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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3758 Introduced in House (IH)]

104th CONGRESS
  2d Session
                                H. R. 3758

 To amend title II of the Social Security Act and the Internal Revenue 
 Code of 1986 to provide prospectively for personal retirement savings 
  accounts to allow for more control by individuals over their Social 
 Security retirement income, to provide for a limitation on payment of 
benefits payable from the Federal Old-Age and Survivors Insurance Trust 
  Fund with respect to individuals with higher levels of income once 
   payments of such benefits have exceeded prior contributions plus 
interest, and to provide other reforms relating to benefits under such 
                               title II.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              July 9, 1996

Mr. Smith of Michigan introduced the following bill; which was referred 
                   to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
 To amend title II of the Social Security Act and the Internal Revenue 
 Code of 1986 to provide prospectively for personal retirement savings 
  accounts to allow for more control by individuals over their Social 
 Security retirement income, to provide for a limitation on payment of 
benefits payable from the Federal Old-Age and Survivors Insurance Trust 
  Fund with respect to individuals with higher levels of income once 
   payments of such benefits have exceeded prior contributions plus 
interest, and to provide other reforms relating to benefits under such 
                               title II.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

                           table of contents
Sec. 1. Short title.
Sec. 2. Findings and purposes.
            TITLE I--INDIVIDUAL RETIREMENT SECURITY PROGRAM

Sec. 101. Reduction in Social Security trust fund contributions.
Sec. 102. Individual retirement program and personal retirement savings 
                            accounts.
Sec. 103. Adjustments to primary insurance amounts under part A of 
                            title II of the Social Security Act.
Sec. 104. Tax treatment of personal retirement savings accounts.
Sec. 105. Revenues from increases in income tax on Social Security 
                            benefits deposited in OASDI trust funds.
               TITLE II--SOCIAL SECURITY BENEFIT REFORMS

Sec. 201. Limitation on payment of certain benefits in excess of 
                            contributions during years of higher 
                            income.
Sec. 202. Gradual increase in retirement age and early retirement age.
Sec. 203. Adjustments to bend points in determining primary insurance 
                            amounts.
Sec. 204. Information relating to benefit limitations provided in 
                            Social Security account statements.
Sec. 205. Coverage of newly hired State and local employees.
Sec. 206. Phased reduction in spousal benefits other than survivor's 
                            benefits to 33 percent of primary insurance 
                            amount.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress makes the following findings:
            (1) America's most popular Government program, Social 
        Security, is in jeopardy. The 1996 Board of Trustee's report 
        states that the current system faces a actuarial deficit of 
        2.19 percent of taxable payroll.
            (2) The Social Security system was designed in 1935 as a 
        pay-as-you-go system, in which current workers support current 
        retirees. This design worked when America had 42 workers per 
        beneficiary in 1945, but that ratio has fallen over time. In 
        1995 there are only 3.3 workers per beneficiary, and by 2060 
        the ratio is projected to fall to 1.8 workers per beneficiary. 
        To pay benefits to the rising number of retirees, the 
        Government has levied increasing FICA taxes on a shrinking 
        portion of the population. These taxes have been increased 33 
        times since 1970.
            (3) Life expectancy has risen substantially since the 
        creation of the Social Security system in 1935. The original 
        retirement age for Social Security was 65, but life expectancy 
        at birth in 1935 was 61. Life expectancy today is now 76, and 
        it is projected to grow to 81 over the next 75 years. The 
        normal retirement age today remains at 65, and is scheduled for 
        only a slight increase to 67 under current law.
            (4) In 1983, the Congress and President Reagan formed the 
        bipartisan Greenspan Commission which agreed on historic 
        legislation to ``save Social Security.'' At that time, the 
        Social Security Administration actuaries warned that the System 
        had an unfunded liability equal to 1.82 percent of taxable 
        payroll. The 1983 law eliminated this liability temporarily. 
        However, the actuaries now say that the unfunded liability is 
        2.19 percent, worse than in 1983.
            (5) According to The 1996 Board of Trustee's report the 
        Social Security trust fund will be exhausted by 2029. However, 
        starting in 2012 benefits will exceed income (excluding 
        interest), and the trust fund nonnegotiable IOUs will have to 
        be tapped. The Federal Government must then decide if it can 
        pay back those IOUs through tax increases, more borrowing, cuts 
        in Government programs, or cuts in Social Security benefits.
    (b) Purposes.--This Act is passed for the following purposes:
            (1) To restore the solvency of the Social Security program 
        in perpetuity, protecting the livelihoods of millions of U.S. 
        workers and retirees.
            (2) To gradually replace the current ``pay-as-you-go'' 
        Social Security financing system with a true retirement savings 
        program over the next 75 to 100 years.
            (3) To give workers and retirees more control over and 
        responsibility for their retirement savings by allowing them to 
        decide how their money is invested.
            (4) To increase retirement benefits and improve the living 
        standards of American seniors by allowing them to take 
        advantage of safe investment opportunities that earn higher 
        returns than those realized under the current Social Security 
        system.
            (5) To stimulate the American economy by increasing savings 
        and investment. This will lead to higher productivity, more 
        jobs, and better wages.
            (6) To protect the Social Security system for the benefit 
        of future generations of Americans.

            TITLE I--INDIVIDUAL RETIREMENT SECURITY PROGRAM

SEC. 101. REDUCTION IN SOCIAL SECURITY TRUST FUND CONTRIBUTIONS.

    (a) Annual Declaration of Reallocation Percentage.--Section 201 of 
the Social Security Act (42 U.S.C. 401) is amended by adding at the end 
the following new subsection:

            ``Annual Declaration of Reallocation Percentage

    ``(n)(1) The Commissioner of Social Security shall declare and 
publish in the Federal Register on or before August 1 of each calendar 
year the reallocation percentage for amounts otherwise appropriated for 
the following fiscal year to the Federal Old-Age and Survivors 
Insurance Trust Fund and the Federal Disability Insurance Trust Fund 
under paragraphs (3) and (4) of subsection (a) and under paragraphs (1) 
and (2) of subsection (b).
    ``(2) For purposes of this title--
            ``(A) The term `reallocation percentage' for any fiscal 
        year means the Commissioner's best estimate of the maximum 
        percentage by which the amounts described in paragraph (1) for 
        such fiscal year may be reduced--
                    ``(i) in any case in which such fiscal year 
                precedes fiscal year 2012, so as to maintain a linear 
                annual reduction in the trust funds performance ratio 
                from the amount of such ratio for the fiscal year 
                preceding such fiscal year to an amount of such ratio 
                for 2012 equal to 1.00, and
                    ``(ii) in any case in which such fiscal year is a 
                fiscal year after fiscal year 2011, so as to maintain a 
                trust funds performance ratio for such fiscal year of 
                1.00.
        In making the estimate under this paragraph, the Commissioner 
        shall utilize the intermediate actuarial assumptions utilized 
        by the Board of Trustees of the Trust Funds for its most recent 
        annual report issued under subsection (c).
            ``(B) The term ``trust funds performance ratio'' means, for 
        any fiscal year, the ratio of--
                    ``(i) the total amount which (as estimated by the 
                Commissioner of Social Security) will be paid into the 
                Federal Old-Age and Survivors Insurance Trust Fund and 
                the Federal Disability Insurance Trust Fund during such 
                fiscal year--
                            ``(I) including the taxes transferred under 
                        subsection (a) at any time during such year,
                            ``(II) disregarding loans (and interest 
                        thereon) made to either such Trust Fund from 
                        the Federal Hospital Insurance Trust Fund under 
                        subsection (l),
                            ``(III) disregarding any transfer payments 
                        between such Trust Funds, and
                            ``(IV) reducing the amount of any transfers 
                        into either such Trust Fund from the Railroad 
                        Retirement Account by the amount of any 
                        transfers from either such Trust Fund to such 
                        Account,
                to
                    ``(ii) the total amount which (as estimated by the 
                Commissioner of Social Security) will be paid from the 
                Federal Old-Age and Survivors Insurance Trust Fund and 
                the Federal Disability Insurance Trust Fund during such 
                fiscal year for all purposes authorized by this 
                section--
                            ``(I) disregarding payments of interest on 
                        (and repayments of) loans from the Federal 
                        Hospital Insurance Trust Fund under subsection 
                        (l),
                            ``(II) disregarding any transfer payments 
                        between such Trust Funds, and
                            ``(III) reducing the amount of any 
                        transfers to the Railroad Retirement Account by 
                        the amount of any transfers into either such 
                        Trust Fund from that Account.''.
    (b) Reduction in Trust Fund Contributions.--Section 201 of such Act 
(as amended by subsection (a)) is amended further by adding at the end 
the following new subsection:

