[House Report 106-507]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-507
=======================================================================
SENIOR CITIZENS' FREEDOM TO WORK ACT OF 2000
_______
March 1, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Archer, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 5]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 5) to amend title II of the Social Security Act to
eliminate the earnings test for individuals who have attained
retirement age, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
I. Introduction................................................. 3
A. Purpose and Summary................................... 3
B. Background and Need for Legislation................... 3
C. Legislative History................................... 4
II. Explanation of Provisions.................................... 5
Section 1. Short Title................................... 5
Section 2. Elimination of the earnings test for
individuals who have attained retirement age......... 5
III.Votes of the Committee....................................... 7
IV. Budget Effects of the Bill................................... 7
A. Committee Estimate of Budgetary Effects............... 7
B. Statement Regarding New Budget Authority and Tax
Expenditures......................................... 7
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 8
V. Other Matters Required to be Discussed Under the Rules of
the House.................................................. 10
A. Committee Oversight Findings and Recommendations...... 10
B. Summary of Findings and Recommendations of the
Government Reform and Oversight Committee............ 11
C. Inflationary Impact Statement......................... 11
VI. Changes in Existing Law Made by the Bill, as Reported........ 11
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Senior Citizens' Freedom to Work Act
of 2000''.
SEC. 2. ELIMINATION OF EARNINGS TEST FOR INDIVIDUALS WHO HAVE ATTAINED
RETIREMENT AGE.
Section 203 of the Social Security Act (42 U.S.C. 403) is amended--
(1) in subsection (c)(1), by striking ``the age of seventy''
and inserting ``retirement age (as defined in section
216(l))'';
(2) in paragraphs (1)(A) and (2) of subsection (d), by
striking ``the age of seventy'' each place it appears and
inserting ``retirement age (as defined in section 216(l))'';
(3) in subsection (f)(1)(B), by striking ``was age seventy or
over'' and inserting ``was at or above retirement age (as
defined in section 216(l))'';
(4) in subsection (f)(3)--
(A) by striking ``33\1/3\ percent'' and all that
follows through ``any other individual,'' and inserting
``50 percent of such individual's earnings for such
year in excess of the product of the exempt amount as
determined under paragraph (8),''; and
(B) by striking ``age 70'' and inserting ``retirement
age (as defined in section 216(l))'';
(5) in subsection (h)(1)(A), by striking ``age 70'' each
place it appears and inserting ``retirement age (as defined in
section 216(l))''; and
(6) in subsection (j)--
(A) in the heading, by striking ``Age Seventy'' and
inserting ``Retirement Age''; and
(B) by striking ``seventy years of age'' and
inserting ``having attained retirement age (as defined
in section 216(l))''.
SEC. 3. CONFORMING AMENDMENTS ELIMINATING THE EXEMPT AMOUNT FOR
INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.
(a) Uniform Exempt Amount.--Section 203(f)(8)(A) of the Social
Security Act (42 U.S.C. 403(f)(8)(A)) is amended by striking ``the new
exempt amounts (separately stated for individuals described in
subparagraph (D) and for other individuals) which are to be
applicable'' and inserting ``a new exempt amount which shall be
applicable''.
(b) Conforming Amendments.--Section 203(f)(8)(B) of the Social
Security Act (42 U.S.C. 403(f)(8)(B)) is amended--
(1) in the matter preceding clause (i), by striking
``Except'' and all that follows through ``whichever'' and
inserting ``The exempt amount which is applicable for each
month of a particular taxable year shall be whichever'';
(2) in clause (i), by striking ``corresponding'';
(3) in clause (ii), in the matter preceding subclause (I), by
striking ``corresponding'' and all that follows through
``individuals)'' and inserting ``exempt amount which is in
effect with respect to months in the taxable year ending after
1993 and before 1995 with respect to individuals who have not
attained retirement age (as defined in section 216(l))'';
(4) in subclause (II) of clause (ii), by striking ``2000''
and all that follows and inserting ``1992,''; and
(5) in the last sentence, by striking ``an exempt amount''
and inserting ``the exempt amount''.
(c) Repeal of Basis for Computation of Exempt Amount Affecting
Individuals Who Have Attained Retirement Age.--Section 203(f)(8)(D) of
the Social Security Act (42 U.S.C. 403(f)(8)(D)) is repealed.
SEC. 4. ADDITIONAL CONFORMING AMENDMENTS.
(a) Elimination of Redundant References to Retirement Age.--Section
203 of the Social Security Act (42 U.S.C. 403) is amended--
(1) in subsection (c), in the last sentence, by striking
``nor shall any deduction'' and all that follows and inserting
``nor shall any deduction be made under this subsection from
any widow's or widower's insurance benefit if the widow,
surviving divorced wife, widower, or surviving divorced husband
involved became entitled to such benefit prior to attaining age
60.''; and
(2) in subsection (f)(1), by striking clause (D) and
inserting the following: ``(D) for which such individual is
entitled to widow's or widower's insurance benefits if such
individual became so entitled prior to attaining age 60,''.
