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A second Social Security reform idea is picking up attention, and it works differently from the high-earner COLA cap already covered here. Instead of touching only the highest benefit checks, a flat-rate cost-of-living adjustment would change the yearly raise for nearly everyone.
The idea isn't new. A version of it was first proposed in 1987. What's new is the Committee for a Responsible Federal Budget reviving it this year as part of a broader push to keep Social Security's trust fund solvent.
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How a Flat-Rate COLA Would Actually Work
Today's COLA applies the same percentage increase to every retiree's own benefit, so a bigger check gets a bigger dollar raise. A flat-rate design would instead calculate a single dollar amount, based on the COLA percentage applied to a lower benchmark benefit, and give that same dollar figure to every retiree regardless of their own benefit size.
The Committee for a Responsible Federal Budget describes the mechanics plainly in its own writeup of the idea.
Representative Penny's 'Flat-Rate COLA' would pay all beneficiaries the same COLA, set at the COLA received by a beneficiary at the 20th percentile.
Who Gains and Who Gets a Smaller Raise
Because the flat dollar amount is pegged to a lower benefit level, anyone whose benefit sits above that level gets less than the current percentage formula would have given them. AARP's policy research arm calculates that roughly 80 percent of beneficiaries, everyone above that benchmark, would receive a smaller raise than they get under today's formula.
The Committee for a Responsible Federal Budget's own modeling of the 20th-percentile version shows the size of that gap growing over time: by 2055, it estimates benefits for the bottom fifth of earners would run about 3 percent lower than scheduled, versus about 19 percent lower for the top fifth. The tradeoff is that the design is meant to slow old-age poverty growth, with the group estimating a 5 to 10 percent reduction depending on exactly where the benchmark is set.
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This isn't the only Social Security COLA idea in play right now. A New Proposal Would Cap Social Security COLAs for the Highest Earners covers a narrower design that only targets the top of the benefit range.
Why This Proposal Exists At All
Social Security's combined trust funds are projected to run short in the early 2030s. Without a fix, the program wouldn't disappear, but it could only pay about 81 percent of scheduled benefits from ongoing payroll tax income. Ideas like a flat-rate COLA and the high-earner cap are two different ways of closing part of that gap.
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For the fuller picture of what the funding shortfall actually means, Social Security Isn't Disappearing in 2032 walks through the math in full.
How to Track This Without Overreacting
A think tank proposal is not legislation. For a flat-rate COLA to become real, a member of Congress would need to write it into a bill, move it through committee, and win votes in both chambers, any of which could change the design entirely.
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The Committee for a Responsible Federal Budget is publishing and promoting the idea. No bill exists yet.
A version would need to move through the House Ways and Means Committee or Senate Finance Committee.
Social Security reforms are typically phased in over years, not applied immediately.
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Common questions
What is a flat-rate Social Security COLA?
Instead of applying the same percentage raise to every retiree's own benefit, a flat-rate COLA would give every retiree the same dollar amount, calculated from the COLA percentage applied to a lower benchmark benefit, such as the 20th percentile.
Who would a flat-rate COLA affect the most?
Anyone whose benefit sits above the benchmark level would receive a smaller raise than the current percentage formula gives them. AARP's policy research arm estimates that's roughly 80 percent of beneficiaries. The design is meant to protect the smallest checks the most.
Is the flat-rate COLA proposal already in effect?
No. It's a proposal from the Committee for a Responsible Federal Budget, a nonpartisan policy group, not a bill Congress has passed. It would need to move through committee hearings and votes in both chambers before it could take effect.
How is this different from the Social Security COLA cap for high earners?
The high-earner cap only slows raises for the top of the benefit range. A flat-rate COLA changes the raise calculation for nearly every retiree, though it's still designed to protect the lowest benefits the most. Both are separate proposals, not settled law.
