Social Security Reform: Implementation Issues for Individual Accounts
(Letter Report, 06/18/1999, GAO/HEHS-99-122).
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.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-99-122
TITLE: Social Security Reform: Implementation Issues for
Individual Accounts
DATE: 06/18/1999
SUBJECT: Investment planning
Federal social security programs
Financial analysis
Financial management
Future budget projections
Retirement benefits
Social security benefits
IDENTIFIER: Social Security Program
Social Security Trust Fund
SSA Individual Account Program
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United States General Accounting Office GAO Report
to the Chairman, Committee on Ways and Means, House of
Representatives June 1999 SOCIAL SECURITY REFORM
Implementation Issues for Individual Accounts GAO/HEHS-99-122 GAO
United States General Accounting Office Washington, D.C. 20548
Health, Education, and Human Services Division B-281329 June 18,
1999 The Honorable Bill Archer Chairman, Committee on Ways and
Means House of Representatives Dear Mr. Chairman: Social Security
forms the foundation for our retirement income system. In 1998, it
provided approximately $265 billion in annual benefits to 31
million workers and their dependents. However, the Social Security
program is facing significant future financial challenges as a
result of profound demographic changes, including the aging of the
baby boom generation and increased life expectancy. A wide variety
of proposals to reform the program is currently being discussed-
from more traditional approaches, such as reducing benefits and
raising taxes, to more fundamental changes, such as creating a
system of individual accounts. As policymakers decide whether and
how to create a system of individual accounts, they must consider
a range of difficult concerns. These concerns include broad
macroeconomic issues, such as how to finance the accounts and how
the accounts would affect the economy and program solvency, as
well as program benefit issues, such as how to balance
opportunities for improved individual investment returns with the
need to maintain an adequate income for those who rely on Social
Security the most. No less important is the need to consider how
readily individual accounts could be implemented and
administered.1 Under a system of individual accounts, workers
would manage their own accounts to varying degrees. This would
expose workers to a greater degree of risk in return for both
greater individual choice in retirement investments and, according
to proponents, the possibility of a higher rate of return on
contributions than available under current law.2 Depending on the
proposal, these accounts would replace all or part of the Social
Security program, or they would supplement Social Security
benefits. Moreover, some proposals would require that all workers
participate, while others would allow workers to opt in or out.
Yet not all individual account proposals clearly delineate how the
accounts would be managed 1In testimony earlier this year, we
discussed how these three issues could be used as criteria for
evaluating reform proposals. See Social Security: Criteria for
Evaluating Social Security Reform Proposals (GAO/T-HEHS-99-94,
Mar. 25, 1999). 2Others, however, believe that returns on
contributions are not the only goal of Social Security and that
individual accounts are not the only way to increase rates of
return. We will address the complex rate of return issue in a
forthcoming report. Page 1
GAO/HEHS-99-122 Implementing Individual Accounts B-281329 and
administered, and administrative feasibility is vital to the
success of any individual account proposal. A system of individual
accounts covering 148 million workers would constitute a
fundamental change to Social Security and would be significantly
larger than any existing retirement investment program. If
practical issues such as administrative barriers and challenges
are not adequately considered before reform decisions are made,
implementation of any proposal could be delayed or even derailed.
Therefore, as you requested, this report focuses on issues to
consider regarding the design and implementation of an individual
account system. We performed our work from October 1998 to May
1999 in accordance with generally accepted government auditing
standards. Appendix II contains a detailed discussion of our
objectives, scope, and methodology. Results The Social Security
system is one of our nation's most important and visible programs.
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. In this context, we believe that three
critical questions would need to be addressed in designing and
implementing a system of individual accounts. All of the decisions
made regarding these three critical questions would affect the
design and structure of such a system, as well as who would bear
any additional administrative responsibilities and costs. Who
would assume new administrative and record-keeping
responsibilities? While proposals for individual accounts vary,
certain key administrative functions would need to be performed
under any system of individual accounts, just as under any other
defined contribution pension plan.3 Worker contributions would
need to be collected, and records on these individual
contributions maintained; contributions would have to be invested,
typically according to worker preferences; and benefits would need
to be paid. Depending on system design, the employer, the worker,
private sector service providers, and the government could all be
affected to varying degrees. Section 1 addresses this question in
detail. How much choice would individuals have in selecting and
controlling their investment options? The design of the investment
structure, including how much discretion individuals would have in
selecting who would invest the 3In defined contribution pension
plans, contributions are allocated to individual accounts by a
predetermined formula, and benefits depend on contribution levels
and returns on investment of these contributions. Page 2
GAO/HEHS-99-122 Implementing Individual Accounts B-281329
contributions as well as the possible range of investment choices,
would need to be considered before implementation. These factors
would affect the cost and administrative complexity of the system.
Section 2 outlines the key issues and trade-offs associated with
various options. How much flexibility would workers have when they
retire and begin to draw on their accounts? A number of options
are available for providing payments to workers upon retirement.
The variety and types of payments offered are important to a
system's design. For example, if annuities were required,
decisions would need to be made about who provided them and how
they would be structured. A discussion of payment options and
related issues is provided in section 3. Table 1 summarizes the
fundamental choices associated with each question and a number of
options that could be considered. Table 1: Key Design and
Administration Issues Critical questions and
Possible options to decisions Fundamental
choices consider Who would assume new
Centralize or decentralize - Build on current Social
administrative and account administration and
Security tax and payroll record-keeping record
keeping. reporting structure. responsibilities?
- Build on employer-based 401(k) structure. - Build on
individually controlled individual retirement account structure.
How much choice would Maximize individual choice -
Offer a broad range of individuals have in selecting or offer
fewer choices. investment options. and controlling their
- Offer a small set of index investment options?
funds. - Combine the two options by requiring a minimum account
balance before a broader range of options is available. How much
flexibility would Maximize individual choice - Make
annuities voluntary workers have when they or ensure
preservation of and permit lump sum and retire and begin to
draw on retirement benefits. gradual account their
accounts?
withdrawals. - Require lifetime annuities. - Combine the two
options by requiring annuitization to ensure at least a minimum
retirement income, with added flexibility for the remainder of the
account. Page 3 GAO/HEHS-99-122
Implementing Individual Accounts B-281329 Essentially, these
decisions amount to trade-offs between simplicity and
standardization on the one hand and heightened individual choice
and flexibility on the other. Simpler, more standardized systems
could limit individual choice by offering only a few investment
options and requiring that retirees annuitize their accounts.
These simplified systems minimize the risk that individuals will
not choose a diversified portfolio or will simply make a bad
choice. Conversely, when a system offers more choice, either in
investment options or in how accumulated savings are distributed
upon retirement, individuals have more opportunity to tailor their
financial situation to their own tastes and preferences. This
increased choice is accompanied by increased risk for the
individual. Decisions about system design would also affect the
costs of administering the program. As systems become more
complex, and more services are offered, administrative costs rise.
Finally, any system of individual accounts would probably
necessitate a change in current federal roles and
responsibilities. Some proposals call for the government to assume
a new administrative role, while others would require an increased
government oversight role. Each proposed alternative offers new
administrative and operational challenges. When designing a system
of individual accounts, the options that are available for each of
the three critical decisions could be combined in a number of
ways. For example, one proposal combines a centralized record-
keeping system with a broad choice among preapproved investment
options and mandatory annuitization. Another proposal would
combine centralized account administration with few investment
choices, and a portion of the account accumulation would be
annuitized to provide an income comfortably above the poverty
level. All of the various combinations would have associated
trade-offs, costs, and other issues. It is important to note that
individual accounts are one of a number of provisions in Social
Security reform packages being considered. Many of these broader
initiatives contain a variety of provisions for addressing Social
Security Trust Fund solvency. While individual accounts offer the
potential for increased investment returns, they cannot by
themselves restore Social Security's solvency without additional
changes to the current system. Moreover, higher returns can be
achieved through other approaches to reform-for example, from
increasing the buildup of the Social Security Trust Fund and
providing opportunities to diversify investments. Higher returns
can also be achieved through such means as investing the Trust
Fund in equities, as some have proposed. Page 4
GAO/HEHS-99-122 Implementing Individual Accounts B-281329 Today,
we are issuing another report that provides additional information
on individual accounts as a component of Social Security reform.
