Social Security (United States)
In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program and is administered by the Social Security Administration. The original Social Security Act was signed into law by Franklin D. Roosevelt in 1935, and the current version of the Act, as amended, encompasses several social welfare and social insurance programs. The average monthly Social Security benefit for December 2019 was $1,382. The total cost of the Social Security program for the year 2019 was $1.059 trillion or about 5 percent of U.S.  GDP for 2019. Social Security is funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Wage and salary earnings in covered employment, up to an amount specifically determined by law (see tax rate table below), are subject to the Social Security payroll tax. Wage and salary earnings above this amount are not taxed. In 2021, the maximum amount of taxable earnings is $142,800. Social Security is nearly universal, with 94 percent of individuals in paid employment in the United States working in covered employment. However, about 6.6 million state  and local government workers in the United States, or 28 percent of all state and local workers, are not covered by Social Security but rather pension plans operated at the state or local level. Social Security payroll taxes are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund, the two Social Security Trust Funds. Social Security revenues exceeded expenditures between 1983 and 2009 which increased trust fund balances. The retirement of the large baby-boom generation, however, will lower  balances. Without legislative changes, trust fund reserves are projected to be depleted in the years 2034 and 2065 for the OASI and DI funds, respectively. Should depletion occur, incoming payroll tax and other revenue would only be sufficient to pay 76 percent of OASI benefits starting in 2035 and 92 percent of DI benefits starting in 2065. With few exceptions, all legal residents working in the United States now have an individual Social Security Number. History. Social Security timeline A limited form of the Social Security program began, during President Franklin D. Roosevelt's first term, as a measure to  implement "social insurance" during the Great Depression of the 1930s. The Act was an attempt to limit unforeseen and unprepared-for dangers in modern life, including old age, disability, poverty, unemployment, and the burdens of widow(er)s with and without children. Opponents, however, decried the proposal as socialism. In a Senate Finance Committee hearing, Senator Thomas Gore (D-OK) asked Secretary of Labor Frances Perkins, "Isn't this socialism?" She said it was not, but he continued, "Isn't this a teeny-weeny bit of socialism?" The provisions of Social Security have been changing since the 1930s, shifting in response to  economic worries as well as coverage for the poor, dependent children, spouses, survivors and the disabled. By 1950, debates moved away from which occupational groups should be included to get enough taxpayers to fund Social Security to how to provide more benefits. Changes in Social Security have reflected a balance between promoting "equality" and efforts to provide "adequate" and affordable protection for low wage workers. Major programs. The larger and better known programs under the Social Security Act are: The Social Security Administration (SSA) administers two of these programs (OASDI and SSI). Benefits. Benefit types. The Social Security program in  the United States pays benefits to three broad categories of individuals: retired individuals and some family members, disabled persons and some family members, and survivors. Within these broad categories, the program defines more specific types of beneficiaries. For example, spouses and divorced spouses are distinct categories, with somewhat different eligibility requirements. Survivor benefits include several categories including aged widow(er)s, aged surviving divorced spouses, disabled widow(er)s, disabled surviving divorced spouses, paternal and maternal orphans, and widow(er)s caring for minor or disabled children. As of 2020, there were about 65 million individuals receiving Social Security benefits. Individuals receiving Retirement Insurance Benefits constitute  the largest group of beneficiaries, with 49.3 million retired workers or family members receiving monthly payments. Social Security Disability Insurance benefits were paid to 8.2 million disabled workers and 1.5 million dependents (children and spouses). About 5.9 million individuals, including 1.9 million children, received some type of survivor benefit from Social Security. Some individuals qualify for more than one type of benefit, but program rules on dual entitlement generally prevent the payment of two full benefits. For example, a person eligible for a retirement benefit and a higher spouse benefit will receive the full retirement benefit and a partial spouse  benefit. The dual entitlement rules disproportionately affect women (6.9 million women in 2019) because historically they have earned less than current or former husbands and this leads to retirement benefits for women that are often lower than the full spouse benefit for which they qualify. In addition, Social Security beneficiaries with low income and limited resources may qualify for additional income through the Supplemental Security Income (SSI) program. SSI is separate from the Social Security program, but it is administered by SSA. In 2020, 2.7 million Social Security beneficiaries received additional income through SSI. System financing. Social Security payments to  beneficiaries, which totaled $1.05 trillion in 2019, are generally financed by payroll taxes on workers in Social Security covered employment, trust fund reserves, and some income taxation of Social Security benefits. The payroll tax rate totals 12.4 percent of earnings up to the taxable maximum (the rate is 6.2 percent from workers and 6.2 percent from employers and 12.4 percent from the self-employed). The OASI Trust Fund and the DI Trust Fund are legally separate. For employees and employers combined, the OASI payroll taxes are 10.6 percent and the DI payroll taxes are 1.8 percent. In 2019, trust  fund reserves for the OASI and DI programs were $2.8 trillion and $93 billion, respectively. Income taxation of some Social Security benefits brought in $34.9 billion for OASI and $1.6 billion for DI in 2019. Assessments of system financing often focus on the combined programs together (OASI and DI) and focus on key measures such as trust fund depletion date, actuarial balance over a 75 year period, and comparisons of program costs to U.S. GDP. Regarding trust fund depletion, the Social Security Trustees, based on technical work by the Social Security Administration's actuaries, project the  combined OASDI trust fund will be depleted in 2035. The Penn Wharton Budget Model (University of Pennsylvania) projects depletion in 2032-2034, depending on the shape of the economic recovery in the U.S. following the COVID-19 pandemic. With regard to actuarial balance, the Social Security Trustees estimate a 75-year actuarial deficit of 3.21 percent of payroll. This is approximately the total payroll tax increase that would be necessary to keep the system solvent for 75 years. The figure is designed to illustrate the size of the deficit. Legislation could close the deficit in ways other than raising the payroll  tax rate. Because taxable earnings are a fraction of GDP, sometimes the system's finances are put into context by using GDP. Social Security's cost are currently 5.0 percent of U.S. GDP. Program costs will rise to 5.9 percent of GDP by 2038 and will, approximately, remain at that level through 2094. In the past, legislation has been enacted to prevent trust fund depletion. Should the trust funds be depleted, Social Security would still have revenue coming into the system from payroll taxes. The Social Security trustees estimate that revenue would be sufficient to pay 79 percent of the  program's benefits. There has been debate about a trust fund depletion scenario, however, regarding whether monthly benefits would be lowered or whether full amounts would be paid but not on a timely basis. The amount of the monthly Social Security benefit to which a worker is entitled currently depends upon the earnings record they have paid FICA or SECA taxes on and upon the age at which the retiree chooses to begin receiving benefits. That said, the U.S. Supreme Court ruled in Flemming v. Nestor (1960) that no one has a contractual right to Social Security benefits. Medicare is  a separate program from Social Security, although disabled and aged (65 or older) Social Security beneficiaries qualify for Medicare. The financing for Medicare (United States) is also based on payroll taxes, trust fund reserves, and the taxation of some Social Security benefits. Primary Insurance Amount and Monthly Benefit Amount calculations. Workers in Social Security covered employment pay FICA (Federal Insurance Contributions Act) or SECA (Self Employed Contributions Act) taxes and earn quarters of coverage if earnings are above minimum amounts specified in the law. Workers with 40 quarters of coverage (QC) are "fully insured" and eligible for retirement benefits. Retirement  benefit amounts depend upon the average of the person's highest 35 years of "adjusted" or "indexed" earnings. A person's payroll-taxable earnings from earlier years are adjusted for economy-wide wage growth, using the national average wage index (AWI), and then averaged. If the worker has fewer than 35 years of covered earnings these non-contributory years are assigned zero earnings. The sum of the highest 35 years of adjusted or indexed earnings divided by 420 (35 years times 12 months per year) produces a person's Average Indexed Monthly Earnings or AIME. The AIME is then used  to calculate the Primary Insurance Amount or PIA. For workers who turn 62 in 2021, the PIA computation formula is: (a) 90 percent of the first $996 of average indexed monthly earnings, plus (b) 32 percent of average indexed monthly earnings between $996 and $6,002, plus (c) 15 percent of average indexed monthly earnings over $6,002 For workers who turn 62 in the future, the 90, 32, and 15 percent factors in the computation formula will remain the same but the dollar amounts in the formula (called bend points) will increase by wage growth in the  national economy, as measured by the AWI. Because the AIME and the PIA calculation incorporate the AWI, Social Security benefits are said to be wage indexed. Because wages typically grow faster than prices, the PIAs for workers turning 62 in the future will tend to be higher in real terms but similar relative to average earnings in the economy at the time age 62 is attained. Monthly benefit amounts are based on