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Interactions Between Social Security Reform and the Supplemental Security Income Program for the Age

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by Paul S. Davies and Melissa M. Favreault January 2004

WP#2004-2  

Abstract 

Most analyses of Social Security reforms ignore interactions with the Supplemental Security Income (SSI) program. We explicitly consider such interactions using a microsimulation model. The basic reform we examine reduces Social Security benefits by the percentage required to approach 75-year solvency. We then add options for attenuating the effects on low-income beneficiaries, including a minimum Social Security benefit and liberalization of three SSI program parameters. Focusing on the elderly in 2022, we compare the simulated reforms with respect to benefit receipt patterns, poverty rates, and winners and losers. Social Security beneficiaries turn to the SSI program for income support in response to Social Security benefit reductions, but substantial SSI reforms are necessary if the SSI program is to play a more effective income security role. Among the limited set of reform options we consider, Social Security minimum benefit plans would be more effective in reducing poverty among low-income beneficiaries.

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Paul Davies is an economist at the Social Security Administration, Office of Policy, Office of Research, Evaluation, and Statistics. Melissa Favreault is a senior research associate at the Urban Institute. The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) to the Center for Retirement Research at Boston College (CRR). The opinions and conclusions are solely those of the authors and should not be construed as representing the opinions or policy of SSA or any agency of the Federal Government or of the CRR. The authors gratefully acknowledge Kalman Rupp, Minh Huyhn, and Jim Sears for allowing us to use the 1997 SSI Financial Eligibility Model, and Kalman Rupp and Sheila Zedlewski for providing helpful comments on an earlier draft. The authors remain solely responsible for all errors.