Social Security individual accounts

The Congressional Research Service (CRS) issued a report May 1 on Social Security individual accounts (IAs). The creation of IAs as part of Social Security - "the fiscal implications of funding accounts and the risks and rewards of investing in equities" - has been debated for years, the report notes, but not the practical issues of managing the accounts. This report addresses the administrative and structural choices facing policymakers in collecting and investing IA funds.

The potential millions of workers and billions of dollars involved would greatly impact the American economy. CRS estimates that if workers contributed 2% of their earnings, IAs could account for as much as 10% of the GDP in 10 years and 25% in 20 years.

Topics covered in the report include: eligibility, participation and enrollment, participation incentives, contribution amounts and collection, education, investment of account assets, fees.

In the area of investments, CRS notes the concern that a government-managed fund may be subject to political interference and presents the centralized investment board as a way to insulate investments from politics while retaining economies of scale. The report cites two centralized investment boards currently in the federal government: the Federal Retirement Thrift Investment Board (FRTIB) which manages the Thrift Savings Program (TSP), and the National Railroad Retirement Investment Trust (NRRIT) which manages the Railroad Retirement program.

The Structure of Social Security Individual Account Contributions and Investments: Choices and Implications, CRS Report RL33398
(pdf, 208KB, 46p., from Open CRS)


Post a Comment

<< Home