Appendix K to the report of the 1983 Greenspan Commission on Social Security Reform

Appendix K- Section E

SUMMARY OF SECTION E - LEVEL OF PRIMARY BENEFITS

   

OASDI Cost 1983-89
(billions)

 

Option No.

Description

II-B

III

Long-Term Cost

E-1

Increase "bend points" by 75% of the increase in wages until they are 80% of what they would have been under 100% wage indexing, effective 1984.

-$3

-$3

-1.08%

E-2

Same as E-1, except effective date is 1987.

*

*

-1.01

E-3

Same as E-1, except effective date is 2000.

0

0

-.80

E-4

Same as E-1, except effective date is 2010.

0

0

-.60

E-5

Same as E-1, except effective date is 2020.

0

0

-.37

E-6

Index "bend points" by 75% of increase in wages for 3 years, beginning 1987.

-1/4

-1/4

-.22

E-7

Change computation point for determining Average Indexed Monthly Earnings from age 62 to age 65.

-3

-3

-.25

E-8

Reduce percentages in PIA benefit formula gradually over time, by 10% relatively, effective in 1984.

-3

-3

-1.08

E-9

Same as E-8, except effective in 1990.

0

0

-.95

E-10

Same as E-9, except 5% reduction.

0

0

-.50

E-11

Same as E-9, except no reduction on first percentage and larger reductions on other two percentages.

0

0

-.95

* Savings of less than $500 million.


E. LEVEL OF PRIMARY BENEFITS

Present law. The Primary Insurance Amount, which is the benefit payable to a worker retiring at age 65 (and also to a disabled worker) is determined from a formula based on Average Indexed Monthly Earnings. This formula involves three different percentages which are applied to different levels of the AIME (as separated by the "bend points"), so as to give relatively higher benefits to lower-earnings persons than to higher-earnings persons.

Options.

E-1 Increase the "bend points" in the PIA benefit formula by 75% of the increase in wages (rather than by 100% as under present law) for "X" years (until such bend points are 80% of what they would have been under 100% wage indexing), effective in 1984.

Costs (in billions of dollars)

Estimate

1983

1984

1985

1986

1987

1988

1989

1983-89

II-B

0

.0

-.1

-.2

-.5

-.8

-1.3

-2.9

III

0

.0

-.1

-.2

-.6

-.9

-1.4

-3.2

25-Year Cost: -.28% of taxable payroll
50-Year Cost: -.79X of taxable payroll
Long-Term Cost: -1.08% of taxable payroll


E-2 Same as Option E-1, except effective in 1987.

Costs (in billions of dollars)

Estimate

1983

1984

1985

1986

1987

1988

1989

1983-89

II-B

0

0

0

0

-.0

-.1

-.2

-.3

III

0

0

0

0

-.0

-.1

-.3

-.4

Long-Term Cost: -1.01% of taxable payroll


E-3 Same as Option E-1, except effective in 2000.

25-Year Cost: -.01% of taxable payroll
50-Year Cost: -.40% of taxable payroll
Long-Term Cost: -.80% of taxable payroll


E-4 Same as Option E-1, except effective in 2010.

25-Year Cost: None
50-Year Cost: -.17% of taxable payroll
Long-Term Cost: -.60% of taxable payroll


E-5 Same as Option E-1, except effective in 2020.

25-Year Cost: None
50-Year Cost: -.03% of taxable payroll
Long-Term Cost: -.37% of taxable payroll


E-6 Index the "bend points" by 75% of the increase in wages for 3 years, effective in 1987.

Costs (in billions of dollars)

Estimate

1983

1984

1985

1986

1987

1988

1989

1983-89

II-B

0

0

0

0

-.0

-.1

-.2

-.3

III

0

0

0

0

-.0

-.1

-.3

-.4

Long-Term Cost: -.22% of taxable payroll


E-7 Change computation point for determining Average Indexed Monthly Earnings from age 62 to age 65 (so that, for retirement cases, 3 more computation years would be required in determining the AIME), phased in beginning with workers who attain age 62 in 1984.

Costs (in billions of dollars)

Estimate

1983

1984

1985

1986

1987

1988

1989

1983-89

II-B

0

.0

-.2

-.4

-.6

-.8

-1.0

-3.0

III

0

.0

-.2

-.4

-.7

-.9

-1.1

-3.3

Long-Term Cost: -.25% of taxable payroll


E-8 Reduce the percentages in the PIA benefit formula -- 90%, 32%, and 15% -- by 10% relatively, over a 15-year period (1984-98), so that they would ultimately be 81.0%, 28.8%, and 13.5%. This would have the effect ultimately of reducing benefits in all cases (regardless of earnings history) by 10%.

Costs (in billions of dollars)

Estimate

1983

1984

1985

1986

1987

1988

1989

1983-89

II-B

0

-.0

-.1

-.2

-.4

-.8

-1.2

-2.8

III

0

-.0

-.1

-.2

-.5

-.9

-1.3

-3.0

Long-Term Cost: -1.08% of taxable payroll


E-9 Same as Option E-8, except begin the reductions in 1990 (instead of 1984).

Long-Term Cost: .95% of taxable payroll


E-10 Same as Option E-9, except reduce the percentage factors by 5% relatively over an 8-year period.

Long-Term Cost: .50% of taxable payroll


E-11 Same as Option E-9, except that the 90% factor would not be reduced, and the 32% factor would be lowered to 25%, and the 15% factor would be lowered to 13%.

Long-Term Cost: .95% of taxable payroll