II

104TH CONGRESS

1ST SESSION S. 825

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

MAY 18 (legislative day, MAY 15), 1995

Mr. KERREY (for himself, Mr. SIMPSON, and Mr. ROBB) 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 1995’’.

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, 1995, 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 1995.’’.
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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, 1995.

6 (B) SELF-EMPLOYMENT TAX.—The

7 amendments made by paragraph (2) shall apply

8 to taxable years beginning after December 31,

9 1995.

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, 1995,
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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 provided in

21 subsection (b), in the case of a deceased individual with

22 respect to whom a personal investment plan was estab23 lished and maintained pursuant to section 252 or 253, the

24 trustee of such plan shall transfer the balance in such plan

25 to a personal investment plan maintained by an eligible

26 survivor if such plan is designated by the eligible survivor
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1 to the trustee not later than 20 business days after the

2 date of such individual’s death. Any such designation shall

3 be made in such form and manner as may be prescribed

4 in regulations of the Commissioner of Social Security.

5 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES6 IGNATION BY ELIGIBLE SURVIVOR.—In any case in which,

7 upon the expiration of such 20-day period, there is an eli8 gible survivor but no timely designation of a personal in9 vestment plan is made by the eligible survivor under sub10 section (a), the trustee shall make the designation of the

11 personal investment plan under subsection (a) on behalf

12 of such eligible survivor, in accordance with regulations

13 of the Commissioner of Social Security.

14 ‘‘(c) DISPOSITION OF PLAN BALANCE WHERE NO

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

16 the expiration of such 20-day period no timely designation

17 under subsection (b) has been made and there is no eligi18 ble survivor, the trustee of the deceased individual’s plan

19 shall transfer the balance in such plan to the Federal Old20 Age and Survivors Insurance Trust Fund within the pe21 riod of 20 business days following the expiration of such

22 20-day period.

23 ‘‘DEFINITIONS

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

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

26 ‘personal investment plan’ means—
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1 ‘‘(A) any personal investment retirement

2 plan in the Personal Investment Fund (estab3 lished under section 257) which is administered

4 by the Personal Investment Board, or

5 ‘‘(B) any individual retirement plan (as de6 fined in section 7701(a)(37) of the Internal

7 Revenue Code of 1986) which is administered

8 or issued by a bank (as defined in section

9 408(n) of such Code),

10 under terms which restrict deposits to personal in11 vestment plan contributions made to the plan pursu12 ant to section 251 or 253 and transfers made to the

13 plan pursuant to section 254, and under which dis14 tributions may only be made on or after the date on

which the individual attains age 591 15 ⁄2, made to a

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

17 after the death of the individual, or attributable to

18 the individual’s becoming disabled within the mean19 ing of section 223(d).

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

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

22 on whom an excise tax is imposed under section

23 3111 of the Internal Revenue Code of 1986 with re24 spect to having an individual in his employ to whom
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1 wages are paid by such person during such calendar

2 year.

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

4 employee’ means, in connection with any person who

5 is a covered employer for any calendar year begin6 ning after December 31, 1995, any individual—

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

8 such employer during such calendar year there

9 is imposed an excise tax under section 3111 of

10 the Internal Revenue Code of 1986, and

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

12 years during such calendar year.

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

14 The term ‘eligible self-employed individual’ means

15 any individual—

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

17 a taxable year beginning after December 31,

18 1995, there is imposed a tax under section

19 1401(a) of the Internal Revenue Code of 1986,

20 and

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

22 years during such taxable year.

23 ‘‘(5) PERSONAL INVESTMENT PLAN CONTRIBU24 TION.—The term ‘personal investment plan con25 tribution’ means—
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1 ‘‘(A) with respect to any eligible employee

2 of a covered employer, an amount equal to 2

3 percent of the wages received by such employee

4 with respect to employment by such employer,

5 and

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

7 income of an individual for any taxable year, an

8 amount equal to 2 percent of such income for

9 such taxable year.

10 ‘‘(6) ELIGIBLE SURVIVOR.—The term ‘eligible

11 survivor’ of a deceased individual means such indi12 vidual’s widow or, if there is no such widow, such in13 dividual’s last surviving divorced wife or surviving

14 divorced husband. Such term shall not include any

15 such surviving divorced wife or surviving divorced

16 husband who is married on the date of the deceased

17 individual’s death.

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

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

20 legal holiday in the area involved.

21 ‘‘PENALTIES

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

23 INVESTMENT PAYROLL DEDUCTION PLAN.—Any covered

24 employer who fails to meet the requirements of section

25 251 for any calendar year shall be subject to a civil penalty

26 of not to exceed the greater of—
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1 ‘‘(1) $5,000, or

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

3 employer as of the beginning of such calendar year.

4 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

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

6 an amount from the wages of an eligible employee in ac7 cordance with a personal investment payroll deduction

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

9 $500 for each such failure.

