Sunday, November 13, 2011

Utah GOP Representative Chaffetz proposes means testing of Social Security benefits by 2019

On Nov. 8, Jason Chaffetz (R-UT) announced his own proposals for Social Security reform. The details are present on this Nov. 8 press release, here. Chaffetz is said to be shopping for cosponsors.

The story was mentioned in the Politco rag (see my Issues Blog yesterday), in conjunction with other GOP proposals from Sen. Tom Coburn (R-OK), and James Lankford (R-OK) to reduce and means test entitlements for wealthier or high income individuals while keeping income taxes  and particularly capital gains taxes as low as possible while reducing federal debt. 

There is a lot of technical language about cost of living in the proposal. 

But the most controversial proposal is the last one, which means tests the benefit amount for retirees collecting benefits starting in 2019, for those who make over a certain amount a year (it doesn’t talk about assets testing, which would get very complicated when there are trusts).  It also boosts amounts for those over age 85, and also supplies a minimum benefit for low income people. Some rumors had suggested means testing could start immediately on wealthier retirees. 

For new retirees, starting in 2016, it also changes the formula for average earnings, including up to 40 years instead of 35.  

Full retirement age for new retirees increases gradually. Early retirement, with a more severe lifetime actuarial penalty based on increasing life expectancy, can still start at 62.

One item that ought to be addresses is the whole subject of Social Security Offset, imposed by many corporate pension plans to subtract from private pension amounts, and which often presumes the person starts collecting at 62.  This is another area for potential reform that both parties have missed. 

The proposal seems to respect the idea that Social Security is at least partially like a retirement annuity based on a person's contributions over the years. 

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