I
105TH CONGRESS
1ST SESSION
H. R. 3082
To amend title II of the Social Security Act and the Internal Revenue
Code of 1986 to provide prospectively for personalized retirement security
through personal retirement savings accounts to allow for more control
by individuals over their Social Security retirement income, and to pro-
vide other reforms relating to benefits under such title II.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 13, 1997
Mr. SMITH of Michigan (for himself, Mr. PORTER, Mr. CAMPBELL, Mr.
KNOLLENBERG, Mr. HOUGHTON, and Mr. SANFORD) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means
A BILL
To amend title II of the Social Security Act and the Internal
Revenue Code of 1986 to provide prospectively for per-
sonalized retirement security through personal retirement
savings accounts to allow for more control by individuals
over their Social Security retirement income, and to pro-
vide other reforms relating to benefits under such title
II.
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
‘‘Social Security Solvency Act of 1997’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
TITLE I—INDIVIDUAL RETIREMENT SECURITY PROGRAM
Sec. 101. Establishment of individual retirement security program.
Sec. 102. Reallocation of certain social security contributions from the social se-
curity trust funds to personal retirement savings accounts.
Sec. 103. Adjustments to primary insurance amounts under part A of title II
of the Social Security Act.
Sec. 104. Personal retirement savings accounts.
TITLE II—SOCIAL SECURITY BENEFIT REFORMS
Sec. 201. Gradual increase in retirement age and early retirement age.
Sec. 202. Adjustments to bend points in determining primary insurance
amounts.
Sec. 203. Information relating to benefit limitations provided in social security
account statements.
Sec. 204. Phased reduction in spousal benefits other than survivor’s benefits to
33 percent of primary insurance amount.
Sec. 205. Limitation on payment of certain benefits in excess of contributions
during years of higher income.
Sec. 206. Coverage of newly hired State and local employees.
Sec. 207. Increase in widow’s and widower’s insurance benefits.
Sec. 208. Study to develop recommendations for providing for elections under
which individuals may opt for exclusion from social security
coverage.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress makes the following
findings:
(1) One of America’s most popular Government
programs, Social Security, is in jeopardy. The 1997
Board of Trustee’s report states that the current
system faces an actuarial deficit of 2.23 percent of
taxable payroll. According to the 1997 Board of
Trustee’s report, the Social Security trust fund will
begin to run a deficit by 2011 and will be exhausted
by 2029.
(2) Helping assure Americans retirement secu-
rity is a major national goal.
(3) The Congress should strengthen Social Se-
curity to ensure Americans retirement security. The
changes 
made 
to 
strengthen 
Social 
Security
should—
(A) create a solvent Social Security sys-
tem,
(B) maintain or increase total retirement
benefits for current and future retirees,
(C) avoid payroll tax increases, and
(D) avoid additional Federal debt as a
means of financing Social Security.
(4) The root causes of the weaknesses in the
present Social Security system are its inadequate
funding mechanism and changing demographics. So-
cial Security was designed in 1935 as a pay–as–you–
go system, in which current workers supported cur-
rent retirees. This design worked when America had
42 workers per beneficiary in 1945, but that ratio
has fallen over time. In 1995 there are only 3.3
workers per beneficiary, and by 2060 the ratio is
projected to fall to 1.8 workers per beneficiary. To
pay benefits to the rising number of retirees, the
Government has levied increasing payroll taxes on
workers. To maintain the program in its current
form, the Government will have to continue to raise
payroll taxes or substantially reduce benefits.
(5) The key to a more secure Social Security
system is increased savings and private investment.
We should move from a financing system based on
the Federal Government’s power to tax workers to
one based on savings and investment accounts
owned and controlled by workers.
(6) Allowing workers to take advantage of high-
er investment returns will increase their income in
retirement. Over the last 100 years, the stock mar-
ket has earned roughly 7 percent after inflation
compared to a yield of 1.5 to 2 percent after infla-
tion projected by the Social Security Administration
for workers’ payroll taxes. The difference is enor-
mous. For example, $1,000 invested for 50 years at
2 percent becomes nearly $2,700. The same amount
invested for 30 years at 7 percent becomes nearly
$30,000.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
an individual who is a covered employee or a covered self-
employed individual, the Commissioner of Social Security
shall make the designation of a personal retirement sav-
ings account under subsection (a) on behalf of such indi-
vidual, in accordance with regulations of the Board of
Trustees.
‘‘(c) DEPOSITS INTO PERSONAL RETIREMENT SAV-
INGS ACCOUNTS.—Within 10 business days after receipt
during any fiscal year of taxes paid under sections 3101(a)
and 3111(a) of the Internal Revenue Code of 1986 with
respect to a covered employee, and within 10 business days
after receipt during any fiscal year of taxes paid under
section 1401(a) of such Code with respect to a covered
self-employed individual, the Secretary of the Treasury,
from amounts otherwise available in the general fund of
the Treasury, shall deposit, into such personal retirement
savings accounts as are designated under this section and
in such manner of distribution as may be specified in con-
nection with the distribution, a total amount equal to the
product derived by multiplying the amount of such taxes
by the reallocation percentage declared for such fiscal year
under section 201(n) of this Act.
‘‘PERIODIC REPORTS BY ACCOUNT TRUSTEE
‘‘SEC. 252. (a) IN GENERAL.—The trustee of a per-
sonal retirement savings account shall make periodic re-
ports concerning the status of the account which shall
meet the requirements of section 408B(g)(2) of the Inter-
nal Revenue Code of 1986 and of this section. Each peri-
odic report shall be furnished to the account holder on
at least a quarterly basis on or before the 30th day follow-
ing the period for which the report is required.
‘‘(b) INFORMATION REQUIRED TO BE INCLUDED.—
The periodic report shall contain the following information
for transactions occurring during the period for which the
report is provided:
‘‘(1) The balance in the account.
‘‘(2) The amount of authorized personal retire-
ment savings account contributions.
‘‘(3) The amount of distributions.
‘‘(4) The name and address of the trustee.
‘‘(5) Commission fees and fees for administra-
tive expenses charged in connection with the ac-
count.
‘‘(6) Other information which may be required
from time to time by the Board of Trustees.
The language of the report shall be written in a form so
as to be understood by the average covered employee.
‘‘(c) REPORTS
TO
BOARD
OF
TRUSTEES.—The
Board of Trustees may require the periodic report to be
filed with the Board at such time as the Board may speci-
fy in regulations under this section.
‘‘(d) FAILURE BY TRUSTEE TO MAKE TIMELY PERI-
ODIC REPORTS.—
‘‘(1) IN GENERAL.—The trustee of a personal
retirement savings account shall be subject to a civil
penalty of not to exceed $100 a day from the date
of such trustee’s failure or refusal to furnish the
periodic report required to be furnished by the trust-
ee under this section until the date on which such
report is furnished.
‘‘(2) PENALTIES
ASSESSED
BY
BOARD
OF
TRUSTEES.—Any civil penalty assessed by this sub-
section shall be imposed by the Board of Trustees
and collected in a civil action. The Board of Trust-
ees may compromise the amount of any civil penalty
imposed by this subsection. The Board of Trustees
may waive the application of this subsection with re-
spect to any failure if the Board of Trustees deter-
mines that such failure is due to reasonable cause
and not to intentional disregard of rules and regula-
tions.
‘‘TRANSFERS TO ACCOUNTS
‘‘SEC. 253. Not later than January 1 of each cal-
endar year after 1999, the Secretary of the Treasury shall
transfer to each of the personal savings retirement ac-
counts in existence as of the end of the preceding fiscal
year and on the date of the transfer, from amounts in
the general fund of the Treasury not otherwise appro-
priated, an amount equal to the quotient derived by divid-
ing—
‘‘(1) 331⁄3 percent of the amount specified as
the budget surplus for such fiscal year in the month-
ly treasury statement issued in December following
such fiscal year, by
‘‘(2) the total number of such personal savings
retirement accounts.
‘‘DEFINITIONS
‘‘SEC. 254. For purposes of this title—
‘‘(1) PERSONAL
RETIREMENT
SAVINGS
AC-
COUNT.—The term ‘personal retirement savings ac-
count’ has the meaning provided in section 408B of
the Internal Revenue Code of 1986.