                ``Reduction in Trust Fund Contributions

    ``(o) Under regulations prescribed by the Commissioner of Social 
Security (in consultation with the Secretary of the Treasury) to carry 
out this subsection, in any case in which a covered employee or a 
covered self-employed individual has elected to enter into elective 
retirement status under section 251(a), the amounts appropriated for 
any fiscal year under paragraphs (3) and (4) of subsection (a) and 
under paragraphs (1) and (2) of subsection (b), to the extent 
attributable to taxes paid with respect to such employee or individual 
during such fiscal year, shall be reduced by the reallocation 
percentage for such fiscal year.''.

SEC. 102. INDIVIDUAL RETIREMENT PROGRAM AND PERSONAL RETIREMENT SAVINGS 
              ACCOUNTS.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';

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

            ``Part B--Individual Retirement Security Program

                      ``elective retirement status

    ``Sec. 251. (a) Election.--
            ``(1) In general.--Under regulations prescribed by the 
        Commissioner of Social Security, an individual who is a covered 
        employee or a covered self-employed individual may elect, in 
        writing filed with the Commissioner, to enter into elective 
retirement status, if--
                    ``(A) the election designates, in such form and 
                manner as may be prescribed in such regulations, one or 
                more personal retirement savings accounts to which 
                contributions with respect to the individual are to be 
                made under subsection (b),
                    ``(B) the election sets forth or is accompanied by 
                the individual's consent to the adjustment to his 
                primary insurance amount under section 215(j), and
                    ``(C) no benefit or other payment under part A this 
                title or under title XVIII on the basis of the 
                individual's wages and self-employment income has 
                become payable at or before the date of the election.
        The individual may designate other personal retirement savings 
        accounts in lieu of or in addition to accounts previously 
        designated, in accordance with regulations of the Secretary of 
        the Treasury.
            ``(2) Additional rules.--Reductions pursuant to an election 
        under this subsection shall apply with respect to calendar 
        years after the calendar year in which the application for the 
        election is filed. Any election made under paragraph (1) shall 
        take effect only if the election is made during the period 
        beginning October 1 and ending November 30 preceding the first 
        calendar year for which it is effective. Any election under 
        this subsection shall be irrevocable.
            ``(3) Elective retirement status.--For purposes of this 
        part--
                    ``(A) Covered employees.--A covered employee is in 
                `elective retirement status' for a calendar year if, as 
                of January 1 of such calendar year, such employee has 
                made an effective election under this subsection.
                    ``(B) Covered self-employed individuals.--A covered 
                self-employed individual is in `elective retirement 
                status' for a taxable year if, as of the first day of 
                such taxable year, such individual has made an 
                effective election under this subsection.
    ``(b) Deposits into Personal Retirement Savings Accounts.--Within 
10 business days after receipt during any fiscal year of taxes paid 
under sections 3101(a) and 3111(a) of the Internal Revenue Code of 1986 
with respect to a covered employee in elective retirement status, and 
within 10 business days after receipt during any fiscal year of taxes 
paid under section 1401(a) of such Code with respect to a covered self-
employed individual in elective retirement status, the Secretary of the 
Treasury, from amounts otherwise available in the general fund of the 
Treasury, shall deposit, into such personal retirement savings accounts 
as are designated under subsection (a), a total amount equal to the 
product derived by multiplying the amount of such taxes by the 
reallocation percentage declared for such fiscal year under section 
201(n).

 ``designation of accounts of surviving spouses and surviving divorced 
                                spouses

    ``Sec. 252. (a) In General.--Except as provided in subsection (b), 
in the case of a deceased individual with respect to whom a personal 
retirement savings account was established and maintained pursuant to 
section 251(b), the trustee of such account shall transfer the balance 
in such account to a personal retirement savings account maintained by 
an eligible survivor if such account is designated by the eligible 
survivor to the trustee not later than 20 business days after the date 
of such individual's death. Any such designation shall be made in such 
form and manner as may be prescribed in regulations of the Commissioner 
of Social Security, in consultation with the Secretary of the Treasury.
    ``(b) Designation in Absence of Timely Designation by Eligible 
Survivor.--In any case in which, upon the expiration of such 20-day 
period, there is an eligible survivor but no timely designation of a 
personal retirement savings account is made by the eligible survivor 
under subsection (a), the trustee shall make the designation of the 
personal retirement savings account under subsection (a) on behalf of 
such eligible survivor, in accordance with regulations of the 
Commissioner of Social Security prescribed in consultation with the 
Secretary of the Treasury.
    ``(c) Disposition of Account Balance Where No Eligible Survivor 
Exists.--In any case in which, upon the expiration of such 20-day 
period no timely designation under subsection (b) has been made and 
there is no eligible survivor, the trustee of the deceased individual's 
account shall transfer the balance in such account to the deceased 
individual's estate within the period of 20 business days following the 
expiration of such 20-day period.

                    ``quarterly reports by trustees

    ``Sec. 253. (a) In General.--The trustee of a personal retirement 
savings account shall make quarterly reports concerning the status of 
the account. Each quarterly report shall be furnished to the account 
holder on or before the 30th day following the calendar quarter for 
which the report is required.
    ``(b) Information Required To Be Included.--The quarterly report 
shall contain the following information for transactions occurring 
during the calendar quarter for which the report is required:
            ``(1) The balance in the account.
            ``(2) The amount of elective retirement contributions.
            ``(3) The amount of distributions.
            ``(4) The name and address of the trustee.
            ``(5) Commission fees and fees for administrative expenses 
        charged in connection with the account.
The language of the report shall be written in a form so as to be 
understood by the average covered employee.
    ``(c) Reports to Commissioner.--The Commissioner of Social Security 
may require the quarterly report to be filed with the Social Security 
Administration at such time as the Commissioner may specify in 
regulations under this section.

                             ``definitions

    ``Sec. 254. For purposes of this part--
            ``(1) Personal retirement savings account.--The term 
        `personal retirement savings account' has the meaning provided 
        in section 408A(b) of the Internal Revenue Code of 1986.
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in his employ to whom 
        wages are paid by such person during such calendar year.
            ``(3) Covered employee.--The term `covered employee' means, 
        for any calendar year, any individual with respect to whose 
        employment by a covered employer during such calendar year 
        there is imposed an excise tax under section 3111 of the 
        Internal Revenue Code of 1986.
            ``(4) Covered self-employed individual.--The term `covered 
        self-employed individual' means any individual on whose self-
        employment income for a taxable year there is imposed a tax 
        under section 1401(a) of the Internal Revenue Code of 1986.
            ``(5) Elective retirement contribution.--The term `elective 
        retirement contribution' means, with respect to any employee or 
        other individual in elective retirement status, an amount 
        deposited with respect to such employee or other individual 
        into a personal retirement savings account pursuant to section 
        251(b).
            ``(6) Eligible survivor.--The term `eligible survivor' of a 
        deceased individual means such individual's widow or, if there 
        is no such widow, such individual's last surviving divorced 
        wife or surviving divorced husband. Such term shall not include 
        any such surviving divorced wife or surviving divorced husband 
        who is married on the date of the deceased individual's death.
            ``(7) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.

