Does Congress Plan to Fix An Impending Social Security Cut?
Q: Have you heard anything about congress fixing a Social Security cut for those of us born in 1960? — K.S.
A: TSCL has been getting a steady stream of email from those of you who might potentially be affected by a sizable benefit cut when you file a claim for benefits. The benefit cuts would affect people born in 1960 who turn age 62 in 2022.
An unintentional effect from the deep economic downturn, due to the COVID-19 pandemic in 2020, is a potential benefit reduction for one group of Social Security recipients who turned age 60 last year. A feature in the Social Security benefit formula that makes the critical calculation of an individual’s initial Social Security retirement benefit (which is linked to the year that workers turn age 60) is sensitive to economic recessions. Known as the average wage index (AWI), it is susceptible to causing permanent benefit reductions when beneficiaries turn 60 in a year of extraordinarily high unemployment and lower wages, as was the case in 2020.
The initial retirement benefits of people who turned 60 last year could be permanently reduced by as much as 9.1%, according to an early estimate by Social Security’s Chief Actuary, Stephen Goss in July of 2020. Without timely remedial action from Congress, people born in 1960 could wind up with Social Security benefits that are 9.1% lower than others with identical earnings and retirement histories born just one year prior to them in 1959.
Recent data from the Congressional Budget Office (CBO), however, indicates that the decline in the AWI may not be so high, but the actual figures will not be known until later this year the CBO has said.
Legislation to protect the benefits of people who turned age 60 in 2020 was introduced last year in the 116th Congress (2019-2020). The Social Security COVID Correction and Equity Act was introduced in the House by Representative John B. Larson, (CT-1). That bill would fix the AWI cuts and would also increase benefits for all retirees by 2%, among other changes. Senators Bill Cassidy, M.D. (R-LA) and Tim Kaine (D-VA) introduced The Protecting Benefits for Retirees Act that would prevent the AWI from ever going negative.
TSCL strongly supports fixing this flaw in the Social Security benefits formula and hopes Congress will move ahead this year to prevent any reduction in benefits.
Here are some resources for those of you who want to stay on top of this issue: The Social Security Administration’s Office of the Actuary maintains a page that lists all legislative inquiries they respond to: https://www.ssa.gov/oact/solvency/index.html.
Here is a tool to help you look up bills introduced in Congress: www.congress.gov.
