Social Security is heading toward insolvency, according to the Committee for a Responsible Federal Budget.
Per its projections, the issue is expected to occur in seven years for retirement trust funds and in nine years for combined trust funds. However, a fix may be possible.
Committee researchers believe enacting a cap for cost-of-living adjustments (COLA) would ensure “seniors maintain an adequate standard of living as they age.”
“If paired with other benefit and/or revenue Trust Fund Solutions, a COLA cap could be a rapid, thoughtful, and progressive way to help restore solvency and put Social Security on a sustainable path,” the release said.
“A COLA cap could meaningfully and quickly improve the solvency of Social Security’s trust funds while concentrating adjustments on those most able to bear them,” the committee added.
Researchers suggest that a COLA cap on its own would not stop the inevitability of insolvency, and only pairing the change with other revenue or benefit reforms would work.
“COLA cap at the 50th percentile in combination with an Employer Compensation Tax (ECT) – which itself would extend solvency 20 years — would delay insolvency by 45 years to 2080,” the report said.
Its proposed solution would mostly affect high earners by “only meaningfully reducing scheduled benefits for higher earners while increasing payable benefits for lower earners.”
“A COLA cap could meaningfully and quickly improve the solvency of Social Security’s trust funds while concentrating adjustments on those most able to bear them, maintaining full inflation protection for most beneficiaries, continuing to maintain inflation protection on an adequate level of benefits for all beneficiaries, and ensuring solvency solutions are spread over more generations,” the report continues.
“It would do so without meaningfully weakening work incentives in the program or enacting nominal benefit cuts or freezes,” it concluded.
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