House Ways and Means Subcommittee on Social Security Hearing

Chairman Johnson, Ranking Member Becerra, and members of the Subcommittee, thank you for giving me the opportunity to testify today on behalf of the National Women's Law Center.

In announcing this hearing, Chairman Johnson stated, "Americans want, need, and deserve a Social Security program they can count on and understand." That is exactly right.

For a large majority of Americans, Social Security is their major source of retirement income--and the most secure and predictable. Defined benefit pensions are disappearing, and more than half of all seniors have no savings in retirement accounts. Social Security is what Americans count on to provide retirement income for life that is adjusted for inflation.

Through wars and recessions, Social Security insurance payments have been made on time and in full to support workers and their families when workers retire, become disabled, or die. That's why 84 percent of Americans agree that they don't mind paying Social Security taxes. n1

My testimony will discuss the importance of Social Security to Americans' retirement security; the need to enhance, not cut, Social Security benefits; how to strengthen Social Security's finances to ensure that all benefits, including disability benefits, can be paid in full; and, finally, the need to provide the Social Security Administration adequate resources to serve the millions of Americans who depend on Social Security.

Social Security is the basis of retirement security for most Americans.

Last month, over 58 million Americans received income from Social Security. n2 Retired workers and their families make up the largest group, over 70 percent; 19 percent are people with disabilities and their families; and a little over 10 percent are surviving spouses and children.

Benefits are modest. The average Social Security benefit for women 65 and older is about $13,100 per year; about $17,200 for men 65 and older. n3 About 40 percent of female retirees receive worker benefits that would not provide a poverty-level income, compared to less than 20 percent of male retirees. n4

Yet these modest payments are critically important. Social Security lifts 22.2 Americans out of poverty, including 15.3 seniors (65 and older) and over 1 million children. n5 Over 870,000 Texans and nearly 1.3 million Californians are lifted out of poverty by Social Security. n6 It's especially important to women; without Social Security, half of all women 65 and older, and two-thirds of women 65 and older living alone, would be poor. n7

For most Americans, Social Security is the main source of retirement income. n8 For two-thirds of seniors in households that receive it, Social Security provides at least half of their retirement income. It's virtually the only source of income (90 percent or more) for over one-third (36 percent) of seniors. Only for seniors in the top 20 percent of the income spectrum is Social Security not the largest source of retirement income; their earnings are. But as seniors age, other sources of income shrink or disappear as they stop working and exhaust their savings. Thus, reliance on Social Security increases with age: nearly half (47 percent) of seniors 80 and older receive virtually all of their income from Social Security.

The data above are based on the Census Bureau'sCurrent Population Survey (CPS). Some have criticized this survey for not fully reflecting distributions that seniors receive from Individual Retirement Accounts and 401(k)s. n9 However, other surveys that measure these distributions confirm that most seniors are receiving limited support from their retirement savings. It is true that, overall, there are trillions of dollars in retirement accounts. But retirement savings are unequally distributed; much of that wealth belongs to a small percentage of wealthy individuals. n10

An analysis of data from the Survey on Income and Program Participation (SIPP) found that only about one in five families headed by seniors received any money from retirement accounts in 2009, and among those did, typical distributions were modest. n11 Among the 19 percent that received any distributions, the median amount for the year was $3,300.

The Federal Reserve Board's Survey of Consumer Finance--a survey that measures assets in detail--also shows that retirement accounts are a limited source of retirement security for most retirees. n12 In 2010, slightly less than half (49 percent) of households between ages 65 and 74 had any assets in retirement accounts; among households over 75, slightly less than one-third (32.8 percent) had any assets in retirement accounts. For the minority who had retirement accounts, the median holding was $100,000 for those ages 65 to 74, $54,000 for those over age 75. Put another way, three-quarters of families ages 65 to 74 have less than $100,000 in retirement accounts; nearly 85 percent of families 75 and older have less than $54,000.

