II

105TH CONGRESS

2D SESSION S. 1792

To reduce social security payroll taxes, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 18, 1998

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

which was read twice and referred to the Committee on Finance

A BILL

To reduce social security payroll taxes, 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; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Social Security Solvency Act of 1998’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Modification of FICA rates to provide pay-as-you-go financing of social

security.

Sec. 3. Voluntary investment of payroll tax cut by employees.

Sec. 4. Increase of social security wage base.

Sec. 5. Cost-of-living adjustments.

Sec. 6. Tax treatment of social security payments.

Sec. 7. Coverage of newly hired State and local employees.
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Sec. 8. Increase in length of computation period from 35 to 38 years.

Sec. 9. Phased in increase in social security retirement age.

Sec. 10. Elimination of earnings test for individuals who have attained early retirement age.

1 SEC. 2. MODIFICATION OF FICA RATES TO PROVIDE PAY2 AS-YOU-GO FINANCING OF SOCIAL SECURITY.

3 (a) IN GENERAL.—

4 (1) TAX ON EMPLOYEES.—Section 3101(a) of

5 the Internal Revenue Code of 1986 (relating to tax

6 on employees) is amended to read as follows:

7 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR8 ANCE.—

9 ‘‘(1) IN GENERAL.—In addition to other taxes,

10 there is hereby imposed on the income of every indi11 vidual a tax equal to the applicable percentage of the

12 wages (as defined in section 3121(a)) received by

13 him with respect to employment (as defined in sec14 tion 3121(b)).

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

16 of paragraph (1), the applicable percentage shall be

17 the percentage set forth in the following table:

‘‘In the case wages The applicable percentage

received during: shall be:

1999 through 2024 ............................................... 5.2

2025 through 2029 ............................................... 5.7

2030 through 2044 ............................................... 6.2

2045 through 2054 ............................................... 6.35

2055 through 2059 ............................................... 6.5

2060 or thereafter ................................................. 6.7 .’’
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1 (2) TAX ON EMPLOYERS.—Section 3111(a) of

2 such Code (relating to tax on employers) is amended

3 to read as follows:

4 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR5 ANCE.—

6 ‘‘(1) IN GENERAL.—In addition to other taxes,

7 there is hereby imposed on every employer an excise

8 tax, with respect to having individuals in his employ,

9 equal to the applicable percentage of the wages (as

10 defined in section 3121(a)) paid by him with respect

11 to employment (as defined in section 3121(b)).

12 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

13 of paragraph (1), the applicable percentage shall be

14 the percentage set forth in the following table:

‘‘In the case wages The applicable percentage

paid during: shall be:

1999 and 2000 ...................................................... 6.2

2001 through 2024 ............................................... 5.2

2025 through 2029 ............................................... 5.7

2030 through 2044 ............................................... 6.2

2045 through 2054 ............................................... 6.35

2055 through 2059 ............................................... 6.5

2060 or thereafter ................................................. 6.7 .’’

15 (3) SELF-EMPLOYMENT TAX.—Section 1401(a)

16 of such Code (relating to tax on self-employment in17 come) is amended to read as follows:

18 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR19 ANCE.—

20 ‘‘(1) IN GENERAL.—In addition to other taxes,

21 there is hereby imposed for each taxable year, on the
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1 self-employment income of every individual, a tax

2 equal to the applicable percentage of the amount of

3 the self-employment income for such taxable year.

4 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

5 of paragraph (1), the applicable percentage shall be

6 the percentage set forth in the following table:

‘‘In the case of a taxable year

Beginning after: And before:

The applicable

percentage

is:

December 31, 1998 .......... January 1, 2001 ............. 11.4

December 31, 2000 .......... January 1, 2025 ............. 10.4

December 31, 2024 .......... January 1, 2030 ............. 11.4

December 31, 2029 .......... January 1, 2045 ............. 12.4

December 31, 2044 .......... January 1, 2055 ............. 12.7

December 31, 2054 .......... January 1, 2060 ............. 13.0

December 31, 2059 .......... ......................................... 13.4 .’’

7 (4) EFFECTIVE DATES.—

8 (A) EMPLOYEES AND EMPLOYERS.—The

9 amendments made by paragraphs (1) and (2)

10 apply to remuneration paid after December 31,

11 1998.

12 (B) SELF-EMPLOYED INDIVIDUALS.—The

13 amendment made by paragraph (3) applies to

14 taxable years beginning after December 31,

15 1998.

16 (b) REALLOCATION OF EMPLOYMENT TAXES.—

17 (1) REALLOCATION OF TAX ON EMPLOYEES

18 AND EMPLOYERS.—Section 201(b)(1) of the Social

19 Security Act (42 U.S.C. 401(b)(1)) is amended by
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1 striking ‘‘(Q) 1.70 per centum of the wages (as so

2 defined) paid after December 31, 1996, and before

3 January 1, 2000, and so reported, and (R) 1.80 per

4 centum of the wages (as so defined) paid after De5 cember 31, 1999, and so reported’’ and inserting

6 ‘‘(Q) 1.70 per centum of the wages (as so defined)

7 paid after December 31, 1996, and before January

8 1, 1999, and so reported, (R) 1.80 per centum of

9 the wages (as so defined) paid after December 31,

10 1998, and before January 1, 2015, and so reported,

11 (S) 2.00 per centum of the wages (as so defined)

12 paid after December 31, 2014, and before January

13 1, 2025, and so reported, (T) 2.30 per centum of

14 the wages (as so defined) paid after December 31,

15 2024, and before January 1, 2030, and so reported,

16 (U) 2.20 per centum of the wages (as so defined)

17 paid after December 31, 2029, and before January

18 1, 2035, and so reported, (V) 2.30 per centum of

19 the wages (as so defined) paid after December 31,

20 2034, and before January 1, 2040, and so reported,

21 (W) 2.40 per centum of the wages (as so defined)

22 paid after December 31, 2039, and before January

23 1, 2045, and so reported, (X) 2.80 per centum of

24 the wages (as so defined) paid after December 31,

25 2044, and before January 1, 2055, and so reported,
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1 and (Y) 2.90 per centum of the wages (as so de2 fined) paid after December 31, 2054, and so re3 ported’’.

4 (2) REALLOCATION OF TAX ON SELF-EMPLOY5 MENT INCOME.—Section 201(b)(2) of such Act (42

6 U.S.C. 401(b)(2)) is amended by striking ‘‘(Q) 1.70

7 per centum of self-employment income (as so de8 fined) so reported for any taxable year beginning

9 after December 31, 1996, and before January 1,

10 2000, and (R) 1.80 per centum of self-employment

11 income (as so defined) so reported for any taxable

12 year beginning after December 31, 1999’’ and in13 serting ‘‘(Q) 1.70 per centum of self-employment in14 come (as so defined) so reported for any taxable

15 year beginning after December 31, 1996, and before

16 January 1, 1999, (R) 1.80 per centum of self-em17 ployment income (as so defined) so reported for any

18 taxable year beginning after December 31, 1998,

19 and before January 1, 2015, (S) 2.00 per centum of

20 self-employment income (as so defined) so reported

21 for any taxable year beginning after December 31,

22 2014, and before January 1, 2025, (T) 2.30 per

23 centum of self-employment income (as so defined) so

24 reported for any taxable year beginning after De25 cember 31, 2024, and before January 1, 2030, (U)
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1 2.20 per centum of self-employment income (as so

2 defined) so reported for any taxable year beginning

3 after December 31, 2029, and before January 1,

4 2035, (V) 2.30 per centum of self-employment in5 come (as so defined) so reported for any taxable

6 year beginning after December 31, 2034, and before

7 January 1, 2040, (W) 2.40 per centum of self-em8 ployment income (as so defined) so reported for any

9 taxable year beginning after December 31, 2039,

10 and before January 1, 2045, (X) 2.80 per centum

11 of self-employment income (as so defined) so re12 ported for any taxable year beginning after Decem13 ber 31, 2044, and before January 1, 2055, and (Y)

14 2.90 per centum of self-employment income (as so

15 defined) so reported for any taxable year beginning

16 after December 31, 2054’’.

