Minimum Social Security Benefit:

A Windfall That Should Be Eliminated

HRD-80-29: Published: Dec 10, 1979. Publicly Released: Dec 10, 1979.

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The minimum benefit provision of the Social Security Act, intended to help the poor, has in recent years mainly benefited retired government workers with pensions and homemakers supported by their spouses' incomes. The provision grants a much higher benefit than individuals have earned and would otherwise receive. The need for the minimum benefit was greatly reduced in 1974 with the implementation of the Supplemental Security Income program, which established a Federal minimum income level for needy people who are at least age 65, blind, or disabled. Before the program, the minimum social security benefit may have been the only source of income for such people. In the fiscal year 1980 budget, the President proposed eliminating the minimum benefit for new beneficiaries to prevent the windfall effect and to reduce the welfare aspect of social security. The Social Security Administration estimated that implementing the proposal in October of 1980 would save the Government $455 million for fiscal years 1981 through 1985.

A study of beneficiaries who were awarded minimum benefits during 1977 showed that homemakers and government pensioners received additional income from the minimum benefit provision more often than the needy. About 44 percent of sampled beneficiaries received no additional income from the minimum provision because of offsets required in other Federal benefits. More than half the remaining 56 percent had income or support from other sources. Federal records showed that 15 percent received Federal pensions averaging $900 a month; 10 percent depended on working spouses earning an average of at least $13,700 during the first year after the beneficiary began receiving social security; and 2 percent relied on retired spouses with Federal pensions averaging $12,500 a year. The extent to which 26 percent of the sample depended on minimum social security benefits could not be determined from selected Federal records; however, a detailed analysis in a metropolitan area indicated that many recipients had a primary means of support other than social security. The study also showed that, in general, minimum beneficiaries had not been a permanent part of the labor force and could not have depended primarily on their earnings from covered employment. Such people would recover their total contribution of social security tax, on the average, six times faster than the people who contributed the most to the trust fund.

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