Could Your Benefits Be Notched?

Could Your Benefits Be Notched?

The Notch Fairness Act Introduced in the House and Senate

Are you at risk of a notch in your Social Security benefits? A "notch" refers to inequality in benefits between people who are close in age and have similar earnings records. One birth group receives significantly more in benefits, sometimes thousands of dollars per year, than the other birth group. Consider these two sisters:

Edith and Audrey started work at the same company on the same day in October 1957. Audrey was slightly older, born in March 1916, than Edith who was born in June 1917. The two worked together at similar pay for twenty-five years. In 1982 with Edith turning 65, both went to the Social Security office to claim their benefits. They were told since the older Audrey had worked about 18 months after her 65th birthday, there would be a slight difference in the benefit each received. The total lifetime earnings of the pair were almost identical, differing only by about four percent in favor of the younger Edith.

To their surprise, when they received notification of their benefits, the difference was not slight. Edith born in 1917 received a $512.60 monthly benefit that was $111.80 per month less than Audrey born in 1916 who received $624.40 per month. The difference was almost 18%.

Edith was a "Notch Baby" affected by changes that Congress made to the Social Security benefit formula in 1977 — a time when the Social Security Trust Fund was facing its first major financing crisis. The change resulted in a disparity of benefits for seniors like Edith who first became 62 and eligible for benefits in 1979 and thereafter. But although benefit reductions were expected at the time, to protect seniors close to retirement, Congress provided a transitional benefit formula. The phase-in completely failed.

Could it happen again? If history is any lesson the risk of "notches" occurring are highest when Social Security reforms are implemented too rapidly in the midst of an economic and Trust Fund fiscal crisis.

TSCL continues to work for The Notch Fairness Act, which has recently been reintroduced in both the House and Senate (H.R.155) and (S.90). Like an “old age boost” the legislation would provide Notch Babies born from 1917 through 1926 with a choice of $5,000 payable in four annual installments of $1,250 or an improved monthly benefit. Sign The Notch Fairness Act Petition today.