gov/history/pdf/1939Act.pdf

Sec. 201. (a) There is hereby created on the books of the Treasury of the United States a trust fund to be known as the 'Federal Old-Age and Survivors Insurance Trust Fund' (hereinafter in this title called the 'Trust Fund'). … There is hereby appropriated to the Trust Fund for the fiscal year ending June 30, 1941, and for each fiscal year thereafter, out of any moneys in the Treasury not otherwise appropriated, amounts equivalent to 100 per centum of the taxes (including interest, penalties, and additions to the taxes) received under the Federal Insurance Contributions Act and covered into the Treasury.

[207] Research Note #20: "The Social Security Trust Funds and the Federal Budget." By Larry DeWitt. United States Social Security Administration, Historian's Office, March 4, 2005, Updated 6/18/07. http://www.ssa.gov/history/BudgetTreatment.html

Finally, just note once again that the financing procedures involving the Social Security program have not changed in any fundamental way since they were established in the original Social Security Act of 1935 and amended in 1939. These changes in federal budgeting rules govern how the Social Security program is accounted for in the federal budget, not how it is financed.

[208] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 24: "All securities held by the trust funds are backed by the full faith and credit of the United States Government, as required by law."

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

Page 5: "In 2009, the combined trust fund assets earned interest at an effective annual rate of 4.9 percent."

[209] The Social Security Administration's Office of the Chief Actuary publishes annual receipts, expenditures, and assets for both of the Social Security trust funds.* † These data show that in years in which the trust funds run a deficit, they receive back monies that the trust funds have loaned to federal government.

* Dataset: "Old-Age and Survivors Insurance Trust Fund, 1937-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a

† Dataset: "Disability Insurance Trust Fund, 1957-2009 [In millions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified Friday February 12, 2010. http://www.socialsecurity.gov/OACT/STATS/table4a2.html

NOTE: Because the disability component of Social Security was not established until 1957, no data on the Disability Trust Fund is available prior to this year.

[210] Web page: "Social Security Trust Funds: Frequently Asked Questions." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

"The government has always repaid Social Security, with interest."

[211] See here.

[212] Web page: "FAQ's: Debunking some Internet Myths. Myths and Misinformation about Social Security." United States Social Security Administration. Last reviewed or modified February 1, 2010. http://www.socialsecurity.gov/history/InternetMyths.html

Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.

[213] Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

"The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions…."

NOTE: The "combined OASI and DI Trust Funds" comprise the Social Security Trust Fund.

[214] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 11: "Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll [Under Intermediate Assumptions]"

NOTE: The "Cost" curve exceeds the "Expenditures" curve for all years starting in 2033. This graph ends in 2090. For the years beyond this, see the following excerpt from the same report.

Pages 15-16: "Extending the horizon beyond 75 years increases the measured unfunded obligation. Through the infinite horizon, the unfunded obligation, or shortfall, equals $20.5 trillion in present value, which represents 3.9 percent of future taxable payroll or 1.3 percent of future GDP. The summarized shortfalls for the 75-year period and through the infinite horizon both reflect annual cash-flow shortfalls for all years after trust fund exhaustion."

[215] Result of an independent study performed by Just Facts. All data used in the study was obtained from the United States Social Security Administration. Our actual calculations show that the program would have become insolvent in 1977, but because approximations were used in the study, we added an extra 3 years as a margin of safety. The original Social Security Act of 1935 specified different tax rates that were supposed to become effective at certain points in time. Over the course of time, the law was changed. Between 1940 and 1962, the tax rates were lower than the Social Security Act of 1935 originally specified. Since 1963, the tax rates have been higher than originally specified. This study accounts for both of these situations. If the study reflected only the extra taxes paid by the younger generations, the insolvency date would have occurred years earlier. This study did not account for the extra taxes and expenses that have resulted from the government adding disability benefits to the Social Security program. If these numbers were added into the calculation, the insolvency date would have occurred years earlier. This study did not account for extra taxes that have resulted from the government increasing the wage threshold. If these numbers were added into the calculation, the insolvency date would have occurred years earlier.

[216] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 138: "The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds."

[217] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

[218] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt, August 5, 2004. Last updated October 10, 2008. http://www.treasurydirect.gov/news/pressroom/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."

[219] Web page: "Social Security Trust Funds: Frequently Asked Questions." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

[220] Web page: "Social Security Online History: Presidential Statements. George W. Bush- 2nd Quarter 2005. President Tours Bureau of Public Debt." United States Social Security Administration, April 5, 2005. http://www.ssa.gov/history/gwbushstmts5b.html#04052005

THE PRESIDENT: See, what's interesting is a lot of people believe that the Social Security trust is -- the government takes a person's money, invests it, and then pays it back to them upon retirement. It doesn't work that way.

MS. CHAPMAN: That's right, that's exactly right.

THE PRESIDENT: This is what exists. And it's very important, then, to make sure that in the future that there's real assets for retirees.

[221] Article: " 'Trust Fund' is Locked in Filing Cabinet." By Dennis Cauchon. USA Today, April 5, 2005. http://www.usatoday.com/news/washington/...

The papers in the cabinet are computer-generated replicas of $1.7 trillion in Treasury bonds — the amount the government has promised to repay Social Security for spending payroll taxes that finance the retirement system on other programs such as defense and education.

The imitation bonds are signed by Chapman, division director of the Office of Public Accounting in the Trust Fund Management Branch of the Bureau of the Public Debt. The bureau is part of the Treasury Department.

[222] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

[223] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt. Last updated August 5, 2004. Last Updated October 10, 2008. http://www.treasurydirect.gov/news/pressroom/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."

[224] Report: "Monthly Statement of the Public Debt of the United States, December 31, 2010." United States Department of the Treasury, Bureau of the Public Debt. http://www.treasurydirect.gov/govt/reports/pd/mspd/...

NOTE: The money that the federal government owes to the Social Security program is itemized in the line items for the "Federal Disability Insurance Trust Fund" and the "Federal Old-Age and Survivors Insurance Trust Fund." Both of these appear on page 9 in "Table III - Detail of Treasury Securities Outstanding."

[225] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 7: "In 2011, the combined trust fund assets earned interest at an effective annual rate of 4.4 percent."

Page 27: "Section 201(d) of the Social Security Act provides that the obligations issued for purchase by the OASI and DI Trust Funds shall have maturities fixed with due regard for the needs of the funds. The usual practice has been to spread the holdings of special issues, as of each June 30, so that the amounts maturing in each of the next 15 years are approximately equal."

[226] Web page: "Frequently Asked Questions About the Public Debt." United States Department of the Treasury, Bureau of the Public Debt. Last Updated November 26, 2010. http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm

What is the Debt Held by the Public?

The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.

What are Intragovernmental Holdings?

Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.

[227] NOTE: There is considerable confusion regarding the terminology associated with the national debt. Just Facts has come across numerous instances in which politicians and reporters use terms that refer to the overall national debt, when in fact, they are only referring to this portion of the debt. Listed below are some frequently used terms categorized by their proper meaning:

(a) Overall national debt – national debt, public debt, gross debt, debt

(b) Portion of the national debt owed to federal entities – Nonmarketable debt, Intragovernmental holdings, debt held by the government, government held debt

(c) Portion of the national debt owed to non-federal entities – Marketable debt, debt held by the public, publicly held debt

[228] United States Code Title 31, Subtitle III, Chapter 31, Subchapter II, Section 3123: “Payment of obligations and interest on the public debt.” Accessed April 7, 2011 at http://www4.law.cornell.edu/uscode/31/3123.html

Section (a): "The faith of the United States Government is pledged to pay, in legal tender, principal and interest on the obligations of the Government issued under this chapter."

[229] Report: "Monthly Statement of the Public Debt of the United States, December 31, 2011." United States Department of the Treasury, Bureau of the Public Debt. http://www.treasurydirect.gov/govt/reports/pd/mspd/...

 

	Millions $
Debt Held By the Public	10,447,663
Intragovernmental Holdings	4,775,277
Total	15,222,940

[231] Speech: "Address of the President to Joint Sessions of Congress." President George W. Bush, February 27, 2001. http://georgewbush-whitehouse.archives.gov/news/...

[232] Report: "A Blueprint for New Beginnings – A Responsible Budget for America's Priorities." Executive Office of the President of the United States, February 28, 2001. http://www.gpoaccess.gov/usbudget/fy02/pdf/blueprnt.pdf

Page 11: "At the end of 2001, there will be $3.2 trillion in publicly held debt. About $2.0 trillion can actually be retired over the next 10 years."

NOTE: The 2 trillion dollars to be retired is "publicly held debt." The numbers cited do not include the debt owed to federal entities.

[233] Report: "A Blueprint for New Beginnings – A Responsible Budget for America's Priorities." Executive Office of the President of the United States, February 28, 2001. http://www.gpoaccess.gov/usbudget/fy02/pdf/blueprnt.pdf

NOTE: Page 201 contains a chart with a section labeled, "Held By." Compare the following two line items:

(a) "Debt securities held as assets by Government accounts."  This is the debt owed to federal entities. Between 2001 and 2011, it rises by 3,782 billion dollars (goes from $2,219 billion to 6,001 billion).

