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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 2175 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Strengthening Social Security Act of 
1996''.

SEC. 2. PORTION OF SOCIAL SECURITY TAXES ON EMPLOYEES DEPOSITED INTO 
              PERSONAL INVESTMENT PLANS.

    (a) Dedication of Employee Taxes and Self-Employment Taxes.--
            (1) Tax on employees.--Subsection (a) of section 3101 of 
        the Internal Revenue Code of 1986 (relating to OASDI tax on 
        employees) is amended--
                    (A) by striking the period at the end of the table 
                and inserting a semicolon; and
                    (B) by adding after and below the table the 
                following:
``except that, in the case of an eligible employee (as defined in 
section 255(3) of the Social Security Act), the rate of tax under this 
subsection shall be 4.2 percent with respect to wages paid on or after 
December 31, 1996, for pay periods ending after such date.''.
            (2) Self-employment tax.--Subsection (a) of section 1401 of 
        such Code (relating to OASDI tax on self-employment income) is 
        amended--
                    (A) by striking the period at the end of the table 
                and inserting a semicolon; and
                    (B) by adding after and below the table the 
                following:
``except that, in the case of an eligible self-employed individual (as 
defined in section 255(4) of the Social Security Act), the rate of tax 
under this subsection shall be 10.4 percent of the amount of the self-
employment income in the case of a taxable year beginning after 
December 31, 1996.''.
            (3) Effective dates.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by this subsection 
                shall apply to remuneration paid after December 31, 
                1996.
                    (B) Self-employment tax.--The amendments made by 
                paragraph (2) shall apply to taxable years beginning 
                after December 31, 1996.
    (b) Personal Investment Plans.--
            (1) In general.--Title II of the Social Security Act is 
        amended--
                    (A) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';

        and
                    (B) by adding at the end the following new part:

                  ``Part B--Personal Investment Plans

             ``personal investment payroll deduction plans

    ``Sec. 251. (a) In General.--Each person who is a covered employer 
for a calendar year shall have in effect a personal investment payroll 
deduction plan for such calendar year for such person's eligible 
employees.
    ``(b) Requirements.--For purposes of this part, the term `personal 
investment payroll deduction plan' means a written plan of an employer 
if--
            ``(1) the plan applies only with respect to wages of 
        eligible employees,
            ``(2) under such plan, the personal investment plan 
        contributions will be deducted from the employee's wages and 
        paid to the Social Security Administration with respect to a 
        personal investment plan designated in accordance with section 
        252(a),
            ``(3) under such plan, the employer is required to pay the 
        amount so deducted with respect to the specified personal 
        investment plan within 10 business days after the payment of 
        the wages from which the amount was deducted,
            ``(4) the employer receives no compensation for the cost of 
        administering such plan, and
            ``(5) the employer does not make any endorsement with 
        respect to any plan.
    ``(c) Amounts Deducted May Be Accumulated by Employer in Certain 
Cases.--If, under the terms of a personal investment plan designated 
under section 252(a), contributions below a specified amount will not 
be accepted, the requirements of subsection (b)(2) shall be treated as 
met if amounts deducted from the wages of such employee are accumulated 
by the employer and paid to such plan not later than 10 business days 
after the first day on which the accumulated amount exceeds such 
specified amount.

``designation of personal investment plans under payroll deduction plan

    ``Sec. 252. (a) In General.--Except as provided in subsection (b), 
the personal investment plan to which the personal investment plan 
contributions with respect to any employee are required to be paid 
under section 251 shall be a personal investment plan designated by the 
employee to the employer not later than 10 business days after the date 
on which the employee becomes an employee of such employer. Any such 
designation shall be made in such form and manner as may be prescribed 
in regulations of the Commissioner of Social Security.
    ``(b) Designation in Absence of Timely Designation by Employee.--In 
any case in which no timely designation of the personal investment plan 
is made, the employer shall make the designation of the personal 
investment plan in accordance with regulations of the Commissioner of 
Social Security.

              ``participation by self-employed individuals

    ``Sec. 253. (a) In General.--Each eligible self-employed individual 
who receives self-employment income in any taxable year beginning after 
December 31, 1996, shall, in such form and manner as shall be 
prescribed in regulations of the Commissioner of Social Security, 
deposit with the Social Security Administration with respect to a 
personal investment plan maintained by such individual the personal 
investment plan contribution for such taxable year. Such deposit shall 
be made within 10 business days after the receipt by such individual of 
such self-employment income.
    ``(b) Amounts Payable May Be Accumulated in Certain Cases.--If, 
under the terms of a personal investment plan maintained under 
subsection (a), contributions below a specified amount will not be 
accepted, the requirements of subsection (a) shall be treated as met if 
amounts otherwise payable under subsection (a) are accumulated by the 
individual and paid to such plan not later than 10 business days after 
the first day on which the accumulated amount exceeds such specified 
amount.

  ``designation of plans of surviving spouses and surviving divorced 
                                spouses

    ``Sec. 254. (a) In General.--Except as otherwise provided in this 
section, in the case of a deceased individual with respect to whom a 
personal investment plan was established and maintained pursuant to 
section 252 or 253, the trustee of such plan shall transfer the balance 
in such plan to a personal investment plan maintained by an eligible 
survivor if such plan is designated by the eligible survivor to the 
trustee not later than 20 business days after the date of such 
individual's death. Any such designation shall be made in such form and 
manner as may be prescribed in regulations of the Commissioner of 
Social Security.
    ``(b) Exception In Case of Written Consent To Transfer to Another 
Beneficiary.--In any case in which the eligible survivor of a deceased 
individual has consented in writing to a transfer by such individual of 
the balance in such individual's personal investment plan to another 
beneficiary, the trustee of such plan shall transfer the balance in 
such plan to such beneficiary within the period of 20 business days 
following the date of such individual's death.
    ``(c) Designation in Absence of Timely Designation or Consent by 
Eligible Survivor.--In any case in which, upon the expiration of the 
20-day period described in subsection (a), there is an eligible 
survivor but no timely designation is made by the eligible survivor 
under subsection (a) and no consent has been made pursuant to 
subsection (b), the trustee shall make the designation of the personal 
investment plan under subsection (a) on behalf of such eligible 
survivor, in accordance with regulations of the Commissioner of Social 
Security.
    ``(d) Disposition of Plan Balance Where No Eligible Survivor 
Exists.--In any case in which, upon the expiration of the 20-day period 
described in subsection (a), no timely designation under subsection (c) 
has been made and there is no eligible survivor, the trustee of the 
deceased individual's plan shall transfer the balance in such plan to 
the estate of the deceased individual.
    ``(e) Period for Transfer by Trustee.--In the case of a transfer by 
a trustee under subsection (a), (c), or (d), the trustee shall transfer 
the balance in the personal investment plan of the deceased individual 
within the period of 20 business days following the expiration of the 
20-day period described in such subsection.

