At the close of the last essay, an outline was presented of the features of an Individual Base Retirement Fund. This IBRF is proposed as a replacement for the present Social Security System, for current and future wage earners, who are not already in or close to retirement.

Each wage earner would be required to have his wages or salary reduced by 10 percent, for investment in his Individual Base Retirement Fund. This MANDATORY INVESTMENT would replace the mandatory Social Security TAXES of 7.65% from the employee, matched by 7.65% from the employer, for a total of 15.3 percent. Self-employed people under SSS are saddled with the total 15.3% of their net profit, which would become 10% consistent with all other earners. Note that the 15.3% under SSS is made up of 12.40% to cover not only retirement, but also survivors and disability insurance, and 2.90% for Medicare hospital insurance.

For married couples, the investments of each working spouse would be split, for equal deposits into each of their IBRF accounts. This resolves the inequities existent with the present SSS, wherein the principal breadwinner, the also wage-earning spouse, and the non-wage-earning spouse are treated woefully different in retirement benefits. It also helps alleviate the economic impacts of divorce or desertion.

A cap would be established, at each age of the participant from 18 to 70, on the accumulated value of the IBRF. All excess would be refunded (or not deducted from wages and salaries). Setting a cap would permit the excess monies to be used for other family financial needs such as buying a home, building an emergency fund, saving for children's education, other retirement investments, etc.

There would be no employer contributions to the IBRFs. This recognizes the inverse relationship of wages and benefits. In a competitive market place, generally an employer will find it necessary to allocate a portion of the price of his products or services to the compensation of employees. Within that employees' compensation, he will tradeoff wages and benefits. Where benefits are made mandatory by the government, wages will be held down accordingly.

In a later essay, the matter of mandatory versus voluntary employee benefits will be discussed at length. Also in another essay, a proposal will be made to give employees a greater say in setting business policies (including the balances among all employees' compensations, top executives' compensations, company stability and growth, and owners' or shareholders' return on investments).

Initially (and for the next several decades), investments in IBRFs would be required to be in federal government debt securities, paying a fixed rate of interest. This insures the safety of the IBRFs, thereby relieving the government of some of its risk in providing the safety net for all citizens. It permits a ready prediction of the value of each IBRF at any age reached by the participant. The fixed rate of interest would be the federal government's long term cost of funds.

For those whose IBRFs would be their only source of retirement income, both alternatives would give the government a degree of protection against the participant dropping into the safety net. The annuity option would provide opportunity for greater monthly income, but with limited or no provision for undistributed portions of ones' IBRF to be paid to ones' estate. The second alternative would have all undistributed IBRF's value go to designated beneficiaries.

The investments in IBRFs would be non-income-tax-deductible. The earnings would accrue tax deferred until redemption, as added value to the debt securities. In the present SSS, the employee's FICA taxes are not income-tax-deductible, but the employer's FICA matching contribution is free of tax to the employee. Congress has played games with the taxability of Social Security retirement payments, thereby inhibiting retirees to do gainful employment. This would end such unjust Congressional actions.

Health care insurance would be a separate requirement (see Responsibility #42 to #45), not funded through IBRFs. In the present SSS only hospital care is provided for, without additional premiums after retirement. Out patient coverage can be elected at a cost of reduced Social Security income. Comparisons here cannot be reliably made, until the effects of the implementation of universal health care are better known. Universal health care would certainly be more just.

Disability income and survivor benefits are proposed to not be features of IBRFs, beyond their accumulated values. Congress should investigate, and determine whether this would constitute too great a risk for the safety net. If too great a risk, it would be necessary for the government to require certain levels of life insurance, and certain levels of disability income insurance, for all wage earners. This would be in addition to the imposition of universal health care insurance, and the requirement for IBRFs. Otherwise wage earners would be encouraged to have these coverages, either on their own, or through employer benefit plans. They would not be mandatory.

For those already receiving Social Security benefits, at the time of implementation of these changes, only a few equitable changes are proposed. After the sum of payments not declared as taxable have equalled contributions made by the employees in their working years, all further payments should be declared as taxable income. These would represent employer payments (that had been tax deductible for the employer, but a tax-free benefit for the employee) plus "earnings" on pseudo-investments. This action is consistent with the actions proposed for other retirement plans (see Responsibility #54 to #56). With this action there would no longer be any rationale to support restrictions on retirees earning income.

There should be no further automatic cost of living adjustments (COLAS). Congress could from time to time determine whether the cumulative effects over the years of inflation or deflation have caused hardships or boons that warrant COLAS upward or downward. In the case of increased benefits, Congress would have to decide where it is most just to impose taxes to pay for the increased benefits.

The final two items to be discussed concerning Social Security will be covered in the next paper. Then government employees retirement plans will be subjected to critique.