Social Security Reform: Effect on Benefits and the Federal Budget of Plans Proposed by the Presidents Commission to Strengthen Social Security

CRS Report for Congress
Received through t he CRS W e b
Social Security Reform: Effect on Benefits
and t he Federal Budget o f Plans Proposed
by the President’s Commission to
St rengthen Social Security
July15,2003
Da wn Nuschler and Geoffrey Ko llmann
Domestic Social Policy Division


Congressional Research Service ˜ The Library of Congress

Social Security Reform: E ffect on Benefits and the
Federal Budget of Plans Proposed by the P resident’s
Commission to Strengthen Social Security
Summary
In 2001, President Bush established t he President’s C ommission to Strengthen
Social Security to make recommendations on ways to “moderniz e and restore fiscal
soundness to the S ocial S ecurity system” i n accordanc e w i t h s i x p rinciples, one of
which m andated t he creation o f voluntar y p ersonal retirement accounts . T h e
Commission propo s e d t hree alternative r eform m odels. Under all three p roposals,
workers could choose t o i nvest in personal accounts and have their t raditional S ocial
Security benefit reduced by some a m o unt. M odel 1 would m ake n o o ther changes
to the p rogram. M odel 2 would s low p rogram growth through one major p rovision
that would i ndex i nitial benefits to prices (rather than wages). M odel 3 would s low
program growth t hrough a variet y o f m eas ures , i ncluding one that would i ndex i nitial
benefits to p r o j ect ed increas es in life ex pect ancy. To mitigat e t he effect s of
traditional b enefit reductions, M odels 2 and 3 would guarantee a minimum b enefit
for l ow-wage earners and m ake changes designed to improve benefits for widow(er)s.
The S ocial S ecurity Administration prepared e stimates of t he effect of the
Commission’s reform m odels on benefit l evel s for future retirees and o n t he federal
budget. C onsistent with these estimates, this report illustrates i nitial m onthly benefits
for future retirees under each of the C ommissi on’s reform p lans and t hree alternative
measures of current law (benefits promised under current law, b e n e f i t s payable
within the s ys tem’s current-law revenue projections and benefits paid t o t o d ay’s
ret i rees). It al so shows t he proj ect ed effect on debt held by the public.
Under M od e l 1 , i f a w orker’s account earns a real rate of return high er than
3.5%, b enefits would ex ceed those promised under current law. Model 1 is not
projected to restore l ong-range s olvency t o t he system . U n d e r M odel 2 , i n m ost
cases, p roj ect ed benefi t s woul d b e l ower t h an l evel s promised under current law.
Under all yi eld assumptions, p rojected benefits for l ow-wage earners would b e h igher
than benefits payable under current law. Model 2 is projected to restore s olvency t o
the s ys tem, although general revenue tran sfers would b e required. Under M odel 3 ,
at t h e l ower yi el d assum p t i on, i n m o st cases proj ect ed benefi t s woul d b e l ower t h an
those promised under current law. At the h i g h e r yi e l d assumptions, i n m ost cases
projected benefits would b e h igher t han current-law promised benefits. U n d er all
yi el d assumptions, project ed benefits fo r l ow-wage earners would b e h igher t han
benefits payable under current law. Mo d e l 3 is projected to restore l ong-range
solvency to the s ys tem, although general revenue transfers and a n ew d e d i c ated
revenue source for t he program would b e required. This new revenue source was not
specified by the C ommission.
Because the funding approach unde r t he three p lans draws from redirected
payrol l t ax es and G eneral Fund revenues, it would i ncrease d ebt h eld b y t he public.
For ex ample, assuming either two-thirds or 100% of workers p articipate i n p ersonal
accounts, under M odel 2 additional borrowi ng is projected to peak at $2.5 trillion and
$4.7 trillion (constant 2001 dollars), respectively.



Contents
Background ..................................................1
President’sCommissiontoStrengthenSocial Security .................3
CommissionReform Models .....................................4
CommissionModel1 .......................................4
CommissionModel2 .......................................4
CommissionModel3 .......................................5
Personal Account Structure ..................................6
SSA Benefit Estimates ..........................................7
Hypothetical Workers ......................................7
IllustrativeEarningsLevels ..................................7
YieldAssumptions .........................................8
General Issues Regarding P ersonal Accounts ........................9
IllustrationofBenefit Effects ....................................10
AlternativeBaselines ......................................10
Effect ofCommissionModel1onBenefitLevels ...............11
Effect ofCommissionModel2onBenefitLevels ...............12
Effect ofCommissionModel3onBenefitLevels ...............15
Effect ofReform Models on theFederal Budget .....................18
Near-TermVersusLong-TermBudget Perspective ...................22
ForAdditionalReading ........................................24
Appendix A. DataTables ..........................................77
Appendix B. General Accounting Office Analys is of Commission
Reform Models ..............................................89
Appendix C . M embers of the P resi dent’s Commission to Strengthen
Social Security ...............................................90
ListofFigures
Fi gu re 1. Model 2 (Two-Thirds P articipation): Annual C ash Flow
from t he General Fund to the Social S ecurity Trust Funds .............20
Fi gu re 2. Model 2 (100% Participation): Annual C ash Flow
from t he General Fund to the Social S ecurity Trust Funds .............20
Figure3.Model2:ProjectedChangeinDebt HeldbythePublic ............21
Fi gu re 4. S o ci al S ecuri t y, M edi care and Medi cai d O ut l ays
Projected Under C urrent Law, 2004-2013 ..........................22
Fi gu re 5. Mandatory and Discretionary Outlays Projected
Under C urrent Law as a Percent o f GDP, 2000-2040 .................23
Fi gu re 6. S o ci al S ecuri t y, M edi care and Medi cai d O ut l ays
Projected Under C urrent Law as a Percent o f GDP, 2000-2040 .........23
Fi gure 7. Comparison of Initial M onthly S ocial S ecurity Benefit
for a Two-Earner Couple W ith Scaled Medium Earnings
UnderCommission Model1andCurrent Law ......................26



for a Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................28
Fi gure 9. Comparison of Initial M onthly S ocial S ecurity Benefit
for a Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................29
Fi gure 10. Comparison of Initial M onthly S ocial S ecurity Benefit
for a Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................30
Fi gure 11. Comparison of Initial M onthly S ocial S ecurity Benefit
for a One-Earner Couple W ith Scaled Lo w E arnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................31
Fi gure 12. Comparison of Initial M onthly S ocial S ecurity Benefit
for a One-Earner Couple W ith Scaled Lo w E arnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................32
Fi gure 13. Comparison of Initial M onthly S ocial S ecurity Benefit
for a One-Earner Couple W ith Scaled Lo w E arnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................33
Fi gure 14. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................34
Fi gure 15. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................35
Fi gure 16. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................36
Fi gure 17. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................37
Fi gure 18. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................38
Fi gure 19. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................39



Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................40
Fi gure 21. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................41
Fi gure 22. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................42
Fi gure 23. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................43
Fi gure 24. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................44
Fi gure 25. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................45
Fi gure 26. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................46
Fi gure 27. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................47
Fi gure 28. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................48
Fi gure 29. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................49
Fi gure 30. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................50
Fi gure 31. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 2 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................51



Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................53
Fi gure 33. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................54
Fi gure 34. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................55
Fi gure 35. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................56
Fi gure 36. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................57
Fi gure 37. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scaled Lo w Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................58
Fi gure 38. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................59
Fi gure 39. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................60
Fi gure 40. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................61
Fi gure 41. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................62
Fi gure 42. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................63
Fi gure 43. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed Medium Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................64



Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................65
Fi gure 45. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................66
Fi gure 46. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................67
Fi gure 47. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................68
Fi gure 48. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................69
Fi gure 49. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Scal ed High Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................70
Fi gure 50. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................71
Fi gure 51. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................72
Fi gure 52. Comparison of Initial M onthly S ocial S ecurity Benefit for a
Two-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................73
Fi gure 53. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 3.0%
Real Investment Yield) ........................................74
Fi gure 54. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 4.6%
Real Investment Yield) ........................................75
Fi gure 55. Comparison of Initial M onthly S ocial S ecurity Benefit for a
One-Earner Couple W ith Steady M ax imum Earnings Under
Commission Model 3 and C urrent Law (Assuming a 5.3%
Real Investment Yield) ........................................76
Li st of Tabl es



Tabl e 1 . P roj ect ed C h ange i n Benefits Under M odel 2 Relative t o t he
Current-LawPromisedBaseline .................................13
Tabl e 2 . P roj ect ed C h ange i n Benefits Under M odel 2 Relative t o t he
Current-LawPayableBaseline ...................................14
Table 3. P roject ed Change in Benefits Under M odel 2 Relative t o
2001 Benefit Levels ...........................................15
Tabl e 4 . P roj ect ed C h ange i n Benefits Under M odel 3 Relative t o t he
Current-LawPromised Baseline .................................16
Tabl e 5 . P roj ect ed C h ange i n Benefits Under M odel 3 Relative t o t he
Current-LawPayableBaseline ...................................17
Table 6. P roject ed Change in Benefits Under M odel 3 Relative t o
2001 Benefit Levels ...........................................18
Table A-1. C ommission Model 1 : P ercent C hange i n P roposed Benefits
Relative to Benefits Promised UnderCurrent Law ...................78
Table A-2. C ommission Model 1 : P ercent C hange i n P roposed Benefits
Relative to Benefits Payable UnderCurrent Law ....................79
Table A-3. C ommission Model 1 : P ercent C hange i n P roposed Benefits
Relative t o 2001 Benefit Levels ..................................80
Table A-4. C ommission Model 2 : P ercent C hange i n P roposed Benefits
for a Two-Earner Couple R elative t o Benefits
Promised UnderCurrent Law ...................................81
Table A-5. C ommission Model 2 : P ercent C hange i n P roposed Benefits
for a One-Earner Couple R elative t o Benefits
Promised UnderCurrent Law ...................................82
Table A-6. C ommission Model 2 : P ercent C hange i n P roposed Benefits
Relative to Benefits Payable UnderCurrent Law ....................83
Table A-7. C ommission Model 2 : P ercent C hange i n P roposed Benefits
Relative t o 2001 Benefit Levels ..................................84
Table A-8. C ommission Model 3 : P ercent C hange i n P roposed Benefits
for a Two-Earner Couple R elative t o Benefits
Promised UnderCurrent Law ...................................85
Table A-9. C ommission Model 3 : P ercent C hange i n P roposed Benefits
for a One-Earner Couple R elative t o Benefits
Promised UnderCurrent Law ...................................86
Table A-10. Commission Model 3 : P ercent C hange i n P roposed Benefits
Relative to Benefits Payable UnderCurrent Law ....................87
Table A-11. Commission Model 3 : P ercent C hange i n P roposed Benefits
Relative t o 2001 Benefit Levels ..................................88



Social Security Reform: Effect o n Benefits
and the Federal Budget of Plans Proposed
by the President’s Commission to
Strengthen Social Security
Background
Congr essional i nterest i n S ocial S ecu rity reform is largely d riven b y t he
system’s projected long-range financing problem s, which are attributable primarily
to ongoing and project ed demographic changes . R ising program costs res ulting from
the retirement o f t he baby boom generation (persons born b etween 1946 and 1964)
is the m ore immediat e concern. In the l o n ger t e rm, project ed increases in life
ex pect ancy and d ecl i n i n g b i rt h rat es cont ri but e t o growi ng i m b al ances i n t h e s ys t em
as fewer workers will be supporting future recipients. The Social Security Trustees
project th a t , b e t w e e n 2000 and 2025, the number o f p ersons age 6 5 and older will
increas e by 76%, while the number of workers payi ng into the s ys tem will increas e
by only 16%. The ratio of covered w orkers t o reci pi ent s i s proj ect ed t o decl i n e from
3.3 today t o 2.3 in 2025. In terms o f financing, t he Trustees project that the S ocial
Securi t y t r u s t funds will be depleted by 2042 under t he intermediate assumptions.
Once the b alances in the t rust funds are d ep leted, annual t ax revenue (payroll tax es
and federal i n com e t ax es p ai d o n b enefi t s ) i s p roj ect ed t o cover approx i m at el y 73%
of benefi t p aym e n t s (and l ess i n l at er years). 1 Over t h e n ex t 7 5 years, on average,
t rust fund ex pendi t u res are proj ect ed t o ex ceed i n com e by 14%. T he l ong-range t rust
fund deficit i s p rojected to equal 1.92% of tax able p ayroll.2
To many policy analysts, the important date in Soci al Security financing i s not

2042, the point at which t he trust funds are p rojected to become insolvent. Rather,


1 By 2075, proj ected annual t ax reve nue would c over only a bout t w o -t h i r d s of benefits
promised under c urrent law.
2 “T axable payr oll” is the amount of workers’ earnings s ubj ect to the Social Security payr oll
tax. T he Social Security payr oll t ax is 6.2% of earnings, up to a maximum. T he amount of
t a x a ble earnings ( the “taxable wage base”) is indexed t o average wage gr owth i n t h e
economy. In 2003, the t axable wage base is $87,000. T he T rustees proj ect that the payroll
tax would have t o be i ncreased on average by 1.92 percentage po i n ts over the period t o
eliminate t he system’s long-r ange funding gap. Alternatively, revenue would have t o be
raised by 15% or benefits would have t o be r educed by 13% imme diately. Policyma ke r s
also focus on t he large i mbalance between costs a nd reve nues a t t he end of t he 75-year
proj ection period, when reve nues would c over only t wo-t hirds of promi sed benefits. T hus,
a s t i me goes by, the i mbalance portrayed in future proj ections will continue to increase,
requiring more remedial action t han an i mmedi ate i ncrease of 1.92 percentage points i n t he
payrolltax.

