social security

enUK

social security,

government program designed to provide for the basic economic security and welfare of individuals and their dependents. The programs classified under the term social security differ from one country to another, but all are the result of government legislation and all are designed to provide some kind of monetary payment to defray a loss of or a deficiency in income.

In Other Countries

A social security program was adopted first in Germany in the 1880s, when Chancellor Otto von Bismarck advocated social legislation not only in order to benefit the workers but also to forestall the program of the socialists and gain the support of the workers for his own party. Legislation setting up compulsory sickness insurance, for which the worker paid two thirds of the cost and the employer one third, was passed in Germany in 1883. Compulsory old-age insurance (see pensionpension,
periodic payments to one who has retired from work because of age or disability. Pensions, originally thought of as charity, are now viewed as an essential part of the social responsibility of employers or of the state.
..... Click the link for more information. ), the cost of which the employee, employer, and government shared, was adopted in 1889; unemployment insurance legislation, however, was not passed until 1927.

As economic insecurity among workers in the highly industrialized countries spread, an increasing number of social security programs were enacted. In Great Britain, the National Insurance Act, devised by David Lloyd George, was passed in 1911, and a compulsory unemployment insurance program as well as old-age insurance and sickness insurance programs were established. The unemployment insurance system excluded many workers, notably government employees, nurses, casual workers, and those who earned over £250 per annum. A survivors insurance program was adopted (1925); in 1942, Parliament was presented with a plan, by Sir William Henry BeveridgeBeveridge, William Henry,
1879–1963, British economist, b. India, grad. Oxford, 1902. His fame as an authority on social problems was gained through investigations and writings in government service (1908–19), especially as director of labor exchanges, set up largely
..... Click the link for more information. , for a more expanded social security program, much of which was enacted after World War II.

France adopted in 1905 a program of voluntary unemployment insurance and in 1928 made insurance plans for old age and sickness mandatory. Meanwhile, diverse social security programs were adopted throughout Europe, differing from country to country as to the kinds of insurance instituted, the categories of workers eligible, the proportions paid by employee, employer, and government, the conditions for receipt of benefits, the amounts of the benefits, and finally in the overall effects of the programs. In 1922, the Soviet Union adopted comprehensive social security plans as part of their socialist economy. Chile became (1924) the first Latin American country to adopt a social security program.

In the United States

The United States did not have social security on a national level until 1935, when the Social Security Act was passed as part of President Franklin Delano Roosevelt's New Deal program. The act established two social insurance programs: a federal-state program of unemployment compensation and a federal program of old-age retirement insurance. It also provided for federal grants to assist the states with programs for the disabled, the aged, child welfare services, public health services, and vocational rehabilitation. The compulsory old-age insurance paid benefits proportionate to prior earnings for persons over 65, with a reserve fund being accumulated through payroll taxes on employers and employees; the rate of the tax was originally set at 1%.

The original Social Security Act of 1935 covered only workers in commercial and industrial occupations, but since then several major amendments have increased the categories of persons eligible for benefits. The amendment of 1939 provided for benefits to the dependents and survivors of workers; an amendment in 1950 broadened the coverage to include full-time farm and domestic workers, many self-employed persons, employees of state and local governments, and employees of nonprofit organizations; later amendments extended coverage to members of the armed forces and to self-employed professionals; and a 1957 amendment provided benefits to insured workers 50 years of age and older who became permanently and totally disabled. The age of eligibility for retirement benefits was lowered from 65 to 62, but with lower benefits for persons retiring before 65.

In 1965, Congress enacted the MedicareMedicare,
national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services.
..... Click the link for more information. program, providing medical benefits for persons over the age of 65, and an accompanying MedicaidMedicaid,
national health insurance program in the United States for low-income persons and persons with disabilities. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services.
..... Click the link for more information. program for the indigent regardless of age. A 1972 amendment tied increases in Social Security retirement benefits to increases in the Consumer Price Index. In 1974, Social Security insurance was taken over by the Social Security Administration, and in 1983 an amendment allowed partial taxation of the benefits given to upper-income recipients. In 1999, payroll deductions for Social Security were set at 6.2% of annual wages below $72,600, and payroll deductions for Medicare were 1.45% of annual wages (no upper limit), with employers contributing matching amounts.

