The trouble with Social Security.

DEMOGRAPHIC TRENDS ARE CATCHING UP WITH iNHERENT FLAWS IN OUR NATION'S RETIREMENT PROGRAM. IN ABOUT A DECADE, THE BABY-BOOM GENERATION WELL BEGIN TO RETIRE. FORCING SHARP RISES IN OUTLAYS THAT WILL BANKRUPT THE SYSTEM. AS THE DAY OF RECKONING EDGES CLOSER, EMPLOYEES AND EMPLOYERS ALIKE ARE ASKING, "SHOULD WE TRUST THE GOVERNMENT WITH OUR RETIREMENT?"

To understand Social Security, one must unravel layers of myth and folklore that have arisen since its inception in 1935. Although commonly understood as a social insurance scheme, Social Security operates by taxing current workers and giving this money to older people. These taxes are mislabeled "contributions" and, along with references to benefits and the Social Security trust fund, create an illusion of fixed assets and guaranteed benefits. But the pay-as-you-go structure means that current collections are not invested in productive assets for the benefit of future retirees. "Everyone in Washington must stop talking about the Social Security trust funds as if they were piles of canned goods in a cupboard," wrote Stern Business School's Lawrence White, Stephen Figlewski, and Paul Wachtel in SternBusiness in 1995. "They are not. They are purely an accounting entry."

The critical year is 2010, when the first of the baby boom generation turns 65. As more boomers reach retirement age, expenditures will snowball. According to the board of trustees of the Social Security Trust Funds, tax revenues alone will be insufficient to fund payouts as early as 2012. By 2019, tax revenues plus interest will no longer be adequate to pay benefits.

Co-sponsored by State Street Bank and Trust Company and Watson Wyatt Worldwide, the roundtable discussion to follow was held during the day the Advisory Council on Social Security released its recommendations. The council broke into three groups of six, five, and two, with each faction advancing its own plan to fix the system. A majority of seven members favored compulsory private savings, but disagreed as to whether workers should have control over these accounts. Sylvester Schieber, a panel member who helped draft the proposal for personal savings accounts, opened CEs roundtable with a call to setting a different course for Social Security. Both Schieber and State Street Global Advisors' William Shipman argue that changes, such as adjusting the CPI to correct cost-of-living increases - a proposal advocated by Sen. Patrick Moynihan among others - would provide at best a short-term fix. "Despite the system's bias for lower income people, low-income earners suffer disproportionately," asserts Shipman, who says that returns on Social Security contributions dramatically trail that of investment in private pension funds. Schieber and Shipman propose a partial privatization system whereby individuals could invest all or some portion in private accounts.

But the question of investing Social Security funds on Wall Street is politically charged and continues to fuel debate. Former Social Security Commissioner Dorcas R. Hardy, who reckons the program's moniker should be Social Insecurity and dubs the $7.5 trillion unfunded liability a "ticking time bomb," divides opinion into four groups: guardians who want to save the system as it is, nibblers willing to tolerate marginal reform; partial redesigners who favor giving some control to individuals; and total redesigners, who hold that the system should be privatized along the lines of what was accomplished in Chile or plans under consideration in Australia.

Employers have a direct interest in the continuing debate. Beyond paying the mandated tax, how and where the money might be invested will have profound implications for economic growth. Ten years after Chile privatized its system in 1981, (See "Chile Today; U.S. Tomorrow," CE October 1996) real growth rate doubled. Critics say Chile cannot be compared to the U.S. which has an economy 30 times larger. Yet countries significantly larger than Chile, such as Argentina and Australia, are considering some form of privatization - and many experts in the U.S. feel that privatization, or partial privatization, may be the only way to save our nation's ailing Social Security system.

SOCIALLY INEPT?

Sylvester Schieber (Watson Wyatt & Company): In evaluating the various potential solutions to the Social Security crisis, there are a number of important criteria. One is overall benefit security. You must have an environment where people can accumulate wealth. From an individual perspective, in Social Security you accumulate wealth, even though there may not be actual wealth standing behind it. A second criteria is fairness across generations. Early on, Social Security paid high rates of return, which may be why the public was so supportive of the program. Going forward, rates of return are expected to be low or actually negative. Third, cost levels are a criteria. Also, at low-income levels adequacy is an issue. So these are some criteria in looking at options.

