Benefits of the PRAUSA Plan
From PAYGO Transfers to Personal Capital
Social Security’s PAYGO structure uses current payroll taxes to pay current beneficiaries. Workers receive a statutory benefit promise, but they own no retirement asset. The PRAUSA Plan changes that structure over time. At the permanent end state, mandatory retirement saving builds funded financial assets owned by workers, while earned OASI obligations are preserved through the transition.
Help Build the Framework for Permanent Social Security Reform
PRAUSA welcomes qualified individuals and institutions prepared to contribute expertise, analysis, leadership, or support to the Social Security Reform Working Group.
Contribute to the Work
Qualified professionals and institutional representatives may request to participate.
Keep Informed
Receive occasional updates on the Working Group, relevant research, and development of the framework.
The result is a fundamentally different retirement system
Workers accumulate owned retirement assets and investment returns, retain more of their earnings after OASI closes, and participate in an economy supported by a larger privately owned capital base. The provisional 6.0 percent mature PRA rate remains subject to independent actuarial certification.
What Changes
The reform produces three broad economic gains. Retirement contributions build worker-owned assets that earn investment returns. The portion of the former OASI burden no longer required for mandatory retirement saving is released to employee compensation and take-home pay. And the continuing flow of funded saving expands the nation’s privately owned capital base. These effects reach well beyond Social Security solvency.
Retirement contributions become productive capital.
Under PAYGO, payroll taxes are largely transferred immediately to current beneficiaries. Under the mature PRA system, mandatory retirement contributions remain invested in worker-owned accounts and finance future retirement from accumulated assets.
Personal ownership replaces no ownership.
Mandatory PRA contributions and investment earnings belong to the participant. They are not federal assets and are unavailable for government spending or borrowing.
Investment returns add retirement value.
PRA assets remain invested over a worker’s career. Earnings compound within the account, so each dollar saved produces retirement value from both the contribution itself and the investment returns it earns.
Family wealth is created and inherited.
Unannuitized PRA assets pass to a spouse, beneficiary, estate, or other lawful recipient. OASI payroll taxes create no comparable owned balance that survives the worker as personal property.
Take-home pay rises after OASI closure.
The 10.6 percent OASI payroll-tax burden ends when final closure is certified. If the mature mandatory PRA rate is certified at approximately 6.0 percent, about 4.6 percentage points of payroll on earnings through the PRA cap are released from mandatory retirement financing and return as increased employee take-home pay, subject to ordinary taxes.
The full former OASI burden is released above the PRA cap.
The mature mandatory PRA contribution is ordinarily capped at the national median covered wage. Above that cap, no mandatory PRA contribution applies after final OASI closure. The full former 10.6 percentage-point OASI burden on those earnings is released from mandatory retirement financing; additional retirement saving remains voluntary.
Capital formation expands at national scale.
Mandatory funded saving creates a continuing flow of privately owned investment capital across the workforce. The accumulated stock of capital grows year after year instead of being immediately consumed as transfer payments.
More capital strengthens economic growth.
A larger capital stock finances business expansion, new technology, equipment, research, and other productive investment. More capital per worker raises productive capacity and supports higher real wages and living standards throughout the economy.
Capital ownership spreads broadly.
Workers who now accumulate no Social Security asset acquire direct ownership of diversified financial capital through ordinary covered employment. The reform broadens participation in the growth of the nation’s productive assets rather than limiting capital ownership to workers who save independently outside Social Security.
Retirement financing stops depending on the worker-to-beneficiary ratio.
PAYGO requires future workers’ taxes to finance prior workers’ benefits. Funded PRAs finance retirement from assets accumulated for each worker, ending the mature system’s structural dependence on a favorable demographic ratio.
The retirement system gains a stronger financial foundation.
PAYGO benefits depend on future payroll-tax collections and recurring political decisions about taxes and benefits. Funded PRAs hold real, participant-owned assets dedicated to retirement. Once the transition is complete, recurring OASI solvency crises end with the OASI tax itself.