Restructure Social Security: CBO’s Policy Options to
Reduce Social Security Future Deficits By 2) Changing Benefit Formula
Future Deficit
Policy Options Reduction (%) To Index Initial Benefits to Prices Rather Than Earnings 167 % By ~33% for top 2 tiers of earnings? 117 Reduce Primary Insurance Amount' By 15% for all tiers of earnings 83 Factors ... iii By 0.5% every year for all tiers of earnings 67 By ~33% for the top tier of earnings 17 Earnings in AIME2 + Bend Points in PIA‘ to price 100% Bend Points in PIA’ formula to price 83 Index ... Earnings in AIME2 formula to price 33 Initial benefits to changes in life expectancy 33 Lower Initial The top 70% of earners 83% Benefits‘ for .. The top 50% of earners 67
Note: 1) Primary Insurance Amount (PIA): the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal
retirement age 2) Average Indexed Monthly Earnings (AIME): an average of monthly income received by a beneficiary during their work life 3) Currently
there are 3 tiers of earnings in calculation of PIA — top tier = 15% of monthly earnings over $4,586; tier 2 = 32% of monthly earnings between $761 and
KP $4,586; tier 3 = 90% of monthly earnings below $761 4) Benefits for newly qualified individuals. Source: CBO, “Social Security Options 2010.” (@)E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 263
Restructure Social Security: CBO’s Policy Solutions to
Reduce Social Security Future Deficits By 3) Raising Retirement Age / Lower Cost-of-Living Adjustment
Future Deficit
Policy Options Reduction (%)
To 70 50%
Fs[uSs Full ReUreivert Index to life expectancy 33 Age
To 68 17 Red It by 0.5 P t Point 50°
Adjust Cost-of-living eeuce mney — a Adjustment’ Base It on the Chained CPI for All Urban Consumers 33
Notes: 1) Cost-of-Living Adjustment (COLA): increases of Social Security’s general benefit based on cost of living, as currently measured by CPI for Urban Wage Earners and Clerical Workers (CPI-W).
KP Source: CBO, “Social Security Options 2010.” (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 264
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