One option is to continue the pay-as-you-go system. Under this system, even cutting benefits somewhat by raising the retirement age gradually to age 70 would still require significant increases in payroll tax. Under current assumptions, the first payroll tax increase of about 0.3 percent on each, the employer and the employee, would be in 2015. To sustain benefits, you would need four iterations of those 0.3 percent increases every five years. So this method is not very appealing, because it's associated with tremendous payroll costs.

Another suggestion that would maintain the benefit structure while avoiding - at least in the short term - increases in the payroll tax, is to take some tax money currently going into Medicare and divert it to OASDI, the retirement portion of Social Security. Forty percent of that money would be invested in private equity markets and would grow over a 15-year period to about a $1 trillion in today's dollars. This proposal would require a 0.8 percent payroll tax on both employers and the employees in 2040 - in essence, it raises the tax on our grandchildren. Two drawbacks are: one, the taxation features, and two, the tremendous issues of having the federal government become the largest investor in the private equity market.

Yet another option would be to have partial privatization, with some investment in individual account options and the rest left in a base safety net system. One major issue with that is determining the relative size of the individual account versus the floor of protection. Within the Social Security Advisory Council, one group advocated having the individual accounts be equal to 1.6 percent of payroll over a worker's career, while another put that figure at 5 percent, or about half of the payroll tax financing retirement benefits.

Finally, there is the option of total privatization. Chile is an example of this type of system, and some other countries, such as Australia, are moving in that direction, However, privatization, whether partial or full, raises its own issues. How much freedom people are given to manage their individual accounts is one question. One proposal suggested a regulatory environment similar to that governing 401(k)s or IRAs, with workers choosing from a variety of options. Another had them directing money across a designated number of accounts set up and run by the government.

Financing the transition cost associated with moving from the current unfunded pay-as-you-go system to a system based on any kind of individual accounts is another privatization issue that presents tremendous intergenerational equity questions. Maintaining a pay-as-you-go basis means having one generation pay a double cost by funding benefits for the people currently receiving them, plus funding their own future benefits. Another option is to totally debt-finance the transition - that is, to issue government bonds as liabilities come due. In essence, the government would be borrowing the money from the general public to fulfill the obligations accrued through the pay-as-you-go system. As people build their individual accounts and benefits are phased down, some payroll tax money would continue to be captured until the debt obligations are paid off. However, the accumulated debt obligations would be significant.

The advisory council reached a mixed transition-financing model that encompassed 1.5 percent of covered payroll and some additional debt financing. Under this proposal, the transition would last for 70 years and result in the accumulation of additional formal debt of $650 billion in present value, which would' then be paid down over time. This creation of new formal federal debt was a cause for concern among some council members, and the proposal also raised tremendous accounting issues, equity issues, cost issues, and financing issues.

The business interest in the Social Security issue is vital because of the partnership involved in the program. This year alone, employers are going to invest somewhere between $150 and $200 billion in Social Security benefits. Most employers wrap their own retirement programs around Social Security, either explicitly through offset programs or implicitly by designing programs to provide replacement rate protection for workers. So if the Social Security benefits are going to be lowered and businesses want to meet these old targets, it means adjusting benefit programs.

Jack Rosen (Continental Health Affiliates): If we were to run out of money in the trust fund tomorrow, what options are available for the government to continue to fund benefits?

Schieber: Technically, without raising taxes, all they can do is distribute the money coming in, meaning if that amounts to 90 percent of the benefits promised, they would send out checks at 90 percent of the full benefit. Politically, Congress can opt to change the law.

