Social Security (United States)

From Free net encyclopedia

(Redirected from Social Security Act)

Social Security in the United States is a social insurance program funded through a dedicated payroll tax. It is also known as the Old Age, Survivors and Disability Insurance program (OASDI), in reference to its three components. When initially signed into law by FDR in 1935, the term Social Security covered unemployment insurance as well, but now the term is used in America to mean only the three benefits for retirement, disability and death which are the three main benefits provided by traditional private sector pension plans that still exist. References to SSI are now generally regarded as erroneous. In the calendar year 2004, it paid out almost $500 billion in benefits. Template:Ref By dollars paid the U.S. Social Security program is the largest government program in the world.

In 2005, the possibility of changing the Social Security system became a major political issue; see Social Security debate (United States).

Contents

1 Retirement benefits
- 1.1 Normal retirement age
2 Other programs
3 Benefit eligibility and calculation
4 History
5 Current operation
6 OHA and ODAR
7 Demographic and revenue projections
8 Fraud
- 8.1 Social Security number fraud
- 8.2 Fraud in the acquisition and use of benefits
9 See also
- 9.1 Articles
- 9.2 Speeches
10 Further reading
11 External links
12 Notes

Retirement benefits

The largest component of OASDI is the payment of retirement benefits. Throughout a worker's career, the Social Security Administration keeps track of his or her earnings. The amount of the monthly benefit to which the worker is entitled depends upon that earnings record and upon the age at which the retiree chooses to begin receiving benefits.

Normal retirement age

The earliest age at which (reduced) benefits are payable is 62. Full retirement benefits are dependent on a retiree's year of birth. Table from Soc Sec Admin Those born before 1938 have a normal retirement age of 65. Normal retirement age increases two months for each ensuing year of birth until the 1943 year of birth when it stays at age 66 years and zero months until the 1954 year of birth. Starting in 1955, the normal retirement age increases again by two months for each year ending in the 1960 year of birth when normal retirement age stops at age 67 for all born thereafter.

The normal retirement age for spousal retirement benefits shifts the year of birth schedule upward by two years so that those spouses born before 1940 have age 65 as their normal retirement age.

Other programs

Spouse's benefit

Any current spouse is eligible and divorced or former spouses are eligible generally if the marriage lasts for at least 10 years. While not recognizing polygamy it is arithmetically possible for one man to generate spousal benefits for all four of his wives; but each in succession after exactly ten year intervals. The spousal retirement benefit is half the PIA of the worker; this is different from the spousal survivor benefit which is the full PIA. The benefit is the product of the PIA times one half times the early retirement factor if the spouse is younger than normal retirement age. There is no gross up for starting spousal benefits after normal retirement age. This can occur if there is a married couple where the younger person (say man) is the only worker and is more than 5 years younger. Only after the worker applies for retirement benefits may the non-working spouse apply for spousal retirement benefits. In this case, when the worker attains age 65, the non working spouse would be at least age 70.

Disability

A worker who has worked long enough (based on quarters of coverage within the recent past) and recently enough to be covered can receive benefits upon becoming totally disabled, regardless of his or her age. The eligibility formula requires a certain number of credits (based on earnings) to have been earned overall, and a certain number within the ten years preceding the disability, but with more lenient provisions for younger workers who become disabled before having had a chance to compile a long earnings history.

The worker must be unable to continue in his or her previous job and unable to adjust to other work, taking into account the worker's age, education and work experience; furthermore, the disability must be long term lasting 12 months, expected to last 12 months, resulting in death, or expected to result in death.Template:Ref As with the retirement benefit, the amount of the disability benefit payable depends on the worker's age and record of covered earnings.

Supplemental Security Income (SSI) uses the same disability criteria as the insured social security disability program, but SSI is not based upon insurance coverage. Instead, a system of means-testing is used to determine if the claimants' income and net worth fall below certain income and asset thresholds after the claimants establish disability.

