Living Outside the Safety Net: LGBT Families and Social Security by SAGE

Living outside the safety net LGBT Families & Social Security

TABLE OF CONTENTS 5 foreword 7 BACKGROUND 8 CHILDREN OF LGBT PARENTS table1 11 SAME-SEX SPOUSES & PARTNERS table2 14 OPTIONS FOR PROTECTING ALL FAMILIES

Living outside the safety net LGBT Families & Social Security

foreword

he Social Security Act was approved by Congress in 1935 at the urging of President Franklin D. Roosevelt, to create a social insurance program that would guarantee that workers would have a source of income after they

retired. In the 77 years since its inception, Social Security has become one of the federal government’s most popular and essential programs. Although never intended to be the sole source of retirement income, the fact is that Social Security is still the foundation for most seniors’ retirement. Without this critical safety-net program, over half of all older Americans would fall into poverty. More than any other federal program, Social Security does exactly what it was designed to do—it gives retired people a secure, basic income for as long as they live.

Congress has consistently improved and strengthened the Social Security Act to extend its reach beyond the original legislation. As a result of these changes, workers’ spouses, children, and other family members are now eligible to receive benefits in their own right. The Act covers millions of additional American workers originally excluded from coverage, including domestic employees and agricultural workers. The long tradition of improving Social Security to more effectively protect America’s workers and their families has been a key to its success and continued impact. In that vein, the Human Rights Campaign Foundation and the National Committee to Preserve Social Security and Medicare Foundation have jointly authored this report, which calls on Congress to strengthen once again the protections provided by Social Security — this time for the spouses, children, and family members of America’s lesbian, gay, bisexual, and transgender (LGBT) community. Over the last two decades, private businesses have engaged in sustained efforts to implement policies aimed at creating safe and productive workplaces for LGBT employees. The majority of Fortune 500 companies have prohibited discrimination based on sexual orientation since 1995 and have offered partner benefits since 2006. Today a majority – 57% - prohibit discrimination based on gender identity. As more and more LGBT people “come out” and are visible to their employers and prospective employers, the need for equal access to benefits for LGBT workers and their families has become clear. For example, a majority of businesses in the Human Rights Campaign Foundation’s annual Corporate Equality Index report having extended healthcare benefits to domestic partners, as well as non-healthcare retirement benefits including pension annuities, 401(k) and other survivor benefits.

Living outside the safety net LGBT Families & Social Security

The Social Security system must be updated in order to keep pace with this progress. LGBT people across the country are denied a host of benefits that are routinely provided to heterosexual couples. Even as more and more states now provide legal recognition for same-sex couples, the Defense of Marriage Act (DOMA) prevents these relationships from being recognized for Social Security family and spousal benefits. As a result, same-sex couples and their families continue to be excluded from all but the most basic Social Security benefits. We believe that the time has come to extend the benefits the Social Security program provides to reflect the changing face and needs of the American workforce. That is why both the HRC and NCPSSM Foundations urge Congress to revise the Social Security Act and to repeal DOMA to ensure that LGBT workers and their families have equal access to these vital benefits. This is a matter of simple fairness. Lesbian, gay, bisexual, and transgender people are vital members of the American workforce and contribute their equal share to the Social Security system with every paycheck. Now is the time to ensure equal access to benefits.

Living outside the safety net LGBT Families & Social Security

background

esbian, gay, bisexual, and transgender people live in 99.3% of all U.S. counties, work in every sector of the economy, and are raising at least 250,000 children.1 These working families have experienced the impact of the current

economic downturn alongside the rest of America. However, systemic discrimination coupled with a lack of uniform relationship recognition increases the risk of poverty for same-sex couples, their children, and the growing number of LGBT older adults. Due to this discrimination, LGBT people — especially the elderly — have lower incomes and are less likely to be able to save for retirement or disability.

The Social Security system was originally designed to safeguard the nation’s most vulnerable elders from slipping into poverty. Social Security has since been expanded to include benefits for workers who have become disabled, as well as their families and survivors. It remains one of the most successful, popular federal programs in the nation and serves about 56 million people, or about 1 in 6 Americans, annually. For many people, Social Security benefits have become a lifeline out of poverty — filling a financial gap created by disability, retirement, or death of a breadwinner. Social Security benefits are modest, but vital. Without Social Security benefits, it is estimated that half of all Americans over the age of 65 would be living below the poverty line. Every year 4.4 million children receive Social Security benefits based on a parent’s work history. Without their benefits over a third of these children would live in poverty. Social Security is the keystone of most Americans’ retirement planning. Workers contribute to the program throughout their working lives, and the amount individuals or their families receive is based on individual work history. Since the inception of Social Security in the 1930s, generations of Americans have paid into the system with the understanding that they and their families will one day receive the benefits owed to them. Despite a lifetime of contributions to the system, however, same-sex couples and many of their children are denied the benefits of Social Security. The denial of Social Security benefits to same-sex partners and their children places this already vulnerable population at an even higher risk for poverty. The financial loss for each family, regardless of income, is real and significant.

