Tuesday, December 29, 2015

CBO's new replacement rate numbers open Social Security, retirement debate

Over at Forbes, I write about how new figures on Social Security "replacement rates" published by the CBO in response to a recent expert panel report to the Social Security Advisory Board will open questions about the adequacy of Social Security benefits and of Americans' overall retirement savings.

The short story is that CBO's new numbers -- which compare Social Security benefits to the final five years of substantial earnings prior to age 62 -- show Social Security benefits coming far closer to the 70 percent total replacement rate recommended by most financial advisers. To me, this doesn't make a strong case for expanding Social Security or for declaring a broader "retirement crisis."

Click here to read the whole article. Read more!

CBO Releases New Social Security Financing Projections

The Congressional Budget Office has released updated projections for Social Security’s long-term funding health. The agency projects that Social Security faces a 75-year actuarial deficit of 4.37 percent of taxable payroll, a substantially larger shortfall than the 2.68 percent deficit projected by Social Security’s Trustees.

The main reasons for the differences between CBO and the Trustees appear to be CBO assuming a more rapid increase in life expectancies, higher disability claiming, and greater earnings inequality.

The CBO projects that the combined Social Security Trust Funds will become insolvent in 2030, with an 80 percent confidence range of between 2026 and 2033. In 99 percent of simulations, the CBO model projected insolvency by 2040. Read more!

Wednesday, December 16, 2015

New article: “Investment Returns: Defined Benefit vs. Defined Contribution Plans”

The Center for Retirement Research at Boston College has released a new Issue in Brief:
“Investment Returns: Defined Benefit vs. Defined Contribution Plans”
by Alicia H. Munnell, Jean-Pierre Aubry, and Caroline V. Crawford
The brief’s key findings are:

  • The analysis compares returns by plan type from 1990-2012 using data from the U.S. Department of Labor’s Form 5500.
  • During this period, defined benefit plans outperformed 401(k)s by an average of
    0.7 percent per year, even after controlling for plan size and asset allocation.
  • In addition, much of the money accumulated in 401(k)s is eventually rolled over into IRAs, which earn even lower returns.
  • One reason for the lower returns in 401(k)s and IRAs is higher fees, which should be a major concern as they can sharply reduce a saver’s nest egg over time.
This brief is available here. Read more!

Schieber: “Fixing Social Security: Everyone Needs To Pitch In”

Writing at Forbes, Sylvester Schieber – the former chairman of the Social Security advisory board and a well-known expert on retirement issues – argues that current retirees should play a role in fixing Social Security’s funding gap.

Given the number of people who are nearing retirement or in retirement and the fact that older Americans tend to vote at higher rates than younger ones, this position might be good politics. But it is an inequitable policy proposition.
As a 69-year-old who has paid into the Social Security system for five decades, I believe we are all in this together and that it is unfair to put all the burden of fixing Social Security onto younger workers and those not yet in the workforce.

Click here to see what Schieber proposes. Read more!

Friday, December 4, 2015

What the U.S. can learn from Chile’s retirement system

Orazio Attanasio, Costas Meghir and Olivia S. Mitchell write about their experience on Chile’s Bravo Commission, which examined potential reforms to Chile’s famous (or infamous) personal accounts retirement plan.

Chile’s pension system has been touted as “best practice” by policymakers and researchers around the world. The nation’s funded and regulated private pension funds called Administradoras de Fondos de Pensiones (AFPs) and financed by workers’ mandatory 10% contributions, has now accumulated over $160 billion in privately-managed accounts. AFPs cover about 10 million affiliates, and provide retirement benefits to more than a million retirees.

Chile’s system, however, is not perfect. Many workers retire with no or very low pensions, mostly because their participation into the formal labor market had been occasional and their contributions low.

Click here to read the whole article.

Read more!

Jed Graham: “Don’t Get Social Security Reform Backward”

Jed Graham of Investors Business Daily makes a nice point: many Social Security reform proposals reduce Cost of Living Adjustments (COLAs), but this results in big benefit cuts for the oldest retirees – who rely more on Social Security and are in greater danger of falling onto poverty – while not cutting benefits at all for the youngest retirees, who often could continue to work.

Jed’s piece – available here – is worth a read.

Read more!

New paper: “Social Security’s Impending Insolvency — Just the Facts”

From Mark Warshawsky at the Mercatus Center. Check it out here.

Read more!

Tuesday, December 1, 2015

New paper: “Forensics and the Future of a Connecticut Pension Plan”

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

“Forensics and the Future of a Connecticut Pension Plan”

By Jean-Pierre Aubry and Alicia H. Munnell

The brief’s key findings are:

  • Connecticut’s State Employees Retirement System faces a large unfunded liability, despite recent efforts by the State to fund.
  • A significant source of the liability is the “legacy debt” built up before the State began pre-funding its pensions in the 1970s.
  • More recently, inadequate contributions, low investment returns (since 2000), and early retirement incentives have added to the problem.
  • A promising approach for addressing the funding problem is to provide more breathing room in exchange for a real and sustained commitment to funding by: 
    • separately funding the legacy debt over multiple generations; while
    • funding ongoing benefits using a stricter method for calculating required contributions, and reducing the long-term assumed return on plan assets.
This brief is available here. Read more!

