In addition, specifies that termination of Social Security coverage of employees of nonprofit organizations is prohibited on or after March 31, 1983. Under prior law, nonprofit organizations could terminate coverage upon giving 2 years' advance notice, providing coverage had been in effect for 8 years or more.
These amendments will avoid gaps in protection for employees of nonprofit organizations (and their families) who move between covered and noncovered work. Further, they will reduce the loss to the trust funds due to payment of "windfalls"--benefits which represent a comparatively high return on Social Security taxes for workers who spend less than a working lifetime in covered employment. The amendments increase revenues by $12.4 billion for 1984 -89 and have a long-range savings of .10 percent of taxable payroll.
Prohibit Termination of Coverage of State and Local Government Employees
Prohibits States from terminating coverage of State and local government employees if the termination has not gone into effect by the date of enactment (4/20/83). Under prior law, a State could terminate coverage for groups of State and local employees by giving 2 years' advance written notice, providing the coverage had been in effect for at least 5 years. Also, permits State and local groups whose coverage has been terminated to be covered again. Prior law prohibited a terminated group from being covered again. This provision avoids gaps in protection for State and local employees (and their families) whose coverage would otherwise have been terminated. Further, it reduces the loss to the trust funds due to payment of "windfalls"--benefits which represent a high return on Social Security taxes for terminated workers compared with the lower return for those with a lifetime of covered work. The provision increases revenues by $3.2 billion for 1983-89 and has a long-range saving of .06 percent of taxable payroll.
Shift Cost-of -Living Adjustments to Calendar Year Basis
Delays the July 1983 cost-of-living adjustment (COLA) to January 1984 and provide for future automatic COLA's on a calendar year basis, with the increase payable in January, rather than in July of each year. Beginning with the COLA payable in January 1985, the period for measuring the increase in the Consumer Price Index (CPI) will be shifted from a first-quarter to first-quarter measure to a third-quarter to third-quarter measure. The SSI benefit increase and SMI premium increase will be delayed to January 1984 and placed on a calendar year basis. (The SSI benefit standard will be increased by $20 for an individual and by $30 for a couple in July 1983. . .) The delay in the Social Security COLA and shift in the measuring period reduces program expenditures by $39.4 billion for 1983-89 and has a long-range savings of .30 percent of taxable payroll.
Cost-of-Living Increases to be Based on Either Wages or Prices (Whichever is Lower) If Balance in OASDI Trust Funds Falls Below Specified Level--"Stabilizer"
Beginning in 1984, future automatic increases will be limited to the lesser of the increase in wages or prices if the ratio of the combined OASDI trust fund assets to estimated outgo falls below a given percentage. If this occurs, the automatic increase will be the smaller of (1) the increase in prices as measured by the Consumer Price Index (the regular COLA) or (2) the increase in wages as measured for purposes of the contribution and benefit base and other automatic wage adjustments in the program. The "triggering" trust fund percentage is 15 percent through 1988 and 20 percent for 1989 and later.
The legislation also includes a provision for making up for any benefit increases that are based on the lower wage increases, rather than on the increase in the cost of living. When the trust fund ratio reaches 32 percent, these additional increases will be given, to the extent that funds are available above the 32-percent ratio, so that benefits are increased to the level they would have reached if all increases had been based on the increase in prices. The provision will help to protect the OASDI program against certain economic contingencies when trust fund balances are low by establishing a procedure for the adjustment of benefits after a worker becomes eligible for benefits that takes account of the possibility that average price increases may exceed average wage increases.
No cost or saving is estimated for this provision since, under the 1983 Trustees intermediate II-B assumptions, the provision is not expected to actually take effect.
Eliminate Windfall Benefits for Persons Receiving Pensions from Noncovered Employment
For workers wh are first eligibile after 1985 for both (1) a pension based on noncovered employment and (2) Social Security retirement or disability benefits, a different benefit computational method will apply. Specifically, the 90-percent factor generally applied to average earnings in the first band of the benefit formula is replaced by a factor of 40 percent, after a 5-year phase-in. There is a guarantee (designed to help protect workers with relatively low pensions based on noncovered employment) that the reduction in Social Security benefit will not exceed one-half of the amount of the pension. For purposes of this guarantee computation, only that portion of the pension attributable to post-1956 noncovered earnings will be considered.
The provision includes exemptions for certain groups, including most current Federal or nonprofit employees who become newly covered under Social Security effective January 1984, railroad employees, and workers who have 30 or more years of Social Security coverage. For workers who have 26-29 years of coverage, a factor larger than 40 percent will be used (on a sliding scale).
This provision is intended to eliminate the windfall that occurs under prior law when the heavy weighting in the benefit formula that is intended for workers with low wages goes instead to workers who spent many years in noncovered employment and worked only a few years in covered employment. The provision decreases the cost of the program by $0.1 billion for 1983-89 and has a long-range saving of .04 percent of taxable payroll.
Lower the Withholding Rate Under the Earnings Test for Individuals Who Have Attained Full Retirement Age
Beginning in 1990, the earnings test benefit withholding rate will decrease from $1 for each $2 of earnings over the annual exempt amount to $1 for each $3 of excess earnings, for individuals who attain full-benefit retirement age (age 65 in 1990). Beginning in the year 2000, the age at which this withholding rate applies will increase as the retirement age increases. The lower withholding rate will apply for the whole year in which an individual attains retirement age (as does the higher annual exempt amount under present law). This change will partly offset the impact of the provisions in the bill for taxing Social Security benefits. The provision has a long-range cost of .01 percent of taxable payroll.
Increase Delayed Retirement Credit for Deferral of Retirement Beyond Full Retirement Age
Beginning in 1990, this provision gradually increases the delayed retirement credit (DRC) payable to workers who delay retirement past the full-benefit retirement age (currently age 65) and up to age 70. DRC's will increase by 1/2 of one percent every other year from 3 percent per year for workers age 65 before 1990 until reaching 8 percent per year for workers age 65 after 2007. Under prior law, DRC's were equal to 3 percent per year for workers who reached age 65 in 1982 or later. This provision is intended to encourage people to continue working beyond age 65, by increasing the credit for people who delay retirement. The provision has a long-range cost of .10 percent of taxable payroll.
