79–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–507

SENIOR CITIZENS’ FREEDOM TO WORK ACT OF 2000

MARCH 1, 2000.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. ARCHER, from the Committee on Ways and Means,

submitted the following

R E P O R T

[To accompany H.R. 5]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the

bill (H.R. 5) to amend title II of the Social Security Act to eliminate

the earnings test for individuals who have attained retirement age,

having considered the same, report favorably thereon with an

amendment and recommend that the bill as amended do pass.

CONTENTS

Page

I. Introduction ...................................................................................................... 3

A. Purpose and Summary ........................................................................ 3

B. Background and Need for Legislation ................................................ 3

C. Legislative History .............................................................................. 4

II. Explanation of Provisions ................................................................................ 5

Section 1. Short Title ............................................................................... 5

Section 2. Elimination of the earnings test for individuals who have

attained retirement age ..................................................................... 5

III. Votes of the Committee .................................................................................... 7

IV. Budget Effects of the Bill ................................................................................. 7

A. Committee Estimate of Budgetary Effects ........................................ 7

B. Statement Regarding New Budget Authority and Tax Expenditures .................................................................................................... 7

C. Cost Estimate Prepared by the Congressional Budget Office .......... 8

V. Other Matters Required to be Discussed Under the Rules of the House 10

A. Committee Oversight Findings and Recommendations .................... 10

B. Summary of Findings and Recommendations of the Government

Reform and Oversight Committee .................................................... 11

C. Inflationary Impact Statement ........................................................... 11

VI. Changes in Existing Law Made by the Bill, as Reported ............................. 11

The amendment is as follows:
2

Strike out all after the enacting clause and insert in lieu thereof

the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Senior Citizens’ Freedom to Work Act of 2000’’.

SEC. 2. ELIMINATION OF EARNINGS TEST FOR INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.

Section 203 of the Social Security Act (42 U.S.C. 403) is amended—

(1) in subsection (c)(1), by striking ‘‘the age of seventy’’ and inserting ‘‘retirement age (as defined in section 216(l))’’;

(2) in paragraphs (1)(A) and (2) of subsection (d), by striking ‘‘the age of seventy’’ each place it appears and inserting ‘‘retirement age (as defined in section

216(l))’’;

(3) in subsection (f)(1)(B), by striking ‘‘was age seventy or over’’ and inserting

‘‘was at or above retirement age (as defined in section 216(l))’’;

(4) in subsection (f)(3)—

(A) by striking ‘‘331⁄3 percent’’ and all that follows through ‘‘any other individual,’’ and inserting ‘‘50 percent of such individual’s earnings for such

year in excess of the product of the exempt amount as determined under

paragraph (8),’’; and

(B) by striking ‘‘age 70’’ and inserting ‘‘retirement age (as defined in section 216(l))’’;

(5) in subsection (h)(1)(A), by striking ‘‘age 70’’ each place it appears and inserting ‘‘retirement age (as defined in section 216(l))’’; and

(6) in subsection (j)—

(A) in the heading, by striking ‘‘Age Seventy’’ and inserting ‘‘Retirement

Age’’; and

(B) by striking ‘‘seventy years of age’’ and inserting ‘‘having attained retirement age (as defined in section 216(l))’’.

SEC. 3. CONFORMING AMENDMENTS ELIMINATING THE EXEMPT AMOUNT FOR INDIVIDUALS

WHO HAVE ATTAINED RETIREMENT AGE.

(a) UNIFORM EXEMPT AMOUNT.—Section 203(f)(8)(A) of the Social Security Act (42

U.S.C. 403(f)(8)(A)) is amended by striking ‘‘the new exempt amounts (separately

stated for individuals described in subparagraph (D) and for other individuals)

which are to be applicable’’ and inserting ‘‘a new exempt amount which shall be applicable’’.

(b) CONFORMING AMENDMENTS.—Section 203(f)(8)(B) of the Social Security Act (42

U.S.C. 403(f)(8)(B)) is amended—

(1) in the matter preceding clause (i), by striking ‘‘Except’’ and all that follows

through ‘‘whichever’’ and inserting ‘‘The exempt amount which is applicable for

each month of a particular taxable year shall be whichever’’;

(2) in clause (i), by striking ‘‘corresponding’’;

(3) in clause (ii), in the matter preceding subclause (I), by striking ‘‘corresponding’’ and all that follows through ‘‘individuals)’’ and inserting ‘‘exempt

amount which is in effect with respect to months in the taxable year ending

after 1993 and before 1995 with respect to individuals who have not attained

retirement age (as defined in section 216(l))’’;

(4) in subclause (II) of clause (ii), by striking ‘‘2000’’ and all that follows and

inserting ‘‘1992,’’; and

(5) in the last sentence, by striking ‘‘an exempt amount’’ and inserting ‘‘the

exempt amount’’.

(c) REPEAL OF BASIS FOR COMPUTATION OF EXEMPT AMOUNT AFFECTING INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.—Section 203(f)(8)(D) of the Social Security Act (42 U.S.C. 403(f)(8)(D)) is repealed.

SEC. 4. ADDITIONAL CONFORMING AMENDMENTS.