Poverty among seniors is more extensive than many people realize, because it is underestimated by the official poverty measure. A more accurate--and disturbing--measure of poverty among seniors is provided by the Census Bureau's Supplemental Poverty Measure (SPM). The SPM takes account of certain out-of-pocket expenditures, including health care and work-related expenses such as child care, and noncash and after-tax resources received by a household, such as Supplemental Nutrition Assistance Program (SNAP) benefits and the Earned Income Tax Credit. n13 Under the SPM, the poverty rate for people 65 and older jumps from 9.1 percent under the official measure to 14.8 percent - an increase of 63 percent. n14

The main reason for the increase in poverty among seniors under the SPM is that even with Medicare, out-of-pocket medical expenses consume a large share of seniors' budgets - 14 percent, nearly three times the share of health spending of non-Medicare households. n15 That means that seniors don't have much left to pay for food, housing, utilities, transportation and other basics.

These statistics demonstrate what most Americans already understand: that's why nine out of ten agree that "Social Security benefits now are more important than ever to ensure that retirees have a dependable income." n16

Social Security should be protected and enhanced--not cut--to improve Americans' retirement security.

Social Security will continue to be vital for future retirees. Defined benefit pensions that provide income for life are disappearing; only 19 percent of private sector workers have access to a defined benefit pension, according to the Bureau of Labor Statistics. n17 And the prospects for retirement savings accounts filling the gap when today's workers retire are not encouraging. Data from the Federal Reserve Board's Survey of Consumer Finance show that 45 percent of all working-age families (ages 25 to 64), and 40 percent of families near retirement (ages 55 to 64), have no retirement savings. n18 When all families are considered--including those without retirement accounts--the median retirement account balance for all working-age families is $3,000; for all near-retirement families, the median balance is $12,000. n19

These data show that today's workers also will rely on Social Security to provide a modest base of income they can count on for life when they retire. They can't afford cuts, whether as part of privatization plans that would replace secure benefits with risky private accounts, a lower and less accurate Cost of Living Adjustment that would hit the oldest beneficiaries--mostly women--especially hard, n20 or further increases in the retirement age, which are simply across-the-board benefit cuts. A one-year increase in the retirement age cuts benefits by about seven percent, regardless of the age at which benefits are claimed. n21 women.

Proposals to cut benefits are especially troubling because Social Security benefits are already shrinking under current law. Changes enacted in 1983 and 1993-primarily the increase in the retirement age which is only partially phased in-will continue to erode benefits. By 2050, benefits will be 24 percent lower than they would have been without these cuts. n22

The nation's retirement savings and pension systems are failing millions of Americans; most of the tax benefits for retirement savings go to those who need them least. n23 They should be reformed. But if the goal is to increase retirement security for average Americans, the surest and most effective way to do it is to protect and enhance Social Security. Social Security is already virtually universal. It provides secure benefits that can't be outlived and are protected against inflation and the ups and downs of the market. In addition, it provides life and disability insurance for workers and their families, imposes few responsibilities on employers, and is highly efficient.

Since Social Security was created, Congress has built on its strong foundation: expanding coverage, adding disability benefits, creating and expanding eligibility for divorced spouses, making cost-of-living adjustments automatic, increasing benefits for widowed spouses. n24 These improvements have made a major difference in people's lives: indeed, a careful study found that all of the reduction in elderly poverty between 1967 and 2000 can be attributed to improvements in Social Security benefits, not to workers' labor market experience. n25

Congress can and should continue the work of improving Social Security benefits to further reduce poverty and increase economic security. Experts and advocates have proposed reforms n26 and Members of Congress have introduced a variety of proposals to enhance benefits, including using the Consumer Price Index for the Elderly, which takes account of elders' higher health care spending, to determine the annual COLA; adjusting the formula to increase benefits overall; reforming the Special Minimum Benefit to improve benefits for workers with low lifetime earnings; giving credit for lost or reduced earnings due to caregiving; restoring student benefits; and reforming the benefit for surviving spouses to provide more adequate and equitable benefits for the survivors of low-and moderate-income couples. These are the kinds of reforms that Congress should consider.

Protecting and improving Social Security is affordable.

