The Nation's Retirement System: A Comprehensive Re-evaluation Needed to Better Promote Future Retirement Security

Published by the Government Accountability Office on 2019-02-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                              United States Government Accountability Office
                              Before the Special Committee on Aging,
                              U.S. Senate

                              THE NATION’S
For Release on Delivery
Expected at 9:30 a.m. ET
Wednesday, February 6, 2019

                              RETIREMENT SYSTEM
                              A Comprehensive
                              Re-evaluation Needed to
                              Better Promote Future
                              Retirement Security
                              Statement of Gene L. Dodaro, Comptroller General of the
                              United States

                                               February 6, 2019

                                               THE NATION’S RETIREMENT SYSTEM
                                               A Comprehensive Re-evaluation Needed to Better
                                               Promote Future Retirement Security
Highlights of GAO-19-342T, a testimony
before the Special Committee on Aging,
U.S. Senate

Why GAO Did This Study                         What GAO Found
Strengthening the U.S. retirement              Fundamental changes over the past 40 years have led to various risks and
system to be more accessible and               challenges for the three main pillars supporting the U.S. retirement system. For
financially sound is important to              example, current projections indicate that by 2034, the Old-Age and Survivors
ensuring that all Americans can retire         trust fund for Social Security’s retirement program—the first pillar—will only be
with dignity and security, and to              sufficient to pay 77 percent of scheduled benefits, due in part to the aging of the
managing the fiscal exposures to the           population (see figure). Other federal government retirement-related programs
federal government from various                also face financial uncertainty. For example, the Pension Benefit Guaranty
retirement-related programs. Currently,        Corporation, which insures the pension benefits of most private sector defined
the U.S. retirement system, and many
                                               benefit plans, estimates a greater than 90 percent chance the multiemployer
of the workers and retirees it was
                                               program will be insolvent by 2025. Meanwhile, employer-sponsored plans—the
designed to help, face major
                                               second pillar—have experienced a shift from traditional defined benefit (DB)
                                               plans that generally provide set monthly payments for life, to defined contribution
This testimony discusses (1) the fiscal        (DC) account-based plans, like 401(k)s. DC plans provide greater portability of
risks and other challenges facing the          savings that can be better suited to the needs of a more mobile workforce, but
U.S. retirement system, and (2) the            also require individuals to assume more responsibility for planning and managing
need to re-evaluate our nation’s               their savings. While DC plans can provide meaningful retirement security for
approach to financing retirement. It is        many, especially higher earners, lower earners appear more prone to having
based on a 2017 report, GAO-18-                little or no savings in their DC accounts. Further, individuals’ savings—the third
111SP, on the nation’s retirement              pillar—may be constrained by economic trends such as low real wage growth
system, with updated statistics when
                                               and growing out-of-pocket health care costs. Combined with increased longevity,
more recent estimates from publicly
                                               these challenges can put individuals at greater risk of outliving their savings and
available sources were available.
                                               fiscal pressures on government programs will likely grow.
What GAO Recommends
                                               The U.S. Population Is Aging
In the 2017 report, GAO recommended
that Congress should consider
establishing an independent
commission to comprehensively
examine the US retirement system and
make recommendations to clarify key
policy goals for the system and
improve how the nation promotes
retirement security.

                                               Congress generally has sought to address retirement-related issues in an
                                               incremental fashion. Also, no one agency is responsible for overseeing the U.S.
                                               retirement system in its entirety, so there is no obvious federal agency to lead a
                                               comprehensive reform effort. It has been nearly 40 years since a federal
                                               commission has conducted a comprehensive evaluation of the nation’s approach
                                               to financing retirement. Without a more comprehensive re-evaluation of the
View GAO-19-342T. For more information,
contact Charles A. Jeszeck at (202) 512-7215   challenges across all three pillars of the system, it may be difficult to identify
or jeszeckc@gao.gov.                           effective, enduring solutions. Unless timely action is taken, many older
                                               Americans risk not having sufficient means for a secure and dignified retirement.
                                                                                       United States Government Accountability Office

         Chairman Collins, Ranking Member Casey, and Members of the

         Thank you for the opportunity to discuss the state of our nation’s
         retirement system. Fundamental changes to the U.S. retirement system
         have occurred over the past 40 years. Traditional pensions have become
         less common, and the number of defined contribution plans, such as
         401(k)s, has been growing. These types of plans can provide meaningful
         retirement security for many; however, the U.S. retirement system, and
         many of the workers and retirees it was designed to help, are facing
         major challenges. Social Security’s financial outlook is threatened by
         demographic trends, certain large pension plans face insolvency, and
         individuals are increasingly responsible for planning and managing their
         own retirement accounts. Strengthening the U.S. retirement system to be
         more accessible and financially sound is important to better ensuring that
         all Americans can retire with dignity and security, and to managing the
         fiscal risks to the federal government from various retirement-related

         My statement today will focus on two topics: (1) the fiscal risks and other
         challenges facing the U.S. retirement system; and (2) the need to re-
         evaluate our nation’s approach to financing retirement.

         My statement is based primarily on a report we issued in October 2017. 1
         For that report, we began with an examination of our recently published
         work and supplemented it with additional information from various federal
         agencies, organizations, and institutions. We also obtained insights from
         a panel of 15 experts that we convened in November 2016, representing
         a range of organizations, subject matter expertise, and views (see app. I
         for a list of the panelists). For this testimony, we updated statistics when
         more recent estimates from publicly available sources were available. A
         detailed description of the methodologies used is included in our prior
         report. We conducted the work on which this statement is based in
         accordance with generally accepted government auditing standards.
         Those standards require that we plan and perform the audit to obtain
         sufficient, appropriate evidence to provide a reasonable basis for our
         findings and conclusions based on our audit objectives. We believe that

          GAO, The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to
         Better Promote Future Retirement Security, GAO-18-111SP (Washington, D.C.: Oct. 18,

         Page 1                                                                   GAO-19-342T
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.

             Social Security has been the foundation of retirement security in the
Background   United States. Enacted in 1935, Social Security provides for the general
             welfare of older Americans by, among other things, establishing a system
             of federal old-age benefits, including a retirement program. Officially titled
             Old-Age and Survivors Insurance (OASI), the Social Security retirement
             program provides benefits to retired workers, their families, and survivors
             of deceased workers. 2 About 51 million retirees and their families
             received $798.7 billion in Social Security retirement benefits in 2017,
             according to Social Security Administration (SSA), which is responsible
             for administering the program. 3

             About 40 years after the creation of Social Security, landmark legislation
             was enacted in 1974 that has played a major role in establishing the
             structure for private sector employers’ involvement in sponsoring
             retirement plans for their workers: the Employee Retirement Income
             Security Act of 1974 (ERISA). ERISA is a complex law administered by
             multiple federal agencies including the Department of Labor (DOL), the
             Internal Revenue Service (IRS) within the Department of the Treasury
             (Treasury), along with the Pension Benefit Guaranty Corporation (PBGC),
             and has evolved with many significant amendments over the years (see
             app. II).

             ERISA was enacted, in part, to address public concerns about the
             security of pension benefits, including the prominent failure of a couple of
             large, private sector pension plans. The act, as amended, does not
             require any employer to establish a retirement plan, but those who do
             must meet certain requirements and minimum standards. For example,
             ERISA establishes certain requirements for all employer-sponsored
             plans, including responsibilities for plan fiduciaries (those who manage
             and control plan assets, among others), as well as minimum funding
             standards for defined benefit (DB) plans, which traditionally promise to
             provide a monthly payment to retirees for life. ERISA also established the

              For more about Social Security, see GAO, Social Security’s Future: Answers to Key
             Questions, GAO-16-75SP (Washington, D.C.: Oct. 27, 2015).
              In addition, on the revenue side, about 174 million people were working and paying
             Social Security taxes in 2017. For more information, see The Board of Trustees, The 2018
             Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance
             and Federal Disability Insurance Trust Funds (Washington, D.C.: June 5, 2018).

             Page 2                                                                     GAO-19-342T
PBGC, the government corporation responsible for insuring the pension
benefits of nearly 37 million American workers and retirees who
participate in nearly 24,800 private sector defined benefit plans. Under
ERISA, tax-qualified DB plans (or the employers who sponsor them) may
have to pay insurance premiums to the PBGC, based on the funding level
of their plans. The IRS also administers the Internal Revenue Code (IRC),
which has provisions that affect pensions and retirement savings.

While SSA administers the Social Security program, and the DOL, PBGC,
and IRS each are generally responsible for administering aspects of
ERISA, several other agencies also have important roles in various parts
of the retirement system. For example, the Department of Health and
Human Services oversees the Centers for Medicare and Medicaid
Services (CMS), which administers the major health care programs that
provide coverage for retirees, as well as the Administration on Aging,
which encourages and assists state grantees that provide services for
older adults.

In addition, agencies such as the U.S. Department of Agriculture and the
Department of Housing and Urban Development oversee food and
housing programs for older adults. Other agencies also play a role in
providing various services and supports for older adults. For example, the
Department of Transportation administers a program that improves
access and alternatives to public transportation for seniors and individuals
with disabilities. The Consumer Financial Protection Bureau, as part of its
mandate to provide financial literacy education, helps consumers
navigate financial choices related to retirement. The Federal Trade
Commission can have consumer protection and investor oversight roles
and responsibilities related to individuals borrowing against their
pensions. In addition, these federal agencies and others work together to
help combat elder financial exploitation, which experts have described as
an epidemic with society-wide repercussions. Citing our prior work on this
topic, in October 2017, Congress enacted the Elder Abuse Prevention
and Prosecution Act, calling on the Department of Justice to work with
other federal, state, and local law enforcement agencies to improve data

Page 3                                                           GAO-19-342T
                                         collection and provide technical assistance focused on combatting elder
                                         abuse. 4

                                         The need for government services and support for older adults in
                                         retirement will continue to grow as the proportion of older adults in the
                                         United States continues to rise significantly in the future. In 1970, those
                                         age 65 and over accounted for about 10 percent of the population, but by
                                         2060, they are expected to account for about 23 percent (see fig. 1). This
                                         reflects long-term decreases in birth rates and increases in life

Figure 1: The U.S. Population Is Aging

                                           Pub. L. No. 115-70, §§ 201-202, 131 Stat. 1208, 1211-12 (2017). For our prior work on
                                         this topic, see GAO, Elder Justice: Stronger Federal Leadership Could Enhance National
                                         Response to Elder Abuse, GAO-11-208 (Washington, D.C.: Mar. 2, 2011) and Elder
                                         Justice: National Strategy Needed to Effectively Combat Elderly Exploitation, GAO-13-110
                                         (Washington, D.C: Nov. 15, 2012).

