[Congressional Record Volume 141, Number 200 (Friday, December 15, 1995)]
[Senate]
[Pages S18732-S18734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            THE SENIOR CITIZENS' FREEDOM TO WORK ACT OF 1995

  Mr. ROTH. Mr. President, yesterday the Finance Committee reported out 
S. 1470 with technical changes. The committee will not file a written 
report. For the benefit of my colleagues, the following is a synopsis 
of the bill's provisions.
  The Social Security retirement earnings limit for senior citizens age 
65 to 69 is gradually increased from the 1995 level of $11,280 to 
$30,000 by the year 2002. The cost of the retirement earnings limit 
proposal is offset by the following reforms: Drug addicts and 
alcoholics will no longer qualify for SSI and SSDI disability benefits 
solely by reason of their addiction; and stepchildren will no longer 
qualify for Social Security dependents' benefits unless their 
stepparent provides at least 50 percent of the stepchild's support; 
such benefits will terminate the month following the divorce.
  A new revolving fund is created within the SSDI Trust Fund to provide 
a stable source of funds for the Social Security Administration to 
conduct continuing disability reviews of SSDI recipients.
  The legislation clarifies that the Secretary of the Treasury and 
other Federal officials are not authorized to underinvest and/or 
disinvest Social Security and Medicare funds in Federal securities or 
obligations in order to avoid the limitations on the public debt.
  Mr. President, I ask unanimous consent that the synopsis of S. 1470 
be printed in the Record, together with a letter from John D. Hawke, 
Under Secretary of the Treasury.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                        Description of Proposals

     1. Increase to Social Security retirement earnings limitation

                              Present Law

       Senior citizens age 70 and older receive full Social 
     Security benefits regardless of the amount of earnings they 
     have from wages or self employment.
       Senior citizens age 65 to 69 receive full Social Security 
     benefits only if their wages or self-employment income are 
     lower than a retirement earnings limit. The earnings limit is 
     increased annually based on the rate of average wage growth. 
     The estimated limitation amounts under present law for 1995 
     and the following seven years are:

        Year                                                Present Law
1995............................................................$11,280
1996.............................................................11,520
1997.............................................................11,880
1998.............................................................12,240
1999.............................................................12,270
2000.............................................................13,200
2001.............................................................13,800
2002.............................................................24,400

       Senior citizens age 65 to 69 who earn more than the limit 
     for a year lose $1 in Social Security benefits for every $3 
     in wages or self-employment income they earn over the 
     limitation amount.

                           Reason for Change

       According to the Social Security Administration, 925,000 
     beneficiaries between age 65 and 69 lose some or all of their 
     benefits as a result of the earnings limit. Given the 
     combined effects of Federal, State and local income taxes, 
     Social Security payroll taxes, income taxes on benefits, and 
     the earnings limit, senior citizens who earn even moderate 
     amounts over the limit may realize very little financial gain 
     from their labor. These rates are a disincentive to work and 
     penalize retirees who often need to work out of economic 
     need.

                            Proposed Change

       The retirement earnings limit for workers age 65 to 69 is 
     gradually raised to $30,000 by the year 2002 as follows;

        Year                                                   Proposed
1996............................................................$14,000
1997.............................................................15,000
1998.............................................................16,000
1999.............................................................17,000
2000.............................................................18,000
2001.............................................................25,000
2002.............................................................30,000

       After 2002, the limitation amount will increase annually 
     based on the rate of average wage growth.
       Senior citizens age 65 to 69 who have wages or self-
     employment income in excess of the earnings limit continue to 
     lose $1 in Social Security benefits for every $3 earned over 
     the limit.
       The substantial gainful activity (SGA) amount used in 
     determining whether an individual under age 65 is eligible 
     for disability benefits on the basis of blindness is not 
     changed. Therefore, it will no longer equal the Social 
     Security retirement earnings limit for senior citizens age 65 
     to 69. The SGA amount for blind individuals under age 65 will 
     continue at the present law amount ($11,280 for 1995-- and 
     will continue to be wage-indexed in future years.

                             Effective Date

       The proposal, phased in gradually over 7 years, would be 
     effective beginning in 1996.
     2. Denial of disability benefits to drug addicts and 
         alcoholics

                              Present Law

       Individuals whose drug addition or alcoholism is a 
     contributing factor material to their disability may receive 
     cash disability benefits under the Social Security Disability 
     Insurance (SSDI) program or the Supplemental Security Income 
     (SSI) program through a representative payee for up to three 
     years. These recipients must participate in an approved 
     treatment program when available, and must allow their 
     participation in a treatment program to be monitored. Cash 
     benefits (SSDI or SSI)) end after 36 months, although medical 
     benefits (Medicare or Medicaid) continue if an individual 
     remains disabled by drug addiction or alcoholism.

