II

104TH CONGRESS

2D SESSION S. 2175

To provide for the long-range solvency of the old-age, survivors, and disability

insurance program, and for other purposes.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 30, 1996

Mr. KERREY (for himself and Mr. SIMPSON) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To provide for the long-range solvency of the old-age, survivors, and disability insurance program, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Strengthening Social

5 Security Act of 1996’’.

6 SEC. 2. PORTION OF SOCIAL SECURITY TAXES ON EMPLOY7 EES DEPOSITED INTO PERSONAL INVEST8 MENT PLANS.

9 (a) DEDICATION OF EMPLOYEE TAXES AND SELF10 EMPLOYMENT TAXES.—
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1 (1) TAX ON EMPLOYEES.—Subsection (a) of

2 section 3101 of the Internal Revenue Code of 1986

3 (relating to OASDI tax on employees) is amended—

4 (A) by striking the period at the end of the

5 table and inserting a semicolon; and

6 (B) by adding after and below the table

7 the following:

8 ‘‘except that, in the case of an eligible employee (as de9 fined in section 255(3) of the Social Security Act), the

10 rate of tax under this subsection shall be 4.2 percent with

11 respect to wages paid on or after December 31, 1996, for

12 pay periods ending after such date.’’.

13 (2) SELF-EMPLOYMENT TAX.—Subsection (a)

14 of section 1401 of such Code (relating to OASDI tax

15 on self-employment income) is amended—

16 (A) by striking the period at the end of the

17 table and inserting a semicolon; and

18 (B) by adding after and below the table

19 the following:

20 ‘‘except that, in the case of an eligible self-employed indi21 vidual (as defined in section 255(4) of the Social Security

22 Act), the rate of tax under this subsection shall be 10.4

23 percent of the amount of the self-employment income in

24 the case of a taxable year beginning after December 31,

25 1996.’’.
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1 (3) EFFECTIVE DATES.—

2 (A) IN GENERAL.—Except as otherwise

3 provided in this paragraph, the amendments

4 made by this subsection shall apply to remu5 neration paid after December 31, 1996.

6 (B) SELF-EMPLOYMENT TAX.—The

7 amendments made by paragraph (2) shall apply

8 to taxable years beginning after December 31,

9 1996.

10 (b) PERSONAL INVESTMENT PLANS.—

11 (1) IN GENERAL.—Title II of the Social Secu12 rity Act is amended—

13 (A) by inserting before section 201 the fol14 lowing:

15 ‘‘PART A—INSURANCE BENEFITS’’;

16 and

17 (B) by adding at the end the following new

18 part:

19 ‘‘PART B—PERSONAL INVESTMENT PLANS

20 ‘‘PERSONAL INVESTMENT PAYROLL DEDUCTION PLANS

21 ‘‘SEC. 251. (a) IN GENERAL.—Each person who is

22 a covered employer for a calendar year shall have in effect

23 a personal investment payroll deduction plan for such cal24 endar year for such person’s eligible employees.
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1 ‘‘(b) REQUIREMENTS.—For purposes of this part, the

2 term ‘personal investment payroll deduction plan’ means

3 a written plan of an employer if—

4 ‘‘(1) the plan applies only with respect to wages

5 of eligible employees,

6 ‘‘(2) under such plan, the personal investment

7 plan contributions will be deducted from the employ8 ee’s wages and paid to the Social Security Adminis9 tration with respect to a personal investment plan

10 designated in accordance with section 252(a),

11 ‘‘(3) under such plan, the employer is required

12 to pay the amount so deducted with respect to the

13 specified personal investment plan within 10 busi14 ness days after the payment of the wages from

15 which the amount was deducted,

16 ‘‘(4) the employer receives no compensation for

17 the cost of administering such plan, and

18 ‘‘(5) the employer does not make any endorse19 ment with respect to any plan.

20 ‘‘(c) AMOUNTS DEDUCTED MAY BE ACCUMULATED

21 BY EMPLOYER IN CERTAIN CASES.—If, under the terms

22 of a personal investment plan designated under section

23 252(a), contributions below a specified amount will not be

24 accepted, the requirements of subsection (b)(2) shall be

25 treated as met if amounts deducted from the wages of
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1 such employee are accumulated by the employer and paid

2 to such plan not later than 10 business days after the first

3 day on which the accumulated amount exceeds such speci4 fied amount.

5 ‘‘DESIGNATION OF PERSONAL INVESTMENT PLANS

6 UNDER PAYROLL DEDUCTION PLAN

7 ‘‘SEC. 252. (a) IN GENERAL.—Except as provided in

8 subsection (b), the personal investment plan to which the

9 personal investment plan contributions with respect to any

10 employee are required to be paid under section 251 shall

11 be a personal investment plan designated by the employee

12 to the employer not later than 10 business days after the

13 date on which the employee becomes an employee of such

14 employer. Any such designation shall be made in such

15 form and manner as may be prescribed in regulations of

16 the Commissioner of Social Security.

17 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES18 IGNATION BY EMPLOYEE.—In any case in which no timely

19 designation of the personal investment plan is made, the

20 employer shall make the designation of the personal in21 vestment plan in accordance with regulations of the Com22 missioner of Social Security.

23 ‘‘PARTICIPATION BY SELF-EMPLOYED INDIVIDUALS

24 ‘‘SEC. 253. (a) IN GENERAL.—Each eligible self-em25 ployed individual who receives self-employment income in

26 any taxable year beginning after December 31, 1996,
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1 shall, in such form and manner as shall be prescribed in

2 regulations of the Commissioner of Social Security, de3 posit with the Social Security Administration with respect

4 to a personal investment plan maintained by such individ5 ual the personal investment plan contribution for such tax6 able year. Such deposit shall be made within 10 business

7 days after the receipt by such individual of such self-em8 ployment income.

9 ‘‘(b) AMOUNTS PAYABLE MAY BE ACCUMULATED IN

10 CERTAIN CASES.—If, under the terms of a personal in11 vestment plan maintained under subsection (a), contribu12 tions below a specified amount will not be accepted, the

13 requirements of subsection (a) shall be treated as met if

14 amounts otherwise payable under subsection (a) are accu15 mulated by the individual and paid to such plan not later

16 than 10 business days after the first day on which the

17 accumulated amount exceeds such specified amount.

18 ‘‘DESIGNATION OF PLANS OF SURVIVING SPOUSES AND

19 SURVIVING DIVORCED SPOUSES

20 ‘‘SEC. 254. (a) IN GENERAL.—Except as otherwise

21 provided in this section, in the case of a deceased individ22 ual with respect to whom a personal investment plan was

23 established and maintained pursuant to section 252 or

24 253, the trustee of such plan shall transfer the balance

25 in such plan to a personal investment plan maintained by

26 an eligible survivor if such plan is designated by the eligi-
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1 ble survivor to the trustee not later than 20 business days

2 after the date of such individual’s death. Any such des3 ignation shall be made in such form and manner as may

4 be prescribed in regulations of the Commissioner of Social

5 Security.

6 ‘‘(b) EXCEPTION IN CASE OF WRITTEN CONSENT TO

7 TRANSFER TO ANOTHER BENEFICIARY.—In any case in

8 which the eligible survivor of a deceased individual has

9 consented in writing to a transfer by such individual of

10 the balance in such individual’s personal investment plan

11 to another beneficiary, the trustee of such plan shall trans12 fer the balance in such plan to such beneficiary within the

13 period of 20 business days following the date of such indi14 vidual’s death.

