SOCIAL SECURITY CURE UNCLEAR.

Byline: Robert Pear The New York Times

After more than two years of work, an advisory panel studying the Federal Insurance Contributions Act has been unable to agree on how to find enough money to pay Social Security benefits to the baby boom generation.

The Advisory Council on Social Security has divided into three factions, with six of the 13 members opposed to the most important change recommended by the others. That recommendation would replace part of Social Security with compulsory private savings that would be invested in stocks and bonds.

The disagreements foreshadow a major battle over proposals to reduce the federal guarantee of retirement benefits and supplement it with a new system of compulsory individual savings accounts.

The six opponents include three union representatives and Robert Ball, a former Social Security commissioner who has worked closely with Democrats in Congress for more than two decades.

Members of Ball's group said they are distressed by the surge of interest in ``privatizing'' part of Social Security and chagrined to see their names associated with such proposals, which they regard as a betrayal of the community solidarity embodied in the Social Security program.

Appointed in June 1994 by Donna Shalala, secretary of health and human services, the 13 members have split into groups of six, five and two. Each faction has its own plan for guaranteeing the solvency of Social Security over the next 75 years.

Several members said they once hoped that the panel would move toward a consensus and advocate investing Social Security money in the stock market.

Instead, the members' disagreements have become sharper in recent months, said the chairman of the panel, Edward Gramlich, a professor of economics at the University of Michigan.

A confidential draft of the final report, to be issued this month, says: ``The council has not only been unable to agree on a plan; we have been unable to agree on the proper criteria to use in assessing the plans.''

In June, the Clinton administration said the money in the Social Security trust fund would increase for two decades, then start to decline. The administration said the trust fund would be depleted in 2029, just as the last of the baby boomers reach 65, and then revenues would cover only three-fourths of benefit costs.

Although the advisory council has been unable to agree on major changes in Social Security or its investment policies, a majority will endorse smaller steps that could extend the life of the trust fund to 2050 or beyond, a substantial achievement.

In an interview, Gramlich said: ``These short-term fixes are nice, and we can agree on them. But it's important for us to do something more to raise national savings for retirement and to do it fairly soon.''

In the draft of the final report, Ball's faction says: ``Social Security is not facing a crisis but does face a long-term deficit, beginning about 30 years from now.''

Members of the council agree that workers could get much higher rates of return if some of their retirement savings were invested in stocks rather than government securities, the only investment now allowed for the Social Security trust fund. The average annual return, adjusted for inflation, is estimated at 7 percent for stocks and 2.3 percent for long-term government bonds.

Five members of the council want to replace the Social Security program with a two-tier system of ``personal security accounts.'' The government would pay a modest flat benefit, about half the average benefit now paid to retirees. Forty percent of payroll taxes would be diverted to the new accounts, and workers would decide how to invest the money.

Under that plan, retirement benefits would no longer be defined by law and a standard formula, but would vary from worker to worker, depending on the success of each investment. People who made identical contributions could end up with radically different benefits.