I
103D CONGRESS
2D SESSION
H. R. 4245
To amend title II of the Social Security Act and the Internal Revenue
Code of 1986 to provide for the long-range solvency of the old-age,
survivors, and disability insurance program.
IN THE HOUSE OF REPRESENTATIVES
APRIL 19, 1994
Mr. ROSTENKOWSKI introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend title II of the Social Security Act and the Internal
Revenue Code of 1986 to provide for the long-range
solvency of the old-age, survivors, and disability insur-
ance program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
This Act may be cited as the ‘‘Social Security Long-
Range Solvency Act of 1994’’.
TABLE OF CONTENTS
Sec. 1. Short title and table of contents.
TITLE I—PROVISIONS RELATING TO FUTURE ENTITLEMENTS
Sec. 101. Adjustments in formula for determining primary insurance amount.
Sec. 102. Gradual increase in retirement age to age 67 by the year 2011.
TITLE II—PROVISIONS RELATING TO CURRENT AND FUTURE
ENTITLEMENTS
Sec. 201. Reduction in cost-of-living adjustment payable in 1995.
Sec. 202. Thresholds for income taxation of social security benefits.
TITLE III—COVERAGE OF NEWLY HIRED STATE AND LOCAL
EMPLOYEES
Sec. 301. Amendments to the Social Security Act.
Sec. 302. Amendments to the Internal Revenue Code of 1986.
Sec. 303. Effective date of title.
TITLE IV—SOCIAL SECURITY PAYROLL TAX
Sec. 401. Level of OASDI tax.
Sec. 402. Level of self-employment tax.
TITLE I—PROVISIONS RELATING
TO FUTURE ENTITLEMENTS
SEC. 101. ADJUSTMENTS IN FORMULA FOR DETERMINING
PRIMARY INSURANCE AMOUNT.
(a) ADDITIONAL
EARNINGS
BRACKET.—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’’;
(2) in clause (iii), by striking ‘‘clause (ii),’’ and
inserting the following: ‘‘clause (ii), but, in the case
of an individual who initially becomes eligible for
old-age or disability insurance benefits, or who dies
(before becoming eligible for such benefits), after
calendar year 2001, do not exceed the amount estab-
lished for purposes of this clause by subparagraph
(B), and’’; and
(3) by inserting after clause (iii) the following
new clause:
graph for purposes of clause (i) of subparagraph
(A), and
‘‘(II) the quotient obtained under clause (ix) of
this subparagraph.
‘‘(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 2001 and before 2052, the amount established for
purposes of clause (ii) of subparagraph (A) shall be an
amount equal to the product of the following factors:
‘‘(I) the amount established with respect to the
preceding calendar year under this subparagraph for
purposes of clause (ii) of subparagraph (A),
‘‘(II) the quotient obtained under clause (x) of
this subparagraph, and
‘‘(III) 0.99.
‘‘(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 2051, the amount established for purposes of clause
(ii) of subparagraph (A) shall be an amount equal to the
product of the following factors:
‘‘(I) the amount established with respect to the
calendar year 2051 under clause (iv) of this sub-
paragraph for purposes of clause (ii) of subpara-
graph (A), and
‘‘(II) the quotient obtained under clause (xi) of
this subparagraph.
‘‘(vi) For individuals who initially become eligible for
old-age or disability insurance benefits, or who die (before
becoming eligible for such benefits), in the calendar year
2002, the amount established for purposes of clause (iii)
of subparagraph (A) shall be an amount equal to the
quotient derived by dividing—
‘‘(I) the amount established with respect to the
calendar year 2002 under clause (iv) of this sub-
paragraph for purposes of clause (ii) of subpara-
graph (A), by
‘‘(II) 0.9950.
‘‘(vii) 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 2002 and before 2052, the amount established for
purposes of clause (iii) of subparagraph (A) shall be an
amount equal to the product of the following factors:
‘‘(I) the amount established with respect to the
preceding calendar year under this subparagraph for
purposes of clause (iii) of subparagraph (A),
‘‘(II) the quotient obtained under clause (x) of
this subparagraph, and
‘‘(III) 0.99.
‘‘(viii) 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 2051, the amount established for purposes of clause
(iii) of subparagraph (A) shall be an amount equal to the
product of the following factors:
‘‘(I) the amount established with respect to cal-
endar year 2051 under clause (vii) of this subpara-
graph for purposes of clause (iii) of subparagraph
(A), and
‘‘(II) the quotient obtained under clause (xi) of
this subparagraph.
‘‘(ix) The quotient obtained under this clause is the
quotient obtained by dividing—
‘‘(I) the deemed average total wages (as defined
in section 209(k)(1)) for the second calendar year
preceding the calendar year for which the determina-
tion is made, by
‘‘(II) the average of the total wages (as defined
in regulations of the Secretary and computed with-
out regard to the limitations specified in section
209(a)(1)) reported to the Secretary of the Treasury
or his delegate for the calendar year 1977.