(b) "Debt held by the public (gross)." – This is the debt owed to non-federal entities. Between 2001 and 2011, it falls by 2,252 billion dollars (goes from $3,410 billion to $1,158 billion).

The net effect is an increase in the national debt:

3,782 billion dollar increase in debt owed to federal entities

– 2,252 billion decrease in debt owed to non-federal entities

= 1,530 billion increase to the national debt.

[234] Report: "A Blueprint for New Beginnings – A Responsible Budget for America's Priorities." Executive Office of the President of the United States, February 28, 2001. http://www.gpoaccess.gov/usbudget/fy02/pdf/blueprnt.pdf

NOTE: Page 201 contains a chart with a section labeled, "Debt Outstanding, End of Year." Examine the line item, "Total, gross federal debt." This is the national debt. Between 2001 and 2011, it increases by 1,530 billion dollars. Observe that this figure matches the result of the calculation in the previous footnote.

[235] Article: "The Impact of Social Security on the National Debt." By James D. Agresti. Just Facts, September 1, 2001. http://justfacts.com/news.impactSS.asp

"I will put Social Security into a lockbox." …

Examine this scenario from Social Security's standpoint. Social Security loans money to the federal government and will collect on the money and interest in the future. … Now look at this from the federal government's standpoint. The federal government borrows money from Social Security and uses it to pay off debt that it owes to someone else. This leaves the national debt exactly as it was.

[236] Article: "Al Gore's Social Security Confusion." By Peter J. Ferrara. Cato Institute. October 26, 2000. http://www.cato.org//dailys/10-06-00.html

"During the presidential debate, Vice President Gore told the nation, 'I will keep Social Security in a lockbox, and that pays down the national debt.' Well, which is it? If you take the Social Security surplus each year and use it to pay down the national debt, you're not exactly keeping Social Security funds in a lockbox."

[237] Article: "The Impact of Social Security on the National Debt." By James D. Agresti. Just Facts, September 1, 2001. http://justfacts.com/news.impactSS.asp

When Social Security loans money to the federal government, the government can either spend the money or use it to pay off someone else that the federal government owes money to. If the federal government spends the money, this action is what some people refer to as, "raiding the Social Security Trust Fund."

This is an inaccurate description of what is taking place because not one dime is taken out of the Social Security Trust Fund. Examine this scenario from Social Security's standpoint. Social Security loans money to the federal government and will collect on the money and interest in the future. Now examine it from the federal government's standpoint. The federal government borrows money from Social Security and spends it. This increases the national debt.

[238] Press release: "Pence Calls on Congress to Stop Raiding Social Security Trust Fund." U.S. Congressman Mike Pence, June 22, 2005. http://mikepence.house.gov/index.php?option=...

"It has simply been wrong these last four decades for the Congress of the United States to take the Social Security surplus and apply it to spending on big government.

"We need to stop raiding the Social Security trust fund. …"

[239] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 24: "All securities held by the trust funds are backed by the full faith and credit of the United States Government, as required by law."

Page 142: "The Social Security Act does not permit expenditures from the OASI [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI [Social Security] program."

Page 221: "Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

[240] Web page: "Social Security Trust Funds: Frequently Asked Questions." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

"[T]he investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest."

[241] Article: "The Impact of Social Security on the National Debt." By James D. Agresti. Just Facts, September 1, 2001. http://justfacts.com/news.impactSS.asp

When Social Security loans money to the federal government, the government can either spend the money or use it to pay off someone else that the federal government owes money to. If the federal government spends the money, this action is what some people refer to as, "raiding the Social Security Trust Fund."

This is an inaccurate description of what is taking place because not one dime is taken out of the Social Security Trust Fund. Examine this scenario from Social Security's standpoint. Social Security loans money to the federal government and will collect on the money and interest in the future. Now examine it from the federal government's standpoint. The federal government borrows money from Social Security and spends it. This increases the national debt. …

"I will put Social Security into a lockbox." …

Examine this scenario from Social Security's standpoint. Social Security loans money to the federal government and will collect on the money and interest in the future. … Now look at this from the federal government's standpoint. The federal government borrows money from Social Security and uses it to pay off debt that it owes to someone else. This leaves the national debt exactly as it was.

[242] Web page: "Debt versus Deficit: What's the Difference?" United States Department of the Treasury, Bureau of the Public Debt. Last updated August 5, 2004. Last Updated October 10, 2008. http://www.treasurydirect.gov/news/pressroom/...

"Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt."

[243] Report: "Monthly Statement of the Public Debt of the United States, December 31, 2010." United States Department of the Treasury, Bureau of the Public Debt. http://www.treasurydirect.gov/govt/reports/pd/mspd/...

NOTE: The money that the federal government owes to the Social Security program is itemized in the line items for the "Federal Disability Insurance Trust Fund" and the "Federal Old-Age and Survivors Insurance Trust Fund." Both of these appear on page 9 in "Table III - Detail of Treasury Securities Outstanding."

[244] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 142: "The Social Security Act does not permit expenditures from the OASI [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI [Social Security] program."

NOTE: This includes the national debt.

[245] "Internal Revenue Manual." Internal Revenue Service. Accessed January 11, 2011 at http://www.irs.gov/irm/index.html

Part 1, Chapter 34, Section 1 (http://www.irs.gov/irm/part1/irm_01-034-001.html): "The main financing component of the Federal funds group is referred to as the General Fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program and consists of all collections not earmarked by law to finance other funds."

[246] United States Code Title 42, Chapter 7, Subchapter II, Section 401: "Trust Funds."

NOTE: As per the link on this page entitled, How current is this?, "Title 42 of the US Code as currently published by the US Government reflects the laws passed by Congress as of Feb. 1, 2010, and it is this version that is published here."

(a) Federal Old-Age and Survivors Insurance Trust Fund

There is hereby created on the books of the Treasury of the United States a trust fund to be known as the "Federal Old-Age and Survivors Insurance Trust Fund". … There is hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund for the fiscal year ending June 30, 1941, and for each fiscal year thereafter, out of any moneys in the Treasury not otherwise appropriated, amounts equivalent to 100 per centum of—

(1) the taxes (including interest, penalties, and additions to the taxes) received under subchapter A of chapter 9 of the Internal Revenue Code of 1939 ….

(b) Federal Disability Insurance Trust Fund

There is hereby created on the books of the Treasury of the United States a trust fund to be known as the "Federal Disability Insurance Trust Fund." … There is hereby appropriated to the Federal Disability Insurance Trust Fund for the fiscal year ending June 30, 1957, and for each fiscal year thereafter, out of any moneys in the Treasury not otherwise appropriated, amounts equivalent to 100 per centum….

[247] Calculated with data from: "Historical Budget Data, Fiscal Years 1962-2006." Congressional Budget Office, September 2008. http://cbo.gov/

NOTES:

- This report is no longer available on the Congressional Budget Office's web site, but the data tables are still posted in pdf format at http://cbo.gov/budget/historical.shtml and in .xls format at http://cbo.gov/budget/data/historical.xls

- The specific data used in the calculations are from the table entitled, "Revenues by Major Source, 1962 to 2006."

- An Excel file containing the data and calculations is available upon request.

[248] House Resolution 1259: "Social Security and Medicare Safe Deposit Box Act of 1999." 106th Congress, United States House of Representatives, March 24, 1999. http://thomas.loc.gov/

Sec 2 (b): "Purpose: It is the purpose of this Act to prohibit the use of Social Security surpluses for any purpose other than reforming Social Security and Medicare."

[249] Report: "Filibusters and Cloture in the Senate." By Richard S. Beth & Stanley Bach. Library of Congress, Congressional Research Service. Updated March 28, 2003. http://www.senate.gov/reference/resources/pdf/RL30360.pdf

Page 2 (in PDF): 

The filibuster is widely viewed as one of the Senate's most characteristic procedural features. Filibustering includes any use of dilatory or obstructive tactics to block a measure by preventing it from coming to a vote. The possibility of filibusters exists because Senate rules place few limits on Senators' rights and opportunities in the legislative process. …

Senate Rule XXII, however, known as the "cloture rule," enables Senators to end a filibuster on any debatable matter the Senate is considering. Sixteen Senators initiate this process by presenting a motion to end the debate. The Senate does not vote on this cloture motion until the second day after the motion is made. Then it usually requires the votes of at least three-fifths of all Senators (normally 60 votes) to invoke cloture. Invoking cloture on a proposal to amend the Senate's standing rules requires the support of two-thirds of the Senators present and voting.

Page10:

Invoking cloture usually requires a three-fifths vote of the entire Senate—"three-fifths of the Senators duly chosen and sworn." If there are no vacancies, therefore, 60 Senators must vote to invoke cloture. In contrast, most other votes require only a simple majority (that is, 51%) of the Senators present and voting, assuming that those Senators constitute a quorum. In the case of a cloture vote, the key is the number of Senators voting for cloture, not the number voting against. Failing to vote on a cloture motion has the same effect as voting against the motion: it deprives the motion of one of the 60 votes needed to agree to it.