Social Security funds are invested in federal securities, mainly long-term bonds. In 1997 a government advisory panel proposed that some of the revenues be invested in stocks and bonds to generate higher returns. The panel was divided over whether the money should be invested by the government or by individuals, as well as the amount that should be shifted from government bonds. Both approaches have their critics. Some regard government investment in stocks as a potential source of intrusive federal influence on U.S. businesses; others feel that allowing individuals to invest their Social Security funds would endanger the minimal postretirement "safety net" for all workers that the program is designed to provide if individuals invest unwisely. President George W. BushBush, George Walker,
1946–, 43d President of the United States (2001–9), b. New Haven, Conn. The eldest son of President George H. W. Bush, he was was raised in Texas and, like his father, attended Phillips Academy in Andover, Mass., and Yale, graduating in 1968.
..... Click the link for more information. , who campaigned for personal Social Security investment accounts, appointed (2001) a commission that offered several options for allowing individual investments in stocks and bonds as part of the Social Security program and for securing the program's financial health; it estimated that it would take as much as $3 trillion of additional revenue over the next 75 years and reductions in guaranteed benefits to accomplish both goals.

Underlying these proposals is the anticipation that the costs of the program as presently structured will outstrip the revenues raised and invested in the early to mid-21st cent. and that benefits will have to be paid from revenues alone, which are expected to be inadequate. If this occurs, Social Security will place a greater burden on the federal budget, and benefits may need to be reduced, or taxes increased, significantly. Although historical returns from investment in stock and bonds over the past century suggest that placing funds in those securities would forestall the program's financial difficulties, the dramatic fluctations in stock prices during and after the market bubble of the late 1990s has given many pause, particularly where individual investment accounts are concerned.

Administration of retirement, survivors, and disability insurance (OASDI) and supplemental security income (SSI) programs is vested in the Social Security Administration. The administration was part of the U.S. Dept. of Health and Human Services until becoming an independent agency in 1995. The Medicare and Medicaid programs are administered by Centers for Medicare and Medicaid Services of the Dept. of Health and Human Services. Unemployment insurance is administered by each state under the overall supervision of the U.S. Dept. of Labor. Contributions are collected by the Internal Revenue Service, while the preparation of benefit checks and the management of trust funds are the responsibility of the Dept. of the Treasury.

Bibliography

See J. Creedy and R. Disney, Social Insurance in Transition (1985); W. A. Achenbaum, Social Security: Visions and Revisions (1988); J. Quadagno, The Transformation of Old Age Security (1988).

social security

a system of income maintenance provided by the state. Most systems have two components: a contributory system, which in the UK is labelled National Insurance (a system which underwrites benefits associated with unemployment, retirement and sickness), and a noncontributory 'safety net’ which usually has some connection with conceptions of a poverty line. The former owes much to the thinking of Beveridge (see BEVERIDGE REPORT), the latter has its historical roots in Poor Law provision.

Sociologists of welfare have concerned themselves with a variety of related issues such as the relationship between ideology and social security systems taken as a whole, images of claimants, the notion of REDISTRIBUTION, and the relationship between social security and POVERTY. see also WELFARE STATE.

Social Security

in the USSR, a system of socioeconomic measures established by the state to provide financial security to elderly and disabled citizens, comprehensive benefits to mothers and children, and medical services and treatment for all citizens.

