Executives of the Business Roundtable are urging Congress to raise the Social Security and Medicare age eligibility to 70, from the current 67, and to adopt means testing for wealthier retirees, in order to keep the entitlement programs solvent longer-term.
"When you look long-term at the U.S. fiscal health, you have to look at these questions," said Business Roundtable President John Engler during a meeting with reporters in Washington Tuesday.
The idea is not likely to be popular. The Simpson-Bowles deficit reduction committee saw opposition when it suggested lifting the retirement age to 69. The Roundtable executives argue that raising the level gradually for those less than 55 years of age now will provide substantial long-term savings to the entitlement programs, while still giving Americans time to adjust to the new requirements.
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"It's the power of compound savings here," said Randall Stephenson, chairman and CEO of AT&T, and vice chair of the group's health and retirement committee. "If you start to save now, it really adds up."
The Roundtable executives contend older workers will still be able to access subsidized health care through Affordable Care Act known as Obamacare, which begins in 2014. What's more, they say, the economy will need older workers to remain in the labor force.
"When we look out 10-15 years, we're going to need more of our workers to work longer,' said Stephenson.
In addition to the higher age requirements, the report titled "Social Security Reform and Medicare Modernization Proposals" endorsed a number of reform measures similar to those of the Simpson-Bowles deficit reduction committee. Their recommendations include means-testing for wealthier retirees in both programs, and tying Social Security cost of living adjustments to the so-called chained Consumer Price Index—an idea rejected by the White House during last month's fiscal cliff negotiations.
Long-Term Solutions vs. Near-Term Consequences
The CEOs said they are looking at pragmatic options which provide a long-term solution to the unsustainable growth of entitlement spending. Yet, beyond the politics, provisions that seem practical on the federal level can have unintended consequences.
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The report calls on Congress to eliminate the Social Security tax exemption for new state and local workers under what's known as section 218 of the federal tax code. Under the provision, roughly one out of every four state and local government workers nationally is now exempt from Social Security payroll taxes, instead paying into public employee pension plans.
"In near-term, absolute dollars it's a modest portion," said Caesar's Entertainment CEO Gary Loveman, who serves as chair of the committee that issued the report. "It's more of an equity provision that everybody ought to be in the system."
Richard Johnson, director of the Urban Institute's retirement policy program, said Social Security administrators have calculated eliminating the Section 218 exemption would reduce Social Security's deficit by about 8 percent. But it would come at a big near-term price of leaving public pension plans underfunded.
"The problem is that putting new state workers into Social Security magnifies the problems states face in paying retirement benefits," Johnson explained, "because states would lose revenues from new hires."
The executives said the report is meant to push Washington D.C. to continue to look at all aspects of the budget, when the country's entitlement commitments are growing increasingly unsustainable.
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"There's a legacy opportunity," said John Engler, adding that the time for taking risks is during this time of divided government, so no one party takes the fallout.
"You do these things together," he said.
—By CNBC's Bertha Coombs; Follow her on Twitter: @coombscnbc