Congressman John B. Larson (D-CT) recently put forward the Social Security 2100 Act, a bill which proposes to strengthen the trust fund and increase benefits for current and future beneficiaries. If passed, the bill would provide a roughly two percent increase beginning in 2015, set the minimum benefit 25 percent above the poverty line and raise the threshold for the combined payroll tax.
The bill also proposes to swap the CPI-W for the CPI-E in calculating the cost of living adjustment. Senior advocates have long scrutinized the CPI-W for its focus on food, fuel and other goods most often purchased by wage earners – not retirees. The CPI-E, on the other hand, places greater weight on medical care and other expenses the elderly disproportionately bear.
“If the bill were to pass, the new inflation adjustment would likely have a significant impact for those receiving Social Security benefits,” said Matthew Allen, co-founder and co-CEO of Social Security Advisors. “Historically, the difference between the CPI-E and CPI-W between 1982 and 2011 has been about two percent, and the CPI-E has always been higher.” Given 2014′s $1,294 average monthly benefit for retired workers, the switch could provide a roughly $300 per year increase if implemented in the next year.
According to the SSA, the bill also proposes several measures to pay for the benefits boosts and strengthen the Social Security Trust Fund:
• A gradual, one percent increase in the contribution rate from 2015 to 2037.
• A requirement for collecting payroll taxes on wages above $400,000 (currently not collected on wages over $117,000).