Social Security: Revisiting Benefits for Spouses and Survivors Alison M. Shelton Analyst in Income Security Dawn Nuschler Specialist in Income Security November 5, 2010 The House Ways and Means Committee is making available this version of this Congressional Research Service (CRS) report, with the cover date shown above, for inclusion in its 2011 Green Book website. CRS works exclusively for the United States Congress, providing policy and legal analysis to Committees and Members of both the House and Senate, regardless of party affiliation. Congressional Research Service R41479 CRS Report for Congress Prepared for Members and Committees of Congress Social Security: Revisiting Benefits for Spouses and Survivors Summary Social Security auxiliary benefits were established in 1939 when Congress extended benefits to the dependents and survivors of workers covered by Social Security. Since 1939, Social Security auxiliary benefits have been modified by Congress numerous times to change eligibility requirements for spouses, widows, children, and others and to expand eligibility for auxiliary benefits to new groups of beneficiaries, such as divorcé(e)s, husbands, and widowers. Auxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of a Social Security-covered worker and are equal to a specified percentage of the worker’s basic monthly benefit amount (subject to a maximum family benefit amount). For example, the spouse of a retired worker may receive up to 50% of the retired worker’s basic benefit and the widow(er) of a retired worker may receive up to 100% of the retired worker’s basic benefit. When auxiliary benefits were first established, most households consisted of a single earner— usually the husband—and a wife who cared for children and remained out of the paid workforce. As a result, benefits for non-working spouses were structured to be relatively generous. A woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a woman who was married less than 10 years, who worked a full career in a low-wage job. In recent decades, this household structure has changed in part because women have entered the workforce in increasing numbers. The labor force participation rate of women with children under the age of 18 increased from 47% in 1975 to 71% in 2008. As a result, many women now qualify for Social Security benefits based on their own work records. In some cases, under the current benefit structure, a two-earner household may receive lower total Social Security benefits than a single-earner household with identical total Social Security-covered earnings. Women are, however, more likely than men to take breaks in employment to care for family members, which can result in fewer years of contributions to Social Security and employer-sponsored pension plans. Another change since 1939 has been an increase in the number of men and women who remain single or who have divorced. Persons who have never married, or who were married for less than 10 years, do not qualify for Social Security spousal or survivor benefits under current law. Proposals to modify the Social Security auxiliary benefit structure are generally motivated by desire to improve equity for families, or adequacy for certain beneficiaries, rather than by the financial status of the Social Security system. For example, some proposals address the adequacy of benefits for certain groups of beneficiaries such as elderly and widowed women. Although Social Security plays an important role in the retirement security of aged women, about 17% of divorced Social Security beneficiaries and 23% of never-married female Social Security beneficiaries have total incomes below the official poverty line. This report describes the current-law structure of auxiliary benefits for spouses, divorced spouses and surviving spouses. It also discusses some of the issues concerning the adequacy and equity of the current-law structure of auxiliary benefits, and presents some recent proposals. Congressional Research Service Social Security: Revisiting Benefits for Spouses and Survivors Contents Introduction ................................................................................................................................1 Origins of Social Security Auxiliary Benefits ..............................................................................3 Auxiliary Benefits Eligibility and Determination.........................................................................4 Auxiliary Benefits are Based on a Primary Earner’s Benefits.................................................4 Currently Married or Separated Spouses of Retired or Disabled Workers ...............................4 Widows and Widowers’ Survivor Benefits.............................................................................5 Mother’s and Father’s Benefits..............................................................................................5 Divorcé(e)s’ Spousal and Survivor Benefits...........................................................................6 Data on Duration of Marriages ........................................................................................6 Dually Entitled Beneficiaries.................................................................................................7 Labor Force Participation of Women ...........................................................................................9 Labor Force Participation of Women with Children ...............................................................9 Earnings Gap ...................................................................................................................... 11 Adequacy and Equity Issues...................................................................................................... 13 Adequacy Issues ................................................................................................................. 13 Equity Issues....................................................................................................................... 15 Other Considerations........................................................................................................... 17 Proposals for Restructuring Social Security Auxiliary Benefits.................................................. 18 Earnings Sharing................................................................................................................. 18 Divorcé(e) Benefits ............................................................................................................. 20 Increase Benefits for the Oldest Old .................................................................................... 21 Minimum Benefit for Low Earners...................................................................................... 22 Caregiver Credits and Drop-out Years for Caregiving .......................................................... 24 Survivor’s Benefit Increased to 75% of Couple’s Combined Benefit.................................... 25 Conclusion................................................................................................................................ 27 Figures Figure 1. Basis of Entitlement for Women Aged 62 or Older, 1960-2008, Selected Years ............8 Figure 2. Labor Force Participation Rate of Women with Children, 1975 to 2008 ...................... 10 Figure 3. Relative Importance of Social Security to Total Retirement Income for Persons Aged 65 or Older in 2006....................................................................................................... 13 Figure 4. Poverty Status of Social Security Beneficiaries Aged 65 or Older in 2006 by Gender and Marital Status ...................................................................................................... 14 Tables Table 1. Percentage Reaching 10th Marriage Anniversary, by Marriage Cohort and Sex, for First and Second Marriages.................................................................................................7 Table 2. Average Benefit Levels Among Retired Workers With Dual Entitlement, December 2009........................................................................................................................9 Congressional Research Service Social Security: Revisiting Benefits for Spouses and Survivors Table 3. Women’s Earnings as a Percent of Men’s Earnings, 1979 and 2009 .............................. 12 Table 4. Benefits for Three Couples with Different Earnings Splits Between Husband and Wife ................................................................................................... 16 Table B-1. Computation of a Worker’s Primary Insurance Amount (PIA) in 2010 Based on an Illustrative AIME of $5,000 .......................................................................................... 30 Table C-1. Social Security Spousal and Widow(er)’s Benefits.................................................... 35 Appendixes Appendix A. Major Changes in Social Security Auxiliary Benefits ............................................ 29 Appendix B. Computation of the Social Security Retired-Worker Benefit.................................. 30 Appendix C. Summary of Social Security Spousal and Widow(er)’s Benefits Under Current Law........................................................................................................................... 33 Congressional Research Service Social Security: Revisiting Benefits for Spouses and Survivors Introduction Social Security provides benefits, sometimes called “auxiliary benefits” or “dependents’ benefits,” to the spouses, former spouses, widow(er)s, children, and parents of retired, disabled, and deceased workers. Auxiliary benefits are based on the work record of the household’s primary earner. Social Security spousal benefits (i.e., benefits for a wife or husband of the primary earner) are payable to the spouse or divorced spouse of a retired or disabled worker. Social Security survivor benefits are payable to the survivors of a deceased worker as a widow(er), as a child, as a mother or father of the deceased worker’s child(ren), or as a parent of the deceased worker. Although Social Security is often viewed as a program that primarily provides benefits to retired and disabled workers, 39% of new benefit awards in 2008 were made to the dependents and survivors of retired, disabled, and deceased workers.1 Spousal and survivor benefits play an important role in ensuring women’s retirement security. About 20.7 million women aged 65 and older receive Social Security benefits, including 8.9 million women who receive retired-worker benefits, 2.5 million women who are entitled solely as the spouse of a retired worker, 3.6 million women who are dually entitled as the survivor of a deceased worker, and 6.1 million women who are dually entitled to a retired-worker benefit and a spouse or survivor benefit (for more information on dually entitled beneficiaries, see “Dually Entitled Beneficiaries” below). 2 For almost 60% of elderly women in beneficiary families, Social Security provided 50% or more of family income in 2008. For about 29% of elderly women in beneficiary families, Social Security provided 90% or more of family income in 2008.3 Women, however, continue to be vulnerable to poverty in old age for several reasons. • Women are more likely to take employment breaks to care for children or parents. During 2008, 91% of men and 76% of women aged 25-54 participated in the labor force. 4 Breaks in employment result in fewer years of contributions to Social Security and employer-sponsored pension plans. • The median earnings of women who are full-time wage and salary workers is 80% of their male counterparts.5 Because Social Security and pension benefits 1 Social Security Administration, Fast Facts & Figures About Social Security, 2009, Washington, DC, July 2009, p. 12, http://www.socialsecurity.gov/policy. 2 Social Security Administration, 2010 Annual Statistical Supplement (Washington, DC 2010), table 5.A15. 3 Social Security Administration, Income of the Aged Chartbook (Washington, DC 2008), p. 25. 4 CRS Report RL30122, Pension Sponsorship and Participation: Summary of Recent Trends, by John J. Topoleski, Table 1. Among workers between the ages of 25 and 64 who were employed in the private sector full-time and yearround in 2008, women were slightly more likely than men (60.1% of women compared to 58.3% of men) to work for a firm that sponsored a retirement plan, and about equally as likely as men to participate in the employer-sponsored pension plan (about 51% of both genders participated in the employer-sponsored retirement plan). 5 Bureau of Labor Statistics, U.S. Department of Labor, Highlights of Women’s Earnings in 2009, Washington, DC, June 2010, http://www.bls.gov/cps/cpswom2009.pdf. If the population were ranked from lowest to highest based on earnings level, the earnings level at the middle of the distribution would be the median value. At most half of the population would have earnings less than the median value, and at most half of the population would have earnings greater than the median value. Congressional Research Service 1 Social Security: Revisiting Benefits for Spouses and Survivors are linked to earnings, this “earnings gap” can lead to lower benefit amounts for women than for men. • Women on average live longer than men. Women reaching the age of 65 in 2008 are likely to live another 19.3 years, on average, compared with another 16.9 years for men.6 As a consequence, women spend longer in retirement and are more vulnerable to inflation and the risk of outliving other assets. The real value of pension benefits declines with age as pensions generally are not adjusted for inflation, and some pensions cease with the death of the retired worker. • About 8% of women aged 50-59, and about 4% of women aged 60-69, have never married and therefore do not qualify for Social Security spousal or survivor benefits. 7 • About 6% of women aged 50-59, about 18% of women aged 60-69, and about 52% of women aged 70 and older are currently widowed. By comparison, about 1% of men aged 50-59, about 4% of men aged 60-69, and about 19% of men aged 70 and older are widowed.8 Spousal and survivor benefits were added to the Social Security system in 1939. At that time, the majority of households consisted of a single earner—generally the husband—and a wife who was not in the paid workforce but instead stayed home to care for children. In recent decades, women have increasingly assumed roles as equal or primary wage earners or as heads of families. Another development over recent decades has been that increasing numbers of men and women remain single or are divorced. Social Security spousal and aged survivor benefits are not available to persons who have never married. Some argue that the unavailability of spousal and survivor benefits for women who have never been married, or who were married for less than 10 years, may be particularly problematic for minority and poor women. 9 The current benefit structure can result in situations where a two-earner household receives lower combined Social Security benefits than a single-earner household with identical total Social Security-covered earnings. Moreover, after the death of one spouse, the disparity in benefits may increase: in a one-earner couple, the surviving spouse receives two-thirds of what the couple received on a combined basis, while in some two-earner couples with roughly equal earnings, the surviving spouse receives roughly one-half of what the couple received on a combined basis. This report presents the current-law structure of auxiliary benefits for spouses, divorced spouses, and surviving spouses. It discusses some issues concerning the adequacy and equity of currentlaw spousal and widow(er)’s benefits, as well as some of the proposed changes. 