A conforming provision reduces from 72 to 70 the age beyond which delayed retirement credits can no longer be earned. The provision setting age 72 as an upper age for earning delayed retirement credits was adopted when the earnings test provisions also applied up to age 72. This change in the DRC provision is in line with the 1977 and 1981 legislation which lowered from 72 to 70 the age at which the earnings test no longer applies, effective for calendar year 1983. This provision has a negligible cost effect in both the short-and long-range.
Amend the Government Pension Offset to Allow Spouses with Low Government Annuities to Retain a Portion of Their Social Security Spouse's Benefit
Provides that for spouses and surviving spouses who become eligible after June 1983 for their public pension based on noncovered employment the amount of the public pension used for purposes of the offset against Social Security benefits will be equal to two-thirds of the public pension. The 1977 amendments generally provided that the amount of a Social Security spouse's or surviving spouse's benefit is offset dollar for dollar by the f ull amount of any pension the spouse may receive based on his or her own work in governmental employment not covered by Social Security. This change responds to the criticism that the offset under prior law applied to the entire government pension--both the part analogous to a Social Security benefit and the part analogous to a private pension--with respect to those who become eligible for a public pension after June 1983.
The provision increases the cost of the program by less than $50 million over 1983-989, and has a negligible long-range cost.
Taxation of Social Security and Railroad Retirement Tier 1 Benefits
Beginning in 1984, includes in taxable income up to one-half of Social Security (and railroad retirement tier 1) benefits received by taxpayers whose incomes exceed certain base amounts. The base amounts are $25,000 for a single taxpayer, $32,000 for married taxpayers filing jointly and zero for married taxpayers filing separately. Income for purposes of figuring these base amounts includes adjusted gross income under prior law, plus nontaxable interest income, and one-half of Social Security and railroad retirement tier 1 benefits. The amount of benefits that could be included in taxable income will be the lesser of one-half of benefits or one-half of the excess of the taxpayers' combined income (AGI + one-half of benefits) over the base amount. The provision for including nontaxable interest income is intended to provide similar tax treatment of benefits received by individuals whose total incomes consist of different mixes of taxable and nontaxable income and to limit opportunities for manipulation of tax liability on benefits.
Includes in the definition of Social Security benefits for tax purposes workmen's compensation benefits to the extent they cause a reduction in Social Security and railroad retirement tier 1 disability benefits. This provision is intended to assure that these social insurance benefits, which are paid in lieu of Social Security payments, are treated similarly for purposes of taxation.
The provision applies to nonresident aliens as well as U.S. citizens. Under the Internal Revenue Code, nonresident aliens who have income from sources other than a U.S. trade or business are taxed at a flat rate of 30 percent, unless a tax treaty provides otherwise, and the taxes must be withheld at the source of payment. Thus, 30 percent of 1/2 of the Social Security benefit (15 percent of the total benefit) will be withheld from nonresident alien beneficiaries.
Provides special rules for dealing with overpayments and lump-sum retroactive benefit payments. Benefits paid to an individual in any taxable year will be reduced by any overpayments repaid during the year. Taxpayers who receive a lump-sum payment of retroactive benefits may treat the benefits as wholly payable for the year in which they receive them or may elect to attribute the benefits to the tax years in which they would have fallen had they been paid timely. No benefits for months before December 1983 would be taxable, regardless of when they are paid.
Requires the Secretary of Health and Human Services and the Railroad Retirement Board to file annual returns with the Secretary of the Treasury setting forth the amounts of benefits paid to each individual in each calendar year, together with the name and address of the individual. Also requires furnishing of similar information to each beneficiary.
Requires that amounts equivalent to estimated quarterly proceeds from the taxation of benefits be automatically deposited in the Social Security trust funds and the railroad retirement account, as appropriate, at the beginning of each calendar quarter, subject to final adjustments based on estimates by the Secretary of the Treasury. Requires an annual report by the Secretary of the Treasury concerning the transfers under this provision.
The provision is estimated to affect about 10 percent of Social Security beneficiaries in 1984. Amounts equal to the estimated tax revenues under this provision will be automatically deposited to the OASDI trust funds. The provision increases trust fund revenues by $26.7 billion for 1983-1989 and by .62 percent of taxable payroll in the long range.
Income Tax Credit for Elderly and Disability Income Exclusion
Credit for the Elderly -- Provides that individuals age 65 or over, or under 65 if they retired with a permanent and total disability and have disability income from a public or private employer on account of that disability, are eligible for a credit equal to 15 percent of a base amount. For individuals under age 65, the initial amount is limited to the amount of their disability income.
Disability Income Exclusion -- Repeals the disability income exclusion. Affected individuals are made eligible for the credit for elderly and disabled persons to the extent of disability income (see above). Under prior law, amounts received under an employer's disability income plan generally were includible in gross income to the extent attributable to employer contributions. However, permanently and totally disabled individuals who retired on disability and were under age 65 could exclude such income within certain limits.
This provision applies to taxable years beginning after December 31, 1983 and has no effect on Social Security program costs.
SURVIVING, DIVORCED, AND DISABLED SPOUSES BENEFITS
Benefits for Surviving Divorced Spouses and Disabled Widows and Widowers Who Remarry
Provides for the continuation of Social Security benefits for surviving divorced spouses, disabled surviving divorced spouses, and disabled widows and widowers who remarry after entitlement to benefits. Under prior law when a disabled or divorced disabled widow(er) married prior to age 60, his or her benefits on the record of a former spouse terminated, unless the new marriage was between a disabled widow(er) and certain auxiliary beneficiaries. This provision removes a possible deterent to marriage previously in the law and provides treatment for disabled or divorced disabled widow(er)s that is more nearly comparable to that provided for aged widow(er)s. This provision is effective with respect to benefits payable after December 1983 and has a cost of about $0.1 billion for 1983-1989. The long range cost is negligible.
Independent Entitlement of Divorced Spouses
Permits a divorced spouse who is age 62 or over and who has been divorced for at least 2 years to receive benefits based on the earnings of a former spouse who is eligible for retirement benefits, regardless of whether the former spouse has applied for benefits or has benefits withheld under the earnings test.
