A Brief History of Major Social Security Reforms
1935: Under President Franklin D. Roosevelt, the Social Security Act is signed into law, providing financial relief to people 65 and older, the unemployed, and low-income families with dependent children. The benefits are funded by a 2% Federal Insurance Contribution Act (FICA) payroll tax.
1939: Under President Franklin D. Roosevelt, amendments to the Social Security Act are signed into law providing benefits to “dependents” including aged spouses, aged survivors, and widows caring for minor children.
1940: Under President Franklin D. Roosevelt, a lump-sum death benefit is created, a “minimum benefit” of $10 per month is established, and the Old-Age Account is replaced with a trust fund containing 100% of the collected FICA payroll taxes.
1950: Under President Harry S. Truman, coverage is expanded to self-employed workers, federal civilian employees, and some state and local government employees. Benefits also increase by 77% and the “minimum benefit” rises to $20 per month. Those over the age of 75 are exempted from the earnings test, and the payroll tax is set to gradually rise from 2% to 3.25% by 1970.
1952: Under President Harry S. Truman, benefit levels increase by 12.5%.
1954: Under President Dwight D. Eisenhower, benefit levels increase by 13%, the payroll tax rate is set to increase to 4% by 1975, a new benefit formula disregards the 4 years of an individual’s lowest lifetime earnings, and the lump-sum death benefit is capped at $255.
1956: Under President Dwight D. Eisenhower, the Disability Insurance trust fund is created and monthly benefits are provided to disabled workers between the ages of 50 and 65. In addition, female workers and wives are able to claim reduced benefits at age 62, and widows can claim unreduced benefits at age 62. The benefit formula is also amended to ignore the 5 years of an individual’s lowest lifetime earnings.
1958: Under President Dwight D. Eisenhower, benefits increase by 7% and become payable to the dependents of disabled workers. Disability benefits are also paid for 12 months retroactively if requirements had been met prior to enrollment. Payroll taxes also increase by 0.25%, ultimately rising to 4.5% by 1969.
1960: Under President Dwight D. Eisenhower, disability benefits are offered to any qualifying beneficiary and their dependents regardless of age.
1961: Under President John F. Kennedy, male retirees can begin collecting reduced benefits at age 62, and male widowers can collect unreduced benefits at age 62. In addition, the “minimum benefit” rises to $40 per month, and the payroll tax is set to gradually rise to 4.625% by 1968.
1965: Under President Lyndon B. Johnson, Medicare Part A (financed by a new 0.8% payroll tax) and Part B (financed by general revenues and premiums paid by enrollees) are created. Social Security benefits increase by 7% and the Social Security payroll tax is set to rise to 5.65% by 1987. Divorced wives and widows become eligible for benefits if their marriage lasted 20 years or longer.
1967: Under President Lyndon B. Johnson, benefits increase by 13% and it becomes easier for young workers to qualify for disability. The payroll tax rate is also set to rise to 5.9% by 1987.
1971: Under President Richard Nixon, benefits increase by 10% and the tax rate is set to rise to 6.05% by 1987.
1972: Under President Richard Nixon, benefits increase by 20%. Beginning in 1975, benefit increases and the taxable wage base are set to be tied to the Consumer Price Index (CPI) and cost-of-living adjustments (COLAs) will be paid when inflation rises 3% or more from the time of the last benefit increase. In addition, a “special minimum benefit” is created for those who worked long careers in low-paying jobs, and the Supplemental Security Income (SSI) program (financed by general revenues) is created.
1977: Under President Jimmy Carter, due to funding concerns, amendments to the benefit formula are made that lead to the creation of the Notch issue. In addition, the earnings test is no longer applied to those over age 70, divorced spouses and survivors can collect benefits if their marriage lasted 10 years, and the minimum benefit is frozen at $122 per month.
1983: Under President Ronald Reagan, the recommendations of the Greenspan Commission are signed into law. The eligibility age is set to rise to 67; benefits become taxable for those earning $25,000 or couples earning $32,000; the Government Pension Offset and Windfall Elimination Provision are applied; and scheduled payroll tax increases are accelerated to reach 6.2% by 1990.
1986: Under President Ronald Reagan, inflation slows and it becomes unlikely that the CPI will rise by the 3% that is required for a COLA to be payable. The 3% requirement is permanently eliminated.
1988: Under President Ronald Reagan, the hold harmless provision is established to protect Social Security beneficiaries against reductions in net benefits when their Medicare Part B premiums are automatically deducted.
1994: Under President Bill Clinton, taxes are reallocated from the Old-Age and Survivors Insurance trust fund to the Disability Insurance trust fund to address solvency issues.
1996: Under President Bill Clinton, eligibility for DI and SSI benefits is prohibited for those who are disabled due to drug addiction or alcoholism.
1997: Under President Bill Clinton, Medicare Part C is created and beneficiaries are given the option of receiving their Medicare benefits through private “Medicare+Choice” health plans.
2000: Under President Bill Clinton, the retirement earnings test is eliminated for those who have reached the full retirement age.
2006: Under President George W. Bush, Medicare Part D is created and beneficiaries receive coverage for self-administered drugs through stand-alone Prescription Drug Plans. In addition, “Medicare+Choice” plans become known as “Medicare Advantage” plans.
2018: The Social Security Trust Funds face insolvency. If no action is taken by Congress, benefits will be significantly cut in 2034.