                                         Page 4                                                                     GAO-19-342T
                                         The U.S. retirement system is supported by three main pillars—Social
Main Pillars of the                      Security, employer-sponsored plans, and individuals’ savings—that serve
U.S. Retirement                          as important sources of retirement income for Americans. Currently, each
                                         of these pillars faces various risks and other challenges. If left
System Face Fiscal                       unchanged, these risks present the federal government with significant
Risks and Other                          potential fiscal exposures, which may legally commit or create
                                         expectations for future federal spending. 5
Pillar One: Social Security              The first pillar, Social Security (specifically, Social Security’s retirement
and Other Federal                        program), is facing financial difficulties, as are other federal programs that
                                         provide essential supports to many older Americans, such as Medicare
                                         and the PBGC’s insurance programs (see fig. 2). In addition, multiple
                                         federal agencies help fund a broad array of home and community-based
                                         services for older adults. As the number of older adults needing
                                         assistance continues to grow, the pressure to increase federal funding for
                                         these services is likely to increase.

Figure 2: Timeline of Projected Fiscal Risks for Certain Federal Programs

                                         Notes: The Pension Benefit Guaranty Corporation insures most private sector defined benefit plans
                                         under one of two programs: the Single-Employer Insurance Program or the Multiemployer Insurance
                                         Program. Social Security’s Old-Age and Survivors Insurance is Social Security’s retirement program.

Social Security                          As the foundation of retirement security in the United States, Social
                                         Security’s retirement program, financed primarily by payroll taxes, helps
                                         reduce poverty among beneficiaries, many of whom rely on Social

                                           Long-term fiscal projections show that, absent fiscal policy changes, the federal
                                         government is on an unsustainable path, largely due to a projected growing gap between
                                         federal revenues and expenditures, driven by demographic changes, health care costs,
                                         and interest costs on the public debt. For more information on the nation’s fiscal exposure
                                         and fiscal health more generally, see GAO, The Nation’s Fiscal Health: Action Is Needed
                                         to Address the Federal Government’s Fiscal Future, GAO-18-299SP (Washington, D.C.:
                                         June 21, 2018).

                                         Page 5                                                                                GAO-19-342T
Security for the majority of their income once they retire. 6 Our analysis of
data from the Federal Reserve Board’s most recent Survey of Consumer
Finances (SCF) showed that in 2016, among households age 65 and
over, the bottom 20 percent, ranked by income, relied on Social Security
retirement benefits for 81 percent of their income, on average.

But Social Security is facing financial difficulties that, if not addressed, will
affect its long-term stability. During the many years that the revenue for
Social Security’s retirement program exceeded costs, the program built
up reserves in the trust fund. However, since 2010, Social Security has
been paying out more in benefits than it received and has relied on
interest income to help cover expenses. For 2018, the cost of the
program was expected to exceed total income by $2 billion and, as a
result, asset reserves were expected to decline. If no changes are made,
current projections indicate that by 2034, the retirement program trust
fund will only be sufficient to pay 77 percent of scheduled benefits. 7

The underlying cause of Social Security’s financial difficulties is the aging
population, driven by lower fertility rates and increased life expectancy,
and accelerated by the ongoing retirement of the baby boom generation. 8
The first baby boomers began receiving Social Security retirement
benefits in 2008, and growing numbers will become eligible for Social
Security benefits in coming years. Our analysis indicates that the number
of baby boomers turning 65 is projected to increase from an average of
about 10,200 per day in 2018 to more than 11,000 per day in 2029 (see
fig. 3).

  Old-Age and Survivors Insurance, also known as Social Security’s retirement program,
provides benefits to retirees as well as their survivors and dependents.
 The Board of Trustees, The 2018 Annual Report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds
(Washington, D.C.: June 5, 2018).
  One measure of an aging population is the portion of a population above a certain age,
such as 65. Two key drivers of the proportion of a population above a certain age are
fertility rates and longevity.

Page 6                                                                       GAO-19-342T
Figure 3: Average Daily Number of People Turning 65

Note: Census data estimates of population are as of July 1 in each year. For baby boomers, born
between 1946 and 1964, the age at which Social Security pays unreduced retirement benefits
gradually increases from 66 to 67.

As with the Social Security retirement program, reserves had also built up
over time in the trust fund for Social Security’s disability program, but in
2005, the program began paying out more than it was taking in. To avoid
benefit reductions, which were expected to begin in 2016, Congress
passed a law in late 2015 that temporarily reallocated some payroll tax
revenue from the retirement trust fund to the disability trust fund. 9 Even
with this added boost, if no further changes are made, reductions in

  According to the Social Security Trustees, in 2016 and 2017, non-interest income and
total income from the DI Trust Fund exceeded benefit payments due primarily to the
temporary reallocation of some of the payroll tax revenue from OASI to DI for the years
2016 through 2018.

Page 7                                                                               GAO-19-342T
                                         disability benefits are projected to be needed beginning in 2032,
                                         according to SSA’s most recent report. 10

                                         For both the Social Security retirement and disability programs combined,
                                         the number of workers contributing to Social Security for each aged,
                                         disabled, dependent, or surviving beneficiary is declining, due to the
                                         aging population and other factors. While there are currently 2.8 workers
                                         contributing to Social Security per beneficiary, this ratio is expected to
                                         decline to 2.2 by 2035, and to 2.0 by 2095 (see fig. 4).

Figure 4: Past and Projected Social Security Covered Workers per Social Security Beneficiary

                                         Note: Beneficiaries include all those receiving benefits from Social Security’s Old-Age and Survivors
                                         Insurance program and its Disability Insurance program combined. Data for the years between 1955
                                         and 1960 are not available.

                                            According to recent SSA data, applications for SSA’s Disability Insurance program have
                                         declined steadily in recent years from a peak of 2.9 million in 2010 to 2.2 million in 2017.
                                         At the same time the number of individuals being awarded benefits has also declined from
                                         a peak of 1 million in 2011 to 762,000 in 2017. Possible explanations for these trends
                                         include better labor market conditions, the availability of health care through the Patient
                                         Protection and Affordable Care Act, and lower award rates at all adjudicative levels of
                                         SSA’s disability determination process. For more information, see Social Security, Annual
                                         Statistical Supplement to the Social Security Bulletin, 2017. SSA Publication No. 13-11700
                                         (Washington, D.C. March 2018).

                                         Page 8                                                                                  GAO-19-342T
                        It is difficult to predict exactly what would occur if either Social Security’s
                        retirement or disability programs were to become insolvent because the
                        Social Security Act does not provide for any procedure for paying less
                        than full benefits. According to SSA, benefits could be reduced across the
                        board by a set percentage, certain benefits could be prioritized, or
                        benefits could be delayed.

Medicare and Medicaid   The major health care programs that include coverage for retirees,
                        Medicare and Medicaid, also face increasing financial challenges due to
                        program and demographic changes. For example, over the years,
                        Congress has made changes to Medicare so that more people have
                        become eligible, even if under age 65. 11 Also, Congress has added two
                        more parts to Medicare: one part allowing insurance under private plans
                        approved by Medicare (Medicare Advantage), 12 and another part
                        providing prescription drug coverage. As of 2017, over 58 million people
                        were enrolled in one or more parts under Medicare. Projections indicate
                        that in the coming decade, as more members of the baby-boom
                        generation become eligible for benefits, the number of Medicare
                        beneficiaries will rise to 75 million in 2027. Similar to the challenges
                        facing Social Security, spending for Medicare Part A (Hospital Insurance)
                        is projected to outpace revenue over time, 13 and the trust fund for
                        Medicare Part A is projected to be unable to pay full benefits beginning in

                           These changes included covering individuals with specific illnesses, such as end stage
                        renal disease. In addition, Medicare beneficiaries also include individuals under age 65
                        who are receiving benefits from Social Security or the Railroad Retirement Board on the
                        basis of a disability.
                          Medicare Advantage Plans (also known as Medicare Part C) are a type of Medicare
                        health plan offered by a private company that contracts with Medicare to provide certain
                        benefits. Medicare Advantage Plans include health maintenance organizations, preferred
                        provider organizations, private fee-for-service plans, special needs plans, and Medicare
                        medical savings account plans.
                           Medicare is funded primarily by payroll taxes, general revenue, and premiums paid by
                        Medicare beneficiaries.

                        Page 9                                                                       GAO-19-342T
       2026. At that time, the Hospital Insurance trust fund will only be sufficient
       to pay 91 percent of hospital-related Medicare spending. 14

       Medicaid, which provides health care coverage and financing for millions
       of low-income individuals, including those age 65 or older, also faces
       financial challenges. Medicaid is the nation’s primary payer for long-term
       services and supports, and the elderly—along with those with
       disabilities—are among the highest cost Medicaid beneficiaries. The
       federal government and states share in the financing of the Medicaid
       program, with the federal government matching most state expenditures
       for Medicaid services using a statutory formula. Estimated Medicaid
       outlays for fiscal year 2017 were $592.2 billion, of which $370.6 billion
       was financed by the federal government and $221.6 billion by the states.
       Over the next 7 years, Medicaid expenditures are expected to increase
       significantly, reaching just over $1 trillion in 2026.

