I
106TH CONGRESS
1ST SESSION
H. R. 1793
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
MAY 13, 1999
Mr. KOLBE (for himself, Mr. STENHOLM, Mr. SMITH of Michigan, Mr.
DOOLEY of California, Mr. SANFORD, Ms. MCCARTHY of Missouri, and
Mr. GREENWOOD) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Rules, for a period to be subsequently determined 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 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. Elimination of earnings test for individuals who have attained retire-
ment age.
Sec. 5. Reduction in the amount of certain transfers to Medicare Trust Fund.
Sec. 6. Increase in number of years taken into account in determining average
indexed monthly earnings.
Sec. 7. Actuarial adjustment for retirement.
Sec. 8. Improvements in process for cost-of-living adjustments.
Sec. 9. Adjustment to upper 2 benefit formula factors.
Sec. 10. Phased-in increase in social security retirement ages.
Sec. 11. Modifications in PIA formula to reflect changes in life expectancy.
Sec. 12. Mechanism for remedying unforeseen deterioration in social security
solvency.
SEC. 2. INDIVIDUAL SECURITY ACCOUNTS.
(a) ESTABLISHMENT AND MAINTENANCE OF INDI-
VIDUAL SECURITY ACCOUNTS.—Title II of the Social Se-
curity Act (42 U.S.C. 401 et seq.) is amended—
(1) by inserting before section 201 the fol-
lowing:
‘‘PART A—INSURANCE BENEFITS’’;
and
(2) by adding at the end the following:
‘‘PART B—INDIVIDUAL SECURITY ACCOUNTS
‘‘INDIVIDUAL SECURITY ACCOUNTS
‘‘SEC. 251. (a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—The Commissioner of So-
cial Security, within 30 days of the receipt of the
first contribution received pursuant to subsection (b)
with respect to an eligible individual, shall establish
in the name of such individual an individual security
account. The individual security account shall be
identified to the account holder by means of the ac-
count holder’s Social Security account number.
‘‘(2) DEFINITION OF ELIGIBLE INDIVIDUAL.—
In this part, the term ‘eligible individual’ means any
individual born after December 31, 1944.
‘‘(b) CONTRIBUTIONS.—
‘‘(1) AMOUNTS
TRANSFERRED
FROM
THE
TRUST FUND.—The Secretary of the Treasury shall
transfer from the Federal Old-Age and Survivors In-
surance Trust Fund, for crediting by the Commis-
sioner of Social Security to an individual security ac-
count 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 531(c)(2) and
6402(l) of the Internal Revenue Code of 1986.
‘‘(c) DESIGNATION OF INVESTMENT TYPE OF INDI-
VIDUAL SECURITY ACCOUNT.—
‘‘(1) DESIGNATION.—Each eligible individual
who is employed or self-employed shall designate the
investment type of individual security account to
which the contributions described in subsection (b)
on behalf of such individual are to be credited.
‘‘(2) FORM OF DESIGNATION.—The designation
described in 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 administration and reductions in burdens on
employers.
‘‘(3) SPECIAL RULE FOR 2000.—Not later than
January 1, 2000, any eligible individual that is em-
ployed or self-employed as of such date shall execute
the designation required under paragraph (1).
‘‘(4) DESIGNATION IN ABSENCE OF DESIGNA-
TION
BY
ELIGIBLE
INDIVIDUAL.—In any case in
which no designation of the individual security ac-
count is made, the Commissioner of Social Security
shall make the designation of the individual security
account in accordance with regulations that take
into account the competing objectives of maximizing
returns on investments and minimizing the risk in-
volved with such investments.
‘‘DEFINITION OF INDIVIDUAL SECURITY ACCOUNT;
TREATMENT OF ACCOUNTS
‘‘SEC. 252. (a) INDIVIDUAL SECURITY ACCOUNT.—
In this part, the term ‘individual security account’ means
any individual security account in the Individual Security
Fund (established under section 254) which is adminis-
tered by the Individual Security Fund Board.
‘‘(b) TREATMENT OF ACCOUNT.—Except as other-
wise provided in this part and in section 531 of the Inter-
nal Revenue Code of 1986, any individual security account
described in subsection (a) shall be treated in the same
manner as an individual account in the Thrift Savings
Fund under subchapter III of chapter 84 of title 5, United
States Code.