There is an important exception to the three-fifths requirement to invoke cloture. Under Rule XXII, an affirmative vote of two-thirds of the Senators present and voting is required to invoke cloture on a measure or motion to amend the Senate rules. This exception has its origin in the recent history of the cloture rule. Before 1975, two-thirds of the Senators present and voting (a quorum being present) was required for cloture on all matters. In early 1975, at the beginning of the 94th Congress, Senators sought to amend the rule to make it somewhat easier to invoke cloture. However, some Senators feared that if this effort succeeded, that would only make it easier to amend the rule again, making cloture still easier to invoke. As a compromise, the Senate agreed to move from a maximum of 67 votes (two-thirds of the Senators present and voting) to a minimum of 60 votes (three-fifths of the Senators duly chosen and sworn) on all matters except future rules changes, including changes in the cloture rule itself.11"

[250] Standing Rules of the Senate, Rule XXII: "Precedence Of Motions." Accessed June 20, 2008 at http://rules.senate.gov/senaterules/rule22.php

2. Notwithstanding the provisions of rule II or rule IV or any other rule of the Senate, at any time a motion signed by sixteen Senators, to bring to a close the debate upon any measure, motion, other matter pending before the Senate, or the unfinished business, is presented to the Senate, the Presiding Officer, or clerk at the direction of the Presiding Officer, shall at once state the motion to the Senate, and one hour after the Senate meets on the following calendar day but one, he shall lay the motion before the Senate and direct that the clerk call the roll, and upon the ascertainment that a quorum is present, the Presiding Officer shall, without debate, submit to the Senate by a yea-and-nay vote the question:

"Is it the sense of the Senate that the debate shall be brought to a close?" And if that question shall be decided in the affirmative by three-fifths of the Senators duly chosen and sworn -- except on a measure or motion to amend the Senate rules, in which case the necessary affirmative vote shall be two-thirds of the Senators present and voting -- then said measure, motion, or other matter pending before the Senate, or the unfinished business, shall be the unfinished business to the exclusion of all other business until disposed of.

Thereafter no Senator shall be entitled to speak in all more than one hour on the measure, motion, or other matter pending before the Senate, or the unfinished business, the amendments thereto, and motions affecting the same, and it shall be the duty of the Presiding Officer to keep the time of each Senator who speaks. Except by unanimous consent, no amendment shall be proposed after the vote to bring the debate to a close, unless it had been submitted in writing to the Journal Clerk by 1 o'clock p.m. on the day following the filing of the cloture motion if an amendment in the first degree, and unless it had been so submitted at least one hour prior to the beginning of the cloture vote if an amendment in the second degree. No dilatory motion, or dilatory amendment, or amendment not germane shall be in order. Points of order, including questions of relevancy, and appeals from the decision of the Presiding Officer, shall be decided without debate.

After no more than thirty hours of consideration of the measure, motion, or other matter on which cloture has been invoked, the Senate shall proceed, without any further debate on any question, to vote on the final disposition thereof to the exclusion of all amendments not then actually pending before the Senate at that time and to the exclusion of all motions, except a motion to table, or to reconsider and one quorum call on demand to establish the presence of a quorum (and motions required to establish a quorum) immediately before the final vote begins. The thirty hours may be increased by the adoption of a motion, decided without debate, by a three-fifths affirmative vote of the Senators duly chosen and sworn, and any such time thus agreed upon shall be equally divided between and controlled by the Majority and Minority Leaders or their designees. However, only one motion to extend time, specified above, may be made in any one calendar day.

[251] U.S. Senate roll call vote number 170: "On the Motion to Invoke Cloture on H.R.1259." 106th Congress, United States Senate, June 16, 1999. http://www.senate.gov/legislative/LIS/roll_call_lists/...

 

	Voted YES	Voted NO	Not Voting
Republican	55
Democratic		44	1

NOTE: A total of 60 yes votes were needed to invoke cloture and allow a vote on the bill.

[252] Report: "Monthly Statement of the Public Debt of the United States, December 31, 2011." United States Department of the Treasury, Bureau of the Public Debt. http://www.treasurydirect.gov/govt/reports/pd/mspd/...

Page 9: "Table III - Detail of Treasury Securities Outstanding … Amount in Millions of Dollars … Federal Disability Insurance Trust Fund [=] $153,996 … Federal Old-Age and Survivors Insurance Trust Fund [=] $2,524,898"

CALCULATION: $153,996,000,000 + $2,524,898,000,000 = $2,678,894,000,000
 

[253] Dataset: "Monthly Population Estimates for the United States: April 1, 2010 to March 1, 2012." U.S. Census Bureau, Population Division, April 2012. http://www.census.gov/popest/data/national/totals/2011/index.html

"Resident Population … January 1, 2012 … [=] 312,780,968"

CALCULATION: $2,678,894,000,000 / 312,780,968 people = $8,565 debt/person

[254] Dataset: "Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2011." U.S. Census Bureau, November 2011. http://www.census.gov/population/...

Total households = 118,682,000

CALCULATION: $2,678,894,000,000 debt / 118,682,000 households = $22,572 debt/household

[255] "2012 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, April 25, 2012. http://www.ssa.gov/oact/tr/2012/tr2012.pdf

Page 10: "As it has since 2010, projected cost exceeds non-interest income throughout the short-range period."

[256] "2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 2: "Annual cost will exceed tax income … at which time the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets…."

Page 8: "Redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until … when the trust funds are projected to become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury."

[257] Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

"The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions…."

NOTE: The "combined OASI and DI Trust Funds" comprise the Social Security Trust Fund.

[258] Report: "Analytical Perspectives: Budget of the United States Government, Fiscal Year 2000." Executive Office of the President of the United States, 1999. http://www.gpoaccess.gov/usbudget/fy00/pdf/spec.pdf

Page 337:

These balances are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits.

[259] Report: "Federal Debt and Interest Costs." Congressional Budget Office, December 2010. http://cbo.gov/ftpdocs/119xx/doc11999/12-14-FederalDebt.pdf

Page IX:

At the end of [Fiscal Year] 2010, gross federal debt totaled $13.5 trillion— the $9.0 trillion in debt held by the public plus $4.5 trillion in debt held by government accounts. More than half of the latter amount is held by the Social Security trust funds. Because those trust funds and other government accounts are part of the federal government, transactions between them and the Treasury are intragovernmental; that is, the government securities in those funds are an asset to the individual programs but a liability to the rest of the government. The resources needed to redeem the government securities in the trust funds and other accounts in some future year must be generated from taxes, income from other government sources, or borrowing by the government in that year.

[260] A detailed accounting of these debts, liabilities, and obligations is published in Just Facts' research on the national debt.

[261] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

The current Social Security system works like this: when you work, you pay taxes into Social Security. The tax money is used to pay benefits to:

• People who already have retired;

• People who are disabled;

• Survivors of workers who have died; and

• Dependents of beneficiaries.

The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.

[262] "The 1936 Government Pamphlet on Social Security." United States Social Security Administration. http://www.ssa.gov/history/ssn/ssb36.html

"The checks will come to you as a right. You will get them regardless of the amount of property or income you may have. They are what the law calls "Old-Age Benefits" under the Social Security Act."

[263] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Library of Congress, Congressional Research Service. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Pages 2-3: "1939 Amendments … The provision for lump-sum payments of 3.5% of accumulated wages for workers who died before age 65, or attained age 65 but were ineligible for benefits, was repealed…."

[264] "Social Security Act of 1935."  United States Social Security Administration. http://www.ssa.gov/history/35act.html

"SEC. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress."

[265] Web page: "Supreme Court Case: Flemming vs. Nestor." United States Social Security Administration. Accessed January 5, 2011 at http://www.ssa.gov/history/nestor.html

There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

[266] Publication No. 05-10006: "A 'Snapshot'." United States Social Security Administration, May 2009. http://ssa.gov/pubs/10006.pdf

Page 4: "The Social Security and Medicare taxes you pay are not put in a special account for you. They are used to pay benefits for people getting benefits today, just as your future benefits will be paid for by future workers."

[267] Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

"The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions…."

NOTE: The "combined OASI and DI Trust Funds" comprise the Social Security Trust Fund.

[268] Calculated with data from Table 8 Alt2: "Trust Fund Operations in Current Dollars, 2012-2090, Intermediate Assumptions, 2012 Trustees Report." United States Social Security Administration, Office of the Chief Actuary. Transmitted to Just Facts on May 14, 2012.

NOTE: An Excel file containing the data and calculations is available upon request.

[269] Report: "Strengthening Social Security and Creating Personal Wealth for All Americans." The President's Commission to Strengthen Social Security, December 21, 2001. http://govinfo.library.unt.edu/csss/reports/Final_report.pdf

Page 72: "Under a personal account program, workers would be given the option to invest a portion of their payroll taxes in accounts that they would own."

Page 74: "All of the plans presented by the Commission provide individuals the option to invest in personal accounts. In all cases, these accounts are at least partially financed by a redirection of payroll tax revenue from the existing system. In return for the opportunity to pursue higher expected returns through personal accounts, individuals who choose the account agree to forgo the benefit that would have been financed by these payroll taxes (plus interest)."

