{ "id": "R43615", "type": "CRS Report", "typeId": "R", "number": "R43615", "active": true, "source": "CRSReports.Congress.gov, EveryCRSReport.com", "versions": [ { "active": true, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=R43615", "source_dir": "crsreports.congress.gov", "date": "2021-06-15", "typeId": "R", "formats": [ { "format": "PDF", "filename": "files/2021-06-15_R43615_8c3ba4795e472746f322def434f5613b262144c5.pdf", "url": "https://crsreports.congress.gov/product/pdf/R/R43615/34", "sha1": "8c3ba4795e472746f322def434f5613b262144c5" }, { "format": "HTML", "filename": "files/2021-06-15_R43615_8c3ba4795e472746f322def434f5613b262144c5.html" } ], "type": "CRS Report", "summary": null, "title": "Social Security: Minimum Benefits", "retrieved": "2021-07-14T04:04:13.316571", "source": "CRSReports.Congress.gov", "id": "R43615_34_2021-06-15" }, { "active": true, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=R43615", "source_dir": "crsreports.congress.gov", "date": "2020-09-10", "typeId": "R", "formats": [ { "format": "PDF", "filename": "files/2020-09-10_R43615_d2eae1752f8afcf6e5ac84415b4aa6c172b73fe8.pdf", "url": "https://crsreports.congress.gov/product/pdf/R/R43615/22", "sha1": "d2eae1752f8afcf6e5ac84415b4aa6c172b73fe8" }, { "format": "HTML", "filename": "files/2020-09-10_R43615_d2eae1752f8afcf6e5ac84415b4aa6c172b73fe8.html" } ], "type": "CRS Report", "summary": null, "title": "Social Security: Minimum Benefits", "retrieved": "2021-07-14T04:04:13.314593", "source": "CRSReports.Congress.gov", "id": "R43615_22_2020-09-10" }, { "source": "EveryCRSReport.com", "id": 604748, "date": "2018-07-20", "retrieved": "2019-09-16T22:23:34.536214", "title": "Social Security: Minimum Benefits", "summary": "Social Security\u2019s special minimum benefit provision, also known as the Special Minimum Primary Insurance Amount (PIA), is an alternative benefit formula that increases benefits paid to workers who had low earnings for many years, and to their dependents and survivors. The Special Minimum PIA is based on the number of years a person has worked, whereas the standard benefit formula is based on a worker\u2019s average lifetime earnings. The worker receives the higher of the two benefits.\nHowever, the Special Minimum PIA has virtually no effect on the benefits paid to today\u2019s new retirees. Under current law, it grows with price levels, whereas the standard benefit is linked to wages. Because wages generally grow faster than prices, the Special Minimum PIA affects fewer beneficiaries every year. In 2017, about 39,347 of the 62 million Social Security recipients qualified for the minimum benefit. Beneficiaries who received higher benefits due to the provision had an average increase to monthly benefits of about $46 in June 2013. The Social Security Administration (SSA) estimates that the provision will have no effect on workers turning 62 in 2019 or later.\nSome recent proposals would redesign the minimum benefit. This renewed interest has been sparked by Social Security proposals that would reduce the regular benefit and by concern over poverty rates among beneficiaries who had low wages throughout their careers. However, some have suggested to allow the minimum benefit to phase out, arguing that the provision does not accurately target the working poor, and that there are other programs that are more appropriate for supplementing the incomes of low-income, low-asset people.\nIncreases in Social Security benefits targeted at lifetime low earners could be implemented in various ways. For example, a new minimum benefit provision could be introduced, the standard benefit could be increased for people who worked for many years at low earnings, or a fixed-dollar benefit could be introduced. Similar provisions could also be introduced through other programs, such as Supplemental Security Income (SSI).", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R43615", "sha1": "ff081dc8dd0f1817ba3af609f9939599e38dcf2d", "filename": "files/20180720_R43615_ff081dc8dd0f1817ba3af609f9939599e38dcf2d.html", "images": { "/products/Getimages/?directory=R/html/R43615_files&id=/1.png": "files/20180720_R43615_images_007c186844411f5b5cd10645592df6d90c419a48.png", "/products/Getimages/?directory=R/html/R43615_files&id=/2.png": "files/20180720_R43615_images_4ec1f570f8856997ae964c3f0be35518ca267805.png", "/products/Getimages/?directory=R/html/R43615_files&id=/0.png": "files/20180720_R43615_images_4bab7a82b3d8271087a10d0a090baec2614d7991.png", "/products/Getimages/?directory=R/html/R43615_files&id=/3.png": "files/20180720_R43615_images_dd1e598d213df345d483f0a3a323a29f542a3be3.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R43615", "sha1": "14ad0968fea088a43b094fc625a8c243ec638214", "filename": "files/20180720_R43615_14ad0968fea088a43b094fc625a8c243ec638214.