‘‘(2) COVERED EMPLOYER.—The term ‘covered
employer’ means, for any calendar year, any person
on whom an excise tax is imposed under section
3111 of the Internal Revenue Code of 1986 with re-
spect to having an individual in his employ to whom
wages are paid by such person during such calendar
year.
‘‘(3) COVERED EMPLOYEE.—The term ‘covered
employee’ means, in connection with any person who
is a covered employer for any calendar year begin-
ning after December 31, 1998, any individual with
respect to whose employment by such employer dur-
ing such calendar year there is imposed an excise
tax under section 3111 of the Internal Revenue
Code of 1986.
‘‘(4) COVERED SELF-EMPLOYED INDIVIDUAL.—
The term ‘covered self-employed individual’ means
any individual on whose self-employment income for
a taxable year beginning after December 31, 1998,
there is imposed a tax under section 1401(a) of the
Internal Revenue Code of 1986.
‘‘(5) BUSINESS DAY.—The term ‘business day’
means any day other than a Saturday, Sunday, or
legal holiday in the area involved.
‘‘(6) BOARD OF TRUSTEES.—
‘‘(A) IN GENERAL.—The term ‘Board of
Trustees’ means the Board of Trustees of the
Federal Old-Age and Survivors Insurance Trust
Fund and the Federal Disability Insurance
Trust Fund.
‘‘(B) ROLE OF SECRETARY OF THE TREAS-
URY.—
‘‘(i) IN GENERAL.—In connection with
the duties of the Board of Trustees under
this part, the Secretary of the Treasury
shall serve as Executive Director of the
Board of Trustees.
‘‘(ii) STAFF.—Upon request of the
Board of Trustees, the Secretary may de-
tail, on a reimbursable basis, any of the
personnel of the Department of the Treas-
ury to the Board of Trustees to assist it in
carrying out its duties under this part.
‘‘(iii) ADMINISTRATIVE
SUPPORT.—
Upon the request of the Board, the Sec-
retary shall provide to the Board of Trust-
ees from the Department of the Treasury,
on a reimbursable basis, the administrative
support services necessary for the Board to
carry out its responsibilities under this
part.’’.
(b) EFFECTIVE
DATE
AND
NOTICE
REQUIRE-
MENTS.—
(1) EFFECTIVE DATE.—The amendments made
by subsection (a) shall apply with respect to wages
paid after December 31, 1998, for pay periods end-
ing after such date and self-employment income for
taxable years beginning after such date.
(2) NOTICE REQUIREMENTS.—
(A) IN GENERAL.—Not later than October
1, 1998, the Commissioner of Social Security,
pursuant to direction by the Board of Trustees
of the Federal Old-Age and Survivors Insurance
Trust Fund and the Federal Disability Insur-
ance Trust Fund, shall—
(i) send to the last known address of
each eligible individual a description of the
program established by the amendments
made by this Act, which shall be written in
the form of a pamphlet in language which
may be readily understood by the average
worker,
(ii) provide for toll-free access by tele-
phone from all localities in the United
States to the Social Security Administra-
tion and for a site on the Internet through
which individuals may obtain information
and answers to questions regarding such
program, and
(iii) provide information to the media
in all localities of the United States about
such program, such toll-free access by tele-
phone, and such site on the Internet.
(B) ELIGIBLE INDIVIDUAL.—For purposes
of this paragraph, the term ‘‘eligible individual’’
means an individual who, as of the date of the
pamphlet sent pursuant to subparagraph (A), is
indicated within the records of the Social Secu-
rity Administration as—
(i) not having attained age 65, and
(ii) being credited with one or more
quarters of coverage under section 213 of
the Social Security Act.
(C) MATTERS
TO
BE
INCLUDED.—The
Commissioner of Social Security shall include
with the pamphlet sent to each eligible individ-
ual pursuant to subparagraph (A)—
(i) a statement of the number of quar-
ters of coverage indicated in the records of
the Social Security Administration as of
the date of the description as credited to
such individual under section 213 of the
Social Security Act and the date as of
which such records may be considered ac-
curate, and
(ii) the number for toll-free access by
telephone established by the Commissioner
pursuant to subparagraph (A).
SEC. 102. REALLOCATION OF CERTAIN SOCIAL SECURITY
CONTRIBUTIONS FROM THE SOCIAL SECU-
RITY TRUST FUNDS TO PERSONAL RETIRE-
MENT SAVINGS ACCOUNTS.
(a) ANNUAL DECLARATION OF REALLOCATION PER-
CENTAGE.—Section 201 of the Social Security Act (42
U.S.C. 401) is amended by adding at the end the following
new subsection:
‘‘Annual Declaration of Reallocation Percentage
‘‘(n)(1) The Board of Trustees shall declare and pub-
lish in the Federal Register on or before August 1 of each
calendar year the reallocation percentage for amounts oth-
erwise appropriated for the following fiscal year to the
Federal Old-Age and Survivors Insurance Trust Fund
under paragraphs (3) and (4) of subsection (a).
‘‘(2) For purposes of this title—
‘‘(A) The term ‘reallocation percentage’ for any
fiscal year means—
‘‘(i) in the case of fiscal years preceding
fiscal year 2004, 20.16 percent,
‘‘(ii) in the case of fiscal years following
fiscal year 2003 and preceding fiscal year 2017,
22.58 percent, and
‘‘(iii) in the case of fiscal years following
fiscal year 2016, the best estimate of the Board
of Trustees of the maximum percentage by
which the amounts described in paragraph (1)
for such fiscal year may be reduced so as to
maintain a reserve in the Federal Old-Age and
Survivors Insurance Trust Fund as of the end
of such fiscal year equal to 50 percent of the
amount of benefits projected to be paid from
the Trust Fund during the next fiscal year.
In making the estimate under clause (ii), the Board
of Trustees shall utilize the intermediate actuarial
assumptions utilized by the Board of Trustees for its
most recent annual report issued under subsection
(c).’’.
(b) REDUCTION IN APPROPRIATIONS TO THE TRUST
FUNDS.—Section 201 of such Act (as amended by sub-
section (a)) is amended further by adding at the end the
following new subsection:
‘‘Reduction in Appropriations to the Trust Funds
‘‘(o) Under regulations prescribed by the Board of
Trustees (in consultation with the Secretary of the Treas-
ury) to carry out this subsection, the amounts appro-
priated for any fiscal year under paragraphs (3) and (4)
of subsection (a), to the extent attributable to taxes paid
during such fiscal year with respect to an individual who
is for such fiscal year a covered employee (as defined in
section 254(3)) or a covered self-employed individual (as
defined in section 254(4)), shall be reduced by the product
derived by multiplying the total amount appropriated
under subsections (a) and (b) for such fiscal year which
is so attributable by (2) the reallocation percentage for
such fiscal year.’’.
SEC. 
103. 
ADJUSTMENTS 
TO 
PRIMARY 
INSURANCE
AMOUNTS UNDER PART A OF TITLE II OF THE
SOCIAL SECURITY ACT.
(a) IN GENERAL.—Section 215 of the Social Security
Act (42 U.S.C. 415) is amended by adding at the end the
following new subsection:
‘‘Adjustment of Primary Insurance Amount in Relation
to Deposits Made to Personal Retirement Savings
Accounts
‘‘(j)(1) Except as provided in paragraph (2), an indi-
vidual’s primary insurance amount as determined in ac-
cordance with this section (before adjustments made
under subsection (i)) shall be equal to the excess (if any)
of—
‘‘(A) the amount which would be so determined
without the application of this subsection, over
‘‘(B) the monthly amount of an immediate life
annuity, determined on the basis of the total of all
amounts which have been deposited pursuant to sec-
tion 251(c) (indexed in the same manner as is appli-
cable with respect to average indexed monthly earn-
ings under subsection (b)) into all personal retire-
ment savings accounts held by such individual, plus
accrued interest compounded annually, assuming an
interest rate of 3.7 percent and using the mortality
table used under 412(l)(7)(C)(ii) of the Internal
Revenue Code of 1986.