Monday, November 30, 2015

A Social Security Reform Plan That Could Pass

Over at National Review, I write about the politics of the flat-benefit Social Security reform plan that I first wrote about for NRO a few weeks ago.

The article provides more details, but here’s the short story: the flat benefit plan is far simpler for reformers to explain; does not renege on the benefits participants already have earned; and would provide benefit increases and payroll tax reductions for current and near-retirees.

Does that guarantee success? NOTHING guarantees success in entitlement reforms. But there’s a better chance of success with this approach than with conventional reforms, which are a very tough sell.

Read more!

New papers from the Social Science Research Network

"Retirement Incomes – Issues and Next Steps"
Australian Journal of Actuarial Practice, 3, 93-97, 2015

ANTHONY ASHER, University of New South Wales (UNSW) - School of Actuarial Studies, Centre for International Finance and Regulation (CIFR)
Email: a.asher@unsw.edu.au

The Actuaries Institute has made the development of an appropriate retirement incomes market a major policy priority. It is therefore pleasing to see how the issue has been picked up by the Financial Systems Inquiry (FSI) Final Report, and by many others in government and industry. As the FSI summarises: The superannuation drawdown phase of Australia’s retirement income system provides limited choice for managing risk in retirement. It also gives little guidance to retirees in navigating complex and important financial decisions. Retirees do not efficiently convert superannuation benefits into income streams in retirement. This note mentions some recent developments, and sets out a view on priorities for the years ahead. Although I am convenor of the Institute’s Retirement Incomes Working Group (RIWG), the views expressed here are personal.

"Final Report on Connecticut's State Employees Retirement System and Teachers' Retirement System"

JEAN-PIERRE AUBRY, Boston College - Center for Retirement Research
Email: aubryj@bc.edu
ALICIA H. MUNNELL, Boston College - Carroll School of Management
Email: crr4381@bc.edu

The report’s key findings are:
• Connecticut’s pension systems for state employees and teachers face large unfunded liabilities, despite recent efforts by the State to fund.
• A significant source of the problem is the "legacy debt" built up before the State began pre-funding its pensions in the 1970s.
• Since pre-funding began, inadequate contributions from the State and low investment returns have added to the problem.
• One way to address the problem is through a two-step approach:
1. separately finance the legacy debt over multiple generations; and
2. fund ongoing benefits using a level-dollar amortization method over a reasonable rolling period; and reduce the long-term assumed return.

"Sustainability of Pension Systems in Europe – The Demographic Challenge"
Australian Journal of Actuarial Practice, 2, 55-61, 2014

CHRIS DAYKIN, Independent
Email: chris@daykinactuary.co.uk

Fiscal sustainability of pensions is a serious issue in Europe because of the ageing of the population but there is also concern that reformed pensions may not be adequate. Actuaries have always been seen as major players in employer-sponsored pension schemes and insured pensions but have often not been very visible in commenting on public policy issues concerning the pension system as a whole. This article introduces the work being done by the Actuarial Association of Europe to raise the profile of actuaries with European institutions on the broader policy issues.

Read more!

New issue brief: “The Affordable Care Act, Medicare Costs, and Retirement Security”

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

“The Affordable Care Act, Medicare Costs, and Retirement Security”

by Alicia H. Munnell and Anqi Chen

The brief’s key findings are:

  • The 2010 Affordable Care Act (ACA) included roughly 165 provisions to improve Medicare’s finances.
  • The Medicare Trustees Report, which reflects the ACA provisions, shows dramatically lower cost projections for Medicare in the future.
  • The Medicare actuaries also produce alternative projections assuming that the legislated restraints on growth in payments to health providers are not feasible.
  • A review of both sets of projections over the past six years shows that the gap between them is narrowing due to declines in the alternative cost projections.
  • However, a significant gap still remains, which underscores the inherent uncertainty involved in long-range projections.
This brief is available here. Read more!

Friday, November 20, 2015

Simple Truths on Social Security

Writing in U.S. News & World Report, I argue that the technical side of Social Security reform should wait until we consider some of the broader issues on what we want a social insurance program to accomplish and how different households react to government plans offering retirement benefits.

First, we must recognize that while Social Security is a progressive program and does help reduce poverty in old age, most benefits don't go to poor households. In fact, the highest-earning fifth of the population receives about one-third of total Social Security benefits, and the next fifth receives almost another third. Social Security doesn't pay benefits to middle- and high-earning households because those households can't save on their own. It pays those benefits based on a political calculation, dating from the time of Social Security's founding, that middle- and higher-earning Americans wouldn't support a program that benefits the poor unless they themselves received a benefit from it. But paying generous benefits to middle- and high-earning households gets very expensive as the population ages and the workforce paying into Social Security shrinks.