[270] Memorandum: "Estimated Financial Effects of the 'Social Security Personal Savings Guarantee and Prosperity Act of 2008.'" By Stephen C. Goss. United States Social Security Administration, Office of the Chief Actuary. May 21, 2008. http://www.ssa.gov/OACT/solvency/PRyan_20080521.pdf

Page 2:

Under the plan specifications described below the Social Security program would be expected to be solvent and to meet its benefit obligations throughout the long-range period 2008 through 2082. The long-range [Social Security] actuarial deficit of 1.70 percent of payroll and the [Social Security] long-range unfunded obligation of $4.3 trillion in present value would be eliminated. In addition, trust fund assets expressed as a percentage of annual program cost are projected to be rising at the end of the 75-year period. Thus, the proposal meets the long-range criteria for sustainable solvency and would be expected to remain solvent for the foreseeable future. General Fund transfers are, however, expected to be needed under the plan in years 2032 through 2063, totaling $4.1 trillion in present discounted value. All estimates are based on the intermediate assumptions of the 2008 Trustees Report plus additional assumptions described below.

NOTE: The financial details of several other personal ownership proposals are available at http://www.ssa.gov/OACT/solvency/index.htm

[271] Report: "Strengthening Social Security and Creating Personal Wealth for All Americans." President's Commission to Strengthen Social Security, December 2001. http://govinfo.library.unt.edu/csss/reports/Final_report.pdf

Page 11: "Personal accounts can also contribute towards the fiscal sustainability of the Social Security system. While there are multiple paths to fiscal sustainability that are consistent with the President's principles for Social Security reform, we have chosen to include three reform models in the report that improve the fiscal sustainability of the current system, are costed honestly, and are preferable to the current Social Security system."

[272] Senate Bill 1302: "Stop the Raid on Social Security Act of 2005." Introduced by Senator Jim DeMint and cosponsored by Senators Santorum, Graham, Crapo, Coburn, Sununu, Isakson, Enzi, Cornyn, Lott, Brownback, And Craig. 109th U.S. Congress, June 23, 2005. http://www.gpo.gov/fdsys/pkg/BILLS-109s1302is/...

Section 255:

(a) Designation of Certified Account Managers- Under the Program, a certified account manager shall be designated by or on behalf of each participating individual to hold for investment under this section such individual's social security personal retirement account assets.

(b) Procedure for Designation- Any designation made under subsection (a) shall be made in such form and manner as shall be prescribed in regulations prescribed by the Board. Such regulations shall provide for annual selection periods during which participating individuals may make designations pursuant to subsection (a). Designations made pursuant to subsection (a) during any such period shall be irrevocable for the one-year period following such period, except that such regulations shall provide for such interim designations as may be necessitated by the decertification of a certified account manager. Such regulations shall provide for such designations made by the Board on behalf of a participating individual in any case in which a timely designation is not made by the participating individual.

(c) Investment- Any balance held in a participating individual's social security personal retirement account under this part which is not necessary for immediate withdrawal shall be invested on behalf of such participating individual by the certified account manager as follows:

(1) INVESTMENT IN MARKETABLE GOVERNMENT SECURITIES- In a representative mix of fixed marketable interest-bearing obligations of the United States then forming a part of the public debt which are not due or callable earlier than 4 years after the date of investment.

(2) ADDITIONAL AND ALTERNATIVE INVESTMENTS- Beginning with 2008, in such additional and alternative investment options in broad-based index funds that are similar to the index fund investment options available within the Thrift Savings Fund established under section 8437 of title 5, United States Code, as the Board determines would be prudent sources of retirement income that could yield greater amounts of income than the investment described in paragraph (1) and a participating individual may elect.

[273] "Biographical Directory of the United States Congress 1774-Present." United States Congress. Accessed January 20, 2011at http://bioguide.congress.gov/

NOTE: This dictionary was used to determine party affiliation.

[274] Article: "Personal Accounts and the Stock Market Collapse." By Andrew G. Biggs. American Enterprise Institute, November 21, 2008. http://www.aei.org/publications/filter.all,pubID.28971/pub_detail.asp

The portfolio would be managed on a "life-cycle" basis, meaning that the proportion of stocks and bonds would automatically be adjusted as the individual aged. Following Shiller, accounts would hold 85 percent stocks through age twenty-nine, then gradually decline to 15 percent stocks by age sixty, with annual rebalancing of assets to maintain these proportions. In Bush's 2005 personal account proposal, individuals would automatically be switched to a life-cycle account as of age forty-seven. It is likely that future personal account proposals would make a life-cycle portfolio the default option at all ages, and it is assumed that accounts would be managed in that way throughout the individual's working career.

[275] Report: "Financial Statements of the Thrift Savings Fund — 2009 and 2008." Federal Retirement Thrift Investment Board, 2010. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 5: "The Plan offers its participants various investment funds that are exposed to different types and amounts of risk, including interest rate, credit, and market risk. The funds (except for the G Fund, which is invested in a way to avoid losses) can be expected to experience greater or lesser volatility over time, depending upon each fund's individual risk profile, thus affecting the fund balances from one period to the next."

[276] Report: "Financial Statements of the Thrift Savings Fund — 2010 and 2011." Federal Retirement Thrift Investment Board, April 20, 2012. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 5: "As of December 31, 2011, there were approximately 4.5 million participants in the Plan, with approximately 2.9 million contributing their own money."

[277] Report: "Financial Statements of the Thrift Savings Fund — 2010 and 2011." Federal Retirement Thrift Investment Board, April 20, 2012. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 3: "Thrift Savings Fund Statements of Net Assets Available for Benefits As of December 31, 2011 And 2010 (In thousands) … 2011 Net Assets Available for Benefits [=] $298,112,910

Page 3: "THRIFT SAVINGS FUND STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2009 AND 2008 (In thousands) … 2009 NET ASSETS AVAILABLE FOR BENEFITS [=] $244,431,311"

[278] "Summary of the Thrift Savings Plan." Federal Retirement Thrift Investment Board, August 2010. https://www.tsp.gov/PDF/formspubs/tspbk08.pdf

Page 3: "If you are a FERS [Federal Employees' Retirement System*] employee, beginning the first time you are paid, your agency will contribute an amount equal to 1% of your basic pay each pay period to your account. These contributions are called Agency Automatic (1%) Contributions. Agency Automatic (1%) Contributions are not taken out of your pay. Nor do they decrease the dollar amount of your pay for income tax or Social Security purposes."

Page 4:

If you are a FERS participant, you receive Agency Matching Contributions on the first 5% of pay that you contribute each pay period. The first 3% of pay that you contribute will be matched dollar-for-dollar; the next 2% will be matched at 50 cents per dollar. Contributions above 5% will not be matched. If you stop making regular employee contributions, your matching contributions will also stop.

Like Agency Automatic (1%) Contributions, Agency Matching Contributions are not taken out of your pay. They also do not increase the dollar amount of your pay for income tax or Social Security purposes.

* NOTE "Federal employees, who are participants of FERS [Federal Employees' Retirement System], the Civil Service Retirement System (CSRS), or equivalent retirement systems, as provided by statute, and members of the uniformed services, are eligible to join the Plan immediately upon being hired. Generally, FERS employees are those employees hired on or after January 1, 1984, while CSRS employees are employees hired before January 1, 1984, who have not elected to convert to FERS. Each group has different rules that govern contribution rates." [Report: "Financial Statements of the Thrift Savings Fund — 2009 and 2008." Federal Retirement Thrift Investment Board, 2010. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf. Page 4.]

[279] Report: "Financial Statements of the Thrift Savings Fund — 2009 and 2008." Federal Retirement Thrift Investment Board, 2010. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 7: On June 22, 2009, the Thrift Savings Plan Enhancement Act (the Act or P.L. 111-31) was signed into law by President Obama. The Act provides for immediate Agency Automatic (1%) and Matching contributions for FERS employees (implemented in August 2009). The Act also requires civilian Federal Agencies to automatically enroll newly hired (and rehired) eligible employees unless the employee makes an affirmative election not to participate in the Fund.

[280] Report: "Financial Statements of the Thrift Savings Fund — 2009 and 2008." Federal Retirement Thrift Investment Board, 2010. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 5: "Individual accounts are maintained for each Plan participant. Each participant's account is credited with the participant's contributions, agency automatic and matching contributions, and charged with withdrawals. The value of the participant's account reflects the number of shares and the daily share prices of the funds in which the participant is invested. Administrative expenses are a component of the share price calculation."

[281] "Summary of the Thrift Savings Plan." Federal Retirement Thrift Investment Board, August 2010. https://www.tsp.gov/PDF/formspubs/tspbk08.pdf

Page 18: "In the event of your death, your account will be distributed to the beneficiary or beneficiaries you designate on the TSP's Designation of Beneficiary form."

[282] Report: "Financial Statements of the Thrift Savings Fund — 2009 and 2008." Federal Retirement Thrift Investment Board, 2010. https://www.tsp.gov/PDF/formspubs/financial-stmt.pdf

Page 4: "Participants may allocate any portion of their contributions among the five investment funds and the [five] TSP Lifecycle Funds."

