Revising Social Security Benefit Formula Which Favors Short-Term Workers Could Save Billions
Highlights
Short-term workers have contributed a relatively small amount of social security tax because they have had little work in covered employment. However, they receive a higher return on their contribution than the average wage earner because of the benefit formula used to attain the program's social adequacy objectives. This advantage is created by spreading the worker's covered earnings over a lifetime and applying the resulting artificially low average wage to a benefit formula that is favorable for low wage earners. Stopping the short-term worker advantage could save as much as $15 billion over the next decade and end windfall social security benefits to retired Government workers who also receive a pension from their noncovered employment.
Recommendations
Matter for Congressional Consideration
Matter | Status | Comments |
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Congress should consider revising the social security benefit formula to remove the advantage that it provides to the short-term worker. |
Closed – Not Implemented
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Congress enacted the Social Security Amendments of 1983 to improve the financing of the Social Security System. It decided to adjust the benefit formula for only short-term workers who receive a pension from non-covered employment, but not for all short-term workers. |