New Social Security Bill Will Change COLA Add More Benefits – Holy Moley

Can it really be? Is it possible? Could Congress actually consider providing additional benefits, adding costs and liabilities to a program it has failed to financially manage for thirty years, a program facing funding shortfalls?

Apparently so … although chances of this going anywhere is unlikely, but it’s the (irresponsible) thought that counts.

The recent Social Security COLA announcement served as a backdrop for the introduction of a new bill to permanently adjust the cost-of-living formula, repeal the controversial Windfall Elimination Provision (WEP) and provide a benefit bump for current and new beneficiaries.

Congressman John Larson Congressman John B. Larson, D-Conn., said he will introduce Social Security 2100: A Sacred Trust this week on the heels of last week’s news that the Cost-of-Living Adjustment (COLA) will be 5.9% for 2022, the highest increase in 40 years.

“While this year’s Cost of Living Adjustment (COLA) is welcome news, it only further underscores the need for Congress to act on Social Security,” Larson said in a statement. “It has been more than 50 years since Congress has improved Social Security benefits.

Seniors are suffering—five million are living below the poverty line—current Social Security benefits are not enough!” Larson claimed Congress has failed seniors, the situation needs to change and the “time is now to enhance Social Security.”

[Larson should look at the data before generalizing. Most seniors are doing quite well]

According to the bill’s fact sheet, there are several significant—and some controversial—provisions: Benefit bump for current and new beneficiaries

It provides an increase for all beneficiaries that is equivalent to about 2% of the average benefit. “The US faces a retirement crisis and a modest boost in benefits strengthens the one leg of the retirement system that is universal and the most reliable,” it notes.

Protection against inflation It improves the annual cost-of-living adjustment (COLA) formula to better reflect the costs incurred by seniors through adopting a CPI-E formula. “This provision will help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection will especially help older retirees and widows who are more likely to rely on Social Security benefits as they age.”

Protects low-income workers “No one who paid into the system over a lifetime should retire into poverty,” Larson said, and therefore the new minimum benefit will be set at 25% above the poverty line and would be tied to wage levels to ensure that the minimum benefit does not fall behind.

Improved benefits for widows And also, widowers in two-income households.

Repeals the Windfall Elimination Provision (WEP) One of the more controversial provisions will eliminate WEP and the Government Pension Offset (GPO).

Ends the Waiting Period The five-month wait will no longer apply to receive disability benefits.

Provides caregiver credits It will ensure that “caregivers are not penalized in retirement for taking time out of the workforce to care for children or other dependents.”

Student benefits Extends benefits for students through age 22.

Increases access It will increase access to benefits for children who live with grandparents or other relatives.

Source: New Social Security Bill Will Change COLA Formula, Eliminate WEP – 401K Specialist

23 comments

  1. Dick, people who are age 65+ today, were ages 16 – 64 over the past 50 years. From 1966 to 2020, according to the Census Bureau, poverty among older Americans declined from 28.5% to 9.0%. That’s pretty dramatic crap, an estimated 2%/year decline in the percentage living in poverty despite the dramatic expansion in the number of Americans age 65+, growing from about 10% of Americans to exceed 20% today. So, there were about 20MM Americans age 65+ in 1066, and about 6MM lived in poverty. Today, there are about 70MM Americans age 65+ and 5 MM live in poverty (measured using income alone). And, yes, that poverty statistic is an income figure, so, it does not measure wealth. The average and median net worth of Americans age 65 – 74 is $1.22MM and $266,000 and for those age 75+, it is $977,000 and $255,000. So, more than half of all American seniors have $250,000+ in net worth.

    So, what were the poverty rates of Americans ages 18 – 64 over the past 50 years? Hard to believe, but the poverty rate for those age 18 – 64 was 10.5% in 1966, and, surprise surprise, 10.4% in 2020. So, about 20MM adults lived in poverty in 1966 and 30MM live in poverty today. So, while I am sure the composition of that 10% has changed over time, 10% of adult Americans have lived in poverty in most of the past 50+ years. Average and median wealth for those ages 35 – 44, $436,000 and $91,000, those ages 45 – 54 $833,000, $169,000 and those ages 55 – 64 $1.18MM, $212,000.