Page 4:

The Agency contracted with Barclays Global Investors (Barclays) for investment in the collective investment trusts in which the F, C, S, and I Fund assets are invested. On December 1, 2009, BlackRock Inc. acquired Barclays Global Investors and the contracting party was renamed BlackRock Institutional Trust Company, N.A. (BlackRock). The acquisition has not changed the provisions of the investment management contract.

In 2005, the Agency initiated the TSP L (Lifecycle) Funds. These are asset allocation portfolios designed for the TSP by Mercer Investment Consulting, Inc. (Mercer) with investment mixes, based on the Plan's existing investment funds, tailored to a target time horizon when the participant intends to withdraw the funds.

[283] "Summary of the Thrift Savings Plan." Federal Retirement Thrift Investment Board, August 2010. https://www.tsp.gov/PDF/formspubs/tspbk08.pdf

Page 8:

The assumption underlying the L Funds is that participants with longer investment time horizons are able to tolerate more risk while seeking higher returns. The funds automatically adjust to reflect a lower tolerance for risk as the investment time horizon approaches.

Each L Fund invests in a mix of the five individual TSP funds. The mix is chosen by experts based on each fund's time horizon. The L Funds are designed to achieve the highest possible rate of return for the amount of risk taken. If the time horizon is a long time from now, the L Fund will be more heavily weighted toward stocks (C, S, and I Funds). As that fund's time horizon shortens, the allocation will gradually shift toward Government securities and bonds (G and F Funds).

[284] Editorial: "No 'Fool's Paradise'." By Donald Luskin. National Review, December 21, 2004. http://www.nationalreview.com/nrof_luskin/kts200412210858.asp

"I used to be an executive of Barclays Global Investors, the firm that has run all the index funds for the Thrift Retirement System since the program was first started in the 1980s. First, I can tell you that no government officials made any investment decisions whatsoever. My company ran the funds — and every individual federal employee decided for himself or herself which of the funds to invest in."

[285] Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010.

Pages 53-54: "The stock market benchmark chosen should be a broad index that reflects the behavior of the stock market as a whole. … The S&P 500 was selected as the appropriate market benchmark because it is representative of a large sample of companies across a large number of industries. … In short, the S&P 500 is a good measure of the equity market as a whole."

Page 23: "Total return is equal to the sum of three component returns; income return, capital appreciation return, and reinvestment return."

Page 203 (Glossary): "Real Return  The inflation-adjusted return on an investment. It measures the growth of purchasing power. The real return of an investment is calculated by geometrically subtracting inflation from the investment's nominal return."

Page 201 (Glossary): "Geometric Mean Return  The compound rate of return. The geometric mean of a return series is a measure of the actual average performance of a portfolio over a given time period."

Page 202 (Glossary): "The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally adjusted, is used to measure inflation."

[286] Calculated with data from: Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010.

Pages 164-165: "Table B-1: Large Company Stocks: Total Returns"

NOTE: The data used to make these calculations comprise a substantial portion of a copyrighted work, and thus, per the "fair use" provision of copyright law, Just Facts cannot republish this data.* However, an Excel file containing the calculations sans the copyrighted data is available upon request.

* United States Code Title 17, Chapter 1, Section 107: "Limitations on exclusive rights: Fair use." http://www.law.cornell.edu/uscode/17/107.shtml

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include— …

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work. …

NOTE: As per the link on this page entitled, How current is this?, "Title 17 of the US Code as currently published by the US Government reflects the laws passed by Congress as of Feb. 1, 2010, and it is this version that is published here."

[287] Calculated with data from: Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010.

Page 202 (Glossary): "Intermediate –Term Government Bonds  A one-bond portfolio with a maturity near five years."

Page 202 (Glossary): "Long-Term Corporate Bonds  Citigroup long-term, high-grade corporate bond index."

202 (Glossary): "Long-Term Government Bonds  A one-bond portfolio with a maturity near 20 years."

Pages 172-173: "Table B-5: Long-Term Corporate Bonds: Total Returns"

Pages 174-175: "Table B6: Long-Term Government Bonds: Total Returns"

Pages 182-183: "Table B-10: Intermediate-Term Government Bonds: Total Returns"

Pages 192-193: "Table B-15: Inflation"

NOTE: The data used to make these calculations comprise a substantial portion of a copyrighted work, and thus, per the "fair use" provision of copyright law, Just Facts cannot republish this data.* However, an Excel file containing the calculations sans the copyrighted data is available upon request.

* United States Code Title 17, Chapter 1, Section 107: "Limitations on exclusive rights: Fair use." http://www.law.cornell.edu/uscode/17/107.shtml

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include— …

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work. …

NOTE: As per the link on this page entitled, How current is this?, "Title 17 of the US Code as currently published by the US Government reflects the laws passed by Congress as of Feb. 1, 2010, and it is this version that is published here."

[288] Report: "Social Security: A Primer." Congressional Budget Office, September 2001. http://www.cbo.gov/ftpdocs/32xx/doc3213/EntireReport.pdf

Page 62: "Any pension system costs something to administer. Staff must perform such tasks as collecting funds, keeping records, managing assets, calculating and paying benefits, overseeing and enforcing rules, and (in some cases) marketing and selling the plans."

[289] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 1: "A key consideration in evaluating proposals for establishing a system of private accounts is the cost of administering the system. The operation of any system of accounts involves basic administrative tasks such as collecting and processing contributions, managing assets, and paying benefits—all of which require recordkeeping. Each of those tasks carries costs, which will ultimately affect a retiree's account balance."

[290] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 1:

The costs of administering the systems vary, in large part because of differences in the level of services and range of asset choices the systems provide. The current Social Security system, for example, restricts participants to one "asset"—promised benefits—and provides, on an annual basis, limited information about expected benefits. By contrast, most mutual funds offer a wide variety of services, including a broad range of asset choices and daily updates on account balances.

Another important factor that can affect administrative costs is the degree to which a system is centralized. For example, a centralized system such as the federal government's Thrift Savings Plan may generate few or no costs for marketing and sales. In a decentralized system that operates at the retail level, such as mutual funds, the cost of those tasks may be substantial. Decentralized systems, however, also allow for competition, which can lead to better services and more efficient operation over time.

[291] Report: "Social Security: A Primer." Congressional Budget Office, September 2001. http://www.cbo.gov/ftpdocs/32xx/doc3213/EntireReport.pdf

Pages 62-63:

Some lessons can be learned by looking at the administrative costs of a range of institutions that offer retirement savings accounts or that manage programs to provide income in retirement. Those institutions include mutual funds, defined-contribution pension plans, Social Security, and private-account plans in other countries. The experience of those institutions suggests that the administrative costs of a system of private accounts would depend greatly on the structure of the program. Under some proposals, administrative costs would be modest; but those costs could be high if an account system provided many services to investors and gave them a wide choice of investments.[Footnote omitted]

Of course, administrative costs may pay for services that people value. Some people may want to choose whether to participate in the program, how much to contribute, the mix of assets in their portfolio, and the frequency with which they adjust their portfolio. When they are at or near retirement, they may want choices about whether and when to convert their assets into an annuity and the kinds of annuities to buy. Restricting the freedom to make financial choices reduces administrative costs, but it may also reduce the value that people place on their accounts.

Another issue for policymakers to consider is how administrative costs would be allocated among participants. Two concerns arise. First, if people do not face the marginal costs of their transactions, they may take actions--such as churning (short-term buying and selling) of assets in their portfolios--that raise administrative costs. Second, if some of the fixed administrative costs are not spread among accounts, they could absorb much of the income of people who have small accounts (because of low incomes or intermittent work histories).

[292] Book: Costs and Benefits of Collective Pension Systems. Edited by Onno W. Steenbeek and S. G. van der Lecq. Springer-Verlag, 2007.

Page 55: "The table shows that administrative costs expressed as percentage of total assets are negatively related to the size of pension funds."

[293] "Summary of the Thrift Savings Plan." Federal Retirement Thrift Investment Board, August 2010. https://www.tsp.gov/PDF/formspubs/tspbk08.pdf

Page 12: "The effect of administrative expenses (after forfeitures) on the earnings of the … Funds is expressed as the expense ratio of each fund. The expense ratio for a fund is comprised of the total administrative expenses charged to that fund during a specific period, divided by that fund's average balance for that period."

[294] This figure could also be expressed as "50 basis points," a basis point being one one-hundredth of a percentage point.

[295] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 2:

The size of the account is crucial in determining the percentage impact of administrative costs on account balances. Because large accounts are unlikely to cost much more to administer than small accounts, administrative costs would affect their balances proportionately less. For example, balances in accounts receiving 4 percent of taxable earnings would probably be affected by administrative costs only half as much, in percentage terms, as accounts receiving 2 percent of taxable earnings.

[296] Report: "Social Security Privatization and the Annuities Market." Congressional Budget Office, February 1998. http://www.cbo.gov/doc.cfm?index=348&type=0

"In addition, the smaller the market, the larger the administrative costs per customer tend to be…."

[297] Book: Costs and Benefits of Collective Pension Systems. Edited by Onno W. Steenbeek and S. G. van der Lecq. Springer-Verlag, 2007.

Page 55:

Economies of scale result from high fixed costs and other operating costs that increase less than proportionally with pension fund size. Examples include the costs arising from policy development, data management systems, reporting requirements and the hiring of experts such as actuaries, accountants, lawyers, and consultants.