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 458117, "date": "2017-01-05", "retrieved": "2017-01-13T15:44:37.871289", "title": "Social Security: Minimum Benefits", "summary": "Social Security\u2019s special minimum benefit provision, also known as the Special Minimum Primary Insurance Amount (PIA), is an alternative benefit formula that increases benefits paid to workers who had low earnings for many years and to their dependents and survivors. The Special Minimum PIA is based on the number of years a person has worked, whereas the standard benefit formula is based on a worker\u2019s average lifetime earnings. The worker receives the higher of the two benefits.\nHowever, the Special Minimum PIA has virtually no effect on the benefits paid to today\u2019s new retirees. Under current law, it grows with price levels, whereas the standard benefit is linked to wages. Because wages generally grow faster than prices, the Special Minimum PIA affects fewer beneficiaries every year. In 2015, about 48,000 of the 60 million Social Security recipients qualified for the minimum benefit. Beneficiaries who received higher benefits due to the provision had an average increase to monthly benefits of about $45. The Social Security Administration (SSA) estimates that the provision will have no effect on workers turning 62 in 2019 or later.\nSome recent proposals would redesign the minimum benefit. This renewed interest has been sparked by Social Security proposals that would reduce the regular benefit and by concern over poverty rates among beneficiaries who had low wages throughout their careers. However, some have argued to allow the minimum benefit to phase out, arguing that the provision does not accurately target the working poor, and that there are other programs that are more appropriate for supplementing the incomes of low income, low asset people.\nIncreases in Social Security benefits targeted at lifetime low earners could be implemented in various ways. For example, a new minimum benefit provision could be introduced, the standard benefit could be increased for people who worked for many years at low earnings, or a fixed dollar-benefit could be introduced. Similar provisions could also be introduced through other programs, such as Supplemental Security Income (SSI).", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43615", "sha1": "87a877f0abf18ae17db9b356d8b50f34eccf8267", "filename": "files/20170105_R43615_87a877f0abf18ae17db9b356d8b50f34eccf8267.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43615", "sha1": "80db1504e570586f8ef4f04f4baabd5048e2f433", "filename": "files/20170105_R43615_80db1504e570586f8ef4f04f4baabd5048e2f433.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 444268, "date": "2014-06-23", "retrieved": "2016-04-06T20:19:15.010243", "title": "Social Security: Minimum Benefits", "summary": "Congressional Research Service\n7-5700\nwww.crs.gov\nR43615\nSummary\nSocial Security\u2019s minimum benefit provision, the Special Minimum Primary Insurance Amount (PIA), is an alternative benefit formula that increases benefits paid to workers who had low earnings for many years and to their dependents and survivors. The Special Minimum PIA is based on the number of years a person has worked, whereas the standard benefit formula is based on a worker\u2019s average lifetime earnings. The worker receives the higher of the two benefits.\nHowever, the Special Minimum PIA has virtually no effect on the benefits paid to today\u2019s new retirees. Under current law, it grows with price levels, whereas the standard benefit is linked to wages. Because wages generally grow faster than prices, the Special Minimum PIA affects fewer beneficiaries every year. In 2013, about one out of every 1,500 Social Security recipients qualified for the minimum benefit, and the provision resulted in only about $20 million of the more than $800 billion in Social Security benefit outlays. The Social Security Administration (SSA) estimates that provision will have no effect on workers turning 62 in 2019 or later.\nSocial Security has had a minimum benefit provision since 1939. Originally, the minimum benefit was a fixed-dollar amount. Congress created the Special Minimum PIA in 1972 in response to concerns that the fixed-dollar minimum provided a windfall to people who had worked only a few years in Social Security-covered employment. The Special Minimum PIA may be paid to workers with more than 10 years in Social Security-covered employment. The Special Minimum benefit amount paid to a retired worker is based on, and rises with, the number of years worked in covered employment.\nSome recent proposals would reinstitute a minimum benefit. This renewed interest has been sparked by Social Security proposals that would reduce the regular benefit and by concern over poverty rates among beneficiaries who had low wages throughout their careers.\nIncreases in Social Security benefits targeted at people with greater need could be implemented in various ways. For example, a new minimum benefit provision could be introduced, the standard benefit could be increased for people who worked for many years at low earnings, or a fixed dollar-benefit could be introduced. Similar provisions could also be introduced through other programs, such as Supplemental Security Income (SSI).