The 2014 Report of the Social Security Trustees shows that although Social Security faces a long-term shortfall, it is fundamentally sound--and with modest adjustments, can be strengthened and improved for decades to come. The Trustees project that on a combined basis, the program's dedicated revenues and the $2.76 trillion reserves in its two Trust Funds--the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund--can pay all promised benefits in full until 2033. n27 After that, Social Security won't be broke--its continuing revenues will cover 77 percent of promised benefits. Such a reduction in vital benefits would be unacceptable, and the long-term shortfall should be addressed. But first Congress must address a more immediate issue.

The Trustees project that the DI Trust Fund will be exhausted in 2016, and income to the DI program will only cover 81 percent of benefits. The depletion of the DI Trust Fund is the result of predictable demographic trends, not abuse of the program; in fact, nearly 20 years ago, the Trustees projected that the DI Trust Fund would run short in 2016. n28 The increase in the number of DI recipients is largely the result of the growth of the working-age population; baby boomers moving into more disability-prone years; the increase in women's labor force participation, which brought their participation in the DI program close to that of men; and the increase in Social Security's full retirement age, which kept workers with disabilities between ages 65 and 66 in the DI program, rather than the retirement program. n29

If Congress fails to act by 2016, insurance payments to disabled workers and their families would be cut by one-fifth. But there is a simple step that Congress can take to prevent these devastating cuts and reassure all workers that if they are seriously injured in a car accident or suffer a devastating stroke and can no longer work, that Social Security will be there for them and their families. It can do this by reallocating payroll tax revenue to rebalance Social Security's two Trust Funds. Currently, of the 6.2 percent of wages that employees pay for Social Security, 5.3 percent goes into the OASI Trust Fund and 0.9 percent goes into the DI Trust Fund. Changing the allocation of the payroll tax to rebalance the Trust Funds is a step Congress has taken 11 times in the past, and in both directions: shifting from OASI to DI six times and from DI to OASI five times. n30

Beyond that, Congress should consider reforms to strengthen the financing of the combined Social Security program and improve the adequacy of benefits. Waiting until the Trust Funds are within six months of exhaustion, as was the case when the 1983 reforms were enacted, would be irresponsible. But the Trustees Report shows that Congress has the time to consider any changes carefully--and, in particular, to consider how changes would impact the millions of Americans who depend on Social Security.

Strengthening Social Security's finances is important to assure workers and retirees that they will get the benefits they have earned and are counting on for themselves and their families. But making Social Security's books balance over a particular period is not an end in itself. It's possible to restore solvency simply by cutting benefits deeply enough--but that is no way to provide Americans with the Social Security program they "want, need, and deserve," in the words of Chairman Johnson.

Social Security is affordable. The Trustees Report shows that as the baby boom generation retires, the costs of Social Security will rise as a percentage of the economy from about 5.0 percent of GDP in 2012 to about 6.2 percent in 2035 when all baby boomers have retired, then level off. To put an increase in spending of 1.2 percentage points of GDP into perspective: between 1950 and 1975, when the baby boomers were children, spending on public education increased by 2.8 percentage points of GDP, with little advance warning. n31 In contrast, Social Security's actuaries have seen the retirement of the baby boom generation coming for a long time--and Congress has taken steps to prepare for it.

What the actuaries and policy makers did not foresee in 1983, when they enacted a plan they projected would secure solvency for Social Security for 75 years, was slow and unequal wage growth. These trends not only have strained average working families; they have eroded Social Security's payroll tax base and account for a substantial share of the long-term shortfall. n32 So it is particularly appropriate to strengthen Social Security by requiring high earners to pay their fair share, rather than by cutting benefits for working Americans.

That is the approach most Americans favor. A national survey by the National Academy of Social Insurance found that seven out of ten Americans, across generations and income groups, preferred a package of changes that would raise revenue by gradually eliminating the cap on taxable earnings and gradually increasing the payroll tax rate, and that would increase--not cut--benefits. n33

There are various options for increasing revenues for Social Security. A report by Social Security's Office of the Chief Actuary presents several. n34 Bills introduced by several Members of Congress would improve benefits, raise revenue, and extend the solvency of the Trust Funds. n35 And immigration reform and other policies that would expand the economy, create jobs, and boost wages for average workers would also improve the solvency of Social Security.

The Social Security Administration needs adequate funding to ensure that Americans receive the benefits they have earned in full and on time.

