The federal retirement program’s long-term solvency recently was put under the spotlight by the Social Security Administration (SSA). The SSA’s Office of the Chief Actuary (OACT) found that when the tax breaks in the One Big Beautiful Bill (OBBB) Act are considered, the Social Security’s reserve fund could run out of money to make full benefit payments sooner than previously forecast.
To help ease that fiscal drain, Sen. Mazie Hirono and Rep. Jill Tokuda, both Democrats representing Hawaii, have introduced the Protecting and Preserving Social Security Act in their respective chambers.
Plus, they say the bill’s proposed change to the way Social Security's benefits are adjusted each year would ease the financial challenges that many of the payments’ recipients now face.
Current COLA measurement: Social Security benefits are adjusted (or not) annually based on an annual cost-of-living adjustment (COLA) amount.
To reach the percentage increase, the SSA reviews the current year's third quarter Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, figure and compares it to the average CPI-W from the previous year.
If there is an increase, the percentage difference becomes the COLA for the upcoming year. If there’s no increase, the retirement benefits stay flat. If the inflation rate drops, don’t panic. Social Security benefits will hold at their current level, not be reduced.
The latest projected COLA bump for Social Security monthly checks in 2026 is estimated to be 2.7 percent. That forecast is the same as last month’s calculation.
The CPI-W is used because it was the only COLA measurement in effect in 1972 when the SSA started making the annual benefits adjustments.
However, some policy makers and elderly advocates say the CPI-W is not the best measure to annually fine-tune federal retirement benefit amounts because it does not accurately reflect the expenses that the country’s nearly 67 million Social Security beneficiaries face.
For example, the CPI-W considers energy costs, including the price of gasoline. That’s generally not an expense for most retirees, who aren’t commuting to jobs.
The CPI-W also doesn’t fully account for rising healthcare and housing costs, which are expenses that typically affect older adults more than younger ones.
New CPI for Social Security: The Hirono/Tokuda bill would require the Social Security COLA us the inflation measure called the Consumer Price Index for the Elderly, or CPI-E.
The Bureau of Labor Statistics (BLS) created the CPI-E years ago, but as an experimental measurement to monitor changes in the cost of goods and services generally purchased by Americans aged 62 and older.
The CPI-E currently has no official use in BLS calculations. But it does typically show a dramatic increase in inflation for products most used by older consumers.
The Protecting and Preserving Social Security Act would require the BLS to publish the CPI-E and use those amounts in determining the annual retirement benefits COLA amount.
“By adopting the CPI-E as the measure for calculating COLAs, the legislation assures that the purchasing power of Social Security benefits are more fully protected from the ravages of inflation,” said Max Richtman, President and CEO of the National Committee to Preserve Social Security and Medicare, which supports the bill.
The Hirono/Tokuda bill also says that if Social Security benefits increase due to CPI-E data, the extra amount will not be counted in determining if someone qualifies for Supplemental Security Income (SSI), the monthly payments Social Security provides to people with disabilities and older adults who have little or no income or resources, or Medicaid.
More payroll tax for the trust fund: In addition, the bill would requires the wealthiest individuals to pay more into the Social Security trust fund via the Federal Insurance Contributions Act (FICA) payroll tax.
Currently, the 6.2 percent Social Security tax is taken from workers’ paychecks, and matched by their employers, until employee earnings reach the annual Social Security wage base limit.
For 2025, the wage base cap is $176,100. Workers who make more than that do not pay any Social Security tax on their higher wages. The wage cap is adjusted annually for inflation.
The cap math means that the most a worker will pay in Social Security taxes for 2025 is $10,918.20 ($176,100 x 6.2 percent).
The Hirono/Tokuda bill would phase out the Social Security tax cap over seven years. The end result would be that all earnings would eventually be taxed regardless of the amount earned.
Support on and off Capitol Hill: In addition to Hirono, Senate cosponsors are Sens. Jeff Merkley of Oregon and Tina Smith of Minnesota. Joining Tokuda on the House side are cosponsoring Reps. Steve Cohen of Tennessee and Jan Schakowsky of Illinois.
All are Democrats.
Private sector supporters are Alliance for Retired Americans, Social Security Works, and the previously mentioned National Committee to Preserve Social Security and Medicare.
You also might find these items of interest:
- Digging a little deeper into the 2025 Social Security COLA
- Social Security taxable wage base goes to $176,100 in 2025
- Some Social Security recipients owe tax on federal retirement benefits
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