Legislative Update: April 2017

Legislative Update: April 2017

Social Security Reform Plan is Blueprint For New Congress

By Jessie Gibbons, Senior Policy Analyst

Late last year, just hours before the 114th Congress came to a close, Congressman Sam Johnson (TX-3) – Chairman of the House Ways and Means Social Security Subcommittee – introduced the Social Security Reform Act of 2016, legislation that would make sweeping changes to the program.  His plan consists of fifteen provisions that would dramatically alter the program. And while it is not likely to be signed into law in full, it is expected to lay the groundwork for Republican leaders as they negotiate Social Security reform plans in the months ahead.

Chairman Johnson’s Social Security Reform Act of 2016 would make the following major changes to the program, among many others:

  1. Means-test benefits so that higher income beneficiaries receive reduced monthly benefits. This change would ultimately transform Social Security from an insurance program into a welfare program for older Americans and leave middle-income seniors living close to the poverty level.
  2. Adopt the “chained” COLA for low- to middle-income retirees and eliminate the COLA for beneficiaries with incomes over $85,000 per year.  Modifying the Social Security cost-of-living adjustment would have an immediate negative impact on current retirees by reducing annual benefit increases.  In addition, eliminating COLAs altogether for a particular segment of the population – something Congress has never done before – would significantly erode the purchasing power of benefits for middle - to – higher - income seniors.
  3. Gradually increase the eligibility age for full, unreduced benefits from 67 to 69, and for increased benefits increased by delayed retirement, from 70 to 72. According to experts, increasing the age of eligibility by one year would result in an across-the-board cut in benefits of 7%. Chairman Johnson’s plan would equate to a 14% benefit cut when fully phased in.
  4. Provide a new minimum benefit for low-wage earners who worked long careers. Those with low career earnings but long career histories would see benefit increases of around 10% to 20%, which would help offset some benefit cuts, but would not likely be enough to keep most low-income seniors out of poverty in retirement.
  5. Supplement Social Security benefits for the oldest seniors. Providing a benefit boost for the oldest seniors – those who have been eligible for benefits for at least twenty years – would provide much-needed financial support to those who are often most in need.
  6. Replace the formula that arbitrarily reduces or eliminates benefits for public employees.  Many individuals employed by state or local governments are subject to the Windfall Elimination Provision and the Government Pension Offset. Replacing these provisions with a new formula could provide public servants with the Social Security benefits they have earned.

While TSCL is pleased that Chairman Johnson’s proposal includes modest benefit increases for the oldest and lowest-income seniors, we are concerned that the majority of the provisions would result in significant cuts for both current and future beneficiaries.  In addition, we are disappointed that the comprehensive plan does not include any revenue increases, like an increase in the payroll tax cap.  Currently the highest earning workers only pay Social Security taxes on earnings up to $127,200.  Increasing the cap has significant support from older Americans, including 79% of TSCL’s members.

In the months ahead, TSCL will continue to monitor negotiations to reform Social Security closely, and we will advocate for solutions that would strengthen and modernize the program responsibly, without cutting benefits for current or future retirees.  For progress updates, visit the Legislative News section of our website, or follow TSCL on Facebook or Twitter.