United States General Accounting Office GAO Testimony Before the Subcommittee on Social Security, Committee on Ways and Means, House of Representatives For Release on Delivery Expected at 10:00 a.m. Thursday, April 10, 1997 SOCIAL SECURITY REFORM Implications for the Financial Well-Being of Women Statement of Jane L. Ross, Director Income Security Issues Health, Education, and Human Services Division GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women Mr. Chairman and Members of the Subcommittee: I am pleased to be here to discuss the impacts of proposals to finance and restructure the Social Security system, specifically the impacts on the financial well-being of women. As you know, the Social Security trust funds are predicted to pay out more in annual benefits than they collect in taxes beginning in 2012 and are expected to be depleted by 2029. Recently, the Social Security Advisory Council offered three alternative reform proposals to address this long-term financing problem. Each of the alternative proposals also affects the financial well-being of beneficiaries, especially women. One reason to be especially concerned about the financial well-being of women is that elderly unmarried women are much more likely to be living below the poverty line. For example, 22 percent of unmarried elderly women have income below the poverty threshold, compared with 15 percent of unmarried elderly men and only 5 percent of elderly married couples. Today, I would like to discuss how and why the benefits for women differ from those for men under the current Social Security system and how each of the three reform proposals of the Social Security Advisory Council might particularly affect women. The information I am providing today is based on previous GAO work and contains preliminary findings from a report being prepared at the request of the Ranking Minority Member of the Subcommittee.1 In summary, our work shows that, although the provisions of the Social Security Act do not differentiate between men and women, women tend to receive lower benefits than men. This is due primarily to differences in lifetime earnings because women tend to have lower wages and fewer years in the workforce. Women’s experience under pension plans differs from men’s not only because of earnings differences but also because of differences in investment behavior and longevity. Moreover, public and private pension plans do not offer the same social insurance protections that Social Security does. Furthermore, some of the provisions of the Social Security Advisory Council’s three proposals may exacerbate the differences in men and women’s benefits. For example, proposals that call for individual retirement accounts will pay benefits that are affected by investment 1 Pension Plans: Survivor Benefit Coverage for Wives Increased After 1984 Pension Law (GAO/HRD-92-49, Feb. 28, 1992); Social Security: Issues Involving Benefit Equity for Working Women (GAO/HEHS-96-55, Apr. 10, 1996); and 401(k) Pension Plans: Many Take Advantage of Opportunity to Ensure Adequate Retirement Income (GAO/HEHS-96-176, Aug. 2, 1996). Page 1 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women behavior and longevity. Expected changes in women’s labor force participation rates and increasing earnings will reduce but probably not eliminate these differences. Over their lifetimes, men and women differ in many ways that have Demographic consequences for how much they will receive from Social Security and Characteristics and pensions. Women make up about 60 percent of the elderly population and Labor Market less than half of the Social Security beneficiaries who are receiving retired worker benefits, but they account for 99 percent of those beneficiaries Attachment Affect who receive spouse or survivor benefits. A little less than half of working Retirement Income women between the ages of 18 and 64 are covered by a pension plan, while slightly over half of working men are covered. The differences between for Men and Women men and women in pension coverage are magnified for those workers Differently nearing retirement age—over 70 percent of men are covered compared with about 60 percent of women. Labor Force Participation Labor force participation rates differ for men and women, with men being and Earnings Differ for more likely, at any point in time, to be employed or actively seeking Men and Women employment than women.2 The gap in labor force participation rates, however, has been narrowing over time as more women enter the labor force, and the Bureau of Labor Statistics predicts it will narrow further. In 1948, for example, women’s labor force participation rate was about a third of that for men, but by 1996, it was almost four-fifths of that for men. The labor force participation rate for the cohort of women currently nearing retirement age (55 to 64 years of age) was 41 percent in 1967 when they were 25 to 34 years of age. The labor force participation rate for women who are 25 to 34 years of age today is 75 percent—an increase of over 30 percentage points. Earnings histories also affect retirement income, and women continue to earn lower wages than men. Some of this difference is due to differences in the number of hours worked, since women are more likely to work part-time and part-time workers earn lower wages. However, median earnings of women working year-round and full-time are still only about 70 percent of men’s.3 2 The labor force participation rate is the proportion of the population under consideration who are working or actively seeking employment. 