Social Security Reform: Effect on Benefits and the Federal Budget of Plans Proposed by the President's Commission to Strengthen Social Security

Social Security Reform: Effect on Benefits and the Federal Budget of Plans Proposed by the President's Commission to Strengthen Social Security

Order Code RL32006
CRS Report for Congress
Received through the CRS Web
Social Security Reform: Effect on Benefits
and the Federal Budget of Plans Proposed
by the President’s Commission to
Strengthen Social Security
July 15, 2003
Dawn Nuschler and Geoffrey Kollmann
Domestic Social Policy Division
Congressional Research Service { The Library of Congress

Social Security Reform: Effect on Benefits and the
Federal Budget of Plans Proposed by the President’s
Commission to Strengthen Social Security
Summary
In 2001, President Bush established the President’s Commission to Strengthen
Social Security to make recommendations on ways to “modernize and restore fiscal
soundness to the Social Security system” in accordance with six principles, one of
which mandated the creation of voluntary personal retirement accounts.
The
Commission proposed three alternative reform models. Under all three proposals,
workers could choose to invest in personal accounts and have their traditional Social
Security benefit reduced by some amount. Model 1 would make no other changes
to the program. Model 2 would slow program growth through one major provision
that would index initial benefits to prices (rather than wages). Model 3 would slow
program growth through a variety of measures, including one that would index initial
benefits to projected increases in life expectancy.
To mitigate the effects of
traditional benefit reductions, Models 2 and 3 would guarantee a minimum benefit
for low-wage earners and make changes designed to improve benefits for widow(er)s.
The Social Security Administration prepared estimates of the effect of the
Commission’s reform models on benefit levels for future retirees and on the federal
budget. Consistent with these estimates, this report illustrates initial monthly benefits
for future retirees under each of the Commission’s reform plans and three alternative
measures of current law (benefits promised under current law, benefits payable
within the system’s current-law revenue projections and benefits paid to today’s
retirees). It also shows the projected effect on debt held by the public.
Under Model 1, if a worker’s account earns a real rate of return higher than
3.5%, benefits would exceed those promised under current law. Model 1 is not
projected to restore long-range solvency to the system. Under Model 2, in most
cases, projected benefits would be lower than levels promised under current law.
Under all yield assumptions, projected benefits for low-wage earners would be higher
than benefits payable under current law. Model 2 is projected to restore solvency to
the system, although general revenue transfers would be required. Under Model 3,
at the lower yield assumption, in most cases projected benefits would be lower than
those promised under current law. At the higher yield assumptions, in most cases
projected benefits would be higher than current-law promised benefits. Under all
yield assumptions, projected benefits for low-wage earners would be higher than
benefits payable under current law. Model 3 is projected to restore long-range
solvency to the system, although general revenue transfers and a new dedicated
revenue source for the program would be required. This new revenue source was not
specified by the Commission.
Because the funding approach under the three plans draws from redirected
payroll taxes and General Fund revenues, it would increase debt held by the public.
For example, assuming either two-thirds or 100% of workers participate in personal
accounts, under Model 2 additional borrowing is projected to peak at $2.5 trillion and
$4.7 trillion (constant 2001 dollars), respectively.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
President’s Commission to Strengthen Social Security . . . . . . . . . . . . . . . . . 3
Commission Reform Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commission Model 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commission Model 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commission Model 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Personal Account Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SSA Benefit Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hypothetical Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Illustrative Earnings Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Yield Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Issues Regarding Personal Accounts . . . . . . . . . . . . . . . . . . . . . . . . 9
Illustration of Benefit Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Alternative Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Effect of Commission Model 1 on Benefit Levels . . . . . . . . . . . . . . . 11
Effect of Commission Model 2 on Benefit Levels . . . . . . . . . . . . . . . 12
Effect of Commission Model 3 on Benefit Levels . . . . . . . . . . . . . . . 15
Effect of Reform Models on the Federal Budget . . . . . . . . . . . . . . . . . . . . . 18
Near-Term Versus Long-Term Budget Perspective . . . . . . . . . . . . . . . . . . . 22
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Appendix A. Data Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Appendix B. General Accounting Office Analysis of Commission
Reform Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Appendix C. Members of the President’s Commission to Strengthen
Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
List of Figures
Figure 1. Model 2 (Two-Thirds Participation): Annual Cash Flow
from the General Fund to the Social Security Trust Funds . . . . . . . . . . . . . 20
Figure 2. Model 2 (100% Participation): Annual Cash Flow
from the General Fund to the Social Security Trust Funds . . . . . . . . . . . . . 20
Figure 3. Model 2: Projected Change in Debt Held by the Public . . . . . . . . . . . . 21
Figure 4. Social Security, Medicare and Medicaid Outlays
Projected Under Current Law, 2004-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figure 5. Mandatory and Discretionary Outlays Projected
Under Current Law as a Percent of GDP, 2000-2040 . . . . . . . . . . . . . . . . . 23
Figure 6. Social Security, Medicare and Medicaid Outlays
Projected Under Current Law as a Percent of GDP, 2000-2040 . . . . . . . . . 23
Figure 7. Comparison of Initial Monthly Social Security Benefit
for a Two-Earner Couple With Scaled Medium Earnings
Under Commission Model 1 and Current Law . . . . . . . . . . . . . . . . . . . . . . 26

Figure 8. Comparison of Initial Monthly Social Security Benefit
for a Two-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Figure 9. Comparison of Initial Monthly Social Security Benefit
for a Two-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Figure 10. Comparison of Initial Monthly Social Security Benefit
for a Two-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Figure 11. Comparison of Initial Monthly Social Security Benefit
for a One-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Figure 12. Comparison of Initial Monthly Social Security Benefit
for a One-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Figure 13. Comparison of Initial Monthly Social Security Benefit
for a One-Earner Couple With Scaled Low Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Figure 14. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Figure 15. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Figure 16. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Figure 17. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Figure 18. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Figure 19. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Figure 20. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Figure 21. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Figure 22. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Figure 23. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Figure 24. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Figure 25. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Figure 26. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Figure 27. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Figure 28. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Figure 29. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Figure 30. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Figure 31. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 2 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Figure 32. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Figure 33. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Figure 34. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Figure 35. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Figure 36. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Figure 37. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Low Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Figure 38. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Figure 39. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Figure 40. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Figure 41. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Figure 42. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Figure 43. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled Medium Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Figure 44. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Figure 45. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Figure 46. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Figure 47. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Figure 48. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Figure 49. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Scaled High Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Figure 50. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Figure 51. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Figure 52. Comparison of Initial Monthly Social Security Benefit for a
Two-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Figure 53. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 3.0%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Figure 54. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 4.6%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Figure 55. Comparison of Initial Monthly Social Security Benefit for a
One-Earner Couple With Steady Maximum Earnings Under
Commission Model 3 and Current Law (Assuming a 5.3%
Real Investment Yield) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
List of Tables

Table 1. Projected Change in Benefits Under Model 2 Relative to the
Current-Law Promised Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Table 2. Projected Change in Benefits Under Model 2 Relative to the
Current-Law Payable Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 3. Projected Change in Benefits Under Model 2 Relative to
2001 Benefit Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 4. Projected Change in Benefits Under Model 3 Relative to the
Current- Law Promised Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 5. Projected Change in Benefits Under Model 3 Relative to the
Current-Law Payable Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 6. Projected Change in Benefits Under Model 3 Relative to
2001 Benefit Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table A-1. Commission Model 1: Percent Change in Proposed Benefits
Relative to Benefits Promised Under Current Law . . . . . . . . . . . . . . . . . . . 78
Table A-2. Commission Model 1: Percent Change in Proposed Benefits
Relative to Benefits Payable Under Current Law . . . . . . . . . . . . . . . . . . . . 79
Table A-3. Commission Model 1: Percent Change in Proposed Benefits
Relative to 2001 Benefit Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Table A-4. Commission Model 2: Percent Change in Proposed Benefits
for a Two-Earner Couple Relative to Benefits
Promised Under Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Table A-5. Commission Model 2: Percent Change in Proposed Benefits
for a One-Earner Couple Relative to Benefits
Promised Under Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Table A-6. Commission Model 2: Percent Change in Proposed Benefits
Relative to Benefits Payable Under Current Law . . . . . . . . . . . . . . . . . . . . 83
Table A-7. Commission Model 2: Percent Change in Proposed Benefits
Relative to 2001 Benefit Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Table A-8. Commission Model 3: Percent Change in Proposed Benefits
for a Two-Earner Couple Relative to Benefits
Promised Under Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Table A-9. Commission Model 3: Percent Change in Proposed Benefits
for a One-Earner Couple Relative to Benefits
Promised Under Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Table A-10. Commission Model 3: Percent Change in Proposed Benefits
Relative to Benefits Payable Under Current Law . . . . . . . . . . . . . . . . . . . . 87
Table A-11. Commission Model 3: Percent Change in Proposed Benefits
Relative to 2001 Benefit Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Social Security Reform: Effect on Benefits
and the Federal Budget of Plans Proposed
by the President’s Commission to
Strengthen Social Security
Background
Congressional interest in Social Security reform is largely driven by the
system’s projected long-range financing problems, which are attributable primarily
to ongoing and projected demographic changes. Rising program costs resulting from
the retirement of the baby boom generation (persons born between 1946 and 1964)
is the more immediate concern. In the longer term, projected increases in life
expectancy and declining birth rates contribute to growing imbalances in the system
as fewer workers will be supporting future recipients. The Social Security Trustees
project that, between 2000 and 2025, the number of persons age 65 and older will
increase by 76%, while the number of workers paying into the system will increase
by only 16%. The ratio of covered workers to recipients is projected to decline from
3.3 today to 2.3 in 2025. In terms of financing, the Trustees project that the Social
Security trust funds will be depleted by 2042 under the intermediate assumptions.
Once the balances in the trust funds are depleted, annual tax revenue (payroll taxes
and federal income taxes paid on benefits) is projected to cover approximately 73%
of benefit payments (and less in later years).1 Over the next 75 years, on average,
trust fund expenditures are projected to exceed income by 14%. The long-range trust
fund deficit is projected to equal 1.92% of taxable payroll.2
To many policy analysts, the important date in Social Security financing is not
2042, the point at which the trust funds are projected to become insolvent. Rather,
1 By 2075, projected annual tax revenue would cover only about two-thirds of benefits
promised under current law.
2 “Taxable payroll” is the amount of workers’ earnings subject to the Social Security payroll
tax. The Social Security payroll tax is 6.2% of earnings, up to a maximum. The amount of
taxable earnings (the “taxable wage base”) is indexed to average wage growth in the
economy. In 2003, the taxable wage base is $87,000. The Trustees project that the payroll
tax would have to be increased on average by 1.92 percentage points over the period to
eliminate the system’s long-range funding gap. Alternatively, revenue would have to be
raised by 15% or benefits would have to be reduced by 13% immediately. Policymakers
also focus on the large imbalance between costs and revenues at the end of the 75-year
projection period, when revenues would cover only two-thirds of promised benefits. Thus,
as time goes by, the imbalance portrayed in future projections will continue to increase,
requiring more remedial action than an immediate increase of 1.92 percentage points in the
payroll tax.