they focus o n 2018, t h e point at which t he system is project ed to begi n running
annual cash-flow deficits (annual outgo would ex ceed annual t a x r evenue). Under
current projections, t he system would run cash-fl ow defi ci t s each year from 2018
through 2077 (the end o f t he current projection p eriod). In each of t h o s e years,
money would h ave t o b e d rawn from t he General Fund of the T reasur y t o p ay
benefits and administrative ex penses.3
Policym akers have considered a variety of ways to remedy the program ’s long-
range funding problems. Some support m aint aining the ex i sting s tructure of the
program t hrough t raditional m easures, s uch as an i ncrease i n t he r e t i r em ent age or
payrol l t ax es. Ot h ers favor redesi gn i n g t he syst em t o i n corporat e p ersonal ret i rem ent
accounts t o s upplement o r repl a ce traditional b enefits. The range o f options is
reflected in the 1 9 9 7 S o c i a l S ecurity Advisory Council report. Unable to reach
consensus o n a single approach, t he Council devised t hree different reform plans.
Each plan rec e i v e d only p ar tial C ouncil endorsement.4 Congressional reform
proposals i ntroduced in recent years reflect a s imilar range of ideas. 5 In the current
Congress, H.R. 75 (Representative S haw) would establish voluntary p ersonal
accounts (Social S ecurity Guarantee Accounts ) fund e d w ith general revenues.
Account contributions would b e equal t o 4 % o f earnings, up to $1,000 (the dollar
limit on contributions would be i ndex ed t o average wage growth). 6 Upon entitlement
to retirement o r d isability benefits, workers would receive 5% of the account balance
as a l ump s um, and the remaining balance w oul d b e u sed t o fi n ance al l o r p art o f t he
worker’s benefit. Under t he proposal, t he worker’s benefit would b e equal t o t he
hi gh er of a current -l aw S o ci al S ecuri t y benefit o r a monthly annuity based o n 95%
of the account balance. 7


3 T he balance in the Social Security trust f unds represents a f orm of “IOU” from t he General
Fund. T hese IOUs consist of f ederal securities credited t o t he trust f unds in amounts equal
to annual Social Security s u r p l u s e s plus i nterest. T r ust f und balances are proj ected to
increase t h r o u gh 2 027, peaking at $7.5 trillion ( nominal dollars). Begi nning in 2028, the
balance i n t he trust f unds would be drawn down t o meet program e xpenses until depletion
in 2042. Over a 14-ye ar period, the General Fund would have t o c ome up with a proj ected
$7.5 trillion t o cover IOUs credited t o t he Social Security trust f unds.
4 For more i nforma tion, s e e C R S Report 97-81, Recommendations of the 1994-1996
Advisory Council on Social Security, by Geoffrey K ollmann.
5 For more i nforma tion, see CRS Issue Brief IB98048, Social Security Reform, by Geoffrey
K ollmann a nd Dawn Nuschler; a nd CRS Report RL31086, Social Security: What Happens
to Future Benefit Levels Under Various Reform Options, by David Koitz, Geoffrey
K o l l ma n n a nd Da wn Nus c hl e r .
6 T he l evel of account contributions under H.R. 75 would be t he same as under Commi ssion
Model2.
7 For more i nforma tion, see CRS Congre ssional Distribution M emorandum, Social Security
Reform Legislation i n t he 108 th Congress: A Comparison of H.R. 75 and Current Law,by
DawnNuschler.

Pr esi dent’ s Commi ssi on to Str e ngthen S oci a l S ecur i ty
In May 2001, President Bush estab l i shed the Pres ident’s C ommission to
Strengthen Social S ecurity (Ex ecutive Order 13210). The 16-member Commission
appointed by the P resident incl uded eight R e publicans and eight Dem ocrats, all of
whom had p reviously ex pressed public support for personal retirement accounts. The
Pres ident direct ed the C ommission to recommend ways t o “m o d ernize and restore
fiscal soundness to the S ocial S ecurity system” i n accordance with the following six
principles of reform:
! Moderni z at i o n m ust not change S o ci al S ecuri t y benefi t s for ret i rees
or near-retirees.
! The ent i re S oci al S ecuri t y surp l u s m ust b e d edi cat ed t o S o ci al
Securityonly.
! S o ci al S ecuri t y payrol l t ax es m u st not be i n creased.
! Government must not invest Social Security funds i n t h e s tock
market.
! Modernization m ust preserve S ocial S ecurity’s disability and
survivors components.
! Moderniz ation m ust i nclude individually controlled, voluntary
personal retirement accounts, wh i ch will augm ent t he Social
Security safety net.
On December 21, 2001, the C ommission issued its final report, Strengthening
Social Security and Creating Wealth for All Americans. T he report, which w as
unanimously a p p r o v ed by t he Commission, incl udes t hree alternative plans for
reforming S ocial S ecurity. Under all three p lans, workers could choose t o i nvest in
personal retirement accounts 8 and t heir traditional S ocial S ecurity benefit would b e
offset (the amount of the o ffset wo u l d v a ry under t he three p lans). The first plan
(Model 1 ) would m ake n o o t h e r changes t o t he program. The s econd plan (Model
2) is projected to slow the growth o f S ocial S ecurity benefits through one major
provision that would i ndex i nitial benefits to prices , rat her t h a n w ages . The third
plan (Model 3 ) would s low future p rogram growth through a variety o f m easures.
To mitigat e t he effect s of benefi t red uctions, Models 2 and 3 would guarantee a
m i n i m u m b enefi t for l ow-wage e a rners and m ake changes desi gn ed t o i m p rove
benefits for widow(er)s.
The C ommission d escribed M odel 1 as a “flex ible framework” i n which the
personal account contributions might be financed entirely as a redirection o f p ayroll
tax revenue (a “carve-out”), entirely from the general revenue of the Treasury (an
“add-on”), or a combination o f t he two. U nder M odel 2 , a portion o f ex i sting p ayroll
tax contributions would be used t o fund the accounts (a “carve-out” funding
approach). Under M odel 3 , workers could m ake additional payroll t ax contributions
to fun d t h eir accounts (an “add-on” fundi ng approach) and receive matching
contributions “carved out” o f ex i sting p ayroll tax es. These additional contributions


8 For a discus s i o n of issues related t o t he creation of personal r etirement accounts under
Social Security, s ee CRS Report RL30571, Social Security Reform: The Issue of I ndividual
Versus Collective I nvestment f or Retirement , by David Koitz.

would b e s ubsidiz ed for l ower-wage workers. According t o t he Commission’s
repor t , M o d el 1 would not restore s olvency t o t he S o ci al S ecuri t y syst em . M odel s
2 and 3 are projected to restore s olvency t o t he system on average over t he nex t 75
years. However, annual cash-flow deficits are ex p ected to occur at points during t he
proj ect i o n p eri od, and general revenues would be required t o close the s ys tem’s
financing gap (in t he case o f M odel 3 , a new p ermanent revenue source would also
be required). (See “Effect of Reform Models on the Federal Budget” below.)
Commi ssi on Refor m M odel s
Commission Model 1 . Under M odel 1 , workers would b e allowed t o d ivert
2 p ercent age poi nt s o f t hei r S o ci al S ecuri t y payrol l t ax es (2% o f t ax abl e earni ngs) t o
a p e r s onal retirement account (or an equivalent amount could b e d rawn from t h e
General Fund), and their t raditional S ocial S ecurity benefit would b e reduced. The
amount of the reduction would b e equal t o what t he personal account would p rovide
had i t earned a 3.5% real rate of return (i.e., for purposes of determining t he benefit
offset, t he account is assumed to earn 3.5% in real terms). In p ractice, the p ayment
a worker would receive from h is or her account would d epend o n t he actual rate of
return. T herefore, i f t he actual rate o f return earned b y t he account is h i gh e r than
3.5%, t he worker’s combined benefit (traditional S oci a l S ecurity benefit p lus
personal account) would ex ceed benefits promised under current law. Conversely,
if the actual rate o f return i s l ower than 3.5%, t he worker’s combined benefit would
be lower r e l a t i v e t o p romised current-law benefits. M odel 1 would m ake n o o ther
changes t o t he program.
Commission Model 2 . Under M odel 2 , workers would b e allowed t o d ivert

4 p ercentage points o f t heir payroll t ax es to a p ersonal retirement account, u p t o an9


annual m ax imum o f $1,000 (index ed t o average wage growth), and t heir traditional
Social Security benefit wo u ld be reduced. The amount of the reduction would b e
equal t o what t he account would p rovide had i t earned a 2% real rate of return (i.e.,
for purposes of determining t he benefit o ffset, t he account is assumed t o earn 2 % i n
real terms). T he paym ent a worker woul d receive from h is or her account, however,
woul d d epend o n t h e actual rat e of ret u rn. If t he act ual rat e o f ret urn ex ceeds t he
assumed rate, the p ayment provided b y t he account would ex ceed the b enefit offset.
If t h e act ual rat e o f ret urn i s l ower t h an t h e assum ed rat e, t h e p aym ent provi ded b y
the account would b e s maller t han t he benefit o ffset.
In terms of t raditional benefits, M odel 2 would change t he Social Security
benefit formula in order t o constrai n t he growth in initial benefits for future retirees .
U n der current law, initial benefits are i ndex ed t o t he growth in average wages .
W age-i ndex i ng i n t h e b enefi t form ul a r e s u l t s i n benefi t l evel s t hat p rovi de each
ge n e r ation o f workers a constant earnings replacement rate (i.e., i nitial b enefit s


9 T he annual contribution limit creates a progr essive system in which l ower-wage earners
would be allowed t o contribute a higher percentage of their earnings. For e xample, a worker
who earns $20,000 a year wo u l d b e a llowed t o c ontribute $800 to a personal a ccount
($20,000 x 4% = $800), or 4% of earnings. A worke r who earns $80,000 a year would be
allowed t o contribute $1,000 to a personal account ($80,000 x 4% = $3,200, subj ect t o t he
annual limit of $1,000), or 1.25% of earnings.

repl ace approx i m at el y t h e s am e p ercent age of pre-ret i rem ent earni ngs for w o rkers
with equivalent lifetime earn i n gs ) .10 By design , t his feature o f t he program allows
successive generations of workers t o s hare increas es in the s tandard of living when
they retire. 11 Model 2 would alter t his aspec t o f t he program by i ndex i ng initial
benefits to price growth, rather t han wage gr o w t h , beginning in 2009. 12 Because
w a ges a re p roject ed to grow faster than prices over time, a shift t o price index i ng
woul d resul t i n s ubst ant i al b enefi t reduct i ons and l ower repl acem ent rat es for fut ure
ret i rees, t hereby re d u c i n g S oci al S ecuri t y’s rol e as an earni ngs repl acem ent
program.13
To mitigat e t he effect s of price index i ng, M odel 2 w o uld provide a minimum
benefit and make cha n ges i ntended t o improve benefits for widow(er)s. W orkers
who earn t he m i n i m u m w age for at l east 3 0 years w oul d b e guarant eed a b enefi t
equal t o 120% of the poverty l evel. W idow(er)s would receive 75% of the couple’s
combined pre-death b enefit (compared t o 50%-67% under current law). Although
widow(er)s would receive a h igher p ercentage of the couple’s combined b enefit, as
benefits are reduced over time, eventually some widow(er)s would receive benefits
under t he plan that would b e l ower than those p romised under current law.
C ommission Model 3 . Under M odel 3 , workers would b e allowed t o
contribute an additional 1 p ercent age poi nt of payrol l t ax es t o a p ersonal ret i rem ent
account and receive a 2.5 percentage point matching con t ribution (up to $1,000
annually) from current payroll t ax es. Lower-wage workers would receive a p artial
“rebate”on t heir additional 1 % contribution t hrough a refundable t ax credit. W o rkers
who choose t o participate i n pers o n a l accounts would h ave t heir traditional S ocial
Security benefit reduced. Under t his p lan, the reduction would b e equal t o what t he
account would p rovide had i t earned a 2.5% real rate of return (i.e., for purposes of
determining t he benefit o ffset, t he account is assumed to earn 2.5% in r e a l t e rms).
The p ayment a worker would receive from h is or her account would d epend o n t he
actual rat e of ret u rn . If t h e a c t ual rat e o f ret urn ex ceeds t he assum ed rat e, t h e
paym ent provided by t he account would e x ceed t h e offset to traditional S ocial
S ecuri t y benefi t s . If t he act ual rat e o f ret u r n i s l o w e r t h an t h e assum ed rat e, t h e
paym ent p rovided b y t he account would b e l ess t han t he benefit o ffset.


10 Under current law, long-r ange replaceme n t r a t es are estimated at: 56% for l ow-wage
earners (i.e., earnings e qual t o 45% of the a ve rage wage ); 42% for a ve rage -wage earners;
and 28% for maximum-wage earners (i.e., earnings a t or a bove t he maximum t axable wage ).
11 Once benefits begi n, they are adj usted annually according t o price gr owth. Annual c ost-
of-living adj ustments allow benefits to maintain their purchasing power over time.
12 T here are different approaches to “price indexing.” T he mechanism used by the Social
Security Admi nistration ( SSA) actuaries in estimating benefit levels under Model 2 involves
downward adj ustments in the “replacement f actors” in the benefit formula, which ar e
currently fixed at 90%, 32% and 15% (see footnote 14 f or a description of t he current-l aw
benefit f ormula). Other c omponents of t he be nefit f ormula (“average i ndexed monthly
earnings” and “ bend points”) would r ema i n i n d e x e d t o a ve r a ge w a ge gr o w t h .
13 While price i n d e x i ng initial Social Security benefits would r esult i n l ower replacement
rates f or future retirees, benefits paid t o f u t ure retirees would provi de the same l evel of
purchasing power as benefits paid to today’ s r etirees.