The Social Security Administration (SSA) is responsible for seeing that Americans receive the benefits they have earned. It has a proud history of delivering world-class service--but its ability to continue to do so is in serious jeopardy.

Despite the substantial and continuing increase in Social Security's caseload, Congress has reduced funding for SSA over the last few years--and the services Americans need and have paid for through their contributions to Social Security are suffering. Field offices have been closed and hours cut back; staffing and training reduced; phone lines are overloaded; wait times for disability determinations and appeals are unacceptable; and public education efforts have been dramatically reduced. n36

In response to pressure from the public and some Members of Congress, some cutbacks have been reversed, at least in part. In 2011, SSA stopped mailing the annual benefit statements that explain what workers can expect to get from Social Security for budget reasons; it recently announced that it would resume mailing statements, but only at five-year intervals and only to workers who have not signed up to view their statements online. n37 It also recently reversed a decision that Social Security offices would no longer issue benefit verification letters to people who came to their offices. n38 These developments are welcome--but fall far short of what is needed.

Increasingly, SSA has been relying on conducting its work through online interactions, and it plans to continue in that direction. n39 But while it is important to improve online services, this strategy has its limits, even for people who are comfortable getting information and conducting business online. For example, for several years, the Social Security website has touted how quick and easy it is to sign up for benefits online. And it is a convenient option. But deciding when to claim benefits--and what benefits to claim, especially for those who are entitled to benefits both as workers and as spouses or widow(ers)--is not a simple decision. It can dramatically affect the payments that workers, and a surviving spouse if they are married, will receive for life. n40 Applicants should be able to consult with well-trained staff to get help understanding the consequences of different choices.

In addition, access to and ability to use online services is more limited among the population of elderly people and people with disabilities that Social Security serves. The most vulnerable beneficiaries are likely to have the most difficulty. And, though future retirees will, in general, have more experience conducting their business online than current retirees, they'll need to continue to maintain internet access and keep up with changing technology to be able to continue to conduct their business online. The ability to apply for benefits online at 66 is no guarantee that at 90, they'll be able to go online to correct an erroneous deduction for Medicare premiums.

It is SSA's responsibility to ensure that all Americans--especially those who are poor or vulnerable--have access to the benefits they deserve. And it is Congress' responsibility to ensure that they have the resources to do the job.

Thank you for giving me this opportunity to testify.

n1 Jasmine Tucker, Virginia Reno, and Thomas Bethel, National Academy of Social Insurance (NASI), Strengthening Social Security: What do Americans Want? (2013), http://www.nasi.org/sites/default/files/research/What_Do_Americans_Want.pdf.

n2 All data in this paragraph are from Social Security Administration (SSA), Monthly Statistical Snapshot, June 2014, http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/2014-05.html.

n3 SSA, Annual Statistical Supplement to the Social Security Bulletin, 2013 (Feb. 2014), Table 5.A16, http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5a.html. The average monthly benefit for all female beneficiaries 65 and older was $1,090.82, or about $13,090 per year as of December 2012, compared to $1,431.23 per month, or $17,175 per year for all male beneficiaries 65 and older.

n4 National Women's Law Center (NWLC) calculations based on SSA, Annual Statistical Supplement 2013, supra note 3, Table 5.B9, http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5b.html, and Census Bureau official poverty thresholds (about $918 per month in 2012 for a single elderly individual).

n5 Paul N. Van de Water, Arloc Sherman, and Kathy Ruffing, Center on Budget and Policy Priorities (CBPP), Social Security Keeps 22 Million Americans Out Of Poverty: A State-By-State Analysis (Oct. 25, 2013), http://www.cbpp.org/cms/index.cfm?fa=view&id=4037.

n6 Id.

n7 NWLC, Women and Social Security (Apr. 2014</chron>), http://www.nwlc.org/resource/women-and-social-security.

n8 All data in this paragraph are from SSA,, Income of the Population 55 or Older, 2012 (Apr. 2014), http://www.ssa.gov/policy/docs/statcomps/income_pop55/.

