PAYMENT FOR MILITARY SERVICE CREDITS APPROPRIATION ESTIMATE "PAYMENT FOR MILITARY SERVICE CREDITS "For payment to the Federal Old-Age and Survivors Insurance, the Federal Disability Insurance, and the Federal Hospital Insurance trust funds for benefit payments and other costs resulting from noncontributory coverage extended certain veterans, as provided under section 217(g) of the Social Security Act, as amended, $105,000,000." EXPLANATION OF APPROPRIATION LANGUAGE The appropriation language establishes a new appropriation account to provide for general fund payments to reimburse the Federal old-age and survivors insurance, the Federal disability insurance, and the Federal hospital insurance trust funds for the cost of paying benefits on a basis of noncontributory military service credits. Section 217(g) of the Social Security Act, as amended by Public Law 89-97, enacted July 30, 1965, authorizes such payment to the trust funds in annual installments over a 50-year period. Thereafter, annual appropriations for current costs are authorized. A supplemental appropriation has been requested for fiscal year 1966 amounting to $105 million for the first of the periodic repayments to the trust funds as provided in Public Law 89-97. The request for $105 million for fiscal year 1967 represents the second such repayment to the trust funds. JUSTIFICATION OF ESTIMATE Insurance claims and indemnities Fiscal year 1966 proposed supplemental-. The estimate of $105 million covers the annual payment to the old-age and survivors insurance, the disability insurance, and the hospital insurance trust funds, for benefit payments (and related administrative and interest costs) based on noncontributory military service credits. BACKGROUND The 1946 Amendments to the Social Security Act provided for the payment of benefits to survivors of World War II veterans who die within 3 years after their discharge from the armed services, by extending coverage to these veterans on a noncontributory basis. These amendments also provided for reimbursement to the old-age and survivors insurance trust fund to meet the additional costs resulting from the payment of benefits based on noncontributory military service. This reimbursement provision was terminated by the 1950 amendments, effective September 1, 1950. (For the period prior to September 1, 1950, almost $15.5 million was paid to the trust fund covering the cost of benefits paid, administrative expenses, and interest lost to the trust fund.) The 1950 amendments continued the provisions of the 1946 amendments regarding payment of benefits, and, in addition, provided old-age and survivors insurance wage credits of $160 for each month of active military or naval service during World War II (Sept. 16, 1940, to July 25, 1947, later extended to Jan. 1, 1957). Later amendments provided for reimbursing the old-age and survivors insurance trust fund and, where applicable, the disability insurance trust fund for costs incurred since September 1, 1950. The Social Security Amendments of 1965, enacted July 30, 1965, further extend the reimbursement provision to cover benefits paid from the Federal hospital insurance trust fund, and establish a 50-year period ending June 30, 2015, for reimbursement. Thereafter annual appropriations for current costs are authorized. A supplemental appropriation for fiscal year 1966 has been requested for the first annual reimbursement. The fiscal year 1967 request represents the second annual reimbursement. ESTIMATED ANNUAL PAYMENT The accumulated liability to the trust funds as of June 30, 1965, based on a detailed analysis of a random sample of actual benefit awards, is $1,005 million$853 million to the OASI trust fund and $152 million to the DI trust fund. The annual installment required to amortize this debt over a 50-year period at 4% percent interest is $45.9 million. The estimate of $105 million is based on this liability plus a projection of future costs and is distributed by trust fund as follows: Mr. BALL. There is one other item from the general fund that is only related in a minor part to health insurance, Mr. Chairman. We have a request for the amount of $105 million to the trust fund for military service credits. This request is for the second annual payment to the trust funds. The first payment is included in our supplemental appropriation request for 1966. Beginning in 1957 servicemen were covered under the social security in the same way as other wage earners, through the payment of social security taxes. For military service before 1957, however, the law provides social security wage credits on a noncontributory basis. Public Law 881, enacted August 1, 1956, and later amendments to the Social Security Act, authorized reimbursement to the trust funds for the costs of these benefit payments plus administrative expenses and interest loss. The 1965 legislation provided for the backlog of amounts due from September 1, 1950, to June 30, 1956, to be repaid over a 10-year period, 1960 through 1969, and authorized annual appropriations for current costs in subsequent years. ACCUMULATED DEBT No appropriation for these purposes has been enacted. The delay that has occurred in beginning the repayments has resulted in an accumulated debt of $1 billion. Senator HILL. $1 billion? REPAYMENT SCHEDULE Mr. BALL. Now, the 1965 social security amendments approach this in a somewhat different way and established a 50-year period for bringing reimbursement up to a current basis. The amendments provided that the trust funds will be repaid by annual appropriations for the costs of old-age and survivors and disability insurance benefits plus administrative expenses and interest loss since September 1950, plus the cost of estimated benefit payments over the next 50 years. And thereafter, you see, the reimbursement would be on a current basis. Approval of this request, together with the first annual reimbursement requested in the 1966 supplemental, will be an important step in preventing further buildup of the moneys owed by the general fund of the Treasury to the trust funds. That completes my statement, Mr. Chairman. If there are any further questions. COMMISSIONER'S SERVICE WITH AGENCY Senator HILL. How long have you been with the Social Security Administration now, Mr. Ball? Mr. BALL. Well, in one capacity or another, since early 1939. I was a career employee up until 1962, when President Kennedy appointed me with the consent of the Senate to be Commissioner. Senator HILL. Commissioner. You have seen this thing grow, haven't you? Mr. BALL. I certainly have. In every way. Senator HILL. In every way. You are not asking for any further growth this year in terms of legislation, are you?. Mr. BALL. No, there is no pending recommendation. Senator HILL. Nothing pending. AMENDMENTS TO TAX BILL Mr. BALL. You may remember that we got a little amendment on the tax bill that blanketed in about 330,000 people Senator HILL. Yes. Mr. BALL. Who hadn't been insured, and whose payments will be paid from general revenue. This is a group who are 72 or over. It was Senator Prouty's amendment on the Senate floor, modified in conference. So, we have some legislation, but we didn't request any. PROUTY AMENDMENT Senator HILL. You didn't request it at this time? You didn't request the Prouty amendment? Mr. BALL. No, sir. Senator HILL. No. Well, the Prouty amendment as originally introduced and passed in the Senate really went pretty far. Mr. BALL. Yes, it was modified in conference very considerably. Senator HILL. Reduced some little bit in conference. Mr. BALL. There is no question but what it would be a very helpful thing for many people. Senator HILL. You mean many who are 72 years of age and over? Mr. BALL. Yes. It goes, as you may remember, only to people who are not receiving any sort of a State or local or Federal pension, or not on assistance. We estimate around 350,000, as I remember, would become eligible for this in October. Senator HILL. About that many? PERCENT OF PEOPLE OVER 65 PROTECTED Mr. BALL. Yes. And that just about completes the coverage of older people under a pension system, Mr. Chairman. I would say about 85 percent of all the people 65 and over are covered under social security now, and another 5 percent under railroad and civil service, and as the years go on, you take those three systems together, and you will have 97 to 98 percent of the population protected. Senator HILL. Yes. Even including our budget people. [Laughter.] Mr. BALL. As soon as they reach the desired age. QUESTIONS BY SENATOR BYRD OF WEST VIRGINIA Senator HILL. I have a series of questions sent over by Senator Byrd, of West Virginia, a member of our subcommittee, who is attending another subcommittee meeting. I will hand you these questions and ask that answers be supplied. Mr. BALL. We shall be glad to supply answers for Senator Byrd's questions. (The questions and answers follow:) 1. Question. As you know, the Senate last year adopted my amendment which provided for persons to retire at age 60 under social security, but to receive reduced benefits. The amendment appeared to be received with favor in many parts of the country, but a conference committee declined to accept it. It is my belief that the early retirement of older workers will open new jobs for younger people. In view of the apparent interest in this program may I ask whether the Social Security Administration is considering making a similar recommendation this year? If it is not, would the Social Security Administration recommend that I reoffer the program? Answer. This question and the one that follows are so interrelated that the answers to both questions have been combined under question No. 2. 2. Question. I ask this question with full knowledge of the country's increasing employment rate and declining unemployment rate. However, it appears that men between the ages of 60 and 62 would prefer to retire under social security. Would your appraisal of the situation bear out this belief? Answer. It is no doubt true that a provision for paying benefits to workers and their spouses beginning at age 60, with the benefits payable in reduced amounts, would have considerable appeal in areas where there are few employment opportunities for older workers. The problem is that either the benefits that would be payable would be very low, or, if fairly substantial benefit reductions were not required, the cost of the program would be substantially increased. As it is now, workers who apply for benefits before age 65 suffer a permanent reduction of 6% percent a year in the benefit amount that would be payable at age 65-a 20-percent reduction if the benefit is taken at age 62. The benefit for a wife or husband is permanently reduced by 8% percent for each year for which the benefit is paid before age 65-a 25-percent reduction if the benefit is taken at age 62. If benefits were made available at age 60, and these same reduction factors were applied (as they would have to be to avoid increases in cost), the reduction for a worker who took his benefit at age 60 would be 33% percent, and the reduction for a wife or husband who took benefits at age 60 would be 41% percent. In this connection, it is worth pointing out that last year's Advisory Council on Social Security noted that the reduced benefits which are now paid to men and their wives who start to get old-age benefits before age 65 are below what they can be expected to live on. For calendar year 1964, benefits awarded to men who came on the rolls before age 65 averaged $75 a month, as compared to $105 for men who came on at or after 65. While the Social Security Administration does not have any figures that would throw light on what might be the effect on job opportunities of providing reduced benefits at age 60, we do have some information on the effect of providing reduced benefits at age 62. According to recent analysis of the employment history of workers entitled to retirement benefits in 1963 (Social Security Bulletin, March 1966), the majority of the men and women claiming reduced benefits at age 62 were prompted to do so by unemployment or by the need to supplement earnings that were characteristically low or that had dropped off substantially. This analysis confirms earlier findings of a survey of the aged that was made in 1963. According to this survey, social security beneficiaries aged 62-64 reported less voluntary retirement, lower employment rates, worse health, and lower incomes than did older beneficiaries. These studies would seem to indicate that, although the payment of reduced benefits at age 62 has no doubt served the purpose of providing some support for people under 65 who are displaced from jobs, the provision has had little effect in opening new jobs for younger people and, in fact, has created a new problem-the problem of a group with permanently low benefits. We have not yet reached a final conclusion on this matter and are continuing our studies of the problems involved and of various alternative ways to deal with these problems. 3. Question. I have been informed that $152,200 has been requested in the fiscal year 1967 budget for the construction of a district office building of the Social Security Administration at Morgantown, W. Va. Can you tell me the tentative construction schedule for this building? Answer. Once funds become available a normal schedule would be: Months (a) Site acquisition---- (b) Design_____ (c) Construction__ 5 7 12 This would mean that the building would be ready for occupancy about 2 years after funds become available. This schedule assumes no site acquisition problems. 4. Question. It is my understanding that the construction of district office buildings at Welch and Beckley, W. Va., have been delayed pending further review of space requirements dut to the new medicare programs. Can you supply for the record a progress report on the design and construction schedules of these buildings? |