Chart 1.-COVERAGE HAS BEEN EXTENDED TO 10 MILLION MORE PERSONS *Approximately 40 percent are members of the Armed Forces (wage credits under old-age and survivors insurance are provided for military service from September 1940 to June 1955). **During a year about 300,000 farmers are also employed as hired farm workers. sional people, and farm or domestic workers who were not regularly employed by a single employer. While service in the Armed Forces is not covered by old-age and survivors insurance on a permanent contributory basis, wage credits of $160 are granted for each month of active military or naval service after September 15, 1940, and before July 1, 1955. CONTRIBUTIONS AND DISBURSEMENTS Program expenditures during the fiscal year totaled $3,364 million, of which $3,276 million was for benefit payments and $89 million for administrative expenses. Total receipts were $5,040 million, including $4,589 million in contributions, $439 million in interest on investments, and $12 million in transfers from the railroad retirement account. Receipts exceeded disbursements by $1,675 million, the amount of the increase in the trust fund during the year. At the end of June 1954, the fund totaled $20.0 billion. All assets of the fund, except $703 million held in cash, were invested in United States Government securities as required by law. Approximately 85 percent of the total fund, or $17.1 billion, was invested in special certificates of indebtedness bearing interest at 214 percent, the average rate paid on the total interest-bearing Federal debt at the time they were issued. The remainder of the fund, $2.3 billion, was invested in public issues, identical with similar bonds owned by private investors and bearing interest at rates varying from 214 to 34 percent. The average interest rate on all investments of the trust fund at the end of the year was about 2.3 percent. ADMINISTERING THE PROGRAM Average staff of the Bureau of Old-Age and Survivors Insurance during the fiscal year approximated 14,000 employees. Located in Baltimore, Md., were about 4,600 employees responsible for establishing and maintaining the earnings records of persons covered by the program, plus the headquarters staff of some 700 people. Decentralized operations through 512 district offices and 6 area offices were staffed by approximately 8,700 employees. Claims services were brought to the people, also, through more than 3,000 itinerant service points fanning out from the parent district offices. The magnitude and quality of Bureau operations are indicated by a few key facts and figures. About 221 million earnings items were received, processed, and posted to individual accounts during the year. Approximately 1,888,000 claims were received during the year, and 1,373,000 monthly benefit and 540,000 lump-sum awards were made. As of June 30, 1954, 6.5 million persons were being issued monthly benefit checks, requiring a series of highly mechanized and systematic actions to keep accurate records of a benefit roll of this dimension. In fiscal year 1954, administrative costs, including those incurred by the Treasury Department for collecting taxes and making disbursements to old-age and survivors insurance beneficiaries, were 1.9 cents out of each tax dollar collected and appropriated to the trust fund under the Federal Insurance Contributions Act. Substantial progress was made by the Bureau of Old-Age and Survivors Insurance and the Internal Revenue Service in their study of the plan to integrate old-age and survivors insurance wage reporting with annual reporting of withholding taxes and to eliminate the quarterly detailed listing of employee earnings items now required for the insurance program. Under the direction of an interagency steering committee, several work groups are developing and testing procedures which might be used if the plan is adopted. It is expected that adoption of the plan will result in savings to employers in reporting costs and will improve the Government's administration of these benefitpayment and tax-collection programs. An undertaking of comparable scope and importance is the study of electronic developments and their possible application to the Bureau's record-keeping operation. This study has as its objective keeping the costs of maintaining the records of earnings of individuals covered under the program to an absolute minimum. Broad plans have been developed for the use of an electronic data-processing machine in the earnings record and statistical operations. The policies and practices used to insure that beneficiaries correctly report events affecting their continued eligibility to receive benefits are being studied. A nationwide survey of a sample of approximately 8,000 beneficiary families was carried out through interviews by district office personnel with the beneficiaries. Information thus obtained was checked against data contained in the claims folders and in the earnings records. Upon completion of the study, action will be taken to tighten up any policies and procedures where corrective action appears to be necessary. In September 1952, the House Appropriations Committee established a survey group to study the possibility of check writing by benefit payment agencies to replace the process of certification by the agency and disbursement by the Treasury Department. A successful trial installation has been made at the Railroad Retirement Board. The Bureau of Old-Age and Survivors Insurance has followed these studies closely and expects in the coming year to make an experimental application in one of its six benefit-payment centers with the assistance of General Accounting Office and Treasury Department representatives. The Bureau's planning to achieve economies from housing all its records operations in one building progressed substantially in fiscal year 1954 with congressional action making $1,500,000 available for the acquisition of land and the preparation of plans and specifications for a building. Proposals for the sale or donation of a site were solicited, architects were appointed, and a site in the Woodlawn area of Baltimore County was selected. Congress appropriated $20,000,000 in August 1954 for use in construction of the building. Tentative plans call for construction to begin in late 1955 and to be completed in the latter part of 1958. The most immediate