Social Security Reform Act of 2016

To preserve Social Security for generations to come, reward work, and improve retirement security. 1. Short title This Act may be cited as the Social Security Reform Act of 2016 2. Table of contents The table of contents for this Act is as follows: Sec. 1. Short title. Sec. 2. Table of contents. Title I—Modernizing Social Security for the 21st Century Sec. 101. Modernize the benefit formula. Sec. 102. Raise full retirement age. Sec. 103. Use an accurate cost-of-living measure. Sec. 104. Cap on nonworking spouse benefit. Sec. 105. Cap on child’s benefit. Sec. 106. Require child beneficiaries to attend school. Title II—Rewarding work Sec. 201. Strengthening Social Security for long career workers. Sec. 202. Repeal of the Retirement Earnings Test. Title III—Improving retirement security Sec. 301. Phaseout of tax on Social Security benefits relating to the Social Security trust funds. Sec. 302. Option to claim delayed retirement credit in partial lump sum. Sec. 303. Strengthening Social Security for low-income seniors. Sec. 304. End 7-year limitation for disabled surviving spouses. Sec. 305. Benefits for disabled surviving spouses. Sec. 306. Waive 2-year duration of divorce requirement. I Modernizing Social Security for the 21st Century 101. Modernize the benefit formula (a) Primary insurance amount computation Section 215(a)(1) of the Social Security Act ( 42 U.S.C. 415(a)(1) (1) in subparagraph (B)(ii), by inserting and before 2023 after 1979 (2) by redesignating subparagraph (D) as subparagraph (E); and (3) by inserting after subparagraph (C) the following new subparagraph: (D) (i) In the case of an individual who initially becomes eligible for old-age or disability insurance benefits, or who dies (before becoming eligible for such benefits), in any calendar year after 2022, the primary insurance amount of the individual shall (except as provided in clause (vii)) be equal to the sum of the amounts determined under clause (ii) with respect to all of the individual’s benefit computation years (as defined in subsection (b)(2)(B)). (ii) For purposes of this subparagraph, the amount determined under this clause with respect to a benefit computation year of an individual shall be equal to the quotient derived by dividing— (I) the product of the individual’s covered earnings ratio determined under clause (iii) for such benefit computation year and the sum of— (aa) 95 percent of the wages and self-employment income of such individual credited for such computation year (as adjusted under subsection (b)(3)) to the extent that such wages and self-employment income do not exceed the amount established for purposes of this item by clause (iv), (bb) 27.5 percent of such wages and self-employment income to the extent that such wages and self-employment income exceed the amount established for purposes of item (aa) but do not exceed the amount established for purposes of this item by clause (iv), (cc) 5 percent of such wages and self-employment income to the extent that such wages and self-employment income exceed the amount established for purposes of item (bb) but do not exceed the amount established for purposes of this item by clause (iv), and (dd) 2 percent of such wages and self-employment income to the extent that such wages and self-employment income exceed the amount established for purposes of item (cc), by (II) the number of months in the individual’s benefit computation years (as defined in subsection (b)(2)(B)), rounded, if not a multiple of $0.10, to the next lower multiple of $0.10, and thereafter increased as provided in subsection (i). (iii) An individual’s covered earnings ratio for a benefit computation year is the ratio of— (I) the total (after adjustment under subsection (b)(3)) of his wages paid in and self-employment income credited to such benefit computation year (determined without regard to clause (v)), to (II) the total (after adjustment under subsection (b)(3)) of his wages paid in and self-employment income credited to such benefit computation year (as determined under clause (v)). (iv) The amount established for purposes of items (aa), (bb), and (cc) of clause (ii)(I) shall be, respectively— (I) 25 percent of the national average wage index (as defined in section 209(k)(1)) for the second calendar year preceding the calendar year for which the determination is made, (II) 100 percent of the national average wage index (as so defined) for such calendar year, and (III) 125 percent of the national average wage index (as so defined) for such calendar year. (v) (I) For purposes of determining an individual’s primary insurance amount pursuant to clause (i), the total (after adjustment under subsection (b)(3)) of the individual’s wages paid in and self-employment income credited to a benefit computation year after 1977 shall be determined by treating all recorded noncovered earnings (as defined in subclause (II)(aa)) derived by the individual from noncovered service performed in such benefit computation year as wages wages (II) For purposes of this subparagraph— (aa) the term recorded noncovered earnings (bb) the term adjusted total covered earnings (III) The Commissioner of Social Security shall provide by regulation or other public guidance for methods for determining whether satisfactory evidence is available in the records of the Commissioner for earnings for noncovered service (other than noncovered service as a member of a uniformed service (as defined in section 210(m))) to be treated as recorded noncovered earnings. Such methods shall provide for reliance on earnings information which is provided to the Commissioner by employers and which, as determined by the Commissioner, constitute a reasonable basis for treatment of earnings for noncovered service as recorded noncovered earnings. In making determinations under this clause, the Commissioner shall also take into account any documentary or other evidence of earnings derived from noncovered service by an individual which is provided by the individual