(a) ELIMINATION OF REDUNDANT REFERENCES TO RETIREMENT AGE.—Section 203

of the Social Security Act (42 U.S.C. 403) is amended—

(1) in subsection (c), in the last sentence, by striking ‘‘nor shall any deduction’’

and all that follows and inserting ‘‘nor shall any deduction be made under this

subsection from any widow’s or widower’s insurance benefit if the widow, surviving divorced wife, widower, or surviving divorced husband involved became

entitled to such benefit prior to attaining age 60.’’; and

(2) in subsection (f)(1), by striking clause (D) and inserting the following: ‘‘(D)

for which such individual is entitled to widow’s or widower’s insurance benefits

if such individual became so entitled prior to attaining age 60,’’.
3

(b) CONFORMING AMENDMENT TO PROVISIONS FOR DETERMINING AMOUNT OF INCREASE ON ACCOUNT OF DELAYED RETIREMENT.—Section 202(w)(2)(B)(ii) of the Social Security Act (42 U.S.C. 402(w)(2)(B)(ii)) is amended—

(1) by striking ‘‘either’’; and

(2) by striking ‘‘or suffered deductions under section 203(b) or 203(c) in

amounts equal to the amount of such benefit’’.

(c) PROVISIONS RELATING TO EARNINGS TAKEN INTO ACCOUNT IN DETERMINING

SUBSTANTIAL GAINFUL ACTIVITY OF BLIND INDIVIDUALS.—The second sentence of

section 223(d)(4) of such Act (42 U.S.C. 423(d)(4)) is amended by striking ‘‘if section

102 of the Senior Citizens’ Right to Work Act of 1996 had not been enacted’’ and

inserting the following: ‘‘if the amendments to section 203 made by section 102 of

the Senior Citizens’ Right to Work Act of 1996 and by the Senior Citizens’ Freedom

to Work Act of 2000 had not been enacted’’.

SEC. 5. EFFECTIVE DATE.

(a) IN GENERAL.—The amendments and repeals made by this Act shall apply with

respect to taxable years ending after December 31, 1999.

(b) SPECIAL RULE APPLICABLE TO INDIVIDUALS WHO ATTAIN NORMAL RETIREMENT

AGE DURING THE FIRST TAXABLE YEAR ENDING AFTER DECEMBER 31, 1999.—Sections 202 and 203 of the Social Security Act, as in effect immediately prior to the

amendments and repeals made by this Act, shall apply to any individual who attains retirement age (as defined in section 216(l) of such Act) during the first taxable year ending after December 31, 1999 (and to any person receiving benefits

under title II of the Social Security Act on the basis of the wages and self-employment income of such individual), but only with respect to earnings for so much of

such taxable year as precedes the month in which such individual attains retirement age (as so defined).

I. INTRODUCTION

A. PURPOSE AND SUMMARY

The ‘‘Senior Citizens Freedom To Work Act of 2000’’ would eliminate the Social Security retirement earnings test for seniors who

attain the full retirement age (currently age 65, rising to 67 in

2027). The purpose of the legislation is to remove work disincentives for seniors who reach full retirement and to improve the fairness of the Social Security program. The legislation would have a

negligible effect on the long-term financial status of the Social Security Trust Funds.

B. BACKGROUND AND NEED FOR LEGISLATION

The Social Security program has included a ‘‘retirement earnings

test’’ since its inception in 1935. The earnings test reduces Social

Security benefits for beneficiaries who continue to work if their

earnings exceed a specific threshold, known as the ‘‘earnings limit.’’

The earnings limit applies only to earnings from wages and selfemployment income; it does not apply to ‘‘unearned’’ income, such

as pensions, savings and investments. The earnings test has been

relaxed over time to reflect changes in the workforce but has not

been eliminated.

Working seniors who lose benefits because of the earnings test

receive a delayed retirement credit (DRC), which increases their

monthly benefits in the future to help compensate them for the

loss. On average, seniors should receive the same amount of lifetime benefits regardless of when they retire.

According to the Congressional Budget Office, 631,000 seniors between the ages of 65 and 69 will have some or all of their benefits

reduced in 2000 because of the earnings test. Thousands more will

deliberately reduce the amount they work to avoid a benefit reduc-
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tion. The benefit reduction in 2000 will average approximately

$8,000 per retiree affected by the earnings test.

After a lifetime of payroll tax contributions, workers have an

earned right to their benefits, regardless of economic need. Withholding benefits from seniors simply because they choose to work

beyond the full retirement age is unfair, and it discriminates

against seniors who need to work to supplement their income.

Moreover, the earnings test imposes a risk because many seniors

will not live long enough to recover all their lost benefits through

the DRC. Lower-income workers and some minorities face the highest risk of losing benefits to which they are entitled because of

their shorter life expectancies.

Not only is the earnings test unfair, but it adversely affects the

economy by discouraging seniors from remaining in the workforce.

After accounting for Federal income and payroll taxes, working

seniors between the ages of 65 and 69 can face high marginal tax

rates as a result of the earnings test. Discouraging work among

seniors may have made sense during the Great Depression when

unemployment was high, but it makes little sense in today’s economic environment.

The retirement of the baby boomers and the aging of the workforce have serious implications for productivity, economic growth

and future living standards. As seniors become an increasing share

of the population, they should be given the appropriate opportunities and incentives to remain in the workforce, to share their skills

and experience with younger workers and to contribute to growth

in the economy.

