Social Security Reform

Social Security is one of the nation's most important and visible programs. Although individual accounts offer the possibility of a better rate of return on individual contributions, a flawed or failed system of accounts could have devastating effects on retirees and undermine public confidence in government. GAO believes that the following three critical questions need to be addressed in designing and implementing a system of individual accounts: Who would assume new administrative and record-keeping responsibilities? How much choice would individuals have in selecting and controlling their investment options? How much flexibility would workers have when they retire and begin to draw on their accounts? This report discusses the fundamental choices associated with each question and several options that could be considered.

GAO noted that: (1) the social security system is one of the nation's most important and visible programs; (2) while individual accounts offer the possibility of an improved rate of return on individual contributions, a flawed or failed system of individual accounts could have devastating effects on individuals' retirement security and on public confidence in government overall; (3) in this context, GAO believes that three critical questions would need to be addressed in designing and implementing a system of individual accounts: (a) who would assume new administrative and recordkeeping responsibilities; (b) how much choice individuals would have in selecting and controlling their investment options; and (c) how much flexibility workers would have when they retire and begin to draw on their accounts; and (4) all of the decisions made regarding these critical questions would affect the design and structure of such a system, as well as who would bear any additional administrative responsibilities and costs.