Social Security has been running at a loss since 2010 because it now distributes more in benefits than it brings into the system in taxes.
As the Trustees for Social Security project, if no changes are made, this program will run dry of its reserve funds by 2033 and then only be able to pay 79% of scheduled benefits thereafter. It is this now-approaching shortfall that has pushed both the right and the left to call for change.
Social Security Reform Bill
Not surprisingly, with being the social safety net of the United States, it is the case that there is financial support in the social security system for millions of retirees, disabled people, and survivors of deceased workers.
Unfortunately for the program, it is facing financial challenges at an alarming rate, which could undermine the ability to pay complete benefits in upcoming years.
These have not only manifested in the Social Security 2100 Act and the Social Security Expansion Act but also are among the legislative efforts devised to address these matters with wide-ranging reforms.
For the first time in more than five decades, the bill would increase the benefits for all beneficiaries by 2%. This attempt also tries to make improvements on COLA so that it can better be aligned with the inflation that affects seniors.
Social Security Reform Bill Legislation Proposals
While these bills vary in specific approach, they generally try to increase benefits, broaden eligibility, and make tax adjustments that build the financial soundness of the program.
Social Security 2100 Act H.R. 4583:
Representative John Larson introduced an omnibus bill that would aim to strengthen Social Security through various means:
- Increase Benefits: Increase 2 percent for all beneficiaries to really provide an earnings boost to retirement income.
- It further suggests modifying the COLA to reflect the increased living costs better of older Americans, so that benefits and cost of living rise at par.
- Eligibility Expansion: This bill restores the dependent children of retired or deceased workers to eligibility for benefits when they reach age 26 if they are full-time students, offering further financial security to young adults as they go for higher education.
- It also aims to eliminate provisions that currently cap benefits to spouses and widows who are themselves recipients of government pensions, so that people benefit fully from this scheme.
- Taxation reforms: To finance these improvements, the government proposes to impose Social Security payroll taxes on income above $400,000 in a move to ensure that rich earners contribute a fairer share to the sustainability of this program.
Social Security Expansion Act (S.393):
This is another bill initiated by Senator Bernie Sanders. The core focus is enhancing benefits and adjusting taxes that have issues with touching Social Security:
- It increases the primary amount of insurance for some beneficiaries, providing them with a much larger sum than that contributed over their working years in terms of benefit.
- It also looks to introduce a new minimum level of benefit for low earners, meaning those who have paid modest contributions to Social Security still stand to walk away with a reasonable quality of retirement benefits.
- Tax Implications: The payroll taxes will now be at a level above $250,000 to see to it that the higher earners pay for the program’s survival.
- This measure also increases the net investment income tax for high earners, which will mean an increase in revenue going into the Social Security program.
Eligibility under Reforms as Proposed by the Bill
Eligibility for both the Social Security 2100 Act and the Social Security Expansion Act would broadly apply to all those currently receiving benefits under Social Security or who, in the future, will become eligible for Social Security benefits.
However, the eligibility criteria might be slightly different depending on specific provisions that may be included in each of the bills.
- The two bills will most likely apply to anyone regardless of age so long as they are eligible to receive Social Security benefits.
- Provisions may be subject to age-related eligibility requirements for dependent children or the types of benefits.
- Most provisions will be income-insensitive and available to any individual.
- Provisions may be income-sensitive and subject to eligibility limitations for tax adjustments or specific types of benefits.
- In general, persons who have gained employment and paid into the Social Security system over enough years will qualify for benefits.
- How to Apply for Retirement, Disability, and Survivor Benefits The details of work history to become eligible under one of the eligibility criteria for benefits include retirement benefits, disability benefits, and survivor benefits.
- The general rule is that U.S. citizens and specific legal residents are eligible for Social Security benefits.
- Receipt of Social Security benefits can be affected by other government programs, including Medicare or Supplemental Security Income (SSI).
Effects of Proposed Social Security Reform Bill
The Social Security 2100 Act and the Social Security Expansion Act:
- Equity: The acts targeted high-income earners for more contributions and strengthened the benefits for low-income people to make the system more just.
- Financial Stability: Social Security must be reformed in the long run, besides saving one from tremendous benefit cut in the future.
- Intergenerational Fairness: Reforming Social Security will ensure the same levels of benefits for future generations as are being enjoyed by current beneficiaries.
- Economic Necessity: Social Security provides for millions of Americans a lifeline, meaning that appropriate benefit levels should be considered to allow Americans from all walks of life to avoid old-age poverty.
- Intergenerational Equity: As the future of Social Security hangs in the balance, future generations should not be burdened with unpopular large cuts or tax increases to support this program.