administrative concern of the Bureau is action to effectuate the amendments to the Social Security Act. Advance planning was directed toward enabling the Bureau to meet the schedules of action imposed by the various provisions of the amendments. Schedules for staffing and for training personnel were designed to accomplish the most economical processing of peak loads; and timely revisions of policies, instructions, and procedures provided basic operating tools. Plans were made in advance for special public information materials to coincide with the dates on which particular provisions of the legislation would become effective so that the public would be informed of its rights and responsibilities. The most immediate and urgent action was the conversion of the benefit amounts of approximately 6.6 million beneficiaries so that checks for the month of September 1954 could be released on time and in the increased amounts. To meet the schedule, conversion pro cedures were developed and tested in advance and the great bulk of the work was performed mechanically. After careful study of administrative alternatives, a new operating division was established in the Bureau to administer the provisions of the amendments which provide protection for the benefit rights of the disabled. This division will be charged with the responsibility for administering a new program area for the Bureau. The new Division of Disability Operations will formulate methods, criteria, and standards for obtaining evidence and making disability determinations, coordinate with State agencies making these determinations, perform the administrative review of these determinations, and make Federal determinations in cases not covered by State agreements. Improving the Program-The 1954 Amendments The fiscal year 1954 was one of intensive legislative activity, culminating in the Social Security Amendments of 1954, signed by the President on September 1, 1954. Legislative activity began early in the fiscal year, with Chairman Reed of the House Committee on Ways and Means introducing the Administration's first social security bill, incorporating the recommendations on extension of coverage set forth in the President's message of August 1, 1953. The proposals had been developed by the Department with the assistance of a group of consultants from the fields of banking, insurance, education, social work, farm and labor organizations, and industry. Shortly before the opening of the second session of the 83d Congress, hearings on the social security system were held by a special subcommittee of the House Committee on Ways and Means, headed by Representative Carl T. Curtis. Testimony at these hearings, presented largely by the Department and by other Government agencies, was devoted to presentation of factual data on the law and the manner in which it operates. These data were thus available to the full Committee on Ways and Means for its subsequent consideration of the Department's legislative proposals. The full-scale legislative proposals of the President and the Department were set forth in the President's message of January 14, 1954. Two weeks of open hearings before the House Committee on Ways and Means were conducted beginning April 1. These hearings drew testimony from groups interested in old-age and survivors insurance, including representatives from the field of business, labor, public employment, the professions, civic groups, agriculture, and public welfare. House passage of the bill was followed by hearings in the Senate from June 24 to July 29. Final passage came on August 20. COVERAGE The amendments afford old-age and survivors insurance coverage to about ten million people who during the course of a year work in employment that was formerly excluded. More than half of these people are in agriculture, either as farm operators or as farm workers. Since only a relatively small group of regular farm workers were previously covered by the program, the 1954 amendments provide retirement and survivors protection for most rural people for the first time. From the viewpoint of the effectiveness of the program in serving the purpose for which it was designed, the coverage of rural people has great significance. Farm people, like people in urban employment, can now look to the insurance program to maintain family income when earnings are cut off by the death of the family bread-winner or his retirement. The number of aged persons and orphans receiving public assistance in rural areas, which has been disproportionately high, can be expected to decline as farm people become insured under the program. About 3.6 million farm operators will now be covered by old-age and survivors insurance in the course of a year. Farmers, like persons in other types of self-employment, are covered only if their net earnings from self-employment equal $400 or more a year. A special provision in the law makes coverage possible for low-income farmers without requiring them to keep books and records that they ordinarily do not maintain. Under this provision a farmer who reports his income on a cash receipts and disbursements basis and whose gross income is $1,800 or less may report for credit under old-age and survivors insurance 50 percent of his gross income in lieu of his actual net; if the gross income of the farmer is more than $1,800 but his net income is less than $900, he may report $900 as his net income. Since low-income farm operators, who may not keep detailed records, nevertheless do know their gross income, they will be able to report their earnings and compute their social security taxes without difficulty. The amendments extend coverage to approximately 2.1 million additional farm workers during the course of a year. Previously a complicated coverage test had limited coverage to about 700,000 farm workers. Effective January 1, 1955, any agricultural worker is covered by old-age and survivors insurance if he is paid $100 or more in cash wages by one employer in a calendar year. It is estimated that under this test from 90 to 95 percent of the persons whose major employment is hired farm work will be covered. While the provision will exclude some migratory workers who spend their full time in farm work, most of those who will continue to be excluded from coverage by the provision are students and semiretired persons who |