Social Security Act Amendments of 1954: A Summary and Legislative History

by WILBUR J. COHEN, ROBERT M. BALL, and ROBERT J. MYERS*

The Eighty-third Congress enacted amendments to the Social tended 24 months, to September 30, Security Act that make significant improvements in the old-age 1956. and survivors insurance program and also affect public assist• (3) Approval of the Pennsylvania ance. The article that follows summarises the major changes; and Missouri laws for aid to the blind articles on specific aspects of the amendments will appear in is extended for 2 additional years. future issues of the Bulletin. Old-Age and Survivors Insurance

HE Social Security Amend• million persons who in the course of Extension of Coverage ments of 1954 became Public a year work in jobs that have not At the end of 1953 the, old-age and TLaw No. 761 (Eighty-third Con• previously been covered. Approxi• survivors insurance program covered gress), on September 1, 1954, when mately 6 million of these persons are about 8 out of 10 of the Nation's President Eisenhower affixed his sig• covered on a compulsory basis and jobs; under the new law about 9 nature to H.R. 9366. about 4 million on an elective basis. out of 10 jobs will be covered at the The amendments were charac• The largest groups are farmers, beginning of 1955. The act extends terized by Oveta Culp Hobby, Secre• members of State and local govern• coverage to about 10 million persons tary of Health, Education, and ment retirement systems (under who, in the course of a year, work in Welfare, as representing "the most voluntary agreement), additional jobs that were not covered under significant advance for the social farm and domestic workers, minis• previous law. ters and members of religious orders security system since the inception Under the new law, coverage is ex• (on a voluntary basis;. and self- of survivors insurance 15 years ago." tended to farmers, members of State employed members of specified pro• The inclusion of self-employed farm• and local retirement systems (other fessions. ers—the largest group covered by than policemen and firemen), addi• the amendments—will have the (2) Primarily to overcome the tional farm workers and domestic "eventual effect of reducing ma• handicap of the late entry into the workers, ministers and members of terially the need for public assistance system for these newly covered work• religious orders, and certain other in rural areas just as it has in urban ers, up to 5 years of lowest or no smaller groups, including some pro• areas. ... The expansion of the earnings are dropped in computing fessional self-employed persons. The social security system as a result of benefits and the insured-status re• exclusion in the earlier law of self- these important amendments will quirements are liberalized. employed lawyers and of self-em• contribute materially to building a (3) The total annual earnings on ployed physicians, dentists, and stronger and better America." which benefits and contributions are members of several other medically The new law amends the Federal based is raised from $3,600 to $4,300. related professions is continued. old-age and survivors insurance pro• (4) Benefits are increased, on the Other major groups that are still excluded are members of the Armed visions of the Social Security Act, average, about $6 a month for per• Forces, most Federal civilian em• the corresponding provisions of the sons now receiving old-age benefits, ployees, and policemen and firemen Internal Revenue Code, the public with proportionate increases for de• covered by a State or local govern• assistance titles of the Social Security pendents and survivors: the mini• ment retirement system. (A tem• Act, and the Railroad Retirement Act. mum old-age benefit is $30.00 and the porary provision enacted earlier Eight major amendments to the So• maximum $98.50. The increase is grants free wage credits of $160 a cial Security Act and other important effective with the September benefit month for periods of service in the modifications were adopted. payments. For those coming on the Armed Forces.) The major changes in the old-age rolls in the future the range will be from $30.00 to $108.50 for an indi• and survivors insurance program are Farm operators.—The amendments vidual and to $200 for a family. as follows: extend coverage to about 3.6 million (1) Coverage is extended, effective (5) The retirement test is liberal• self-employed farm operators. One January 1, 1955, to approximately 10 ised and improved. of the major stumbling blocks to (6) The benefit tights of disabled their coverage has been the apparent * Mr. Cohen is Director, Division of persons are protected. necessity of requiring low-income Research and Statistics, Office of Com• There are two-major amendments farm operators, who may have no in• missioner: Mr. Ball is Deputy Director of come-tax liability, to keep records the Bureau of Old-Age and Survivors in the public assistance program: Insurance; and Mr. Myers is Chief Actu• (1) The present Federal matching that they would not ordinarily main• ary of the Social Security Administration. formula for public assistance is ex• tain. The new legislation includes a simplified reporting procedure for survivors insurance agreement, if a coverage under a State agreement, the use of the low-income turner. referendum by secret written ballot at the option of the State, of civilian The farm operator with gross income is held among the members of the employees of State National Guard of not more than $1,800 in a year system and a majority of those eligi• units and certain inspectors of agri• who reports his income tax on a ble to vote in the referendum vote cultural products. Special provision cash basis may report either his in favor of coverage. is also made for coverage under the actual net earnings from farm self- The law continues the present ex• Utah agreement of employees of cer• employment, as determined on his clusion of policemen and firemen who tain educational institutions in posi• income-tax return, or 50 percent of are covered by a State or local re• tions covered by a retirement system his gross income. If his gross income tirement system. These two groups, and for retroactive coverage of mem• is more than $1,800, he must com• because of the special demands of bers of the Arizona Teachers' Retire• pute his net earnings, although he their work, usually have special pro• ment System. may report an assumed income of visions in their retirement systems Farm workers.—Under the 1950 $900 if his actual net income is less (lower retirement ages, for example), law, to be covered a farm worker than that amount. and most of the organizations repre• needed to be "regularly employed" Employees of State and local gov• senting policemen and firemen were by one employer and to receive cash ernments under retirement systems.— opposed to the coordination of their wages of $50 or more in a calendar In the course of a year about 3.5 provisions with the provisions of the quarter from that employer. The def• million employees (other than police• old-age and survivors insurance sys• inition of "regularly employed" was men and firemen) are in positions tem. complicated and difficult to apply. In covered by State and local retirement It is the policy of Congress, the general, after a farm worker had systems.1 The 1950 law provided for law states, that the protection of worked for one employer continuously covering State and local government members and beneficiaries of the re• for an entire calendar quarter, he was employees under voluntary agree• tirement systems should not be im• "regularly employed" in succeeding ments between the individual States paired as a result of coverage of the quarters if he worked for that em• and the Federal Government. It ex• members under old-age and survi• ployer on a full-time basis on at least cluded from coverage under such an vors insurance. This statement of 60 days during the quarter. Records agreement, however, employees in policy was designed by Congress to must have been kept over a substan• positions covered by a State or local make clear its intent in providing tial period before it was clear whether retirement system on the date the for coverage of this group; it does or not an individual was covered. agreement was made applicable to not have the effect of requiring that The new law substitutes a simple the coverage groups to which they the provisions of the retirement sys• coverage test for the old test. A farm 2 belong. tem be subject to Federal review. worker is covered with respect to his Under the 1950 law the only way The law also removes the possibility work for an employer if he is paid in which employees under a retire• that members of a system (other at least $100 in cash wages by that ment system could be covered was by than firemen and policemen) may be employer in a calendar year. The dissolving the system before the covered without a referendum by new test continues to exclude from group was brought under the Federal- dissolving the retirement system. coverage intermittent and short- State agreement. Several States and A State may cover without a refer• term workers and to avoid nuisance a large number of local governments endum employees who are in positions reporting of small amounts of wages save secured old-age and survivors covered by a retirement system but but will result in the coverage of insurance coverage for employees by who are not themselves eligible for most workers who make a living this method. In all but a few cases, membership. A State may also cover from farm work. These workers will where old-age and survivors insurance without a referendum at any time be credited with 1 quarter of cover• alone provides greater protection before January 1, 1958, employees age for $100 of annual wages, 2 quar• ters for $200, 3 for $300, and 4 for than the dissolved system, a supple• who are not now under a retirement $400. Coverage is extended to cotton mental system has then been estab• system and who could not have been gin workers. lished to replace the one abandoned. covered when their coverage group Under the new law, a State may was brought in because at that time The specific exclusion of turpen• bring members of a State or local they were under a retirement system. tine workers remains effective. Mexi• retirement system (except policemen A State may hold a referendum can contract farm workers also and firemen) under its old-age and among all of the members of a retire• continue to be excluded, and a new 1 Of this number, about 300,000 em• ment system or, for the purposes of provision excludes workers brought ployees were already covered under old- a referendum, it may treat any in from the British West Indies age and survivors insurance in December political subdivision or any combina• 1953. In audition, about 500.000 employees (under certificates of the Depart• were in State and local government em• tion of political subdivisions as ment of Agriculture) for short-term ployment covered by old-age and survi• having a separate retirement system. farm work. vors insurance but not by State or local Each public institution of higher retirement systems. The law as amended covers a total learning may also be considered as 2 Coverage was made available for mem- of approximately 2.1 million addi• ben of the Wisconsin retirement fund by having a separate retirement system. tional farm workers over the course special provisions enacted in 1953. Special provision is made for the of a year. Accountants, architects, engineers, domestic workers, be covered if they ligious orders working in a foreign and funeral directors.