PBGC   The PBGC insures the pension benefits of most private sector DB plans
       through one of its two programs: the Single-Employer Insurance Program
       and the Multiemployer Insurance Program. The single-employer program
       is the larger of the two programs. As of the end of fiscal year 2018, the
       single-employer program insured about 26 million workers and retirees
       participating in about 23,400 private sector single-employer DB plans. As
       of the end of fiscal year 2018, the multiemployer program insured about
       11 million workers and retirees in about 1,400 private sector DB plans
       created through a collective bargaining agreement between two or more
       employers and a union.

       Although PBGC is one of the largest of any federal government
       corporations, with over $110 billion in assets, its pension benefit
       guarantees are increasingly at risk due to its substantial liabilities. At the
       end of fiscal year 2018, PBGC’s net accumulated financial deficit was
       over $51 billion, and its exposure to potential future losses for
       underfunded retirement plans was estimated to be nearly $185 billion. 15

          The Boards of Trustees, 2018 Annual Report of the Boards of Trustees of the Federal
       Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds
       (Washington, D.C.: June 5, 2018). GAO designated Medicare as a high-risk program in
       1990 due to its size, complexity, and susceptibility to mismanagement and improper
       payments, and it remains on GAO’s high-risk list for these reasons. See GAO, High-Risk
       Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others,
       GAO-17-317 (Washington, D.C.: Feb. 15, 2017).
            PBGC, Annual Report 2018 (Washington, D.C.: Nov. 15, 2018).

       Page 10                                                                    GAO-19-342T
We designated the single-employer program as high risk in July 2003 and
added the multi-employer program to our high-risk list in January 2009.
Concerns about PBGC’s financial future have kept both programs on
GAO’s high-risk list. As long as PBGC’s long-term financial stability
remains uncertain, the retirement benefits of millions of U.S. workers and
retirees are at risk of greater reductions should their benefit plans be
terminated below PBGC’s current guaranteed benefit levels. 16

In contrast to Social Security, PBGC is not funded by tax revenues, but by
the premiums paid by plans or their sponsors, the assets acquired from
terminated plans, and investment returns on these funds. The primary
drivers of the government’s fiscal exposure related to PBGC’s deficit are
the collective financial risk of the many underfunded pension plans
insured by PBGC and the long-term decline in the number of participants
covered by traditional DB plans. Since 1985, there has been a 78 percent
decline in the number of plans insured by PBGC and more than 13 million
fewer workers actively participating in PBGC-insured plans. There has
also been a recent trend of single-employer plan sponsors transferring
the liability for some of their participants to insurance companies via
group annuity “buy-outs,” further reducing the number of participants in
PBGC-covered plans. As a result of these trends, even though PBGC
premium rates have increased significantly in recent years, PBGC’s
premium base has been eroding over time as fewer sponsors are paying
premiums for fewer participants.

In addition, more recently, PBGC’s net accumulated financial deficit has
escalated dramatically due to the critical and declining status of a number
of large multiemployer pension plans. 17 As we previously reported,
PBGC’s multiemployer plan is projected to become insolvent in
approximately 6 years, and if that happens, participants in the insolvent
multiemployer plans who rely on PBGC guarantees will receive only a
small fraction of current statutory guarantees. According to PBGC, most
participants would receive less than $2,000 a year, and in many cases

     For more information on PBGC and the high-risk list, see GAO-17-317.
  GAO, Central States Pension Fund: Investment Policy Decisions and Challenges
Facing the Plan, GAO-18-106 (Washington, D.C.: June 4, 2018) and Central States
Pension Fund: Department of Labor Activities under the Consent Decree and Federal
Law, GAO-18-05 (Washington, D.C.: June 4, 2018).

Page 11                                                                     GAO-19-342T
Social Safety Net Programs   Our prior work has found that federally-funded services for older
                             Americans were not reaching many older adults who may need them, and
                             that the funding for these programs had decreased while the number of
                             older adults had increased. 18 The federal government helps provide state
                             and local governments with funding for a broad array of home and
                             community-based services for older adults through multiple federal
                             agencies and programs. 19 In addition to long-term care services funded
                             by Medicaid, these programs also include services funded under the
                             Older Americans Act of 1965, as amended, which provides grants to
                             states for such services as home-delivered and congregate meals, home-
                             based care, transportation, and housing. In our 2015 report, we
                             recommended that the Department of Health and Human Services (HHS)
                             should facilitate development of a cross-agency federal strategy to help
                             ensure that federal resources are used effectively and efficiently to
                             support a comprehensive system of home and community-based services
                             and related supports for older adults. While HHS agreed with our
                             recommendation, the agency has yet to develop a cross-agency strategy
                             involving all five agencies that fund these services. 20

                             As the number of older adults needing assistance continues to grow, the
                             gap in services can only be expected to widen. Absent any changes,
                             state and local governments are facing—and will continue to face—a gap
                             between receipts and expenditures in the coming years, putting greater
                             pressure on the federal government to increase funding. 21

                               See GAO, Older Adults: Federal Strategy Needed to Help Ensure Efficient and Effective
                             Delivery of Home and Community-Based Services and Supports, GAO-15-190
                             (Washington, D.C.: May 20, 2015); and Older Americans Act: Updated Information on
                             Unmet Need for Services, GAO-15-601R (Washington, D.C.: June 10, 2015).
                               GAO, State and Local Governments’ Fiscal Outlook 2018 Update, GAO-19-208SP
                             (Washington, D.C.: Dec. 13, 2018).
                               GAO is currently conducting a study on the accessibility of home and community-based
                             services in rural areas. The report is expected to be issued in Spring 2019.
                                Since 2007, GAO has published simulations of long-term fiscal trends in the state and
                             local government sector, which have consistently shown that the sector faces long-term
                             fiscal pressures. For the most recent of these reports, see GAO-19-208SP.

                             Page 12                                                                      GAO-19-342T
Pillar Two: Employer-   The second pillar of the U.S. retirement system, employer-sponsored
Sponsored Retirement    retirement plans, is also an important source of income relied upon by
                        many Americans in their retirement. However, not everyone has access
                        to employer-sponsored plans, and among those who do, certain
                        provisions and requirements of the plans can make it difficult for
                        individuals to accumulate savings over time. 22

                        Bureau of Labor Statistics data indicate that about one-third of private
                        sector workers in the United States did not have access to an employer-
                        sponsored retirement plan in 2016, and about two-thirds did. 23 Of those
                        with access, the vast majority (about 76 percent) participated in the plan,
                        either because they were automatically enrolled by the plan sponsor or
                        they chose to participate.

                        Although individuals without access to an employer-sponsored plan can
                        save for retirement on their own, having access to an employer-
                        sponsored retirement plan makes it easier to save, and more likely that
                        an individual will have another source of income in retirement beyond
                        Social Security. Our prior work found that employees working for smaller
                        firms and in certain industries, such as leisure and hospitality, are
                        significantly less likely to have access to an employer-sponsored plan
                        compared with those working in larger firms and in certain other
                        industries, such as information services. Also, we found that low-income
                        workers are much less likely than high-income workers to have access to
                        an employer-sponsored plan.

                           The challenges discussed here about employer-sponsored plans are applicable
                        primarily to private sector workers, as the challenges faced by public sector workers are
                        somewhat different. Virtually all public sector workers have access to employer-sponsored
                        retirement plans, and in most cases, defined benefit plans. However, public sector plans
                        are not governed by most of the substantive requirements under ERISA, including PBGC
                           Bureau of Labor Statistics, National Compensation Survey, Access, participation, and
                        take-up rates for retirement benefits (Washington, D.C.: July 2017. In this testimony, we
                        define “access to an employer-sponsored retirement plan” to mean that a worker’s
                        employer is offering a plan and that the worker is eligible to participate in the plan. In our
                        2015 report on retirement plan coverage, we found similar results using Survey of Income
                        and Program Participation (SIPP) data matched with W2 tax data. We calculated that 61
                        percent of private sector workers had access to an employer-sponsored retirement plan,
                        while 39 percent did not. In addition, in our 2015 report, we estimated that another 15
                        percent chose not to participate, even though they had access so that, overall, about half
                        of private sector workers lacked coverage from a workplace plan. See GAO, Retirement
                        Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage,
                        GAO-15-556 (Washington, D.C.: Sept. 10, 2015).

                        Page 13                                                                          GAO-19-342T
Among those individuals who have access to employer-sponsored plans
in the private sector, the structure of plans has changed over time, with a
shift from traditional DB pension plans to defined contribution (DC) plans,
such as 401(k)s, as the primary type of retirement plan (see fig. 5). DB
plans are traditional retirement plans that generally promise to provide a
benefit for the life of the participant, based on a formula specified in the
plan that typically takes into account factors such as an employee’s
salary, years of service, and age at retirement. DC plans are employer-
sponsored account-based retirement plans, such as a 401(k) plan, that
allow individuals to accumulate tax-advantaged retirement savings in an
individual account based on employee and/or employer contributions, and
the investment returns (gains and losses) earned on the account. The
amount of assets held in individual retirement accounts (IRA) also has
increased significantly. Most of the assets in IRAs are funded by assets
rolled over from DC plans, and sometimes DB plans, when individuals
change jobs or retire.

