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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

Social Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues

Kathleen S. Swendiman, Legislative Attorney

Thomas J. Nicola, Legislative Attorney

June 7, 2013

http://www.fas.org/sgp/crs/misc/RL32822.pdf

[full-text, 15 pages]

 

Summary

Calculations indicating that in the long run the Social Security program will not be financially

sustainable under the present statutory scheme have fueled the current debate regarding Social

Security reform. This report addresses selected legal issues which may be raised regarding

entitlement to Social Security benefits as Congress considers possible changes to the Social

Security program, and in view of projected long-range shortfalls in the Social Security Trust

Funds.

 

Social Security is a statutory entitlement program. Beneficiaries have a legal entitlement to

receive Social Security benefits as set forth under the Social Security Act. The fact that Social

Security benefits are financed by taxes on an employee’s wages, however, does not limit

Congress’s power to fix the levels of benefits under the Social Security Act or the conditions upon

which they may be paid. Congress’s authority to modify provisions of the Social Security

program was affirmed in the 1960 Supreme Court decision in Flemming v. Nestor, wherein the

Court held that an individual does not have an accrued “property right” in his or her Social

Security benefits. The Court has made clear in subsequent court decisions that the payment of

Social Security taxes conveys no contractual rights to Social Security benefits.

 

Congress has the power to legislatively promise to pay individuals a certain level of Social

Security benefits, and to provide legal evidence of Congress’s “guarantee” of the obligation of the

federal government to provide for the payment of such benefits in the future. While Congress

may decide to take whatever measures necessary to fulfill such an obligation, courts would be

unlikely to find that Congress’s unilateral promise constitutes a contract which could not be

modified in the future. In addition, a congressional promise not to reduce a specific level of

Social Security benefits payable to certain eligible individuals would likely not overcome the

constitutional principle, subject to due process considerations, that one Congress may not bind a

subsequent Congress to legislative action or inaction.

 

The calculations concerning the possible future insolvency of the Social Security Trust Funds

raise a question whether that result would affect the legal right of beneficiaries to receive full

Social Security benefits. While an entitlement by definition legally obligates the United States to

make payments to any person who meets the eligibility requirements established in the statute

that creates the entitlement, a provision of the Antideficiency Act prevents an agency from paying

more in benefits than the amount in the source of funds available to pay the benefits. The Social

Security Act states that Social Security benefits shall be paid only from the Social Security Trust

Funds, and the act appropriates all payroll taxes to pay benefits. Although the legal right of

beneficiaries to receive full benefits would not be extinguished by an insufficient amount of funds

in the Social Security Trust Funds, it appears that beneficiaries would have to wait until the Trust

Funds receive an amount sufficient to pay full benefits in the case of a shortfall, unless Congress

amends applicable laws.

 

Contents

Congressional Authority To Modify Entitlements ........................................................................... 1

Congressional Guarantee of Social Security Benefit Payments ...................................................... 5

Congressional Power To Modify Its Own Contracts ................................................................. 5

Congressional Power To Promise Future Deference ................................................................. 7

Payment of Social Security Benefits From the Trust Fund in Case of Exhaustion.......................... 8

Conclusion ..................................................................................................................................... 11

 

Contacts

Author Contact Information........................................................................................................... 12

 

 

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