View Mobile Site

The ‘notch' — the Social Security issue that just won’t die

Text Size: Small Large Medium
POSTED August 30, 2013 10:42 p.m.

I frequently tell folks that despite the subject matter, my column generally isn't really for senior citizens. Once you are getting a Social Security check, I really don't have too much news or information for you. But if you are approaching retirement age (somewhere in your late mid 50s to early 60s) then I have tons of advice to help you decide when and why and how to take your Social Security checks.

But this week, if you are under 85, you can stop reading the column right now. (However, if you have a much older parent or relative, you may want to keep reading because today's column refers to him or her.)

That's because I'm going to trot an updated version of the timeworn "notch" column. My email inbox has been filled lately with emails from elderly readers who keep bringing up this tired old issue. My hunch is an article about the so-called "Social Security notch" must have appeared in a national publication and it has incensed older folks who will go to their graves convinced the government has cheated them out of Social Security benefits that are rightfully theirs.

For those readers who don't have a clue what I am talking about, the "notch" refers to a time period when corrections were made to the Social Security benefit formula — corrections that were necessary to ensure that all Social Security recipients were paid properly, but corrections that were misconstrued by many to be a way of bilking them out of benefits they felt they were due. Here's the story.

In 1972, Congress passed a law mandating automatic annual cost-of-living adjustments — or COLAs — to Social Security checks. Those COLAs were to be based on increases in the government's official inflation measuring stick: the consumer price index. (Before 1972, COLAs were not automatic. They were sporadic and happened only if Congress specifically authorized a yearly increase.)

As part of the new process, the Social Security Administration had to come up with a formula for calculating increases to people's Social Security checks — which they did. But after COLAs were paid for a couple of years, someone noticed the formula was wrong. Social Security beneficiaries were getting increases that were slightly higher than justified by the actual increase in living costs.

Once the mistake was discovered and SSA notified Congress, several decisions had to be made. For one, they had to figure out what to do about all of the Social Security beneficiaries who received the overly generous COLA adjustments. Congress quickly decided to let them keep the money. (It would have been political suicide to send overpayment letters to every senior citizen in the country demanding repayment of the incorrectly paid funds.)

The second choice Congress had to make was to decide where to draw the line — to figure out which people would have their benefits figured using the proper COLA formula. And they drew that line at 1918. In other words, they said everyone born in 1918 and later would have his or her Social Security benefit figured using the corrected formula.

Sounds simple enough, doesn't it? But sometimes Congress can't leave well enough alone. In this case, they bowed to pressure from senior citizen groups who demanded a transition period from the old (incorrect) formula to the new (proper) formula. After lots of haggling, what they eventually decided is that everyone born between 1918 and 1921 would have his or her benefit figured using a special formula.

So, we ended up with the following scenarios: People born after 1921 had their benefits figured using the proper (and lower) COLA formula; people born before 1918 had their benefits figured using the incorrect (and higher) formula, and people born between 1918 and 1921 had their benefits figured with a special formula not quite as generous as the one used for the pre-1918 crowd but more generous than the one used for the post-1921 crowd.

You'd think everyone would be happy, right? Well, what happened next was pretty bizarre. Social Security recipients born in 1918 and later started to complain that they weren't getting quite as much as folks born 1917 and earlier. Someone should have splashed some cold water in their faces and said, "Duh, you are being paid correctly. It's the folks born before 1918 who are getting overly generous benefits."

Instead, mobs of angry senior citizens around the country started to form into groups demanding justice. Even Ann Landers got into the fray, labeling people born between 1918 and 1921 "notch babies." They mistakenly thought they were singled out for lower benefit adjustments than everyone else. To repeat the facts: They were getting slightly lower benefits than people born 1917 and earlier, but they were getting higher benefits than everyone born from 1922 on.

Then lobbying groups got into the mix and really muddied things. They sent letters to folks born in the so-called "notch years" telling them they were being cheated out of Social Security benefits and asking for donations to fight this injustice. And to help fill their coffers even more, the lobbyists craftily expanded the definition of those notch years to include everyone born through 1926. Some inexplicably even pushed the "notch" cutoff into 1930s! So, senior citizens of all ages started sending in tens of millions of dollars — money that paid for many overpriced lobbyists and some pretty nice office space on K Street in Washington, D.C. — but money that accomplished nothing else. After all, there really was no injustice to fight.

Sadly, millions of seniors born between 1918 and 1926 or even later went to their graves bitter and disappointed — including my own mother! Those still alive believe to this day that they are being cheated out of Social Security benefits. Shame on all those folks who perpetuate this myth.

 

Commenting is not available.

Commenting not available.

Please wait ...