No, the article title is not alluding to some new sci-fi based show about a robot claiming Social Security in the future. Instead, it refers to a surprising piece of legislation – The Social Security 2100 Act (surprising given the ongoing partisan divide in Congress). The bill was recently re-introduced for the third time by Representative John Larson (D-CT) (he first brought it to the House floor in 2014, and tried again in 2017 to no avail) and is aimed at solving one of the biggest issues facing the government and Americans: the funding shortage for Social Security. This attempt comes with more than 200 co-sponsors and appears to have a good deal of broad support.
What exactly does the Social Security 2100 Act entail? Let's take a closer look at its seven key action points.
An increase in the primary insurance amount (PIA) formula factor to 93% from 90% beginning in 2020: Increasing the PIA formula amount would have a small but positive upward impact on what seniors are paid from the program.
Switch COLA calculation to CPI-E from CPI-W: The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been the program's inflationary tether since 1975. But since it tracks the spending habits of working-age urban and clerical workers, rather than seniors who represent a majority of beneficiaries, it results in the underweighting of important spending categories for seniors, such as medical care and housing -- and therefore, a lower cost-of-living adjustment (COLA). The Consumer Price Index for the Elderly (CPI-E) adjusts this by tethering COLA increases to the spending habits of households with seniors aged 62 and up.
Increase the special minimum PIA for newly eligible retired or disabled workers beginning in 2020: Providing a special minimum primary insurance amount is a fancy way of saying that minimum benefits paid out by the program would be increased. The current minimum benefit pays out well below the poverty level, so this is a direct attempt to reduce elderly and disabled poverty rates.
Adjust the taxation of Social Security benefit thresholds beginning in 2020: The taxation of Social Security benefits was introduced in 1983 and expanded in 1993. It allows up to 50% of benefits to be taxed for a single taxpayer whose adjusted gross income (AGI) plus one-half of benefits exceeds $25,000 (or $32,000 for a couple filing jointly). Up to 85% of benefits become taxable when AGI plus one-half of benefits tops $34,000 for a single filer or $44,000 for a couple filing jointly. These income thresholds have never been adjusted for inflation. The Social Security 2100 Act would increase this threshold and create a single taxation point of up to 85% for single filers and joint filers above $50,000 and $100,000, respectively.
Reinstitute the payroll tax on earned income above $400,000: Currently, all earned income between $0.01 and $132,900 is subject to Social Security's 12.4% payroll tax, with any earned income above $132,900 exempt from the payroll tax. Larson's proposal aims to create a moratorium on taxation between $132,900 and $400,000, with the 12.4% payroll tax once again reinstituted on earned income above $400,000. Over time, this moratorium figure would shrink and eventually disappear, since the current cap of $132,900 increases in-step with the National Average Wage Index each year (as long as COLA is a positive number).
Gradually increase the payroll tax for all workers to 14.8%: Over the next 24 years, the Social Security Act would increase the payroll tax by 0.1% per year, pushing it from 12.4% to 14.8%. Keep in mind that only the self-employed pay the full payroll tax rate. If you're employed by someone else, your employer covers half of your liability. This would mean a 0.05% increase per year, or a 1.2% aggregate increase over 24 years for most workers.
Combine the OASI and DI Trusts into one fund: Lastly, and mostly for simplicity, the Old-Age and Survivors Insurance Trust (OASI) and Disability Insurance Trust (DI) would be combined into a single trust, the OASDI.
Granted this bill is just a proposal, and who know if it will ever see the light of day as actual law. Its proposals differ greatly from central Republican ideas for fixing the system (i.e. rather than increasing or amending payroll taxes, they have proposed gradually increasing the full retirement age to account for increased longevity; waiting longer to receive benefits or accepting a much steeper reduction if you claim benefits early reduces lifetime benefit payouts, thus saving the program money). With Republicans still in control of the Senate, even if the House pushes the Act through it would likely stall out there.
As I’ve written about many times previously, the clock is ticking on resolving Social Security’s projected funding shortfall, and there’s been very little movement on the political front to tackle this issue. What we're ultimately left with is an abundance of simple to complex solutions to fix Social Security. Many of them work, but they're essentially all one-sided in terms of support. Considering that 60 votes are needed in the Senate for the passage of any amendments to Social Security, a bipartisan approach is going to be needed for any real change to occur.