[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5734 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 5734

 To amend title II of the Social Security Act and the Internal Revenue 
   Code of 1986 to provide prospectively for personalized retirement 
security through personal retirement savings accounts to allow for more 
control by individuals over their Social Security retirement income, to 
amend such title and the Balanced Budget and Emergency Deficit Control 
Act of 1985 to protect social security surpluses, and to provide other 
           reforms relating to benefits under such title II.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 14, 2002

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

_______________________________________________________________________

                                 A BILL


 
 To amend title II of the Social Security Act and the Internal Revenue 
   Code of 1986 to provide prospectively for personalized retirement 
security through personal retirement savings accounts to allow for more 
control by individuals over their Social Security retirement income, to 
amend such title and the Balanced Budget and Emergency Deficit Control 
Act of 1985 to protect social security surpluses, and to provide other 
           reforms relating to benefits under such title II.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Retirement 
Security Act''.
    (b) Table of Contents.--

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

Sec. 101. Establishment of individual retirement security program.
Sec. 102. Adjustments in amounts appropriated to the Federal Old-Age 
                            and Survivors Insurance Trust Fund based on 
                            reallocation percentage.
Sec. 103. Adjustments to primary insurance amounts under part A of 
                            title II of the Social Security Act.
Sec. 104. Personal retirement savings accounts.
Sec. 105. Individual retirement security program refundable credit.
              TITLE II--SOCIAL SECURITY SURPLUS PROTECTION

Sec. 201. Transfers of budget surpluses to Federal Old-Age and 
                            Survivors Insurance Trust Fund.
               TITLE III--SOCIAL SECURITY BENEFIT REFORMS

Sec. 301. Gradual increase in retirement age and early retirement age.
Sec. 302. Adjustments to bend points in determining primary insurance 
                            amounts.
Sec. 303. Information relating to benefit limitations provided in 
                            social security account statements.
Sec. 304. Coverage of newly hired State and local employees.
Sec. 305. Increase in monthly insurance benefits for widows and 
                            widowers.
Sec. 306. Acceleration of increase in delayed retirement credit.
Sec. 307. Authorization for reimbursement of Federal Disability 
                            Insurance Trust Fund for certain costs of 
                            disability insurance benefits.
Sec. 308. Study to develop recommendations for providing for elections 
                            under which individuals may opt for 
                            exclusion from social security coverage.
Sec. 309. Increase in number of years disregarded in determining 
                            average annual earnings on which benefit 
                            amounts are based where remunerative work 
                            is precluded by need to provide child care.
Sec. 310. Exclusion of disabled adult children from reduction in 
                            benefits under the family maximum 
                            provisions.
                     TITLE IV--RETIREMENT SECURITY

Sec. 401. Pensions and individual retirement arrangement provisions of 
                            the Economic Growth and Tax Relief 
                            Reconciliation Act of 2001 made permanent.
Sec. 402. Acceleration of phase-ins of scheduled increases in IRA and 
                            pension plan contribution limits.
Sec. 403. Refundable credit for premiums on qualified long-term care 
                            insurance contracts.
Sec. 404. Tax credit for taxpayers providing care for dependent parents 
                            in their households.
Sec. 405. Nonrefundable tax credit for expenses of seniors for 
                            maintaining a principal residence.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--On July 15, 1999, the House Budget Committee Social 
Security Task Force adopted the following Findings by unanimous vote on 
July 15, 1999:
            (1) Time is the enemy of Social Security reform and we 
        should move without delay. Prompt action will give us time to 
        institute gradual reforms that allow workers to plan for their 
        retirement and minimizes the impact for current or near-term 
        retirees.
            (2) The Social Security Trust Fund is a secure, legal 
        entity comprised of U.S. Treasury Bonds backed by the full 
        faith and credit of the U.S. Government. While the U.S. has 
        never defaulted on any of its obligations, these represent a 
        legal claim on future Federal revenue. Such securities will 
        have to be redeemed from funds outside the Trust Fund itself.
            (3) Any reform must consider the effects on all 
        generations, genders, and those currently receiving Social 
        Security benefits. Since current demographic projections may 
        very well underestimate future life expectancy, reform 
        proposals should insure that the intergenerational balance that 
        has characterized this program remains intact.
            (4) No payroll tax increase.
            (5) A universal Social Security survivor and disability 
        benefit program needs to be maintained. To shield the disabled 
        and those who have been in the system a short time, general 
        fund monies should be used to supplement program benefits.
            (6) Social Security surpluses should only be spent for 
        Social Security and should support a reform program that 
        encourages savings and overall economic growth.
            (7) Investment in the capital markets presents an 
        opportunity to restore Social Security's solvency. The 
        investment income generated by savings-based reform should not 
        be used for any purpose other than retirement.
            (8) Investments in personal accounts can be managed to 
        minimize administrative costs, avoiding substantial reductions 
        rates of return on investment. Individual investors can use 
        guaranteed return securities and annuities to create a personal 
        investment safety net that assures a stable retirement income 
        for each worker.
    (b) Additional Findings.--The Congress adds the following to the 
above Findings:
            (1) One of America's most popular Government programs, 
        Social Security, is in jeopardy. The 1998 Board of Trustee's 
        report states that the current system faces an actuarial 
        deficit of 2.09 percent of taxable payroll. According to the 
        1998 Board of Trustee's report, the Social Security trust fund 
        will begin to run a deficit by 2014 and will be exhausted by 
        2032.
            (2) Helping assure Americans retirement security is a major 
        national goal.
            (3) The Congress should strengthen Social Security to 
        ensure Americans retirement security. The changes made to 
        strengthen Social Security should create a solvent Social 
        Security system, and avoid payroll tax increases.
            (4) The root causes of the weaknesses in the current Social 
        Security system are its inadequate funding mechanism and 
        changing demographics. Social Security was designed in 1935 as 
        a pay-as-you-go system, in which current workers supported 
        current retirees. This design worked when America had 42 
workers per beneficiary in 1945, but that ratio has fallen over time. 
In 1999 there are only 3.2 workers per beneficiary, and by 2060 the 
ratio is projected to fall to 1.8 workers per beneficary. To pay 
benefits to the rising number of retirees, the Government has levied 
increasing payroll taxes on workers. To maintain the program in its 
current form, the Government will have to continue to raise payroll 
taxes or substantially reduce benefits.
            (5) The key to a more secure Social Security system is 
        increased savings and private investment. We should move from a 
        financing system based on the Federal Government's power to tax 
        workers to one based on savings and investment accounts owned 
        and controlled by workers.
            (6) Allowing workers to take advantage of higher investment 
        returns will increase their income in retirement. Over the last 
        100 years, the stock market has earned roughly 7 percent after 
        inflation compared to a yield of 1.5 to 2 percent after 
        inflation projects by the Social Security Administration for 
        workers' payroll taxes. The difference is enormous. For 
        example, $1,000 invested for 50 years at 2 percent becomes 
        nearly $2,700. The same amount invested for 50 years at 7 
        percent becomes nearly $30,000.
    (c) Purposes.--The purposes of this Act are as follows:
            (1) To give workers and retirees more ownership and control 
        over their retirement savings.
            (2) To improve the living standards of American seniors by 
        allowing them to take advantage of low-risk investment 
        opportunities that earn higher returns than those they can 
        expect to realize under the current Social Security system.
            (3) To stimulate the American economy by increasing savings 
        and investment leading to higher productivity, more jobs, and 
        better wages.
            (4) To ensure the solvency of the Social Security system 
        while maintaining an adequate reserve in the Social Security 
        trust fund.

            TITLE I--INDIVIDUAL RETIREMENT SECURITY PROGRAM

SEC. 101. ESTABLISHMENT OF INDIVIDUAL RETIREMENT PROGRAM.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';

        and
            (2) by adding at the end the following new part:

            ``Part B--Individual Retirement Security Program

           ``deposits to personal retirement savings accounts

    ``Sec. 251. (a) Designation of Personal Retirement Savings Accounts 
by Participating Individuals.--
            (1) In general.--Under regulations prescribed by the Board 
        of Trustees, a participating individual, and the spouse of such 
        an individual, upon the attainment of a minimum deposit balance 
        in the Interim Investment Fund as described in subsection (b), 
        may designate, in writing filed with the Commissioner of Social 
        Security in such form and manner as may be prescribed in such 
        regulations, one or more personal retirement savings accounts 
        to which deposits with respect to the individual or spouse are 
        to be made under subsection (b). The individual or spouse may 
        designate other personal retirement savings accounts in lieu of 
        or in addition to accounts previously designated, in accordance 
        with regulations of the Board of Trustees.
            (2) Election not to participate.--For provisions relating 
        to election not to be a participating individual, see section 
        254(3)(B).
    ``(b) Deposits to Personal Retirement Savings Accounts.--
            ``(1) In general.--In any case in which the total amount in 
        the Interim Investment Fund credited under section 252 to a 
        participating individual as of the end of any annual reporting 
        month, adjusted so as to reflect net earnings and net losses 
        attributable to such amount from investment of the balance in 
        the Fund under section 252(c), equals or exceeds the minimum 
        deposit amount, the Secretary of the Treasury shall, within 30 
        days after the end of such month, notify the individual of the 
        amount credited to such individual in the Fund. If such total 
        amount credited to such individual as of the end of such 
        individual's annual reporting month is at least equal to the 
        minimum deposit amount, pursuant to the written election of 
        such individual which is filed in accordance with regulations 
        of the Board of Trustees and received by the Secretary of the 
        Treasury during the 90-day period following the individual's 
        annual reporting month, the Secretary of the Treasury shall 
        transfer such total amount from such Fund to such personal 
        retirement savings accounts as are designated under subsection 
        (a) with respect to such individual.
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Annual reporting month.--The term `annual 
                reporting month' means, in connection with a 
                participating individual, a calendar month of the 
                calendar year assigned to such individual as his or her 
                annual reporting month according to a schedule that 
                shall be prescribed in regulations of the Board of 
                Trustees.
                    ``(B) Minimum deposit balance.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `minimum deposit balance' means an 
                        amount equal to $2,500.
                            ``(ii) Adjustments.--The Secretary of the 
                        Treasury shall adjust annually (effective for 
                        annual reporting months occurring after 
                        December 2003) the dollar amount set forth in 
                        clause (i) under procedures providing for 
                        adjustments in the same manner and to the same 
                        extent as adjustments are provided for under 
                        the procedures used to adjust benefit amounts 
under section 215(i)(2)(A), except that any amount so adjusted that is 
not a multiple of $1.00 shall be rounded to the nearest multiple of 
$1.00.
    ``(c) Lump Sum Payment to Estate Upon Death of Account Holder.--
Upon the death of the account holder, the amount of any assets in the 
personal retirement savings account shall be transferred in a lump sum, 
under rules established by the Board of Trustees, to the account 
holder's estate.
    ``(d) Public Education Effort.--Under regulations prescribed by the 
Board of Trustees, the Commissioner of Social Security shall conduct a 
public education effort. Such effort shall include dissemination to 
participating individuals of information that will assist them in 
making educated investment decisions under the program established 
under this part.

