WASHINGTON — Social Security reform talks will heat up in January when Democrats take majority control of Congress. But the discussion will be far different from what it was in 2005, when President Bush pushed for a new system of personal retirement savings accounts.

Momentum for that idea, which would have funded voluntary retirement savings accounts for younger workers by diverting a portion of current payroll taxes, died as Republicans in Congress failed to take up Bush's initiative in the face of fierce opposition from a variety of groups, including Democrats.

But Social Security's looming financial problems remain.

The coming retirement of the baby boom generation will put such a strain on the program that by 2040, there will only be enough revenue to pay 74 percent of promised benefits, according to the latest estimate by the Social Security trustees.

Making adjustments to the benefits and tax structure of Social Security now could help avoid larger, more painful changes later, according to many policy experts.

Administration officials now say they're willing to discuss all options.

One proposal getting a lot of attention is a "little bit for everybody" plan that could form the basis of a successful bill, according to experts.

The so-called "LMS plan" is named for Jeffrey Liebman, a former aide to President Clinton; Maya MacGuineas, a former adviser to GOP Sen. John McCain of Arizona; and Andrew Samwick, former chief economist for Bush's Council of Economic Advisers.

After gathering dust for the past year, the plan is generating new interest on Capitol Hill, said MacGuineas, director of fiscal policy programs at the New America Foundation.

The plan's key components would:

  • Change benefit formulas to reduce payments to future retirees, especially the wealthy.

  • Increase to 68 the age at which full Social Security retirement benefits would become available and reduce early retirement benefits.

  • Create mandatory personal retirement accounts funded through a combination of new payroll deductions and contributions from Social Security trust fund surpluses.

  • Allow people to invest the accounts in any of 15 private fund companies certified by the government. All payments from the accounts would be as annuities.

  • Make 90 percent of a worker's earnings subject to the FICA payroll tax — that's where it was in 1982 — and do away with the current annual cap ($94,200 in 2006 and $97,500 for 2007).

  • Create a minimum Social Security benefit for workers who spend many years earning low wages.

The Social Security Administration's Office of the Actuary confirmed the plan would eliminate Social Security's solvency gap over the next 75 years while maintaining benefits at relatively comparable levels for future retirees.

"We tried to figure how to make compromise in each major area," MacGuineas said.

She believes lawmakers see the plan as an honest attempt by a bipartisan group to identify the difficult choices necessary to shore up Social Security.

Other policy experts aren't optimistic Congress and the White House can muster the political will necessary to change the 71-year-old social insurance program.

"You really can't bet on it happening," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan think tank that advocates fiscal responsibility. "The political environment isn't much better than it was."

Bixby and others acknowledge there is a slim chance common ground can be found because Bush wants a signature domestic success to mark the end of his presidency while Democrats want to prove they can produce results.

"There is opportunity and danger," said Michael Tanner, director of health and welfare studies at the CATO Institute, a libertarian think tank. "The Democrats now share in governing responsibility and will have to face up to the fact that something needs to be done about Social Security."


Options for Social Security reform

The Social Security program provides a foundation of economic security for an estimated 48 million retirees, disabled persons and survivors of deceased workers. The program is fiscally sound in the short term but will eventually run out of money to pay full benefits.

To avoid dramatic tax increases or benefit cuts, lawmakers and policy experts have been debating options to balance Social Security's finances. Those options fall into broad categories.

Many politicians have said that any changes to Social Security should not change benefits paid to current retirees or those very near retirement.

Increase revenues:

Options include increasing the cap on taxable earnings, raising the FICA tax rate, investing trust fund surpluses in equities and extending Social Security coverage to the 25 percent of state and local government employees that do not currently participate in the federal program.

Reduce benefits:

Options include further increasing the eligibility age for full or early retirement benefits, lowering the annual cost-of-living adjustment and adjusting the formula used to calculate benefit levels.

Individual savings accounts:

Advocates believe people could accumulate larger retirement savings through personal savings accounts funded, at least in part, by Social Security payroll taxes. Those participating in such accounts would forfeit a portion of future Social Security benefits.

Opponents say such accounts would weaken Social Security in the short term because less money would be available to pay current benefits. They also contend private savings accounts would unravel the social insurance aspect of the Social Security program to the detriment of women, minorities and low-wage earners.


On the Web: Social Security beneficiaries and payments by county: www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html;

Social Security Administration: www.ssa.gov;

The Concord Coalition:www.concordcoalition.org;

CATO Institute project on Social Security: www.socialsecurity.org;

New America Foundation retirement security: www.newamerica.net/issues/retirement_security,


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