Revisions in these estimates have recently been prepared that take into account the rise in earnings levels since 1951-1952 and the most recent coverage and benefit experience. According to these new estimates the level premium cost of the program after 1955, on an intermediate basis and assuming 2.4 percent interest, is 7.51 percent. The level contribution rate equivalent to the graduated contribution rates in the law is estimated at 7.29 percent, with a resulting deficit of 0.22 percent. Thus the new estimates show that the deficit has been significantly reduced. Taking into account the practice of using contribution rates rounded to convenient fractions, the system is as nearly in balance as is practical.

The difficulties involved in making exact predictions of the actuarial status of a program that reaches into the distant future are widely recognized. If different assumptions as to, say, interest, mortality, or earnings had been used, different results would have been obtained. Accordingly, no one set of estimates should be looked upon as final. As economic and other conditions change, the Department will continue to prepare new cost estimates reflecting the latest information available.

A Study of the Minimum Benefit

Public Law 761, the Social Security Act Amendments of 1954, contained the following section calling for a study of the minimum benefit under the old-age and survivors insurance program:

Sec. 404. (a) The Secretary of Health, Education, and Welfare shall conduct a full and complete study with a view to determining the feasibility of increasing the minimum old-age insurance benefit under title II of the Social Security Act to (1) $55 per month, (2) $60 per month, and (3) $75 per month.

(b) Such study shall include (1) a detailed analysis of the estimated increase in cost, if any, involved in increasing such minimum benefit to each of the above referred to amounts, (2) estimates of the financial impact such increase would have upon the Old-Age and Survivors Insurance Trust Fund, and (3) an estimate of the amount, if any, by which Federal grants to the States for public assistance would be reduced by reason of such increase in minimum old-age insurance benefits.

(c) The Secretary shall report to the Congress at the earliest practicable date the results of the study provided for by this section.

In accordance with this directive a study of the feasibility of increasing the minimum benefit to the specified amounts was conducted during the fiscal year 1955. The study included, in addition to the required analysis of costs and of the impact on Federal grants for public assistance, an analysis of the relationship of the proposed increases to employment patterns, earnings, and benefit levels of workers and of beneficiaries with a view to determining who would benefit

from, and who would be disadvantaged by the proposed increases in benefits and cost.

In connection with the study, estimates were prepared of the benefits that are expected to be awarded under the program in the next 5 years. It is anticipated that about 80 percent of the benefits awarded to retired men workers during that period will be based on earnings after 1950 and will reflect the changes in the program, described earlier, that are expected to improve benefit adequacy. Among these retired male beneficiaries whose benefits are based on earnings after 1950 only 6 percent are expected to qualify for less than $60 a month; over 80 percent are expected to receive benefits between $75 and $108.50.

The study was completed and a report on the study was submitted to the Congress shortly after the end of the fiscal year. The conclusions reached in the study, as summarized in the report, are as follows:

. . . the proposed increases in the minimum would result in appreciable increases in the cost of the old-age and survivors insurance program. The increase in cost on a level-premium basis for the $55 minimum would be 0.6 percent of payroll; for the $60 minimum, 0.9 percent; for the $75 minimum, 1.8 percent.

With a $55 minimum the savings in Federal grants to States for old-age assistance would amount to about 4 percent at present and about 8 percent in 1960. The comparable figures for a $75 minimum would be 10 percent now and somewhat under 19 percent in 1960. The additional expenditures for old-age and survivors insurance in 1955 would amount to from 5 to 7 times the reduction in the Federal share of assistance costs; for 1960 from 8 to 11 times.

Those who would benefit from the proposed increases in the minimum, aside from those people now on the rolls, would be widows whose husbands died before the recent improvements in old-age and survivors insurance, families where the wife had barely enough covered work to be insured, and people who had spent most of their lives outside of covered work such as doctors, lawyers, Federal employees, and investors. In addition there would be some regular lifetime workers in low-wage areas, such as Puerto Rico and the Virgin Islands, or in farming, with its low cash wage and considerable remuneration in kind. The chief group that would be hurt by reason of paying additional contributions without any benefit increases would be the regular, full-time, lifetime workers who supported themselves and their families throughout their lives by work in covered jobs.

It would seem very difficult to justify to the long-term contributors to the system, who even under present law receive less in proportion to their contributions than do the short-term contributors that they must pay still higher contributions to help finance benefit increases for others while not getting additional benefits themselves. Especially would this be true when it is considered that among those who would receive the increased amounts would be self-employed doctors and lawyers, Federal workers, investors and others whose major source of support—income from noncovered work or investments—is not subject to the taxes that support the program.

Thus the provision of high minimum benefits not only would increase the cost of the program but it might also jeopardize the financing of the program by decreasing the willingness of the long-term regular worker to support the system. In the opinion of the Department of Health, Education, and Welfare there are values inherent in the contributory, variable-benefit system that make it most important that no step be taken, however expedient it may seem in the short run, that would weaken the financial basis of the system.

Legislative Developments in 1955

A bill (H. R. 7770) to consolidate reporting of wages for incometax withholding and social security purposes was introduced in the House of Representatives shortly before the first session of the Eightyfourth Congress adjourned. Since quarterly reports of earnings would not be made under the plan for workers covered by the income-tax withholding procedures, the bill provides for changing the insured status requirements under the program from the present quarterly basis to an annual basis.

