II

106TH CONGRESS

2D SESSION S. 2085

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 I’’ or ‘‘RARE Act I’’.
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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. TEN PERCENT FICA TAX CUT FOR WORKERS WHO

17 HAVE REACHED RETIREMENT AGE.

18 (a) IN GENERAL.—

19 (1) OLD-AGE, SURVIVORS, AND DISABILITY IN20 SURANCE.—Section 3101(a) of the Internal Revenue

21 Code of 1986 (relating to old-age, survivors, and dis22 ability insurance) is amended to read as follows:

23 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR24 ANCE.—
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1 ‘‘(1) GENERAL EMPLOYEE RATE.—In addition

2 to other taxes, there is hereby imposed on the in3 come of every individual who has not attained the

4 retirement age (as defined in section 216(l) of the

5 Social Security Act) a tax equal to 6.2 percent of

6 the wages (as defined in section 3121(a)) received by

7 him with respect to employment (as defined in sec8 tion 3121(b)).

9 ‘‘(2) RETIREMENT EMPLOYEE RATE.—In addi10 tion to other taxes, there is hereby imposed on the

11 income of every individual who has attained the re12 tirement age (as defined in section 216(l) of the So13 cial Security Act) a tax equal to 5.58 percent of the

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

15 him with respect to employment (as defined in sec16 tion 3121(b)).’’.

17 (2) HOSPITAL INSURANCE.—Section 3101(b) of

18 the Internal Revenue Code of 1986 (relating to hos19 pital insurance) is amended to read as follows:

20 ‘‘(b) HOSPITAL INSURANCE.—

21 ‘‘(1) GENERAL EMPLOYEE RATE.—In addition

22 to the tax imposed by the preceding subsection,

23 there is hereby imposed on the income of every indi24 vidual who has not attained the retirement age (as

25 defined in section 216(l) of the Social Security Act)
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1 a tax equal to 1.45 percent of the wages (as defined

2 in section 3121(a)) received by him with respect to

3 employment (as defined in section 3121(b)).

4 ‘‘(2) POST RETIREMENT EMPLOYEE RATE.—In

5 addition to the tax imposed by the preceding sub6 section, there is hereby imposed on the income of

7 every individual who has attained the retirement age

8 (as defined in section 216(l) of the Social Security

9 Act) a tax equal to 1.305 percent of the wages (as

10 defined in section 3121(a)) received by him with re11 spect to employment (as defined in section

12 3121(b)).’’.

13 (b) SELF-EMPLOYED INDIVIDUALS.—

14 (1) OLD-AGE, SURVIVORS, AND DISABILITY IN15 SURANCE.—Section 1401(a) of the Internal Revenue

16 Code of 1986 (relating to old-age, survivors, and dis17 ability insurance) is amended to read as follows:

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

20 ‘‘(1) GENERAL EMPLOYEE RATE.—In addition

21 to other taxes, there shall be imposed for each tax22 able year, on the self-employment income of every

23 individual who has not attained the retirement age

24 (as defined in section 216(l) of the Social Security
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1 Act), a tax equal to 12.40 percent of the amount of

2 the self-employment income for such taxable year.

3 ‘‘(2) RETIREMENT EMPLOYEE RATE.—In addi4 tion to other taxes, there shall be imposed for each

5 taxable year, on the self-employment income of every

6 individual who has not attained the retirement age

7 (as defined in section 216(l) of the Social Security

8 Act), a tax equal to 11.78 percent of the amount of

9 the self-employment income for such taxable year.’’.

10 (2) HOSPITAL INSURANCE.—Section 1401(b) of

11 the Internal Revenue Code of 1986 (relating to hos12 pital insurance) is amended to read as follows:

13 ‘‘(b) HOSPITAL INSURANCE.—

14 ‘‘(1) GENERAL EMPLOYEE RATE.—In addition

15 to the tax imposed by the preceding subsection,

16 there shall be imposed for each taxable year, on the

17 self-employment income of every individual who has

18 not attained the retirement age (as defined in sec19 tion 216(l) of the Social Security Act), a tax equal

20 to 2.9 percent of the amount of the self-employment

21 income for such taxable year.

22 ‘‘(2) POST RETIREMENT EMPLOYEE RATE.—In

23 addition to the tax imposed by the preceding sub24 section, there shall be imposed for each taxable year,

25 on the self-employment income of every individual
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1 who has not attained the retirement age (as defined

2 in section 216(l) of the Social Security Act), a tax

3 equal to 2.755 percent of the amount of the self-em4 ployment income for such taxable year.’’.

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

6 this section shall apply with respect to taxable years end7 ing after December 31, 2000.

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