(b) Conforming Amendment to Provisions for Determining Amount of
Increase on Account of Delayed Retirement.--Section 202(w)(2)(B)(ii) of
the Social Security Act (42 U.S.C. 402(w)(2)(B)(ii)) is amended--
(1) by striking ``either''; and
(2) by striking ``or suffered deductions under section 203(b)
or 203(c) in amounts equal to the amount of such benefit''.
(c) Provisions Relating to Earnings Taken Into Account in Determining
Substantial Gainful Activity of Blind Individuals.--The second sentence
of section 223(d)(4) of such Act (42 U.S.C. 423(d)(4)) is amended by
striking ``if section 102 of the Senior Citizens' Right to Work Act of
1996 had not been enacted'' and inserting the following: ``if the
amendments to section 203 made by section 102 of the Senior Citizens'
Right to Work Act of 1996 and by the Senior Citizens' Freedom to Work
Act of 2000 had not been enacted''.
SEC. 5. EFFECTIVE DATE.
(a) In General.--The amendments and repeals made by this Act shall
apply with respect to taxable years ending after December 31, 1999.
(b) Special Rule Applicable to Individuals Who Attain Normal
Retirement Age During the First Taxable Year Ending After December 31,
1999.--Sections 202 and 203 of the Social Security Act, as in effect
immediately prior to the amendments and repeals made by this Act, shall
apply to any individual who attains retirement age (as defined in
section 216(l) of such Act) during the first taxable year ending after
December 31, 1999 (and to any person receiving benefits under title II
of the Social Security Act on the basis of the wages and self-
employment income of such individual), but only with respect to
earnings for so much of such taxable year as precedes the month in
which such individual attains retirement age (as so defined).
I. INTRODUCTION
A. Purpose and Summary
The ``Senior Citizens Freedom To Work Act of 2000'' would
eliminate the Social Security retirement earnings test for
seniors who attain the full retirement age (currently age 65,
rising to 67 in 2027). The purpose of the legislation is to
remove work disincentives for seniors who reach full retirement
and to improve the fairness of the Social Security program. The
legislation would have a negligible effect on the long-term
financial status of the Social Security Trust Funds.
B. Background and Need for Legislation
The Social Security program has included a ``retirement
earnings test'' since its inception in 1935. The earnings test
reduces Social Security benefits for beneficiaries who continue
to work if their earnings exceed a specific threshold, known as
the ``earnings limit.'' The earnings limit applies only to
earnings from wages and self-employment income; it does not
apply to ``unearned'' income, such as pensions, savings and
investments. The earnings test has been relaxed over time to
reflect changes in the workforce but has not been eliminated.
Working seniors who lose benefits because of the earnings
test receive a delayed retirement credit (DRC), which increases
their monthly benefits in the future to help compensate them
for the loss. On average, seniors should receive the same
amount of lifetime benefits regardless of when they retire.
According to the Congressional Budget Office, 631,000
seniors between the ages of 65 and 69 will have some or all of
their benefits reduced in 2000 because of the earnings test.
Thousands more will deliberately reduce the amount they work to
avoid a benefit reduction. The benefit reduction in 2000 will
average approximately $8,000 per retiree affected by the
earnings test.
After a lifetime of payroll tax contributions, workers have
an earned right to their benefits, regardless of economic need.
Withholding benefits from seniors simply because they choose to
work beyond the full retirement age is unfair, and it
discriminates against seniors who need to work to supplement
their income.
Moreover, the earnings test imposes a risk because many
seniors will not live long enough to recover all their lost
benefits through the DRC. Lower-income workers and some
minorities face the highest risk of losing benefits to which
they are entitled because of their shorter life expectancies.
Not only is the earnings test unfair, but it adversely
affects the economy by discouraging seniors from remaining in
the workforce. After accounting for Federal income and payroll
taxes, working seniors between the ages of 65 and 69 can face
high marginal tax rates as a result of the earnings test.
Discouraging work among seniors may have made sense during the
Great Depression when unemployment was high, but it makes
little sense in today's economic environment.
The retirement of the baby boomers and the aging of the
workforce have serious implications for productivity, economic
growth and future living standards. As seniors become an
increasing share of the population, they should be given the
appropriate opportunities and incentives to remain in the
workforce, to share their skills and experience with younger
workers and to contribute to growth in the economy.
Finally, repealing the earnings test will improve the
personal and financial well-being of America's senior citizens.
As seniors continue to enjoy increased longevity and better
health, they should be allowed to work as long as they are
willing to do so. Studies have shown that allowing seniors to
remain productive in retirement has a positive impact on their
health and self-esteem. Moreover, repealing the earnings test
would allow seniors the freedom to work without penalty so they
can supplement their Social Security benefits. This is
particularly important to many lower- and moderate-income
retirees who rely more heavily on earnings from work rather
than savings and pensions.
