CFK reports from: The National Press Club
Event: panel releases report: “Uncharted Waters: Paying Benefits from Individual Accounts in Federal Retirement Policy”
Organized by: The National Academy of Social Insurance
Where/When: Washington, D.C., January 26, 2005

Today, the National Academy of Social Insurance released a 224-page report titled “Uncharted Waters: Paying Benefits from Individual Accounts in Federal Retirement Policy.”

The co-chairs of the panel that developed the report are Kenneth S. Apfel, a public policy expert with The University of Texas, and Michael J. Graetz, a law professor at Yale.

Apfel indicated that the effects of Social Security personal accounts, currently being discussed by President George W. Bush and many other politicians, would have complicated ramifications for children and families who are affected by the system in ways other than retirement.

The report neither supports nor opposes the establishment of such accounts. Instead, it reviews some of the issues that the accounts would raise for those Social Security beneficiaries who are not retirees.

In a fact sheet about the report, the researchers say that policymakers will need to decide whether to have uniform federal policies concerning a child’s right to his or her parents’ personal accounts should a parent die, or to leave the issue to state jurisdiction. Other questions that will need to be addressed are:

• Would a widowed spouse with children have access to the inherited funds for immediate needs?
• If children and a widowed spouse live in separate households, how would the money from a personal account be allocated?
• How would child support requirements affect distribution of personal accounts after a parent’s death?
• Would children have the right to access funds, if they were to outlive their parents?

Both Apfel and Graetz urged lawmakers to pay careful attention to how and when money from these accounts would be paid out to spouses and survivors if private accounts become a new part of the Social Security system or are created outside Social Security.

On January 24, 2005, Connect for Kids published the article “Social Security Reform: Remember the Kids,” which noted that approximately 3 million children receive Social Security as dependents of deceased, disabled, or retired workers and just over 2 million children do not receive Social Security themselves, but live with relatives who do.

Responding to a question on how payouts might be affected under a privatized personal account system, the researchers noted that survivor benefits are currently calculated using similar formulas to those that determine the retirement benefits that older Americans receive. “Payouts are important because a central goal of Social Security policy is to assure some level of adequate income,” Apfel said in a press release regarding the report.

President Bush has indicated that his personal account plan – yet to be fully proposed – would not affect survivor and disability payouts.

However, said Apfel at the briefing, “A change in retirement automatically affects disability and survivor [benefits].”

“You have to think through how these issues relate,” added Graetz.

The report was funded by the Ford Foundation, the Actuarial Foundation, TIAA-CREF Institute, and the Foundation for Child Development.

To obtain a full copy, contact Simona Tudose at studose@nasi.org.