WSJ: SSA cracking down on disability judges

According to the Wall Street Journal, the Social Security Administration is seeking to increase the agency’s control over the administrative law judges who decide many disability cases. In the wake of scandals in West Virginia and Puerto Rico, SSA is imposing new standards to generate more uniformity of standards from judge to judge and to reduce outliers who approve or disapprove applications at extraordinary rate. The Journal says:

The Social Security Administration, smarting from recent scandals, this weekend is set to tighten its grip on 1,500 administrative law judges to ensure that disability benefits are awarded consistently and to rein in fraud in the program.

The agency is rewriting the job descriptions of its judicial corps, allowing officials more latitude to crack down on judges who are awarding disability benefits outside the norm.

Many judges have operated as if they were independent of the agency and awarded or denied benefits based on their own judgments. A few weeks ago, the SSA notified the judges of the changes.

The job descriptions will no longer include the words "complete individual independence," and will also clarify that the judges are "subject to the supervision and management" of other agency officials, according to a draft reviewed by The Wall Street Journal.

The Journal also has a blog item with more details.

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Blahous: Don’t Worsen Social Security’s Soaring Cost Problem

Chuck Blahous, one of Social Security’s public trustees and a senior research fellow at the Mercatus Center, writes on proposals to increase Social Security benefits. Check it out over at e21.

 

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Social Security: Big deal or no deal?

George Mason economist Bryan Caplan weighs in over at EconLog.

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New papers from the Social Science Research Network

"The Future of Old Age Income Security"
Lee Kuan Yew School of Public Policy Research Paper No. 13-20

MUKUL G. ASHER, National University of Singapore - Lee Kuan Yew School of Public Policy
Email: sppasher@nus.edu.sg

This is the revised version of the Robert Butler Memorial Lecture delivered at the International Centre Global Alliance Symposium on ‘The Future of Ageing’ on 21 June 2013 in Singapore. The lecture covers and discusses about the future of income security and social welfare discussing global trends in developed and developing countries using the 2012 Revision of the UNDESA’s World Population Prospects.

"Can Pensions Be Restructured in (Detroit’s) Municipal Bankruptcy?"
The Federalist Society, White Paper Series, October 2013
U of Penn, Inst for Law & Econ Research Paper No. 13-33

DAVID A. SKEEL, New York University School of Law, University of Pennsylvania Law School, European Corporate Governance Institute (ECGI)
Email: dskeel@law.upenn.edu

This paper, which was written as a White Paper for the Federalist Society, describes and assesses the question whether public employee pensions can be restructured in bankruptcy, with a particular focus on Detroit. Part I gives a brief overview both of the treatment of pensions under state law, and of the Michigan law governing the Detroit pensions. Part II explains the legal argument for restructuring an underfunded pension in bankruptcy. Part III considers the major federal constitutional objections to restructuring. Part IV discusses arguments based on the Michigan Constitution and Part V assesses several Chapter 9 arguments against restructuring. None of these arguments appear to prevent restructuring. Assuming that pensions can in fact be restructured, Part VI discusses the Chapter 9 factors that may affect the extent to which they are or can be restructured in a particular case.

"The Cost of 'Choice' in a Voluntary Pension System"
2013 New York University Review of Employee Benefits and Executive Compensation 6-1 to 6-55

JONATHAN BARRY FORMAN, University of Oklahoma College of Law
Email: JFORMAN@OU.EDU
GEORGE A. (SANDY) MACKENZIE, Independent
Email: sandymackenzie50@gmail.com