                              ``penalties

    ``Sec. 256. (a) Failure by Trustee To Make Timely Transfers.--If 
the balance in the personal retirement savings account of a deceased 
individual is not transferred by the trustee within the time prescribed 
by section 253--
            ``(1) the trustee shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount of the balance, and
            ``(2) shall be liable--
                    ``(A) in the case of a transfer required to be made 
                to another personal retirement savings account, to the 
                widow or the surviving divorced wife or surviving 
                divorced husband (as the case may be), or
                    ``(B) in the case of a transfer required to be made 
                to the Federal Old-Age and Survivors Insurance Trust 
                Fund, to such Trust Fund,
        for interest on the balance at the underpayment rate determined 
        under section 6621 of the Internal Revenue Code of 1986 from 
        the last day by which such balance was required to be so 
        transferred to the date on which such balance is transferred to 
        the designated personal retirement savings account.
    ``(b) Failure by Trustee To Make Timely Quarterly Reports.--The 
trustee of a personal retirement savings account shall be subject to a 
civil penalty of not to exceed $100 a day from the date of such 
trustee's failure or refusal to furnish the quarterly report required 
to be furnished by the trustee under section 254 until the date on 
which such report is furnished.
    ``(c) Rules for Application of Section.--
            ``(1) Penalties assessed by commissioner.--Any civil 
        penalty assessed by this section shall be imposed by the 
        Commissioner of Social Security and collected in a civil 
        action.
            ``(2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            ``(3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.''
    (b) Effective Date and Notice Requirements.--
            (1) Effective date.--The amendments made by subsection (a) 
        shall apply with respect to wages paid after December 31, 1997, 
        for pay periods ending after such date and self-employment 
        income for taxable years beginning after such date.
            (2) Notice requirements.--
                    (A) In general.--Not later than October 1, 1997, 
                the Commissioner of Social Security shall--
                            (i) send to the last known address of each 
                        eligible individual a description of the 
                        program established by the amendments made by 
                        this Act, which shall be written in the form of 
                        a pamphlet in language which may be readily 
                        understood by the average worker,
                            (ii) provide for toll-free access by 
                        telephone from all localities in the United 
                        States to the Social Security Administration 
                        through which individuals may obtain 
                        information and answers to questions regarding 
                        such program, and
                            (iii) provide information to the media in 
                        all localities of the United States about such 
                        program and such toll-free access by telephone.
                    (B) Eligible individual.--For purposes of this 
                paragraph, the term ``eligible individual'' means an 
                individual who, as of the date of the pamphlet sent 
                pursuant to subparagraph (A), is indicated within the 
                records of the Social Security Administration as--
                            (i) not having attained age 65, and
                            (ii) being credited with one or more 
                        quarters of coverage under section 213 of the 
                        Social Security Act.
                    (C) Matters to be included.--The Commissioner shall 
                include with the pamphlet sent to each eligible 
                individual pursuant to subparagraph (A)--
                            (i) a statement of the number of quarters 
                        of coverage indicated in the records of the 
                        Social Security Administration as of the date 
                        of the description as credited to such 
                        individual under section 213 of the Social 
                        Security Act and the date as of which such 
                        records may be considered accurate, and
                            (ii) the number for toll-free access by 
                        telephone established by the Commissioner 
                        pursuant to subparagraph (A).

SEC. 103. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS UNDER PART A OF 
              TITLE II OF THE SOCIAL SECURITY ACT.

    (a) In General.--Section 215 of the Social Security Act (42 U.S.C. 
415) is amended by adding at the end the following new subsection:

   ``Adjustment of Primary Insurance Amount of Covered Employees and 
 Covered Self-Employed Individuals in Elective Retirement Status Under 
                                 Part B

    ``(j)(1) Except as provided in paragraph (2), in the case of an 
individual who is a covered employee (as defined under section 254(3)) 
or a covered self-employed individual (as defined under section 254(4)) 
and who is in elective retirement status (as defined in section 
251(a)(3)), such individual's primary insurance amount as determined in 
accordance with this section (before adjustments made under subsection 
(i)) shall be equal to the excess (if any) of--
            ``(A) the amount which would be so determined if this 
        subsection did not apply, over
            ``(B) the actuarial present value, as of the date of the 
        determination of such amount, of the total amount of the 
        elective retirement contributions paid or payable under section 
        251 with respect to such individual, assuming an interest rate, 
        compounded annually, at 4.3 percent.
    ``(2)(A) In the case of an individual described in paragraph (1) 
who becomes entitled to disability insurance benefits under section 
223, such individual's primary insurance amount shall be determined 
without regard to paragraph (1).
    ``(B) For any month ending after an individual described in 
subparagraph (A) has attained age 60, such individual's primary 
insurance amount as determined in accordance with this section (before 
subsequent adjustments made under subsection (i)) shall be equal the 
product derived by multiplying--
            ``(i) the amount which would be so determined if this 
        subsection did not apply, by
            ``(ii) the applicable percentage determined under the 
        following table:

        ``If the number of such individual's
                                                                       
          quarters of coverage (within the
                                                                       
          meaning of section 213(a)(2)) as of
                                                                       
          the end of such month in which

          he or she attains age 60 (or,

          if later, the first month of
                                                         The applicable
          entitlement) is:
                                                         percentage is:
                Less than 9..........................     100 percent. 
                More than 8 but less than 21.........      90 percent. 
                More than 20 but less than 61........      80 percent. 
                More than 60 but less than 101.......      70 percent. 
                More than 100 but less than 141......      60 percent. 
                More than 140........................     50 percent.''
    (b) Conforming Amendment to Railroad Retirement Act of 1974.--
Section 1 of the Railroad Retirement Act of 1974 (45 U.S.C. 231) is 
amended by adding at the end the following:
    ``(s) In applying applicable provisions of the Social Security Act 
for purposes of determining the amount of the annuity to which an 
individual is entitled under this Act, such individual shall not be 
treated as in `elective retirement status' as defined in section 
251(a)(3) of the Social Security Act.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to months after December 1997.

SEC. 104. TAX TREATMENT OF PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section 
408 the following new section:

