Social Security Benefits Could Rise Under New Proposal
Could Social Security benefits increase? Two Connecticut lawmakers introduced a proposal this summer designed to raise payments for current and future retirees, expand cost-of-living adjustments, and reduce taxes on monthly checks. The bill, called the Social Security 2100 Act, was reintroduced by U.S. Representative John Larson and Senator Richard Blumenthal, both Democrats.
Under the bill as proposed, benefits would increase. The legislation would change the formula used to calculate payments, producing an increase of roughly 2% for current and future recipients. The exact amount would depend on each recipient’s benefit, with a 2% increase adding about $40 a month to a $2,000 payment. This increase would apply in 2027 and remain in effect through 2036.
The annual cost-of-living adjustment, commonly called the COLA, is now based on an inflation measure that tracks spending by urban workers. The bill would require the government to also calculate inflation using a specific index designed around the spending habits of people 62 and older. Benefits would use whichever calculation produced the larger increase. This change could result in higher COLAs during years when expenses that fall heavily on seniors, including health care and housing, rise faster than other prices. The new formula would apply from 2027 through 2036.
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For people who have been eligible for Social Security for more than 15 years, the proposal would provide another increase. This extra boost would be phased in over five years, beginning in the 16th year of eligibility. By the 20th year, recipients would receive the full increase, which is calculated using 5% of a benchmark Social Security benefit rather than the size of each person’s check. The provision is intended to help people who have been retired for many years and may have exhausted much of their savings.
Targeting specific groups and tax thresholds
The proposal would create a higher minimum benefit for people who spent much of their working lives in low-wage jobs. Someone with at least 30 years of covered work could receive a minimum benefit equal to 125% of the federal poverty guideline. Smaller increases would apply to people with between 11 and 29 qualifying years. The provision would primarily affect people who become eligible for Social Security after 2026, rather than everyone already receiving retirement benefits.
When one spouse dies, a household generally loses one of its two Social Security checks. The surviving spouse can typically keep the larger benefit, but not both. The bill would create an alternative calculation for some surviving spouses. A widow or widower could receive a benefit based on 75% of the couple’s combined benefits, subject to a limit. This change would most likely help middle-income couples in which both spouses worked and earned their own benefits.
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Some recipients must pay federal income taxes on part of their benefits. The tax is based on what the federal government calls “combined income,” which includes adjusted gross income, tax-exempt interest, and half of a person’s benefits. Under current law, benefits can begin to become taxable when combined income exceeds $25,000 for an individual or $32,000 for a married couple filing jointly. The bill would raise those thresholds to $35,000 for individuals and $50,000 for couples. That could reduce or eliminate the tax for some middle-income retirees, depending on their other income.
The bill attempts to prevent benefit increases from causing someone to lose Medicaid or Supplemental Security Income. Programs such as SSI and Medicaid have strict income limits. Ordinarily, even a small increase in Social Security can affect whether someone qualifies. Under the proposal, benefit increases created by the bill would not be counted when determining eligibility for SSI, Medicaid, or the Children’s Health Insurance Program. This protection could be particularly important for low-income seniors who receive both Social Security and SSI or rely on Medicaid for health care.
Funding the proposal through tax changes
Workers and employers each pay a 6.2% Social Security payroll tax, but only on wages up to an annual limit. Earnings above that limit are not currently subject to the tax. The bill would eliminate that cap after 2026, meaning the payroll tax would apply to all wages. High earners would receive some additional credit toward their future benefits, but at a much lower rate than other earnings. The proposal would also apply an additional Social Security tax to net investment income for taxpayers making more than $400,000.
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Because the Social Security 2100 Act is currently in committee, it would have to pass Congress and be signed by the president before taking effect. Larson introduced the House version in June, while Blumenthal introduced a companion bill in July. It remains to be seen how likely it is this bill would pass given that Democrats are outnumbered in Congress. The proposal was also reintroduced as Larson is in a four-way primary for the Democratic nomination for his seat.
Supporters argue that the Social Security 2100 Act offers a sustainable path forward for the program. By adjusting the payroll tax and modifying the benefit formula, the legislation aims to ensure solvency without drastic cuts. However, the path to enactment is steep. The proposal faces a Republican majority in the House and a Senate that is evenly divided. To pass, it would require significant bipartisan compromise.