Under prior law, a divorced spouse could not qualify for dependent's benefits based on the earnings of a former spouse until the former spouse had filed an application for benefits. If the former spouse did become entitled to benefits but continued to work, a divorced spouse could have some or all benefits withheld due to the former spouse's earnings. This provision is of particular benefit to divorced women who do not qualify for benefits based on their own earnings and are unable to obtain benefits based on their former husbands' earnings because those former husbands are still working. The requirement that the divorce must have been in effect for 2 years is intended to discourage divorces solely for the purpose of becoming entitled to benefits or avoiding the earnings test. The provision is effective beginning January 1985. The provision is estimated to cost $0.1 billion for 1983-89 and to have a long-range cost of .01 percent of taxable payroll.
Index Deceased Worker's Earnings to Widow(er)'s Eligibility
In computing aged widow(er)'s benefits for the spouse of a worker who died before age 62, the deceased worker's earnings will be indexed to wages up to the earliest of: (1) 2 years before the worker would have reached age 62, (2) 2 years before the survivor becomes eligible for aged widow(er)'s benefits, or (3) 2 years before the survivor becomes eligible for disabled widow(er)'s benefits. The new computation will apply only if it results in a higher benefit than the prior-law computation. Under prior law, if a worker died before reaching age 62, the aged widow(er)'s benefit payable at or after age 60 was based on outdated wage levels because the deceased worker's earnings record were adjusted to wages only until his or her death, and the benefit based on this record was indexed to prices thereafter. The provision is effective for widow(er)s newly eligible for benefits after December 1984. It increases program costs by less than $50 million for 1983-89 and has a long-range cost of .05 percent of taxable payroll.
Increase Benefits for Disabled Widow(er)s
Benefits for disabled widow(er)s age 50-59 (including those already on the rolls) will be 71.5 percent of the PIA--the same reduction currently applicable to aged widow(er)s entitled at age 60. Under prior law, benefits for disabled widow(er)s were further reduced for entitlement before age 60 with a maximum reduction of 50 percent for disabled widow(er)s becoming entitled at age 50. This provision improves the benefit adequacy for a group (of whom about 99 percent are women) who, by definition, are unable to work. The provision increases costs by $1.4 billion for 1983-89 and has a long-range cost of .01 percent of taxable payroll.
Employee-Employer Tax Rate Schedule and 1984 Employee Tax Credit
Advances previously scheduled FICA tax-rate increases for OASDI from 1985 to 1984, and advances part of the scheduled 1990 increase to 1989. OASDHI tax rate schedules for employees and employers, each, under the new law and as previously scheduled are shown below. (No changes were made in HI tax rates f or employees and employers.)
The new law also provides, for 1984 only, a credit for employees against their FICA tax liability of 0.3 percent of their wages. The effect of the credit on employees is to apply a 6.7-percent FICA tax rate to their wages; however, regular automatic appropriations to the trust funds will be at the full 7.0-percent FICA rate. (Conforming changes are made with respect to the tier 1 railroad retirement taxes.)
The revised tax-rate schedule increases revenues to the trust funds by $39.4 billion over the period 1983-1989 and by 0.3percent of taxable payroll over the long range.
Increases tax rates on self-employment income for OASDI and HI to equal the combined employee- employer rates. OASDI and HI tax-rate schedules for the self-employed under P.L. 98-21 and as previously scheduled are shown below:
Provides credits against SECA tax liability for 1984-1989 equal to a percentage of self-employment income according to the following schedule:
After 1989, the credit will be replaced with special provisions designed to treat the self-employed in much the same manner as employees and employers are treated for Social Security and income tax purposes.
First, a person's net earnings from self-employment would, in effect, be adjusted downwards so that only half of the total combined tax would be considered part of the person's net earnings. This is comparable to the way employees are treated in that the employer tax with respect to their wages is not counted as part of their wages for Social Security tax and benefit purposes.
Second, self-employed individuals will get an income tax deduction equal to one-half of the SECA tax. This deduction will parallel for the self-employed the present provisions under which employers are allowed to deduct as a business expense the Social Security taxes they pay on their employees' wages.
Regular automatic appropriations to the trust funds will continue to be based on the full SECA tax rates without regard to tax credits or income tax deductions. (Tax revenues and earnings credited for benefit purposes will generally be slightly lowered due to the adjustment in net earnings.) The revised tax-rate schedule for the self-employed increases OASDI revenues by $18.5 billion and HI revenues by $8.3 billion over the period 1983-1989. The long-range effect of the revised schedule is to increase OASDI revenue by 0.19 percent of taxable payroll and HI revenue by 0.4 percent of taxable payroll.
Allocations to the OASI and DI Trust Funds
Provides a new allocation schedule of OASDI taxes for employees and employers, each, and the self-employed, as follows:
The provision does not raise any new revenue but shifts revenue from the DI trust fund to the OASI trust fund. The effect of this reallocation is to put the two parts of the program in roughly comparable financial condition, with the DI program being in slightly more favorable circumstances than OASI.
MECHANISMS TO ASSURE CONTINUED BENEFIT PAYMENTS-- "FAILSAFE"
Normalization of Social Security Tax Income
Establishes accounting procedures for crediting the OASDI trust funds and the HI trust fund at the beginning of each month with estimated revenues for the entire month. Treasury will be required to estimate the amount of tax revenue to be collected each month and transfer such sums to the trust funds at the beginning of the month. The trust funds will pay interest, at rates equivalent to those earned on trust fund investments, on amounts so credited to the extent that they are credited prior to Treasury's actual receipt of taxes. Under prior law, Social Security taxes were transferred to the trust funds on an estimated as-received basis throughout the month.
The provision is a change primarily in accounting procedures and, under alternative II-B assumptions developed for the 1983 Trustees Report, is unlikely to have a cost effect on the trust funds. Under these assumptions, the amounts transferred under normalization in all likelihood will not be needed to pay benefits and amounts transferred to the trust funds in advance of tax receipts will be invested in Government obligations at the same interest rate that the trust funds must pay Treasury. Therefore, the interest earned on the advances will offset the interest payments to Treasury.
Extends authority for interfund borrowing among the OASI, DI, and HI funds for calendar years 1983-1987 (such borrowing had been authorized for 1982), with provision for repayment of the principal and interest of all such loans (including amounts borrowed in 1982) at the earliest feasible time, but not later than the end of calendar year 1989. Borrowing is permitted only to the extent that the balance in the lending fund is sufficient to meet its own obligations. Such borrowing is subject to the following additional requirements: (1) repayment of interest to the HI trust fund is to begin immediately; (2) the borrowing fund is to make repayments whenever the ratio of its assets at the end of the year to projected outgo during the following year exceeds 15 percent; (3) the lending fund's assets may not be reduced below 10 percent of outgo by borrowing; and (4) a 24-month repayment schedule for any outstanding loans is provided for 1988-1989.
