SOCIAL SECURITY AMENDMENTS OF 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00003R000200120001-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 207
• Document Creation Date: December 21, 2016
• Document Release Date: July 23, 2008
• Sequence Number: 1
• Publication Date: March 24, 1983
• Content Type: REPORT

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98TH CONGRESS 1 HOUSE OF REPRESENTATIVES I REPORT
1st Session J t No. 98-47
SOCIAL SECURITY AMENDMENTS OF 1983
Mr. RosTENKowsxi, from the committee of conference,
submitted the following
CONFERENCE REPORT
[To accompany H.R. 1900]
The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 1900) to
assure the solvency of the Social Security Trust Funds, to reform
the medicare reimbursement of hospitals, to extend the Federal
supplemental compensation program, and for other purposes,
having met, after full and free conference, have agreed to recom-
mend and do recommend to their respective Houses as follows:
That the House recede from its disagreement to the amendment
of the Senate and agree to the same with an amendment as fol-
lows:
In lieu of the matter proposed to be inserted by the Senate
amendment insert the following:
SECTION 1. This Act, with the following table of, contents, may be
cited as the "Social Security Amendments of 1983
TABLE OF CONTENTS
Sec. 1. Short title.
TITLE I-PROVISIONS AFFECTING THE FINANCING OF THE SOCIAL
SECURITY SYSTEM
PART A-COVERAGE
Sec. 101. Coverage of newly hired Federal employees.
Sec. 102. Coverage of employees of nonprofit organizations.
Sec. 103. Duration of agreements for coverage of State and local employees.
PART B-COMPUTATION OF BENEFIT AMOUNTS
Sec. 111. Shift of cost-of-living adjustments to calendar year basis.
Sec. 112. Costof-living increases to be based on either wages or prices (whichever is
lower) when balance in OASDI trust funds falls below specified level.
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Sec. 113. Elimination of windfall benefits for individuals receiving pensions from
noncovered employment.
Sec. 114. Increase in old-age insurance benefit amounts on account of delayed retire-
ment.
PART C-REVENUE PROVISIONS
Sec. 121. Taxation of social security and [tier 1] railroad retirement benefits.
Sec. 122. Credit for the elderly and the permanently and totally disabled.
Sec. 123. Acceleration of increases in FICA taxes; 1984 employee tax credit.
Sec. 124. Taxes on self-employment income; credit against such taxes.
Sec. 125. Allocations to disability insurance trust fund.
PART D-BENEFITS FOR CERTAIN SURVIVING, DIVORCED, AND DISABLED SPOUSES
Sec. 131. Benefits for surviving divorced spouses and disabled widows and widowers
who remarry.
Sec. 132. Entitlement to divorced spouse's benefits before entitlement of insured indi-
vidual to benefits.
Sec. 133. Indexing of deferred surviving spouse's benefits,
Sec. 134. Limitation on benefit reduction for early retirement in case of disabled
widows and widowers.
PART E-MECHANISMS To ASSURE CONTINUED BENEFIT PAYMENTS IN UNEXPECTEDLY
ADVERSE CONDITIONS
Sec. 141. Normalized crediting of social security taxes to trust funds.
Sec. 142. Interfund borrowing extension.
Sec. 143. Recommendations by Board of Trustees to remedy inadequate balances in
the Social Security Trust Funds.
PART F-OTHER FINANCING AMENDMENTS
Sec. 151. Financing of noncontributory military wage credits.
Sec. 152. Accounting for certain unnegotiated checks for benefits under the social se-
curity program.
Sec. 153. Float periods.
TITLE II-ADDITIONAL PROVISIONS RELA TING TO LONG-TERM
FINANCING OF THE SOCIAL SECURITY SYSTEM
Sec. 201. Increase in retirement age.
PART A-ELIMINATION OF GENDER-BASED DISTINCTIONS
Sec. 301. Divorced husbands.
Sec. 302. Remarriage of surviving spouse before age of eligibility.
Sec. 303. Illegitimate children.
Sec. 304. Transitional insured status.
Sec. 305. Equalization of benefits under section 228.
Sec. 306. Father's insurance benefits.
Sec. 307. Effect of marriage on childhood disability benefits and on other depend-
ents'or survivors' benefits.
Sec. 308. Credit for certain military service.
Sec. 309. Conforming amendments.
Sec. 310. Effective date of part A.
PART B-COVERAGE
Sec. 321. Coverage of employees of foreign affiliates of American employers.
Sec. 322. Extension of coverage by international social security agreement.
Sec. 323. Treatment of certain service performed outside the United States.
Sec. 324. Amount received under certain deferred compensation and salary reduction
arrangements treated as wages for FICA taxes.
Sec. 325. Treatment of contributions under simplified employee pensions.
Sec. 326. Effect of changes in names of State and local employee groups in Utah.
Sec. 327. Effective dates of international social security agreements.
Sec. 328. Codification &f Rowan decision with respect to meals and lodging.
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PART C-OTHER AMENDMF.NTS
Sec. 331. Technical and conforming amendments to maximum family benefit provi-
sions.
Sec. 332. Relaxation of insured status requirements for certain workers previously
entitled to a period of disability.
Sec. 333. Protection of benefits of illegitimate children of disabled beneficiaries.
Sec. 334. One-month retroactivity of widow's and widower's insurance benefits.
Sec. 335. Nonassignability of benefits.
Sec. 336. Use of death certificates to prevent erroneous benefit payments to deceased
individuals.
Sec. 337. Public pension offset.
Sec. 338. Study concerning the establishment of the Social Security Administration
as an independent agency.
Sec. 339. Limitation on payments to prisoners.
Sec. 340. Limitations on payments to nonresident aliens.
Sec. 341. Addition of public members to Trust Fund Board of Trustees.
Sec. 342. Payments schedule by State and local governments.
Sec. 343. Professors of clinical medicine.
Sec. 344. Earnings sharing implementation report.
Sec. 345. Veterans'Administration reorganization report.
Sec. 346. Social security cards.
Sec. 347. Budgetary treatment of Trust Fund operations.
Sec. 348. Liberalization of earnings text.
TITLE IV-SUPPLEMENTAL SECURITY INCOME BENEFITS
Sec. 401. Increase in Federal SSI benefit standard.
Sec. 402. Adjustments in Federal SSI pass-through provisions.
Sec. 403. SSI eligibility for temporary residents of emergency shelters for the home-
less.
Sec. 404. Disregarding of emergency and other in-kind assistance provided by non-
profit organizations.
Sec. 405. Notification with respect to SSI program.
TITLE V-UNEMPLOYMENT COMPENSATION PROVISIONS
PART A-FEDERAL SUPPLEMENTAL COMPENSATION
Sec. 501. Extension of program.
Sec. 502. Number of weeks for which compensation payable.
Sec. 503. E fective date.
Sec. 504. Training
Sec. 505. Coordination with trade readjustment program.
PART B-PROVISIONS RELATING TO INTEREST AND CREDIT REDUCTIONS
Sec. 511. Deferral of interest.
Sec. 512. Cap on credit reduction.
Sec. 513 Average employer contribution rate.
Sec. 514. Date or payment of interest.
Sec. 515. Penalty for failure to pay interest.
PART C-MISCELLANEOUS PROVISIONS
Sec. 521. Treatment of employees providing services to educational institutions.
Sec. 522. Extended benefits for individuals who are hospitalized or on jury duty.
Sec. 523. Voluntary health insurance programs permitted.
Sec. 524. Treatment of certain or anizations retroactively determined to be described
in section 501(cX3) of the Internal Revenue Code of 1954.
TITLE VI-PROSPECTIVE PAYMENTS FOR MEDICARE INPATIENT
HOSPITAL SERVICES
Sec. 601. Medicare payments for inpatient hospital services on the basis of prospec-
tive rates.
Sec. 602. Conforming amendments.
Sec. 603. Re rts, experiments, and demonstration projects.
Sec. 604. Effective dates.
Sec. 605. Delay in provision relating to hospital-based skilled nursing facilities.
Sec. 606. Shift in medicare premiums to coincide with cost-of-living increase.
Sec. 607. Section 1122 amendments.
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TITLE I-PRO VISIONS AFFECTING THE FI-
NANCING OF THE SOCIAL SECURITY
SYSTEM
SEC. 101. (a)(1) Section 210(a) of the Social Security Act is amend-
ed by striking out paragraphs (5) and (6) and inserting in lieu there-
of the following:
"(5) Service performed in the employ of the United States or
any instrumentality of the United States, if such service-
"(A) would be excluded from the term `employment' for
purposes of this title if the provisions of paragraphs (5) and
(6) of this subsection as in effect in January 1983 had re-
mained in effect, and
"(B) is performed by an individual who (i) has been con-
tinuously in the employ of the United States or an instru-
mentality thereof since December 31, 1983 (and for this pur-
pose an individual who returns to the performance of such
service after being separated therefrom following a previous
period of such service shall nevertheless be considered upon
such return as having been continuously in the employ of
the United States or an instrumentality thereof, regardless
of whether the period of such separation began before or
after December 31, 1983, if the period of such separation
does not exceed 365 consecutive days), or (ii) is receiving an
annuity from the Civil Service Retirement and Disability
Fund, or benefits (for service as an employee) under another
retirement system established by a law of the United States
for employees of the Federal Government (other than for
members of the uniformed services);
except that this paragraph shall not apply with respect to-
"(i) service performed as the President or Vice President
of the United States,
"(ii) service performed-
"(I) in a position placed in the Executive Schedule
under sections 5312 through 5317 of title 5, United
States Code,
"(II) as a noncareer appointee in the Senior Executive
Service or a noncareer member of the Senior Foreign
Service, or
"(III) in a position to which the individual is ap-
pointed by the President (or his designee) or the Vice
President under section 105(a)(1), 106(a)(1), or 107 (a)(1)
or (b)(1) of title 3, United States Code, if the maximum
rate of basic pay for such position is at or above the
rate for level V of the Executive Schedule,
"(iii) service performed as the Chief Justice of the United
States, an Associate Justice of the Supreme Court, a judge
of a United States court of appeals, a judge of a United
States District Court (including the district court of a terri-
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tory), a judge of the United States Claims Court, a judge of
the United States Court of International Trade, a judge of
the United States Tax Court, a United States magistrate, or
a referee in bankruptcy or United States bankruptcy judge,
"(iv) service performed as a Member, Delegate, or Resi-
dent Commissioner of or to the Congress, or
`(v) any other service in the legislative branch of the Fed-
eral Government if such service is performed by an individ-
ual who, on December 31, 1983, is not subject to subchapter
III of chapter 83 of title 5, United States Code;
`(6) Service performed in the employ of the United States or
any instrumentality of the United States if such service is per-
formed-
"(A) in a penal institution of the United States by an
inmate thereof,
"(B) by any individual as an employee included under
section 5351(2) of title 5, United States Code (relating to cer-
tain interns, student nurses, and other student employees of
hospitals of the Federal Government), other than as a
medical or dental intern or a medical or dental resident in
training; or
"(C) by any individual as an employee serving on a tem-
porary basis in case of fire, storm, earthquake, flood, or
other similar emergency; ".
(2) Section 210(p) of such Act is amended by striking out `provi-
sions of-" and all that follows and inserting in lieu thereof `provi-
sions of subsection (a)(5). ".
(b)(1) Section 3121(b) of the Internal Revenue Code of 1954 is
amended by striking out paragraphs (5) and (6) and inserting in lieu
thereof the following:
"(5) service performed in the employ of the United States or
any instrumentality of the United States, if such service-
"(A) would be excluded from the term `employment' for
purposes of this title if the provisions of paragraphs (5) and
(6) of this subsection as in effect in January 1983 had re-
mained in effect, and
"(B) is performed by an individual who (i) has been con-
tinuously in the employ of the United States or an instru-
mentality thereof since December 31, 1983 (and for this pur-
pose an individual who returns to the performance of such
service after being separated therefrom following a previous
period of such service shall nevertheless be considered upon
such return as having been continuously in the employ of
the United States or an instrumentality thereof, regardless
of whether the period of such separation began before or
after December 31, 1983, if the period of such separation
does not exceed 365 consecutive days), or (ii) is receving an
annuity from the Civil Service Retirement and Disability
Fund, or benefits (for service as an employee) under another
retirement system established by law of the United States
for employees of the Federal Government other than for
members of the uniformed services);
except that this paragraph shall not apply with respect to-
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"(i) service performed as the President or Vice President
of the United States,
(ii) service performed-
"(I) in a position placed in the Executive Schedule
under Sections 5312 through 5317 of title 5, United
States Code.
"(II) as a noncareer appointee in the Senior Executive
Service or a noncareer member of the Senior Foreign
Service, or
"(III) in a position to which the individual is ap-
pointed by the President (or his designee) or the Vice
President under section 105(a)(1), 106(a)(1), or 107 (a)(1)
or (b)(1) of title 3, United States Code, if the maximum
rate of basic pay for such position is at or above the
rate for level V of the Executive Schedule,
"(iii) service performed as the Chief Justice of the United
States, an Associate Justice of the Supreme Court, a judge
of a United States court of appeals, a judge of a United
States district court (including the district court of a terri-
tory), a judge of the United States Claims Court, a judge of
the United States Court of International Trade, a judge of
the United States Tax Court, a United States magistrate, or
a referee in bankruptcy or United States bankruptcy judge,
"(iv) service performed as a Member, Delegate, or Resi-
dent Commissioner of or to the Congress, or
`(v) any other service in the legislative branch of the Fed-
eral Government if such service is performed by an individ-
ual who, on December 31, 1983, is not subject to subchapter
III of chapter 83 of title 5, United States Code;
`(6) service performed in the employ of the United States or
any instrumentality of the United States if such service is per-
formed-
"(A) in a penal institution of the United States by an
inmate thereof,
"(B) by any individual as an employee included under
section 5351(2) of title 5, United States Code (relating to cer-
tain interns, student nurses, and other student employees of
hospitals of the Federal Government), other than as a
medical or dental intern or a medical or dental resident in
training; or
"(C) by any individual as an employee serving on a tem-
porary basis in case of fire, storm, earthquake, flood, or
other similar emergency;".
(2) Section 3121(u)(1) of such Code is amended to read as follows:
"(1) IN GENERAL.-For purposes of the taxes imposed by sec-
tions 3101(b) and 3111(b), subsection (b) shall be applied with-
out regard to paragraph (5) thereof ".
(c)(1) Section 209 of the Social Security Act is amended by adding
at the end thereof the following new paragraph:
"For purposes of this title, in the case of an individual perform-
ing service under the provisions of section 294 of title 28, United
States Code (relating to assignment of retired justices and judges to
active duty), the term `wages' shall, subject to the provisions of sub-
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section (a) of this section, include any payment under section 371(b)
of such title 28 which is received during the period of such service. ".
(2) Section 3121(i) of the Internal Revenue Code of 1954 (relating
to computation of wages in certain cases) is amended by adding at
the end thereof the following new paragraph:
"(5) SERVICE PERFORMED BY CERTAIN RETIRED JUSTICES AND
JUDGES.-For purposes of this chapter, in the case of an individ-
ual performing service under the provisions of section 294 of
title 28, United States Code (relating to assignment of retired
justices and judges to active duty), the term `wages' shall, sub-
ject to the provisions of subsection (a)(1) of this section, include
any payment under section 371(b) of such title 28 which is re-
ceived during the period of such service. ".
(d) The amendments made by this section shall be effective with
respect to remuneration paid after December 31, 1983.
(e) Nothing in this Act shall reduce the accrued entitlements to
future benefits under the Federal Retirement System of current and
retired Federal employees and their families.
COVERAGE OF EMPLOYEES OF NONPROFIT ORGANIZATIONS
SEC. 102. (a) Section 210(a)(8) of the Social Security Act is amend-
ed-
(1) by striking out "(A)" immediately after "(8)",-
(2) by striking out "subparagraph" where it first appears and
inserting in lieu thereof `paragraphand
(3) by striking out subparagraph (B).
(b)(1) Section 3121(b)(8) of the Internal Revenue Code of 1954 is
amended-
(A) by striking out "(A)" immediately after "(8)';?
(B) by striking out "subparagraph" where it first appears and
inserting in lieu thereof `paragraphand
(C) by striking out subparagraph (B).
(2) Section 3121(k) of such Code is repealed.
(3) Section 3121(r) of such Code is amended-
(A) by striking out "subsection (b)(8)(A)" and "section
210(a)(8XA)" in paragraph (3) and inserting in lieu thereof "sub-
section (b)(8)" and "section 210(a)(8)", respectively; and
(B) by striking out paragraph (4).
(c) The amendments made by the preceding provisions of this sec-
tion shall be effective with respect to service performed after Decem-
ber 31, 1983 (but the provisions of sections 2 and 3 of Public Law
94-563 and section 312(c) of Public Law 95-216 shall continue in
effect, to the extent applicable, as though such amendments had not
been made).
(d) The period for which a certificate is in effect under section
3121(k) of the Internal Revenue Code of 1954 may not be terminated
under paragraph (1)(D) or (2) thereof on or after March 31, 1983; but
no such certificate shall be effective with respect to any service to
which the amendments made by this section apply.
(e)(1) If any individual-
(A) on January 1, 1984, is age 55 or over, and is an employee
of an organization described in section 210(a)(8XB) of the Social
Security Act (A) which does not have in effect (on that date) a
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waiver certificate under section 3121(k) of the Internal Revenue
Code of 1954 and (B) to the employees of which social security
coverage is extended on January 1, 1984, solely by reason of the
enactment of this section, and
(B) after January 1, 1984, acquires the number of quarters of
coverage (within the meaning of section 213 of the Social Secu-
rity Act) which is required for purposes of this subparagraph
under paragraph (2),
then such individual shall be deemed to be a fully insured individ-
ual (as defined in section 214 of the Social Security Act) for all of
the purposes of title II of such Act.
(2) The number of quarters of coverage which is required for pur-
poses of subparagraph (B) of paragraph (1) shall be determined as
follows:
In the case of an in- The number of quar-
dividual who on ters of coverage
January 1, 1984, so required
is- shall be-
age 60 or over .......................................................................................................... 6
age 59 or over but less than age 60 ...................................................................... 8
age 58 or over but less than age 59 ...................................................................... 12
age 57 or over but less than age 58 ...................................................................... 16
age 55 or over but less than age 57 ...................................................................... 20.
DURATION OF AGREEMENTS FOR COVERAGE OF STATE AND LOCAL
EMPLOYEES
SEC. 103. (a) Section 218(g) of the Social Security Act is amended
to read as follows:
"Duration of Agreement
"(g) No agreement under this section may be terminated, either in
its entirety or with respect to any coverage group, on or after the
date of the enactment of the Social Security Amendments of 1983. ".
(b) The amendment made by subsection (a) shall apply to any
agreement in effect under section 218 of the Social Security Act on
the date of the enactment of this Act, without regard to whether a
notice of termination is in effect on such date, and to any agreement
or modification thereof which may become effective under such sec-
tion 218 after that date.
PART B-COMPUTATION OF BENEFIT AMOUNTS
SHIFT OF COST-OF-LIVING ADJUSTMENTS TO CALENDAR YEAR BASIS
SEC. 111. (a)(1) Section 215(i)(2)(A)(ii) of the Social Security Act is
amended by striking out "June" and inserting in lieu thereof "De-
cember".
(2) Section 215(i)(2)(AXiii) of such Act is amended by striking out
"May" and insert in lieu thereof "November".
(3) Section 215(i)(2)(B) of such Act is amended by striking out
"May" each place it appears and inserting in lieu thereof in each
instance "November".
(4) Section 203(f)(8XA) of such Act is amended by striking out
"June" and inserting in lieu thereof "December".
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(5) Section 230(a) of such Act is amended by striking out "June"
and inserting in lieu thereof "December".
(6) Section 215(i)(2) of such Act as in effect in December 1978, and
as applied in certain cases under the provisions of such Act as in
effect after December 1978, is amended by striking out "June" in
subparagraph (A)(ii) and inserting in lieu thereof "December"; and
by striking out "May" each place it appears in subparagraph (B)
and inserting in lieu thereof in each instance "November".
(7) Section 202(m) of such Act (as it applies in certain cases by
reason of section 2 of Public Law 97-123) is amended by striking out
"May" and inserting in lieu thereof "November".
(8) The amendments made by this subsection shall apply with re-
spect to cost-of-living increases determined under section 215(i) of
the Social Security Act for years after 1982.
(b)(1) Section 215(i)(1)(A) of the Social Security Act is amended by
striking out "March 31 " and inserting in lieu thereof "September
30"; and by striking out "1974"and inserting in lieu thereof "1982".
(2) Section 215(i)(1XA) of such Act as in effect in December 1978,
and as applied in certain cases under the provisions of such Act as
in effect after December 1978, is amended by striking out "March
31 " and inserting in lieu thereof "September 30" and by striking out
"1974 " and inserting in lieu thereof "1982".
(3) The amendments made by this subsection shall apply with re-
spect to cost-of-living increases determined under section 215(i) of
the Social Security Act for years after 1983.
(c) Section 215(i)(4) of such Act is amended by inserting, ", and as
amended by section 111 (A)(6) and (b)(2) of the Social Security
Amendments of 1983, " after "as in effect in December 1978" the
first place it appears.
(d) Notwithstanding any provision to the contrary in section 215(i)
of the Social Security Act, the "base quarter" (as defined in para-
graph (1)(A)(i) of such section) in the calendar year 1983 shall be a
"cost-of-living computation quarter" within the meaning of para-
graph (1)(B) of such section (and shall be deemed to have been deter-
mined by the Secretary of Health and Human Services to be a "cost-
of-living computation quarter" under paragraph (2)(A) of such sec-
tion) for all of the purposes of such Act as amended by this section
and by other provisions of this Act, without regard to the extent by
which the Consumer Price Index has increased since the last prior
cost-of-living computation quarter which was established under
such paragraph (1)(B).
(e) Section 403(b) of the Omnibus Reconciliation Act of 1982
(Public Law 97-253) is amended to read as follows:
"(b)(1) Except as provided in paragraph (2), the amendment made
by subsection (a)(1) shall apply with respect to amounts payable for
periods beginning after May 31, 1983.
"(2) In the cases of individuals to whom pension is payable under
sections 521, 541, and 542 of title 38, United States Code, the
amendment made by subsection (a)(1) shall take effect on the first
day after May 31, 1983, that an increase is made in maximum
annual rates of pension pursuant to section 3112 of title 38, United
States Code. ".
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COST-OF-LIVING INCREASES TO BE BASED ON EITHER WAGES OR PRICES
(WHICHEVER IS LOWER) WHEN BALANCE IN OASDI TRUST FUNDS
FALLS BELOW SPECIFIED LEVEL
SEC. 112. (a) Section 215(i)(1) of the Social Security Act is amend-
ed-
(1) by striking out "in which" in subparagraph (B) and all
that follows down through the first semicolon in such subpara-
graph and inserting in lieu thereof "with respect to which the
applicable increase percentage is 3 percent or more;
(2) by striking out "and" at the end of subparagraph (B);
(3) by redesignating subparagraph (C) as subparagraph (H);
and
(4) by inserting after subparagraph (B) the following new sub-
paragraphs:
"(C) the term `applicable increase percentage' means-
`(i) with respect to a base quarter or cost-of-living compu-
tation quarter in any calendar year before 1985, or in any
calendar year after 1984 and before 1989 for which the
OASDI fund ratio is 15.0 percent or more, or in any calen-
dar year after 1988 for which the OASDI fund ratio is 20.0
percent or more, the CPI increase percentage; and
"(ii) with respect to a base quarter or cost-of-living com-
putation quarter in any calendar year after 1984 and before
1989 for which the OASDI fund ratio is less than 15.0 per-
cent, or in any calendar year after 1988 for which the
OASDI fund ratio is less than 20.0 percent, the CPI in-
crease percentage or the wage increase percentage, which-
ever (with respect to that quarter) is the lower-
"(D) the term 'CPI increase percentage' with respect to a base
quarter or cost-of-living computation quarter in any calendar
year, means the percentage (rounded to the nearest one-tenth of
1 percent) by which the Consumer Price Index for that quarter
(as prepared by the Department of Labor) exceeds such index for
the most recent prior calendar quarter which was a base quar-
ter under subparagraph (A)(ii) or, if later, the most recent cost-
of-living computation quarter under subparagraph (B);
"(E) the term `wage increase percentage', with respect to a
base quarter or cost-of-living computation quarter in any calen-
dar year, means the percentage (rounded to the nearest one-
tenth of 1 percent) by which the SSA average wage index for the
year immediately preceding such calendar year exceeds such
index for the year immediately preceding the most recent prior
calendar year which included a base quarter under subpara-
graph (A)(ii) or, if later, which included a cost-of-living compu-
tation quarter;
"(F) the term `OASDI fund ratio ; with respect to any calen-
dar year, means the ratio of-
"(i) the combined balance in the Federal Old Age and
Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund as of the beginning of such year, in-
cluding the taxes transferred under section 201(a) on the
first day of such year and reduced by the outstanding
amount of any loan (including interest thereon) theretofore
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made to either such Fund from the Federal Hospital Insur-
ance Trust Fund under section 201(l), as of the beginning of
such year, to
"(ii) the total amount which (as estimated by the Secre-
tary) will be paid from the Federal Old-Age and Survivors
Insurance Trust Fund and the Federal Disability Insurance
Trust Fund during such calendar year for all purposes au-
thorized by section 201 (other than payments of interest on,
or repayments of, loans from the Federal Hospital Insur-
ance Trust Fund under section 201(l)), but excluding any
transfer payments between such trust funds and reducing
the amount of any transfers to the Railroad Retirement Ac-
count by the amount of any transfers into either such trust
fund from that Account;
"(G) the term `SSA average wage index', with respect to any
calendar year, means the average of the total wages reported to
the Secretary of the Treasury or his delegate for the preceding
calendar year as determined for purposes of subsection
(b)(3XAXii); and".
