Elder Law Prof Blog

2009 SS Trustees Report revises last year's estimates

The Social Security Board of Trustees today released its annual report on the financial health of the Social Security Trust Funds.  The Trustees project that program costs will exceed tax revenues in 2016, one year sooner than projected in last year’s report.  The combined assets of the Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2037, four years sooner than projected last year.  The worsening of the long-range outlook for the Social Security program is due primarily to the recent economic downturn and faster reductions in mortality than previously assumed.

In the 2009 Annual Report to Congress, the Trustees announced:

• The projected point at which tax revenues will fall below program costs comes in 2016 -- one year sooner than the estimate in last year’s report.

• The projected point at which the Trust Funds will be exhausted comes in 2037 -- four years sooner than the estimate in last year’s report.

• The projected actuarial deficit over the 75-year long-range period is 2.00 percent of taxable payroll -- up from 1.70 percent in last year’s report.

• Over the 75-year period, the Trust Funds would require additional revenue equivalent to $5.3 trillion in today’s dollars to pay all scheduled benefits.

“Today’s Trustees Report contains some disappointing, but not unexpected, news about the financial condition of the Trust Funds,” Commissioner Astrue said.  “We should be neither casual nor hysterical about the revised insolvency dates.  As with the economy as a whole, the Social Security system will weather this recession.  However, the sooner we get on with the task of reforming the system, the easier it will be to make the tough choices that we all know we need to make.”

Other highlights of the Trustees Report include:

• Income including interest to the combined Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $805 billion ($672 billion in net contributions, $17 billion from taxation of benefits and $116 billion in interest) in 2008.

• Total expenditures from the combined OASDI Trust Funds amounted to $625 billion in 2008.

• The assets of the combined OASDI Trust Funds increased by about $180 billion in 2008 to a total of $2.4 trillion.

• During 2008, an estimated 162 million people had earnings covered by Social Security and paid payroll taxes.

• Social Security paid benefits of $615 billion in calendar year 2008.  There were almost 51 million beneficiaries at the end of the calendar year.

• The cost of $5.7 billion to administer the program in 2008 was a very low 0.9 percent of total expenditures.

• The combined Trust Fund assets earned interest at an effective annual rate of 5.1 percent in 2008.

The Board of Trustees is comprised of six members.  Four serve by virtue of their positions with the federal government: Timothy F. Geithner, Secretary of the Treasury and Managing Trustee; Michael J. Astrue, Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and Human Services; and Hilda L. Solis, Secretary of Labor.  The two public trustee positions are currently vacant.

The 2009 Trustees Report will be posted at www.socialsecurity.gov/OACT/TR/2009/.  

GAO recommends improvements in SSA's collection of disability related medical reports

The timely collection of relevant medical evidence from providers, such as physicians and psychologists, is key to the Social Security Administration (SSA) process for deciding whether an estimated 2.5 million new claimants each year have impairments that qualify them to receive disability benefits. The initial determinations are generally made by state agencies called Disability Determination Services (DDSs). We evaluated: (1) the challenges, if any, in collecting medical records from the claimants’ own providers and ways SSA and the DDSs are responding to these challenges; (2) the challenges, if any, in obtaining high-quality consultative exams and ways SSA and the DDSs are responding to these challenges; and (3) the progress SSA has made in moving from paper to electronic collection of medical evidence. We surveyed 51 DDS directors, visited 5 state DDSs, reviewed sample case files, and interviewed officials with SSA, DDSs, and associations for claimants and providers. \

What GAO Recommends

GAO recommends SSA identify DDS evidence collection practices that may be promising, evaluate their effectiveness, and encourage implementation of successful practices in other states, as applicable. To do so, SSA should cost-effectively compile and assess additional data on the collection process. SSA should also work to identify and address barriers to expanded use of its online medical evidence submission options.

Did you know: Monthly Social Security Bulletin: the scholarly journal of SSA

Social Security Bulletin, Vol. 68 No. 3

Printed copies of this document are scheduled for release in late December 2008.

The Effects of Wage Indexing on Social Security Disability Benefits

by L. Scott Muller

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

Cohort Differences in Wealth and Pension Participation of Near-Retirees

by Irena Dushi and Howard M. Iams

This article examines pension participation and nonpension net worth of two cohorts of near retirees. Particularly, the authors look at people born in 1933 through 1939 who were ages 55–61 in 1994, and the more recent cohort consisting of people of the same age in 2004 who were born in 1943 through 1949. Data are from the Health and Retirement Study, a longitudinal, nationally representative survey of older Americans.

