About the Social Security Statement

The Social Security Administration (SSA) does not prepare Social Security statements out of the kindness of its heart—it is required to do so by law. The Congressional Research Service (CRS) has issued a report on the statements, which are useful regardless of the reason they are prepared. 

Zhe Li, Social Policy Analyst at the Library of Congress, and Dawn Nuschler, Specialist in Income Security at the CRS, in a new report outline the SSA’s efforts to inform Social Security participants and beneficiaries about the program and their savings and benefits. 

Since Social Security provides substantial retirement income for millions of retirees, plan sponsors and administrators and service providers may find it useful in their management of retirement plans to know more about developments concerning Social Security benefits—as well as the ways in which participants are learning about their coverage under the almost 90-year-old program. 

Not an Option 

Section 1143 of the Social Security Act requires the SSA to provide Social Security number (SSN) holders with annual statements that contain certain information from their Social Security records. The statement must be available to SSN holders age 25 or older and who either earn wages or have net earnings from self-employment. 

What the Statement Contains

The statement must contain: 

• wages and self-employment income reported to the SSN holders’ records;
• estimates of the payroll tax contributions SSN holders and their employers have paid, and 
• estimates of the potential benefits SSN holders and their family members may qualify for based on those earnings.

The statement also includes:

• an individual’s earnings history year by year as shown in SSA’s records;
• information on benefit eligibility for the individual and his or her eligible family members;
• estimates of potential Social Security benefits payable to the individual and his or her eligible family members based on the individual’s earnings history; 
• estimates of the individual’s retirement benefits based on different claiming ages, ranging from age 62 to age 70; and 
• a notification that employment not covered by Social Security can result in lower Social Security benefits. 

In addition to the annual statement, the SSA also provides supplemental fact sheets to provide clarity and information that is based on an individual’s age group and earnings.

Delivery 

In 1988, the SSA began providing the Personal Earnings and Benefit Estimate Statement (PEBES) on request. 

The Omnibus Budget and Reconciliation Act of 1989 amended the Social Security Act to require the SSA to provide statements to eligible individuals according to a set schedule and to inform eligible individuals about the statement’s availability. 

From fiscal year (FY) 1989 to FY 1994, the SSA sent the PEBES only on request. Starting in FY 1995, the statement was mailed to specific age groups of individuals. In FY 2010, the SSA sent more than 155 million statements to SSN holders age 25 or older who were not receiving Social Security benefits and for whom SSA could determine mailing addresses. 

Li and Nuschler note that during the period FY 2000-FY 2010, it cost approximately $70 million per year to prepare and mail the statements. 
Beginning in 2011, the SSA modified the ways in which the statement is made available in an effort to save money; however, in doing so, it also has made an effort to target specific groups in a way intended to best meet their needs. In March of that year, the SSA stopped mailing statements to save money, but since then, the SSA has revised its policy. 

Since May 1, 2012, SSA has made an online version of the statement available to SSN holders age 18 or older through “my Social Security Account.” 

Since January 2017: 

• The SSA automatically sends paper statements only to individuals who are age 60 or older, are not receiving Social Security benefits, and have not created an online account with the SSA. 
• Any other individual must create an account “my Social Security Account” to access his or her statement online or request a mailed paper statement from SSA.
• In FY 2018, there were about 38.8 million registered users of “my Social Security Account,” and 16.8 million—43%—accessed their statements online. In all, approximately, 31.4 million people received or viewed their statements in any form—paper or online—in FY 2018.

Suggestions

Li and Nuschler suggest that policymakers could consider ways to improve the statement which they argue would provide individuals with better information that would help them to prepare for retirement, including:

• developing more accurate benefit estimates for younger workers, women, lower earners and those with zero earnings in the two years before they received the statement; 
• providing additional information related to benefits for spouses and survivors, benefits for workers with earnings not covered by Social Security, an accrued benefit illustration (i.e., an estimate of the worker’s benefit based on his or her earnings to date, assuming no future earnings) and other retirement plan information (i.e., information on other potential vested retirement plan benefits); 
• assessing the effectiveness of the latest version of the statement introduced in 2021; and 
• exploring strategies to expand distribution of the paper statement and increase access to the online statement, since analysis has shown several concerns regarding the shift from mailed paper statements to online statements accessible through online accounts.

The Statement’s Impact

Li and Nuschler cite studies that have analyzed the role the statement plays in the SSA’s communication with potential beneficiaries. Research, they observe, has found that receiving the statement may increase some types of knowledge about the Social Security program.

The benefit estimates the statement contains, write Li and Nuschler, can help individuals adjust their expectations of what the program will provide and inform their financial planning decisions, including when to claim Social Security benefits. They note that researchers have found that the information provided in the statement may influence an individual’s decision on when to claim retired-worker benefits and to apply for disabled-worker benefits, as well as mixed impacts on workers’ employment decisions.

Li and Nuschler point out that full Social Security retired-worker benefits are payable at the Social Security full retirement age (FRA). The FRA is 67 for workers born in 1960 or later; individuals can claim Social Security retired-worker benefits as early as age 62, but benefits claimed before the FRA typically are subject to a permanent reduction for early retirement. Individuals also can claim Social Security retired-worker benefits after the FRA; in that case, benefits claimed after the FRA are subject to a permanent increase for delayed retirement. “The reduction for early retirement and the increase for delayed retirement can have a large impact on an individual’s monthly benefit payment. For this reason, SSA provides a range of benefit estimates based on claiming age,” write Li and Nuschler. “The statement is considered to be one of the important tools SSA uses to communicate with the public and also a financial literacy vehicle to assist individuals and households with retirement planning,” they add.