Recommendations by Trustees to Remedy Inadequate Trust Fund Balances
Provides that if the Board of Trustees determines at any time that the OASI, DI, HI or SMI trust fund ratio may become less than 20 percent in any calendar year, the Board shall promptly submit to each House of the Congress a report setting forth the Board's recommendations for statutory adjustments affecting the receipts of, and disbursements from, the trust fund(s) necessary to achieve a 20-percent ratio, with due regard to the economic conditions that created the inadequacy. The report also shall include specific information as to the extent to which benefits would have to be reduced, payroll taxes increased, or some combination thereof enacted in order to meet the 20-percent-ratio objective.
OTHER FINANCING AMENDMENTS
Financing of Noncontributory Military Wage Credits
Provides for lump sum payments to the OASDHI Trust Funds from the general fund for: (1) the value of the additional Social Security benefits arising from pre-1957 gratuitous military service wage credits and (2) the amount equivalent to the combined employer-employee OASDHI taxes on the post-1956 noncontributory military wage credits for the period from 1957-1983. The amount of the lump sums will be determined within 30 days after enactment and automatically transferred to the trust funds. The trust funds will be reimbursed on an annual basis on July 1 for the OASDHI employer-employee taxes on the post-1956 wage credits for military service after 1983. Under prior law, the noncontributory wage credits were financed by annual payments from the general fund to the trust funds over an extended period of time. Short-range savings for 1983-89 are $18.6 billion. Long-range savings are .01 percent of taxable payroll.
Uncashed OASDI Checks
Provides that the Secretary of the Treasury shall implement procedures within 24 months of enactment to permit identification of OASDI benefit checks that have not been presented for payment within 6 months. Also authorizes annual appropriations to the trust funds of amounts equal to future benefit checks (including interest) remaining uncashed after 6 months. In addition, subject to the appropriations process, the trust funds shall be credited with the amount which the Secretary of the Treasury and the Secretary of Health and Human Services jointly determine to be those checks (and the interest thereon) which have been uncashed for a period of 6 months or more on the date of enactment.
Previously, money was transferred to the general fund from the trust funds each month to cover benefit checks for the month. The amounts transferred for those checks that were not cashed were never returned to the Social Security trust funds because there was no cutoff point after which the Treasury Department stopped payment on unnegotiated checks. Thus, there has been in a sense a trust fund subsidy to general revenues since 1940. This provision authorizes an appropriation from the general fund to the trust funds--an estimated $1.3 billion in 1983 ($500 million of which is interest)--for unnegotiated checks issued since 1940 and approximately $50 million each year thereafter for checks issued in the future which are not negotiated ($52 million each year, with accrued interest).
Accelerate State and Local Deposits of Social Security Taxes
Requires States to deposit withheld Social Security contributions for State and local employees twice a month. Previously, these deposits were made on a monthly basis, a substantial advantage over private employers who must deposit as often as eight times per month. This provision is effective for calendar months beginning after December 1983. The provision produces $1.1 billion in additional revenue for the period 1984-1989.
Float Allowance Revision
Requires the Secretaries of Treasury and Health and Human Services to conduct a study consisting of two separate investigations. The first concerns the actual average length of time between the issuance of benefit checks and their redemption by Federal Reserve banks; the second will deal with the feasibility and desirability of providing for the transfer on a daily basis to the general fund from the appropriate trust fund of amounts equal to the amounts of benefit checks which are paid by the Federal Reserve Banks on each day. The Secretary of the Treasury is required to promulgate regulations to implement the changes found appropriate by these investigations.
Current Treasury procedures governing the transfer of trust fund monies to the general fund generally recognize a 2-day delay between the time checks are issued and the time they are presented to the Treasury for payment. A recent study by the Inspector General of the Department of Health and Human Services found it took an average of 5.2 days for checks to clear through the banking system. The study estimated that, if the trust funds were drawn down as checks are actually paid by Treasury, the Social Security trust funds could earn as much as $91.5 million in additional interest each year.
Public Members on the Boards of Trustees
Provides for the addition of two public members to the Boards of Trustees of the OASDI, HI and SMI trust funds. The public members will be nominated by the President and confirmed by the Senate and cannot be from the same political party. The provision is effective April 20, 1983. The addition of public Trustees will help improve and maintain public confidence in the management and investment procedures of the Social Security trust funds.
Separate Treatment of Trust Fund Operations Under the Unified Budget
Provides for a display of OASI, DI, HI and SMI trust fund operations as a separate function within the Federal budget for fiscal years beginning on or after October 1, 1984 through September 30, 1992. Removes the Social Security trust fund operations from the unified budget, effective October 1, 1992. Removal of the operations of the trust funds tends to insulate the program from pressures caused by unrelated budgetary considerations. However, Social Security will remain subject to the congressional budget reconciliation process under which reductions in program expenditures may be targeted in order to achieve the overall Federal budget goals sought by the Congress. The provision will have no cost effect on the trust funds.
Annual Trustees' Reports
Provides that the annual OASDI and HI Trustees' Reports shall include an actuarial opinion by the Chief Actuaries certifying that the techniques and methodologies used are generally accepted within the actuarial profession and that the assumptions and cost estimates used are reasonable. In addition, provides that the 1983 Trustees' Reports, normally required to be filed by April 1, need not be filed until June 4, 1983 (45 days after the date of enactment).
Retirement Age/Reduction for Early Retirement
Increases by 2 months a year the retirement age for people reaching age 62 in 2000-2005; maintains age 66 for people reaching age 62 in 2005-2016; increases by 2 months a year the retirement age for people reaching age 62 in 2017-2022; maintains age 67 for people reaching age 62 after 2022. Does not change age of eligibility for Medicare.
Does not change the availability of reduced benefits at 62 (60 for widows) but revises the reduction factors so that there is a further reduction (up to a maximum of 30 percent for workers entitled at age 62 after the retirement age is increased to age 67, rather than only up to 20 percent for entitlement at age 62 under prior law). There is no increase in the maximum reduction in the case of widow(er)s.
