Social Security: The Notch Issue (CRS Report for Congress)
| Release Date |
Revised Feb. 11, 2011 |
| Report Number |
RS22678 |
| Report Type |
Report |
| Authors |
Dawn Nuschler, Specialist in Income Security |
| Source Agency |
Congressional Research Service |
| Older Revisions |
-
Premium June 13, 2007 (5 pages, $24.95)
add
|
Summary:
Some Social Security beneficiaries who were born from 1917 to 1921âthe so-called notch babiesâbelieve they are not receiving fair Social Security benefits. (The Social Security Administration (SSA) and a 1994 commission on the notch issue define the notch period as 1917 to 1921, though some advocates define the period as 1917 to 1926.) The notch issue resulted from legislative changes to Social Security during the 1970s. The 1972 Amendments to the Social Security Act first established cost-of-living adjustments (COLAs) for Social Security. This change was intended to adjust benefits for inflation automatically, but an error caused benefits to rise substantially faster than inflation.
Congress corrected the error in the 1977 Amendments. However, benefits for those born from 1910 to 1916 were calculated using the flawed formula, giving them unintended windfall benefits. The notch babies, born from 1917 to 1921, became eligible for benefits during the period in which the corrected formula was phased in. For many who retired during in this phase-in period, however, the transition formula did not lessen the differential between their benefits and the windfall benefits received by people born in earlier cohorts. Some notch babies feel it is unfair that their benefits are lower than those received by the older individuals who received the windfall, and also that the transition formula did not do enough to make up the difference.
A number of legislative attempts have been made over the years to give notch babies additional benefits, but none have been successful. A congressionally mandated commission studied the issue and concluded in its 1994 report that "benefits paid to those in the âNotch' years are equitable, and no remedial legislation is in order."
Any future change to the Social Security benefit formula has the potential to create a notch. This is an important consideration as lawmakers consider changes to ensure long-term system solvency.