(b) Section 215(i)(2)(AXii) of such Act is amended by striking out
"by the same percentage" and all that follows down through the
semicolon, in the sentence immediately following subdivision (III),
and inserting in lieu thereof "by the applicable increase percent-
age; ? .
(c) Section 215(i) of such Act is further amended by adding at the
end thereof the following new paragraph:
"(5XA) If-
"(i) with respect to any calendar year the `applicable increase
percentage' was determined under clause (ii) of paragraph (1)(C)
rather than under clause (i) of such paragraph, and the in-
crease becoming effective under paragraph (2) in such year was
accordingly determined on the basis of the wage increase per-
centage rather than the CPI increase percentage (or there was
no such increase becoming effective under paragraph (2) in that
year because the wage increase percentage was less than 3 per-
cent), and
"(ii) for any subsequent calendar year in which an increase
under paragraph (2) becomes effective the OASDI fund ratio is
greater than 32.0 percent,
then each of the amounts described in subdivisions (I), (II), and (III)
of paragraph (2)(AXii), as increased under paragraph (2) effective
with the month of December in such subsequent calendar year, shall
be further increased (effective with such month) by an additional
percentage, which shall be determined under subparagraph (B) and
shall apply as provided in subparagraph (C).
"(B) The applicable additional percentage by which the amounts
described in subdivisions (I), (II), and (III) of paragraph (2)(AXii) are
to be further increased under subparagraph (A) in the subsequent
calendar year involved shall be the amount derived by-
"(i) subtracting (I) the compounded percentage benefit in-
creases that were actually paid under paragraph (2) and this
paragraph from (II) the compounded percentage benefit in-
creases that would have been paid if all increases under para-
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graph (2) had been made on the basis of the CPI increase per-
centage,
"(ii) dividing the difference by the sum of the compounded
percentage in subdivision (I) and 100 percent, and
"(iii) multiplying such quotient by 100 and rounding to the
nearest one-tenth of 1 percent,
with the compounded increases referred to in subdivisions (I) and
(II) being measured-
"(iv) in the case of amounts described in subdivision (I) of
paragraph (2)(A)(ii), over the period beginning with the calen-
dar year in which monthly benefits described in such subdivi-
sion were first increased on the basis of the wage increase per-
centage and ending with such subsequent calendar year, and
"(v) in the case of amounts described in subdivisions (II) and
(III) of paragraph (2)(A)(ii), over the period beginning with the
calendar year in which the individual whose primary insurance
amount is increased under such subdivision (II) initially
became eligible for an old-age or disability insurance benefit, or
died before becoming so eligible, and ending with such subse-
quent calendar year,
except that if the Secretary determines in any case that the applica-
tion (in accordance with subparagraph (C)) of the additional per-
centage as computed under the preceding provisions of this subpara-
graph would cause the OASDI fund ratio to fall below 32.0 percent
in the calendar year immediately following such subsequent year, he
shall reduce such applicable additional percentage to the extent nec-
essary to ensure that the OASDI fund ratio will remain at or above
32.0 percent through the end of such following year.
"(C) Any applicable additional percentage increase in an amount
described in subdivision (I), (II), or (III) of paragraph (2)(A)(ii), made
under this paragraph in any calendar year, shall thereafter be treat-
ed for all the purposes of this Act as a part of the increase made in
such amount under paragraph (2) for that year. ".
(d)(1) Section 215(i)(2)(C) of such Act is amended by adding at the
end thereof the following new clause:
"(iii) The Secretary shall determine and promulgate the OASDI
fund ratio and the SSA wage index for each calendar year before
November 1 of that year, based upon the most recent data then
available, and shall include a statement of such fund ratio and
wage index (and of the effect such ratio and the level of such index
may have upon benefit increases under this subsection) in any noti-
fication made under clause (ii) and any determination published
under subparagraph (D). ".
(2) Section 215(i)(4) of such Act (as amended by section 111(b)(1) of
this Act) is further amended by striking out "section 111(b)(2)" and
inserting in lieu thereof "sections 111(b)(2) and 112".
(e) The amendments made by the preceding provisions of this sec-
tion shall apply with respect to monthly benefits under title II of
the Social Security Act for months after December 1981.
(f) Notwithstanding anything to the contrary in section 215(i)(1)(F)
of the Social Security Act (as added by subsection (a)(4) of this sec-
tion), the combined balance in the Trust Funds which is to be used
in determining the "OASDI fund ratio" with respect to the calendar
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year 1985 under such section shall be the estimated combined bal-
ance in such Funds as of the close of that year (rather than as of its
beginning), including the taxes transferred under section 201(a) on
the first day of the year following that year.
ELIMINATION OF WINDFALL BENEFITS FOR INDIVIDUALS RECEIVING
PENSIONS FROM NONCOVERED EMPLOYMENT
SEC. 113. (a) Section 215(a) of the Social Security Act is amended
by adding at the end thereof the following new paragraph:
"(7XA) In the case of an individual whose primary insurance
amount would be computed under paragraph (1) of this subsection,
who-
"(i) attains age 62 after 1985 (except where he or she became
entitled to a disability insurance benefit before 1986 and re-
mained so entitled in any of the 12 months immediately preced-
ing his or her attainment of age 62), or
"(ii) would attain age 62 after 1985 and becomes eligible for a
disability insurance benefit after 1985,
and who first becomes eligible after 1985 for a monthly periodic
payment (including a payment determined under subparagraph (C),
but excluding a payment under the Railroad Retirement Act of 1974
or 1937) which is based in whole or in part upon his or her earnings
for service which did not constitute `employment' as defined in sec-
tion 210 for purposes of this title (hereafter in this paragraph and
in subsection (d)(5) referred to as `noncovered service), the primary
insurance amount of that individual during his or her concurrent
entitlement to such monthly periodic payment and to old-age or dis-
ability insurance benefits shall be computed or recomputed under
subparagraph (B) with respect to the initial month in which the in-
dividual becomes eligible for such benefits.
"(B)(i) If paragraph (1) of this subsection would apply to such an
individual (except for subparagraph (A) of this paragraph), there
shall first be computed an amount equal to the individual's pri-
mary insurance amount under the preceding paragraphs of this sub-
section, except that for purposes of such computation the percentage
of the individual's average indexed monthly earnings established by
subparagraph (A)(i) of paragraph (1) shall be the percent specified in
clause (ii). There shall then be computed (without regard to this
paragraph) a second amount, which shall be equal to the individ-
ual's primary insurance amount under the preceding paragraphs of
this subsection, except that such second amount shall be reduced by
an amount equal to one-half of the portion of the monthly periodic
payment which is attributable to noncovered service performed after
1956 (with such attribution being based on the proportionate
number of years of such noncovered service) and to which the indi-
vidual is entitled (or is deemed to be entitled) for the initial month
of his or her eligibility for old-age or disability insurance benefits.
The individual's primary insurance amount shall be the larger of
the two amounts computed under this subparagraph (before the ap-
plication of subsection (i)) and shall be deemed to be computed
under paragraph (1) of this subsection for the purpose of applying
other provisions of this title.
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"(ii) For purposes of clause (i), the percent specified in this clause
is-
"(I) 80.0 percent with respect to individuals who initially
become eligible for old-age or disability insurance benefits in
1986;
"(II) 70.0 percent with respect to individuals who so become
eligible in 1987;
"(III) 60.0 percent with respect to individuals who so become
eligible in 1988;
"(IV) 50.0 percent with respect to individuals who so become
eligible in 1989; and
"(V) 40.0 percent with respect to individuals who so become
eligible in 1990 or thereafter.
"(C)(i) Any periodic payment which otherwise meets the require-
ments of subparagraph (A), but which is paid on other than a
monthly basis, shall be allocated on a basis equivalent to a monthly
payment (as determined by the Secretary), and such equivalent
monthly payment shall constitute a monthly periodic payment for
purposes of this paragraph.
"(ii) In the case of an individual who has elected to receive a peri-
odic payment that has been reduced so as to provide a survivors
benefit to any other individual, the payment shall be deemed to be
increased (for purposes of any computation under this paragraph or
subsection (d)(5)) by the amount of such reduction.
"(iii) If an individual to whom subparagraph (A) applies is eligi-
ble for a periodic payment beginning with a month that is subse-
quent to the month in which he or she becomes eligible for old-age
or disability insurance benefits, the amount of that payment (for
purposes of subparagraph (B)) shall be deemed to be the amount to
which he or she is, or is deemed to be, entitled (subject to clauses (i),
(ii), and (iv) of this subparagraph) in such subsequent month.
"(iv) For purposes of this paragraph, the term `periodic payment'
includes a payment payable in a lump sum if it is a commutation
of, or a substitute for, periodic payments.
"(D) This paragraph shall not apply in the case of an individual
who has 30 years or more of coverage (as defined in paragraph
(1)(C)(ii)). In the case of an individual who has more than 24 years
of coverage but less than 30 years of coverage (as so defined), the
percent specified in the applicable subdivision of subparagraph
(B)(ii) shall (if such percent is smaller than the percent specified in
whichever of the following clauses applies) be deemed to be-
"(i) 80 percent, in the case of an individual who has 29 of
such years of coverage;
"(ii) 70 percent, in the case of an individual who has 28 of
such years;
"(iii) 60 percent, in the case of an individual who has 27 of
such years; and
"(iv) 50 percent, in the case of an individual who has 26 of
such years.
"(E) This paragraph shall not apply in the case of an individual
who on January 1, 1984-
"(i) is an employee performing service to which social security
coverage is extended on that date solely by reason of the amend-
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ments made by section 101 of the Social Security Amendments
of 1983; or
"(ii) is an employee of a nonprofit organization which (on De-
cember 31, 1983) did not have in effect a waiver certificate
under section 3121(k) of the Internal Revenue Code of 1954 and
to the employees of which social security coverage is extended
on that date solely by reason of the amendments made by sec-
tion 102 of that Act, unless social security coverage had previ-
ously extended to service performed by such individual as an
employee of that organization under a waiver certificate which
was subsequently (prior to December 31, 1983) terminated. ".
(b) Section 215(d) of such Act is amended by adding at the end
thereof the following new paragraph:
"(5) In the case of an individual whose primary insurance amount
is not computed under paragraph (1) of subsection (a) by reason of
paragraph (4)(BXii) of that subsection, who-
"(A) attains age 62 after 1985 (except where he or she became
entitled to a disability insurance benefit before 1986, and re-
mained so entitled in any of the 12 months immediately preced-
ing his or her attainment of age 62), or
"(B) would attain age 62 after 1985 and becomes eligible for a
disability insurance benefit after 1985, and who first becomes
eligible after 1985 for a monthly periodic payment (including a
payment determined under subsection (a)(7XC), but excluding a
payment under the Railroad Retirement Act of 1974 or 1937)
which is based (in whole or in part) upon his or her earnings in
noncovered service, the primary insurance amount of such indi-
vidual during his or her concurrent entitlement to such month-
ly periodic payment and to old-age or disability insurance bene-
fits shall be the primary insurance amount computed or recom-
puted under this subsection (without regard to this paragraph
and before the application of subsection (i)) reduced by an
amount equal to the smaller of-
`(i) one-half of the primary insurance amount (computed
without regard to this paragraph and before the applica-
tion of subsection (i)), or
"(ii) one-half of the portion of the monthly periodic pay-
ment (or payment determined under subsection (a)(7XC))
which is attributable to noncovered service performed after
1956 (with such attribution being based on the proportion-
ate number of years of such noncovered service) and to
which that individual is entitled (or is deemed to be enti-
tled) for the initial month of his or her eligibility for old-
age or disability insurance benefits.
This paragraph shall not apply in the case of any individual to
whom subsection (a)(7) would not apply by reason of subparagraph
(E) or the first sentence of subparagraph (D) thereof
(c) Section 215(f) of such Act is amended by adding at the end
thereof the following new paragraph:
11(9XA) In the case of an individual who becomes entitled to a pe-
riodic payment determined under subsection (a)(7XA) (including a
payment determined under subsection (a)(7XC)) in a month subse-
quent to the first month in which he or she becomes entitled to an
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old-age or disability insurance benefit, and whose primary insur-
ance amount has been computed without regard to either such sub-
section or subsection (d)(5), such individual's primary insurance
amount shall be recomputed, in accordance with either such subsec-
tion or subsection (d)(5), as may be applicable, effective with the
first month of his or her concurrent entitlement to such benefit and
such periodic payment.
"(B) If an individual's primary insurance amount has been com-
puted under subsection (a)(7) or (d)(5), and it becomes necessary to
recompute that primary insurance amount under this subsection-
"(0 so as to increase the monthly benefit amount payable
with respect to such primary insurance amount (except in the
case of the individual's death), such increase shall be deter-
mined as though such primary insurance amount had initially
been computed without regard to subsection (a)(7) or (d)(5), or
"(ii) by reason of the individual's death, such primary insur-
ance amount shall be recomputed without regard to (and as
though it had never been computed with regard to) subsection
(a)(7) or (d)(5). ".
(d) Sections 202(e)(2) and 202(f)(3) of such Act are each amended
by striking out "section 215(f)(5) or (6)" wherever it appears and in-
serting in lieu thereof "section 215(f)(5), 215(f)(6), or 215(f)(9)(B)".
INCREASE IN OLD-AGE INSURANCE BENEFIT AMOUNTS ON ACCOUNT OF
DELAYED RETIREMENT
SEC. 114. (a) Section 202(w)(1)(A) of the Social Security Act is
amended to read as follows:
"(A) the applicable percentage (as determined under para-
graph (6)) of such amount, multiplied by".
(b) Section 202(w) of such Act is further amended by adding at the
end thereof the following new paragraph:
"(6) For purposes of paragraph (1)(A), the `applicable percentage'
"(A)'/12 of 1 percent in the case of an individual who first be-
comes eligible for an old-age insurance benefit in any calendar
year before 1979,-
"(B) '/4 of 1 percent in the case of an individual who first be-
comes eligible for an old-age insurance benefit in any calendar
year after 1978 and before .1987;
"(C) in the case of an individual who first becomes eligible
for an old-age insurance benefit in a calendar year after 1986
and before 2005, a percentage equal to the applicable percentage
in effect under this paragraph for persons who first became eli-
gible for an old-age insurance benefit in the preceding calendar
year (as increased pursuant to this subparagraph), plus '/24 of 1
percent if the calendar year in which that particular individual
first becomes eligible for such benefit is not evenly divisible by
2; and
"(D) 2/3 of 1 percent in the case of an individual who first be-
comes eligible for an old-age insurance benefit in a calendar
year after 2004. ".
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17
PART C-REVENUE PROVISIONS
SEC. 121. TAXATION OF SOCIAL SECURITY AND TIER I RAILROAD RETIRE-
MENT BENEFITS.
(a) GENERAL RuLE.-Part II of subchapter B of chapter 1 of the
Internal Revenue Code of 1954 (relating to amounts specifically in-
cluded in gross income) is amended by redesignating section 86 as
section 87 and by inserting after section 85 the following new sec-
tion:
"SEC. 86. SOCIAL SECURITY AND TIER I RAILROAD RETIREMENT BENEFITS.
"(a) IN GENERAL.-Gross income for the taxable year of any tax-
payer described in subsection (b) includes social security benefits in
an amount equal to the lesser of-
"(1) one-half of the social security benefits received during the
taxable year, or
"(2) one-half of the excess described in subsection (b)(1).
"(b) TAXPAYERS TO WHOM SUBSECTION (a) APPLIES. -
"(1) IN GENERAL. -A taxpayer is described in this subsection
if-
"(A) the sum of-
"(i) the modified adjusted gross income of the tax-
payer for the taxable year, plus
"(ii) one-half of the social security benefits received
during the taxable year, exceeds
"(B) the base amount.
"(2) MODIFIED ADJUSTED GROSS INCOME.-For purposes of this
subsection, the term `modified adjusted gross income' means ad-
justed fross income-
'(A) determined without regard to this section and sec-
tions 221 911, 931, and 933, and
"(B) increased by the amount of interest received or ac-
crued by the taxpayer during the taxable year which is
exempt from tax.
"(c) BASE AMOUNT.-For purposes of this section, the term `base
amount' means-
"(1) except as otherwise provided in this subsection, $25,000,
"(2) $32,000, in the case of a joint return, and
`(3) zero, in the case of a taxpayer who-
"(A) is married at the close of the taxable year (within
the meaning of section 143) but does not file a joint return
for such year, and
"(B) does not live apart from his spouse at all times
during the taxable year.
"(d) SOCIAL SECURITY BENEFIT.-
"(1) IN GENERAL.-For purposes of this section, the term
`social security benefit' means any amount received by the tax-
payer by reason of entitlement to-
"(A) a monthly benefit under title II of the Social Secu-
rity Act, or
"(B) a tier 1 railroad retirement benefit.
For purposes of the preceding sentence, the amount received
by any taxpayer shall be determined as if the Social Secu-
rity Act did not contain section 203(i) thereof
"(2) ADJUSTMENT FOR REPAYMENTS DURING YEAR.-
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"(A) IN GENERAL.-For purposes of this section, the
amount of social security benefits received during any tax-
able year shall be reduced by any repayment made by the
taxpayer during the taxable year of a social security benefit
previously received by the taxpayer (whether or not such
benefit was received during the taxable year).
"(B) DENIAL OF DEDUCTION.-If (but for this subpara-
graph) any portion of the repayments referred to in subpar-
agraph (A) would have been allowable as a deduction for
the taxable year under section 165, such portion shall be al-
lowable as a deduction only to the extent it exceeds the
social security benefits received by the taxpayer during the
taxable year (and not repaid during such taxable year).
"(3) WORKMEN'S COMPENSATION BENEFITS SUBSTITUTED FOR
SOCIAL SECURITY BENEFITS.-For purposes of this section, if, by
reason of section 224 of the Social Security Act (or by reason of
section 3(a)(1) of the Railroad Retirement Act of 1974), any
social security benefit is reduced by reason of the receipt of a
benefit under a workmen's compensation act, the term `social se-
curity benefit' includes that portion of such benefit received
under the workmen's compensation act which equals such re-
duction.
"(4) TIER 1 RAILROAD RETIREMENT BENEFIT. -For purposes of
paragraph (1), the term `tier 1 railroad retirement benefit'
means a monthly benefit under section 3(a), 4(a), or 4(f) of the
Railroad Retirement Act of 1974.
"(e) LIMITATION ON AMOUNT INCLUDED WHERE TAXPAYER RE-
CEIVES LUMP-SUM PAYMENT.-
"(1) LIMITATION. -If-
"(A) any portion of a lump-sum payment of social secu-
rity benefits received during the taxable year is attributable
to prior taxable years, and
"(B) the taxpayer makes an election under this subsection
for the taxable year,
then the amount included in gross income under this section for the
taxable year by reason of the receipt of such portion shall not exceed
the sum of the increases in gross income under this chapter for prior
taxable years which would result solely from taking into account
such portion in the taxable years to which it is attributable.
"(2) SPECIAL RULES. -
"(A) YEAR TO WHICH BENEFIT ATTRIBUTABLE.-For pur-
poses of this subsection, a social security benefit is attribut-
able to a taxable year if the generally applicable payment
date for such benefit occurred during such taxable year.
`(B) ELECTION.-An election under this subsection shall
be made at such time and in such manner as the Secretary
shall by regulations prescribe. Such election, once made,
may be revoked only with the consent of the Secretary.
"(f) TREATMENT AS PENSION OR ANNUITY FOR CERTAIN PUR-
PosES.-For purposes of-
"(1) section 43(c)(2) (defining earned income),
"(2) section 219(f)(1) (defining compensation),
"(3) section 221(b)(2) (defining earned income), and
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"(4) section 911(bXl) (defining foreign earned income),
any social security benefit shall be treated as an amount received as
a pension or annuity. "
(b) INFORMATION REPORTING.-Subpart B of part III of sub-
chapter A of chapter 61 of such Code (relating to information con-
cerning transactions with other persons) is amended by adding at
the end thereof the following new section:
"SEC. 6050F. RETURNS RELATING TO SOCIAL SECURITY BENEFITS.
"(a) REQUIREMENT OF REPORTING.-The appropriate Federal offi-
cial shall make a return, according to the forms and regulations
prescribed by the Secretary, setting forth-
"(1) the-
"(A) aggregate amount of social security benefits paid
with respect to any individual during any calendar year,
"(B) aggregate amount of social security benefits repaid
by such individual during such calendar year, and
"(C) aggregate reductions under section 224 of the Social
Security Act (or under section 3(a)(l) of the Railroad Retire-
ment Act of 1974) in benefits which would otherwise have
been paid to such individual during the calendar year on
account of amounts received under a workmen's compensa-
tion act, and
"(2) the name and address of such individual.
"(b) STATEMENTS To BE FURNISHED To INDIVIDUALS WITH RE-
SPECT To WHOM INFORMATION Is FURNISHED.-Every person
making a return under subsection (a) shall furnish to each individ-
ual whose name is set forth in such return a written statement
showing-
"(1) the name of the agency making the payments, and
`(2) the aggregate amount of payments, of repayments, and of
reductions, with respect to the individual as shown on such
return.
The written statement required under the preceding sentence shall
be furnished to the individual on or before January 31 of the year
following the calendar year for which the return under subsection
(a) was made.
"(c) DEFINITIONS.-For purposes of this section-
"(1) APPROPRIATE FEDERAL OFFICIAL.-The term `appropriate
Federal official' means-
"(A) the Secretary of Health and Human Services in the
case of social security benefits described in section
86(d)(1XA), and
"(B) the Railroad Retirement Board in the case of social
security benefits described in section 86(d)(1XB).
"(2) SOCIAL SECURITY BENEFIT.-The term `social security
benefit' has the meaning given to such term by section 86(d)(1). "
(c) TREATMENT OF NONRESIDENT ALIENS. -
(1) AMENDMENT OF SECTION 871(a).-Subsection (a) of section
871 of such Code (relating to tax on income not connected with
United States business) is amended by adding at the end there-
of the following new paragraph:
"(3) TAXATION OF SOCIAL SECURITY BENEFITS. -For purposes of
this section and section 1441-
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"(A) one-half of any social security benefit (as defined in
section 86(d)) shall be included in gross income, and
"(B) section 86 shall not apply. "
(2) AMENDMENT OF SECTION 1441.-Section 1441 of such Code
(relating to withholding of tax on nonresident aliens) is amend-
ed by adding at the end thereof the following new subsection:
"(g) CROSS REFERENCE.-
"For provision treating one-half of social security benefits as subject to
withholding under this section, see section 871(a)(3). "
(3) DISCLOSURE OF INFORMATION TO SOCIAL SECURITY ADMINIS-
TRATION OR RAILROAD RETIREMENT BOARD. -
(A) IN GENERAL.-Subsection (h) of section 6103 of such
Code (relating to disclosure to certain Federal officers and
employees for purposes of tax administration, etc.) is
amended by adding at the end thereof the following new
paragraph:
"(6) WITHHOLDING OF TAX FROM SOCIAL SECURITY BENEFITS.-
Upon written request of the payor agency, the Secretary may
disclose available return information from the master files of
the Internal Revenue Service with respect to the address and
status of an individual as a nonresident alien or as a citizen or
resident of the United States to the Social Security Administra-
tion or the Railroad Retirement Board (whichever is appropri-
ate) for purposes of carrying out its responsibilities for with-
holding tax under section 1441 from social security benefits (as
defined in section 86(d))."
(B) CONFORMING AMENDMENT.-Paragraph (4) of section
6103(p) of such Code (relating to safeguards) is amended by
inserting "(h)(6), " after "(h)(2), " in the material preceding
subparagraph (A) and in subparagraph (F)(ii), thereof.
(C) DISCLOSURE BY FINANCIAL INSTITUTIONS. -Section
1113 of the Right to Financial Privacy Act of 1978 (92 Stat.
3706; 12 U.S.C. 3413) is amended by adding at the end
thereof the following new subsection:
`(k)(1) Nothing in this title shall apply to the disclosure by the
financial institution of the name and address of any customer to
the Department of the Treasury, the Social Security Administration,
or the Railroad Retirement Board, where the disclosure of such in-
formation is necessary to, and such information is used solely for
the purpose of, the proper administration of section 1441 of the In-
ternal Revenue Code of 1954, title II of the Social Security Act, or
the Railroad Retirement Act of 1974.
"(2) Notwithstanding any other provision of law, any request au-
thorized by paragraph (1) (and the information contained therein)
may be used by the financial institution or its agents solely for the
purpose of providing the customer's name and address to the De-
partment of the Treasury, the Social Security Administration, or the
Railroad Retirement Board and shall be barred from redisclosure
by the financial institution or its agents. "
(d) SOCIAL SECURITY BENEFITS TREATED AS UNITED STATES
SOURCES.-Subsection (a) of section 861 of such Code (relating to
income from sources within the United States) is amended by
adding at the end thereof the following new paragraph:
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21
"(8) SOCIAL SECURITY BENEFITS. Any social security benefit
(as defined in section 86(d)). "
(e) TRANSFERS TO TRUST FUNDS. -
(1) IN GENERAL.-There are hereby appropriated to each payor
fund amounts equivalent to the aggregate increase in tax liabil-
ities under chapter 1 of the Internal Revenue Code of 1954
which is attributable to the application of sections 86 and
871(a)(3) of such Code (as added by this section) to payments
from such payor fund.
