A. SOCIAL SECURITY AMENDMENTS SINCE THE 1994 REPORT
Since the 1994 Annual Report was transmitted to the Congress on April 11, 1994, three laws affecting the OASDI program in a significant way have been enacted. The more important legislative changes, from an actuarial standpoint, are described below.
The Social Security Independence and Program Improvements Act of 1994 (Public Law 103-296, signed on August 15, 1994) established the Social Security Administration as an independent agency, effective March 31, 1995. Under the new law, the Commissioner of Social Security is appointed by the President and confirmed by the Senate to serve a 6-year term. The law also provides for Presidential appointment and Senate confirmation of a Deputy Commissioner to serve a 6-year term. The initial term of office for both the Commissioner and the Deputy Commissioner will end January 19, 2001.
The law provides that the Commissioner of Social Security, who previously served as Secretary of the Board of Trustees, is a member of the Board and that the Deputy Commissioner is Secretary of the Board.
The law includes several additional provisions that affect the trust funds from a financial standpoint. Among the most significant of these changes are:
- Restrictions, generally effective 180 days after enactment, were placed on Social Security disability insurance benefit payments to individuals disabled by drug addiction and alcoholism. Among the provisions affecting these individuals were: time limiting benefits and payments to 36 months; suspending benefits for non-compliance with treatment for substance abuse; strengthening representative payee requirements; imposing treatment require ments on DI beneficiaries; establishing referral and monitoring agreements in all States; and generally requiring gradual payment of any retroactive benefits due to substance abusers.
- The amount State and local election officials and election workers must be paid for the earnings to be covered under Social Security was increased from $100 to $1000 a year, effective January 1, 1995. Beginning in the year 2000, the coverage threshold is scheduled to increase automatically as wage levels rise.
- In calculating increases in the OASDI contribution and benefit base and the earnings test exempt amounts for all years after 1994, the base year used in calculating the increases is designated as 1994. Since increases in the base and exempt amounts will no longer depend on the rounded amounts applicable in the previous year, distortion in these amounts which could occur over time is eliminated.
The Social Security Domestic Employment Reform Act of 1994 (Public Law 103-387, signed on October 22, 1994) included a number of provisions affecting the OASDI program. The more important legislative changes, from an actuarial standpoint are:
- A greater portion of the OASDI tax rate, which is 6.20 percent for employees and employers, each, was allocated to the DI Trust Fund effective with respect to wages paid after December 31, 1993, and to self-employment income for taxable years beginning after such date. For 1994 through 1996, the rate allocated to the DI Trust Fund was increased from 0.60 percent to 0.94 percent for employees and employers, each. (The reallocation resulted in transfers of taxes from the OASI Trust Fund to the DI Trust Fund in October and November 1994 for the retroactive period.) For 1997 through 1999, the DI rate was increased from 0.60 per cent to 0.85 percent, each. Beginning with the year 2000, the DI Trust Fund allocation was increased from 0.71 percent to 0.90 percent.
- The coverage threshold for domestic employees' earnings paid per employer was raised from $50 per calendar quarter to $1,000 annually in calendar year 1994. In cases where domestic employees were paid less than $1,000 in 1994, their employers must report the earnings on form W-2 and the employees will receive credit under Social Security for wages. However, no Social Security taxes are payable on these wages. In calendar years after 1995, the $1,000 coverage threshold will increase in $100 increments as average wages increase.
- The prisoner nonpayment provision already in the law was extended to all individuals confined to a jail, prison, or other penal institution or correctional facility pursuant to a conviction of a crime punishable by imprisonment for more than 1 year (regardless of the actual sentence imposed). Suspension will also apply to beneficiaries confined by court order in an institution at public expense in connection with a finding that the individual is: guilty but insane, with respect to an offense punishable by imprisonment for more than 1 year; not guilty of such an offense by reason of insanity or by reason of similar factors (such as a mental disease, a mental defect, or mental incompetence); or incompetent to stand trial for such an offense.
The Uruguay Round Agreements Act (Public Law 103-465, signed on December 8, 1994) included a provision that increased from 50 to 85 percent the amount of Social Security benefits which are subject to mandatory Federal income tax withholding because they are paid to nonresident aliens. This provision applies to benefits paid in taxable years ending after December 31, 1994.
The actuarial estimates shown in this report reflect the anticipated effects of these changes.