SSA Benefit Statements: Well Received by the Public But Difficult to Comprehend
Published: 1996-12-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a congressional request, GAO reviewed the Social Security Administration's (SSA) overall progress in issuing the Personal Earnings and Benefits Estimate Statement (PEBES), focusing on: (1) whether the PEBES benefit estimates are reasonable; (2) what SSA has done to improve the statement; (3) the extent to which the statement communicates its goals and information clearly; (4) SSA plans to revise the statement further; and (5) actions that GAO believes will improve the statement.
section_title: What GAO Found
paragraphs: GAO found that: (1) the methods and assumptions used by SSA for estimating future retirement benefits are consistent with those used by private and public pension plan sponsors; (2) the public feels that the PEBES can be a valuable tool for retirement planning; (3) although SSA has taken steps to improve PEBES, it fails to communicate clearly the complex information readers need to understand SSA programs and benefits, partly because the design and organization of the statement make it difficult for the reader to locate and understand important information; (4) readers are confused by several important explanations, such as who in their family is eligible for benefits; (5) SSA is considering redesigning PEBES, but only if the redesign results in reduced printing costs; (6) this approach overlooks hidden costs, such as the workload generated by public inquiries when people do not understand the statement, and the possibility that a poorly designed statement will undermine, rather than improve, public confidence; and (7) active leadership from SSA senior managers will be needed to ensure the success of this important initiative.

section_title: Letter
paragraphs: Social Security, the nation’s largest federal program, provides benefits to retired and disabled workers and their dependents and survivors. Public confidence in Social Security has been low for a number of years, in part because the public has lacked an understanding of Social Security programs. Recognizing the need to provide individuals with better information about Social Security, the Congress enacted legislation in 1989 requiring that the public be provided with regular statements about their Social Security benefits. Both the sponsor of the legislation and officials from the Social Security Administration (SSA) hoped that providing workers with this valuable information would help rebuild public confidence in Social Security and supply workers with a useful financial planning tool.
As required by the Congress, in 1995 SSA began sending the statements, called Personal Earnings and Benefit Estimate Statements (PEBES), automatically to workers who had reached age 60. Starting in fiscal year 2000, the PEBES will reach an estimated 123 million people each year—almost every U.S. worker aged 25 and older. These six-page statements supply workers with information about their yearly earnings on record at SSA; information about their eligibility for Social Security retirement, survivor, and disability benefits; and estimates of these benefits. The PEBES also explains Social Security programs and benefits.SSA projects that this effort will cost more than $80 million in fiscal year 2000 alone.
Concerned about the clarity and usefulness of these statements, you asked us to look at SSA’s overall progress in issuing the PEBES. In testimony before the Subcommittee on September 12, 1996, we discussed how effectively the PEBES conveys information to the public. This report, at your request, expands on that testimony. Specifically, we focus on whether the PEBES benefit estimates are reasonable, what SSA has done to improve the statement, the extent to which the PEBES communicates its goals and information clearly, SSA’s plans to revise the statement further, and actions we believe will improve the statement. To develop this information, we reviewed SSA’s documentation on the PEBES and met with SSA officials. We also met with SSA staff who respond to public inquiries on the PEBES toll-free telephone number and observed them as they answered almost 100 telephone calls. In addition, we reviewed selected public- and private-sector pension benefit statements and discussed the PEBES with recognized experts in the field. Finally, we asked an expert in document design and communication to review and provide comments on the PEBES. We conducted our work from September 1995 to September 1996 in accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: Since the Social Security Act became law in 1935, workers have had the right to review their earnings records on file at SSA to ensure that they are correct. In 1988, SSA introduced the PEBES to better enable workers who requested such information to review their earnings records and obtain benefit estimates. According to SSA, fewer than 2 percent of the workers who pay Social Security taxes request these statements each year.
The PEBES legislation requires SSA to begin sending the PEBES to eligible workers who have not requested a statement according to the schedule that appears in table 1. SSA plans to mail some statements even sooner than required and, by fiscal year 2000, will have mailed statements automatically to over 70 million workers.
By providing these statements, SSA’s goals are to (1) better inform the public of benefits available under SSA’s programs, (2) assist workers in planning for their financial future, and (3) better ensure that Social Security earnings records are complete and accurate. Accurate earnings records are important because a worker’s eligibility for Social Security benefits and the size of the benefit itself depend on the worker’s earnings record. Early identification and correction of errors in earnings records can benefit both SSA and the public by reducing the time and cost required to correct earnings records years later when an individual files for retirement benefits.