‘‘INDIVIDUAL SECURITY ACCOUNT DISTRIBUTIONS
‘‘SEC. 253. (a) DATE OF INITIAL DISTRIBUTION.—
Except as provided in subsection (c), distributions may
only be made from an individual security account of an
eligible individual on and after the earliest 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 individual security account are sufficient
to provide a monthly payment over the life expect-
ancy of the eligible individual (determined under rea-
sonable actuarial assumptions) which, when added to
the eligible individual’s monthly benefit under part A
(if any), is at least equal to an amount equal to 1⁄12
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 with the
date determined under subsection (a), the balance in
an individual security account available to provide
monthly payments not in excess of the amount de-
scribed in subsection (a)(2) shall be paid, as elected
by the account holder (in such form and manner as
shall be prescribed in regulations of the Individual
Security Fund Board), 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) similar to the require-
ments applicable to payments of benefits under sub-
chapter III of chapter 84 of title 5, United States
Code, and providing for indexing for inflation.
‘‘(2) PAYMENT OF EXCESS FUNDS.—To the ex-
tent funds remain in an eligible individual’s indi-
vidual security account after the application of para-
graph (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 in a lump sum, under
rules established by the Individual Security Fund Board,
to the individual’s heirs.
‘‘INDIVIDUAL SECURITY FUND
‘‘SEC. 254. (a) ESTABLISHMENT.—There is estab-
lished and maintained in the Treasury of the United
States an Individual Security Fund in the same manner
as the Thrift Savings Fund under sections 8437, 8438,
and 8439 (but not section 8440) of title 5, United States
Code.
‘‘(b) INDIVIDUAL SECURITY FUND BOARD.—
‘‘(1) IN GENERAL.—There is established and
operated in the Social Security Administration 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.
‘‘(2) SPECIFIC
INVESTMENT
AND
REPORTING
DUTIES.—
‘‘(A) IN GENERAL.—The Individual Secu-
rity Fund Board shall manage and report on
the activities of the Individual Security Fund
and the individual security accounts of such
Fund in the same manner as the Federal Re-
tirement Thrift Investment Board manages and
reports on the Thrift Savings Fund and the in-
dividual accounts of such Fund under sub-
chapter VII of chapter 84 of title 5, United
States Code.
‘‘(B) STUDY AND REPORT ON INCREASED
INVESTMENT OPTIONS.—
‘‘(i) STUDY.—The Individual Security
Fund Board shall conduct a study regard-
ing ways to increase an eligible individual’s
investment options with respect to such in-
dividual’s individual security account and
with respect to rollovers or distributions
from such account.
‘‘(ii) REPORT.—Not later than 2
years after the date of enactment of the
21st Century Retirement Act of 1999, the
Individual Security Fund Board shall sub-
mit a report to the President and Congress
that contains a detailed statement of the
results of the study conducted pursuant to
clause (i), together with the Board’s rec-
ommendations for such legislative actions
as the Board considers appropriate.
‘‘BUDGETARY TREATMENT OF INDIVIDUAL SECURITY
FUND AND ACCOUNTS
‘‘SEC. 255. The receipts and disbursements of the In-
dividual 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 ex-
penditures and net lending (budget outlays) of the United
States Government.’’.
(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 (as defined in section
3121(a)) received by him with respect to em-
ployment (as defined in section 3121(b)).
‘‘(B) INDIVIDUALS COVERED UNDER PART
B OF TITLE II OF THE SOCIAL SECURITY ACT.—
In addition to other taxes, there is hereby im-
posed on the income of every part B eligible in-
dividual a tax equal to 4.2 percent of the wages
(as defined in section 3121(a)) received by such
individual with respect to employment (as de-
fined in section 3121(b)).
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—
‘‘(A) IN GENERAL.—In addition to other
taxes, there is hereby imposed on the income of
every part B eligible individual an individual se-
curity account contribution equal to the sum
of—
‘‘(i) 2 percent of the wages (as so de-
fined) received by such individual with re-
spect to employment (as so defined), plus
‘‘(ii) so much of such wages (not to
exceed $2,000) as designated by the indi-
vidual in the same manner as described in
section 251(c) of the Social Security Act.
‘‘(B) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
calendar year beginning after 2000, the
dollar amount in subparagraph (A)(ii)
shall be increased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year, determined by
substituting ‘calendar year 1999’ for
‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(ii) 
ROUNDING.—If 
any 
dollar
amount after being increased under clause
(i) is not a multiple of $10, such dollar
amount shall be rounded to the nearest
multiple of $10.’’.
(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.—
In addition to other taxes, there is hereby im-
posed for each taxable year, on the self-employ-
ment income of every part B eligible individual,
a tax equal to 10.4 percent of the amount of
the self-employment income for such taxable
year.