Page 14                                                          GAO-19-342T
Figure 5: Trends in Private Sector Retirement Plans since 1975

                                         With DB plans, participants can accumulate retirement savings simply by
                                         continuing to work for the employer offering the plan, and the employer is
                                         responsible for ensuring that the amount in the plan is sufficient to pay
                                         promised benefits at retirement. However, even when DB plans were
                                         more prevalent, many workers did not have access, and those with
                                         access to DB plans could still face challenges under certain
                                         circumstances. For example, when DB plan participants change
                                         employers, their accrued benefits are less portable than accrued savings
                                         in a DC plan. If the change in employers takes place before they have
                                         met vesting requirements, DB plan participants can lose all the benefits
                                         accumulated from employer contributions to that point, which in the

                                         Page 15                                                         GAO-19-342T
private sector, generally means everything. 24 Also, for DB plans that base
benefits on final average salary, benefit accruals are significantly
“backloaded.” As a result, if a DB plan participant changes employers
mid-career, it could result in missing out on the time when the biggest
benefit accruals would have occurred. In addition, when entering
retirement, although those with DB plans can generally rely on receiving a
set monthly benefit for life, they may still face challenges. For example,
participants in certain financially troubled plans—such as those in the
multiemployer plans discussed earlier—could see their benefits being
suspended or cut. In addition, if a DB plan participant is offered and
accepts a lump-sum payment in place of a lifetime annuity, the participant
may face challenges similar to those with DC accounts in terms of
managing the spend down of their retirement savings.

With DC plans, responsibility for planning and managing retirement
savings is shifted from employers to employees. Participants in DC plans
are often required to make complex financial decisions—decisions that
generally require financial literacy and that could have significant
consequences for their financial security throughout retirement. For
example, workers with DC plans have to decide whether to participate in
the plan, how much to contribute to their accounts and how to manage
their investments to strike the right balance between risk and returns.

One way DC plan enrollment and contribution levels can be encouraged
is by putting automatic mechanisms in place. For example, DC plan
sponsors can encourage participation in the plan by adopting auto-
enrollment, whereby eligible workers are enrolled into a plan
automatically, unless they choose to opt out. DC plan sponsors can also
encourage increases in contribution rates by adopting auto-escalation,
whereby the employee’s contributions are automatically increased to a
predetermined level on a set schedule, unless they choose to opt out.

Participants in DC plans also have to decide whether to borrow from their
accounts if other needs arise, or cash out their accounts when they
change jobs. When leaving an employer, those with DC accounts may be
allowed to transfer their accumulated balances into a new employer plan
or an individual retirement account (IRA), but they may also be tempted to

    ERISA requires that retirement plan participants’ rights to their accrued benefit derived
from their own contributions be nonforfeitable. However, as noted earlier, employees with
private sector DB plans generally do not contribute to these plans, so, in most instances,
all unvested accrued benefits would be lost when a change of employment takes place.

Page 16                                                                          GAO-19-342T
cash out their accounts, even though they may face associated tax
consequences. Similarly, when entering retirement, those with DC
accounts may decide to transfer the account balance into an IRA, or they
may decide to receive the funds in a lump-sum payment. While some DC
plans also offer monthly payments through an annuity, most do not
provide lifetime income options or other options that can help participants
draw down their retirement funds in a systematic way.

Findings from the most recent SCF indicate that an individual’s ability to
accumulate retirement savings depends on the individual’s income level.
In addition, the disparities in average account balances by income level
have increased markedly over time (see fig. 6). For example, according to
SCF data, households in the top 10 percent of income level appeared to
be substantially better prepared for retirement than most others, with an
average account balance of more than $720,000 in 2016. In contrast,
households with below average income, in the second quintile, had an
average account balance of about $47,000. Among lower-income
households, our prior work suggests that cashing out accounts when
changing jobs may be a significant drain on retirement savings, along with
unexpected events that may also cause them to withdraw funds from their
accounts prior to retirement. 25

  GAO, Retirement Security: Low Defined Contribution Savings May Pose Challenges,
GAO-16-408 (Washington, D.C.: May 5, 2016).

Page 17                                                                 GAO-19-342T
Figure 6: All Households’ Average Retirement Account Balances, by Income Quintiles, 1989-2016

                                        Note: Retirement account balances include savings in individual retirement accounts as well as
                                        401(k) or other defined contribution account savings. The changes over time are cross-sectional
                                        comparisons, not longitudinal ones—that is, the households in a particular quintile in one year may
                                        not be the same households in that quintile in another year.
                                            The top 10 percent is also included in the highest quintile.

                                        Retirement experts have posited a variety of reasons for employers’ shift
                                        to DC plans. One oft-cited reason is that the structure of DC plans gives
                                        employers better control over how much they spend on wages and
                                        benefits packages. With DC plans, employers may choose whether to
                                        make contributions to participants’ individual accounts; in contrast, DB
                                        plans promise a certain future monthly benefit to employees in retirement,
                                        and the employer must bear the risk of making adequate contributions to
                                        the plan to make good on that promise. Another reason retirement
                                        experts cite for the shift to DC plans was the introduction of 401(k)
                                        accounts in the Internal Revenue Code in 1978, which they credit with
                                        fostering the adoption of account-based plans by sanctioning the use of
                                        salary deferrals as a source of contributions. Some retirement experts
                                        have also suggested that employees’ preferences and demands have
                                        changed over time, making DC plans more feasible and, in some
                                        respects, more appealing. For example, some analysts have noted that
                                        the portability of an account-based plan can be better suited to meet the
                                        needs of a more mobile workforce.

                                        Page 18                                                                                 GAO-19-342T
Pillar Three: Individuals’               The third pillar of the retirement savings system—individuals’ personal
Savings and Other                        savings—is the remaining important source of retirement income, and it
                                         also faces certain risks and challenges. Personal savings can include a
                                         variety of assets, such as amounts saved from income or wages;
                                         contributions to accounts outside of a retirement plan; non-retirement
                                         financial wealth that is inherited or accumulated over time; and equity
                                         from tangible assets such as a home. These savings are expected to
                                         augment any income from the first two pillars: Social Security and
                                         employer-sponsored retirement plans.

                                         Over the past several decades, however, the personal saving rate—which
                                         is calculated as the proportion of disposable income that households
                                         save—has trended steeply downward, from a high of 14.2 percent in
                                         1975, to a low of 3.1 percent in 2005, before recovering somewhat to 6.8
                                         percent in 2018 (see fig. 7). 26

Figure 7: Trend in U.S. Personal Saving Rate, 1959-2017

                                            It is important to note that the saving rate is an average, reflecting all households in the
                                         United States, across various stages of life.

                                         Page 19                                                                           GAO-19-342T
                                       While the specific implications of a historically low national saving rate on
                                       any current or future retiree are less clear, the decline in the U.S.
                                       personal savings rate over time is concerning and could have implications
                                       for retirement security, particularly when coupled with the recent trend of
                                       low wage growth. After accounting for inflation, average wages remain
                                       near the levels they were in the 1970s for most individuals (see fig. 8),
                                       adding to the difficulty of increasing their level of saving.

Figure 8: Mean Household Incomes, by Quintiles and Top 5 Percent, 1970–2017

                                       Note: The changes over time are cross-sectional comparisons, not longitudinal ones—that is, the
                                       households in a particular quintile in one year may not be the same households in that quintile in
                                       another year.
                                           The top 5 percent is also included in the highest quintile.

                                       In addition, many households have accumulated little wealth. SCF data
                                       show that among households in which the head of the household was
                                       working, the average value of all financial assets, excluding savings in
                                       retirement accounts, was $70,700 in 2016. 27 For households in which the
                                       head was retired, this average was $89,700.

                                          This estimate includes retirement savings, which cannot be easily separated out. All
                                       amounts are in 2016 dollars.

                                       Page 20                                                                                 GAO-19-342T
For those who become home owners and build up equity in a home, this
equity can serve as an important asset, providing a potential income
source in retirement either by selling the home or obtaining a reverse
mortgage. However, increased household debt levels may affect the
amount of income available from this source, as well as from other
assets. Data on the make-up of debt indicate that home ownership has
been declining, while education debt has been rising, especially since

Another challenge with implications for individuals’ ability to accumulate
personal savings is that economy-wide, aggregate health care
expenditures are projected to continue to grow as a percentage of the
overall economy, and individuals have to contend with rising health care
costs as they strive to save for retirement. CMS projections estimate that
the annual growth rate of out-of-pocket health care spending for the U.S.
population, per capita, will increase from 3.0 percent in 2018 to about 3.8
percent by 2026. While these costs are projected to rise for the population
as a whole, individuals age 65 and over face the highest out-of-pocket
health-related expenses. Further, health care expenses can be larger
relative to other expenses for many retirees and hard to predict, making
the amount of income retirees need to plan to spend on health care
difficult to determine.

Simultaneously, trends in longer life expectancy have the potential to
increase economic vulnerability for retirees. Specifically, life expectancy
for those age 65 or older has increased significantly over the past century
and is projected to continue to increase. For example, a man turning 65 in
2030 is expected to live to age 85.0, on average, an additional 5.3 years
compared to a man who turned 65 in 1980, who was only expected to live
to age 79.7, on average. A woman turning 65 in 2030 is expected to live
to age 87.2, on average, an additional 3.5 years compared to a woman
who turned 65 in 1980, who was only expected to live to age 83.8, on

Moreover, these life expectancies are averages, with some individuals
living well beyond their life expectancy. As a result, people must now
prepare for this greater longevity risk—that is, the risk that they will spend
more years in retirement and potentially outlive their savings. For those
who lack sufficient personal savings or other assets to augment their
Social Security benefit or income from any employer-sponsored plan, the
only option to maintain a desired standard of living may be to continue
working past age 65. Our prior work has found that labor force
participation among older workers has increased during the last decade

Page 21                                                            GAO-19-342T
                         and that, compared to current retirees, workers age 55 or older were
                         more likely to expect to retire later and to work during retirement. Our
                         prior work has also identified challenges maintaining retirement savings
                         should older workers become unemployed. 28

                         Over the past 40 years, the nation has taken an incremental approach to
The Need to              addressing the U.S. retirement system; however, such an approach may
Re-evaluate the          not be able to effectively address the interrelated foundational nature of
                         the challenges facing the system today. Without a more comprehensive
Nation’s Approach to     re-evaluation of the myriad challenges across all three pillars of the
Financing Retirement     retirement system, identifying effective, enduring solutions may be
                         difficult, and the consequences could be significant. Unless timely action
                         is taken, many older Americans risk not having sufficient means for a
                         secure and dignified retirement in the future.

