Proposals may create IT burden
- By Allan Holmes
- Jan 19, 1997
Long-awaited proposals released this month to shore up the Social Security program would require the federal government to invest possibly billions of dollars in a computer system to monitor the investments.
The Advisory Council on Social Security a 13-member panel that was scheduled to report a year ago on the long-term financing of Social Security recommended in a report that the federal government adopt one of three proposals which would allow individuals to invest at least a portion of their Social Security payroll taxes in the stock market. Experts estimate Social Security will run out of money in 2029.
The council recommended in two proposals that the federal government monitor the investments but it did not specify whether it would be the Social Security Administration or the Treasury Department that collects the Social Security payroll taxes.
In either case a massive computer system would be needed to monitor the investments. Under one proposal 142 million accounts would be created covering each American currently paying into the Social Security program. "Potentially if one of these radical departures [from the traditional system] was enacted then there would be a large administrative burden put on this agency and the potential for information technology would expand likewise " a spokesman at SSA said.
SSA officials said it is too early to elaborate on the system needed to monitor the investments. Norm Berthaut vice president of INPUT Inc.'s U.S. Government Office said investing Social Security funds in equities would require SSA to develop "a system comparable to the system that it now uses to track contributions.... It would be more than a few billion dollars in infrastructure and hardware and software."But some financial experts do not expect these changes to require SSA to spend heavily on IT. Frank Schlier a research director specializing in financial systems at The Gartner Group Stamford Conn. said SSA could outsource the management of the investing and accounts to a bank brokerage house or insurance company. "I just don't see a huge investment in systems " he said.
But before Social Security is changed many obstacles must be overcome.
Sen. Patrick Moynihan (D-N.Y.) whose opinion on entitlements is highly regarded by both parties and who talked with President Clinton about the issue this month said if Social Security "goes private you're going to lose it." But House Majority Leader Dick Armey (R-Texas) praised the council's suggestions to privatize portions of Social Security.
Social Security Proposals
Maintenance of Benefits The federal government would hire investment managers to invest a portion of Social Security payroll taxes in equities.
Publicly Held Individual Accounts Social Security would remain unchanged and the federal government would manage individual accounts that would use an additional 1.6 percent increase in payroll taxes to invest in bond or equity index funds for each worker.
Two-Tiered System A flat retirement benefit for full-career workers individuals could invest 5 percent of the current Social Security payroll tax in self-managed Personal Security Accounts.