U.S. Social Security Reform: A Diverse Issue for Actuaries

U.S. Social Security Reform: A Diverse Issue for Actuaries
by Sam Phillips

Actuaries are passionate about the topic of social security and their opinions "run the gamut from calls for complete privatization of the system to outright rejection of privatization in any form" notes Steve Siegel, a research actuary with the SOA. (See book review)

Siegel refers to a survey conducted last year by the Pension Section's Research Team. Nearly 2,400 actuaries shared their opinions about social security providing over 60 pages of written comments in addition to responses to multiple–choice questions. When asked for suggested changes to the system, respondent's answers ranged from abolishing the system altogether to significantly expanding the program by requiring all workers to be covered.

"Given the range of opinions expressed across the board, it was evident that this is yet another example of the diversity of ideas and viewpoints among actuaries," said Siegel.

One of the multiple choice questions posed in the survey was, "What changes, if any, should be made to the current system?" Respondents could choose more than one proposed change. "Increasing the normal retirement age to quality for benefits" received the greatest response overall–74 percent. A tabulation of the results from this question follows. Please note that percentages do not add up to 100 percent as respondents could choose more than one change.

What Changes, If Any, Should Be Made to the Current System?

  Response Options Percent Reponse  
Add personal retirement accounts 29%
Increase normal retirement age to qualify for benefits 74%
Reduce benefits 38%
Increase payroll taxes 37%
Invest part of Social Security Trust Funds in the private sector 29
Other changes 26%
No changes 1%
Unsure 3%

Respondents indicating "other changes" were asked to provide details–nearly 1,000 did. Following are a few of the more popular changes noted.

  • Make the system means–tested.
  • Remove or substantially raise the limitation on which salary/wages can be taxed.
  • Index initial benefits to the CPI, not wages.
  • Abolish the system completely or gradually phase it out.

"The topic of social security reform is one that yielded a myriad of responses from the actuarial community," said Siegel. "This diversity is exciting because it demonstrates that actuaries have thought deeply about this issue and appear willing to engage in the Social Security debate. It's also clear that given their unique perspective, actuaries can play a vital role in this debate."

For more information about the U.S. Social Security System, visit the following Web sites: