ANDREW G. BIGGS, American Enterprise Institute
Email: andrew.biggs@aei.org

Under current law, eligibility for Social Security retirement benefits requires 40 quarters (roughly 10 years) of earnings in covered employment. While individuals with less than 40 quarters of employment may receive benefits based on the earnings record of an eligible spouse, a small number of unmarried individuals fail to qualify for retirement benefits due to a short earnings record. These non-qualified individuals often must depend on Supplemental Security Income (SSI) for support in retirement. However, SSI eligibility requirements limit earnings and asset accumulation, making it more difficult for beneficiaries to work or save.

This paper explores the effects of eliminating the 40 quarters eligibility requirement. Doing so would allow retirement benefit eligibility for individuals with very short work histories and reduce dependency on SSI benefits. The effects of reducing the 40 quarters eligibility requirement are analyzed for the 1950 birth cohort using the Policy Simulation Group's GEMINI and PENSIM microsimulation models of the Social Security population and private pensions.

Eliminating the 40 quarters eligibility requirement would increase benefits for approximately 5.8 percent of individuals. These benefit increases would be concentrated in the bottom three deciles of lifetime earnings, where 15 percent of individuals would receive increased benefits. Average benefit increases for affected individuals in the bottom three deciles of earnings would be around $2,400 per year. Benefit increases are concentrated among immigrants, whose shorter periods in the labor force increase the likelihood of not satisfying the current 40 quarters eligibility requirement. Due to the relatively small number of affected individuals, increases in total system costs would be modest. The 75-year actuarial deficit would increase from 1.70 percent of taxable payroll under current law to around 1.79 percent of payroll.

While reducing or eliminating the 40 quarters eligibility requirement could increase benefit availability for very low lifetime earners, it would also increase benefits for individuals whose primary earnings were derived from employment not covered by Social Security. These individuals, mostly employees of state and local governments, could receive windfalls if other corrective actions were not taken. However, application of the existing WEP/GPO provisions to newly Social Security eligible state/local government employees could help correct for any imbalances in relative benefit generosity, although some modifications to WEP/GPO rules to maintain neutrality between covered and non-covered employees may be necessary.

Moreover, increased Social Security retirement benefits could potentially remove individuals from SSI, which could then put at risk these individuals' eligibility for means-tested assistance programs such as Medicaid and Food Stamps. In most cases, however, increased Social Security benefits would supplement SSI rather than eliminate it.

DAVID P. BERNSTEIN, affiliation not provided to SSRN
Email: spstat@yahoo.com

This paper contains nine different essays on Social Security reform and multi-pillar pension plans. The nine topics are:

1. Transition costs
2. Progressive indexation
3. Government guarantees on private accounts
4. Life cycle investing
5. Impact of add-on accounts on Social Security solvency
6. Administrative costs on multi-pillar pension plans
7. Potential lessons on Social Security reform from Argentina
8. Automatic adjustment mechanisms in Germany
9. Universal accounts and social security

SHARMILA CHOUDHURY, Congressional Research Service
Email: schoudhury@crs.loc.gov
BENJAMIN BRIDGES, U.S. Social Security Administration
Email: benjamin.bridges@ssa.gov

This article analyzes Social Security benefits as a retirement resource for selected subgroups of recent cohorts of near-retirees. The analysis therein examines the distribution of benefits among subgroups by (1) race and ethnicity, (2) nativity, and (3) disability status. We use improved data (actual earnings histories) to produce more accurate measures of benefits. We look at how the average values of several benefit measures, such as Social Security wealth and earnings replacement rates, differ among the selected subgroups and discuss reasons for these differences. This study finds that substantial differences in earnings levels and/or mortality levels among these subgroups interact with Social Security program provisions to produce sizable differences in the values of our benefit measures.

JENNIFER MCNABB, affiliation not provided to SSRN
DAVID TIMMONS, affiliation not provided to SSRN
JAE SONG, U.S. Social Security Administration
Email: jae.song@ssa.gov
CAROLYN PUCKETT, affiliation not provided to SSRN

The Social Security Administration (SSA) collects a wealth of data in its role as administrator of two large national entitlement programs. Linking SSA?s administrative data with survey data yields a broader set of demographic and socioeconomic information and also improves the quality of the survey data. The agency uses these data to produce analyzes and research on policy initiatives for its programs and on the earnings of the working and beneficiary populations. SSA studies how these programs and potential changes to them affect individuals, the economy, and program solvency, and develops models to project demographic and economic characteristics of the current working population into the future. The agency also produces public-use micro data files that are available to outside researchers, as well as a variety of research and statistical publications to inform policymakers and the public.

HOWARD IAMS, U.S. Social Security Administration
Email: Howard.m.iams@ssa.gov
GAYLE REZNIK, Social Security Administration
Email: Gayle.Reznik@ssa.gov
CHRISTOPHER R. TAMBORINI, Social Security Administration - Office of Retirement Policy
Email: Chris.Tamborini@ssa.gov

Changes in American family and work patterns over the past decades have prompted various policy proposals for changing the structure of Social Security benefits. In this article, we use the Social Security Administration?s Modeling Income in the Near Term (MINT) microsimulation model to project how Social Security benefit amounts would change in response to incorporating earnings sharing into benefit calculations for the population aged 62 or older in 2030 under three hypothetical policy scenarios. The earnings sharing scenarios modeled in the article would reduce benefits for the majority of individuals, although there are important differences among married, divorced, and widowed individuals. Some groups of men and women would experience increases in Social Security benefits, while some would receive reduced benefits in comparison to current law, particularly widowed individuals. Allowing widows to inherit the earnings records of their deceased husbands would improve their outcomes.

JOYCE NICHOLAS, affiliation not provided to SSRN
MICHAEL WISEMAN, Government of the United States of America - Social Security Administration
Email: Michael.Wiseman@ssa.gov

In the United States, poverty is generally assessed on the basis of income, as reported in the Current Population Survey?s (CPS?s) Annual Social and Economic Supplement (ASEC), using an official poverty standard established in the 1960s. The prevalence of receipt of means-tested transfers is under reported in the CPS, with uncertain consequences for the measurement of poverty rates by both the official standard and by using alternative ?relative? measures linked to the contemporaneous income distribution. The article reports results estimating the prevalence of poverty in 2002. We complete this effort by using a version of the 2003 CPS/ASEC for which a substantial majority (76 percent) of respondents have individual records matching administrative data from the Social Security Administration on earnings and receipt of income from the Old-Age, Survivors, and Disability Insurance and Supplemental Security Income (SSI) programs. Adjustment of the CPS income data with administrative data substantially improves coverage of SSI receipt. The consequence for general poverty is sensitive to the merge procedures employed, but under both sets of merge procedures considered, the estimated poverty rate among all elderly persons and among elderly SSI recipients is substantially less than rates estimated using the unadjusted CPS. The effect of the administrative adjustment is less significant for perception of relative poverty than for absolute poverty. We emphasize the effect of these adjustments on perception of poverty among the elderly in general and elderly SSI recipients in particular.