10 ‘‘(c) FAILURE BY EMPLOYER TO MAKE TIMELY PAY11 MENTS TO PERSONAL INVESTMENT PLAN.—If an amount

12 deducted from the wages of an eligible employee under a

13 social security payroll deduction plan is not paid to the

14 Social Security Administration with respect to the speci15 fied personal investment plan within the time prescribed

16 by section 251—

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

18 penalty of not to exceed 50 percent of the amount

19 so deducted, and

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

21 on the amount so deducted at the underpayment

22 rate determined under section 6621 of the Internal

23 Revenue Code of 1986 from the last day by which

24 such amount was required to be so paid to the date
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1 on which such amount is paid into the specified per2 sonal investment plan.

3 ‘‘(d) FAILURE BY ELIGIBLE SELF-EMPLOYED INDI4 VIDUAL TO MAKE TIMELY PAYMENTS TO PERSONAL IN5 VESTMENT PLAN.—If a personal investment plan con6 tribution is not paid by an eligible self-employed individual

7 to the Social Security Administration with respect to a

8 personal investment plan maintained by the individual

9 within the time prescribed by section 253, such individual

10 shall be subject to a civil penalty of not to exceed 50 per11 cent of the amount of such contribution.

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

13 TRANSFERS.—If the balance in the personal investment

14 plan of a deceased individual is not transferred by the

15 trustee within the time prescribed by section 254—

16 ‘‘(1) the trustee shall be subject to a civil pen17 alty of not to exceed 50 percent of the amount of

18 the balance, and

19 ‘‘(2) shall be liable—

20 ‘‘(A) in the case of a transfer required to

21 be made to another personal investment plan,

22 to the widow or the surviving divorced wife or

23 surviving divorced husband (as the case may

24 be), or
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1 ‘‘(B) in the case of a transfer required to

2 be made to the Federal Old-Age and Survivors

3 Insurance Trust Fund, to such Trust Fund,

4 for interest on the balance at the underpayment rate

5 determined under section 6621 of the Internal Reve6 nue Code of 1986 from the last day by which such

7 balance was required to be so transferred to the date

8 on which such balance is transferred to the des9 ignated personal investment plan.

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

11 ‘‘(1) PENALTIES ASSESSED BY COMMIS12 SIONER.—Any civil penalty assessed by this section

13 shall be imposed by the Commissioner of Social Se14 curity and collected in a civil action.

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

16 compromise the amount of any civil penalty imposed

17 by this section.

18 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER19 TAIN CASES.—The Commissioner may waive the ap20 plication of this section with respect to any failure

21 if the Commissioner determines that such failure is

22 due to reasonable cause and not to intentional dis23 regard of rules and regulations.

24 ‘‘PERSONAL INVESTMENT FUND

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

26 established and maintained in the Treasury of the United
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1 States a Personal Investment Fund in the same manner

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

3 and 8439 of title 5, United States Code.

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

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

6 operated in the Social Security Administration a

7 Personal Investment Fund Board in the same man8 ner as the Federal Retirement Thrift Investment

9 Board under subchapter VII of chapter 84 of title

10 5, United States Code.

11 ‘‘(2) SPECIFIC INVESTMENT DUTIES.—The Per12 sonal Investment Fund shall be managed by the

13 Personal Investment Fund Board in the same man14 ner as the Thrift Savings Fund is managed under

15 subchapter VIII of chapter 84 of title 5, United

16 States Code.’’.

17 (2) AMOUNTS DEDUCTED TO BE SHOWN ON

18 W–2 STATEMENTS.—Subsection (a) of section 6051

19 of the Internal Revenue Code of 1986 (relating to

20 receipts for employees) is amended—

21 (A) by striking ‘‘and’’ at the end of para22 graph (9);

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

24 paragraph (10) and inserting ‘‘, and’’; and
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1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(11) the total amount deducted from the em4 ployee’s wages under a personal investment payroll

5 deduction plan established under part B of title II

6 of the Social Security Act.’’.

7 (3) EXEMPTION FROM ERISA REQUIRE8 MENTS.—Subsection (b) of section 4 of the Em9 ployee Retirement Income Security Act of 1974 (29

10 U.S.C. 1003(b)) is amended—

11 (A) by striking ‘‘or’’ at the end of para12 graph (4);

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

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

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

16 paragraph:

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

18 deduction plan established under part B of title II

19 of the Social Security Act and does not provide for

20 employer contributions.’’.

21 (4) EFFECTIVE DATE AND NOTICE REQUIRE22 MENTS.—

23 (A) EFFECTIVE DATE.—The amendments

24 made by paragraph (1) (and any personal in25 vestment payroll deduction plan required there-
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1 under) shall apply with respect to wages paid

2 after December 31, 1995, for pay periods end3 ing after such date and self-employment income

4 for taxable years beginning after such date.

