[Senate Report 108-176]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 349
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-176
======================================================================
 
                 SOCIAL SECURITY PROTECTION ACT OF 2003

                                _______
                                

                October 29, 2003.--Ordered to be printed

                                _______
                                

  Mr. Grassley, from the Committee on Finance, submitted the following

                              R E P O R T

                        [To accompany H.R. 743]

                             together with

                            ADDITIONAL VIEWS

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(H.R. 743) to amend the Social Security Act and the Internal 
Revenue Code of 1986 to provide additional safeguards for 
Social Security and Supplemental Security Income beneficiaries 
with representative payees, to enhance program protections, and 
for other purposes, reports favorably thereon with an amendment 
in the nature of a substitute and recommends that the bill, as 
amended, to pass.








                                CONTENTS

                                                                   Page
  I.  Summary, Background and Legislative History.....................3
          A. Summary.............................................     3
          B. Background and Need for Legislation.................     5
          C. Legislative History.................................     8
 II.  Explanation of the Bill.........................................8
     Title I--Protection of Beneficiaries.............................8
          Subtitle A--Representative Payees......................     8
              Sec. 101. Authority to reissue benefits misused by 
                  organizational representative payees...........     8
              Sec. 102. Oversight of representative payees.......     9
              Sec. 103. Disqualification from service as 
                  representative payees of persons convicted of 
                  offenses resulting in imprisonment for more 
                  than 1 year or fleeing prosecution, custody, or 
                  confinement....................................    10
              Sec. 104. Fee forfeiture in case of benefit misuse 
                  by representative payees.......................    11
              Sec. 105. Liability of representative payees for 
                  misused benefits...............................    11
              Sec. 106. Authority to redirect delivery of benefit 
                  payments when a representative payee fails to 
                  provide required accounting....................    12
              Sec. 107. Survey of use of payments by 
                  representative payees..........................    12
          Subtitle B--Enforcement................................    13
              Sec. 111. Civil monetary penalty authority with 
                  respect to wrongful conversions by 
                  representative payees..........................    13
     Title II--Program Protections...................................13
              Sec. 201. Civil monetary penalty authority with 
                  respect to withholding of material facts.......    13
              Sec. 202. Issuance by Commissioner of Social 
                  Security of receipts to acknowledge submission 
                  of reports of changes in work or earnings 
                  status of disabled beneficiaries...............    14
              Sec. 203. Denial of title II benefits to persons 
                  fleeing prosecution, custody, or confinement, 
                  and to persons violating probation or parole...    15
              Sec. 204. Requirements relating to offers to 
                  provide for a fee a product or service 
                  available without charge from the Social 
                  Security Administration........................    16
              Sec. 205. Refusal to recognize certain individuals 
                  as claimant representatives....................    17
              Sec. 206. Penalty for corrupt or forcible 
                  interference with administration of Social 
                  Security Act...................................    17
              Sec. 207. Use of symbols, emblems, or names in 
                  reference to social security or medicare.......    18
              Sec. 208. Disqualification from payment during 
                  trial work period upon conviction of fraudulent 
                  concealment of work activity...................    19
              Sec. 209. Authority for judicial orders of 
                  restitution....................................    20
              Sec. 210. Information for the administration of 
                  provisions related to non-covered employment...    21
              Sec. 211. Authority for cross-program recovery of 
                  benefit overpayments...........................    22
              Sec. 212. Prohibition of payment of title II 
                  benefits to persons not authorized to work in 
                  the United States..............................    23
     Title III--Attorney Representative Fee Payment System Improvemen24
              Sec. 301. Cap on attorney assessments..............    24
              Sec. 302. GAO study of fee payment process for 
                  claimant representatives.......................    25
     Title IV--Miscellaneous and Technical Amendments................26
          Subtitle A--Amendments Relating to the Ticket to Work 
              and Work Incentives Improvement Act of 1999........    26
              Sec. 401. Elimination of demonstration authority 
                  sunset date....................................    26
              Sec. 402. Expansion of waiver authority available 
                  in connection with demonstration projects 
                  providing for reductions in disability 
                  insurance benefits based on earnings...........    26
              Sec. 403. Funding of demonstration projects 
                  providing for reductions in disability 
                  insurance benefits based on earnings...........    27
              Sec. 404. Availability of Federal and State work 
                  incentive services to additional individuals...    27
              Sec. 405. Technical amendment clarifying treatment 
                  of referrals under the Ticket to Work and Self-
                  Sufficiency Program............................    28
              Sec. 406. GAO study of Ticket to Work and Self-
                  Sufficiency Program............................    29
          Subtitle B--Miscellaneous Amendments...................    30
              Sec. 411. Elimination of transcript requirement in 
                  remand cases fully favorable to the claimant...    30
              Sec. 412. Nonpayment of benefits upon removal from 
                  the United States..............................    30
              Sec. 413. Reinstatement of certain reporting 
                  requirements...................................    31
              Sec. 414. Clarification of definitions regarding 
                  certain survivor benefits......................    31
              Sec. 415. Clarification respecting the FICA and 
                  SECA tax exemptions for an individual whose 
                  earnings are subject to the laws of a 
                  totalization agreement partner.................    32
              Sec. 416. Coverage under divided retirement system 
                  for public employees...........................    32
              Sec. 417. Compensation for the Social Security 
                  Advisory Board.................................    33
              Sec. 418. 60-month employment requirement for 
                  government pension offset exemption............    34
              Sec. 419. Post-1956 Military Wage Credits..........    35
          Subtitle C--Technical Amendments.......................    35
              Sec. 421. Technical correction relating to 
                  responsible agency head........................    35
              Sec. 422. Technical correction relating to 
                  retirement benefits of ministers...............    36
              Sec. 423. Technical corrections relating to 
                  domestic employment............................    36
              Sec. 424. Technical corrections of outdated 
                  references.....................................    37
              Sec. 425. Technical correction respecting self-
                  employment income in community property States.    37
              Sec. 426. Technical changes to the Railroad 
                  Retirement and Survivors Improvement Act of 
                  2001...........................................    38
          Subtitle D--Amendments Related to Title XVI............    39
              Sec. 430. Exclusion from income for certain 
                  infrequent or irregular income and certain 
                  interest or dividend income....................    39
              Sec. 431. Uniform 9-month resource exclusion 
                  periods........................................    41
              Sec. 432. Modification of dedicated account 
                  requirements...................................    41
              Sec. 433. Elimination of certain restrictions on 
                  the application of the student earned income 
                  exclusion......................................    42
              Sec. 434. Exclusion of Americorps and other 
                  volunteer benefits for purposes of determining 
                  supplemental security income eligibility and 
                  benefit amounts and social security disability 
                  insurance entitlement..........................    43
              Sec. 435. Exception to retrospective monthly 
                  accounting for nonrecurring income.............    43
              Sec. 436. Removal of restriction on payment of 
                  benefits to children who are born or who become 
                  blind or disabled after their military parents 
                  are stationed overseas.........................    44
              Sec. 437. Treatment of education-related income and 
                  resources......................................    45
              Sec. 438. Monthly treatment of uniformed service 
                  compensation...................................    45
              Sec. 439. Update of resource limits................    46
              Sec. 440. Review of State agency blindness and 
                  disability determinations......................    47
III.  Budget Effects of the Bill.....................................47
 IV.  Votes of the Committee.........................................65
          A. Motion to Report the Bill...........................    66
  V.  Regulatory Impact and Other Matters............................66
          A. Regulatory Impact...................................    66
          B. Information Relating to Unfunded Mandates...........    66
          C. Tax Complexity Analysis.............................    66
 VI.  Changes in Existing Law Made by the Bill as Reported...........66
VII.  Additional Views...............................................67





            I. Summary, Background, and Legislative History


                               A. SUMMARY

    The ``Social Security Protection Act of 2003,'' H.R. 743, 
as amended by the Committee on Finance of the U.S. Senate, 
provides the Social Security Administration (SSA) with 
important new tools to fight waste, fraud, and abuse in the 
Social Security and Supplemental Security Income programs, 
increases the ability of disability beneficiaries to return to 
work, and improves the equity and efficiency of both programs.
    Passage of the bill would improve the Representative Payee 
program operated by the Social Security Administration. 
Representative Payees are individuals or organizations who 
manage the monthly Social Security or Supplemental Security 
Income (SSI) payments for beneficiaries who need help managing 
their financial affairs. The bill would impose stricter 
standards on individuals and organizations that serve as 
representative payees for Social Security and SSI recipients. 
The bill would make non-governmental representative payees 
liable for misused funds and subject them to civil monetary 
penalties. The bill also contains funds for the Inspector 
General of the Social Security Administration to conduct a 
survey that would for the first time produce statistically 
significant measures of the degree to which benefit payments 
managed by representative payees are not being used for the 
welfare of beneficiaries.
    The bill would help disability beneficiaries return to 
work. The bill would enhance provisions of the Ticket to Work 
program that would better enable SSA to test ways of helping 
individuals with disabilities return to employment. The bill 
would provide more individuals access to support and services 
that can help them work. The bill would also encourage more 
employers to hire individuals with disabilities by expanding 
eligibility for the Work Opportunity Tax Credit.
    The bill would improve representation for claimants of 
disability benefits in the Social Security and SSI programs. 
The bill would tighten restrictions on attorneys who represent 
Social Security and SSI disability claimants, as well as limit 
the processing fee that SSA charges attorneys who elect to have 
their representative fee paid directly to them by SSA. The bill 
would also require the General Accounting Office to survey 
current claimant representation by attorneys and non-attorneys 
and assess the advantages and disadvantages of extending the 
current attorney fee withholding process in the Social Security 
program to the SSI program, and of extending fee withholding to 
non-attorney representatives in both programs.
    The bill would expand and improve important provisions in 
the current SSI program that deny benefits to fugitive felons 
and allow SSA to cooperate with law enforcement in order to 
apprehend these and other felons. The bill would expand the 
denial of benefits payable to fugitive felons and probation and 
parole violators to include Social Security benefits, and would 
provide important technical clarifications as to how the 
provision would operate for both Social Security and SSI 
benefits.
    The bill would make more equitable the Social Security 
benefits paid to beneficiaries who receive pensions based on 
work that was not covered by Social Security. The bill would 
close the ``last day'' loophole in the application of the 
Government Pension Offset. The bill would also require State 
and local pension plans to report to the Internal Revenue 
Service whether an individual's pension is based on employment 
not covered by Social Security. This information would then be 
shared with the Social Security Administration for the 
administration of provisions related to pensions based on non-
covered employment.
    The bill would help stop waste, fraud, and abuse within the 
Social Security and SSI programs and help SSA to recoup 
monetary damages from waste, fraud, and abuse. The bill would 
create new penalties to prevent persons from misrepresenting 
themselves when they offer Social Security-related services, 
prohibit disabled individuals who fraudulently conceal work 
activity from being eligible for a trial work period, and allow 
the Federal courts to order individuals who break Social 
Security law to make restitution to the Social Security Trust 
Funds or the U.S. Treasury's general fund.
    The bill would give SSA more flexibility to recover 
overpayments in one program from underpayments made in another 
program, with protections for low-income beneficiaries. The 
bill would also require non-citizens to have work authorization 
at the time of application for benefits, or to have had work 
authorization at some point in the past, in order to be 
eligible to receive Social Security benefits. The bill would 
also protect Social Security employees from harm while 
conducting their duties.
    The bill would improve benefits and simplify administration 
of the SSI program. The bill would make the income reporting 
process less cumbersome, establish greater uniformity of 
eligibility, increase the asset limit for eligibility, and make 
other improvements and simplifications in the program.
    Finally, passage of the bill would correct, clarify, or 
modify various technical aspects of current law in the Social 
Security, SSI, and Railroad Retirement programs.
    The Congressional Budget Office estimates that H.R. 743, as 
reported by the Committee on Finance, would result in net 10-
year savings of $595 million.

                             B. BACKGROUND

    The Social Security and SSI programs touch the lives of 
nearly every American and represented close to one-fourth of 
all Federal outlays in 2003. Last year, the Federal Government 
paid nearly $500 billion in Social Security and SSI benefits to 
about 50 million retired and disabled workers and their 
families or survivors, and disabled, blind, and aged low-income 
individuals. Given the programs' size and extensive influence 
over the economic well-being of American workers and their 
families, it is important to eliminate inadequate protections 
for beneficiaries, to improve the ability of disabled 
beneficiaries to return to work, improve the equity of the 
application of current law, and fight activities that drain 
resources from Social Security and thereby undermine the 
financial security of beneficiaries.
    Nearly 7 million Social Security and SSI beneficiaries 
cannot, for physical or mental reasons, manage their own 
financial affairs. In these cases, the SSA appoints an 
individual or organization, called a ``representative payee,'' 
to manage these beneficiaries' benefits. While most 
representative payees are conscientious and honest, some 
violate the trust placed in them. In a report issued in June 
2002, ``Analysis of Information Concerning Representative Payee 
Misuse of Beneficiaries' Payments,'' the SSA Inspector General 
stated that SSA found that more than 2,400 individuals who 
served as representative payees misused $12 million in benefits 
between January 1997 and December 1999. The SSA and the SSA 
Inspector General have recommended legislation to raise the 
standards for persons and organizations serving as 
representative payees and to impose stricter regulation and 
monetary penalties on those who mismanage benefits.
    In addition to protecting the financial security of 
vulnerable beneficiaries, this bill would also expand and 
improve the policy adopted in P.L. 104-193, the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(PRWORA), denying benefit payments to fugitive felons and 
individuals who violate their probation or parole and allowing 
SSA to cooperate with law enforcement in order to apprehend 
such felons. The 1996 legislation applied to SSI benefits to 
such individuals; however, no such prohibition exists for 
Social Security benefits. The Congressional Budget Office 
estimates that Social Security will pay $525 million in 
benefits over the next 10 years to Social Security 
beneficiaries who are fugitives or probation or parole 
violators. In an August 2000 report, ``Old-Age, Survivors and 
Disability Insurance Benefits Paid to Fugitives,'' the SSA 
Inspector General estimated that about 17,000 fugitives 
received Social Security benefits between PRWORA's enactment 
and 1999, and recommended legislation similar to the SSI 
provisions which would prohibit payment of Social Security 
benefits to fugitive felons and probation or parole violators, 
and would allow SSA to cooperate with law enforcement in order 
to apprehend these individuals as well as others seeking to 
avoid arrest.
    The bill would also incorporate recommendations by the SSA 
Inspector General to provide SSA with new authority to further 
safeguard Social Security programs, help shield SSA employees 
from harm while conducting their duties, subject perpetrators 
of fraud to new civil monetary penalties, and prevent persons 
from misrepresenting themselves as they provide Social 
Security-related services.
    The bill would assist individuals who are applying for 
disability benefits by improving the oversight of the attorneys 
who represent them before the Social Security Administration. 
Under present law, attorneys disbarred in one jurisdiction, but 
licensed to practice in another jurisdiction, must be 
recognized as a claimant's representative. The bill would 
authorize the Commissioner of Social Security to refuse to 
recognize as a representative, or disqualify as a 
representative, an attorney who has been disbarred or suspended 
from any court or bar, or who has been disqualified from 
participating in or appearing before any Federal program or 
agency.
    Advocates for disability claimants and attorney 
representatives have testified that the SSA's processing fee 
for withholding attorney fees from past-due benefits is 
excessive and limits the pool of attorneys willing to help 
disability claimants. The advocates recommend limiting the fee 
in order to increase the availability of attorney 
representation.
    Besides encouraging representation of claimants seeking 
benefits, advocates for individuals with disabilities have 
discussed the need to improve and clarify provisions of the 
Ticket to Work program by enhancing demonstration projects, 
making work incentive services available to more individuals, 
and expanding eligibility for the Work Opportunity Tax Credit. 
These recommendations are intended to encourage more disabled 
beneficiaries to return to work or to maintain work effort.
    The bill also contains two provisions highlighted by the 
Social Security Advisory Board (SSAB). The first provision 
would allow the SSA to collect outstanding Supplemental 
Security Income overpayments by offsetting the full amount owed 
against any lump-sum retroactive Social Security benefit to 
which the beneficiary may be entitled. The second provision 
would provide for better information sharing between 
governmental entities to improve the administration of the 
Social Security program with regard to the treatment of public 
employee pensions. Both of these provisions are expected to 
provide substantial savings to the Social Security programs.
    The bill contains numerous provisions aimed at correcting 
inequities in the application of current law. One of these 
provisions, which relates to State and local workers who are 
not covered by Social Security, resulted from an August 2002 
General Accounting Office (GAO) report, ``Social Security 
Administration: Revision to the Government Pension Offset 
Exemption Should Be Considered.'' The GAO found that teachers 
in Texas, and to a lesser extent in Georgia, who were not 
previously covered by Social Security, were using a loophole in 
the law to receive higher spousal or survivor benefits from 
Social Security. In effect, teachers contributed to Social 
Security for as little as one day (an average of $3 in payroll 
taxes) and could qualify for over $100,000 in spousal or 
survivor benefits over a lifetime, whereas similar workers who 
were covered by Social Security throughout their careers 
received little or no spousal or survivor benefits. The GAO 
indicated that more State and local workers were likely to use 
this loophole in the future. The GAO recommended amending the 
law to treat State and local workers the same as Federal 
workers in applying the exemption.
    Since September 11, 2001, and with the renewed interest in 
the enforcement of U.S. immigration laws, Members of Congress 
and the Social Security Inspector General have raised concerns 
that individuals who were never legally permitted to work in 
the United States are permitted to collect Social Security 
(Title II) benefits on the basis of their unauthorized 
earnings. The 1996 welfare reform legislation limited the 
payment of benefits to U.S. citizens, nationals, and aliens who 
are lawfully present in the United States. But, this provision 
only affects the payment of benefits to individuals within the 
United States; it does not affect their eligibility 
(entitlement) to that benefit. Thus, a non-citizen who is not 
lawfully present in the United States can often receive a 
benefit by simply moving to another country. The bill would 
expand on the 1996 welfare reform provision by prohibiting the 
payment of Title II benefits to any person, regardless of the 
person's place of residence, unless he or she was legally 
permitted to engage in employment in the United States at any 
time prior to (and including) the time he or she applies for 
benefits. It would also prohibit the payment of benefits to the 
spouses, dependents, or survivors of these ineligible workers.
    For many years, SSA has asked the Congress to enact several 
provisions to simplify the administration of the Supplemental 
Security Income (SSI) program. Additionally, the President's 
Fiscal Year 2003 and Fiscal Year 2004 budgets proposed to 
expand one of the quality review processes that currently apply 
to the Social Security disability insurance program to the SSI 
program. That change is expected to produce savings in the SSI 
program of $1.5 billion over 10 years. In addition, many of the 
eligibility rules for the SSI program have not been modified 
since the program's inception in 1972, due to the associated 
costs to the Federal budget. In order to allow SSI 
beneficiaries to keep more of their resources, the bill uses 
the savings from the proposal in the President's budget to 
increase the asset limit for SSI eligibility. The bill also 
includes many of the program simplification provisions 
requested by SSA for the SSI program.

