Social Security
Social Security represents a strong commitment to our nation’s seniors. Ever since Ida May Fuller of Vermont received the first Social Security check issued, seniors have had a reliable safety-net to fall back on in retirement and to supplement individual retirement savings or pensions. Over 40 percent of all elderly Americans are kept out of poverty by their monthly benefits, and these benefits are the major source of income for two-thirds of all beneficiaries.
In their 2010 annual report, the Social Security Trustees calculated that Social Security's Trust Fund will become depleted in 2040. The Congressional Budget Office estimates that the Social Security Trust Fund will not be insolvent until 2052. Because Social Security is a pay-as-you-go system, both the Social Security Administration and the Congressional Budget Office estimate that after these dates Social Security will still be able to continue to pay 70 to 80 percent of benefits to all retirees if the Trust Fund is depleted. While it is becoming increasingly clear that life expectancy and the approaching retirement of the Baby Boom generation will place a significant strain on Social Security in the future, Senator Leahy strongly believes that America’s seniors deserve the full benefits that they have been promised. There is no clear solution on how to preserve Social Security. But what is certain is that we must begin a serious dialogue about how to gradually reform the program to ensure that it remains strong for current beneficiaries as well as future generations. To read the full text of the Social Security Trustees annual report please refer to the Related Files section of this page.
Social Security Reform
On November 10, 2010, the co-chairs of President Obama’s Commission on Fiscal Responsibility and Reform, Erskine Bowles and Alan Simpson, released a proposal containing policy suggestions aimed at bringing budget deficits under control. This plan, which contained some suggestions regarding the Social Security and Medicare programs, would reduce the deficit by $3.9 trillion over the next decade. After reviewing the plan, eleven members of the Commission voted for the final plan on December 3, 2010. Under President Obama’s Executive Order, the support of fourteen of the eighteen commissioners was needed in order to send any package to Congress for a vote. While Congress will not be voting on the Commission’s final plan, Senator Leahy continues to examine the final report of the Commission closely as Congress continues to discuss deficit reduction.
Senator Leahy believes that we must look carefully at any proposed changes to the Social Security system, including proposals to raise the retirement age or make changes to the taxable earnings base, and how they would impact benefits for seniors and individuals with disabilities.
Social Security COLA
Social Security Beneficiaries generally receive a cost-of-living adjustment (COLA) in January each year to compensate for the effects of inflation. The COLA is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between the third quarter (July-September) of the previous year and the third quarter of the current year. The CPI-W is updated by the Department of Labor’s Bureau of Labor Statistics monthly. The COLA becomes effective in December of the current year and is payable in January of the following year. The amount of the COLA for Social Security beneficiaries is not voted on each year by Congress, but determined by an automatic formula based on the CPI-W.
Unfortunately, for the second year in a row the CPI-W does not register sufficient inflation for this past year because of the current economic climate. On October 15, 2010, the Social Security Administration announced that there will not be a COLA for Social Security beneficiaries for 2011. Under current law, consumer prices must rise past the level when the last Social Security increase was last awarded, in this case 2008, for another adjustment in benefits to take effect. The information provided by Bureau of Labor and Statistics show prices for the third quarter of this year did rise by 1.5% compared with last year, however prices fell by 0.6% compared to 2008, resulting in no COLA for this year.
Despite this projection Senator Leahy understands that seniors, many on fixed incomes, continue to pay for rising cost of health care, food and fuel and continue to feel the effects of difficult economic times.
That is why he once again cosponsored the Emergency Senior Citizens Relief Act. Based on the average Social Security benefit, this $250 payment would represent a 1.7% increase for beneficiaries. Last year, Senator Leahy also joined several of his colleagues in writing to Minority Leader Mitch McConnell asking him to support the consideration of this critical legislation, which will provide seniors with this emergency payment. Unfortunately, on December 8, 2010, the Senate failed to garner enough votes on the Emergency Senior Citizens Relief Act to proceed to its full consideration. Because the Emergency Senior Citizens Relief Act was not acted upon during the 111th Congress, it will need to be reintroduced this year. Senator Leahy continues to support this critical legislation and do all that he can to protect the benefits of Vermont seniors.
Social Security COLA and Medicare Part B Premiums
Under current law, most Medicare enrollees are protected from any Medicare Part B premium increases beyond Social Security cost-of-living adjustments by a “hold harmless” provision. The hold-harmless provisions prevent Social Security payments from decreasing from one year to the next as a result of Part B premium increases. With no COLA increase projected for Social Security for 2011, the hold harmless provision will prevent the majority of beneficiaries from paying the increase in Part B premiums, despite projected increases in Part B expenditures. While the majority of Medicare beneficiaries are protected by the hold-harmless provisions legislation would be needed to protect all beneficiaries from paying the increase in Part B Premiums.
