Friday, May 29, 2015

New papers from the Social Science Research Network

"Are US Workers Ready for Retirement? Trends in Plan Sponsorship, Participation, and Preparedness" 
Journal of Pension Benefits, Ferenczy Benefits Law Center, Winter 2015. pp. 25-39
TERESA GHILARDUCCI, Schwartz Center for Economic Policy Analysis (SCEPA), The New School - Department of Economics, University of Notre Dame - Department of Economics
The New School for Social Research
The New School for Social Research

Most workers need a workplace retirement plan to supplement their Social Security to achieve an adequate retirement income — defined here as a 70 percent replacement rate at age 65. However, only 44 percent of workers in the United States participate in a retirement plan at work. The lack of retirement readiness is not caused by the Great Recession but by two structural trends: not enough people have access to a retirement plan at work and, when they do, the amounts saved are often not enough to ensure adequate retirement living standards.

Between 1999 and 2011, the availability, distinct from participation, of employer-sponsored retirement plans in the United States declined from 61 percent to 53 percent. [Ghilarducci, Teresa and Saad-Lessler, Joelle. “Explaining the Decline in Offer Rate of Employer Retirement Plans Between 2001-2012,” Schwartz Center for Economic Policy Analysis and Department of Economics, The New School for Social Research, Working Paper Series, 2014. Forthcoming in the Industrial and Labor Relations Review.] All workers, regardless of sex, race, industry, firm size, and union status, experienced a drop in coverage rates. However, being in a union was somewhat protective; union workers experienced a 6 percent drop in coverage while non-union worker rates dropped 14 percent.

The research study evaluated pension fund management of Ethiopian social security agency. To attain these objectives, eleven years’ financial statements were used as a secondary data and different ratio analysis was carried out to examine the status of fund management of Ethiopian social security agency. Those ratios shows that the organization current assets is very much large when compared with its current liabilities which shows the organization is in the best position to pay off all of its current liability. Again, the finding displays the asset turnover has been decreasing from time to time which shows under utilization of companies asset. In addition to this, large percentage of the asset of social security is financed by equity and small percentage is financed by debt. Lastly, the analysis puts that the organization is absorbent up to 50% of its income. That means up to 50% of them is consumed by its expenses.

"Accounting for Pension Flows and Funds: A Case Study for Accounting, Economics and Public Finances" 
EGPA XII Permanent Study Group Public Sector Financial Management Workshop, Zurich-Winterthur (Switzerland), May 7-8, 2015
YURI BIONDI, French National Center for Scientific Research (CNRS)
Université Paris Dauphine

Accounting for pension obligations has been co-evolving with political and financial economic strategies aimed to prompt and promote active financial markets and institutional investors, as well as transnational harmonisation and convergence of accounting standards between private and public sectors. In this context, our article provides a theoretical analysis of accounting for pension obligations, drawing upon a comprehensive review of existing practice and regulation. The latter are still inconsistent with the actuarial representation that has been adopted by the IPSAS 25 (Employee Benefits) and the IAS 19 (Employee Benefits). According to our frame of analysis, a variety of viable modes of pension management exists and shall be acknowledged by accounting and financial regulations. Accounting (and financial economic) concepts and regulatory recommendations are then elaborated in view to clarify and improve on pension protection, that is, the assurance of continued provision of pension payments at their agreed levels under viable alternative modes of pension management. 
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Thursday, May 28, 2015

Capretta: “What is the Huckabee plan for Social Security?”

My AEI colleague Jim Capretta writes for National Review on former Arkansas Gov. Mike Huckabee’s unusual position regarding Social Security reform:

Former Arkansas governor Mike Huckabee is setting out on a populist course in hopes of securing the Republican nomination for president in 2016. Among other things, he has come out against the next round of free-trade agreements. He also wants to be seen as the GOP defender of middle-class entitlement programs. In announcing his candidacy, he said, “If Congress wants to take away someone’s retirement, let them end their own congressional pensions — not your Social Security.”
Huckabee’s populism is music to the ears of some conservatives in Washington. They want the GOP to adjust its economic message going into 2016. They argue that the Republican nominee for president will need to do much better among working-class voters than 2012 nominee Mitt Romney, especially in the Midwest.
They are right about that, of course. But there’s got to be a better way to go about it than Huckabee-style populism.

Check out the whole article here. Read more!

