[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3055 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 3055
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, to
amend such title and the Balanced Budget and Emergency Deficit Control
Act of 1985 to protect Social Security surpluses, and to provide other
reforms relating to benefits under such title II.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 10, 2003
Mr. Smith of Michigan (for himself, Mr. Kolbe, Mr. Stenholm, Mr.
Toomey, Mr. Shadegg, and Mr. Flake) 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 prospectively for personalized retirement
security through personal retirement savings accounts to allow for more
control by individuals over their Social Security retirement income, to
amend such title and the Balanced Budget and Emergency Deficit Control
Act of 1985 to protect Social Security surpluses, and to provide other
reforms relating to benefits under such title II.
Be it enacted by the Senate and House of Representatives 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 2003''.
(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. Adjustments in amounts appropriated to the Federal Old-Age
and Survivors Insurance Trust Fund based on
reallocation percentage.
Sec. 103. Adjustments to primary insurance amounts under part A of
title II of the Social Security Act.
Sec. 104. Personal retirement savings accounts.
Sec. 105. Individual retirement security program refundable credit.
TITLE II--SOCIAL SECURITY SURPLUS PROTECTION
Sec. 201. Regulation of flow of funds between the General Fund and the
Social Security Trust Funds.
TITLE III--SOCIAL SECURITY BENEFIT REFORMS
Sec. 301. Gradual increase in retirement age and early retirement age.
Sec. 302. Adjustments to bend points in determining primary insurance
amounts.
Sec. 303. Information relating to benefit limitations provided in
social security account statements.
Sec. 304. Coverage of newly hired State and local employees.
Sec. 305. Increase in monthly insurance benefits for widows and
widowers.
Sec. 306. Acceleration of increase in delayed retirement credit.
Sec. 307. Authorization for reimbursement of Federal Disability
Insurance Trust Fund for certain costs of
disability insurance benefits.
Sec. 308. Study to develop recommendations for providing for elections
under which individuals may opt for
exclusion from social security coverage.
Sec. 309. Increase in number of years disregarded in determining
average annual earnings on which benefit
amounts are based where remunerative work
is precluded by need to provide child care.
Sec. 310. Exclusion of disabled adult children from reduction in
benefits under the family maximum
provisions.
TITLE IV--RETIREMENT SECURITY
Sec. 401. Pensions and individual retirement arrangement provisions of
the Economic Growth and Tax Relief
Reconciliation Act of 2001 made permanent.
Sec. 402. Acceleration of phase-ins of scheduled increases in IRA and
pension plan contribution limits.
Sec. 403. Refundable credit for premiums on qualified long-term care
insurance contracts.
Sec. 404. Tax credit for taxpayers providing care for dependent parents
in their households.
Sec. 405. Nonrefundable tax credit for expenses of seniors for
maintaining a principal residence.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--On July 15, 1999, the House Budget Committee Social
Security Task Force adopted the following Findings by unanimous vote on
July 15, 1999:
(1) Time is the enemy of Social Security reform and we
should move without delay. Prompt action will give us time to
institute gradual reforms that allow workers to plan for their
retirement and minimizes the impact for current or near-term
retirees.
(2) The Social Security Trust Fund is a secure, legal
entity comprised of U.S. Treasury Bonds backed by the full
faith and credit of the U.S. Government. While the U.S. has
never defaulted on any of its obligations, these represent a
legal claim on future Federal revenue. Such securities will
have to be redeemed from funds outside the Trust Fund itself.
(3) Any reform must consider the effects on all
generations, genders, and those currently receiving Social
Security benefits. Since current demographic projections may
very well underestimate future life expectancy, reform
proposals should insure that the intergenerational balance that
has characterized this program remains intact.
(4) No payroll tax increase.
(5) A universal Social Security survivor and disability
benefit program needs to be maintained. To shield the disabled
and those who have been in the system a short time, general
fund monies should be used to supplement program benefits.
(6) Social Security surpluses should only be spent for
Social Security and should support a reform program that
encourages savings and overall economic growth.
(7) Investment in the capital markets presents an
opportunity to restore Social Security's solvency. The
investment income generated by savings-based reform should not
be used for any purpose other than retirement.
(8) Investments in personal accounts can be managed to
minimize administrative costs, avoiding substantial reductions
rates of return on investment. Individual investors can use
guaranteed return securities and annuities to create a personal
investment safety net that assures a stable retirement income
for each worker.
(b) Additional Findings.--The Congress adds the following to the
above Findings:
(1) One of America's most popular Government programs,
Social Security, is in jeopardy. The 1998 Board of Trustee's
report states that the current system faces an actuarial
deficit of 2.09 percent of taxable payroll. According to the
1998 Board of Trustee's report, the Social Security trust fund
will begin to run a deficit by 2014 and will be exhausted by
2032.
(2) Helping assure Americans retirement security is a major
national goal.
(3) The Congress should strengthen Social Security to
ensure Americans retirement security. The changes made to
strengthen Social Security should create a solvent Social
Security system, and avoid payroll tax increases.
(4) The root causes of the weaknesses in the current Social
Security system are its inadequate funding mechanism and
changing demographics. Social Security was designed in 1935 as
a pay-as-you-go system, in which current workers supported
current retirees. This design worked when America had 42
workers per beneficiary in 1945, but that ratio has fallen over
time. In 1999 there are only 3.2 workers per beneficiary, and
by 2060 the ratio is projected to fall to 1.8 workers per beneficary.
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 higher investment
returns will increase their income in retirement. Over the last
100 years, the stock market has earned roughly 7 percent after
inflation compared to a yield of 1.5 to 2 percent after
inflation projects by the Social Security Administration for
workers' payroll taxes. The difference is enormous. For
example, $1,000 invested for 50 years at 2 percent becomes
nearly $2,700. The same amount invested for 50 years at 7
percent becomes nearly $30,000.
(c) Purposes.--The purposes of this Act are as follows:
(1) To give workers and retirees more ownership and control
over their retirement savings.
(2) To improve the living standards of American seniors by
allowing them to take advantage of low-risk investment
opportunities that earn higher returns than those they can
expect to realize under the current Social Security system.
(3) To stimulate the American economy by increasing savings
and investment leading to higher productivity, more jobs, and
better wages.
(4) To ensure the solvency of the Social Security system
while maintaining an adequate reserve in the Social Security
trust fund.
TITLE I--INDIVIDUAL RETIREMENT SECURITY PROGRAM
SEC. 101. ESTABLISHMENT OF INDIVIDUAL RETIREMENT PROGRAM.
(a) In General.--Title II of the Social Security Act is amended--
(1) by inserting before section 201 the following:
``Part A--Insurance Benefits'';
and
(2) by adding at the end the following new part:
``Part B--Individual Retirement Security Program
``deposits to personal retirement savings accounts
``Sec. 251. (a) Designation of Personal Retirement Savings Accounts
by Participating Individuals.--
``(1) In general.--Under regulations prescribed by the
Board of Trustees, a participating individual, and the spouse
of such an individual, upon the attainment of a minimum deposit
balance in the Interim Investment Fund as described in
subsection (b), may designate, in writing filed with the
Commissioner of Social Security in such form and manner as may
be prescribed in such regulations, one or more personal
retirement savings accounts to which deposits with respect to
the individual or spouse are to be made under subsection (b).
The individual or spouse may designate other personal
retirement savings accounts in lieu of or in addition to
accounts previously designated, in accordance with regulations
of the Board of Trustees.
``(2) Election not to participate.--For provisions relating
to election not to be a participating individual, see section
254(3)(B).
``(b) Deposits to Personal Retirement Savings Accounts.--
``(1) In general.--In any case in which the total amount in
the Interim Investment Fund credited under section 252 to a
participating individual as of the end of any annual reporting
month, adjusted so as to reflect net earnings and net losses
attributable to such amount from investment of the balance in
the Fund under section 252(c), equals or exceeds the minimum
deposit amount, the Secretary of the Treasury shall, within 30
days after the end of such month, notify the individual of the
amount credited to such individual in the Fund. If such total
amount credited to such individual as of the end of such
individual's annual reporting month is at least equal to the
minimum deposit amount, pursuant to the written election of
such individual which is filed in accordance with regulations
of the Board of Trustees and received by the Secretary of the
Treasury during the 90-day period following the individual's
annual reporting month, the Secretary of the Treasury shall
transfer such total amount from such Fund to such personal
retirement savings accounts as are designated under subsection
(a) with respect to such individual.
``(2) Definitions.--For purposes of this subsection:
``(A) Annual reporting month.--The term `annual
reporting month' means, in connection with a
participating individual, a calendar month of the
calendar year assigned to such individual as his or her
annual reporting month according to a schedule that
shall be prescribed in regulations of the Board of
Trustees.
``(B) Minimum deposit balance.--
``(i) In general.--Subject to clause (ii),
the term `minimum deposit balance' means an
amount equal to $2,500.
``(ii) Adjustments.--The Secretary of the
Treasury shall adjust annually (effective for
annual reporting months occurring after
December 2005) the dollar amount set forth in
clause (i) under procedures providing for
adjustments in the same manner and to the same
extent as adjustments are provided for under
the procedures used to adjust benefit amounts
under section 215(i)(2)(A), except that any amount so adjusted that is
not a multiple of $1.00 shall be rounded to the nearest multiple of
$1.00.
