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[House Report 106-507]
[From the U.S. Government Publishing Office]

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:

  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 ``33\1/3\ 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,''.
  (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 self-employment 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 reduction. 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 lower- and 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.
    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.
---------------------------------------------------------------------------
    \1\ Working 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.
---------------------------------------------------------------------------

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 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 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 ismaintained 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 33\1/3\ 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.

      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 so-called early retirement 
age, or ERA) and the NRA; recipients are exempt from the 
earnings test when they reach age 70.

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

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TITLE II--FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS

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            old-age and survivors insurance benefit payments

                       Old Age Insurance Benefits

Sec. 202. (a) * * *

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  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--
          (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 [either] was not 
                entitled to an old-age insurance benefit [or 
                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.

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                    reduction of insurance benefits

  Sec. 203. (a)  * * *

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 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 [the 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;

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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; [nor 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 divorced 
wife, widower, or surviving divorced husband involved became 
entitled to such benefit prior to attaining age 60.

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  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 [the 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.

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  (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'sinsurance 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 [the 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.

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                  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 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 [was 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, 
        [(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 providedin 
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.

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          (3) For purposes of paragraph (1) and subsection (h), 
        an individual's excess earnings for a taxable year 
        shall be [33\1/3\ 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, 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 [age 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 self-employment 
        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.

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          (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 [the 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) [Except 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 [corresponding] 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 [corresponding 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--
                          (I) * * *
                          (II) the national average wage index 
                        (as so defined) for [2000 (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 
[an 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.

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          [(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--
                  [(i) for each month of any taxable year 
                ending after 1995 and before 1997, $1,041.66\2/
                3\,
                  [(ii) for each month of any taxable year 
                ending after 1996 and before 1998, $1,125.00,
                  [(iii) for each month of any taxable year 
                ending after 1997 and before 1999, $1,208.33\1/
                3\,
                  [(iv) for each month of any taxable year 
                ending after 1998 and before 2000, $1,291.66\2/
                3\,
                  [(v) for each month of any taxable year 
                ending after 1999 and before 2001, $1,416.66\2/
                3\,
                  [(vi) for each month of any taxable year 
                ending after 2000 and before 2002, $2,083.33\1/
                3\,
                  [(vii) for each month of any taxable year 
                ending after 2001 and before 2003, $2,500.00.]

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         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--
          (i) beginning with or after the month in which such 
        individual attained [age 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 [age 
        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 fora delay, but in no case may the period be extended 
more than four months.

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               Attainment of [Age Seventy] Retirement Age

  (j) For the purposes of this section, an individual shall be 
considered as [seventy years of age] having attained retirement 
age (as defined in section 216(l)) during the entire month in 
which he attains such age.

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                 DISABILITY INSURANCE BENEFIT PAYMENTS

                     Disability Insurance Benefits

  Sec. 223. (a) * * *

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                        Definition of Disability

  (d)(1) * * *

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  (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, [if 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 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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