                         C. LEGISLATIVE HISTORY

    Last Congress, the House of Representatives passed H.R. 
4070, ``The Social Security Program Protection Act'' on June 
26, 2002, by a vote of 425-0. The Senate Finance Committee pre-
conferenced the bill with the House Ways and Means Committee. 
The bill was changed to reflect the pre-conference agreement. 
The bill was taken up on the Senate floor and passed by 
unanimous consent on November 18, 2002, and a report on the 
bill was placed in the Congressional Record. The House of 
Representatives did not act on the Senate passed bill before 
adjourning.
    The strong support for H.R. 4070 in the 107th Congress, led 
to the introduction of H.R. 743, the ``Social Security 
Protection Act of 2003'' in the 108th Congress. On March 5, the 
House of Representatives considered H.R. 743, as amended, under 
suspension of the rules; it failed by a vote of 249-180 (a two-
thirds vote being required). On March 13, 2003, the Committee 
on Ways and Means ordered favorably reported H.R. 743, the 
``Social Security Protection Act of 2003,'' as amended, by a 
rollcall vote of 35-2. The House of Representatives passed H.R. 
743 on April 2, 2003, by a vote of 396-28.
    The Senate Committee on Finance marked up H.R. 743 and 
approved the bill, as modified, on September 17, 2003, by a 
voice vote with a quorum present.

                      II. Explanation of the Bill


                  TITLE I. PROTECTION OF BENEFICIARIES


                   SUBTITLE A. REPRESENTATIVE PAYEES

Section 101. Authority To Reissue Benefits Misused by Organizational 
        Representative Payees

            Present Law
    The Social Security Act requires the re-issuance of 
benefits misused by any representative payee when the 
Commissioner finds that the Social Security Administration 
(SSA) negligently failed to investigate and monitor the payee.
            Explanation of Provision
    The new provision eliminates the requirement that benefits 
be reissued only upon a finding of SSA negligence. Thus, the 
Commissioner would re-issue benefits under Titles II, VIII and 
XVI in any case in which a beneficiary's funds are misused by 
an organizational payee or an individual payee representing 15 
or more beneficiaries.
    The new provision defines misuse as any case in which a 
representative payee converts the benefits entrusted to his or 
her care for purposes other than the ``use and benefit'' of the 
beneficiary, and authorizes the Commissioner to define ``use 
and benefit'' in regulation.
            Reason for Change
    There have been a number of highly publicized cases 
involving organizational representative payees that have 
misused large sums of monies paid to them on behalf of the 
Social Security and Supplemental Security Income (SSI) 
beneficiaries they represented. In most instances, these 
organizations operated ascriminal enterprises, bent not only on 
stealing funds from beneficiaries, but also on carefully concealing the 
evidence of their wrongdoing. These illegal activities went undetected 
until large sums had been stolen. If the SSA is not shown to be 
negligent for failing to investigate and monitor the payee, affected 
beneficiaries may never be repaid or may be repaid only when the 
representative payee committing misuse makes restitution to the SSA. 
Requiring the SSA to reissue benefit payments to these victims of 
benefit misuse provides essential protection from financial hardship.
            Effective Date
    This provision applies to benefit misuse by a 
representative payee as determined by the Commissioner on or 
after January 1, 1995.

Section 102. Oversight of Representative Payees

            Present Law
    Present law requires community-based nonprofit 
organizational representative payees to be licensed or bonded. 
Periodic on-site reviews of representative payees by the Social 
Security Administration are authorized, but not required.
            Explanation of Provision
    The new provision requires community-based nonprofit 
organizational representative payees to be both licensed and 
bonded (provided that licensing is available in the State). In 
addition, such representative payees must submit yearly proof 
of bonding and licensing, as well as copies of any available 
independent audits that were performed on the payee in the past 
year.
    The new provision also requires the Commissioner of Social 
Security to conduct periodic onsite reviews of: (1) a person 
who serves as a representative payee to 15 or more 
beneficiaries, (2) non-governmental fee-for-service 
representative payees (as defined in Titles II and XVI), and 
(3) any agency that serves as the representative payee to 50 or 
more beneficiaries. In addition, the Commissioner is required 
to submit an annual report to the Committee on Ways and Means 
of the House of Representatives and the Committee on Finance of 
the Senate on the reviews conducted in the prior fiscal year.
            Reason for Change
    Strengthening the bonding and licensing requirements for 
community-based nonprofit social service agencies would add 
further safeguards to protect beneficiaries' funds. State 
licensing provides for some oversight by the State into the 
organization's business practices, and bonding provides some 
assurances that a surety company has investigated the 
organization and approved it for the level of risk associated 
with the bond. Requiring annual certification as to the 
licensing and bonding of the payee, as well as submission of 
audits performed, should help prevent a payee from dropping 
their licensing or bonding subsequent to the SSA approving them 
as payee.
            Effective Date
    The bonding, licensing, and audit provisions are effective 
on the first day of the 13th month following enactment of the 
legislation. The periodic on-site review provision is effective 
upon enactment.

Section 103. Disqualification From Service as Representative Payee of 
        Persons Convicted of Offenses Resulting in Imprisonment for 
        More Than One Year, of Persons Fleeing Prosecution, Custody or 
        Confinement, and of Persons Violating Probation or Parole

            Present Law
    Individuals convicted of fraud under the Social Security 
Act are disqualified from being representative payees.
            Explanation of Provision
    The new provision expands the scope of disqualification to 
prohibit an individual from serving as a representative payee 
if he or she: (1) has been convicted of any offense resulting 
in imprisonment for more than 1 year; (2) is fleeing to avoid 
prosecution, or custody or confinement after conviction; or (3) 
violated a condition of probation or parole. An exception 
applies if the Commissioner of Social Security determines that 
a person who has been convicted of any offense resulting in 
imprisonment for more than 1 year would, notwithstanding such 
conviction, be an appropriate representative payee.
    The new provision requires the Commissioner to submit a 
report to the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate 
evaluating procedures and reviews conducted for representative 
payees to determine whether they are sufficient to protect 
benefits from being misused.
            Reason for Change
    Prohibiting persons convicted of offenses resulting in 
imprisonment for more than 1 year and persons fleeing 
prosecution, custody or confinement for a felony from serving 
as representative payees decreases the likelihood of 
mismanagement or abuse of beneficiaries' funds. Also, allowing 
such persons to serve as representative payees could raise 
serious questions about the SSA's stewardship of taxpayer 
funds. The agency's report will assist Congress in its 
oversight of the representative payee program.
            Effective Date
    This provision is effective on the first day of the 13th 
month beginning after the date of enactment, except that the 
report to Congress is due no later than 270 days after the date 
of enactment.

Section 104. Fee Forfeiture in Case of Benefit Misuse by Representative 
        Payees

            Present Law
    Certain organizational representative payees are authorized 
to collect a fee for their services. The fee, which is 
determined by a statutory formula, is deducted from the 
beneficiary's benefit payments.
            Explanation of Provision
    The new provision requires representative payees to forfeit 
the fee for those months during which the representative payee 
misused funds, as determined by the Commissioner of Social 
Security or a court of competent jurisdiction.
            Reason for Change
    Payees who misuse their clients' funds are not properly 
performing the service for which the fee was paid; therefore, 
they should forfeit such fees. Permitting the payee to retain 
the fees is tantamount to rewarding the payee for violating his 
or her responsibility to use the benefits for the individual's 
needs.
            Effective Date
    This provision applies to any month involving benefit 
misuse by a representative payee as determined by the 
Commissioner or a court of competent jurisdiction after 180 
days after the date of enactment.

Section 105. Liabilities of Representative Payees for Misused Benefits

            Present Law
    Although the SSA has been provided with expanded authority 
to recover overpayments (such as the use of tax refund offsets, 
referral to contract collection agencies, notification of 
credit bureaus, and administrative offsets of future Federal 
benefits payments), these tools cannot be used to recoup 
benefits misused by a representative payee.
            Explanation of Provision
    The new provision treats benefits misused by a non-
governmental representative payee (including all individual 
representative payees) as an overpayment to the representative 
payee, rather than the beneficiary, thus subjecting the 
representative payee to current overpayment recovery 
authorities. Any recovered benefits not already reissued to the 
beneficiary pursuant to section 101 of this legislation would 
be reissued to either the beneficiary or their alternate 
representative payee, up to the total amount misused.
            Reason for Change
    Treating misused benefits as overpayments to the 
representative payee would provide the SSA with additional 
means for recovering misused payments.
            Effective Date
    Applies to benefit misuse by a representative payee in any 
case where the Commissioner of Social Security or a court of 
competent jurisdiction makes a determination of misuse after 
180 days after the date of enactment.

Section 106. Authority to Redirect Delivery of Benefit Payments When a 
        Representative Payee Fails to Provide Required Accounting

            Present Law
    The Social Security Act requires representative payees to 
submit accounting reports to the Commissioner of Social 
Security detailing how a beneficiary's benefit payments were 
used. A report is required at least annually, but may be 
requested by the Commissioner at any time if the Commissioner 
has reason to believe the representative payee is misusing 
benefits.
            Explanation of Provision
    The new provision authorizes the Commissioner of Social 
Security to require a representative payee to receive any 
benefits under Titles II, VIII, and XVI in person at a Social 
Security field office if the representative payee fails to 
provide an annual accounting of benefits report. The 
Commissioner would be required to provide proper notice and the 
opportunity for a hearing prior to redirecting benefits to the 
field office.
            Reason for Change
    Accounting reports are an important means of monitoring the 
activities of representative payees to prevent misuse of 
benefits. Redirecting benefit payments to the field office 
would enable the agency to promptly address the failure of the 
representative payee to file a report.
            Effective Date
    This provision is effective 180 days after the date of 
enactment.

Section 107. Survey of Use of Payments to Representative Payees

            Present Law
    The Social Security Act authorizes the appointment of 
representative payees to receive and manage Title II (OASDI) 
and Title XVI (SSI) benefits on behalf of beneficiaries who 
cannot manage their own finances because of mental or physical 
impairments. A representative payee may be an individual or an 
organization, including non-profits, State or local government 
agencies.
            Explanation of Provision
    This provision would authorize and appropriate $17.8 
million to the Inspector General of the Social Security 
Administration for Fiscal Year 2004 to conduct a statistically 
significant survey to determine how the payments made to each 
category of representative payee are being used on behalf of 
beneficiaries. The study is to be completed by February 1, 
2005.
            Reason for Change
    When all of the categories of representative payees are 
considered, there are a total of about 5.3 million payees. In 
the aggregate, these payees receive and manage about $44 
billion of payments on behalf of about 6.7 million Social 
Security beneficiaries. The payees are supposed to use these 
payments to meet the needs of the beneficiaries. However, to 
date, there has not been a statistically significant national 
survey to estimate the number of payments provided to each type 
of payee that are not being properly used on behalf of 
beneficiaries. The Inspector General has proposed that such a 
survey be conducted in Fiscal Year 2004 at a cost of $17.8 
million. This section provides the funds for such a study.
            Effective Date
    Upon enactment.

                        SUBTITLE B: ENFORCEMENT

Section 111. Civil Monetary Penalty Authority With Respect to Wrongful 
        Conversions by Representative Payees

            Present Law
    The Social Security Act authorizes the Commissioner to 
impose a civil monetary penalty (of up to $5,000 for each 
violation) along with an assessment (of up to twice the amount 
wrongly paid) upon any person who knowingly uses false 
information or knowingly omits information to wrongly obtain 
Title II, VIII or XVI benefits.
            Explanation of Provision
    The new provision expands the application of civil monetary 
penalties to include misuse of Title II, VIII or XVI benefits 
by representative payees. A civil monetary penalty of up to 
$5,000 may be imposed for each violation, along with an 
assessment of up to twice the amount of misused benefits.
            Reason for Change
    Providing authority for SSA to impose civil monetary 
penalties along with an assessment of up to twice the amount of 
misused benefits would provide the SSA with an additional means 
to address benefit misuse by representative payees.
            Effective Date
    This provision applies to violations occurring after the 
date of enactment.

                     TITLE II. PROGRAM PROTECTIONS


Sec. 201. Civil Monetary Penalty Authority With Respect to Withholding 
        Material Facts

            Present Law
    The Social Security Act authorizes the Commissioner of 
Social Security to impose civil monetary penalties and 
assessments on any person who makes a statement or 
representation of a material fact for use in determining 
initial or continuing rights to Title II, VIII, or XVI benefits 
that the person knows or should know omits a material fact or 
is false or misleading. In order for the penalty or assessment 
to be imposed, the law requires an affirmative act on the part 
of the individual of making (or causing to be made) a statement 
that omits a material fact or is false or misleading.
            Explanation of Provision
    This provision authorizes civil monetary penalties and 
assessments and sanctions for the failure to come forward and 
notify the SSA of changed circumstances that affect eligibility 
or benefit amount when that person knows or should know that 
the failure to come forward is misleading.
            Reason for Change
    Currently the SSA cannot impose civil monetary penalties 
and assessments on a person who should have come forward to 
notify the SSA of changed circumstances that affect eligibility 
or benefit amount, but did not. This amendment is intended to 
close this loophole in the current law, but is not intended to 
expand Section 1129 and 1129A to include those individuals 
whose failure to come forward to notify the SSA was not done 
for the purpose of improperly obtaining or continuing to 
receive benefits. For instance, it is not intended that the 
expanded authority be used against individuals who do not have 
the capacity to understand that their failure to come forward 
is misleading.
    Examples of the types of individuals intended to be covered 
under this amendment to Section 1129 and 1129A include (but are 
not limited to): (1) an individual who has a joint bank account 
with a beneficiary in which the SSA direct deposited the 
beneficiary's Social Security checks; upon the death of the 
beneficiary, this individual fails to advise the SSA of the 
beneficiary's death, instead spending the proceeds from the 
deceased beneficiary's Social Security checks; and (2) an 
individual who is receiving benefits under one SSN while 
working under another SSN.
            Effective Date
    Applies to violations committed after the date on which the 
Commissioner implements the centralized computer file described 
in Section 202.

Section 202. Issuance by Commissioner of Social Security of Receipts to 
        Acknowledge Submission of Reports of Changes in Work or 
        Earnings Status

            Present Law
    Changes in employment or earnings can affect an 
individual's continued entitlement to disability benefits under 
Title II or Title XVI. Beneficiaries are required to report 
such changes, but the SSA has not implemented a system to 
acknowledge that beneficiaries have properly fulfilled their 
obligation.
            Explanation of Provision
    The new provision requires the Commissioner to issue a 
receipt to a disabled beneficiary (or representative of a 
beneficiary) who reports a change in his or her work or 
earnings status. The Commissioner is required to continue 
issuing such receipts until the Commissioner has implemented a 
centralized computer file that would record the date on which 
the disabled beneficiary (or representative) reported the 
change in work or earnings status.
            Reason for Change
    SSA does not currently have an effective system in place 
for processing and recording Title II and Title XVI disability 
beneficiaries' reports of changes in work and earnings status. 
Issuing receipts to disabled beneficiaries who make such 
reports would provide them with proof that they had properly 
fulfilled their obligation to report these changes.
            Effective Date
    This provision requires the Commissioner to begin issuing 
receipts as soon as possible, but no later than 1 year after 
the date of enactment.

Section 203. Denial of Title II Benefits to Persons Fleeing 
        Prosecution, Custody, or Confinement, and to Persons Violating 
        Probation or Parole

            Present Law
    The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (P.L. 104-193) included provisions 
making persons ineligible to receive Social Security benefits 
under Title XVI (SSI) during any month in which they are 
fleeing to avoid prosecution for a felony, or to avoid custody 
or confinement after conviction for a felony, or are in 
violation of a condition of probation or parole. However, the 
same prohibition does not apply to Social Security benefits 
under Title II (OASDI).
            Explanation of Provision
    This provision makes persons ineligible to receive Social 
Security benefits under Title II for months in which they are 
fleeing to avoid prosecution for a felony, or to avoid custody 
or confinement after conviction for a felony, or are in 
violation of a condition of probation or parole. The provision 
gives the Commissioner of Social Security the authority to pay 
Title II or Title XVI benefits, if there is ``good cause.'' The 
provision also requires the Commissioner, upon written request 
by law enforcement officials, to assist such officials in 
apprehending fugitives by providing them with an address, 
Social Security number, and if available, a photograph.
    The provision clarifies that in order for an individual to 
be considered ``fleeing,'' law enforcement must be pursuing the 
individual. Thus, the provision provides that benefits under 
Title II or Title XVI will be withheld or suspended only in 
those cases in which the relevant law enforcement agency 
notifies SSA that it intends to pursue the individual by 
seeking arrest, extradition, prosecution, or the revocation of 
probation or parole.
            Reason for Change
    Although the fugitive felon provision applies to Title XVI 
(SSI), it does not apply to Title II (OASDI). This section of 
the bill would extend this provision to Title II.
    The fugitive felon provision was intended to deny benefits 
to those seeking to avoid arrest or prosecution, not to deny 
benefits to those no longer sought by law enforcement. The 
Committee has been made aware of numerous cases in which law 
enforcement agencies have chosen not to pursue individuals 
identified through the current Title XVI fugitive felon 
program. Such cases often involve minor offenses that may be 
decades old and will never be prosecuted. As a result, the only 
effect of the individual's illegal actions isthe denial of SSI 
benefits. The Committee does not believe the Social Security 
Administration should become the law enforcement agency of last resort. 
Therefore, this section of the bill provides that benefits under Title 
II or Title XVI will be withheld or suspended only in those cases in 
which the relevant law enforcement agency notifies SSA that it intends 
to pursue the individual by seeking arrest, extradition, prosecution, 
or the revocation of probation or parole. Moreover, the good cause 
exception will provide the SSA with the ability to pay benefits under 
circumstances in which the Commissioner deems withholding of benefits 
to be inappropriate--for example, but not limited to, situations where 
beneficiaries are found to be victims of identity theft.
            Effective Date
    This provision is effective on the first day of the first 
month that begins on or after the date that is 9 months after 
the date of enactment.

Section 204. Requirements Relating to Offers to Provide for a Fee a 
        Product or Service Available Without Charge From the Social 
        Security Administration

            Present Law
    The Social Security Act prohibits or restricts various 
activities involving the use of Social Security and Medicare 
symbols, emblems, or references which give a false impression 
that an item is approved, endorsed, or authorized by the Social 
Security Administration, the Health Care Financing 
Administration, or the Department of Health and Human Services. 
It also provides for the imposition of civil monetary penalties 
with respect to violations of the section.
            Explanation of Provision
    The new provision requires persons or companies charging a 
fee for services available for free from SSA to include in 
their solicitations a statement that the services they provide 
for a fee are available directly from SSA free of charge. The 
statements would be required to comply with standards 
promulgated through regulation by the Commissioner of Social 
Security with respect to their content, placement, visibility, 
and legibility.
            Reason for Change
    Several individuals and companies offer Social Security 
services for a fee even though the same services are available 
directly from the SSA free of charge. For example, the SSA's 
Inspector General has encountered business entities that have 
offered assistance to individuals in changing their names (upon 
marriage) or in obtaining a Social Security number (upon the 
birth of a child) for a fee, even though these services are 
directly available from the SSA for free. The offer from the 
business entities either did not state at all, or did not 
clearly state, that these services were available from the SSA 
for free. These practices can mislead and deceive senior 
citizens, newlyweds, new parents, and other individuals seeking 
services or products, who may not be aware that the SSA 
provides these services for free.
            Effective Date
    Applies to offers of assistance made after the sixth month 
following the issuance of these standards. Requires the 
Commissioner to promulgate regulations within 1 year after the 
date of enactment.