The United States and most other industrialized nations have multi-pillar retirement systems that fit within the World Bank’s multi-pillar model for retirement savings consisting of a first-tier public system, a second-tier employment-based pension system, and a third-tier of supplemental voluntary savings. While in many countries, the second-tier occupational pension is mandatory or quasi-mandatory, in the United States, both the second and third-tier retirement savings systems are voluntary. That is, employers are not required to offer pensions, and when they do, they have considerable choice over the type of pension plan to have and over many of that plan’s features. Moreover, when employers do offer a pension plan, it is probably a 401(k)-type plan that offers employees considerable choice about whether to participate, about how much to contribute, about how to invest those contributions (and prior accumulations), and about the timing and nature of distributions. In short, unlike our first-tier, mandatory Social Security system, America’s second-tier, private pension system is replete with choice: choices about the type of pension plan, choices about the amount and timing of contributions, choices about investments, and choices about the timing and nature of distributions.
To be sure, the availability of pension choices may be of value to employers and individuals, but, on the whole, the costs of choice almost certainly exceed the benefits. Pertinent here, one of the major problems with the current pension system is its incredible complexity. That complexity imposes significant costs on individuals, employers, and government, especially when compared to the relatively rigid, but straightforward, Social Security system. As more fully discussed below, the administrative costs for Social Security’s retirement system are well under 1% of benefits paid. Meanwhile, other than the cost for a payroll withholding service, employers incur almost no costs because of Social Security; and almost the only choice that workers face is the choice about when to take their benefits, at which point in time, a costless and simple application leads to a lifetime of inflation-adjusted retirement income.
On the other hand, employers, individuals, and government all incur significant costs in connection with the current pension system. Employers incur significant costs in choosing, designing, administering, or even outsourcing their pensions; individuals incur significant costs in connection with the management, investment, and distribution of their contributions and benefits; and the government incurs significant costs in regulating thousands of disparate pension plans and millions of Individual Retirement Accounts (IRAs). Also, because of the voluntary nature of our second-tier, private pension system, coverage and participation rates are low, and retirement savings may be inadequate for many retirees.
All in all, this Article focuses on the costs of choice in America’s voluntary private pension system. At the outset, Part II of this Article provides an overview of the current U.S. retirement system — both Social Security and private pensions. Next, Part III of this Article looks at the costs associated with the current Social Security and private pension systems. Finally, Part IV of this Article outlines some ways to reduce the costs associated with the private pension system. In particular, Part IV discusses how to reduce costs by moving to a universal, second-tier pension system; and Part IV also discusses some more modest approaches for reducing the costs associated with the current private pension system.

"Pensions, Employment, and Family Programs"
Well-Being and Social Policy 9 (1): 23-43, 2013

MARTHA MIRANDA-MUÑOZ, Interamerican Conference for Social Security (CISS)
Email: m.miranda@ciss.org.mx
NELLY AGUILERA, Interamerican Conference for Social Security (CISS)
Email: nelly_aguilera_aburto@hotmail.com
GABRIEL MARTINEZ, Instituto Tecnológico Autónomo de México (ITAM)
Email: gabriel0317@gmail.com

Pension, employment, family, and health insurance programs constitute the four major categories of social policy. This report discusses the options for the design of programs within the first three categories based on a framework that aims at providing universal social security protection throughout Mexico. Although the core benefits of these programs are monetary benefits, their provision requires application of solid strategies specific to each program for the regulation of suppliers, provision of a fiscal framework, and interaction with other programs and institutions. Employment programs require use of a seamless design within the educational system and business training programs, as well as the adoption of an unemployment insurance program. Family programs, including the main programs that combat extreme poverty, should be incorporated into a general framework to allow them to serve as vehicles for the integration of the beneficiaries into society. At the same time, implementation of family programs is key to solving the special challenges of female workers, integrating the disabled into the labor market, adopting a policy for the comprehensive development of young children, and addressing the growing problem of long-term disability care. Finally, realization of successful pension programs requires a platform upon which to articulate the fiscal aspects, service solutions, and multiplicity of the increasing number of programs that serve the elderly and disabled.