17 (c) FUTURE RATES AND ALLOCATION BETWEEN

18 TRUST FUNDS PROPOSED BY BOARD OF TRUSTEES FOR

19 LEGISLATIVE ACTION.—

20 (1) IN GENERAL.—Section 201(c) of the Social

21 Security Act (42 U.S.C. 401(c)) is amended in the

22 matter following paragraph (5) by striking ‘‘(as de23 fined by the Board of Trustees).’’ and inserting ‘‘(as

24 defined by the Board of Trustees. If such finding

25 shows that the combined Trust Funds are not in
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1 close actuarial balance (as so defined), then such re2 port (beginning in April 2000) shall include a legis3 lative recommendation by the Board of Trustees

4 specifying new rates of tax under sections 3101(a),

5 3111(a), and 1401(a) of the Internal Revenue Code

6 of 1986, and the allocation of those rates between

7 the Trust Funds necessary in order to restore the

8 combined Trust Funds and each Trust Fund to ac9 tuarial balance. If such finding shows that the com10 bined Trust Funds are in close actuarial balance (as

11 so defined), but that 1 of the Trust Funds is not in

12 close actuarial balance, then such report (beginning

13 in April 2000) shall include a legislative rec14 ommendation by the Board of Trustees specifying a

15 new allocation of such rates of tax between the

16 Trust Funds, so that each Trust Fund is in close

17 actuarial balance. Such recommendation shall be

18 considered by Congress under procedures described

19 in subsection (n)).’’.

20 (2) FAST-TRACK CONSIDERATION OF LEGISLA21 TIVE RECOMMENDATIONS.—Section 201 of such Act

22 (42 U.S.C. 401) is amended by adding at the end

23 the following new subsection:

24 ‘‘(n)(1) Any legislative recommendation included in

25 the report provided for in subsection (c) shall—
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1 ‘‘(A) not later than 3 days after the Board of

2 Trustees submits such report, be introduced (by re3 quest) in the House of Representatives by the Ma4 jority Leader of the House and be introduced (by re5 quest) in the Senate by the Majority Leader of the

6 Senate; and

7 ‘‘(B) be given expedited consideration under the

8 same provisions and in the same way, subject to

9 paragraph (2), as a joint resolution under section

10 2908 of the Defense Base Closure and Realignment

11 Act of 1990 (10 U.S.C. 2678 note).

12 ‘‘(2) For purposes of applying paragraph (1) with re13 spect to such provisions, the following rules shall apply:

14 ‘‘(A) Section 2908(a) of the Defense Base Clo15 sure and Realignment Act of 1990 (10 U.S.C. 2678

16 note) shall not apply.

17 ‘‘(B) Any reference to the resolution described

18 in subsection (a) shall be deemed to be a reference

19 to the legislative recommendation submitted under

20 subsection (c) of this Act.

21 ‘‘(C) Any reference to the Committee on Na22 tional Security of the House of Representatives shall

23 be deemed to be a reference to the Committee on

24 Ways and Means of the House of Representatives

25 and any reference to the Committee on Armed Serv-
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1 ices of the Senate shall be deemed to be a reference

2 to the Committee on Finance of the Senate.

3 ‘‘(D) Any reference to the date on which the

4 President transmits a report shall be deemed to be

5 a reference to the date on which the recommenda6 tion is submitted under subsection (c).’’.

7 (d) CONFORMING AMENDMENTS TO FERS TO PRO8 TECT PAYROLL TAX CUT.—The table contained in section

9 8422(a)(3) of title 5, United States Code, is amended—

10 (1) by striking ‘‘7’’ the second place it appears

11 and inserting ‘‘6’’;

12 (2) by striking ‘‘7.25’’ and inserting ‘‘6.25’’;

13 (3) by striking ‘‘7.4’’ and inserting ‘‘6.4’’;

14 (4) by striking ‘‘7.5’’ the first, third, fifth, and

15 seventh places it appears and inserting ‘‘6.5’’;

16 (5) by striking ‘‘7.75’’ each place it appears

17 and inserting ‘‘6.75’’;

18 (6) by striking ‘‘7.9’’ each place it appears and

19 inserting ‘‘6.9’’; and

20 (7) by striking ‘‘8’’ each place it appears and

21 inserting ‘‘7’’.

22 SEC. 3. VOLUNTARY INVESTMENT OF PAYROLL TAX CUT BY

23 EMPLOYEES.

24 (a) SHORT TITLE.—This section may be cited as the

25 ‘‘Voluntary Investment Contribution Act (VICA)’’.
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1 (b) VOLUNTARY INVESTMENT OF PAYROLL TAX

2 CUT.—

3 (1) IN GENERAL.—Title II of the Social Secu4 rity Act (42 U.S.C. 401 et seq.) is amended—

5 (A) by inserting before section 201 the fol6 lowing:

7 ‘‘PART A—INSURANCE BENEFITS’’;

8 and

9 (B) by adding at the end the following:

10 ‘‘PART B—VOLUNTARY INVESTMENT ACCOUNTS

11 ‘‘EMPLOYEE ELECTION AND DESIGNATION OF VOL12 UNTARY INVESTMENT ACCOUNT UNDER PAYROLL

13 DEDUCTION PLAN

14 ‘‘SEC. 251. (a) IN GENERAL.—An individual who is

15 an employee of a covered employer may elect to participate

16 in the employer’s voluntary investment account payroll de17 duction plan either—

18 ‘‘(1) not later than 10 business days after the

19 individual becomes an employee of the employer, or

20 ‘‘(2) during any open enrollment period.

21 The Commissioner shall by regulation provide for at least

22 1 open enrollment period annually.

23 ‘‘(b) PERIOD OF ELECTION.—

24 ‘‘(1) TIME ELECTION TAKES EFFECT.—An elec25 tion under subsection (a) shall take effect with re-
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1 spect to the first pay period beginning more than 14

2 days after the date of the election.

3 ‘‘(2) TERMINATION.—An election under sub4 section (a) shall terminate—

5 ‘‘(A) upon the termination of employment

6 of the employee of the covered employer, or

7 ‘‘(B) with respect to pay periods beginning

8 more than 14 days after the employee termi9 nates such election.

10 ‘‘(c) DESIGNATION OF VOLUNTARY INVESTMENT AC11 COUNT.—

12 ‘‘(1) INITIAL ELECTION.—An employee shall, at

13 the time an election is made under subsection (a),

14 designate the voluntary investment account to which

15 voluntary investment account contributions on behalf

16 of the employee are to be deposited.

17 ‘‘(2) CHANGES.—The Commissioner shall by

18 regulation provide the time and manner by which an

19 employee may—

20 ‘‘(A) designate another voluntary invest21 ment account to which contributions are to be

22 deposited, and

23 ‘‘(B) transfer amounts from one such ac24 count to another.
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1 ‘‘(d) FORM OF ELECTIONS.—Elections under this

2 section shall be made—

3 ‘‘(1) on W–4 forms (or any successor forms), or

4 ‘‘(2) in such other manner as the Commissioner

5 may prescribe in order to ensure ease of administra6 tion and reductions in burdens on employers.

7 ‘‘VOLUNTARY INVESTMENT ACCOUNT PAYROLL

8 DEDUCTION PLANS

9 ‘‘SEC. 252. (a) IN GENERAL.—Each person who is

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

11 a voluntary investment account payroll deduction plan for

12 such calendar year for such person’s electing employees.

13 ‘‘(b) VOLUNTARY INVESTMENT ACCOUNT PAYROLL

14 DEDUCTION PLANS.—For purposes of this part, the term

15 ‘voluntary investment account payroll deduction plan’

16 means a written plan of an employer—

17 ‘‘(1) which applies only with respect to wages of

18 any employee who elects to become an electing em19 ployee in accordance with section 251,

20 ‘‘(2) under which the voluntary investment ac21 count contributions under section 3101(a) of the In22 ternal Revenue Code of 1986 will be deducted from

23 an electing employee’s wages and, together with such

24 contributions under section 3111(a) of such Code on

25 behalf of such employee, will be paid to the Social

26 Security Administration for deposit in 1 or more vol-
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1 untary investment accounts designated by such em2 ployee in accordance with section 251,

3 ‘‘(3) under which the employer is required to

4 pay the amount so contributed with respect to the

5 specified voluntary investment account of the elect6 ing employee within the same time period as other

7 taxes under sections 3101 and 3111 with respect to

8 the wages of such employee,

9 ‘‘(4) under which the employer receives no com10 pensation for the cost of administering such plan,

11 and

12 ‘‘(5) under which the employer does not make

13 any endorsement with respect to any voluntary in14 vestment account.

