Social Security Administration

Development of the Social Security Act began with the Committee on Economic Security (CES), which President Roosevelt created by Executive Order on June 29, 1934. The CES’s function was to study problems relating to economic security and make recommendations for legislation that would promote the economic well-being of individuals. The CES was composed of Secretary of Labor Frances Perkins; Secretary of the Treasury, Henry Morgenthau, Jr.; Secretary of Agriculture, Henry Wallace; Attorney General, Homer Cummings; and Federal Emergency Relief Administrator, Harry Hopkins. In January 1935, the committee sent its report to the president, who introduced the report to both houses of Congress on 17 January 1935. President Roosevelt signed the Social Security Act on 14 August 1935.

The Social Security Act of 1935 provided for several new programs. The one that would grow to affect the largest population was the Old-Age Benefit system, which is now commonly known as Social Security retirement benefits. Even before the Old-Age Insurance program was in full operation, lawmakers enacted significant changes. As originally enacted, Old-Age Insurance would pay benefits only to retired workers. The Social Security Amendments of 1939 broadened the program to include benefits for spouses, dependents, and survivors. The first monthly checks were issued in January 1940, even though they were not originally scheduled to begin until 1942.

The next major changes in benefits and coverage were made in the 1950s. The 1950 Social Security Amendments, signed by President Harry S. Truman, provided the first cost-of-living adjustment (COLA) in monthly benefits since they began in 1940—providing an (average) increase of 77 percent (the increase was more generous to low wage than to high wage workers). The 1950 amendments also extended coverage to several categories of workers, including regularly employed farm and domestic workers, federal civilian employees not covered under the Federal Civil Service Retirement System, some state and local government employees (at the election of employers) some not covered under another retirement program, and employees of nonprofit organizations. Even more categories of workers were added in subsequent years. On 1 August 1956, lawmakers amended the Social Security Act to provide monthly benefits to permanently and totally disabled workers age fifty to sixty-four, and to adult children who became disabled before age eighteen and whose parents were deceased or retired workers. Two years later, lawmakers eliminated the minimum age requirement for disabled workers. The 1956 amendments also made reduced, early retirement benefits available for women between sixty-two to sixty-four years of age. Amendments enacted in 1961 extended early retirement to men.

By the 1960s, the basics of the OASDI programs were in place, but further program changes created new categories of beneficiaries, increased benefits to maintain purchasing power, and adjusted tax rates to insure adequate financing. President Lyndon B. Johnson signed the 1965 amendments that created the Medicare program, to be administered by the Social Security Administration. The Medicare program originally provided health insurance to people age sixty-five and older, but was expanded in 1972 to include disabled persons who had received Social Security or Railroad Retirement benefits for twenty-four months. In 1969, the responsibilities of the Social Security Administration were further increased through the creation of Black Lung Benefits for miners and their dependents.

Two major changes in the 1970s were the automatic indexation of OASDI benefits and the creation of the Supplemental Security Income (SSI) program. In the time between the OASDI program’s enactment and the 1972 amendments, Congress and the president provided benefit increases on an ad hoc basis. The 1972 amendments provided that, effective in 1975, increases in the cost of living, as measured by the Consumer Price Index, would determine annual benefit increases. These annual increases would help insure that inflation would not erode the value of benefits. The 1972 Amendments also created the SSI program, to be administered by the Social Security Administration. The SSI program replaced state programs that provided benefits for low-income aged, blind, and disabled persons. Payment of SSI benefits began in 1974.

In the late 1970s, the OADSI programs faced new challenges precipitated by economic and demographic conditions that were unfavorable to the program’s finances. High inflation, coupled with low or negative real wage growth, caused benefit expenditures to increase rapidly while payroll taxes went up more slowly. This was exacerbated by high unemployment, which also reduced payroll tax revenue. Since the payroll tax is the primary source of funding for the OASDI programs, this meant that financing would become inadequate to pay benefits in the future. In addition, demographic projections showed declining birth rates and increased life expectancy. This meant there would be fewer workers paying payroll taxes per retiree, and that retirees would be receiving benefits longer.

In 1979, actuaries estimated the Old-Age and Survivors Insurance Trust Fund, through which retirement and survivors’ benefits were paid, would not be able to fund benefits by some point in the 1980s. In December 1981, President Ronald Reagan formed the National Commission on Social Security Reform (NCSSR). Based on the NCSSR’s recommendations, the Congress enacted a package of provisions in 1983 intended to resolve the financing crisis. This package moved to earlier years the tax rate increases already scheduled in law, taxation of Social Security benefits for certain higher-income beneficiaries, and gradual increases in the age of eligibility for unreduced retirement benefits. The 1980s also saw changes in the Disability Insurance program regarding periodic review of a worker’s disability status.

From the mid-1980s through the 1990s, program changes centered on refinement of disability determinations, adjustments in taxation of Social Security benefits and the payroll tax, and expanded benefit coverage for certain groups of workers. One significant change was instituted with the Social Security Independence and Program Improvements Act of 1994, signed by President William J. Clinton. This act made the Social Security Administration an independent agency effective 31 March 1995.

A major change also occurred in the disability program on 17 December 1999, when President Clinton signed the Ticket to Work and Work Incentives Improvement Act of 1999. This law provides disability beneficiaries with a voucher to be used to purchase vocational rehabilitation services, employment services, and other support services from an employment network of their choice. The Ticket to Work initiative shifted the disability program’s emphasis away from administration of monthly benefits and more toward rehabilitation and assistance in helping disabled beneficiaries return to work.