A new bill proposed by Rep. John B. Larson (D-CT) would bring sweeping changes to Social Security benefits, including hiking the annual cost-of-living adjustment to better reflect costs incurred by seniors.
The bill, called “Social Security 2100: A Sacred Trust,” is slated to be introduced this week, according to a report from 401K Specialist. If it passes, it would provide an increase for all beneficiaries that is equivalent to about 2% of the average benefit, Larson said on his website. It would also tweak the annual COLA by adopting a CPI-E (Consumer Price Index-Elderly) formula designed to take into account health care expenses, which seniors spend a greater portion of their income on than other age groups.
“Improved inflation protection will especially help older retirees and widows who are more likely to rely on Social Security benefits as they age,” Larson wrote in a statement.
A higher cost-of-living adjustment is especially important now, with inflation running so high. As GOBankingRates previously reported, the COLA for 2021 was only 1.3%, which means next year’s adjustment will rise by more than 4%. Some senior groups wanted an even higher COLA for 2022 of 6% to 6.1%, arguing that it would be needed to fully cover the needs of seniors.
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Other highlights of Larson’s bill include the following:
Protects low-income workers by setting a new minimum benefit of 25% above the poverty line, which would be tied to wage levels to ensure that the minimum benefit does not fall behind.
Provides higher benefits for widows and widowers in two income households.
Repeals the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) that “currently penalize many public servants.”
Ends the 5-month waiting period to receive disability benefits.
Provides caregiver credits to ensure that caregivers aren’t penalized in retirement for taking time out of the workforce to care for children or other dependents.
Extends benefits for students through age 22.
Increases access to benefits for children who live with their grandparents or other relatives.
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The bill would also require the wealthy to pay the same Social Security payroll tax rate as everyone else. Right now, Social Security taxes are not collected on annual wages over $142,800. Larson’s legislation would apply the payroll tax to wages above $400,000.
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Last updated: October 22, 2021
This article originally appeared on GOBankingRates.com: Social Security Update: New Bill Could Benefit Seniors Immensely by Improving Cost-of-Living Formula