(2) TRANSFERS.-The amounts appropriated by paragraph (1)
to any payor fund shall be transferred from time to time (but
not less frequently than quarterly) from the general fund of the
Treasury on the basis of estimates made by the Secretary of the
Treasury of the amounts referred to in such paragraph. Any
such quarterly payment shall be made on the first day of such
quarter and shall take into account social security benefits esti-
mated to be received during such quarter. Proper adjustments
shall be made in the amounts subsequently transferred to the
extent prior estimates were in excess of or less than the amounts
required to be transferred.
(3) DEFINITIONS.-For purposes of this subsection-
(A) PAYOR FUND.-The term `payor fund" means any
trust fund or account from which payments of social secu-
rity benefits are made.
(B) SOCIAL SECURITY BENEFITS.-The term "social secu-
rity benefits" has the meaning given such term by section
86(d)(1) of the Internal Revenue Code of 1954.
(4) REPORTS.-The Secretary of the Treasury shall submit
annual reports to the Congress and to the Secretary of Health
and Human Services and the Railroad Retirement Board on-
(A) the transfers made under this subsection during the
year, and the methodology used in determining the amount
of such transfers and the funds or account to which made,
and
(B) the anticipated operation of this subsection during
the next 5 years.
(f) TECHNICAL AMENDMENTS. -
(1) Subsection (a) of section 85 of such Code is amended by
striking out "this section, " and inserting in lieu thereof "this
section, section 86, ".
(2) Subparagraph (B) of section 128(c)(3) of such Code (as in
effect for taxable years beginning after December 31, 1984) is
amended by striking out "85, " and inserting in lieu thereof "85,
86"
(3) The table of sections for part II of subchapter B of chapter
1 of such Code is amended by striking out, the item relating to
section 86 and inserting in lieu thereof the following:
`Sec. 86. Social security and tier 1 railroad retirement benefits.
"Sec. 87. Alcohol fuel credit. "
(4) The table of sections for subpart B of part III of sub-
chapter A of chapter 61 of such Code is amended by adding at
the end thereof the following new item:
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"Sec. 6050F. Returns relating to social security benefits. "
(g) EFFECTIVE DATES.-
(1) IN GENERAL.-Except as provided in paragraph (2), the
amendments made by this section shall apply to benefits re-
ceived after December 31, 1983, in taxable years ending after
such date.
(2) TREATMENT OF CERTAIN LUMP-SUM PAYMENTS RECEIVED
AFTER DECEMBER 31, 1983.-The amendments made by this sec-
tion shall not apply to any portion of a lump-sum payment of
social security benefits (as defined in section 86(d) of the Inter-
nal Revenue Code of 1954) received after December 31, 1983, if
the generally applicable payment date for such portion was
before January 1, 1984.
SEC. 122. CREDIT FOR THE ELDERLY AND THE PERMANENTLY AND
TOTALLY DISABLED.
(a) GENERAL RULE.-Section 37 of the Internal Revenue Code of
1954 (relating to credit for the elderly) is amended to read as fol-
lows:
"SEC. 37. CREDIT FOR THE ELDERLY AND THE PERMANENTLY AND
TOTALLY DISABLED.
"(a) GENERAL RULE.-In the case of a qualified individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 15 percent of such individ-
ual's section 37 amount for such taxable year.
"(b) QUALIFIED INDIVIDUAL.--For purposes of this section, the
term `qualified individual' means any individual-
"(1) who has attained age 65 before the close of the taxable
year, or
"(2) who retired on disability before the close of the taxable
year and who, when he retired, was permanently and totally
disabled.
"(c) SECTION 37 AMOUNT.-For purposes of subsection (a)-
"(1) IN GENERAL.-An individual's section 37 amount for the
taxable year shall be the applicable initial amount determined
under paragraph (2), reduced as provided in paragraph (3) and
in subsection (d).
"(2) INITIAL AMOUNT-
"(A) IN GENERAL.-Except as provided in subparagraph
(B), the initial amount shall be-
"(i) $5,000 in the case of a single individual, or a
joint return where only one spouse is a qualified indi-
vidual,
"(ii) $7,500 in the case of a joint return where both
spouses are qualified individuals, or
"(iii) $3,750 in the case of a married individual
filing a separate return.
"(B) LIMITATION IN CASE OF INDIVIDUALS WHO HAVE NOT
ATTAINED AGE 65.-
"(4) IN GENERAL.--In the case of a qualified individ-
ual who has not attained age 65 before the close of the
taxable year, except as provided in clause (ii), the ini-
tial amount shall not exceed the disability income for
the taxable year.
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"(ii) SPECIAL RULES IN CASE OF JOINT RETURN.-In
the case of a joint return where both spouses are quali-
fied individuals and at least one spouse has not at-
tained age 65 before the close of the taxable year-
"(I) if both spouses have not attained age 65
before the close of the taxable year, the initial
amount shall not exceed the sum of such spouses'
disability income, or
"(II) if one spouse has attained age 65 before the
close of the taxable year, the initial amount shall
not exceed the sum of $5,000 plus the disability
income for the taxable year of the spouse who has
not attained age 65 before the close of the taxable
year.
"(iii) DISABILITY INCOME.-For purposes of this sub-
paragraph, the term `disability income' means the ag-
gregate amount includable in the gross income of the
individual for the taxable year under section 72 or
105(a) to the extent such amount constitutes wages (or
payments in lieu of wages) for the period during which
the individual is absent from work on account of per-
manent and total disability.
"(3) REDUCTION. -
"(A) IN GENERAL.-The reduction under this paragraph
is an amount equal to the sum of the amounts received by
the individual (or, in the case of a joint return, by either
spouse) as a pension or annuity or as a disability benefit-
"(0 which is excluded from gross income and payable
under-
"(I) title II of the Social Security Act,
"(II) the Railroad Retirement Act of 1974, or
"(III) a law administered by the Veterans' Ad-
ministration, or
"(ii) which is excluded from gross income under any
provision of law not contained in this title.
No reduction shall be made under clause (i) (III) for any amount de-
scribed in section 104(a)(4)?
"(B) TREATMENT OF CERTAIN WORKMEN'S COMPENSATION
BENEFITS.-For purposes of subparagraph (A), any amount
treated as a social security benefit under section 86(dX3)
shall be treated as a disability benefit received under title
II of the Social Security Act.
"(d) LIMITATIONS. -
"(1) ADJUSTED GROSS INCOME LIMITATION.-If the adjusted
gross income of the taxpayer exceeds-
"(A) $7,500 in the case of a single individual,
"(B) $10,000 in the case of a joint return, or
`(C) $5,000 in the case of a married individual filing a
separate return,
the section 37 amount shall be reduced by one-half of the excess
of the adjusted gross income over $7,500, $10,000, or $5,000, as
the case may be.
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"(2) LIMITATION BASED ON AMOUNT OF TAX.-The amount of
the credit allowed by this section for the taxable year shall not
exceed the amount of the tax imposed by this chapter for such
taxable year.
"(e) DEFINITIONS AND SPECIAL RULES.-FOr purposes of this sec-
tion-
"(1) MARRIED COUPLE MUST FILE JOINT RETURN.-Except in
the case of a husband and wife who live apart at all times
during the taxable year, if the taxpayer is married at the close
of the taxable year, the credit provided by this section shall be
allowed only if the taxpayer and his spouse file a joint return
for the taxable year.
"(2) MARITAL STATUS.-Marital status shall be determined
under section 143.
"(3) PERMANENT AND TOTAL DISABILITY DEFINED.-An indi-
vidual is permanently and totally disabled if he is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which
can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months. An individual shall not be considered to be permanent-
ly and totally disabled unless he furnishes proof of the exist-
ence thereof in such form and manner, and at such times, as
the Secretary may require.
"(f) NONRESIDENT ALIEN INELIGIBLE FOR CREDIT.-NO credit shall
be allowed under this section to any nonresident alien. "
(b) REPEAL OF EXCLUSION FOR CERTAIN DISABILITY PAYMENTS.-
Subsection (d) of section 105 of such Code (relating to certain dis-
ability payments) is hereby repealed.
(c) CONFORMING AMENDMENTS.-
(1) Sections 41(b)(2), 44A(b)(2), 46(a)(4)(B), 53(a)(2), and 904(g)
of such Code are each amended by striking out "relating to
credit for the elderly" and inserting in lieu thereof "relating to
credit for the elderly and the permanently and totally dis-
abled"
(2) Subsection (a) of section 85 of such Code is amended by
striking out ", section 105(d), ".
(3) Subparagraph (B) of section 128(c)(3) of such Code (as in
effect for taxable years beginning after December 31, 1984) is
amended by striking out "105(d),'.
(4) Paragraph (3) of section 403(b) of such Code is amended by
striking out "sections 105(d) and 911" and inserting in lieu
thereof "section 911 ".
(5) Clause (i) of section 415(c)(3)(C) of such Code is amended
by striking out "section 105(d)(4)" and inserting in lieu thereof
"section 37(e)(3)".
(6) Paragraph (6) of section 7871(a) of such Code is amended
by striking out subparagraph (A), and by redesignating subpara-
graphs (B), (C), and (D) as subparagraphs (A), (B), and (C), re-
spectively.
(7) The table of sections for subpart A of part IV of sub-
chapter A of chapter 1 of such Code is amended by striking out
the item relating to section 37 and inserting in lieu thereof the
following:
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"Sec. 37. Credit for the elderly and the permanently and totally disabled. "
(d) EFFECTIVE DATE. -
(1) IN GENERAL.-The amendments made by this section shall
apply to taxable years beginning after December 31, 1983.
(2) TRANSITIONAL RULE.-If an individual's annuity starting
date was deferred under section 105(d)(6) of the Internal Reve-
nue Code of 1954 (as in effect on the day before the date of the
enactment of this section), such deferral shall end on the first
day of such individual's first taxable year beginning after De-
cember 31, 1983.
SEC. 123. ACCELERATION OF INCREASES IN FICA TAXES; 1984 EMPLOYEE
TAX CREDIT.
(a) ACCELERATION OF INCREASES IN FICA TAXES. -
(1) TAX ON EMPLOYEES.-Subsection (a) of section 3101 of the
Internal Revenue Code of 1954 (relating to rate of tax on em-
ployees for old-age, survivors, and disability insurance) is
amended by striking out paragraphs (1) through (7) and insert-
ing in lieu thereof the following:
"In cases of wages The rate
received during: shall be:
1984, 1985, 1986, or 1987 ...................................................................... 5.7 percent
1988 or 1989 ............................................................................................ 6.06 percent
1990 or thereafter .................................................................................. 6.2 percent. ?
(2) EMPLOYER TAX.-Subsection (a) of section 3111 of such
Code is amended by striking out paragraphs (1) through (7) and
inserting in lieu thereof the following:
`In cases of wages The rate
paid during: shall be:
1984, 1985, 1986, or 1987 ...................................................................... 5.7 percent
1988 or 1989 ............................................................................................ 6.06 percent
1990 or thereafter .................................................................................. 6.2 percent. ?
(3) EFFECTIVE DATE.-The amendments made by this subsec-
tion shall apply to remuneration paid after December 31, 1983.
(b) 1984 EMPLOYEE TAX CREDIT.-
(1) IN GENERAL.-Chapter 25 of such Code is amended by
adding at the end thereof the following new section:
"SEC. 3510. CREDIT FOR INCREASED SOCIAL SECURITY EMPLOYEE TAXES
AND RAILROAD RETIREMENT TIER I EMPLOYEE TAXES IM-
POSED DURING 1984.
"(a) GENERAL RuLE.-There shall be allowed as a credit against
the tax imposed by section 3101(a) on wages received during 1984 an
amount equal to 3/v of 1 percent of the wages so received.
`(b) TIME CREDIT ALLOWED.-The credit under subsection (a)
shall be taken into account in determining the amount of the tax
deducted under section 3102(a).
"(c) WAGES.-For purposes of this section, the term `wages' has the
meaning given to such term by section 3121(a).
"(d) APPLICATION TO AGREEMENTS UNDER SECTION 218 OF THE
SOCIAL SECURITY ACT.-For purposes of determining amounts equiv-
alent to the tax imposed by section 3101(a) with respect to remunera-
tion which-
"(1) is covered by an agreement under section 218 of the
Social Security Act, and
`(2) is paid during 1984,
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the credit allowed by subsection (a) shall be taken into account. A
similar rule shall also apply in the case of an agreement under sec-
tion 3121(l).
"(e) CREDIT AGAINST RAILROAD RETIREMENT EMPLOYEE AND EM-
PLOYEE REPRESENTATIVE TAXES.-
"(1) IN GENERAL.-There shall be allowed as a credit against
the taxes imposed by sections 3201(a) and 3211(a) on compensa-
tion paid during 1984 and subject to such taxes at rates deter-
mined by reference to section 3101 an amount equal to 3/10 of 1
percent of such compensation.
"(2) TIME CREDIT ALLOWED.-The credit under paragraph (1)
shall be taken into account in determining the amount of the
tax deducted under section 3202(a) (or the amount of the tax
under section 3211(a)).
"(3) COMPENSATION.-FOr purposes of this subsection, the
term `compensation' has the meaning given to such term by sec-
tion 3231(e).
"(f) COORDINATION WITH SECTION 6413(c).-For purposes of sub-
section (c) of section 6413, in determining the amount of the tax im-
posed by section 3101 or 3201, any credit allowed by this section
shall be taken into account. "
(2) CLERICAL AMENDMENT.-The table of sections for chapter
25 of such Code is amended by adding at the end thereof the
following new item.
"Sec. 3510. Credit for increased social security employee taxes and
railroad retirement tier 1 employee taxes imposed
during 1984. "
(3) EFFECTIVE DATE.-The amendments made by this subsec-
tion shall apply to remuneration paid during 1984.
(4) DEPOSITS IN SOCIAL SECURITY TRUST FUNDS.-For purposes
of subsection (h) of section 218 of the Social Security Act (relat-
ing to deposits in social security trust funds of amounts received
under section 218 agreements), amounts allowed as a credit pur-
suant to subsection (d) of section 3510 of the Internal Revenue
Code of 1954 (relating to credit for remuneration paid during
1984 which is covered under an agreement under section 218 of
the Social Security Act) shall be treated as amounts received
under such an agreement.
(5) DEPOSITS IN RAILROAD RETIREMENT ACCOUNT.-For pur-
poses of subsection (a) of section 15 of the Railroad Retirement
Act of 1974, amounts allowed as a credit under subsection (e) of
section 3510 of the Internal Revenue Code of 1954 shall be treat-
ed as amounts covered into the Treasury under subsection (a) of
section 3201 of such Code.
SEC. 124. TAXES ON SELF-EMPLOYMENT INCOME; CREDIT AGAINST SUCH
TAXES FOR YEARS BEFORE 1990; DEDUCTION OF SUCH TAXES
FOR YEARS AFTER 1989.
(a) INCREASE IN RATES.-Subsections (a) and (b) of section 1401 of
the Internal Revenue Code of 1954 (relating to rates of tax on self-
employment income) are amended to read as follows:
"(a) OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.-In addi-
tion to other taxes, there shall be imposed for each taxable year, on
the self-employment income of every individual, a tax equal to the
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following percent of the amount of the self-employment income for
such taxable year.
"In the case of a taxable year
Per-
Beginning after:
And before:
cent:
December 31,
1983
................................................ January 1, 1988...............................................
11.40
December 31,
1987
................................................ January 1, 1990...............................................
12.12
December 31,
1989
.............................................................................................................................
12.40
"(b) HOSPITAL INSURANCE.-In addition to the tax imposed by the
preceding subsection, there shall be imposed for each taxable year,
on the self-employment income of every individual, a tax equal to
the following percent of the amount of the self-employment income
for such taxable year:
"In the case of a taxable year
Per
Beginning after:
And before:
cent:
December 31,
1983
................................................ January 1, 1985...............................................
2.60
December 31,
1984
................................................ January 1, 1986...............................................
2.70
December 91,
1985
.............................................................................................................................
2.90.
(b) CREDIT FOR YEARS BEFORE 1990 AGAINST SELF-EMPLOYMENT
T.9xES.-Section 1401 of such Code is amended by redesignating sub-
section (c) as subsection (d) and by inserting after subsection (b) the
following new subsection:
"(6) CREDIT AGAINST TAXES IMPOSED BY THIS SECTION. -
"(1) IN GENERAL.-In the case of a taxable year beginning
before 1990, there shall be allowed as a credit against the taxes
imposed by this section for any taxable year an amount equal to
the applicable percentage of the self-employment income of the
individual for such taxable year.
"(2) APPLICABLE PERCENTAGE. -For purposes of paragraph (1),
the applicable percentage shall be determined in accordance
with the following table:
"In the case of taxable The applicable
years beginning in: percentage is:
1984 ........................................................................................................................... 2.7
1985 ........................................................................................................................... 2.3
1986, 1987, 1988, or 1989 ........................................................................................ 2.0. ?
(c) ALLOWANCE OF DEDUCTION FOR YEARS AFTER 1989 FOR ONE-
HALF OF TAXES ON SELF-EMPLOYMENT INCOME. -
(1) IN GENERAL.-Section 164 of such Code (relating to deduc-
tion for taxes) is amended by redesignating subsection (f) as sub-
section (g) and by inserting after subsection (e) the following
new subsection:
"(f7 DEDUCTION FOR ONE-HALF OF SELF-EMPLOYMENT TAXES.-
"(1) IN GENERAL.-In the case of an individual, in addition to
the taxes described in subsection (a), there shall be allowed as a
deduction for the taxable year an amount equal to one-half of
the taxes imposed by section 1401 for such taxable year.
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"(2) DEDUCTION TREATED AS ATTRIBUTABLE TO TRADE OR BUSI-
NEss.-For purposes of this chapter, the deduction allowed by
paragraph (1) shall be treated as attributable to a trade or busi-
ness carried on by the taxpayer which does not consist of the
performance of services by the taxpayer as an employee. "
(2) ALTERNATIVE DEDUCTION ALLOWED IN COMPUTING SELF-EM-
PLOYMENT TAXES.-Subsection (a) of section 1402 of such Code
(defining net earnings from self-employment) is amended by
striking out "and" at the end of paragraph (11), by redes-
ignating paragraph (12) as paragraph (13), and by inserting
after paragraph (11) the following new paragraph:
"(12) in lieu of the deduction provided by section 164(f) (relat-
ing to deduction for one-half of self-employment taxes), there
shall be allowed a deduction equal to the product of-
"(A) the taxpayer's net earnings from self-employment for
the taxable year (determined without regard to this para-
graph), and
"(B) one-half of the sum of the rates imposed by subsec-
tions (a) and (b) of section 1401 for such year; and".
(3) Conforming amendment to Social Security Act.-Subsec-
tion (a) of section 211 of the Social Security Act is amended by
striking out "and" at the end of paragraph (10), by redes-
ignating paragraph (11) as paragraph (12), and by inserting
after paragraph (10) the following new paragraph:
"(11) In lieu of the deduction provided by section 164(f) of the
Internal Revenue Code of 1954 (relating to deduction for one-
half of self-employment taxes), there shall be allowed a deduc-
tion equal to the product of-
"(A) the taxpayer's net earnings from self-employment for
the taxable year (determined without regard to this para-
graph), and
"(B) one-half of the sum of the rates imposed by subsec-
tions (a) and (b) of section 1401 of such Code for such year,-
and ".
(4) Section 164(f) deduction taken into account in computing
earned income.-
(A) Subparagraph (A) of section 401(c)(2) of such Code (de-
fining earned income) is amended by striking out "and" at
the end of clause (iv), by striking out the period at the end
of clause (v) and inserting in lieu thereof ", and'; and by
inserting after clause (v) the following new clause:
"(vi) with regard to the deduction allowed to the tax-
payer by section 164(f). "
(B) Clause (ii) of section 43(c)(2)(A) of such Code is
amended by inserting before the period but such net
earnings shall be determined with regard to the deduction
allowed to the taxpayer by section 164(f)".
(5) CONFORMING AMENDMENT.-Subsection (a) of section 275
of such Code (relating to denial of deduction for certain taxes)
is amended by adding at the end thereof the following new sen-
tence:
"Paragraph (1) shall not apply to any taxes to the extent such taxes
are allowable as a deduction under section 164(f). "
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(d) EFFECTIVE DATES.-
(1) IN GENERAL.-Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1983.
(2) SUBSECTION (c).-The amendments made by subsection (c)
shall apply to taxable years beginning after December 31, 1989.
SEC. 125. TREATMENT OF CERTAIN FACULTY PRACTICE PLANS.
(a) GENERAL RuLE.-For purposes of subsection (s) of section 3121
of the Internal Revenue Code of 1954 (relating to concurrent employ-
ment by 2 or more employers)-
(1) the following entities shall be deemed to be related corpo-
rations:
(A) a State university which employs health professionals
as faculty members at a medical school, and
(B) a faculty practice plan described in section 501(c)(3) of
such Code and exempt from tax under section 501(a) of
such Code-
(i) which employs faculty members of such medical
school, and
(ii) 30 percent or more of the employees of which are
concurrently employed by such medical school; and
(2) remuneration which is disbursed by such faculty practice
plan to a health professional employed by both such entities
shall be deemed to have been actually disbursed by such univer-
sity as a common paymaster and not to have been actually dis-
bursed by such faculty practice plan.
(b) EFFECTIVE DATE.-The provisions of subsection (a) shall apply
to remuneration paid after December 31, 1983.
ALLOCATIONS TO DISABILITY INSURANCE TRUST FUND
SEC. 125. (a) Section 201(b)(1) of the Social Security Act is amend-
ed by striking out clauses (K) through (M) and inserting in lieu
thereof the following: "(K) 1.65 per centum of the wages (as so de-
fined) paid after December 31, 1981, and before January 1, 1983,
and so reported, (L) 1.25 per centum of the wages (as so defined)
paid after December 31, 1982, and before January 1, 1984, and so
reported, (M) 1.00 per centum of the wages (as so defined) paid after
December 31, 1983, and before January 1, 1988, and so reported, (N)
1.06 per centum of the wages (as so defined) paid after December 31,
1987, and before January 1, 1990, and so reported, (0) 1.20 per
centum of the wages (as so defined) paid after December 31, 1989,
and before January 1, 2000, and so reported, and (P) 1.42 per centurn
of the wages (as so defined) paid after December 31, 1999, and so
reported, ".
(b) Section 201(b)(2) of such Act is amended by striking out clauses
(K) through (M) and inserting in lieu thereof the following: "(K)
1.2375 per centum of the amount of self-employment income (as so
defined) so reported for any taxable year beginning after December
31, 1981, and before January 1, 1983, (L) 0.9375 per centum of the
amount of self-employment income (as so defined) so reported for
any taxable year beginning after December 31, 1982, and before Jan-
uary 1, 1984, (M) 1.00 per centum of the amount of self-employment
income (as so defined) so reported for any taxable year beginning
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after December 31, 1983, and before January 1, 1988, (N) 1.06 per
centum of the self-employment income (as so defined) so reported for
any taxable year beginning after December 31, 1987, and before Jan-
uary 1, 1990, (0) 1.20 per centum of the amount of self-employment
income (as so defined) so reported for any taxable year beginning
after December 31, 1989, and before January 1, 2000, and (P) 1.42
per centum of the self-employment income (as so defined) so reported
for any taxable year begining after December 31, 1999, ".
PART D-BENEFITS FOR CERTAIN SURVIVING, DIVORCED, AND
DISABLED SPOUSES
BENEFITS FOR SURVIVING DIVORCED SPOUSES AND DISABLED WIDOWS
AND WIDOWERS WHO REMARRY
SEC. 131. (a)(1) Section 202(e)(3) of the Social Security Act is re-
pealed.
(2) Section 202(e)(4) of such Act is amended to read as follows:
"(4) For purposes of paragraph (1), if-
"(A) a widow or surviving divorced wife marries after attain-
ing age 60 (or after attaining age 50 if she was entitled before
such marriage occurred to benefits based on disability under
this subsection), or
"(B) a disabled widow or disabled surviving divorced wife de-
scribed in paragraph (1)(B)(ii) marries after attaining age 50,
such marriage shall be deemed not to have occurred. ".
(3)(A) Section 202(e) of such Act is further amended by redes-
ignating paragraph (4) (as amended by paragraph (2) of this subsec-
tion), and paragraphs (5) through (8), as paragraphs (3) through (7),
respectively.
(B) Section 202(e)(1)(B)(ii) of such Act is amended by striking out
"(5)" and inserting in lieu thereof "(4)".
(C) Section 202(e)(1)(F) of such Act is amended by striking out
"(6)" in clause (i) and "(5)" in clause (ii) and inserting in lieu there-
of "(5)" and "(4)"; respectively.
(D) Section 202(e)(2)(A) of such Act is amended by striking out
"(8)" and inserting in lieu thereof "(7)"
(E) The paragraph of section 202(e) of such Act redesignated as
paragraph (5) by subparagraph (A) of this paragraph is amended by
striking out "(5)" and inserting in lieu thereof "(4) '.
(F) The paragraph of such section 202(e) redesignated as para-
graph (7) by subparagraph (A) of this paragraph is amended by
striking out "(4)" and inserting in lieu thereof "(3)".
(G) Section 202(k) of such Act is amended by striking out "(e)(4)"
each place it appears in paragraphs (2)(B) and (3)(B) and inserting
in lieu thereof "(e)(3)"
(H) Section 226(e)(1XA) of such Act is amended by striking out
"202(e)(5)" and inserting in lieu thereof "202(e)(4)".
(b)(1) Section 202(f)(4) of such Act is repealed.
