3 Senators Are Finally Addressing the 70-Year-Old $255 Social Security Death Benefit
Deathcare may be a traditional profession that’s said to be slow to change, but it’s nothing compared to the decrepit pace of the Social Security death benefit. The $255 lump-sum amount that was instituted in 1954 has not budged despite rising funeral costs. Adjusted for inflation, that $255 should be around $2,900 — and that’s exactly the amount some senators hope to begin awarding if their new bill passes.
Keeping pace
Last week, Vermont Senator Peter Welch introduced the Social Security Survivor Benefits Equity Act, a bill that would raise the lump-sum death benefit to $2,900 to reflect today’s cost of living. Vermont Senator Bernie Sanders and Massachusetts Senator Elizabeth Warren co-sponsored the bill.
“Funeral costs should be the last thing on the minds of grieving families when they lose a loved one,” Welch said, according to one NBC outlet. “But because benefits designed to help folks afford funeral expenses haven’t kept pace with inflation, the cost of burying a loved one has become top of mind for many mourning families.”
When the $255 amount was set in 1954, the average cost of a funeral was roughly $700, so the $255 payment to a qualified spouse or child made a fairly significant dent in the price. However, as prices steadily increased over the next seven decades, $255 made less and less of an impact.
Other Social Security benefits have done a better job of keeping up with the times. The cost of living benefit, for example, has used the Consumer Price Index for Urban Wage Earners and Clerical Workers to “ensure the benefit captures true fiscal realities,” according to the Act’s one-pager, which proposes this index be used to incrementally increase the death benefit as well.
Although the Social Security Survivor Benefits Equity Act is endorsed by Social Security Works, a nonprofit that lobbies for Social Security reform.
Historically low
According to the Social Security Administration’s historian, the lump-sum death benefit was introduced in 1935 and awarded survivors 3.5% of the deceased’s eligible earnings, which were capped at $3,000. In 1939, the average lump-sum payout was $96.
Monthly survivor benefit payments were implemented in 1940, so the earnings-based lump-sum benefit was discontinued. It was replaced by a payment calculated as six times the deceased’s monthly Social Security retirement benefit. In 1940, the lump-sum benefit ranged from $63 to $273. A 1950 amendment reduced the calculation from six times the retirement benefit to three times, resulting in an average payout of $147.
Finally, in 1954, the $255 lump-sum amount was set as a maximum payout, although some workers could receive less if they earned less in retirement payments. A 1981 amendment basically set the benefit at $255 or three times the average retirement benefit, whichever is less, which meant virtually every eligible worker would receive the lesser $255.
If the Social Security Survivor Benefits Equity Act passes, it would be enacted sometime in 2025.