The introduction of a social-security system was one of the demands of the proletariat in prerevolutionary Russia. A system was formulated in the party program adopted in 1903 at the Second Congress of the RSDLP. At the Sixth All-Russian Conference of the RSDLP (Prague, 1912), the Bolshevik party again demanded the recognition of the proletariat’s right to social security, proposed appropriate organizational and legal forms of social security that would guarantee the full realization of this right (a state insurance system), and defined the instances in which a citizen is entitled to social security (mutilation, illness, old age, loss of breadwinner). These demands, formulated by V. I. Lenin, have become known as the Leninist workers’ insurance program. Lenin specified the most important principles on which a state insurance system should be organized. He believed that (1) state insurance should provide for all wage earners and their families, (2) workers should receive assistance in all cases of disability and in case of loss of earnings as a result of unemployment, (3) compensation should be equal to full prior earnings without any payments being imposed on the insured, and (4) insurance should be administered by uniform local agencies that are fully managed by the insureds themselves (see Poln. sobr. soch., 5th ed., vol. 21, pp. 146-49).

In the USSR, a system of social security based on Leninist principles has been established by law. Social security is provided in many different forms. State social insurance is available to industrial and nonindustrial workers and employees and individuals in positions of equivalent status, and their families. Social insurance for kolkhoz workers is paid out of a centralized union fund for social insurance, and social security for kolkhoz workers is paid out of a centralized social-security union fund. Social security is also paid by government agencies out of direct allocations from the state budget (this form is often called social security in the narrow sense). Supplementary forms of social security are paid out of the funds of individual kolkhozes and different unions, including the Writers’, Artists’, and Composers’ unions.

Each form of social security is unique in terms of the individuals insured, but the same general principles are used in establishing the fund from which payments are made and the agencies that make the payments. These general principles include the following: (1) the universality of social security, that is, the equal right of all working people in the USSR under certain conditions to receive specified forms of social security regardless of race, sex, or religious belief; (2) the comprehensiveness of social security and the multiplicity of its forms, for example, pensions, benefits, care provided in homes for invalids and for the aged, prosthetic services, and the training and job placement of invalids; (3) the payment of social security out of state and public funds without withholdings from wages; and (4) the payment of social security in amounts large enough to satisfy the Soviet population’s most essential needs and other material and nonmaterial requirements.

The most important forms of social security are pensions and benefits. Pensions include old-age, disability, seniority, and survivors insurance. Benefits are granted to temporarily disabled workers, pregnant women, new mothers, the children of low-in-, come families, mothers with many children, and unwed mothers. Benefits are also granted to cover the travel expenses of those who need sanatorium treatment.

Social service plays an important role in the provision of social-security benefits to the disabled and the aged. A large network of special homes has been established, including state-supported homes for handicapped children. Prosthetic services are available, and transportation is provided either free of charge or at special rates. Invalids and certain other pensioners are granted special rates for travel on mass transit, airplanes, boats, ships, and railroads and are eligible for rent-and-service discounts and special tax benefits. Social-security agencies administer technicum and vocational-technical boarding schools offering the handicapped professional training.

Social security is supplemented by free medical care, free hospitalization, and treatments at sanatoriums and health resorts. Also available are state and public child-care and educational establishments, including preschool institutions, homes for children, Pioneer camps, and children’s sanatoriums.

The level of financial security provided for Soviet citizens is expected to rise in the future through increased wages and social consumption funds, the greater part of which are allocated to social security.

In capitalist countries, the bitter class struggle has resulted in the bourgeoisie conceding to the workers fundamental rights, including the introduction of social security. Bourgeois propaganda has asserted that with the concession of these rights the nature of the modern bourgeois state has changed, that capitalism has been transformed into people’s capitalism, and that a universal welfare state has been established with the elimination of financial insecurity in capitalist society. These assertions are contradicted by reality. In the new stage of the general crisis of capitalism, the monopolistic bourgeoisie is waging an offensive against the gains won by workers. The movement of workers in defense of their social rights, including the right to social security, is supported by the World Federation of Trade Unions and by communist and workers’ parties in various countries. These organizations regard the movement to be part of the class struggle against monopoly domination and for major social changes in the existing system.

