Question

How is Social Security different from a private defined benefit plan? When and why is Social Security projected to become insolvent? What are some possible solutions to the problem? Why are these solutions difficult to implement?

Answer 1

Social security is different from a private defined benefit plan. One of the benefit plan is pension plan. Pension plan is a plan on which employer promises to pay his employee after a specific age or retirement from their age. A pension are pay in lump - sum amount or in regular installment i.e. monthly, half yearly or yearly.

Many Government and public industries as well as large companies i.e. Multi National companies etc. Provided his employee a pension benefit plans means of compensating his workers in lie of increased or extra pay like bonus, basic and Dearness allowance etc.

In a private sector, benefit plans are funded exclusively by employers contribution. Employers are not contributed and not giving any retirement benefit plans to his employees.

Many other retirement plans are giving by employers in governemnt and public industries.

Social security projected is became insolvent due to not giving focus on these securities. If peoples or president of the social security are not given any focus on the same so one day socail security became insolvent.

Social Security is funded by the general public. Social security is come for the help of poor peoples, old age homes, disasters etc. If the funded are not given by the people are in well manner, then the social security became insolvent.

If the funded are given by peoples to social security and the chief of these security are not well educated and well experienced. He have not any knowlegde of finance that how can maintain fund and where we can invest the same by which we can earn more returns. If these knowledge are not linked with social security then, the social security became insolvent.

The Solution of the same problem is to appoint the chief of social security is well experienced and well educated. By well experienecd person, person knows the investment of fund by which the social security earns a huge return.

we take an example of Life insurance pplicy company. It is also a social security company by which if LIC are not able to manage his funds then LiC became insolvent.

These solutions are difficult to implement because of not fully utilidation of resource and not well educated and experienced persons. By which social security can not survive and became insolvent.