\nContents\nIntroduction\t1\nDetermining Regular Social Security Retirement Benefits\t1\nDetermining the Special Minimum PIA Benefit Amount\t1\nYears of Coverage\t2\nSpecial Minimum PIA Initial Monthly Benefit Amounts\t2\nBenefits for Family Members\t4\nPotential Adjustments to the Special Minimum PIA Benefit Amount\t4\nDually Entitled Beneficiaries\t5\nThe Special Minimum PIA Has Little Effect on Current Beneficiaries\t5\nHistory of the Social Security Minimum Benefit Provision\t6\nOriginal Structure of the Social Security Minimum Benefit (1939 to 1981)\t6\nThe Special Minimum PIA (1973 to the Present)\t7\nArguments For and Against a Minimum Benefit Provision\t8\nArguments for a Minimum Benefit Provision\t8\nArguments for Phasing Out the Social Security Minimum Benefit\t9\nCriteria for Evaluating Minimum Benefit Proposals\t9\nTo What Extent Does the Benefit Reduce Poverty?\t9\nShould the Benefit Grow with Prices or Wages?\t10\nWhat Years of Coverage Requirements Should a Minimum Benefit Have?\t10\nInteractions Between Social Security Minimum Benefits and Supplemental Security Income\t11\nOther Considerations\t12\nMinimum Benefit Options and Estimated Effects\t12\nOptions Based on Number of Years of Work\t13\nOptions to Enhance the Standard Social Security Benefit\t14\nA Fixed-Dollar Benefit\t14\nAlternative Strategies for Addressing Poverty Among Long-Term Low-Wage Workers\t15\n\nTables\nTable 1. Special Minimum PIA Monthly Benefit Amounts, 2014\t3\nTable 2. Number of Special Minimum PIA Beneficiaries and Average Increase in Monthly Benefit, June 2013\t5\n\nContacts\nAuthor Contact Information\t16\n\nIntroduction\nSocial Security\u2019s minimum benefit provision, the Special Minimum Primary Insurance Amount (PIA), is an alternative benefit formula that increases benefits paid to workers who had low earnings for many years and to their dependents and survivors. Unlike the standard Social Security benefit formula, which is based on a worker\u2019s average lifetime earnings, the Special Minimum PIA is based on the number of years a person has worked.\nThis paper explains how the Special Minimum PIA functions under current law and presents arguments for and against expanding it. It then discusses criteria for evaluating proposals for change and describes some specific options for increasing benefits paid to people with low earnings or low income.\nDetermining Regular Social Security Retirement Benefits\nTo compute the regular Social Security retirement benefit (known as the regular \u201cprimary insurance amount,\u201d or PIA), a worker\u2019s highest 35 years of earnings are converted into current-dollar terms by indexing each year of earnings to historical wage growth. The highest 35 years of indexed earnings are divided by 35 to determine career-average annual earnings and then divided by 12 to determine the worker\u2019s average indexed monthly earnings (AIME). If a worker has fewer than 35 years of earnings in covered employment, years of no earnings are entered as zeros.\nNext, the standard Social Security benefit formula is applied to the worker\u2019s AIME. Two dollar thresholds, known as \u201cbendpoints,\u201d are used to divide the worker\u2019s AIME into three segments; in 2014, the two bendpoints are $816 and $4,917. Next, three factors\u201490%, 32%, and 15%\u2014are applied to the three different segments of the worker\u2019s AIME to compute the basic monthly benefit. Because the lower factors apply to people with higher earnings, the benefit formula is progressive. That is, it replaces a higher percentage of the pre-retirement earnings of workers with low career-average earnings than for workers with high career-average earnings. For details, see CRS Report R43542, How Social Security Benefits Are Computed: In Brief, by Noah P. Meyerson.\nSocial Security also provides auxiliary benefits to eligible family members of a retired, disabled, or deceased worker. Benefits payable to family members are equal to a specified percentage of the worker\u2019s PIA. For example, a spouse\u2019s benefit is equal to 50% of the worker\u2019s PIA and a widow(er)\u2019s benefit is equal to 100% of the deceased worker\u2019s PIA. For more information on auxiliary benefits, see \u201cBenefits for the Worker\u2019s Family Members\u201d in CRS Report R42035, Social Security Primer, by Dawn Nuschler.\nDetermining the Special Minimum PIA Benefit Amount\nUnlike the regular benefit, the Special Minimum PIA benefit is based only on the number of years spent in Social Security-covered employment. Beneficiaries receive the higher of the two amounts.\nYears of Coverage\nA \u201cyear of coverage\u201d for the purposes of computing the Special Minimum PIA is a year during which the worker earns more than a specified threshold. Since 1991, the annual threshold for a year of coverage under the Special Minimum PIA has equaled 15% of the \u201cold law\u201d contribution and benefit base. The \u201cold law\u201d contribution and benefit base is indexed to increases in the national average wage. As a result, year of coverage thresholds for the Special Minimum PIA are effectively indexed to wage growth. The 2014 threshold is $13,050.\nThe year of coverage thresholds create a \u201ccliff\u201d effect. If a worker\u2019s earnings in a year are even one dollar short of the threshold for that year, a year of coverage is not credited.