New online Social Security statements don't cut it
CHICAGO (Reuters) - Your annual Social Security benefit statement, which provides an important annual reminder and explanation of benefits, has moved online.
Paper statements were eliminated last year for most participating workers in a budget-cutting move, which saves $70 million annually in printing and postage. Last week, the Social Security Administration (SSA) introduced the replacement - an online statement accessible to anyone who sets up an account at the agency's website (here). So far 130,000 Americans have signed up.
Social Security Commissioner Michael Astrue pitches the online statement as a modernization move, and an "important financial planning tool." But technology doesn't always make things better. I signed up myself, and can report there is nothing there that you did not already get in the annual paper statement. More importantly, most Americans will not remember to log on to check their benefits on a regular basis - and for now, they won't be receiving email reminders even after they have signed up. The savings hardly seem worth it compared with the potential detriment.
And here's the kicker: the SSA's move arguably violates federal law, which requires that a personalized statement be mailed to all participating workers over age 25 under amendments to the Social Security Act passed in 1989 and 1990.
The SSA claims it has the legal authority to suspend the mailings "As the Department of Justice and the General Accounting Office have recognized repeatedly in the past, an agency head has the authority to curtail or discontinue programs and activities, including those required by statute, in order to avoid exhaustion of agency funds," says an SSA spokesman.
Social Security advocates don't agree. "This is a choice the commissioner has made in terms of what he wants to cut from the budget," says Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare Foundation. "He's not bound by law to stop sending the statements."
The shift to online services also raises digital divide issues, especially for rural and low-income areas of the country. One in five adults don't use the Internet, according to the Pew Internet & American Life Project. Seniors, non-native English speakers, low-income and less-educated households are least likely to have access. Pew also reports that 62 percent of households had access to broadband last year, with minority groups, rural areas and low-income households least likely to have high-speed service.
Evidence is mixed on the effectiveness of the statement as an educational tool. Two-thirds of respondents to a survey by the SSA recalled receiving their statement, and only two-thirds of that group actually read it. So if only a fraction of workers make the effort to access the information, that data suggests it won't be a big loss.
But an analysis of the survey data by the bipartisan Social Security Advisory Board - an independent panel appointed by the president, Congress and Social Security commissioner - found a clear link between receipt of the statement and understanding of Social Security benefits. More than half of those who read the statement reported that as a result, they increased their savings rate or revised their financial plans for the future; 25 percent said they contacted a personal financial adviser. And that seems like a pretty big deal.
The cutbacks in the SSA's public outreach and education go well beyond paper statements. The SSA also has frozen hiring for the past two years, and projects that it will have lost 9,000 employees through attrition by the end of fiscal 2013 - a 10 percent reduction in workforce. Some local field offices are being consolidated, and all are closing in the midafternoon due to the staff shortages. The SSA also has suspended an outreach program that periodically sends staffers into remote areas far from offices to answer questions one-on-one.
Individual counseling is important for the SSA's more complex services. Disability insurance and Supplemental Security Insurance, for example, both require interviews and applications. Even filing for retirement benefits can raise thorny questions around the most beneficial date to file, along with spousal and survivor benefit issues.
"The commissioner says people just need to get accustomed to using the Internet," says journalist Eric Laursen, author of an exhaustive new history of the politics surrounding Social Security called "The People's Pension: The War Against Social Security from Reagan to Obama" (AK Press). "But a host of programs the SSA administers don't lend themselves to the Web."
The idea of a statement was first championed by the late U.S. senator Daniel Patrick Moynihan of New York. Here's what he said about the importance of the statement at the time:
"We pay our taxes to federal, state and local governments and we hear back from them every year — reminding us to tote up how much we've paid in and how much we still owe or are due back. We receive monthly statements from our banks and credit card companies. Yet every month, in every paycheck, we see money withheld for Social Security, but we hear nary a word from the Social Security Administration."
So now we are at that place where you get to continue paying your Federal Insurance Contributions Act taxes (FICA) - which fund not only benefits but the SSA's administrative and public outreach expenses, but you only get a statement if you have Internet access - and know how to use it.
(The writer is a Reuters columnist. The opinions expressed are his own. For more from Mark Miller, see link.reuters.com/qyk97s)