Industry News

Recently, the National Institute on Retirement Security (NIRS) released its issue brief, A Vanishing Benefit: Why Social Security’s Special Minimum Benefit is Fading Away. The brief reports on Social Security’s “Special Minimum Benefit” (SMB) that was initially enacted by Congress in 1972. The SMB is an alternative Social Security formula to establish a benefit “floor” intended to protect workers from experiencing severe poverty in retirement.

To be eligible for the SMB, workers must: 1) have a record of 11 years or more of covered employment; and 2) not be qualified for another Social Security benefit of a higher value. Over time, indexing of the SMB formula combined with substantial economic changes has made the policy unsuccessful at reducing poverty. Since the indexing was based on prices rather than wages, participation in the program has diminished. As a result, no new retirees will qualify for the benefit in the near future.

According to the brief, “Fixing the minimum benefit would help to reduce financial insecurity among seniors by providing adequate benefits for workers with lifetime low income who may not otherwise be able to continue employment past the standard retirement age.” 

The brief concludes, “Congress will be forced to address Social Security’s financing in the coming years as the Social Security trust fund is projected to be depleted in the 2030s. Various proposals already exist to expand and/or modify Social Security benefits. Whenever Congress does act to pass major Social Security legislation, it should fix the indexing of the special minimum benefit. Establishing a true floor to prevent elder poverty would do much to improve retirement security for low-income Americans.” 

The report is available here.