Tuesday, May 26, 2015

New article: “Are Americans of All Ages and Income Levels Shortsighted About Their Finances?”

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

“Are Americans of All Ages and Income Levels Shortsighted
About Their Finances?”

by Steven A. Sass and Jorge D. Ramos-Mercado

The brief’s key findings are:

  • A recent CRR analysis of a FINRA survey found that financial satisfaction depends much more on meeting day-to-day, rather than distant, needs.
  • This study explores whether households of all ages and income levels are also shortsighted.
  • The results confirm that distant needs, like retirement saving, consistently take a back-seat to more immediate concerns.
  • The results underscore the importance of making it easy and automatic for Americans to save for distant goals that may otherwise receive little attention.

This brief is available here. Read more!

Monday, May 25, 2015

Social Security Bulletin, Vol. 75 No. 2

Social Security Bulletin, Vol. 75 No. 2

Released May 2015.

Download entire publication

Adult OASDI Beneficiaries and SSI Recipients Who Need Representative Payees: Projections for 2025 and 2035

by Chris E. Anguelov, Gabriella Ravida, and Robert R. Weathers II

This article examines how changing demographics might affect the number of adult OASDI beneficiaries and SSI recipients who need a representative payee to manage their benefit payments. The authors use administrative data and projections from the Modeling Income in the Near Term (MINT) model to project the number of beneficiaries who will need a representative payee, with detail by beneficiary age, program type, and type of payee. Demand for representative payees is projected to grow over the next two decades as the retired-worker population increases. Because retired-worker beneficiaries are less likely than disabled-worker beneficiaries to have a family member serve as their representative payee, the Social Security Administration will need to increase efforts to recruit and monitor nonfamily representative payees. The authors describe ongoing agency efforts to prepare for the projected growth in demand for representative payees.

Employment, Earnings, and Primary Impairments Among Beneficiaries of Social Security Disability Programs

by David R. Mann, Arif Mamun, and Jeffrey Hemmeter

This article examines the employment and earnings of Disability Insurance beneficiaries and working-age Supplemental Security Income recipients across detailed primary-impairment categories. The authors use 2011 data from linked Social Security administrative files to identify which beneficiaries and recipients are most likely to have earnings and to have higher levels of earnings. They find substantial heterogeneity in these outcomes across primary impairments.

Retirement Plan Coverage by Firm Size: An Update

by Irena Dushi, Howard M. Iams, and Jules Lichtenstein

This article provides an update of the relationship between pension plan coverage and firm size among private-sector workers, using data from the Survey of Income and Program Participation (SIPP) for 3 years: 2006, 2009, and 2012. Following previous work, our measures of pension coverage and participation take into account, and correct for, survey-response errors in the SIPP by using information in the W-2 records regarding tax-deferred earnings to defined contribution plans. The authors' findings show that compared with 2006, the offer and participation rates of any pension plan slightly increased in 2009 and 2012. Throughout the 2006–2012 period, offer and participation rates differed substantially by firm size, whereas there was little difference in the take-up rate.

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

by Benjamin Bridges and Robert V. Gesumaria

In 2011, the Census Bureau released its first report on the Supplemental Poverty Measure (SPM). The SPM addresses many criticisms of the official poverty measure, and its intent is to provide an improved statistical picture of poverty. This article examines the extent of poverty identified by the two measures. The authors present a detailed examination of poverty among nonaged adults (those aged 18–64). For a more comprehensive view of poverty and comparison purposes, some findings are presented for younger and older segments of the population.

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Friday, May 22, 2015

Website updates from SSA’s Office of Retirement Policy (ORP)

We are pleased to share with you the updated Social Security Administration Office of Retirement Policy website:

What Has Been Updated?

· New updates based on the Modeling Income in the Near Term, Version 7 (MINT7) microsimulation model:

· Current Law Fact Sheets

· Population Profiles—Highlight the characteristics of certain populations, such as veteran beneficiaries.

· Population Projections—Show how certain populations, such as survivor-only beneficiaries, are projected to look in the future.

· Program Explainers—Explain aspects of the Social Security program, such as the minimum benefit.

· Policy Option Projections—Analyses of how proposed changes to Social Security program might affect future beneficiaries and benefit levels.

· Projection Methodology—An explanation of the MINT7 model and the definitions we use.

What Else Can I Find There?