Issuing the PEBES is a significant initiative for SSA. The projected cost of $80 million in fiscal year 2000 includes $56 million for production costs, such as printing and mailing the statement, and $24 million for personnel costs. SSA estimates that 608 staff-years will be required to handle the PEBES workload in fiscal year 2000: SSA staff are needed to prepare the statements, investigate discrepancies in workers’ earnings records, and respond to public inquiries (when individuals receive a PEBES, they are instructed to call SSA if they have questions or find errors in the earnings record contained in the statement).
section_title: SSA’s Approach to Calculating Retirement Benefit Estimates Is Reasonable
paragraphs: The benefit estimates provided in the PEBES are intended to help workers plan for their financial future. To estimate retirement benefits, SSA makes certain assumptions about an individual’s future employment and earnings. SSA assumes, for example, that individuals will continue to work until they retire and that individuals’ future earnings will remain about the same as their most recent earnings. SSA chose this overall approach to calculating benefit estimates because it is consistent with approaches used by private and public pension plan sponsors to prepare benefit estimates, according to SSA officials. The experts we talked with generally agreed that SSA’s approach for estimating future retirement benefits is reasonable.
In estimating retirement benefits, SSA does not, however, vary its methodology to take into consideration certain special circumstances that could affect a worker’s actual retirement benefit. As a result, while the PEBES estimates are reasonable for most workers, they may over- or understate benefits for certain individuals. For example, the PEBES estimate is overstated for federal workers who are eligible for both Civil Service Retirement System and Social Security benefits. For these workers, the law requires a reduction in their Social Security retirement or disability benefits according to a specific formula. In 1996, this reduction may be as much as $219 per month; however, the PEBES benefit estimates do not reflect this reduction.
SSA officials told us that it would be too difficult and costly to take such special circumstances into consideration when estimating benefits.
Rather, SSA has included in the statements descriptions of certain circumstances that may result in workers’ receiving Social Security benefits that are greater or less than the estimated amount. Our work shows that it would be very difficult for SSA to modify its PEBES benefit estimates to reflect these circumstances.
section_title: SSA Has Taken Steps to Enhance the PEBES; Public Reaction Has Been Positive
paragraphs: Since the PEBES was first developed, SSA has conducted several small-scale and national surveys to assess the general public’s reaction to receiving an unsolicited PEBES. In addition, SSA has conducted a series of focus groups with the public and SSA employees to elicit their opinions of the statement and to determine what parts of it they did and did not understand.
In response to this feedback, SSA revised the statement. For example, early statements routinely provided benefit estimates for age 65, the earliest age at which workers could retire and receive their full Social Security retirement benefit, and for delayed retirement at age 70. When SSA learned that many people were interested in the effect of early retirement on their benefits, SSA added an estimate for retirement at age 62. In addition, as it revised the statement, SSA applied a computerized readability formula to it and concluded that the PEBES could be understood by those who read at a seventh grade level, which is consistent with SSA’s standard for agency notices.
Overall public reaction to receiving an unsolicited PEBES has been consistently favorable. In a nationally representative survey conducted during a 1994 pilot test, the majority of the respondents indicated they were glad to receive their statements. In addition, 95 percent of the respondents said the information provided was helpful to their families. Overall, older individuals reacted more favorably to receiving a PEBES than did younger individuals. In addition, SSA representatives who answer the toll-free telephone calls from the public have stated that most callers say they are pleased that they received a PEBES and that the information is useful to them for financial planning.
section_title: Clearly Communicating SSA Program and Benefit Information Could Further Enhance the PEBES’ Value
paragraphs: Although SSA has taken steps to improve the PEBES, we found that the current statement still provides too much information, which may overwhelm the reader, and it presents the information in a way that undermines its usefulness. These weaknesses are attributable, in part, to the process SSA used to develop the PEBES. Additional information and expanded explanations have made the statement longer, but some explanations still confuse readers. Moreover, SSA has not collected detailed information from its front-line workers on the public’s response to the PEBES.
Research suggests that, in general, people find forms, notices, and statements difficult to use and understand. For this reason, many people may approach a PEBES-like statement “with fear, frustration, insecurity, and hesitation.” To overcome this challenge, the design expert we consulted suggested that such statements include the following:
An obvious purpose: Readers need to know immediately why they received the statement, what information it contains, and what they are expected to do with the information.
An attractive and functional design and organization: The statement should look easy to read, the sections should be clearly labeled, and the organization should be evident at a glance. When readers need explanations to understand complex information, the explanations should appear with the information.