The Medicare Premium Fairness Act (S 3950) would freeze the monthly Medicare Part B Premium for all Medicare beneficiaries at the 2009 premium level. Unfortunately, because this legislation was not acted upon during the 111th Congress, it will need to be reintroduced this year in order to receive consideration.
How is Social Security COLA Calculated?
The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA. The amount of the COLA for Social Security beneficiaries is not voted on each year by Congress, but determined by an automatic formula based on the CPI.
What does the CPI-W measure?
Currently there are two common consumer price indexes (CPI) published monthly by the Bureau of Labor Statistics at the Department of Labor. The CPI-U tracks changes in the prices of goods and services purchased by typical urban wage earners and clerical workers. While the CPI-U is the number that is most often associated with cost of living increases, the Social Security COLA is determined by the CPI-W. There is concern that the CPI-W does not accurately reflect the inflation experience of the elderly population because the prices of items commonly needed by seniors, including health care, are rising faster than overall prices. Some have suggested that the COLA rely instead on the CPI-U, but this number still doesn’t reflect the specific goods and services needed by seniors. In an effort to protect the purchasing power of Social Security benefits, an experimental senior-only consumer price index is being studied by the Bureau of Labor Statistics. The Consumer Price Index for the Elderly (CPI-E) attempts to measure the inflation experience of people age 62 and older and tends to grow slightly faster than the CPI-W.
Senator Leahy shares the concerns of many Vermonters that the CPI-W does not accurately measure the goods and services purchased by seniors and agrees that the Senate may need to reevaluate how COLAs are measured to ensure this situation does continue to disadvantage seniors.
Government Pension Offset (GPO) and Windfall Elimination Program (WEP)
Last Congress, Senator Leahy was proud to cosponsor of S.484, the Social Security Fairness Act of 2009. This bill would end the unfair practice of reducing the Social Security benefit of a retiree, or their spouse, who also receives a pension not covered by Social Security. Senator Leahy believes that public employees should not be penalized for dedicating their careers to public service. This legislation has not yet been reintroduced during the 112th Congress. To read reports prepared by the Congressional Research Service about the GPO and WEP please refer to the Related Files section on this page.
Social Security Frequently Asked Questions
Q) What is the future solvency of Social Security?
A) Social Security faces a long term funding imbalance, not an immediate crisis. Both the Social Security Trustees and the Congressional Budget Office project that there will be enough money in the Social Security Trust Fund to continue to pay full benefits for Social Security recipients for at least the next 35 years.
Q) Do Members of Congress pay Social Security?
A) Yes. Before 1984, all federal employees, including Members of Congress, were covered by the Civil Service Retirement System (CSRS) which was designed as a comprehensive system that did not include payment of Social Security taxes. That changed in 1983, when Congress passed the Social Security Act (P.L. 98_21). That legislation required all Members of Congress, who were elected after 1984, to be covered under Social Security. Today, Members of Congress do pay into Social Security, and they do collect from it just like any other taxpayer.
Q) What other benefits are paid by Social Security?
A) In addition to being the most reliable source of income for many seniors, Social Security also provides spousal benefits, survivor benefits, and disability benefits. To find out if you qualify for these benefits, visit the Social Security website at http://www.ssa.gov
Q) I received an email that read, "Which political party took Social Security from the independent trust fund and put it into the general fund so that Congress could spend it?" Is the information in this email factual?
A) This email is one a few that is circulating on the internet that contains many myths about the history of the Social Security program. The Social Security Administration maintains a section of their website that debunks these myths. You can find this website at: http://www.ssa.gov/history/InternetMyths2.html
You can also read about other Social Security myths here: http://www.ssa.gov/history/InternetMyths.html
For additional information and frequently asked questions about the Social Security program, visit the Social Security Administration's website at: http://www.ssa.gov/history/hfaq.html
Related News
- Comment Of Senator Patrick Leahy On The 2013 Social Security COLA Announcement, October 16, 2012
- Statement Of Senator Patrick Leahy On The Motion To Invoke Cloture On The Emergency Senior Citizens Relief Act of 2010, December 8, 2010
- Sanders Calls for Emergency Social Security Boost, Leahy Backs Proposal to Help Seniors and Disabled , October 15, 2010
Related Files
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Social Security Administration Board of Trustees 2010 Report
1.83 MB
Full Text of the 2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds -
CRS Report Social Security Cost of Living Adjustment
147.6 KB
Congressional Research Service Report on Social Security Cost of Living Adjustment for 2011 -
The Government Pension Offset (GPO)
224.6 KB
CRS Report. Updated March 25, 2011. -
Social Security: The Windfall Elimination Provision (WEP)
161.2 KB
CRS Report Social Security: The Windfall Elimination Provision (WEP)
Related Legislation
S. 484
A bill to amend title II of the Social Security Act to repeal the Government pension offset and windfall elimination provisions.
S. 1685
A bill to provide an emergency benefit of $250 to seniors, veterans, and persons with disabilities in 2010 to compensate for the lack of a cost-of-living adjustment for such year, and for other purposes.