Model 3 would reduce S ocial S ecurity benefits for future retirees by slowing t he
growth in initial benefits to reflect project ed increas es in life ex pect ancy. It would
reduce b enefits for h igher-wage workers through o ther changes in the benefit formula
(t he t h i rd repl acem ent fact or i n t h e b enefi t form ul a w oul d b e l owered gradual l y from
15% to 10%). 14 As under M odel 2 , i t would p rovide a minimum b enefit and m ake
changes d esigned t o improve benefits for widow(er)s. W orkers who earn t he
minimum wage for at least 3 0 years would b e guaranteed a b enefit equal t o 100% of
the poverty l evel. W idow(er)s would r e c eive 75% of the couple’s combined p re-
deat h b enefit (compared t o 50%-67% under current law). As under M odel 2 ,
widow(er)s would receive a h igher p ercentage of the couple’s combined b enefit. In
addition, Model 3 would revise actuarial benefit adjustments for early/late retirem ent.
Benefits for workers who retire early (before t he “full retirement age” (FR A)) would
decrease rel at i v e t o current l aw, and b en e fi t s for w orkers who ret i re aft er t h e FR A
would i ncrease relative t o current law. Fi nally, M odel 3 calls for n ew (unspecified)
dedicated revenue sources for S ocial S ecurity.
Personal Accoun t S tructure. The C ommission makes only b road
recommendations on how personal accounts should b e s tructured within the S ocial
Security system. The Commission speci fies that personal accoun t s should b e
administered b y a go v e r n ment-appointed board, possibly m odeled after the Thrift
Savings P lan Board (which manages a defined contribution p lan for federal workers)
or the Federal Reserve Board. Once t he account reaches a certain value, the worker
should b e allowed t o t ransfer t he account to a p rivate provider. The C o mmission
further recommends that workers i nvest in a b roadly diversified portfolio of co rporate
stocks, corporat e bonds and government bonds and t hat workers be allowed t o
change investment allocations no more than once every 12 months.
According t o t he Commissio n , w o r k ers s hould h ave access t o t heir accounts
only upon retirement, and t hey s hould b e required t o t ake account distributions as an
annuity (a gu aranteed paym ent for life) o r a s periodic p ayments. Lu mp-sum
distributions should b e allowed only o n t he portion o f t he account that ex ceeds t he
level of assets needed to provide the retired worker a combined b enefit (traditional
Social Security plus personal account) above the poverty l evel. M arried couples who
annuitiz e t heir account balance(s) should b e required t o purchase a two-thirds joint
and s urvivor annuity which p rovides t he surviving s pouse wit h a benefit equal t o
two-thirds of the couple’s combined p re-death b enefit. Upon divorce, account assets
attributable to contributio n s made during t he marriage and earnings on account
balances brought into the m arriage s hould b e d ivided equally (i.e., account balances
brought into the m arriage would not be shared). Fi nally, i f a worker dies before


14 Under t he current benefit computation f ormula, t hree replacement f actors are applied t o
three brackets of a worker’s “average i ndexed monthly earnings” (AIM E) to determine t he
basic monthly benefit amount. ( T o ge t t he AIME, a worker’s past earnings are indexed t o
reflect the growth i n average wages over time, and an average monthly amount is computed
based on t he 35 highest years.) T he two AIM E a mounts t hat s eparate t he three brackets
(called “ bend points”) a re indexed t o a verage wage gr owth. In 2003, the basic benefit
formula i s: 90% of the f irst $606 of AIME; plus 32% of AIME over $606 through $3,653;
plus 15% of AIME over $3,653. Under M odel 3, t he third r eplacement f a c t o r w o u l d be
lowered gradually from 15% to 10%.

ret i rem ent , t h e account bal ance s hould be t rans ferrabl e t o t he account of t h e s urvi vi ng
spouse (if applicable) o r t o t he worker’s estate.
It is important to note t hat S ocial S ecurity benefit constraints p rescribed under
Models 2 and 3 would apply across-the-board to retirem ent, survivors and disability
b e n efits, regardless o f whether the wor ker chooses to participate i n p ers o n a l
reti rement accounts. However, the C ommission acknowledged that the d isability
component of the p rogram warrants m ore careful deliberation and recommended t hat
reform of the d isab ility program b e considered separately.
SSA Benefit Estimates
In J anuary 2002, the S ocial S ecur i t y Administration’s (SSA’s) Office of the
Chief Actuary prepared benefit estimates for future retirees under each of the
Commission’s reform p lans. 15 Thes e e stimates are based on t he intermediate
assumptions of the 2001 Social Security Trustees report and additional assumptions
made by the act uaries regarding ret urns on privat e s ecurities, administrative ex penses
for p ersonal accounts and annuities, and personal account participation rates.
Hypothetical Workers. The SSA act uaries provide benefit estimates for both
one- and two-earner couples at different earnings l evels retiring i n 2012, 2022, 2032,

2042, 2052 and 2075. When viewing t he followi ng figu res d epicting t hese estimates,


note t hat t he jump from 10-year intervals from 2012 to 2052 to the 23-year interval
in 2052 to 2075 tends t o m a k e t h e s lope reflecting growth i n b enefit levels appear
relativel y steeper at the end of th e p ro j ect ion period. (The change in interval s i s
noted with brackets o n t he figu res.) Thus, one should not assume necessarily that
t h ere i s s o m e f eat ure i n a part i cul ar m odel t hat accel erat es benefi t growt h i n t hose
years. In the case o f a two-earner couple, both m embers are assumed t o h ave equal
earnings. In all cases, both m embers of a couple are assumed t o retire at t he same
timeatage65.
Illustrative Earnings Leve ls. Because S o ci al S ecuri t y benef i t l evel s are
based on a worker’s earnings histo ry, t he SSA act uaries provide benefit estimates
using four illustrative earnings patterns (“s cal ed” l ow earnings, “s cal ed” m edium
earni ngs, “scal ed” h i gh earni ngs and st eady m ax i m u m earni ngs).16 The illustrative
earnings p atterns are defined as follows:


15 S S A , O ffice of the Chief Actuary, Estimates of Financial Effects f or Three M ode l s
Developed by t he P r esident’s Commission to Strengthen Social Security, J an. 31, 2002
(hereafter c ited a s SSA Actuarial M emorandum, J an. 31, 2002). T he SSA me morandum is
included i n t he Commi ssion’s f inal report: Strengthening Social S e c urity and Creating
Personal We alth for All Americans, Dec. 2001. See a lso, SSA Memorandum, Revisions of
E s t i mated Unified Budget Effects and Summary General Revenue Requirements f o r
Commission Mo d e l s — I nformation , J uly 22, 2002. (Hereafter cited a s SSA Actuarial
Memorandum, J uly 22, 2002.)
16 “Scaled” earnings patterns — in which earnings are relativel y l o w e a r ly in a worker’s
career, i ncrease s teadily during mid-career, and decline s omewhat t oward t he end of career
— are considered more typical than steady earnings patterns i n which wo rkers have t he
same relative l evel of earnings each year throughout their careers.

! Scaled Lo w Earner = Earnings of $15,875 in 2002
! Scaled Medium Earner = Earnings o f $35,277 in 2002
! Scaled High Earner = Earnings o f $56,443 in 2002
! Steady M ax imum Earner = Earnings of $84,900 in 2002
The s cal ed low earnings pattern approx imates t he average lifetime earnings of
a s teady l ow-wage earner (i.e., s omeone who always earned 45% of the n ational
average w age). T he scal ed m edi um earni ngs p at t ern approx i m at es t he average
lifetime earnings of a steady average-wage worker (i.e., s omeone who always earned
the national average wage). T h e s caled high earnings pattern approx imates t he
average lifetime earnings of a steady high-wage worker (i.e., someone who always
earned 160% of the n ational average wage). The s teady m ax imum earner i s s omeone
who always earned a t l east t he max imum amount of earnings s ubject to the S ocial
Security payroll t ax (i.e., the t ax able wage base).
Traditional S ocial S ecurity benefits are bas ed on average career earni ngs.
Therefore, scal ed and s t eady earni ngs p at t erns resul t i n approx i m at el y t h e s am e l evel
of benefits. P ersonal account accumu l a tions, however, d epend o n t he level o f
earnings i n each year of a worker’s career (among other factors). As s uch, scaled and
st eady earni ngs p at t erns resul t i n d i fferent annuity values. The SSA actuaries u s e
scal ed earni ngs p at t erns, whi ch t hey c onsi d er t o be m o re represent at i v e o f act ual
ex perience, to estimate future benefit l evel s under t he reform models and current law.
Yi eld Assumpti ons. The SSA actuaries provide benefit illustrations under
three alternative i nvestment yi elds for t he personal accounts (low yield, 50% equity
yi eld and high yi eld). The low i nvestment yi el d refl ect s t he l ong-t erm rat e o n U .S .
Treasury bonds. T h e “ 5 0% equity yi eld” is design ed to represent an average
investment portfolio of 50% equity, 30% corporate bonds and 20% Treasury bonds.
The h igh i nvestment yi eld reflects a portfolio of 60% equity, 24% corporate bonds
and 16% Treasury bonds. The actuaries used these assumptions to p r o j e c t the
following illustrative yields:
! Lo w Yield = 3.0% Real Investment Yield
! 50% Equity Yield = 4.6% Real Investment Yield
! High Yield = 5.3% Real Investment Yield
Estimates assum e t h at , at t he time of retirem ent, the entire bal ance in the
personal account is converted to an inflation-index ed 17 joint-and-two-thirds survivor18
annuity. Administrative ex p enses for personal accounts and annuities are assumed


17 T he availability of inflation-indexed annuities i s very l i mi t e d i n t he current annuity
market. T he actuaries prepared a s econd set of estimates based on a variable annuity option,
which r esults in higher proj ected initial monthly benefits. T he actuaries consider the f ixed
annuity option t o be t he primary s et of estimates. In t heir vi ew, i ndivi duals would be l ess
likely t o choose t he variable annuity option because payments could decline from one year
tothenext.
18 A j oint-a nd-two-thirds-s urvi vor a nnuity provides the s urvi vi ng spouse a n a mount equal
to two-thirds of the couple’s combined pre-death amount.

to be equal t o 0.3% of assets. Finally, p rojected monthly annuity values are b ased on
the average life ex p ectancy for t he total U.S. population.
Gener a l I ssues Regar di ng P er sonal Accounts
Currently, t here are about 151 million S ocial S ecurity-covered workers (1999
estimate). If all covered workers under age 55 el ected to participate i n voluntary
personal accounts, about 130 million p ersonal accounts would be established within
the S ocial S ecurity system . Under M odel 2, i t i s estimated t hat $62 billion (with two-
thirds participation) and $92 billion (w ith 100% participation) would b e contributed
t o p e rsonal accounts b y t he federal government in the first year (2004). B y
comparison, ther e a re 3 . 1 million participants in the federal Thrift Savings P lan
(TSP), t he largest employer-sponsored de fined contribution p lan. As of March 31,
2003, the TSP held assets totaling $104.5 billion. In 2000, approx imately 61 million
Americans p articipated in employe r -s ponsored retirement p lans or Individual
Retirement Accounts (IR As). 19 According t o one estimate, m or e t h a n $4.5 trillion
is held in employer-sponsored defined contribution p lans and IRAs.20
The ac t uari es’ p roj ect i ons of changes i n t radi t i onal b enefi t s and p ersonal
account outcomes under t he Com m i s s i o n ’ s reform m odel s are b ased on t h e
intermedia t e d e m o graphic and economic assumptions of the 2001 Social Security
Trustees Report. W h ile projections are m ade o n a 75-year basis, annual fluctuations
i n t h ese v ari abl es are t yp i cal l y proj ect ed for onl y t he fi rst 1 0 years. For t he rem ai nder
of the 75-year project i o n period, thes e fact ors are held steady at t heir “ultimate
values” o n t he basis t hat changes in these factors over t he long run average out to the
ultimate values . C hanges in average wage growth, inflation, interest rates and other
variables are difficult to predict over a 75-year period. Outcomes projected under t he
Commission’s reform p lans would v a r y t o t he ex t ent t h at act ual ex p eri ence d i ffers
from t he intermediate assumptions in the 2001 Trustees Report.
Individuals assume a d egree o f ri s k when p ersonal account contributions are
invested in equities. Personal account outco mes p rojected by the actuaries are b ased
on a 3.0%, 4.6%, o r 5.3% real investment yi eld i n each year of the i nvestment period.
In pract i ce, year-t o-year fl uct u at i ons i n i nvestment yi elds would affect the eventual
balance in t he account (the account balance could b e h igher o r l ower based o n t he
actual annual returns). Actual personal account balances would d epend o n s everal
factors i ncluding the l engt h o f t he investment period, the l evel and t i m i n g of account
contributions and i nvestment yi elds, and administrative costs.
In addition, benefit l evels under t he proposals would b e affected by the m onthly
annuity the p ersonal account would p rovide. In p ractice, annuity values would b e
very sensitive to the annuitiz ation rules specified in the law and regulations and to


19 CRS Report RL31770, Retirement Savings Accounts: Ea rly Withdrawals and Required
Distributions , by Patrick J . Purcell.
20 Estimate by Profit Sharing/401(k) Council of America cited i n “A New Retirement T actic
f o r a Ne w T a x La w,” The Wall Street Journal , M ay 29, 2003.

