I
107TH CONGRESS
1ST SESSION
H. R. 2771
To amend title II of the Social Security Act to provide for individual security
accounts funded by employee and employer Social Security payroll deduc-
tions, to extend the solvency of the old-age, survivors, and disability
insurance program, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 2, 2001
Mr. KOLBE (for himself, Mr. STENHOLM, Mr. SMITH of Michigan, Mr.
DOOLEY of California, and Mr. TOOMEY) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Rules, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To amend title II of the Social Security Act to provide
for individual security accounts funded by employee and
employer Social Security payroll deductions, to extend
the solvency of the old-age, survivors, and disability in-
surance program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘21st Century Retirement Security Act’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Individual security accounts.
Sec. 3. Minimum social security benefit.
Sec. 4. Reduction in the amount of certain transfers to Medicare Trust Fund.
Sec. 5. Increase in number of years taken into account in determining average
indexed monthly earnings.
Sec. 6. Actuarial adjustment for retirement.
Sec. 7. Improvements in process for cost-of-living adjustments.
Sec. 8. Adjustment to benefit formula factors.
Sec. 9. Adjustments to bend points in determining primary insurance amounts.
Sec. 10. Modification to PIA formula to reflect changes in life expectancy.
Sec. 11. Treatment of disabled beneficiaries.
Sec. 12. Maintenance of benefit and contribution base.
Sec. 13. Phased-in increase in Social Security retirement ages.
Sec. 14. Mechanism for remedying unforeseen deterioration in Social Security
solvency.
SEC. 2. INDIVIDUAL SECURITY ACCOUNTS.
(a) ESTABLISHMENT AND MAINTENANCE OF INDI-
VIDUAL SECURITY ACCOUNTS.—
(1) IN GENERAL.—Title II of the Social Secu-
rity Act (42 U.S.C. 401 et seq.) is amended—
(A) by inserting before section 201 the fol-
lowing:
‘‘PART A—INSURANCE BENEFITS’’;
and
(B) by adding at the end the following:
‘‘PART B—INDIVIDUAL SECURITY SYSTEM
‘‘Subpart 1—Individual Security Accounts
‘‘FEDERALLY-ADMINISTERED INDIVIDUAL SECURITY
ACCOUNT
‘‘SEC. 251. (a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—Within 30 days after re-
ceiving the first contribution under subsection (b)
with respect to an eligible individual, the Commis-
sioner of Social Security shall establish an individual
security account for such individual in the Individual
Security Fund. Each account shall be identified to
its account holder by means of the account holder’s
Social Security account number.
‘‘(2) ELIGIBLE INDIVIDUAL.—For purposes of
this part, the term ‘eligible individual’ means any in-
dividual born after December 31, 1946.
‘‘(b) CONTRIBUTIONS.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall transfer from the Federal Old-Age
and Survivors Insurance Trust Fund, for crediting
by the Commissioner of Social Security to the indi-
vidual security account of an eligible individual, an
amount equal to the sum of any amount received by
such Secretary on behalf of such individual under
section 3101(a)(2) or 1401(a)(2) of the Internal
Revenue Code of 1986.
‘‘(2) OTHER CONTRIBUTIONS.—For provisions
relating to additional contributions credited to indi-
vidual security accounts, see sections 532(c)(2) and
6402(l) of the Internal Revenue Code of 1986.
‘‘(c) CREDITING REQUIREMENTS.—Except as other-
wise provided in section 252, contributions under sub-
section (b) on behalf of an eligible individual shall be
credited—
‘‘(1) to the individual security account estab-
lished for such individual under subsection (a); and
‘‘(2) in accordance with the allocation in effect
with respect to such individual under subsection (d).
‘‘(d) ALLOCATION AND OTHER DESIGNATIONS.—
‘‘(1) IN GENERAL.—The Commissioner of So-
cial Security shall prescribe regulations in accord-
ance with which any eligible individual who is em-
ployed or self-employed may designate—
‘‘(A) in the event that 2 or more invest-
ment options are available in the Individual Se-
curity Fund—
‘‘(i) the option or options to which
such individual wishes to have such indi-
vidual’s contributions under subsection (b)
credited; and
‘‘(ii) if such individual designates
more than 1 option under clause (i), how
such individual wishes for those contribu-
tions to be allocated; and
‘‘(B) the amount of wages or self-employ-
ment income such individual wishes to des-
ignate for purposes of section 3101(a)(2)(C) or
1401(a)(2)(C) of the Internal Revenue Code of
1986 (as applicable), if any.
‘‘(2) DEFAULT ALLOCATION.—In the absence of
a required designation under paragraph (1)(A), con-
tributions on behalf of the individual involved shall
be allocated in such manner as the Commissioner of
Social Security shall prescribe, taking into account
the competing objectives of maximizing returns on
investments and minimizing the risk involved with
such investments.
‘‘(3) FORM OF DESIGNATION.—Any designation
under paragraph (1) shall be made in such manner
and at such intervals as the Commissioner of Social
Security may prescribe in order to ensure ease of ad-
ministration and to avoid creating an undue burden
on employers.
‘‘(4) SPECIAL RULE FOR 2003.—Not later than
January 1, 2003, any eligible individual who is em-
ployed or self-employed as of such date shall execute
all designations required under paragraph (1).
‘‘(e) PERIODIC STATEMENTS TO ACCOUNT HOLD-
ER.—
‘‘(1) IN
GENERAL.—The Individual Security
Fund Board shall prescribe regulations under which
each individual for whom an individual security ac-
count is maintained under this section shall be fur-
nished with—
‘‘(A) a periodic statement relating to the
individual’s account, including, for any report-
ing period as of the end of which the individ-
ual’s account balance is at least equal to the
minimum balance amount (within the meaning
of section 252), clear and conspicuous notice to
that effect;
‘‘(B) a summary description of any invest-
ment options or other choices which may be
available to such individual under this section
or under section 252 (as applicable); and
‘‘(C) any forms and information necessary
to make a designation under subsection (d) or
section 252 (as applicable).
‘‘(2) INFORMED
DECISIONMAKING.—All infor-
mation, materials, and other matter furnished under
this subsection shall be furnished to the account
holder at such times and in such manner as the
Board considers appropriate in order to permit in-
formed decisionmaking.
‘‘PRIVATELY-ADMINISTERED INDIVIDUAL SECURITY
ACCOUNT
‘‘SEC. 252. (a) DEFINITIONS.—For purposes of this
part—
‘‘(1) MINIMUM DEPOSIT AMOUNT.—
‘‘(A) IN GENERAL.—The term ‘minimum
deposit amount’ means an amount equal to
$7,500, as adjusted under subparagraph (B).
‘‘(B) ADJUSTMENT.—The Secretary of the
Treasury shall adjust annually (effective for pe-
riods beginning after December 2003) the dol-
lar amount set forth in subparagraph (A) under
procedures providing for adjustments in the
same manner and to the same extent as adjust-
ments are provided for under the procedures
used to adjust benefit amounts under section
215(i)(2)(A), except that any amount so ad-
justed that is not a multiple of $10 shall be
rounded to the nearest multiple of $10.
‘‘(2) FEDERALLY-ADMINISTERED
INDIVIDUAL
SECURITY ACCOUNT.—The term ‘Federally-adminis-
tered individual security account’ means an indi-
vidual security account maintained, in accordance
with applicable provisions of this part, in the Indi-
vidual Security Fund.
‘‘(3) PRIVATELY-ADMINISTERED
INDIVIDUAL
SECURITY ACCOUNT.—The term ‘privately-adminis-
tered individual security account’ means an indi-
vidual security account maintained, in accordance
with applicable provisions of this part, by a certified
institution.
‘‘(4) CERTIFIED INSTITUTION.—The term ‘cer-
tified institution’ refers to an investment firm, credit
union, insurance company, or other certified institu-
tion under subpart 3.
‘‘(b) OPTION TO DESIGNATE A PRIVATELY-ADMINIS-
TERED INDIVIDUAL SECURITY ACCOUNT.—
‘‘(1) IN
GENERAL.—Under regulations pre-
scribed by the Individual Security Fund Board,
whenever the balance in an individual’s Federally-
administered individual security account is at least
equal to the minimum deposit amount, such indi-
vidual shall be eligible to designate a privately-ad-
ministered individual security account (established
and maintained on such individual’s behalf) to serve
as such individual’s individual security account
under this part, in lieu of such individual’s Feder-
ally-administered individual security account.
‘‘(2) EFFECT
OF
DESIGNATION.—If an indi-
vidual makes a designation under paragraph (1)—
‘‘(A) the entire balance in the individual’s
Federally-administered individual security ac-
count shall be promptly transferred to the pri-
vately-administered individual security account
specified by such individual in such designation;
and
‘‘(B) that privately-administered individual
security account shall, for all purposes, be
treated as the electing individual’s individual se-
curity account, subject to paragraph (4).
‘‘(3) INFORMATION
REQUIRED
TO
BE
IN-
CLUDED.—A designation under this subsection shall
not be effective unless it is made in such time, form,
and manner as the Individual Security Fund Board
prescribes.
‘‘(4) SUBSEQUENT DESIGNATIONS.—The Secu-
rities and Exchange Commission shall provide by
regulation opportunity for subsequent designation,
from time to time, of another individual security ac-
count in lieu of the account previously designated
under this section, subject to the following:
‘‘(A) OPTIONS
AVAILABLE.—The account
designated under this paragraph may be either
within—
‘‘(i) another certified institution, sub-
ject to subparagraph (B); or
‘‘(ii) the Individual Security Fund.
‘‘(B) MINIMUM
BALANCE.—In order to
make a designation referred to in subparagraph
(A)(i), the balance in the individual’s individual
security account must be at least equal to the
minimum deposit amount. No minimum balance
requirement under this subparagraph shall
apply in the case of a designation referred to in
subparagraph (A)(ii).
