The Latest Social Security 2100 Act: Redesigned for Action

Oct 28, 2021 / By Elaine Floyd, CFP®

Every year since 2014, John Larson, a Democratic representative from Connecticut, has introduced some version of the Social Security 2100 Act. I’ve always considered it a good bill, with something for everyone. In addition to a few tweaks here and there that raised benefits for everyone by a small amount and changed the index used for the COLA, its most important provision called for a gradual raising of the payroll tax, to 7.4% from the current 6.2%, to restore solvency to the system. In September 2019, SSA actuaries determined that if passed, benefits could be paid in full over the next 75 years and the trust fund would never run out.

The new version of the bill, Social Security 2100: A Sacred Trust, has been redesigned, apparently with the goal of getting Republicans on board. The small benefit boost and use of the CPI-E for the COLA are still there, as is the tax on earnings over $400,000, but the payroll tax percent increase is missing, and most of the bill’s provisions sunset in 2027. Under this bill, the trust fund would run out in 2038, just four years later than the 2034 projected in this year’s trustees report.

Rather than trying to fix everything now, the goal of this bill seems to be to gain bipartisan support for Social Security, setting the stage for future legislation that will restore full solvency. Progressives in Congress, the National Committee To Preserve Social Security and Medicare, and Nancy Altman of Social Security Works have all come out in favor of the bill.

Financial planners will not love this bill because the sunset provisions make it hard to plan. For example, it calls for the abolishment of the WEP and GPO—but only during the years 2022 through 2026. Widows can receive an alternative benefit equal to 75% of the couple’s combined benefit—but again, only from 2022 through 2026. If the bill passes, we’ll have to reprogram our calculators and step up our client education efforts. Let’s hope SSA will be in a position to understand and implement the changes.

Here are the bill’s provisions as outlined in the SSA actuaries’ letter:

  • Section 101. Increase the first PIA formula factor from 90 percent to 93 percent for all beneficiaries with benefit entitlement for months in 2022 through 2026. Revert to current-law benefit levels for January 2027 and later.
  • Section 102. Use the Consumer Price Index for the Elderly (CPI-E) rather than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to temporarily calculate the cost-of-living adjustment (COLA), effective for December 2022 through December 2026 COLAs. Revert to current-law benefit levels for January 2028 and later. We estimate this change would increase the COLA by an average of 0.2 percentage point per year.
  • Section 103. Increase the special minimum PIA temporarily for workers who become newly eligible for retirement or disability benefits or die in 2022 through 2026. Revert to current- law benefit levels for January 2027 and later.
  • Section 104. Replace the current-law thresholds for federal income taxation of OASDI benefits with a single set of thresholds at $35,000 for single filers and $50,000 for joint filers for taxation of up to 85 percent of OASDI benefits, effective for tax years 2022 through 2026.
  • Section 105. Establish an alternative benefit for surviving spouses. This benefit would be available temporarily for surviving spouses with benefit entitlement for months in 2022 through 2026. Revert to current-law benefit levels for January 2027 and later. For the surviving spouse, the alternative benefit would equal 75 percent of the sum of the survivor’s own worker benefit and the deceased worker’s PIA (including any actuarial reductions or delayed retirement credits (DRC)).
  • Section 106. Provide a 5-percent uniform PIA increase 20 years after initial eligibility, temporarily for 2022 through 2026. Revert to current-law benefit levels for January 2027 and later.
  • Section 107. For workers caring for a child under age 12 or for a dependent relative, provide a temporary “earnings” credit on their record to be used for computation of their benefit. Effective for all beneficiaries with benefit entitlement for months in 2022 through 2026, with all past caregiving years counted. Revert to current-law benefit levels for January 2027 and later.
  • Section 108. Eliminate the DI waiting period after enactment of the proposal effective for those who become newly entitled in 2022 through 2026. Revert to current law for new entitlements in January 2027 and later.
  • Section 109. End the DI benefit cliff temporarily for beneficiaries with earnings after initial disability entitlement for months in 2022 through 2026. In this period, use a $1-for-$2 offset for earnings above the blind substantial gainful activity (SGA) level. Revert to current law for months of benefit entitlement in 2027 and later.
  • Section 110. Temporarily cease applying the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) for all beneficiaries with benefit entitlement for months in 2022 through 2026. Revert to current-law benefit levels for January 2027 and later.
  • Section 111. Provide benefits for full-time and part-time students who are children of disabled, retired, or deceased workers until attainment of age 26, for all eligible children with benefit entitlement for months in 2022 through 2026. Revert to current-law benefit levels for January 2027 and later.
  • Section 112. Provide benefits to children who are in the custody of a grandparent or other eligible relative for at least 12 months and are receiving at least one-half of their financial support from the relative. Effective for all eligible children with benefit entitlement for months in 2022 through 2026. Revert to current-law benefit criteria for January 2027 and later.
  • Section 113. Prevent reductions in the AWI for any year 2021 or later from reducing benefits for individuals who become newly eligible for benefits two years later.
  • Section 201 and Section 202. Apply the combined OASDI payroll tax rate on covered earnings above $400,000 paid in 2022 and later. Tax all covered earnings once the current-law taxable maximum exceeds $400,000. Credit the additional earnings that are taxed for benefit purposes.

The bill has gotten quite a bit of attention in the industry press, but little or no mention in major general newspapers.

You can watch the progress of the bill, H.R. 5723, at Congress.gov

As director of retirement and life planning for Horsesmouth, Elaine Floyd helps advisors better serve their clients by understanding the practical and technical aspects of retirement income planning. A former wirehouse broker, she earned her CFP designation in 1986.

 

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