``SEC. 408A. PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) General Rule.--Gross income shall not include any amount 
deposited in a personal retirement savings account under section 251 or 
252 of the Social Security Act.
    ``(b) Personal Retirement Savings Account.--For purposes of this 
title, the term `personal retirement savings account' means a trust 
created or organized in the United States for the exclusive benefit of 
an individual or his beneficiaries, but only if the written governing 
instrument creating the trust meets the following requirements:
            ``(1) No contribution will be accepted other than under 
        sections 251 and 252 of the Social Security Act.
            ``(2) No amount may be paid or distributed from such trust 
        before the date on which the account holder attains age 60, 
        becomes entitled to disability insurance benefits under section 
        223 of the Social Security Act, or dies.
            ``(3) The trustee is a bank (as defined in section 408(n)) 
        or such other person who demonstrates to the satisfaction of 
        the Secretary that the manner in which such other person will 
        administer the trust will be consistent with the requirements 
        of this section.
            ``(4) No part of the trust fund is invested in life 
        insurance contracts.
            ``(5) The interest of an individual in the balance in his 
        account is nonforfeitable.
            ``(6) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(7) Under the terms governing the account, contributions 
        will be accepted irrespective of the amount of the 
        contribution.
            ``(8) The same requirements as are applicable with respect 
        to trusts under paragraph (11) of section 401(a) are met with 
        respect to the account (disregarding subparagraph (B) thereof), 
        as if the annuity starting date with respect to the account 
        holder is the day on which the account holder attains age 60 or 
        becomes entitled to disability insurance benefits under section 
        223 of the Social Security Act.
Paragraphs (1), (2), and (8) shall not apply to direct trustee-to-
trustee transfers between personal retirement savings accounts of the 
same individual.
    ``(c) Investment Requirements.--Amounts held in an individual's 
account shall be invested in the manner described in paragraph (1), 
(2), or (3), or in a manner consisting of any combination thereof.
            ``(1) Investments under this paragraph may be in the form 
        of securities of the United States Government.
            ``(2) Investments under this paragraph may be in the form 
        of--
                    ``(A) insurance contracts,
                    ``(B) certificates of deposit, or
                    ``(C) other instruments or obligations selected by 
                qualified professional asset managers,
        which return the amount invested and pay interest, at a 
        specified rate or rates, on that amount during a specified 
        period of time.
            ``(3) Investments under this paragraph may be in the form 
        of a portfolio of common stock designed to replicate the 
        performance of an index which shall be selected by the trustee, 
        under standards which shall be prescribed in regulations of the 
        Secretary applying for purposes of this paragraph the same 
        principles as are applicable under section 8438(b)(2) of title 
        5, United States Code. Such index must be a commonly recognized 
        index comprised of common stock the aggregate market value of 
which is a reasonably complete representation of the United States 
equity markets. The portfolio shall be designed such that, to the 
extent practicable, the percentage of the total amount invested in the 
manner described in this paragraph that is invested in each stock is 
the same as the percentage determined by dividing the aggregate market 
value of all shares of that stock by the aggregate market value of all 
shares of all stocks included in such index.
    ``(d) Account Exempt From Tax.--
            ``(1) General rule.--Except as provided in paragraph (2), 
        any personal retirement savings account is exempt from taxation 
        under this subtitle. Notwithstanding the preceding sentence, 
        any such account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Application of prohibited transactions rules, etc.--
        Rules similar to the rules of paragraphs (2), (3), and (4) of 
        section 408(e) shall apply to personal retirement savings 
        accounts.
    ``(e) Distributions Taxed As If Social Security Benefits.--
            ``(1) General rule.--Amounts paid or distributed from a 
        personal retirement savings account shall be includible in 
        gross income only if so includible under section 86, determined 
        by treating such amounts as Social Security benefits (as 
        defined in such section).
            ``(2) Trustee-to-trustee transfers.--No amount shall be 
        includible in gross income by reason of a direct trustee-to-
        trustee transfer between personal retirement savings accounts 
        of the same individual.
    ``(f) Certain Other Rules To Apply.--The following rules shall 
apply to personal retirement savings accounts in the same manner that 
such rules apply to individual retirement accounts:
            ``(1) Section 408(h) (relating to custodial accounts)
            ``(2) Sections 408(i) and 6693 (relating to reports).
            ``(3) Section 4975 (relating to prohibited transactions).''
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 408 the 
following new item:

                              ``Sec. 408A. Personal retirement savings 
                                        accounts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 105. REVENUES FROM INCREASES IN INCOME TAX ON SOCIAL SECURITY 
              BENEFITS DEPOSITED IN OASDI TRUST FUNDS.

    Subparagraph (B) of section 121(e)(1) of the Social Security 
Amendments of 1983 (Public Law 98-21, 42 U.S.C. 401 note) is amended to 
read as follows:
                    ``(B)(i) There are hereby appropriated to the 
                hospital insurance trust fund amounts equal to the 
                increase in tax liabilities described in subparagraph 
                (A)(ii) with respect to taxable years beginning before 
                January 1, 1998.
                    ``(ii) There are hereby appropriated to each payor 
                fund amounts equal to the increase in tax liabilities 
                described in subparagraph (A)(ii), with respect to 
                taxable years beginning after December 31, 1997, which 
                is attributable to the application of sections 86 and 
                871(a)(3) of such Code to payments from such payor 
                fund.
                    ``(iii) Such appropriated amounts shall be 
                transferred from the general fund of the Treasury on 
                the basis of estimates of such tax liabilities made by 
                the Secretary of the Treasury. Transfers shall be made 
                pursuant to a schedule made by the Secretary of the 
                Treasury that takes into account estimated timing of 
                collection of such liabilities.''

               TITLE II--SOCIAL SECURITY BENEFIT REFORMS

SEC. 201. LIMITATION ON PAYMENT OF CERTAIN BENEFITS IN EXCESS OF 
              CONTRIBUTIONS DURING YEARS OF HIGHER INCOME.

    (a) In General.--Section 202 of the Social Security Act (42 U.S.C. 
402) is amended by adding at the end the following new subsection:

``limitation on payment of certain benefits in excess of contributions 
                     during years of higher income

