SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Notch Fairness Act of 2005''.

SEC. 2. NEW GUARANTEED MINIMUM PRIMARY INSURANCE AMOUNT WHERE 
              ELIGIBILITY ARISES DURING TRANSITIONAL PERIOD.

    (a) In General.--Section 215(a) of the Social Security Act is 
amended--
            (1) in paragraph (4)(B), by inserting ``(with or without 
        the application of paragraph (8))'' after ``would be made'', 
        and by striking ``1984'' in clause (i) and inserting ``1989''; 
        and
            (2) by adding at the end the following:
    ``(8)(A) In the case of an individual described in paragraph (4)(B) 
(subject to subparagraphs (F) and (G) of this paragraph), the amount of 
the individual's primary insurance amount as computed or recomputed 
under paragraph (1) shall be deemed equal to the sum of--
            ``(i) such amount, and
            ``(ii) the applicable transitional increase amount (if 
        any).
    ``(B) For purposes of subparagraph (A)(ii), the term `applicable 
transitional increase amount' means, in the case of any individual, the 
product derived by multiplying--
            ``(i) the excess under former law, by
            ``(ii) the applicable percentage in relation to the year in 
        which the individual becomes eligible for old-age insurance 
        benefits, as determined by the following table:

``If the individual becomes                              The applicable
  eligible for such benefits in:                         percentage is:
        1979...................................................     55 
        1980...................................................     45 
        1981...................................................     35 
        1982...................................................     32 
        1983...................................................     25 
        1984...................................................     20 
        1985...................................................     16 
        1986...................................................     10 
        1987...................................................      3 
        1988...................................................      5.
    ``(C) For purposes of subparagraph (B), the term `excess under 
former law' means, in the case of any individual, the excess of--
            ``(i) the applicable former law primary insurance amount, 
        over
            ``(ii) the amount which would be such individual's primary 
        insurance amount if computed or recomputed under this section 
        without regard to this paragraph and paragraphs (4), (5), and 
        (6).
    ``(D) For purposes of subparagraph (C)(i), the term `applicable 
former law primary insurance amount' means, in the case of any 
individual, the amount which would be such individual's primary 
insurance amount if it were--
            ``(i) computed or recomputed (pursuant to paragraph 
        (4)(B)(i)) under section 215(a) as in effect in December 1978, 
        or
            ``(ii) computed or recomputed (pursuant to paragraph 
        (4)(B)(ii)) as provided by subsection (d),
(as applicable) and modified as provided by subparagraph (E).
    ``(E) In determining the amount which would be an individual's 
primary insurance amount as provided in subparagraph (D)--
            ``(i) subsection (b)(4) shall not apply;
            ``(ii) section 215(b) as in effect in December 1978 shall 
        apply, except that section 215(b)(2)(C) (as then in effect) 
        shall be deemed to provide that an individual's `computation 
        base years' may include only calendar years in the period after 
        1950 (or 1936 if applicable) and ending with the calendar year 
        in which such individual attains age 61, plus the 3 calendar 
        years after such period for which the total of such 
        individual's wages and self-employment income is the largest; 
        and
            ``(iii) subdivision (I) in the last sentence of paragraph 
        (4) shall be applied as though the words `without regard to any 
        increases in that table' in such subdivision read `including 
        any increases in that table'.
    ``(F) This paragraph shall apply in the case of any individual only 
if such application results in a primary insurance amount for such 
individual that is greater than it would be if computed or recomputed 
under paragraph (4)(B) without regard to this paragraph.
    ``(G)(i) This paragraph shall apply in the case of any individual 
subject to any timely election to receive lump sum payments under this 
subparagraph.
    ``(ii) A written election to receive lump sum payments under this 
subparagraph, in lieu of the application of this paragraph to the 
computation of the primary insurance amount of an individual described 
in paragraph (4)(B), may be filed with the Commissioner of Social 
Security in such form and manner as shall be prescribed in regulations 
of the Commissioner. Any such election may be filed by such individual 
