The compromise Social Security rescue plan approved by the president's Social Security advisory commission late Saturday night, with the endorsement of President Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), would provide $169 billion over the next seven years in new tax revenues or benefit reductions.
That would cover all or most of the estimated shortfall of $150 billion to $200 billion over that period.
On a long-term basis, the plan would improve the 75-year financial status of the system by a net of 1.22 percent of taxable payroll.
Since the long-term deficit is estimated at 1.8 percent, another 0.58 percent of payroll must be covered by other measures, and individual commission members will offer their own solutions to cover the 0.58 percent.
Following are the major provisions of the compromise:
* The annual cost-of-living adjustment, now paid in July, would be postponed this year until next January, then paid each January. From 1983 through 1989, this would save $40 billion. The change would affect all 36 million beneficiaries.
The average single retired person receiving $420 monthly would receive about $20 a month less for six months in the first year than under current law.
A special provision would reduce the impact on low-income elderly and disabled persons also receiving welfare.
* Half of a person's Social Security benefits would be subject to federal income tax, but only if he or she had adjusted gross income of $20,000 from sources excluding Social Security, or in the case of a married couple filing jointly, $25,000. Proceeds of the income tax would be fed into the Social Security trust fund, bringing it $30 billion in new revenues from 1983 to 1989.
About 3 million persons would pay added taxes under this provision.
A single taxpayer with adjusted gross income of $30,000 plus $6,000 in annual Social Security benefits, who now pays $4,089 in federal income taxes, would have to pay $689 more. A married couple with $40,000 adjusted gross income plus $13,116 annual benefits, now paying $4,874 in taxes, would pay an additional $1,416.
* A Social Security payroll tax increase of three-tenths of 1 percent on employers and employes, scheduled for 1985, would be moved to 1984. For the period 1985 to 1987, the rate would be as scheduled in current law.
In 1988, part of an increase scheduled for 1990 would begin, and the added tax in 1988 and 1989 would be 0.36 percent.
In effect, this means higher taxes in 1984, 1988 and 1989. In 1984 only, the worker would be allowed to credit the entire increase against his income tax or to get it back from the Treasury as a refundable tax credit if no income tax was paid.
This provision would add $40 billion to Social Security revenues from 1983 to 1989.
All 116 million persons subject to Social Security tax would pay the extra amount, but in 1984 they would get it back from the Treasury. From 1985 to 1987, they would pay nothing extra compared to existing law.
In 1988, however, a worker at an annual salary of $26,918 would pay an extra $97 in taxes and, in 1989 the same worker, assuming an average yearly pay raise, would pay $104 extra.
* As of next Jan. 1, mandatory Social Security coverage would be extended to all new federal workers and employes of nonprofit organizations, which now can opt for inclusion if the organization chooses. Federal workers covered by the civil service retirement system would stay in it.
It is anticipated that the government would establish a supplementary employer pension for new federal employes, so they would end up getting Social Security plus a supplementary pension as is now the case with many private-sector workers. This provision would add $20 billion in revenues from 1983 to 1989.
* Local and state governments covered by Social Security would be barred from dropping out as of the date of enactment of the proposed plan. Savings: $3 billion from 1983 to 1989.
* The so-called windfall portion of Social Security benefits received by federal, state and local government employes who qualify for Social Security on the basis of relatively short periods of employment in the private sector would be eliminated for those first eligible to retire after 1983.
They would receive a benefit, but less than under current law. Savings: $200 million from 1983 to 1989.
* The Social Security tax on self-employed persons, now three-fourths of the combined employer-employe rate, would be increased to the full employer-employe rate, but half of the total payment could be deducted from taxable income. Even so, many self-employed would pay a higher net of Social Security and income taxes, and the gain to Social Security from 1983 to 1989 would be $18 billion.
* Beginning in 1988, the plan would seek to stabilize the trust fund by providing that whenever the fund drops to less than one-fifth of a year's benefits, the annual cost-of-living adjustment would be equal to either the annual rise in prices or the annual rise in wages, whichever was less.
* The plan would phase in from 1990 to 2010 a larger bonus, equal to 8 percent a year instead of 3 percent, for each year a person delays retirement after 65.
* The trust fund would be reimbursed by the Treasury for free wage credits granted the military at one time and for uncashed Social Security checks. This would net $18 billion.
* Benefits and eligibility would be improved, at little total cost, for certain types of widows and widowers, divorced persons and survivors.