This report provides details on administrative costs, which could
have a direct effect on the amount of savings accumulated in
individual accounts over time.4 Agency Comments We provided
draft copies of this report to the Social Security Administration
(SSA), the Internal Revenue Service (IRS), the Securities and
Exchange Commission, the Department of Labor's Pension and Welfare
Benefits Administration, the Department of the Treasury, and the
Federal Retirement Thrift Investment Board, as well as other
external reviewers who are experts in Social Security reform. In
commenting on our report, the reviewers generally agreed with our
characterization of the possible options and issues to consider
under a system of individual accounts. They provided comments to
us, either in oral or written form. These comments were primarily
technical and clarifying in nature. In addition to technical
comments, SSA stated that we should devote a portion of the report
to the challenges of ensuring compliance under an individual
account system. While we do not discuss compliance in a separate
section, we did expand our discussion of this issue throughout the
report. SSA also stated that we should discuss in more detail the
shifting roles of agencies under such a system. We expanded this
discussion as well. SSA further suggested that we discuss the
impact of individual accounts on capital markets; however, this
issue will be discussed in detail in a forthcoming report. We have
incorporated these and other comments where appropriate. The
written comments we received are included in appendixes III and
IV. We are sending copies of this report to the Honorable Charles
B. Rangel, Ranking Minority Member, House Ways and Means
Committee; other interested congressional committees; the
Honorable Kenneth S. Apfel, Commissioner of Social Security; the
Honorable Alexis M. Herman, Secretary of Labor; the Honorable
Robert E. Rubin, Secretary of the Treasury; the Honorable Arthur
Levitt, Chairman of the Securities and Exchange Commission; and
the Honorable Roger W. Mehle, Executive 4Social Security Reform:
Administrative Costs for Individual Accounts Depend on System
Design (GAO/HEHS-99-131, June 18, 1999). Page 5
GAO/HEHS-99-122 Implementing Individual Accounts B-281329 Director
of the Federal Retirement Thrift Investment Board. We will also
make copies available to others on request. If you have any
questions concerning this report, please contact me on (202) 512-
7215. Other GAO contacts and key contributors to this report are
listed in appendix V. Sincerely yours, Cynthia M. Fagnoni
Director, Education, Workforce, and Income Security Issues Page 6
GAO/HEHS-99-122 Implementing Individual Accounts Page 7
GAO/HEHS-99-122 Implementing Individual Accounts Contents Letter
1 Section 1
12 Who Would Assume Options for Account Administration and
Record Keeping 12 Issues and Trade-offs to
Consider When Choosing Among 14 New
Administrative Options and Record-Keeping A System
of Individual Accounts Would Face Record-Keeping
20 Responsibilities? Challenges Start-Up Issues: System
Design and Development Would Take 21 Time
Section 2
24 How Much Choice Options for Management Structure and
Investment Choice 24 Issues and Trade-offs to
Consider When Choosing Among 27 Would
Individuals Options Have in Selecting and Start-Up
Issues: Developing an Investment Structure Would Take
34 Controlling Time Investments? Section 3
36 How Much Flexibility Options for Payment of Retirement
Benefits 36 Issues and Trade-offs
to Consider When Choosing Among 38 Would Be
Granted in Options Paying Retirement Start-Up
Issues: Need for Payout Structure Before
42 Benefits? Implementation of Individual
Accounts Appendix I
44 Flowchart of Current Earnings Process Appendix II
46 Objectives, Scope, and Methodology Page 8
GAO/HEHS-99-122 Implementing Individual Accounts Contents Appendix
III
47 Comments From the Social Security Administration Appendix IV
50 Comments From the Federal Retirement Thrift Investment Board
Appendix V
52 GAO Contacts and Staff Acknowledgments Bibliography
53 Related GAO Products
56 Tables Table 1: Key Design and Administration
Issues 3 Table 1.1: Trade-offs
Between Centralized and Decentralized 14
Administration and Record Keeping Table 1.2: Characteristics of
U.S. Businesses and Workforce Pose 20 Challenges for a
System of Individual Accounts Table 2.1: Trade-offs Between
Limited Investment Choice and 28 Greater Choice
Table 3.1: Trade-offs for Paying Retirement Benefits
38 Figures Figure 1.1: Options for Account
Administration and Record 13 Keeping Figure
2.1: Options for Management Structure and Investment
25 Choice Figure 3.1: Options for Payment of Retirement Benefits
37 Page 9 GAO/HEHS-99-122 Implementing
Individual Accounts Contents Abbreviations ERISA Employee
Retirement Income Security Act of 1974 FERSA Federal
Employees' Retirement System Act of 1986 FICA Federal
Insurance Contributions Act IRA individual retirement
account IRS Internal Revenue Service PWBA Pension
and Welfare Benefits Administration SSA Social Security
Administration TSP Thrift Savings Plan Page 10
GAO/HEHS-99-122 Implementing Individual Accounts Page 11
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? A new system of individual accounts would entail
additional administrative and record-keeping activities. Decisions
about where and how the information for each individual's
contributions would be recorded and managed, as well as how the
money itself would be invested, would determine the administrative
structure of a system of individual accounts. There are several
options for how such a system could be structured, and each option
offers advantages and challenges that must be considered.
Moreover, decisions about structure would affect the related
federal role and responsibilities. Depending on the system
structure, the government could be taking on a new role or
expanding its current role. Finally, designing a new system of
individual accounts would take time. Options for Account The
basic options for account administration and record keeping span a
Administration and continuum ranging from a centralized
record-keeping system operated by the government to a completely
decentralized system managed by Record Keeping individuals
or various entities in the private sector (see figure 1.1). Under
a centralized structure, which would build on the current payroll
reporting and tax collection system, a federal agency, such as
SSA, would assume record-keeping responsibilities. Alternatively,
a new centralized government clearinghouse could assume
responsibility for centralized record keeping, similar to the
structure for the federal Thrift Savings Plan (TSP). A
decentralized structure could build on the system that has grown
up around employer-sponsored 401(k) plans or individually managed
individual retirement accounts (IRA).5 Under 401(k) plans,
individual records are maintained by either the employer or a
separate entity hired to manage the plan, or both. Under an IRA,
the record-keeping responsibility rests with the individual
investor and the financial institution where the funds are
invested. 5A 401(k) pension plan is an employer-sponsored defined
contribution plan that allows participants to contribute, before
taxes, a portion of their salary to a qualified retirement
account. An IRA is a personal, tax-deferred retirement account.
Page 12 GAO/HEHS-99-122
Implementing Individual Accounts Section 1 Who Would Assume New
Administrative and Record-Keeping Responsibilities? Figure 1.1:
Options for Account Administration and Record Keeping Page 13
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? Some proposals to create individual accounts
include provisions for a tax credit to finance all or part of a
worker's individual account. Under these proposals, contributions
would be transferred from the Treasury to an individual's
account.6 Moreover, some proposals call for replacing all or part
of the current Social Security program or supplementing Social
Security benefits. Regardless, accounts could still be maintained
centrally or could be decentralized. Issues and Trade-offs
While each of the options depicted above is based on an existing
program to Consider When or model, none of the
models could accommodate a nationwide system of individual
accounts without significant change. Depending on the option
Choosing Among selected, these changes could
place additional costs, burdens, or Options
responsibilities on government agencies, employers, individual
workers, or private sector providers. Therefore, selecting an
option would involve carefully weighing the associated trade-offs.
For example, a centralized system is an option because it would
build on an already existing centralized record-keeping system,
could achieve economies of scale, and would maintain employers'
responsibilities. Yet, it could raise concerns about increased
government involvement, responsibilities, and contingent
liabilities. In contrast, using a decentralized system would
minimize direct government involvement yet still affect government
workloads. However, economies of scale could be more difficult to
achieve and responsibilities of and costs to employers,
individuals, or both would likely increase. Table 1.1 summarizes
issues to consider when weighing the merits of centralized and
decentralized account administration and record keeping. Table
1.1: Trade-offs Between Centralized and Decentralized
Centralized administration and record Decentralized
administration and record Administration and Record Keeping
keeping keeping Would
build upon existing government Would require an
expanded infrastructure, system, but would still require
significant especially for 401(k) model changes Would take
advantage of economies of scale Would make economies of scale more
difficult to achieve Would increase government role in
Would minimize government role in managing individual account
system managing individual account system, but an
increased oversight role would need to be considered Would likely
maintain employer role or Could increase employer
role, individual minimize additional employer responsibilities
responsibility, or both 6The funds from the Treasury could
originate either from the unified budget surplus or from general
revenues. Page 14 GAO/HEHS-99-
122 Implementing Individual Accounts Section 1 Who Would Assume
New Administrative and Record-Keeping Responsibilities?
Centralized Administration The current centralized Social
Security record-keeping system was not and Record-Keeping
designed to maintain records on individual accounts that are owned
and Structure managed by individual workers.
SSA records annual earnings and calculates benefits on the basis
of these earnings; the agency does not maintain individual
contribution records nor does it base benefits on the payroll
taxes paid into the system.7 As a result, aspects of the existing
system would probably have to change to accommodate the
introduction of individual accounts, or workers would have to
accept certain limitations built into the system. For example, the
system is not designed to record contributions, earnings, or
losses to individual account records in a timely manner. This
delay does not affect Social Security benefits, but it could
affect benefits based on an individual's earnings on investments
in the equities market. Under the current centralized system, SSA
and the IRS work together to record each worker's earnings and
collect taxes owed. Currently, both employers and employees pay
Federal Insurance Contributions Act (FICA) taxes, which are used
primarily for Social Security. Employers withhold FICA taxes from
employees' pay and then regularly deposit both employers' and
employees' shares of the taxes to a designated Federal Reserve
bank or other authorized depository. Employers submit reports
summarizing these deposits to the IRS at least quarterly. These
reports indicate the aggregate amount of taxes withheld from
workers' paychecks; they do not link the taxes paid to a
particular individual. Once a year, usually at the beginning of a
calendar year, employers submit an IRS W-2 form to SSA for each
worker, showing the individual's earnings for the previous year.
SSA then begins the process of checking this information and
posting it to the earnings files it maintains for individual
workers. Only when these W-2s were posted to earnings records
would SSA know how much would be available for investment on
behalf of an individual. Appendix I contains a detailed time line
for the responsibilities of the employer, IRS, and SSA under the
current system. Relying on the current record-keeping system would
present several challenges under an individual account system.
