[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 440 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 440

To amend title II of the Social Security Act to provide for individual 
   security accounts funded by employee and employer Social Security 
 payroll deductions, to extend the solvency of the old-age, survivors, 
       and disability insurance program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 1, 2005

  Mr. Kolbe (for himself and Mr. Boyd) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
 to the Committee on Rules, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend title II of the Social Security Act to provide for individual 
   security accounts funded by employee and employer Social Security 
 payroll deductions, to extend the solvency of the old-age, survivors, 
       and disability insurance program, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Bipartisan 
Retirement Security Act of 2005''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Individual security accounts.
Sec. 3. Minimum social security benefit.
Sec. 4. Reduction in the amount of certain transfers to medicare trust 
                            fund.
Sec. 5. Revised formula for average indexed monthly earnings.
Sec. 6. Actuarial adjustment for retirement.
Sec. 7. Corrections for CPI overstatement in cost-of-living indexation.
Sec. 8. Adjustments to bend points in determining primary insurance 
                            amounts.
Sec. 9. Adjustment to benefit formula factors.
Sec. 10. Modification to PIA formula to reflect changes to life 
                            expectancy.
Sec. 11. Treatment of disabled beneficiaries.
Sec. 12. Maintenance of benefit and contribution base.
Sec. 13. Acceleration of increase in social security eligibility age.
Sec. 14. Mechanism for remedying unforeseen deterioration in social 
                            security solvency.
Sec. 15. Increase in widow's and widower's insurance benefits.
Sec. 16. Limitation on benefits of married couple to level of maximum 
                            worker benefits.

SEC. 2. INDIVIDUAL SECURITY ACCOUNTS.

    (a) Establishment and Maintenance of Individual Security 
Accounts.--
            (1) In general.--Title II of the Social Security Act (42 
        U.S.C. 401 et seq.) is amended--
                    (A) by inserting before section 201 the following:

                  ``Part A--Insurance Benefits''; and

                    (B) by adding at the end the following:

                  ``Part B--Individual Security System

               ``Subpart 1--Individual Security Accounts

          ``federally-administered individual security account

    ``Sec. 251. (a) Establishment.--
            ``(1) In general.--Within 30 days after crediting the first 
        contribution under subsection (b) with respect to an eligible 
        individual, the Commissioner of Social Security shall establish 
        an individual security account for such individual in the 
        Individual Security Fund. Each account shall be identified to 
        its account holder by means of the account holder's social 
        security account number.
            ``(2) Eligible individual.--For purposes of this part, the 
        term `eligible individual' means any individual born after 
        December 31, 1949.
    ``(b) Contributions.--
            ``(1) In general.--The Secretary of the Treasury shall 
        transfer from the Federal Old-Age and Survivors Insurance Trust 
        Fund, for crediting by the Commissioner of Social Security to 
        the individual security account of an eligible individual, an 
        amount equal to the sum of any amount received by such 
        Secretary on behalf of such individual under section 3101(a)(2) 
        or 1401(a)(2) of the Internal Revenue Code of 1986.
            ``(2) Other contributions.--For provisions relating to 
        additional contributions credited to individual security 
        accounts, see sections 54(d) and 6402(l) of the Internal 
        Revenue Code of 1986.
    ``(c) Crediting Requirements.--Except as otherwise provided in 
section 252, contributions under subsection (b) on behalf of an 
eligible individual shall be credited--
            ``(1) to the individual security account established for 
        such individual under subsection (a); and
            ``(2) in accordance with the allocation in effect with 
        respect to such individual under subsection (d).
    ``(d) Allocation and Other Designations.--
            ``(1) In general.--The Commissioner of Social Security 
        shall prescribe regulations in accordance with which any 
        eligible individual who is employed or self-employed may 
        designate--
                    ``(A) in the event that 2 or more investment 
                options are available in the Individual Security Fund--
                            ``(i) the option or options to which such 
                        individual wishes to have such individual's 
                        contributions under subsection (b) credited; 
                        and
                            ``(ii) if such individual designates more 
                        than 1 option under clause (i), how such 
                        individual wishes for those contributions to be 
                        allocated; and
                    ``(B) the amount of wages or self-employment income 
                such individual wishes to designate for purposes of 
                section 3101(a)(2)(C) or 1401(a)(2)(C) of the Internal 
                Revenue Code of 1986 (as applicable), if any.
            ``(2) Default allocation.--In the absence of a required 
        designation under paragraph (1)(A), contributions on behalf of 
        the individual involved shall be allocated in such manner as 
        the Commissioner of Social Security shall prescribe, taking 
        into account the competing objectives of maximizing returns on 
        investments and minimizing the risk involved with such 
        investments.
            ``(3) Form of designation.--Any designation under paragraph 
        (1) shall be made in such manner and at such intervals as the 
        Commissioner of Social Security may prescribe in order to 
        ensure ease of administration and to avoid creating an undue 
        burden on employers.
            ``(4) Special rule for 2007.--Not later than December 31, 
        2007, any eligible individual who is employed or self-employed 
        as of such date shall execute all designations required under 
        paragraph (1).
    ``(e) Periodic Statements to Account Holder.--
            ``(1) In general.--The Individual Security Fund Board shall 
        prescribe regulations under which each individual for whom an 
        individual security account is maintained under this section 
        shall be furnished with--
                    ``(A) a periodic statement relating to the 
                individual's account, including, for any reporting 
                period as of the end of which the individual's account 
                balance is at least equal to the minimum balance amount 
                (within the meaning of section 252), clear and 
                conspicuous notice to that effect;
                    ``(B) a summary description of any investment 
                options or other choices which may be available to such 
                individual under this section or under section 252 (as 
                applicable); and
                    ``(C) any forms and information necessary to make a 
                designation under subsection (d) or section 252 (as 
                applicable).
            ``(2) Informed decisionmaking.--All information, materials, 
        and other matter furnished under this subsection shall be 
        furnished to the account holder at such times and in such 
        manner as the Board considers appropriate in order to permit 
        informed decisionmaking.

          ``privately-administered individual security account

    ``Sec. 252. (a) Definitions.--For purposes of this part--
            ``(1) Minimum deposit amount.--
                    ``(A) In general.--The term `minimum deposit 
                amount' means an amount equal to $7,500, as adjusted 
                under subparagraph (B).
                    ``(B) Adjustment.--The Secretary of the Treasury 
                shall adjust annually (effective for periods beginning 
                after December 2006) the dollar amount set forth in 
                subparagraph (A) 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 $10 shall be rounded to the 
                nearest multiple of $10.
            ``(2) Federally-administered individual security account.--
        The term `Federally-administered individual security account' 
        means an individual security account maintained, in accordance 
        with applicable provisions of this part, in the Individual 
        Security Fund.
            ``(3) Privately-administered individual security account.--
        The term `privately-administered individual security account' 
        means an individual security account maintained, in accordance 
        with applicable provisions of this part, by a certified 
        institution.
            ``(4) Certified institution.--The term `certified 
        institution' refers to an investment firm, credit union, 
        insurance company, or other certified institution under subpart 
        3.
    ``(b) Option to Designate a Privately-Administered Individual 
Security Account.--
            ``(1) In general.--Under regulations prescribed by the 
        Individual Security Fund Board, whenever the balance in an 
        individual's Federally-administered individual security account 
        is at least equal to the minimum deposit amount, such 
        individual shall be eligible to designate a privately-
        administered individual security account (established and 
        maintained on such individual's behalf) to serve as such 
        individual's individual security account under this part, in 
        lieu of such individual's Federally-administered individual 
        security account.
            ``(2) Effect of designation.--If an individual makes a 
        designation under paragraph (1)--
                    ``(A) the entire balance in the individual's 
                Federally-administered individual security account 
                shall be promptly transferred to the privately-
                administered individual security account specified by 
                such individual in such designation; and
                    ``(B) that privately-administered individual 
                security account shall, for all purposes, be treated as 
                the electing individual's individual security account, 
                subject to paragraph (4).
            ``(3) Regulatory management of private investment.--A 
        designation under this subsection shall not be effective unless 
        it is made in such time, form, and manner as the Individual 
        Security Fund Board prescribes. The Individual Security Fund 
        Board shall--
                    ``(A) maintain individual account records, and
                    ``(B) combine account transactions with certified 
                institutions maintaining privately-administered 
                individual security accounts in aggregate amounts,
        in the same manner as is applicable with respect to records and 
        account transactions with respect to Federally administered 
        individual security accounts.
            ``(4) Subsequent designations.--The Individual Security 
        Fund Board shall provide by regulation opportunity for 
        subsequent designation, from time to time, of another 
        individual security account in lieu of the account previously 
        designated under this section, subject to the following:
                    ``(A) Options available.--The account designated 
                under this paragraph may be either within--
                            ``(i) another certified institution, 
                        subject to subparagraph (B); or
                            ``(ii) the Individual Security Fund.
                    ``(B) Minimum balance.--In order to make a 
                designation referred to in subparagraph (A)(i), the 
                balance in the individual's individual security account 
                must be at least equal to the minimum deposit amount. 
                No minimum balance requirement under this subparagraph 
                shall apply in the case of a designation referred to in 
                subparagraph (A)(ii).
                    ``(C) Only 1 account permitted at any time.--An 
                individual may not, at any time, concurrently 
                maintain--
                            ``(i) a privately-administered individual 
                        security account with each of 2 or more 
                        certified institutions; or
                            ``(ii) a privately-administered and a 
                        Federally-administered individual security 
                        account.
                    ``(D) Effect.--A designation under this paragraph 
                has (with respect to the individual's respective 
                accounts, before and after such designation) the same 
                effect as results following a designation under 
                paragraph (2) (with respect to the Federally-
                administered and privately-administered accounts 
                involved).

           ``distributions from individual security accounts

    ``Sec. 253. (a) Date of Earliest Distribution.--Except as provided 
in subsection (c), distributions may not be made from the Federally-
administered or privately-administered individual security account of 
an eligible individual (as the case may be) before the earlier of--
            ``(1) the date the eligible individual attains normal 
        retirement age, as determined under section 216 (or early 
        retirement age, as so determined, if elected by such 
        individual), or
            ``(2) the date on which funds in the eligible individual's 
        account are sufficient to provide a monthly payment over the 
        life expectancy of the eligible individual (determined under 
        reasonable actuarial assumptions) which, when added to the 
        eligible individual's monthly benefit under part A (if any), is 
        at least equal to an amount equal to \1/12\ of 185 percent of 
        the poverty line (as defined in section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)) as in effect on 
        such date for an individual) and adjusted annually thereafter 
        by the CPI increase percentage determined under section 215(i).
    ``(b) Forms of Distribution.--
            ``(1) Required monthly payments.--Except as provided in 
        paragraph (2), beginning as of the date distributions begin to 
        be made in accordance with subsection (a), the balance in the 
        individual security account available to provide monthly 
        payments not in excess of the amount described in subsection 
        (a)(2) shall be paid, as elected by the account holder (in such 
        form and manner as shall be prescribed in regulations of the 
        Individual Security Fund Board or the Securities and Exchange 
        Commission, as applicable), by means of the purchase of 
        annuities or equal monthly payments over the life expectancy of 
        the eligible individual (determined under reasonable actuarial 
        assumptions) in accordance with requirements (which shall be 
        provided in regulations of the Board or Commission, as 
        applicable) similar to the requirements applicable to payments 
        of benefits under subchapter III of chapter 84 of title 5, 
        United States Code.
            ``(2) Payment of excess funds.--To the extent funds remain 
        in an eligible individual's Federally-administered or 
        privately-administered individual security account (as the case 
        may be) after the application of paragraph (1) and to the 
        extent not inconsistent with the provisions of subchapter III 
        of chapter 84 of title 5, United States Code, such funds shall 
        be payable to the eligible individual in such manner and in 
        such amounts as determined by the eligible individual.
    ``(c) Distribution in the Event of Death Before the Date of Initial 
Distribution.--If the eligible individual dies before the date 
determined under subsection (a), the balance in such individual's 
individual security account shall be distributed to the individual's 
heirs under rules established by the Individual Security Fund Board or 
the Securities and Exchange Commission, as applicable.

 ``Subpart 2--Individual Security Fund; Individual Security Fund Board

                       ``individual security fund

    ``Sec. 261. There shall be established and maintained in the 
Treasury of the United States an Individual Security Fund in the same 
manner as the Thrift Savings Fund under sections 8437 (excluding 
paragraphs (4) and (5) of subsection (c) thereof), 8438, and 8439 of 
title 5, United States Code.

                    ``individual security fund board

    ``Sec. 262. (a) Establishment.--There shall be established and 
maintained in the Social Security Administration an Individual Security 
Fund Board in the same manner as the Federal Retirement Thrift 
Investment Board under subchapter VII of chapter 84 of title 5, United 
States Code.
    ``(b) Specific Investment and Reporting Duties.--The Individual 
Security Fund Board shall manage and report on the activities of the 
Individual Security Fund and on Federally-administered individual 
security accounts in the same manner as the Federal Retirement Thrift 
Investment Board manages and reports on the Thrift Savings Fund and the 
individual accounts of such Fund under subchapter VII of chapter 84 of 
title 5, United States Code.
    ``(c) Budgetary Treatment of Individual Security Fund and 
Accounts.--The receipts and disbursements of the Individual Security 
Fund and any accounts within such Fund shall not be included in the 
totals of the budget of the United States Government as submitted by 
the President or of the congressional budget and shall be exempt from 
any general budget limitation imposed by statute on expenditures and 
net lending (budget outlays) of the United States Government.
    ``(d) Executive Director.--The Board shall appoint an Executive 
Director, without regard to the provisions of law governing 
appointments in the competitive service. The Executive Director shall 
receive the same compensation, and shall have, with respect to the 
Individual Security Fund and accounts within such Fund, the same duties 
and responsibilities, as does the Executive Director (appointed under 
section 8474(a) of title 5, United States Code) with respect to the 
Thrift Savings Fund and accounts within such Fund.