—The earlier are paid $50 in cash wages by an country or in a possession of the extension of coverage to the self- employer in a calendar quarter. They United States to compute their net employed specifically excluded certain may number as many as 50,000 earnings from self-employment with• professions. The 1954 amendments in the course of a year. The provi• out regard to the "earned income" bring under coverage some 100,000 sion retains the principle in the old deduction provisions in the Internal accountants, architects, engineers, law of applying the same coverage Revenue Code. Without such a pro• and funeral directors on the same test for these nonbusiness services vision, they would not be able to in• basis as that on which other non- that is applied to domestic services clude their wages and salaries in farm self-employed persons are cov• performed in private homes. Con• computing their self-employment ered. gress believed it was important to earnings for purposes of social se• Civilian employees of the Federal establish uniform tests for these two curity coverage. Government not covered by a retire• types of work because there are cer• Lay employees of nonprofit organi• ment system.—The new law extends tain kinds of nonbusiness services zations.—The amendments contain coverage to about 150,000 civilian em• that are not, strictly speaking, do• three provisions that make coverage ployees of the Federal Government mestic service in private homes but possible for additional lay employees and its instrumentalities who are not that are difficult to distinguish from of religious and other nonprofit or• now covered by retirement systems. domestic service. ganizations (whose coverage is on a Services of Federal employees covered Ministers and members of religious voluntary group basis) and so afford by old-age and survivors insurance orders.—The old law excluded from relief for certain employees who have under the former provisions are also coverage any service performed by a suffered hardship under the provi• creditable retroactively under the minister of a church in the exercise sions previously in effect. civil-service retirement system for of his ministry or by a member of a One of these provisions extends the those individuals who are later religious order in the exercise of the period allowed for election of cover• covered by the civil-service retire• duties required by the order. The age by additional employees of a ment system. The amendments pro• amendments permit ministers, Christ• nonprofit organization that, with the hibit, for the newly covered Federal ian Science practitioners, and those concurrence of at least two-thirds of employees, the crediting of the same members of religious orders who the lay employees, has elected cover• period of Federal service under any have not taken a vow of poverty to age. The other two provisions per• other Federal retirement system. obtain coverage by filing a certificate mit retroactive coverage in certain Domestic workers in private homes indicating their desire to be covered cases where coverage was not secured and others who perform work not in as self-employed persons. In general, because of a mistake or misunder• the course of the employer's business. application can be filed within 2 years standing on the part of either the —The new law covers all domestic after coverage becomes available or organization or the individual after the individual has become a workers who work in nonfarm private United States citizens employed minister, a Christian Science practi• homes and who are paid $50 in cash outside the United States by foreign tioner, or a member of a religious wages by an employer in a calendar subsidiaries of American employers. order. An election of coverage will quarter. It deletes the time require• —The 1950 law covered United States be effective for the taxable year with • ment of the 1950 legislation limiting citizens working outside the United respect to which it is filed, and for the coverage of domestic workers to States for American employers. The all subsequent years. those who work for a single employer new law extends this coverage to in• on at least 24 days during a calendar It was believed by Congress that clude United States citizens working quarter. The simplified test means voluntary coverage on an individual for foreign subsidiaries of American coverage during the course of a year basis, while not generally desirable, companies, at the option of the for about 200,000 more household was justified for this group. Some American company involved. These workers than does the old law. It churches have expressed the fear provisions make coverage available to also affords additional coverage for that their participation in the pro• roughly 100,000 United States citi• 50,000-100,000 workers who under gram as employers of ministers might zens. the old law were covered on some interfere with the principle of sep• but not all of their domestic jobs. American employers frequently find aration of church and State. Many Most of the domestic workers still it necessary to carry on their opera• church representatives also believe excluded from coverage are students, tions in other countries through sub• that individual ministers who do not housewives, and others who spend sidiaries established under the laws want coverage, on grounds of con• comparatively little time working for of a foreign country. The United science, should not be required to pay. Almost 90 percent of the per• States citizens working for such sub• participate. About 250,000 ministers sons whose major activity is domestic sidiaries are likely to have the same and members of religious orders are employment are covered by the law close economic and personal ties with affected. as amended. the United States, and the same ex• A special provision, designed pri• pectation of returning to the United Persons performing other types of marily to take care of missionaries States, as do United States citizens service not in the course of the em• working in a foreign country, per• working abroad for American em• ployer's trade or business will, like mits ministers and members of re• ployers. Their coverage will prevent the gaps in protection under old- requirements of some single pur• who first qualifies for benefits after age and survivors insurance that chaser, continues to be excluded from the effective date, or who had at would otherwise occur. coverage as an employee. least 6 quarters of coverage after Because the United States cannot Home workers who are not covered June 1953, or who qualifies for cer• levy the employer tax of the old-age as employees would continue to be tain types of benefit recomputations and survivors insurance program covered as self-employed persons if after the effective date, can elimin• upon foreign subsidiaries of Ameri• they meet the requirement of $400 ate up to 4 years of lowest or no can employers, the United States in net income from self-employment. earnings from the computation. If, citizens employed by these subsidi• Employees engaged in fishing and in addition to meeting these require• aries must be covered under volun• related activities. — Employees en• ments, he has at least 20 quarters tary provisions. Accordingly, the gaged in the catching of fish, shell• of coverage (acquired at any time), American employer involved must fish, and other aquatic species (ex• he can eliminate an additional low make an agreement with the Secre• cept salmon and halibut), either year. tary of the Treasury to pay the from the shore or as officers or crew This "dropout" of years of low social security taxes for all the members of vessels of 10 net tons or earnings will benefit both those in• United States citizens employed less, were excluded from coverage by dividuals to whom coverage is ex• abroad by the foreign subsidiary. the 1939 amendments. The protec• tended by the new law and those who To avoid adverse selection the law tion of the program has thus been were covered in the past. Without provides that all the American citi• denied to many of the lower-paid such a provision, individuals first zens employed by a given subsidiary workers in the fishing industry. This, brought under coverage on January would have to be covered if any gap in protection has been particu• 1, 1955, would be under a severe were covered- larly evident since 1951, when self- handicap, since all the months in the Home workers.—The new law ex• employed owners of fishing vessels years 1951-54, during which they had tends employee coverage to about were covered. The 1954 law covers no covered earnings, would be included 100,000 additional home workers. employees, such as fishermen and as divisor months in the computation Home workers who have the status clam diggers, who have been exclud• of their average monthly wage. Under of employees under the usual com• ed. About 50,000 additional people the change, as newly covered persons mon-law rules applicable in determin• will be covered in the course of a qualify for benefits, their benefit ing employer-employee relationship year under this provision. amounts will be based entirely on have been covered since 1937. In United States citizens employed by their covered earnings after 1954 and addition, under the 1950 amend• American employers on vessels and the years 1951-54 dropped out in the ments, home workers who do not aircraft of foreign registry.