‘‘(C) ONLY 1 ACCOUNT PERMITTED AT ANY
TIME.—An individual may not, at any time,
concurrently maintain—
‘‘(i) a privately-administered indi-
vidual security account with each of 2 or
more certified institutions; or
‘‘(ii) a privately-administered and a
Federally-administered individual security
account.
‘‘(D) EFFECT.—A designation under this
paragraph has (with respect to the individual’s
respective accounts, before and after such des-
ignation) the same effect as results following a
designation under paragraph (2) (with respect
to the Federally-administered and privately-ad-
ministered accounts involved).
‘‘DISTRIBUTIONS FROM INDIVIDUAL SECURITY ACCOUNTS
‘‘SEC. 253. (a) DATE
OF EARLIEST DISTRIBU-
TION.—Except as provided in subsection (c), distributions
may not be made from the Federally-administered or pri-
vately-administered individual security account of an eligi-
ble individual (as the case may be) before the earlier of—
‘‘(1) the date the eligible individual attains nor-
mal retirement age, as determined under section 216
(or early retirement age, as so determined, if elected
by such individual), or
‘‘(2) the date on which funds in the eligible in-
dividual’s account are sufficient to provide a month-
ly payment over the life expectancy of the eligible in-
dividual (determined under reasonable actuarial as-
sumptions) which, when added to the eligible individ-
ual’s monthly benefit under part A (if any), is at
least equal to an amount equal to 1⁄12 of 185 percent
of the poverty line (as defined in section 673(2) of
the Community Services Block Grant Act (42 U.S.C.
9902(2) and determined on such date for a family
of the size involved) and adjusted annually there-
after by the adjustment determined under section
215(i).
‘‘(b) FORMS OF DISTRIBUTION.—
‘‘(1) REQUIRED MONTHLY PAYMENTS.—Except
as provided in paragraph (2), beginning as of the
date distributions begin to be made in accordance
with subsection (a), the balance in the individual se-
curity account available to provide monthly pay-
ments not in excess of the amount described in sub-
section (a)(2) shall be paid, as elected by the ac-
count holder (in such form and manner as shall be
prescribed in regulations of the Individual Security
Fund Board or the Securities and Exchange Com-
mission, as applicable), by means of the purchase of
annuities or equal monthly payments over the life
expectancy of the eligible individual (determined
under reasonable actuarial assumptions) in accord-
ance with requirements (which shall be provided in
regulations of the Board or Commission, as applica-
ble) similar to the requirements applicable to pay-
ments of benefits under subchapter III of chapter 84
of title 5, United States Code.
‘‘(2) PAYMENT OF EXCESS FUNDS.—To the ex-
tent funds remain in an eligible individual’s Feder-
ally-administered or privately-administered indi-
vidual security account (as the case may be) after
the application of paragraph (1) and to the extent
not inconsistent with the provisions of subchapter
III of chapter 84 of title 5, United States Code,
such funds shall be payable to the eligible individual
in such manner and in such amounts as determined
by the eligible individual.
‘‘(c) DISTRIBUTION IN THE EVENT OF DEATH BE-
FORE THE DATE OF INITIAL DISTRIBUTION.—If the eligi-
ble individual dies before the date determined under sub-
section (a), the balance in such individual’s individual se-
curity account shall be distributed to the individual’s heirs
under rules established by the Individual Security Fund
Board or the Securities and Exchange Commission, as ap-
plicable.
‘‘Subpart 2—Individual Security Fund; Individual
Security Fund Board
‘‘INDIVIDUAL SECURITY FUND
‘‘SEC. 261. There shall be established and maintained
in the Treasury of the United States an Individual Secu-
rity Fund in the same manner as the Thrift Savings Fund
under sections 8437 (excluding paragraphs (4) and (5) of
subsection (c) thereof), 8438, and 8439 of title 5, United
States Code.
‘‘INDIVIDUAL SECURITY FUND BOARD
‘‘SEC. 262. (a) ESTABLISHMENT.—There shall be es-
tablished and maintained in the Social Security Adminis-
tration an Individual Security Fund Board in the same
manner as the Federal Retirement Thrift Investment
Board under subchapter VII of chapter 84 of title 5,
United States Code.
‘‘(b) SPECIFIC INVESTMENT AND REPORTING DU-
TIES.—The Individual Security Fund Board shall manage
and report on the activities of the Individual Security
Fund and on Federally-administered individual security
accounts in the same manner as the Federal Retirement
Thrift Investment Board manages and reports on the
Thrift Savings Fund and the individual accounts of such
Fund under subchapter VII of chapter 84 of title 5,
United States Code.
‘‘(c) BUDGETARY TREATMENT OF INDIVIDUAL SECU-
RITY FUND AND ACCOUNTS
‘‘The receipts and disbursements of the Individual
Security Fund and any accounts within such Fund shall
not be included in the totals of the budget of the United
States Government as submitted by the President or of
the congressional budget and shall be exempt from any
general budget limitation imposed by statute on expendi-
tures and net lending (budget outlays) of the United
States Government.
‘‘(d) COMMISSIONER OF SOCIAL SECURITY AS EXEC-
UTIVE DIRECTOR.—The Commissioner of Social Security
shall have, with respect to the Individual Security Fund
and accounts within such Fund, the same duties and re-
sponsibilities as does the Executive Director (appointed
under section 8474(a) of title 5, United States Code) with
respect to the Thrift Savings Fund and accounts within
such Fund.
‘‘Subpart 3—Certified Institutions
‘‘CERTIFICATION OF INSTITUTIONS BY SECURITIES AND
EXCHANGE COMMISSION
‘‘SEC 271. (a) IN GENERAL.—For purposes of meet-
ing the requirements of section 532 of the Internal Rev-
enue Code of 1986 (relating to trusteeship of individual
security accounts), any institution that is engaged, in a
fiduciary capacity, in the business of maintaining accounts
for individuals for purposes of investment may apply to
the Securities and Exchange Commission (in such form
and manner as the Commission shall by regulation re-
quire) for certification under this subpart.
‘‘(b) REVIEW REQUIREMENTS.—In reviewing any ap-
plication for certification under this subpart and deter-
mining whether to approve the application for certifi-
cation, the Commission shall consider the following fac-
tors:
‘‘(1) The financial history and condition of the
institution.
‘‘(2) The adequacy of the institution’s capital
structure.
‘‘(c) NOTICE OF DENIAL OF APPLICATION FOR CER-
TIFICATION.—If the Commission votes to deny any appli-
cation for certification by any institution, the Commission
shall promptly notify the institution of the denial of such
application, giving specific reasons in writing for the Com-
mission’s determination with reference to the factors de-
scribed in subsection (b).
‘‘(d) NONDELEGATION REQUIREMENT.—The author-
ity of the Commission to make any determination to deny
any application under this section may not be delegated
by the Commission.
‘‘REVOCATION OF CERTIFICATION
‘‘SEC. 272. (a) IN GENERAL.—The Securities and
Exchange Commission shall prescribe regulations in ac-
cordance with which the certified status of an institution
may be voluntarily or involuntarily revoked.
‘‘(b) JUDICIAL REVIEW.—Any party to any involun-
tary revocation proceeding under this section to which an
institution is a party may obtain a review of any order
served pursuant to this section by the filing in the court
of appeals of the United States for the circuit in which
the home office of the institution is located, or in the
United States Court of Appeals for the District of Colum-
bia Circuit, within 30 days after the date of service of such
order, a written petition praying that the order of the
Commission be modified, terminated, or set aside. A copy
of such petition shall be forthwith transmitted by the clerk
of the court to the Commission, and thereupon the Com-
mission shall file in the court the record in the proceeding,
as provided in section 2112 of title 28, United States
Code. Upon the filing of such petition, such court shall
have jurisdiction, which upon the filing of the record shall
be exclusive, to affirm, modify, terminate, or set aside, in
whole or in part, the order of the Commission. Review of
such proceedings shall be had as provided in chapter 7
of title 5, United States Code. The judgment and decree
of the court shall be final, except that the judgment and
decree shall be subject to review by the Supreme Court
upon certiorari, as provided in section 1254 of title 28,
United States Code. The commencement of proceedings
for judicial review under this subsection shall not, unless
specifically ordered by the court, operate as a stay of any
order issued by the Commission.
‘‘FIDUCIARY DUTIES
‘‘SEC. 273. (a) IN GENERAL.—In the case of a pri-
vately-administered individual security account which does
not form part of an individual account plan covered under
part 4 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974, rules similar to the rules
of such part 4 applicable to individual account plans cov-
ered under such part 4 shall apply with respect to a pri-
vately-administered individual security account and the
terms of any arrangement under which such account is
maintained.
‘‘(b) GENERAL REQUIREMENTS.—In applying under
subsection (a) the rules of part 4 of subtitle B of title
I of the Employee Retirement Income Security Act of
1974 in the case of a privately-administered individual se-
curity account, references in such part to the Secretary
of Labor shall be deemed to be references to the Securities
and Exchange Commission, references in such part to a
participants or beneficiary in connection with an indi-
vidual account plan covered under such part shall be
deemed to be references to the account holder with respect
to the privately-administered individual security account,
and references in such part to the plan administrator or
plan sponsor in connection with an individual account plan
covered under such part shall be deemed to be references
to the trustee of the privately-administered individual se-
curity account.