Finally, repealing the earnings test will improve the personal

and financial well-being of America’s senior citizens. As seniors

continue to enjoy increased longevity and better health, they

should be allowed to work as long as they are willing to do so.

Studies have shown that allowing seniors to remain productive in

retirement has a positive impact on their health and self-esteem.

Moreover, repealing the earnings test would allow seniors the freedom to work without penalty so they can supplement their Social

Security benefits. This is particularly important to many lowerand moderate-income retirees who rely more heavily on earnings

from work rather than savings and pensions.

C. LEGISLATIVE HISTORY

On February 15, 2000, the Subcommittee on Social Security held

a public hearing on improving Social Security work incentives,

which focused on the effects of repealing the Social Security earnings test for working seniors who reach the full retirement age as

provided in H.R. 5, which was introduced by Mr. Sam Johnson and

Mr. Collin Peterson on March 1, 1999. The Subcommittee received

testimony in support of repealing the earnings test from the Commissioner of Social Security as well as senior advocates, economists, academics, business representatives, and senior citizens. In

addition, during the first session of the 106th Congress, the Subcommittee and the Full Committee on Ways and Means held numerous hearings on Social Security reform proposals that included

provisions to eliminate the earnings test.
5

1Working seniors who retire before the full retirement age lose $1 of Social Security benefits

for every $2 of earnings in excess of the earnings limit. The limit is $10,080 in 2000. It increases

annually with average wage growth.

On February 16, 2000, the Subcommittee on Social Security ordered favorably reported to the full Committee H.R. 5, the Senior

Citizens’ Freedom to Work Act of 2000, as amended, by a unanimous voice vote, with a quorum present.

On February 29, 2000, the Full Committee on Ways and Means

ordered favorably reported to the House H.R. 5, the Senior Citizens’ Freedom to Work Act of 2000, as amended, by a unanimous

voice vote, with a quorum present.

II. EXPLANATION OF PROVISIONS

SECTION 1. SHORT TITLE

The short title of the bill is the Senior Citizens’ Freedom to Work

Act of 2000.

SECTION 2. ELIMINATION OF THE EARNINGS TEST FOR INDIVIDUALS

WHO HAVE ATTAINED RETIREMENT AGE

Present law

Working seniors who reach the full retirement age (currently 65

in 2000, rising to 67 by 2027) receive a benefit reduction if their

earnings from wages and self-employment income exceed a specific

threshold, or ‘‘earnings limit.’’ In 2000, the earnings limit for working seniors age 65 and older is $17,000. Social Security benefits are

reduced by $1 for every $3 of earnings in excess of the limit. Legislation passed in 1996 will increase the earnings limit to $25,000 in

2001 and to $30,000 in 2002. Thereafter, the limit will increase

with average wage growth in the economy. Seniors are exempt

from the earnings test once they reach age 70. A separate earnings

test applies to working seniors who retire before the full retirement

age.1 The earnings test only applies to the Old-Age and Survivors

Insurance Program.

Explanation of provision

The proposal would exempt working seniors from the earnings

test once they reach the full retirement age.

Reason for change

According to the Congressional Budget Office, 631,000 non-disabled beneficiaries age 65 through 69 lose some or all of their Social Security benefits as a result of the earnings test. Many more

are negatively impacted because they deliberately hold their earnings below the limit to avoid the penalty. Withholding benefits

from working seniors is inconsistent with the fact that workers are

entitled to their Social Security benefits regardless of economic

need. Moreover, the earnings test penalizes seniors who want or

need to work during retirement to supplement their Social Security

benefits. The penalty discourages many seniors from working as

much as they otherwise would, thus reducing their personal and financial well-being. Discouraging work among seniors also has serious implications for productivity, economic growth and future living
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standards. Given the impending retirement of the Baby Boom generation and the implications for economic growth, we need to take

steps now to encourage older workers to remain in the work force.

Eliminating the earnings test for seniors who reach the full retirement age would also reduce Social Security Administration administrative costs and reduce the number of inaccurate benefit payments each year. The Social Security Administration estimates

that the cost of administering the earnings test for those age 65

through 69 is approximately $70 million annually.

[Section 3 of the legislation makes several technical and conforming amendments required by the repeal of the earnings limit.]

SECTION 4. ADDITIONAL CONFORMING AMENDMENTS

Present law

Seniors who reach the full retirement age and do not receive benefits (either because they don’t file for benefits or because benefits

are withheld under the earnings test) receive a delayed retirement

credit (DRC) to partially compensate them for the loss. The DRC

increases the worker’s Social Security benefit for each month that

benefits are fully withheld. The DRC is 6 percent per year for

workers age 65 in 2000. It will increase by 0.5 percentage points

every two years until reaching 8 percent for seniors reaching the

full retirement age (then age 66) in 2009, at which point, the DRC

will be ‘‘actuarially fair.’’ In other words, on average, the DRC

should fully compensate workers for benefits withheld under the

earnings test.

