Is Social Security Really Broke?

The Truth about Social Security Financing

When Kathleen Casey-Kirschling, the nation's first baby boomer, received her retirement benefits a few months ago, skeptics believe that was the signal. For people who are under the impression that social security is failing, this is an indication that the program will go bankrupt, as more baby boomers will start claiming their benefits and the funds will run out. These people believed that as a result, the agency would be unable to fulfill its promise to other claimants.

Is it true?

Contrary to this belief, as early as the 1980s, the government has already taken steps to strengthen Social Security and prepare for other adjustments, not only for the boomers. In 2001, President Bush had even created a federal commission to look into ways on how to undertake necessary changes in social security system to address future problems.

According to the 2008 Trustee Report, changes made on the program have paid off as it showed steady improvement in the program’s long-term financial status.

The agency may be facing challenges today but these are problems brought about by the reforms being undertaken within the system.

“Social Security is at a crossroads. We face enormous challenges to shore up the system,” said Commissioner Michael J. Astrue in the agency’s press release. “I will continue to work with President Bush, Congress and our stakeholders to develop policy solutions. I also look forward to working with the next administration, since the challenges that face the Social Security system will undoubtedly require a bipartisan and multi-year effort.”

The report also highlighted the following accomplishments:

• Income including interest to the combined Old Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $785 billion ($656 billion in net contributions, $19 billion from taxation of benefits and $110 billion in interest) in 2007.


• Total expenditures from the combined OASDI Trust Funds amounted to $595 billion in 2007.


• The assets of the combined OASDI Trust Funds increased by about $190 billion in 2007 to a total of $2.2 trillion


• During 2007, an estimated 163 million people had earnings covered by Social Security and paid payroll taxes.


• Social Security paid benefits of $585 billion in calendar year 2007. There were almost 50 million beneficiaries at the end of the calendar year.


• The cost of $5.5 billion to administer the program in 2007 was a very low 0.9 percent of total expenditures.


• The combined Trust Fund assets earned interest at an effective annual rate of 5.3 percent in 2007.

How is that possible?

The estimated 65 million boomers have actually paid into the system and together with the 89 million other employed Americans, have helped build a reserve. In addition, nearly one in three retired Americans are contributing to the trust funds by paying taxes on their Social Security.

Others may argue that the worker-to-retiree ratio is declining and that life expectancy is increasing, which place a strain on social security funds. However, these factors – including those of the boomers – have long been thought of. The issues of changing demographics and immigration have also been taken into account before the projections were made.

In fact considering all these factors, and granting that there will be no changes, Social Security can still pay 100 percent of promised benefits until 2040 and more than 70 percent of benefits after that.

Now perhaps it would be fair to say that social security income will grow and continue to pay for benefits of the claimants. Through income earned from the trust funds, the agency can earmark enough funds for benefits and administrative costs. Whatever amount remains from the income after benefits and other expenses are deducted will be treated as surplus and added to the trust funds.

One of the big reasons why the country’s social security system will not fail is because of the treasury bonds. The Social Security trust funds buy interest-earning special Treasury Bonds, similar to the government bonds pension funds and private investors buy. By law, all income to the trust funds not immediately needed to pay expenses, is invested in bonds guaranteed by the government.

The Trustees invest Social Security surplus by buying special Treasury Bonds that are earning interest in the trust funds. When claimants need to use them or it reaches maturity, the treasury bonds can be cashed. These bonds are not only safe; it also earns approximately 7 percent in annual interest.

Setting the Limits to Corporate Blogging

How far can one go in posting information on blogs?

As soon as blogging was introduced into the business world as a new means to interact with colleagues, business clients and suppliers, many companies have embraced the idea of giving their employees and workers the new voice of freedom.

Top corporations have even formally made blogging a part of their business marketing strategies. Some companies have also established a blog network for their employees and executives.

Blogging has become a very effective business tool. Proof of this is the Internet popularity of some corporate "spokesbloggers" like Microsoft's Robert Scoble.

However, just recently, the corporate blogging world was rocked with controversy when a libel suit was filed against a popular company over one of its employees’ personal blogs. The trouble ensued from the blog allegedly hosted by one of the company’s executive in the intellectual property department.

The executive who later revealed his identity posted blogs as a way for the company to advocate for new federal laws on patents and patent litigation. However, since the company has a pending patent case, two lawyers of the concerned party filed a libel lawsuit against the executive for “tarnishing their good names and disparaging a patent case their client had filed against them, while allegedly concealing his affiliation with the company”.

