Proposals

Truth About Social Security ("TASS") Plan
Plan Details

Objectives

The objectives of the proposed plan are:

• To provide actuarially sound long-term basis for Social Security,
• To guarantee that workers whose productivity has been cut short by permanent and significant disability are guaranteed are not forced to live in poverty,
• To guarantee that no elder citizen who meets work requirements lives in poverty,
• To guarantee that no spouse or other surviving dependent should live in poverty because of the death of the wage earner,
• Recognizing that all workers who can contribute will be required to contribute, to recognize that differing levels of contribution should entitle retired workers to differing levels of return; while some shifting of benefits are necessary to fund the minimum guarantees above, there should be some relationship between contribution and benefit; and
• Recognizing that standards of living and life styles vary at various income level, to assure that, within the context of fiscal responsibility because of the guarantees above, individuals should be afforded to the right to make their own choices regarding preparing for their retirement.

Plan Overview

Simply, the proposed plan offers workers two options to plan for their retirements:

1. A defined benefit plan that is essentially identical to the current social security plan, except for:
• Improved guarantees for minimum wage earners and dependents
• A continuation of the indexing of retirement age beyond the currently legislated 67
2. A defined contribution plan that allows workers to put their own social security payments into "personal accounts" whose performance determines the benefits they will receive during retirement.

Shortfalls in the current plan (and funding for the improved benefits) are accomplished by three changes:

1. The further indexing of retirement age
2. Removal of the cap on the amount of payroll subject to social security withholding
3. A shift in the investment strategy for the Social Security Trust Fund from strictly government debt to a predetermined mix of high quality common stock, investment grade commercial debt and government bonds, consistent with a prudent investment strategy for infinite-term growth in overall assets.

It is projected that such changes will not only eliminate the shortfall without other changes, they will produce a surplus equivalent to 15% of the expected benefits and that prudent policy would, eventually, call for a reduction in the tax rates below the 12.4% charged today, to keep the surplus reserve from becoming excessive.

Finally, it should be noted that, because a significant portion the projected revenues will be invested in private accounts, there is a transition cost associated with the transfer of those portions from an inter-generational tax to personal investment accounts. We propose that this cost be recognized and underwritten by a supplemental tax to last only until the transition costs have been paid.

Plan Operation

Much of the detailed operation of the plan is based on the work of the Presidential Commission. This is particularly true in the handling of fund assets not distributed to individual accounts, whether because they are being escrowed pending transfer or because the worker has elected to remain in within the traditional system. For that reason, some of the operational details have been "glossed over" in the following descriptions.

Further Details

• Plan Options
Traditional (Defined Benefit") Plan
Individual Accounts ("Defined Contribution") Plan
Employee Election
• Benefit Payouts
Traditional (Defined Benefit") Plan
Individual Accounts ("Defined Contribution") Plan
• Supplemental Benefits
Minimum Benefit
Disability Benefit
Survivor Benefits
• Employer Contributions
• Alternate Tax Base