Notch Bulletin: How Long Have Notch Babies Been Underpaid?

Notch Bulletin: How Long Have Notch Babies Been Underpaid?

I was born during the Notch period.  I would like to know how long Notch Babies have been underpaid.  In addition could you tell me if the underpayment has been corrected and if we are receiving the right amount now? — M.R. Fort Cobb, OK

The "Notch" refers to a disparity in benefits that resulted when Congress changed the Social Security benefit formula in 1977.  The changes affected seniors who became entitled to Social Security just two years later.  The group born from 1917 through 1926 are known as "Notch Babies" because they receive lower Social Security benefits than other individuals with similar earnings histories.

Last year the Government Accountability Office (GAO) in a report to Congress defined "notches" as "unduly large incremental reductions."  In addition, the GAO further said "Notches create marked inequities between beneficiaries close in age to each other."

If you were born during the Notch period and receive Social Security benefits based on your work record, or that of a Notch Baby spouse, you have been affected by this inequity from your first Social Security check.  According to TSCL studies, this disparity costs you on average about $1,000 to as much as $3,000 per year in lower benefits.

The Notch continues because Congress has yet to enact legislation to correct it.  Notch Reform has been a highly contentious issue.  In 1994 the director of the GAO testified to the Commission on the Social Security Notch saying that the Social Security Trust Fund would not have built up adequate surplus "had notch legislation been enacted at an earlier date."  Over those same ten years, however, from 1995 through 2004, the federal government used more than $1.4 trillion in surplus Social Security revenues that could have been used to pay Notch reform benefits to fund other government spending.

TSCL is pushing for "The Notch Fairness Act" legislation that would give Notch Babies born from 1917 through 1926 their choice of a lump-sum of $5,000 payable in four annual installments or an improved monthly benefit.  This legislation is now estimated to cost $27 billion.  Sponsorship of this legislation is building steadily, but we need your help.  Please contact your Representative and ask for his or her support of "The Notch Fairness Act," (H.R. 368).

Sources:  "Implications Of Different Indexing Choices," Government Accountability Office, September 2006, GAO-06-804, pg. 55.  "GAO's Analysis of the Notch Issue," GAO, September 16, 1994, GAO/T-HEHS-94-236.

June 2007