``(c) Lump Sum Payment to Estate Upon Death of Account Holder.--
Upon the death of the account holder, the amount of any assets in the
personal retirement savings account shall be transferred in a lump sum,
under rules established by the Board of Trustees, to the account
holder's estate.
``(d) Public Education Effort.--Under regulations prescribed by the
Board of Trustees, the Commissioner of Social Security shall conduct a
public education effort. Such effort shall include dissemination to
participating individuals of information that will assist them in
making educated investment decisions under the program established
under this part.
``interim investment fund
``Sec. 252. (a) Establishment of Interim Investment Fund.--There is
established in the Treasury of the United States an Interim Investment
Fund. The Board of Trustees shall serve as trustees of such Fund. The
Fund consists of all amounts derived from payments into the Fund under
subsection (b) and remaining after investment of such amounts under
subsection (c), including additional amounts derived as income from
such investments. The amounts held in the Fund are appropriated and
shall remain available without fiscal year limitation to be held for
investment under subsection (c), to pay the administrative expenses
related to the Fund and to investment under subsection (c), and to make
transfers to personal retirement savings accounts under section
251(b)(1).
``(b) Payments Into Interim Investment Fund.--
``(1) In general.--During each calendar year, the Secretary
of the Treasury shall deposit into the Interim Investment Fund,
from amounts otherwise available in the general fund of the
Treasury, a total amount equal, in the aggregate, to 100
percent of the redirected social security taxes for such
calendar year of each individual who is a participating
individual for such calendar year.
``(2) Transfers based on estimates.--The amounts deposited
pursuant to paragraph (1) shall be transferred in at least
monthly payments from the general fund in the Treasury to the
Interim Investment Fund, such amounts to be determined on the
basis of estimates by the Secretary of the Treasury of the
taxes, specified in section 251(b)(1), paid to or deposited
into the Treasury; and proper adjustments shall be made in
amounts subsequently transferred to the extent prior estimates
were in excess of or were less than actual amounts.
``(3) Separate accounting and crediting.--Subject to this
paragraph, the Secretary of the Treasury shall provide for
prompt, separate accounting of the amounts deposited in the
Interim Investment Fund with respect to each individual during
each calendar year, together with any increases or decreases
therein for such year so as to reflect the net returns and
losses from investment thereof while held in the Fund during
such year. Such accounting shall also take into account any
adjustments made pursuant to paragraph (2). Under such
accounting, amounts initially deposited into the Fund during
each fiscal year with respect to the redirected social security
taxes of each participating individual (including net returns
and losses from the investment thereof) shall be credited, not
later than the end of the succeeding fiscal year, as follows:
``(A) If the participating individual is not
married as of the end of the fiscal year in which the
amounts to be credited were deposited, such amount
shall be credited to such participating individual.
``(B) If the participating individual is married as
of the end of such fiscal year--
``(i) 50 percent of such amounts shall be
credited to such participating individual, and
``(ii) 50 percent of such amounts shall be
credited to the individual who is the spouse of
such individual as of the end of such fiscal
year.
``(4) Redirected social security taxes.--For purposes of
paragraph (1), the term `redirected social security taxes' of
an individual for a calendar year means the product derived by
multiplying--
``(A) the sum of the total taxes paid under
sections 3101(a) and 3111(a) of the Internal Revenue
Code of 1986 with respect to such individual during
such calendar year, and the total taxes paid under
section 1401(a) of such Code with respect to such
individual during such calendar year, by
``(B) the reallocation percentage declared for such
calendar year under section 201(n)(2) of this Act.
``(c) Investment in Common Stock and Corporate Bonds in 3
Alternative Investment Accounts.--
``(1) In general.--For purposes of investment of the
Interim Investment Fund, the Board of Trustees shall divide the
Fund into 3 investment accounts. Such accounts shall consist of
the 60/40 investment account, the 40/60 investment account, and
the 80/20 investment account. The Board of Trustees shall
contract with appropriate investment managers selected for
investment of amounts held in each investment account.
``(2) Rules relating to the 60/40 investment account.--
``(A) Default investment account.--Except as
provided in an election in effect under paragraph (3),
amounts held in the Interim Investment Fund shall be
credited to the 60/40 investment account and invested
as provided in subparagraph (B).
``(B) Investment.--Each investment manager selected
under paragraph (1) for investment of amounts held in
the 60/40 investment account shall invest such amounts
under regulations which shall be prescribed by
the Board of Trustees so as to ensure, to the maximum extent
practicable, that, of the total balance in the Fund credited to such
account and available for investment (after allowing for administrative
expenses)--
``(i) 60 percent is invested in common
stock in accordance with paragraph (4), and
``(ii) 40 percent is invested in corporate
bonds in accordance with paragraph (5).
``(3) Election of transfers to the 40/60 investment account
and the 80/20 investment account.--
``(A) In general.--Pursuant to any individual's
written election filed in accordance with regulations
of the Board of Trustees and received by the Secretary
of the Treasury during the period beginning January 1
of each year and ending March 31 of such year, the
Secretary of the Treasury shall transfer to any of the
investment accounts in the Interim Investment Fund
(whichever is designated in such election), from either
of the other investment accounts in the Interim
Investment Fund, the amount credited to such other
investment account as of the end of the fiscal year
ending on September 30 of the prior calendar year.
``(B) Investment of 40/60 investment account.--Each
investment manager selected under paragraph (1) for
investment of amounts held in the 40/60 investment
account shall invest such amounts under regulations
which shall be prescribed by the Board of Trustees so
as to ensure, to the maximum extent practicable, that,
of the total balance in the Fund credited to such
account and available for investment (after allowing
for administrative expenses)--
``(i) 40 percent is invested in common
stock in accordance with paragraph (4), and
``(ii) 60 percent is invested in corporate
bonds in accordance with paragraph (5).
``(C) Investment of 80/20 investment account.--Each
investment manager selected under paragraph (1) for
investment of amounts held in the 80/20 investment
account shall invest such amounts under regulations
which shall be prescribed by the Board of Trustees so
as to ensure, to the maximum extent practicable, that,
of the total balance in the Fund credited to such
account and available for investment (after allowing
for administrative expenses)--
``(i) 80 percent is invested in common
stock in accordance with paragraph (4), and
``(ii) 20 percent is invested in corporate
bonds in accordance with paragraph (5).
``(4) Investment in common stock.--In accordance with
regulations which shall be prescribed by the Board of Trustees,
the Board of Trustees shall establish standards which must be
met by common stock selected for investment of the balance of
the Interim Investment Fund pursuant to paragraph (2)(B)(i),
(3)(B)(i), or (3)(C)(i). In conformity with such standards, the
Board of Trustees shall select, for purposes of such
investment, indices which are comprised of common stock the
aggregate market value of which is, in each case, a reasonably
broad representation of publicly held companies whose shares
are traded on the equity markets. Amounts invested in common
stock by each investment manager shall beheld in a portfolio
designed to replicate the performance of one or more of such
indices.
``(5) Investment in corporate bonds.--In accordance with
regulations which shall be prescribed by the Board of Trustees,
the Board of Trustees shall establish standards which must be
met by corporate bonds selected for investment of the balance
of the Interim Investment Fund pursuant to paragraph
(2)(B)(ii), (3)(B)(ii), or (3)(C)(ii). Such standards shall
take into account the competing considerations of risk and
return. Amounts invested in corporate bonds by each investment
manager shall be held in a portfolio which shall consist of a
diverse range of corporate bonds, taking into full account the
opposing considerations of risk and maximization of return.
``(d) Lump Sum Payment to Estate Upon Death of Participating
Individual.--Upon the death of a participating individual, the amount
of any assets in the Interim Investment Fund credited to such
individual shall be transferred in a lump sum, under rules established
by the Board of Trustees, to such individual's estate.
``periodic reports by account trustee
``Sec. 253. (a) In General.--The trustee of a personal retirement
savings account shall make periodic reports concerning the status of
the account which shall meet the requirements of section 531(g)(2) of
the Internal Revenue Code of 1986 and of this section. Each periodic
report shall be furnished to the account holder on at least a
semiannual basis on or before the 60th day following 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 rate of return for the period covered.
``(3) The amount of authorized personal retirement savings
account contributions.
``(4) The amount of distributions.
``(5) The name and address of the trustee.
``(6) Commission fees and fees for administrative expenses
charged in connection with the account.
``(7) 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 participating individual.
``(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 specify in regulations under this section.
``(d) Failure by Trustee To Make Timely Periodic 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 trustee 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 subsection shall be imposed by the
Board of Trustees and collected in a civil action. The Board of
Trustees may compromise the amount of any civil penalty imposed
by this subsection. The Board of Trustees may waive the
application of this subsection with respect to any failure if
the Board of Trustees determines that such failure is due to
reasonable cause and not to intentional disregard of rules and
regulations.
``definitions
``Sec. 254. For purposes of this title--
``(1) Personal retirement savings account.--The term
`personal retirement savings account' has the meaning provided
in section 531 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 respect to having an individual in his employ to whom
wages are paid by such person during such calendar year.
