[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2717 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2717

 To improve the solvency of the Social Security Program, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 5, 1999

 Mr. DeFazio introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To improve the solvency of the Social Security Program, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Social Security Investment Act of 
1999''.

SEC. 2. INVESTMENT OF THE SOCIAL SECURITY TRUST FUNDS.

    (a) In General.--Section 201(d) of the Social Security Act (42 
U.S.C. 401(d)) is amended to read as follows:
    ``(d)(1) It shall be the duty of the Managing Trustee to invest 
such portion of each of the Trust Funds as is not, in his judgment, 
required to meet current withdrawals. Subject to paragraph (2), such 
investments may be made only in interest-bearing obligations of the 
United States or in obligations guaranteed as to both principal and 
interest by the United States. For such purpose such obligations may be 
acquired (A) on original issue at the issue price, or (B) by purchase 
of outstanding obligations at the market price.
    ``(2)(A) The Managing Trustee of the Federal Old-Age and Survivors 
Insurance Trust Fund shall establish in such Trust Fund a Common Stock 
Investment Account. Such Account shall hold such amounts in such Trust 
Fund as are deposited into such Account pursuant to this paragraph, 
together with any dividends and capital gain derived from the 
investment in accordance with this paragraph of amounts maintained in 
such Account. For each fiscal year, amounts held in such Account shall 
be invested in common stock in accordance with the investment policies 
and other policies established by the Independent Social Security 
Investment Oversight Board for such fiscal year.
    ``(B) Upon receipt by the Federal Old-Age and Survivors Insurance 
Trust Fund of any amount appropriated under subsection (n), the 
Managing Trustee shall deposit a portion of such amount into the Common 
Stock Investment Account of the Trust Fund which is sufficient to 
maintain compliance with subsection (C).
    ``(C) The Managing Trustee shall limit deposits into the Common 
Stock Investment Account pursuant to subparagraph (B), and shall 
provide for withdrawals from such Account, to the extent necessary to 
ensure that the portion of the total amount held in the Federal Old-Age 
and Survivors Insurance Trust Fund which is maintained in such Account 
remains as close as practicable at the end of each target year 
(specified in the following table) at the applicable percentage 
(specified in such table) for that target year of the total amount held 
in such Trust Fund.

``For each target year                                   The applicable
  consisting of:                                         percentage is:
        2002...............................................  8 percent.
        2005............................................... 16 percent.
        2008............................................... 24 percent.
        2011............................................... 32 percent.
        2014 and each year thereafter...................... 40 percent.
    ``(3)(A) The purposes for which obligations of the United States 
may be issued under chapter 31 of title 31, United States Code, are 
hereby extended to authorize the issuance at par of public-debt 
obligations for purchase by the Trust Funds under paragraph (1).
    ``(B) Such obligations issued for purchase by the Trust Funds shall 
have maturities fixed with due regard for the needs of the Trust Funds 
and shall bear interest at a rate equal to the average market yield 
(computed by the Managing Trustee on the basis of market quotations as 
of the end of the calendar month next preceding the date of such issue) 
on all marketable interest-bearing obligations of the United States 
then forming a part of the public debt which are not due or callable 
until after the expiration of four years from the end of such calendar 
month; except that where such average market yield is not a multiple of 
one-eighth of 1 per centum, the rate of interest of such obligations 
shall be the multiple of one-eighth of 1 per centum nearest such market 
yield.
    ``(C) Each obligation issued for purchase by the Trust Funds under 
subparagraph (A) shall be evidenced by a paper instrument in the form 
of a bond, note, or certificate of indebtedness issued by the Secretary 
of the Treasury setting forth the principal amount, date of maturity, 
and interest rate of the obligation, and stating on its face that the 
obligation shall be incontestable in the hands of the Trust Funds, that 
the obligation is supported by the full faith and credit of the United 
States, and that the United States is pledged to the payment of the 
obligation with respect to both principal and interest.
    ``(D) The Managing Trustee may purchase interest-bearing 
obligations of the United States or obligations guaranteed as to both 
principal and interest by the United States, other than obligations 
issued for purchase by the Trust Funds, on original issue or at the 
market price, for purposes of investment of the amounts held in the 
Trust Funds only where he determines that the purchase of such other 
obligations is in the public interest.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning on or after October 1, 
1999.

SEC. 3. RULES GOVERNING INVESTMENT OF FEDERAL OLD-AGE AND SURVIVORS 
              INSURANCE TRUST FUND IN COMMON STOCK.