Need More Information?

Contact us at

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Sign up here to receive an e-mail when we release new or updated content.

Website Feedback

We encourage and need your feedback to help make the content and design of this website more useful. Please send all comments to (and note that you are commenting on the Office of Retirement Policy website).

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Early Social Security claiming declines

The Wall Street Journal reports on new research from the Center for Retirement Research at Boston College showing that the percentage of Americans filing for early – meaning, reduced – Social Security retirement benefits has fallen in recent years.

A new study from the Center for Retirement Research at Boston College—titled Trends in Social Security Claiming —finds that, in 2013, 36% of men and 40% of women who turned 62 claimed Social Security. Sixty-two is the youngest age at which most people become eligible for benefits.

Those figures differ significantly from the numbers published by the Social Security Administration, which estimated that 42% of men and 48% of women who claimed retiree benefits in 2013 were 62.

What’s more, according to the Boston College study, “the share of people claiming Social Security retired-worker benefits when they attain age 62 has been falling since the mid-1990s…a decline [that] is fully consistent with the increase in the average retirement age.”

Read more!

Sen. Hatch Introduces Three Disability–Related Bills

Sen. Orin Hatch (R-UT) introduced three pieces of legislation relating to the Social Security Disability Insurance program, which is facing insolvency next year. Hatch's bills are companion legislation to bills already introduced in the House by Rep. Sam Johnson (R-TX).
These include:

  • The Guiding Responsible and Improved Disability Decisions (GRIDD) Act, S. 1194, requires the Social Security Administration (SSA) to update its medical and vocational "grids" used by disability decision makers. The "grid rules" use age, education, past work experience and capacity for work to create guidelines that assist in determining whether an individual is or is not disabled. SSA published the grid rules in 1979, but the rules have not be updated to stay current with the modern workplace or developments in medicine and technology. This update would also include rules related to applicants' inability to communicate in English, based on a recent instance in Puerto Rico where it was reported the "grid rules" in place would prevent Spanish-speaking claimants from finding work. Additional background available at:
  • The Promoting Opportunity through Informed Choice Act, S. 1197, provides support for disability beneficiaries that want to return to work by requiring the SSA to develop public online tools to assist beneficiaries in determining the impact of earnings on their eligibility for benefits they receive. Additional background available at:
  • The Disability Evidence Integrity Act, S. 1198, deters the SSA from making determinations on disabled individuals to receive DI benefits based on evidence provided by individuals who have been convicted of a felony or are expelled from participating in any Federal health care program. These individuals are sometimes referred to as "dirty docs." Additional background available at:
Hatch said: "For far too long, the SSDI program has failed to keep up with the rapid changes in medicine, technology and education," Hatch said. "These bills are the first step in modernizing the SSDI program to make it more effective and efficient for both beneficiaries and taxpayers. With the trust fund expected to be exhausted in 2016, Congress should continue to examine how to address the financial challenges facing SSDI while also looking for ways to improve the program for beneficiaries." Read more!

Weigel on the GOP’s “Save Social Security” Caucus

Bloomberg’s Dave Weigel looks at former Arkansas Gov. Mike Huckabee, leader of what Weigel calls the Republican “Save Social Security” caucus. Unfortunately, as Weigel notes, Huckabee isn’t particularly clear about what he would do to save it.

In the middle of Mike Huckabee's presidential announcement, his populism took him to a land many Republican candidates fear to tread.

"There are some who propose that to save the safety nets like Medicare and Social Security, we ought to chop off the payments for the people who have faithfully had their paychecks and pockets picked by the politician, promising them that their money would be waiting for them when they were old and sick," said Huckabee. "My friend, you were forced to pay for Social Security and Medicare. For 50 years, the government grabs the money from our paychecks and says it'll be waiting for us when we turn 65. If Congress wants to take away someone's retirement, let them end their own congressional pensions, not your Social Security."

As with a lot of the speech, the words hung together splendidly but the math was TBD.

You can read the whole article here.

Read more!