    ``(y)(1) Notwithstanding any other provision of this title, if, 
with respect to any year of higher income for an individual--
            ``(A) the total amount of the current adjusted values of 
        all of such individual's social security old-age or survivors 
        benefits in prior months, determined as of the beginning of 
        such year, exceed
            ``(B) the total amount of the current adjusted values of 
        all OASDI taxes paid with respect to the wages and self-
        employment income on which such benefits are based, determined 
as of the beginning of such year,
then such individual's social security old-age or survivors benefits 
for any month in such year shall be reduced (after all other deductions 
and reductions applicable under this title) by the percentage reduction 
determined under paragraph (2) for such year. Benefits, as reduced 
under this paragraph, if not a multiple of $1, shall be increased to 
the next higher multiple of $1.
    ``(2)(A) The percentage reduction determined under this paragraph 
for an individual's taxable year is the product derived by 
multiplying--
            ``(i) 1 percent, by
            ``(ii) the applicable income-based factor of the individual 
        for the taxable year.
    ``(B)(i) For purposes of subparagraph (A), in the case of an 
individual who is not married as of the beginning of the taxable year, 
the applicable income-based factor of the individual for the taxable 
year is the quotient (not greater than 100) derived by dividing--
            ``(I) the individual's excess income for the taxable year, 
        by
            ``(II) $300,
rounded (if not a whole number) to the next lower whole number.
    ``(ii) For purposes of clause (i), an individual's excess income 
for a taxable year is the excess of--
            ``(I) the adjusted gross income of such individual for such 
        taxable year, over
            ``(II) $50,000.
    ``(C)(i) For purposes of subparagraph (A), in the case of an 
individual who is married as of the beginning of the taxable year, the 
applicable income-based factor of the individual for the taxable year 
is the quotient (not greater than 100) derived by dividing--
            ``(I) the excess joint income of the individual and the 
        individual's spouse for the taxable year, by
            ``(II) $600,
rounded (if not a whole number) to the next lower whole number.
    ``(ii) For purposes of clause (i), the excess joint income of an 
individual and the individual's spouse for a taxable year is the excess 
of--
            ``(I) the total adjusted gross income of such individual 
        and such individual's spouse for such taxable year, over
            ``(II) $100,000.
    ``(D)(i) For taxable years ending after December 31, 1998, the 
dollar amounts referred to in subparagraphs (B) and (C) shall each be 
adjusted as provided in this subparagraph. The Commissioner of Social 
Security shall, on or before November 1 of 1998 and every year 
thereafter, determine and publish in the Federal Register the dollar 
amounts referred to in subparagraphs (B) and (C) as adjusted under this 
subparagraph for taxable years ending after December 31 of such year.
    ``(ii) The amount of each such dollar amount as adjusted under this 
subparagraph shall be the larger of--
            ``(I) the dollar amount in effect for the taxable year 
        ending in or with the calendar year in which the determination 
        under this subparagraph is made, or
            ``(II) the product of such dollar amount and the ratio of 
        the national average wage index (as defined in section 
        209(k)(1)) for the calendar year preceding the calendar year in 
        which the determination under this subparagraph is made to the 
        national average wage index (as so defined) for 1996,
with such product, if not a multiple of $10, being rounded to the next 
higher multiple of $10 where such amount is a multiple of $5 but not of 
$10 and to the nearest multiple of $10 in any other case.
    ``(3) For purposes of this subsection--
            ``(A) The term `year of higher income' for an individual 
        means any taxable year--
                    ``(i) if, in the case of an individual who is not 
                married as of the beginning of such taxable year, the 
                adjusted gross income of such individual for such 
                taxable year (disregarding distributions from personal 
                retirement savings accounts (as defined in section 
                254(1)) exceeds $50,000, or
                    ``(ii) if, in the case of an individual who is 
                married as of the beginning of such taxable year, the 
                total adjusted gross income of such individual and such 
                individual's spouse for such taxable year (disregarding 
                distributions from personal retirement savings accounts 
                (as defined in section 254(1)) exceeds $100,000.
            ``(B) The term `adjusted gross income' has the meaning 
        provided in section 62 of the Internal Revenue Code of 1986.
            ``(C)(i) The term `current adjusted value' of an amount, 
        determined as of the beginning of any calendar year, means the 
        original amount, plus interest on such amount, compounded 
        annually through the end of the preceding calendar year at the 
        trust fund interest rate as in effect from year to year.
            ``(ii) The term `trust fund interest rate' in effect for 
        any year means the average rate of interest earned during the 
fiscal year ending in such year on investments of amounts in the 
Federal Old-Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund, as determined by the Managing Trustee 
of such Trust Funds.
            ``(D) The term `social security old-age or survivors 
        benefit' of an individual means a monthly insurance benefit 
        under this title based on the wages and self-employment income 
        of such individual and paid or payable from the Federal Old-Age 
        and Survivors Insurance Trust Fund.
            ``(E) The term `OASDI taxes' means the taxes imposed under 
        sections 1401(a), 3101(a), and 3111(a) of the Internal Revenue 
        Code of 1986.
    ``(4) The Commissioner of Social Security shall provide by 
regulation for the maintenance of such records, relating to individuals 
to whom social security old-age or survivors benefits are otherwise 
payable under this section, of total benefits paid and OASDI taxes 
paid, as is necessary to preclude, to the maximum extent practicable, 
overpayments and underpayments of benefits resulting from the operation 
of this subsection. The Commissioner and the Secretary of the Treasury 
shall enter into such arrangements as are necessary to ensure that such 
records maintained by the Commissioner are currently accurate at all 
times.
    ``(5)(A) In any case in which a taxable year of an individual is a 
year of higher income for such individual, if a social security old-age 
or survivors benefit has been paid to such individual for any month in 
such year, such individual (or the individual who is in receipt of such 
benefit on his behalf) shall make a report to the Commissioner of 
Social Security of his adjusted gross income, and (if he is married) 
the adjusted gross income of his spouse, for such taxable year. Such 
report shall be made on or before the fifteenth day of the fourth month 
following the close of such year, and shall contain such information 
and be made in such manner as the Commissioner may by regulations 
prescribe. The Commissioner may grant a reasonable extension of time 
for making such report if he finds that there is valid reason for a 
delay, but in no case may the period be extended more than three 
months.
    ``(B) If an individual fails to make a report required under 
subparagraph (A), within the time prescribed by or in accordance with 
such subparagraph, for any taxable year and a benefit based on such 
individual's wages and self-employment income is paid for any month in 
such taxable year or the next following taxable year which is in excess 
of the amount payable by reason of this subsection, he shall be deemed 
to have been overpaid for such month an additional amount as follows:
            ``(i) in the case of the first such month for which a 
        benefit is paid in excess of the amount payable by reason of 
        this subsection, the additional amount shall be equal to the 
        amount of such excess;
            ``(ii) in the case of the second such month for which a 
        benefit is paid in excess of the amount payable by reason of 
        this subsection, the additional amount shall be equal to two 
        times the amount of such excess; and
            ``(iii) in the case of the third or a subsequent such month 
        for which a benefit is paid in excess of the amount payable by 
        reason of this subsection, the additional amount shall be equal 
        to three times the amount of such excess;
except that additional amounts of overpayment determined under this 
paragraph shall be determined only for months for which the benefit in 
excess of the amount payable was received and accepted.
    ``(C)(i)(I) If the Commissioner of Social Security determines, on 
the basis of information obtained by or submitted to him, that it may 
reasonably be expected that an individual's social security old-age or 
survivors benefits will not be payable (in whole or in part) for any 
month in a taxable year of such individual by reason of this 
subsection, the Commissioner may, before the close of such taxable 
year, suspend the payment (in whole or in part) for each month in such 
year (or for only such months as the Commissioner may specify) of such 
benefits. Such suspension shall remain in effect with respect to the 
benefits for any month until the Commissioner has determined the extent 
to which benefits are payable under this subsection.
    ``(II) The Commissioner of Social Security may, before the close of 
the taxable year of an individual on whose wages and self-employment 
income benefits are otherwise payable during such year, request of such 
individual that he make, at such time or times as the Commissioner may 
specify, a declaration of his estimated adjusted gross income (or the 
estimated total adjusted gross income for him and his spouse) for the 
taxable year and that he furnish to the Commissioner such other 
information with respect to such income as the Commissioner may 
specify. A failure by such individual to comply with any such request 
shall in itself constitute justification for a determination under 
subclause (I) that it may reasonably be expected that such benefits are 
not payable (in whole or in part) by reason of this subsection.
    ``(III) If the payment of an individual's social security old-age 
or survivors benefits have been suspended (in whole or in part) for all 
months in any taxable year of such individual under subclause (I), no 
payment of such unpaid benefits shall be made for any such month in 
such taxable year after the expiration of the period of three years, 
three months, and fifteen days following the close of such taxable year 
unless within such period the individual, or some other person entitled 
to benefits under this title on the basis of the same wages and self-
employment income, files with the Commissioner of Social Security 
information showing that the unpaid portion of a benefit for such month 
is payable to such individual.
    ``(ii) If, after the close of a taxable year of an individual to 
whom social security old-age or survivors benefits were otherwise 
payable for months in such year, the Commissioner of Social Security 
requests such individual to furnish a report of his adjusted gross 
income (or the total adjusted gross income of him and his spouse) for 
such taxable year or any other information with respect to such income 
which the Commissioner may specify, and the individual fails to comply 
with such request, such failure shall in itself constitute 
justification for a determination that such benefits were not payable 
(in whole or in part) for each month in such taxable year (or only for 
such months thereof as the Commissioner may specify) by reason of this 
subsection.
    ``(D) The Commissioner of Social Security shall develop and 
implement procedures in accordance with this paragraph to avoid paying 
more than the correct amount of an individual's social security old-age 
or survivors benefits as a result of the failure of the individual to 
file a correct report or estimate of adjusted gross income. Such 
procedures may include identifying categories of individuals whose 
social security old-age or survivors benefits which are not payable (in 
whole or in part) under this subsection are likely to be paid and 
requesting that they estimate their adjusted gross income (or the total 
adjusted gross income of them and their spouses) more frequently than 
other persons subject to this subsection.
    ``(6) Benefits of any individual (other than an individual 
described in paragraph (1)) based on the wages and self-employment 
income of any other individual to whom benefits are not payable by 
reason of paragraph (1) shall be payable as though such other 
individual were receiving such benefits.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to benefits otherwise payable in taxable years 
ending after December 31, 1997.

SEC. 202. GRADUAL INCREASE IN RETIREMENT AGE AND EARLY RETIREMENT AGE.