                           Reason for Change

       The Committee is concerned that the current policy of 
     paying cash Social Security and SSI disability benefits to 
     individuals whose sole severe disabling condition is drug 
     addiction or alcoholism is false compassion and only helps 
     those individuals sustain his/her addiction. Treatment is 
     needed instead. The legislation diverts part of the savings 
     to additional Federal funding to States for drug and alcohol 
     treatment, providing an incentive for States to provide 
     treatment to former recipients.

                            Proposed Change

       The proposal would end entitlement to SSDI and SSI 
     disability benefits if drug addiction or alcoholism is the 
     contributing factor material to the individual's disability. 
     Individuals with drug addiction and/or alcoholism who have 
     another severe disabling condition can qualify for benefits 
     based on that disabling condition.
       If a person qualifying for disability benefits based on 
     another disability is also determined to be an alcoholic or 
     drug addict and unable to manage their benefits, a 
     representative payee would be appointed to receive and handle 
     the individual's checks. In the case of any individual whose 
     benefits are paid through a representative payee, the 
     Commissioner of Social Security shall refer that individual 
     to the appropriate State agency for substance abuse treatment 
     services approved under the Public Health Service Act 
     Substance Abuse Prevention and Treatment Block Grant.
       For each of fiscal years 1997 and 1998, $50 million will be 
     available to fund additional treatment programs and services 
     through Substance Abuse Prevention and Treatment Block Grant.

                             Effective Date

       Generally, changes apply to benefits for months beginning 
     on or after the date of enactment. However, an individual 
     entitled to benefits before the month of enactment would 
     continue to be eligible for benefits until January 1, 1997. 
     The Commissioner of Social Security must notify such 
     individuals within three months of the date of enactment. The 
     Committee's intent in providing this partial grandfather is 
     to allow current beneficiaries to complete treatment and to 
     allow the Social Security Administration to determine in an 
     orderly fashion if such individuals are disabled by another 
     condition.
       Those who wish to reapply for benefits must do so within 
     four months after the date of enactment in order to qualify 
     for priority redetermination of eligibility. The Commissioner 
     must make these determinations within one year after the date 
     of enactment for individuals who reapply.
       In addition, in the case of an individual with an 
     alcoholism or drug addiction condition who is entitled to 
     Social Security or SSI disability benefits on the date of 
     enactment, the representative payee and referral 

[[Page S18733]]
     to treatment requirement will apply on or after the first continuing 
     disability review occurring after enactment.
     3. Entitlement of stepchildren to Social Security dependent 
         benefits

                              Present Law

       Generally a child, including a stepchild, under age 18 (or 
     under age 19 in the case of an individual attending 
     elementary or secondary school full-time) may be entitled to 
     receive Social Security benefits as the dependent child of a 
     worker when the worker retires, becomes disabled, or dies.
       A stepchild is deemed dependent on a stepparent if he/she 
     lives with the stepparent or receives one-half of his/her 
     support from the stepparent. Social Security dependent 
     benefits continue to be paid to a stepchild after the child's 
     natural parent and the stepparent divorce. Continuation of 
     those benefits after divorce may reduce the amount available 
     for payment to other children entitled to receive Social 
     Security Dependent benefits based on the worker's record.

                           Reason for Change

       Under current law children who are entitled on a worker's 
     record may be unnecessarily penalized by the entitlement of a 
     stepchild who has other means of support. This change would 
     result in the payment of benefits only to stepchildren who 
     are truly dependent on the stepparent for their support, and 
     only as long as the natural parent and stepparent are 
     married.

                            Proposed Change

       Social Security dependents' benefits are payable to a 
     stepchild only when the stepparent provides at least 50 
     percent of the stepchild's support upon application for 
     benefits. A stepchild is eligible for survivors' benefits 
     upon the death of a stepparent if the stepparent provided at 
     least 50 percent of the stepchild's support immediately 
     preceding death.
       In addition, a stepchild's Social Security benefits based 
     on the work record of his/her stepparent are terminated the 
     month following the divorce of the child's natural parent and 
     stepparent. The stepparent must also notify the Social 
     Security Administration of the divorce and the Social 
     Security Administration is required to notify annually those 
     potentially affected by this provision.

                             Effective Date

       The proposal is generally effective three months after date 
     of enactment for new entitlement of stepchildren to benefits 
     and for divorces finalized after that period.
     4. SSDI revolving fund for continuing disability reviews

                              Present Law

       The administrative costs of conducting continuing 
     disability reviews (CDRs) of individuals receiving Social 
     Security disability benefits are provided through an 
     appropriation of trust fund monies, and are considered 
     discretionary spending subject to the domestic discretionary 
     spending cap of the Budget Enforcement Act.