William Shipman (State Street Global Advisors): The government receives the FICA taxes along with the other taxes and pays benefits. Any positive cash flow is consumed by general government spending - aircraft carriers, food stamps, etc. for which the government issues itself a nonmarketable IOU that basically says, "I owe myself the money that I have already spent." These IOUs, currently about $515 billion, are assumed to be real wealth that can be drawn down. That means that you would today have to immediately tax another $515 billion in order to pay the future benefits stipulated by law through the taxes stipulated by law. And then you would still have an unfunded liability of $2.7 trillion. No matter how you slice it, under today's law we have a liability of $515 billion plus $2.7 trillion.

So the Social Security "trust fund" doesn't have wealth. It has journal entries. What it can do is raise taxes and issue more debt, debase the currency over the long ran, or reduce other government spending.

One other thing worth mentioning is that OASDI, the retirement portion of Social Security, is running a positive cash flow. The hospital insurance trust fund is not. It's running a negative flow. As politics heat up on this issue, you might find people saying that we have to solve the Medicare problem before the Social Security problem. That is, the government can magically boost the portion of FICA tax that goes to the hospital trust fund, thereby moving up the day that the OASDI fund hits the wall. The switch would be invisible to all of us, because we'd still be paying the same 15.3 percent of our wages.

Jack Davis (Ventura Foods, LLC): I'm having a difficult time processing these dates, dollars, rates, and data. Can someone tell me, if we took the current trust fund and its dollar amount and all future collections of Social Security at the current rates and gave it to a money manger, what type of return would it need to pay the benefits currently mandated by law?

Schieber: It's impossible - way beyond markets. The hole is dug and it's getting bigger. To give a sense of the rate at which we are digging, between 1985 and 1995, while federal debt went up $2 trillion, unfunded liabilities went up $2.6 trillion. Estimates after the 1983 program amendments suggested that the program would have enough funding to last until 2063, the year the youngest member of the baby boom generation turns 99. But in the subsequent 15 years, we have gone from that default date, 2063, down to 2029. We're looking down a tunnel and it's not the light we're seeing, but the head of a train that's coming right at us.

Marshall Carter (State Street Bank and Trust Company): When Social Security was started in 1935, the retirement age was 65 and the average lifespan was 61 and the ratio of active workers to retired workers was 40 to one. By 1950, it was 16 to one. Today, it's 3.2 to one and headed toward two to one. A baby girl born in America today has a 33 percent chance of living to age 100. If someone supports that person for 20 years and she enters the work force for 38 to 39 years, she will be retired for 40 years. Yet today there is no country in the world, no segment of the economy, putting away that kind of retirement fund.

Frank Cahouet (Mellon Bank Corp.): With the big pool of monetary obligation here, what I don't understand is the government's reluctance to diversify investments. Why buy only U.S. Treasuries? If a mixed portfolio is really sensible, why not move in that direction, perhaps erring on the side of having a disproportionate share in fixed income?

Schieber: First of all, we ran the system purely as a pay-as-you-go system until the early 1980s, when we passed the '83 amendments. So it was only then that we began to accumulate some substantial capital and, in recent years, that investing became a real issue.

Furthermore, when the original act was passed, early policymakers became concerned about what the federal government was going to do with this large accumulation of capital and with the prospect of the government becoming a large owner of the private capital base in this economy. This is still a concern today, and some people believe that if we are going to substantially fund benefits, we have to do it through some kind of individual accounts. Shipman: There are three common objections we hear to that: One, markets may not perform in the future as they have in the past. Two, even if they do perform similarly, what about a case where the market crashes just as a particular individual retires? And three, markets really can't handle all this capital. As the baby boomers pay in, we will have a speculative bubble, and when they retire and divest, there will be a great fall.

Now, taking the most extreme of cases, assume all the FICA tax funds - about $320 billion today - are suddenly going into the market; assume the constraint that it has to go into the U.S. market and that it must all go into equities that must be traded on the New York Stock Exchange. Even if you take these very bizarre assumptions, it is equal to 33 minutes of trading volume per day, which is just a nit. Under more reasonable assumptions - diversifying across borders and asset classes - it's nine minutes of trading volume per day. It's a non-issue in terms of impact on markets.

Carter Beese (Alex. Brown International): In discussing the option of some sort of personal investment in the stock market, what about that phrase we keep hearing: "a boon to Wall Street?"

