Liberal Deposit Requirements of States' Social Security Contributions Adversely Affected Trust Funds

HRD-79-14: Published: Dec 18, 1978. Publicly Released: Dec 18, 1978.

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On March 30, 1978, HEW published in the Federal Register its proposal to increase the frequency by which States must deposit social security contributions. GAO evaluated the issues surrounding the frequency of State deposits and the reasonableness of the HEW proposal.

The State's and local governments' objections to more frequent deposits are (1) the loss of investment income because the social security contributions would no longer be in their possession for a longer period of time, and (2) the administrative problems and additional costs of more frequent deposits. GAO believes that these social security contributions should earn investment income for the trust funds and it sees no valid reason for the continued extended retention of these social security contributions by the State and local governments. With respect to the administrative problems and related costs, GAO believes that these problems can be reasonably worked out within the time frame provided by law. It also believes that HEW's original proposal to increase the frequency of deposits to a monthly basis was a step in the right direction and would result in the trust funds earning additional interest income of over $1 billion from 1980-1984. However, if these contributions were required to be deposited biweekly or semimonthly, an additional $73 million could be earned during the same time period.

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