to the Commissioner and which the Commissioner considers appropriate as a reasonable basis for treatment of such earnings as recorded noncovered earnings. (vi) In the case of any individual whose primary insurance amount would be computed under this subparagraph who first becomes entitled after 1985 to a monthly periodic payment made by a foreign employer or foreign country that is based in whole or in part upon noncovered service, the primary insurance amount of such individual shall be determined under section 215 as such section was in effect on the day before the enactment of the Social Security Reform Act of 2016 (vii) In the case of an individual who initially becomes eligible for old-age or disability insurance benefits, or who dies (before becoming eligible for such benefits), in any year during the 9-year period beginning with 2023, the primary insurance amount of the individual shall be equal to the sum of— (I) the applicable percentage (specified for such year in the table set forth in clause (viii)) of the individual’s primary insurance amount, as determined under this subparagraph (other than this clause and clause (viii)) with the application of clauses (i) through (vi) of this subparagraph, plus (II) a percentage, equal to the excess of 100 percent over the applicable percentage, of the individual’s primary insurance amount, as determined under this paragraph (other than this clause and clause (viii)) with the application of the preceding subparagraphs of this paragraph (as if such preceding subparagraphs applied for the individual and clauses (i) through (vi) of this subparagraph did not apply), rounded to the nearest $1, except that any amount so established which is a multiple of $0.50 but not of $1, shall be rounded to the next highest $1. (viii) The table set forth in this clause is as follows: The applicable For the year: percentage is: 2023 10 2024 20 2025 30 2026 40 2027 50 2028 60 2029 70 2030 80 2031 90. . (b) Repeal of the windfall elimination provision (1) In general Section 215(a) of the Social Security Act ( 42 U.S.C. 415(a) (2) Conforming amendments Section 215 of such Act ( 42 U.S.C. 415 (A) in subsection (d), by striking paragraph (3); and (B) in subsection (f), by striking paragraph (9). (c) Computation of primary insurance amount for current beneficiaries Section 215(a) of the Social Security Act ( 42 U.S.C. 415(a) (7) In the case of any individual who initially becomes eligible for an old-age or disability insurance benefit before January 1, 2023, any computation or recomputation of the primary insurance amount of such individual shall be made under section 215 as such section was in effect on the day before the enactment of section 101 of the Social Security Reform Act of 2016 . (d) Conforming amendment Section 209(k)(1) of such Act ( 42 U.S.C. 409(k)(1) 215(a)(1)(D) 215(a)(1)(D)(iii), 215(a)(1)(E) (e) Effective date The amendments made by this section shall apply with respect to monthly insurance benefits payable on or after January 1, 2023. 102. Raise full retirement age (a) In general Section 216(l) of the Social Security Act ( 42 U.S.C. 416(l) (1) in paragraph (1)— (A) in subparagraph (D), by striking and (B) in subparagraph (E), by striking 67 years of age. and before January 1, 2023, 67 years of age; (C) by adding at the end the following: (F) with respect to an individual who attains early retirement age after December 31, 2022, and before January 1, 2030, 67 years of age plus the number of months in the age increase factor (as determined under paragraph (3)) for the calendar year in which such individual attains early retirement age; and (G) with respect to an individual who attains early retirement age after December 31, 2029, 69 years of age. ; and (2) in paragraph (3), by adding at the end the following: (C) With respect to an individual who attains early retirement age in the 7-year period consisting of the calendar years 2023 through 2029, the age increase factor shall be equal to three-twelfths of the number of months in the period beginning with January 2023 and ending with December of the year in which the individual attains early retirement age. . (b) Extension of maximum age for entitlement to delayed retirement credit Section 202(w)(2)(A) of such Act ( 42 U.S.C. 402(w)(2)(A) (1) by striking prior to the month in which such individual attained age 70, and prior to the later of— (2) by adding at the end the following: (i) the month in which such individual would attain age 70, or (ii) the month which ends 36 months after the end of the month in which such individual attained retirement age (as defined in section 216(l)), and . 103. Use an accurate cost-of-living measure (a) In general Section 215(i)(1) of the Social Security Act ( 42 U.S.C. 415(i)(1) (H) the term Consumer Price Index . (b) Application to pre-1979 law (1) In general Section 215(i)(1) of the Social Security Act as in effect in December 1978, and as applied in certain cases under the provisions of such Act as in effect after December 1978, is amended by adding at the end the following: (D) the term Consumer Price Index . (2) Conforming change Section 215(i)(4) of the Social Security Act ( 42 U.S.C. 415(i)(4) and by section 103 of the Social Security Reform Act of 2016 1986 (c) No effect on adjustments under other laws Section 215(i) of such Act ( 42 U.S.C. 415(i) (6) Any provision of law (other than in this title) which provides for adjustment of an amount based on a change in benefit amounts resulting from a determination made under this subsection shall be applied and administered without regard to the amendments made by section 103 of the Social Security Reform Act of 2016 . (d) Limit on COLA Section 215(i)(2)(A) of the Social Security Act ( 42 U.S.C. 415(i)(2)(A) (iv) (I) In any case in which (but for this clause) an increase would take effect with December of any calendar year after 2017 pursuant to clause (ii)(I) in the benefit amount to which an individual is entitled, any increase pursuant to clause (ii)(II) in an individual’s