New paper: "Not All Disabilities Are Alike: Implementing a Rating System for SSDI."

The National Center for Policy Analysis released a new paper by Pam Villarreal, "Not All Disabilities Are Alike: Implementing a Rating System for SSDI."

Despite today's workplace accommodations for the disabled, improved diagnoses and treatments, and less physically demanding jobs, the number of individuals receiving disability payments has increased dramatically over previous decades.  Prior to 1990, the annual percentage of workers receiving benefits grew about half a percent per year.

Since 1990, the percentage of workers receiving Social Security Disability Insurance (SSDI) benefits has grown an average of 4.8 percent annually.  As a result, the Disability Trust Fund, which is funded by 1.8 percentage points of the payroll tax (split evenly between workers and employers), is expected to be depleted by the end of 2016. As of December 2013:

•  There were 10.2 million individual disabled workers, disabled widowers or disabled adult children receiving Social Security Disability.
• Disabled beneficiaries ages 18 to 64 were 4.8 percent of the total nonsenior adult population.
• The average beneficiary age was 53 years and the average monthly benefit was $1,146.

Unfortunately, despite these numbers, there is little political will for a complete overhaul of SSDI.  Policymakers have proposed just a few reforms, mainly focused on efforts to combat fraud.  But more could be done regarding how beneficiaries are paid and how to provide better work incentives:

• Restructure the all-or-nothing payment system to reflect varying degrees of disability, as does the Veterans' Disability system.  A lower level of benefit payments could be awarded to individuals who have a higher probability of improvement.
• Eliminate the "Ticket to Work" program and lift the maximum monthly income limit for work. The current SSDI system offers a voluntary "Ticket to Work" program in which beneficiaries can work for up to three years without losing their disability benefits. However, the program had little effect on beneficiaries returning to work. In exchange for a reduction in payments due to rating disability by degree, the monthly maximum limit on labor income ($1,090 in 2015) that disqualifies a beneficiary from receiving disability benefits could be eliminated.

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CBO: Social Security shortfall rises

My first piece over at Forbes focuses on the CBO's new projections for Social Security, which show a substantially larger long-term deficit compared to previous years. Will this spur Congress to action?

Click here to read the whole piece.


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Agenda for June 19 Meeting of 2015 Technical Panel on Assumptions and Methods

2015 Technical Panel on Assumptions and Methods

Meeting Agenda

June 19, 2015

The meeting will be held in the offices of the Social Security Advisory Board:

400 Virginia Avenue SW, Suite 625, Washington DC 20024

8:30-9:00    Executive Session

9:00-9:30    Resolve Fertility Assumption Recommendations

9:30-10:30  Review Mortality Section and Recommendations

10:30-10:45  Break

10:45-11:45  Review Disability Section and Recommendations

11:45-12:15  Lunch

12:15-1:30   Review Economic Assumptions and Methods

• Real Earnings Growth
• Labor Force Participation
• Unemployment Rate
• Taxable Share of Covered Earnings
• Inflation and Interest Rates

1:30-1:45  Break

1:45-3:00  Review Presentation Section

• Presentation of Uncertainty
• Illustrating Scheduled Benefits to Earnings
• Measures of Long-run Financial Stability

3:00-3:30  Other Issues

3:30-4:00   Executive Session – Next Steps 

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New paper: “Does Mortality Differ Between Public and Private Sector Workers?”

The Center for Retirement Research has released a new issue brief: 

“Does Mortality Differ Between Public and Private Sector Workers?” by Alicia H. Munnell, Jean-Pierre Aubry, and Geoffrey T. Sanzenbacher.

The brief’s key findings are:

• In projecting pension costs, state and local plans assume their workers will live longer than private sector workers.  Is this assumption accurate and, if so, why?
• The analysis confirms that public sector workers – particularly women – have lower mortality rates than their private sector counterparts.
• The question is whether lower mortality reflects the nature of the job or the nature of the workers.
• The answer is the workers – specifically their education levels.  Controlling for education, the gap between public and private workers disappears. 

This brief is available here. Read more!

Blahous: "The Social Security Trustees Respectable Projection Record"

Over at e21, Social Security Public Trustee Chuck Blahous writes about the accuracy of the Trustees' projections, in the wake of a two recent papers by several academics claiming that SSA's SSA actuaries, who are very influential in setting the Trustees' assumptions, have made significant and one-sided errors in recent years. Blahous states, "As a currently-serving trustee I have been asked for my view of the Kashin-King-Soneji work. Summarizing very roughly, their factual observations and analyses strike me as essentially correct, though I disagree with many of their interpretative conclusions."


Blahous makes several valuable points. He notes, for instance, that while the Kashin-King-Soneji papers focus on Social Security's mortality assumptions -- that is, projections of how quickly life spans increase -- these are only a small part of the many factors that influence social security's finances. Other factors, in particular the Great Recession, caused much larger errors in projecting Social Security finances.The papers are really one some very narrow demographic issues in the Social Security projection process, but are generalized to the broader conclusions drawn by Social Security's actuaries and trustees.

