[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3082 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 3082

 To amend title II of the Social Security Act and the Internal Revenue 
   Code of 1986 to provide prospectively for personalized retirement 
security through personal retirement savings accounts to allow for more 
 control by individuals over their Social Security retirement income, 
 and to provide other reforms relating to benefits under such title II.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 13, 1997

   Mr. Smith of Michigan (for himself, Mr. Porter, Mr. Campbell, Mr. 
 Knollenberg, Mr. Houghton, and Mr. Sanford) introduced the 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, 
 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 1997''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
            TITLE I--INDIVIDUAL RETIREMENT SECURITY PROGRAM

Sec. 101. Establishment of individual retirement security program.
Sec. 102. Reallocation of certain social security contributions from 
                            the social security trust funds to personal 
                            retirement savings accounts.
Sec. 103. Adjustments to primary insurance amounts under part A of 
                            title II of the Social Security Act.
Sec. 104. Personal retirement savings accounts.
               TITLE II--SOCIAL SECURITY BENEFIT REFORMS

Sec. 201. Gradual increase in retirement age and early retirement age.
Sec. 202. Adjustments to bend points in determining primary insurance 
                            amounts.
Sec. 203. Information relating to benefit limitations provided in 
                            social security account statements.
Sec. 204. Phased reduction in spousal benefits other than survivor's 
                            benefits to 33 percent of primary insurance 
                            amount.
Sec. 205. Limitation on payment of certain benefits in excess of 
                            contributions during years of higher 
                            income.
Sec. 206. Coverage of newly hired State and local employees.
Sec. 207. Increase in widow's and widower's insurance benefits.
Sec. 208. Study to develop recommendations for providing for elections 
                            under which individuals may opt for 
                            exclusion from social security coverage.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress makes the following findings:
            (1) One of America's most popular Government programs, 
        Social Security, is in jeopardy. The 1997 Board of Trustee's 
        report states that the current system faces an actuarial 
        deficit of 2.23 percent of taxable payroll. According to the 
        1997 Board of Trustee's report, the Social Security trust fund 
        will begin to run a deficit by 2011 and will be exhausted by 
        2029.
            (2) Helping assure Americans retirement 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--
                    (A) create a solvent Social Security system,
                    (B) maintain or increase total retirement benefits 
                for current and future retirees,
                    (C) avoid payroll tax increases, and
                    (D) avoid additional Federal debt as a means of 
                financing Social Security.
            (4) The root causes of the weaknesses in the present Social 
        Security system are its inadequate funding mechanism and 
        changing demographics. 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 1995 there are only 3.3 workers per beneficiary, and 
        by 2060 the ratio is projected to fall to 1.8 workers per 
        beneficiary. To pay benefits to the rising number of retirees, 
        the Government has levied increasing payroll taxes on workers. 
        To maintain the program in its current form, the Government 
        will have to continue to raise payroll taxes or substantially 
        reduce benefits.
            (5) The key to a more secure Social Security system is 
        increased savings and private investment. We should move from a 
        financing system based on the Federal Government's power to tax 
        workers to one based on savings and investment accounts owned 
        and controlled by workers.
            (6) Allowing workers to take advantage of 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 projected 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 30 years at 7 
        percent becomes nearly $30,000.
    (b) 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.--Under regulations prescribed by the Board of Trustees, an 
individual who is a covered employee or a covered self-employed 
individual 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 are to be made under subsection 
(c). The individual 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.
    ``(b) Designation by Commissioner in Absence of Timely Designation 
by Individual.--The initial designation by an individual must be made 
within 10 business days following the first day for which such 
individual is a covered employee or a covered self-employed individual. 
In any case in which there is no timely designation of a personal 
retirement savings account with respect to an individual who is a 
covered employee or a covered self-employed individual, the 
Commissioner of Social Security shall make the designation of a 
personal retirement savings account under subsection (a) on behalf of 
such individual, in accordance with regulations of the Board of 
Trustees.
    ``(c) Deposits Into Personal Retirement Savings Accounts.--Within 
10 business days after receipt during any fiscal year of taxes paid 
under sections 3101(a) and 3111(a) of the Internal Revenue Code of 1986 
with respect to a covered employee, and within 10 business days after 
receipt during any fiscal year of taxes paid under section 1401(a) of 
such Code with respect to a covered self-employed individual, the 
Secretary of the Treasury, from amounts otherwise available in the 
general fund of the Treasury, shall deposit, into such personal 
retirement savings accounts as are designated under this section and in 
such manner of distribution as may be specified in connection with the 
distribution, a total amount equal to the product derived by 
multiplying the amount of such taxes by the reallocation percentage 
declared for such fiscal year under section 201(n) of this Act.