    Title II of the Social Security Act is amended by adding at the end 
the following new section:

 ``investment of federal old-age and survivors insurance trust fund in 
                              common stock

    ``Sec. 231. (a) Selection of Index and Portfolio Design.--
            ``(1) Selection of index.--The Independent Social Security 
        Investment Oversight Board shall select, for purposes of 
        investment of amounts held in the Common Stock Investment 
        Account of the Federal Old-Age and Survivors Insurance Trust 
        Fund, an index which is a commonly recognized index comprised 
        of common stock the aggregate market value of which is a 
        reasonably complete representation of the United States equity 
        markets.
            ``(2) Portfolio design.--Amounts held in the Common Stock 
        Investment Account of the Federal Old-Age and Survivors 
        Insurance Trust Fund shall be invested in a portfolio designed 
        to replicate the performance of the index selected under 
        paragraph (1). The portfolio shall be designed such that, to 
        the extent practicable, the percentage of the balance in such 
        Account that is invested in each stock is the same as the 
        percentage determined by dividing the aggregate market value of 
        all shares of that stock by the aggregate market value of all 
        shares of all stocks included in such index.
    ``(c) No Voting Rights in Securities.--The Independent Social 
Security Investment Oversight Board and the Managing Trustee of the 
Federal Old-Age and Survivors Insurance Trust Fund may not exercise 
voting rights associated with the ownership of securities by the Trust 
Fund.
    ``(d) Engagement of Qualified Public Accountant.--
            ``(1) In general.--The Independent Social Security 
        Investment Oversight Board shall annually engage, on behalf of 
        the Federal Old-Age and Survivors Insurance Trust Fund, an 
        independent qualified public accountant, who shall conduct an 
        examination of all accounts and other books and records 
        maintained in the administration of this section as the public 
        accountant considers necessary to enable the public accountant 
        to make the determination required by paragraph (2). The 
        examination shall be conducted in accordance with generally 
        accepted auditing standards and shall involve such tests of the 
        accounts, books, and records as the public accountant considers 
        necessary.
            ``(2) Examination and report.--The public accountant 
        conducting an examination under paragraph (1) shall determine 
        whether the accounts, books, and records referred to in 
        paragraph (1) have been maintained in conformity with generally 
        accepted accounting principles applied on a basis consistent 
        with the manner in which such principles were applied during 
        the examination conducted under paragraph (1) during each 
        preceding year after 2000. The public accountant shall transmit 
        to the Board and the Comptroller General of the United States a 
        report on his examination, including his determination under 
        this paragraph.
            ``(3) Definition.--For the purposes of this subsection, the 
        term `qualified public accountant' shall have the same meaning 
        as is provided in section 103(a)(3)(D) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1023(a)(3)(D)).
    ``(e) Fiduciary Responsibilities.--
            ``(1) In general.--Under regulations of the Secretary of 
        Labor, the provisions of sections 8477 and 8478 of title 5, 
        United States Code, shall apply in connection with the amounts 
        maintained in the Common Stock Investment Account of the 
        Federal Old-Age and Survivors Insurance Trust Fund in the same 
        manner and to the same extent as such provisions apply in 
        connection with the Thrift Savings Fund.
            ``(2) Investigative authority.--Any authority available to 
        the Secretary of Labor under section 504 of the Employee 
        Retirement Income Security Act of 1974 is hereby made available 
        to the Secretary of Labor, and any officer designated by the 
        Secretary of Labor, to determine whether any person has 
        violated, or is about to violate, any provision applicable 
        under paragraph (1).
            ``(3) Exculpatory provisions; insurance.--
                    ``(A) In general.--Any provision in an agreement or 
                instrument which purports to relieve a fiduciary from 
                responsibility or liability for any responsibility, 
                obligation, or duty under this section shall be void.
                    ``(B) Insurance.--Amounts held in the Federal Old-
                Age and Survivors Insurance Trust Fund available for 
                administrative expenses shall be available and may be 
                used at the discretion of the Independent Social 
                Security Investment Oversight Board to purchase 
                insurance to cover potential liability of persons who 
                serve in a fiduciary capacity with respect to amounts 
                maintained in the Common Stock Investment Account of 
                such Trust Fund, without regard to whether a policy of 
                insurance permits recourse by the insurer against the 
                fiduciary in the case of a breach of a fiduciary 
                obligation.''.