In capitalist countries social-security benefits are provided through three major systems—social insurance, social assistance, and public service. Social insurance, the most common social-security system, involves the obligatory withholding of insurance contributions, from the wages of workers. Pensions and benefits are paid after the termination of a specified period, after a certain age has been reached, or after certain other conditions have been met, regardless of the financial situation of the insured’s family.

Social assistance is financed entirely from the funds of the state budget. Not all workers deprived of their earnings as a result of disability or unemployment are eligible, but only those who after the investigation of the incomes of all family members are recognized as being unable to support themselves. The granting of assistance is supervised by administrative agencies. In most bourgeois countries social assistance is used to supplement an inadequate system of social insurance. In some countries, including Australia and New Zealand, it is the main form of social security.

Public service primarily involves the payment of pensions. This system is characteristic of Sweden, Finland, Norway, Canada, and Iceland. Depending on the circumstances, every citizen may be eligible for an old-age pension, an invalidity pension, or a survivors pension. Pension payments are made at fixed rates that are the same for all. A special tax paid by all citizens from the ages of 16-18 until retirement age is used to raise funds for public-service programs. Pensions are very small, and citizens retire at a relatively old age, for example, in Sweden, Norway, and Iceland both men and women retire at 67, and in Ireland at 70.

All bourgeois social-security systems differ radically from the social-security system in the USSR. The management of the social-security system is not entrusted to workers’ representatives in any capitalist country, and the retirement age is five to ten years higher than in the USSR. Benefits are paid only after a waiting period of two to five days, and the percentage of prior wages compensated for by pensions and benefits is substantially lower. The payment of benefits at the rate of 100 percent of wages is very common in the USSR and does not exist at all in capitalist countries.

REFERENCE

Andreev, V. S. Pravo sotsial’nogo obespecheniia v SSSR. Moscow, 1974.

V. S. ANDREEV and V. I. USENIN

social security

1. public provision for the economic, and sometimes social, welfare of the aged, unemployed, etc., esp through pensions and other monetary assistance 2. a government programme designed to provide such assistance

Social Security

enUK
Related to Social Security: Social Security number, Social Security benefits, Social Security card

Social Security

A federal program designed to provide benefits to employees and their dependants through income for retirement, disability, and other purposes. The social security program is funded through a federal tax levied on employers and employees equally.

The Social Security Program was created by the Social Security Act of 1935 (42 U.S.C.A. § 301 et seq.) to provide old age, survivors, and disability insurance benefits to the workers of the United States and their families. The program, which is administered by the Social Security Administration (SSA), an independent federal agency, was expanded in 1965 to include Health Insurance benefits under the Medicare program and to assist the states in establishing Unemployment Compensation programs. Unlike Welfare, which is financial assistance given to persons who qualify on the basis of need, Social Security benefits are paid to an individual or his family on the basis of that person's employment record and prior contributions to the system.

History

As a general term, social security refers to any plan designed to protect society from the instability that is caused by individual catastrophes, such as unemployment or the death of a wage earner. It is impossible to predict which families will have to endure these burdens in a given year, but disaster can be expected to strike a certain number of households each year. A government-sponsored plan of social insurance spreads the risk among all members of society so that no single family is completely ruined by an interruption of, or end to, incoming wages.

Germany was the first industrial nation to adopt a program of social security. In the 1880s Chancellor Otto von Bismarck instituted a plan of compulsory sickness and old age insurance to protect wage earners and their dependents. Over the next 30 years, other European and Latin American countries created similar plans with various features to benefit different categories of workers.

In the United States, the federal government accepted the responsibility of providing pensions to disabled veterans of the Revolutionary War. Pensions were later paid to disabled and elderly veterans of the Civil War. The first federal old age pension bill was not introduced until 1909, however. To fill this void, many workers joined together to form beneficial associations, which offered sickness, old age, and funeral benefit insurance. The federal government encouraged people to set aside money for future emergencies with a popular postal savings plan. People who could not manage were helped, if at all, by private charity because it was generally believed that those who wanted to help themselves would.