"Race, Trust, and Retirement Decisions"

TERRANCE KIERON MARTIN, University of Texas - Pan American - College of Business Administration - Department of Economics & Finance, Texas Tech University
Email: martintk@utpa.edu

Using the 2008 National Longitudinal Survey of Youth, this study investigates whether racial differences in trust can explain decisions to consult a financial planner and the variation in accumulated retirement wealth. Black and Hispanics are more likely to report having low trust compared to non-Black, non-Hispanic respondents. The results show evidence that low trust impacts the two outcome decisions of Blacks more relative to non-Black, non-Hispanic respondents. Low trust minimally affects Hispanics relative to non-Black, non-Hispanic respondents as it related to the decision to consult a financial planner and the accumulation of retirement wealth. Marginal effects of Tobit regression analysis show no evidence of racial difference in the effect of a financial planner.

"Non-Contributory Pensions"

SEBASTIAN GALIANI, University of Maryland
Email: galiani@econ.umd.edu
PAUL J. GERTLER, University of California, Berkeley - Haas School of Business, National Bureau of Economic Research (NBER)
Email: GERTLER@HAAS.BERKELEY.EDU
ROSANGELA BANDO, Inter-American Development Bank
Email: Rosangelab@iadb.org

The creation of non-contributory pension schemes is becoming increasingly common as countries struggle to reduce poverty. Drawing on data from Mexico’s Adultos Mayores Program (Older Adults Program) -- a cash transfer scheme aimed at rural adults over 70 years of age -- we evaluate the effects of this program on the well-being of the beneficiary population. Exploiting a quasi-experimental design whereby the program relies on exogenous geographical and age cutoffs to identify its target group, we find that the mental health of elderly adults in the program is significantly improved, as their score on the Geriatric Depression Scale decreases by 12%. We also find that the proportion of treated individuals doing paid work is reduced by 20%, with most of these people switching from their former activities to work in family businesses; treated households show higher levels of consumption expenditures (on average, an increase of 23%). Very importantly, we also rule out significant anticipation effects that might have been associated with the program transfers. Thus, overall, we find that non-contributory pension schemes target to the poor in developing countries can improve the well-being of poor older adults without having any indirect impact (through potential anticipation effects) on the earnings or savings of future program participants.

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CBO Releases New Social Security Projections

The Congressional Budget Office has released new projections for Social Security’s finances over the next 75 years, for which they project an actuarial deficit of 3.36 percent of taxable payroll. CBO states:

That means, for example, that if the Social Security payroll tax rate was increased immediately and permanently by 3.36 percentage points—from the current rate of 12.40 percent to  15.76 percent—or if scheduled benefits were reduced by an equivalent amount, then the trust funds’ projected balance at the end of 2087 would equal projected outlays for 2088.

In addition, CBO provides a closer focus on how Social Security’s finances will evolve over the next quarter century.

This, folks, is how it’s done: solid, detailed analysis, presented with plenty of charts and tables to make it understandable. Check it out here.

 

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New paper: “The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study”

A new Michigan Retirement Research Center Working Paper is available for download. View the Abstract and Key Findings below.

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The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study (WP 2013-288)

by Alan L. Gustman, Thomas L. Steinmeier and Nahid Tabatabai

Abstract:

This paper uses data from the Health and Retirement Study to investigate the effects of Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provision on Social Security benefits received by individuals and households. WEP reduces the benefits of individuals who worked in jobs covered by Social Security and also worked in uncovered jobs where a pension was earned. WEP also reduces spouse benefits. GPO reduces spouse and survivor benefits for persons who worked in uncovered government employment where they also earned a pension. Unlike previous studies, we take explicit account of pensions earned on jobs not covered by Social Security, a key determinant of the size of WEP and GPO adjustments. Also unlike previous studies, we focus on the household. This allows us to incorporate the full effects of WEP and GPO on spouse and survivor benefits, and to evaluate the effects of WEP and GPO on the assets accumulated by affected families. Among our specific findings: About 3.5 percent of households are subject to either WEP or to GPO. The present value of their Social Security benefits is reduced by roughly one fifth. This amounts to five to six percent of the total wealth they accumulate before retirement. Households affected by both WEP and GPO lose about one third of their benefit. Limiting the Social Security benefit to half the size of the pension from uncovered employment reduces the penalty from WEP for members of the original HRS cohort by about 60 percent.