On the other hand, I can't help but think that some of the qualitative points made by Kashin-Kind-Soneji -- that the processes for setting these assumptions and doing other calculations regarding Social Security finances are too closed, secretive and turf-conscious, and that there's a (perhaps undue) emphasis on not making significant changes to these projections from year to year -- are true and important. From my own experience at SSA, which included several years in the inter-agency working group that helps construct the Trustees Report, it's an odd process. Some of their criticisms are harsh, at times overly so, but they do convey something of the flavor of how things work at SSA.

Finally, the Kashin-King-Soneji papers -- which focus on SSA's longevity assumptions -- reminded of a chart on disability projections contained in 2014 Congressional testimony by Richard Burkhauser, a disability expert at Corner who's also affiliated with the American Enterprise Institute. The chart shows the Trustees' projections of disability beneficiaries as a percentage of the working-age population relative to what actually occurred (the solid black line). These projections go back several decades, far before the post-2000 period the Kashin-King-Soneji papers study, but there is a pattern of underestimating the growth of the disability population. Relief from disability costs, it seems, was always right around the corner. If most of the growth of the DI was from predictable demographic causes, which is the SSA actuaries' argument, you'd think the increase would be more easily foreseeable.

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New papers from the Social Science Research Network

"Labor Market Shocks and Early Social Security Benefit Claiming" 
Michigan Retirement Research Center Research Paper No. WP 2014-317

DAVID CARD, University of California, Berkeley - Department of Economics, Institute for the Study of Labor (IZA), National Bureau of Economic Research (NBER)
Email: card@econ.berkeley.edu
NICOLE MAESTAS, RAND Corporation
Email: maestas@rand.org
PATRICK J. PURCELL, U.S. Social Security Administration
Email: patrick.purcell@ssa.gov

Many job-losers suffer large and persistent losses in earnings capacity. For displaced workers who are age-eligible, one reaction to these losses is to begin claiming Social Security retirement benefits. We use administrative earnings records from the Social Security Administration’s Continuous Work History Sample to study the impacts of labor market shocks among workers in their late 50’s and early 60’s on Social Security retirement benefit claiming rates. We find that labor market shocks lead to current and future increases in the fraction of insured workers who initiate Social Security benefits at the earliest possible claiming age. Moreover, once they initiate benefits, early claimants continue to have low levels of earnings in all subsequent years.

"Determinants of Expected Returns at Public Defined-Benefit Pension Plans" 
FRB of Cleveland Working Paper No. 15-8

RAJ AGGARWAL, University of Akron - Department of Finance
Email: aggarwa@uakron.edu
JOHN W. GOODELL, University of Akron - Department of Finance, College of Business Administration
Email: JohnGoo@uakron.edu

Estimated expected returns are important for pension plans, as they influence many plan characteristics including required asset levels, annual contributions, and the extent of plan under- or over funding. Yet, there seems to be little prior literature on the factors influencing these estimated future returns. In an attempt to fill this gap, this paper presents the results of a panel analysis of data on the determinants of such returns used by US public defined-benefit (DB) pension plans for the period 2001-2011. As expected, we find that real return estimates by DB public pension funds are positively related to fund size, fund age, international asset diversification, state income, and corruption levels. However, more interestingly and importantly, we document that real return estimates by public US DB pension funds are positively related to cultural measures of individualism and masculinity, and negatively related to uncertainty avoidance. These results should be of much interest not only to scholars and pension beneficiaries, but also to fund managers, other capital market participants, and policymakers.

"Ageing in India: Need for Universal Pension Scheme" 
Economic & Political Weekly, May 2, Vol. 50(18), 41.

CHARAN SINGH, Indian Institute of Management (IIMB), Bangalore
Email: charansingh@iimb.ernet.in
KANCHAN BHARATI, Centre for Culture and Development
Email: kbharati82@gmail.com
AYANENDU SANYAL, St Joseph's College, Bangalore
Email: ayanendu1@gmail.com

India has low pension coverage, and the pension system is unable to fulfill its purpose. A non-contributory, basic pension can guarantee a regular income in old age to all residents of the country, regardless of earning or occupation. The feasibility of introducing such a pension in India is explored in this paper. It is argued that a properly crafted universal pension scheme will increase the coverage of pension without putting stress on the fisc. 

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Spring newsletter from the Michigan Retirement Research Center

		MRRC Newsletter: Volume 15, Issue 2 - May 2015
		Director's corner John Laitner This Newsletter features the April 2015 MRRC Researcher Workshop at the University of Michigan in Ann Arbor. The Workshop is an annual event. 2015 workshop offers glimpses of upcoming work MRRC held its researcher workshop April 17 and 18, 2015. Thirty-five researchers presented work-in-progress and received feedback and answered questions from attendees. Section 508 and its place in the research community Enacted by Congress in 1998, Section 508 refers to laws requiring federal agencies to make electronic and information technology accessible to people with disabilities. SSA releases Annual Statistical Supplement, 2014 In April the Social Security Administration released the 2014 Annual Statistical Supplement on its website.

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