primary insurance amount, or any increase pursuant to clause (ii)(III) in the permitted amount of total monthly benefits based on an individual’s primary insurance amount, the applicable increase percentage with respect to the applicable cost-of-living computation quarter shall be deemed to be zero in the case of such individual if the modified adjusted gross income of such individual for such calendar year, as would be determined for purposes of section 1839(i), equals or exceeds the applicable base amount. (II) For purposes of subclause (I), the applicable base amount is the threshold amount applicable for such calendar year under subparagraph (A) of section 1839(i)(2) (or, in the case of an individual filing a joint return, the threshold amount so applicable under subparagraph (B) of such section). Such threshold amount shall be subject to adjustments under section 1839(i)(5). . (e) Disclosure of return information (1) In general The first sentence of section 6103(l)(20)(A) , or whose increase in primary insurance amount may be limited under section 215(i)(2)(A)(iv) of such Act (2) Conforming amendments (A) Section 6103(l)(20)(A)(vii) of such Code is amended by inserting that the increase in the taxpayer’s primary insurance amount under section 215(i)(2)(A)(iv) may be limited, or section 1839 of the Social Security Act (B) Section 6103(l)(20)(B)(i) of such Code is amended— (i) by inserting , any limitation in an increase in primary insurance amount under such section 215(i)(2)(A)(iv), under such section 1860D–13(a)(7) (ii) by inserting or any such limitation adjustment or increase (f) Effective date (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply with respect to adjustments effective with or after December 2018. (2) Subsection (e) The amendments made by subsection (e) shall apply to requests for information after the date of the enactment of this Act. 104. Cap on nonworking spouse benefit (a) Wife’s insurance benefits Section 202(b) of the Social Security Act ( 42 U.S.C. 402(b) (1) in paragraph (1)— (A) in subparagraph (D), by striking such individual, such individual or, if less, than the amount determined under paragraph (2)(B), (B) in subparagraph (J), by striking one-half of the primary insurance amount of such individual the lesser of— (i) one-half of the primary insurance amount of such individual, or (ii) the amount determined under paragraph (2)(B), or ; and (2) in paragraph (2)— (A) by inserting (A) (2) (B) by inserting subparagraphs (B) and (C) and Except as provided in (C) by adding at the end the following new subparagraphs: (B) (i) Effective with respect to a wife or divorced wife of an individual entitled to old-age or disability insurance benefits who initially becomes eligible for such benefits after 2022, such wife’s insurance benefit for each month shall not exceed— (I) if the month of such initial eligibility is before 2032, the transitional amount determined under subparagraph (C), or (II) if the month of such initial eligibility is after 2031, 50 percent of the primary insurance amount determined for an individual who is an average wage index worker with respect to such month. (ii) For purposes of clause (i), the term average wage index worker 1/12 (C) (i) The transitional amount determined under this subparagraph is the excess of— (I) the amount of the benefit determined under subparagraph (A), over (II) the reduction amount determined under clause (ii) (if any). (ii) The reduction amount determined under this clause is the applicable percentage specified in clause (iii) of the excess (if any) of— (I) the amount of the benefit determined under subparagraph (A), over (II) 50 percent of the primary insurance amount determined for an individual who is an average wage index worker (as defined in subparagraph (B)(ii)) with respect to the month in which the individual described in subparagraph (B)(i) initially becomes eligible for old-age or disability insurance benefits. (iii) For purposes of clause (ii), the applicable percentage specified in this clause is the percentage specified in connection with the year in which the individual described in subparagraph (B)(i) initially becomes eligible for old-age or disability insurance benefits, as set forth in the following table: If the year in which the individual first becomes eligible is: The applicable 2023 10 2024 20 2025 30 2026 40 2027 50 2028 60 2029 70 2030 80 2031 90. (D) For purposes of this paragraph, an individual shall be deemed eligible for a benefit for a month if, upon filing application therefor in such month, she would be entitled to such benefit for such month. . (b) Husband’s insurance benefits Section 202(c) of such Act ( 42 U.S.C. 402(c) (1) in paragraph (1)— (A) in subparagraph (D), by striking such individual, such individual or, if less, than the amount determined under paragraph (2)(B), (B) in subparagraph (J), by striking one-half of the primary insurance amount of such individual the lesser of— (i) one-half of the primary insurance amount of such individual, or (ii) the amount determined under paragraph (2)(B), or ; and (2) in paragraph (2)— (A) by inserting (A) (2) (B) by inserting subparagraphs (B) and (C) and Except as provided in (C) by adding at the end the following new subparagraphs: (B) (i) Effective with respect to a husband or divorced husband of an individual entitled to old-age or disability insurance benefits who initially becomes eligible for such benefits after 2022, such husband’s insurance benefit for each month shall not exceed— (I) if the month of such initial eligibility is before 2032, the transitional amount determined under subparagraph (C), or (II) if the month of such initial eligibility is after 2031, 50 percent of the primary insurance amount determined for an individual who is an average wage index worker with respect to such month. (ii) For purposes of clause (i), the term average wage index worker 1/12 (C) (i) The transitional amount determined under this subparagraph is the excess of— (I) the amount of the benefit determined