C. Legislative History
On February 15, 2000, the Subcommittee on Social Security
held a public hearing on improving Social Security work
incentives, which focused on the effects of repealing the
Social Security earnings test for working seniors who reach the
full retirement age as provided in H.R. 5, which was introduced
by Mr. Sam Johnson and Mr. Collin Peterson on March 1, 1999.
The Subcommittee received testimony in support of repealing the
earnings test from the Commissioner of Social Security as well
as senior advocates, economists, academics, business
representatives, and senior citizens. In addition, during the
first session of the 106th Congress, the Subcommittee and the
Full Committee on Ways and Means held numerous hearings on
Social Security reform proposals that included provisions to
eliminate the earnings test.
On February 16, 2000, the Subcommittee on Social Security
ordered favorably reported to the full Committee H.R. 5, the
Senior Citizens' Freedom to Work Act of 2000, as amended, by a
unanimous voice vote, with a quorum present.
On February 29, 2000, the Full Committee on Ways and Means
ordered favorably reported to the House H.R. 5, the Senior
Citizens' Freedom to Work Act of 2000, as amended, by a
unanimous voice vote, with a quorum present.
II. EXPLANATION OF PROVISIONS
section 1. short title
The short title of the bill is the Senior Citizens' Freedom
to Work Act of 2000.
section 2. elimination of the earnings test for individuals who have
attained retirement age
Present law
Working seniors who reach the full retirement age
(currently 65 in 2000, rising to 67 by 2027) receive a benefit
reduction if their earnings from wages and self-employment
income exceed a specific threshold, or ``earnings limit.'' In
2000, the earnings limit for working seniors age 65 and older
is $17,000. Social Security benefits are reduced by $1 for
every $3 of earnings in excess of the limit. Legislation passed
in 1996 will increase the earnings limit to $25,000 in 2001 and
to $30,000 in 2002. Thereafter, the limit will increase with
average wage growth in the economy. Seniors are exempt from the
earnings test once they reach age 70. A separate earnings test
applies to working seniors who retire before the full
retirement age.\1\ The earnings test only applies to the Old-
Age and Survivors Insurance Program.
---------------------------------------------------------------------------
\1\ Working seniors who retire before the full retirement age lose
$1 of Social Security benefits for every $2 of earnings in excess of
the earnings limit. The limit is $10,080 in 2000. It increases annually
with average wage growth.
---------------------------------------------------------------------------
Explanation of provision
The proposal would exempt working seniors from the earnings
test once they reach the full retirement age.
Reason for change
According to the Congressional Budget Office, 631,000 non-
disabled beneficiaries age 65 through 69 lose some or all of
their Social Security benefits as a result of the earnings
test. Many more are negatively impacted because they
deliberately hold their earnings below the limit to avoid the
penalty. Withholding benefits from working seniors is
inconsistent with the fact that workers are entitled to their
Social Security benefits regardless of economic need. Moreover,
the earnings test penalizes seniors who want or need to work
during retirement to supplement their Social Security benefits.
The penalty discourages many seniors from working as much as
they otherwise would, thus reducing their personal and
financial well-being. Discouraging work among seniors also has
serious implications for productivity, economic growth and
future living standards. Given the impending retirement of the
Baby Boom generation and the implications for economic growth,
we need to take steps now to encourage older workers to remain
in the work force. Eliminating the earnings test for seniors
who reach the full retirement age would also reduce Social
Security Administration administrative costs and reduce the
number of inaccurate benefit payments each year. The Social
Security Administration estimates that the cost of
administering the earnings test for those age 65 through 69 is
approximately $70 million annually.
[Section 3 of the legislation makes several technical and
conforming amendments required by the repeal of the earnings
limit.]
section 4. additional conforming amendments
Present law
Seniors who reach the full retirement age and do not
receive benefits (either because they don't file for benefits
or because benefits are withheld under the earnings test)
receive a delayed retirement credit (DRC) to partially
compensate them for the loss. The DRC increases the worker's
Social Security benefit for each month that benefits are fully
withheld. The DRC is 6 percent per year for workers age 65 in
2000. It will increase by 0.5 percentage points every two years
until reaching 8 percent for seniors reaching the full
retirement age (then age 66) in 2009, at which point, the DRC
will be ``actuarially fair.'' In other words, on average, the
DRC should fully compensate workers for benefits withheld under
the earnings test.
The earnings test and the delayed retirement credit only
apply to the Old-Age and Survivors Insurance program. The
Social Security Act contains a separate earnings threshold,
called the substantial gainful activity (SGA) level, which
applies only to the Disability Insurance program. Workers with
earnings above the SGA level are ineligible for disability
benefits. In 2000, the SGA level for non-blind individuals with
disabilities is $700 per month. This level is set by
regulation. In 2000, the SGA level for individuals who are
blind is $1,170 per month. This level increases annually with
average wage growth in the economy as established in statute.
Explanation of the provision
The provision makes conforming changes to eliminate the DRC
for working seniors who would have had benefits withheld under
the earnings test if the legislation were not enacted. The DRC
is retained for seniors who choose to delay benefit application
beyond the full retirement age.
