History of Social Security

A History of Social Security - 2 Part Series

Pictured: Ernest Ackerman, retired Cleveland motorman, who retired one day after the Social Security program began, first recorded payment

Social Security works because it speaks to a universal human need. All people throughout human history have faced the uncertainties brought on by death, disability and old age. Prior to the turn of the 20th century, the majority of people in the United States lived and worked on farms and economic security was provided by the extended family. However, this arrangement changed as America underwent the Industrial Revolution. The extended family and the family farm as sources of economic security became less common. Then, the Great Depression triggered a crisis in the nation's economic life. It was against this backdrop that the Social Security Act emerged.

THE SOCIAL SECURITY ACT
On June 8, 1934, President Franklin D. Roosevelt, in a message to the Congress, announced his intention to provide a program for Social Security. Subsequently, the President created by Executive Order the Committee on Economic Security, which was composed of Frances Perkins, Secretary of Labor, Chairwoman; Henry Morgenthau, Jr., Secretary of the Treasury; Henry A. Wallace, Secretary of Agriculture; Homer S. Cummings, Attorney General; and Harry L. Hopkins, Federal Emergency Relief Administrator. The committee was instructed to study the entire problem of economic insecurity and to make recommendations that would serve as the basis for legislative consideration by the Congress.

In early January 1935, the Committee made its report to the President, and on January 17 the President introduced the report to both Houses of Congress for simultaneous consideration. Each House passed its own version, but eventually the differences were resolved and the Social Security Act was signed into law on August 14, 1935. In addition to several provisions for general welfare, the new Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement.

IMPLEMENTING THE ACT
One provision of the Act established a bipartisan Social Security Board (SSB) composed of three members appointed by the President. The original members were John G. Winant, Chairman; Arthur J. Altmeyer; and Vincent M. Miles. The SSB was faced with the tasks of providing employers, employees and the public with information on how earnings were to be reported, what benefits were available and how they were to be provided. In addition, sites for field installations had to be chosen and personnel to staff these offices had to be selected and trained.
http://www.ssa.gov/history/pics/ssbbrief.jpg
First formal meeting of the Social Security Board, 9/14/35. Left to right: Altmeyer, Winant and Miles.

The monumental first task was the need to register employers and workers by January 1, 1937, when workers would begin acquiring credits toward old-age insurance benefits. Since the SSB did not have the resources available to accomplish this, they contracted with the U.S. Postal Service to distribute the applications, beginning in November 1936. The post offices collected the completed forms, typed the Social Security number (SSN) cards, and returned the cards to the applicants. The applications then were forwarded to the SSB's processing center located in Baltimore, Maryland, where the numbers were registered and various employment records established. Over 35 million SSN cards were issued through this procedure in 1936-37.

First SSN account established for
John D. Sweeney, Jr. of New Rochelle,
New York.
Lowest number ever issued
(SSN 001-01-0001) to Grace Dorothy
Owen of Concord, New Hampshire.

Postmen in New York City distributing SSN applications in November 1936.

FIRST PAYMENTS
Under the 1935 law, monthly benefits were to start in 1942. From 1937 until 1942, Social Security was to pay benefits to retirees in the form of a single, lump-sum refund payment. The earliest reported applicant for a lump-sum refund was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman's pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents. The average lump-sum payment during this period was $58.06. The smallest payment ever made was for 5 cents.
http://www.ssa.gov/history/pics/ackerman.gif

Stay tuned for part two...

If you would like more information on this topic, fill in the form below and click submit and we will get right back to you.

Name

Email Address

Postal Address

City

State

Zipcode

Phone

Please fill in any details or questions here

The Retirement Investing Newsletter - Retire Richer, Sooner, Smarter. Start planning NOW because later may come sooner than you think!