CRS-2
they focus on 2018, the point at which the system is projected to begin running
annual cash-flow deficits (annual outgo would exceed annual tax revenue). Under
current projections, the system would run cash-flow deficits each year from 2018
through 2077 (the end of the current projection period). In each of those years,
money would have to be drawn from the General Fund of the Treasury to pay
benefits and administrative expenses.3
Policymakers have considered a variety of ways to remedy the program’s long-
range funding problems. Some support maintaining the existing structure of the
program through traditional measures, such as an increase in the retirement age or
payroll taxes. Others favor redesigning the system to incorporate personal retirement
accounts to supplement or replace traditional benefits. The range of options is
reflected in the 1997 Social Security Advisory Council report. Unable to reach
consensus on a single approach, the Council devised three different reform plans.
Each plan received only partial Council endorsement.4
Congressional reform
proposals introduced in recent years reflect a similar range of ideas.5 In the current
Congress, H.R. 75 (Representative Shaw) would establish voluntary personal
accounts (Social Security Guarantee Accounts) funded with general revenues.
Account contributions would be equal to 4% of earnings, up to $1,000 (the dollar
limit on contributions would be indexed to average wage growth).6 Upon entitlement
to retirement or disability benefits, workers would receive 5% of the account balance
as a lump sum, and the remaining balance would be used to finance all or part of the
worker’s benefit. Under the proposal, the worker’s benefit would be equal to the
higher of a current-law Social Security benefit or a monthly annuity based on 95%
of the account balance.7
3 The balance in the Social Security trust funds represents a form of “IOU” from the General
Fund. These IOUs consist of federal securities credited to the trust funds in amounts equal
to annual Social Security surpluses plus interest. Trust fund balances are projected to
increase through 2027, peaking at $7.5 trillion (nominal dollars). Beginning in 2028, the
balance in the trust funds would be drawn down to meet program expenses until depletion
in 2042. Over a 14-year period, the General Fund would have to come up with a projected
$7.5 trillion to cover IOUs credited to the Social Security trust funds.
4 For more information, see CRS Report 97-81, Recommendations of the 1994-1996
Advisory Council on Social Security, by Geoffrey Kollmann.
5 For more information, see CRS Issue Brief IB98048, Social Security Reform, by Geoffrey
Kollmann and Dawn Nuschler; and CRS Report RL31086, Social Security: What Happens
to Future Benefit Levels Under Various Reform Options, by David Koitz, Geoffrey
Kollmann and Dawn Nuschler.
6 The level of account contributions under H.R. 75 would be the same as under Commission
Model 2.
7 For more information, see CRS Congressional Distribution Memorandum, Social Security
Reform Legislation in the 108th Congress: A Comparison of H.R. 75 and Current Law, by
Dawn Nuschler.

CRS-3
President’s Commission to Strengthen Social Security
In May 2001, President Bush established the President’s Commission to
Strengthen Social Security (Executive Order 13210). The 16-member Commission
appointed by the President included eight Republicans and eight Democrats, all of
whom had previously expressed public support for personal retirement accounts. The
President directed the Commission to recommend ways to “modernize and restore
fiscal soundness to the Social Security system” in accordance with the following six
principles of reform:
! Modernization must not change Social Security benefits for retirees
or near-retirees.
! The entire Social Security surplus must be dedicated to Social
Security only.
! Social Security payroll taxes must not be increased.
! Government must not invest Social Security funds in the stock
market.
! Modernization must preserve Social Security’s disability and
survivors components.
! Modernization must include individually controlled, voluntary
personal retirement accounts, which will augment the Social
Security safety net.
On December 21, 2001, the Commission issued its final report, Strengthening
Social Security and Creating Wealth for All Americans. The report, which was
unanimously approved by the Commission, includes three alternative plans for
reforming Social Security. Under all three plans, workers could choose to invest in
personal retirement accounts8 and their traditional Social Security benefit would be
offset (the amount of the offset would vary under the three plans). The first plan
(Model 1) would make no other changes to the program. The second plan (Model
2) is projected to slow the growth of Social Security benefits through one major
provision that would index initial benefits to prices, rather than wages. The third
plan (Model 3) would slow future program growth through a variety of measures.
To mitigate the effects of benefit reductions, Models 2 and 3 would guarantee a
minimum benefit for low-wage earners and make changes designed to improve
benefits for widow(er)s.
The Commission described Model 1 as a “flexible framework” in which the
personal account contributions might be financed entirely as a redirection of payroll
tax revenue (a “carve-out”), entirely from the general revenue of the Treasury (an
“add-on”), or a combination of the two. Under Model 2, a portion of existing payroll
tax contributions would be used to fund the accounts (a “carve-out” funding
approach). Under Model 3, workers could make additional payroll tax contributions
to fund their accounts (an “add-on” funding approach) and receive matching
contributions “carved out” of existing payroll taxes. These additional contributions
8 For a discussion of issues related to the creation of personal retirement accounts under
Social Security, see CRS Report RL30571, Social Security Reform: The Issue of Individual
Versus Collective Investment for Retirement, by David Koitz.

CRS-4
would be subsidized for lower-wage workers. According to the Commission’s
report, Model 1 would not restore solvency to the Social Security system. Models
2 and 3 are projected to restore solvency to the system on average over the next 75
years. However, annual cash-flow deficits are expected to occur at points during the
projection period, and general revenues would be required to close the system’s
financing gap (in the case of Model 3, a new permanent revenue source would also
be required). (See “Effect of Reform Models on the Federal Budget” below.)
Commission Reform Models
Commission Model 1. Under Model 1, workers would be allowed to divert
2 percentage points of their Social Security payroll taxes (2% of taxable earnings) to
a personal retirement account (or an equivalent amount could be drawn from the
General Fund), and their traditional Social Security benefit would be reduced. The
amount of the reduction would be equal to what the personal account would provide
had it earned a 3.5% real rate of return (i.e., for purposes of determining the benefit
offset, the account is assumed to earn 3.5% in real terms). In practice, the payment
a worker would receive from his or her account would depend on the actual rate of
return. Therefore, if the actual rate of return earned by the account is higher than
3.5%, the worker’s combined benefit (traditional Social Security benefit plus
personal account) would exceed benefits promised under current law. Conversely,
if the actual rate of return is lower than 3.5%, the worker’s combined benefit would
be lower relative to promised current-law benefits. Model 1 would make no other
changes to the program.
Commission Model 2. Under Model 2, workers would be allowed to divert
4 percentage points of their payroll taxes to a personal retirement account, up to an
annual maximum of $1,000 (indexed to average wage growth),9 and their traditional
Social Security benefit would be reduced. The amount of the reduction would be
equal to what the account would provide had it earned a 2% real rate of return (i.e.,
for purposes of determining the benefit offset, the account is assumed to earn 2% in
real terms). The payment a worker would receive from his or her account, however,
would depend on the actual rate of return. If the actual rate of return exceeds the
assumed rate, the payment provided by the account would exceed the benefit offset.
If the actual rate of return is lower than the assumed rate, the payment provided by
the account would be smaller than the benefit offset.
In terms of traditional benefits, Model 2 would change the Social Security
benefit formula in order to constrain the growth in initial benefits for future retirees.
Under current law, initial benefits are indexed to the growth in average wages.
Wage-indexing in the benefit formula results in benefit levels that provide each
generation of workers a constant earnings replacement rate (i.e., initial benefits
9 The annual contribution limit creates a progressive system in which lower-wage earners
would be allowed to contribute a higher percentage of their earnings. For example, a worker
who earns $20,000 a year would be allowed to contribute $800 to a personal account
($20,000 x 4% = $800), or 4% of earnings. A worker who earns $80,000 a year would be
allowed to contribute $1,000 to a personal account ($80,000 x 4% = $3,200, subject to the
annual limit of $1,000), or 1.25% of earnings.

CRS-5
replace approximately the same percentage of pre-retirement earnings for workers
with equivalent lifetime earnings).10 By design, this feature of the program allows
successive generations of workers to share increases in the standard of living when
they retire.11 Model 2 would alter this aspect of the program by indexing initial
benefits to price growth, rather than wage growth, beginning in 2009.12 Because
wages are projected to grow faster than prices over time, a shift to price indexing
would result in substantial benefit reductions and lower replacement rates for future
retirees, thereby reducing Social Security’s role as an earnings replacement
program.13
To mitigate the effects of price indexing, Model 2 would provide a minimum
benefit and make changes intended to improve benefits for widow(er)s. Workers
who earn the minimum wage for at least 30 years would be guaranteed a benefit
equal to 120% of the poverty level. Widow(er)s would receive 75% of the couple’s
combined pre-death benefit (compared to 50%-67% under current law). Although
widow(er)s would receive a higher percentage of the couple’s combined benefit, as
benefits are reduced over time, eventually some widow(er)s would receive benefits
under the plan that would be lower than those promised under current law.
Commission Model 3. Under Model 3, workers would be allowed to
contribute an additional 1 percentage point of payroll taxes to a personal retirement
account and receive a 2.5 percentage point matching contribution (up to $1,000
annually) from current payroll taxes. Lower-wage workers would receive a partial
“rebate”on their additional 1% contribution through a refundable tax credit. Workers
who choose to participate in personal accounts would have their traditional Social
Security benefit reduced. Under this plan, the reduction would be equal to what the
account would provide had it earned a 2.5% real rate of return (i.e., for purposes of
determining the benefit offset, the account is assumed to earn 2.5% in real terms).
The payment a worker would receive from his or her account would depend on the
actual rate of return. If the actual rate of return exceeds the assumed rate, the
payment provided by the account would exceed the offset to traditional Social
Security benefits. If the actual rate of return is lower than the assumed rate, the
payment provided by the account would be less than the benefit offset.
10 Under current law, long-range replacement rates are estimated at: 56% for low-wage
earners (i.e., earnings equal to 45% of the average wage); 42% for average-wage earners;
and 28% for maximum-wage earners (i.e., earnings at or above the maximum taxable wage).
11 Once benefits begin, they are adjusted annually according to price growth. Annual cost-
of-living adjustments allow benefits to maintain their purchasing power over time.
12 There are different approaches to “price indexing.” The mechanism used by the Social
Security Administration (SSA) actuaries in estimating benefit levels under Model 2 involves
downward adjustments in the “replacement factors” in the benefit formula, which are
currently fixed at 90%, 32% and 15% (see footnote 14 for a description of the current-law
benefit formula). Other components of the benefit formula (“average indexed monthly
earnings” and “bend points”) would remain indexed to average wage growth.
13 While price indexing initial Social Security benefits would result in lower replacement
rates for future retirees, benefits paid to future retirees would provide the same level of
purchasing power as benefits paid to today’s retirees.

