II

106TH CONGRESS

2D SESSION S. 2086

To amend title II of the Social Security Act and the Internal Revenue

Code of 1986 to provide incentives for older Americans to remain in

the workforce beyond the age of eligibility for full social security benefits.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 22, 2000

Mr. LUGAR (for himself, Mr. GREGG, and Mr. BREAUX) introduced the

following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend title II of the Social Security Act and the Internal

Revenue Code of 1986 to provide incentives for older

Americans to remain in the workforce beyond the age

of eligibility for full social security benefits.

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 ‘‘Retired Americans

5 Right of Employment Act II’’ or ‘‘RARE Act II’’.
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1 SEC. 2. ELIMINATION OF EARNINGS TEST FOR INDIVID2 UALS WHO HAVE ATTAINED EARLY RETIRE3 MENT AGE.

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

5 Act (42 U.S.C. 403) is amended—

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

7 seventy’’ and inserting ‘‘early retirement age (as de8 fined in section 216(l))’’;

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

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

11 appears and inserting ‘‘early retirement age (as de12 fined in section 216(l))’’;

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

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

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

16 (4) in subsection (f)(3)—

(A) by striking ‘‘331 17 ⁄3 percent’’ and all

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

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

20 earnings for such year in excess of the product

21 of the exempt amount as determined under

22 paragraph (8),’’; and

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

24 ‘‘early retirement age (as defined in section

25 216(l))’’;
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1 (5) in subsection (h)(1)(A), by striking ‘‘age

2 70’’ each place it appears and inserting ‘‘early re3 tirement age (as defined in section 216(l))’’; and

4 (6) in subsection (j)—

5 (A) in the heading, by striking ‘‘Age Sev6 enty’’ and inserting ‘‘Early Retirement Age’’;

7 and

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

9 inserting ‘‘having attained early retirement age

10 (as defined in section 216(l))’’.

11 (b) CONFORMING AMENDMENTS ELIMINATING THE

12 SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE

13 ATTAINED AGE 62.—

14 (1) UNIFORM EXEMPT AMOUNT.—Section

15 203(f)(8)(A) of the Social Security Act (42 U.S.C.

16 403(f)(8)(A)) is amended by striking ‘‘the new ex17 empt amounts (separately stated for individuals de18 scribed in subparagraph (D) and for other individ19 uals) which are to be applicable’’ and inserting ‘‘a

20 new exempt amount which shall be applicable’’.

21 (2) CONFORMING AMENDMENTS.—Section

22 203(f)(8)(B) of the Social Security Act (42 U.S.C.

23 403(f)(8)(B)) is amended—

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

25 striking ‘‘Except’’ and all that follows through
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1 ‘‘whichever’’ and inserting ‘‘The exempt amount

2 which is applicable for each month of a par3 ticular taxable year shall be whichever’’;

4 (B) in clauses (i) and (ii), by striking ‘‘cor5 responding’’ each place it appears; and

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

7 exempt amount’’ and inserting ‘‘the exempt

8 amount’’.

9 (3) REPEAL OF BASIS FOR COMPUTATION OF

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

11 the Social Security Act (42 U.S.C. 403(f)(8)(D)) is

12 repealed.

13 (c) ADDITIONAL CONFORMING AMENDMENTS.—

14 (1) ELIMINATION OF REDUNDANT REFERENCES

15 TO RETIREMENT AGE.—Section 203 of the Social

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

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

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

19 that follows and inserting ‘‘nor shall any deduc20 tion be made under this subsection from any

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

22 widow, surviving divorced wife, widower, or sur23 viving divorced husband involved became enti24 tled to such benefit prior to attaining age 60.’’;

25 and
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1 (B) in subsection (f)(1), by striking clause

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

3 such individual is entitled to widow’s or wid4 ower’s insurance benefits if such individual be5 came so entitled prior to attaining age 60,’’.