under subparagraph (A), over (II) the reduction amount determined under clause (ii) (if any). (ii) The reduction amount determined under this clause is the applicable percentage specified in clause (iii) of the excess (if any) of— (I) the amount of the benefit determined under subparagraph (A), over (II) 50 percent of the primary insurance amount determined for an individual who is an average wage index worker (as defined in subparagraph (B)(ii)) with respect to the month in which the individual described in subparagraph (B)(i) initially becomes eligible for old-age or disability insurance benefits. (iii) For purposes of clause (ii), the applicable percentage specified in this clause is the percentage specified in connection with the year in which the individual described in subparagraph (B)(i) initially becomes eligible for old-age or disability insurance benefits, as set forth in the following table: If the year in which the individual first becomes eligible is: The applicable 2023 10 2024 20 2025 30 2026 40 2027 50 2028 60 2029 70 2030 80 2031 90. (D) For purposes of this paragraph, an individual shall be deemed eligible for a benefit for a month if, upon filing application therefor in such month, he would be entitled to such benefit for such month. . (c) Conforming amendment Section 209(k)(1) of such Act ( 42 U.S.C. 409(k)(1) 202(b)(2)(B), 202(c)(2)(B), 203(f)(8)(B)(ii) 105. Cap on child’s benefit (a) Child’s insurance benefits Section 202(d)(2) of the Social Security Act ( 42 U.S.C. 402(d)(2) (1) by striking Such (A) Except as provided in subparagraph (B), such (2) by adding at the end the following: (B) (i) Such child's insurance benefit for each month, with respect to a child of an individual entitled to old-age or disability insurance benefits who initially becomes eligible for such old-age or disability insurance benefits after 2022 and has not died prior to the end of such month, shall not exceed— (I) if the month of such initial eligibility is before 2032, the transitional amount determined under subparagraph (C), or (II) if the month of such initial eligibility is after 2031, 50 percent of the primary insurance amount determined for an individual who is an average wage index worker with respect to such month. (ii) For purposes of clause (i), the term average wage index worker 1/12 (C) (i) The transitional amount determined under this subparagraph is the excess of— (I) the amount of the benefit determined under subparagraph (A), over (II) the reduction amount determined under clause (ii) (if any). (ii) The reduction amount determined under this clause is the applicable reduction percentage specified in clause (iii) of the excess (if any) of— (I) the amount of the benefit determined under subparagraph (A), over (II) 50 percent of the primary insurance amount as determined for an individual who is an average wage index worker (as defined in subparagraph (B)(ii)) with respect to the month in which the individual described in subparagraph (B)(i) initially becomes eligible for old-age or disability insurance benefits. (iii) For purposes of clause (ii), the applicable reduction percentage specified in this clause is the percentage specified in connection with the year in which the individual described in subparagraph (B)(i) becomes entitled to old-age or disability insurance benefits, as set forth in the following table: If the year in which the individual first becomes eligible is: The applicable reduction 2023 10 2024 20 2025 30 2026 40 2027 50 2028 60 2029 70 2030 80 2031 90. (D) For purposes of this paragraph, an individual shall be deemed eligible for a benefit for a month if, upon filing application therefor in such month, he would be entitled to such benefit for such month. . (b) Conforming amendment Section 209(k)(1) of such Act ( 42 U.S.C. 409(k)(1) 202(d)(2)(B), 203(f)(8)(B)(ii) 106. Require child beneficiaries to attend school (a) Child’s benefits under title II (1) In general Section 202(d)(1)(B)(i) of the Social Security Act ( 42 U.S.C. 402(d)(1)(B)(i) age of 18 applicable full-time attendance age (2) Applicable full-time attendance age Section 202(d)(7) of such Act ( 42 U.S.C. 402(d)(7) (E) The applicable full-time attendance age (i) the age of 18 (in the case of an individual who becomes entitled to child’s insurance benefits before 2019), and (ii) the age of 15 (in the case of an individual who becomes entitled to child’s insurance benefits in or after 2019). . (3) Conforming amendments (A) Termination Section 202(d)(1) of such Act ( 42 U.S.C. 402(d)(1) age of 18 applicable full-time attendance age (B) Reentitlement Section 202(d)(6) of such Act ( 42 U.S.C. 402(d)(6) age of 18 applicable full-time attendance age II Rewarding work 201. Strengthening Social Security for long career workers (a) In general Section 215(a)(1) of the Social Security Act ( 42 U.S.C. 415(a)(1) (1) by redesignating subparagraph (E) (as redesignated by section 101) as subparagraph (F); and (2) by inserting after subparagraph (D) (as redesignated by section 101) the following new subparagraph: (E) (i) In the case of an individual who initially becomes eligible for old-age or disability insurance benefits, or who dies (before becoming eligible for such benefits), in any calendar year after 2022, the primary insurance amount computed under subparagraph (A) with respect to the individual shall not be less than the greater of— (I) the minimum amount computed under subparagraph (C), or (II) except as provided in clause (iv), in the case of an individual who has at least 10 years of work (as defined in clause (iii)), the minimum amount determined under clause (ii). (ii) (I) The minimum amount determined under this clause is the dollar amount equal to 1/12 (II) For purposes of subclause (I), the applicable percentage is the percentage specified in connection with the number of years of work, as set forth in the following table: If the number of years The applicable of work is: percentage is: 11 3 12 6 13 9 14 12 15 15 16 16 17 17 18 18 19 19 20 25 21 25 2/3 22 