‘‘(2) In the case of an individual described in para-
graph (1) who becomes entitled to disability insurance
benefits under section 223, such individual’s primary in-
surance amount shall be determined without regard to
paragraph (1).
‘‘(3) For purposes of this subsection, the term ‘imme-
diate life annuity’ means an annuity—
‘‘(A) the annuity starting date (as defined in
section 72(c)(4) of the Internal Revenue Code of
1986) of which commences with the first month fol-
lowing the date of the determination, and
‘‘(B) which provides for a series of substantially
equal monthly payments over the life expectancy of
the individual described in paragraph (1).’’.
(b) CONFORMING AMENDMENT TO RAILROAD RE-
TIREMENT ACT OF 1974.—Section 1 of the Railroad Re-
tirement Act of 1974 (45 U.S.C. 231) is amended by add-
ing at the end the following:
‘‘(s) In applying applicable provisions of the Social
Security Act for purposes of determining the amount of
the annuity to which an individual is entitled under this
Act, section 215(j) of the Social Security Act and part
B of title II of such Act shall be disregarded.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to computations and
recomputations of primary insurance amounts occurring
after December 31, 1998.
SEC. 104. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
(a) DEDUCTION
FOR
CONTRIBUTIONS
BY
TAX-
PAYER.—Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to additional
itemized deductions) is amended by redesignating section
222 as section 223 and by inserting after section 221 the
following new section:
‘‘SEC. 222. CONTRIBUTIONS TO PERSONAL RETIREMENT
SAVINGS ACCOUNTS.
‘‘(a) IN GENERAL.—In the case of an individual who
is an electing personal retirement savings account partici-
pant for the taxable year, there shall be allowed as a de-
duction an amount equal to 50 percent of the amount con-
tributed during such taxable year by such individual to
a personal retirement savings account maintained for the
benefit of such individual.
‘‘(b) LIMITATION.—The amount of contributions
which may be taken into account under subsection (a)
shall not exceed $2,000.
‘‘(c) ELECTING PERSONAL RETIREMENT SAVINGS
ACCOUNT PARTICIPANT.—An individual is an electing
personal retirement savings account participant for any
taxable year if any amount is deposited under section
251(c) of the Social Security Act for such taxable year
to a personal retirement savings account maintained for
the benefit of such individual.
‘‘(d) SPECIAL RULES.—
‘‘(1) NO DEDUCTION FOR TRUSTEE-TO-TRUST-
EE TRANSFERS.—No deduction shall be allowed for
amounts transferred to an account under section
408B(f)(2).
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
personal retirement savings account on the last day
of the preceding taxable year if the contribution is
made on account of such taxable year and is made
not later than the time prescribed by law for filing
the return for such taxable year (not including ex-
tensions thereof).’’
(b) PERSONAL RETIREMENT SAVINGS ACCOUNTS.—
Subpart A of part I of subchapter D of chapter 1 of such
Code (relating to pension, profit-sharing, stock bonus
plans, etc.) is amended by inserting after section 408A
the following new section:
‘‘SEC. 408B. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any amount deposited in a personal retirement sav-
ings account under section 251(c) of the Social Security
Act.
‘‘(b) PERSONAL RETIREMENT SAVINGS ACCOUNT.—
For purposes of this title, the term ‘personal retirement
savings account’ means a trust created or organized in the
United States for the exclusive benefit of an individual or
his beneficiaries, but only if the written governing instru-
ment creating the trust meets the following requirements:
‘‘(1) No contribution will be accepted other
than—
‘‘(A) deposits under sections 251(c) and
253 of the Social Security Act, and
‘‘(B) contributions made in cash, except
that contributions under this subparagraph may
not be accepted for any taxable year in excess
of $2,000.
‘‘(2) No amount may be paid or distributed
from such trust—
‘‘(A) before the date on which the account
holder attains age 591⁄2, becomes entitled to
disability insurance benefits under section 223
of the Social Security Act, or dies, or
‘‘(B) in a manner not meeting the require-
ments of subsection (d).
‘‘(3) The trustee of which is a regulated invest-
ment company (as defined in section 851) which is
approved by the Secretary for purposes of this sec-
tion.
‘‘(4) The interest of an individual in the bal-
ance in his account is nonforfeitable.
Paragraphs (1) and (2) shall not apply to direct trustee-
to-trustee transfers described in subsection (f)(2).
‘‘(c) INVESTMENT REQUIREMENTS.—
‘‘(1) IN GENERAL.—Amounts in a personal re-
tirement savings account may be invested only in
regulated investment companies (as defined in sec-
tion 851) which are approved by the Secretary for
purposes of this section.
‘‘(2) CRITERIA FOR SECRETARIAL APPROVAL.—
The Secretary may approve a regulated investment
company for purposes of this section only if—
‘‘(A) an election is in effect under section
851(b)(1) for such company, and
‘‘(B) the portfolio assets of such com-
pany—
‘‘(i) replicate the assets of a broad-
based index of stocks which is approved by
the Secretary, or
‘‘(ii) are of a type determined by the
Secretary not to involve high risks for the
investor.
To the extent possible, the Secretary shall approve
under subparagraph (B)(i) funds in each of the fol-
lowing 4 categories: domestic stocks, domestic bonds,
stocks of companies having small capitalization, and
foreign stocks. The Secretary shall take into account
management costs in determining whether to ap-
prove a company for purposes of this section.
‘‘(d) DISTRIBUTION REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met with respect to distributions from
a personal retirement savings account only if such
distributions are in accordance with a payment op-
tion under paragraph (2). The preceding sentence
shall not apply to direct trustee-to-trustee transfers
described in subsection (f)(2).
‘‘(2) PAYMENT OPTIONS.—The payment options
under this paragraph are the following:
‘‘(A) LIFETIME OPTION.—Distributions in
equal annual or more frequent periodic install-
ments over a stated period of 10, 15, or 20
years, payable to the account holder. The trust-
ee of the account shall be liable under the terms
of the account to the account holder for the
timely payment of periodic payments during the
stated period. If the account holder survives the
stated period, the terms governing the account
shall provide for continuing distributions for the
life of the account holder in annual or more fre-
quent periodic payments for the life of the ac-
count holder or (if earlier) until exhaustion of
the account balance.
‘‘(B) NONLIFETIME
OPTION.—Distribu-
tions in equal annual or more frequent periodic
installments of interest only, or of interest and
principal. Any such payment of equal install-
ments shall continue until—
‘‘(i) payment ceases at the direction of
the account holder to the trustee,
‘‘(ii) payment continues in accordance
with this subparagraph but at an adjusted
level at the direction of the account holder
to the trustee, or
‘‘(iii) the distribution converts to an
option described in subparagraph (A) at
the direction of the account holder to the
trustee.
‘‘(C) ADDITIONAL OPTIONS.—Distributions
in any other manner permitted under regula-
tions prescribed by the Secretary.
‘‘(e) ACCOUNT EXEMPT FROM TAX.—
‘‘(1) GENERAL RULE.—Any personal retirement
savings account is exempt from taxation under this
subtitle. Notwithstanding the preceding sentence,
any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unre-
lated business income of charitable, etc. organiza-
tions).
‘‘(2) APPLICATION
OF
PROHIBITED
TRANS-
ACTIONS RULES, ETC.—Rules similar to the rules of
paragraphs (2), (3), and (4) of section 408(e) shall
apply to personal retirement savings accounts.
‘‘(f) DISTRIBUTIONS TAXED AS IF SOCIAL SECURITY
BENEFITS.—
‘‘(1) GENERAL RULE.—Amounts paid or dis-
tributed from a personal retirement savings account
shall be includible in gross income only if so includ-
ible under section 86, determined by treating such
amounts as social security benefits (as defined in
such section).
‘‘(2) TRUSTEE-TO-TRUSTEE
TRANSFERS.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer between per-
sonal retirement savings accounts of the same indi-
vidual.