Retirement Issues Have   Congress has generally sought to address retirement-related issues and
Been Addressed with an   concerns one issue at a time. As highlighted in appendix II, at least 25
                         laws pertaining to retirement have been enacted since ERISA. 29 Some
Incremental Approach
                         laws—such as the Social Security Amendments of 1983 and the Pension
                         Protection Act of 2006—made large changes to the retirement system.
                         Other laws were more targeted. For example in 1984, Congress amended
                         ERISA to address concerns that women were not receiving their share of
                         private pension benefits by, among other things, permitting certain breaks
                         in service without loss of pension credits, and changing treatment of
                         pension benefits for widowed and divorced spouses. Similarly, in 1996,
                         Congress created a simplified retirement savings vehicle for employers
                         with 100 or fewer employees to help address concerns that smaller
                         employers were not sponsoring plans.

                         The number of agencies that play roles in the current retirement system
                         has also contributed to the incremental approach to addressing concerns,
                         with no single federal agency being responsible for taking a broad view of
                         the system as a whole. As described earlier, there are at least 10

                           See GAO, Retirement Security: Most Households Approaching Retirement Have Low
                         Savings, GAO-15-419 (Washington, D.C.: May 12, 2015) and Unemployed Older
                         Workers: Many Experience Challenges Regaining Employment and Face Reduced
                         Retirement Security, GAO-12-445 (Washington, D.C.: Apr. 25, 2012).
                            For further details and examples, see the chronology of retirement-related legislation
                         since 1960 in app. II.

                         Page 22                                                                        GAO-19-342T
                          agencies that have a role in overseeing some part of the system, or that
                          are involved in providing supports and services to older Americans. In
                          addition to DOL, IRS, and PBGC, which are the agencies generally
                          responsible for administering ERISA, SSA administers the Social Security
                          program; and the Department of Health and Human Services oversees
                          CMS, which administers the health care programs for retirees. In addition,
                          various other agencies play a role in providing a range of services and
                          supports to assist older adults through retirement.

                          Having multiple agencies involved in the system has also contributed to a
                          complex web of programs and requirements. For example, our prior work
                          identified more than 130 reports and disclosures stemming from
                          provisions of ERISA and the Internal Revenue Code. Although each plan
                          sponsor is required to submit only certain of these reports and
                          disclosures, determining which ones can be challenging, and we found
                          that the agencies’ online resources to aid plan sponsors with this task
                          were neither comprehensive nor up to date. 30 We made several
                          recommendations to address these issues that have not been fully

Need for More             While three federal commissions have focused on various retirement
Comprehensive Reform of   issues (see app. III), it has been nearly 40 years since the last
                          comprehensive evaluation of the nation’s approach to financing
the U.S. Retirement
                          retirement by a federal commission. The 1979 President’s Commission
System                    on Pension Policy conducted a broad study of retirement-related issues
                          and made a series of over-arching recommendations, such as creation of
                          a minimum universal pension system that would provide a portable
                          benefit for all workers that would be a supplement to Social Security.
                          Other recommendations included federal protections for participants in
                          state and local government plans, more consistent tax treatment of
                          pension plans and retirement savings vehicles, provisions to strengthen
                          Social Security, as well as proposals regarding employment of older
                          workers and disability programs. 31 However, many of the commission’s
                          recommendations were not implemented.

                             GAO, Private Pensions: Clarity of Required Reports and Disclosures Could Be
                          Improved, GAO-14-92 (Washington, D.C.: Nov. 21, 2013).
                               For more details on the 1979 commission, see app. III.

                          Page 23                                                                   GAO-19-342T
The issues identified nearly 40 years ago by the 1979 commission’s
comprehensive re-evaluation of the U.S. retirement system continue to be
issues facing the nation today. In fact, these issues have only become
more complex and more urgent due to fundamental changes that have
occurred since 1979—especially the growing fiscal exposure to the
federal government and the shift from DB to DC plans, with its associated
increase in risks and responsibilities for individual workers. Taken
together, these changes may make it harder for retirees to achieve
financial security in retirement, especially for those without access to
employer-sponsored plans and at the lower end of the income scale.

A panel of 15 retirement experts convened by GAO in November 2016
agreed that there is a need for a new comprehensive evaluation of the
U.S. retirement system. 32 They noted weaknesses in the current system’s
ability to help ensure that all individuals can provide for a secure
retirement. They also discussed the burden that the current system’s
complexity places on individuals, employers, and federal government.
Although there was agreement among many panelists that a more
comprehensive approach would be needed to provide a secure retirement
for future retirees, opinions varied on the types of solutions needed. For
example, some panelists suggested that a new government-sponsored
savings vehicle should be created, while others supported modifying the
existing employer-sponsored system to make any needed changes.

In addition, several panelists commented on how the current system can
be overly complex and confusing for employers, especially small
employers. They discussed how the current private sector system poses
financial and litigation risk for employers, especially with respect to
investment decisions, fiduciary duty, and fees. For example, one panelist
suggested that DC plan sponsors may welcome the federal government
providing more guidance on the types of investments that would be
regarded as prudent and safe as a way to reduce their litigation risk.

Panelists also noted that the experiences of other countries can provide
useful insights for ways to improve U.S. retirement programs and policies.
For example, some panelists described the approach being taken by the
United Kingdom (UK) as a potential model for expanding access to
retirement savings plans. In the UK model, universal access for workers
was implemented by mandating that all employers automatically enroll

     For more information on the panelists, see app. I.

Page 24                                                        GAO-19-342T
                                            employees in either their own or the government-sponsored retirement
                                            savings plan, the National Employment Savings Trust. 33

                                            In our 2017 report, we suggested five policy goals for a reformed U.S.
                                            retirement system as a starting point for discussion: (1) promoting
                                            universal access to a retirement savings vehicle, (2) ensuring greater
                                            retirement income adequacy, (3) improving options for the spend down
                                            phase of retirement, (4) reducing complexity and risk for both participants
                                            and plan sponsors, and (5) stabilizing fiscal exposure to the federal
                                            government (see table 1 for more detail on these goals).

Table 1: Policy Goals for Evaluating Potential Options for Reforming the U.S. Retirement System

Goals                                                               Reasons for considering reform
Promote universal access to a retirement savings vehicle            About one-third of U.S. private sector workers do not have access
                                                                    to an employer-sponsored retirement plan
Ensure greater retirement income adequacy                           Many Americans are at risk of relying solely on Social Security in
Improve options for the spend down phase of retirement              Plans may not provide sufficient tools to aid retirees in the spend
                                                                    down of their savings, including the absence of lifetime income
                                                                    options in most defined contribution plans.
Reduce complexity and risk for both plan participants and plan      Decisions related to managing retirement savings and plan
sponsors                                                            sponsorship have reached a level of complexity that participants
                                                                    and plan sponsors, respectively, find difficult to navigate
Stabilize fiscal exposure to the federal government                 As the number of retirees increases, so does the financial stress
                                                                    on government programs serving the aging population
Source: GAO analysis. I GAO-19-342T

                                            Reforming the nation’s retirement system to create a system that meets
                                            all of these goals, or others identified by the Congress, will require a
                                            careful and deliberative approach. For example, some type of consensus
                                            about the goals would need to be established as a first step. Broad
                                            questions are likely to be raised about how each of the goals should be
                                            achieved. The examination of relevant issues by past federal
                                            commissions, the discussions at our November 2016 panel, as well as
                                            what we can learn from the experiences of other countries, further
                                            illustrate how complex any reform effort is likely to be. Also, we recognize
                                            that some of these goals may compete with each other—in particular,
                                            ensuring greater retirement security and minimizing fiscal exposure to the
                                            federal government. Therefore, a balanced approach will be required,

                                                 For further discussion of NEST, see GAO-15-556.

                                            Page 25                                                                         GAO-19-342T
                   which can only result from a more holistic examination of the issues by
                   those representing a broad range of perspectives.

                   As a result, we recommended that Congress consider establishing an
                   independent commission to comprehensively examine the U.S. retirement
                   system and make recommendations to clarify key policy goals for the
                   system and improve the nation’s approach to promoting more stable
                   retirement security. We suggested that such a commission include
                   representatives from government agencies, employers, the financial
                   services industry, unions, participant advocates, and researchers, among
                   others, to help inform policymakers on changes needed to improve the
                   current U.S. retirement system.

                   Chairman Collins, Ranking Member Casey, and Members of the
                   Committee, this concludes my prepared remarks. I would be happy to
                   answer any questions that you may have.

                   For further information regarding this testimony, please contact Charles
GAO Contacts and   A. Jeszeck at (202) 512-7215 or jeszeckc@gao.gov. Contact points for
Staff              our Offices of Congressional Relations and Public Affairs may be found
                   on the last page of this statement.
                   In addition to the contact above, Margie K. Shields, Assistant Director;
                   Jennifer Gregory, Analyst-in-Charge; Justine Augeri; and Gustavo O.
                   Fernandez made key contributions to this publication. Also contributing to
                   this report were Barbara D. Bovbjerg, Managing Director, Education,
                   Workforce, and Income Security Issues; Oliver Richard, Chief Economist;
                   Frank Todisco, Chief Actuary; James Bennett, Deborah Bland, Corinna
                   Nicolaou, and Adam Wendel, with assistance from others who worked on
                   our 2017 report.

                   Page 26                                                         GAO-19-342T
Appendix I: GAO’s Expert Panel on the State
                                              Appendix I: GAO’s Expert Panel on the State of

of Retirement

                                              We convened a panel of retirement experts in November 2016 to obtain
                                              their insights on the condition of retirement in the United States and
                                              various options for a new approach to help ensure that all individuals can
                                              provide for a secure retirement. This appendix provides a description of
                                              our methodology for selecting the panel. (See text box for final list of 15
                                              experts participating in our panel.)