5 (B) NOTICE REQUIREMENTS.—

6 (i) IN GENERAL.—Not later than Oc7 tober 1, 1995, the Commissioner of Social

8 Security shall—

9 (I) send to the last known ad10 dress of each eligible individual a de11 scription of the program established

12 by the amendments made by this sec13 tion, which shall be written in the

14 form of a pamphlet in language which

15 may be readily understood by the av16 erage worker,

17 (II) provide for toll-free access by

18 telephone from all localities in the

19 United States to the Social Security

20 Administration through which individ21 uals may obtain information and an22 swers to questions regarding such pro23 gram, and

24 (III) provide information to the

25 media in all localities of the United
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1 States about such program and such

2 toll-free access by telephone.

3 (ii) ELIGIBLE INDIVIDUAL.—For pur4 poses of this subparagraph, the term ‘‘eli5 gible individual’’ means an individual who,

6 as of the date of the pamphlet sent pursu7 ant to clause (i), is indicated within the

8 records of the Social Security Administra9 tion as—

10 (I) not having attained age 55,

11 and

12 (II) being credited with one or

13 more quarters of coverage under sec14 tion 213 of the Social Security Act.

15 (iii) MATTERS TO BE INCLUDED.—

16 The Commissioner shall include with the

17 pamphlet sent to each eligible individual

18 pursuant to clause (i)—

19 (I) a statement of the number of

20 quarters of coverage indicated in the

21 records of the Social Security Admin22 istration as of the date of the descrip23 tion as credited to such individual

24 under section 213 of the Social Secu25 rity Act and the date as of which such
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1 records may be considered accurate,

2 and

3 (II) the number for toll-free ac4 cess by telephone established by the

5 Commissioner pursuant to clause (i).

6 SEC. 3. PHASED IN INCREASE IN SOCIAL SECURITY RETIRE7 MENT AGES.

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

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

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

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

12 new subparagraphs:

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

14 early retirement age (as determined under para15 graph (2)) after December 31, 1999, and before

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

17 of the number of months in the period beginning

18 with January 2000 and ending with December of

19 the year in which the individual attains early retire20 ment age (as so determined);

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

22 early retirement age (as so determined) after De23 cember 31, 2028, 70 years of age; and

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

25 early retirement age (as so determined) after De-
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1 cember 31, 2029, 70 years of age plus one-twenty2 fourths of the number of months in the period be3 ginning with January 2030 and ending with Decem4 ber of the year in which the individual attains early

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

6 (2) by striking paragraph (3).

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

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

9 to read as follows:

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

11 ‘‘(A) except as otherwise provided in this para12 graph, age 62 in the case of an old-age, wife’s, or

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

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

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

16 respect to an individual who attains early retirement

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

18 December 31, 1999, and before January 1, 2017, 62

19 years of age plus two-twelfths of the number of

20 months in the period beginning with January 2000

21 and ending with December of the year in which the

22 individual attains early retirement age (as deter23 mined under subparagraph (A)),
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1 ‘‘(II) with respect to an individual who attains

2 early retirement age (as so determined) after De3 cember 31, 2016, 65 years of age, and

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

5 early retirement age (as so determined) after De6 cember 31, 2029, 65 years of age plus one-twenty7 fourths of the number of months in the period be8 ginning with January 2030 and ending with Decem9 ber of the year in which the individual attains early

10 retirement age (as determined under subparagraph

11 (A)); and

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

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

14 of the number of months in the period beginning

15 with January 2000 and ending with December of

16 the year in which the individual attains early retire17 ment age (as determined under subparagraph (A)),

18 ‘‘(II) with respect to such an individual who at19 tains early retirement age (as so determined) after

20 December 31, 2016, 63 years of age, and

21 ‘‘(III) with respect to such an individual who

22 attains early retirement age (as so determined) after

23 December 31, 2029, 63 years of age plus one-twen24 ty-fourths of the number of months in the period be25 ginning with January 2030 and ending with Decem-
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1 ber of the year in which the individual attains early

2 retirement age (as determined under subparagraph

3 (A)).’’.

4 (c) REDUCTION IN BENEFITS FOR EARLY RETIREES

5 MAINTAINED AT CURRENT LEVEL.—Section

6 202(q)(9)(A) of the Social Security Act (42 U.S.C.

7 402(q)(9)(A)) is amended by inserting ‘‘, but in no event

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

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

10 (a) IN GENERAL.—

11 (1) REDUCTION IN INCREASES APPLIED TO

12 HIGHER PRIMARY INSURANCE AMOUNTS.—Section

13 215(i)(2)(A) of the Social Security Act (42 U.S.C.