‘‘(3) RETURN
OF
EXCESS
CONTRIBUTIONS.—
Paragraph (1) shall not apply to the distribution of
any contribution (other than a deposit made under
section 251(c) of the Social Security Act) made dur-
ing a taxable year to the extent that such contribu-
tion exceeds the dollar amount specified in sub-
section (b)(1)(B) if—
‘‘(A) such distribution is received on or be-
fore the last day prescribed by law (including
extensions) for filing such individual’s return
for such taxable year,
‘‘(B) such contribution is not taken into
account in determining the deduction allowed
under section 222, and
‘‘(C) such distribution is accompanied by
the amount of net income attributable to such
contribution.
Any net income described in subparagraph (C) shall
be included in gross income for the taxable year in
which such contribution is made.
‘‘(g) CERTAIN OTHER RULES TO APPLY.—The fol-
lowing rules shall apply to personal retirement savings ac-
counts in the same manner that such rules apply to indi-
vidual retirement accounts:
‘‘(1) Section 408(h) (relating to custodial ac-
counts).
‘‘(2) Section 408(i) (relating to reports).
‘‘(h) TREATMENT
AFTER
DEATH
OF
ACCOUNT
HOLDER.—A personal retirement savings account shall
cease to be such on the date of the account holder’s death,
but no amount shall be includible in gross income by rea-
son of such cessation.’’
(c) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by inserting after
paragraph (17) the following new paragraph:
‘‘(18) PERSONAL
RETIREMENT
SAVINGS
AC-
COUNTS.—The deduction allowed by section 222.’’
(d) TAX ON EXCESS CONTRIBUTIONS.—
(1) IN
GENERAL.—Subsection (a) of section
4973 of such Code is amended by striking ‘‘or’’ at
the end of paragraph (4), by adding ‘‘or’’ at the end
of paragraph (5), and by inserting after paragraph
(5) the following new paragraph:
‘‘(6) a personal retirement savings account (as
defined in section 408B),’’.
(2) EXCESS CONTRIBUTION DEFINED.—Section
4973 is amended by adding at the end the following
new subsection:
‘‘(g) EXCESS CONTRIBUTIONS
TO PERSONAL RE-
TIREMENT SAVINGS ACCOUNTS.—For purposes of this
section—
‘‘(1) IN GENERAL.—In the case of personal re-
tirement savings accounts maintained for the benefit
of any 1 beneficiary, the term ‘excess contributions’
means the amount by which the amount contributed
for the taxable year to such accounts exceeds
$2,000.
‘‘(2) SPECIAL RULES.—For purposes of para-
graph (1), the following contributions shall not be
taken into account:
‘‘(A) Any contributions under section
251(c) of the Social Security Act.
‘‘(B) Any trustee-to-trustee transfer.’’
(e) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 4975(e) of such
Code (relating to tax on prohibited transactions) is
amended by redesignating subparagraph (F) as sub-
paragraph (G), by striking ‘‘or’’ at the end of sub-
paragraph (E), and by inserting after subparagraph
(E) the following new subparagraph:
‘‘(F) a personal retirement savings account
described in section 408B(b), or’’.
(2) Paragraph (2) of section 6693(a) of such
Code (relating to failure to provide reports on cer-
tain tax favored accounts or annuities) is amended
by redesignating subparagraphs (C) and (D) as sub-
paragraphs (D) and (E), respectively, and by insert-
ing after subparagraph (B) the following new sub-
paragraph:
‘‘(C) section 408B(g)(2) (relating to per-
sonal retirement savings accounts),’’.
(f) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 222. Contributions to personal retirement savings accounts.
‘‘Sec. 223. Cross reference.’’
(2) The table of sections for subpart A of part
I of subchapter D of chapter 1 of such Code is
amended by inserting after the item relating to sec-
tion 408A the following new item:
‘‘Sec. 408B. Personal retirement savings accounts.’’
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
TITLE II—SOCIAL SECURITY
BENEFIT REFORMS
SEC. 201. GRADUAL INCREASE IN RETIREMENT AGE AND
EARLY RETIREMENT AGE.
(a) RETIREMENT AGE.—Section 216(l)(1) of the So-
cial Security Act (42 U.S.C. 416(l)(1)) is amended to read
as follows:
‘‘(l)(1) The term ‘retirement age’ means—
‘‘(A) with respect to an individual who attains
age 62 before January 1, 2000, 65 years of age,
‘‘(B) with respect to an individual who attains
age 62 after December 31, 1999, and before Janu-
ary 1, 2015, 65 years of age plus 3⁄12 of the number
of months in the period beginning with January
2000 and ending with the last month of the calendar
year in which the individual attains age 62,
‘‘(C) with respect to an individual who attains
age 62 after December 31, 2014, and before Janu-
ary 1, 2016, 69 years of age, and
‘‘(D) with respect to an individual who attains
age 62 in any year after December 31, 2015, the
projected retirement age (as determined by the Com-
missioner under paragraph (3)) for the year in
which such individual attains age 62.’’.
(b) EARLY RETIREMENT AGE.—Section 216(l)(2) of
such Act (42 U.S.C. 416(l)(2)) is amended to read as fol-
lows:
‘‘(2) The term ‘early retirement age’ means—
‘‘(A) except as otherwise provided in this para-
graph—
‘‘(i) age 62, in the case of an old-age,
wife’s, or husband’s insurance benefit, or
‘‘(ii) age 60, in the case of a widow’s or
widower’s insurance benefit,
‘‘(B) with respect to an individual who attains
early retirement age (as defined in subparagraph
(A)) after December 31, 1999, and before January
1, 2011, the applicable retirement age (as defined in
paragraph (1)), minus—
‘‘(i) 3 years, in the case of an old-age,
wife’s, or husband’s insurance benefit, or
‘‘(ii) 5 years, in the case of a widow’s or
widower’s insurance benefit,
‘‘(C) with respect to an individual who attains
early retirement age (as defined in subparagraph
(A)) after December 31, 2010, and before January
1, 2016—
‘‘(i) age 65, in the case of an old-age,
wife’s, or husband’s insurance benefit, or
‘‘(ii) age 63, in the case of a widow’s or
widower’s insurance benefit, and
‘‘(D) with respect to an individual who attains
early retirement age (as defined in subparagraph
(A)) after December 31, 2015, the applicable retire-
ment age (as defined in paragraph (1)), minus—
‘‘(i) 4 years, in the case of an old-age,
wife’s, or husband’s insurance benefit, or
‘‘(ii) 6 years, in the case of a widow’s or
widower’s insurance benefit.’’.
(c) 
PROJECTED
RETIREMENT
AGE.—Section
216(l)(3) of such Act (42 U.S.C. 416(l)(3)) is amended
to read as follows:
‘‘(3)(A) Not later than October 1 of each year after
2014, the Commissioner of Social Security shall deter-
mine, and publish in the Federal Register, the projected
retirement age for the year following such October 1.
‘‘(B) For purposes of this paragraph—
‘‘(i) The ‘projected retirement age’ for any year
means the age (rounded, if not otherwise expressible
as a whole number of months, to the next lower
whole number of months) which, if such age were
the retirement age (as defined in this subsection) in
effect for individuals who attain age 62 in such year
(and are credited under this title with wages or self-
employment income), would cause the ratio of the
projected post-retirement lifetime for such individ-
uals to the potential working lifetime for such indi-
viduals to be equal to the ratio of the projected post-
retirement lifetime for all individuals who attain age
62 in 2015 (and are credited under this title with
wages or self-employment income) to the potential
working lifetime for such individuals attaining age
62 in 2015.
‘‘(ii) The ‘projected post-retirement lifetime’ for
individuals attaining age 62 in any year means the
average projected lifetime (rounded, if not otherwise
expressible as a whole number of months, to the
next lower whole number of months) of such individ-
uals commencing with the month following the
month in which the applicable retirement age is at-
tained, as determined by the Commissioner of Social
Security, utilizing the intermediate actuarial as-
sumptions utilized by the Board of Trustees of the
Federal Old-Age and Survivors Insurance Trust
Fund for its most recent annual report issued under
section 201(c).