or, in the event of such individual's death before any such election is 
filed by such individual, by any other beneficiary entitled to benefits 
under section 202 on the basis of such individual's wages and self-
employment income. Any such election filed after December 31, 2005, 
shall be null and void and of no effect.
    ``(iii) Upon receipt by the Commissioner of a timely election filed 
by the individual described in paragraph (4)(B) in accordance with 
clause (ii)--
            ``(I) the Commissioner shall certify receipt of such 
        election to the Secretary of the Treasury, and the Secretary of 
        the Treasury, after receipt of such certification, shall pay 
        such individual, from amounts in the Federal Old-Age and 
        Survivors Insurance Trust Fund, a total amount equal to $5,000, 
        in 4 annual lump sum installments of $1,250, the first of which 
        shall be made during fiscal year 2006 not later than July 1, 
        2006, and
            ``(II) subparagraph (A) shall not apply in determining such 
        individual's primary insurance amount.
    ``(iv) Upon receipt by the Commissioner as of December 31, 2005, of 
a timely election filed in accordance with clause (ii) by at least one 
beneficiary entitled to benefits on the basis of the wages and self-
employment income of a deceased individual described in paragraph 
(4)(B), if such deceased individual has filed no timely election in 
accordance with clause (ii)--
            ``(I) the Commissioner shall certify receipt of all such 
        elections received as of such date to the Secretary of the 
        Treasury, and the Secretary of the Treasury, after receipt of 
        such certification, shall pay each beneficiary filing such a 
        timely election, from amounts in the Federal Old-Age and 
        Survivors Insurance Trust Fund, a total amount equal to $5,000 
        (or, in the case of 2 or more such beneficiaries, such amount 
        distributed evenly among such beneficiaries), in 4 equal annual 
        lump sum installments, the first of which shall be made during 
        fiscal year 2006 not later than July 1, 2006, and
            ``(II) solely for purposes of determining the amount of 
        such beneficiary's benefits, subparagraph (A) shall be deemed 
        not to apply in determining the deceased individual's primary 
        insurance amount.''.
    (b) Effective Date and Related Rules.--
            (1) Applicability of amendments.--
                    (A) In general.--Except as provided in paragraph 
                (2), the amendments made by this Act shall be effective 
                as though they had been included or reflected in 
                section 201 of the Social Security Amendments of 1977.
                    (B) Applicability.--No monthly benefit or primary 
                insurance amount under title II of the Social Security 
                Act shall be increased by reason of such amendments for 
                any month before July 2006.
            (2) Recomputation to reflect benefit increases.--In any 
        case in which an individual is entitled to monthly insurance 
        benefits under title II of the Social Security Act for June 
        2006, if such benefits are based on a primary insurance amount 
        computed--
                    (A) under section 215 of such Act as in effect (by 
                reason of the Social Security Amendments of 1977) after 
                December 1978, or
                    (B) under section 215 of such Act as in effect 
                prior to January 1979 by reason of subsection (a)(4)(B) 
                of such section (as amended by the Social Security 
                Amendments of 1977),
        the Commissioner of Social Security (notwithstanding section 
        215(f)(1) of the Social Security Act) shall recompute such 
        primary insurance amount so as to take into account the 
        amendments made by this Act.
Notch Fairness Act of 2005 - Amends title II (Old Age, Survivors and Disability Insurance) of the Social Security Act with respect to the benefit computation formula for individuals affected by the changes in benefit computation rules enacted in the Social Security Amendments of 1977 who reached age 65 after 1979 and before 1989.

Sets forth a schedule of additional benefit increases for such beneficiaries (and related beneficiaries), with percentages declining from 55 percent to five percent keyed to the year an individual became eligible for such benefits between 1979 and 1989.

Provides for an election to receive such payments in a lump sum.
To amend title II of the Social Security Act to allow workers who attain age 65 after 1981 and before 1992 to choose either lump sum payments over four years totalling $5,000 or an improved benefit computation formula under a new 10-year rule governing the transition to the changes in benefit computation rules enacted in the Social Security Amendments of 1977, and for other purposes.