Section 205. Refusal to Recognize Certain Individuals as Claimant 
        Representatives

            Present Law
    An attorney in good standing is entitled to represent 
claimants before the Commissioner of Social Security. The 
Commissioner may prescribe rules and regulations governing the 
recognition of persons other than attorneys representing 
claimants before the Commissioner. Under present law, attorneys 
disbarred in one jurisdiction, but licensed to practice in 
another jurisdiction, must be recognized as a claimant's 
representative.
            Explanation of Provision
    The new provision authorizes the Commissioner to refuse to 
recognize as a representative, or disqualify as a 
representative, an attorney who has been disbarred or suspended 
from any court or bar, or who has been disqualified from 
participating in or appearing before any Federal program or 
agency. Due process (i.e., notice and an opportunity for a 
hearing) would be required before taking such action. Also, if 
a representative has been disqualified or suspended as a result 
of collecting an unauthorized fee, full restitution is required 
before reinstatement can be considered.
            Reason for Change
    This provision could potentially provide additional 
protections for beneficiaries who may rely on representatives 
during all phases of their benefit application process. 
However, the Committee remains concerned that the SSA does not 
yet have any system in place to verify whether or not a person 
seeking appointment as a claimant representative is in fact an 
attorney. Moreover, SSA has no system to determine whether or 
not an attorney who seeks appointment has been disbarred.
            Effective Date
    Upon enactment.

Section 206. Penalty for Corrupt or Forcible Interference with 
        Administration of the Social Security Act

            Present Law
    No provision.
            Explanation of Provision
    The new provision imposes a fine of not more than $5,000, 
and imprisonment of not more than 3 years, or both, for 
attempting to intimidate or impede--corruptly or by using force 
or threats of force--any Social Security Administration 
officer, employee or contractor (including State employees of 
disability determination services and any individuals 
designated by the Commissioner) while they are acting in their 
official capacities under the Social Security Act. If the 
offense is committed only by threats of force, however, the 
offender is subject to a fine of not more than $3,000 and/or no 
more than 1 year in prison.
            Reason for Change
    This provision extends to SSA employees the same 
protections provided to employees of the Internal Revenue 
Service under the Internal Revenue Code of 1954. These 
protections will allow SSA employees to perform their work with 
more confidence that they will be safe from harm.
    The Committee expects that judgment will be used in 
enforcing this section. Social Security and SSI disability 
claimants and beneficiaries are frequently subject to multiple, 
severe life stressors, which may include severe physical, 
psychological, or financial difficulties. In addition, 
disability claimants or beneficiaries who encounter delays in 
approval of initial benefit applications or in post-entitlement 
actions may incur additional stress, particularly if they have 
no other source of income. Under such circumstances, claimants 
or beneficiaries may at times express frustration in an angry 
manner, without truly intending to threaten or intimidate SSA 
employees. In addition, approximately 25 percent of Social 
Security disability beneficiaries and 35 percent of disabled 
SSI recipients have mental impairments, and such individuals 
maybe less able to control emotional outbursts. These factors 
should be taken into account in enforcing this provision.
            Effective Date
    Upon enactment.

Section 207. Use of Symbols, Emblems or Names in Reference to Social 
        Security or Medicare

            Present Law
    The Social Security Act prohibits (subject to civil 
penalties) the use of Social Security or Medicare symbols, 
emblems and references on any item in a manner that conveys the 
false impression that such item is approved, endorsed or 
authorized by the Social Security Administration, the Health 
Care Financing Administration, or the Department of Health and 
Human Services.
            Explanation of Provision
    The new provision expands the prohibition in present law to 
several other references to Social Security and Medicare, 
including the Centers for Medicare and Medicaid Services.
            Reason for Change
    The SSA Inspector General has found these phrases appearing 
in mailings, solicitations, or flyers, which, when used with 
the SSA's words, symbols, emblems, and references may be 
particularly misleading and more likely to convey the false 
impression that such item is approved, endorsed, or authorized 
by the SSA, the Health Care Financing Administration (now the 
Centers for Medicare and Medicaid Services), or the Department 
of Health and Human Services. Expansion of this list helps to 
ensure that individuals receiving any type of mail, 
solicitations or flyers bearing symbols, emblems or names in 
reference to Social Security or Medicare are not misled into 
believing that these agencies approved or endorsed the services 
or products depicted.
            Effective Date
    Applies to items sent after 180 days after the date of 
enactment.

Section 208. Disqualification From Payment During Trial Work Period 
        Upon Conviction of Fraudulent Concealment of Work Activity

            Present Law
    An individual entitled to disability benefits under Title 
II (OASDI) is entitled to a ``trial work period'' to test his 
or her ability to work. The trial work period allows 
beneficiaries to work with earnings above the substantial 
gainful activity level for up to 9 months (which need not be 
consecutive), within any 60-month period, without any loss of 
benefits. A month counts as a trial work period month if the 
individual earns above a level established by regulation (this 
amount is $570 a month in 2003).
    SSA's Inspector General has pursued criminal prosecution of 
Title II disability beneficiaries who fraudulently conceal work 
activity. As benefits received during the trial work period are 
not included in the dollar-loss totals, the dollar loss to the 
government may fall below the thresholds set by the U.S. 
Attorneys in determining which fraud cases to prosecute.
            Explanation of Provision
    Under the new provision, an individual who is convicted of 
fraudulently concealing work activity during the trial work 
period would not be entitled to receive a disability benefit 
for trial work period months that occur prior to the conviction 
but within the same period of disability. If the individual had 
already been paid benefits for these months, he or she would be 
liable for repayment of these benefits, in addition to any 
restitution, penalties, fines, or assessments that were 
otherwise due.
    In order to be considered to be fraudulently concealing 
work activity under this provision, the individual must have: 
(1) provided false information to SSA about his or her earnings 
during that period; (2) worked under another identity, 
including under the Social Security number of another person or 
a false Social Security number; or (3) taken other actions to 
conceal work activity with the intent to fraudulently receive 
benefits that he or she was not entitled to.
            Reason for Change
    Under current law, if an individual is convicted of 
fraudulently concealing work activity, the dollar loss to the 
government is calculated based on the benefits that the 
individual would have received had he or she not concealed the 
work activity. During the trial work period, disability 
beneficiaries continue to receive their monthly benefit amount 
regardless of their work activity. Therefore, the SSA does not 
include benefits paid during a trial work period in calculating 
the total dollar loss to the government, even if the individual 
fraudulently concealed work activity during that period. As a 
result, the dollars lost to the government may fall below the 
thresholds set by the U.S. Attorneys in cases involving 
fraudulent concealment of work by Title II disability 
beneficiaries. In such situations, the case would not be 
prosecuted, even if the evidence of fraud was very clear.
    This provision rectifies the situation by establishing that 
individuals convicted of fraudulently concealing work activity 
during the trial work period are not entitled to receive any 
disability benefits for trial work period months prior to the 
conviction (but within the same period of disability).
            Effective Date
    Effective with respect to work activity performed after the 
date of enactment.

Sec. 209. Authority for Judicial Orders of Restitution

            Present Law
    A court may order restitution when sentencing a defendant 
convicted of various offenses. However, violations of the 
Social Security Act are not included among those for which the 
court may order restitution.
            Explanation of Provision
    This provision amends the Social Security Act to allow a 
Federal court to order restitution to the Social Security 
Administration for violations of the Social Security Act. 
Restitution in connection with benefit misuse by a 
representative payee would be credited to the Social Security 
Trust Funds for cases involving OASDI recipients and to the 
general fund for cases involving Supplemental Security Income 
and Special Veterans benefits. Other restitution funds, 
credited to a special fund established in the Treasury, would 
be available to defray expenses incurred in implementing Title 
II, Title VIII, and Title XVI. If the court does not order 
restitution, or only orders partial restitution, the court must 
state the reason on the record.
            Reason for Change
    This provision would enhance a judge's ability to 
compensate the programs and punish persons convicted of 
violations including, but not limited to, improper receipt of 
Social Security payments and misuse of Social Security numbers.
            Effective Date
    Effective with respect to violations occurring on or after 
the date of enactment.

Sec. 210. Information for the Administration of Provisions Related to 
        Non-covered Employment

            Present Law
    There are approximately 6.6 million workers who do not pay 
taxes into the Social Security system. The majority of these 
workers are State and local government employees. Many of these 
government workers may eventually qualify for Social Security 
as the result of other employment, or as the spouse or survivor 
of a worker covered by Social Security. The Government Pension 
Offset (GPO) and the Windfall Elimination Provision (WEP) were 
enacted--in 1977 and 1983, respectively--to reduce the 
advantage these government workers may have when they apply for 
Social Security benefits.
    However, the Social Security Administration (SSA) has had 
difficulty implementing these provisions due to the lack of 
data. State and local governments provide annual reports of 
pension benefits to the IRS on Form 1099R, but the current form 
does not indicate whether the pension was based on employment 
covered by Social Security. Moreover, the SSA does not have 
access to this IRS data.
            Explanation of Provision
    This provision would require State and local government 
pension paying entities to indicate on their Form 1099R report 
whether the pension is based in whole or in part on earnings 
not covered by Social Security. This proposal would also allow 
the IRS to share these reports with SSA for the purpose of 
equitably administering the GPO and WEP.
            Reason for Change
    This change would make the application of these provisions 
more equitable because it would improve SSA's ability to 
identify persons receiving State and local government pensions 
based on non-covered work in a manner comparable to SSA's 
present ability to identify persons receiving Federal pensions 
based on non-covered work.
    SSA has an ongoing computer-matching program with the 
Federal Office of Personnel Management (OPM) that matches 
persons receiving Social Security benefits with persons 
receiving a pension from the Federal government based on non-
covered employment. However, SSA does not have any similar 
program to identify Social Security beneficiaries who are 
receiving pensions based on non-covered work for a State or 
local government.
    A previous study by the General Accounting Office (GAO) 
found that there are many beneficiaries who are not subjected 
to the GPO or WEP because the SSA does not know they are 
receiving pensions based on non-covered employment.
    This provision would allow the SSA to obtain data on 
pensions based on non-covered work in a more timely and 
consistent manner, reducing incorrect Social Security benefit 
payments. In cases where the person begins to receive the 
pension before filing for Social Security benefits, SSA could 
annotate the person's record so that this information would be 
available at the time the person applies for Social Security 
benefits. The proposal would thereby improve SSA's stewardship 
over the Social Security program and its trust funds.
    Organizations representing State and local employees report 
their members are often unaware of these provisions until they 
apply for retirement benefits. The Committee believes the 
Social Security Administration should utilize the annual 
earnings statement mailed to every employee over the age of 25 
to more explicitly inform State and local employees about the 
GPO and WEP. These employees should also be informed about 
their options to avoid these provisions by electing coverage 
under the Social Security program.
            Effective Date
    Taxable years beginning after December 31, 2003.

Sec. 211. Authorize Cross-Program Recovery for Benefit Overpayments

            Present Law
    The Social Security Administration has the authority to 
recover SSI overpayments from subsequent SSI monthly benefits 
and OASDI overpayments from subsequent OASDI monthly benefits. 
But, recovery efforts may be blocked when the beneficiary's 
eligibility changes from one program to another. The SSA has 
authority to collect prior SSI overpayments from Title II or 
Title VIII, but this authority is limited to 10% of the 
benefits paid.
            Explanation of Provision
    This provision would allow the Social Security 
Administration to more fully recover overpayments paid under 
Title II, Title VIII, or Title XVI from the benefits paid under 
any of these programs. It would provide for withholding up to 
100 percent of any lump-sum underpayment. Any recovery from any 
continuing monthly benefit under Title II or Title VII would be 
limited to 10 percent. Recovery under Title XVI would be 
limited to the lesser of 100 percent of the monthly benefit or 
10 percent of individual's total monthly income.
            Reason for Change
    The amount of outstanding, uncollected overpayments is 
large and continues to grow. Allowing the withholding of 
underpayments and monthly benefits between programs will 
greatly enhance the SSA's ability to recover overpayments. 
Without these changes, it would be difficult or impossible to 
recover overpayments, particularly when individuals are no 
longer eligible for ongoing monthly benefits.
            Effective Date
    Upon enactment.

Sec. 212. Prohibit Benefits to Persons Not Authorized to Work in the 
        United States

            Present Law
    Under current law, non-citizens who work illegally in the 
United States can receive Title II benefits based on the 
earnings from their illegal work. In addition, although current 
law prohibits the payment of benefits to persons who are not 
lawfully present in the United States, such persons can 
generally receive their benefits outside the United States--
with the exception of certain countries, such as Cuba and North 
Korea. Benefit payments may, in some but not all cases, be 
limited to a period of 6 months for persons living in other 
countries. In addition, benefits for dependents or survivors 
may be limited to 6 months unless they lived in the United 
States for at least 5 years in the family relationship on which 
the benefits are based.
            Explanation of Provision
    This provision would prohibit the payment of Title II 
benefits to any person who was not legally permitted to engage 
in employment in the United States prior to (or including) the 
time he or she applies for Title II benefits. It would also 
prohibit the payment of benefits to the spouses, survivors, or 
dependents of illegal workers.
    Prior to the enactment of P.L. 92-603 on October 30, 1972, 
SSA records did not reflect whether an individual was 
authorized to work when his or her Social Security account 
number (SSN) was issued. Thus, the Committee expects that all 
SSNs issued prior to July 1974--when the 1972 provision was 
first implemented by SSA--shall be deemed to comply with the 
new requirement, unless the SSA has evidence to the contrary.
    The Committee also recognizes that some individuals who are 
issued a non-work SSN may later become a U.S. citizen or 
receive authorization to work. Although such individuals are 
supposed to report these changes to SSA, not all do. In such 
cases, SSA would not be aware of the change, and would deny 
benefits, unless the individual maintained records to document 
the change. To reduce the number of potential denials and the 
need to rely on documents maintained by the individual, SSA 
should take two steps. First, SSA should utilize the annual 
notices it sends to all employees for whom there is a 
discrepancy between the name and SSN submitted by their 
employer and the data in SSA's records. SSA should use these 
mailings to notify employees that their wages are being 
reported on a non-work SSN, and recommend that these workers 
report any change in their work status to SSA. Second, SSA 
should use the annual earnings and benefit statements it sends 
to all workers over age 25 to notify these workers that their 
wages are being reported on a non-work SSN. Again, SSA should 
recommend that these workers report any change in their work 
status to SSA.
            Reason for Change
    Individuals who were never legally permitted to work in the 
United States should not be able to collect Social Security 
benefits on the basis of their illegal earnings. The Social 
Security program should not reward those who violate our 
immigration laws. This provision would begin to address this 
issue by limiting benefits to those who were authorized to work 
in the United States at some point in time.
    This provision does not fully address this issue as 
individuals who begin working illegally and later obtain legal 
status could still use their illegal earnings to qualify for 
Social Security benefits. However, the Commissioner of Social 
Security has raised concerns about SSA's ability to administer 
a more comprehensive approach. The Committee believes the 
proposal in the bill is the best approach to this issue at this 
time, but the Committee will continue to consider ways to more 
fully address this issue in the future.
            Effective Date
    Benefit applications filed on or after January 1, 2004.

  TITLE III.--ATTORNEY REPRESENTATIVE FEE PAYMENT SYSTEM IMPROVEMENTS


Section 301. Cap on Attorney Representative Assessments

            Present Law
    The Social Security Act allows the fees of claimant 
representatives who are attorneys to be paid by the SSA 
directly to the attorney out of the claimant's past-due 
benefits for Title II claims. The SSA is authorized to charge 
an assessment at a rate not to exceed 6.3 percent of approved 
attorney fees for the costs of determining, processing, 
withholding and distributing attorney representative fees for 
Title II claims.
            Explanation of Provision
    The new provision imposes a cap of $75 on the 6.3 percent 
assessment on approved attorney representative fees for Title 
II claims, and this cap is indexed for inflation.
            Reason for Change
    The Ticket to Work and Work Incentives Improvement Act of 
1999 (P.L. 106-170) which created the 6.3 percent assessment 
also required the General Accounting Office (GAO) to examine 
the costs incurred by the SSA in administering attorney fees; 
identify efficiencies that the SSA could implement to reduce 
such costs; and determine whether the assessment impairs access 
to legal representation for claimants.
    The GAO concluded that inadequate data made a precise 
estimate of the administrative cost of attorney fees impossible 
to calculate. It further concluded that the SSA could take 
additional steps to automate the attorney fee process and 
thereby achieve significant administrative savings. Finally, 
GAO concluded that access to legal representation had been 
largely unaffected by the fee assessment.
    Given the uncertainty regarding the true cost of the 
administering the attorney fee process, dissatisfaction with 
continued delays in processing attorney fees, and lack of 
progress in further automating the fee process, the Committee 
decided to cap the fee. This fee cap attempts to balance the 
competing goals of having attorneys pay the legitimate costs of 
fee withholding while at the same time encouraging the SSA to 
reduce these costs to the greatest extent possible.
            Effective Date
    After 180 days after the date of enactment.

Sec. 302. GAO Study of Fee Payment Process for Claimant Representatives

            Present Law
    An individual applying for Title II or Title XVI disability 
benefits may seek the assistance of another person. The person 
assisting the applicant may not charge or receive a fee unless 
it is first approved by the Social Security Administration 
(SSA). If the person assisting the individual is an attorney 
and the individual is awarded past-due benefits under Title II, 
the SSA will deduct the attorney's fee from the individual's 
benefits and pay the attorney directly--minus a fee to cover 
the SSA's administrative costs.
            Explanation of Provision
    This provision would require the General Accounting Office 
to conduct a study of the fee-withholding payment process for 
claimant representatives. The study would include a 
statistically significant survey of the characteristics of the 
current fee withholding system. The report would also include 
an analysis of the costs and benefits of the current system. In 
addition, the study would also assess the advantages and 
disadvantages of extending the current fee withholding system 
for attorneys to SSI cases. Finally, the report would assess 
the advantages and disadvantages of extending the fee 
withholding system to non-attorney representatives of both 
Social Security and SSI claimants.
            Reason for Change
    The Senate Finance Committee has received letters, 
testimony, and communications about the effects of the current 
fee-withholding process on claimants from disability advocates, 
the Social Security Administration, the Social Security 
Advisory Board, and attorney and non-attorney representatives 
of claimants. Among these materials, there is a difference of 
opinion about whether the current system is helpful or harmful 
to the claimants. Moreover, in these materials, some people 
believe that the current fee-withholding system should be 
extended to attorneys representing SSI disability claimants, 
while other people believe that the current fee-withholding 
system should not be extended to SSI claimants or should be 
eliminated. Furthermore, in the materials, some people believe 
that the current fee-withholding system should be extended to 
non-attorney representatives of both Social Security and SSI 
disability claimants, while others argue against such an 
extension. Based on these conflicting views and disagreements, 
the Committee decided that the best way to proceed at this time 
is to obtain a detailed report on these issues from the General 
Accounting Office.
            Effective Date
    The report would be due 24 months after the date of 
enactment.

           TITLE IV.--MISCELLANEOUS AND TECHNICAL AMENDMENTS


    SUBTITLE A: AMENDMENTS RELATING TO THE TICKET TO WORK AND WORK 
                   INCENTIVES IMPROVEMENT ACT OF 1999

Section 401. Eliminate Demonstration Authority Sunset Date

            Present Law
    The Commissioner of Social Security may waive compliance 
with the benefit requirements of Title II as necessary for a 
thorough evaluation of experiments and demonstration projects 
designed to encourage the disabled to return to work. This 
authority expires on December 17, 2004.
            Explanation of Provision
    This provision would eliminate the expiration date, thus 
providing permanent authority for the Commissioner to waive 
compliance with the benefit requirements under Title II.
            Reason for Change
    This change would conform the Social Security demonstration 
project authority with the SSI demonstration authority. The 
removal of the limitation on authority is warranted because 
demonstration projects are structured to protect beneficiaries, 
usually have very minimal costs, and often help to improve the 
program for both beneficiaries and administrators.
            Effective Date
    Upon enactment.