Congress enacted the Social Security Act of 1935 as part of the economic and social reforms that made up President franklin d. roosevelt's New Deal. The act provided for the payment of monthly benefits to qualified wage earners who were at least 65 years old or payment of a lump-sum death benefit to the estate of a wage earner who died before reaching age 65.

In 1939 Congress created a separate benefit for secondary beneficiaries—the dependent spouses, children, widows, widowers, and parents of wage earners—to soften the economic hardship created when they lost a wage earner's support. Such beneficiaries are entitled to benefits because the wage earner made contributions to the plan. Beneficiaries can receive their payments directly upon the retirement or death of the worker.

Social Security originally protected only workers in industry and commerce. It excluded many classes of workers because collecting their contributions was considered too expensive or inconvenient. Congress exempted household workers, farmers, and workers in family businesses, for example, because it believed that they were unlikely to maintain adequate employment records. In the 1950s, however, Congress extended Social Security protection to most self-employed individuals, most state and local government employees, household and farm workers, members of the armed forces, and members of the clergy. Federal employees, who previously had their own retirement and benefit system, were given Social Security coverage in 1983.

Old Age, Survivors, and Disability Insurance

Federal Old Age, Survivors, and Disability Insurance (OASDI) benefits are monthly payments made to retired people, to families whose wage earner has died, and to workers who are unemployed because of sickness or accident. Workers qualify for such protection by having been employed for the mandatory minimum amount of time and by having made contributions to Social Security. There is no financial need requirement to be satisfied. Once a worker qualifies for protection, his family is also entitled to protection. The entire program is geared toward helping families as a matter of social policy.

Two large funds of money are held in trust to pay benefits earned by people under OASDI: the Old Age and Survivors Trust Fund and the Disability Insurance Trust Fund. As workers and employers make payroll contributions to these funds, money is paid out in benefits to people currently qualified to receive monthly checks.

The OASDI program is funded by payroll taxes levied on employees and their employers and on the self-employed. The tax is imposed upon the employee's taxable income, up to a maximum taxable amount, with the employer contributing an equal amount. The self-employed person contributes twice the amount levied on an employee. In 2003 the rate was 6.2 percent, levied on earned income up to a maximum of $87,000.

Old Age Benefits A person becomes eligible for Social Security old age benefits by working a minimum number of calendar quarters. The number of quarters required for full insurance increases with the worker's age. Forty quarters is the maximum requirement. The individual is credited for income up to the maximum amount of money covered by Social Security for those years. This amount is adjusted to reflect the impact of inflation on normal earnings and ensure that a worker who pays increasing Social Security contributions during his or her work life will receive retirement benefits that keep pace with inflation.

Persons born before 1950 can retire at age 65 with full benefits based on their average income during their working years. For those born between 1950 and 1960, the retirement age for full benefits has increased to age 66. Persons born in 1960 or later will not receive full retirement benefits until age 67. Any person, however, may retire at age 62 and receive less than full benefits. At age 65, a worker's spouse who has not contributed to Social Security receives 50 percent of the amount paid to the worker.

The First Payments of Social Security

After the enactment of the Social Security Act of 1935 (42 U.S.C.A. § 301 et seq.) and the creation of the Social Security Administration (SSA), the federal government had a short time to establish the program before beginning to pay benefits. Monthly benefits were to begin in 1940. The period from 1937 to 1940 was to be used both to build up the trust funds and to provide a minimum period for participation for persons to qualify for monthly benefits.

From 1937 until 1940, however, Social Security paid benefits in the form of a single, lump-sum payment. The purpose of these one-time payments was to provide some compensation to people who contributed to the program but would not participate long enough to be vested for monthly benefits.

The first applicant for a lump-sum benefit was Ernest Ackerman, a Cleveland motorman who retired one day after the Social Security Program began. During his one day of participation in the program, five cents was withheld from Ackerman's pay for Social Security, and upon retiring, he received a lump-sum payment of seventeen cents.

Payments of monthly benefits began in January 1940. On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont, in the amount of $22.54. Fuller died in January 1975 at the age of one hundred. During her thirty-five years as a beneficiary, she received more than $20,000 in benefits.