                  ``Subpart 3--Certified Institutions

 ``certification of institutions by securities and exchange commission

    ``Sec. 271. (a) In General.--For purposes of this part, any 
institution that is engaged, in a fiduciary capacity, in the business 
of maintaining accounts for individuals for purposes of investment may 
apply to the Securities and Exchange Commission (in such form and 
manner as the Commission shall by regulation require) for certification 
under this subpart.
    ``(b) Review Requirements.--In reviewing any application for 
certification under this subpart and determining whether to approve the 
application for certification, the Commission shall consider the 
following factors:
            ``(1) The financial history and condition of the 
        institution.
            ``(2) The adequacy of the institution's capital structure.
            ``(3) The future earnings prospects of the institution.
            ``(4) The general character and fitness of the management 
        of the institution.
            ``(5) The convenience and needs of individuals who are 
        account holders with respect to personal retirement accounts 
        for which the institution is to serve as trustee.
            ``(6) Whether the institution's corporate powers are 
        consistent with the purposes of this part.
            ``(7) The institution's disclosure policies, including with 
        respect to its administrative fees, investment policies, and 
        investment activities.
            ``(8) The appropriateness of--
                    ``(A) the fund or funds that such institution 
                proposes to offer for purposes of this part, and
                    ``(B) the criteria by which such institution will 
                make future decisions regarding the selection of new 
                funds or the making of any other modifications in the 
                investment options offered by such institution for 
                purposes of this part, as determined based on 
                guidelines established by the Commission for purposes 
                of this paragraph.
    ``(c) Notice of Denial of Application for Certification.--If the 
Commission votes to deny any application for certification by any 
institution, the Commission shall promptly notify the institution of 
the denial of such application, giving specific reasons in writing for 
the Commission's determination with reference to the factors described 
in subsection (b).
    ``(d) Nondelegation Requirement.--The authority of the Commission 
to make any determination to deny any application under this section 
may not be delegated by the Commission.

                     ``revocation of certification

    ``Sec. 272. (a) In General.--The Securities and Exchange Commission 
shall prescribe regulations in accordance with which the certified 
status of an institution may be voluntarily or involuntarily revoked.
    ``(b) Judicial Review.--Any party to any involuntary revocation 
proceeding under this section to which an institution is a party may 
obtain a review of any order served pursuant to this section by the 
filing in the court of appeals of the United States for the circuit in 
which the home office of the institution is located, or in the United 
States Court of Appeals for the District of Columbia Circuit, within 30 
days after the date of service of such order, a written petition 
praying that the order of the Commission be modified, terminated, or 
set aside. A copy of such petition shall be forthwith transmitted by 
the clerk of the court to the Commission, and thereupon the Commission 
shall file in the court the record in the proceeding, as provided in 
section 2112 of title 28, United States Code. Upon the filing of such 
petition, such court shall have jurisdiction, which upon the filing of 
the record shall be exclusive, to affirm, modify, terminate, or set 
aside, in whole or in part, the order of the Commission. Review of such 
proceedings shall be had as provided in chapter 7 of title 5, United 
States Code. The judgment and decree of the court shall be final, 
except that the judgment and decree shall be subject to review by the 
Supreme Court upon certiorari, as provided in section 1254 of title 28, 
United States Code. The commencement of proceedings for judicial review 
under this subsection shall not, unless specifically ordered by the 
court, operate as a stay of any order issued by the Commission.

                           ``fiduciary duties

    ``Sec. 273. (a) In General.--In the case of a privately-
administered individual security account which does not form part of an 
individual account plan covered under part 4 of subtitle B of title I 
of the Employee Retirement Income Security Act of 1974, rules similar 
to the rules of such part 4 applicable to individual account plans 
covered under such part 4 shall apply with respect to a privately-
administered individual security account and the terms of any 
arrangement under which such account is maintained.
    ``(b) General Requirements.--In applying under subsection (a) the 
rules of part 4 of subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 in the case of a privately-administered 
individual security account, references in such part to the Secretary 
of Labor shall be deemed to be references to the Securities and 
Exchange Commission, references in such part to a participants or 
beneficiary in connection with an individual account plan covered under 
such part shall be deemed to be references to the account holder with 
respect to the privately-administered individual security account, and 
references in such part to the plan administrator or plan sponsor in 
connection with an individual account plan covered under such part 
shall be deemed to be references to the trustee of the privately-
administered individual security account.
    ``(c) Limitation on Liability.--Any account holder who issues an 
instruction to the trustee of the account directing an investment of 
funds held in the account shall sign an acknowledgement prescribed by 
the Securities and Exchange Commission which states that the account 
holder understands that an investment of any amount in the account is 
made at the account holder's risk, that the account holder is not 
protected by the Government or by the trustee against any loss on such 
investment, and that a return on such investment is not guaranteed by 
the Government or by the trustee. Notwithstanding the preceding 
provisions of this section and any other provision of Federal or State 
law, the trustee of a privately-administered individual security 
account shall not be liable for losses suffered in connection with any 
investment of assets held in the account unless it is shown by clear 
and convincing evidence that the trustee did not act in the manner in 
which a reasonable trustee would act under the circumstances then 
prevailing in evaluating the risk and reward properties of the 
investment option involved.

                        ``Subpart 4--Enforcement

                           ``cause of action

    ``Sec. 281. The account holder with respect to a privately-
administered individual security account who is adversely affected by 
an act or practice of any party (other than the Securities and Exchange 
Commission, the Social Security Administration, the Department of the 
Treasury, or any officer or employee of any of the foregoing) in 
violation of any provision of this part, may bring an action--
            ``(1) to enjoin such act or practice, or
            ``(2) to obtain other appropriate equitable relief (A) to 
        redress such violation or (B) to enforce such provision.

                        ``jurisdiction and venue

    ``Sec. 282. Civil actions under this subpart may be brought in the 
district courts of the United States in the district where the 
privately-administered individual security account is administered, 
where the violation took place, or where a defendant resides or may be 
found, and process may be served in any district where a defendant 
resides or may be found. The district courts of the United State shall 
have jurisdiction, without regard to the amount in controversy or the 
citizenship of the parties, to grant the relief provided for in section 
281 in any action.

       ``right of securities and exchange commission to intervene

    ``Sec. 283. A copy of the complaint or notice of appeal in any 
action under this subpart shall be served upon the Securities and 
Exchange Commission by certified mail. The Commission shall each have 
the right to intervene in any action.

                     ``awards of costs and expenses

    ``Sec. 284. In any action brought under this subpart, the court in 
its discretion may award all or a portion of the costs and expenses 
incurred in connection with such action, including reasonable 
attorney's fees, to any party who prevails or substantially prevails in 
such action.

                        ``limitation on actions

    ``Sec. 285. (a) In General.--Except as provided in subsection (c), 
an action under this subpart may not be brought after the later of--
            ``(1) 6 years after the date on which the cause of action 
        arose, or
            ``(2) 3 years after the applicable date specified in 
        subsection (b).
    ``(b) Applicable Date.--The applicable date specified in this 
subsection is the earliest date on which the plaintiff acquired or 
should have acquired actual knowledge of the existence of such cause of 
action.
    ``(c) Cases of Fraud or Concealment.--In the case of fraud or 
concealment, the period described in subsection (a)(2) shall be 
extended to 6 years after the applicable date specified in subsection 
(b).

      ``penalty for failure to timely provide required information

    ``Sec. 286. The Securities and Exchange Commission may assess a 
penalty, payable to it, against any person who fails to provide any 
notice or other material information required under this part or any 
regulations prescribed under this part within the applicable time limit 
specified therein. Such penalty shall not exceed $1,000 for each day 
for which such failure continues.

            ``actions by securities and exchange commission

    ``Sec. 287. If any person is assessed under this subpart and fails 
to pay the assessment when due, or any person otherwise fails to meet 
any requirement of this part, the Securities and Exchange Commission 
may bring a civil action in any district court of the United States 
within the jurisdiction of which such person's assets are located or in 
which such person resides or is found for the recovery of the amount of 
the assessment or for appropriate equitable relief to redress the 
violation or enforce the provisions of this part, and process may be 
served in any other district. The district courts of the United States 
shall have jurisdiction over actions brought under this section by the 
Commission without regard to the amount in controversy.

   ``criminal penalty for fraud or intentional misrepresentation in 
                   connection with investment options

    ``Sec. 288. Any person who makes, or causes to be made, a statement 
or representation of a material fact for use in selecting an investment 
option that the person knows or should know is false or misleading or 
knows or should know omits a material fact or makes such a statement 
with knowing disregard for the truth shall upon conviction be fined not 
more than $500,000 or imprisoned for not more than 5 years, or both.''.
            (2) Authorization for funding of initial costs.--There are 
        authorized to be appropriated to the Individual Security Fund 
        Board, for each of fiscal years 2006 and 2007, such sums as may 
        be necessary to pay for the expenses incurred during such 
        fiscal year in the administration of part B of title II of the 
        Social Security Act during such fiscal year.
    (b) Modification of FICA Rates.--
            (1) Employees.--Section 3101(a) of the Internal Revenue 
        Code of 1986 (relating to tax on employees) is amended to read 
        as follows:
    ``(a) Old-Age, Survivors, and Disability Insurance.--
            ``(1) In general.--
                    ``(A) Individuals covered under part a of title ii 
                of the social security act.--In addition to other 
                taxes, there is hereby imposed on the income of every 
                individual who is not a part B eligible individual a 
                tax equal to 6.2 percent of the wages received by him 
                with respect to employment.
                    ``(B) Individuals covered under part b of title ii 
                of the social security act.--
                            ``(i) In general.--In addition to other 
                        taxes, there is hereby imposed on the income of 
                        every part B eligible individual a tax equal to 
                        the applicable percentage of the wages received 
                        by such individual with respect to employment.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the term `applicable percentage' 
                        means the excess of 6.2 percent, over
                                    ``(I) 3 percent, in the case of the 
                                first $10,000 of such wages received in 
                                the calendar year, and
                                    ``(II) 2 percent, in the case of 
                                any additional such wages received in 
                                the calendar year.
            ``(2) Contribution of oasdi tax reduction to individual 
        security accounts.--In addition to other taxes, there is hereby 
        imposed on the income of every part B eligible individual for 
        the calendar year an individual security account contribution 
        equal to the sum of--
                    ``(A) 3 percent of so much of the wages as does not 
                exceed the first $10,000 received in such calendar year 
                by such individual with respect to employment,
                    ``(B) 2 percent of the excess of--
                            ``(i) such wages, over
                            ``(ii) the wages taken into account under 
                        subparagraph (A), plus
                    ``(C) so much of such wages (not to exceed $5,000) 
                as is designated by the individual in the same manner 
                as described in section 251(d) of the Social Security 
                Act.
            ``(3) Inflation adjustments.--
                    ``(A) In general.--In the case of any calendar year 
                beginning after 2006, the $10,000 amount in paragraphs 
                (1) and (2) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the wage increase percentage (if 
                        any) for such year.
                    ``(B) Designated contributions.--In the case of any 
                calendar year beginning after 2006, the $5,000 amount 
                in paragraph (2)(C) shall be increased by an amount 
                equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the percentage increase (if any) for 
                        such year determined under section 215(i) of 
                        the Social Security Act.
                    ``(C) Rounding.--If any dollar amount after being 
                increased under subparagraph (A) or (B) is not a 
                multiple of $10, such dollar amount shall be rounded to 
                the nearest multiple of $10.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Wages.--The term `wages' shall have the 
                meaning given to such term by section 3121(a).
                    ``(B) Employment.--The term `employment' shall have 
                the meaning given to such term by section 3121(b).
                    ``(C) Wage increase percentage.--The term `wage 
                increase percentage', with respect to a calendar year, 
                means the percentage increase which would become 
                effective under section 215(i)(2) of the Social 
                Security Act for such year if such increase were 
                determined as described in section 215(i)(5)(A)(i) of 
                such Act.''.
            (2) Self-employed.--Section 1401(a) of the Internal Revenue 
        Code of 1986 (relating to tax on self-employment income) is 
        amended to read as follows:
    ``(a) Old-Age, Survivors, and Disability Insurance.--
            ``(1) In general.--
                    ``(A) Individuals covered under part a of the 
                social security act.--In addition to other taxes, there 
                shall be imposed for each taxable year, on the self-
                employment income of every individual who is not a part 
                B eligible individual for the calendar year ending with 
                or during such taxable year, a tax equal to 12.40 
                percent of the amount of the self-employment income for 
                such taxable year.
                    ``(B) Individuals covered under part b of title ii 
                of the social security act.--
                            ``(i) In general.--In addition to other 
                        taxes, there is hereby imposed for each taxable 
                        year, on the self-employment income of every 
                        part B eligible individual, a tax equal to the 
                        applicable percentage of the amount of the 
                        self-employment income for such taxable year.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the term `applicable percentage' 
                        means the excess of 12.4 percent, over
                                    ``(I) 3 percent, in the case of the 
                                first $10,000 of self-employment income 
                                received in the calendar year, and
                                    ``(II) 2 percent, in the case of 
                                any additional self-employment income 
                                received in the calendar year.
            ``(2) Contribution of oasdi tax reduction to individual 
        security accounts.--In addition to other taxes, there is hereby 
        imposed for each taxable year, on the self-employment income of 
        every part B eligible individual for the calendar year, an 
        individual security account contribution equal to the sum of--
                    ``(A) 3 percent of self-employment income as does 
                not exceed the first $10,000 of such income derived 
                during the taxable year by such individual,
                    ``(B) 2 percent of self-employment income in the 
                case of any additional self-employment income derived 
                by such individual during the taxable year, and
                    ``(C) so much of such self-employment income (not 
                to exceed $5,000) as is designated by the individual in 
                the same manner as described in section 251(d) of the 
                Social Security Act.
            ``(3) Inflation adjustments.--
                    ``(A) In general.--In the case of any calendar year 
                beginning after 2006, the $10,000 amount in paragraphs 
                (1) and (2) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the wage increase percentage (if 
                        any) for such year,
                    ``(B) Designated contributions.--In the case of any 
                calendar year beginning after 2006, the $5,000 amount 
                in paragraph (2)(C) shall be increased by an amount 
                equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the percentage increase (if any) for 
                        such year determined under section 215(i) of 
                        the Social Security Act.
                    ``(C) Rounding.--If any dollar amount after being 
                increased under subparagraph (A) or (B) is not a 
                multiple of $10, such dollar amount shall be rounded to 
                the nearest multiple of $10.
            ``(4) Definition.--For purposes of this subsection, the 
        term `wage increase percentage', with respect to a calendar 
        year, means the percentage increase which would become 
        effective under section 215(i)(2) of the Social Security Act in 
        such year if such increase were determined as described in 
        section 215(i)(5)(A)(i) of such Act.''.
            (3) Part b eligible individual.--
                    (A) Taxes on employees.--Section 3121 of such Code 
                (relating to definitions) is amended by inserting after 
                subsection (s) the following new subsection:
    ``(t) Part B Eligible Individual.--For purposes of this chapter, 
the term `part B eligible individual' means, for any calendar year, an 
individual who is an eligible individual (as defined in section 
251(a)(2) of the Social Security Act) for such calendar year.''.
                    (B) Self-employment tax.--Section 1402 of such Code 
                (relating to definitions) is amended by adding at the 
                end the following new subsection:
    ``(l) Part B Eligible Individual.--The term `part B eligible 
individual' means, for any calendar year, an individual who is an 
eligible individual (as defined in section 251(a)(2) of the Social 
Security Act) for such calendar year.''.
            (4) Effective dates.--
                    (A) Employees.--The amendments made by paragraphs 
                (1) and (3)(A) apply to remuneration paid after 
                December 31, 2005.
                    (B) Self-employed individuals.--The amendments made 
                by paragraphs (2) and (3)(B) apply to taxable years 
                beginning after December 31, 2005.
    (c) Matching Contributions.--
            (1) In general.--Part IV of subchapter A of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to credits against 
        tax) is amended by adding at the end the following new subpart:

            ``Subpart H--Individual Security Account Credits

``Sec. 54. Individual security account credit.

