Connecticut Democratic Representative John Larson will introduce a bill that, if approved in the United States Congress, would change the way in which the Cost of Living Adjustment (COLA) is established so that retirees receive more money in their Social Security checks.
The legislation, named “Social Security 2023: A Sacred Trust” (Insurance Social 2100: a sacred fund) has already been introduced in the federal House of Representatives. However, it remains under evaluation by the Health subcommittee as well as the Social Security subcommittee since last year after being referred to the Ways and Means Committee.
“By 87 For years, the federal government has kept a promise to all Americans: If you contribute to Social Security with each of your paychecks, you’ll to be able to retire with dignity. President Biden has called this promise ‘sacred fund’”, reads an entry on the representative’s website.
“It is the responsibility of Congress to keep this promise and safeguard Social Security for all Americans. Congress must also ensure that the benefits respond to the expenses of Americans, today, tomorrow and always”, adds the legislator.
“This is why the director of the Social Security Subcommittee of the Committee of Ways and Means, representative Larson created ‘Social Security 2100: a sacred fund,’” the document begins.
The The basis that supports the measure is that retirees experience expenses that are not contemplated under the COLA formula to calculate inflation levels and determine if there will be increases in the annual monthly checks received by Social Security beneficiaries.
The COLA measures inflation levels to grant possible increases in Social Security checks.
However , the adjustment falls short to cover expenses such as care and housing, which are essential for the elderly population.
The Larson measure would allow the COLA measurement to be associated with Consumer Price Index for the Elderly (Consumer Price Index for the Elderly / CPI-E).
The Senior Citizens League, an entity that represents retirees, has estimated that, on average, a beneficiary who applied for Social Security does 30 years would have received about $14,000 dollars more in retirement funds if the CPI-E it would have been used to calculate the COLA.
“This provision will help retirees who spend a large portion of their income on health care and other necessities,” highlights a fact sheet from Larson’s office. “The improved protection against inflation will especially help older retirees and widows who are more likely to depend on Social Security benefits as they age,” the document adds.
Other provisions of the measure seek to impact the five million retirees living in poverty with a new minimum established in benefits of 25% above the poverty line and tied to salary levels.
The bill also establishes that widowers will not be penalized for having double income.
The bill also repeals the Provision of Elimination of Extraordinary Earnings (WEP) and Government Pension Offset (GPO) which currently reduces Social Security benefits for many civil servants such as teachers.
The changes would be financed, in part, with more taxes for those who generate more than $400, 000 year.
In the 2021, any income earned in excess of $142,800 is exempt from paying the Social Security Payroll Tax, a 6.2% tax that finances almost the 87% of profits. The cap, which increases each year, is $400,000 in the 2022.
Under Larson’s proposal, any income in excess of $400,000 would be subject to tax. The above implies that anyone who wins $1 million in 2022 would have to pay 6.2% for the first $90,000 Of income, and then 6.2% of the last $600,10 that the person enters in the year.
The 13 October, the Social Security Administration (SSA) will announce the COLA increase effective next year.
Although initial estimates pointed to a percentage that could exceed 10%, the latest numbers have been more conservative due to a drop in inflation in the past few months. An increase of approximately 8.7% is now anticipated.
SSA relies on inflation levels between July and September to establish the COLA amount.
It may interest you:
Increase in Social Security checks due to COLA in 2023: why would it be lower than expected?