Social Security's Special Minimum Benefit

Summary

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Some Social Security reform proposals, such as two of the three offered by the President's Commission to Strengthen Social Security, would modify and strengthen Social Security's special minimum benefit provision, which is intended to enhance benefits for low earners and is phasing out under current law. In order to inform policymakers as they continue to deliberate the provision's future, this article presents the most recent and comprehensive history and analysis available about the special minimum benefit.

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Social Security's Special Minimum Benefit

Some Social Security reform proposals, such as two of the three offered * The authors are with the Office of Retirement Policy, Office of Policy, Social Security Administration.

by Kelly A. Olsen and Don Hoffmeyer*

Summary

Social Security's special minimum primary insurance amount (PIA) provision was enacted in 1972 to increase the adequacy of benefits for regular long-term, low-earning covered workers and their dependents or survivors. At the time, Social Security also had a regular minimum benefit provision for persons with low lifetime average earnings and their families. Concerns were rising that the low lifetime average earnings of many regular minimum beneficiaries resulted from sporadic attachment to the covered workforce rather than from low wages. The special minimum benefit was seen as a way to reward regular, low-earning workers without providing the windfalls that would have resulted from raising the regular minimum benefit to a much higher level. The regular minimum benefit was subsequently eliminated for workers reaching age 62, becoming disabled, or dying after 1981.

Under current law, the special minimum benefit will phase out over time, although it is not clear from the legislative history that this was Congress's explicit intent. The phaseout results from two factors: (1) special minimum benefits are paid only if they are higher than benefits payable under the regular PIA formula, and (2) the value of the regular PIA formula, which is indexed to wages

presents the most recent and comprehensive information available about the special minimum benefit in order to help policymakers make informed decisions about the provision's future.

Highlights of the current special minimum benefit include the following:

* Very few persons receive the special minimum benefit. As of December 2001, about 134,000 workers and their dependents and survivors were entitled to a benefit based on the special minimum. Of those, only about 79,000 received a higher total benefit because of the special minimum; the other 55,000 were dually entitled. (In effect, when persons are eligible for more than one type of benefit-that is, they are dually eligible-the highest benefit payable determines total benefits. If the special minimum benefit is not the highest benefit payable, it does not increase total benefits paid.)

* As of February 2000, retired workers who were special minimum beneficiaries with unreduced benefits and were not dually entitled were receiving, on average, a monthly benefit of $510 per month. That amount is approximately $2,000 less than the annual poverty threshold for an aged individual.

* Special minimum benefits provide small increases in total benefits. For special minimum beneficiaries who were not dually entitled as of December 2001, the average special minimum monthly PIA was just $39 higher than the regular PIA.

* Most special minimum beneficiaries are female retired workers. About 90 percent of special minimum beneficiaries ar...

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