The Critics argue that a legislative solution will be too costly. Cost cannot be the sole basis by which we decide the worth of public policy. I agree that we must be fiscally responsible, but we must also be politically responsible. Congress created the notch, and we have the power to correct it and restore fairness to the system. resources exist to correct this inequity without jeopardizing the Social Security trust fund. The Social Security Administration has 'estimated that assests in the trust fund will total $200 billion by 1990 and $1.3 trillion by 2000. The estimates of the cost of Mr. Roybal's or Mr. Ford's legislation (both of which I have cosponsored) range from $50 - $80 billion through 1996. These bills offer fair and responsible solutions to the notch, and they should be considered by this Subcommittee. Mr. Chairman, I hope you will agree that a legislative solution to correct the disparities in benefits to notch victims is justified. Continued faith in the Social Security system depends on your actions. Statement of Congressman Esteban E. Torres I want to thank Chairman Andy Jacobs for holding this hearing on the General Accounting Office Report about the Social Security "Notch" issue. Since coming to Congress in 1982, I have received thousands of letters, postcards and phone calls asking me about the Social Security "notch". One petition I receieved contained over 1,500 signitures urging elimination of the "notch" problem. I have been following this issue since my election in 1982 and I have cosponsored numerous bills that sought to resolve the situation. In fact, late last year I wrote you a letter along with sixty other Members of Congress. The letter asked you to hold a hearing as soon as the General Accounting Office released their report on the notch issue. I applaud your decision to examine this issue and attempt to put it to rest. The one comment shared by everyone contacting me about the benefit inequity has been that the "notch" is unfair. The idea that all workers could equally contribute to the same Social Security System and then be discriminated against simply because of the date of their birth is intolerable. People who have worked all their lives expect a fair share of their Social Security benefits. They do not want to hear excuses about flaws in the benefit formula. I have received several letters from my consituent Ms. Shirley Hagen about the "notch". Her letters are typical of the many thousands I have received. She wrote: "My older sister was born in 1914 and she got $783 a month. When I was getting ready to retire, they said I would get $410. I couldn't figure it out because my sister didn't make more money than me, so I questioned the figure. They found a mistake and when the final figure came in it was $420." When she found out this difference was due to the "notch" she started organizing others in the same situation and she has since become the director of "Notch Babies, Inc." Her group has been busy informing others about the problem and meeting with federal elected officals to convince them to correct the "notch". Mr. Chairman, I am pleased that the first obstacle to correcting the Social Security "notch" situation has been overcome with today's hearing. The report by the General Accounting Office is an excellent starting point which will prove instrumental in reaching a reasonable compromise to correct this "inequity". While any proposal threatening the financial stability of the entire Social Security System is unacceptable, the "notch" must be resolved. For these reasons, I sponsored H. R. 1917 introduced by Congressman Roybal. I also support H. R. 3788 introduced by Congressman Ford. I believe that these bills offer a reasonable and equitable way to solve this unfair situation. Once again, I thank you for holding this hearing today. But I also strongly encourage this subcommittee to take the next step and develop a bill to solve this problem. A hearing is fine, but what we really need to do is write a bill which we can vote on in the House Chamber, send it to the Senate and the President; a bill which once and for all, will solve the "notch" inequity. enjoy corresponding with my constituents about this problem. However, I want most to tell them that the problem has been put to rest. I AN EXAMPLE OF THE NOTCH INJUSTICE Sidney M. Ulan and Gertrude Warwick of Wallingford, Pennsylvania Statement by Sidney M. Ulan After serving almost four years in the Army Air Corps as a pilot in World War II, I entered the family business in Chester, Pennsylvania at the end of 1945. Together with my partner (who happens to be my sister), we conducted a men's clothing store and shared equally in the profits and losses for over thirty years. We paid exactly the same amount into Social Security in all those years and retired from the business at the end of 1982, when I applied for Social Security benefits. My sister was already collecting Social Security and I expected to receive about 20 percent less than her since I took early retirement at age 62. I was shocked when I was told at the Social Security office that I would receive about 44 percent less. In dollars, that meant about $350 a month less instead of about $150 less which I had expected to receive. Later, after about six months of inquiring at the Social Security office I discovered that the additional $200 difference was the "Notch". When this legislation was passed in 1977, it was the best kept secret since the "D-Day" invasion of Normandy in World War II. I really believe that our legislators, at that time, thought that it would remain a secret. This 1977 legislation not only discriminates against those born between 1917-1928 but even creates reductions for each year between 1917-1921, with those born in 1920 losing the most which can amount to over $200 monthly. When Social Security increases are given, everyone gets the same percentage increase. When the COLA's are frozen, everyone