``(3) Participating individual.--
``(A) In general.--The term `participating
individual' means any individual--
``(i) with respect to whose employment by a
person who is a covered employer for any
calendar year beginning after December 31,
2004, there is imposed an excise tax under
section 3111 of the Internal Revenue Code of
1986, or
``(ii) on whose self-employment income for
a taxable year beginning after December 31,
2004, there is imposed a tax under section
1401(a) of the Internal Revenue Code of 1986,
and who has not filed an election for exemption under
subparagraph (B).
``(B) Election for exemption.--
``(i) In general.--An individual may, prior
to attaining retirement age (as defined in
section 216(l)) and receiving any distribution
from a personal retirement savings account,
file with the Commissioner of Social Security
under this subparagraph, in such form and
manner as shall be prescribed in regulations of
the Commissioner, a written form electing to be
exempted from the status of `participating
individual' for purposes of this part. Upon
completion of the procedures provided for under
clause (ii), an individual who has filed such
an election and has not received a distribution
from a personal retirement savings account
shall not be treated as a participating
individual under this part. Any such election
shall be irrevocable.
``(ii) Procedure.--The Board of Trustees
shall prescribe by regulation procedures
governing the termination of an individual's
status as `participating individual' pursuant
to an election for exemption filed under this
subparagraph. Such procedures shall include--
``(I) prompt closing of all
personal retirement savings accounts of
such individual and prompt transfer to
the Federal Old-Age and Survivors
Insurance Trust Fund and the Federal
Disability Insurance Trust Fund of the
balance in such accounts, and
``(II) prompt transfer to such
Trust Funds of any amount credited to
such person in the Interim Investment
Fund.
The Commissioner of Social Security shall
determine, in accordance with such regulations,
the allocation between such Trust Funds of
amounts transferred to such Trust Funds
pursuant to this clause.
``(4) Business day.--The term `business day' means any day
other than a Saturday, Sunday, or legal holiday in the area
involved.
``(5) 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 treasury.--
``(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 detail, on a
reimbursable basis, any of the personnel of the
Department of the Treasury 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 Secretary shall
provide to the Board of Trustees 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 Requirements.--
(1) Effective date.--The amendments made by subsection (a)
shall apply with respect to wages paid after December 31, 2004,
for pay periods ending 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, 2004,
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 Insurance 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
telephone from all localities in the United
States to the Social Security Administration
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 telephone,
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 Security 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 individual pursuant to subparagraph (A)--
(i) a statement of the number of quarters
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 accurate, and
(ii) the number for toll-free access by
telephone established by the Commissioner
pursuant to subparagraph (A).
SEC. 102. ADJUSTMENTS IN AMOUNTS APPROPRIATED TO THE FEDERAL OLD-AGE
AND SURVIVORS INSURANCE TRUST FUND BASED ON REALLOCATION
PERCENTAGE.
(a) In General.--Section 201 of the Social Security Act (42 U.S.C.
401) is amended by adding at the end the following new subsection:
``Reduction in Appropriations to Federal Old-Age and Survivors
Insurance Trust Fund Based on Reallocation Percentage
``(n)(1) Under regulations prescribed by the Board of Trustees of
the Trust Funds (in consultation with the Secretary of the Treasury) to
carry out this subsection, the amounts transferred from the general
fund in the Treasury to each Trust Fund under subsections (a) and (b)
during any calendar year shall be reduced by an amount equal to the
product derived by multiplying--
``(A) the total amount which would (but for this
subsection) be so transferred during such year, by
``(B) the reallocation percentage for such year.
``(2)(A) The Board of Trustees shall declare and publish in the
Federal Register on or before July 1 of each calendar year the
reallocation percentage for amounts otherwise transferrable to the
Trust Funds under this section during the next following calendar year.
``(B) For purposes of this subsection, the term `reallocation
percentage' for amounts otherwise transferrable during any calendar
year means--
``(i) in the case of calendar years preceding 2026, 20.16
percent,
``(ii) in the case of calendar years following 2025 and
preceding 2039, 22.18 percent, and
``(iii) in the case of each calendar year following 2038,
the best estimate of the Board of Trustees of the maximum
percentage by which the amounts described in subparagraph (A)
for the calendar year may be reduced so as to maintain a
reserve in each Trust Fund as of the end of such calendar year
equal to 15 percent of the amount of benefits projected to be
paid from the Trust Fund during the next calendar year, except
that such percentage--
``(I) shall be adjusted as necessary for the
calendar year so as to avoid a reduction in the
percentage below the percentage in effect for the
preceding calendar year and to amortize any
substantially deviant annual increase over the
remaining calendar years ending with or prior to 2038
to the extent necessary, in accordance with regulations
of the Board of Trustees, to avoid instability arising
from such annual increase, and
``(II) may not exceed for any year 64.52 percent.
In determining the percentage for any year under clause (iii), 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) Recommendations Regarding Reductions in Social Security
Taxes.--In any case in which the Board of Trustees of the Federal Old-
Age and Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund at any time estimates that the reallocation
percentage (as defined in section 201(n)(2)(B)(i) of the Social
Security Act) for any of the next following 5 calendar years will equal
64.52 percent, the Board of Trustees shall include within its next
annual report to the Congress and the President its recommendations for
reductions in taxes under chapters 2 and 21 of the Internal Revenue
Code of 1986 so as to avoid unnecessary surpluses in such Trust Funds.
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 individual's
primary insurance amount as determined in accordance 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 applicable monthly amount, which shall be
determined under clause (i), (ii), or (iii) as follows:
``(i) Except as provided in clauses (ii) and (iii),
the applicable monthly amount shall be the initial
monthly amount of an immediate joint and survivor
annuity, determined on the basis of the total amount of
the individual's redirected social security taxes (as
defined in section 252(a)(4)) for calendar years ending
before the date of the determination of the
individual's primary insurance amount, plus 50 percent
of the amounts paid to designated accounts of the
individual for such calendar years under section
3511(d) of the Internal Revenue Code of 1986, (indexed
in the same manner as is applicable with respect to
average indexed monthly earnings under subsection (b)).
``(ii) In the case of an individual who, as of the
first day of the first month for which such primary
insurance amount is determined, is married, the
applicable monthly amount shall be the sum of--
``(I) \2/3\ of the initial monthly amount
of an immediate joint and survivor annuity,
determined on the basis of the total amount of
the individual's redirected social security
taxes (as defined in section 252(a)(4)) for
calendar years ending before the date of the
determination of the individual's primary
insurance amount, plus 50 percent of the
amounts paid to designated accounts of the
individual for such calendar years under
section 3511(d) of the Internal Revenue Code of
1986, (indexed in the same manner as is
applicable with respect to average indexed
monthly earnings under subsection (b)); plus
``(II) \1/3\ of the initial monthly amount
of an immediate joint and survivor annuity,
determined on the basis of the total amount of
the redirected social security taxes (as
defined in section 252(a)(4)) of such
individual's spouse for calendar years ending
before the date of the determination of the
individual's primary insurance amount, plus 50
percent of the amounts paid to designated
accounts of the individual's spouse for such
calendar years under section 3511(d) of such
Code, (indexed in the same manner as is
applicable with respect to average indexed
monthly earnings under subsection (b)).
``(iii) In the case of an individual who, as of the
first day of the first month for which such primary
insurance amount is determined, is divorced (and has
not remarried since such divorce), the applicable
monthly amount shall be the sum of--
``(I) \1/2\ of the initial monthly amount
of an immediate joint and survivor annuity,
determined on the basis of the total amount of
such individual's redirected social security
taxes (as defined in section 252(a)(4)) for
calendar years ending before the date of the
determination of the individual's primary
insurance amount, plus 50 percent of the
amounts paid to designated accounts of the
individual for such calendar years under
section 3511(d) of the Internal Revenue Code of
1986, (indexed in the same manner as is
applicable with respect to average indexed
monthly earnings under subsection (b)); plus
``(II) \1/2\ of the initial monthly amount
of an immediate joint and survivor annuity,
determined on the basis of the total amount of
the redirected social security taxes (as
defined in section 252(a)(4)) of the
individual's former spouse in connection with
such divorce for calendar years ending before
the date of the determination of the
individual's primary insurance amount, plus 50
percent of the amounts paid to designated
accounts of such former spouse for such
calendar years under section 3511(d) of such
Code, (indexed in the same manner as is
applicable with respect to average indexed
monthly earnings under subsection (b)).
``(2) In making determinations under this subsection, the
Commissioner shall employ the intermediate assumptions used by the
Board of Trustees of the Federal Old-Age and Survivors Insurance Trust
Fund and the Federal Disability Insurance Trust Fund in its most recent
annual report, including mortality tables consistent with such
assumptions, except that the Commissioner shall assume an interest rate
equal to the sum of the projected average market yield (as assumed by
the Commissioner) on all marketable interest-bearing obligations of the
United States forming a part of the public debt which are not due or
callable until after the expiration of 4 years, plus 0.7 percent.
``(3) In the case of an individual described in paragraph (1) who
becomes entitled to disability insurance benefits under section 223,
such individual's primary insurance amount shall be determined without
regard to paragraph (1).