15 ‘‘(c) PENALTIES FOR FAILURE TO ESTABLISH VOL16 UNTARY INVESTMENT ACCOUNT PAYROLL DEDUCTION

17 PLAN.—

18 ‘‘(1) IN GENERAL.—Any covered employer who

19 fails to meet the requirements of this section for any

20 calendar year shall be subject to a civil penalty of

21 not to exceed the greater of—

22 ‘‘(A) $2,500, or

23 ‘‘(B) $100 for each electing employee of

24 such employer as of the beginning of such cal25 endar year.
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1 ‘‘(2) RULES FOR APPLICATION OF SUB2 SECTION.—

3 ‘‘(A) PENALTIES ASSESSED BY COMMIS4 SIONER.—Any civil penalty assessed by this

5 subsection shall be imposed by the Commis6 sioner of Social Security and collected in a civil

7 action.

8 ‘‘(B) COMPROMISES.—The Commissioner

9 may compromise the amount of any civil pen10 alty imposed by this subsection.

11 ‘‘(C) AUTHORITY TO WAIVE PENALTY IN

12 CERTAIN CASES.—The Commissioner may waive

13 the application of this subsection with respect

14 to any failure if the Commissioner determines

15 that such failure is due to reasonable cause and

16 not to intentional disregard of rules and regula17 tions.

18 ‘‘PARTICIPATION BY SELF-EMPLOYED INDIVIDUALS

19 ‘‘SEC. 253. An individual shall make an election to

20 become an electing self-employed individual, designate a

21 voluntary investment account, and have in effect a vol22 untary investment account payroll deduction plan under

23 rules similar to the rules under sections 251 and 252.

24 ‘‘DEFINITIONS AND SPECIAL RULES

25 ‘‘SEC. 254. For purposes of this part—

26 ‘‘(1) VOLUNTARY INVESTMENT ACCOUNT.—
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1 ‘‘(A) IN GENERAL.—The term ‘voluntary

2 investment account’ means—

3 ‘‘(i) any voluntary investment account

4 in the Voluntary Investment Fund (estab5 lished under section 255) which is adminis6 tered by the Voluntary Investment Board,

7 or

8 ‘‘(ii) any individual retirement plan

9 (as defined in section 7701(a)(37) of the

10 Internal Revenue Code of 1986), other

11 than a Roth IRA (as defined in section

12 408A(b) of such Code), which is des13 ignated by the electing employee as a vol14 untary investment account (in such man15 ner as the Secretary of the Treasury may

16 prescribe) and which is administered or

17 issued by a bank or other person referred

18 to in section 408(a)(2) of such Code.

19 ‘‘(B) TREATMENT OF ACCOUNTS.—

20 ‘‘(i) IN GENERAL.—Except as pro21 vided in clause (ii)—

22 ‘‘(I) any voluntary investment ac23 count described in subparagraph

24 (A)(i) shall be treated in the same

25 manner as an account in the Thrift
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1 Savings Fund under subchapter III of

2 chapter 84 of title 5, United States

3 Code, and

4 ‘‘(II) any voluntary investment

5 account described in subparagraph

6 (A)(ii) shall be treated in the same

7 manner as an individual retirement

8 plan (as so defined).

9 ‘‘(ii) EXCEPTIONS.—

10 ‘‘(I) CONTRIBUTION LIMIT.—The

11 aggregate amount of contributions for

12 any taxable year to all voluntary in13 vestment accounts of an electing em14 ployee shall not exceed the aggregate

15 amount of contributions made pursu16 ant to sections 3101(a)(3),

17 3111(a)(3), and 1401(a)(3) of the In18 ternal Revenue Code of 1986 and paid

19 pursuant to section 252 or 253 on be20 half of such employee.

21 ‘‘(II) NO DEDUCTION AL22 LOWED.—No deduction shall be al23 lowed under section 219 of the Inter24 nal Revenue Code of 1986 for a con25 tribution to a voluntary investment
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1 account described in subparagraph

2 (A)(ii).

3 ‘‘(III) ROLLOVER CONTRIBU4 TIONS.—No rollover contribution may

5 be made to a voluntary investment ac6 count unless it is from another vol7 untary investment account. A rollover

8 described in the preceding sentence

9 shall not be taken into account for

10 purposes of subclause (I).

11 ‘‘(IV) DISTRIBUTIONS ALLOWED

12 TO SOCIAL SECURITY BENE13 FICIARIES.—Notwithstanding any

14 other provision of law, distributions

15 may only be made from a voluntary

16 investment account of an electing em17 ployee on or after the earlier of the

18 date on which the employee begins re19 ceiving benefits under this title or the

20 date of the employee’s death.

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

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

23 on whom an excise tax is imposed under section

24 3111 of the Internal Revenue Code of 1986 with re25 spect to having an individual in the person’s employ
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1 to whom wages are paid by such person during such

2 calendar year.

3 ‘‘(3) ELECTING EMPLOYEE.—The term ‘electing

4 employee’ means an individual with respect to whom

5 an election under section 251 is in effect.

6 ‘‘(4) ELECTING SELF-EMPLOYED INDIVID7 UAL.—The term ‘electing self-employed individual’

8 means an individual with respect to whom an elec9 tion under section 253 is in effect.

10 ‘‘VOLUNTARY INVESTMENT FUND

11 ‘‘SEC. 255. (a) ESTABLISHMENT.—There is estab12 lished and maintained in the Treasury of the United

13 States a Voluntary Investment Fund in the same manner

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

15 and 8439 of title 5, United States Code.

16 ‘‘(b) VOLUNTARY INVESTMENT FUND BOARD.—

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

18 operated in the Social Security Administration a

19 Voluntary Investment Fund Board in the same man20 ner as the Federal Retirement Thrift Investment

21 Board under subchapter VII of chapter 84 of title

22 5, United States Code.

23 ‘‘(2) SPECIFIC INVESTMENT DUTIES.—The Vol24 untary Investment Fund shall be managed by the

25 Voluntary Investment Fund Board in the same man26 ner as the Thrift Savings Fund is managed under
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1 subchapter VIII of chapter 84 of title 5, United

2 States Code.’’.

3 (2) EXEMPTION FROM ERISA REQUIRE4 MENTS.—Section 4(b) of the Employee Retirement

5 Income Security Act of 1974 (29 U.S.C. 1003(b)) is

6 amended—

7 (A) in paragraph (4), by striking ‘‘or’’;

8 (B) in paragraph (5), by striking the pe9 riod and inserting ‘‘; or’’; and

10 (C) by inserting after paragraph (5) the

11 following:

12 ‘‘(6) such plan is a voluntary investment ac13 count payroll deduction plan established under part

14 B of title II of the Social Security Act.’’.

15 (3) EFFECTIVE DATE AND NOTICE REQUIRE16 MENTS.—

17 (A) EFFECTIVE DATE.—The amendments

18 made by this subsection (and any voluntary in19 vestment account payroll deduction plan re20 quired thereunder) apply with respect to wages

21 paid after December 31, 2000, for pay periods

22 beginning after such date and self-employment

23 income for taxable years beginning after such

24 date.