26 1/3 23 27 24 27 2/3 25 28 1/3 26 29 27 29 2/3 28 30 1/3 29 31 30 31 2/3 31 32 1/3 32 33 33 33 2/3 34 34 1/3 35 or greater 35. (iii) (I) For purposes of this subparagraph, the term year of work (II) For purposes of applying the table in clause (ii) in the case of an individual entitled to disability insurance benefits under section 223, the number of years of work of such individual shall be deemed to be the product of 35 times the ratio of the actual number of years of work of such individual to the number of such individual’s benefit computation years. Any such product which is not a multiple of one shall be rounded to the next higher multiple of one. (III) In the case of a widow, surviving divorced wife, widower, surviving divorced husband, or surviving divorced parent (hereinafter in this subclause referred to as the surviving beneficiary insured individual (iv) In the case of an individual who initially becomes eligible for old-age or disability insurance benefits, or who dies (before becoming eligible for such benefits), in any year during the 9-year period beginning with 2023, the primary insurance amount computed under subparagraph (A) with respect to the individual shall not be less than the greater of— (I) the minimum amount computed under subparagraph (C), or (II) the applicable phase-in percentage (specified for such calendar year in the table set forth in clause (v)) of the minimum amount determined under clause (ii). (v) The table set forth in this clause is as follows: The applicable phase-in For the calendar year: percentage is: 2023 10 2024 20 2025 30 2026 40 2027 50 2028 60 2029 70 2030 80 2031 90. . (b) Conforming amendment Section 209(k)(1) of such Act ( 42 U.S.C. 409(k)(1) 215(a)(1)(F), 215(a)(1)(E), 202. Repeal of the Retirement Earnings Test (a) In general Subsections (b), (c)(1), (d), (f), (h), (j), and (k) of section 203 of the Social Security Act ( 42 U.S.C. 403 (b) Conforming amendments Section 203 of such Act (as amended by subsection (a)) is further amended— (1) by redesignating subsections (c), (e), (g), and (l) as subsections (b), (c), (d), and (e), respectively; (2) in subsection (b) (as so redesignated)— (A) by striking Noncovered Work Outside the United States or (B) by redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3), respectively; (C) by striking paragraphs (2), (3), and (4) of (D) by striking the last sentence; (3) in subsection (c) (as so redesignated), by striking subsections (c) and (d) subsection (b) (4) in subsection (d) (as so redesignated), by striking subsection (c) subsection (b) (5) in subsection (e) (as so redesignated), by striking subsection (g) or (h)(1)(A) subsection (d) (c) Additional conforming amendments (1) Provisions relating to benefits terminated upon deportation Section 202(n)(1) of the Social Security Act ( 42 U.S.C. 402(n)(1) Section 203(b), (c), and (d) Section 203(b) (2) Provisions relating to exemptions from reductions based on early retirement Section 202(q) of such Act ( 42 U.S.C. 402(q) (A) in paragraph (5)(B), by striking section 203(c)(2) section 203(b)(1) (B) in paragraph (7)(A), by striking deductions under section 203(b), 203(c)(1), 203(d)(1), or 222(b) deductions on account of work under section 203 or deductions under section 222(b) (3) Provisions relating to exemptions from reductions based on disregard of certain entitlements to child’s insurance benefits Section 202(s) of such Act ( 42 U.S.C. 402(s) (A) in paragraph (1), by striking paragraphs (2), (3), and (4) of section 203(c) paragraphs (1), (2), and (3) of section 203(b) (B) in paragraph (3), by striking The last sentence of subsection (c) of section 203, subsection (f)(1)(C) of section 203, and subsections Subsections (4) Provisions relating to suspension of aliens' benefits Section 202(t)(7) of such Act ( 42 U.S.C. 402(t)(7) Subsections (b), (c), and (d) Subsection (b) (5) Provisions relating to reductions in benefits based on maximum benefits Section 203(a)(3)(B)(iii) of such Act ( 42 U.S.C. 403(a)(3)(B)(iii) and subsections (b), (c), and (d) and subsection (b) (6) Provisions relating to penalties for misrepresentations concerning earnings for periods subject to deductions on account of work Section 208(a)(1)(C) of such Act ( 42 U.S.C. 408(a)(1)(C) under section 203(f) of this title for purposes of deductions from benefits under section 203 for purposes of deductions from benefits on account of work (7) Provisions taking into account earnings in determining benefit computation years Clause (I) in the next to last sentence of section 215(b)(2)(A) of such Act ( 42 U.S.C. 415(b)(2)(A) no earnings as described in section 203(f)(5) in such year no wages, and no net earnings from self-employment (in excess of net loss from self-employment), in such year (8) Provisions relating to rounding of benefits Section 215(g) of such Act ( 42 U.S.C. 415(g) and any deduction under section 203(b) (9) Provisions defining income for purposes of SSI Section 1612(a) of such Act ( 42 U.S.C. 1382a(a) (A) in paragraph (1)(A), by striking as determined under section 203(f)(5)(C) as defined in the last two sentences of this subsection (B) by adding at the end (after and below paragraph (2)(H)) the following: For purposes of paragraph (1)(A), the term wages wages . (d) Effective date The amendments made by this section shall apply with respect to taxable years ending after December 31, 2022. III Improving retirement security 301. Phaseout of tax on Social Security benefits relating to the Social Security trust funds (a) In general Section 86 (g) Phaseout of tax relating to the Social Security trust funds (1) In general In the case of any taxable year beginning after December 31, 2044, and before January 1, 2054, the base amount shall be determined under subsection (c)(1) by— (A) substituting for $25,000 For taxable years beginning in calendar year— The amount is— 2045 $32,500 2046 $40,000 2047 $47,500 2048 $55,000 2049 $62,500 2050 $70,000 2051 $77,500 2052 $85,000 2053 $92,500; and (B) substituting for $32,000 For taxable years beginning