Since 1975 Social Security benefits have increased annually to offset the corrosive effects of inflation on fixed incomes. These increases, known as cost of living allowances (COLAs), are based on the annual increase in consumer prices. Allowing benefits to increase automatically ended the need for special acts of Congress, but it has also steadily increased the cost of the Social Security Program.A person who continues to work past the retirement age may lose some benefits because Social Security is designed to replace lost earnings. If earnings from employment do not exceed the amount specified by law, the person receives the full benefits. If earnings are greater than that amount, one dollar of benefit is withheld for every two dollars in wages earned above the exempt amount. Once a person reaches age 70, however, he does not have to report earnings to the SSA, and the benefit is not reduced.

The Future of Social Security

The payment of Old-Age, Survivors, and Disability Insurance (OASDI) benefits has been a cornerstone of U.S. social welfare policy since the establishment of the social security administration in 1935. At the same time, the long-term financial stability of OASDI has been a constant worry. In the early years of the twenty-first century, concerns about Social Security mounted as policy makers assessed the impact of the retirement of the "Baby Boom" generation. Many younger people raised the issue of "generation equity." They express doubt that Social Security benefits will be available when they retire, and anger that they will be forced to pay, through payroll taxes, for the baby boomers' retirement benefits.

Reform of the Social Security system has always been a political hot potato. Retirees and those approaching retirement form a strong Lobbying force, and they zealously protect their benefits. Employers and employees are equally vocal in their opposition to higher payroll taxes to fund OASDI. Thus, changes in Social Security required bipartisan support, which materialized in the face of an impending Social Security crisis. The 1982–83 National Commission on Social Security Reform successfully secured from Congress the short-term financing of OASDI. As a result, Congress passed a series of laws meant to accumulate surpluses as a hedge against future burdens. The Social Security surplus is the amount by which revenue from the federal payroll tax exceeds the amount of Social Security benefits paid out.

Shortly after these new laws went into effect, Social Security began running a surplus. Surplus Social Security revenue can be used to fund other government programs and to help retire the national debt. During the favorable economic climate of the late 1990s, Congress began to use the surplus to pay down the federal debt, hoping to better position the government to meet its obligations to future retirees. And, in 2000, the federal government generated enough revenue so that the entire Social Security surplus was available for paying off debt.

The state of Social Security became a major campaign issue in the 2000 elections, with both Republicans and Democrats attempting to appear as though they were guardians of Social Security assets. Candidates from both parties promised to create a "lockbox," meaning that the Social Security surplus would be spent entirely on debt retirement. With the advent of fiscally lean years in the early 2000s, the lockbox approach was largely disregarded by politicians who advanced other ideas about what to do with Social Security surpluses. These ideas included using the surplus to help offset decreases in revenues brought about by tax cuts and using the surplus to fund new or expanded spending initiatives.

Analysts argue that the real issue often is clouded. It is not how to spend the surplus now, but how to maintain the long-term solvency of the Social Security trust fund. Planners estimate that the income from the trust fund will exceed expenses each year until 2020. The trust fund balances will then start to decline as investments are redeemed to meet the increased expenses from a swelling retired workforce. Although it is estimated that 75 percent of the costs would continue to be met from current payroll and income taxes, in the absence of any changes, full benefits could not be paid beginning in 2030.

In its 1996 report, the Social Security Administration's Advisory Council looked at various long-term financing options for OASDI. The council could not reach consensus on a specific long-term plan, but it did suggest several types of financing that represent a marked departure from previous efforts to fund Social Security. The council noted that past efforts have generally featured cutting benefits and raising tax rates on a "pay-as-you-go" basis. The council agreed that this approach must be changed and offered three ways of restoring financial solvency.