New paper: “Tax and spending reform for fiscal stability and economic growth”

“Tax and spending reform for fiscal stability and economic growth”

By Andrew Biggs, Alan Viard, Alex Brill and Joseph Antos

American Enterprise Institute

May 19, 2015 | AEI Economic Perspectives

Key Points

  • The current trajectory of explosive growth in federal debt and entitlement spending is fiscally untenable and will unduly burden future generations.
  • This plan focuses on tax reform proposals that raise necessary revenues with the least possible impact on saving and economic growth and on entitlement spending reform proposals that make those programs better targeted and more efficient.
  • These proposals would improve fiscal stability and economic growth and hold the national debt to 62.7 percent of annual gross domestic product in 2040 by narrowing the fiscal imbalance, limiting the size of government, and adopting a more growth-friendly tax code.

Read the PDF.

Read the full Peterson Foundation Solutions Initiative III report.


Read more!

Wednesday, May 20, 2015

Center for Retirement Research Spring 2015 Newsletter

Read the whole newsletter online here.


Bigger and Better: The New Public Plans Database

New features include more data on 150 pension plans, interactive maps, and enhanced search.

Heading Off a Retirement Crisis

A new book explores the nation's brewing retirement crisis and how to prevent it.

Claiming Social Security Later

CRR study shows a sharp drop in the percentage of workers claiming Social Security at age 62.

Rescuing Stranded 401(k) Accounts

A clearinghouse for small accounts could reduce fees and consolidate retirement savings.

And the Winners Are...

CRR announces new research grants for junior faculty and Ph.D. students.

Thanks to our supporters:
The Social Security Administration, the Alfred P. Sloan Foundation, Boston College, the Center for Satate and Local Government Excellence, FINRA Investor Education Foundation, IMPAQ International, the National Institute on Aging, Prudential Financial, and the State of Connecticut.

We also thank members of our research partnership program: BlackRock, Capital Group, Charles Schwab & Co. Inc., Citigroup, Fidelity & Guaranty Life, Goldman Sachs, Mercer, National Association of Retirement Plan Participants, Prudential Financial, State Street, and TIAA-CREF Institute.

Read more!

Sunday, May 10, 2015

Huckabee: giving retirees what they paid for

Over at the Corner, my AEI colleague Ramesh Ponnuru looks at former Arkansas Gov. Mike Huckabee’s shameless – and I think mistaken – pitch to seniors as Huckabee launches his campaign for the GOP presidential nomination. Huckabee says:

“You were forced to pay for Social Security and Medicare for 50 years. The government grabs money from our paychecks and says it will be waiting for us when we turn 65. If Congress wants to take away someone’s retirement, let them end their own Congressional pensions-not your Social Security. As President, I promise you will get what you paid for!”

One problem with this statement is basic math: since Social Security and Medicare are (vastly) underfunded, we either need to pay more in or get less out. Sure, politicians promised us a certain benefit formula, but they also promised a certain tax rate. Huckabee implicitly asserts that changes should be in the tax side, not the benefit side. Good luck running in a Republican primary on that platform.

Second, as Ramesh points out, Huckabee’s support for the Fair Tax implies a 30% sales tax on goods and services. So seniors’ benefits might not be cut under a Huckabee administration, but the amount they could buy with their benefits would fall by 30%. Again, good luck.

Finally, Huckabee’s basic “get what you paid for” statement is incorrect: by law, Social Security benefits will be cut when the trust fund runs out (next year for disability, in the early 2030s for retirement). Whatever you may believe about the economics of the trust fund – personally, not much – the trust funds’ exhaustion is by definition a signal that Americans haven’t paid enough to fund the benefits they’ve been promised. In other words, Huckabee’s Social Security policy could be to slash benefits across the board by 25% when the trust fund runs out and that policy would be entirely consisting with his promise that “you will get what you paid for.” Just not a penny more.

Read more!

Friday, May 8, 2015

New papers from the Social Science Research Network


"The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key Factor in Americans’ Retirement Confidence"
EBRI Issue Brief, Number 413 (April 2015)

RUTH HELMAN, Greenwald & Associates
CRAIG COPELAND, Employee Benefit Research Institute (EBRI)
JACK VANDERHEI, Employee Benefit Research Institute (EBRI)