—The computations. After 20 quarters of have employee status under the usual 1950 amendments extended coverage work in covered employment they common-law rules are covered as em• to United States citizens employed can drop an additional year, which ployees if (1) they work according to abroad by American employers, but would be the year in which their the specifications of the person for not to United States citizens em• covered earnings were lowest. In• whom the work is done on materials ployed by American employers on dividuals who are already covered or goods furnished by that person vessels and aircraft of foreign regis• by the program can also drop the 4 and required to be returned to him try. The new law corrects the situa• or 5 years of lowest or no covered or the person he designates; (2) tion by covering this small group earnings whenever they occurred. they are paid cash wages of $50 or of American citizens on the same Years in which their earnings were more during a calendar quarter by basis as other American citizens low because of sickness or unemploy• a given employer; and (3) they are working outside the United States ment will no longer reduce their subject to State licensing laws. The for American employers. average monthly wage and benefit 1954 amendments cover as employees amount unless such years exceed five. those home workers who meet the Computation of Average The computation of the average first two conditions but not the third. Monthly Earnings monthly wage is also simplified by By eliminating the licensing require• The 1954 amendments change the providing for the use of standard ment, the law provides employee method for computing the average first-of-the-year closing and end-of- coverage to all home workers who monthly wage, on which the pri• the-year starting dates, with all com• perform service under substantially mary insurance amount (and thus putations generally based on calen• the same conditions, irrespective of the amount of every dependent's and dar years for both wage earners and the State in which they are located. survivor's benefit) is based. For in• self-employed persons. On the other hand, any home worker dividuals who qualify for benefits in a rural area, for example, who is after the effective date of the new Maximum Earnings Base not subject to any supervision or law, or who meet certain other con• Under the new law the maximum control by any person, and who buys ditions after that date, computation amount of covered earnings consid• raw materials and makes and com• of their average monthly wage will ered for both tax and benefit pur• pletes any article and sells the same ignore-up to 5 years in which their poses is raised from $3,600 to $4,200 to any person, even though it is made earnings were lowest (or nonexist• a year, effective January 1, 1955. It according to the specifications and ent). In general, every individual is estimated that, as a result of this amendment, some ?0 million persons restores approximately the same re• beneficiaries presently on the rolls will receive additional credits in lationship between general earnings as well as for those qualifying in the 1955. levels and the maximum earnings future. For workers now retired, Old-age and survivors insurance base that existed in 1951. In 1953, monthly payments will range from benefits, within limits, vary with the approximately 43 percent of the $30.00 to $98.50, compared with $25.00 individual's previous earnings. Since regularly employed male workers to $85.00 under the old law; the benefits are related to past earnings, covered by old-age and survivors in• average increase will be about $6.00. it follows that the basic factor in surance had earnings of more than For those coming on the rolls in the the determination of benefit amounts $4,200, and in 1951 about 48 percent future, the range of benefit payments, is the level of previous earnings. had earnings in excess of $3,600. taking into account the higher earn• More than three-fifths of the male ings base, will be from $30.00 to workers regularly covered by the Increase in Benefits $108.50. program now earn more than $3,600, A general increase in the benefit Revised benefit formula.—The new the maximum amount counted for levels will result from the provisions law raises from $100 to $110 the benefit purposes under the 1950 already discussed and from the pro• amount of average savings to which amendments. The congressional com• vision, discussed later, preserving the the 55-percent factor in the formula mittees took the position that, if benefit rights of persons with ex• is applicable. the principle that benefits should tended total disability. In addition, A further amendment in the form• vary with earnings is to be main• the new law provides for an increase ula is made by increasing the factor tained, earnings above the $3,600 in the percentage of average monthly for the second step from 15 percent limit must be counted toward bene• earnings yielded by the benefit form• to 20 percent and raising the maxi• fits in the future. ula. mum earnings to which the formula Raising the earnings base to $4,200 Benefit payments are increased for applies from $300 a month to $350, in line with the increase in the an• nual earnings base from $3,600 to $4,200. Table 1 compares illustrative benefits for a retired worker under the new law and under the old law. The revised formula, which is ap• plicable to average earnings com• puted over the period since 1950, will be used for workers coming on the rolls in the future who are eligible for dropping out low years of earn• ings from the average wage compu• tation. If, however, the individual's benefit would be larger without the dropout and with computation made by means of the conversion table, which will be used to raise the bene• fits of persons now on the rolls, he will receive the larger amount. Increase for present beneficiaries.— The new law increases benefits for the 6.6 million beneficiaries on the rolls in September. It thus follows the precedent of the 1950 and 1952 amendments. The purpose of helping beneficiaries to meet their current living needs through their benefit For persons now on the rolls, the are not eligible for dropping out low payments is served only if the value increase in old-age insurance bene• years from the computation of their of the benefits is kept adjusted to fits (or primary insurance amounts average monthly wage, as well as changes in economic conditions. on which dependents' and survivors' those who do not have their benefits Table 1.—Illustrative monthly bene• benefits are based) is determined by increased by at least $5 by use of fits for retired workers use of a conversion table. Selected the dropout and the new benefit primary insurance amounts under formula. For the relatively few work• Average the old law and the new, higher ers eligible for the dropout who would monthly wage Old law New law amounts are shown below. get a higher benefit on the basis of Married 1 Single average earnings computed over the With On basis Under old law drop• Single Mar• Under new law period since 1936, the low 4 or 5 of old law out ried 1 $25.00 $30.00 years may be dropped from the com• 30.00 35.00 40.00 45.00 putation based on the modified 1939 Assuming level earnings 50.00 55.00 act formula and the conversion table 60.00 65.10 2 applied. $50 $50 $27.50 $41.30 * $30.00 4 * $45.00 70.00 3 78.50 100 100 55.00 80.00 * 55.00 * 4 82.50 Family benefits.—Dependents' and 150 150 62.50 93.80 68.50 80.10 91.90 102.80 98.50 200 200 70.00 105.00 78.50 survivors' monthly benefits will be 117.80 85.00 250 250 77.50 116.30 88.50 132.80 300 300 85.00 127.50 98.50 147.80 increased automatically in line with (5) (5) 108.50 162.80 The new amounts approximate the the increase in primary insurance 350 350 results that would be obtained by amounts, since they are computed as Assuming specified increase in earnings arising from dropout applying the new formula to the percentages of that amount. The $50 average monthly earnings on which maximum amount of benefits that

2 $70 $27.50 $41.30 $38.50 4 $57.80 the previous benefit was based, and may be paid on an individual's record 100 120 55.00 3 80.00 62.50 93.80 150 170 62.50 93.80 72.50 108.80 by providing also a guarantee of a is raised from $168.75 to $200.00. 200 220 70.00 105.00 82.50 123.80 250 270 77.50 116.30 92.50 138.80 benefit of at least $5.00 more than The former provision that family 300 310 85.00 127.50 100.50 150.80 350 (5) was payable under the old law. The benefits may not exceed 80 percent 350 (5) 108.50 162.80 minimum benefit is now $30.00. The of the average monthly earnings on * Amounts produced by use of new formula; with new maximum of $98.50 is the result which they are based is retained. In level average monthly wage amounts of less than $130, slightly higher benefits result from use of 1952 of the application of the new no case, however, can application of formula and conversion table. formula to the maximum average 1 With wife aged 65 or over. this maximum reduce total benefits 2 Application of 80-percent maximum may not re» earnings of $300.00 considered under below the larger of 1 1/2 times the duce benefit to less than $45. 3 Reduced to 80 percent of average wage. the previous law. primary insurance amount, or $50.00. 4 Application of 80-percent maximum may not re- duce benefits to less than the larger of 1 1/2 times pri- The conversion table may also be In this way the benefits for a retired mary insurance amount of $50. applicable for some workers coming worker and his wife, as well as for 5Old law included earnings only up to $300 a month. on the rolls in the future—those who any two survivor beneficiaries, will always be payable in their full pro• Table 2,-—Illustrative monthly benefits for survivors of insured workers portions. Under the old law, appli•

cation of the 80-percent maximum Average monthly Aged widow or Widow and 1 Widow and 2 Widow and 3 wage 1 2 sometimes prevented a wife from widower child children children getting the full one-half of the hus• With drop• band's benefit amount. The new pro• On basis out as pro• of old New law Old law vision replaces the former stipulation vided in Old law New law Old law New law Old law New law law new law that family benefits may not be re• duced below $45.00. Assuming level earnings The minimum amount payable when only one survivor beneficiary is $50 3 4 5 4 $50 $20.70 $30.00 $41.30 $45.00 $45.00 5 5 $50.00 4 $45.00 $50.00 100 6 7 drawing payments on an individual's 100 41.30 * 41.30 80.00 82.50 6 * 7 80.00 82.50 6 80.00 * 7 82.50 150 150 6 6 46.90 51.40 93.80 * 102.80 6 120.00 120.00 120.00 6 120.00 record is $30.00 a month, the same 200 200 52.50 58.90 105.00 * 117.80 140.00 157.00 6 160.00 6 160.00 250 250 58.20 66.40 116.30 132.80 8 as the minimum old-age insurance 155.00 177.00 168.80 8 300 200.00 300 63.80 73.90 127.50 147.80 8 168.80 197.00 8 168.80 8 350 200.00 benefit. This amount accordingly be• 350 81.40 162.80 8 (5) (9) (9) 200.00 (9) 8 200.00 comes the minimum payment for any

single surviving widow, widower, Assuming specified increase in earnings arising from dropout child, or parent, instead of a propor• $70

tion of the minimum primary amount 3 4 7 $50 $20.70 $30.00 $41.30 $57.80 4 7 $45.00 $57.80 4 $45.00 7 57.80 6 100 6 120 41.30 46.90 80.00 6 6 as provided under the old law. Table 93.80 80.00 96.00 80.00 6 96.00 150 170 46.90 54.40 93.80 6 6 108.80 120.00 136.00 6 120.00 6 136.00 200 2 presents illustrative survivor bene• 220 52.50 61.90 105.00 6 123.80 140.00 165.00 160.00 6 176.00 250 270 69.40 58.20 116.30 138.80 155.00 185.00 8 8 fits under the old law and under the 310 168.80 200.00 300 75.40 8 8 63.80 127.50 150.80 168.80 200.00 8 168.80 8 200.00 350 350 81.40 162.80 8 8 new law. (9) (9) (9) 200.00 (9) 200.00 Lump-sum death payment. — The * Amounts produced by use of new formula; with 5 Application of 80-percent maximum may not re• new law retains the former provision level average monthly wage amounts of less than duce benefits below $50. $130, slightly higher benefits result from use of 1952 6 Reduced to 80 percent of average wage. formula and conversion table. setting the lump-sum death payment 7 Application of 80-percent maximum may not re• 1 Same for single surviving parent or child. duce benefits below 1 1/2 times the primary insurance at three times the primary insurance 2 Same for 2 aged parents. amount. 3 amount but places a maximum of Application of $30 minimum family benefit. 8 Dollar maximum on benefits. 9 4 Application of 80-percent maximum may not re• Maximum average wage under old law is $300. $255 on the amount that can be paid. duce benefits below $45.