14 415(i)(2)(A)) is amended—

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

16 (vii); and

17 (B) in clause (ii), by striking ‘‘The in18 crease shall’’ in the matter following subclause

19 (III) and all that follows through ‘‘Any in20 crease’’ and inserting the following:

21 ‘‘(iii) With respect to the amounts described in

22 subclauses (I) and (III) of clause (ii), the increase shall

23 be derived by multiplying each of such amounts (including

24 each of those amounts as previously increased under this

25 subparagraph) by the applicable increase percentage.
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1 ‘‘(iv) With respect to primary insurance amounts de2 scribed in subclause (II) of clause (ii), the increase shall

3 be derived by—

4 ‘‘(I) multiplying each of such amounts (includ5 ing each such amount as previously increased under

6 this subparagraph) by the applicable increase per7 centage,

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

9 increased under subclause (I) the greatest primary

10 insurance amount which is below the 30th percentile

11 of such amounts, and

12 ‘‘(III) reducing each primary insurance amount

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

14 amount determined as if there had been no reduc15 tion in such amount under this subclause in any pre16 ceding year and the amount of the increase under

17 subclause (I) in the primary insurance amount de18 scribed in subclause (II).

19 ‘‘(v) Any amount increased under clause (iii) or

20 clause (iv) which is not a multiple of $0.10 shall be de21 creased to the next lower multiple of $0.10.

22 ‘‘(vi) Any increase’’.

23 (2) CONFORMING AMENDMENT.—The last sen24 tence of section 215(a)(4) of such Act (42 U.S.C.

25 415(a)(4)) is amended, in subclause (I), by striking
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1 ‘‘clause (iii) of subsection (i)(2)(A)’’ and inserting

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

3 (b) CONFORMING AMENDMENTS TO MAINTAIN CUR4 RENT LEVELS OF COST-OF-LIVING ADJUSTMENT UNDER

5 OTHER PROGRAMS.—

6 (1) SUPPLEMENTAL SECURITY INCOME FOR

7 THE AGED, BLIND, AND DISABLED.—Section

8 1617(a)(2) of the Social Security Act (42 U.S.C.

9 1382f(a)(2)) is amended by striking ‘‘by the same

10 percentage’’ and all that follows through ‘‘percent11 age,’’ and inserting the following: ‘‘by the applicable

12 increase percentage (within the meaning of section

13 215(i)(1)(C)) used in determining the amount by

14 which benefit amounts under title II are increased

15 for such month’’.

16 (2) SUPPLEMENTARY MEDICAL INSURANCE.—

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

18 1395r(a)(3)(B)) is amended by striking ‘‘by a per19 centage’’ and all that follows through ‘‘November 1’’

20 and inserting the following: ‘‘by the applicable in21 crease percentage (within the meaning of section

22 215(i)(1)(C)) used in determining the amount by

23 which benefit amounts under title II are increased

24 for the month of December preceding the year of the

25 promulgation’’.
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1 (3) CERTAIN VETERAN’S BENEFITS.—Section

2 3112 of title 38, United States Code, is amended—

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

4 same percentage by which such benefit amounts

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

6 increase percentage (within the meaning of sec7 tion 215(i)(1)(C) of such Act) used in deter8 mining the amount by which such benefit

9 amounts are increased’’; and

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

11 the same percentage as the percentage by which

12 such benefit amounts are increased’’ and insert13 ing ‘‘by the applicable increase percentage

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

15 such Act) used in determining the amount by

16 which such benefit amounts are increased’’.

17 (4) COST-OF-LIVING ADJUSTMENTS TO LIMITA18 TIONS ON BENEFITS AND CONTRIBUTIONS UNDER

19 QUALIFIED PLANS.—Subsection (d) of section 415 of

20 the Internal Revenue Code of 1986 (relating to cost21 of-living adjustments) is amended by striking ‘‘sec22 tion 215(i)(2)(A)’’ and inserting ‘‘section

23 215(i)(2)(A)(iii)’’.

24 (c) AMENDMENT TO PRIOR APPLICABLE LAW.—Sec25 tion 215(i)(4) of the Social Security Act (42 U.S.C.
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1 415(i)(4)) is amended by adding at the end the following

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

3 for the continued application of this subsection as in effect

4 in December 1978 as provided by the preceding provisions

5 of this paragraph and the amendments referred to therein.

6 Such regulations shall provide for the application of the

7 amendments to the preceding provisions of this subsection

8 made by section 2 of the COLA Limitation Act of 1995

9 so as to have the same effect on the corresponding provi10 sions of this subsection as in effect in December 1978 and

11 applicable in accordance with this paragraph.’’.

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

13 this section shall apply with respect to adjustments under

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

15 months after the date of the enactment of this Act.

16 SEC. 5. MODIFICATION OF CPI CALCULATION FOR SOCIAL

17 SECURITY COLAS.

18 Notwithstanding any other provision of title II of the

19 Social Security Act, with respect to calculations made

20 after December 31, 1995, with respect to any cost-of-liv21 ing calculation under such title, the Bureau of Labor Sta22 tistics of the Department of Labor shall reduce the annual

23 percentage change in the Consumer Price Indexes, as de24 termined without regard to this section, by .5 percentage

25 point.
26

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1 SEC. 6. PHASED REDUCTION IN SPOUSAL BENEFITS OTHER

2 THAN SURVIVOR’S BENEFITS TO 33 PERCENT

3 OF PRIMARY INSURANCE AMOUNT.

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

5 202(b)(2) of the Social Security Act (42 U.S.C. 402(b)(2))

6 is amended to read as follows:

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

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

9 benefit for each month shall be equal to the applicable per10 centage of the primary insurance amount of her husband

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

12 in connection with the calendar year in which such individ13 ual becomes eligible for such benefit, as specified in the

14 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.’’.