15 ‘‘(c) DESIGNATION IN ABSENCE OF TIMELY DES16 IGNATION OR CONSENT BY ELIGIBLE SURVIVOR.—In any

17 case in which, upon the expiration of the 20-day period

18 described in subsection (a), there is an eligible survivor

19 but no timely designation is made by the eligible survivor

20 under subsection (a) and no consent has been made pursu21 ant to subsection (b), the trustee shall make the designa22 tion of the personal investment plan under subsection (a)

23 on behalf of such eligible survivor, in accordance with reg24 ulations of the Commissioner of Social Security.
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1 ‘‘(d) DISPOSITION OF PLAN BALANCE WHERE NO

2 ELIGIBLE SURVIVOR EXISTS.—In any case in which, upon

3 the expiration of the 20-day period described in subsection

4 (a), no timely designation under subsection (c) has been

5 made and there is no eligible survivor, the trustee of the

6 deceased individual’s plan shall transfer the balance in

7 such plan to the estate of the deceased individual.

8 ‘‘(e) PERIOD FOR TRANSFER BY TRUSTEE.—In the

9 case of a transfer by a trustee under subsection (a), (c),

10 or (d), the trustee shall transfer the balance in the per11 sonal investment plan of the deceased individual within the

12 period of 20 business days following the expiration of the

13 20-day period described in such subsection.

14 ‘‘DEFINITIONS

15 ‘‘SEC. 255. For purposes of this part—

16 ‘‘(1) PERSONAL INVESTMENT PLAN.—The term

17 ‘personal investment plan’ means—

18 ‘‘(A) any personal investment retirement

19 plan in the Personal Investment Fund (estab20 lished under section 257) which is administered

21 by the Personal Investment Board, or

22 ‘‘(B) any individual retirement plan (as de23 fined in section 7701(a)(37) of the Internal

24 Revenue Code of 1986) which is administered

25 or issued by a bank or other person referred to

26 in section 408(a)(2) of such Code,
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1 under terms which restrict deposits to personal in2 vestment plan contributions made to the plan pursu3 ant to section 251 or 253 and transfers made to the

4 plan pursuant to section 254, and under which dis5 tributions may only be made on or after the date on

which the individual attains age 591 6 ⁄2, made to a

7 beneficiary (or to the estate of the individual) on or

8 after the death of the individual, or attributable to

9 the individual’s becoming disabled within the mean10 ing of section 223(d).

11 ‘‘(2) COVERED EMPLOYER.—The term ‘covered

12 employer’ means, for any calendar year, any person

13 on whom an excise tax is imposed under section

14 3111 of the Internal Revenue Code of 1986 with re15 spect to having an individual in his employ to whom

16 wages are paid by such person during such calendar

17 year.

18 ‘‘(3) ELIGIBLE EMPLOYEE.—The term ‘eligible

19 employee’ means, in connection with any person who

20 is a covered employer for any calendar year begin21 ning after December 31, 1996, any individual—

22 ‘‘(A) with respect to whose employment by

23 such employer during such calendar year there

24 is imposed an excise tax under section 3111 of

25 the Internal Revenue Code of 1986, and
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1 ‘‘(B) who does not attain the age of 55

2 years during such calendar year.

3 ‘‘(4) ELIGIBLE SELF-EMPLOYED INDIVIDUAL.—

4 The term ‘eligible self-employed individual’ means

5 any individual—

6 ‘‘(A) on whose self-employment income for

7 a taxable year beginning after December 31,

8 1996, there is imposed a tax under section

9 1401(a) of the Internal Revenue Code of 1986,

10 and

11 ‘‘(B) who does not attain the age of 55

12 years during such taxable year.

13 ‘‘(5) PERSONAL INVESTMENT PLAN CONTRIBU14 TION.—The term ‘personal investment plan con15 tribution’ means—

16 ‘‘(A) with respect to any eligible employee

17 of a covered employer, an amount equal to 2

18 percent of the wages received by such employee

19 with respect to employment by such employer,

20 and

21 ‘‘(B) with respect to the self-employment

22 income of an individual for any taxable year, an

23 amount equal to 2 percent of such income for

24 such taxable year.
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1 ‘‘(6) ELIGIBLE SURVIVOR.—The term ‘eligible

2 survivor’ of a deceased individual means such indi3 vidual’s widow or, if there is no such widow, such in4 dividual’s last surviving divorced wife or surviving

5 divorced husband. Such term shall not include any

6 such surviving divorced wife or surviving divorced

7 husband who is married on the date of the deceased

8 individual’s death.

9 ‘‘(7) BUSINESS DAY.—The term ‘business day’

10 means any day other than a Saturday, Sunday, or

11 legal holiday in the area involved.

12 ‘‘PENALTIES

13 ‘‘SEC. 256. (a) FAILURE TO ESTABLISH PERSONAL

14 INVESTMENT PAYROLL DEDUCTION PLAN.—Any covered

15 employer who fails to meet the requirements of section

16 251 for any calendar year shall be subject to a civil penalty

17 of not to exceed the greater of—

18 ‘‘(1) $5,000, or

19 ‘‘(2) $100 for each eligible employee of such

20 employer as of the beginning of such calendar year.

21 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

22 UNDER PLAN.—Any covered employer who fails to deduct

23 an amount from the wages of an eligible employee in ac24 cordance with a personal investment payroll deduction

25 plan shall be subject to a civil penalty of not to exceed

26 $500 for each such failure.
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1 ‘‘(c) FAILURE BY EMPLOYER TO MAKE TIMELY PAY2 MENTS TO PERSONAL INVESTMENT PLAN.—If an amount

3 deducted from the wages of an eligible employee under a

4 social security payroll deduction plan is not paid to the

5 Social Security Administration with respect to the speci6 fied personal investment plan within the time prescribed

7 by section 251—

8 ‘‘(1) the employer shall be subject to a civil

9 penalty of not to exceed 50 percent of the amount

10 so deducted, and

11 ‘‘(2) shall be liable to the employee for interest

12 on the amount so deducted at the underpayment

13 rate determined under section 6621 of the Internal

14 Revenue Code of 1986 from the last day by which

15 such amount was required to be so paid to the date

16 on which such amount is paid into the specified per17 sonal investment plan.

18 ‘‘(d) FAILURE BY ELIGIBLE SELF-EMPLOYED INDI19 VIDUAL TO MAKE TIMELY PAYMENTS TO PERSONAL IN20 VESTMENT PLAN.—If a personal investment plan con21 tribution is not paid by an eligible self-employed individual

22 to the Social Security Administration with respect to a

23 personal investment plan maintained by the individual

24 within the time prescribed by section 253, such individual
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1 shall be subject to a civil penalty of not to exceed 50 per2 cent of the amount of such contribution.

3 ‘‘(e) FAILURE BY TRUSTEE TO MAKE TIMELY

4 TRANSFERS.—If the balance in the personal investment

5 plan of a deceased individual is not transferred by the

6 trustee within the time prescribed by section 254—

7 ‘‘(1) the trustee shall be subject to a civil pen8 alty of not to exceed 50 percent of the amount of

9 the balance, and

10 ‘‘(2) shall be liable for interest on the balance

11 at the underpayment rate determined under section

12 6621 of the Internal Revenue Code of 1986 from the

13 last day by which such balance was required to be

14 so transferred to the date on which such balance is

15 transferred.

16 ‘‘(f) RULES FOR APPLICATION OF SECTION.—

17 ‘‘(1) PENALTIES ASSESSED BY COMMIS18 SIONER.—Any civil penalty assessed by this section

19 shall be imposed by the Commissioner of Social Se20 curity and collected in a civil action.