                 ``periodic reports by account trustee

    ``Sec. 252. (a) In General.--The trustee of a personal retirement 
savings account shall make periodic reports concerning the status of 
the account which shall meet the requirements of section 408B(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 quarterly 
basis on or before the 30th 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 amount of authorized personal retirement savings 
        account contributions.
            ``(3) The amount of distributions.
            ``(4) The name and address of the trustee.
            ``(5) Commission fees and fees for administrative expenses 
        charged in connection with the account.
            ``(6) Other information which may be required from time to 
        time by the Board of Trustees.
The language of the report shall be written in a form so as to be 
understood by the average covered employee.
    ``(c) Reports to Board of Trustees.--The Board of Trustees may 
require the periodic report to be filed with the Board at such time as 
the Board may 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.

                        ``transfers to accounts

    ``Sec. 253. Not later than January 1 of each calendar year after 
1999, the Secretary of the Treasury shall transfer to each of the 
personal savings retirement accounts in existence as of the end of the 
preceding fiscal year and on the date of the transfer, from amounts in 
the general fund of the Treasury not otherwise appropriated, an amount 
equal to the quotient derived by dividing--
            ``(1) 33\1/3\ percent of the amount specified as the budget 
        surplus for such fiscal year in the monthly treasury statement 
        issued in December following such fiscal year, by
            ``(2) the total number of such personal savings retirement 
        accounts.

                             ``definitions

    ``Sec. 254. For purposes of this title--
            ``(1) Personal retirement savings account.--The term 
        `personal retirement savings account' has the meaning provided 
        in section 408B of the Internal Revenue Code of 1986.
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in his employ to whom 
        wages are paid by such person during such calendar year.
            ``(3) Covered employee.--The term `covered employee' means, 
        in connection with any person who is a covered employer for any 
        calendar year beginning after December 31, 1998, any individual 
        with respect to whose employment by such employer during such 
        calendar year there is imposed an excise tax under section 3111 
        of the Internal Revenue Code of 1986.
            ``(4) Covered self-employed individual.--The term `covered 
        self-employed individual' means any individual on whose self-
        employment income for a taxable year beginning after December 
        31, 1998, there is imposed a tax under section 1401(a) of the 
        Internal Revenue Code of 1986.
            ``(5) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.
            ``(6) Board of trustees.--
                    ``(A) In general.--The term `Board of Trustees' 
                means the Board of Trustees of the Federal Old-Age and 
                Survivors Insurance Trust Fund and the Federal 
                Disability Insurance Trust Fund.
                    ``(B) Role of secretary of the 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, 1998, 
        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, 1998, 
                the Commissioner of Social Security, pursuant to 
                direction by the Board of Trustees of the Federal Old-
                Age and Survivors Insurance Trust Fund and the Federal 
                Disability 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. REALLOCATION OF CERTAIN SOCIAL SECURITY CONTRIBUTIONS FROM 
              THE SOCIAL SECURITY TRUST FUNDS TO PERSONAL RETIREMENT 
              SAVINGS ACCOUNTS.

    (a) Annual Declaration of Reallocation Percentage.--Section 201 of 
the Social Security Act (42 U.S.C. 401) is amended by adding at the end 
the following new subsection:

            ``Annual Declaration of Reallocation Percentage

    ``(n)(1) The Board of Trustees shall declare and publish in the 
Federal Register on or before August 1 of each calendar year the 
reallocation percentage for amounts otherwise appropriated for the 
following fiscal year to the Federal Old-Age and Survivors Insurance 
Trust Fund under paragraphs (3) and (4) of subsection (a).
    ``(2) For purposes of this title--
            ``(A) The term `reallocation percentage' for any fiscal 
        year means--
                    ``(i) in the case of fiscal years preceding fiscal 
                year 2004, 20.16 percent,
                    ``(ii) in the case of fiscal years following fiscal 
                year 2003 and preceding fiscal year 2017, 22.58 
                percent, and
                    ``(iii) in the case of fiscal years following 
                fiscal year 2016, the best estimate of the Board of 
                Trustees of the maximum percentage by which the amounts 
                described in paragraph (1) for such fiscal year may be 
                reduced so as to maintain a reserve in the Federal Old-
                Age and Survivors Insurance Trust Fund as of the end of 
                such fiscal year equal to 50 percent of the amount of 
                benefits projected to be paid from the Trust Fund 
                during the next fiscal year.
        In making the estimate under clause (ii), the Board of Trustees 
        shall utilize the intermediate actuarial assumptions utilized 
        by the Board of Trustees for its most recent annual report 
        issued under subsection (c).''.
    (b) Reduction in Appropriations to the Trust Funds.--Section 201 of 
such Act (as amended by subsection (a)) is amended further by adding at 
the end the following new subsection:

            ``Reduction in Appropriations to the Trust Funds

    ``(o) Under regulations prescribed by the Board of Trustees (in 
consultation with the Secretary of the Treasury) to carry out this 
subsection, the amounts appropriated for any fiscal year under 
paragraphs (3) and (4) of subsection (a), to the extent attributable to 
taxes paid during such fiscal year with respect to an individual who is 
for such fiscal year a covered employee (as defined in section 254(3)) 
or a covered self-employed individual (as defined in section 254(4)), 
shall be reduced by the product derived by multiplying the total amount 
appropriated under subsections (a) and (b) for such fiscal year which 
is so attributable by (2) the reallocation percentage for such fiscal 
year.''.