                           Reason for Change

       Limited administrative resources have prevented the Social 
     Security Administration from keeping up with CDRs, which 
     estimates that for every $1 spent conducting CDRs, $6 are 
     saved in benefits that would otherwise be paid to individuals 
     who are no longer disabled. The Social Security 
     Administration estimates that the failure to perform timely 
     CDRs between 1990 and 1995 will cost the SSDI Trust Fund $2.3 
     billion by 1999. The proposed revolving fund would be a 
     source of non-appropriated administrative resources to 
     finance CDRs, enabling SSA to perform this essential program-
     integrity work.

                            Proposed Change

       A revolving fund is established in the Social Security 
     Disability Insurance (SSDI) Trust Fund as a source of non-
     appropriated administrative funds to finance Social Security 
     CDRs. At the start of each fiscal year, the revolving fund 
     will be credited with an amount equal to the estimated 
     present value of savings to the SSDI and Medicare trust funds 
     achieved as a result of CDRs of beneficiaries conducted in 
     the prior fiscal year--except for the first year, during 
     which $300 million will be credited. These amounts will be 
     calculated by the Social Security Administration's Chief 
     Actuary, with appropriate adjustments made annually in 
     subsequent years. Amounts credited to the revolving fund are 
     available for all expenditures related to conducting CDRs by 
     the Social Security Administration and appropriate State 
     agencies.
       In addition, the position of Chief Actuary in the Social 
     Security Administration is established in law.

                             Effective Date

       The revolving fund is effective for fiscal years beginning 
     after September 30, 1995, and sunsets September 30, 2005.
     5. Protection of Social Security and Medicare trust funds

                              Present Law

       The various authorizing statutes of the major Federal trust 
     funds require that any program income not needed to meet 
     current expenditures be invested in interest-bearing 
     obligations of the United States or in obligations guaranteed 
     as to both principal and interest by the United States. The 
     vast majority of these securities are ``special issue'' non-
     marketable obligations of the United States. Virtually the 
     entire amount of securities held by the Federal trust funds 
     is considered Federal debt subject to the statutory debt 
     limit.

                           Reason for Change

       Since late October, the total amount of the public debt 
     obligations has been very close to the public debt limit. 
     This has given rise to concerns that the Social Security and 
     Medicare Trust Funds might be under invested or disinvested 
     for debt management purposes. While the Administration has 
     stated that it would not take such action, the Committee 
     concluded that it was desirable to make clear in law that 
     these funds could not be used for debt management purposes. 
     In clarifying this, the Committee does not intend that the 
     legislation authorize conduct in contravention of any other 
     applicable provision of law, such as the public debt limit.
       The Committee seeks to assure that, to the maximum extent 
     possible under the statutory debt limit, the Secretary of the 
     Treasury and other Federal officials shall invest and 
     disinvest Social Security and Medicare trust funds solely for 
     the purposes of accounting for the income and disbursements 
     of these programs. The Committee further intends that the 
     investments of the trust funds are made timely, in accordance 
     with the normal investment practices of the Treasury, and are 
     not drawn down prematurely for the purposes of avoiding 
     limitations on the public debt or to make room under the 
     statutory debt limit for the Secretary of the Treasury to 
     issue new debt obligations in order to cover other 
     expenditures of the Government.

                            Proposed Change

       The legislation codifies Congress' understanding of present 
     law that the Secretary of the Treasury and other Federal 
     officials are not authorized to use Social Security and 
     Medicare funds for debt management purposes. Specifically, 
     the Secretary of the Treasury and other Federal officials are 
     required not to delay or otherwise underinvest incoming 
     receipts to the Social Security and Medicare trust funds. 
     They are also required not to sell, redeem or otherwise 
     disinvest securities, obligations or other assets of these 
     trust funds except when necessary to provide for the payment 
     of benefits and administrative expenses of the cash benefit 
     programs. The Committee intends that these requirements be 
     carried out to the maximum extent possible under the 
     statutory debt limit. The legislation applies to the 
     following trust funds:
       1. Federal Old-Age and Survivors Insurance (OASI) Trust 
     Fund;
       2. Federal Disability Insurance (DI) Trust Fund;
       3. Federal Hospital Insurance (HI) Trust Fund; and
       4. Federal Supplementary Medical Insurance (SMI) Trust 
     Fund.
     Effective Date
       The proposal is effective upon date of enactment.


                       budget effects of the bill

       According to preliminary estimates of the Congressional 
     Budget office, the legislation will reduce mandatory spending 
     by $200 million over seven years (FY 1996-2002) and by $2.7 
     billion over ten years (FY 1996-2005).