    So, the numbers suggest that, generally speaking, many adults who once lived in poverty emerge from poverty in their later years, including periods of retirement.

    Seems pretty clear that we’ve been more than modestly successful at reducing poverty, whether measured on an income or a wealth basis for Americans age 65+. Unfortunately, we have done so by awarding them entitlements that many did not fund with their taxes, shifting the debt/bill to generations too young to vote or those generations yet unborn. That has created the expectation that there’s more to be had from the same source.

    This stupidity has been a bipartisan effort of buying votes, starting even with FDR (changes as early as 1940), to Carter (with his stupid CPI changes in the 1970’s) to Bush II with Medicare Part D.

    Like

  2. “I just can’t comprehend how people can have a life of work and then reach retirement with basically nothing.”

    I can’t comprehend how you can’t comprehend that.*

    Income disparity is an important concept to recognize when we discuss “entitlement spending”. We see constant references to taxing the rich, or taxing the “working man” to support those who are too lazy (dumb, dishonest…) to support themselves or who made bad choices.

    There are some of those, for sure, and always will be, and there are systems to investigate and minimize the abuse. At some point the cost of enforcement exceeds the benefit. I wonder which is greater, the cost of illicit welfare fraud/abuse, or the cost of high level financial or corporate shenanigans, legal or illegal?

    In so many cases these SNAP, welfare, EITC, etc. recipients are hard working, honest, people who are in jobs which are beneficial, even crucial to our well being, but do not pay enough to reasonably maintain a family**, let alone save for emergencies or for retirement. Many of these are not just entry level jobs. They are lifetime jobs.

    *”From 2007 to 2016, the median net worth of the top 20% increased 13%, to $1.2 million. For the top 5%, it increased by 4%, to $4.8 million. In contrast, the median net worth of families in lower tiers of wealth decreased by at least 20%.” (The median wealth of the poorest 20% is either zero or negative in most years we examined.)
    Pew research, FEBRUARY 7, 2020

    **We have also often heard that one should not have children until they are able to afford them. (I, for one would not be here.) But children are a natural, essential (economic) resource. Never mind that 5-10 percent of them are destined to live in poverty.

    Like

  3. “Seniors are suffering—five million are living below the poverty line…”

    [Larson should look at the data before generalizing. Most seniors are doing quite well]

    The flaw of averages again. Most seniors doing well are cold comfort to those below the poverty line.

    Verily I say unto you, Inasmuch as ye did it unto one of these my brethren, even these least, ye did it unto me.

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    1. 9% of those 65+ live in poverty by income, not counting the various social support programs provided to them. The chances are those people were always living in poverty or close to it. In fact, most are doing as well or better than many middle class younger families.

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      1. Cold comfort.

        “…most are doing as well or better than many middle class younger families.”

        Most seniors or most seniors in poverty?

        Paraphrasing Andrew Biggs, very low income SS recipients live in poverty, but… they are used to it.They have always lived in poverty.

        If you’re not already familiar, Andrew Biggs blog may be a good source for all things Social Security related. He ran the place under Bush, I believe, and is considered one of the leading experts on all things retirement.

        http://andrewgbiggs.blogspot.com/

        I generally disagree with the guy on principle, so he can’t be all bad.

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      2. Nothing new on that blog for over a year. Nobody is denying the existence or harm of poverty. It has always existed and always will and of course it will carry into retirement. Those in such state need and should received assistance. And they do at both federal and state levels. The value of that like SNAP, RX assistance, property tax and housing subsidies, health care are not reflected in poverty “incomes.”

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      3. The USA is the richest country in the world and we have 9% of people over 65 living in poverty. And that is just fine, because there are programs to help them. CRAZY!. That is 4.9 million people 2019 data. Those so called welfare programs are just a jobs program for the people working in each state’s county welfare offices. People I know living in poverty are still living in poverty even with all the programs that they may qualify for some aid. My brother who is 64 with cancer gets a total from SSI, SNAP, & energy assistance of $12,576 per year. That is still under the poverty level. My 91 year old mother gets $12,936 per year, just over the poverty level. My wife and I applied for SNAP at age 60, we where told that we had $50 per month to much, so we did not qualify. But, if we had $100 in medical bills per month we would qualify for $15 per month, what a joke, in the richest country in the world. Maybe if SS minimum payment for very low income retirees was 1,074 per month we could scale back our welfare programs and save money.