State of Retirement Panel Participants (Positions are as of November 2016)
William Bortz                                                        Regina Jefferson
Michael S. Gordon Fellow                                             Professor of Law
Pension Rights Center                                                Columbus School of Law
                                                                     The Catholic University of America
Phyllis Borzi
Assistant Secretary of Labor                                         David John
Employee Benefits Security Administration                            Senior Strategic Policy Advisor
Harry Conaway
President & CEO                                                      Melissa Kahn
Employee Benefit Research Institute                                  Managing Director, Retirement Policy Strategist
                                                                     State Street Global Advisors
Warren Cormier
CEO and Founder                                                      Hank Kim
Boston Research Technologies                                         Executive Director & Counsel
                                                                     The National Conference on Public Employee Retirement
Teresa Ghilarducci                                                   Systems
Professor of Economics and Director of the
Schwartz Center for Economic Policy Analysis                         Diane Oakley
The New School for Social Research                                   Executive Director
                                                                     National Institute on Retirement Security
Bill Hallmark
Vice President for Pensions                                          Virginia Reno
American Academy of Actuaries                                        Deputy Commissioner for Retirement and Disability Policy
                                                                     Social Security Administration
Will Hansen
Senior Vice President for Retirement Policy                          Sita Nataraj Slavov
ERISA Industry Committee                                             Professor of Public Policy, Schar School of Policy and
Cindy Hounsell                                                       George Mason University
Women’s Institute for a Secure Retirement
Source: GAO. I GAO-19-342T

Methodology for Selecting                     To identify the experts to invite to this meeting, we compiled an initial list
the Panel and Analyzing                       based on interviews with experts conducted during recent GAO
                                              retirement income security work and the organizations invited to
Their Remarks
                                              participate in a 2005 GAO forum on the future of the defined benefit

                                              Page 27                                                                         GAO-19-342T
Appendix I: GAO’s Expert Panel on the State of

system and the Pension Benefit Guaranty Corporation. 1 Potential experts
were identified based on the following criteria:

•   Organizational type: To ensure that we considered the unique roles or
    situations of various entities involved in retirement income policy, we
    selected panelists from the federal government, state or local
    government, research institutes or universities, advocacy or
    membership organizations, and financial services firms.
•   Organizational reputation: To ensure that our panelists span political
    perspectives, we selected panelists from organizations known to be
    conservative, moderate, and liberal (to the extent the reputation for
    the organization could be easily identified).
•   Subject matter expertise: To ensure that the discussion considered as
    many aspects of retirement income security as possible, we selected
    panelists with expertise across a range of areas, including defined
    benefit (DB) plans, defined contribution (DC) plans, individual
    retirement accounts (IRA), demographic trends, vulnerable
    populations, actuarial science, income in retirement, financial literacy,
    and behavioral finance.
•   Range of views: To ensure that our discussion was inclusive of
    different philosophies regarding the role of government with regard to
    the population and the economy, we selected panelists to represent
    the viewpoints of individuals and business.
•   Representation of diverse groups: To ensure that the discussion
    benefited from different viewpoints, we selected panelists to reflect
    gender, racial, and ethnic diversity.

An initial list of 41 potential experts was shared with GAO management
officials with expertise in retirement issues, actuarial science, and
strategic planning, as well as GAO methodologists, for their comments
and suggestions. From this, we developed a shorter list eventually
arriving at our final group of 15, listed above. These final 15 panelists
were also evaluated for conflicts of interest. A conflict of interest was
considered to be any current financial or other interest that might conflict
with the service of an individual because it (1) could impair objectivity and
(2) could create an unfair competitive advantage for any person or
organization. All potential conflicts were discussed by GAO staff. The 15

 GAO, Highlights of a GAO Forum: The Future of the Defined Benefit System and the
Pension Benefit Guaranty Corporation, GAO-05-578SP (Washington, D.C. June 1, 2005).

Page 28                                                                 GAO-19-342T
Appendix I: GAO’s Expert Panel on the State of

experts were determined to be free of conflicts of interest, and the group
as a whole was judged to have no inappropriate biases.

Panelists engaged in a day-long discussion about our nation’s approach
to retirement policy (see text box). The discussion was guided by a list of
questions developed in advance, and the meeting was conducted by a
GAO moderator to ensure that all panelists had an opportunity to
participate and provide responses.

Page 29                                                          GAO-19-342T
Appendix I: GAO’s Expert Panel on the State of

 State of Retirement Expert Panel Agenda
 Welcome and Opening Remarks

 Session 1: How Well Is Our Current National Approach to Retirement Security

 Preamble: Retirement income sources in the United States have often been referred to
 as a three-legged stool – Social Security, employer-sponsored retirement plans, and
 personal savings.
     1. Can the U.S, retirement system today still be accurately described by these
          three retirement income sources? Why/why not?
     2. Are there aspects of our nation’s approach to retirement income security that
          are working well? If so, are these aspects functioning well for all, or only for
          particular populations?
     3. Are there aspects of our nation’s approach to retirement income security that
          are concerning? If so, what are your biggest concerns?
     4. Are there any specific populations you are particularly concerned about? If so,
          which ones and why?

 Session 2: Reevaluating the Roles of the Federal Government, Employers, and

 Preamble: Key actors in assuring a secure retirement have traditionally included the
 federal government, employers, and individuals, but their roles have evolved over time.
     •    Are there ways roles could or should be adapted or modified to address the
          strengths and weaknesses that have been identified for:
               o Federal government?
               o Employers?
               o Individuals?

 Session 3: Reevaluating Our Nation’s Approach to Retirement Policy

 Preamble: Various proposals for a broader, more cohesive approach to retirement policy
 have been made over time.
     1. Do you believe there is a need for some type of national retirement policy?
     2. If such a policy were to be proposed--
              2a. What could or should be the primary goals of such a policy?
              2b. What could or should be the roles of key actors in achieving those
     3. What do you believe could be the greatest benefits of a national retirement
     4. What do you believe could be the greatest risks or potential downsides of a
         national retirement policy?
 What barriers exist to creating a national retirement policy and how could the federal
 government best address these barriers?
Source: GAO I GAO-19-342T

Page 30                                                                        GAO-19-342T
Appendix II: Selected Federal Legislation
                                           Appendix II: Selected Federal Legislation
                                           Related to Retirement Security from 1960-

Related to Retirement Security from 1960-
                                           The chronology highlights below selected federal legislation related to
                                           retirement security in the United States since 1960. It is based on a larger
                                           chronology included in our prior special product on the nation’s retirement
                                           system (GAO-18-111SP). The chronology is intended to illustrate the
                                           incremental approach that the nation has taken to improving the U.S.
                                           retirement system and to convey the changes that the legislation enacted
                                           at the time. It is not intended to provide an exhaustive list of legislation
                                           that has impacted retirement in the United States, to make statements
                                           about current provisions of the law, or to provide comprehensive
                                           descriptions of each law.

Chronology of Selected Federal Legislation Shaping Retirement in the United States (1960–Present)
1961         Social Security Amendments of 1961
             Selected provision: Enacted a provision for men, comparable to the provision enacted for women in 1956, concerning
             early retirement at age 62.
1962         Self-Employed Individuals Tax Retirement Act of 1962
             Selected provision: Imposed minimum distribution requirements for self-employed participants in a qualified plan
             generally beginning at age 70 ½.
1965         Social Security Amendments of 1965
             Selected provisions: Enacted new titles to the Social Security Act for Medicare and Medicaid. Medicare provided
             hospital, post-hospital extended care, and home health coverage to almost all Americans age 65 or older; Medicaid
             provided states with the option of receiving federal funding for providing health care services to certain low-income and
             medically needy individuals.
1967         Age Discrimination in Employment Act of 1967
             Selected provisions: Made it unlawful for an employer to discriminate against any individual with respect to
             compensation, terms, conditions, or privileges of employment because of age; and required the Secretary of Labor to
             carry on a continuing program of education and information, which could include research with a view to reducing
             barriers to the employment of older persons.
1974         Employee Retirement Income Security Act of 1974 (ERISA)
             Selected provisions: Regulated private sector employers who offer pension or welfare benefit plans for their employees.
             •   Title I: Imposed reporting and disclosure requirements on plans; imposed certain responsibilities on plan
             •   Title II: Strengthened participation requirements for employees age 25 and over; established vesting rules; required
                 that a joint and survivor annuity be provided; and established minimum funding standards. In addition, provided
                 individual retirement accounts (IRAs) for persons not covered by pensions.
             •   Title IV: Required certain employers and plan administrators to fund an insurance system to protect certain kinds of
                 retirement benefits (i.e., to pay premiums to the federal government’s Pension Benefit Guaranty Corporation
1978         Revenue Act of 1978
             Selected provisions: Established qualified deferred compensation plans called 401(k) plans after 26 U.S.C. § 401(k),
             which allowed for pre-tax employee contributions to such plans (known as elective deferrals).
1980         Multiemployer Pension Plan Amendments Act of 1980
             Selected provisions: Strengthened the funding requirements for multiemployer pension plans; authorized plan
             preservation measures for financially troubled multiemployer plans; and revised the manner in which insurance
             provisions applied to multiemployer plans.