6 Social Security Administration, The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, Washington, DC, 2009, Table V.A3, http://www.ssa.gov/OACT/TR/2009/lr5a3.html. 7 U.S. Census Bureau, Number, Timing and Duration of Marriages and Divorces: 2004 , Washington, DC, 2007, Table 3, http://www.census.gov/population/www/socdemo/marr-div/2004detailed_tables.html. 8 Ibid. 9 Madonna Harrington Meyer, Douglas A. Wolf, and Christine L. Himes, Linking Benefits to Marital Status: Race and Diminishing Access to Social Security Spouse and Widow Benefits in the U.S., Center for Retirement Research, Boston College, CRR WP 2004-5, Boston, MA, March 2004. See also Christopher R. Tamborini, Howard Iams, and Kevin Whitman, “Marital History, Race and Social Security: Spouse and Widow Benefit Eligibility in the United States,” Research on Aging, vol. 31, no. 5 (2009), pp. 577-605. Congressional Research Service 2 Social Security: Revisiting Benefits for Spouses and Survivors Origins of Social Security Auxiliary Benefits The original Social Security Act of 193510 established a system of Old-Age Insurance to provide benefits to individuals who were aged 65 or older and who had “earned” retirement benefits through work in jobs covered by the system. Before the Old-Age Insurance program was in full operation, the Social Security Amendments of 193911 extended monthly benefits to workers’ dependents and survivors. The program now provided Old-Age and Survivors Insurance (OASI). 12 The 1939 amendments established benefits for the following dependents and survivors: (1) a wife aged 65 or older; (2) a child under the age of 18; (3) a widowed mother of any age caring for an eligible child; (4) a widow aged 65 or older; and (5) a surviving dependent parent aged 65 or older. The 1938 Social Security Advisory Council, in its report to the Social Security Board and the Senate Finance Committee, justified creating spousal benefits on the grounds of the adequacy of household benefits: The inadequacy of the benefits payable during the early years of the old-age insurance program is more marked where the benefits must support not only the annuitant himself but also his wife. In 1930, 63.8 per cent of men aged 65 and over were married. Payment of supplementary allowances to annuitants who have wives over 65 will increase the average benefit in such a manner as to meet the greatest social need with the minimum increase in cost. The Council believes that an additional 50 percent of the basic annuity would constitute a reasonable provision for the support of the annuitant’s wife.13 The Social Security Board concurred in its own report, which it wrote based on the Council’s report. The Board also found that benefit adequacy was the primary justification for spousal benefits: The Board suggests that a supplementary benefit be paid for the aged dependent wife of the retired worker which would be related to his old-age benefit. Such a plan would take account of greater presumptive need of the married couple without requiring investigation of individual need.14 Since 1939, auxiliary benefits have been modified by Congress many times, including the expansion of benefits to husbands, widowers, and divorced spouses. The legislative history of auxiliary benefits is outlined in detail in Appendix A. 10 P.L. 271, 74th Congress. 11 P.L. 379, 76th Congress. 12 Congress later established the Disability Insurance (DI) program in 1956. 13 Social Security Administration, Report of the 1938 Advisory Council on Social Security, http://www.socialsecurity.gov/history/reports/38advise.html. 14 Social Security Board, A Report to the President and to the Congress of the United States, Washington, DC, December 30, 1938, http://www.socialsecurity.gov/history/reports/38ssbadvise.html. Congressional Research Service 3 Social Security: Revisiting Benefits for Spouses and Survivors Auxiliary Benefits Eligibility and Determination Auxiliary Benefits are Based on a Primary Earner’s Benefits Auxiliary benefits for a spouse, survivor, or other dependent are based on the benefit amount received by a primary earner (an insured worker). The primary earner may receive a Social Security retirement or disability benefit. Social Security retirement benefits are based on the average of a worker’s highest 35 years of earnings. A worker’s basic monthly benefit amount (primary insurance amount or PIA) is computed by applying the Social Security benefit formula to the worker’s career-average, wage-indexed earnings. The benefit formula replaces a higher percentage of the pre-retirement earnings of workers with low career-average earnings than for workers with high career-average earnings. The primary earner’s initial monthly benefit is equal to his or her PIA if benefits are claimed at or after full retirement age (FRA, currently rising from age 65 to age 67). A worker’s initial monthly benefit will be less than his or her PIA if the worker begins receiving benefits before FRA, and it will be greater than his or her PIA if the worker begins receiving benefits after FRA. The purpose of the actuarial adjustment to benefits claimed before or after FRA is to ensure that the worker receives roughly the same total lifetime benefits regardless of when he or she claims benefits (assuming he or she lives to average life expectancy). For a detailed explanation of the Social Security retired worker benefit computation, the actuarial adjustment to benefits claimed before or after FRA and other benefit adjustments that may apply, see Appendix B. Auxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of the primary earner.15 Auxiliary benefits are determined as a percentage of the primary earner’s PIA, subject to a maximum family benefit amount. For example, the spouse of a retired or disabled worker may receive up to 50% of the worker’s PIA, and the widow(er) of a deceased worker may receive up to 100% of the worker’s PIA. As with benefits paid to the primary earner, auxiliary benefits are subject to adjustments based on age at entitlement and other factors. A basic description of auxiliary benefits is provided in the following sections, with more detailed information provided in Appendix C. Currently Married or Separated Spouses of Retired or Disabled Workers Social Security provides a spousal benefit that is equal to 50% of a retired or disabled worker’s PIA.16 A qualifying spouse must be at least 62 years old or have a qualifying child (a child who is under the age of 16 or who receives Social Security disability benefits) in his or her care. A qualifying spouse may be either married to or separated from the worker. An individual must have been married to the worker for at least one year before he or she applies for spousal benefits, with 15 Benefits for the dependent children and parents of an insured worker are not discussed in this report. As noted above, a retired worker’s own monthly benefit may be higher or lower than his or her PIA. A disabled worker’s benefit is equal to his or her PIA. 16 Congressional Research Service 4 Social Security: Revisiting Benefits for Spouses and Survivors certain exceptions. In addition, the worker must be entitled to (generally, collecting) benefits for an eligible spouse to become entitled to benefits.17 If a spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. An individual who is entitled to a Social Security benefit based on his or her own work record and to a spousal benefit in effect receives the higher of the two benefits (see “Dually Entitled Beneficiaries” below). Widows and Widowers’ Survivor Benefits Under current law, surviving spouses (including divorced surviving spouses) may be eligible for aged widow(er)’s benefits beginning at the age of 60. If the surviving spouse receives Social Security disability benefits and meets certain other conditions, survivor benefits are available beginning at the age of 50. The aged widow(er)’s basic benefit is equal to 100% of the deceased worker’s PIA. A qualifying widow(er) must have been married to the deceased worker for at least nine months18 and must not have remarried before the age of 60 (or before age 50 if disabled). Widow(er)s who remarry after the age of 60 (or after age 50 if disabled) may become entitled to benefits based on the prior deceased spouse’s work record. (Widow(er)s who are caring for children under the age of 16 or disabled may receive survivor benefits at any age and do not have to meet the length of marriage requirement—see “Mother’s and Father’s Benefits” below.) Survivor benefits are not available to unmarried women, although they may be available to the natural mother or father of a deceased worker’s biological child. If an aged widow(er) claims survivor benefits before FRA, his or her monthly benefit is reduced (up to a maximum of 28.5%) to take into account the longer expected period of benefit receipt. In addition, survivor benefits may be affected by the deceased worker’s decision to claim benefits before FRA under the widow(er)’s limit provision (see Appendix C). As with spouses of retired or disabled workers, a surviving spouse who is entitled to a Social Security benefit based on his or her own work record and a widow(er)’s benefit receives in effect the higher of the two benefits (see “Dually Entitled Beneficiaries” below). Mother’s and Father’s Benefits Social Security provides benefits to a surviving spouse or divorced surviving spouse of any age who is caring for the deceased worker’s child, when that child is either under the age of 16 or disabled. Mother’s and father’s benefits are equal to 75% of the deceased worker’s PIA, subject to a maximum family benefit. There are no length of marriage requirements for mother’s and father’s benefits, whether the beneficiary was married to, separated from or divorced from the deceased worker; however, remarriage generally ends entitlement to mother’s and father’s benefits. 17 18 As discussed below, different rules may apply in the case of a divorced spouse. Exceptions are provided in some cases such as accidental death or death in the line of duty. Congressional Research Service 5 Social Security: Revisiting Benefits for Spouses and Survivors Divorcé(e)s’ Spousal and Survivor Benefits Spousal benefits are available to a divorced spouse beginning at the age of 62, if the marriage lasted at least 10 years before the divorce became final and the person claiming spousal benefits is currently unmarried. 19 A divorced spouse who is younger than 62 years old is not eligible for spousal benefits even with an entitled child in his or her care. Survivor benefits are available to a divorced surviving spouse beginning at the age of 60 (or beginning at age 50 if disabled) if the divorced surviving spouse has not remarried before the age of 60 (or before age 50 if disabled), or if the surviving divorced spouse has an entitled child in his or her care. Divorced spouses who are entitled to benefits receive the same spousal and survivor benefits as married or separated persons. If a divorced spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. In addition, a divorced spouse who is entitled to a Social Security benefit based on his or her own work record and a spousal or survivor benefit receives in effect the higher of the two benefits (see “Dually Entitled Beneficiaries” below). Data on Duration of Marriages A divorced person who was married to a primary earner for less than 10 years does not qualify for spousal benefits on that spouse’s record (although he or she may qualify for benefits based on his or her own record or on another spouse’s record). 20 First marriages that end in divorce last about eight years, on average. 21 Table 1 shows that first marriages occurring from 1955 to 1959 lasted longer than those occurring in subsequent decades. About 87% of women who married for the first time during the late 1950s stayed married for 10 years or longer; however, since the late 1970s, only about 70% of women’s first marriages have lasted for at least 10 years (with the exception of a slight increase in marriage duration rates during the late 1980s). According to the same source, about 24% of women aged 45 in 2004 had been married two or more times.22 19 As noted previously, generally the worker must have claimed benefits for an eligible spouse to become entitled to benefits. An eligible divorced spouse, however, may become independently entitled to benefits if the worker is eligible for (but has not yet claimed) benefits and the couple has been divorced for at least 2 years. (Social Security Administration, Program Operations Manual System (POMS), Section RS 00202.001 (Spouse), http://policy.ssa.gov/poms.nsf/links/0300202001) If a person has more than one former spouse, he or she is entitled to a spousal benefit based on the earnings record of the highest-earning spouse. 20 As noted above, a divorced surviving spouse may qualify for mother’s or father’s benefits regardless of the length of marriage to the primary earner. 21 U.S. Census Bureau, Number, Timing, and Duration of Marriages and Divorces: 2004, Washington, DC, February 2005, Table 6, http://www.census.gov/population/www/socdemo/marr-div/2004detailed_tables.html. 22 U.S. Census Bureau, Number, Timing and Duration of Marriages and Divorces: 2004, Washington, DC, Tables 1, 2 and 6, http://www.census.gov/population/www/socdemo/marr-div/2004detailed_tables.html. Congressional Research Service 6 Social Security: Revisiting Benefits for Spouses and Survivors Table 1. Percentage Reaching 10th Marriage Anniversary, by Marriage Cohort and Sex, for First and Second Marriages First Marriages Year of Marriage Male Female 1955-1959 88.3% 1960-1964 Second Marriages Male Female 86.8% X X 85.0 82.3 X X 1965-1969 76.9 74.9 X X 1970-1974 74.4 71.6 X X 1975-1979 73.0 70.0 74.9% 72.1% 1980-1984 73.7 70.7 75.0 71.6 1985-1989 76.4 73.0 70.3 66.8 1990-1994 70.0 69.2 68.0 64.3 Source: U.S. Census Bureau, Number, Timing and Duration of Marriages and Divorces: 2004, Washington, DC, Table 2, http://www.census.gov/population/www/socdemo/marr-div/2004detailed_tables.html. Other data suggest that, for men and women aged 15 to 44 in 2002, the probability of a first marriage lasting 10 years or longer was 65%. The remaining one-third of first marriages ended in divorce or separation before reaching the 10th anniversary. The probability that a first marriage would remain intact for at least 10 years was 68%, 51%, and 64% for Hispanic, Black, and White women, respectively. Among women aged 40 to 44 in 2002, 27% had been married two or more times. 