Let’s get into update on some legislation aimed at improving financial shortfalls for millions of seniors. At the head of this effort, John Larson from Connecticut currently sits as the chairman of the House Ways and Means Social Security Subcommittee. The legislation adopts the consumer price index for the elderly as the basis of the annual cost-of-living adjustment and applies the payroll tax to annual wages above $400,000. In an email, Larson states “We are in the process of working toward markup, which will be held hopefully very soon”. A new report by the Committee for a Responsible Federal Budget criticizes the bill for only keeping Social Security solvent until 2038, only four years from its current projected depletion date.
The bill is a “substantial downgrade from 2019′s Social Security 2100 Act, which we’ve praised as a responsible solution to Social Security’s financial troubles,” according to the policy group. The previous version of Social Security 2100 would have subjected earnings over $400,000 to the payroll tax while also gradually raising the payroll tax rate from 12.4% to 14.8%, the report states. A Sacred Trust “removes nearly half of the solvency-improving revenue from the original bill, while dramatically expanding new spending, but making that spending temporary to cover up the costs. Specifically, the new legislation removes adjustments to the payroll tax rate, which were responsible for closing two-thirds of the solvency gap, while adding eight new benefit expansions that would further increase benefits for disabled workers, spouses, young adults, and the very old. To obscure the cost of its benefit expansions, the legislation would set them all to expire after five years. A Sacred Trust would close half of the solvency gap, while SS2100 closed the full solvency gap, the committee said.“
Assuming the five-year benefit expansions are made permanent, as clearly intended, we estimate they would consume more than all of the revenue increases. In fact, a permanent version of A Sacred Trust would actually worsen solvency.” The Sacred Trust bill would push to 2038 the trust fund’s depletion date, at which it would be forced to cut benefits 20%. A permanent version of the Sacred Trust legislation, the report asserts, “might actually advance the solvency date so that Social Security runs out of reserves one year earlier.” In responding to the report, Larson told ThinkAdvisor in the email that “the COVID pandemic and its impact on seniors and inflation has given a new urgency to act” and pass the legislation. Social Security 2100: A Sacred Trust, Larson said, “gives beneficiaries the improvements and security they desperately need now. Democrats will keep fighting in Congress to improve solvency and benefits over time without harming the Trust Funds, but the seniors and people with disabilities we’ve heard from can’t wait. The time to act is now.”