SEC. 103. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS UNDER PART A OF 
              TITLE II OF THE SOCIAL SECURITY ACT.

    (a) In General.--Section 215 of the Social Security Act (42 U.S.C. 
415) is amended by adding at the end the following new subsection:

 ``Adjustment of Primary Insurance Amount in Relation to Deposits Made 
                to Personal Retirement Savings Accounts

    ``(j)(1) Except as provided in paragraph (2), an 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 monthly amount of an immediate life annuity, 
        determined on the basis of the total of all amounts which have 
        been deposited pursuant to section 251(c) (indexed in the same 
        manner as is applicable with respect to average indexed monthly 
        earnings under subsection (b)) into all personal retirement 
        savings accounts held by such individual, plus accrued interest 
        compounded annually, assuming an interest rate of 3.7 percent 
        and using the mortality table used under 412(l)(7)(C)(ii) of 
        the Internal Revenue Code of 1986.
    ``(2) In the case of an individual described in 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).
    ``(3) For purposes of this subsection, the term `immediate life 
annuity' means an annuity--
            ``(A) the annuity starting date (as defined in section 
        72(c)(4) of the Internal Revenue Code of 1986) of which 
        commences with the first month following the date of the 
        determination, and
            ``(B) which provides for a series of substantially equal 
        monthly payments over the life expectancy of the individual 
        described in paragraph (1).''.
    (b) Conforming Amendment to Railroad 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, 1998.

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 222 as section 223 and by inserting after section 
221 the following new section:

``SEC. 222. CONTRIBUTIONS TO PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) In General.--In the case of an individual who is an electing 
personal retirement savings account 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(c) of the Social Security Act for such taxable year to a 
personal retirement savings account maintained for the benefit of such 
individual.
    ``(d) Special Rules.--
            ``(1) No deduction for trustee-to-trustee transfers.--No 
        deduction shall be allowed for amounts transferred to an 
        account under section 408B(f)(2).
            ``(2) Time when contributions deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to a personal retirement savings account on the 
        last day of the preceding taxable year if the contribution is 
        made on account of such taxable year and is made not later than 
        the time prescribed by law for filing the return for such 
        taxable year (not including extensions thereof).''
    (b) Personal Retirement Savings Accounts.--Subpart A of part I of 
subchapter D of chapter 1 of such Code (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section 
408A the following new section:

``SEC. 408B. PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) General Rule.--Gross income shall not include any amount 
deposited in a personal retirement savings account under section 251(c) 
of the Social Security Act.
    ``(b) Personal Retirement Savings Account.--For purposes of this 
title, the term `personal retirement savings account' means a trust 
created or organized in the United States for the exclusive benefit of 
an individual or his beneficiaries, but only if the written governing 
instrument creating the trust meets the following requirements:
            ``(1) No contribution will be accepted other than--
                    ``(A) deposits under sections 251(c) and 253 of the 
                Social Security Act, and
                    ``(B) contributions made in cash, except that 
                contributions under this subparagraph may not be 
                accepted for any taxable year in excess of $2,000.
            ``(2) No amount may be paid or distributed from such 
        trust--
                    ``(A) before the date on which the account holder 
                attains age 59\1/2\, becomes entitled to disability 
                insurance benefits under section 223 of the Social 
                Security Act, or dies, or
                    ``(B) in a manner not meeting the requirements of 
                subsection (d).
            ``(3) 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.
            ``(4) The interest of an individual in the balance in his 
        account is nonforfeitable.
Paragraphs (1) and (2) shall not apply to direct trustee-to-trustee 
transfers described in subsection (f)(2).
    ``(c) Investment Requirements.--
            ``(1) In general.--Amounts in a personal 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.
        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. 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 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).
            ``(2) Payment options.--The payment options under this 
        paragraph are the following:
                    ``(A) Lifetime option.--Distributions in equal 
                annual or more frequent periodic installments over a 
                stated period of 10, 15, or 20 years, payable to 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 periodic payments 
                during the stated period. If the account holder 
                survives the stated period, the terms governing the 
                account shall provide for continuing distributions for 
                the life of the account holder in annual or more 
                frequent periodic payments for the life of the account 
                holder or (if earlier) until exhaustion of the account 
                balance.
                    ``(B) Nonlifetime option.--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.
                    ``(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(c) 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 222, 
                and
                    ``(C) such distribution is accompanied by the 
                amount of net income attributable to such contribution.
        Any net income described in subparagraph (C) shall be included 
        in gross income for the taxable year in which such contribution 
        is made.
    ``(g) Certain Other Rules To Apply.--The 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 (17) the following new paragraph:
            ``(18) Personal retirement savings accounts.--The deduction 
        allowed by section 222.''
    (d) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of such 
        Code is amended by striking ``or'' at the end of paragraph (4), 
        by adding ``or'' at the end of paragraph (5), and by inserting 
        after paragraph (5) the following new paragraph:
            ``(6) a personal retirement savings account (as defined in 
        section 408B),''.
            (2) Excess contribution defined.--Section 4973 is amended 
        by adding at the end the following new subsection:
    ``(g) Excess Contributions to Personal 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(c) of the 
                Social Security Act.
                    ``(B) Any trustee-to-trustee transfer.''
    (e) Conforming Amendments.--
            (1) Paragraph (1) of section 4975(e) of such Code (relating 
        to tax on prohibited transactions) is amended by redesignating 
        subparagraph (F) as 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 408B(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 408B(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. 222. Contributions to personal 
                                        retirement savings accounts.
                              ``Sec. 223. Cross reference.''
            (2) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 of such Code is amended by inserting 
        after the item relating to section 408A the following new item:

                              ``Sec. 408B. Personal retirement savings 
                                        accounts.''
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

               TITLE II--SOCIAL SECURITY BENEFIT REFORMS

SEC. 201. GRADUAL INCREASE IN RETIREMENT AGE AND EARLY RETIREMENT AGE.

    (a) Retirement Age.--Section 216(l)(1) of the Social Security Act 
(42 U.S.C. 416(l)(1)) is amended to read as follows:
    ``(l)(1) The term `retirement age' means--
            ``(A) with respect to an individual who attains age 62 
        before January 1, 2000, 65 years of age,
            ``(B) with respect to an individual who attains age 62 
        after December 31, 1999, and before January 1, 2015, 65 years 
        of age plus \3/12\ of the number of months in the period 
        beginning with January 2000 and ending with the last month of 
        the calendar year in which the individual attains age 62,
            ``(C) with respect to an individual who attains age 62 
        after December 31, 2014, and before January 1, 2016, 69 years 
        of age, and
            ``(D) with respect to an individual who attains age 62 in 
        any year after December 31, 2015, the projected retirement age 
        (as determined by the Commissioner under paragraph (3)) for the 
        year in which such individual attains age 62.''.
    (b) Early Retirement Age.--Section 216(l)(2) of such Act (42 U.S.C. 
416(l)(2)) is amended to read as follows:
    ``(2) The term `early retirement age' means--
            ``(A) except as otherwise provided in this paragraph--
                    ``(i) age 62, in the case of an old-age, wife's, or 
                husband's insurance benefit, or
                    ``(ii) age 60, in the case of a widow's or 
                widower's insurance benefit,
            ``(B) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 1999, and before January 1, 2011, the applicable retirement 
        age (as defined in paragraph (1)), minus--
                    ``(i) 3 years, in the case of an old-age, wife's, 
                or husband's insurance benefit, or
                    ``(ii) 5 years, in the case of a widow's or 
                widower's insurance benefit,
            ``(C) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 2010, and before January 1, 2016--
                    ``(i) age 65, in the case of an old-age, wife's, or 
                husband's insurance benefit, or
                    ``(ii) age 63, in the case of a widow's or 
                widower's insurance benefit, and
            ``(D) with respect to an individual who attains early 
        retirement age (as defined in subparagraph (A)) after December 
        31, 2015, the applicable retirement age (as defined in 
        paragraph (1)), minus--
                    ``(i) 4 years, in the case of an old-age, wife's, 
                or husband's insurance benefit, or
                    ``(ii) 6 years, in the case of a widow's or 
                widower's insurance benefit.''.
    (c) Projected Retirement Age.--Section 216(l)(3) of such Act (42 
U.S.C. 416(l)(3)) is amended to read as follows:
    ``(3)(A) Not later than October 1 of each year after 2014, the 
Commissioner of Social Security shall determine, and publish in the 
Federal Register, the projected retirement age for the year following 
such October 1.
    ``(B) For purposes of this paragraph--
            ``(i) The `projected retirement age' for any year means the 
        age (rounded, if not otherwise expressible as a whole number of 
        months, to the next lower whole number of months) which, if 
        such age were the retirement age (as defined in this 
        subsection) in effect for individuals who attain age 62 in such 
        year (and are credited under this title with wages or self-
        employment income), would cause the ratio of the projected 
        post-retirement lifetime for such individuals to the potential 
        working lifetime for such individuals to be equal to the ratio 
        of the projected post-retirement lifetime for all individuals 
        who attain age 62 in 2015 (and are credited under this title 
        with wages or self-employment income) to the potential working 
        lifetime for such individuals attaining age 62 in 2015.
            ``(ii) The `projected post-retirement lifetime' for 
        individuals attaining age 62 in any year means the average 
        projected lifetime (rounded, if not otherwise expressible as a 
        whole number of months, to the next lower whole number of 
        months) of such individuals commencing with the month following 
        the month in which the applicable retirement age is attained, 
        as determined by the Commissioner of Social Security, utilizing 
        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).
            ``(iii) The `potential working lifetime' for individuals 
        attaining age 62 in any year means the number of calendar 
        months during the period beginning with January of the year 
        following the year in which age 20 is attained by such 
        individuals and ending with the month in which the applicable 
        retirement age is attained by such individuals.''.
    (d) Definition of Elapsed Years for Purposes of Determining Benefit 
Computation Years.--Section 215(b)(2)(B)(iii) of such Act (42 U.S.C. 
415(b)(2)(B)(iii)) is amended--
            (1) by striking ``the year in which he attained age 62'' 
        and all that follows and inserting ``the year in which he 
        attained--''; and
            (2) by adding at the end the following:
                    ``(I) early retirement age (as defined in section 
                216(l)(2) in the case of old-age, wife's, and husband's 
                insurance benefits), in the case of an individual who 
                attained age 62 before January 1, 2012,
                    ``(II) age 65 plus \3/12\ of the number of months 
                in the period beginning with January 2012 and ending 
                with the last month of the calendar year in which the 
                individual attained age 62, in the case of an 
                individual who attained age 62 after December 31, 2011, 
                and before January 1, 2015, or
                    ``(III) one year greater than early retirement age 
                (as so defined), in the case of an individual who 
                attained age 62 after December 31, 2014;
        except that such term excludes any calendar year any part of 
        which is included in a period of disability.''.