15 ‘‘(B) For purposes of subparagraph (A)—
27

•S 825 IS

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

2 a wife’s insurance benefit if such individual meets

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

4 (D) of paragraph (1), and

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

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

7 eligibility of less than 12 consecutive months shall

8 not be taken into account.’’.

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

10 202(c)(3) of such Act (42 U.S.C. 402(c)(3)) is amended

11 to read as follows:

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

13 paragraph (2) of this subsection, such husband’s insur14 ance benefit for each month shall be equal to the applica15 ble percentage of the primary insurance amount of his wife

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

17 in connection with the calendar year in which such individ18 ual becomes eligible for such benefit, as specified in the

19 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
28

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‘‘If the calendar year in

which the individual becomes eligible is:

The applicable percentage shall

be:

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 husband’s insurance benefit if such individual

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

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

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

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

8 in eligibility of less than 12 consecutive months shall

9 not be taken into account.’’.

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

11 EMPLOYEES.

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

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

14 210(a) of the Social Security Act (42 U.S.C.

15 410(a)(7)) is amended to read as follows:

16 ‘‘(7) Excluded State or local government em17 ployment (as defined in subsection (r));’’.

18 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

19 EMPLOYMENT.—
29

•S 825 IS

1 (A) IN GENERAL.—Section 210 of such

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

3 the end the following new subsection:

4 ‘‘Excluded State or Local Government Employment

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

6 local government employment’ means any service per7 formed in the employ of a State, of any political subdivi8 sion thereof, or of any instrumentality of any one or more

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

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

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

12 preceding provisions of this section as in effect in

13 March 1995 had remained in effect, and (ii) the re14 quirements of paragraph (2) are met with respect to

15 such service, or

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

17 with respect to such service.

18 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT WHICH

19 CONTINUES.—

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

21 paragraph are met with respect to service for any

22 employer if—

23 ‘‘(i) such service is performed by an indi24 vidual—
30

•S 825 IS

1 ‘‘(I) who was performing substantial

2 and regular service for remuneration for

3 that employer before January 1, 1996,

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

5 that employer on December 31, 1995, and

6 ‘‘(III) whose employment relationship

7 with that employer was not entered into

8 for purposes of meeting the requirements

9 of this subparagraph, and

10 ‘‘(ii) the employment relationship with that

11 employer has not been terminated after Decem12 ber 31, 1995.

13 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND

14 INSTRUMENTALITIES.—For purposes of subpara15 graph (A), under regulations (consistent with regula16 tions established under section 3121(t)(2)(B) of the

17 Internal Revenue Code of 1986)—

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

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

20 District of Columbia shall be treated as a single

21 employer, and

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

23 political subdivision of a State (as so defined)

24 shall be treated as a single employer and shall

25 not be treated as described in clause (i).
31

•S 825 IS

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

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

3 paragraph are met with respect to service if such

4 service is performed—

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

6 State or political subdivision thereof to relieve

7 such individual from unemployment,

8 ‘‘(ii) in a hospital, home, or other institu9 tion by a patient or inmate thereof as an em10 ployee of a State or political subdivision thereof

11 or of the District of Columbia,

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

13 a State or political subdivision thereof or of the

14 District of Columbia, serving on a temporary

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

16 flood, or other similar emergency,

17 ‘‘(iv) by any individual as an employee in18 cluded under section 5351(2) of title 5, United

19 States Code (relating to certain interns, student

20 nurses, and other student employees of hos21 pitals of the District of Columbia Government),

22 other than as a medical or dental intern or a

23 medical or dental resident in training,

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

25 worker if the remuneration paid in a calendar
32

•S 825 IS

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

2 respect to service performed during 1996, and

3 the adjusted amount determined under sub4 paragraph (C) for any subsequent year with re5 spect to service performed during such subse6 quent year, except to the extent that service by

7 such election official or election worker is in8 cluded in employment under an agreement

9 under section 218, or

10 ‘‘(vi) by an employee in a position com11 pensated solely on a fee basis which is treated

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

13 business for purposes of inclusion of such fees

14 in net earnings from self-employment.

15 ‘‘(B) DEFINITIONS.—As used in this para16 graph, the terms ‘State’ and ‘political subdivision’

17 have the meanings given those terms in section

18 218(b).

19 ‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR

20 ELECTION OFFICIALS AND ELECTION WORKERS.—

21 For each year after 1996, the Secretary shall adjust

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

23 the same time and in the same manner as is pro24 vided under section 215(a)(1)(B)(ii) with respect to
33

•S 825 IS

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

2 except that—

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

4 1993 shall be substituted for the calendar year

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

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

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

8 higher multiple of $100 where such amount is

9 a multiple of $50 and to the nearest multiple

10 of $100 in any other case.

