On January 30, Representative John Larson (D-Conn), who was just named chairman of the House of Representative’s Social Security subcommittee, will introduce the Social Security 2100 Act.
Larson chose this date because it falls on the birthday of President Franklin D. Roosevelt, who signed the Social Security Act into law in 1935.
Here’s a summary of the proposal:
- All Social Security beneficiaries would see their benefits increase by 2%.
- The income thresholds on taxation of Social Security benefits (which we talked about here) would be raised from $25,000 to $50,000 for single filers and from $32,000 to $100,000 for joint filers.
- The annual cost-of-living adjustment would be modified to help protect seniors against inflation. This change should of particular benefit to older retirees and widows, who are more likely to rely on Social Security benefits as they age.
- The new minimum benefit amount would be set at 25% above the poverty line and indexed to wages in an effort to protect low-income workers.
- The Social Security wage base would be modified so that high earners would pay a more proportionate share of Social Security payroll tax. Currently, the 6.2% Social Security payroll tax isn’t collected on earnings that exceed the wage base ($132,900 in 2019). That means that any earnings about that amount are not subject to the withholding. If the bill is signed into law, the wages up to $400,000 will be subject to Social Security tax withholding.
- Any increase in benefits due to the bill’s passing would not negatively impact beneficiaries of Social Security, Medicaid, and CHIP. In other words, there would be no reduction of benefits from Social Security or loss of eligibility for Medicaid or CHIP.
- The bill would establish a single Social Security Trust Fund. What is currently known as the Social Security Trust Fund is really made up of two separate trust funds: Old-Age and Survivors (OASI) and Disability Insurance (DI). The bill proposes combining the two. Larson says that doing this would not change Social Security’s overall financial condition and would not increase the deficit or debt.
- Finally, the Social Security payroll tax rate would gradually increase. By 2042, workers and employers would each pay 7.4% instead of the 6.2% withheld currently. For the average worker, this would translate into an extra 50 cents withheld per week each year to keep Social Security solvent through 2092 (according to estimates by the Social Security Administration’s Chief Actuary).
As always, we will monitor the proposal’s progress and report any updates here.
If you’ll be collecting Social Security benefits for the first time in 2019 and need some guidance, we can help. Click here to sign up for a no-cost, no-obligation chat with a member of our financial advisor network.