Shipman: The boon refers to the issue of fees, but this is an incredibly competitive business, and I suspect that fees will be substantially lower than the average fee today. Furthermore, the competition would be global, not just Wall Street.

The great challenge to the investment business is having end users who are individuals rather than investment professionals. Assuming total privatization, that's 130 million people that the investment industry has to reach. In defined benefit models, we have one-on-one presentations, but you cannot do that with 130 million people.

Josh S. Weston (Automatic Data Processing): Let's assume that under free choice, people all want to go into equities. Since corporate America would have the same earnings tomorrow as today, where will that return come from? If the government dumps $400 billion into the market for equity, how will that affect supply and demand? This 33 minutes of added trading time a day is all demand - not sell, all buy.

Schieber: The issue is in creating additional savings in your macro economy. If you don't do that, you are just rebalancing the national portfolio, driving up equity prices, and affecting the bond markets, because you will have a void where you had financing before.

Dorcus Hardy (Work Recovery, Inc.): Why does privatization have to mean Wall Street? Why can't you take your money and open a passbook savings account? If you want to take your money and put it under the mattress, that should be your business.

Schieber. A bogeyman that is raised is that people will not be able to handle the investment. But when you desegregate the 401(k) data, you find that younger people do invest more aggressively than older people. In the aggregate it seems conservatively invested because older people tend to have more money in these plans than younger people, so you get a weighting toward more conservative investment.

Harry E. Gould, Jr. (Gould Paper Corp.): As I see it, total privatization is a non-starter. Leaving it in the government's hands, the whole thing will get bigger, but giving too much control to an individual - well, if he loses his money, he's going to be back on your doorstep saying, "But I gave you 30 years of my life - you've got to make it up to me."

Shipman: I think people should have the freedom of choice to be able to invest in markets if they wish. Or, if they want to stay in the system as it is structured, they should have that freedom as well.

Since 1950, the tax rate that we pay into the system has gone up about 17 times, and the wage base on which it's applied has gone up five times, so it's gone from 3 percent on $3,000 of income to 15.3 percent on $62,700 of income. The benefits that are paid out by the government are collateralized by this wage tax. If you move to a system where the government invests the money, the benefits will then be collateralized by the assets, but the legal requirement that the government has to pay the benefits has not changed. However, a 1960 Supreme Court Ruling held that Social Security is not obligated as a matter of law to pay the benefits in the same way that an insurance company is obligated by law to fill its contractual obligations. So one factor with individual accounts is that the chances that the government will be able to expropriate your wealth are substantially less than if the government holds the wealth and changes the benefit formula. That is the main reason, in my view, why individuals should own the account and have personal property rights.

Weston: There are additional factors that have not been mentioned. There are 3 million employers - most of them not Fortune 500 firms - who will have to route funds deducted from each employee's pay among 9,000 different mutual funds. And that's not to mention individual stocks. Who can cope with that number of itty bitty transactions?

On the other hand, there is the case of the government setting up the Federal Thrift Savings Plan in 1986, which gave employees three choices of where their money will be put: government bonds, private sector bonds, or equities at an administrative cost of about 0.1 percent.

But that's not all. The Medicare consequences dwarf even the serious consequences we've heard about. And, if we are adding 1.5 percent to the employee contribution, what will we do about the self-employed workers who don't have an employer to match that 1.5 percent?

Jeffrey Parker (Yamaichi International, Inc.): I think that takes us to only one real solution - allowing people to manage their own funds. And, at the end of the day, if they blow that money because they invest in companies that blow up, we as a society are really no worse off than a pay-as-you-go system, because we've already decided that we're going to support them.

Carter: What about individuals who hit retirement during a downcycle in the market? What does that do to their capability to support their retirement? I am also concerned that workers in the lower end of the spectrum, under $40,000 or $30,000, are not equipped to manage their pension money. As we start the 10th year of 401(k) experience, we are finding that the companies that do well with the 401(k) and have good asset allocation require massive amounts of worker education - that worker education is the real key. Could that be one argument against giving workers control?

