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Summary of Provisions That Would Change the Social Security ProgramUpdated May 3, 2006 
Description of Proposed Provisions:


Estimates based on the intermediate assumptions of the 2005 Trustees Report
Change from present law  Results with this provision  

Longrange actuarial balance 
Annual balance in 75th year 
Longrange actuarial balance 
Annual balance in 75th year 

Category: CostofLiving Adjustment  
A1  Beginning December 2006,
reduce costofliving adjustment for OASDI benefits by 1
percentage point. graph  table  pdfgraph  pdftable 
1.49  2.30  0.44  3.41  
A2  Beginning December 2006,
reduce costofliving adjustment for OASDI benefits by 0.5
percentage point. graph  table  pdfgraph  pdftable 
0.76  1.20  1.16  4.50  
A3  Beginning December 2006, use the
"superlative" (or "chained") CPI for COLAs, estimated to reduce
the COLA by 0.22 percentage point. graph  table  pdfgraph  pdftable 
0.34  0.54  1.58  5.16  
Category: Provisions Affecting Level of Monthly Benefits (PIA)  
B1  Increase the number of years used to
calculate benefits for retirees and survivors (but not for
disabled workers) from 35 to 38, phased in 20062010. graph  table  pdfgraph  pdftable 
0.28  0.43  1.64  5.27  
B2  Increase the number of years used to
calculate benefits for retirees and survivors (but not for
disabled workers) from 35 to 40, phased in 20062014. graph  table  pdfgraph  pdftable 
0.46  0.73  1.46  4.97  
B3 
For each year from 20062036, multiply the 32 and 15 percent
formula factors by 0.987, reducing the factors to 21 percent
and 10 percent respectively, for new eligibles in 2036 and later. graph  table  pdfgraph  pdftable 
1.60  3.29  0.32  2.41  
B4  Reduce benefits by
3 percent for those newly eligible for benefits in 2006 and later. graph  table  pdfgraph  pdftable 
0.37  0.54  1.56  5.16  
B5  Reduce benefits by
5 percent for those newly eligible for benefits in 2006 and later. graph  table  pdfgraph  pdftable 
0.61  0.90  1.31  4.80  
B6 
Beginning with those newly eligible for OASDI benefits in 2012 and
later, reduce PIA formula factors so that benefits grow by
inflation rather than by increases in real wages. graph  table  pdfgraph  pdftable 
2.38  7.85  0.45  2.14  
B7  Progressive price indexing of PIA formula
factors beginning with individuals newly eligible for OASDI
benefits in 2012. Create new bend point at the 30th
percentile of earners. Maintain currentlaw benefits for earners
at the 30th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph  table  pdfgraph  pdftable 
1.43  4.62  0.50  1.09  
B8  Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 40th
percentile of earners. Maintain currentlaw benefits for earners
at the 40th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph  table  pdfgraph  pdftable 
1.21  3.89  0.72  1.81  
B9  Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 50th
percentile of earners. Maintain currentlaw benefits for earners
at the 50th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph  table  pdfgraph  pdftable 
0.97  2.92  0.96  2.78  
B10  Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 60th
percentile of earners. Maintain currentlaw benefits for
earners at the 60th percentile and below and reduce upper
2 formula factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph  table  pdfgraph  pdftable 
0.68  1.82  1.24  3,88  
B11 
Beginning with those newly eligible in 2013, multiply the 90 and 32
PIA factors each year by 0.9925 and 0.982, respectively. Stop
reductions in
2050. Beginning with those newly eligible in 2008, multiply the 15
factor by 0.982. Stop reduction of the 15 factor in 2045. DI will
have present law scheduled benefit and proportional reduction at
conversion to retired worker benefits at normal retirement age,
based on years of disability. graph  table  pdfgraph  pdftable 
2.08  5.78  0.15  0.08  
B12 
Progressive price indexing of PIA formula factors beginning with
individuals newly eligible for OASI benefits in 2012. Create new
bend point at the 30th percentile of earners. Maintain currentlaw
benefits for earners at the 30th percentile and below and reduce
upper 2 formula factors (32% and 15%) such that maximum worker
benefit grows by inflation rather than the growth in average wages.
Disability benefits are not affected by the proposal. Disabled
worker beneficiaries, upon attaining normal retirement age, would
be subject to a proportional reduction in benefits based on the
worker's years of disability. graph  table  pdfgraph  pdftable 
1.21  3.97  0.71  1.73  
B13 