Marriage for Same Sex Couples, The Williams Institute, http://williamsinstitute.law.ucla.edu/headlines/marriage-for-same-sex-couples/.

Living outside the safety net LGBT Families & Social Security

Children of LGBT parents Many same-sex couples use adoption to form their families. When one parent is the biological parent, or when joint adoption is not permitted under state law, second-parent adoption is the only option that allows a same-sex partner to legally adopt his or her biological or adoptive child while leaving the rights of the “first parent” intact.2 Access to adoption for same-sex parents is far from universally accessible — in fact only eighteen states make second-parent adoption available. In the absence of fair adoption laws, thousands of same-sex parents across the country remain legal strangers to the children they are raising. A child becomes eligible for Social Security benefits when a parent becomes disabled, retires, or passes away. Many children with disabilities will also be determined eligible for benefits based on their parents’ work history. If the disability begins prior to the child’s 22nd birthday, benefits can last throughout the child’s lifetime. Recognizing the power of these benefits to ensure a consistent quality of life for a family, the Social Security Administration also considers stepchildren and step-grandchildren to be eligible despite the absence of a legal, formal relationship with the working parent. However, the children of many same-sex parents are not included within this expansive umbrella definition of “child,” and children of a parent who is not legally recognized are denied these crucial benefits. Many children of same-sex parents only have one legal parent because of the inability to access joint or second-parent adoption. If these children lose a parent who is not tied to them biologically or through adoption, the Social Security system determines that they are not eligible to receive any benefit. Children’s Benefits About 4.4 million children receive approximately $2.4 billion each month based on their parents’ Social Security record.3 These child benefits are intended to help families remain financially stable after the loss of a wage earner and to provide for basic necessities until the child completes high school. Children become eligible for these payments when a working parent retires, dies, or becomes disabled. The amount of this benefit depends upon the work history of the deceased, disabled, or retired parent. Children are eligible to receive survivor Social Security payments until they turn 18 (or 19 if they are in secondary school full time). In addition to biological children, a worker’s stepchildren, grandchildren, or step-grandchildren may also be eligible to receive Social Security benefits. In general, a child may receive up to one-half of the parent’s full retirement or disability benefit, or 75 percent of the deceased parent’s basic Social Security benefit. The average amount a child receives upon the death of a parent is $785 per month, or $330 per month if the parent becomes disabled.4 A child whose parent received the maximum retirement benefit of $2,513 could receive as much as $1,256 per month.5 Children whose parental relationships to a worker are not recognized for purposes of Social 2

The term “first parent” is used in certain legal scenarios when one parent in considered a legal parent of the child, either biologically or through adoption, prior to their partner or “second parent” becoming the legal parent of the child.

3 Social Security Administration, Benefits for Children 1 (2012), available at http://www.ssa.gov/pubs/10085.pdf. 4 Social Security Administration, Monthly Statistical Snapshot: July 2012, Social Security Online (Aug. 2012) http://www.ssa.gov/policy/docs/quickfacts/ stat_snapshot/. 5 Social Security Administration, Maximum Social Security Retirement Benefit, Social Security Online (updated Mar. 9, 2012), http://ssa-custhelp.ssa.gov/app/answers/ detail/a_id/5/~/maximum-social-security-retirement-benefit. This figure is based on a worker retiring at age 66 in 2012 after earning the maximum taxable amount for every year after age 21.

