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Social Security Chief Would End Retiree Earning Curbs

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Times Staff Writer

Social Security Commissioner Dorcas R. Hardy, departing from Reagan Administration policy, called Thursday for elimination of the program’s restrictions on outside earnings by retirees, saying that the limits encourage people to “circumvent the law and join the underground economy.”

“Many older Americans who want to continue working--who want to continue being active, productive members of our society--are being penalized by their government for no good reason other than the fact that, in addition to working, they happen to be over age 65 and eligible for Social Security,” Hardy told a congressional committee.

Penalty Called Antiquated

“I believe the earnings penalty is antiquated and that it should be eliminated,” she said.

Under current law, Social Security beneficiaries between 65 and 69 may earn up to $8,400 a year in outside income without any penalty. For every additional $2 they earn, Social Security benefits are cut by $1.

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This rule prompts some retirees to report less than they earn or hide their work income entirely, Hardy told the House Ways and Means Committee’s Social Security subcommittee.

Elimination of the earnings penalty would increase Social Security outlays by $23 billion in the next five years, the Congressional Budget Office told the subcommittee. Administration officials have refused to support proposals to drop the rule because of the impact it would have on the federal budget deficit.

Unauthorized Views

Hardy made her disagreement with that policy unequivocal Thursday, offering the committee her views in a written statement that conspicuously lacked the official emblem of the Department of Health and Human Services, the parent agency of the Social Security Administration.

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By contrast, the official written testimony she was authorized to give, approved by the Office of Management and Budget and provided in advance to the committee, supported the income limits. It warned that “eliminating the earnings test now would cost the trust fund billions” and would constitute a major change in Social Security policies.

There is no time in the waning days of the current Congress, which is scheduled to adjourn at the end of next week, to change or repeal the earnings rule. However, Hardy’s endorsement will lend support to the bipartisan forces working on legislation for next session. The issue has been pushed aggressively by advocates of the elderly in response to persistent complaints by retirees.

Four members of Congress testified at the hearing that the restriction is unfair and a serious burden for many retirees.

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“I’m concerned about the divorced women, who are coming back to the work force in disproportionate numbers,” said Rep. Ron Wyden (D-Ore.). These older women often have very small Social Security benefits and need to keep them all to supplement modest incomes from such jobs as clerks and secretaries, he said.

Wyden proposed that the outside income ceiling be raised over a 10-year period to $18,000, the average U.S. salary.

Rep. Bill Archer (R-Tex.) said that older workers are “desperately needed to fill a growing employment vacuum. It’s an affront to those people that the earnings limit” discourages them from working, he said.

However, Rep. Andrew Jacobs Jr. (D-Ind.), the subcommittee chairman and an opponent of lifting the limit, argued that a person who is still earning significant job income is not truly retired and therefore should not get full retirement benefits.

The earnings ceiling is revised each year for those between 65 and 69. The current $8,400 limit compares with $6,120 allowed for beneficiaries younger than 65. Under current law, the penalty of $1 lost for each $2 earned will be eased in 1990, when it will become $1 for each $3.

Only after retirees reach the age of 70 are they allowed to collect full benefits regardless of their earnings.

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The earnings limit currently affects 600,000 working retirees, a small fraction of the 8 million persons between 65 and 69 who receive Social Security. However, advocates of a change believe that many more retirees would go to work if there were no penalty and that other retirees with jobs would begin declaring their income honestly.

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