U.S. Rep. John Larson, who represents greater Hartford, Bristol and New Britain, recently sat down with attorney Dean Kilbourne and me to talk about a bill he introduced in Congress called the Social Security 2100 Act. Larson, the ranking member of the Ways and Means Social Security subcommittee, shed light on and offered insight into proposed changes to Social Security. I asked Congressman Larson to explain his bill.
Larson stressed four major components of the act. He said the Social Security 2100 Act would expand benefits for current and new beneficiaries by providing an increase that is the equivalent of 2 percent of the average benefit. The United States faces a retirement crisis. A modest boost in Social Security benefits strengthens the one leg of the retirement system that has always stood up.
This act would provide protection against inflation by improving the annual cost of living adjustment (COLA) formula to better reflect the costs incurred by seniors through adopting a CPI-E formula. This will help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection would especially help older retirees and widows who are more likely to rely on Social Security benefits as they age.
The Social Security 2100 Act would protect low income workers. No one who paid into the system over a lifetime should retire into poverty. The new minimum benefit would be set at 25 percent above the poverty line and would be indexed to wages to ensure that the minimum benefit does not fall behind.
It would also cut taxes for beneficiaries. Over 10 million Social Security recipients would see a tax cut. Presently, your Social Security benefits are taxed if you have non-Social Security income exceeding $25,000 for an individual or $32,000 for couples. This would raise that threshold to $50,000 and $100,000, respectively.
This act calls for holding SSI, Medicaid, and CHIP beneficiaries harmless, meaning that it will ensure that any increase in benefits from the bill do not result in a reduction in SSI benefits or loss of eligibility for Medicaid or CHIP.
Congressman Larson further explained how we would pay for the increased benefits. He said with this bill, millionaires and billionaires would pay the same rate as everyone else. Presently, payroll taxes are not collected on wages over $128,400. This legislation would apply the payroll tax to wages above $400,000. This provision would only affect the top 0.4 percent of wage earners.
Every employed person would pay 50 cents per week to keep the system solvent. This increase would gradually phase in the contribution rate beginning in 2019 so that by 2042, workers and employers would pay 7.4 percent instead of 6.2 percent today. For the average worker, this would mean paying an additional 50 cents per week every year to keep the system solvent.
Additionally, this bill would establish a Social Security Trust Fund. 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). The combined trust funds are what is usually referred to as the Social Security Trust Fund. This provision would combine the OASI and DI trust funds into one Social Security Trust Fund. Enactment of this provision would not change Social Security’s overall financial condition and would not increase the deficit or debt.
In summary, Congressman Larson pointed out the good news - there is a path forward to put Social Security on the right track that won’t add a penny to the deficit, would achieve solvency beyond the 75-year window and would expand benefits in a meaningful way. Larson, along with over 173 of his colleagues, who are original co-sponsors of this legislation, believe there can be no further delay. With 10,000 baby boomers a day becoming eligible for Social Security benefits, Congress must act now. Social Security is not an entitlement. It is the insurance that we’ve paid for and earned.
Attorney Daniel O. Tully is a partner in the law firm of Kilbourne & Tully, P.C., members of the National Academy of Elder Law Attorneys Inc., with offices at 120 Laurel St., Bristol 860-583-1341.