Summary of the Financial Sanity Act of 2027

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  1. Because life expectancy has increased dramatically since 1940, but the Social Security normal retirement age has increased only 2 years, in half-year increments, moves the Social Security normal retirement age for people born after 1967 to age 70. For someone born in 1968, the normal retirement age is 67½. For someone born in 1969, the normal retirement age is 68. Subject to the future change provisions below, for someone born in 1973 or later, it is age 70.
  2. To  increase the defined contribution nature of Social Security, for people whose Social Security normal retirement age is increased pursuant to 1 above, subject to 1/6th phase-ins as noted above, if 1% or more of their annual earnings is contributed to an IRA, 401(k) account etc., a 1% matching contribution, with a minimum of $500 and maximum of $1,000 (both indexed for inflation), will be made by the U.S. Treasury. The $500 amount is pro-rated for people who work part-time. The same will apply for contributions to an HSA. A 50% excise tax applies to non-retirement and non-health (HSA) distributions.
  3. Because single persons can get severely shortchanged by Social Security and the percent of the population that is single has grown, a significant death benefit is added for people (generally, single people) whose normal retirement age is increased pursuant to 1 above if they die after attaining early retirement age and before they and/or their relatives have received benefits equal to their contributions plus half the employer matching contributions to the Social Security trust fund (the “shortfall”). If no survivor benefits apply, a shortfall benefit will be gradually phased in, with 1/6th payable to those born in 1968, 2/6ths payable to those born in 1969, and the full amount payable to those born in 1973 or later.
  4. To reduce the annuity nature of Social Security, for people whose Social Security normal retirement age is increased pursuant to 1 above, their benefit in excess of $2,000 per month (indexed for inflation) is gradually reduced up to 50%. The reduction for someone born in 1968 is 1/6th of 33.33%, or 5.55%. For someone born in 1969, the reduction is 2/6th of 33.33%, or 11.11%. A 33.33% reduction applies to those born post-1972, except the reduction is increased to 37% in 2045, 43% in 2050 and 50% in 2055.
  5. To deal with future changes in life expectancy, the age 70 normal retirement age is adjusted for each decade beginning on January 1, 2050, to account for changing life expectancy, so that the percentage of life expected to receive benefits (based on life expectancy at age 65, using 2041 as the initial base year), remains constant. Rounding to the closest half-year applies. Example: Assume life expectancy of a 65-year-old in 2041 is, rounded, 20 years. (In 2041, the Social Security normal retirement age 70.) The percentage of life for which benefits are expected is 17.65 (i.e., 85-70/85). If life expectancy at age 65 in 2043 is 21 years (i.e., to age 86), then the normal retirement age is 71 (i.e., 86 x .1765 = 15.2, 86 – 15.2 = 70.8; rounded to 71) for 2050 through 2059. A new normal retirement age would be calculated in 2053, continuing to use the 17.65 percent, effective for the decade beginning on January 1, 2060. Early and late retirement ages are adjusted accordingly. Normal retirement age would not drop below age 70.
  6. Consistent with 1 and 5 above, Social Security early retirement age is 5 years prior to normal retirement age. So, for someone born in 1967 or earlier, it is age 62. For someone born in 1968, it is age 62½. For someone born in 1969, it is age 63. For someone born in 1973 or later, it is age 65.
  7. Consistent with 1 and 5 above, Social Security late retirement age is normal retirement age plus 3 years. So, for someone born in 1967 or earlier, it is age 70. For anyone born in 1968, it is age 70½. For someone born in 1973 or later, it is age 73.
  8. Consistent with 1 and 5 above, starting in 2035, eligibility for widow’s and widower’s benefits, etc., is moved back 3 years (from 50 to 53 and from 60 to 63).
  9. To simplify taxation and increase fairness, beginning in 2029, include employer-paid health insurance premiums in FICA and HI wages but completely exclude Social Security payments from income taxation.
  10. After 2037, to increase equity, for Social Security participants with less than a full history of work, their benefit will be potentially limited by taking the highest ten years of indexed wages, averaging them, and applying such average to years with indexed wages less than the average, calculating the benefit, and then prorating the benefit by years worked divided by 35 (or years pre-death). For this purpose, years worked will include years when minimum wage or greater was earned during at least 3 quarters of the year and time spent providing a majority of the care of one or more minors and/or disabled persons. (Currently, assuming equal pay, a person who works 40 years pays roughly 4 times the taxes (in present value terms) that a person working 10 years pays, but receives roughly only double the benefit.)
  11. Because older adults who have children later in life should have saved significantly, beginning in 2030, child benefits are eliminated for parents eligible to receive Social Security benefits.
  12. Because the purpose of a COLA is to keep benefits in line with price changes, starting in 2030, the annual benefit COLA is changed to the chained consumer price index for wage and salary workers (CPI-W).
  13. Because many people can draw benefits off a person’s primary insurance amount (PIA) and the family maximum is 150% or more, for benefits first paid after 2029, the family maximum is 150% of the PIA.
  14. For divorced spouses, increase the number of years of marriage necessary to draw death benefits on a prior spouse from 10 to 15, unless the majority of the marriage was spent raising children/disabled.  
  15. Starting in 2029, all Social Security and Medicare trust funds are eliminated. (The trust funds are fallacies; all benefits are ultimately paid by the General Fund and federal solvency is required.)
  16. Medicare initial eligibility age is the Social Security normal retirement age. See 1 and 2 above. (Between Obamacare, Medicaid, etc., people can get reasonably priced health care coverage prior to retirement.)
  17. To simplify Medicare, beginning in 2029, the Medicare Part A and B deductibles are combined into one $1,000 combined deductible (instead of $1,676 for Part A and $283 for Part B, in 2026).
  18. Starting in 2029, the Medicare Part A $0 payment period is reduced from 60 to 30 days, and the amount payable during days 31-60 is $333 (instead of $419 for days 61-90) and the amount payable for days 61-150 is $667 (instead of $838 for days 91-150). Most leave the hospital within 30 days.
  19. Starting in 2029, after payment of the (combined) deductible, 50% of the next $8,000 of Part B benefits are payable by the individual (with 80% kicking in thereafter). To increase competition and incentive to control costs, Medigap cannot cover the any of the Part A/B deductible or any Part B out-of-pockets.
  20. Starting in 2029, for those participating in Medicare Part C (Medicare Advantage), the excess of costs over traditional Parts A and B costs to the U.S. government will be paid by them, with the charges to be recovered in the second year following the year of the cost, to be prorated amongst Part C participants pro rata based on current year premiums. (MedPAC estimated this amount to be $84 billion in 2025.)
  21. Beginning in 2029, tax subsidies for employer provided health insurance and Obamacare exist only for high deductible health plan coverage (as defined in Code §223(c)(2)).
  22. Starting in 2029, the co-insurance (i.e., the amount paid by the consumer) percentage under a high deductible health insurance plan must be at least 25 percent (until the maximum out-of-pocket amount is reached). Also, the deductible can be lower than current law minimums (and can be $0), if the co-insurance percentage is never below 50 percent (until the maximum out-of-pocket amount is reached).
  23. Starting in 2030, the patent life of any drug sold for less abroad to a foreign government or organizations is halved.
  24. The Fed’s sole objective is changed to producing stable prices.
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