CRS-6
Model 3 would reduce Social Security benefits for future retirees by slowing the
growth in initial benefits to reflect projected increases in life expectancy. It would
reduce benefits for higher-wage workers through other changes in the benefit formula
(the third replacement factor in the benefit formula would be lowered gradually from
15% to 10%).14 As under Model 2, it would provide a minimum benefit and make
changes designed to improve benefits for widow(er)s. Workers who earn the
minimum wage for at least 30 years would be guaranteed a benefit equal to 100% of
the poverty level. Widow(er)s would receive 75% of the couple’s combined pre-
death benefit (compared to 50%-67% under current law). As under Model 2,
widow(er)s would receive a higher percentage of the couple’s combined benefit. In
addition, Model 3 would revise actuarial benefit adjustments for early/late retirement.
Benefits for workers who retire early (before the “full retirement age” (FRA)) would
decrease relative to current law, and benefits for workers who retire after the FRA
would increase relative to current law. Finally, Model 3 calls for new (unspecified)
dedicated revenue sources for Social Security.
Personal Account Structure.
The Commission makes only broad
recommendations on how personal accounts should be structured within the Social
Security system. The Commission specifies that personal accounts should be
administered by a government-appointed board, possibly modeled after the Thrift
Savings Plan Board (which manages a defined contribution plan for federal workers)
or the Federal Reserve Board. Once the account reaches a certain value, the worker
should be allowed to transfer the account to a private provider. The Commission
further recommends that workers invest in a broadly diversified portfolio of corporate
stocks, corporate bonds and government bonds and that workers be allowed to
change investment allocations no more than once every 12 months.
According to the Commission, workers should have access to their accounts
only upon retirement, and they should be required to take account distributions as an
annuity (a guaranteed payment for life) or as periodic payments.
Lump-sum
distributions should be allowed only on the portion of the account that exceeds the
level of assets needed to provide the retired worker a combined benefit (traditional
Social Security plus personal account) above the poverty level. Married couples who
annuitize their account balance(s) should be required to purchase a two-thirds joint
and survivor annuity which provides the surviving spouse with a benefit equal to
two-thirds of the couple’s combined pre-death benefit. Upon divorce, account assets
attributable to contributions made during the marriage and earnings on account
balances brought into the marriage should be divided equally (i.e., account balances
brought into the marriage would not be shared). Finally, if a worker dies before
14 Under the current benefit computation formula, three replacement factors are applied to
three brackets of a worker’s “average indexed monthly earnings” (AIME) to determine the
basic monthly benefit amount. (To get the AIME, a worker’s past earnings are indexed to
reflect the growth in average wages over time, and an average monthly amount is computed
based on the 35 highest years.) The two AIME amounts that separate the three brackets
(called “bend points”) are indexed to average wage growth. In 2003, the basic benefit
formula is: 90% of the first $606 of AIME; plus 32% of AIME over $606 through $3,653;
plus 15% of AIME over $3,653. Under Model 3, the third replacement factor would be
lowered gradually from 15% to 10%.

CRS-7
retirement, the account balance should be transferrable to the account of the surviving
spouse (if applicable) or to the worker’s estate.
It is important to note that Social Security benefit constraints prescribed under
Models 2 and 3 would apply across-the-board to retirement, survivors and disability
benefits, regardless of whether the worker chooses to participate in personal
retirement accounts. However, the Commission acknowledged that the disability
component of the program warrants more careful deliberation and recommended that
reform of the disability program be considered separately.
SSA Benefit Estimates
In January 2002, the Social Security Administration’s (SSA’s) Office of the
Chief Actuary prepared benefit estimates for future retirees under each of the
Commission’s reform plans.15
These estimates are based on the intermediate
assumptions of the 2001 Social Security Trustees report and additional assumptions
made by the actuaries regarding returns on private securities, administrative expenses
for personal accounts and annuities, and personal account participation rates.
Hypothetical Workers. The SSA actuaries provide benefit estimates for both
one- and two-earner couples at different earnings levels retiring in 2012, 2022, 2032,
2042, 2052 and 2075. When viewing the following figures depicting these estimates,
note that the jump from 10-year intervals from 2012 to 2052 to the 23-year interval
in 2052 to 2075 tends to make the slope reflecting growth in benefit levels appear
relatively steeper at the end of the projection period. (The change in intervals is
noted with brackets on the figures.) Thus, one should not assume necessarily that
there is some feature in a particular model that accelerates benefit growth in those
years. In the case of a two-earner couple, both members are assumed to have equal
earnings. In all cases, both members of a couple are assumed to retire at the same
time at age 65.
Illustrative Earnings Levels. Because Social Security benefit levels are
based on a worker’s earnings history, the SSA actuaries provide benefit estimates
using four illustrative earnings patterns (“scaled” low earnings, “scaled” medium
earnings, “scaled” high earnings and steady maximum earnings).16 The illustrative
earnings patterns are defined as follows:
15 SSA, Office of the Chief Actuary, Estimates of Financial Effects for Three Models
Developed by the President’s Commission to Strengthen Social Security, Jan. 31, 2002
(hereafter cited as SSA Actuarial Memorandum, Jan. 31, 2002). The SSA memorandum is
included in the Commission’s final report: Strengthening Social Security and Creating
Personal Wealth for All Americans, Dec. 2001. See also, SSA Memorandum, Revisions of
Estimated Unified Budget Effects and Summary General Revenue Requirements for
Commission Models — Information, July 22, 2002. (Hereafter cited as SSA Actuarial
Memorandum, July 22, 2002.)
16 “Scaled” earnings patterns — in which earnings are relatively low early in a worker’s
career, increase steadily during mid-career, and decline somewhat toward the end of career
— are considered more typical than steady earnings patterns in which workers have the
same relative level of earnings each year throughout their careers.

CRS-8
! Scaled Low Earner = Earnings of $15,875 in 2002
! Scaled Medium Earner = Earnings of $35,277 in 2002
! Scaled High Earner = Earnings of $56,443 in 2002
! Steady Maximum Earner = Earnings of $84,900 in 2002
The scaled low earnings pattern approximates the average lifetime earnings of
a steady low-wage earner (i.e., someone who always earned 45% of the national
average wage). The scaled medium earnings pattern approximates the average
lifetime earnings of a steady average-wage worker (i.e., someone who always earned
the national average wage). The scaled high earnings pattern approximates the
average lifetime earnings of a steady high-wage worker (i.e., someone who always
earned 160% of the national average wage). The steady maximum earner is someone
who always earned at least the maximum amount of earnings subject to the Social
Security payroll tax (i.e., the taxable wage base).
Traditional Social Security benefits are based on average career earnings.
Therefore, scaled and steady earnings patterns result in approximately the same level
of benefits. Personal account accumulations, however, depend on the level of
earnings in each year of a worker’s career (among other factors). As such, scaled and
steady earnings patterns result in different annuity values. The SSA actuaries use
scaled earnings patterns, which they consider to be more representative of actual
experience, to estimate future benefit levels under the reform models and current law.
Yield Assumptions. The SSA actuaries provide benefit illustrations under
three alternative investment yields for the personal accounts (low yield, 50% equity
yield and high yield). The low investment yield reflects the long-term rate on U.S.
Treasury bonds.
The “50% equity yield” is designed to represent an average
investment portfolio of 50% equity, 30% corporate bonds and 20% Treasury bonds.
The high investment yield reflects a portfolio of 60% equity, 24% corporate bonds
and 16% Treasury bonds. The actuaries used these assumptions to project the
following illustrative yields:
! Low Yield = 3.0% Real Investment Yield
! 50% Equity Yield = 4.6% Real Investment Yield
! High Yield = 5.3% Real Investment Yield
Estimates assume that, at the time of retirement, the entire balance in the
personal account is converted to an inflation-indexed17 joint-and-two-thirds survivor
annuity.18 Administrative expenses for personal accounts and annuities are assumed
17 The availability of inflation-indexed annuities is very limited in the current annuity
market. The actuaries prepared a second set of estimates based on a variable annuity option,
which results in higher projected initial monthly benefits. The actuaries consider the fixed
annuity option to be the primary set of estimates. In their view, individuals would be less
likely to choose the variable annuity option because payments could decline from one year
to the next.
18 A joint-and-two-thirds-survivor annuity provides the surviving spouse an amount equal
to two-thirds of the couple’s combined pre-death amount.