(2) Section 202()(5) of such Act is amended to read as follows:
"(5) For purposes of paragraph (1), if-
"(A) a widower marries after attaining age 60 (or after attain-
ing age 50 if he was entitled before such marriage occurred to
benefits based on disability under this subsection), or
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"(B) a disabled widower described in paragraph (1)(BXii) mar-
ries after attaining age 50,
such marriage shall be deemed not to have occurred.
(3)(A) Section 202(f) of such Act is further amended by redes-
ignating paragraph (5) (as amended by paragraph (2) of this subsec-
tion), and paragraphs (6) through (8), as paragraphs (4) through (7),
respectively.
(B) Section 202()(1XBXii) of such Act is amended by striking out
"(6)" and inserting in lieu thereof "(5)".
(C) Section 202()(1XF) o f such Act is amended by striking out
"(7)" in clause (i) and `(6)' in clause (ii) and inserting in lieu there-
of "(6)" and `(5)'; respectively.
(D) Section 202()(2XA) of such Act is amended by striking out
"(5)" and inserting in lieu thereof "(4)".
(E) The paragraph of section 202(f) of such Act redesignated as
paragraph (6) by subparagraph (A) of this paragraph is amended by
striking out "(6)" and inserting in lieu thereof "(5)
(F) Section 202(k) of such Act is amended by striking out "(f)(5)"
each place it appears in paragraphs (2XB) and (3XB) and inserting
in lieu thereof "(f)(4)".
(G) Section 226(e)(1XA) of such Act is amended by striking out
"202(f)(6)" and inserting in lieu thereof "202()(5)".
(c)(1) Section 202(sX2) of such Act is amended by striking out
"Subsection (f)(4), and so much of subsections (b)(3), (d)(5), (e)(3),
(g)(3), and (h)(4)" and inserting in lieu thereof "So much of subsec-
tions (b)(3), (d)(5), (g)(3), and (h)(4)"
(2) Section 202(s)(3) of such Act is amended by striking out
%W), "
(d)(1) The amendments made by this section shall be effective
with respect to monthly benefits payable under title II of the Social
Security Act for months after December 1983.
(2) In the case of an individual who was not entitled to a monthly
benefit of the type involved under title II of such Act for December
1983, no benefit shall be paid under such title by reason of such
amendments unless proper application for such benefit is made.
ENTITLEMENT TO DIVORCED SPOUSE'S BENEFITS WITHOUT REGARD TO
ENTITLEMENT OF INSURED INDIVIDUAL TO BENEFITS; EXEMPTION OF
DIVORCED SPOUSE'S BENEFITS FROM DEDUCTION ON ACCOUNT OF
WORK
SEC. 132. (a) Section 202(b) of the Social Security Act is amended
by adding at the end thereof the following new paragraph:
"(5XA) Notwithstanding the preceding provisions othis subsec-
tion, except as provided in subparagraph (B), the divorced wife of an
individual who is not entitled to old-age or disability insurance
benefits, but who has attained a 62 and is a fully insured individ-
ual (as defined in section 214), iif such divorced wife-
"(i) meets the requirements of subparagraphs (A) through (D)
of paragraph (1), and
`(ii) has been divorced from such insured individual for not
less than 2 years,
shall be entitled to a wife's insurance benefit under this subsection
for each month, in such amount, and beginning and ending with
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such months, as determined (under regulations of the Secretary) in
the manner otherwise provided for wife's insurance benefits under
this subsection, as if such insured individual had become entitled to
old-age insurance benefits on the date on which the divorced wife
first meets the criteria for entitlement set forth in clauses (i) and
(ii).
"(B) A wife's insurance benefit provided under this paragraph
which has not otherwise terminated in accordance with subpara-
graph (E), (F), (H), or (J) of paragraph (1) shall terminate with the
month preceding the first month in which the insured individual is
no longer a fully insured individual. ".
(b)(1)(A) Section 203(b) of such Act is amended-
(i) by inserting "(1)" after "(b)"
(ii) by striking out "(1) such individual's benefit" and "(2) if
such individual" and inserting in lieu thereof "(A) such indi-
vidual's benefit" and "(B) if such individual" ; respectively;
(iii) by striking out "clauses (1) and (2)" and inserting in lieu
thereof "clauses (A) and (B)";
(iv) by striking out "(A) an individual" and "(B) if a deduc-
tion" and inserting in lieu thereof "(i) an individual" and "(ii)
if a deduction" respectively; and
(v) by adding at the end thereof the following new paragraph:
"(2) When any of the other persons referred to in paragraph (1)(B)
is entitled to monthly benefits as a divorced spouse under section
,202 (b) or (c) for any month and such person has been so divorced
for not less than 2 years, the benefit to which he or she is entitled
on the basis of the wages and self-employment income of the indi-
vidual referred to in paragraph (1) for such month shall be deter-
mined without regard to deductions under this subsection as a
result of excess earnings of such individual, and the benefits of all
other individuals who are entitled for such month to monthly bene-
fits under section 202 on the basis of the wages and self-employment
income of such individual referred to in paragraph (1) shall be de-
termined as i f no such divorced spouse were entitled to benefits for
such month.'.
(B)(i) Section 203(f)(1) of such Act is amended-
(I) in the first sentence, by inserting "(excluding surviving
spouses referred to in subsection (b)(2))" after "all other per-
sons" the first place it appears, and by striking out "all other
persons" the second place it appears and inserting in lieu there-
of "all such other persons';- and
(II) in the second sentence, by inserting "(excluding divorced
spouses referred to in subsection (b)(2))" after "other persons ".
(ii) Section 203(f)(7) of such Act is amended by inserting "(exclud-
ing divorced spouses referred to in subsection (b)(2))" after "all per-
sons (2) Section 203(d)(1) o f'such Act is amended-
(A) by inserting `(A)" after "(d)(1)"? and
(B) by adding at the end thereof the following new subpara-
graph:
"(B) When any divorced spouse is entitled to monthly benefits
under section 202 (b) or (c) for any month and such divorced spouse
has been so divorced for not less than 2 years, the benefit to which
he or she is entitled for such month on the basis of the wages and
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self-employment income of the individual entitled to old-age insur-
ance benefits referred to in subparagraph (A) shall be determined
without regard to deduction under this paragraph as a result of
excess earnings of such individual, and the benefits of all other in-
dividuals who are entitled for such month to monthly benefits
under section 202 on the basis of the wages and self-employment
income of such individual referred to in subparagraph (A) shall be
determined as if no such divorced spouse were entitled to benefits
for such month. ".
(c)(1) The amendments made by subsection (a) shall apply with re-
spect to monthly insurance benefits for months after December 1984,
but only on the basis of applications filed on or after January 1,
1985.
(2) The amendments made by subsection (b) shall apply with re-
spect to monthly insurance benefits for months after December 1984.
INDEXING OF DEFERRED SURVIVING SPOUSE'S BENEFITS TO RECENT
WAGE LEVELS
SEC. 133. (a)(1) Section 202(e)(2) of the Social Security Act is
amended-
(A) by redesignating subparagraph (B) as subparagraph (D),?
and
(B) by striking out "(2)(A) Except" and all that follows down
through "If such deceased individual" and inserting in lieu
thereof the following:
"(2)(A) Except as provided in subsection (q), paragraph (8) of this
subsection, and subparagraph (D) of this paragraph, such widow's
insurance benefit for each month shall be equal to the primary in-
surance amount (as determined for purposes of this subsection after
application of subparagraphs (B) and (C)) of such deceased individu-
al.
"(B)(i) For purposes of this subsection, in any case in which such
deceased individual dies before attaining age 62 and section
215(a)(1) (as in effect after December 1978) is applicable in determin-
ing such individual's primary insurance amount-
"(I) such primary insurance amount shall be determined
under the formula set forth in section 215(a)(1)(B)(i) and (ii)
which is applicable to individuals who initially become eligible
for old-age insurance benefits in the second year after the year
specified in clause (ii),
"(II) the year specified in clause (ii) shall be substituted for
the second calendar year specified in section 215(b)(3)(A)(ii)(I),
and
"(III) such primary insurance amount shall be increased
under section 215(i) as if it were the primary insurance amount
referred to in section 215(i)(2)(A)(ii)(II), except that it shall be in-
creased only for years beginning after the first year after the
year specified in clause (ii).
"(ii) The year specified in this clause is the earlier of-
"(I) the year in which the deceased individual attained age
60, or would have attained age 60 had he lived to that age, or
"(II) the second year preceding the year in which the widow
or surviving divorced wife first meets the requirements of para-
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graph (1)(B) or the second year preceding the year in which the
deceased individual died, whichever is later.
"(iii) This subparagraph shall apply with respect to any benefit
under this subsection only to the extent its application does not
result in a primary insurance amount for purposes of this subsection
which is less than the primary insurance amount otherwise deter-
mined for such deceased individual under section 215.
"(C) If such deceased individual".
(2) Section 202(e) of such Act (as amended by paragraph (1) of this
subsection) is further amended-
(A) in paragraph (1)(D) and in the matter in paragraph (1)
following subparagraph (F)(ii), by inserting "(as determined
after application of subparagraphs (B) and (C) of paragraph
(2))" after `primary insurance amount'; and
(B) in paragraph (2)(D)(ii), by inserting "(as determined with-
out regard to subparagraph (C))" after `primary insurance
amount".
(b)(1) Section 202(f)(3) of such Act is amended-
(A) by redesignating subparagraph (B) as subparagraph (D);
and
(B) by striking out "(3)(.A) Except" and all that follows down
through "If such deceased individual" and inserting in lieu
thereof the following:
"(3)(A) Except as provided in subsection (q), paragraph (2) of this
subsection, and subparagraph (D) of this paragraph, such widower's
insurance benefit for each month shall be equal to the primary in-
surance amount (as determined for purposes of this subsection after
application of subparagraphs (B) and (C)) of such deceased individu-
al.
"(B)(i) For purposes of this subsection, in any case in which such
deceased individual dies before attaining age 62 and section
215(a)(1) (as in effect after December 1978) is applicable in determin-
ing such individual's primary insurance amount-
"(I) such primary insurance amount shall be determined
under the formula set forth in section 215(a)(1)(B) (i) and (ii)
which is applicable to individuals who initially become eligible
for old-age insurance benefits in the second year after the year
specified in clause (ii),
"(II) the year specified in clause (ii) shall be substituted for
the second calendar year specified in section 215(b)(3)(A)(ii)(I),
and
"(III) such primary insurance amount shall be increased
under section 215(i) as if it were the primary insurance amount
referred to in section 2156)(2)(A)(ii)(II), except that it shall be in-
creased only for years beginning after the first year after the
year specified in clause (ii).
"(ii) The year specified in this clause is the earlier of-
"(I) the year in which the deceased individual attained age
60, or would have attained age 60 had she lived to that age, or
"(II) the second year preceding the year in which the widower
first meets the requirements of paragraph (1)(B) or the second
year preceding the year in which the deceased individual died,
whichever is later.
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`(iii) This subparagraph shall apply with respect to any benefit
under this subsection only to the extent its application does not
result in a primary insurance amount for purposes of this subsection
which is less than the primary insurance amount otherwise deter-
mined for such deceased individual under section 215.
"(C) If such deceased individual ".
(2) Section 202(f) of such Act (as amended by paragraph (1) of this
subsection) is further amended-
(A) in paragraph (1)(D) and in the matter in paragraph (1)
following subparagraph (F)(ii), by inserting "(as determined
after application of subparagraphs (B) and (C) of paragraph
(3)) " after `primary insurance amount';- and
(B) in paragraph (3)(D)(ii), by inserting "(as determined with-
out regard to subparagraph (C))" after `primary insurance
amount".
(c) The amendments made by this section shall apply with respect
to monthly insurance benefits for months after December 1984 for
individuals who first meet all criteria for entitlement to benefits
under section 202 (e) or (f) of the Social Security Act (other than
making application for such benefits) after December 1984.
LIMITATION ON BENEFIT REDUCTION FOR EARLY RETIREMENT IN CASE
OF DISABLED WIDOWS AND WIDOWERS
SEC. 134. (a)(1) Section 202(q)(1) of the Social Security Act is
amended by striking out the semicolon at the end of subparagraph
(B)(ii) and all that follows and inserting in lieu thereof a period.
(2)(A) Section 202(q)(6) of such Act is amended to read as follows:
"(6) For purposes of this subsection, the `reduction period' for an
individual's old-age, wife's, husband's, widow's, or widower's insur-
ance benefit is the period-
"(A) beginning-
"(i) in the case of an old-age or husband's insurance
benefit, with the first day of the first month for which such
individual is entitled to such benefit,
"(ii) in the case of a wife's insurance benefit, with the
first day of the first month for which a certificate described
in paragraph (5)(A)(i) is effective, or
`(iii) in the case of a widow's or widower's insurance
benefit, with the first day of the first month for which such
individual is entitled to such benefit or the first day of the
month in which such individual attains age 60, whichever
is the later, and
"(B) ending with the last day of the month before the month
in which such individual attains retirement age. ".
(B) Section 202(g)(3XG) of such Act is amended by striking out
`paragraph (6)(A) (or, if such paragraph does not apply, the period
specified in paragraph (6)(B))" and inserting in lieu thereof `para-
graph (6)".
(C) Section 202(q) of such Act is further amended, in paragraphs
(1)(BXi), (3)(EXii), and (3)(FXiiXI), by striking out `paragraph (6)(A)"
and inserting in lieu thereof `paragraph (6)".
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(3) Section 202(q)(7) of such Act is amended by striking out the
matter preceding subparagraph (A) and inserting in lieu thereof the
following:
"(7) For purposes of this subsection, the `adjusted reduction
period' for an individual's old-age, wife's, husband's, widow's, or
widower's insurance benefit is the reduction period prescribed in
paragraph (6) for such benefit, excluding-7.
(4) Section 202(q)(10) of such Act is amended-
(A) in that part of the second sentence preceding clause (A), by
striking out "or an additional adjusted reduction period';-
(B) in clauses (B)(i) and (C)(i), by striking out `, plus the
number of months in the adjusted additional reduction period
multipled by 43/240 of 1 percent';-
(C) in clause (B)(ii), by striking out `plus the number of
months in the additional reduction period multiplied by 43/240 of
1 percent, "? and
(D) in clause (C)(ii), by striking out `plus the number of
months in the adjusted additional reduction period multiplied
by 43/240 of 1 percent. "
(b) Section 202(m)(2)(B) of such Act (as applicable after the enact-
ment of section 2 of Public Law 97-123) is amended by striking out
"subsection (q)(6)(A)(ii)" and inserting in lieu thereof "subsection
(q)(6)(B)"
(c) The amendments made by this section shall apply with respect
to benefits for months after December 1983.
PART E-MECHANISMS To ASSURE CONTINUED BENEFIT PAYMENTS
IN UNEXPECTEDLY ADVERSE CONDITIONS
NORMALIZED CREDITING OF SOCIAL SECURITY TAXES TO TRUST FUNDS
SEC. 141. (a)(1) The last sentence of section 201(a) of the Social Se-
curity Act is amended-
(A) by striking out "from time to time" each place it appears
and inserting in lieu thereof "monthly on the first day of each
calendar month "and
(B) by striking out `paid to or deposited into the Treasury"
and inserting in lieu thereof "to be paid to or deposited into the
Treasury during such month ".
(2) Section 201(a) of such Act is further amended by adding at the
end thereof the following new sentence: "All amounts transferred to
either Trust Fund under the preceding sentence shall be invested by
the Managing Trustee in the same manner and to the same extent
as the other assets of such Trust Fund; and such Trust Fund shall
pay interest to the general fund on the amount so transferred on the
first day of any month at a rate (calculated on a daily basis, and
applied against the difference between the amount so transferred on
such first day and the amount which would have been transferred
to the Trust Fund up to that day under the procedures in effect on
January 1, 1983) equal to the rate earned by the investments of such
Fund in the same month under subsection (d). ".
(b)(1) The last sentence of section 1817(a) of such Act is amend-
ed-
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(A) by striking out "from time to time" and inserting in lieu
thereof "monthly on the first day of each calendar month "; and
(B) by striking out `paid to or deposited into the Treasury"
and inserting in lieu thereof "to be paid to or deposited into the
Treasury during such month ".
(2) Section 1817(a) of such Act is further amended by adding at
the end thereof the following new sentence: "All amounts trans-
ferred to the Trust Fund under the preceding sentence shall be in-
vested by the Managing Trustee in the same manner and to the
same extent as the other assets of the Trust Fund; and the Trust
Fund shall pay interest to the general fund on the amount so trans-
ferred on the first day of any month at a rate (calculated on a daily
basis, and applied against the difference between the amount so
transferred on such first day and the amount which would have
been transferred to the Trust Fund up to that day under the proce-
dures in effect on January 1, 1983) equal to the rate earned by the
investments of the Trust Fund in the same month under subsection
(C). Py.
(c) The amendments made by this section shall become effective
on the first day of the month following the month in which this Act
is enacted.
SEC. 142. (a)(1) Section 201(l)(1) of the Social Security Act is
amended-
(A) by striking out "January 1983" and inserting in lieu
thereof "January 1988"; and
(B) by inserting after "or" the second place it appears ", sub-
ject to paragraph (5), ".
(2)(A) Section 201(l)(2) of such Act is amended-
(i) by striking out "from time to time" and inserting in lieu
thereof "on the last day of each month after such loan is
made ",-
(ii) by striking out "interest" and inserting in lieu thereof
"the total interest accrued to such day"; and
(iii) by striking out "the loan were an investment under sub-
section (d)" and inserting in lieu thereof "such amount had re-
mained in the Depositary Account established with respect to
such lending Trust Fund under subsection (d) or section
1817(c)"(B) The amendment made by this paragraph shall apply with re-
spect to months beginning more than thirty days after the date of
enactment of this Act.
(3) Section 201(l)(3) of such Act is amended-
(A) by inserting "(A)" after the paragraph designation; and
(B) by adding at the end thereof the following new subpara-
graphs:
"(B)(i) If on the last day of any year after a loan has been made
under paragraph (1) by the Federal Hospital Insurance Trust Fund
to the Federal Old-Age and Survivors Trust Fund or the Federal
Disability Insurance Trust Fund, the Managing Trustee determines
that the OASDI trust fund ratio exceeds 15 percent, he shall trans-
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fer from the borrowing Trust Fund to the Federal Hospital Insur-
ance Trust Fund on amount that-
"(I) together with any amounts transferred from another bor-
rowing Trust Fund under this paragraph for such year, will
reduce the OASDI trust fund ratio to 15 percent; and
"(II) does not exceed the outstanding balance of such loan.
`(ii) Amounts required to be transferred under clause (i) shall be
transferred on the last day of the first month of the year succeeding
the year in which the determination described in clause (i) is made.
"(iii) For purposes of this subparagraph, the term `OASDI trust
fund ratio' means, with respect to any calendar year, the ratio of-
"(I) the combined balance in the Federal Old-Age and Survi-
vors Insurance Trust Fund and the Federal Disability Insur-
ance Trust Fund, reduced by the outstanding amount of any
loan (including interest thereon) theretofore made to either such
Fund from the Federal Hospital Insurance Trust Fund, as of
the last day of such calendar year, to
`(II) the amount estimated by the Secretary to be the total
amount to be paid from the Federal Old-Age and Survivors In-
surance Trust Fund and the Federal Disability Insurance Trust
Fund during the calendar ,year following such calendar year for
all purposes authorized by section 201 (other than payments of
interest on, and repayments of, loans from the Federal Hospital
Insurance Trust Fund under paragraph (1), but excluding any
transfer payments between such trust funds and reducing the
amount of any transfer to the Railroad Retirement Account by
the amount of any transfers into either such trust fund from
that Account).
"(C)(i) The full amount of all loans made under paragraph (1)
(whether made before or after January 1, 1983) shall be repaid at
the earliest feasible date and in any event no later than December
31, 1989.
"(ii) For the period after December 31, 1987, and before January 1,
1990, the Managing Trustee shall transfer each month to the Feder-
al Hospital Insurance Trust Fund from any Trust Fund with any
amount outstanding on a loan made from the Federal Hospital In-
surance Trust Fund under paragraph (1) an amount not less than
an amount equal to (I) the amount owed to the Federal Hospital In-
surance Trust Fund by such Trust Fund at the beginning of such
month (plus the interest accrued on the outstanding balance of such
loan during such month), divided by (II) the number of months
elapsing after the preceding month and before January 1990. The
Managing Trustee may, during this period, transfer larger amounts
than prescribed by the preceding sentence. "
(4) Section 201(l) of such Act is further amended by adding at the
end thereof the following new paragraph:
"(5)(A) No amounts may be borrowed from the Federal Hospital
Insurance Trust Fund under paragraph (1) during any month if the
Hospital Insurance Trust Fund ratio for such month is less than 10
percent.
"(B) For purposes of this paragraph, the term `Hospital Insurance
trust fund ratio' means, with respect to any month, the ratio of-
"(i) the balance in the Federal Hospital Insurance Trust
Fund, reduced by the outstanding amount of any loan (includ-
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ing interest thereon) theretofore made to such Trust Fund under
this subsection, as of the last day of the second month preceding
such month, to
"(ii) the amount obtained by multiplying by twelve the total
amount which (as estimated by the Secretary) will be paid from
the Federal Hospital Insurance Trust Fund during the month
for which such ratio is to be determined (other than payments
of interest on, or repayments of loans from another Trust Fund
under this subsection), and reducing the amount of any trans-
fers to the Railroad Retirement Account by the amount of any
transfer into the Hospital Insurance Trust Fund from that Ac-
count. ".
(b)(l) Section 1817(j)(1) of such Act is amended-
(A) by striking out "January 1983" and inserting in lieu
thereof "January 1988" ; and
(B) by inserting ", subject to paragraph (5), " after "may".
(2)(A) Section 1817(j)(2) of such Act is amended-
(i) by striking out "from time to time" and inserting in lieu
thereof "on the last day of each month after such loan is
made ",-
(ii) by striking out "interest" and inserting in lieu thereof
"the total interest accrued to such day" and
(iii) by striking out "the loan were an investment under sub-
section (c)" and inserting in lieu thereof "such amount had re-
mained in the Depositary Account established with respect to
such lending Trust Fund under section 201(d)".
(B) The amendment made by this paragraph shall apply with re-
spect to months beginning more than 30 days after the date of enact-
ment of this Act.
(3) Section 1817(j)(3) of such Act is amended-
(A) by inserting "(A)" after the paragraph designation; and
(B) by adding at the end thereof the following new subpara-
graphs:
"(B)(i) If on the last day of any year after a loan has been made
under paragraph (1) by the Federal Old-Age and Survivors Insur-
ance Trust Fund or the Federal Disability Insurance Trust Fund to
the Federal Hospital Insurance Trust Fund, the Managing Trustee
determines that the Hospital Insurance Trust Fund ratio exceeds 15
percent, he shall transfer from such Trust Fund to the lending trust
fund an amount that-
"(I) together with any amounts transferred to another lending
trust fund under this paragraph for such year, will reduce Hos-
pital Insurance Trust Fund ratio to 15 percent; and
"(II) does not exceed the outstanding balance of such loan.
"(ii) Amounts required to be transferred under clause (i) shall be
transferred on the last day of the first month of the year succeeding
the year in which the determination described in clause (i) is made.
`(iii) For purposes of this subparagraph, the term `Hospital Insur-
ance Trust Fund ratio' means, with respect to any calendar year, the
ratio of-
`(I) the balance in the Federal Hospital Insurance Trust
Fund, reduced by the amount of any outstanding loan (includ-
ing interest thereon) from the Federal Old-Age and Survivors
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Insurance Trust Fund and the Federal Disability Insurance
Trust Fund, as of the last day of such calendar year; to
"(II) the amount estimated by the Secretary to be the total
amount to be paid from the Federal Hospital Insurance Trust
Fund during the calendar year following such calendar year
(other than payments of interest on, and repayments of, loans
from the Federal Old-Age and Survivors Insurance Trust Fund
and the Federal Disability Insurance Trust Fund under para-
graph (1)), and reducing the amount of any transfer to the Rail-
road Retirement Account by the amount of any transfers into
such Trust Fund from the Railroad Retirement Account.
"(C)(i) The full amount of all loans made under paragraph (1)
(whether made before or after January 1, 1983) shall be repaid at
the earliest feasible date and in any event no later than December
31, 1989. ".
"(ii) For the period after December 31, 1987 and before January 1,
1990, the Managing Trustee shall transfer each month from the
Federal Hospital Insurance Trust Fund to any Trust Fund that is
owed any amount by the Federal Hospital Insurance Trust Fund on
a loan made under paragraph (1), an amount not less than an
amount equal to (I) of the amount owed to such Trust Fund by the
Federal Hospital Insurance Trust Fund at the beginning of such
month (plus the interest accrued on the outstanding balance of such
loan during such month), divided by (II) the number of months
elapsing after the preceding month and before January 1990. The
Managing Trustee may, during this period, transfer larger amounts
than prescribed by the preceding sentence. ".
(4) Section 1817(j) of such Act is further amended by adding at
the end thereof the following new paragraph:
"(5)(A) No amounts may be loaned by the Federal Old-Age and
Survivors Insurance Trust Fund or the Federal Disability Insurance
Trust Fund under paragraph (1) during any month if the OASDI
trust fund ratio for such month is less than 10 percent.