21 ‘‘(2) COMPROMISES.—The Commissioner may

22 compromise the amount of any civil penalty imposed

23 by this section.

24 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER25 TAIN CASES.—The Commissioner may waive the ap-
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1 plication of this section with respect to any failure

2 if the Commissioner determines that such failure is

3 due to reasonable cause and not to intentional dis4 regard of rules and regulations.

5 ‘‘PERSONAL INVESTMENT FUND

6 ‘‘SEC. 257. (a) ESTABLISHMENT.—There is hereby

7 established and maintained in the Treasury of the United

8 States a Personal Investment Fund in the same manner

9 as the Thrift Savings Fund under sections 8437, 8438,

10 and 8439 of title 5, United States Code.

11 ‘‘(b) PERSONAL INVESTMENT FUND BOARD.—

12 ‘‘(1) IN GENERAL.—There is established and

13 operated in the Social Security Administration a

14 Personal Investment Fund Board in the same man15 ner as the Federal Retirement Thrift Investment

16 Board under subchapter VII of chapter 84 of title

17 5, United States Code.

18 ‘‘(2) SPECIFIC INVESTMENT DUTIES.—The Per19 sonal Investment Fund shall be managed by the

20 Personal Investment Fund Board in the same man21 ner as the Thrift Savings Fund is managed under

22 subchapter VIII of chapter 84 of title 5, United

23 States Code.’’.

24 (2) AMOUNTS DEDUCTED TO BE SHOWN ON W–

25 2 STATEMENTS.—Subsection (a) of section 6051 of

26 the Internal Revenue Code of 1986 (relating to re-
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1 ceipts for employees), as amended by section

2 301(c)(3) of the Health Insurance Portability and

3 Accountability Act of 1986, is amended—

4 (A) by striking ‘‘and’’ at the end of para5 graph (10);

6 (B) by striking the period at the end of

7 paragraph (11) and inserting ‘‘, and’’; and

8 (C) by adding at the end the following new

9 paragraph:

10 ‘‘(12) the total amount deducted from the em11 ployee’s wages under a personal investment payroll

12 deduction plan established under part B of title II

13 of the Social Security Act.’’.

14 (3) EXEMPTION FROM ERISA REQUIRE15 MENTS.—Subsection (b) of section 4 of the Em16 ployee Retirement Income Security Act of 1974 (29

17 U.S.C. 1003(b)) is amended—

18 (A) by striking ‘‘or’’ at the end of para19 graph (4);

20 (B) by striking the period at the end of

21 paragraph (5) and inserting ‘‘; or’’; and

22 (C) by adding at the end the following new

23 paragraph:

24 ‘‘(6) such plan is a personal investment payroll

25 deduction plan established under part B of title II
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1 of the Social Security Act and does not provide for

2 employer contributions.’’.

3 (4) EFFECTIVE DATE AND NOTICE REQUIRE4 MENTS.—

5 (A) EFFECTIVE DATE.—The amendments

6 made by paragraph (1) (and any personal in7 vestment payroll deduction plan required there8 under) shall apply with respect to wages paid

9 after December 31, 1996, for pay periods end10 ing after such date and self-employment income

11 for taxable years beginning after such date.

12 (B) NOTICE REQUIREMENTS.—

13 (i) IN GENERAL.—Not later than Oc14 tober 1, 1997, the Commissioner of Social

15 Security shall—

16 (I) send to the last known ad17 dress of each eligible individual a de18 scription of the program established

19 by the amendments made by this sec20 tion, which shall be written in the

21 form of a pamphlet in language which

22 may be readily understood by the av23 erage worker,

24 (II) provide for toll-free access by

25 telephone from all localities in the
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1 United States to the Social Security

2 Administration through which individ3 uals may obtain information and an4 swers to questions regarding such pro5 gram, and

6 (III) provide information to the

7 media in all localities of the United

8 States about such program and such

9 toll-free access by telephone.

10 (ii) ELIGIBLE INDIVIDUAL.—For pur11 poses of this subparagraph, the term ‘‘eli12 gible individual’’ means an individual who,

13 as of the date of the pamphlet sent pursu14 ant to clause (i), is indicated within the

15 records of the Social Security Administra16 tion as—

17 (I) not having attained age 55,

18 and

19 (II) being credited with one or

20 more quarters of coverage under sec21 tion 213 of the Social Security Act.

22 (iii) MATTERS TO BE INCLUDED.—

23 The Commissioner shall include with the

24 pamphlet sent to each eligible individual

25 pursuant to clause (i)—
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1 (I) a statement of the number of

2 quarters of coverage indicated in the

3 records of the Social Security Admin4 istration as of the date of the descrip5 tion as credited to such individual

6 under section 213 of the Social Secu7 rity Act and the date as of which such

8 records may be considered accurate,

9 and

10 (II) the number for toll-free ac11 cess by telephone established by the

12 Commissioner pursuant to clause (i).

13 SEC. 3. PHASED IN INCREASE IN SOCIAL SECURITY RETIRE14 MENT AGES.

15 (a) NORMAL RETIREMENT AGE.—Section 216(l) of

16 the Social Security Act (42 U.S.C. 416(l) is amended—

17 (1) by striking subparagraphs (B), (C), (D),

18 and (E) of paragraph (1) and inserting the following

19 new subparagraphs:

20 ‘‘(B) with respect to an individual who attains

21 early retirement age (as determined under para22 graph (2)) after December 31, 1999, and before

23 January 1, 2029, 65 years of age plus two-twelfths

24 of the number of months in the period beginning

25 with January 2000 and ending with December of
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1 the year in which the individual attains early retire2 ment age (as so determined);

3 ‘‘(C) with respect to an individual who attains

4 early retirement age (as so determined) after De5 cember 31, 2028, 70 years of age; and

6 ‘‘(D) with respect to an individual who attains

7 early retirement age (as so determined) after De8 cember 31, 2029, 70 years of age plus one-twenty9 fourths of the number of months in the period be10 ginning with January 2030 and ending with Decem11 ber of the year in which the individual attains early

12 retirement age (as so determined).’’; and

13 (2) by striking paragraph (3).

14 (b) EARLY RETIREMENT AGE.—Section 216(l)(2) of

15 the Social Security Act (42 U.S.C. 416(l)(2)) is amended

16 to read as follows:

17 ‘‘(2) The term ‘early retirement age’ means—

18 ‘‘(A) except as otherwise provided in this para19 graph, age 62 in the case of an old-age, wife’s, or

20 husband’s insurance benefit, and age 60 in the case

21 of a widow’s or widower’s insurance benefit;

22 ‘‘(B)(i)(I) except as provided in clause (ii), with

23 respect to an individual who attains early retirement

24 age (as determined under subparagraph (A)) after

25 December 31, 1999, and before January 1, 2017, 62
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1 years of age plus two-twelfths of the number of

2 months in the period beginning with January 2000

3 and ending with December of the year in which the

4 individual attains early retirement age (as deter5 mined under subparagraph (A)),

6 ‘‘(II) with respect to an individual who attains

7 early retirement age (as so determined) after De8 cember 31, 2016, 65 years of age, and

9 ‘‘(III) with respect to an individual who attains

10 early retirement age (as so determined) after De11 cember 31, 2029, 65 years of age plus one-twenty12 fourths of the number of months in the period be13 ginning with January 2030 and ending with Decem14 ber of the year in which the individual attains early

15 retirement age (as determined under subparagraph

16 (A)); and

17 ‘‘(ii)(I) with respect to widow’s and widower’s

18 insurance benefits, 60 years of age plus two-twelfths

19 of the number of months in the period beginning

20 with January 2000 and ending with December of

21 the year in which the individual attains early retire22 ment age (as determined under subparagraph (A)),

23 ‘‘(II) with respect to such an individual who at24 tains early retirement age (as so determined) after

25 December 31, 2016, 63 years of age, and
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1 ‘‘(III) with respect to such an individual who

2 attains early retirement age (as so determined) after

3 December 31, 2029, 63 years of age plus one-twen4 ty-fourths of the number of months in the period be5 ginning with January 2030 and ending with Decem6 ber of the year in which the individual attains early

7 retirement age (as determined under subparagraph

8 (A)).’’.

