Social Security Income Measurement in Two Surveys

By Iams, Howard M.; Purcell, Patrick J. | Social Security Bulletin, July 1, 2013 | Go to article overview

Social Security Income Measurement in Two Surveys


Iams, Howard M., Purcell, Patrick J., Social Security Bulletin


As a major source of income for retired persons in the United States, Social Security benefits directly influence economic well-being. That fact underscores the importance of measuring Social Security income accurately in household surveys. Using Social Security Administration (SSA) records, we examine Social Security income as reported in two Census Bureau surveys, the Survey of Income and Program Participation (SIPP) and the Current Population Survey (CPS). Although SSA usually deducts Medicare premiums from benefit payments, both the CPS and the SIPP aim to collect and record gross Social Security benefit amounts (before Medicare premium deductions). We find that the Social Security benefit recorded in the CPS closely approximates the gross benefit recorded for CPS respondents in SSA's records, but the Social Security benefit recorded in the SIPP more closely approximates SSA's record of net benefit payments (after deducting Medicare premiums).

Selected Abbreviations

CPS Current Population Survey

MBR Master Beneficiary Record

PHUS Payment History Update System

SIPP Survey of Income and Program Participation

SSA Social Security Administration

Introduction

Social Security benefits are a major source of retire- ment income in the United States, and they directly influence the economic well-being and poverty status of many beneficiaries. Social Security retired-worker benefits replace a portion of preretirement income. That portion is greater for low lifetime earners than for higher earners; consequently Social Security ben- efits account for a greater share of retirement income for lower-income beneficiaries (SSA 2012; Butrica and others 2012). Because Social Security income influences economic well-being, it is important that household surveys measure it accurately.

The payment of Medicare premiums complicates the survey measurement of Social Security income. Most beneficiaries elect to have the Social Security Administration (SSA) deduct those premiums from their monthly Social Security benefit, so that the amount they receive reflects a net monthly benefit that is lower than their gross benefit.1 For all Social Security beneficiaries, income tax liability, poverty status, and eligibility for means-tested federal benefit programs-such as Supplemental Security Income and the Supplemental Nutrition Assistance Program- are determined using the gross benefit before any deductions. However, because the actual cash income that most beneficiaries receive is net of Medicare deductions, they may report the net amount in house- hold surveys as their monthly Social Security income. Analysts who use household surveys to measure income need to know whether the Social Security income recorded on these surveys reflects the gross amount or the benefit net of Medicare premiums.

This article assesses the accuracy of Social Secu- rity income as it is recorded in the Census Bureau's Survey of Income and Program Participation (SIPP) and Current Population Survey (CPS). A major goal of the SIPP is to measure income amounts by source to allow analysts to estimate how many individuals and families are eligible for government income-security programs. A major goal of the CPS is to measure total individual and family income and the percentage of the population with income below the poverty thresh- old. Accurately measuring Social Security income is essential to achieving those goals.

The SIPP and the CPS ask similar questions about Social Security income, but the two surveys" reference periods differ. The SIPP, as a longitudinal survey, groups its respondents in 4-year panels, in which participants are interviewed every 4 months.2 The SIPP asks respondents whether they received any Social Security benefits during the 4 months prior to the month of the interview and, if so, they are asked to report the monthly amount of Social Security income they received. Those respondents are then told that "some people have what is called a 'Medicare Part B' premium taken out of their Social Security benefit before it reaches them," and are asked if they had the Part ? …

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