For OASI beneficiaries becoming eligible for benefits in 2018 and
later, multiply the PIA factors by the ratio of life expectancy at
67 for 2013 to the life expectancy at age 67 for the 4th year prior
to the year of benefit eligibility. Unisex life expectancies, based
on period life tables, would be used as projected by SSA's Office
of the Chief Actuary. Disability benefits are not affected by the
proposal. Disabled worker beneficiaries, upon attaining normal
retirement age, would be subject to a proportional reduction in
benefits based on the worker's years of disability.
graph  table  pdfgraph  pdftable 
0.45  1.77  1.48  3.93  
Category: Provisions Affecting Retirement Age  
C1  Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67). graph  table  pdfgraph  pdftable 
0.14  0.00  1.78  5.70  
C2  Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67) and then index
the normal retirement age (by 1 month every 2 years)
until the NRA reaches age 68. graph  table  pdfgraph  pdftable 
0.52  0.76  1.40  4.94  
C3  Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67) and then index
the normal retirement age (by 1 month every 2 years)
until the NRA reaches age 70. graph  table  pdfgraph  pdftable 
0.69  1.61  1.24  4.09  
C4 
Eliminate the hiatus in the normal retirement age (speed up the
increase to age 67) and then increase the NRA 2 months per year until
the NRA reaches age 68. graph  table  pdfgraph  pdftable 
0.62  0.76  1.30  4.94  
C5 
Shorten the hiatus in the normal retirement age (speed up the
increase to age 67). That is, increase the NRA by 2 months per year
for those attaining age 62 in 2012 through 2017, five years earlier
than in current law, which would increase the NRA 2 months per year
for those reaching age 62 in 2017 through 2022. graph  table  pdfgraph  pdftable 
0.07  0.00  1.86  5.70  
Category: Provisions Affecting Payroll Tax Rates  
D1  Raise payroll tax rates (for employees
and employers combined) by 2.0 percentage points in 2006 and later. graph  table  pdfgraph  pdftable 
1.96  2.00  0.04  3.70  
D2  Raise payroll tax rates (for employees
and employers combined) by 2.1 percentage points in 2020 (to 14.5%
combined) and by an additional 2.1 percentage points in 2050 (to
16.6% combined). graph  table  pdfgraph  pdftable 
1.98  4.21  0.05  1.49  
Category: Provisions Affecting OASDI Contribution and Benefit Base  
E1  Beginning in 2006, make all earnings
subject to the payroll tax (but retain the currentlaw taxable
maximum for benefit calculations). graph  table  pdfgraph  pdftable 
2.21  2.89  0.28  2.81  
E2  Beginning in 2006, make all earnings
subject to the payroll tax and credit them for benefit purposes. graph  table  pdfgraph  pdftable 
1.82  2.06  0.10  3.64  
E3 
Determine the level of the contribution and benefit base such that
90 percent of the earnings would be subject to the payroll tax
(phased in 20062015). All earnings subject to the payroll tax
would be used in determining benefits. graph  table  pdfgraph  pdftable 
0.83  0.96  1.09  4.74  
E4 
Make 90 percent of the earnings subject to the payroll tax (phased in
20082017), but retain the currentlaw taxable maximum for
benefit purposes. This estimate considers all selfemployed
earnings in computing the percentage of earnings subject to
the payroll tax. graph  table  pdfgraph  pdftable 
1.00  1.47  0.93  4.23  
Category: Provisions Affecting Coverage of Employment  
F1  Cover newly hired State and local
government employees beginning in 2006. graph  table  pdfgraph  pdftable 
0.22  0.01  1.71  5.70  
Category: Provisions Affecting Trust Fund Investment in Equities  
G1  Invest 40 percent of the Trust Funds in
equities (phased in 20062020), assuming
an ultimate 6.5 percent real rate of return on equities. graph  table  pdfgraph  pdftable 
0.88  0.00  1.04  5.70  
G2  Invest 40 percent of the Trust Funds in
equities (phased in 20062020), assuming
an ultimate 5.5 percent real rate of return on equities. graph  table  pdfgraph  pdftable 
0.64  0.00  1.29  5.70  
G3 
Invest 40 percent of the Trust Funds in equities (phased in
20062020), assuming an ultimate 3 percent real rate of return on
equities, the same as the assumed ultimate yield on the
specialissue Social Security trust fund bonds. graph  table  pdfgraph  pdftable 
0.00  0.00  1.92  5.70  
Category: Provisions Affecting Taxation of Benefits  
H1  Tax Social Security benefits in a
manner similar to private pension income beginning in 2006.
Phase out the lowerincome thresholds during 20062015. graph  table  pdfgraph  pdftable 
0.33  0.27  1.60  5.43 
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