And second, there is plenty of evidence that middle- and high-earning households treat Social Security and personal saving as substitutes. That is, if you increase Social Security benefits, these households will save less on their own. If Social Security benefits are lower, middle- and high-earning households tend to save more to make up the difference. Research from the U.S., United Kingdom, Canada and Poland finds similar results: If future Social Security benefits are lowered, middle- and upper-income workers save more. But if future benefits are made more generous, working-age households will save less. The result of the Democratic candidates' plans to expand Social Security benefits would very likely be less individual retirement saving by middle- and upper-income Americans.

Click here to read the whole article.

Read more!

Smith: “What should Social Security do?”

Writing in The Hill, Brenton Smith asks what I think is an important question: “What should Social Security do?”

Depending upon which part of the debate about Social Security reform that you follow, the program is either welfare, forced savings, or old-age insurance.  We pay for the benefits with revenue that is either called taxes or insurance premiums. The program contributes to our deficit, depending upon what definition of deficit is used.  

We should be asking what Social Security should do before we look for ways to pay for what it is doing. Andrew Biggs notes in his article in National Review, "Social Security needs a new paradigm for how individuals and government programs contribute to retirement security."

He argues that Social Security needs a new charter, poverty prevention. Biggs provides ample evidence that Social Security is horribly inefficient at poverty prevention.  His solution would replace the purpose of Social Security which is old-age insurance with a basic income payment.

If you want Social Security to serve as a program to end poverty in the elderly, the answer is simple. Just end the program, and transfer the resources to a program such as the Supplemental Security Income program that actually serves to eliminate of poverty, probably better than Social Security ever will.

While I don’t think the solution Smith suggests in his final paragraph is feasible – a strong means-tested guarantee against poverty in retirement probably requires forced saving, as in Australia – I strongly endorse Smith’s argument that we think about what we want Social Security to accomplish before we start on the technical changes needed to get Social Security to long-term solvency.

Read more!

A flat benefit plan for Social Security reform

Over at National Review online, I outline what I’ve called the “flat benefit plan” to reform Social Security. It’s modeled after the retirement systems of New Zealand and the U.K., with some nods to Australia and Canada as well.

Read the article, but the main outline is:

  • Beginning immediately, institute a minimum social security benefit for all long-term U.S. residents set at the single, over-65 poverty threshold (about $950). This would increase access to Social Security and raise benefits for about the bottom third of retirees.
  • The minimum benefit would be paid regardless of work history and earnings. Other than current law’s taxation of benefits, it would not be means-tested. The poverty-level minimum would be indexed over time with wages.
  • Over several decades, gradually reduce the maximum social security benefit so that eventually everyone receives the same flat dollar amount. 
  • Expand personal retirement saving through universal auto-enrollment in 401k plans, auto-escalation of contributions, and regulatory relief to make it less costly for small employers to offer retirement plans.

In addition, there are several other provisions to the plan that I don’t discuss much in the NRO article.

  • Immediately eliminate the 12.4% Social Security payroll tax for workers 62 and over.
  • Gradually raise the early retirement age from 62 back up to its original level of 65.
  • Pay COLAs on a progressive basis, so that current retirees receiving a sub-poverty level benefit receive an above-inflation COLA, those with mid-level benefits receive the CPI-W, and those with higher benefits receive COLAs base on the Chained CPI.

The plan would be solvent over 75 years and thereafter.

Take a look at the article and let me know what you think.

Read more!

Tuesday, November 17, 2015

New paper: “The Potential Effect of Offering Lump Sums in the Social Security Program”

Authors: Raimond Maurer, PhD; Olivia S. Mitchell, PhD; Ralph Rogalla, PhD; and Tatjana Schimetschek, MSc

  • Political debate has focused on the question of whether Social Security solvency should be achieved by larger benefit cuts or higher taxes, which in effect asks which people—current or future generations—should bear the greater burden of fixing the system.
  • But new research reframes this debate, offering a budget-neutral, actuarially fair lump sum payment, instead of the current delayed retirement credit, as a way to encourage people to delay claiming their Social Security benefits and work longer.
  • Under one of the lump sum alternatives presented here, survey participants indicated a willingness to delay claiming Social Security by up to eight months, on average, compared to the status quo, and to continue working for four of them.
  • Delayed claiming would mean additional months or years of Social Security payroll tax contributions, which could modestly improve the program’s solvency. Other benefits are possible as well: improved physical and mental health among the elderly from extended labor force participation, which could reduce the strain on health care programs like Medicare and Medicaid and help offset the macroeconomic costs of an aging population.

Click here to read the whole paper.

Read more!

Monday, November 16, 2015

New papers from the Social Science Research Network

"Changes to the Ticket to Work Regulations in 2008 Attracted Providers and Participants, But Impacts on Work and Benefits are Unclear"
Social Security Bulletin. 75(4): 15-33, 2015

JODY SCHIMMEL, Mathematica Policy Research, Inc.
Email: jodyschimmel@gmail.com
DAVID C. STAPLETON, Mathematica Policy Research, Inc.
Email: dstapleton@mathematica-mpr.com

In this article, the authors use administrative data from the Social Security Administration to explore employment service provider and beneficiary participation in the Ticket to Work program over time and to assess the extent to which participants had earnings sufficient to have their cash benefits suspended or terminated for work. The authors focus on the effects of 2008 regulatory changes to the program on participation and participant earnings.

