Bill would buy extra time to reform Social Security
February 1, 2022 | View PDF
While the chances of action begin as slim at best, House Democrats recently reintroduced a Social Security reform bill designed to give lawmakers a few more years to figure out how to fix the long-term solvency of the Social Security Trust Funds, among other things.
Right now, those trust funds – the Old-Age and Survivors Insurance Trust Fund (OASI), which pays retirement and survivor benefits, and the Disability Insurance (DI) Trust Fund, which pays disability benefits, are both scheduled to run out of money in just 13 years.
At that time – in 2034 – only 78% of promised benefits will be payable. The new legislation proposes to extend that date to 2038 to buy lawmakers more time to figure out a long-term solution to solvency.
In an effort to broaden the effort to include Republicans and get enough support to pass something, Rep. John Larson, D-Conn., chair of the House Ways and Means Social Security Subcommittee, is making some changes to previous versions of the legislation he’s introduced.
He has also included proposals that President Joe Biden has advocated, including setting a higher minimum benefit for low-income workers.
Under Larson’s proposal, benefits would be set at 125% above the poverty line and tied to current wage levels. It would also boost benefits for both new and existing beneficiaries amounting to about 2% of the average benefit. Annual cost-of-living adjustments would be tied to the Consumer Price Index for the Elderly or CPI-E. This experimental index is thought to better reflect the costs seniors face by focusing on health care and other necessities that seniors pay. Previous versions of Larson’s proposals have had nearly unanimous Democratic support but have failed to get Republicans on board.
Larson’s proposal would also repeal rules that reduce Social Security benefits for public workers and their spouses, widows or widowers who also have pension income. It also includes other changes, including increasing certain widows’ and widowers’ benefits, boosting beneficiaries’
benefits after 15 years, eliminating a five-month waiting period to receive disability benefits and creating caregiver credits so that the retirement benefits of those who take time out of the workforce are not reduced. At a recent Congressional hearing, some of these ideas seemed to garner some Republican support.
The elimination of one proposal in particular, a higher payroll tax rate, might also get some Republicans on board. As it stands, Larson’s current plan calls for increasing Social Security taxes paid by higher-wage earners. In 2021, those taxes are capped at $142,800 in wages and in 2022 that would rise to $147,000. This proposal reapplies taxes on wages at $400,000 and up, which is in line with President Biden’s proposals. But at the same time, it would also raise the thresholds above which income, including Social Security, is taxed. The plan calls for changing that to $35,000 for individual and $50,000 for couples, up from $25,000 and $32,000 respectively.