Hardy: There is that paternalistic concern. One of the reasons that Senator Moynihan has mandated that everyone get a personal earnings and benefit estimate statement is to educate people that they have X amount coming from Social Security and, if they need Y, they need to do something about it. It seems to me that the earlier a person receives that, the better.

Weston: That's why one obligation employers have, regardless of how we resolve the Social Security issue, is better educating employees of today and tomorrow to plan for more than $1,000 a month.

SECURITY CLIQUES

Hardy: Currently Social Security benefits are going out at the rate of $12,000 per second. That's seven days a week, 24 hours a day. So the question comes down to where do we go from here and who are the players. I see four classes of participants. There are the guardians, the nibblers, the partial redesigners, and the redesigners.

The guardians are those who believe that Social Security is a program of individual equity and social adequacy, that the government is paternal and taxes are going to go up and that's how it will be and how they want it to stay. That's life, and then you die. Bob Ball, a former commissioner of Social Security who served on the advisory council with Syl Schieber, is the leader of the guardians. But their group no longer has a cohesive plan together, having recently pulled back their proposal of "maintained benefits" and investing 40 percent of the trust fund in private markets and said, "Let's study it some more."

The nibblers are the ones who have constantly nibbled at the Social Security statute over the last 40 years. They advocate measures like raising the retirement age to 70, fixing the COLA, maybe raising payroll taxes - a little here, a little there.

The redesigners and partial redesigners favor privatization or partial privatization respectively. And I hope that they will continue to push toward some kind of partial privatization that involves individual responsibility. We as a society tend to say, "It's there. It's mine. I want everything I put in." Somehow the social fabric has to be turned so that there is not this incredible expectation from the federal government.

I think we all have a collective responsibility to ensure that there's no intergenerational warfare about this issue, which will be tough. We've got to make sure that the seniors of today understand that it's not their Social Security, it's their grandkids'.

Arnie Pollard (CE): As a practical matter, it seems to me that in a free society like America, when you have a terribly complicated problem - an extremely intellectually and analytically complicated problem - and multiple political sides, society will not achieve a consensus on any radical change in the status quo. Until we see Hitler coming at us from outerspace on an asteroid so that everyone can collectively look up and apprehend a clear and present danger more worrisome than the individual aspects of the problem that divides us, we're going nowhere.

Schieber: The asteroid is much bigger than we actually perceive. Given our age structure and looking at total entitlements by 2030, the retirement element of Social Security alone will take up more as a percentage of GDP than we as a society have been willing to give the government during the last 30 to 40 years. This issue is crowding out everything else that Congress gets to do. That's what this whole budget battle is about right now - trying to figure out how to balance the budget without delaying these entitlements.

Shipman: It may be that it has to hit the wall before something changes here, but that certainly hasn't been true for other countries - for Argentina, Peru, Bolivia, even in the U.K. and Australia. Many countries have moved or are moving toward a system where people are empowered to save for themselves.

John W. Bachmann (Edward Jones): It seems to me that this is not just an American issue, it's a Western issue and that the term "self-reliance" is going to become the mantra of the entire Western world. Young people today are not shoveling coal; they are knowledge workers, and they want a lot more control.

Joseph J. Melone (The Equitable Cos.): What I'm worried about is that the reform discussion is so complicated that it's going to paralyze all decisions. I think we've got to tackle this monster on many fronts. When you are stuck in a hole, the first rule is stop digging. We should do two things right now to cut down the growth rate of the liability: raise the retirement age to 70 and redefine the COLA.

Schieber: A majority of Advisory Council members advocated increasing the age limit at the rate of the increase in longevity. We would bring it to age 67, then increase it by about one month every other year.

In determining the effects of changing the retirement age, there are some distinctions between Social Security and Medicare. Given a 20-year life expectancy beyond the normal retirement age, for each year it's raised you save one-twentieth of the lifetime Social Security benefit. But that's not true in Medicare, because older people use more health care than younger people. So when you raise the retirement age you take out the youngest group of people, who are likely the relatively low users. Therefore, raising the eligibility age for Medicare to age 70 will reduce the eligible population by about 18 percent, but only reduce the cost by 6 percent.