Improvement of the Retire• ment Test Establishment of uniform annual withheld for each $80 (or for each test for wage earners and self-em• fraction of that amount) in excess of Monthly benefits under the old-age ployed persons.—Two separate tests $1,200, but no benefit "will be sus• and survivors insurance system are of earnings were provided under the pended for any month in which the paid upon the retirement or death of old law, applicable to beneficiaries individual neither earned wages of the family earner. The law provides under age 75. Wage earners were more than $80 nor rendered substan• that benefits are not payable to per• subject to an "all-or-none" monthly tial services as a self-employed per• sons otherwise eligible for benefits test, under which benefits for the son in his trade or business. if they have substantial employment individual and for any dependents Wage earners will no longer lose or self-employment earnings, as de• drawing benefits on his record were a benefit each month they earn more termined under the retirement test withheld for any month in which he than a specified amount. They will set out in the act. The new law main• earned covered wages of more than be able to take intermittent full-time tains this principle, but changes have $75. The test for self-employed per• work or more regular part-time work been made to increase the equity of sons was on an annual basis; 1 than was possible in the past without the retirement test and to afford month's benefit was withheld for each the loss of benefits or with the loss greater opportunities to retired indi• $75 (or fraction thereof) of self- of only a few months' benefits, de• viduals to supplement their benefits employment earnings in excess of pending on what they earn. A bene• through earnings from part-time or $900 in a year, except that no benefit ficiary may work throughout the year intermittent work. was withheld for any month in which at $110 a month, for example, and Age.—Under the old law, benefits the self-employed person did not lose only 2 months' benefits; under were payable at age 75 without re• render substantial services in his previous law he would lose all 12. As gard to the test of retirement. The trade or business. another example, a beneficiary may amendments reduce the "age 75" pro• The new law puts the test on an earn $300 a month for 3 months with• vision to age 72. The reduction in annual basis for both wages and self- out losing any benefits, while under the age at which benefits are paid employment earnings, and the two previous law he would lose 3 months' benefits. as a straight annuity rather than as types of income are combined for a retirement benefit was made purposes of determining the individ• The combination of wages and self- largely in recognition of the typically ual's total earnings. The amount of employment earnings for retirement later retirement ages of some of the earnings that individuals may have test purposes eliminates the discrim• newly covered groups, particularly without loss of benefits is raised to inatory dual exemption that had farmers. $1,200. One month's benefit will be been possible for some individuals having both types of earnings, be• deceased individual had 6 quarters of fore September 1950. Any deceased cause of the separate tests formerly coverage; and (3) making individuals worker who was not fully insured contained in the law. eligible for the disability "freeze" under the law in effect at that time Earnings in noncovered work.—For when they had 6 quarters of coverage but who had at least 6 quarters of administrative reasons the retire• out of the previous 13 quarters and coverage is deemed to have been ment test under the old law ap• 20 quarters of coverage during the fully insured at the time of his plied only to earnings in work covered previous 40-quarter period ending death, except for purposes of de• by the old-age and survivors insur• with the quarter in which the dis• termining the entitlement of a ance program, and individuals who ability started. widower or of a former wife (di• worked in noncovered employment Continuous employment.—The 1950 vorced) to mother's insurance ben• could continue to draw benefits re• amendments greatly liberalized the efits.3 This amendment makes the gardless of their earnings. The new requirements for insured status by new-start provisions of the 1950 law law eliminates this anomaly by pro• granting, a "new start," whereby an applicable for survivors of insured viding that earnings from any type individual was fully insured if he had individuals who had died before Sep• of employment or self-employment in quarters of coverage, acquired at any tember 1950, just as the 1950 law the United States, whether or not time, equal in number to half the had made those provisions applicable covered by the system, be taken into calendar quarters elapsing after 1950 to persons who had retired before account in determining if benefits (rather than 1936) and before age September 1950. should be withheld. Such a provision 65 or death. The congressional com• The primary insurance amount of is now administratively feasible, mittees concerned with the 1954 leg• such a deceased worker will be com• since coverage of the system will be islation believed that it was unneces• puted only through the use of the nearly universal. sary to provide for another new start conversion table in the 1954 law, us• Employment outside the United in the requirements for insured sta• ing the closing and starting dates States.—The retirement test under tus. In their opinion, successive new contained in the law as it was in the new law continues to apply to starts, reducing the insured-status re• effect before September 1950. Proof covered earnings outside the United quirements to the minimum of 6 of support, when required, may be States in the same way as in this quarters of coverage, "tend to weaken filed any time before September 1956: country. In addition, a test is es• the principle that benefits should be Monthly benefits will be payable only tablished for employment in non- payable only on the basis of a sub• for months after August 1954 on the covered work outside the United stantial degree of attachment to em• basis of applications filed after States. Beneficiaries residing abroad ployment covered by the system." month. will thus be on a generally com- The committees believed, however, Persons deported from the United parable basis with those living in the that there was "good reason to grant States.—The legislation provides that United States. a temporary liberalization to benefit old-age insurance benefits shall not No specific earnings amount could those newly covered workers who, al• be payable to any person deported possibly differentiate between full- though they are continuously en• from the United States after August time and part-time work in all the gaged in covered work after 1954, die 1954 because of illegal entry, con• countries where beneficiaries might or retire before they can meet the viction of a crime, or subversive ac• be working. For this reason a differ• requirements for insured status." For tivity. Dependents' or survivors' ben• ent type of test is provided; benefits this reason, an individual is now efits based on the record of a de• are withheld for any month in which deemed to be fully insured at the time portee are payable unless the benefi• a beneficiary under age 72 engages in of his death or attainment of age ciaries are noncitizens who leave the noncovered remunerative activity 65, whichever is earlier, if all the United States. A deported person who (either employment or self-employ• quarters elapsing after 1954 and up is later lawfully readmitted to this ment) outside the United States on to that time are quarters of coverage, country for permanent residence here seven or more different calendar provided that he has had at least 6 will be able to receive old-age and days. For administrative reasons, the quarters of coverage after 1954. The survivors insurance benefits for monthly test, rather than the annual transitional provision ceases to be months following his reentry. test, is provided. applicable to those reaching age 65 Disability freeze. — The eligibility or dying after the third quarter of conditions for the disability freeze Eligibility Conditions 1958, since any newly covered indi• are discussed in the following sec• The new law makes three import• vidual who works continuously in tion. There are, however, two eligi• ant changes in the eligibility condi• covered employment after 1954 and bility conditions for the freeze that tions of the program. They are (1) through the third quarter of 1958 are in the nature of insured-status including, as an alternative for ac• will meet the insured-status require• conditions, although the law does not quiring fully insured status, a transi• ments as in the 1950 law. 3 Before the 1950 amendments, benefits tional provision for persons continu• Deaths before September 1950.— were not payable to the widower or to ously employed during 1955-58; (2) The new law makes benefits pay• the former wife (divorced). Moreover, making survivor benefits payable in able to about 200,000 persons on survivor benefits were not payable on the cases of deaths between December the basis of earnings of certain indi• earnings of persons who died before 1940, since such benefits were not included 1939 and September 1950 if the viduals who died after 1939 and be• in the program until that date. so characterize them: a requirement standard ordinary life insurance A medical finding of blindness, as identical with that for currently in• issued currently carries this waiver. defined, would alone be sufficient sured status (6 quarters of coverage Great advances have been made in proof that an individual is disabled. out of the last 13 quarters) and a rehabilitation techniques and efforts Individuals with a visual handicap longer requirement (20 quarters of in recent years. It is recognized that that does not meet this definition coverage out of the last 40 quarters) prompt referral of disabled persons may nevertheless meet the general to test a reasonably substantial as for appropriate vocational rehabili• definition of disability if they are well as recent attachment to the tation services increases the effective• found unable to engage in any sub• labor force. ness of such services and enhances stantial gainful activity because of the probability of their success. The visual impairment that can be ex• Preservation of Benefit Rights new law specifically states that it is pected to be of long-continued and in• for the Disabled the policy of Congress that disabled definite duration. Under the old law, a worker's individuals applying for disability The law sets forth the conditions rights to old-age and survivors insur• determinations are to be promptly under which disability determinations ance benefits might be impaired or referred to State vocational rehabili• will be made. The State vocational lost entirely if he had periods of tation agencies, to the end that as rehabilitation agencies or other ap- total disability before reaching re• many as possible may be restored to propriate State agencies, will, under 4 gainful work. tirement age. Unless the worker agreements with the Secretary of was already permanently insured The disabled individual, to qualify Health, Education, and Welfare, de• when he became disabled, he lost his for the new disability freeze, must termine if the individual is suffering fully insured status when he reached have not less than 6 quarters of cov- from a disability and the day the retirement age because the entire erage during the 13-quarter period disability began and the day it period of his disability was included that ends with the quarter in which ceases. Their determinations will be in the elapsed time that was the basis the period, of disability begins, and considered as the determinations of for determining his insured status. 