the p revailing i nterest rates at the time the annuity is purchased.21 For ex ample, t he
actuaries’ p rojections assume that the entire account balance would b e a nnuitized.
If some workers were allowed t o t ake p art o f t he account balance as a lump sum, as
recommended b y t he Commission, monthly annuity values wo uld b e l ower.
Furt herm ore, proj ect ed annui t y val u es are b ased on average l i fe ex p ect ancy for t he
total U.S. population, as opposed to life ex p ectancy weighted by income and gender.
Li fe ex pect an cy adj u st ed for i ncom e w ould result i n s omewhat higher annuity
paym ents for l ower-paid workers and s omewhat l ower p a ym ents for h igher-paid
workers. Because wom en l i v e l onger t h an m en o n average, l i fe ex p ect ancy adj u st ed
by ge n d e r would result i n s omewhat l ower paym ent s for w om en and s om ewhat
hi gh er paym ent s for m en. 22
Illustration of Benefit Effects
C onsistent with the benefit es timates prepared by t he act uaries , t hi s r ep o r t
illustrates i nitial m onthly b enefits for fut ure retirees under each of the C ommission’s
reform plans and current law (estimates are shown i n c o n s t ant 2001 dollars). It
should b e noted that the actuaries have constr ucted t he benefit ex amples t o reflect the
amount payable o n a worker’s record. T herefore, i n t he case o f a one-earner couple,
the amount shown represents t he combi n ed benefi t p ayabl e t o t h e ret i red worker and
spouse. In the case o f a two-earner couple, th e amount shown represents t he benefit
payable t o each retired w o r k e r ( o r each member of the couple). For ex ample, as
shown i n Fi gure 8 , a two-earner couple with scaled low earnings retiring at age 65
in 2012 is project e d t o r e c eive $734 each under M odel 2 based o n a 3.0% real
investment yi eld. As shown i n Fi gure 11 , under t h e s a m e s c e n ario, a one-earner
couple i s p rojected to receive a combi n ed benefit o f $1,093.
Alte rnative Baselines. For comparison purposes, each figu re shows i nitial
monthly b en ef i t s projected under t he Commission’s reform p lans and t hree
al t ernat i v e m easures of current l aw:
! B en ef i ts “Promi sed ” Un d er C u rren t L aw
(benefits computed under t he cu rrent-law benefit formula)
! Ben ef i ts “Payab le” Un d er Cu rren t L aw
(amount of current-law benefits that would b e p ayable if benefits
were adjusted to fit within the s ys tem’s project ed revenue)


21 For more i nformation on annuitization i ssues, please r efer to: CRS Report RL31324,
Social Security Reform: The Effect of Economic Variability on Ind i vidual Accounts and
Their Annuities , by Geoffrey K ollmann, Dawn Nuschler and Patrick Purcell.
22 T he use of “unisex” life expectancy tables is somew hat controversial. As a r esult of a
1983 Supreme Court decision, employer-sponsored retirement plans (such as t he federal
T hrift Savi ngs Plan) must use unisex life expectancy tables to compute annuity payments.
T he Court held t hat t he use of gender-specific life expectancy tables in employer-s ponsored
plans had vi olated T itle VII of t he Ci vi l Rights Act of 1964 ( Arizona Governing Commission
for Tax Deferred Annuity & Deferred Compensation Plans v. Norris, 463 U.S. 1073). T he
ruling does not apply t o i ndivi dually purchased annuities.

! 2001 Benef i t L evels
(benefits paid to today’s retirees )
T h e reader m u st use caut i o n when com pari ng t h ese p roj ect ed benefi t l evel s.
Neither “promised” b enefits or proposed benefits are fully funded under current law.
Bo th require additional revenue. Benef its project e d under M odels 2 and 3 require
general revenue infusions. B e n efits promised under current law imply the u se of
i n creased payrol l t ax es and/ or general revenue i n fusi ons t o pay b enefi t s i n ful l aft er
2037 (based on the 2038 insolvency date projected in the 2001 Trustees Report). In
contrast, t he current-law payable b aseline does not allow for additional revenue
sources, s o b enefits must be constrained to fit within projected revenue under current
law. Therefore, it is hardly s u r p r i s i ng that after 2037 benefits projected under t he
reform models and b enefits promised under current l a w a re always high er than
benefits payable under current law. 23
Sever a l o ther points are worth k eepin g i n mind when comparing projected
benefit l evels under t he proposals and the alternative m easures of current law. Fi rst,
the estimates are based on t h e a s sumption t hat p ersonal accounts would first be
available i n 2004 to workers who were under age 55 at the b eginning of 2002 (i.e.,
workers born i n 1948 or later). Therefore, among the illustrations shown h ere, only
workers retiring i n 2052 and 2075 at age 6 5 could ex p erience a full career under t he
pers o n a l account system. Assuming workers begi n i nvesting i n p ersonal accounts
at the s tart of their career, t hese individuals woul d h a v e t he advantage o f l onger
periods over which to grow their accounts. This a d v a n t a g e w ould b e o ffset by the
second point, which is that under M odels 2 and 3, the effects o f p roposed reductions
in traditional S ocial S ecurity b e n e fi t s would b e cumulative (e.g. , p rice index i ng
initial b enefits under M odel 2 ). Therefore, youn ger c o h o rts would ex p erience
increas ingl y l arger reductions in traditi onal b enefits over t he projection p eriod.
Effect of Commission Model 1 on Be nefi t Levels. Under M odel 1 , t he
o n l y change t o current -l aw S o ci al S ecuri t y i s t h e reduct i o n i n b enefi t s t h at o c c u r s
when a worker chooses to participate i n p er sonal retirement accounts. This reduction
is equal t o what t he pers onal acc ount would provide had i t earned a 3.5% real
investment yi eld. How workers fare compared t o current l aw i s t herefore ent i rel y a
function o f t he real investment yi eld o n t he per s o n a l a c c o u n t. If the account earns
less than 3.5%, t he worker will do less well than under current law. If it earns more
than 3.5%, t he worker will do better.
This is cl early shown i n t he benefit illustrations provided by t he SSA act uaries .
In al l i nstances where t h e real investment yi el d i s portrayed as 3%, t he illustrated
couple d o e s l ess well t han under current law. In all i nstances where t he real
investment yi eld i s portrayed as 4.6% or 5.3% , t he illustrated coupl e does b etter t han
under current law. The s ame conclusion applies i f comparisons are m ade t o t he


23 It can be said that it is unreasonable t o portray a situation where no legi slative action i s
ever taken t o cor r e c t S o c i al Security’s financial i mbalance, l eading t o precipitous benefit
cuts in 2038. However, by definition “current law” means no change i n t he program’ s
financing or b e n efit structure. Furthermore, to posit when or what action would be t aken
is purely speculative.

baseline o f S ocial S ecurity benefits payable under current law. As an ex ample o f t he
effect o f Model 1 , Fi gure 7 shows p rojected benefit l evels for two-earner couples
with medium earnings under all three i nvestment yi eld s cenarios. (See Tables A-1
through A -3 i n Appendix A.) Because of the s implicity and obvious effects o f
Model 1, and the fact that it has s o little impact on the s ys tem’s financi ng, t his report
focuses analysis o n M odels 2 and 3.
Effect of Commission Model 2 on Be nefi t Levels. Fi g u r e s 8-31
illustrate th e effect s of M odel 2 on future benefit l evel s for a range of hypothetical
workers.24
Current-Law Promised Baseline. Under M odel 2, early in the projection
peri od, l o w-wage earners are p roj ect ed t o recei ve higher b e n e fi t s than those promi s e d
under current law, even under t he low-yi el d assumption. Under t he 3.0% investment
yi eld s cenario, a two-earner couple r e t iring i n 2022 is projected to receive benefits
that are 11% high er than benefits pro mised under current law. Fo r retirees in 2042
and l ater, p roposed benefits would b e l ow e r than benefits promised under current
law. Under t h e 4.6% and 5.3% investment yi eld s cenarios, two-earner couples
retiring i n 2012 through 2052 are p rojected to receive high er benefits than promised
under current law. However, by the end of the projection p e riod, under all
i nvest m ent yi e l d s cenari o s, l o w-wage earners woul d recei ve benefi t s bel o w l evel s
promised under current law. Dependi n g on the i nvestment yi eld assumption,
reductions are p rojected to range from 7 % t o 28%.
Fo r workers at other w a g e l e v els, benefits are p rojected to be below l evels
promised under current law, ex cept for two cases where t hey are unch a n g e d . T he
largest reductions occur l ate i n t he projec tion period due to the cumulative effect s of
price i ndex i ng, t he primary change in traditional b enefits under M odel 2 . W hil e
retirees in 2012 are p rojected to receive benefits less than 1% below l evels p romised
under current law, workers retiring i n 2075 w o u l d e x p erience reductions ranging
from 16% to 42%, d epending on earnings l evel and i nvestment yi eld assumption.
For ex ample, with a 5.3% investment yi eld, a t wo-ea r n e r c o u p le with medium
earnings retiring i n 2075 is projected to receive a 16% lower b ene f it under t he
proposal. W ith a 3.0% investment yi eld, a t wo-earn e r c o u p le with max imum
earnings retiring i n 2075 would receive a 42% lower b enefit compared to levels
promised under current law.
All workers would b e s ubject to the reductions in traditional benefits project ed
under M odel 2 whether o r not they choose t o p articipate i n p ersonal accounts. By the
end o f t he projection p eriod, t raditional benefits would be s ignificantly lower t han
benefits promised under current law, p rimarily due to the effect of price i ndex i ng
over time. For ex am ple, traditional benefits are project ed to be 35% lower for a t wo-
earner couple with low earnings a n d 46% lower for a t wo-earner couple with
max imum earnings. (See Table 1 below and Table A-4 in Appendix A.)


24 T he proj ected benefit effects discussed below are f or two-earner couples, t he more typical
case. Proj ected benefit effects f or one-earner couples are s hown i n t he figures a nd in the
data tables in Appendi x A.

Table 1. Projected Change in Benefits Under M odel 2 Relative
to the C urrent-Law Promised Baseline
Real invest ment yield o n personal account
Retiring With no personal
(age 65) account 3.0% 4.6% 5.3%
Scaled lo w earner ($15,875 in 2002)
2012 1% higher 2% higher 2% higher 2% higher
2032 1% lower 2% higher 10% higher 11% higher
2075 35% lo wer 28% lo wer 10% lo wer 7 % lower
Steady ma ximum earner ($84,900 in 2002)
2012 1% lo wer 1 % lower 0.4% lo wer 0 .3% lower
2032 18% lower 16% lower 12% lower 11% lower
2075 46% lower 42% lower 30% lower 27% lower
Not e : Results are s hown f or 2-earner couples with equal earnings. Results for medium and
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
Current-Law Payable Baseline.25 In al l cases, w orkers wi t h l o w earni ngs
are p rojected to receive high er benefits under M odel 2 r e l a tive t o t he current-law
payable b aseline. Fo r ex ample, with a 4.6% investment yi eld, a t wo-earner couple
with low earnings retiring i n 2012 is pro j e c t e d to receive a 2 % h igher b enefit.
Similar couples retiring i n 2042 and 2075 woul d receive projected benefits that are
51% and 34% high er, respectively, than those p ayable under current law. T h i s
outcome is attributable to the minimum benefit guarantee for long-term l ow-wage
earners and t he w a y p e r s o nal account contributions are s tructured under M odel 2
(l ow-wage earners m ay cont ri but e a l arger p ercent age of t h ei r earni ngs b ecause of t h e
dollar limit on account contributions).
Ex cept for t w o cases where b enefi t s are unch a n g e d , w orkers at ot her w age
levels retiring early in the p rojection p eriod (2012, 2022 and 2032) are p rojected to
receive lower benefits compared to those payable under current law. Later i n t h e
proj ect i o n p er i o d , i n m o st cases, p roj ect ed benefits would b e h igher t han t hose
payable under current law, primarily at the h igher yield assumptions. For ex ample,
a t wo-earner couple with medium earnings retiring i n 2042 is projected to receive a
9% to 33% high er benefit, depending o n t h e i nvestment yi eld. If the couple h ad
max imum earnings, benefits are p rojected to be from 6 % t o 21% high er. By t he end


25 In 2012, 2022 and 2032, benefits payable under current law would be t he same as benefits
promised under current law, because the s ys tem would be able t o pay promised benefits in
full until 2038 under i ntermediate assumptions of the 2001 Social Security T r ustees Report.
In 2042, 2052 and 2075, there would be s ubstantial differences in proj ected benefit l evels
under t he two c urrent-l aw baselines.

of the p rojection p eriod (2075), t wo-earner couples with medium, high and max imum
earni ngs woul d recei ve proj ect ed benefi t s t h at are 10%, 12% and 13% l o w e r ,
r e spectively, under t he low-yi eld assumption. At the higher yield assumptions,
however, p rojected benefits would b e h igher t han t hose p ayable under current law.
(S ee Table 2 below and Table A-6 in Appendix A.)
Table 2. Projected Change in Benefits Under M odel 2 Relative
to the C urrent-Law Payable B aseline
Real investment yield on personal account
Retiring
(age 65) 3.0% 4.6% 5.3%
Scaled low e arner ($15,875 in 2002)
2012 2% higher 2% higher 2% higher
2042 30% higher 51% higher 55% higher
2075 7% higher 34% higher 40% higher
St eady m a xi m um e arner ($84,900 in 2002)
2012 1% lower 0.4% lower 0.3% lower
2042 6% higher 19% higher 21% higher
2075 13% lower 5% higher 9% higher
Not e : Results are s hown f or 2-earner couples with equal earnings. Results for medium and
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
2001 Be nefit Levels. In al l cases, M odel 2 woul d resul t i n p roj ect ed benefi t
levels that are h igher t han t hose p aid t o t oday’s retirees (as would b enefits payable
under c u r r e n t law). The amount of the p rojected change would v ary considerably,
depending on the worker’s earnings l evel, year of retirement and invest ment yi eld.
Fo r ex ample, b enefits for a two-earner couple with low earnings retiring i n 2012 are
projected to be around 16% high er than thos e p aid t o t oday’s retirees. A two-earner
couple with low earnings retiring i n 2075 is projected to receive 38% high er benefits
under t he 3.0% yi eld assumption and 81% high er benefits under t he 5.3 % yi e l d
assumption. Under t he 4.6% yi e l d s c enario, a t wo-earner couple with max imum
earnings retiring i n 2012 would receive 21% high er benefits compared t o the 49%
high er benefits for a couple retiring i n 2075. (See Table 3 below and Table A-7 in
AppendixA.)



