Testimony by Commissioner Jo Anne Barnhart
for
February 28, 2002
Hearing before the Subcommittee on Social Security,
Ways and Means Committee
Mr. Chairman, Members of the Subcommittee: Thank you for giving me this
opportunity to speak to you today on a number of important topics. We are
embarking on a period of national discussion of how to ensure that the
Social Security System is sound for today's younger workers when they are
ready to retire. This is a tremendously important and complex challenge.
Our topic today is more immediate, concentrating on the short-term.
I would like to begin by outlining for you the importance of Social
Security to women and discussing some of the features of Social Security
that contribute to their economic well-being.
For over 60 years, Social Security has provided a solid floor of
financial protection. It has allowed the great majority of Americans to
retire with the dignity that comes from financial independence, without
fear of poverty or reliance on others.
I'd like to discuss some of the ways that Social Security helps women
that are integral to the program and can and should be preserved in the
reform process. One element of Social Security that has proven helpful for
women is the Social Security benefit formula. Social Security benefits
have been structured to provide a higher replacement rate to low earners
since the program's inception in 1935. This feature is very important to
women because women tend to have shorter careers, and, when they do work,
earn less than men. Because of the structure of the benefit formula, the
benefits for low earners, including many women, replace a larger portion
of pre-retirement earnings than the benefits received by higher
earners.
Another important feature of the program that should not be overlooked
when we think about improvements in retirement income security for women
is the automatic cost-of-living adjustments (COLAs), enacted in 1972.
Women's greater life expectancy makes COLAs especially important. For
example, as a result of COLAs that maintain the purchasing power of
benefits, a $100.00 monthly payment that began in 1975 would have
increased to $347 today.
A third feature I would like to mention is the benefits Social Security
provides to the family members of retired, disabled, and deceased workers.
This aspect of the program makes Social Security especially important to
women. In addition to a benefit as a retired or disabled worker, women may
receive benefits as a spouse or as a widow. Women are more likely to
receive spouse's or widow(er)'s benefits than men because their lower
earnings often result in them being eligible for higher spouse's or
widow(er)'s benefits than the worker's benefits they would receive on
their own record.
I would also note that the important spouse's and aged widow's benefits
I just mentioned were not part of the Social Security Act of 1935. Rather,
they were added to the program in 1939 in recognition of the important
role that Social Security could play in providing economic security for
women. For this same reason, benefits were subsequently added for divorced
wives and for disabled widows.
In addition to adding new groups to the umbrella of Social Security
protection, over the years Congress has enacted legislation to increase
the level of protection provided under Social Security. For example, there
have been significant changes in widow(er)'s benefits, raising the amount
of benefits for a widow(er) from 75 percent to as high as 100 percent of
the worker's benefit. In addition, in 1983, benefits for disabled
widow(er)s were raised from as little as 50 percent of the worker's
benefit to 71.5 percent.
Another example of the changing protection for women under Social
Security is the protection given to divorced women. After first adding
protection for divorced women in 1965, Congress expanded the level of that
protection as well. This was done in 1972 by removing the requirement that
a divorced wife be dependent upon her husband and in 1977 by decreasing
the number of years the couple had to have been married in order for the
divorced spouse to qualify for benefits from 20 to 10 years.
Today, consideration is being given to possible incremental changes
affecting women. Some changes would affect larger groups of women and have
high costs, while others would be targeted at more limited groups and have
smaller costs. I believe that any high-cost proposals should be considered
in the context of comprehensive reform of the program. Given that the
program is not in long- range actuarial balance, it seems appropriate that
significant changes to the program should be evaluated only when
considering other elements in the future modernization of Social
Security.
For the most part, proposals for incremental changes are well targeted
to address concerns affecting relatively small groups of people, most of
them women. Some deal with time limits in the law that are no longer
appropriate or that should allow exceptions. However, for the women
affected, these changes would make a substantial difference in their
economic security.