11 The Secretary shall determine and publish in the

12 Federal Register each adjusted amount determined

13 under this subparagraph not later than November 1

14 preceding the year for which the adjustment is

15 made.’’.

16 (B) CONFORMING AMENDMENTS.—

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

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

19 covered transportation service) is repealed.

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

21 U.S.C. 410(p)) is amended—

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

23 ‘‘service is performed’’ and all that

24 follows and inserting ‘‘service is serv-
34

•S 825 IS

1 ice described in subsection (r)(3)(A).’’;

2 and

3 (II) in paragraph (3)(A), by in4 serting ‘‘under subsection (a)(7) as in

5 effect in March 1995’’ after ‘‘section’’.

6 (3) ADDITIONAL AMENDMENTS RELATING TO

7 COVERAGE AGREEMENTS.—

8 (A) AUTHORIZATION FOR ALL STATES TO

9 EXTEND COVERAGE TO STATE AND LOCAL PO10 LICEMEN AND FIREMEN UNDER EXISTING COV11 ERAGE AGREEMENTS.—

12 (i) IN GENERAL.—Section 218(l) of

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

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

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

16 State of’’ and all that follows through

17 ‘‘prior to the date of enactment of this

18 subsection’’ and inserting ‘‘a State en19 tered into pursuant to this section’’;

20 and

21 (II) by striking paragraph (2).

22 (ii) CONFORMING AMENDMENT.—Sec23 tion 218(d)(8)(D) of such Act (42 U.S.C.

24 418(d)(8)(D)) is amended by striking

25 ‘‘agreements with the States named in’’
35

•S 825 IS

1 and inserting ‘‘State agreements modified

2 as provided in’’.

3 (iii) EFFECTIVE DATE.—The amend4 ments made by this subparagraph shall

5 apply with respect to modifications filed by

6 States after the date of the enactment of

7 this Act.

8 (B) CONFORMING AMENDMENTS.—Section

9 218(c)(6) of such Act (42 U.S.C. 418(c)(6)) is

10 amended—

11 (i) by striking subparagraph (C);

12 (ii) by redesignating subparagraphs

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

14 (D), respectively; and

15 (iii) by striking subparagraph (F) and

16 inserting the following:

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

18 under section 210(a).’’

19 (4) AUTHORITY FOR STATES TO MODIFY COV20 ERAGE AGREEMENTS WITH RESPECT TO ELECTION

21 OFFICIALS AND ELECTION WORKERS.—Section

22 218(c)(8) of such Act (42 U.S.C. 418(c)(8)) is

23 amended—

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

25 1968,’’ and inserting ‘‘at any time’’;
36

•S 825 IS

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

2 ‘‘$1,000 with respect to service performed dur3 ing 1996, and the adjusted amount determined

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

5 year with respect to service performed during

6 such subsequent year’’; and

7 (C) by striking the last sentence and in8 serting the following new sentence: ‘‘Any modi9 fication of an agreement pursuant to this para10 graph shall be effective with respect to services

11 performed in and after the calendar year in

12 which the modification is mailed or delivered by

13 other means to the Secretary.’’.

14 (b) AMENDMENTS TO THE INTERNAL REVENUE

15 CODE OF 1986.—

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

17 3121(b) of the Internal Revenue Code of 1986 (re18 lating to employment) is amended to read as follows:

19 ‘‘(7) excluded State or local government em20 ployment (as defined in subsection (t));’’.

21 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

22 EMPLOYMENT.—Section 3121 of such Code is

23 amended by inserting after subsection (s) the follow24 ing new subsection:
37

•S 825 IS

1 ‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM2 PLOYMENT.—

3 ‘‘(1) IN GENERAL.—For purposes of this chap4 ter, the term ‘excluded State or local government

5 employment’ means any service performed in the

6 employ of a State, of any political subdivision there7 of, or of any instrumentality of any one or more of

8 the foregoing which is wholly owned thereby, if—

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

10 from the term ‘employment’ for purposes of this

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

12 in effect in March 1995 had remained in effect,

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

14 met with respect to such service, or

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

16 are met with respect to such service.

17 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

18 WHICH CONTINUES.—

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

20 this paragraph are met with respect to service

21 for any employer if—

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

23 individual—

24 ‘‘(I) who was performing sub25 stantial and regular service for remu-
38

•S 825 IS

1 neration for that employer before Jan2 uary 1, 1996,

3 ‘‘(II) who is a bona fide employee

4 of that employer on December 31,

5 1995, and

6 ‘‘(III) whose employment rela7 tionship with that employer was not

8 entered into for purposes of meeting

9 the requirements of this subpara10 graph, and

11 ‘‘(ii) the employment relationship with

12 that employer has not been terminated

13 after December 31, 1995.