CRS-9
to be equal to 0.3% of assets. Finally, projected monthly annuity values are based on
the average life expectancy for the total U.S. population.
General Issues Regarding Personal Accounts
Currently, there are about 151 million Social Security-covered workers (1999
estimate). If all covered workers under age 55 elected to participate in voluntary
personal accounts, about 130 million personal accounts would be established within
the Social Security system. Under Model 2, it is estimated that $62 billion (with two-
thirds participation) and $92 billion (with 100% participation) would be contributed
to personal accounts by the federal government in the first year (2004).
By
comparison, there are 3.1 million participants in the federal Thrift Savings Plan
(TSP), the largest employer-sponsored defined contribution plan. As of March 31,
2003, the TSP held assets totaling $104.5 billion. In 2000, approximately 61 million
Americans participated in employer-sponsored retirement plans or Individual
Retirement Accounts (IRAs).19 According to one estimate, more than $4.5 trillion
is held in employer-sponsored defined contribution plans and IRAs.20
The actuaries’ projections of changes in traditional benefits and personal
account outcomes under the Commission’s reform models are based on the
intermediate demographic and economic assumptions of the 2001 Social Security
Trustees Report. While projections are made on a 75-year basis, annual fluctuations
in these variables are typically projected for only the first 10 years. For the remainder
of the 75-year projection period, these factors are held steady at their “ultimate
values” on the basis that changes in these factors over the long run average out to the
ultimate values. Changes in average wage growth, inflation, interest rates and other
variables are difficult to predict over a 75-year period. Outcomes projected under the
Commission’s reform plans would vary to the extent that actual experience differs
from the intermediate assumptions in the 2001 Trustees Report.
Individuals assume a degree of risk when personal account contributions are
invested in equities. Personal account outcomes projected by the actuaries are based
on a 3.0%, 4.6%, or 5.3% real investment yield in each year of the investment period.
In practice, year-to-year fluctuations in investment yields would affect the eventual
balance in the account (the account balance could be higher or lower based on the
actual annual returns). Actual personal account balances would depend on several
factors including the length of the investment period, the level and timing of account
contributions and investment yields, and administrative costs.
In addition, benefit levels under the proposals would be affected by the monthly
annuity the personal account would provide. In practice, annuity values would be
very sensitive to the annuitization rules specified in the law and regulations and to
19 CRS Report RL31770, Retirement Savings Accounts: Early Withdrawals and Required
Distributions, by Patrick J. Purcell.
20 Estimate by Profit Sharing/401(k) Council of America cited in “A New Retirement Tactic
for a New Tax Law,” The Wall Street Journal, May 29, 2003.

CRS-10
the prevailing interest rates at the time the annuity is purchased.21 For example, the
actuaries’ projections assume that the entire account balance would be annuitized.
If some workers were allowed to take part of the account balance as a lump sum, as
recommended by the Commission, monthly annuity values would be lower.
Furthermore, projected annuity values are based on average life expectancy for the
total U.S. population, as opposed to life expectancy weighted by income and gender.
Life expectancy adjusted for income would result in somewhat higher annuity
payments for lower-paid workers and somewhat lower payments for higher-paid
workers. Because women live longer than men on average, life expectancy adjusted
by gender would result in somewhat lower payments for women and somewhat
higher payments for men.22
Illustration of Benefit Effects
Consistent with the benefit estimates prepared by the actuaries, this report
illustrates initial monthly benefits for future retirees under each of the Commission’s
reform plans and current law (estimates are shown in constant 2001 dollars). It
should be noted that the actuaries have constructed the benefit examples to reflect the
amount payable on a worker’s record. Therefore, in the case of a one-earner couple,
the amount shown represents the combined benefit payable to the retired worker and
spouse. In the case of a two-earner couple, the amount shown represents the benefit
payable to each retired worker (or each member of the couple). For example, as
shown in Figure 8, a two-earner couple with scaled low earnings retiring at age 65
in 2012 is projected to receive $734 each under Model 2 based on a 3.0% real
investment yield. As shown in Figure 11, under the same scenario, a one-earner
couple is projected to receive a combined benefit of $1,093.
Alternative Baselines. For comparison purposes, each figure shows initial
monthly benefits projected under the Commission’s reform plans and three
alternative measures of current law:
! Benefits “Promised” Under Current Law
(benefits computed under the current-law benefit formula)
! Benefits “Payable” Under Current Law
(amount of current-law benefits that would be payable if benefits
were adjusted to fit within the system’s projected revenue)
21 For more information on annuitization issues, please refer to: CRS Report RL31324,
Social Security Reform: The Effect of Economic Variability on Individual Accounts and
Their Annuities, by Geoffrey Kollmann, Dawn Nuschler and Patrick Purcell.
22 The use of “unisex” life expectancy tables is somewhat controversial. As a result of a
1983 Supreme Court decision, employer-sponsored retirement plans (such as the federal
Thrift Savings Plan) must use unisex life expectancy tables to compute annuity payments.
The Court held that the use of gender-specific life expectancy tables in employer-sponsored
plans had violated Title VII of the Civil Rights Act of 1964 (Arizona Governing Commission
for Tax Deferred Annuity & Deferred Compensation Plans v. Norris, 463 U.S. 1073). The
ruling does not apply to individually purchased annuities.

CRS-11
! 2001 Benefit Levels
(benefits paid to today’s retirees)
The reader must use caution when comparing these projected benefit levels.
Neither “promised” benefits or proposed benefits are fully funded under current law.
Both require additional revenue. Benefits projected under Models 2 and 3 require
general revenue infusions. Benefits promised under current law imply the use of
increased payroll taxes and/or general revenue infusions to pay benefits in full after
2037 (based on the 2038 insolvency date projected in the 2001 Trustees Report). In
contrast, the current-law payable baseline does not allow for additional revenue
sources, so benefits must be constrained to fit within projected revenue under current
law. Therefore, it is hardly surprising that after 2037 benefits projected under the
reform models and benefits promised under current law are always higher than
benefits payable under current law.23
Several other points are worth keeping in mind when comparing projected
benefit levels under the proposals and the alternative measures of current law. First,
the estimates are based on the assumption that personal accounts would first be
available in 2004 to workers who were under age 55 at the beginning of 2002 (i.e.,
workers born in 1948 or later). Therefore, among the illustrations shown here, only
workers retiring in 2052 and 2075 at age 65 could experience a full career under the
personal account system. Assuming workers begin investing in personal accounts
at the start of their career, these individuals would have the advantage of longer
periods over which to grow their accounts. This advantage would be offset by the
second point, which is that under Models 2 and 3, the effects of proposed reductions
in traditional Social Security benefits would be cumulative (e.g., price indexing
initial benefits under Model 2). Therefore, younger cohorts would experience
increasingly larger reductions in traditional benefits over the projection period.
Effect of Commission Model 1 on Benefit Levels. Under Model 1, the
only change to current-law Social Security is the reduction in benefits that occurs
when a worker chooses to participate in personal retirement accounts. This reduction
is equal to what the personal account would provide had it earned a 3.5% real
investment yield. How workers fare compared to current law is therefore entirely a
function of the real investment yield on the personal account. If the account earns
less than 3.5%, the worker will do less well than under current law. If it earns more
than 3.5%, the worker will do better.
This is clearly shown in the benefit illustrations provided by the SSA actuaries.
In all instances where the real investment yield is portrayed as 3%, the illustrated
couple does less well than under current law. In all instances where the real
investment yield is portrayed as 4.6% or 5.3%, the illustrated couple does better than
under current law. The same conclusion applies if comparisons are made to the
23 It can be said that it is unreasonable to portray a situation where no legislative action is
ever taken to correct Social Security’s financial imbalance, leading to precipitous benefit
cuts in 2038. However, by definition “current law” means no change in the program’s
financing or benefit structure. Furthermore, to posit when or what action would be taken
is purely speculative.

CRS-12
baseline of Social Security benefits payable under current law. As an example of the
effect of Model 1, Figure 7 shows projected benefit levels for two-earner couples
with medium earnings under all three investment yield scenarios. (See Tables A-1
through A-3 in Appendix A.) Because of the simplicity and obvious effects of
Model 1, and the fact that it has so little impact on the system’s financing, this report
focuses analysis on Models 2 and 3.
Effect of Commission Model 2 on Benefit Levels. Figures 8-31
illustrate the effects of Model 2 on future benefit levels for a range of hypothetical
workers.24
Current-Law Promised Baseline. Under Model 2, early in the projection
period, low-wage earners are projected to receive higher benefits than those promised
under current law, even under the low-yield assumption. Under the 3.0% investment
yield scenario, a two-earner couple retiring in 2022 is projected to receive benefits
that are 11% higher than benefits promised under current law. For retirees in 2042
and later, proposed benefits would be lower than benefits promised under current
law. Under the 4.6% and 5.3% investment yield scenarios, two-earner couples
retiring in 2012 through 2052 are projected to receive higher benefits than promised
under current law.
However, by the end of the projection period, under all
investment yield scenarios, low-wage earners would receive benefits below levels
promised under current law.
Depending on the investment yield assumption,
reductions are projected to range from 7% to 28%.
For workers at other wage levels, benefits are projected to be below levels
promised under current law, except for two cases where they are unchanged. The
largest reductions occur late in the projection period due to the cumulative effects of
price indexing, the primary change in traditional benefits under Model 2. While
retirees in 2012 are projected to receive benefits less than 1% below levels promised
under current law, workers retiring in 2075 would experience reductions ranging
from 16% to 42%, depending on earnings level and investment yield assumption.
For example, with a 5.3% investment yield, a two-earner couple with medium
earnings retiring in 2075 is projected to receive a 16% lower benefit under the
proposal. With a 3.0% investment yield, a two-earner couple with maximum
earnings retiring in 2075 would receive a 42% lower benefit compared to levels
promised under current law.
All workers would be subject to the reductions in traditional benefits projected
under Model 2 whether or not they choose to participate in personal accounts. By the
end of the projection period, traditional benefits would be significantly lower than
benefits promised under current law, primarily due to the effect of price indexing
over time. For example, traditional benefits are projected to be 35% lower for a two-
earner couple with low earnings and 46% lower for a two-earner couple with
maximum earnings. (See Table 1 below and Table A-4 in Appendix A.)
24 The projected benefit effects discussed below are for two-earner couples, the more typical
case. Projected benefit effects for one-earner couples are shown in the figures and in the
data tables in Appendix A.