One approach, called Maintenance of Benefits (MB), calls for an increase in income taxes on OASDI benefits, a redirection of some revenue from other trust funds, and, most importantly, the adoption of a plan allowing the federal government to invest a portion of the trust fund assets directly in common stocks. Rates of returns on stocks have historically exceeded those on federal government bonds, where all Social Security funds are now invested. If the returns were to continue, the MB plan would maintain Social Security benefits for all income groups of workers and reassure younger workers that they will get their money's worth when they retire.

A second approach, labeled the Individual Accounts (IA) plan, would create individual accounts that would work alongside Social Security. The IA plan would increase the income taxation of benefits, accelerate the scheduled increase in retirement age, reduce the growth of future benefits to middle- and upper-income workers, and increase employees' mandatory contributions to Social Security by 1.6 percent. This increase would be allocated to individual investment accounts held by the government and controlled by the worker, but with a limited set of investment options available. It is estimated that the combined income from both funds would yield essentially the same benefits as promised under the current system for all groups.

A third approach, labeled the Personal Security Accounts (PSA) plan, would create larger, fully funded individual accounts that would replace a portion of Social Security. Under this plan, five percent of an individual's current payroll tax would be invested in his PSA, which he then could use to invest in a range of financial instruments. The rest of his payroll tax would be used to fund a modified OASDI program. It would provide a flat dollar amount (the equivalent of $410 monthly in 1996), in addition to the proceeds of the individual's PSA. This approach would also change the taxation of benefits and move eligibility for early retirement benefits from age 62 to 65. The combination of the flat benefit payment and the income from the PSA would exceed, on average, the benefits promised under the current system.

In 2001, the concept of individual accounts was once again proposed, this time by the george w. bush administration's Commission to Strengthen Social Security (CSSS). The CSSS introduced the idea of Social Security individual accounts, also called Personal Retirement Accounts (PRAs). PRAs would earn a market return over the workers' lives and replace some of the retirement benefits promised by Social Security. These plans are also known as "carve-outs" because they carve out or redirect some portion of a worker's 12.4 percent Social Security payroll tax into a personal retirement account that can be invested in stocks and bonds. The accounts would be owned and presumably managed by individual workers.

Any type of personal retirement account privatizes a portion of Social Security, which means a significant shift in the way Social Security is funded. Proponents claim that they will generate more advance funding for Social Security's long-term obligations. They would also result in a higher level of national saving for retirement. In addition, advocates point to the fact that individuals gain more control over their future because they are allowed to invest as much or as little in Social Security plans and private retirement plans as they choose.

The PRA system, however, raises several concerns:

Would the government be permitted to manipulate the Stock Market or make politically motivated investment decisions with PRA funds?
Would inexperienced investors make poor investment choices and be left to suffer the consequences?
Would a precipitous stock market decline cause workers to lose their retirement funds?

According to the CSSS, the answer to all these questions is "no." Under the current system, retirees receive only a one to two percent return on government bond investments. Even under the worst stock market conditions, an individual historically has been guaranteed a lifetime real return (based on 63 years) of 6.3 percent. The CSSS also promises that all retirees will be paid out a guaranteed minimal "safety net," regardless of stock market performance.

The debate on both sides continues, and will not likely be resolved until legislation is passed by Congress that would allow PRAs. One thing remains clear, however, some type of reform has to be enacted to protect a system that is predicted to evaporate in the coming years.

Medicare

The Medicare Program provides basic healthcare benefits to recipients of Social Security and is funded through the Social Security Trust Fund. President Harry S. Truman first proposed a medical care program for the aged in the late 1940s, but it was not enacted until 1965, when Medicare was established as one of President Lyndon B. Johnson's Great Society programs (42 U.S.C.A. § 1395 et seq.).

The Medicare Program is administered by the Health Care Financing Administration (HCFA). The federal government enters into contracts with private insurance companies for the processing of Medicare claims. To qualify for Medicare payments for their services, healthcare providers must meet state and local licensing laws and standards set by the HCFA.

Medicare is divided into a hospital insurance program and a supplementary medical insurance program. The Medicare hospital insurance plan is funded through Social Security payroll taxes. It covers reasonable and medically necessary treatment in a hospital or skilled nursing home, meals, regular nursing care services, and the cost of necessary special care.