Robert M. Ball: A Life Dedicated to Social Security

by Carolyn Puckett

With the death of Robert Myers Ball at age 93 on January 29, 2008, the Social Security program lost one of its most committed supporters. In 2001, Ball's biographer, historian Edward D. Berkowitz, described Ball as "the major non-Congressional player in the history of Social Security in the period between 1950 and the present."

Remembering Mollie Orshansky—The Developer of the Poverty Thresholds

by Gordon M. Fisher

In a federal government career that lasted more than four decades, Mollie Orshansky worked for the Children's Bureau, the Department of Agriculture, the Social Security Administration, and other agencies. While working at the Social Security Administration during the 1960s, she developed the poverty thresholds that became the federal government's official statistical measure of poverty; her thresholds remain a major feature of the architecture of American social policy and are widely known internationally.

Several features from our Web site are also reprinted in the Bulletin each quarter.  These include

• SSI Monthly Statistics
• Program Highlights
• Monthly Statistical Snapshot

One heckuva Social Security scam....

A woman accused of helping her religious leader hide a decaying corpse on her toilet so they could continue collecting her Social Security was convicted of a misdemeanor in a deal for her to testify against the leader, a prosecutor said Monday.  Tammy Lewis, 36, of Necedah, pleaded no contest to obstructing a police officer and fined $350 in a plea bargain that defers prosecution of more serious charges. Juneau County Circuit John Roemer ordered her to pay the fine within 60 days or serve a seven-day jail sentence.

Lewis and Alan Bushey, 58, were accused of hiding 90-year-old Magdeline Alvina Middlesworth's body on a toilet in Lewis' home after she died in March. Investigators said Middlesworth and Lewis were members of a religious sect Bushey led called the Order of the Divine Will.

Bushey told Lewis that God would revive Middlesworth, who friends and family said was from Washington state, investigators said.  Lewis in May initially told a sheriff's deputy that Middlesworth was on vacation.  The deputy later discovered the elderly woman's rotting body in Lewis' stench-filled home.

She also told authorities she was Middlesworth's power of attorney, and the older woman used all of her money to support their six-member religious group. Investigators believe Middlesworth's Social Security and annuity checks totaling nearly $3,000 were deposited after her death into a bank account she shared with Lewis.

As part of Lewis' plea deal, five other charges, including three felony counts of hiding a corpse and causing mental harm to a child, will be dismissed in two years if she cooperates with prosecutors and follows other court orders involving her children, District Attorney Scott Southworth said.

"We view her as a victim as well of Alan Bushey," Southworth said. "We also understand the power, the mental power, that Alan Bushey was exercising over her, the coercion he was exerting over her."  A deferred prosecution agreement calls for Lewis to continue to receive mental health treatment and testify against Bushey in a trial set to begin in April, the prosecutor said.  She and her two children, now ages 12 and 15, will be witnesses in the trial, he said.

Lewis' son told detectives Bushey told him demons were destroying Middlesworth's appearance as she decayed in the bathroom to make it look like she wouldn't rise from the dead, the criminal complaint said.

Source:  AP/The Capital Times (Madison, WI), http://www.madison.com/tct/news//index.php?ntid=314772

TOC: Vol 68 No. 2 Social Security Bulletin

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

by Andrew G. Biggs and Glenn R. Springstead

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

Social Security Beneficiaries Affected by the Windfall Elimination Provision in 2006

by Barbara A. Lingg

The Windfall Elimination Provision (WEP) is a method of computing benefits for some workers who receive a pension based on non-Social Security covered work. At the end of 2006, about 970,000 beneficiaries, mainly retired workers, were affected by the WEP. This article provides a brief legislative history, describes the WEP computation, and presents statistical data about beneficiaries affected by the WEP.

An Overview of the Railroad Retirement Program

by Kevin Whitman

The Railroad Retirement program was established in the 1930s. It provides retirement, survivor, unemployment, and sickness benefits to individuals who have spent a substantial portion of their career in railroad employment, as well as to these workers' families. This article describes the history, benefit structure, and funding of the Railroad Retirement program.

The Canadian Safety Net for the Elderly

by Michael Wiseman and Martynas Yčas

Canada's Public Pensions System is widely applauded for reducing poverty among the elderly. This article reviews benefits provided to Canada's older people and compares the Canadian system to the U.S. Supplemental Security Income program. Although Canada's system would probably be judged prohibitively expensive for the United States, the authors argue that there are nevertheless lessons to be learned from the Canadian experience.

