Potential Savings to the Social Security Administration of Rounding Benefits Payments to the Nearest Penny

There is a potential for significant savings to the social security system if benefits were calculated to the nearest penny rather than rounded up to the next highest dime as required by law. An estimated savings of $386 million would accrue to the Retirement and Survivors Insurance Program from calendar years 1980 through 1986 if section 215(g) of the Social Security Act were amended to provide that benefits be calculated to the nearest penny. The estimate of $386 million in savings assumed an average savings of $0.045 per person per check in the first year and an increase of $0.045 per check for each year the beneficiary remained on the rolls since one cost of living adjustment would be made each year. A somewhat smaller savings would also be achieved for the Disability Insurance Program. A recent study by the Social Security Administration estimated that implementing the new method of calculating benefits would involve a one-time cost of about $700,000 for computer system redesign and about $600,000 of annual recurring cost for manual calculations and handling public inquiries. To minimize administrative problems and avoid reducing benefits to current beneficiaries, the Social Security Administration believes that the change should be implemented concurrently with a general benefit increase. Section 215 of the Social Security Act should be amended.