Proposals to trim Social Security benefits continue this year. President Bush's 2007 budget, among other reductions, calls for the elimination of the $255 lump-sum Social Security death benefit. You didn't know there was a $255 death benefit? You're not alone. Many people don't know about it. The payment began in 1939 to assist families with funeral expenses and the amount was last adjusted in 1952. Today it hardly covers the cost of flowers, let alone a funeral, but cutting the benefit would do little to improve Social Security's finances.
Surprisingly, despite the ongoing proposals for cuts, efforts to provide a $5,000 lump-sum are resulting in the highest level of support in Congress for Notch Reform in well over a decade. "The Notch Fairness Act" (H.R. 615) was re-introduced by Representative Ralph Hall (TX) early last year. The legislation would allow Notch Babies born from 1917 through 1926 their choice of a $5,000 lump-sum payable in four annual installments or an improved monthly benefit.
The "Notch" refers to a benefit disparity that occurred when Congress enacted changes to the Social Security benefit formula in 1977. In the 1977 legislation, Congress provided a transition benefit formula to phase in the changes. The transition formula affected seniors who first became eligible to retire just two years after the legislation was enacted, but in almost every case the transition benefit formula failed to provide any protection from deep benefit cuts.
We have a recent example of a failed government transition plan. On January 1st of this year, about 6.2 million of the nation's poorest and sickest Medicare beneficiaries were transferred from state Medicaid drug coverage and automatically assigned to Medicare Part D drug plans. Despite the government having a transition plan in place to prevent disruptions in coverage, hundreds of thousands of seniors were overcharged for their drugs, many were denied their prescriptions, and forced to leave their pharmacies empty handed. Congress and the Administration are still working on correcting all the problems.
TSCL estimates the cost of Notch reform to be around $27 billion. Today, "The Notch Fairness Act" has 93 co-sponsors in Congress and the number is growing rapidly. Please help us build on this success by contacting your Representative and ask him or her to co-sponsor ‘The Notch Fairness Act'."
May 2006
