© Reuters. FILE PHOTO: US President-elect Joe Biden delivers a televised address to the nation in Wilmington
By Mark Miller
CHICAGO (Reuters) – President-elect Joe Biden will be busy with his fight against the pandemic over the next month and Social Security likely won't be high on his agenda. However, it would be a very smart move to push ahead with major reforms to social security, our main pension program.
The role of that safety net has never been more important as the country tries to overcome the COVID-19 disaster. Here are six social security steps the new president and Congress should take.
Long-term social security solvency was already dwindling before the pandemic, and this has accelerated somewhat due to the economic downturn and the associated collapse in revenue from the Federal Insurance Contribution Act (FICA) – better known as wage tax. The Social Security Actuary now expects the combined retirement and disability trust funds to be “exhausted” by 2034 – a term that refers to the point when the reserve funds will be phased out. This is a year earlier than the Social Security Trustees' last projection before the pandemic began.
At the time of exhaustion, social security would have sufficient income from current tax payments to cover around 80% of the promised benefits. And the exhaustion date could come earlier depending on the length and depth of the recession.
As a candidate, Biden released a detailed Social Security Plan that addresses the solvency problem by adding a new tier of FICA contributions for high earners. Currently, employees and employers share a 12.4% FICA tax levied on incomes up to $ 137,700 (the cap will be adjusted to $ 142,800 in 2021, adjusted for inflation). Biden would add a new tax of the same amount on income over $ 400,000.
Biden stayed away from a large-scale FICA tax hike that would allow lawmakers to avoid political flak in tax hikes for people with less than stratospheric income – but his plan only extends solvency until 2040. It would be good to keep going walk. But that would likely require a new source of income – a Wall Street tax or fossil fuels, for example. That seems reasonable to me, but unlikely.
IMPROVEMENT OF BENEFITS
The economic devastation caused by COVID-19 is making the expansion of social security benefits more critical than ever. Biden has proposed a number of moderate extensions that should be incorporated into the law. This includes the crediting of caregivers towards their services for the time they have spent outside the workforce – a change that will particularly benefit women who already face a significant gender gap in retirement (https://nyti.ms/ 3mk50h5). It would also expand benefits for widows and seniors who had received payments for 20 years.
Biden also advocates moving to a more generous yardstick for determining the annual cost of living adjustment for social security.
OPEN FIELD OFFICES – SECURE
The large network of branch offices of the social security authority has been closed since March due to the pandemic, with most of the employees working virtually. As the pandemic recedes, it will be vital from a health standpoint to reopen offices safely, with priority given to offices that serve low-income workers who are less likely to interact with the agency online.
The reopening could offer opportunities to modernize the offices. "You could really redesign the offices to make them environmentally green and safe," said Nancy Altman, president of Social Security Works, an advocacy group that recently published a series of transition recommendations https: // for the new administration.
Reverse tightening of disability rules
Whenever possible, the new administration should quickly reverse steps that the Trump administration has taken under the rulebook to make applying for and receiving social security benefits for the disabled. This is especially wrong as there is growing evidence that many COVID-19 victims will have long-term effects of the disease https://reut.rs/2KadgmR that will incapacitate them and require social security income.
FIX THE COVID & # 39; NOTCH & # 39;
The job loss caused by pandemics has resulted in a technical glitch threatening unjustified benefit cuts for workers turning 60 this year.
The benefits are based on each employee's earnings history and are indexed to reflect the growth of all national wages as a whole. However, total wages will fall significantly this year due to job losses in the pandemic – an unusual situation for which the social security system is not suited. Indexing occurs in the year you turn 60, which is why that age group would suffer a single hit. Social Security actuaries earlier this year estimated that someone expecting an initial benefit of $ 2,000 per month over the next year would get around $ 119 less because of the “notch”.
The most sensible solution is also simple. Congress should set a floor on the indexation of system revenues – similar to the indemnity for cost of living adjustments – to ensure that the total wage calculation does not diminish benefits.
FIX THE FICA MESS
President Donald Trump signed a memorandum from the President https://reut.rs/2KtBGay in August ordering the deferral of FICA taxes until the end of the year as a stimulus measure. This was an ineffective idea from the start as it gave tax breaks to workers, not those who have lost their jobs and are in need of disaster relief. And most employers didn't want anything to do with it, as it created a liability that later had to be paid back by temporarily doubling the tax liabilities for both employees and employers.
Without federal guidance, very few private employers have implemented the plan – but it was enforced by the federal government. That means federal employees will see a sudden surge in their taxes starting in January.
Biden could reduce the impact by placing an executive order that spreads the repayments over a longer period of time.
A much broader pension reform is also awaiting action. But social security was designed to deal with such moments. The opportunity to make good use of the program should not be missed.
(The opinions expressed here are those of the author, a Reuters columnist.)