25 (B) NOTICE REQUIREMENTS.—
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1 (i) IN GENERAL.—Not later than Oc2 tober 1, 2000, the Commissioner of Social

3 Security shall—

4 (I) send to the last known ad5 dress of each eligible individual a de6 scription of the program established

7 by the amendments made by this sub8 section, which shall be written in the

9 form of a pamphlet in language which

10 may be readily understood by the av11 erage worker,

12 (II) provide for toll-free access by

13 telephone from all localities in the

14 United States and access by the Inter15 net to the Social Security Administra16 tion through which individuals may

17 obtain information and answers to

18 questions regarding such program,

19 and

20 (III) provide information to the

21 media in all localities of the United

22 States about such program and such

23 toll-free access by telephone and ac24 cess by Internet.
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1 (ii) ELIGIBLE INDIVIDUAL.—For pur2 poses of this subparagraph, the term ‘‘eli3 gible individual’’ means an individual who,

4 as of the date of the pamphlet sent pursu5 ant to clause (i), is indicated within the

6 records of the Social Security Administra7 tion as being credited with 1 or more quar8 ters of coverage under section 213 of the

9 Social Security Act (42 U.S.C. 413).

10 (iii) MATTERS TO BE INCLUDED.—

11 The Commissioner shall include with the

12 pamphlet sent to each eligible individual

13 pursuant to clause (i)—

14 (I) a statement of the number of

15 quarters of coverage indicated in the

16 records of the Social Security Admin17 istration as of the date of the descrip18 tion as credited to such individual

19 under section 213 of such Act and the

20 date as of which such records may be

21 considered accurate, and

22 (II) the number for toll-free ac23 cess by telephone established by the

24 Commissioner pursuant to clause (i).
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1 (c) CONFORMING AMENDMENTS TO PAYROLL TAX

2 PROVISIONS.—

3 (1) EMPLOYEES VOLUNTARY INVESTMENT CON4 TRIBUTIONS.—Section 3101(a) of the Internal Reve5 nue Code of 1986 (relating to tax on employees), as

6 amended by section 2(a)(1), is amended by adding

7 at the end the following:

8 ‘‘(3) VOLUNTARY INVESTMENT ACCOUNT CON9 TRIBUTION.—In the case of an electing employee (as

10 defined in section 254(3) of the Social Security Act),

11 in addition to other taxes, there is hereby imposed

12 on the income of such employee a voluntary invest13 ment account contribution equal to 1 percent of the

14 wages (as so defined) received by him with respect

15 to employment (as so defined).’’.

16 (2) EMPLOYERS MATCHING CONTRIBUTIONS.—

17 Section 3111(a) of such Code (relating to tax on em18 ployers), as amended by section 2(a)(2), is amended

19 by adding at the end the following:

20 ‘‘(3) MATCHING CONTRIBUTION TO EMPLOYEE

21 VOLUNTARY INVESTMENT ACCOUNT CONTRIBU22 TION.—In the case of an employer having in his em23 ploy an electing employee (as defined in section

24 254(3) of the Social Security Act), in addition to

25 other taxes, there is hereby imposed on such em-
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1 ployer a voluntary investment account contribution

2 equal to 1 percent of the wages (as so defined) paid

3 by him with respect to employment (as so defined)

4 of such employee.’’.

5 (3) SELF-EMPLOYMENT VOLUNTARY INVEST6 MENT ACCOUNT CONTRIBUTIONS.—Section 1401(a)

7 of such Code (relating to tax on self-employment in8 come), as amended by section 2(a)(3), is amended

9 by adding at the end the following:

10 ‘‘(3) VOLUNTARY INVESTMENT ACCOUNT CON11 TRIBUTION.—In the case of an electing self-em12 ployed individual (as defined in section 254(4) of the

13 Social Security Act), in addition to other taxes,

14 there is hereby imposed for each taxable year, on the

15 self-employment income of such individual, a vol16 untary investment account contribution equal to 2

17 percent of the amount of the self-employment in18 come for such taxable year.’’.

19 (4) EFFECTIVE DATES.—

20 (A) EMPLOYEES AND EMPLOYERS.—The

21 amendments made by paragraphs (1) and (2)

22 apply to remuneration paid after December 31,

23 2000.

24 (B) SELF-EMPLOYED INDIVIDUALS.—The

25 amendment made by paragraph (3) applies to
25

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1 taxable years beginning after December 31,

2 2000.

3 SEC. 4. INCREASE OF SOCIAL SECURITY WAGE BASE.

4 (a) IN GENERAL.—Section 230 of the Social Security

5 Act (42 U.S.C. 430) is amended—

6 (1) in subsection (b)—

7 (A) in paragraph (1), by striking

8 ‘‘$60,600’’ and inserting ‘‘$97,500’’; and

9 (B) in paragraph (2), by striking ‘‘1992’’

10 and inserting ‘‘2001’’; and

11 (2) in subsection (c)—

12 (A) by striking ‘‘(1)’’ and all that follows

13 through ‘‘$29,700.’’ and inserting ‘‘the ‘con14 tribution and benefit base’ with respect to re15 muneration paid (and taxable years begin16 ning)—

17 ‘‘(1) in 2001 shall be $85,000,

18 ‘‘(2) in 2002 shall be $92,000, and

19 ‘‘(3) in 2003 shall be $97,500.’’; and

20 (B) by striking ‘‘specified in clause (2) of

21 the preceding sentence’’ and inserting ‘‘specified

22 in the preceding sentence’’.

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

24 this section take effect on January 1, 2001.
26

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1 SEC. 5. COST-OF-LIVING ADJUSTMENTS.

2 (a) COST-OF-LIVING BOARD.—Title XI of the Social

3 Security Act (42 U.S.C. 1301 et seq.) is amended by add4 ing at the end the following:

5 ‘‘PART D—COST-OF-LIVING ADJUSTMENTS

6 ‘‘DETERMINATION OF INFLATION ADJUSTMENT

7 ‘‘SEC. 1180. (a) MODIFICATION OF COST-OF-LIVING

8 ADJUSTMENT.—

9 ‘‘(1) IN GENERAL.—Notwithstanding any other

10 provision of law, any cost-of-living adjustment de11 scribed in subsection (e) shall be reduced by the ap12 plicable percentage point.

13 ‘‘(2) APPLICABLE PERCENTAGE POINT.—In this

14 section, the term ‘applicable percentage point’

15 means—

16 ‘‘(A) except as provided in subparagraph

17 (B), 1 percentage point; or

18 ‘‘(B) the applicable percentage point

19 adopted by the Cost-of-Living Board under sub20 section (b) for the calendar year.

21 ‘‘(b) COST-OF-LIVING BOARD DETERMINATION.—

22 ‘‘(1) IN GENERAL.—The Cost-of-Living Board

23 established under section 1181 shall for each cal24 endar year after 1998 determine if a new applicable

25 percentage point is necessary to replace the applica26 ble percentage point described in subsection
27

•S 1792 IS

1 (a)(2)(A) to ensure an accurate cost-of-living adjust2 ment which shall apply to any cost-of-living adjust3 ment taking effect during such year.

4 ‘‘(2) ADOPTION OR REJECTION OF NEW APPLI5 CABLE PERCENTAGE POINT.—

6 ‘‘(A) ADOPTION.—

7 ‘‘(i) IN GENERAL.—If the Cost-of-Liv8 ing Board adopts by majority vote a new

9 applicable percentage point under para10 graph (1), then, for purposes of subsection

11 (a)(1), the new applicable percentage point

12 shall remain in effect during the following

13 calendar year.

14 ‘‘(ii) APPROPRIATE ADJUSTMENTS.—

15 The Cost-of-Living Board shall make ap16 propriate adjustments to the applicable

17 percentage point applied to any cost-of-liv18 ing adjustment if—

19 ‘‘(I) the period during which the

20 change in the cost-of-living is meas21 ured for such adjustment is different

22 than the period used by the Cost-of23 Living Board; or
28

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1 ‘‘(II) the adjustment is based on

2 a component of an index rather than

3 the entire index.

4 ‘‘(B) REJECTION.—If the Cost-of-Living

5 Board fails by majority vote to adopt a new ap6 plicable percentage point under paragraph (1)

7 for any calendar year, then the applicable per8 centage point for such calendar year shall be

9 the applicable percentage point described in

10 subsection (a)(2)(A).

11 ‘‘(c) REPORT.—Not later than November 1 of each

12 calendar year, the Cost-of-Living Board shall submit a re13 port to the President and Congress containing a detailed

14 statement with respect to the new applicable percentage

15 point (if any) agreed to by the Board under subsection

16 (b).

17 ‘‘(d) JUDICIAL REVIEW.—Any determination by the

18 Cost-of Living Board under subsection (b) shall not be

19 subject to judicial review.

20 ‘‘(e) COST-OF-LIVING ADJUSTMENT DESCRIBED.—A

21 cost-of-living adjustment described in this subsection is

22 any cost-of-living adjustment for a calendar year after

23 1998 determined by reference to a percentage change in

24 a consumer price index or any component thereof (as pub25 lished by the Bureau of Labor Statistics of the Depart-
29

•S 1792 IS

1 ment of Labor and determined without regard to this sec2 tion) and used in any of the following:

3 ‘‘(1) The Internal Revenue Code of 1986.

