MEMBERSHIP OF THE ADVISORY COUNCIL Edward R. Stettinius, Jr., rector, University of Virginia; Chairman. Sumner H. Slichter, Lamont University professor, Harvard University; Associate Chairman. Frank Bane, executive director, Council of State Governments. Nelson H. Cruikshank, director of social-insurance activities, American Mary H. Donlon, chairman, New York State Workmen's Compensation Board. Adrien J. Falk, president, S & W Fine Foods, Inc. Marion B. Folsom, treasurer, Eastman Kodak Co. M. Albert Linton, president, Provident Mutual Life Insurance Co. Florence R. Sabin, scientist. S. Abbot Smith, president, Thomas Strahan Co. Delos Walker, vice president, R. H. Macy & Co. Ernest C. Young, dean of the graduate school, Purdue University. I 74779-48- -2 OLD-AGE AND SURVIVORS INSURANCE INTRODUCTION AND SUMMARY Opportunity for the individual to secure protection for himself and his family against the economic hazards of old age and death is essential to the sustained welfare, freedom, and dignity of the American citizen. For some, such protection can be gained through individual savings and other private arrangements. For others, such arrangements are inadequate or too uncertain. Since the interest of the whole Nation is involved, the people, using the Government as the agency for their cooperation, should make sure that all members of the community have at least a basic measure of protection against the major hazards of old age and death. In the last analysis the security of the individual depends on the success of industry and agriculture in producing an increasing flow of goods and services. However, the very success of the economy in making progress, while creating opportunities, also increases risks. Hence, the more progressive the economy, the greater is the need for protection against economic hazards. This protection should be made available on terms which reinforce the interest of the individual in helping himself. A properly designed social-security system will reinforce the drive of the individual toward greater production and greater efficiency, and will make for an environment conducive to the maximum of economic progress. THE METHOD OF SOCIAL INSURANCE The Council favors as the foundation of the social-security system. the method of contributory social insurance with benefits related to prior earnings and awarded without a needs test. Differential benefits based on a work record are a reward for productive effort and are consistent with general economic incentives, while the knowledge that benefits will be paid-irrespective of whether the individual is in needsupports and stimulates his drive to add his personal savings to the basic security he has acquired through the insurance system. Under such a social insurance system, the individual earns a right to a benefit that is related to his contribution to production. This earned right is his best guaranty that he will receive the benefits promised and that they will not be conditioned on his accepting either scrutiny of his personal affairs or restrictions from which others are free. Public-assistance payments from general tax funds to persons who are found to be in need have serious limitations as a way of maintaining family income. Our goal is, so far as possible, to prevent dependency through social insurance and thus greatly reduce the need for assistance. We recognize that, for a decade or two, public assistance will be necessary for many persons whose need could have been met by the insurance program if it had been in effect for a longer time and had covered all persons gainfully employed. The Council looks forward, however, to the time when virtually all persons in the United States will have retirement or survivorship protection under the oldage and survivors' insurance program. If insurance benefits are of reasonable amount, public assistance will then be necessary only for those aged persons and survivors with unusual needs and for the few who, for one reason or another, have been unable to earn insurance rights through work. Under such conditions the Federal expenditure for public assistance can be reduced to a small fraction of its present amount. The Council has studied the existing system of old-age and survivors insurance and unanimously approves its basic principles. The Council, however, finds three major deficiencies in the program: 1. Inadequate coverage-only about three out of every five jobs are covered by the program. 2. Unduly restrictive eligibility requirements for older workers— largely because of these restrictions, only about 20 percent of those aged 65 or over are either insured or receiving benefits under the program. 3. Inadequate benefits-retirement benefits at the end of 1947 averaged $25 a month for a single person. The Council's recommendations are designed to remedy these major defects. The Council has agreed unanimously on 20 of its 22 specific recommendations. The two instances of dissenting opinions have been noted in connection with the recommendations themselves, and the reasons for the dissents have been given in appendixes F and G. SUMMARY OF RECOMMENDATIONS Recommendations on coverage 1. Self-employment.-Self-employed persons such as business and professional people, farmers, and others who work on their own account should be brought under coverage of the old-age and survivors insurance system. Their contributions should be payable on their net income from self-employment, and their contribution rate should be 11⁄2 times the rate payable by employees. Persons who earn very low incomes from self-employment should for the present remain excluded. 2. Farm workers.-Coverage of the old-age and survivors insurance system should be extended to farm employees. 3. Household workers.-Coverage of the old-age and survivors insurance system should be extended to household workers. 4. Employees of nonprofit institutions.-Employment for nonprofit institutions now excluded from coverage under the old-age and survivors insurance program should be brought under the program, except that clergymen and members of religious orders should continue to be excluded. 5. Federal civilian employees.-Old-age and survivors insurance coverage should be extended immediately to the employees of the Federal Government and its instrumentalities who are now excluded from the civil-service retirement system. As a temporary measure designed to give protection to the short-term Government worker, the wage credits of all those who die or leave Federal employment with less than 5 years' service should be transferred to old-age and survivors insurance. The Congress should direct the Social Security Administration and the agencies administering the various Federal retirement programs to develop a permanent plan for extending old-age and survivors insurance to all Federal civilian employees, whereby the benefits and contributions of the Federal retirement systems would supplement the protection of old-age and survivors insurance and provide combined benefits at least equal to those now payable under the special retirement systems. 6. Railroad employees.-The Congress should direct the Social Security Administration and the Railroad Retirement Board to undertake a study to determine the most practicable and equitable method of making the railroad retirement system supplementary to the basic old-age and survivors insurance program. Benefits and contributions of the railroad retirement system should be adjusted to supplement the basic protection afforded by old-age and survivors insurance, so that the combined protection of the two programs would at least equal that under the Railroad Retirement Act. 7. Members of the armed forces.-Old-age and survivors insurance coverage should be extended to members of the armed forces, including those stationed outside the United States. 8. Employees of State and local governments.-The Federal Government should enter into voluntary agreements with the States for the extension of old-age and survivors insurance to the employees of State and local governments, except that employees engaged in proprietary activities should be covered compulsorily. 9. Social security in island possessions.-A commission should be established to determine the kind of social-security protection appropriate to the possessions of the United States. 10. Inclusion of tips as wages.-The definition of wages as contained in section 209 (a) of the Social Security Act, as amended, and section 1426 (a) of subchapter A of chapter 9 of the Internal Revenue Code should be amended to specify that such wages shall include all tips or gratuities customarily received by an employee from a customer of an employer. Recommendations on eligibility 11. Insured status.-To permit a larger proportion of older workers, particularly those newly covered, to qualify for benefits, the requirements for fully insured status should be 1 quarter of coverage for each 2 calendar quarters elapsing after 1948 or after the quarter in which the individual attains the age of 21, whichever is later, and before the quarter in which he attains the age of 65 (60 for women) or dies. Quarters of coverage earned at any time after 1936 should count toward meeting this requirement. A minimum of 6 quarters of coverage should be required and a worker should be fully and permanently insured if he has 40 quarters of coverage. In cases of death before January 1, 1949, the requirement should continue to be 1 quarter of coverage for each 2 calendar quarters elapsing after 1936 or after the quarter in which the age of 21 was attained, whichever is later, and before the quarter in which the individual attained the age of 65 or died. |