6 (2) CONFORMING AMENDMENT TO PROVISIONS

7 FOR DETERMINING AMOUNT OF INCREASE ON AC8 COUNT OF DELAYED RETIREMENT.—Section

9 202(w)(2)(B)(ii) of the Social Security Act (42

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

11 (A) by striking ‘‘either’’; and

12 (B) by striking ‘‘or suffered deductions

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

14 equal to the amount of such benefit’’.

15 (d) EFFECTIVE DATE.—The amendments and re16 peals made by subsections (a), (b), and (c) shall apply with

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

18 SEC. 3. USE OF ALL YEARS IN COMPUTATION.

19 (a) USE OF ALL YEARS OF EARNINGS IN BENEFIT

20 COMPUTATION.—Section 215(b)(2)(B) of the Social Secu21 rity Act (42 U.S.C. 415(b)(2)(B)) is amended by striking

22 clauses (i) and (ii) and inserting the following:

23 ‘‘(i)(I) for calendar years before 2010, the term

24 ‘benefit computation years’ means those computation

25 base years equal in number to the number deter-
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1 mined under subparagraph (A) plus the applicable

2 number of years determined under subclause (III),

3 for which the total of such individual’s wages and

4 self-employment income, after adjustment under

5 paragraph (3), is the largest;

6 ‘‘(II) for calendar years after 2009, the term

7 ‘benefit computation years’ means all of the com8 putation base years; and

9 ‘‘(III) for purposes of subclause (I), the applica10 ble number of years is the number of years specified

11 in connection with the year in which such individual

12 reaches early retirement age (as defined in section

13 216(l)(2)), or, if earlier, the calendar year in which

14 such individual dies, as set forth in the following

15 table:

‘‘If such calendar year is: The applicable number of years

is:

Before 2001 ....................................................................................... 0

2001 ................................................................................................... 1

2002 ................................................................................................... 2

2003 ................................................................................................... 3

2004 ................................................................................................... 4

2005 ................................................................................................... 5

2006 ................................................................................................... 6

2007 ................................................................................................... 7

2008 ................................................................................................... 8

2009 ................................................................................................... 9;

16 ‘‘(ii) the term ‘computation base years’ means

17 the calendar years after 1950, except that such term

18 excludes any calendar year entirely included in a pe19 riod of disability; and’’.
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1 (b) CONFORMING AMENDMENT.—Section

2 215(b)(1)(B) of the Social Security Act (42 U.S.C.

3 415(b)(1)(B)) is amended by striking ‘‘in those years’’

4 and inserting ‘‘in an individual’s benefit computation

5 years determined under paragraph (2)(A)’’.

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

7 this section shall apply to benefit computation years begin8 ning after December 31, 2000.

9 SEC. 4. ACTUARIAL ADJUSTMENT FOR RETIREMENT.

10 (a) EARLY RETIREMENT.—

11 (1) IN GENERAL.—Section 202(q) of the Social

12 Security Act (42 U.S.C. 402(q)) is amended—

(A) in paragraph (1)(A), by striking ‘‘5 13 ⁄9’’

14 and inserting ‘‘the applicable fraction (deter15 mined under paragraph (12))’’; and

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

17 ‘‘(12) For purposes of paragraph (1)(A), the ‘applica18 ble fraction’ for an individual who attains the age of 62

19 in—

‘‘(A) any year before 2001, is 5 20 ⁄9;

‘‘(B) 2001, is 7 21 ⁄12;

‘‘(C) 2002, is 11 22 ⁄18;

‘‘(D) 2003, is 23 23 ⁄36;

‘‘(E) 2004, is 2 24 ⁄3; and

‘‘(F) 2005 or any succeeding year, is 25 25 ⁄36.’’.
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1 (2) MONTHS BEYOND FIRST 36 MONTHS.—Sec2 tion 202(q) of such Act (42 U.S.C. 402(q)(9)) (as