20 quarters of coverage during the the Secretary, with the following Benefit amounts, whether for retire• 40-quarter period that ends with such exceptions. ment or survivor benefits, were based quarter. These requirements are in• on the average monthly wage, which The Secretary is authorized to re• tended to limit the application of the was computed by taking an indi• view, on his own motion, any deter• provisions to individuals who have vidual's total earnings from a speci• mination made by a State agency that had a reasonably long, as well as re- fied starting date up to age 65 or a disability exists and, as a result of cent, record of earnings in covered death and dividing that total by the such review, to make a finding that work. They operate to screen out full elapsed time, including any no disability exists or that the dis• those individuals who had voluntarily periods of total disability. The 1954 ability began later than determined retired from gainful activity and had amendments, freezing old-age and by the State agency, or that the dis• not been compelled to leave the survivors insurance status during ex• ability ceased earlier than deter• labor force because of their disability. tended total disability, remove this mined by the State agency. The law disadvantage by preventing such Disability must have lasted for 6 also gives an individual, dissatisfied periods of disability from reducing months before it may be considered. with a determination by a State or or wiping out retirement and sur• This provision is intended to exclude the Secretary, the right to a hearing vivor benefits. In addition, there is from consideration temporary condi• by the Secretary and to Judicial re• available to the disabled individual tions. The law also states that an view of the final decision of the Sec• the 4- or 5-year dropout period pro• individual filing an application for a retary after such hearing, to the vided by the new law for all persons. disability determination must submit same extent as provided in section such proof of the existence of his 205 (b) and section 205 (g) of the The freeze provision is analogous disability as may be required. 1950 law. to the "waiver of premium" com• Disability is defined in the new law An agreement may cover all per• monly used in life insurance and en- as the inability to engage in any sons in the State or only certain dowment annuity policies to main• substantial gainful activity because classes of individuals, as may be des• tain the protection of these policies of any medically determinable physi• ignated in the agreement at the for the duration of the policyholder's cal or mental impairment that can State's request. In the relatively few disability. About 375 life insurance be expected to result in death or to cases where there is no agreement companies, including all of the be of long-continued and indefinite largest, offer a waiver-of-premium with a State, then the disability duration. clause to individuals purchasing ordi• determinations will be made by the nary life insurance. About half the Blindness also constitutes disability Secretary. Such determination will and is defined in the law as central also be made for the types or classes

4 The Social Security Act Amendments visual acuity of 5/200 or less in the of cases that, because of their char• of 1952 contained provisions for a dis• better eye with a correcting lens; an acteristics or, their volume, the State ability freeze that never became operative eye in which the visual field is re• has asked to have excluded from the and that differ in many respects from the duced to 5° or less concentric con• 1954 provisions. For a summary of the agreement. 1952 provisions, see the Bulletin, Septem• traction is considered as having a Standards for evaluating disability ber 1952. central visual acuity of 5/200 or less. are to be. worked out in consultation with the State agencies, and both 1955, must, however, be alive on that supporting basis from contributions the State agencies and The Bureau date to get credit for a period of of covered individuals and employers. of Old-Age and Survivors Insurance disability. Accordingly, the 1950 and 1952 legis• will apply these standards for the Until July 1, 1957, the application lation contained a tax schedule that purposes of the freeze. Equal treat• can establish a period of disability it was believed would, under a level- ment of all disabled persons under beginning on the earliest date the wage assumption, make the system the old-age and survivors insurance individual was disabled and met the self-supporting as nearly as could be system in all States will thus be freeze earnings requirements. In foreseen under circumstances then promoted. other words, an individual who was existing. The program's actuarial Disability evaluation has two as• disabled as early as the fourth quar• balance was virtually the same under pects. There must be (1) medically ter of 1941 could have sufficient the 1952 act as under the 1950 act; determinable impairment of serious qualifying earnings and establish a the reason was that the rise in earn• proportions that is expected to con-. period of disability, provided he has ings levels in the 3 years preceding tinue indefinitely and for a long time been continuously disabled and has the enactment of the 1952 act was or to result in death, and (2) a pres• filed an application before July 1, taken into account in the estimates ent inability to engage in substantial 1957. Despite the administrative diffi• for the 1952 act. It was recognized gainful work by reason of such im• culties, Congress believed that the that future experience might differ pairment; efforts toward rehabilita• large number of persons who have from the conditions assumed in the tion will not, of course, be considered been totally disabled for the years estimates, so that any tax schedule, as interrupting a period of disability before the enactment of this provi• at least in the distant future, might until the individual has actually been sion should be included in the group have to be modified. restored to gainful activity. The receiving the advantages of the After enactment of the 1952 act, physical or mental impairment must freeze provision, but only for periods new cost estimates5 were developed be of a nature and degree of severity of disability continuing to the date to take into account the considerable sufficient to justify its consideration of application. change in economic conditions dur• as the cause of failure to obtain any Benefit increases for disabled indi• ing the past few years and the addi• substantial gainful work. viduals already on the benefit rolls tional actuarial and statistical data The provision that the freeze apply will be payable beginning July 1955. available from the program's opera• only for impairments that "can be Newly entitled persons will be able to tions and from the 1950 Census. Ac• expected to be of long-continued and have their benefits computed with cording to these estimates the level- indefinite duration" is not inconsist• the exclusion of a period of disability premium cost of the benefit disburse• ent with efforts toward rehabilitation, beginning with benefits payable for ments and administrative expenses since it refers only to the duration July 1955. Survivors of workers who under the 1952 amendments is some• of the impairment and does not re• died after having qualified for a what more than 1/2 of 1 percent of quire a prediction of continued in• period of disability will receive In• payroll higher than the level-premium ability to work. An individual would creased benefits. equivalent of the scheduled taxes not meet the definition of disability The amendments specifically pro• (including allowance for interest on if he can, by reasonable effort and vide that nothing in title II shall be the existing trust fund). with safety to himself, achieve re• construed as authorizing the Secre• This deficiency is of long-range covery or substantial reduction of tary of Health, Education, and Wel• importance. In this connection, the the symptoms of his condition. fare or any other officer or employee Committee on Ways and Means of Payments to the vocational rehabil• of the United States to interfere in the House of Representatives stated itation agencies for their services any way with the practice of medi• in its report on the 1954 amendments: will be met from the old-age and sur• cine or with relationships between vivors Insurance trust fund. The pay• practitioners of medicine and their While we recognize that future costs ments may be made in advance or as patients, or to exercise any supervi• estimates, particularly if earnings reimbursement, and before audit or sion or control over the administra• continue to rise, may indicate that settlement by the General Accounting tion or operation of any hospital. a lower schedule of contribution rates will provide for a self-supporting sys• Office. All payments must be used Financing Basis and Policy* tem, we believe that our policy should solely for the purposes for which they be one of utmost prudence in this are made, and any money not used Congress carefully considered the area. Consequently the long-range for such purposes must be returned problem of cost in determining the schedule of old-age and survivors in• for deposit in the trust fund. old-age and survivors insurance ben• surance contributions should be ad• January 1, 1955, was set as the efit provisions of both the 1950 and justed so as to meet the additional costs of the changes now proposed earliest date a freeze application can 1952 acts. The belief was expressed and also to cover fully the deficiency be accepted in order to give the De• in the committee reports that the which the new estimates indicate in partment of Health, Education, and old-age and survivors insurance pro• the financing of the present program. Welfare time to prepare its forms gram should be on a completely self- With this in mind we have proposed and procedures and negotiate neces• that the scheduled rates on employer •This section was prepared in its en• sary agreements with State agencies. tirety by the Chief Actuary of the Social

An individual who files before July 1, Security Administration. 5 Actuarial Study No. 36. June 1953. Table 3.—Benefit costs and contribu• The policy according to the Senate- Table 5.—Changes in estimated level- tions under intermediate-cost esti• approved bill was that any proposed premium costs of benefit payments mates, 1952 Act and 1954 bills and as percent of payroll, by type of law amendments should not add costs change, intermediate-cost estimate that are not offset by increased in• come and that any existing "insuffi• Level-premium equivalent Level- (percent) ciency" as a result of new cost esti• Item premium mates, if relatively small, need not cost Item House- Senate- require legislative action until more 1954 1952 ap• ap- Cost of 1952 Act: 1 amend• experience bore out the indications. Act proved proved 1952 estimate, 2 1/4 percent interest 6.00 bill ments bill The 1 1/2-percent increase in the ul• Current estimate, 2 1/4 percent interest 6.74 Current estimate, 2.4 percent interest 6.62 timate combined employer-employee