Severely disabled children may qualify for SSI. Standards for child disability are different from those for adults. In addition, nondisabled minor children of disabled or deceased workers may receive dependent or survivor'sbenefits. A program called Disabled Adult Child Insurance Benefits (DACIB) provides benefits for the disabled adult children of disabled or deceased workers.

Disability determination at the Social Security Administration has created the largest system of administrative courts in the United States. Depending on the state of residence, a claimant whose initial application for benefits is denied can request reconsideration or a hearing before an Administrative Law Judge.

Reconsideration involves a re-examination of the evidence and the opportunity for a hearing before a (nonattorney) disability hearing officer. The hearing officer then issues a decision in writing, providing justification for his/her finding. If the claimant is denied at the reconsideration stage, s/he may request a hearing before an Administrative Law Judge. In some states, SSA has implemented a pilot program that eliminates the reconsideration step and allows claimants to appeal an initial denial directly to an Administrative Law Judge.

Because the number of applications for Social Security is very large (approximately 650,000 applications per year), the number of hearings requested by claimants often exceeds the capacity of Administrative Law Judges. The number of hearings requested and availability of Administrative Law Judges varies geographically across the United States. In some areas of the country, it is possible for a claimant to have a hearing with an Administrative Law Judge within 90 days of his/her request. In other areas, waiting times of 18 months are not uncommon.

After the hearing, the Administrative Law Judge (ALJ) issues a decision in writing. The decision can be Fully Favorable (meaning the ALJ has found the claimant to be disabled as of the date s/he alleged in the application through the present), Partially Favorable (meaning the ALJ has found the claimant to be disabled at some point, but not as of the date alleged in the application OR the ALJ has found that the claimant was disabled, but has improved), or Unfavorable (meaning the ALJ has not found that the claimant was disabled at all). Claimants can appeal Partially Favorable and Unfavorable decisions to Social Security's Appeals Council, which is located in Virginia. The Appeals Council does not hold hearings; it accepts written briefs. Response time from the Appeals Council can range from 12 weeks to more than 3 years.

If the claimant disagrees with the Appeals Council's decision, s/he can appeal the case in the federal district court for his/her judicial district. As in most federal court cases, an unfavorable district court decision can be appealed to the appropriate appellate circuit court, and an unfavorable appellate court decision can be appealed to the United States Supreme Court.

Survivors' benefits

If a worker covered by Social Security dies, a surviving spouse or children can receive survivors' benefits. In some instances, survivors' benefits are available even to a divorced spouse. Survivor's benefits to nondisabled children end at age 18, or when the child graduates from high school, whichever is later. The earliest age for a nondisabled widow(er)'s benefit is age 60. The benefit is equal to the worker's full retirement benefit for spouses who are at or older than survivor's normal retirement age. If the worker dies when the survivor is younger, there is an actuarial reduction.

Benefit eligibility and calculation

"Your Social Security Statement"

In 1999 the Social Security Administration began mailing to all workers aged 25 and over a document entitled "Your Social Security Statement." This document provides a table of the worker's lifetime earnings record, reporting for each year the earnings amount that has been subject to Social Security and Medicare taxes. A career summary of estimated taxes paid by the worker and his or her employer for Social Security and Medicare is also provided. This statement is mailed automatically each year about three months before the worker's birthday. The statement is also available on request from the Social Security Administration. The SSA's homepage for information about the Social Security statement is http://www.ssa.gov/mystatement/.

Quarters of coverage

The original design of the plan required the system to indicate which calendar quarter of the year the individual had covered earnings. A threshold dollar figure of $970 applies to the year 2006 ($920 in year 2005). An individual earns one credit for each $970 of wages, or self employment income, and can earn up to 4 credits per year. When an individual has earned (970x4) $3,880.00, he or she has earned the 4 credits for the year. ($970=1cr, $1940=2cr, $2910=3cr, $3880=4cr). In earlier literature the term "quarters" was used instead of credits. The dollar amount required per credit changes each year.