                             miscellaneous

       Attached is a letter from John D. Hawke, Jr., Under 
     Secretary of the Treasury for Domestic Finance, providing 
     comments on the proposal to protect the Social Security and 
     Medicare trust funds as originally introduced. The 
     legislation reported by the Committee includes a modification 
     of this proposal to address these concerns.


                                   Department of the Treasury,

                                Washington, DC, December 15, 1995.
     Hon. William V. Roth, Jr.
     Chairman, Senate Finance Committee
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: Our comments have been requested with 
     respect to the provisions of Section 6 of S. 1470, the 
     ``Senior Citizens' Freedom to Work Act of 1995.'' This 
     section of the bill is intended to provide protections to the 
     Social Security and Medicare trust funds at times when the 
     public debt limit might otherwise cause certain adverse 
     consequences with respect to those funds.
       The Administration shares the objective of protecting the 
     beneficiaries of these funds. As you know, both the President 
     and the Secretary of the Treasury have stated that the 
     Secretary has no authority to redeem securities from the 
     Social Security fund for any purpose other than to assure the 
     payment of benefits. The same principle would apply as well 
     to the other 178 trust funds that are not subject to the 
     Secretary's express debt management powers.
       Section 6 would do the following:
       It would require that all revenues received or held by 
     these funds be invested in public debt obligations, 
     ``notwithstanding any other provision of law.'' Thus, it 
     would effectively create an exception to the debt limit to 
     permit the investment of incoming receipts of these funds.
       It would forbid the ``disinvestment''--that is, the 
     redemption prior to maturity--of securities held by the funds 
     if a purpose thereof were ``to reduce the amount of 
     outstanding public debt obligations.''
       It would allow Treasury to disinvest the funds and to issue 
     corresponding new public debt, ``notwithstanding the public 
     debt limit,'' to the extent necessary to raise cash to pay 
     benefits to fund beneficiaries.
       The provision of Section 6 would, however, have serious 
     adverse consequences, and would present certain practical 
     problems 

[[Page S18734]]
     that could frustrate or impede the realization of its objectives:
       First, the continued investment of new fund receipts, 
     notwithstanding the debt limit, would cause outstanding 
     Treasury debt to exceed the debt limit in an ever increasing 
     amount. This would prohibit Treasury from issuing any other 
     new Treasury debt. Even the rollover of maturing debt would 
     be precluded so long as outstanding debt remained over the 
     debt limit. As a consequence we would face imminent default 
     on all other outstanding obligations.
       Because no other new debt could be issued, the bill would 
     also remove Treasury's ability to raise cash to pay benefits 
     from other trust funds, even after a disinvestment of 
     securities held by such funds.
       Second, while the bill intends to protect the ability to 
     make payments to fund beneficiaries at times when the debt 
     limit would otherwise preclude such payments, as a practical 
     matter it cannot be assured that the protected payments could 
     actually be made, given the current methods of paying 
     government obligations.
       The Federal Reserve's current procedure, when government 
     checks are presented for payment, is to give immediate credit 
     to the presenting bank. Incoming checks are not actually 
     sorted for several days after presentment. There is not 
     presently in place any operational capability that would 
     permit a distinction to be made between protected benefit 
     checks and all other checks being presented for payment.
       While the bill would require the Secretary to institute 
     procedures to assure that the protected benefits are paid 
     when due, we estimate that it would take a minimum of three 
     months, and perhaps longer, to institute the changes in the 
     payments system necessary to provide this assurance.
       Finally, the protected payment procedures prescribed by 
     this legislation would only be triggered when we were in, or 
     on the brink of, default.
       Since the country has never in its history experienced a 
     default, it is impossible to determine whether or to what 
     extent it would be possible for Treasury to sell new debt to 
     the public to make the protected payments.
       In such a situation, all other payment obligations of the 
     United States would either be in default or would be ``queued 
     up'' for payment as cash became available.
       We would be pleased to work with the Committee to try to 
     develop legislative language that would carry out the 
     objectives that we share, while avoiding the adverse 
     consequences we see flowing from the language in the current 
     bill.
       We continue to believe, however, that the most effective 
     and certain means for assuring that the interests of 
     beneficiaries of Social Security and Medicare--as well as all 
     other trust funds--are fully protected, is promptly to enact 
     a clean permanent increase in the debt limit.
           Sincerely,

                                           John D. Hawke, Jr.,

                                   Under Secretary of the Treasury
     for Domestic Finance.

                          ____________________