\nSpecial Minimum PIA Initial Monthly Benefit Amounts\nThe Special Minimum PIA depends only on a worker\u2019s years of coverage. A worker must have at least 11 years of coverage to be eligible for the benefit. For those with 11 years, the Special Minimum PIA monthly benefit is $39.30. It increases by about $41 for each additional year of coverage (see Table 1). (For each additional year of coverage, the actual increase in the PIA is not exactly $41 because of the cumulative impact of annual rounding.) For example a person with 30 years of coverage would qualify for an initial monthly Special Minimum PIA benefit of $804.00 (before potential adjustments, as will be discussed below). \nTable 1. Special Minimum PIA Monthly Benefit Amounts, 2014 \nNumber of Years of Coverage\nMonthly Primary Insurance Amount\n\n11\n$59.80 \n\n12\n80.20\n\n13\n121.20\n\n14\n161.90\n\n15\n202.40\n\n16\n243.60\n\n17\n284.40\n\n18\n325.30\n\n19\n366.10\n\n20\n407.10\n\n21\n448.00\n\n22\n488.60\n\n23\n530.10\n\n24\n570.90\n\n25\n611.50\n\n26\n653.00\n\n27\n693.40\n\n28\n734.30\n\n29\n775.20\n\n30\n816.00\n\nSource: Social Security Administration, http://www.socialsecurity.gov/cgi-bin/smt.cgi.\nThe Special Minimum PIA benefit amounts are indexed to price inflation, in contrast to regular Social Security benefits, which are indexed to wage inflation. Wages generally grow faster than prices, so regular benefits have grown faster than Special Minimum PIA benefits. As a result, a worker\u2019s regular benefit is now almost always higher than the Special Minimum PIA benefit. \nAfter the initial year of benefit receipt, the same Social Security cost-of-living-adjustment (COLA) applies to both the Special Minimum PIA benefit and regular benefits.\nBenefits for Family Members\nMonthly benefit rates for dependents and survivors are figured as a percentage of the worker\u2019s Special Minimum PIA, not to exceed the family maximum amount (described below). The computation of auxiliary benefits uses the same rates that are used for regular benefits. For details, see \u201cBenefits for the Worker\u2019s Family Members\u201d in CRS Report R42035, Social Security Primer, by Dawn Nuschler.\nPotential Adjustments to the Special Minimum PIA Benefit Amount\nVarious provisions may cause a worker\u2019s monthly benefit payment to differ from the PIA. Some of the provisions apply to both the regular PIA and the Special Minimum PIA, and some adjustments differ.\nFour provisions affect both the regular benefit and the Special Minimum benefit:\nActuarial benefit reduction. The provision reduces monthly benefits below the PIA for people who claim benefits before the full retirement age (FRA). \nRetirement earnings test (RET). The RET reduces current benefits for beneficiaries who are younger than the FRA and have earnings that exceed a specified dollar amount.\nGovernment pension offset (GPO). The GPO reduces benefits for people who have pensions from employment that is not covered by Social Security, but who are entitled to Social Security spouse or survivor benefits based on a spouse or deceased spouse\u2019s work record in Social Security-covered employment. \nFamily maximum benefit. The maximum total benefit that can be received by all members of a family varies from 150% to 188% of the retired or deceased worker\u2019s PIA, even if the sum of the benefits for the individuals in the family would be greater.\nTwo provisions affect regular benefits but do not affect Special Minimum benefits:\nDelayed retirement credit (DRC). The DRC increases regular benefits for workers who start receiving benefits after reaching the FRA. It does not apply to Special Minimum benefits. \nWindfall elimination provision (WEP). A regular benefit may be reduced under the WEP if the worker is entitled to a pension based on employment in certain federal, state, or local government positions that are not covered by Social Security. It does not apply to Special Minimum benefits.\nDually Entitled Beneficiaries\nSome beneficiaries are entitled to Social Security benefits based both on their own work and on a spouse\u2019s work. When a beneficiary\u2019s retired-worker benefit is higher than the spousal or survivor benefit, the beneficiary receives only the retired-worker benefit. But when the beneficiary\u2019s retired-worker benefit is lower than the spousal or survivor benefit, the person is referred to as \u201cdually entitled\u201d and receives a payment equal to the spousal or survivor benefit. (Technically, the payment consists of the retired-worker benefit plus the difference between the retired-worker benefit and the full spousal or survivor benefit.)\nMany workers\u2014primarily women\u2014who qualify for the Special Minimum PIA based on their own work are dually entitled and receive a benefit amount that is equal to the higher spouse or survivor benefit. Therefore, although they technically receive the Special Minimum benefit, the provision has no effect on their benefits.