Table 3. Projected Change in Benefits Under M odel 2 Relative
to 2001 Benefit L evels
Real investment yield on personal account
Retiring
(age 65) 3.0% 4.6% 5.3%
Scaled low e arner ($15,875 in 2002)
2012 15% higher 16% higher 16% higher
2075 38% higher 73% higher 81% higher
St eady m a xi m um e arner ($84,900 in 2002)
2012 21% higher 21% higher 21% higher
2075 23% higher 49% higher 54% higher
Not e : Results are s hown f or 2-earner c ouples with equal e arnings. Results for medium a nd
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
Eff e c t o f Commission Model 3 on Benefit Levels. Fi gures 32-55
illustrate the effect s of M odel 3 on future benefit l evel s for a range of hypothetical
workers.
Current-Law Promised Baseline. Under M odel 3 , at t he lower i nvestment
yi eld (3.0%), projected benefits for workers at all w a g e l e v els retiring after 2032
would b e l ower than benefits promised under current law. Fo r ex a m p l e , i n 2075,
benefits are p rojected to be 14% lower for a t wo-earner couple with low earnings and
18% lower for a t wo-earn e r c o u ple with max imum earnings. At the higher yield
assum p t i ons, i n m ost cases, w orkers at al l w age l evel s are proj ect ed t o recei ve hi gh er
benefits. For ex ample, with a 5.3% investment yi eld, benefits are p rojected to be 9%
high er for a two-earner couple with low ear nings retiring i n 2032 and 5 % h igher for
similar workers retiring i n 2075. By comparison, under t he same yi eld assumption,
a t wo-earner couple with max imum earnin g s i s p r o jected to receive a 1 % l ower
benefit i n 2032 and a 9% high er benefit i n 2075.
All workers would b e s ubject to the reductions in traditional benefits project ed
under M odel 3 whether o r not they choose t o p articipate i n p ersonal accounts. By the
end o f t he projection p eriod, tra d i tional benefits would be s ignificantly lower t han
benefits promised under cur r e n t law, primarily due to the effect of slowing t he
growth in initial benefits to take into account projected increases in life ex p ectancy.
For ex am p l e, t r a d i t i o n a l b enefi t s are p roj ect ed t o be 22% l o wer for a t wo-earner
couple with low earnings and 35% lower for a t wo-earner couple with max i mum
earni ngs. (S ee Table 4 below and Table A-8 in Appendix A.)



Table 4. Projected Change in Benefits Under M odel 3 Relative
to the C urrent- L aw Promised Baseline
Real invest ment yield o n personal account
Retiring With no personal
(age 65) account 3.0% 4.6% 5.3%
Scaled lo w earner ($15,875 in 2002)
2012 < 1% higher 1% higher 2% higher 2% higher
2032 4% lower 2% higher 8% higher 9% higher
2075 22% lower 14% lower 2% higher 5% higher
St ea dy ma ximum e a r ner ($84,900 in 2002)
2012 1% lower 1% higher 2% higher 2% higher
2032 20% lo wer 10% lo wer 2 % lower 1% lo wer
2075 35% lower 18% lower 4% higher 9% higher
Not e : Results are s hown f or 2-earner couples with equal earnings. Results for medium and
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
Current-Law Payable Baseline. Under M odel 3 , a two-earner couple with
low earnings i s p rojected to receive high er benefits compared to those p ayable under
current law, under all three yield assumptions. F o r ex ample, a t wo-earner couple
with low earnings retiring i n 2042 is projected to receive a 36% high er benefit at t he
lower yield assumption (3.0%) and a 57% high er benefit at t he h i gh e r yi eld
assumption (5.3%). For workers at other wage levels, benefits are projected to be
lower t han t hose p ayable under current law i n m ost cases early in the p roj e c t ion
p e r i od (2022 and 2032). Later in the p rojection p eriod, however, b enefit s a r e
projected to be high er relative t o t he current -l aw payabl e b asel i n e. For ex am p l e,
benefits for a two-earner couple with m a x i m u m earnings retiring i n 2042 are
projected t o be 25% high er with a 3.0% investment yi eld and 52% high er with a
5.3% investment yi el d. By 2075, benefits for a two-ear ner c oupl e with maximum
earni n g s a r e projected to be 22% and 63% high er under t he 3.0% and 5.3% yi eld
assum p t i ons, respect i v el y. (S ee Table 5 below and Table A-10 in Appendix A.)



Table 5. Projected Change in Benefits Under M odel 3 Relative
to the C urrent-Law Payable B aseline
Real investment yield on personal account
Retiring
(age 65) 3.0% 4.6% 5.3%
Scaled low e arner ($15,875 in 2002)
2012 1% higher 2% higher 2% higher
2042 36% higher 53% higher 57% higher
2075 29% higher 52% higher 57% higher
St eady m a xi m um e arner ($84,900 in 2002)
2012 1% higher 2% higher 2% higher
2042 25% higher 48% higher 52% higher
2075 22% higher 56% higher 63% higher
Not e : Results are s hown f or 2-earner c ouples with equal earnings. Results for medium a nd
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
2001 Be nefit Levels. In all cases, b enefits projected under M odel 3 would
be higher than benefits paid to today’s retirees . The size of the project ed increas e
would b ecome larger over t he cour s e o f the p rojection p eriod. Fo r ex ample, for a
two-earner couple with low earnings, benefits are p rojected to be 15% high er in 2012
and 97% high er in 2075 with a 4.6% investment yi eld. Under t he 5.3% yi eld
assumption, benefits for a two-earner couple with max imum earnings are projected
to be 24% high er in 2012 and 131% high er in 2075. (See Table 6 below and Table
A-11 in Appendix A.)



Table 6. Projected Change in Benefits Under M odel 3 Relative
to 2001 Benefit L evels
Real investment yield on personal account
Retiring
(age 65) 3.0% 4.6% 5.3%
Scaled low e arner ($15, 875 in 2002)
2012 15% higher 15% higher 15% higher
2075 67% higher 97% higher 104% higher
St eady m a xi m um e arner ($84,900 in 2002)
2012 23% higher 24% higher 24% higher
2075 73% higher 121% higher 131% higher
Not e : Results are s hown f or 2-earner couples with equal earnings. Results for medium and
high-wage earners and f or one-earner couples are s hown i n t he data tables in Appendi x A.
Effect of Refor m M odel s on the Feder al Budget
The SSA act uaries provided estimates of t he net cash-flow requirements from
general revenues over t he nex t 75 years under c u r r e nt law and the C ommission’s26
reform plans (i.e., estimates include years of positive and negative cash flow).
Assuming benefits promised under current
P r ojected Net Cash-F l owlaw wouldbepaidinfullafterthetrust
Re quirements F r om Ge neralf unds are ex h austed in 2038 (under t h e
Revenues O ver 75 Y earsint ermediate assumptions in the 2001
Trustees Report), t he general revenue
Current Law Promi sed: $4.2 trillionrequirements under current law are
Commi ssion Model 2: $2.2 trillionprojected to be $4.2 trillion (present v alue
Commi ssion Model 3: $2.8 trillionbasis) over t he 75-year projection p eriod.27
Es timates for M odels 2 and 3 assumeNe t cash-flow requirements from t heGeneral Fund are p rojected to be lower

2/3 participation i n personal accounts.under t he Commission’s reform p lans.


Assuming t wo-thirds participation i n
p e r s onal accounts, Model 2 would require a p rojected $2.2 trillion (present v alu e


26 T r ust f und assets as of J an. 1, 2001 ($1 t rillion) are not subtracted from t he estimates.
27 SSA Actuarial M emorandum, J an. 31, 2002, p. 27.

basis) over t he projection p eriod.28 Model 3 would require a p rojected $2.8 trillion
(present value b asis) over t he period.29
Under current law, the t rust funds are p rojected to run annual cash-flow deficits
in 2016-2075 (and beyond).30 Under M odel 2, assuming t wo-thirds participation i n
personal accounts, annual cash-flow defi cits are p rojected to occur i n 2010 - 2 058
(2006-2057 with 100% participation).31 Starting i n 2029, projected annual cash-flow
defici ts under M odel 2 would b e l ower
than under t he current-law promised
F i rst Y ear of P rojected Annualbas e line (2032 wi t h 100% part i ci p at i on). 32
Trust F und Cash-Flow Def icitsModel 3 wo uld require both t emporary
Current Law: 2016general revenue infusions and n ew
Model 2: 2010 (two-t hirds)dedicated revenues from an unspecified
2006 (100%)source (t o b e d et erm i n ed by C ongress) t o
Model 3:* 2014 (two-t hirds)achieve positive cas h flow by t he end of
2011 (100%)the projection period. With these new
dedicated revenues, which are projected to
*With new (unspecified) dedicatedbe equal t o 0.63% of tax able p ayroll on
revenues.ave r a ge over t he 75-year projection
period,33 annual cash-f l ow deficits are
projected to occur i n 2014-2071 assuming t wo -thirds p articipation i n p e rsonal
accounts (2011-2061 with 100% participation). 34 Beca u s e M o d el 3 w oul d requi re
new d edi cat ed r e v e n u es from an unspecified source (in addition t o s peci fied
temporary general revenue infusions), the f ollowing discussion focuses o n M odel 2 .
Projected annual cash flow from t he General Fund to the S ocial S ecurity trust
funds under M o d e l 2 , assuming t wo-thirds and 100% participation i n p ersonal
accounts, is compared to both current-law baselines in Fi gu res 1 a n d 2 .


28 SSA Actuarial M emorandum, J uly 22, 2002, table 4. E s timates assume that traditional
benefit r eductions would apply t o r etirement, survivors and disability benefits. If disability
benefits were held harml e ss, gi ven t hat disabled workers may not have sufficient time t o
gr ow their accounts, larger general r evenue infusions would be r equired ( a n d proj ected
savi ngs would be s omewhat o ve r s t a ted). One study estimates that the a dditional 75-year
cost of transfers needed under M odel 2 to protect the disability component would be $0.6
trillion ( present value basis) or 0.3% of taxable payroll (see Assessing the Plans Proposed
by the President’s C o mmission to Strengthen Social Security, by Peter A. Di amond and
Pet e r R. Or s za g, Tax Not es , J uly 29, 2002).
29 SSA Actuarial M emorandum, J uly 22, 2002, table 4.
30 Under t he intermediate assumptions i n the 2003 T r ustees Report, the t rust funds are
proj ected to begi n r unning cash-flow deficits in 2018.
31 SSA Actuarial M emorandum, J an. 31, 2002, p. 22.
32 Ibid., pp. 68-69.
33 Under t he intermediate assumptions in the 2001 T r ustees Report, the average long-r ange
funding shortfall under t he current system is proj ected to equal 1.86% of taxable payroll.
34 SSA Actuarial M emorandum, J an. 31, 2002, p. 22.

Figure 1 . Model 2 (Tw o-Thirds P articipation): Annual Cash
Flow from the G eneral Fund to the S ocial S ecurity Trust Funds
B illions ( C ons t a nt 2001 D olla r s )
$800
$700CurrentLaw
Promised
$600
$500CurrentLaw
$400Payable
$300
$200Model2(2/3)
$100
$0
-$100 2001 2007 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073
-$200
-$300
Figure 2 . Model 2 (100% Participation): Annual Cash Flow from
the G eneral Fund to the S ocial S ecurity Trust Funds


B illio ns ( C o ns t a nt 200 1 D olla r s )
$800
$700CurrentLaw
Promised
$600
$500CurrentLaw
$400Payable
$300
$200 Model 2 (1 00%)
$100
$0
- $100 2001 2007 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073
-$200
-$300

The change i n publicly-held d ebt p rojected under M odel 2 with 0%, t wo-thirds
and 100% participation i n p er sonal accounts i s c o m p a red i n Fi gure 3 . Because a
“car v e - out” approach redirects p ayroll tax es t o fund the accounts, one effect is t o
increase d ebt h eld b y t he public. This additional borrowing would o ccur from 2004-
2051 assuming t wo-thirds p articipation i n p ersonal accounts and from 2004-2060
assuming 100% participat i o n , and i s p rojected to peak at $2.5 trillion and $4.735
trillion, respectively (constant 2001 dollars). These i ncreases i n publ i cl y-hel d d ebt
projected under t he two s cenarios illu strate the imp a c t of personal account
participation rat es on Treas ury borrowing (the higher the particip at i o n r ate, the
greater the n egative effect on the unifi ed federal budget over t he coming d ecades).


Figure 3 . Model 2 : P rojected Change in Debt Held by the P ublic
$7 T r illio n s ( C o n s t a n t 2 0 0 1 D o lla r s )
1 0 0 % P a r t ic ip a t io n
$4 2 /3 P articip atio n
$1
-$2 2002 2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057
-$5 W it h N o P e r s o n al
Accounts
-$8
-$11
-$14
35 SSA Ac t uar i a l Memor andum, J ul y 22, 2002, r e vi sed t abl e s on pp. 57-58.

Near -Ter m V er sus Long-Ter m Budget P er specti ve
It i s al so i m port ant t o consi d er S o ci al S ecuri t y’s l ong-range fi n a n ci ng needs
(both under current law and the C ommission’s reform m odels) i n t he contex t o f t he
overall federal budget. T he Congressional Budget Office projects t hat t otal federal
spending will be $27 trillion (nominal do llar s ) o v e r t h e nex t 10 years (2004-2013)
under current law. Combined spending for S ocial S ecurity, M edicare and Medicaid
would t otal a p rojected $12.7 trillion (nominal doll a r s ), increasing 78% over t he
period. By 2013, projected spending for t hese three p rograms would represent 53%
of the entire federal budget. P rojected a nnual s pending for t hese programs is shown
inFigure4.
Figure 4 . S ocial S ecurity, Medicare a nd Medicaid O utlays
Projected Under Current Law , 2004-2013
$1.8 T r ill io n s ( N o m i n a l D o lla r s )
$1.6
$1.4Medicaid
$1.2
$1.0
Medicare
$0.8
$0.6
$0.4 Social S ecurity
$0.2
$0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
C B O d at a, M ar ch 2 0 0 3
Over t h e n ex t s everal decades, t ot al m a n d at o ry spendi ng i s proj ect ed t o grow
faster than Gross Domestic Product (GDP ). The Office of Management and Budget
(OMB) p rojects t hat m andatory spending (com p r i s ed primarily of Soci al Security,
Medicare and Medicaid) will increase from 11.3% of GDP in 2010 to 16.8% in 2040
under current law as s hown i n Fi gure 5 . S oci al S ecuri t y i s proj ect ed t o i n crease from
4.3% to 6.4% of GDP over t he period. Medicare s pending is projected to grow even
faster from 2.6% of GDP in 2010 to 5.5% in 2040. Medicai d s p e n d i ng would
increase from 1.9% of GDP to 3.2% over t he 2010-2040 period (Fi gure 6 ). 36


36 T hese CBO and OMB pr oj ect i ons do not r e f l ect t he c ost of Medi car e pr e scr i pt i on dr ug
legi slation ( H.R. 1) currently before the Congress.