The lower part of Table 1 presents the (weighted) average administrative costs for different size categories in terms of total assets. The table shows that administrative costs expressed as percentage of total assets are negatively related to the size of pension funds. While the smallest funds have operating costs of 1.23% of total assets, this percentage is only 0.10% for the largest funds. … In summary, Table 1 shows that the operating costs of pension funds are characterized by strong economies of scale, irrespective of whether the size of the institution is expressed in terms of participant numbers or total assets.

[298] Memo: "Estimated Financial Effects of 'The Progressive Personal Account Plan." By Stephen C. Goss. United States Social Security Administration, Office of the Chief Actuary, December 1, 2003. http://www.ssa.gov/oact/solvency/PFerrara_20031201.html

Starting in 2005, all workers who will reach their 55th birthday on January 1, 2005 or later will have the option to enroll in the personal account plan. Enrollees with earnings in OASDI (Social Security) covered employment will have a portion of their payroll tax contribution (12.4 percent of taxable earnings in total) redirected from the OASDI Trust Funds to an individual account. The percentage of taxable earnings to be redirected in 2005 will be 10 percent of the first $10,000 of covered earnings for the year, plus 5 percent of earnings in excess of $10,000 up to the OASDI taxable maximum amount (which is $87,000 for 2003). The $10,000 threshold would be indexed by increases in the SSA national Average Wage Index (AWI) for years after 2005. The progressive scale for IA contributions redirected from the OASDI Trust Funds is estimated to amount to about 6.4 percentage points of the 12.4 percent payroll tax rate on average. The total amount redirected from the OASDI contribution rate indicated in Table 1 is less than 6.4 percent of payroll for years through 2029, because workers age 55 and older at the beginning of 2005 have no IA contributions.

Under the plan, individual account (IA) assets, once credited, would be automatically invested by workers through a central administrative authority that would maintain all records of individual transactions and balances. Participants would be offered a range of investment options provided by qualified private investment companies. … Unless otherwise specified, IA balances would be maintained in a default portfolio with 65 percent in a specified broad index fund consisting of private equities for corporations based in the United States (such as the Wilshire 5000) and 35 percent in a broad index of corporate bonds issued by companies based in the United States. Due to the nature of the accounts, an ultimate administrative cost of 0.25 percent of assets is assumed to be reasonable.

[299] Cost Estimate: "H.R. 3821, Bipartisan Retirement Security Act of 2004." Congressional Budget Office, February 24, 2004. http://www.cbo.gov/doc.cfm?index=5667&type=0

Page 1: "H.R. 3821, the Bipartisan Retirement Security Act of 2004, introduced by Representatives [Jim] Kolbe [Republican, Arizona] and [Charles] Stenholm [Democrat, Texas], would make numerous changes to the Social Security system. … [It] would redirect approximately 2.3 percentage points of the current 12.4 percent payroll tax for Old-Age, Survivors and Disability Insurance (OASDI) to individual accounts, which would belong to covered workers."

Page 7: "H.R. 3821 would establish a new system of individual accounts (labeled individual security accounts), which would be funded primarily through receipts from the existing payroll tax and earnings on the accounts' investments."

Page 18: "In general, H.R. 3821 copies many features of the proposed IAs [individual accounts] from the federal employees' Thrift Savings Plan (TSP), the government's 401(k)-type program, a giant venture that now manages more than $100 billion in assets on behalf of 3 million current and former federal employees."

CALCULATION: 2.3 / 12.4 = 18.5%

[300] "Biographical Directory of the United States Congress 1774-Present." United States Congress. Accessed January 20, 2011at http://bioguide.congress.gov/

NOTE: This dictionary was used to determine party affiliations.

[301] Study: "Administrative Costs of Private Accounts in Social Security." By Ben Page under the direction of Douglas Hamilton and Robert Dennis. Congressional Budget Office, Macroeconomic Analysis Division, March 2004. http://www.cbo.gov/ftpdocs/52xx/doc5277/Report.pdf

Page 12:

The administrative costs of the TSP [Thrift Savings Plan] are held in check by several factors: investment choices are restricted; the system is quite large, and investments are bundled and made centrally; and all covered workers operate under the same payroll system, which simplifies recordkeeping. In addition, all records provided by the employing agencies are in electronic form. An annual cost of $25 would reduce the assets in an account receiving 2 percent of earnings by about 5 percent at retirement. However, the administrative costs of a universal system that offered the same services as the TSP could be higher because a different set of employers and employees would be covered. For example, many employers provide Social Security with paper earnings records, which are more costly to process than electronic records.

NOTE: The following factors could cause Social Security personal ownership systems to meet or better the Thrift Savings Plan administrative costs:

• The increasing ubiquity of computers and/or a requirement that participating employers submit the required data electronically.

• Overall assets in the personal ownership system would dwarf those in the Thrift Savings Plan, thus introducing economies of scale.

• Large individual account balances would accrue under personal ownership systems in which people were allowed to save and invest larger percentages of their payroll taxes.

[302] "Summary of the Thrift Savings Plan." Federal Retirement Thrift Investment Board, August 2010. https://www.tsp.gov/PDF/formspubs/tspbk08.pdf

Page 12: "The effect of administrative expenses (after forfeitures) on the earnings of the … Funds is expressed as the expense ratio of each fund. The expense ratio for a fund is comprised of the total administrative expenses charged to that fund during a specific period, divided by that fund's average balance for that period."

NOTE: The table on this page shows that during 2009, the administrative expenses for all of the funds were 0.028%.

[303] CALCULATION: ($50,000/year) X (45 years) X 12.4% = $279,000

[304] Publication No. 05-10006: "A 'Snapshot'." United States Social Security Administration, May 2009. http://ssa.gov/pubs/10006.pdf

Page 4: "The Social Security and Medicare taxes you pay are not put in a special account for you. They are used to pay benefits for people getting benefits today, just as your future benefits will be paid for by future workers."

[305] Table VI.F7: "Operations of the Combined OASI and DI Trust Funds, in CPI-indexed 2012 Dollars, Calendar Years 2012-90 [In billions]." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified April 23, 2012. http://www.ssa.gov/OACT/TR/2012/lr6f7.html

"The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions…."

NOTE: The "combined OASI and DI Trust Funds" comprise the Social Security Trust Fund.

[306] An Excel file containing the data and calculations is available upon request.

NOTE: For projecting future returns, there is considerable question over whether the geometric or arithmetic return of the past is more instructive.* Thus, to provide information that portrays the strengths and weaknesses of both measures, Just Facts cites the worst- and best-case geometric return scenarios for all 45-year periods since 1926. This allows readers to see the full range of historical variation for the investment period.

With regard to the "average" scenario, Just Facts cites the geometric return (which is by mathematical law always lower than the arithmetic return†) because our Standards of Credibility require that we give "preferentiality to figures that are contrary to our viewpoints" and use "the most cautious plausible interpretations of such data."

* Paper: "Forecasting U.S. Equity Returns in the 21st Century." By John Y. Campbell (Professor of Economics Harvard University). In "Estimating the Real Rate of Return on Stocks Over the Long Term." U.S. Social Security Advisory Board, August 2001. http://www.ssab.gov/Publications/Financing/estimated rate of return.pdf

Page 3: "The geometric average return is the cumulative past return on U.S. equities, annualized. … The arithmetic average return is the average of one-year past returns on U.S. equities. …When returns are serially uncorrelated, the arithmetic average represents the best forecast of future return in any randomly selected future year. For long holding periods, the best forecast is the arithmetic average compounded up appropriately. … When returns are negatively serially correlated, however, the arithmetic average is not necessarily superior as a forecast of long-term future returns."

† Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010. Page 100.

[307] An Excel file containing the data and calculations is available upon request.

NOTE: For projecting future returns, there is considerable question over whether the geometric or arithmetic return of the past is more instructive.* Thus, to provide information that portrays the strengths and weaknesses of both measures, Just Facts cites the worst- and best-case geometric return scenarios for all 45-year periods since 1926. This allows readers to see the full range of historical variation for the investment period.

With regard to the "average" scenario, Just Facts cites the geometric return (which is by mathematical law always lower than the arithmetic return†) because our Standards of Credibility require that we give "preferentiality to figures that are contrary to our viewpoints" and use "the most cautious plausible interpretations of such data."

* Paper: "Forecasting U.S. Equity Returns in the 21st Century." By John Y. Campbell (Professor of Economics Harvard University). In "Estimating the Real Rate of Return on Stocks Over the Long Term." U.S. Social Security Advisory Board, August 2001. http://www.ssab.gov/Publications/Financing/estimated rate of return.pdf

Page 3: "The geometric average return is the cumulative past return on U.S. equities, annualized. … The arithmetic average return is the average of one-year past returns on U.S. equities. …When returns are serially uncorrelated, the arithmetic average represents the best forecast of future return in any randomly selected future year. For long holding periods, the best forecast is the arithmetic average compounded up appropriately. … When returns are negatively serially correlated, however, the arithmetic average is not necessarily superior as a forecast of long-term future returns."

† Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010. Page 100.

[308] An Excel file containing the data and calculations is available upon request.