The provision has a long-range savings of 0.68 percent of taxable payroll. (A chart showing the effects of this provision is attached.)
Report to Congress on Effects of Increased Retirement Age
Requires the Secretary to conduct a comprehensive study and analysis of the implications of the change in retirement age for those individuals affected by the provision for increasing full retirement age who, because they are engaging in physically demanding employment or because they are unable to extend their working careers for health reasons, may not benefit from improvements in longevity. The Secretary's report and recommendations are to be submitted to Congress by January 1, 1986.
MISCELLANEOUS AND TECHNICAL PROVISIONS
ELIMINATION OF GENDER-BASED DISTINCTIONS
Provides Social Security benefits for aged divorced husbands and aged or disabled surviving divorced husbands based on their former wives' earnings records. The statute, as previously written, provided for the payment of benefits to aged divorced wives, and aged or disabled surviving divorced wives but benefits were not provided for similarly situated men. However, as a result of court decisions, Social Security benefits were being paid to similarly situated husbands. This provision conforms the statute to reflect benefits that were actually being paid and has no cost.
Remarriage of Surviving Spouse Before Age of Eligibility
Provides Social Security benefits for a widower who has remarried prior to attaining age 60 but is unmarried at the time he applies for benefits. The statute, as previously written, provided for the payment of benefits to a widow on a deceased husband's earnings if she was unmarried when she applied for benefits; even if she remarried prior to age 60. The statute did not provide benefits for similarly situated men although benefits were actually being paid to such widowers as a result of court decisions that declared this gender-based distinction in the law unconstitutional. This provision conforms the statute to reflect benefits that were actually being paid and, therefore, has no added cost.
Provides Social Security benefits for illegitimate children based on their mothers' earnings. Prior law provided for a determination of eligibility for illegitimate children based on their fathers' earnings without regard to appropriate intestate law, if, among other things, the father had been decreed by a court or was shown by evidence satisf actory to the Secretary to be the father of the child. The statute did not provide for such determinations of eligibility for illegitimate children based on their mothers' earnings. This provision provides for such determinations based on mothers' earnings beginning with benefits payable for months after April 1983 and has a negligible cost.
Transitional Insured Status
Makes husbands and widowers eligible under transitionally insured provisions which previously applied to wives and widows. Under prior law, certain workers who attained age 72 before 1969 were eligible for a flat-rate Social Security benefit (currently $125.60) on the basis of fewer quarters of coverage than would ordinarily be required. Wives and widows of eligible male workers who reached 72 prior to 1969 also were eligible for benefits under prior law, but husbands and widowers of eligible female workers were not. The provision is effective for monthly benefits payable for months after April 1983. The cost of this provision in both the short and long-range is negligible.
Equalize Special Age-72 Benefits
Provides that where both a husband and wife qualify for Prouty benefits under section 228 of the Social Security Act, a full benefit will be paid to each spouse. Section 228 of prior law provided for special payments to persons who attained age 72 before 1968 and who had no quarters of coverage and to persons age 72 in 1968 or later who had at least 3 quarters of coverage for every year after 1966 and before the year of attainment of age 72. Even though each spouse had to meet the same eligibility requirements he or she would have had to meet if not married, once the eligibility of both was determined, the husband received a benefit equal to that paid a single individual and the wife received one-half of that amount. Thus, the total payment for the couple, which comes largely from general revenues, was allocated so that the husband was paid two-thirds of the total and the wife was paid one-third. By providing each spouse the full benefit payable to a single individual, the provision increases benefits for couples where both husband and wife qualify for Prouty benefits. The provision is effective for monthly benefits payable for months after April 1983. The cost of this provision in both the short- and long-range is negligible.
Fathers' Insurance Benefits
Provides Social Security benefits for fathers who care for children of their retired, disabled or deceased divorced wives. The statute, as previously written, provided for benefits for a young wife, widowed mother or surviving divorced mother who had in her care an entitled child under age 16 or disabled. The statute did not provide benefits for similarly situated men although benefits were actually being paid to such fathers as a result of court decisions that declared this gender-based distinction in the law unconstitutional. This provision conforms the statute to reflect benefits that were actually being paid and, therefore, has no cost effect.
Effect of Marriage on Childhood Disability Beneficiary and on Other Dependents, or Survivors' Benefits
Provides for the continuation of (1) the benefits of a childhood disability beneficiary, regardless of sex, and (2) the benefits of an individual, regardless of sex, who is receiving dependents' or survivors' benefits, when the beneficiary's spouse is no longer eligible for benefits as a childhood disability beneficiary or disabled worker beneficiary. Under prior law, when a childhood disability beneficiary or a person getting certain kinds of dependents' or survivors' benefits married an individual who was a childhood disability beneficiary or a disabled worker beneficiary, the benefits of each individual continued. If the disability benefits of one spouse were terminated, the continued eligibility of the other spouse depended on the spouse's sex. A woman's childhood disability benefits or benefit; as a dependent or survivor ended when her husband's disability benefits ended. This was not the case for a similarly situated man whose wife's disability benefits ended. The provision is effective for benefits payable for months after April 1983, and has a negligible cost.
Credit for Certain Military Service
Permits, under certain circumstances, widowers to waive the right to a civil service survivor's annuity and receive credit (not otherwise possible) for military service prior to 1957 for purposes of determining eligibility for, and the amount of, Social Security survivors' benefits. Under prior law, only widows were allowed to exercise this option. This provision is effective with respect to monthly benefits payable for months after April 1983. The cost effect is negligible.
Foreign Work Test
Changes the foreign work test to provide that retirement, auxiliary, or survivor beneficiaries will have benefits withheld for each month in which they are under age 70 and work for more than 45 hours in noncovered remunerative activity outside the United States. (However, the present law 7-day work test will continue to apply with respect to withholding an auxiliary benefit because of work performed by the retired worker.) The provision is effective with respect to benefits payable for months after April 1983. The provision has a negligible cost effect.