For example, one potential change would be to eliminate the requirement
for disabled widow(er)'s benefits that the disability must occur no later
than 7 years after the worker's death, or after surviving spouse
child-in-care benefits were payable.
The 7-year closing date, also enacted in 1968, was intended to provide
disability protection for widow(er)s until they have a reasonable
opportunity after the worker's death to become insured for disability
benefits on their own earnings record. However, now, a worker disabled
after age 50 may need more than 7 years of work--up to 10 years depending
on his/her age--in order to be fully insured. Thus, the current provision
leaves gaps in the protection of some widow(er)s, because the 7-year
period may not afford all of them adequate opportunity to qualify for
disability benefits based on their own work records.
This is only one example. There are other similar changes that could be
made. We would be glad to work with the Committee as you consider these
kinds of proposals that would improve the protection afforded under Social
Security to women.
Another issue I would like to discuss concerns providing the public
with information about Social Security. One of our basic responsibilities
to the public is to help Americans understand the value of the Social
Security program and its importance to them and their families. I pledge
to you that I will continue to improve the quality of the information we
provide. The Social Security Statement is the most significant vehicle we
have to increase the public's understanding of the basic features of
Social Security and to enable Americans to prepare for their long-term
financial security.
As you know, the Statement provides estimates of Social Security
retirement, disability, and survivors' benefits that workers and their
families could be eligible to receive now and in the future. The Statement
also provides information about Social Security's future, pointing out
that changes will be needed.
Communicating complicated technical information in a way that is
understandable to a diverse public can be difficult, but SSA has worked
diligently to ensure that the message in our Social Security Statement is
clear.
I realize there is great interest in the Statement. During the
confirmation process, I was asked by Members from both sides of the aisle
about my plans to improve the Statement. I consistently emphasized my
intention to ensure that the Statement would continue to be a factual
document serving as a valuable tool for Americans to plan their
retirement.
So let me today reiterate my commitment to ensure that the Statement
remains a factual document that informs workers about how the program
operates and how it is funded. This is important information that the
public needs to have from its government. However, I want to be sure that
it not unduly alarm those nearing retirement. I am reviewing the current
statement and expect to make some revisions in its content.
Although reasonable people can disagree about how best to restore
Social Security to a path of long-term solvency, I believe there is clear
agreement that the benefits of current beneficiaries are to be preserved
and protected. Indeed, President Bush outlined as his very first principle
for reform that "Modernization must not change Social Security benefits
for retirees and near retirees." As the debate continues about ways to
best put Social Security on sound financial footing, it is important to
assure today's Social Security beneficiaries that they are not going to be
adversely affected by reform proposals that Congress may ultimately enact
into law.
I understand the motivation on the part of many Members of Congress to
provide a written reassurance to current Social Security beneficiaries
that they will continue to receive their full benefits. However, I would
not be doing my job if I did not raise some concerns regarding this
matter.
For example, would such a written reassurance be legally binding on
future Congresses? And would it require the government to use general
revenue transfers to pay future Social Security benefits when the trust
funds become exhausted if no changes are made? Also, I am concerned about
the possible unintended consequence of creating undue alarm among those
nearing retirement who do not receive such a written notice.
Further, as administrator of Social Security, I should point out that
sending out these notices to 46 million beneficiaries would increase
administrative costs by millions of dollars, using valuable administrative
funds that could be used in other ways. For example, each million dollars
spent for this purpose could be used instead to process claims, work
redeterminations, or deal with inquiries. Also, prior experience has shown
that sending out notices generates increased workloads for our field
offices and our toll-free number-and our field staff is already struggling
to deal with the current workloads and still maintain a high level of
service.
I know that there are various approaches that are being considered to
assure individuals and families currently receiving benefits that they
will receive all benefits due under current law, including accurate cost
of living increases. Whatever decision Congress makes on this matter,
Social Security stands ready to work with you to get the task
accomplished.
Mr. Chairman and Members of the Subcommittee, thank you again for
inviting me to testify. I will be happy to answer any questions you may
have.
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