``SEC. 54. INDIVIDUAL SECURITY ACCOUNT CREDIT.

    ``(a) Allowance of Credit.--Each part B eligible individual is 
entitled to a credit for the taxable year in an amount equal to the sum 
of--
            ``(1) $150,
            ``(2) 50 percent of the designated wages of such individual 
        for the taxable year,
            ``(3) 50 percent of the designated self-employment income 
        of such individual for the taxable year, plus
            ``(4) 50 percent of the designated earned income credit.
    ``(b) Limitations.--
            ``(1) Amount.--The amount determined under paragraphs (2) 
        and (3) of subsection (a) with respect to such individual for 
        any taxable year may not exceed the excess (if any) of--
                    ``(A) $600, over
                    ``(B) the sum of the amounts received by the 
                Secretary on behalf of such individual under 
                subparagraphs (A) and (B) of section 3101(a)(2) and 
                subparagraphs (A) and (B) of 1401(a)(2) for the taxable 
                year.
            ``(2) Failure to make voluntary contributions.--In the case 
        of a part B eligible individual with respect to whom the amount 
        of wages designated under section 3101(a)(2)(C) plus the amount 
        self-employment income designated under section 1401(a)(2)(C) 
        for the taxable year is zero, the credit to which such 
        individual is entitled under this section shall be equal to 
        zero.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Part b eligible individual.--The term `part B 
        eligible individual' means, for any calendar year, an 
        individual who is an eligible individual (as defined in section 
        251(a)(2) of the Social Security Act) for such calendar year.
            ``(2) Designated wages.--The term `designated wages' means 
        with respect to any taxable year the amount designated under 
        section 3101(a)(2)(C).
            ``(3) Designated self-employment income.--The term 
        `designated self-employment income' means with respect to any 
        taxable year the amount designated under section 1401(a)(2)(C) 
        for such taxable year.
            ``(4) Designated earned income credit.--The term 
        `designated earned income credit' means the amount of the 
        credit allowed under section 32 for the taxable year that is 
        designated by the part B eligible individual in the same manner 
        as described in section 251(d) of the Social Security Act.
    ``(d) Credit Used Only for Individual Security Account.--For 
purposes of this title, the credit allowed under this section with 
respect to any part B eligible individual--
            ``(1) shall not be treated as a credit allowed under this 
        part, but
            ``(2) shall be treated as an overpayment of tax under 
        section 6401(b)(3) which may, in accordance with section 
        6402(l), only be transferred to an individual security account 
        established under part B of title II of the Social Security Act 
        with respect to such individual.''.
            (2) Contribution of eitc amounts to individual security 
        accounts.--Section 32 of such Code (relating to earned income) 
        is amended by adding at the end the following new subsection:
    ``(n) Contribution to Individual Security Account.--
            ``(1) In general.--An eligible part B individual who is 
        allowed a credit under this section may designate all or a 
        portion of such credit as a contribution to the individual 
        security account established on behalf of such individual.
            ``(2) Credit used only for individual security account.--
        For purposes of this title, the amount designated under 
        paragraph (1) with respect to any part B individual--
                    ``(A) shall not be treated as a credit allowed 
                under this section, but
                    ``(B) shall be treated as an overpayment of tax 
                under section 6401(b)(3) which may, in accordance with 
                section 6402(l), only be transferred to an individual 
                security account established under part B of title II 
                of the Social Security Act with respect to such 
                individual.''.
            (3) Contribution of credited amounts to individual security 
        account.--
                    (A) Credited amounts treated as overpayment of 
                tax.--Subsection (b) of section 6401 (relating to 
                excessive credits) is amended by adding at the end the 
                following new paragraph:
            ``(3) Special rule for credit under sections 32 and 54.--
        Subject to the provisions of section 6402(l), the following sum 
        shall be considered an overpayment--
                    ``(A) Section 54 credit.--The amount of any credit 
                allowed under section 54 for any taxable year, plus
                    ``(B) Section 32 designated earned income credit 
                contribution.--The amount of the earned income credit 
                designated as a contribution to an individual security 
                account under section 32(n) for the taxable year.''.
                    (B) Transfer of credit amount to individual 
                security account.--Section 6402 of such Code (relating 
                to authority to make credits or refunds) is amended by 
                adding at the end the following new subsection:
    ``(l) Overpayments Attributable to Individual Security Account 
Credit.--In the case of any overpayment described in section 6401(b)(3) 
with respect to any individual, the Secretary shall transfer for 
crediting by the Commissioner of Social Security to the individual 
security account of an such individual, an amount equal to the amount 
of such overpayment.''.
            (4) Notice to eitc recipients of matching contributions to 
        individual security accounts.--In connection with information 
        and tax forms relating to the credit allowed under section 32 
        of the Internal Revenue Code of 1986, the Secretary of the 
        Treasury shall provide notice of the availability of matching 
        contributions pursuant to section 54 of such Code (as added by 
        subsection (a) of this section) to individual security accounts 
        under part B of title II of the Social Security Act.
            (5) Conforming amendments.--
                    (A) Section 1324(b)(2) of title 31, United States 
                Code, is amended by inserting before the period at the 
                end ``, or enacted by the Bipartisan Retirement 
                Security Act of 2005''.
                    (B) The table of subparts for part IV of subchapter 
                A of chapter 1 of the Internal Revenue Code of 1986 is 
                amended by adding at the end the following new item:

          ``Subpart H. Individual security account credits.''

            (6) Effective date.--The amendments made by this subsection 
        shall apply to refunds payable after December 31, 2005.
    (d) Tax Treatment of Individual Security Accounts.--
            (1) In general.--Subchapter F of chapter 1 of the Internal 
        Revenue Code of 1986 (relating to exempt organizations) is 
        amended by adding at the end the following new part:

                 ``PART IX--INDIVIDUAL SECURITY SYSTEM

``Sec. 530A. Individual security fund.
``Sec. 530B. Individual security accounts.

``SEC. 530A. INDIVIDUAL SECURITY FUND AND FEDERALLY-ADMINISTERED 
              INDIVIDUAL SECURITY ACCOUNTS.

    ``The Individual Security Fund established under section 261 of the 
Social Security Act shall be exempt from taxation under this subtitle.

``SEC. 530B. INDIVIDUAL SECURITY ACCOUNTS.

    ``(a) In General.--For purposes of this section, the term 
`individual security account' means a Federally-administered individual 
security account and a privately-administered security account.
    ``(b) Individual Security Accounts Defined.--For purposes of 
subsection (a)--
            ``(1) Federally-administered security account.--The term 
        `Federally-administered individual security account' means the 
        account established under section 251 of the Social Security 
        Act.
            ``(2) Privately-administered security account.--The term 
        `privately-administered individual security account' means a 
        trust created or organized in the United States exclusively for 
        the benefit of an individual or his beneficiaries, but only if 
        the written governing instrument creating the trust meets the 
        following requirements:
                    ``(A) Except in the case of rollover contributions 
                from another individual security account of such 
                individual--
                            ``(i) no contribution will be accepted 
                        unless it is in cash,
                            ``(ii) contributions will not be accepted 
                        for the taxable year in excess of the sum of--
                                    ``(I) the amounts collected with 
                                respect to such beneficiary under 
                                sections 3101(a)(2) and 1401(a)(2), and
                                    ``(II) the amounts transferred to 
                                such account under section 6402(l), and
                            ``(iii) any contributions with respect to 
                        an account holder which are not accepted 
                        pursuant to this paragraph are promptly 
                        refunded directly to the account holder.
                    ``(B) The trustee is an institution which is 
                certified under subpart 3 of part B of title II of the 
                Social Security Act.
                    ``(C) No part of the trust funds will be invested 
                in life insurance contracts.
                    ``(D) The interest of an individual in the balance 
                in his account is nonforfeitable.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
    ``(c) Contributions.--
            ``(1) In general.--No deduction shall be allowed for 
        contributions credited to an individual security account under 
        part B of title II of the Social Security Act or amounts 
        transferred to such account under section 6402(l).
            ``(2) Rollovers.--
                    ``(A) Rollover from privately-administered 
                individual security account.--The entire balance of an 
                individual security account of the account holder may 
                be rolled over to another individual security account 
                of the account holder.
                    ``(B) Rollover of inheritance.--Any portion of a 
                distribution to an heir from an individual security 
                account made by reason of the death of the beneficiary 
                of such account may be rolled over to the individual 
                security account of the heir.
    ``(d) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--An individual security account 
        is exempt from taxation under this subtitle unless such account 
        has ceased to be an individual security account by reason of 
        paragraph (2). 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) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to 
        privately-administered individual security accounts, and any 
        amount treated as distributed under such rules shall be 
        includible in gross income and shall not be treated as a social 
        security benefit for purposes of section 86.
            ``(3) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--The requirements of this 
                subparagraph are met with respect to an amount paid or 
                distributed from an individual security account to the 
                account holder only if the entire amount in such 
                account is received by the account holder and is paid 
                into another individual security account for the 
                benefit of such holder not later than the 60th day 
                after the day on which the holder receives the payment 
                or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from a privately-administered individual 
                security account if, at any time during the 1-year 
                period ending on the day of such receipt, such 
                individual received on 3 other occasions any other 
                amount described in subparagraph (A) from an individual 
                security account which was not includible in the 
                individual's gross income because of the application of 
                this paragraph.
    ``(e) Distributions.--
            ``(1) In general.--The portion of any distribution from an 
        individual security account under section 253 of the Social 
        Security Act which is attributable to amounts contributed to 
        such account under section 3101(a)(2) (other than subparagraph 
        (C) thereof) and section 1401(a)(2) (other than subparagraph 
        (C) thereof), together with earnings thereon, shall be 
        includible in gross income as a social security benefit for 
        purposes of section 86.
            ``(2) Voluntary contributions.--The portion of any 
        distribution from an individual security account under section 
        253 of the Social Security Act which is attributable to amounts 
        contributed to such account under section 3101(a)(2)(C), 
        section 1401(a)(2)(C), and section 6402(l), together with 
        earnings thereon, shall not be includible in gross income.
            ``(3) Period in which distributions must be made from 
        account of decedent.--In the case of amounts remaining in an 
        individual security account from which distributions began 
        before the death of the beneficiary, rules similar to the rules 
        of section 401(a)(9)(B) shall apply to distributions of such 
        remaining amounts.
            ``(4) Rollovers.--Paragraph (1) shall not apply to amounts 
        rolled over under subsection (c)(2) in a direct transfer by the 
        Commissioner of Social Security, under regulations which the 
        Commissioner shall prescribe.
    ``(f) Account Beneficiary.--For purposes of this section, the 
account beneficiary is the individual for whose benefit the individual 
security account is established.''.
            (2) Clerical amendment.--The table of parts for subchapter 
        F of chapter 1 of the Internal Revenue Code of 1986 is amended 
        by adding after the item relating to part VIII the following 
        new item:

                ``Part IX. Individual security system''.

            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.

SEC. 3. MINIMUM SOCIAL SECURITY BENEFIT.

