It’s been almost 100 years since Franklin D. Roosevelt signed the Social Security Bill into law in 1935.  And, contrary to what most people believe, there was a “Lump Sum Death Benefit” (LSDB)  applied to that bill that took effect at that time.  However, the original LSDB was discontinued in 1939 at a time when the maximum payment was $315. . . which you can see was more than today’s standard (and maximum) $255 benefit.  The average Lump Sum Benefit in 1939, however, was approximately $97.

 

The Lump Sum Death Benefit was reinstated in 1954, but with the maximum benefits capped at $255.  There have been other minor changes to the law since that time, but the maximum benefit has remained capped at $255.

 

That may all change if Senate Bill #5178 introduced by Senator Peter Welch of Vermont on September 25, 2024, makes its way into becoming a law of the land.  The bill, co-authored by Senator Bernie Sanders of Vermont and Senator Elizabeth Warren of Massachusetts, is titled “A bill to amend Title II of the Social Security Act to update the amount of Social Security lump sum death payments and index lump sum death payments to inflation”.   You can follow the bill from this website.

 

This article from CNBC gives us some more information on the proposed legislation.  In it, bill author Senator Welch makes these statements:

 

• “The change is aimed at helping to alleviate the financial burden for families following the loss of a loved one”
• “Funeral costs should be the last thing on the minds of grieving families when they lose a loved one”
• “. . .because benefits designed to help folks afford funeral expenses haven’t kept pace with inflation, the cost of burying a loved one has become top of mind for many mourning families”

 

The CNBC article also tells us that the terms of the bill call for a $2,900 death benefit that would start as early as 2025.  That amount would then be indexed for inflation similar to the Social Security cost-of-living adjustment (COLA).

 

The history of Social Security

The history of the Social Security Lump-Sum Death Benefit

 

Funeral Director Daily take:  At first this looks like a boon for funeral homes and families where they would have more money to take care of Death Care expenses.  However, before this bill becomes law there are plenty of hoops to pass through, including wondering how it would be funded by the United States Government.

 

And like many consumers will do, I just Googled “Cremation costs in Minneapolis”, which is the nearest large city to my residence.  Google told me that the costs would be between $1,875 to $2,995.  I’m guessing that upon examination that those prices would be for some variant of what I would call a Direct Cremation with No Services (DCNS).

 

What worries me some, and I can see this happening because those quoted cremation cost service dollar numbers are less than the proposed Social Security benefits according to S.5178, is that we would see a proliferation of television or streaming advertisements that would announce from companies that DCNS services would be done at “no cost to the consumer”.  The catch, of course, is that those services would be done with the thought process that the client family would sign the lump-sum death benefit over to the provider. . . .and with the benefit indexed for inflation, this business practice could well continue.

 

So, at first thought without doing a complete study of the situation, I’m not so sure that this would be a great idea for traditional funeral homes with a high cost of overhead at this time nor would competition advertising those practices be good for traditional funeral homes.  From my point of view, I’m guessing that revenues per service, in total, would head downward because of this type of practice.

 

On the other hand, looking at it from a consumer’s perspective, it is an additional immediate help of more than $2,600 in benefit than is received at this time.  It’s hard to argue that would not be a good thing for a consumer.

 

It’s notable that these senators want to help citizens pay off the costs of death care.  However, it is also notable that the bill was entered in September of an election year and that it can be used as a populist benefit but potentially never get pushed through the Senate once the election is over.  It’s difficult to know the exact intent of why it was put into play at this time. . . .

 

Final Thoughts:  I’ve been fortunate that I’ve had a few friends who have served as United States Congressmen and/or United States Senators.  One of them who I still see from time to time is former U.S. Congressman Vin Weber of Minnesota.  (Vin Weber bio)

 

I can remember having talks with Congressman Weber in the 1980’s or 1990’s about Social Security and the SS LSDB.  What I vividly remember from those talks is how he told me that Social Security was an incredible insightful program began in the 1930’s with one major flaw  —  that flaw was the actuarial tables at that time never “correctly” took into consideration how long we would live. . . . that mistake has flawed Social Security almost since its inception.

 

According to Google AI, life expectancy for United States men in 1935 was 61.7 years of age and benefits from Social Security did not start until age 65.  Life expectancy for women at the time was 65. . . So, from those age estimates you can see that most citizens would never live long enough to receive benefits and even if you got to the benefit age, you did not collect benefits for very long.

 

Life expectancy today is 77 years for men and 80 years for women and the basic age of early benefits has been lowered to 62.  i.e. most people now live to collect the benefits and actually collect benefits for a very long time.

 

According to then Congressman Weber, it has been this actuarial mis-calculation, in addition to benefits added to the program that were never part of the original calculations, that has brought on many of the problems with the deteriorating Social Security benefit system.

 

More news from the world of Death Care:

• A Local Perspective:  Learning from past environmental mistakes.  Las Vegas Optic (NM)
• Transamerica introduces final expense insurance powered by Bestow.  PR Newswire
• Cemetery superintendent counters claims of members who resigned.  Marblehead Current (MA)
• Remains at “lost cemetery’ removed for tests.  BBC News  (Great Britain)
• Innovative Pasco landowner finds new revenue in eco-friendly burials.  Business Observer (FL)

 

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