In computing the taxable income of self employed persons for Federal income tax purposes, the taxpayer is entitled to a deduction equal to half the self-employment tax for the year. The self employment tax is the combined Social Security and Medicare tax of 15.3% of net earnings from self employment. Further, in determining the amount of net earnings from self-employment (for purposes of computing the self employment tax), the taxpayer's net earnings from sole proprietorship businesses (generally, unincorporated businesses) and farms are reduced by an amount corresponding to half of the 15.3% rate (that is, the business and farm net income is reduced by 7.65%) on Schedule SE (included with the individual's Form 1040 tax return). The net effect is that the taxpayer must report $4201.00 to get a net (rounded) earned income of $3880 to qualify for 4 full quarters.

AIME or Average Indexed Monthly Earnings

In the calendar year in which the worker attains age 62, all cover wages are indexed by multiplying each year's covered wage by an indexing factor for each year. The index factor accounts for inflation in wages. It is the wage indexation and not price indexation that keeps the retirement benefit replacing a constant ratio of pre-retirement earned income. The average of the highest 35 year's of indexed covered earnings, with a zero for each year for which the worker did not pay FICA tax is called the AIME or Average Indexed Monthly Earnings after dividing by 12.

PIA or Primary Insurance Amount

The AIME is then multiplied stepwise using the coefficient 0.90 for all AIME less than or equal to the first bend point (which was $180 in 1979 and in year 2006 it is $656) plus the co-efficient 0.32 times AIME in excess of the first bendpoint but not exceeding the second bend point (which was $1,085 in 1979 and in year 2006 it is $3,955) and the coeeficient of 0.15 times AIME in excess of the second bend point. This is the PIA or Primary Insurance Amount. Those who retire at their normal retirement age get a benefit equal to their PIA. Likewise for disability benefits. Those workers who retire before normal retirement age will get a reduction and those workers who retire after normal retirement age will get a gross up the SSA's delayed credits table.

History

A limited form of the Social Security program began as a measure to implement "social insurance" during the Great Depression of the 1930s, when poverty rates among senior citizens exceeded 50% Template:Ref.

Social Security was controversial when enacted and remains so today. Several provisions were introduced to sway public opinion for the passage of the law. President Franklin Delano Roosevelt promised that participation in the program would be completely voluntary and that participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program. That is the money the participants elected to put into the Program would be deductible from their income for tax purposes each year. The money the participants put into the independent "Trust Fund" rather than into the General operating fund were to be used to fund the Social Security Retirement Program and no other Government program. The annuity payments to the retirees were never to be taxed as income.

Creation: The Social Security Act

Image:RooseveltSSAsigning.jpg

The Social Security Act was drafted by President Roosevelt's committee on economic security under Edwin E. Witte, and passed by Congress in 1935 as part of the New Deal.

The Act may be formally cited as the Social Security Act, ch. 531, 49 Stat. 620 (Aug. 14, 1935), now codified as Chapter 7 of title 42 of the United States Code, Template:Usc through Template:Usc. The Act is also known as the Old Age Pension Act.

The law included benefits for the retired and the unemployed. This allowed elderly Americans, hard hit by the depression, to begin receiving benefits within two years after the law was enacted. Payments to current retirees were (and continue to be) financed by a payroll tax on current workers' wages, half directly as a payroll tax and half paid by the employer.

The first collection of taxes (deductions) began in 1937, as did the first payments. In 1937, there were 53,236 beneficiaries for the first payment. In the first few years, until 1940, benefits were paid as a single, lump-sum amount.

Two Supreme Court rulings affirmed the constitutionality of the Social Security Act.

Steward Machine Company vs. Davis, 301 U.S, 548Template:Ref(1937) held in a 5–4 decision that given the exigencies of the Great Depression: "[i]t is too late today for the argument to be heard with tolerance that in a crisis so extreme the use of the moneys of the nation to relieve the unemployed and their dependents is a use for any purpose narrower than the promotion of the general welfare..." The arguments opposed to the social security act (articulated by justices Butler, McReynolds, and Sutherland in their opinions) were that the social security act went beyond the powers that were granted to the federal government in the constitution. They argued that by imposing a tax on employers that could be avoided only by contributing to a state unemployment compensation fund, that the federal government was essentially forcing each state to establish an unemployment compensation fund that would meet its criteria, and that the federal government had no power to enact such a program.