CRS-13
Table 1. Projected Change in Benefits Under Model 2 Relative
to the Current-Law Promised Baseline
Real investment yield on personal account
Retiring
With no personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
1% higher
2% higher
2% higher
2% higher
2032
1% lower
2% higher
10% higher
11% higher
2075
35% lower
28% lower
10% lower
7% lower
Steady maximum earner ($84,900 in 2002)
2012
1% lower
1% lower
0.4% lower
0.3% lower
2032
18% lower
16% lower
12% lower
11% lower
2075
46% lower
42% lower
30% lower
27% lower
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
Current-Law Payable Baseline.25 In all cases, workers with low earnings
are projected to receive higher benefits under Model 2 relative to the current-law
payable baseline. For example, with a 4.6% investment yield, a two-earner couple
with low earnings retiring in 2012 is projected to receive a 2% higher benefit.
Similar couples retiring in 2042 and 2075 would receive projected benefits that are
51% and 34% higher, respectively, than those payable under current law. This
outcome is attributable to the minimum benefit guarantee for long-term low-wage
earners and the way personal account contributions are structured under Model 2
(low-wage earners may contribute a larger percentage of their earnings because of the
dollar limit on account contributions).
Except for two cases where benefits are unchanged, workers at other wage
levels retiring early in the projection period (2012, 2022 and 2032) are projected to
receive lower benefits compared to those payable under current law. Later in the
projection period, in most cases, projected benefits would be higher than those
payable under current law, primarily at the higher yield assumptions. For example,
a two-earner couple with medium earnings retiring in 2042 is projected to receive a
9% to 33% higher benefit, depending on the investment yield. If the couple had
maximum earnings, benefits are projected to be from 6% to 21% higher. By the end
25 In 2012, 2022 and 2032, benefits payable under current law would be the same as benefits
promised under current law, because the system would be able to pay promised benefits in
full until 2038 under intermediate assumptions of the 2001 Social Security Trustees Report.
In 2042, 2052 and 2075, there would be substantial differences in projected benefit levels
under the two current-law baselines.

CRS-14
of the projection period (2075), two-earner couples with medium, high and maximum
earnings would receive projected benefits that are 10%, 12% and 13% lower,
respectively, under the low-yield assumption. At the higher yield assumptions,
however, projected benefits would be higher than those payable under current law.
(See Table 2 below and Table A-6 in Appendix A.)
Table 2. Projected Change in Benefits Under Model 2 Relative
to the Current-Law Payable Baseline
Real investment yield on personal account
Retiring
(age 65)
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
2% higher
2% higher
2% higher
2042
30% higher
51% higher
55% higher
2075
7% higher
34% higher
40% higher
Steady maximum earner ($84,900 in 2002)
2012
1% lower
0.4% lower
0.3% lower
2042
6% higher
19% higher
21% higher
2075
13% lower
5% higher
9% higher
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
2001 Benefit Levels. In all cases, Model 2 would result in projected benefit
levels that are higher than those paid to today’s retirees (as would benefits payable
under current law). The amount of the projected change would vary considerably,
depending on the worker’s earnings level, year of retirement and investment yield.
For example, benefits for a two-earner couple with low earnings retiring in 2012 are
projected to be around 16% higher than those paid to today’s retirees. A two-earner
couple with low earnings retiring in 2075 is projected to receive 38% higher benefits
under the 3.0% yield assumption and 81% higher benefits under the 5.3% yield
assumption. Under the 4.6% yield scenario, a two-earner couple with maximum
earnings retiring in 2012 would receive 21% higher benefits compared to the 49%
higher benefits for a couple retiring in 2075. (See Table 3 below and Table A-7 in
Appendix A.)

CRS-15
Table 3. Projected Change in Benefits Under Model 2 Relative
to 2001 Benefit Levels
Real investment yield on personal account
Retiring
(age 65)
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
15% higher
16% higher
16% higher
2075
38% higher
73% higher
81% higher
Steady maximum earner ($84,900 in 2002)
2012
21% higher
21% higher
21% higher
2075
23% higher
49% higher
54% higher
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
Effect of Commission Model 3 on Benefit Levels. Figures 32-55
illustrate the effects of Model 3 on future benefit levels for a range of hypothetical
workers.
Current-Law Promised Baseline. Under Model 3, at the lower investment
yield (3.0%), projected benefits for workers at all wage levels retiring after 2032
would be lower than benefits promised under current law. For example, in 2075,
benefits are projected to be 14% lower for a two-earner couple with low earnings and
18% lower for a two-earner couple with maximum earnings. At the higher yield
assumptions, in most cases, workers at all wage levels are projected to receive higher
benefits. For example, with a 5.3% investment yield, benefits are projected to be 9%
higher for a two-earner couple with low earnings retiring in 2032 and 5% higher for
similar workers retiring in 2075. By comparison, under the same yield assumption,
a two-earner couple with maximum earnings is projected to receive a 1% lower
benefit in 2032 and a 9% higher benefit in 2075.
All workers would be subject to the reductions in traditional benefits projected
under Model 3 whether or not they choose to participate in personal accounts. By the
end of the projection period, traditional benefits would be significantly lower than
benefits promised under current law, primarily due to the effect of slowing the
growth in initial benefits to take into account projected increases in life expectancy.
For example, traditional benefits are projected to be 22% lower for a two-earner
couple with low earnings and 35% lower for a two-earner couple with maximum
earnings. (See Table 4 below and Table A-8 in Appendix A.)

CRS-16
Table 4. Projected Change in Benefits Under Model 3 Relative
to the Current- Law Promised Baseline
Real investment yield on personal account
Retiring
With no personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
< 1% higher
1% higher
2% higher
2% higher
2032
4% lower
2% higher
8% higher
9% higher
2075
22% lower
14% lower
2% higher
5% higher
Steady maximum earner ($84,900 in 2002)
2012
1% lower
1% higher
2% higher
2% higher
2032
20% lower
10% lower
2% lower
1% lower
2075
35% lower
18% lower
4% higher
9% higher
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
Current-Law Payable Baseline. Under Model 3, a two-earner couple with
low earnings is projected to receive higher benefits compared to those payable under
current law, under all three yield assumptions. For example, a two-earner couple
with low earnings retiring in 2042 is projected to receive a 36% higher benefit at the
lower yield assumption (3.0%) and a 57% higher benefit at the higher yield
assumption (5.3%). For workers at other wage levels, benefits are projected to be
lower than those payable under current law in most cases early in the projection
period (2022 and 2032). Later in the projection period, however, benefits are
projected to be higher relative to the current-law payable baseline. For example,
benefits for a two-earner couple with maximum earnings retiring in 2042 are
projected to be 25% higher with a 3.0% investment yield and 52% higher with a
5.3% investment yield. By 2075, benefits for a two-earner couple with maximum
earnings are projected to be 22% and 63% higher under the 3.0% and 5.3% yield
assumptions, respectively. (See Table 5 below and Table A-10 in Appendix A.)

CRS-17
Table 5. Projected Change in Benefits Under Model 3 Relative
to the Current-Law Payable Baseline
Real investment yield on personal account
Retiring
(age 65)
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
1% higher
2% higher
2% higher
2042
36% higher
53% higher
57% higher
2075
29% higher
52% higher
57% higher
Steady maximum earner ($84,900 in 2002)
2012
1% higher
2% higher
2% higher
2042
25% higher
48% higher
52% higher
2075
22% higher
56% higher
63% higher
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
2001 Benefit Levels. In all cases, benefits projected under Model 3 would
be higher than benefits paid to today’s retirees. The size of the projected increase
would become larger over the course of the projection period. For example, for a
two-earner couple with low earnings, benefits are projected to be 15% higher in 2012
and 97% higher in 2075 with a 4.6% investment yield. Under the 5.3% yield
assumption, benefits for a two-earner couple with maximum earnings are projected
to be 24% higher in 2012 and 131% higher in 2075. (See Table 6 below and Table
A-11 in Appendix A.)

CRS-18
Table 6. Projected Change in Benefits Under Model 3 Relative
to 2001 Benefit Levels
Real investment yield on personal account
Retiring
(age 65)
3.0%
4.6%
5.3%
Scaled low earner ($15, 875 in 2002)
2012
15% higher
15% higher
15% higher
2075
67% higher
97% higher
104% higher
Steady maximum earner ($84,900 in 2002)
2012
23% higher
24% higher
24% higher
2075
73% higher
121% higher
131% higher
Note: Results are shown for 2-earner couples with equal earnings. Results for medium and
high-wage earners and for one-earner couples are shown in the data tables in Appendix A.
Effect of Reform Models on the Federal Budget
The SSA actuaries provided estimates of the net cash-flow requirements from
general revenues over the next 75 years under current law and the Commission’s
reform plans (i.e., estimates include years of positive and negative cash flow).26
Assuming benefits promised under current
law would be paid in full after the trust
Projected Net Cash-Flow
funds are exhausted in 2038 (under the
Requirements From General
intermediate assumptions in the 2001
Revenues Over 75 Years
Trustees Report), the general revenue
requirements under current law are
Current Law Promised:
$4.2 trillion
Commission Model 2:
$2.2 trillion
projected to be $4.2 trillion (present value
Commission Model 3:
$2.8 trillion
basis) over the 75-year projection period.27
Net cash-flow requirements from the
Estimates for Models 2 and 3 assume
General Fund are projected to be lower
2/3 participation in personal accounts.
under the Commission’s reform plans.
Assuming two-thirds participation in
personal accounts, Model 2 would require a projected $2.2 trillion (present value
26 Trust fund assets as of Jan. 1, 2001 ($1 trillion) are not subtracted from the estimates.
27 SSA Actuarial Memorandum, Jan. 31, 2002, p. 27.

CRS-19
basis) over the projection period.28 Model 3 would require a projected $2.8 trillion
(present value basis) over the period.29
Under current law, the trust funds are projected to run annual cash-flow deficits
in 2016-2075 (and beyond).30 Under Model 2, assuming two-thirds participation in
personal accounts, annual cash-flow deficits are projected to occur in 2010-2058
(2006-2057 with 100% participation).31 Starting in 2029, projected annual cash-flow
deficits under Model 2 would be lower
than under the current-law promised
First Year of Projected Annual
baseline (2032 with 100% participation).32
Trust Fund Cash-Flow Deficits
Model 3 would require both temporary
general
revenue infusions
and
new
Current Law:
2016
dedicated revenues from an unspecified
Model 2:
2010 (two-thirds)
source (to be determined by Congress) to
2006 (100%)
achieve positive cash flow by the end of
Model 3:*
2014 (two-thirds)
the projection period. With these new
2011 (100%)
dedicated revenues, which are projected to
*With
new
(unspecified)
dedicated
be equal to 0.63% of taxable payroll on
revenues.
average over the 75-year projection
period,33 annual cash-flow deficits are
projected to occur in 2014-2071 assuming two-thirds participation in personal
accounts (2011-2061 with 100% participation).34 Because Model 3 would require
new dedicated revenues from an unspecified source (in addition to specified
temporary general revenue infusions), the following discussion focuses on Model 2.
Projected annual cash flow from the General Fund to the Social Security trust
funds under Model 2, assuming two-thirds and 100% participation in personal
accounts, is compared to both current-law baselines in Figures 1 and 2.
28 SSA Actuarial Memorandum, July 22, 2002, table 4. Estimates assume that traditional
benefit reductions would apply to retirement, survivors and disability benefits. If disability
benefits were held harmless, given that disabled workers may not have sufficient time to
grow their accounts, larger general revenue infusions would be required (and projected
savings would be somewhat overstated). One study estimates that the additional 75-year
cost of transfers needed under Model 2 to protect the disability component would be $0.6
trillion (present value basis) or 0.3% of taxable payroll (see Assessing the Plans Proposed
by the President’s Commission to Strengthen Social Security, by Peter A. Diamond and
Peter R. Orszag, Tax Notes, July 29, 2002).
29 SSA Actuarial Memorandum, July 22, 2002, table 4.
30 Under the intermediate assumptions in the 2003 Trustees Report, the trust funds are
projected to begin running cash-flow deficits in 2018.
31 SSA Actuarial Memorandum, Jan. 31, 2002, p. 22.
32 Ibid., pp. 68-69.
33 Under the intermediate assumptions in the 2001 Trustees Report, the average long-range
funding shortfall under the current system is projected to equal 1.86% of taxable payroll.
34 SSA Actuarial Memorandum, Jan. 31, 2002, p. 22.