the PIA. Once the PIA is computed, it is indexed for price inflation over time. Thus, Social Security monthly benefit amounts retain their purchasing power throughout a person 's retirement years. A worker who first starts receiving a retirement benefit at the full retirement age receives a monthly benefit amount equal to 100 percent of the PIA. A worker who claims the retirement benefit before the full retirement age receives a reduced monthly benefit amount and a worker who claims at an age after the full retirement age (up to age 70) receives an increased monthly amount. The 90, 32, and 15 percent factors in the PIA computation lead to higher replacement rates for persons with lower career earnings. For example, a retired individual whose average earnings are  below the first bend point can receive a monthly benefit at the full retirement age that equals 90 percent of the person's average monthly earnings before retirement. The table shows replacement rates for workers who turned 62 in 2013. The PIA computation formula for disabled workers parallels that for retired workers except the AIME is based on fewer years to reflect disablement before age 62. The monthly benefit amount of a disabled worker is 100 percent of PIA. Benefits for spouses, children, and widow(er)s depend on the PIAs of a spouse or a deceased spouse. Aged spouse and divorced  spouse beneficiaries can receive up to 50 percent of the PIA. Survivor benefit rates are higher and aged widow(er)s and aged surviving divorced spouses can receive 100 percent of the PIA. Federal, state and local employees who have elected (when they could) NOT to pay FICA taxes are eligible for a reduced FICA benefits and full Medicare coverage if they have more than forty quarters of qualifying Social Security covered work. To minimize the Social Security payments to those who have not contributed to FICA for 35+ years and are eligible for federal, state and local benefits, which are  usually more generous, Congress passed the Windfall Elimination Provision, WEP. The WEP provision will not eliminate all Social Security or Medicare eligibility if the worker has 40 quarters of qualifying income, but calculates the benefit payments by reducing the 90% multiplier in the first PIA bendpoint to 40–85% depending on the number of Years of Coverage. Foreign pensions are subject to WEP. A special minimum benefit, based on an alternative PIA calculation, is available for some workers with long careers but low earnings. However, it is rarely higher than the regularly-computed PIA and thus few workers qualify for the  special minimum benefit. Only 32,000 individuals received the special minimum benefit in 2019. The benefits someone is eligible for are potentially so complicated that potential retirees should consult the Social Security Administration directly for advice. Many questions are addressed and at least partially answered on many online publications and online calculators. How workers can get estimates of benefits. The Social Security Administration (SSA) provides benefit estimates to workers through the Social Security Statement. The Statement can be accessed online by opening an online account with SSA called "my Social Security". With that account, workers can also construct "what if" scenarios , helping them to understand the effect on monthly benefits if they work additional years or delay the start of retirement benefits. The "my Social Security" account also offers other services, allowing individuals to request a replacement Social Security card or check the status of an application. A printed copy of the Social Security Statement is mailed to workers age 60 or older. In 2021, SSA began producing "Retirement Ready" fact sheets, available online and as part of the online Statement, that tailor retirement planning information to different age groups (young, middle age, and older workers). SSA also has a Benefits  Calculators web page with several stand-alone online calculators that help individuals estimate their benefits and prepare for retirement. These include benefit calculators for spouses, calculators for persons affected by the Windfall Elimination Provision or the Government Pension Offset and calculators to determine a person's full retirement age or the effect of the earnings test on benefits. SSA also provides a life expectancy calculator to help with retirement planning. Full retirement age (FRA). If a person first claims a retirement benefit at the full retirement age (FRA), the individual will receive a monthly benefit amount equal to 100 percent  of the individual's primary insurance amount (PIA). If first claimed before the FRA, the monthly benefit amount is smaller than 100 percent of PIA and if claimed after the FRA the monthly amount is higher than 100 percent of PIA. Sometimes the full retirement age is referred to as the normal retirement age. Historically, the FRA was age 65. The 1983 Amendments to the Social Security Act gradually increased the FRA and, for individuals born in 1960 or later, the FRA is 67. The early retirement age (age 62) has not changed, but the monthly benefit amount paid at  the early retirement age is lower if a person has a higher FRA. For example, when the FRA was age 65, the early retirement benefit was 80 percent of the worker's PIA. For a person with a FRA of 67, the early retirement benefit is 70 percent of PIA. Individuals who first claim retirement benefits after the FRA (and up to age 70) receive delayed retirement credits that increase the monthly benefit amount by 8 percent per year of delayed claiming. For example, if a person has a FRA of 67 and waits until age 70 to claim retirement  benefits, the individual's monthly benefit amount will be 124 percent of PIA. When a retirement beneficiary dies, a widow(er) or surviving divorced spouse is generally eligible for a monthly benefit amount equal to that received by the retirement beneficiary. Thus, a worker who delays retirement increases both the monthly benefit amount of the retirement benefit and, ultimately, the benefit a survivor receives. Many press articles, guides, and studies have focused on whether it is optimal to claim benefits at the full retirement age or some other age. The Social Security Administration produces a publication called "When to Start Receiving  Retirement Benefits" that is designed to help individuals understand the issues involved in deciding when to begin benefits. The Center for Retirement Research at Boston College produced a guide designed to help individuals make informed claiming decisions. Between 1985 and 2015, claiming of retirement benefits at the early retirement age became much less common and claiming at the full retirement age or later more common. In 2019, 1 in 4 individuals claimed at the early retirement age. From 2009 through 2019, the percentage of men claiming retirement benefits after the full retirement age increased from 4.1 percent to 16.2 percent . The effects of the COVID-19 pandemic and ensuing recession and recovery on benefit claiming, however, are not yet known. The full retirement age is relevant for some benefit types other than retirement benefits. For example, aged spouses and aged survivors who claim spouse or survivor benefits before the full retirement age receive reduced spouse or survivor benefits. The increase in the full retirement age from the 1983 Amendments to the Social Security Act was phased in at a slightly different pace for survivor benefits and the full retirement age is 67 for survivors born in 1962 or later. Many aged  survivors, however, are well past the full retirement age when the worker dies and thus can receive full survivor benefits immediately upon the worker's death. For some types of Social Security benefits, benefits are not reduced or increased based on the age the benefits are first claimed. For example, a full monthly benefit amount (100 percent of PIA) is paid to disabled workers regardless of the age at which benefits start. At the full retirement age, the Social Security Administration reclassifies disabled workers as retired workers but the individual's monthly benefit amount is not affected. Delayed benefits. If  a worker delays receiving Social Security retirement benefits until after they reach full retirement age, the benefit will increase by two-thirds of one percent of the PIA per month. After age 70 there are no more increases as a result of delaying benefits. Social Security uses an "average" survival rate at your full retirement age to prorate the increase in the amount of benefit increase so that the total benefits are roughly the same whenever you retire. Women may benefit more than men from this delayed benefit increase since the "average" survival rates are based on both men and  women and women live approximately three years longer than men. The other consideration is that workers have only a limited number of years of "good" health left after they reach full retirement age and unless they enjoy their job they may be passing up an opportunity to do something else they may enjoy doing while they are still relatively healthy. Benefits while continuing work. Due to changing needs or personal preferences, a person may go back to work after retiring. In this case, it is possible to get Social Security retirement or survivors benefits and work at the same time . A worker who is of full retirement age or older may (with spouse) keep all benefits, after taxes, regardless of earnings. But, if this worker or the worker's spouse are younger than full retirement age and receiving benefits and earn "too much", the benefits will be reduced. If working under full retirement age for the entire year and receiving benefits, Social Security deducts $1 from the worker's benefit payments for every $2 earned above the annual limit of $15,120 (2013). Deductions cease when the benefits have been reduced to zero and the worker will get  one more year of income and age credit, slightly increasing future benefits at retirement. For example, if you were receiving benefits of $1,230/month (the average benefit paid) or $14,760 a year and have an income of $29,520/year above the $15,120 limit ($44,640/year) you would lose all ($14,760) of your benefits. If you made $1,000 more than $15,200/year you would "only lose" $500 in benefits. You would get no benefits for the months you work until the $1 deduction for $2 income "squeeze" is satisfied. Your  first social security check will be delayed for several monthsthe first check may be only a fraction of the "full" amount. The benefit deductions change in the year you reach full retirement age and are still workingSocial Security deducts only one dollar in benefits for every three you earn above $40,080 in 2013 for that year and has no deduction thereafter. The income limits change (presumably for inflation) year by