‘‘(x) The quotient obtained under this clause is the
quotient obtained by dividing—
‘‘(I) the deemed average total wages (as defined
in section 209(k)(1)) for the second calendar year
preceding the calendar year for which the determina-
tion is made, by
‘‘(II) the deemed average total wages (as de-
fined in section 209(k)(1)) for the third calendar
year preceding the calendar year for which the de-
termination is made.
‘‘(xi) The quotient obtained under this clause is the
quotient obtained by dividing—
‘‘(I) the deemed average total wages (as defined
in section 209(k)(1)) for the second calendar year
preceding the calendar year for which the determina-
tion is made, by
‘‘(II) the average of the total wages (as defined
in regulations of the Secretary and computed with-
out regard to the limitations specified in section
209(a)(1)) reported to the Secretary of the Treasury
or his delegate for the calendar year 2049.’’; and
(4) in clause (xii) (as redesignated), by striking
‘‘clause (ii)’’ and inserting ‘‘the preceding clauses of
this subparagraph’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to individuals who ini-
tially become eligible (within the meaning of section
215(a)(3)(B) of the Social Security Act) for old-age or dis-
ability insurance benefits under title II of the Social Secu-
rity Act, or who die (before becoming eligible for such ben-
efits), in any calendar year after 2001.
SEC. 102. GRADUAL INCREASE IN RETIREMENT AGE TO
AGE 67 BY THE YEAR 2011.
(a) IN GENERAL.—Section 216(l) of the Social Secu-
rity Act (42 U.S.C. 416(l)) is amended—
(1) by striking subparagraphs (C) and (D) of
paragraph (1) and by redesignating subparagraph
(E) as subparagraph (C);
(2) in subparagraph (B) of paragraph (1), by
striking ‘‘January 1, 2005,’’ and inserting ‘‘January
1, 2011,’’;
(3) in subparagraph (C) of paragraph (1) (as
redesignated), by striking ‘‘December 31, 2021,’’
and inserting ‘‘December 31, 2010,’’; and
(4) by striking paragraph (3) and inserting the
following:
‘‘(3) The age increase factor for any individual who
attains early retirement age in the 11-year period consist-
ing of calendar years 2000 through 2010 shall be equal
to 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.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to benefits of individ-
uals attaining early retirement age (as defined in section
216(l)(2) of the Social Security Act) after 1999.
TITLE 
II—PROVISIONS 
RELAT-
ING TO CURRENT AND FU-
TURE ENTITLEMENTS
SEC. 201. REDUCTION IN COST-OF-LIVING ADJUSTMENT
PAYABLE IN 1995.
(a) IN GENERAL.—For purposes of determining any
increase described in section 215(i)(2)(A)(ii) of the Social
Security Act (42 U.S.C. 415(i)(2)(A)(ii)) which is effective
for December 1994, the applicable increase percentage (as
defined in section 215(i)(1)(C) of such Act (42 U.S.C.
415(i)(1)(C))) shall be deemed to be the difference (not
less than zero) derived by subtracting 0.5 percent from
the applicable increase percentage (as so defined).
(b) INAPPLICABILITY TO PROVISIONS NOT RELATING
TO OASDI BENEFITS OR TIER I RAILROAD RETIREMENT
BENEFITS.—Subsection (a) shall apply only with respect
to adjustments to social security benefits (as defined in
section 86(d) of the Internal Revenue Code of 1986) and
primary insurance amounts determined under title II of
the Social Security Act. For purposes of provisions of law
otherwise referring to section 215(i) of the Social Security
Act or otherwise basing adjustments on adjustments made
under such section 215(i), such section 215(i) shall be ap-
plied as if this section had not been enacted.
SEC. 202. THRESHOLDS FOR INCOME TAXATION OF SOCIAL
SECURITY BENEFITS.
(a) UNIFORM APPLICABILITY OF TAX.—Subsection
(a) of section 86 of the Internal Revenue Code of 1986
(relating to social security and tier 1 railroad retirement
benefits) is amended—
(1) by striking paragraph (2);
(2) by striking ‘‘(a) IN GENERAL.—’’ and all
that follows through ‘‘paragraph (2), gross’’ in para-
graph (1) and inserting ‘‘(a) IN GENERAL.—Gross’’;
and
(3) by redesignating subparagraphs (A) and
(B) of such subsection (as so amended) as para-
graphs (1) and (2), respectively.
(b) CONFORMING AMENDMENTS.—Subsection (c) of
such section 86 (relating to base amount and adjusted
base amount) is amended—
(1) in the heading, by striking ‘‘AND ADJUSTED
BASE AMOUNT’’;
(2) by striking paragraph (2);
(3) by striking ‘‘section—’’ and all that follows
through ‘‘The term’’ in paragraph (1) and inserting
‘‘section, the term’’;
(4) by redesignating subparagraphs (A), (B),
and (C) of such subsection (as so amended) as para-
graphs (1), (2), and (3), respectively; and
(5) by redesignating clauses (i) and (ii) of para-
graph (3) of such subsection (as so redesignated) as
subparagraphs (A) and (B), respectively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxable years begin-
ning after December 31, 1994.