``(4) For purposes of this subsection--
``(A) The term `immediate joint and survivor annuity' means
an annuity--
``(i) 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 following the
date of the determination,
``(ii) which provides for a series of substantially
equal monthly payments over the life expectancy of the
individual described in paragraph (1), subject to
annual percentage adjustments equal to the annual
percentage adjustments taking effect under subsection
(i),
``(iii) which provides for a survivor annuity for
such individual's spouse in the form of a series of
substantially equal monthly payments over the life
expectancy of such spouse, the initial monthly payment
of which is equal to the amount of the last monthly
payment payable during the joint lives of such
individual and such spouse, subject to annual
percentage adjustments equal to the annual percentage
adjustments taking effect under subsection (i), and
``(iv) which is the actuarial equivalent of an
immediate life annuity for the life of such individual.
``(B) The term `immediate life annuity' means an annuity--
``(i) 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 following the
date of the determination, and
``(ii) which provides for a series of substantially
equal monthly payments over the life expectancy of the
individual described in paragraph (1), subject to
annual percentage adjustments equal to the annual
percentage adjustments taking effect under subsection
(i).''.
(b) Conforming Amendment to Railroad Retirement Act of 1974.--
Section 1 of the Railroad Retirement Act of 1974 (45 U.S.C. 231) is
amended by adding 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, 2004.
SEC. 104. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
(a) Deduction for Contributions by Taxpayer.--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 223 as section 224 and by inserting after section
222 the following new section:
``SEC. 223. CONTRIBUTIONS TO PERSONAL RETIREMENT SAVINGS ACCOUNTS.
``(a) In General.--In the case of an individual who is an electing
personal retirement savings account participant for the taxable year,
there shall be allowed as a deduction an amount equal to 50 percent of
the amount contributed 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(b) 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-trustee transfers.--No
deduction shall be allowed for amounts transferred to an
account in a rollover contribution described in section
531(b)(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 extensions thereof).''
(b) Personal Retirement Savings Accounts.--Subchapter F of chapter
1 of such Code (relating to exempt organizations) is amended by adding
at the end the following new part:
``PART IX--PERSONAL RETIREMENT SAVINGS ACCOUNTS
``Sec. 531. Personal retirement savings
accounts.
``SEC. 531. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
``(a) General Rule.--Gross income shall not include any amount
deposited in a personal retirement savings account under section 251(b)
of the Social Security Act.
``(b) Personal Retirement Savings Account.--
``(1) In general.--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 instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted other than--
``(i) deposits under section 251(b) of the
Social Security Act,
``(ii) amounts paid under section 3511(d),
``(iii) contributions made in cash, except
that contributions under this subparagraph may
not be accepted for any taxable year in excess
of $2,000, and
``(iv) a contribution which is a rollover
contribution described in paragraph (2).
``(B) Except as provided in paragraph (3) and
subsection (f)(2), no amount may be paid or distributed
from such trust--
``(i) before the date on which the account
holder attains age 59\1/2\ or dies, or
``(ii) in a manner not meeting the
requirements of subsection (d).
``(C) The trustee of which is a regulated
investment company (as defined in section 851) which is
approved by the Secretary for purposes of this section.
``(D) The interest of an individual in the balance
in his account is nonforfeitable.
``(2) Transfer pursuant to election for exemption.--If the
account holder makes an election of exemption under section
254(3)(B) of the Social Security Act, so much of the amounts in
the personal retirement savings account as are attributable to
contributions under section 251(b) of such Act, and payments
under section 3511(d), and earnings thereon, shall be paid to
the Federal Old-Age and Survivors Insurance Trust Fund and the
Federal Disability Insurance Trust Fund in accordance with the
regulations under such section 254(3)(B).
``(3) Rollover contributions.--For purposes of paragraph
(1)(A), a rollover contribution is described in this paragraph
if such contribution is--
``(A) a direct trustee-to-trustee transfer
described in subsection (f)(2), or
``(B) a transfer from an eligible retirement plan
(as defined in section 402(c)(8)) to the personal
retirement savings account if no amount is includible
in gross income by reason of such transfer, determined
by treating such account as the same type of plan as
the plan from which such transfer were made.
``(c) Investment Requirements.--
``(1) In general.--Amounts in a personal retirement savings
account may be invested only in regulated investment companies
(as defined in section 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 company--
``(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.
``(3) Diversification required.--To the extent possible,
the Secretary shall approve under subparagraph (B)(i) funds in
each of the following 4 categories: domestic stocks, domestic
bonds, stocks of companies having small capitalization, and
foreign stocks. Nothing in this subsection shall be construed
to preclude the use of managed funds devised so as to minimize
risk.
``(4) Consideration of management costs.--The Secretary
shall take into account management costs in determining whether
to approve 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 (other than reasonable administrative fees
meeting such requirements as may be prescribed in regulations
of the Secretary) only if such distributions are in accordance
with a payment option under paragraph (2). The preceding
sentence shall not apply to direct trustee-to-trustee transfers
described in subsection (f)(2) or distributions to a deceased
account holder's estate under section 251(c) of the Social
Security Act.
``(2) Payment options.--The payment options under this
paragraph are the following:
``(A) Lifetime option.--Distributions in equal
annual or more frequent periodic installments payable
to the account holder in equal annual or more frequent
periodic installments over the life of the account
holder. The trustee of the account shall be liable
under the terms of the account to the account holder
for the timely payment of such periodic payments.
``(B) Nonlifetime option.--
``(i) In general.--Distributions in equal
annual or more frequent periodic installments
of interest only, or of interest and principal.
Any such payment of equal installments 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.
``(ii) Limitations.--Payments from the
account under a distribution described in
clause (i) shall be limited as of any date to
the extent necessary to ensure that funds in
the account are sufficient at all times to
provide a monthly payment over the life
expectancy of the account holder (determined
under reasonable actuarial assumptions) which,
when added to the account holder's monthly
benefit under part A (if any), is at least
equal to an amount equal to \1/12\ of the
poverty line (as determined under 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).
``(C) Additional options.--Distributions in any
other manner permitted under regulations 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 unrelated business income of charitable,
etc. organizations).
``(2) Application of prohibited transactions 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 distributed from a
personal retirement savings account shall be includible in
gross income only if so includible 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 personal retirement savings accounts
of the same individual.
``(3) Return of excess contributions.--Paragraph (1) shall
not apply to the distribution of any contribution (other than a
deposit made under section 251(b) of the Social Security Act)
made during a taxable year to the extent that such contribution
exceeds the dollar amount specified in subsection (b)(1)(B)
if--
``(A) such distribution is received on or before
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 223,
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 following rules shall
apply to personal retirement savings accounts in the same manner that
such rules apply to individual retirement accounts:
``(1) Section 408(h) (relating to custodial accounts).
``(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 reason of such cessation.''
(c) Deduction Allowed Whether or Not Taxpayer Itemizes Other
Deductions.--Subsection (a) of section 62 of such Code is amended by
inserting after paragraph (18) the following new paragraph:
``(19) Personal retirement savings accounts.--The deduction
allowed by section 223.''
(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 (3),
by adding ``or'' at the end of paragraph (4), and by inserting
after paragraph (4) the following new paragraph:
``(5) a personal retirement savings account (as defined in
section 531),''.
(2) Excess contribution defined.--Section 4973 of such Code
is amended by adding at the end the following new subsection:
``(g) Excess Contributions to Personal Retirement Savings
Accounts.--For purposes of this section--
``(1) In general.--In the case of personal retirement
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 paragraph (1), the
following contributions shall not be taken into account:
``(A) Any contributions under section 251(b) 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 subparagraph (G), by striking ``or'' at the
end of subparagraph (E), and by inserting after subparagraph
(E) the following new subparagraph:
``(F) a personal retirement savings account
described in section 531(b), or''.
(2) Paragraph (2) of section 6693(a) of such Code (relating
to failure to provide reports on certain tax favored accounts
or annuities) is amended by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E), respectively, and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) section 531(g)(2) (relating to personal
retirement savings accounts),''.
(f) Clerical Amendments.--
(1) The table of sections for part VII of subchapter B of
chapter 1 of such Code is amended by striking the last item and
inserting the following new items:
``Sec. 223. Contributions to personal
retirement savings accounts.
``Sec. 224. Cross reference.''
(2) The table of parts for subchapter F of chapter 1 of
such Code is amended by adding after the item relating to part
VIII the following new item:
``Part IX--Personal retirement savings
accounts.''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
SEC. 105. INDIVIDUAL RETIREMENT SECURITY PROGRAM REFUNDABLE CREDIT.
(a) In General.--Chapter 25 of the Internal Revenue Code of 1986
(relating to general provisions relating to employment taxes) is
amended by adding at the end the following new section:
``SEC. 3511. INDIVIDUAL RETIREMENT SECURITY PROGRAM REFUNDABLE CREDIT.
``(a) In General.--The designated account of each participating
individual shall receive for each calendar year the lesser of--
``(1) the credit amount, or
``(2) the amount of compensation includible in the such
individual's gross income for such year.
``(b) Credit Amount.--
``(1) In general.--For purposes of subsection (a), the term
`credit amount' means--
``(A) $300 in the case of modified adjusted gross
income for the taxable year greater than $5,000 but
less than or equal to $25,000,
``(B) $150 in the case of modified adjusted gross
income for the taxable year greater than $25,000 but
less than or equal to $35,000, and
``(C) zero in any other case.
``(2) Modified adjusted gross income.--For purposes of
paragraph (1), the term `modified adjusted gross income' means
adjusted gross income determined without regard to sections
911, 931, and 933.