The earnings test and the delayed retirement credit only apply

to the Old-Age and Survivors Insurance program. The Social Security Act contains a separate earnings threshold, called the substantial gainful activity (SGA) level, which applies only to the Disability Insurance program. Workers with earnings above the SGA

level are ineligible for disability benefits. In 2000, the SGA level for

non-blind individuals with disabilities is $700 per month. This level

is set by regulation. In 2000, the SGA level for individuals who are

blind is $1,170 per month. This level increases annually with average wage growth in the economy as established in statute.

Explanation of the provision

The provision makes conforming changes to eliminate the DRC

for working seniors who would have had benefits withheld under

the earnings test if the legislation were not enacted. The DRC is

retained for seniors who choose to delay benefit application beyond

the full retirement age.

The provision makes several other conforming amendments relating to the SGA level for the blind and provisions made redundant by the repeal of the earnings test.

Reason for change

The DRC is repealed for seniors who have reached the full retirement age because they will receive their full Social Security benefits regardless of their earnings from work. As a result, there is no

need to compensate seniors for lost benefits because they will no

longer be penalized for working. Because of the interaction between
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the earnings test and the DRC, the cost of repealing the earnings

test is fully recovered over time. Consequently, repealing the earnings test has a negligible long-term impact on Social Security’s financial solvency. In addition, there is no impact on the estimated

date of the Trust Funds’ depletion or the date when benefit outlays

exceed income.

This provision ensures that the current law substantial gainful

activity level for the blind is maintained and will continue to be

wage-indexed in the future.

SECTION 5. EFFECTIVE DATE

Sections 2 through 4 (which lower the earnings test exempt age

from 70 to the full retirement age and make conforming amendments) are effective for taxable years after December 31, 1999.

A special rule is provided for seniors who reach the full retirement age in 2000. The special rule retains the $17,000 earnings

limit and the 331⁄3 percent withholding rate for seniors who reach

the full retirement age in 2000, ensuring that they will not be affected by the more stringent earnings test which applies to early

retirees. Once the worker attains the full retirement age, the earnings test will no longer apply.

III. VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the

House of Representatives, the following statements are made concerning the votes of the Committee on Ways and Means in its consideration of the bill, H.R. 5, as amended.

MOTION TO REPORT THE BILL

The bill, H.R. 5, as amended, was ordered favorably reported by

a unanimous voice vote, with a quorum present.

IV. BUDGET EFFECTS OF THE BILL

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d)(2) of rule XIII of the Rules of the

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the

bill, H.R. 5, as reported.

The Committee agrees with the estimate prepared by the Congressional Budget Office (CBO) which is included below.

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee states the Committee bill

results in no net increase or decrease in budget authority for direct

spending programs relative to current law, and no new or increased

tax expenditures.
8

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the

House of Representatives, requiring a cost estimate prepared by

the Congressional Budget Office (‘‘CBO’’), the following statement

by CBO is provided.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, March 1, 2000.

Hon. BILL ARCHER,

Chairman, Committee on Ways and Means,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5, the Senior Citizens’

Freedom to Work Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Kathy Ruffing.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 5—Senior Citizens’ Freedom to Work Act of 2000

Summary: H.R. 5 would repeal the earnings test that reduces the

Social Security benefits of some people between the program’s normal retirement age (currently 65) and 69. Under H.R. 5, those individuals could draw their full Social Security benefits, regardless of

their earnings.

CBO estimates that enacting H.R. 5 would increase direct spending by $3.9 billion in fiscal year 2000, by $19.8 billion over the

2000–2005 period, and by $22.8 billion over the 2000–2010 period.

Administrative costs would rise by $35 million in 2000, but fall by

$0.7 billion over the 2001–2010 period. Both the benefit payments

and administrative expenses for Social Security are off-budget. The

bill would have no pay-as-you-go impact because legislation affecting the Social Security trust funds is exempt from pay-as-you-go

procedures. H.R. 5 would impose no mandates on state, local, or

tribal governments or on the private-sector.

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 5 is shown in Table 1. The costs of this legislation fall within budget function 650 (Social Security).

Basis of estimate: Under current law, for beneficiaries between

Social Security’s normal retirement age (NRA), now 65, and 69, a

dollar of benefits is withheld for every three dollars of earnings

above a threshold. Under the Contract With America Advancement

Act, that threshold is $17,000 in 2000; it will rise to $25,000 in

2001 and $30,000 in 2002, and climb with average wages thereafter. A stricter test applies to beneficiaries between age 62 (the socalled early retirement age, or ERA) and the NRA; recipients are

exempt from the earnings test when they reach age 70.
9

TABLE 1.—ESTIMATED BUDGET EFFECTS OF H.R. 5

[By fiscal year, in billions of dollars]

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DIRECT SPENDING

Estimated Outlays: Benefit Payments ........... 3.9 4.3 3.6 3.1 2.7 2.1 1.6 1.0 0.5 0.1 0.1

SPENDING SUBJECT TO APPROPRIATION ACTION

Estimated Outlays: Administrative Costs .... (1) ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1

Memorandum:

Exempt amount

under current

law (by calendar year, in

dollars) 2 .......... 17,000 25,000 30,000 31,200 32,400 33,480 34,560 35,880 37,200 38,520 39,840

1 Less than $50 million.

2 Through 2002, these are the amounts set in the Contract With America Advancement Act (Public Law 104–121). After 2002, they are in- dexed to overall wage increases.