23 Dually Entitled Beneficiaries A person may qualify for a spousal or survivor benefit as well as for a Social Security benefit based on his or her own work record (a retired-worker benefit). In such cases, the person in effect receives the higher of the worker benefit and the spousal/survivor benefit. When the person’s retired-worker benefit is higher than the spousal/survivor benefit to which he or she would be entitled, the person receives only the retired-worker benefit. Conversely, when the person’s retired-worker benefit is lower than the spousal/survivor benefit, the person is referred to as “dually entitled” and receives the retired-worker benefit plus a spousal/survivor benefit that is equal to the difference between the retired-worker benefit and the full spousal/survivor benefit. In essence, the person receives a total benefit amount equal to the higher spousal benefit. Women have increasingly become entitled to Social Security benefits based on their own work records, either as retired-worker beneficiaries only or as dually entitled beneficiaries. As shown in Figure 1, the percentage of women aged 62 or older entitled to benefits based on their own work records—as retired workers or as dually-entitled beneficiaries—grew from 43% in 1960 to 73% in 2009. Most of this growth was in the percentage of dually-entitled beneficiaries, however. The percentage of women aged 62 or older entitled to benefits based solely on their own work records 23 U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, Marriage and Cohabitation in the United States: A Statistical Portrait Based on Cycle 6 (2002) of the National Survey of Family Growth, Series 23, Number 28, Washington, DC, February 2010, Figures 6 and 14 and Tables 9 and 16, available at http://www.cdc.gov/nchs/data/series/sr_23/sr23_028.pdf. Congressional Research Service 7 Social Security: Revisiting Benefits for Spouses and Survivors fluctuated in a range between 39% and 45% between 1960 and 2009. In 2009, 54% of women aged 62 or older relied to some extent on benefits received as a spouse or survivor: half (27%) of spouse and survivor beneficiaries were dually entitled, whereas the other half received spouse or survivor benefits only. Figure 1. Basis of Entitlement for Women Aged 62 or Older, 1960-2008, Selected Years 100% 90% 80% Dependents Only Percent 70% 60% 50% Dual Entitlement 40% 30% 20% Workers Only 10% 0% 1960 1970 1980 1990 2000 2009 Source: U.S. Social Security Administration, Annual Statistical Supplement, 2010, Washington, DC, table 5.A14, http://www.ssa.gov/policy/docs/statcomps/supplement/2010/5a.html#table5.A14. As shown in Table 2, among wives who are dually-entitled spousal beneficiaries in December 2009, the retired-worker benefit accounted for 68% of the combined monthly benefit (the retiredworker benefit with a top-up provided by the spousal benefit) and the spousal benefit accounted for 32% of the combined monthly benefit, on average. Among widows who are dually entitled survivor beneficiaries, the retired-worker benefit and the widow(er)’s benefit each accounted for about half of the combined monthly benefit, on average.24 Many more women than men are dually entitled to retired-worker benefits and spousal or widow(er)’s benefits. As shown in the table, in December 2009, about 6.4 million women and 147,000 men were dually-entitled to benefits.25 24 U.S. Social Security Administration, Annual Statistical Supplement, 2009, Washington, DC, table 5.G4, http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2009/5g.html#table5.g4. The percentages reported here may differ slightly from the percentages represented in the table due to rounding. 25 U.S. Social Security Administration, Annual Statistical Supplement, 2009, Washington, DC, table 5.G2, http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2009/5g.html#table5.g2. Congressional Research Service 8 Social Security: Revisiting Benefits for Spouses and Survivors Table 2. Average Benefit Levels Among Retired Workers With Dual Entitlement, December 2009 Average Monthly Benefit: Type of Secondary Benefit Spouses Wives of Retired & Disabled Workers Husbands of Retired & Disabled Workers Widow(er)s Widows Widowers Number Combined Benefit Retired-Worker Benefit Reduced Secondary Benefit 2,862,295 $714 $483 $231 2,822,655 $715 $483 $232 39,640 $657 $488 $169 3,726,296 $1,293 $654 $639 3,619,057 $1,295 $646 $649 107,239 $1,219 $915 $304 Source: U.S. Social Security Administration, Annual Statistical Supplement, 2010, Washington, DC, table 5.G3, http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2010/5g.html#table5.g3. Labor Force Participation of Women In 1970, about 43% of women aged 16 or older participated in the labor force, compared with about 80% of men aged 16 or older. By 2008, about 60% of women aged 16 or older participated in the labor force, compared with 73% of men in the same age group. 26 The increase in labor force participation among women since 1970 has led to an increase in the number of women who qualify for Social Security benefits based on their own work records. Labor Force Participation of Women with Children In 2009, the United States had an estimated 5.3 million parents who stayed at home to care for children. This included 5.1 million mothers and 158,000 fathers. Although these figures may reflect economic conditions, the number of stay-at-home mothers was lower in 2009 than in 2008, and the number of stay-at-home fathers was about the same. 27 Women with children under the age of 18 have increasingly entered the labor force in recent decades, as shown in Figure 2. The labor force participation rate of women with children under the age of 18 increased from 47% to a peak of 73% in 2000. By 2004, the rate had receded to 71% and has remained at that level through 2008. The labor force participation rate of women with children aged 6 to 17 (none younger) rose 23 percentage points over this period, from 55% in 1975 to 78% in 2008. The labor force participation rate of women with children under the age of 6 increased 25 percentage points over this period, from 39% in 1975 to 64% in 2008. In general, women with children aged 6-17 are more likely to participate in the labor force (78%) 26 Bureau of Labor Statistics, Women in the Labor Force: A Databook, Washington, DC, September 2009, table 2, http://www.bls.gov/cps/wlftable2.htm. 27 U.S. Census Bureau, Census Bureau Reports Families With Children Increasingly Face Unemployment, Washington, DC, January 15, 2010, http://www.census.gov/Press-Release/www/releases/archives/families_households/014540.html. Congressional Research Service 9 Social Security: Revisiting Benefits for Spouses and Survivors than women with children under the age of 6 (64%) or under the age of 3 (60%). In addition, unmarried mothers are more likely to participate in the labor force (76%) than married mothers (69%).28 Figure 2. Labor Force Participation Rate of Women with Children, 1975 to 2008 90 80 70 60 50 40 30 20 10 0 1975 1980 1985 1990 1995 2000 2005 With Children Under Age 18 With Children 6 to 17, None Younger With Children Under Age 6 With Children Under Age 3 No Children Under Age 18 Source: http://stats.bls.gov/cps/wlf-databook-2009.pdf., Table 7. Women with children have fewer years of paid work, on average. By the age of 50, women without children who were born between 1948 and 1958 (i.e., aged 52-62 in 2010) had worked on average about two years less than men overall (i.e., men with and without children). For a woman with two children, however, the gap at the age of 50 was about 6.5 years less than the average man with or without children. By the age of 50, African American women (with and without children) have worked, on average, about two years more than other women with and without children. 29 For many women, caregiving is also likely to lead to part-time work. Women are more likely than men to work part time (i.e., less than 35 hours per week in a sole or principal job). In 2009, 26% 28 U.S. Department of Labor, Women in the Labor Force: A Databook, Washington, DC, September 2009, Tables 6 and 7, http://stats.bls.gov/cps/wlf-databook-2009.pdf. 29 Melissa M. Favreault and C. Eugene Steuerle, The Implications of Career Lengths for Social Security, The Urban Institute, Discussion Paper 08-03, Washington, DC, 2008, http://www.urban.org/UploadedPDF/ 411646_careerlengths.pdf. Congressional Research Service 10 Social Security: Revisiting Benefits for Spouses and Survivors of women in wage and salary jobs worked part time, compared to 16% of men. These proportions have changed little over time. 30 In 2009, about 71% of mothers worked or were actively searching for work. About two-thirds of mothers who worked in 2009 were in a dual-earner family. The remaining third were the sole jobholders in their family, either because their spouses were unemployed or out of the labor force, or because these mothers were heads of household. 31 Women with more education and women in later birth cohorts are also likely to have longer employment histories than other women.32 In 2008, women accounted for more than half of all workers within several industry sectors: financial activities (women constituted 54.8% of employees in this sector), education and health services (75.2%), and leisure and hospitality (51.5%). However, women were under-represented (relative to their share of total employment) in agriculture (23.9%), mining (12.9%), construction (9.7%), manufacturing (29.3%), and transportation and utilities (23.1%).33 Earnings Gap Another reason why women receive lower retired-worker benefits than men is that women who were full-time wage and salary workers had median34 weekly earnings of $657, or about 80% of the $819 median for their male counterparts.35 The women’s-to-men’s earnings ratio was about 62% in 1979. It increased gradually during the 1980s and 1990s and peaked at 81% in 2005 and 2006. In 2009, the earnings gap between women and men varied among age groups (see Table 3). Among full-time workers, women aged 16-24 earned 93% as much as men; women aged 25-34 earned about 89% as much as men; and women aged 55-64 earned about 75% as much as men. 30 Bureau of Labor Statistics, U.S. Department of Labor, Highlights of Women’s Earnings in 2009, Washington, DC, June 2010, page 3, http://www.bls.gov/cps/cpswom2009.pdf. 31 U.S. Congress, Joint Economic Committee, Understanding the Economy: Working Mothers in the Great Recession, committee print, prepared by the Committee’s majority staff, 111th Cong., May 2010. 32 Melissa M. Favreault and C. Eugene Steuerle, The Implications of Career Lengths for Social Security, The Urban Institute, Discussion Paper 08-03, Washington, DC, 2008, http://www.urban.org/UploadedPDF/ 411646_careerlengths.pdf. 33 U.S. Department of Labor, Women in the Labor Force: A Databook, Washington, DC, September 2009, Table 14, http://stats.bls.gov/cps/wlf-databook-2009.pdfve. 34 If the population were ranked from lowest to highest based on earnings level, the earnings level at the middle of the distribution would be the median value. 35 Bureau of Labor Statistics, U.S. Department of Labor, Highlights of Women’s Earnings in 2009, Washington, DC, June 2010, page 1, http://www.bls.gov/cps/cpswom2009.pdf. Congressional Research Service 11 Social Security: Revisiting Benefits for Spouses and Survivors Table 3. Women’s Earnings as a Percent of Men’s Earnings, 1979 and 2009 Age Women’s Earnings as a Percent of Men's, 1979 Total, 16 years and older Women's Earnings as a Percent of Men's, 2009 62.3% 80.2% 16 to 24 years 78.6% 92.6% 16 to 19 years 85.2% 90.7% 20 to 24 years 76.3% 92.9% 62.1% 78.7% 25 to 34 years 67.5% 88.7% 35 to 44 years 58.3% 77.4% 45 to 54 years 56.8% 73.6% 55 to 64 years 60.6% 75.3% 65 years and older 77.6% 76.1% Total, 25 years and older Source: Bureau of Labor Statistics, U.S. Department of Labor, Highlights of Women's Earnings in 2009, Washington, DC, June 2010, Table 12, http://www.bls.gov/cps/cpswom2009.pdf Note: Ratios are for men and women who are full-time wage and salary earners with median earnings. Over time, the earnings gap between women and men has narrowed for most age groups. For example, among full-time workers aged 25-34, the women’s-to-men’s earnings ratio increased from 68% in 1979 to 89% in 2009. For workers aged 35-44, the earnings ratio increased from 58% in 1979 to 77% in 2009. Similarly, for workers aged 45-54, the earnings ratio increased from 57% in 1979 to 74% in 2009. Comparing the annual earnings of women and men may understate differences in total earnings across longer time periods. Using a 15-year timeframe (1983-1998), one study found that women in the prime working years of 26 to 59 had total earnings over the 15-year period that were 38% of what prime-age men earned, in total, over the same period. 36 As women enter the work force in greater numbers, more women will qualify for Social Security benefits based on their own work records, instead of a spousal benefit that is equal to 50% of the husband’s PIA. However, retired-worker and disabled-worker benefits for women continue to be lower than those for men on average for a range of reasons, as discussed above. Consequently, after the death of a husband, the survivor’s benefit, which is equal to 100% of the husband’s PIA, will continue to play an important role in the financial well-being of widows. 36 Stephen J. Rose and Heidi I. Hartmann, Still a Man’s Labor Market: The Long-Term Earnings Gap, Institute for Women’s Policy Research, Washington, DC, 2004, http://www.iwpr.org/pdf/C355.pdf. Congressional Research Service 12 Social Security: Revisiting Benefits for Spouses and Survivors Adequacy and Equity Issues Adequacy Issues Social Security is a key component of total retirement income for both men and women. Figure 3 shows the extent to which men and women of different marital status rely on Social Security benefits. The height of the columns represents the average proportion of each subgroup that relies on Social Security for 50% or more (hatched bars), 90% or more (light bars), or 100% (dark bars) of their total retirement income. Figure 3. Relative Importance of Social Security to Total Retirement Income for Persons Aged 65 or Older in 2006 P ct o f In co m e fro m S o cial S ecurity 70% 60% 50% 50% or more 90% or more 100% 40% 30% 20% 10% Men N ever M arried D ivorced W idow ed M arried N ever M arried D ivorced W idow ed M arried 0% Women Source: Social Security Administration, Income of the Population 55 or Older, 2006, Washington, DC, January 2009, Table 8.B3, http://www.ssa.gov/policy/docs/statcomps/income_pop55/2006/sect08.html#table8.b3. Cutting this data a different way (not shown in Figure 3), among men aged 65 or older in 2006 who relied on Social Security benefits for 100% of their retirement income: 8.7% were married, 14.2% were widowed, 18.7% were divorced, and 21.1% were never married. Among women aged 65 or older in 2006 who relied on Social Security benefits for 100% of their retirement income: 9.6% were married, 19.5% were widowed, 17.5% were divorced, and 13.4% were never married. Congressional Research Service 13 Social Security: Revisiting Benefits for Spouses and Survivors Social Security is credited with keeping many of the nation’s elderly out of poverty. However, in 2006, 7.5% of Social Security beneficiaries aged 65 or older were below the poverty line. 37 Figure 4 highlights the differences in poverty status among men and women aged 65 or older who receive Social Security benefits, after Social Security is combined with other sources of income such as earnings from work, pensions, income from assets and cash public assistance. 38 The data in the figure are for 2006. In 2006, the poverty threshold for a single person aged 65 or older was $9,669 and for a married couple with at least one member aged 65 or older it was $12,186.39 Figure 4. Poverty Status of Social Security Beneficiaries Aged 65 or Older in 2006 by Gender and Marital Status Percentage Below Poverty Line 25% 20% 15% 10% 5% 0% Married Nonmarried Widowed Marital Status Women Age 65 or Older Divorced Never Married Men Age 65 or Older Source: Social Security Administration, Income of the Population 55 or Older, 2006, Washington, DC, January 2009, Table 11.3, http://www.ssa.gov/policy/docs/statcomps/income_pop55/2006/sect11.html#table11.3. Figure 4 shows that non-married women—including widowed, divorced and never-married women—are more likely to be in poverty than their male counterparts. Particularly vulnerable among women are divorced beneficiaries and the never-married. Among women, about 17% of divorced Social Security beneficiaries and 23% of never-married Social Security beneficiaries have total incomes below the official poverty line. Research using data from the early 1990s found that divorced beneficiaries have unusually high incidence of both serious health problems 37 Social Security Administration, Income of the Population 55 or Older, 2006, Washington, DC, January 2009, Table 11.1, http://www.ssa.gov/policy/docs/statcomps/income_pop55/2006/sect11.html#table11.1. 