Balancing Act

Everyone agreed that something had to be done. Otherwise, Social Security's main retirement fund would have slid into the red by July. But there are few more politically volatile issues than whether to restore the system to solvency by raising more revenues or by reducing benefits. After wrestling with the problem for a year, a bipartisan commission headed by Economist Alan Greenspan recommended a mixture that leans more heavily on new revenues than on benefit cuts. Passed overwhelmingly by Congress, the plan represents a victory for Claude Pepper and others who opposed shrinking the system. Its major provisions:

> Increases in the payroll tax will be accelerated, netting some $39.4 billion in added revenue by 1990. At present, employers and employees each ante up 6.7% of salary; the figure for employers will reach 7% next year, 7.05% for both in 1985, 7.15% in 1986, 7.51% in 1988 and 7.65% in 1990. The tax is currently applied to a maximum pay of $35,700, but this ceiling will rise as the average national wage increases, as under the present law.

> Self-employed people will have to pay a Social Security tax equal to 100% of the total paid by employers and employees; they now pay only 70%.

> Taxes will have to be paid on a portion of the Social Security benefits of anyone whose income plus one-half of their pension exceeds $25,000 a year. For married couples filing jointly, the base amount will be $32,000.

> For the first time, all federal employees who join the Government after Jan. 1, 1984, will be covered by Social Security, expanding the system's base and revenues. Employees of nonprofit organizations will also be forced into the system. Employees of state or local governments now covered can no longer withdraw.

> Early retirement will still be permitted at 62, but benefits, currently 80% of the full pension paid at 65, will drop to 75% in the year 2009 and 70% in 2027.

> The retirement age for full benefits will increase from 65 to 66 between 2003 and 2009 and then to 67 between 2021 and 2027. > The next cost of living adjustment for those now receiving benefits will be delayed from July to next January. The change will be calculated each January thereafter, based on fluctuations in the Consumer Price Index.

> The bonus that workers over 65 get for delaying their retirement, which is now 3% of benefits for each year's delay, will gradually increase to 8% between 1990 and 2008. The maximum delay is five years. This file is automatically generated by a robot program, so viewer discretion is required.