Note.—Outlays represent extra benefits that would be paid from the Old-Age and Survivors Insurance Trust Fund, which is off-budget.

Direct spending

CBO estimates that repealing the earnings test for beneficiaries

over the NRA, effective January 1, 2000, would lead to outlays of

about $5 billion in that calendar year for additional Social Security

benefits. Only three-quarters of that cost, $3.9 billion, would occur

in fiscal year 2000 because the bill would affect payments for only

nine months of that fiscal year.

CBO bases its estimate on data obtained from the Social Security

Administration’s (SSA’s) Continuous Work History Sample. That

source has consistently shown that approximately 2.4 million beneficiaries between the ages of 65 and 69 have earnings, although

only a minority of them make enough to be affected by the earnings test. In calendar year 2000, CBO estimates that approximately

625,000 people would receive, on average, an extra benefit of

$8,200 under H.R. 5. By 2002, that number would shrink to about

400,000 people, collecting on average an extra benefit of about

$10,000. After 2002, an estimated 350,000 to 400,000 workers each

year would have at least some benefits withheld under current law

and therefore would be affected by the bill.

The cost of repeal would decline over time for several reasons.

First, the amount of exempt earnings is scheduled to rise steeply

in 2001 and 2002, and thus fewer people would be subject to the

test under current law. Second, the NRA will climb gradually from

65 to 66 in the next decade, further shrinking the number of people

affected. Third, the costs will gradually be offset by savings in the

delayed retirement credit (DRC), which boosts subsequent benefits

for anyone who defers receiving payments for any months after

reaching the NRA but before age 70. Under current law, the DRC

will eventually climb to 8 percent of benefits for each full year deferred. CBO assumes that most people affected by repeal of the

earnings test will apply for benefits at the NRA, thus forfeiting

their eventual entitlement to the DRC. Although CBO estimates

that H.R. 5 would add to government outlays in each of the first

10 years, actuaries at the Social Security Administration (SSA)

judge that repeal would have only a negligible effect on benefits
10

over a 75-year period, because the extra payments will be almost

exactly offset by savings in the DRC.

In its estimates, CBO does not assume that repeal of the earnings test would substantially affect the labor force participation or

earnings of people between the NRA and age 69. In theory, the effect could operate in either direction. Older people who now hold

their earnings just below the threshold might work more. But on

the other hand, people with high earnings might work less, because

they could enjoy the same standard of living by combining a Social

Security benefit with reduced earnings. Empirical evidence suggests that, in the past, the earnings test has slightly dampened

work by people aged 65 through 69. (A recent study suggests the

effect on work hours could be about a 5 percent reduction.) Even

the modest effect suggested by that research would fade under current law, because—as the threshold climbs to $30,000—it will affect fewer people’s decisions.

For purposes of its estimate, CBO assumes enactment in the

spring of 2000. Because the bill would be retroactive to January 1,

2000, SSA would have to compute and refund benefits withheld

since that date. If enactment occurs later in the year, the processing time could push the fiscal year 2000 costs of $3.9 billion into

2001. That results would have no effect, however, on the aggregate

costs of the bill.

Spending subject to appropriation

H.R. 5 would also affect SSA’s administrative costs, which are

funded by an annual appropriation. Computing and refunding retroactive benefits for calendar year 2000 would cost approximately

$35 million. In later years, however, SSA would save about $65

million annually because it would no longer have to administer the

complex earnings test for people over the NRA.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Acts sets up pay-as-you-go procedures for legislation that affects direct spending or receipts. However, provisions that affect the Old-Age and Survivors Insurance and Disability Insurance trust funds are specifically exempt from these

procedures. Therefore, H.R. 5 would have no pay-as-you-go impact.

Intergovernmental and private-sector impact: H.R. 5 contains no

intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would not affect the budgets of

state, local, or tribal governments.

Estimate prepared by: Federal Costs: Kathy Ruffing; Costs to

State and Local Governments: Leo Lex; Costs to the Private Sector:

Ralph Smith.

Estimate approved by: Robert A. Sunshine, Assistant Director for

Budget Analysis.

V. OTHER MATTERS REQUIRED TO BE DISCUSSED

UNDER THE RULES OF THE HOUSE

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the rules of the

House of Representatives (relating to oversight findings), the Committee advises that it was a result of the Committee’s oversight re-
11

view. On February 15, 2000, the Subcommittee on Social Security

held a public hearing on ‘‘Improving Social Security Work Incentives’’ which discussed repealing the Social Security earnings test

for working seniors who reach the full retirement age as provided

in H.R. 5, the Senior Citizens’ Freedom to Work Act of 2000.

B. SUMMARY OF FINDINGS AND RECOMMENDATIONS OF THE

COMMITTEE ON GOVERNMENT REFORM

With respect to clause 3(c)(4) of rule XII of the Rules of the

House of Representatives, the Committee advises that no oversight

findings or recommendations have been submitted to this Committee by the Committee on Government Reform with respect to

the provisions contained in the bill.

C. CONSTITUTIONAL AUTHORITY STATEMENT

With respect to clause 3(d)(1) of rule XIII of the Rules of the

House of Representatives (relating to Constitutional Authority), the

Committee states that the Committee’s action in reporting this bill

is derived from Article I of the Constitution, Section 8 (‘‘The Congress shall have Power To lay and collect Taxes, Duties, Imposts

and Excises * * *’’), and from the 16th Amendment to the Constitution.