Living outside the safety net LGBT Families & Social Security

Security receive nothing when a parent retires, dies, or becomes disabled, even if that parent is the primary breadwinner for the family. The average annual loss of child survivor benefits for families when a deceased parent goes unrecognized for Social Security purposes is $9,420.6 The Social Security Administration reports that nearly 65% of all recipients of these benefits are under the age of 14, and 20% of children become eligible for these benefits before the age of 9. This means that these families can experience a significant annual loss for 10 years or more. For example, if the unrecognized parent of a five year old child leaves the workforce or passes away, the loss of family income will be an average of $4,044 annually until the child turns 18.7 In addition to survivor benefits received directly by the child, the Social Security system also provides a benefit to the surviving or former spouse of a worker who is caring for the workerâ&#x20AC;&#x2122;s child. The child must be under the age of 16 and the Social Security Administration explicitly provides that the child must be a natural or adopted child in order to qualify. This benefit provides the surviving parent with 75% of a workerâ&#x20AC;&#x2122;s basic benefit, or an average $886 per month.8 This benefit is only available to a spouse or former spouse. A same-sex spouse is not recognized for the purposes of this benefit, because of the Defense of Marriage Act (DOMA). The exclusion of a child being raised by a surviving samesex spouse from this benefit results in an average additional annual loss of $10,632 for that family.9 Adult child disability benefits Children who become disabled before age 22 have access to disability payments through adulthood based on their parentsâ&#x20AC;&#x2122; work history. These individuals, referred to by the Social Security Administration as adult disabled children, become eligible for child benefits if a parent is deceased or starts receiving retirement or disability benefits. Unlike adult disability benefits, the disabled adult child benefit is available without any personal work history and the payments continue as long as the adult child remains disabled and unmarried. Almost one million adult disabled children receive this benefit every year. It is crucial for the parents of disabled children, who will support their child financially throughout much of their lifetime, and ensures that a disabled adult relying on family support will not experience poverty when a parent leaves the workforce or passes away. Recognizing the power of these benefits to ensure a consistent quality of life both for the disabled adult child and for his or her family, the Social Security Administration also considers stepchildren and step-grandchildren to be eligible under certain circumstances. The average monthly benefit a disabled adult child receives is $705.84 or $8,470 per year.10 Because this benefit continues through adulthood, the loss to the child of a legally-unrecognized same-sex parent can be felt over decades. For example, an adult disabled child of an unrecognized parent would experience an average loss of $254,102 over a 30 year period.11

30 years Over a 30 year period, an adult disabled child of a legally-unrecognized parent would forfeit, on average, $254,102 in Social Security benefits.

Based on the average received by a child following the death of a parent, $785, for twelve months. See supra note 3.

7 See Christopher R. Tamborini et al., Social Security Administration, A Profile of Social Security Child Beneficiaries and their Families: Sociodemographic Map and Economic Characteristics 6 (2004), available at http://www.ssa.gov/policy/docs/ssb/v71n1/v71n1p1.pdf. 8

The average widowed mother/father benefit is $886/month. See Social Security Administration, supra note 3.

9 Id. Based on the average received by a child following the death of a parent, $886 for twelve months. 10 Social Security Administration, Annual Statistical Report on the Social Security and Disability Insurance Program, 2011 at 19, available at http://www.ssa.gov/policy/ docs/statcomps/di_asr/2011/di_asr11.pdf. 11

Based on receipt of average annual amount of $8,470 for 30 years. See id.

Living outside the safety net LGBT Families & Social Security

The following example illustrates the unfavorable outcomes for a family’s Social Security benefits where the only variable is whether a couple’s marital or family relationship is recognized for purposes of benefit eligibility. The 40 year old primary breadwinner for a family with two school age children passes away. The breadwinner’s basic benefit is $1,046.12 Different Sex, Married

Same-Sex, Unrecognized Parent

Same-Sex, Recognized as Parent

Each child receives 75% of deceased parent’s basic benefit ($1,046) which is $785.*

Children of a same-sex parent go unrecognized.

Each child receives 75% of deceased parent’s basic benefit ($1,046) which is $785.

Total of $1,570 in child survivor benefits would be payable.

Total child survivor benefits would be $0.

Total of $1,570 in child survivor benefits would be payable.

Spouse raising children under 16 years old receives 75% of basic benefit, which is $785.

Same-sex spouse raising children under 16 benefits would be $0.

Total benefits for a samesex spouse raising a child would be $0.