‘‘(c) LIMITATION ON LIABILITY.—Any account holder
who issues an instruction to the trustee of the account
directing an investment of funds held in the account shall
sign an acknowledgement prescribed by the Securities and
Exchange Commission which states that the account hold-
er understands that an investment of any amount in the
account is made at the account holder’s risk, that the ac-
count holder is not protected by the Government or by
the trustee against any loss on such investment, and that
a return on such investment is not guaranteed by the Gov-
ernment or by the trustee. Notwithstanding the preceding
provisions of this section and any other provision of Fed-
eral or State law, the trustee of a privately-administered
individual security account shall not be liable for losses
suffered in connection with any investment of assets held
in the account unless it is shown by clear and convincing
evidence that the trustee did not act in the manner in
which a reasonable trustee would act under the cir-
cumstances then prevailing in evaluating the risk and re-
ward properties of the investment option involved.
‘‘Subpart 4—Enforcement
‘‘CAUSE OF ACTION
‘‘SEC. 281. The account holder with respect to a pri-
vately-administered individual security account who is ad-
versely affected by an act or practice of any party (other
than the Securities and Exchange Commission, the Social
Security Administration, the Department of the Treasury,
or any officer or employee of any of the foregoing) in viola-
tion of any provision of this part, may bring an action—
‘‘(1) to enjoin such act or practice, or
‘‘(2) to obtain other appropriate equitable relief
(A) to redress such violation or (B) to enforce such
provision.
‘‘JURISDICTION AND VENUE
‘‘SEC. 282. Civil actions under this subpart may be
brought in the district courts of the United States in the
district where the privately-administered individual secu-
rity account is administered, where the violation took
place, or where a defendant resides or may be found, and
process may be served in any district where a defendant
resides or may be found. The district courts of the United
State shall have jurisdiction, without regard to the amount
in controversy or the citizenship of the parties, to grant
the relief provided for in section 281 in any action.
‘‘RIGHT OF SECURITIES AND EXCHANGE COMMISSION TO
INTERVENE
‘‘SEC. 283. A copy of the complaint or notice of ap-
peal in any action under this subpart shall be served upon
the Securities and Exchange Commission by certified mail.
The Commission shall each have the right to intervene in
any action.
‘‘AWARDS OF COSTS AND EXPENSES
‘‘SEC. 284. In any action brought under this subpart,
the court in its discretion may award all or a portion of
the costs and expenses incurred in connection with such
action, including reasonable attorney’s fees, to any party
who prevails or substantially prevails in such action.
‘‘LIMITATION ON ACTIONS
‘‘SEC. 285. (a) IN GENERAL.—Except as provided in
subsection (c), an action under this subpart may not be
brought after the later of—
‘‘(1) 6 years after the date on which the cause
of action arose, or
‘‘(2) 3 years after the applicable date specified
in subsection (b).
‘‘(b) APPLICABLE DATE.—The applicable date speci-
fied in this subsection is the earliest date on which the
plaintiff acquired or should have acquired actual knowl-
edge of the existence of such cause of action.
‘‘(c) CASES OF FRAUD OR CONCEALMENT.—In the
case of fraud or concealment, the period described in sub-
section (a)(2) shall be extended to 6 years after the appli-
cable date specified in subsection (b).
‘‘PENALTY FOR FAILURE TO TIMELY PROVIDE REQUIRED
INFORMATION
‘‘SEC. 286. The Securities and Exchange Commission
may assess a penalty, payable to it, against any person
who fails to provide any notice or other material informa-
tion required under this part or any regulations prescribed
under this part within the applicable time limit specified
therein. Such penalty shall not exceed $1,000 for each day
for which such failure continues.
‘‘ACTIONS BY SECURITIES AND EXCHANGE COMMISSION
‘‘SEC. 287. If any person is assessed under this sub-
part and fails to pay the assessment when due, or any
person otherwise fails to meet any requirement of this
part, the Securities and Exchange Commission may bring
a civil action in any district court of the United States
within the jurisdiction of which such person’s assets are
located or in which such person resides or is found for
the recovery of the amount of the assessment or for appro-
priate equitable relief to redress the violation or enforce
the provisions of this part, and process may be served in
any other district. The district courts of the United States
shall have jurisdiction over actions brought under this sec-
tion by the Commission without regard to the amount in
controversy.
‘‘CRIMINAL PENALTY FOR FRAUD OR INTENTIONAL MIS-
REPRESENTATION
IN
CONNECTION
WITH
INVEST-
MENT OPTIONS
‘‘SEC. 288. Any person who makes, or causes to be
made, a statement or representation of a material fact for
use in selecting an investment option that the person
knows or should know is false or misleading or knows or
should know omits a material fact or makes such a state-
ment with knowing disregard for the truth shall upon con-
viction be fined not more than $500,000 or imprisoned
for not more than 5 years, or both.’’.
(2) IMPLEMENTATION.—
(A) PROVISIONS
RELATING
TO
FEDER-
ALLY-ADMINISTERED INDIVIDUAL SECURITY AC-
COUNTS.—The Individual Security Fund Board,
in consultation with the Commissioner of Social
Security and the Secretary of the Treasury,
shall establish an expedited procedure to ensure
timely implementation of the amendments made
by this subsection, to the extent that they relate
to Federally-administered individual security ac-
counts. The Board shall submit to each House
of the Congress a report on the status of such
implementation not later than March 1, 2003.
All measures necessary to prepare for—
(i) the implementation of such amend-
ments, to the extent necessary to provide
for at least the option described in section
251(d)(2) of the Social Security Act (as
amended by this section), shall be com-
pleted by the Board, the Commissioner,
and the Secretary not later than January
1, 2003; and
(ii) 
full 
implementation 
of 
such
amendments (as they relate to Federally-
administered individual security accounts)
shall be completed by the Commission, the
Commissioner, and the Secretary not later
than January 1, 2005.
(B) PROVISIONS RELATING TO PRIVATELY-
ADMINISTERED
INDIVIDUAL
SECURITY
AC-
COUNTS.—The Securities and Exchange Com-
mission, in consultation with the Commissioner
of Social Security and the Secretary of the
Treasury, shall establish an expedited procedure
to ensure timely implementation of the amend-
ments made by this section, to the extent that
they relate to privately-administered individual
security accounts. The Commission shall submit
to each House of the Congress a report on the
status of such implementation not later than
March 1, 2003. All measures necessary to pre-
pare for full implementation of such amend-
ments (as they relate to privately-administered
individual security accounts) shall be completed
by the Commission, the Commissioner, and the
Secretary not later than January 1, 2005.
(C) DEFINITIONS.—For purposes of this
paragraph, the terms ‘‘Individual Security
Fund Board’’, ‘‘Federally-administered indi-
vidual security account’’, and ‘‘privately-admin-
istered individual security account’’ have the
meanings given them under part B of title II of
the Social Security Act (as amended by this
subsection).
(b) MODIFICATION OF FICA RATES.—
(1) EMPLOYEES.—Section 3101(a) of the Inter-
nal Revenue Code of 1986 (relating to tax on em-
ployees) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—
‘‘(A) INDIVIDUALS COVERED UNDER PART
A OF TITLE II OF THE SOCIAL SECURITY ACT.—
In addition to other taxes, there is hereby im-
posed on the income of every individual who is
not a part B eligible individual a tax equal to
6.2 percent of the wages received by him with
respect to employment.
‘‘(B) INDIVIDUALS COVERED UNDER PART
B OF TITLE II OF THE SOCIAL SECURITY ACT.—
‘‘(i) IN
GENERAL.—In addition to
other taxes, there is hereby imposed on the
income of every part B eligible individual a
tax equal to the applicable percentage of
the wages received by such individual with
respect to employment.
‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the term ‘applicable
percentage’ means the excess of 6.2 per-
cent, over
‘‘(I) 3 percent, in the case of the
first $10,000 of such wages received
in the calendar year, and
‘‘(II) 2 percent, in the case of
any additional such wages received in
the calendar year.
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—In addition
to other taxes, there is hereby imposed on the in-
come of every part B eligible individual for the cal-
endar year an individual security account contribu-
tion equal to the sum of—
‘‘(A) 3 percent of so much of the wages as
does not exceed the first $10,000 received in
such calendar year by such individual with re-
spect to employment,
‘‘(B) 2 percent of the excess of—
‘‘(i) such wages, over
‘‘(ii) the wages taken into account
under subparagraph (A), plus
‘‘(C) so much of such wages (not to exceed
$5,000) as designated by the individual in the
same manner as described in section 251(c) of
the Social Security Act.
‘‘(3) INFLATION ADJUSTMENT BASED ON WAGE
INDEX.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2003, the $10,000
amount in paragraphs (1) and (2) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the percentage increase (if any)
for such year determined under section
215(i) of the Social Security Act.
‘‘(B) DESIGNATED
CONTRIBUTIONS.—In
the case of any calendar year beginning after
2008, the $5,000 amount in paragraph (2)(C)
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the percentage increase (if any)
for such year determined under section
215(i) of the Social Security Act.
‘‘(C) ROUNDING.—If any dollar amount
after being increased under subparagraph (A)
or (B) is not a multiple of $10, such dollar
amount shall be rounded to the nearest multiple
of $10.
‘‘(4) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) WAGES.—The term ‘wages’ shall have
the meaning given to such term by section
3121(a).
‘‘(B) EMPLOYMENT.—The term ‘employ-
ment’ shall have the meaning given to such
term by section 3121(b).’’.
(2) SELF-EMPLOYED.—Section 1401(a) of the
Internal Revenue Code of 1986 (relating to tax on
self-employment income) is amended to read as fol-
lows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—
‘‘(A) INDIVIDUALS COVERED UNDER PART
A OF THE SOCIAL SECURITY ACT.—In addition
to other taxes, there shall be imposed for each
taxable year, on the self-employment income of
every individual who is not a part B eligible in-
dividual for the calendar year ending with or
during such taxable year, a tax equal to 12.40
percent of the amount of the self-employment
income for such taxable year.