                             ``definitions

    ``Sec. 255. For purposes of this part--
            ``(1) Personal investment plan.--The term `personal 
        investment plan' means--
                    ``(A) any personal investment retirement plan in 
                the Personal Investment Fund (established under section 
                257) which is administered by the Personal Investment 
                Board, or
                    ``(B) any individual retirement plan (as defined in 
                section 7701(a)(37) of the Internal Revenue Code of 
                1986) which is administered or issued by a bank or 
                other person referred to in section 408(a)(2) of such 
                Code,
        under terms which restrict deposits to personal investment plan 
        contributions made to the plan pursuant to section 251 or 253 
        and transfers made to the plan pursuant to section 254, and 
        under which distributions may only be made on or after the date 
        on which the individual attains age 59\1/2\, made to a 
        beneficiary (or to the estate of the individual) on or after 
        the death of the individual, or attributable to the 
        individual's becoming disabled within the meaning of section 
        223(d).
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in his employ to whom 
        wages are paid by such person during such calendar year.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, in connection with any person who is a covered employer 
        for any calendar year beginning after December 31, 1996, any 
        individual--
                    ``(A) with respect to whose employment by such 
                employer during such calendar year there is imposed an 
                excise tax under section 3111 of the Internal Revenue 
                Code of 1986, and
                    ``(B) who does not attain the age of 55 years 
                during such calendar year.
            ``(4) Eligible self-employed individual.--The term 
        `eligible self-employed individual' means any individual--
                    ``(A) on whose self-employment income for a taxable 
                year beginning after December 31, 1996, there is 
                imposed a tax under section 1401(a) of the Internal 
                Revenue Code of 1986, and
                    ``(B) who does not attain the age of 55 years 
                during such taxable year.
            ``(5) Personal investment plan contribution.--The term 
        `personal investment plan contribution' means--
                    ``(A) with respect to any eligible employee of a 
                covered employer, an amount equal to 2 percent of the 
                wages received by such employee with respect to 
                employment by such employer, and
                    ``(B) with respect to the self-employment income of 
                an individual for any taxable year, an amount equal to 
                2 percent of such income for such taxable year.
            ``(6) Eligible survivor.--The term `eligible survivor' of a 
        deceased individual means such individual's widow or, if there 
        is no such widow, such individual's last surviving divorced 
        wife or surviving divorced husband. Such term shall not include 
        any such surviving divorced wife or surviving divorced husband 
        who is married on the date of the deceased individual's death.
            ``(7) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.

                              ``penalties

    ``Sec. 256. (a) Failure To Establish Personal Investment Payroll 
Deduction Plan.--Any covered employer who fails to meet the 
requirements of section 251 for any calendar year shall be subject to a 
civil penalty of not to exceed the greater of--
            ``(1) $5,000, or
            ``(2) $100 for each eligible employee of such employer as 
        of the beginning of such calendar year.
    ``(b) Failure To Make Deductions Required Under Plan.--Any covered 
employer who fails to deduct an amount from the wages of an eligible 
employee in accordance with a personal investment payroll deduction 
plan shall be subject to a civil penalty of not to exceed $500 for each 
such failure.
    ``(c) Failure by Employer To Make Timely Payments to Personal 
Investment Plan.--If an amount deducted from the wages of an eligible 
employee under a social security payroll deduction plan is not paid to 
the Social Security Administration with respect to the specified 
personal investment plan within the time prescribed by section 251--
            ``(1) the employer shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount so deducted, and
            ``(2) shall be liable to the employee for interest on the 
        amount so deducted at the underpayment rate determined under 
        section 6621 of the Internal Revenue Code of 1986 from the last 
        day by which such amount was required to be so paid to the 
date on which such amount is paid into the specified personal 
investment plan.
    ``(d) Failure by Eligible Self-Employed Individual To Make Timely 
Payments to Personal Investment Plan.--If a personal investment plan 
contribution is not paid by an eligible self-employed individual to the 
Social Security Administration with respect to a personal investment 
plan maintained by the individual within the time prescribed by section 
253, such individual shall be subject to a civil penalty of not to 
exceed 50 percent of the amount of such contribution.
    ``(e) Failure by Trustee To Make Timely Transfers.--If the balance 
in the personal investment plan of a deceased individual is not 
transferred by the trustee within the time prescribed by section 254--
            ``(1) the trustee shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount of the balance, and
            ``(2) shall be liable for interest on the balance at the 
        underpayment rate determined under section 6621 of the Internal 
        Revenue Code of 1986 from the last day by which such balance 
        was required to be so transferred to the date on which such 
        balance is transferred.
    ``(f) Rules for Application of Section.--
            ``(1) Penalties assessed by commissioner.--Any civil 
        penalty assessed by this section shall be imposed by the 
        Commissioner of Social Security and collected in a civil 
        action.
            ``(2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            ``(3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.