The provision makes several other conforming amendments
relating to the SGA level for the blind and provisions made
redundant by the repeal of the earnings test.
Reason for change
The DRC is repealed for seniors who have reached the full
retirement age because they will receive their full Social
Security benefits regardless of their earnings from work. As a
result, there is no need to compensate seniors for lost
benefits because they will no longer be penalized for working.
Because of the interaction between the earnings test and the
DRC, the cost of repealing the earnings test is fully recovered
over time. Consequently, repealing the earnings test has a
negligible long-term impact on Social Security's financial
solvency. In addition, there is no impact on the estimated date
of the Trust Funds' depletion or the date when benefit outlays
exceed income.
This provision ensures that the current law substantial
gainful activity level for the blind ismaintained and will
continue to be wage-indexed in the future.
section 5. effective date
Sections 2 through 4 (which lower the earnings test exempt
age from 70 to the full retirement age and make conforming
amendments) are effective for taxable years after December 31,
1999.
A special rule is provided for seniors who reach the full
retirement age in 2000. The special rule retains the $17,000
earnings limit and the 33\1/3\ percent withholding rate for
seniors who reach the full retirement age in 2000, ensuring
that they will not be affected by the more stringent earnings
test which applies to early retirees. Once the worker attains
the full retirement age, the earnings test will no longer
apply.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the votes of the Committee on Ways and Means in its
consideration of the bill, H.R. 5, as amended.
motion to report the bill
The bill, H.R. 5, as amended, was ordered favorably
reported by a unanimous voice vote, with a quorum present.
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made concerning the effects on the budget of the revenue
provisions of the bill, H.R. 5, as reported.
The Committee agrees with the estimate prepared by the
Congressional Budget Office (CBO) which is included below.
B. Statement Regarding New Budget Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states the
Committee bill results in no net increase or decrease in budget
authority for direct spending programs relative to current law,
and no new or increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the Congressional Budget Office (``CBO''), the
following statement by CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, March 1, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5, the Senior
Citizens' Freedom to Work Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathy
Ruffing.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 5--Senior Citizens' Freedom to Work Act of 2000
Summary: H.R. 5 would repeal the earnings test that reduces
the Social Security benefits of some people between the
program's normal retirement age (currently 65) and 69. Under
H.R. 5, those individuals could draw their full Social Security
benefits, regardless of their earnings.
CBO estimates that enacting H.R. 5 would increase direct
spending by $3.9 billion in fiscal year 2000, by $19.8 billion
over the 2000-2005 period, and by $22.8 billion over the 2000-
2010 period. Administrative costs would rise by $35 million in
2000, but fall by $0.7 billion over the 2001-2010 period. Both
the benefit payments and administrative expenses for Social
Security are off-budget. The bill would have no pay-as-you-go
impact because legislation affecting the Social Security trust
funds is exempt from pay-as-you-go procedures. H.R. 5 would
impose no mandates on state, local, or tribal governments or on
the private-sector.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 5 is shown in Table 1. The costs of
this legislation fall within budget function 650 (Social
Security).
Basis of estimate: Under current law, for beneficiaries
between Social Security's normal retirement age (NRA), now 65,
and 69, a dollar of benefits is withheld for every three
dollars of earnings above a threshold. Under the Contract With
America Advancement Act, that threshold is $17,000 in 2000; it
will rise to $25,000 in 2001 and $30,000 in 2002, and climb
with average wages thereafter. A stricter test applies to
beneficiaries between age 62 (the so-called early retirement
age, or ERA) and the NRA; recipients are exempt from the
earnings test when they reach age 70.
TABLE 1.--ESTIMATED BUDGET EFFECTS OF H.R. 5
[By fiscal year, in billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
DIRECT SPENDING
Estimated Outlays: Benefit Payments.................. 3.9 4.3 3.6 3.1 2.7 2.1 1.6 1.0 0.5 0.1 0.1
SPENDING SUBJECT TO APPROPRIATION ACTION
Estimated Outlays: Administrative Costs.............. (\1\) -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1
Memorandum:
Exempt amount under current law (by calendar 17,000 25,000 30,000 31,200 32,400 33,480 34,560 35,880 37,200 38,520 39,840
year, in dollars) \2\...........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $50 million.
\2\ Through 2002, these are the amounts set in the Contract With America Advancement Act (Public Law 104-121). After 2002, they are indexed to overall
wage increases.
Note.--Outlays represent extra benefits that would be paid from the Old-Age and Survivors Insurance Trust Fund, which is off-budget.
Direct spending
CBO estimates that repealing the earnings test for
beneficiaries over the NRA, effective January 1, 2000, would
lead to outlays of about $5 billion in that calendar year for
additional Social Security benefits. Only three-quarters of
that cost, $3.9 billion, would occur in fiscal year 2000
because the bill would affect payments for only nine months of
that fiscal year.