‘‘(B) INDIVIDUALS COVERED UNDER PART
B OF TITLE II OF THE SOCIAL SECURITY ACT.—
‘‘(i) IN
GENERAL.—In addition to
other taxes, there is hereby imposed for
each taxable year, on the self-employment
income of every part B eligible individual,
a tax equal to the applicable percentage of
the amount of the self-employment income
for such taxable year.
‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the term ‘applicable
percentage’ means the excess of 12.4 per-
cent, over
‘‘(I) 3 percent, in the case of the
first $10,000 of self-employment in-
come received in the calendar year,
and
‘‘(II) 2 percent, in the case of
any additional self-employment income
received in the calendar year.
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—In addition
to other taxes, there is hereby imposed for each tax-
able year, on the self-employment income of every
part B eligible individual for the calendar year, an
individual security account contribution equal to the
sum of—
‘‘(A) 3 percent of self-employment income
as does not exceed the first $10,000 of such in-
come derived during the taxable year by such
individual,
‘‘(B) 2 percent of self-employment income
in the case of any additional self-employment
income derived by such individual during the
taxable year, and
‘‘(C) so much of such self-employment in-
come (not to exceed $5,000) as designated by
the individual in the same manner as described
in section 251(c) of the Social Security Act.
‘‘(3) INFLATION ADJUSTMENT BASED ON WAGE
INDEX.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2003, the $10,000
amount in paragraphs (1) and (2) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the percentage increase (if any)
for such year determined under section
215(i) of the Social Security Act.
‘‘(B) DESIGNATED
CONTRIBUTIONS.—In
the case of any calendar year beginning after
2008, the $5,000 amount in paragraph (2)(C)
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the percentage increase (if any)
for such year determined under section
215(i) of the Social Security Act.
‘‘(C) ROUNDING.—If any dollar amount
after being increased under subparagraph (A)
or (B) is not a multiple of $10, such dollar
amount shall be rounded to the nearest multiple
of $10.
(3) PART B ELIGIBLE INDIVIDUAL.—
(A) TAXES ON EMPLOYEES.—Section 3121
of such Code (relating to definitions) is amend-
ed by inserting after subsection (s) the fol-
lowing new subsection:
‘‘(t) PART B ELIGIBLE INDIVIDUAL.—For purposes
of this chapter, the term ‘part B eligible individual’ means,
for any calendar year, an individual who is an eligible indi-
vidual (as defined in section 251(a)(2) of the Social Secu-
rity Act) for such calendar year.’’.
(B) 
SELF-EMPLOYMENT
TAX.—Section
1402 of such Code (relating to definitions) is
amended by adding at the end the following
new subsection:
‘‘(k) PART B ELIGIBLE INDIVIDUAL.—The term
‘part B eligible individual’ means, for any calendar year,
an individual who is an eligible individual (as defined in
section 251(a)(2) of the Social Security Act) for such cal-
endar year.’’.
(4) EFFECTIVE DATES.—
(A) EMPLOYEES.—The amendments made
by paragraphs (1) and (3)(A) apply to remu-
neration paid after December 31, 2002.
(B) SELF-EMPLOYED
INDIVIDUALS.—The
amendments made by paragraphs (2) and
(3)(B) apply to taxable years beginning after
December 31, 2002.
(c) MATCHING CONTRIBUTIONS.—
(1) IN GENERAL.—Part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (re-
lating to credits against tax) is amended by adding
at the end the following new subpart:
‘‘Subpart H—Individual Security Account Credits
‘‘Sec. 54. Individual security account credit.’’.
‘‘SEC. 54. INDIVIDUAL SECURITY ACCOUNT CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—Each part B eligible
individual is entitled to a credit for the taxable year in
an amount equal to the sum of—
‘‘(1) $150,
‘‘(2) 50 percent of the designated wages of such
individual for the taxable year,
‘‘(3) 50 percent of the designated self-employ-
ment income of such individual for the taxable year,
and
‘‘(4) 50 percent of the designated earned in-
come credit.
‘‘(b) LIMITATIONS.—
‘‘(1) AMOUNT.—The amount determined under
paragraphs (2) and (3) of subsection (a) with re-
spect to such individual for any taxable year may
not exceed the excess (if any) of—
‘‘(A) $600, over
‘‘(B) the sum of the amounts received by
the Secretary on behalf of such individual under
subparagraphs 
(A) 
and 
(B) 
of 
section
3101(a)(2) and subparagraphs (A) and (B) of
1401(a)(2) for the taxable year.
‘‘(2) FAILURE TO MAKE VOLUNTARY CONTRIBU-
TIONS.—In the case of a part B eligible individual
with respect to whom the amount of wages des-
ignated under section 3101(a)(2)(C) plus the
amount self-employment income designated under
section 1401(a)(2)(C) for the taxable year is zero,
the credit to which such individual is entitled under
this section shall be equal to zero.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) PART B ELIGIBLE INDIVIDUAL.—The term
‘part B eligible individual’ means, for any calendar
year, an individual who is an eligible individual (as
defined in section 251(a)(2) of the Social Security
Act) for such calendar year.
‘‘(2) DESIGNATED
WAGES.—The term ‘des-
ignated wages’ means with respect to any taxable
year 
the 
amount 
designated 
under 
section
3101(a)(2)(C).
‘‘(3) 
DESIGNATED
SELF-EMPLOYMENT
IN-
COME.—The term ‘designated self-employment in-
come’ means with respect to any taxable year the
amount designated under section 1401(a)(2)(C) for
such taxable year.
‘‘(4) DESIGNATED EARNED INCOME CREDIT.—
The term ‘designated earned income credit’ means
the amount of the credit allowed under section 32
for the taxable year that is designated by the part
B eligible individual in the same manner as de-
scribed in section 251(c) of the Social Security Act.
‘‘(d) CREDIT USED ONLY FOR INDIVIDUAL SECU-
RITY ACCOUNT.—For purposes of this title, the credit al-
lowed under this section with respect to any part B eligible
individual—
‘‘(1) shall not be treated as a credit allowed
under this part, but
‘‘(2) shall be treated as an overpayment of tax
under section 6401(b)(3) which may, in accordance
with section 6402(l), only be transferred to an indi-
vidual security account established under part B of
title II of the Social Security Act with respect to
such individual.’’.
(2) CONTRIBUTION OF EITC AMOUNTS TO INDI-
VIDUAL SECURITY ACCOUNTS.—Section 32 of such
Code (relating to earned income) is amended by add-
ing at the end the following new subsection:
‘‘(n) CONTRIBUTION TO INDIVIDUAL SECURITY AC-
COUNT.—
‘‘(1) IN
GENERAL.—An eligible part B indi-
vidual who is allowed a credit under this section may
designate all or a portion of such credit as a con-
tribution to the individual security account estab-
lished on behalf of such individual.
‘‘(2) CREDIT USED ONLY FOR INDIVIDUAL SE-
CURITY ACCOUNT.—For purposes of this title, the
amount designated under paragraph (1) with respect
to any part B eligible individual—
‘‘(A) shall not be treated as a credit al-
lowed under this section, but
‘‘(B) shall be treated as an overpayment of
tax under section 6401(b)(3) which may, in ac-
cordance with section 6402(l), only be trans-
ferred to an individual security account estab-
lished under part B of title II of the Social Se-
curity Act with respect to such individual.’’.
(3) CONTRIBUTION OF CREDITED AMOUNTS TO
INDIVIDUAL SECURITY ACCOUNT.—
(A) CREDITED
AMOUNTS
TREATED
AS
OVERPAYMENT OF TAX.—Subsection (b) of sec-
tion 6401 (relating to excessive credits) is
amended by adding at the end the following
new paragraph:
‘‘(3) SPECIAL RULE FOR CREDIT UNDER SEC-
TIONS 32 AND 54.—Subject to the provisions of sec-
tion 6402(l), the following sum shall be considered
an overpayment—
‘‘(A) SECTION 54 CREDIT.—The amount of
any credit allowed under section 54 for any tax-
able year, plus
‘‘(B) SECTION 32 DESIGNATED EARNED IN-
COME CREDIT CONTRIBUTION.—The amount of
the earned income credit designated as a con-
tribution to an individual security account
under section 32(n) for the taxable year.’’.
(B) TRANSFER OF CREDIT AMOUNT TO IN-
DIVIDUAL SECURITY ACCOUNT.—Section 6402
of such Code (relating to authority to make
credits or refunds) is amended by adding at the
end the following new subsection:
‘‘(l) OVERPAYMENTS ATTRIBUTABLE TO INDIVIDUAL
SECURITY ACCOUNT CREDIT.—In the case of any over-
payment described in section 6401(b)(3) with respect to
any individual, the Secretary shall transfer for crediting
by the Commissioner of Social Security to the individual
security account of an such individual, an amount equal
to the amount of such overpayment.’’.
(4) NOTICE TO EITC RECIPIENTS OF MATCHING
CONTRIBUTIONS
TO
INDIVIDUAL
SECURITY
AC-
COUNTS.—In connection with information and tax
forms relating to the credit allowed under section 32
of the Internal Revenue Code of 1986, the Secretary
of the Treasury shall provide notice of the avail-
ability of matching contributions pursuant to section
54 of such Code (as added by subsection (a) of this
section) to individual security accounts under part B
of title II of the Social Security Act.
(5) CONFORMING AMENDMENTS.—
(A) Section 1324(b)(2) of title 31, United
States Code, is amended by inserting before the
period at the end ‘‘, or enacted by the 21st
Century Retirement Act’’.
(B) The table of subparts for part IV of
subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the
end the following new item:
‘‘Subpart H. Individual Security Account Credits.’’.
(6) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to refunds payable
after December 31, 2002.