in calendar year— The amount is— 2045 $65,000 2046 $80,000 2047 $95,000 2048 $110,000 2049 $125,000 2050 $140,000 2051 $155,000 2052 $170,000 2053 $185,000. (2) Termination after 2053 of tax relating to the Social Security trust funds In the case of any taxable year beginning after December 31, 2053— (A) subsection (a)(1) shall not apply, and (B) the amount determined under paragraph (3)(A) shall be zero. (3) Preservation of tax relating to the hospital insurance trust fund In the case of any taxable year beginning after December 31, 2044, the amount determined under subsection (a)(2) shall be equal to the sum of— (A) the amount determined under subsection (a)(1) (after the application of paragraphs (1) and (2) of this subsection), plus (B) the excess of— (i) the amount determined under subsection (a)(2)— (I) without regard to this paragraph, and (II) by determining the base amount, and the amount determined under subsection (a)(1), without regard to paragraphs (1) and (2) of this subsection, over (ii) the amount determined under subsection (a)(1) without regard to paragraphs (1) and (2) of this subsection. . (b) Conforming amendment Section 871(a)(3)(A) of such Code is amended by inserting (35 percent in the case of taxable years beginning after December 31, 2053) 85 percent (c) Transfers to trust funds With respect to tax liabilities determined for taxable years beginning after December 31, 2044, the aggregate increase in tax liabilities described in section 121(e)(1)(A)(ii) of the Social Security Amendments of 1983 (and referred to in section 121(e)(1)(B) of such Act) shall be equal to the aggregate increase in tax liabilities under chapter 1 (d) Effective dates (1) In general Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2044. (2) Conforming amendment The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2053. 302. Option to claim delayed retirement credit in partial lump sum Section 202(w) of the Social Security Act ( 42 U.S.C. 402(w) (7) (A) In any case in which an individual becomes entitled to an old-age insurance benefit in a calendar year after 2022, and such benefit is subject to a monthly increase under paragraph (1), such individual may elect to receive, in lieu of the monthly increase under paragraph (1)— (i) an alternate monthly increase as determined under subparagraph (E); and (ii) in addition to such monthly benefit as increased under clause (i), a one-time lump sum payment, payable at the time of such individual’s entitlement to such benefit, equal to the sum of the present values (as determined by the Commissioner of Social Security using reasonable assumptions) of the applicable percentage (determined under subparagraph (B)) of the amount of such monthly benefit (as determined before the application of such increase) for each month in the life expectancy period (determined under subparagraph (C)). (B) The applicable percentage determined under this subparagraph is the percentage equal to the product of— (i) 1/6 (ii) the number (if any) of the increment months for such individual. (C) The life expectancy period determined under this subparagraph is, with respect to an individual, the period— (i) beginning with the month in which the individual becomes entitled to an old-age insurance benefit; and (ii) ending with the month before the last month of life expectancy (as determined by the Commissioner of Social Security using reasonable actuarial assumptions) for the cohort of individuals who become eligible for an old-age insurance benefit in the same month as the individual. (D) The Commissioner of Social Security shall certify to the Managing Trustee of the Federal Old-Age and Survivors Insurance Trust Fund the amount of any lump sum payment payable to an individual under subparagraph (A) and, upon receipt of such certification, the Managing Trustee shall make payment of such lump sum payment to such individual from such Trust Fund. (E) An alternate monthly increase for an individual determined under this subparagraph shall be equal to the monthly increase for the individual that would be determined under paragraph (1) if such monthly increase were determined by substituting 1/2 2/3 (F) (i) For purposes of determining the amount of any benefit payable under this title on the basis of the wages and self-employment income of an individual who makes an election under this paragraph, the amount of any such benefit shall be determined as if such individual’s old-age benefit had been increased under paragraph (1) without regard to this paragraph. (ii) For purposes of applying any reduction under subsection (k)(3)(A) to the monthly insurance benefit of an individual who makes an election under this paragraph, the amount of such individual’s old-age benefit shall be determined as if such old-age benefit had been increased under paragraph (1) without regard to this paragraph. . 303. Strengthening Social Security for low-income seniors (a) In general Section 202 of the Social Security Act ( 42 U.S.C. 402 (aa) Increase in benefit amounts on account of long-Term eligibility (1) In the case of an individual who is a qualified beneficiary for a calendar year after 2022, the amount of any monthly insurance benefit of such qualified beneficiary under this section or section 223 for any month in such calendar year shall be increased in accordance with paragraph (3). (2) (A) For purposes of this subsection, the term qualified beneficiary (i) such calendar year begins at least 20 years after the applicable date of eligibility for such individual; and (ii) such individuals’s modified adjusted gross income (applicable with respect to such calendar year as determined under subparagraph (C)) is less than (subject to subparagraph (D)) the applicable base amount for such calendar year, or in the case of a joint return (within the meaning of section 7701(a)(38) (B) For purposes of this subsection, the applicable date of eligibility for an individual is the date on which the individual on whose wages and self-employment income the monthly insurance