SEC. 4. ESTABLISHMENT OF THE INDEPENDENT SOCIAL SECURITY INVESTMENT 
              OVERSIGHT BOARD.

    Title VII of the Social Security Act is amended by inserting after 
section 705 (42 U.S.C. 906) the following new section:

        ``independent social security investment oversight board

    ``Sec. 706. (a) There is established in the Social Security 
Administration an Independent Social Security Investment Oversight 
Board.
    ``(b) The Board shall be composed of a Chairman and four additional 
members. The Chairman and each additional member shall be appointed by 
the President, by and with the advice and consent of the Senate.
    ``(c) Members of the Board shall have substantial experience, 
training, and expertise in the management of financial investments and 
service in a fiduciary capacity.
    ``(d)(1) A member of the Board shall be appointed for a term of 10 
years, except that of the members first appointed--
            ``(A) the member appointed as Chairman shall be appointed 
        for a term of 10 years;
            ``(B) one member shall be appointed for a term of 8 years;
            ``(C) one member shall be appointed for a term of 6 years;
            ``(D) one member shall be appointed for a term of 4 years; 
        and
            ``(E) one member shall be appointed for a term of 2 years,
as designated by the President at the time of appointment.
    ``(2)(A) A vacancy on the Board shall be filled in the manner in 
which the original appointment was made and shall be subject to any 
conditions which applied with respect to the original appointment.
    ``(B) An individual chosen to fill a vacancy shall be appointed for 
the unexpired term of the member replaced.
    ``(C) The term of any member shall not expire before the date on 
which the member's successor takes office.
    ``(3) An individual appointed as a member of the Board may be 
removed from office only pursuant to a finding by the President of 
neglect of duty or malfeasance in office.
    ``(e) The member of the Board designated by the President as 
Chairman shall serve as Chairman for a term of 4 years (or until the 
expiration of his term as member of the Board, if earlier). A member 
serving as Chairman may be reappointed as Chairman.
    ``(f) The Board shall--
            ``(1) establish policies for investments in common stock of 
        amounts in the Common Stock Investment Account of the Federal 
        Old-Age and Survivors Insurance Trust Fund under section 
        201(d)(2), including--
                    ``(A) the risk and return parameters for such 
                investments; and
                    ``(B) the number and structure of the portfolios in 
                which such investments are maintained;
            ``(2) review bids from, and select managers for, such 
        investments;
            ``(3) annually review the performance of each investment 
        manager selected pursuant to paragraph (2) and provide for 
        reallocation of funds among them by the Managing Trustee as 
        appropriate;
            ``(4) report annually to each House of the Congress and to 
        the President regarding the earnings on such investments and 
        publish such reports annually in the Federal Register; and
            ``(5) review and approve the budget of the Board.
    ``(g)(1) The Board may--
            ``(A) adopt, alter, and use a seal;
            ``(B) establish policies with which the Managing Trustee of 
        the Federal Old-Age and Survivors Insurance Trust Fund is 
        required to comply under section 201(d)(2); and
            ``(C) take such other actions as may be necessary to carry 
        out the functions of the Board.
    ``(2) The policies of the Board may not require the Managing 
Trustee to invest or to cause to be invested any sums in the Federal 
Old-Age and Survivors Insurance Trust Fund in a specific asset or to 
dispose of or cause to be disposed of any specific asset of such Trust 
Fund.
    ``(h)(1) The Board shall meet--
            ``(A) not less than once during each month; and
            ``(B) at additional times at the call of the Chairman.
    ``(2)(A) The Board shall perform the functions and exercise the 
powers of the Board on a majority vote of a quorum of the Board.
    ``(B) A vacancy on the Board shall not impair the authority of a 
quorum of the Board to perform the functions and exercise the powers of 
the Board.
    ``(3) Three members of the Board shall constitute a quorum for the 
transaction of business.
    ``(4)(A) Each member of the Board who is not an officer or employee 
of the Federal Government shall be compensated at the daily rate of 
basic pay payable for level IV of the Executive Schedule for each day 
during which such member is engaged in performing a function of the 
Board.
    ``(B) A member of the Board shall be paid travel, per diem, and 
other necessary expenses under subchapter I of chapter 57 of title 5, 
United States Code, while traveling away from such member's home or 
regular place of business in the performance of the duties of the 
Board.
    ``(5) The accrued annual leave of any officer or employee of the 
Federal Government who is a member of the Board shall not be charged 
for any time used in performing services for the Board.
    ``(i) The members of the Board shall discharge their 
responsibilities solely in the interest of the Federal Old-Age and 
Survivors Insurance Trust Fund in connection with investments of 
amounts in the Common Stock Investment Account of such Trust Fund under 
section 201(d)(2).
    ``(j) The Board shall prepare and submit to the President, and, at 
the same time, to the appropriate committees of Congress, an annual 
budget of the expenses and other items relating to the Board which 
shall be included as a separate item in the budget required to be 
transmitted to the Congress under section 1105 of title 31, United 
States Code.
    ``(k) The Board may submit to the President, and, at the same time, 
shall submit to each House of Congress, any legislative recommendations 
of the Board relating to any of its functions under this section.
    ``(l) There are hereby made available from Federal Old-Age and 
Survivors Insurance Trust Fund such sums as are necessary to carry out 
the provisions of this section and to administer the provisions of 
section 231, in accordance with certifications which shall be made from 
time to time by the Board to the Secretary of the Treasury.''.