4 ‘‘(2) Titles II, XVIII, and XIX of this Act.

5 ‘‘(3) Any other Federal program (not including

6 programs under title XVI of this Act).

7 ‘‘COST-OF-LIVING BOARD

8 ‘‘SEC. 1181. (a) ESTABLISHMENT OF BOARD.—

9 ‘‘(1) ESTABLISHMENT.—There is established a

10 board to be known as the Cost-of-Living Board (in

11 this section referred to as the ‘Board’).

12 ‘‘(2) MEMBERSHIP.—

13 ‘‘(A) COMPOSITION.—The Board shall be

14 composed of 5 members of whom—

15 ‘‘(i) 1 shall be the Chairman of the

16 Board of Governors of the Federal Reserve

17 System;

18 ‘‘(ii) 1 shall be the Chairman of the

19 President’s Council of Economic Advisers;

20 and

21 ‘‘(iii) 3 shall be appointed by the

22 President, by and with the advice and con23 sent of the Senate.

24 The President shall consult with the leadership

25 of the House of Representatives and the Senate
30

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1 in the appointment of the Board members

2 under clause (iii).

3 ‘‘(B) EXPERTISE.—The members of the

4 Board appointed under subparagraph (A)(iii)

5 shall be experts in the field of economics and

6 should be familiar with the issues related to the

7 calculation of changes in the cost of living. In

8 appointing members under subparagraph

9 (A)(iii), the President shall consider appoint10 ing—

11 ‘‘(i) former members of the Presi12 dent’s Council of Economic Advisers;

13 ‘‘(ii) former Treasury department offi14 cials;

15 ‘‘(iii) former members of the Board of

16 Governors of the Federal Reserve System;

17 ‘‘(iv) other individuals with relevant

18 prior government experience in positions

19 requiring appointment by the President

20 and Senate confirmation; and

21 ‘‘(v) academic experts in the field of

22 price statistics.

23 ‘‘(C) DATE.—

24 ‘‘(i) NOMINATIONS.—Not later than

25 30 days after the date of enactment of the
31

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1 Social Security Solvency Act of 1998, the

2 President shall submit the nominations of

3 the members of the Board described in

4 subparagraph (A)(iii) to the Senate.

5 ‘‘(ii) SENATE ACTION.—Not later

6 than 60 days after the Senate receives the

7 nominations under clause (i), the Senate

8 shall vote on confirmation of the nomina9 tions.

10 ‘‘(3) TERMS AND VACANCIES.—

11 ‘‘(A) TERMS.—A member of the Board ap12 pointed under paragraph (2)(A)(iii) shall be ap13 pointed for a term of 5 years, except that of the

14 members first appointed under that para15 graph—

16 ‘‘(i) 1 member shall be appointed for

17 a term of 1 year;

18 ‘‘(ii) 1 member shall be appointed for

19 a term of 3 years; and

20 ‘‘(iii) 1 member shall be appointed for

21 a term of 5 years.

22 ‘‘(B) VACANCIES.—

23 ‘‘(i) IN GENERAL.—A vacancy on the

24 Board shall be filled in the manner in

25 which the original appointment was made
32

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1 and shall be subject to any conditions

2 which applied with respect to the original

3 appointment.

4 ‘‘(ii) FILLING UNEXPIRED TERM.—An

5 individual chosen to fill a vacancy shall be

6 appointed for the unexpired term of the

7 member replaced.

8 ‘‘(C) EXPIRATION OF TERMS.—The term

9 of any member appointed under paragraph

10 (2)(A)(iii) shall not expire before the date on

11 which the member’s successor takes office.

12 ‘‘(4) INITIAL MEETING.—Not later than 30

13 days after the date on which all members of the

14 Board have been appointed, the Board shall hold its

15 first meeting. Subsequent meetings shall be deter16 mined by the Board by majority vote.

17 ‘‘(5) OPEN MEETINGS.—Notwithstanding sec18 tion 552b of title 5, United States Code, or section

19 10 of the Federal Advisory Committee Act (5 U.S.C.

20 App.), the Board may, by majority vote, close any

21 meeting of the Board to the public otherwise re22 quired to be open under that section. The Board

23 shall make the records of any such closed meeting

24 available to the public not later than 30 days of that

25 meeting.
33

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1 ‘‘(6) QUORUM.—A majority of the members of

2 the Board shall constitute a quorum, but a lesser

3 number of members may hold hearings.

4 ‘‘(7) CHAIRPERSON AND VICE CHAIRPERSON.—

5 The Board shall select a Chairperson and Vice

6 Chairperson from among the members appointed

7 under paragraph (2)(A)(iii).

8 ‘‘(b) POWERS OF THE BOARD.—

9 ‘‘(1) HEARINGS.—The Board may hold such

10 hearings, sit and act at such times and places, take

11 such testimony, and receive such evidence as the

12 Board considers advisable to carry out the purposes

13 of this part.

14 ‘‘(2) INFORMATION FROM FEDERAL AGEN15 CIES.—The Board may secure directly from any

16 Federal department or agency such information as

17 the Board considers necessary to carry out the pro18 visions of this part, including the published and un19 published data and analytical products of the Bu20 reau of Labor Statistics. Upon request of the Chair21 person of the Board, the head of such department

22 or agency shall furnish such information to the

23 Board.

24 ‘‘(3) POSTAL SERVICES.—The Board may use

25 the United States mails in the same manner and
34

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1 under the same conditions as other departments and

2 agencies of the Federal Government.

3 ‘‘(4) GIFTS.—The Board may accept, use, and

4 dispose of gifts or donations of services or property.

5 ‘‘(c) BOARD PERSONNEL MATTERS.—

6 ‘‘(1) COMPENSATION OF MEMBERS.—Each

7 member of the Board who is not otherwise an officer

8 or employee of the Federal Government shall be

9 compensated at a rate equal to the daily equivalent

10 of the annual rate of basic pay prescribed for level

11 III of the Executive Schedule under section 5315 of

12 title 5, United States Code, for each day (including

13 travel time) during which such member is engaged

14 in the performance of the duties of the Board. All

15 members of the Board who otherwise are officers or

16 employees of the United States shall serve without

17 compensation in addition to that received for their

18 services as officers or employees of the United

19 States.

20 ‘‘(2) TRAVEL EXPENSES.—The members of the

21 Board shall be allowed travel expenses, including per

22 diem in lieu of subsistence, at rates authorized for

23 employees of agencies under subchapter I of chapter

24 57 of title 5, United States Code, while away from
35

•S 1792 IS

1 their homes or regular places of business in the per2 formance of services for the Board.

3 ‘‘(3) STAFF.—

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

5 the Board may, without regard to the civil serv6 ice laws and regulations, appoint and terminate

7 an executive director and such other additional

8 personnel as may be necessary to enable the

9 Board to perform its duties. The employment of

10 an executive director shall be subject to con11 firmation by the Board.

12 ‘‘(B) COMPENSATION.—The Chairperson

13 of the Board may fix the compensation of the

14 executive director and other personnel without

15 regard to the provisions of chapter 51 and sub16 chapter III of chapter 53 of title 5, United

17 States Code, relating to classification of posi18 tions and General Schedule pay rates, except

19 that the rate of pay for the executive director

20 and other personnel may not exceed the rate

21 payable for level IV of the Executive Schedule

22 under section 5316 of such title.

23 ‘‘(4) DETAIL OF GOVERNMENT EMPLOYEES.—

24 Any Federal Government employee may be detailed

25 to the Board without additional reimbursement
36

•S 1792 IS

1 (other than the employee’s regular compensation),

2 and such detail shall be without interruption or loss

3 of civil service status or privilege.

4 ‘‘(5) PROCUREMENT OF TEMPORARY AND

5 INTERMITTENT SERVICES.—The Chairperson of the

6 Board may procure temporary and intermittent serv7 ices under section 3109(b) of title 5, United States

8 Code, at rates for individuals which do not exceed

9 the daily equivalent of the annual rate of basic pay

10 prescribed for level V of the Executive Schedule

11 under section 5316 of such title.

12 ‘‘(d) TERMINATION.—Section 14 of the Federal Advi13 sory Committee Act (5 U.S.C. App.) shall not apply to

14 the Board.

