Notch Bulletin: May 2009

Notch Bulletin: May 2009

Why Chances For Notch Reform Are Stronger Than Ever

Recently we received the following from one of our readers:
I‘m a Notch Baby born in 1925.  I recently read where you say that “Congress may ‘give birth’ to a new generation of Notch Babies.”  What do you mean by that?— Sam G.

Notch Babies frequently tell us that they fear that Congress is waiting for the Notch problem to “die away.”  Each year as they grow older, Notch Babies, seniors born from 1917 through 1926, are passing away, and some of you believe this leaves little incentive for Congress to take action.  But Congress may start to think differently soon.   We believe that lawmakers are more apt to take up Notch reform as they consider Social Security reform.  Some policy analysts have said that, without carefully implementing future changes to Social Security, a Notch in Social Security benefits could affect future retirees, thus “giving birth to a new generation of Notch Babies.”  TSCL has been hard at work educating our new Congress about the need for a fair settlement for Notch Babies today and why we must prevent Notch Baby Boomers in the future.

Today’s Social Security Notch refers to an inequity in benefits affecting seniors born  from 1917 through 1926 who receive lower benefits than other seniors having similar work and earnings records.  It occurred due to changes Congress made to the Social Security benefit formula in 1977, which affected the group of seniors who began turning age 62 just two years later.  Those 1977 changes are not unlike benefit formula changes under study once again today.

In 1977, Social Security was in a financial crisis, also not unlike the one that’s beginning to develop today due to high unemployment and growing numbers of new retirees.  Because the changes made in 1977 did not properly phase-in over a long enough period of time, benefits for people affected were sharply lower than those of other retirees.  In one well-publicized example of two sisters born two years apart, the younger sister received $90 per month less than her older sister, even though the younger had 17.5% more earnings credited to her record and paid more in Social Security taxes over her lifetime.

TSCL is continuing to fight for “The Notch Fairness Act,” which would provide Notch Babies their choice of $5,000 payable in four annual installments or an improved monthly benefit.  The bill (H.R. 1067) was recently introduced in the House by Rep. Ralph Hall (TX), and in the Senate (S.81) by Senator David Vitter (LA).

A record number of Members of Congress supported the legislation in 2008 and with the growing prospect of Social Security reform we feel the prospect for a $5,000 Notch Reform settlement to be stronger in 2009 than ever.

Source:  Social Security Notch Debate, David Koitz and Geoffrey Kollman, CRS, February 24, 1995.