n9 See, e.g., Sylvester Scheiber and Andrew Biggs, "Retirees Aren't Headed for the Poor House," Wall St. Journal (Jan. 23, 2014), http://online.wsj.com/news/articles/SB10001424052702304603704579329012635470796.

n10 Monique Morrissey and Natalie Sabadish, Economic Policy Institute (EPI), Retirement Inequality Chartbook: How the 401(k) revolution created a few big winners and many losers at 27 (Sept. 2013), http://www.epi.org/publication/retirement-inequality-chartbook/

n11 All data in this paragraph are from Howard M. Iams and Patrick J. Purcell, "The Impact of Retirement Account Distributions on Measures of Family Income," Social Security Bulletin, Vol. 73 No. 2 (May 2013), http://www.ssa.gov/policy/docs/ssb/v73n2/v73n2p77.pdf .

n12 All data in this paragraph are from Jesse Bricker, et. al., Federal Reserve Board, "Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Vol. 98, No. 2, Table 6.B. (June 2012) , http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf.

n13 Kathleen Short, U.S. Census Bureau, The Research Supplemental Poverty Measure: 2012 (Nov. 2013), http://www.census.gov/prod/2013pubs/p60-247.pdf.

n14 Id. NWLC calculation of percentage increase based on Table 1.

n15 Juliette Cubanski, Christina Swoope, Anthony Damico, and Tricia Neuman, Kaiser Family Foundation, Health Care on a Budget: The Financial Burden of Health Spending by Medicare Households (Jan. 2014), http://kff.org/medicare/issue-brief/health-care-on-a-budget-the-financial-burden-of-health-spending-by-medicare-households/.

n16 Strengthening Social Security: What do Americans Want?, supra note 1. http://www.nasi.org/sites/default/files/research/What_Do_Americans_Want.pdf.

n17 Bureau of Labor Statistics, Employee Benefits Survey, Retirement Benefits: Access, Participation and Take-Up Rates, Table 2 (Mar. 2013), http://www.bls.gov/ncs/ebs/benefits/2013/ownership/private/table02a.pdf.

n18 Nari Rhee, National Institute on Retirement Security, The Retirement Savings Crisis: Is It Worse Than We Think (June 2013), http://www.ebri.org/pdf/briefspdf/EBRI_IB_397_Mar14.RCS.pdf.

n19 Id.

n20 Joan Entmacher and Katherine Gallagher Robbins, NWLC, Obama Plan Fails to Adequately Protect Long-Term Social Security Beneficiaries from Chained CPI (Apr. 2013), http://www.nwlc.org/sites/default/files/pdfs/chainedcpipresidentobamabumpup.pdf, and Cutting the Social Security COLA by Changing the Way Inflation Is Calculated Would Especially Hurt Women (June 2011), http://www.nwlc.org/resource/cutting-social-security-cola-changing-way-inflation-calculated-would-especially-hurt-

n21 Kathy A. Ruffing & Paul N. Van de Water, CBPP, Social Security Benefits Are Modest: Policy Makers Have Only Limited Room to Reduce Benefits Without Causing Hardship (Jan. 2011), http://www.cbpp.org/files/1-11-11socsec.pdf.

n22 Virginia Reno, NASI, What's Next for Social Security (Oct. 2013), http://www.nasi.org/sites/default/files/research/Whats_Next_for_Social_Security_Oct2013.pdf. The other reductions are from taxing a growing share of Social Security benefits and delaying the COLA from July to January.

n23 Chuck Marr, Nathaniel Frentz, and Chye-Ching Huang, CBPP, Retirement Tax Incentives Are Ripe for Reform: Current Incentives Are Expensive, Inefficient, and Inequitable (Dec. 2013), http://www.cbpp.org/cms/?fa=view&id=4063.

n24 See SSA, Social Security History, http://www.ssa.gov/history/.

n25 Gary Engelhardt and Jonathan Gruber, National Bureau of Economic Research, Social Security and the Evolution of Elderly Poverty, NBER Working Paper 10466 (May 2004), http://www.nber.org/aginghealth/summer04/w10466.html.

