H.R. 4968 — Protecting and Preserving Social Security Act

This section directs the Bureau of Labor Statistics to develop and publish a monthly Consumer Price Index for Elderly Consumers that measures changes over time in expenditures typical for individuals aged 62 or older, effective for months ending on or after July 31 of the calendar year following enactment. It authorizes appropriations as necessary for this purpose.

This section modifies the cost-of-living adjustment (COLA) computation for Social Security benefits under title II by redefining the "Consumer Price Index" to mean the Consumer Price Index for Elderly Consumers (CPI-E, as published by the Bureau of Labor Statistics) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). (As background, COLAs increase primary insurance amounts and other benefits to account for inflation; CPI-E reflects spending patterns of individuals aged 62 and older, with greater weight on healthcare costs.) The change applies to both benefits computed under law in effect after December 1978 and certain benefits under pre-1979 law; ensures no effect on adjustments under other federal laws; provides that resulting benefit increases do not count as income or resources for Supplemental Security Income (SSI) or Medicaid eligibility; and takes effect for COLA computation quarters (i.e., third calendar quarters) ending on or after September 30 of the second calendar year following enactment.

This section modifies the definitions of wages under the Social Security Act (SSA) and Internal Revenue Code (IRC) to exclude only a phased-down "applicable percentage" of remuneration above the contribution and benefit base (CBB)—the maximum annual earnings subject to the 12.4% OASDI payroll tax (6.2% each on employees and employers)—paid in calendar years after 2025 (from 100% exclusion previously), and makes conforming changes for self-employment income in taxable years beginning in such calendar years. The applicable exclusion percentages, identical for wages (IRC §3121(a)(1), SSA §209(a)(1)(J)) and self-employment income (IRC §1402(b)(1), SSA §211(b)(2)), are (1) 86% in 2026, (2) 71% in 2027, (3) 57% in 2028, (4) 43% in 2029, (5) 29% in 2030, (6) 14% in 2031, and (7) 0% thereafter. (Thus, it phases in taxation of 14% of excess earnings in 2026, increasing annually to 100% after 2031, expanding the taxable base and related benefit credits.)

This section revises the Social Security Act's primary insurance amount (PIA) formula—which determines monthly old-age, disability, and survivor benefits—by distinguishing "basic" average indexed monthly earnings (AIME; i.e., earnings up to the annual contribution and benefit base, currently $168,600 for 2024) from "surplus AIME" (i.e., earnings above the contribution and benefit base) and adding two new progressive tiers applicable to surplus AIME for individuals initially eligible for benefits, or who die before eligibility, after 2025. (1) It applies 3% to surplus AIME up to a new bend point of $8,933 (for 2026 eligibility, indexed annually thereafter by the higher of the national average wage index for the second preceding year or the highest prior such index, divided by the 2024 index); and (2) 0.25% to the sum of surplus AIME plus one-twelfth of the contribution and benefit base for the individual's last computation base year, to the extent that sum exceeds the new bend point. (As background, the existing PIA formula applies 90% to the first bend point of basic AIME (currently $1,174 and indexed for 2025), 32% to basic AIME between the first and second bend points (currently $7,078 and indexed for 2025), and 15% to basic AIME above the second bend point; these rates remain unchanged.) (Thus, the revision provides a minimal benefit increase equal to 3% or less of surplus AIME for high earners.)