Written By: Mark Munzenberger
The AFCPE Government Relations Task Force spends time each meeting discussing some of the most pressing legislative issues currently facing our country, and ultimately the impact it has on the individuals and families we work with. There are few issues that generate as much lively discussion as the topics of Social Security and Medicare! Why, you ask? Consider the following:
Assets of the Social Security Old-Age and Survivors Insurance (OASI) Trust Fund will be exhausted in 2033, a year earlier than last year’s estimate, according to the latest annual Social Security Trustees’ Report. Benefits payouts for OASI will be limited to 76% of obligations when that happens. When assets are exhausted, benefit payouts will be limited to current income, unless supplemental government appropriations are made. The Disability Insurance fund (DI) will not see its assets exhausted until 2057, at which point benefits would be cut by 9%. The assets supporting payouts from Medicare part A, the hospital insurance fund (HI), will last until 2026, at which time benefits would also be cut by 9%. Next year’s report will also likely show earlier exhaustion dates since increases in benefit amounts to compensate for inflation will create a faster payout rate.
Clearly, most citizens (and politicians!) believe that Social Security and Medicare are essential programs to protect and preserve for generations to come … but agreements about how to shore up the funding issues are hard to come by. What are some potential solutions?
- Adjust the taxable wage cap. This year, someone with $1 million in work income would pay the same amount of OASDI tax as someone with $147,000 in wages.
- Increase payroll tax rates. The current rate is 12.4 percent. Some propose raising that to 14.4 percent.
- Broaden the definition of income. Certain forms of income are not subject to SSA payroll taxes.
- Introduce more progressivity. Typically referred to as “means testing,” this approach calls for adjusting the size of your Social Security payments based on your wages, wealth, or income.
- Cut benefits for new recipients.
- Reduce the annual cost-of-living adjustment (COLA).
- Up the retirement age.
AARP recently published an excellent article written by John Waggoner that explains the urgency of the situation, along with proposed solutions to remedy the challenges of keeping these vital programs solvent. Here is the link to the article – we highly encourage you to read it!
We want to hear from you! What potential solutions do you prefer? How important is it that we start to see action from our elected representatives to address this issue sooner than later? Please send your comments and thoughts to Luisa Singletary of the AFCPE Government Relations Task Force at firstname.lastname@example.org with the subject line – The Future of Social Security.