Annuities could play an important role in the proposed private Social Security account program.[@@]

Officials who insisted on anonymity discussed that program detail Wednesday during a background briefing that took place before President Bush delivered his State of the Union speech.

Many Democrats are opposing the private account proposal, and even some Republicans appear to object.

But, if Congress approves the Bush proposal, the private account program could end up resembling federal employees’ popular Thrift Savings Plan, according to the officials who gave the briefing.

- Investment options: Bush talked during his speech about offering a menu of investment options similar to those offered by the Thrift Savings Plan. Thrift plan members have a choice of 5 funds: A government securities fund, a fixed-income fund, a common stock index fund, a small-cap stock fund and an international stock index fund.

Barclays Global Investors, San Francisco, manages 4 of the funds, and a plan board manages the fifth fund, the government securities investment fund.

- Who would get the private accounts? The officials who gave the briefing said the administration believes accounts would be phased in, and the schedule for phasing the program in would be based on the ages of the participating workers. Starting in 2009, workers born in 1965 or earlier who participate in the private account program might gain complete investment control over their accounts, the official said.

- How much could workers contribute? Up to 4% of their income. The initial cap might be $1,000.

- How would retirees tap the account funds? When workers with private Social Security accounts retired, the funds would be put in annuities, and the annuities would pay out income to retirees over time.

A unit of MetLife Inc., New York, handles benefit annuitization for the Thrift Savings Plan.

The American Council of Life Insurers, Washington, has been working for years to educate government officials about the value of annuities.

“Our message is getting through: The administration appears to recognize the importance of annuitization,” says ACLI spokesman Jack Dolan.

- What would happen if a worker or retiree died? The briefers said the funds would go to an heir designed by the retiree.

- What would the fees be like for the companies managing the fund assets? The briefers pointed out that annual fees for participants in the Thrift Savings Plan amount to only about 0.3% of assets.

Jason Furman and Robert Greenstein, analysts at a private think tank, the Center on Budget and Policy Priorities, Washington, write in a comment about the briefing that the conclusion they draw is that the private account program probably would have a “net neutral effect” on the fiscal situation of Social Security program and might have no direct effect on Social Security solvency.

The budget center analysts also note that they believe young workers who enter the private account program would face the same Social Security benefits cuts facing other young workers.

Workers in the private account program might have to earn a minimum return of 3% above the inflation rate before they would get anything other than the minimum guaranteed Social Security benefits, according to the budget center analysts.