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      4. My Mom and Dad lived above the poverty level form 1948 to 1995, while raising 6 children, not so since 1995 in retirement. But what difference does it make, there are still 4.9 million, above age 65 living in poverty after a life time of working, when many can no longer work. So much for FDRs dream of every retiree living a good life in retirement.

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      5. I’m just trying to understand. I just can’t comprehend how people can have a life of work and then reach retirement with basically nothing. To me that means that had a life’s income that allowed for the purchase only of the very basic life necessities, no other spending. FDR never saw SS as providing a good life in retirement. Here is what he said. “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”

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      6. With all the talk about helping the low income worker, a minimum wage of $7.25 in 2021, sets the wage floor for many workers too low, so they will never have any extra income to save for retirement.

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      7. “I just can’t comprehend how people can have a life of work and then reach retirement with basically nothing.”

        I can’t comprehend how you can’t comprehend that.*

        Income disparity is an important concept to recognize when we discuss “entitlement spending”. We see constant references to taxing the rich, or taxing the “working man” to support those who are too lazy (dumb, dishonest…) to support themselves or who made bad choices.

        There are some of those, for sure, and always will be, and there are systems to investigate and minimize the abuse. At some point the cost of enforcement exceeds the benefit. I wonder which is greater, the cost of illicit welfare fraud/abuse, or the cost of high level financial or corporate shenanigans, legal or illegal?

        In so many cases these SNAP, welfare, EITC, etc. recipients are hard working, honest, people who are in jobs which are beneficial, even crucial to our well being, but do not pay enough to reasonably maintain a family**, let alone save for emergencies or for retirement. Many of these are not just entry level jobs. They are lifetime jobs.

        *”From 2007 to 2016, the median net worth of the top 20% increased 13%, to $1.2 million. For the top 5%, it increased by 4%, to $4.8 million. In contrast, the median net worth of families in lower tiers of wealth decreased by at least 20%.” (The median wealth of the poorest 20% is either zero or negative in most years we examined.)
        Pew research, FEBRUARY 7, 2020

        **We have also often heard that one should not have children until they are able to afford them. (I, for one would not be here.) But children are a natural, essential (economic) resource. Never mind that 5-10 percent of them are destined to live in poverty.

        Like

      8. Dick, people who are age 65+ today, were ages 16 – 64 over the past 50 years. From 1966 to 2020, according to the Census Bureau, poverty among older Americans declined from 28.5% to 9.0%. That’s pretty dramatic crap, an estimated 2%/year decline in the percentage living in poverty despite the dramatic expansion in the number of Americans age 65+, growing from about 10% of Americans to exceed 20% today. So, there were about 20MM Americans age 65+ in 1066, and about 6MM lived in poverty. Today, there are about 70MM Americans age 65+ and 5 MM live in poverty (measured using income alone). And, yes, that poverty statistic is an income figure, so, it does not measure wealth. The average and median net worth of Americans age 65 – 74 is $1.22MM and $266,000 and for those age 75+, it is $977,000 and $255,000. So, more than half of all American seniors have $250,000+ in net worth.

        So, what were the poverty rates of Americans ages 18 – 64 over the past 50 years? Hard to believe, but the poverty rate for those age 18 – 64 was 10.5% in 1966, and, surprise surprise, 10.4% in 2020. So, about 20MM adults lived in poverty in 1966 and 30MM live in poverty today. So, while I am sure the composition of that 10% has changed over time, 10% of adult Americans have lived in poverty in most of the past 50+ years. Average and median wealth for those ages 35 – 44, $436,000 and $91,000, those ages 45 – 54 $833,000, $169,000 and those ages 55 – 64 $1.18MM, $212,000.

        So, the numbers suggest that, generally speaking, many adults who once lived in poverty emerge from poverty in their later years, including periods of retirement.

        Seems pretty clear that we’ve been more than modestly successful at reducing poverty, whether measured on an income or a wealth basis for Americans age 65+. Unfortunately, we have done so by awarding them entitlements that many did not fund with their taxes, shifting the debt/bill to generations too young to vote or those generations yet unborn. That has created the expectation that there’s more to be had from the same source.