‘‘(iii) The ‘potential working lifetime’ for indi-
viduals attaining age 62 in any year means the num-
ber of calendar months during the period beginning
with January of the year following the year in which
age 20 is attained by such individuals and ending
with the month in which the applicable retirement
age is attained by such individuals.’’.
(d) DEFINITION OF ELAPSED YEARS FOR PURPOSES
OF DETERMINING BENEFIT COMPUTATION YEARS.—Sec-
tion 
215(b)(2)(B)(iii) 
of 
such 
Act 
(42 
U.S.C.
415(b)(2)(B)(iii)) is amended—
(1) by striking ‘‘the year in which he attained
age 62’’ and all that follows and inserting ‘‘the year
in which he attained—’’; and
(2) by adding at the end the following:
‘‘(I) early retirement age (as defined in
section 216(l)(2) in the case of old-age, wife’s,
and husband’s insurance benefits), in the case
of an individual who attained age 62 before
January 1, 2012,
‘‘(II) age 65 plus 3⁄12 of the number of
months in the period beginning with January
2012 and ending with the last month of the cal-
endar year in which the individual attained age
62, in the case of an individual who attained
age 62 after December 31, 2011, and before
January 1, 2015, or
‘‘(III) one year greater than early retire-
ment age (as so defined), in the case of an indi-
vidual who attained age 62 after December 31,
2014;
except that such term excludes any calendar year
any part of which is included in a period of disabil-
ity.’’.
SEC. 202. ADJUSTMENTS TO BEND POINTS IN DETERMIN-
ING PRIMARY INSURANCE AMOUNTS.
(a) 
ADDITIONAL
BEND
POINT.—Section
215(a)(1)(A) of the Social Security Act (42 U.S.C.
415(a)(1)(A)) is amended—
(1) in clause (ii), by striking ‘‘and’’ at the end;
(2) in clause (iii), by striking ‘‘clause (ii),’’ and
inserting the following: ‘‘clause (ii) but do not exceed
the amount established for purposes of this clause
by subparagraph (B), and’’; and
(3) by inserting after clause (iii) the following
new clause:
‘‘(iv) the applicable percentage of the individ-
ual’s average indexed monthly earnings to the extent
that such earnings exceed the amount established
for purposes of clause (iii), determined, in connec-
tion with the calendar year in which the individual
initially becomes eligible for old-age or disability in-
surance benefits, or dies (before becoming eligible
for such benefits), in accordance with the following
table:
Applicable
‘‘Calendar year:
Percentage:
1999 ......................................................................................... 13 percent
2000 ......................................................................................... 11 percent
2001 .........................................................................................
9 percent
2002 .........................................................................................
7 percent
After 2002 ................................................................................
5 percent,’’.
(b) INITIAL LEVEL OF ADDITIONAL BEND POINT.—
Section 
215(a)(1)(B)(i) 
of 
such 
Act 
(42 
U.S.C.
415(a)(1)(B)(i)) is amended by adding at the end the fol-
lowing new sentence: ‘‘For individuals who initially become
eligible for old-age or disability insurance benefits, or who
die (before becoming eligible for such benefit), in the cal-
endar year 1998, the amount established for purposes of
clause (iii) of subparagraph (A) shall be $3,391.’’.
(c) ANNUAL ADJUSTMENTS TO PIA FORMULA.—
(1) IN
GENERAL.—Section 215(a)(1)(B) of
such Act (42 U.S.C. 415(a)(1)(B)) is amended fur-
ther—
(A) by redesignating clause (iii) as clause
(v);
(B) in clause (ii), by striking ‘‘1979, each
of the amounts so established shall equal the
product of the corresponding amount’’ and in-
serting ‘‘1998, the amount established for pur-
poses of clause (i) of subparagraph (A) shall
equal the product of the amount established for
purposes of clause (i) of subparagraph (A)’’;
(C) by inserting after clause (ii) the follow-
ing new clauses:
‘‘(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 1998, effective for such calendar year, each of the
amounts established under clause (i) for purposes of
clauses (ii) and (iii) of subparagraph (A) shall equal the
corresponding amount in effect for the preceding calendar
year, increased by the same percentage as the percentage
by which the Consumer Price Index for the calendar quar-
ter ending with September 30 of such preceding calendar
year exceeds the Consumer Price Index for the calendar
quarter ending with the preceding September 30. For pur-
poses of this clause, the Consumer Price Index for a cal-
endar quarter shall be the arithmetical mean of the
Consumer Price Index for Wage Earners and Clerical
Workers (CPI–W), as prepared by the Department of
Labor, for the 3 months in such quarter.
‘‘(iv) 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 1998, effective for such calendar year—
‘‘(I) the percentage in effect under clause (ii) of
subparagraph (A) shall be equal to the product de-
rived by multiplying the percentage in effect under
such clause for the preceding calendar year by 0.98,
and
‘‘(II) the percentage in effect under clause (iii)
of subparagraph (A) shall be equal to the product
derived by multiplying the percentage in effect under
such clause for the preceding calendar year by
0.975.
‘‘(v) 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 2003, effective for such calendar year, the percent-
age in effect under clause (iv) of subparagraph (A) shall
be equal to the product derived by multiplying the percent-
age in effect under such clause for the preceding calendar
year by 0.975.’’; and
(D) in clause (v) (as redesignated), by
striking 
‘‘amount’’ 
and 
inserting 
‘‘dollar
amount’’, by striking ‘‘clause (ii)’’ and inserting
‘‘clauses (ii) and (iii)’’, and by adding at the
end the following new sentence: ‘‘Each percent-
age established under clause (iv) for any cal-
endar year shall be rounded to the nearest
0.001 percent, except that any percentage so
established which is a multiple of 0.0005 per-
cent but not of 0.001 percent shall be rounded
to the next higher 0.001 percent.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply with respect to pri-
mary insurance amounts of individuals attaining
early retirement age (as defined in section 216(l) of
the Social Security Act), or dying, after December
31, 1997.
SEC. 203. INFORMATION RELATING TO BENEFIT LIMITA-
TIONS PROVIDED IN SOCIAL SECURITY AC-
COUNT STATEMENTS.
(a) IN GENERAL.—Section 1143 of the Social Secu-
rity Act (42 U.S.C. 1320b–13) is amended—
(1) in the heading for subsection (a), by strik-
ing ‘‘Upon Request’’ and inserting ‘‘of Annual
Statements’’;
(2) in subsection (a)(1), by striking ‘‘Begin-
ning’’ and all that follows and inserting the follow-
ing: ‘‘The Commissioner of Social Security shall pro-
vide an annual social security account statement
(hereinafter in this section referred to as the ‘state-
ment’) to each eligible individual for whom a mailing
address can be determined through such methods as
the Commissioner determines to be appropriate.’’;
(3) in subsection (a)(2)(A), by striking ‘‘at the
date of the request’’;
(4) in subsection (a)(2)(B), by striking ‘‘on the
date of the request’’;
(5) in subsection (a)(2)(C), by striking ‘‘on the
date of the request’’ and by striking ‘‘and’’ at the
end;
(6) in subsection (a)(2)(D), by inserting ‘‘in the
case of individuals not receiving benefits,’’ after
‘‘(D)’’, and by striking ‘‘title XVIII.’’ and inserting
‘‘title XVIII; and’’;
(7) by adding after subparagraph (D) the fol-
lowing:
‘‘(E) a table setting forth an estimate, in rela-
tion to 1980 and every 10th year thereafter through
2030, of the following information:
‘‘(i) the total amount of the current ad-
justed values of all employee, employer, and
self-employment contributions made with re-
spect to the wages and self-employment income
of the average earner retiring at retirement age
in each such year;
‘‘(ii) the total amount of the current ad-
justed values of the social security old-age or
survivors 
benefits 
(as 
defined 
in 
section
202(y)(3)(D)) paid for all prior months on the
basis of the wages and self-employment income
of the average earner retiring at retirement age
in each such year; and
‘‘(iii) the total amount of the current ad-
justed values of the monthly benefits which will
have been paid under such subsections, as of
the time of the death of the average earner re-
tiring at retirement age in each such year, on
the basis of his or her wages and self-employ-
ment income, as projected under the intermedi-
ate actuarial assumptions utilized by the Board
of Trustees of the Federal Old-Age and Survi-
vors Insurance Trust Fund for its most recent
annual report issued under section 201(c).’’;
For purposes of subparagraph (E), the term ‘current ad-
justed value’ has the meaning provided in section
202(y)(3)(C).’’;
(8) by striking subsection (b);
(9) in subsection (c)—
(A) by striking the heading and inserting
the following:
‘‘Required Estimates of Benefits’’;
(B) by striking ‘‘(c)(1) By not later’’ and
all that follows through ‘‘With respect to’’ in
paragraph (2) and inserting ‘‘(b) With respect
to’’; and
(C) by adding at the end the following new
sentence: ‘‘The Commissioner shall provide such
estimates of retirement benefit amounts to eligi-
ble individuals who have not attained age 50
upon request.’’; and
(10) by adding at the end the following new
subsection:
‘‘Inclusion of Statements to Retirees With Other Mailings
‘‘(c) The Commissioner of Social Security shall en-
sure that statements provided to eligible individuals who
are receiving benefits under title II are included to the
maximum extent practicable with mailings otherwise made
to such individuals. The Commissioner shall consult with
the Secretary of the Treasury in carrying out the require-
ment of this subsection and such Secretary shall provide
such appropriate assistance to the Commissioner as is nec-
essary to carry out such requirements.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply with respect to statements pro-
vided on or after October 1, 1998.