\nThe Special Minimum PIA Has Little Effect on Current Beneficiaries\nThe Special Minimum PIA has only a minimal effect on current benefits, because the standard benefit is almost always greater than the special minimum benefit. Only about 35,000 of the 54 million Social Security beneficiaries were affected by the Special Minimum PIA in June 2013, and it increased their average benefit by just $46 per month (see Table 2). That is, the special minimum benefit was, on average, $46 larger than the standard benefit those beneficiaries were entitled to. SSA projects that the provision will have no effect on people turning 62 in 2019 or later.\nAlmost 75% of the affected beneficiaries were workers, and about 20% were widows. Spouses and child beneficiaries accounted for the remainder. Most workers who qualify for the special minimum PIA are women.\nTable 2. Number of Special Minimum PIA Beneficiaries \nand Average Increase in Monthly Benefit, June 2013\nBeneficiary Type\nNumber of Beneficiaries\nAverage Monthly Benefit Increase\n\nWorker\n25,333\n$51.28\n\nSpouse\n1,526\n25.04\n\nChild\n1,199\n29.67\n\nWidow\n6,673\n36.03\n\nAll Beneficiaries\n34,731\n46.45\n\nSource: Craig A. Feinstein, Diminishing Effect of the Special Minimum PIA, Social Security Administration, Actuarial Note No. 154, November 2013, Table 3.\nSince 1999, the provision has benefited only newly entitled beneficiaries whose regular benefit is subject to the WEP. As explained above, the WEP can reduce regular benefits but does not reduce Special Minimum benefits. The Special Minimum helps only individuals whose regular benefit (reduced by the WEP) is less than the Special Minimum benefit (not reduced by the WEP). \nHistory of the Social Security Minimum Benefit Provision\nOriginal Structure of the Social Security Minimum Benefit (1939 to 1981)\nCongress first created a Social Security Minimum Benefit provision in 1939, when it established a Minimum Benefit of $10 per month. (At the time, $10 was the lowest monthly benefit amount payable under the benefit calculations used that year.)\nFrom 1939 to 1981, the Minimum Benefit provided a minimum benefit to anyone with low average earnings in Social Security-covered employment. Unlike the current Special Minimum PIA, the law did not require any number of years of work or any level of earnings. The Minimum Benefit applied both to people with long careers with low annual earnings and to people with shorter careers with higher annual earnings. \nSuccessive legislation periodically raised the original $10 monthly dollar amount in increments until 1975, when Minimum Benefit amounts for newly entitled beneficiaries were tied to increases in the consumer price index. Also starting in 1975, a cost-of-living adjustment (COLA) was provided for Minimum Benefits following the initial year of benefit entitlement.\nThe Social Security Financing Amendments of 1977 (P.L. 95-216) fixed the initial Minimum Benefit at the amount in effect in December 1978\u2014$122 per month\u2014for beneficiaries newly entitled in January 1979 or later. Annual COLAs continued to be provided to beneficiaries following the first year of benefit receipt.\nThe House Ways and Means Committee Report to accompany the bill to freeze the benefit (H.R. 9346, which became P.L. 95-216) contained this rationale: \nIncreasingly, the minimum benefit is being paid to people who did not, during their working years, rely on their covered earnings as a primary source of support. Such people include, for example, workers whose primary work was in non-covered employment subject to a staff retirement system\u2014such as Federal civilian employees. In December 1975, about 45% of civil service retirement annuitants were receiving Social Security benefits, more than a quarter of whom were receiving the minimum.... Because of the characteristics of people getting the minimum, it has been characterized as being a windfall\u2019 to people who have not worked regularly under the program. \nThe Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) eliminated the original Minimum Benefit structure for all current and future beneficiaries effective January 1, 1982. The bill was enacted into law on August 13, 1981, but public outcry led to reconsideration. Subsequently, in December 1981, Congress passed legislation to restore the original Minimum Benefit structure for people who became eligible for Social Security benefits before January 1, 1982. That law eliminated the original Minimum Benefit structure for all beneficiaries who attained the age of 62, became disabled, or were eligible for survivor benefits based on the death of a family member after December 1981.\nThe Special Minimum PIA (1973 to the Present)\nThe Special Minimum PIA was enacted in 1972 at the same time as the Supplemental Security Income (SSI) program and was designed to help reduce dependence on SSI by people who worked in Social Security-covered employment for many years. The provision took effect in January 1973. The Special Minimum PIA operated alongside the original Minimum Benefit until the end of 1981, when the latter was phased out. When both provisions were in effect, beneficiaries received the higher of the benefits.