15 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There

16 are authorized to be appropriated to the Board such sums

17 as are necessary to carry out the purposes of this part.’’.

18 (c) TERMINATION OF WAGE INDEX ADJUSTMENT.—

19 Section 215(i)(1)(C) of the Social Security Act (42 U.S.C.

20 415(i)(1)(C)) is amended—

21 (1) in clause (i)—

22 (A) by inserting ‘‘and before 1999’’ after

23 ‘‘after 1988’’; and

24 (B) by inserting ‘‘, or in any calendar year

25 after 1998, the CPI increase percentage’’; and
37

•S 1792 IS

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

2 1999’’ after ‘‘after 1988’’.

3 SEC. 6. TAX TREATMENT OF SOCIAL SECURITY PAYMENTS.

4 (a) IN GENERAL.—Section 86(a) of the Internal Rev5 enue Code of 1986 (relating to social security and tier 1

6 railroad retirement benefits) is amended to read as fol7 lows:

8 ‘‘(a) IN GENERAL.—Notwithstanding section 207 of

9 the Social Security Act, social security benefits shall be

10 included in the gross income of a taxpayer for any taxable

11 year in the manner provided under section 72.’’.

12 (b) CONFORMING AMENDMENTS.—Section 86 of the

13 Internal Revenue Code of 1986 is amended by striking

14 subsections (b), (c), and (e) and by redesignating sub15 sections (d) and (f) as subsections (b) and (c), respec16 tively.

17 (c) TRANSFERS TO TRUST FUNDS.—Paragraph

18 (1)(A) of section 121(e) of the Social Security Amend19 ments of 1983, as amended by section 13215(c)(1) of the

20 Omnibus Budget Reconciliation Act of 1993, is amended

21 by striking ‘‘1993.’’ and inserting ‘‘1993, plus (iii) the

22 amounts equivalent to the aggregate increase in tax liabil23 ities under chapter 1 of the Internal Revenue Code of

24 1986 which is attributable to the amendments to section
38

•S 1792 IS

1 86 of such Code made by section 6 of the Social Security

2 Solvency Act of 1998.’’.

3 (d) EFFECTIVE DATE; APPLICATION; WAIVER OF

4 PENALTY.—

5 (1) EFFECTIVE DATE.—The amendments made

6 by this section apply to taxable years ending after

7 June 30, 1998.

8 (2) APPLICATION OF AMENDMENTS TO TAX9 ABLE YEAR 1998.—In the case of any taxable year

10 which includes July 1, 1998, the amount a taxpayer

11 is required to include in gross income under section

12 86 of the Internal Revenue Code of 1986 shall (in

13 lieu of the amount otherwise determined) be equal to

14 50 percent of the sum of—

15 (A) the amount of social security benefits

16 of the taxpayer to be included in gross income

17 for such year under such section 86, determined

18 as if the amendments made by this section had

19 not been enacted, plus

20 (B) such amount determined as if such

21 amendments had been in effect for the entire

22 taxable year.

23 (3) WAIVER OF CERTAIN ESTIMATED TAX PEN24 ALTIES.—No addition to tax shall be imposed under

25 section 6654 of the Internal Revenue Code of 1986
39

•S 1792 IS

1 (relating to failure to pay estimated income tax)

2 with respect to any underpayment of an installment

3 required to be paid with respect to a taxable year to

4 which paragraph (2) applies to the extent that such

5 underpayment was created or increased by the

6 amendments made by this section.

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

8 EMPLOYEES.

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

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

11 210(a) of the Social Security Act (42 U.S.C.

12 410(a)(7)) is amended to read as follows:

13 ‘‘(7) Excluded State or local government em14 ployment (as defined in subsection (s));’’.

15 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

16 EMPLOYMENT.—

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

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

19 the end the following new subsection:

20 ‘‘Excluded State or Local Government Employment

21 ‘‘(s)(1) IN GENERAL.—The term ‘excluded State or

22 local government employment’ means any service per23 formed in the employ of a State, of any political subdivi24 sion thereof, or of any instrumentality of any one or more

25 of the foregoing which is wholly owned thereby, if—
40

•S 1792 IS

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

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

3 preceding provisions of this section as in effect on

4 December 31, 2000, had remained in effect, and (ii)

5 the requirements of paragraph (2) are met with re6 spect to such service, or

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

8 with respect to such service.

9 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

10 WHICH CONTINUES.—

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

12 paragraph are met with respect to service for any

13 employer if—

14 ‘‘(i) such service is performed by an indi15 vidual—

16 ‘‘(I) who was performing substantial

17 and regular service for remuneration for

18 that employer before January 1, 2001,

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

20 that employer on December 31, 2000, and

21 ‘‘(III) whose employment relationship

22 with that employer was not entered into

23 for purposes of meeting the requirements

24 of this subparagraph, and
41

•S 1792 IS

1 ‘‘(ii) the employment relationship with that

2 employer has not been terminated after Decem3 ber 31, 2000.

4 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND

5 INSTRUMENTALITIES.—For purposes of subpara6 graph (A), under regulations (consistent with regula7 tions established under section 3121(t)(2)(B) of the

8 Internal Revenue Code of 1986)—

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

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

11 District of Columbia shall be treated as a single

12 employer, and

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

14 political subdivision of a State (as so defined)

15 shall be treated as a single employer and shall

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

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

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

19 paragraph are met with respect to service if such

20 service is performed—

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

22 State or political subdivision thereof to relieve

23 such individual from unemployment,

24 ‘‘(ii) in a hospital, home, or other institu25 tion by a patient or inmate thereof as an em-
42

•S 1792 IS

1 ployee of a State or political subdivision thereof

2 or of the District of Columbia,

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

4 a State or political subdivision thereof or of the

5 District of Columbia, serving on a temporary

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

7 flood, or other similar emergency,

8 ‘‘(iv) by any individual as an employee in9 cluded under section 5351(2) of title 5, United

10 States Code (relating to certain interns, student

11 nurses, and other student employees of hos12 pitals of the District of Columbia Government),

13 other than as a medical or dental intern or a

14 medical or dental resident in training,

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

16 worker if the remuneration paid in a calendar

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

18 respect to service performed during 2001, and

19 the adjusted amount determined under sub20 paragraph (C) for any subsequent year with re21 spect to service performed during such subse22 quent year, except to the extent that service by

23 such election official or election worker is in24 cluded in employment under an agreement

25 under section 218, or
43

•S 1792 IS

1 ‘‘(vi) by an employee in a position com2 pensated solely on a fee basis which is treated

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

4 business for purposes of inclusion of such fees

5 in net earnings from self-employment.

6 ‘‘(B) DEFINITIONS.—As used in this para7 graph, the terms ‘State’ and ‘political subdivision’

8 have the meanings given those terms in section

9 218(b).

10 ‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR

11 ELECTION OFFICIALS AND ELECTION WORKERS.—

12 For each year after 2001, the Secretary shall adjust

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

14 the same time and in the same manner as is pro15 vided under section 215(a)(1)(B)(ii) with respect to

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

17 except that—

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

19 1998 shall be substituted for the calendar year

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

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

22 multiple of $50, shall be rounded to the nearest

23 multiple of $50.

24 The Commissioner of Social Security shall determine

25 and publish in the Federal Register each adjusted
44

•S 1792 IS

1 amount determined under this subparagraph not

2 later than November 1 preceding the year for which

3 the adjustment is made.’’.

4 (B) CONFORMING AMENDMENTS.—

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

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

7 covered transportation service) is repealed.

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

9 U.S.C. 410(p)) is amended—

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

11 ‘‘service is performed’’ and all that

12 follows and inserting ‘‘service is serv13 ice described in subsection (s)(3)(A).’’;

14 and

15 (II) in paragraph (3)(A), by in16 serting ‘‘under subsection (a)(7) as in

17 effect on December 31, 2000’’ after

18 ‘‘section’’.

19 (iii) Section 218(c)(6) of such Act (42

20 U.S.C. 418(c)(6)) is amended—

21 (I) by striking subparagraph (C);

22 (II) by redesignating subpara23 graphs (D) and (E) as subparagraphs

24 (C) and (D), respectively; and
45

•S 1792 IS

1 (III) by striking subparagraph

2 (F) and inserting the following:

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

4 under section 210(a).’’