"(B) For purposes of this paragraph, the term `OASDI trust fund
ratio' means, with respect to any month, the ratio of-
"(i) the combined balance in the Federal Old-Age and Survi-
vors Insurance Trust Fund and the Federal Disability Insur-
ance Trust Fund, reduced by the outstanding amount of any
loan (including interest thereon) theretofore made to either such
Trust Fund from the Federal Hospital Insurance Trust Fund
under section 201(l), as of the last day of the second month pre-
ceding such month, to
"(ii) the amount obtained by multiplying by twelve the total
amount which (as estimated by the Secretary) will be paid from
the Federal Old-Age and Survivors Insurance Trust Fund and
the Federal Disability Insurance Trust Fund during the month
for which such ratio is to be determined for all purposes au-
thorized by section 201 (other than payments of interest on, or
repayments of, loans from the Federal Hospital Insurance Trust
Fund under section 201(l)), but excluding any transfer payments
between such trust funds and reducing the amount of any
transfers to the Railroad Retirement Account by the amount of
any transfers into either such trust fund from that Account. ".
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RECOMMENDATIONS BY BOARD OF TRUSTEES TO REMEDY INADEQUATE
BALANCES IN THE SOCIAL SECURITY TRUST FUNDS
SEC. 143. Title VII of the Social Security Act is amended by
adding at the end thereof the following new section:
"RECOMMENDATIONS BY BOARD OF TRUSTEES TO REMEDY INADEQUATE
BALANCES IN THE SOCIAL SECURITY TRUST FUNDS
"SEC. 709. (a) If the Board of Trustees of the Federal Old-Age and
Survivors Insurance Trust Fund, the Federal Disability Insurance
Trust Fund determines at any time that the balance ratio of such
Trust Fund for any calendar year may become less than 20 percent,
the Board shall promptly submit to each House of the Congress a
report setting forth its recommendations for statutory adjustments
affecting the receipts and disbursements of such Trust Fund neces-
sary to maintain the balance ratio of such Trust Fund at not less
than 20 percent, with due regard to the economic conditions which
created such inadequacy and the amount of time necessary to allevi-
ate such inadequacy in a prudent manner. The report shall set forth
specifically the extent to which benefits would have to be reduced,
taxes under sections 1401, 3101, or 3111 of the Internal Revenue
Code of 1954 would have to be increased, or a combination thereof,
in order to obtain the objectives referred to in the preceding sen-
tence.
`(b) For purposes of this section, the term `balance ratio' means,
with respect to any calendar year in connection with any Trust
Fund referred to in subsection (a), the ratio of -
"(1) the balance in such Trust Fund, reduced by the outstand-
ing amount of any loan (including interest thereon) theretofore
made to such Trust Fund under section 201(l), as of the begin-
ning of each year, to
"(2) the total amount which (as estimated by the Secretary)
will be paid from such Trust Fund during such calendar year
for all purposes authorized by section 201, 1817, or 1841 (as ap-
plicable), other than payments of interest on, or payments of,
loans under section 201(l), but excluding any transfer payments
between such Trust Fund and any other Trust Fund referred to
in subsection (a) and reducing the amount of any transfers to
the Railroad Retirement Account by the amount of any trans-
fers into such Trust Fund from that Account. ".
SEC. 151. (a) Section 217(g) of the Social Security Act is amended
to read as follows:
"Appropriation to Trust Funds
"(g)(1) Within thirty days after the date of the enactment of the
Social Security Amendments of 1983, the Secretary shall determine
the amount equal to the excess of-
"(A) the actuarial present value as of such date of enactment
of the past and future benefit payments from the Federal Old-
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Age and Survivors Insurance Trust Fund, the Federal Disabil-
ity Insurance Trust Fund, and the Federal Hospital Insurance
Trust Fund under this title and title XVIII, together with asso-
ciated administrative costs, resulting from the operation of this
section (other than this subsection) and section 210 of this Act
as in effect before the enactment of the Social Security Act
Amendments of 1950, over
"(B) any amounts previously transferred from the general
fund of the Treasury to such Trust Funds pursuant to the provi-
sions of this subsection as in effect immediately before the date
of the enactment of the Social Security Act Amendments of
1983.
Such actuarial present value shall be based on the relevant actuar-
ial assumptions set forth in the report of the Board of Trustees of
each such Trust Fund for 1983 under sections 201(c) and 1817(b).
Within thirty days after the date of the enactment of the Social Se-
curity Act Amendments of 1983, the Secretary of the Treasury shall
transfer the amount determined under this paragraph with respect
to each such Trust Fund to such Trust Fund from amounts in the
general fund of the Treasury not otherwise appropriated.
"(2) The Secretary shall revise the amount determined under
paragraph (1) with respect to each such Trust Fund in 1985 and
each fifth year thereafter, as determined appropriate by the Secre-
tary from data which becomes available to him after the date of the
determination under paragraph (1) on the basis of the amount of
benefits and administrative expenses actually paid from such Trust
Fund under this title or title XVIII and the relevant actuarial as-
sumptions set forth in the report of the Board of Trustees of such
Trust Fund for such year under section 201(c) or 1817(b). Within 30
days after any such revision, the Secretary of the Treasury, to the
extent provided in advance in appropriation Acts, shall transfer to
such Trust Fund, from amounts in the general fund of the Treasury
not otherwise appropriated, or from such Trust Fund to the general
fund of the Treasury, such amounts as the Secretary o f the Treasury
determines necessary to compensate for such revision.'.
(b)(1) Section 229(b) of such Act is amended to read as follows:
"(b) There are authorized to be appropriated to each of the Trust
Funds, consisting of the Federal Old-Age and Survivors Insurance
Trust Fund, the Federal Disability Insurance Trust Fund, and the
Federal Hospital Insurance Trust Fund, for transfer on July 1 of
each calendar year to such Trust Fund from amounts in the general
fund in the Treasury not otherwise appropriated, an amount equal
to the total of the additional amounts which would be appropriated
to such Trust Fund for the fiscal year ending September 30 of such
calendar year under section 2'01 or 1817 of this Act if the amounts
of the additional wages deemed to have been paid for such calendar
year by reason of subsection (a) constituted remuneration for employ-
ment (as defined in section 3121(b) of the Internal Revenue Code of
1954) for purposes of the taxes imposed by sections 3101 and 3111 of
the Internal Revenue Code of 1954. Amounts authorized to be appro-
priated under this subsection ,for transfer on July 1 of each calendar
year shall be determined on the basis of estimates of the Secretary
of the wages deemed to be paid for such calendar year under subsec-
tion (a); and proper adjustments shall be made in amounts author-
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ized to be appropriated for subsequent transfer to the extent prior
estimates were in excess of or were less than such wages so deemed
to be paid. ".
(2) The amendment made by paragraph (1) shall be effective with
respect to wages deemed to have been paid for calendar years after
1983.
(3)(A) Within thirty days after the date of the enactment of this
Act, the Secretary of Health and Human Services shall determine
the additional amounts which would have been appropriated to the
Federal Old-Age and Survivors Insurance Trust Fund, the Federal
Disability Insurance Trust Fund, and the Federal Hospital Insur-
ance Trust Fund under sections 201 and 1817 of the Social Security
Act if the additional wages deemed to have been paid under section
229(a) of the Social Security Act prior to 1984 had constituted remu-
neration for employment (as defined in section 3121(b) of the Inter-
nal Revenue Code of 1954) for purposes of the taxes imposed by sec-
tions 3101 and 3111 of the Internal Revenue Code of 1954, and the
amount of interest which would have been earned on such amounts
if they had been so appropriated.
(B)(i) Within thirty days after the date of the enactment of this
Act, the Secretary of the Treasury shall transfer to each such Trust
Fund, from amounts in the general fund of the Treasury not other-
wise appropriated, an amount equal to the amount determined with
respect to such Trust Fund under subparagraph (A), less any
amount appropriated to such Trust Fund pursuant to the provisions
of section 229(b) of the Social Security Act prior to the date of the
determination made under subparagraph (A) with respect to wages
deemed to have been paid for calendar years prior to 1984.
(ii) The Secretary of Health and Human Services shall revise the
amount determined under clause (i) with respect to each such Trust
Fund within one year after the date of the transfer made to such
Trust Fund under clause (i), as determined appropriate by such Sec-
retary from data which becomes available to him after the date of
the transfer under clause (i). Within 30 days after any such revision,
the Secretary of the Treasury shall transfer to such Trust Fund,
from amounts in the general fund of the Treasury not otherwise ap-
propriated, or from such Trust Fund to the general fund of the
Treasury, such amounts as the Secretary of Health and Human
Services certifies as necessary to take into account such revision.
CREDITING AMOUNTS OF UNNEGOTIATED CHECKS TO TRUST FUNDS
SEC. 153. (a) The Secretary of the Treasury shall take such actions
as may be necessary to ensure that amounts of checks for benefits
under title II of the Social Security Act which have not been pre-
sented for payment within a reasonable length of time (not to exceed
twelve months) after issuance are credited to the Federal Old-Age
and Survivors Insurance Trust Fund or the Federal Disability In-
surance Trust Fund, whichever may be the fund from which the
check was issued, to the extent provided in advance in appropri-
ation Acts. Amounts of any such check shall be recharged to the
fund from which they were issued if payment is subsequently made
on such check.
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(b)(1) The Secretary of the Treasury shall transfer from the gener-
al fund of the Treasury to the Federal Old-Age and Survivors Insur-
ance Trust Fund and to the Federal Disability Insurance Trust
Fund, as appropriate, as soon as possible after the date of the enact-
ment of this Act, such sums as may be necessary to reimburse such
Trust Funds in the total amounts of all currently unnegotiated
benefit checks (including interest thereon), to the extent provided in
advance in appropriation Acts. After the amounts appropriated by
this subsection have been transferred to the Trust Funds, the provi-
sions of subsection (a) shall be applicable.
(2) As used in paragraph (1), the term "currently unnegotiated
benefit checks" means the checks issued under title II of the Social
Security Act prior to the date of the enactment of this Act, which
remain unnegotiated after the twelfth month following the date on
which they were issued.
SEC. 154. (a) The Secretary of Health and Human Services and
the Secretary of the Treasury shall jointly undertake, as soon as pos-
sible after the date of the enactment of this Act, a thorough study
with respect to the period of time (hereafter in this section referred
to as the "float period') between the issuance of checks from the
general fund of the Treasury in payment of monthly insurance bene-
fits under title II of the Social Security Act and the transfer to the
general fund from the Federal Old-Age and Survivors Insurance
Trust Fund or the Federal Disability Insurance Trust Fund, as ap-
plicable, of the amounts necessary to compensate the general fund
for the issuance of such checks. Each such Secretary shall consult
the other regularly during the course of the study and shall, as ap-
propriate, provide the other with such information and assistance
as he may require.
(b) The study shall include--
(1) an investigation of the feasibility and desirability of main-
taining the float periods which are allowed as of the date of the
enactment of this section in the procedures governing the pay-
ment of monthly insurance benefits under title II of the Social
Security Act, and of the general feasibility and desirability of
making adjustments in such procedures with respect to float pe-
riods; and
(2) a separate investigation of the feasibility and desirability
of providing, as a specific form of adjustment in such proce-
dures with respect to float periods, for the transfer each day to
the general fund of the Treasury from the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability In-
surance Trust Fund, as appropriate, of amounts equal to the
amounts of the checks referred to in subsection (a) which are
paid by the Federal Reserve Banks on such day.
(c) In conducting the study required by subsection (a), the Secretar-
ies shall consult, as appropriate, the Director of the Office of Man-
agement and Budget, and the Director shall provide the Secretaries
with such information and assistance as they may require. The Sec-
retaries shall also solicit the views of other appropriate officials and
organizations.
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(d)(1) Not later than six months after the date of the enactment of
this Act, the Secretaries shall submit to the President and the Con-
gress a report of the findings of the investigation required by subsec-
tion (b)(1), and the Secretary of the Treasury shall by regulation
make such adjustments in the procedures governing the payment of
monthly insurance benefits under title II of the Social Security Act
with respect to float periods (other than adjustments in the form de-
scribed in subsection (b)(2)) as may have been found in such investi-
gation to be necessary or appropriate.
(2) Not later than twelve months after the date of the enactment
of this Act, the Secretaries shall submit to the President and the
Congress a report of the findings of the separate investigation re-
quired by subsection (b)(2), together with their recommendations
with respect thereto; and, to the extent necessary or appropriate to
carry out such recommendations, the Secretary of the Treasury shall
by regulation make adjustments in the procedures with respect to
float periods in the form described in such subsection.
TRUST FUND TRUSTEES' REPORTS
SEC. 155. (a) The next to last sentence of section 201(c) of the Social
Security Act is amended by striking out "Such report shall also in-
clude" and inserting in lieu thereof the following: "Such report
shall include an actuarial opinion by the Chief Actuary of the
Social Security Administration certifying that the techniques and
methodologies used are generally accepted within the actuarial pro-
fession and that the assumptions and cost estimates used are rea-
sonable, and shall also include ".
(b) Section 1817(b) of such Act is amended by inserting immediate-
ly before the last sentence the following new sentence: "Such report
shall also include an actuarial opinion by the Chief Actuarial Offi-
cer of the Health Care Financing Administration certifying that the
techniques and methodologies used are generally accepted within
the actuarial profession and that the assumptions and cost esti-
mates used are reasonable.":
(c) Section 1841(b) of such Act is amended by inserting immediate-
ly before the last sentence the following new sentence: "Such report
shall also include an actuarial opinion by the Chief Actuarial Offi-
cer of the Health Care Financing Administration certifying that the
techniques and methodologies used are generally accepted within
the actuarial profession and that the assumptions and cost esti-
mates used are reasonable. ".
(d) Notwithstanding sections 201(c)(2), 1817(b)(2), and 1841(b)(2) of
the Social Security Act, the annual reports of the Boards of Trustees
of the Trust Funds which are required in the calendar year 1983
under those sections may be filed at any time not later than forty-
five days after the date of the enactment of this Act.
(e) The amendments made by this section shall take effect on the
date of the enactment of this Act.
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TITLE II-ADDITIONAL PRO VISIONS RELATING TO LONG-
TERM FINANCING OF THE SOCIAL SECURITY SYSTEM
SEC. 201. (a) Section 216 of the Social Security Act is amended by
adding at the end thereof the following new subsection:
"Retirement Age
"(1)(1) The term `retirement age' means-
"(A) with respect to an individual who attains early retire-
ment age (as defined in paragraph (2)) before January 1, 2000,
65 years of age;
"(B) with respect to an individual who attains early retire-
ment age after December 31, 1999, and before January 1, 2005,
65 years of age plus the number of months in the age increase
factor (as determined under paragraph (3)) for the calendar year
in which such individual attains early retirement age;
"(C) with respect to an individual who attains early retire-
ment age after December 31, 2004, and before January 1, 2017,
66 years of age;
"(D) with respect to an individual who attains early retire-
ment age after December 31, 2016, and before January 1, 2022,
66 years of age plus the number of months in the age increase
factor (as determined under paragraph (3)) for the calendar year
in which such individual attains early retirement age; and
"(E) with respect to an individual who attains early retire-
ment age after December 31, 2021, 67 years of age.
"(2) The term `early retirement age' means age 62 in the case of an
old-age, wife's, or husband's insurance benefit, and age 60 in the
case of a widow's or widower's insurance benefit.
"(3) The age increase factor for any individual who attains early
retirement age in a calendar year within the period to which sub-
paragraph (B) or (D) of paragraph (1) applies shall be determined as
follows:
"(A) With respect to an individual who attains early retire-
ment age in the 5-year period consisting of the calendar years
2000 through 2004, the age increase factor shall be equal to two-
twelfths of the number of months in the period beginning with
January 2000 and ending with December of the year in which
the individual attains early retirement age.
"(B) With respect to an individual who attains early retire-
ment age in the 5 -period consisting of the calendar years 2017
through 2021, the age increase factor shall be equal to two-
twelfths of the number of months in the period beginning with
January 2017 and ending with December of the year in which
the individual attains early retirement age. "
(b)(1) Section 202(q)(9) of such Act is amended to read as follows:
"(9) The amount of the reduction for early retirement specified in
paragraph (1)-
'(A) for old-age insurance benefits, wife's insurance benefits,
and husband's insurance benefits, shall be the amount specified
in such paragraph for the first 36 months of the reduction
period (as defined in paragraph (6)) or adjusted reduction
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period (as defined in paragraph (7)), and five-twelfths of 1 per-
cent for any additional months included in such periods; and
"(B) for widow's insurance benefits and widower's insurance
benefits, shall be periodically revised by the Secretary such
that-
"(i) the amount of the reduction at early retirement age
as defined in section 216(a) shall be 28.5 percent of the full
benefit; and
`(ii) the amount of the reduction for each month in the
reduction period (specified in paragraph (6)) or the adjusted
reduction period (specified in paragraph (7)) shall be estab-
lished by linear interpolation between 28.5 percent at the
month of attainment of early retirement age and 0 percent
at the month of attainment of retirement age. ".
(2) Section 202(q)(1) of such Act is amended by striking out "If"
and inserting in lieu thereof "Subject to paragraph (9), if".
(c) Title II of the Social Security Act is further amended-
(1) by striking out "age 65" or "age of 65"; as the case may be,
each place it appears in the following sections and inserting in
lieu thereof in each instance "retirement age (as defined in sec-
tion 216(l))".?
(A) subsections (a), (b), (c), (d), (e), (f), (q), (r), and (w) of
section 202;
(B) subsections (c) and (f) of section 203;
(C) subsection (f) of section 215;
(D) subsections (h) and (i) of section 216, and
(E) section 223(a); and
(2) by striking out "age sixty-five" in section 203(c) and insert-
ing in lieu thereof "retirement age (as defined in section
216(l))"? and
(3) by striking out "age of sixty-five" in section 223(a) and in-
serting in lieu thereof "retirement age (as defined in section
216(l))"(d) The Secretary shall conduct a comprehensive study and analy-
sis of the implications of the changes made by this section in retire-
ment age in the case of those individuals (affected by such changes)
who, because they are engaged 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 shall submit to the Congress no later than January 1,
1986, a full report on the study and analysis. Such report shall in-
clude any recommendations for legislative changes, including recom-
mendations with respect to the provision of protection against the
risks associated with early retirement due to health considerations,
which the Secretary finds necessary or desirable as a result of the
findings contained in this study.
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48
TITLE III-MISCELLANEOUS AND TECHNICAL PROVISIONS
PART A-ELIMINATION OF GENDER-BASED
SEC. 301. (a)(1) Section 202(c)(1) of the Social Security Act is
amended, in the matter preceding subparagraph (A), by inserting
"and every divorced husband (as defined in section 216(d))" before
"of an individual" and by inserting "or such divorced husband"
after "if such husband".
(2) Section 202(c)(1) of such Act is further amended-
(A) by striking out "and at the end of subparagraph (B);
(B) by redesignating subparagraph (C) as subparagraph (D),
and by inserting after subparagraph (B) the following new sub-
paragraph:
"(C) in the case of a divorced husband, is not married, and";
and
(C) by striking out the matter following subparagraph (D) (as
so redesignated) and inserting in lieu thereof the following:
"shall be entitled to a husband's insurance benefit for each month,
beginning with-
"(0 in the case of a husband or divorced husband (as so de-
fined) of an individual who is entitled to an old-age insurance
benefit, if such husband or divorced husband has attained age
65, the first month in which he meets the criteria specified in
subparagraphs (A), (B), (C), and (D), or
"(ii) in the case of a husband or divorced husband (as so de-
fined) of-
"(I) an individual entitled to old-age insurance benefits,
if such husband or divorced husband has not attained age
65, or
"(II) an individual entitled to disability insurance bene-
fits,
the first month throughout which he is such a husband or di-
vorced husband and meets the criteria specified in subpara-
graphs (B), (C), and (D) (if in such month he meets the criterion
specified in subparagraph (A)),
whichever is earlier, and ending with the month preceding the
month to which any of the following occurs:
"(E) he dies,
"(F) such individual dies,
"(G) in the case of a husband, they are divorced and either (i)
he has not attained age 62, or (ii) he has attained age 62 but
has not been married to such individual for a period of 10 years
immediately before the divorce became effective,
"(H) in the case of a divorced husband, he marries a person
other than such individual,
`(I) he becomes entitled to an old-age or disability insurance
benefit based on a primary insurance amount which is equal to
or exceeds one-half of the primary insurance amount of such in-
dividual, or
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`(J) such individual is not entitled to disability insurance
benefits and is not entitled to old-age insurance benefits. ".
(3) Section 202(c)(3) of such Act is amended by inserting "(or, in
the case of a divorced husband, his former wife)" before "for such
month":
(4) Section 202(c) of such Act is further amended by adding after
paragraph (3) the following new paragraph:
`(4) In the case of any divorced husband who marries-
"(A) an individual entitled to benefits under subsection (b),
(e), (g), or (h) of this section, or
"(B) an individual who has attained the age of 18 and is en-
titled to benefits under subsection (d), by reason of paragraph
(1)(B)(ii) thereof,
such divorced husband's entitlement to benefits under this subsec-
tion, notwithstanding the provisions of paragraph (1) (but subject to
subsection (s)), shall not be terminated by reason of such marriage. ".
(5) Section 202(c) of such Act is further amended by adding after
paragraph (4) (as added by paragraph (4) of this subsection) the fol-
lowing new paragraph:
"(5)(A) Notwithstanding the preceding provisions of this subsec-
tion, except as provided in subparagraph (B), the divorced husband
of an individual who is not entitled to old-age or disability insur-
ance benefits, but who has attained age 62 and is a fully insured
individual (as defined in section 214), if such divorced husband-
"(0 meets the requirements of subparagraphs (A) through (D)
of paragraph (1), and
"(ii) has been divorced from such insured individual for not
less than 2 years,
shall be entitled to a husband's insurance benefit under this subsec-
tion for each month, in such amount, and beginning and ending
with such months, as determined (under regulations o f the Secre-
tary) in the manner otherwise provided for husbands insurance
benefits under this subsection, as if such insured individual had
become entitled to old-age insurance benefits on the date on which
the divorced husband first meets the criteria for entitlement set
forth in classes (i) and (ii).
"(B) A husband's insurance benefit provided under this para-
graph which has not otherwise terminated in accordance with sub-
paragraph (E), (F), (H), or (I) of paragraph (1) shall terminate with
the month preceding the first month in which the insured individu-
al is no longer a fully insured individual. ".
(6) Section 202(c)(2XA) of such Act is amended bey inserting "(or di-
vorced husband)" after `payable to such husband
(7) Section 202(b)(3XA) of such Act is amended by striking out
"(f)" and inserting in lieu thereof "(c), (f), ".
(8) Section 202(c)(1XD) of such Act (as redesignated by paragraph
(2) of this subsection) is amended by striking out "his wife" and in-
serting in lieu thereof "such individual"
(9) Section 202(d)(5XA) of such Act is amended by inserting "(c), "
after "(b), ".
(b)(l) Section 202(f)(1) of such Act is amended, in the matter pre-
ceding subparagraph (A), by inserting "and every surviving divorced
husband (as defined in section 216(d))" before "of an individual"
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and by inserting "or such surviving divorced husband" after "if
such widower".
(2) Section 202(f)(1) of such Act is further amended by striking out
"his deceased wife" in subparagraph (D) and in the matter follow-
ing subparagraph (F) and inserting in lieu thereof "such deceased
individual ".
(3) Section 202(f)(3)(B)(ii)(II) of such Act (as amended by section
133(b)(1)(B) of this Act) is amended by inserting "or surviving di-
vorced husband" after "widower".
(4) Paragraph (3)(D) of section 202(f) of such Act (as redesignated
by section 133(b)(1)(A) of this Act), and paragraphs (4), (5), and (6) of
such section (as redesignated by section 131(b)(3)(A) of this Act), are
each amended by inserting "or surviving divorced husband" after
"widower" wherever it appears.
(5) Paragraph (3)(D) of section 202(f) of such Act (as redesignated
by section 133(b)(1)(A) of this Act) is further amended by striking out
"wife" wherever it appears and inserting in lieu thereof "individu-
al".
(6) Section 202(g)(3)(A) of such Act is amended by inserting `(c), "
before "(f), ".
"
(7) Section 202(h)(4)(A) of such Act is amended by inserting "(0,
before "(e), ".
(c)(1) Section 216(d) of such Act is amended by redesignating para-
graph (4) as paragraph (6), and by inserting after paragraph (3) the
following new paragraphs:
"(4) The term `divorced husband' means a man divorced from an
individual, but only if he had been married to such individual for a
period of 10 years immediately before the date the divorce became
effective.
"(5) The term `surviving divorced husband' means a man divorced
from an individual who has died, but only if he had been married
to the individual for a period of 10 years immediately before the di-
vorce became effective. ".
(2) The heading of section 216(d) of such Act is amended to read
as follows:
"Divorced Spouses; Divorce ".
(d)(1) Section 205(b) of such Act is amended by inserting "divorced
husband, " after "husband, ", and by inserting "surviving divorced
husband, " after "widower, ".
(2) Section 205(c)(1)(C) of such Act is amended by inserting "sur-
viving divorced husband, "after "wife, ".
SEC. 302. Section 202(f)(1)(A) of the Social Security Act is amended
by striking out "has not remarried" and inserting in lieu thereof "is
not married"
SEC. 303. (a) Section 216(h)(3) of the Social Security Act is amend-
ed by inserting "mother or" before "father" wherever it appears.
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(b) Section 216(h)(3XAXii) of such Act is amended by striking out
all that follows "time" and inserting in lieu thereof "such appli-
cant's application for benefits was filed;".
(c) Section 216(h)(3XBXii) of such Act is amended by striking out
"such period of disability began" and inserting in lieu thereof "such
applicant's application for benefits was filed".