                                           Page 31                                                                        GAO-19-342T
                                           Appendix II: Selected Federal Legislation
                                           Related to Retirement Security from 1960-

Chronology of Selected Federal Legislation Shaping Retirement in the United States (1960–Present)
1982         Tax Equity and Fiscal Responsibility Act of 1982
             Selected provisions: Reduced the maximum annual addition (employer contributions, employee contributions, and
             forfeitures) for each participant in a defined contribution (DC) plan; reduced the maximum annual retirement benefit for
             each participant in a defined benefit (DB) plan; introduced special rules for “top heavy” plans (i.e., plans in which more
             than 60 percent of the present value of the cumulative accrued benefits under the plan for all employees accrue to key
             employees, including certain owners and officers); and expanded minimum distribution requirements to all qualified
1983         Social Security Amendments of 1983
             Selected provisions: Gradually raised the normal retirement age from 65 to 67, depending on an individuals’ year of
             birth; expanded coverage; increased the self-employment tax for self-employed persons; subjected a portion of Social
             Security benefits to federal income tax for the first time; and changed how cost-of-living adjustments are calculated
             when trust funds are low.
1984         Deficit Reduction Act of 1984
             Selected provisions: Amended nondiscrimination testing requirements for 401(k) plans and required minimum
             distribution rules, and restricted prefunding of certain employee post-retirement welfare benefits (such as disability and
             medical benefits).
1984         Retirement Equity Act of 1984
             Selected provisions: Changed participation rules by lowering the minimum age that a plan may require for enrollment
             (from age 25 to 21), and permitted certain breaks in service without loss of pension credits. Also, strengthened
             treatment of pension benefits for widowed and divorced spouses.
1986         Single-Employer Pension Plan Amendments Act of 1986
             Selected provisions: Raised the per-participant PBGC premium from $2.60 to $8.50; established certain distress criteria
             that a contributing sponsor or substantial member of a contributing sponsor’s controlled group must meet in order to
             terminate a single-employer plan under a distress termination; established certain criteria for PBGC to terminate a plan
             that does not have sufficient assets to pay benefits that are currently due (referred to as “involuntary terminations”); and
             created a new liability to plan participants for certain non-guaranteed benefits.
1986         Federal Employees’ Retirement System Act of 1986
             Selected provisions: Established the Federal Employees’ Retirement System (FERS). Unlike the existing Civil Service
             Retirement System (CSRS), retirement and disability benefits under FERS were structured to be fully funded by
             employee and employer contributions and interest earned by the bonds in which the contributions were invested. The
             DB under FERS was lower than under CSRS, but FERS also included a DC plan component: the Thrift Savings Plan.
1986         Omnibus Budget Reconciliation Act of 1986
             Selected provisions: Required employers that sponsor pension (DB plans) and retirement savings plans (DC plans such
             as a 401(k)) to provide benefit accruals or allocations for employees who work beyond their normal retirement age.
1986         Tax Reform Act of 1986
             Selected provisions: Established faster minimum vesting schedules; adjusted limitations on contributions and benefits
             for qualified plans; limited the exclusion for employee elective deferrals to $7,000; and amended nondiscrimination
             coverage rules. Also, restricted the allowable tax-deductible contributions to IRAs for individuals with incomes above a
             certain level and who participate in employer-sponsored pension plans, and imposed an additional 10 percent tax on
             early distributions (before age 59 ½) from a qualified retirement plan.
1987         Omnibus Budget Reconciliation Act of 1987
             Selected provisions: Strengthened funding rules for pension plans and the level and structure of PBGC premiums.
1993         Omnibus Budget Reconciliation Act of 1993
             Selected provisions: Reduced compensation taken into account in determining contributions and benefits under
             qualified retirement plans, and expanded taxation of Social Security benefits.

                                           Page 32                                                                          GAO-19-342T
                                            Appendix II: Selected Federal Legislation
                                            Related to Retirement Security from 1960-

Chronology of Selected Federal Legislation Shaping Retirement in the United States (1960–Present)
1994         Retirement Protection Act of 1994
             Selected provisions: Strengthened funding rules for pension plans.
1996         Small Business Job Protection Act of 1996
             Selected provisions: Created a type of simplified retirement savings vehicle for small employers; added a
             nondiscrimination safe harbor for 401(k) plans; amended the definition highly compensated employee; and modified
             certain participation rules for DC plans.
1997         Taxpayer Relief Act of 1997
             Selected provision: Established Roth IRAs, under which contributions are after-tax, but distributions after age 59½ are
2000         Senior Citizens’ Freedom to Work Act of 2000
             Selected provision: Amended the Social Security Act to eliminate the earnings limit for individuals who have reached
             their normal retirement age.
2001         Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
             Selected provisions: Increased the individual elective deferrals that may be made to a 401(k) plan; added “catch-up
             contributions” that allow individuals age 50 or older to make additional contributions; increased the maximum annual
             contributions to DC plans and individual retirement accounts; increased the maximum annual benefits under a DB plan;
             increased the compensation limit for qualified trusts; reduced the minimum vesting requirements for matching
             contributions; and changed the rules that permit plans to cash-out, without consent.
2002         Sarbanes-Oxley Act of 2002
             Selected provision: Added a new requirement that individual account pension plans provide notice to participants and
             beneficiaries in advance of periods during which the ability of participants or beneficiaries to take certain actions with
             respect to their accounts will be temporarily suspended, limited, or restricted (referred to as “blackout periods”).
2005         Deficit Reduction Act of 2005
             Selected provisions: For plan years that begin after December 31, 2005, set the PBGC flat-rate premium for
             multiemployer plans at $8.00; and, for each plan year that begins after 2006, indexed future premium levels to the
             national average wage index.
2006         Pension Protection Act of 2006 (PPA)
             Selected provisions: Strengthened the minimum funding requirements for DB plans; set certain benefit limitations for
             underfunded DB plans; enhanced the protections for spouses; amended plan asset diversification requirements;
             changed provisions concerning the portability of pension plans; allowed the adoption of automatic enrollment and target
             date funds for DC plans; and increased reporting and disclosure requirements for plan sponsors.
2008         Worker, Retiree, and Employer Recovery Act of 2008
             Selected provision: Modified PPA’s funding requirements to grant relief for single-employer DB plans.
2012         Moving Ahead for Progress in the 21st Century Act (MAP-21)
             Selected provisions: Provided funding relief for single-employer DB plans by changing the interest rates used to reflect a
             25-year historical average; increased premium rates for sponsors of single-employer and multiemployer DB plans; and
             included other provisions intended to improve the governance of PBGC.
2012         American Taxpayer Relief Act of 2012
             Selected provisions: Extended the tax-free treatment of distributions from IRAs made for charitable purposes; allowed
             for certain in-plan transfers to a Roth account.
2014         Multiemployer Pension Reform Act of 2014 (MPRA)
             Selected provisions: Allowed severely underfunded multiemployer plans, under certain conditions and with the approval
             of federal regulators, the option to reduce the retirement benefits of current retirees to avoid plan insolvency; and
             expanded PBGC’s ability to intervene when plans are in financial distress.

                                            Page 33                                                                          GAO-19-342T
                                               Appendix II: Selected Federal Legislation
                                               Related to Retirement Security from 1960-

Chronology of Selected Federal Legislation Shaping Retirement in the United States (1960–Present)
2018               Bipartisan Budget Act of 2018
                   Selected provisions: Established a temporary Joint Select Committee on Solvency of Multiemployer Pension Plans. The
                   goal of the Joint Select Committee was to improve the solvency of multiemployer pension plans and PBGC.
Source: GAO I GAO-19-342T

                                               Page 34                                                                    GAO-19-342T
Appendix III: Structure, Scope, and
                                                   Appendix III: Structure, Scope, and
                                                   Recommendations of Three Past Federal
                                                   Commissions on Retirement Issues

Recommendations of Three Past Federal
Commissions on Retirement Issues
                                                   Since the enactment of ERISA, there have been three federal
                                                   commissions on retirement issues: The President’s Commission on
                                                   Pension Policy, the National Commission on Social Security Reform, and
                                                   the President’s Commission to Strengthen Social Security (see table 2).
                                                   We examined these commissions to gain insights on possible structures
                                                   for federal commissions, the scope of work these commissions can take
                                                   on, and the types of recommendations they can make.

Table 2: Federal Commissions Addressing Retirement-related Issues since 1974

                                                                 National Commission on Social
                             President’s Commission on           Security Reform (known as the            President’s Commission to
Commission                   Pension Policy                      Greenspan Commission)                    Strengthen Social Security
When and how                 In 1978, President Carter        Established by the president and            This bipartisan commission was
established                  signed an executive order        appointed by the Congress and               established in May 2001 by
                             authorizing this commission and President Reagan in 1981.                    President Bush.
                             it was established when
                             committee members were
                             appointed in 1979, 5 years after
                             the enactment of the Employee
                             Retirement Income Security Act
                             of 1974 (ERISA).
Appointment of               President Carter appointed all      The President, the Majority Leader of    President Bush appointed all 16
members                      11 commission members.              the Senate and the Speaker of the        commission members.
                                                                 House of Representatives at the time
                                                                 were each responsible for selecting
                                                                 five members of the commission in a
                                                                 bipartisan way.
Scope of study               The commission was called           The commission was to conduct a          The commission was to study and
                             upon to conduct a 2-year study      study and make recommendations           report, using six guiding principles,
                             of the nation’s pension systems     regarding the short-term financing       specific recommendations to
                             and the future course of national   crisis faced by Social Security at the   preserve Social Security for seniors
                             retirement-income policies, and     time.                                    while building wealth for younger
                             issue a series of reports on                                                 Americans.
                             short-term and long-term issues
                             with respect to retirement,
                             survivor, and disability
Final report                 The final report was issued in      The final report was issued in 1983      The final report, “Strengthening
                             February 1981.                      and was the basis for the Social         Social Security and Creating
                                                                 Security Amendments of 1983 which        Personal Wealth for All Americans,”
                                                                 addressed the long-term financing        was issued in December 2001.
                                                                 problem by gradually increasing the
                                                                 retirement age from 65 to 67, among
                                                                 other things, and made other
                                                                 significant changes to Social Security
                                                                 such as expanding coverage.
Source: GAO. I GAO-19-342T

                                                   Page 35                                                                          GAO-19-342T
                           Appendix III: Structure, Scope, and
                           Recommendations of Three Past Federal
                           Commissions on Retirement Issues

Carter Commission (1979-   In 1978, President Carter signed an executive order authorizing the
1981)                      Carter Commission, which was established when committee members
                           were appointed in 1979. The commission was to conduct a 2-year sturdy
                           of the nation’s pension systems and the future course of national
                           retirement income policies. President Carter appointed all 11 commission
                           members. The commission also had an executive director and 37
                           staffers. Its final report, Coming of Age: Toward a National Retirement
                           Income Policy, was released in February 1981. 1

Charge to the Carter       The commission was ordered to:
                           •   Conduct a comprehensive review of retirement, survivor, and disability
                               programs existing in the United States, including private, federal,
                               state, and local programs.
                           •   Develop national policies for retirement, survivor, and disability
                               programs that can be used as a guide by public and private programs.
                               The policies were to be designed to ensure that the nation had
                               effective and equitable retirement, survivor, and disability programs
                               that took into account available resources and demographic changes
                               expected into the middle of the next century.
                           •   Submit to the President a series of reports including the commission’s
                               findings and recommendations on short-term and long-term issues
                               with respect to retirement, survivor, and disability programs. The
                               commission was charged with covering the following issues in its
                               findings and recommendations:
                               •     overlaps and gaps among the private, state, and local sectors in
                                     providing income to retired, surviving, and disabled persons;
                               •     the financial ability of private, federal, state, and local retirement,
                                     survivor, and disability systems to meet their future obligations;
                               •     appropriate retirement ages, the relationship of annuity levels to
                                     past earnings and contributions, and the role of retirement,
                                     survivor, and disability programs in private capital formation and
                                     economic growth;
                               •     the implications of the recommended national policies for the
                                     financing and benefit structures of the retirement, survivor, and
                                     disability programs in the public and private sectors; and

                            President’s Commission on Pension Policy, Coming of Age: Toward a National
                           Retirement Income Policy (Feb. 26, 1981).

