SCHAUMBURG, Ill., Mar. 2, 1999 -- Actuaries responding to a fax survey on Social Security reforms gave strong support to indexing the retirement age to increases in life expectancy. They also favored limiting investment choices if individual accounts are enacted, but in general respondents opposed individual accounts. More than 1,000 Society of Actuaries' members responded to the survey, conducted through the society's member newsletter. For more than two years, The Actuary has received more articles and letters on social security than on any other single topic. To offer more members a forum for their views, the editors included a survey in the September 1998 issue asking opinions on five statements related to possible U.S. Social Security reforms. The survey drew 1,067 responses, representing 6.6% of the 16,209 members as of the Oct. 31, 1998, deadline. (Responses represented individual actuaries' views, not those of the Society or the profession.)
Members were asked to rate their views from 1, strongly agree, to 5, strongly disagree. Respondents also were asked to provide information on their gender, level of actuarial examinations completed (Fellow, Associate or pre-Associate), age category and practice area. The respondent group was at least 87% male and 12% female; 65% Fellows, 30% Associates and 4% pre-Associates; 40% pension actuaries, 31% life insurance, 17% health insurance, 5% finance/investment, 1% property-casualty insurance and 5% 'other'; and 1% under age 25, 32% aged 25-40, 40% aged 41-54, 14% aged 55-64 and 12% over age 65.
Results
Respondents overall opposed the first statement, "reforms should include a
defined contribution (DC) feature using individual investment accounts," 52%
disagreeing and 38% agreeing. ("Defined contribution" is a retirement plan
feature focusing on the amount workers contribute rather than the amount they
would receive, the latter called "defined benefit.")
On statement B, "if a DC feature with individual investment accounts is enacted, workers should have only a few investment choices," respondents overall favored the idea, 59% agreeing vs. 25% disagreeing. All groups except the 11-member under-25 group reflected that trend. Individual groups diverged from the total respondent population on statement C, that the U.S. government should invest some Social Security trust funds in equities if U.S. reforms do not include a DC feature. While respondents as a whole opposed the statement (45% vs. 38%), several categories of respondents supported it.
A strong majority of respondents supported the fourth statement, that the Social Security retirement age should be indexed with improvements in life expectancy to help stabilize financing. Of all respondents, 74% agreed, and support was strong in each category.
Opposition was consistent on the fifth statement, that Social Security benefits should be adjusted with the ratio of retirees to workers to help stabilize the system's financing. Overall, respondents disagreed with the statement (56% vs. 24%). However, nearly 20% gave a neutral response or no answer (18% and 2% respectively), a trend generally reflected in all categories. More than 50% of respondents in each group disagreed with the statement.
Comments
Nearly one-fourth -- 248 -- of the respondents took time to comment on the surveys
five statements.
Dominating the comments was the theme of fairness, as it does in the public debates. The typical focus was on people in need and the common welfare. "Raising the retirement age discriminates against the disabled, blue-collar workers, and others with lower life expectancy," wrote one respondent. Said another, "Allowing future retirees to direct their accounts would only benefit those with an understanding of investments. For others, it could diminish a benefit they need to survive financially." Another respondent wrote, "The discussion should not focus on 'Am I getting fair value for my contributions?' This is social insurance for the greatest good." Only a few writers saw fairness differently; said one, "I want to know how much of my contribution of Social Security will come back to me versus how much is going to support others' retirement funding."
Beyond fairness, topics of comments showed strong views on government involvement, investing Social Security funds in equities, launching individual accounts and other concerns.
Comments on increasing the U.S. government's involvement in the equity markets were rarely positive. "The government should not be investing and becoming part-owner of any business; the (potential for) conflict of interest is just too high," wrote one respondent. "The government is the guarantor, not a bettor," stated another. But some writers cautioning against bureaucracy and potentially high expenses favoring investments often indirectly supported government involvement while. Typical was the comment, "Investment choices should be somewhat limited to avoid or reduce administrative problems."
The concept of investing in equities raised clear, strong feelings. "The U.S. government investing in the equity market is a dangerous move, equivalent to socialism through the back door," wrote one member. However, many comments focused on protecting the needy. "Since Social Security is the only thing (helping stave off poverty) for a sizeable number of Americans, the financing should be conservative. No equities on a program-wide or an individual basis should be allowed." Those cautioning against administrative overkill often simultaneously supported equity investment and/or individual accounts. Said one writer favoring such accounts, "The goal would be to maximize total returns: investment income minus management costs." Stated another, "Social Security is the safety net component of retirement. With the greater popularity of defined contribution plans with significant market risk, we shouldn't expect workers to assume more of this risk with Social Security; they need a stable, fixed component. If the government wants to take the risk and invest in the market, fine."
The Society of Actuaries, marking its 50th anniversary in 1999, has about 16,500 members primarily in the United States and Canada. It is North America's largest educational, research and professional organization for actuaries. Society members practice primarily in the fields of life and health insurance, pensions, employee benefits and investments.