(d) Section 216(h)(,) of such Act is further amended-
(1) by striking out "his" wherever it appears and inserting in
lieu thereof "his or her"; and
(2) by striking out "he" in subparagraph (B) and inserting in
lieu thereof "he or she"
TRANSITIONAL INSURED STATUS
SEC. 304. (a) Section 227(a) of the Social Security Act is amend-
ed-
(1) by striking out "wife" wherever it appears and inserting in
lieu thereof `spouse';
(2) by striking out "wife's" wherever it appears and inserting
in lieu thereof "spouse's';
(3) by striking out "she" wherever it appears and inserting in
lieu thereof "he or she";
(4) by striking out "his" and inserting in lieu thereof "the
and
(5) by inserting "or section 202(c)" after "section 202(b)" wher-
ever it appears.
(b) Section 227(b) and section 227(c) of such Act are amended-
(1) by striking out "widow" wherever it appears and inserting
in lieu thereof "surviving spouse';
(2) by striking out "widow's" wherever it appears and insert-
ing in lieu thereof "surviving spouse's";
(3) by striking out "her" wherever it appears and inserting in
lieu thereof "the"; and
(4) by inserting "or section 202(f)" after "section 202(e)" wher-
ever it appears.
(c) Section 216 of such Act is amended by inserting before subsec-
tion (b) the following new subsection:
"Spouse; Surviving Spouse
"(a)(1) The term `spouse' means a wife as defined in subsection (b)
or a husband as defined in subsection (f).
`(2) The term `surviving spouse' means a widow as defined in sub-
section (c) or a widower as defined in subsection (g). "
EQUALIZATION OF BENEFITS UNDER SECTION 228
SEC. 305. (a) Section 228(b) of the Social Security Act is
amended-
(1) by striking out "(1) Except as provided in paragraph (2),
the" and inserting in lieu thereof "The"; and
(2) by striking out paragraph (2).
(b) Section 228(c)(2) of such Act is amended by striking out "(B)
the larger of" and all that follows and inserting in lieu thereof "(B)
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the benefit amount as determined without regard to this subsec-
tion. '
(c) Section 228(c)(3) of such Act is amended to read as follows:
"(3) In the case of a husband or wife both of whom are entitled to
benefits under this section for any month, the benefit amount of
each spouse, after any reduction under paragraph (1), shall be fur-
ther reduced (but not below zero) by the excess (if any) of (A) the
total amount of any periodic benefits under governmental pension
systems for which the other spouse is eligible for such month, over
(B) the benefit amount of such other spouse as determined without
regard to this subsection. ".
(d) Section 228 of such Act is further amended-
(1) by striking out "he" wherever it appears in subsections (a)
and (c)(1) and inserting in lieu thereof "he or she';- and
(2) by striking out "his" in subsection (c)(4)(C) and inserting
in lieu thereof "his or her".
(e) The Secretary shall increase the amounts specified in section
228 of the Social Security Act, as amended by this section, to take
into account any general benefit increases (as referred to in section
215(i)(3) of such Act), and any increases under section 215(i) of such
Act, which have occurred after June 1974 or may hereafter occur.
FATHER'S INSURANCE BENEFITS
SEC. 306. (a) Section 202(g) of the Social Security Act is amend-
(1) by striking out "widow" wherever it appears and inserting
in lieu thereof "surviving spouse';-
(2) by striking out "widow's" wherever it appears and insert-
ing in lieu thereof "survivin ' spouse's ";
(3) by striking out "wife s insurance benefits" and "he" in
paragraph (1)(D) and inserting in lieu thereof "a spouse's insur-
ance benefit" and "such individual", respectively;
(4) by striking out "her" wherever it appears and inserting in
lieu thereof "his or her",-
(5) by striking out "she" wherever it appears and inserting in
lieu thereof "he or she';-
(6) by striking out "mother" wherever it appears and inserting
in lieu thereof 'parent",-
(7) by inserting "or father's" after "mother's" wherever it ap-
pears;
(8) by striking out "after August 1950"; and
(9) in paragraph (3)(A) (as amended by section 301(b)(7) of this
Act)-
(A) by inserting "this subsection or" before "subsection
(a)"? and
(B) by striking out "(c)," and inserting in lieu thereof
"(b), (c), (e),
(b) The heading of section 202(g) of such Act is amended by insert-
ing "and Father's" after "Mother's" :
(c) Section 216(d) of such Act (as amended by section 301(c)(1) of
this Act) is further amended by redesignating paragraph (6) as para-
graph (8) and by inserting after paragraph (5) the following new
paragraphs:
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"(6) The term `surviving divorced father' means a man divorced
from an individual who has died, but only if (A) he is the father of
her son or daughter, (B) he legally adopted her son or daughter
while he was married to her and while such son or daughter was
under the age of 18, (C) she legally adopted his son or daughter
while he was married to her and while such son or daughter was
under the age of 18, or (D) he was married to her at the time both of
them legally adopted a child under the age of 18.
`(7) The term `surviving divorced parent' means a surviving di-
vorced mother as defined in paragraph (3) of this subsection or a
surviving divorced father as defined in paragraph (6). ".
(d) Section 202(c)(1) of such Act (as amended by section 301(a) of
this Act) is further amended by inserting "(subject to subsection (s))"
before "be entitled to" in the matter following subparagraph (D)
and preceding subparagraph (E).
(e) Section 202(c)(1)(B) of such Act is amended by inserting after
"62" the following: "or (in the case of a husband) has in his care
(individually or jointly with such individual) at the time of filing
such application a child entitled to child's insurance benefits on the
basis of the wages and self-employment income of such individual" :
(f) Section 202(c)(1) of such Act (as amended by section 301(a) of
this Act and the preceding provisions of this section) is further
amended by redesignating the new subparagraphs (I) and (J) as sub-
paragraphs (J) and (K), respectively, and by inserting after subpara-
graph (H) the following new subparagraph:
"(I) in the case of a husband who has not attained age 62, no
child of such individual is entitled to a child's insurance bene-
fit, ".
(g) Section 202(f)(1)(C) of such Act is amended by inserting "(i)"
after "(C)"; by inserting "or" after "223,"; and by adding at the end
thereof the following new clause:
"(ii) was entitled, on the basis of such wages and self-employ-
ment income, to father's insurance benefits for the month pre-
ceding the month in which he attained age 65, and" :
(h) Section 202(f)(5) of such Act (as redesignated by section
131(b)(3)(A) of this Act) is amended by striking out "or" at the end
of subparagraph (A), by redesignating subparagraph (B) as subpara-
graph (C), and by inserting immediately after subparagraph (A) the
following new subparagraph:
"(B) the last month for which he was entitled to father's in-
surance benefits on the basis of the wages and self-employment
income of such individual, or".
(i) Section 203(f)(1)(F) of such Act is amended by striking out "sec-
tion 202(b) (but only by reason of having a child in her care within
the meaning of paragraph (1)(B) of that subsection)" and inserting
in lieu thereof `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)".
EFFECT OF MARRIAGE ON CHILDHOOD DISABILITY BENEFITS AND ON
OTHER DEPENDENTS' OR SURVIVORS' BENEFITS
SEC. 307. (a) Subsections (b)(3), (d)(5), (g)(3), and (h)(4) of section
202 of the Social Security Act (as amended by the preceding provi-
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sions of this Act) are each amended by striking out ", except that"
and all that follows and inserting in lieu thereof a period.
(b) The amendments made by subsection (a) shall apply with re-
spect to benefits under title II of the Social Security Act for months
after the month in which this Act is enacted, but only in cases in
which the "last month" referred to in the provision amended is a
month after the month in which this Act is enacted.
CREDIT FOR CERTAIN MILITARY SERVICE
SEC. 308. Section 217(f) of the Social Security Act is amended-
(1) by striking out "widow" each place it appears and insert-
ing in lieu thereof "survivin' spouse'; and
(2) by striking out "his' and "her" wherever they appear
(except in clause (A) of paragraph (1)) and inserting in lieu
thereof in each instance "his or her".
SEC. 309. (a) Section 202(b)(3)(A) of the Social Security Act (as
amended by section 301(a)(6) of this Act) is further amended by in-
serting "(g) "after "(f), ".
(b) Section 202(q)(3) of such Act is amended by inserting "or sur-
viving divorced husband" after "widower" in subparagraphs (E),
(F), and (G).
(c) Section 202(q)(5) of such Act is amended-
(1) by inserting "or husband's" after "wife's" wherever it ap-
pears;
(2) by striking out "her" in subparagraph (A)(i) and inserting
in lieu thereof "him or her";
(3) by striking out "her" the second place it appears in sub-
paragraph (A)(ii) and inserting in lieu thereof "the";
(4) by striking out "she" wherever it appears and inserting in
lieu thereof "he or she";
(5) by striking out "her" wherever it appears (except where
paragraphs (2) and (3) of this subsection apply) and inserting in
lieu thereof "his or her';
(6) by striking out "the woman" in subparagraph (B)(ii) and
"a woman" in subparagraph (C) and inserting in lieu thereof
"the individual" and "an individual"; respectively; and
(7) in subparagraph (D)-
(A) by inserting "or widower's " after "widow's
(B) by striking out "husband" wherever it appears and
inserting in lieu thereof "spouse';
(C) by striking out "husband's" wherever it appears and
inserting in lieu thereof "spouse's"; and
(D) by inserting "or father's" after "mother's ".
(d)(1) Section 202(q)(6)(A) of such Act (as amended by section
134(a)(2) of this Act) is further amended by striking out "or hus-
band's" in clause (i) and by inserting "or husband's" after "wife's"
in clause (ii).
(2) Section 202(q)(7) of such Act is amended-
(A) in subparagraph (B), by inserting "or husband's" after
"wife's'; by striking out "she" and inserting in lieu thereof
"such individual"; and by inserting "his or" before "her"; and
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(B) in subparagraph (D), by inserting "or widower's" after
"widow's ".
(e)(1) Section 202(s)(1) of such Act is amended by inserting "(c)(1), "
after "(b)(1), ".
(2) Section 202(s)(2) of such Act (as amended by section 131(c)(1) of
this Act) is further amended by inserting "(c)(4), " after "(b)(3), ".
(3) Section 202(s)(3) of such Act (as amended by section 131(c)(2) of
this Act) is further amended by striking out "So much" and all that
follows down through "the last sentence" and inserting in lieu
thereof "The last sentence".
(f) The third sentence of section 203(b)(1) of such Act (as amended
by section 132(b) of this Act) is further amended by inserting "or fa-
ther's "after "mother's".
(g) Section 203(c) of such Act is amended to read as follows:
"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
Secretary shall determine, shall be made from any payment or pay-
ments 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 and
for more than forty-five hours of which such individual en-
gaged in noncovered remunerative activity outside the United
States;
`(2) in which such individual, if a wife or husband under age
sixty-five entitled to a wife's or husband's insurance benefit, did
not have in his or her care (individually or jointly with his or
her spouse) a child of such spouse entitled to a child's insur-
ance benefit and such wife's or husband's insurance benefit for
such month was not reduced under the provisions of section
202(q);
"(3) in which such individual, if a widow or widower entitled
to a mother's or father's insurance benefit, did not have in his
or her care a child of his or her deceased spouse entitled to a
child's insurance benefit; or
"(4) in which such an individual, if a surviving divorced
mother or father entitled to a mothers or father's insurance
benefit, did not have in his or her care a child of his or her
deceased former spouse who (A) is his or her son, daughter, or
legally adopted child and (B) is entitled to a child's insurance
benefit on the basis of the wages and self-employment income of
such deceased former spouse.
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
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any month in which the widow or surviving divorced wife is enti-
tled and has not attained age 65 (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 age 65 (but only if he became so
entitled prior to attaining age 60). ".
(h) Section 203(d) of such Act is amended by inserting "divorced
husband, " after "husband, " in paragraph (1)(A) (as amended by sec-
tion 132(b)(2) of this Act) and by inserting "or father's" after "moth-
er's"each place it appears in paragraph (2).
(i)(1) Section 205(b) of such Act (as amended by section 301(d)(1) of
this Act) is further amended by inserting "surviving divorced
father, " after "surviving divorced mother, ".
(2) Section 205(c)(1)(C) of such Act (as amended by section 301(d)(2)
of this Act) is further amended by inserting "surviving divorced
father, " after "surviving divorced mother, ".
(j) Section 216(f)(3)(A) of such Act is amended by inserting "(c), "
before "(f)",
(k) Section 216(g)(6)(A) of such Act is amended by inserting "(0,
"
before "(f)".
(1) Section 222(b)(1) of such Act is amended by striking out "or
surviving divorced wife" and inserting in lieu thereof ", surviving
divorced wife, or surviving divorced husband"
(m) Section 222(b)(2) of such Act is amended by inserting "or fa-
ther's" after "mother's" wherever it appears.
(n) Section 222(b)(3) of such Act is amended by inserting "divorced
husband, " after "husband, ".
(o) Section 223(d)(2) of such Act is amended by striking out "or
widower" in subparagraphs (A) and (B) and inserting in lieu thereof
"widower, or surviving divorced husband".
(p) Section 225(a) of such Act is amended by inserting "or surviv-
ing divorced husband" after "widower".
(q)(1) Section 226(e)(3) of such Act is amended to read as follows:
`(3) For purposes of determining entitlement to hospital insurance
benefits under subsection (b), any disabled widow aged 50 or older
who is entitled to mother's insurance benefits (and who would have
been entitled to widow's insurance benefits by reason of disability if
she had filed for such widow's benefits), and any disabled widower
aged 50 or older who is entitled to father's insurance benefits (and
who would have been entitled to widower's insurance benefits by
reason of disability if he had filed for such widower's benefits),
shall, upon application for such hospital insurance benefits be
deemed to have filed for such widow's or widower's insurance bene-
fits. ".
(2) For purposes of determining entitlement to hospital insurance
benefits under section 226(e)(3) of such Act, as amended by para-
graph (1), an individual becoming entitled to such hospital insur-
ance benefits as a result of the amendment made by such paragraph
shall, upon furnishing proof of his or her disability within twelve
months after the month in which this Act is enacted, under such
procedures as the Secretary of Health and Human Services may pre-
scribe, be deemed to have been entitled to the widow's or widower's
benefits referred to in such section 226(e)(3), as so amended, as of the
time such individual would have been entitled to such widow's or
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widower's benefits if he or she had filed a timely application there-
for.
SEC. 310. (a) Except as otherwise specifically provided in this title,
the amendments made by this part apply only with respect to
monthly benefits payable under title II of the Social Security Act for
months after the month in which this Act is enacted.
(b) Nothing in any amendment made by this part shall be con-
strued as affecting the validity of any benefit which was paid, prior
to the effective date of such amendment, as a result of a judicial
determination.
COVERAGE OF EMPLOYEES OF FOREIGN AFFILIATES OF AMERICAN
EMPLOYERS
SEC. 321. (a)(1) So much of subsection (1) of section 3121 of the In-
ternal Revenue Code of 1954 (relating to agreements entered into by
domestic corporations with respect to foreign subsidiaries) as pre-
cedes the second sentence of paragraph (1) thereof is amended to
read as follows:
"(1) AGREEMENTS ENTERED INTO BY AMERICAN EMPLOYERS WITH
RESPECT TO FOREIGN AFFILIATES.-
"(1) AGREEMENT WITH RESPECT TO CERTAIN EMPLOYEES OF
FOREIGN AFFILIATE.-The Secretary shall, at the American em-
ployer's request, enter into an agreement (in such manner and
form as may be prescribed by the Secretary) with any American
employer (as defined in subsection (h)) who desires to have the
insurance system established by title II of the Social Security
Act extended to service performed outside the United States in
the employ of any 1 or more of such employer's foreign affiliates
(as defined in paragraph (8)) by all employees who are citizens
or residents of the United States, except that the agreement
shall not apply to any service performed by, or remuneration
paid to, an employee if such service or remuneration would be
excluded from the term `employment' or `wages; as defined in
this section, had the service been performed in the United
States. "
(2) Paragraph (8) of section 3121(l) of such Code (defining foreign
subsidiary) is amended to read as follows:
"(8) FOREIGN AFFILIATE DEFINED.-For purposes of this sub-
section and section 210(a) of the Social Security Act-
"(A) IN GENERAL.-A foreign affiliate of an American
employer is any foreign entity in which such American em-
ployer has not less than a 10 percent interest.
"(B) DETERMINATION OF 10-PERCENT INTEREST.-For pur-
poses of subparagraph (A), an American employer has a 10-
percent interest in any entity if such employer has such an
interest directly (or through one or more entities)-
"(4) in the case of a corporation, in the voting stock
thereof, and
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"(ii) in the case of any other entity, in the profits
thereof "
(b) The clause (B) of section 210(a) of the Social Security Act (de-
fining employment) which precedes paragraph (1) thereof (as amend-
ed by section 323(a)(2) of this Act) is further amended to read as fol-
lows: "(B) outside the United States by a citizen or resident of the
United States as an employee (i) of an American employer (as de-
fined in subsection (e) of this section), or (ii) of a foreign affiliate (as
defined in section 3121(l)(8) of the Internal Revenue Code of 1954) of
an American employer during any period for which there is in effect
an agreement, entered into pursuant to section 3121(l) of such Code,
with respect to such affiliate; "
(c) Subsection (a) of section 406 of the Internal Revenue Code of
1954 (relating to treatment of certain employees of foreign subsidiar-
ies for pension, etc., purposes) is amended to read as follows:
"(a) TREATMENT AS EMPLOYEES OF AMERICAN EMPLOYER.-FOr
purposes of applying this part with respect to a pension, profit-shar-
ing, or stock bonus plan described in section 401(a), an annuity plan
described in section 403(a), or a bond purchase plan described in sec-
tion 405(a), of an American employer (as defined in section 3121(h)),
an individual who is a citizen or resident of the United States and
who is an employee of a foreign affiliate (as defined in section
3121(l)(8)) of such American employer shall be treated as an employ-
ee of such American employer, if-
"(1) such American employer has entered into an agreement
under section 3121(l) which applies to the foreign affiliate of
which such individual is an employee;
"(2) the plan of such American employer expressly provides
for contributions or benefits for individuals who are citizens or
residents of the United States and who are employees of its for-
eign affiliates to which an agreement entered into by such
American employer under section 3121(l) applies; and
"(3) contributions under a funded plan of deferred compensa-
tion (whether or not a plan described in section 401(a), 403(a), or
405(a)) are not provided by any other person with respect to the
remuneration paid to such individual by the foreign affiliate. "
(d) Paragraph (1) of section 407(a) of such Code (relating to certain
employees of domestic subsidiaries engaged in business outside the
United States) is amended-
(1) by striking out "citizen of the United States" and insert-
ing in lieu thereof "citizen or resident of the United States"
;
and
(2) by striking out "citizens of the United States" and insert-
ing in lieu thereof "citizens or residents of the United States ".
(e)(1) Those provisions of subsection (1) of section 3121 of such
Code which are not amended by subsection (a) of this section are
amended in accordance with the following table:
Strike out (wherever it appears in the And insert:
text or heading):
domestic corporation ................................ American employer
domestic corporations .............................. American employers
subsidiary .................................................. affiliate
subsidiaries ................................................ affiliates
foreign corporation ................................... foreign entity
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Strike out (wherever it appears in the And insert:
text or heading):
foreign corporations ................................. foreign entities
citizens ........................................................ citizens or residents
the word "a" where it appears before an
"domestic"
(2)(A) Section 406 of such Code (other than subsection (a) thereof)
is amended in accordance with the following table:
Strike out (wherever appearing in the And insert:
text):
domestic corporation ................................ American employer
subsidiary .................................................. affiliate
the word "a" where it appears before an
"domestic ".
(B) Paragraph (3) of subsection (c) of such section 406 (as in effect
before the amendment made by subparagraph (A)) is amended by
striking out "another corporation controlled by such domestic corpo-
ration" and inserting in lieu thereof "another entity in which such
American employer has not less than a 10 percent interest (within
the meaning of section 3121(l)(8XB))".
(C)(i) So much of subsection (d) of such section 406 as precedes
paragraph (1) thereof is amended by striking out "another corpora-
tion " and inserting in lieu thereof "another taxpayer"(ii) Paragraph (1) of subsection (d) of such section 406 is amended
by striking out "any other corporation" and inserting in lieu thereof
"any other taxpayer".
(D)(i) The heading of such section 406 is amended to read as fol-
lows:
"SEC. 406. EMPLOYEES OF FOREIGN AFFILIATES COVERED BY SECTION
3121(l) AGREEMENTS."
:
(ii) The table of sections for subpart A of part I of subchapter D of
chapter 1 of such Code is amended by striking out the item relating
to section 406 and inserting in lieu thereof the following:
"Sec. 406. Employees of foreign affiliates covered by section 3121(l)
agreements. "
(3) Clause (A) of the second sentence of section 1402(b) of such
Code (defining self-employment income) is amended by striking out
"employees of foreign subsidiaries of domestic corporations" and in-
serting in lieu thereof "employees of foreign affiliates of American
employers
(4)(A) Subparagraph (C) of section 6413(c)(2) of such Code (relating
to special refunds of FICA taxes in the case of employees of certain
foreign corporations) is amended-
(i) by striking out "FOREIGN CORPORATIONS" in the heading
and inserting in lieu thereof "FOREIGN AFFILIATES" and
(ii) by striking out "domestic corporation" in the text and in-
serting in lieu thereof "American employer"
(B) The heading of paragraph (2) of section 6413(c) of such Code is
amended by striking out "FOREIGN CORPORATIONS" and inserting in
lieu thereof "FOREIGN AFFILIATES".
()(1XA) The amendments made by this section (other than subsec-
tion (d)) shall apply to agreements entered into after the date of the
enactment of this Act.
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(B) At the election of any American employer, the amendments
made by this section (other than subsection (d)) shall also apply to
any agreement entered into on or before the date of the enactment of
this Act. Any such election shall be made at such time and in such
manner as the Secretary may by regulations prescribe.
(2)(A) The amendments made by subsection (d) shall apply to
plans established after the date of the enactment of this Act.
(B) At the election of any domestic parent corporation the amend-
ments made by subsection (d) shall also apply to any plan estab-
lished on or before the date of the enactment of this Act. Any such
election shall be made at such time and in such manner as the Sec-
retary may by regulations prescribe.
EXTENSION OF COVERAGE BY INTERNATIONAL SOCIAL SECURITY
AGREEMENT
SEC. 322. (a)(1) Section 210(a) of the Social Security Act is amend-
ed, in the matter preceding paragraph (1)-
(A) by striking out "either" before "(A)", and
(B) by inserting before except" the following: ", or (C) if it
is service, regardless of where or by whom performed, which is
designated as employment or recognized as equivalent to em-
ployment under an agreement entered into under section 233".
(2) Section 3121(b) of the Internal Revenue Code of 1954 is amend-
ed, in the matter preceding paragraph (1)-
(A) by striking out "either" before "(A)", and
(B) by inserting before "; except" the following: ", or (C) if it
is service, regardless of where or by whom performed, which is
designated as employment or recognized as equivalent to em-
ployment under an agreement entered into under section 233 of
the Social Security Act".
(b)(1) Section 211(b) of the Social Security Act is amended by in-
serting after "non-resident alien individual" the following: ", except
as provided by an agreement under section 233".
(2) The first sentence of section 1402(b) of the Internal Revenue
Code of 1954 is amended by inserting after "nonresident alien indi-
vidual" the following: ", except as provided by an agreement under
section 233 of the Social Security Act".
(c) The amendments made by this section shall be effective for
taxable years beginning on or after the date of the enactment of this
Act.
TREATMENT OF CERTAIN SERVICE PERFORMED OUTSIDE THE UNITED
STATES
SEC. 323. (a)(1) Subsection (b) of section 3121 of the Internal Reve-
nue Code of 1954 (defining employment) is amended by striking out
"a citizen of the United States" in the matter preceding paragraph
(1) thereof and inserting in lieu thereof "a citizen or resident of the
United States ".
(2) Subsection (a) of section 210 of the Social Security Act is
amended by striking out "a citizen of the United States" in the
matter preceding paragraph (1) thereof and inserting in lieu thereof
"a citizen or resident of the United States"
.
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(b)(1) Paragraph (11) of section 1402(a) of the Internal Revenue
Code of 1954 (defining net earnings from self-employment) is amend-
ed by striking out "in the case of an individual described in section
911(d)(1)(B), ' .
(2)(A) Paragraph (10) of section 211(a) of the Social Security Act is
amended to read as follows:
"(10) the exclusion from gross income provided by section
911(a)(1) of the Internal Revenue Code of 1954 shall not apply;
and".
(B) Effective with respect to taxable years beginning after Decem-
ber 31, 1981, and before January 1, 1984, paragraph (10) of section
211(a) ?f, such Act is amended to read as follows:
10) in the case of an individual described in section
911(d)(1)(B) of the Internal Revenue Code of 1954, the exclusion
from gross income provided by section 911(a)(1) of such Code
shall not apply; and".
(c)(1) The amendments made by subsection (a) shall apply to remu-
neration paid after December 31, 1983.
(2) Except as provided in subsection (b)(2)(B), the amendments
made by subsection (b) shall apply to taxable years beginning after
December 31, 1983.
AMOUNTS RECEIVED UNDER CERTAIN DEFERRED COMPENSATION AND
SALARY REDUCTION ARRANGEMENTS TREATED AS WAGES FOR FICA
TAXES
SEC. 324. (a)(1) Section 3121 of the Internal Revenue Code of 1954
(relating to definitions) is amended by adding at the end thereof the
following new subsection:
"(v) TREATMENT OF CERTAIN DEFERRED COMPENSATION AND
SALARY REDUCTION ARRANGEMENTS.-
"(1) CERTAIN EMPLOYER CONTRIBUTIONS TREATED AS WAGES.-
Nothing in any paragraph of subsection (a) (other than para-
graph (1)) shall exclude from the term `wages'-
`(A) any employer contribution under a qualified cash or
deferred arrangement (as defined in section 401(k)) to the
extent not included in gross income by reason of section
402(a)(8), or
"(B) any amount treated as an employer contribution
under section 414(h)(2).
