Social Security Retirement Accounts

Pursuant to a congressional request, GAO reviewed proposed legislation to create a system of individual Social Security retirement accounts (ISSRA), focusing on the: (1) implications of H.R. 306 on the retirement income of individuals; and (2) key differences between H.R. 306 and the 1990 proposal. GAO noted that: (1) ISSRA could be integrated with the Social Security benefit structure and, given favorable market conditions, could improve retirement incomes; (2) although both proposals include a 2-percent payroll tax diversion, H.R. 306 would deplete Social Security trust fund contingency reserves; (3) under the 1990 proposal, the ISSRA program would end when the projected Old Age and Survivors Insurance (OASI) cost rate would rise to equal the income rate, except for the accumulation and payment of interest; (4) H.R. 306 proposes a permanent ISSRA scheme that would require future payroll tax increases or benefit reductions; (5) since H.R. 306 does not provide for benefit reductions to account for the diversion of payroll tax revenues, individuals will generally receive a higher total retirement income; and (6) under H.R. 306, the ISSRA program would effectively become a mandatory defined contribution supplement to Social Security.