A MIXED METHOD

Weston: There are four elements to the Committee for Economic Development's position. One, the retirement age should keep going up until it gets to 70. Two, COLA, which is a different word for the Consumer Price Index (CPI), should be fixed - not just because we need the money, but because it's inaccurate. Most economists say that COLA has exaggerated the real cost of living increase and that getting that figure to reflect what it should would solve one-third of this whole problem. Three, a big part of the problem would be fixed if we reduced the primary insurance amount (PIA), for middle-income and upper-middle income people, leaving the poor people alone. The reduction in PIA - where we look at an individual's historical wages over 20 years and adjust them for wage increases occurring during that time to determine benefit pay-outs - would reduce the growth in benefits. This decrease in payouts would then be offset by private retirement accounts (PRAs) that would be set up. The Committee recommends creating PRAs, in addition to the current FICA, of 1.5 percent of the paycheck, plus 1.5 percent from the employer for a fund analogous to the Federal Thrift Savings Plan.

Cahouet: So that's an additional 1.5 percent from the employer that comes out of our shareholders.

J.P. Donlon (CE): Why not embrace a fundamentally different approach, where individuals can make choices and handle their own accounts as they are handling their 401(k)s? What is the argument against full privatization - a Chilean situation?

Shipman: In the Chilean system, there are guarantees and, in that sense, you cannot say it's fully privatized. I think guarantees are important - that society should maintain a level of income for those folks that can't make it. That said, a low-income worker who is able to invest in markets and get just a 7.8 percent return, which is way below historical returns, that individual - without redistribution - will be way ahead of the current system. Even if redistribution is the objective, redistribution through a market-based system is substantially better than redistribution through a pay-as-you-go system. So I think people should have the freedom of choice to be able to invest in markets if they wish or to stay in the system as it is structured.

Jose Pinera, the minister of labor in Chile when they privatized, argues that this collateral benefit of growth is very important. In 1973, Chile was the highest per capita recipient country of foreign aid in the world. They also had the first Social Security system in the Western hemisphere, which started in 1924. And they ran into the same demographic problem; tax rates were high and the benefits were low. When they moved toward privatization, it was structured so that workers had a choice of staying in the existing public system or going into a private system, choosing an investment house to - under tight government controls - manage their money. In the last 10 years, Chilean real GDP has compounded at about 7 percent a year. It has the lowest unemployment rate of any country in Latin America and a savings rate of 27 percent, as compared to our 3 percent. Individual Chileans have a passbook account and can find out what's in their account at any time. Since this started in 1981, when there were no assets, the assets - owned by individual Chileans equal roughly 42 percent of GDP or the U.S. equivalent of $3 trillion.

The Chilean system is behavior-specific, not age-specific, so age-specific issues in our system, such as raising the retirement age - are not relevant. Chileans can retire whenever they want to as long as they have enough wealth in the account to meet certain specifications. A Chilean couple can go into their investment account, enter a PIN number and query the computer about financials. Maybe they were planning to retire at age 65 and have now decided to retire at age 62. The computer knows the asset level and earnings history of these individuals and can tell them, 'In order to retire at age 62, you must increase your savings rate from 10 percent to 13 percent.' It asks, "do you want to do that?" They enter, "yes," and now the employer takes out 13 percent instead of 10 percent. Think about it. There's nothing any of us can do about our age, but there's an enormous amount we can do about our behavior. Empowering people to get what they want through their behavior, then achieves the needs, not only of the individual, but of society.

THE YOUNG AND THE CYNICAL

Hardy: It's my understanding that Generation Xers believe that General Hospital will be around a lot longer than Social Security. Young people today don't believe that they are going to see any benefits. I think people are just starting to look at their pay stubs and say, why am I contributing this money? Is it making my grandmother or my parents better off? Because it's not going to be there for me when I get to retirement.

Rosen: One thing missing in this discussion today is America's contract with the elderly which says if you pay while you work, we guarantee you a basic income and health security.