benefit is based initially became eligible (or died before becoming eligible) for old-age insurance benefits under subsection (a) or entitled to disability insurance benefits under section 223. (C) An individuals’s modified adjusted gross income applicable with respect to a calendar year shall be as determined for purposes of section 1839(i)(4) with respect to premiums for a month in such year. (D) For purposes of subparagraph (A)(ii), the applicable base amount for a calendar year is— (i) in the case of calendar year 2023, $25,000; and (ii) in the case of any calendar year beginning after 2023, the product (rounded to the nearest multiple of $1,000) of $25,000 and the percentage (if any) by which the average of the Chained Consumer Price Index for All Urban Consumers (C–CPI–U, as published in its initial version by the Bureau of Labor Statistics of the Department of Labor) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period ending with August 2022. (3) (A) The increase required under paragraph (1) with respect to the monthly insurance benefit of an individual who is a qualified beneficiary for a calendar year shall be equal to the applicable percentage (specified for such benefit in subparagraph (B)) of the full increase amount for such calendar year (determined under subparagraph (C)). (B) The applicable percentage specified for a monthly insurance benefit under this subparagraph for a calendar year is the percentage specified, in connection with the number of years ending after the applicable date of eligibility for such individual and before such calendar year, in the following table: The applicable If the number of years is: percentage is: 20 20 21 40 22 60 23 80 24 or more 100. (C) (i) Except as provided in clauses (ii) and (iii), the full increase amount determined under this subparagraph for a calendar year in connection with the monthly insurance benefit of a qualified beneficiary is a dollar amount equal to 5 percent of the primary insurance amount of a hypothetical individual if— (I) such primary insurance amount is determined for January of such calendar year; (II) on January 1 of the calendar year in which occurred the applicable date of eligibility with respect to such qualified beneficiary, such hypothetical individual were fully insured, attained retirement age (as defined in section 216(l)(2)) and were otherwise eligible for, and applied for, old-age insurance benefits; and (III) such hypothetical individual’s average indexed monthly earnings taken into account in determining such primary insurance amount were equal to 1/12 (ii) (I) In the case of a monthly insurance benefit under subsection (b) or (c), the full increase amount determined under this subparagraph shall be one-half the amount determined under clause (i); or (II) in the case of a monthly insurance benefit under subsection (d), (g), or (h), the full increase amount determined under this subparagraph shall be the percentage of the amount determined under clause (i) equal to the ratio which the amount of such benefit bears to the primary insurance amount (before the application of section 203(a)) of the individual on whose wages and self-employment income the monthly insurance benefit is based. (iii) In the case of an individual whose applicable date of eligibility is before 2019, the full increase amount determined under this subparagraph shall be the product of— (I) the amount determined under clause (i) (after application of any reduction under clause (ii)); and (II) a fraction— (aa) the numerator of which is the number of calendar years in the period beginning with calendar year 2019 and ending with the first calendar year for which the individual is a qualified beneficiary; and (bb) the denominator of which is 24. (4) In the case of a qualified beneficiary who is entitled to 2 or more monthly insurance benefits under this title for the same month— (A) the earliest applicable date of eligibility for such beneficiary with respect to such benefits shall be treated as the applicable date of eligibility for such beneficiary for the purposes of this subsection; and (B) such beneficiary shall be entitled to an increase with respect only to one such benefit. (5) This subsection shall be applied to monthly insurance benefits after any increase under subsection (w) and any applicable reductions and deductions under this title. (6) In any case in which an individual is entitled to benefits under both this section and section 223, the increase under this subsection shall be paid from the Federal Old-Age and Survivors Insurance Trust Fund. . (b) Conforming amendments (1) Section 202 of such Act ( 42 U.S.C. 402 (A) in the last sentence of subsection (a), by striking subsection (q) and subsection (w) subsections (q), (w), and (aa) (B) in subsection (b)(2), by striking subsections (k)(5) and (q) subsections (k)(5), (q), and (aa) (C) in subsection (c)(2), by striking subsections (k)(5) and (q) subsections (k)(5), (q), and (aa) (D) in subsection (d)(2), by adding at the end the following: This paragraph shall apply subject to subsection (aa). (E) in subsection (e)(2)(A), by striking subsection (k)(5), subsection (q), and subparagraph (D) of this paragraph subsection (k)(5), subsection (q), subsection (aa), and subparagraph (D) of this paragraph (F) in subsection (f)(2)(A), by striking subsection (k)(5), subsection (q), and subparagraph (D) of this paragraph subsection (k)(5), subsection (q), subsection (aa), and subparagraph (D) of this paragraph (G) in subsection (g)(2), by striking Such Except as provided in subsections (k)(5) and (aa), such (H) in subsection (h)(2)(A), by inserting and subsection (aa) subparagraphs (B) and (C) (I) in section 223(a)(2), by striking section 202(q) sections 202(q) and 202(aa) (2) Section 203(a)(4) of such Act ( 42 U.S.C. 403(a)(4) section 222(b) and before any increase under section 202(aa) (3) Section 209(k)(1) of such Act ( 42 U.S.C. 409(k)(1) 202(aa)(2)(D)(i), 202(aa)(3)(C)(i)(II), 203(f)(8)(B)(ii) 304. End 7-year limitation for disabled