Several important decisions would need to be made if a centralized
structure was chosen. How Much Additional While SSA
maintains information on workers' earnings and work histories,
Information on Individual more information would need to be
obtained and maintained for an Workers Would Be Needed?
individual account system. For example, SSA does not keep personal
7To determine a worker's monthly benefit, SSA applies a formula to
reported lifetime earnings. This approach, therefore, holds the
worker harmless when the employer does not remit the accurate
Social Security tax payment to the IRS. Page 15
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? information such as addresses on an ongoing
basis, and IRS keeps only addresses that are submitted annually on
individual tax returns. If individual accounts were to be
considered the personal property of the individual, current
information on such things as addresses would become important,
especially when assets must be allocated or distributed in
response to life events such as death or divorce. What New
Administrative The current reporting and tax collection
system does not include other Functions Would Need to Be
administrative activities that would need to occur under an
individual Included, and Who Would Be account system, such as
creating systems to collect and record individual Responsible for
Them? investment choices, transmitting contributions to
investment managers, recording account value changes, sending
periodic account statements,8 and providing payout entities with
necessary account information. While the investment manager could
perform some of these activities, under a centralized system,
government agencies would likely assume many of these
responsibilities.9 Would the Current Reporting Each year SSA
receives a large number of incorrect W-2 forms from Error
Threshold Change? employers. Under a system of individual
accounts, these errors could result in lost investment returns.
For example, of the 235 million W-2s received for tax year 1996,
about 19 million, or 1 in 12, had errors.10 Following internal
corrections, SSA was able to resolve inconsistencies for about 15
million of the W-2s, leaving about 4 million uncorrectable without
contacting the employers. SSA does not contact all of the
employers whose reports include these errors, however, because
contacting employers can be time-consuming and expensive for both
SSA and the employer. Therefore, SSA sets a tolerance threshold
for errors and does not pursue errors with dollar amounts that
fall below the threshold. According to SSA, if these tolerances
were eliminated, its workload would at least double. Under a
system of individual accounts, in which the account is considered
to be personal property, it would be necessary to determine if
such a threshold for error could be tolerated and whether the
worker would be held harmless for employer error. 8Beginning in
fiscal year 2000, SSA will be required by law to send Personal
Earnings and Benefit Estimate Statements to almost every U.S.
worker. However, if these statements were to be used for
individual accounts as well, they would need substantial revision.
9See National Academy of Social Insurance, "Report of the Panel on
Privatization of Social Security" (Washington, D.C.: National
Academy of Social Insurance, Nov. 1998), which contains a detailed
discussion of administrative activities under individual accounts.
10These errors or inconsistencies include mismatches between
individual names and Social Security numbers, errors in FICA
calculations, and inconsistencies between aggregate reports
submitted to the IRS and the W-2 reports. Page 16
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? Would Changes in the Current Under a
centralized system, the federal role would be mostly Regulation
and Oversight administrative in nature. However, if a
centralized clearinghouse was Structure Be Needed?
established, the oversight role would increase (especially if
individuals were allowed to opt in or out of the system). Striking
a balance between the need for additional personal information and
the need to maintain individuals' privacy and limit access to this
information would be an important oversight consideration. In
addition, the government would need to ensure that workers'
contributions were made promptly and accurately, as well as
prevent fraud and abuse in the system. Would Posting Delays Be
If the current system of employers' reporting individual earnings
on an Tolerated? annual basis continued, it
would result in a considerable lag-as much as 7 to 22 months-
between the time taxes were deducted from an individual's earnings
and the time funds were credited to the individual's name.
Depending on the performance of an individual's selected
investments, these lags could result in lost account
accumulations. However, changing to a system that recorded
earnings more frequently would place additional reporting burdens
on employers and the government as well as increase administrative
costs. The delays in posting contributions or earnings information
to individual accounts are viewed by some as a significant barrier
to a centralized system. However, there are several options for
mitigating the effects of a time lag, each of which poses new
record-keeping challenges. The record keeper, working together
with the designated investment manager, could do one of the
following: * Pool the aggregate funds into a safe investment
vehicle, such as a money market account, until they are allocated
to individual accounts. The earnings could then be credited to
individual accounts along with actual contributions at a later
date, and all workers would earn the same return during the lag
period. * Permit workers to select personal investment options
annually; group these individual selections by investment option;
and invest incoming, pooled funds accordingly. * Project future
contributions (perhaps on the basis of prior earnings history) and
credit the accounts according to individual investment choices
until actual cash contributions are deposited into accounts.11
11These options were developed by the Employee Benefit Research
Institute and are discussed in more detail in Kelly A. Olsen and
Dallas L. Salisbury, Individual Social Security Accounts: Issues
in Assessing Administrative Feasibility and Costs, special report
of the Employee Benefit Research Institute (Washington, D.C.: Nov.
1998). Page 17 GAO/HEHS-99-
122 Implementing Individual Accounts Section 1 Who Would Assume
New Administrative and Record-Keeping Responsibilities? Under a
centralized system of individual accounts, it is likely that the
agencies involved would require additional time and resources to
address the above issues. However, at the same time, building on
the current system and keeping records centrally could achieve
economies of scale and minimize additional burdens and costs for
employers and individuals. Decentralized
Alternatively, individual account record keeping and
administration could Administration and be based on a
model similar to either the current 401(k) or IRA system. Record-
Keeping Structure While minimizing government involvement in
the administration of the system, either approach would probably
be accompanied by additional responsibilities and costs for
employers, workers, or both. Moreover, for both of these options,
the appropriate government oversight role would have to be
considered. Under a 401(k) defined contribution pension plan,
individual employers sponsor a retirement plan for their
employees. Employees are able to contribute pretax dollars to a
qualified tax-deferred retirement plan. Under such plans, employee
contributions can be invested in several options and, depending on
the plan, employees may control how the assets are allocated among
the various choices; the employer, a designated fund manager, or
both, maintain records. Although the number of 401(k) plans has
risen dramatically, employers are not required to provide such a
retirement plan. If this model was chosen, several important
questions would need to be addressed. What Changes Would Be
Not all employers offer employee retirement plans-about 50 percent
of Required to Ensure That All full-time private sector workers
are covered by any type of Workers Could Be Covered
employer-provided retirement plan; about 25 million people
participate in Under Such a System? a 401(k) plan. Under
a 401(k) model, employers, especially those that currently do not
provide any retirement plan, would bear the additional cost and
responsibility of creating an infrastructure to quickly deposit
contributions and provide employees with links to and choices
among funds. However, recent employer surveys and our interviews
with employers' groups showed that most employers oppose any
additional paperwork burden or costs. What Would Be the Potential
401(k) plans differ in both the services they offer and the
diversity of Outcomes of Building on the available investment
options. These differences would raise questions of Current
System? fairness if the system became the
foundation for a universal system of Page 18
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? individual accounts. In addition, requiring
uniformity across the different plans would need to be considered.
What Would Be the Possible If employers were asked to bear
additional costs and responsibilities, they Effect of Placing
Additional might decide to change or reduce the benefit
packages they currently Requirements on Employers? offer,
thus possibly undermining the overall goal of pension plans and
individual accounts: improved retirement security. In addition, it
is not clear how current contributions to 401(k) plans would be
handled. For example, policymakers would need to decide whether or
not individual account contributions would be separate and
distinct from 401(k) contributions. If these contributions were
not considered separately, then individual accounts could replace
401(k) savings. Would Changes in the Current Under this
decentralized system, government oversight and regulatory
Regulation and Oversight responsibilities would likely
increase; the more complex a system of Structure Be Needed?
individual accounts, the more challenging and costly oversight and
compliance activities could be. Currently, the Department of
Labor's Pension and Welfare Benefits Administration (PWBA) has
responsibility for overseeing and regulating the 401(k) system.
The Department of the Treasury and IRS have responsibility for
drafting and enforcing rules regarding 401(k) plans' qualified tax
status. With the Pension Benefit Guaranty Corporation and IRS,
PWBA also enforces compliance with the Employee Retirement Income
Security Act of 1974 (ERISA). Under ERISA, these agencies are
expected to protect employee benefit plans and their participants
and beneficiaries should employers go out of business, fail to
remit payments, and so on. ERISA requires, among other things,
that participants receive annual reports, that assets be held in
trust, and that there be a fiduciary responsible for acting solely
in the interests of the plans' participants and beneficiaries. The
role of ERISA-or some other entity or mechanism to safeguard
individual account accumulations-would need to be carefully
considered. An IRA is a specific retirement account purchased by
an individual worker, usually through a bank or another financial
institution, that can be invested in almost any kind of investment
vehicle. Under current law, IRAs are subject to a contribution
limit. Several questions would need to be considered if individual
accounts were managed under a decentralized structure, similar to
today's IRA system. How Would the Individual Individual
workers would be responsible for selecting an investment Worker Be
Affected? manager or managers to invest their
contributions. Workers would be expected to keep track of
investments, understand the system as a whole, Page 19
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? pursue error corrections, and generally ensure
that contributions were made according to applicable rules and
that tax obligations were properly met. Workers might benefit,
however, because this approach could minimize lag time between
depositing contributions and beginning to earn returns on those
contributions. Would Changes Be Needed in IRAs that
are not provided through employee benefit plans are exempt from
How the Market Was ERISA; yet various
entities have oversight responsibility for the range of Regulated?
vehicles available under IRAs. For example, the IRS sets the rules
for IRA tax qualification, and the Securities and Exchange
Commission has broad responsibility over the securities markets.