``(c) Compensation.--For purposes of subsection (a), the term
`compensation' means with respect to an individual--
``(1) wages (as defined in section 3121(a)) received by
such individual during such year on which tax is imposed by
section 3101, and
``(2) self-employment income (as defined in 1402(b)) of
such individual for the taxable year of such individual ending
in such calendar year on which tax is imposed by section 1401.
``(d) Payment to Designated Account.--Notwithstanding any other
provision of this title, the Secretary, as soon as practicable, shall
transfer from amounts otherwise available in the general fund of the
Treasury, amounts equal to the amount required to be paid under
subsection (a) to the designated account of each participating
individual in accordance with regulations which the Secretary shall
prescribe to carry out this section.
``(e) Other Definitions and Special Rule.--For purposes of this
section--
``(1) Designated account.--The term `designated account'
means the separate account in the Interim Investment Fund
provided for under section 252 of the Social Security Act or,
in lieu thereof, the personal retirement savings account of the
participating individual designated under section 251 of the
Social Security Act.
``(2) Participating individual.--The term `participating
individual' shall have the meaning given to such term by
section 254 of the Social Security Act.
``(3) Special rule relating to agreements by american
employers of foreign affiliates.--Any amounts paid pursuant to
an agreement under section 3121(l) (relating to agreements
entered into by American employers with respect to foreign
affiliates) which are equivalent to the taxes referred to in
subsection (b)(1)(A) shall be treated as taxes referred to in
such subsection.''.
(b) Conforming Amendment.--The table of sections for chapter 25 of
such Code is amended by adding at the end the following new item:
``Sec. 3511. Individual retirement
security program refundable
credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to remuneration received, and net earnings for self-employment
for services performed, after December 31, 2004.
TITLE II--SOCIAL SECURITY SURPLUS PROTECTION
SEC. 201. REGULATION OF FLOW OF FUNDS BETWEEN THE GENERAL FUND AND THE
SOCIAL SECURITY TRUST FUNDS.
Section 201 of the Social Security Act (as amended by the preceding
provisions of this Act) is amended further by adding at the end the
following new subsection:
``Additional Transfers Between the General Fund and the Trust Funds
``(o)(1) In addition to the amounts otherwise appropriated to the
Federal Old-Age and Survivors Insurance Trust Fund and the Federal
Disability Insurance Trust Fund for each fiscal year after fiscal year
2006 and before fiscal year 2014, there is hereby appropriated to such
Trust Funds for each such fiscal year the applicable amount for such
fiscal year. Amounts appropriated to such Trust Funds under this
paragraph shall be distributed between the Trust Funds for any fiscal
year in the same proportion as amounts are appropriated to such Trust
Funds under subsections (a) and (b). The amounts appropriated by this
paragraph shall be transferred from time to time during the fiscal year
from the general fund in the Treasury to the Trust Funds, such amounts
to be determined on the basis of estimates by the Secretary of the
Treasury, and proper adjustments shall be made in amounts subsequently
transferred to the extent prior estimates were in excess of or were
less than the actual amounts. All amounts transferred to each Trust
Fund under this paragraph shall be invested by the Managing Trustee in
the same manner and to the same extent as the other assets of such
Trust Fund.
``(2) For purposes of paragraph (1), the applicable amount for any
fiscal year is the amount set forth in the following table:
``In the case of fiscal year-- The amount is--
2007...................................................$21 billion
2008...................................................$47 billion
2009...................................................$78 billion
2010..................................................$106 billion
2011..................................................$147 billion
2012..................................................$184 billion
2013..................................................$283 billion.
``(3)(A) The Board of Trustees shall determine, prior to the
beginning of each calendar year after 2018--
``(i) the projected reduction under subsection (n) in the
the amount which would (but for subsection (n)) be transferred
during such year from the general fund in the Treasury to the
Trust Funds under subsections (a) and (b),
``(ii) the projected payroll for such year, and
``(iii) whether there will be a surplus appropriation (as
defined in subparagraph (E)(ii)) to the Federal Old-Age and
Survivors Insurance Trust Fund for such year and the amount of
such surplus appropriation.
Projections under this paragraph shall be based on the best estimates
of the Board of Trustees.
``(B) In any case in which, for any calendar year after 2018, the
projected reduction determined under subparagraph (A)(i) exceeds 5
percent of the projected payroll determined under subparagraph (A)(ii),
if the Board of Trustees determines under subparagraph (A)(iii) that
there will be a surplus appropriation to the Federal Old-Age and
Survivors Insurance Trust Fund for such year, the Board of Trustees
shall certify such determinations to the Secretary of the Treasury
prior to such year, and such Secretary shall, during such year,
transfer from such Trust Fund to the general fund of the Treasury an
amount equal to such surplus appropriation.
``(C) The transfers required under subparagraph (B) shall be made
from time to time during the year from the Trust Funds to the general
fund of the Treasury, such amounts to be determined on the basis of the
estimates made by the Board of Trustees under subparagraph (A). The
Board of Trustees may, during the year, certify revised estimates under
subparagraph (A) for the year, and, upon certification of such revised
estimates to such Secretary, proper adjustments shall be made in
amounts subsequently transferred to the extent the prior estimates were
in excess of or were less than the latest estimated amounts.
``(D) In any case in which the transfer of any amount to the
general fund of the Treasury from either Trust Fund pursuant to
subparagraph (B) for any calendar year would (but for this
subparagraph) cause--
``(i) the total amount transferred from such Trust Fund
pursuant to subparagraph (B) (including accrued net earnings
thereon) to exceed
``(ii) the total amount transferred to such Trust Fund
pursuant to paragraph (1) (including accrued net earnings
thereon),
the amount of such transfer shall be limited to the extent necessary to
ensure that the total amount described in clause (i) does not exceed
the total amount described in clause (ii), and this paragraph shall not
be effective for subsequent calendar years in connection with such
Trust Fund.
``(E) For purposes of this paragraph--
``(i) The term `social security payroll' for any year means
the sum of the wages (as defined in section 3121 of the
Internal Revenue Code of 1986) reported to the Secretary of the
Treasury or his delegate during such year pursuant to subtitle
F of such Code and the self-employment income (as defined in
section 1402 of such Code) reported to the Secretary of the
Treasury or his delegate during such year pursuant to subtitle
F of such Code.
``(ii) The term `surplus appropriation' for any year, in
connection with the Federal Old-Age and Survivors Insurance
Trust Fund, means the excess of--
``(I) the total amount transferred to such Trust
Fund during such year pursuant to appropriations under
paragraphs (3) and (4) of subsection (a), after
reduction under subsection (n), over
``(II) the total amount necessary to be transferred
to such Trust Fund during such year so as to maintain a
reserve in such Trust Fund as of the end of such year
equal to 50 percent of the amount of benefits paid from
the Trust Fund during such year.''.
TITLE III--SOCIAL SECURITY BENEFIT REFORMS
SEC. 301. GRADUAL INCREASE IN RETIREMENT AGE AND EARLY RETIREMENT AGE.
(a) Normal Retirement Age.--Section 216(l) of the Social Security
Act (42 U.S.C. 416(l) is amended--
(1) in paragraph (1), by striking subparagraphs (A), (B),
(C), (D), and (E) and inserting the following:
``(A) with respect to an individual who attains age
62 (or in the case of a widow's or widower's insurance
benefit, age 60) before January 1, 2000, 65 years of
age;
``(B) with respect to an individual who attains age
62 (or in the case of a widow's or widower's insurance
benefit, age 60) after December 31, 1999 and before
January 1, 2011, 65 years of age plus \2/12\ of the
number of months in the period beginning with January
2000 and ending with December of the year in which the
individual attains age 62 (or in the case of a widow's
or widower's insurance benefit, age 60);
``(C) with respect to an individual who attains age
62 (or in the case of a widow's or widower's insurance
benefit, age 60) after December 31, 2010, and before
January 1, 2012, 67 years of age; and
``(D) with respect to an individual who attains age
62 (or in the case of a widow's or widower's insurance
benefit, age 60) after December 31, 2011, 67 years of
age plus \1/24\ of the number of months in the period
beginning with January 2012 and ending with December of
the year in which the individual attains age 62
(rounded down to a full month).''; and
(2) by striking paragraph (3).
SEC. 302. ADJUSTMENTS TO BEND POINTS IN DETERMINING PRIMARY INSURANCE
AMOUNTS.
(a) Additional Bend Point.--Section 215(a)(1)(A) of the Social
Security Act (42 U.S.C. 415(a)(1)(A)) is amended--
(1) in clause (ii), 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 individual's
average indexed monthly earnings to the extent that such
earnings exceed the amount established for purposes of clause
(iii), determined, in connection with the calendar year in
which the individual initially becomes eligible for old-age or
disability insurance benefits, or dies (before becoming
eligible for such benefits), in accordance with the following
table:
``Calendar year: Applicable Percentage:
2005.......................................... 13 percent
2006.......................................... 11 percent
2007.......................................... 9 percent
2008.......................................... 7 percent
After 2008.................................... 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 following 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 calendar
year 2004, the amount established for purposes of clause (iii) of
subparagraph (A) shall be $3,720.''.
