A bill that would drastically overhaul how Social Security benefits are provided was introduced in the U.S. House of Representatives. Unfortunately the bill really has little chance of becoming law with the current makeup of Congress, but don’t expect the Social Security 2100 Act to go away either. Democrats have set their agenda on how to improve and fund Social Security benefits and will likely not scrap their plans, but any future chance of passing the bill will likely depend on what happens during the next few election cycles.
The bill calls for benefit increases, protection for low-wage workers and increased revenue through elimination of the Social Security tax cap. Below are all the different items included in the bill.
- Benefit bump for current and new beneficiaries – Provides an increase for all beneficiaries that is the equivalent to about 2% of the average benefit. The US faces a retirement crisis and a modest boost in benefits strengthens the one leg of the retirement system that is universal and the most reliable.
- Protection against inflation – Improves the annual cost-of-living adjustment (COLA) formula to better reflect the costs incurred by seniors through adopting a CPI-E formula. This provision will help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection will especially help older retirees and widows who are more likely to rely on Social Security benefits as they age.
- Protects low-income workers – No one who paid into the system over a lifetime should retire into poverty. The new minimum benefit will be set at 25% above the poverty line and would be tied to wage levels to ensure that the minimum benefit does not fall behind.
- Improves benefits for widows and widowers in two income households
- Repeals the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) that currently penalize many public servants.
- Ends the 5-month waiting period to receive disability benefits.
- Provides caregiver credits to ensure that caregivers are not penalized in retirement for taking time out of the workforce to care for children or other dependents.
- Extends benefits for students through age 22.
- Increases access to benefits for children who live with grandparents or other relatives.
- Have millionaires and billionaires pay the same rate as everyone else – Presently, payroll taxes are not collected on wages over $142,800. This legislation would apply the payroll tax to wages above $400,000. This provision would only affect the top 0.4% of wage earners.
- Extends the depletion date (when a 20% cut to benefits would occur) to 2038 – Giving Congress more time to ensure long term solvency of the Trust Funds.
- Social Security Trust Fund Established – Social Security provides all-in-one retirement, survivor, and disability benefits funded through the dedicated FICA contribution paid by workers. There are technically two trust funds, Old-Age and Survivors (OASI) and Disability Insurance (DI), and that are usually referred to as the Social Security Trust Fund. This provision combines the OASI & DI trust funds into one Social Security Trust Fund, to ensure that all benefits will be paid.