    Section 215 of the Social Security Act (42 U.S.C. 415) is amended 
by adding at the end the following:

                  ``Minimum Monthly Insurance Benefit

    ``(j)(1) Notwithstanding the preceding provisions of this section--
            ``(A) the primary insurance amount of a qualified 
        individual shall be equal to the greater of--
                    ``(i) the primary insurance amount determined under 
                this section (without regard to this subsection), or
                    ``(ii) \1/12\ of the applicable percentage of the 
                applicable amount, and
        rounded, if not a multiple of $0.10, to the next lower multiple 
        of $0.10, and thereafter increased as provided in subsection 
        (i), and
            ``(B) any recomputation of the primary insurance amount of 
        a qualified individual shall not result in a primary insurance 
        amount less than the primary insurance amount as in effect 
        immediately prior to such recomputation.
    ``(2) For purposes of this subsection--
            ``(A) The term `qualified individual' means an individual--
                    ``(i) who initially becomes eligible for old-age or 
                disability insurance benefits, or dies (before becoming 
                eligible for such benefits) for a month beginning after 
                December 31, 2009, and
                    ``(ii) who, in the case of any such individual 
                other than an individual eligible for old-age insurance 
                benefits, has quarters of coverage greater in number 
                than the number of such individual's elapsed years (as 
                defined in subsection (a)(1)(C)(ii)).
            ``(B) The term `applicable amount' means, in connection 
        with an individual--
                    ``(i) in any case in which the year of such 
                individual's initial eligibility is prior to 2014, 
                $8,825, adjusted annually, for each year after 2003 and 
                before the earlier of--
                            ``(I) the year of the individual's initial 
                        eligibility, or
                            ``(II) 2014,
                by the CPI increase percentage determined under section 
                215(i) for such year, or
                    ``(ii) in any case in which the year of such 
                individual's initial eligibility is after 2013, the 
                dollar amount determined under clause (i) for 2013, 
                multiplied by the percentage (rounded to the nearest 
                one-tenth of 1 percent) by which the national average 
                wage index (as defined in section 209(k)(1)) for the 
                second year prior to the year of such individual's 
                initial eligibility exceeds such index for 2011.
            ``(C)(i) In the case of a qualified individual described in 
        subparagraph (A)(i), the term `applicable percentage' means the 
        sum of--
                            ``(I) the product derived by multiplying 
                        2.0 percent by the number of such individual's 
                        quarters of coverage in excess of 40, to the 
                        extent that the number of such quarters of 
                        coverage does not exceed 80, and
                            ``(II) the product derived by multiplying 
                        0.5 percent by the number of such individual's 
                        quarters of coverage, to the extent that the 
                        number of such quarters of coverage is in 
                        excess of 80 but does not exceed 160.
            ``(ii) In the case of a qualified individual described in 
        subparagraph (A)(ii), the term `applicable percentage' means 
        the sum of--
                    ``(I) the product derived by multiplying the higher 
                pro-rated percentage increment by the number of such 
                individual's quarters of coverage, to the extent that 
                the number of such quarters of coverage exceeds the 
                number of such individual's elapsed years (as defined 
                in subsection (a)(10(C)(ii)) but does not exceed twice 
                the number of such elapsed years, and
                    ``(II) the product derived by multiplying the lower 
                pro-rated percentage increment by the number of such 
                individual's quarters of coverage, to the extent that 
                the number of such quarters of coverage exceeds twice 
                the number of such elapsed years but does not exceed 4 
                times the number of such elapsed years.
            ``(iii) For purposes of clause (ii)--
                    ``(I) the higher pro-rated percentage increment, in 
                connection with the qualified individual, is the 
                quotient obtained by dividing 80 percent by the number 
                of the individual's elapsed years, and
                    ``(II) the lower pro-rated percentage increment, in 
                connection with the qualified individual, is the 
                quotient obtained by dividing 40 percent by twice the 
                number of the individual's elapsed years,
        each of which is rounded, if a multiple of 0.05 percent and not 
        of 0.10 percent, to the next higher multiple of 0.10 percent, 
        and in any other case to the next higher multiple of 0.10 
        percent.
    ``(3) In the case of a qualified individual who becomes eligible 
for old-age or disability insurance benefits, or who dies (before 
becoming eligible to such benefits) in a year prior to 2014, in lieu of 
the amount otherwise determined under paragraph (1)(A)(ii), the amount 
provided under paragraph (1)(A)(ii) shall be deemed to be equal to the 
the product derived by multiplying such amount otherwise determined by 
the percentage set forth in the following table in connection with such 
year, rounded, if not a multiple of $0.10, to the next lower multiple 
of $0.10.

                                                         The applicable
  ``If the year is:                                      percentage is:
        2010...................................................     20 
        2011...................................................     40 
        2012...................................................     60 
        2013...................................................  80.''.

SEC. 4. REDUCTION IN THE AMOUNT OF CERTAIN TRANSFERS TO MEDICARE TRUST 
              FUND.

    Subparagraph (A) of section 121(e)(1) of the Social Security 
Amendments of 1983 (42 U.S.C. 401 note), as amended by section 
13215(c)(1) of the Omnibus Budget Reconciliation Act of 1993, is 
amended--
            (1) in clause (ii), by striking ``the amounts'' and 
        inserting ``the applicable percentage of the amounts''; and
            (2) by adding at the end the following: ``For purposes of 
        clause (ii), the applicable percentage for a year is equal to 
        100 percent, reduced (but not below zero) by 10 percentage 
        points for each year after 2010.''.

SEC. 5. REVISED FORMULA FOR AVERAGE INDEXED MONTHLY EARNINGS.

    (a) In General.--So much of subsection (b) of section 215 of the 
Social Security Act (42 U.S.C. 415) as precedes paragraph (3) is 
amended to read as follows:

        ``Average Indexed Monthly Earnings; Average Monthly Wage

    ``(b)(1)(A) In the case of an individual who is entitled to old-age 
insurance benefits (except as provided in paragraph (2)(C)), or who has 
died (before becoming eligible for such benefits or disability 
insurance benefits), such individual's average indexed monthly earnings 
shall be equal to the quotient obtained by dividing--
                    ``(i) the total (after adjustment under paragraph 
                (3)) of his wages paid in and self-employment income 
                credited to his computation base years (determined 
                under subparagraph (C)(i)), by
                    ``(ii) the product derived by multiplying--
                            ``(I) the number of such individual's 
                        elapsed years (determined under subparagraph 
                        (C)(ii)), by
                            ``(II) 12.
    ``(B)(i) For purposes of clause (i) of subparagraph (A), in the 
case of an individual who becomes eligible for old-age insurance 
benefits, or dies (before becoming eligible for such benefits or 
disability insurance benefits), in any calendar year after 2004 and 
before 2013, if the number of such individual's computation base years 
exceed in number the maximum number for such calendar year, those 
computation base years referred to in such clause shall consist only of 
those computation base years, equal in number to such maximum number, 
for which the total of such individual's wages and self-employment 
income, after adjustment under paragraph (3), is the largest. For 
purposes of this clause, the maximum number for a calendar year is the 
maximum number set forth in connection with such calendar year in the 
following table:

                                                           The maximum 
  ``If the calendar year is:                        number of years is:
        2005 or 2006...........................................     37 
        2007 or 2008...........................................     39 
        2009 or 2010...........................................     41 
        2011 or 2012...........................................     43.
    ``(ii) For purposes of subclause (I) of subparagraph (A)(ii), in 
the case of an individual who becomes eligible for old-age insurance 
benefits, or dies (before becoming eligible for such benefits or 
disability insurance benefits), in any calendar year after 2004, if the 
number of such individual's elapsed years exceed in number the maximum 
number for such calendar year, the number of elapsed years referred to 
in such subclause shall be deemed equal to such maximum number. For 
purposes of this clause, the maximum number for a calendar year is the 
maximum number set forth in connection with such calendar year in the 
following table:

                                                           The maximum 
  ``If the calendar year is:                        number of years is:
        2005 or 2006...........................................     36 
        2007 or 2008...........................................     37 
        2009 or 2010...........................................     38 
        2011 or 2012...........................................     39 
        after 2012.............................................     40.
    ``(C) For purposes of this subsection with respect to any 
individual--
            ``(i) the term `computation base year' means any calendar 
        year after 1950 and before--
                    ``(I) in the case of an individual entitled to old-
                age insurance benefits or disability insurance 
                benefits, the year in which occurred (whether by reason 
                of section 202(j)(1) or otherwise) the first month of 
                that entitlement, or
                    ``(II) in the case of an individual who has died 
                (without having become entitled to old-age insurance 
                benefits), the year succeeding the year of his death,
        except that such term excludes any calendar year entirely 
        included in a period of disability, and
            ``(ii) the term `elapsed year' means (except as otherwise 
        provided by section 104(j)(2) of the Social Security Amendments 
        of 1972) a calendar year--
                    ``(I) after 1950 (or, if later, the year in which 
                the individual attained age 21), and
                    ``(II) before the year in which the individual 
                died, or, if it occurred earlier (but after 1960), the 
                year in which he attained age 62;
        except that such term excludes any calendar year any part of 
        which is included in a period of disability.
    ``(2)(A) In the case of an individual who is entitled to disability 
insurance benefits, such individual's average indexed monthly earnings 
shall be equal to the quotient obtained by dividing--
            ``(i) the total (after adjustment under paragraph (3)) of 
        his wages paid in, and self-employment income credited to, 
        those of his computation base years (determined under paragraph 
        (1)(C)(i)) which--
                    ``(I) are elapsed years (determined under paragraph 
                (1)(C)(ii)),
                    ``(II) occurred prior to his current period of 
                disability, and
                    ``(III) are equal in number to the reduced number 
                determined under subparagraph (B),
        for which the total of such individual's wages and self-
        employment income, after adjustment under paragraph (3), is the 
        largest, by
            ``(ii) the product derived by multiplying--
                    ``(I) the number of the individual's elapsed years, 
                by
                    ``(II) 12.
    ``(B) The reduced number of an individual's elapsed years, 
determined under this subparagraph for purposes of subparagraph 
(A)(i)(III), is the number of such elapsed years, reduced by the number 
of years equal to one-fifth of such number of elapsed years 
(disregarding any resulting fractional part of a year), but not by more 
than 5 years.
    ``(C)(i) This paragraph, once applicable with respect to any 
individual, shall continue to apply for purposes of determining such 
individual's primary insurance amount for purposes of any subsequent 
eligibility for disability or old-age insurance benefits, unless, prior 
to the month in which such eligibility begins, there occurs a period of 
at least 12 consecutive months for which he was not entitled to a 
disability or an old-age insurance benefit.
    ``(ii) If an individual to which this paragraph applies is living 
with a child (of such individual or his or her spouse) under the age of 
3 in any calendar year which is included in such individual's elapsed 
years, but which is not disregarded pursuant to subparagraphs (A)(i) 
and (B) by reason of the reduction in the number of such individual's 
elapsed years under subparagraph (B), the number by which the number of 
such elapsed years is reduced under subparagraph (B) shall be increased 
by one (up to a combined total not exceeding 3) for each such calendar 
year, except that--
            ``(I) no calendar year shall be disregarded by reason of 
        this clause (in determining elapsed years to be taken into 
        account under subparagraph (A)(i)) unless the individual was 
        living with such child substantially throughout the period in 
        which the child was alive and under the age of 3 in such year 
        and the individual had no earnings as described in section 
        203(f)(5) in such year,
            ``(II) the particular calendar years to be disregarded 
        under this clause (in determining such elapsed years) shall be 
        those years (not otherwise disregarded under subparagraph (B)) 
        which, before the application of section 215(f), meet the 
        conditions of subclause (I), and
            ``(III) this clause shall apply only to the extent that its 
        application would not result in a lower primary insurance 
        amount.
    ``(D) The reduction in the number of elapsed years taken into 
account under subparagraph (A)(i) resulting from the application of 
subparagraphs (B) and (C) shall not in any case reduce the number of 
elapsed years taken into account under subparagraph (A)(i) to less than 
2.''.
    (b) Conforming Amendment.--Section 215(b)(3)(A) of such Act (42 
U.S.C. 415(b)(3)(A)) is amended by striking ``for purposes of the 
selection therefrom of benefit computation years under paragraph (2)'' 
and inserting ``for purposes of paragraphs (1)(B)(i) and (2)(A)(i)''.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to individuals initially becoming eligible for old-
age or disability insurance benefits, or dying (before becoming 
eligible for such benefits), in any calendar year after 2008. For 
purposes of this subsection, and individual shall be deemed eligible 
for a benefit for a month if, upon filing application therefor in such 
month, such individual would be entitled to such benefit for such 
month.

SEC. 6. ACTUARIAL ADJUSTMENT FOR RETIREMENT.

    (a) Early Retirement.--
            (1) In general.--Section 202(q) of the Social Security Act 
        (42 U.S.C. 402(q)) is amended--
                    (A) in paragraph (1)(A), by striking ``\5/9\'' and 
                inserting ``the applicable old-age benefit fraction 
                (determined under paragraph (12)(A))'', and by striking 
                ``\25/36\'' and inserting ``the applicable spousal 
                benefit fraction (determined under paragraph 
                (12)(B))''; and
                    (B) by adding at the end the following:
    ``(12) For purposes of paragraph (1)(A)--
            ``(A) the `applicable old-age benefit fraction' for an 
        individual who attains the age of 62 in--
                    ``(i) any year before 2006, is \5/9\;
                    ``(ii) 2006, is \7/12\;
                    ``(iii) 2007, is \11/18\;
                    ``(iv) 2008, is \23/36\;
                    ``(v) 2009, is \2/3\; and
                    ``(vi) 2010 or any succeeding year, is \25/36\; and
            ``(B) the `applicable spousal benefit fraction' for an 
        individual who becomes eligible for wife's or husband's 
        insurance benefits in--
                    ``(i) any year before 2006, is \25/36\;
                    ``(ii) 2006, is \35/48\;
                    ``(iii) 2007, is \55/72\;
                    ``(iv) 2008, is \115/144\;
                    ``(v) 2009, is \5/6\; and
                    ``(vi) 2010 or any succeeding year, is \125/
                144\.''.
            (2) Months beyond first 36 months.--Section 202(q) of such 
        Act (42 U.S.C. 402(q)(9)) (as amended by paragraph (1)) is 
        amended--
                    (A) in paragraph (9)(A), by striking ``five-
                twelfths'' and inserting ``the applicable fraction 
                (determined under paragraph (13))''; and
                    (B) by adding at the end the following:
    ``(13) For purposes of paragraph (9)(A), the `applicable fraction' 
for an individual who becomes eligible for old-age, wife's, or 
husband's insurance benefits in--
            ``(A) any year before 2006, is \5/12\;
            ``(B) 2006, is \16/36\;
            ``(C) 2007, is \16/36\;
            ``(D) 2008, is \17/36\;
            ``(E) 2009, is \17/36\; and
            ``(F) 2010 or any succeeding year, is \1/2\.''.
            (3) Eligibility.--Section 202(q) of such Act (as amended by 
        the preceding provisions of this subsection) is amended further 
        by adding at the end the following new paragraph:
    ``(14) For purposes of this subsection, an individual shall be 
deemed eligible for a benefit for a month if, upon filing application 
therefor in such month, such individual would be entitled to such 
benefit for such month.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to individuals who, in connection with old-age, 
        wife's, and husband's insurance benefits under title II of the 
        Social Security Act, become eligible for such benefits (within 
        the meaning of section 202(q)(14) of such Act (as amended by 
        this subsection) in years after 2005.
    (b) Delayed Retirement.--Section 202(w)(6) of the Social Security 
Act (42 U.S.C. 402(w)(6)) is amended--
            (1) in subparagraph (C), by striking ``and'' at the end;
            (2) in subparagraph (D), by striking ``2004.'' and 
        inserting ``2004 and before 2009;''; and
            (3) by adding at the end the following:
            ``(E) \17/24\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2008 and before 
        2011;
            ``(F) \3/4\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2010 and before 
        2013;
            ``(G) \19/24\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2012 and before 
        2015; and
            ``(H) \5/6\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2014.''.