Easy-to-understand explanations: Readers need explanations of complex programs and benefits in the simplest and most straightforward language possible.
subsections: section_title: Commissioner’s Message Does Not Effectively Convey Purpose
paragraphs: In the 1996 PEBES, the message from the Commissioner of Social Security does not clearly explain why SSA is providing the statement. Although the message does include information on the statement’s contents and the need for individuals to review the earnings recorded by SSA, its presentation is uninviting, according to the design expert we consulted. More specifically, the type is too dense; the lines are too long; white space is lacking; and the key points are not highlighted. On the basis of these findings, SSA officials told us they have revised the Commissioner’s message for the 1997 PEBES to make it shorter and less complex. “The Social Security Board of Trustees projects that the system will continue to have adequate resources to pay benefits in full for more than 30 years. This means that there is time for the Congress to make changes needed to safeguard the program’s financial future. I am confident these actions will result in the continuation of the American public’s widespread support for Social Security.”
Some participants in SSA focus groups, however, thought the message suggested that the resources would not necessarily be there after 30 years. For example, one participant in a 1994 focus group who reviewed a similar Commissioner’s message said, “... first thing I think about when I read the message is,  is not going to be there for me.” The focus group results suggest that the future solvency of the Social Security system may be too complex a topic to address adequately in the PEBES.
section_title: Design and Organization Are Not User Friendly
paragraphs: Comments from SSA’s public focus groups, SSA employees, and benefit experts indicate that the statement contains too much information and is too complex. In a 1994 focus group summary, for example, SSA reported that younger workers aged 25 to 35 wanted “a much simplified form—a single page—with estimated benefits and how much in taxes they paid into the system with the remainder of the information put in a pamphlet for future reference.” Moreover, given the length and complexity of the current statement, some focus group participants and benefit experts suggested that SSA add an index or a table of contents to help readers navigate the statement.
SSA has not used the best layout and design to help the reader identify the most important points and move easily from one section to the next. The structure of the statement is not clear at a glance. Readers cannot immediately grasp what the sections of the statement are and in which order they should read them, according to the design expert with whom we consulted. The statement lacks effective use of features such as bulleting and highlighting, which would make it more user friendly.
In addition, the PEBES is disorganized: information does not appear where needed. The statement has a patchwork of explanations scattered throughout, requiring readers to flip from one page to another to find needed information. For example, page two begins by referring the reader to page four, and page three contains six references to information on other pages. Furthermore, to understand how the benefit estimates were developed and any limitations to these estimates, a PEBES recipient must read explanations spread over five pages. SSA representatives who answer the PEBES toll-free telephone number told us that callers frequently fail to realize that the answers to their questions can be found within the document. In fact, we observed the representatives telling callers to turn to a certain page in the statement to answer their questions.
With benefit estimate explanations spread over several pages, individuals may miss important information. For example, the PEBES benefit estimate appears on page three; the explanation that the benefit estimate may be overstated for certain federal workers is not found until the bottom of page five. Without fully reviewing this additional information, a reader may not realize that the PEBES benefit estimate could be overstated.
In addition, some of the explanations needed to fully understand information in the PEBES are located within the answer to a question that the PEBES recipient may not read. For example, the statement explains that the retirement benefit is reflected in today’s dollars. This explanation, however, is located in the answer to the following question: “When I requested a statement like this several years ago, my retirement benefit was higher. What happened?” Readers skipping the answer to this question would not know key information about the value of their estimate in today’s economy.
section_title: Explanations Are Not Always Easy to Understand
paragraphs: Because the PEBES addresses complex programs and issues, explaining these points in simple, straightforward language is challenging. Although SSA made changes to improve the explanation of work credits, for example, many people still do not understand what these credits are, the relevance of the credits to their benefits, and how the credits are accumulated.
The public also frequently asks questions about the PEBES’ explanation of family benefits. Family benefits are difficult to calculate and explain because their amounts are dependent on a number of factors, such as the age of the spouse and the spouse’s eligibility for benefits on his or her own work record. Informing the public about family benefits, however, is especially important: a 1995 survey revealed that as much as 40 percent of the public is unaware of these benefits.
section_title: Weaknesses of the PEBES Are Linked to SSA’s Approach
paragraphs: A team of representatives from a cross section of SSA offices governs SSA’s decisions on the PEBES’ development, testing, and implementation. The team has revised and expanded the statement in response to feedback on individual problems. The design expert we consulted observed that the current statement “appears to have been the result of too many authors, without a designated person to review the entire piece from the eyes of the readers. It seems to have developed over time, piecemeal . . ..”