                       ``personal investment fund

    ``Sec. 257. (a) Establishment.--There is hereby established and 
maintained in the Treasury of the United States a Personal Investment 
Fund in the same manner as the Thrift Savings Fund under sections 8437, 
8438, and 8439 of title 5, United States Code.
    ``(b) Personal Investment Fund Board.--
            ``(1) In general.--There is established and operated in the 
        Social Security Administration a Personal Investment Fund Board 
        in the same manner as the Federal Retirement Thrift Investment 
        Board under subchapter VII of chapter 84 of title 5, United 
        States Code.
            ``(2) Specific investment duties.--The Personal Investment 
        Fund shall be managed by the Personal Investment Fund Board in 
        the same manner as the Thrift Savings Fund is managed under 
        subchapter VIII of chapter 84 of title 5, United States 
        Code.''.
            (2) Amounts deducted to be shown on w-2 statements.--
        Subsection (a) of section 6051 of the Internal Revenue Code of 
        1986 (relating to receipts for employees), as amended by 
        section 301(c)(3) of the Health Insurance Portability and 
        Accountability Act of 1986, is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (10);
                    (B) by striking the period at the end of paragraph 
                (11) and inserting ``, and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(12) the total amount deducted from the employee's wages 
        under a personal investment payroll deduction plan established 
        under part B of title II of the Social Security Act.''.
            (3) Exemption from erisa requirements.--Subsection (b) of 
        section 4 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1003(b)) is amended--
                    (A) by striking ``or'' at the end of paragraph (4);
                    (B) by striking the period at the end of paragraph 
                (5) and inserting ``; or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(6) such plan is a personal investment payroll deduction 
        plan established under part B of title II of the Social 
        Security Act and does not provide for employer 
        contributions.''.
            (4) Effective date and notice requirements.--
                    (A) Effective date.--The amendments made by 
                paragraph (1) (and any personal investment payroll 
                deduction plan required thereunder) shall apply with 
                respect to wages paid after December 31, 1996, for pay 
                periods ending after such date and self-employment 
                income for taxable years beginning after such date.
                    (B) Notice requirements.--
                            (i) In general.--Not later than October 1, 
                        1997, the Commissioner of Social Security 
                        shall--
                                    (I) send to the last known address 
                                of each eligible individual a 
                                description of the program established 
                                by the amendments made by this section, 
                                which shall be written in the form of a 
                                pamphlet in language which may be 
                                readily understood by the average 
                                worker,
                                    (II) provide for toll-free access 
                                by telephone from all localities in the 
                                United States to the Social Security 
                                Administration through which 
                                individuals may obtain information and 
                                answers to questions regarding such 
                                program, and
                                    (III) provide information to the 
                                media in all localities of the United 
                                States about such program and such 
                                toll-free access by telephone.
                            (ii) Eligible individual.--For purposes of 
                        this subparagraph, the term ``eligible 
                        individual'' means an individual who, as of the 
                        date of the pamphlet sent pursuant to clause 
                        (i), is indicated within the records of the 
                        Social Security Administration as--
                                    (I) not having attained age 55, and
                                    (II) being credited with one or 
                                more quarters of coverage under section 
                                213 of the Social Security Act.
                            (iii) Matters to be included.--The 
                        Commissioner shall include with the pamphlet 
                        sent to each eligible individual pursuant to 
                        clause (i)--
                                    (I) a statement of the number of 
                                quarters of coverage indicated in the 
                                records of the Social Security 
                                Administration as of the date of the 
                                description as credited to such 
                                individual under section 213 of the 
                                Social Security Act and the date as of 
                                which such records may be considered 
                                accurate, and
                                    (II) the number for toll-free 
                                access by telephone established by the 
                                Commissioner pursuant to clause (i).

SEC. 3. PHASED IN INCREASE IN SOCIAL SECURITY RETIREMENT AGES.

    (a) Normal Retirement Age.--Section 216(l) of the Social Security 
Act (42 U.S.C. 416(l) is amended--
            (1) by striking subparagraphs (B), (C), (D), and (E) of 
        paragraph (1) and inserting the following new subparagraphs:
            ``(B) with respect to an individual who attains early 
        retirement age (as determined under paragraph (2)) after 
        December 31, 1999, and before January 1, 2029, 65 years of age 
        plus two-twelfths of the number of months in the period 
        beginning with January 2000 and ending with December of the 
        year in which the individual attains early retirement age (as 
        so determined);
            ``(C) with respect to an individual who attains early 
        retirement age (as so determined) after December 31, 2028, 70 
        years of age; and
            ``(D) with respect to an individual who attains early 
        retirement age (as so determined) after December 31, 2029, 70 
        years of age plus one-twenty-fourths of the number of months in 
        the period beginning with January 2030 and ending with December 
        of the year in which the individual attains early retirement 
        age (as so determined).''; and
            (2) by striking paragraph (3).
    (b) Early Retirement Age.--Section 216(l)(2) of the Social Security 
Act (42 U.S.C. 416(l)(2)) is amended to read as follows:
    ``(2) The term `early retirement age' means--
            ``(A) except as otherwise provided in this paragraph, age 
        62 in the case of an old-age, wife's, or husband's insurance 
        benefit, and age 60 in the case of a widow's or widower's 
        insurance benefit;
            ``(B)(i)(I) except as provided in clause (ii), with respect 
        to an individual who attains early retirement age (as 
        determined under subparagraph (A)) after December 31, 1999, and 
        before January 1, 2017, 62 years of age plus two-twelfths of 
        the number of months in the period beginning with January 2000 
        and ending with December of the year in which the individual 
        attains early retirement age (as determined under subparagraph 
        (A)),
            ``(II) with respect to an individual who attains early 
        retirement age (as so determined) after December 31, 2016, 65 
        years of age, and
            ``(III) with respect to an individual who attains early 
        retirement age (as so determined) after December 31, 2029, 65 
        years of age plus one-twenty-fourths of the number of months in 
        the period beginning with January 2030 and ending with December 
        of the year in which the individual attains early retirement 
        age (as determined under subparagraph (A)); and
            ``(ii)(I) with respect to widow's and widower's insurance 
        benefits, 60 years of age plus two-twelfths of the number of 
        months in the period beginning with January 2000 and ending 
        with December of the year in which the individual attains early 
        retirement age (as determined under subparagraph (A)),
            ``(II) with respect to such an individual who attains early 
        retirement age (as so determined) after December 31, 2016, 63 
        years of age, and
            ``(III) with respect to such an individual who attains 
        early retirement age (as so determined) after December 31, 
        2029, 63 years of age plus one-twenty-fourths of the number of 
        months in the period beginning with January 2030 and ending 
        with December of the year in which the individual attains early 
        retirement age (as determined under subparagraph (A)).''.
    (c) Reduction in Benefits for Early Retirees Maintained at Current 
Level.--Section 202(q)(9)(A) of the Social Security Act (42 U.S.C. 
402(q)(9)(A)) is amended by inserting ``, but in no event shall be 
greater than 30 percent'' before the semicolon.