year. Spouse's benefit and government pension offsets. The spouse or divorced spouse of a retirement beneficiary is eligible for a Social Security spouse benefit if the spouse or  divorced spouse is 62 or older. The benefit amount is equal to 50 percent of the retirement beneficiary's Primary Insurance Amount if the spouse claims the benefit at the full retirement age or later. If a person is eligible for both a retirement benefit based the person's own work in Social Security covered employment and a spouse benefit based on a spouse's work in covered employment, SSA will pay a total amount approximately equal to the higher of the two benefits. For example, if at the full retirement age, a spouse claims a retirement benefit of $ 300 and a spouse benefit of $450, SSA will pay the person a $300 retirement benefit and a $150 dollar partial spouse benefit for a total benefit of $450. A spouse is eligible after a one-year duration of marriage requirement is met and a divorced spouse is eligible for spousal benefits if the marriage lasted for at least ten years and the person applying is not currently married. Payment of benefits to a divorced spouse does not reduce the Social Security benefits of the retired worker or family members of the retired worker, such as  the worker's current spouse. A divorced person can claim spousal benefits once the former spouse is eligible for retirement benefits, regardless of whether the former spouse has claimed those retirement benefits. Spousal benefits are reduced if claimed before the full retirement age. The reduction is 25/36 of 1% per month for the first 36 months and 5/12 of 1% for each additional month earlier than the full retirement age. This typically works out to between 50% and 32.5% of the retirement beneficiary's Primary Insurance Amount. There is no increase for starting spousal benefits "after" the full retirement age . Although Social Security rules are gender-neutral, spousal benefits are disproportionately paid to women. Because of trends in marriage and workforce participation, retirement benefits are projected to become increasingly important for women, but spouse and survivor benefits will still be common. Because spouse benefits are only a 50 percent benefit and because divorced individuals do not share resources with a current husband or wife, divorced spouse beneficiaries have poverty rates that are "quite high." About 29 percent of divorced spouse beneficiaries are in poverty compared to only about 5.4 percent of married spouse beneficiaries. There is a Social Security government  pension offset that will reduce or eliminate any spousal (or ex-spouse) or widow(er)'s benefits if the spouse or widow(er) is also receiving a government (federal, state, or local) pension from work that did not require paying Social Security taxes. The basic rule is that Social Security benefits will be reduced by two-thirds of the spouse's or widow(er)'s government pension. If the spouse's or widow(er)'s government pension exceeds 150% of the "normal" spousal or widow(er)'s benefit the spousal benefit is eliminated. For example, a "normal" spousal or widow(er)'s benefit of $1,000 /month would be reduced to $0.00 if the spouse or widow(er)'s if already drawing a non-FICA taxed government pension of $1,500/month or more per month. Pensions from work where Social Security taxes were paid do not reduce Social Security spousal or widow(er)'s benefits. Pensions received from foreign countries do not cause GPO; however, a foreign pension may be subject to the WEP. Widow(er) benefits. If a worker covered by Social Security dies, a surviving spouse can receive survivors' benefits if a 9-month duration of marriage is met. If a widow(er) waits until Full  Retirement Age, they are eligible for 100 percent of their deceased spouse's PIA. If the death of the worker was accidental the duration of marriage test may be waived. A divorced spouse may qualify if the duration of marriage was at least ten full years and the widow(er) is not currently married, or remarried after attainment of age 60 (50 if disabled and eligible for specific types of benefits prior to the date of marriage). A father or mother of any age with a child age 16 or under or a disabled adult child in his or her care  may be eligible for benefits. The earliest age for a non-disabled widow(er)'s benefit is age 60. If the worker received retirement benefits prior to death, the benefit amount may not exceed the amount the worker was receiving at the time of death or 82.5% of the PIA of the deceased worker (whichever is more). If the surviving spouse starts benefits before full retirement age, there is an actuarial reduction. If the worker earned delayed retirement credits by waiting to start benefits after their full retirement age, the surviving spouse will have those credits applied to their benefit. If  the worker died before the year of attainment of age 62, the earnings will be indexed to the year in which the surviving spouse attained age 60. Children's benefits. Children of a retired, disabled or deceased worker receive benefits as a "dependent" or "survivor" if they are under the age of 18, or as long as attending primary or secondary school up to age 19 years and 2months; or are over the age of 18 and were disabled before the age of 22. The benefit for a child on a living parent's record is 50% of the PIA , for a surviving child the benefit is 75% of the PIA. The benefit amount may be reduced if total benefits on the record exceed the family maximum. In "Astrue v. Capato" (2012), the Supreme Court unanimously held that children conceived after a parent's death (by in vitro fertilization procedure) are not entitled to Social Security survivors' benefits if the laws of the state in which the parent's will was signed do not provide for such benefits. Disability. A worker who has worked long enough and recently enough (based on "quarters of coverage" within the recent past) to be  covered "can" receive disability benefits. These benefits start after five full calendar months of disability, regardless of his or her age. The eligibility formula requires a certain number of credits (based on earnings) to have been earned overall, and a certain number within the ten years immediately preceding the disability, but with more-lenient provisions for younger workers who become disabled before having had a chance to compile a long earnings history. The worker must be unable to continue in his or her previous job and unable to adjust to other work, with age, education, and work experience taken into  account; furthermore, the disability must be long-term, lasting twelve months, expected to last twelve months, resulting in death, or expected to result in death. As with the retirement benefit, the amount of the disability benefit payable depends on the worker's age and record of covered earnings. Supplemental Security Income (SSI) uses the same disability criteria as the insured social security disability program, but SSI is not based upon insurance coverage. Instead, a system of means-testing is used to determine whether the claimants' income and net worth fall below certain income and asset thresholds. Severely disabled children may  qualify for SSI. Standards for child disability are different from those for adults. Disability determination at the Social Security Administration has created the largest system of administrative courts in the United States. Depending on the state of residence, a claimant whose initial application for benefits is denied can request "reconsideration" or a "hearing before an Administrative Law Judge (ALJ)". Such hearings sometimes involve participation of an independent vocational expert (VE) or medical expert (ME), as called upon by the ALJ. Reconsideration involves a re-examination of the evidence and, in some cases, the opportunity for a hearing before a (non -attorney) disability hearing officer. The hearing officer decides the case and provides justification for the finding in writing. If the claimant is denied at the reconsideration stage, (s)he may request a hearing before an Administrative Law Judge. In some states, SSA has implemented a pilot program that eliminates the reconsideration step and allows claimants to appeal an initial denial directly to an Administrative Law Judge. Because the number of applications for Social Security disability is very large (approximately 650,000 applications per year), the number of hearings requested by claimants often exceeds the capacity of Administrative Law Judges. The number of  hearings requested and availability of Administrative Law Judges varies geographically across the United States. In some areas of the country, it is possible for a claimant to have a hearing with an Administrative Law Judge within 90 days of the request. In other areas, waiting times of 18 months are not uncommon. After the hearing, the Administrative Law Judge (ALJ) issues a decision in writing. The decision can be "Fully Favorable" (the ALJ finds the claimant disabled as of the date that (s) he alleges in the application through the present), "Partially Favorable" (the ALJ finds the claimant disabled at  some point, but not as of the date alleged in the application; OR the ALJ finds that the claimant "was" disabled but has improved), or "Unfavorable" (the ALJ finds that the claimant was not disabled at all). Claimants can appeal decisions to Social Security's Appeals Council, which is in Virginia. The Appeals Council does not hold hearings; it accepts written briefs. Response time from the Appeals Council can range from twelve weeks to more than three years. Claimant who disagrees with the Appeals Council's decision can appeal the case in the federal district court. As in most federal  court cases, an unfavorable district court decision can be appealed to the appropriate United States Court of Appeals, and an unfavorable appellate court decision can be appealed to the United States Supreme Court. The Social Security Administration has maintained its goal for judges to resolve 500–700 cases per year but Administrative Law Judges struggle to meet this goal. While 81% of Administrative Law Judges met this productivity level in 2019, only 18% achieved this case disposition target in 2020. Office of Hearing Operations staffing and work procedure disruptions related to the COVID-19 pandemic have doubtlessly contributed to lower Administrative Law  Judge productivity in 2020. The debate about the social security system in the United States has been ongoing for decades and there is much concern about its sustainability. Current operation. Joining and quitting. Obtaining a Social Security number for a child is voluntary. Further, there is no general legal requirement that individuals join the Social Security program unless they want or have to work. Under normal circumstances, FICA