This paper presents key findings from the 25th annual Retirement Confidence Survey (RCS), a survey that gauges the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The 2015 RCS by EBRI/Greenwald & Associates finds that the nation’s retirement confidence continues to rebound from the record lows experienced between 2009 and 2013 -- but this is based on the increasing optimism of those who indicate they and/or their spouse have a retirement plan. The percentage of workers confident about having enough money for a comfortable retirement, at record lows between 2009 and 2013, increased in 2014 and again in 2015. Twenty-two percent are now very confident (up from 13 percent in 2013 and 18 percent in 2014), while 36 percent are somewhat confident. Twenty-four percent are not at all confident (statistically unchanged from 28 percent in 2013 and 24 percent in 2014). The increased confidence since 2013 is strongly related to retirement plan participation. Among those with a plan, the percentage very confident increased from 14 percent in 2013 to 28 percent in 2015. In contrast, the percentage very confident remained statistically unchanged among those without a plan (10 percent in 2013, 9 percent in 2014, and 12 percent in 2015). Retiree confidence in having a financially secure retirement, which historically tends to exceed worker confidence levels, also increased, with 37 percent very confident (up from 18 percent in 2013 and 27 percent in 2014). The percentage not at all confident was 14 percent (statistically unchanged from 14 percent in 2013 and 17 percent in 2014). Worker confidence in the affordability of various aspects of retirement has also rebounded. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses has increased (37 percent, up from 25 percent in 2013 and 29 percent in 2014). The percentages of workers who are very confident in their ability to pay for medical expenses (18 percent, up from 12 percent in 2011) and long-term care expenses (14 percent, up from 9 percent in 2011) are slowly inching upward. Cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 50 percent of workers citing these factors. Nevertheless, many workers say they could save a small amount more. Seven in 10 (69 percent) state they could save $25 a week more than they are currently saving for retirement.

"A Look at the End-of-Life Financial Situation in America"
EBRI Notes, Vol. 36, No. 4 (April 2015)

SUDIPTO BANERJEE, Employee Benefit Research Institute (EBRI)

This paper takes a comprehensive look at the financial situation of older Americans at the end of their lives. In particular, it documents the percentage of households with a member who recently died with few or no assets. It also documents the income, debt, home-ownership rates, net home equity, and dependency on Social Security for households that experienced a recent death. Significant findings include that among those who died at ages 85 or above, 20.6 percent had no non-housing assets and 12.2 percent had no assets left. Among singles who died at or above age 85, 24.6 percent had no non-housing assets left and 16.7 percent had no assets left. Data show those who died at earlier ages were generally worse off financially: 29.8 percent of households that lost a member between ages 50 and 64 had no assets left. Households with at least one member who died earlier also had significantly lower income than households with all surviving members. The report shows that among singles who died at ages 85 or above, 9.1 percent had outstanding debt (other than mortgage debt) and the average debt amount for them was $6,368. The report also shows that the importance of Social Security to older households cannot be overstated. For recently deceased singles, it provided at least two-thirds of their household income. Couple households above 75 with deceased members received more than 60 percent of their household income from Social Security. The data for this study come from the University of Michigan’s Health and Retirement Study (HRS), which is sponsored by the National Institute on Aging, and is the most comprehensive national survey of older Americans.

"Measured Matters: The Use of 'Big Data' in Employee Benefits"
EBRI Notes, Vol. 36, No. 4 (April 2015)

STEPHEN BLAKELY, Employee Benefit Research Institute (EBRI)

Since “big data” is changing so many aspects of the business world, how is it affecting the way health and retirement benefits are provided to private-sector workers? This paper summarizes the presentations and discussion at the Dec. 11, 2014, EBRI policy forum held in Washington, DC, on the topic, “Measured Matters: The Use of ‘Big Data’ in Employee Benefits:” the use of massive amounts of data and computer-driven data analytics to determine how people behave when it comes to health and retirement plans, which programs work or do not, and how to get better results at lower cost. EBRI’s 75th biannual policy forum last December delved into both the status and promise of this trend before an audience of about a hundred benefits professionals and policymakers. Two panels of experts -- one focusing on health and the other on retirement -- provided an overview of what employers, researchers, and data analysts are currently doing, what they hope to be doing, and what seems to be working so far. Speakers included employers, research and analytic experts, health and retirement plan executives, and consultants. Among the broad areas of agreement: Employers and researchers are making a major commitment to capturing and analyzing the vast amount of health and retirement data in their benefit plans; the health sector is considerably farther down the road than the retirement sector in using data analytics in benefits plan design and management, but both fields are in the very early stages of using big data; many workers are already seeing the results of this trend, such as the rapidly growing use of electronic medical records and their ability to access their own health records online; the science of applied mathematics seems destined to dominate the art of employee benefits.

