General nature of plan:
There are two methods that could be utilized in extending the protection
of the Federal old-age and survivors insurance system to persons
in the armed forces. One is the moratorium plan whereby all pre-existing
rights under the Federal old-age and survivors insurance system,
possessed by persons entering the armed forces, would be frozen
at the time they entered the armed forces. The other method is simply
to extend the coverage of the old-age and survivors insurance system
to include service in the armed forces.
The moratorium plan has three disadvantages. One is that a large
proportion of persons entering the armed forces have no previous
existing benefit rights to be frozen. The second is that there is
no increase in the benefit rights as occurs in the case of periods
of insured employment. If these men had not been in the armed forces
during the war, but had continued at their regular jobs or gone
into war industry in most cases they would have been building up
their benefit rights. The third is that it is more difficult to
understand because it would be necessary to explain in each individual
case that the period of military service would be blocked out in
computing an individual's average wage (upon which benefits are
paid) and in determining eligibility for benefits, both of which
are related to the period of time elapsing from the date the Federal
system originally went into effect (or from the date the individual
became 21 years of age, whichever is the later).
It seems preferable, therefore, to treat service in the armed forces
as though it were insured employment and to credit to the serviceman's
social security account the wages received during his military service.
Amount of wages to be credited:
In selecting the amount of wages to be credited to the serviceman's
social security account consideration must be given to equity to
the serviceman, and to administrative factors. The actual amount
of pay received by the serviceman might be credited under the program
plus an arbitrary amount such as $60 or $75 per month to represent
the value of the subsistence which he receives. Crediting the actual
pay, however, may involve substantial administrative difficulties.
Two other simpler possibilities are either the highest pay during
military service, or pay at time of discharge--plus some amount
in lieu of subsistence. Another even more simple possibility is
to provide some flat sum for all persons in the service, such as
$160 per month, as is provided in the military service amendments
to the Railroad Retirement Act. It should be noted that the crediting
of any amount less than $250 per month (the maximum under the present
insurance program) may reduce the amount of any benefit slightly
for those few persons who had higher earnings and were covered under
the insurance system before entering military service.
Contributions by servicemen:
Since the old-age and survivors insurance program is
a contributory program, it is suggested that the legislation affording
military service credit provide that contributions be paid just
as they are in private employment. This should add to the assurance
that any benefits derived from military service are being provided
through a contributory program. In private employment, the employer
may pay the individual's contributions for him. Analogously, provision
can be made that the Federal Government should pay the serviceman's
contributions.
Duplicate benefits:
An important question to be decided is the relationship of regular
veterans' benefits to benefits which would be payable under the
Federal old-age and survivors insurance system. It is desirable
not only to eliminate gaps, but also overlaps in providing protection
against economic loss. In other countries having a social insurance
system adjustments are usually made to prevent the payment of duplicate
benefits for the same hazard. In Great Britain, for example, social
security benefits usually are not payable if the person is eligible
for veterans' benefits. In Germany the social insurance benefit
may be reduced to one-third when veterans' benefits are payable.
In this country the problem of adjustment of duplicate benefits
payable for the same hazards under the Social Security Act and other
laws has not yet been faced or solved. If the social security law
had been passed first it is probable that the various other laws
Federal, State, and local, providing protection against economic
loss due to the same hazards would have taken into account the basic
protection provided under the Social Security Act. That is to say,
the benefits provided under such other laws would have been made
supplementary to the extent necessary to a more desirable degree
of protection. However, as it is, in this country benefits are paid
under veterans' legislation, under workmen's compensation laws,
and, under other Federal, State, and local government retirement
plans without any adjustment for the fact that we now have a basic
social security law. The result is that frequently the benefits
provided are in excess of the economic loss sustained.
In the case of workmen's compensation the duplication of benefit
payments occurs only in the case of death, since disability benefits
are not yet provided under the basic social security law. But in
the case of death, while each type of law calculates benefits as
a percentage of the wage loss sustained with a maximum to prevent
payment of more than the wage loss, the payment of the given percentage
under several laws results many times in a payment in excess of
100 percent of the wage loss sustained. If veterans' benefits are
intended to cover a proportion of the economic loss, the same result
occurs in the case of death as under workmen's compensation.
Duplicate benefits can also occur in the case of persons who are
entitled to old-age retirement benefits under both the old-age and
survivors insurance system and under some other Federal, State,
or local Government retirement plan. While this duplication is reduced
somewhat by the fact that all old-age retirement benefits are generally
related to the actual period of service, this duplication is by
no means eliminated in its entirety, since the benefits provided
under the Federal old-age and survivors insurance system have very
little relationship to the actual actuarial value of the contributions
that have been made by or on behalf of each individual who is insured.
This is particularly true in the early years of the operation of
the Federal old-age and survivors insurance system. Of course, if
in the present instance the Government bears the cost of the employee's
contributions as well as the employer's contributions, this is all
the more true.
In this respect social insurance differs from private insurance.
A comparison of the actuarial value of contributions and the actuarial
value of benefits payable in the early years of the old-age and
survivors insurance system will be found in table 5 of the report
of the Senate Finance Committee on the Social Security Act amendments
of 1939 (S. Rept. No. 734, 76th Cong., 1st sess.). That table indicates,
for example, that a person who receives under the old-age and survivors
insurance system $27.50 a month makes contributions which would
purchase an annuity of only 41 cents a month. However, eventually,
as this table indicates, the employees' contributions will cover
approximately one-half of the actuarial cost of the benefits for
the high-paid employee.