If we were to change some of our government's entitlement programs to say, "We will pay for your health services or retirement services, and allow you to keep your savings," would that change the way we think about retirement plans and savings? It seems to me that there's a negative incentive in this country to save money for retirement. Because you hit a certain age where you need to get rid of all your assets. So our society, in effect, is sending people in two different directions, one saying save and the other one saying, get rid of those savings before you have to pay 55 percent of them to the government.

Schieber: Whatever we do, we have to protect people currently retired or close to retirement. I would like to see at least a partial individual-based system arise. For this to happen, we have to separate the rank and file, in both the labor movement and among the elderly, from their national leaders, because I think their national leaders in both cases are going to state very strong positions for the status quo.

William R. Holland (United Dominion Industries, Ltd.): I would like to see us move toward the private sector and a plan where individuals take more responsibility. I would like to see more of a Chilean type plan, but pragmatically, I don't think the political will is there. But right now I'm more concerned with the deficit and the fact that I pay 1.45 percent of my income to fund Medicare when I'll never use it.

Hardy: I see a redesign by 2000 that will include some kind of individual participation and responsibility. First, 2012 is the furthest date out that the receipts are enough to cover the benefits, which isn't a lot of time. Second, President Clinton wants a legacy and fixing Social Security would enable him to say, "This was done on my watch."

Even before that, a fix on Medicare is extremely important. Sen. Kerrey has a proposal ready that would set aside 2 percent of payroll tax for an individual account, which would be a great way to redesign. I think the pressure is building on this issue and that a redesign in the next few years is likely.

RELATED ARTICLE: A WHO'S WHO OF ROUNDTABLE PARTICIPANTS

John W. Bachmann is managing principal of Edward Jones, a financial brokerage with $65 billion in assets.

J. Carter Beese, Jr. is chairman of Alex. Brown International, an investment banking firm with $7 billion in assets.

Frank V. Cahouet is chairman, president, and CEO of Mellon Bank Corp., a banking corporation with $200 billion in assets.

Marshall N. Carter is chairman and CEO of State Street Bank and Trust Co, a specialized trust bank with $3 trillion of assets under custody and $300 billion in assets under management; he co-authored the book, "Promises to Keep: Saving Social Security's Dream."

Jack Davis is president and CEO of Ventura Foods, LLC, a food processing & packaging company with $200 million in sales.

Kenneth J. Gorman is chairman and CEO of Atlantic Mutual Insurance Co., an insurance company with more than $1 billion in assets,

Harry E. Gould, Jr. is chairman and president of Gould Paper Corp., an $800 million paper manufacturing company.

Dorcas R. Hardy is the former commissioner of Social Security (1986-88) and chairman and CEO of Work Recovery, Inc., a manufacturing firm, and author of the book "Social Insecurity."

William R. Holland is chairman and CEO of United Dominion Industries, Ltd., a $2.5 billion manufacturer of engineered products.

Joseph T. Lynaugh is president and CEO of NYLCare Health Plans, a healthcare provider with $2.5 billion in revenues,

Joseph J. Melone is president and CEO of The Equitable Cos., a $200 billion life insurance, annuity, and pension contracts firm.

Jeffrey Parker is chief administrative officer of Yamaichi International (America), Inc., a brokerage and investment bank with $14 billion in assets.

Jack Rosen is chairman and CEO of Continental Health Affiliates, a healthcare provider with annual revenues of 69.9 million.

Sylvester J. Schleber is vice president, director research and information, at Watson Wyatt & Co., a benefits consulting firm,

William G. Shipman is principal of State Street Global Advisors, the asset management division of State Street Bank and Trust Co. and co-author of "Promises to Keep: Saving Social Security's Dream."

A.W. (Pete) Smith, Jr. is president and CEO of Watson Wyatt & Co., a benefits consulting firm.

James L. Wareham is chairman, president and CEO of Wheeling-Pittsburgh Steel Corp., a steel and steel products manufacturer with $1 billion in annual sales.

Josh S. Weston is chairman of research for the Committee for Economic Development and chairman of Automatic Data Processing, a computing and information services company with $4 billion in annual revenue.