"(2) TREATMENT OF CERTAIN NONQUALIFIED DEFERRED COM-
PENSATION PLANS. -
"(A) IN GENERAL.-Any amount deferred under a nonqua-
lified deferred compensation plan shall be taken into ac-
count for purposes of this chapter as of the later of-
"(i) when the services are performed, or
"(ii) when there is no substantial risk of forfeiture of
the rights to such amount.
"(B) TAXED ONLY ONCE.-Any amount taken into account
as wages by reason of subparagraph (A) (and the income at-
tributable thereto) shall not thereafter be treated as wages
for purposes of this chapter.
"(C) NONQUALIFIED DEFERRED COMPENSATION PLAN.-For
purposes of this paragraph, the term `nonqualified deferred
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compensation plan' means any plan or other arrangement
for deferral of compensation other than a plan described in
subsection (a)(5).
"(3) EXEMPT GOVERNMENTAL DEFERRED COMPENSATION
PLAN.-For purposes of subsection (a)(5), the term `exempt gov-
ernmental deferred compensation plan' means any plan provid-
ing for deferral of compensation established and maintained
for its employees by the United States, by a State or political
subdivision thereof, or by an agency or instrumentality of any of
the foregoing. Such term shall not include-
"(A) any plan to which section 83, 402(b), 403(c), 457(a), or
457(e)(1) applies, and
"(B) any annuity contract described in section 403(b). "
(2) Paragraph (5) of section 3121(a) of such Code (defining wages)
is amended-
(A) by striking out "or" at the end of subparagraph (C),
(B) by striking out the semicolon at the end of subparagraph
(D) and inserting in lieu thereof a comma, and
(C) by adding at the end thereof the following new subpara-
graphs:
"(E) under or to an annuity contract described in section
403(b), other than a payment for the purchase of such contract
which is made by reason of a salary reduction agreement
(whether evidenced by a written instrument or otherwise),
"(F) under or to an exempt governmental deferred compensa-
tion plan (as defined in subsection (v)(3)), or
"(G) to supplement pension benefits under a plan or trust de-
scribed in any of the foregoing provisions of this paragraph to
take into account some portion or all of the increase in the cost
of living (as determined by the Secretary of Labor) since retire-
ment but only if such supplemental payments are under a plan
which is treated as a welfare plan under section 3(2)(B)(ii) of
the Employee Retirement Income Security Act of 1974; ".
(3) Subsection (a) of section 3121 of such Code (defining wages) is
amended-
(A) in paragraph (2), by striking out subparagraph (A) and
redesignating subparagraphs (B), (C), and (D) as subparagraphs
(A), (B), and (C), respectively,
(B) by striking out paragraphs (3) and (9),
(C) in paragraph (13)(A)-
(i) by inserting "or" after "death, ", and
(ii) by striking out "or (iii) retirement after attaining an
age specified in the plan referred to in subparagraph (B) or
in a pension plan of the employer, ", and
(D) by striking out "subparagraph (B)" in the last sentence
thereof and inserting in lieu thereof "subparagraph (A)".
(b)(1) Section 3306 of the Internal Revenue Code of 1954 (relating
to definitions) is amended by adding at the end thereof the follow-
ing new subsection:
"(r) TREATMENT OF CERTAIN DEFERRED COMPENSATION AND
SALARY REDUCTION ARRANGEMENTS.-
"(1) CERTAIN EMPLOYER CONTRIBUTIONS TREATED AS WAGES.-
Nothing in any paragraph of subsection (b) (other than para-
graph (1)) shall exclude from the term 'wages'-
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"(A) any employer contribution under a qualified cash or
deferred arrangement (as defined in section 401(k)) to the
extent not included in gross income by reason of section
402(a)(8), or
"(B) any amount treated as an employer contribution
under section 414(h)(2).
"(2) TREATMENT OF CERTAIN NONQUALIFIED DEFERRED COM-
PENSATION PLANS. -
"(A) IN GENERAL. Any amount deferred under a
nonqualified deferred com ensation plan shall be taken
into account for purposes of this chapter as of the later of-
"(4) when the services are performed, or
"(ii) when there is no substantial risk of forefeiture
of the rights to such amount.
"(B) TAxED ONLY ONCE.-Any amount taken into account
as wages by reason of subparagraph (A) (and the income at-
tributable thereto) shall not thereafter be treated as wages
for purposes of this chapter.
"(C) NONQUALIFIED DEFERRED COMPENSATION PLAN.-For
purposes of this paragraph, the term 'nonqualified deferred
compensation plan' means any plan or other arrangement
for deferral of compensation other than a plan described in
subsection (b)(5). "
(2) Paragraph (5) of section 3306(b) of such Code (defining wages)
is amended-
(A) by striking out "or" at the end of subparagraph (C),
(B) by striking out the semicolon at the end of subparagraph
(D) and inserting in lieu thereof a comma, and
(C) by adding at the end thereof the following new subpara-
graphs:
`(E) under or to an annuity contract described in section
403(b), other than a payment for the purchase of such contract
which is made by reason of a salary reduction agreement
(whether evidenced by a written instrument or otherwise),
"(F) under or to an exempt governmental deferred compensa-
tion plan (as defined in section 3121(v)(3)), or
"(G) to supplement pension benefits under a plan or trust de-
scribed in any of the foregoing provisions of this paragraph to
take into account some portion or all of the increase in the cost
of living (as determined by the Secretary of Labor) since retire-
ment but only if such supplemental payments are under a plan
which is treated as a welfare plan under section 3(2)(BXii) of
the Employee Retirement Income Security Act of 1974; ".
(3) Subsection (b) of section 3306 of such Code (defining wages) is
amended-
(A) in paragraph (2), by striking out subparagraph (A) and
redesignating subparagraphs (B), (C), and (D) as subparagraphs
(A), (B), and (C), respectively,
(B) by striking out paragraphs (3) and (8), and (C) in para-
graph (10)(A)-
(i) by inserting "or" after "death,"; and
(ii) by striking out "or (iii) retirement after attaining an
age specified in the Ian referred to in subparagraph (B) or
in a pension plan of the employer,
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(4)(A Subparagraph (A) of section 3306(b)(2) of such Code, as redes-
ignated by paragraph (3)(A), is amended to read as follows:
"(A) sickness or accident disability (but, in the case of
payments made to an employee or any of his dependents,
this subparagraph shall exclude from the term `wages' only
payments which are received under a workman's compensa-
tion law), or".
(B) Subsection (b) of section 3306 of such Code (defining wages) is
amended by adding at the end thereof the following new flush sen-
tence:
"Except as otherwise provided in regulations prescribed by the Sec-
retary, any third party which makes a payment included in wages
solely by reason of the parenthetical matter contained in subpara-
graph (A) of paragraph (2) shall be treated for purposes of this chap-
ter and chapter 22 as the employer with respect to such wages ".
(C) Rules similar to the rules of subsections (d) and (e) of section 3
of the Act entitled "An Act to amend the Omnibus Reconciliation
Act of 1981 to restore minimum benefits under the Social Security
Act" (Public Law 97-123), approved December 29, 1981, shall apply
in the administration of section 3306(b)(2)(A) of such Code (as
amended by subparagraph (A)).
(c)(1) Section 209 of the Social Security Act is amended by adding
at the end thereof (as amended by this Act) the following new para-
graphs:
"Nothing in any of the foregoing provisions of this section (other
than subsection (a)) shall exclude from the term `wages'
"(1) any employer contribution under a qualified cash or de-
ferred arrangement (as defined in section 401(k) of the Internal
Revenue Code of 1954) to the extent not included in gross
income by reason of section 402(a)(8) of such Code, or
"(2) any amount which is treated as an employer contribution
under section 414(h)(2) of such Code.
"Any amount deferred under a nonqualified deferred compensa-
tion plan (within the meaning of section 3121(v)(2)(C) of the Internal
Revenue Code of 1954) shall be taken into account for purposes of
this title as of the later of when the services are performed, or when
there is no substantial risk of forfeiture of the rights to such
amount. Any amount taken into acount as wages by reason of the
preceding sentence (and the income attributable thereto) shall not
thereafter be treated as wages for purposes of this title. "
(2) Subsection (e) of section 209 of such Act is amended by adding
before the semicolon at the end thereof the following: ", or (5) under
or to an annuity contract described in section 403(b) of the Internal
Revenue Code of 1954, other than a payment for the purchase of
such contract which is made by reason of a salary reduction agree-
ment (whether evidence by a written instrument or otherwise), or (6)
under or to an exempt governmental deferred compensation plan (as
defined in section 3121(v)(3) of such Code), or (7) to supplement pen-
sion benefits under a plan or trust described in any of the foregoing
provisions of this subsection to take into account some portion or all
of the increase in the cost of living (as determined by the Secretary
of Labor) since retirement but only if such supplemental payments
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are under a plan which is treated as a welfare plan under section
3(2)(B)(ii) of the Employee Retirement Income Security Act of 1974; ".
(3) Section 209 of such Act is amended-
(A) in subsection (b), by striking out paragraph (1) and rede-
signing paragraphs (2), (3), and (4) as paragraphs (1), (2), and
(3), respectively,
(B) by striking out subsections (c) and (i), and
(C) in subsection (m)(1)-
(i) by inserting "or" after "death, ", and
(ii) by striking out "or (C) retirement after attaining an
age specified in the plan referred to in paragraph (2) or in a
pension plan of the employer, ".
(4) Section 203(f)(5)(C) of the Social Security Act is amended by
adding at the end thereof the following new sentence: "The term
`wages' does not include-
"(i) the amount of any payment made to, or on behalf of,
an employee or any of his dependents (including any
amount paid by an employer for insurance or annuities, or
into a fund, to provide for any such payment) on account of
retirement, or
"(ii) any payment or series of payments by an employer to
an employee or any of his dependents upon or after the ter-
mination of the employee's employment relationship be-
cause of retirement after attaining an age specified in a
plan referred to in section 209(m)(2) or in a pension plan of
the employer. "
(d)(1) Except as otherwise provided in this subsection, the amend-
ments made by this section shall apply to remuneration paid after
December 31, 1983.
(2) Except as otherwise provided in this subsection, the amend-
ments made by subsection (b) shall apply to remuneration paid after
December 31, 1984.
(3) The amendments made by this section shall not apply to em-
ployer contributions made during 1984 and attributable to services
performed during 1983 under a qualified cash or deferred arrange-
ment (as defined in section 401(k) of the Internal Revenue Code of
1954) if, under the terms of such arrangement as in effect on March
24,1983-
(A) the employee makes an election with respect to such con-
tribution before January 1, 1984, and
(B) the employer identifies the amount of such contribution
before January 1, 1984.
In the case of the amendments made by subsection (b), the preceding
sentence shall be applied by substituting "1985" for "1984" each
place it appears and by substituting "during 1984" for "during
1983"
(4) In the case of an ageeement in existence on March 24, 1983,
between a nonqualified deferred compensation plan (as defined in
section 3121(v)(2XC) of the Internal Revenue Code of 1954, as added
by this section) and an individual-
(A) the amendments made by this section (other than subsec-
tion (b)) shall apply with respect to services performed by such
individual after December 31, 1983, and
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(B) the amendments made by subsection (b) shall apply with
respect to services performed by such individual after December
31, 1984.
The preceding sentence shall not apply in the case of a plan to
which section 457(a) of such Code applies.
EFFECT OF CHANGES IN NAMES OF STATE AND LOCAL EMPLOYEE
GROUPS IN UTAH
SEC. 326. (a) Section 218(o) of the Social Security Act is amended
by adding at the end thereof the following new sentence: "Coverage
provided for in this subsection shall not be affected by a subsequent
change in the name of a group. ".
(b) The amendment made by subsection (a) shall apply with re-
spect to name changes made before, on, or after the date of the en-
actment of this section.
SEC. 327. (a) Section 233(e)(2) of the Social Security Act is amend-
ed by striking out "during which each House of the Congress has
been in session on each of 90 days" and inserting in lieu thereof
"during which at least one House of the Congress has been in ses-
sion on each of 60 days".
(b) The amendment made by subsection (a) shall be effective on
the date of the enactment of this Act.
CODIFICATION OF ROWAN DECISION WITH RESPECT TO MEALS AND
LODGING
SEC. 328. (a)(1) Subsection (a) section 3121 of the Internal Revenue
Code of 1954 (defining wages) is amended by striking out "or" at the
end of paragraph (17), by striking out the period at the end of para-
graph (18) and inserting in lieu thereof `, or'; and by inserting after
paragraph (18) the following new paragraph:
"(19) the value of any meals or lodging furnished by or on
behalf of the employer if at the time of such furnishing it is
reasonable to believe that the employee will be able to exclude
such items from income under section 119. ".
(2) Section 209 of the Social Security Act is amended by striking
out "or" at the end of subsection (p), by striking out the period at
the end of subsection (q) and inserting in lieu thereof `; or"; and by
inserting after subsection (q) the following new subsection:
"(r) The value of any meals or lodging furnished by or on behalf
of the employer if at the time of such furnishing it is reasonable to
believe that the employee will be able to exclude such items from
income under section 119 of the Internal Revenue Code of 1954. ".
(b)(1) Subsection (a) of section 3121 of such Code is amended by
inserting after paragraph (19) (as added by subsection (a) of this sec-
tion) the following new sentence: "Nothing in the regulations pre-
scribed for purposes of chapter 24 (relating to income tax withhold-
ing) which provides an exclusion from `wages' as used in such chap-
ter shall be construed to require a similar exclusion from `wages' in
the regulations prescribed for purposes of this chapter. ".
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(2) Section 209 of the Social Security Act is amended by inserting
immediately after subsection (r) (as added by subsection (a) of this
section) the following new sentence: "Nothing in the regulations pre-
scribed for purposes of chapter 24 of the Internal Revenue Code of
1954 (relating to income tax withholding) which provides an exclu-
sion from `wages' as used in such chapter shall be construed to re-
quire a similar exclusion from `wages' in the regulations prescribed
for purposes of this title. ".
(c) Subsection (b) of section 3306 of the Internal Revenue Code of
1954 (defining wages) is amended-
(1) by striking out "or" at the end of paragraph (12),
(2) by striking out the period at the end of paragraph (13) and
inserting in lieu thereof `, or';
(3) by adding immediately after paragraph (13) the following
new paragraph:
"(14) the value of any meals or lodging furnished by or on
behalf of the employer if at the time of such furnishing it is
reasonable to believe that the employee will be able to exclude
such items from income under section 119."; and
(4) by adding at the end thereof the following new flush sen-
tence:
"Nothing in the regulations prescribed for purposes of chapter 24
(relating to income tax withholding) which provides an exclusion
from `wages' as used in such chapter shall be construed to require a
similar exclusion from `wages' in the regulations prescribed for pur-
poses of this chapter. ".
(d)(1) Except as provided in paragraph (2), the amendments made
by subsections (a) and (b) shall apply to remuneration paid after De-
cember 31, 1983.
(2) The amendments made by subsection (c) shall apply to remu-
neration paid after December 31, 1984.
TREATMENT OF CONTRIBUTIONS UNDER SIMPLIFIED EMPLOYEE
PENSIONS
SEC. 329. (a) Subparagraph (D) of section 3121(a)(5) of the Internal
Revenue Code of 1954 (defining wages) is amended by striking out
"section 219" and inserting in lieu thereof "section 219(b)(2)".
(b) Subsection (e) of section 209 of the Social Security Act, as
amended by this Act, is amended by striking out the semicolon at
the end thereof and inserting in lieu thereof the following: ", or (8)
under a simplified employee pension (as defined in section 408(k) of
the Internal Revenue Code of 1954) if, at the time of the payment, it
is reasonable to believe that the employee will be entitled to a de-
duction under section 219(b)(2) of such Code for such payment; ".
(c) Subparagraph (D) of section 3306(b)(5) of the Internal Revenue
Code of 1954 is amended by striking out "section 219" and inserting
in lieu thereof "section 219(b)(2)".
(d)(1) Except as provided in paragraph (2), the amendments made
by this section shall apply to remuneration paid after December 31,
1983.
(2) The amendments made by subsection (c) shall apply to remu-
neration paid after December 31, 1984.
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68
PART C-OTHER AMENDMENTS
TECHNICAL AND CONFORMING AMENDMENTS TO MAXIMUM FAMILY
BENEFIT PROVISIONS
SEC. 331. (a)(1) Section 203(a)(3)(A) of the Social Security Act is
amended by striking out clause (ii) and inserting in lieu thereof the
following:
"(ii) an amount (I) initially equal to the product of 1.75 and
the primary insurance amount that would be computed under
section 215(a)(1), for January of the year determined for pur-
poses of this clause under the following two sentences, with re-
spect to average indexed monthly earnings equal to one-twelfth
of the contribution and benefit base determined for that year
under section 230, and (II) thereafter increased in accordance
with the provisions of section 215(i)(2)(A)(ii).
The year established for purposes of clause (ii) shall be 1983 or, if it
occurs later with respect to any individual, the year in which oc-
curred the month that the application of the reduction provisions
contained in this subparagraph began with respect to benefits pay-
able on the basis of the wages and self-employment income of the
insured individual. If for any month subsequent to the first month
for which clause (ii) applies (with respect to benefits payable on the
basis of the wages and self-employment income of the insured indi-
vidual) the reduction under this subparagraph ceases to apply, then
the year determined under the preceding sentence shall be redeter-
mined (for purposes of any subsequent application of this subpara-
graph with respect to benefits payable on the basis of such wages
and self-employment income) as though this subparagraph had not
been previously applicable. ".
(2) Section 203(a)(7) of such Act is amended by striking out every-
thing that follows "shall be reduced to an amount equal to" and
inserting in lieu thereof "the amount determined in accordance
with the provisions of paragraph (3)(A)(ii) of this subsection, except
that for this purpose the references to subparagraph (A) in the last
two sentences of paragraph (3)(A) shall be deemed to be references to
paragraph (7).'.
(b) Clause (i) in the last sentence of section 203(b)(1) of such Act
(as amended by section 132(b) of this Act) is further amended by
striking out `penultimate sentence" and inserting in lieu thereof
"first sentence of paragraph (4)".
(c) The amendments made by subsection (a) shall be effective with
respect to payments made for months after December 1983.
RELAXATION OF INSURED STATUS REQUIREMENTS FOR CERTAIN
WORKERS PREVIOUSLY ENTITLED TO A PERIOD OF DISABILITY
SEC. 332. (a) Section 216(i)(3) of the Social Security Act is amend-
ed-
(1) by striking out the semicolon at the end of clause (ii) of
subparagraph (B) and inserting in lieu thereof `, or "I- and
(2) by inserting after clause (ii) of such subparagraph the fol-
lowing new clause:
"(iii) in the case of an individual (not otherwise insured
under clause (i)) who, by reason of clause (ii), had a prior period
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of disability that began during a period before the quarter in
which he or she attained age 31, not less than one-half of the
quarters beginning after such individual attained age 21 and
ending with such quarter are quarters of coverage, or (if the
number of quarters in such period is less than 12) not less than
6 of the quarters in the 12-quarter period ending with such
quarter are quarters of coverage; ".
(b) Section 223(c)(1)(B) of such Act is amended-
(1) by striking out the semicolon at the end of clause (ii) and
inserting in lieu thereof `, or"; and
(2) by inserting after clause (ii) the following new clause:
"(iii) in the case of an individual (not otherwise insured
under clause (i)) who, by reason of section 216(i)(3)(B)(ii),
had a prior period of disability that began during a period
before the quarter in which he or she attained age 31, not
less than one-half of the quarters beginning after such indi-
vidual attained age 21 and ending with the quarter in
which such month occurs are quarters of coverage, or (if the
number of quarters in such period is less than 12) not less
than 6 of the quarters in the 12-quarter period ending with
such quarter are quarters of coverage,-".
(c) The amendments made by this section shall be effective with
respect to applications for disability insurance benefits under sec-
tion 223 of the Social Security Act, and for disability determina-
tions under section 216(i) of such Act, filed after the date of the en-
actment of this Act, except that no monthly benefits under title II of
the Social Security Act shall be payable or increased by reason of
the amendments made by this section for months before the month
following the month of enactment of this Act.
PROTECTION OF BENEFITS OF ILLEGITIMATE CHILDREN OF DISABLED
BENEFICIARIES
SEC. 333. (a) The last sentence of section 216(h)(3) of the Social Se-
curity Act is amended by striking out "subparagraph (A)(i)" and in-
serting in lieu thereof "subparagraphs (A)(i) and (B)(i)".
(b) The amendment made by subsection (a) shall be effective on
the date of the enactment of this Act.
ONE-MONTH RETROACTIVITY OF WIDOW'S AND WIDOWER'S INSURANCE
BENEFITS
SEC. 334. (a) Section 202(j)(4)(B) of the Social Security Act is
amended-
(1) by redesignating clauses (iii) and (iv) as clauses (iv) and
(v), respectively; and
(2) by adding after clause (ii) the following new clause:
"(iii) Subparagraph (A) does not apply to a benefit under subsec-
tion (e) or (f) for the month immediately preceding the month of ap-
plication, if the insured individual died in that preceding month. ".
(b) The amendments made by subsection (a) shall apply with re-
spect to survivors whose applications for monthly benefits are filed
after the second month following the month in which this Act is
enacted.
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SEC. 335. (a) Section 207 of the Social Security Act is amended-
(1) by inserting "(a)" before "The right"; and
(2) by adding at the end thereof the following new subsection:
"(b) No other provision of law, enacted before, on, or after the date
of the enactment of this section, may be construed to limit, super-
sede, or otherwise modify the provisions of this section except to the
extent that it does so by express reference to this section. ".
(b)(1) Section 459(a) of such Act is amended by inserting "(includ-
ing section 207)" after "any other provision of law. "
(2)(A) Section 86(a) of the Internal Revenue Code of 1954 (as
added by section 121(a) of this Act) is amended by inserting "(not-
withstanding section 207 of the Social Security Act)" before "in-
cludes" :
(B) Section 871(a)(3)(A) of such Code (as added by section 121(c)(1)
of this Act) is amended by inserting "(notwithstanding section 207
of the Social Security Act)" after "income" :
(c) The amendments made by subsection (a) shall apply only with
respect to benefits payable or rights existing under the Social Secu-
rity Act on or after the date of the enactment of this Act.
USE OF DEATH CERTIFICATES TO PREVENT ERRONEOUS BENEFIT
PAYMENTS TO DECEASED INDIVIDUALS
SEC. 336. Section 205 of the Social Security Act is amended by
adding at the end thereof the following new subsection:
"USE OF DEATH CERTIFICATES TO CORRECT PROGRAM INFORMATION
"(r)(1) The Secretary shall undertake to establish a program under
which-
"(A) States (or political subdivisions thereof) voluntarily con-
tract with the Secretary to furnish the Secretary periodically
with information (in a form established by the Secretary in con-
sultation with the States) concerning individuals with respect
to whom death certificates (or equivalent documents main-
tained by the States or subdivisions) have been officially filed
with them;
"(B) There will be (1) a comparison of such information on
such individuals with information on such individuals in the
records being used in the administration of this Act, (2) valida-
tion of the results of such comparisons, and (3) corrections in
such records to accurately reflect the status of such individual.
`(2) Each State (or political subdivision thereof) which furnishes
the Secretary with information on records of deaths in the State or
subdivision under this subsection may be paid by the Secretary from
amounts available for administration of this Act the reasonable costs
(established by the Secretary in consultation with the States) for
transcribing and transmitting such information to the Secretary.
"(3) In the case of individuals with respect to whom federally
funded benefits are provided by (or through) a Federal or State
agency other than under this Act, the Secretary shall to the extent
feasible provide such information through a cooperative arrange-
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ment with such agency, for ensuring proper payment of those bene-
fits with respect to such individuals if-
"(A) under such arrangement the agency provides reimburse-
ment to the Secretary for the reasonable cost of carrying out
such arrangement, and
"(B) such arrangement does not conflict with the duties of the
Secretary under paragraph (1).
"(4) The Secretary may enter into similar agreements with States
to provide information for their use in programs wholly funded by
the States if the requirements of (r)(3XA) and (r)(3XB) are met.
"(5) The Secretary may use or provide for the use of such records
as may be corrected under this section, subject to such safeguards as
the Secretary determines are necessary or appropriate to protect the
information from unauthorized use or disclosure, for statistical and
research activities conducted by Federal and State agencies;
"(6) Information furnished to the Secretary under this subsection
may not be used for any purpose other than the purpose described in
this subsection and is exempt from disclosure under section 552 of
title 5, United States Code, and from his requirements of section
552a of such title.
"(7) The Secretary shall include information on the status of the
program established under this section and impediments to the ef-
fective implementation of the program in the 1984 report required
under section 704 of the Act. ".
SEC. 337. (a) Subsections (b)(4XA), (c)(2XA), (f)(2)(A), and (g)(4XA) of
section 202 of the Social Security Act, and paragraph (7)(A) of sec-
tion 202(e) of such Act (as redesignated by section 131(a)(3)(A) of this
Act), are each amended-
(1) by striking out "by an amount equal to the amount of any
monthly periodic benefit" and inserting in lieu thereof "by an
amount equal to two-thirds of the amount of any monthly peri-
odic benefit" and
(2) by adding at the end thereof the following new sentence:
"The amount of the reduction in any benefit under this subpar-
agraph, if not a multiple of $0.10, shall be rounded to the next
higher multiple of $0.10. ".
