By: L.N. Reklai

September 21, 2017 (Koror, Palau) A proposal to remove ceiling on taxable income for Social Security is fair, said Social Security Administrator Ulai Teltull.

“Social Security is a defined benefit system, meaning that the benefit you get when you retire  is defined by law and not necessarily based on what you pay into the system.  Right now a person earning OVER $24,000 dollars is paying 6% of up to $24,000 only of their salary.  But when they retire they will be getting benefits based on their gross salary,” she added.


In other words, a person making $50,000 dollars now only pays SS tax on $24,000 of his or her salary.  When that person retires, he or she will be getting benefits based on their $50,000 salary and not the $24,000 that they paid taxes on.

“On the other hand, a person who is making $24,000 or less a year is paying tax on his full salary.  When that person retires, he or she will receive social security retirement benefits based on his or her actual salary.”

When asked if it is fair to raise contributions and remove the ceiling on SS contributions in order to pay for the added benefits to retirees, Teltull expressed that that was not for her to say. “That’s a policy decision for our policy makers to make.”

Teltull added that Social Security cannot take on that added cost without new contributions. “Social Security has very large unfunded liability and it cannot take this on without adding to that liability.”

Explaining what unfunded liability means in simplified terms, Ms. Teltull stated that numbers show that within about five years after a person retires, he or she will have received in social security benefits amount equivalent to what he or she contributed to the system during entire working life.  After that, that person will continue to receive benefits. Even after a person passes away their spouses and other beneficiaries will continue to receive his or her benefits.  That estimated benefit payout above what was contributed is the Unfunded Liability.

“That is why it is very important that Social Security limits drawdown from its investments and continue to grow it as much as possible.  That’s the fund that will continue to pay benefits after people retire and/ or pass away.

The FY 2018 Annual Budget bill which has passed both House and Senate contain an amendment to Social Security Act increasing contributions to Social Security from 6% to 7% and removing the ceiling placed on taxable income entirely.  The increase will pay for the $50 COLA benefit to retirees. [/restrict]