Congress has a new plan to fix Social Security. How it would change benefits – CNBC

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 A Social Security reform bill popular with House Democrats is getting reintroduced in Congress.

This time, it features some changes aimed at attracting more support from Republicans across the aisle.

The bill, known as the Social Security 2100 Act, is being brought forward by Rep. John Larson, D-Conn., who serves as chairman of the House Ways and Means Social Security Subcommittee.

Those who appeared alongside him on Tuesday to announce the reintroduction of the bill included Rep. Alexandria Ocasio-Cortez, D-N.Y., and House Ways and Means Committee Chairman Richard Neal, D-Mass.

As wealth concentration has become more prevalent in America, a couple of things lawmakers can do right now to offset that is to embrace this Social Security proposal and extend the expanded child tax credit, according to Neal.

“We have this rare moment to accomplish seismic achievements, and this is the time to do it,” he said.

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The new version of the bill, called Social Security 2100: A Sacred Trust, comes on the heels of the Social Security Administration’s latest estimates that the trust funds that support the program have just 13 years before they will be depleted. At that time, in the year 2034, 78% of promised benefits will be payable.

The bill proposes extending that date to 2038 to give Congress more time to come up with a long-term solution to the program’s solvency issues.

The measure would also incorporate proposals made by President Joe Biden during his presidential campaign

“We have a person on Pennsylvania Avenue who knows and understands that Social Security is a sacred trust,” Larson said of Biden.

This new bill combines Biden’s proposals with House Ways and Means initiatives to expand and enhance Social Security benefits, he said.

“It’s got a lot that’s attractive, and nothing that I think should cause Democrats problems in an election year,” said Nancy Altman, president of Social Security Works, an advocacy group that promotes expanding benefits.

Like Biden’s plan, the Social Security 2100 Act would set a higher minimum benefit for low-income workers. Benefits would be set at 125% above the poverty line and tied to wage current wage levels.

In addition, there’s a benefit boost for both new and existing beneficiaries amounting to about 2% of the average benefit.

Annual cost-of-living adjustments would be tied to the Consumer Price Index for the Elderly, or CPI-E. The argument is that this experimental index may better reflect the costs seniors face. Biden also included this change in his Social Security proposals.

The plan also integrates a couple of elements that might help draw more support for the proposal. Notably, the Social Security 2100 Act proposed in 2019 had more than 200 co-sponsors, though all were Democrats.

To have that social safety net, isn’t just good for us individually for peace of mind. It helps us feel like we are part of a society that respects our elders and values our vulnerable.

Rep. Alexandria Ocasio-Cortez

Democratic Congresswoman from New York

On Tuesday, lawmakers indicated that the new version of the bill has already drawn a similar level of support.

Ocasio-Cortez remembered how Social Security benefits helped her family when her father died unexpectedly of cancer.

“Social Security checks helped my family through,” she said. “It’s why my brother and I were able to go to college.

“It’s why I felt confident while I as at college that my mom would be able to have something to eat,” she added. “To have that social safety net, isn’t just good for us individually for peace of mind.

“It helps us feel like we are part of a society that respects our elders and values our vulnerable.”

Seeking bipartisan support

Rep. John Larson, D-Conn., leaves the Capitol after the final votes of the week on Feb. 28, 2019.

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The new version would repeal rules that reduce Social Security benefits for public workers and their spouses, widows or widowers who also have pension income. These are known as the Windfall Elimination Provision and Government Pension Offset.

This issue came up at a recent House hearing on Social Security, and has bipartisan support.

One proposal that was eliminated — a higher payroll tax rate — may also help draw more support. The Social Security 2100 Act had previously called for gradually increasing contributions to the program from workers and employers to 7.4%, up from the current rate of 6.2%, over roughly 20 years.

However, the legislation does call for increasing Social Security taxes paid by higher wage earners. In 2021, those taxes are capped at $142,800 in wages, and in 2022 that will rise to $147,000. This proposal reapplies taxes on wages at $400,000 and up, which is also in line with what Biden has proposed.

At the same time, the bill would also raise the thresholds above which income including Social Security is taxed. The plan calls for changing that to $35,000 for individuals and $50,000 for couples, up from $25,000 and $32,000, respectively.

Notably, the bill would also prevent certain beneficiaries from having their benefits reduced if the National Average Wage Index declines due to unforeseen circumstances, such as events impacting the economy.

It would also require the Social Security Administration to mail paper statements to all workers ages 25 and up, unless they request electronic delivery.

Other changes included in the bill include extending benefits for students up through age 25, increasing certain widows’ and widowers’ benefits, boosting beneficiaries’ benefits after 15 years, eliminating a five-month waiting period to receive disability benefits and creating caregiver credits so that those who take time out of the work force do not have their retirement benefits reduced as a result.

It remains to be seen how much attention this bill will get amid Congress’ busy legislative agenda and whether it will be embraced by Republican lawmakers. However, advocates like Social Security Works are optimistic.

“We’re all hoping that after they finish, however they finish the reconciliation and the debt limit and all these other things, that they will bring up Social Security,” Altman said.

The National Committee to Preserve Social Security and Medicare was also among the groups to support the proposal.

“There is good news for everyone in this bill, which is only fitting, since Social Security touches almost every American’s life,” said Max Richtman, president and CEO at the National Committee to Preserve Social Security and Medicare.

“It is time for the full House to pass Rep. Larson’s bill and send it on to the Senate,” he said.

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