9 (c) REDUCTION IN BENEFITS FOR EARLY RETIREES

10 MAINTAINED AT CURRENT LEVEL.—Section

11 202(q)(9)(A) of the Social Security Act (42 U.S.C.

12 402(q)(9)(A)) is amended by inserting ‘‘, but in no event

13 shall be greater than 30 percent’’ before the semicolon.

14 SEC. 4. LIMITATIONS ON COST-OF-LIVING ADJUSTMENTS.

15 (a) IN GENERAL.—

16 (1) REDUCTION IN INCREASES APPLIED TO

17 HIGHER PRIMARY INSURANCE AMOUNTS.—Section

18 215(i)(2)(A) of the Social Security Act (42 U.S.C.

19 415(i)(2)(A)) is amended—

20 (A) by redesignating clause (iii) as clause

21 (vii); and

22 (B) in clause (ii), by striking ‘‘The in23 crease shall’’ in the matter following subclause

24 (III) and all that follows through ‘‘Any in25 crease’’ and inserting the following:
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1 ‘‘(iii) With respect to the amounts described in sub2 clauses (I) and (III) of clause (ii), the increase shall be

3 derived by multiplying each of such amounts (including

4 each of those amounts as previously increased under this

5 subparagraph) by the applicable increase percentage.

6 ‘‘(iv) With respect to primary insurance amounts de7 scribed in subclause (II) of clause (ii), the increase shall

8 be derived by—

9 ‘‘(I) multiplying each of such amounts (includ10 ing each such amount as previously increased under

11 this subparagraph) by the applicable increase per12 centage,

13 ‘‘(II) determining among all such amounts as

14 increased under subclause (I) the greatest primary

15 insurance amount which is below the 30th percentile

16 of such amounts, and

17 ‘‘(III) reducing each primary insurance amount

18 as increased under subclause (I) to the sum of such

19 amount determined as if there had been no reduc20 tion in such amount under this subclause in any pre21 ceding year and the amount of the increase under

22 subclause (I) in the primary insurance amount de23 scribed in subclause (II).
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1 ‘‘(v) Any amount increased under clause (iii) or

2 clause (iv) which is not a multiple of $0.10 shall be de3 creased to the next lower multiple of $0.10.

4 ‘‘(vi) Any increase’’.

5 (2) CONFORMING AMENDMENT.—The last sen6 tence of section 215(a)(4) of such Act (42 U.S.C.

7 415(a)(4)) is amended, in subclause (I), by striking

8 ‘‘clause (iii) of subsection (i)(2)(A)’’ and inserting

9 ‘‘clause (vii) of subsection (i)(2)(A)’’.

10 (b) CONFORMING AMENDMENTS TO MAINTAIN CUR11 RENT LEVELS OF COST-OF-LIVING ADJUSTMENT UNDER

12 OTHER PROGRAMS.—

13 (1) SUPPLEMENTAL SECURITY INCOME FOR

14 THE AGED, BLIND, AND DISABLED.—Section

15 1617(a)(2) of the Social Security Act (42 U.S.C.

16 1382f(a)(2)) is amended by striking ‘‘by the same

17 percentage’’ and all that follows through ‘‘percent18 age,’’ and inserting the following: ‘‘by the applicable

19 increase percentage (within the meaning of section

20 215(i)(1)(C)) used in determining the amount by

21 which benefit amounts under title II are increased

22 for such month’’.

23 (2) SUPPLEMENTARY MEDICAL INSURANCE.—

24 Section 1839(a)(3)(B) of such Act (42 U.S.C.

25 1395r(a)(3)(B)) is amended by striking ‘‘by a per-
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1 centage’’ and all that follows through ‘‘November 1’’

2 and inserting the following: ‘‘by the applicable in3 crease percentage (within the meaning of section

4 215(i)(1)(C)) used in determining the amount by

5 which benefit amounts under title II are increased

6 for the month of December preceding the year of the

7 promulgation’’.

8 (3) CERTAIN VETERAN’S BENEFITS.—Section

9 3112 of title 38, United States Code, is amended—

10 (A) in subsection (a), by striking ‘‘by the

11 same percentage by which such benefit amounts

12 are increased’’ and inserting ‘‘by the applicable

13 increase percentage (within the meaning of sec14 tion 215(i)(1)(C) of such Act) used in deter15 mining the amount by which such benefit

16 amounts are increased’’; and

17 (B) in subsection (b)(1), by striking ‘‘by

18 the same percentage as the percentage by which

19 such benefit amounts are increased’’ and insert20 ing ‘‘by the applicable increase percentage

21 (within the meaning of section 215(i)(1)(C) of

22 such Act) used in determining the amount by

23 which such benefit amounts are increased’’.

24 (4) COST-OF-LIVING ADJUSTMENTS TO LIMITA25 TIONS ON BENEFITS AND CONTRIBUTIONS UNDER
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1 QUALIFIED PLANS.—Subsection (d) of section 415 of

2 the Internal Revenue Code of 1986 (relating to cost3 of-living adjustments) is amended by striking ‘‘sec4 tion 215(i)(2)(A)’’ and inserting ‘‘section

5 215(i)(2)(A)(iii)’’.

6 (c) AMENDMENT TO PRIOR APPLICABLE LAW.—Sec7 tion 215(i)(4) of the Social Security Act (42 U.S.C.

8 415(i)(4)) is amended by adding at the end the following

9 new sentence: ‘‘The Secretary shall provide by regulation

10 for the continued application of this subsection as in effect

11 in December 1978 as provided by the preceding provisions

12 of this paragraph and the amendments referred to therein.

13 Such regulations shall provide for the application of the

14 amendments to the preceding provisions of this subsection

15 made by section 4 of the Strengthening Social Security

16 Act of 1996 so as to have the same effect on the cor17 responding provisions of this subsection as in effect in De18 cember 1978 and applicable in accordance with this para19 graph.’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply with respect to adjustments under

22 section 215(i) of the Social Security Act effective within

23 months after the date of the enactment of this Act.
26

•S 2175 IS

1 SEC. 5. MODIFICATION OF CPI CALCULATION FOR SOCIAL

2 SECURITY COLAS.

3 Notwithstanding any other provision of title II of the

4 Social Security Act, with respect to calculations made

5 after December 31, 1996, with respect to any cost-of-liv6 ing calculation under such title, the Bureau of Labor Sta7 tistics of the Department of Labor shall reduce the annual

8 percentage change in the Consumer Price Indexes, as de9 termined without regard to this section, by .5 percentage

10 point.