38 In 2009, the poverty threshold for a single person aged 65 or older was $10,289, and for a married couple with at least one member aged 65 or older it was $12,968. U.S. Census Bureau, Poverty Thresholds for 2009 by Size of Family and Number of Related Children Under 18 Years, http://www.census.gov/hhes/www/poverty/threshld/thresh09.html. 39 U.S. Census Bureau, Poverty Thresholds 2006, http://www.census.gov/hhes/www3.poverty/threshld/thresh06.html. Congressional Research Service 14 Social Security: Revisiting Benefits for Spouses and Survivors and poverty.40 Poverty rates are also high among never-married women, and in particular among never-married minority women. 41 The poverty rate among widows receiving Social Security and other income fell from 41% in 1967 to 13% in 2008. By comparison, the poverty rate among widows who do not receive Social Security fell from 40% in 1967 to 33% in 2008. The drop in the poverty rate among widows who receive Social Security could be attributed in part to congressional action in 1972 to raise the benefit rate for widows to the current-law rate of 100% of the deceased worker’s benefit (in 1967, 2 out of every 5 widows aged 65 or older who were receiving Social Security had income below the poverty line, but by 1973 the poverty rate among this group had fallen to just over 23%). Disabled widows remain at particular risk for poverty, however. About 39% of disabled widows who are eligible for Social Security and 59% of disabled widows who are not eligible for Social Security have total income below the poverty line.42 The reasons for the disparity in poverty rates among elderly men and women relate in part to women’s lower lifetime earnings, which affect Social Security benefits and pensions. In addition, women live two to three years longer than men on average, making them more likely to exhaust retirement savings and other assets before death. If the deceased husband was receiving a pension, the widow’s benefit may be significantly reduced, or the pension may cease with the husband’s death, depending on whether the couple had a joint and survivor annuity and how the joint and survivor annuity was structured. Elderly widows also may be at risk if assets are depleted by health-related expenses prior to the death of a spouse. Equity Issues Although Social Security provides essential income support to non-working spouses and widows, the current-law spousal benefit structure can lead to a variety of incongruous benefit patterns that have been documented in the literature.43 For example, a woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a woman who was married less than 10 years, who worked a full career in a low-wage job. The current system also provides proportionately more benefits relative to payroll tax contributions to one-earner couples (which predominated when Social Security was created in the 1930s) than to single persons or to couples with two-earners, on average. As a result, the current 40 David A. Weaver, “The Economic Well-Being of Social Security Beneficiaries, With an Emphasis on Divorced Beneficiaries,” Social Security Bulletin, vol. 60, no. 4 (1997). 41 Madonna Harrington Meyer, Douglas A. Wolf, and Christine L. Himes, Linking Benefits to Marital Status: Race and Diminishing Access to Social Security Spouse and Widow Benefits in the U.S., Center for Retirement Research, Boston College, CRR WP 2004-5, Boston, MA, March 2004. See also Christopher R. Tamborini, Howard Iams, and Kevin Whitman, “Marital History, Race and Social Security Spouse and Widow Benefit Eligibility in the United States,” Research on Aging, vol. 31, no. 5 (May 2009), pp. 577-605, http://roa.sagepub.com/cgi/content/abstract/31/5/577. See also Richard W. Johnson, Melissa M. Favreault, and Joshua H. Goldwyn, Employment, Social Security, and Future Retirement Outcomes for Single Mothers, The Urban Institute, Washington, DC, July 2003. 42 David A. Weaver, “Widows and Social Security,” Social Security Bulletin, vol. 70, no. 3 (2010), pp. 89-109. 43 See, for example, Christopher R. Tamborini and Kevin Whitman, “Women, Marriage and Social Security Benefits Revisited,” Social Security Bulletin, vol. 67, no. 4 (2007). See also Alicia H. Munnell, Geoffrey Sanzenbacher, and Mauricio Soto, Working Wives Reduce Social Security Replacement Rates, Center for Retirement Research, Number 715, Boston, MA, October 2007. Congressional Research Service 15 Social Security: Revisiting Benefits for Spouses and Survivors system can lead to situations where Social Security provides unequal benefits to one-earner and two-earner couples with the same total household earnings. Putting this in a different perspective, some two-earner couples may have to contribute significantly more to Social Security to receive the same retirement and spousal benefits that the system provides to a one-earner couple with identical total household earnings. These anomalies have become more widespread in recent decades as women’s share of household income has increased, and also as women have increasingly become heads of families. Table 4 illustrates the disparate treatment of one-earner and two-earner couples with examples developed by the American Academy of Actuaries. In the table, a one-earner couple with household earnings of $34,200 is compared with two different two-earner couples. The second couple in the comparison is a two-earner couple with the same total household earnings ($34,200) as the one-earner couple, with the earnings evenly split between the two spouses (each spouse earns $17,100). The third couple in the comparison is a two-earner couple in which one spouse earns $34,200 (the same as the primary earner in the one-earner couple) and the other spouse earns half that amount, or $17,100, for total household earnings of $51,300. Table 4. Benefits for Three Couples with Different Earnings Splits Between Husband and Wife First Couple: One Earner with Earnings of $34,200 Second Couple: Two Earners with Total Household Earnings of $34,200 Split Evenly Third Couple: Two Earners with Earnings of $34,200 and $17,100 Total household earnings $34,200 $34,200 $51,300 Spouse A earns $34,200 $17,100 $34,200 Spouse B earns $0 $17,100 $17,100 $2,120 $2,120 $3,180 Total monthly benefit paid to couple at retirement $2,025 total (equals $1,350 worker benefit to Spouse A and $675 spousal benefit to Spouse B) $1,750 total (equals $875 worker benefit to Spouse A and $875 worker benefit to Spouse B) $2,225 total (equals $1,350 worker benefit to Spouse A and $875 worker benefit to Spouse B) Total monthly benefit paid to survivor $1,350 $875 $1,350 Annual Social Security payroll taxes (employee share only) Source: American Academy of Actuaries, Women and Social Security, Issue Brief, June 2007. As the table illustrates, a one-earner couple may receive higher retirement and survivor benefits than a two-earner couple with identical total household earnings. Specifically, the first couple with one earner receives a total of $2,025 in monthly retirement benefits, compared to the second couple with two earners which receives a total of $1,750 in monthly retirement benefits. Similarly, the survivor of the one-earner couple receives $1,350 in monthly benefits (either as a retired worker or as a surviving spouse). In comparison, the survivor of the two-earner couple with identical total household earnings receives $875 in monthly benefits. In the third couple shown in Table 4, both spouses work in Social Security-covered employment, but in this example one spouse earns $34,200 annually and the other spouse earns $17,100. This couple receives monthly benefits that are $200 higher than the monthly benefits received by the Congressional Research Service 16 Social Security: Revisiting Benefits for Spouses and Survivors one-earner couple ($2,225 compared with $2,025); however, this couple has earned much more over time ($17,100 annually) and contributed commensurately more in Social Security payroll taxes ($1,060 annually). The survivor benefit received by the third couple is identical to that received by the one-earner couple. Thus, the current-law Social Security spousal benefit structure requires some two-earner couples to make substantially higher contributions for similar benefit levels. With higher earnings but similar benefits to the one-earner couple, the third couple’s replacement rate (i.e., initial monthly benefits as a percentage of pre-retirement earnings) is lower than that of the one-earner couple. 44 After the death of one spouse, the disparity in benefits between one-earner and two-earner couples may increase, as shown in the table. In the one-earner couple, the surviving spouse receives a benefit equal to two-thirds of the couple’s combined benefit (for a reduction equal to one-third of the couple’s combined benefit). 45 In a two-earner couple with equal earnings (the second couple), the surviving spouse receives a benefit equal to one-half of the couple’s combined benefit. Further, the surviving spouse in the first couple (the one-earner couple) receives a larger monthly benefit than the survivor of the second couple (a two-earner couple with earnings evenly split)— $1,350 compared to $875—although both couples paid the same amount of Social Security payroll tax contributions. Similarly, compared to the one-earner couple, the surviving spouse in the third couple (a two-earner couple with unequal earnings and somewhat higher total earnings than the one-earner couple) receives the same monthly benefit ($1,350) although the couple paid a higher amount of Social Security payroll tax contributions. For both two-earner couples in these examples, after the death of one spouse, the second earnings record does not result in the payment of any additional benefits.46 In addition to inequities among couples with different work histories and earnings levels, the current structure of Social Security auxiliary benefits creates inequities among the divorced. Divorced spouses with 9½ years of marriage, for example, receive no Social Security spousal and survivor benefits, whereas divorced spouses with 10 or more years of marriage may receive full spousal and survivor benefits. Other Considerations The current structure of Social Security spousal and survivor benefits also raises other considerations. • Divorced spouses receive a higher benefit after the death of their former spouse (the primary earner): benefits for a divorced spouse are equal to 50% of the primary earner’s PIA, while benefits for a divorced surviving spouse are equal to 44 For further discussion of replacement rates among couples with different earnings histories, see Alicia H. Munnell, Geoffrey Sanzenbacher, and Mauricio Soto, Working Wives Reduce Social Security Replacement Rates, Center for Retirement Research, Number 7-15, Boston, MA, October 2007. The authors argue that wives’ entrance into the labor market, and the ensuing rise in the ratio of wives’ earnings to husbands’ earnings, has lowered the replacement rate received by average-earning married couples from 50% of pre-retirement income to 45% over the past 40 years. 45 On a combined basis, the couple received 150% of the worker’s PIA. The surviving spouse receives 100% of the worker’s PIA. This results in a reduction equal to one third of the couple’s combined benefit. 46 American Academy of Actuaries, Women and Social Security, Issue Brief, June 2007. For a related discussion, see “Survivor’s Benefit Increased to 75% of Couple’s Combined Benefit” below. Congressional Research Service 17 Social Security: Revisiting Benefits for Spouses and Survivors 100% of the primary earner’s PIA. This can create volatility in the income of divorced spouses. • Social Security automatically provides pension rights to one or more eligible divorced spouses, in contrast to private pensions. Further, the benefit payable to the primary earner is not reduced for benefits paid to a current and/or one or more former spouses, again in contrast to private pensions. • Widow(er)s who had high-earning spouses may face steep remarriage penalties for marrying a lower-earning second husband (if remarriage occurs before the eligibility age for widow(er)’s benefits). • For most married women who will depend on the spousal benefit, lifetime Social Security benefits are maximized by claiming benefits as early as possible, unless the benefit based on the wife’s work record is less than 40% of her husband’s in which case the age differential between the two spouses becomes important in determining the wife’s optimum claiming age. 47 In response to the inequities and other issues described above, policymakers and researchers have proposed a number of ways to restructure Social Security auxiliary benefits. Some of these proposals are discussed in the following section. Proposals for Restructuring Social Security Auxiliary Benefits A number of proposals have been put forward to modify the current structure of Social Security spousal and survivor benefits. These proposals have different potential consequences for benefit levels for current, former and surviving spouses, for the re-distribution of benefits among couples from different socio-economic levels, for what might be known as “gaming” the system to receive the maximum benefits possible, for eligibility for means-tested programs such as Supplemental Security Income and for work incentives. 48 Earnings Sharing Earnings sharing has been suggested as a way to address the unequal treatment of one-earner versus two-earner couples under current law. As noted above, Social Security often provides substantially higher benefits to one-earner couples than to two-earner couples with the same total household earnings. In addition, earnings sharing has sometimes been suggested as a way to provide benefits to divorced women whose marriages did not last long enough (at least 10 years) 47 Alicia H. Munnell and Mauricio Soto, Why Do Women Claim Social Security Benefits So Early?, Center for Retirement Research, Boston, MA, October 2005. The reason is that the increase in the monthly benefit from waiting to claim at the wife’s FRA is generally too small to offset the reduction in total spousal benefits that is expected to occur based on men’s lower-than-average life expectancy. After the husband dies, the survivor benefit is equal to 100% of the deceased husband’s PIA, regardless of when the wife first claimed benefits. 