NCPA Offers Reform Proposal

October 26, 2001

The National Center for Policy Analysis has offered a proposal for partially privatizing Social Security. Under the proposal, which is described as a “hybrid” of various proposals introduced in the last several years:

• Workers would have the option of privately investing two percentage points of their payroll taxes.



• Workers would not be given a choice of investment options. Workers would have to invest in a single fund made up of 70 percent stocks and 30 percent bonds.



• The Social Security administration would collect and deposit funds, as well as be responsible for all bookkeeping. The fund itself would be managed by a private company under contract to the SSA.



• At retirement, workers could convert funds into an annuity or take programmed withdrawals according to a schedule determined by the Secretary of the Treasury.



• There would be limited inheritability of the account. Workers who died prior to retirement could pass the balance of their accounts on to their heirs, unless those heirs claim benefits from Social Security based on the deceased’s contributions. This would primarily impact non-working spouses.



• The transition would be partially paid for through an infusion of General Revenues.

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