Social Security: The Notch Issue.
GENERAL ACCOUNTING OFFICE WASHINGTON DC HUMAN RESOURCES DIV
Pagination or Media Count:
Social security retirees born just befor 1917 generally receive higher benefits than those born in 1917 and after-a disparity commonly referred to as the notch. Pre-1917 birth retirees were compensated at an unexpectedly high level because of the way increased inflation affected the benefit formula. This resulted from the introduction of an automatic cost-of-living adjustment in the 1972 Amendment to the Social Security Act. Continued use of this benefit formula would have jeopardized the solvency of the Social Security Trust Funds and required large future increases in payroll taxes to pay for the growing benefits. Faced with this problem, in 1977 the Congress corrected the formula, in effect reducing benefits for retirees born after 1916. For nearly a decade, these retirees have voiced their concerns to the Congress that they have been treated unfairly. Because of the continuing controversy, the Chairman of the Subcommittee on Social Security, House Committee on Ways and Means asked GAO to study the issue. Specifically, the Chairman asked GAO to review - how the notch arose, how beneficiaries are affected, alternatives for financing legislation to address the issue, and socioeconomic characteristics of those affected.
- Economics and Cost Analysis