SEC. 7. CORRECTIONS FOR CPI OVERSTATEMENT IN COST-OF-LIVING INDEXATION.

    (a) Modifications to Cost-of-Living Indexation of Social Security 
Benefits.--
            (1) In general.--Section 215(i)(1)(D) of the Social 
        Security Act (42 U.S.C. 415(i)(1)(D)) is amended to read as 
        follows:
            ``(D) the term `CPI increase percentage', with respect to a 
        base quarter or cost-of-living computation quarter in any 
        calendar year, means the percentage (rounded to the nearest 
        one-tenth of 1 percent) by which the Chained Consumer Price 
        Index for All Urban Consumers (published by the Bureau of Labor 
        Statistics of the Department of Labor) for the such base 
        quarter or cost-of-living computation quarter exceeds such 
        index for the later of--
                    ``(i) the most recent calendar quarter (prior to 
                such base quarter or cost-of-living computation 
                quarter) which was a base quarter under subparagraph 
                (A)(ii), or
                    ``(ii) the most recent cost-of-living computation 
                quarter under subparagraph (B);''.
            (2) Definitions.--Section 215(i)(1)(G) of such Act (42 
        U.S.C. 415(i)(1)(G)) is amended to read as follows:
            ``(G) the Chained Consumer Price Index for All Urban 
        Consumers for a base quarter, a cost-of-living computation 
        quarter, or any other calendar quarter shall be the 
        arithmetical mean of such index (published by the Bureau of 
        Labor Statistics of the Department of Labor as of the end of 
        such quarter) for the 3 months in such quarter.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to increases under section 215(i) of 
        the Social Security Act effective with the month of December of 
        years after 2004.
    (b) Consumer Price Index Adjustments Applicable to the Internal 
Revenue Code Provisions.--
            (1) In general.--Paragraph (3) of section 1(f) of the 
        Internal Revenue Code of 1986 (defining Consumer Price Index) 
        is amended to read as follows:
            ``(3) Cost-of-living adjustment.--
                    ``(A) In general.--For purposes of paragraph (2), 
                the cost-of-living adjustment for any calendar year is 
                the product of--
                            ``(i) the CPI fraction for calendar years 
                        before 2006, multiplied by
                            ``(ii) the Chained CPI fraction for 
                        calendar years after 2005,
                reduced by 1.
                    ``(B) CPI fraction for calendar years before 
                2006.--The CPI fraction for calendar years before 2006 
                is the fraction--
                            ``(i) the numerator of which is the CPI for 
                        the calendar year 2004, and
                            ``(ii) the denominator of which is the CPI 
                        for the calendar year 1992.
                    ``(C) Chained cpi fraction for calendar years after 
                2005.--The Chained CPI fraction for calendar years 
                after 2005 is the fraction--
                            ``(i) the numerator of which is the Chained 
                        CPI for the preceding calendar year, and
                            ``(ii) the denominator of which is the 
                        Chained CPI for the calendar year 2004.''.
            (2) Conforming amendments.--
                    (A) Paragraph (4) of section 1(f) of such Code is 
                amended to read as follows:
            ``(4) CPI and chained cpi for any calendar year.--For 
        purposes of paragraph (3)--
                    ``(A) CPI.--The CPI for any calendar year is the 
                average of the Consumer Price Index as of the close of 
                the 12-month period ending on August 31 of such 
                calendar year.
                    ``(B) Chained cpi.--The Chained CPI for any 
                calendar year is the average of the Chained Consumer 
                Price Index as of the close of the 12-month period 
                ending on August 31 of such calendar year.''.
                    (B) Paragraph (5) of section 1(f) of such Code is 
                amended to read as follows:
            ``(5) Consumer price index and chained consumer price 
        index.--For purposes of paragraph (4)--
                    ``(A) Consumer price index.--The term `Consumer 
                Price Index' means the last Consumer Price Index for 
                all-urban consumers published by the Department of 
                Labor. For purposes of the preceding sentence, the 
                revision of the Consumer Price Index which is most 
                consistent with the Consumer Price Index for calendar 
                year 1986 shall be used.
                    ``(B) Chained consumer price index.--The term 
                `Chained Consumer Price Index' means the initial 
                Chained Consumer Price Index for all-urban consumers 
                published by the Department of Labor.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.
    (c)  Cost-of-Living Adjustments Under Other Provisions Utilizing 
the Consumer Price Index.--
            (1) In general.--Except as provided in paragraph (2), for 
        purposes of determining the amount of any cost-of-living 
        increase which takes effect for benefits payable after December 
        31, 2005, with respect to any benefit described in paragraph 
        (4), any such increase for the period for which the percentage 
        change is determined shall be deemed to be, in lieu of the 
        increase otherwise determined under applicable law in 
        connection with such benefits, the increase determined under 
        such applicable law by substituting the Chained CPI for any 
        month for the CPI for such month.
            (2) Increases determined from a constant base year.--
                    (A) In general.--In any case in which the amount of 
                the cost-of-living increase which takes effect for 
                benefits payable after December 31, 2005, with respect 
                to any benefit described in paragraph (4) is determined 
                under applicable law by reference to a change in the 
                CPI over a period which is determined by reference to a 
                base period which remains constant from year to year, 
                any such increase for any period shall be deemed to be, 
                in lieu of the increase otherwise determined under 
                applicable law in connection with such benefits, the 
                increase, expressed as a percentage increase, equal to 
                the product of--
                            (i) the CPI fraction prior to 2006, 
                        multiplied by
                            (ii) the Chained CPI fraction after 2005,
                reduced by 1.
                    (B) CPI fraction prior to 2006.--The CPI fraction 
                prior to 2006 is the fraction--
                            (i) the numerator of which is the CPI for 
                        the period, ending with or during 2004, which 
                        corresponds to the base period, and
                            (ii) the denominator of which is the CPI 
                        for the base period.
                    (C) Chained cpi fraction after 2005.--The Chained 
                CPI fraction after 2005 is the fraction--
                            (i) the numerator of which is the Chained 
                        CPI for the period, ending with or during the 
                        year preceding the year in which the 
                        determination takes effect, which corresponds 
                        to the base period, and
                            (ii) the denominator of which is the 
                        Chained CPI for the period, ending with or 
                        during 2004, which corresponds to the base 
                        period.
            (3) CPI and chained cpi.--For purposes of paragraph (1)--
                    (A) CPI.--The CPI for any period means, in 
                connection with any benefit described in paragraph (4), 
                the average monthly Consumer Price Index for such 
                period, as determined under the applicable law in 
                connection with such benefit (without regard to this 
                subsection).
                    (B) Chained cpi.--The Chained CPI for any period 
                means, in connection with any benefit described in 
                paragraph (4), the average monthly Chained Consumer 
                Price Index for all urban consumers (published by the 
                Bureau of Labor Statistics of the Department of Labor) 
                for such period, determined under applicable law in the 
                same manner as the CPI for such period would be 
                determined.
            (4) Rules to apply only to computation of benefit 
        amounts.--The preceding provisions of this subsection shall 
        apply only for purposes of determining the amount of benefits 
        and not for purposes of determining--
                    (A) whether a threshold increase in the Consumer 
                Price Index has been met, or
                    (B) increases in amounts under other provisions of 
                law not described in paragraph (5) which operate by 
                reference to increases in such benefits.
            (5) Benefits to which subsection applies.--For purposes of 
        this subsection, the benefits described in this paragraph are--
                    (A) retired and retainer pay subject to adjustment 
                under section 1401a of title 10, United States Code;
                    (B) civil service retirement benefits under section 
                8340 of title 5, United States Code, foreign service 
                retirement benefits under section 826 of the Foreign 
                Service Act of 1980, Central Intelligence Agency 
                retirement benefits under part J of the Central 
                Intelligence Agency Retirement Act of 1964 for certain 
                employees, and any other benefits under any similar 
                provision under any retirement system for employees of 
                the government of the United States;
                    (C) Federal workers' compensation under section 
                8146a of title 5, United States Code;
                    (D) benefits under section 3(a), 4(a), or 4(f) of 
                the Railroad Retirement Act of 1974; and
                    (E) benefits and expenditure limits under title 
                XVIII or XIX of the Social Security Act.
            (6) Benefit.--For purposes of this section, the term 
        ``benefit'' includes a payment.
    (d) Recapture to Federal Old-Age and Survivors Insurance Trust 
Fund.--Section 201 of the Social Security Act (42 U.S.C. 401) is 
amended by adding at the end the following new subsection:
    ``(o) On July 1 of each calendar year specified in the following 
table, the Secretary of the Treasury shall transfer, from the general 
fund of the Treasury to the Federal Old-Age and Survivors Insurance 
Trust Fund, an amount equal to the applicable percentage for such year, 
specified in such table, of the total wages paid in and self-employment 
income credited to such year.

``For the following                                      The applicable
   calendar years:                                       percentage is:
        After 2006 and before 2008.............................   0.02 
        After 2007 and before 2009.............................   0.04 
        After 2008 and before 2010.............................   0.10 
        After 2009 and before 2011.............................   0.12 
        After 2010 and before 2012.............................   0.13 
        After 2011 and before 2013.............................   0.20 
        After 2012 and before 2014.............................   0.24 
        After 2013 and before 2015.............................   0.29 
        After 2014 and before 2021.............................   0.33 
        After 2020 and before 2045.............................   0.39 
        After 2044 and before 2065.............................   0.47 
        After 2064.............................................0.57.''.

SEC. 8. 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 to read as follows:
    ``(a)(1)(A)(i) Subject to clause (ii), the primary insurance amount 
of an individual shall (except as otherwise provided in this section) 
be equal to the sum of--
            ``(I) 90 percent of the individual's average indexed 
        monthly earnings (determined under subsection (b)) to the 
        extent that such earnings do not exceed the amount established 
        for purposes of this subclause by subparagraph (B),
            ``(II) 70 percent of the individual's average indexed 
        monthly earnings to the extent that such earnings exceed the 
        amount established for purposes of subclause (I) but do not 
        exceed the amount established for purposes of this subclause by 
        subparagraph (B),
            ``(III) 20 percent of the individual's average indexed 
        monthly earnings to the extent that such earnings exceed the 
        amount established for purposes of subclause (II) but do not 
        exceed the amount established for purposes of this subclause by 
        subparagraph (B), and
            ``(IV) 10 percent of the individual's average indexed 
        monthly earnings to the extent that such earnings exceed the 
        amount established for purposes of this clause by subparagraph 
        (B).
    ``(ii) In the case of individuals becoming eligible for old-age or 
disability insurance benefits, or dying (before becoming eligible for 
such benefits), in any calendar year after 2005 and before 2016--
            ``(I) In lieu of the percentage specified in subclause (II) 
        of clause (i), the applicable percentage set forth in the 
        following table in connection with such calendar year shall 
        apply:

                                                         The applicable
  ``If the calendar year is:                             percentage is:
        2006...................................................   35.8 
        2007...................................................   39.6 
        2008...................................................   43.4 
        2009...................................................   47.2 
        2010...................................................   51.0 
        2011...................................................   54.8 
        2012...................................................   58.6 
        2013...................................................   62.4 
        2014...................................................   66.2.
            ``(II) In lieu of the percentage specified in subclause 
        (III) of clause (i), the applicable percentage set forth in the 
        following table in connection with such calendar year shall 
        apply:

                                                         The applicable
  ``If the calendar year is:                             percentage is:
        2006...................................................   30.8 
        2007...................................................   29.6 
        2008...................................................   28.4 
        2009...................................................   27.2 
        2010...................................................   26.0 
        2011...................................................   24.8 
        2012...................................................   23.6 
        2013...................................................   22.4 
        2014...................................................   21.2.
            ``(III) In lieu of the percentage specified in subclause 
        (IV) of clause (i), the applicable percentage set forth in the 
        following table in connection with such calendar year shall 
        apply:

                                                         The applicable
  ``If the calendar year is:                             percentage is:
        2006...................................................   14.5 
        2007...................................................   14.0 
        2008...................................................   13.5 
        2009...................................................   13.0 
        2010...................................................   12.5 
        2011...................................................   12.0 
        2012...................................................   11.5 
        2013...................................................   11.0 
        2014...................................................10.5.''.
    (b) Initial Level of Additional Bend Point.--Section 215(a)(1)(B) 
of such Act (42 U.S.C. 415(a)(1)(B)) is amended--
            (1) in clause (i), by inserting ``(as then in effect)'' 
        after ``subparagraph (A)'', and 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 benefits) after 2005, 
        such dollar amounts shall be deemed to have been so established 
        in 1979 for purposes of subclauses (I) and (III) of 
        subparagraph (A)(i), respectively, as in effect with respect to 
        such individuals.'';
            (2) by redesignating clause (iii) as clause (iv);
            (3) by inserting after clause (ii) the following new 
        clause:
    ``(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 2005, the amount 
established for purposes of clause (ii) of subparagraph (A) for such 
calendar year after 2005 shall be 183.8 percent of the amount 
established for purposes of clause (i) for such calendar year.''; and
            (4) in clause (iv) (as redesignated by paragraph (1)), by 
        striking ``clause (ii)'' and inserting ``clauses (ii) and 
        (iii)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to individuals becoming eligible for old-age 
insurance benefits or disability insurance benefits, or dying (before 
becoming eligible for such benefits), after 2005.

SEC. 9. ADJUSTMENT TO BENEFIT FORMULA FACTORS.