In 1992, about 9.6 million individuals contributed to an IRA.12
Overseeing the large number of accounts, ensuring compliance, and
preventing fraud would be significant issues to consider under
this model. A System of Individual Regardless of the type of
administration and record-keeping structure Accounts Would Face
selected, additional challenges would need to be addressed under
an individual account system. These challenges primarily center on
the Record-Keeping nature of the ever-
changing American workforce and its employers and Challenges
can complicate keeping accurate and timely records on earnings or
account contributions. Table 1.2 details these challenges. Table
1.2: Characteristics of U.S. Businesses and Workforce Pose
Characteristic Challenge
Challenges for a System of Individual Employer turnover
About 650,000 employers go out of Accounts
business or start new businesses each year (about a 10-percent
turnover rate). This turnover could create particular challenges
in ensuring that contributions were made and credited to
individual accounts. Once an employer went out of business, making
corrections to individual accounts would be difficult, if not
impossible. Employer record keeping
About 4 million employers have 10 or fewer employees. These small
businesses tend to have particular record-keeping problems, and
their records are often error-prone. According to SSA, about 85
percent of the nation's 6.5 million employers still submit forms
on paper, requiring additional administrative steps to check and
record the data. (continued) 12This number includes individuals
who contributed to an IRA through their employer. Page 20
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? Characteristic
Challenge Workers with more than one employer Many
workers in the United States have more than one job at any given
time or work for more than one employer during the year.
Specifically, about 58 million workers (about 40 percent of the
total workforce) have annual earnings reported to SSA from more
than one employer. This could pose special problems for
administering and monitoring compliance with individual account
requirements unless a mechanism was created to consolidate the
records, especially at retirement. Unique reporting structure used
by In 1998, the United States had self-employed
approximately 12 to 15 million self-employed individuals. The
self-employed have their own wage reporting system-they do not
file W-2s directly with SSA but rather provide information to only
the IRS through their annual tax filings. The IRS then forwards
this information to SSA at a later date. Further complicating
their record-keeping status, about one-half of the self-employed
also work for employers that send W-2s to SSA. Because of similar
problems, some of the countries whose pension systems we reviewed
for this work either do not include the self-employed in their
pension systems or offer coverage as an option rather than a
requirement. Ensuring the compliance of the self-employed under a
system of individual accounts would need to be considered. Start-
Up Issues: Estimates of how long an individual account
system's design and System Design and development would take
would depend upon how quickly the proposal moved through the
legislative process and how complex the proposed Development Would
system was. Some reform proponents have cited the federal TSP as
an Take Time example of quick implementation. Ten
months after passage of the Federal Employees' Retirement System
Act of 1986 (FERSA), the federal TSP began investing participants'
contributions in the government securities fund, and the TSP began
investing contributions in the stock and bond index funds 8 months
later. Moreover, the TSP plans to add two additional funds in May
2000. While this example illustrates how a system can begin with
one simple investment fund and add more over time, the challenges
of establishing the TSP differ in certain ways from those of
setting up a Page 21 GAO/HEHS-99-
122 Implementing Individual Accounts Section 1 Who Would Assume
New Administrative and Record-Keeping Responsibilities? national
system of individual accounts. The federal workforce, as well as
the federal government as a single employer, differs substantially
from the workforce that would be covered under a nationwide
system. For example, the federal workforce experiences less job
turnover, tends to be older, and has higher average earnings than
the general workforce. In addition, federal agencies experience
greater stability and have greater access to automation for
payroll and record-keeping functions than the employer population
at large. These characteristics helped expedite the implementation
of the TSP, since an infrastructure for implementing the system
already existed and could be built upon. Issues to consider before
selecting a system would include * computer system design,
development, and testing needs; * year 2000 systems design issues;
* the contract procurement process (requests for proposals, the
bidding process, and contractor selection); * regulation
development and promulgation; * hiring and training new staff; *
the possible need to set up individual accounts for those who do
not have earnings; and * the need for employer and public
education. Regardless of the type of individual account management
system selected, the length of time needed to develop the system
would need to be considered-especially since no system exists that
has demonstrated the capacity to handle a national system of
individual accounts without significant changes. Creating a
centralized system that would build on the existing computer
capacity of federal agencies such as SSA and the IRS could pose
special challenges in the near term. Officials from various
federal agencies told us their computer systems staff have been
working to ensure that their systems are ready for the year 2000,
and as a result, other needed systems changes have been deferred
until that challenge has been met. Moreover, systems staff may
need to continue working on year 2000 issues even after 2000
arrives, thus affecting their ability to take on any additional
requirements. If the new system design involved any contracting
out for services, then lead time would need to be considered for
such things as issuing requests for proposals, qualifying bidders,
and carrying out other activities required by law and regulation.
These requirements would need to be incorporated Page 22
GAO/HEHS-99-122 Implementing Individual Accounts Section 1 Who
Would Assume New Administrative and Record-Keeping
Responsibilities? into any implementation time frame. Moreover,
regardless of the account management system chosen, the time
needed for regulation development and promulgation would need to
be considered. For example, the ERISA construct is a well-
developed body of law on employee benefits; however, the ERISA
framework has been developed over a number of years. In fact, some
regulations alone have taken years to be promulgated. Hiring and
training qualified staff would also take time. Depending on the
structure of the new design, staff might be expected to be able to
answer any number of technical questions about system design,
requirements for employers and individuals, and investment and
payout options. Even if these services could be contracted out,
lead time would also need to be considered if this option was
chosen. In addition, measures to prevent employee fraud and to
protect account holders' personal information would need to be
considered. Moreover, some proposals call for establishing
accounts for individuals who do not have any earnings. One such
approach might be to allow a spouse without earnings to set up an
account that was based on the other spouse's earnings.
Accommodating such accounts would be important in considering
system design. Finally, educating employers and the public on the
essentials of the new system would be important to its
administration and implementation. It would take time to develop
and implement an education campaign for both employers and workers
to ensure that the public understood the new system and how it
would affect their retirement income security. Many proposals do
not specify what entity would be responsible for public education
or what would be involved, but, as an example, SSA officials told
us that it currently takes about 1 year and costs about $1 million
to develop a specific public service announcement campaign. Page
23 GAO/HEHS-99-122 Implementing
Individual Accounts Section 2 How Much Choice Would Individuals
Have in Selecting and Controlling Investments? A system of
individual accounts would provide workers with opportunities to
assert greater control over their retirement savings and possibly
receive a greater rate of return than is available under current
law. When designing a system, critical decisions would need to be
made about how much choice or discretion individuals would have in
selecting funds, who would invest their funds, and what the range
of their investment choices would be. These decisions, in part,
would determine the cost and complexity of the system and the
degree of public education needed. Moreover, offering the level of
customer service found in the private sector, such as frequent
deposits and accessibility of account information, would add costs
and administrative complexity to a system. Options for
Alternatives for designing the investment structure of a system of
Management individual accounts range from offering the
individual a limited number of preselected funds, such as those
offered by the federal TSP, to offering a Structure and
broad array of private market choices, such as those available
through Investment Choice IRAs. As with record keeping, options
for managing these investment choices could vary from a
centralized, government-managed system to a decentralized,
privately managed system. Figure 2.1 shows the basic options that
represent both ends of the spectrum; however, numerous variations
fall in between. Page 24 GAO/HEHS-99-122
Implementing Individual Accounts Section 2 How Much Choice Would
Individuals Have in Selecting and Controlling Investments? Figure
2.1: Options for Management Structure and Investment Choice
Examples of some of the existing investment management options and
the choices they offer are discussed below. The federal TSP and
the system of individual accounts developed in Chile illustrate
different approaches to limiting choice. Thrift Savings Plan
The TSP currently offers three investment fund choices to
contributors. The first, a government securities fund, is managed
by the independent Federal Retirement Thrift Investment Board. The
other two funds, a fixed income (or bond) fund and a common stock
fund, are managed under competitively awarded contracts, currently
with Barclays Global Investors. Barclays has no responsibility for
record keeping or reporting requirements at the individual TSP
participant level. Instead the Thrift Investment Board, through an
agreement with the Department of Agriculture's National Finance
Center, maintains individual records. Page 25
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? Individuals may invest their contributions in any of
the funds in any combination they choose. Chile
In Chile, workers may select from over 12 qualified private
pension funds. Each fund was created solely for the country's
retirement program. Fund administrators are responsible for
maintaining records, as well as investing contributions, which are
sent directly to the private fund from the employers. The
government sets minimum and maximum rates of return for the
participating funds. Under this system, workers must invest their
contributions with only one fund; if they decide to change funds
they must move their entire balance. At the other end of the
continuum, offering greater investment choices, IRAs illustrate
the flexibility individuals can experience when investing in
privately managed individual accounts. The systems developed in
the United Kingdom and Sweden demonstrate still other approaches
that also offer greater individual choice for investments.