    (a) Retirement Age.--Section 216(l)(1) of the Social Security Act 
(42 U.S.C. 416(l)(1)) is amended to read as follows:
    ``(l)(1) The term `retirement age' means--
            ``(A) with respect to an individual who attains age 62 
        before January 1, 2000, 65 years of age,
            ``(B) with respect to an individual who attains age 62 
        after December 31, 1999, and before January 1, 2015, 65 years 
        of age plus \3/12\ of the number of months in the period 
        beginning with January 2000 and ending with the last month of 
        the calendar year in which the individual attains age 62,
            ``(C) with respect to an individual who attains age 62 
        after December 31, 2014, and before January 1, 2016, 69 years 
        of age, and
            ``(D) with respect to an individual who attains age 62 in 
        any year after December 31, 2015, the projected retirement age 
        (as determined by the Commissioner under paragraph (3)) for the 
        year in which such individual attains age 62.''.
    (b) Early Retirement Age.--Section 216(l)(2) of such Act (42 U.S.C. 
416(l)(2)) is amended to read as follows:
    ``(2) The term `early retirement age' means--
            ``(A) except as otherwise provided in this paragraph--
                    ``(i) age 62, in the case of an old-age, wife's, or 
                husband's insurance benefit, or
                    ``(ii) age 60, in the case of a widow's or 
                widower's insurance benefit,
            ``(B) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 1999, and before January 1, 2011, the applicable retirement 
        age (as defined in paragraph (1)), minus--
                    ``(i) 3 years, in the case of an old-age, wife's, 
                or husband's insurance benefit, or
                    ``(ii) 5 years, in the case of a widow's or 
                widower's insurance benefit,
            ``(C) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 2010, and before January 1, 2016--
                    ``(i) age 65, in the case of an old-age, wife's, or 
                husband's insurance benefit, or
                    ``(ii) age 63, in the case of a widow's or 
                widower's insurance benefit, and
            ``(D) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 2015, the applicable retirement age (as defined in 
        paragraph (1)), minus--
                    ``(i) 4 years, in the case of an old-age, wife's, 
                or husband's insurance benefit, or
                    ``(ii) 6 years, in the case of a widow's or 
                widower's insurance benefit.''.
    (c) Projected Retirement Age.--Section 216(l)(3) of such Act (42 
U.S.C. 416(l)(3)) is amended to read as follows:
    ``(3)(A) Not later than October 1 of each year after 2014, the 
Commissioner of Social Security shall determine, and publish in the 
Federal Register, the projected retirement age for the year following 
such October 1.
    ``(B) For purposes of this paragraph--
            ``(i) The `projected retirement age' for any year means the 
        age (rounded, if not otherwise expressible as a whole number of 
        months, to the next lower whole number of months) which, if 
        such age were the retirement age (as defined in this 
        subsection) in effect for individuals who attain age 62 in such 
        year (and are credited under this title with wages or self-
        employment income), would cause the ratio of the projected 
        post-retirement lifetime for such individuals to the potential 
        working lifetime for such individuals to be equal to the ratio 
        of the projected post-retirement lifetime for all individuals 
        who attain age 62 in 2015 (and are credited under this title 
        with wages or self-employment income) to the potential working 
        lifetime for such individuals attaining age 62 in 2015.
            ``(ii) The `projected post-retirement lifetime' for 
        individuals attaining age 62 in any year means the average 
        projected lifetime (rounded, if not otherwise expressible as a 
        whole number of months, to the next lower whole number of 
        months) of such individuals commencing with the month following 
        the month in which the applicable retirement age is attained, 
        as determined by the Commissioner of Social Security, utilizing 
        the intermediate actuarial assumptions utilized by the Board of 
        Trustees of the Federal Old-Age and Survivors Insurance Trust 
        Fund for its most recent annual report issued under section 
        201(c).
            ``(iii) The `potential working lifetime' for individuals 
        attaining age 62 in any year means the number of calendar 
        months during the period beginning with January of the year 
        following the year in which age 20 is attained by such 
        individuals and ending with the month in which the applicable 
        retirement age is attained by such individuals.''.
    (d) Definition of Elapsed Years for Purposes of Determining Benefit 
Computation Years.--Section 215(b)(2)(B)(iii) of such Act (42 U.S.C. 
415(b)(2)(B)(iii)) is amended--
            (1) by striking ``the year in which he attained age 62'' 
        and all that follows and inserting ``the year in which he 
        attained--''; and
            (2) by adding at the end the following:
                    ``(I) early retirement age (as defined in section 
                216(l)(2) in the case of old-age, wife's, and husband's 
                insurance benefits), in the case of an individual who 
                attained age 62 before January 1, 2012,
                    ``(II) age 65 plus \3/12\ of the number of months 
                in the period beginning with January 2012 and ending 
                with the last month of the calendar year in which the 
                individual attained age 62, in the case of an 
                individual who attained age 62 after December 31, 2011, 
                and before January 1, 2015, or
                    ``(III) one year greater than early retirement age 
                (as so defined), in the case of an individual who 
                attained age 62 after December 31, 2014;
        except that such term excludes any calendar year any part of 
        which is included in a period of disability.''.

SEC. 203. ADJUSTMENTS TO BEND POINTS IN DETERMINING PRIMARY INSURANCE 
              AMOUNTS.

    (a) Additional Bend Point.--Section 215(a)(1)(A) of the Social 
Security Act (42 U.S.C. 415(a)(1)(A)) is amended--
            (1) in clause (ii), by striking ``and'' at the end;
            (2) in clause (iii), by striking ``clause (ii),'' and 
        inserting the following: ``clause (ii) but do not exceed the 
        amount established for purposes of this clause by subparagraph 
        (B), and''; and
            (3) by inserting after clause (iii) the following new 
        clause:
            ``(iv) 5 percent of the individual's average indexed 
        monthly earnings to the extent that such earnings exceed the 
        amount established for purposes of clause (iii),''.
    (b) Initial Level of Additional Bend Point.--Section 
215(a)(1)(B)(i) of such Act (42 U.S.C. 415(a)(1)(B)(i)) is amended by 
adding at the end the following new sentence: ``For individuals who 
initially become eligible for old-age or disability insurance benefits, 
or who die (before becoming eligible for such benefit), in the calendar 
year 1998, the amount established for purposes of clause (iii) of 
subparagraph (A) shall be $3,391.''.
    (c) Use of CPI in Determining Cost-of-Living Increases in Highest 2 
Bend Points.--
            (1) In general.--Section 215(i)(2)(A)(ii) of such Act (42 
        U.S.C. 415(i)(2)(A)(ii)) is amended by striking the sentence 
        after and below subdivision (III) and inserting the following 
        new sentences:
``If the Commissioner, effective with December of any year, increases 
the amounts described in subdivisions (I), (II), and (III), the 
Commissioner shall also, effective for the following calendar year, 
increase the amounts established under subsection (a)(1)(B) for 
purposes of clauses (ii) and (iii) of subsection (a)(1)(A). The 
increases in the amounts described in subdivisions (I), (II), and (III) 
shall be derived by multiplying each of the amounts (including each of 
those amounts as previously increased under this subparagraph) by the 
applicable increase percentage. The increase in the amounts established 
under subsection (a)(1)(B) for purposes of clauses (ii) and (iii) of 
subsection (a)(1)(A) shall be derived by multiplying each of the 
amounts (including each of those amounts as previously increased under 
this subparagraph) by the excess (if any) of the wage increase 
percentage over 1.3 percentage points. Any amount so increased that is 
not a multiple of $0.10 shall be decreased to the next lower multiple 
of $0.10.''.
            (2) Conforming amendment.--Section 215(a)(1)(B)(ii) of such 
        Act (42 U.S.C. 415(a)(1)(B)(ii)) is amended by striking ``each 
        of the amounts so established'' and inserting ``the amount so 
        established for purposes of subparagraph (A)(i)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to amounts effective for calendar 
        years after 1997.

SEC. 204. INFORMATION RELATING TO BENEFIT LIMITATIONS PROVIDED IN 
              SOCIAL SECURITY ACCOUNT STATEMENTS.