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

    (a) In General.--
            (1) Reduction in increases applied to higher primary 
        insurance amounts.--Section 215(i)(2)(A) of the Social Security 
        Act (42 U.S.C. 415(i)(2)(A)) is amended--
                    (A) by redesignating clause (iii) as clause (vii); 
                and
                    (B) in clause (ii), by striking ``The increase 
                shall'' in the matter following subclause (III) and all 
                that follows through ``Any increase'' and inserting the 
                following:
    ``(iii) With respect to the amounts described in subclauses (I) and 
(III) of clause (ii), the increase shall be derived by multiplying each 
of such amounts (including each of those amounts as previously 
increased under this subparagraph) by the applicable increase 
percentage.
    ``(iv) With respect to primary insurance amounts described in 
subclause (II) of clause (ii), the increase shall be derived by--
            ``(I) multiplying each of such amounts (including each such 
        amount as previously increased under this subparagraph) by the 
        applicable increase percentage,
            ``(II) determining among all such amounts as increased 
        under subclause (I) the greatest primary insurance amount which 
        is below the 30th percentile of such amounts, and
            ``(III) reducing each primary insurance amount as increased 
        under subclause (I) to the sum of such amount determined as if 
        there had been no reduction in such amount under this subclause 
        in any preceding year and the amount of the increase under 
        subclause (I) in the primary insurance amount described in 
        subclause (II).
    ``(v) Any amount increased under clause (iii) or clause (iv) which 
is not a multiple of $0.10 shall be decreased to the next lower 
multiple of $0.10.
    ``(vi) Any increase''.
            (2) Conforming amendment.--The last sentence of section 
        215(a)(4) of such Act (42 U.S.C. 415(a)(4)) is amended, in 
        subclause (I), by striking ``clause (iii) of subsection 
        (i)(2)(A)'' and inserting ``clause (vii) of subsection 
        (i)(2)(A)''.
    (b) Conforming Amendments To Maintain Current Levels of Cost-of-
Living Adjustment Under Other Programs.--
            (1) Supplemental security income for the aged, blind, and 
        disabled.--Section 1617(a)(2) of the Social Security Act (42 
        U.S.C. 1382f(a)(2)) is amended by striking ``by the same 
        percentage'' and all that follows through ``percentage,'' and 
        inserting the following: ``by the applicable increase 
        percentage (within the meaning of section 215(i)(1)(C)) used in 
        determining the amount by which benefit amounts under title II 
        are increased for such month''.
            (2) Supplementary medical insurance.--Section 1839(a)(3)(B) 
        of such Act (42 U.S.C. 1395r(a)(3)(B)) is amended by striking 
        ``by a percentage'' and all that follows through ``November 1'' 
        and inserting the following: ``by the applicable increase 
        percentage (within the meaning of section 215(i)(1)(C)) used in 
        determining the amount by which benefit amounts under title II 
        are increased for the month of December preceding the year of 
        the promulgation''.
            (3) Certain veteran's benefits.--Section 3112 of title 38, 
        United States Code, is amended--
                    (A) in subsection (a), by striking ``by the same 
                percentage by which such benefit amounts are 
                increased'' and inserting ``by the applicable increase 
                percentage (within the meaning of section 215(i)(1)(C) 
                of such Act) used in determining the amount by which 
                such benefit amounts are increased''; and
                    (B) in subsection (b)(1), by striking ``by the same 
                percentage as the percentage by which such benefit 
                amounts are increased'' and inserting ``by the 
                applicable increase percentage (within the meaning of 
                section 215(i)(1)(C) of such Act) used in determining 
                the amount by which such benefit amounts are 
                increased''.
            (4) Cost-of-living adjustments to limitations on benefits 
        and contributions under qualified plans.--Subsection (d) of 
        section 415 of the Internal Revenue Code of 1986 (relating to 
        cost-of-living adjustments) is amended by striking ``section 
        215(i)(2)(A)'' and inserting ``section 215(i)(2)(A)(iii)''.
    (c) Amendment to Prior Applicable Law.--Section 215(i)(4) of the 
Social Security Act (42 U.S.C. 415(i)(4)) is amended by adding at the 
end the following new sentence: ``The Secretary shall provide by 
regulation for the continued application of this subsection as in 
effect in December 1978 as provided by the preceding provisions of this 
paragraph and the amendments referred to therein. Such regulations 
shall provide for the application of the amendments to the preceding 
provisions of this subsection made by section 4 of the Strengthening 
Social Security Act of 1996 so as to have the same effect on the 
corresponding provisions of this subsection as in effect in December 
1978 and applicable in accordance with this paragraph.''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to adjustments under section 215(i) of the Social 
Security Act effective within months after the date of the enactment of 
this Act.

SEC. 5. MODIFICATION OF CPI CALCULATION FOR SOCIAL SECURITY COLAS.

    Notwithstanding any other provision of title II of the Social 
Security Act, with respect to calculations made after December 31, 
1996, with respect to any cost-of-living calculation under such title, 
the Bureau of Labor Statistics of the Department of Labor shall reduce 
the annual percentage change in the Consumer Price Indexes, as 
determined without regard to this section, by .5 percentage point.