                       ``interim investment fund

    ``Sec. 252. (a) Establishment of Interim Investment Fund.--There is 
established in the Treasury of the United States an Interim Investment 
Fund. The Board of Trustees shall serve as trustees of such Fund. The 
Fund consists of all amounts derived from payments into the Fund under 
subsection (b) and remaining after investment of such amounts under 
subsection (c), including additional amounts derived as income from 
such investments. The amounts held in the Fund are appropriated and 
shall remain available without fiscal year limitation to be held for 
investment under subsection (c), to pay the administrative expenses 
related to the Fund and to investment under subsection (c), and to make 
transfers to personal retirement savings accounts under section 
251(b)(1).
    ``(b) Payments Into Interim Investment Fund.--
            ``(1) In general.--During each calendar year, the Secretary 
        of the Treasury shall deposit into the Interim Investment Fund, 
        from amounts otherwise available in the general fund of the 
        Treasury, a total amount equal, in the aggregate, to 100 
        percent of the redirected social security taxes for such 
        calendar year of each individual who is a participating 
        individual for such calendar year.
            ``(2) Transfers based on estimates.--The amounts deposited 
        pursuant to paragraph (1) shall be transferred in at least 
        monthly payments from the general fund in the Treasury to the 
        Interim Investment Fund, such amounts to be determined on the 
        basis of estimates by the Secretary of the Treasury of the 
        taxes, specified in section 251(b)(1), paid to or deposited 
        into the Treasury; and proper adjustments shall be made in 
        amounts subsequently transferred to the extent prior estimates 
        were in excess of or were less than actual amounts.
            ``(3) Separate accounting and crediting.--Subject to this 
        paragraph, the Secretary of the Treasury shall provide for 
        prompt, separate accounting of the amounts deposited in the 
        Interim Investment Fund with respect to each individual during 
        each calendar year, together with any increases or decreases 
        therein for such year so as to reflect the net returns and 
        losses from investment thereof while held in the Fund during 
        such year. Such accounting shall also take into account any 
        adjustments made pursuant to paragraph (2). Under such 
        accounting, amounts initially deposited into the Fund during 
        each fiscal year with respect to the redirected social security 
        taxes of each participating individual (including net returns 
        and losses from the investment thereof) shall be credited, not 
        later than the end of the succeeding fiscal year, as follows:
                    ``(A) If the participating individual is not 
                married as of the end of the fiscal year in which the 
                amounts to be credited were deposited, such amount 
                shall be credited to such participating individual.
                    ``(B) If the participating individual is married as 
                of the end of such fiscal year--
                            ``(i) 50 percent of such amounts shall be 
                        credited to such participating individual, and
                            ``(ii) 50 percent of such amounts shall be 
                        credited to the individual who is the spouse of 
                        such individual as of the end of such fiscal 
                        year.
            ``(4) Redirected social security taxes.--For purposes of 
        paragraph (1), the term `redirected social security taxes' of 
        an individual for a calendar year means the product derived by 
        multiplying--
                    ``(A) the sum of the total taxes paid under 
                sections 3101(a) and 3111(a) of the Internal Revenue 
                Code of 1986 with respect to such individual during 
                such calendar year, and the total taxes paid under 
                section 1401(a) of such Code with respect to such 
                individual during such calendar year, by
                    ``(B) the reallocation percentage declared for such 
                calendar year under section 201(n)(2) of this Act.
    ``(c) Investment in Common Stock and Corporate Bonds in 3 
Alternative Investment Accounts.--
            ``(1) In general.--For purposes of investment of the 
        Interim Investment Fund, the Board of Trustees shall divide the 
        Fund into 3 investment accounts. Such accounts shall consist of 
        the 60/40 investment account, the 40/60 investment account, and 
        the 80/20 investment account. The Board of Trustees shall 
        contract with appropriate investment managers selected for 
        investment of amounts held in each investment account.
            ``(2) Rules relating to the 60/40 investment account.--
                    ``(A) Default investment account.--Except as 
                provided in an election in effect under paragraph (3), 
                amounts held in the Interim Investment Fund shall be 
                credited to the 60/40 investment account and invested 
                as provided in subparagraph (B).
                    ``(B) Investment.--Each investment manager selected 
                under paragraph (1) for investment of amounts held in 
                the 60/40 investment account shall invest such amounts 
                under regulations which shall be prescribed by 
the Board of Trustees so as to ensure, to the maximum extent 
practicable, that, of the total balance in the Fund credited to such 
account and available for investment (after allowing for administrative 
expenses)--
                            ``(i) 60 percent is invested in common 
                        stock in accordance with paragraph (4), and
                            ``(ii) 40 percent is invested in corporate 
                        bonds in accordance with paragraph (5).
            ``(3) Election of transfers to the 40/60 investment account 
        and the 80/20 investment account.--
                    ``(A) In general.--Pursuant to any individual's 
                written election filed in accordance with regulations 
                of the Board of Trustees and received by the Secretary 
                of the Treasury during the period beginning January 1 
                of each year and ending March 31 of such year, the 
                Secretary of the Treasury shall transfer to any of the 
                investment accounts in the Interim Investment Fund 
                (whichever is designated in such election), from either 
                of the other investment accounts in the Interim 
                Investment Fund, the amount credited to such other 
                investment account as of the end of the fiscal year 
                ending on September 30 of the prior calendar year.
                    ``(B) Investment of 40/60 investment account.--Each 
                investment manager selected under paragraph (1) for 
                investment of amounts held in the 40/60 investment 
                account shall invest such amounts under regulations 
                which shall be prescribed by the Board of Trustees so 
                as to ensure, to the maximum extent practicable, that, 
                of the total balance in the Fund credited to such 
                account and available for investment (after allowing 
                for administrative expenses)--
                            ``(i) 40 percent is invested in common 
                        stock in accordance with paragraph (4), and
                            ``(ii) 60 percent is invested in corporate 
                        bonds in accordance with paragraph (5).
                    ``(C) Investment of 80/20 investment account.--Each 
                investment manager selected under paragraph (1) for 
                investment of amounts held in the 80/20 investment 
                account shall invest such amounts under regulations 
                which shall be prescribed by the Board of Trustees so 
                as to ensure, to the maximum extent practicable, that, 
                of the total balance in the Fund credited to such 
                account and available for investment (after allowing 
                for administrative expenses)--
                            ``(i) 80 percent is invested in common 
                        stock in accordance with paragraph (4), and
                            ``(ii) 20 percent is invested in corporate 
                        bonds in accordance with paragraph (5).
            ``(4) Investment in common stock.--In accordance with 
        regulations which shall be prescribed by the Board of Trustees, 
        the Board of Trustees shall establish standards which must be 
        met by common stock selected for investment of the balance of 
        the Interim Investment Fund pursuant to paragraph (2)(B)(i), 
        (3)(B)(i), or (3)(C)(i). In conformity with such standards, the 
        Board of Trustees shall select, for purposes of such 
        investment, indices which are comprised of common stock the 
        aggregate market value of which is, in each case, a reasonably 
        broad representation of publicly held companies whose shares 
        are traded on the equity markets. Amounts invested in common 
        stock by each investment manager shall beheld in a portfolio 
        designed to replicate the performance of one or more of such 
        indices.
            ``(5) Investment in corporate bonds.--In accordance with 
        regulations which shall be prescribed by the Board of Trustees, 
        the Board of Trustees shall establish standards which must be 
        met by corporate bonds selected for investment of the balance 
        of the Interim Investment Fund pursuant to paragraph 
        (2)(B)(ii), (3)(B)(ii), or (3)(C)(ii). Such standards shall 
        take into account the competing considerations of risk and 
        return. Amounts invested in corporate bonds by each investment 
        manager shall be held in a portfolio which shall consist of a 
        diverse range of corporate bonds, taking into full account the 
        opposing considerations of risk and maximization of return.
    ``(d) Lump Sum Payment to Estate Upon Death of Participating 
Individual.--Upon the death of a participating individual, the amount 
of any assets in the Interim Investment Fund credited to such 
individual shall be transferred in a lump sum, under rules established 
by the Board of Trustees, to such individual's estate.

                 ``periodic reports by account trustee

    ``Sec. 253. (a) In General.--The trustee of a personal retirement 
savings account shall make periodic reports concerning the status of 
the account which shall meet the requirements of section 531(g)(2) of 
the Internal Revenue Code of 1986 and of this section. Each periodic 
report shall be furnished to the account holder on at least a 
semiannual basis on or before the 60th day following the period for 
which the report is required.
    ``(b) Information Required To Be Included.--The periodic report 
shall contain the following information for transactions occurring 
during the period for which the report is provided:
            ``(1) The balance in the account.
            ``(2) The rate of return for the period covered.
            ``(3) The amount of authorized personal retirement savings 
        account contributions.
            ``(4) The amount of distributions.
            ``(5) The name and address of the trustee.
            ``(6) Commission fees and fees for administrative expenses 
        charged in connection with the account.
            ``(7) Other information which may be required from time to 
        time by the Board of Trustees.
The language of the report shall be written in a form so as to be 
understood by the average participating individual.
    ``(c) Reports to Board of Trustees.--The Board of Trustees may 
require the periodic report to be filed with the Board at such time as 
the Board may specify in regulations under this section.
    ``(d) Failure by Trustee To Make Timely Periodic Reports.--
            ``(1) In general.--The trustee of a personal retirement 
        savings account shall be subject to a civil penalty of not to 
        exceed $100 a day from the date of such trustee's failure or 
        refusal to furnish the periodic report required to be furnished 
        by the trustee under this section until the date on which such 
        report is furnished.
            ``(2) Penalties assessed by board of trustees.--Any civil 
        penalty assessed by this subsection shall be imposed by the 
        Board of Trustees and collected in a civil action. The Board of 
        Trustees may compromise the amount of any civil penalty imposed 
        by this subsection. The Board of Trustees may waive the 
        application of this subsection with respect to any failure if 
        the Board of Trustees determines that such failure is due to 
        reasonable cause and not to intentional disregard of rules and 
        regulations.