Total

$1,882/month $22,593/year

$0/month $0/year

$1,570/month $18,840/year

Difference

-$22,593/year

-$312/month -$3,744/year

Total surviving spouse benefits of $785.* Total income would be $2,355, but the family maximum benefit allowed will be $1,882.12

* indicates amount before adjustment for the family maximum benefit

12 Assuming a family maximum benefit of 180 percent of the deceased’s basic benefit.

Living outside the safety net LGBT Families & Social Security

Same-sex spouses and partners The exclusion of same-sex spouses and domestic partners from Social Security benefits has a long-term, life changing economic impact on couples and families across the country. More than 140,000 same-sex couples have formalized their relationships under state law.13 Among these are 50,000 same-sex couples who are legally married under state law. According to recent census data at least half a million couples live completely unrecognized across the country in long term, committed relationships.14 Social Security spousal benefits provide much needed financial support for families when a worker retires, becomes disabled or passes away. Social Security spousal benefits are also available for divorced spouses if the marriage lasted at least 10 years. There is no limit to the number of former spouses that can be eligible for benefits based on one worker’s Social Security history. Although same-sex couples can marry in nine states and the District of Columbia, these couples remain unrecognized by the federal government and in many states. Even legally married same-sex spouses are considered legal strangers for the purposes of Social Security because of DOMA. This results in the denial of all benefits regardless of the length of the relationship, the number of children in the household or legal recognition of the marriage on the state level. This financial loss is compounded for families in which both same-sex partners or spouses are not recognized as legal parents. As the baby boomer generation ages over the next ten years, the number of LGBT older adults is also expected to continue to grow. The routine denial of federal protections and benefits to same-sex couples and their children will put this vulnerable population at a greater risk of isolation and poverty. Survivor Benefits for spouses The Social Security system recognizes that the death of a spouse is a financial as well as emotional loss for a family. Social Security benefits are designed to supplement families’ incomes and to provide surviving spouses with some level of financial stability. A surviving spouse is eligible to receive benefits on the decedent’s Social Security record when he or she reaches retirement age or at any time if he or she is disabled or is raising the worker’s child. On average, a retirement-age surviving spouse receives $1,184 monthly.15 For many survivors and their children, Social Security benefits ensure that they can remain in a family home.

A legally-unrecognized child of a deceased same-sex parent could forfeit as much $15,072 annually in survivor income or as much as 13

256,224

before they reach age 18.

Marriage for Same Sex Couples, supra note 1.

14 See U.S. Census Bureau, American Community Survey Briefs: Same-Sex Couple Households 1 (2011), available at http://www.census.gov/prod/2011pubs/acsbr10-03.pdf. 15 Social Security Administration, Social Security: Understanding the Benefits 21 (2012), available at http://www.ssa.gov/pubs/10024.pdf.

Living outside the safety net LGBT Families & Social Security

Surviving same-sex spouses and their children are too often faced with the financial free-fall that these safety-net benefits were designed to prevent. A surviving spouse who is retirement age is often entitled to 100% of the deceased spouse’s benefit. In order to maximize benefits, a surviving spouse with his or her own work history may choose to receive a benefit based on either his or her own history or that of his or her deceased spouse. Same-sex surviving spouses are denied this option, potentially reducing the household income substantially, especially if the surviving spouse was not the primary breadwinner. Spousal Disability and Retirement Benefits Disability benefits can be provided either through Social Security or through the supplemental security income (SSI) program. The Social Security Administration estimates that 30% of all workers will become disabled before reaching age 62. This often sudden decrease in household income can be devastating for a family. A spouse or former spouse of a disabled worker becomes eligible to receive benefits when he or she reaches retirement age, or at any time if he or she is raising the couple’s child. Social Security benefits are also available for a retired worker’s spouse. These benefits provide a spouse up to one half of the retired worker’s full retirement benefit. As discussed above, when the retired worker passes away the surviving spouse then becomes eligible to receive benefits on the worker’s Social Security record. A same-sex spouse of a deceased or disabled worker is not legally recognized and is not eligible to receive any of these benefits. The average monthly retirement benefit for a worker who retired at full retirement age is around $1,350.16 For single-wage-earning same-sex households, the non-working partner would have little or no personal work history and would be considered ineligible to receive spousal benefits even after reaching full retirement age. On average, this would result in a $675 monthly loss or $8,100 annual household loss — a loss that often goes on for a decade or more. Death benefits Recognizing the financial burden of burial and final illness, the Social Security system awards a one-time payment of $255 to partially offset costs. This payment can be made only to a surviving spouse. LGBT families who go unrecognized by Social Security are denied this benefit.

675 monthly $

On average, a full retirement age same-sex household with one wage-earner forfeits $675 monthly or $8,100 annually in lost spousal retirement benefits.

16 Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 2011 at 5.21 tbl. 5.B-1 (2012), available at http://www.ssa.gov/policy/ docs/statcomps/supplement/2011/supplement11.pdf.