(d) TAX TREATMENT OF INDIVIDUAL SECURITY SYS-
TEM.—
(1) IN GENERAL.—Subchapter F of chapter 1
of the Internal Revenue Code of 1986 (relating to
exempt organizations) is amended by adding at the
end the following new part:
‘‘PART IX—INDIVIDUAL SECURITY SYSTEM
‘‘Sec. 531. Individual security fund.
‘‘Sec. 532. Individual security accounts.
‘‘SEC. 531. INDIVIDUAL SECURITY FUND AND FEDERALLY-
ADMINISTERED INDIVIDUAL SECURITY AC-
COUNTS.
‘‘The Individual Security Fund established under sec-
tion 261 of the Social Security Act shall be exempt from
taxation under this subtitle.
‘‘SEC. 532. INDIVIDUAL SECURITY ACCOUNTS.
‘‘(a) IN GENERAL.—For purposes of this section, the
term ‘individual security account’ means a Federally-ad-
ministered individual security account and a privately-ad-
ministered security account.
‘‘(b) INDIVIDUAL SECURITY ACCOUNTS DEFINED.—
For purposes of subsection (a)—
‘‘(1) FEDERALLY-ADMINISTERED SECURITY AC-
COUNT.—The term ‘Federally-administered indi-
vidual security account’ means the account estab-
lished under section 251 of the Social Security Act.
‘‘(2) PRIVATELY-ADMINISTERED SECURITY AC-
COUNT.—The term ‘privately-administered individual
security account’ means a trust created or organized
in the United States exclusively for the benefit of an
individual or his beneficiaries, but only if the written
governing instrument creating the trust meets the
following requirements:
‘‘(A) Except in the case of rollover con-
tributions from another individual security ac-
count of such individual—
‘‘(i) no contribution will be accepted
unless it is in cash,
‘‘(ii) contributions will not be accepted
for the taxable year in excess of the sum
of—
‘‘(I) the amounts collected with
respect to such beneficiary under sec-
tions 3101(a)(2) and 1401(a)(2), and
‘‘(II) the amounts transferred to
such account under section 6402(l),
and
‘‘(iii) any contributions with respect to
an account holder which are not accepted
pursuant to this paragraph are promptly
refunded directly to the account holder.
‘‘(B) The trustee is a institution which is
certified under subpart 3 of subtitle B of title
II of the Social Security Act.
‘‘(C) No part of the trust funds will be in-
vested in life insurance contracts.
‘‘(D) The interest of an individual in the
balance in his account is nonforfeitable.
‘‘(E) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(c) CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for contributions credited to an individual se-
curity account under part B of title II of the Social
Security Act or amounts transferred to such account
under section 6402(l).
‘‘(2) ROLLOVERS.—
‘‘(A) ROLLOVER FROM PRIVATELY-ADMIN-
ISTERED
INDIVIDUAL
SECURITY
ACCOUNT.—
The entire balance of an individual security ac-
count of the account holder may be rolled over
to another individual security account of the ac-
count holder.
‘‘(B) ROLLOVER
OF
INHERITANCE.—Any
portion of a distribution to an heir from a Fed-
erally-administered individual security account
made by reason of the death of the beneficiary
of such account may be rolled over to the indi-
vidual security account of the heir.
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—An individual se-
curity account is exempt from taxation under this
subtitle unless such account has ceased to be an in-
dividual security account by reason of paragraph
(2). Notwithstanding the preceding sentence, any
such account is subject to the taxes imposed by sec-
tion 511 (relating to imposition of tax on unrelated
business income of charitable, etc. organizations).
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar
to the rules of paragraphs (2) and (4) of section
408(e) shall apply to privately-administered indi-
vidual security accounts, and any amount treated as
distributed under such rules shall be includible in
gross income and shall not be treated as a social se-
curity benefit for purposes of section 86.
‘‘(3) ROLLOVER CONTRIBUTION.—An amount is
described in this paragraph as a rollover contribu-
tion if it meets the requirements of subparagraphs
(A) and (B).
‘‘(A) IN GENERAL.—The requirements of
this subparagraph are met with respect to an
amount paid or distributed from an individual
security account to the account holder only if
the entire amount in such account is received
by the account holder and is paid into another
individual security account for the benefit of
such holder not later than the 60th day after
the day on which the holder receives the pay-
ment or distribution.
‘‘(B) LIMITATION.—This paragraph shall
not apply to any amount described in subpara-
graph (A) received by an individual from a pri-
vately-administered individual security account
if, at any time during the 1-year period ending
on the day of such receipt, such individual re-
ceived on 3 other occasions any other amount
described in subparagraph (A) from an indi-
vidual security account which was not includible
in the individual’s gross income because of the
application of this paragraph.
‘‘(e) DISTRIBUTIONS.—
‘‘(1) IN
GENERAL.—The portion of any dis-
tribution from an individual security account under
section 253 of the Social Security Act which is at-
tributable to amounts contributed to such account
under section 3101(a)(2) (other than subparagraph
(C) thereof) and section 1401(a)(2) (other than sub-
paragraph (C) thereof), together with earnings
thereon, shall be includible in gross income as a so-
cial security benefit for purposes of section 86.
‘‘(2) VOLUNTARY
CONTRIBUTIONS.—The por-
tion of any distribution from an individual security
account under section 253 of the Social Security Act
which is attributable to amounts contributed to such
account 
under 
section 
3101(a)(2)(C), 
section
1401(a)(2)(C), and section 6402(l), together with
earnings thereon, shall not be includible in gross in-
come.
‘‘(3) PERIOD IN WHICH DISTRIBUTIONS MUST
BE MADE FROM ACCOUNT OF DECEDENT.—In the
case of amounts remaining in an individual security
account from which distributions began before the
death of the beneficiary, rules similar to the rules of
section 401(a)(9)(B) shall apply to distributions of
such remaining amounts.
‘‘(4) ROLLOVERS.—Paragraph (1) shall not
apply to amounts rolled over under subsection (c)(2)
in a direct transfer by the Commissioner of Social
Security, under regulations which the Commissioner
shall prescribe.
‘‘(f) ACCOUNT BENEFICIARY.—For purposes of this
section, the account beneficiary is the individual for whose
benefit the individual security account is established.’’.
(2) CLERICAL
AMENDMENT.—The table of
parts for subchapter F of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding after
the item relating to part VIII the following new
item:
‘‘Part IX. Individual security system.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2002.
SEC. 3. MINIMUM SOCIAL SECURITY BENEFIT.
Section 215 of the Social Security Act (42 U.S.C.
415) is amended by adding at the end the following:
‘‘Minimum Monthly Insurance Benefit
‘‘(j)(1) Notwithstanding the preceding provisions of
this section—
‘‘(A) the primary insurance amount of a quali-
fied individual shall be equal to the greater of—
‘‘(i) the primary insurance amount deter-
mined under this section (without regard to this
subsection), or
‘‘(ii) 1⁄12 of the applicable percentage of
the applicable amount, and
‘‘(B) any recomputation of the primary insur-
ance amount of a qualified individual shall not result
in a primary insurance amount less than the pri-
mary insurance amount as in effect immediately
prior to such recomputation.
‘‘(2) For purposes of this subsection—
‘‘(A) The term ‘qualified individual’ means an
individual—
‘‘(i) who initially becomes eligible for old-
age or disability insurance benefits, or dies (be-
fore becoming eligible for such benefits) for a
month beginning after December 31, 2009, and
‘‘(ii) who has at least 80 quarters of cov-
erage.
‘‘(B) The term ‘applicable amount’ means, in
connection with an individual, $8,259 adjusted
annually—
‘‘(i)(I) with respect to an individual whose
initial month of eligibility occurs in a year prior
to 2011, by the CPI increase percentage deter-
mined under section 215(i) for 1996 through
the year prior to such year of eligibility; and
‘‘(II) with respect to an individual whose
initial month of eligibility occurs in a year after
2010, by the CPI increase percentage deter-
mined under such section for 1996 through
2009, and by the wage increase percentage de-
termined under such section for 2009 through
the second year prior to the year of such eligi-
bility; and
‘‘(ii) by the CPI increase percentage deter-
mined under such section for all years begin-
ning with the year of an individual’s initial eli-
gibility.
‘‘(C)(i) The term ‘applicable percentage’ means,
for computations and recomputations of a qualified
individual’s primary insurance amount under this
section whose initial eligibility occurs in any calendar
year specified in the table under clause (ii), the sum
of—
‘‘(I) the applicable base percentage speci-
fied in such table in connection with such year,
plus
‘‘(II) the product derived by multiplying
the applicable percentage increment specified in
such table in connection with such year by the
ratio of the number of such individual’s quar-
ters of coverage (if any) in excess of the min-
imum number of quarters required under sub-
paragraph (A)(ii) but not in excess of twice
such minimum, to such minimum.
‘‘(ii) For purposes of clause (i), the applicable
base percentages and applicable percentage incre-
ments are set forth in connection with calendar
years in the following table:
‘‘If the calendar
year is:
The applicable
base percentage
is:
And the applicable
percentage incre-
ment is:
2006 ............................
12 percent ...................
8 percent
2007 ............................
24 percent ...................
16 percent
2008 ............................
36 percent ...................
24 percent
2009 ............................
48 percent ...................
32 percent
After 2009 ..................
60 percent ...................
40 percent.’’
SEC. 4. REDUCTION IN THE AMOUNT OF CERTAIN TRANS-
FERS TO MEDICARE TRUST FUND.
Subparagraph (A) of section 121(e)(1) of the Social
Security Amendments of 1983 (42 U.S.C. 401 note), as
amended by section 13215(c)(1) of the Omnibus Budget
Reconciliation Act of 1993, is amended—
(1) in clause (ii), by striking ‘‘the amounts’’
and inserting ‘‘the applicable percentage of the
amounts’’; and
(2) by adding at the end the following: ‘‘For
purposes of clause (ii), the applicable percentage for
a year is equal to 100 percent, reduced (but not
below zero) by 10 percentage points for each year
after 2009.’’.
