If President Barack Obama thought he could get through his State of the Union address without promising action on the third rail of American politics, the American Academy of Actuaries has other ideas.
The group called on the president, as well as Congress, to vow to ensure the long-term viability of Social Security and Medicare, something that has long been talked about with little to show for all the rhetoric.
“The president is seeking to make 2014 a ‘year of action,’ and there are few matters in Washington more often missing from everyone’s to-do list than federal entitlement reforms,” said Tom Terry, president of the academy, in a statement. “(The) challenges will grow more unmanageable the longer they remain unattended.”
Media analysts foreshadowing the president’s Tuesday night address expect to see only modest proposals on the retirement front. A roundup by the Washington Post included only one mention of the topic, by The New York Times.
Politicians need to ensure longtime retirement security by improving the governance, transparency and disclosures about the value of public pension plans, the academy said. States and cities have been struggling with ensuring pension funds are viable as they gobble up more of the money needed for roads, schools and public safety.
The academy also urged that the following steps be taken to make the programs more sound:
- Raising the retirement age: Evaluations by pension actuaries support an increase in the full retirement age for Social Security, which should be part of any reform effort in order to promote sustainable solvency. Advantages include compensating for longer lifespans/increased longevity, preserving the current benefit formula, increasing labor force participation, and preserving disability benefits.
- Medicare reforms: Delaying tough decisions will lead to the need for more drastic changes in the future, with potentially greater negative consequences for beneficiaries, taxpayers, and health care providers.
- Health care costs: Containing expenditures is key and analyses conducted by health actuaries must be used to ensure a more sustainable health care system, which can benefit Medicare, Medicaid, and CHIP (Children’s Health Insurance Program), as well as the cost of federal employee health insurance coverage.