Section 402. Expansion of Waiver Authority Available in Connection with 
        Demonstration Projects Providing for Reductions in Disability 
        Insurance Benefits Based on Earnings

            Present Law
    The Ticket to Work and Work Incentives Improvement Act of 
1999 (P.L. 106-170) directs the Commissioner to conduct 
demonstration projects for the purpose of evaluating a program 
for Title II disability beneficiaries under which benefits are 
reduced by $1 for each $2 of the beneficiary's earnings above a 
level determined by the Commissioner. To permit a thorough 
evaluation of alternative methods, the Ticket to Work Act 
allows the Commissioner to waive compliance with the benefit 
provisions of Title II and allows the Secretary of Health and 
Human Services to waive compliance with the benefit 
requirements of Title XVIII.
            Explanation of Provision
    This provision allows the Commissioner to also waive 
requirements in Section 1148 of the Social Security Act, 
related to outcome payments provided to employment networks 
participating in the Ticket to Work Program.
            Reason for Change
    Under the $1-for-$2 benefit offset demonstration project, 
earnings of many beneficiaries may not be sufficient to 
completely eliminate their benefits. However, benefits must be 
completely eliminated before employment networks participating 
in the Ticket to Work program are eligible to receive outcome 
payments. Therefore, employment networks may be reluctant to 
accept tickets from beneficiaries participating in the $1-for-
$2 benefit offset demonstration, making it impossible for the 
SSA to effectively test this mandated project.
            Effective Date
    Upon enactment.

Section 403. Funding of Demonstration Projects Providing for Reductions 
        in Disability Insurance Benefits Based on Earnings

            Present Law
    The Ticket to Work Act provides that the benefits and 
administrative expenses of conducting the $1-for-$2 
demonstration projects will be paid out of the Old-Age, 
Survivors, and Disability Insurance (OASDI) and Federal 
Hospital Insurance and Federal Supplementary Medical Insurance 
(HI/SMI) trust funds, to the extent provided in advance in 
appropriations acts.
            Explanation of Provision
    The new provision establishes that administrative expenses 
for the $1-for-$2 demonstration project will be paid out of 
otherwise available annually-appropriated funds, and that 
benefits associated with the demonstration project will be paid 
from the OASDI or HI/SMI trust funds.
            Reason for Change
    Administrative costs for demonstration projects conducted 
under the broader Title II demonstration project authority are 
paid out of otherwise available annually appropriated funds, 
and benefits associated with the demonstration projects are 
paid from the OASDI or HI/SMI Trust Funds. This provision would 
make funding sources for the $1-for-$2 demonstration project 
under the Ticket to Work Act consistent with funding sources 
for other Title II demonstration projects.
            Effective Date
    Upon enactment.

Section 404. Availability of Federal and State Work Incentive Services 
        to Additional Individuals

            Present Law
    The Ticket to Work Act directs SSA to establish a 
community-based program to provide benefit planning and 
assistance to disabled beneficiaries. To establish this 
program, SSA is required to award cooperative agreements (or 
grants or contracts) to State or private entities. In 
fulfillment of this requirement, SSA has established the 
Benefits Planning, Assistance, and Outreach (BPAO) program. The 
Act also authorizes SSA to award grants to State protection and 
advocacy (P&A) systems so that they can provide protection and 
advocacy services to disabled beneficiaries. SSA has 
established the Protection and Advocacy to Beneficiaries of 
Social Security (PABSS) Program pursuant to this authorization.
    To be eligible for services under either the BPAO or PABSS 
programs, an individual must be entitled to Title II (OASDI) or 
Title XVI (SSI) benefits based on disability or blindness.
            Explanation of Provision
    The new provision expands eligibility for the BPAO and 
PABSS programs to include individuals who (1) are no longer 
eligible for SSI benefits because of an increase in earnings, 
but remain eligible for Medicaid; (2) receive only a State 
Supplementary payment (a payment that some States provide as a 
supplement to theFederal SSI benefit); or (3) are in an 
extended period of Medicare eligibility under Title XVIII after a 
period of Title II disability has ended.
    This provision also expands the current PABSS assistance 
(which is available for securing and regaining employment) to 
include maintaining employment.
            Reason for Change
    Although disabled beneficiaries may have progressed beyond 
eligibility for Federal cash benefits, but may still need 
information about the effects of work on their medical or State 
benefits, or they may need advocacy or other services to help 
them maintain or regain employment. Extending eligibility for 
the BPAO and PABSS programs to beneficiaries who are no longer 
eligible for Federal cash benefits will help to prevent these 
beneficiaries from returning to the Federal cash benefit rolls 
and help them to reach their optimum level of employment.
    By extending the current PABSS assistance to maintaining 
employment, this provision would ensure that disabled 
individuals would not face a situation in which they would have 
to wait until they lost their employment in order to once again 
be eligible to receive PABSS services.
    The Committee intends this provision to provide a 
continuity of services for disabled individuals throughout the 
process of initially securing employment, the course of their 
employment and, if needed, their efforts to regain employment.
            Effective Date
    The amendment to the BPAO program is effective with respect 
to grants, cooperative agreements or contracts entered into on 
or after the date of enactment. The amendment to the PABSS 
program is effective for payments provided after the date of 
enactment.

Sec. 405. Technical Amendment Clarifying Treatment of Referrals Under 
        the Ticket to Work and Self-Sufficiency Program

            Present Law
    Employers may claim a Work Opportunity Tax Credit (WOTC) 
for newly hired employees with disabilities who have been 
referred by a State vocational rehabilitation (VR) agency. The 
WOTC is equal to 40 percent of the first $6,000 of wages paid 
to newly hired employees during their first year of employment 
when the employee is retained for at least 400 work hours. A 
lesser credit rate of 25 percent is provided to employers when 
the employee remains on the job for 120-399 hours.
    The Ticket to Work Act provides a ``ticket'' to eligible 
Title II (OASDI) and Title XVI (SSI) beneficiaries that allows 
them to obtain employment and other support services from an 
approved ``employment network'' of their choice. Employment 
networks may include State, local, or private entities that can 
provide directly, or arrange for other organizations or 
entities to provide, employment services, VR services, or other 
support services.
    Under current law, an employer hiring a disabled individual 
referred by an employment network does not qualify for the WOTC 
unless the employment network is a State VR agency.
            Explanation of Provision
    The new provision allows employers who hire disabled 
workers through referrals by any employment network approved 
under the Ticket to Work Act to qualify for the WOTC.
            Reason for Change
    The Ticket to Work program was designed to increase choice 
available to beneficiaries when they select providers of 
employment services. Employers hiring individuals with 
disabilities should be able to qualify for the WOTC regardless 
of whether the employment referral is made by a public or 
private service provider. This amendment updates eligibility 
criteria for the WOTC to conform to the expansion of employment 
services and the increase in number and range of VR providers 
as a result of the enactment of the Ticket to Work Act.
            Effective Date
    This provision is effective as if it were included in 
section 505 of the Ticket to Work Act.

Sec. 406. GAO Study of Ticket to Work and Self-Sufficiency Program

            Present Law
    The Ticket to Work and Work Incentives Improvement Act of 
1999 (P.L. 106-170) was designed to help disabled beneficiaries 
who are seeking employment services, vocational rehabilitation 
services, and other support services to assist them in 
obtaining, regaining, and maintaining self-supporting 
employment.
    The Ticket to Work Program is being phased in the over a 3-
year period. During the first phase which began in February 
2002, the program was available in 13 States. In the second 
phase which began in November 2002, it was expanded to 20 
additional States, as well as to the District of Columbia. In 
the third and final phase beginning in November 2003, SSA will 
expand the program to the remaining 17 States, as well as to 
American Samoa, Guam, the Northern Mariana Islands, Puerto 
Rico, and the Virgin Islands
    By implementing the Ticket to Work program in phases, the 
SSA will have the opportunity to evaluate the program and make 
any necessary improvements before the program is fully 
implemented nationwide.
            Explanation of Provision
    This provision would require the General Accounting Office 
to provide an interim assessment of the Ticket to Work program.
            Reason for Change
    Current law requires numerous annual and interim reports 
analyzing various aspects of the Ticket to Work program, as 
well as a final report by the Advisory Panel 8 years after the 
date of enactment. However, no one has compiled all of the 
information available so far in order to assess how well the 
Ticket to Work program is working and whether any additional 
legislative or administrative changes are needed.
            Effective Date
    The report would be due 12 months after the date of 
enactment.

                  SUBTITLE B. MISCELLANEOUS AMENDMENTS

Section 411. Elimination of Transcript Requirement in Remand Cases 
        Fully Favorable to the Claimant

            Present Law
    The Social Security Act requires SSA to file a hearing 
transcript with the District Court for any SSA hearing that 
follows a court remand of an SSA decision.
            Explanation of Provision
    The new provision clarifies that SSA is not required to 
file a transcript with the court when SSA, on remand, issues a 
decision fully favorable to the claimant.
            Reason for Change
    A claimant whose benefits have been denied is provided a 
transcript of a hearing to be used when the claimant appeals 
his case in Federal District court. If the Administrative Law 
Judge issues a fully favorable decision, then transcribing the 
hearing is unnecessary since the claimant would not appeal this 
decision.
            Effective Date
    Upon enactment.

Section 412. Nonpayment of Benefits Upon Removal From the United States

            Present Law
    In most cases, the Social Security Act prohibits the 
payment of Social Security benefits to non-citizens who are 
deported from the United States. However, the Act does not 
prohibit the payment of Social Security benefits to non-
citizens who are deported for smuggling other non-citizens into 
the United States.
            Explanation of Provision
    The new provision requires SSA to suspend benefits of 
beneficiaries who are removed from the United States, pursuant 
to a removal notice from the Attorney General or the Secretary 
of Homeland Security, for smuggling aliens.
            Reason for Change
    Individuals who are removed from the United States for 
smuggling aliens have committed an act that should prohibit 
them from receiving Social Security benefits.
            Effective Date
    Upon enactment.

Section 413. Reinstatement of Certain Reporting Requirements

            Present Law
    The Federal Reports Elimination and Sunset Act of 1995 
``sunsetted'' most annual or periodic reports from agencies to 
Congress that were listed in a 1993 House inventory of 
congressional reports.
            Explanation of Provision
    The new provision reinstates the requirements for several 
periodic reports to Congress that were subject to the 1995 
``sunset'' Act, including annual reports on the financial 
solvency of the Social Security and Medicare programs (the 
Board of Trustees' reports on the OASDI, HI, and SMI trust 
funds) and annual reports on certain aspects of the 
administration of the Title II disability program (the SSA 
Commissioner's reports on pre-effectuation reviews of 
disability determinations and continuing disability reviews).
            Reason for Change
    The reports to be reinstated provide Congress with 
important information needed to evaluate and oversee the Social 
Security and Medicare programs.
            Effective Date
    Upon enactment.

Section 414. Clarification of Definitions Regarding Certain Survivor 
        Benefits

            Present Law
    Under the definitions of ``widow'' and ``widower'' in 
Section 216 of the Social Security Act, a widow or widower must 
have been married to the deceased spouse for at least 9 months 
before his or her death in order to be eligible for survivor 
benefits.
            Explanation of Provision
    The new provision creates an exception to the 9-month 
requirement for cases in which the Commissioner finds that the 
claimant and the deceased spouse would have been married for 
longer than 9 months but for the fact that the deceased spouse 
was legally prohibited from divorcing a prior spouse who was in 
a mental institution.
            Reason for Change
    This provision allows the Commissioner to issue benefits in 
certain unusual cases in which the duration of marriage 
requirement could not be met due to a legal impediment over 
which the individual had no control and the individual would 
have met the legal requirements were it not for the legal 
impediment.
            Effective Date
    Effective for benefit applications filed after the date of 
enactment.

Section 415. Clarification Respecting the FICA and SECA Tax Exemptions 
        for an Individual Whose Earnings are Subject to the Laws of a 
        Totalization Agreement Partner

            Present Law
    In cases where there is a totalization agreement with a 
foreign country, a worker's earnings are exempt from U.S. 
Social Security payroll taxes when those earnings are subject 
to the foreign country's retirement system.
            Explanation of Provision
    The new provision clarifies the legal authority to exempt a 
worker's earnings from U.S. Social Security tax in cases where 
the earnings were subject to a foreign country's retirement 
system in accordance with a U.S. totalization agreement, but 
the foreign country's law does not require compulsory 
contributions on those earnings. The provision establishes that 
such earnings are exempt from U.S. Social Security tax whether 
or not the worker elected to make contributions to the foreign 
country's retirement system.
            Reason for Change
    In U.S. totalization agreements, a person's work is 
generally subject to the Social Security laws of the country in 
which the work is performed. In most cases, the worker (whether 
subject to the laws of the United States or the other country) 
is compulsorily covered and required to pay contributions in 
accordance with the laws of that country. In some instances, 
however, work that would be compulsorily covered in the United 
States is excluded from compulsory coverage in the other 
country (such as Germany). In such cases, the IRS has 
questioned the exemption from U.S. Social Security tax for 
workers who elect not to make contributions to the foreign 
country's retirement system. This provision would remove any 
questionregarding the exemption and would be consistent with 
the general philosophy behind the coverage rules of totalization 
agreements.
            Effective Date
    Upon enactment.

Section 416. Coverage Under Divided Retirement System for Public 
        Employees

            Present Law
    Social Security coverage for State and local employees 
covered under a public pension plan is established through an 
agreement between the States and the Federal government. Every 
State and local government has the option of electing Social 
Security coverage for its employees by a majority vote in a 
referendum. In certain States, however, there is an alternative 
method known as a divided retirement system. Under this system, 
employees voting in the referendum may individually choose 
whether they want Social Security coverage, provided that all 
newly hired employees are required to participate in Social 
Security.
            Explanation of Provision
    This provision would extend the authority to operate a 
divided retirement system to all States.
            Reason for Change
    In the past, Congress has provided 21 States with the 
authority to operate divided retirement systems. This authority 
has generally been granted as a result of a merger between two 
political subdivisions. Without this authority, a majority vote 
would determine whether or not every employee would participate 
in Social Security. As the number of non-covered employees 
often exceeds the number of Social Security-covered employees 
in the new merged political subdivision, those employees 
currently covered by Social Security could lose that coverage. 
This provision was originally proposed in February 2002 to 
address the proposed merger between the governments of the city 
of Louisville and Jefferson County, in the State of Kentucky. 
Enactment of this provision would allow other States to operate 
a divided system in the future as the need arises.
            Effective Date
    Upon enactment.

Section 417. Compensation for the Social Security Advisory Board

            Present Law
    The Social Security Advisory Board is an independent, 
bipartisan Board established by the Congress under the Social 
Security Act. The seven-member Board is appointed by the 
President and the Congress to advise the President, the 
Congress and the Commissioner of Social Security on matters 
related to the Social Security and Supplemental Security Income 
programs. Members of the Board serve without compensation, 
except that while engaged in Board business away from their 
homes or regular places of business members may be allowed 
reimbursement for travel expenses, including per diem in lieu 
of subsistence.
            Explanation of Provision
    The new provision establishes that compensation for Social 
Security Advisory Board members will be provided, at the daily 
rate of basic pay for level IV of the Executive Schedule, for 
each day (including travel time) during which the member is 
engaging in the business of the Board.
            Reason for Change
    Other government advisory boards--such as the Employee 
Retirement Income Security Act Advisory Council, the Pension 
Benefit Guaranty Corporation Advisory Committee and the Thrift 
Savings Plan Board--provide compensation for their members. 
This provision allows for similar treatment of Social Security 
Advisory Board members with respect to compensation.
            Effective Date
    January 1, 2003.

Section 418. 60-Month Period of Employment Requirement for Government 
        Pension Offset Exemption

            Present Law
    The ``dual entitlement'' rule reduces a spouse's or 
survivor's Social Security benefit $1-for-$1 by his or her own 
Social Security retirement or disability benefit. For 
government workers who are not covered by Social Security, the 
Government Pension Offset (GPO) reduces their Social Security 
spouse's or survivor's benefit by an amount equal to two-thirds 
of their public pension. However, under the ``last day rule,'' 
State and local government workers are exempt from the GPO if 
they are covered by both a government pension and Social 
Security on their last day of government employment.
            Explanation of Provision
    This provision requires that State and local government 
workers covered by a public pension who subsequently elect 
coverage under Social Security (pursuant to a referendum 
approved under Section 218 of the Social Security Act) must be 
covered by Social Security for at least the last 5 years of 
their government employment in order to be exempt from the GPO.
            Reason for Change
    The GPO was enacted in 1977 to equalize the treatment of 
workers covered by Social Security and those with government 
pensions not covered by Social Security. However, current law 
effectively provides an unintended exemption when State or 
local government workers are covered by both Social Security 
and their government pension on their last day of employment. 
In such cases, the GPO does not apply.
    Although individuals could have used this exemption since 
1977, knowledge of this ``last-day'' loophole did not become 
widespread until recent years. According to the General 
Accounting Office (GAO), nearly all of the cases they 
identified in which individuals took advantage of this loophole 
occurred in the last several years.
    For example, the GAO reported one-fourth (3,521) of all 
Texas public education retirees took advantage of this loophole 
in 2002. In most cases, teachers typically worked a single day 
in a non-teaching position (clerical, food service, or 
maintenance). Most of these employees paid about $3 in Social 
Security payroll taxes. The average spousal benefit resulting 
from these last-day loophole jobs would be an additional $5,200 
a year.
    The 5-year rule adopted in this provision has precedent in 
1987 legislation allowing Federal employees covered by the old 
Civil Service Retirement System (CSRS) to elect coverage under 
Social Security as part of the transition to the new Federal 
Employees Retirement System (FERS). That legislation required 
Federal employees who transferred from CSRS to FERS and Social 
Security to work for at least 5 years before retirement in 
order to be exempt from the GPO.
    This change will establish uniform application of the GPO 
exemption for all Federal, State, and local government workers 
who elect to join Social Security through the referendum 
process provided under current law.
            Effective Date
    The provision is effective for applications filed after the 
month of enactment. However, the provision would not apply to 
individuals whose last day of employment for the State or local 
governmental entity was covered by Social Security and occurs 
on or before December 31, 2003.

Sec. 419. Post-1956 Military Wage Credits

            Present Law
    Prior to January 1, 2002, members of the uniformed services 
were deemed to be paid amounts greater than their actual 
taxable wages. These deemed wages were designed to increase 
Social Security benefits for persons with military service by 
giving them credit for various tax-free benefits such as in-
kind food and housing allowances. The Social Security trust 
funds (and later the Medicare HI trust fund) have received 
various transfers from general funds over the years (most 
recently from DoD appropriations) designed to offset the cost 
of these additional benefits. The FY 2002 Department of Defense 
Appropriations Act (Public Law 107-117) eliminated deemed wage 
credits for all years after calendar year 2001. However, the 
amount owed for 2000 and 2001 remains outstanding.
            Explanation of Provision
    This provision would transfer from general funds to the 
Social Security and Medicare trust funds the remaining balance 
owed for 2000 and 2001, and make conforming amendments to 
reflect the termination of deemed military wage credits.
            Reason for Change
    This provision would constitute a full and final accounting 
of the amount owed to the trust funds for deemed military wage 
credits.
            Effective Date
    Upon enactment.

                    SUBTITLE C. TECHNICAL AMENDMENTS

Section 421. Technical Correction Relating to Responsible Agency Head

            Present Law
    The Social Security Act directs ``the Secretary of Health 
and Human Services'' to send periodic Social Security 
Statements to individuals.
    Security Statements to individuals.
            Explanation of Provision
    The new provision makes a technical correction by inserting 
a reference to the Commissioner of Social Security in place of 
the Secretary of Health and Human Services.
            Reason for Change
    The ``Social Security Independence and Program Improvements 
Act of 1994'' (P.L. 103-296) made the Social Security 
Administration an independent agency separate from the 
Department of Health and Human Services. This provision updates 
Section 1143 to reflect that change.
            Effective Date
    Upon enactment.

