Questions & Puzzles

[RRand98163@aol.com]

Dear Andy Lang, 

	Your comment titled questions and puzzles raises several provocative 
questions and implies that there are no valid answers and that the questions 
have been swept under the rug. You assert that an important government report 
on some of these questions was improperly squelched.  Such an accusation 
without any proof is highly improper. Here are answers to some of your 
questions, answers readily available from many sources.

	1. Private defined benefit plans have relatively higher accumulated 
funds because they are pre-funded to one degree or another. Social Security 
is on a modified pay-as-you-go basis--the only substantial pre-funding has to 
do with the extra costs of retirement benefits for the baby-boomers, a 
generation considerably larger in numbers than preceding or subsequent 
generations. Pay-as-you-go financing is not feasible for private employers 
because there is no assurance that the private employer will be present when 
the promised retirement benefits become due, whereas the government will 
always have the power to tax. A second reason for the pay-as-you-approach for 
Social Security was to avoid placing control of an immense pension fund 
invested in private securities under the control of the government.
2. The annual 75 years projections contained in the annual report of the 
Social Security is the equivalent for pay-as-you-go plans of the annual 
valuation reports required for private pension plans. Any competent pension 
actuary involved in private pension consulting will confirm this.
3. Proposals for personal account schemes to replace the present Social 
Security plan are really not serious unless they include a well-planned 
approach for amortizing the six trillion dollar accrued liability of OASDI.

Robert J. Randall, FSA