    (a) In General.--Section 1143 of the Social Security Act (42 U.S.C. 
1320b-13) is amended--
            (1) in the heading for subsection (a), by striking ``Upon 
        Request'' and inserting ``of Annual Statements'';
            (2) in subsection (a)(1), by striking ``Beginning'' and all 
        that follows and inserting the following: ``Not later than 
        October 1 of each year, the Commissioner of Social Security 
        shall provide an annual social security account statement 
        (hereinafter in this section referred to as the `statement') to 
        each eligible individual for whom a mailing address can be 
        determined through such methods as the Commissioner determines 
        to be appropriate.'';
            (3) in subsection (a)(2)(A), by striking ``at the date of 
        the request'';
            (4) in subsection (a)(2)(B), by striking ``on the date of 
        the request'';
            (5) in subsection (a)(2)(C), by striking ``on the date of 
        the request'' and by striking ``and'' at the end;
            (6) in subsection (a)(2)(D), by inserting ``in the case of 
        individuals not receiving benefits,'' after ``(D)'', and by 
        striking ``title XVIII.'' and inserting ``title XVIII;'';
            (7) by adding after subparagraph (D) the following:
            ``(E) a table setting forth an estimate, in relation to 
        1980 and every 10th year thereafter through 2030, of the 
        following information:
                    ``(i) the total amount of the current adjusted 
                values of all employee, employer, and self-employment 
                contributions made with respect to the wages and self-
                employment income of the average earner retiring at 
                retirement age in each such year;
                    ``(ii) the total amount of the current adjusted 
                values of the social security old-age or survivors 
                benefits (as defined in section 202(y)(3)(D)) paid for 
                all prior months on the basis of the wages and self-
                employment income of the average earner retiring at 
                retirement age in each such year; and
                    ``(iii) the total amount of the current adjusted 
                values of the monthly benefits which will have been 
                paid under such subsections, as of the time of the 
                death of the average earner retiring at retirement age 
                in each such year, on the basis of his or her wages and 
                self-employment income, as projected under the 
                intermediate actuarial assumptions utilized by the 
                Board of Trustees of the Federal Old-Age and Survivors 
                Insurance Trust Fund for its most recent annual report 
                issued under section 201(c); and
            ``(F) the year for which the annual rate of outgo from the 
        Federal Old-Age and Survivors Insurance Trust Fund will first 
        exceed the annual rate of deposits to such Trust Fund 
        (excluding any return of obligations held by such Trust Fund), 
        as projected under the intermediate actuarial assumptions 
        utilized by the Board of Trustees of the Federal Old-Age and 
        Survivors Insurance Trust Fund for its most recent annual 
        report issued under section 201(c).
For purposes of subparagraph (E), the term `current adjusted value' has 
the meaning provided in section 202(y)(3)(C).'';
            (8) by striking subsection (b);
            (9) in subsection (c)--
                    (A) by striking the heading and inserting the 
                following:

                  ``Required Estimates of Benefits'';

                    (B) by striking ``(c)(1) By not later'' and all 
                that follows through ``With respect to'' in paragraph 
                (2) and inserting ``(b) With respect to''; and
                    (C) by adding at the end the following new 
                sentence: ``The Commissioner shall provide such 
                estimates of retirement benefit amounts to eligible 
                individuals who have not attained age 50 upon 
                request.''; and
            (10) by adding at the end the following new subsection:

       ``Inclusion of Statements to Retirees with Other Mailings

    ``(c) The Commissioner of Social Security shall ensure that 
statements provided to eligible individuals who are receiving benefits 
under title II are included to the maximum extent practicable with 
mailings otherwise made to such individuals. The Commissioner shall 
consult with the Secretary of the Treasury in carrying out the 
requirement of this subsection and such Secretary shall provide such 
appropriate assistance to the Commissioner as is necessary to carry out 
such requirements.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to statements provided on or after October 1, 1996.

SEC. 205. COVERAGE OF NEWLY HIRED STATE AND LOCAL EMPLOYEES.