taxes or SECA taxes will be collected on all wages. About the only way to avoid paying either FICA or SECA taxes is to join a religion that does not believe in  insurance, such as the Amish or a religion whose members have taken a vow of poverty (see IRS publication 517 and 4361). Federal workers employed before 1987, various state and local workers including those in some school districts who had their own retirement and disability programs were given the one-time option of joining Social Security. Many employees and retirement and disability systems opted to keep out of the Social Security system because of the cost and the limited benefits. It was often much cheaper to obtain much higher retirement and disability benefits by staying in their original retirement and  disability plans. Now only a few of these plans allow new hires to join their existing plans without also joining Social Security. In 2004, the Social Security Administration estimated that 96% of all U.S. workers were covered by the system with the remaining 4% mostly a minority of government employees enrolled in public employee pensions and not subject to Social Security taxes due to historical exemptions. It is possible for railroad employees to get a "coordinated" retirement and disability benefits. The U.S. Railroad Retirement Board (or "RRB") is an independent agency in the executive branch of the United States government  created in 1935 to administer a social insurance program providing retirement benefits to the country's railroad workers. Railroad retirement TierI payroll taxes are coordinated with social security taxes so that employees and employers pay TierI taxes at the same rate as social security taxes and have the same benefits. In addition, both workers and employers pay TierII taxes (about 6.2% in 2005), which are used to finance railroad retirement and disability benefit payments that are over and above social security levels. TierII benefits are a supplemental retirement and disability benefit system that pays 0.875% times years of service times  average highest five years of employment salary, in addition to Social Security benefits. The FICA taxes are imposed on nearly all workers and self-employed persons. Employers are required to report wages for covered employment to Social Security for processing Forms W-2 and W-3. Some specific wages are not part of the Social Security program (discussed below). Internal Revenue Code provisions section 3101 imposes payroll taxes on individuals and employer matching taxes. Section 3102 mandates that employers deduct these payroll taxes from workers' wages before they are paid. Generally, the payroll tax is imposed on everyone in employment earning "wages  as defined in 3121 of the Internal Revenue Code. and also taxes net earnings from self-employment. Trust fund. Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury (technically, the Federal Old-Age and Survivors Insurance Trust Fund", as established by ). Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they did between 1983 and 2009, the excess is invested in special series, non-marketable U.S. government bonds. Thus, the Social Security Trust Fund indirectly finances the federal government's general purpose deficit spending. In 2007 , the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $2.2trillion. Some regard the Trust Fund as an accounting construct with no economic significance. Others argue that it has specific legal significance because the Treasury securities it holds are backed by the "full faith and credit" of the U.S. government, which has an obligation to repay its debt. The Social Security Administration's authority to make benefit payments as granted by Congress extends only to its current revenues and existing Trust Fund balance, i.e. redemption of its holdings of Treasury securities. Therefore, Social  Security's ability to make full payments once annual benefits exceed revenues depends in part on the federal government's ability to make good on the bonds it has issued to the Social Security trust funds. As with any other federal obligation, the federal government's ability to repay Social Security is based on its power to tax and borrow and the commitment of Congress to meet its obligations. In 2009 the Office of the Chief Actuary of the Social Security Administration calculated an unfunded obligation of $15.1trillion for the Social Security program. The unfunded obligation is the difference  between the future cost of Social Security (based on several demographic assumptions such as mortality, work force participation, immigration, and age expectancy) and total assets in the Trust Fund given the expected contribution rate through the current scheduled payroll tax. This unfunded obligation is expressed in present value dollars and is a part of the Fund's long-range actuarial estimates, not necessarily a certainty of what will occur in the long run. An Actuarial Note to the calculation says "the term obligation is used in lieu of the term liability, because liability generally indicates a contractual obligation (as in  the case of private pensions and insurance) that cannot be altered by the plan sponsor without the agreement of the plan participants." Office of Hearings Operations (OHO, formerly ODAR or OHA). On August 8, 2017, Acting Commissioner Nancy A. Berryhill informed employees that the Office of Disability Adjudication and Review ("ODAR") would be renamed to Office of Hearings Operations ("OHO"). The hearing offices had been known as "ODAR" since 2006, and the Office of Hearings and Appeals ("OHA") before that. OHO administers the ALJ hearings for the Social Security Administration. Administrative Law Judges ("ALJs") conduct hearings and issue decisions . After an ALJ decision, the Appeals Council considers requests for review of ALJ decisions, and acts as the final level of administrative review for the Social Security Administration (the stage at which "exhaustion" could occur, a prerequisite for federal court review). Benefit payout comparisons. Some federal, state, local and education government employees pay no Social Security but have their own retirement, disability systems that nearly always pay much better retirement and disability benefits than Social Security. These plans typically require vesting (working 5–10 years for the same employer before becoming eligible for retirement). But their retirement typically depends on only  the average of the best 3–10 years salaries times some retirement factor (typically 0.875%–3.0%) times years employed. This retirement benefit can be a "reasonably good" (75–85% of salary) retirement at close to the monthly salary they were last employed at. For example, if a person joined the University of California retirement system at age 25 and worked for 35 years they could receive 87.5% (2.5% × 35) of their average highest three year salary with full medical coverage at age 60. Police and firefighters who joined at 25 and worked for 30 years could receive 90% (3.0% × 30) of  their average salary and full medical coverage at age 55. These retirements have cost of living adjustments (COLA) applied each year but are limited to a maximum average income of $350,000/year or less. Spousal survivor benefits are available at 100–67% of the primary benefits rate for 8.7% to 6.7% reduction in retirement benefits, respectively. UCRP retirement and disability plan benefits are funded by contributions from both members and the university (typically 5% of salary each) and by the compounded investment earnings of the accumulated totals. These contributions and earnings are held in a trust fund that is invested . The retirement benefits are much more generous than Social Security but are believed to be actuarially sound. The main difference between state and local government sponsored retirement systems and Social Security is that the state and local retirement systems use compounded investments that are usually heavily weighted in the stock market securities, which historically have returned more than 7.0%/year on average despite some years with losses. Short term federal government investments may be more secure but pay much lower average percentages. Nearly all other federal, state and local retirement systems work in a similar fashion with different benefit retirement ratios . Some plans are now combined with Social Security and are "piggy backed" on top of Social Security benefits. For example, the current Federal Employees Retirement System, which covers the vast majority of federal civil service employees hired after 1986, combines Social Security, a modest defined-benefit pension (1.1% per year of service) and the defined-contribution Thrift Savings Plan. The current Social Security formula used in calculating the benefit level (primary insurance amount or PIA) is progressive vis-à-vis lower average salaries. Anyone who worked in OASDI covered employment and other retirement would be entitled to both the alternative  non-OASDI pension and an Old Age retirement benefit from Social Security. Because of their limited time working in OASDI covered employment the sum of their covered salaries times inflation factor divided by 420 months yields a low adjusted indexed monthly salary over 35 years, AIME. The progressive nature of the PIA formula would in effect allow these workers to also get a slightly higher Social Security Benefit percentage on this low average salary. Congress passed in 1983 the Windfall Elimination Provision to minimize Social Security benefits for these recipients. The basic provision is that the first salary bracket, $ 0–791/month (2013) has its normal benefit percentage of 90% reduced to 40–90%see Social Security for the exact percentage. The reduction is limited to roughly 50% of what you would be eligible for if you had always worked under OASDI taxes. The 90% benefit percentage factor is not reduced if you have 30 or more years of "substantial" earnings. The average Social Security payment of $1,230/month ($14,760/year) in 2013 is only slightly above the federal poverty level for one$11,420/yr and below the poverty guideline of $15,500/yr for two. For this reason, financial advisers  often encourage those who have the option to do so to supplement their Social Security contributions with private retirement plans. One "good" supplemental retirement plan option is an employer-sponsored 401(K) (or 403(B)) plan when they are offered by an employer. 