Chile's Next Generation Pension Reform

by Barbara E. Kritzer

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

Access full bulletin:  http://www.ssa.gov/policy/docs/ssb/v68n2/index.html

SS COLA for 2009

From the Social Security Administration:

Monthly Social Security and Supplemental Security Income benefits for more than 55 million Americans will increase 5.8 percent in 2009, the Social Security Administration announced today.  The 5.8 percent increase is the largest since 1982.             

Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics' Consumer  Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year.  This year's increase in the CPI-W was 5.8 percent.          

The 5.8 percent Cost-of-Living Adjustment (COLA) will begin with benefits that over 50 million Social Security beneficiaries receive in January 2009.  Increased payments to more than 7 million Supplemental Security Income beneficiaries will begin on December 31.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $106,800 from $102,000.  Of the estimated 164 million workers who will pay Social Security taxes in 2009, about 11 million will pay higher taxes as a result of the increase in the taxable maximum. 

Information about Medicare changes for 2009 can be found at www.medicare.gov.

More:  http://www.ssa.gov/pressoffice/pr/2009cola-pr.htm

Prof. Kaplan (IL) on planning for retirement

Dick Kaplan's article entitled “A Guide to Starting Social Security Benefits,” has just appeared in the Journal of Retirement Planning (July-Aug. 2008) and is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1192902

Abstract:  When a person should begin taking Social Security retirement benefits is a critical question for planning one’s retirement. This article explains the various factors at play in determining the optimum starting point, including: longevity considerations; spousal implications, whether for a previously employed or a previously unemployed spouse; the impact of post-retirement employment; the availability of health insurance prior to Medicare eligibility for the worker and the worker’s spouse; alternative sources of retirement income, including distributions from retirement savings plan assets and lifetime liquidation of nonretirement assets (and the pertinent income tax ramifications); and anticipated investment strategies.

Dick rules!

 

Century Foundation report disputes Social Security "crisis"

Scare Tactics: Why Social Security Is Not in Crisis

Opponents of Social Security have been striving to convince American workers, especially young adults, that Social Security will no longer exist by the time they retire. Phrases such as "imminent crisis" and "unmanageable costs" lace this rhetoric. To a large extent, this alarmism is voiced by those who are hostile to government and therefore favor replacing all or part of one of this nation’s most successful and essential programs with private investment accounts. Bernard Wasow demonstrates why the "crisis" in Social Security is actually quite manageable. Originally published in 2004, this document was updated in July 2008.

Get it here.

SSA OIG publishes report on bank fees charged for illegal garnishments against SS funds

The SSA's Office of the Inspector General has published a report on financial institutions that have been charging service fees for garnishing accounts holding Social Security funds.  Federal law prohibits involuntary alienation of SS funds on deposit except in very limited circumstances.  Here's a summary of the report:

"The objective of our review was to determine whether financial institutions (FI) were
deducting service fees and garnishments from beneficiaries’ direct deposit, personal
accounts. This report contains information related to the 12 largest FIs and a sample of
13 small-, medium- and large-sized FIs that received electronic deposit of payments to
Social Security beneficiaries in the United States from September 1, 2006 through
August 31, 2007. Specifically, this report contains information on

• the number of FIs that allowed the garnishment of Old-Age, Survivors and Disability
Insurance (OASDI)1 and/or Supplemental Security Income (SSI)2 payments;
• the number of accounts upon which garnishment-related fees were imposed and the
total dollar amount of fees charged to these accounts as a result of the garnishment;
and
• the types of fees these FIs charged beneficiaries."

Read the report here:  http://www.ssa.gov/oig/ADOBEPDF/A-15-08-28031.pdf

SSA will offer SS debit card

The government plans to announce today that it will offer MasterCard debit cards to the estimated 4 million Social Security recipients who don't have bank accounts.  Instead of getting a paper check, a recipient's monthly benefit would be electronically transferred, at no cost, to the debit card's balance. Using the card to make purchases ould be free, as would one ATM withdrawal a month. Switching from paper checks to the debit card would save recipients -- and taxpayers -- a fair amount of money. It costs the government 88 cents more to send a paper check than it does to transfer money electronically. And people without bank accounts pay on average $6 to cash a check, according to the Treasury Department.

Source/more:  LA Times, http://www.latimes.com/business/la-fi-debit10-2008jun10,0,27432.story