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(NewsNation<\/a>) \u2014 One idea to strengthen Social Security<\/a>\u2018s finances would give every beneficiary the same annual dollar increases in their monthly checks.<\/p>\n A new analysis<\/a> from the Committee for a Responsible Federal Budget (CRFB) examined how replacing the current cost-of-living adjustment<\/a> (COLA) with a flat rate could affect the program as it faces a looming funding shortfall<\/a>.<\/p>\n Under current law, all Social Security beneficiaries receive the same percentage benefit increase each year through COLA, which is based on inflation<\/a>.<\/p>\n However, because the adjustment is calculated as a percentage, beneficiaries with higher monthly checks receive larger annual dollar increases \u2014 a difference that compounds over time.<\/p>\n A so-called \u201cflat-rate COLA\u201d would also be based on inflation, but instead of giving everyone the same percentage increase, it would give everyone the same dollar increase based on a benchmark benefit level.<\/p>\n That option would help shore up Social Security\u2019s finances by slowing future benefit growth broadly, though the largest reductions would fall on those with the highest lifetime earnings.<\/p>\n It\u2019s one of several reforms lawmakers could consider as they look for ways to put the nation\u2019s primary retirement program on stable footing.<\/p>\n Without congressional action, retirees could face a 22 percent benefit cut in late 2032<\/a>, when Social Security\u2019s main retirement trust fund is expected to be depleted.<\/p>\n How would a flat-rate COLA change Social Security benefits?<\/p>\n Former Rep. Tim Penny (D-Minn.) first proposed a flat-rate COLA<\/a> in 1987. Under his proposal, everyone would receive the same dollar increase as someone at the 20th percentile of beneficiaries.<\/p>\n \u201cWhile we protect those most in need of the cost-of-living allowance, we would at the same time make appreciable savings for the Treasury,\u201d Penny said at the time.<\/p>\n If lawmakers revived the proposal, it would mark a major shift from the current COLA model.<\/p>\n This year\u2019s 2.8 percent COLA<\/a> increased the average retired worker\u2019s monthly benefit by about $56<\/a>. By comparison, someone receiving the maximum monthly benefit<\/a> of $5,181 would get a bump of about $145 under the same percentage adjustment.<\/p>\n Meanwhile, a flat-rate COLA would have applied the 2.8 percent increase to a benchmark benefit level and given every beneficiary the same dollar amount.<\/p>\n The trade-off is that such a plan would effectively cap benefit growth for most beneficiaries, especially higher earners who receive larger monthly checks because they paid more into the system over their working lives.<\/p>\n Would a flat-rate COLA save Social Security?<\/p>\n On its own, a flat-rate COLA would not solve Social Security<\/a>\u2018s long-term financial challenges, though it could significantly improve the program\u2019s outlook.<\/p>\n If enacted in 2027, a flat-rate COLA based on the 20th percentile benefit level would close about half of Social Security\u2019s 75-year funding shortfall, according to Urban Institute modeling cited by the CFRB.<\/p>\n That estimate is based on last year\u2019s Social Security Trustees report, so the proposal would likely close a smaller share of the gap under the latest outlook, CRFB noted.<\/p>\n The impact of a flat-rate COLA on future benefits would vary depending on a worker\u2019s lifetime earnings. <\/p>\n If set at the 20th percentile, the bottom fifth of lifetime earners would receive benefits that are about 3 percent lower in 2065 than under current law, compared with about 19 percent lower for the top fifth of retirees, according to the analysis.<\/p>\n Whether such a proposal could gain political support remains unclear. Americans overwhelmingly oppose<\/a> Social Security benefit reductions, which makes major changes to the program politically difficult. <\/p>\n