Figure 5 . Mandatory and Discretionary Outl ays P rojected
Under Current Law a s a P ercent of GDP , 2000-2040
18PercentofGDP
16
14Mandatory
12
10
8
6
4Discretionary
2
0
200 0 20 10 202 0 20 30 204 0
O M B d at a, F Y2004 Budget P r op os al
Figure 6 . S ocial S ecurity, Medicare a nd Medicaid O utlays
Projected Under Current Law a s a P ercent of GDP , 2000-2040


7 P ercent of GD P


SocialSecurity
6
5
4
3Medicare
Medicaid
2
1
0
200 0 20 10 2020 20 30 2 040
O M B dat a, F Y2004 B udget P rop osal

Based o n t he actuaries’ p rojections, t raditional b enefit constraints s uch as p rice
index i ng combined with person a l a ccounts (as under M odel 2 ) are projected to
eliminate the system’s long-range actuarial deficit and improve the system’s fiscal
outlook over t he “infinite horizon” (beyond the t raditional 75-year projection p eriod).
Using a carve-out funding approach for p ersonal accounts under M odel 2 is projected
to result in larger annual cash-flow deficits compared to current law for roughly 3 0
years, coi n ci di ng wi t h a p eri o d o f i ncreasi n g fi s cal pressure rel at ed t o t he agi n g o f t he
U.S. population and sign ificant p rojected growth in health care costs, among other
factors. Supporters argu e t hat, while the Commission’s reform m odels are p rojected
to increas e t he near-term fiscal burden, they would have positive fiscal effect s over
the long run. They argue that a partially advance-funded system would reduce the
long-term cost o f t he program t o t he government and allow workers who choose t o
participate i n p ersonal accounts t o m ak e up for some or all of t h e r e ductions in
traditional benefits that would be needed to bring t he system into balance.
For Addi ti onal Readi ng
CRS Report R L31086, Soci a l S ecuri t y: What H a p p ens t o F ut ure B enef i t L evel s
Under Various Reform Options , b y David Koitz, Geoffrey Kollmann, and Dawn
Nuschler.



CRS-25
iki/CRS-RL32006
g/w Figure 7: Effect of Commission Model 1
s.or
leakon Benefit Levels for Two-Earner Couples
://wiki
http With Scaled Medium Earnings



CRS-26
Figur e 7 . Compa r i s on of I nit i a l Mont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 1 a nd Cur r e nt La w
$2,500
Model1:
5.3%Yield
Model1:
$2,0004.6%Yield
CurrentLaw
Promised
Model1:
$1,5003.0%Yield
iki/CRS-RL32006
g/w
s.or
leak$1, 000
://wiki 2 0 0 1 B enefi t Level Curr ent Law Payabl e
http
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects cur rent law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Current La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-27
iki/CRS-RL32006
g/w Figures 8 - 31:
s.or
leak Effect of Commission Model 2
://wiki
http on Benefit Levels for Future Retirees



CRS-28
Figur e 8 . Compa r i s on of I nit i a l Mont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$1,400
$1, 200 Curre nt Law
Promised
$1,000Model2
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki C u rre n t L aw P ayab l e
http 2001 B e ne fit Le ve l
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-29
Figur e 9 . Compa r i s on of I nit i a l Mont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$1,400
CurrentLaw
Promised
$1,200
$1,000
Model2
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
http
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-30
Figur e 1 0 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$1,400
$1,200Model2
$1, 000 Curre nt Law
Promised
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki C u rre n t L aw P ayab l e
http 2001 B e ne fit Le ve l
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-31
Figur e 1 1 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$2,000
$1, 800 C u rre n t L a w
Promised
$1,600
Model2
$1,400
iki/CRS-RL32006$1, 200
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l
http Curre nt Law Payable
$600
$400
$200
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-32
Figur e 1 2 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$2,000
CurrentLaw
$1,800Promised
$1,600
$1,400
Model2
iki/CRS-RL32006$1, 200
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l Curre nt Law Payable
http
$600
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-33
Figur e 1 3 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 2 a nd C ur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$2,000
$1,800
$1,600Model2
$1,400
CurrentLaw
iki/CRS-RL32006$1, 200 Pro mis e d
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l Curre nt Law Payable
http
$600
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-34
Figur e 1 4 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$2,500
CurrentLaw
$2,000Promised
Model2
iki/CRS-RL32006$1, 500
g/w
s.or
leak
://wiki$1, 000
http 2001 B e ne fit Le ve l
C u rre n t L aw P ayab l e
$500
Year o f Ret irem ent a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-35
Figur e 1 5 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$2,500
CurrentLaw
Promised
$2,000
iki/CRS-RL32006$1, 500
g/w
s.or Mode l 2
leak
://wiki$1, 000
http2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-36
Figur e 1 6 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$2,500
CurrentLaw
$2,000Promised
iki/CRS-RL32006$1, 500
g/w Mode l 2
s.or
leak
://wiki$1, 000
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-37
Figur e 1 7 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$3,500
$3,000
CurrentLaw
Promised
$2,500
iki/CRS-RL32006$2, 000 Mode l 2
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-38
Figur e 1 8 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$3,500
$3, 000 Curre nt Law
Promised
$2,500Model2
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki
http2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-39
Figur e 1 9 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$3,500
CurrentLaw
$3,000Promised
$2,500Model2
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki C u rre n t L aw P ayab l e
http 2001 B e ne fit Le ve l
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-40
Figur e 2 0 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$3,000
CurrentLaw
Promised
$2,500
$2,000Model2
iki/CRS-RL32006
g/w
s.or$1, 500
leak
://wiki
http$1, 000 2001 B e ne fit Le ve l Curre nt Law Payable
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-41
Figur e 2 1 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$3,000
CurrentLaw
Promised
$2,500
Model2
$2,000
iki/CRS-RL32006
g/w
s.or$1, 500
leak
://wiki
http$1, 000 2001 B e ne fit Le ve l Curre nt Law Payable
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-42
Figur e 2 2 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$3,000
CurrentLaw
Promised
$2,500
$2,000
iki/CRS-RL32006 Mode l 2
g/w
s.or$1, 500
leak
://wiki 2001 B e ne fit Le ve l Curre nt Law Payable
http$1, 000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-43
Figur e 2 3 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$4,500
$4, 000 Curre nt Law
$3,500Promised
$3,000
iki/CRS-RL32006 Mode l 2
g/w$2, 500
s.or
leak$2, 000
://wiki
http$1, 500 2001 B e ne fit Le ve l Curre nt Law Payab l e
$1,000
$500
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-44
Figur e 2 4 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$4,500
CurrentLaw
$4,000Promised
$3,500
Model2
$3,000
iki/CRS-RL32006
g/w$2, 500
s.or
leak$2, 000
://wiki
http$1, 500 2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year of Ret irem ent at A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-45
Figur e 2 5 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$4,500
CurrentLaw
$4,000Promised
$3,500
Model2
$3,000
iki/CRS-RL32006
g/w$2, 500
s.or
leak$2, 000
://wiki C u rre n t L aw P ayab l e
http$1, 500 2001 B e ne fit Le ve l
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-46
Figur e 2 6 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 3 .0% Real Investment Yield)
$3,500
CurrentLaw
Promised
$3,000
$2,500
Model2
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-47
Figur e 2 7 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 4 .6% Real Investment Yield)
$3,500
$3, 000 C u rre n t L a w
Promised
Model2
$2,500
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki
http2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-48
Figur e 2 8 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 5 .3% Real Investment Yield)
$3,500
CurrentLaw
Promised
$3,000
Model2
$2,500
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-49
Figur e 2 9 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 3 .0% Real Investment Yield)
$6,000
$5,000
CurrentLaw
Promised
$4,000
iki/CRS-RL32006 Mode l 2
g/w
s.or$3, 000
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-50
Figur e 3 0 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 4 .6% Real Investment Yield)
$6,000
CurrentLaw
$5,000Promised
$4,000Model2
iki/CRS-RL32006
g/w
s.or$3, 000
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-51
Figur e 3 1 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 2 a nd Cur r e nt
La w ( Assuming a 5 .3% Real Investment Yield)
$6,000
CurrentLaw
$5,000
Promised
$4,000Model2
iki/CRS-RL32006
g/w
s.or$3, 000
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-52
iki/CRS-RL32006
g/w Figures 32 - 55:
s.or
leak Effect of Commission Model 3
://wiki
http on Benefit Levels for Future Retirees



CRS-53
Figur e 3 2 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$1,400
CurrentLaw
$1,200Promised
$1,000
Model3
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki C u rre n t L aw P ayab l e
http 2001 B e ne fit Le ve l
$400
$200
Year o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-54
Figur e 3 3 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$1,400
$1,200Model3
$1,000
CurrentLaw
Promised
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
http
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-55
Figur e 3 4 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$1,400
Model3
$1,200
$1, 000 Curre nt Law
Promised
iki/CRS-RL32006$800
g/w
s.or
leak
$600
://wiki
http 2001 B e ne fit Le ve l Curre nt Law Payable
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-56
Figur e 3 5 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$2,000
$1, 800 C u rre n t L a w
Promised
$1,600
$1,400
Model3
iki/CRS-RL32006$1, 200
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l
http C u rre n t L aw P ayab l e
$600
$400
$200
Year o f Ret irem ent a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-57
Figur e 3 6 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$2,000
$1,800
Model3
$1,600
$1, 400 Curre nt Law
Promised
iki/CRS-RL32006$1, 200
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l Curre nt Law Payable
http
$600
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-58
Figur e 3 7 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Low Ea r nings Unde r C ommis s i on Mode l 3 a nd C ur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$2,000
$1,800Model3
$1,600
$1, 400 Curre nt Law
Promised
iki/CRS-RL32006$1, 200
g/w
s.or$1, 000
leak
://wiki$800 2001 B e ne fit Le ve l Curre nt Law Payable
http
$600
$400
$200
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-59
Figur e 3 8 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$2,500
CurrentLaw
$2,000Promised
iki/CRS-RL32006$1, 500
g/w Mode l 3
s.or
leak
://wiki$1, 000
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$500
Year o f Ret irem ent a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-60
Figur e 3 9 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$2,500
Model3
$2,000
CurrentLaw
iki/CRS-RL32006$1, 500 Pro mis e d
g/w
s.or
leak
://wiki$1, 000
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-61
Figur e 4 0 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$2,500
Model3
$2,000
CurrentLaw
iki/CRS-RL32006$1, 500 Pro mis e d
g/w
s.or
leak
://wiki$1, 000
http 2001 B e ne fit Le ve l Curre nt Law Payable
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-62
Figur e 4 1 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$3,500
CurrentLaw
$3,000Promised
$2,500Model3
iki/CRS-RL32006$2, 000
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-63
Figur e 4 2 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$3,500
CurrentLaw
Promised
$3,000
$2,500
iki/CRS-RL32006$2, 000 Mode l 3
g/w
s.or
leak
$1,500
://wiki
http2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-64
Figur e 4 3 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d Me dium Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$3,500
$3,000
Model3
$2,500
CurrentLaw
iki/CRS-RL32006$2, 000 Pro mis e d
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-65
Figur e 4 4 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$3,000
CurrentLaw
$2,500Promised
$2,000
iki/CRS-RL32006
g/w Mode l 3
s.or$1, 500
leak
://wiki C u rre n t L aw P ayab l e
http$1, 000 2001 B e ne fit Le ve l
$500
Year o f Ret irem ent a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-66
Figur e 4 5 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$3,000
Model3
$2,500
CurrentLaw
$2,000Promised
iki/CRS-RL32006
g/w
s.or$1, 500
leak
://wiki
http$1, 000 2001 B e ne fit Le ve l Curre nt Law Payable
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-67
Figur e 4 6 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$3,500
$3,000
Model3
$2,500
CurrentLaw
iki/CRS-RL32006$2, 000 Pro mis e d
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-68
Figur e 4 7 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 3 .0% Real Investment Yield)
$4,500
CurrentLaw
$4,000Promised
$3,500Model3
$3,000
iki/CRS-RL32006
g/w$2, 500
s.or
leak$2, 000
://wiki
http$1, 500 2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
$500
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-69
Figur e 4 8 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 4 .6% Real Investment Yield)
$4,500
CurrentLaw
$4,000Promised
$3,500
$3,000Model3
iki/CRS-RL32006
g/w$2, 500
s.or
leak$2, 000
://wiki2001 Benefit Level Curre nt Law Payable
http$1, 500
$1,000
$500
Year of Ret irem ent at A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-70
Figur e 4 9 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h Sc a l e d High Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt La w
(Assuming a 5 .3% Real Investment Yield)
$4,500
$4,000
Model3
$3,500
$3,000
iki/CRS-RL32006 Curre nt Law
g/w$2, 500 Pro mis e d
s.or
leak$2, 000
://wiki 2001 B e ne fit Le ve l Curre nt Law Payable
http$1, 500
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-71
Figur e 5 0 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 3 .0% Real Investment Yield)
$3,500
CurrentLaw
Promised
$3,000
$2,500
iki/CRS-RL32006$2, 000 Mode l 3
g/w
s.or
leak
$1,500
://wiki
http 2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Yea r o f Ret irem en t a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-72
Figur e 5 1 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 4 .6% Real Investment Yield)
$4,000
$3,500
Model3
$3,000
CurrentLaw
$2,500Promised
iki/CRS-RL32006
g/w
s.or$2, 000
leak
://wiki$1, 500
http
2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-73
Figur e 5 2 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a Tw o- Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 5 .3% Real Investment Yield)
$4,000
$3,500Model3
$3,000
$2, 500 Curre nt Law
iki/CRS-RL32006 Pro mis e d
g/w
s.or$2, 000
leak
://wiki$1, 500
http C u rre n t L aw P ayab l e
2001 B e ne fit Le ve l
$1,000
$500
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-74
Figur e 5 3 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 3 .0% Real Investment Yield)
$6,000
$5,000
CurrentLaw
Promised
$4,000Model3
iki/CRS-RL32006
g/w
s.or$3, 000
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
Year o f Ret irem ent a t A ge 6 5
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-75
Figur e 5 4 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 4 .6% Real Investment Yield)
$6,000
CurrentLaw
$5,000Promised
$4,000
iki/CRS-RL32006 Mode l 3
g/w
s.or$3, 000
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l C u rre n t L aw P ayab l e
$1,000
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



CRS-76
Figur e 5 5 . Compa r is on of Init ia l M ont hly Soc ia l Se c ur i t y Be ne f i t f or a One - Ea r ne r
Couple W it h St e a dy M a x i mum Ea r nings Unde r Commis s i on Mode l 3 a nd Cur r e nt
La w ( Assuming a 5 .3% Real Investment Yield)
$6,000
$5,000
Model3
$4,000
iki/CRS-RL32006
g/w Curre nt Law
s.or$3, 000 Pro mis e d
leak
://wiki
http$2, 000
2001 B e ne fit Le ve l Curre nt Law Payable
$1,000
Year o f Ret irem ent a t A ge 65
$0{}
2001 2012 2022 2032 2042 2052 2075
: Figur e p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.Current Law P romised” reflects current law modified to allo w borrowing from
General Fund of the T reasur y to p ay sc he duled b enefits in full.Cur rent La w P ayable” r eflects the amount of current-law bene fits that wo uld b e p ayab le if b e ne fits we r e ad j usted
t within the systems p roj ected revenue. P roj ected benefits are sho wn in constant 2001 dollars.



