Notch Bulletin: February 2011

Notch Bulletin: February 2011

Recently we received the following from one of our readers:
I went to my local Social Security office to talk to them about the inadequacy of my monthly benefit.  I told them I was a Notch Baby (1926) and therefore receiving less.  I was given a brochure entitled “The Notch Provision” which said I am not affected by the Notch.  The first line of this Social Security Administration brochure reads: “The term ‘notch’ refers to Social Security benefits paid to people born between 1917 and 1921.” Please tell me why the difference.

One of the most confusing and contentious aspects of the Social Security Notch, is the difference of opinion over the years considered affected by the Notch inequity.  Although the Social Security Administration’s publications refer only to 1917 through 1921, most Notch Reform legislation refer to benefit inequities affecting people born in the ten-year period from 1917 through 1926.

The Social Security Administration views the five-year period from 1917 through 1921 as the Notch period, because people born during those years were affected by a specific provision of law that was part of the Social Security Amendments of 1977 that changed the Social Security benefit formula.  Much like today, in 1977 the Social Security system was in a financial crisis and headed into deficit.

In order to prevent an abrupt drop in benefits and to phase-in the new benefit formula changes, Congress provided a transitional benefit formula that covered the group of retirees born during the five-year period of 1917 through 1921.  That group had their benefits figured two ways— by the transitional benefit formula, and the new wage indexed benefit formula and received the higher of the two benefits.

The transition formula was flawed and it failed to produce a higher benefit for most of the people born from 1917 through 1921.  There was an abrupt drop in benefits starting with people born in 1917.  When benefits of average earners born in 1917 and thereafter are charted on a graph, the benefits show a deep “V” notch.  People born in 1920 and 1921 hit the deepest trough of the “V.”  Initial benefits of people born in 1922 started to slowly rise again but benefits didn’t recover until people born after 1926.  Notch Reformers in Congress recognize this and thus most legislation covers the ten-year period from 1917 through 1926.

Members of Congress have frequently told us that chances for passage are highest when Congress considers Social Security reform as they are expected to do this year.  TSCL is meeting with many supporters on Capitol Hill urging them to enact of “The Notch Fairness Act” which would provide retirees born from 1917 through 1926 a choice of $5,000 payable in four annual installments or an improved monthly benefit.

To learn more call 1-800-333-8725 or watch our new video on Notch Reform