5 (b) AMENDMENTS TO THE INTERNAL REVENUE

6 CODE OF 1986.—

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

8 3121(b) of the Internal Revenue Code of 1986 (re9 lating to employment) is amended to read as follows:

10 ‘‘(7) excluded State or local government em11 ployment (as defined in subsection (t));’’.

12 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

13 EMPLOYMENT.—Section 3121 of such Code is

14 amended by inserting after subsection (s) the follow15 ing new subsection:

16 ‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM17 PLOYMENT.—

18 ‘‘(1) IN GENERAL.—For purposes of this chap19 ter, the term ‘excluded State or local government

20 employment’ means any service performed in the

21 employ of a State, of any political subdivision there22 of, or of any instrumentality of any one or more of

23 the foregoing which is wholly owned thereby, if—

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

25 from the term ‘employment’ for purposes of this
46

•S 1792 IS

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

2 in effect on December 31, 2000, had remained

3 in effect, and (ii) the requirements of para4 graph (2) are met with respect to such service,

5 or

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

7 are met with respect to such service.

8 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

9 WHICH CONTINUES.—

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

11 this paragraph are met with respect to service

12 for any employer if—

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

14 individual—

15 ‘‘(I) who was performing sub16 stantial and regular service for remu17 neration for that employer before Jan18 uary 1, 2001,

19 ‘‘(II) who is a bona fide employee

20 of that employer on December 31,

21 2000, and

22 ‘‘(III) whose employment rela23 tionship with that employer was not

24 entered into for purposes of meeting
47

•S 1792 IS

1 the requirements of this subpara2 graph, and

3 ‘‘(ii) the employment relationship with

4 that employer has not been terminated

5 after December 31, 2000.

6 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES

7 AND INSTRUMENTALITIES.—For purposes of

8 subparagraph (A), under regulations—

9 ‘‘(i) all agencies and instrumentalities

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

11 the Social Security Act) or of the District

12 of Columbia shall be treated as a single

13 employer, and

14 ‘‘(ii) all agencies and instrumentalities

15 of a political subdivision of a State (as so

16 defined) shall be treated as a single em17 ployer and shall not be treated as de18 scribed in clause (i).

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

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

21 this paragraph are met with respect to service

22 if such service is performed—

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

24 by a State or political subdivision thereof
48

•S 1792 IS

1 to relieve such individual from unemploy2 ment,

3 ‘‘(ii) in a hospital, home, or other in4 stitution by a patient or inmate thereof as

5 an employee of a State or political subdivi6 sion thereof or of the District of Columbia,

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

8 of a State or political subdivision thereof

9 or of the District of Columbia, serving on

10 a temporary basis in case of fire, storm,

11 snow, earthquake, flood, or other similar

12 emergency,

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

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

15 United States Code (relating to certain in16 terns, student nurses, and other student

17 employees of hospitals of the District of

18 Columbia Government), other than as a

19 medical or dental intern or a medical or

20 dental resident in training,

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

22 worker if the remuneration paid in a cal23 endar year for such service is less than

24 $1,000 with respect to service performed

25 during 2001, and the adjusted amount de-
49

•S 1792 IS

1 termined under section 210(s)(3)(C) of the

2 Social Security Act for any subsequent

3 year with respect to service performed dur4 ing such subsequent year, except to the ex5 tent that service by such election official or

6 election worker is included in employment

7 under an agreement under section 218 of

8 the Social Security Act, or

9 ‘‘(vi) by an employee in a position

10 compensated solely on a fee basis which is

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

12 as a trade or business for purposes of in13 clusion of such fees in net earnings from

14 self-employment.

15 ‘‘(B) DEFINITIONS.—As used in this para16 graph, the terms ‘State’ and ‘political subdivi17 sion’ have the meanings given those terms in

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

19 (3) CONFORMING AMENDMENTS.—

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

21 Code (relating to covered transportation serv22 ice) is repealed.

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

24 such Code (relating to application of hospital
50

•S 1792 IS

1 insurance tax to Federal, State, and local em2 ployment) is amended—

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

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

5 that follows through the end of such sub6 paragraph and inserting ‘‘service is service

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

8 (ii) in subparagraph (C)(i), by insert9 ing ‘‘under subsection (b)(7) as in effect

10 on December 31, 2000’’ after ‘‘chapter’’.

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

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

13 apply with respect to service performed after December

14 31, 2000.

15 SEC. 8. INCREASE IN LENGTH OF COMPUTATION PERIOD

16 FROM 35 TO 38 YEARS.

17 Section 215(b)(2)(B) of the Social Security Act (42

18 U.S.C. 415(b)(2)) is amended—

19 (1) in clause (ii), by striking ‘‘and’’ at the end;

20 (2) in clause (iii)—

21 (A) by striking ‘‘age 62’’ and inserting

22 ‘‘the applicable age’’; and

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

24 inserting ‘‘; and’’; and

25 (3) by adding at the end the following:
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1 ‘‘(iv) the term ‘applicable age’ means with re2 spect to individuals who attain age 62—

3 ‘‘(I) before 2001, age 62;

4 ‘‘(II) in 2001, age 63;

5 ‘‘(III) in 2002, age 64; and

6 ‘‘(IV) after 2002, age 65.’’.

7 SEC. 9. PHASED IN INCREASE IN SOCIAL SECURITY RETIRE8 MENT AGE.

9 (a) IN GENERAL.—Section 216(l) of the Social Secu10 rity Act (42 U.S.C. 416(l) is amended—

11 (1) in paragraph (1), by striking subparagraphs

12 (B), (C), (D), and (E) and inserting the following:

13 ‘‘(B) with respect to an individual who at14 tains early retirement age after December 31,

15 1999, and before January 1, 2018, 65 years of

age plus 2 16 ⁄12 of the number of months in the

17 period beginning with January 2000 and ending

18 with December of the year in which the individ19 ual attains early retirement age;

20 ‘‘(C) with respect to an individual who at21 tains early retirement age after December 31,

22 2017, and before January 1, 2066, 68 years of

age plus 1 23 ⁄24 of the number of months in the

24 period beginning with January 2018 and ending

25 with December of the year in which the individ-
52

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1 ual attains early retirement age, rounded down

2 to the lowest whole month; and

3 ‘‘(D) with respect to an individual who at4 tains early retirement age after December 31,

5 2065, 70 years of age.’’; and

6 (2) by striking paragraph (3).

7 (b) CONFORMING REDUCTIONS FOR RECEIVING BEN8 EFITS BEFORE NORMAL RETIREMENT AGE.—Section

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

10 402(q)(9)(A)) is amended by striking ‘‘and five-twelfths

11 of 1 percent for any additional months included in such

12 periods’’ and inserting ‘‘five-twelfths of 1 percent for the

13 next 24 months included in such periods, three-eighths of

14 1 percent for the next 24 months included in such periods,

15 and one-third of 1 percent for any additional months in16 cluded in such periods’’.

17 (c) STUDY OF THE EFFECT OF INCREASING THE RE18 TIREMENT AGE.—

19 (1) STUDY PLAN.—Not later than February 15,

20 2000, the Commissioner of Social Security shall sub21 mit to Congress a detailed study plan for evaluating

22 the effects of increases in the retirement age sched23 uled under section 216(l) of the Social Security Act

24 on the day before the date of enactment of the

25 amendments made by subsection (a) and under such
53

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1 amendments. The study plan shall include a descrip2 tion of the methodology, data, and funding that will

3 be required in order to provide to Congress not later

4 than February 15, 2005—

5 (A) an evaluation of trends in mortality

6 and their relationship to trends in health sta7 tus, among individuals approaching eligibility

8 for social security retirement benefits;

9 (B) an evaluation of trends in labor force

10 participation among individuals approaching eli11 gibility for social security retirement benefits

12 and among individuals receiving retirement ben13 efits, and of the factors that influence the

14 choice between retirement and participation in

15 the labor force;

16 (C) an evaluation of changes, if any, in the

17 social security disability program that would re18 duce the impact of increases in the retirement

19 age on workers in poor health or physically de20 manding occupations;

21 (D) an evaluation of the methodology used

22 to develop projections for trends in mortality,

23 health status, and labor force participation

24 among individuals approaching eligibility for so-
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1 cial security retirement benefits and among in2 dividuals receiving retirement benefits; and

3 (E) an evaluation of such other matters as

4 the Commissioner deems appropriate for evalu5 ating the effects of increases in the retirement

6 age.