11 SEC. 6. PHASED REDUCTION IN SPOUSAL BENEFITS OTHER

12 THAN SURVIVOR’S BENEFITS TO 33 PERCENT

13 OF PRIMARY INSURANCE AMOUNT.

14 (a) WIFE’S INSURANCE BENEFITS.—Section

15 202(b)(2) of the Social Security Act (42 U.S.C. 402(b)(2))

16 is amended to read as follows:

17 ‘‘(2)(A) Except as provided in subsection (q) and

18 paragraph (4) of this subsection, such wife’s insurance

19 benefit for each month shall be equal to the applicable per20 centage of the primary insurance amount of her husband

21 (or, in the case of a divorced wife, her former husband)

22 in connection with the calendar year in which such individ23 ual becomes eligible for such benefit, as specified in the

24 following table:
27

•S 2175 IS

‘‘If the calendar year in

which the individual becomes eligible is:

The applicable percentage shall

be:

Before calendar year 2000 ................................................ 50 percent

Calendar year 2000 ........................................................... 49 percent

Calendar year 2001 ........................................................... 48 percent

Calendar year 2002 ........................................................... 47 percent

Calendar year 2003 ........................................................... 46 percent

Calendar year 2004 ........................................................... 45 percent

Calendar year 2005 ........................................................... 44 percent

Calendar year 2006 ........................................................... 43 percent

Calendar year 2007 ........................................................... 42 percent

Calendar year 2008 ........................................................... 41 percent

Calendar year 2009 ........................................................... 40 percent

Calendar year 2010 ........................................................... 39 percent

Calendar year 2011 ........................................................... 38 percent

Calendar year 2012 ........................................................... 37 percent

Calendar year 2013 ........................................................... 36 percent

Calendar year 2014 ........................................................... 35 percent

Calendar year 2015 ........................................................... 34 percent

After calendar year 2015 .................................................. 33 percent.’’.

1 ‘‘(B) For purposes of subparagraph (A)—

2 ‘‘(i) an individual shall be treated as eligible for

3 a wife’s insurance benefit if such individual meets

4 the requirements of subparagraphs (B), (C), and

5 (D) of paragraph (1), and

6 ‘‘(ii) in determining when an individual becomes

7 eligible for a wife’s insurance benefit, any break in

8 eligibility of less than 12 consecutive months shall

9 not be taken into account.’’.

10 (b) HUSBAND’S INSURANCE BENEFITS.—Section

11 202(c)(3) of such Act (42 U.S.C. 402(c)(3)) is amended

12 to read as follows:

13 ‘‘(3)(A) Except as provided in subsection (q) and

14 paragraph (2) of this subsection, such husband’s insur15 ance benefit for each month shall be equal to the applica-
28

•S 2175 IS

1 ble percentage of the primary insurance amount of his wife

2 (or, in the case of a divorced husband, his former wife)

3 in connection with the calendar year in which such individ4 ual becomes eligible for such benefit, as specified in the

5 following table:

‘‘If the calendar year in

which the individual becomes eligible is:

The applicable percentage shall

be:

Before calendar year 2000 ................................................ 50 percent

Calendar year 2000 ........................................................... 49 percent

Calendar year 2001 ........................................................... 48 percent

Calendar year 2002 ........................................................... 47 percent

Calendar year 2003 ........................................................... 46 percent

Calendar year 2004 ........................................................... 45 percent

Calendar year 2005 ........................................................... 44 percent

Calendar year 2006 ........................................................... 43 percent

Calendar year 2007 ........................................................... 42 percent

Calendar year 2008 ........................................................... 41 percent

Calendar year 2009 ........................................................... 40 percent

Calendar year 2010 ........................................................... 39 percent

Calendar year 2011 ........................................................... 38 percent

Calendar year 2012 ........................................................... 37 percent

Calendar year 2013 ........................................................... 36 percent

Calendar year 2014 ........................................................... 35 percent

Calendar year 2015 ........................................................... 34 percent

After calendar year 2015 .................................................. 33 percent.’’.

6 ‘‘(B) For purposes of subparagraph (A)—

7 ‘‘(i) an individual shall be treated as eligible for

8 a husband’s insurance benefit if such individual

9 meets the requirements of subparagraphs (B), (C),

10 and (D) of paragraph (1), and

11 ‘‘(ii) in determining when an individual becomes

12 eligible for a husband’s insurance benefit, any break

13 in eligibility of less than 12 consecutive months shall

14 not be taken into account.’’.
29

•S 2175 IS

1 SEC. 7. COVERAGE OF NEWLY HIRED STATE AND LOCAL

2 EMPLOYEES.

3 (a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—

4 (1) IN GENERAL.—Paragraph (7) of section

5 210(a) of the Social Security Act (42 U.S.C.

6 410(a)(7)) is amended to read as follows:

7 ‘‘(7) Excluded State or local government em8 ployment (as defined in subsection (r));’’.

9 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

10 EMPLOYMENT.—

11 (A) IN GENERAL.—Section 210 of such

12 Act (42 U.S.C. 410) is amended by adding at

13 the end the following new subsection:

14 ‘‘Excluded State or Local Government Employment

15 ‘‘(r)(1) IN GENERAL.—The term ‘excluded State or

16 local government employment’ means any service per17 formed in the employ of a State, of any political subdivi18 sion thereof, or of any instrumentality of any one or more

19 of the foregoing which is wholly owned thereby, if—

20 ‘‘(A)(i) such service would be excluded from the

21 term ‘employment’ for purposes of this title if the

22 preceding provisions of this section as in effect in

23 March 1997 had remained in effect, and (ii) the re24 quirements of paragraph (2) are met with respect to

25 such service, or
30

•S 2175 IS

1 ‘‘(B) the requirements of paragraph (3) are met

2 with respect to such service.

3 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT WHICH

4 CONTINUES.—

5 ‘‘(A) IN GENERAL.—The requirements of this

6 paragraph are met with respect to service for any

7 employer if—

8 ‘‘(i) such service is performed by an indi9 vidual—

10 ‘‘(I) who was performing substantial

11 and regular service for remuneration for

12 that employer before January 1, 1997,

13 ‘‘(II) who is a bona fide employee of

14 that employer on December 31, 1996, and

15 ‘‘(III) whose employment relationship

16 with that employer was not entered into

17 for purposes of meeting the requirements

18 of this subparagraph, and

19 ‘‘(ii) the employment relationship with that

20 employer has not been terminated after Decem21 ber 31, 1996.

22 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND

23 INSTRUMENTALITIES.—For purposes of subpara24 graph (A), under regulations (consistent with regula-
31

•S 2175 IS

1 tions established under section 3121(t)(2)(B) of the

2 Internal Revenue Code of 1986)—

3 ‘‘(i) all agencies and instrumentalities of a

4 State (as defined in section 218(b)) or of the

5 District of Columbia shall be treated as a single

6 employer, and

7 ‘‘(ii) all agencies and instrumentalities of a

8 political subdivision of a State (as so defined)

9 shall be treated as a single employer and shall

10 not be treated as described in clause (i).

11 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

12 ‘‘(A) IN GENERAL.—The requirements of this

13 paragraph are met with respect to service if such

14 service is performed—

15 ‘‘(i) by an individual who is employed by a

16 State or political subdivision thereof to relieve

17 such individual from unemployment,

18 ‘‘(ii) in a hospital, home, or other institu19 tion by a patient or inmate thereof as an em20 ployee of a State or political subdivision thereof

21 or of the District of Columbia,

22 ‘‘(iii) by an individual, as an employee of

23 a State or political subdivision thereof or of the

24 District of Columbia, serving on a temporary
32

•S 2175 IS

1 basis in case of fire, storm, snow, earthquake,

2 flood, or other similar emergency,

3 ‘‘(iv) by any individual as an employee in4 cluded under section 5351(2) of title 5, United

5 States Code (relating to certain interns, student

6 nurses, and other student employees of hos7 pitals of the District of Columbia Government),

8 other than as a medical or dental intern or a

9 medical or dental resident in training,

10 ‘‘(v) by an election official or election

11 worker if the remuneration paid in a calendar

12 year for such service is less than $1,000 with

13 respect to service performed during 1997, and

14 the adjusted amount determined under sub15 paragraph (C) for any subsequent year with re16 spect to service performed during such subse17 quent year, except to the extent that service by

18 such election official or election worker is in19 cluded in employment under an agreement

20 under section 218, or

21 ‘‘(vi) by an employee in a position com22 pensated solely on a fee basis which is treated

23 pursuant to section 211(c)(2)(E) as a trade or

24 business for purposes of inclusion of such fees

25 in net earnings from self-employment.
33

•S 2175 IS

1 ‘‘(B) DEFINITIONS.—As used in this para2 graph, the terms ‘State’ and ‘political subdivision’

3 have the meanings given those terms in section

4 218(b).