H. R. 7770 also includes a provision under which the Federal old-age and survivors insurance trust fund would earn a higher rate of interest on its investments. The law now requires that special obligations issued to the trust fund bear interest at a rate equal to the average rate of interest borne by all interest-bearing obligations of the United States forming a part of the public debt. (When the average rate is not a multiple of 1% of 1 percent, the rate of interest is the multiple of 1% of 1 percent next lower than the average rate.) In determining the interest rate under this rule all obligations, including very short-terms ones, are included. Yet the financial commitments of the system are basically of a long-term nature and it is appropriate to take that fact into account in arriving at a rate of interest that is equitable. Under H. R. 7770 the interest rate on special obligations issued to the fund would be the average rate of all marketable United States Government obligations having maturity dates more than 5 years after issuance; thus short-term obligations would not be considered. The bill also provides that the average rate would be rounded to the nearest (rather than the next lower) multiple of 1% of 1 percent.

Late in the first session, the House of Representatives passed H. R. 7225, a bill that would lower the retirement age to 50 for insured individuals who are permanently and totally disabled, reduce the benefit eligibility age for wives, widows, female parents, and women workers to 62, continue monthly benefits for disabled children after age 18, extend old-age and survivors insurance coverage to self-employed professional people not yet covered (except doctors) and a few smaller groups, increase the contribution rates, and establish an Advisory Council on Social Security Financing. Time did not permit full consideration of the measure by the Senate. The Department endorsed the extension of coverage provided by the bill but stated that the other provisions required study and evaluation more extensive than could be provided during the closing days of the 1955 session of Congress.

After a number of months of intensive study and public hearings, the Select Committee on Survivor Benefits of the House of Representatives (the Hardy Committee) reported out a bill, H. R. 7089, that was passed by the House on July 13, 1955. The Senate Committee on Finance is expected to consider the bill at the next session of the Congress. This bill would make major improvements in the survivor benefit programs for servicemen, including extension of contributory old-age and survivors insurance coverage to members of the Armed Forces and coordination of the survivor benefits payable by the Veterans Administration with those that would be provided by old-age and survivors insurance. The bill would substantially carry out the recommendations of the President and of this Department that coverage be extended to members of the uniformed services on a contributory, wage-related basis.

H. R. 7089 includes provision for reimbursement of the Federal old-age and survivors insurance trust fund for past and future expenditures resulting from the gratuitous $160 monthly wage credits which are provided under existing law for military service performed since September 15, 1940.

When it became evident that Senate consideration of H. R. 7089 could not be completed in 1955, the Eighty-fourth Congress enacted Public Law 325 as a stop-gap measure. This law extended the expiration date of the gratuitous $160 monthly wage-credit provision from July 1, 1955, to April 1, 1956. If H. R. 7089 is enacted to provide contributory coverage of the Armed Forces effective January 1, 1956, the social security law will need to be amended so that the $160 gratuitous credits will not be granted for military service after 1955.

In addition to the significant developments that occurred during the year in respect to improved retirement and survivors protection for members of the Armed Forces, the President took steps to improve veterans' legislation by establishing the President's Commission on Veterans' Pensions, with General Omar N. Bradley as Chairman. At the President's direction, this Commission began a comprehensive study of the Federal laws providing nonmedical benefits to veterans and their dependents, including the relationship of these benefits to benefits provided under the social security and other general programs, as a basis for recommendations to be submitted to the Congress. The Department was asked to furnish information about the present and potential effects of the old-age and survivors insurance program and others administered by the Department on veterans.

Amendments to the Railroad Retirement Act were approved August 12, 1955. These amendments made no basic changes in the coordination of the railroad retirement and old-age and survivors

insurance programs; however, they did remove the former requirement in the railroad law that survivor annuities be reduced by the amount of any old-age and survivors insurance benefit (based on a different wage record) payable to the annuitant.

Some progress was made during the year toward carrying out the recommendation of the Committee on Retirement Policy for Federal Personnel that old-age and survivors insurance coverage be extended to employees covered by the Federal civil service retirement system and that the latter system be revised to be supplementary to old-age and survivors insurance. The Department of Health, Education, and Welfare believes that the recommendation, if carried out, would substantially improve the protection afforded to Federal employees.

Public Assistance

The twentieth year of administering public assistance under the Social Security Act was an occasion for taking stock-appraising gains and evaluating needs in planning the future direction of the program.

Gains in Public Assistance

Benefits of the public assistance titles of the act are now extended to the needy aged and blind and to dependent children in all the approximately 3,100 counties in the United States, and in Alaska, Hawaii, the District of Columbia, Puerto Rico, and the Virgin Islands. Nevada, since 1945 the only jurisdiction without a federally aided program of aid to dependent children, passed legislation authorizing the initiation of its program in July 1955. The federally aided program initiated in Maine during the year brought to 43 the States administering aid to the permanently and totally disabled for which Federal grants were provided under a 1950 amendment to the act. In addition, States provide general assistance, using only State and/or local funds.

During the past 20 years the State public assistance programs have undergone great development in their ability to help people meet their needs in ways that are consistent with the dignity of the individual and with respect for his rights and responsibilities. Much of the gain is attributable to implementation of concepts embodied in the public assistance titles of the act reenforced by the knowledge and experience of related fields of economics, law, social work, medicine, and public administration.

For example, placement of responsibility with a single State agency for statewide operation of the program has contributed to the develop