CRS-20
Figure 1. Model 2 (Two-Thirds Participation): Annual Cash
Flow from the General Fund to the Social Security Trust Funds
Billions (Constant 2001 Dollars)
$800
Current Law
$700
Promised
$600
$500
Current Law
$400
Payable
$300
$200
Model 2 (2/3)
$100
$0
-$100
2001
2007
2013
2019
2025
2031
2037
2043
2049
2055
2061
2067
2073
-$200
-$300
Figure 2. Model 2 (100% Participation): Annual Cash Flow from
the General Fund to the Social Security Trust Funds
Billions (Constant 2001 Dollars)
$800
$700
Current Law
Promised
$600
$500
Current Law
Payable
$400
$300
Model 2 (100%)
$200
$100
$0
-$100
2001
2007
2013
2019
2025
2031
2037
2043
2049
2055
2061
2067
2073
-$200
-$300

CRS-21
The change in publicly-held debt projected under Model 2 with 0%, two-thirds
and 100% participation in personal accounts is compared in Figure 3. Because a
“carve-out” approach redirects payroll taxes to fund the accounts, one effect is to
increase debt held by the public. This additional borrowing would occur from 2004-
2051 assuming two-thirds participation in personal accounts and from 2004-2060
assuming 100% participation, and is projected to peak at $2.5 trillion and $4.7
trillion, respectively (constant 2001 dollars).35 These increases in publicly-held debt
projected under the two scenarios illustrate the impact of personal account
participation rates on Treasury borrowing (the higher the participation rate, the
greater the negative effect on the unified federal budget over the coming decades).
Figure 3. Model 2: Projected Change in Debt Held by the Public
Trillions (Constant 2001 Dollars)
$7
100% Participation
$4
2/3 Participation
$1
-$2
2002
2007
2012
2017
2022
2027
2032
2037
2042
2047
2052
2057
-$5
With No Personal
Accounts
-$8
-$11
-$14
35 SSA Actuarial Memorandum, July 22, 2002, revised tables on pp. 57-58.

CRS-22
Near-Term Versus Long-Term Budget Perspective
It is also important to consider Social Security’s long-range financing needs
(both under current law and the Commission’s reform models) in the context of the
overall federal budget. The Congressional Budget Office projects that total federal
spending will be $27 trillion (nominal dollars) over the next 10 years (2004-2013)
under current law. Combined spending for Social Security, Medicare and Medicaid
would total a projected $12.7 trillion (nominal dollars), increasing 78% over the
period. By 2013, projected spending for these three programs would represent 53%
of the entire federal budget. Projected annual spending for these programs is shown
in Figure 4.
Figure 4. Social Security, Medicare and Medicaid Outlays
Projected Under Current Law, 2004-2013
Trillions (Nominal Dollars)
$1.8
$1.6
$1.4
Medicaid
$1.2
$1.0
Medicare
$0.8
$0.6
$0.4
Social Security
$0.2
$0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
CBO data, M arch 2003
Over the next several decades, total mandatory spending is projected to grow
faster than Gross Domestic Product (GDP). The Office of Management and Budget
(OMB) projects that mandatory spending (comprised primarily of Social Security,
Medicare and Medicaid) will increase from 11.3% of GDP in 2010 to 16.8% in 2040
under current law as shown in Figure 5. Social Security is projected to increase from
4.3% to 6.4% of GDP over the period. Medicare spending is projected to grow even
faster from 2.6% of GDP in 2010 to 5.5% in 2040. Medicaid spending would
increase from 1.9% of GDP to 3.2% over the 2010-2040 period (Figure 6).36
36 These CBO and OMB projections do not reflect the cost of Medicare prescription drug
legislation (H.R. 1) currently before the Congress.

CRS-23
Figure 5. Mandatory and Discretionary Outlays Projected
Under Current Law as a Percent of GDP, 2000-2040
Percent of GDP
18
16
14
Mandatory
12
10
8
6
4
Discretionary
2
0
2000
2010
2020
2030
2040
OM B data, FY2004 Budget Prop osal
Figure 6. Social Security, Medicare and Medicaid Outlays
Projected Under Current Law as a Percent of GDP, 2000-2040
P e rc e nt of GD P
7
Social S ecurity
6
5
4
3
M edicare
M edicaid
2
1
0
2000
2010
2020
2030
2040
O M B dat a, F Y2004 B udget P rop osal

CRS-24
Based on the actuaries’ projections, traditional benefit constraints such as price
indexing combined with personal accounts (as under Model 2) are projected to
eliminate the system’s long-range actuarial deficit and improve the system’s fiscal
outlook over the “infinite horizon” (beyond the traditional 75-year projection period).
Using a carve-out funding approach for personal accounts under Model 2 is projected
to result in larger annual cash-flow deficits compared to current law for roughly 30
years, coinciding with a period of increasing fiscal pressure related to the aging of the
U.S. population and significant projected growth in health care costs, among other
factors. Supporters argue that, while the Commission’s reform models are projected
to increase the near-term fiscal burden, they would have positive fiscal effects over
the long run. They argue that a partially advance-funded system would reduce the
long-term cost of the program to the government and allow workers who choose to
participate in personal accounts to make up for some or all of the reductions in
traditional benefits that would be needed to bring the system into balance.
For Additional Reading
CRS Report RL31086, Social Security: What Happens to Future Benefit Levels
Under Various Reform Options, by David Koitz, Geoffrey Kollmann, and Dawn
Nuschler.

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CRS-77
Appendix A. Data Tables

