SENATE BILL REPORT

SJM 8007

BYSenators Bauer, Sellar, Patterson, Warnke, Vognild and Sutherland

Requesting enactment of the social security notch adjustment act.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 13, 1989

Senate Staff:Desley Brooks (786-7443)

AS OF FEBRUARY 10, 1989

BACKGROUND:

In 1975, automatic yearly cost-of-living adjustments to Social Security benefits were implemented.  However, the formula used to compute payment rates tended to overcompensate for inflation. Because of unusually high inflation in the 1970s, benefit rates for people initially affected by the new formula -- generally those born in 1910 and later -- increased dramatically.  In 1977, Congress passed amendments to the Social Security Act, which changed the way Social Security benefits were computed.  These amendments led to the creation of the "notch."  The term "notch" is used to refer to the difference between benefit amounts payable to workers born after 1916 and those payable to workers with similar earnings histories born in 1916 and earlier.

To ease the burden of the changeover for people approaching retirement age at the time the computation formula was corrected, a five-year transition period was implemented.  It called for special benefit computations that gradually lowered replacement rates for people born from 1917 to 1921.  It has been suggested that, as a result of this change in computation of benefits, workers born between 1917 and 1921 receive lower social security benefits.

SUMMARY:

The Washington State Legislature requests the United States Congress to enact the Social Security Notch Adjustment Act proposed by Senator Terry Sanford.

Appropriation:  none

Revenue:   none

Fiscal Note:    none requested