Senate OKs End to Social Security Earnings Penalty


The Senate unanimously passed legislation Wednesday that would permit Americans 65 to 69 years old to earn as much money as they want each year without losing any Social Security benefits.

The measure, which passed, 100 to 0, was approved unanimously by the House earlier this month. It will go to President Clinton next week, and he is expected to sign it promptly.

Clinton, traveling in India, issued a statement praising the Senate’s action. “I look forward to opening a new era of opportunity for older Americans by signing this measure into law.”

The bill will repeal a Depression-era law that has penalized many Social Security recipients who earn more than a minimal income after they retire. The limit had been enacted to prod older people into getting out of the work force so younger workers could find jobs.

Under current law, retirees from 65 to 69 must forfeit $1 in Social Security benefits for each $3 that they earn beyond $17,000 a year. The Social Security Administration estimates that 800,000 Americans will be affected by the legislation.


The change will be retroactive to Jan. 1.

The repeal of the earnings limit marks the first significant change in the 65-year-old Social Security program since 1983, when Congress voted to gradually raise the age at which workers become eligible for benefits. The age will gradually increase from 65 now to 67 in 2027.

Although Republicans have been pushing for years to repeal the earnings limit, Democrats have opposed the move for fear its cost would reduce the amount of money available for other domestic programs. But the shift of the federal budget from deficits into projected surpluses eased their concerns.

Momentum for the change was heightened by renewed support from business, which needs more workers in the current economic boom, and labor shortage, and wants to be able to coax older Americans back into the work force.

Clinton initially opposed repealing the earnings limit unless it was coupled with longer-term reforms in Social Security. But after congressional Democrats endorsed the legislation, he embraced it in mid-February, saying that he would be “thrilled” to sign such a bill if it were passed without unwanted amendments.

Popularity With Voters Underscored

The unanimous votes in both chambers--and the point all senators made of casting a vote Wednesday--reflected the measure’s certain popularity with voters. Similar 100-to-0 votes in the Senate have occurred only twice in the last 12 months, both times on minor provisions.

Sen. William V. Roth Jr. (R-Del.), chairman of the Senate Finance Committee and floor manager of the legislation, hailed the Senate vote, saying: “It’s good for seniors, it’s good for America and it’s good government.”

The measure will not repeal the existing penalty for those ages 62 to 64 who opt for early retirement and receive reduced benefits. Retirees in that category will continue to lose $1 in benefits for every $2 they earn beyond $10,080 a year.

Lawmakers initially intended to push for repeal of the earnings limit for those workers too, but decided against it after lobby groups for seniors pointed out that the change would place in jeopardy some benefits that the spouses of such workers receive.

Workers 70 or older historically have been exempt from any earnings test.

Although lawmakers congratulated themselves for removing the earnings cap, analysts cautioned that the legislation will do nothing to address the long-term solvency of the Social Security program.

Under current projections, by 2034 the retirement of the baby boom generation is expected to increase outlays for the program so much that taxes on workers’ paychecks would only finance 75% of benefits.

Economists have recommended a series of options for coping with this anticipated shortfall, from raising the age at which future retirees will be eligible for Social Security checks to limiting full-fledged benefits to lower-income and middle-income Americans.

The legislation the Senate passed Wednesday, however, goes in the opposite direction, providing a full benefit for all Americans who reach 65, whether they remain in the work force or retire.

The fiscal effect of the new measure is debatable. The nonpartisan Congressional Budget Office estimated last fall that eliminating the earnings limit would cost the Social Security trust fund $22.7 billion over the next decade.

However, the SSA has argued that the effect actually would be negligible over the longer run because the revenue loss would be offset by increases in money from payroll taxes as more older Americans remain in the work force.

Both lawmakers and White House officials have expressed the hope that Congress will tackle the longer-term solvency issue after a new administration takes office next January. But some analysts expect both sides to continue to eschew any radical action until the situation becomes critical.

Senators Back Off Adding Amendments

As was the case during House consideration of the earnings-limit measure, senators flocked to support the bill Wednesday, making it one of the few truly bipartisan actions of the 106th Congress.

Senators initially had hoped to tack on a couple of minor amendments but rejected them to meet Clinton’s requirement that they send him a “clean” bill--free of riders--so he could sign it into law quickly.

The Senate did add a technical correction to the House version of the bill, which the House must approve before the measure can go to the president. House members are expected to back that provision--by voice vote--early next week.

As expected, lobbyists for older Americans strongly supported the repeal of the earnings limit. AARP, the chief lobby group of retired people, called the bill “a positive step for our nation and its older workers.”