NOTE: For projecting future returns, there is considerable question over whether the geometric or arithmetic return of the past is more instructive.* Thus, to provide information that portrays the strengths and weaknesses of both measures, Just Facts cites the worst- and best-case geometric return scenarios for all 45-year periods since 1926. This allows readers to see the full range of historical variation for the investment period.

With regard to the "average" scenario, Just Facts cites the geometric return (which is by mathematical law always lower than the arithmetic return†) because our Standards of Credibility require that we give "preferentiality to figures that are contrary to our viewpoints" and use "the most cautious plausible interpretations of such data."

* Paper: "Forecasting U.S. Equity Returns in the 21st Century." By John Y. Campbell (Professor of Economics Harvard University). In "Estimating the Real Rate of Return on Stocks Over the Long Term." U.S. Social Security Advisory Board, August 2001. http://www.ssab.gov/Publications/Financing/estimated rate of return.pdf

Page 3: "The geometric average return is the cumulative past return on U.S. equities, annualized. … The arithmetic average return is the average of one-year past returns on U.S. equities. …When returns are serially uncorrelated, the arithmetic average represents the best forecast of future return in any randomly selected future year. For long holding periods, the best forecast is the arithmetic average compounded up appropriately. … When returns are negatively serially correlated, however, the arithmetic average is not necessarily superior as a forecast of long-term future returns."

† Ibbotson 2010 Valuation Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926-2009. Morningstar, 2010. Page 100.

[309] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, January 2010. http://www.ssa.gov/pubs/10024.html

Survivors benefits

When you die, your family may be eligible for benefits based on your work.

Family members who can collect benefits include a widow or widower who is:

• 60 or older; or

• 50 or older and disabled; or

• Any age if he or she is caring for your child who is younger than 16 or disabled and entitled to Social Security benefits on your record.

Your children can receive benefits, too, if they are unmarried and:

• Younger than 18 years old; or

• Between 18 and 19 years old, but in an elementary or secondary school as full-time students; or

• Age 18 or older and severely disabled (the disability must have started before age 22).

Additionally, your parents can receive benefits on your earnings if they were dependent on you for at least half of their support.

Payment after death

If you have enough credits, a one-time payment of $255 also will be made after your death. This benefit may be paid to your spouse or minor children if they meet certain requirements.

If you are divorced

If you are divorced, your ex-spouse may be eligible for survivors benefits based on your earnings when you die. He or she must:

• Be at least age 60 years old (or 50 if disabled) and have been married to you for at least 10 years; or

• Be any age if he or she is caring for a child who is eligible for benefits based on your earnings; and

• Not be eligible for an equal or higher benefit based on his or her own work; and

• Not be currently married, unless the remarriage occurred after age 60 or after age 50 if disabled.

Benefits paid to an ex-spouse will not affect the benefit rates for other survivors receiving benefits on your earnings record.

[310] Report: "Strengthening Social Security and Creating Personal Wealth for All Americans." The President's Commission to Strengthen Social Security, December 21, 2001. http://govinfo.library.unt.edu/csss/reports/Final_report.pdf

Page 7:

One egregious failing of the present system is its effect on minorities with shorter life spans than the white majority. For black men age 20, only some 65 percent can be expected to survive to age 65. Thus, one of every three black youths will pay for retirement benefits they will never collect. No one intends this; and with time the gap may close. But it is not closed now. And because Social Security provides no property rights to its contributors – the Supreme Court has twice so ruled – a worker could easily work forty years then die and own not a penny of the contributions he has made for retirement benefits he will never collect. There are, to be sure, survivors and dependents benefits, but many workers die before eligibility for these is established. Disability insurance was added during the Eisenhower Administration so that workers are covered during their working years. But far too many never receive any retirement benefits and leave no estate.

Page 32:

Almost one in five 20-year-olds will not live to age 65. Among African American males, this percentage is even higher. While Social Security offers survivors benefits to spouses who have reached retirement age and to children under the age of 16, Social Security – which constitutes the total saving for many lower-income workers – offers no opportunity for workers to build and pass on any substantial wealth to their heirs, even if the worker died prior to receiving any benefits at all. The only lump sum wealth Social Security provides to pass on is a one-time payment of a $255 death benefit.

[311] Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

"For those born after 1959, the full retirement age to qualify for Social Security benefits is 67 years old."

NOTE: Individuals who turned 40 years-old in 2010 were born in 1970. Thus, their full retirement age is 67.

[312] Report: "United States Life Tables by Hispanic Origin." U.S. Centers for Disease Control and Prevention, National Center for Health Statistics, October 2010. http://www.cdc.gov/nchs/data/series/sr_02/sr02_152.pdf

Page 10 (page 16 in pdf): "Table G. Expectation of life by age, sex, Hispanic origin, and race for the non-Hispanic white and non-Hispanic black populations: United States, 2006 … Age [=] 40 … Life Expectancy … Hispanic male [=] 40.2 … Hispanic female [=] 44.3 … Non-Hispanic white male [=] 37.9 … Non-Hispanic white female [=] 41.8 … Non-Hispanic black male [=]  33.2 … Non-Hispanic black female [=] 38.7"

NOTE: The life expectancy for 40-year-olds beyond their full retirement age of 67 is determined by the formula: 40 years-old + life expectancy for 40-year-olds (shown above) – 67 years

[313] Report: "Strengthening Social Security and Creating Personal Wealth for All Americans." The President's Commission to Strengthen Social Security, December 21, 2001. http://govinfo.library.unt.edu/csss/reports/Final_report.pdf

Page 11: "Personal accounts improve retirement security by facilitating wealth creation and providing participants with assets that they own and that can be inherited, rather than providing only claims to benefits that remain subject to political negotiation."

[314] Report: "Social Security Reform: Current Issues and Legislation." By Dawn Nuschler. Congressional Research Service, September 14, 2010. http://aging.senate.gov/crs/ss6.pdf

Page 25: "Legislation Introduced in the 110th Congress … H.R. 2002 (which is similar to H.R. 530 in the 109th Congress), H.R. 4181, S. 2765 (which is similar to S. 540 in the 109th Congress) and H.R. 6110 would have established individual accounts funded with a redirection of current payroll taxes, among other program changes. … There was no congressional action on these measures during the 110th Congress."

Page 26: "H.R. 2002. Representative Sam Johnson introduced H.R. 2002 (Individual Social Security Investment Program Act of 2007) on April 23, 2007. The measure would have established individual accounts funded with 6.2 percentage points of the current Social Security payroll tax. Participation in the individual account system would have been voluntary for workers aged 22 to 54 (in 2007) and mandatory for younger individuals."

27: "S. 2765. Senator Chuck Hagel introduced S. 2765 (Saving Social Security Act of 2008) on March 13, 2008. The measure would have allowed workers born in 1963 or later (workers aged 45 or younger in 2008) to redirect 4 percentage points of the current Social Security payroll tax to an individual account (a SAFE account). Eligible workers would have been enrolled automatically in the individual account system and allowed to waive their eligibility for a SAFE account."

27: "H.R. 107. Representative Jeff Flake introduced H.R. 107 (Securing Medicare and Retirement for Tomorrow Act of 2009) on January 6, 2009.[Footnote 36] Among other provisions, the measure would establish individual accounts funded with 6.2 percentage points of the current Social Security payroll tax. Participation in the individual account system would be mandatory for workers below the Social Security full retirement age.* [Footnote 36: H.R. 107 is similar to H.R. 4181 introduced by Representative Flake in the 110th Congress.]"

29: "H.R. 4529. Representative Paul Ryan introduced H.R. 4529….[Footnote 41] Title IV of the bill … would allow workers who are aged 55 or younger in 2012 to redirect a portion of their payroll tax contributions to voluntary individual accounts. [Footnote 41: H.R. 4529 is similar to H.R. 6110 introduced by Representative Ryan in the 110th Congress and includes provisions similar to H.R. 1776 introduced by Representative Ryan in the 109th Congress.]"

NOTE: * In 2009, the year this bill was sponsored, people who were born in 1943 turned 66 years-old, which is the full retirement age for people born in 1943. [Publication number 05-10024: "Understanding the Benefits." United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html]

[315] "Biographical Directory of the United States Congress 1774-Present." United States Congress. Accessed January 20, 2011at http://bioguide.congress.gov/

NOTE: This dictionary was used to determine party affiliations.

[316] Report: "2008 Republican Platform." Republican National Committee, September 2008. http://www.gop.com/2008Platform/2008platform.pdf

Page 19: "We believe the solution [to Social Security's financial problems] should give workers control over, and a fair return on, their contributions. No changes in the system should adversely affect any current or near retiree."

[317] Report: "2008 Democratic Party Platform." Democratic National Committee, August 25, 2008. http://www.democrats.org/about/party_platform

"We will fulfill our obligation to strengthen Social Security and to make sure that it provides guaranteed benefits Americans can count on, now and in future generations. We will not privatize it."

[318] Web page: "Obama '08, Seniors and Social Security" Obama for America. Accessed November 11, 2008 at http://www.barackobama.com/

"In the midst of the 2005 debate over Social Security privatization, Obama gave a major speech at the National Press Club forcefully arguing against privatization. He also repeatedly voted against Republican amendments that aimed to privatize Social Security or cut benefits."

