From: Richard Arsinow <richard.arsinow@rauland.com>
Subject: Questions on the Sanford Rebate Bill
Thank you, Rep. Sanford, for your innovative proposal. Please answer the following questions:
*If "every working American would receive his or her share of the Social Security Surplus", doesn't this mean that your rebate would exactly balance the Social Security budget, that there would be neither defecit nor surplus? How is it, then, that "The trust fund will continue to grow as long as Social Security is running Surpluses"? Is it strictly from the reinvestment of earnings on the trust fund? Or do all our shares not add up to the whole surplus? Or do you exempt employer shares and require that they be put into the trust fund?
*Will it be easy to see the relationship between the amounts rebated to PRAs, which are considered early payment of future Social Security benefits, and the reductions in formula benefits which result? Will it be exact, or will some receive more in PRA rebates and see less future benefit reductions, while others receive less in PRA rebates and see more future benefit reductions? If the effect is uneven, can you generalize as to which groups will fare better under your plan and which groups worse?
*If the 401(k) model were used, participants would have several choices in which to invest funds, and each would decide his or her own investment mix. You seem to require a fixed portfolio, selected by the plan administrator. Why?
*You state that earnings on the additional after-tax contributions would come out tax-free. Just so that we're clear on this, the principal amounts consisting of the partial rebates of after-tax FICA and the additional contributions themselves would also come out tax-free, right? How about the earnings on the after-tax FICA rebates?
*By what mechanism would people pass on Social Security benefits to their children and grandchildren? How would the future series of benefits be valued?
*Obviously this program has a limited time horizon, due to the impending baby boomer retirement. Would it automatically come back into play if Social Security ever developed a surplus again? While there is no surplus to rebate, may new workers open PRAs using only their optional after-tax contributions?
