A new proposal would replace Social Security’s percentage-based cost-of-living adjustment with the same dollar increase for every beneficiary. The idea could give people with smaller checks a larger annual raise while reducing future increases for recipients who already receive higher benefits.
The proposal has not been introduced as a new bill and no change has been approved. Social Security will continue using the current percentage formula when it calculates the 2027 COLA later this year.
Recent reporting on the proposal follows a new analysis from the Committee for a Responsible Federal Budget. The group examined an older plan that former Minnesota Rep. Tim Penny introduced in 1987 and considered how a similar system could affect benefits and Social Security funding today.
How a Flat-Rate Social Security COLA Would Work?
Social Security currently applies the same percentage increase to each person’s existing benefit. A beneficiary receiving $1,000 a month gets a smaller dollar increase than someone receiving $3,000 because the percentage is applied to different starting amounts.
Under the flat-rate proposal, every beneficiary would receive the same dollar increase. The amount would be tied to the COLA received by a person at a selected benefit percentile, such as the 20th or 30th percentile.
The plan would not give everyone the same monthly Social Security benefit. People with larger checks would continue receiving more money. Only the annual COLA increase would become equal in dollar terms.
The following example shows the difference. The $50 flat increase is used only to explain the calculation. It is not an amount that has been approved or formally proposed for 2027.
| Current monthly benefit | Increase under a 3.8% COLA | Increase under a hypothetical $50 flat COLA |
|---|---|---|
| $1,000 | $38 | $50 |
| $1,500 | $57 | $50 |
| $2,000 | $76 | $50 |
| $2,500 | $95 | $50 |
| $3,000 | $114 | $50 |
A beneficiary with a smaller check could receive more than under the current percentage formula. Someone with a larger check would still get an increase, but the raise would be smaller than the amount produced by a full percentage adjustment.
The Plan Would Shift More of the Annual Increase Toward Lower Benefits
The strongest argument for a flat-rate COLA is that the price of groceries, electricity and other basic needs does not rise according to a retiree’s Social Security check.
A gallon of milk costs the same for a person receiving $1,100 a month and a person receiving $3,000. The current formula still gives the larger dollar increase to the person with the larger benefit.
The new flat-rate COLA analysis found that a plan based on the 20th percentile could reduce future scheduled benefits for the bottom fifth of lifetime earners by about 3% in 2065. The reduction would reach about 19% for the top fifth.
A plan based on the 30th percentile produced a different result. The bottom fifth received a benefit increase of about 1% compared with scheduled benefits, while the top fifth received about 17% less.
Those figures compare the proposal with benefits promised under current law. They do not account for the automatic reductions that could occur if the Social Security trust fund runs short and Congress has not approved another funding solution.
Supporters Say Lower Earners Could Be Better Protected From Future Cuts
Social Security’s financial condition has made the flat-rate proposal more important than it was when a similar idea appeared almost four decades ago.
Our recent report on the possible Social Security benefit cuts after 2032 explained that the retirement and survivor trust fund is projected to run out of reserves during the fourth quarter of that year.
The latest report from the program’s trustees says continuing tax revenue would cover about 78% of scheduled retirement and survivor benefits after the fund is depleted. That is equal to an immediate funding gap of about 22%.
The flat-rate analysis found that lower-income retirees could receive 13% to 14% more than they would receive under a payable-benefits scenario. The increase occurs because slowing the growth of larger benefits would leave more money available for payments across the program.
The same modeling estimated that a flat-rate COLA based on the 20th percentile could close about half of Social Security’s 75-year funding shortfall. Setting the amount at the 30th percentile could close about two-fifths of the gap.
The proposal still would not fully repair the system. A flat-rate COLA at the 20th percentile would delay the projected depletion of the combined trust funds by only about two years if Congress approved no other changes.
The Current 2027 COLA Process Has Not Changed
Beneficiaries should not confuse the new policy analysis with the COLA that will be announced in October.
Our review of the 2027 Social Security COLA projection found that The Senior Citizens League expects a 3.8% increase. A separate estimate based on recent inflation data places the possible increase at 3.6%.
Neither figure is official. The Social Security Administration will calculate the final adjustment using the average CPI-W reading from July, August and September 2026.
The agency will compare that three-month average with the average from the same period in 2025. The percentage difference, rounded to the nearest tenth of one percent, will become the 2027 COLA.
Social Security confirms that the current COLA remains tied to inflation. The formula has been used for automatic annual adjustments since 1975. The 2026 increase was 2.8%.
Congress would need to pass legislation before Social Security could replace that percentage adjustment with a fixed dollar amount.
A Flat Increase Would Create Winners and Losers Over Time
The proposal is designed to protect people who depend most heavily on Social Security. It would also reduce the connection between a person’s previous earnings, payroll tax contributions and future COLA increases.
Higher earners generally receive larger Social Security benefits because they paid more payroll tax during their working years. A percentage COLA preserves the relative difference between benefit levels as prices rise.
A fixed dollar increase would gradually narrow that difference. A person starting with a larger benefit would still receive more each month, but the gap between higher and lower benefits would grow more slowly.
The effect would become larger the longer a person receives benefits. One smaller COLA may have a limited effect during the first year. Repeated smaller increases would compound over 10, 20 or 30 years.
Long-lived beneficiaries with high initial benefits would therefore experience the largest reduction compared with current scheduled benefits. Lower-benefit recipients could receive stronger protection late in life, when personal savings may be exhausted and returning to work is no longer realistic.
The Proposal Is One Part of a Much Larger Funding Debate
Social Security’s combined 75-year funding deficit grew to 4.42% of taxable payroll in the 2026 Trustees Report. It stood at 3.82% in the previous report.
No single COLA change is likely to close the entire gap. Lawmakers are also considering higher payroll taxes, a larger taxable wage base, changes to the retirement age, revised initial benefit formulas and new taxes on high earners.
Congress could also combine a flat-rate COLA with additional revenue. The committee found that pairing the 20th-percentile version with a broader employer compensation tax could cover most or all of the long-term gap under some economic assumptions.
Any final package would involve difficult choices. Raising taxes places more of the cost on current workers and employers. Reducing benefit growth shifts more of the burden to future and current beneficiaries. Waiting leaves less time to introduce changes gradually.
What Social Security Beneficiaries Need to Know?
No beneficiary is currently scheduled to receive a flat-dollar COLA. The idea remains a policy model, not an approved change to Social Security.
The 2027 adjustment will still be calculated as a percentage. July inflation data will provide the first of the three CPI-W readings used in the official formula, and Social Security is expected to announce the final figure in October.
The renewed flat-rate proposal does show where the funding debate may move next. Instead of cutting every check by the same percentage after the trust fund is depleted, lawmakers could try to protect smaller benefits and limit future growth at the top.
Such a change could reduce the long-term shortfall and give low-income beneficiaries more protection. It would also mean smaller lifetime benefits for many people who earned larger monthly checks through higher wages and payroll tax contributions.
The central question is no longer limited to the size of the next COLA. Congress must decide how annual increases, payroll taxes and promised benefits should be divided before the retirement trust fund reaches its projected 2032 deadline.