Helvering vs. Davis, 301 U.S. 619., decided on the same day, upheld the program because "The proceeds of both [employee and employer] taxes are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way." That is, the Social Security Tax is constitutional as a mere exercise of Congress's general taxation powers.

Expansion

The original 1935 law only paid retirement benefits to the primary worker. It also contained the first national unemployment compensation program, aid to the states for various health and welfare programs, and the Aid to Dependent Children program. The initial tax rate was 2.0% of the first $3,000 of the employee's earnings, shared equally between the employee and the employer. The tax rate has been raised in several steps over the years, beginning in 1950, when it was raised to 3.0%. Template:Ref

Image:SocialSecurityposter2.gif In 1939, the Federal Insurance Contributions Act (see FICA tax), which had been enacted in 1937, changed the law by adding survivors' benefits and benefits for the retiree's spouse and children. Originally, many types of people were excluded, primarily farm workers, the self-employed, and anyone employed by an employer of less than ten people. These exclusions, intended to exclude those from whom it would be difficult to monitor compliance, covered approximately half of the civilian labor force in the United States.

In 1956 the tax rate was raised to 4.0% (2.0% for the employer, 2.0% for the employee) and disability benefits were added. Also in 1956, women were allowed to retire at age 62 with reduced benefits (70%). In 1961, the same provision for early retirement was added for men, and the tax was increased to 6.0%.

Medicare was added in 1965 by the Social Security Act of 1965, part of President Lyndon B. Johnson's "Great Society" program. See List of Social Security legislation (United States). Social Security was changed to withdraw funds from the independent "Trust" and put it into the General fund for additional congressional revenue.

In 1975, regular (annual) cost of living adjustments, not requiring a specific vote by Congress, began (table of past COLAs).

During the Jimmy Carter administration annuity payments were granted to immigrants. Immigrants at the age of 65 began to receive SSI (Supplemental Security Income, which are not part of Social Security) payments. This is welfare because SSI is available to extremely poor elderly even if they did not pay into any system, but SSI is not an entitlement because there is no right to SSI payments.

The taxing of Social Security benefits occurred as a result of the 1982 the Greenspan CommissionTemplate:Fact and the 1983 amendments to make the system more solvent. Those amendments not only taxed benefits in excess of a threshold (generally $25,000 for singles and $32,000 for couples using a complex formula that compared three different measures) it also gradually increased normal retirement age from 65 to ultimately to age 67 for those born after 1959.

In 1940, cash benefits distributed totaled $35 million. That increased to $961 million in 1950, $11.2 billion in 1960, $31.9 billion in 1970, $120.5 billion in 1980, and $247.8 billion in 1990 (all figures in current dollars, not adjusted for inflation). In 2004, cash benefits distributed were $492 billion. In 2004 there were 47.5 million beneficiaries.

Changes in 1983 for fiscal stability

In the early 1980s, there was concern about the long-term prospects for Social Security because of demographic considerations, particularly what would happen when people born during the post-World War II baby boom retired. A commission chaired by Alan Greenspan made several recommendations for addressing the issue. Template:Ref Under the 1983 Amendments to Social Security, signed into law by President Ronald Reagan, a previously enacted increase in the payroll tax rate was accelerated, additional employees were added to the system, the full benefit retirement age was slowly increased, and up to one-half of the value of the Social Security benefit was made potentially taxable income. Template:Ref

As a result of these changes, the Social Security system began to generate a large surplus of funds, intended to cover the added retirement costs of the "boomers." Congress invested these surpluses into special series, non-marketable U.S. Government bonds which are held by the Social Security trust fund. Under the law, the Government bonds held by Social Security are backed by the full faith and credit of the U.S. government. Because the government had adopted the unified budgeting since the Johnson admistration, this surplus off-sets the total fiscal debt making it look much smaller.