VI. CHANGES IN EXISTING LAW MADE BY THE BILL AS

REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

SOCIAL SECURITY ACT

* * * * * * *

TITLE II—FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY

INSURANCE BENEFITS

* * * * * * *

OLD-AGE AND SURVIVORS INSURANCE BENEFIT PAYMENTS

Old Age Insurance Benefits

SEC. 202. (a)***

* * * * * * *

Increase in Old-Age Insurance Benefit Amounts on Account of

Delayed Retirement

(w)(1)***

(2) For purposes of this subsection, the number of increment

months for any individual shall be a number equal to the total

number of the months—
12

(A) which have elapsed after the month before the month in

which such individual attained retirement age (as defined in

section 216(l)) or (if later) December 1970 and prior to the

month in which such individual attained age 70, and

(B) with respect to which—

(i) such individual was a fully insured individual (as defined in section 214(a)),

(ii) such individual øeither¿ was not entitled to an oldage insurance benefit øor suffered deductions under section 203(b) or 203(c) in amounts equal to the amount of

such benefit¿, and

(iii) such individual was not subject to a penalty imposed

under section 1129A.

* * * * * * *

REDUCTION OF INSURANCE BENEFITS

SEC. 203. (a) * * *

* * * * * * *

Deductions on Account of Noncovered Work Outside the United

States or Failure to Have Child in Care

(c) Deductions, in such amounts and at such time or times as the

Commissioner of Social Security shall determine, shall be made

from any payment or payments under this title to which an individual is entitled, until the total of such deductions equals such individual’s benefits or benefit under section 202 for any month—

(1) in which such individual is under øthe age of seventy¿ retirement age (as defined in section 216(l)) and for more than

forty-five hours of which such individual engaged in noncovered remunerative activity outside the United States;

* * * * * * *

For purposes of paragraphs (2), (3), and (4) of this subsection, a

child shall not be considered to be entitled to a child’s insurance

benefit for any month in which paragraph (1) of section 202(s) applies or an event specified in section 222(b) occurs with respect to

such child. Subject to paragraph (3) of such section 202(s), no deduction shall be made under this subsection from any child’s insurance benefit for the month in which the child entitled to such benefit attained the age of eighteen or any subsequent month; ønor

shall any deduction be made under this subsection from any widow’s insurance benefit for any month in which the widow or surviving divorced wife is entitled and has not attained retirement age

(as defined in section 216(l)) (but only if she became so entitled

prior to attaining age 60), or from any widower’s insurance benefit

for any month in which the widower or surviving divorced husband

is entitled and has not attained retirement age (as defined in section 216(l)) (but only if he became so entitled prior to attaining age

60).¿ nor shall any deduction be made under this subsection from

any widow’s or widower’s insurance benefit if the widow, surviving
13

divorced wife, widower, or surviving divorced husband involved became entitled to such benefit prior to attaining age 60.

* * * * * * *

Deductions From Dependents’ Benefits on Account of Noncovered

Work Outside the United States by Old Age Insurance Beneficiary

(d)(1)(A) Deductions shall be made from any wife’s, husband’s, or

child’s insurance benefit, based on the wages and self employment

income of an individual entitled to old age insurance benefits, to

which a wife, divorced wife, husband, divorced husband, or child is

entitled, until the total of such deductions equals such wife’s, husband’s, or child’s insurance benefit or benefits under section 202 for

any month in which such individual is under øthe age of seventy¿

retirement age (as defined in section 216(l)) and for more than forty

five hours of which such individual engaged in noncovered remunerative activity outside the United States.

* * * * * * *

(2) Deductions shall be made from any child’s insurance benefit

to which a child who has attained the age of eighteen is entitled,

or from any mother’s or father’s insurance benefit to which a person is entitled, until the total of such deductions equals such child’s

insurance benefit or benefits or mother’s or father’s insurance benefit or benefits under section 202 for any month in which such child

or person entitled to mother’s or father’s insurance benefits is married to an individual under øthe age of seventy¿ retirement age (as

defined in section 216(l)) who is entitled to old-age insurance benefits and for more than forty-five hours of which such individual engaged in noncovered remunerative activity outside the United

States.

* * * * * * *

Months to Which Earnings Are Charged

(f) For purposes of subsection (b)—

(1) The amount of an individual’s excess earnings (as defined

in paragraph (3)) shall be charged to months as follows: There

shall be charged to the first month of such taxable year an

amount of his excess earnings equal to the sum of the payments to which he and all other persons (excluding divorced

spouses referred to in subsection (b)(2)) are entitled for such

month under section 202 on the basis of his wages and self-employment income (or the total of his excess earnings if such excess earnings are less than such sum), and the balance, if any,

of such excess earnings shall be charged to each succeeding

month in such year to the extent, in the case of each such

month, of the sum of the payments to which such individual

and all such other persons are entitled for such month under

section 202 on the basis of his wages and self-employment income, until the total of such excess has been so charged. Where

an individual is entitled to benefits under section 202(a) and

other persons (excluding divorced spouses referred to in subsection (b)(2)) are entitled to benefits under section 202(b), (c),

or (d) on the basis of the wages and self-employment income
14

of such individual, the excess earnings of such individual for

any taxable year shall be charged in accordance with the provisions of this subsection before the excess earnings of such persons for a taxable year are charged to months in such individual’s taxable year. Notwithstanding the preceding provisions of

this paragraph but subject to section 202(s), no part of the excess earnings of an individual shall be charged to any month