CRS-78
Table A-1. Commission Model 1: Percent Change in Proposed
Benefits Relative to Benefits Promised Under Current Law
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
-0.2
-0.1
0.0
0.0
0.0
0.0
2022
-0.9
-0.6
0.4
0.3
0.6
0.4
2032
-2.2
-1.5
1.6
1.1
2.3
1.6
2042
-3.8
-2.6
3.6
2.4
5.1
3.4
2052
-4.6
-3.1
4.7
3.1
6.6
4.5
2075
-4.5
-3.1
4.5
3.0
6.4
4.3
Scaled medium earner ($35,277 in 2002)
2012
-0.3
-0.2
0.0
0.0
0.0
0.0
2022
-1.2
-0.8
0.5
0.4
0.8
0.6
2032
-3.0
-2.0
2.1
1.4
3.1
2.1
2042
-5.2
-3.5
4.8
3.2
6.9
4.6
2052
-6.2
-4.2
6.3
4.2
8.9
6.0
2075
-6.1
-4.1
6.0
4.1
8.6
5.8
Scaled high earner ($56,443 in 2002)
2012
-0.3
-0.2
0.0
0.0
0.0
0.0
2022
-1.5
-1.0
0.7
0.4
1.0
0.7
2032
-3.6
-2.4
2.6
1.8
3.8
2.5
2042
-6.3
-4.2
5.8
3.9
8.3
5.6
2052
-7.5
-5.1
7.6
5.1
10.8
7.3
2075
-7.4
-5.0
7.3
4.9
10.4
7.0
Steady maximum earner ($84,900 in 2002)
2012
-0.5
-0.4
0.0
0.0
0.0
0.0
2022
-1.9
-1.3
0.7
0.5
1.2
0.8
2032
-4.3
-2.9
3.0
2.0
4.4
2.9
2042
-8.0
-5.4
7.5
5.1
10.7
7.3
2052
-10.5
-7.1
10.9
7.4
15.6
10.5
2075
-10.2
-6.9
10.5
7.1
15.0
10.1
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-79
Table A-2. Commission Model 1: Percent Change in Proposed
Benefits Relative to Benefits Payable Under Current Law
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
-0.2
-0.1
0.0
0.0
0.0
0.0
2022
-0.9
-0.6
0.4
0.3
0.6
0.4
2032
-2.2
-1.5
1.6
1.1
2.3
1.6
2042
31.5
33.2
41.7
40.1
43.8
41.5
2052
31.7
33.8
44.6
42.5
47.3
44.3
2075
42.4
44.6
55.9
53.7
58.7
55.6
Scaled medium earner ($35,277 in 2002)
2012
-0.3
-0.2
0.0
0.0
0.0
0.0
2022
-1.2
-0.8
0.5
0.4
0.8
0.6
2032
-3.0
-2.0
2.1
1.4
3.1
2.1
2042
29.7
32.0
43.4
41.2
46.2
43.1
2052
29.5
32.3
46.8
44.0
50.5
46.5
2075
40.1
43.0
58.2
55.2
62.0
57.9
Scaled high earner ($56,443 in 2002)
2012
-0.3
-0.2
0.0
0.0
0.0
0.0
2022
-1.5
-1.0
0.7
0.4
1.0
0.7
2032
-3.6
-2.4
2.6
1.8
3.8
2.5
2042
28.2
31.0
44.7
42.2
48.2
44.5
2052
27.7
31.1
48.6
45.2
53.1
48.2
2075
38.2
41.7
60.1
56.5
64.7
59.7
Steady maximum earner ($84,900 in 2002)
2012
-0.5
-0.4
0.0
0.0
0.0
0.0
2022
-1.9
-1.3
0.7
0.5
1.2
0.8
2032
-4.3
-2.9
3.0
2.0
4.4
2.9
2042
25.8
29.4
47.1
43.7
51.5
46.7
2052
23.7
28.4
53.2
48.3
59.6
52.6
2075
33.9
38.9
64.8
59.7
71.5
64.3
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-80
Table A-3. Commission Model 1: Percent Change in Proposed
Benefits Relative to 2001 Benefit Levels
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
13.3
12.7
13.5
12.9
13.6
12.9
2022
19.3
18.5
20.9
19.6
21.1
19.8
2032
24.9
24.2
29.7
27.4
30.6
28.0
2042
35.2
35.2
45.6
42.1
47.8
43.6
2052
47.6
48.0
62.0
57.6
65.1
59.7
2075
84.5
84.9
101.9
96.5
105.6
99.0
Scaled medium earner ($35,277 in 2002)
2012
13.2
12.6
13.5
12.8
13.6
12.9
2022
18.9
18.2
21.0
19.7
21.4
19.9
2032
23.8
23.5
30.4
27.8
31.6
28.6
2042
33.3
33.9
47.3
43.2
50.2
45.2
2052
45.1
46.3
64.4
59.2
68.6
62.0
2075
81.4
82.8
104.8
98.4
109.8
101.8
Scaled high earner ($56,443 in 2002)
2012
15.1
14.6
15.5
14.8
15.6
14.9
2022
20.6
20.1
23.3
21.9
23.7
22.2
2032
25.2
25.1
33.2
30.5
34.8
31.5
2042
34.0
35.2
51.3
46.7
54.9
49.1
2052
45.6
47.5
69.4
63.4
74.5
66.8
2075
82.0
84.4
110.9
103.6
117.0
107.7
Steady maximum earner ($84,900 in 2002)
2012
21.1
20.6
21.8
21.1
21.9
21.1
2022
29.1
28.7
32.6
31.0
33.1
31.4
2032
33.8
34.1
44.1
40.9
46.0
42.1
2042
41.4
43.6
65.3
59.5
70.3
62.8
2052
51.6
55.3
87.8
79.5
95.7
84.7
2075
89.7
94.2
133.4
123.4
143.0
129.7
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-81
Table A-4. Commission Model 2: Percent Change in Proposed
Benefits for a Two-Earner Couple Relative to Benefits
Promised Under Current Law
With no
Real investment yield on personal account
Retired
personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
1.2
1.5
1.9
2.0
2022
9.2
10.6
13.2
13.7
2032
-0.9
2.3
9.9
11.3
2042
-10.0
-4.7
10.1
13.2
2052
-18.2
-12.0
6.5
10.5
2075
-34.5
-28.4
-10.4
-6.6
Scaled medium earner ($35,277 in 2002)
2012
-0.9
-0.5
0.0
0.0
2022
-9.9
-8.5
-6.1
-5.7
2032
-18.2
-15.2
-8.3
-7.0
2042
-25.7
-20.5
-5.9
-2.8
2052
-32.5
-26.1
-6.3
-2.0
2075
-45.9
-39.6
-20.5
-16.3
Scaled high earner ($56,443 in 2002)
2012
-0.9
-0.6
-0.2
-0.2
2022
-9.9
-8.9
-7.0
-6.7
2032
-18.2
-15.9
-10.7
-9.7
2042
-25.7
-21.8
-10.7
-8.4
2052
-32.5
-27.4
-11.3
-7.8
2075
-45.9
-40.9
-25.4
-22.0
Steady maximum earner ($84,900 in 2002)
2012
-0.9
-0.7
-0.4
-0.3
2022
-9.9
-9.0
-7.5
-7.2
2032
-18.2
-16.3
-12.0
-11.2
2042
-25.7
-22.4
-13.3
-11.4
2052
-32.5
-28.4
-15.8
-13.1
2075
-45.9
-41.9
-29.7
-27.1
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-82
Table A-5. Commission Model 2: Percent Change in Proposed
Benefits for a One-Earner Couple Relative to Benefits
Promised Under Current Law
With no
Real investment yield on personal account
Retired
personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
1.2
1.4
1.7
1.7
2022
9.2
10.0
11.9
12.2
2032
-0.9
1.3
6.4
7.4
2042
-10.0
-6.4
3.6
5.7
2052
-18.2
-14.1
-1.5
1.2
2075
-34.5
-30.4
-18.2
-15.6
Scaled medium earner ($35,277 in 2002)
2012
-0.9
-0.6
-0.3
-0.3
2022
-9.9
-9.0
-7.3
-7.0
2032
-18.2
-16.2
-11.5
-10.7
2042
-25.7
-22.2
-12.3
-10.2
2052
-32.5
-28.1
-14.8
-11.9
2075
-45.9
-41.7
-28.7
-25.9
Scaled high earner ($56,443 in 2002)
2012
-0.9
-0.7
-0.5
-0.4
2022
-9.9
-9.2
-7.9
-7.7
2032
-18.2
-16.7
-13.1
-12.5
2042
-25.7
-23.0
-15.5
-14.0
2052
-32.5
-29.0
-18.2
-15.8
2075
-45.9
-42.5
-32.0
-29.7
Steady maximum earner ($84,900 in 2002)
2012
-0.9
-0.7
-0.5
-0.5
2022
-9.9
-9.3
-8.3
-8.1
2032
-18.2
-16.9
-14.0
-13.5
2042
-25.7
-23.5
-17.3
-16.0
2052
-32.5
-29.7
-21.2
-19.4
2075
-45.9
-43.2
-35.0
-33.2
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-83
Table A-6. Commission Model 2: Percent Change in Proposed
Benefits Relative to Benefits Payable Under Current Law
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
1.5
1.4
1.9
1.7
2.0
1.7
2022
10.6
10.1
13.2
11.9
13.7
12.2
2032
2.3
1.3
9.9
6.4
11.3
7.4
2042
30.3
28.0
50.6
41.7
54.8
44.5
2052
21.5
18.7
47.2
36.0
52.6
39.8
2075
6.8
3.8
33.6
22.0
39.3
25.8
Scaled medium earner ($35,277 in 2002)
2012
-0.5
-0.6
0.0
-0.3
0.0
-0.3
2022
-8.5
-9.0
-6.1
-7.3
-5.7
-7.0
2032
-15.2
-16.2
-8.3
-11.5
-7.0
-10.7
2042
8.7
6.4
28.8
20.0
32.9
22.8
2052
2.1
-0.7
29.4
17.7
35.3
21.7
2075
-9.9
-13.0
18.6
6.3
24.8
10.5
Scaled high earner ($56,443 in 2002)
2012
-0.6
-0.7
-0.2
-0.5
-0.2
-0.4
2022
-8.9
-9.2
-7.0
-7.9
-6.7
-7.7
2032
-15.9
-16.7
-10.7
-13.1
-9.7
-12.5
2042
7.0
5.3
22.2
15.5
25.3
17.7
2052
0.4
-2.0
22.5
13.0
27.3
16.3
2075
-11.8
-14.3
11.3
1.4
16.4
4.8
Steady maximum earner ($84,900 in 2002)
2012
-0.7
-0.7
-0.4
-0.5
-0.3
-0.5
2022
-9.0
-9.3
-7.5
-8.3
-7.2
-8.1
2032
-16.3
-16.9
-12.0
-14.0
-11.2
-13.5
2042
6.1
4.7
18.6
13.1
21.2
14.9
2052
-1.1
-2.9
16.3
8.8
20.1
11.4
2075
-13.3
-15.3
4.9
-3.0
8.8
-0.3
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-84
Table A-7. Commission Model 2: Percent Change in Proposed
Benefits Relative to 2001 Benefit Levels
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
15.3
14.4
15.7
14.8
15.8
14.8
2022
33.1
31.3
36.3
33.5
36.8
33.8
2032
30.6
27.6
40.3
34.1
42.1
35.3
2042
34.0
29.9
54.8
43.8
59.1
46.7
2052
36.2
31.3
64.9
50.5
71.1
54.6
2075
38.3
32.8
73.1
55.9
80.5
60.9
Scaled medium earner ($35,277 in 2002)
2012
12.9
12.1
13.5
12.5
13.5
12.5
2022
10.1
8.5
13.0
10.5
13.5
10.8
2032
8.2
5.6
17.0
11.5
18.6
12.6
2042
11.7
8.0
32.3
21.7
36.6
24.5
2052
14.4
9.8
45.0
30.1
51.6
34.6
2075
16.6
11.2
53.6
35.9
61.6
41.2
Scaled high earner ($56,443 in 2002)
2012
14.8
14.0
15.2
14.3
15.3
14.3
2022
11.6
10.2
13.9
11.7
14.3
12.0
2032
9.2
6.9
16.0
11.4
17.2
12.2
2042
11.9
8.7
27.8
19.2
31.0
21.4
2052
14.4
10.3
39.6
27.1
45.1
30.8
2075
16.2
11.5
46.7
31.9
53.3
36.3
Steady maximum earner ($84,900 in 2002)
2012
21.0
20.2
21.4
20.4
21.4
20.4
2022
19.7
18.2
21.7
19.6
22.1
19.8
2032
17.0
14.7
23.0
18.7
24.2
19.5
2042
19.3
16.2
33.4
25.5
36.3
27.5
2052
21.2
17.5
42.6
31.7
47.2
34.8
2075
22.7
18.5
48.5
35.7
54.1
39.4
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-85
Table A-8. Commission Model 3: Percent Change in Proposed
Benefits for a Two-Earner Couple Relative to Benefits
Promised Under Current Law
With no
Real investment yield on personal account
Retired
personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
0.2
1.2
1.6
1.6
2022
2.1
5.0
7.4
7.8
2032
-3.9
1.5
8.1
9.4
2042
-8.6
-0.8
12.1
14.8
2052
-13.1
-4.4
11.9
15.3
2075
-22.2
-13.7
2.0
5.4
Scaled medium earner ($35,277 in 2002)
2012
-0.9
0.4
0.9
1.0
2022
-8.0
-4.1
-0.9
-0.4
2032
-13.5
-6.2
2.8
4.4
2042
-17.7
-7.2
10.3
13.9
2052
-21.7
-10.0
11.9
16.6
2075
-29.9
-18.5
2.7
7.2
Scaled high earner ($56,443 in 2002)
2012
-1.0
0.6
1.1
1.2
2022
-9.2
-4.6
-1.6
-1.2
2032
-15.5
-7.0
1.3
2.8
2042
-19.7
-7.4
9.7
13.3
2052
-23.6
-9.9
12.6
17.5
2075
-31.6
-18.3
3.5
8.2
Steady maximum earner ($84,900 in 2002)
2012
-1.2
1.1
1.7
1.8
2022
-11.9
-6.1
-3.2
-2.8
2032
-20.2
-10.0
-2.1
-0.6
2042
-24.1
-9.0
7.9
11.4
2052
-27.8
-10.1
13.2
18.2
2075
-35.4
-18.2
4.3
9.2
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-86
Table A-9. Commission Model 3: Percent Change in Proposed
Benefits for a One-Earner Couple Relative to Benefits
Promised Under Current Law
With no
Real investment yield on personal account
Retired
personal
(age 65)
account
3.0%
4.6%
5.3%
Scaled low earner ($15,875 in 2002)
2012
0.2
0.9
1.1
1.2
2022
2.1
4.1
5.7
5.9
2032
-3.9
-0.3
4.2
5.0
2042
-8.6
-3.4
5.4
7.2
2052
-13.1
-7.2
3.8
6.1
2075
-22.2
-16.5
-5.8
-3.6
Scaled medium earner ($35,277 in 2002)
2012
-0.9
0.0
0.3
0.4
2022
-8.0
-5.4
-3.2
-2.9
2032
-13.5
-8.5
-2.5
-1.4
2042
-17.7
-10.6
1.2
3.6
2052
-21.7
-13.8
1.0
4.1
2075
-29.9
-22.2
-7.9
-4.9
Scaled high earner ($56,443 in 2002)
2012
-1.0
0.1
0.4
0.5
2022
-9.2
-6.1
-4.1
-3.8
2032
-15.5
-9.8
-4.2
-3.1
2042
-19.7
-11.4
0.2
2.6
2052
-23.6
-14.3
0.9
4.2
2075
-31.6
-22.6
-7.9
-4.7
Steady maximum earner ($84,900 in 2002)
2012
-1.2
0.4
0.8
0.8
2022
-11.9
-8.0
-6.1
-5.8
2032
-20.2
-13.4
-8.0
-7.0
2042
-24.1
-13.9
-2.5
-0.1
2052
-27.8
-15.9
-0.1
3.3
2075
-35.4
-23.8
-8.5
-5.2
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-87
Table A-10. Commission Model 3: Percent Change in Proposed
Benefits Relative to Benefits Payable Under Current Law
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
1.2
0.9
1.6
1.1
1.6
1.2
2022
5.0
4.1
7.4
5.7
7.8
5.9
2032
1.5
-0.3
8.1
4.2
9.4
5.0
2042
35.6
32.2
53.4
44.2
57.1
46.6
2052
32.1
28.2
54.5
43.3
59.3
46.6
2075
28.7
24.6
52.2
40.5
57.2
43.8
Scaled medium earner ($35,277 in 2002)
2012
0.4
0.0
0.9
0.3
1.0
0.4
2022
-4.1
-5.4
-0.9
-3.2
-0.4
-2.9
2032
-6.2
-8.5
2.8
-2.5
4.4
-1.4
2042
26.9
22.3
50.8
38.4
55.8
41.8
2052
24.3
19.1
54.5
39.5
61.0
43.8
2075
21.5
16.0
53.1
37.4
59.9
41.9
Scaled high earner ($56,443 in 2002)
2012
0.6
0.1
1.1
0.4
1.2
0.5
2022
-4.6
-6.1
-1.6
-4.1
-1.2
-3.8
2032
-7.0
-9.8
1.3
-4.2
2.8
-3.1
2042
26.6
21.2
50.1
37.0
54.9
40.3
2052
24.5
18.3
55.6
39.3
62.3
43.9
2075
21.9
15.5
54.4
37.4
61.5
42.2
Steady maximum earner ($84,900 in 2002)
2012
1.1
0.4
1.7
0.8
1.8
0.8
2022
-6.1
-8.0
-3.2
-6.1
-2.8
-5.8
2032
-10.0
-13.4
-2.1
-8.0
-0.6
-7.0
2042
24.5
17.8
47.6
33.4
52.4
36.6
2052
24.2
16.2
56.3
37.9
63.3
42.7
2075
22.0
13.7
55.7
36.4
63.0
41.4
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-88
Table A-11. Commission Model 3: Percent Change in Proposed
Benefits Relative to 2001 Benefit Levels
3.0% real yield
4.6% real yield
5.3% real yield
Retired
2-earner
1-earner
2-earner
1-earner
2-earner
1-earner
(age 65)
couple
couple
couple
couple
couple
couple
Scaled low earner ($15,875 in 2002)
2012
14.9
13.8
15.3
14.1
15.4
14.2
2022
26.5
24.2
29.3
26.0
29.7
26.3
2032
29.6
25.7
38.0
31.3
39.6
32.4
2042
39.4
34.1
57.7
46.3
61.4
48.8
2052
48.0
41.8
73.2
58.6
78.5
62.1
2075
66.7
59.3
97.1
79.6
103.6
83.9
Scaled medium earner ($35,277 in 2002)
2012
14.0
12.8
14.6
13.2
14.6
13.3
2022
15.5
12.9
19.2
15.4
19.9
15.8
2032
19.8
15.2
31.2
22.8
33.3
24.3
2042
30.4
24.0
55.0
40.4
60.1
43.8
2052
39.3
31.7
73.1
54.3
80.4
59.1
2075
57.3
48.3
98.3
75.6
107.0
81.4
Scaled high earner ($56,443 in 2002)
2012
16.2
14.9
16.8
15.3
16.9
15.4
2022
16.9
14.0
20.5
16.4
21.1
16.8
2032
20.7
15.6
31.5
22.8
33.5
24.2
2042
32.4
25.1
56.9
41.4
62.0
44.8
2052
41.9
33.2
77.4
56.8
85.0
61.9
2075
60.6
50.2
103.5
78.7
112.7
84.9
Steady maximum earner ($84,900 in 2002)
2012
23.2
21.5
23.9
22.0
24.0
22.0
2022
23.6
20.0
27.3
22.5
28.0
22.9
2032
25.8
19.6
36.9
27.0
39.0
28.4
2042
39.9
30.7
66.0
48.0
71.4
51.6
2052
52.2
40.7
91.6
66.9
100.2
72.7
2075
72.8
59.0
120.5
90.8
130.8
97.7
Source: Table prepared by CRS based on data from SSA, Office of the Chief Actuary, January 2002.

