WASHINGTON -- The $165 billion Social Security rescue plan signed by President Reagan Wednesday extracts sacrifices from workers, employers and pensioners to keep the retirement system solvent.
Its major provisions include:
-Speeded up payroll tax increases for 116 million workers this decade. The payroll tax, now 6.7 percent each for employers and employees, rises to 7 percent in 1984, 7.05 percent in 1985, 7.15 percent in 1986, 7.51 percent in 1988 and 7.65 percent in 1990. The 1984, 1988 and 1989 hikes are additional but only employers pay the 1984 increase; workers get an automatic tax credit.
-A six-month delay in the July cost-of-living increase for 36 million beneficiaries. It will be paid in January 1984 and in January thereafter. Beginning in 1985, the increase will be based on the lower of wages or prices -- instead of prices, as currently -- if the trust funds run down. Most forecasts say that is unlikely.
-Four million Supplemental Security Income recipients, whose increase also is delayed, get an across-the-board monthly benefit hike in July -- $20 for singles, $30 for couples.
-A tax on half the benefits of better-off pensioners, if their Social Security checks boost their total adjusted gross income above $25,000 for singles and $32,000 for couples. An estimated 4 million will be affected.
-Self-employed workers, who now pay three-quarters of the combined employer-employee rate, will pay the full rate as of January, as well as the increases other workers pay.
-All newly hired federal workers must pay into Social Security come January, as well as high government officials including the president, Cabinet, Social Security commissioner and Congress. Employees of non-profit organizations must join in January; state and local government workers may no longer drop out.
-Raising the 65-year retirement age in two steps to 67 in 2027. Those born in 1938 on will be affected by a two-month-a-year increase, to 66, from 2003-2009. Those born in 1955 on would be affected by another two-month-a-year increase, to 67, from 2021-2027. Workers could retire early at 62, but at even lower benefits than they get now.
-Incentives to retire later and to keep working while collecting Social Security. The 3 percent a year delayed retirement credit will go up to 8 percent, phased in from 1990 to 2008. The 'earnings test' that reduces benefits $1 for every $2 earned will be softened to a $1 cut for every $3 earned for 65- to 69-year-olds, as of 1990.
-Six more months of life for the extended unemployment compensation program, including up to 10 more weeks of benefits for jobless workers whose eligibility runs out. It affects 1.6 million recipients.
-A cost-saving change in the way Medicare pays hospital bills - fixing the fees in advance rather than paying the 'reasonable' charge after patients check out.