Read more!

Tuesday, November 3, 2015

New papers from the Social Science Research Network

"Phantoms Never Die: Living with Unreliable Population Data"

ANDREW J. G. CAIRNS, Heriot-Watt University - Department of Actuarial Science & Statistics
Email: a.cairns@ma.hw.ac.uk
DAVID P. BLAKE, City University London - Cass Business School - The Pensions Institute
Email: d.blake@city.ac.uk
KEVIN DOWD, City University London - Sir John Cass Business School
Email: kevin.dowd@hotmail.co.uk
AMY R. KESSLER, Prudential Retirement
Email: akessler@bear.com

The analysis of national mortality trends is critically dependent on the quality of the population, exposures and deaths data that underpin death rates. We develop a framework that allows us to assess data reliability and identify anomalies, illustrated, by way of example, using England & Wales (EW) population data. First, we propose a set of graphical diagnostics that help to pinpoint anomalies. Second, we develop a simple Bayesian model that allows us to quantify objectively the size of any anomalies. Two-dimensional graphical diagnostics and modelling techniques are shown to improve significantly our ability to identify and quantify anomalies. An important conclusion is that significant anomalies in population data can often be linked to uneven patterns of births in cohorts born in the distant past. In the case of EW, errors of more than 9% in the estimated size of some birth cohorts can be attributed to an uneven pattern of births. We propose methods that can use births data to improve estimates of the underlying population exposures.
Finally, we consider the impact of anomalies on mortality forecasts and annuity values, and find significant impacts for some cohorts. Our methodology has general applicability to other population data sources, such as the Human Mortality Database.

"How Does the Probability of a 'Successful' Retirement Differ Between Participants in Final-Average Defined Benefit Plans and Voluntary Enrollment 401(k) Plans?"
EBRI Notes, Vol. 36, No. 10 (October 2015)

JACK VANDERHEI, Employee Benefit Research Institute (EBRI)
Email: vanderhei@ebri.org

This paper begins with a review of the previous academic literature and summarizes previous Employee Benefit Research Institute (EBRI) research analyzing the conditions under which voluntary-enrollment (VE) 401(k) plans are likely to provide an accumulation of retirement assets at least equivalent to those provided under a counterfactual final-average defined benefit (DB) plan. New research is then presented to show the percentage of “successful” retirements by income quartile for workers currently ages 25-29 who will have more than 30 years of simulated eligibility for participation in a 401(k) plan. Results are first presented for both voluntary-enrollment 401(k) plans and final-average DB plans with a 1.5 percent accrual rate. Sensitivity analysis is provided by also analyzing the comparative success rates of final-average DB plans with accrual rates of 1.0 and 2.0 percent. Using baseline assumptions (defined in the study), it appears that the DB plan has a higher probability of achieving a real replacement rate (when combined with Social Security payments) of 60 percent than the VE 401(k) plans for the first three income quartiles. If a 70 percent replacement rate is used as a threshold, participants in the third- and fourth-income quartiles have a much higher probability of success with the 401(k) plans than the DB plans. When the threshold is set at a higher (and according to many financial planners, more realistic) replacement rate of 80 percent, the 401(k) plans have a much higher probability of success than the counterfactual DB plans for all groups except for the lowest-income quartile (where the results are virtually even).

"The Impact of Temporary Assistance Programs on the Social Security Claiming Age"

GEOFFREY SANZENBACHER, Boston College Economics Department
Email: geoffrey.sanzenbacher.1@bc.edu
APRIL YANYUAN WU, Mathematica Policy Research, Inc.
Email: wuuv@bc.edu
MATTHEW S. RUTLEDGE, Boston College, Center for Retirement Research
Email: rutledma@umich.edu

Delaying claiming past the early eligibility age of 62 has taken on increased importance. Individuals turning 62 with no job and limited income may be able to use temporary assistance programs such as Unemployment Insurance (UI), Medicaid, and the Supplemental Nutrition Assistance Program (SNAP) as sources of support prior to collecting Social Security benefits. To what extent do these programs allow recipients to delay Social Security claiming? The challenge in answering this question stems from the fact that program users’ dire economic straits may make them more likely to claim benefits from both Social Security and these programs, generating a misleading correlation between Social Security claiming and temporary assistance benefits. This paper constructs instruments for program generosity that vary with an individual’s state of residence but should not reflect the characteristics or circumstances of the individual.

Read more!

Wednesday, October 28, 2015

CRFB estimates of solvency effects of Bush Social Security plan

The Committee for a Responsible Federal Budget released their estimates of the effects on Social Security’s financing of the reform plan released yesterday by Gov. Jeb Bush. Overall, the CRFB estimates are very close to the figures contained in an analysis I released yesterday.