58% of American workers have access to such plans. Many of these employers will match a portion of an employee's savings dollar-for-dollar up to a certain percentage of the employee's salary. Even without employer matches, individual retirement accounts (IRAs) are portable, self-directed, tax-deferred retirement accounts that offer the potential to substantially increase retirement  savings. Their limitations include: the financial literacy to tell a "good" investment account from a less advantageous one; the savings barrier faced by those who are in low-wage employment or burdened by debt; the requirement of self-discipline to allot from an early age the required percentage of salary into "good" investment account(s); and the self–discipline needed to leave it there to earn compound interest until needed after retirement. Financial advisers often suggest that long-term investment horizons should be used, as historically short-term investment losses "self correct", and most investments continue to deliver good average investment  returns. The IRS has tax penalties for withdrawals from IRAs, 401(K)s, etc. before the age of , and requires mandatory withdrawals once the retiree reaches 70; other restrictions may also apply on the amount of tax-deferred income one can put in the account(s). For people who have access to them, self-directed retirement savings plans have the potential to match or even exceed the benefits earned by federal, state and local government retirement plans. International agreements. People sometimes relocate from one country to another, either permanently or on a limited-time basis. This presents challenges to businesses, governments, and individuals  seeking to ensure future benefits or having to deal with taxation authorities in multiple countries. To that end, the Social Security Administration has signed treaties, often referred to as "Totalization Agreements", with other social insurance programs in various foreign countries. Overall, these agreements serve two main purposes. First, they eliminate dual Social Security taxation, the situation that occurs when a worker from one country works in another country and is required to pay Social Security taxes to both countries on the same earnings. Second, the agreements help fill gaps in benefit protection for workers who have divided their careers between  the United States and another country. The following countries have signed totalization agreements with the SSA (and the date the agreement became effective):<ref name="www.ssa.gov/international"></ref> Social Security number. A side effect of the Social Security program in the United States has been the near-universal adoption of the program's identification number, the Social Security number, as the "de facto" U.S. national identification number. The social security number, or SSN, is issued pursuant to section 205(c)(2) of the Social Security Act, codified as . The government originally stated that the SSN would not be a means of identification, but currently  a multitude of U.S. entities use the Social Security number as a personal identifier. These include government agencies such as the Internal Revenue Service as well as the military, in addition to private agencies such as banks, colleges and universities, health insurance companies, and employers. Although the Social Security Act itself does not require a person to have a Social Security Number (SSN) to live and work in the United States, the Internal Revenue Code does generally require the use of the social security number by individuals for federal tax purposes: Importantly, most parents apply for Social Security numbers for  their dependent children in order to include them on their income tax returns as a dependent. Everyone filing a tax return, as taxpayer or spouse, must have a Social Security Number or Taxpayer Identification Number (TIN) since the IRS is unable to process returns or post payments for anyone without an SSN or TIN. The Privacy Act of 1974 was in part intended to limit usage of the Social Security number as a means of identification. Paragraph (1) of subsection (a) of section7 of the Privacy Act, an uncodified provision, states in part: However, the Social Security Act provides: Further , paragraph (2) of subsection (a) of section7 of the Privacy Act provides in part: The exceptions under section7 of the Privacy Act include the Internal Revenue Code requirement that social security numbers be used as taxpayer identification numbers for individuals. Demographic and revenue projections. In each year since 1982, OASDI tax receipts, interest payments and other income have exceeded benefit payments and other expenditures, for example by more than $150billion in 2004. As the "baby boomers" move out of the work force and into retirement, however, expenses will come to exceed tax receipts and then, after several more years , will exceed all OASDI trust income, including interest. At that point the system will begin drawing on its trust fund Treasury Notes, and will continue to pay benefits at the current levels until the Trust Fund is exhausted. In 2013, the OASDI retirement insurance fund collected $731.1billion and spent $645.5billion; the disability program (DI) collected $109.1billion and spent $140.3billion; Medicare (HI) collected $243.0billion and spent $266.8billion and Supplementary Medical Insurance, SMI, collected $293.9billion and spent $307.4billion. In 2013 all Social Security programs except the retirement trust fund (OASDI) spent more than they  brought in and relied on significant withdrawals from their respective trust funds to pay their bills. The retirement (OASDI) trust fund of $2.541trillion is expected to be emptied by 2033 by one estimate as new retirees become eligible to join. The disability (DI) trust fund's $153.9billion will be exhausted by 2018; the Medicare (HI) trust fund of $244.2billion will be exhausted by 2023 and the Supplemental Medical Insurance (SMI) trust fund will be exhausted by 2020 if the present rate of withdrawals continueseven sooner if they increase. The total "Social Security" expenditures in 2013 were $ 1,360billion dollars, which was 8.4% of the $16,200billion GNP (2013) and 37.0% of the federal expenditures of $3,684billion (including a $971.0billion deficit). All other parts of the Social Security program: medicare (HI), disability (DI) and Supplemental Medical (SMI) trust funds are already drawing down their trust funds and are projected to go into deficit in about 2020 if the present rate of withdrawals continue. As the trust funds are exhausted either benefits will have to be cut, fraud minimized or taxes increased. In 2005, this exhaustion of the OASDI Trust Fund was projected to occur in 2041  by the Social Security Administration or by 2052 by the Congressional Budget Office, CBO. Thereafter, however, the projection for the exhaustion date of this event was moved up slightly after the recession worsened the U.S. economy's financial picture. The 2011 OASDI Trustees Report stated: Annual cost exceeded non-interest income in 2010 and is projected to continue to be larger throughout the remainder of the 75-year valuation period. Nevertheless, from 2010 through 2022, total trust fund income, including interest income, is more than is necessary to cover costs, so trust fund assets will continue to grow during that  time. Beginning in 2023, trust fund assets will diminish until they become exhausted in 2036. Non-interest income is projected to be sufficient to support expenditures at a level of 77 percent of scheduled benefits after trust fund exhaustion in 2036, and then to decline to 74 percent of scheduled benefits in 2085. In 2007, the Social Security Trustees suggested that either the payroll tax could increase to 16.41 percent in 2041 and steadily increased to 17.60 percent in 2081 or a cut in benefits by 25 percent in 2041 and steadily increased to an overall cut of 30 percent  in 2081. The Social Security Administration projects that the demographic situation will stabilize. The cash flow deficit in the Social Security system will have leveled off as a share of the economy. This projection has come into question. Some demographers argue that life expectancy will improve more than projected by the Social Security Trustees, a development that would make solvency worse. Some economists believe future productivity growth will be higher than the current projections by the Social Security Trustees. In this case, the Social Security shortfall would be smaller than currently projected. Tables published by the government's National Center  for Health Statistics show that life expectancy at birth was 47.3 years in 1900, rose to 68.2 by 1950 and reached 77.3 in 2002. The latest annual report of the Social Security Agency (SSA) trustees projects that life expectancy will increase just six years in the next seven decades, to 83 in 2075. A separate set of projections, by the Census Bureau, shows more rapid growth. The Census Bureau projection is that the longer life spans projected for 2075 by the Social Security Administration will be reached in 2050. Other experts, however, think the past gains in life expectancy can not be repeated, and add that the adverse effect on the system's finances may be partly offset if health improvements or reduced retirement benefits induce people to stay in the workforce longer. Actuarial science, of the kind used to project the future solvency of social security, is subject to uncertainty. The SSA actually makes three predictions: optimistic, midline, and pessimistic (until the late 1980s it made four). The Social Security crisis that was developing prior to the 1983 reforms resulted from midline projections that turned out to be too optimistic. It has been argued that the overly pessimistic projections  of the mid to late 1990s were partly the result of the low economic growth (according to actuary David Langer) assumptions that resulted in pushing back the projected exhaustion date (from 2028 to 2042) with each successive Trustee's report. During the heavy-boom years of the 1990s, the midline projections were too pessimistic. Obviously, projecting out 75 years is a significant challenge and, as such, the actual situation might be much better or much worse than predicted. The Social Security Advisory Board has on three occasions since 1999 appointed a Technical Advisory Panel to review the methods and assumptions  used in the annual projections for the Social Security trust funds. The most recent report of the Technical Advisory Panel, released in June 2008 with a copyright date of October 2007, includes a number of recommendations for improving the Social Security projections. , under current law, the Congressional Budget Office reported that the "Disability Insurance trust fund will be exhausted in fiscal year 2017 and the Old-Age and Survivors Insurance trust fund will be exhausted in 2033." Costs of Social Security have already started to exceed income since 2018. This means the trust funds have already begun to be empty  and will be fully depleted in the near future. As of 2018, the projections made by the Social Security Administration estimates that Social Security program as a whole will deplete all