Discussions about the Social Security program in the next few years will necessarily emphasize the critical subject of future financing. But serious attention must be given, as well, to strengthening the adequacy of the Social Security benefit structure for both current and future beneficiaries, to dealing with major inequities for certain beneficiaries, and to continuing and improving both the income replacement and "social adequacy" features of the program.

Recommendations

With these issues and facts in mind, the Committee on Policy for the Aging recommends the following objectives for the Social Security program:

1. The Social Security cash benefit program should continue to be the primary mechanism for assuring that people do not experience a major decline in their overall standard of living upon retirement. It should assure, as well, that all older people have a basic retirement income commensurate with their earnings while employed.

Despite some of its limitations, the Social Security program has evolved as one of the most highly effective and socially viable instruments for assuring a basic retirement income for most Americans and for preventing widespread poverty and economic dependency in old age. At the present time, many (but not all) workers can expect their retirement income to approximate their preretirement earnings (earnings in the year immediately preceding retirement). Under a system of weighted benefits, the Social Security Administration estimates that the person who retires in the future, after working regularly under the program, will receive a benefitpayable to husband and wife-as follows:

a little over 50 percent of preretirement earnings for the worker who earned the maximum covered wage amount;

nearly 70 percent of preretirement earnings for the worker who earned the median wage for male workers; and

nearly 85 percent of preetirement earnings for the worker

The committee supports the weighted benefit level principle as socially desirable. At the same time, we support (a) continued efforts to improve the benefit structure for all workers and (b) action to improve

who earned the federal minimum duced from its current one-half of wage. the primary amount to one-third. This change, in many instances, would maintain the present total benefit received by the couple. At the same time, it would materially improve the income protection available to single workers, widows, and widowers. Also, in most instances, it would improve the relative position of two-worker married couples in comparison to oneworker couples.

OASDI has become the

primary source of income support for the majority of the older population upon retirement.

benefits for currently retired beneficiaries.

2. In line with these concerns, improvements should be made in the adequacy and equity of the OASDI benefit structure for single workers, widows and widowers, and working couples.

The need to strengthen the adequacy of Social Security benefits for certain groups of workers is particularly urgent. For many people-especially single workers, widows, and widowers-benefits do not meet even a low standard of sufficiency. To help correct this situation, action should be taken to increase the amount of the benefit payable to the primary wage-earner. For example, the "primary benefit" payable to all workers could be increased by 12.5 percent and the benefit for the accompanying spouse re

3. The Social Security benefit structure should be further improved to reflect increases in national productivity and overall national wage levels.

Since the Social Security Act amendments of 1972, the OASDI program has included provisions to authorize automatic increases to beneficiaries in relation to annual changes in the cost of living. This feature has materially improved the overall adaptability of the program. To further improve the adequacy of the program, a national policy should be adopted whereby adjustments would be made periodically in benefits to reflect increases in national wage levels and national productivity. In the long run, such an approach would help guarantee that OASDI beneficiaries not only maintain their purchasing power in relation to changing prices, but also that they share in the rising standard of living and wage levels of the currently employed population.

4. Continued efforts should be made to achieve universal coverage of persons employed in the nation's labor force, and ways should be found to coordinate the various public retirement systems with the basic OASDI program.

Coverage of all workers in the labor force, including federal government employees and persons employed by state and local governments, should be a high priority objective. It is poor policy to permit voluntary withdrawal by large groups of government employees from a system that must be both compulsory and universal if it is to operate effectively and efficiently as a basic social insurance program. A special effort is also needed to coordinate the various public retirement systems that have been developed for federal, state, and local

PUBLIC WELFARE/SPECIAL 1977 25

government employees with the basic OASDI benefit program.

5. Further action should be taken to liberalize the "retirement test" provisions of the law, as these apply to persons age sixty-five to seventy-two, to encourage older persons to continue to earn some income from employment if they wish.