SEC. 5. REPEAL OF LIMITATION ON SOCIAL SECURITY WAGE BASE FOR FICA AND 
              SECA TAXES.

    (a) FICA Tax.--Paragraph (1) of section 3121(a) of the Internal 
Revenue Code of 1986 (defining wages) is hereby repealed.
    (b) SECA Tax.--Subsection (b) of section 1402 of such Code 
(relating to definitions) is amended to read as follows:
    ``(b) Self-Employment Income.--
            ``(1) In general.--The term `self-employment income' means 
        the net earnings from self-employment derived by an individual 
        (other than a nonresident alien individual, except as provided 
        by an agreement under section 233 of the Social Security Act) 
        during any taxable year.
            ``(2) Exception for minimum net earnings.--
                    ``(A) In general.--The term `self-employment 
                income' shall not include the net earnings from self-
                employment, if such net earnings for the taxable year 
                are less than $400.
                    ``(B) Application of special rules.--In the case of 
                church employee income, the special rules of subsection 
                (j)(2) shall apply for purposes of subparagraph (A).
            ``(3) Determination of nonresident alien status.--An 
        individual who is not a citizen of the United States but who is 
        a resident of the Commonwealth of Puerto Rico, the Virgin 
        Islands, Guam, or American Samoa shall not, for purposes of 
        this chapter, be considered to be a nonresident alien 
        individual.''.
    (c) Conforming Amendments.--
            (1) Subsection (b) of section 31 of the Internal Revenue 
        Code of 1986 is hereby repealed.
            (2) Subparagraph (A) of section 51(h)(1) of such Code is 
        amended by striking ``so much'' and all the follows through the 
        period and inserting ``the lesser of--
                            ``(i) so much of such remuneration as 
                        constitutes `wages' within the meaning of 
                        section 3121(a), or
                            ``(ii) $6,000.''.
            (3) Subsection (s) of section 3121 of such Code is amended 
        by striking ``sections 3102, 3111, and 3121(a)(1)'' and 
        inserting ``sections 3102 and 3111''.
            (4) Section 3122 of such Code is amended by striking the 
        fourth sentence.
            (5) Subsections (a), (b), (c), and (d) of section 3125 of 
        such Code are each amended by striking the last sentence.
            (6) Subsection (c) of section 6413 of such Code is hereby 
        repealed.
            (7) Subsection (c) of section 230 of the Social Security 
        Act is amended by striking ``and sections 1402, 3121, 3122, 
        3125, 6413, and 6654 of the Internal Revenue Code of 1986''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2000.

SEC. 6. BASIC EXEMPTION FROM EMPLOYEE SOCIAL SECURITY TAXES.