SEC. 202. 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:

                                                             Applicable
``Calendar year:                                            Percentage:
    1999..........................................          13 percent 
    2000..........................................          11 percent 
    2001..........................................           9 percent 
    2002..........................................           7 percent 
    After 2002....................................        5 percent,''.
    (b) Initial Level of Additional Bend Point.--Section 
215(a)(1)(B)(i) of such Act (42 U.S.C. 415(a)(1)(B)(i)) is amended by 
adding at the end the 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 1998, the amount established for purposes of clause (iii) of 
subparagraph (A) shall be $3,391.''.
    (c) Annual Adjustments to PIA Formula.--
            (1) In general.--Section 215(a)(1)(B) of such Act (42 
        U.S.C. 415(a)(1)(B)) is amended further--
                    (A) by redesignating clause (iii) as clause (v);
                    (B) in clause (ii), by striking ``1979, each of the 
                amounts so established shall equal the product of the 
                corresponding amount'' and inserting ``1998, the amount 
                established for purposes of clause (i) of subparagraph 
                (A) shall equal the product of the amount established 
                for purposes of clause (i) of subparagraph (A)'';
                    (C) by inserting after clause (ii) the 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 1998, effective for such 
calendar year, each of the amounts established under clause (i) for 
purposes of clauses (ii) and (iii) of subparagraph (A) shall equal the 
corresponding amount in effect for the preceding calendar year, 
increased by the same percentage as the percentage by which the 
Consumer Price Index for the calendar 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 1998, 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.
    ``(v) For individuals who initially become eligible for old-age or 
disability insurance benefits, or who die (before becoming eligible for 
such benefits), in any calendar year after 2003, effective for such 
calendar year, the 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.''; and
                    (D) in clause (v) (as redesignated), by striking 
                ``amount'' and inserting ``dollar amount'', by striking 
                ``clause (ii)'' and inserting ``clauses (ii) and 
                (iii)'', and by adding at the end the following new 
                sentence: ``Each percentage established under clause 
                (iv) 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 attaining early retirement age (as defined in 
        section 216(l) of the Social Security Act), or dying, after 
        December 31, 1997.

SEC. 203. INFORMATION RELATING TO BENEFIT 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, 1998.

SEC. 204. PHASED REDUCTION IN SPOUSAL BENEFITS OTHER THAN SURVIVOR'S 
              BENEFITS TO 33 PERCENT OF PRIMARY INSURANCE AMOUNT.

    (a) Wife's Insurance Benefits.--Section 202(b)(2) of the Social 
Security Act (42 U.S.C. 402(b)(2)) is amended to read as follows:
    ``(2)(A) Except as provided in subsection (q) and paragraph (4) of 
this subsection, such wife's insurance benefit for each month shall be 
equal to the applicable percentage of the primary insurance amount of 
her husband (or, in the case of a divorced wife, her former husband) in 
connection with the calendar year in which such individual becomes 
eligible for such benefit, as specified in the following table:

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        Before calendar year 2000....................       50 percent 
        Calendar year 2000...........................       49 percent 
        Calendar year 2001...........................       48 percent 
        Calendar year 2002...........................       47 percent 
        Calendar year 2003...........................       46 percent 
        Calendar year 2004...........................       45 percent 
        Calendar year 2005...........................       44 percent 
        Calendar year 2006...........................       43 percent 
        Calendar year 2007...........................       42 percent 
        Calendar year 2008...........................       41 percent 
        Calendar year 2009...........................       40 percent 
        Calendar year 2010...........................       39 percent 
        Calendar year 2011...........................       38 percent 
        Calendar year 2012...........................       37 percent 
        Calendar year 2013...........................       36 percent 
        Calendar year 2014...........................       35 percent 
        Calendar year 2015...........................       34 percent 
        After calendar year 2015.....................       33 percent 
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        wife's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a wife's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.
    (b) Husband's Insurance Benefits.--Section 202(c)(3) of such Act 
(42 U.S.C. 402(c)(3)) is amended to read as follows:
    ``(3)(A) Except as provided in subsection (q) and paragraph (2) of 
this subsection, such husband's insurance benefit for each month shall 
be equal to the applicable percentage of the primary insurance amount 
of his wife (or, in the case of a divorced husband, his former wife) in 
connection with the calendar year in which such individual becomes 
eligible for such benefit, as specified in the following table:

``If the calendar year in which the The applicable percentage shall be:
        individual becomes eligible 
        is:
        Before calendar year 2000....................       50 percent 
        Calendar year 2000...........................       49 percent 
        Calendar year 2001...........................       48 percent 
        Calendar year 2002...........................       47 percent 
        Calendar year 2003...........................       46 percent 
        Calendar year 2004...........................       45 percent 
        Calendar year 2005...........................       44 percent 
        Calendar year 2006...........................       43 percent 
        Calendar year 2007...........................       42 percent 
        Calendar year 2008...........................       41 percent 
        Calendar year 2009...........................       40 percent 
        Calendar year 2010...........................       39 percent 
        Calendar year 2011...........................       38 percent 
        Calendar year 2012...........................       37 percent 
        Calendar year 2013...........................       36 percent 
        Calendar year 2014...........................       35 percent 
        Calendar year 2015...........................       34 percent 
        After calendar year 2015.....................       33 percent 
    ``(B) For purposes of subparagraph (A)--
            ``(i) an individual shall be treated as eligible for a 
        husband's insurance benefit if such individual meets the 
        requirements of subparagraphs (B), (C), and (D) of paragraph 
        (1), and
            ``(ii) in determining when an individual becomes eligible 
        for a husband's insurance benefit, any break in eligibility of 
        less than 12 consecutive months shall not be taken into 
        account.''.

SEC. 205. LIMITATION ON PAYMENT OF CERTAIN BENEFITS IN EXCESS OF 
              CONTRIBUTIONS DURING YEARS OF HIGHER INCOME.

    (a) In General.--Section 202 of the Social Security Act (42 U.S.C. 
402) is amended by adding at the end the following new subsection:

``limitation on payment of certain benefits in excess of contributions 
                     during years of higher income