5 ‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR

6 ELECTION OFFICIALS AND ELECTION WORKERS.—

7 For each year after 1997, the Secretary shall adjust

8 the amount referred to in subparagraph (A)(v) at

9 the same time and in the same manner as is pro10 vided under section 215(a)(1)(B)(ii) with respect to

11 the amounts referred to in section 215(a)(1)(B)(i),

12 except that—

13 ‘‘(i) for purposes of this subparagraph,

14 1994 shall be substituted for the calendar year

15 referred to in section 215(a)(1)(B)(ii)(II), and

16 ‘‘(ii) such amount as so adjusted, if not a

17 multiple of $100, shall be rounded to the next

18 higher multiple of $100 where such amount is

19 a multiple of $50 and to the nearest multiple

20 of $100 in any other case.

21 The Secretary shall determine and publish in the

22 Federal Register each adjusted amount determined

23 under this subparagraph not later than November 1

24 preceding the year for which the adjustment is

25 made.’’.
34

•S 2175 IS

1 (B) CONFORMING AMENDMENTS.—

2 (i) Subsection (k) of section 210 of

3 such Act (42 U.S.C. 410(k)) (relating to

4 covered transportation service) is repealed.

5 (ii) Section 210(p) of such Act (42

6 U.S.C. 410(p)) is amended—

7 (I) in paragraph (2), by striking

8 ‘‘service is performed’’ and all that

9 follows and inserting ‘‘service is serv10 ice described in subsection (r)(3)(A).’’;

11 and

12 (II) in paragraph (3)(A), by in13 serting ‘‘under subsection (a)(7) as in

14 effect in March 1997’’ after ‘‘section’’.

15 (3) ADDITIONAL AMENDMENTS RELATING TO

16 COVERAGE AGREEMENTS.—

17 (A) AUTHORIZATION FOR ALL STATES TO

18 EXTEND COVERAGE TO STATE AND LOCAL PO19 LICEMEN AND FIREMEN UNDER EXISTING COV20 ERAGE AGREEMENTS.—

21 (i) IN GENERAL.—Section 218(l) of

22 such Act (42 U.S.C. 418(l)) is amended—

23 (I) in paragraph (1), by striking

24 ‘‘(1)’’ after ‘‘(l)’’, and by striking ‘‘the

25 State of’’ and all that follows through
35

•S 2175 IS

1 ‘‘prior to the date of enactment of this

2 subsection’’ and inserting ‘‘a State en3 tered into pursuant to this section’’;

4 and

5 (II) by striking paragraph (2).

6 (ii) CONFORMING AMENDMENT.—Sec7 tion 218(d)(8)(D) of such Act (42 U.S.C.

8 418(d)(8)(D)) is amended by striking

9 ‘‘agreements with the States named in’’

10 and inserting ‘‘State agreements modified

11 as provided in’’.

12 (iii) EFFECTIVE DATE.—The amend13 ments made by this subparagraph shall

14 apply with respect to modifications filed by

15 States after the date of the enactment of

16 this Act.

17 (B) CONFORMING AMENDMENTS.—Section

18 218(c)(6) of such Act (42 U.S.C. 418(c)(6)) is

19 amended—

20 (i) by striking subparagraph (C);

21 (ii) by redesignating subparagraphs

22 (D) and (E) as subparagraphs (C) and

23 (D), respectively; and

24 (iii) by striking subparagraph (F) and

25 inserting the following:
36

•S 2175 IS

1 ‘‘(E) service which is included as employment

2 under section 210(a).’’

3 (4) AUTHORITY FOR STATES TO MODIFY COV4 ERAGE AGREEMENTS WITH RESPECT TO ELECTION

5 OFFICIALS AND ELECTION WORKERS.—Section

6 218(c)(8) of such Act (42 U.S.C. 418(c)(8)) is

7 amended—

8 (A) by striking ‘‘on or after January 1,

9 1968,’’ and inserting ‘‘at any time’’;

10 (B) by striking ‘‘$100’’ and inserting

11 ‘‘$1,000 with respect to service performed dur12 ing 1997, and the adjusted amount determined

13 under section 210(r)(3)(C) for any subsequent

14 year with respect to service performed during

15 such subsequent year’’; and

16 (C) by striking the last sentence and in17 serting the following new sentence: ‘‘Any modi18 fication of an agreement pursuant to this para19 graph shall be effective with respect to services

20 performed in and after the calendar year in

21 which the modification is mailed or delivered by

22 other means to the Secretary.’’.

23 (b) AMENDMENTS TO THE INTERNAL REVENUE

24 CODE OF 1986.—
37

•S 2175 IS

1 (1) IN GENERAL.—Paragraph (7) of section

2 3121(b) of the Internal Revenue Code of 1986 (re3 lating to employment) is amended to read as follows:

4 ‘‘(7) excluded State or local government em5 ployment (as defined in subsection (t));’’.

6 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

7 EMPLOYMENT.—Section 3121 of such Code is

8 amended by inserting after subsection (s) the follow9 ing new subsection:

10 ‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM11 PLOYMENT.—

12 ‘‘(1) IN GENERAL.—For purposes of this chap13 ter, the term ‘excluded State or local government

14 employment’ means any service performed in the

15 employ of a State, of any political subdivision there16 of, or of any instrumentality of any one or more of

17 the foregoing which is wholly owned thereby, if—

18 ‘‘(A)(i) such service would be excluded

19 from the term ‘employment’ for purposes of this

20 chapter if the provisions of subsection (b)(7) as

21 in effect in March 1997 had remained in effect,

22 and (ii) the requirements of paragraph (2) are

23 met with respect to such service, or

24 ‘‘(B) the requirements of paragraph (3)

25 are met with respect to such service.
38

•S 2175 IS

1 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

2 WHICH CONTINUES.—

3 ‘‘(A) IN GENERAL.—The requirements of

4 this paragraph are met with respect to service

5 for any employer if—

6 ‘‘(i) such service is performed by an

7 individual—

8 ‘‘(I) who was performing sub9 stantial and regular service for remu10 neration for that employer before Jan11 uary 1, 1997,

12 ‘‘(II) who is a bona fide employee

13 of that employer on December 31,

14 1996, and

15 ‘‘(III) whose employment rela16 tionship with that employer was not

17 entered into for purposes of meeting

18 the requirements of this subpara19 graph, and

20 ‘‘(ii) the employment relationship with

21 that employer has not been terminated

22 after December 31, 1996.

23 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES

24 AND INSTRUMENTALITIES.—For purposes of

25 subparagraph (A), under regulations—
39

•S 2175 IS

1 ‘‘(i) all agencies and instrumentalities

2 of a State (as defined in section 218(b) of

3 the Social Security Act) or of the District

4 of Columbia shall be treated as a single

5 employer, and

6 ‘‘(ii) all agencies and instrumentalities

7 of a political subdivision of a State (as so

8 defined) shall be treated as a single em9 ployer and shall not be treated as de10 scribed in clause (i).

