The Protecting and Preserving Social Security Act directs the Bureau of Labor Statistics to publish a Consumer Price Index for Elderly Consumers (CPI‑E) and replaces the Social Security Act’s statutory definition of “Consumer Price Index” with that CPI‑E for cost‑of‑living adjustments. It further phases in temporary rules (2026–2031) that treat a percentage of earnings above the Social Security contribution and benefit base as wages and self‑employment income for tax and crediting purposes.
Finally, the bill creates a separate “surplus average indexed monthly earnings” (surplus AIME) category and adds small benefit factors for those surplus earnings when computing primary insurance amounts for individuals who first become eligible after 2025.
Taken together the changes shift how COLAs are measured, slightly expand the base of earnings that receive Social Security credit and taxes for a limited period, and give a modest, targeted benefit credit for very high earners’ surplus earnings—affecting payroll reporting, benefit calculation, and trust‑fund flows for future beneficiaries and high‑income workers.
At a Glance
What It Does
Requires BLS to publish a monthly Consumer Price Index for Elderly Consumers and makes that index the statutory CPI used for Social Security COLAs. Temporarily treats a declining percentage (86% in 2026 down to 0% after 2031) of earnings above the taxable maximum as subject to Social Security wage and self‑employment rules. Creates a separate surplus AIME and applies very small benefit factors (3% and 0.25%) to those surplus amounts above a bend point.
Who It Affects
The Bureau of Labor Statistics (index production), the Social Security Administration (COLA and benefit computations), the IRS and payroll systems (wage and self‑employment reporting), high‑income workers with earnings above the taxable maximum, and future beneficiaries who first become eligible after 2025.
Why It Matters
Switching to CPI‑E can raise COLAs relative to CPI‑W for older beneficiaries because it tracks spending patterns typical of people 62+. The temporary treatment of earnings above the taxable maximum changes who pays payroll taxes (and who receives credits) and the surplus AIME alters future benefit calculations for new beneficiaries—introducing new administrative burdens and altering long‑term cost and benefit dynamics.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
Title I directs the Bureau of Labor Statistics to prepare and publish a Consumer Price Index for Elderly Consumers (CPI‑E) and makes that index the statutory “Consumer Price Index” for the Social Security Act’s COLA mechanism. The BLS index must begin publication for months ending on or after the July 31 following enactment, and the Social Security COLA computation quarters that use the new statutory CPI are those ending on or after September 30 of the second calendar year after enactment.
The bill also says any COLA increase under title II should not be counted as income or resources for SSI or Medicaid eligibility, and it instructs agencies that other federal statutory adjustments that depend on Social Security COLA determinations remain applied without regard to this amendment.
Title II has two linked changes to how earnings above the Social Security contribution and benefit base are treated. First, it amends the Internal Revenue Code and the Social Security Act to count an “applicable percentage” of remuneration above the taxable maximum as wages (and a corresponding percentage of net self‑employment income as self‑employment income) for Social Security purposes.
That applicable percentage is specified in a calendar‑year schedule: 86% for 2026, 71% for 2027, 57% for 2028, 43% for 2029, 29% for 2030, 14% for 2031, and 0% for calendar years after 2031. The wage rules apply to remuneration paid after 2025; the self‑employment rules apply to taxable years beginning in or after 2026.Second, the bill changes the benefit formula for people who initially become eligible for title II benefits (or die before becoming eligible) after 2025 by splitting the Average Indexed Monthly Earnings (AIME) into a basic AIME capped at the contribution base and a surplus AIME drawn from earnings above the base.
The surplus AIME receives very small benefit factors: 3% applied up to a bend point (set at $8,933 for 2026 and then indexed using the national average wage index with a higher‑index floor), and 0.25% on amounts above that bend point. These surplus credits feed into the primary insurance amount calculation for new eligibles only, so they do not retroactively raise benefits for current beneficiaries.Operationally, the bill creates multiple implementation tasks: BLS must construct and publish a CPI‑E; SSA must adjust COLA and AIME computation systems to use CPI‑E and to calculate separate basic and surplus AIME; IRS and payroll processors must treat a fractional share of over‑base wages as taxable and reportable for Social Security in the specified years; and actuaries will need to model the combined revenue and benefit effects.
The bill phases most of the temporary taxation/crediting by 2031 and limits the surplus benefit credit to individuals who first become eligible after 2025, reducing—but not eliminating—transition complexity for current beneficiaries.
The Five Things You Need to Know
The bill requires the Bureau of Labor Statistics to publish a Consumer Price Index for Elderly Consumers (CPI‑E) and makes that index the statutory “Consumer Price Index” for Social Security COLAs.
It directs that COLA quarters using the new CPI‑E begin for computation quarters ending on or after September 30 of the second calendar year after enactment.
For calendar years 2026–2031 the bill treats a schedule share of earnings above the contribution/benefit base as wages/self‑employment income for Social Security: 86% (2026), 71% (2027), 57% (2028), 43% (2029), 29% (2030), 14% (2031), and 0% after 2031.
It creates a separate surplus AIME for earnings above the contribution base and applies a 3% factor up to a bend point (set at $8,933 in 2026 and indexed thereafter) and 0.25% above that bend point when computing primary insurance amounts for new eligibles after 2025.
The bill specifies that any COLA increase from using CPI‑E will not count as income or resources for SSI or Medicaid eligibility, and the surplus‑AIME rules apply only to individuals who first become eligible (or die before eligibility) in calendar years after 2025.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
BLS must publish a Consumer Price Index for Elderly Consumers (CPI‑E)
This section directs the Bureau of Labor Statistics to prepare and publish a monthly index called the Consumer Price Index for Elderly Consumers that reflects spending patterns of U.S. residents age 62 and older. The statute authorizes whatever appropriations are necessary to build and publish the index and sets the first applicable publication date to months ending on or after the July 31 following enactment, giving BLS time to build the series and methodology.
