You may have read the bad news: Social Security will be insolvent by 2033 and benefits will have to be cut by over twenty percent to make up the shortfall. That will happen unless Congress takes decisive action to deal with this funding crisis – and does so in the near future. However, its record in dealing with Social Security issues (the “third rail” of electoral politics) is not good. The last significant Social Security reform was in 1983. Since then there has been some talk of fixes like increasing the retirement age to 70, means testing the availability of Social Security benefits,  various mechanisms to increase the Social Security payroll tax as well as proposals of more serious Social Security reforms (more on that below). But there’s also a popular bill pending in Congress that would increase Social Security benefits payable to millions of employees and retirees covered by state, county or municipal retirement plans.

What could Congress do that might assure our children and grandchildren that they too will receive Social Security benefits? Consider replacing the present pay-as-you-go system where current employees pay the benefit costs of current retirees. Replace it with a program where the Social Security taxes paid by both employees and their employers (each currently contributes 6.2 percent of an employee’s annul income up to $168,600.00) are directed into a private investment account similar to a Section 401(k) account. These private investment accounts would be phased in for employees who are not near retirement age and would provide conservative and well diversified Government directed investment options. Fiduciary standards of conduct would apply to account managers and advisors, and minimum benefits would be guaranteed by the Federal Government if there is a shortfall in a private account. Investment returns on these private accounts should exceed those realized by the Social Security trust fund which currently earns an annual return of about 2.5 percent on its U.S. Government bond holdings. 

Could a program like this save Social Security for our children and grandchildren? Based on the operating results of a similar program, the answer to that question is a tentative “yes.”  In 1981, Chile adopted a defined contribution national pension program funded through private investment accounts. Its model incorporates several of the features mentioned above and has been followed by countries around the world including ten countries in Latin America. And it is time for the U.S. to give serious consideration to this approach along with other incremental reforms with a goal of preserving Social Security in the long run – with no benefit cuts. Like any solution to retirement plan funding shortfalls, the sooner reform is implemented the less painful it will be. But do not expect any Congressional attention to the dire Social Security funding problem before the 2024 elections – and that’s the takeaway!

Andrew S. Williams has practiced in the employee benefits and ERISA arena since ERISA was passed in 1974. He has been recognized by his peers through a survey conducted by Leading Lawyers Network as among the top 5 percent of Illinois lawyers in Small, Closely and Privately Held Business Law and Employee Benefit Law. He maintains a website,, with additional updates, commentary and analysis on benefits and employment topics.

The above material is intended for general information purposes and should not be relied on or construed as professional advice. Under the applicable Illinois Rules of Professional Conduct, the contents of this e-mail may be considered to be attorney advertising. The transmission of this information is not intended to create, and receipt of it does not create a lawyer-client relationship.

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