Individual Retirement Individuals with IRAs can manage accounts
themselves or select their own Accounts private
financial institution to do the record keeping and investment
management. As previously stated, IRA contributions can be
invested in almost any kind of investment vehicle. In general, the
individual IRA owner is responsible for complying with the rules
applicable to IRAs. United Kingdom The United Kingdom
system consists of a state-provided, flat-rate benefit based on
work history and an earnings-related benefit. For the earnings-
related benefit portion, individuals have a choice of
participating in the state earnings-related benefit program,
participating in their employer's pension plan (if available), or
voluntarily opting out and choosing their own individual account
through any private financial provider. As in the United States,
employers withhold each individual's contributions and remit them
to the government. After a reconciliation process, the government
sends the contributions to the individual's financial provider for
investment. This provider, like an IRA, maintains the records and
manages the investment. In 1996, the United Kingdom's Personal
Investment Authority regulated about 4,000 firms providing
individual accounts. Page 26
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? Sweden Sweden has planned a system
of individual accounts, but it is not yet in full operation. This
system will include a basic state pension and an individual
account benefit. Employers and individuals will contribute a total
of 18.5 percent of an individual's earnings to the social security
system; 2.5 percent of this contribution will be collectively
invested on behalf of the individual in government bonds.13 When
systems are in place, individuals will be able to direct their 2.5
percent contributions into a registered fund of their choice. To
register, a fund must be licensed to operate in Sweden and agree
to certain reporting and fee requirements. In addition, all
records will be maintained by the government pension agency, and,
at retirement, the government agency provides the individual's
annuity. Issues and Trade-offs There are trade-offs associated
with the range of investment choices to Consider When
offered, as illustrated in table 2.1. When individuals have more
investment choices, they have more opportunity to tailor their
financial situation to Choosing Among their own tastes
and preferences and assert greater control over their Options
personal property. However, with a greater variety of choices
comes the possibility that individuals will not choose a
diversified portfolio or will simply make a bad selection, thus
lessening their retirement income from the individual account.14
As the range and variety of investment choices grow, so does the
risk that an individual's retirement income will not be adequate.
This results in increased risk to the government that individuals
with inadequate income will turn to the government for support
from other programs. In addition, a wider range of investment
choices also leads to higher administrative costs, which, if not
offset by significantly higher returns, could undermine the
retirement income for individuals. Limiting investment choice
would help to minimize risk and administrative costs, but doing so
could also limit the possible return on investments. Moreover,
limiting choices raises concerns about the role of government in
selecting the investment vehicles and the possibility of political
influence over these selections. Essentially, the challenge
becomes finding the right balance between individual choice and
the related risks and costs to the individual and the government.
13Currently, the individual's contribution is 6.95 percent and the
employer's contribution is 6.4 percent of earnings, and 2.5
percent of the total is invested in government bonds. As of 2000,
the total contribution will amount to 18.5 percent: 9.25 from both
employer and employee. 14Under some proposals for individual
accounts, retirees would continue to receive Social Security
benefits at some level, as well as the accumulated balance in
their individual accounts. Page 27
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? Table 2.1: Trade-offs Between Limited Investment
Choice and Greater Choice Limited, but diversified, investment
choice Greater
investment choice Minimizes individual risk, but may also limit
Increases individual risk because of returns
possibility of less diversification, but also provides opportunity
to maximize returns for some Minimizes government risk
Increases government risk Minimizes administrative costs
Increases administrative costs Increases concern over political
influence Decreases concern over political influence
Limited, but Diversified, Several proposals suggest
offering individual accounts with a limited set of Investment
Choice investment options to minimize risk
and administrative cost, while providing some degree of choice and
the possibility of earning higher rates of return than are
available under today's Social Security program. If participants
were given limited investment choice, a number of issues would
need to be resolved. Would There Be Ways to The
federal TSP structure minimizes this risk by having a third party
Mitigate the Concern Over passively manage index
funds.15 In addition, the law creating the TSP Political Influence
of mandated an independent, five-person
oversight board with specific Investment Choices?
fiduciary responsibilities to the plan participants. The Thrift
Investment Board must manage the funds solely for the benefit of
the participants; if they fail to do so they can be civilly and
criminally liable. In Chile, the use of private fund
administrators helped to insulate investment policies from
political influence, and the ability of individuals to change
pension funds gave private administrators incentives to protect
investors' interests. What If Individuals Did Not As
part of program design, it would be necessary to decide what
should Make an Investment Choice? happen to the
contributions of those individuals who did not choose among the
investments offered. Some have proposed placing these
contributions in the lowest risk accounts. Another option would be
to place these contributions in a few balanced funds, or life
cycle accounts, that had portfolios with the same components but
were weighted differently depending on the age of the worker-with
less risk as workers neared retirement. How Much Public Education
Public education about the choices available and the risks
associated with Would Be Necessary Under a each
would be needed under any system. However, the need to educate
System With Limited Choice? the public about the
consequences of using different investment strategies 15Index
funds are a common form of passive investment management in which
securities are held in proportion to their representation in
certain stock or bond market indexes. Page 28
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? would be less under a system with limited choice than
under a system with a broader range of choice. When the number of
choices is limited, the degree of risk is more defined, and the
program is less complex. What Would the Federal Role
Because both choice and risk would be limited, the need for
government Be in a Limited Choice regulation and
oversight of investment activities would be less complex
Structure? under a TSP model than under a
system offering wider choice; under the TSP model, individuals'
accounts are pooled and invested collectively. The government's
role would depend on whether the government invested in funds on
behalf of participants, as Sweden plans to do, or individuals
invested directly in the funds. The government's role would likely
center around authorizing an independent infrastructure and
monitoring the overall operations. However, the mechanisms used to
minimize risk can have unintended consequences that should be
considered. In Chile, because the government sets maximum and
minimum rates of return for all participating funds and places
restrictions on the composition of the fund portfolio, fund
managers tend to hold portfolios of assets that are similar to the
ones held by their competitors. Each fund, thus, earns a return
that is close to the national average. While helping to lessen
individual risk, this requirement has limited the variety of
choice and earnings potential of the privately managed funds. What
Protections Would It would be necessary to determine
the role of government if any of the Investors Have If Funds
Failed? available funds failed. While this would be an issue
for scenarios with either limited or greater investment choices,
it would have significance because of the role played by the
government in selecting the available options. Greater Investment
Choice Some reform proposals would give individuals more
discretion in selecting their investments. This greater discretion
could be provided under a management structure similar to that of
IRAs or the United Kingdom's plan, or under a centralized system
such as Sweden's. If greater investment choice was offered,
certain decisions would need to be made. What Options Would Be
Experiences in Chile demonstrate that extensive competition among
Available to Minimize investment funds can lead to
frequent and costly switching among funds. High-Pressure Sales
Tactics, To minimize this, Chile has reduced the number of
times participants may Especially for Inexperienced switch
among funds from four to two times a year. In contrast, Sweden
Investors? designed its program to protect
its investors from high-pressure sales tactics. In Sweden,
individual contributions will be amalgamated, and the government
pension agency will execute buy orders in its name. As a Page 29
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? result, the identities of the individual account
holders will be known only to the pension agency, not to the
investment providers. How Much Public Education Currently,
the information that is required to be disclosed to investors is
Would Be Necessary? not uniform across different
investment products. Under a system of individual accounts, this
information would need to be presented in a more clear and simple
format for the general public to understand. Moreover, the public
would need a greater level of education to learn about the wider
variety of investment options, understand and use the information
disclosed to them, and fully appreciate the consequences of
investment choices.16 The United Kingdom experienced substantial
difficulties when it moved to individual accounts, in part, by
providing too little public education and relying on its already
existing regulatory system, which proved to be inadequate. In what
has become known as the "mis-selling" controversy, high-pressure
sales tactics were used to persuade individuals, especially older
workers, to switch to unsuitable individual accounts that could
not meet their retirement needs. What Should Be Done With
Just as in the limited choice option, it would be necessary to
decide what Contributions When the should happen with
the contributions of those individuals who neglected Individual
Fails to Choose an to choose among the investments offered.
This decision could be more Investment?
complicated if many investment options were offered. What Would
the Federal Role The government's regulatory and oversight
role would be designed to Be in a System With Greater protect
investors from fraudulent and inappropriate sales practices. A
lack Investment Choice? of such oversight was a
factor in the mis-selling controversy in the United Kingdom. In
the United States, regulations and oversight mechanisms exist for
the current IRA and 401(k) structures, as well as the securities
market. It would be necessary to consider what special provisions
should be included in a nationwide system of individual accounts.
For example, requirements to disclose information to investors
vary across different products or investment types, and more
simplified information could be needed to ensure that
inexperienced investors received information that was helpful to
them. Should the Government More investment choice
increases the possibility that individuals will not Provide
Guaranteed Minimum choose diversified portfolios or will
simply make bad selections, and thus Benefits?
their retirement income may not be adequate. Some governments have
explicitly accepted this risk by guaranteeing a minimum benefit.
In Chile, the government sets a minimum rate of return that
investment fund 16More information on this topic can be found in a
forthcoming GAO report that discusses capital markets and
educational issues related to individual accounts. Page 30
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? companies must provide. In addition, Chilean workers
are guaranteed that they will receive at least a minimum monthly
pension if they participate for at least 20 years in the system.