"Which State-Law Reporting, Record-Keeping, and Disclosure Mandates Does ERISA Permit that Relate to State Criminal Laws, Insurance Laws, Healthcare Laws, Tax Laws, Domestic Relations Laws, Labor Laws, or Other State Laws?"
20 J. Deferred Compensation 1 (Spring 2015)

ALBERT FEUER, Law Offices of Albert Feuer

This article discusses when a pension or welfare plan governed by ERISA must comply with state law reporting, record-keeping and disclosure mandates.
Any such mandate directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party's interaction with an ERISA plan, would seem prima facie to relate to an ERISA plan. Thus, at first blush, any such mandate would appear to be preempted. However, this approach is obviously incorrect. It would preclude a state from compelling a pension plan or its participants from filing tax reports about benefit distributions.
On the other hand, such plan mandates do not affect plan benefit structures or the administration of those structures other than requiring such reports, record-keeping, or disclosure, and imposing cost burdens on the plan. Thus, at second blush, all such mandates seem permissible. However, this approach is obviously incorrect. It would permit a state to compel plans to provide reports so that the state could regulate plan fiduciary conduct or to make large expenditures to generate and keep records with little utility.
This article argues for a common sense approach. ERISA permits a state-law reporting or disclosure mandate directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party interacting with an ERISA plan, such as a service provider, that implements a state law that ERISA does not otherwise preempt, but only to the extent the mandate is needed for the effective administration of such state law. If ERISA preempted a mandate needed to implement a state law not otherwise preempted, the state law would in practice be preempted. The effective administration requirement prevents undue interference with ERISA's benefit protections other than the reporting, record-keeping and disclosure mandate. If the state mandate is generally applicable, rather than principally applicable to ERISA plans, there would be a rebuttable presumption that the mandate is so limited.
ERISA preempts all other reporting and disclosure mandates directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party interacting with an ERISA plan, such as a third party administrator, even if the compliance burdens are slight. Preemption is unaffected by whether the mandate arises from a law that explicitly refers to ERISA. Plan sponsors must comply with all state-law mandates that ERISA does not preempt regardless of plan terms. On the other hand, plan administrators must comply with all state-law mandates with which plan terms require compliance.
This approach recognizes that the preemption of a state-law reporting and disclosing mandates is determined by whether it unduly interferes with the other ERISA benefit protections. Thus, states may require employers to report their contributions to ERISA plans needed to show compliance with those prevailing wage laws that ERISA permits. Thus, state courts considering contract claims by a supplier to an ERISA plan may require the plan to respond to discovery requests with respect to the claim. Thus, states may require those plans subject to the QDRO rules to disclose, to an individual eligible to use a QDRO, the information that may be needed to have a state court prepare and issue a QDRO granting the individual plan benefit rights, but not other information that is not so needed. Thus, states may require ERISA plans to file reports and respond to audit request with respect to the healthcare, if any, they provide that the states may regulate. Thus, states may require ERISA health reimbursement plans, their insurers, or their third party administrators to report claims experience, including price data, if ERISA permits the states to assemble, maintain, and perhaps publicize, such a data base, but only to the extent the mandate is needed for the effective administration of the permitted activities.

Read more!

Wednesday, May 6, 2015

Upcoming event: “Responsibly Confronting Social Security Disability’s Financing Crisis”

Responsibly Confronting Social Security Disability’s Financing Crisis

Tuesday, May 12, 2015

12:30 p.m. – 3:30 p.m.
(Lunch will be provided)

Rayburn House Office Building B-340

12:30 p.m. Welcome/Kick-Off

12:45-1:30 p.m. The Evolution of the Disability Fund's Financing Problem

· Charles P. Blahous, Director of Spending and Budget Initiative and Senior Research Fellow, Mercatus Center

· Stephen C. Goss, Chief Actuary, Social Security Administration

· Ed Lorenzen, Senior Advisor, Committee for a Responsible Federal Budget

1:35-2:15 p.m. The Effects of Current SSDI Policy on Labor Force Participation

· Andrew G. Biggs, Resident Scholar, American Enterprise Institute

· David Stapleton, Senior Fellow and Director of the Center for Studying Disability Policy, Mathematica Policy Research

2:20-3:15 p.m. Promising Approaches to Reform

· Jason J. Fichtner, Senior Research Fellow, Mercatus Center

· Marc Goldwein, Senior Vice President and Senior Policy Director, Committee for a Responsible Federal Budget

· Mark J. Warshawsky, Visiting Scholar, Mercatus Center

3:15-3:30 p.m. Concluding Remarks

Click here for more information.