Although SSA officials have obtained the public’s feedback, they have missed some key opportunities along the way to improve the statement. While SSA conducted tests to ensure that the PEBES could be read at a seventh grade level, it has not conducted formal comprehension tests.For example, SSA could have administered either oral or written tests to a sample of readers to determine whether they actually understood SSA’s explanations of certain complex issues. These tests would have provided SSA with quantifiable, objective information to use in revising the statement. SSA has also failed to take advantage of information from its workers who answer the public’s questions about the PEBES every day. SSA currently has front-line workers record the reason people call, but the information collected does not provide sufficient detail for SSA to understand the problems people are having with the PEBES.
section_title: No Consensus Exists on the Best Model for the Statement
paragraphs: Although the public and benefit experts agree that the current statement contains too much information, a standard benefit statement model does not exist within the public or private sector, and there is no clear consensus on how best to present benefit information. The Canadian government chose to use a two-part document when it began sending out benefit statements in 1985. The Canada Pension Plan’s one-page statement provides specific individual information, including the earnings record and benefit estimates. A separate brochure details the program explanations. The first time the Plan mails the statement, it sends both the one-page individual information and the detailed brochure; subsequent mailings contain only the single page with the individual information.
Although some focus group participants and benefit experts prefer a two-part format, others believe that all the information should remain in a single document, fearing that statement recipients will lose or might not read the separate explanations. SSA has twice tested the public’s reaction to receiving two separate documents. On the basis of a 1987 focus group test, SSA concluded that it needed to either redesign the explanatory brochure or incorporate the information into one document. SSA chose the latter approach. In a 1994 test, people indicated that they preferred receiving one document; however, the single document SSA used in the test contained less information and had a more readable format than the current PEBES.
section_title: Redesign Plans Do Not Fully Consider Costs
paragraphs: SSA, through the Government Printing Office, has awarded a 2-year contract for printing the statements for fiscal years 1997 and 1998. These statements will have the same format as the current PEBES with only a few wording changes. SSA is considering a more extensive redesign of the PEBES for the fiscal year 1999 mailings, which it will implement only if it will save money on printing costs.
By focusing on reduced printing costs as the main reason for redesigning the PEBES, SSA is overlooking the hidden costs of the statement’s existing weaknesses. For example, if people do not understand why they got the statement or have questions about information provided in the statement, they may call or visit SSA, creating more work for SSA staff. Furthermore, if the PEBES frustrates or confuses people, it could undermine public confidence in SSA and its programs.
Our work suggests, and experts agree, that the PEBES’ value could be enhanced by several changes. Yet SSA’s redesign team is focusing on reducing printing costs without considering all of the factors that would ensure that the PEBES is a cost-effective document.
section_title: Conclusions
paragraphs: The PEBES initiative is an important step toward better informing the public about SSA’s programs and benefits. However, extensive revisions to the PEBES are needed to ensure that the statement communicates effectively. To best convey information to the public about SSA’s programs and benefits, the PEBES needs an improved layout and design, as well as simplified explanations. SSA will need to start now to complete these changes before its 1999 redesign target date, because revising the PEBES will involve time to collect data and to develop and test alternatives. SSA can help ensure that the changes target the most significant weaknesses by systematically obtaining more detailed feedback from front-line workers. SSA can also ensure that the changes clarify the statement by conducting formal comprehension tests with a sample of future PEBES recipients.
In addition, SSA could evaluate alternative formats for communicating the information presented in PEBES. For example, SSA could present the Commissioner’s message in a separate cover letter accompanying the statement; alternatively, SSA could consider a two-part option, similar to the approach of the Canada Pension Plan. To select the most cost-effective option, SSA needs to collect and assess additional cost information on available options and test different PEBES formats.
Our work suggests that improving the PEBES will require attention from SSA’s senior leadership. For example, how best to balance the public’s need for information with the problems resulting from providing too much information warrants senior management involvement.
section_title: Recommendations to the Commissioner of Social Security
paragraphs: In order for the PEBES to better convey information to the public about SSA’s programs and benefits, we recommend that SSA revise the current statement to improve its layout and design and to simplify explanations. We also recommend that SSA evaluate and test alternative formats for communicating the information presented in the PEBES and the accompanying Commissioner’s message.
section_title: Agency Comments
paragraphs: We obtained comments on a draft of this report from SSA. SSA officials agreed with our conclusions and recommendations and provided specific information on the steps they plan to take to improve the PEBES (see app. II).
We are sending copies of this report to the Commissioner of Social Security and other interested parties. Copies will also be made available to others on request. If you or your staff have any questions concerning this report, please call me on (202) 512-7215 or Cynthia Fagnoni, Assistant Director, on (202) 512-7202. Other major contributors to this report include Kay Brown, Evaluator-in-Charge; Hans Bredfeldt, Senior Evaluator; and Nora Landgraf and Elizabeth Jones, Evaluators.
section_title: Personal Earnings and Benefit Estimate Statement
section_title: Comments From the Social Security Administration
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