    Section 215(a)(1)(B) of the Social Security Act (42 U.S.C. 
415(a)(1)(B)) (as amended by section 8) is amended further--
            (1) by redesignating clause (iv) as clause (vii); and
            (2) by inserting after clause (iii) the following:
    ``(iv) For an individual who initially becomes eligible for old-age 
insurance benefits, or who dies (before becoming eligible for such 
benefits or disability insurance benefits), in any calendar year after 
2011, each of the amounts otherwise established for purposes of 
subclauses (I), (II), (III), and (IV) of subparagraph (A)(i) under this 
subparagraph shall be substituted with the product derived by 
successively multiplying, once for each year of the factoring period 
for such individual--
            ``(I) such amount (after applying this clause for earlier 
        years of the factoring period), by
            ``(II) the designated factor for such year.
    ``(v) For purposes of clause (iii), the term `factoring period' 
means, for an individual, the period beginning with 2012 and ending 
with the earlier of--
            ``(I) the year of the individual's initial eligibility or 
        death, or
            ``(II) 2060.
    ``(vi) For purposes of clause (iii), the term `designated factor' 
means--
            ``(I) for a year prior to 2031, 0.975, except that, for any 
        such year, such factor shall be 1.000 with respect to amounts 
        otherwise established for purposes of subclause (I) of 
        subparagraph (A)(i) under this subparagraph, and
            ``(II) for a year after 2030, 0.985.''.

SEC. 10. MODIFICATION TO PIA FORMULA TO REFLECT CHANGES TO LIFE 
              EXPECTANCY.

    (a) In General.--Section 215(a)(1) of the Social Security Act (42 
U.S.C. 415(a)(1)(B)) is amended by redesignating subparagraph (C) and 
(D) as subparagraphs (D) and (E), respectively, and by inserting after 
subparagraph (B) the following new subparagraph:
    ``(C)(i) For individuals who initially become eligible for old-age 
insurance benefits (or who die before becoming eligible for such 
benefits) in any calendar year after 2011, the primary insurance amount 
computed under this paragraph shall be the product derived by 
multiplying such amount as computed under the preceding subparagraphs 
of this paragraph by the life expectancy ratio for such calendar year.
    ``(ii) The Commissioner of Social Security, using generally 
accepted actuarial principles, shall determine and publish in the 
Federal Register on or before November 1 of each calendar year the life 
expectancy ratio for the following calendar year.
    ``(iii) For purposes of clause (ii), the life expectancy ratio for 
any calendar year is the ratio of--
            ``(I) the period life expectancy of an individual attaining 
        age 62 on January 1, 2008, to
            ``(II) the period life expectancy of an individual 
        attaining age 62 on January 1 of the third calendar year 
        preceding the calendar year in which the determination under 
        clause (ii) is made.''.
    (b) Study of the Effect of Increases in Life Expectancy.--
            (1) Study plan.--Not later than December 15, 2006, the 
        Commissioner of Social Security shall submit to Congress a 
        detailed study plan for evaluating the effects of increases in 
        life expectancy on the expected level of retirement income from 
        social security, pensions, and other sources. The study plan 
        shall include a description of the methodology, data, and 
        funding that will be required in order to provide to the 
        Congress not later than February 15, 2008--
                    (A) an evaluation of trends in mortality and their 
                relationship to trends in health status, among 
                individuals approaching eligibility for old-age 
                insurance benefits under title II of the Social 
                Security Act;
                    (B) an evaluation of trends in labor force 
                participation among individuals approaching eligibility 
                for such benefits and among individuals receiving such 
                benefits, and of the factors that influence the choice 
                between retirement and participation in the labor 
                force;
                    (C) an evaluation of changes, if any, in the 
                disability insurance program under title II of the 
                Social Security Act that would reduce the impact of 
                changes in the retirement income of workers in poor 
                health or physically demanding occupations;
                    (D) an evaluation of the methodology used to 
                develop projections for trends in mortality, health 
                status, and labor force participation among individuals 
                approaching eligibility for old-age insurance benefits 
                and among individuals receiving such benefits; and
                    (E) an evaluation of such other matters as the 
                Commissioner deems appropriate for evaluating the 
                effects of increases in life expectancy.
            (2) Report on results of study.--Not later than February 
        15, 2008, the Commissioner of Social Security shall provide to 
        the Congress an evaluation of the implications of the trends 
        studied under paragraph (1), along with recommendations, if 
        any, of the extent to which the conclusions of such evaluations 
        indicate that projected increases in life expectancy require 
        modification in the disability insurance program under title II 
        of the Social Security Act and other income support programs.

SEC. 11. TREATMENT OF DISABLED BENEFICIARIES.

    Section 215(a) of the Social Security Act (42 U.S.C. 415(a)) is 
amended by adding at the end the following new paragraph:
    ``(8)(A) Notwithstanding the preceding provisions of this 
subsection, in the case of an individual who has or has had a period of 
disability and becomes entitled to old-age insurance benefits under 
section 202(a) (or dies) in or after 2006, the primary insurance amount 
of such individual shall be the sum of--
            ``(i) the amount determined under subparagraph (B), and
            ``(ii) the product derived by multiplying--
                    ``(I) the excess of the amount determined under 
                subparagraph (C) over the amount determined under 
                subparagraph (B), by
                    ``(II) the adjustment factor for such individual 
                determined under subparagraph (D).
    ``(B) The amount determined under this subparagraph is the amount 
of such individual's primary insurance amount as determined under this 
section without regard to this paragraph.
    ``(C) The amount determined under this subparagraph is the amount 
of such individual's primary insurance amount as determined under this 
section as in effect with respect to individuals becoming eligible for 
old-age or disability insurance benefits under section 202(a) in 2004.
    ``(D)(i) Subject to clause (ii), the adjustment factor determined 
under this subparagraph for any individual is the ratio (not greater 
than 1) of--
            ``(I) the number of months, ending after the date on which 
        such individual has attained age 22 and preceding the earlier 
        of such individual's first month of entitlement to old-age 
        insurance benefits under section 202(a) or the month of such 
        individual's death, which occurred during a period of 
        disability of such individual, to
            ``(II) 480.
    ``(ii) In the case of an individual who has attained age 22 as of 
the date of the enactment of the Bipartisan Retirement Security Act of 
2005, the adjustment factor determined under this subparagraph for such 
individual is the product derived by multiplying the ratio determined 
under clause (i) by the ratio (not greater than 1) of--
            ``(I) the number of calendar years for which contributions 
        have been made to such individual's individual security account 
        pursuant to section 251(b)(1), to
            ``(II) 40.''.

SEC. 12. MAINTENANCE OF BENEFIT AND CONTRIBUTION BASE.

    (a) In General.--So much of section 230 of the Social Security Act 
(42 U.S.C. 430) as precedes subsection (d) is amended to read as 
follows:

             ``maintenance of benefit and contribution base

    ``Sec. 230. (a) Not later than November 1 of each calendar year 
(beginning with or after 2005), the Commissioner shall determine and 
publish in the Federal Register the contribution and benefit base 
determined under subsections (b) and (c) which shall be effective with 
respect to remuneration paid after such calendar year and taxable years 
beginning after such year.
    ``(b) For purposes of this section, and for purposes of determining 
wages and self-employment income under sections 209, 211, 213, and 215 
of this Act and sections 54, 1402, 3121, 3122, 3125, 6413, and 6654 of 
the Internal Revenue Code of 1986--
            ``(1) the `contribution and benefit base' with respect to 
        remuneration paid (and taxable years beginning)--
                    ``(A) in 2006 shall be $97,500,
                    ``(B) in 2007 shall be $106,800,
                    ``(C) in 2008 shall be $117,000,
                    ``(D) in 2009 shall be $129,000, and
                    ``(E) in 2010 shall be $142,500; and
            ``(2) the `contribution and benefit base' with respect to 
        remuneration paid (and taxable years beginning) in any calendar 
        year after 2010 shall be equal to the dollar amount equal to 
        the lowest amount which, if applied under this title as the 
        benefit and contribution base for the preceding year, would 
        have caused the total untaxed covered remuneration for such 
        year to constitute no more than 13 percent of the total amount 
        of wages paid, and self-employment income derived, in such year 
        by all individuals.
Each contribution and benefit base determined under paragraph (2) shall 
(if not a multiple of $25) be rounded to the nearest multiple of $25.
    ``(c) For purposes of this section, the term `total untaxed covered 
remuneration' for a calendar year means the total amount of wages paid 
to, and self-employment income derived by, all individuals in such 
calendar year, which was, with respect to each individual paid such 
wages and deriving such self-employment income, in excess of the 
contribution and benefit base for that calendar year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to remuneration paid in (and taxable years beginning in) any calendar 
year after 2005.

SEC. 13. ACCELERATION OF INCREASE IN SOCIAL SECURITY ELIGIBILITY 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 early 
        retirement age (as defined in paragraph (2)) before January 1, 
        2000, 65 years of age; and
            ``(B) with respect to an individual who attains early 
        retirement age after December 31, 1999, and before January 1, 
        2012, 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 early retirement 
        age; and
            ``(C) with respect to an individual who attains early 
        retirement age after December 31, 2011, 67 years of age.''; and
            (2) by striking paragraph (3).

SEC. 14. MECHANISM FOR REMEDYING UNFORESEEN DETERIORATION IN SOCIAL 
              SECURITY SOLVENCY.

    (a) In General.--Section 709 of the Social Security Act (42 U.S.C. 
910) is amended--
            (1) by redesignating subsection (b) as subsection (c); and
            (2) by striking ``Sec.  709. (a) If the Board of Trustees'' 
        and all that follows through ``any such Trust Fund'' and 
        inserting the following:
    ``Sec. 709. (a)(1)(A) If the Board of Trustees of the Federal Old-
Age and Survivors Insurance Trust Fund and the Federal Disability 
Insurance Trust Fund determines at any time, using intermediate 
actuarial assumptions, that the balance ratio of either such Trust Fund 
for any calendar year during the succeeding period of 75 calendar years 
will be zero, the Board shall promptly submit to each House of the 
Congress and to the President a report setting forth its 
recommendations for statutory adjustments affecting the receipts and 
disbursements of such Trust Fund necessary to maintain the balance 
ratio of such Trust Fund at not less than 20 percent, with due regard 
to the economic conditions which created such inadequacy in the balance 
ratio and the amount of time necessary to alleviate such inadequacy in 
a prudent manner. The report shall set forth specifically the extent to 
which benefits would have to be reduced, taxes under section 1401, 
3101, or 3111 of the Internal Revenue Code of 1986 would have to be 
increased, or a combination thereof, in order to obtain the objectives 
referred to in the preceding sentence.
    ``(B) In addition to any reports under subparagraph (A), the Board 
shall, not later than May 30, 2006, prepare and submit to Congress and 
the President recommendations for statutory adjustments to the 
disability insurance program under title II of this Act to modify the 
changes in disability benefits under the Bipartisan Retirement Security 
Act of 2005 without reducing the balance ratio of the Federal 
Disability Insurance Trust Fund. The Board shall develop such 
recommendations in consultation with the National Council on 
Disability, taking into consideration the adequacy of benefits under 
the program, the relationship of such program with old age benefits 
under such title, and changes in the process for determining initial 
eligibility and reviewing continued eligibility for benefits under such 
program.
    ``(2)(A) The President shall, no later than 30 days after the 
submission of the report to the President, transmit to the Board and to 
the Congress a report containing the President's approval or 
disapproval of the Board's recommendations.
    ``(B) If the President approves all the recommendations of the 
Board, the President shall transmit a copy of such recommendations to 
the Congress as the President's recommendations, together with a 
certification of the President's adoption of such recommendations.
    ``(C) If the President disapproves the recommendations of the 
Board, in whole or in part, the President shall transmit to the Board 
and the Congress the reasons for that disapproval. The Board shall then 
transmit to the Congress and the President, no later than 60 days after 
the date of the submission of the original report to the President, a 
revised list of recommendations.
    ``(D) If the President approves all of the revised recommendations 
of the Board transmitted to the President under subparagraph (C), the 
President shall transmit a copy of such revised recommendations to the 
Congress as the President's recommendations, together with a 
certification of the President's adoption of such recommendations.
    ``(E) If the President disapproves the revised recommendations of 
the Board, in whole or in part, the President shall transmit to the 
Board and the Congress the reasons for that disapproval, together with 
such revisions to such recommendations as the President determines are 
necessary to bring such recommendations within the President's 
approval. The President shall transmit a copy of such recommendations, 
as so revised, to the Board and the Congress as the President's 
recommendations, together with a certification of the President's 
adoption of such recommendations.
    ``(3)(A) This paragraph is enacted by Congress--
            ``(i) as an exercise of the rulemaking power of the Senate 
        and the House of Representatives, respectively, and as such it 
        is deemed a part of the rules of each House, respectively, but 
        applicable only to the extent that it is inconsistent with such 
        rules; and
            ``(ii) with full recognition of the constitutional right of 
        either House to change the rules (so far as relating to the 
        procedure of that House) at any time, in the same manner, and 
        to the same extent as in the case of any other rule of that 
        House.
    ``(B) For purposes of this paragraph, the term `joint resolution' 
means only a joint resolution which is introduced within the 10-day 
period beginning on the date on which the President transmits the 
President's recommendations, together with the President's 
certification, to the Congress under subparagraph (B), (D), or (E) of 
paragraph (2), and--
            ``(i) which does not have a preamble;
            ``(ii) the matter after the resolving clause of which is as 
        follows: `That the Congress approves the recommendations of the 
        President as transmitted on ______ pursuant to section 709(a) 
        of the Social Security Act, as follows:________', the first 
        blank space being filled in with the appropriate date and the 
        second blank space being filled in with the statutory 
        adjustments contained in the recommendations; and
            ``(iii) the title of which is as follows: `Joint resolution 
        approving the recommendations of the President regarding social 
        security.'
    ``(C) A joint resolution described in subparagraph (B) that is 
introduced in the House of Representatives shall be referred to the 
Committee on Ways and Means of the House of Representatives. A joint 
resolution described in subparagraph (B) introduced in the Senate shall 
be referred to the Committee on Finance of the Senate.
    ``(D) If the committee to which a joint resolution described in 
subparagraph (B) is referred has not reported such joint resolution (or 
an identical joint resolution) by the end of the 20-day period 
beginning on the date on which the President transmits the 
recommendation to the Congress under paragraph (2), such committee 
shall be, at the end of such period, discharged from further 
consideration of such joint resolution, and such joint resolution shall 
be placed on the appropriate calendar of the House involved.
    ``(E)(i) On or after the third day after the date on which the 
committee to which such a joint resolution is referred has reported, or 
has been discharged (under subparagraph (D)) from further consideration 
of, such a joint resolution, it is in order (even though a previous 
motion to the same effect has been disagreed to) for any Member of the 
respective House to move to proceed to the consideration of the joint 
resolution. A Member may make the motion only on the day after the 
calendar day on which the Member announces to the House concerned the 
Member's intention to make the motion, except that, in the case of the 
House of Representatives, the motion may be made without such prior 
announcement if the motion is made by direction of the committee to 
which the joint resolution was referred. All points of order against 
the joint resolution (and against consideration of the joint 
resolution) are waived. The motion is highly privileged in the House of 
Representatives and is privileged in the Senate and is not debatable. 
The motion is not subject to amendment, or to a motion to postpone, or 
to a motion to proceed to the consideration of other business. A motion 
to reconsider the vote by which the motion is agreed to or disagreed to 
shall not be in order. If a motion to proceed to the consideration of 
the joint resolution is agreed to, the respective House shall 
immediately proceed to consideration of the joint resolution without 
intervening motion, order, or other business, and the joint resolution 
shall remain the unfinished business of the respective House until 
disposed of.
    ``(ii) Debate on the joint resolution, and on all debatable motions 
and appeals in connection therewith, shall be limited to not more than 
2 hours, which shall be divided equally between those favoring and 
those opposing the joint resolution. An amendment to the joint 
resolution is not in order. A motion further to limit debate is in 
order and not debatable. A motion to postpone, or a motion to proceed 
to the consideration of other business, or a motion to recommit the 
joint resolution is not in order. A motion to reconsider the vote by 
which the joint resolution is agreed to or disagreed to is not in 
order.
    ``(iii) Immediately following the conclusion of the debate on a 
joint resolution described in subparagraph (B) and a single quorum call 
at the conclusion of the debate if requested in accordance with the 
rules of the appropriate House, the vote on final passage of the joint 
resolution shall occur.
    ``(iv) Appeals from the decisions of the Chair relating to the 
application of the rules of the Senate or the House of Representatives, 
as the case may be, to the procedure relating to a joint resolution 
described in subparagraph (B) shall be decided without debate.
    ``(F)(i) If, before the passage by one House of a joint resolution 
of that House described in subparagraph (B), that House receives from 
the other House a joint resolution described in subparagraph (B), then 
the following procedures shall apply:
            ``(I) The joint resolution of the other House shall not be 
        referred to a committee and may not be considered in the House 
        receiving it except in the case of final passage as provided in 
        subclause (II).
            ``(II) With respect to a joint resolution described in 
        subparagraph (B) of the House receiving the joint resolution, 
        the procedure in that House shall be the same as if no joint 
        resolution had been received from the other House, but the vote 
        on final passage shall be on the joint resolution of the other 
        House.
    ``(ii) Upon disposition of the joint resolution received from the 
other House, it shall no longer be in order to consider the joint 
resolution that originated in the receiving House.
    ``(b) If the Board of Trustees of the Federal Hospital Insurance 
Trust Fund or the Federal Supplementary Medical Insurance Trust Fund 
determines at any time that the balance ratio of either such Trust 
Fund''.
    (b) Conforming Amendments.--
            (1) Section 709(b) of such Act (as amended by subsection 
        (a) of this section) is amended by striking ``any such'' and 
        inserting ``either such''.
            (2) Section 709(c) of such Act (as redesignated by 
        subsection (a) of this section) is amended by inserting ``or 
        (b)'' after ``subsection (a)''.