SEC. 204. PHASED REDUCTION IN SPOUSAL BENEFITS
OTHER THAN SURVIVOR’S BENEFITS TO 33
PERCENT OF PRIMARY INSURANCE AMOUNT.
(a) 
WIFE’S
INSURANCE
BENEFITS.—Section
202(b)(2) of the Social Security Act (42 U.S.C. 402(b)(2))
is amended to read as follows:
‘‘(2)(A) Except as provided in subsection (q) and
paragraph (4) of this subsection, such wife’s insurance
benefit for each month shall be equal to the applicable per-
centage of the primary insurance amount of her husband
(or, in the case of a divorced wife, her former husband)
in connection with the calendar year in which such individ-
ual becomes eligible for such benefit, as specified in the
following table:
‘‘If 
the 
calendar 
year 
in
which the individual be-
comes eligible is:
The applicable percentage shall
be:
Before calendar year 2000 ................................................
50 percent
Calendar year 2000 ...........................................................
49 percent
‘‘If 
the 
calendar 
year 
in
which the individual be-
comes eligible is:
The applicable percentage shall
be:
Calendar year 2001 ...........................................................
48 percent
Calendar year 2002 ...........................................................
47 percent
Calendar year 2003 ...........................................................
46 percent
Calendar year 2004 ...........................................................
45 percent
Calendar year 2005 ...........................................................
44 percent
Calendar year 2006 ...........................................................
43 percent
Calendar year 2007 ...........................................................
42 percent
Calendar year 2008 ...........................................................
41 percent
Calendar year 2009 ...........................................................
40 percent
Calendar year 2010 ...........................................................
39 percent
Calendar year 2011 ...........................................................
38 percent
Calendar year 2012 ...........................................................
37 percent
Calendar year 2013 ...........................................................
36 percent
Calendar year 2014 ...........................................................
35 percent
Calendar year 2015 ...........................................................
34 percent
After calendar year 2015 ..................................................
33 percent
‘‘(B) For purposes of subparagraph (A)—
‘‘(i) an individual shall be treated as eligible for
a wife’s insurance benefit if such individual meets
the requirements of subparagraphs (B), (C), and
(D) of paragraph (1), and
‘‘(ii) in determining when an individual becomes
eligible for a wife’s insurance benefit, any break in
eligibility of less than 12 consecutive months shall
not be taken into account.’’.
(b) HUSBAND’S
INSURANCE
BENEFITS.—Section
202(c)(3) of such Act (42 U.S.C. 402(c)(3)) is amended
to read as follows:
‘‘(3)(A) Except as provided in subsection (q) and
paragraph (2) of this subsection, such husband’s insur-
ance benefit for each month shall be equal to the applica-
ble percentage of the primary insurance amount of his wife
(or, in the case of a divorced husband, his former wife)
in connection with the calendar year in which such individ-
ual becomes eligible for such benefit, as specified in the
following table:
‘‘If 
the 
calendar 
year 
in
which the individual be-
comes eligible is:
The applicable percentage shall
be:
Before calendar year 2000 ................................................
50 percent
Calendar year 2000 ...........................................................
49 percent
Calendar year 2001 ...........................................................
48 percent
Calendar year 2002 ...........................................................
47 percent
Calendar year 2003 ...........................................................
46 percent
Calendar year 2004 ...........................................................
45 percent
Calendar year 2005 ...........................................................
44 percent
Calendar year 2006 ...........................................................
43 percent
Calendar year 2007 ...........................................................
42 percent
Calendar year 2008 ...........................................................
41 percent
Calendar year 2009 ...........................................................
40 percent
Calendar year 2010 ...........................................................
39 percent
Calendar year 2011 ...........................................................
38 percent
Calendar year 2012 ...........................................................
37 percent
Calendar year 2013 ...........................................................
36 percent
Calendar year 2014 ...........................................................
35 percent
Calendar year 2015 ...........................................................
34 percent
After calendar year 2015 ..................................................
33 percent
‘‘(B) For purposes of subparagraph (A)—
‘‘(i) an individual shall be treated as eligible for
a husband’s insurance benefit if such individual
meets the requirements of subparagraphs (B), (C),
and (D) of paragraph (1), and
‘‘(ii) in determining when an individual becomes
eligible for a husband’s insurance benefit, any break
in eligibility of less than 12 consecutive months shall
not be taken into account.’’.
SEC. 205. LIMITATION ON PAYMENT OF CERTAIN BENEFITS
IN 
EXCESS 
OF 
CONTRIBUTIONS 
DURING
YEARS OF HIGHER INCOME.
(a) IN GENERAL.—Section 202 of the Social Security
Act (42 U.S.C. 402) is amended by adding at the end the
following new subsection:
‘‘LIMITATION ON PAYMENT OF CERTAIN BENEFITS IN EX-
CESS OF CONTRIBUTIONS DURING YEARS OF HIGHER
INCOME
‘‘(y)(1) Notwithstanding any other provision of this
title, if, with respect to any year of higher income for an
individual—
‘‘(A) the total amount of the current adjusted
values of all of such individual’s social security old-
age or survivors benefits in prior months, deter-
mined as of the beginning of such year, exceed
‘‘(B) the total amount of the current adjusted
values of all OASDI taxes paid with respect to the
wages and self-employment income on which such
benefits are based, determined as of the beginning of
such year,
then such individual’s social security old-age or survivors
benefits for any month in such year shall be reduced (after
all other deductions and reductions applicable under this
title) by the percentage reduction determined under para-
graph (2) for such year. Benefits, as reduced under this
paragraph, if not a multiple of $1, shall be increased to
the next higher multiple of $1.
‘‘(2)(A) The percentage reduction determined under
this paragraph for an individual’s taxable year is the prod-
uct derived by multiplying—
‘‘(i) 1 percent, by
‘‘(ii) the applicable income-based factor of the
individual for the taxable year.
‘‘(B)(i) For purposes of subparagraph (A), in the
case of an individual who is not married as of the begin-
ning of the taxable year, the applicable income-based fac-
tor of the individual for the taxable year is the quotient
(not greater than 100) derived by dividing—
‘‘(I) the individual’s excess income for the tax-
able year, by
‘‘(II) $300,
rounded (if not a whole number) to the next lower whole
number.
‘‘(ii) For purposes of clause (i), an individual’s excess
income for a taxable year is the excess of—
‘‘(I) the adjusted gross income of such individ-
ual for such taxable year, over
‘‘(II) $50,000.
‘‘(C)(i) For purposes of subparagraph (A), in the
case of an individual who is married as of the beginning
of the taxable year, the applicable income-based factor of
the individual for the taxable year is the quotient (not
greater than 100) derived by dividing—
‘‘(I) the excess joint income of the individual
and the individual’s spouse for the taxable year, by
‘‘(II) $600,
rounded (if not a whole number) to the next lower whole
number.