SEC. 5. INCREASE IN NUMBER OF YEARS TAKEN INTO AC-
COUNT IN DETERMINING AVERAGE INDEXED
MONTHLY EARNINGS.
(a) IN GENERAL.—Section 215(b) of the Social Secu-
rity Act (42 U.S.C. 415(b)(1)) is amended—
(1) by striking subparagraph (B) of paragraph
(1) and inserting the following:
‘‘(B) the product derived by multiplying—
‘‘(i) the number of elapsed years, reduced
(in any case to which paragraph (2)(A)(i) ap-
plies) to the extent provided in paragraph
(2)(C), by
‘‘(ii) 12.’’;
(2) in subparagraph (A) of paragraph (2), by
striking all of such subparagraph as precedes
‘‘Clause (ii),’’ and inserting the following:
‘‘(2)(A) The number of an individual’s benefit com-
putation years equals—
‘‘(i) in the case of an individual who is entitled
to old-age insurance benefits (except as provided in
the second sentence of this subparagraph), or who
has died, the number of his computation base years,
and
‘‘(ii) in the case of an individual who is entitled
to disability insurance benefits, the number of
elapsed years reduced by the number of years equal
to one-fifth of the number of elapsed years (dis-
regarding any resulting fractional part of a year),
but not by more than 5 years.’’; and
(3) by adding at the end of paragraph (2) the
following new subparagraph:
‘‘(C)(i) For purposes of clause (i) of paragraph
(1)(B), the number of elapsed years shall be reduced pur-
suant to such clause by the number of years specified in
connection with the calendar year in which such individual
becomes eligible for old-age insurance benefits, or dies (be-
fore becoming eligible for such benefits), as set forth in
the following table:
‘‘If such calendar year is:
The applicable number of years
is:
2000 or 2001 .....................................................................................
2002 or 2003 .....................................................................................
2004 or 2005 .....................................................................................
2006 or 2007 .....................................................................................
2008 or 2009 .....................................................................................
After 2009 ..........................................................................................
0.
‘‘(ii) The reduction provided in clause (i) of
paragraph (1)(B) shall not apply in any case in
which—
‘‘(I) the individual is married at the time
the individual becomes eligible for old-age insur-
ance benefits or dies (before becoming eligible
for such benefits), and
‘‘(II) the total of the wages paid in and
self-employment income credited to the pre-
ceding calendar year with respect to the indi-
vidual is less than the total of the wages paid
in and self-employment income credited to such
year with respect to the individual’s spouse.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to individuals attain-
ing early retirement age (as defined in section 216(l)(2)
of the Social Security Act) or dying after December 31,
2001.
SEC. 6. ACTUARIAL ADJUSTMENT FOR RETIREMENT.
(a) EARLY RETIREMENT.—
(1) IN GENERAL.—Section 202(q) of the Social
Security Act (42 U.S.C. 402(q)) is amended—
(A) in paragraph (1)(A), by striking ‘‘5⁄9’’
and inserting ‘‘the applicable fraction (deter-
mined under paragraph (12))’’; and
(B) by adding at the end the following:
‘‘(12) For purposes of paragraph (1)(A), the ‘applica-
ble fraction’ for an individual who attains the age of 62
in—
‘‘(A) any year before 2002, is 5⁄9;
‘‘(B) 2002, is 7⁄12;
‘‘(C) 2003, is 11⁄18;
‘‘(D) 2004, is 23⁄36;
‘‘(E) 2005, is 2⁄3; and
‘‘(F) 2006 or any succeeding year, is 25⁄36.’’.
(2) MONTHS BEYOND FIRST 36 MONTHS.—Sec-
tion 202(q) of such Act (42 U.S.C. 402(q)(9)) (as
amended by paragraph (1)) is amended—
(A) in paragraph (9)(A), by striking ‘‘five-
twelfths’’ and inserting ‘‘the applicable fraction
(determined under paragraph (13))’’; and
(B) by adding at the end the following:
‘‘(13) For purposes of paragraph (9)(A), the ‘applica-
ble fraction’ for an individual who attains the age of 62
in—
‘‘(A) any year before 2002, is 5⁄12;
‘‘(B) 2002, is 16⁄36;
‘‘(C) 2003, is 16⁄36;
‘‘(D) 2004, is 17⁄36;
‘‘(E) 2005, is 17⁄36; and
‘‘(F) 2006 or any succeeding year, is 1⁄2.’’.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) shall apply to individuals
who attain the age of 62 in years after 2001.
(b) DELAYED RETIREMENT.—Section 202(w)(6) of
the Social Security Act (42 U.S.C. 402(w)(6)) is
amended—
(1) in subparagraph (C), by striking ‘‘and’’ at
the end;
(2) in subparagraph (D), by striking ‘‘2004.’’
and inserting ‘‘2004 and before 2007;’’; and
(3) by adding at the end the following:
‘‘(E) 17⁄24 of 1 percent in the case of an indi-
vidual who attains the age of 62 in a calendar year
after 2006 and before 2009;
‘‘(F) 3⁄4 of 1 percent in the case of an indi-
vidual who attains the age of 62 in a calendar year
after 2008 and before 2011;
‘‘(G) 19⁄24 of 1 percent in the case of an indi-
vidual who attains the age of 62 in a calendar year
after 2010 and before 2013; and
‘‘(H) 5⁄6 of 1 percent in the case of an indi-
vidual who attains the age of 62 in a calendar year
after 2012.’’.
SEC. 7. IMPROVEMENTS IN PROCESS FOR COST-OF-LIVING
ADJUSTMENTS.
(a) ANNUAL DECLARATIONS OF ACHIEVED SUBSTI-
TUTION BIAS CORRECTION AND RETAINED UPPER LEVEL
SUBSTITUTION BIAS.—
(1) ACHIEVED
SUBSTITUTION
BIAS
CORREC-
TION.—Not later than October 1, 2002, and annu-
ally thereafter, the Commissioner of the Bureau of
Labor Statistics shall publish in the Federal Reg-
ister an estimate of the number of percentage points
by which the annual rate of change in the Consumer
Price Index is reduced below the rate it would other-
wise have attained by reason of adjustments in the
determination of such index instituted by the Bu-
reau after January 31, 2001.
(2) UPPER
LEVEL
SUBSTITUTION
BIAS.—Not
later than August 1, 2002, and annually thereafter,
the Commissioner of the Bureau of Labor Statistics
shall publish in the Federal Register an estimate of
the upper level substitution bias retained in the Con-
sumer Price Index, expressed in terms of a percent-
age point effect on the annual rate of change in the
Consumer Price Index for the preceding calendar
year determined through the use of a superlative
index that accounts for changes that consumers
make in the quantities of goods and services con-
sumed.
(b) FUNDING FOR CPI IMPROVEMENTS.—
(1) IN
GENERAL.—There is hereby appro-
priated to the Bureau of Labor Statistics in the De-
partment of Labor, for each of fiscal years 2002,
2003, and 2004, $30,000,000 for use by the Bureau
for the following purposes:
(A) Research, evaluation, and implementa-
tion of a superlative index to estimate upper
level substitution bias in the Consumer Price
Index.
(B) Expansion of the Consumer Expendi-
ture Survey and the Point of Purchase Survey.
(C) Implementation of revisions to the
Consumer Price Index with respect to programs
under title II of the Social Security Act (42
U.S.C. 401 et seq.).
(2) REPORTS.—The Commissioner of the Bu-
reau of Labor Statistics shall submit reports regard-
ing the use of appropriations made under paragraph
(1) to the Committee on Appropriations of the
House of Representative and the Committee on Ap-
propriations of the Senate upon the request of each
Committee.
(c) INFORMATION SHARING.—The Commissioner of
the Bureau of Labor Statistics may secure directly from
the Secretary of Commerce information necessary for pur-
poses of calculating the Consumer Price Index. Upon re-
quest of the Commissioner of the Bureau of Labor Statis-
tics, the Secretary of Commerce shall furnish that infor-
mation to the Commissioner.
(d) ADMINISTRATIVE ADVISORY COMMITTEE.—The
Bureau of Labor Statistics shall, in consultation with the
National Bureau of Economic Research, the American
Economic Association, and the National Academy of Stat-
isticians, establish an administrative advisory committee.
The advisory committee shall periodically advise the Bu-
reau of Labor Statistics regarding revisions of the Con-
sumer Price Index and conduct research and experimen-
tation with alternative data collection and estimating ap-
proaches.
(e) MODIFICATIONS TO COST-OF-LIVING INDEXING
OF BENEFITS.—
(1) IN GENERAL.—Section 215(i)(1)(D) of the
Social Security Act (42 U.S.C. 415(i)(1)(D)) is
amended to read as follows:
‘‘(D) the term ‘CPI increase percentage’, with
respect to a base quarter or cost-of-living computa-
tion quarter in any calendar year, means—
‘‘(i) the percentage (rounded to the nearest
one-hundredth of 1 percent) by which the Con-
sumer Price Index for that quarter (as prepared
by the Department of Labor) exceeds such
index for the most recent prior calendar quarter
which was a base quarter under subparagraph
(A)(ii) or, if later, the most recent cost-of-living
computation quarter under subparagraph (B),
‘‘(ii) reduced (but not below zero) by the
upper level substitution bias (rounded to the
nearest one-hundredth of 1 percent) retained in
such index (as published by the Secretary of
Labor pursuant to section 8(a)(2) of the 21st
Century Retirement Security Act in connection
with the annual rate of change in the Consumer
Price Index for the preceding calendar year), to
the extent applicable to such percentage, and
‘‘(iii) reduced further (but not below zero)
by the excess (if any) of 0.33 percentage points
over the sum of—
‘‘(I) the reduction in percentage
points undergone by the percentage de-
scribed in clause (i) pursuant to clause (ii),
and
‘‘(II) the reduction in percentage
points undergone by the percentage de-
scribed in clause (i) (rounded to the near-
est one-hundredth of 1 percent) attrib-
utable to the achieved substitution bias
correction (as last published by the Sec-
retary of Labor pursuant to section 8(a)(1)
of the 21st Century Retirement Security
Act), to the extent applicable to such per-
centage.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply with respect to in-
creases under section 215(i) of the Social Security
Act effective with the month of December of years
after 2001.