SEC. 15. INCREASE IN WIDOW'S AND WIDOWER'S INSURANCE BENEFITS.

    (a) Widow's Insurance Benefits.--Section 202(e) of the Social 
Security Act (42 U.S.C. 402(e)) is amended by adding at the end the 
following new paragraph:
    ``(9)(A) In any case in which the amount of a widow's insurance 
benefit (as determined under the preceding paragraphs of this 
subsection) for the entitlement month of the widow (or surviving 
divorced wife) is less than the minimum benefit amount for such month 
determined under subparagraph (C), the amount of such benefit for such 
month and each succeeding month shall be increased to such minimum 
benefit amount (or the amount most recently established in lieu thereof 
under section 215(i)).
    ``(B) For purposes of this paragraph, the term `entitlement month' 
of a widow (or surviving divorced wife) means, in connection with her 
benefit under this subsection, the first month of her entitlement to 
such benefit.
    ``(C) For purposes of subparagraph (A), the minimum benefit amount 
determined under this subparagraph for the entitlement month of the 
widow (or surviving divorced wife) is an amount equal to the lesser 
of--
            ``(i) 75 percent of the sum of--
                    ``(I) the imputed deceased individual's benefit for 
                such month, as determined under subparagraph (D) or (E) 
                (as applicable), and
                    ``(II) the imputed survivor benefit for such month, 
                as determined under subparagraph (F), or
            ``(ii) the increased benefit cap determined under 
        subparagraph (G) for such month.
    ``(D)(i) For purposes of subparagraph (C)(i)(I), if the deceased 
individual died in a month for which he was not entitled to any benefit 
under this title based on his wages or self-employment income or the 
wages and self-employment income of the widow (or surviving divorced 
wife), the imputed deceased individual's benefit for the entitlement 
month of the widow (or surviving divorced wife) is the sum of--
            ``(I) the imputed old-age insurance benefit (determined 
        under clause (ii)) of the deceased individual for her 
        entitlement month (if any), and
            ``(II) the imputed husband's insurance benefit (determined 
        under clause (iii)) of the deceased individual for her 
        entitlement month (if any).
    ``(ii) The amount of the imputed old-age insurance benefit of the 
deceased individual for the entitlement month of the widow (or 
surviving divorced wife) is the amount of the old-age insurance benefit 
to which he would have been entitled for such month--
            ``(I) determined, in the case of such a deceased individual 
        who had attained age 62 as of the date of his death, as if he 
        had applied for such benefit in the month of his death and had 
        survived throughout the subsequent period ending with her 
        entitlement month, or
            ``(II) determined, in the case of such a deceased 
        individual who died before attaining age 62 but would have 
        attained age 62 before the end of her entitlement month, as if 
        he had survived throughout the subsequent period ending with 
        her entitlement month, and had applied for such benefit during 
        the first month for which he would have been eligible for such 
        benefit (assuming a primary insurance amount for the deceased 
        individual determined under paragraph (2)(B) of this 
        subsection).
For purposes of determining the deceased individual's imputed old-age 
insurance benefit under this clause, the determination of whether the 
deceased individual was a fully-insured individual (as defined in 
section 214(a)) shall be made as of the date of his death. In any case 
in which the deceased individual died before attaining age 62 and would 
not have attained age 62 before the end of the entitlement month of the 
widow (or surviving divorced wife), the deceased individual's imputed 
old-age insurance benefit shall be deemed to be zero.
    ``(iii) The amount of the imputed husband's insurance benefit of 
the deceased individual for the entitlement month of the widow (or 
surviving divorced wife) is the amount of the husband's insurance 
benefit under subsection (c) to which he would have been entitled for 
such month (assuming, for purposes of reduction under subsection 
(k)(3)(A), the entitlement to an old-age insurance benefit for such 
month, if any, as described in clause (ii))--
            ``(I) determined, in the case of such a deceased individual 
        who had attained age 62 as of the date of his death, as if he 
        had applied for such benefit in the month of his death and had 
        survived throughout the subsequent period ending with her 
        entitlement month, or
            ``(II) determined, in the case of such a deceased 
        individual who died before attaining age 62 but would have 
        attained age 62 before the end of her entitlement month, as if 
        he had survived throughout the subsequent period ending with 
        her entitlement month and had applied for such benefit during 
        the first month for which he would have been eligible for such 
        benefit.
In any case in which the deceased individual died before he attained 
age 62 and would not have attained age 62 before the end of the 
entitlement month of the widow (or surviving divorced spouse), the 
deceased individual's imputed husband's insurance benefit shall be 
deemed to be zero.
    ``(E)(i) For purposes of subparagraph (C), if the deceased 
individual died during a month for which he otherwise would have been 
entitled (but for his death) to an old-age insurance benefit under 
subsection (a) or a disability insurance benefit under section 223, or 
to a husband's insurance benefit under subsection (c) based on the 
wages and self-employment income of the widow (or surviving divorced 
wife), the imputed deceased individual's benefit for the entitlement 
month of the widow (or surviving divorced wife) is the sum of--
            ``(I) the amount of the old-age or disability insurance 
        benefit (if any) to which he would have been entitled for her 
        entitlement month if he had survived throughout the period 
        subsequent to his death and ending with such month, and
            ``(II) the amount of the husband's insurance benefit (if 
        any) to which he would have been entitled for her entitlement 
        month based on her wages and self-employment income if he had 
        survived throughout the period subsequent to his death and 
        ending with such month (assuming, for purposes of reduction 
        under subsection (k)(3)(A), the entitlement to an old-age or 
        disability insurance benefit for such month, if any, as 
        described in subclause (I)).
    ``(ii) If the deceased individual otherwise would have been 
entitled (but for his death) to a disability insurance benefit under 
section 223 for the month in which he died, the amount determined under 
clause (i) shall be determined as if he had survived throughout the 
period commencing with the month of his death and ending with the 
entitlement month of the widow (or surviving divorced wife) and he had 
remained entitled to disability insurance benefits throughout such 
period (or until becoming entitled to old-age insurance benefits under 
subsection (a) during such period).
    ``(F) For purposes of subparagraph (C)(i)(II)--
            ``(i) In the case of a widow (or surviving divorced wife) 
        who is entitled for her entitlement month to an old-age 
        insurance benefit under subsection (a) or a disability 
        insurance benefit under section 223, or otherwise would have 
        been entitled (but for the deceased individual's death) to a 
        wife's insurance benefit under subsection (b) for such month, 
        the amount of her imputed survivor benefit for such month is 
        the sum of--
                    ``(I) the amount of such old-age or disability 
                insurance benefit (if any), and
                    ``(II) the amount of such wife's insurance benefit 
                (if any), assuming, for purposes of reduction under 
                subsection (k)(3)(A), the entitlement to an old-age 
                insurance or disability insurance benefit for such 
                month (if any), as described in subclause (I).
            ``(ii) In the case of a widow (or surviving divorced wife) 
        who is not described in clause (i) but has attained (or would 
        attain) age 62 as of the end of her entitlement month, the 
        amount of her imputed survivor benefit is the sum of--
                    ``(I) the amount of the old-age insurance benefit 
                under subsection (a) to which she would be entitled for 
                such month if she filed application for such benefit 
                during such month, and
                    ``(II) the amount to which she otherwise would have 
                been entitled (but for the deceased individual's death) 
                as a wife's insurance benefit under subsection (b) for 
                such month, based on the deceased individual's wages 
                and self-employment income, if she had filed 
                application for such benefit during such month 
                (assuming a primary insurance amount for the deceased 
                individual determined under paragraph (2)(B) of this 
                subsection and assuming, for purposes of reduction 
                under subsection (k)(3)(A), the entitlement to an old-
                age insurance benefit for such month, if any, as 
                described in subclause (I)).
In any case in which the widow (or surviving divorced wife) would not 
attain age 62 before the end of the her entitlement month, her imputed 
survivor benefit shall be deemed to be zero.
    ``(G) The increased benefit cap determined under this subparagraph 
for the entitlement month of the widow (or surviving divorced wife) is 
the amount which would be the amount of a theoretical individual's old-
age insurance benefit under subsection (a) (reduced as provided in 
subsection (q)) if--
            ``(i) such theoretical individual's primary insurance 
        amount for the first month of entitlement were equal to the 
        average of the primary insurance amounts upon which old-age 
        insurance benefits under subsection (a) are payable for--
                    ``(I) in any case in which the entitlement month of 
                the widow (or surviving divorced wife) is the month of 
                December, such month, or
                    ``(II) in any other case, the latest month of 
                December preceding such entitlement month,
            ``(ii) such first month of such theoretical individual's 
        entitlement to such old-age insurance benefit were the 
        entitlement month of the widow (or surviving divorced spouse), 
        and
            ``(iii) the month in which the theoretical individual 
        attained or would attain retirement age (as defined in section 
        216(l)) were the month in which the widow (or surviving 
        divorced wife) attained or would attain retirement age (as so 
        defined).
    ``(H) If, in determining the amount of the benefit under this 
section pursuant to this paragraph, the imputed old-age insurance 
benefit or imputed husband's insurance benefit of the deceased 
individual was deemed to be zero pursuant to the last sentence of 
clause (ii) or (iii) of subparagraph (D), or the imputed survivor 
benefit of the widow (or surviving divorced wife) was deemed to be zero 
pursuant to the last sentence of subparagraph (F), effective for any 
month after the entitlement month of the widow (or surviving divorced 
wife) in which the deceased individual would have attained age 62 or 
she attains age 62, the Commissioner shall recompute the amount of the 
benefit under this paragraph by substituting a reference to such later 
month for each reference in the preceding provisions of this paragraph 
to her entitlement month.
    ``(I)(i) Any reference in this paragraph to the widow's insurance 
benefit (as determined under the preceding paragraphs of this 
subsection) shall be deemed a reference to such benefit, taking into 
account all applicable reductions and deductions under this title.
    ``(ii) Any reference in this paragraph to the imputed old-age 
insurance benefit or imputed husband's insurance benefit described in 
subparagraph (D), the old-age insurance benefit, disability insurance 
benefit, or husband's insurance benefit described in subparagraph (E), 
or the old-age insurance benefit, disability insurance benefit, or 
wife's insurance benefit described in subparagraph (F) shall be deemed 
a reference to such benefit, taking into account applicable reductions 
under this section but disregarding reductions or deductions otherwise 
applicable under this title.
    ``(iii) A widow's insurance benefit which has been increased under 
this paragraph shall be subject to all reductions and deductions 
otherwise applicable to widow's insurance benefits under this title, 
except that such benefit shall not be subject to any reduction 
otherwise applicable under subsection (q)(1).''.
    (b) Widower's Insurance Benefits.--Section 202(f) of such Act (42 
U.S.C. 402(f)) is amended by adding at the end the following new 
paragraph:
    ``(9)(A) In any case in which the amount of a widower's insurance 
benefit (as determined under the preceding paragraphs of this 
subsection) for the entitlement month of the widower (or surviving 
divorced husband) is less than the minimum benefit amount for such 
month determined under subparagraph (C), the amount of such benefit for 
such month and each succeeding month shall be increased to such minimum 
benefit amount (or the amount most recently established in lieu thereof 
under section 215(i)).
    ``(B) For purposes of this paragraph, the term `entitlement month' 
of a widower (or surviving divorced husband) means, in connection with 
his benefit under this subsection, the first month of his entitlement 
to such benefit.
    ``(C) For purposes of subparagraph (A), the minimum benefit amount 
determined under this subparagraph for the entitlement month of the 
widower (or surviving divorced husband) is an amount equal to the 
lesser of--
            ``(i) 75 percent of the sum of--
                    ``(I) the imputed deceased individual's benefit for 
                such month, as determined under subparagraph (D) or (E) 
                (as applicable), and
                    ``(II) the imputed survivor benefit for such month, 
                as determined under subparagraph (F), or
            ``(ii) the increased benefit cap determined under 
        subparagraph (G) for such month.
    ``(D)(i) For purposes of subparagraph (C)(i)(I), if the deceased 
individual died in a month for which she was not entitled to any 
benefit under this title based on her wages or self-employment income 
or the wages and self-employment income of the widower (or surviving 
divorced husband), the imputed deceased individual's benefit for the 
entitlement month of the widower (or surviving divorced husband) is the 
sum of--
            ``(I) the imputed old-age insurance benefit (determined 
        under clause (ii)) of the deceased individual for his 
        entitlement month (if any), and
            ``(II) the imputed wife's insurance benefit (determined 
        under clause (iii)) of the deceased individual for his 
        entitlement month (if any).
    ``(ii) The amount of the imputed old-age insurance benefit of the 
deceased individual for the entitlement month of the widower (or 
surviving divorced husband) is the amount of the old-age insurance 
