Much More Than 'Retirement'

Social Security's disability and survivors' payments benefit some 14 million Americans. Under privatization plans, those twin lifelines would be jeopardized.

By Karen Gilgoff

The recent debate on the privatization of the Social Security system focuses primarily on one issue: Does it make sense to use a portion of Social Security payroll contributions to fund individual retirement accounts? Proponents claim that the return on stocks, purchased over a working lifetime, would more than make up for cuts in basic benefits that could result from the expensive transition to the new system.

Even if you buy the argument that stocks would bring a high rate of return over alifetime — a premise challenged by AFSCME and others — what happens when a person is disabled at 28? Or when someone dies at 35, leaving behind young children?

Social Security isn't just about retirement, even though it's natural to think of it that way. To be sure, nearly everyone has a parent or grandparent among the 28.5 million retirees who gets a Social Security check each month. But they are only part of the picture.

WHO GETS BENEFITS? A total of 45 million checks go out each month — to one in six Americans and nearly one in four American households. In addition to retirees, this number includes 5.1 million widows and widowers; almost 5 million disabled workers; 730,000 severely disabled adult children of deceased, retired or disabled workers; and more than 3 million children under 18 who receive benefits because a parent has retired, become disabled or died.

Thus every working American who pays into Social Security is buying two big insurance policies, along with a retirement benefit. The disability insurance, which provides income to workers who become disabled at almost any time during their work life, is comparable to a private policy worth nearly a quarter of a million dollars.

Similar policies, however, are virtually non-existent (and very expensive) on the private insurance market. One reason is that Social Security pays benefits not only to the disabled worker but also to every dependent member of the worker's family.

Think a disability could never strike you? According to the Social Security Administration, a 20-year-old worker has about a 3-in-10 chance of becoming disabled before reaching retirement age. Disability could result from a serious auto accident, the onset of a mental illness, the development of multiple sclerosis or Parkinson's disease, or a vast number of other causes.

Once benefits begin, a worker will continue to receive them as long as he or she is disabled and can't work. An eligible spouse and the worker's minor children will get monthly checks, too. In addition, all will be eligible for Medicare health care coverage.

WHEN DISABILITY STRIKES...The system worked very well for Louie Thomas, an Ohio truck driver, and his wife. Betty Thomas is a member of Council 8 and, as an instructor's assistant with Cincinnati's North Fairmount School, was president of Local 1938 for more than 11 years.

Although there was little evidence that early heart disease ran in his family, Louie had a massive heart attack at age 34. His doctor told him that he must quit work immediately. He and Betty had five young children: Frankie, age 10; Jeff, 7; Sandy, 6; Suzie, 5; and Danny, 3. They all depended on dad as the family's chief breadwinner.

Louie had four heart attacks that first year, and had no trouble qualifying for Social Security disability benefits. The whole family got checks, and without them, according to Betty, "We would have lost everything." She says that, even with her husband's Medicare coverage and her own employer's health plan, "Louie's out-of-pocket medical bills sometimes cost more than my yearly salary."

REASON FOR LIVING. Although Louie Thomas had even more heart attacks, he vowed to keep going until all of his children finished high school. He died at age 49, a few months after the youngest child's graduation. "If not for Social Security, my husband surely would have died much sooner," Betty says. "Knowing he had a reliable income reduced his daily stress and made him believe he could still take care of his family."

Betty currently works as the full-time coordinator for AFSCME's statewide Ohio Retiree Chapter 1184. Her children are all grown, with jobs of their own.

The moral of the Thomas story? "Social Security is insurance against poverty and is essential to the protection of people with disabilities." So says Marty Ford, assistant director of government affairs for the ARC of the United States and co-chair of the Social Security Task Force of the Consortium of Citizens with Disabilities (CCD — a coalition of 54 disability organizations). Ford adds that the system serves especially well because it provides benefits to multiple family members, across multiple generations, based on the coverage of a single wage earner.