This incident brought up the issue of how far blogging must be tolerated by companies in expressing views publicly.

While blogging policies may vary from company to company, some have already adopted so-called “common sense” rules on blogging. Sun Microsystems, Yahoo, Google, Dell and BBC, to name a few, have their own blogging policies. Some of their rules may not be strict but it somehow defines and guides a blogger on what information to posts on his blogsite. Most important of all, the rule tells a blogger to identify himself and disclose his corporate affiliation before giving out any information related to his work.

Although personal blogging is mostly allowed by a number of companies, the “common sense” rule often applies to information related to the company such as vital corporate policies, confidential matter, and other delicate legal information.

As a result, this incident drove many companies to review their policies on corporate blogging about disclosure of company-related information.

Punitive Damages Award: How Much is Enough?

Punitive damages award in personal injury claims is perhaps one of the most controversial legal issues being debated on for a long time.

Why is that so?

Just look at these figures: almost $3 million in punitive damages for a spilled cup of McDonald's coffee, $5 billion for the Exxon Valdez oil spill, and $145 billion for a Florida tobacco class action.

These are only some of the startling amounts given as punitive damages in some of the most popular cases in recent history. Because of this, punitive damages has become of the most controversial aspect of the tort system.

Are punitive damages awards too high?

According to the Tort Reform Association, only about twenty-one states have passed limits on punitive damages. Some of the states with punitive damages limit include Alabama, Alaska, Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Texas, and Virginia.

However, in some states, like California, punitive damages in a lawsuit may also be awarded based on a “clear and convincing evidence standard”.

How much really is enough as punitive damages? How are punitive damages determined?

Typically, the award of punitive damages depends on the case and is often determined by the capacity of the defendant to pay, the defendant’s status, how the damage or harm done will affect the defendant’s image or social standing, and the gravity of the injury, among others. In most cases, like in a personal injury, the awarding of punitive damages in a claim is usually based on a statute.

In response to the award of high punitive damages verdicts, the Supreme Court has made several decisions, which limit awards of punitive damages through the due process of law clauses of the Fifth and Fourteenth Amendments to the Constitution.

According to the US Supreme Court, a number of cases indicated that a 4:1 ratio between punitive and compensatory damages is broad enough to “lead to a finding of constitutional impropriety”, and that any ratio of 10:1 or higher is almost certainly unconstitutional.

Here are some cases involving punitive damages issues where the Supreme Court has mediated:

• In BMW of North America, Inc. v. Gore (1996), where the Court ruled that punitive damages must be, “reasonable, as determined based on the degree of reprehensibility of the conduct, the ratio of punitive damages to compensatory damages, and any criminal or civil penalties applicable to the conduct”.


• In State Farm Auto. Ins. v. Campbell (2003), the Court held that punitive damages might only be based on the acts of the defendants, which harmed the plaintiffs.


• Most recently, in Philip Morris USA v. Williams (2007), the Court ruled that punitive damage awards could not be imposed “for the direct harm that the misconduct caused others, but may consider harm to others as a function of determining how reprehensible it was”. Misconduct therefore that is more reprehensible justifies a larger punitive damage award.

And how did this staggering amount in punitive damages award came about?

There is a clash of opinion on the matter. Some years ago, Amy Kolz presented this differing opinion from two widely respected Ivy League academics, Harvard Law School's W. Kip Viscusi and Cornell Law School's Theodore Eisenberg on this controversial issue.

Kolz cited Viscusi, an economist, who said that juries are more likely to grant punitive awards and grant them at a higher level. Although he pointed out that juries are also almost exclusively responsible for the growth of the $100 million-plus so-called "blockbuster" awards, he, however, did not call for its abolition. Instead, he favored that more guidance be given to jurors in the determination of the awards. In addition to this, he also called for a “regulatory compliance defense option” as a means to eliminate punitive damages for parties that passed government regulatory standards.

On the other hand, Eisenberg opposed Viscusi’s opinions. On the contrary, he finds that juries and judges award punitive damages in approximately the same ratio to compensatory damages, and that the level of punitive damages has not increased over time. He argues that there is no reason for dramatic change. According to Eisenberg, the punitive damages problem is created by self-interested groups to change the tort system.

The two scholars’ study and conclusions were apparently based "on empirical premises about punitive damages, understanding of applicable legal rules, and statistical methodology."