48 For the proposals discussed in this section of the report, an estimate of the proposal’s effect on the Social Security trust fund is provided when a recent estimate is available from the Social Security Administration’s Office of the Chief Actuary. Congressional Research Service 18 Social Security: Revisiting Benefits for Spouses and Survivors to qualify them for divorced spouse or survivor benefits. By definition, earnings sharing would not affect never-married persons. Under the most basic form of earnings sharing, spousal and survivor benefits would be eliminated. Instead, for each year of marriage, a couple’s covered earnings would be added together and divided evenly between the spouses. For years when an individual is not married, his or her own earnings would be recorded. If a person has multiple marriages, the earnings sharing would occur during each period of marriage. Both members of a couple would have individual earnings records reflecting shared earnings as a member of the couple as well as any earnings before or after the marriage. Social Security benefits would be computed separately for each member of the couple, based on the individual earnings records and using the current-law benefit formula. For couples who were married for the entire career of one or both members, both members of the couple would receive identical benefits and the couple’s combined benefit would be equal to twice that of either member of the couple. The two spouses would receive different benefits, however, if either had earnings before or after the marriage. Earnings sharing proposals would reduce benefits for the majority of individuals, relative to current law, and in the absence of other benefit enhancements. For example, a 2009 Social Security Administration (SSA) study (hereafter, 2009 SSA Study)49 found that 61% of individuals would receive average benefit reductions of about 17%. About 11% of individuals would experience no change in benefits, and 28% would experience benefit increases averaging about 10%. A report issued by the House Committee on Ways and Means in 1985 examined the impact of a generic earnings sharing plan, as described above, on one-earner and two-earner couples in 2030. In the absence of transition provisions, about 64% of men and about 37% of women would have lower benefits than under current law. Average benefits for aged beneficiaries would decline by about 4.5%.50 Studies have found that the largest benefit reductions under earnings sharing could affect widows and divorced widows, particularly those in the lowest socioeconomic groups. The 2009 SSA study found that about 93% of widows would experience an average benefit reduction of 27% while 45% of divorced women would experience benefit reductions averaging about 22%.51 The 1985 congressional study found that 67% of widows would experience lower benefits with the benefit loss averaging 29%, while 39% of divorced women would experience lower benefits with the benefit loss among this group averaging 31%. The decline in widow’ benefits results from eliminating the surviving spouse benefit under current law and replacing it with earnings credits. The widow’s benefit under current law is equal to 100% of the husband’s PIA, where the husband’s PIA is determined based on unshared earnings. Although earnings sharing would increase the amount of earnings credited to the surviving wife (assuming the husband was the higher earner), the benefit payable to the surviving wife based on shared earnings would be lower than the current-law widow’s benefit. Another study found that, in short, the gains experienced by 49 Howard M. Iams, Gayle L. Reznik, and Christopher R. Tamborini, “The Effects of Earnings Sharing on U.S. Social Security Benefits in 2030: An Application of the MINT Microsimulation Model,” Social Security Bulletin, vol. 69, no. 1 (2009). SSA’s study focuses on the impact of earnings sharing on benefits received by the population that will be age 62 or older in 2030. 50 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Report on Earnings Sharing Implementation Study, 99th Cong., 1st sess., February 14, 1985. 51 The 2009 SSA study also found that 96% of widowers would experience an average benefit reduction of 20%. Congressional Research Service 19 Social Security: Revisiting Benefits for Spouses and Survivors divorce(e)s and some married women under earnings sharing would come largely at the expense of widowed men and women. 52 Some earnings sharing proposals would mitigate these effects by providing enhanced benefits to survivors or other targeted groups. For example, an “inheritance provision” could allow a surviving spouse to count all (instead of half) of a deceased spouse’s earnings (or those of a deceased former spouse) during each year of marriage, in addition to all of his or her own earnings. An inheritance provision would protect some, though not all, surviving spouses. For example, the 2009 SSA study found that 40% of widows would receive lower benefits relative to current law under earnings sharing with an inheritance provision. Alternatively, benefits for surviving spouses could be based on an amount equal to two-thirds of the combined benefit the couple was receiving when both members of the couple were alive (see “Survivor’s Benefit Increased to 75% of Couple’s Benefit” below), or special provisions could be targeted to surviving disabled spouses.53 Provisions to protect survivors from benefit reductions, however, would reduce the amount of savings that would otherwise be achieved through program changes. Similarly, provisions to increase benefits for survivors relative to current law would increase program costs. A higher survivor benefit could be self-financed by reducing, on an actuarially-fair basis, the combined benefit the couple receives while both members of the couple are alive. 54 Divorcé(e) Benefits Under the Social Security program, a divorced spouse must have been married to the worker for at least 10 years to qualify for spousal and survivor benefits based on the worker’s record, as discussed above. Benefits for divorced spouses are equal to 50% of the worker’s PIA; benefits for divorced surviving spouses are equal to 100% of the worker’s PIA. One approach to extend Social Security spousal and survivor benefits to more divorced spouses would be to lower the 10year marriage requirement (for example, to 5 or 7 years). Proposals to lower the length-ofmarriage requirement for divorced spouses would improve benefit adequacy for some, although not all, divorced women. One study estimated that lowering the marriage-duration requirement from 10 to 7 years would increase benefits for about 8% of all divorced women aged 62 or older in the year 2030. Lowering the marriage-duration requirement to five years would increase benefits for about 14% of all divorced women in the year 2030. The study found that, among divorced women aged 62 and over who would receive higher benefits as a result of lowering the marriage-duration requirement to five or seven years, the outcomes were moderately progressive in the sense that they channeled a greater share of benefit increases to low-income and non-college-educated divorced women in old age. For example, under a seven-year marriage-duration requirement, about 13% of divorced women in the lowest retirement income quintile would receive a benefit 52 Melissa M. Favreault and C. Eugene Steuerle, Social Security Spouse and Survivor Benefits for the Modern Family, The Urban Institute/The Retirement Security Project, Discussion Paper 07-01, Washington, DC, March 2007, page 19. 53 Congressional Budget Office, Earnings Sharing Options for the Social Security System, Washington, DC, January 1986. 54 Melissa M. Favreault and C. Eugene Steuerle, Social Security Spouse and Survivor Benefits for the Modern Family, The Urban Institute/The Retirement Security Project, Discussion Paper 07-01, Washington, DC, March 2007. Congressional Research Service 20 Social Security: Revisiting Benefits for Spouses and Survivors increase compared with around 6% in the highest quintile who would receive a benefit increase. Among divorced women who gain, the average benefit in the lowest retirement income quintile would rise by 63%, compared with an average increase of 26% among divorced women in the highest quintile. However, 87% of divorced women in the lowest retirement income quintile would not receive an increase in benefits under the seven-year marriage-duration option. 55 Some researchers contend that the 50% benefit rate for divorced spouses (50% of the worker’s PIA) is not sufficient to prevent many divorcé(e)s from falling into poverty. 56 The 50% benefit rate for spouses initially was established to supplement the benefit received by a one-earner couple (i.e., in 1939, a spousal benefit was provided for a dependent wife to supplement the benefit received by the worker). Some observers contend that it may not be sufficient for persons (divorced spouses) who may be living alone. As described above, about 16.5% of divorced women and 8.7% of divorced men have incomes below the poverty line, compared to 2.3% of married men and women (see Figure 4 above). It has been estimated that increasing the benefit rate for divorced spouses from 50% to 75% of the worker’s PIA would lower the poverty rate among divorce(e)s from 30% to 11%. 57 Increase Benefits for the Oldest Old Another type of benefit modification would increase benefits for the oldest old (for example, beneficiaries aged 80 or older) by a specified percentage of their benefit (such as 5% or 10%). One rationale for this proposal is that beneficiaries tend to exhaust their personal savings and other assets over time, becoming more reliant on Social Security at advanced ages. Another rationale is that, after the age of 60, Social Security retirement benefits do not keep pace with rising living standards. In particular, the formula for computing a worker’s initial retirement benefit is indexed to national average wage growth through the age of 60 and then to price inflation (the Consumer Price Index) starting at the age of 62. Once a beneficiary begins receiving benefits, his or her benefits increase each year with price inflation (the annual cost-of-living adjustment) so that the initial benefit amount is effectively fixed in real terms. Living standards, however, tend to rise over time at a pace that exceeds price inflation. One option would be to increase a beneficiary’s payment by 5% at the age of 80.58 According to one study, this option would result in a slight decline in poverty rates among widows and non55 Christopher R. Tamborini and Kevin Whitman, “Lowering Social Security’s Duration-of-Marriage Requirement: Distributional Effects for Future Female Retirees,” Journal of Women and Aging, vol. 22 (2010), pp. 184-203. For the purposes of the study, a “benefit increase” is defined as a 1% or greater increase in the 2030 benefit amount under the policy change, relative to current law. The study suggests that a large proportion of divorced female retirees in 2010 will have a retired-worker benefit (based on their own earnings histories) which exceeds the divorced-spouse benefit (50% of the former spouse’s benefit), but which is less than the surviving divorced-spouse benefit (100% of the deceased former spouse’s benefit). That is, much of the benefit increases in 2030 would accrue to divorced surviving spouses who were receiving a retired-worker benefit while the former spouse was alive but became dually-entitled upon the death of the former spouse before 2030. (Because the study addresses benefits in the year 2030, it does not include some divorced women who would receive higher benefits upon the death of a former spouse at a later date.) 56 As discussed in David A. Weaver, “The Economic Well-Being of Social Security Beneficiaries, With an Emphasis on Divorced Beneficiaries,” Social Security Bulletin, vol. 60, no. 4 (1997), p. 11. 57 Ibid, p. 11. 58 The Social Security Administration’s Office of the Chief Actuary estimates that a similar proposal to provide a 5% increase to the benefit level of any beneficiary who is 85 or older at the beginning of 2010 or who reaches their 85th birthday after the beginning of 2010 would increase the Social Security trust fund’s projected 75-year actuarial deficit by 4.5% (based on the intermediate assumptions of the 2009 Social Security Trustees Report). The estimate is available (continued...) Congressional Research Service 21 Social Security: Revisiting Benefits for Spouses and Survivors married retired-worker beneficiaries aged 80 or older (declines of 3% and 4%, respectively). The same study found that this option is not well-targeted toward low-income beneficiaries: less than 30% of the additional benefits would accrue to beneficiaries in the bottom quintile of the income distribution. 59 Alternatively, a benefit increase for the oldest old could be limited to beneficiaries who receive a below-poverty-level benefit. One proposal along these lines (“longevity insurance”) would provide a benefit to persons aged 82 or older that would be pro-rated based on the number of years the person contributed to Social Security. 60 Minimum Benefit for Low Earners Some observers argue that a carefully-designed minimum benefit has the potential to reduce poverty rates among older women, including divorced and never-married women, more efficiently than existing spousal and survivor benefits.61 Minimum benefit proposals are aimed at improving the adequacy of benefits, in comparison with some other proposals that address issues of equity among individuals and couples with different marital statuses. Most minimum benefit proposals would require the worker to have between 20 and 30 years of Social Security-covered earnings to qualify for a minimum benefit at the poverty line or somewhat above it (for example, 120% of the poverty line). 62 These work tenure requirements are intended to address, although not resolve, concerns that providing a minimum benefit could discourage work effort. Setting eligibility for a minimum benefit at 20 to 30 years of covered earnings would allow many workers to take several years out of the labor force to care for children (or other family members) and still receive a higher benefit than they would have qualified for in the absence of a minimum benefit. Arguably, intermittent work histories play a greater role than long-term low earnings in leading to below-poverty-level benefits among women. 63 Therefore, proposals for a minimum benefit based on a specified number of years of (...continued) on SSA’s website at http://www.ssa.gov/OACT/solvency/provisions/charts/chart_run343.pdf. 59 Sharmila Choudhury, Michael V. Leonesio, and Kelvin R. Utendorf, et al., Analysis of Social Security Proposals Intended to Help Women: Preliminary Results, Social Security Administration, Office of Research, Evaluation, and Statistics, ORES Working Paper No. 88, Washington, DC, January 2001, p. 21. 60 John Turner, “Longevity Insurance: Strengthening Social Security at Advanced Ages” in Strengthening Social Security for Vulnerable Groups, ed. National Academy of Social Insurance (Washington, DC, 2009), pp. 45-48. The full report is available at http://www.nasi.org/sites/default/files/research/ Strengthening_Social_Security_for_Vulnerable_Groups.pdf. 61 Melissa M. Favreault, Gordon B.T. Mermin, and C. Eugene Steuerle, Minimum Benefits in Social Security, AARP Public Policy Institute, Washington, DC, August 2006, p. 13. See also Pamela Herd, “Ensuring a Minimum: Social Security Reform and Women,” The Gerontologist, vol. 45, no. 1 (2005), pp. 12-25. 62 The second model proposed by the President’s Commission to Strengthen Social Security in 2001 would provide a minimum benefit set at 120% of the poverty line, payable to minimum-wage workers with 30 or more years of covered earnings. The Commission’s third model would provide a minimum benefit set at 100% of the poverty line for minimum-wage workers with 30 years of covered earnings, increasing to 111% of the poverty line for minimum-wage workers with 40 years of covered earnings. See President’s Commission to Strengthen Social Security, Strengthening Social Security and Creating Personal Wealth for All Americans, Washington, DC, December 21, 2001, http://govinfo.library.unt.edu/csss/reports/Final_report.pdfm, models 2 and 3. 63 Melissa M. Favreault, A New Minimum Benefit for Low Lifetime Earners, The Urban Institute: Retirement Policy Program, Washington, DC, March 2009. Congressional Research Service 22 Social Security: Revisiting Benefits for Spouses and Survivors covered employment could be combined with modified spousal benefits or with a caregiver credit to balance recognition of longer work effort with recognition of the requirements of caregiving. 