reserves by 2034. Increased spending for Social Security will occur at the same time as increases in Medicare, as a result of the aging of the baby boomers. One projection illustrates the relationship between the two programs: From 2004 to 2030, the combined spending on Social Security and Medicare is expected to rise from 8% of national income (gross domestic product) to 13%. Two-thirds of the increase occurs  in Medicare. In an annually issued report released in August 2021, the U.S. Treasury Department announced that the Old-Age and Survivors Trust Fund was projected to be able to pay scheduled benefits until 2033 while the Disability Insurance Trust Fund was projected to be able to pay its benefits through 2057, 1 year and 8 years earlier respectively than the previous report found. Ways to eliminate the projected shortfall. Social Security is predicted to start running out of having enough money to pay all prospective retirees at today's benefit payouts by 2034. Taxation. Tax on wages and self -employment income. Benefits are funded by taxes imposed on wages of employees and self-employed persons. As explained below, in the case of employment, the employer and employee are each responsible for one half of the Social Security tax, with the employee's half being withheld from the employee's pay check. In the case of self-employed persons (i.e., independent contractors), the self-employed person is responsible for the entire amount of Social Security tax. The portion of taxes collected from the employee for Social Security are referred to as "trust fund taxes" and the employer is required to  remit them to the government. These taxes take priority over everything, and represent the only debts of a corporation or LLC that can impose personal liability upon its officers or managers. A sole proprietor and officers of a corporation and managers of an LLC can be held personally liable for non-payment of the income tax and social security taxes whether or not actually collected from the employee. The "Federal Insurance Contributions Act" (FICA) (codified in the Internal Revenue Code) imposes a Social Security withholding tax equal to 6.20% of the gross wage amount, up to but not exceeding the  Social Security Wage Base ($97,500 for 2007; $102,000 for 2008; and $106,800 for 2009, 2010, and 2011). The same 6.20% tax is imposed on employers. For 2011 and 2012, the employee's contribution was reduced to 4.2%, while the employer's portion remained at 6.2%. In 2012, the wage base increased to $110,100. In 2013, the wage base increased to $113,700. For each calendar year for which the worker is assessed the FICA contribution, the SSA credits those wages as that year's covered wages. The income cutoff is adjusted yearly for inflation and other  factors. A separate payroll tax of 1.45% of an employee's income is paid directly by the employer, and an additional 1.45% deducted from the employee's paycheck, yielding a total tax rate of 2.90%. There is no maximum limit on this portion of the tax. This portion of the tax is used to fund the Medicare program, which is primarily responsible for providing health benefits to retirees. The Social Security tax rates from 1937–2010 can be accessed on the Social Security Administration's website. The combined tax rate of these two federal programs is 15.30% (7.65% paid by the  employee and 7.65% paid by the employer). In 2011–2012 it temporarily dropped to 13.30% (5.65% paid by the employee and 7.65% paid by the employer). For self-employed workers (who technically are not employees and are deemed not to be earning "wages" for federal tax purposes), the self-employment tax, imposed by the Self-Employment Contributions Act of 1954, codified as Chapter2 of Subtitle A of the Internal Revenue Code, , is 15.3% of "net earnings from self-employment." In essence, a self-employed individual pays both the employee and employer share of the tax, although half of the self-employment  tax (the "employer share") is deductible when calculating the individual's federal income tax. If an employee has overpaid payroll taxes by having more than one job or switching jobs during the year, the excess taxes will be refunded when the employee files his federal income tax return. Any excess taxes paid by employers, however, are not refundable to the employers. By Congressional Budget Office (CBO) calculations the lowest income quintile (0–20%) and second quintile (21–40%) of households in the U.S. pay an average income tax of −9.3% and −2.6% and Social Security taxes of 8.3% and 7.9% respectively. By  CBO calculations the household incomes in the first quintile and second quintile have an average Total Federal Tax rate of 1.0% and 3.8% respectively. Wages not subject to tax. Workers are not required to pay Social Security taxes on wages from certain types of work: Federal income taxation of benefits. Originally the benefits received by retirees were not taxed as income. Beginning in tax year 1984, with the Reagan-era reforms to repair the system's projected insolvency, retirees with incomes over $25,000 (in the case of married persons filing separately who did not live with the spouse at  any time during the year, and for persons filing as "single"), or with combined incomes over $32,000 (if married filing jointly) or, in certain cases, any income amount (if married filing separately from the spouse in a year in which the taxpayer lived with the spouse at any time) generally saw part of the retiree benefits subject to federal income tax. In 1984, the portion of the benefits potentially subject to tax was 50%. The Deficit Reduction Act of 1993 set the portion to 85%. Moreover, since the taxable income threshold is not indexed to inflation, the portion of  beneficiaries' social security payments subject to income tax has risen significantly in real terms since the threshold was set in 1984. Criticisms. Claim of discrimination against the poor and the middle class. Workers must pay 12.4 percent, including a 6.2 percent employer contribution, on their wages below the Social Security Wage Base ($142,800 in 2021), but no tax on income in excess of this amount. Therefore, high earners pay a lower percentage of their total income because of the income caps; because of this, and the fact there is no tax on unearned income, social security taxes are often  viewed as being regressive. However, benefits are adjusted to be significantly more progressive, even when accounting for differences in life expectancy. According to the non-partisan Congressional Budget Office, for people in the bottom fifth of the earnings distribution, the ratio of benefits to taxes is almost three times as high as it is for those in the top fifth. Despite its regressive tax rate, Social Security benefits are calculated using a progressive benefit formula that replaces a much higher percentage of low-income workers' pre-retirement income than that of higher-income workers (although these low-income workers pay  a higher percentage of their pre-retirement income). Supporters of the current system also point to numerous studies that show that, relative to high-income workers, Social Security disability and survivor benefits paid on behalf of low-income workers more than offset any retirement benefits that may be lost because of shorter life expectancy (this offset would apply only at a population level). Other research asserts that survivor benefits, allegedly an offset, actually exacerbate the problem because survivor benefits are denied to single individuals, including widow(er)s married fewer than nine months (except in certain situations), divorced widow(er)s married fewer than  ten years, and co-habiting or same-sex couples, unless they are legally married in their state of residence. Unmarried individuals and minorities tend to be less wealthy. Social Security's benefit formula provides 90% of average indexed monthly earnings (AIME) below the first "bend point" of $791/month, 32% of AIME between the first and second bend points $791 to $4781/month, and 15% of AIME in excess of the second bend point up to the Ceiling cap of $113,700 in 2013. The low income bias of the benefit calculation means that a lower paid  worker receives a much higher percentage of his or her salary in benefit payments than higher paid workers. In fact, a married low salaried worker can receive over 100% of their salary in benefits after retiring at the full retirement age. High-salaried workers receive 43% or less of their salary in benefits despite having paid into the "system" at the same rate (see benefit calculations above). To minimize the impact of Social Security taxes on low salaried workers the Earned Income Tax Credit and the Child Care Tax Credit were passed, which largely refund the FICA and or SECA  payments of low-salaried workers through the income tax system. By Congressional Budget Office (CBO) calculations the lowest income quintile (0–20%) and second quintile (21–40%) of households in the U.S. pay an average federal income tax of −9.3% and −2.6% of income and Social Security taxes of 8.3% and 7.9% of income respectively. By CBO calculations the household incomes in the first and second quintiles have an average total federal tax rate of 1.0% and 3.8% respectively. However, these groups also have by far the smallest percentage of American household incomesthe first quintile earns just 3.2% of all income, while  the second quintile earns only 8.4% of all income. Higher-income retirees will have to pay income taxes on 85% of their Social Security benefits and 100% on all other retirement benefits they may have. Marital status. The Social Security Act defines the rules for determining marital relationships for SSI recipients. The act requires that if a couple is cohabitating they should be considered married for purposes of the SSI program. Consequently, if the claimant is found disabled and found to be "holding out"; this claimant will be entitled to reduced or no SSI benefits. However, the Social Security Act  does not accept that a claimant "holding out as husband or wife" should be entitled of Survivor, Retirement or Widows benefits, when the claimant's "husband or wife" dies. SSA rules and regulations about marital status either prohibit (SRDI program) or reduce (SSI program) benefits to indigent claimants. Claim that politicians exempted themselves from the tax. Critics of Social Security have said that the politicians who created Social Security exempted themselves from having to pay the Social Security tax. When the federal government created Social Security, all federal employees, including the president and members of Congress, were exempt from having  to pay the Social Security tax, and they received no Social Security benefits. This law was changed by the Social Security Amendments of 1983, which brought within the Social Security