Living outside the safety net LGBT Families & Social Security

The following example illustrates the inequities that result when the marriage of a same-sex couple is not recognized for purposes of determining Social Security benefits for the couple. Partner 1 retires at the full retirement age, is the primary breadwinner, and is considered to be a maximum earner with a basic benefit of $2,513.60. Partner 2 is considered to be a scaled low earner with a basic benefit of $945 and retires at age 66.

Different Sex, Married

Same-Sex, Married

Partner 1 receives a benefit of $2,513/month Partner 2 can opt to receive a total benefit that is equal to Â˝ of Partner 1â&#x20AC;&#x2122;s benefit in lieu of his/her own and receives $1,256/month.

Partner 1 receives a benefit of $2,513/month. Partner 2 receives benefit of $945/month.

Total Income:

$3,769/month $45,228/year

$3,458/month $41,496/year

In the above scenario if Partner 1 predeceases Partner 2:

Different Sex, Married

Same-Sex, Married in State

Partner 2 receives a combined benefit that is equal to100% of Partner 1â&#x20AC;&#x2122;s benefit of $2,513/month.

Partner 2 receives only his/her individual benefit of $945.

Total Income:

$2,513/month $30,156/year, which is 66% of original post-retirement household income.

$945/month $11,340/year, which is 27% of original post-retirement household income.

Living outside the safety net LGBT Families & Social Security

Options for Protecting All Families The Social Security system was designed to protect against poverty and hardship when families are faced with retirement, disability, or death of a spouse or parent. However, the system has failed to keep up with the changing face of the American family. At a time when more and more states are formally recognizing same-sex partnerships, the current system fails to provide LGBT families and couples with the protection they need and deserve. The time has come to end this pernicious form of discrimination. Congress must take steps to address these inequalities by ensuring that lawful marriages between same-sex couples are recognized by the federal government, and that LGBT families are equally supported by vital Social Security safeguards. Amend the Social Security Act Expand access to spousal benefits The Social Security Act currently provides benefits for spouses of deceased, disabled, or retired workers. However, DOMA prohibits the Social Security Administration from recognizing lawfully married same-sex couples for purposes of these benefits, and many state laws prohibit recognition of same-sex relationships. Congress should amend the Social Security Act to include same-sex domestic partners as eligible to receive equal benefits following the death, retirement, or disability of their loved one. Expand access to child benefits Currently, the Social Security Act defines “child” for eligibility purposes as the “child or legally adopted child” or “step child” of a worker. This definition has been interpreted in such a way as to exclude many children being raised by same-sex couples who are unable to both serve as legal parents due to state law restrictions. Congress should include language within the Social Security Act’s definition of “child” that reflects the permanent relationship between a legallyunrecognized same-sex parent and his or her child. Repeal the Defense of Marriage Act The Defense of Marriage Act (DOMA) created a federal definition of marriage that excludes same-sex couples. DOMA defines the term “marriage” to be between one man and one woman and “spouse” as a different sex husband or wife for federal purposes. DOMA prevents surviving same-sex spouses from receiving the Social Security benefits that they are otherwise entitled to. Repealing DOMA would be a significant first step toward ensuring that all couples have equal access to this crucial package of benefits. The Respect for Marriage Act (RMA) would repeal DOMA and would specifically provide an inclusive federal definition of marriage. The RMA would recognize all marriages entered into legally on the state level for purposes of federal law and marital benefits, including Social Security benefits.

Living outside the safety net LGBT Families & Social Security

ABOUT THE AUTHORS Robin Maril; Legislative Counsel, Administrative Advocacy, Human Rights Campaign. Dr. Carroll Estes; Chair of the Board of Directors, National Committee to Preserve Social Security and Medicare Foundation.

Staff Acknowledgements The authors wish to acknowledge the assistance of the staff from our organizations who have participated in the development of this report. Among the staff whom we thank for their dedication and their tireless efforts are the following: Human Rights Campaign, Allison Herwitt, Legislative Director; Brian Moulton, Legal Director; and Robert Villaflor, Design Director; National Committee to Preserve Social Security and Medicare, Daniel Adcock, Director of Government Relations and Policy; Webster Phillips, Senior Policy Advisor; and Julie Tippens, Director of Strategic Partnerships; National Committee Foundation, Ellen Morgenstern, Director. And finally, we would like to add a special note of acknowledgement for the leadership of our two organizations in the development of this report and their steadfast support, Chad Griffin, President, Human Rights Campaign; and Max Richtman, President and CEO, National Committee to Preserve Social Security and Medicare and National Committee Foundation.

Living outside the safety net LGBT Families & Social Security