Makes CPI‑E the statutory Consumer Price Index for Social Security COLAs
Section 102 substitutes CPI‑E for the statutory definition of “Consumer Price Index” in section 215(i) of the Social Security Act, including a conforming application to pre‑1979 law and an express rule that other federal statutory adjustments that rely on Social Security COLA determinations remain applied without regard to this amendment. It also states that any COLA increase resulting from the change will not be counted as income or resources for SSI or Medicaid eligibility. The effective date for COLA computations is tied to COLA computation quarters ending on or after September 30 of the second calendar year after enactment.
Counts a percentage of wages above the taxable maximum as 'wages' for Social Security (employees/employers)
This amendment to IRC section 3121 and to SSA section 209 inserts an “applicable percentage” schedule into the definition of wages so that a fraction of remuneration above the contribution and benefit base is treated as wage earnings for Social Security purposes. The schedule phases the percentage down from 86% in 2026 to 0% after 2031. The provision affects how payroll withholding and employer reporting characterize high earnings in calendar years after 2025 and therefore affects both the taxable base and the credits counted toward Social Security benefits during the specified window.
Applies a matching schedule to self‑employment income (SECA)
Mirroring the wage change, the bill amends IRC section 1402 and SSA section 211 to require that an applicable percentage of net self‑employment income above the contribution and benefit base be treated as self‑employment income for Social Security. The same 86% → 0% schedule applies, and the change takes effect for taxable years beginning in or after calendar year 2026. Practically, self‑employed taxpayers and their preparers must adjust SE tax and credited earnings computations for the affected taxable years.
Creates surplus AIME and adds small benefit factors for surplus earnings
This provision splits AIME into a basic AIME (capped at the contribution and benefit base) and a surplus AIME drawn from earnings above that base. The bill then adds two small benefit factors: 3% applied to surplus AIME up to a bend point (set at $8,933 for 2026) and 0.25% applied above that bend point. The bend point is index‑adjusted after 2026 using the national average wage index with a built‑in floor. These surplus credits feed into the primary insurance amount calculation only for individuals who initially become eligible (or die before eligibility) after 2025, so current beneficiaries are not retroactively affected.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Future Social Security beneficiaries (people who first become eligible after 2025): the new surplus AIME gives modest extra credits for earnings above the taxable maximum, increasing benefits slightly for that cohort.
- Older beneficiaries in payment years after the CPI‑E adoption: because CPI‑E typically tracks elderly spending (notably on healthcare), COLAs computed with CPI‑E are likely to be larger than CPI‑W‑based COLAs in many years, benefiting recipients whose purchasing power otherwise erodes.
- Low‑income SSI recipients and Medicaid beneficiaries: the bill expressly excludes COLA increases under title II from counting as income or resources for SSI and Medicaid eligibility, protecting those means‑tested programs from automatic eligibility displacement.
Who Bears the Cost
- High‑income workers with earnings above the taxable maximum during 2026–2031: payroll changes mean a fraction of their over‑cap earnings will be treated as wages/self‑employment income for Social Security, increasing their contributions (and possibly employer contributions where applicable) during those years.
- Employers and payroll service providers: they must update payroll systems to apply the applicable percentage to over‑cap wages, adjust reporting, and account for different rules across calendar years, creating implementation and compliance costs.
- SSA, IRS and BLS administrative budgets: BLS must construct a new CPI‑E series, SSA must modify COLA and AIME computation systems to handle CPI‑E and surplus AIME, and IRS must adjust withholding/SE tax procedures—each requiring resources and coordination.
Key Issues
The Core Tension
The central dilemma is between improving benefit adequacy for older and future beneficiaries (via CPI‑E and surplus AIME) and keeping the Social Security system administratively simple and fiscally predictable: the bill strengthens COLAs and creates modest extra credits for high earners while simultaneously imposing a temporary, complex patch to how over‑cap earnings are taxed and credited—an approach that helps some beneficiaries now but increases administrative burden and creates ambiguous financing effects going forward.
The bill blends three types of changes—measurement (CPI‑E), temporary tax/credit expansion for over‑cap earnings, and benefit formula changes for surplus earnings—creating implementation interactions that are not settled in the text. First, adopting CPI‑E alters COLAs for all title II beneficiaries, but the statute’s cross‑reference that other laws “shall be applied and administered without regard to the amendments” creates potential ambiguity: some federal adjustments that track Social Security COLAs may continue to use the prior CPI definition in practice or require separate amendment, and agencies must interpret which external formulas follow the new CPI and which do not.
Second, the temporary treatment of over‑cap earnings uses a declining ‘‘applicable percentage’’ that restores zero treatment after 2031. The bill does not address employer tax incidence explicitly; under current FICA structure employers and employees share the payroll tax, so employer-side compliance and cost allocation questions will arise, especially for high‑wage payroll policies and executive compensation arrangements.
Third, the surplus AIME construction and the tiny benefit factors (3% and 0.25%) will increase benefits for future beneficiaries who earn above the base, but the bill limits those increases to new eligibles after 2025. That clean eligibility cutoff reduces political and budgetary shock to current beneficiaries but raises fairness questions about cohorts and creates actuarial modelling challenges: adding revenue from temporarily counting over‑cap earnings and adding future liabilities from surplus AIME do not move in simple, offsetting ways, and the bill does not include a reconciliation mechanism or explicit solvency analysis requirement.
Finally, the indexing rule for the surplus bend point uses the national average wage index with a floor tied to the highest prior index—an unusual hybrid that will produce nonstandard indexing behavior and complicate projections.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.