14 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES

15 AND INSTRUMENTALITIES.—For purposes of

16 subparagraph (A), under regulations—

17 ‘‘(i) all agencies and instrumentalities

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

19 the Social Security Act) or of the District

20 of Columbia shall be treated as a single

21 employer, and

22 ‘‘(ii) all agencies and instrumentalities

23 of a political subdivision of a State (as so

24 defined) shall be treated as a single em-
39

•S 825 IS

1 ployer and shall not be treated as de2 scribed in clause (i).

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

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

5 this paragraph are met with respect to service

6 if such service is performed—

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

8 by a State or political subdivision thereof

9 to relieve such individual from unemploy10 ment,

11 ‘‘(ii) in a hospital, home, or other in12 stitution by a patient or inmate thereof as

13 an employee of a State or political subdivi14 sion thereof or of the District of Columbia,

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

16 of a State or political subdivision thereof

17 or of the District of Columbia, serving on

18 a temporary basis in case of fire, storm,

19 snow, earthquake, flood, or other similar

20 emergency,

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

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

23 United States Code (relating to certain in24 terns, student nurses, and other student

25 employees of hospitals of the District of
40

•S 825 IS

1 Columbia Government), other than as a

2 medical or dental intern or a medical or

3 dental resident in training,

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

5 worker if the remuneration paid in a cal6 endar year for such service is less than

7 $1,000 with respect to service performed

8 during 1996, and the adjusted amount de9 termined under section 210(r)(3)(C) of the

10 Social Security Act for any subsequent

11 year with respect to service performed dur12 ing such subsequent year, except to the ex13 tent that service by such election official or

14 election worker is included in employment

15 under an agreement under section 218 of

16 the Social Security Act, or

17 ‘‘(vi) by an employee in a position

18 compensated solely on a fee basis which is

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

20 as a trade or business for purposes of in21 clusion of such fees in net earnings from

22 self-employment.

23 ‘‘(B) DEFINITIONS.—As used in this para24 graph, the terms ‘State’ and ‘political subdivi-
41

•S 825 IS

1 sion’ have the meanings given those terms in

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

3 (3) CONFORMING AMENDMENTS.—

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

5 (relating to covered transportation service) is

6 repealed.

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

8 such Code (relating to application of hospital

9 insurance tax to Federal, State, and local em10 ployment) is amended—

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

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

13 that follows through the end of such sub14 paragraph and inserting ‘‘service is service

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

16 (ii) in subparagraph (C)(i), by insert17 ing ‘‘under subsection (b)(7) as in effect in

18 March 1995’’ after ‘‘chapter’’.

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

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

21 apply with respect to service performed after December

22 31, 1995.
42

•S 825 IS

1 SEC. 8. ADJUSTMENTS IN FORMULA FOR DETERMINING

2 PRIMARY INSURANCE AMOUNT.

3 (a) ADDITIONAL EARNINGS BRACKET.—Section

4 215(a)(1)(A) of the Social Security Act (42 U.S.C.

5 415(a)(1)(A)) is amended—

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

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

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

9 of an individual who initially becomes eligible for

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

11 (before becoming eligible for such benefits), after

12 calendar year 2001, do not exceed the amount estab13 lished for purposes of this clause by subparagraph

14 (B), and’’; and

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

16 new clause:

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

18 becomes eligible for old-age or disability insurance

19 benefits, or who dies (before becoming eligible for

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

21 of the individual’s average indexed monthly earnings

22 to the extent that such earnings exceed the amount

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

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

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

26 amended—
43

•S 825 IS

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

2 2002’’ after ‘‘1979’’ the first place it appears, and

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

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

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

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

7 new clauses:

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

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

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

11 after 2001, the amount established for purposes of clause

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

13 product of the following factors:

14 ‘‘(I) the amount established with respect to cal15 endar year 1979 under clause (i) of this subpara16 graph for purposes of clause (i) of subparagraph

17 (A), and

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

19 this subparagraph.

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

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

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

23 after 2001 and before 2026, the amount established for

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

25 amount equal to the product of the following factors:
44

•S 825 IS

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

2 preceding calendar year under this subparagraph for

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

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

5 this subparagraph, and

6 ‘‘(III) 0.99.

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

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

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

10 after 2025, the amount established for purposes of clause

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

12 product of the following factors:

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

14 calendar year 2025 under clause (iv) of this sub15 paragraph for purposes of clause (ii) of subpara16 graph (A), and

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

18 this subparagraph.

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

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

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

22 2002, the amount established for purposes of clause (iii)

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

24 quotient derived by dividing—
45

•S 825 IS

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

2 calendar year 2002 under clause (iv) of this sub3 paragraph for purposes of clause (ii) of subpara4 graph (A), by

‘‘(II) 0.9950 5 .

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

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

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

9 after 2002 and before 2026, the amount established for

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

11 amount equal to the product of the following factors:

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

13 preceding calendar year under this subparagraph for

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

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

16 this subparagraph, and

17 ‘‘(III) 0.99.

