Annual Social Security Statement: A Key Guide

Agency terms new online reports “huge success,” but numbers represent small fraction of beneficiaries.

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Michael J. Astrue, commissioner of Social Security, recently put out a press release trumpeting the agency's belated launch on May 1 of an online Social Security statement. In less than two months, the agency announced, a million people have created an online account and viewed their Social Security statement.

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"The online Social Security Statement is a huge success," Astrue said in the press release. For an agency that provided retirement and disability benefits to 61.6 million people as of May and receives payroll taxes from 208.5 million people, Social Security is particularly reserved in its public statements. Including Astrue's victory lap announcement, the agency has issued a grand total of 10 national press releases so far in 2012.

In reality, as the agency's own inspector general and the U.S. Government Accountability Office have found, Social Security has had few recent successes in managing the way it provides Americans with crucial details of what is, to most of us, the single most important government benefit we will ever receive.

The agency used to mail out more than 150 million personalized Social Security statements a year. These printed reports contained a historical record of a person's payroll taxes and year-by-year earnings record, and projections of how much they would receive in retirement benefits at various possible ages at which they are eligible to claim benefits.

Social Security can be a very complicated program to navigate. Economist Larry Kotlikoff, a Social Security expert at Boston University, recently estimated that "for an age-62 couple there are over 100 million combinations of months for each of the two spouses to take retirement benefits, spousal benefits, and decide whether or not to file and suspend one's retirement benefits."

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Academic research has documented that consumers do not understand these complexities. Further, the annual statement has been identified as the single most valuable communication the agency has with consumers. So, of course, the agency decided to stop sending it out, claiming it needed to find budget savings and that the growth of the Internet made it logical to convert the statement to an online tool.

That was in March of 2011. At the time, 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." Months later, however, the agency had not done so and could not even project when it would begin.

In the fall of last year, the agency's Office of the Inspector General (OIG) gave it a slap on the wrist for not having a strategic plan to develop and implement online services. Social Security disagreed, but according to the OIG's report, also said it "does not believe it is wise to commit to specific expansions or refinements of SSA's electronic services in future years given the constantly evolving needs of the Agency and its customers."

Having taken more than a year to provide the online capabilities it promised in 2011, the agency now declares the program a "huge success."

Really?

Even if consumers continued creating online Social Security statements at the rate they did during the months of May and June, they would have created 6 million of them in the space of 12 months. How does one compare six million online statements against 150 million printed statements mailed out each year? Or against those 270 million people either receiving Social Security benefits or making tax payments into the system?

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And while there is no doubt that the country is becoming an online nation, Internet access and use is still skewed heavily toward younger and more affluent Americans. The Pew Research Center provides authoritative snapshots of Internet use over time.

While younger Americans have been heavy users of online services for years, older people have not. And this is the age group for which Social Security is most important. As of last April, Pew reported, 53 percent of Americans age 65 and older were using the Internet—the first time Pew surveys found a majority of seniors had done so. Odds are that lower-income seniors are not heavily represented along online users.

A Social Security spokeswoman said last week that the agency had resumed mailing out paper statements last February to Americans age 60 and older who were not already receiving benefits. She said it had sent out 6.7 million statements through the end of June. Only 5,500 other individuals have taken up the agency's offer to mail them statements on request.

Even adding these mailings to the million online accounts produces a tiny number compared with the prior practice. Social Security has indeed been a remarkable success since it was created in 1935. But not in this case.

Corrected on 07/23/2012: An earlier version of this story incorrectly stated when the Social Security Administration announced it would stop sending out paper statements. The correct date was March 2011.