CRS-89
Appendix B. General Accounting Office Analysis of
Commission Reform Models
At the request of the Senate Committee on Aging, the General Accounting
Office (GAO) issued a report37 that analyzes the reform models recommended by the
President’s Commission. The GAO report focused primarily on Model 2. The GAO
used two alternative outcomes — one with universal (100%) participation in personal
accounts and one with no participation in personal accounts. The assumptions used
regarding economic growth were those contained in the intermediate assumptions of
the 2001 Trustees Report. Presumably, under these assumptions the projected
average real rate of return on personal accounts invested in a broad mix of funds
would be 4.6% (about 8% in nominal terms), the same as used in the intermediate
rate of return scenario shown in SSA’s benefit examples.
In terms of benefit adequacy and individual equity, the report found that under
Model 2 future retirees who chose to participate in personal accounts would receive
a combination of Social Security and personal account benefits that, despite the
benefit offset, would be higher than for retirees who chose not to participate in
personal accounts.
If participation in personal accounts were universal, the
combination of benefits would be higher than those that would be paid in the future
if benefits were reduced to fit within the program’s projected revenue.
If
participation in personal accounts were not universal, retirees who did not choose to
participate in personal accounts eventually would receive benefits that would be
lower than those that would be paid in the future if benefits were reduced to fit within
the program’s projected revenue. The cohort results under Model 3 are generally
similar to Model 2.
In terms of the effect on the program financing, the GAO found that Model 2
would reduce the cost of the program and provide sustainable solvency, without
general revenue subsidies and regardless of whether workers participate in personal
accounts. However, if all workers chose to participate in personal accounts, over
three decades of general revenue transfers would be needed to achieve trust fund
solvency. Model 3 also restores solvency over the 75-year period, regardless of
whether workers participate in personal accounts, although general fund revenues are
needed throughout the projection period to keep Social Security solvent. However,
if participation in personal accounts were universal, at the end of the projection
period the Social Security trust fund ratio would be declining, whereas if
participation were zero, it would be rising.
37 GAO Report GAO -03-310, Social Security Reform: Analysis of Reform Models
Developed by the President’s Commission to Strengthen Social Security.

CRS-90
Appendix C. Members of the President’s
Commission to Strengthen Social Security
Co-Chairmen
Patrick Moynihan (Democrat)
Former New York Senator and Chairman of the Senate Finance Committee
Dick Parsons (Republican)
Co-Chief Operating Officer of AOL/Time Warner
Members
Leanne Abdnor (Republican)
Former Executive Director of the Alliance for Worker Retirement Security
Sam Beard (Democrat)
Founder and President of Economic Security 2000
John Cogan (Republican)
Former OMB Deputy Director under President Reagan
Robert Deposada (Republican)
Executive Director, Hispanic Business Roundtable and President and CEO
of ONE Research and Marketing, Inc.
Bill Frenzel (Republican)
Former Minnesota Representative
Estelle James (Democrat)
Consultant with the World Bank, former World Bank lead economist in
Policy Research Department
Robert Johnson (Democrat)
CEO of Black Entertainment Television
Gwendolyn King (Republican)
Former Commissioner of the Social Security Administration
Olivia Mitchell (Democrat)
Professor at Wharton University, former co-chair of the 1994-96 Social
Security Advisory Council’s technical panel on retirement saving
Gerry Parsky (Republican)
Former Assistant Secretary of the Treasury under President Ford
Tim Penny (Democrat)
Former Minnesota Representative

CRS-91
Robert Pozen (Democrat)
Fidelity Investments
Thomas Saving (Republican)
Texas A&M Director of Private Enterprise Research Center and a Social
Security Public Trustee
Fidel Vargas (Democrat)
Former mayor of Baldwin Park, California and current Vice President of
Reliant Equity Investors
Executive Director: Charles P. Blahous
The full text of the Commission’s reports and meeting transcripts are available
on the Commission’s web site at [http://www.csss.gov].