This report provides an overview of research findings on major Federal welfare system design issues. The report is based on: a review of 100 major welfare studies completed since 1975; interviews with Federal, State, and local welfare officials; the results of the General Accounting Office's (GAO) welfare work; and an analysis of the Census Bureau's Survey of Income and Program Participation data. The report focuses on questions concerning: (1) benefit targeting and adequacy (whom should welfare serve and how much should recipients get?); (2) system complexity (what form should benefits take, and how should benefits be funded and delivered?); (3) work incentives versus dependency; and (4) impact on the family unit. Several important problems identified are the following: (1) confusion over whether welfare should provide for demonstrated needs or strive to eradicate poverty altogether; (2) complexity, high cost, and inefficiency of the existing program; and (3) while it has not been proved that receipt of welfare is a major disincentive to work, welfare appears to have done little to encourage work. Research does not support the view that welfare encourages two-parent families to break up, or that unmarried women have children in order to become eligible. Three appendices include a discussion of welfare evolution and reform efforts; selected summary information for all household units in the United States for September, 1983; and a list of GAO welfare reports issued, 1980-1987. A bibliography of major studies reviewed is also included. (KH)