Section 422. Technical Correction Relating to Retirement Benefits of 
        Ministers

            Present Law
    The ``Small Business Job Protection Act of 1996'' (P.L. 
104-188) established that certain retirement benefits received 
by ministers and members of religious orders (such as the 
rental value of a parsonage or parsonage allowance) are not 
subject to Social Security payroll taxes. However, these 
retirement benefits are treated as net earnings from self-
employment for the purpose of acquiring insured status and 
calculating Social Security benefit amounts.
            Explanation of Provision
    The new provision makes a conforming change to exclude 
these benefits received by retired clergy from Social Security-
covered earnings for the purpose of acquiring insured status 
and calculating Social Security benefit amounts.
            Reason for Change
    P.L. 104-188 provided that certain retirement benefits 
received by ministers and members of religious orders are not 
subject to payroll taxes. However, a conforming change was not 
made to the Social Security Act to exclude these benefits from 
being counted as wages for the purpose of acquiring insured 
status and calculating Social Security benefit amounts. This 
income is therefore not treated in a uniform manner. This 
provision would conform the Social Security Act to the Internal 
Revenue Code with respect to such income.
            Effective Date
    Effective for years beginning before, on, or after December 
31, 1994 which is the same Section 1456 of P.L. 104-188.

Section 423. Technical Correction Relating to Domestic Employment

            Present Law
    Present law is ambiguous concerning the Social Security 
coverage and tax treatment of domestic service performed on a 
farm. Domestic employment on a farm appears to be subject to 
two separate coverage thresholds (one for agricultural labor 
and another for domestic employees).
            Explanation of Provision
    The new provision clarifies that domestic service on a farm 
is treated as domestic employment, rather than agricultural 
labor, for Social Security coverage and tax purposes.
            Reason for Change
    Prior to 1994, domestic service on a farm was treated as 
agricultural labor and was subject to the coverage threshold 
for agricultural labor. According to the SSA, in 1994, when 
Congress amended the law with respect to domestic employment, 
the intent was that domestic employment on a farm would be 
subject to the coverage threshold for domestic employees 
instead of the threshold for agricultural labor. However, the 
current language is unclear, making it appear as if farm 
domestics are subject to both thresholds.
            Effective Date
    Upon enactment.

Section 424. Technical Correction of Outdated References

            Present Law
    The Social Security Act and the Internal Revenue Code of 
1986 each contain a number of outdated references that relate 
to the Social Security program.
            Explanation of Provision
    The new provision corrects outdated references in the 
Social Security Act and the Internal Revenue Code by correcting 
a citation respecting a tax deduction related to health 
insurance costs of self-employed individuals, and eliminating a 
reference to an obsolete 20-day agricultural work test.
            Reason for Change
    Over the years, provisions in the Social Security Act, the 
Internal Revenue Code and other related laws have been deleted, 
re-designated or amended. However, necessary conforming changes 
have not always been made. Consequently, the Social Security 
law and the Internal Revenue Code contain some outdated 
references.
            Effective Date
    Upon enactment.

Section 425. Technical Correction Respecting Self-Employment Income in 
        Community Property States

            Present Law
    The Social Security Act and the Internal Revenue Code 
provide that, in the absence of a partnership, all self-
employment income from a trade or business operated by a 
married person in a community property State is deemed to be 
the husband's unless the wife exercises substantially all of 
the management and control of the trade or business.
            Explanation of Provision
    Under the new provision, self-employment income from a 
trade or business that is not a partnership, and that is 
operated by a married person in a community property State, is 
taxed and credited to the spouse who is carrying on the trade 
or business. If the trade or business is jointly operated, the 
self-employment income is taxed and credited to each spouse 
based on his or her distributive share of gross earnings.
            Reason for Change
    Present law was found to be unconstitutional in several 
court cases in 1980. Since then, income from a trade or 
business that is not a partnership in a community property 
State has been treated the same as income from a trade or 
business that is not a partnership in a non-community property 
State--it is taxed and credited to the spouse who is found to 
be carrying on the business.
    This change will conform the provisions in the Social 
Security Act and the Internal Revenue Code to current practice 
in both community property and non-community property States.
            Effective Date
    Upon enactment.

Section 426. Technical Changes to the Railroad Retirement and 
        Survivors' Improvement Act of 2001

            Present Law
    The ``Railroad Retirement and Survivors'' Improvement Act 
of 2001'' (Public Law 107-90) established the Railroad 
Retirement Investment Trust to invest the assets of the 
railroad retirement program in a special trust fund created 
outside of the general fund of the U.S. Treasury. An 
independent Board of Trustees was appointed to administer the 
Trust. The Trustees are responsible for establishing investment 
guidelines for the prudent management of trust fund assets and 
for selecting outside investment advisors and managers to 
implement investment policies.
            Explanation of Provisions
    Quorum Rules--Clarifies that a vacancy on the Board of the 
Trust does not preclude the Board from making changes in the 
Investment Guidelines with the unanimous vote of all remaining 
Trustees.
    Certain Transfers--Clarifies that the Railroad Retirement 
Board can require the Trust to transfer amounts to the Railroad 
Retirement Account (RRA), and that excess Social Security 
Equivalent Benefits Account assets can be transferred to the 
RRA until used to pay benefits.
    Investment of Assets--Clarifies that the Trust may invest 
the assets in accordance with its investment guidelines either 
directly or through the retention of outside investment 
managers.
    Clerical Changes--Makes a number of grammatical and 
typographical changes.
    Other Board Powers--Consolidates the Board's administrative 
powers and specifies that such powers include the ability to 
execute necessary business functions such as entering into 
contracts and taking all other necessary steps to make and 
secure trust investments in a prudent manner.
    State and Local Taxes--Clarifies that the Trust is exempt 
from income, sales and use taxes imposed or levied by a State, 
political subdivision, or local taxing authority.
    Funding of Administrative Expenses--Deletes a redundant 
paragraph regarding the Trust's authority to pay its 
administrative expenses.
    Investment in Federal Securities in Non-Governmental 
Accounts--Clarifies that the Trust may purchase qualifying 
Federal obligations for investment of assets transferred from 
the SSEB Account either directly or through a commingled 
account that is invested only in such qualifying federal 
obligations, and reinvest earnings on such Federal obligations 
in the same manner.
    Quarterly Transfers to RRB--Clarifies that the Trust may 
transfer amounts to the RRB for the payment of benefits on a 
quarterly basis (or on such other basis upon which the RRB and 
Trust may agree).
            Reason for Change
    All nine changes are technical in nature and are needed to 
promote the efficient implementation of the Railroad Retirement 
and Survivors' Improvement Act of 2001.
            Effective Date
    Upon enactment.

              SUBTITLE D. AMENDMENTS RELATED TO TITLE XVI

Section 430. Exclusion From Income for Certain Infrequent or Irregular 
        Income and Certain Interest or Dividend Income

            Present Law
    An individual who has no countable income, and who meets 
all other SSI eligibility criteria, is eligible to receive 
Federal Supplemental Security Income (SSI) benefits equal to 
the amount of the Federal Benefit Rate (FBR), which is $552 a 
month for an individual or $829 a month for a couple in 2003. 
If the individual has countable income (i.e., total income 
minus applicable exclusions), the payment amount is reduced by 
$1 for each $1 of countable income, whether earned or unearned. 
An individual with countable income greater than the FBR is not 
eligible for a federal cash benefit.
    Several exclusions apply to the calculation of countable 
earned and unearned income. One such provision is for the 
exclusion of infrequent or irregular income. Under current law, 
an individual can receive up to $20 of infrequent or irregular 
unearned income per month and up to $10 of infrequent or 
irregular earned income per month. Income is considered to be 
infrequent if it is received no more than once in a calendar 
quarter from a single source. Income is considered to be 
irregular if the recipient could not reasonably expect to 
receive the income. Both exclusions are ``all or nothing.'' 
That is, if either the ``infrequent or irregular'' earned 
income or ``infrequent or irregular'' unearned income exceeds 
their respective monthly limits, none of the income in that 
category can be excluded.
    In order to be eligible for SSI, recipients must have 
countable resources of no more than $2,000 for individuals or 
$3,000 for couples. If an SSI recipient receives interest or 
dividend income on these countable resources, this income is 
excluded as infrequent or irregular income only if it is 
credited on a quarterly basis. Interest or dividend income 
received on a monthly basis is countable as unearned income.
            Explanation of Provision
    This provision changes the calculation of infrequent and 
irregular income from a monthly to a quarterly basis. 
Therefore, individuals could exclude $60 per quarter of 
unearned income and $30 per quarter of earned income that is 
received irregularly and infrequently. This provision also 
excludes from the determination of an individual's income all 
interest and dividend income earned on countable resources.
            Reason for Change
    The original SSI legislation enacted in 1972 contained a 
provision excluding infrequent and irregular unearned income of 
$60 per quarter and earned income of $30 per quarter. The 
intent in excluding these amounts was to simplify 
administration of the SSI program by allowing SSA to ignore 
occasional small gifts and small amounts of earnings. However, 
the ``Omnibus Budget Reconciliation Act of 1981'' changed the 
amount of the exclusion to $20 a month for unearned and $10 a 
month for earned income to conform with the change from a 
quarterly to a monthly accounting system. This change 
unintentionally disadvantaged some SSI beneficiaries by 
lowering the cap on the amount of infrequent or irregular 
income that could be excluded at one time.
    The provision restores the exclusion for infrequent or 
irregular income to its original quarterly basis. This change 
will permit an individual to receive small gifts, or payment 
for infrequent jobs such as babysitting, without worrying that 
fairly insignificant amounts of income would adversely affect 
his or her benefits. For example, under current law, a $25 cash 
birthday gift would be counted as income to the individual. 
Under this proposal, such a relatively insignificant gift would 
not be counted as income if the income did not exceed the 
quarterly limit. The change will also simplify program 
administration by reducing the need to make benefit adjustments 
due to small amounts of infrequently-received income.
    The exclusion from countable income of all interest and 
dividend income earned on countable resources under this 
provision would simplify the administration of the program by 
eliminating the need to track small interest or dividend 
payments (which would generally amount to only a few dollars a 
month because they would be earned on resources currently 
limited to a maximum value of $2,000 or $3,000) and the need to 
adjust benefit amounts and pursue the recovery of overpayments 
arising from to minor fluctuations in interest and dividend 
income.
            Effective Date
    The change is effective with respect to benefits payable 
for months that begin more than 90 days after the date of 
enactment.

Section 431. Uniform 9-Month Resource Exclusion Periods

            Present Law
    The SSI program limits the amount of resources 
beneficiaries may have to $2,000 for individuals and $3,000 for 
couples. Resources consist of cash, other liquid assets, or 
property that an individual owns and could convert to cash. 
Certain types of cash payments are excluded from resources for 
specific periods of time. Currently, State and local crime 
victim's assistance and State and local relocation assistance 
payments are excluded for 9 months after the month of receipt; 
retroactive Social Security and SSI payments are excluded for 6 
months after the month of receipt; and Earned Income Tax Credit 
(EITC) and Child Tax Credit (CTC) payments are excluded for 1 
month after the month of receipt. After the expiration of the 
time period, any remaining value of the payment becomes a 
countable resource for purposes of determining SSI eligibility.
            Explanation of Provision
    This provision increases to 9 months and makes uniform the 
time period for excluding from resources amounts attributable 
to payments of past-due Social Security and SSI benefits, EITC 
payments, and CTC payments.
            Reason for Change
    The resource exclusion periods are intended to allow 
beneficiaries who receive significant sums of money sufficient 
time to meet outstanding obligations or needs before the sums 
become countable as assets, which could result in SSI 
ineligibility. The legislative history of these provisions 
provides no rationale for the differing exclusion time periods 
permitted for excluding various types of payments. Uniformity 
simplifies SSI administration and improves the public's 
understanding of the SSI program. Moreover, increasing the 
length of the exclusion period for some of these payments 
allows beneficiaries more time to meet outstanding obligations 
or needs and reduces current incentives to spend payments 
rapidly, and perhaps imprudently, to avoid exceeding resource 
limits.
            Effective Date
    The change is effective for benefits payable on or after 
the date of enactment.

Section 432. Modification of the Dedicated Account Requirement

            Present Law
    The SSI program requires that past-due benefits to a 
disabled child that are greater than six times the maximum 
monthly SSI benefit be deposited in a special account and be 
used by the child's parents or representative payee only for 
certain specified purposes related to the impairment (or 
combination of impairments) of the beneficiary.
            Explanation of Provision
    This provision modifies the dedicated account requirement 
by allowing the funds in the account to be used for 
reimbursement of past expenditures incurred by the child's 
parent or representative payee that were forthe good of the 
beneficiary. The modification also clarifies that funds from the 
dedicated account can be used for any purpose that is for the good of 
the beneficiary, not just for certain specified purposes related to the 
impairment of the beneficiary.
            Reason for Change
    Field office employees of the Social Security 
Administration have remarked that the current law rules and 
regulations for dedicated accounts are overly intrusive, very 
cumbersome administratively, and lead to unsatisfactory results 
for some families trying to meet the needs of a disabled child 
in their family. The change will allow more flexibility in the 
administration of dedicated accounts by clearly allowing any 
expenses that are for the good of the beneficiary to be drawn 
from the account. This change to the SSI program will also make 
the treatment of funds in these accounts consistent with the 
requirements placed on representative payees, including 
parents, who receive payments on behalf of children who do not 
have dedicated accounts, and those children who are survivors 
or dependents under Title II.
            Effective Date
    The provision would be effective on January 1, 2004 and 
apply with respect to expenditures of funds from dedicated 
accounts on or after that date, or accounts established on or 
after that date.

Section 433. Elimination of Certain Restrictions on the Application of 
        the Student Earned Income Exclusion

            Present Law
    The earned income of a beneficiary who is a child and who 
is determined to be a student is excluded subject to limits 
prescribed by SSA. Currently, the program excludes up to $1,340 
a month, but no more than $5,410 a year. To be eligible for the 
exclusion, an individual must be a child--defined as an 
unmarried individual under age 22 who is not the head of a 
household--and must also be a student regularly attending a 
school, college, university, or a course of vocational or 
technical training designed to prepare him or her for gainful 
employment.
            Explanation of Provision
    This provision permits the student earned income exclusion 
to apply to any individual under age 22 who is a student. 
Therefore, students under age 22 who are married or heads of 
households will now be eligible for the exclusion.
            Reason for Change
    The intent of the original student earned income exclusion 
was to help a student to finance school attendance, to 
recognize the special expenses that many students with 
disabilities incur to attend school, and to provide tangible 
incentives to encourage work and education. Because the 
definition of the term ``child'' under SSI rules includes the 
requirement that an individual be neither married nor the head 
of a household, young married and single parent students do not 
have the incentive from an earned income exclusion that is 
available to other students. It is not reasonable or equitable 
to deny married individuals or heads of households an exclusion 
which may make the difference in their ability to attend school 
and progress toward self-sufficiency.
            Effective Date
    The change is effective for benefits payable for months 
that begin 1 year after the date of enactment.

Section 434. Exclusion of Americorps and Other Volunteer Benefits for 
        Purposes of Determining Supplemental Security Income 
        Eligibility and Benefit Amounts and Social Security Disability 
        Insurance Entitlement

            Present Law
    Americorps volunteers receive a living allowance during 
their participation in the program, and may also receive an 
educational award. For volunteers in the Americorps VISTA 
programs, these payments are categorically excluded from income 
in the SSI program and are not counted as earnings for trial 
work period (TWP) and substantial gainful activity (SGA) 
purposes in the Title II disability program. However, 
Americorps volunteers who are not in the VISTA program have 
these payments counted as earnings both for the SSI program and 
for TWP and SGA purposes in the Title II disability program. In 
addition, current SSI rules count room and board provided for 
non-VISTA volunteers under the Americorps program as in-kind 
support and maintenance.
            Explanation of Provision
    This provision excludes all payments and benefits to all 
Americorps volunteers, both cash and in-kind, for the purpose 
of determining SSI eligibility and benefit amounts, and for the 
purpose of determining initial and continuing eligibility for 
Social Security disability insurance benefits.
            Reason for Change
    This provision eliminates the disparate treatment in the 
SSI and Title II disability programs between payments to 
volunteers in the Americorps VISTA program and payments to 
other Americorps volunteers, and between payments in cash and 
in-kind. This change removes current disincentives that may 
prevent young people with disabilities from participating in 
the Americorps program.
            Effective Date
    The change is effective for benefits payable for months 
that begin 60 days after the date of enactment.

Section 435. Exception to Retrospective Monthly Accounting for 
        Nonrecurring Income

            Present Law
    SSI benefit amounts are determined under a system known as 
``retrospective monthly accounting'' (RMA). Under RMA, the SSI 
benefit payment for the current month is based on a recipient's 
circumstances in the second prior month. For example, countable 
income received in October determines the SSI payment for 
December. For individuals newly eligible for SSI, however, 
there is a transition to RMA during the first 3 months of 
eligibility for payment. During this transition period, 
countable income received in the first month determines the 
payment amount for the first month and also for each of the 
following 2 months. For example, if the first month of payment 
eligibility is October, countable income received in October 
determines the payment amounts for October, November and 
December.
            Explanation of Provision
    Under this provision, one-time, nonrecurring income is 
counted only for the month that the income is received, and not 
for any other month in the transition to RMA during the first 3 
months of an individual's SSI eligibility. This exception would 
not apply to income that is ongoing but the amounts of which 
fluctuate.
            Reason for Change
    In some cases in which an individual has non-recurring 
income in the first month of SSI payment eligibility, the 
application of RMA during the first 3 months of such 
eligibility can result in more income being counted than is 
actually received. In such cases during the 3-month period, SSI 
benefits may be reduced by $3 for each $1 of income received, 
instead of by the normal and equitable $1 for each $1 ofincome 
received. This provision would eliminate the triple counting of one-
time, nonrecurring income, thereby more accurately and fairly 
reflecting an individual's financial means.
            Effective Date
    The provision is effective for benefits payable for months 
that begin on or after 1 year following the date of enactment.

Section 436. Removal of Restriction on Payment of Benefits to Children 
        Who Are Born or Who Become Blind or Disabled After Their 
        Military Parents Are Stationed Overseas

            Present Law
    An individual must generally be a U.S. resident and present 
in the United States to receive SSI benefits. An exception is 
made for blind and disabled children of U.S. military personnel 
stationed overseas. These children are eligible for SSI 
benefits if the child received SSI benefits in the month before 
the parents reported overseas. Those children of U.S. military 
personnel who are born, who become blind or disabled, or who 
first apply for SSI benefits while overseas are not eligible 
for SSI benefits.
            Explanation of Provision
    This provision extends the current law eligibility for SSI 
for blind and disabled children of military personnel overseas 
to blind and disabled children of military personnel who were 
born overseas, who became blind or disabled while overseas, or 
who first applied for SSI benefits overseas.
            Reason for Change
    This amendment would eliminate the disparate treatment with 
regard to SSI eligibility between blind and disabled children 
of military personnel overseas who were eligible for SSI before 
they went overseas and those children who were born, became 
blind or disabled, or first applied for SSI benefits after 
going overseas. This provision would be a reasonable change in 
the law to protect a specific, limited group of children who 
reside outside the United States only because their parents are 
serving their country by being stationed overseas.
            Effective Date
    The provision is effective for benefits payable for months 
beginning after enactment but only on the basis of an 
application filed after enactment.