One of the most controversial provisions of the Social Security Act is the so-called "retirement test"-the measurement of earnings for a given period to determine if wages are within the amount allowed beneficiaries of Social Security. At present, Social Security benefits are payable upon attainment of age seventy-two, whether or not the beneficiary has retired. The retirement test is applied below this age, based on the concept that Social Security is a means of replacing earned income lost at retirement, rather than an annuity. The amount of income now allowed under the retirement test is presently scheduled to increase with escalations in wage levels.

The committee believes that the retirement test provisions should be retained, but they should be liberalized as a major incentive to continued employment for older people who wish to work past the age of sixty-five. We support the existing provision that permits the amount of income allowed under the retirement test to increase with escalations in wage levels, and we recommend two additional measures aimed at liberalizing the retirement test:

The law that now directs the withholding of $1 for every $2 of earnings above the base amount (currently $230 a month, or $2,760 a year) should be changed; we recommend withholding $1 for every $3 earned above the base amount.

There should be an equitable increase in the benefit payable upon retirement to persons between the ages of sixty-five and seventy-two for each year of delayed retirement.

The present law provides for an increase of 1 percent in benefit levels for each year in which a covered individual did not receive Social Security benefits because of application of the retirement test. The amount of 26 PUBLIC WELFARE/SPECIAL 1977

this annual increment should be increased to at least 2 or 3 percent to encourage the continued employment of older people past the normal retirement age of sixty-five.

6. The protection afforded older women, particularly older widows, under So

The economic status of older women should be a matter of priority

concern.

cial Security should be strengthened, and action should be taken to equalize the protection afforded to women workers generally.

The economic status of older women-in particular, the low income of nearly eight million older widows-should be a matter of priority concern in the development of future national policy to improve the OASDI cash benefit program. To help assure improved benefit protection for women, the Committee on Policy for the Aging recommends the following actions:

. Currently, the law has a twentyyear marriage requirement for a divorced spouse to qualify for benefits. In addition, the marriage must have been continuous. The committee believes that the twenty-year "duration of marriage" requirement should be reduced, and the "contin

uous marriage" requirement should be eliminated.

• Disabled widows or widowers and disabled surviving spouses should be eligible for Social Security without regard to age, and their benefits should not be subject to an actuarial reduction as is now the case. Disabled spouses of Social Security beneficiaries should also be entitled to monthly benefits.

An age sixty-two computation point should be made applicable for men born before 1913 as a means of providing increased benefits for retired male workers, older women, aged widows, and others. This change would provide larger benefits, not only to the retired male worker, but also to older married women and widows who receive secondary benefits based on the primary insurance amount of a living or deceased male worker.

7. Finally, the financial integrity of the Social Security cash benefit program should be ensured and its financing base improved in terms of both short- and long-range financing.

To help preserve the financial integrity of the OASDI program and to facilitate the financing of needed improvements in benefits, the committee proposes that the following actions be taken:

The current maximum on the taxable wage base should be gradually increased until the full wages of virtually all wage earners are covered.

The basic contributory character of the OASDI program should be preserved, but financing from general revenue funds should be gradually introduced. The long-range objective should be to establish a tripartite system based on contributions from the covered employee, the employer, and general

tax revenues.

Action should be taken to "decouple" those benefit provisions of the current law that raise the prospect of future beneficiaries receiving, in effect, a double upward adjustment of their benefits upon retirement. The present "coupling" situation is a complicated one. It results from changes made in the benefit formula by the 1972 amendments to the Social Security Act. The in

tention of the automatic cost-of-living provision of the amendments was simply to guarantee that increases in monthly benefit checks would correspond with increases in prices over the years. However, the automatic cost-of-living increase was applied to the benefit formula, rather than directly to monthly benefit checks. As a result, the following "double indexing" situation was created: Currently, as prices go up, the wages of most workers increase, thereby increasing the "average monthly earnings" on which their future Social Security benefits will be based. At the same time, the Social Security benefit schedule is increasing because of the automatic cost-of-living provision. Thus-unless the law is changed-future beneficiaries will receive not only higher monthly benefits based on in

creased wages during employment, but also higher Social Security benefits based on increases in the benefit formula.