TITLE III—COVERAGE OF NEWLY
HIRED STATE AND LOCAL EM-
PLOYEES
SEC. 301. AMENDMENTS TO THE SOCIAL SECURITY ACT.
(a) IN GENERAL.—Paragraph (7) of section 210(a)
of the Social Security Act (42 U.S.C. 410(a)(7)) is amend-
ed to read as follows:
‘‘(7) Excluded State or local government em-
ployment (as defined in subsection (r));’’.
(b) EXCLUDED STATE OR LOCAL GOVERNMENT EM-
PLOYMENT.—
(1) 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
‘‘(r)(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
March 1994 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, 1995,
‘‘(II) who is a bona fide employee of
that employer on December 31, 1994, 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, 1994.
‘‘(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 subdivison 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 1995, 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 1995, the Secretary shall adjust
the amount referred to in subparagraph (A)(v) at
the same time and in the same manner as is pro-
vided under section 215(a)(1)(B)(ii) with respect to
the amounts referred to in section 215(a)(1)(B)(i),
except that—
‘‘(i) for purposes of this subparagraph,
1993 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 Secretary 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.’’.
(2) CONFORMING AMENDMENTS.—
(A) Subsection (k) of section 210 of such
Act (42 U.S.C. 410(k)) (relating to covered
transportation service) is repealed.
(B) Section 210(p) of such Act (42 U.S.C.
410(p)) is amended—
(i) in paragraph (2), by striking
‘‘service is performed’’ and all that follows
and inserting ‘‘service is service described
in subsection (r)(3)(A).’’; and
(ii) in paragraph (3)(A), by inserting
‘‘under subsection (a)(7) as in effect in
March 1994’’ after ‘‘section’’.
(c) ADDITIONAL AMENDMENTS RELATING TO COV-
ERAGE AGREEMENTS.—
(1) AUTHORIZATION FOR ALL STATES TO EX-
TEND COVERAGE TO STATE AND LOCAL POLICEMEN
AND FIREMEN UNDER EXISTING COVERAGE AGREE-
MENTS.—
(A) IN GENERAL.—Section 218(l) of such
Act (42 U.S.C. 418(l)) is amended—
(i) in paragraph (1), by striking ‘‘(1)’’
after ‘‘(l)’’, and by striking ‘‘the State of’’
and all that follows through ‘‘prior to the
date of enactment of this subsection’’ and
inserting ‘‘a State entered into pursuant to
this section’’; and
(ii) by striking paragraph (2).
(B) CONFORMING
AMENDMENT.—Section
218(d)(8)(D) 
of 
such 
Act 
(42 
U.S.C.
418(d)(8)(D)) is amended by striking ‘‘agree-
ments with the States named in’’ and inserting
‘‘State agreements modified as provided in’’.
(C) EFFECTIVE DATE.—The amendments
made by this paragraph shall apply with respect
to modifications filed by States after the date of
the enactment of this Act.
(2) 
CONFORMING
AMENDMENTS.—Section
218(c)(6) of such Act (42 U.S.C. 418(c)(6)) is
amended—
(A) by striking subparagraph (C);
(B) by redesignating subparagraphs (D)
and (E) as subparagraphs (C) and (D), respec-
tively; and
(C) by striking subparagraph (F) and in-
serting the following:
‘‘(E) service which is included as employment
under section 210(a).’’
(d) AUTHORITY FOR STATES TO MODIFY COVERAGE
AGREEMENTS WITH RESPECT TO ELECTION OFFICIALS
AND ELECTION WORKERS.—Section 218(c)(8) of such
Act (42 U.S.C. 418(c)(8)) is amended—
(1) by striking ‘‘on or after January 1, 1968,’’
and inserting ‘‘at any time’’;
(2) by striking ‘‘$100’’ and inserting ‘‘$1,000
with respect to service performed during 1995, and
the adjusted amount determined under section
210(r)(3)(C) for any subsequent year with respect to
service performed during such subsequent year’’;
and
(3) by striking the last sentence and inserting
the following new sentence: ‘‘Any modification of an
agreement pursuant to this paragraph shall be effec-
tive with respect to services performed in and after
the calendar year in which the modification is mailed
or delivered by other means to the Secretary.’’.
SEC. 302. AMENDMENTS TO THE INTERNAL REVENUE CODE
OF 1986.
(a) IN GENERAL.—Paragraph (7) of section 3121(b)
of the Internal Revenue Code of 1986 (relating to employ-
ment) is amended to read as follows:
‘‘(7) excluded State or local government em-
ployment (as defined in subsection (t));’’.
(b) EXCLUDED STATE OR LOCAL GOVERNMENT EM-
PLOYMENT.—Section 3121 of such Code is amended by
inserting after subsection (s) the following 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 March 1994 had remained in effect,
and (ii) the requirements of paragraph (2) are
met with respect to such service, or
‘‘(B) the requirements of paragraph (3)
are met with respect to such service.
‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT
WHICH CONTINUES.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to service
for any employer if—
‘‘(i) such service is performed by an
individual—
‘‘(I) who was performing sub-
stantial and regular service for remu-