                             ``definitions

    ``Sec. 254. For purposes of this title--
            ``(1) Personal retirement savings account.--The term 
        `personal retirement savings account' has the meaning provided 
        in section 531 of the Internal Revenue Code of 1986.
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in his employ to whom 
        wages are paid by such person during such calendar year.
            ``(3) Participating individual.--
                    ``(A) In general.--The term `participating 
                individual' means any individual--
                            ``(i) with respect to whose employment by a 
                        person who is covered employer for any calendar 
                        year beginning after December 31, 2002, there 
                        is imposed an excise tax under section 3111 of 
                        the Internal Revenue Code of 1986, or
                            ``(ii) on whose self-employment income for 
                        a taxable year beginning after December 31, 
                        2002, there is imposed a tax under section 
                        1401(a) of the Internal Revenue Code of 1986,
                and who has not filed an election for exemption under 
                subparagraph (B).
                    ``(B) Election for exemption.--
                            ``(i) In general.--An individual may, prior 
                        to attaining retirement age (as defined in 
                        section 216(l) and receiving any distribution 
                        from a personal retirement savings account, 
                        file with the Commissioner of Social Security 
                        under this subparagraph, in such form and 
                        manner as shall be prescribed in regulations of 
                        the Commissioner, a written form electing to be 
                        exempted from the status of `participating 
                        individual' for purposes of this part. Upon 
                        completion of the procedures provided for under 
                        clause (ii), an individual who has filed such 
                        an election and has not received a distribution 
                        from a personal retirement savings account 
                        shall not be treated as a participating 
                        individual under this part. Any such election 
                        shall be irrevocable.
                            ``(ii) Procedure.--The Board of Trustees 
                        shall prescribe by regulation procedures 
                        governing the termination of an individual's 
                        status as `participating individual' pursuant 
                        to an election for exemption filed under this 
                        subparagraph. Such procedures shall include--
                                    ``(I) prompt closing of all 
                                personal retirement savings accounts of 
                                such individual and prompt transfer to 
                                the Federal Old-Age and Survivors 
                                Insurance Trust Fund and the Federal 
                                Disability Insurance Trust Fund of the 
                                balance in such accounts, and
                                    ``(II) prompt transfer to such 
                                Trust Funds of any amount credited to 
                                such person in the Interim Investment 
                                Fund.
                        The Commissioner of Social Security shall 
                        determine, in accordance with such regulations, 
                        the allocation between such Trust Funds of 
                        amounts transferred to such Trust Funds 
                        pursuant to this clause.
            ``(4) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.
            ``(5) Board of trustees.--
                    ``(A) In general.--The term `Board of Trustees' 
                means the Board of Trustees of the Federal Old-Age and 
                Survivors Insurance Trust Fund and the Federal 
                Disability Insurance Trust Fund.
                    ``(B) Role of secretary of the treasury.--
                            ``(i) In general.--In connection with the 
                        duties of the Board of Trustees under this 
                        part, the Secretary of the Treasury shall serve 
                        as Executive Director of the Board of Trustees.
                            ``(ii) Staff.--Upon request of the Board of 
                        Trustees, the Secretary may detail, on a 
                        reimbursable basis, any of the personnel of the 
                        Department of the Treasury to the Board of 
                        Trustees to assist it in carrying out its 
                        duties under this part.
                            ``(iii) Administrative support.--Upon the 
                        request of the Board, the Secretary shall 
                        provide to the Board of Trustees from the 
                        Department of the Treasury, on a reimbursable 
                        basis, the administrative support services 
                        necessary for the Board to carry out its 
                        responsibilities under this part.''.
    (b) Effective Date and Notice Requirements.--
            (1) Effective date.--The amendments made by subsection (a) 
        shall apply with respect to wages paid after December 31, 2002, 
        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, 2002, 
                the Commissioner of Social Security, pursuant to 
                direction by the Board of Trustees of the Federal Old-
                Age and Survivors Insurance Trust Fund and the Federal 
                Disability Insurance Trust Fund, shall--
                            (i) send to the last known address of each 
                        eligible individual a description of the 
                        program established by the amendments made by 
                        this Act, which shall be written in the form of 
                        a pamphlet in language which may be readily 
                        understood by the average worker,
                            (ii) provide for toll-free access by 
                        telephone from all localities in the 
United States to the Social Security Administration and for a site on 
the Internet through which individuals may obtain information and 
answers to questions regarding such program, and
                            (iii) provide information to the media in 
                        all localities of the United States about such 
                        program, such toll-free access by telephone, 
                        and such site on the Internet.
                    (B) Eligible individual.--For purposes of this 
                paragraph, the term ``eligible individual'' means an 
                individual who, as of the date of the pamphlet sent 
                pursuant to subparagraph (A), is indicated within the 
                records of the Social Security Administration as--
                            (i) not having attained age 65, and
                            (ii) being credited with one or more 
                        quarters of coverage under section 213 of the 
                        Social Security Act.
                    (C) Matters to be included.--The Commissioner of 
                Social Security shall include with the pamphlet sent to 
                each eligible individual pursuant to subparagraph (A)--
                            (i) a statement of the number of quarters 
                        of coverage indicated in the records of the 
                        Social Security Administration as of the date 
                        of the description as credited to such 
                        individual under section 213 of the Social 
                        Security Act and the date as of which such 
                        records may be considered accurate, and
                            (ii) the number for toll-free access by 
                        telephone established by the Commissioner 
                        pursuant to subparagraph (A).

SEC. 102. ADJUSTMENTS IN AMOUNTS APPROPRIATED TO THE FEDERAL OLD-AGE 
              AND SURVIVORS INSURANCE TRUST FUND BASED ON REALLOCATION 
              PERCENTAGE.

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

    ``Reduction in Appropriations to Federal Old-Age and Survivors 
         Insurance Trust Fund Based on Reallocation Percentage

    ``(n)(1) Under regulations prescribed by the Board of Trustees of 
the Trust Funds (in consultation with the Secretary of the Treasury) to 
carry out this subsection, the amounts transferred from the general 
fund in the Treasury to each Trust Fund under section 201 during any 
calendar year shall be reduced by an amount equal to the product 
derived by multiplying--
            ``(A) the total amount which would (but for this 
        subsection) be so transferred during such year, by
            ``(B) the reallocation percentage for such year.
    ``(2)(A) The Board of Trustees shall declare and publish in the 
Federal Register on or before July 1 of each calendar year the 
reallocation percentage for amounts otherwise transferrable to the 
Trust Funds under this section during the next following calendar year.
    ``(B) For purposes of this subsection, the term `reallocation 
percentage' for amounts otherwise transferrable during any calendar 
year means--
            ``(i) in the case of calendar years preceding 2026, 20.16 
        percent,
            ``(ii) in the case of calendar years following 2025 and 
        preceding 2039, 22.18 percent, and
            ``(iii) in the case of each calendar year following 2038, 
        the best estimate of the Board of Trustees of the maximum 
        percentage by which the amounts described in subparagraph (A) 
        for the calendar year may be reduced so as to maintain a 
        reserve in the Trust Fund as of the end of such calendar year 
        equal to 15 percent of the amount of benefits projected to be 
        paid from the Trust Fund during the next calendar year, except 
        that such percentage--
                    ``(I) shall be adjusted as necessary for the 
                calendar year so as to avoid a reduction in the 
                percentage below the percentage in effect for the 
                preceding calendar year and to amortize any 
                substantially deviant annual increase over the 
                remaining calendar years ending with or prior to 2038 
                to the extent necessary, in accordance with regulations 
                of the Board of Trustees, to avoid instability arising 
                from such annual increase, and
                    ``(II) may not exceed for any year 64.52 percent.
In making the percentage for any year under clause (iii), the Board of 
Trustees shall utilize the intermediate actuarial assumptions utilized 
by the Board of Trustees for its most recent annual report issued under 
subsection (c).''.
    (b) Recommendations Regarding Reductions in Social Security 
Taxes.--In any case in which the Board of Trustees of the Federal Old-
Age and Survivors Insurance Trust Fund and the Federal Disability 
Insurance Trust Fund at any time estimates that the reallocation 
percentage (as defined in section 201(n)(2)(B)(i) of the Social 
Security Act for any of the next following 5 calendar years will equal 
64.52 percent, the Board of Trustees shall include within its next 
annual report to the Congress and the President its recommendations for 
reductions in taxes under chapters 2 and 21 of the Internal Revenue 
Code of 1986 so as to avoid unnecessary surpluses in such Trust Funds.

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

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

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

    ``(j)(1) Except as provided in paragraph (2), an individual's 
primary insurance amount as determined in accordance with this section 
(before adjustments made under subsection (i)) shall be equal to the 
excess (if any) of--
            ``(A) the amount which would be so determined without the 
        application of this subsection, over
            ``(B) the applicable monthly amount determined under clause 
        (i), (ii), or (iii), which shall be determined as follows:
                    ``(i) Except as provided in clauses (ii) and (iii), 
                the applicable monthly amount shall be the initial 
                monthly amount of an immediate joint and survivor 
                annuity, determined on the basis of the total amount of 
                the individual's redirected social security taxes (as 
                defined in section 252(a)(4)) for calendar years ending 
                before the date of the determination of the 
                individual's primary insurance amount, plus 50 percent 
                of the amounts paid to designated accounts of the 
                individual for such calendar years under section 
                3511(d) of the Internal Revenue Code of 1986, (indexed 
                in the same manner as is applicable with respect to 
                average indexed monthly earnings under subsection (b)).
                    ``(ii) In the case of an individual who, as of the 
                first day of the first month for which such primary 
                insurance amount is determined, is married, the 
                applicable monthly amount shall be the sum of--
                            ``(I) \2/3\ of the initial monthly amount 
                        of an immediate joint and survivor annuity, 
                        determined on the basis of the total amount of 
                        the individual's redirected social security 
                        taxes (as defined in section 252(a)(4)) for 
                        calendar years ending before the date of the 
                        determination of the individual's primary 
                        insurance amount, plus 50 percent of the 
                        amounts paid to designated accounts of the 
                        individual for such calendar years under 
                        section 3511(d) of the Internal Revenue Code of 
                        1986, (indexed in the same manner as is 
                        applicable with respect to average indexed 
                        monthly earnings under subsection (b)); plus
                            ``(II) \1/3\ of the initial monthly amount 
                        of an immediate joint and survivor annuity, 
                        determined on the basis of the total amount of 
                        the redirected social security taxes (as 
                        defined in section 252(a)(4)) of such 
                        individual's spouse for calendar years ending 
                        before the date of the determination of the 
                        individual's primary insurance amount, plus 50 
                        percent of the amounts paid to designated 
                        accounts of the individual's spouse for such 
                        calendar years under section 3511(d) of such 
                        Code, (indexed in the same manner as is 
                        applicable with respect to average indexed 
                        monthly earnings under subsection (b)).
                    ``(iii) In the case of an individual who, as of the 
                first day of the first month for which such primary 
                insurance amount is determined, is divorced (and has 
                not remarried since such divorce), the sum of--
                            ``(I) \1/2\ of the initial monthly amount 
                        of an immediate joint and survivor annuity, 
                        determined on the basis of the total amount of 
                        such individual's redirected social security 
                        taxes (as defined in section 252(a)(4)) for 
                        calendar years ending before the date of the 
                        determination of the individual's primary 
                        insurance amount, plus 50 percent of the 
                        amounts paid to designated accounts of the 
                        individual for such calendar years under 
                        section 3511(d) of the Internal Reven-ue Code 
                        of 1986, (indexed in the same manner as is 
                        applicable with respect to average indexed 
                        monthly earnings under subsection (b)); plus
                            ``(II) \1/2\ of the initial monthly amount 
                        of an immediate joint and survivor annuity, 
                        determined on the basis of the total amount of 
                        the redirected social security taxes (as 
                        defined in section 252(a)(4)) of the 
                        individual's former spouse in connection with 
                        such divorce for calendar years ending before 
                        the date of the determination of the 
                        individual's primary insurance amount, plus 50 
                        percent of the amounts paid to designated 
                        accounts of such former spouse for such 
                        calendar years under section 3511(d) of such 
                        Code, (indexed in the same manner as is 
                        applicable with respect to average indexed 
                        monthly earnings under subsection (b)).
    ``(2) In making determinations under this subsection, the 
Commissioner shall employ the intermediate assumptions used by the 
Board of Trustees of the Federal Old-Age and Survivors Insurance Trust 
Fund and the Federal Disability Insurance Trust Fund in its most recent 
annual report, including mortality tables consistent with such 
assumptions, except that the Commissioner shall assume an interest rate 
equal to the sum of the projected average market yield (as assumed by 
the Commissioner) on all marketable interest-bearing abligations of the 
United States forming a part of the public debt which are not due or 
callable until after the expiration of 4 years, plus 0.7 percent.
    ``(3) In the case of an individual described in paragraph (1) who 
becomes entitled to disability insurance benefits under section 223, 
such individual's primary insurance amount shall be determined without 
regard to paragraph (1).
    ``(4) For purposes of this subsection--
            ``(A) The term `immediate joint and survivor annuity' means 
        an annuity--
                    ``(i) the annuity starting date (as defined in 
                section 72(c)(4) of the Internal Revenue Code of 1986) 
                of which commences with the first month following the 
                date of the determination,
                    ``(ii) which provides for a series of substantially 
                equal monthly payments over the life expectancy of the 
                individual described in paragraph (1), subject to 
                annual percentage adjustments equal to the annual 
                percentage adjustments taking effect under subsection 
                (i),
                    ``(iii) which provides for a survivor annuity for 
                such individual's spouse in the form of a series of 
                substantially equal monthly payments over the life 
                expectancy of such spouse, the initial monthly payment 
                of which is equal to the amount of the last monthly 
                payment payable during the joint lives of such 
                individual and such spouse, subject to annual 
                percentage adjustments equal to the annual percentage 
                adjustments taking effect under subsection (i), and
                    ``(iv) which is the actuarial equivalent of an 
                immediate life annuity for the life of such individual.
            ``(B) The term `immediate life annuity' means an annuity--
                    ``(i) the annuity starting date (as defined in 
                section 72(c)(4) of the Internal Revenue Code of 1986) 
                of which commences with the first month following the 
                date of the determination, and
                    ``(ii) which provides for a series of substantially 
                equal monthly payments over the life expectancy of the 
                individual described in paragraph (1), subject to 
                annual percentage adjustments equal to the annual 
                percentage adjustments taking effect under subsection 
                (i).''.
    (b) Conforming Amendment to Railroad Retirement Act of 1974.--
Section 1 of the Railroad Retirement Act of 1974 (45 U.S.C. 231) is 
amended by adding at the end the following:
    ``(s) In applying applicable provisions of the Social Security Act 
for purposes of determining the amount of the annuity to which an 
individual is entitled under this Act, section 215(j) of the Social 
Security Act and part B of title II of such Act shall be disregarded.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to computations and recomputations of primary 
insurance amounts occurring after December 31, 2002.