(A) for which such individual was not entitled to a benefit

under this title, (B) in which such individual øwas age seventy

or over¿ was at or above retirement age (as defined in section

216(l)), (C) in which such individual, if a child entitled to

child’s insurance benefits, has attained the age of 18, ø(D) for

which such individual is entitled to widow’s insurance benefits

and has not attained retirement age (as defined in section

216(l)) (but only if she became so entitled prior to attaining age

60), or widower’s insurance benefits and has not attained retirement age (as defined in section 216(l)) (but only if he became so entitled prior to attaining age 60),¿ (D) for which such

individual is entitled to widow’s or widower’s insurance benefits

if such individual became so entitled prior to attaining age 60,

(E) in which such individual did not engage in self-employment

and did not render services for wages (determined as provided

in paragraph (5) of this subsection) of more than the applicable

exempt amount as determined under paragraph (8), if such

month is in the taxable year in which occurs the first month

after December 1977 that is both (i) a month for which the individual is entitled to benefits under subsection (a), (b), (c), (d),

(e), (f), (g), or (h) of section 202 (without having been entitled

for the preceding month to a benefit under any other of such

subsections), and (ii) a month in which the individual did not

engage in self-employment and did not render services for

wages (determined as provided in paragraph (5)) of more than

the applicable exempt amount as determined under paragraph

(8), or (F) in which such individual did not engage in self-employment and did not render services for wages (determined as

provided in paragraph (5) of this subsection) of more than the

applicable exempt amount as determined under paragraph (8),

in the case of an individual entitled to benefits under section

202(b) or (c) (but only by reason of having a child in his or her

care within the meaning of paragraph (1)(B) of subsection (b)

or (c), as may be applicable) or under section 202(d) or (g), if

such month is in a year in which such entitlement ends for a

reason other than the death of such individual, and such individual is not entitled to any benefits under this title for the

month following the month during which such entitlement

under section 202(b), (d), or (g) ended.

* * * * * * *

(3) For purposes of paragraph (1) and subsection (h), an individual’s excess earnings for a taxable year shall be ø331⁄3 percent of his earnings for such year in excess of the product of

the applicable exempt amount as determined under paragraph

(8) in the case of an individual who has attained (or, but for

the individual’s death, would have attained) retirement age (as

defined in section 216(l)) before the close of such taxable year,
15

or 50 percent of his earnings for such year in excess of such

product in the case of any other individual,¿ 50 percent of such

individual’s earnings for such year in excess of the product of

the exempt amount as determined under paragraph (8), multiplied by the number of months in such year, except that, in determining an individual’s excess earnings for the taxable year

in which he attains øage 70¿ retirement age (as defined in section 216(l)), there shall be excluded any earnings of such individual for the month in which he attains such age and any

subsequent month (with any net earnings or net loss from selfemployment in such year being prorated in an equitable manner under regulations of the Commissioner of Social Security).

For purposes of the preceding sentence, notwithstanding section 211(e), the number of months in the taxable year in which

an individual dies shall be 12. The excess earnings as derived

under the first sentence of this paragraph, if not a multiple of

$1, shall be reduced to the next lower multiple of $1.

* * * * * * *

(8)(A) Whenever the Commissioner of Social Security pursuant to section 215(i) increases benefits effective with the month

of December following a cost-of-living computation quarter he

shall also determine and publish in the Federal Register on or

before November 1 of the calendar year in which such quarter

occurs øthe new exempt amounts (separately stated for individuals described in subparagraph (D) and for other individuals)

which are to be applicable¿ a new exempt amount which shall

be applicable (unless prevented from becoming effective by subparagraph (C)) with respect to taxable years ending in (or with

the close of) the calendar year after the calendar year in which

such benefit increase is effective (or, in the case of an individual who dies during the calendar year after the calendar

year in which the benefit increase is effective, with respect to

such individual’s taxable year which ends, upon his death, during such year).

(B) øExcept as otherwise provided in subparagraph (D), the

exempt amount which is applicable to individuals described in

such subparagraph and the exempt amount which is applicable

to other individuals, for each month of a particular taxable

year, shall each be whichever¿ The exempt amount which is

applicable for each month of a particular taxable year shall be

whichever of the following is the larger—

(i) the øcorresponding¿ exempt amount which is in effect

with respect to months in the taxable year in which the

determination under subparagraph (A) is made, or

(ii) the product of the øcorresponding exempt amount

which is in effect with respect to months in the taxable

year ending after 2001 and before 2003 (with respect to individuals described in subparagraph (D)) or the taxable

year ending after 1993–and before 1995 (with respect to

other individuals)¿ exempt amount which is in effect with

respect to months in the taxable year ending after 1993 and

before 1995 with respect to individuals who have not attained retirement age (as defined in section 216(l)), and the

ratio of—
16

(I) * * *

(II) the national average wage index (as so defined)

for ø2000 (with respect to individuals described in subparagraph (D)) or 1992 (with respect to other individuals)¿ 1992, with such product, if not a multiple of $10, being rounded to

the next higher multiple of $10 where such product is a multiple of $5 but not of $10 and to the nearest multiple of $10

in any other case.