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Where Lindsay Graham is Wrong on Entitlements (and I used to be)

Sen. Lindsay Graham is an entitlement reform hero – a guy who’s been willing to get out there on crucially important but politically unpopular issues. But in a discussion of his potential presidential campaign (probability 0.925, he says) he makes what I now consider to be a mistake on entitlement reform: fixing Social Security, he says, “so simple you could do it on the back of a napkin.”

I used to think that. You can go to a list of reform options – raising the retirement age, cutting COLAs, whatever you like – and patch them together until the savings are enough to erase the long-term deficit. And you’re done.

Here’s the problem: that approach assumes that Social Security is working perfectly, with the exception of being underfunded. In other words, Social Security policy effectively has one lever, with one end labeled ‘More Taxes’ and the other ‘Less Benefits.’

But if Social Security isn’t working perfectly then the Chinese-menu approach will cement in place problems that could be fixed. And, by being fixed, make Social Security work better even while we’re lowering costs.

For instance, Social Security leaves almost 1-in-10 retirees in poverty, despite spending $900 billion per year. We could give every retiree a poverty-level benefit and take the elderly poverty rate to zero for about half that amount. That’s pretty much what I’ve proposed.

Likewise, Social Security penalizes people who choose to delay retirement. If you continue to work, you’ll continue to pay taxes. But, on average, you’ll receive only 3 cents in extra benefits for each dollar of taxes you pay. So why not cut the payroll tax on older workers?

Similarly, the Social Security disability program could be reformed to encourage rehabilitation and re-employment rather than disability and dependency. But those reforms have nothing to do with tax rates or benefit formulas.

In other words, Social Security is an underfunded government program. Meaning, it’s underfunded and it’s a government program. We can make improvements on both ends of that equation.

Read more!

Agenda for May 7-8 Meeting of 2015 Social Security Technical Panel on Assumptions and Methods

The 2015 Social Security Technical Panel on Assumptions and Methods will hold a two-day public meeting on Thursday and Friday, May 7th and 8th.  On Thursday, May 7 the meeting will be from 9:00am to 5:00pm, and on Friday May 8 from  8:30am to 4:00pm. The meeting will be held in the offices of the Social Security Advisory Board (400 Virginia Ave S.W., Suite 625, Washington, DC).

Meeting Agenda
8:30-9:00  Executive Session
9:00- 10:30    Mortality

Presentation by Gary King, Albert J. Weatherhead III University Professor at Harvard University; Konstantin Kashin, Department of Government, Harvard University; and Samir Soneji, Assistant Professor of The Dartmouth Institute for Health Policy and Clinical Practice Discussion
10:30-10:45  Break
10:45-12:15  Inflation and Interest Rates   
  Discussion led by Peter Diamond and Jeff Brown
  OCACT comments
12:15-12:45   Lunch
12:45-1:45    Immigration (finalize specific recommendations)
  Discussion led by Michael Teitelbaum
1:45-3:15   Mortality II
  Presentation by Sam Preston, Professor of Sociology, University of Pennsylvania
  OCACT comments
3:15-3:30  Break
3:30-5:00   Replacement Rates (finalize specific recommendations)
  Discussion led by Peter Diamond/Jeff Brown
  OCACT comments

Friday, May 8, 2015
8:30-10:00   Labor Force Participation (finalize specific recommendations)
  Discussion led by Katharine Abraham/Claudia Goldin
  OCACT response
Unemployment Rate: New
  Discussion led by Katharine Abraham
10:00-10:15   Break
10:15-11:45  OCACT questions
  Taxable share of total wages: stabilize? go back up? or keep dropping?
o  Discussion led by David Autor
o  OCACT response
  Mortality differentials by earnings/education
o  Discussion led by Sam Gutterman
o  OCACT response
  Remaining issues from OCACT:
o  How to project when at peak or trough of economic cycle?
o  How to project average benefit levels for future beneficiaries?
11:45-12:15  Lunch
12:15-1:45  Uncertainty (finalize specific recommendations)
  Discussion led by Joe Silvestri
1:45-2:00  Break
2:00-3:00  Infinite Horizon: New
  Discussion led by Jeff Brown/Sam Gutterman
3:00–4:00    Fertility II
  Comments by Sam Gutterman
  Ron Rindfuss response
4:00-4:30   Executive Session

Read more!