SEC. 104. PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    (a) Deduction for Contributions by Taxpayer.--Part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 
(relating to additional itemized deductions) is amended by 
redesignating section 223 as section 224 and by inserting after section 
222 the following new section:

``SEC. 223. CONTRIBUTIONS TO PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) In General.--In the case of an individual who is an electing 
personal retirement savings account participant for the taxable year, 
there shall be allowed as a deduction an amount equal to 50 percent of 
the amount contributed during such taxable year by such individual to a 
personal retirement savings account maintained for the benefit of such 
individual.
    ``(b) Limitation.--The amount of contributions which may be taken 
into account under subsection (a) shall not exceed $2,000.
    ``(c) Electing Personal Retirement Savings Account Participant.--An 
individual is an electing personal retirement savings account 
participant for any taxable year if any amount is deposited under 
section 251(b) of the Social Security Act for such taxable year to a 
personal retirement savings account maintained for the benefit of such 
individual.
    ``(d) Special Rules.--
            ``(1) No deduction for trustee-to-trustee transfers.--No 
        deduction shall be allowed for amounts transferred to an 
        account in a rollover contribution described in section 
        531(b)(2).
            ``(2) Time when contributions deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to a personal retirement savings account on the 
        last day of the preceding taxable year if the contribution is 
        made on account of such taxable year and is made not later than 
        the time prescribed by law for filing the return for such 
        taxable year (not including extensions thereof).''
    (b) Personal Retirement Savings Accounts.--Subchapter F of chapter 
1 of such Code (relating to exempt organizations) is amended by adding 
at the end the following new part:

            ``PART IX--PERSONAL RETIREMENT SAVINGS ACCOUNTS

                              ``Sec. 531. Personal retirement savings 
                                        accounts.

``SEC. 531. PERSONAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) General Rule.--Gross income shall not include any amount 
deposited in a personal retirement savings account under section 251(b) 
of the Social Security Act.
    ``(b) Personal Retirement Savings Account.--
            ``(1) In general.--For purposes of this title, the term 
        `personal retirement savings account' means a trust created or 
        organized in the United States for the exclusive benefit of an 
        individual or his beneficiaries, but only if the written 
        governing instrument creating the trust meets the following 
        requirements:
                    ``(A) No contribution will be accepted other than--
                            ``(i) deposits under section 251(b) of the 
                        Social Security Act,
                            ``(ii) amounts paid under section 3511(d),
                            ``(iii) contributions made in cash, except 
                        that contributions under this subparagraph may 
                        not be accepted for any taxable year in excess 
                        of $2,000, and
                            ``(iv) a contribution which is a rollover 
                        contribution described in paragraph (2).
                    ``(B) Except as provided in paragraph (3) and 
                subsection (f)(2), no amount may be paid or distributed 
                from such trust--
                            ``(i) before the date on which the account 
                        holder attains age 59\1/2\ or dies, or
                            ``(ii) in a manner not meeting the 
                        requirements of subsection (d).
                    ``(C) The trustee of which is a regulated 
                investment company (as defined in section 851) which is 
                approved by the Secretary for purposes of this section.
                    ``(D) The interest of an individual in the balance 
                in his account is nonforfeitable.
            ``(3) Transfer pursuant to election for exemption.--If the 
        account holder makes an election of exemption under section 
        254(3)(B) of the Social Security Act, so much of the amounts in 
        the personal retirement savings account as are attributable to 
        contributions under section 251(b) of such Act, and payments 
        under section 3511(d), and earnings thereon, shall be paid to 
        the Federal Old-Age and Survivors Insurance Trust Fund and the 
        Federal Disability Insurance Trust Fund in accordance with the 
        regulations under such section 254(3)(B).
            ``(2) Rollover contributions.--For purposes of paragraph 
        (1)(A), a rollover contribution is described in this paragraph 
        if such contribution is--
                    ``(A) a direct trustee-to-trustee transfer 
                described in subsection (f)(2), or
                    ``(B) a transfer from an eligible retirement plan 
                (as defined in section 402(c)(8)) to the personal 
                retirement savings account if no amount is includible 
                in gross income by reason of such transfer, determined 
                by treating such account as the same type of plan as 
                the plan from which such transfer were made.
    ``(c) Investment Requirements.--
            ``(1) In general.--Amounts in a personal retirement savings 
        account may be invested only in regulated investment companies 
        (as defined in section 851) which are approved by the Secretary 
        for purposes of this section.
            ``(2) Criteria for secretarial approval.--The Secretary may 
        approve a regulated investment company for purposes of this 
        section only if--
                    ``(A) an election is in effect under section 
                851(b)(1) for such company, and
                    ``(B) the portfolio assets of such company--
                            ``(i) replicate the assets of a broad-based 
                        index of stocks which is approved by the 
                        Secretary, or
                            ``(ii) are of a type determined by the 
                        Secretary not to involve high risks for the 
                        investor.
            ``(3) Diversification required.--To the extent possible, 
        the Secretary shall approve under subparagraph (B)(i) funds in 
        each of the following 4 categories: domestic stocks, domestic 
        bonds, stocks of companies having small capitalization, and 
        foreign stocks. Nothing in this subsection shall be construed 
        to preclude the use of managed funds devised so as to minimize 
        risk.
            ``(4) Consideration of management costs.--The Secretary 
        shall take into account management costs in determining whether 
        to approve a company for purposes of this section.
    ``(d) Distribution Requirements.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to distributions from a personal retirement 
        savings account (other than reasonable administrative fees 
        meeting such requirements as may be prescribed in regulations 
        of the Secretary) only if such distributions are in accordance 
        with a payment option under paragraph (2). The preceding 
        sentence shall not apply to direct trustee-to-trustee transfers 
        described in subsection (f)(2) or distributions to a deceased 
        account holder's estate under section 251(c) of the Social 
        Security Act.
            ``(2) Payment options.--The payment options under this 
        paragraph are the following:
                    ``(A) Lifetime option.--Distributions in equal 
                annual or more frequent periodic installments payable 
                to the account holder in equal annual or more frequent 
                periodic installments over the life of the account 
                holder. The trustee of the account shall be liable 
                under the terms of the account to the account holder 
                for the timely payment of such periodic payments.
                    ``(B) Nonlifetime option.--
                            ``(i) In general.--Distributions in equal 
                        annual or more frequent periodic installments 
                        of interest only, or of interest and principal. 
                        Any such payment of equal installments shall 
                        continue until--
                                    ``(I) payment ceases at the 
                                direction of the account holder to the 
                                trustee,
                                    ``(II) payment continues in 
                                accordance with this subparagraph but 
                                at an adjusted level at the direction 
                                of the account holder to the trustee, 
                                or
                                    ``(III) the distribution converts 
                                to an option described in subparagraph 
                                (A) at the direction of the account 
                                holder to the trustee.
                            ``(ii) Limitations.--Payments from the 
                        account under a distribution described in 
                        clause (i) shall be limited as of any date to 
                        the extent necessary to ensure that funds in 
                        the account are sufficient at all times to 
                        provide a monthly payment over the life 
                        expectancy of the account holder (determined 
                        under reasonable actuarial assumptions) which, 
                        when added to the account holder's monthly 
                        benefit under part A (if any), is at least 
                        equal to an amount equal to \1/12\ of the 
                        poverty line (as determined under section 
                        673(2) of the Community Services Block Grant 
                        Act (42 U.S.C. 9902(2)) and determined on such 
                        date for a family of the size involved).
                    ``(C) Additional options.--Distributions in any 
                other manner permitted under regulations prescribed by 
                the Secretary.
    ``(e) Account Exempt From Tax.--
            ``(1) General rule.--Any personal retirement savings 
        account is exempt from taxation under this subtitle. 
        Notwithstanding the preceding sentence, any such account is 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc. organizations).
            ``(2) Application of prohibited transactions rules, etc.--
        Rules similar to the rules of paragraphs (2), (3), and (4) of 
        section 408(e) shall apply to personal retirement savings 
        accounts.
    ``(f) Distributions Taxed as if Social Security Benefits.--
            ``(1) General rule.--Amounts paid or distributed from a 
        personal retirement savings account shall be includible in 
        gross income only if so includible under section 86, determined 
        by treating such amounts as social security benefits (as 
        defined in such section).
            ``(2) Trustee-to-trustee transfers.--No amount shall be 
        includible in gross income by reason of a direct trustee-to-
        trustee transfer between personal retirement savings accounts 
        of the same individual.
            ``(3) Return of excess contributions.--Paragraph (1) shall 
        not apply to the distribution of any contribution (other than a 
        deposit made under section 251(b) of the Social Security Act) 
        made during a taxable year to the extent that such contribution 
        exceeds the dollar amount specified in subsection (b)(1)(B) 
        if--
                    ``(A) such distribution is received on or before 
                the last day prescribed by law (including extensions) 
                for filing such individual's return for such taxable 
                year,
                    ``(B) such contribution is not taken into account 
                in determining the deduction allowed under section 223, 
                and
                    ``(C) such distribution is accompanied by the 
                amount of net income attributable to such contribution.
        Any net income described in subparagraph (C) shall be included 
        in gross income for the taxable year in which such contribution 
        is made.
    ``(g) Certain Other Rules To Apply.--The following rules shall 
apply to personal retirement savings accounts in the same manner that 
such rules apply to individual retirement accounts:
            ``(1) Section 408(h) (relating to custodial accounts).
            ``(2) Section 408(i) (relating to reports).
    ``(h) Treatment After Death of Account Holder.--A personal 
retirement savings account shall cease to be such on the date of the 
account holder's death, but no amount shall be includible in gross 
income by reason of such cessation.''
    (c) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (18) the following new paragraph:
            ``(19) Personal retirement savings accounts.--The deduction 
        allowed by section 223.''
    (d) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of such 
        Code is amended by striking ``or'' at the end of paragraph (3), 
        by adding ``or'' at the end of paragraph (4), and by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) a personal retirement savings account (as defined in 
        section 531),''.
            (2) Excess contribution defined.--Section 4973 of such Code 
        is amended by adding at the end the following new subsection:
    ``(g) Excess Contributions to Personal Retirement Savings 
Accounts.--For purposes of this section--
            ``(1) In general.--In the case of personal retirement 
        savings accounts maintained for the benefit of any 1 
        beneficiary, the term `excess contributions' means the amount 
        by which the amount contributed for the taxable year to such 
        accounts exceeds $2,000.
            ``(2) Special rules.--For purposes of paragraph (1), the 
        following contributions shall not be taken into account:
                    ``(A) Any contributions under section 251(b) of the 
                Social Security Act.
                    ``(B) Any trustee-to-trustee transfer.''
    (e) Conforming Amendments.--
            (1) Paragraph (1) of section 4975(e) of such Code (relating 
        to tax on prohibited transactions) is amended by redesignating 
        subparagraph (F) as subparagraph (G), by striking ``or'' at the 
        end of subparagraph (E), and by inserting after subparagraph 
        (E) the following new subparagraph:
                    ``(F) a personal retirement savings account 
                described in section 531(b), or''.
            (2) Paragraph (2) of section 6693(a) of such Code (relating 
        to failure to provide reports on certain tax favored accounts 
        or annuities) is amended by redesignating subparagraphs (C) and 
        (D) as subparagraphs (D) and (E), respectively, and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) section 531(g)(2) (relating to personal 
                retirement savings accounts),''.
    (f) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