Whenever the Commissioner of Social Security determines that øan

exempt amount¿ the exempt amount is to be increased in any year

under this paragraph, he shall notify the House Committee on

Ways and Means and the Senate Committee on Finance within 30

days after the close of the base quarter (as defined in section

215(i)(1)(A)) in such year of the estimated amount of such increase,

indicating the new exempt amount, the actuarial estimates of the

effect of the increase, and the actuarial assumptions and methodology used in preparing such estimates.

* * * * * * *

ø(D) Notwithstanding any other provision of this subsection,

the exempt amount which is applicable to an individual who

has attained retirement age (as defined in section 216(l)) before

the close of the taxable year involved shall be—

ø(i) for each month of any taxable year ending after 1995 and before 1997, $1,041.662⁄3, ø(ii) for each month of any taxable year ending after 1996 and before 1998, $1,125.00,

ø(iii) for each month of any taxable year ending after 1997 and before 1999, $1,208.331⁄3, ø(iv) for each month of any taxable year ending after 1998 and before 2000, $1,291.662⁄3, ø(v) for each month of any taxable year ending after 1999 and before 2001, $1,416.662⁄3, ø(vi) for each month of any taxable year ending after 2000 and before 2002, $2,083.331⁄3, ø(vii) for each month of any taxable year ending after 2001 and before 2003, $2,500.00.¿

* * * * * * *

Report of Earnings to Commissioner of Social Security

(h)(1)(A) If an individual is entitled to any monthly insurance

benefit under section 202 during any taxable year in which he has

earnings or wages, as computed pursuant to paragraph (5) of subsection (f), in excess of the product of the applicable exempt

amount as determined under subsection (f)(8) times the number of

months in such year, such individual (or the individual who is in

receipt of such benefit on his behalf) shall make a report to the

Commissioner of Social Security of his earnings (or wages) for such

taxable year. Such report shall be made on or before the fifteenth

day of the fourth month following the close of such year, and shall

contain such information and be made in such manner as the Commissioner of Social Security may by regulations prescribe. Such report need not be made for any taxable year—
17

(i) beginning with or after the month in which such individual attained øage 70¿ retirement age (as defined in section

216(l)), or

(ii) if benefit payments for all months (in such taxable year)

in which such individual is under øage 70¿ retirement age (as

defined in section 216(l)) have been suspended under the provisions of the first sentence of paragraph (3) of this subsection,

unless—

(I) such individual is entitled to benefits under subsection (b), (c), (d), (e), (f), (g), or (h) of section 202,

(II) such benefits are reduced under subsection (a) of

this section for any month in such taxable year, and

(III) in any such month there is another person who also

is entitled to benefits under subsection (b), (c), (d), (e), (f),

(g), or (h) of section 202 on the basis of the same wages

and self-employment income and who does not live in the

same household as such individual.

The Commissioner of Social Security may grant a reasonable extension of time for making the report of earnings required in this

paragraph if the Commissioner finds that there is valid reason for

a delay, but in no case may the period be extended more than four

months.

* * * * * * *

Attainment of øAge Seventy¿ Retirement Age

(j) For the purposes of this section, an individual shall be considered as øseventy years of age¿ having attained retirement age (as

defined in section 216(l)) during the entire month in which he attains such age.

* * * * * * *

DISABILITY INSURANCE BENEFIT PAYMENTS

Disability Insurance Benefits

SEC. 223. (a)***

* * * * * * *

Definition of Disability

(d)(1)***

* * * * * * *

(4)(A) The Commissioner of Social Security shall by regulations

prescribe the criteria for determining when services performed or

earnings derived from services demonstrate an individual’s ability

to engage in substantial gainful activity. No individual who is blind

shall be regarded as having demonstrated an ability to engage in

substantial gainful activity on the basis of earnings that do not exceed an amount equal to the exempt amount which would be applicable under section 203(f)(8), to individuals described in subparagraph (D) thereof, øif section 102 of the Senior Citizens’ Right to

Work Act of 1996 had not been enacted¿ if the amendments to section 203 made by section 102 of the Senior Citizens’ Right to Work
18

Act of 1996 and by the Senior Citizens’ Freedom to Work Act of

2000 had not been enacted. Notwithstanding the provisions of paragraph (2), an individual whose services or earnings meet such criteria shall, except for purposes of section 222(c), be found not to be

disabled. In determining whether an individual is able to engage

in substantial gainful activity by reason of his earnings, where his

disability is sufficiently severe to result in a functional limitation

requiring assistance in order for him to work, there shall be excluded from such earnings an amount equal to the cost (to such individual) of any attendant care services, medical devices, equipment, prostheses, and similar items and services (not including

routine drugs or routine medical services unless such drugs or

services are necessary for the control of the disabling condition)

which are necessary (as determined by the Commissioner of Social

Security in regulations) for that purpose, whether or not such assistance is also needed to enable him to carry out his normal daily

functions; except that the amount to be excluded shall be subject

to such reasonable limits as the Commissioner of Social Security

may prescribe.

* * * * * * *

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