(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 further--
(A) by redesignating clause (iii) as clause (x);
(B) in clause (ii), by inserting ``for purposes of
clauses (i) and (ii) of subparagraph (A)'' after ``each
of the amounts so established'';
(C) by inserting after clause (ii) the following
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 2004, 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 quarter 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
purposes of this clause, the Consumer Price Index for a calendar
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 2004, the amount established
under clause (i) for purposes of clause (iii) of subparagraph (A) shall
equal the product of the corresponding amount established with respect
to the calendar year 2002 under clause (i) of this subparagraph and the
quotient obtained by dividing--
``(I) the national average wage index (as defined in
section 209(k)(1)) for the second calendar year preceding the
calendar year for which the determination is made, by
``(II) the national average wage index (as so defined) for
2002.
``(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 2004, effective for such
calendar year--
``(I) the percentage in effect under clause (ii) 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 0.98, 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.
``(vi) 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 2009, effective for such
calendar year, the percentage in effect under clause (iv) 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.
``(vii)(I) Subject to section 201(p), in the case of an individual
who is entitled to disability insurance benefits and to whom this
clause applies, this subparagraph shall apply as if the amendments made
by the Social Security Solvency Act of 2003 had not been enacted.
``(II) This clause applies to any individual who first becomes
eligible for such benefits in 2004, and whose average indexed monthly
earnings (determined under subsection (b)) do not exceed the amount
established for purposes of this subclause by clause (viii).
``(III) This clause also applies to any individual who first
becomes eligible for such benefits in any year after 2004, and whose
average indexed monthly earnings (determined under subsection (b)) do
not exceed the dollar amount referred to in subclause (II), after
applying clauses (ii) and (iii) of subsection (a)(1)(B) to such dollar
amount, in connection with such year, in the same manner and to the
same extent as they apply to dollar amounts in subsection (a)(1)(B)(i),
except that, for purposes of this subclause, the references in such
clauses to 1979 and 1977 shall be deemed to be references to 2004 and
2002, respectively.
``(viii) For individuals who initially become eligible for
disability insurance benefits in calendar year 2004, the amount
established for purposes of subclause (II) of clause (vii) shall be
$1,666\2/3\. For individuals who initially become eligible for
disability insurance benefits in any calendar year after 2004, the
dollar amount so established shall equal the product of $1,666\2/3\ and
the quotient obtained by dividing--
``(I) the national average wage index (as defined in
section 209(k)(1)) for the second calendar year preceding the
calendar year for which the determination is made, by
``(II) the national average wage index (as so defined) for
2002.
``(ix) Subject to section 201(p), in the case of an individual who
is entitled to disability insurance benefits, who first becomes
eligible for such benefits in any year after 2003, and to whom clause
(vii) does not apply, the primary insurance amount of such individual
shall not be less than the primary insurance amount that would be
determined for such individual under this section if such individual's
average indexed monthly earnings (determined under subsection (b)) were
equal to the dollar amount referred to in clause (vii) in connection
with such year.''; and
(D) in clause (x) (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 percentage established under clause
(v) for any calendar year shall be rounded to the
nearest 0.001 percent, except that any percentage so
established which is a multiple of 0.0005 percent 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 primary insurance amounts of
individuals initially becoming eligible for old-age or
disability insurance benefits, or dying, after December 31,
2003.
(d) Maximum Percent Reduction in Primary Insurance Amounts.--
(1) In general.--Section 215(a)(1) of such Act (42 U.S.C.
415(a)(1)) is amended further by adding at the end the
following new subparagraph:
``(E)(i) Except in any case described in clause (iii), an
individual's primary insurance amount as otherwise determined under
this section shall in no case be less than such individual's primary
insurance amount determined under this section as if the amendments
made by section 302 of the Social Security Solvency Act of 2003 had not
been enacted, reduced by the maximum percent reduction specified, in
connection with the specified year in which such individual initially
becomes eligible for old-age insurance benefits and in connection with
the specified next higher amount of the annual equivalent of average
indexed monthly earnings (determined under subsection (b)), in the
following table:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average indexed monthly earnings (annual equivalent)
``Year of initial eligibility --------------------------------------------------------------------------------------------------
$5,000 $10,000 $15,000 $20,000 $21,000 $22,000 $23,000 $24,000 $25,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
2005................................................. 0.0 0.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0
2006................................................. 0.0 0.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0
2007................................................. 1.0 1.0 1.0 1.0 2.0 3.0 4.0 5.0 6.0
2008................................................. 2.0 2.0 2.0 2.0 3.0 4.0 5.0 6.0 7.0
2009................................................. 3.0 3.0 3.0 3.0 4.0 5.0 6.0 7.0 8.0
2010................................................. 4.0 4.0 4.0 4.0 5.0 6.0 7.0 8.0 9.0
2011................................................. 5.0 5.0 5.0 5.0 6.0 7.0 8.0 9.0 10.0
2012................................................. 6.0 6.0 6.0 6.0 7.0 8.0 9.0 10.0 11.0
2013................................................. 7.0 7.0 7.0 7.0 8.0 9.0 10.0 11.0 12.0
2014................................................. 8.0 8.0 8.0 8.0 9.0 10.0 11.0 12.0 13.0
2015................................................. 9.0 9.0 9.0 9.0 10.0 11.0 12.0 13.0 14.0
2016................................................. 10.0 10.0 10.0 10.0 11.0 12.0 13.0 14.0 15.0
2017................................................. 11.0 11.0 11.0 11.0 12.0 13.0 14.0 15.0 16.0
2018 or later year................................... 12.0 12.0 12.0 12.0 13.0 14.0 15.0 16.0 17.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
``(ii) Each of the dollar amounts set forth in the table under
clause (i) in connection with any year after 2005 shall be deemed to be
the product derived by multiplying such dollar amount by the quotient
obtained by dividing--
``(I) the national average wage index (as defined in
section 209(k)(1)) for the second calendar year preceeding such
calendar year, by
``(II) the national average wage index (as so defined) for
2003.
``(iii) In the case of an individual who becomes entitled to old-
age insurance benefits by reason entitlement to disability insurance
benefits for the month preceding the month in which such individual
attains retirement age (as described in section 202(a)(3)), the
individual's primary insurance amount shall be the sum of--
``(I) the product derived by multiplying the individual's
primary insurance amount (as determined without regard to the
amendments made by section 302 of the Social Security Solvency
Act of 2003) by the individual's disability period ratio, plus
``(II) the product derived by multiplying the individual's
primary insurance amount (as determined under this section as
amended by section 302 of the Social Security Solvency Act of
2003) by the excess of 1 over the individual's disability
period ratio.
For purposes of this clause, the term `disability period ratio' means,
in connection with an individual, the ratio of the total number of
years excluded under section 215(b)(2)(B)(iii), by reason of 1 or more
periods of disability, in determining thereunder the individual's
number of elapsed years, to the sum of such number of excluded years
plus such number of elapsed years.''.
(2) Effective date.--The amendment made by this subsection
shall apply with respect to benefits for months after November
2003.
SEC. 303. INFORMATION RELATING TO BENEFIT LIMITATIONS PROVIDED IN
SOCIAL SECURITY ACCOUNT STATEMENTS.
(a) In General.--Section 1143 of the Social Security Act (42 U.S.C.
1320b-13) is amended--
(1) in the heading for subsection (a), by striking ``Upon
Request'' and inserting ``of Annual Statements'';
(2) in subsection (a)(1), by striking ``Beginning'' and all
that follows and inserting the following: ``The Commissioner of
Social Security shall provide an annual social security account
statement (hereinafter in this section referred to as the
`statement') 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 following:
``(E) a table setting forth an estimate, in relation to
1980 and every 10th year thereafter through 2030, of the
following information:
``(i) the total amount of the current adjusted
values of all employee, employer, and self-employment
contributions made with respect 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 adjusted
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 adjusted
values of the monthly benefits which will have been
paid under such subsections, as of the time of the
death of the average earner retiring at retirement age
in each such year, on the basis of his or her wages and
self-employment income, as projected under the
intermediate actuarial assumptions 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).
For purposes of subparagraph (E), the term `current adjusted 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 eligible
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 ensure 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
requirement of this subsection and such Secretary shall provide such
appropriate assistance to the Commissioner as is necessary to carry out
such requirements.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply with respect to statements provided on or after October 1, 2004.
SEC. 304. 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 employment (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 performed in the employ of a State, of
any political subdivision 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 December 2004 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 substantial and
regular service for remuneration for that
employer before January 1, 2004,
``(II) who was a bona fide employee of that
employer on December 31, 2003, 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 December 31,
2003.
``(B) Treatment of multiple agencies and
instrumentalities.--For purposes of subparagraph (A), under
regulations (consistent with regulations 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 institution by
a patient or inmate thereof as an employee 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 included
under section 5351(2) of title 5, United States Code
(relating to certain interns, student nurses, and other
student employees of hospitals 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 2004, and the adjusted amount
determined under subparagraph (C) for any subsequent
year with respect to service performed during such
subsequent year, except to the extent that service by
such election official or election worker is included
in employment under an agreement under section 218, or
``(vi) by an employee in a position compensated
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 paragraph, 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 2004, the
Commissioner of Social 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 referred to in section 215(a)(1)(B)(i),
except that--
``(i) for purposes of this subparagraph, 1999 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
service described in subsection
(s)(3)(A).''; and
(II) in paragraph (3)(A), by
inserting ``under subsection (a)(7) as
in effect in December 2003'' after
``section''.