WHEN YOU BECOME A SURVIVOR...Social Security's survivor benefit is equally valuable to the American worker. If Louie Thomas had died at 34, instead of becoming disabled, his family would have been covered by his Social Security life insurance policy. Today, that coverage is valued at over $375,000. It provides spouse and family benefits (for minor or disabled children) when a breadwinner dies at almost any age — working or retired.

Robert Baumgarner knows all about survivor insurance. A public assistance specialist in Florida's Department of Children and Families in the Tampa area, Baumgarner is a member of Council 79 and recording secretary of Local 3039. His father, who worked on airplane radar systems, died when Bob was 9.

"My father had life insurance from a private company," Bob says, "but nothing that would have given us an ongoing monthly income. At the time, my mother was only 36 and a homemaker. She got Social Security widow's benefits."

Bob, an only child, got monthly benefits, too. "It was mainly Social Security that kept us going. Without it, we might have even qualified for welfare and food stamps." Eventually his mother got a job with a regular salary. But even then, "We would have had a much lower standard of living if not for my Social Security survivor's checks."

Baumgarner says his family's experience should be a lesson to those who believe Social Security is only for retirement. "Young people think about Social Security in terms of what it's going to be like for them at 65 or 70. They don't consider what will happen if they're suddenly taken ill, or have an accident, and their family loses their salary." Thanks to his father's Social Security coverage, he says, he was able to enjoy a normal childhood, get a basic education and then go to college.

PRIVATIZATION MEANS CUTS. Expert Judy Chesser cautions that Social Security privatization could jeopardize that reliable coverage. Chesser is director of government affairs for United Cerebral Palsy and was formerly the Social Security Administration's deputy commissioner for legislation.

"Although the authors of several 'private accounts' bills introduced in Congress in the last two years have claimed they will hold harmless [exempt from cuts] disability and survivor benefits, none have actually done so," she says. "This is because these bills contain benefit calculation formulas that reduce all benefits, including those for people with disabilities and survivors." One of the privatization bills was introduced by former Sen. Daniel Patrick Moynihan (D-N.Y.), currently co-chair of President Bush's Social Security Commission (see Page 23).

Chesser points to a General Accounting Office (GAO) report released in January that analyzed the effect on disability benefits of converting even a small portion of Social Security to individual investment accounts. The GAO said that such proposals "would reduce insurance benefits while creating individual accounts with the expectation that the income from them would largely offset reductions in insurance benefits. In our estimates, the income from the individual account would not be sufficient to compensate for the decline in the insurance benefits that disabled beneficiaries would receive."

INDIVIDUAL LOSSES. As an example, the report cited a worker with average earnings who becomes disabled at age 45. Under an individual accounts plan, he or she would lose as much as 18 percent of the benefits that Social Security would normally provide.

A major reason for the loss, says the GAO, is that most people who become disabled have shorter work histories than older, retired beneficiaries. So they would have less time to accumulate money in their accounts. The same would be true for a worker who dies.

"When you're in your 20s, you think that nothing is ever going to happen to you, that you're always going to be healthy," says Cathy Conley, 42, a driver's license examiner in Portsmouth, Ohio, and member of the Ohio Civil Service Employees Association/AFSCME Local 11. But Conley knows better. Her husband Larry became disabled almost 15 years ago, and she estimates that Social Security disability benefits comprise about 40 percent of their joint income.

Conley says they couldn't afford to live on less. Not surprisingly, she thinks privatizing Social Security would be "a huge mistake."

Social Security Covers Victims of Terrorism

The Social Security Administration has published a special fact sheet on survivor and disability benefits for families victimized by the recent terrorists attacks. In response to the tragic circumstances, the SSA reminds all Americans that Social Security is the nation's "family protection plan," providing reliable family income in the event of a wage earner's death or disability.

The agency is expecting thousands of Social Security claims to be filed in the wake of the Sept. 11 disaster. For a copy of the new fact sheet, which explains the survivor and disability programs and how to apply for benefits, visit this Web site:www.SSA.gov.