64 Some women, however, do not reach 20 years of covered earnings. About 40% of women aged 60 to 64 in 2000 had fewer than 20 years of earnings.65 This percentage is likely to decline in younger cohorts. Moreover, minimum benefit provisions may have the unintended effect of providing minimum benefits to workers with high earnings but sporadic work histories. To maintain the minimum benefit at a constant ratio to average living standards, some proposals would link the minimum benefit to wage growth instead of setting the minimum benefit equal to a specified percentage of the poverty line.66 The official poverty line is indexed to price growth, whereas living standards rise with increases in wages and productivity. Wage growth generally outpaces price growth.67 Social Security already has a “special minimum” benefit designed to help workers with long careers at low wages. The number of beneficiaries who receive the special minimum benefit under current law declines each year. The Social Security Administration has estimated that the special minimum benefit will disappear for workers reaching age 62 in 2012 and later.68 In 2009, the special minimum benefit was paid to 82,337 beneficiaries.69 A worker is awarded the special minimum benefit only if it exceeds the worker’s regular benefit. The value of the special minimum benefit, which is indexed to prices, is rising more slowly than the value of the regular Social Security benefit, which is indexed to wages. Some researchers propose modernizing the special minimum benefit to make it more relevant today, for example, by tying it to a poverty level that is in line with the recommendations of the National Academy of Social Insurance. 70 If a new minimum benefit is provided, it would be necessary to address interactions between Social Security benefits and eligibility for Supplemental Security Income, Medicaid and other means-tested programs for low-income individuals. 71 64 Melissa M. Favreault, A New Minimum Benefit for Low Lifetime Earners, The Urban Institute: Retirement Policy Program, Washington, DC, March 2009. 65 Ibid, Table 4. 66 For example, the third model proposed by the President’s Commission to Strengthen Social Security would link the minimum benefit to average wage growth. See President’s Commission to Strengthen Social Security, Strengthening Social Security and Creating Personal Wealth for All Americans, Washington, DC, December 21, 2001, http://govinfo.library.unt.edu/csss/reports/Final_report.pdfm, model 3. 67 While projected growth in wages over time is expected to help reduce poverty among the elderly in the future (because initial monthly Social Security benefits are indexed to average wage growth), this may be offset by benefit reductions for future beneficiaries to address Social Security’s projected long-range financial imbalance. 68 Email from Social Security Administration staff, September 8, 2010.. 69 Annual Statistical Supplement, 2010, Social Security Administration, Washington, DC, table 5.A8. 70 Laura Sullivan, Tatjana Meschede and Thomas M. Shapiro, “Enhancing Social Security for Low-Income Workers: Coordinating an Enhanced Minimum Benefit with Social Safety Net Provisions for Seniors” in Strengthening Social Security for Vulnerable Groups, ed. National Academy of Social Insurance (Washington, DC, 2009), pp. 27-30. The full report is available at http://www.nasi.org/sites/default/files/research/ Strengthening_Social_Security_for_Vulnerable_Groups.pdf. 71 The Social Security Administration’s Office of the Chief Actuary provides actuarial estimates for a number of proposals that would establish a new minimum benefit or alter the current-law special minimum benefit. Estimates are available on SSA’s website at http://www.ssa.gov/OACT/solvency/provisions/benefitlevel.html#B6 (see proposals under “B5: Minimum benefits”). For example, one proposal (item B5.1) would increase the PIA to a level such that a worker with 30 years of earnings at the minimum wage level would receive an adjusted PIA equal to 120% of the (continued...) Congressional Research Service 23 Social Security: Revisiting Benefits for Spouses and Survivors Caregiver Credits and Drop-out Years for Caregiving Women are more likely than men to take career breaks to care for a child or other relative, as discussed above. The Social Security retired-worker benefit is based on the average of a worker’s 35 highest years of covered earnings. If a worker has fewer than 35 years of earnings, for example due to years of unpaid caregiving, years of no earnings are entered as zeros in the computation of career-average earnings. Years of zero earnings lower the worker’s career-average earnings, resulting in a lower initial monthly benefit (see “Computation of the Primary Earner’s Benefit” for further explanation). One approach is to replace years of low or zero earnings with a caregiver credit equal to a specified dollar amount. Some proposals would provide the same fixed credit to all eligible persons.72 Other proposals would link the amount of the credit to foregone earnings, so that higher earners would receive higher credits. The latter proposal would require that the caregiver have been in the paid labor force previously. Some proposals to base benefits on caregiving, rather than on marriage, would eliminate the current spousal benefit.73 A second approach is to drop years of caregiving, up to a fixed maximum number of years, from the benefit computation period. This approach could be implemented either by dropping years of zero earnings or by dropping years of low earnings. 74 The proposal to drop years of zero earnings (rather than low earnings) would require a person to leave the workforce completely. This could be problematic for many women, making the proposal less likely to reach as many women as a caregiver credit. Allowing a parent to drop up to five years of zero (or low) earnings for caring for a child at home would cause the parent’s AIME (average indexed monthly earnings) to be calculated based on the highest 30 years of earnings, rather than the highest 35 years of earnings (the benefit computation period would be shortened from 35 years to 30 years). This change in the benefit computation would result in higher initial monthly benefits for these workers (and higher benefits for family members who receive benefits based on their work records). (...continued) federal poverty level for an aged individual. SSA estimates that the proposal would increase the Social Security trust fund’s projected 75-year actuarial deficit by 2.0% (based on the intermediate assumptions of the 2009 Social Security Trustees Report). The estimate, including more information on the proposal, is available on SSA’s website at http://www.ssa.gov/OACT/solvency/provisions/charts/chart_run229.pdf. 72 For example, during the 2000 presidential campaign, former Vice President Gore proposed that parents be allowed to substitute half the average wage for up to 5 years of caregiving for one child and up to 9 years of caregiving for two or more children. (To put this into perspective, in 2010, the Social Security average wage index is an estimated $43,084; half the average wage index would be about $21,542 in 2010.) 73 The Social Security Administration’s Office of the Chief Actuary provides actuarial estimates for a proposal to give parents earnings credits for up to 5 years if they have a child under the age of 6. Under the proposal, the earnings credited for a childcare year would be equal to one-half of the Social Security average wage index (or about $21,542 in 2010). SSA estimates that the proposal would increase the Social Security trust fund’s projected 75-year actuarial deficit by 12.0% (based on the intermediate assumptions of the 2009 Social Security Trustees Report). The estimate, including more information on the proposal, is available on SSA’s website at http://www.ssa.gov/OACT/solvency/ provisions/charts/chart_run206.pdf. 74 The 1979 Advisory Council on Social Security recommended offering drop-out years scaled to the length of service, with a maximum of 6 drop-out years (as reported in: U.S. Congress, Senate Special Committee on Aging, Summary of Recommendations and Surveys on Social Security and Pension Policies, committee print, 96th Cong., October 1980). The National Commission on Social Security in 1981 proposed that parents be able to credit up to 10 years of child care for children under age 6 to be counted toward qualifying for the special minimum benefit (see National Commission on Social Security, Final Report: Social Security in America’s Future, Washington, DC, March 1981). Congressional Research Service 24 Social Security: Revisiting Benefits for Spouses and Survivors Policies to credit years of caregiving in the provision of public pension benefits have been implemented in other countries in different ways. In making such a provision, one question to consider is whether the credit should be available only to parents who have stopped working completely or also to parents who continue to work part-time or full-time. Another question to consider is whether to provide credits only for the care of young children or also for the care of other immediate family members such as an aging parent. Canada excludes years of caring for children under the age of 7 from the averaging period in the pension calculation and from the contributory period under its earnings-related scheme. Germany provides pension points (equal to a year’s contributions at the national average earnings) for three years per child, which can be taken by either the employed or non-employed parent, or shared between parents.75 Other recent proposals, however, would count additional years of earnings (more than 35 years) in the Social Security benefit computation. For example, some proposals would increase the averaging period from 35 to 38 years.76 These proposals are aimed at helping improve Social Security’s projected long-range financial position and at encouraging people to work longer. Such proposals generally would affect women disproportionately. A criticism of proposals to drop or credit years of caregiving is that they may be of most benefit to higher-wage households that can afford to forego one spouse’s earnings over a period of several years. Lower-wage spouses, and single working mothers, may not be in a position to stop working for any period of time. In addition, a practical issue involves ascertaining that years out of the workforce are actually spent caring for children or other family members. Survivor’s Benefit Increased to 75% of Couple’s Combined Benefit Under current law, an aged surviving spouse receives the higher of his or her own retired-worker benefit and 100% of the deceased spouse’s PIA. This leads to a reduction in benefits compared with the combined benefit the couple was receiving when both members of the couple were alive. The reduction ranges from one-third of the combined benefit for a one-earner couple to one-half of the combined benefit for some two-earner couples.77 However, there is not always a corresponding reduction in household expenses for the surviving member of the couple. Some contend that 75% of the income previously shared by the couple (i.e., a reduction of 25%) more closely approximates the income needed by the surviving spouse to maintain his or her standard of living.78 One frequently mentioned proposal would increase the surviving spouse’s benefit to the higher of (1) the deceased spouse’s benefit, (2) the surviving spouse’s own benefit, and (3) 75% of the couple’s combined monthly benefit when both spouses were alive. 79 The couple’s combined 75 Organization for Economic Cooperation and Development, Pensions at a Glance, 2009, pp. 178 and 200. 76 See, for example, 1994-1996 Advisory Council on Social Security, Report vol. 1, Findings and Recommendations, Washington, DC, January 1997, p. 19. 77 See the discussion under “Equity Issues.” 78 American Academy of Actuaries, Social Security Reform: Changes to the Benefit Formula and Taxation of Benefits, Issue Brief, Washington, DC, October 2006, p. 7. See also 1994-1996 Advisory Council on Social Security, Report vol. 1, Findings and Recommendations, Washington, DC, January 1997, p. 19. 79 1994-1996 Advisory Council on Social Security, Report vol. 1, Findings and Recommendations, Washington, DC, January 1997, p. 19. See also Joan Entmacher, “Strengthening Social Security Benefits for Widow(er)s: The 75 Percent Combined Worker Benefit Alternative,” in Strengthening Social Security for Vulnerable Groups, ed. National (continued...) Congressional Research Service 25 Social Security: Revisiting Benefits for Spouses and Survivors monthly benefit when both spouses were alive would be the sum of (1) the higher-earner’s benefit and (2) the higher of the lower-earner’s worker benefit and spousal benefit. Some proposals for a 75% survivor benefit would target the provision to lower-income households by capping the survivor benefit, for example, at the benefit amount received by the average retired-worker beneficiary.80 A 75% minimum survivor benefit would increase benefits for many surviving spouses, both in dollar terms and as a replacement rate for the combined benefit received by the couple when both spouses were alive. For a one-earner couple, the benefit for the surviving spouse would increase from 100% to 112% of the worker’s benefit (112% = 75% of 150% of the worker’s benefit that the couple received when both spouses were alive). For a two-earner couple with similar earnings histories, the surviving spouse’s benefit would increase from roughly 50% of the couple’s combined benefit when both spouses were alive (under current law, the surviving spouse receives the benefit received by the higher-earning spouse while he or she was alive) to 75% of the couple’s combined benefit when both spouses were alive. A 75% minimum survivor benefit provision would “reward” the second income of a two-earner couple and improve equity between one-earner and two-earner couples. Under current law, upon the death of either spouse, the earnings record of the lower-earning spouse does not result in the payment of any additional benefits (i.e., in addition to the benefits payable on the earnings record of the higher-earning spouse). Stated another way, the earnings record of the lower-earning spouse effectively “disappears” with the death of either spouse. 81 Because a 75% survivor benefit would increase costs to the Social Security system, some have proposed financing it through a gradual reduction in the spousal benefit from 50% to 33% of the primary earner’s benefit, while both spouses are alive. 82 For a one-earner couple, the couple’s combined benefit would be reduced from 150% to 133% of the worker’s benefit. This is broadly consistent with the structure of private annuities, where the annuity payout is lower to adjust for a longer expected payout period. As a result, more dually-entitled spouses would likely qualify for (...continued) Academy of Social Insurance (Washington, DC, 2009), pp. 23-26. The full report is available at http://www.nasi.org/ sites/default/files/research/Strengthening_Social_Security_for_Vulnerable_Groups.pdf. 80 President’s Commission to Strengthen Social Security, Strengthening Social Security and Creating Personal Wealth for All Americans, Washington, DC, December 21, 2001, http://govinfo.library.unt.edu/csss/reports/Final_report.pdfm, models 2 and 3. See also Peter A. Diamond and Peter R. Orszag, Saving Social Security: A Balanced Approach (Washington, DC: Brookings Institution Press, 2004), p. 105. 