(f) CONSUMER PRICE INDEX ADJUSTMENTS APPLI-
CABLE TO INTERNAL REVENUE CODE PROVISIONS.—
(1) IN
GENERAL.—Paragraph (3) of section
1(f) of the Internal Revenue Code of 1986 (defining
cost-of-living adjustment) is amended by striking the
period at the end and inserting a comma and by in-
serting at the end the following flush material:
‘‘reduced (but not below zero) by the number of
percentage points determined under paragraph
(9) for the calendar year for which such adjust-
ment is being determined.’’.
(2) LIMITATION ON INCREASES.—Subsection (f)
of section 1 of such Code is amended by adding at
the end the following new paragraph:
‘‘(9) LIMITATION ON INCREASES IN CPI.—
‘‘(A) IN GENERAL.—The number of per-
centage points determined under this paragraph
for any calendar year is—
‘‘(i) the upper level substitution bias,
to the extent applicable to the percentage
adjustment under paragraph (3), plus
‘‘(ii) the excess (if any) of 0.33 per-
centage points over the sum of—
‘‘(I) such upper level substitution
bias, and
‘‘(II) the achieved substitution
bias correction, to the extent applica-
ble to the percentage adjustment
under paragraph (3).
‘‘(B) COMPUTATION OF BASE TO REFLECT
LIMITATION.—The Secretary shall adjust the
number taken into account under paragraph
(3)(B) so that any increase which is not taken
into account by reason of subparagraph (A)
shall not be taken into account at any time so
as to allow such increase for any period.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph, the terms ‘achieved substitution bias
correction’ and ‘upper level substitution bias’
mean, with respect to any 12-month period end-
ing on August 31 of a calendar year, the
achieved substitution bias correction and upper
level substitution bias most recently published
by the Secretary of Labor pursuant to section
8(a) of the 21st Century Retirement Security
Act for a period ending on or before August 31
of such calendar year.’’.
(g) CORRESPONDING AMENDMENTS TO OTHER PRO-
VISIONS UTILIZING THE CONSUMER PRICE INDEX.—
(1) IN GENERAL.—For purposes of determining
the amount of any cost-of-living adjustment which
takes effect for benefits payable after December 31,
2002, with respect to any benefit described in para-
graph (5)—
(A) any increase in the relevant index (de-
termined without regard to this subsection)
shall be reduced by the number of percentage
points determined under paragraph (2), and
(B) the amount of the increase in such
benefit shall be equal to the product of—
(i) the increase in the relevant index
(as reduced under subparagraph (A)), and
(ii) the average such benefit for the
preceding calendar year under the program
described in paragraph (5) which provides
such benefit.
(2) LIMITATION ON INCREASES.—
(A) IN GENERAL.—The number of percent-
age points determined under this paragraph for
any calendar year is—
(i) the upper level substitution bias, to
the extent applicable to the percentage ad-
justment under the relevant index, plus
(ii) the excess (if any) of 0.33 per-
centage points over the sum of—
(I) such upper level substitution
bias, and
(II) the achieved substitution
bias correction, to the extent applica-
ble to the percentage adjustment
under the relevant index,.
(B) COMPUTATION OF BASE TO REFLECT
LIMITATION.—Any increase which is not taken
into account by reason of subparagraph (A)
shall not be taken into account at any time so
as to allow such increase for any period.
(3) PARAGRAPH (1) TO APPLY ONLY TO COM-
PUTATION OF BENEFIT AMOUNTS.—Paragraph (1)
shall apply only for purposes of determining the
amount of benefits and not for purposes of
determining—
(A) whether a threshold increase in the rel-
evant index has been met, or
(B) increases in amounts under other pro-
visions of law not described in paragraph (5)
which operate by reference to increases in such
benefits.
(4) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
(A) COST-OF-LIVING
ADJUSTMENT.—The
term ‘‘cost-of-living adjustment’’ means any ad-
justment in the amount of benefits described in
paragraph (5) which is determined by reference
to changes in an index.
(B) INDEX.—
(i) INDEX.—The term ‘‘index’’ means
the Consumer Price Index and any other
index of price or wages.
(ii) RELEVANT
INDEX.—The term
‘‘relevant index’’ means the index on the
basis of which the amount of the cost-of-
living adjustment is determined.
(C) ACHIEVED SUBSTITUTION BIAS COR-
RECTION; UPPER LEVEL SUBSTITUTION BIAS.—
The terms ‘achieved substitution bias correc-
tion’ and ‘upper level substitution bias’ mean,
with respect to the applicable 12-month period
preceding a cost-of-living adjustment, the
achieved substitution bias correction and upper
level substitution bias most recently published
by the Secretary of Labor pursuant to section
8(a) of the 21st Century Retirement Security
Act.
(5) BENEFITS
TO
WHICH
SUBSECTION
AP-
PLIES.—For purposes of this subsection, the benefits
described in this paragraph are—
(A) retired and retainer pay subject to ad-
justment under section 1401a of title 10,
United States Code;
(B) civil service retirement benefits under
section 8340 of title 5, United States Code, for-
eign service retirement benefits under section
826 of the Foreign Service Act of 1980, Central
Intelligence Agency retirement benefits under
part J of the Central Intelligence Agency Re-
tirement Act of 1964 for certain employees, and
any other benefits under any similar provision
under any retirement system for employees of
the government of the United States;
(C) Federal workers’ compensation under
section 8146a of title 5, United States Code;
(D) benefits under section 3(a), 4(a), or
4(f) of the Railroad Retirement Act of 1974;
and
(E) benefits and expenditure limits under
title XVIII or XIX of the Social Security Act.
(6) BENEFIT.—For purposes of this section,
the term ‘‘benefit’’ includes a payment.
(h) RECAPTURE TO FEDERAL OLD-AGE AND SUR-
VIVORS INSURANCE TRUST FUND.—Section 201 of the
Social Security Act (42 U.S.C. 401) is amended by adding
at the end the following new subsection:
‘‘(n) On July 1 of each calendar year specified in the
following table, the Secretary of the Treasury shall trans-
fer, from the general fund of the Treasury to the Federal
Old-Age and Survivors Insurance Trust Fund, an amount
equal to the applicable percentage for such year, specified
in such table, of the total wages paid in and self-employ-
ment income credited to such year.
‘‘For a calendar year—
The applicable percentage for
the year is—
After 2001 and before 2003 ..........
0.13 percent
After 2002 and before 2004 ..........
0.15 percent
After 2003 and before 2005 ..........
0.20 percent
After 2004 and before 2006 ..........
0.24 percent
After 2005 and before 2007 ..........
0.28 percent
After 2006 and before 2008 ..........
0.32 percent
After 2007 and before 2009 ..........
0.35 percent
After 2008 and before 2010 ..........
0.38 percent
After 2009 and before 2016 ..........
0.47 percent
After 2015 and before 2040 ..........
0.55 percent
After 2039 and before 2060 ..........
0.66 percent
After 2059 .....................................
0.80 percent.’’.
SEC. 8. ADJUSTMENT TO BENEFIT FORMULA FACTORS.
Section 215(a)(1)(B) of the Social Security Act (42
U.S.C. 415(a)(1)(B)) is amended—
(1) by redesignating clause (iii) as clause (vi);
and
(2) by inserting after clause (ii) the following:
‘‘(iii) For an individual who initially becomes eligible
for old-age or disability insurance benefits, or who dies
(before becoming eligible for such benefits), in any cal-
endar year after 2008, each of the amounts otherwise es-
tablished for purposes of clauses (i), (ii), and (iii) of sub-
paragraph (A) under this subparagraph shall be sub-
stituted with the product derived by successively multi-
plying, once for each year of the factoring period for such
individual—
‘‘(I) such amount (after applying this clause for
earlier years of the factoring period), by
‘‘(II) the designated factor for such year.
‘‘(iv) For purposes of clause (iii), the term ‘factoring
period’ means, for an individual, the period beginning with
2012 and ending with the earlier of—
‘‘(I) the year of the individual’s initial eligibility
or death, or
‘‘(II) 2060.
‘‘(v) For purposes of clause (iii), the term ‘designated
factor’ means—
‘‘(I) for a year prior to 2031, 0.975, except
that, for any such year, such factor shall be 1.000
with respect to amounts otherwise established for
purposes of clause (i) of subparagraph (A) under
this subparagraph, and
‘‘(II) for a year after 2030, 0.985.’’.
SEC. 9. 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)—
(A) by striking ‘‘32 percent’’ and inserting
‘‘70 percent’’; and
(B) by striking ‘‘and’’ at the end;
(2) in clause (iii)—
(A) by striking ‘‘15 percent’’ and inserting
‘‘20 percent’’; and
(B) 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:
‘‘(iv) 15 percent of the individual’s average in-
dexed 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) 
of 
such 
Act 
(42 
U.S.C.
415(a)(1)(B)) is amended—
(1) by redesignating clause (iii) as clause (iv);
(2) by inserting after clause (ii) the following
new clause:
‘‘(iii) For individuals who initially become eligible for
old-age or disability insurance benefits, or who die (before
becoming eligible for such benefits), in any calendar year
after 2008, the amount established for purposes of clause
(ii) of subparagraph (A) for such calendar year after 2008
shall be 196 percent of the amount established for pur-
poses of clause (i) for such calendar year.’’; and
(3) in clause (iv) (as redesignated by paragraph
(1)), by striking ‘‘clause (ii)’’ and inserting ‘‘clauses
(ii) and (iii)’’.