system all members of Congress, the president and the vice president, federal judges, and certain executive-level political appointees, as well as all federal employees hired in any capacity on or after January 1, 1984. Many state and local government workers, however, are exempt from Social Security taxes because they contribute instead to alternative retirement systems set up by their employers. Claim that it is a Ponzi scheme. Critics have  drawn parallels between Social Security and Ponzi schemes, arguing that the sustenance of Social Security is due to continuous contributions over time. One criticism of the analogy is that while Ponzi schemes and Social Security have similar "structures" (in particular, a sustainability problem when the number of new people paying in is declining), they have different "transparencies". In the case of a Ponzi scheme, the fact that there is no return-generating mechanism other than contributions from new entrants is obscured whereas Social Security payouts have always been openly underwritten by incoming tax revenue and the interest on the Treasury  bonds held by or for the Social Security system. The sudden loss of confidence resulting in a collapse of a conventional Ponzi scheme when the scheme's true nature is revealed is unlikely to occur in the case of the Social Security system. Private sector Ponzi schemes are also vulnerable to collapse because they cannot compel new entrants, whereas participation in the Social Security program is a condition for joining the U.S. labor force. In connection with these and other issues, Robert E. Wright calls Social Security a "quasi" pyramid scheme in his book, "Fubarnomics". Estimated net benefits under  differing circumstances. In 2004, Urban Institute economists C. Eugene Steuerle and Adam Carasso created a Web-based Social Security benefits calculator. Using this calculator it is possible to estimate net Social Security benefits (i.e., estimated lifetime benefits minus estimated lifetime FICA taxes paid) for different types of recipients. In the book "Democrats and RepublicansRhetoric and Reality" Joseph Fried used the calculator to create graphical depictions of the estimated net benefits of men and women who were at different wage levels, single and married (with stay-at-home spouses), and retiring in different years. These graphs vividly show that generalizations about  Social Security benefits may be of little predictive value for any given worker, due to the wide disparity of net benefits for people at different income levels and in different demographic groups. For example, the graph below (Figure 168) shows the impact of wage level and retirement date on a male worker. As income goes up, net benefits get smallereven negative. However, the impact is much greater for the future retiree (in 2045) than for the current retiree (2005). The male earning $95,000 per year and retiring in 2045 is estimated to lose over $200,000 by participating in  the Social Security system. In the next graph (Figure 165) the depicted net benefits are averaged for people turning age 65 anytime during the years 2005 through 2045. (In other words, the disparities shown are not related to retirement.) However, we do see the impact of gender and wage level. Because women tend to live longer, they generally collect Social Security benefits for a longer time. As a result, they get a higher net benefit, on average, no matter what the wage level. The next image (Figure 166) shows estimated net benefits for married men and women at different wage  levels. In this particular scenario it is assumed that the spouse has little or no earnings and, thus, will be entitled to collect a spousal retirement benefit. According to Fried: Two significant factors are evident: First, every column in Figure 166 depicts a net benefit that is higher than any column in Figure 165. In other words, the average married person (with a stay-at-home spouse) gets a greater benefit per FICA tax dollar paid than does the average single person, no matter what the gender or wage level. Second, there is only limited progressivity among married workers with  stay-at-home spouses. Review Figure 166 carefully: The net benefits drop as the wage levels increase from $50,000 to $95,000; however, they increase as the wage levels grow from $5,000 to $50,000. In fact, net benefits are lowest for those earning just $5,000 per year. The last graph shown (Figure 167) is a combination of Figures 165 and 166. In this graph it is very clear why generalizations about the value of Social Security benefits are meaningless. At the $95,000 wage level a married person could be a big winner, getting net benefits  of about $165,000. On the other hand, he could lose an estimated $152,000 in net benefits if he remains single. Altogether, there is a "swing" of over $300,000 based upon the marriage decision (and the division of earnings between the spouses). In addition there is a large disparity between the high net benefits of the married person earning $95,000 ($165,152) versus the relatively low net benefits of the man or woman earning just $5,000 ($30,025 or $41,890, depending on gender). In other words, the high earner, in this scenario, gets a far  greater return on his FICA tax investment than does the low earner. In the book "How Social Security Picks Your Pocket" other factors affecting Social Security net benefits are identified: Generally, people who work for more than 35 years get a lower net benefit, all other factors being equal. People who do not live long after retirement age get a much lower net benefit. Finally, people who derive a high percentage of income from non-wage sources get high Social Security net benefits because they appear to be poor, when they are not. The progressive benefit formula for Social Security  is blind to the income a worker may have from non-wage sources, such as spousal support, dividends and interest, or rental income. Current controversies. Proposals to reform of the Social Security system have led to heated debate, centering on funding of the program. In particular, proposals to "privatize" funding have caused great controversy. Contrast with private pensions. Although Social Security is sometimes compared to private pensions, the two systems are different in a number of respects. It has been argued that Social Security is an insurance plan as opposed to a retirement plan. Unlike a pension, for example, Social  Security pays disability benefits. A private pension fund accumulates the money paid into it, eventually using those reserves to pay pensions to the workers who contributed to the fund; and a private system is not universal. Social Security cannot "prefund" by investing in marketable assets such as equities, because federal law prohibits it from investing in assets other than those backed by the U.S. government. As a result, its investments to date have been limited to special non-negotiable securities issued by the U.S. Treasury, although some argue that debt issued by the Federal National Mortgage Association and other  quasi-governmental organizations could meet legal standards. Social Security cannot by law invest in private equities, although some other countries (such as Canada) and some states permit their pension funds to invest in private equities. As a universal system, Social Security generally operates as a pipeline, through which current tax receipts from workers are used to pay current benefits to retirees, survivors, and the disabled. When there is an excess of taxes withheld over benefits paid, by law this excess is invested in Treasury securities (not in private equities) as described above. Two broad categories of private pension plans  are "defined benefit pension plans" and "defined contribution pension plans." Of these two, Social Security is more similar to a defined benefit pension plan. In a defined benefit pension plan, the benefits ultimately received are based on some sort of pre-determined formula (such as one based on years worked and highest salary earned). Defined benefit pension plans generally do not include separate accounts for each participant. By contrast, in a defined contribution pension plan each participant has a specific account with funds put into that account (by the employer or the participant, or both), and the ultimate benefit is  based on the amount in that account at the time of retirement. Some have proposed that the Social Security system be modified to provide for the option of individual accounts (in effect, to make the system, at least in part, more like a defined contribution pension plan). Specifically, on February 2, 2005, President George W. Bush made Social Security a prominent theme of his State of the Union Address. He described the Social Security system as "headed for bankruptcy", and outlined, in general terms, a proposal based on partial privatization. Critics responded that privatization would require huge new government borrowing  to fund benefit payments during the transition years. See Social Security debate (United States). Both "defined benefit" and "defined contribution" private pension plans are governed by the Employee Retirement Income Security Act (ERISA), which requires employers to provide minimum levels of funding to support "defined benefits" pensions. The purpose is to protect the workers from corporate mismanagement and outright bankruptcy, although in practice many private pension funds have fallen short in recent years. In terms of financial structure, the current Social Security system is analogous to an underfunded "defined benefit" pension ("underfunded" meaning not that it is in trouble, but  that its savings are not enough to pay future benefits without collecting future tax revenues). Contrast with insurance. Besides the argument over whether the returns on Social Security contributions should or can be compared to returns on private investment instruments, there is the question of whether the contributions are nonetheless analogous to pooled insurance premiums charged by for-profit commercial insurance companies to maintain and generate a return on a "risk pool of funds". Like any insurance program, Social Security "spreads risk" as the program protects workers and covered family members against loss of income from the wage earner's  retirement, disability, or death. For example, a worker who becomes disabled at a young age could receive a large return relative to the amount they contributed in FICA before becoming disabled, since disability benefits can continue for life. As in private insurance plans, everyone in the particular insurance pool is insured against the same risks, but not everyone will benefit to the same extent. The analogy to insurance, however, is limited by the fact that paying FICA taxes creates no legal right to benefits and by the extent to which Social Security is, in fact, funded by FICA taxes. During  2011 and 2012, for example, FICA tax revenue was insufficient to maintain Social Security's solvency without transfers from general revenues. These transfers added to the general budget deficit like general program spending. Private retirement savings crisis. While inflation-adjusted stock market values generally rose from 1978 to 1997, from 1998 through 2007 they were higher than in March 2013. This has caused workers' supplemental retirement plans such as 401(k)s to perform substantially more poorly than expected when current retirees were investing the bulk of their savings in them. In 2010, the median household retirement account balance for workers aged  55 to 64 was $120,000, which will provide only a trivial supplement to Social Security benefits, but about a third of households had no retirement savings at all. 75% of Americans nearing retirement age had less than $30,000 in their retirement accounts, which "Forbes" called "the greatest retirement crisis in American history." Court interpretation of the Act to provide benefits. The United States Court of Appeals for the Seventh Circuit has indicated that the Social Security Act has a moral purpose and should be liberally interpreted in favor of claimants when deciding what counted as covered wages for  purposes of meeting the quarters of coverage requirement to make a worker eligible for benefits. That court has also stated: "...