\nUnlike the original Minimum Benefit, the Special Minimum PIA did not help people who had paid Social Security payroll taxes for only a few years.\nSpecial Minimum PIA initial benefits were indexed to price inflation in 1977. In contrast, the thresholds for determining a year of coverage under the Special Minimum PIA are indexed to growth in national average wages, which historically have risen faster than prices. \nFor a detailed legislative history of the Special Minimum PIA, see Kelly A. Olsen and Don Hoffmeyer, \u201cSocial Security\u2019s Minimum Benefit,\u201d Social Security Bulletin, vol. 64, no. 2 (2001/2002), pp.4-6, at http://www.ssa.gov/policy/docs/ssb/v64n2/v64n2p1.pdf.\nArguments For and Against a Minimum Benefit Provision\nArguments for a Minimum Benefit Provision\nWith the effective elimination of the Special Minimum PIA, many policy makers and analysts have suggested creating a new minimum benefit. A minimum benefit within Social Security could be a suitable way to reward long-term, low-wage work without subjecting beneficiaries to means testing, which is often cumbersome to administer and which may make beneficiaries feel stigmatized. \nSome argue that a minimum benefit remains necessary because many elderly Social Security beneficiaries, especially elderly women, are poor or near poor. In 2012, about 7% of Social Security beneficiaries aged 65 or older had family incomes below the poverty threshold and about 13% of beneficiaries aged 65 or older had family incomes below 125% of the poverty threshold. (The comparable figures for non-beneficiaries are 20% and 24%, respectively.) About 9% of female beneficiaries aged 65 or over had family incomes below the poverty line, compared with about 4% of male beneficiaries in this age group. Some research suggests restructuring the Social Security minimum could be more effective in alleviating poverty than certain reforms to the SSI program, although a combination of both programs could be useful in the event that Social Security benefits are greatly reduced in the future.\nSome view minimum benefits as a way to reward long-term, low-wage work with a Social Security benefit that is at or above the poverty threshold. Restructuring the Social Security minimum benefit to provide a benefit at or above the poverty threshold (e.g., 120% of the poverty threshold) for long-term workers would more generously reward long-term participation in the workforce.\nOthers view a restructuring of minimum benefits as potentially helpful in the context of legislation that reduces Social Security benefits or exposes them to market risk. Several recent proposals that would reduce regular Social Security benefits have included minimum benefit guarantees.\nA minimum benefit could be designed to reduce poverty rates among older beneficiaries more efficiently than existing Social Security spousal and survivor benefits. This is partly because a redesigned minimum benefit could reach women who do not qualify for Social Security spouse or survivor benefits because they never married or because they divorced before reaching 10 years of marriage. Because of changing marriage and work patterns, the number of women eligible for spousal and survivors benefits is declining, making this a more important consideration. \nArguments for Phasing Out the Social Security Minimum Benefit\nOne argument for allowing the Special Minimum PIA to phase out is that minimum benefits cannot be accurately targeted to the working poor. Because SSA does not collect information on earnings per hour or on the number of hours worked, it is impossible to distinguish between people who had low annual earnings because they worked few hours at higher wages and those who worked many hours at lower wages. People with high annual but low lifetime earnings may be seen as having chosen their low earnings by working less than others.\nAnother argument is that means-tested programs, such as SSI, are a more appropriate way to supplement the incomes of people with very low incomes and assets. Means testing can help target transfers to those who are in greatest financial need. Some research suggests, however, that means testing can harm incentives for work and saving because SSI\u2019s asset limits are currently quite low. Another consideration is that Social Security is available to retired workers earlier than SSI. Retired workers can claim Social Security benefits starting at the age of 62 while SSI is available to aged beneficiaries starting at age 65. Finally, SSI is generally insufficient to move recipients above the federal poverty level.\nCriteria for Evaluating Minimum Benefit Proposals\nThere are a number of possible criteria to consider when evaluating proposals for a minimum benefit.\nTo What Extent Does the Benefit Reduce Poverty?\nOne possible goal of a minimum benefit would be to reduce poverty. The Special Minimum PIA was not linked to poverty, and many people who receive it still have family income below the federal poverty threshold. The maximum benefit for people entitled in 2014 is $816 a month, or $9,792 a year, which is below the federal poverty guideline for a single person of $11,670. Proposed minimum benefit levels are often expressed as a percent of the federal poverty guidelines or as a percentage of a new poverty measure that is in line with the recommendations of the National Academy of Sciences.