(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 subparagraphs
(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 (relating to employment) is
amended to read as follows:
``(7) excluded State or local government employment (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 following new subsection:
``(t) Excluded State or Local Government Employment.--
``(1) In general.--For purposes of this chapter, the term
`excluded State or local government employment' means any
service performed in the employ of a State, of any political
subdivision 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 chapter if the
provisions of subsection (b)(7) as in effect in
December 2003 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
substantial and regular service for
remuneration for that employer before
January 1, 2004,
``(II) who was a bona fide employee
of that employer on December 31, 2003,
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
December 31, 2003.
``(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 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
institution by a patient or inmate thereof as
an employee 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
included under section 5351(2) of title 5,
United States Code (relating to certain
interns, student nurses, and other student
employees of hospitals 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 2004, and
the adjusted amount determined under section
210(s)(3)(C) of the Social Security Act for any
subsequent year with respect to service
performed during such subsequent year, except to the extent that
service by such election official or election worker is included in
employment under an agreement under section 218 of the Social Security
Act, or
``(vi) by an employee in a position
compensated solely on a fee basis which is
treated pursuant to section 1402(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 paragraph, the
terms `State' and `political subdivision' have the
meanings given those terms in section 218(b) of the
Social Security Act.''.
(3) Conforming amendments.--
(A) Subsection (j) of such section 3121 (relating
to covered transportation service) is repealed.
(B) Paragraph (2) of section 3121(u) of such Code
(relating to application of hospital insurance tax to
Federal, State, and local employment) is amended--
(i) in subparagraph (B), by striking
``service is performed'' in clause (ii) and all
that follows through the end of such
subparagraph and inserting ``service is service
described in subsection (t)(3)(A).''; and
(ii) in subparagraph (C)(i), by inserting
``under subsection (b)(7) as in effect in
December 2004'' after ``chapter''.
(c) Effective Date.--Except as otherwise provided in this section,
the amendments made by this section shall apply with respect to service
performed after December 31, 2004.
SEC. 305. INCREASE IN MONTHLY INSURANCE BENEFITS FOR WIDOWS AND
WIDOWERS.
(a) Old-Age Insurance Benefits.--Section 202(a) of the Social
Security Act (42 U.S.C. 402(a)) is amended by adding at the end the
following new sentence: ``For any month ending after the month in which
the individual is a widow, widower, surviving divorced wife, or
surviving divorced husband in connection with any deceased spouse and
has not remarried since the death of such deceased spouse, the
individual's old-age insurance benefit shall be increased to 110
percent of the individual's primary insurance amount for such month.''.
(b) Widow's Insurance Benefits.--Section 202(e)(2) of such Act (42
U.S.C. 402(e)(2)) is amended--
(1) in subparagraph (A), by striking ``the primary
insurance amount'' and inserting ``110 percent of the primary
insurance amount'';
(2) in subparagraph (D)(i), by inserting ``110 percent of''
before ``the amount''; and
(3) in subparagraph (D)(ii), by striking ``82\1/2\
percent'' and inserting ``90\1/4\ percent''.
(c) Widower's Insurance Benefits.--Section 202(f)(3) of such Act
(42 U.S.C. 402(f)(3)) is amended--
(1) in subparagraph (A), by striking ``the primary
insurance amount'' and inserting ``110 percent of the primary
insurance amount'';
(2) in subparagraph (D)(i), by inserting ``110 percent of''
before ``the amount''; and
(3) in subparagraph (D)(ii), by striking ``82\1/2\
percent'' and inserting ``90\1/4\ percent''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to benefits for months after December 2004.
SEC. 306. ACCELERATION OF INCREASE IN DELAYED RETIREMENT CREDIT.
(a) In General.--Section 202(w) of the Social Security Act (42
U.S.C. 402(w)) is amended--
(1) in paragraph (1)(A), by striking ``the applicable
percentage (as determined under paragraph (6))'' and inserting
``\2/3\ of 1 percent''; and
(2) by striking paragraph (6).
(b) Effective Date.--The amendments made by this section shall
apply with respect to individuals who attain retirement age after
calendar year 2004.
SEC. 307. AUTHORIZATION FOR REIMBURSEMENT OF FEDERAL DISABILITY
INSURANCE TRUST FUND FOR CERTAIN COSTS OF DISABILITY
INSURANCE BENEFITS.
(a) In General.--Section 201 of the Social Security Act (as amended
by the preceding provisions of this Act) is amended further by adding
at the end the following new subsection:
``Reimbursement of Federal Disability Insurance Trust Fund for Certain
Costs of Disability Insurance Benefits
``(p) Clauses (vi) and (vii) of section 215(a)(1)(B) shall apply
with respect to benefits paid during any fiscal year only to the extent
provided for in advance in an Appropriation Act providing for
reimbursement of the Federal Disability Insurance Trust Fund for any
portion of such benefits representing a net increase resulting from the
operation of such clauses. The Commissioner of Social Security shall
report to each House of the Congress as soon as practicable before each
fiscal year the Commissioner's determination of the amounts necessary
to provide for any such net increase for such fiscal year.''.
SEC. 308. STUDY TO DEVELOP RECOMMENDATIONS FOR PROVIDING FOR ELECTIONS
UNDER WHICH INDIVIDUALS MAY OPT FOR EXCLUSION FROM SOCIAL
SECURITY COVERAGE.
(a) In General.--As soon as practicable after the date of the
enactment of this Act, the Commissioner of Social Security shall
conduct a thorough and comprehensive study of the most appropriate and
feasible means of providing for elections under which individuals may
opt for exclusion from coverage under the old-age, survivors, and
disability insurance program under part A of title II of the Social
Security Act and chapters 2 and 21 of the Internal Revenue Code of
1986.
(b) Requirements.--In conducting the study pursuant to this
section, the Commissioner shall prepare and make full use, as
appropriate, of such econometric models and actuarial analyses as are
necessary to carry out such study. Such study shall take into account
the extent to which the old-age, survivors, and disability insurance
program may accommodate such elections and the terms and conditions for
such elections which would most effectively permit such accommodation.
The Commissioner shall conduct the study pursuant to this section in
consultation with the Board of Trustees of the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability Insurance
Trust Fund and with other appropriate departments and agencies of the
Federal Government, and such other departments and agencies shall
provide to the Commissioner such assistance, on a reimbursable basis,
as may be necessary and appropriate.
(c) Report.--Not later than 180 days after the date of the
enactment of this Act, the Commissioner of Social Security shall submit
to the Committee on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate a written report containing a
recommendation, or alternative recommendations, for providing for
elections described in subsection (a). Such report shall contain a
complete description of the models and analyses used in carrying out
the study pursuant to this section and shall be accompanied by draft
legislation which, if enacted, would carry out the recommendations
contained in the report.
SEC. 309. INCREASE IN NUMBER OF YEARS DISREGARDED IN DETERMINING
AVERAGE ANNUAL EARNINGS ON WHICH BENEFIT AMOUNTS ARE
BASED WHERE REMUNERATIVE WORK IS PRECLUDED BY NEED TO
PROVIDE CHILD CARE.
(a) In General.--Section 215(b)(2) of the Social Security Act (42
U.S.C. 415(b)(2)) is amended--
(1) by striking the period at the end of clause (ii) of
subparagraph (A) and inserting a comma;
(2) by striking ``Clause (ii), once'' after and below
clause (ii) of subparagraph (A) and inserting the following:
``and reduced further to the extent provided in subparagraph (B).
Clause (ii), once'';
(3) by striking ``If an individual'' in the matter
following clause (ii) of subparagraph (A) and all that follows
through the end of subparagraph (A);
(4) by redesignating subparagraph (B) as subparagraph (F);
and
(5) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Subject to subparagraph (C), in any case in which--
``(i) in any calendar year which is included in an
individual's computation base years, such individual is living
with a child (of such individual or his or her spouse) under
the age of 13,
``(ii) such calendar year is not disregarded pursuant to
subparagraphs (A) and (E) (in determining such individual's
benefit computation years) by reason of the reduction in the
number of such individual's elapsed years under subparagraph
(A), and
``(iii) during such calendar year, such individual submits
to the Commissioner of Social Security, in such form as the
Commissioner shall prescribe by regulations, a written
statement that the requirements of clause (i) are met with
respect to such calendar year,
then the number by which such elapsed years are reduced under this
paragraph pursuant to subparagraph (A) shall be increased by one (up to
a combined total not exceeding 5) for each such calendar year.
``(C)(i) No calendar year shall be disregarded by reason of
subparagraph (B) (in determining such individual's benefit computation
years) unless the individual had no earnings as described in section
203(f)(5) for such year.
``(ii) No calendar year shall be disregarded by reason of
subparagraph (B) (in determining such individual's benefit computation
years) in connection with a child referred to in subparagraph (B)(i)
unless the individual was living with the child substantially
throughout the period in such year in which the child was alive and
under the age of 13 in such year.
``(iii) The particular calendar years to be disregarded under this
subparagraph (in determining such benefit computation years) shall be
those years (not otherwise disregarded under subparagraph (A)) which,
before the application of subsection (f), meet the conditions of the
preceding provisions of this subparagraph.