‘‘(ii) For purposes of clause (i), the excess joint in-
come of an individual and the individual’s spouse for a
taxable year is the excess of—
‘‘(I) the total adjusted gross income of such in-
dividual and such individual’s spouse for such tax-
able year, over
‘‘(II) $100,000.
‘‘(3) For purposes of this subsection—
‘‘(A) The term ‘year of higher income’ for an
individual means any taxable year—
‘‘(i) if, in the case of an individual who is
not married as of the beginning of such taxable
year, the adjusted gross income of such individ-
ual for such taxable year exceeds $50,000, or
‘‘(ii) if, in the case of an individual who is
married as of the beginning of such taxable
year, the total adjusted gross income of such in-
dividual and such individual’s spouse for such
taxable year exceeds $100,000.
‘‘(B) The term ‘adjusted gross income’ has the
meaning provided in section 62 of the Internal Reve-
nue Code of 1986.
‘‘(C)(i) The term ‘current adjusted value’ of an
amount, determined as of the beginning of any cal-
endar year, means the original amount, plus interest
on such amount, compounded annually through the
end of the preceding calendar year at the trust fund
interest rate as in effect from year to year.
‘‘(ii) The term ‘trust fund interest rate’ in ef-
fect for any year means the average rate of interest
earned during the fiscal year ending in such year on
investments of amounts in the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal
Disability Insurance Trust Fund, as determined by
the Managing Trustee of such Trust Funds.
‘‘(D) The term ‘social security old-age or survi-
vors benefit’ of an individual means a monthly insur-
ance benefit under this title based on the wages and
self-employment income of such individual and paid
or payable from the Federal Old-Age and Survivors
Insurance Trust Fund.
‘‘(E) The term ‘OASDI taxes’ means the taxes
imposed under sections 1401(a), 3101(a), and
3111(a) of the Internal Revenue Code of 1986.
‘‘(4) The Commissioner of Social Security shall pro-
vide by regulation for the maintenance of such records,
relating to individuals to whom social security old-age or
survivors benefits are otherwise payable under this section,
of total benefits paid and OASDI taxes paid, as is nec-
essary to preclude, to the maximum extent practicable,
overpayments and underpayments of benefits resulting
from the operation of this subsection. The Commissioner
and the Secretary of the Treasury shall enter into such
arrangements as are necessary to ensure that such records
maintained by the Commissioner are currently accurate at
all times.
‘‘(5)(A) In any case in which a taxable year of an
individual is a year of higher income for such individual,
if a social security old-age or survivors benefit has been
paid to such individual for any month in such year, such
individual (or the individual who is in receipt of such bene-
fit on his behalf) shall make a report to the Commissioner
of Social Security of his adjusted gross income, and (if
he is married) the adjusted gross income of his spouse,
for such taxable year. Such report shall be made on or
before the fifteenth day of the fourth month following the
close of such year, and shall contain such information and
be made in such manner as the Commissioner may by reg-
ulations prescribe. The Commissioner may grant a reason-
able extension of time for making such report if he finds
that there is valid reason for a delay, but in no case may
the period be extended more than three months.
‘‘(B) If an individual fails to make a report required
under subparagraph (A), within the time prescribed by or
in accordance with such subparagraph, for any taxable
year and a benefit based on such individual’s wages and
self-employment income is paid for any month in such tax-
able year or the next following taxable year which is in
excess of the amount payable by reason of this subsection,
he shall be deemed to have been overpaid for such month
an additional amount as follows:
‘‘(i) in the case of the first such month for
which a benefit is paid in excess of the amount pay-
able by reason of this subsection, the additional
amount shall be equal to the amount of such excess;
‘‘(ii) in the case of the second such month for
which a benefit is paid in excess of the amount pay-
able by reason of this subsection, the additional
amount shall be equal to two times the amount of
such excess; and
‘‘(iii) in the case of the third or a subsequent
such month for which a benefit is paid in excess of
the amount payable by reason of this subsection, the
additional amount shall be equal to three times the
amount of such excess;
except that additional amounts of overpayment deter-
mined under this paragraph shall be determined only for
months for which the benefit in excess of the amount pay-
able was received and accepted.
‘‘(C)(i)(I) If the Commissioner of Social Security de-
termines, on the basis of information obtained by or sub-
mitted to him, that it may reasonably be expected that
an individual’s social security old-age or survivors benefits
will not be payable (in whole or in part) for any month
in a taxable year of such individual by reason of this sub-
section, the Commissioner may, before the close of such
taxable year, suspend the payment (in whole or in part)
for each month in such year (or for only such months as
the Commissioner may specify) of such benefits. Such sus-
pension shall remain in effect with respect to the benefits
for any month until the Commissioner has determined the
extent to which benefits are payable under this subsection.
‘‘(II) The Commissioner of Social Security may, be-
fore the close of the taxable year of an individual on whose
wages and self-employment income benefits are otherwise
payable during such year, request of such individual that
he make, at such time or times as the Commissioner may
specify, a declaration of his estimated adjusted gross in-
come (or the estimated total adjusted gross income for
him and his spouse) for the taxable year and that he fur-
nish to the Commissioner such other information with re-
spect to such income as the Commissioner may specify.
A failure by such individual to comply with any such re-
quest shall in itself constitute justification for a deter-
mination under subclause (I) that it may reasonably be
expected that such benefits are not payable (in whole or
in part) by reason of this subsection.
‘‘(III) If the payment of an individual’s social security
old-age or survivors benefits have been suspended (in
whole or in part) for all months in any taxable year of
such individual under subclause (I), no payment of such
unpaid benefits shall be made for any such month in such
taxable year after the expiration of the period of three
years, three months, and fifteen days following the close
of such taxable year unless within such period the individ-
ual, or some other person entitled to benefits under this
title on the basis of the same wages and self-employment
income, files with the Commissioner of Social Security in-
formation showing that the unpaid portion of a benefit
for such month is payable to such individual.
‘‘(ii) If, after the close of a taxable year of an individ-
ual to whom social security old-age or survivors benefits
were otherwise payable for months in such year, the Com-
missioner of Social Security requests such individual to
furnish a report of his adjusted gross income (or the total
adjusted gross income of him and his spouse) for such tax-
able year or any other information with respect to such
income which the Commissioner may specify, and the indi-
vidual fails to comply with such request, such failure shall
in itself constitute justification for a determination that
such benefits were not payable (in whole or in part) for
each month in such taxable year (or only for such months
thereof as the Commissioner may specify) by reason of
this subsection.
‘‘(D) The Commissioner of Social Security shall de-
velop and implement procedures in accordance with this
paragraph to avoid paying more than the correct amount
of an individual’s social security old-age or survivors bene-
fits as a result of the failure of the individual to file a
correct report or estimate of adjusted gross income. Such
procedures may include identifying categories of individ-
uals whose social security old-age or survivors benefits
which are not payable (in whole or in part) under this
subsection are likely to be paid and requesting that they
estimate their adjusted gross income (or the total adjusted
gross income of them and their spouses) more frequently
than other persons subject to this subsection.
‘‘(6) Benefits of any individual (other than an indi-
vidual described in paragraph (1)) based on the wages and
self-employment income of any other individual to whom
benefits are not payable by reason of paragraph (1) shall
be payable as though such other individual were receiving
such benefits.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to benefits otherwise
payable in taxable years ending after December 31, 1997.
SEC. 206. COVERAGE OF NEWLY HIRED STATE AND LOCAL
EMPLOYEES.
(a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—
(1) IN
GENERAL.—Paragraph (7) of section
210(a) of the Social Security Act (42 U.S.C.
410(a)(7)) is amended to read as follows:
‘‘(7) Excluded State or local government em-
ployment (as defined in subsection (s));’’.