\nShould the Benefit Grow with Prices or Wages?\nIn addition to setting a benefit level when a minimum benefit was first implemented, policy makers would have to decide how a minimum benefit would grow each year. As noted above, the effect of the Special Minimum PIA has essentially ended because it is linked to prices and regular Social Security benefits are linked to wages, which generally grow faster than prices. If the goal of a minimum benefit were to ensure a certain purchasing power, it could be indexed to prices. Under current law, the maximum SSI monthly benefit\u2014which now effectively functions as the minimum benefit for most Social Security beneficiaries\u2014grows with prices. However, if the goal of a minimum benefit were to provide beneficiaries with an income that grew at about the same rate as workers\u2019 income, it could be linked to wage levels. \nWhat Years of Coverage Requirements Should a Minimum Benefit Have?\nTo target the benefit at people with many years of work, many proposals would link minimum benefit levels to the number of years a person has worked in Social Security-covered employment. Many recent minimum benefit proposals would require that the worker have 30 years of Social Security-covered earnings to qualify for the full minimum benefit. These work tenure requirements are intended to reward long-time attachment to the workforce.\nA number of proposals would also provide a lower minimum benefit for people with 10 or 20 years of covered earnings. Lowering the required number of years of coverage would allow the minimum benefit to reach more workers, including more part-time and part-year workers. Women are more likely than men to work few years. \nLowering the required number of years of coverage could, however, arguably, result in inadequate benefits for people with years of coverage at the lower bound of 10 or 20 years. A lower years-of-coverage requirement also raises questions about work incentives. Finally, in conjunction with a lower years-of-coverage requirement, the Windfall Elimination Provision or a similar policy could be applied to the minimum benefit provision to prevent a windfall to people with pensions from non-covered employment.\nSome have suggested counting quarters of coverage, instead of years of coverage as under the Special Minimum PIA, to make it easier for workers to qualify for the minimum benefit or to reach higher benefit levels. (Eligibility for regular benefits is based in part on a worker\u2019s quarters of coverage. Workers earn up to four quarters of coverage. In 2014, each $1,200 earns one quarter of coverage; the dollar amount grows each year with average wages.) A variation on this type of reform would be to count partial years of coverage (i.e., if a person earned 50% of the coverage threshold, they would accrue half a year of coverage). One study looked at combining a quarterly coverage threshold with lowering the dollar amount of the coverage threshold (on an annualized basis). The study found that this reform would reach more workers than allowing partial years of coverage.\nAnother possible reform would be to extend the years of coverage included for benefit determination beyond the current 30 years, for example to 35 or 40 years. This type of reform would reward additional years of work. Implemented together with wage indexation of the minimum benefit, this reform would slightly increase the share of benefits going to people with the most (35 or more) work years compared with current law.\nInteractions Between Social Security Minimum Benefits and Supplemental Security Income\nIf the Social Security minimum benefit is redesigned to be more generous or reach more people, it would be necessary to address interactions between Social Security benefits and eligibility for other programs targeted at low-income individuals, most importantly the SSI. There would also be interactions with Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the Low Income Home Energy Assistance Program (LIHEAP).\nSSI is available to people with low incomes and very limited resources. If a Social Security beneficiary also receives SSI, there is often no advantage to an increase in Social Security benefits, because SSI benefits will be reduced by an equal amount. Specifically, a person\u2019s \u201ccountable\u201d income is subtracted from the total of the SSI federal benefit rate ($721 per month in 2014 for an individual living independently) plus any state supplement. Countable income equals all unearned income, including Social Security benefits, in excess of $20. \nIf a Social Security benefit is increased above the SSI federal benefit rate, affected beneficiaries\u2019 total income will increase, but they may be at risk of losing Medicaid eligibility. If countable income exceeds the base SSI benefit, then SSI eligibility is suspended. After 12 consecutive months of suspension, the person is formally terminated from the SSI program. If a person loses SSI eligibility, he or she may, depending on the state, also lose Medicaid eligibility. Section 1619(b) of the Social Security Act protects Medicaid eligibility for people who lose their SSI eligibility due to earned income only. There is no protection for those who lose eligibility based on unearned income, such as Social Security benefits.