The Social Security Guarantee Plan
Saving and Strengthening Social Security Without Raising Taxes or Cutting Benefits
April 28, 1999
Today, Ways and Means Committee Chairman Bill Archer and Social Security Subcommittee Chairman Clay Shaw announced their plan to save Social Security, now and permanently without raising taxes or cutting benefits. This plan will for the first time give a ll Americans an opportunity to create wealth while simultaneously guaranteeing that current and future generations receive their full Social Security benefits as promised.
Social Security Lockbox - Building on the budget resolution, the Archer/Shaw plan would end the practice of using Social Security funds to pay for other government programs. The Archer/Shaw plan reserves 100% of Social Security payroll taxes for Social Security.
Guarantees Current Social Security System - Because Social Security has been successful in providing older Americans with a safe and secure retirement, the Archer/Shaw plan maintains the current system in its entirety. Full benefits, including C OLAs, are guaranteed for everyone. The current-law retirement age remains in effect. There is no privatization of the system at all.
Modernizes Financing to Guarantee Benefits - Under current projections, Social Security's outgo begins to exceed income in 2014 and the Trust Funds will be completely insolvent by 2034. In order to guarantee Social Security, the Archer/Shaw plan uses budget surpluses to modernize the financing of Social Security from a pay-as-you-go system to a partially pre-funded retirement plan which gives Americans the opportunity to create wealth for themselves and their families.
Personally-Controlled Social Security Guarantee Accounts - The Archer/Shaw plan would save Social Security by giving 150 million American workers an annual refundable income tax credit equal to 2% of a worker's wages to be deposited in their own Social Security Guarantee Account (SSGA). To maintain progressivity, the tax cut is capped at the Social Security wage base ($72,600 for 1999), meaning no one would receive a tax cut in excess of $1,452 (2% of $72,600), regardless of their income. Work ers would select where to invest their SSGA funds from 50 pre-approved, low-risk, investment options. The assets in these accounts would grow tax-free. No withdrawals would be permitted until a worker became eligible for either retirement or disability benefits.
Social Security + SSGAs = Guaranteed Retirement Security for All Americans - Upon retirement or disability, SSGA balances would help finance a worker's full Social Security benefit.
Reduces Payroll Tax Burden on Our Children and Grandchildren - Saving Social Security and making it sustainable also means payroll taxes can be reduced across the board in 2050 and in 2060.
SSGAs Can Be Left to Heirs - Under the current Social Security system, a worker who spends a lifetime paying 12.4% of their earnings in Social Security taxes but dies prior to retirement loses all of their Social Security money. If the worker ha s a surviving spouse, a portion of their taxes is used to fund survivor benefits. The Archer/Shaw plan maintains the survivor benefit features of current law but also, for the first time, would allow SSGA balances of workers who die before retirement to pass tax-free to their heirs.
Earnings Limit Is Eliminated - The Guarantee Plan permanently repeals by 2006 the Social Security earnings limit on seniors age 62-69. (The earnings limit today is $15,500, meaning seniors between 65-69 lose $1 in Social Security benefits for e very $3 in earnings above $15,500; seniors between 62-64 lose even more.)