Key Findings:

* About 3.5 percent of households in the Health and Retirement Study (HRS) are subject to either the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) provision, features of the Social Security benefit determination process that limit the benefits of employees who worked in jobs not covered by Social Security, but who are also are eligible for Social Security benefits.

* The present value of the Social Security benefits of affected households is reduced by roughly one fifth, amounting to five to six percent of the total wealth affected households accumulate before retirement.

* Households affected by both WEP and GPO lose about one third of their benefit.

* Limiting WEP adjustments to Social Security benefits to half the size of the pension from uncovered employment, as in current law, reduces the penalty from WEP for members of the original HRS cohort by about 60 percent and substantially affects any interpretation of the law’s impact that is based solely on the provisions of the adjustment to the Primary Insurance Amount formula (PIA) under WEP.

View/Download Working Paper (PDF):

http://www.mrrc.isr.umich.edu/dl.cfm?pid=915&type=102

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Job opportunity: Income Security Program Analyst

Position Opening for Income Security Program Analyst

The National Academy of Social Insurance (NASI) seeks a mid-level Program Analyst for policy analysis, research, outreach and education activities on income security and related issues. The Academy is a nonprofit, nonpartisan organization devoted to research and education on Social Security, health care financing, and related public and private programs. Its 1,000 members are among the nation’s leading experts on social insurance programs and policy.

Responsibilities: The Income Security Program Analyst will be part of an interdisciplinary team that conducts and disseminates NASI’s policy analysis, research, and education activities on income security and related issues. S/he will work with the team on public education campaigns on Social Security and related issues, including developing and implementing strategic partnerships and new outreach initiatives. S/he will collect, analyze, and synthesize research and policy analyses. S/he will plan events and participate in outreach and dissemination of NASI materials with the goal of promoting deeper understanding of social insurance programs – to include Social Security, unemployment insurance, disability income policy, and related issues – among the public and among policymakers and their staffs.  The Program Analyst reports to the Academy’s Vice President for Income Security Policy.

Specific responsibilities include:

Manage partnerships with professional intermediaries, community organizations, and others that relate to NASI’s public education effort on Social Security:

• Manage a project that funds four organizations to carry out Social Security public education activities;
• Develop and implement strategic partnerships to maximize the impact of publications, events, and other activities in the area of income security;
• Field requests and inquiries from partner organizations and others;
• Interact with project advisory committees;
• Contribute to developing videos, infographics, and other public education materials;
• Represent NASI at coalition meetings and other events;
• Track partners’ progress and accomplishments; and
• Plan and produce synthesis reports on project activities for the funder and the public.

Plan and implement events:

• Events include workshops, Hill briefings, large conferences, and expert roundtables;
• Schedule and coordinate meetings between NASI staff and policymakers, including members of Congress and the Administration;
• Coordinate travel and logistics with VIP speakers and their staff; and
• Work with other staff to promote event participation and track event outcomes.

Research and writing:

• Research income security issues and draft reports, articles, and other materials suitable for varied audiences;
• Edit materials written by others to create policy briefs and other products;
• Coordinate reviews of draft reports and briefs and incorporate expert comments; and
• Draft blogs or other materials to bring attention to NASI content.

Other project activities:

• Coordinate work with members of relevant committees and staff their meetings;
• Work with VP to commission work from outside experts, monitor progress and arrange for review of products;
• Coordinate reviews of draft reports and other documents; and
• Work with development staff to research and identify new sources of funding and draft funding proposals and grant reports on issues related to income security.