1 Effect of changes: Benefit eost 6.62 7.34 7.65 7.50 rate, in both the House-approved and Extension of coverage —.18 6.05 7.12 7.12 7.12 Contributions Senate-approved bills, represents an Raising earnings base to $4,200 -.15 2 Net difference, or Increase in benefits +.82 lack of actuarial balance equivalent level increase of slightly Liberalization of retirement test + .20 Elimination of lowest years of earnings + .13 .57 .22 .53 .38 more than 1 percent of payroll. As "Disability freeze" provision + ,07 indicated by table 3, under the in• 1 Includes adjustments to reflect (a) lower contribu• Cost of 1954 amendments, 1 2.4-percent interest tion rote for the self-employed, compared with em• termediate-cost estimate this amount 7.50 ployer-employee rate, (b) the existing trust fund, and (c) administrative expenses. meets the increased cost of the bene• fits provided by the Senate-approved 1 Includes adjustments to reflect (a) lower con tribution rates for the self-employed compared with and employee in 1970 be raised from bill although it does not appreciably employer-employee rate; (b) the existing trust fund; 3 1/4 to 3 1/2 percent and that in 1975 and (c) administrative expenses. reduce the currently estimated actu• 2 Primarily reflects effect of new benefit formula and thereafter the rate be increased arial deficiency of the present sys• and conversion table but includes effect of revised to 4 percent, with corresponding minimum and maximum benefit provisions and the tem. Under the House-approved bill, miner changes in insured-status provisions. changes for the self-employed.6 on the other hand, the increase in the ultimate contribution rate serves ial balance to the point where, for The changes made by the Senate to meet not only the increased cost all practical purposes, it may be said Committee on Finance would have but also to reduce the lack of actuar- to be sufficiently provided for. made the estimated long-range cost The benefit costs under the new of the program significantly greater Table 4.—Estimated progress of trust law fall between those of the House- than did the bill as it passed the fund under new law, 2.4-percent approved bill and those of the bill House of Representatives. Thus, the interest approved by the Senate. Accordingly, net effect of the benefit changes in (in millions) it may be said that under the 1954 the Senate-approved bill would have amendments the increase in the ul• been to increase the long-range costs Ad• timate contribution rate meets all the Fund of the program by slightly more than Con• Benefit minis• Calendar Interes at end additional costs of the benefit tribu• pay• trative 1 percent of payroll as against the year on of tions ments ex• changes and a substantial part of fund year corresponding figure of of 1 per• penses the deficiency that the latest esti• cent for the House bill. The Senate mates indicated in regard to the fi• Actual data committee made the following state• nancing of the 1952 act. ment in this connection: "Neverthe• less, we believe that the long-range 1953 1 $3,945 $3,006 $88 $414 $18,707 1953 2 4,105 3,236 92 424 19,102 Results of Cost Estimates on schedule of old-age and survivors in• Range Basis surance contributions should be ad• Low-cost estimate 3 justed so as to meet the additional The level-premium cost for the ben• costs of the changes now proposed. efits provided in the 1954 amend• 1954 $5,308 $3,550 $88 $468 $21,240 ments, on the basis of 2 1/4-percent On the other hand, we believe that 1955 5,939 4,495 101 526 23,109 there is no necessity now to attempt 1960 7,796 7,040 116 667 28,785 interest, is roughly 6.6-8.4 percent of 1970 12,522 10,559 144 1,029 44,831 to cover fully, or even partially, the 1980 16,247 14,203 173 1,861 80,330 payroll, while at 2 1/2-percent interest 1990 17,735 17,144 200 2,647 113,146 217 the corresponding figures are 6.4 and deficiency which the new estimates 2000 19,740 18,289 3,535 151,432 2020 indicate in the financing of the pres• 23,262 23,407 268 6,558 279,598 8.2 percent, respectively.8 ent program."7 The Senate accord• Table 4 presents the estimated op• ingly retained the rate schedule ap• High-cost estimate 3 erations of the trust fund under the proved by the House. 1954 amendments, on the basis of a 1954 $5,149 $3,722 $95 $464 $20,898 2.4-percent interest rate, which is the 1955 5,906 4,994 117 511 22,203 In brief, then, the House-approved 1960 7,725 7,950 151 553 23,418 interest rate used as the appropriate 1970 12,390 12,020 193 bill would be financed by a contribu• 698520 22,278 1980 15,820 16,071 single rate in the estimates for the tion schedule set so that, under the 1990 233 29,538 16,615 19,534 269 402 15,542 2000 (4) preceding version of the bill. During intermediate-cost estimate, the sys• 17,753 21,231 290 (4) 2020 18,393 27,998 351 ------tem would be self-supporting, or, in 8 For more details on the cost estimates see Robert J. Myers, Actuarial Cost Esti• 1 other words, so that there would be : Excludes effect of railroad coverage under finan• cial interchange provisions. mates for the Old-Age and Survivors In• little or no "actuarial insufficiency." 2 Includes effect of railroad coverage under financial surance System as Modified by the Social interchange provisions; partly estimated. Security Amendments of 1954, prepared 3 All estimates based on high-employment assumptions. 6 House Report No. 1698, May 28. 1954. for the use of the House Committee on 7 Senate Report No. 1987, July 27, 1954. 4 Fund exhausted in 1995. Ways and Means, August 20, 1954. Table 6.—Estinwted cost of benefit guide to action. The trust fund is a followed the low-cost estimate, the payments under 1952 Act and under cumulative item and thus tends over new law, intermediate-cost esti• contribution rates would probably be mate 1 the course of years to move relatively adjusted downward, or perhaps not rapidly in one direction or the other, be increased in future years accord• under the necessary assumption that ing to schedule. If, on the other Amount Percent of (in millions) payroll the provisions of the law remain un• hand, the experience followed the Calendar year changed whether the experience de• high-cost estimate, the contribution 1952 New 1952 New velops as "low cost" or "high cost." rates would have to be raised above Act law Act law The cost as a percentage of payroll— those scheduled. The high-cost esti• the best measure of cost—has a rela• 1955 $4,075 $4,715 3.05 2.94 mate in table 4 does indicate that 1960 5,716 7,495 1.10 4.40 tive range from the low-cost to the under the tax schedule adopted there 1970 8,318 11,290 5.26 5.94 1980 11.116 15,137 6.40 7.27 high-cost estimate of only about 10 would be ample funds to meet benefit 2000 14,812 19.760 7.30 8.11 percent in the early years of opera• disbursements for several decades, 2020 19.475 25,702 8.63 9.50 tion and about 50 percent ultimately. even under relatively high-cost ex• Level premium 2 2 1/4-percent interest ------6.69 7.42 perience. In any event, if a deficiency ------The results under the two estimates 2.4 percent interest 6.60 7.32 ------arises in the financing of the system 2 1/2--percent interest ----- 6.54 7.25 are consistent and reasonable, since the system on an intermediate-cost some years hence, or if subsequent 1 All estimates based on high employment assump• experience and actuarial estimates tions. estimate basis is intended to be ap• 2 Level-premium contribution rate for benefit pay• proximately self-supporting. Accord• indicate the imminence of a defi• ments after 1952 and in perpetuity, not taking into ciency, it is believed that the situation account (a) lower contribution rate for self-employed ingly, in most instances a low-cost compared with employer-employee rate, (b) exist• can readily and safely be handled by ing trust fund, and (c) administrative expenses; estimate should show that the system assumes benefits and payrolls remain level after the is more than self-supporting, and a a future Congress when the occasion year 2050. high-cost estimate should show that arises. a deficiency would eventually arise. the past fiscal year, this was the rate In actual practice, under the philos• Results of Intermediate-Cost being earned. From July 1954 the ophy in the 1950 and 1952 acts as Estimate rate has been only 2.3 percent, since set forth in the committee reports, Intermediate-cost estimates were the special issues in the trust fund, assuming no change in benefit pro• constituting almost 90 percent of total developed by averaging the low-cost visions, the tax schedule would be investments, now bear a rate of 2 1/4 and high-cost estimates (using dollar adjusted in future years so that percent, in comparison with 2 3/8 per• estimates and then developing the neither of the developments of the cent to the fiscal year ended June 30, corresponding estimates relative to trust fund shown, in table 4 would 1954. For consistency, the 2.4-percent payroll). This intermediate-cost esti• ever eventuate. Thus, if experience rate has continued to be used for the mate may not represent the most trust fund calculations. Under the low-cost estimate, the Table 7.—Estimated benefit payments as percent of taxable payroll under trust fund builds up rather rapidly new law, by type of benefit, intermediate-cost estimate 1 and even in 50 years will be growing Monthly benefits Lump• at a rate of about $6 billion a year sum Dis• Calendar year death ability Total and will amount to about $180 billion. benefits pay• freeze 3 In fact, under this estimate, benefit Old-age Wife's 2 Widow's 2 Parent's Mother's Child's ments disbursements will not exceed con• tribution income during the next 65 Actual data 4 years, and even in the year 2000 will ------1951 0.99 0.15 0.14 0.01 0.07 0.24 0.05 1.65 be about 6 percent smaller. ------1952 1.11 .17 .16 .01 .08 .26 .05 1.83 ------Under the high-cost estimate the 1953 1.50 .22 .20 .01 .09 .30 .07 2.39 trust fund will build up to a maxi• mum of about $30 billion in the next Estimated data 25 years but will then decrease until 1960 2.83 .35 .53 .01 .18 .42 .10 .04 4.46 it is exhausted in 1995. Benefit dis• 1970 3.80 .40 .97 .01 .18 .39 .11 ,06 5.94 bursements will exceed contribution 1980 4.86 .44 1.24 .01 .17 .35 .13 .07 7.27 1990 5.71 .44 1.34 .02 .16 .34 .14 .08 8.22 income during 1958-69, and again in 2000 5.75 .43 1,25 .02 .15 .32 .14 .08 8.11 2020 6.99 .50 1.27 ,01 .15 1973-74 and after 1979. Accordingly, .32 .15 .09 9.50 the trust fund will remain more or Level premium: 5 2 1/4-percent in• less stable at about $25 billion during terest 5.17 .44 1.10 .01 .16 .34 .13 .07 7.42 2 1/2-percent in• 1955-85 (since interest income offsets terest 5.03 .44 1.08 .01 .16 .34 .13 .07 7,25 the excess of disbursements over con•