Some U.S. proposals would ensure that workers receive at least the
benefits promised under the current Social Security system. This
raises the possibility that some people might take greater risk
with their investments if they knew that the government would
provide a guarantee, thus creating a contingent liability for the
government. System Design and Decisions about the design of
a system of individual accounts, including Administrative Costs
the flexibility offered in making investment decisions, have a
direct effect on administrative cost.17 In general, the more
services offered to the investor and the more investment options
provided, the higher the administrative costs. Much of these costs
would probably be borne by individual account holders, which would
directly affect their accumulations and, eventually, their
benefits. Moreover, under almost any scenario, government agencies
would require additional resources, either for new record-keeping
and administrative duties or new oversight and monitoring
responsibilities. Decisions would have to be made concerning who
would bear the different costs associated with the accounts. There
are, however, options that could help limit administrative costs
while still offering a degree of choice in investment vehicles.
Offering choices among investment funds that are passively managed
or based on a broad market index could keep costs down. Indexing
does not require research on individual companies or securities,
and securities held in index funds are not bought and sold
frequently.18 Both activities-market research and frequent
trading-can increase investment costs. In the TSP, where costs per
participant are kept low relative to other defined contribution
plans, both the bond and equity funds are invested in index funds,
and records are kept centrally. System design can also be used to
keep administrative costs down, when offering a greater range of
investment choices. In the United Kingdom, one study found
administrative costs to be as high as 36 percent of an 17See
GAO/HEHS-99-131, June 18, 1999. 18Index funds that require a
specific ratio between stocks and bonds would require daily buying
and selling to maintain the ratio. Page 31
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? account's value.19 The study attributed these high
costs, in part, to the fact that these accounts are voluntary,
decentralized, and do not take advantage of economies of scale. In
contrast, in Sweden, a centralized mandatory system can take
advantage of economies of scale. Sweden's system is in the early
stages of implementation, and it is too early to know how well it
will work. Preretirement Access to Whether to allow
individuals access to their account funds prior to Individual
Account Funds retirement would be both a policy and a cost
consideration. Ensuring that retirement income is available for
the life of the retiree is a fundamental goal of Social Security.
However, with accounts viewed as the property of the contributor,
there could be pressure for access to the funds before retirement
age, including access to these accounts through divorce,
disability, or loans. While some may argue that individuals should
be allowed the freedom to optimize their lifetime income through
borrowing from their accounts before retirement, the added
complexity and potential diminution of retirement income and
possible increased risk to the government should be given serious
consideration. Most major proposals prohibit loans and other
preretirement access to individual account balances. A number of
issues would need to be addressed if loans were allowed under an
individual account system. These issues include the following: for
what purposes would loans be allowed; who would approve and
service the loans; how would loan denials, if any, be appealed;
who would enforce loan repayment; and what would happen if an
individual defaulted on a loan? Under a 401(k) plan, employers may
allow individuals early access before age 59 in certain
circumstances (including death, disability, hardship situations,
and separation from service), but individuals may be subject to a
10-percent additional income tax for early withdrawal.
Administrative costs would be affected by the treatment of each of
these issues, and these costs could be significant. Customer
Service There would also be a range of customer service
options that could be Considerations considered in
any system of individual accounts. When more services and more
flexibility are offered, the costs and administrative complexity
of 19This percentage includes costs attributed to fund
accumulation (that is, management and administrative costs) and
costs of switching from one financial provider to another or
stopping contributions altogether; it does not include
annuitization costs. If annuitization costs were included, the
study estimated that total charges could be as high as 43 percent.
See Mamta Murthi, J. Michael Orszag, and Peter R. Orszag, "The
Charge Ratio on Individual Accounts: Lessons from the U.K.
Experience," Birkbeck College Working Paper 99-2 (London:
University of London, Mar. 1999). Page 32
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? managing the investments increase. Moreover, if
individuals consider the individual accounts as their personal
property, they may expect more options and better service than
they would from a government program. Many of the services that
could be considered in the design of an individual account system
are discussed below. How Frequently Should Statements
provide individuals with information on the actual value of
Statements Be Issued? their account, and the frequency
of such statements under current systems varies. Statements
estimating future Social Security benefits will be provided to all
U.S. workers once a year beginning in fiscal year 2000. Sweden
will also require annual statements, while the TSP currently
provides statements twice a year. Statements for private
investments, such as brokerage accounts, however, are often
provided on a quarterly or monthly basis. How Often Should
Deposits Be While making deposits more frequently could
increase earnings potential, Credited to an Individual it
could also increase administrative costs and require additional
reporting Account? and reconciling because
of the likely increase in reporting errors. Shifting to more
frequent deposits might not be costly for employers with
electronic record keeping, but doing so could represent a
significant cost for small businesses. Conversely, making deposits
to accounts less frequently would raise the issue of how funds
collected but not deposited would be treated and who would benefit
from any earnings. Should Valuations Be Valuation is
the process by which investment gains or losses are reflected
Performed on a Daily or in account balances. If valuation
is performed daily, then participants' Periodic Basis?
accounts reflect daily changes in market performance. Because
valuation is rather involved, daily valuation is more expensive
than periodic valuation and raises the possibility that some
participants might switch among funds more frequently. This in
turn could lead to their having inadequate retirement income. How
Often Should Individuals The frequency of interfund transfers
can affect the value of an individual's Be Allowed to Transfer
Funds account, depending on who incurs the cost of the
transfer. The TSP Between Investment Options, currently
allows individuals to move their assets once a month, and there
and Who Should Bear the Cost? is no direct charge to the
individual. At the end of each calendar year, individuals in the
United Kingdom may transfer to a new provider. However, they are
charged exit fees, and other provisions often make such changes
financially unrewarding. Under Sweden's plan, individuals will be
able to transfer their funds at any time and incur a cost of about
$10 per transfer. Page 33 GAO/HEHS-
99-122 Implementing Individual Accounts Section 2 How Much Choice
Would Individuals Have in Selecting and Controlling Investments?
What Channels of Direct A number of options, such as
toll-free numbers, regional offices, the Communication Should Be
Internet, and form inquiries, are available for interaction on
account Established for Individuals to information. For
example, participants in the TSP can conduct Obtain Account
Information? transactions, such as changing their account
allocations, through either a computer-assisted phone service or
the Internet. As a general rule, more flexibility equals higher
costs. However, higher costs could be associated with more
customer service and, potentially, with higher investment returns;
yet higher investment returns are not consistently correlated with
higher administrative costs. Many actively managed investment
options have not been able to generate higher returns than broad
market indexes. Start-Up Issues: As with the
start-up of any new system, considerations such as the Developing
an following would need to be addressed
prior to implementation: Investment Structure * establishing a
link between the record keeper and investment manager for Would
Take Time fund deposits, * phasing system
changes gradually, and * addressing the challenges of small
accounts. If the investment management function was contracted out
from a centralized record-keeping entity, a mechanism would be
needed to link the information on deposits with actual
contributions and the individual's investment selection before
crediting deposits to the individual's account. For instance, for
an individual account system under the current structure, SSA
would maintain an individual's record, IRS would receive
contribution information from employers, and individual
contributions would be sent to a Federal Reserve bank or other
authorized repository. After reconciliation between SSA and IRS
was completed, this information and the individual's contribution
would need to be linked to the individual's investment choice and
forwarded to the designated investment manager. Phasing the new
system in gradually and limiting choices would have advantages.
For example, the TSP started with one fund, then added two more
funds, and, in May 2000, will add another two: a Small
Capitalization Stock Index Fund and an International Stock Index
Fund. This gradual phase-in allowed the TSP and federal agencies
sufficient time to establish a record-keeping system, inform the
participants of their investment options, and observe the
investment patterns before expanding the choices offered. Sweden
plans to collect and accumulate contributions Page 34
GAO/HEHS-99-122 Implementing Individual Accounts Section 2 How
Much Choice Would Individuals Have in Selecting and Controlling
Investments? before crediting them to individual accounts; the
phasing allows more time for investor education about the new
system and more substantial accumulation of account balances
before investment. Small accounts would pose challenges during
both system start-up and full-scale implementation. Average
taxable earnings for U.S. workers in 1997 were $22,383, so an
annual contribution of 2 percent of earnings would equal an
average contribution of about $448 per year. The level of
administrative costs can have a significant effect on account
accumulation: the higher the percentage charged, the greater the
effect. Moreover, if individuals were charged a flat fee per
account for administrative costs, accumulations in small accounts
would be affected to a greater extent than if an annual percentage
rate were charged.20 However, there are ways to mitigate the
problems associated with small accounts. Suggestions from various
pension experts include (1) designing an administrative fee
structure that permits large accounts to cross-subsidize small
accounts; (2) establishing a separate, privately managed defined
benefit plan for low earners; and (3) pooling the contributions of
small accounts and investing them until they reach a designated
size and then moving the contributions and earnings into
individual accounts.21 Another alternative would permit workers
initially to select among a small set of passively managed funds.
Then, after several years, when account assets had built up
sufficiently, workers seeking more investment choice would be
given the option of rolling their investment funds into any
qualified retirement account. 20For more information on the
effects of administrative costs, see GAO/HEHS-99-131, June 18,
1999. 21State Street Corporation, among others, has raised this
third option as a possible means to address small accounts. Page
35 GAO/HEHS-99-122
Implementing Individual Accounts Section 3 How Much Flexibility
Would Be Granted in Paying Retirement Benefits? A third critical
decision would involve how much flexibility in the choice of
payout options to afford workers when they retire and begin to
draw on their accounts. Several options are available for the
payout of benefits upon retirement, and each option has issues and
trade-offs associated with it. In essence, the desire to give
retirees flexibility in drawing on their accumulated savings must
be balanced with the goal of ensuring reliable income over a
retiree's life span. While some may argue that the method for
payout would not need to be addressed for some time, it is
important to note that there are many issues related to payout
that could affect the overall goals of the program. These issues
would need to be explored and clarified before implementation.