benefit to which she would have been entitled for such month--
            ``(I) determined, in the case of such a deceased individual 
        who had attained age 62 as of the date of her death, as if she 
        had applied for such benefit in the month of her death and had 
        survived throughout the subsequent period ending with his 
        entitlement month, or
            ``(II) determined, in the case of such a deceased 
        individual who died before attaining age 62 but would have 
        attained age 62 before the end of his entitlement month, as if 
        she had survived throughout the subsequent period ending with 
        his entitlement month, and had applied for such benefit during 
        the first month for which she would have been eligible for such 
        benefit (assuming a primary insurance amount for the deceased 
        individual determined under paragraph (2)(B) of this 
        subsection).
For purposes of determining the deceased individual's imputed old-age 
insurance benefit under this clause, the determination of whether the 
deceased individual was a fully-insured individual (as defined in 
section 214(a)) shall be made as of the date of her death. In any case 
in which the deceased individual died before attaining age 62 and would 
not have attained age 62 before the end of the entitlement month of the 
widower (or surviving divorced husband), the deceased individual's 
imputed old-age insurance benefit shall be deemed to be zero.
    ``(iii) The amount of the imputed wife's insurance benefit of the 
deceased individual for the entitlement month of the widower (or 
surviving divorced husband) is the amount of the wife's insurance 
benefit under subsection (b) to which she would have been entitled for 
such month (assuming, for purposes of reduction under subsection 
(k)(3)(A), the entitlement to an old-age insurance benefit for such 
month, if any, as described in clause (ii))--
            ``(I) determined, in the case of such a deceased individual 
        who had attained age 62 as of the date of her death, as if she 
        had applied for such benefit in the month of her death and had 
        survived throughout the subsequent period ending with his 
        entitlement month, or
            ``(II) determined, in the case of such a deceased 
        individual who died before attaining age 62 but would have 
        attained age 62 before the end of his entitlement month, as if 
        she had survived throughout the subsequent period ending with 
        his entitlement month and had applied for such benefit during 
        the first month for which she would have been eligible for such 
        benefit.
In any case in which the deceased individual died before she attained 
age 62 and would not have attained age 62 before the end of the 
entitlement month of the widower (or surviving divorced husband), the 
deceased individual's imputed husband's insurance benefit shall be 
deemed to be zero.
    ``(E)(i) For purposes of subparagraph (C), if the deceased 
individual died during a month for which she otherwise would have been 
entitled (but for her death) to an old-age insurance benefit under 
subsection (a) or a disability insurance benefit under section 223, or 
to a wife's insurance benefit under subsection (b) based on the wages 
and self-employment income of the widower (or surviving divorced 
husband), the imputed deceased individual's benefit for the entitlement 
month of the widower (or surviving divorced husband) is the sum of--
            ``(I) the amount of the old-age or disability insurance 
        benefit (if any) to which she would have been entitled for his 
        entitlement month if she had survived throughout the period 
        subsequent to her death and ending with such month, and
            ``(II) the amount of the wife's insurance benefit (if any) 
        to which she would have been entitled for his entitlement month 
        based on his wages and self-employment income if she had 
        survived throughout the period subsequent to her death and 
        ending with such month (assuming, for purposes of reduction 
        under subsection (k)(3)(A), the entitlement to an old-age or 
        disability insurance benefit for such month, if any, as 
        described in subclause (I)).
    ``(ii) If the deceased individual otherwise would have been 
entitled (but for her death) to a disability insurance benefit under 
section 223 for the month in which she died, the amount determined 
under clause (i) shall be determined as if she had survived throughout 
the period commencing with the month of her death and ending with the 
entitlement month of the widower (or surviving divorced husband) and 
she had remained entitled to disability insurance benefits throughout 
such period (or until becoming entitled to old-age insurance benefits 
under subsection (a) during such period).
    ``(F) For purposes of subparagraph (C)(i)(II)--
            ``(i) In the case of a widower (or surviving divorced 
        husband) who is entitled for his entitlement month to an old-
        age insurance benefit under subsection (a) or a disability 
        insurance benefit under section 223, or otherwise would have 
        been entitled (but for the deceased individual's death) to a 
        husband's insurance benefit under subsection (c) for such 
        month, the amount of her imputed survivor benefit for such 
        month is the sum of--
                    ``(I) the amount of such old-age or disability 
                insurance benefit (if any), and
                    ``(II) the amount of such husband's insurance 
                benefit (if any), assuming, for purposes of reduction 
                under subsection (k)(3)(A), the entitlement to an old-
                age insurance or disability insurance benefit for such 
                month (if any), as described in subclause (I).
            ``(ii) In the case of a widower (or surviving divorced 
        husband) who is not described in clause (i) but has attained 
        (or would attain) age 62 as of the end of his entitlement 
        month, the amount of his imputed survivor benefit is the sum 
        of--
                    ``(I) the amount of the old-age insurance benefit 
                under subsection (a) to which he would be entitled for 
                such month if he filed application for such benefit 
                during such month, and
                    ``(II) the amount to which he otherwise would have 
                been entitled (but for the deceased individual's death) 
                as a husband's insurance benefit under subsection (c) 
                for such month, based on the deceased individual's 
                wages and self-employment income, if he had filed 
                application for such benefit during such month 
                (assuming a primary insurance amount for the deceased 
                individual determined under paragraph (2)(B) of this 
                subsection and assuming, for purposes of reduction 
                under subsection (k)(3)(A), the entitlement to an old-
                age insurance benefit for such month, if any, as 
                described in subclause (I)).
In any case in which the widower (or surviving divorced husband) would 
not attain age 62 before the end of the his entitlement month, his 
imputed survivor benefit shall be deemed to be zero.
    ``(G) The increased benefit cap determined under this subparagraph 
for the entitlement month of the widower (or surviving divorced 
husband) is the amount which would be the amount of a theoretical 
individual's old-age insurance benefit under subsection (a) (reduced as 
provided in subsection (q)) if--
            ``(i) such theoretical individual's primary insurance 
        amount for the first month of entitlement were equal to the 
        average of the primary insurance amounts upon which old-age 
        insurance benefits under subsection (a) are payable for--
                    ``(I) in any case in which the entitlement month of 
                the widower (or surviving divorced husband) is the 
                month of December, such month, or
                    ``(II) in any other case, the latest month of 
                December preceding such entitlement month,
            ``(ii) such first month of such theoretical individual's 
        entitlement to such old-age insurance benefit were the 
        entitlement month of the widower (or surviving divorced 
        husband), and
            ``(iii) the month in which the theoretical individual 
        attained or would attain retirement age (as defined in section 
        216(l)) were the month in which the widower (or surviving 
        divorced husband) attained or would attain retirement age (as 
        so defined).
    ``(H) If, in determining the amount of the benefit under this 
section pursuant to this paragraph, the imputed old-age insurance 
benefit or imputed wife's insurance benefit of the deceased individual 
was deemed to be zero pursuant to the last sentence of clause (ii) or 
(iii) of subparagraph (D), or the imputed survivor benefit of the 
widower (or surviving divorced husband) was deemed to be zero pursuant 
to the last sentence of subparagraph (F), effective for any month after 
the entitlement month of the widower (or surviving divorced husband) in 
which the deceased individual would have attained age 62 or he attains 
age 62, the Commissioner shall recompute the amount of the benefit 
under this paragraph by substituting a reference to such later month 
for each reference in the preceding provisions of this paragraph to her 
entitlement month.
    ``(I)(i) Any reference in this paragraph to the widower's insurance 
benefit (as determined under the preceding paragraphs of this 
subsection) shall be deemed a reference to such benefit, taking into 
account all applicable reductions and deductions under this title.
    ``(ii) Any reference in this paragraph to the imputed old-age 
insurance benefit or imputed wife's insurance benefit described in 
subparagraph (D), the old-age insurance benefit, disability insurance 
benefit, or wife's insurance benefit described in subparagraph (E), or 
the old-age insurance benefit, disability insurance benefit, or 
husband's insurance benefit described in subparagraph (F) shall be 
deemed a reference to such benefit, taking into account applicable 
reductions under this section but disregarding reductions or deductions 
otherwise applicable under this title.
    ``(iii) A widower's insurance benefit which has been increased 
under this paragraph shall be subject to all reductions and deductions 
otherwise applicable to widower's insurance benefits under this title, 
except that such benefit shall not be subject to any reduction 
otherwise applicable under subsection (q)(1).''.
    (c) Cost-of-Living Adjustments to Guaranteed Widow's and Widower's 
Insurance Benefits.--Section 215(i)(2)(A)(ii) of such Act (42 U.S.C. 
415(i)(2)(A)(ii)) is amended--
            (1) in subclause (II), by striking ``and'' at the end;
            (2) in subclause (III), by striking ``1978.'' and inserting 
        ``1979, and'';
            (3) by adding at the end the following new subclause:
            ``(IV) the benefit amount to which an individual is 
        entitled for that month under subsection (e) or (f) of section 
        202 if such benefit amount has been increased under paragraph 
        (10) of such subsection.''; and
            (4) in the matter following subclause (IV) (added by 
        paragraph (3)), by striking ``(I), (II), and (III)'' and 
        inserting ``(I), (II), (III), and (IV)''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to widow's and widower's insurance benefits for 
which applications are filed in months after November 2005.

SEC. 16. LIMITATION ON BENEFITS OF MARRIED COUPLE TO LEVEL OF MAXIMUM 
              WORKER BENEFITS.

    (a) Wife's Insurance Benefits.--Section 202(b)(2) of the Social 
Security Act (42 U.S.C. 402(b)(2)) is amended to read as follows:
    ``(2) Except as provided in subsections (k)(5) and (q), such wife's 
insurance benefit for each month shall be equal to the excess (not less 
than zero) of--
            ``(A) the lesser of--
                    ``(i) 150 percent of her husband's primary 
                insurance amount, or
                    ``(ii) the primary insurance amount for such month 
                of a hypothetical individual--
                            ``(I) who is entitled to old-age insurance 
                        insurance benefits for such month,
                            ``(II) who became entitled to such benefit 
                        upon attaining age 62 during the month in which 
                        her husband became entitled to old-age 
                        insurance benefits, and
                            ``(III) to whom wages and self-employment 
                        income were credited in each of such 
                        hypothetical individual's elapsed years (within 
                        the meaning of section 215(b)(2)(B)(iii)) in an 
                        amount equal to the maximum amount includible 
                        under this title as wages and self-employment 
                        income for such year, over
            ``(B) the primary insurance amount of her husband.''.
    (b) Husband's Insurance Benefits.--Section 202(c)(2) of such Act 
(42 U.S.C. 402(c)(2)) is amended to read as follows:
    ``(2) Except as provided in subsections (k)(5) and (q), such 
husband's insurance benefit for each month shall be equal to the excess 
(not less than zero) of--
            ``(A) the lesser of--
                    ``(i) 150 percent of his wife's primary insurance 
                amount, or
                    ``(ii) the primary insurance amount for such month 
                of a hypothetical individual--
                            ``(I) who is entitled to old-age insurance 
                        insurance benefits for such month,
                            ``(II) who became entitled to such benefit 
                        upon attaining age 62 during the month in which 
                        his wife became entitled to old-age insurance 
                        benefits, and
                            ``(III) to whom wages and self-employment 
                        income were credited in each of such 
                        hypothetical individual's elapsed years (within 
                        the meaning of section 215(b)(2)(B)(iii)) in an 
                        amount equal to the maximum amount includible 
                        under this title as wages and self-employment 
                        income for such year, over
            ``(B) the primary insurance amount of his wife.''.
    (c) Application of Family Maximum.--Section 203(a) of such Act (42 
U.S.C. 403(a)) is amended by adding at the end the following:
    ``(11) For purposes of determining under this subsection the amount 
of reduction in total monthly benefits to which beneficiaries may be 
entitled for a month on the basis of the wages and self-employment 
income of an individual, the amount of a wife's insurance benefit or a 
husband's insurance benefit for each month based on such wages and 
self-employment income shall be deemed to be equal to one-half of the 
primary insurance amount of the individual for such month (subject to 
subsections (k)(5) and (q) of section 202).''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to wife's insurance benefits and husband's insurance 
benefits in cases in which the spouse becomes eligible for old-age 
insurance benefits or disability insurance benefits in any calendar 
year after 2005.
                                 <all>