                              ``Sec. 223. Contributions to personal 
                                        retirement savings accounts.
                              ``Sec. 224. Cross reference.''
            (2) The table of parts for subchapter F of chapter 1 of 
        such Code is amended by adding after the item relating to part 
        VIII the following new item:

          ``Part IX--Personal retirement savings accounts.''.

    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 105. INDIVIDUAL RETIREMENT SECURITY PROGRAM REFUNDABLE CREDIT.

    (a) In General.--Chapter 25 of the Internal Revenue Code of 1986 
(relating to general provisions relating to employment taxes) is 
amended by adding at the end the following new section:

``SEC. 3511. INDIVIDUAL RETIREMENT SECURITY PROGRAM REFUNDABLE CREDIT.

    ``(a) In General.--The designated account of each participating 
individual shall receive for each calendar year the lesser of--
            ``(1) the credit amount, or
            ``(2) the amount of compensation includible in the such 
        individual's gross income for such year.
    ``(b) Credit Amount.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `credit amount' means--
                    ``(A) $300 in the case of modified adjusted gross 
                income for the taxable year greater than $5,000 but 
                less than or equal to $25,000,
                    ``(B) $150 in the case of modified adjusted gross 
                income for the taxable year greater than $25,000 but 
                less than or equal to $35,000, and
                    ``(C) zero in any other case.
            ``(2) Modified adjusted gross income.--For purposes of 
        paragraph (1), the term `modified adjusted gross income' means 
        adjusted gross income determined without regard to sections 
        911, 931, and 933.
    ``(c) Compensation.--For purposes of subsection (a), the term 
`compensation' means with respect to an individual--
            ``(1) wages (as defined in section 3121(a)) received by 
        such individual during such year on which tax is imposed by 
        section 3101, and
            ``(2) self-employment income (as defined in 1402(b)) of 
        such individual for the taxable year of such individual ending 
        in such calendar year on which tax is imposed by section 1401.
    ``(d) Payment to Designated Account.--Notwithstanding any other 
provision of this title, the Secretary, as soon as practicable, shall 
transfer from amounts otherwise available in the general fund of the 
Treasury, amounts equal to the amount required to be paid under 
subsection (a) to the designated account of each participating 
individual in accordance with regulations which the Secretary shall 
prescribe to carry out this section.
    ``(e) Other Definitions and special rule.--For purposes of this 
section--
            ``(1) Designated account.--The term `designated account' 
        means the separate account in the Interim Investment Fund 
        provided for under section 252 of the Social Security Act or, 
        in lieu thereof, the personal retirement savings account of the 
        participating individual designated under section 251 of the 
        Social Security Act.
            ``(2) Participating Individual.--The term `participating 
        individual' shall have the meaning given to such term by 
        section 254 of the Social Security Act.
            ``(3) Special Rule Relating to Agreements by American 
        Employers of Foreign Affiliates.--Any amounts paid pursuant to 
        an agreement under section 3121(l) (relating to agreements 
        entered into by American employers with respect to foreign 
        affiliates) which are equivalent to the taxes referred to in 
        subsection (b)(1)(A) shall be treated as taxes referred to in 
        such subsection.''.
    (b) Conforming Amendment.--The table of sections for chapter 25 of 
such Code is amended by adding at the end the following new item:

                              ``Sec. 3511. Individual retirement 
                                        security program refundable 
                                        credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to remuneration received, and net earnings for self-employment 
for services performed, after December 31, 2002.

              TITLE II--SOCIAL SECURITY SURPLUS PROTECTION

SEC. 201. TRANSFERS OF BUDGET SURPLUSES TO FEDERAL OLD-AGE AND 
              SURVIVORS INSURANCE TRUST FUND.

    Section 201 of the Social Security Act (as amended by the preceding 
provisions of this Act) is amended further by adding at the end the 
following new subsection:

           ``Transfers of Budget Surpluses to the Trust Funds

    ``(o)(1) In addition to the amounts otherwise appropriated to the 
Federal Old-Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund for each fiscal year after fiscal year 
2004 and before fiscal year 2012, there is hereby appropriated to such 
Trust Funds for each such fiscal year the applicable amount for such 
fiscal year. Amounts appropriated to such Trust Funds under this 
paragraph shall be distributed between the Trust Funds for any fiscal 
year in the same proportion as amounts are appropriated to such Trust 
Funds under subsections (a) and (b). The amounts appropriated by this 
paragraph shall be transferred from time to time during the fiscal year 
from the general fund in the Treasury to the Trust Funds, such amounts 
to be determined on the basis of estimates by the Secretary of the 
Treasury, and proper adjustments shall be made in amounts subsequently 
transferred to the extent prior estimates were in excess of or were 
less than the actual amounts. All amounts transferred to each Trust 
Fund under this paragraph shall be invested by the Managing Trustee in 
the same manner and to the same extent as the other assets of such 
Trust Fund.
    ``(2) For purposes of paragraph (1), the applicable amount for any 
fiscal year is the amount set forth in the following table:

In the case of
                                                                    The
fiscal year--
                                                            amount is--
    2005...................................................$21 billion 
    2006...................................................$47 billion 
    2007...................................................$78 billion 
    2008..................................................$106 billion 
    2009..................................................$147 billion 
    2010..................................................$184 billion 
    2011..................................................$283 billion.

    ``(3)(A) Subject to subparagraph (B), in any case in which the 
reallocation percentage (as defined in subsection (n)(2)(B)(i)) for any 
calendar year after 2016 of the best estimate of the Board of Trustees 
of the amounts otherwise transferrable during such calendar year to the 
Federal Old-Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund under subsection (a) exceeds 5 percent 
of the social security payroll for such calendar year, the Secretary of 
the Treasury shall transfer during such calendar year, from such Trust 
Funds to the general fund of the Treasury, amounts equivalent to 100 
percent of the excess of--
            ``(i) the projected amount of the allowable Trust Funds 
        cushion reduction for such calendar year, over
            ``(ii) 5 percent of the projected social security payroll 
        for such fiscal year.
The amounts to be transferred from the Trust Funds for any calendar 
year shall be allocated between the Trust Funds in proportion to the 
amounts transferred to the Trust Funds during such calendar year under 
subsection (a). The amounts appropriated by this paragraph shall be 
transferred from time to time during each fiscal year from the Trust 
Funds to the general fund in the Treasury, such amounts to be 
determined on the basis of estimates by the Secretary of the Treasury, 
and proper adjustments shall be made in amounts subsequently 
transferred to the extent prior estimates were in excess of or were 
less than the actual amounts.
    ``(B) In any case in which the transfer of any amount to the 
general fund of the Treasury from either Trust Fund pursuant to 
subparagraph (A) for any calendar year would (but for this 
subparagraph) cause--
            ``(i) the total amount transferred from such Trust Fund 
        pursuant to subparagraph (A) (including accrued net earnings 
        thereon) to exceed
            ``(ii) the total amount transferred to such Trust Fund 
        pursuant to paragraph (1) (including accrued net earnings 
        thereon),
the amount of such transfer shall be limited to the extent necessary to 
ensure that the total amount described in clause (ii) does not exceed 
the total amount described in clause (i), and this paragraph shall not 
be effective for subsequent calendar years in connection with such 
Trust Fund.
    ``(4) For purposes of this subsection--
            ``(A) The term `social security payroll' for any fiscal 
        year means the sum of the wages (as defined in section 3121 of 
        the Internal Revenue Code of 1986) reported to the Secretary of 
        the Treasury or his delegate during such fiscal year pursuant 
        to subtitle F of such Code and the self-employment income (as 
        defined in section 1402 of such Code) reported to the Secretary 
        of the Treasury or his delegate during such fiscal year 
        pursuant to subtitle F of such Code.
            ``(B) The term `allowable Trust Fund cushion reduction' for 
        a fiscal year means the amount by which the amounts otherwise 
        appropriated for the fiscal year to the Federal Old-Age and 
        Survivors Insurance Trust Fund under paragraphs (3) and (4) of 
        subsection (a) 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 
        such fiscal year.''.

               TITLE III--SOCIAL SECURITY BENEFIT REFORMS

SEC. 301. GRADUAL INCREASE IN RETIREMENT AGE AND EARLY RETIREMENT AGE.

