The Social Security Administration's decision to end paper statements summarizing people's Social Security benefits has been criticized by the government's chief watchdog agency. Consumers badly need more information about the program, not less, the Government Accountability Office (GAO) concluded. It added that widely publicized proposals to reform the program will make it even more important for the public to get accurate information to use in adapting retirement plans.
Last March, the Social Security Administration (SSA) stopped sending out paper versions of "Your Social Security Statement," an annual report based on a person's actual work history and projected Social Security benefits. This paper statement is the SSA's primary outreach communication. It is particularly important in helping people near retirement make decisions about when to begin claiming Social Security benefits.
When it announced the decision to end the paper statements, the SSA said it was doing so to save money. In Congressional testimony, SSA Commissioner Michael J. Astrue said the agency has spent about $70 million each year to mail out more than 150 million Social Security statements.
Astrue's decision has been questioned as a short-sighted effort to save a modest amount of money at an agency that spends roughly $60 billion a month in benefits. "Most people avoid retirement planning and have no idea how much money they will have once they stop working," commented Alicia H. Munnell, director of the Center for Retirement Research at Boston College. "The Social Security Statement was one of the few ways of ensuring that everybody had some idea about their benefits. I strongly urge Social Security to restore the Statement as soon as possible."
In his March testimony, Astrue said, "We will send statements only to people age 60 and over and people under age 60 upon request. We also are working on making the statements available online."
According to a review of the SSA's actions by the GAO, however, the agency still cannot say when it will begin providing the statements online. The GAO says the agency told it there is no timetable for resuming the statements and could provide GAO no assurance that the combination of printed and online statements won't cost even more money than the savings earlier claimed by the agency.
Right now, consumers have no access to either printed or online statements. The SSA says they can use an online benefits estimation tool, but retirement experts say it lacks the detail of the annual printed statements. Efforts to find out how many people visit the online SSA website were not successful.
The GAO critique was contained in Congressional testimony last week by Barbara D. Bovbjerg, a GAO managing director. "At best, [SSA] officials said the provision of the statement, both online and through the mail, may be resumed early in calendar year 2012, though they are currently unsure of the timeline," her prepared remarks said.
A SSA spokesman provided this prepared response to U.S. News's questions about the GAO testimony and criticisms of its decision: "Most of the $70 million annual cost of the paper Social Security Statement is for postage. Any online statement will cost a small fraction compared to doing it the old fashioned way. We are working out the technical issues related to an online statement and plan to consult with Congress and stakeholders in the coming months."
By law, the agency is required to provide Americans with annual Social Security statements that include:
• An estimate of potential monthly Social Security retirement, disability, survivor, and auxiliary benefits and a description of the benefits under Medicare
• The amount of wages paid to the employee and income from self-employment
• An estimate of the individual's aggregate contributions paid to Social Security, including employer contributions
• An estimate of the individual's aggregate contributions paid to Medicare, including employer contributions
In a letter to Astrue dated June 13, Sen. Ben Cardin, a Maryland Democrat, urged the agency to reconsider its decision. "Since 1999, the Social Security Annual Earnings Statement has given Americans an indispensable retirement tool to ensure that every worker has an in-depth knowledge of where their hard-earned money is being saved," his letter said. "The statement also ensures that Americans can verify that their earnings have been reported accurately, and it provides a check against clerical errors. The agency's expenditure represents a small cost for a large and tangible benefit."
Cardin also raised the possibility that SSA’s action might be against the law and certainly against the intent of Congress. Annual statements were not the SSA's decision, his letter noted, but were mandated by Congress. As of yesterday, Cardin’s office had received no reply from Astrue, a spokeswoman said.
Already, Bovbjerg testified, there is extensive research that documents widespread public misunderstanding of Social Security and its benefits. "Half of those responding to a seven-question quiz on basic Social Security knowledge, included as part of a survey of working-aged adults, received a grade of D or F," she said. "While two-thirds of the respondents reported that they recalled receiving the statement within the last six months, very few respondents understood how their Social Security benefits are calculated."
Corrected on 7/13/2011: An earlier version of this story incorrectly reported that Sen. Cardin co-sponsored the law requiring that Social Security provide annual statements. Cardin supported the provision but it was actually sponsored by the late Democratic Sen. Patrick Moynihan, of New York.