Section 437. Treatment of Education-Related Income and Resources

            Present Law
    Income from grants, scholarships or fellowships used to pay 
for tuition or educational fees is excluded in determining SSI 
eligibility and benefit amounts. However, monetary gifts to an 
SSI recipient are counted as unearned income even if the money 
is used to pay for tuition or educational fees.
            Explanation of Provision
    This provision excludes from the determination of income 
any gift to an individual for use in paying tuition or 
educational fees, just as grants, scholarships and fellowships 
for such use are currently excluded from the determination of 
income. The provision also excludes grants, scholarships, 
fellowships, or gifts to be used for tuition or education fees 
from an individual's countable resources for 9 months after the 
month of receipt.
            Reason for Change
    Permitting the exclusion of such gifts when determining SSI 
eligibility and benefit amounts could permit and encourage 
familial and community support of an individual's education and 
thus increase the chances that such an individual might become 
self-sufficient and leave the SSI rolls.
            Effective Date
    The change is effective for benefits payable for months 
that begin more than 90 days after the date of enactment.

Section 438. Monthly Treatment of Uniformed Service Compensation

            Present Law
    Members of the uniformed services are paid on the first day 
of the month for work performed in the previous calendar month, 
and are paid at mid-month as partial payment of the amount due 
for the current calendar month. Earnings statements are issued 
monthly, reflecting monthly compensation earned in 1 month, but 
paid in two installments in two different months. For example, 
a leave and earnings statement dated February 1 shows the 
compensation for January in one sum, which includes payments 
received on January 15 and February 1 (the date of the 
statement). Therefore, SSA field office personnel must have two 
monthly leave and earnings statements to determine 1 month's 
income, and the income reported on each statement must be 
broken down to determine how much was received in each month.
            Explanation of Provision
    This provision would count cash military compensation as 
reported on a monthly leave and earnings statement issued by 
the military, which reflects compensation earned in the prior 
month, as received in the prior month.
            Reason for Change
    The provision would simplify the determination of countable 
income in SSA field offices by making it unnecessary to view 
earnings statements for two months to determine one month's 
earnings.
            Effective Date
    The change is effective for benefits payable for months 
beginning at least 90 days after the date of enactment.

Section 439. Update for Resource Limit

            Present Law
    The SSI program limits the amount of resources 
beneficiaries may own and still be eligible for benefits. These 
limits are $2,000 for individuals and $3,000 for couples. The 
resource limits were last updated by The Deficit Reduction Act 
of 1984 (PL 98-369), with the last installment of the update 
taking place in 1989.
            Explanation of Provision
    This provision changes the resource limits to $3,000 for 
individuals and $4,500 for couples, and subsequently indexes 
the amounts for inflation in the same manner as the maximum SSI 
benefit amount is indexed.
            Reason for Change
    If the resource limits for SSI had been indexed for 
inflation since the enactment of the program in 1972, the 
limits would currently be roughly $6,000 for an individual and 
$9,000 for a couple. This provision to update the resource 
limits will allow SSI beneficiaries to save more of their 
resources to cover costs of an urgent nature or of significant 
size--such as health emergencies, storm damage, home repairs, 
or winter utility bills--that because of their size or 
immediacy could not be covered by the monthly benefit payment 
that the recipient uses to pay for ongoing basic needs such as 
food, clothing and shelter. In addition, the change will allow 
some individuals who are elderly or disabled and have very low 
incomes to apply for and receive SSI while holding onto a 
slightly larger amount of resources for these types of future 
``rainy day'' needs. The Committee recognizes that the change 
to the resource limits will increase Federal expenditures by 
$3.8 billion over 10 years. Therefore, the Committee has 
included in this legislation several provisions that will 
produce an equal amount of budgetary savings. The Committee 
believes that savings in the SSI program should be used to 
improve the benefits in the SSI program.
            Effective Date
    The increase to $3,000 and $4,500 is effective for benefits 
payable for January 2004. Indexing the resource limits is 
effective January 1, 2005.

Section 440. Review of State Agency Blindness and Disability 
        Determinations

            Present Law
    State agencies are required to conduct blindness and 
disability determinations to establish an individual's 
eligibility for: (1) Title II (Federal Old-Age, Survivors, and 
Disability Insurance (OASDI) benefits); and (2) Title XVI 
(Supplemental Security Income (SSI)). Disability determinations 
are made in accordance with disability criteria defined in 
statute as well as standards promulgated under regulations or 
other guidance.
    Under current law, the Commissioner of Social Security is 
required to review the State agencies' Title II blindness and 
disability determinations in advance of awarding or continuing 
payment to individuals. This requirement for review is met 
when: (1) at least 50 percent of all initial allowances have 
been reviewed, and (2) other such determinations have been 
reviewed as necessary to ensure a high level of accuracy.
            Explanation of Provision
    After a 1-year phase-in, the bill aligns disability and 
blindness review requirements for Title XVI with those 
currently required under Title II. As under Title II, the 
Commissioner of Social Security would be required to review 
initial Title XVI blindness and disability determinations made 
by State agencies in advance of awarding payments. For FY2004, 
the review would be required for at least 25 percent of all 
State-determined allowances made after March 2004. In FY2005 
and thereafter, review would be required for at least 50 
percent of State-determined allowances. To the extent feasible, 
the bill requires the Commissioner to select for review those 
State agency determinations that are most likely to be 
incorrect.
            Reason for Change
    The provision will improve the integrity of the 
Supplemental Security Income program.
            Effective Date
    The proposal is effective January 1, 2004.

                    III. Budget Effects of the Bill

    In compliance with sections 308 and 403 of the 
Congressional Budget Act of 1974, and paragraph 11(a) of rule 
XXVI of the Standing Rules of the Senate, the following letter 
has been received from the Congressional Budget Office on the 
budgetary impact of the legislation:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 28, 2003.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
                       U.S. Senate, Washington, DC.
    Dear Chairman: The Congressional Budget Office has prepared 
the enclosed revised cost estimate for H.R. 743, the Social 
Security Protection Act of 2003. We have made minor 
clarifications in the text of an estimate that we sent you on 
October 24. The estimated budgetary effects, however, are 
unchanged.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathy 
Ruffing.
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

               Congressional Budget Office Cost Estimate


H.R. 743--Social Security Protection Act of 2003

    Summary: H.R. 743 would:
     Strengthen the Social Security Administration's 
(SSA's) oversight of representative payees (people who handle 
benefit checks for others, such as children or mentally 
impaired adults);
     Bar fugitives from receiving Social Security 
benefits;
     Enhance SSA's ability to enforce rules that limit 
Social Security benefits for people with pensions from 
noncovered work in state and local government, and close a 
loophole that now enables some to skirt those restrictions by 
switching jobs briefly;
     Broaden the agency's ability to recover past 
overpayments in the Supplemental Security Income (SSI) program 
from Social Security benefits and vice versa;
     Reduce how much SSA may charge attorneys when it 
remits their fee directly from accrued benefits of successful 
claimants;
     Expand eligibility of people with some resources 
for SSI and, consequently, Medicaid; and
     Step up federal review of SSI awards made by state 
agencies.
    On balance, enacting H.R. 743 would lead to small net costs 
in 2004 and 2005 and net savings thereafter. In total, CBO 
estimates that H.R. 743 would reduce direct spending and boost 
revenue by $0.6 billion over the 2004-2013 period. The federal 
budget classifies the Social Security portion of that figure 
(-$3.3 billion) as ``off budget'' and the rest ($2.7 billion) 
as ``on-budget.'' (One provision would transfer $0.7 billion 
from the on- to the off-budget side of the ledger, which swells 
both figures but does not affect the total.)
    H.R. 743 would also affect discretionary spending. CBO 
estimates that implementing the bill would cost SSA about $20 
million to $30 million annually for extra enforcement and 
processing activities.
    The Joint Committee on Taxation has reviewed the tax 
provisions of H.R. 743 and determined those provisions contain 
no intergovernmental or private-sector mandates as defined in 
the Unfunded Mandates Reform Act (UMRA). CBO reviewed the rest 
of the act for mandates. Section 4 of UMRA excludes from the 
provisions of that act any provision in a bill or act that 
relates to the Old-Age, Survivors, and Disability Insurance 
program (OASDI) under title II of the Social Security Act. The 
provisions of H.R. 743 that amend title II of the Social 
Security Act would fall within that exclusion. Other provisions 
would preempt certain state laws; the costs resulting from 
those mandates, if any, would be significantly below the 
threshold established in UMRA ($60 million in 2004, adjusted 
annually for inflation). Changes to the SSI program would lead 
to additional state spending for Medicaid, but those changes 
would not result in mandates as defined in UMRA. The act does 
contain one private-sector mandate, but CBO estimates that its 
cost would not exceed the UMRA threshold ($120 million in 2004, 
adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary effects of H.R. 743 are shown in Table 1. The costs 
of the legislation fall within budget functions 550 (health), 
570 (Medicare), 600 (income security), and 650 (Social 
Security).
    Basis of estimate: About a dozen of H.R. 743's provisions 
account for its estimated budgetary effects. They are listed in 
Table 2. For this estimate, CBO assumes that H.R. 743 will be 
enacted this fall.

                              TABLE 1.--ESTIMATED EFFECTS OF H.R. 743, THE SOCIAL SECURITY PROTECTION ACT OF 2003, BY TITLE
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By Fiscal Year, in Millions of Dollars
                                                               -----------------------------------------------------------------------------------------
                                                                  2004     2005     2006     2007     2008     2009     2010     2011     2012     2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          CHANGES IN DIRECT SPENDING (OUTLAYS)
 Title I: Protection of Beneficiaries..........................        7        9        5        *        *        *        *        *        *        *
Title II: Program Protections.................................      -59     -116     -226     -279     -328     -390     -424     -413     -415     -420
Title III: Attorney Fee Payment System Improvements...........       12       24       25       27       28       29       31       32       33       34
Title IV: Miscellaneous and Technical Amendments:.............       49      116      183      226      268      285      288      277      269      243
    Total Direct Spending:
        On-budget.............................................      735       40      130      187      241      263      270      269      283      284
        Off-budget............................................     -727       -8     -143     -213     -273     -338     -376     -372     -395     -427
                                                                -----------------------------------------------------------------------------------------
            Total.............................................        9       32      -12      -26      -32      -75     -105     -104     -113     -143
                                                                    CHANGES IN REVENUES
  Title IV: Miscellaneous and Technical Amendments:
    On-budget.................................................       -2        *        *        *        *        *        *        *        *        *
    Off-budget................................................        1        1        2        2        3        3        3        4        4        5
                                                                -----------------------------------------------------------------------------------------
        Total.................................................       -1        1        2        2        3        3        3        4        4        5
                                             NET CHANGES IN DIRECT SPENDING AND REVENUES (EFFECT ON DEFICITS)
Direct Spending and Revenues (Net):
        On-budget.............................................      737       40      130      187      241      263      270      269      283      284
        Off-budget............................................     -727       -9     -144     -215     -276     -341     -379     -376     -400     -432
                                                                -----------------------------------------------------------------------------------------
            Total.............................................       10       31      -14      -28      -34      -78     -109     -108     -117     -148
                                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION (OUTLAYS)
 Spending Subject to Appropriation
    On-budget.................................................       14       16       15       16       17       17       18       18       18       19
    Off-budget................................................        5        4       11        7        8        8        8        6        7        7
                                                               -----------------------------------------------------------------------------------------
        Total.................................................       19       20       26       23       25       25       26       24       26       26
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTES: Details may not add to totals because of rounding.
The Congressional Budget Act labels revenues and outlays of the Social Security trust funds ``off-budget.''
* = Less than $500,000.


                         TABLE 2.--ESTIMATED EFFECTS OF H.R. 743, THE SOCIAL SECURITY PROTECTION ACT OF 2003, BY MAJOR PROVISION
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By Fiscal Year, in Millions of Dollars
                                                               -----------------------------------------------------------------------------------------
                                                                  2004     2005     2006     2007     2008     2009     2010     2011     2012     2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          CHANGES IN DIRECT SPENDING (OUTLAYS)
              Title 1: Protection of Beneficiaries
Authority to Reissue Certain Misused Benefits:
    OASDIa....................................................        2        *        *        *        *        *        *        *        *        *
    SSI.......................................................        1        *        *        *        *        *        *        *        *        *
Survey of Use of Payments by Representative Payees............        4        9        5        *        *        *        *        *        *        *
                                                               -----------------------------------------------------------------------------------------
        Subtotal, Title I.....................................        7        9        5        *        *        *        *        *        *        *
                  Title II: Program Protections
 Denial of Title II Benefits to Fugitives:
    OASDIa....................................................      -10      -30      -44      -55      -59      -61      -63      -66      -68      -70
    Medicare..................................................       -1       -4      -11      -15      -19      -22      -23      -25      -25      -27
Infomation on Pensions from Noncovered Employment.............        0        *     -125     -185     -240     -300     -330     -315     -315     -315
Cross-program Recovery of Overpayments:
    OASDIa....................................................       -1       -3       -3       -3       -3       -3       -3       -3       -2       -2
        SSI...................................................      -48      -79      -43      -21       -7       -4       -5       -5       -5       -6
                                                               -----------------------------------------------------------------------------------------
        Subtotal, Title II....................................      -59     -116     -226     -279     -328     -390     -424     -413     -415     -420
      Title III: Attorney Fee Payment System Improvements:
     Cap on Attorney Assessments Offsetting Receipts, OASDIa...       12       24       25       27       28       29       31       32       33       34
        Title IV: Miscellaneous and Technical Amendments
 Demonstration Authority Sunset Date:
    OASDIa....................................................        *        2        5        5        5        5        5        5        5        5
Coverage under Divided Retirement Systems:
    OASDIa....................................................        *        *        *        *        *        *        *        *        *        1
60-month Employment Requirement for Exemption from GPO:
    OASDIa....................................................        *        *       -1       -2       -4       -8      -15      -26      -49      -80
Post-1956 Military Wage Credits:
    Payments to Trust Funds...................................      903        0        0        0        0        0        0        0        0        0
    Offsetting Receipt, OASDIa................................     -730        0        0        0        0        0        0        0        0        0
    Offsetting receipt, HI....................................     -173        0        0        0        0        0        0        0        0        0
             Amendments related to SSI (Subtitle D)
Update for Resource Limit:
    SSI.......................................................        6       14       19       18       21       22       23       26       23       26
    Medicaid..................................................       45      110      185      240      290      335      370      405      440      485
    Medicare..................................................        5       20       35       55       80       90      100      105      115      120
Review of State Agency Determinations:
    SSI.......................................................       -3      -11      -20      -28      -39      -48      -57      -71      -67      -81
    Medicaid..................................................       -4      -19      -40      -62      -85     -111     -138     -167     -198     -233
Other SSI Provisions..........................................        *        *        *        *        *        *        *        *        *        *
                                                               -----------------------------------------------------------------------------------------
        Subtotal, Title IV....................................       49      116      183      226      268      285      288      277      269      243
Total Changes in Direct Spending:
    On-budget.................................................      735       40      130      187      241      263      270      269      283      284
    Off-budget................................................     -727       -8     -143     -213     -273     -338     -376     -372     -395     -427
                                                               -----------------------------------------------------------------------------------------
        Total.................................................        9       32      -12      -26      -32      -75     -105     -104     -113     -143
                                                                    CHANGES IN REVENUES
        Title IV: Miscellaneous and Technical Amendments
Coverage under Divided Retirement Systems:
    OASDI Revenues a..........................................        1        1        2        2        3        3        3        4        4        5
    Other Revenues............................................        *        *        *        *        *        *        *        *        *        *
Clarification of Tax Treatment of Individual Work Plans.......       -2        *        *        *        *        *        *        *        *        *
Total Changes in Revenues:
    On-budget.................................................       -2        *        *        *        *        *        *        *        *        *
    Off-budget................................................        1        1        2        2        3        3        3        4        4        5
                                                               -----------------------------------------------------------------------------------------
        Total.................................................       -1        1        2        2        3        3        3        4        4        5
                                                   CHANGES IN SPENDING SUBJECT TO APPROPRIATION (OUTLAYS)
 OASDI Administrative Expenses a...............................        5        4       11        7        8        8        8        6        7        7
SSI Administrative Expenses...................................       14       16       15       16       17       17       18       18       19       19
                                                               -----------------------------------------------------------------------------------------
      Total Changes...........................................       19       20       26       23       25       25       26       24       26      26
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Details may not add to totals because of rounding.
OASDI=Old-Age, Survivors, and Disability Insurance (title II of Social Security Act); SSI=Supplemental Security Income (title XVI); GPO=government
  pension offset; HI=Hospital Insurance (title XVIII).
*= Less than $500,000.
a Off-budget.