What we both find is that the Bush plan could be expected to eliminate Social Security’s 75-year actuarial deficit and to produce a small trust fund surplus at the end of 75 years. Where we differ is that the CRFB analysis finds that, despite the program being solvent over the long term, the Social Security trust fund would go through a period of insolvency that would require that the trust fund be granted the authority to borrow. That borrowing would be repaid by the end of 75 years. In my analysis, the trust fund remained solvent throughout the 75 year period.


The differences are likely due to small details of how we set up the provisions to be simulated. But again, both analyses show a similar picture: that the Bush proposal would substantially improve the long-term solvency of Social Security.

Read more!

Tuesday, October 27, 2015

SSA actuarial score of budget deal Social Security provisions

The Social Security Administration’s Office of the Chief Actuary has published a valuation of the Social Security reform provisions included in the Bipartisan Budget Act of 2015. These include changes to the Social Security Disability program, including temporary reallocation of the payroll tax to extend the program’s trust fund solvency to 2022, as well as changes that shut off certain retirement benefit claiming strategies that were a cost to Social Security.

Overall, the provisions would improve the long-term actuarial balance of the combined Social Security retirement and disability programs by 0.04% of taxable payroll.

The SSA document with additional details is available here.

Read more!

Jeb Bush releases Social Security reform proposal

Former Florida Gov. Jeb Bush has released a Social Security reform proposal designed to balance the program’s finances, establish a new minimum benefit for long-term low-wage workers, and increase incentives to delay retirement.

I analyzed the plan using the Policy Simulation Group’s microsimulation models. You can find the full analysis, including detailed provisions included in the plan, here.


Read more!

Event: “Forging a New Path: How Tax Reform Could Address the Coming Retirement Crisis”

“Forging a New Path: How Tax Reform Could Address the Coming Retirement Crisis”

Center for American Progress
October 30, 2015, 9:30am ET - 12:15pm ET
About This Event

American families face a growing retirement crisis. More than half of all working-age households are in danger of having to make severe and painful cuts to their standard of living as they grow old. Basically, American families need more and more money for retirement, while their savings have actually remained flat or even declined. People live longer and health care costs are rising faster than inflation. But, unstable jobs, uncertain financial markets and employers cutting back on offering retirement benefits for employees make it more difficult to save for retirement. No wonder then that the retirement crisis is getting worse.

This worsening crisis underscores the urgent need for policymakers to help families save more for their retirement. The tax code offers a particularly effective yet often underexplored tool at the federal and state levels to help Americans save enough for life after work. Please join the Center for American Progress and The New School’s Schwartz Center for Economic Policy Analysis as we host a conversation with policy experts and government officials to discuss the retirement crisis and explore ways to address the crisis through tax reform by means of promoting refundable tax credits for retirement savings and encouraging relevant reforms at the state level.

Welcoming remarks:
Carmel Martin, Executive Vice President for Policy, Center for American Progress

Featured panelists, The State of Research on Efficiency of Savings Incentives:
Lily Batchelder, Professor of Law and Public Policy, New York University School of Law
John Friedman, Associate Professor of Economics, Brown University
William Gale, Arjay and Frances Miller Chair in Federal Economic Policy in the Economic Studies Program, Brookings Institution, Washington, D.C.

Moderated by:
Teresa Ghilarducci, Director, Schwartz Center for Economic Policy Analysis, The New School

Featured panelists, Raising Awareness of the Retirement Crisis and Tax Reform as a Solution:
Shaun O’Brien, Assistant Policy Director for Health and Retirement, AFL-CIO
Gary Koenig, Vice President, Economic and Consumer Security, AARP Public Policy Institute
Diane Oakley, Executive Director, National Institute on Retirement Security

Moderated by:
Rebecca Vallas, Director of Policy, Poverty to Prosperity Program, Center for American Progress

Closing keynote address:
Karen Dynan, Assistant Secretary for Economic Policy and Chief Economist, U.S. Department of the Treasury

Light refreshments will be served at 9:00 a.m.


RSVP for this event →


Center for American Progress
1333 H St. NW, 10th Floor
Washington, D.C. 20005

Map & Directions External Link Icon

Nearest Metro: Blue/Orange Line to McPherson Square or Red Line to Metro Center

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Friday, October 23, 2015

Apply for the Steven H. Sandell Grant Program via the Center for Retirement Research at Boston College


Submit Your Application

Submit Letter of Support

About Steven H. Sandell

The Center for Retirement Research sponsors the annual Steven H. Sandell Grant Program for scholars in the field of retirement research and policy. The program is funded by the U.S. Social Security Administration to provide opportunities for junior scholars from all academic disciplines to pursue cutting-edge projects on retirement income issues. Priority areas include:

• Social Security

• Macroeconomic analyses of Social Security

• Wealth and retirement income

• Program interactions

• International research

• Demographic research

Grant Awards

Up to three grants of $45,000 are awarded based upon the quality of the applicant’s proposal and his or her proposed budget. Applicants are required to complete the research outlined in the proposal within one year of the award. Grant recipients may be required to present their work to the Social Security Administration in Washington, DC or Baltimore.


