The sad part is that I think that most people will look at this bill and focus on the parts that they, philosophically, don't like rather than emphasizing that it represents an excellent effort at potential bipartisan compromise. I hope I'm wrong.
What's in the bill?
- The Social Security Wage Base, that is the amount subject to the 6.2% OASDI tax that is currently at $118,500, will increase as follows:
- $156,550 in 2017
- $194,600 in 2018
- $232,650 in 2019
- $270,700 in 2020
- $308,750 in 2021
- after 2021, to be determined by the Secretary of the Treasury to capture 90% of all FICA-covered wages
- Change the current 3-band formula for calculating Social Security benefits to a 4-band formula thus allowing that all compensation considered for purposes of Social Security taxes also be considered for Social Security benefits, but not increasing Social Security benefits for the highest earners.
- Beginning in 2022, the Social Security Normal Retirement Age (SSNRA) would again begin to gradually increase. This would have little, if any, effect on people currently close to SSNRA, but would reflect longer work spans and life spans for younger workers. This piece of the bill would be reexamined by actuaries every 10 years to study the effects of mortality improvements.
- Change the basis for calculating the annual COLA for current SS beneficiaries by putting more weight on, for example, food, clothing, and transportation, and by putting relatively lower weight on housing, medical care, and recreation. The intent is to more closely mirror the necessary spending of a senior citizen as compared to that of an average urban wage earner.
- Create a minimum benefit at 125% of the poverty level
- Increase the benefit amount (I can't quite determine how this will work) after a person has been eligible to have been in pay status for 20 years
- Base the SS benefit on 38 years of SS wages rather than 35
- No legislation can be considered that would temporarily lower SS revenue for a year
Is this what I think is the best solution for Social Security? Probably not.
On the other hand, is this the best solution that I have seen that has a chance of passing Congress and being signed into law by the President? In my opinion, it has the best chance since 1983.
Let's see where it goes.