Tuesday, May 5, 2015

McArdle: “Social Security expansion would hasten fiscal disaster”

Bloomberg View columnist Megan McArdle writes about proposals to expand Social Security benefits.

It is a truth universally acknowledged that Americans are underprepared for retirement. And given this sad fact, there’s a growing movement on the left saying we need a government solution, stat: specifically, an expansion of Social Security benefits.

Perhaps you are confused. Weren’t we just talking about entitlement reform so that we could spend less on the program? Why, yes, we were. But since no one, left or right, really wants to take on our vast army of retirees, that chatter has died down. Now that it has, progressives have decided that the best defense is a good offense. Instead of reluctantly agreeing to a compromise where Republicans let some taxes rise and Democrats agree to entitlement cuts, they’re demanding bigger tax hikes to fund bigger entitlements. At the core of their argument is a good point: Americans really do need more money for retirement. But missing is a realistic discussion of where that money might come from.

Worth reading.

Read more!

Smith: Means-testing won't save Social Security

Brenton Smith, writing in The Hill, takes on Gov. Chris Christie’s proposal to means-test Social Security benefits for high-income retirees.

Christie's proposal contained a controversial policy option of means-testing benefits.  Some believe that phasing-out benefits for higher-income Americans should be the first option to consider for addressing the financing gap in Social Security.  This alternative should be the last.  It introduces terrible incentives to the system, and begs questions about how we pay for benefits.

Check out the whole piece here.

I took on the issue of mean-testing in National Affairs a couple years back. Worth checking out if you’re interested in the issue.

An additional issue I don’t think I considered at the time: Social Security benefits for high-income retirees are subject to income taxes. So the gain to the system’s financing from means-testing is the amount of the benefit cut – which is usually pretty small, on a system-wide basis – minus the income taxes that would have been collected on those benefits. It doesn’t really seem worth the effort.

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Monday, May 4, 2015

New papers from the Social Science Research Network

"Economic Conditions and SSI Applications"
Michigan Retirement Research Center Research Paper No. 2014-318

AUSTIN NICHOLS, The Urban Institute
LUCIE SCHMIDT, Williams College - Department of Economics
PURVI SEVAK, Hunter College, Department of Economics

The Supplemental Security Income (SSI) program provides federally-funded income support for individuals with disabilities, and has become one of the most important means-tested transfer programs in the United States. Previous studies have examined the effects of economic conditions on growth in disability caseloads, but most focus on the Social Security Disability Insurance (SSDI) program. Most work on SSI dates from before welfare reform, which had both direct and indirect effects on the composition of the population at risk for SSI participation. In this paper we examine the relationship between SSI application risk and economic conditions between 1996 and 2010, using data from the Survey of Income and Program Participation (SIPP) linked to the Social Security Administration’s 831 file, which includes monthly data on SSI (and SSDI) application and receipt. Results from hazard models suggest that higher state unemployment rates have a large, positive effect on the risk of SSI application among jobless individuals, and our evidence suggests that female potential applicants may be more responsive to local economic conditions than men. State-level TANF policies have no effect on SSI application risk but state fiscal distress significantly increases application risk. Given the continued growth of the SSI program, understanding these relationships is increasingly important and policy-relevant.

"Understanding Participation in SSI"
Michigan Retirement Research Center Working Paper WP 2015-319

KATHLEEN M. MCGARRY, University of California, Los Angeles (UCLA) - Department of Economics, National Bureau of Economic Research (NBER)
ROBERT F. SCHOENI, University of Michigan at Ann Arbor - Survey Research Center

The Supplemental Security Income program (SSI) provides a guaranteed income for the elderly. As such it can serve to mitigate any deleterious effects of reductions in Social Security benefits that might result from any Social Security reform. However, participation in SSI among qualified individuals has proven to be low. We show that this low participation rate, just over 50%, observed at the program’s inception has continued to today with little if any change. We also find that transfers from children are far larger among eligible non-participants suggesting that family assistance may offset the need for public assistance.

Read more!