The 2016 Sandell Grant Program deadline will be January 31, 2016. Please use the application forms at the top of this page. View the proposal guidelines and the budget matrix.


Please contact Marina Tsiknis with any questions about the Sandell Grant Program at 617-552-1092 or tsiknis@bc.edu.

Read more!

Wednesday, October 21, 2015

Event: “A Solution to the SSDI Trust Fund Dilemma: Long-Term Modernization with Short-Term Options to Delay Exhaustion”

Mathematica Policy Research Logo

A Solution to the SSDI Trust Fund Dilemma: Long-Term Modernization with Short-Term Options to Delay Exhaustion

In the absence of reforms, the Social Security Trustees predict that the SSDI Trust Fund will be exhausted in the fourth quarter of 2016; subsequent revenues will be enough to pay only 81 percent of the benefits due. Some potential solutions, such as restricting eligibility, reducing benefit amounts, or allocating a larger share of Social Security payroll taxes to the SSDI Trust Fund are politically problematic. Initiatives to reduce fraud and improve the program's integrity have bipartisan support, but it is uncertain what the actual savings from these initiatives would be, and they seem unlikely to solve the financing problem on their own.

In this briefing sponsored by Mathematica Policy Research and the Committee for a Responsible Federal Budget (CRFB), disability policy experts David Stapleton (Mathematica) and Edward Lorenzen (CRFB) will describe and discuss long- and short-term policy options, including:

Comprehensive modernization of the nation's fragmented disability support system to improve outcomes for people with disabilities and to eventually yield tens of billions in savings for taxpayers every year

Near-term reforms, such as addressing program integrity issues and restructuring work incentives, which may complement the modernization effort and delay Trust Fund exhaustion

A new Mathematica issue brief, “A Solution to the SSDI Trust Fund Dilemma: Long-Term Modernization with Short-Term Options to Delay Exhaustion,” provides more information and will be available at the briefing.

Friday, October 23, 11:00 a.m. - 12:00 p.m. (ET)
B-318 Rayburn House Office Building
Craig Thornton, a senior fellow at Mathematica, will moderate the event.

For more information, please contact sbruns@mathematica-mpr.com.

Read more!

Saturday, October 17, 2015

Upcoming event: “How should retirement investment advice be regulated?”

Join us on October 16 for a discussion with Secretary of Labor Thomas Perez on how investment advice should be regulated.


Brookings Event Invitation

REMINDER: Join us Friday afternoon for an examination of the Labor Department's proposed regulation on retirement investment advice.
Register to attend in person » Register to watch the live webcast »

How should retirement investment advice be regulated?
Featuring keynote remarks by Secretary of Labor Thomas E. Perez

Friday, October 16, 2015, 2:30 — 5:00 PM
The Brookings Institution, Falk Auditorium, 1775 Massachusetts Ave, NW
Washington, DC  20036

RSVP to Attend


RSVP for the webcast


The U.S. Department of Labor is proposing to change the legal standards for those providing investment advice to retirement accounts.  The department has proposed to limit the conflicts of interests that some advisors face when they receive differential compensation for recommending certain investment products over others. Notably, DOL has proposed making such advisors legally liable (fiduciaries) for the advice they provide, which would limit the conflicts of interest they would face.  As more and more American households are being expected to provide for their own retirement, rather than being able to rely on traditional pension plans, these issues are increasingly important.
Supporters of this “best interest” standard argue that conflicts of interest have been shown to undermine savers' retirement assets and must be addressed, and that low-balance investors may be better served by signing up for low-cost, model-based advice that is not conflicted.  Many in the investment industry, however, believe that the Labor Department’s proposed rules are unworkable, believe that conflicts of interest do not present challenges for savers, and that the proposed changes could make it harder and more expensive for low-income savers to be able to afford the professional guidance they need.
On Friday, October 16, the Initiative on Business and Public Policy at Brookings will host an event exploring these issues.  Secretary of Labor Thomas E. Perez will keynote the event, and will be joined by two panels of experts from industry, think tanks, and consumer advocates.  Participants will take questions from the moderator and audience.
The event will be live webcast. Join the conversation via Twitter at #FiduciaryRule.


Martin Neil Baily, Bernard L. Schwartz Chair in Economic Policy Development and Director, Initiative on Business and Public Policy, The Brookings Institution

Keynote Remarks

Thomas E. Perez, Secretary, U.S. Department of Labor

Panel 1: How should the rule be implemented?

Moderator: Josh Gotbaum, Guest Scholar, Economic Studies, The Brookings Institution
Kent Mason, Partner, Davis & Harman
Marilyn Mohrman-Gillis, Managing Director, Public Policy & Communications, Certified Financial Planner Board
Barbara Roper, Director of Investor Protection, Consumer Federation of America
Jim Szostek, Vice President, Taxes & Retirement Security, American Council of Life Insurers

Panel 2: Examining the evidence on conflicts of interest

Moderator: Martin Neil Baily, Bernard L. Schwartz Chair in Economic Policy Development and Director, Initiative on Business and Public Policy, The Brookings Institution
Sean Collins, Senior Director, Industry and Financial Analysis, Investment Company Institute
Jane Dokko, Fellow, Economic Studies, The Brookings Institution

Read more!