CBO bases its estimate on data obtained from the Social
Security Administration's (SSA's) Continuous Work History
Sample. That source has consistently shown that approximately
2.4 million beneficiaries between the ages of 65 and 69 have
earnings, although only a minority of them make enough to be
affected by the earnings test. In calendar year 2000, CBO
estimates that approximately 625,000 people would receive, on
average, an extra benefit of $8,200 under H.R. 5. By 2002, that
number would shrink to about 400,000 people, collecting on
average an extra benefit of about $10,000. After 2002, an
estimated 350,000 to 400,000 workers each year would have at
least some benefits withheld under current law and therefore
would be affected by the bill.
The cost of repeal would decline over time for several
reasons. First, the amount of exempt earnings is scheduled to
rise steeply in 2001 and 2002, and thus fewer people would be
subject to the test under current law. Second, the NRA will
climb gradually from 65 to 66 in the next decade, further
shrinking the number of people affected. Third, the costs will
gradually be offset by savings in the delayed retirement credit
(DRC), which boosts subsequent benefits for anyone who defers
receiving payments for any months after reaching the NRA but
before age 70. Under current law, the DRC will eventually climb
to 8 percent of benefits for each full year deferred. CBO
assumes that most people affected by repeal of the earnings
test will apply for benefits at the NRA, thus forfeiting their
eventual entitlement to the DRC. Although CBO estimates that
H.R. 5 would add to government outlays in each of the first 10
years, actuaries at the Social Security Administration (SSA)
judge that repeal would have only a negligible effect on
benefits over a 75-year period, because the extra payments will
be almost exactly offset by savings in the DRC.
In its estimates, CBO does not assume that repeal of the
earnings test would substantially affect the labor force
participation or earnings of people between the NRA and age 69.
In theory, the effect could operate in either direction. Older
people who now hold their earnings just below the threshold
might work more. But on the other hand, people with high
earnings might work less, because they could enjoy the same
standard of living by combining a Social Security benefit with
reduced earnings. Empirical evidence suggests that, in the
past, the earnings test has slightly dampened work by people
aged 65 through 69. (A recent study suggests the effect on work
hours could be about a 5 percent reduction.) Even the modest
effect suggested by that research would fade under current law,
because--as the threshold climbs to $30,000--it will affect
fewer people's decisions.
For purposes of its estimate, CBO assumes enactment in the
spring of 2000. Because the bill would be retroactive to
January 1, 2000, SSA would have to compute and refund benefits
withheld since that date. If enactment occurs later in the
year, the processing time could push the fiscal year 2000 costs
of $3.9 billion into 2001. That results would have no effect,
however, on the aggregate costs of the bill.
Spending subject to appropriation
H.R. 5 would also affect SSA's administrative costs, which
are funded by an annual appropriation. Computing and refunding
retroactive benefits for calendar year 2000 would cost
approximately $35 million. In later years, however, SSA would
save about $65 million annually because it would no longer have
to administer the complex earnings test for people over the
NRA.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Acts sets up pay-as-you-go procedures
for legislation that affects direct spending or receipts.
However, provisions that affect the Old-Age and Survivors
Insurance and Disability Insurance trust funds are specifically
exempt from these procedures. Therefore, H.R. 5 would have no
pay-as-you-go impact.
Intergovernmental and private-sector impact: H.R. 5
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act and would not
affect the budgets of state, local, or tribal governments.
Estimate prepared by: Federal Costs: Kathy Ruffing; Costs
to State and Local Governments: Leo Lex; Costs to the Private
Sector: Ralph Smith.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was a result of the Committee's
oversight review. On February 15, 2000, the Subcommittee on
Social Security held a public hearing on ``Improving Social
Security Work Incentives'' which discussed repealing the Social
Security earnings test for working seniors who reach the full
retirement age as provided in H.R. 5, the Senior Citizens'
Freedom to Work Act of 2000.
B. Summary of Findings and Recommendations of the Committee on
Government Reform
With respect to clause 3(c)(4) of rule XII of the Rules of
the House of Representatives, the Committee advises that no
oversight findings or recommendations have been submitted to
this Committee by the Committee on Government Reform with
respect to the provisions contained in the bill.
C. Constitutional Authority Statement
With respect to clause 3(d)(1) of rule XIII of the Rules of
the House of Representatives (relating to Constitutional
Authority), the Committee states that the Committee's action in
reporting this bill is derived from Article I of the
Constitution, Section 8 (``The Congress shall have Power To lay
and collect Taxes, Duties, Imposts and Excises * * *''), and
from the 16th Amendment to the Constitution.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE II--FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS
* * * * * * *
old-age and survivors insurance benefit payments
Old Age Insurance Benefits
Sec. 202. (a) * * *
* * * * * * *
Increase in Old-Age Insurance Benefit Amounts on Account of Delayed
Retirement
(w)(1) * * *
(2) For purposes of this subsection, the number of increment
months for any individual shall be a number equal to the total
number of the months--
(A) which have elapsed after the month before the
month in which such individual attained retirement age
(as defined in section 216(l)) or (if later) December
1970 and prior to the month in which such individual
attained age 70, and
(B) with respect to which--
(i) such individual was a fully insured
individual (as defined in section 214(a)),
(ii) such individual [either] was not
entitled to an old-age insurance benefit [or
suffered deductions under section 203(b) or
203(c) in amounts equal to the amount of such
benefit], and
(iii) such individual was not subject to a
penalty imposed under section 1129A.