(2) EXCLUDED STATE OR LOCAL GOVERNMENT
EMPLOYMENT.—
(A) IN
GENERAL.—Section 210 of such
Act (42 U.S.C. 410) is amended by adding at
the end the following new subsection:
‘‘Excluded State or Local Government Employment
‘‘(s)(1) IN GENERAL.—The term ‘excluded State or
local government employment’ means any service per-
formed in the employ of a State, of any political subdivi-
sion thereof, or of any instrumentality of any one or more
of the foregoing which is wholly owned thereby, if—
‘‘(A)(i) such service would be excluded from the
term ‘employment’ for purposes of this title if the
preceding provisions of this section as in effect in
August 1997 had remained in effect, and (ii) the re-
quirements of paragraph (2) are met with respect to
such service, or
‘‘(B) the requirements of paragraph (3) are met
with respect to such service.
‘‘(2) EXCEPTION
FOR
CURRENT
EMPLOYMENT
WHICH CONTINUES.—
‘‘(A) IN GENERAL.—The requirements of this
paragraph are met with respect to service for any
employer if—
‘‘(i) such service is performed by an indi-
vidual—
‘‘(I) who was performing substantial
and regular service for remuneration for
that employer before January 1, 1998,
‘‘(II) who is a bona fide employee of
that employer on December 31, 1997, and
‘‘(III) whose employment relationship
with that employer was not entered into
for purposes of meeting the requirements
of this subparagraph, and
‘‘(ii) the employment relationship with that
employer has not been terminated after Decem-
ber 31, 1997.
‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND
INSTRUMENTALITIES.—For purposes of subpara-
graph (A), under regulations (consistent with regula-
tions established under section 3121(t)(2)(B) of the
Internal Revenue Code of 1986)—
‘‘(i) all agencies and instrumentalities of a
State (as defined in section 218(b)) or of the
District of Columbia shall be treated as a single
employer, and
‘‘(ii) all agencies and instrumentalities of a
political subdivision of a State (as so defined)
shall be treated as a single employer and shall
not be treated as described in clause (i).
‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—
‘‘(A) IN GENERAL.—The requirements of this
paragraph are met with respect to service if such
service is performed—
‘‘(i) by an individual who is employed by a
State or political subdivision thereof to relieve
such individual from unemployment,
‘‘(ii) in a hospital, home, or other institu-
tion by a patient or inmate thereof as an em-
ployee of a State or political subdivision thereof
or of the District of Columbia,
‘‘(iii) by an individual, as an employee of
a State or political subdivision thereof or of the
District of Columbia, serving on a temporary
basis in case of fire, storm, snow, earthquake,
flood, or other similar emergency,
‘‘(iv) by any individual as an employee in-
cluded under section 5351(2) of title 5, United
States Code (relating to certain interns, student
nurses, and other student employees of hos-
pitals of the District of Columbia Government),
other than as a medical or dental intern or a
medical or dental resident in training,
‘‘(v) by an election official or election
worker if the remuneration paid in a calendar
year for such service is less than $1,000 with
respect to service performed during 1998, and
the adjusted amount determined under sub-
paragraph (C) for any subsequent year with re-
spect to service performed during such subse-
quent year, except to the extent that service by
such election official or election worker is in-
cluded in employment under an agreement
under section 218, or
‘‘(vi) by an employee in a position com-
pensated solely on a fee basis which is treated
pursuant to section 211(c)(2)(E) as a trade or
business for purposes of inclusion of such fees
in net earnings from self-employment.
‘‘(B) DEFINITIONS.—As used in this para-
graph, the terms ‘State’ and ‘political subdivision’
have the meanings given those terms in section
218(b).
‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR
ELECTION
OFFICIALS
AND
ELECTION
WORKERS.—
For each year after 1998, the Commissioner of So-
cial Security shall adjust the amount referred to in
subparagraph (A)(v) at the same time and in the
same 
manner 
as 
is 
provided 
under 
section
215(a)(1)(B)(ii) with respect to the amounts re-
ferred to in section 215(a)(1)(B)(i), except that—
‘‘(i) for purposes of this subparagraph,
1995 shall be substituted for the calendar year
referred to in section 215(a)(1)(B)(ii)(II), and
‘‘(ii) such amount as so adjusted, if not a
multiple of $100, shall be rounded to the next
higher multiple of $100 where such amount is
a multiple of $50 and to the nearest multiple
of $100 in any other case.
The Commissioner of Social Security shall determine
and publish in the Federal Register each adjusted
amount determined under this subparagraph not
later than November 1 preceding the year for which
the adjustment is made.’’.
(B) CONFORMING AMENDMENTS.—
(i) Subsection (k) of section 210 of
such Act (42 U.S.C. 410(k)) (relating to
covered transportation service) is repealed.
(ii) Section 210(p) of such Act (42
U.S.C. 410(p)) is amended—
(I) in paragraph (2), by striking
‘‘service is performed’’ and all that
follows and inserting ‘‘service is serv-
ice described in subsection (s)(3)(A).’’;
and
(II) in paragraph (3)(A), by in-
serting ‘‘under subsection (a)(7) as in
effect in December 1997’’ after ‘‘sec-
tion’’.
(iii) Section 218(c)(6) of such Act (42
U.S.C. 418(c)(6)) is amended—
(I) by striking subparagraph (C);
(II) by redesignating subpara-
graphs (D) and (E) as subparagraphs
(C) and (D), respectively; and
(III) by striking subparagraph
(F) and inserting the following:
‘‘(E) service which is included as employment
under section 210(a).’’
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) IN
GENERAL.—Paragraph (7) of section
3121(b) of the Internal Revenue Code of 1986 (re-
lating to employment) is amended to read as follows:
‘‘(7) excluded State or local government em-
ployment (as defined in subsection (t));’’.
(2) EXCLUDED STATE OR LOCAL GOVERNMENT
EMPLOYMENT.—Section 3121 of such Code is
amended by inserting after subsection (s) the follow-
ing new subsection:
‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM-
PLOYMENT.—
‘‘(1) IN GENERAL.—For purposes of this chap-
ter, the term ‘excluded State or local government
employment’ means any service performed in the
employ of a State, of any political subdivision there-
of, or of any instrumentality of any one or more of
the foregoing which is wholly owned thereby, if—
‘‘(A)(i) such service would be excluded
from the term ‘employment’ for purposes of this
chapter if the provisions of subsection (b)(7) as
in effect in December 1997 had remained in ef-
fect, and (ii) the requirements of paragraph (2)
are met with respect to such service, or
‘‘(B) the requirements of paragraph (3)
are met with respect to such service.
‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT
WHICH CONTINUES.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to service
for any employer if—
‘‘(i) such service is performed by an
individual—
‘‘(I) who was performing sub-
stantial and regular service for remu-
neration for that employer before Jan-
uary 1, 1998,
‘‘(II) who is a bona fide employee
of that employer on December 31,
1997, and
‘‘(III) whose employment rela-
tionship with that employer was not
entered into for purposes of meeting
the requirements of this subpara-
graph, and
‘‘(ii) the employment relationship with
that employer has not been terminated
after December 31, 1997.
‘‘(B) TREATMENT OF MULTIPLE AGENCIES
AND
INSTRUMENTALITIES.—For purposes of
subparagraph (A), under regulations—
‘‘(i) all agencies and instrumentalities
of a State (as defined in section 218(b) of
the Social Security Act) or of the District
of Columbia shall be treated as a single
employer, and
‘‘(ii) all agencies and instrumentalities
of a political subdivision of a State (as so
defined) shall be treated as a single em-
ployer and shall not be treated as de-
scribed in clause (i).
‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to service
if such service is performed—
‘‘(i) by an individual who is employed
by a State or political subdivision thereof
to relieve such individual from unemploy-
ment,
‘‘(ii) in a hospital, home, or other in-
stitution by a patient or inmate thereof as
an employee of a State or political subdivi-
sion thereof or of the District of Columbia,
‘‘(iii) by an individual, as an employee
of a State or political subdivision thereof
or of the District of Columbia, serving on
a temporary basis in case of fire, storm,
snow, earthquake, flood, or other similar
emergency,
‘‘(iv) by any individual as an employee
included under section 5351(2) of title 5,
United States Code (relating to certain in-
terns, student nurses, and other student
employees of hospitals of the District of