Coverage of Employees of Foreign Affiliates of American Employers
Permits any American employer (a corporation, sole proprietorship, or partnership) to provide coverage for U.S. citizens and U.S. residents working outside the United States for a foreign affiliate when the American employer has not less than a 10 percent direct or indirect interest in the foreign employer. Under prior law, such coverage was available only to U.S. citizens and only if both the American employer and the foreign affiliate were corporations. This change permits continuation of Social Security protection for some additional U.S. citizens and residents while they work outside the United States for a period of time. The provision is effective upon enactment (4/20/83). The cost effect is negligible.
Extension of Coverage by International Social Security Agreement
Provides for the imposition of Social Security taxes if an international Social Security agreement provides for coverage under the U.S. Social Security system. The provision corrects a drafting error in section 233 of the Social Security Act which prevented U.S. Social Security taxes from being imposed on earnings intended to be covered under the U.S. system pursuant to an international Social Security agreement. The provision is effective for taxable years beginning after April 20, 1983, and has negligible cost implications.
Treatment of Certain Services Performed Outside the United States
Provides that foreign earned income which was previously subject to the Social Security self-employment tax is creditable for Social Security coverage purposes. This provision is effective with respect to taxable years beginning after December 31, 1981. This assures that such earnings are covered under Social Security since they are subject to Social Security taxes. Also provides that the self-employment income of U.S. citizens who are residents of foreign countries would be computed for Social Security purposes without regard to the foreign earned income exclusion. This provision subjects the self-employment income of U.S. citizens to Social Security taxes regardless of their residences. This change is effective with respect to remuneration paid after December 31, 1983. The provision has negligible cost implications.
Coverage of Amounts Received Under Certain Deferred Compensation and Salary Reduction Arrangements
Provides that employer contributions shall be taxed and credited for Social Security purposes if they are: (1) made under a deferred compensation or salary reduction arrangement as part of a qualified plan under section 401(k) of the Internal Revenue Code; (2) made for an annuity contract under section 403(b) of the Code; or (3) they are employee contributions treated as employer contributions under section 414(h)(2) of the Code. With respect to payments not paid to or under such plans (non-qualified deferred compensation), provides that such compensation will be taxed and credited when the related services are performed or when there is no substantial risk of forfeiture of rights to the amounts, whichever is later. Also, assures that non-qualified deferred compensation will be taxed only once. The provision assures that certain deferred compensation and salary reduction plans are not used to avoid Social Security tax liability and that employees get Social Security protection based on such remuneration. The net effect is a long-range savings of .03 percent of taxable payroll.
Extend Social Security Coverage to All Standby Pay
Covers payments (other than vacation or sick pay) made to an employee after the month in which he attains age 62 even if the employee did not work for the employer during the period for which the payment was made. (Such payments are often referred to as standby pay.) This provision is effective for payments made after December 31, 1983. For Social Security earnings test purposes, the standby pay will count as earnings for the periodfor which the wages are paid. This provision is intended to close a loophole in the law which could have enabled some beneficiaries to continue working while avoiding Social Security taxes and benefit reductions under the earnings test. The cost effect is negligible.
Treatment of Contributions under Simplified Employee Pensions
Excludes from coverage employer contributions to a simplified employee pension plan. Previously, such contributions were excluded from Social Security taxes but not from coverage. Since the tax and coverage treatment for Social Security purposes were not the same, credit could be given for amounts not taxed. The amendment is effective with respect to remuneration paid after December 31, 1983, and has negligible cost implications.
Effect of Changes in Names of State and Local Employee Groups in Utah
Amends the provision in the Social Security Act listing entities for which Utah may arrange Social Security coverage as separate coverage groups to provide that coverage will not be affected by a subsequent change in the name of any of the entities. Under prior law, Utah was permitted to extend Social Security coverage to specific entities listed in the law as separate coverage groups. The names of some of the entities specifically listed in the law changed after the provision was enacted. The amendment prevents confusion and potential conflict over whether the entities should continue to be treated as separate coverage groups for Social Security purposes. The amendment is effective for past and future name changes and has no cost implications.
Effective Dates of International Social Security Agreements
Provides that an international Social Security agreement can become effective after the expiration of a period during which at least one House of the Congress has been in session on each of 60 days. Prior law required a period during which both Houses have been in session on each of 90 days. Because days on which either House failed to meet could not be counted under prior law, there were considerable delays in implementing agreements. This provision is effective for agreements submitted to Congress after enactment (4/20/83), and the cost effect is negligible.
Codification of Rowan Decision with Respect to Coverage of Meals and Lodging
Conforms the statutory language to the decision in Rowan Companies, Inc. v. United States (1981), that the value of meals and lodging furnished to an employee for the convenience of the employer is not wages for Social Security coverage and tax purposes. Also, provides that an exclusion of income from income tax withholding shall not affect the treatment of the income for Social Security coverage and taxation purposes. The Rowan decision could have been interpreted to mean that certain payments (other than meals and lodging) that are currently treated as covered wages under Social Security should not be taxed and credited under Social Security because they are not subject to income tax withholding. Broadening application of the Rowan decision would have decreased Social Security revenues and reduced employee protection. The provision is effective for remuneration paid after December 31, 1983. The cost effect is negligible.
Technical and Conforming Amendments to the Maximum Family Benefit Provisions
Eliminates the January readjustment of the limit on combined maximum family benefits (MFB) that occurs because of a technical defect in the MFB provision included in the 1977 Social Security amendments. Under prior law, when children were entitled to benefits on more than one worker's record, MFB's on each record were combined for the purpose of paying the family benefits. However, there was an overall limit on the amount any one family could get when maximums were combined--the so-called "super maximum." A problem occurred where the super maximum was recomputed each January, because the new super maximum was based solely on wage increases as reflected in the new higher contribution and benefit base and did not take account of price increases reflected in the previous cost-of-living adjustment (COLA). If the contribution and benefit base did not increase at the same rate as the COLA in the previous year, benefits based on the recomputed super maximum effective January for families on the rolls could be greater, or less, than benefits for the previous December. Thus, the January readjustment resulted in a benefit cut in times when wages did not rise as fast as prices, and resulted in a "windfall" benefit increase in times when wages rose faster than prices. Under the new provision, the super maximum is no longer adjusted each January; once the super maximum is computed for a family, the limit thereafter increases on the basis of COLA's alone. The provision is effective with respect to benefits for months after December 1983. The provision has a negligible cost effect in both the short-and long-range.
