C alculations indicating that the current Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selected legal issues that may be raised regarding entitlement to Social Security benefits as Congress considers possible changes to the Social Security program in view of projected long-range shortfalls in the Social Security Trust Funds. Social Security benefits are administered pursuant to Title II of the Social Security Act, known as the Old Age, Survivors and Disability Insurance (OASDI) program . Title II is part of a larger social insurance program in which Congress uses its power to tax and spend for the general welfare to promote the social goals of aiding the aged, survivors of workers, disabled persons, and persons of limited means. Beneficiaries under Title II have a legal entitlement to receive Social Security benefits as set forth by the Social Security Act and as administered by the Social Security Administration (SSA), an independent agency in the executive branch. An individual's right to Social Security benefits is in a sense "earned," since there is a general relationship between OASDI benefits and wages earned and the tax paid thereon. However, benefits are not directly measured by the amount of payments made through the years into the system. Thus, the fact that Social Security benefits are financed by taxes on an employee's wages does not provide a limit on Congress's power to fix the levels of benefits under the Social Security Act, or the conditions upon which they may be paid. The Supreme Court's landmark decision in Flemming v. Nestor provided an analysis of the relationship between a beneficiary's legal entitlement to receive Social Security benefits and the power of Congress to change that entitlement by amending the underlying statute. The Court in that case upheld a provision, Section 202(a) of the Social Security Act, that terminated Social Security benefits to a person deported for membership in the Communist Party. Nestor at one time had been a member of the Communist Party. Later he began receiving Social Security benefits which were cut off when he was deported to his native Bulgaria. Nestor argued that he had a "property right" in his Social Security benefits and that, by cutting off those benefits, the government had made an unlawful "taking" of his benefits that contravened the Fifth Amendment. The Court, however, disagreed. Justice Harlan wrote: To engraft upon the Social Security system a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to everchanging conditions which it demands.... It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and has since retained, a clause expressly reserving to it "[t]he right to alter, amend, or repeal any provision" of the act. §1104, 49 Stat. 648, 42 U.S.C. §1304. That provision makes express what is implicit in the institutional needs of the program.... We must conclude that a person covered by the act has not such a right in benefit payments as would make every defeasance of "accrued" interests violative of the Due Process Clause of the Fifth Amendment. The inherent ability of Congress to modify the provisions of Title II of the Social Security Act, even to the extent of affecting the benefits an individual is currently receiving, is thus well established. The same principle that current benefit amounts may be modified has been applied to other, similar programs involving pensions, such as Federal Civil Service Retirement. One significant example is the Supreme Court affirmance, without opinion, of a decision of a three-judge district court in National Association of Retired Federal Employees v. Horner. The district court in that case upheld a provision of the Balanced Budget and Emergency Deficit Control Act, which suspended paying a scheduled cost-of-living adjustment (COLA) for federal retirees, saying that it did not violate the Takings Clause of the Fifth Amendment, which states that private property shall not be taken for public use without just compensation. The dispute centered on whether the provision of the act, signed by the President on December 12, 1985, which suspended any automatic spending increase that first would be paid during the period beginning with the date of enactment, constituted a taking of private property of the retirees. The section providing for the COLA, 5 U.S.C. §8340(b), provided that it would take effect on December 1 of each year. While Section 8340(b) made the COLA effective on December 1, it was not scheduled to be paid until January 2, 1986. The retirees argued that the COLA for the 12 months after December 1, 1985, became their private property on December 1, 1985, and, consequently, that the suspension signed on December 12, 1985, took their property which had accrued between December 1 and 12 without compensation in violation of the Takings Clause. The court rejected their claim, asserting that, "It is utterly clear, however, that the statute [Section 8340(b)] cannot be read as plaintiffs wish." It cited an earlier case, Stouper v. Jones , as dispositive . The appellant in the Stouper case retired in 1953 and began receiving disability annuity payments pursuant to the law then in force. In 1956, Congress amended the law to discontinue benefits to recipients whose earning capacity was restored to a level fairly comparable to the current rate of pay for the position held immediately prior to retirement. After the Retirement Division of the Civil Service Commission determined that the appellant had been restored to that earning capacity, her disability annuity was terminated. The appellant asserted that the 1956 amendment could not constitutionally be applied in her case because at the time she retired she acquired a vested right to an annuity that could not be taken from her by subsequent legislation. The U.S. Court of Appeals for the District of Columbia in Stouper said that "[I]t is well settled that a pension granted by the government confers no right which cannot be revised, modified, or recalled by subsequent legislation. United States ex rel. Burnett v. Teller , 107 U.S. 64 (1882)." The court in the Stouper case added that benefits under the Civil Service Retirement Act are similar to those under the Social Security Act; they are not based on an employee's contributions to the retirement fund, but instead on the employee's earnings record and years of service. It was noted that the Retirement Act pays higher benefits when a deceased employee is survived by a widow or widower and children, than when he or she is survived only by a widow or widower even though the employee's contribution to the Civil Service Retirement and Disability Fund had been the same in either case. "We conclude that an employee has no right under the Retirement Act based on contractual annuity principles, and hold that the appellant had no vested right to the disability annuity which was terminated." The U.S. Supreme Court also has made clear that the payment of Social Security taxes conveys no contractual rights to Social Security benefits. In 1937 the High Court upheld the constitutionality of the Social Security Act in Helvering v. Davis . In doing so, the Court held that the Social Security program is not an insurance program. The court noted, "The proceeds of both employee and employer taxes are to be paid into the treasury like any other internal revenue generally, and are not earmarked in any way." The Court, in essence, deferred to Congress on the question of which welfare schemes fall within the ambit of the Constitution's General Welfare Clause. Later, in Flemming , the Court rejected any comparison of Social Security with insurance or an annuity: It is apparent that the noncontractual interest of an employee covered by the act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments. The absence of contractual rights extends to government pensions in general. In Dodge v. Board Education , a retired school teacher challenged the constitutionality of a state statute that reduced her retirement annuity from $1,500 to $500. The statute in effect when she retired said that, "Each person so retired ... shall be paid the sum of fifteen hundred ($1500) annually and for life from the date of such retirement." The Supreme Court did not interpret this mandatory language ("shall," "annually and for life") to supersede a subsequent state statute that reduced the amount of the annual annuity, saying that, "The presumption is that a law is not intended to create private contractual or vested rights but merely declares a policy until the legislature shall ordain otherwise." The presumption that pension statutes do not preclude Congress from decreasing or eliminating benefits at a future time rests on the recognition that legislative bodies require flexibility in public welfare matters. "[O]ur cases are clear that legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15-16 (1976). While acknowledging this latitude, the Supreme Court in Flemming nevertheless indicated that congressional action may be subject to some constitutional restraint: Quoting from an earlier case, the Court in Flemming said that "Whether wisdom or unwisdom resides in the scheme of benefits set forth in Title II [of the Social Security Act], it is not for us to say. The answer for such inquiries must come from Congress, not the courts. Our concern here, as often, is with power, not with wisdom." Helvering v. Davis, [301 U.S. 619] supra, at 644 [1937]. Particularly when we deal with a withholding of a noncontractual benefit under a social welfare program such as this, we must recognize that the Due Process Clause can be thought to interpose a bar only if the statute manifests a patently arbitrary classification, utterly lacking in rational justification.