81 The Social Security Administration’s Office of the Chief Actuary provides actuarial estimates for a proposal to establish an alternative benefit for a surviving spouse in cases where both the husband and wife established insured status as retired workers. Under the proposal, the alternative benefit for the surviving spouse would be equal to 75% of the sum of the surviving spouse’s own retired-worker benefit and the worker PIA (including any delayed retirement credits) of the deceased spouse. The alternative benefit would be payable if it is higher than the benefit payable under current law and could not exceed the benefit of a worker who is born and becomes eligible for retired-worker benefits in the same year as the surviving spouse and who earns the SSA average wage every year. SSA estimates that the proposal would increase the Social Security trust fund’s projected 75-year actuarial deficit by 3.0% (based on the intermediate assumptions of the 2009 Social Security Trustees Report). If the alternative benefit for the surviving spouse were such that it could not exceed the benefit of a worker who is born and becomes eligible for retired-worker benefits in the same year as the surviving spouse and who earns the taxable maximum amount every year, the proposal would increase the Social Security trust fund’s projected 75-year actuarial deficit by 15%. The estimates are available on SSA’s website at http://www.ssa.gov/OACT/solvency/index.html (see Table 2, items D2a and D2b). 82 Henry J. Aaron and Robert D. Reischauer, Countdown to Reform: The Great Social Security Debate (New York: The Century Foundation, 2001), pp. 102-106. Congressional Research Service 26 Social Security: Revisiting Benefits for Spouses and Survivors a retirement benefit based on their own work record only, because more dually-entitled spouses would likely have a retired-worker benefit of their own that is equal to at least 33% (rather than 50%) of the higher-earning spouse’s retired-worker benefit. 83 Reducing a one-earner couple’s combined monthly benefit to 133% of the worker’s benefit, as a way to finance a 75% survivor benefit, could be problematic for low-income couples. Effectively, the increased survivor benefit would help the survivors of both one-earner and two-earner couples, but it would be financed by reducing the combined benefits of one-earner couples from 150% to 133% of the worker’s benefit. In addition, unless this proposal were modified for divorced spouses, it would also reduce the spousal benefits received by divorce(e)s from 50% to 33% of the primary earner’s benefit. After the death of the primary earner, benefits for a divorcé(e) would jump to 100% of the primary earner’s benefit, creating income volatility unless this outcome is addressed for divorcé(e)s. Although the 75% survivor benefit option could increase benefits for vulnerable groups such as aged widows, it would not address the needs of other vulnerable groups, such as individuals who were never married or who divorced before reaching 10 years of marriage. In addition, a 75% survivor benefit option would provide somewhat more additional benefits to higher-income beneficiaries than to lower-income beneficiaries. To address this outcome, as noted above, some proposals would cap the 75% survivor benefit at the average retired-worker benefit. Conclusion This report described the current-law structure of Social Security auxiliary benefits for spouses, former spouses and surviving spouses. When Social Security auxiliary benefits were established in 1939, they were based on the typical family structure at the time consisting of a single wageearner—generally the husband—and a wife who stayed at home to care for children and remained out of the paid workforce. As a result, a woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is larger than the retirement benefit received by a single woman, or a woman who was married less than 10 years, who worked a full career in a low-wage job. In recent decades, this family structure has changed: women have entered the workforce in increasing numbers, more men and women remain single, and divorce rates have risen. As a result, more women now qualify for Social Security retirement benefits based on their own work records. Social Security auxiliary benefits, however, continue to play a crucial role in improving income security for older women, as well as for young surviving spouses and children of deceased workers. Women in particular continue to be vulnerable to poverty in old-age and depend on the income support provided by Social Security. Some policymakers and researchers have expressed concerns about the current structure of Social Security auxiliary benefits on both equity and adequacy grounds. The current structure can lead to 83 The Social Security Administration’s Office of the Chief Actuary provides actuarial estimates for a proposal to reduce the spousal benefit from 50% to 33% of the PIA of the other spouse. Under the proposal, the spousal benefit as a percentage of the other spouse’s PIA would be reduced by 1 percentage point each year until it reaches 33%. SSA estimates that the proposal would reduce the Social Security trust fund’s projected 75-year actuarial deficit by 6.0% (based on the intermediate assumptions of the 2009 Social Security Trustees Report). The estimate is available on SSA’s website at http://www.ssa.gov/OACT/solvency/provisions/charts/chart_run309.pdf. Congressional Research Service 27 Social Security: Revisiting Benefits for Spouses and Survivors situations in which a one-earner couple receives higher retirement and survivor benefits than a two-earner couple with identical total household earnings. In addition, auxiliary benefits do not reach certain groups, such as persons who divorced before 10 years of marriage or mothers who never married. This report presented a number of recent proposals for modifying the current structure of Social Security spousal and survivor benefits. Each of the proposals generally targets benefit increases to certain, but not all, vulnerable groups. For example, an enhanced widow(er)’s benefit would provide income support to many elderly women and men, but it would not help those who divorced before 10 years of marriage or who never married. Similarly, a caregiver credit for workers who stay at home to care for young children would increase benefits for never-married and divorced women, but it would not help those without children, whether married or unmarried. The consideration of potential changes to Social Security spousal and survivor benefits involves balancing improvements in benefit equity, for example, between one-earner and two-earner couples, with improvements in benefit adequacy for persons who experience relatively higher poverty rates, such as never-married men and women. In addition, the policy discussion about auxiliary benefits may involve balancing benefit increases for spouses and survivors, divorced spouses, or never-married persons with other potential program changes to offset the higher program costs in light of the Social Security system’s projected long-range financial outlook.84 84 For additional reading, see Social Security Modernization: Options to Address Solvency and Benefit Adequacy, Report of the Special Committee on Aging, United States Senate, S.Rept. 111-187, 111th Congress, Second Session, May 13, 2010, http://aging.senate.gov/ss/ssreport2010.pdf. Congressional Research Service 28 Appendix A. Major Changes in Social Security Auxiliary Benefits Amendment Type of Benefit Retired Workers Retired worker aged 65 and older 1956 Retired woman aged 62-64 1961 Retired man aged 62-64 Disabled worker aged 50-64 Disabled worker under age 65 Dependents of Retired Workers 1939 1950 1956 1939 1956 1965 1981 Type of Benefit Dependents of Disabled Workers 1935 Disabled Workers 1956 1960 Amendment Wife Wife aged 65 and older Wife under age 65 caring for eligible child Wife aged 62-64 Child Child under 18 Disabled child aged 18 and older Full-time student aged 18-21 Student category eliminated except for high school students under age 19 1950 1961 1978a Husband Husband aged 65 and older Husband aged 62-64 Husband under age 65 caring for eligible child 1965 Divorced Wife Divorced wife age 62 and older 1976a Divorced Husband Divorced husband aged 62 and older 1958 Same as dependents of retired-worker recipient Survivors Widowed Mother 1939 Widowed mother any age caring for eligible child 1939 1956 1965 1965 1967 Widow Widow aged 65 and older Widow aged 62-64 Widow aged 60-61 Divorced widow aged 60 and older Disabled widow aged 50-59 1950 1961 1967 1972 Widower Dependent widower aged 65 and older Dependent widower aged 62-64 Disabled dependent widower aged 50-61 Widower aged 60-61 1975a Widowed Father Widowed father caring for eligible child 1939 1956 1965 1981 1939 1956 1961 Child Child under age 18 Disabled child aged 18 and older Full-time student aged 18-21 Student category eliminated except for high school students under age 19 Parent Dependent parent aged 65 and older Dependent female parent aged 62-64 Dependent male parent aged 62-64 Source: CRS Report RL30565, Social Security: Summary of Major Changes in the Cash Benefits Program, May 18, 2000 (out of print). a. Effective date: based on court decisions, not changes in the law. In 1983, the law was changed to reflect the court decisions. CRS-29 Social Security: Revisiting Benefits for Spouses and Survivors Appendix B. Computation of the Social Security Retired-Worker Benefit To be eligible for a Social Security retired-worker benefit, a person generally needs 40 quarters of coverage, or 10 years of Social Security-covered employment (among other requirements).85 A worker’s initial monthly benefit is based on his or her 35 highest years of earnings, which are indexed to historical wage growth to bring past earnings in line with current wage levels (earnings through the age of 60 are indexed; earnings thereafter are counted at nominal value). The 35 highest years of indexed earnings are divided by 35 to determine the worker’s careeraverage annual earnings. The resulting amount is divided by 12 to determine the worker’s average indexed monthly earnings (AIME). If a worker has fewer than 35 years of earnings in covered employment (because of time out of the labor force for family caregiving, spells of unemployment or other reasons), years of no earnings are entered as zeros. The worker’s basic benefit amount (i.e., basic benefit before any adjustments for early or delayed retirement) is called the primary insurance amount (PIA). The PIA is determined by applying a formula to the AIME as shown in Table B-1. First, the AIME is sectioned into three brackets (or levels) of earnings. Three progressive replacement factors—90%, 32%, and 15%—are applied to the three different brackets of AIME. The three products derived from multiplying each replacement factor and bracket of AIME are added together to get the worker’s PIA. Because the replacement factors are progressive, the benefit formula replaces a higher percentage of the preretirement earnings of workers with low career-average earnings than for workers with high career-average earnings. For workers who become eligible for retirement benefits (i.e., those who attain the age of 62), become disabled, or die in 2010, the PIA is determined as shown in the example in Table B-1. Table B-1. Computation of a Worker’s Primary Insurance Amount (PIA) in 2010 Based on an Illustrative AIME of $5,000 Factors Three Brackets of AIME (2010) 90% first $761 of AIME, plus 32% AIME over $761 and through $4,586, plus 15% AIME over $4,586 Total (Worker’s PIA) PIA for Worker with an Illustrative AIME of $5,000 $684.90 $1,224.00 $62.10 $1,971.00 Source: Congressional Research Service 85 A worker needs at least 40 quarters of coverage (QCs) for a Social Security retired-worker benefit and may earn a maximum of 4 QCs per calendar year. In 2010, a worker obtains 1 QC for each $1,120 of covered earnings, up to a maximum of 4 QCs for earnings of $4,480 or more. Fewer QCs may be required for Social Security disability benefits, depending on the age at which the worker became disabled. For more information, see CRS Report RL32279, Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), by Scott Szymendera. Congressional Research Service 30 Social Security: Revisiting Benefits for Spouses and Survivors Adjustment to Benefits Claimed Before or After FRA A worker’s initial monthly benefit is equal to his or her PIA if he or she begins receiving benefits at FRA.86 A worker’s initial monthly benefit will be less than his or her PIA if he or she begins receiving benefits before FRA, and it will be greater than his or her PIA if he or she begins receiving benefits after FRA. Retirement benefits are reduced by five-ninths of 1% (or 0.0056) of the worker’s PIA for each month of entitlement before FRA up to 36 months, for a reduction of about 6.7% a year (from age 62 to age 65). For each month of entitlement before FRA in excess of 36 months (up to 24 months), retirement benefits are reduced by five-twelfths of 1% (or 0.0042) of the worker’s PIA, for a reduction of 5% a year (from age 65 to age 67). Workers who delay filing for benefits until after FRA receive a delayed retirement credit (DRC). The DRC applies beginning with the month the worker attains FRA and ending with the month before he or she attains the age of 70. Starting in 1990, the DRC was increased until it reached 8% per year for workers born in 1943 or later (i.e., the DRC reached 8% starting with workers who attained age 62 in 2005 or age 66 in 2009). The actuarial adjustment to benefits claimed before or after FRA is intended to provide the worker with roughly the same total lifetime benefits regardless of the age at which he or she begins receiving benefits (assuming he or she lives to average life expectancy). Therefore, if a worker claims benefits before FRA, his or her monthly benefit is reduced to take into account the longer expected period of benefit receipt. For a worker whose FRA is 66, the decision to claim benefits at the age of 62 results in a 25% reduction in his or her PIA. For a worker whose FRA is 67, the decision to claim benefits at the age of 62 results in a 30% reduction in his or her PIA. Similarly, if a worker claims benefits after FRA, his or her monthly benefit is increased to take into account the shorter expected period of benefit receipt. Other Adjustments to Benefits Other benefit adjustments may apply, such as those related to simultaneous entitlement to more than one type of Social Security benefit (for more information see the section above entitled “Dually Entitled Beneficiaries”). Under the windfall elimination provision (WEP), the Social Security benefit formula is modified to reduce benefits for persons who have pensions from noncovered employment in federal, state, or local governments.87 The Social Security maximum family benefit provision may cap total benefits received by members of a family, by reducing the benefits of individual family members.88 Under the retirement earnings test (RET), the monthly 86 A worker may begin receiving retirement benefits as early as age 62; however, the FRA is the earliest age at which full (unreduced) retirement benefits are first payable. The FRA ranges from age 65 to age 67 depending on the worker’s year of birth. The FRA is 65 for workers born before 1938; it is increasing gradually to age 67 for workers born in 1938 or later. The FRA reaches 67 for workers born in 1960 or later. The Social Security Administration provides a chart showing the full retirement age based on year of birth, plus examples of reductions for early benefit receipt, at this link: http://www.socialsecurity.gov/retire2/agereduction.htm#chart. 