* * * * * * *
reduction of insurance benefits
Sec. 203. (a) * * *
* * * * * * *
Deductions on Account of Noncovered Work Outside the United States or
Failure to Have Child in Care
(c) Deductions, in such amounts and at such time or times as
the Commissioner of Social Security shall determine, shall be
made from any payment or payments under this title to which an
individual is entitled, until the total of such deductions
equals such individual's benefits or benefit under section 202
for any month--
(1) in which such individual is under [the age of
seventy] retirement age (as defined in section 216(l))
and for more than forty-five hours of which such
individual engaged in noncovered remunerative activity
outside the United States;
* * * * * * *
For purposes of paragraphs (2), (3), and (4) of this
subsection, a child shall not be considered to be entitled to a
child's insurance benefit for any month in which paragraph (1)
of section 202(s) applies or an event specified in section
222(b) occurs with respect to such child. Subject to paragraph
(3) of such section 202(s), no deduction shall be made under
this subsection from any child's insurance benefit for the
month in which the child entitled to such benefit attained the
age of eighteen or any subsequent month; [nor shall any
deduction be made under this subsection from any widow's
insurance benefit for any month in which the widow or surviving
divorced wife is entitled and has not attained retirement age
(as defined in section 216(l)) (but only if she became so
entitled prior to attaining age 60), or from any widower's
insurance benefit for any month in which the widower or
surviving divorced husband is entitled and has not attained
retirement age (as defined in section 216(l)) (but only if he
became so entitled prior to attaining age 60).] nor shall any
deduction be made under this subsection from any widow's or
widower's insurance benefit if the widow, surviving divorced
wife, widower, or surviving divorced husband involved became
entitled to such benefit prior to attaining age 60.
* * * * * * *
Deductions From Dependents' Benefits on Account of Noncovered Work
Outside the United States by Old Age Insurance Beneficiary
(d)(1)(A) Deductions shall be made from any wife's,
husband's, or child's insurance benefit, based on the wages and
self employment income of an individual entitled to old age
insurance benefits, to which a wife, divorced wife, husband,
divorced husband, or child is entitled, until the total of such
deductions equals such wife's, husband's, or child's insurance
benefit or benefits under section 202 for any month in which
such individual is under [the age of seventy] retirement age
(as defined in section 216(l)) and for more than forty five
hours of which such individual engaged in noncovered
remunerative activity outside the United States.
* * * * * * *
(2) Deductions shall be made from any child's insurance
benefit to which a child who has attained the age of eighteen
is entitled, or from any mother's or father's insurance benefit
to which a person is entitled, until the total of such
deductions equals such child'sinsurance benefit or benefits or
mother's or father's insurance benefit or benefits under section 202
for any month in which such child or person entitled to mother's or
father's insurance benefits is married to an individual under [the age
of seventy] retirement age (as defined in section 216(l)) who is
entitled to old-age insurance benefits and for more than forty-five
hours of which such individual engaged in noncovered remunerative
activity outside the United States.
* * * * * * *
Months to Which Earnings Are Charged
(f) For purposes of subsection (b)--
(1) The amount of an individual's excess earnings (as
defined in paragraph (3)) shall be charged to months as
follows: There shall be charged to the first month of
such taxable year an amount of his excess earnings
equal to the sum of the payments to which he and all
other persons (excluding divorced spouses referred to
in subsection (b)(2)) are entitled for such month under
section 202 on the basis of his wages and self-
employment income (or the total of his excess earnings
if such excess earnings are less than such sum), and
the balance, if any, of such excess earnings shall be
charged to each succeeding month in such year to the
extent, in the case of each such month, of the sum of
the payments to which such individual and all such
other persons are entitled for such month under section
202 on the basis of his wages and self-employment
income, until the total of such excess has been so
charged. Where an individual is entitled to benefits
under section 202(a) and other persons (excluding
divorced spouses referred to in subsection (b)(2)) are
entitled to benefits under section 202(b), (c), or (d)
on the basis of the wages and self-employment income of
such individual, the excess earnings of such individual
for any taxable year shall be charged in accordance
with the provisions of this subsection before the
excess earnings of such persons for a taxable year are
charged to months in such individual's taxable year.