                           Page 36                                                                 GAO-19-342T
                      Appendix III: Structure, Scope, and
                      Recommendations of Three Past Federal
                      Commissions on Retirement Issues

                          •     specific reforms and organizational changes in the present
                                systems that may be required to meet the goals of the national

Carter Commission’s   In its final report, the Carter Commission prescribed a goal for retirement
Recommendations       income policy and made numerous recommendations. According to the
                      report, a desirable retirement income goal is the replacement of pre-
                      retirement income from all sources. Recommendations focused on
                      strengthening four areas: employer pensions, Social Security, “individual
                      efforts” (personal savings, employment of older workers, and disability),
                      and public assistance. Recommendations were also made regarding the
                      administration of the U.S. retirement system. Examples of ways to
                      strengthen each area follow:

                      •   Strengthening Employer Pensions. The commission recommended
                          establishing a Minimum Universal Pension System (MUPS) for all
                          workers. MUPS was intended to provide a portable benefit that was
                          supplemental to Social Security. It would have built upon existing
                          employer plans and existing plans that did not meet the requirements
                          would have needed to be amended. Another recommendation was to
                          establish a Public Employee Retirement Income Security Act (i.e. a
                          public sector version of ERISA) so that public and private sector
                          employees would receive similar protections.
                      •   Strengthening Social Security. The commission recommended
                          mandatory universal coverage, raising the retirement age for workers
                          who were not approaching retirement, re-examining or making
                          adjustments to the special minimum benefit as well as the spousal
                          benefit and other miscellaneous benefits.
                      •   Strengthening Individual Efforts. The commission recommended
                          that contribution and benefit limitations for all individuals should be
                          treated more consistently for all types of retirement savings. The
                          commission also recommended a refundable tax credit for low- and
                          moderate-income individuals to encourage saving for retirement. For
                          older workers, recommendations included improving unemployment
                          benefits to provide short-term income maintenance and keep them in
                          the labor force. The commission also recommended further in-depth
                          study of the Disability Insurance program.
                      •   Strengthening Public Assistance. The commission made
                          recommendations to address inflation protection for retirement income
                          and setting Social Security’s Supplemental Security Income at the
                          poverty line level and eliminating its assets test.

                      Page 37                                                          GAO-19-342T
                          Appendix III: Structure, Scope, and
                          Recommendations of Three Past Federal
                          Commissions on Retirement Issues

                          •   Administration. The commission recommended consolidating the
                              administration of all federal retirement systems as well as
                              consolidating ERISA administrative functions under one entity. It also
                              recommended an interdepartmental task force to coordinate executive
                              branch agencies dealing with retirement income.

Greenspan Commission      In 1981, President Reagan signed an executive order establishing the
(1981-1983)               Greenspan Commission. The President asked the commission to conduct
                          a 1-year study and propose realistic, long-term reforms to put Social
                          Security on sound financial footing and to reach bipartisan consensus so
                          these reforms could be passed into law. The President, the Senate
                          Majority Leader, and the Speaker of the House of Representatives each
                          made five appointments, with no more than three of the five appointments
                          coming from one political party to ensure a bipartisan commission. The
                          President was responsible for appointing the commission’s chair. The
                          commission had a staff of 23. The final report, Report of the National
                          Commission on Social Security Reform, was issued on January 20,
                          1983. 2

Charge to the Greenspan   The commission was ordered to
                          •   Review relevant analyses of the current and long-term financial
                              condition of the Social Security Trust Funds
                          •   Identify problems that could threaten the long-term solvency of such
                          •   Analyze potential solutions to such problems that would both assure
                              the financial integrity of the Social Security system and appropriate
                          •   Provide appropriate recommendations to the Secretary of Health and
                              Human Services, the President, and Congress.

Greenspan Commission’s    In its final report, the Greenspan Commission found both short and long-
Recommendations           term financing problems and recommended that action should be taken to
                          strengthen the financial status of the Social Security program. Twelve
                          commission members voted in favor of a consensus package with 13
                          recommendations to address Social Security’s short-term deficit,
                          including, for example:

                           National Commission on Social Security Reform, Report of the National Commission on
                          Social Security Reform (Washington. D.C.: Jan. 20, 1983).

                          Page 38                                                                  GAO-19-342T
                             Appendix III: Structure, Scope, and
                             Recommendations of Three Past Federal
                             Commissions on Retirement Issues

                             •   Expand Social Security to include coverage for nonprofit and civilian
                                 federal employees hired after January 1, 1984, as well as prohibiting
                                 the withdrawal of state and local employees.
                             •   Shift cost-of-living adjustments to an annual basis.
                             •   Make the Social Security Administration its own separate,
                                 independent agency.
                             •   Make adjustments to spousal and survivor benefits.
                             •   Revise the schedule for Social Security payroll taxes.
                             •   Establish the taxation of benefits for higher-income persons.

                             In addition, these 12 commission members agreed that the long-range
                             deficit should be reduced to approximately zero, and their
                             recommendations were projected to meet about two-thirds of the long-
                             range financial deficit. Seven of the 12 members agreed that the
                             remaining one-third of the long-range financial deficit should be met by a
                             deferred, gradual increase in the normal retirement age, while the other 5
                             members agreed that it should be met by an increase in future
                             contribution rates starting in 2010.

                             After the Greenspan Commission’s final report was issued, Congress
                             enacted the Social Security Amendments of 1983. The amendments
                             incorporated many of the Greenspan Commission’s recommendations
                             and made comprehensive changes to Social Security coverage,
                             financing, and benefit structure. These changes included addressing
                             Social Security’s long-term financing problems by gradually increasing the
                             retirement age from 65 to 67, among other things.

President’s Commission to    In 2001, President Bush signed an executive order establishing the
Strengthen Social Security   President’s Commission to Strengthen Social Security. The President
                             asked the Commission to produce an interim report describing the
                             challenges facing the Social Security system and the criteria by which the
                             Commission would evaluate reform proposals, as well as a final report to
                             set forth the Commission’s recommendations regarding how to
                             strengthen Social Security with personal accounts. The commission had a
                             staff of sixteen members appointed by the President, of which no more
                             than eight members were of the same political party. The final report,

                             Page 39                                                         GAO-19-342T
                                Appendix III: Structure, Scope, and
                                Recommendations of Three Past Federal
                                Commissions on Retirement Issues

                                Strengthening Social Security and Creating Personal Wealth for All
                                Americans, was issued in December 2001. 3

Charge to the President’s       The commission was asked to submit to the President bipartisan
Commission to Strengthen        recommendations to modernize and restore fiscal soundness to the
Social Security                 Social Security system according to the following principles:

                                •   Modernization must not change Social Security benefits for retirees or
                                •   The entire Social Security surplus must be dedicated to Social
                                    Security only;
                                •   Social Security payroll taxes must not be increased;
                                •   Government must not invest Social Security funds in the stock market;
                                •   Modernization must preserve Social Security’s disability and survivors
                                    components; and
                                •   Modernization must include individually controlled, voluntary personal
                                    retirement accounts, which will augment the Social Security safety
The President’s Commission to   In its final report, the Commission offered three models for Social Security
Strengthen Social Security      reform. All three models shared a common framework whereby voluntary
Recommendations                 individual accounts were established in exchange for a reduction in the
                                Social Security defined portion of benefit. According to the report:

                                •   Reform Model 1 would have established a voluntary personal account
                                    option, but did not specify other changes in Social Security’s benefit
                                    and revenue structure and was intended to achieve full long-term
                                •   Reform Model 2 would have enabled future retirees to receive Social
                                    Security benefits that would be at least as great as then current
                                    retirees and increased Social Security benefits paid to low-income
                                    workers. Model 2 would have established a voluntary personal
                                    account without raising taxes or requiring additional worker
                                    contributions. It was intended to achieve solvency and balanced
                                    Social Security revenues and costs.

                                 President's Commission to Strengthen Social Security, Strengthening Social Security
                                and Creating Personal Wealth for All Americans (Washington. D.C.: Dec. 21, 2001).

                                Page 40                                                                    GAO-19-342T
           Appendix III: Structure, Scope, and
           Recommendations of Three Past Federal
           Commissions on Retirement Issues

           •   Reform Model 3 would have established a voluntary personal account
               option that generally enabled workers to reach or exceed then-current
               scheduled benefits and wage replacement ratios. It was intended to
               achieve solvency by adding revenues and by slowing benefit growth
               less than price indexing.

           Page 41                                                        GAO-19-342T
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