n26 For a discussion of such proposals, see, e.g., Joan Entmacher and Amy Matsui, Addressing the Challenges Women Face in Retirement: Improving Social Security, Pensions, and SSI, 46 John Marshall Law Review 749 (2013); Center for Community Change and Older Women's Economic Security Task Force of the National Council of Women's Organizations, Expanding Social Security Benefits for Financially Vulnerable Populations (October 2013), http://gvfrs.retirementsecurityvoices.org/wp-content/uploads/2013/10/cccfinalweb10_29.pdf; National Committee to Preserve Social Security and Medicare, National Organization for Women Foundation and Institute for Women's Policy Research, Breaking the Social Security Glass Ceiling: A Proposal to Modernize Women's Benefits (May 2012), http://www.ncpssmfoundation.org/Portals/0/embargo_breaking_ss_glass_ceiling.pdf; Commission to Modernize Social Security, Plan for a New Future: The Impact of Social Security Reform on People of Color (October 2011), http://www.insightcced.org/New_Future_Social_Security_Commission_Report_Final.pdf; Virginia Reno and Joni Lavery, NASI, Fixing Social Security: Adequate Benefits, Adequate Financing (October 2009), http://www.nasi.org/research/2009/fixing-social-security.

n27 Board of Trustees, The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (2014), http://ssa.gov/oact/TR/2014/tr2014.pdf.

n28 Kathy Ruffing, CBPP, How Much of the Growth in Disability Insurance Stems From Demographic Changes? (Jan. 2014), http://www.cbpp.org/cms/index.cfm?fa=view&id=4080.,

n29 Id.

n30 Kathy Ruffing and Paul Van de Water, CBPP, Congress Needs to Boost Disability Insurance Share of Payroll Tax by 2016, Traditional Step Would Avert Trust Fund Depletion, Benefit Cuts (Jul. 2014), http://www.cbpp.org/cms/index.cfm?fa=view&id=4168

n31 What's Next for Social Security, supra note 22.

n32 Monique Morrissey, EPI, Is an Aging Population--or Slow and Unequal Wage Growth--Our Biggest Challenge? (July 25, 2014), http://www.epi.org/blog/aging-population-slow-unequal-wage-growth/ and Dean Baker, Center for Economic and Policy Research, The Impact of the Upward Redistribution of Wage Income on Social Security Solvency (Feb. 3, 2013), http://www.cepr.net/index.php/blogs/cepr-blog/the-impact-of-the-upward-redistribution-of-wage-income-on-social-security-solvency.

n33 Strengthening Social Security: What Do Americans Want?, supra note 1.

n34 Office of the Chief Actuary, SSA, Summary of Provisions that Would Change the Social Security Program (Oct. 2013), http://ssa.gov/oact/solvency/provisions/summary.pdf.

n35 Analyses by the Office of the Chief Actuary of various proposals by Members of Congress and others affecting Trust Fund Solvency are available here: http://ssa.gov/oact/solvency/index.html.

n36 See Strengthen Social Security Coalition, Transition Report for the New Commissioner of Social Security: How to Ensure the World-Class Service the American People Deserve (March 2013), http://www.strengthensocialsecurity.org/sites/default/files/Transition-Report-Web-FINAL.pdf.

n37 Mark Miller, Reuters, "Social Security to Resume Benefits Statement Mailings" (Apr. 19, 2014), http://www.reuters.com/article/2014/04/19/us-social-security-idUSBREA3I0GL20140419.

n38 Press Release, Social Security Administration, "Social Security Extends Access to Benefit Verification" (Jul. 17, 2014) http://www.ssa.gov/news/press/releases.html#!/post/7-2014-1

n39 SSA, Agency Strategic Plan, 2014-2018 (2014), http://www.ssa.gov/agency/asp/materials/pdfs/plan-2014-2018.pdf.

n40 See NWLC, Making the Most of Your Retirement Income: Social Security Worker Benefits (May 2014), http://www.nwlc.org/resource/making-most-your-retirement-income-social-security-worker-benefits and NWLC, Making the Most of Your Retirement Income: Social Security for Spouses, Divorced Spouses and Widow/Widowers (May 2014), http://www.nwlc.org/resource/making-most-your-retirement-income-social-security-spouses-divorced-spouses-and-widowswidow.

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