You Earned It, You Keep It Act

Summary

Eliminates future federal taxation of Social Security benefits and requires the Treasury to replace any reductions in transfers to Social Security, Railroad Retirement, and Hospital Insurance trust funds caused by that change. It also changes how payroll taxes treat wages above the Social Security contribution base (adding a $250,000-related cap and aggregation rules) and adds a new Social Security benefit formula bend point that increases benefits slightly for earnings above a $250,000 threshold for people who first become eligible after 2025. The bill includes a protective rule so SSI, Medicaid, and CHIP eligibility and benefit levels use pre-enactment Title II benefit amounts for means-tested calculations.

• Removes future inclusion of Social Security benefits in gross income, eliminating federal taxation of those benefits for taxable years beginning after enactment.
• Directs annual Treasury payments to replace reductions in transfers to Social Security, Railroad Retirement, and Hospital Insurance trust funds caused by eliminating benefit taxation.
• Alters the statutory definition of “wages” for payroll-tax purposes by adding a $250,000 aggregation cap and successor-employer counting rules, potentially changing what pay is subject to FICA.
• Adds a new PIA bend point in the Social Security benefit formula that increases benefits slightly for earnings above a $250,000 threshold for people first eligible after 2025.
• Applies the new Title II benefit formula only to individuals who first become eligible for benefits in calendar years after 2025, while protecting SSI, Medicaid, and CHIP eligibility calculations by freezing counted Title II amounts at pre-enactment levels.
• Creates administrative changes for SSA and IRS on withholding, wage reporting, benefit computation, and employer aggregation procedures.
• Makes the Treasury responsible for ongoing annual payments to keep affected trust funds whole, which increases federal outlays compared with current law.
• Successor-employer and related-employer aggregation rules mean pay from predecessor employers or related entities will count toward the $250,000 threshold.