surviving spouses (a) Widow’s insurance benefits (1) In general Section 202(e) of the Social Security Act ( 42 U.S.C. 402(e) (A) in paragraph (1)(B)(ii), by striking which began before the end of the period specified in paragraph (4) (B) in paragraph (1)(F)(ii), by striking (I) in the period specified in paragraph (4) and (II) (C) by striking paragraph (4) and by redesignating paragraphs (5) through (8) as paragraphs (4) through (7), respectively; and (D) in paragraph (4)(A)(ii) (as redesignated by subparagraph (C)), by striking whichever begins the first day of the seventeenth month before the month in which her application is filed (2) Conforming amendments (A) Section 202(e)(1)(F)(i) of such Act ( 42 U.S.C. 402(e)(1)(F)(i) paragraph (5) paragraph (4) (B) Section 202(e)(1)(C)(ii)(III) of such Act ( 42 U.S.C. 402(e)(2)(C)(ii)(III) paragraph (8) paragraph (6) (C) Section 226(e)(1)(A)(i) of such Act ( 42 U.S.C. 426(e)(1)(A)(i) 202(e)(4), (b) Widower’s insurance benefits (1) In general Section 202(f) of such Act ( 42 U.S.C. 402(f) (A) in paragraph (1)(B)(ii), by striking which began before the end of the period specified in paragraph (4) (B) in paragraph (1)(F)(ii), by striking (I) in the period specified in paragraph (4) and (II) (C) by striking paragraph (4) and by redesignating paragraphs (5) through (8) as paragraphs (4) through (7), respectively; and (D) in paragraph (4)(A)(ii) (as redesignated by subparagraph (C)), by striking whichever begins the first day of the seventeenth month before the month in which his application is filed (2) Conforming amendments (A) Section 202(f)(1)(F)(i) of such Act ( 42 U.S.C. 402(f)(1)(F)(i) paragraph (5) paragraph (4) (B) Section 202(f)(1)(C)(ii)(III) of such Act ( 42 U.S.C. 402(f)(2)(C)(ii)(III) paragraph (8) paragraph (6) (C) Section 226(e)(1)(A)(i) of such Act (as amended by subsection (a)(2)(C)) is further amended by striking 202(f)(1)(B)(ii), and 202(f)(4) and 202(f)(1)(B)(ii) (c) Effective date The amendments made by this section shall apply with respect to benefits payable for months after December 2022 and for which applications are filed after December 2022. 305. Benefits for disabled surviving spouses (a) In general (1) Eligibility for widow’s insurance benefits Section 202(e)(1)(B)(ii) of the Social Security Act ( 42 U.S.C. 402(e)(1)(B)(ii) has attained age 50 but has not attained age 60 and (2) Eligibility for widower’s insurance benefits Section 202(f)(1)(B)(ii) of such Act ( 42 U.S.C. 402(f)(1)(B)(ii) has attained age 50 but has not attained age 60 and (3) Conforming amendment Section 202(q)(3)(A) of such Act ( 42 U.S.C. 402(q)(3)(A) If the first month widow’s or widower’s insurance benefit) If the first month for which an individual both is entitled to a wife’s or husband’s insurance benefit and has attained age 62 or for which an individual is entitled to a widow’s or widower’s insurance benefit (b) Preclusion of entitlement after early remarriage (1) Widow’s insurance benefits Section 202(e)(1)(B)(ii) of such Act ( 42 U.S.C. 402(e)(1)(B)(ii) and has not remarried prior to attaining the age which is 12 years less than early retirement age (as defined in section 216(l)(2)) (2) Widower’s insurance benefits Section 202(f)(1)(B)(ii) of such Act ( 42 U.S.C. 402(f)(1)(B)(ii) and has not remarried prior to attaining the age which is 12 years less than early retirement age (as defined in section 216(l)(2)) (c) Effective date The amendments made by this section shall apply with respect to benefits payable for months after December 2022 and for which applications are filed after December 2022. 306. Waive 2-year duration of divorce requirement (a) Wife’s insurance benefits Section 202(b)(4)(A) of the Social Security Act ( 42 U.S.C. 402(b)(4)(A) The criterion for entitlement under clause (ii) shall be deemed met upon the remarriage of the insured individual to someone other than the applicant during the 2-year period referred to in such clause. (b) Husband’s insurance benefits Section 202(c)(4)(A) of such Act ( 42 U.S.C. 402(c)(4)(A) The criterion for entitlement under clause (ii) shall be deemed met upon the remarriage of the insured individual to someone other than the applicant during the 2-year period referred to in such clause. (c) Effective date The amendments made by this section shall apply with respect to benefits payable for months after December 2022 and for which applications are filed after December 2022.

Summary: Social Security Reform Act of 2016 This bill amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act (SSAct) to: phase in (from 2023 to 2032) a new benefit formula for retired and disabled worker beneficiaries becoming eligible in 2023 and later; repeal the windfall elimination provision; raise the full retirement age; extend the maximum age for entitlement to delayed retirement credit; limit eligibility for the cost-of-living adjustment and tie increases in benefits to the Chained Consumer Price Index for All Urban Consumers; cap the nonworking spouse benefit and the child's benefit; lower the age requirement in or after 2019 for school attendance by child beneficiaries; provide a new minimum benefit for workers with more than 10 years of covered earnings; repeal the retirement earnings test; provide an option to split the delayed retirement credit to offer a lump sum benefit at initial entitlement for workers attaining age 62 in 2023 and later; increase after 2022 the monthly benefit of beneficiaries who have been eligible for at least 20 years; eliminate the seven year limitation on widow's and widower's benefits for disabled surviving spouses and the requirement that such spouses attain age 50 to be eligible for benefits; and waive the two-year duration of the divorce requirement for benefit eligibility in cases of remarriage to someone other than the claimant before the two-year period has elapsed. The bill amends the Internal Revenue Code to phaseout and eliminate after 2053 the tax that is credited to the Old Age, Survivors, Insurance (OASI) and Disability Income (DI) Trust Funds.