    (a) Normal Retirement Age.--Section 216(l) of the Social Security 
Act (42 U.S.C. 416(l) is amended--
            (1) in paragraph (1), by striking subparagraphs (A), (B), 
        (C), (D), and (E) and inserting the following:
                    ``(A) with respect to an individual who attains age 
                62 (or in the case of a widow's or widower's insurance 
                benefit, age 60) before January 1, 2000, 65 years of 
                age;
                    ``(B) with respect to an individual who attains age 
                62 (or in the case of a widow's or widower's insurance 
                benefit, age 60) after December 31, 1999 and before 
                January 1, 2011, 65 years of age plus \2/12\ of the 
                number of months in the period beginning with January 
                2000 and ending with December of the year in which the 
                individual attains age 62 (or in the case of a widow's 
                or widower's insurance benefit, age 60);
                    ``(C) with respect to an individual who attains age 
                62 (or in the case of a widow's or widower's insurance 
                benefit, age 60) after December 31, 2010, and before 
                January 1, 2012, 67 years of age; and
                    ``(D) with respect to an individual who attains age 
                62 (or in the case of a widow's or widower's insurance 
                benefit, age 60) after December 31, 2011, 67 years of 
                age plus \1/24\ of the number of months in the period 
                beginning with January 2012 and ending with December of 
                the year in which the individual attains age 62 
                (rounded down to a full month).''; and
            (2) by striking paragraph (3).

SEC. 302. ADJUSTMENTS TO BEND POINTS IN DETERMINING PRIMARY INSURANCE 
              AMOUNTS.

    (a) Additional Bend Point.--Section 215(a)(1)(A) of the Social 
Security Act (42 U.S.C. 415(a)(1)(A)) is amended--
            (1) in clause (ii), by striking ``and'' at the end;
            (2) in clause (iii), by striking ``clause (ii),'' and 
        inserting the following: ``clause (ii) but do not exceed the 
        amount established for purposes of this clause by subparagraph 
        (B), and''; and
            (3) by inserting after clause (iii) the following new 
        clause:
            ``(iv) the applicable percentage of the individual's 
        average indexed monthly earnings to the extent that such 
        earnings exceed the amount established for purposes of clause 
        (iii), determined, in connection with the calendar year in 
        which the individual initially becomes eligible for old-age or 
        disability insurance benefits, or dies (before becoming 
        eligible for such benefits), in accordance with the following 
        table:
                                                             Applicable
``Calendar year:                                            Percentage:
    2003..........................................          13 percent 
    2004..........................................          11 percent 
    2005..........................................           9 percent 
    2006..........................................           7 percent 
    After 2006....................................        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 2002, the amount established for purposes of clause (iii) of 
subparagraph (A) shall be $3,720.''.
    (c) Annual Adjustments to PIA Formula.--
            (1) In general.--Section 215(a)(1)(B) of such Act (42 
        U.S.C. 415(a)(1)(B)) is amended further--
                    (A) by redesignating clause (iii) as clause (ix);
                    (B) in clause (ii), by inserting ``for purposes of 
                clauses (i) and (ii) of subparagraph (A)'' after ``each 
                of the amounts so established'';
                    (C) by inserting after clause (ii) the following 
                new clauses:
    ``(iii) For individuals who initially become eligible for old-age 
or disability insurance benefits, or who die (before becoming eligible 
for such benefits), in any calendar year after 2002, the amount 
established under clause (i) for purposes of clause (iii) of 
subparagraph (A) shall equal the product of the corresponding amount 
established with respect to the calendar year 2002 under clause (i) of 
this subparagraph and the quotient obtained by dividing--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1)) for the second calendar year preceeding the 
        calendar year for which the determination is made, by
            ``(II) the national average wage index (as so defined) for 
        2000.
    ``(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 2002, 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 2007, 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.
    ``(vi)(I) Subject to section 201(p), in the case of an individual 
who is entitled to disability insurance benefits and to whom this 
clause applies, this subparagraph shall apply as if the amendments made 
by the Social Security Solvency Act of 2002 had not been enacted.
    ``(II) This clause applies to any individual who first becomes 
eligible for such benefits in 2002, and whose average indexed monthly 
earnings (determined under subsection (b)) do not exceed the amount 
established for purposes of this subclause by clause (vii).
    ``(III) This clause also applies to any individual who first 
becomes eligible for such benefits in any year after 2002, and whose 
average indexed monthly earnings (determined under subsection (b)) do 
not exceed the dollar amount referred to in subclause (II), after 
applying clauses (ii) and (ii) of subsection (a)(1)(B) to such dollar 
amount, in connection with such year, in the same manner and to the 
same extent as they apply to dollar amounts in subsection (a)(1)(B)(i), 
except that, for purposes of this subclause, the references in such 
clauses to 1979 and 1977 shall be deemed to be references to 2002 and 
2000, respectively.
    ``(vii) For individuals who initially become eligible for 
disability insurance benefits in calendar year 2002, the amount 
established for purposes of subclause (II) of clause (vi) shall be 
$1,666\2/3\. For individuals who initially become eligible for 
disability insurance benefits in any calendar year after 2002, the 
dollar amount so established shall equal the product of $1,666\2/3\ and 
the quotient obtained by dividing--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1)) for the second calendar year preceeding the 
        calendar year for which the determination is made, by
            ``(II) the national average wage index (as so defined) for 
        2000.
    ``(viii) Subject to section 201(p), in the case of an individual 
who is entitled to disability insurance benefits, who first becomes 
eligible for such benefits in any year after 2001, and to whom clause 
(vi) does not apply, the primary insurance amount of such individual 
shall not be less than the primary insurance amount that would be 
determined for such individual under this section if such individual's 
average indexed monthly earnings (determined under subsection (b)) were 
equal to the dollar amount referred to in clause (vi) in connection 
with such year.''; and
                    (D) in clause (ix) (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 initially becoming eligible for old-age or 
        disability insurance benefits, or dying, after December 31, 
        2001.
    (d) Maximum Percent Reduction in Primary Insurance Amounts.--
            (1) In general.--Section 215(a)(1) of such Act (42 U.S.C. 
        415(a)(1)) is amended further by adding at the end the 
        following new subparagraph:
    ``(E)(i) Except in any case described in clause (iii), an 
individual's primary insurance amount as otherwise determined under 
this section shall in no case be less than such individual's primary 
insurance amount determined under this section as if the amendments 
made by section 302 of the Social Security Solvency Act of 2002 had not 
been enacted, reduced by the maximum percent reduction specified, in 
connection with the specified year in which such individual initially 
becomes eligible for old-age insurance benefits and in connection with 
the specified next higher amount of the annual equivalent of average 
indexed monthly earnings (determined under subsection (b)), in the 
following table:


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Average indexed monthly earnings (annual equivalent)
            ``Year of initial eligibility             --------------------------------------------------------------------------------------------------
                                                         $5,000    $10,000    $15,000    $20,000    $21,000    $22,000    $23,000    $24,000    $25,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003.................................................        0.0        0.0        0.0        0.0        1.0        2.0        3.0        4.0        5.0
2004.................................................        0.0        0.0        0.0        0.0        1.0        2.0        3.0        4.0        5.0
2005.................................................        1.0        1.0        1.0        1.0        2.0        3.0        4.0        5.0        6.0
2006.................................................        2.0        2.0        2.0        2.0        3.0        4.0        5.0        6.0        7.0
2007.................................................        3.0        3.0        3.0        3.0        4.0        5.0        6.0        7.0        8.0
2008.................................................        4.0        4.0        4.0        4.0        5.0        6.0        7.0        8.0        9.0
2009.................................................        5.0        5.0        5.0        5.0        6.0        7.0        8.0        9.0       10.0
2010.................................................        6.0        6.0        6.0        6.0        7.0        8.0        9.0       10.0       11.0
2011.................................................        7.0        7.0        7.0        7.0        8.0        9.0       10.0       11.0       12.0
2012.................................................        8.0        8.0        8.0        8.0        9.0       10.0       11.0       12.0       13.0
2013.................................................        9.0        9.0        9.0        9.0       10.0       11.0       12.0       13.0       14.0
2014.................................................       10.0       10.0       10.0       10.0       11.0       12.0       13.0       14.0       15.0
2015.................................................       11.0       11.0       11.0       11.0       12.0       13.0       14.0       15.0       16.0
2016 or later year...................................       12.0       12.0       12.0       12.0       13.0       14.0       15.0       16.0       17.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    ``(ii) Each of the dollar amounts set forth in the table under 
clause (i) in connection with any year after 2003 shall be deemed to be 
the product derived by multiplying such dollar amount by the quotient 
obtained by dividing--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1)) for the second calendar year preceeding such 
        calendar year, by
            ``(II) the national average wage index (as so defined) for 
        2001.
    ``(iii) In the case of an individual who becomes entitled to old-
age insurance benefits by reason entitlement to disability insurance 
benefits for the month preceding the month in which such individual 
attains retirement age (as described in section 202(a)(3)), the 
individual's primary insurance amount shall be the sum of--
            ``(I) the product derived by multiplying the individual's 
        primary insurance amount (as determined without regard to the 
        amendments made by section 302 of the Social Security Solvency 
        Act of 2002) by the individual's disability period ratio, plus
            ``(II) the product derived by multiplying the individual's 
        primary insurance amount (as determined under this section as 
        amended by section 302 of the Social Security Solvency Act of 
        2002) by the excess of 1 over the individual's disability 
        period ratio.
For purposes of this clause, the term `disability period ratio' means, 
in connection with an individual, the ratio of the total number of 
years excluded under section 215(b)(2)(B)(iii), by reason of 1 or more 
periods of disability, in determining thereunder the individual's 
number of elapsed years, to the sum of such number of excluded years 
plus such number of elapsed years.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to benefits for months after November 
        2001.

SEC. 303. INFORMATION RELATING TO BENEFIT LIMITATIONS PROVIDED IN 
              SOCIAL SECURITY ACCOUNT STATEMENTS.