SEC. 6. PHASED REDUCTION IN SPOUSAL BENEFITS OTHER THAN SURVIVOR'S 
              BENEFITS TO 33 PERCENT OF PRIMARY INSURANCE AMOUNT.

    (a) Wife's Insurance Benefits.--Section 202(b)(2) of the Social 
Security Act (42 U.S.C. 402(b)(2)) is amended to read as follows:
    ``(2)(A) Except as provided in subsection (q) and paragraph (4) of 
this subsection, such wife's insurance benefit for each month shall be 
equal to the applicable percentage of the primary insurance amount of 
her husband (or, in the case of a divorced wife, her former husband) in 
connection with the calendar year in which such individual becomes 
eligible for such benefit, as specified in the following table:

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        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.''.
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        wife's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a wife's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.
    (b) Husband's Insurance Benefits.--Section 202(c)(3) of such Act 
(42 U.S.C. 402(c)(3)) is amended to read as follows:
    ``(3)(A) Except as provided in subsection (q) and paragraph (2) of 
this subsection, such husband's insurance benefit for each month shall 
be equal to the applicable percentage of the primary insurance amount 
of his wife (or, in the case of a divorced husband, his former wife) in 
connection with the calendar year in which such individual becomes 
eligible for such benefit, as specified in the following table:

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        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.''.
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        husband's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a husband's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.

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

    (a) Amendments to the Social Security Act.--
            (1) In general.--Paragraph (7) of section 210(a) of the 
        Social Security Act (42 U.S.C. 410(a)(7)) is amended to read as 
        follows:
            ``(7) Excluded State or local government employment (as 
        defined in subsection (r));''.
            (2) Excluded state or local government employment.--
                    (A) In general.--Section 210 of such Act (42 U.S.C. 
                410) is amended by adding at the end the following new 
                subsection:

            ``Excluded State or Local Government Employment

    ``(r)(1) In general.--The term `excluded State or local government 
employment' means any service performed in the employ of a State, of 
any political subdivision thereof, or of any instrumentality of any one 
or more of the foregoing which is wholly owned thereby, if--
            ``(A)(i) such service would be excluded from the term 
        `employment' for purposes of this title if the preceding 
        provisions of this section as in effect in March 1997 had 
        remained in effect, and (ii) the requirements of paragraph (2) 
        are met with respect to such service, or
            ``(B) the requirements of paragraph (3) are met with 
        respect to such service.
    ``(2) Exception for current employment which continues.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to service for any employer if--
                    ``(i) such service is performed by an individual--
                            ``(I) who was performing substantial and 
                        regular service for remuneration for that 
                        employer before January 1, 1997,
                            ``(II) who is a bona fide employee of that 
                        employer on December 31, 1996, and
                            ``(III) whose employment relationship with 
                        that employer was not entered into for purposes 
                        of meeting the requirements of this 
                        subparagraph, and
                    ``(ii) the employment relationship with that 
                employer has not been terminated after December 31, 
                1996.
            ``(B) Treatment of multiple agencies and 
        instrumentalities.--For purposes of subparagraph (A), under 
        regulations (consistent with regulations established under 
        section 3121(t)(2)(B) of the Internal Revenue Code of 1986)--
                    ``(i) all agencies and instrumentalities of a State 
                (as defined in section 218(b)) or of the District of 
                Columbia shall be treated as a single employer, and
                    ``(ii) all agencies and instrumentalities of a 
                political subdivision of a State (as so defined) shall 
                be treated as a single employer and shall not be 
                treated as described in clause (i).
    ``(3) Exception for certain services.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to service if such service is performed--
                    ``(i) by an individual who is employed by a State 
                or political subdivision thereof to relieve such 
                individual from unemployment,
                    ``(ii) in a hospital, home, or other institution by 
                a patient or inmate thereof as an employee of a State 
                or political subdivision thereof or of the District of 
                Columbia,
                    ``(iii) by an individual, as an employee of a State 
                or political subdivision thereof or of the District of 
                Columbia, serving on a temporary basis in case of fire, 
                storm, snow, earthquake, flood, or other similar 
                emergency,
                    ``(iv) by any individual as an employee included 
                under section 5351(2) of title 5, United States Code 
                (relating to certain interns, student nurses, and other 
                student employees of hospitals of the District of 
                Columbia Government), other than as a medical or dental 
                intern or a medical or dental resident in training,
                    ``(v) by an election official or election worker if 
                the remuneration paid in a calendar year for such 
                service is less than $1,000 with respect to service 
                performed during 1997, and the adjusted amount 
                determined under subparagraph (C) for any subsequent 
                year with respect to service performed during such 
                subsequent year, except to the extent that service by 
                such election official or election worker is included 
                in employment under an agreement under section 218, or
                    ``(vi) by an employee in a position compensated 
                solely on a fee basis which is treated pursuant to 
                section 211(c)(2)(E) as a trade or business for 
                purposes of inclusion of such fees in net earnings from 
                self-employment.
            ``(B) Definitions.--As used in this paragraph, the terms 
        `State' and `political subdivision' have the meanings given 
        those terms in section 218(b).
            ``(C) Adjustments to dollar amount for election officials 
        and election workers.--For each year after 1997, the Secretary 
        shall adjust the amount referred to in subparagraph (A)(v) at 
        the same time and in the same manner as is provided under 
        section 215(a)(1)(B)(ii) with respect to the amounts referred 
        to in section 215(a)(1)(B)(i), except that--
                    ``(i) for purposes of this subparagraph, 1994 shall 
                be substituted for the calendar year referred to in 
                section 215(a)(1)(B)(ii)(II), and
                    ``(ii) such amount as so adjusted, if not a 
                multiple of $100, shall be rounded to the next higher 
                multiple of $100 where such amount is a multiple of $50 
                and to the nearest multiple of $100 in any other case.
        The Secretary shall determine and publish in the Federal 
        Register each adjusted amount determined under this 
        subparagraph not later than November 1 preceding the year for 
        which the adjustment is made.''.
                    (B) Conforming amendments.--
                            (i) Subsection (k) of section 210 of such 
                        Act (42 U.S.C. 410(k)) (relating to covered 
                        transportation service) is repealed.
                            (ii) Section 210(p) of such Act (42 U.S.C. 
                        410(p)) is amended--
                                    (I) in paragraph (2), by striking 
                                ``service is performed'' and all that 
                                follows and inserting ``service is 
                                service described in subsection 
                                (r)(3)(A).''; and
                                    (II) in paragraph (3)(A), by 
                                inserting ``under subsection (a)(7) as 
                                in effect in March 1997'' after 
                                ``section''.
            (3) Additional amendments relating to coverage 
        agreements.--
                    (A) Authorization for all states to extend coverage 
                to state and local policemen and firemen under existing 
                coverage agreements.--
                            (i) In general.--Section 218(l) of such Act 
                        (42 U.S.C. 418(l)) is amended--
                                    (I) in paragraph (1), by striking 
                                ``(1)'' after ``(l)'', and by striking 
                                ``the State of'' and all that follows 
                                through ``prior to the date of 
                                enactment of this subsection'' and 
                                inserting ``a State entered into 
                                pursuant to this section''; and
                                    (II) by striking paragraph (2).
                            (ii) Conforming amendment.--Section 
                        218(d)(8)(D) of such Act (42 U.S.C. 
                        418(d)(8)(D)) is amended by striking 
                        ``agreements with the States named in'' and 
                        inserting ``State agreements modified as 
                        provided in''.
                            (iii) Effective date.--The amendments made 
                        by this subparagraph shall apply with respect 
                        to modifications filed by States after the date 
                        of the enactment of this Act.
                    (B) Conforming amendments.--Section 218(c)(6) of 
                such Act (42 U.S.C. 418(c)(6)) is amended--
                            (i) by striking subparagraph (C);
                            (ii) by redesignating subparagraphs (D) and 
                        (E) as subparagraphs (C) and (D), respectively; 
                        and
                            (iii) by striking subparagraph (F) and 
                        inserting the following:
            ``(E) service which is included as employment under section 
        210(a).''
            (4) Authority for states to modify coverage agreements with 
        respect to election officials and election workers.--Section 
        218(c)(8) of such Act (42 U.S.C. 418(c)(8)) is amended--
                    (A) by striking ``on or after January 1, 1968,'' 
                and inserting ``at any time'';
                    (B) by striking ``$100'' and inserting ``$1,000 
                with respect to service performed during 1997, and the 
                adjusted amount determined under section 210(r)(3)(C) 
                for any subsequent year with respect to service 
                performed during such subsequent year''; and
                    (C) by striking the last sentence and inserting the 
                following new sentence: ``Any modification of an 
                agreement pursuant to this paragraph shall be effective 
                with respect to services performed in and after the 
                calendar year in which the modification is mailed or 
                delivered by other means to the Secretary.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (7) of section 3121(b) of the 
        Internal Revenue Code of 1986 (relating to employment) is 
        amended to read as follows:
            ``(7) excluded State or local government employment (as 
        defined in subsection (t));''.
            (2) Excluded state or local government employment.--Section 
        3121 of such Code is amended by inserting after subsection (s) 
        the following new subsection:
    ``(t) Excluded State or Local Government Employment.--
            ``(1) In general.--For purposes of this chapter, the term 
        `excluded State or local government employment' means any 
        service performed in the employ of a State, of any political 
        subdivision thereof, or of any instrumentality of any one or 
        more of the foregoing which is wholly owned thereby, if--
                    ``(A)(i) such service would be excluded from the 
                term `employment' for purposes of this chapter if the 
                provisions of subsection (b)(7) as in effect in March 
                1997 had remained in effect, and (ii) the requirements 
                of paragraph (2) are met with respect to such service, 
                or
                    ``(B) the requirements of paragraph (3) are met 
                with respect to such service.
            ``(2) Exception for current employment which continues.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to service for any 
                employer if--
                            ``(i) such service is performed by an 
                        individual--
                                    ``(I) who was performing 
                                substantial and regular service for 
                                remuneration for that employer before 
                                January 1, 1997,
                                    ``(II) who is a bona fide employee 
                                of that employer on December 31, 1996, 
                                and
                                    ``(III) whose employment 
                                relationship with that employer was not 
                                entered into for purposes of meeting 
                                the requirements of this subparagraph, 
                                and
                            ``(ii) the employment relationship with 
                        that employer has not been terminated after 
                        December 31, 1996.
                    ``(B) Treatment of multiple agencies and 
                instrumentalities.--For purposes of subparagraph (A), 
                under regulations--
                            ``(i) all agencies and instrumentalities of 
                        a State (as defined in section 218(b) of the 
                        Social Security Act) or of the District of 
                        Columbia shall be treated as a single employer, 
                        and
                            ``(ii) all agencies and instrumentalities 
                        of a political subdivision of a State (as so 
                        defined) shall be treated as a single employer 
                        and shall not be treated as described in clause 
                        (i).
            ``(3) Exception for certain services.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to service if such 
                service is performed--
                            ``(i) by an individual who is employed by a 
                        State or political subdivision thereof to 
                        relieve such individual from unemployment,
                            ``(ii) in a hospital, home, or other 
                        institution by a patient or inmate thereof as 
                        an employee of a State or political subdivision 
                        thereof or of the District of Columbia,
                            ``(iii) by an individual, as an employee of 
                        a State or political subdivision thereof or of 
                        the District of Columbia, serving on a 
                        temporary basis in case of fire, storm, snow, 
                        earthquake, flood, or other similar emergency,
                            ``(iv) by any individual as an employee 
                        included under section 5351(2) of title 5, 
                        United States Code (relating to certain 
                        interns, student nurses, and other student 
                        employees of hospitals of the District of 
                        Columbia Government), other than as a medical 
                        or dental intern or a medical or dental 
                        resident in training,
                            ``(v) by an election official or election 
                        worker if the remuneration paid in a calendar 
                        year for such service is less than $1,000 with 
                        respect to service performed during 1997, and 
                        the adjusted amount determined under section 
                        210(r)(3)(C) of the Social Security Act for any 
                        subsequent year with respect to service 
                        performed during such subsequent year, except 
                        to the extent that service by such election 
                        official or election worker is included in 
                        employment under an agreement under section 218 
                        of the Social Security Act, or
                            ``(vi) by an employee in a position 
                        compensated solely on a fee basis which is 
                        treated pursuant to section 1402(c)(2)(E) as a 
                        trade or business for purposes of inclusion of 
                        such fees in net earnings from self-employment.
                    ``(B) Definitions.--As used in this paragraph, the 
                terms `State' and `political subdivision' have the 
                meanings given those terms in section 218(b) of the 
                Social Security Act.''.
            (3) Conforming amendments.--
                    (A) Subsection (j) of such section 3121 (relating 
                to covered transportation service) is repealed.
                    (B) Paragraph (2) of section 3121(u) of such Code 
                (relating to application of hospital insurance tax to 
                Federal, State, and local employment) is amended--
                            (i) in subparagraph (B), by striking 
                        ``service is performed'' in clause (ii) and all 
                        that follows through the end of such 
                        subparagraph and inserting ``service is service 
                        described in subsection (t)(3)(A).''; and
                            (ii) in subparagraph (C)(i), by inserting 
                        ``under subsection (b)(7) as in effect in March 
                        1997'' after ``chapter''.
    (c) Effective Date.--Except as otherwise provided in this section, 
the amendments made by this section shall apply with respect to service 
performed after December 31, 1996.