[T]he regulations should be liberally applied in favor of beneficiaries" when deciding a case in favor of a felon who had his disability payments retroactively terminated upon incarceration. According to the court, that the Social Security Act "should be liberally construed in favor of those seeking its benefits can not be doubted." "The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a  lot awaits them when journey's end is near." Constitutionality. The constitutionality of Social Security is intricately linked to the evolving nature of Supreme Court jurisprudence on federal power (the 20th century saw a dramatic increase in allowed congressional action). When Social Security was first passed, there were significant questions over its constitutionality as the Court had found another pension scheme, the original Railroad Retirement Act, to violate the due process clause of the Fifth Amendment. Some, such as University of Chicago law professor Richard Epstein and Harvard University professor Robert Nozick, have argued that Social Security should be unconstitutional . In the 1937 U.S. Supreme Court case of "Helvering v. Davis", the Court examined the constitutionality of Social Security when George Davis of the Edison Electric Illuminating Company of Boston sued in connection with the Social Security tax. The U.S. District Court for the District of Massachusetts first upheld the tax. The District Court judgment was reversed by the Circuit Court of Appeals. Commissioner Guy Helvering of the Bureau of Internal Revenue (now the Internal Revenue Service) took the case to the Supreme Court, and the Court upheld the validity of the tax. During the 1930s President Franklin Delano Roosevelt  was in the midst of promoting the passage of a large number of social welfare programs under the New Deal and the Supreme Court struck down many of those programs (such as the Railroad Retirement Act and the National Recovery Act) as unconstitutional. Modified versions of the affected programs were afterwards approved by the Court, including Social Security. When "Helvering v. Davis" was argued before the Court, the larger issue of constitutionality of the old-age insurance portion of Social Security was not decided. The case was limited to whether the payroll tax was a suitable use of Congress's  taxing power. Despite this, no serious challenges regarding the system's constitutionality are now being litigated, and Congress's spending power may be more coextensive, as shown in cases like "South Dakota v. Dole" during the Reagan Administration. Fraud and abuse. Social Security Number theft. Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information. In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to "Dear Social Security Number And Card owner  and purporting to be from the Social Security Administration. The message informs the reader that someone illegally is using your Social Security number and assuming your identity" and directs the reader to a website designed to look like Social Security's Internet website. "I am outraged that someone would target an unsuspecting public in this manner," said Commissioner Jo Anne B. Barnhart. "I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud." Once directed to the phony website, the individual is reportedly asked to confirm his or  her identity with "Social Security and bank information". Specific information about the individual's credit card number, expiration date and PIN is then requested. "Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN," Commissioner Jo Anne B. Barnhart reported. Social Security Administration Inspector General O'Carroll recommended people always take precautions when giving out personal information. "You should never provide your Social Security number or other personal information over the Internet or by telephone unless you are extremely confident of the source to whom you are providing the  information," O'Carroll said. Fraud in the acquisition and use of benefits. Given the vast size of the program, fraud sometimes occurs. The Social Security Administration has its own investigatory unit to combat and prevent fraud, the Cooperative Disability Investigations Unit (CDIU). The Cooperative Disability Investigations (CDI) Program continues to be one of the most successful initiatives, contributing to the integrity of SSA's disability programs. In addition when investigating fraud in other SSA programs, the Social Security Administration may request investigatory assistance from other law enforcement agencies including the Office of the Inspector General as well as state and local  authorities. Restrictions on potentially deceptive communications. Because of the importance of Social Security to millions of Americans, many direct-mail marketers packaged their mailings to resemble official communications from the Social Security Administration, hoping recipients would be more likely to open them. In response, Congress amended the Social Security Act in 1988 to prohibit the private use of the phrase "Social Security" and several related terms in any way that would convey a false impression of approval from the Social Security Administration. The constitutionality of this law () was upheld in "United Seniors Association, Inc. v. Social Security Administration", 423 F.3d  397 (4th Cir. 2005), cert den 547 U.S. 1162; 126 S.Ct. 2346 (2006) (text at Findlaw). Public economics. Current recipients. The 2011 annual report by the program's Board of Trustees noted the following: in 2010, 54 million people were receiving Social Security benefits, while 157 million people were paying into the fund; of those receiving benefits, 44 million were receiving retirement benefits and 10 million disability benefits. In 2011, there will be 56 million beneficiaries and 158 million workers paying in. In 2010, total income was $781.1billion and expenditures were $712.5billion, which meant a total net increase  in assets of $68.6billion. Assets in 2010 were $2.6trillion, an amount that is expected to be adequate to cover the next ten years. In 2023, total income and interest earned on assets are projected to no longer cover expenditures for Social Security, as demographic shifts burden the system. By 2035, the ratio of potential retirees to working age persons will be 37 percentthere will be less than three potential income earners for every retiree in the population. At this rate the Social Security Trust Fund would be exhausted by 2036. Saving behavior. Social Security affects the saving behavior  of the people in three different ways. The wealth substitution effect occurs when a person saving for retirement recognizes that the Social Security system will take care of him and decreases his expectations about how much he needs to personally save. The retirement effect occurs when a taxpayer saves more each year in an effort to reduce the total number of years he must work to accumulate enough savings before retirement. The bequest effect occurs when a taxpayer recognizes a decrease in resources stemming from the Social Security tax and compensates by increasing personal savings to cover future expected costs  of having children. Reducing cost of living adjustment (COLA). At present, a retiree's benefit is annually adjusted for inflation to reflect changes in the consumer price index. Some economists argue that the consumer price index overestimates price increases in the economy and therefore is not a suitable metric for adjusting benefits, while others argue that the CPI underestimates the effect of inflation on what retired people actually need to buy to live. The current cost of living adjustment is based on the consumer price index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics  routinely checks the prices of 211 different categories of consumption items in 38 geographical areas to compute 8,018 item-area indices. Many other indices are computed as weighted averages of these base indices. CPI-W is based on a market basket of goods and services consumed by urban wage earners and clerical workers. The weights for that index are updated in January of every even-numbered year. People who say the CPI-W overestimates inflation recommend updating the weights each month; this produces the Chained Consumer Price Index for all urban consumers (C-CPI-U). People who say the C -CPI-U [or the unchained CPI for All Urban Consumers (CPI-U)] disadvantages the elderly point out that seniors consume more medical care than younger people, and that the costs of medical care have been rising faster than inflation in other parts of the economy. According to this view, the costs of the things the elderly buy have been rising faster than the market basket averaged to obtain CPI-W, CPI-U or C-CPI-U. Some have recommended fixing this by using a CPI for the Elderly (CPI-E). In 2003 economics researchers Hobijn and Lagakos estimated that the  social security trust fund would run out of money in 40 years using CPI-W and in 35 years using CPI-E. Consumption. According to a 2016 study in the "American Economic Journal: Macroeconomics", the Social Security benefit increases from 1952 to 1991 have a "large, immediate, and significant positive response of consumption". Health outcomes. According to a 2021 study, the expansion of old-age assistance under the 1935 Social Security Act reduced mortality among the elderly by 30-39%.