C alculations indicating that the current Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selected legal issues that may be raised regarding entitlement to Social Security benefits as Congress considers possible changes to the Social Security program in view of projected long-range shortfalls in the Social Security Trust Funds. Beneficiaries under Title II have a legal entitlement to receive Social Security benefits as set forth by the Social Security Act and as administered by the Social Security Administration (SSA), an independent agency in the executive branch. Thus, the fact that Social Security benefits are financed by taxes on an employee's wages does not provide a limit on Congress's power to fix the levels of benefits under the Social Security Act, or the conditions upon which they may be paid. The U.S. Supreme Court also has made clear that the payment of Social Security taxes conveys no contractual rights to Social Security benefits. A legislative guarantee of a certain level of Social Security benefit payments with a corresponding obligation upon future Congresses for payment of such benefits would require either a finding of a contractual relationship between the federal government and individual certificate holders, the modification or repeal of which would be constitutionally impermissible, or a right stemming from Congress's implied promise not to enact legislation in the future that would bind a future Congress in the sense that the legislative enactment guaranteeing Social Security benefit payments could not be repealed or altered. Payment of Social Security Benefits From the Trust Fund in Case of Exhaustion

The projected exhaustion of the Social Security Trust Funds, formally known as the Federal Old Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund, raises a question regarding whether that possibility would affect the legal right of beneficiaries to receive full Social Security benefits. Social Security is a statutory entitlement program. An entitlement by definition legally obligates the United States to make payments to any person who meets the eligibility requirements established in the statute that creates the entitlement. Congress, however, has reserved the "right to alter, amend, or repeal any provision of this (Social Security) Act" and the U.S. Supreme Court has affirmed Congress's power to modify provisions of the Social Security Act in Flemming v. Nestor and subsequent court decisions. Congress has the power legislatively to guarantee to pay eligible individuals a certain level of Social Security benefits and not to reduce that level of benefits to such individuals in the future. While Congress may decide to take whatever measures necessary to fulfill such an obligation, courts would be unlikely to find that Congress's unilateral promise constitutes a contract that could not be modified or abrogated in the future. Although the legal right of beneficiaries to receive full benefits would not be extinguished by the insufficient amount of funds in the Social Security Trust Funds, a court suit to obtain the difference between the amount in them available to pay partial benefits and the full benefit amount would not be likely to succeed in getting the difference. Consequently, unless Congress amends applicable laws, it appears that beneficiaries would have to wait until the trust funds receive an amount sufficient to pay full benefits to receive the difference between the amount that can be paid from them and the full benefit amount.
Calculations indicating that the Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selected legal issues that may be raised regarding entitlement to Social Security benefits as Congress considers possible changes to the Social Security program in view of projected long-range shortfalls in the Social Security Trust Funds.
Social Security is a statutory entitlement program. Beneficiaries have a legal entitlement to receive Social Security benefits as set forth under the Social Security Act. The fact that Social Security benefits are financed by taxes on an employee's wages, however, does not limit Congress's power to fix the levels of benefits under the Social Security Act or the conditions upon which they may be paid. Congress's authority to modify provisions of the Social Security program was affirmed in the 1960 Supreme Court decision in Flemming v. Nestor, wherein the Court held that an individual does not have an accrued "property right" in his or her Social Security benefits. The Court has made clear in subsequent court decisions that the payment of Social Security taxes conveys no contractual rights to Social Security benefits.
Congress has the power legislatively to promise to pay individuals a certain level of Social Security benefits, and to provide legal evidence of Congress's "guarantee" of the obligation of the federal government to provide for the payment of such benefits in the future. While Congress may decide to take whatever measures necessary to fulfill such an obligation, courts would be unlikely to find that Congress's unilateral promise constitutes a contract which could not be modified in the future. In addition, a congressional promise not to reduce a specific level of Social Security benefits payable to certain eligible individuals would likely not overcome the constitutional principle, subject to due process considerations, that one Congress may not bind a subsequent Congress to legislative action or inaction.
The calculations concerning the possible future insolvency of the Social Security Trust Funds raise a question relating to whether that result would affect the legal right of beneficiaries to receive full Social Security benefits. While an entitlement by definition legally obligates the United States to make payments to any person who meets the eligibility requirements established in the statute that creates the entitlement, a provision of the Antideficiency Act prevents an agency from paying more in benefits than the amount in the source of funds available to pay the benefits. The Social Security Act states that Social Security benefits shall be paid only from the Social Security Trust Funds, and the act appropriates all payroll taxes to pay benefits. Although the legal right of beneficiaries to receive full benefits would not be extinguished by an insufficient amount of funds in the Social Security Trust Funds, it appears that beneficiaries would have to wait until the Trust Funds receive an amount sufficient to pay full benefits in the case of a shortfall unless Congress amends applicable laws.