    (a) Wages.--Subsection (a) of section 3121 of the Internal Revenue 
Code of 1986 is amended by inserting before paragraph (2) the following 
new paragraph:
            ``(1) in the case of tax imposed by section 3101(a), so 
        much of the wages (determined without regard to this paragraph) 
        paid to an individual during the calendar year as does not 
        exceed the basic exemption (as defined in subsection (k)) 
        unless such individual designates a lower amount with respect 
        to the employer;''.
    (b) Basic Exemption.--Section 3121 of such Code is amended further 
by inserting after subsection (j) the following new subsection:
    ``(k) Basic Exemption.--
            ``(1) In general.--For purposes of subsection (a)(1) and 
        this subsection, the term `basic exemption' for a taxable year 
        means $4,000 for the taxable year ending with or during 
        calendar year 2000 and the amount determined under paragraph 
        (2) for taxable years ending with or during calendar years 
        after 2000.
            ``(2) Annual adjustment.--The Secretary shall, on or before 
        November 1 of 2000 and of every year thereafter, determine and 
        publish in the Federal Register the basic exemption for taxable 
        years ending with or during the succeeding calendar year. The 
        amount of the basic exemption determined under this paragraph 
        shall be the larger of--
                    ``(A) the amount of the basic exemption in effect 
                for taxable years ending with or during the calendar 
                year in which the determination under this subsection 
                is made, or
                    ``(B) the product of the amount prescribed in 
                paragraph (1) in effect for the taxable year ending 
                with or during calendar year 2000 and the ratio of the 
                national average wage index (as defined in section 
                209(k)(1) of the Social Security Act) for taxable years 
                ending with or during the calendar year before the 
                calendar year in which the determination under this 
                paragraph is made to the national average wage index 
                (as so defined) for 1998,
        with such product, if not a multiple of $10, being rounded to 
        the next higher multiple of $10 where such amount is a multiple 
        of $5 but not of $10 and to the nearest multiple of $10 in any 
        other case.''.
    (c) Self-Employment Income.--Section 1401 of such Code is amended 
by redesignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection:
    ``(c) Coordination With Basic Exemption From Employee FICA Tax.--
            ``(1) Comparable exemption.--Notwithstanding subsection 
        (a), the rate of tax imposed by subsection (a) shall be \1/2\ 
        the otherwise applicable rate but only with respect to so much 
        of the self-employment income for the taxable year as does not 
        exceed an amount equal to the basic exemption (as defined in 
        section 3121(k)) for the calendar year beginning with or during 
        such taxable year, subject to paragraph (2).
            ``(2) Coordination.--The amount described in paragraph (1) 
        shall be reduced by the amount of remuneration received during 
        the taxable year which would (but for section 3121(a)(1)) be 
        treated as wages as defined in section 3121(a). If the amount 
        of the reduction required under the preceding sentence exceeds 
        the amount described in paragraph (1)--
                    ``(A) the self-employment income of the individual 
                for such taxable year shall be increased by the amount 
                of such excess, but
                    ``(B) the tax imposed by this section on such 
                excess shall be at a rate equal to \1/2\ of the 
                otherwise applicable rate of tax under subsection 
                (a).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.''.

SEC. 7. INCREASE IN BENEFITS AT AGE 85.

    Section 202 of the Social Security Act (42 U.S.C. 402) is amended 
by adding at the end the following new subsection:
            ``(z) Notwithstanding the preceding provisions of this 
        section, the amount of an individual's monthly insurance 
        benefit under this section for any month ending after the date 
        on which such individual attains age 85 shall be increased to 
        an amount equal to the product derived by multiplying the 
        amount of such benefit (before the application of this 
        subsection) by the percentage specified in connection with the 
        calendar year in which such individual attains 85 years of age, 
        as set forth in the following table:

``If such calendar year is:                 The percentage is:
        2001.........................................    0.25 percent. 
        2002.........................................    0.50 percent. 
        2003.........................................    0.75 percent. 
        2004.........................................    1.00 percent. 
        2005.........................................    1.25 percent. 
        2006.........................................    1.50 percent. 
        2007.........................................    1.75 percent. 
        2008.........................................    2.00 percent. 
        2009.........................................    2.25 percent. 
        2010.........................................    2.50 percent. 
        2011.........................................    2.75 percent. 
        2012.........................................    3.00 percent. 
        2013.........................................    3.25 percent. 
        2014.........................................    3.50 percent. 
        2015.........................................    3.75 percent. 
        2016.........................................    4.00 percent. 
        2017.........................................    4.25 percent. 
        2018.........................................    4.50 percent. 
        2019.........................................    4.75 percent. 
        After 2019...................................  5.00 percent.''.

SEC. 8. YEARS OF LOW EARNINGS WHILE PROVIDING CHILD CARE DISREGARDED IN 
              DETERMINING BENEFIT COMPUTATION YEARS.

