Small-Business Owners React to Social Security Individual Accounts

March 24, 1999

WASHINGTON, DC -- As Congress and the president take up Social Security reform, most small-business owners are unaware of how they might have to help operate Social Security individual accounts, and one-fifth of those who favor them are unwilling to pay any extra administrative costs, according to a recent publication released by the nonpartisan Employee Benefit Research Institute (EBRI). The survey also found that roughly a third of all small business owners are so supportive that they would be willing to spend $500 or more -- in some cases substantially more -- in additional payroll processing costs each year to help administer individual Social Security accounts." In an effort to further explore the complex issue further, the Employee Benefit Research Institute has published "Beyond Ideology: Are Individual Social Security Accounts Feasible?" This publication details the difficult administrative issues raised by individual social security accounts, and represents the ideas of nearly more than 200 leaders from the private and public sectors gathered at an EBRI policy forum in Washington last December. Reflecting EBRI's nonideological approach to research and analysis, the new book contains views from both advocates and critics of individual Social Security accounts, as well as informed observations from those who are neutral on the issue. EBRI's survey was conducted by Mathew Greenwald and Associates, a Washington, DC, polling firm, and was based on 500 interviews with small-business leaders whose firms employed between five and 100 full-time workers. The survey's margin of error is plus or minus 4 percentage points. Details of the survey are contained in the new EBRI book. In presenting the survey findings at the EBRI forum, Greenwald said survey results indicated that a majority of small business leaders (57 percent) favor some type of individual accounts when asked a generic question about support or opposition with no mention of cost. Under the various "individual account" proposals introduced in Congress, workers would be able to invest a portion of their future Social Security payroll taxes in the private financial markets. The survey also found that roughly a third of all small business owners are so supportive that they would be willing to spend $500 or more — in some cases substantially more — in additional payroll processing costs each year to help administer individual Social Security accounts. But the EBRI survey also found that 60 percent of small-business owners are not following the current debate over Social Security reform, and that almost two-thirds had not thought about the possibility that they might be required by law to help administer the accounts. "Small business owners simply cannot run their primary business and be expected to first understand and then to properly administer benefit programs," said Carol R. Sears, president of the American Society of Pension Actuaries, who also addressed the forum and whose conclusions are included in the EBRI book. "Lack of desire coupled with lack of ability is an opportunity for a privatized Social Security system to be unappreciated...and will cause certain irritation," said Sears, a vice president of an actuarial firm specializing in small business pension plans. According to Dallas Salisbury, EBRI president and CEO, the survey "shows that most small employers support Social Security individual accounts only if they don't have to pay for it -- and many don't support it at all. Simply put, the cost and burdens of administration will ultimately define support or opposition from the small business community." Salisbury added: "As our leaders begin to seriously address Social Security reform, they cannot ignore the millions of small-business owners whose payroll processing costs would be affected under some reform options to create and maintain individual Social Security accounts for every worker. If Congress wants a new program design to last, they need to make sure small-business decision-makers understand and support it." EBRI, which does not lobby or advocate public policy positions, is the first group to specifically examine the opinions of small-business leaders about the maximum they would be willing to pay in processing costs under different administrative scenarios and still support individual Social Security accounts. Reform proposals that would create individual investment accounts would be likely to affect the way that almost all payrolls are processed in the United States. Small businesses are a critically important player in that process, since there are almost 5 million small employers in the U.S. (with fewer than 100 workers), employing about 41 percent of all private-sector full-time workers in the nation, according to the most current Census Bureau data. EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, DC. Founded in 1978, its mission is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI does not lobby and does not take positions on legislative proposals. For more information: * Visit the EBRI web site at * Call EBRI at 202/659-0670. * Members of the press may request complimentary copies of "Beyond Ideology: Are Individual Social Security Accounts Feasible?" from Danny Devine (202) 775.6308. Others may order copies from EBRI-ERF Publications, P.O. Box 4866, Hamden Station, Baltimore MD 21211, or call (410) 516-6946. Single copies are $29.95. "Beyond Ideology: Are Individual Social Security Accounts Feasible?" Edited by Dallas L. Salisbury 244 pages Washington, DC: Employee Benefit Research Institute Education and Research Fund Paper cover. ISBN 0-86643-092-X ### #465