    ``(y)(1) Notwithstanding any other provision of this title, if, 
with respect to any year of higher income for an individual--
            ``(A) the total amount of the current adjusted values of 
        all of such individual's social security old-age or survivors 
        benefits in prior months, determined as of the beginning of 
        such year, exceed
            ``(B) the total amount of the current adjusted values of 
        all OASDI taxes paid with respect to the wages and self-
        employment income on which such benefits are based, determined 
        as of the beginning of such year,
then such individual's social security old-age or survivors benefits 
for any month in such year shall be reduced (after all other deductions 
and reductions applicable under this title) by the percentage reduction 
determined under paragraph (2) for such year. Benefits, as reduced 
under this paragraph, if not a multiple of $1, shall be increased to 
the next higher multiple of $1.
    ``(2)(A) The percentage reduction determined under this paragraph 
for an individual's taxable year is the product derived by 
multiplying--
            ``(i) 1 percent, by
            ``(ii) the applicable income-based factor of the individual 
        for the taxable year.
    ``(B)(i) For purposes of subparagraph (A), in the case of an 
individual who is not married as of the beginning of the taxable year, 
the applicable income-based factor of the individual for the taxable 
year is the quotient (not greater than 100) derived by dividing--
            ``(I) the individual's excess income for the taxable year, 
        by
            ``(II) $300,
rounded (if not a whole number) to the next lower whole number.
    ``(ii) For purposes of clause (i), an individual's excess income 
for a taxable year is the excess of--
            ``(I) the adjusted gross income of such individual for such 
        taxable year, over
            ``(II) $50,000.
    ``(C)(i) For purposes of subparagraph (A), in the case of an 
individual who is married as of the beginning of the taxable year, the 
applicable income-based factor of the individual for the taxable year 
is the quotient (not greater than 100) derived by dividing--
            ``(I) the excess joint income of the individual and the 
        individual's spouse for the taxable year, by
            ``(II) $600,
rounded (if not a whole number) to the next lower whole number.
    ``(ii) For purposes of clause (i), the excess joint income of an 
individual and the individual's spouse for a taxable year is the excess 
of--
            ``(I) the total adjusted gross income of such individual 
        and such individual's spouse for such taxable year, over
            ``(II) $100,000.
    ``(3) For purposes of this subsection--
            ``(A) The term `year of higher income' for an individual 
        means any taxable year--
                    ``(i) if, in the case of an individual who is not 
                married as of the beginning of such taxable year, the 
                adjusted gross income of such individual for such 
                taxable year exceeds $50,000, or
                    ``(ii) if, in the case of an individual who is 
                married as of the beginning of such taxable year, the 
                total adjusted gross income of such individual and such 
                individual's spouse for such taxable year exceeds 
                $100,000.
            ``(B) The term `adjusted gross income' has the meaning 
        provided in section 62 of the Internal Revenue Code of 1986.
            ``(C)(i) The term `current adjusted value' of an amount, 
        determined as of the beginning of any calendar year, means the 
        original amount, plus interest on such amount, compounded 
        annually through the end of the preceding calendar year at the 
        trust fund interest rate as in effect from year to year.
            ``(ii) The term `trust fund interest rate' in effect for 
        any year means the average rate of interest earned during the 
        fiscal year ending in such year on investments of amounts in 
        the Federal Old-Age and Survivors Insurance Trust Fund and the 
        Federal Disability Insurance Trust Fund, as determined by the 
        Managing Trustee of such Trust Funds.
            ``(D) The term `social security old-age or survivors 
        benefit' of an individual means a monthly insurance benefit 
        under this title based on the wages and self-employment income 
        of such individual and paid or payable from the Federal Old-Age 
        and Survivors Insurance Trust Fund.
            ``(E) The term `OASDI taxes' means the taxes imposed under 
        sections 1401(a), 3101(a), and 3111(a) of the Internal Revenue 
        Code of 1986.
    ``(4) The Commissioner of Social Security shall provide by 
regulation for the maintenance of such records, relating to individuals 
to whom social security old-age or survivors benefits are otherwise 
payable under this section, of total benefits paid and OASDI taxes 
paid, as is necessary to preclude, to the maximum extent practicable, 
overpayments and underpayments of benefits resulting from the operation 
of this subsection. The Commissioner and the Secretary of the Treasury 
shall enter into such arrangements as are necessary to ensure that such 
records maintained by the Commissioner are currently accurate at all 
times.
    ``(5)(A) In any case in which a taxable year of an individual is a 
year of higher income for such individual, if a social security old-age 
or survivors benefit has been paid to such individual for any month in 
such year, such individual (or the individual who is in receipt of such 
benefit on his behalf) shall make a report to the Commissioner of 
Social Security of his adjusted gross income, and (if he is married) 
the adjusted gross income of his spouse, for such taxable year. Such 
report shall be made on or before the fifteenth day of the fourth month 
following the close of such year, and shall contain such information 
and be made in such manner as the Commissioner may by regulations 
prescribe. The Commissioner may grant a reasonable extension of time 
for making such report if he finds that there is valid reason for a 
delay, but in no case may the period be extended more than three 
months.
    ``(B) If an individual fails to make a report required under 
subparagraph (A), within the time prescribed by or in accordance with 
such subparagraph, for any taxable year and a benefit based on such 
individual's wages and self-employment income is paid for any month in 
such taxable year or the next following taxable year which is in excess 
of the amount payable by reason of this subsection, he shall be deemed 
to have been overpaid for such month an additional amount as follows:
            ``(i) in the case of the first such month for which a 
        benefit is paid in excess of the amount payable by reason of 
        this subsection, the additional amount shall be equal to the 
        amount of such excess;
            ``(ii) in the case of the second such month for which a 
        benefit is paid in excess of the amount payable by reason of 
        this subsection, the additional amount shall be equal to two 
        times the amount of such excess; and
            ``(iii) in the case of the third or a subsequent such month 
        for which a benefit is paid in excess of the amount payable by 
        reason of this subsection, the additional amount shall be equal 
        to three times the amount of such excess;
except that additional amounts of overpayment determined under this 
paragraph shall be determined only for months for which the benefit in 
excess of the amount payable was received and accepted.
    ``(C)(i)(I) If the Commissioner of Social Security determines, on 
the basis of information obtained by or submitted to him, that it may 
reasonably be expected that an individual's social security old-age or 
survivors benefits will not be payable (in whole or in part) for any 
month in a taxable year of such individual by reason of this 
subsection, the Commissioner may, before the close of such taxable 
year, suspend the payment (in whole or in part) for each month in such 
year (or for only such months as the Commissioner may specify) of such 
benefits. Such suspension shall remain in effect with respect to the 
benefits for any month until the Commissioner has determined the extent 
to which benefits are payable under this subsection.
    ``(II) The Commissioner of Social Security may, before the close of 
the taxable year of an individual on whose wages and self-employment 
income benefits are otherwise payable during such year, request of such 
individual that he make, at such time or times as the Commissioner may 
specify, a declaration of his estimated adjusted gross income (or the 
estimated total adjusted gross income for him and his spouse) for the 
taxable year and that he furnish to the Commissioner such other 
information with respect to such income as the Commissioner may 
specify. A failure by such individual to comply with any such request 
shall in itself constitute justification for a determination under 
subclause (I) that it may reasonably be expected that such benefits are 
not payable (in whole or in part) by reason of this subsection.
    ``(III) If the payment of an individual's social security old-age 
or survivors benefits have been suspended (in whole or in part) for all 
months in any taxable year of such individual under subclause (I), no 
payment of such unpaid benefits shall be made for any such month in 
such taxable year after the expiration of the period of three years, 
three months, and fifteen days following the close of such taxable year 
unless within such period the individual, or some other person entitled 
to benefits under this title on the basis of the same wages and self-
employment income, files with the Commissioner of Social Security 
information showing that the unpaid portion of a benefit for such month 
is payable to such individual.
    ``(ii) If, after the close of a taxable year of an individual to 
whom social security old-age or survivors benefits were otherwise 
payable for months in such year, the Commissioner of Social Security 
requests such individual to furnish a report of his adjusted gross 
income (or the total adjusted gross income of him and his spouse) for 
such taxable year or any other information with respect to such income 
which the Commissioner may specify, and the individual fails to comply 
with such request, such failure shall in itself constitute 
justification for a determination that such benefits were not payable 
(in whole or in part) for each month in such taxable year (or only for 
such months thereof as the Commissioner may specify) by reason of this 
subsection.
    ``(D) The Commissioner of Social Security shall develop and 
implement procedures in accordance with this paragraph to avoid paying 
more than the correct amount of an individual's social security old-age 
or survivors benefits as a result of the failure of the individual to 
file a correct report or estimate of adjusted gross income. Such 
procedures may include identifying categories of individuals whose 
social security old-age or survivors benefits which are not payable (in 
whole or in part) under this subsection are likely to be paid and 
requesting that they estimate their adjusted gross income (or the total 
adjusted gross income of them and their spouses) more frequently than 
other persons subject to this subsection.
    ``(6) Benefits of any individual (other than an individual 
described in paragraph (1)) based on the wages and self-employment 
income of any other individual to whom benefits are not payable by 
reason of paragraph (1) shall be payable as though such other 
individual were receiving such benefits.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to benefits otherwise payable in taxable years 
ending after December 31, 1997.