11 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

12 ‘‘(A) IN GENERAL.—The requirements of

13 this paragraph are met with respect to service

14 if such service is performed—

15 ‘‘(i) by an individual who is employed

16 by a State or political subdivision thereof

17 to relieve such individual from unemploy18 ment,

19 ‘‘(ii) in a hospital, home, or other in20 stitution by a patient or inmate thereof as

21 an employee of a State or political subdivi22 sion thereof or of the District of Columbia,

23 ‘‘(iii) by an individual, as an employee

24 of a State or political subdivision thereof

25 or of the District of Columbia, serving on
40

•S 2175 IS

1 a temporary basis in case of fire, storm,

2 snow, earthquake, flood, or other similar

3 emergency,

4 ‘‘(iv) by any individual as an employee

5 included under section 5351(2) of title 5,

6 United States Code (relating to certain in7 terns, student nurses, and other student

8 employees of hospitals of the District of

9 Columbia Government), other than as a

10 medical or dental intern or a medical or

11 dental resident in training,

12 ‘‘(v) by an election official or election

13 worker if the remuneration paid in a cal14 endar year for such service is less than

15 $1,000 with respect to service performed

16 during 1997, and the adjusted amount de17 termined under section 210(r)(3)(C) of the

18 Social Security Act for any subsequent

19 year with respect to service performed dur20 ing such subsequent year, except to the ex21 tent that service by such election official or

22 election worker is included in employment

23 under an agreement under section 218 of

24 the Social Security Act, or
41

•S 2175 IS

1 ‘‘(vi) by an employee in a position

2 compensated solely on a fee basis which is

3 treated pursuant to section 1402(c)(2)(E)

4 as a trade or business for purposes of in5 clusion of such fees in net earnings from

6 self-employment.

7 ‘‘(B) DEFINITIONS.—As used in this para8 graph, the terms ‘State’ and ‘political subdivi9 sion’ have the meanings given those terms in

10 section 218(b) of the Social Security Act.’’.

11 (3) CONFORMING AMENDMENTS.—

12 (A) Subsection (j) of such section 3121

13 (relating to covered transportation service) is

14 repealed.

15 (B) Paragraph (2) of section 3121(u) of

16 such Code (relating to application of hospital

17 insurance tax to Federal, State, and local em18 ployment) is amended—

19 (i) in subparagraph (B), by striking

20 ‘‘service is performed’’ in clause (ii) and all

21 that follows through the end of such sub22 paragraph and inserting ‘‘service is service

23 described in subsection (t)(3)(A).’’; and
42

•S 2175 IS

1 (ii) in subparagraph (C)(i), by insert2 ing ‘‘under subsection (b)(7) as in effect in

3 March 1997’’ after ‘‘chapter’’.

4 (c) EFFECTIVE DATE.—Except as otherwise provided

5 in this section, the amendments made by this section shall

6 apply with respect to service performed after December

7 31, 1996.

8 SEC. 8. ADJUSTMENTS IN FORMULA FOR DETERMINING

9 PRIMARY INSURANCE AMOUNT.

10 (a) ADDITIONAL EARNINGS BRACKET.—Section

11 215(a)(1)(A) of the Social Security Act (42 U.S.C.

12 415(a)(1)(A)) is amended—

13 (1) in clause (ii), by striking ‘‘and’’;

14 (2) in clause (iii), by striking ‘‘clause (ii),’’ and

15 inserting the following: ‘‘clause (ii), but, in the case

16 of an individual who initially becomes eligible for

17 old-age or disability insurance benefits, or who dies

18 (before becoming eligible for such benefits), after

19 calendar year 2001, do not exceed the amount estab20 lished for purposes of this clause by subparagraph

21 (B), and’’; and

22 (3) by inserting after clause (iii) the following

23 new clause:

24 ‘‘(iv) in the case of an individual who initially

25 becomes eligible for old-age or disability insurance
43

•S 2175 IS

1 benefits, or who dies (before becoming eligible for

2 such benefits), after calendar year 2001, 10 percent

3 of the individual’s average indexed monthly earnings

4 to the extent that such earnings exceed the amount

5 established for purposes of clause (iii),’’.

6 (b) BEND POINT AMOUNTS.—Section 215(a)(1)(B)

7 of the Social Security Act (42 U.S.C. 415(a)(1)(B)) is

8 amended—

9 (1) in clause (ii), by inserting ‘‘and before

10 2002’’ after ‘‘1979’’ the first place it appears, and

11 by striking ‘‘by dividing—’’ and all that follows and

12 inserting ‘‘under clause (ix) of this subparagraph.’’;

13 (2) by redesignating clause (iii) as clause (xii);

14 (3) by inserting after clause (ii) the following

15 new clauses:

16 ‘‘(iii) For individuals who initially become eligible for

17 old-age or disability insurance benefits, or who die (before

18 becoming eligible for such benefits), in any calendar year

19 after 2001, the amount established for purposes of clause

20 (i) of subparagraph (A) shall be an amount equal to the

21 product of the following factors:

22 ‘‘(I) the amount established with respect to cal23 endar year 1979 under clause (i) of this subpara24 graph for purposes of clause (i) of subparagraph

25 (A), and
44

•S 2175 IS

1 ‘‘(II) the quotient obtained under clause (ix) of

2 this subparagraph.

3 ‘‘(iv) For individuals who initially become eligible for

4 old-age or disability insurance benefits, or who die (before

5 becoming eligible for such benefits), in any calendar year

6 after 1997 and before 2022, the amount established for

7 purposes of clause (ii) of subparagraph (A) shall be an

8 amount equal to the product of the following factors:

9 ‘‘(I) the amount established with respect to the

10 preceding calendar year under this subparagraph for

11 purposes of clause (ii) of subparagraph (A),

12 ‘‘(II) the quotient obtained under clause (x) of

13 this subparagraph, and

14 ‘‘(III) 0.98.

15 ‘‘(v) For individuals who initially become eligible for

16 old-age or disability insurance benefits, or who die (before

17 becoming eligible for such benefits), in any calendar year

18 after 2021, the amount established for purposes of clause

19 (ii) of subparagraph (A) shall be an amount equal to the

20 product of the following factors:

21 ‘‘(I) the amount established with respect to the

22 calendar year 2021 under clause (iv) of this sub23 paragraph for purposes of clause (ii) of subpara24 graph (A), and
45

•S 2175 IS

1 ‘‘(II) the quotient obtained under clause (xi) of

2 this subparagraph.

3 ‘‘(vi) For individuals who initially become eligible for

4 old-age or disability insurance benefits, or who die (before

5 becoming eligible for such benefits), in the calendar year

6 2002, the amount established for purposes of clause (iii)

7 of subparagraph (A) shall be an amount equal to the

8 quotient derived by dividing—

9 ‘‘(I) the amount established with respect to the

10 calendar year 2002 under clause (iv) of this sub11 paragraph for purposes of clause (ii) of subpara12 graph (A), by

‘‘(II) 0.9825 13 .