Qualifications:

• Bachelors or Masters in social science or public policy with a strong academic record;
• 3-5 years of work experience, preferably in policy analysis, research, and/or project management in the area of income security policy;
• Experience developing and implementing strategic partnerships and outreach;
• Excellent oral and written communication skills;
• Ability and willingness to perform multiple tasks in a small office environment and work with other members of the Academy’s interdisciplinary staff;
• Ability and willingness to meet deadlines, and to adapt priorities in response to changing opportunities and demands;
• Strong organizational and time management skills;
• Strong interpersonal skills;
• Proven analytic skills; and
• Familiarity with social insurance programs, such as Social Security, unemployment insurance, and other income security programs.

Compensation: Salary is commensurate with experience. Benefits include health insurance, pension, paid vacation, sick leave, and all federal holidays.

To Apply: Send cover letter, resume, writing sample and three references to nasi@nasi.org with the subject line “Program Analyst.”  Or by mail to: National Academy of Social Insurance, 1776 Massachusetts Avenue NW, Suite 400, Washington, DC 20036.  Applicants are encouraged to apply early, as applications are being reviewed on a rolling basis.

The National Academy of Social Insurance is an equal opportunity employer. Minorities and persons with disabilities are encouraged to apply.

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New publication: “Will the Rebound in Equities and Housing Save Retirement?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Will the Rebound in Equities and Housing Save Retirement?”

By Alicia H. Munnell, Anthony Webb, and Rebecca Cannon Fraenkel

The brief’s key findings are:

• The 2010 National Retirement Risk Index showed that 53 percent of households will not be able to maintain their standard of living in retirement.
• But equity and house prices have both increased since then.
• Interestingly, updating the asset values only reduces the Index to 50 percent because:
  • the rise in house prices has been relatively modest in real terms; and
  • the more robust growth in stocks mainly benefits the top third of households.

This brief is available here.

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Social Security Bulletin, Vol. 73 No. 4

Social Security Bulletin, Vol. 73 No. 4

Released November 2013

Download entire publication

How Do Trends in Women's Labor Force Activity and Marriage Patterns Affect Social Security Replacement Rates?

by April Yanyuan Wu, Nadia S. Karamcheva, Alicia H. Munnell, and Patrick J. Purcell

Changes in the role of women in the economy and in the family have affected both the amount and the type of Social Security benefits they receive in retirement. Women's labor force participation rate increased from less than 40 percent in 1950 to more than 70 percent in 2011. Over much of the same period, marriage rates fell and divorce rates rose. This article examines how women's higher earnings and lower marriage rates have affected Social Security replacement rates over time for individuals and for households.

Growth in New Disabled-Worker Entitlements, 1970–2008

by David Pattison and Hilary Waldron

We find that three factors—(1) population growth, (2) the growth in the proportion of women insured for disability, and (3) the movement of the large baby boom generation into disability-prone ages—explain 90 percent of the growth in new disabled-worker entitlements over the 36-year subperiod (1972–2008). The remaining 10 percent is the part attributable to the disability “incidence rate.” Looking at the two subperiods (1972–1990 and 1990–2008), unadjusted measures appear to show faster growth in the incidence rate in the later period than in the earlier one. This apparent speedup disappears once we account for the changing demographic structure of the insured population. Although the adjusted growth in the incidence rate accounts for 17 percent of the growth in disability entitlements in the earlier subperiod, it accounts for only 6 percent of the growth in the more recent half. Demographic factors explain the remaining 94 percent of growth over the 1990–2008 period.

The Supplemental Poverty Measure (SPM) and the Aged: How and Why the SPM and Official Poverty Estimates Differ

by Benjamin Bridges and Robert V. Gesumaria

In November 2011, the Census Bureau released its first report on the Supplemental Poverty Measure. The SPM addresses many criticisms of the official poverty measure and is intended to provide an improved statistical picture of poverty. This article examines the extent of poverty identified by the two measures. First, we look at how the SPM and official estimates differ for various aged and nonaged groups. Then, we look at why the SPMpoverty rate for the aged is much higher than the official rate.

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