Individual Investment Accounts for Social Security Would Hurt Disabled, GAO Report States

A new General Accounting Office study sent to Sen. Tom Harkin (D-Iowa) on Feb. 6 revealed that Americans with disabilities, who constitute 17% of those that receive Social Security benefits, would lose income and benefits under proposals by President Bush and others to allow workers to put some of their payroll taxes into individual investment accounts for the Social Security program, the New York Times reports. The study concluded that "even under the best of circumstances, Social Security reform proposals would reduce benefits" for people with disabilities. According to the report, for an employee with "average earnings" who begins receiving disability benefits at age 45, such plans would reduce benefits -- now about $786 per month -- by 4% to 18% over a lifetime. "Most disability insurance beneficiaries would be adversely affected by the reform proposals," the GAO concluded. The New York Times reports that proposals for individual investment accounts "often are paired with proposals that would reduce Social Security benefits." Advocates of private accounts, however, argue that income from investing in stocks and bonds would "largely offset" the reduced benefits. While the GAO said that "some or even many retirees" might benefit from individual investment accounts, the report concludes that income from the individual accounts would not be "sufficient" to compensate disabled insurance beneficiaries for the decline in benefits. Under many of the proposals, disabled workers would receive less income from individual accounts than retirees because the disabled usually have shorter work histories and, thus, would have less time to accumulate money in their accounts, according to the Times.

A 'Wake-Up Call'?
In 1999, Reps. Jim Kolbe (R-Ariz.) and Charles Stenholm (D-Texas) proposed a plan to establish individual investment accounts, and a Kolbe aide said the Arizona lawmaker is "revising" the bill to address concerns about benefit reductions for the disabled. "We realize that a person who is permanently disabled at the age of 25 may have only five or six years to accumulate money in a personal account," the aide said. Another concern is that more than 30% of those receiving disability benefits suffer from "mental impairments," which could prevent them from making "wise" investment decisions. "This [GAO] report is a wake-up call to policymakers, to all of us in Congress," Harkin said, adding, "Social Security is not just about retirement. It's also about protecting people who are wiped out by accident or illness that leaves them disabled. You can plan your retirement, but you can't plan for disability. It can happen to anyone at any time." He added, "Before we reform Social Security, we better stop and think about people with disabilities because they are among the most vulnerable in society" (Pear, New York Times, 2/7).