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

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

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

21 after 2025, the amount established for purposes of clause

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

23 product of the following factors:

24 ‘‘(I) the amount established with respect to cal25 endar year 2025 under clause (vii) of this subpara-
46

•S 825 IS

1 graph for purposes of clause (iii) of subparagraph

2 (A), and

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

4 this subparagraph.

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

6 quotient obtained by dividing—

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

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

9 preceding the calendar year for which the determina10 tion is made, by

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

12 in regulations of the Secretary and computed with13 out regard to the limitations specified in section

14 209(a)(1)) reported to the Secretary of the Treasury

15 or his delegate for the calendar year 1977.

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

17 quotient obtained by dividing—

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

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

20 preceding the calendar year for which the determina21 tion is made, by

22 ‘‘(II) the deemed average total wages (as de23 fined in section 209(k)(1)) for the third calendar

24 year preceding the calendar year for which the de25 termination is made.
47

•S 825 IS

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

2 quotient obtained by dividing—

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

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

5 preceding the calendar year for which the determina6 tion is made, by

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

8 in regulations of the Secretary and computed with9 out regard to the limitations specified in section

10 209(a)(1)) reported to the Secretary of the Treasury

11 or his delegate for the calendar year 2024.’’; and

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

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

14 this subparagraph’’.

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

16 this section shall apply with respect to individuals who ini17 tially become eligible (within the meaning of section

18 215(a)(3)(B) of the Social Security Act) for old-age or dis19 ability insurance benefits under title II of the Social Secu20 rity Act, or who die (before becoming eligible for such ben21 efits), in any calendar year after 2001.
48

•S 825 IS

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

2 OASDI TRUST FUND.

3 Subsection (d) of section 13215 of the Omnibus

4 Budget Reconciliation Act of 1993 is amended by insert5 ing ‘‘, and ending before January 1, 1996’’ after ‘‘1993’’.

6 SEC. 10. ESTABLISHMENT OF THE EQUITIES FUND WITHIN

7 THE FEDERAL OLD-AGE AND SURVIVORS IN8 SURANCE TRUST FUND.

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

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

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

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

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

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

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

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

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

18 paragraph:

19 ‘‘(2)(A) There is hereby established within the Fed20 eral Old-Age and Survivors Insurance Trust Fund (here21 after in this paragraph referred to as the ‘Trust Fund’)

22 an Equities Fund. Investment by the Managing Trustee

23 of the portion of the Trust Fund consisting of amounts

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

25 designed to replicate the performance of the index selected

26 under subparagraph (B). The portfolio shall be designed
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1 such that, to the extent practicable, the percentage of the

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

3 as the percentage determined by dividing the aggregate

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

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

6 index.

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

8 which is a commonly recognized index comprised of com9 mon stock the aggregate market value of which is a rea10 sonably complete representation of the United States eq11 uity markets.

12 ‘‘(C) The amounts of the Trust Fund held by the Eq13 uities Fund shall consist of amounts deposited in the Eq14 uities Fund under section 10(c) of the Strengthening So15 cial Security Act of 1995 and such amounts as may be

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

17 hereafter provided in this section.

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

19 Trust Fund of amounts in the Equities Fund shall be sub20 ject to guidelines and procedures prescribed by the Per21 sonal Investment Fund Board pursuant to subsection (n).

22 The Managing Trustee may carry out the functions with

23 respect to investment of amounts in the Equities Fund

24 in a manner which is not in accordance with such guide25 lines and procedures only if such functions are otherwise
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1 carried out in accordance with the requirements of this

2 paragraph.’’.

3 (b) CREDITING OF INCOME AND PROCEEDS FROM

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

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

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

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

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

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

10 of the Equities Fund.’’.

11 (c) DEPOSITS TO EQUITIES FUND.—

12 (1) IN GENERAL.—There is transferred on Oc13 tober 1 of 1997, and each of the succeeding 14 cal14 endar years, to the Equities Fund, from amounts

15 otherwise available in the Federal Old-Age and Sur16 vivors Insurance Trust Fund, an amount equal to

17 the applicable percentage of the Trust Fund.

18 (2) DETERMINATIONS AND ADJUSTMENTS.—

19 (A) APPLICABLE PERCENTAGE.—The Per20 sonal Investment Fund Board shall determine

21 the applicable percentage for each fiscal year

22 under paragraph (1), such that—

23 (i) a gradual phase-in occurs during

24 the 15-year period described in paragraph

25 (1), and
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1 (ii) such percentage shall not exceed

2 25 percent for fiscal year 2012.

3 (B) TRANSFERS.—Transfers under para4 graph (1) shall be made by the Secretary of the

5 Treasury on the basis of estimates by the Sec6 retary. Proper adjustments shall be made in

7 amounts subsequently appropriated to the Eq8 uities Fund to the extent prior estimates were

9 in excess of or were less than the actual

10 amounts.

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

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

13 apply with respect to fiscal years beginning on or after

14 such date.

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