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

            ``Excluded State or Local Government Employment

    ``(s)(1) In general.--The term `excluded State or local government 
employment' means any service performed in the employ of a State, of 
any political subdivision thereof, or of any instrumentality of any one 
or more of the foregoing which is wholly owned thereby, if--
            ``(A)(i) such service would be excluded from the term 
        `employment' for purposes of this title if the preceding 
        provisions of this section as in effect in March 1997 had 
        remained in effect, and (ii) the requirements of paragraph (2) 
        are met with respect to such service, or
            ``(B) the requirements of paragraph (3) are met with 
        respect to such service.
    ``(2) Exception for current employment which continues.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to service for any employer if--
                    ``(i) such service is performed by an individual--
                            ``(I) who was performing substantial and 
                        regular service for remuneration for that 
                        employer before January 1, 1998,
                            ``(II) who is a bona fide employee of that 
                        employer on December 31, 1997, and
                            ``(III) whose employment relationship with 
                        that employer was not entered into for purposes 
                        of meeting the requirements of this 
                        subparagraph, and
                    ``(ii) the employment relationship with that 
                employer has not been terminated after December 31, 
                1997.
            ``(B) Treatment of multiple agencies and 
        instrumentalities.--For purposes of subparagraph (A), under 
        regulations (consistent with regulations established under 
        section 3121(t)(2)(B) of the Internal Revenue Code of 1986)--
                    ``(i) all agencies and instrumentalities of a State 
                (as defined in section 218(b)) or of the District of 
                Columbia shall be treated as a single employer, and
                    ``(ii) all agencies and instrumentalities of a 
                political subdivision of a State (as so defined) shall 
                be treated as a single employer and shall not be 
                treated as described in clause (i).
    ``(3) Exception for certain services.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to service if such service is performed--
                    ``(i) by an individual who is employed by a State 
                or political subdivision thereof to relieve such 
                individual from unemployment,
                    ``(ii) in a hospital, home, or other institution by 
                a patient or inmate thereof as an employee of a State 
                or political subdivision thereof or of the District of 
                Columbia,
                    ``(iii) by an individual, as an employee of a State 
                or political subdivision thereof or of the District of 
                Columbia, serving on a temporary basis in case of fire, 
                storm, snow, earthquake, flood, or other similar 
                emergency,
                    ``(iv) by any individual as an employee included 
                under section 5351(2) of title 5, United States Code 
                (relating to certain interns, student nurses, and other 
                student employees of hospitals of the District of 
                Columbia Government), other than as a medical or dental 
                intern or a medical or dental resident in training,
                    ``(v) by an election official or election worker if 
                the remuneration paid in a calendar year for such 
                service is less than $1,000 with respect to service 
                performed during 1998, and the adjusted amount 
                determined under subparagraph (C) for any subsequent 
                year with respect to service performed during such 
                subsequent year, except to the extent that service by 
                such election official or election worker is included 
                in employment under an agreement under section 218, or
                    ``(vi) by an employee in a position compensated 
                solely on a fee basis which is treated pursuant to 
                section 211(c)(2)(E) as a trade or business for 
                purposes of inclusion of such fees in net earnings from 
                self-employment.
            ``(B) Definitions.--As used in this paragraph, the terms 
        `State' and `political subdivision' have the meanings given 
        those terms in section 218(b).
            ``(C) Adjustments to dollar amount for election officials 
        and election workers.--For each year after 1998, the 
        Commissioner of Social Security shall adjust the amount 
        referred to in subparagraph (A)(v) at the same time and in the 
        same manner as is provided under section 215(a)(1)(B)(ii) with 
        respect to the amounts referred to in section 215(a)(1)(B)(i), 
        except that--
                    ``(i) for purposes of this subparagraph, 1995 shall 
                be substituted for the calendar year referred to in 
                section 215(a)(1)(B)(ii)(II), and
                    ``(ii) such amount as so adjusted, if not a 
                multiple of $100, shall be rounded to the next higher 
                multiple of $100 where such amount is a multiple of $50 
                and to the nearest multiple of $100 in any other case.
        The Commissioner of Social Security shall determine and publish 
        in the Federal Register each adjusted amount determined under 
        this subparagraph not later than November 1 preceding the year 
        for which the adjustment is made.''.
                    (B) Conforming amendments.--
                            (i) Subsection (k) of section 210 of such 
                        Act (42 U.S.C. 410(k)) (relating to covered 
                        transportation service) is repealed.
                            (ii) Section 210(p) of such Act (42 U.S.C. 
                        410(p)) is amended--
                                    (I) in paragraph (2), by striking 
                                ``service is performed'' and all that 
                                follows and inserting ``service is 
                                service described in subsection 
                                (s)(3)(A).''; and
                                    (II) in paragraph (3)(A), by 
                                inserting ``under subsection (a)(7) as 
                                in effect in December 1997'' after 
                                ``section''.
                            (iii) Section 218(c)(6) of such Act (42 
                        U.S.C. 418(c)(6)) is amended--
                                    (I) by striking subparagraph (C);
                                    (II) by redesignating subparagraphs 
                                (D) and (E) as subparagraphs (C) and 
                                (D), respectively; and
                                    (III) by striking subparagraph (F) 
                                and inserting the following:
            ``(E) service which is included as employment under section 
        210(a).''
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (7) of section 3121(b) of the 
        Internal Revenue Code of 1986 (relating to employment) is 
        amended to read as follows:
            ``(7) excluded State or local government employment (as 
        defined in subsection (t));''.
            (2) Excluded state or local government employment.--Section 
        3121 of such Code is amended by inserting after subsection (s) 
        the following new subsection:
    ``(t) Excluded State or Local Government Employment.--
            ``(1) In general.--For purposes of this chapter, the term 
        `excluded State or local government employment' means any 
        service performed in the employ of a State, of any political 
        subdivision thereof, or of any instrumentality of any one or 
        more of the foregoing which is wholly owned thereby, if--
                    ``(A)(i) such service would be excluded from the 
                term `employment' for purposes of this chapter if the 
                provisions of subsection (b)(7) as in effect in 
                December 1997 had remained in effect, and (ii) the 
                requirements of paragraph (2) are met with respect to 
                such service, or
                    ``(B) the requirements of paragraph (3) are met 
                with respect to such service.
            ``(2) Exception for current employment which continues.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to service for any 
                employer if--
                            ``(i) such service is performed by an 
                        individual--
                                    ``(I) who was performing 
                                substantial and regular service for 
                                remuneration for that employer before 
                                January 1, 1998,
                                    ``(II) who is a bona fide employee 
                                of that employer on December 31, 1997, 
                                and
                                    ``(III) whose employment 
                                relationship with that employer was not 
                                entered into for purposes of meeting 
                                the requirements of this subparagraph, 
                                and
                            ``(ii) the employment relationship with 
                        that employer has not been terminated after 
                        December 31, 1997.
                    ``(B) Treatment of multiple agencies and 
                instrumentalities.--For purposes of subparagraph (A), 
                under regulations--
                            ``(i) all agencies and instrumentalities of 
                        a State (as defined in section 218(b) of the 
                        Social Security Act) or of the District of 
                        Columbia shall be treated as a single employer, 
                        and
                            ``(ii) all agencies and instrumentalities 
                        of a political subdivision of a State (as so 
                        defined) shall be treated as a single employer 
                        and shall not be treated as described in clause 
                        (i).
            ``(3) Exception for certain services.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to service if such 
                service is performed--
                            ``(i) by an individual who is employed by a 
                        State or political subdivision thereof to 
                        relieve such individual from unemployment,
                            ``(ii) in a hospital, home, or other 
                        institution by a patient or inmate thereof as 
                        an employee of a State or political subdivision 
                        thereof or of the District of Columbia,
                            ``(iii) by an individual, as an employee of 
                        a State or political subdivision thereof or of 
                        the District of Columbia, serving on a 
                        temporary basis in case of fire, storm, snow, 
                        earthquake, flood, or other similar emergency,
                            ``(iv) by any individual as an employee 
                        included under section 5351(2) of title 5, 
                        United States Code (relating to certain 
                        interns, student nurses, and other student 
                        employees of hospitals of the District 
of Columbia Government), other than as a medical or dental intern or a 
medical or dental resident in training,
                            ``(v) by an election official or election 
                        worker if the remuneration paid in a calendar 
                        year for such service is less than $1,000 with 
                        respect to service performed during 1998, and 
                        the adjusted amount determined under section 
                        210(s)(3)(C) of the Social Security Act for any 
                        subsequent year with respect to service 
                        performed during such subsequent year, except 
                        to the extent that service by such election 
                        official or election worker is included in 
                        employment under an agreement under section 218 
                        of the Social Security Act, or
                            ``(vi) by an employee in a position 
                        compensated solely on a fee basis which is 
                        treated pursuant to section 1402(c)(2)(E) as a 
                        trade or business for purposes of inclusion of 
                        such fees in net earnings from self-employment.
                    ``(B) Definitions.--As used in this paragraph, the 
                terms `State' and `political subdivision' have the 
                meanings given those terms in section 218(b) of the 
                Social Security Act.''.
            (3) Conforming amendments.--
                    (A) Subsection (j) of such section 3121 (relating 
                to covered transportation service) is repealed.
                    (B) Paragraph (2) of section 3121(u) of such Code 
                (relating to application of hospital insurance tax to 
                Federal, State, and local employment) is amended--
                            (i) in subparagraph (B), by striking 
                        ``service is performed'' in clause (ii) and all 
                        that follows through the end of such 
                        subparagraph and inserting ``service is service 
                        described in subsection (t)(3)(A).''; and
                            (ii) in subparagraph (C)(i), by inserting 
                        ``under subsection (b)(7) as in effect in 
                        December 1996'' after ``chapter''.
    (c) Effective Date.--Except as otherwise provided in this section, 
the amendments made by this section shall apply with respect to service 
performed after December 31, 1997.

SEC. 206. PHASED REDUCTION IN SPOUSAL BENEFITS OTHER THAN SURVIVOR'S 
              BENEFITS TO 33 PERCENT OF PRIMARY INSURANCE AMOUNT.

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

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        Before calendar year 2000....................       50 percent 
        Calendar year 2000...........................       49 percent 
        Calendar year 2001...........................       48 percent 
        Calendar year 2002...........................       47 percent 
        Calendar year 2003...........................       46 percent 
        Calendar year 2004...........................       45 percent 
        Calendar year 2005...........................       44 percent 
        Calendar year 2006...........................       43 percent 
        Calendar year 2007...........................       42 percent 
        Calendar year 2008...........................       41 percent 
        Calendar year 2009...........................       40 percent 
        Calendar year 2010...........................       39 percent 
        Calendar year 2011...........................       38 percent 
        Calendar year 2012...........................       37 percent 
        Calendar year 2013...........................       36 percent 
        Calendar year 2014...........................       35 percent 
        Calendar year 2015...........................       34 percent 
        After calendar year 2015.....................    33 percent.''.
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        wife's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a wife's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.
    (b) Husband's Insurance Benefits.--Section 202(c)(3) of such Act 
(42 U.S.C. 402(c)(3)) is amended to read as follows:
    ``(3)(A) Except as provided in subsection (q) and paragraph (2) of 
this subsection, such husband's insurance benefit for each month shall 
be equal to the applicable percentage of the primary insurance amount 
of his wife (or, in the case of a divorced husband, his former wife) in 
connection with the calendar year in which such individual becomes 
eligible for such benefit, as specified in the following table:

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        Before calendar year 2000....................       50 percent 
        Calendar year 2000...........................       49 percent 
        Calendar year 2001...........................       48 percent 
        Calendar year 2002...........................       47 percent 
        Calendar year 2003...........................       46 percent 
        Calendar year 2004...........................       45 percent 
        Calendar year 2005...........................       44 percent 
        Calendar year 2006...........................       43 percent 
        Calendar year 2007...........................       42 percent 
        Calendar year 2008...........................       41 percent 
        Calendar year 2009...........................       40 percent 
        Calendar year 2010...........................       39 percent 
        Calendar year 2011...........................       38 percent 
        Calendar year 2012...........................       37 percent 
        Calendar year 2013...........................       36 percent 
        Calendar year 2014...........................       35 percent 
        Calendar year 2015...........................       34 percent 
        After calendar year 2015.....................    33 percent.''.
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        husband's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a husband's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.
                                 <all>
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