Options for Payment There are three basic ways to pay
retirement benefits under a system of of Retirement
individual accounts: annuitization, timed withdrawals, and lump
sum payments. Under a system of annuities, the retiree contracts
with the Benefits annuity provider, generally an
insurance company, to provide income for an agreed-upon length of
time. Individuals provide a mutually agreed upon dollar amount,
called a premium, to the provider in return for their monthly
benefit.22 The contract specifies the premium paid to the company,
the monthly amount paid to the retiree, and the interest rate that
will be calculated on the premium over the life of the annuity.
Premiums can be paid either as a lump sum or as a series of annual
payments. For example, $100,000 today (the average premium in
today's annuity market) yields a monthly benefit of approximately
$700 to $800 per month for a 65-year-old male for the rest of his
life. Other options for the payout of accounts include timed
withdrawals (also referred to as self-annuitization) and lump sum
payments. In a timed withdrawal, retirees specify a withdrawal
schedule with the investment manager or record keeper. Each month,
they receive their predetermined amount, while the balance of the
individual account remains invested. Under a lump sum payment
option, individuals may liquidate their accounts through a single
payment at retirement and choose to spend or save their money
according to their needs or desires. A fundamental decision in
paying retirement benefits to participants in individual accounts
would be whether to require participants to annuitize the funds in
their accounts. Figure 3.1 illustrates the options that would be
available under a system in which individuals were required to
annuitize 22In a forthcoming report, we will provide a more
detailed discussion of the factors that affect the costs
associated with purchasing an annuity and how this cost could
factor into a system of individual accounts. Page 36
GAO/HEHS-99-122 Implementing Individual Accounts Section 3 How
Much Flexibility Would Be Granted in Paying Retirement Benefits?
their funds as well as the options available if more flexibility
was granted regarding the payout of funds. Figure 3.1: Options for
Payment of Retirement Benefits There are at least two ways that
annuities could be provided: the government could sponsor the
annuities centrally or individuals could purchase their annuities
from the private market. If the government sponsored annuities,
the government could provide them, contract with a private
provider, or create a new quasi-governmental agency to provide the
annuities.23 23For example, the Pension Benefit Guaranty
Corporation currently pays annuity benefits to participants in
defined benefit pension plans that are terminated with
insufficient assets to pay guaranteed benefits. Page 37
GAO/HEHS-99-122 Implementing Individual Accounts Section 3 How
Much Flexibility Would Be Granted in Paying Retirement Benefits?
Issues and Trade-offs Choosing between options such
as making annuities mandatory and to Consider When
allowing beneficiaries to select their own course would require
carefully examining the significant trade-offs associated with
each option. For Choosing Among example,
requiring individuals to annuitize individual accounts would be
Options one way to ensure that
benefits were available for the entire life of the retiree,
regardless of how long that might be. Yet annuitization would
allow individuals less flexibility, especially those with shorter
life expectancies. Timed withdrawals and lump sum payments also
present issues to consider. For example, a worker who selected a
timed withdrawal could live longer than expected and run out of
money, or a worker who selected a lump sum could spend it quickly
or invest it badly, leaving nothing for retirement. These
possibilities increase the risk that some retirees would be left
without adequate income and the government might be called upon to
provide further income support; however, providing choice would
enable individuals to pass on accumulated wealth. Table 3.1
depicts the trade-offs that would need to be considered before
deciding how the payout system would be structured under a system
of individual accounts. Table 3.1: Trade-offs for Paying
Retirement Benefits Mandatory annuitization
Choice for beneficiaries Reduces range of individual choice
Maximizes individual choice Ensures reliability of income over a
lifetime, Increases risk of elderly population with but may
disadvantage those with shorter life inadequate retirement income
expectancies Minimizes risk to government of need to
Increases risk to government of need to provide further income
support provide further income support Provides
option to choose to ensure family Provides opportunity to
pass on benefits if annuitant dies
accumulated wealth Can be less costly to administer
Can be more costly to administer Deciding on payout options for a
system of individual accounts would not be limited, however, to
choosing between requiring annuities or permitting maximum choice.
Partial annuitization is one way of coping with the trade-offs.
Payout options could be combined to ensure minimum benefits while
offering greater flexibility to the individual. In Chile, for
example, individuals are required to purchase an annuity that
represents 70 percent of the average worker's salary, but they can
withdraw the funds that exceed this level. Mandatory Annuitization
Some of the proposals for individual accounts require annuitizing
account accumulations to ensure dependable retirement benefits.
The Page 38 GAO/HEHS-99-122
Implementing Individual Accounts Section 3 How Much Flexibility
Would Be Granted in Paying Retirement Benefits? administrative
functions would be performed by an annuity provider, which would
both prepare the annuity contract and pay the benefits according
to its terms. Once a provider was chosen, the investment manager
would be released from its responsibilities. For example, under
the TSP, MetLife is the current annuity provider; when
participants leave federal employment and choose to annuitize
their TSP accounts, they then deal only with MetLife. MetLife
offers five different types of annuities, each with a variety of
features from which to choose. It is up to individuals to select
the annuity they want to purchase, and the TSP transfers the funds
to cover the premium. Any individual account system would require
that a mechanism for communication be established among the record
keeper, the investment manager, and the annuity provider to share
personal information and account balances to initiate the
payments. This mechanism would take time to develop and should
therefore be thought through prior to implementing individual
accounts. In creating the TSP, the establishment of a payout
system at the same time as the entire system was recognized and
included in the initial FERSA legislation. Payout Structure
Affects Concerns over administrative costs raise important
issues regarding Administrative Costs system design. The
administrative cost of purchasing an individual annuity in the
current market is relatively high, averaging a one-time charge of
about 5 percent of the premium.24 This cost is for maintaining
records, making payments, and providing services to the annuitant
as well as some profit margin for the annuity provider. These
costs can significantly reduce the amount accumulated in a savings
account and therefore reduce lifetime benefit amounts. Government-
sponsored and centrally managed annuities are one way to lower
administrative costs, in part by taking advantage of economies of
scale. In addition, the current Social Security system has
demonstrated that it has the capability of managing a large volume
of benefit payments. In addition to these administrative costs,
current retirees who purchase annuities in the private market pay
additional costs because of the characteristics of the other
individuals who buy annuities. This situation is known as "adverse
selection." In the current private market, consumers who expect to
live a long time are much more likely to purchase annuities than
others are. As a result, annuity providers charge higher prices
than they would if every retiree purchased an annuity. The cost of
insuring 24James M. Poterba and Mark J. Warshawsky, "The Costs of
Annuitizing Retirement Payouts from Individual Accounts"
(Cambridge, Mass.: National Bureau of Economic Research, Jan.
1999). Page 39 GAO/HEHS-99-122
Implementing Individual Accounts Section 3 How Much Flexibility
Would Be Granted in Paying Retirement Benefits? against adverse
selection could be as high as 12 percent of the premium.25 Making
annuities mandatory would help equalize the pool of applicants by
including individuals with lower life expectancies, thus somewhat
mitigating the need for these additional costs. Moreover, managing
the annuities centrally could provide additional opportunity for
reduced costs. Pooling individual annuitants would provide more
certainty that those with longer life expectancies would be
balanced out by those with shorter life expectancies. However,
making annuities mandatory or managing them centrally limits
individual choice and increases the role of government in the
payout process. Other Implementation In addition to
the broad issues of payout structure and administrative Issues
costs, there are a number of implementation issues that arise in
relation to a discussion on mandatory annuities that should be
addressed before making a decision on a method for paying
retirement benefits. Would a Unisex Mortality Table As a result
of a Supreme Court decision, pension plans that provide group Be
Used? annuities must use a unisex
mortality table that pools together the risk factors for men and
women, thereby ensuring that both sexes receive the same monthly
benefit, although they have different mortality rates. In
contrast, individual annuities are not required to use the unisex
table. Under the current system, SSA pays the same benefit to
women and men who have the same earnings record. If a unisex
mortality table was required, there would be the possibility that
insurance companies would market only to men. What Would Happen If
a Person This could affect the overall account accumulation
and, therefore, the Retired When the Market Was value of the
annuity that a retiree would be able to purchase. Unlike a Down?
lump sum, under an annuity an individual would no longer control
the money and would not be able to move it in and out of the
financial market. Additionally, the interest rates at the time of
retirement affect the annuity payments. If, for example, the
interest rates were low at retirement, then the monthly payments
would be lower than at higher interest rates and would stay
constant regardless of any change in interest rates. In the United
Kingdom, an annuity purchase may be delayed until an individual
reaches age 75. What If a Retiree Wanted Once individuals
contract with an annuity company, their only access to Access to
His or Her Funds? the funds is through the monthly payment;
individuals needing extra money are not able to draw from their
premium. Under a lump sum, 25Poterba and Warshawsky, "The Costs of
Annuitizing Retirement Payouts from Individual Accounts." Page 40
GAO/HEHS-99-122 Implementing Individual Accounts Section 3 How
Much Flexibility Would Be Granted in Paying Retirement Benefits?
however, the money would be accessible. This becomes an issue when
people begin to consider their individual accounts to be personal
property. It would be important to make sure individuals
understood that agreeing to an annuity would deny them access to
their accumulated account balance but would ensure them a lifetime
of retirement benefits. An important consideration is that any
early retirement provisions would affect the annuity payout. Would
Annuity Payments Be Currently, Social Security beneficiaries
get a cost of living adjustment to Indexed to Inflation?
their benefits. Most private annuities do not offer this option.
