The national discussion of policies and strategies to reform the U.S. Social Security system involves both social policy and financial management issues. The Government Finance Officers Association (GFOA), representing thousands of expert financial managers from all fifty states and their many local governments, is uniquely qualified to offer sound and balanced financial policy recommendations to the nation's policymakers. GFOA urges Congress and the President to assure that the Social Security system is operated on the same sound financial principles that are required of public and private sector retirement plans. GFOA's policy objective is to assure an efficient and equitable intergovernmental system of social insurance and retirement financing that complements public or private retirement plans.
To assure that the primary U.S. social insurance system operates according to prudent financial principles, GFOA recommends that Congress incorporate the following principles and policies in any reform of the Social Security System:
- Independent Budgetary and Accounting Status. Restore the Social Security Trust funds to independent budgetary and accounting status to discourage the co-mingling of restricted revenues and assets. The future solvency of the system that millions will rely on depends on the willingness of federal lawmakers to exhibit the financial discipline necessary to ensure its stability.
- Actuarial-Based Funding Plan. Design a contribution and funding plan in accordance with accepted actuarial practices and the same standards required of public and private pension plans. A review of the assumptions, the plan and its operating and actuarial results should be performed every five years and recommendations made to Congress regarding funding and benefits adjustments.
- Prudent Person Investment Principle. Provide authority to prudently invest an appropriate percentage of the Trust funds in broadly diversified portfolios for the sole and exclusive benefit of the program's beneficiaries.
- Hold Harmless. GFOA opposes mandatory Social Security coverage for state and local government employees as a component of Social Security reform.
- Publication date: February 2000