Appendix A. D ata Tables



Table A-1. C ommission Model 1: Percent C hange in Proposed
Benefits Relative to Benefits Promised Under C urrent Law
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e coupl e coupl e couple couple
Scaled low e arner ( $15,875 in 2002)
2012 -0.2 -0.1 0.0 0.0 0.0 0.0
2022 -0.9 -0.6 0.4 0.3 0.6 0.4
2032 -2.2 -1.5 1.6 1.1 2.3 1.6
2042 -3.8 -2.6 3.6 2.4 5.1 3.4
2052 -4.6 -3.1 4.7 3.1 6.6 4.5
2075 -4.5 -3.1 4.5 3.0 6.4 4.3
Scaled medium earner ($35,277 in 2002)
2012 -0.3 -0.2 0.0 0.0 0.0 0.0
2022 -1.2 -0.8 0.5 0.4 0.8 0.6
2032 -3.0 -2.0 2.1 1.4 3.1 2.1
2042 -5.2 -3.5 4.8 3.2 6.9 4.6
2052 -6.2 -4.2 6.3 4.2 8.9 6.0
2075 -6.1 -4.1 6.0 4.1 8.6 5.8
Scaled high earner ($56,443 in 2002)
2012 -0.3 -0.2 0.0 0.0 0.0 0.0
2022 -1.5 -1.0 0.7 0.4 1.0 0.7
2032 -3.6 -2.4 2.6 1.8 3.8 2.5
2042 -6.3 -4.2 5.8 3.9 8.3 5.6
2052 -7.5 -5.1 7.6 5.1 10.8 7.3
2075 -7.4 -5.0 7.3 4.9 10.4 7.0
Steady maxi mum e arner ( $84,900 in 2002)
2012 -0.5 -0.4 0.0 0.0 0.0 0.0
2022 -1.9 -1.3 0.7 0.5 1.2 0.8
2032 -4.3 -2.9 3.0 2.0 4.4 2.9
2042 -8.0 -5.4 7.5 5.1 10.7 7.3
2052 -10.5 -7.1 10.9 7.4 15.6 10.5
2075 -10.2 -6.9 10.5 7.1 15.0 10.1
So urce : T able prepared by CRS b ased on data fr om SSA, Office of the Chief Actuary, January 2002.



Table A-2. C ommission Model 1: Percent C hange in Proposed
Benefits Relative to Benefits Payable Under C urrent Law
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 -0.2 -0.1 0.0 0.0 0.0 0.0
2022 -0.9 -0.6 0.4 0.3 0.6 0.4
2032 -2.2 -1.5 1.6 1.1 2.3 1.6
2042 31.5 33.2 41.7 40.1 43.8 41.5
2052 31.7 33.8 44.6 42.5 47.3 44.3
2075 42.4 44.6 55.9 53.7 58.7 55.6
Scaled medium earner ($35,277 in 2002)
2012 -0.3 -0.2 0.0 0.0 0.0 0.0
2022 -1.2 -0.8 0.5 0.4 0.8 0.6
2032 -3.0 -2.0 2.1 1.4 3.1 2.1
2042 29.7 32.0 43.4 41.2 46.2 43.1
2052 29.5 32.3 46.8 44.0 50.5 46.5
2075 40.1 43.0 58.2 55.2 62.0 57.9
Scaled high earner ($56,443 in 2002)
2012 -0.3 -0.2 0.0 0.0 0.0 0.0
2022 -1.5 -1.0 0.7 0.4 1.0 0.7
2032 -3.6 -2.4 2.6 1.8 3.8 2.5
2042 28.2 31.0 44.7 42.2 48.2 44.5
2052 27.7 31.1 48.6 45.2 53.1 48.2
2075 38.2 41.7 60.1 56.5 64.7 59.7
Steady maxi mum e arner ( $84,900 in 2002)
2012 -0.5 -0.4 0.0 0.0 0.0 0.0
2022 -1.9 -1.3 0.7 0.5 1.2 0.8
2032 -4.3 -2.9 3.0 2.0 4.4 2.9
2042 25.8 29.4 47.1 43.7 51.5 46.7
2052 23.7 28.4 53.2 48.3 59.6 52.6
2075 33.9 38.9 64.8 59.7 71.5 64.3
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-3. C ommission Model 1: Percent C hange in Proposed
Benefits Relative to 2001 Benefit L evels
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 13.3 12.7 13.5 12.9 13.6 12.9
2022 19.3 18.5 20.9 19.6 21.1 19.8
2032 24.9 24.2 29.7 27.4 30.6 28.0
2042 35.2 35.2 45.6 42.1 47.8 43.6
2052 47.6 48.0 62.0 57.6 65.1 59.7
2075 84.5 84.9 101.9 96.5 105.6 99.0
Scaled medium earner ($35,277 in 2002)
2012 13.2 12.6 13.5 12.8 13.6 12.9
2022 18.9 18.2 21.0 19.7 21.4 19.9
2032 23.8 23.5 30.4 27.8 31.6 28.6
2042 33.3 33.9 47.3 43.2 50.2 45.2
2052 45.1 46.3 64.4 59.2 68.6 62.0
2075 81.4 82.8 104.8 98.4 109.8 101.8
Scaled high earner ($56,443 in 2002)
2012 15.1 14.6 15.5 14.8 15.6 14.9
2022 20.6 20.1 23.3 21.9 23.7 22.2
2032 25.2 25.1 33.2 30.5 34.8 31.5
2042 34.0 35.2 51.3 46.7 54.9 49.1
2052 45.6 47.5 69.4 63.4 74.5 66.8
2075 82.0 84.4 110.9 103.6 117.0 107.7
Steady maxi mum e arner ( $84,900 in 2002)
2012 21.1 20.6 21.8 21.1 21.9 21.1
2022 29.1 28.7 32.6 31.0 33.1 31.4
2032 33.8 34.1 44.1 40.9 46.0 42.1
2042 41.4 43.6 65.3 59.5 70.3 62.8
2052 51.6 55.3 87.8 79.5 95.7 84.7
2075 89.7 94.2 133.4 123.4 143.0 129.7
So urce : T able prepared by CRS b ased on data fr om SSA, Office of the Chief Actuary, January 2002.