1 tribution income). All estimates based on high-employment assump• 4 Excludes effect of railroad coverage under finan• tions. cial interchange provisions; partly estimated. 2 Although there is a wide spread Includes excesses of wife's and widow's benefits 5 Level premium contribution rate for benefit pay• over old-age benefits for female old-age beneficiaries ments after 1952 and in perpetuity, not taking into in the ultimate estimated amounts in also eligible for wife's and widow's benefits. Also account (a) lower contribution rate for self-employed includes husband's and widower's benefits. compared with employer-employee rate; (b) existing the trust fund under the two esti• 3 Cost of ths "disability freeze" shown separately, trust fund; and (c) administrative expenses; assumes mates, the range offers a reasonable although in actual practice it is spread among the benefits and payrolls remain level after the vear 2050. various types of benefits. probable estimate; it is impossible to decline in the far-distant future in• $30 for the first child, and $21 for develop any such figures. Rather, the dicates that the revised tax schedule each additional child in a family. The- intermediate-cost estimate has been is not self-supporting under the in• congressional committees stated that set down as a convenient and readily termediate-cost estimate with a level- this action was taken pending possi• available single set of figures to use earnings assumption, but this esti• ble consideration of basic amend• for comparative purposes. mate may not represent the most ments in the Federal matching form• Table 5 gives an estimate of the probable estimate or what future ex• ula and to allow time for States to level-premium cost, tracing through perience will be. Any lack of self- plan for operations under any revised the increase in cost from the 1952 support or any deficiency that event• law. The cost of continuing such in• law according to the major changes ually develops can, of course, be creased Federal payments is about made. Table 6 shows the year-by- acted upon by Congress in later years. $400 million for the 24-month period year cost of the benefit payments ac• from October 1, 1954, to September. cording to the intermediate-cost es• Public Assistance 30, 1956. timate for the 1952 act and for the The new law extends through Sep• A second public assistance amend• 1954 amendments. These figures are tember 30, 1956, the provisions of the ment, extends for two years—from based on a future level-earnings as• 1952 amendments, which were sched• June 30, 1955, to June 30fi 1957—the sumption and do not consider busi• uled to expire at the close of Sep• provision in section 344 of the Social ness cycles, which over a long period tember 30, 1954, with respect to Fed• Security Act Amendments of 1950. of years tend to average out. The eral payments to States for public This section provided that certain 1955 benefit disbursements under the assistance programs. Until that date State plans for aid to the blind that 1954 act are estimated at about $4.7 the Federal share in old-age assist• did not meet the requirements of billion, with a range of $4.5 billion to ance, aid to the blind, and aid to the clause (8) of section 1002 (a) of the $5.0 billion (in contrast to contribu• permanently and totally disabled will Social Security Act could be approved tion income of about $5.9 billion). In continue to be four-fifths of the first for the period from October 1, 1950, 1955 the cost of the 1954 amendments $25 of a State's average monthly pay• to June 30, 1955. These requirements will be about $700 million more than ment per recipient, plus one half the specify that, in determining need, that for the 1952 act would have remainder, within individual maxi• any other income and resources of a been. The cost as a percentage of mums of $55. For aid to dependent person claiming aid to the blind must payroll is about the same because of children the Federal share will be be considered, with the exception the higher payroll resulting from the four-fifths of the first $15 of a State's provided in clause 8. Only Pennsyl• extension of coverage in the 1954 average monthly payment per recip• vania and Missouri are now affected amendments. In subsequent years the ient, plus half the balance, within indi• by the provision. Extending the time benefit cost of the 1954 amendments, vidual maximums of $30 for the adult, to June 30, 1957, will give these two as a percentage of payroll, increasing• States sufficient time to make the ly exceeds the cost of the 1952 act; Table 8.—Estimated progress of trust necessary modifications in their laws the excess will be about 7/8 percent fund under new law, intermediate- so that they, like all other States, of payroll after 1970. cost estimate, 2.4-percent interest1 will comply with the income-and- Table 7 presents the costs of the [In millions] resources provision in the Act as a benefits under the 1954 amendments condition for Federal grants to the as a percent of payroll for each of Ad• States. Con• Benefit minis• Interest Fund the various types of benefits. Table Calendar tribu• pay• trative on at end year 8 shows the estimated operation of tions ments ex• fund of year Amendments to the Railroad the trust fund under the 1954 amend• penses Retirement Act ments according to the intermediate- cost estimate (using a 2.4-percent in• Actual data Four amendments are made in the terest rate) and is comparable with Railroad Retirement Act, designed to 1951 $3,367 $1,885 $81 $417 $15,540 preserve the present relationship be• table 4. According to this estimate, 1952 3,819 2,194 88 365 17,442 2 1953 3,945 3,006 88 414 18, 707 tween the railroad retirement system contribution income generally exceeds 1953 3 4,105 3,236 92 424 19,102 benefit disbursements for the next and old-age and survivors insurance. These amendments (1) change ref• 30 years, although in 1959, 1963-64, Estimated data and 1969 (the years preceding the erences in the Railroad Retirement next three scheduled increases in the 1954 $5,228 $3,636 $91 $466 $21,069 Act to "the Social Security Act of 1055 5,922 4,745 109 519 22,656 1952" to "the Social Security Act of contribution rates), there is an excess 1960 7,760 7,495 134 610 26,102 of benefit outgo over contribution in• 1965 9.947 9,456 151 664 28,506 1954," (2) permit the retroactive pay• 1970 12,456 11.290 168 774 33,554 1975 come. This difference is in most in• 15,090 13,182 186 983 42,810 ment of annuities under the railroad 1980 16,034 stances more than counterbalanced 15,137 203 1,279 54,934 program for up to 12 months before 1990 17,175 18,339 234 1,525 64,344 by interest income, so that the fund is 2000 18,747 19,760 254 1,539 65,056 the application is filed, (3) permit 2020 20.828 25,702 310 1,282 52,122 expected to grow more or less steadily wages earned in employment covered until reaching a maximum of $70 bil• 1 All estimates based on high-employment assumptions. by old-age and survivors insurance lion in 2011, and then to decrease until 2 Excludes effect of railroad coverage under finan• plus railroad compensation to go as it is exhausted in the year 2031. The cial interchange provisions. high as $4,200 for purposes of com• 3 Includes effect of railroad coverage under finan• cial interchange provisions; partly estimated. puting railroad survivor annuities, and (4) include the amended old-age public assistance. On the same day 5. Certain employees in positions and survivors insurance retirement Representative Reed introduced H.R. covered by a retirement system but test as part of the retirement test 7199 and H.R. 7200, which carried not members of a retirement system applying to survivor annuitants out the President's recommendations would be covered. under the railroad program. on old-age and survivors insurance 6. Certain employees of the Na• and public assistance, respectively. tional Guard would be covered as Legislative History The Committee held public hearings State and local employees. President Eisenhower, in his State on H.R. 7199 and on various other 7. Coverage would be extended to of the Union Message of February 2, proposals from April 1 to 15. After several additional groups of Federal 1953, recommended that the "old-age extensive executive sessions a new employees. and survivors insurance law should bill, H.R. 9366, was introduced by 8. Coverage would be extended, on promptly be extended to cover mil• Representative Reed on May 28 that an elective basis, to United -States lions of citizens who have been left embodied the Committee's recom• citizens employed outside the United out of the social security system." mendations. States by foreign subsidiaries of Shortly thereafter, Oveta Culp The bill was reported favorably by American employers. Hobby, Secretary of Health, Educa• the Committee on the same day and 9. A fifth year, of low earnings tion, and Welfare, named a group of passed the House of Representatives could be dropped, in computing aver• consultants to consider the extension on June 1 by a vote of 355 to 8 (with age monthly earnings, by persons who of old-age and survivors insurance. two members answering "present"). had 20 quarters of coverage. Their report was submitted on June The Senate Committee on Finance 10. Persons who had all quarters 24, 1953.9 On August 1, 1953, Presi• held public hearings from June 24 to of coverage in the quarters elapsing dent Eisenhower submitted a special July 9 and reported the bill favor• after 1954 would be fully insured at message to Congress, transmitting the ably, with amendments, on July 27; the time of retirement or death. Consultants' Report with the recom• with nine amendments from the floor 11. Computations of average earn• mendation of the Secretary that spe• it passed the Senate by a voice vote ings for benefit purposes would be cific additional groups should be cov• on August 13. made on an annual rather than a ered. On August 3, Representative The conferees from the House and quarterly basis. Daniel Reed, Chairman of the Ways Senate completed their report on 12. The maximum monthly family and Means Committee of the House August 20, and the report was adopted benefit would be increased from $190 of Representatives, introduced a bill, in both Houses on that same date. to $200. H.R. 6812, carrying out the coverage The bill was signed by the Presi• 13. A husband and wife (and a recommendations. dent on September 1, 1854, and be• widow and 1 child) would receive 1 1/2 During the fall of 1953, a subcom• came Public Law No. 761. times the primary insurance amount mittee of the House Committee on House action on H.R. 7199 and H.R. even though the combined amount Ways and Means held public hear• 7200.—The House committee on Ways would exceed 80 percent of the aver• ings on various aspects of social se• and Means made 22 substantive age monthly earnings. curity under the chairmanship of changes in H.R. 7199 and H.R. 7200. 14. The minimum monthly benefit Representative Carl Curtis, of Ne• These changes, embodied in H.R. 9366 of $30 for a retired worker would be braska. On January 6, 1954, Repre• as passed by the House without applied to any sole survivor benefi• sentative Curtis introduced a bill, amendment, were: ciary (widow, widower, child, or H.R. 6863, which provided for 1. Self-employed physicians would parent). blanketing-in the uninsured aged, continue to be excluded.10 15. The maximum lump-sum death widows, and dependent children, for 2. Self-employed ministers and payment would be $255.00 instead of extensive changes in the coverage, Christian Science practitioners would $325.50. benefits, and financing of the old-age be covered. 16. Certain survivors of individuals and survivors insurance program and 3. Coverage of agricultural workers who died before the insured status for the termination of Federal grants would be on the basis of $200 cash provisions were liberalized in 1950 to the States for old-age assistance wages from one employer in a calen• would be eligible for benefits if the and aid to dependent children. dar year (instead of $50 in a calendar wage earner had enough quarters of On January 14, 1954, the President quarter). coverage so that he would have been transmitted to the Congress a special 4. The referendum for State and insured had he died after the pro• message recommending important local government employees would visions were liberalized. changes in the Federal old-age and require that there be a majority of 17. Benefits would be withheld from survivors insurance system and the eligible employees participating in dependents and survivors for months Federal programs of grants-in-aid for the referendum, in addition to at in which the beneficiary resided out•