\nSome analysts have proposed that people who become ineligible for SSI due to an increased special minimum benefit remain eligible for Medicaid. Another possible remedy would be to increase the dollar amount of the Social Security benefit that is disregarded in determining SSI eligibility.\nOther Considerations\nSome proposals would combine a years-of-coverage requirement with credits for a limited number of years of care-giving, unemployment, or poor health in the definition of a \u201cyear of coverage.\u201d Providing those credits would require documentation of qualifying activities, which could increase Social Security\u2019s administrative costs.\nAnother important consideration is how disabled workers would be affected. Under Social Security Disability Insurance (SSDI) program rules, eligible disabled workers may receive benefits based on shorter work histories than retired workers; minimum benefit proposals could also treat disabled beneficiaries differently.\nMinimum benefit proposals are often structured to avoid conferring windfalls on people without a strong attachment to Social Security-covered employment. Such people may include recent immigrants or people who worked most of their careers in non-covered state or local government employment.\nAnother question is whether spouses would be entitled to auxiliary benefits based on a worker\u2019s minimum benefit. If policy makers wished to allow that but wanted to limit outlays, a limit could be placed on the couple\u2019s total benefit.\nMinimum Benefit Options and Estimated Effects\nThere have been numerous proposals for minimum benefits. Most fall into three categories: \nA benefit based on the number of years of work, similar to the Special Minimum PIA,\nA percentage increase in the regular benefit based on the number of years of work, or\nA fixed-dollar amount.\nSSA\u2019s Office of the Chief Actuary, the Congressional Budget Office (CBO), and SSA\u2019s Office of Retirement Policy have all published detailed analyses of the effects of various minimum benefit options.\nOptions Based on Number of Years of Work\nOne approach would be to reconfigure the Special Minimum PIA. Like the Special Minimum, the benefit would be based on the computed number of years of work, which would be defined as taxable earnings above a threshold. A beneficiary would receive the minimum benefit if it was higher than the standard benefit.\nFor example, the National Academy of Social Insurance developed an option that would provide beneficiaries who worked for 30 years with a benefit equivalent to 125% of the poverty line. A year of work was defined as earning four quarters of coverage. The minimum benefit would phase down proportionally for workers with less than 30 years but more than 10 years of earnings. SSA\u2019s Office of the Chief Actuary estimated that when fully phased in, this provision would increase total benefits by almost 2%. (A variation of this option would count up to eight years of care for children under the age of 5 as years of coverage and would increase total benefits by slightly more than 2%.)\nSSA\u2019s Office of Retirement Policy found that in 2050, the option (without an adjustment for childcare years) would increase benefits for 16% of beneficiaries and for a third of the poorest fifth of beneficiaries. Of those affected, about 40% would have their benefit increase by more than a fifth.\nSimilar provisions to reconfigure the Special Minimum PIA were included in proposals developed by the Commission on Fiscal Responsibility and Reform and the (Rivlin-Domenici) Debt Reduction Task Force. The Fiscal Commission proposed redefining a year of coverage as a year in which four quarters of coverage are earned and setting the minimum PIA for workers with 30 years of coverage equal to 125% of the monthly poverty level. That benefit level would have been indexed to prices for eight years and then to wages. The Rivlin-Domenici task force proposed defining a year of coverage as a year in which a worker either earned 20% of the old law maximum or had a child in care, setting the minimum PIA for 30 years of coverage equal to 133% of the poverty level, indexing benefits to wages, and limiting benefits to workers with more than", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43615", "sha1": "5314ca5bfba18c156e66e3d9a6d87eacfbc98310", "filename": "files/20140623_R43615_5314ca5bfba18c156e66e3d9a6d87eacfbc98310.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43615", "sha1": "3b0080ff8db289d28da35a88f4732d63e44d46fa", "filename": "files/20140623_R43615_3b0080ff8db289d28da35a88f4732d63e44d46fa.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 328, "name": "Social Security" } ] } ], "topics": [ "Aging Policy", "Domestic Social Policy" ] }