Notch Reform remains high on TSCL's agenda for 2007.  Recently, the nonpartisan Government Accountability Office (GAO) suggested that Notch issues could grow in importance as Congress picks up the debate on Social Security reform this year.  A recent GAO report considered Notch issues in a review of proposals to change Social Security. 

The GAO specifically mentions "notches in benefits" and how they occur, saying that "any index that does not maintain purchasing power results in workers born in one year receiving higher benefits than workers with similar earnings born 1 year later."  A footnote explains "this is the so-called notch effect.  Such a situation occurred immediately after the 1977 amendments.  Notches generate controversy and confusion among beneficiaries because of inequities that result from them."

If you haven't already signed the Social Security Notch Victim Constituent Petition, please do so right now!

Using a computer simulation the GAO analyzed benefit reductions that would be required if no changes were made to Social Security, but benefits were paid solely on current funding.  The GAO chose a phase-in period balancing both the size of the benefit reductions with "minimizing the size of each year's incremental reduction to avoid ‘notches,' or unduly large incremental reductions," the report said.  "Notches create marked inequities between beneficiaries close in age."  In order to avoid those "notches" the simulation required 30 years to phase in the reductions.  

Congress didn't have the advantages of sophisticated computers in 1977 when they enacted the law changes that gave birth to today's Notch Babies.  With Social Security facing insolvency, Congress passed legislation that affected persons who started to retire just 2 years later.  The new benefit formula went into effect almost immediately because a limited five-year transitional formula, intended to phase-in the changes) failed.  Persons born from 1917 through 1926 received lower benefits than other retirees with similar work and earnings records.

Notch Reform, however, is far from over.  Some 118 Members of Congress, a record number, signed on as co-sponsors of "The Notch Fairness Act," (H.R. 615) in the last Congress.  This legislation would provide Notch Babies born 1917 through 1926 or survivors who receive benefits based on their account, $5,000 or improved monthly benefit.

Congressman Ralph Hall (TX) has told TSCL that he plans to re-introduce "The Notch Fairness Act" in January 2007.  We will continue to press for a settlement.

If you haven't already signed the Social Security Notch Victim Constituent Petition, please do so right now!

Sources:  "Social Security Reform, Implications of Different Indexing Choices," GAO, September 2006, GAO-06-804.

January 2007