Upcoming event: “Aging Securely: An Actuarial Forum on Financial and Health Care Retirement Challenges”

You're Invited to

Aging Securely: An Actuarial Forum on Financial and

Health Care Retirement Challenges


Please join us for a public policy discussion led by actuarial experts on lifetime income, long-term care, and the sustainability of public programs that serve the needs of older people.



October 23, 2015

Noon - 3:00 PM EDT

Congressional Meeting Room South (CVC-217)

Capitol Visitor Center

Lunch will be provided

Register Now

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Noon - Lunch available

12:05 - Welcome Remarks & Introduction to the Academy's Aging Securely Initiative


Tom Terry, immediate past president, American Academy of Actuaries

Tom Wildsmith, president-elect, American Academy of Actuaries

12:15 - Public Policies to Support Lifetime Income


Noel Abkemeier, co-chairperson, Lifetime Income Risk Joint Task Force

Mark Shemtob, member, Lifetime Income Risk Joint Task Force

1:15 - The Need for Long-Term Care and Public Policy Options


Chris Giese, member, Aging Task Force

Bruce Stahl, vice chairperson, Long-Term Care Reform Subcommittee

Eric Stallard, chairperson, Long-Term Care Reform Subcommittee

2:00 - Sustainability of Public Programs-The State of Medicare and Social Security; Release of the Academy's New Social Security Game


Steve Alpert, chairperson, Public Interest Committee

Tim Leier, chairperson, Social Security Committee

Cori Uccello, senior health fellow, American Academy of Actuaries

2:55 - Concluding Remarks


Tom Terry, immediate past president, American Academy of Actuaries

Tom Wildsmith, president-elect, American Academy of Actuaries




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Thursday, October 15, 2015

Upcoming hearing: “Understanding Social Security’s Long-Term Fiscal Picture”

U.S. Senate Committee on Homeland Security & Governmental Affairs


Understanding Social Security’s Long-Term Fiscal Picture

Full Committee Hearing

October 20, 2015 10:00AM

Location: SD-342, Dirksen Senate Office Building


  • Stephen C. Goss

    Chief Actuary

    U.S. Social Security Administration

  • Jagadeesh Gokhale, Ph.D.

    Director of Special Projects

    Penn Wharton Public Policy Initiative

  • Dean Baker, Ph.D.


    Center for Economic and Policy Research


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Wednesday, October 14, 2015

Webinar: “State and International Strategies to Expand Private Sector Retirement Savings”

Reminder: have you registered for our free webinar?

State and International Strategies to Expand
Private Sector Retirement Savings

DATE: Wednesday, October 21, 2015
TIME: 1:00 PM – 2:00 PM EST

Please join us for a one hour briefing and Q&A session to discuss a recently released report by the U.S. Government Accountability Office (GAO) examining coverage and participation rates in workplace retirement savings programs, state initiatives and comparative international strategies to expand retirement savings.
Our Panel:

  • Sharon Hermes and Jessica Gray, Senior Analysts, Education, Workforce, and Income Security Issues, U.S. Government Accountability Office (GAO)
  • Kathleen Kennedy Townsend, Commissioner, Maryland Commission on Retirement Security and Savings
  • Julian Federle, Chief Policy and Programs Officer, Office of the Illinois State Treasurer
  • Michael P. Kreps, Principal, Groom Law Group and former Senior Pensions and Employment Counsel, U.S. Senate Committee on Health, Education, Labor and Pensions


  • Angela M. Antonelli, Executive Director, Georgetown Center for Retirement Initiatives
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Center for Retirement Research 2016 Dissertation Fellowship Program

The Center for Retirement Research at Boston College announces the 2016 Dissertation Fellowship Program, funded by the U.S. Social Security Administration.

  • The Dissertation Fellowships support doctoral candidates writing dissertations on retirement income and policy issues. The program is open to scholars in all academic disciplines.
  • Up to three fellowships of $28,000 will be awarded.
  • The submission deadline for proposals is January 31, 2016.  Award recipients will be announced in April 2016.
  • The proposal guidelines are available online.
For questions, please contact:
Marina Tsiknis
617-552-1092 Read more!

New paper: “Social Security Replacement Rates”

WASHINGTON, DC – The Senate Budget Committee today released its October 6, 2015, issue of the Budget Bulletin focused on Social Security replacement rates. The Budget Bulletin provides regular expert articles by Senate Budget Committee analysts on the issues before Congress relating to the budget, deficits, debt, and the economy.

Read the full Senate Budget Bulletin here.

Excerpts follow:

Social Security Replacement Rates

Social Security provides monthly cash benefits to retired and disabled workers, as well as their eligible spouses, dependents, and survivors. The current benefit formula, enacted by Congress in 1977, was first applied to individuals born in 1917, who turned 62 in 1979. To evaluate the adequacy and equity of this formula, benefits are often compared with wages. The ratio of benefits to wages, known as the replacement rate, reflects the extent to which benefits replace the wages lost due to retirement, disability, or death. The higher the ratio, the easier it is for workers to maintain their standard of living after they become eligible for benefits.