SEC. 8. ADJUSTMENTS IN FORMULA FOR DETERMINING PRIMARY INSURANCE 
              AMOUNT.

    (a) Additional Earnings Bracket.--Section 215(a)(1)(A) of the 
Social Security Act (42 U.S.C. 415(a)(1)(A)) is amended--
            (1) in clause (ii), by striking ``and'';
            (2) in clause (iii), by striking ``clause (ii),'' and 
        inserting the following: ``clause (ii), but, in the case of an 
        individual who initially becomes eligible for old-age or 
        disability insurance benefits, or who dies (before becoming 
        eligible for such benefits), after calendar year 2001, do not 
        exceed the amount established for purposes of this clause by 
        subparagraph (B), and''; and
            (3) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in the case of an individual who initially becomes 
        eligible for old-age or disability insurance benefits, or who 
        dies (before becoming eligible for such benefits), after 
        calendar year 2001, 10 percent of the individual's average 
        indexed monthly earnings to the extent that such earnings 
        exceed the amount established for purposes of clause (iii),''.
    (b) Bend Point Amounts.--Section 215(a)(1)(B) of the Social 
Security Act (42 U.S.C. 415(a)(1)(B)) is amended--
            (1) in clause (ii), by inserting ``and before 2002'' after 
        ``1979'' the first place it appears, and by striking ``by 
        dividing--'' and all that follows and inserting ``under clause 
        (ix) of this subparagraph.'';
            (2) by redesignating clause (iii) as clause (xii);
            (3) by inserting after clause (ii) the following new 
        clauses:
    ``(iii) For individuals who initially become eligible for old-age 
or disability insurance benefits, or who die (before becoming eligible 
for such benefits), in any calendar year after 2001, the amount 
established for purposes of clause (i) of subparagraph (A) shall be an 
amount equal to the product of the following factors:
            ``(I) the amount established with respect to calendar year 
        1979 under clause (i) of this subparagraph for purposes of 
        clause (i) of subparagraph (A), and
            ``(II) the quotient obtained under clause (ix) of this 
        subparagraph.
    ``(iv) For individuals who initially become eligible for old-age or 
disability insurance benefits, or who die (before becoming eligible for 
such benefits), in any calendar year after 1997 and before 2022, the 
amount established for purposes of clause (ii) of subparagraph (A) 
shall be an amount equal to the product of the following factors:
            ``(I) the amount established with respect to the preceding 
        calendar year under this subparagraph for purposes of clause 
        (ii) of subparagraph (A),
            ``(II) the quotient obtained under clause (x) of this 
        subparagraph, and
            ``(III) 0.98.
    ``(v) For individuals who initially become eligible for old-age or 
disability insurance benefits, or who die (before becoming eligible for 
such benefits), in any calendar year after 2021, the amount established 
for purposes of clause (ii) of subparagraph (A) shall be an amount 
equal to the product of the following factors:
            ``(I) the amount established with respect to the calendar 
        year 2021 under clause (iv) of this subparagraph for purposes 
        of clause (ii) of subparagraph (A), and
            ``(II) the quotient obtained under clause (xi) of this 
        subparagraph.
    ``(vi) For individuals who initially become eligible for old-age or 
disability insurance benefits, or who die (before becoming eligible for 
such benefits), in the calendar year 2002, the amount established for 
purposes of clause (iii) of subparagraph (A) shall be an amount equal 
to the quotient derived by dividing--
            ``(I) the amount established with respect to the calendar 
        year 2002 under clause (iv) of this subparagraph for purposes 
        of clause (ii) of subparagraph (A), by
            ``(II) 0.98<SUP>25.
    ``(vii) For individuals who initially become eligible for old-age 
or disability insurance benefits, or who die (before becoming eligible 
for such benefits), in any calendar year after 2002 and before 2022, 
the amount established for purposes of clause (iii) of subparagraph (A) 
shall be an amount equal to the product of the following factors:
            ``(I) the amount established with respect to the preceding 
        calendar year under this subparagraph for purposes of clause 
        (iii) of subparagraph (A),
            ``(II) the quotient obtained under clause (x) of this 
        subparagraph, and
            ``(III) 0.98.
    ``(viii) For individuals who initially become eligible for old-age 
or disability insurance benefits, or who die (before becoming eligible 
for such benefits), in any calendar year after 2021, the amount 
established for purposes of clause (iii) of subparagraph (A) shall be 
an amount equal to the product of the following factors:
            ``(I) the amount established with respect to calendar year 
        2021 under clause (vii) of this subparagraph for purposes of 
        clause (iii) of subparagraph (A), and
            ``(II) the quotient obtained under clause (xi) of this 
        subparagraph.
    ``(ix) The quotient obtained under this clause is the quotient 
obtained by dividing--
            ``(I) the deemed average total wages (as defined in section 
        209(k)(1)) for the second calendar year preceding the calendar 
        year for which the determination is made, by
            ``(II) the average of the total wages (as defined in 
        regulations of the Secretary and computed without regard to the 
        limitations specified in section 209(a)(1)) reported to the 
        Secretary of the Treasury or his delegate for the calendar year 
        1977.
    ``(x) The quotient obtained under this clause is the quotient 
obtained by dividing--
            ``(I) the deemed average total wages (as defined in section 
        209(k)(1)) for the second calendar year preceding the calendar 
        year for which the determination is made, by
            ``(II) the deemed average total wages (as defined in 
        section 209(k)(1)) for the third calendar year preceding the 
        calendar year for which the determination is made.
    ``(xi) The quotient obtained under this clause is the quotient 
obtained by dividing--
            ``(I) the deemed average total wages (as defined in section 
        209(k)(1)) for the second calendar year preceding the calendar 
        year for which the determination is made, by
            ``(II) the average of the total wages (as defined in 
        regulations of the Secretary and computed without regard to the 
        limitations specified in section 209(a)(1)) reported to the 
Secretary of the Treasury or his delegate for the calendar year 
2020.''; and
            (4) in clause (xii) (as redesignated), by striking ``clause 
        (ii)'' and inserting ``the preceding clauses of this 
        subparagraph''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to individuals who initially become eligible (within 
the meaning of section 215(a)(3)(B) of the Social Security Act) for 
old-age or disability insurance benefits under title II of the Social 
Security Act, or who die (before becoming eligible for such benefits), 
in any calendar year after 1997.