    (a) In General.--Section 1143 of the Social Security Act (42 U.S.C. 
1320b-13) is amended--
            (1) in the heading for subsection (a), by striking ``Upon 
        Request'' and inserting ``of Annual Statements'';
            (2) in subsection (a)(1), by striking ``Beginning'' and all 
        that follows and inserting the following: ``The Commissioner of 
        Social Security shall provide an annual social security account 
        statement (hereinafter in this section referred to as the 
        `statement') to each eligible individual for whom a mailing 
        address can be determined through such methods as the 
        Commissioner determines to be appropriate.'';
            (3) in subsection (a)(2)(A), by striking ``at the date of 
        the request'';
            (4) in subsection (a)(2)(B), by striking ``on the date of 
        the request'';
            (5) in subsection (a)(2)(C), by striking ``on the date of 
        the request'' and by striking ``and'' at the end;
            (6) in subsection (a)(2)(D), by inserting ``in the case of 
        individuals not receiving benefits,'' after ``(D)'', and by 
        striking ``title XVIII.'' and inserting ``title XVIII; and'';
            (7) by adding after subparagraph (D) the following:
            ``(E) a table setting forth an estimate, in relation to 
        1980 and every 10th year thereafter through 2030, of the 
        following information:
                    ``(i) the total amount of the current adjusted 
                values of all employee, employer, and self-employment 
                contributions made with respect to the wages and self-
                employment income of the average earner retiring at 
                retirement age in each such year;
                    ``(ii) the total amount of the current adjusted 
                values of the social security old-age or survivors 
                benefits (as defined in section 202(y)(3)(D)) paid for 
                all prior months on the basis of the wages and self-
                employment income of the average earner retiring at 
                retirement age in each such year; and
                    ``(iii) the total amount of the current adjusted 
                values of the monthly benefits which will have been 
                paid under such subsections, as of the time of the 
                death of the average earner retiring at retirement age 
                in each such year, on the basis of his or her wages and 
                self-employment income, as projected under the 
                intermediate actuarial assumptions utilized by the 
                Board of Trustees of the Federal Old-Age and Survivors 
                Insurance Trust Fund for its most recent annual report 
                issued under section 201(c).
For purposes of subparagraph (E), the term `current adjusted value' has 
the meaning provided in section 202(y)(3)(C).'';
            (8) by striking subsection (b);
            (9) in subsection (c)--
                    (A) by striking the heading and inserting the 
                following:

                  ``Required Estimates of Benefits'';

                    (B) by striking ``(c)(1) By not later'' and all 
                that follows through ``With respect to'' in paragraph 
                (2) and inserting ``(b) With respect to''; and
                    (C) by adding at the end the following new 
                sentence: ``The Commissioner shall provide such 
                estimates of retirement benefit amounts to eligible 
                individuals who have not attained age 50 upon 
                request.''; and
            (10) by adding at the end the following new subsection:

       ``Inclusion of Statements to Retirees With Other Mailings

    ``(c) The Commissioner of Social Security shall ensure that 
statements provided to eligible individuals who are receiving benefits 
under title II are included to the maximum extent practicable with 
mailings otherwise made to such individuals. The Commissioner shall 
consult with the Secretary of the Treasury in carrying out the 
requirement of this subsection and such Secretary shall provide such 
appropriate assistance to the Commissioner as is necessary to carry out 
such requirements.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to statements provided on or after October 1, 2002.

SEC. 304. COVERAGE OF NEWLY HIRED STATE AND LOCAL EMPLOYEES.

    (a) Amendments to the Social Security Act.--
            (1) In general.--Paragraph (7) of section 210(a) of the 
        Social Security Act (42 U.S.C. 410(a)(7)) is amended to read as 
        follows:
            ``(7) Excluded State or local government employment (as 
        defined in subsection (s));''.
            (2) Excluded state or local government employment.--
                    (A) In general.--Section 210 of such Act (42 U.S.C. 
                410) is amended by adding at the end the following new 
                subsection:

            ``Excluded State or Local Government Employment

    ``(s)(1) In General.--The term `excluded State or local government 
employment' means any service performed in the employ of a State, of 
any political subdivision thereof, or of any instrumentality of any one 
or more of the foregoing which is wholly owned thereby, if--
            ``(A)(i) such service would be excluded from the term 
        `employment' for purposes of this title if the preceding 
        provisions of this section as in effect in December 2002 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, 2002,
                            ``(II) who was a bona fide employee of that 
                        employer on December 31, 2001, 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, 
                2001.
            ``(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 2002, 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 2002, the 
        Commissioner of Social Security shall adjust the amount 
        referred to in subparagraph (A)(v) at the same time and in the 
        same manner as is provided under section 215(a)(1)(B)(ii) with 
        respect to the amounts referred to in section 215(a)(1)(B)(i), 
        except that--
                    ``(i) for purposes of this subparagraph, 1999 shall 
                be substituted for the calendar year referred to in 
                section 215(a)(1)(B)(ii)(II), and
                    ``(ii) such amount as so adjusted, if not a 
                multiple of $100, shall be rounded to the next higher 
                multiple of $100 where such amount is a multiple of $50 
                and to the nearest multiple of $100 in any other case.
        The Commissioner of Social Security shall determine and publish 
        in the Federal Register each adjusted amount determined under 
        this subparagraph not later than November 1 preceding the year 
        for which the adjustment is made.''.
                    (B) Conforming amendments.--
                            (i) Subsection (k) of section 210 of such 
                        Act (42 U.S.C. 410(k)) (relating to covered 
                        transportation service) is repealed.
                            (ii) Section 210(p) of such Act (42 U.S.C. 
                        410(p)) is amended--
                                    (I) in paragraph (2), by striking 
                                ``service is performed'' and all that 
                                follows and inserting ``service is 
                                service described in subsection 
                                (s)(3)(A).''; and
                                    (II) in paragraph (3)(A), by 
                                inserting ``under subsection (a)(7) as 
                                in effect in December 2001'' 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 2001 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, 2002,
                                    ``(II) who was a bona fide employee 
                                of that employer on December 31, 2001, 
                                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, 2001.
                    ``(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 2002, 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 2002'' 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, 2002.

SEC. 305. INCREASE IN MONTHLY INSURANCE BENEFITS FOR WIDOWS AND 
              WIDOWERS.

    (a) Old-Age Insurance Benefits.--Section 202(a) of the Social 
Security Act (42 U.S.C. 402(a)) is amended by adding at the end the 
following new sentence: ``For any month ending after the month in which 
the individual is a widow, widower, surviving divorced wife, or 
surviving divorced husband in connection with any deceased spouse and 
has not remarried since the death of such deceased spouse, the 
individual's old-age insurance benefit shall be increased to 110 
percent of the individual's primary insurance amount for such month.''.
    (b) Widow's Insurance Benefits.--Section 202(e)(2) of such Act (42 
U.S.C. 402(e)(2)) is amended--
            (1) in subparagraph (A), by striking ``the primary 
        insurance amount'' and inserting ``110 percent of the primary 
        insurance amount'';
            (2) in subparagraph (D)(i), by inserting ``110 percent of'' 
        before ``the amount''; and
            (3) in subparagraph (D)(ii), by striking ``82\1/2\ 
        percent'' and inserting ``90\1/4\ percent''.
    (c) Widower's Insurance Benefits.--Section 202(f)(3) of such Act 
(42 U.S.C. 402(f)(3)) is amended--
            (1) in subparagraph (A), by striking ``the primary 
        insurance amount'' and inserting ``110 percent of the primary 
        insurance amount'';
            (2) in subparagraph (D)(i), by inserting ``110 percent of'' 
        before ``the amount''; and
            (3) in subparagraph (D)(ii), by striking ``82\1/2\ 
        percent'' and inserting ``90\1/4\ percent''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to benefits for months after December 2002.

SEC. 306. ACCELERATION OF INCREASE IN DELAYED RETIREMENT CREDIT.

    (a) In General.--Section 202(w) of the Social Security Act (42 
U.S.C. 402(w)) is amended--
            (1) in paragraph (1)(A), by striking ``the applicable 
        percentage (as determined under paragraph (6))'' and inserting 
        ``\2/3\ of 1 percent''; and
            (2) by striking paragraph (6).
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to individuals who attain retirement age after 
calendar year 2002.

SEC. 307. AUTHORIZATION FOR REIMBURSEMENT OF FEDERAL DISABILITY 
              INSURANCE TRUST FUND FOR CERTAIN COSTS OF DISABILITY 
              INSURANCE BENEFITS.

    (a) In General.--Section 201 of the Social Security Act (as amended 
by the preceding provisions of this Act) is amended further by adding 
at the end the following new subsection:

``Reimbursement of Federal Disability Insurance Trust Fund for Certain 
                 Costs of Disability Insurance Benefits

    ``(p) Clauses (vi) and (vii) of section 215(a)(1)(B) shall apply 
with respect to benefits paid during any fiscal year only to the extent 
provided for in advance in an Appropriation Act providing for 
reimbursement of the Federal Disability Insurance Trust Fund for any 
portion of such benefits representing a net increase resulting from the 
operation of such clauses. The Commissioner of Social Security shall 
report to the each House of the Congress as soon as practicable before 
each fiscal year the Commissioner's determination of the amounts 
necessary to provide for any such net increase for such fiscal year.''.

SEC. 308. STUDY TO DEVELOP RECOMMENDATIONS FOR PROVIDING FOR ELECTIONS 
              UNDER WHICH INDIVIDUALS MAY OPT FOR EXCLUSION FROM SOCIAL 
              SECURITY COVERAGE.

    (a) In General.--As soon as practicable after the date of the 
enactment of this Act, the Commissioner of Social Security shall 
conduct a thorough and comprehensive study of the most appropriate and 
feasible means of providing for elections under which individuals may 
opt for exclusion from coverage under the old-age, survivors, and 
disability insurance program under part A of title II of the Social 
Security Act and chapters 2 and 21 of the Internal Revenue Code of 
1986.
    (b) Requirements.--In conducting the study pursuant to this 
section, the Commissioner shall prepare and make full use, as 
appropriate, of such econometric models and actuarial analyses as are 
necessary to carry out such study. Such study shall take into account 
the extent to which the old-age, survivors, and disability insurance 
program may accommodate such elections and the terms and conditions for 
such elections which would most effectively permit such accommodation. 
The Commissioner shall conduct the study pursuant to this section in 
consultation with the Board of Trustees of the Federal Old-Age and 
Survivors Insurance Trust Fund and the Federal Disability Insurance 
Trust Fund and with other appropriate departments and agencies of the 
Federal Government, and such other departments and agencies shall 
provide to the Commissioner such assistance, on a reimbursable basis, 
as may be necessary and appropriate.
    (c) Report.--Not later than 180 days after the date of the 
enactment of this Act, the Commissioner of Social Security shall submit 
to the Committee on Ways and Means of the House of Representatives and 
the Committee on Finance of the Senate a written report containing a 
recommendation, or alternative recommendations, for providing for 
elections described in subsection (a). Such report shall contain a 
complete description of the models and analyses used in carrying out 
the study pursuant to this section and shall be accompanied by draft 
legislation which, if enacted, would carry out the recommendations 
contained in the report.

SEC. 309. INCREASE IN NUMBER OF YEARS DISREGARDED IN DETERMINING 
              AVERAGE ANNUAL EARNINGS ON WHICH BENEFIT AMOUNTS ARE 
              BASED WHERE REMUNERATIVE WORK IS PRECLUDED BY NEED TO 
              PROVIDE CHILD CARE.