[319] Speech: "A Hope to Fulfill." Barack Obama, April 26th, 2005.

"I think we will save Social Security from privatization this year."

[320] Web page: "Reform Group." Josι Piρera, 2010. http://www.josepinera.com/pr/penref_refgroup.htm

Chile [1980] - Peru [1993] - Australia, Colombia [1994] - Uruguay [1996] - Mexico [1997] - Bolivia, El Salvador, Hungary, Kazhakstan [1998] - Hungary [1998] - Poland, Sweden [1999] - Hong Kong [2000] - Costa Rica, Latvia [2001] - Bulgaria, Croatia, Estonia, Russia [2002] - Dominican Rep., Kosovo [2003] - Korea, Lithuania [2004] - Nigeria, Slovakia [2005] - Macedonia [2006] - Romania [2008]

[321] "The President's News Conference." George W. Bush, March 16, 2005. http://www.presidency.ucsb.edu/ws/index.php?pid=63360

David [David Gregory, NBC News].

Social Security Reform

Q. Mr. President, you say you're making progress in the Social Security debate. Yet private accounts, as the centerpiece of that plan, something you first campaigned on 5 years ago and laid before the American people, remains, according to every measure we have, poll after poll, unpopular with a majority of Americans. So the question is, do you feel that this is a point in the debate where it's incumbent upon you, and nobody else, to lay out a plan to the American people for how you actually keep Social Security solvent for the long term?

NOTE: Credit for bringing this fact to our attention belongs to the Media Research Center ["Gregory Insists Personal Accounts 'Unpopular', Poll Differs." March 17, 2005. http://www.mediaresearch.org/cyberalerts/2005/cyb20050317.asp]

[322] "Washington Post-ABC News Poll: Social Security/Iraq." Washington Post,

Tuesday, March 15, 2005. http://www.washingtonpost.com/wp-srv/politics/...

This Washington Post-ABC News poll was conducted by telephone March 10 - 13, 2005 among 1,001 randomly selected adults nationwide. Margin of sampling error for overall results is plus or minus three percentage points. …

9g. Would you support or oppose a plan in which people who chose to could invest some of their Social Security contributions in the stock market?

NOTE: Credit for bringing this fact to our attention belongs to the Media Research Center ["Gregory Insists Personal Accounts 'Unpopular', Poll Differs." March 17, 2005. http://www.mediaresearch.org/cyberalerts/2005/cyb20050317.asp]

[323] "Washington Post-ABC News Poll: Social Security/Iraq." Washington Post,

Tuesday, March 15, 2005. http://www.washingtonpost.com/wp-srv/politics/...

"9g. Would you support or oppose a plan in which people who chose to could invest some of their Social Security contributions in the stock market?"

 

Date	Support (%)	Oppose (%)	No Opinion (%)
March 13, 2005	56	41	3
December 19, 2004	53	44	3
July 15, 2002	52	45	3
April 22, 2001	53	46	2
March 25, 2001	52	45	3
October 30, 2000	58	35	8
September 6, 2000	59	37	4
May 10, 2000	64	31	5

[324] Article: "Skepticism of Bush's Social Security Plan Is Growing." By Jonathan Weisman. Washington Post, March 15, 2005. Page A01. http://www.washingtonpost.com/wp-dyn/articles/...

NOTE: Credit for bringing this fact to our attention belongs to the Media Research Center ["Gregory Insists Personal Accounts 'Unpopular', Poll Differs." March 17, 2005. http://www.mediaresearch.org/cyberalerts/2005/cyb20050317.asp]

[325] Article: "Study Says Disabled Would Lose Benefits Under New Social Security Plan." By Robert Pear. New York Times, February 7, 2001.

http://query.nytimes.com/gst/fullpage.html?res=...

[326] Calculated with data from the report: "Social Security Reform: Potential Effects on SSA's Disability Program and Beneficiaries," United States General Accounting Office, January 2001. http://www.gao.gov/new.items/d0135.pdf

Page 43: "This scenario maintains current-law benefits while increasing payroll tax rates to levels that support those benefits."

Page 44: Data from "Table 9: Payroll Tax Rates."

 

Years	Disability Tax Rate
2000-24	1.80%
2060-73	2.69%

CALCULATION: (2.69 – 1.80) / 1.80 = .49

[327] Report: "Social Security Reform: Potential Effects on SSA's Disability Programs and Beneficiaries," United States General Accounting Office, January 2001. http://www.gao.gov/new.items/d0135.pdf

Page 36: "In the cases we studied, our analyses indicate that most disabled beneficiaries would receive higher benefits under Social Security reform proposals than under a solvency scenario that maintained payroll tax rates while reducing benefits."

[328] Article: "Study Says Disabled Would Lose Benefits Under New Social Security Plan." By Robert Pear. New York Times, February 7, 2001.

http://query.nytimes.com/gst/fullpage.html?res=...

President Bush has said he wants to let workers put some of their Social Security payroll taxes into personal investment accounts, but at the same time he has championed the rights of people with disabilities.

The new study, by the General Accounting Office, an investigative arm of Congress, concludes that "even under the best of circumstances, Social Security reform proposals would reduce benefits" for people with disabilities.

[329] Web page: "Social Security: Governor Bush's Approach." Bush/Cheney 2000. Accessed at http://www.georgebush.com/ in September 2000.

[330] Report: "Strengthening Social Security and Creating Personal Wealth for All Americans." President's Commission to Strengthen Social Security, December 2001. http://govinfo.library.unt.edu/csss/reports/Final_report.pdf

Page 149.

[331] Web page: "History: Frequently asked questions." United States Social Security Administration. Last reviewed or modified August 12, 2010.

http://www.ssa.gov/history/hfaq.html

Q21:  When did Social Security cards bear the legend "NOT FOR IDENTIFICATION"?

A:  The first Social Security cards were issued starting in 1936, they did not have this legend. Beginning with the sixth design version of the card, issued starting in 1946, SSA added a legend to the bottom of the card reading "FOR SOCIAL SECURITY PURPOSES -- NOT FOR IDENTIFICATION."

[332] Web page: "Social Security Number Chronology." United States Social Security Administration. Updated November 9, 2005. http://www.ssa.gov/history/ssn/ssnchron.html

1961

The Civil Service Commission adopted the SSN as an official Federal employee identifier.

Internal Revenue Code Amendments (P.L. 87-397) required each taxpayer to furnish identifying number for tax reporting.

1962

The Internal Revenue Service adopted the SSN as its official taxpayer identification number.

1964

Treasury Department, via internal policy, required buyers of Series H savings bonds to provide their SSNs.

1965

Internal Revenue Amendments (P.L. 89-384) enacted Medicare. It became necessary for most individual s age 65 and older to have an SSN.

1966

The Veterans Administration began to use the SSN as the hospital admissions number and for patient record keeping.

1969

The Department of Defense adopted the SSN in lieu of the military service number for identifying Armed Forces personnel.

1970

Bank Records and Foreign Transactions Act (P.L. 91-508) required all banks, savings and loan associations, credit unions and brokers/dealers in securities to obtain the SSNs of all of their customers. Also, financial institutions were required to file a report with the IRS, including the SSN of the customer, for any transaction involving more than $10,000.

[333] Web page: "History: Frequently asked questions." United States Social Security Administration. Last reviewed or modified August 12, 2010.

http://www.ssa.gov/history/hfaq.html

"Q21:  When did Social Security cards bear the legend "NOT FOR IDENTIFICATION"? A:  … The legend has not been on any new cards issued since 1972."

[334] Bill Summary and Status for Public Law 103-465: "Uruguay Round Agreements Act." 103rd Congress. Signed into law by Bill Clinton on December 8, 1994. http://thomas.loc.gov/

[335] Public Law 103-465: "Uruguay Round Agreements Act." 103rd Congress. Signed into law by Bill Clinton on December 8, 1994. http://www.gpo.gov/fdsys/pkg/BILLS-103hr5110enr/...

Section 742:

TAXPAYER IDENTIFICATION NUMBERS REQUIRED AT BIRTH.

(a) EARNED INCOME CREDIT- Clause (i) of section 32(c)(3)(D) is amended to read as follows:

(i) IN GENERAL- The requirements of this subparagraph are met if the taxpayer includes the name, age, and TIN of each qualifying child (without regard to this subparagraph) on the return of tax for the taxable year.

(b) DEPENDENCY EXEMPTION- Subsection (e) of section 6109 is amended to read as follows:

"(e) FURNISHING NUMBER FOR DEPENDENTS- Any taxpayer who claims an exemption under section 151 for any dependent on a return for any taxable year shall include on such return the identifying number (for purposes of this title) of such dependent."

(c) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to returns for taxable years beginning after December 31, 1994.

(2) EXCEPTION- The amendments made by this section shall not apply to--

(A) returns for taxable years beginning in 1995 with respect to individuals who are born after October 31, 1995, and

(B) returns for taxable years beginning in 1996 with respect to individuals who are born after November 30, 1996.

[336] Web page: "When am I legally required to provide my Social Security number?" United States Social Security Administration. Updated December 14, 2010. http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/...

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