Proposals to correct this situation are called "decoupling." Such a change would substantially ease the long-range financial difficulties of the Social Security system. However, the committee recommends that decoupling should be accompanied by the introduction of some system, such as wage-indexing, that would help stabilize the present replacement rates provided for in the automatic benefit provisions of the

act.

• To lessen the impact of the Social Security payroll tax on low-wage earners covered under the program, a permanent system should be adopted that would allow either an income tax credit or a direct refund

of a portion of taxes. This should be equivalent to the combined contributions of the individual and his employer.

Notes and References

1. Prior to the 1972 Social Security amend ments, retirement benefits for men were fig. ured differently, and less advantageously. than benefits for women. In general, in the case of retired male workers, benefits were

computed on the basis of earnings averaged over a number of years equal to the number elapsing after 1950 and before age sixty-five. For women workers, on the other

hand, benefits were based on the number of

years up to age sixty-two, which gave them, in effect, three additional drop-out years (in figuring their average monthly earnings). The 1972 amendments (P.L. 92-603) provided an age sixty-two computation point for men, but only for those born after 1912. U.S., Congress, Senate, Special Committee on Aging.

Women and Social Security Adapting to a New Era, prepared by the Task Force on Women and Social Security, 94th Cong., 1st sess., 1975, p. 26.

to provide for a more adequate and realistic minimum income. Also, there should be federal efforts and financial incentives to encourage all the states to provide supplemental assistance to SSI beneficiaries, at least up to the annually determined and updated low-income level as determined by the United States Bureau of Labor Statistics. Federal financial participation should be available to meet part of the costs of state supplementation.

2. The responsiveness of the SSI program, its eligibility criteria, and methods of eligibility determination should be improved, in order to assure more objective and sensitive administration of the program. We recommend the following steps:

a. Less emphasis on such factors as family structure PUBLIC WELFARE SPECIAL 1977 27

and living arrangements in determining eligibility and more emphasis on financial need. In particular, the present provision in law requiring a one-third reduction in the basic SSI payment when the beneficiary lives in another person's or family's household should be eliminated. This provision is patently arbitrary. Only actual cash contributions should be counted as income in such joint living arrangements.

b. The SSI law should be amended to require that initial decisions on an application by an aged person be made within thirty calendar days. In the case of a blind or disabled person making application, decisions should be made within sixty calendar days from the date of application. This longer period for the blind and disabled would sometimes be necessary because of the need for medical determination of legal blindness or permanent and total disability. Additionally, the law should require that beneficiaries receive their SSI check within forty-five days of the date of initial eligibility.

c. The development and implementation of a permanent "outreach" program, operated at the district office level of the Social Security Administration, should be mandated by law to assure continuous efforts to locate low-income aged, blind, and disabled persons who may not be aware of benefits to which they are entitled.

d. Annual redeterminations of eligibility should involve direct assistance by Social Security staff, including home visits, for those beneficiaries who are homebound. Similar assistance by Social Security staff should also be made available, as a matter of standard practice, to the homebound aged, blind, or disabled person at the time of original application for assistance and when there has been a change in the individual's financial situation that requires an adjustment of the SSI benefit. SSI beneficiaries who are homebound should not be expected to experience delays in their eligibility status, solely because of their inability to come into a Social Security district office.

3. SSI beneficiaries should be automatically entitled and have clear access to such other basic programs as Medicaid, food stamps, public social services provided under Title XX of the Social Security Act, services for older people developed under the programs of the Older Americans Act, and vocational rehabilitation services, including rehabilitation and restorative services that may improve overall independent functioning and services related to a return to employment. Appropriate titles of the Social Security Act and related legislation should be amended to provide for automatic eligibility of SSI beneficiaries for the programs and services cited above.-Adopted by the APWA Board of Directors on December 9, 1976

Report on the Supplemental Security Income Program

The supplemental security income (SSI) program, established under the provisions of the 1972 amendments to the Social Security Act, has undergone a torturous and turbulent implementation. Established as a federally administered program on January 1, 1974, the SSI program federalized the previous state-administered adult assistance programs of aid to the aged, blind, and disabled. Under the provisions of Title XVI of the act, the major responsibility for the administration of the new program was placed with the Social Security Administration.