87 For more information on the windfall elimination provision, see CRS Report 98-35, Social Security: The Windfall Elimination Provision (WEP), by Alison M. Shelton. 88 The maximum family benefit varies from 150% to 188% of the retired or deceased worker’s PIA (see Section 203 of the Social Security Act, 42 U.S.C. 403). The family maximum cannot be exceeded regardless of the number of beneficiaries entitled to benefits on the worker’s record. If the sum of all benefits based on the worker’s record exceeds (continued...) Congressional Research Service 31 Social Security: Revisiting Benefits for Spouses and Survivors Social Security benefit is reduced for persons who are below FRA and have wage or salary incomes above an annual dollar threshold (annual exempt amount). 89 (...continued) the maximum family benefit, each dependent’s or survivor’s benefit is reduced in equal proportion to bring the total amount of benefits within the family maximum. For the family of a worker who attains age 62 or dies in 2010, the total amount of benefits payable is limited to 150% of the first $972 of PIA, plus; 272% of PIA over $972 and through $1,403, plus; 134% of PIA over $1,403 and through $1,830, plus; 175% of PIA over $1,830. The dollar amounts in the benefit formula (known as “bend points”) are indexed to average wage growth, as in the primary benefit formula. A different family maximum applies in the case of a disabled worker. For the family of a worker who is entitled to disability benefits, the maximum family benefit is the lesser of 85% of the worker’s AIME or 150% of the worker’s PIA. In no case, however, can the family benefit be less than 100% of the worker’s PIA. 89 For more information on the retirement earnings test, see CRS Report R41242, Social Security Retirement Earnings Test: How Earnings Affect Benefits, by Dawn Nuschler and Alison M. Shelton. Congressional Research Service 32 Social Security: Revisiting Benefits for Spouses and Survivors Appendix C. Summary of Social Security Spousal and Widow(er)’s Benefits Under Current Law Social Security benefits for spouses and widow(er)s are based on a percentage of the worker’s primary insurance amount (PIA), with various adjustments for age at entitlement and other factors. The following section describes some of the adjustments that apply to benefits for spouses and widow(er)s. Age-Related Benefit Adjustment for Spouses Spousal benefits (including those for divorced spouses) are reduced when the spouse claims benefits before FRA to take into account the longer expected period of benefit receipt (assuming the individual lives to average life expectancy).90 A spouse who claims benefits at the age of 62 (the earliest eligibility age for retirement benefits) may receive a benefit that is as little as 32.5% of the worker’s PIA. 91 Age-Related Benefit Adjustments for Widow(er)s The earliest age a widow(er) can claim benefits is age 60. If a widow or widower (including divorced and disabled widow(er)s) claims survivor benefits before FRA,92 his or her monthly benefit is reduced up to a maximum of 28.5%93 to take into account the longer expected period of benefit receipt (assuming he or she lives to average life expectancy). 90 Spousal benefits are reduced by 25/36 of 1% (or 0.0069) for each month of entitlement before FRA, up to 36 months, and by five-twelfths of 1% (or 0.0042) for each month of entitlement before FRA in excess of 36 months. The reduction is applied to the base spousal benefit, which is 50% of the worker’s PIA. The spousal benefit is not reduced for entitlement before FRA if the spouse is caring for a qualifying child. 91 For example, if the worker’s PIA is $1,000, the spousal benefit payable at the spouse’s FRA is 50% of this amount, or $500. If the spouse claims benefits at age 62 and his or her FRA is 67, the spousal benefit is reduced by 35%, from $500 to $325 per month. (The percent reduction for entitlement to benefits five years before FRA is found as the sum of (25/36) * 36 months plus (5/12) * 24 months, for a total reduction of 35%.) The spouse’s benefit of $325 is equal to 32.5% of the worker’s PIA of $1,000. The following link at the Social Security Administration’s website allows users to see how timing the receipt of spousal benefits can affect benefit amounts: http://www.ssa.gov/OACT/quickcalc/ spouse.html. 92 The FRA is increasing gradually from age 65 to age 67. While the FRA for retired workers and spouses will reach age 67 for persons born in 1960 or later, it will reach age 67 for widow(er)s born in 1962 or later. The Social Security Administration provides FRAs for widow(er)s based on year of birth, plus examples of reductions for early benefit receipt, at this link: https://www.ssa.gov/survivorchartred.htm. 93 Survivor benefits are reduced for each month of entitlement before FRA by a fraction derived by dividing 28.5% (the maximum reduction) by the number of possible months of early retirement, which is the number of months between age 60 and the person’s FRA. For example, a person whose FRA is 66 could claim benefits at age 60 and potentially receive benefits for up to 72 months before FRA. The reduction for each month before FRA is therefore 28.5% ÷ 72 = 0.00396. As a result of this methodology, the fractions involved in reducing the widow(er)’s benefit for entitlement before FRA vary depending on the date of birth and the FRA associated with that birthdate. Survivor benefits paid from ages 50 to 59 based on a disability are not further reduced. The maximum reduction of 28.5% and the procedure for finding reduction amounts for widow(er)s who retire between age 60 and FRA are described in Social Security Administration, Handbook, section 724, available at http://www.socialsecurity.gov/OP_Home/handbook/handbook.07/ handbook-0724.html. Congressional Research Service 33 Social Security: Revisiting Benefits for Spouses and Survivors In addition, survivor benefits may be affected by the deceased worker’s decision to claim benefits before FRA. If the deceased worker claimed benefits before FRA (and therefore was receiving a reduced benefit) and the widow(er) claims survivor benefits at FRA, the widow(er)’s benefit is reduced under the widow(er)’s limit provision. Under the widow(er)’s limit provision, which is intended to prevent the widow(er)’s benefit from exceeding the deceased worker’s retirement benefit, the widow(er)’s benefit is limited to: (1) the benefit the worker would be receiving if he or she were still alive, or (2) 82.5% of the worker’s PIA, whichever is higher.94, 95 Benefit Adjustments Based on Other Factors Benefits for spouses and widow(er)s may be subject to other reductions, in addition to those based on entitlement before FRA. For example, under the dual entitlement rule, a Social Security spousal or widow(er)’s benefit is reduced or fully offset if the person also receives a Social Security retired-worker or disabled-worker benefit (see “Dually Entitled Beneficiaries” above). Similarly, under the Government Pension Offset, a Social Security spousal or widow(er)’s benefit is reduced or fully offset if the person also receives a pension based on his or her own employment in certain federal, state or local government positions that are not covered by Social Security.96 In some cases, a spousal or widow(er)’s benefit may be reduced to bring the total amount of benefits payable to family members based on the worker’s record within the maximum family benefit amount (see Appendix B, “Other Adjustments to Benefits”). 97 Under the Social Security retirement earnings test, auxiliary benefits may be reduced if the auxiliary beneficiary is below the FRA and has earnings above specified dollar thresholds. Also, under the RET, benefits paid to spouses may be reduced if the benefits are based on the record of a worker beneficiary who is affected by the RET (excluding benefits paid to divorced spouses who have been divorced for at least two years). Table C-1 shows the percentage of a worker’s PIA on which various categories of spousal and widow(er)’s benefits are based. It also shows the age at which benefits are first payable on a reduced basis (the eligibility age) and the maximum reduction to benefits claimed before FRA relative to the worker’s PIA. 94 For more information, see David A. Weaver, The Widow(er)’s Limit Provision of Social Security, Social Security Administration, Office of Policy, Office of Research, Evaluation, and Statistics, Working Paper Series Number 92, June 2001, http://www.socialsecurity.gov/policy/docs/workingpapers/wp92.pdf. 95 If the worker died before attaining FRA and he or she had benefits withheld under the retirement earnings test (RET), for purposes of determining the limit on the widow(er)’s benefit, the worker’s benefit is recomputed and increased at the time of the worker’s death to take into account months for which the worker’s benefits were partially or fully withheld under the RET. For more information on the RET and how it affects benefits for survivors, see CRS Report R41242, Social Security Retirement Earnings Test: How Earnings Affect Benefits, by Dawn Nuschler and Alison M. Shelton. 96 See CRS Report RL32453, Social Security: The Government Pension Offset (GPO), by Alison M. Shelton. 97 Benefits for a divorced spouse, a surviving divorced spouse or a disabled surviving divorced spouse are not reduced for the family maximum. Benefits for other auxiliaries and survivors are reduced for the family maximum not taking into account the divorced beneficiary. Social Security Administration, Program Operations Manual System (POMS), Section RS 00615.682 (Family Benefits Where a Divorced Spouse or a Surviving Divorced Spouse is Entitled), https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615682. Congressional Research Service 34 Social Security: Revisiting Benefits for Spouses and Survivors Table C-1. Social Security Spousal and Widow(er)’s Benefits Basis for Entitlement Spouse Eligibility Age Age 62 Basic Benefit Amount Before Any Adjustments 50% of worker’s PIA The worker on whose record benefits are based must be receiving benefits. Divorced Spouse Age 62 (if divorced individual was married to the worker for at least 10 years before the divorce became final and is currently unmarried) Generally, the worker on whose record benefits are based must be receiving benefits. However, a divorced spouse may receive benefits on the worker’s record if the worker is eligible for (but not receiving) benefits and the divorce has been final for at least 2 years. Widowed Mothers and Fathers No minimum age requirement Minimum Possible Benefit, Expressed as a Percent of the Worker’s PIA a 32.5% of the worker’s PIA (The figure of 32.5% is found as follows. The spousal benefit is 50% of the worker’s PIA. A spouse who claims benefits at age 62 and has an FRA of 67 would have his or her spousal benefit reduced by 35%, as described in footnote 91. Mathematically, the calculation is (1-.35)*0.50 of the retired worker’s benefit= 0.325. ) 50% of worker’s PIA 32.5% of worker’s PIA (The reduction to spousal benefits for a divorced spouse who claims benefits before FRA is identical to the reduction for a married or separated spouse.) 75% of deceased worker’s PIA No reduction based on age at entitlement Mother’s and father’s benefits end if the beneficiary becomes entitled to a widow(er)’s benefit. Widow(er) & Divorced Widow(er) Age 60 100% of deceased worker’s PIA (if divorced individual was married to the worker for at least 10 years before the divorce became final and did not remarry before age 60) Disabled Widow(er) & Divorced Disabled 71.5% of deceased worker’s PIA (As described in footnote 93, the maximum reduction to the survivor benefit as a result of early entitlement is 28.5%. The figure of 71.5% is found as (1-.285) * 100% of the deceased worker’s benefit. See also “widow(er)’s limit provision,” below.) Age 50 The qualifying disability Congressional Research Service 100% of deceased worker’s PIA 71.5% of deceased worker’s PIA 35 Social Security: Revisiting Benefits for Spouses and Survivors Basis for Entitlement Eligibility Age Widow(er) must have occurred: (if divorced individual was married to the worker for at least 10 years before the divorce became final and did not remarry before age 50) (1) within 7 years of the worker’s death; Basic Benefit Amount Before Any Adjustments (2) within 7 years of having been previously entitled to benefits on the worker’s record as a widow(er) with a child in his/her care; or Minimum Possible Benefit, Expressed as a Percent of the Worker’s PIA a (As described in footnote 93, the maximum reduction to the survivor benefit as a result of early entitlement is 28.5%, including for divorced survivors and disabled survivors who claim benefits before age 60.) (3) within 7 years of having been previously entitled to benefits as a disabled widow(er) that ended because the qualifying disability ended (whichever is later).a Widow(er)’s Limit Provision As noted above, widow(er)’s benefits are reduced if a widow(er) claims benefits before FRA, with a maximum age-related reduction equal to 28.5% of the deceased worker’s PIA. If a widow(er) claims benefits at FRA, his or her benefits are reduced if the deceased worker (on whose record the widow(er)’s benefit is based) claimed benefits before FRA and therefore was receiving a reduced benefit. The reduction is based on the widow(er)’s limit provision. Under this provision, the widow(er)’s benefit is limited to the higher of: (1) the benefit the worker would be receiving if he or she were still alive, and (2) 82.5% of the deceased worker’s PIA. Stated another way, under the widow(er)’s limit provision, the maximum reduction is 17.5% of the deceased worker’s PIA (i.e., no less than 82.5% of the deceased worker’s PIA is payable). The widow(er)’s limit provision is intended to prevent the widow(er)’s benefit from exceeding the deceased worker’s retirement benefit. Social Security Handbook, Section 724.3 Note Regarding the Widow(er)’s Limit Provision and the Retirement Earnings Test: If the worker died before reaching FRA and he or she had benefits fully or partially withheld for one or more months under the Social Security retirement earnings test (RET), for purposes of determining the limit on the widow(er)’s benefit, the deceased worker’s benefit is recomputed and increased (at the time of his or her death) to take into account months for which benefits were withheld under the RET. (For more information, see CRS Report R41242, Social Security Retirement Earnings Test: How Earnings Affect Benefits, by Dawn Nuschler and Alison M. Shelton.) Source: Social Security Administration, Social Security Handbook, Sections 418, 420 and 724, http://www.ssa.gov/ OP_Home/handbook/handbook.html. a. The maximum reduction shown in this column reflects two steps: (1) computation of the spouse or widow(er) benefit as the applicable percentage (for example, 50% or 100%) of the retired or disabled worker’s PIA,; and (2) application to the spousal or widow(er) benefit of the maximum reduction for early entitlement, assuming the spouse or widow(er) claims benefits at the earliest possible age (ages 62 and 60, Congressional Research Service 36 Social Security: Revisiting Benefits for Spouses and Survivors respectively). For widowed mothers and fathers who have a qualified child in care, there is no reduction for entitlement before the full retirement age. b. Benefits for disabled widow(er)s beginning at age 50 were enacted in 1967 when workers aged 50-59 needed up to seven years of covered employment to qualify for disability benefits based on their own work record. Congressional Research Service 37