``(iv) This subparagraph shall apply only to the extent that its
application would not result in a lower primary insurance amount.
``(D) The number of an individual's benefit computation years as
determined under this paragraph shall in no case be less than 2.''.
(b) Effective Date.--The amendments made by this section shall
apply only with respect to computation base years after 2003.
SEC. 310. EXCLUSION OF DISABLED ADULT CHILDREN FROM REDUCTION IN
BENEFITS UNDER THE FAMILY MAXIMUM PROVISIONS.
(a) In General.--Section 203(a)(3) of the Social Security Act (42
U.S.C. 403(a)(3)) is amended by adding at the end the following new
subparagraph:
``(E) When any of the individuals who are entitled to benefits on
the basis of the wages and self-employment income of any insured
individual and to whom this subsection applies is entitled to child's
insurance benefits under section 202(d) on the basis of such wages and
self-employment income and is described in section 202(d)(1)(G), the
benefit to which he or she is so entitled for any month shall be
determined without regard to this subsection, and the benefits of all
other individuals who are entitled for such month to monthly benefits
under section 202 on the basis of the wages and self-employment income
of such insured individual shall be determined as if no such child were
entitled to benefits for such month.''.
(b) Effective Date.--The amendment made by this section shall apply
with respect to benefits for months after December 2003.
TITLE IV--RETIREMENT SECURITY
SEC. 401. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF
THE ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF
2001 MADE PERMANENT.
(a) In General.--Section 901 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by adding at the end the
following new subsection:
``(c) Exception.--Subsections (a) and (b) shall not apply to the
provisions of, and amendments made by, subtitles (A) through (F) of
title VI (relating to pension and individual retirement arrangement
provisions).''.
(b) Conforming Amendments.--Section 901(b) of such Act is amended--
(1) by striking ``and the Employee Retirement Income
Security Act of 1974'' in the text, and
(2) by striking ``of Certain Laws'' in the heading.
SEC. 402. ACCELERATION OF PHASE-INS OF SCHEDULED INCREASES IN IRA AND
PENSION PLAN CONTRIBUTION LIMITS.
(a) IRA Contribution limit.--
(1) Deductible amount.--Subparagraph (A) of section
219(b)(5) of the Internal Revenue Code of 1986 is amended to
read as follows:
``(A) In general.--The deductible amount shall be
$5,000.''.
(2) Catch-up amount.--Subparagraph (B) of section 219(b)(5)
of such Code is amended to read as follows:
``(B) Catch-up contributions for individuals 50 or
older.--In the case of an individual who has attained
the age of 50 before the close of the taxable year, the
dollar amount in effect under paragraph (1)(A) for such
taxable year (determined without regard to this
paragraph) shall be increased by $1,000.''.
(b) Elective Deferrals.--Subparagraph (B) of section 402(g)(1) of
such Code is amended by striking ``the amount determined'' and all that
follows and inserting ``$15,000.''.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--Subparagraph (A) of section 457(e)(15) of
such Code is amended by striking ``the amount determined'' and all that
follows and inserting ``$15,000.''.
(d) Simple Retirement Accounts.--Clause (i) of section 408(p)(2)(E)
of such Code is amended by striking ``the amount determined'' and all
that follows and inserting ``$10,000.''.
(e) Catch-Up Contributions.--Subparagraph (B) of section
414(v)(2)(B) of such Code is amended--
(1) in clause (i) by striking ``determined'' and all that
follows and inserting ``$5,000.'', and
(2) in clause (ii) by striking ``determined'' and all that
follows and inserting ``$2,500.''.
(f) Conforming Changes to Related COLA Provisions.--
(1) IRAs.--Clause (i) of section 219(b)(5)(C) of such Code
is amended--
(A) by striking ``2008'' and inserting ``2005'',
and
(B) by striking ``2007'' and inserting ``2004''.
(2) Elective deferrals.--Paragraph (4) of section 402(g) of
such Code is amended--
(A) by striking ``2006'' and inserting ``2005'',
and
(B) by striking ``2005'' and inserting ``2004''.
(3) Deferred compensation plans of state and local
governments and tax-exempt organizations.--Subparagraph (B) of
section 457(e)(15) of such Code is amended--
(A) by striking ``2006'' and inserting ``2005'',
and
(B) by striking ``2005'' and inserting ``2004''.
(4) Catch-up contributions.--Subparagraph (C) of section
414(v)(2) of such Code is amended--
(A) by striking ``2006'' and inserting ``2005'',
and
(B) by striking ``2005'' and inserting ``2004''.
(g) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2004.
SEC. 403. REFUNDABLE CREDIT FOR PREMIUMS ON QUALIFIED LONG-TERM CARE
INSURANCE CONTRACTS.
(a) In General.--Subpart C of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to refundable credits)
is amended by redesignating section 36 as section 37 and by inserting
after section 35 the following new section:
``SEC. 36. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 33 percent of the amount of the
eligible long-term care premiums (as defined in section 213(d)(10))
paid during the taxable year for coverage for the taxpayer, his spouse,
and dependents under a qualified long-term care insurance contract (as
defined in section 7702B(b)).
``(b) Dollar Limitation.--The amount of the credit allowed to a
taxpayer under subsection (a) shall not exceed $1,000 ($2,000 in the
case of a joint return).
``(c) Coordination With Other Deductions.--Any amount paid by a
taxpayer for any qualified long-term care insurance contract to which
subsection (a) applies shall not be taken into account in computing the
amount allowable to the taxpayer as a deduction under section 162(l) or
213(a).''.
(b) Technical Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting ``or from section 36 of
such Code'' before the period at the end.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by striking the item relating to section 35 and
inserting the following new items:
``Sec. 36. Premiums on qualified long-
term care insurance contracts.
``Sec. 37. Overpayment of taxes.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
SEC. 404. TAX CREDIT FOR TAXPAYERS PROVIDING CARE FOR DEPENDENT PARENTS
IN THEIR HOUSEHOLDS.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to nonrefundable
personal credits) is amended by inserting after section 25B the
following new section:
``SEC. 25C. CREDIT FOR TAXPAYERS PROVIDING CARE FOR DEPENDENT PARENTS
IN THEIR HOUSEHOLDS.
``(a) Allowance of Credit.--In the case of an individual who
maintains a household which includes as a member one or more qualified
persons, there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year an amount equal to the qualified care
expenses.
``(b) Limitation.--The amount of the credit allowed by subsection
(a) shall not exceed $1,000 for each qualified person.
``(c) Qualified Person.--For purposes of this section, the term
`qualified person' means any individual--
``(1) who is a father or mother of the taxpayer, his
spouse, or his former spouse or who is an ancestor of such a
father or mother,
``(2) for whom the taxpayer is allowed an exemption amount
under section 151, and
``(3) whose name and TIN are included on the taxpayer's
return for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother shall be
treated as a father or mother.
``(d) Qualified Care Expenses.--For purposes of this section, the
term `qualified care expenses' means the amount paid or incurred by the
taxpayer to provide care for a qualified person in the principal
residence of the taxpayer. No amount shall be taken into account under
this section with respect to a qualified person for any expense
incurred for a period during which such person is receiving qualified
long-term care services (as defined in section 7702B(c)(1)) outside of
such residence.
``(e) Denial of Double Benefit.--A credit shall not be allowed
under this section for any expense for which a credit or deduction is
claimed under any other provision of this title.
``(f) Special Rules.--For purposes of this section, rules similar
to the rules of paragraphs (1), (2), (3), and (4) of section 21(e)
shall apply.''
(b) Clerical Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 of such Code is amended by
inserting after the item relating to section 25B the following new
item:
``Sec. 25C. Credit for taxpayers
providing care for dependent
parents in their households.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
SEC. 405. NONREFUNDABLE TAX CREDIT FOR EXPENSES OF SENIORS FOR
MAINTAINING A PRINCIPAL RESIDENCE.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to nonrefundable
personal credits) is amended by inserting after section 25C the
following new section:
``SEC. 25D. EXPENSES OF SENIORS FOR MAINTAINING A PRINCIPAL RESIDENCE.
``(a) Allowance of Credit.--In the case of an eligible individual,
at the election of the taxpayer there shall be allowed as a credit
against the tax imposed by this subtitle for the taxable year an amount
equal to qualified residence expenses.
``(b) Dollar Limitation.--The amount allowed as a credit by
subsection (a) for the taxable year shall not exceed $1,000.
``(c) Qualified Residence Expenses.--For purposes of this section,
the term `qualified residence expenses' means the amount paid or
incurred by the taxpayer for the maintenance of the principal residence
of the taxpayer. No amount shall be taken into account under this
section for any expense incurred for a period during which the taxpayer
is receiving qualified long-term care services (as defined in section
7702B(c)(1)) outside of such residence.
``(d) Eligible Individual.--The term `eligible individual' means an
individual who has attained age 65 as of the end of the taxable year.
``(e) Special Rules.--
``(1) Double benefit.--A credit shall not be allowed under
this section for any expense for which a credit or deduction is
claimed under any other provision of this title.
``(2) Election.--A taxpayer who claims the credit under
section 25C for a taxable year shall not be eligible to make an
election under this section for such year.''.
(b) Conforming Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 of such Code is amended by
inserting after the item relating to section 25C the following new
item:
``Sec. 25D. Expenses of seniors for
maintaining a principal
residence.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
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