Answers to Questions on Women and Minorities

[National Dialogue Moderator <moderator>]

* What are your broad approaches to benefits and their levels for
women (and men) in diverse family situations?

   We crafted our proposal to increase equity relative to the
   existing system.  Under current law, rates of return for two-earner
   couples are much lower than for one-earner couples, to the extent
   that for some birth years, a low-income two-earner couple gets
   an inferior rate of return to a high-earner one-earner couple.
   Rates of return also vary widely according to birth year.  By
   giving attention to the quality of the deal provided by Social
   Security for every birth cohort and every demographic circumstance,
   we believe our proposal improves upon current law considerably.

* Do you wish enactment of a proposal that would be adequate in
itself to meet the retirement needs of current workers? Or do you
favor an initiative that is to supplement pensions, savings and
other means, private and governmental, of financial support?

   Our proposal was developed originally with the National Commission
   on Retirement Policy, which made simultaneous recommendations
   to shore up both Social Security and private retirement savings.
   I strongly oppose measures to simply shore up one part of the
   retirement structure at the expense of another, as would be the
   case under a proposal that did not increase net national saving,
   but simply mandated that the Social Security system would change
   its investment portfolio at the expense of savings return rates
   external to Social Security. This is one reason why Social
   Security reform must increase net national savings, to avoid
   simply giving with one hand and taking away with the other.

* How should we address the fact that within 30 years, we will have
only 2 workers for every retiree?

   Our plan does this principally through advance funding, reducing
   the proportion of the benefits that are paid by taxing future
   workers.

* Do you wish to provide incentives for individuals to save or do
you wish to concentrate on strengthening the safety net? If it is
the former, at what price to the safety net?

   We must do both.  The personal accounts in our proposal would
   increase the investment return and incentives to save, and the
   added progressivity would increase the protection against poverty.

* Is equity provided between single and dual earning couples?

   Our proposal would improve upon existing law in this respect.

* What is the approach to benefits on divorce?  How does it work
for a person divorced after a short time (ex. 7 years), a middle
term (ex. 15 years), and a long term (ex. 25 years)?

   Our proposal would not change the underlying Social Security
   system's treatment of divorce, but would create new protections
   through the established property right in the personal account,
   which would belong to the couple rather than to the government,
   and thus be available for division if the couple divorced prior
   to retirement.  Moreover, by strengthening the progressivity of
   the existing system, the reform plan would treat divorcees much
   better than does current law, because a large proportion of the
   elderly poor are widows and divorcees.

* What is the benefit to a survivor when one person in a retired
married couple dies?  Does it permit the survivor to maintain the
same living standard as the couple?

   Our plan gradually phases up the current-law widow's benefit so
   that it ultimately reaches at least 75% of the benefit that
   would be provided based on the combined wage history of the
   couple, the higher of this figure or current law.

* Does your legislation do anything to provide credit for years of
caregiving, and how does it treat an individual who combined years
of work and years of caregiving?

   Yes, we award 5 "dropout" years in the AIME formula to the earner
   with lesser lifetime earnings in every dually entitled two-earner
   couple.

* What about homemakers who become disabled. There is nothing in
our system for them or their families, unless they have sufficient
wage earning history.

   Our proposal contains a number of elements that would be likely
   to increase benefits available in such a situation.  The basic
   defined disability benefit would still be there, plus even
   workers with low earnings would have received a considerable
   increase in their personal account balance due to the progressive
   match program. Workers with low earnings histories will on
   balance see a considerable increase in benefits under our
   proposal.

* How will it affect poverty rates?

   These would be greatly reduced under our proposal due to the
   added progressivity in the basic defined benefit.

* Does it provide adequate support for the most vulnerable, the
low earners, those with intermittent work history, and single women
(who lack access to the benefits of a higher-earning male).?

   Yes, as above.

* What is the approach to the management of disability and
pre-retirement survivor benefits?

   Same as under current law, with supplemental benefits from any
   accumulations in the personal accounts.

* How do you provide a better benefit package for a woman who's
worked in a low wage job and hasn't had access to a pension plan?

   Again, our proposal shows substantial gains for low-wage workers
   relative to current law.

* Would the reform give workers more freedom over their retirement
options? In other words, would a worker be able to choose her own
retirement age, would she be able to choose how she would like to
receive retirement benefits (lump sum, annuity, etc.), would she
be able to choose to share her retirement savings with her children
or a local charity?

   Individuals could still retire at any age beginning with the
   early eligibility age of 62.  Workers would be required to
   annuitize that portion of the personal account that is necessary
   to produce a poverty-level inflation-indexed annuity, but would
   have flexibility (post-retirement) as to the use of surplus
   personal account accumulations.

* Would the proposal result in a better rate of return on payroll
taxes? In other words, would the proposal give workers a better
deal for the dollar?

   Yes, significantly so.

* Would the worker, should she die before retirement, be able to
leave her retirement savings to her spouse or children?

   Yes, the amount in the personal account.

* Is the reform fair and affordable? In other words, would the
proposal be a self-funded system or would it place financial
expectations and payment burdens on future generations? Is the cost
of the reform paid equally across generations or is one generation
expected to pay more than others?

   We believe our Gregg-Breaux-Kerrey-Grassley proposal is the best
   on the table in terms of fairness between generations, along
   with its counterpart, the Kolbe-Stenholm bill.  The reason is
   that both deal with the cash-flow of the system in a way that
   does not require huge tax increases in the future to pay off an
   enormous trust fund balance.  This is the single greatest "hidden
   cost" of proposals that seek to attain trust fund solvency
   without making explicit choices to restrain the growth of outlays
   in future years.


Senator Judd Gregg