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Legislative Update: Reform Is The First Step By Michael Plumer, Deputy Director of Legislative Affairs, TREA Senior Citizens League Social Security taxes will begin to fall short of benefits by 2016. The 2001 Social Security Trustees Report stated that, `Bringing Social Security into balance over the next 75 years could be achieved by either a permanent 13% reduction in benefits or a 15% increase in payroll tax income or some combination of the two.` This is a fancy way of saying `reform.` And TSCL believes Notch Reform should be the first step in any reform plan. Social Security Trustees consider benefit cuts and higher taxes as inevitable to fixing Social Security. Yet, without guarantees that current Social Security recipients, (and those close to retirement) will receive the benefits they have planned on, Social Security reform may be hard to achieve in a timely way. Abrupt change is something our government should avoid, because, as we have seen in the past, it can unintentionally create a `Notch` in benefits. This is what happened in 1977. Recognizing that the Social Security program would go bankrupt by 1981, Congress changed the way benefits were calculated. Promising to `protect the benefit rights` of those who were about to retire, Congress provided a transitional benefit formula. A gradual lowering of Social Security benefits was expected, but instead, benefits plunged rapidly for those born from 1917 through 1926, because the formula did not work as anticipated. In addition, the economic conditions of double-digit inflation and low wage growth that followed in the 1980s contributed to even greater disparities. Many of those born during that period, the `Notch Babies,` receive more than $1,000 less in benefits annually than other retirees with similar work and earnings histories. To this day, Congress has not made good on the promise to protect the benefit rights of Notch Babies. This makes future Social Security reform all the more difficult because Congress again must convince Americans that they will keep their promise to protect the benefit rights of those who may be disproportionately affected by new benefit cuts. Keeping their promise to Notch Babies is essential in gaining the confidence and support of America`s future retirees for Social Security reform. Contact your Members of Congress asking them to keep that promise and implement Notch Reform as a first step in Social Security reform. Ask them to co-sponsor `The Notch Fairness Act` H.R.97 introduced by Ralph Hall (D-TX) and H.R.853 introduced by Robert Wexler (D-FL) which would provide the option of an improved monthly benefit or a Lump-Sum of $5,000 paid in four annual installments. Write an e-mail to ask your Members of Congress asking him or her to co-sponsor `The Notch Fairness Act` by clicking on the link below. Once there, choose the `$5000 Notch Settlement Petition`: http://action.tscl.org/NotchVictimsSettlement.asp To read related stories on our website, click the headline below: `Preserving Social Security`
This article first appeared in Volume 6, Issue 7 of "The Social Security and Medicare Advisor" newsletter (June/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.
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