Relaxation of Insured Status Requirements for Certain Workers Previously Entitled to a Period of Disability
Extends the application of the special disability insured status test for workers disabled before age 31 by providing that a worker who had a period of disability that began before age 31, who subsequently recovered, and then became disabled again at age 31 or later will again be insured for disablity benefits if he has one quarter of coverage for every two calendar quarters elapsing after age 21 and through the quarter in which the later period of disability began (up to a maximum of 20 quarters of coverage out of 40 calendar quarters). This provision provides relief to those workers who could otherwise not get disability benefits because they did not have time following recovery from an earlier disability to work long enough before a second disability to meet the 20-out-of-40 quarters insured status test. The provision is effective for benefits payable for the month after April 1983. Program costs are negligible.
Protection of Benefits of Illegitimate Children of Disabled Workers
Provides Social Security monthl benefits to the illegitimate child of a disabled worker for the first month in which the child satisfies all entitlement conditions even though the acknowledgment, court decree or order establishing parenthood occurs later than the first day of the month. Prior law provided benefits for illegitimate children of disabled workers for the first month throughout which those conditions were satisfied. This provision removes the anomaly that existed because prior law deemed an acknowledgement, court decree, or court order establishing the parenthood of the illegitimate child of a retired worker to have occurred on the first day of the month in which it actually occurred. This provision is effective with benefits for April 1983 and has a negligible cost.
Allow One Month Retroactivity of Widow's and Widower's Insurance Benefits
Allows one month's retroactivity for an aged widow(er) who files an application for actuarially reduced widow(er)'s benefits in the calendar month following the month her (his) spouse died. This provision makes an exception to the rule, enacted in the Social Security Amendments of 1977, that bars the payment of retroactive benefits before an application is filed if the retroactive benefits would result in the reduction of future benefits. This provision facilitates payment in situations where death occurs late in the month and the widow(er) is under age 65 and fails to apply for benefits until the following month. The provision is effective for benefits based on applications filed after June 1983. It increases the cost of the program by about $0.1 billion over 1983-89 and has a negligible long-range cost.
Nonassignability of Benefits
Provides, effective upon enactment (4/20/83), that the provision in Social Security law (section 207) prohibiting assignment of Social Security or SSI benefits or subjecting them to the operations of bankruptcy laws may not be superseded by another law unless the other law does so by express reference to section 207. Under prior law, the Social Security Act prohibited the transfer or assignment of any future Social Security or SSI benefits payable and further stated that no money payable or rights existing under the Act should be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. Based on the legislative history of the Bankruptcy Reform Act of 1978, some bankruptcy courts have considered Social Security and SSI benefits listed by the debtor to be income for purposes of bankruptcy proceedings under that Act and have ordered SSA in a number of cases to send all or part of a debtor's benefit check to the trustee in bankruptcy. This provision clarifies that such orders are not appropriate. Program costs are not affected.
Use of Death Certificates to Prevent Erroneous Benefit Payments to Deceased Individuals
Provides that the Secretary o Health and Human Services (HHS) will establish a program under which the States can voluntarily contract with HHS to supply information derived from official death certificates. This information will be compared with benefit program records in order to prevent payments from being made to deceased persons. The provision will protect the confidentiality of Statesupplied death information by exempting it from the Freedom of Information Act. Under prior law, SSA had to rely on voluntary reporting of beneficiary deaths and there was evidence that some deaths were going unreported. State death records are the ultimate source of death information, and access to these records will provide an effective backup to the series of improvements already in place at SSA which are designed to reduce the possibilities of continuiing benefit payments when deaths occur. The provision saves $0.1 billion for 1983-89 and has a negligible long-range saving.
Study of SSA as an Independent Agency
Provides that a study shall be conducted with respect to the establishment of SSA as an independent agency by a panel of experts in the fields of government administration, social insurance and labor relations appointed by the Chairman of the House Committee on Ways and Means and the Senate Committee on Finance. The study is to be conducted in consultation with the Commissioner of Social Security and its report shall address: managing the transition, authorities needing to be transferred or amended, the programs which should be included within the jurisdiction of the new agency, the relationships of SSA to other organizations required as a result of establishing SSA as an independent agency and any other details which may be necessary. The panel will submit a report and recommendations to the Chairmen of the committees no later than April 1, 1984. Authorizes the appropriation from the general fund of sums necessary to carry out the study.
Suspending Payment of Benefits to Prisoners
Suspends payment of OASDI benefits to convicte felons while in prison; benefits to auxiliaries based on an incarcerated individual's earnings will not be affected. This provision extends to OASI the prior-law provision that limited payment of DI benefits to prisoners convicted of a felony and is effective with benefits for months after April 1983. The provision produces a negligible reduction in benefit payments each year.
U.S. Residency Requirement for Alien Auxiliary and Survivor Beneficiaries Outside the United States
Suspends Social Security monthly benefits for any alien auxiliary or survivor beneficiary who is outside the United States for more than 6 months unless the beneficiary resided in the United States for at least 5 years, and unless during that period the relationship of the beneficiary to the worker which is the basis for payment was in existence. Children who cannot meet the 5-year residency test on their own will be deemed to meet it if the test was met by the parents (or parent). Also, children adopted outside the United States will not be paid outside the United States. To a large extent, the provision avoids paying benefits to auxiliaries and survivors outside the United States who had little or no connection to the United States and who were not dependent on the worker for their livelihoods while he or she was working under Social Security in the United States. The provision does not apply if nonpayment would be contrary to a U.S. treaty obligation or to individuals who are citizens or residents of a country with which the United States has an international Social Security agreement. The provision is effective for individuals who initially become eligible for benefits after December 31, 1984. The provision reduces benefit outgo by $0.1 billion for 1984-89 and has a negligible long-range savings.
Professors of Clinical Medicine
Deems State universities that employ health care professionals as faculty members at medical schools, and tax-exempt faculty practice plans that employ faculty members of the medical schools, to be related corporations for purposes of "common paymaster" rules, provided that 30 percent or more of the employees of the plans are concurrently employed by the medical schools. This provision is effective for remuneration paid after 1983.
Generally an employer is required to pay FICA taxes for its employees only on amounts up to the wage base. However, if an employee works for more than one employer during the year and his annual wages exceed the wage base, employer FICA taxes can be paid on amounts in excess of the wage base. The "common paymaster" exception provides that if two or more related corporations employ the same individual, and pay him through a common paymaster that is one of the corporations, then the common paymaster is considered to be the only employer.
