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