[Congressional Record Volume 146, Number 16 (Tuesday, February 22, 2000)]
[Senate]
[Pages S688-S689]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LUGAR (for himself, Mr. Gregg, and Mr. Breaux):
  S. 2085. A bill to amend title II of the Social Security Act and the 
Internal Revenue Code of 1986 to provide incentives for older Americans 
to remain in the workforce beyond the age of eligibility for full 
Social Security benefits; to the Committee on Finance.


            the retired americans right of employment act i

  S. 2086. A bill to amend title II of the Social Security and the 
Internal Revenue Code of 1986 to provide incentives for older Americans 
to remain in the workforce beyond the age of eligibility

[[Page S689]]

for full Social Security benefits; to the Committee on Finance.


            the retired americans right of employment act ii

  Mr. LUGAR. Mr. President, I rise today with my colleagues, Senators 
Gregg and Breaux, to introduce two pieces of bipartisan legislation 
intended to encourage older Americans to remain in the workforce. Today 
more individuals wish to work and are capable of working beyond 
retirement age. Yet our laws discourage such behavior. Our policies 
should provide productive older Americans with incentives for staying 
in the workforce, paying taxes, and strengthening our economy and 
Social Security System.
  The American economy, its workforce, and ensuing retirement patterns 
have all changed dramatically since Congress passed the Social Security 
Act over sixty years ago. In 1935, when the Social Security retirement 
age was set at age 65, most workers were employed in physically 
demanding jobs in either the manufacturing or agricultural sectors. The 
physical strain of work and the resulting health problems made it 
difficult for individuals to continue to labor past the age of 65. 
Furthermore, most individuals were not expected to live much beyond the 
age of retirement. The life expectancy of individuals born in 1935 was 
only 61 years.
  Today's economy and workforce differs greatly from the industrial one 
that Social Security was designed to augment. The current American 
employment base is mostly service and technology driven. These sectors 
do not take as much of a physical toll on workers. Compared with the 
1950's that witnessed 20 percent of the workforce in physically taxing 
jobs, today those figures are closer to 7 percent.
  The health and life expectancy of older Americans also has improved 
dramatically since Social Security was enacted. In the past decade, the 
rate of disability among older Americans has been falling nearly three 
times as fast as the previous eight decades. Older Americans are living 
longer and healthier as a result of improvements in medicine and 
treatment. According to Frank Williams, a professor of medicine at the 
University of Rochester, the approaching trend for older Americans will 
be to experience a longer ``health span'' during their retirement years 
and a brief acute illness before death, rather than years of costly, 
chronic disability. Other studies have supported these findings. This 
suggests that older Americans have the physical abilities to continue 
to work beyond retirement age if they so choose.
  Unfortunately, laws remain on the books that are designed to penalize 
older Americans for staying in the workforce past retirement age. We 
cannot afford to discourage older Americans from working. As our 
economy grows and the baby-boomers approach retirement, productive 
workers will be scarce. Tapping into the pool of experienced older 
Americans will be important to continue to improve our economy and 
standard of living.
  The two bills I am introducing today each make four changes to our 
laws in an effort to encourage older Americans to remain in the 
workforce. The most significant disincentive for working past 
retirement age is the Social Security earnings test and both bills I 
have introduced would eliminate it. In 2000, the earnings test provides 
that recipients under age 65 may earn up to $10,080 a year in wages or 
self-employment income without having their Social Security benefits 
affected. Those aged 65-69 can earn up to $17,000 a year. For earnings 
above these amounts, recipients under age 65 lose $1 of benefits for 
each $2 of earnings, and those aged 65-69 lose $1 in benefits for each 
$3 of earnings.
  The earnings test was established during a time when our nation 
pushed older employees out of the workforce in order to make room for a 
younger generation. Our economy is in need of all productive workers, 
including the growing pool of experienced older Americans. The 
antiquated Social Security earnings test remains an onerous work 
disincentive for older Americans and it should be eliminated. The 
elimination of the earnings test was one of the recommendations 
contained in the final report of the 21st Century National Commission 
on Retirement Policy.
  The second provision contained in both pieces of legislation would 
change the Social Security benefit formula to include all earnings 
years in the calculation of an individual's benefit, including those 
that occur after retirement. Under current law, the Social Security 
Administration determines an individual's retirement benefit by using 
the average of the top 35 earnings years prior to an individual's 
eligibility age. For most people, retirement eligibility occurs at age 
62. This means that for most Americans, those earnings that occur after 
age 62 are not accounted for in an individual's benefit calculation. 
This anomaly in the law provides a disincentive to work past retirement 
age. Our two bills would address this by including all earnings years 
in the benefit formula. Retirees will be rewarded through a higher 
benefit for continuing to work and pay taxes.
  The third provision would make adjustments to the benefit formula for 
those who retire early and those who delay retirement. The 21st Century 
National Commission on Retirement Policy recommends adjustments to the 
early retirement benefit level and the delayed retirement credit to 
reflect more accurately the value of extra taxes paid if retirement is 
delayed. Actuarial studies have found that the Social Security benefit 
formula is currently weighted to favor those individuals who retire 
early and against those who delay retirement. These bills adjust the 
benefit calculation to ensure that there is not a bias in the benefit 
formula that discourages working.
  Where the two bills differ is in the fourth section, which uses the 
tax code to induce individuals to work past the retirement age. The 
RARE Act I would cut individuals' portion of the FICA tax by 10 percent 
once they reach full retirement age as an incentive for them to stay in 
the workforce. Retirees would see their FICA tax cut from 7.65 percent 
to 6.885 percent. Under current law, the Old-Age, Survivors, and 
Disability Insurance (OASDI) is currently funded with a 6.2 percent tax 
on employee wages up to $76,200 with a matching contribution by the 
employer. The Hospital Insurance (HI) or Medicare portion is funded 
through a 1.45 percent tax on all wages with a similar employer match. 
Because FICA taxes are levied on the first dollar of wages earned, this 
tax reduction will benefit all income levels of retirees, including 
those who choose to work part-time after retirement.
  The second bill, the RARE Act II, takes a bolder tax cutting 
approach. It would provide individuals who have reached the full 
retirement age with a tax credit equal to the lesser of 10 percent of 
the amount of income tax owed or the earned income of an individual. 
This provision would effectively reward older Americans who continue to 
earn and to pay taxes past the age of retirement.
  Mr. President, the Retired Americans Right of Employment Acts are 
thoughtful pieces of legislation aimed at keeping productive workers 
engaged in our economy and I urge my colleagues to support these 
bipartisan efforts.

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