The special series, non-marketable bonds currently held in Social Security trust fund are off-balance sheet and are excluded from the U.S. National Debt calculation. They also cannot be sold on the open market unlike traditional bonds. Due to these unique features, some have raised the specter that the bonds held in the trust fund are only "IOUs" that the government has written to itself. However, it is true that, as the Social Security and Medicare Trustees note,

Since neither the interest paid on the Treasury bonds held in the HI [Hospital Insurance] and OASDI Trust Funds, nor their redemption, provides any net new income to the Treasury, the full amount of the required Treasury payments to these trust funds must be financed by some combination of increased taxation, increased Federal borrowing and debt, or a reduction in other government expenditures. (Status of Social Security and Medicare Programs: A summary of the 2005 annual reports) Template:Ref

This means that, indeed, these "bonds" simply represent a promise to pay the trust fund later, whether by increasing taxes, cutting benefits, or simply borrowing more money.

While this is actually true of all bondsTemplate:Ref, normally bonds are at least funded by an immediate income from a private source, when the bond is purchased. In the case of the bonds placed in the trust fund, they are simply placed printed and arbitrarily in the trust, with no external source of money. The Federal government "buys" them from itself.

However, since the Social Security only has legal authority to pay benefits out of its current FICA contributions or accumulated trust fund, the existence of the trust fund would provide legal authority for the federal government to continue to pay benefits when current benefits exceed current FICA taxes -- until of course the trust fund completely depletes. The issue of funding or financing -- because OSADHI (including Medicare) is so massive -- cannot be segregated from the rest of the federal budget because its sheer size means that we either have no other government spending, have massive tax hikes or benefit cuts. Massive government borrowing would not work unless it comes from abroad because the net fiscal stimulus of extra domestic borrowing is offset dollar for dollar by less private domestic spending.

Current operation

Contrast with private pensions

Although Social Security is sometimes compared to private pensions, the payment of disability benefits distinguishes Social Security from most private pensions. In other ways the two systems are fundamentally different as well. A private pension fund accumulates the money paid into it, eventually using those reserves to pay pensions to the workers who contributed to the fund. Social Security, on the other hand, is fundamentally a wealth transfer system. It operates as a pipeline, through which current tax receipts from workers are used to pay current benefits to retirees, survivors, and the disabled. Although there is a Social Security Trust Fund that holds the cumulative excess of taxes withheld over benefits paid. Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities.

Two broad categories of private pension plans are "defined benefit pension plans" and "defined contribution pension plans." Of these two, Social Security is more similar to a defined benefit pension plan. In a defined benefit pension plan, the benefits ultimately received are based on some sort of pre-determined formula (such as one based on years worked and highest salary earned). Defined benefit pension plans generally do not include separate accounts for each participant. By contrast, in a defined contribution pension plan each participant has a specfic account with funds put into that account (by the employer or the participant, or both), and the ultimate benefit is based on the amount in that account at the time of retirement. Some have proposed that the Social Security system be modified to provide for the option of individual accounts (in effect, to make the system, at least in part, more like a defined contribution pension plan). Specifically, on February 2, 2005, President George W. Bush made Social Security a prominent theme of his State of the Union Address. He described the Social Security system as "headed for bankruptcy", and outlined, in general terms, a proposal based on partial privatization. Critics responded that privatization would worsen the program's solvency outlook and would require huge new borrowing. See Social Security debate (United States).

Private pensions are governed by the Employee Retirement Income Security Act, which requires minimum levels of funding. The purpose is to protect the workers from corporate mismanagement and outright bankruptcy. In terms of financial structure, Social Security would be analogous to an underfunded pension ("underfunded" meaning not that it is in trouble, but that its "savings" are not enough to pay future benefits without collecting future tax revenues).

For solvency, Social Security relies on its tax revenues and broad base of public support. Since millions of retirees have paid into the system during their working lives, it would be politically difficult for Congress to allow it to fail.