The data used was taken from court records of 18 years involving punitive damages award and data provided by the Civil Justice Survey of State Courts for 45 of the 75 most populous U.S. counties. The data compared the compensatory and punitive damages of individual cases and finds that there is a strong relationship between the two in both judge and jury trials.

The argument about the issue was made a few years ago yet the questions raised still need answers today. Since punitive awards have a predictable relationship to compensatory damages, and compensatory awards are a measure of harm, this does not show that the tort system as a whole is irrational or unbalanced.

In fact, fewer than 11 percent of the state court cases that are included in the study were in excess of $1 million, which is hardly evidence of a broader problem – of course, with the exception of a few high-profile cases like McDonald’s or Philip Morris’.

In short, for the state of California, for instance, the determining factor in the award of punitive damages in a lawsuit would always depend on the merit of the case, which would be a fair enough deal for both plaintiff and defendant.

Genetic Identification: Potential Cause of Employment Discrimination?

Recent strides in genetic engineering and technology have made possible the early identification of diseases and other potential health risks to humans. Incidentally, this also stirred up debates on the legality of the information gathered from this method. Can anyone have access to information from this data? What is the limit to the use of this information? Can law prevent abuse of one’s genetic information? Can this be a potential cause for discrimination in the workplace?

Genetic discrimination could possibly be a potential cause for employment discrimination. Because data derived from genetic identification might also reveal one’s medical condition such as one’s genetic susceptibility to certain diseases, this could increase the possibility of abuse.

Many fear that with this information, a health company or an employer may discriminate anyone. People who undergo genetic testing may also be at risk for genetic discrimination. For example, a health insurer might refuse to give coverage to a woman who has a DNA difference that raises her odds of getting breast cancer. Employers could also use DNA information to decide whether to hire or fire an employee or worker.

The results of a genetic test are normally included in a person’s medical records. When a person applies for life, disability, or health insurance, the insurance company may first ask to look at one’s records before making a decision about coverage. An employer may also have the right to look at an employee’s medical records.

As a result, genetic test results could affect a person’s insurance coverage or employment. People making decisions about genetic testing should be aware that when test results are placed in their medical records, the results might not be kept private.

However, under the new law, discrimination based on one’s medical information from genetic identification sources is prohibited.

According to law, genetic discrimination occurs “when people are treated differently or unfairly by their employer or insurance company because they have a gene mutation that causes or increases the risk of an inherited disorder”.

Fear of discrimination is a common concern among people who had undergone genetic testing. Several laws at the federal and state levels help protect people against genetic discrimination.

On May 21, 2008, President George W. Bush signed the Genetic Information Nondiscrimination Act of 2008, also referred to as GINA, a new federal law that protects people from this type of discrimination. The law also prevents possible discriminatory acts by health insurers and employers.

Part of this law, which relates to health insurers, will take effect next year while those relating to employers will be implemented on November 2009. However, the law does not cover members of the military and does not include life insurance, disability insurance, and long-term care insurance.

Before the federal law was passed, many states had already enacted laws against genetic discrimination, which vary according to the degree of protection among the different states. The federal law sets a minimum standard of protection met in all states and strengthens the protections provided by any of the state law.

Laws Regarding Genetic Discrimination

At the national level, nine bills were under consideration in the 105th Congress that directly address genetic discrimination. These are the following:

• H.R. 306 - health insurance –sponsored by Representative Louise Slaughter (D-NY)


• H.R. 328 - health insurance Representative Gerald Solomon (R-NY) is sponsoring bill


• H.R. 2198 - health insurance sponsored by Representative Clifford Stearns (R-FL)


• H.R. 2215 - employment sponsored by Representative Joseph Kennedy (D-MA)


• H.R. 2216 - life and disability insurance sponsored by Representative Joseph Kennedy (D-MA)


• H.R. 2275 - employment sponsored by Representative Nita Lowey (D-NY)


• S. 89 (companion to H.R. 306) - health insurance by Senator Olympia Snowe (R-ME)


• S. 422 - health, life and disability insurance by Senator Pete Domenici (R-NM)


• S. 1045 (companion to H.R. 2275) - employment by Senator Tom Daschle (D-SD)

In addition, two bills under consideration that include genetic issues as part of their focus are:

• H.R. 1815 - medical privacy, insurance sponsored by Representative Jim McDermott (D-WA)


• S. 346 - patient's rights, health insurance sponsored by Senator Paul Wellstone (D-MN)

At the state level, twenty-four states, including California, have enacted laws that either provide protection against genetic discrimination or prohibit genetic testing in either the insurance or employment setting.

• Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Maryland, Minnesota, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Virginia, Tennessee, Texas and Wisconsin have legislative protections against genetic discrimination in health insurance.

In states like Illinois, Iowa, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas and Wisconsin legislative protections against genetic discrimination in the workplace have been enacted.

On the other hand, Arizona and Colorado have legislative protections against genetic discrimination in disability insurance. In addition, Arizona, New Jersey, Maryland and Montana have limited legislative protections against genetic discrimination in life insurance.

At least sixty bills are pending in eighteen state legislatures that would provide protection against genetic discrimination in either the insurance or employment setting.

These bills are in the states of Alabama, California, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont Virginia, Washington and Wisconsin.

Laws against genetic discrimination are needed to help ease concerns about this type of discrimination and help those getting genetic tests that could benefit their health or affect how society would treat them. The law would also enable people to take part in research studies without fear that their DNA information might be used against them in health insurance or the workplace.

In the end, how we make good use of genetic information will ultimately determine how we have evolved as a truly civilized society.

How Disability Insurance Can Save You from Bankruptcy

For people who have gone through some illness, injury, disability or medical condition that requires him to leave work, the loss of earning is perhaps the worst situation that one can experience.

What happens when you become seriously injured or sick and you cannot perform your job? If you do not have any insurance protecting that loss of income, it can be devastating to your finances.

How long could you go without income? The loss of income undermines one’s ability to obtain and maintain all of his other financial needs.

For those who have not been involved in a workplace injury or disability, consider this information:

• Employers reported that slightly more than 60 million workdays are lost from occupational injuries and illnesses.


• Three out of 10 working individuals between the ages of 35 and 65 were disabled for 90 days or longer.


• Almost one in five individuals between the ages of 35 and 65 will become disabled for five years or more prior to turning 65.


• For people under age 65, the probability of disability is higher than the probability of death.

How can you avoid bankruptcy in your time of need? One way is by investing in disability insurance.

Disability income insurance is designed to indemnify the insured for income lost when he cannot work. If you suffer a prolonged illness or injury that prevents you from doing your job, this insurance is meant to supplement the income that you otherwise cannot earn. These policies can be found through group employer coverage or a stand-alone individual policy.

For most employees and workers who are injured while at work, they may get compensation for their work-related injuries through workers compensation benefits. But this may not be enough to sustain his expenses. In this case, a disability insurance benefit can supplement that expenses that a worker may incur while being injured and unemployed.

Most employers offer disability insurance coverage with short-term and long-term benefits to workers. Short-term policies usually provide benefits from six months to one year while long-term disability benefits cover long period of disability.

Aside from providing medical benefits, disability insurance also compensates a worker for lost income due to his illness or injury, thereby saving him from total loss or bankruptcy.

Discrimination Charges Disputed by DWP official

June 15, 2008

LOS ANGELES - Raman Raj, Los Angeles Department of Water and Power (DWP) executive, has dismissed accusations that he left the agency seven years ago not because of the discrimination cases but due to his closeness to Mayor Antonio Villaraigosa.

Raj, then DWP Assistant General Manager, had allegedly shielded union employees from disciplinary action, interfered in investigations, and discouraged employee complaints. The report also said Raj manipulated severance packages to remove managers who disagreed with him. Eventually, the DWP spent $ 3.3 million settling discriminatory cases.

A law firm hired by the agency to look into the allegations recommended that Raj should leave for the good of the agency

However, in a recent LA Times interview, Raman Raj said the report was just a “charade” and was merely staged to justify his removal. He said he left the DWP in August 2001 not because of the discrimination cases but because a representative of then-Mayor James K. Hahn thought he was too close to Villaraigosa, who had just lost his bid for mayor.

Raj said neither case had a connection to his departure from the DWP in August 2001, when, while undergoing treatment for cancer, he negotiated a $145,000 severance to cover his health benefits.

Raj said he left the utility because DWP Commissioner Dominick Rubalcava viewed him as being too close to Villaraigosa, D'Arcy and former DWP General Manager S. David Freeman.

Raj served at the DWP from 1999 to 2001, holding the title of assistant general manager and overseeing such issues as human resources and labor relations.