Insurance companies have said that if payments were indexed to
inflation they would charge more. Who Would Be Responsible for
Insurers have told us that early on under a new system, account
balances Small Accounts? would be small and that
the government should hold and annuitize accounts because it would
not be economical for insurers to do so. Monthly payment amounts
are linked to the premium, which may be all or some portion of an
individual account, and a premium of $10,000 might provide a
monthly payment of only $60 to $80. Some argue that it would be
especially important for these small accounts to be given every
opportunity to face minimal administrative costs. How Would the
Federal Role If annuities were offered through the private
market, there would need to Change Under a System of be
coordination between SSA and the investment manager. A system
would Mandatory Annuities? need to be created whereby
the money in individual accounts for annuity payments to retirees
would be sent to the annuity provider for benefit payments. If the
payout structure was decentralized, additional oversight and
regulation would be needed to prevent fraud in the system and to
ensure that individuals received the money that was due to them.
Similarly, a decision would need to be made about whether the
government would guarantee annuities to the full amount.
Currently, by law, each state is responsible for regulating the
insurance industry, but if annuities became part of a national
system of individual accounts, the role of the federal government
would need to be revisited. Timed Withdrawals and If
annuities were not required, retirees could be permitted to assess
their Lump Sum Payments individual needs and make
decisions based on their personal situations. Several questions
would need to be answered before implementing timed withdrawals or
lump sums as payout options for individual accounts. Page 41
GAO/HEHS-99-122 Implementing Individual Accounts Section 3 How
Much Flexibility Would Be Granted in Paying Retirement Benefits?
Would Individuals Be Able to Under the current Social Security
system, retirees receive a reduced Choose These Options If They
benefit if they retire early. A decision would have to be made
regarding Retired Early? whether and when
retirees could gain access to their funds prior to the
predetermined normal retirement age. What Would Happen If an
Individuals might calculate their monthly withdrawals on the basis
of the Individual's Self-Determined number of years they expect
to live. It is possible, though, that an Periodic Payments or
individual who selected a timed withdrawal could live longer than
Withdrawals Failed to Cover expected and run out of money. In
addition, a worker who selects a lump His or Her Full Lifetime?
sum could spend it quickly or invest it badly, leaving none for
retirement. Would the Government Provide A decision would have
to be made about a government guarantee in the a Minimum Pension
If Funds event that retirement funds were outlived or
depleted. In Chile, for Were Outlived or Exhausted? example,
for those who select a timed withdrawal option, the government
guarantees a minimum pension if one's funds are depleted before
his or her death. This again raises the possibility that some
people would take greater risk with their investments if they knew
that the government would provide a guarantee, thus creating a
contingent liability for the government. Start-Up Issues: Need
It would be important to look at how all the parts of a system of
individual for Payout Structure accounts would interact
with each other and determine whether, as a whole, the system was
structured to meet its preestablished goals-such Before
as enhancing individual choice and paying retirement benefits.
Therefore, Implementation of the start-up time for
creating a payout system should be considered within the broader
context of the entire system. Whether annuities were Individual
Accounts mandatory or voluntary, the government's role
would need to be redefined. If mandatory annuities were selected
as the payout option, an oversight agency's responsibilities could
include creating a system for processing annuities, developing a
process for contracting out annuity services, or creating a system
that regulated at least some of the activities of private
insurance companies that offer annuities. Furthermore, the various
types of annuities being offered would need to be considered,
since the specific option selected could make a difference in
retirement provisions. Regardless of the payout structure, the
public would need to be educated to understand the payout options
available to them. If annuities were mandatory, for example,
individuals would need to be educated about the annuity options
available to them, because differing features could make a
difference in the amount of retirement income. In addition, the
public Page 42 GAO/HEHS-99-122
Implementing Individual Accounts Section 3 How Much Flexibility
Would Be Granted in Paying Retirement Benefits? would need to be
educated about how the payout would occur, which agency would be
responsible for processing the payout, and what the effects of
each option available to them would be. Page 43
GAO/HEHS-99-122 Implementing Individual Accounts Appendix I
Flowchart of Current Earnings Process Page 44 GAO/HEHS-99-122
Implementing Individual Accounts Appendix I Flowchart of Current
Earnings Process Page 45
GAO/HEHS-99-122 Implementing Individual Accounts Appendix II
Objectives, Scope, and Methodology At your request, the objectives
of this review were to explore the options under a system of
individual accounts for (1) placement of new administrative
responsibilities, (2) managing investment funds and determining
the extent of investment choices, and (3) determining the degree
of flexibility offered to individuals at payout. To accomplish
this, we agreed to include in our analysis the federal role in
administering or regulating both individual accounts and personal
savings accounts as well as the role of large and small employers,
including the self-employed and businesses that typically have no
retirement plans. We met with officials from the federal agencies
that would be affected by a system of individual accounts,
including the Social Security Administration (SSA), the Internal
Revenue Service (IRS), the Securities and Exchange Commission, the
Department of Labor's Pension and Welfare Benefits Administration,
the Pension Benefit Guaranty Corporation, and the Department of
the Treasury. In addition, we met with experts in the areas of
Social Security and pension reform, as well as employer
representatives, payroll processors, investment managers, and
annuity providers, to obtain a more detailed understanding of the
tasks involved in each aspect of account management. We also
reviewed the experiences of other countries related to the
administration of individual accounts to determine what additional
manpower or other resources would be required. We performed our
work from October 1998 to May 1999 in Washington, D.C., and
Sacramento, California, in accordance with generally accepted
government auditing standards. We provided a draft copy of our
report to SSA, IRS, the Securities and Exchange Commission, the
Pension and Welfare Benefits Administration, and the Federal
Retirement Thrift Investment Board for review and comment. SSA and
the Federal Retirement Thrift Investment Board provided written
comments, which are included in appendixes III and IV. We also
provided draft copies of our report to experts in the field of
Social Security and pension reform. Page 46
GAO/HEHS-99-122 Implementing Individual Accounts Appendix III
Comments From the Social Security Administration Page 47
GAO/HEHS-99-122 Implementing Individual Accounts Appendix III
Comments From the Social Security Administration Page 48
GAO/HEHS-99-122 Implementing Individual Accounts Appendix III
Comments From the Social Security Administration Page 49
GAO/HEHS-99-122 Implementing Individual Accounts Appendix IV
Comments From the Federal Retirement Thrift Investment Board This
discussion was deleted. Page 50 GAO/HEHS-99-122 Implementing
Individual Accounts Appendix IV Comments From the Federal
Retirement Thrift Investment Board Page 51
GAO/HEHS-99-122 Implementing Individual Accounts Appendix V GAO
Contacts and Staff Acknowledgments GAO Contacts Barbara D.
Bovbjerg, (202) 512-7215 Kay E. Brown, (202) 512-3674 Staff
In addition to those named above, the following team members made
Acknowledgments important contributions to this report: Valerie
Rogers, Abbey Frank, Gerard Grant, Deborah Moberly, Elizabeth
O'Toole, Roger Thomas, and Rodina Tungol. Page 52
GAO/HEHS-99-122 Implementing Individual Accounts Bibliography
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55 GAO/HEHS-99-122 Implementing Individual Accounts
Related GAO Products Social Security Reform: Administrative Costs
for Individual Accounts Depend on System Design (GAO/HEHS-99-131,
June 18, 1999). Social Security: Criteria for Evaluating Social
Security Reform Proposals (GAO/T-HEHS-99-94, Mar. 25, 1999).
Social Security: Individual Accounts as an Element of Long-Term
Financing Reform (GAO/T-HEHS-99-86, Mar. 16, 1999). Social
Security Reform: Experiences of the Alternative Plans in Texas
(GAO/HEHS-99-31, Feb. 26, 1999). Social Security and Surpluses:
GAO's Perspective on the President's Proposals (GAO/T-AIMD/HEHS-
99-96, Feb. 23, 1999). Social Security and Minorities: Current
Benefits and Implications of Reform (GAO/T-HEHS-99-60, Feb. 10,
1999). Social Security: What the President's Proposal Does and
Does Not Do (GAO/T-AIMD/HEHS-99-76, Feb. 9, 1999). Social Security
Reform: Implications for Women (GAO/T-HEHS-99-52, Feb. 3, 1999).
Social Security: Different Approaches for Addressing Program
Solvency (GAO/HEHS-98-33, July 22, 1998). Social Security
Financing: Implications of Stock Investing for the Trust Fund, the
Federal Budget, and the Economy (GAO/T-AIMD/HEHS-98-152, Apr. 22,
1998). Social Security Financing: Implications of Government Stock
Investing for the Trust Fund, the Federal Budget, and the Economy
(GAO/HEHS-98-74, Apr. 22, 1998). 401(k) Pension Plans: Loan
Provisions Enhance Participation but May Affect Income Security
for Some (GAO/HEHS-98-5, Oct. 1, 1997). (207040) Page 56
GAO/HEHS-99-122 Implementing Individual Accounts Ordering
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