Social Security

Issues Involving Benefit Equity for Working Women Gao ID: HEHS-96-55 April 10, 1996

When the social security program was established in the 1930s, less than 15 percent of married women held paying jobs outside the home; today, about 60 percent of married women are paid workers. Despite the movement of women into the labor market, the social security benefit structure has remained essentially unchanged over the years. The fairness of the benefit structure has come under increasing scrutiny, especially as it affects women who have earned benefits in their own right. For example, a two-earner couple will receive lower combined benefits in retirement than an identical one-earner couple. Also, a married woman who works and pays social security taxes might not, because of the dual entitlement limitation, receive higher benefits than if she had never worked and received only a spousal benefit. Several proposals seek to remedy these inequities. These include two broad proposals--"earnings sharing" and a "double-decker" plan--and several more-narrow proposals, such as reducing spousal benefits. None of the measures has been adopted, however, partly because they would either boost program costs or reduce benefits for some beneficiaries. Their enactment could also impose a large administrative burden on the Social Security Administration.

GAO noted that: (1) the Social Security Act is gender neutral when it comes to awarding individual retirement benefits; (2) women are more likely to qualify for spousal and survivor benefits and experience dual entitlement limits because of their lower lifetime earnings and longer life expectancies; (3) the monthly benefits for a two-earner couple are one-third less than those of a one-earner couple with the same demographics and lifetime earnings; (4) the survivor of a one-earner couple receives 67 percent of the total benefits received when both spouses were alive; (5) the survivor of a two-earner couple can receive between 50 percent and 67 percent of combined pre-death benefits; (6) a retired married person is often eligible for larger benefits as a spouse or survivor than as a retired worker; (7) an individual's retirement contributions do not necessarily increase his retirement benefits, but may provide disability coverage and family survivor coverage; (8) people with lower lifetime earnings and fewer Social Security contributions receive more Social Security benefits; (9) the issue of benefit fairness is likely to become more widespread as women spend more time in the workforce and increase their earnings; (10) the earnings sharing proposal combines the covered earnings of a husband and wife for each year that the couple is married and credits half of the combined total to each spouse's Social Security earnings; (11) the double-decker plan provides a flat-rate benefit for qualified beneficiaries and a proportional plan based on beneficiaries' lifetime covered earnings; and (12) SSA has not changed the way it administers retirement benefits because of the potential program costs, inequity issues, and administrative burdens.

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