Notwithstanding the preceding provisions of this
paragraph but subject to section 202(s), no part of the
excess earnings of an individual shall be charged to
any month (A) for which such individual was not
entitled to a benefit under this title, (B) in which
such individual [was age seventy or over] was at or
above retirement age (as defined in section 216(l)),
(C) in which such individual, if a child entitled to
child's insurance benefits, has attained the age of 18,
[(D) for which such individual is entitled to widow's
insurance benefits and has not attained retirement age
(as defined in section 216(l)) (but only if she became
so entitled prior to attaining age 60), or widower's
insurance benefits and has not attained retirement age
(as defined in section 216(l)) (but only if he became
so entitled prior to attaining age 60),] (D) for which
such individual is entitled to widow's or widower's
insurance benefits if such individual became so
entitled prior to attaining age 60, (E) in which such
individual did not engage in self-employment and did
not render services for wages (determined as providedin
paragraph (5) of this subsection) of more than the applicable exempt
amount as determined under paragraph (8), if such month is in the
taxable year in which occurs the first month after December 1977 that
is both (i) a month for which the individual is entitled to benefits
under subsection (a), (b), (c), (d), (e), (f), (g), or (h) of section
202 (without having been entitled for the preceding month to a benefit
under any other of such subsections), and (ii) a month in which the
individual did not engage in self-employment and did not render
services for wages (determined as provided in paragraph (5)) of more
than the applicable exempt amount as determined under paragraph (8), or
(F) in which such individual did not engage in self-employment and did
not render services for wages (determined as provided in paragraph (5)
of this subsection) of more than the applicable exempt amount as
determined under paragraph (8), in the case of an individual entitled
to benefits under section 202(b) or (c) (but only by reason of having a
child in his or her care within the meaning of paragraph (1)(B) of
subsection (b) or (c), as may be applicable) or under section 202(d) or
(g), if such month is in a year in which such entitlement ends for a
reason other than the death of such individual, and such individual is
not entitled to any benefits under this title for the month following
the month during which such entitlement under section 202(b), (d), or
(g) ended.
* * * * * * *
(3) For purposes of paragraph (1) and subsection (h),
an individual's excess earnings for a taxable year
shall be [33\1/3\ percent of his earnings for such year
in excess of the product of the applicable exempt
amount as determined under paragraph (8) in the case of
an individual who has attained (or, but for the
individual's death, would have attained) retirement age
(as defined in section 216(l)) before the close of such
taxable year, or 50 percent of his earnings for such
year in excess of such product in the case of any other
individual,] 50 percent of such individual's earnings
for such year in excess of the product of the exempt
amount as determined under paragraph (8), multiplied by
the number of months in such year, except that, in
determining an individual's excess earnings for the
taxable year in which he attains [age 70] retirement
age (as defined in section 216(l)), there shall be
excluded any earnings of such individual for the month
in which he attains such age and any subsequent month
(with any net earnings or net loss from self-employment
in such year being prorated in an equitable manner
under regulations of the Commissioner of Social
Security). For purposes of the preceding sentence,
notwithstanding section 211(e), the number of months in
the taxable year in which an individual dies shall be
12. The excess earnings as derived under the first
sentence of this paragraph, if not a multiple of $1,
shall be reduced to the next lower multiple of $1.
* * * * * * *
(8)(A) Whenever the Commissioner of Social Security
pursuant to section 215(i) increases benefits effective
with the month of December following a cost-of-living
computation quarter he shall also determine and publish
in the Federal Register on or before November 1 of the
calendar year in which such quarter occurs [the new
exempt amounts (separately stated for individuals
described in subparagraph (D) and for other
individuals) which are to be applicable] a new exempt
amount which shall be applicable (unless prevented from
becoming effective by subparagraph (C)) with respect to
taxable years ending in (or with the close of) the
calendar year after the calendar year in which such
benefit increase is effective (or, in the case of an
individual who dies during the calendar year after the
calendar year in which the benefit increase is
effective, with respect to such individual's taxable
year which ends, upon his death, during such year).
(B) [Except as otherwise provided in subparagraph
(D), the exempt amount which is applicable to
individuals described in such subparagraph and the
exempt amount which is applicable to other individuals,
for each month of a particular taxable year, shall each
be whichever] The exempt amount which is applicable for
each month of a particular taxable year shall be
whichever of the following is the larger--
(i) the [corresponding] exempt amount which
is in effect with respect to months in the
taxable year in which the determination under
subparagraph (A) is made, or
(ii) the product of the [corresponding exempt
amount which is in effect with respect to
months in the taxable year ending after 2001
and before 2003 (with respect to individuals
described in subparagraph (D)) or the taxable
year ending after 1993-and before 1995 (with
respect to other individuals)] exempt amount
which is in effect with respect to months in
the taxable year ending after 1993 and before
1995 with respect to individuals who have not
attained retirement age (as defined in section
216(l)), and the ratio of--
(I) * * *
(II) the national average wage index
(as so defined) for [2000 (with respect
to individuals described in
subparagraph (D)) or 1992 (with respect
to other individuals)] 1992,
with such product, if not a multiple of $10, being
rounded to the next higher multiple of $10 where such
product is a multiple of $5 but not of $10 and to the
nearest multiple of $10 in any other case.