7 (2) REPORT ON RESULTS OF STUDY.—Not later

8 than February 15, 2005, the Commissioner of Social

9 Security shall provide to Congress an evaluation of

10 the implications of the trends studied under para11 graph (1), along with recommendations, if any, of

12 the extent to which the conclusions of such evalua13 tions indicate that future scheduled increases in the

14 retirement age should be modified. Furthermore,

15 such report should include recommendations for

16 modifying the social security disability program and

17 other income support programs that should be con18 sidered in conjunction with scheduled increases in

19 the retirement age.

20 SEC. 10. ELIMINATION OF EARNINGS TEST FOR INDIVID21 UALS WHO HAVE ATTAINED EARLY RETIRE22 MENT AGE.

23 (a) IN GENERAL.—Section 203 of the Social Security

24 Act (42 U.S.C. 403) is amended—
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•S 1792 IS

1 (1) in subsection (c)(1), by striking ‘‘the age of

2 seventy’’ and inserting ‘‘early retirement age (as de3 fined in section 216(l))’’;

4 (2) in paragraphs (1)(A) and (2) of subsection

5 (d), by striking ‘‘the age of seventy’’ each place it

6 appears and inserting ‘‘early retirement age (as de7 fined in section 216(l))’’;

8 (3) in subsection (f)(1)(B), by striking ‘‘was

9 age seventy or over’’ and inserting ‘‘was at or above

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

11 (4) in subsection (f)(3)—

(A) by striking ‘‘331 12 ⁄3 percent’’ and all

13 that follows through ‘‘any other individual,’’

14 and inserting ‘‘50 percent of such individual’s

15 earnings for such year in excess of the product

16 of the exempt amount as determined under

17 paragraph (8),’’; and

18 (B) by striking ‘‘age 70’’ and inserting

19 ‘‘early retirement age (as defined in section

20 216(l))’’;

21 (5) in subsection (h)(1)(A), by striking ‘‘age

22 70’’ each place it appears and inserting ‘‘early re23 tirement age (as defined in section 216(l))’’; and

24 (6) in subsection (j)—
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•S 1792 IS

1 (A) in the heading, by striking ‘‘Age Sev2 enty’’ and inserting ‘‘Early Retirement Age’’;

3 and

4 (B) by striking ‘‘seventy years of age’’ and

5 inserting ‘‘having attained early retirement age

6 (as defined in section 216(l))’’.

7 (b) CONFORMING AMENDMENTS ELIMINATING THE

8 SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE

9 ATTAINED AGE 62.—

10 (1) UNIFORM EXEMPT AMOUNT.—Section

11 203(f)(8)(A) of the Social Security Act (42 U.S.C.

12 403(f)(8)(A)) is amended by striking ‘‘the new ex13 empt amounts (separately stated for individuals de14 scribed in subparagraph (D) and for other individ15 uals) which are to be applicable’’ and inserting ‘‘a

16 new exempt amount which shall be applicable’’.

17 (2) CONFORMING AMENDMENTS.—Section

18 203(f)(8)(B) of the Social Security Act (42 U.S.C.

19 403(f)(8)(B)) is amended—

20 (A) in the matter preceding clause (i), by

21 striking ‘‘Except’’ and all that follows through

22 ‘‘whichever’’ and inserting ‘‘The exempt amount

23 which is applicable for each month of a particu24 lar taxable year shall be whichever’’;
57

•S 1792 IS

1 (B) in clauses (i) and (ii), by striking ‘‘cor2 responding’’ each place it appears; and

3 (C) in the last sentence, by striking ‘‘an

4 exempt amount’’ and inserting ‘‘the exempt

5 amount’’.

6 (3) REPEAL OF BASIS FOR COMPUTATION OF

7 SPECIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of

8 the Social Security Act (42 U.S.C. (f)(8)(D)) is re9 pealed.

10 (c) ADDITIONAL CONFORMING AMENDMENTS.—

11 (1) ELIMINATION OF REDUNDANT REFERENCES

12 TO RETIREMENT AGE.—Section 203 of the Social

13 Security Act (42 U.S.C. 403) is amended—

14 (A) in subsection (c), in the last sentence,

15 by striking ‘‘nor shall any deduction’’ and all

16 that follows and inserting ‘‘nor shall any deduc17 tion be made under this subsection from any

18 widow’s or widower’s insurance benefit if the

19 widow, surviving divorced wife, widower, or sur20 viving divorced husband involved became enti21 tled to such benefit prior to attaining age 60.’’;

22 and

23 (B) in subsection (f)(1), by striking clause

24 (D) and inserting the following: ‘‘(D) for which

25 such individual is entitled to widow’s or widow-
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•S 1792 IS

1 er’s insurance benefits if such individual be2 came so entitled prior to attaining age 60,’’.

3 (2) CONFORMING AMENDMENT TO PROVISIONS

4 FOR DETERMINING AMOUNT OF INCREASE ON AC5 COUNT OF DELAYED RETIREMENT.—Section

6 202(w)(2)(B)(ii) of the Social Security Act (42

7 U.S.C. 402(w)(2)(B)(ii)) is amended—

8 (A) by striking ‘‘either’’; and

9 (B) by striking ‘‘or suffered deductions

10 under section 203(b) or 203(c) in amounts

11 equal to the amount of such benefit’’.

12 (3) PROVISIONS RELATING TO EARNINGS

13 TAKEN INTO ACCOUNT IN DETERMINING SUBSTAN14 TIAL GAINFUL ACTIVITY OF BLIND INDIVIDUALS.—

15 The second sentence of section 223(d)(4) of such

16 Act (42 U.S.C. 423(d)(4)) is amended by striking

17 ‘‘if section 102 of the Senior Citizens’ Right to

18 Work Act of 1996 had not been enacted’’ and insert19 ing the following: ‘‘if the amendments to section 203

20 made by section 102 of the Senior Citizens’ Right to

21 Work Act of 1996 and by the Social Security Sol22 vency Act of 1998 had not been enacted’’.

23 (d) STUDY OF THE EFFECT OF TAKING EARNINGS

24 INTO ACCOUNT IN DETERMINING SUBSTANTIAL GAINFUL

25 ACTIVITY OF DISABLED INDIVIDUALS.—
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1 (1) IN GENERAL.—Not later than February 15,

2 2000, the Commissioner of Social Security shall con3 duct a study on the effect that taking earnings into

4 account in determining substantial gainful activity of

5 individuals receiving disability insurance benefits has

6 on the incentive for such individuals to work and

7 submit to Congress a report on the study.

8 (2) CONTENTS OF STUDY.—The study con9 ducted under paragraph (1) shall include the evalua10 tion of—

11 (A) the effect of the current limit on earn12 ings on the incentive for individuals receiving

13 disability insurance benefits to work;

14 (B) the effect of increasing the earnings

15 limit or changing the manner in which disability

16 insurance benefits are reduced or terminated as

17 a result of substantial gainful activity (includ18 ing reducing the benefits gradually when the

19 earnings limit is exceeded) on—

20 (i) the incentive to work; and

21 (ii) the financial status of the Federal

22 Disability Insurance Trust Fund;

23 (C) the effect of extending eligibility for

24 the Medicare program to individuals during the

25 period in which disability insurance benefits of
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1 the individual are gradually reduced as a result

2 of substantial gainful activity and extending

3 such eligibility for a fixed period of time after

4 the benefits are terminated on—

5 (i) the incentive to work; and

6 (ii) the financial status of the Federal

7 Hospital Insurance Trust Fund and the

8 Federal Supplementary Medical Insurance

9 Trust Fund; and

10 (D) the relationship between the effect of

11 substantial gainful activity limits on blind indi12 viduals receiving disability insurance benefits

13 and other individuals receiving disability insur14 ance benefits.

15 (3) CONSULTATION.—The analysis under para16 graph (2)(C) shall be done in consultation with the

17 Administrator of the Health Care Financing Admin18 istration.

19 (e) EFFECTIVE DATE.—The amendments and re20 peals made by subsections (a), (b), and (c) shall apply with

21 respect to taxable years ending after December 31, 2002.

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