Social Security tax on wages and self-employment income

Benefits are funded by taxes imposed on wages of employees and self-employed persons. As explained below, in the case of employment, the employer and employee are each responsible for one half of the Social Security tax, with the employee's half being withheld from the employee's pay check. In the case of self-employed persons (i.e., independent contractors), the self-employed person is responsible for the entire amount of Social Security tax.

The Federal Insurance Contributions Act (FICA) (codified in the Internal Revenue Code) imposes a withholding Social Security tax equal to 6.20% of the gross wage amount, up to but not exceeding the Social Security Wage Base $94,200 for the year 2006). For the year 2005, the SSWB was exactly $90,000. The same 6.20% tax is imposed on employers. For calendar each year for which the worker is assessed the FICA contribution, the SSA credits those wages as that year's covered wages. The income cutoff is adjusted yearly for inflation and other factors.

For self-employed workers (who technically are not employees and are deemed not to be earning "wages" for Federal tax purposes), the self employment tax, imposed by the Self-Employment Contributions Act of 1954, codified as Chapter 2 of Subtitle A of the Internal Revenue Code, Template:Usc through Template:Usc, is 12.4% of "net earnings from self-employment" (see Template:Usc).

If an employee has excess taxes withheld from his pay (due to multiple jobs having been held by the employee during a single calendar year), the employee can apply for a refund of the excess on Form 1040. The excess taxes paid by employers, however, are not refundable to the employers.

A separate payroll tax of 1.45% of an employee's income paid directly by the employer, and an additional 1.45% deducted from the employee's paycheck, yielding an effective rate of 2.9%, funds the Medicare program. This program is primarily responsible for providing health benefits to retirees.

The combined tax rate of these two federal programs is 15.3%.

Social Security Trust Fund

Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury. Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they have in most years, the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust fund indirectly finances the federal government's general purpose deficit spending. At the end of 2004, the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $1.7 trillion. Template:Ref

Social Security number

A side effect of the Social Security program in the United States has been the near-universal adaptation of the program's identification number, the Social Security number, as the national identification number in the United States. The social security number, or SSN, is issued pursuant to section 205(c)(2) of the Social Security Act, codified as Template:Usc. A multitude of U.S. entities use the Social Security number as a personal identifier. These include government agencies such as the Internal Revenue Service, as well as private agencies such as banks, creditors, health insurance companies, and employers.

The Privacy Act of 1974 was in part intended to limit usage of the Social Security number as a means of identification. Paragraph (1) of subsection (a) of section 7 of the Privacy Act, an uncodified provision, states in part:

(1) It shall be unlawful for any Federal, State or local government agency to deny to any individual any right, benefit, or privilege provided by law because of such individual's refusal to disclose his social security account number.

However, paragraph (2) of subsection (a) of section 7 of the Privacy Act provides in part:

(2) the provisions of paragraph (1) of this subsection shall not apply with respect to -

(A) any disclosure which is required by Federal statute, or

(B) the disclosure of a social security number to any Federal, State, or local agency maintaining a system of records in existence and operating before January 1, 1975, if such disclosure was required under statute or regulation adopted prior to such date to verify the identity of an individual.

Privacy Act of 1974, Pub. L. No. 93-579, 88 Stat. 1897 (Dec. 31, 1974), sec. 7(a) (emphasis added).

The exceptions under section 7 of the Privacy Act include the Internal Revenue Code requirement that social security numbers be used as taxpayer identification numbers for individuals.

Opting out of Social Security

There is no general provision for individuals to opt out of the program (some specific exemptions are discussed below). Internal Revenue Code Provisions section 3101 imposes payroll taxes on individuals and employer matching taxes. Section 3102 mandates that employers deduct these payroll taxes from workers' wages before they are paid. Generally, the payroll tax is mandatory on everyone in employment earning "wages" as defined in 3121 of the Internal Revenue Code, and also taxes net earnings from self-employment.