3 Even after accounting for differences in education, work effort, age, and other characteristics that affect wages, women earn wages that are about 15 to 20 percent lower than men’s wages, on average. Page 2 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women The lower labor force participation of women leads to fewer years with covered earnings4 on which Social Security benefits are based.5 In 1993, the median number of years with covered earnings for men reaching 62 was 36 but was only 25 for women. Almost 60 percent of men had 35 years with covered earnings, compared with less than 20 percent of women. Lower annual earnings and fewer years with covered earnings lead to women’s receiving lower monthly retired worker benefits from Social Security, since many years with low or zero earnings are used in the calculation of Social Security benefits. On average, the retired worker benefits received by women are about 75 percent of those received by men. In many cases, a woman’s retired worker benefits are lower than the benefits she is eligible to receive as the spouse or survivor of a retired worker.6 Life Expectancies Differ Women tend to live longer than men and thus may spend many of their for Men and Women later retirement years alone. A woman who is 65 years old can expect to live an additional 19 years (to 84 years of age), and a man of 65 can expect to live an additional 15 years (to 80 years of age). By 2070, the Social Security Administration projects that a 65-year-old woman will be able to expect to live another 22 years, and a 65-year-old-man, another 18 years. Additionally, husbands tend to be older than their wives and so are likely to die sooner. Differences in longevity do not currently affect the receipt of monthly Social Security benefits but can affect income from pensions if annuities are purchased individually. Women Invest More Many pension plans give participants responsibility for managing the Conservatively Than Men investment of their pension assets, and differences in how men and women invest can lead to differences in pension benefits they receive. When making financial decisions, women tend to be more risk averse than men. One consequence of this is that women tend to invest more of their pension funds in safer but lower yielding assets, such as government bonds. The results of a recent study7 of the federal Thrift Savings Plan indicate that men are much more likely to invest in the stock fund than are 4 Years of covered earnings are the years in which the individual received earnings on which Social Security taxes were paid. 5 Social Security benefits are based on the 35 years of highest covered earnings. 6 GAO/HEHS-96-55, Apr. 10, 1996. 7 Richard P. Hinz, David D. McCarthy, and John A. Turner, “Are Women Conservative Investors? Gender Differences in Participant Directed Pension Investments,” in Positioning Pensions for the Year 2000, Olivia Mitchell, ed. (Philadelphia: University of Pennsylvania Press, 1996). Page 3 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women women. The authors estimated that, after 35 years of participation in the plan at historical yields and identical contributions, the difference in investment behavior between men and women can lead to men having a pension portfolio that is 16 percent larger. Social Security provisions and pension plan provisions differ in several Pension Plan ways (see app. I for a summary). Under Social Security, the basic benefit a Provisions Offer worker receives who retires at the normal retirement age (NRA)8 is based Different Benefits on the 35 years with the highest covered earnings.9 The formula is progressive in that it guarantees that higher-income workers receive From Social Security higher benefits, while the benefits of lower-income workers are a higher percentage of their preretirement earnings. The benefit is guaranteed for the life of the retired worker and increases annually with the cost of living. Private pensions are different. They can be classified into two basic types: defined benefit and defined contribution plans. Pension benefits in defined benefit plans are generally based on a formula that includes years with the firm, age at retirement, and salary averaged over some number of years.10 Employers offering defined contribution plans generally promise to make guaranteed periodic contributions to workers’ accounts, but the amount of retirement benefits is not specified. The benefits from defined contribution plans depend on the contributions plus investment returns or losses. Today, defined contribution plans are the most prevalent type of pension plan, and 401(k) plans are one of the fastest growing defined contribution plan types.11 Typically, at retirement, workers receive a joint and survivor annuity that provides pension benefits to the surviving spouse after the worker’s death, unless both the worker and spouse elect, in writing, not to take the joint and survivor annuity. In this instance, the retiring worker 8 Currently, the normal retirement age is 65 years. It is set to gradually increase to 67 for those born in 1960 or after. The early retirement age (the earliest age at which a worker qualifies for Social Security retirement benefits) will remain at 62. 9 The calculation of a worker’s basic benefit amount first involves calculating average indexed monthly earnings (AIME) on the basis of the 35 years of highest earnings. For workers becoming eligible for Social Security benefits in 1997, benefits are equal to 90 percent of the first $455 of AIME, plus 32 percent of the AIME from $455 to $2,741, plus 15 percent of the AIME in excess of $2,741. The dollar amounts in the formula are called the bend points, and the percentages are called the conversion factors. 10 In defined benefit plans that are integrated with Social Security, pension benefits also depend on the size of an individual’s Social Security benefit. 