Table A-4. C ommission Model 2: Percent C hange in Proposed
Benefits for a Two-Earner Couple R elative t o B enefits
Promised Under C urrent Law
With no Real i nvest m e nt yi el d on personal account
Retiredpersonal
(age 65) account 3.0% 4.6% 5.3%
Scaled low e arner ( $15,875 in 2002)
2012 1.2 1.5 1.9 2.0
2022 9.2 10.6 13.2 13.7
2032 -0.9 2.3 9.9 11.3
2042 -10.0 -4.7 10.1 13.2
2052 -18.2 -12.0 6.5 10.5
2075 -34.5 -28.4 -10.4 -6.6
Scaled medium earner ($35,277 in 2002)
2012 -0.9 -0.5 0.0 0.0
2022 -9.9 -8.5 -6.1 -5.7
2032 -18.2 -15.2 -8.3 -7.0
2042 -25.7 -20.5 -5.9 -2.8
2052 -32.5 -26.1 -6.3 -2.0
2075 -45.9 -39.6 -20.5 -16.3
Scaled high earner ($56,443 in 2002)
2012 -0.9 -0.6 -0.2 -0.2
2022 -9.9 -8.9 -7.0 -6.7
2032 -18.2 -15.9 -10.7 -9.7
2042 -25.7 -21.8 -10.7 -8.4
2052 -32.5 -27.4 -11.3 -7.8
2075 -45.9 -40.9 -25.4 -22.0
Steady maxi mum e arner ( $84,900 in 2002)
2012 -0.9 -0.7 -0.4 -0.3
2022 -9.9 -9.0 -7.5 -7.2
2032 -18.2 -16.3 -12.0 -11.2
2042 -25.7 -22.4 -13.3 -11.4
2052 -32.5 -28.4 -15.8 -13.1
2075 -45.9 -41.9 -29.7 -27.1
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-5. C ommission Model 2: Percent C hange in Proposed
Benefits for a One-Earner Couple R elative t o B enefits
Promised Under C urrent Law
With no Real investment yield on personal account
Retiredpersonal
(age 65) account 3.0% 4.6% 5.3%
Scaled low e arner ( $15,875 in 2002)
2012 1.2 1.4 1.7 1.7
2022 9.2 10.0 11.9 12.2
2032 -0.9 1.3 6.4 7.4
2042 -10.0 -6.4 3.6 5.7
2052 -18.2 -14.1 -1.5 1.2
2075 -34.5 -30.4 -18.2 -15.6
Scaled medium earner ($35,277 in 2002)
2012 -0.9 -0.6 -0.3 -0.3
2022 -9.9 -9.0 -7.3 -7.0
2032 -18.2 -16.2 -11.5 -10.7
2042 -25.7 -22.2 -12.3 -10.2
2052 -32.5 -28.1 -14.8 -11.9
2075 -45.9 -41.7 -28.7 -25.9
Scaled high earner ($56,443 in 2002)
2012 -0.9 -0.7 -0.5 -0.4
2022 -9.9 -9.2 -7.9 -7.7
2032 -18.2 -16.7 -13.1 -12.5
2042 -25.7 -23.0 -15.5 -14.0
2052 -32.5 -29.0 -18.2 -15.8
2075 -45.9 -42.5 -32.0 -29.7
Steady maxi mum e arner ( $84,900 in 2002)
2012 -0.9 -0.7 -0.5 -0.5
2022 -9.9 -9.3 -8.3 -8.1
2032 -18.2 -16.9 -14.0 -13.5
2042 -25.7 -23.5 -17.3 -16.0
2052 -32.5 -29.7 -21.2 -19.4
2075 -45.9 -43.2 -35.0 -33.2
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-6. C ommission Model 2: Percent C hange in Proposed
Benefits Relative to Benefits Payable Under C urrent Law
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 1.5 1.4 1.9 1.7 2.0 1.7
2022 10.6 10.1 13.2 11.9 13.7 12.2
2032 2.3 1.3 9.9 6.4 11.3 7.4
2042 30.3 28.0 50.6 41.7 54.8 44.5
2052 21.5 18.7 47.2 36.0 52.6 39.8
2075 6.8 3.8 33.6 22.0 39.3 25.8
Scaled medium earner ($35,277 in 2002)
2012 -0.5 -0.6 0.0 -0.3 0.0 -0.3
2022 -8.5 -9.0 -6.1 -7.3 -5.7 -7.0
2032 -15.2 -16.2 -8.3 -11.5 -7.0 -10.7
2042 8.7 6.4 28.8 20.0 32.9 22.8
2052 2.1 -0.7 29.4 17.7 35.3 21.7
2075 -9.9 -13.0 18.6 6.3 24.8 10.5
Scaled high earner ($56,443 in 2002)
2012 -0.6 -0.7 -0.2 -0.5 -0.2 -0.4
2022 -8.9 -9.2 -7.0 -7.9 -6.7 -7.7
2032 -15.9 -16.7 -10.7 -13.1 -9.7 -12.5
2042 7.0 5.3 22.2 15.5 25.3 17.7
2052 0.4 -2.0 22.5 13.0 27.3 16.3
2075 -11.8 -14.3 11.3 1.4 16.4 4.8
Steady maxi mum e arner ( $84,900 in 2002)
2012 -0.7 -0.7 -0.4 -0.5 -0.3 -0.5
2022 -9.0 -9.3 -7.5 -8.3 -7.2 -8.1
2032 -16.3 -16.9 -12.0 -14.0 -11.2 -13.5
2042 6.1 4.7 18.6 13.1 21.2 14.9
2052 -1.1 -2.9 16.3 8.8 20.1 11.4
2075 -13.3 -15.3 4.9 -3.0 8.8 -0.3
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-7. C ommission Model 2: Percent C hange in Proposed
Benefits Relative to 2001 Benefit L evels
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 15.3 14.4 15.7 14.8 15.8 14.8
2022 33.1 31.3 36.3 33.5 36.8 33.8
2032 30.6 27.6 40.3 34.1 42.1 35.3
2042 34.0 29.9 54.8 43.8 59.1 46.7
2052 36.2 31.3 64.9 50.5 71.1 54.6
2075 38.3 32.8 73.1 55.9 80.5 60.9
Scaled medium earner ($35,277 in 2002)
2012 12.9 12.1 13.5 12.5 13.5 12.5
2022 10.1 8.5 13.0 10.5 13.5 10.8
2032 8.2 5.6 17.0 11.5 18.6 12.6
2042 11.7 8.0 32.3 21.7 36.6 24.5
2052 14.4 9.8 45.0 30.1 51.6 34.6
2075 16.6 11.2 53.6 35.9 61.6 41.2
Scaled high earner ($56,443 in 2002)
2012 14.8 14.0 15.2 14.3 15.3 14.3
2022 11.6 10.2 13.9 11.7 14.3 12.0
2032 9.2 6.9 16.0 11.4 17.2 12.2
2042 11.9 8.7 27.8 19.2 31.0 21.4
2052 14.4 10.3 39.6 27.1 45.1 30.8
2075 16.2 11.5 46.7 31.9 53.3 36.3
Steady maxi mum e arner ( $84,900 in 2002)
2012 21.0 20.2 21.4 20.4 21.4 20.4
2022 19.7 18.2 21.7 19.6 22.1 19.8
2032 17.0 14.7 23.0 18.7 24.2 19.5
2042 19.3 16.2 33.4 25.5 36.3 27.5
2052 21.2 17.5 42.6 31.7 47.2 34.8
2075 22.7 18.5 48.5 35.7 54.1 39.4
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-8. C ommission Model 3: Percent C hange in Proposed
Benefits for a Two-Earner Couple R elative t o B enefits
Promised Under C urrent Law
With no Real i nvest m e nt yi el d on personal account
Retiredpersonal
(age 65) account 3.0% 4.6% 5.3%
Scaled low e arner ( $15,875 in 2002)
2012 0.2 1.2 1.6 1.6
2022 2.1 5.0 7.4 7.8
2032 -3.9 1.5 8.1 9.4
2042 -8.6 -0.8 12.1 14.8
2052 -13.1 -4.4 11.9 15.3
2075 -22.2 -13.7 2.0 5.4
Scaled medium earner ($35,277 in 2002)
2012 -0.9 0.4 0.9 1.0
2022 -8.0 -4.1 -0.9 -0.4
2032 -13.5 -6.2 2.8 4.4
2042 -17.7 -7.2 10.3 13.9
2052 -21.7 -10.0 11.9 16.6
2075 -29.9 -18.5 2.7 7.2
Scaled high earner ($56,443 in 2002)
2012 -1.0 0.6 1.1 1.2
2022 -9.2 -4.6 -1.6 -1.2
2032 -15.5 -7.0 1.3 2.8
2042 -19.7 -7.4 9.7 13.3
2052 -23.6 -9.9 12.6 17.5
2075 -31.6 -18.3 3.5 8.2
Steady maxi mum e arner ( $84,900 in 2002)
2012 -1.2 1.1 1.7 1.8
2022 -11.9 -6.1 -3.2 -2.8
2032 -20.2 -10.0 -2.1 -0.6
2042 -24.1 -9.0 7.9 11.4
2052 -27.8 -10.1 13.2 18.2
2075 -35.4 -18.2 4.3 9.2
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-9. C ommission Model 3: Percent C hange in Proposed
Benefits for a One-Earner Couple R elative t o B enefits
Promised Under C urrent Law
With no Real investment yield on personal account
Retiredpersonal
(age 65) account 3.0% 4.6% 5.3%
Scaled low e arner ( $15,875 in 2002)
2012 0.2 0.9 1.1 1.2
2022 2.1 4.1 5.7 5.9
2032 -3.9 -0.3 4.2 5.0
2042 -8.6 -3.4 5.4 7.2
2052 -13.1 -7.2 3.8 6.1
2075 -22.2 -16.5 -5.8 -3.6
Scaled medium earner ($35,277 in 2002)
2012 -0.9 0.0 0.3 0.4
2022 -8.0 -5.4 -3.2 -2.9
2032 -13.5 -8.5 -2.5 -1.4
2042 -17.7 -10.6 1.2 3.6
2052 -21.7 -13.8 1.0 4.1
2075 -29.9 -22.2 -7.9 -4.9
Scaled high earner ($56,443 in 2002)
2012 -1.0 0.1 0.4 0.5
2022 -9.2 -6.1 -4.1 -3.8
2032 -15.5 -9.8 -4.2 -3.1
2042 -19.7 -11.4 0.2 2.6
2052 -23.6 -14.3 0.9 4.2
2075 -31.6 -22.6 -7.9 -4.7
Steady maxi mum e arner ( $84,900 in 2002)
2012 -1.2 0.4 0.8 0.8
2022 -11.9 -8.0 -6.1 -5.8
2032 -20.2 -13.4 -8.0 -7.0
2042 -24.1 -13.9 -2.5 -0.1
2052 -27.8 -15.9 -0.1 3.3
2075 -35.4 -23.8 -8.5 -5.2
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-10. Commission Model 3: Percent C hange in Proposed
Benefits Relative to Benefits Payable Under C urrent Law
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 1.2 0.9 1.6 1.1 1.6 1.2
2022 5.0 4.1 7.4 5.7 7.8 5.9
2032 1.5 -0.3 8.1 4.2 9.4 5.0
2042 35.6 32.2 53.4 44.2 57.1 46.6
2052 32.1 28.2 54.5 43.3 59.3 46.6
2075 28.7 24.6 52.2 40.5 57.2 43.8
Scaled medium earner ($35,277 in 2002)
2012 0.4 0.0 0.9 0.3 1.0 0.4
2022 -4.1 -5.4 -0.9 -3.2 -0.4 -2.9
2032 -6.2 -8.5 2.8 -2.5 4.4 -1.4
2042 26.9 22.3 50.8 38.4 55.8 41.8
2052 24.3 19.1 54.5 39.5 61.0 43.8
2075 21.5 16.0 53.1 37.4 59.9 41.9
Scaled high earner ($56,443 in 2002)
2012 0.6 0.1 1.1 0.4 1.2 0.5
2022 -4.6 -6.1 -1.6 -4.1 -1.2 -3.8
2032 -7.0 -9.8 1.3 -4.2 2.8 -3.1
2042 26.6 21.2 50.1 37.0 54.9 40.3
2052 24.5 18.3 55.6 39.3 62.3 43.9
2075 21.9 15.5 54.4 37.4 61.5 42.2
Steady maxi mum e arner ( $84,900 in 2002)
2012 1.1 0.4 1.7 0.8 1.8 0.8
2022 -6.1 -8.0 -3.2 -6.1 -2.8 -5.8
2032 -10.0 -13.4 -2.1 -8.0 -0.6 -7.0
2042 24.5 17.8 47.6 33.4 52.4 36.6
2052 24.2 16.2 56.3 37.9 63.3 42.7
2075 22.0 13.7 55.7 36.4 63.0 41.4
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Table A-11. Commission Model 3: Percent C hange in Proposed
Benefits Relative to 2001 Benefit L evels
3.0% real yield 4.6% real yield 5.3% real yield
Retired 2-earner 1-earner 2-earner 1-earner 2-earner 1-earner
(age 65) coupl e coupl e couple coupl e coupl e couple
Scaled low e arner ( $15,875 in 2002)
2012 14.9 13.8 15.3 14.1 15.4 14.2
2022 26.5 24.2 29.3 26.0 29.7 26.3
2032 29.6 25.7 38.0 31.3 39.6 32.4
2042 39.4 34.1 57.7 46.3 61.4 48.8
2052 48.0 41.8 73.2 58.6 78.5 62.1
2075 66.7 59.3 97.1 79.6 103.6 83.9
Scaled medium earner ($35,277 in 2002)
2012 14.0 12.8 14.6 13.2 14.6 13.3
2022 15.5 12.9 19.2 15.4 19.9 15.8
2032 19.8 15.2 31.2 22.8 33.3 24.3
2042 30.4 24.0 55.0 40.4 60.1 43.8
2052 39.3 31.7 73.1 54.3 80.4 59.1
2075 57.3 48.3 98.3 75.6 107.0 81.4
Scaled high earner ($56,443 in 2002)
2012 16.2 14.9 16.8 15.3 16.9 15.4
2022 16.9 14.0 20.5 16.4 21.1 16.8
2032 20.7 15.6 31.5 22.8 33.5 24.2
2042 32.4 25.1 56.9 41.4 62.0 44.8
2052 41.9 33.2 77.4 56.8 85.0 61.9
2075 60.6 50.2 103.5 78.7 112.7 84.9
Steady maxi mum e arner ( $84,900 in 2002)
2012 23.2 21.5 23.9 22.0 24.0 22.0
2022 23.6 20.0 27.3 22.5 28.0 22.9
2032 25.8 19.6 36.9 27.0 39.0 28.4
2042 39.9 30.7 66.0 48.0 71.4 51.6
2052 52.2 40.7 91.6 66.9 100.2 72.7
2075 72.8 59.0 120.5 90.8 130.8 97.7
Source: T able p repared b y CRS based o n d ata from SSA, Office of the Chief Actuary, January 2002.



Appendix B . General Accounting Office Analys is of
Commission Reform Models
At the requ e s t of the S enate C ommittee o n Agi ng, t he General Accounting
Office (GAO) issued a report 37 t h at anal yz es t h e reform m odel s recom m ended b y t he
Pres ident’s C ommission. The GAO repor t focused primarily on Model 2 . The GAO
used two alternative outcomes — one with uni versal (100%) p articipation i n p ersonal
accounts and one with no participation i n personal accounts. The assumptions used
regarding economic growth were those contai ned i n t he intermediate assumptions of
the 2001 Trustees R e p o r t . Presumably, under t hese assumptions the p rojected
average real rate of return on pers onal acc ount s i nvested in a broad mix of funds
would b e 4.6% (about 8% in nominal terms), t he same as used in t h e i ntermediate
rate of return scenario shown i n S S A’s benefit ex amples.
In terms o f b enefit adequacy and i ndividual equity, t he report found that under
Model 2 future retirees who chose t o p articipate i n p ersonal accounts would receive
a combination o f S ocial S ecurit y a n d p e rsonal account benefits that, d espite the
benefit o ffset, woul d b e h igher t han for retirees who chose not to participat e i n
p e r s o n al accounts. If participation i n p ersonal accounts were universal, t h e
combination o f b enefits would b e h igher t han t hose t hat would b e p aid i n t he future
if benefits were reduced to fit within the p rogram’s projected revenue. If
participation i n p ersonal accounts were not universal, retirees who d id not choose t o
participate i n p ersonal accounts eventually would receive benefits t h at would b e
lower t han t hose t hat would b e p aid i n t he fu ture if benefits were reduced to fit within
the p rogram’s projected revenue. T he c ohort result s under M odel 3 are generally
similar t o Model 2.
In terms of the effect on the program financing, the GAO found that Model 2
would reduce t he cost of the p rogram and p rovide sustainable s o l v e n c y, without
general revenue subsidies and regardless of whether workers participate i n p ersonal
accounts. However, if all workers chose t o p a rticipate i n p ersonal accounts, over
t h ree d ecades of general revenue t ransfers woul d b e n eeded t o achi eve t rust fund
sol v ency. M odel 3 al so rest ores sol v en cy over t he 75-year period, rega r d less of
whether workers participate i n p ersonal accounts, although general fund revenues are
needed throughout the p rojection p eriod t o k eep Social Security solvent. However,
i f part i ci p at i o n i n p ersonal accou n t s were uni versal , at t he end o f t he proj ect i o n
period the S ocial S ecurity trust fund ratio would be declining, whereas if
participation were z ero, it would be rising.


37 GAO Re por t GAO -03-310, Social Securi t y R e form: Analysis of Reform Models
De veloped by t he President’s Commi ssion to Strengthen Social Security.

Appendix C . M embers of the P resident’s
Commission to Strengthen S ocial S ecurity
Co-Chairmen
Patrick Moynihan (Democrat )
Former New York Senator and C hairman of t he Senate Fi nance C ommittee
Di ck Pa rson s (Republican)
C o -C hi ef Operat i n g O ffi cer of AOL/ T i m e W arner
Members
Leanne Abdnor (Republican)
Former Ex ecutive Direct or of the Alliance for Worker Retirem ent S ecurity
S a m B eard (Democrat )
Founder and President o f Economic Security 2000
John Cogan (Republican)
Fo rmer OMB Deputy Direct or under P resident Reagan
Robert Deposada (Republican)
Ex ecutive Director, Hispanic Business R oundtable and President and C EO
of ONE R esearch and M arket i n g, In c.
B i l l Fren zel (Republican)
Former Minnesota Repres entative
Estelle James (Democrat )
Consultant with the W orld Bank, former W o rld Bank l ead economist i n
P o l i cy R esearch Depart m ent
Robert Johnson (Democrat )
C E O o f Bl ack Ent ert ai nm ent T el evi s i o n
Gw endolyn King (Republican)
Former Commissioner of t he Soci al Security Administration
Olivia Mi tchell (Democrat )
Professor at W harton University, former co-chair o f t he 1994-96 Social
Security Advisory Council’s t echni cal panel o n retirement s aving
Gerry Pa rsk y (Republican)
Fo rmer Assistant S ecretary o f t he Treasury under P resident Fo rd
Tim Penny (Democrat )
Former Minnesota Repres entative



Rob ert Po zen (Democrat )
Fi delity Investments
Thomas Saving (Republican)
Tex as A &M Di rect or of P ri v at e E nt erpri s e R esearch C ent er and a S o ci al
Security Public Trustee
Fi del Vargas (Democrat )
Form er m ayo r o f Bal dwi n P ark, C al i forni a and current Vi ce P resi d ent o f
Reliant Equity Investors
E x ecu ti ve Di rector: C harles P. Bl ahous
The full t ex t of t he Commission’s reports and m eeting t ranscripts are available
on the C ommission’s web site at [ http://www.csss.gov] .