9Consultants on Social Security, A Re• least two-thirds of those voting being, side the United States unless the port to the Secretary of Health, Educa• in favor of coverage. beneficiary met certain requirements tion, and Welfare on Extension of Old-Age as to earlier residence in the United and Survivors Insurance to Additional 10 The Committee first tentatively voted States or the insured person was cur• Groups of Current Workers, 1953. For a on May 20 to include physicians but later rently insured, at death or at the summary, see the Bulletin, September voted to exclude them (Congressional 1953, pp. 3-7. Record, May 20, 1954. p. D 562). attainment of age 65, on the basis of military service wage credits or agricultural products. tions of higher learning to be a employment outside the United 6. All Federal employees covered by separate coverage group. States. the House bill would be excluded, 7. The Kerr amendment to permit 18. Earnings during periods of un• and Federal employees would not be Christian Science practitioners to be lawful residence could not be used permitted to receive credit under two covered on a voluntary basis as self- in determination of insured status Federal retirement systems for the employed persons. or benefit amounts. same period of Federal service. 8. The Kerr amendment to permit 19. All benefits payable on an in• 7. The retirement-test provisions ministers who are engaged as mis• dividual's record would be terminated would be modified by (a) increasing sionaries outside the United States if he was deported because of illegal the basic exemption of $1,000 to $1,200 to be covered on a voluntary basis as entry, conviction of a crime, or sub• a year; (b) limiting the retirement self-employed persons. versive activity. test, as it applies to employment in 9. The Long amendment to require 20. A revised schedule of contribu• the United States, to covered em• the Department of Health, Educa• tion rates would be established, with ployment; and (c) reducing from 75 tion, and Welfare to study the feasi• increases to percent each for to 72 the age at which benefits are bility and costs of providing increased employer and employee to 1970 and payable irrespective of retirement. minimum, benefits of $55, $60, and $75 4 percent each in 1975 and thereafter, 8. The lump-sum death payment a month under old-age and survivor and corresponding increases for the would continue to be three times the insurance. self-employed. primary insurance amount (that is, The amendments defeated were: 21. The Federal matching provi• up to $325.50, instead of $255.00 as in 1. The Johnston (of South Caro- sions for public assistance would be the House bill). lina) amendment to reduce the eli• extended 1 year, rather than on the 9. The House provisions restricting gibility age from 65 to 60 for old-age: new basis proposed in H.R. 7200. benefit rights for persons outside and survivors insurance. 22. Period for approval of Penn• the United States, persons illegally 2. The Stennis amendment that sylvania and Missouri plans for aid in the United States, and persons would have left the coverage of farm to the blind would be extended 2 deported would be eliminated. workers under the 1950 amendments additional years. 10. The 1952 public assistance unchanged. Senate action on H.R. 9366".—The matching formula would be extended 3. The Humphrey amendment to Senate Committee on Finance made for 2 years instead of 1 year as in increase the widow's benefit from major changes in the bill as passed the House bill. three-fourths of the primary insur• by the House. On August 13, the Senate passed ance amount to 100 percent. 1. Farmers and all self-employed H.R. 9366, as amended, by a voice 4. The Long amendment to require professional persons would be ex• vote. Nine additional amendments States to disregard the increased old- 11 cluded. were adopted, six were rejected, and age and survivors insurance benefits 2. Ministers would be allowed to six amendments were presented but in determining need of public assist• elect coverage as self-employed per• withdrawn. ance recipients. sons within 2 years; those electing The amendments adopted were: 5. The Hennings-Symington-Martin- such coverage would be compulsorily 1. The Smathers-Holland amend• Duff amendment to make permanent covered thereafter. ment to exclude temporary agricul• the exemption of Missouri and Penn• 3. Christian Science practitioners tural workers from the British West sylvania from the income-and-re• would be excluded. Indies. sources requirement for aid to blind. 4. Coverage of farm workers would 2. The Ives amendment to permit 6. The Humphrey amendment to be broadened to include those re• coverage of employees of nonprofit increase payments under old-age as• ceiving $50 or more in wages in a institutions that fail to formally sistance, aid to the blind, and aid to quarter from an employer. elect coverage but pay taxes. the permanently and totally disabled 5. Provisions of State and local 3. The Morse amendment to permit $5 a month, and under aid to de• coverage would be modified to (a) employees of nonprofit institutions pendent children $3 (with a floor require the vote of a majority of who failed to elect coverage and for provision), and to repeal the section those who are members of the system whom taxes have been paid to be relating to limitations on Puerto Rico in favor of referendum; (b) make covered. and the Virgin Islands. institutions of higher learning a sep• 4. The Humphrey amendment to The amendments withdrawn were: arate coverage group; (c) enable include funeral directors on a com• 1. The Lehman amendment to ex• each political subdivision or any such pulsory basis. tend coverage, increase benefits, add subdivisions to be a separate cover• 5. The Hayden-Goldwater amend• permanent and total disability bene• age group; (d) include certain State ment to permit retroactive cover• fits and temporary disability bene• government employees in Utah; and age of employees who are members fits, and make other changes. (e) include certain inspectors of of the Arizona teachers' retirement 2. The Humphrey amendment to system. extend coverage to dentists. 11 This action reversed an earlier tenta• tive action of the Committee covering 6. The Kerr amendment to make 3. The Humphrey amendment to these groups on an individual voluntary optional with the State—instead of elective basis (Congressional Record, July extend coverage to accountants. 13, 1954, p. D 824). mandatory — provisions for institu• 4. The Kennedy amendment to pro- vide extra credit for postponed re• tems. the retirement test no longer applies. tirement. 5. Modified the Senate provision 12. Raised to $1,200 per year the 5. The Kennedy amendment to in• that Federal service credited under exempt amount of earnings permit• crease the minimum old-age and sur• the old-age and survivors insurance ted to beneficiaries without loss of vivors insurance benefit to $35 a program for benefit purposes could benefits, in accordance with the Sen• month. not be used to establish retirement ate version. 6. The Martin-Long amendment to credit under any other Federal re• 13. Agreed to House version that, require Congress to review estimated tirement system, to provide that its to determining the amount of earned old-age and survivors insurance dis• limiting effect would be applicable income that a beneficiary has re• bursements every 2 years and to to only those groups newly brought ceived, earnings from noncovered as make any adjustments in tax rates under the old-age and survivors in• well as covered employment will be necessary to ensure that income to surance by the 1954 amendments. counted. the trust fund will cover expendi• 6. Adopted the Senate provision 14. Agreed to Senate provision con• tures for the ensuing 2 years. permitting ministers, Christian Sci• tinuing present law with respect to Conference action.—The House- ence practitioners, and members of payment of benefits to dependents Senate conferees reached agreement religious orders who have not taken and survivors of an insured worker, on August 20. They took the follow• a vow of poverty, whether employees when such persons reside outside the ing action on the substantive differ• or self-employed, to secure coverage United States. ences in the two versions of the as self-employed persons but on an 15. Agreed to eliminate House pro• amendments. individual voluntary basis. vision disallowing wage credits 1. Covered farm workers on the 7. Extended coverage to farm op• earned by a person during a period basis of earnings in a calendar year, erators under the terms of the House of unlawful residence. as in the House version, but with bill. 16. Agreed to retain, in modified $100 as the amount rather than $200. 8. Continued exclusion of lawyers, form, the House provision for not 2. Continued the exclusion of in• dentists, and other medical practi• paying benefits to an insured worker dividuals performing services in con• tioners, as in the Senate bill, but when he has been deported. Benefits nection with the production or har• with extension of coverage to self- would be continued to eligible de• vesting of gum naval stores, as in employed professional architects, ac• pendents and survivors of deported the Senate bill. countants, and engineers, as in the persons if they stay in the United 3. Excluded temporary agricultural House bill. States or if they live abroad and are workers from the British West Indies 9. With respect to coverage of citizens of the United States. (similar to the present exclusion of members of State and local retire• 17. Continued to September 30, agricultural workers from Mexico), ment systems, concurred in Senate 1956, the present matching formulas as in the Senate bill. amendment requiring that a majority for old-age assistance, aid to the 4. Extended coverage to Federal of the employees eligible to vote in blind, aid to the permanently and employees not covered by Federal the referendum vote in favor of cov• totally disabled, and aid to depend• staff retirement systems, as provided erage; (also concurred in Senate ent children, in accordance with the in the House bill; the employees amendments making other minor Senate amendment. of the District Federal Home Loan changes relating to extension of cov• 18. Agreed to Senate amendment Banks and the Tennessee Valley erage of State and local employees). adding a provision directing the Sec• Authority employees were excluded. 10. Agreed to House version pro• retary of Health, Education, and Wel• The conferees suggested that a study viding for a maximum lump-sum fare to conduct a study with a view bee made of dual coverage under the death payment of $255. to determining the feasibility of in• old-age and survivors insurance pro• 11. Agreed to Senate amendment creasing the minimum old-age insur• gram and Federal retirement sys• reducing to age 72 the age at which ance benefit to $55, $60, and $75.