Groups not required to pay Social Security

There are a number of groups of workers who are exempted from Social Security taxes:

Federal employees hired before 1984 who elected to continue to participate in the federal retirement program instead of receiving part of their retirement under Social Security coverage.
State, or local government workers participating in their employers' alternative retirement system.
Ministers may choose whether or not they will participate in the Social Security program.
Self-employed workers with annual net earnings below $400.
Election workers earning $1,000 or less a year.
Household workers earning less than $1,100 per year.
Minor children with earnings from household work but for whom household work is not their principal occupation.
Most college students working at their school.
Individuals who are members of certain religious groups such as the Amish and Mennonites.
Some primary and secondary school educators have their own pension and disability insurance system that predates Social Security. They are allowed to pay in to their own system instead of the government system. Partly because these funds can be invested in securities, teachers' pension plans tend to be fairly generous.

Before the 1983 changes, three counties in Texas (Galveston, Brazoria, and Matagorda) opted out of the system and now use an Alternate Plan, a private pension plan created and administered by First Financial Benefits, Inc.

In 1983, the U.S. Congress also closed a loophole in the original Social Security Act that allowed municipal governments to opt out of the Social Security system, and also brought all civilian federal employees whose employment began in 1984 or later part under the system.

Restrictions on potentially deceptive communications

Because of the importance of Social Security to millions of Americans, many direct-mail marketers packaged their mailings to resemble official communications from the Social Security Administration, hoping that recipients would be more likely to open them. In response, Congress amended the Social Security Act in 1988 to prohibit the private use of the phrase "Social Security" and several related terms in any way that would convey a false impression of approval from the Social Security Administration. The constitutionality of this law (42 U.S.C. § 1140) was upheld in United Seniors Association, Inc. v. Social Security Administration, ___ F.3d ___ (4th Cir. 2005) (text at Findlaw Template:Ref).

OHA and ODAR

"The Office of Hearings and Appeals (OHA) administers the hearings and appeals program for the Social Security Administration (SSA). Administrative Law Judges (ALJs) conduct hearings and issue decisions. The Appeals Council considers appeals from hearing decisions, and acts as the final level of administrative review for the Social Security Administration." [1]

In 2006, OHA was renamed to ODAR. On April 3, 2006, Commissioner Jo Ann B. Barnhart distributed the following message throughout the SSA "I am pleased to announce the establishment of the new Office of Disability Adjudication and Review. The current Office of Hearings and Appeals will move from the Office of Disability and Income Security Programs to form the nucleus of this new organization." [2]

Demographic and revenue projections

In each year since 1982, OASDI tax receipts, interest payments and other income have exceeded benefit payments and other expenditures, most recently (in 2004) by more than $150 billion. Template:Ref As the "baby boomers" move out of the work force and into retirement, however, it is anticipated that expenses will come to exceed Social Security tax revenues if there are no changes in current law concerning taxes, benefits, and the retirement age.

According to most projections, the Social Security trust fund will begin drawing on its Treasury Notes toward the end of the next decade (around 2018 or 2019), at which time the repayment of these notes will have to be financed from the general fund. At some time thereafter, variously estimated as 2041 (by the Social Security AdministrationTemplate:Ref) or 2052 (by the Congressional Budget OfficeTemplate:Ref), the Social Security Trust Fund will have exhausted the claim on general revenues that had been built up during the years of surplus. At that point, current Social Security tax receipts would be sufficient to fund 74 or 78% of the promised benefits, according to the two respective projections.

The Social Security Administration projects that the demographic situation will stabilize. The cash flow deficit in the Social Security system will have levelled off as a share of the economy. This projection has come into question. Some demographers argue that life expectancy will improve more than projected by the Social Security Trustees, a development that would make solvency worse. Some economists believe future productivity growth will be higher than the current projections by the Social Security Trustees. In this case, the Social Security shortfall would be smaller than currently projected.

Tables published by the government's National Center for Health Statistics show that life expectancy at birth was 47.3 years in 1900, rose to 68.2 by 1950 and reached 77.3 in 2002. The latest annual report of the Social Security trustees projects that life expectancy will increase just six years in the next seven decades, to 83 in 2075. A separate set of projections, by the Census Bureau, shows more rapid growth.