3 amended by paragraph (1)) is amended—

4 (A) in paragraph (9)(A), by striking ‘‘five5 twelfths’’ and inserting ‘‘the applicable fraction

6 (determined under paragraph (13))’’; and

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

8 ‘‘(13) For purposes of paragraph (9)(A), the ‘applica9 ble fraction’ for an individual who attains the age of 62

10 in—

‘‘(A) any year before 2001, is 5 11 ⁄12;

‘‘(B) 2001, is 16 12 ⁄36;

‘‘(C) 2002, is 16 13 ⁄36;

‘‘(D) 2003, is 17 14 ⁄36;

‘‘(E) 2004, is 17 15 ⁄36; and

‘‘(F) 2005 or any succeeding year, is 1 16 ⁄2.’’.

17 (3) EFFECTIVE DATE.—The amendments made

18 by paragraphs (1) and (2) shall apply to individuals

19 who attain the age of 62 in years after 1999.

20 (b) DELAYED RETIREMENT.—Section 202(w)(6) of

21 the Social Security Act (42 U.S.C. 402(w)(6)) is

22 amended—

23 (1) in subparagraph (C), by striking ‘‘and’’ at

24 the end;
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1 (2) in subparagraph (D), by striking ‘‘2004.’’

2 and inserting ‘‘2004 and before 2007;’’; and

3 (3) by adding at the end the following:

‘‘(E) 17 4 ⁄24 of 1 percent in the case of an indi5 vidual who attains the age of 62 in a calendar year

6 after 2006 and before 2009;

‘‘(F) 3 7 ⁄4 of 1 percent in the case of an indi8 vidual who attains the age of 62 in a calendar year

9 after 2008 and before 2011;

‘‘(G) 19 10 ⁄24 of 1 percent in the case of an indi11 vidual who attains the age of 62 in a calendar year

12 after 2010 and before 2013; and

‘‘(H) 5 13 ⁄6 of 1 percent in the case of an indi14 vidual who attains the age of 62 in a calendar year

15 after 2012.’’.

16 SEC. 5. NONREFUNDABLE CREDIT FOR INDIVIDUALS WHO

17 WORK BEYOND NORMAL RETIREMENT AGE.

18 (a) IN GENERAL.—Subpart A of part IV of sub19 chapter A of chapter 1 of the Internal Revenue Code of

20 1986 (relating to nonrefundable personal credits) is

21 amended by inserting after section 25A the following:

22 ‘‘SEC. 25B. CREDIT FOR INDIVIDUALS WHO WORK BEYOND

23 NORMAL RETIREMENT AGE.

24 ‘‘(a) IN GENERAL.—In the case of a qualified indi25 vidual, there shall be allowed as a credit against the tax
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1 imposed by this chapter for the taxable year an amount

2 equal to the lesser of—

3 ‘‘(1) 10 percent of the amount of such tax, or

4 ‘‘(2) the earned income (as defined in section

5 32(b)(2)) of such individual for such taxable year.

6 ‘‘(b) APPLICATION WITH OTHER CREDITS.—In de7 termining any credit allowed under this subpart, the tax

8 imposed by this chapter shall (before any other reductions)

9 be reduced by the credit allowed under subsection (a).

10 ‘‘(c) QUALIFIED INDIVIDUAL.—For purposes of this

11 section, the term ‘qualified individual’ means any indi12 vidual who has attained retirement age (as defined in sec13 tion 216(l)(1) of the Social Security Act) before the close

14 of the taxable year.’’.

15 (b) CONFORMING AMENDMENT.—The table of sec16 tions for subpart A of part IV of subchapter A of chapter

17 1 of the Internal Revenue Code of 1986 is amended by

18 inserting after the item relating to section 25A the fol19 lowing:

‘‘Sec. 25B. Credit for individuals who work beyond normal retirement age.’’.

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

21 this section shall apply to taxable years beginning after

22 December 31, 2000.

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