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—
‘‘(A) IN GENERAL.—In addition to other
taxes, there is hereby imposed for each taxable
year, on the self-employment income of every
individual, an individual security account con-
tribution equal to the sum of—
‘‘(i) 2 percent of the amount of the
self-employment income for each individual
for such taxable year; and
‘‘(ii) so much of such self-employment
income (not to exceed $2,000) as des-
ignated by the individual in the same man-
ner as described in section 251(c) of the
Social Security Act.
‘‘(B) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning after 2000, the dol-
lar amount in subparagraph (A)(ii) shall
be increased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year in which the tax-
able year begins, determined by sub-
stituting ‘calendar year 1999’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(ii) 
ROUNDING.—If 
any 
dollar
amount after being increased under clause
(i) 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, 1999.
(B) SELF-EMPLOYED
INDIVIDUALS.—The
amendments made by paragraphs (2) and
(3)(B) apply to taxable years beginning after
December 31, 1999.
(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
subparagraphs (A) and (B) of paragraph (1) with
respect 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
sections 3101(a)(2)(A)(i) and 1401(a)(2)(A)(i)
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)(A)(ii) plus the
amount self-employment income designated under
section 1401(a)(2)(A)(ii) 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)(A)(ii).
‘‘(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)(A)(ii)
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.
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(o) 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, 1999.
(d) TAX TREATMENT OF INDIVIDUAL SECURITY AC-
COUNTS.—
(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 FUND AND
ACCOUNTS
‘‘Sec. 531. Individual Security Fund and Accounts.
‘‘SEC. 531. INDIVIDUAL SECURITY FUND AND ACCOUNTS.
‘‘(a) GENERAL
RULE.—The Individual Security
Fund and individual security accounts shall be exempt
from taxation under this subtitle.
‘‘(b) INDIVIDUAL SECURITY FUND AND ACCOUNTS
DEFINED.—For purposes of this section, the terms ‘Indi-
vidual Security Fund’ and ‘individual security account’
means the fund and account established under sections
254 and 251, respectively, of part B of title II of the So-
cial Security Act.
‘‘(c) CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for contributions credited to an individual se-
curity account under section 251 of the Social Secu-
rity Act or section 6402(l).
‘‘(2) ROLLOVER OF INHERITANCE.—Any por-
tion of a distribution to an heir from an individual
security account made by reason of the death of the
beneficiary of such account may be rolled over to the
individual security account of the heir.
‘‘(d) DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any distribution from an
individual security account under section 253 of the
Social Security Act shall be included in gross income
under section 72.
‘‘(2) 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.
‘‘(3) 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.’’.
(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 fund and accounts.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1999.
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, 2005, and
‘‘(ii) who has at least 80 quarters of cov-
erage.
‘‘(B) The term ‘applicable amount’ means, in
connection with an individual, $7,992 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. ELIMINATION OF EARNINGS TEST FOR INDIVID-
UALS WHO HAVE ATTAINED RETIREMENT
AGE.
(a) IN GENERAL.—Section 203 of the Social Security
Act (42 U.S.C. 403) is amended—
(1) in subsection (c)(1), by striking ‘‘the age of
seventy’’ and inserting ‘‘retirement age (as defined
in section 216(l))’’;
(2) in paragraphs (1)(A) and (2) of subsection
(d), by striking ‘‘the age of seventy’’ each place it
appears and inserting ‘‘retirement age (as defined in
section 216(l))’’;
(3) in subsection (f)(1)(B), by striking ‘‘was
age seventy or over’’ and inserting ‘‘was at or above
retirement age (as defined in section 216(l))’’;
(4) in subsection (f)(3)—
(A) by striking ‘‘331⁄3 percent’’ and all
that follows through ‘‘any other individual,’’
and inserting ‘‘50 percent of such individual’s
earnings for such year in excess of the product
of the exempt amount as determined under
paragraph (8),’’; and
(B) by striking ‘‘age 70’’ and inserting
‘‘retirement age (as defined in section 216(l))’’;
(5) in subsection (h)(1)(A), by striking ‘‘age
70’’ each place it appears and inserting ‘‘retirement
age (as defined in section 216(l))’’; and
(6) in subsection (j)—
(A) in the heading, by striking ‘‘Age Sev-
enty’’ and inserting ‘‘Retirement Age’’; and
(B) by striking ‘‘seventy years of age’’ and
inserting ‘‘having attained retirement age (as
defined in section 216(l))’’.
(b) CONFORMING AMENDMENTS ELIMINATING THE
SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE
ATTAINED RETIREMENT AGE.—
(1) 
UNIFORM
EXEMPT
AMOUNT.—Section
203(f)(8)(A) of the Social Security Act (42 U.S.C.