    (a) In General.--Section 215(b)(2) of the Social Security Act (42 
U.S.C. 415(b)(2)) is amended--
            (1) by striking the period at the end of clause (ii) of 
        subparagraph (A) and inserting a comma;
            (2) by striking ``Clause (ii), once'' after and below 
        clause (ii) of subparagraph (A) and inserting the following:
        ``and reduced further to the extent provided in subparagraph 
        (B). Clause (ii), once'';
            (3) by striking ``If an individual'' in the matter 
        following clause (ii) of subparagraph (A) and all that follows 
        through the end of subparagraph (A);
            (4) by redesignating subparagraph (B) as subparagraph (E); 
        and
            (5) by inserting after subparagraph (A) the following new 
        subparagraphs:
    ``(B) Subject to subparagraph (D), in any case in which--
            ``(i) in any calendar year which is included in an 
        individual's computation base years, such individual is living 
        with a child (of such individual or his or her spouse) under 
        the age of 12,
            ``(ii) such calendar year is not disregarded pursuant to 
        subparagraphs (A) and (F) (in determining such individual's 
        benefit computation years) by reason of any reduction in the 
        number of such individual's elapsed years under subparagraph 
        (A), and
            ``(iii) at any time during or after such calendar year and 
        on or before the date of the application by such individual for 
        benefits based on such individual's wages and self-employment 
        income, such individual submits to the Commissioner of Social 
        Security, in such form as the Commissioner shall prescribe by 
        regulations, a written statement that the requirements of 
        clause (i) are met with respect to such calendar year,
then the number by which such elapsed years are reduced under this 
paragraph pursuant to subparagraph (A) shall be increased by one (up to 
the maximum number applicable under subparagraph (C)) for each such 
calendar year.
    ``(C) For purposes of subparagraph (B), the maximum number by which 
elapsed years may be reduced pursuant to such subparagraph is the 
number of years specified in connection with the calendar year in which 
such individual first meets all requirements for entitlement to old-age 
insurance benefits or disability insurance benefits (other than filing 
application therefor), or dies (before first meeting such 
requirements), as set forth in the following table:

``If such calendar year is:         The applicable maximum number of 
                                            years is:
        After 2004 and before 2007.............................     1. 
        After 2006 and before 2009.............................     2. 
        After 2008 and before 2011.............................     3. 
        After 2010 and before 2013.............................     4. 
        After 2012.............................................     5. 
    ``(D)(i) No calendar year shall be disregarded by reason of 
subparagraph (B) (in determining such individual's benefit computation 
years) in connection with a child unless the individual was living with 
the child substantially throughout the period in such year in which the 
child was alive and under the age of 12 in such year and the individual 
had no earnings as described in section 203(f)(5) in such year.
    ``(ii) The particular calendar years to be disregarded under 
subparagraph (B) (in determining such benefit computation years) shall 
be those years (not otherwise disregarded under subparagraph (A)) 
which, before the application of subsection (f), meet the conditions of 
clause (i).
    ``(iii) Subparagraph (B) shall apply only to the extent that its 
application would not result in a lower primary insurance amount.''.
    (b) Effective Date.--The amendments made by this section shall 
apply only with respect to individuals first meeting all requirements 
for entitlement to old-age insurance benefits or disability insurance 
benefits (other than filing application therefor), or dying (before 
first meeting such requirements), after December 31, 2004.

SEC. 9. PHASED-IN INCREASE IN NUMBER OF BENEFIT COMPUTATION YEARS TO 
              40.

    (a) In General.--Section 215(b)(2) of the Social Security Act (42 
U.S.C. 415(b)(2)) (as amended by section 8) is amended further--
            (1) in subparagraph (A)(i), by striking ``by 5 years'' and 
        inserting ``to the extent provided in subparagraph (F)''; and
            (2) by adding at the end of paragraph (2) the following new 
        subparagraph:
    ``(F) For purposes of clause (i) of subparagraph (A), the number of 
elapsed years shall be reduced pursuant to such clause by the number of 
years specified in connection with the calendar year in which such 
individual becomes eligible for old-age insurance benefits, or dies 
(before becoming eligible for such benefits), as set forth in the 
following table:

``If such calendar year is:         The applicable number of years is:
        After 2004 and before 2007.............................     4. 
        After 2006 and before 2009.............................     3. 
        After 2008 and before 2011.............................     2. 
        After 2010 and before 2013.............................     1. 
        After 2012.............................................   0.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to individuals attaining early retirement age (as 
defined in section 216(l)(2) of the Social Security Act), or dying 
(before attaining such age), after December 31, 2004.
                                 <all>