            Direct-Spending and Revenues
    Title I--Protection of Beneficiaries. Nearly seven million 
people--three million adults and four million children--who get 
Social Security, SSI, or both have their checks sent to a 
representative payee who helps manage their finances. The payee 
must use the money to meet the beneficiary's needs and report 
certain events, such as changes in the beneficiary's income or 
school attendance, to SSA. In most cases, a family member 
serves as a representative payee. But attorneys, guardians, and 
other nonrelatives, social service agencies, institutions, and 
organizations also serve as payees, especially for disabled 
adults. About 45,000 organizations serve as representative 
payees for about 750,000 clients. SSA approves representative 
payees, requires annual reports from them, and conducts on-site 
reviews every three years of certain payees who serve a large 
number of beneficiaries.
    H.R. 743 would direct SSA to certify annually that social 
service agencies meet licensing and bonding requirements and to 
conduct periodic on-site inspections of more representative 
payees. This would enhance SSA's ability to recover misused 
funds and to impose civil monetary penalties.
    Most of the provisions would have negligible effects on 
benefit payments or recoveries. One section, however, would 
require SSA to pay beneficiaries any amounts that had been 
misused by an organizational representative payee. (Currently, 
such claimants must show negligence by SSA.) ``Misuse'' means 
converting funds to the payee's own use or any purpose other 
than the use and benefit of the client. The provision would be 
retroactive to January 1, 1995.
    According to SSA, representative payees misuse about $3 
million in benefits each year. Although SSA's Inspector General 
(IG) has found weaknesses in internal controls of some 
organizational payees, few of the resulting errors would 
constitute misuse. Because organizations handle about 12 
percent of the dollars flowing through representative payees, 
CBO estimates that reimbursing nine years' worth of misused 
benefits would cost $3 million in 2004. Extra costs in 2005 
through 2013 would be negligible.
    The IG has issued many audits of representative payees, but 
most have focused on particular organizations and make it 
difficult to draw conclusions about nationwide patterns. H.R. 
743 would direct the IG to conduct a national, statistically 
representative study of all types of payees--relatives, 
nonrelatives, institutions, local government agencies, and 
organizations. The legislation would provide $17.8 million for 
that study from SSA's section 1110 research budget, normally 
reserved for research performed outside SSA under grants or 
contracts. CBO assumes that those funds would be spent in 2004 
through 2006.
    Title II--Program Protection. This title would add to SSA's 
tools for avoiding or recovering erroneous payments and would 
bar payment of Social Security benefits to fugitives from the 
law.
    Fugitive Provisions. In 1996, Congress barred SSI benefits 
to people with outstanding arrest warrants, whether they were 
convicted felons or people avoiding prosecution. H.R. 743 would 
extend that policy to Social Security. CBO estimates the 
provision would reduce Social Security spending by $10 million 
in 2004 and $525 million over the 2004-2013 period. CBO also 
estimates that the policy would save $172 million in Medicare 
over the 10 years.
    CBO used data reported by SSA's IG to estimate those 
savings. The IG generalized from a sample of about 400 cases in 
10 states to estimate that fugitives received between $40 
million and $180 million in Social Security benefits in 1999. 
The midpoint of that range ($110 million) reflected an 
estimated 15,000 fugitives with an average benefit of almost 
$600 per month. Assuming that their number and average benefits 
keep pace with the overall program, CBO extrapolated that total 
to $130 million in 2004 and $175 million in 2013.
    CBO expects, however, that savings would fall short of 
those figures. First, large-scale enforcement poses challenges. 
By tapping the National Crime Information Center (NCIC) and 
obtaining data directly from some states that do not report 
fully to the NCIC, SSA already has automated access to more 
than 80 percent of fugitive warrants. But the SSI experience 
shows that some records lack key information, such as full name 
and Social Security number, for an accurate match; some 
subjects are incarcerated (and have their benefits suspended 
under other provisions of law); some are even victims of 
identity theft. Verification, when successful, takes about two 
months, so that even a swift suspension almost inevitably 
involves some overpayments that are difficult to recover. Based 
on those hurdles, CBO assumes that about 60 percent of the 
savings identified by the IG are attainable.
    Second, some people spotted when checking fugitive lists 
clear their records when their benefits stop, resulting in 
little or no long-term savings. Law-enforcement authorities 
focus on the most-serious offenders (either pursuing them 
aggressively or arresting them on new offenses) but rarely 
clear other warrants from the books. Thus, remaining warrants 
are disproportionately older--about 15 percent of state 
warrants, for example, are more than 10 years old--and usually 
cite nonviolent offenses such as drug possession and probation 
or parole violation. In such cases, ``fugitives'' with no 
subsequent convictions typically face nothing worse than a 
suspended sentence or probation. Some will take that calculated 
risk and voluntarily contact authorities. In a new study of the 
SSI provisions, the Inspector General found that one-third of 
people suspended under the fugitive provisions sometime during 
the 1996-2002 period were receiving SSI in February 2003, 
having satisfied their warrants. CBO thus subtracted another 
one-third from the potential savings, bringing the result to 40 
percent of the IG's figure. CBO assumes those savings are 
attainable about two years after enactment. Early savings are 
more modest, as SSA signs data-sharing agreements with more 
states, writes regulations, and follows its verification and 
notice practices.
    CBO assumes that 80 percent of fugitives who would be 
affected by this provision are disabled beneficiaries who 
qualify for Medicare. If they lost their health benefits too, 
extra savings in 2013 (when their average Medicare benefits--
about $9,600--almost match their assumed Social Security 
benefits, $9,900) could reach $54 million. However, their 
Social Security benefits would be suspended, not terminated. 
Suspension does not interrupt Medicare eligibility. Some 
Medicare savings would probably occur simply because 
beneficiaries fail to realize they remain eligible, fear using 
their Medicare card, or stop paying the premium (which is 
usually withheld from Social Security checks) for Part B 
coverage. CBO estimates that the resulting drop in use of 
Medicare benefits would save about half as much as an outright 
ban, or about $27 million in 2013.
    Information on Pensions from Noncovered Employment. State 
and local governments have been permitted to join Social 
Security since the 1950s. The Census Bureau counts 14 million 
active members and 6 million beneficiaries in 2,200 state and 
local government retirement plan. About one-quarter are not 
covered by Social Security. Most are clustered in a few states: 
California, Colorado, Georgia, Illinois, Louisiana, Maine, 
Massachusetts, Missouri, Ohio, and Texas. Elsewhere, exempt 
employees (if any) are usually police officers or firefighters.
    A retiree with a pension from noncovered state or local 
employment, or from the federal system that covers civil 
servants hired before 1984, may have his or her Social Security 
benefit reduced or eliminated by two provisions of current law: 
the Windfall Elimination Provision (WEP) and the Government 
Pension Offset (GPO). CBO estimates that the GPO and WEP, as 
currently administered, will save Social Security $56 billion 
over the 2004-2013 period and that H.R. 743 would boost that by 
$2.1 billion. Because the GPO and WEP provisions also are 
discussed later, here is a brief description.
     Since 1986, the WEP has trimmed benefits for 
noncovered annuitants with ``split careers''--those who also 
worked long enough in covered employment to qualify for Social 
Security (primary beneficiaries, in the program's lexicon). It 
removes the tilt in favor of lower earners from their benefit 
formula. Social Security benefits depend on lifetime earnings, 
usually averaged over 35 years. Low average earnings, however, 
could result just as well from 25 years of well-paid noncovered 
work and 10 yearsunder Social Security as from decades of 
covered employment at modest earnings. The Congress enacted the WEP, a 
slimmed-down formula that applies when workers also have an annuity 
from noncovered work, to make that distinction.\1\
---------------------------------------------------------------------------
    \1\ All Social Security benefits are based on a Primary Insurance 
Amount (PIA), which in turn depends on Average Indexed Monthly Earnings 
(AIME). For a retired worker, AIME is calculated by adjusting past 
earnings to current values, then averaging the top 35 years--
essentially, ages 22 through 61, with the lowest 5 years dropped. For 
someone who reaches 62 in 2003, the PIA equals 90 percent times the 
first $606 of AIME, 32 percent times the next $3,047, and 15 percent 
times AIME over $3,653, if any. (Those ``bend points'' rise with 
average wages.) The WEP formula generally uses 40 percent in place of 
the 90 percent factor. It makes exceptions for annuitants with at least 
20 years of covered work and those with very small pensions.
---------------------------------------------------------------------------
     The GPO reduces Social Security benefits when the 
annuitant qualifies for benefits as a spouse or widow(er)--that 
is, as secondary beneficiaries. The GPO's drafters likened it 
to Social Security's rules for other two-earner couples. A 
wife, for example, collects on her husband's record only if the 
resulting benefit (about half of his) exceeds her own retired-
worker benefit. She cannot combine the two amounts. 
Specifically, the GPO trims the Social Security benefit by $2 
for every $3 of the noncovered pension--often erasing it 
entirely. The Congress acted quickly to enact the GPO after the 
Supreme Court held in 1977 that Social Security programs could 
no longer discriminate on the basis of gender.
    For federal civil service retirees, SSA enforces the GPO 
and WEP provisions by matching data from the Office of 
Personnel Management. Otherwise, it must rely on claimants' 
reports and alert employees to spot potential GPO and WEP 
cases. (SSA staff ask about government pensions and are trained 
to notice gaps in earnings histories that may suggest 
noncovered employment.) H.R. 743 would direct the Internal 
Revenue Service (IRS) to require administrators of state and 
local pension plans to add coverage status to payment reports, 
presumably the 1099-R forms sent to participants and to the 
IRS, and share that information with SSA.
    Studies in the mid-1990s by the General Accounting Office 
(GAO) and SSA of Illinois and Ohio pensioners, respectively, 
found that SSA had missed about 9 percent of people who ought 
to have been subject to GPO or WEP. State and local annuitants 
make up almost exactly half of people affected by the 
provisions. If the Illinois and Ohio patterns are typical, that 
suggests about 4.5 percent of potential cases avoid the GPO and 
WEP reductions. In fact, CBO assumed that figure had improved 
since the mid-1990s, through greater staff experience plus 
enhanced data on earnings in noncovered employment after 1977 
(when the government switched from quarterly to annual 
crediting of wages). Thus, CBO substituted a 4 percent error 
rate.
    CBO assumed that SSA would gain access to IRS data from the 
biggest noncovered plans even as IRS and SSA work out what 
changes, if any, to require in future 1099-R reports. By 
targeting in that way, CBO assumes that SSA could use some 
reports of pension income in 2004, which will be filed in 2005, 
to target the first batch of cases for suspension or reduction 
in 2006. SSA would also launch efforts to recover past 
overpayments to those beneficiaries. Although a few 
overpayments would stretch back 20 years, the average would be 
roughly 6 years. Some would not be recovered; SSA's most 
effective tool is to withhold them from regular monthly 
benefits, but the GPO--unlike the WEP--often erases the entire 
benefit. CBO assumed one-third of the overpayments would not be 
recovered and that SSA would recoup the bulk of the rest within 
the 4 years after discovery. As SSA matches with more pension 
plans' reports each year, annual savings would mount to an 
estimated $300 million in 2009, peak at $330 million in 2010, 
then stabilize as recoveries fade in importance.
    Cross-program Recovery of Overpayments. As noted above, 
SSA's best tool for recovering overpayments is to subtract them 
from regular monthly checks. Current law permits SSA to do that 
under both titles II (Social Security) and XVI (SSI) of the 
Social Security Act, although deductions may not exceed 10 
percent of monthly income in SSI.
    Special rules apply when SSI recipients qualify for Social 
Security. If an SSI beneficiary receives a Social Security 
award that includes retroactive benefits, all of his or her SSI 
benefits for the same months are withheld from that lump-sum 
check. And if he or she has stopped receiving SSI but gets 
monthly Social Security checks, past SSI overpayments can be 
withheld, within limits.
    Almost one-third of disabled adults on SSI get Social 
Security, and some title II beneficiaries formerly received 
SSI. As a means-tested program, SSI permits recipients to keep 
$20 a month of unearned income (which includes Social Security) 
and offsets the rest.
    In 2001, SSA found 130,000 people who were getting SSI when 
they should have received Social Security in addition or 
instead. Further digging by SSA boosted that number to about 
300,000. (Some are no longer receiving benefits.) Labeled 
``special-workload'' cases, those people are entitled to a 
lump-sum payment for the months they should have received 
Social Security. Because of the programs' interactions, that 
lump-sum check will be split: for example, of a retroactive 
check for $300 a month for five years, $1,200 will go to the 
individual and $16,800 will go from the trust funds to the 
general fund of the Treasury as a recovered overpayment. SSA 
anticipates that about $4 billion of the lump-sum payments to 
special-workload cases will be sent to the Treasury under that 
rule.
    The law, though, limits SSA's powers of ``cross-program 
recovery'' in certain narrow situations. Most immediately, it 
fails to cover some special-workload cases with SSI 
overpayments unrelated to the months covered by the Social 
Security award. If the two periods do not match exactly, SSA 
must withhold those unrelated overpayments chiefly from future 
Social Security benefits, not from the lump-sum check. H.R. 743 
would authorize SSA to deduct them from the lump-sum. It also 
would authorize cross-program recovery in the rare cases where 
an SSI-only beneficiary has outstanding title II overpayments. 
(Current law has no provision for recovering Social Security 
overpayments from SSI benefits.)
    Based on information from SSA, CBO estimates that enhanced 
tools for cross-program recovery would increase SSI recoveries 
by $223 million over 10 years and Social Security recoveries by 
$26 million. The SSI savings largely come from speeding up 
recoveries that SSA would have achieved eventually. Thus, most 
of the savings occur in 2004 through 2007 as SSA finishes 
processing the special workload.
    Denial of Title II Benefits to Aliens Not Authorized to Be 
Employed in the United States. Section 212 of H.R. 743 would 
stipulate that, effective in January 2004, noncitizens who 
claim Social Security benefits must have been issued a Social 
Security number (SSN) ``consistent with the requirements of 
subclause (I) or (III) of section 205(c)(2)(B)(I) [of the 
Social Security Act].'' Those subclauses spell out the rules 
for assigning SSNs to aliens who are authorized to work in the 
United States: those admitted as legal permanent residents, and 
those who enter in another category (such as student or 
tourist, or ``legal temporary resident'' under the 1986 
amnesty) and later change their status to legal permanent 
resident. The huge majority of native-born citizens, in 
contrast, receive SSNs soon after birth.
    Subclause II of the same section governs the issuance of 
special numbers for nonwork purposes--specifically, when 
individuals seek benefits from federal, state, or local 
programs that require an SSN. Although there are no documented 
cases where an individual received Social Security benefits 
solely on a nonwork SSN, there are hypothetical situations 
where benefits might be paid.
    In CBO's judgment, H.R. 743 essentially reiterates the 
current-law link between Social Security benefits and valid 
SSNs, and thus would lead to little or no savings.
    Title III--Attorney Representative Fee Payment System 
Improvements. Many Social Security claimants, especially 
disability applicants who win benefits on appeal, are 
represented by attorneys. A standard fee agreement between 
attorney and client pledges that the attorney will receive 25 
percent of any past-due benefits up to a cap of $5,300. (That 
cap stood at $4,000 for more than a decade until SSA raised it 
in 2002.) When SSA awardsOASDI benefits in such cases, it pays 
the attorney fee directly from the past-due amounts. In contrast, when 
SSA awards SSI benefits only, or denies all benefits, the attorney must 
seek his or her fee from the client. Processing attorney fees is a 
labor-intensive chore, and in 1999 the Congress permitted SSA to 
withhold up to 6.3 percent of the amounts paid to offset some of those 
costs.
    SSA pays attorney fees in about 200,000 OASDI cases and 
concurrent (OASDI and SSI) cases a year. The average fee, still 
dampened by the $4,000 lid, is now about $2,700, and the 
average processing charge about $170. By 2013, CBO expects that 
annual volume will be about 240,000, the average fee about 
$3,600, and hence the average charge about $225. H.R. 743 
proposes to cap the charge at $75 with future adjustments for 
inflation. That would erase more than half of expected 
receipts, a loss of $34 million in 2013. CBO estimates that 
over the 2004-2013 period the proposed fee cap would cost $275 
million.
    Title IV--Miscellaneous and Technical Amendments. This 
title contains a variety of provisions with significant 
budgetary effects.
    Demonstration Projects. H.R. 743 would amend sections of 
the Ticket to Work and Work Incentives Improvement Act of 1999 
(Public Law 106-170) that govern SSA's research and 
demonstration projects. It would permanently authorize SSA to 
waive certain provisions of law, when appropriate, for 
demonstration projects. Currently such waivers expire in 
December 2004, even for projects already launched. The Congress 
first adopted the waiver language in 1980 and has extended it 
four times since then. In the near term, SSA does not plan to 
use such waivers extensively other than for the $1-for-$2 
demonstrations (see below). In the longer term, because SSA has 
no specific pipeline of projects, CBO estimates spending on 
such projects of about $5 million a year, a typical level for 
the 1990-2002 period (adjusted for inflation).
    Disability Insurance (DI) beneficiaries face limits on 
their earnings. Applicants who earn more than $800 a month 
(labeled substantial gainful activity, or SGA) in 2003 cannot 
qualify for DI; beneficiaries who make more than that for a 
nine-month trial work period and three-month grace period lose 
their entire check, although they retain Medicare and some 
other privileges. The 1999 law directed SSA to conduct 
demonstrations in which checks would be reduced by $1 for each 
$2 of earnings over certain thresholds. But that law left 
unclear how the projects would be funded. H.R. 743 clarifies 
that SSA would pay benefits from the trust fund and other costs 
for the demonstrations from its appropriation for 
administrative expenses.
    Permission to Operate Divided Retirement Systems. Under 
section 218 of the Social Security Act, 21 states are allowed 
to operate retirement systems in which some but not all 
employees are covered under Social Security. In divided 
systems, new employees must pay Social Security tax, but 
employees already on the payroll may choose their coverage. H.R 
743 would extend that to all states.
    A planned merger of two Louisville-area fire and police 
departments spurs this provision. That merger involves about 
1,300 employees. CBO assumes that 200 of them would choose 
Social Security, and 60 or so new hires each year would add to 
their ranks. Extra Social Security taxes would grow from $1 
million in 2004 to $5 million in 2013. Workers who switch 
coverage can avoid or soften the GPO and the WEP. Only a few of 
the newly covered employees, though, would qualify for Social 
Security in the next 10 years, and CBO estimates extra benefits 
of $1 million in 2013 (with effects of less than $500,000 a 
year before then).
    Extending divided-retirement authority to all states would 
avoid the need for piecemeal legislation in the future. CBO and 
SSA have not found widespread interest elsewhere, although 
isolated situations like Louisville's may occur. Noncovered 
states have resisted mandatory coverage, and no state has been 
added to the divided-retirement list since 1977. (In fact, 
Congress acted in 1983 to bar states that already had coverage 
agreements from ending them.) Therefore, CBO assumes negligible 
effects aside from the Louisville merger.
    60-month Employment Requirement for Exemption from 
Government Pension Offset. H.R. 743 would limit a tactic that 
some public employees are using to skirt the GPO. The GPO 
applies to state and local retirees whose last day of 
employment under their pension plan was not covered under 
Social Security. The General Accounting Office reports that 
some workers discovered that by switching jobs for a short 
time--sometimes just one day--they can avoid a lifetime of GPO-
related reductions. Specifically, GAO found 4,800 such 
transfers through June 2002; nearly all were in Texas. H.R. 743 
would replace the ``last-day'' rule with a 60-month 
requirement--the same rule that applies to federal civil 
servants.
    CBO had to estimate how the job-switching detected by GAO 
might evolve over time. Of the 4,800 transfers that GAO found, 
3,500 occurred in 2002 alone, where they amounted to a quarter 
of retirements in the Teachers' Retirement System of Texas. GAO 
found only a handful of cases outside Texas but voiced concern 
that the practice would spread.
    To gauge that possibility, CBO looked at retirement plans 
in other states with large noncovered sectors. CBO concluded 
that conditions in Texas are uniquely favorable to ``last-day'' 
switches. Texas combines a huge noncovered sector, a small 
covered sector, and a statewide plan that recognizes service in 
both. Elsewhere, employees who sought a covered job would have 
to change occupations (for example, from law enforcement to 
teacher) and give up some advantages of their original plan; in 
some states, such as Ohio and Massachusetts, no covered 
positions exist. California, with its mix of covered and 
noncovered jurisdictions, bears the closest resemblance to 
Texas but has a much smaller noncovered sector and thus fewer 
employees with an incentive to switch. If the ``last-day'' rule 
remains intact, states may face pressure from employees to 
amend their plans to accommodate such transfers. But amending a 
plan, especially when the state legislature must approve, is 
complex and time-consuming.
    Under current law, CBO assumes that annual transfers 
spurred by the ``last-day'' rule will climb to 7,000 in 2004--
twice the number in 2002, enough to accommodate further growth 
in Texas (where the practice clearly had not peaked) and some 
spillover to other states. Under H.R 743, significant savings 
in Social Security would follow in about seven years. That lag 
stems from the programs' contrasting rules for eligibility: a 
typical retiree under the Texas teachers' plan qualifies for a 
pension at age 55 and (if the GPO does not erase it) for Social 
Security at age 62. Thus, the first batch of 7,000 annuitants 
who retire in calendar 2004 would reach 62 in 2011. Spouses and 
widow(er)s affected by the GPO in December 2002 saw their 
Social Security reduced by an average of $325 and $505, 
respectively, or about $400 overall. Adjusting those figures 
for inflation and for the age and sex of the affected group led 
CBO to estimate those 7,000 would lose an average of $475, or 
$4 million in December 2011. By December 2013, three cohorts of 
retirees push the monthly savings up to $10 million; savings in 
fiscal year 2013 equal $80 million.
    Real-life cases would be more varied than these simple 
examples. Some annuitants retire after 55 (and reach 62 years 
old before 2011); some are widowed (and qualify for Social 
Security at age 60, not at age 62); and others must wait for a 
younger spouse to reach 62 years old. But these typical cases 
illustrate why CBO estimates small savings through 2010 and 
rapidly growing amounts after that.
    Military Wage Credits. The original Social Security Act of 
1935 did not cover members of the armed services. The 1950 Act 
provided them with free wage credits of $160 a month for 1940 
through 1947. Later acts kept those ``deemed'' credits even 
after Social Security began to cover members' basic pay in 
1956. The 1967 amendments set deemed credits at $300 a quarter, 
where they remained until 2002. The credits were an ad hoc way 
to acknowledge the noncash allowances--for food, housing, and 
so forth--that supplemented basic pay. Until 1983, the services 
reimbursed Social Security intermittently for the estimated 
cost of the resulting benefits. The Congress then amended the 
law to require annual payments, which amounted to about $300 
million a year in the 1980s and 1990s--about $10 million 
annually from small agencies (the Coast Guard, Public Health 
Service, and National Oceanic and Atmospheric Administration) 
and the rest from the Department of Defense.
    The Congress repealed deemed military credits in the 2002 
defense appropriation bill. By then, however, the Defense 
Department had failed to pay amounts owed for 2000 and 2001. 
(The smaller agencies had kept up their contributions.)
    H.R. 743 would transfer $903 million--the Social Security 
actuaries' estimate of arrears plus interest--from the Treasury 
to the trust funds. Intragovemmental transfers do not affect 
total outlays or the deficit. Here, however, they would have 
one peculiar effect: the entire $903 million payment would 
count as an on-budget outlay, as would the receipt by Hospital 
Insurance ($173 million), but the rest ($730 million) would be 
credited to Social Security as an off budget receipt.
    Other Provisions Affecting Social Security. H.R. 743 would 
broaden the Work Opportunity Tax Credit to cover people who use 
a ticket for vocational rehabilitation (VR) under the 1999 law. 
That credit, which expires after December 2003, allows 
employers to subtract up to 40 percent of the first $6,000 of 
wages from income tax when they hire members of targeted 
groups. People referred by state VR agencies are one such 
group; H.R. 743 would add DI and SSI beneficiaries who choose 
other VR providers, such as private firms or nonprofit 
organizations. The first tickets were distributed in 2002 and 
nationwide implementation will take three years. The Joint 
Committee on Taxation estimates that broadening eligibility for 
the tax credit would reduce revenues by $2 million in 2004.
    Title IV would expand eligibility for widows' and widowers' 
benefits in narrow circumstances. To collect Social Security on 
a deceased worker's record, a widow or widower must either have 
been married to the worker for nine months or be actively 
caring for the worker's child. Lawmakers recently learned about 
an unusual case in which a worker could not marry his longtime 
companion because state law forbade him from divorcing his 
wife, who was in a mental institution. When his wife's death 
finally permitted him to remarry, he was already terminally ill 
and died a few months later. H.R. 743 would waive the duration-
of-marriage requirement in those rare circumstances. Only one 
such case has come to light and CBO expects that the provision 
would have little cost.
    Increase Resource Limits in SSI H.R. 743 would increase the 
amount of countable resources that an individual or couple may 
own and still qualify for SSI. Under current law, to be 
eligible for SSI, an individual can have countable resources 
valued at up to $2,000, while couples can have resources of up 
to $3,000. (Besides the applicant's own resources, SSA counts 
resources belonging to others in some situations--to parents of 
disabled children, and to sponsors of immigrants.) Those 
ceilings have not changed since 1989. Countable resources 
include cash, liquid assets, and real or personal property that 
could be converted to cash. Some items--including the value of 
a primary residence, an automobile, medical equipment, and 
certain household goods--are not counted. Resources are only 
used to determine whether someone is eligible for SSI; they do 
not determine benefit amounts.
    The legislation would increase the resource limits to 
$3,000 for individuals and $4,500 for couples beginning in 
January 2004. After 2004, the limits would rise by the annual 
cost-of-living adjustment granted to SSI recipients. By 
increasing the resource limits, the act would allow more people 
to become eligible for the program and reduce the amount of 
time it takes some applicants to ``spend down'' their assets to 
become eligible, It also would affect some current 
beneficiaries who lose benefits, either temporarily or 
permanently, when their countable resources grow.
    CBO estimates the provision would gradually increase SSI 
enrollment up to about 18,000 additional people in 2006 and 
about 21,000 in 2013. CBO based its estimate on information 
from SSA about the characteristics of applicants and 
beneficiaries who would be affected and assumptions about how 
long the current limits bar them from the program. Applicants 
who are rejected for excess resources are older, on average, 
than the current SSI caseload; are more likely to have other 
income that would trim their SSI benefit; and, CBO assumes, 
might prevail on a second or third application even under 
current law as they draw down their resources for living 
expenses.
    In most states, SSI eligibility automatically confers 
entitlement to Medicaid benefits. For these predominantly adult 
cases, CBO assumes that the average Medicaid cost would greatly 
exceed the SSI benefit. We estimate that H.R. 743 would 
increase spending on SSI by $6 million in 2004, $78 million 
over the 2004-2008 period, and $198 million over the 2004-2013 
period. We also estimate that it would increase federal 
Medicaid outlays by $45 million in 2004, $870 million over the 
2004-2008 period, and $2.9 billion over the 2004-2013 period.
    Part of that effect comes from additional participants in 
the Qualified Medicare Beneficiary (QMB) and Specified Low-
Income Medicare Beneficiary (SLMB) programs, who do not 
necessarily receive SSI. Under those programs, Medicaid pays 
some or all of the premiums and cost-sharing under Parts A and 
B of Medicare for enrollees who have incomes below 120 percent 
of the federal poverty level and countable assets up to two 
times the resource limit used in the SSI program. By raising 
and indexing the resource limit in SSI, H.R. 743 would set that 
threshold at about $7,500 in 2013, compared with $4,000 under 
current law.
    Based on current participation in the programs, CBO 
estimates that the act would eventually increase the number of 
QMB and SLMB beneficiaries by about 225,000. That effect would 
occur gradually, with most of the cost in the second half of 
CBO's 10-year horizon. The extra participants would increase 
federal Medicaid spending for the QMB and SLMB programs by $10 
million in 2004, $380 million over the 2004-2008 period, and 
$1.5 billion over the 2004-2013 period. (Those amounts are a 
subset of the Medicaid totals cited above.)
    CBO estimates that additional participation in the QMB 
program would increase Medicare spending as well. That program 
covers all Medicare cost-sharing for enrollees with incomes 
below the federal poverty level and limited assets. CBO 
anticipates that new QMB participants would use more Medicare 
services than under current law because they would no longer 
have to pay anything for them. As a result, CBO estimates extra 
Medicare spending (net of premiums) of $5 million in 2004, $195 
million over the 2004-2008 period, and $725 million over the 
2004-2013 period.
    Review of State Agency SSI Awards. H.R. 743 would require 
SSA to conduct reviews of initial decisions to award SSI 
benefits to certain disabled adults. The legislation would 
direct SSA to review at least 25 percent of all favorable 
adult-disability determinations made by the states' Disability 
Determination Service (DDS) offices in 2004. The agency would 
have to review at least half of the adult-disability awards 
made by DDS offices in 2005 and beyond.
    CBO anticipates that state DDS offices will approve between 
350,000 and 400,000 SSI claims from disabled adults annually 
between 2004 and 2013. Based on similar reviews in the Social 
Security Disability Insurance program, CBO projects that by 
2013 the extra reviews would ultimately overturn more than 
20,000 of those awards, leading to lower outlays for SSI and 
Medicaid. CBO estimates that the provision would reduce SSI 
benefits by $3 million and Medicaid outlays by $4 million in 
2004. Over the 2004-2013 period, CBO estimates the savings at 
$425 million in SSI and $1.1 billion in Medicaid.
    Other SSI Provisions. H.R. 743 would make a limited 
exception to SSI's retrospective monthly accounting when a 
claimant has certain nonrecurring income. An SSI check may 
fluctuate depending on a recipient's other income. 
Retrospective monthly accounting is used to determine those 
benefit amounts. When someone first qualifies for SSI, the 
amount of countable income in the first month determines 
benefits for the first three months of eligibility. Thus, 
nonrecurring income in that first month can shrink benefits in 
the next two months. H.R. 743 would permit SSA to exclude 
certain nonrecurring income when calculating SSI benefits for 
the second and third (but not the first) month. Based on data 
provided by SSA, CBO estimates the provision would increase 
benefits by an average of $160 per month for around 1,000 
beneficiaries in 2004. Although costs in any single year would 
not reach $500,000, the provision would increase outlays by a 
total of $1 million over the 2004-2008 period, and $2 million 
over the 2004-2013 period.
    H.R. 743 also would enable some blind or disabled children 
of U.S. military personnel stationed overseas to receive SSI. 
Under current law, those children may continue to collect SSI 
only if they were already eligible when the family moved 
overseas. The legislation would allow them to qualify overseas 
even if they did not previously receive SSI. Based on 
information from SSA, CBO expects the provision would add fewer 
than a dozen children,some of them infants born overseas, to 
the SSI rolls at an average benefit of about $500 a month. Extra costs 
would not reach $500,000 in any year but would total about $1 million 
over the 2004-2013 period.
    Finally, H.R. 743 proposes several liberalizations to the 
SSI program that, in CBO's estimate, each would cost less than 
$500,000 over the 2004-2013 period. They include:
           Expanding the exclusions for certain 
        infrequent or irregular income;
           Making the 9-month resource exclusion 
        periods uniform;
           Modifying the dedicated account requirement;
           Eliminating certain restrictions on student 
        earned income;
           Excluding AmeriCorps and other volunteer 
        benefits from income;
           Changing the treatment of education-related 
        income and resources; and
           Altering the monthly treatment of uniformed 
        service compensation.
            Spending Subject to Appropriation
    H.R. 743 would increase SSA's administrative cost by 
increasing standards for certain program integrity activities 
and by slightly increasing program caseloads. These costs are 
subject to annual appropriation and are thus classified as 
discretionary spending. CBO estimates added costs would be $19 
million in 2004, $113 million over the 2004-2008 period and 
$240 million through 2013. About two-thirds would be for SSI 
administration with the remainder for the OASDI program.
    Title I. H.R. 743 would require SSA to monitor 
representative payees more stringently. Currently, SSA conducts 
on-site inspections every three years for high-volume payees--
organizations serving more than 100 beneficiaries and 
individuals (such as attorneys) serving more than 20; the 
legislation would lower those thresholds to 50 and 15 
beneficiaries, respectively. That would permanently add about 
$4 million a year to SSA's costs. H.R. 743 also would require 
SSA to enforce bonding and licensing requirements, redirect 
benefit checks when a representative payee fails to file an 
annual accounting, and compensate beneficiaries for any funds 
misused by organizational payees since 1995. Those costs would 
be largest in the early years of implementation, pushing SSA's 
required funding for title I to an estimated $8 million in 2004 
and $6 million in 2005. Social Security and SSI would each 
account for about half of those amounts.
    Title II. Provisions of title II to bar fugitives from 
receiving Social Security benefits and to enforce the GPO and 
WEP using IRS information also would entail administrative 
costs, especially in the early phases. Obtaining the IRS data 
is just the first step; SSA must match to its records and 
follow-up potential cases manually, at an estimated cost of 
$250 each. Some investigations will lead nowhere; some people 
will be exempt because they collect a survivor payment (not a 
retirement annuity) from state or local government, or 
qualified before the GPO or WEP took effect. CBO assumes that 
SSA will track down 3 cases for every 2 ultimately affected. 
Once SSA finds them, however, annual costs are more modest, 
chiefly to verify the pension amount in case of cost-of-living 
adjustments or other changes. CBO assumes that using 1099-R 
reports of pension income to help enforce the GPO and WEP 
provisions would ultimately boost the number of GPO and WEP 
cases by about 4 percent, or 60,000 people by 2013. To get 
there, CBO assumes that SSA would detect more than 300,000 
apparent matches, weed out 200,000 based on information already 
in its records, and investigate the remaining 100,000 
intensively. Costs would peak at $8 million in 2006, as SSA 
uses the first batch of IRS information, before subsiding. 
Enforcing the fugitive provision would cost SSA $1 million to 
$2 million annually, chiefly because SSA already screens 
fugitive lists to enforce the ban in SSI.
    Title IV. Title IV would increase SSA's costs of 
administering the SSI program. Lifting the resource limit would 
increase the number of beneficiaries. Most of the new 
beneficiaries, however, would apply and be rejected under 
current law; changing these denials to allowances would not 
involve significant costs. The new reviews of state agency 
allowances--roughly 125,000 cases annually when fully phased-
in--would cost $145 million over the 2004-2013 period. On top 
of the reviews, which are estimated to cost about $100 each (in 
2004 dollars), SSA estimates some additional start-up costs in 
the first year. Thus, the estimated annual costs would rise 
from $9 million in 2004 to $17 million in 2013.
    Intergovernmental and private-sector impact: The Joint 
Committee on Taxation has reviewed the tax provisions of the 
act and determined that those provisions contain no 
intergovernmental or private-sector mandates as defined in 
UMRA.
    Section 4 of UMRA excludes from that law's requirements any 
provision in a bill or act that relates to the OASDI programs 
under title II of the Social Security Act. The provisions of 
H.R. 743 that amend title II of the Social Security Act fall 
within that exclusion.
    Other provisions of H.R. 743, however, contain mandates as 
defined in UMRA. The act would preempt state laws that might 
otherwise prohibit the exchange of information betweenSSA and 
state and local law enforcement officers conducting background checks 
on representative payees. That preemption could limit the application 
of state privacy laws in some cases, but it would impose no duty on 
state or local governments that would result in additional spending.
    H.R. 743 also would exempt the Railroad Retirement 
Investment Trust from state and local taxes. The Trust was 
created in 2002 to invest most of the funds of the government's 
Railroad Retirement program. CBO has found no state that has 
attempted to collect or plans to collect any type of tax from 
the Trust. Consequently, CBO estimates that this preemption of 
state taxing authority, while an intergovernmental mandate as 
defined in UMRA, would result in no significant revenue losses 
to state or local governments, and any potential losses would 
be far below the threshold established in UMRA ($60 million in 
2004, adjusted annually for inflation).
    Finally, the act would alter income and eligibility 
requirements in the SSI program. Because SSI beneficiaries are 
eligible for Medicaid, CBO estimates that state spending for 
Medicaid would increase by about $2.2 billion over the 2004-
2013 period. However, states have significant flexibility in 
Medicaid to alter their programmatic responsibilities, so this 
additional spending would not be the result of a mandate as 
defined in UMRA.
    H.R. 743 contains one private-sector mandate as defined in 
UMRA, It would prohibit private entities from charging a fee 
for products and services that are available for free from SSA, 
unless they disclose that alternative when they make the offer. 
CBO estimates that the resulting cost to the private sector 
would not exceed the threshold established in UMRA ($120 
million in 2004, adjusted annually for inflation).
    Previous CBO Estimate: On March 20, 2003, CBO transmitted a 
cost estimate for H.R. 743 as ordered reported by the House 
Committee on Ways and Means on March 13, 2003. We estimated 
that version of H.R. 743 would lead to a combined $655 million 
in direct spending reductions and revenue increases over the 
2004-2013 period. This version totals $594 million over the 
same period. Provisions that differ significantly between the 
two versions, and their effects on the 10-year totals, are:
           The nationwide study of representative 
        payees (at a cost of $18 million);
           A provision of the House version, dropped by 
        the Senate, that would temporarily extend the attorney-
        fee program to SSI (forgoing receipts of $26 million);
           New provisions to enforce the GPO and WEP 
        using IRS information (saving $2.1 billion) and to 
        allow additional cross-program recovery (saving $249 
        million);
           Permanent authority for SSA to grant waivers 
        in demonstration projects involving Social Security 
        disability beneficiaries (at an estimated cost of $42 
        million); and
           All of the SSI provisions in title IV, 
        subtitle D of the Senate version (net cost of $2.3 
        billion).
    Estimate prepared by: Federal Spending: Social Security-
Kathy Ruffing; SSI-Geoffrey Gerhardt; Medicaid Eric Rollins.
    Federal revenues. Edward Harris and Annabelle Bartsch; 
Impact on state, local, and tribal governments: Leo Lex; Impact 
on the private sector: Ralph Smith.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       IV. Votes of the Committee