Earnings Sharing Implementation Report
Requires the Secretary of Health and Human Services, in consultation with the Senate Committee on Finance and the Ways and Means Committee of the House of Representatives, to report by July 1984 on specific recommendations to implement an earnings-sharing plan. This provision has no program cost or saving.
Social Security Cards
Provides that the Secretary of Health and Human Services shall issue a Social Security card made of banknote paper, which is to the maximum extent practicable, un-counterfeitable, for all new and replacement cards issued after October 30, 1983 (193 days after the date of enactment). Also provides that by July 19, 1983 (90 days after enactment) the Secretary shall report to Congress on his implementation plans for this provision. Such a card should be both more counterfeit-resistant and more durable than the present card. SSA had already planned to make this change which has a first year cost of $1.3 million.
Veterans' Administration Reorganization Report
Waives the general requirement that the Veterans' Administration provide advance notice to the Congress before reducing the staff in any of its offices by more than 10 percent in any fiscal year. The provision applies only to a planned administrative reorganization at the VA Los Angeles Data Processing Center involving the transfer of 25 full-time equivalent employees.
TITLE IV - SUPPLEMENTAL SECURITY INCOME PROVISIONS
Delay of SSI COLA and Increase in Federal SSI Benefit Standard
As discussed above, the SSI cost-of-living adjustments (COLA's) will now occur in January, rather than in July, beginning with January 1984. Thus, SSI and title II COLA's will continue to occur at the same time. However, the percentages may differ in the future when title II COLA's may, depending on the condition of the trust funds, be based on the lower change in either the CPI or average wages. The SSI COLA will be based on CPI changes even when the title II COLA is based on wage changes.
Effective July 1, 1983, however, the Federal SSI benefit standard is increased by $20 per month for individuals, $30 for couples, and $10 for essential persons as shown below:
The increase in the Federal SSI benefit standard, in conjunction with the SSI COLA delay, increases SSI program costs by $3.74 billion for FY 1983-98.
Mandatory State Passthrough of Federal SSI Benefit Increases
Permits a State which uses the payment level method for meeting the requirement that it pass through cost-of-living increases in the Federal SSI standard, to pass through only the amount of the increase in the Federal SSI standard that would have occurred in July 1983 under prior law rather than the July 1983 increase of $20 a month for individuals and $30 a month for couples that is provided by P.L. 98-21. This will permit some States to reduce their state supplement amounts, but they will be required to maintain combined Federal-State benefit levels which are at least equal to the March 1983 levels plus the July 1983 passthrough amount described above plus all subsequent increases in the Federal benefit level. Prior law permited a State using the payment level method to maintain its December 1976 payment levels by passing through increases in the Federal SSI standard. The change that requires basing future passthroughs on March 1993 rather than December 1976 levels is intended to prevent States that have increased their payment levels since 1976 from reducing them to 1976 levels or levels between the December 1976 and March 1983 levels. The amendment continues the provision of prior law which permited a State to meet the passthrough requirement by the aggregate expenditures method (i.e., to spend at least the same amount for SSI supplementation in the current 12-month period as in the last 12-month period). The provision is effective on enactment (4/20/83) and has no effect on Federal costs.
SSI Eligibility for Temporary Residents of Emergency Shelters for the Homeless
Provides that aged, blind, and disabled residents of public emergency shelters for the homeless (to be defined in regulations) may be eligible for SSI benefits for as many as 3 months in a 12-month period. Under prior law, residents of public institutions (excluding publicly operated community residences housing 16 or fewer persons and certain medical institutions) were not eligible for SSI benefits for any full month of institutionalization. Thus, individuals who otherwise may have been eligible for SSI lost, or were unable to establish, eligibility if they lived in publicly operated emergency shelters throughout a month. The provision is effective for months after April 1983 and increases SSI program costs by approximately $35 million through fiscal year 1989.
Disregard Emergency and Other In-Kind Assistance Under the SSI and AFDC Programs When Provided by Private Nonprofit Organizations
Excludes from income under the SSI program in-kind support and maintenance provided by a private nonprofit organization if the State determines (under regulations issued by the Secretary) that such assistance is based on need. Previously, in SSI, the receipt of privately furnished in-kind support and maintenance (other than certain home energy assistance) generally caused a reduction in SSI benefits. For the AFDC program, the amendment provides statutory authority for present policy that generally leaves the treatment of in-kind assistance to State decisions (except for the mandatory disregard of certain in-kind home energy assistance). This provision allows a charitable organization to assist a needy aged, blind, or disabled person or a needy family without causing a reduction in the recipients' SSI or AFDC benefits. The provision is effective for months after April 1983 and is temporary, expiring September 30, 1984. SSI program costs will be less than $1 million during the period that the provision is in effect.
Requires the Secretary to provide, prior to July 1984, a one-time notice to all elderly OASDI beneficiaries who are potentially eligible for SSI benefits of the availability of SSI. Also requires, effective on enactment, that similar information on SSI availability be included with the standard notice to OASDI beneficiaries of upcoming eligibility for Supplementary Medical Insurance (SMI) at age 65. The provision results in additional cumulative program costs of $618 million ($460 million Federal and $158 million State) through FY 1988 and additional administrative costs of $32 million through FY 1985.
TITLE V - UNEMPLOYMENT COMPENSATION PROVISIONS
Modifies and extends for 6 months the Federal Supplemental Compensation program which was due to expire March 31, 1983. This program provides additional weeks of Federally financed unemployment compensation benefits to jobless workers who have exhausted all other State and Federal unemployment benefits.
TITLE VI - PROSPECTIVE PAYMENTS FOR MEDICARE INPATIENT HOSPITAL SERVICES
Includes a major change in the method of payment under Medicare for inpatient hospital services. Services will be paid for on a prospective basis according to rates set by the Secretary of HHS. A single payment amount will be paid for each type of case, identified by the diagnosis group into which each case is classified.
This change is intended to improve the Medicare program's ability to act as a prudent purchaser of services, and to provide predictability regarding payments for both the Government and hospitals. It is also intended to reform the financial incentives hospitals face and promote efficiency in the provision of services by rewarding cost-effective hospital practices.