Senators propose pathway for Social Security overhaul as fund deadline nears

A bipartisan group of senators proposed legislation to force a formal debate on Social Security as the program’s retirement trust fund is projected to be depleted in the fourth quarter of 2032. The annual Social Security trustees report released in June said the program would be able to pay 78% of scheduled retirement benefits at that point if Congress does not act.

The bill, called the PROMISE Act, would set procedures for considering changes to a federal program that pays monthly benefits to more than 71 million Americans, according to the Social Security Administration. Social Security operates largely on payroll tax revenue, with trust fund reserves used to cover gaps when benefit payments exceed incoming taxes.

The sponsors are Sens. Dick Durbin of Illinois, the Democratic whip; Bill Cassidy, Republican of Louisiana; John Cornyn, Republican of Texas; Tim Kaine, Democrat of Virginia; Angus King, independent of Maine; and Thom Tillis, Republican of North Carolina.

Durbin said in a statement that delays would make the financing problem harder to resolve. The senators’ proposal says Congress has seen multiple Social Security bills introduced, but few have advanced to a vote.

How the process would work

Under the PROMISE Act, the Social Security Advisory Board, an independent bipartisan body, would gather public input and send Congress a base bill. Any recommendations in that legislation would have to extend Social Security solvency by at least 50 years, according to a fact sheet on the proposal.

The Senate and House majority leaders would introduce the base bill. If they did not, other lawmakers could file it. The bill would then go to the Senate Finance Committee and the House Ways and Means Committee, where lawmakers could hold hearings and consider amendments.

After committee review, the measure would receive 100 hours of floor consideration in each chamber. Lawmakers could offer substitute amendments, but any such amendment would need 60 votes in the Senate. Final passage in the Senate would also require at least 60 votes.

The proposal would also establish a solvency review every 10 years. If that review found a projected funding shortfall, the same floor procedures would be activated. The bill’s fact sheet says the process would not create a fiscal commission, bypass regular order or dictate a specific policy result.

Pressure from trust fund projections

The trustees report said the Old-Age and Survivors Insurance trust fund, which supports retirement and survivor benefits, is projected to run dry three months earlier than previously estimated. If that fund is combined for projection purposes with the disability insurance trust fund, the program could pay full benefits until 2034, after which 83% of scheduled benefits would be payable, according to the report.

The report also raised the program’s 75-year actuarial deficit to 4.42% of taxable payroll from 3.82%. The Committee for a Responsible Federal Budget, a think tank that supports the PROMISE Act, said Social Security’s financial position had worsened substantially.

The effort follows a June 10 statement from Cassidy, Durbin, Kaine and Tillis calling for bipartisan work after the trustees report. Cassidy told CNBC in June that he wanted action before he and Durbin leave Congress. Durbin is retiring at the end of his term, and Cassidy did not win his recent primary reelection contest.

Other ideas discussed by lawmakers include increasing the retirement age, raising taxes on high earners and eliminating the payroll tax cap. Sens. Elizabeth Warren, Democrat of Massachusetts, and Bernie Moreno, Republican of Ohio, recently wrote that they favor removing that cap, which is currently $184,500.

This story draws on original reporting from CNBC.