Managing the data

By Larry Dignan Print this article Print

President Bush wants to close a $4 trillion spending gap in Social Security through 2079, but there remain technical challenges in setting up private accounts.

Challenge: Manage the Data

Solution: Require Electronic Filing

Even if a system could be designed to handle the private accounts of potentially all of the 159 million people covered by Social Security, managing all the account information would be a huge procedure, says Input's Fedeli.

Why? Much of that data arrives on paper forms.

"You are talking stacks and stacks of paper. The principal challenge is collecting the information and then allocating the money," Salisbury says. "We assume the world is automated. It isn't."

Without an all-electronic system, processes could easily bog down.

Speaking before a House Appropriations subcommittee in February, SSA commissioner Jo Anne Barnhart said the agency is making progress with electronic filings, but still has a ways to go to become all-electronic.

For fiscal 2004, 60 percent of employee wage reports were filed electronically, up from 27 percent in 2001.

Barnhart added that the SSA is also encouraging online filing for benefits claims.

In fiscal 2004, 217,000 benefit claims were filed online, up from 148,000 the year before.

That lack of automation would magnify the problems with record-keeping if employers were required to report wages going into private accounts more frequently.

Today, half of employers in the United States report data on wages, employees and taxes paid annually.

Millions of small employers go bust and never pay Social Security.

With private accounts, small employers would have a fiduciary responsibility to get 2 percent to 4 percent of Social Security funds to a private account.

Click here to read more about government technologists seeking to reduce the rate of tech project failures.

Meanwhile, private accounts would tax existing SSA systems. In 2005, the SSA projects it will pay $518 billion to 48 million beneficiaries, or 4 million checks a month.

The agency also processes 8 million claims for benefits, conducts 58 million transactions through its 800 -number and issues 140 million Social Security statements.

Private accounts would mean more statements and call volume.

"You'd get to billions of transactions quickly," Cavanaugh says.

Challenge: Managing the project

Fix: Set realistic time lines, up front

If the SSA and Congress work out the aforementioned information management issues, the real work begins: implementing the system.

To see the perils, look no further than the Federal Retirement Thrift Investment Board's Thrift Savings Plan.

In July, Sens. Susan Collins and Joe Lieberman blasted the board and American Management Systems, now known as CGI-AMS, for "a failed computer-programming project that wasted $36 million in federal retirement assets."

In 1997, AMS was contracted to build a record-keeping system to allow federal employees to track investments online.

Four years later, repeated delays and budget overruns produced an "almost useless" system, as stated in the report by Collins and Lieberman.

Materials, Communications and Computers Inc. was hired in 2001 and completed the project in 18 months at a cost of $33 million.

Fedeli says the SSA has a good track record with project management, but building a system to handle private accounts won't be easy.

The SSA's fiscal 2006 information-technology budget of $494 million is devoted to office automation projects such eDib, an electronic disability claim processing system.

Building a system to handle private accounts would be another ball game.

"I hope the SSA realizes its strengths and weaknesses," Fedeli says. "This project would be out of its specialty. There could be a lot of time and money wasted for a lot of work the SSA is not used to doing."

This article was originally published on 2005-04-01
Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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