14 ‘‘(vii) For individuals who initially become eligible for

15 old-age or disability insurance benefits, or who die (before

16 becoming eligible for such benefits), in any calendar year

17 after 2002 and before 2022, the amount established for

18 purposes of clause (iii) of subparagraph (A) shall be an

19 amount equal to the product of the following factors:

20 ‘‘(I) the amount established with respect to the

21 preceding calendar year under this subparagraph for

22 purposes of clause (iii) of subparagraph (A),

23 ‘‘(II) the quotient obtained under clause (x) of

24 this subparagraph, and

25 ‘‘(III) 0.98.
46

•S 2175 IS

1 ‘‘(viii) For individuals who initially become eligible for

2 old-age or disability insurance benefits, or who die (before

3 becoming eligible for such benefits), in any calendar year

4 after 2021, the amount established for purposes of clause

5 (iii) of subparagraph (A) shall be an amount equal to the

6 product of the following factors:

7 ‘‘(I) the amount established with respect to cal8 endar year 2021 under clause (vii) of this subpara9 graph for purposes of clause (iii) of subparagraph

10 (A), and

11 ‘‘(II) the quotient obtained under clause (xi) of

12 this subparagraph.

13 ‘‘(ix) The quotient obtained under this clause is the

14 quotient obtained by dividing—

15 ‘‘(I) the deemed average total wages (as defined

16 in section 209(k)(1)) for the second calendar year

17 preceding the calendar year for which the determina18 tion is made, by

19 ‘‘(II) the average of the total wages (as defined

20 in regulations of the Secretary and computed with21 out regard to the limitations specified in section

22 209(a)(1)) reported to the Secretary of the Treasury

23 or his delegate for the calendar year 1977.

24 ‘‘(x) The quotient obtained under this clause is the

25 quotient obtained by dividing—
47

•S 2175 IS

1 ‘‘(I) the deemed average total wages (as defined

2 in section 209(k)(1)) for the second calendar year

3 preceding the calendar year for which the determina4 tion is made, by

5 ‘‘(II) the deemed average total wages (as de6 fined in section 209(k)(1)) for the third calendar

7 year preceding the calendar year for which the de8 termination is made.

9 ‘‘(xi) The quotient obtained under this clause is the

10 quotient obtained by dividing—

11 ‘‘(I) the deemed average total wages (as defined

12 in section 209(k)(1)) for the second calendar year

13 preceding the calendar year for which the determina14 tion is made, by

15 ‘‘(II) the average of the total wages (as defined

16 in regulations of the Secretary and computed with17 out regard to the limitations specified in section

18 209(a)(1)) reported to the Secretary of the Treasury

19 or his delegate for the calendar year 2020.’’; and

20 (4) in clause (xii) (as redesignated), by striking

21 ‘‘clause (ii)’’ and inserting ‘‘the preceding clauses of

22 this subparagraph’’.

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall apply with respect to individuals who ini25 tially become eligible (within the meaning of section
48

•S 2175 IS

1 215(a)(3)(B) of the Social Security Act) for old-age or dis2 ability insurance benefits under title II of the Social Secu3 rity Act, or who die (before becoming eligible for such ben4 efits), in any calendar year after 1997.

5 SEC. 9. REDIRECTION OF TAX REVENUES IN OBRA-93 TO

6 OASDI TRUST FUND.

7 Subsection (d) of section 13215 of the Omnibus

8 Budget Reconciliation Act of 1993 is amended by insert9 ing ‘‘, and ending before January 1, 1997’’ after ‘‘1993’’.

10 SEC. 10. ESTABLISHMENT OF THE EQUITIES FUND WITHIN

11 THE FEDERAL OLD-AGE AND SURVIVORS IN12 SURANCE TRUST FUND.

13 (a) EQUITIES FUND.—Section 201(d) of the Social

14 Security Act (42 U.S.C. 401(d)) is amended—

15 (1) in the second sentence, by striking ‘‘Such’’

16 and inserting ‘‘Subject to paragraph (2), such’’;

17 (2) in the third sentence, by striking ‘‘(1) on

18 original’’ and ‘‘(2) by purchase’’ inserting ‘‘(A) on

19 original’’ and ‘‘(B) by purchase’’, respectively;

20 (3) by inserting ‘‘(1)’’ after ‘‘(d)’’; and

21 (4) by adding at the end the following new

22 paragraph:

23 ‘‘(2)(A) There is hereby established within the Fed24 eral Old-Age and Survivors Insurance Trust Fund (here25 after in this paragraph referred to as the ‘Trust Fund’)
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•S 2175 IS

1 an Equities Fund. Investment by the Managing Trustee

2 of the portion of the Trust Fund consisting of amounts

3 held in the Equities Fund may be made only in a portfolio

4 designed to replicate the performance of the index selected

5 under subparagraph (B). The portfolio shall be designed

6 such that, to the extent practicable, the percentage of the

7 Equities Fund that is invested in each stock is the same

8 as the percentage determined by dividing the aggregate

9 market value of all shares of that stock by the aggregate

10 market value of all shares of all stocks included in such

11 index.

12 ‘‘(B) The Managing Trustee shall select an index

13 which is a commonly recognized index comprised of com14 mon stock the aggregate market value of which is a rea15 sonably complete representation of the United States eq16 uity markets.

17 ‘‘(C) The amounts of the Trust Fund held by the Eq18 uities Fund shall consist of amounts deposited in the Eq19 uities Fund under section 10(c) of the Strengthening So20 cial Security Act of 1996 and such amounts as may be

21 appropriated to, or deposited in, the Equities Fund as

22 hereafter provided in this section.

23 ‘‘(D) Investment by the Managing Trustee of the

24 Trust Fund of amounts in the Equities Fund shall be sub25 ject to guidelines and procedures prescribed by the Per-
50

•S 2175 IS

1 sonal Investment Fund Board pursuant to subsection (n).

2 The Managing Trustee may carry out the functions with

3 respect to investment of amounts in the Equities Fund

4 in a manner which is not in accordance with such guide5 lines and procedures only if such functions are otherwise

6 carried out in accordance with the requirements of this

7 paragraph.’’.

8 (b) CREDITING OF INCOME AND PROCEEDS FROM

9 INVESTMENT IN EQUITIES.—Section 201(f) of the Social

10 Security Act (42 U.S.C. 401(f)) is amended by adding at

11 the end the following new sentence: ‘‘The income on, and

12 proceeds from the sale or redemption of, equities held by

13 the Equities Fund in the Federal Old-Age and Survivors

14 Insurance Trust Fund shall be credited to and form a part

15 of the Equities Fund.’’.

16 (c) DEPOSITS TO EQUITIES FUND.—

17 (1) IN GENERAL.—There is transferred on Oc18 tober 1 of 1997, and each of the succeeding 14 cal19 endar years, to the Equities Fund, from amounts

20 otherwise available in the Federal Old-Age and Sur21 vivors Insurance Trust Fund, an amount equal to

22 the applicable percentage of the Trust Fund.

23 (2) DETERMINATIONS AND ADJUSTMENTS.—

24 (A) APPLICABLE PERCENTAGE.—The Per25 sonal Investment Fund Board shall determine
51

•S 2175 IS

1 the applicable percentage for each fiscal year

2 under paragraph (1), such that—

3 (i) a gradual phase-in occurs during

4 the 15-year period described in paragraph

5 (1), and

6 (ii) such percentage shall not exceed

7 25 percent for fiscal year 2012.

8 (B) TRANSFERS.—Transfers under para9 graph (1) shall be made by the Secretary of the

10 Treasury on the basis of estimates by the Sec11 retary. Proper adjustments shall be made in

12 amounts subsequently appropriated to the Eq13 uities Fund to the extent prior estimates were

14 in excess of or were less than the actual

15 amounts.

16 (d) EFFECTIVE DATE.—The amendments made by

17 this section shall take effect on October 1, 1997, and shall

18 apply with respect to fiscal years beginning on or after

19 such date.

Æ