Medicare's supplementary medical insurance program is financed by a combination of monthly insurance premiums paid by people who sign up for coverage and money contributed by the federal government. The government contributes the major portion of the cost of the program, which is funded out of general tax revenues. Persons who enroll pay a small annual deductible fee for any medical costs incurred above that amount during the year and also a regular monthly premium. Once the deductible has been paid, Medicare pays 80 percent of all bills incurred for physicians' and surgeons' services, diagnostic and laboratory tests, and other services, but does not pay for routine physical checkups, drugs, and medicines, eyeglasses, hearing aids, dentures, and orthopedic shoes. Doctors are not required to accept Medicare patients, but almost all do.

Medicare's hospital insurance is financed by a payroll tax of 2.9 percent, divided equally between employers and employees. The money is placed in a trust fund and invested in U.S. Treasury Securities. The fund accumulated a surplus during the 1980s and early 1990s. It was projected that the fund would run out of money by the early 2000s as outlays arose more rapidly than future payroll tax revenues, but this proved not to be the case.

The Future of Social Security

From its modest beginnings, Social Security has grown to become an essential facet of modern life. In 1940 slightly more than 222,000 people received monthly Social Security benefits. In 2002, 39.2 million people received Old Age and Survivors Insurance, 7.2 million received disability insurance, and 41.1 million were covered by Medicare. One in seven individuals received a Social Security benefit, and more than 90 percent of all workers were covered by Social Security. As of 2003, the SSI program had nearly doubled in size since its inception in 1974.

By the 1980s the Social Security Program faced a serious long-term financing crisis. President ronald reagan appointed a blue-ribbon panel, known as the Greenspan Commission, to study the issues and recommend legislative changes. The final bill, signed into law in 1983 (Pub. L. 98-21, 97 Stat. 65), made numerous changes in the Social Security and Medicare Programs; these changes included taxing Social Security benefits, extending Social Security coverage to federal employees, and increasing the retirement age in the twenty-first century.

By the 1990s, however, concerns were again raised about the long-term financial viability of Social Security and Medicare. Various ideas and plans to ensure the financial stability of these programs were put forward. The budget committees in both the House of Representatives and the Senate established task forces to investigate proposals for Social Security reform. Other task forces, such as one established by the National Conference of State Legislatures, investigated the impact of Social Security reform on interests at the state and local levels. By the end of the 1990s, the federal government had achieved a budget surplus, and President bill clinton and some members of Congress advocated use of the surplus to save Social Security. However, no political consensus as to what changes should be made had emerged by the end of the 1990s.

The issue of Social Security was at the center of a major debate between george w. bush and al gore during the 2000 presidential election debates. Bush advocated then, as he did after assuming the presidency, that employees who pay into the Social Security system should be allowed to pay the funds into personal retirement accounts. Under this proposal, employees would have the option of converting these funds into other investments, such as stock. However, during the first three years of his presidency, Bush did not successfully establish this initiative.

As of December 2002, the annual cost of Social Security represented 4.4 percent of the gross domestic product. The Social Security Administration predicted that the OASDI tax income would fall short of outlays by 2018, and the OASDI trust fund was predicted to be exhausted by 2042, though some commentators refuted this finding. The total combined OASDI assets in 2002 amounted to $1.378 trillion.

Cross-references

Disability Discrimination; Elder Law; Health Care Law; Senior Citizens.

social security

social security

social security

so′cial secu′rity

social security

social security

social security

social security,

In Other Countries

In the United States

Bibliography

social security

Social Security

REFERENCE

social security

Social Security

Social Security

History

Old Age, Survivors, and Disability Insurance

The First Payments of Social Security

The Future of Social Security

Further readings

Medicare

The Future of Social Security

Further readings

Cross-references

Social Security

Social Security

Social Security.

Social Security

Words related to Social Security

noun social welfare program in the U.S.

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