SEC. 10. MODIFICATION TO PIA FORMULA TO REFLECT
CHANGES TO LIFE EXPECTANCY.
(a) IN GENERAL.—Section 215(a)(1) of the Social
Security Act (42 U.S.C. 415(a)(1)(B)) is amended by re-
designating subparagraph (C) and (D) as subparagraphs
(D) and (E), respectively, and by inserting after subpara-
graph (B) the following new subparagraph:
‘‘(C)(i) For individuals who initially become eligible
for old-age or disability insurance benefits (or who die be-
fore becoming eligible for such benefits) in any calendar
year after 2011, the primary insurance amount computed
under this paragraph shall be the product derived by mul-
tiplying such amount as computed under the preceding
subparagraphs of this paragraph by the life expectancy
ratio for such calendar year.
‘‘(ii) The Commissioner of Social Security, using gen-
erally accepted actuarial principles, shall determine and
publish in the Federal Register on or before November 1
of each calendar year the life expectancy ratio for the fol-
lowing calendar year.
‘‘(iii) For purposes of clause (ii), the life expectancy
ratio for any calendar year is the ratio of—
‘‘(I) the period life expectancy of an individual
attaining age 62 on January 1, 2010, to
‘‘(II) the period life expectancy of an individual
attaining age 62 on January 1 of the third calendar
year preceding the calendar year in which the deter-
mination under clause (ii) is made.’’.
(b) STUDY OF THE EFFECT OF INCREASES IN LIFE
EXPECTANCY.—
(1) STUDY PLAN.—Not later than February 15,
2003, the Commissioner of Social Security shall sub-
mit to Congress a detailed study plan for evaluating
the effects of increases in life expectancy on the ex-
pected level of retirement income from social secu-
rity, pensions, and other sources. The study plan
shall include a description of the methodology, data,
and funding that will be required in order to provide
to the Congress not later than February 15, 2008—
(A) an evaluation of trends in mortality
and their relationship to trends in health sta-
tus, among individuals approaching eligibility
for old-age insurance benefits under title II of
the Social Security Act;
(B) an evaluation of trends in labor force
participation among individuals approaching eli-
gibility for such benefits and among individuals
receiving such benefits, and of the factors that
influence the choice between retirement and
participation in the labor force;
(C) an evaluation of changes, if any, in the
disability insurance program under title II of
the Social Security Act that would reduce the
impact of changes in the retirement income of
workers in poor health or physically demanding
occupations;
(D) an evaluation of the methodology used
to develop projections for trends in mortality,
health status, and labor force participation
among individuals approaching eligibility for
old-age insurance benefits and among individ-
uals receiving such benefits; and
(E) an evaluation of such other matters as
the Commissioner deems appropriate for evalu-
ating the effects of increases in life expectancy.
(2) REPORT ON RESULTS OF STUDY.—Not later
than February 15, 2008, the Commissioner of Social
Security shall provide to the Congress an evaluation
of the implications of the trends studied under para-
graph (1), along with recommendations, if any, of
the extent to which the conclusions of such evalua-
tions indicate that projected increases in life expect-
ancy require modification in the disability insurance
program under title II of the Social Security Act
and other income support programs.
SEC. 11. TREATMENT OF DISABLED BENEFICIARIES.
Section 215(a) of the Social Security Act (42 U.S.C.
415(a)) is amended by adding at the end the following
new paragraph:
‘‘(8)(A) Notwithstanding the preceding provisions of
this subsection, in the case of an individual who has or
has had a period of disability and becomes entitled to old-
age insurance benefits under section 202(a) (or dies) in
or after 2006, the primary insurance amount of such indi-
vidual shall be the sum of—
‘‘(i) the amount determined under subpara-
graph (B), and
‘‘(ii) the product derived by multiplying—
‘‘(I) the excess of the amount determined
under subparagraph (C) over the amount deter-
mined under subparagraph (B), by
‘‘(II) the adjustment factor for such indi-
vidual determined under subparagraph (D).
‘‘(B) The amount determined under this subpara-
graph is the amount of such individual’s primary insur-
ance amount as determined under this section without re-
gard to this paragraph.
‘‘(C) The amount determined under this subpara-
graph is the amount of such individual’s primary insur-
ance amount as determined under this section as in effect
with respect to individuals becoming eligible for old-age
or disability insurance benefits under section 202(a) in
2001.
‘‘(D) The adjustment factor determined under this
subparagraph for any individual is the ratio (not greater
than 1) of—
‘‘(i) the number of months, preceding the ear-
lier of such individual’s first month of entitlement to
old-age insurance benefits under section 202(a) or
the month of such individual’s death, which occurred
during a period of disability of such individual, to
‘‘(ii) 480.’’.
SEC. 12. MAINTENANCE OF BENEFIT AND CONTRIBUTION
BASE.
(a) IN GENERAL.—Section 230 of the Social Security
Act (42 U.S.C. 430) is amended to read as follows:
MAINTENANCE OF THE CONTRIBUTION AND BENEFIT
BASE
‘‘SEC. 230. (a) The Commissioner of Social Security
shall determine and publish in the Federal Register on or
before November 1 of each calendar year the contribution
and benefit base determined under subsection (b) which
shall be effective with respect to remuneration paid after
such calendar year and taxable years beginning after such
year.
‘‘(b) For purposes of this section, for purposes of de-
termining wages and self-employment income under sec-
tions 209, 211, 213, and 215 of this Act and sections 54,
1402, 3121, 3122, 3125, 6413, and 6654 of the Internal
Revenue Code of 1986, and for purposes of section
4022(b)(3)(B) of Public Law 93–406, the contribution
and benefit base is—
‘‘(1) with respect to remuneration paid in (and
taxable years beginning in) 2002, $90,800,
‘‘(2) with respect to remuneration paid in (and
taxable years beginning in) 2003, $101,200,
‘‘(3) with respect to remuneration paid in (and
taxable years beginning in) 2004, $111,600, and
‘‘(4) with respect to remuneration paid in (and
taxable years beginning in) any calendar year after
2004, an amount equal to 86 percent of the quotient
derived by dividing—
‘‘(A) the total wages paid in the calendar
year preceding the calendar year in which the
determination is made under subsection (a), by
‘‘(B) the number of individuals credited
with wages paid during the calendar year pre-
ceding the calendar year in which the deter-
mination is made under subsection (a),
rounded (if not a multiple of $100) to the nearest
multiple of $100.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to remuneration paid in (and tax-
able years beginning in) any calendar year after 2001.
SEC. 13. PHASED-IN INCREASE IN SOCIAL SECURITY RE-
TIREMENT AGES.
Section 216(l) of the Social Security Act (42 U.S.C.
416(l) is amended—
(1) in paragraph (1), by striking subparagraphs
(A), (B), (C), (D), and (E) and inserting the fol-
lowing:
‘‘(A) with respect to an individual who attains
early retirement age (as defined in paragraph (2))
before January 1, 2000, 65 years of age; and
‘‘(B) with respect to an individual who attains
early retirement age after December 31, 1999, and
before January 1, 2012, 65 years of age plus 2⁄12 of
the number of months in the period beginning with
January 2000 and ending with December of the
year in which the individual attains early retirement
age; and
‘‘(C) with respect to an individual who attains
early retirement age after December 31, 2011, 67
years of age.’’; and
(2) by striking paragraph (3).
SEC. 14. MECHANISM FOR REMEDYING UNFORESEEN DETE-
RIORATION IN SOCIAL SECURITY SOLVENCY.
(a) IN GENERAL.—Section 709 of the Social Security
Act (42 U.S.C. 910) is amended—
(1) by redesignating subsection (b) as sub-
section (c); and
(2) by striking ‘‘SEC. 709. (a) If the Board of
Trustees’’ and all that follows through ‘‘any such
Trust Fund’’ and inserting the following:
‘‘SEC. 709. (a)(1)(A) If the Board of Trustees of the
Federal Old-Age and Survivors Insurance Trust Fund and
the Federal Disability Insurance Trust Fund determines
at any time, using intermediate actuarial assumptions,
that the balance ratio of either such Trust Fund for any
calendar year during the succeeding period of 75 calendar
years will be zero, the Board shall promptly submit to each
House of the Congress and to the President a report set-
ting forth its recommendations for statutory adjustments
affecting the receipts and disbursements of such Trust
Fund necessary to maintain the balance ratio of such
Trust Fund at not less than 20 percent, with due regard
to the economic conditions which created such inadequacy
in the balance ratio and the amount of time necessary to
alleviate such inadequacy in a prudent manner. The report
shall set forth specifically the extent to which benefits
would have to be reduced, taxes under section 1401, 3101,
or 3111 of the Internal Revenue Code of 1986 would have
to be increased, or a combination thereof, in order to ob-
tain the objectives referred to in the preceding sentence.
‘‘(B) In addition to any reports under subparagraph
(A), the Board shall, not later than May 30, 2001, prepare
and submit to Congress and the President recommenda-
tions for statutory adjustments to the disability insurance
program under title II of this Act to modify the changes
in disability benefits under the 21st Century Retirement
Security Act without reducing the balance ratio of the
Federal Disability Insurance Trust Fund. The Board shall
develop such recommendations in consultation with the
National Council on Disability, taking into consideration
the adequacy of benefits under the program, the relation-
ship of such program with old age benefits under such
title, and changes in the process for determining initial
eligibility and reviewing continued eligibility for benefits
under such program.
‘‘(2)(A) The President shall, no later than 30 days
after the submission of the report to the President, trans-