The Federal Government would of course have no power to require
our State or local governments to make adjustments in benefits to
take account of the basic benefits provided under the Social Security
Act. However, it would appear that the Federal Government should
make adjustments in the benefits provided under various Federal
laws to cover economic loss in order to take account of the basic
protection provided by the Federal old-age and survivors insurance
system. This adjustment should, of course, be made in such a manner
as to eliminate any gaps in the protection and to prevent any reduction
in combined protection below a reasonable level. In the case of
the various special Federal old-age retirement plans which relate
the amount of benefits to length of service, while the problem of
duplication exists, it is not quite so great, although its solution
is more difficult. Therefore, any adjustment should start with Federal
employee non-contributory plans where benefits are paid that are
not related to the length of service; such as veterans' benefits
and benefits payable under the United States Employees Compensation
Act, the District of Columbia Workmen's Compensation Act, the Longshoremen
and Harbor Workers Compensation Act, and various non-contributory
retirement plans for officers of the armed forces.
If the benefits provided under the old-age and survivors insurance
system, standing alone, and the benefits provided under these other
Federal non-contributory plans, standing alone, were considered
completely adequate, it would probably be logical and reasonable
to provide that benefits should be payable under only one law. Thus,
one method would be to provide that no benefits shall be payable
under the Federal old-age and survivors insurance system if benefits
are payable under some other Federal law to cover the same hazard.
This method is incorporated in bill S. 281. Its defect is that the
benefit payable under some other Federal law may not be adequate
and also not be as great as the benefit payable under the Federal
old-age and survivors insurance system. Moreover, it would seem
to be inequitable to pay the non-contributory benefit and withhold
all of the "insurance" benefit toward which some contribution had
been made by or on behalf of the insured.
Another method is to provide that there shall be subtracted from
the benefits payable under the Federal old-age and survivors insurance
system benefits payable under some other Federal law. This would
make certain that a person would always receive an amount equal
to the higher of the two benefits. However, again we could not be
sure that even the higher of the two benefits was completely adequate.
Moreover this method also would not recognize that a person insured
under the Federal old-age and survivors insurance system probably
should receive some additional protection because of the contributions
that he has made under that system.
A third method would be to provide that the full old-age and survivors
insurance system benefits shall be paid in any case and that the
benefits provided under any other Federal law shall be reduced by
only one-half of the amount of the old-age and survivors insurance
benefits or one-half of the amount of the benefits provided under
the other law, whichever amount is the lesser. An alternative way
of accomplishing the same result as achieved under the last-mentioned
method would be to make an equivalent adjustment in the Federal
old-age and survivors insurance system benefits but pay the full
benefits provided under the other Federal law. While this alternative
would accomplish the same result and might be considered more acceptable,
it is not so logical if the Federal old-age and survivors insurance
system is recognized as the basic social security system and all
other governmental systems are considered supplemental thereto.
It should be recognized that even this third method does not bring
about a fundamental readjustment of benefits under the various systems
to take into account their relationship to each other. Therefore,
this method does not make certain that the total combined benefits
is adequate in all cases. However, it does make certain that in
all cases where protection is provided under more than one system,
the beneficiary receives more in total benefits than he would receive
under any one system.
There are a number of other methods which would adjust, in part
at least, the duplication of benefits occurring under the several
Federal laws, but it is doubted whether they would be considered
as understandable as any of the three mentioned above.
In deciding on the adjustment to be made an important detail relates
to the treatment of survivors who are already receiving old-age
and survivors insurance benefits or would have been receiving such
benefits if credit for military service had been granted in the
past. For the survivors of persons already killed in service retroactive
credit might be granted and benefits adjusted so that all survivors
of persons killed in service will receive benefits according to
the same plan. Some of the alternatives for adjusting benefits would
result in reduced benefit amounts for a small number of persons
already receiving, or eligible, for old-age and survivors insurance
benefits. Therefore, consideration should be given to whether to
apply the adjustment provisions only with respect to future deaths
in order not to reduce benefits already payable, or to apply the
adjustment with respect to all deaths in the military service since
1940.
Disqualification: It is assumed that since old-age and survivors
benefits are payable under a contributory insurance program there
will be no disqualification from receipt of any credit under the
old-age and survivors insurance program if the discharge is not
under honorable conditions.
Effective date of plan:
Among the various dates which may be considered in determining the
effective date of the plan are the following: September 8, 1939,
at which time the emergency was proclaimed by the President; August
31, 1940, when the National Guard was called into active service;
and September 16, 1940, when the Selective Training and Service
Act was approved. As calendar quarters constitute the time unit
with respect to wage credits under the old-age and survivors insurance
system, the wage credits to be provided might begin with a calendar
quarter, such as July 1, 1940, or October 1, 1940.
Terminal date of plan:
The providing of wage credits for servicemen under the old-age and
survivors insurance program might be terminated at the end of the
war or at the end of a reasonable period thereafter. It is impossible
to determine now the length of time it will take for demobilization
after the termination of hostilities. Moreover, it does not seem
necessary that a terminal date be specified in the initial legislative
enactment. If termination of the plan is desired at the end of the
war the appropriate date can be inserted at that time by amendment.
However, there is no fundamental reason why the crediting of wages
under the old-age and survivors insurance program for military service
need be discontinued at all, since movement of individuals in and
out of the armed forces will continue, although on a reduced scale.
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