The initial payment level provided under the law was $130 for a single individual and $219 for a married couple. Subsequent changes in the payment level have increased this monthly payment to $167.80 for a single person and $251.80 for a couple. Because of a cost-of-living feature added to the law in 1973, fu

28 PUBLIC WELFARE/SPECIAL 1977

Issues

early implementation of the SSI program. The program is unusually

complex and has involved a mas

sive, extremely difficult conversion effort by the Social Security Administration (SSA). It also has necessitated a host of new administrative relationships between SSA and state public welfare agencies that in and by themselves have proven to be complicated, confusing, and often frustrating.

A recent report by a special study group appointed by the secretary of health, education, and welfare and the commissioner of the Social Security Administration made several proposals for administrative and legislative improvements in the program. The study group's recommendations were in the areas of benefit levels; eligibility; the overall performance of the administrative agency (SSA); and phases of the program involving planning, staffing, training, district office operations, and data processing systems. The report is now being used by SSA as a basis for formulating needed changes in the overall operation of the program and as a base for future

legislative planning.

In general, the many issues confronting the program can be divided into four broad categories:

1. In the judgment of this committee, the overriding issue is the inadequacy of the basic federal payment now made to the needy aged, blind, and disabled.

2. There are a set of issues related to administrative efficiency of the program, many of these stemming from the numerous relationships between the SSI program and other social welfare programs-including Medicaid, food stamps, public social services, vocational rehabilitation, and the payment of state supplementary payments authorized under the legislation.

3. There are important coverage issues that remain critical. These include the failure of the program, as it has operated, to reach all of those who are potentially eligible and the gap that exists in the provision of emergency financial assistance to those who receive SSI.

4. Finally, there are a number of issues stemming from the precise tests of eligibility required under the law, particularly those relating to the determination of other income, real and personal property, household composition, and the earned and unearned income of noneligible spouses. Discussion

The SSI program that became effective on January 1, 1974, emerged out of the lengthy debate in the Congress on the proposed Family Assistance Plan recommended by the Nixon administration. From the beginning, the program's conceptualization and actual intent have never been clear. On the one hand, it was initially put forth as a national minimum income program for the needy aged, blind, and disabled. In fact, the basic law retains most of the highly individualized and precise eligibility tests that characterized the former federal-state adult assistance programs.

If SSI is to be a guaranteed minimum income program, it should provide benefits, through the basic federal payment, at least equal to the poverty line standard or above.

It is currently estimated that the federal cost of providing payments at this level would be slightly in excess of $3 billion (over the $4.7 billion in federal SSI costs for fiscal year 1977). Many states are presently providing an optional supplement at their own expense in order to bring SSI benefits up to a more adequate level. Thus, the gap between the federal payment level and the poverty line adds to the administrative complexity of the program and thwarts efforts to rationalize its operation.

Since there are many issues and problems that result from the present working relationships between SSI and other programs, attention should be given to modifications in the SSI law that would (1) attempt to deal with interface issues more coherently than now is being done administratively and (2) clarify the intent of the law as a national minimum income program that is substantially different from the traditional public assistance model based on highly individualized test

ing of income and resources. It is particularly important to remove from the current law references to mandatory work registration tests and the like.

Despite present shortcomings in both administration and adequacy, the SSI program does represent a major policy breakthrough in establishing a national minimum income standard for the aged, blind, and disabled. Also, it does represent an in-place mechanism for income redistribution-in fact so much so, that ultimately the question must be faced as to whether it should be utilized as the way to replace many of the income redistribution functions of the present old age survivors, and disability insurance (OASDI) cash benefit program. If SSI were to become the major income redistribution mechanism available to the low income aged, blind, and disabled, the OASDI program could be geared solely to what many feel its major job should be-i.e., the replacement of a certain portion of income during retirement.

PUBLIC WELFARE/SPECIAL 1977 29