    (a) In General.--Section 215(b)(2) of the Social Security Act (42 
U.S.C. 415(b)(2)) is amended--
            (1) by striking the period at the end of clause (ii) of 
        subparagraph (A) and inserting a comma;
            (2) by striking ``Clause (ii), once'' after and below 
        clause (ii) of subparagraph (A) and inserting the following:
``and reduced further to the extent provided in subparagraph (B). 
Clause (ii), once'';
            (3) by striking ``If an individual'' in the matter 
        following clause (ii) of subparagraph (A) and all that follows 
        through the end of subparagraph (A);
            (4) by redesignating subparagraph (B) as subparagraph (F); 
        and
            (5) by inserting after subparagraph (A) the following new 
        subparagraphs:
    ``(B) Subject to subparagraph (C), in any case in which--
            ``(i) in any calendar year which is included in an 
        individual's computation base years, such individual is living 
        with a child (of such individual or his or her spouse) under 
        the age of 13,
            ``(ii) such calendar year is not disregarded pursuant to 
        subparagraphs (A) and (E) (in determining such individual's 
        benefit computation years) by reason of the reduction in the 
        number of such individual's elapsed years under subparagraph 
        (A), and
            ``(iii) during such calendar year, such individual submits 
        to the Commissioner of Social Security, in such form as the 
        Commissioner shall prescribe by regulations, a written 
        statement that the requirements of clause (i) are met with 
        respect to such calendar year,
then the number by which such elapsed years are reduced under this 
paragraph pursuant to subparagraph (A) shall be increased by one (up to 
a combined total not exceeding 5) for each such calendar year.
    ``(C)(i) No calendar year shall be disregarded by reason of 
subparagraph (B) (in determining such individual's benefit computation 
years) unless the individual had no earnings as described in section 
203(f)(5) for such year.
    ``(ii) No calendar year shall be disregarded by reason of 
subparagraph (B) (in determining such individual's benefit computation 
years) in connection with a child referred to in subparagraph (B)(i) 
unless the individual was living with the child substantially 
throughout the period in such year in which the child was alive and 
under the age of 13 in such year.
    ``(iii) The particular calendar years to be disregarded under this 
subparagraph (in determining such benefit computation years) shall be 
those years (not otherwise disregarded under subparagraph (A)) which, 
before the application of subsection (f), meet the conditions of the 
preceding provisions of this subparagraph.
    ``(iv) This subparagraph shall apply only to the extent that its 
application would not result in a lower primary insurance amount.
    ``(D) The number of an individual's benefit computation years as 
determined under this paragraph shall in no case be less than 2.''.
    (b) Effective Date.--The amendments made by this section shall 
apply only with respect to computation base years after 2001.

SEC. 310. EXCLUSION OF DISABLED ADULT CHILDREN FROM REDUCTION IN 
              BENEFITS UNDER THE FAMILY MAXIMUM PROVISIONS.

    (a) In General.--Section 203(a)(3) of the Social Security Act (42 
U.S.C. 403(a)(3)) is amended by adding at the end the following new 
subparagraph:
    ``(E) When any of the individuals who are entitled to benefits on 
the basis of the wages and self-employment income of any insured 
individual and to whom this subsection applies is entitled to child's 
insurance benefits under section 202(d) on the basis of such wages and 
self-employment income and is described in section 202(d)(1)(G), the 
benefit to which he or she is so entitled for any month shall be 
determined without regard to this subsection, and the benefits of all 
other individuals who are entitled for such month to monthly benefits 
under section 202 on the basis of the wages and self-employment income 
of such insured individual shall be determined as if no such child were 
entitled to benefits for such month.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to benefits for months after December 2001.

                     TITLE IV--RETIREMENT SECURITY

SEC. 401. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF 
              THE ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 
              2001 MADE PERMANENT.

    (a) In General.--Section 901 of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 is amended by adding at the end the 
following new subsection:
    ``(c) Exception.--Subsections (a) and (b) shall not apply to the 
provisions of, and amendments made by, subtitles (A) through (F) of 
title VI (relating to pension and individual retirement arrangement 
provisions).''.
    (b) Conforming Amendments.--Section 901(b) of such Act is amended--
            (1) by striking ``and the Employee Retirement Income 
        Security Act of 1974'' in the text, and
            (2) by striking ``of Certain Laws'' in the heading.

SEC. 402. ACCELERATION OF PHASE-INS OF SCHEDULED INCREASES IN IRA AND 
              PENSION PLAN CONTRIBUTION LIMITS.

    (a) IRA Contribution Limit.--
            (1) Deductible amount.--Subparagraph (A) of section 
        219(b)(5) of the Internal Revenue Code of 1986 is amended to 
        read as follows:
                    ``(A) In general.--The deductible amount shall be 
                $5,000.''.
            (2) Catch-up amount.--Subparagraph (B) of section 219(b)(5) 
        of such Code is amended to read as follows:
                    ``(B) Catch-up contributions for individuals 50 or 
                older.--In the case of an individual who has attained 
                the age of 50 before the close of the taxable year, the 
                dollar amount in effect under paragraph (1)(A) for such 
                taxable year (determined without regard to this 
                paragraph) shall be increased by $1,000.''.
    (b) Elective Deferrals.--Subparagraph (B) of section 402(g)(1) of 
such Code is amended by striking ``the amount determined'' and all that 
follows and inserting ``$15,000.''.
    (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--Subparagraph (A) of section 457(e)(15) of 
such Code is amended by striking ``the amount determined'' and all that 
follows and inserting ``$15,000.''.
    (d) Simple Retirement Accounts.--Clause (i) of section 408(p)(2)(E) 
of such Code is amended by striking ``the amount determined'' and all 
that follows and inserting ``$10,000.''.
    (e) Catch-Up Contributions.--Subparagraph (B) of section 
414(v)(2)(B) of such Code is amended--
            (1) in clause (i) by striking ``determined'' and all that 
        follows and inserting ``$5,000.'', and
            (2) in clause (ii) by striking ``determined'' and all that 
        follows and inserting ``$2,500.''.
    (f) Conforming Changes to Related COLA Provisions.--
            (1) IRAs.--Clause (i) of section 219(b)(5)(C) of such Code 
        is amended--
                    (A) by striking ``2008'' and inserting ``2003'', 
                and
                    (B) by striking ``2007'' and inserting ``2002''.
            (2) Elective deferrals.--Paragraph (4) of section 402(g) of 
        such Code is amended--
                    (A) by striking ``2006'' and inserting ``2003'', 
                and
                    (B) by striking ``2005'' and inserting ``2002''.
            (3) Deferred compensation plans of state and local 
        governments and tax-exempt organizations.--Subparagraph (B) of 
        section 457(e)(15) of such Code is amended--
                    (A) by striking ``2006'' and inserting ``2003'', 
                and
                    (B) by striking ``2005'' and inserting ``2002''.
            (4) Simple retirement accounts.--Clause (ii) of section 
        408(p)(2)(E) of such Code is amended--
                    (A) by striking ``2005'' and inserting ``2003'', 
                and
                    (B) by striking ``2004'' and inserting ``2002''.
            (5) Catch-up contributions.--Subparagraph (C) of section 
        414(v)(2) of such Code is amended--
                    (A) by striking ``2006'' and inserting ``2003'', 
                and
                    (B) by striking ``2005'' and inserting ``2002''.
    (g) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2002.

SEC. 403. REFUNDABLE CREDIT FOR PREMIUMS ON QUALIFIED LONG-TERM CARE 
              INSURANCE CONTRACTS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 33 percent of the amount of the 
eligible long-term care premiums (as defined in section 213(d)(10)) 
paid during the taxable year for coverage for the taxpayer, his spouse, 
and dependents under a qualified long-term care insurance contract (as 
defined in section 7702B(b)).
    ``(b) Dollar Limitation.--The amount of the credit allowed to a 
taxpayer under subsection (a) shall not exceed $1,000 ($2,000 in the 
case of a joint return).
    ``(c) Coordination With Other Deductions.--Any amount paid by a 
taxpayer for any qualified long-term care insurance contract to which 
subsection (a) applies shall not be taken into account in computing the 
amount allowable to the taxpayer as a deduction under section 162(l) or 
213(a).''.
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or from section 36 of 
        such Code'' before the period at the end.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the item relating to section 35 and 
        inserting the following new items:

                              ``Sec. 36. Premiums on qualified long-
                                        term care insurance contracts.
                              ``Sec. 37. Overpayment of taxes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 404. TAX CREDIT FOR TAXPAYERS PROVIDING CARE FOR DEPENDENT PARENTS 
              IN THEIR HOUSEHOLDS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. CREDIT FOR TAXPAYERS PROVIDING CARE FOR DEPENDENT PARENTS 
              IN THEIR HOUSEHOLDS.

    ``(a) Allowance of Credit.--In the case of an individual who 
maintains a household which includes as a member one or more qualified 
persons, there shall be allowed as a credit against the tax imposed by 
this chapter for the taxable year an amount equal to the qualified care 
expenses.
    ``(b) Limitation.--The amount of the credit allowed by subsection 
(a) shall not exceed $1,000 for each qualified person.
    ``(c) Qualified Person.--For purposes of this section, the term 
`qualified person' means any individual--
            ``(1) who is a father or mother of the taxpayer, his 
        spouse, or his former spouse or who is an ancestor of such a 
        father or mother,
            ``(2) for whom the taxpayer is allowed an exemption amount 
        under section 151, and
            ``(3) whose name and TIN are included on the taxpayer's 
        return for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother shall be 
treated as a father or mother.
    ``(d) Qualified Care Expenses.--For purposes of this section, the 
term `qualified care expenses' means the amount paid or incurred by the 
taxpayer to provide care for a qualified person in the principal 
residence of the taxpayer. No amount shall be taken into account under 
this section with respect to a qualified person for any expense 
incurred for a period during which such person is receiving qualified 
long-term care services (as defined in section 7702B(c)(1)) outside of 
such residence.
    ``(e) Denial of Double Benefit.--A credit shall not be allowed 
under this section for any expense for which a credit or deduction is 
claimed under any other provision of this title.
    ``(f) Special Rules.--For purposes of this section, rules similar 
to the rules of paragraphs (1), (2), (3), and (4) of section 21(e) 
shall apply.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25B the following new 
item:

                              ``Sec. 25C. Credit for taxpayers 
                                        providing care for dependent 
                                        parents in their households.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 405. NONREFUNDABLE TAX CREDIT FOR EXPENSES OF SENIORS FOR 
              MAINTAINING A PRINCIPAL RESIDENCE.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25C the 
following new section:

``SEC. 25D. EXPENSES OF SENIORS FOR MAINTAINING A PRINCIPAL RESIDENCE.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
at the election of the taxpayer there shall be allowed as a credit 
against the tax imposed by this subtitle for the taxable year an amount 
equal to qualified residence expenses.
    ``(b) Dollar Limitation.--The amount allowed as a credit by 
subsection (a) for the taxable year shall not exceed $1,000.
    ``(c) Qualified Residence Expenses.--For purposes of this section, 
the term `qualified residence expenses' means the amount paid or 
incurred by the taxpayer for the maintenance of the principal residence 
of the taxpayer. No amount shall be taken into account under this 
section for any expense incurred for a period during which the taxpayer 
is receiving qualified long-term care services (as defined in section 
7702B(c)(1)) outside of such residence.
    ``(d) Eligible Individual.--The term `eligible individual' means an 
individual who has attained age 65 as of the end of the taxable year.
    ``(e) Special Rules.--
            ``(1) Double benefit.--A credit shall not be allowed under 
        this section for any expense for which a credit or deduction is 
        claimed under any other provision of this title.
            ``(2) Election.--A taxpayer who claims the credit under 
        section 25C for a taxable year shall not be eligible to make an 
        election under this section for such year.''.
    (b) Conforming Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25C the following new 
item:

                              ``Sec. 25D. Expenses of seniors for 
                                        maintaining a principal 
                                        residence.''

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.
                                 <all>