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the following statements are made 
concerning the votes of the Committee on Finance in 
consideration of the bill, H.R. 743.

                      A. MOTION TO REPORT THE BILL

    The bill, H.R. 743, as amended, was ordered favorably 
reported by a voice vote (with a quorum being present).

                 V. Regulatory Impact and Other Matters


                          A. REGULATORY IMPACT

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee states that the legislation 
will not significantly increase regulation of any individuals 
or businesses; will not adversely impact the personal privacy 
of individuals; and will result in no significant additional 
paperwork.
    For further discussion of the impact of the bill on tax 
complexity, see section C. below.

              B. INFORMATION RELATING TO UNFUNDED MANDATES

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                       C. TAX COMPLEXITY ANALYSIS

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the House Committee on Ways and 
Means, the Senate Committee on Finance, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Internal Revenue Code and that have 
widespread applicability to individuals or small businesses.

        VI. Changes to Existing Law Made by the Bill as Reported

    In the opinion of the Committee, it is necessary, in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate, relating to changes in existing law made by the 
bill reported by the Committee.

                         VII. Additional Views

    I write to express my concerns about an effect of a 
proposal in Section 210 of this bill that came to light after 
the Committee ordered the bill reported. I am concerned that 
the inclusion in this bill of a proposal from the President's 
budget could require some retirees of State and local 
governments to repay the Federal government thousands or tens 
of thousands of dollars of Social Security benefit 
overpayments. I plan to work to change this provision as the 
bill moves through the legislative process to prevent this 
outcome.
    Under current law, some State and local government workers 
do not participate in the Social Security program, but instead 
are covered by separate pensions administered by these 
governments. At some point these workers may also receive 
Social Security benefits as a widow, widower, or spouse of a 
worker who did participate in Social Security. Under the 
Government Pension Offset (GPO)--a longstanding provision of 
the Social Security program--these widow's, widower's, and 
spousal monthly Social Security benefits are reduced by an 
amount equal to two-thirds of the monthly amounts of the State 
and local government pensions they receive. The Social Security 
Administration is not aware, however, that some of these 
widows, widowers, and spouses are receiving State and local 
government pensions. Therefore, the GPO is not applied to the 
Social Security benefits of the individuals in these cases.
    Pension-issuing entities--including State and local 
governments' pension-issuing agencies--must submit to the IRS 
each year Form 1099R, which indicate the amount of pension 
payments issued to retirees. The President's budget included a 
proposal to require these State and local government agencies 
to also include indicators on these Form 1099R that denote 
whether or not these pension recipients were covered by Social 
Security as workers. The proposal also included a provision 
that would allow the IRS to share this Form 1099R information 
with the Social Security Administration (SSA) on a confidential 
basis. SSA would use this information to help determine whether 
the current widow's, widower's, or spousal Social Security 
benefits of these pension recipients would be subject to the 
GPO. If so, these monthly Social Security benefits of current 
beneficiaries would henceforth be reduced or eliminated 
according to current law. In addition, the monthly benefits of 
all future beneficiaries would also be reduced or eliminated. 
Moreover, if the information on these Form 1099Rs had been 
known by SSA at the time that current Social Security 
beneficiaries first began drawing benefits, the current 
beneficiaries would have received smaller benefits than what 
they actually received in each of the months dating back to 
their first monthly benefit. The total of such ``overpayments'' 
could amount to thousands or tens of thousands of dollars.
    Subsequent to the time that H.R. 743 was reported by the 
Senate Finance Committee, it became apparent, however, that 
there were two different views of how these overpayments could 
be treated. One view of the language in the ``Chairman's Mark'' 
would result in SSA working with the individual to have him or 
her repay these overpayments over time. Another view of the 
language in the ``Chairman's Mark'' would only result in 
prospective benefit payments being reduced or eliminated.
    By allowing SSA to recover these overpayments, current 
beneficiaries would face the necessity of repayment just as 
their monthly Social Security benefits would be eliminated or 
significantly reduced by the GPO. This could leave these 
beneficiaries--including widows and widowers--in severe 
financial straits. This is unacceptable to me. Therefore, I 
will work to see that the language of this provision is changed 
as it moves through the legislative process, so that the 
receipt of the information contained in the modified Form 
1099Rs by SSA would not cause these Social Security 
beneficiaries to have to repay any overpayments.

                                                         Max Baucus

                                
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