11 401(k) pension plans are salary reduction plans that allow participants to contribute, before taxes, a portion of their salary to a retirement account. Many employers match workers’ contributions to these accounts. Also, many employers allow participants to direct the investment of their account balances. Page 4 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women may elect, along with the spouse, to take a single life annuity or a lump-sum distribution if allowed under the plan. When workers retire, they are uncertain how long they will live and how quickly the purchasing power of a fixed payment will deteriorate. They run the risk of outliving their assets. Annuities provide insurance against outliving assets. Some annuities provide, though at a higher cost or reduced initial benefit, insurance against inflation risk, although annuity benefits often do not keep pace with inflation. Many pension plans are managed under a group annuity contract with an insurance company that can provide lifetime benefits. Individual annuities, however, tend to be costly. Benefits for Dependents Under Social Security, the dependents of a retired worker may be eligible Differ Under Social to receive benefits. For example, the spouse of a retired worker is eligible Security and Pensions to receive up to 50 percent of the worker’s basic benefit amount, while a dependent surviving spouse is eligible to receive up to 100 percent of the deceased worker’s basic benefit. Furthermore, divorced spouses and survivors are eligible to receive benefits under a retired worker’s Social Security record provided they were married for at least 10 years. If the retired worker has a child under 18 years old, the child is eligible for Social Security benefits, as is the dependent nonelderly parent of the child. The retired worker’s Social Security benefit is not reduced to provide benefits to dependents and former spouses. Pensions, both public and private, generally do not offer the same protections to dependents as Social Security. Private and public pension benefits are based on a worker’s employment experience and not the size of the worker’s family. At retirement, a worker and spouse normally receive a joint and survivor annuity so that the surviving spouse will continue to receive a pension benefit after the retired worker’s death. A worker, with the written consent of the spouse, can elect to take retirement benefits in the form of a single life annuity so that benefits are guaranteed only for the lifetime of the retired worker. This wasn’t always the case. Under the Employee Retirement Income Security Act of 1974, a married worker had the option to choose an annuity that provided benefits only as long as the retiree lived. Recognizing marriage as an economic partnership, the Congress sought through the Retirement Equity Act of 1984 to bring the retiring worker’s spouse directly into the decision-making process concerning benefit Page 5 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women payment options. Under this act, a joint and survivor annuity became the normal payout option and written spousal consent is required to choose another option. This requirement was prompted partly by testimony before the Congress by widows who stated that they were financially unprepared at their husbands’ death because they were unaware of their husbands’ choice to not take a joint and survivor annuity. Through the spousal consent requirement, the Congress envisioned that, among other things, a greater percentage of married men would retain the joint and survivor annuity and give their spouses the opportunity to receive survivor benefits. The monthly benefits under a joint and survivor annuity, however, are lower than under a single life annuity. Moreover, pension plans do not generally contain provisions to increase benefits to the retired worker for a dependent spouse or for children. As under Social Security, divorced spouses can also receive part of the retired worker’s pension benefit if a qualified domestic relations order is in place. However, the retired worker’s pension benefit is reduced in order to pay the former spouse. The three alternative proposals of the Social Security Advisory Council Some Reform would make changes of varying degrees to the structure of Social Security. Proposals Would The key features of the proposals are summarized in appendix II. Make Social Security More Like Pension Plans The Maintain Benefits Plan The Maintain Benefits (MB) plan would make only minor changes to the Would Make Fewest structure of current Social Security benefits. The major change that would Changes to Social Security affect women’s benefits is the extension of the computation period for benefits from 35 years to 38 years of covered earnings.12 Currently, earnings are averaged over the 35 years with the highest earnings to compute a worker’s Social Security benefits. If the worker has worked less than 35 years, then some of the years of earnings used in the calculation are equal to zero. Extending the computation period for the lifetime average earnings to 38 years would have a greater impact on women than on men. Although women’s labor force participation is increasing, the Social Security Administration forecasts that fewer than 30 percent of the women retiring in 2020 will have 38 years of covered earnings, compared with almost 60 percent of men. 12 One supporter of the MB plan does not support this provision. Page 6 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women The Individual Accounts The Individual Accounts (IA) plan would keep many features of the current Plan Would Add a Defined Social Security system but add an individual account modeled after the Contribution Component 401(k) pension plan. Workers would be required to contribute an additional 1.6 percent of taxable earnings to their individual