A draft report by the president's Social Security advisory commission recommends bringing into the system all future federal employes and all current federal employes with less than five years of government service.
It also recommends removing Social Security from the federal budget as a way of insulating Social Security tax and benefit decisions from future budget politics.
The draft, prepared by the commission staff, is meant to reflect all points of agreement reached so far. If commission Republicans and Democrats can reconcile their differences further by their Jan. 15 reporting date, it could change.
At this point, however, inclusion of federal employes is the only major step on which the two sides have been able to agree to raise the $150 billion to $200 billion they say is needed to keep Social Security solvent over the next seven years.
Some combination of tax increases and benefit curtailments presumably will be required to raise the rest, but there are differences over what the mix should be.
Most Democrats on the 15-member commission favor raising most of the money by moving up to 1984 Social Security tax increases already scheduled for 1985, 1986 and 1990. Most of the Republicans would rely mainly on benefit cuts, including curtailment of the cost-of-living increases that now go automatically to beneficiaries each year.
Several commission members, including Chairman Alan Greenspan, have said they doubt the commission can agree unless some agreement first is reached by President Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.). But there have been no signs of that, and a request by one member that the commission meet again before Jan. 15 was turned down Monday by a majority of the members as fruitless.
The largest of the Social Security trust funds will run out of money this summer unless Congress takes some action in the interim, as all sides expect it to do.
The commission informally agreed on the federal employe and federal budget issues last year. The draft report puts these agreements in formal terms.
It says that all federal workers with less than five years of service as of Jan. 1, 1984, should be brought into Social Security as of that date, meaning they would owe the full tax and be eligible for all benefits.
About 500,000 government employes would be covered the first year, experts estimate. Federal employes are already paying the Medicare part of the Social Security tax, as of Jan. 1 of this year.
Federal employes forced into Social Security would no longer be eligible for the current civil service retirement system; only those with five or more years of service would remain in that.
For those put in Social Security, the commission is assuming that the federal government would develop a supplementary system. Future federal retirees then would receive both Social Security and supplementary benefits just as many private workers do now.
The report also recommends that as of Jan. 1, 1984, all employes of private nonprofit organizations be brought into Social Security. At present, the nonprofit employer decides whether to participate and about 900,000 nonprofit employes are not covered, while about 5.2 million are.
The report makes no specific recommendation on coverage for the 4 million state and local government employes presently outside the system. State and local governments also can take part or not now, as they choose. While noting that the commission considers such coverage "desirable," the report says many commission members believe there are constitutional or political problems in trying to require it.
These other points of agreement are contained in the draft:
The fundamental structure and principles of Social Security are sound and should not be changed, but the system (excluding Medicare) will need $150 billion to $200 billion in new revenues or cuts over calendar years 1983 to 1989 to stay solvent. Its long-term deficit over the next 75 years is 1.8 percent of taxable payroll.
Social Security should be removed from the unified federal budget so that Congress and the president would not be tempted to look to Social Security cuts each year in cutting the budget generally. Two public members should be added to the Social Security board of trustees. Social Security reserves should be invested in government bonds that reflect current yields on long-term government borrowing.
Some way should be found to smooth out the flows of Social Security funds so that temporary increases in inflation and unemployment cannot throw the system into insolvency. Keeping cost-of-living increases 1.5 percentage points below the increase each year in wages in the economy as a whole would be one way. Pegging them to the percentage increases in prices or wages, whichever is least, would be another. Currently, benefits rise each year in tandem with prices.
Ways should be found to improve benefits for women, such as allowing a few years of free coverage for child-care years or liberalizing benefit rules for widows and divorcees.