Comments on the Social Security Notch Issue.
Abstract
While differences in benefit amounts exist between cohorts of retirees who came under the benefit rules enacted in the 1977 Amendments to the Social Security Act, and those who continued to have their benefits computed under the pre-1977 rules, such differences do not justify benefit increases for those under the new law. Those beneficiaries under the new law who claim an inequity, in particular the transition (or notch) cohorts born from 1917 to 1921, are comparing their benefit levels to a group that received an unintended windfall from the system as a result of a flawed benefit formula. The notch group generally receives benefit levels that are as high or higher than most cohorts coming before or after them. In fact, many in the notch cohorts are among those that will receive the highest relative benefit levels in the history of the Social Security program. Analyses by social security experts agree with the findings in GAO's 1988 report. GAO also finds that enacting the proposed notch legislation (H.R.917/S.567) would be costly. The bill would result in the reduction of reserves credited to the Old-Age and Survivors Insurance (OASI) trust fund and could require revenue raising measures, such as a payroll tax increase under the Social Security firewall provisions of the 1990 Budget Enforcement Act. A payroll tax increase would have a negative impact on today's workers, who are already paying a substantial tax rate to finance current and future benefits. Measures to finance higher benefits for the notch group also could diminish the ability of the Social Security system to address developing problems in the Disability Insurance fund and the Medicare Hospital Insurance fund.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jul 23, 1992
- Accession Number
- ADA298969
Entities
Organizations
- United States Government Accountability Office