SEC. 9. REDIRECTION OF TAX REVENUES IN OBRA-93 TO OASDI TRUST FUND.

    Subsection (d) of section 13215 of the Omnibus Budget 
Reconciliation Act of 1993 is amended by inserting ``, and ending 
before January 1, 1997'' after ``1993''.

SEC. 10. ESTABLISHMENT OF THE EQUITIES FUND WITHIN THE FEDERAL OLD-AGE 
              AND SURVIVORS INSURANCE TRUST FUND.

    (a) Equities Fund.--Section 201(d) of the Social Security Act (42 
U.S.C. 401(d)) is amended--
            (1) in the second sentence, by striking ``Such'' and 
        inserting ``Subject to paragraph (2), such'';
            (2) in the third sentence, by striking ``(1) on original'' 
        and ``(2) by purchase'' inserting ``(A) on original'' and ``(B) 
        by purchase'', respectively;
            (3) by inserting ``(1)'' after ``(d)''; and
            (4) by adding at the end the following new paragraph:
    ``(2)(A) There is hereby established within the Federal Old-Age and 
Survivors Insurance Trust Fund (hereafter in this paragraph referred to 
as the `Trust Fund') an Equities Fund. Investment by the Managing 
Trustee of the portion of the Trust Fund consisting of amounts held in 
the Equities Fund may be made only in a portfolio designed to replicate 
the performance of the index selected under subparagraph (B). The 
portfolio shall be designed such that, to the extent practicable, the 
percentage of the Equities Fund that is invested in each stock is the 
same as the percentage determined by dividing the aggregate market 
value of all shares of that stock by the aggregate market value of all 
shares of all stocks included in such index.
    ``(B) The Managing Trustee shall select an index which is a 
commonly recognized index comprised of common stock the aggregate 
market value of which is a reasonably complete representation of the 
United States equity markets.
    ``(C) The amounts of the Trust Fund held by the Equities Fund shall 
consist of amounts deposited in the Equities Fund under section 10(c) 
of the Strengthening Social Security Act of 1996 and such amounts as 
may be appropriated to, or deposited in, the Equities Fund as hereafter 
provided in this section.
    ``(D) Investment by the Managing Trustee of the Trust Fund of 
amounts in the Equities Fund shall be subject to guidelines and 
procedures prescribed by the Personal Investment Fund Board pursuant to 
subsection (n). The Managing Trustee may carry out the functions with 
respect to investment of amounts in the Equities Fund in a manner which 
is not in accordance with such guidelines and procedures only if such 
functions are otherwise carried out in accordance with the requirements 
of this paragraph.''.
    (b) Crediting of Income and Proceeds From Investment in Equities.--
Section 201(f) of the Social Security Act (42 U.S.C. 401(f)) is amended 
by adding at the end the following new sentence: ``The income on, and 
proceeds from the sale or redemption of, equities held by the Equities 
Fund in the Federal Old-Age and Survivors Insurance Trust Fund shall be 
credited to and form a part of the Equities Fund.''.
    (c) Deposits to Equities Fund.--
            (1) In general.--There is transferred on October 1 of 1997, 
        and each of the succeeding 14 calendar years, to the Equities 
        Fund, from amounts otherwise available in the Federal Old-Age 
        and Survivors Insurance Trust Fund, an amount equal to the 
        applicable percentage of the Trust Fund.
            (2) Determinations and adjustments.--
                    (A) Applicable percentage.--The Personal Investment 
                Fund Board shall determine the applicable percentage 
                for each fiscal year under paragraph (1), such that--
                            (i) a gradual phase-in occurs during the 
                        15-year period described in paragraph (1), and
                            (ii) such percentage shall not exceed 25 
                        percent for fiscal year 2012.
                    (B) Transfers.--Transfers under paragraph (1) shall 
                be made by the Secretary of the Treasury on the basis 
                of estimates by the Secretary. Proper adjustments shall 
                be made in amounts subsequently appropriated to the 
                Equities Fund to the extent prior estimates were in 
                excess of or were less than the actual amounts.
    (d) Effective Date.--The amendments made by this section shall take 
effect on October 1, 1997, and shall apply with respect to fiscal years 
beginning on or after such date.
                                 <all>
```