SEC. 206. COVERAGE OF NEWLY HIRED STATE AND LOCAL EMPLOYEES.

    (a) Amendments to the Social Security Act.--
            (1) In general.--Paragraph (7) of section 210(a) of the 
        Social Security Act (42 U.S.C. 410(a)(7)) is amended to read as 
        follows:
            ``(7) Excluded State or local government 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 August 1997 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, 1998,
                            ``(II) who is a bona fide employee of that 
                        employer on December 31, 1997, and
                            ``(III) whose employment relationship with 
                        that employer was not entered into for purposes 
                        of meeting the requirements of this 
                        subparagraph, and
                    ``(ii) the employment relationship with that 
                employer has not been terminated after December 31, 
                1997.
            ``(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 1998, 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 1998, 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, 1995 shall 
                be substituted for the calendar year referred to in 
                section 215(a)(1)(B)(ii)(II), and
                    ``(ii) such amount as so adjusted, if not a 
                multiple of $100, shall be rounded to the next higher 
                multiple of $100 where such amount is a multiple of $50 
                and to the nearest multiple of $100 in any other case.
        The Commissioner of Social Security shall determine and publish 
        in the Federal Register each adjusted amount determined under 
        this subparagraph not later than November 1 preceding the year 
        for which the adjustment is made.''.
                    (B) Conforming amendments.--
                            (i) Subsection (k) of section 210 of such 
                        Act (42 U.S.C. 410(k)) (relating to covered 
                        transportation service) is repealed.
                            (ii) Section 210(p) of such Act (42 U.S.C. 
                        410(p)) is amended--
                                    (I) in paragraph (2), by striking 
                                ``service is performed'' and all that 
                                follows and inserting ``service is 
                                service described in subsection 
                                (s)(3)(A).''; and
                                    (II) in paragraph (3)(A), by 
                                inserting ``under subsection (a)(7) as 
                                in effect in December 1997'' 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 1997 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, 1998,
                                    ``(II) who is a bona fide employee 
                                of that employer on December 31, 1997, 
                                and
                                    ``(III) whose employment 
                                relationship with that employer was not 
                                entered into for purposes of meeting 
                                the requirements of this subparagraph, 
                                and
                            ``(ii) the employment relationship with 
                        that employer has not been terminated after 
                        December 31, 1997.
                    ``(B) Treatment of multiple agencies and 
                instrumentalities.--For purposes of subparagraph (A), 
                under regulations--
                            ``(i) all agencies and instrumentalities of 
                        a State (as defined in section 218(b) of the 
                        Social Security Act) or of the District of 
                        Columbia shall be treated as a single employer, 
                        and
                            ``(ii) all agencies and instrumentalities 
                        of a political subdivision of a State (as so 
                        defined) shall be treated as a single 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 1998, 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 1996'' 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, 1998.

SEC. 207. INCREASE IN WIDOW'S AND WIDOWER'S INSURANCE BENEFITS.

    (a) Widow's Insurance Benefits.--Section 202(e)(2) of the Social 
Security 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''.
    (b) 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''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to benefits for months after December 1998.

SEC. 208. 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.
                                 <all>