("Social Security Underestimates Future Life Spans, Critics Say"Template:Ref) The Census Bureau projection is that the longer life spans projected for 2075 by the Social Security Administration will be reached in 2050. Other experts, however, think that the past gains in life expectancy cannot be repeated, and add that the adverse effect on the system's finances may be partly offset if health improvements induce people to stay in the workforce longer.

Actuarial science, of the kind used to project the future solvency of social security, is by nature inexact. The SSA actually makes three predictions: optimistic, midline, and pessimistic. The social security crisis that was developing prior to the 1983 reforms resulted from midline projections that turned out to be too optimistic. During the heavy-boom years of the '90s, the midline projections were too pessimistic. Obviously, projecting out 75 years is a significant challenge and, as such, all predictions must be taken with a grain of salt. The actual situation might be much better or much worse than predicted.

Increased spending for Social Security will occur at the same time as increases in Medicare, as a result of the aging of the baby boomers. One projection illustrates the relationship between the two programs:

From 2004 to 2030, the combined spending on Social Security and Medicare is expected to rise from 7% of national income (gross domestic product) to 13%. Two-thirds of the increase occurs in Medicare. Template:Ref

Fraud

Social Security number fraud

Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related idenity information.

In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to “Dear Social Security Number And Card owner” and purporting to be from the Social Security Administration. The message informs the reader “that someone illegally is using your Social Security number and assuming your identity” and directs the reader to a website designed to look like Social Security’s Internet website.

“I am outraged that someone would target an unsuspecting public in this manner,” said Commissioner Jo Anne B. Barnhart. “I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud.” See Press Release.

Once directed to the phony website, the individual is reportedly asked to confirm his or her identity with “Social Security and bank information.” Specific information about the individual’s credit card number, expiration date and PIN number is then requested. “Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN number,” Commissioner Jo Anne B. Barnhart reported.

Social Security Administration Inspector General O’Carroll recommended people always take precautions when giving out personal information. “You should never provide your Social Security number or other personal information over the Internet or by telephone unless you are extremely confident of the source to whom you are providing the information,” O’Carroll said. See Press Release.

Fraud in the acquisition and use of benefits

Given the vast size of the program, fraud occurs. The Social Security Administration has its own investigatory group, Continuing Disability Investigations (CDI). In addition, the Social Security Administration may request investigatory assistance from other federal law enforcement agencies including the Office of the Inspector General and the FBI.

See also

401k
Government operations
Health savings account
Individual retirement account
Ownership society
Social Security Administration
Jo Anne B. Barnhart Commissioner Social Security Administration
NOSSCR National Organization of Social Security Claimants' Representatives
Social security disability

Articles

Community of Minds : Working Together - The $44 Trillion Abyss - 2003 Fortune MagazineTemplate:Ref
Social Security Suicide - AlterNetTemplate:Ref
"The Fake Crisis"Template:Ref- Rolling Stone
"What Does Price Indexing Mean for Social Security Benefits?"Template:Ref- from Center for Retirement Research, January, 2005 (explanation of wage indexing versus price indexing)
Getting a grip on Social Security: The flaw in the systemTemplate:Ref
Center for American Progress: Social Security by the Numbers (reference guide with stats)Template:Ref
"An ownership society evolves: who says individualized accounts are a better way to solve social problems? The laws of nature"Template:Refby William Tucker (relates self-organization theory to Social Security)

Speeches

President George W. Bush - State of the Union Address - February 2, 2005Template:Ref
- "Bush's State of the Union: Social Security 'Bankruptcy?'"Template:Ref- FactCheck.org commentary on the speech
FRB:Testimony, Greenspan--Economic outlook and current fiscal issues--February 25, 2004Template:Ref

Further reading

Social Security Disability Advocate's Handbook, James Publishing, 2005, ISBN 1580120334
Social Security Handbook, Germania Publishing, 2006.

External links

Notes

nl:Social Security Act

Retrieved from "http://www.netipedia.com/index.php/Social_Security_%28United_States%29"

Categories: Social Security (United States)

Views

Personal tools

Create an account or log in

Search