account, which would be held by the government. Workers would direct the investment of their account balances among a limited number of investment options. At retirement, the distribution from this individual account would be converted by the government into an indexed annuity. The IA plan, like the MB plan, would extend the computation period to 38 years; it would also change the basic benefit formula by lowering the conversion factors at the higher earnings level. This plan would also accelerate the legislated increase in the normal retirement age and then index it to future increases in longevity. As a consequence of these changes, basic Social Security benefits would be lower for all workers, but workers would also receive a monthly payment from the annuitized distribution from their individual account, which proponents claim would offset the reduction in the basic benefit. In addition to extending the computation period, elements of the IA plan that would disproportionately affect women are the changes in benefits received by spouses and survivors, since women are much more likely to receive spouse and survivor benefits. The spouse benefit would be reduced from 50 percent of the retired worker’s basic benefit amount to 33 percent. The survivor benefit would increase from 100 percent of the deceased worker’s basic benefit to 75 percent of the couple’s combined benefit if the latter was higher. These changes would probably result in increased lifetime benefits for many women. Additionally, at retirement a worker and spouse would receive a joint and survivor annuity for the distribution of their individual account unless the couple decided on a single life annuity. The Personal Security The Personal Security Accounts (PSA) plan would make the most dramatic Accounts Plan Would changes to the structure of Social Security. This plan would replace the Replace Social Security current system with a two-tier system. The tier I benefit would be a flat benefit based on years of covered earnings. The full tier I benefit, which With a Flat Benefit and a would be equivalent to 65 percent of the poverty threshold, would be Defined Contribution received after 35 years of covered earnings. The tier II benefit would be Component the distribution from the retired worker’s personal security account. The personal security account is modeled after the 401(k) pension plan and would be funded by diverting 5 percentage points of the worker’s Social Page 7 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women Security payroll tax into the account,13 which would not be held by the government. Proponents of the PSA plan claim that over a worker’s lifetime the tier I benefits plus the tier II distribution would be larger than the lifetime Social Security benefits currently received by retired workers. The worker would direct the investment of his or her account assets. At retirement, workers would not be required to annuitize the distribution from their personal security account but could elect to receive a lump-sum payment. This could potentially affect women disproportionately, since the worker is not required to consult with his or her spouse regarding the disposition of the personal account distribution. Under the PSA plan, the tier I benefit for spouses would be equal to the higher of their own tier I benefit or 50 percent of the full tier I benefit. Furthermore, spouses would receive their own tier II accumulations, if any. The tier I benefit for a survivor would be 75 percent of the benefit payable to the couple; in addition, the survivor could inherit the balance of the deceased spouse’s personal security account assets. Many of the proposed changes to Social Security would affect the benefits Effects on Women’s received by men and by women differently.14 The current Social Security Benefits of Changing system is comparable to a defined benefit plan’s paying a guaranteed Basic Social Security lifetime benefit that is increased with the cost of living. Each of the Advisory Council proposals would potentially change the level of that Law benefit, and two of the proposals would create an additional defined contribution component. Not only would retired worker benefits be changed by these proposals, but the level of benefits for spouses and survivors would be affected. Conservative Investment Two Advisory Councils plans—the IA and PSA plans—would create defined Behavior May Have contribution accounts for workers. Both plans would also lower basic Adverse Consequences for Social Security benefits. On the basis of calculations by the National Academy of Social Insurance, the IA plan would lower basic benefits by Retirement Income 17 percent for the average earner, while the PSA plan would lower the basic or tier I benefit to about 47 percent of the benefit paid to today’s average earner. The rest of a retired worker’s Social Security benefit would come from the distribution from his or her private account. Under both plans, 13 The payroll tax for Social Security is 12.4 percent of taxable earnings. The tax is split evenly between the employee and employer. 