Senators pitch Social Security reform process as 2032 shortfall nears

A bipartisan group of senators wants to create a formal path for Congress to debate Social Security changes before a projected funding shortfall hits retirees. For households that expect monthly benefits to be part of their retirement income, the clock is getting harder to ignore: the latest trustees report says the main retirement trust fund could run out in 2032.

The bill, called the PROMISE Act, would set up a process for considering Social Security legislation rather than choosing a specific fix. PROMISE stands for Protecting Retirement Opportunities and Maintaining Income Security for Everyone.

The proposal is being introduced by Sen. Dick Durbin, Democrat of Illinois, Sen. Bill Cassidy, Republican of Louisiana, Sen. John Cornyn, Republican of Texas, Sen. Tim Kaine, Democrat of Virginia, Sen. Angus King, independent of Maine, and Sen. Thom Tillis, Republican of North Carolina.

Social Security is more than 90 years old and pays benefits to more than 71 million Americans each month, according to the Social Security Administration. The program is pay-as-you-go, meaning current payroll taxes help fund current benefits. Trust funds help fill the gap when taxes coming in are not enough to cover scheduled payments.

The annual Social Security trustees report released in June said the Old-Age and Survivors Insurance trust fund, the fund used for retirement and survivor benefits, may be depleted in the fourth quarter of 2032. At that point, the program would be able to pay 78% of scheduled retirement benefits, according to the report.

If the retirement fund were combined with the disability trust fund, the trustees report said full benefits could be paid until 2034, after which 83% of benefits would be payable.

What the bill would do

The PROMISE Act would direct the Social Security Advisory Board, an independent bipartisan panel, to gather public input and send Congress a base bill. Any recommendations in that bill would have to extend Social Security solvency for at least 50 years.

The Senate and House majority leaders would introduce the base bill. If they did not, other members of Congress could bring it forward. The measure would then go to the Senate Finance Committee and the House Ways and Means Committee, where lawmakers could hold hearings, consider the bill or make changes.

After that, the bill would receive 100 hours of floor consideration in both the Senate and House. Lawmakers could offer substitute amendments during that period. In the Senate, an amendment would need 60 votes to be adopted, and the final bill would also need at least 60 votes.

A fact sheet for the proposal says the bill is meant to let Congress weigh serious Social Security proposals. It says the measure would not predetermine the policy result, create a fiscal commission or bypass the regular legislative process.

The bill would also create a review every 10 years. If a future funding shortfall is projected, the same floor procedures would be triggered.

Why lawmakers are pushing now

Durbin said in a statement that Social Security is a core retirement promise, but delaying action will make the program’s financial gap harder to address. He previously joined Cassidy, Kaine and Tillis in a June 10 statement calling for bipartisan action after the trustees report was released.

Cassidy told CNBC.com in June that he wanted to act before he and Durbin leave Congress. Durbin is retiring at the end of his current term, while Cassidy did not win his recent primary reelection bid, according to CNBC.

Lawmakers have floated several possible Social Security changes, including raising the retirement age, increasing taxes on high earners and removing the payroll tax cap. Sens. Elizabeth Warren, Democrat of Massachusetts, and Bernie Moreno, Republican of Ohio, recently wrote that they support eliminating the cap, which is currently $184,500.

The trustees report also said Social Security’s 75-year solvency gap rose to 4.42% of payroll from 3.82%. The Committee for a Responsible Federal Budget, a think tank that supports the PROMISE Act, said the program’s financial outlook has “substantially worsened.”

This story draws on original reporting from CNBC.