        This stupidity has been a bipartisan effort of buying votes, starting even with FDR (changes as early as 1940), to Carter (with his stupid CPI changes in the 1970’s) to Bush II with Medicare Part D.

        Like

  4. The banks have been reporting 10k for years now. The burden of reporting $600 transactions was going to be a ridiculous burden.
    The SSA bill can’t go anywhere, the big spending bills are front and center now.

    Like

  5. Do not underestimate the chances of this bill. This is vote buying at its best.

    The young do not vote or care about Social Security because it is running out of money. In July 2021, a Harris poll found that 71% of American believe that Social Security will run out of money during their lifetime, 83% among Gen X and surprisingly 61% among baby boomers. The 2021 trustees report states that benefits will have to be reduce in 2033 to 76% (Old-Age and Survivors Insurance Trust Fund). With the Disability Trust fund the benefits may be extended to 2034. It is just so irresponsible for congress to even think about expanding Social Security instead of fixing the funding for the current benefit liabilities. Because congress is irresponsible, it has a great chance of passing.

    But nobody is talking about Medicare Part A (hospital insurance) Trust Fund that will only be able to pay scheduled benefits until 2026 then requiring a cut to 91%. Part B & Part D are currently funded from the general revenue fund and not Medicare taxes so I guess they are safe?

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  6. When I was young in the Cleveland Ohio area, there was a car salesman named Dale Spitzer. He looked like a nice, honest guy. His sales pitch was “I want to sell you a car now!”. He had a nice smile and was totally, fully believable. Later, I came to regret buying a car from someone else.

    Anyway, when I see the D’s pitch expansions in entitlements, I always think that they have a warped, unbelievable version of Dale Spitzer’s pitch Here’s what I hear, it’s kind of like a modern day Wimpy (perhaps you are too young to know who Wimpy is, you could Google it on your iPhone). Makes no difference what the actual words Brandon, Kamala, Pocahontas, Sandy, Bernie or others use: “You’ll gladly vote for me in the future if I have others pay at some future date so you can have more entitlements today.”

    Paraphrasing Niemöller:
    – First they came for the millionaires and billionaires, and I did not speak out—because I was not a wealthy person.
    – Then they came for the corporations, partnerships and sole proprietorships, and I did not speak out— because I was not a business owner.
    – Then they came for the property owners, homes, rental properties, farms, and I did not speak out—because I did not own such property.
    – Then they came for my 401k, my modest pension, my own Social Security benefits, even my modest bank account – and there was no one left to speak for me.

    Go ahead. Remain silent. Then vote for the D’s who promise you free stuff because we are a rich country – enter the make believe world that you deserve free stuff to be paid with taxes on others. ….

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    1. They are coming after your modest bank account with the proposal of having the IRS track bank accounts with $600 which has now been raised to $10,000. If 60% of the US households did not pay income tax in 2020, I would say a fair amount made somewhere between $10K and $50K. Most probably paid their mortgages and cars payments so at least $10k of transactions passed through those tax cheating people bank accounts. Almost of that income is already reported on W-2 to the IRS. The only people that they might catch are the cash economy workers such as waitresses and bar tenders, you know, the low wage earners who don’t pay taxes now. If they have a few kids, they might even get cash back form the government too.

      This requirement, if passed, will be a big waste of resources for the banks and the IRS for very little gain. The cost just to process the data has to be excessive. We know that the data can’t be security from hackers either so why collect the data of little value. It has nothing to do with finding tax cheats.

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      1. So, if this passes, the banks will have one more reason to raise their account fees charged each month. As far as the COLA calculation goes, you have 12 months of increased prices before you get the increase, going to CPI-E is not going to make a big difference over time.
        Also, if inflation remains high for several years the SS trust fund may be gone in 2030. Time to means test SS benefits IMO.

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      2. SS is a welfare program, it is not an insurance program. The Supreme Court has ruled that the SS taxes paid in your name are not your property and there is zero money being held for you. SS taxes paid in for 10 years+ and only entitle you to a benefit when you qualify. The government can change the SS program at any time, and this could includes a means test for high wealth individuals.

        Like

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