14 The proposed changes could also affect benefits received from pension plans that are integrated with Social Security. How the changes in these benefits would affect men and women is beyond the scope of our testimony. Page 8 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women the account balances at retirement would depend on the contributions made to the worker’s account and investment returns or losses on the account assets. Since women tend to earn lower wages, they would be contributing less, on average, than men to their accounts. Furthermore, even if contributions were equal, women tend to be more conservative investors than men, which could lead to lower investment returns. Consequently, women would typically have smaller account balances at retirement and would receive lower benefits than men. The difference in investment strategy could lead to a situation in which men and women with exactly the same labor market experiences receive substantially different Social Security benefits. The extent to which investor education can close the gap in investment behavior between men and women is unknown. How Account Distributions The two Advisory Council proposals with individual or personal accounts Are Handled Affects differ in the handling of the distribution of the account balances at Benefit Levels retirement. The IA plan would require annuitization of the distribution at retirement, and choosing a single life annuity or a joint and survivor annuity would be left to the worker and spouse. If the single life annuity option for individual account balances was chosen, then the spouse would receive the survivor’s basic benefit after the death of the retired worker plus the annuitized benefit based on the work records of both individuals. The PSA plan would not require that the private account distribution be annuitized at retirement. A worker and spouse could take the distribution as a lump sum and attempt to manage their funds so that they did not outlive their assets. If the assets were exhausted, the couple would have only their basic tier I benefits, plus any other savings and pension benefits. Furthermore, even if personal account tier II assets were left after the death of the retired worker, the balance of the PSA account would not necessarily have to be left to the survivor. If a worker and spouse chose to purchase an annuity at retirement, then the couple would receive a lower monthly benefit than would be available from a group annuity. Both the IA and the PSA plans could lead to situations where men and women in identical circumstances received different Social Security benefits. Suppose a man and woman had the same labor market experiences and the same amount in their private accounts and then annuitized their distributions. The monthly annuity payments would reflect the differences in expected longevity (separate life tables could be used for men and women in the calculation of annuitized benefits) and, Page 9 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women although the expected lifetime payments would be the same, the monthly payments to the woman would be lower, since women have longer life expectancies. Even though the current provisions of Social Security are gender neutral, Conclusions differences during the working and retirement years may lead to different benefits for men and women. For example, differences in labor force attachment, earnings, and longevity lead to women’s being more likely than men to receive spouse or survivor benefits. Women who do receive retired worker benefits typically receive lower benefits than men. As a result of lower Social Security benefits and the lower likelihood of receiving pension benefits, among other causes, elderly single women experience much higher poverty rates than elderly married couples and elderly single men. Social Security is a large and complex program that protects most workers and their families from income loss because of a worker’s retirement. Public and private pension plans do not offer the social insurance protections that Social Security does. Pension benefits are neither increased for dependents nor generally indexed to the cost of living as are Social Security benefits. Typically, at retirement a couple will receive a joint and survivor annuity that initially pays monthly benefits that are 15 to 20 percent lower than if they had chosen to forgo the survivor benefits with a single life annuity. Furthermore, under a qualified domestic relations order, a divorced retired worker’s pension benefits may be reduced to pay benefits to a former spouse. While the three alternative proposals of the Social Security Advisory Council are intended to address the long-term financing problem, they would make changes that could affect the relative level of benefits received by men and women. Each of the proposals has the potential to exacerbate the current differences in benefits between men and women. Narrowing the gap in labor force attachment, earnings, and investment behavior may reduce the differences in benefits. But as long as these differences remain, men and women will continue to experience different outcomes with regard to Social Security benefits. This concludes my prepared statement. I would be happy to answer any questions you or other Members of the Subcommittee may have. Page 10 GAO/T-HEHS-97-112 Social Security Reform: Implications for the Financial Well-Being of Women For more information on this testimony, please call Jane Ross on Contributors (202) 512-7230; Frank Mulvey, Assistant Director, on (202) 512-3592; or Thomas Hungerford, Senior Economist, on (202) 512-7028. Page 11 GAO/T-HEHS-97-112 Appendix I Features of Social Security Under Current Law and Those of Pensions Current pension plan provisions Federal Employees’ Provisions under Retirement current Social Security System/Thrift Savings Defined contribution Type of beneficiarya law Plan Defined benefit plans plans Retired worker — Benefit computation is — FERS benefit is based Benefit is based on Benefit is based on based on 35 years of on statutory formula formula under plan contributions of highest covered earnings — TSP benefit is based documents employee, employer, or — Progressive formula on employee and both plus investment leads to redistribution government returns of individual — Benefits reduced contributions plus account balances actuarially if taken investment returns of between 62 and normal individual account