Whenever the Commissioner of Social Security determines that
[an exempt amount] the exempt amount is to be increased in any
year under this paragraph, he shall notify the House Committee
on Ways and Means and the Senate Committee on Finance within 30
days after the close of the base quarter (as defined in section
215(i)(1)(A)) in such year of the estimated amount of such
increase, indicating the new exempt amount, the actuarial
estimates of the effect of the increase, and the actuarial
assumptions and methodology used in preparing such estimates.
* * * * * * *
[(D) Notwithstanding any other provision of this
subsection, the exempt amount which is applicable to an
individual who has attained retirement age (as defined
in section 216(l)) before the close of the taxable year
involved shall be--
[(i) for each month of any taxable year
ending after 1995 and before 1997, $1,041.66\2/
3\,
[(ii) for each month of any taxable year
ending after 1996 and before 1998, $1,125.00,
[(iii) for each month of any taxable year
ending after 1997 and before 1999, $1,208.33\1/
3\,
[(iv) for each month of any taxable year
ending after 1998 and before 2000, $1,291.66\2/
3\,
[(v) for each month of any taxable year
ending after 1999 and before 2001, $1,416.66\2/
3\,
[(vi) for each month of any taxable year
ending after 2000 and before 2002, $2,083.33\1/
3\,
[(vii) for each month of any taxable year
ending after 2001 and before 2003, $2,500.00.]
* * * * * * *
Report of Earnings to Commissioner of Social Security
(h)(1)(A) If an individual is entitled to any monthly
insurance benefit under section 202 during any taxable year in
which he has earnings or wages, as computed pursuant to
paragraph (5) of subsection (f), in excess of the product of
the applicable exempt amount as determined under subsection
(f)(8) times the number of months in such year, such individual
(or the individual who is in receipt of such benefit on his
behalf) shall make a report to the Commissioner of Social
Security of his earnings (or wages) for such taxable year. Such
report shall be made on or before the fifteenth day of the
fourth month following the close of such year, and shall
contain such information and be made in such manner as the
Commissioner of Social Security may by regulations prescribe.
Such report need not be made for any taxable year--
(i) beginning with or after the month in which such
individual attained [age 70] retirement age (as defined
in section 216(l)), or
(ii) if benefit payments for all months (in such
taxable year) in which such individual is under [age
70] retirement age (as defined in section 216(l)) have
been suspended under the provisions of the first
sentence of paragraph (3) of this subsection, unless--
(I) such individual is entitled to benefits
under subsection (b), (c), (d), (e), (f), (g),
or (h) of section 202,
(II) such benefits are reduced under
subsection (a) of this section for any month in
such taxable year, and
(III) in any such month there is another
person who also is entitled to benefits under
subsection (b), (c), (d), (e), (f), (g), or (h)
of section 202 on the basis of the same wages
and self-employment income and who does not
live in the same household as such individual.
The Commissioner of Social Security may grant a reasonable
extension of time for making the report of earnings required in
this paragraph if the Commissioner finds that there is valid
reason fora delay, but in no case may the period be extended
more than four months.
* * * * * * *
Attainment of [Age Seventy] Retirement Age
(j) For the purposes of this section, an individual shall be
considered as [seventy years of age] having attained retirement
age (as defined in section 216(l)) during the entire month in
which he attains such age.
* * * * * * *
DISABILITY INSURANCE BENEFIT PAYMENTS
Disability Insurance Benefits
Sec. 223. (a) * * *
* * * * * * *
Definition of Disability
(d)(1) * * *
* * * * * * *
(4)(A) The Commissioner of Social Security shall by
regulations prescribe the criteria for determining when
services performed or earnings derived from services
demonstrate an individual's ability to engage in substantial
gainful activity. No individual who is blind shall be regarded
as having demonstrated an ability to engage in substantial
gainful activity on the basis of earnings that do not exceed an
amount equal to the exempt amount which would be applicable
under section 203(f)(8), to individuals described in
subparagraph (D) thereof, [if section 102 of the Senior
Citizens' Right to Work Act of 1996 had not been enacted] if
the amendments to section 203 made by section 102 of the Senior
Citizens' Right to Work Act of 1996 and by the Senior Citizens'
Freedom to Work Act of 2000 had not been enacted.
Notwithstanding the provisions of paragraph (2), an individual
whose services or earnings meet such criteria shall, except for
purposes of section 222(c), be found not to be disabled. In
determining whether an individual is able to engage in
substantial gainful activity by reason of his earnings, where
his disability is sufficiently severe to result in a functional
limitation requiring assistance in order for him to work, there
shall be excluded from such earnings an amount equal to the
cost (to such individual) of any attendant care services,
medical devices, equipment, prostheses, and similar items and
services (not including routine drugs or routine medical
services unless such drugs or services are necessary for the
control of the disabling condition) which are necessary (as
determined by the Commissioner of Social Security in
regulations) for that purpose, whether or not such assistance
is also needed to enable him to carry out his normal daily
functions; except that the amount to be excluded shall be
subject to such reasonable limits as the Commissioner of Social
Security may prescribe.
* * * * * * *