403(f)(8)(A)) is amended by striking ‘‘the new ex-
empt amounts (separately stated for individuals de-
scribed in subparagraph (D) and for other individ-
uals) which are to be applicable’’ and inserting ‘‘a
new exempt amount which shall be applicable’’.
(2) 
CONFORMING
AMENDMENTS.—Section
203(f)(8)(B) of such Act (42 U.S.C. 403(f)(8)(B))
is amended—
(A) in the matter preceding clause (i), by
striking ‘‘Except’’ and all that follows through
‘‘whichever’’ and inserting ‘‘The exempt amount
which is applicable for each month of a par-
ticular taxable year shall be whichever’’;
(B) in clauses (i) and (ii), by striking ‘‘cor-
responding’’ each place it appears; and
(C) in the last sentence, by striking ‘‘an
exempt amount’’ and inserting ‘‘the exempt
amount’’.
(3) REPEAL OF BASIS FOR COMPUTATION OF
SPECIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of
such Act (42 U.S.C. 403(f)(8)(D)) is repealed.
(c) ADDITIONAL CONFORMING AMENDMENTS.—
(1) ELIMINATION OF REDUNDANT REFERENCES
TO RETIREMENT AGE.—Section 203 of the Social
Security Act (42 U.S.C. 403) is amended—
(A) in subsection (c), in the last sentence,
by striking ‘‘nor shall any deduction’’ and all
that follows and inserting ‘‘nor shall any deduc-
tion be made under this subsection from any
widow’s or widower’s insurance benefit if the
widow, surviving divorced wife, widower, or sur-
viving divorced husband involved became enti-
tled to such benefit prior to attaining age 60.’’;
and
(B) in subsection (f)(1), by striking sub-
paragraph (D) and inserting the following: ‘‘(D)
for which such individual is entitled to widow’s
or widower’s insurance benefits if such indi-
vidual became so entitled prior to attaining age
60,’’.
(2) CONFORMING AMENDMENT TO PROVISIONS
FOR DETERMINING AMOUNT OF INCREASE ON AC-
COUNT
OF
DELAYED
RETIREMENT.—Section
202(w)(2)(B)(ii) 
of 
such 
Act 
(42 
U.S.C.
402(w)(2)(B)(ii)) is amended—
(A) by striking ‘‘either’’; and
(B) by striking ‘‘or suffered deductions
under section 203(b) or 203(c) in amounts
equal to the amount of such benefit’’.
(3) 
PROVISIONS
RELATING
TO
EARNINGS
TAKEN INTO ACCOUNT IN DETERMINING SUBSTAN-
TIAL GAINFUL ACTIVITY OF BLIND INDIVIDUALS.—
The second sentence of section 223(d)(4) of such
Act (42 U.S.C. 423(d)(4)) is amended by striking
‘‘if section 102 of the Senior Citizens’ Right to
Work Act of 1996 had not been enacted’’ and insert-
ing the following: ‘‘if the amendments to section 203
made by section 102 of the Senior Citizens’ Right to
Work Act of 1996 and by the Strengthening Social
Security Act of 1998 had not been enacted’’.
(d) EFFECTIVE DATE.—The amendments and re-
peals made by this section shall apply with respect to tax-
able years ending after December 31, 1999.
SEC. 5. 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. 6. 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 .....................................................................................
5.
2002 or 2003 .....................................................................................
4.
2004 or 2005 .....................................................................................
3.
2006 or 2007 .....................................................................................
2.
2008 or 2009 .....................................................................................
1.
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,
1999.
SEC. 7. 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 2001, is 5⁄9;
‘‘(B) 2001, is 7⁄12;
‘‘(C) 2002, is 11⁄18;
‘‘(D) 2003, is 23⁄36;
‘‘(E) 2004, is 2⁄3; and
‘‘(F) 2005 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 2001, is 5⁄12;
‘‘(B) 2001, is 16⁄36;
‘‘(C) 2002, is 16⁄36;
‘‘(D) 2003, is 17⁄36;
‘‘(E) 2004, is 17⁄36; and
‘‘(F) 2005 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 1999.
(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. 8. 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, 1999, 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 December 31, 1998.
(2) UPPER
LEVEL
SUBSTITUTION
BIAS.—Not
later than August 1, 2000, 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 1999,
2000, and 2001, $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 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 Act of 1999 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 Act of
1999), 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 1999.
(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
(8) 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:
‘‘(8) 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 Act of
1999 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,
1999, 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 Act of
1999.
(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.