retirement age (NRA); balances increased if taken after NRA — NRA to increase to 67 years for those born after 1959 b b b Spouse — Benefit is 50% of the retired worker’s benefit — Benefit is actuarially reduced if taken between 62 and NRA Survivor — Benefit is equal to Joint and survivor Joint and survivor Joint and survivor amount deceased annuity is normal form of annuity is normal form of annuity is normal form of spouse would be annuity, and survivor annuity annuity receiving but not less receives 50% of basic than 82-1/2% of annuity deceased spouse’s benefit — Benefit is actuarially reduced if taken between 62 and NRA Dually entitled beneficiaryc Receives own retired b b b worker benefit plus difference (if positive) between spouse or survivor benefit and his/her retired worker benefit (continued) Page 12 GAO/T-HEHS-97-112 Appendix I Features of Social Security Under Current Law and Those of Pensions Current pension plan provisions Federal Employees’ Provisions under Retirement current Social Security System/Thrift Savings Defined contribution Type of beneficiarya law Plan Defined benefit plans plans Divorced and surviving — Must have been Qualifying court order Qualified domestic Qualified domestic divorced spouse married for at least 10 relations order relations order years and currently be unmarried — Must be at least 62 years old for divorced spouse, 60 years old for divorced survivor — Benefit actuarially reduced if younger than NRA — Divorced spouse benefit is 50% of retired worker’s benefit — Surviving divorced spouse benefit is 100% of retired worker’s benefit b b b Mother or father and — Have eligible child in widowed mother or father care plus child — Under 65 years old — 50% of retired worker’s benefit plus 50% of child’s benefit — 75% of deceased worker’s benefit plus 75% of child’s benefit a Beneficiary categories are based on Social Security definitions. b Not applicable. c Entitled to benefit both as retired worker and as spouse or survivor of retired worker. Page 13 GAO/T-HEHS-97-112 Appendix II Features of Social Security Under Current Law and Those of Three Reform Proposals Provisions under Reform proposals of 1994-96 Social Security Advisory Council current Social Security Personal security Type of beneficiarya law Maintain benefits Individual accounts accounts Retired worker — Benefit computation is Extends computation — Extends computation — Creates two-tier based on 35 years of period from 35 years to period from 35 years to system with tier I a flat highest covered earnings 38 years of covered 38 years of covered benefit based on years — Progressive formula earnings earnings of covered earnings and leads to redistribution — Changes benefit tier II a personal security — Benefits reduced formula by lowering account (PSA) based on actuarially if taken conversion factors defined contribution between 62 and normal — Accelerates increase pension retirement age (NRA); of NRA and indexes to — Accelerates increase increased if taken after longevity of NRA and indexes to NRA — Creates individual longevity — NRA to increase to 67 account (IA) based on — Increases early years for those born after defined contribution retirement age to 65 1959 pension years Spouse — Benefit is 50% of the Same as current law — Benefits are lowered Benefits are tier II retired worker’s benefit from 50% to 33% of accumulations plus 50% — Benefit is actuarially retired worker’s benefit of full tier I benefit reduced if taken — Joint and survivor between 62 and NRA annuity with IA balance Survivor — Benefit is equal to Same as current law — 75% of couple’s 75% of benefit payable amount deceased combined benefit to couple plus eligible to spouse would be — Joint and survivor inherit balance of receiving but not less annuity with IA balance deceased spouse’s PSA than 82 1/2% of deceased spouse’s benefit — Benefit is actuarially reduced if taken between 62 and NRA Dually entitled beneficiaryb Receives own retired Same as current law Higher of own basic Tier II accumulations worker benefit plus benefit or 33% of plus higher of own tier I difference (if positive) spouse’s benefit benefit or 50% of full tier between spouse or I benefit survivor benefit and his/her retired worker benefit (continued) Page 14 GAO/T-HEHS-97-112 Appendix II Features of Social Security Under Current Law and Those of Three Reform Proposals Provisions under Reform proposals of 1994-96 Social Security Advisory Council current Social Security Personal security Type of beneficiarya law Maintain benefits Individual accounts accounts Divorced and surviving — Must have been Same as current law No mention No mention divorced spouse married for at least 10 years and currently be unmarried — Must be at least 62 years old for divorced spouse, 60 years old for divorced survivor — Benefit actuarially reduced if younger than NRA — Divorced spouse benefit is 50% of retired worker’s benefit — Surviving divorced spouse benefit is 100% of retired worker’s benefit Mother or father and — Have eligible child in Same as current law Same as for spouse or Same as for spouse or widowed mother or father care survivor plus child’s survivor plus child’s plus child — Under 65 years old benefit, which is same as benefit, which is same as — 50% of retired current law current law worker’s benefit plus 50% of child’s benefit — 75% of deceased worker’s benefit plus 75% of child’s benefit a Beneficiary categories are based on Social Security definitions. b Entitled to benefits both as retired worker and as spouse or survivor of retired worker. 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Social Security Reform: Implications for the Financial Well-Being of Women
Published by the Government Accountability Office on 1997-04-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)