is affected equally. If a downward adjustment is necessary in the future, everyone should receive the same percentage decrease. I wonder how our Senators and Congressmen would react if they were told that because of the budget deficit, all those legislators born after 1916 would have to accept a $20,000 annual cut. Well, Social Security has tremendous reserves in the billions with trillions foreseen in the near future. These reserves were partly created by the reduction given the Notch babies. The tragedy of the Notch injustice is the fact that millions of Notch babies are veterans of World War II, who put their lives on the line for their country. They deserve better treatment. Finally, there are several bills in the House to partially correct this gross injustice. The money is there in the Social Security surplus and would only cost 10 percent of this surplus over the next ten years. Let's stop all this rhetoric that has been going on for the past five years and bring it to a vote. NOTCH EXAMPLES Sidney Ulan and his Sister, Gertrude Warwick of Pennsylvania II. Sidney Ulan, born in 1920, is a Notch Baby. His sister, Gertrude Warwick, is not notched. Gertrude was born in 1915, two years prior to the Notch Years. Following World War II, Sidney returned from the European theatre as a decorated combat pilot. Together with his sister, Gertrude, he took over the reins of the family business. For the next three and-half decades they shared the work and split profits and losses equally. Sidney's and Gertrude's Social Security records confirm that they have paid almost identical amounts into the Social Security system: When Sidney and Gertrude decided to liquidate their business in 1981, Gertrude had already reached age 65 and Sidney was ready to take early retirement at age 62. So Sidney figured that his Social Security check would be about 20 percent less than Gertrude's check since he was taking a reduction for early retirement at age 62. But instead of a 20% reduction, Sidney was shocked to discover he would get only about one-half of what Gertrude was receiving! And in 1988, Sidney still received a monthly check of about $462 which is 43.9 percent less ($362 less) than Gertrude's $824 monthly check. Although Sidney's benefits were reduced by 20 percent because of his early retirement, the Notch actually caused a bigger reduction. Even if Sidney had retired at age 65, his monthly benefit check would still be 29.1% less ($247) than Gertrude's check! This month, Sidney will receive about $197 less than Gertrude would have received if they had both retired at age 62. And, over the sixty-four months since Sidney first claimed benefits, the Notch has already cost him over $12,000. STATEMENT OF FRED A. HARDIN, PRESIDENT, UNITED TRANSPORTATION UNION, FOR THE HEARING OF THE SOCIAL SECURITY SUBCOMMITTEE, HOUSE WAYS AND MEANS COMMITTEE, ON THE SOCIAL SECURITY NOTCH ISSUE My name is Fred A. Hardin. As president of the United Transportation Union, one of the largest unions of railroad workers, I wish to thank the Chairman and members of the Social Security Subcommittee for the opportunity to present my comments on the "notch issue." I will not go into the technicalities of the so-called "notch issue", how and why it developed, and the dilemma it presents to those searching for a solution. That has been done by the many experts who have already testified. My main reason for presenting my comments is to make the committee fully aware that any notch legislation would have a direct impact on the railroad retirement system. The notch issue is a matter of direct concern to active and retired rail workers and their families. As you know, a major portion of each annuity paid under the Railroad Retirement Act, the tier 1 portion, is computed under social security benefit formulas, including the transition formula and the new formula provided by the 1977 Social Security Act amendments. It was the application of these formulas which gave rise to the notch issue. Because of the use of the Social Security Act benefit formulas to compute tier 1 railroad retirement benefits, the notch has passed through to many individuals who receive railroad retirement benefits. Thus, the same notch problems and issues that exist with respect to the social security program are also applicable to railroad retirement. Many rail retirees are hurt and indignant that, for reasons that are difficult or impossible to understand and accept, they are getting less in benefits than individuals with similar work histories who retired earlier. I greatly sympathize with the plight of these individuals. At the same time, rail retirees are also aware that any legislation enacted to fix the notch problem will result in added costs to the railroad retirement system. This is true because while the major portion of the tier 1 benefit structure is financed through a financial relationship with the social security system, a substantial part of tier 1 costs is paid directly from the Railroad Retirement Account. Any cost added to railroad retirement at this time is a matter of concern. To finance benefits under current levels, the Railroad Retirement Board's actuary, in his last report to Congress, called for substantial employment tax increases. As a result, this committee added several provisions to its portion of the recently enacted budget reconciliation act. First, the committee moved to raise the tier 2 tax paid by employees from 4.25% to 4.90% of taxable tier 2 payroll, and raise the tier 2 tax paid by employers from 14.75% to 16.10% of taxable tier 2 payroll. This was a smaller increase than the Board's actuary requested. Second, the committee established a Commission on Railroad Retirement Reform. The purpose of the commission is to study, and make recommendations with respect to, the railroad retirement system's short-term and long-term financial condition. of the commission is due on or before October 1, 1989. The report |