Replacement rates provide a useful way to assess the relative value of benefits, provided they are presented in a clear and consistent manner. These rates as typically presented by the Social Security Administration (SSA), however, have been subject to criticism focused on SSA’s use of career-average, wage-indexed earnings as the denominator in their calculations, resulting in the rates’ removal from the 2014 and 2015 annual Social Security trustees’ reports.

The Social Security disability trust fund will be insolvent by the end of next year. The retirement and survivor trust fund will be insolvent in less than two decades. While that might seem like plenty of time to solve the problem, it all depends on which path the federal government chooses to take. Some solutions are more time-sensitive than others.

The public deserves the opportunity to consider all the options to address Social Security’s pending insolvency while there is still time to make a difference. And careful consideration starts with a better understanding of replacement rates and their public policy implications.

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Friday, October 9, 2015

New papers from the Social Science Research Network

"What Causes Workers to Retire Before They Plan?"
Center for Retirement Research Working Paper No. 2015-22

ALICIA H. MUNNELL, Boston College - Center for Retirement Research
GEOFFREY SANZENBACHER, Boston College Economics Department
Email: geoffrey.sanzenbacher.1@bc.edu
ANTHONY WEBB, Boston College - Center for Retirement Research
Email: webbaa@bc.edu

This paper explores the extent to which health, employment, family, or finances are associated with earlier-than-planned retirement using the Health and Retirement Study (HRS). The importance of any shock that drives early retirement depends both on its effect on those experiencing it and its prevalence in the population; therefore, the analysis proceeds in two steps. First, a probit regression is used to determine the strength of the relationship between the shocks and earlier-than-planned retirement, controlling for individual characteristics. Second, to incorporate the prevalence of the shock, counterfactual experiments are run to determine how much early retirement would be reduced in the population if these shocks did not occur.

"Job Polarization and Labor Market Outcomes for Older, Middle-Skilled Workers"
Center for Retirement Research at Boston College Working Paper No. 2015-23

MATTHEW S. RUTLEDGE, Boston College, Center for Retirement Research
Email: rutledma@umich.edu
QI GUAN, Boston College - Center for Retirement Research
Email: qi.guan@bc.edu

Numerous studies have found that even as employment growth in high- and low-skill occupations has been robust, employment in middle-skill occupations such as office administration and manufacturing is in long-term decline. The timing of this decline could not be worse for the older workers looking to prolong their careers to compensate for decreasing Social Security and pension income. But few existing studies have examined the consequences of job polarization on older workers, who may be less likely than prime-aged workers to find work in high- or low-skill occupations. This paper uses the Survey of Income and Program Participation to investigate employment outcomes specifically for older workers first observed in middle-skill jobs. If they leave a middle-skill job, are they able to find jobs in another skill level, or are they forced out of employment prematurely? What are the circumstances surrounding these transitions, and how are the workers’ earnings affected?

"Characteristics of Noninstitutionalized DI and SSI Program Participants, 2013 Update"
Office of Retirement and Disability Policy, Office of Research, Evaluation, and Statistics. Research and Statistics Note, No. 2015-02, 2015

MICHELLE STEGMAN, Government of the United States of America - Office of Program Development, Social Security Administration
Email: Michelle.Stegman@ssa.gov
JEFFREY HEMMETER, Government of the United States of America - Social Security Administration
Email: jeffrey.hemmeter@ssa.gov

The authors use data from the 2008 panel of the Survey of Income and Program Participation (SIPP) matched to administrative records from the Social Security Administration (SSA) to produce tables describing the characteristics of Disability Insurance (DI) beneficiaries and Supplemental Security Income (SSI) recipients in December 2010. This match to survey data allows the authors to provide detailed information on the economic and demographic characteristics of program participants not available in administrative records. These tables update those previously published by DeCesaro and Hemmeter (2008) using 2002 data.

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Monday, October 5, 2015

Upcoming event: Savings & Retirement Foundation

TUESDAY, OCTOBER 13: Join us on  for a luncheon discussion of the Department of Labor's Update to Fiduciary Rules with Charles Gabril, Kent Mason, and Ike Brannon. Please RSVP through the link below if you plan to attend.

Join us on Tuesday, October 13th at Noon
for a special event on Capitol Hill
A Panel Discussion on The U.S. Department of Labor's Updated Fiduciary Rules
Confirmed Panelists
Charles Gabriel
Capital Alpha
Kent Mason
Davis & Harman
Ike Brannon 
President of Capital Policy Analytics
Tuesday October 13, 2015
Noon-1:00 p.m.

Dirksen Senate Office Building
Room G11

Lunch will be provided.
This is a widely attended event.







Charles Gabriel
President, Capital-Alpha

Kent Mason
Partner, Davis & Harman

Ike Brannon
President, Capital Policy Analytics

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