The Protecting and Preserving Social Security Act would use the Consumer Price Index for the Elderly, or CPI-E, to calculate the relevant cost-of-living adjustment and phase out the cap on Social Security contributions over the next seven years.
H.R.4968, recently reintroduced by Sen. Mazie Hirono, D-Hawaii, and Rep. Jill Tokuda, D-Hawaii, "is expected to extend the ability of the Old Age, Survivors, and Disability Insurance (OASDI) program to pay scheduled benefits in full and on time for an additional 11 years, from 2034 to 2045," according to the Social Security Administration’s Office of the Chief Actuary, the lawmakers said in a statement.
"The bill raises the payroll tax cap in increments," Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, said Friday in an email.
The group supports the bill.
In its analysis of the proposed legislation, the Social Security Actuaries explained that "basically, people making over the cap (currently $176,100) would have to pay in at a 1.8% rate on their additional income in the first year, and then it would go up by an additional 1.8% for the next six years until they are paying the full 12.4% payroll tax on all of their income," Nancy Altman, president of Social Security Works, told ThinkAdvisor on Friday in another email.
"Importantly, those who contribute more will get somewhat larger benefits in return," Altman added.
The National Committee to Preserve Social Security and Medicare said in a statement that it's been calling for years "for an improved COLA formula that reflects the real impact of inflation on seniors, which the current one [Consumer Price Index for Urban Wage Earners] (CPI-W) does not."
"Every extra dollar in COLAs will help older Americans to meet their monthly living expenses — from groceries to gas to housing. We also applaud the bill for strengthening Social Security's trust fund by asking the wealthy to pay their fair share. We look forward to working with our allies on Capitol Hill to enact this crucial legislation,” the committee explained.
A look at previous COLAs shows that the senior-focused index would not always have resulted in higher benefits than the current formula, which uses the Consumer Price Index for Urban Wage Earners and Clerical Workers.
Tokuda said in the statement that the Protecting and Preserving Social Security Act would also end "unjust practices like reclaiming final checks."
Reclaiming final checks, Altman explained, "refers to the unjust practice that if (for example) you die on the last day of the month, your entire benefit from that month is reclaimed by Social Security. Many have suggested prorating this to reflect people being alive for part of the month."
The depletion date for the Social Security Old Age and Survivor Insurance (OASI) Trust Fund will come a year earlier, in 2032, due to the tax and spending bill signed into law July 4, according to nonpartisan analysis by the Social Security chief actuary, released on Aug. 5.
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