(b) The amendments made by subsection (a) of this section shall
apply only with respect to monthly insurance benefits payable under
title II of the Social Security Act to individuals who initially
become eligible (as defined in section 334 of Public Law 95-216) for
monthly periodic benefits (within the meaning of the provisions
amended by subsection (a)) for months after June 1983.
STUDY CONCERNING THE ESTABLISHMENT OF THE SOCIAL SECURITY
ADMINISTRATION AS AN INDEPENDENT AGENCY
SEC. 338. (a) There is hereby established, under the authority of
the Committee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate, a joint study panel to
be known as the Joint Study Panel on the Social Security Adminis-
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tration (hereafter in this section referred to as the "Panel"). The
duties of the Panel shall be to conduct the study provided for in
subsection (c).
(b)(1) The Panel shall be composed of 3 members, appointed joint-
ly by the chairmen of the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the
Senate and such chairmen shall jointly select one member of the
Panel to serve as chairman of the Panel. Members of the Panel
shall be chosen, on the basis of their integrity, impartiality, and
good judgment, from individuals who, as a result of their training,
experience, and attainments, are widely recognized by professionals
in the fields of government administration, social insurance, and
labor relations as experts in those fields.
(2) Vacancies in the membership of the Panel shall not affect the
power of the remaining members to perform the duties of the Panel
and shall be filled in the same manner in which the original ap-
pointment was made.
(3) Each member of the Panel not otherwise in the employ of the
United States Government shall receive the daily equivalent of the
annual rate of basic pay payable for level V of the Executive Sched-
ule under section 5316 of title 5, United States Code, for each day
during which such member is actually engaged in the performance
of the duties of the Panel. Each member of the Panel shall be al-
lowed travel expenses in the same manner as any individual em-
ployed intermittently by the Federal Government is allowed travel
expenses under section 5703 of title 5, United States Code.
(4) By agreement between the chairmen of the Committee on Ways
and Means of the House of Representatives and the Committee on
Finance of the Senate, such Committees shall provide the Panel, on
a reimbursable basis, office space, clerical personnel, and such sup-
plies and equipment as may be necessary for the Panel to carry out
its duties under this section. Subject to such limitations as the
chairmen of such Committees may jointly prescribe, the Panel may
appoint such additional personnel as the Panel considers necessary
and fix the compensation of such personnel as it considers appropri-
ate at an annual rate which does not exceed the rate of basic pay
then payable for GS-18 of the General Schedule under section 5332
of title 5, United States Code, and may procure by contract the tem-
porary or intermittent services of clerical personnel and experts or
consultants, or organizations thereof.
(5) There are hereby authorized to be appropriated to the Panel,
from amounts in the general fund of the Treasury not otherwise ap-
propriated, such sums as are necessary to carry out the purposes of
this section.
(c)(1) The Panel shall undertake, as soon as possible after the date
of the enactment of this Act, a thorough study with respect to the
implementation of removing the Social Security Administration
from the Department of Health and Human Services and establish-
ing it as an independent agency in the executive branch with its
own independent administrative structure, including the possibility
of such a structure headed by a board appointed by the President,
by and with the advice and consent of the Senate.
(2) The Panel in its study under paragraph (1) shall address, ana-
lyze, and report specifically on the following matters:
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(A) the manner in which the transition to an independent
agency would be conducted;
(B) the authorities which would have to be transferred or
amended in such a transition;
(C) any program or programs which would be included within
the jurisdiction of the new agency;
(D) the legal and other relationships of the Social Security
Administration with other organizations which would be re-
quired as a result of establishing the Social Security Adminis-
tration as an independent agency; and
(E) any other details which may be necessary for the develop-
ment of appropriate legislation to establish the Social Security
Administration as an independent agency.
(d) The Panel shall submit to the Committee on Ways and Means
of the House of Representatives and the Committee on Finance of
the Senate, not later than April 1, 1984, a report of the findings of
the study conducted under subsection (c), together with any recom-
mendations the Panel considers appropriate. The Panel and all au-
thority granted in this section shall expire thirty days after the date
of the filing of its report under this section.
SEC. 339. (a) Section 202 of the Social Security Act is amended by
adding at the end thereof the following new subsection:
(x)(1) Notwithstanding any other provision of this title, no month-
ly benefits shall be paid under this section, or under section 223 to
any individual for any month during which such individual is con-
fined in a jail, prison, or other penal institution or correctional fa-
cility, pursuant to his conviction of an offense which constituted a
felony under applicable law, unless such individual is actively and
satisfactorily participating in a rehabilitation program which has
been spefically approved for such individual by a court of law and,
as determined by the Secretary, is expected to result in such individ-
ual being able to engage in substantial gainful activity upon release
and within a reasonable time.
(2) Benefits which would be payable to any individual (other than
a confined individual to whom benefits are not payable by reason of
paragraph (1)) under this title on the basis of the wages and self-
employment income of such a confined individual but for the provi-
sions of paragraph (1), shall be payable as though such confined in-
dividual were receiving such benefits under this section.
(3) Notwithstanding the provisions of section 552a of title 5,
United States Code, or any other provision of Federal or State law,
any agency of the United States Government or of any State (or po-
litical subdivision thereof) shall make available to the Secretary,
upon written request, the name and social security account number
of any individual who is confined in a jail, prison, or other penal
institution or correctional facility under the jurisdiction of such
agency, pursuant to his conviction of an offense which constituted a
felony under applicable law, which the Secretary may require to
carry out the provisions of this subsection.
(b) Section 223 of such Act is amended by striking out subsection
(f).
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(c) The amendments made by subsections (a) and (b) shall apply
with respect to monthly benefits payable for months beginning on or
after the date of enactment of this Act.
REQUIREMENT OF PREVIOUS UNITED STATES RESIDENCY FOR ALIEN
DEPENDENTS AND SURVIVORS LIVING OUTSIDE THE UNITED STATES
SEC. 340. (a) Section 202(t) of the Social Security Act is amend-
ed-
(1) in the heading, by adding after "United States" the fol-
lowing: `; Residency Requirements for Dependents and Survi-
vorsand
(2) by adding at the end thereof the following new paragraph:
"(11)(A) Paragraph (2) and subparagraphs (A), (B), (C), and (E) of
paragraph (4) shall apply with respect to an individual's monthly
benefits under subsection (b), (c), (d), (e), (f), (g), or (h) only if such
individual meets the residency requirements of this paragraph with
respect to those benefits.
"(B) An individual entitled to benefits under subsection (b), (c), (e),
(f), or (g) meets the residency requirements of this paragraph with
respect to those benefits only if such individual has resided in the
United States, and while so residing bore a spousal relationship to
the person on whose wages and self-employment income such entitle-
ment is based, for a total period of not less than 5 years. For pur-
poses of this subparagraph, a period of time for which an individu-
al bears a spousal relationship to another person consists of a period
throughout which the individual has been, with respect to such
other person, a wife, a husband, a widow, a widower, a divorced
wife, a divorced husband, a surviving divorced wife, a surviving di-
vorced husband, a surviving divorced mother, a surviving divorced
father, or (as applicable in the course of such period) any two or
more of the foregoing.
"(C) An individual entitled to benefits under subsection (d) meets
the residency requirements of this paragraph with respect to those
benefits only if-
"(i)(I) such individual has resided in the United States (as
the child of the person on whose wages and self-employment
income such entitlement is based) for a total period of not less
than 5 years, or
"(II) the person on whose wages and self-employment income
such entitlement is based, and the individual's other parent
(within the meaning of subsection (h)(3)), if any, have each re-
sided in the United States for a total period of not less than 5
years (or died while residing in the United States), and
"(ii) in the case of an individual entitled to such benefits as
an adopted child, such individual was adopted within the
United States by the person on whose wages and self-employ-
ment income such entitlement is based, and has lived in the
United States with such person and received at least one-half of
his or her support from such person for a period (beginning
before such individual attained age 18) consisting of-
"(I) the year immediately before the month in which such
person became eligible for old-age insurance benefits or dis-
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ability insurance benefits or died, whichever occurred first,
or
"(II) if such person had a period of disability which con-
tinued until he or she became entitled to old-age insurance
benefits or disability insurance benefits or died, the year
immediately before the month in which such period of dis-
ability began.
"(D) An individual entitled to benefits under subsection (h) meets
the residency requirements of this paragraph with respect to those
benefits only if such individual has resided in the United States,
and while so residing was a parent (within the meaning of subsec-
tion (h)(3)) of the person on whose wages and self-employment
income such entitlement is based, for a total period of not less than
5 years.
"(E) This paragraph shall not apply with respect to any individu-
al who is a citizen or resident of a foreign country with which the
United States has an agreement in force concluded pursuant to sec-
tion 233, except to the extent provided by such agreement. ".
(b) Paragraphs (2) and (4) of section 202(t) of such Act are each
amended by striking out "Paragraph (1) shall not apply" and insert-
ing in lieu thereof "Subject to paragraph (11), paragraph (1) shall
not apply".
(c) The amendments made by this section shall apply with respect
to any individual who initially becomes eligible for benefits under
section 202 or 223 after December 31, 1984.
SEC. 341. (a) Section 201(c) of the Social Security Act is amend-
ed-
(1) by inserting before the period at the end of the first sen-
tence the following: ", and of two members of the public (both
of whom may not be from the same political party), who shall
be nominated by the President for a term of four years and sub-
ject to confirmation by the Senate" and
(2) by adding at the end thereof the following new sentence:
"A person serving on the Board of Trustees shall not be consid-
ered to be a fiduciary and shall not be personally liable for ac-
tions taken in such capacity with respect to the Trust Funds. ".
(b) Section 1817(b) of such Act is amended-
(1) by inserting before the period at the end of the first sen-
tence the following: ", and of two members of the public (both
of whom may not be from the same political party), who shall
be nominated by the President for a term of four years and sub-
ject to confirmation by the Senate" and
(2) by adding at the end thereof the following new sentence:
"A person serving on the Board of Trustees shall not be consid-
ered to be a fiduciary and shall not be personally liable for ac-
tions taken in such capacity with respect to the Trust Fund. ".
(c) Section 1841(b) of such Act is amended-
(1) by inserting before the period at the end of the first sen-
tence the following: `, and of two members of the public (both
of whom may not be from the same political party), who shall
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be nominated by the President for a term of four years and sub-
ject to confirmation by the Senate 'I- and
(2) by adding at the end thereof the following new sentence:
"A person serving on the Board of Trustees shall not be consid-
ered to be a fiduciary and shall not be personally liable for ac-
tions taken in such capacity with respect to the Trust Fund. ".
(d) The amendments made by this section shall become effective
on the date of enactment of this Act.
SEC. 342. (a) Section 218(e)(1XA) of the Social Security Act is
amended to read as follows:
`(A) that the State will pay to the Secretary of the Treasury-
`(i) on the last day of each calendar month, amounts
equivalent to the sum of the taxes which would be imposed
by sections 3101 and 3111 of the Internal Revenue Code of
1954 with respect to the period which includes the first fif-
teen days of such calendar month if the services for which
wages were paid in such period to employees covered by the
agreement constituted employment covered by the agree-
ment constituted employment as defined in section 3231 of
such Code, and
"(ii) on the fifteenth day of the calendar month following
such calendar month, amounts equivalent to the sum of the
taxes which would be imposed by sections 3101 and 3111 of
such Code with respect to the period beginning with the six-
teenth day of such calendar month and ending with the
last day of such calendar month if the services for which
wages were paid in such period to employees covered by the
agreement constituted employment as defined in section
3121 of such Code; and".
(b) The amendments made by this section shall apply to calendar
months beginning after December 31, 1983.
SEC. 344. (a) The Secretary of Health and Human Services (herein-
after in this Part referred to as the "Secretary') shall develop, in
consultation with the Senate Committee on Finance and the Com-
mittee on Ways and Means of the House of Representatives, propos-
als for earnings sharing legislation as described in subsection (b).
The Secretary shall report such proposals to such committees not
later than July 1, 1984. The report and proposals provided to such
committees shall-
(1) take into account, discuss, and analyze the impact of earn-
ings sharing on various categories of social security benefici-
aries and include recommendations for the implementation of
earnings sharing which may be necessary to provide adequate
protection for particular classes of beneficiaries;
(2) include specific recommendations with respect to an appro-
priate and feasible time period or time periods for implementa-
tion of such proposals along with recommendations for any
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transition provisions which may be necessary or appropriate;
and
(3) provide cost-impact analyses on each proposal presented.
(b) For the purposes of subsection (a), the term "earnings sharing"
refers to proposals that the combined earnings of a husband and
wife during the period of their marriage shall be divided equally
and shared between them for social security benefit purposes.
(c) In preparing the report and proposals required in subsection
(a), the Secretary shall include consideration and analysis of the
earnings sharing proposals contained in (1) S. 3, 98th Congress, 1st
Session, (2) H.R. 1513, 97th Congress, 1st Session, and (3) the earn-
ings sharing option described in the report entitled "Social Security
and the Changing Roles of Men and Women"; submitted to the Con-
gress pursuant to Public Law 95-216, the Social Security Amend-
ments of 1977.
(d) In carrying out subsections (a), (b), and (c), the Secretary shall
consult with the Director of the Congressional Budget Office. Not
later than 30 days after the Secretary submits the report required in
subsection (a), the Director of the Congressional Budget Office shall
submit a report to the committees identified in such subsection on
the methodologies, recommendations, and analyses used in the Sec-
retary's report.
SEC. 345. The requirements of section 210(b)(2)(A) of title 38,
United States Code, shall not apply to the planned administrative
reorganization at the Veterans' Administration Los Angeles Data
Processing Center involving the transfer of 25 full-time equivalent
employees from the Office of Data Management and Technology to
the Department of Medicine and Surgery of the Veterans' Adminis-
tration.
SEC. 346. (a) Section 205(c)(2) of the Social Security Act is amend-
ed by adding at the end thereof the following new subparagraph:
"(D) The Secretary shall issue a social security card to each indi-
vidual at the time of the issuance of a social security account
number to such individual. The social security card shall be made
of banknote paper, and (to the maximum extent practicable) shall be
a card which cannot be counterfeited. ".
(b) The amendment made by this section shall apply with respect
to all new and replacement social security cards issued more than
193 days after the date of the enactment of this Act.
(c) Within 90 days after the date of the enactment of this Act the
Secretary of Health and Human Services shall report to the Con-
gress on his plans for implementing the amendment made by this
section.
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BUDGETARY TREATMENT OF TRUST FUND OPERATIONS
SEC. 347. (a)(1) Title VII of the Social Security Act (as amended by
section 143 of this Act) is further amended by adding at the end
thereof the following new section:
"BUDGETARY TREATMENT OF TRUST FUND OPERATIONS
"SEC. 710. The disbursements of the Federal Old-Age and Survi-
vors Insurance Trust Fund, the Federal Disability Insurance Trust
Fund, the Federal Hospital Insurance Trust Fund, and the Federal
Supplementary Medical Insurance Trust Fund shall be treated as a
separate major functional category in the budget of the United
States Government as submitted by the President and in the con-
gressional budget, and the receipts of such Trust Funds, including
the taxes imposed under sections 1401, 3101, and 3111 of the Inter-
nal Revenue Code of 1954, shall be set forth separately in such
budgets. ".
(2)(A) The amendment made by paragraph (1) shall apply with re-
spect to fiscal years beginning on or after October 1, 1984, and
ending on or before September 30, 1992, except that such amendment
shall apply with respect to the fiscal year beginning on October 1,
1983, to the extent it relates to the congressional budget.
(b) Effective for fiscal years beginning on or after October 1, 1992,
section 710 of such Act (as added by subsection (a) of this section) is
amended to read as follows:
"BUDGETARY TREATMENT OF TRUST FUND OPERATIONS
"SEC. 710. (a) The receipts and disbursements of the Federal Old-
Age and Survivors Insurance Trust Fund, the Federal Disability In-
surance Trust Fund, and the Federal Hospital Insurance Trust
Fund and the taxes imposed under sections 1401, 3101, and 3111 of
the Internal Revenue Code of 1954 shall not be included in the
totals of the budget of the United States Government as submitted
by the President or of the congressional budget and shall be exempt
from any general budget limitation imposed by statute on expendi-
tures and net lending (budget outlays) of the United States Govern-
ment.
"(b) The disbursements of the Federal Supplementary Medical In-
surance Trust Fund shall be treated as a separate major functional
category in the budget of the United States Government as submit-
ted by the President and in the congressional budget, and the re-
ceipts of such Trust Fund shall be set forth separately in such budg-
ets. ".
SEC. 348. (a) Section 203(f)(3) of the Social Security Act is amend-
ed by striking out "50 per centum of his earnings for such year in
excess of the product of the applicable exempt amount as deter-
mined under paragraph (8)" and inserting in lieu thereof the follow-
ing: "331/3 percent of his earnings for such year in excess of the prod-
uct of the applicable exempt amount as determined under para-
graph (8) in the case of an individual who has attained retirement
age (as defined in section 216(l)) before the close of such taxable
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year, or 50 percent of his earnings for such year in excess of such
product in the case of any other individual"
(b) The amendment made by subsection (a) shall apply only in the
case of individuals attaining retirement age (as defined in section
210(l) of the Social Security Act) after December 1989.
SEC. 401. (a)(1) Section 1617 of the Social Security Act is amended
by adding at the end thereof the following new subsection:
"(c) Effective July 1, 1983-
"(1) each of the dollar amounts in effect under subsections
(a)(1)(A) and (b)(1) of section 1611, as previously increased under
this section, shall be increased by $240 (and the dollar amount
in effect under subsection (a)(1)(A) section 211 of Public Law 93-
66, as previously so increased, shall be increased by $120); and
"(2) each of the dollar amounts in effect under subsections
(a)(2)(A) and (b)(2) of section 1611, as previously increased under
this section, shall be increased by $360. ".
(2) Section 1617(b) of such Act is amended by striking out "this
section " and inserting in lieu thereof "subsection (a) of this section ".
(b) Section 1617(a)(2) of such Act is amended by inserting ", or, if
greater (in any case where the increase under title II was deter-
mined on the basis of the wage increase percentage rather than the
CPI increase percentage), the percentage by which benefit amounts
under title II would be increased for such month if the increase had
been determined on the basis of the CPI increase percentage, " after
"are increased for such month ".
SEC. 402. Section 1618 of the Social Security Act is amended by
redesignating the subsection (c) which was added by Public Law 97-
377 as subsection (d), and by adding at the end thereof the following
new subsection:
"(e)(1) For any particular month after March 1983, a State which
is not treated as meeting the requirements imposed by paragraph (4)
of subsection (a) by reason of subsection (b) shall be treated as meet-
ing such requirements if and only if-
"(A) the combined level of its supplementary payments (to re-
cipients of the type involved) and the amounts payable (to or on
behalf of such recipients) under section 1611(b) of this Act and
section 211(a)(1XA) of Public Law 93-66, for that particular
month,
is not less than-
"(B) the combined level of its supplementary payments (to re-
cipients of the type involved) and the amounts payable (to or on
behalf of such recipients) under section 1611(b) of this Act and
section 211(a)(1XA) of Public Law 93-66, for March 1983, in-
creased by the amount of all cost-of-living adjustments under
section 1617 (and any other benefit increases under this title)
which have occurred after March 1983 and before that particu-
lar month.
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"(2) In determining the amount of any increase in the combined
level involved under paragraph (1)(B) of this subsection, any portion
of such amount which would otherwise be attributable to the in-
crease under section 1617(c) shall be deemed instead to be equal to
the amount of the cost-of-living adjustment which would have oc-
curred in July 1983 (without regard to the 3percent limitation con-
tained in section 215(i)(1)(B)) if section 111 of the Social Security
Amendments of 1983 had not been enacted. ".
SSI ELIGIBILITY FOR TEMPORARY RESIDENTS OF EMERGENCY SHELTERS
FOR THE HOMELESS
SEC. 403. (a) Section 1611(e)(1) of the Social Security Act is amend-
ed-
(1) by striking out "subparagraph (B) and (C)" in subpara-
graph (A) and inserting in lieu thereof "subparagraphs (B), (C),
and (D)"? and
(2) by adding at the end thereof the following new subpara-
graph:
"(D) A person may be an eligible individual or eligible spouse for
purposes of this title with respect to any month throughout which
he is a resident of a public emergency shelter for the homeless (as
defined in regulations which shall be prescribed by the Secretary);
except that no person shall be an eligible individual or eligible
spouse by reason of this subparagraph more than three months in
any 12-month period. ".
(b) The amendments made by subsection (a) shall be effective with
respect to months after the month in which this Act is enacted.
DISREGARDING OF EMERGENCY AND OTHER IN-KIND ASSISTANCE
PROVIDED BY NONPROFIT ORGANIZATIONS
SEC. 404. (a) Section 1612(b)(13) of the Social Security Act is
amended by striking out "any assistance received" and all that fol-
lows down through "(B)" and inserting in lieu thereof the following:
"any support or maintenance assistance furnished to or on behalf of
such individual (and spouse if any) which (as determined under reg-
ulations of the Secretary by such State agency as the chief executive
officer of the State may designate) is based on need for such support
or maintenance, including assistance received to assist in meeting
the costs of home energy (including both heating and cooling), and
which ".
(b) Section 402(a)(36) of such Act is amended by striking out
"shall not include as income" and all that follows down through
"(B)" and inserting in lieu thereof the following: "shall not include
as income any support or maintenance assistance furnished to or on
behalf of the family which (as determined under regulations of the
Secretary by such State agency as the chief executive officer of the
State may designate) is based on need for such support and mainte-
nance, including assistance received to assist in meeting the costs of
home energy (including both heating and cooling), and which ".
(c) The amendments made by this section shall be effective with
respect to months which begin after the month in which this Act is
enacted and end before October 1, 1984.
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NOTIFICATION REGARDING SSI
SEC. 405. Prior to July 1, 1984, the Secretary of Health and
Human Services shall notify all elderly recipients of benefits under
title II of the Social Security Act who may be eligible for supple-
mental security income benefits under title XVI of such act of the
availability of the supplemental security income program, and shall
encourage such recipients to contact the Social Security district
office. Such notification shall also be made to all recipients prior to
attainment of age 65, with the notification made with respect to eli-
gibility for supplementary medical insurance.
TITLE V-UNEMPLOYMENT COMPENSATION PROVISIONS
PART A-FEDERAL SUPPLEMENTAL COMPENSATION
EXTENSION OF PROGRAM
SEC. 501. (a) Paragraph (2) of section 602(f) of the Federal Supple-
mental Compensation Act of 1982 is amended by striking out
"March 31, 1983" and inserting in lieu thereof "September 30,
1983'
(b) Section 605(2) of such Act is amended by striking out "April 1,
1983" and inserting in lieu thereof "October 1, 1983".
NUMBER OF WEEKS FOR WHICH COMPENSATION PAYABLE
SEC. 502. (a) Subsection (e) of section 602 of the Federal Supple-
mental Compensation Act of 1982 is amended by redesignating para-
graph (3) as paragraph (4) and by striking out paragraph (2) and in-
serting in lieu thereof the following new paragraphs:
"(2)(A) In the case of any account from which Federal supplemen-
tal compensation was first payable to an individual for a week be-
ginning after March 31, 1983, the amount established in such ac-
count shall be equal to the lesser of-
"(i) 55 per centum of the total amount of regular compensa-
tion (including dependents' allowances) payable to the individu-
al with respect to the benefit year (as determined under the
State law) on the basis of which he most recently received regu-
lar compensation, or
(ii) the applicable limit determined under the following table
times his average weekly benefit amount for his benefit year,
"In the case of The applicable
weeks during a: limit is:
6 -percent period ..............................................................................................
14
5-percent period ..............................................................................................
12
4-percent period ..............................................................................................
10
Low-unemployment period ...........................................................................
8
"(B) In the case of any State whose applicable limit, as deter-
mined under clause (ii) of subparagraph (A) for the first week begin-
ning after March 27, 1983, and after the date of the enactment of
part A of title V of the Social Security Amendments of 1983, would
be more than 4 weeks lower than the number of weeks applicable to
such State under this paragraph as in effect for the week beginning
March 27, 1983, the applicable limit for such State for that week
and any succeeding week shall not be lower than 4 less than the
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number so applicable to such State for the week beginning March
27, 1983.
"(C) In the case of any account from which Federal supplemental
compensation was payable to an individual for a week beginning
before April 1, 1983, the amount established in such account shall
be equal to the lesser of the subparagraph (A) entitlement or the
sum of-
"(i) the subparagraph (A) entitlement reduced (but not below
zero) by the aggregate amount of Federal supplemental compen-
sation paid to such individual for weeks beginning before April
1, 1983, plus
`(ii) such individual's additional entitlement.
"(D) For purposes of subparagraph (C) and this subparagraph-
"(i) The term `subparagraph (A) entitlement' means the
amount which would have been established in the account if
subparagraph (A) had applied to such account.
"(ii) The term `additional entitlement' means the lesser of-
"(I) three-fourths of the subparagraph (A) entitlement, or
"(II) the applicable limit determined under the following
table times the individual's average weekly benefit amount
for his benefit year.
"In the case of The applicable
weeks during a: limit is:
6-percent period .................................................................................... 10
5 -percent period .................................................................................... 8
4percent period .. ............d...................................................................... 8
Low-employment perio ...................................................................... 6
"(E) Except as provided in subparagraph (C)(i), for purposes of de-
termining the amount of Federal supplemental compensation pay-
able for weeks beginning after March 31, 1983, from an account de-
scribed in subparagraph (C), no reduction in such account shall be
made by reason of any Federal supplemental compensation paid to
the individual for weeks beginning before April 1, 1983.
"(3)(A) For purposes of this subsection, the terms `6 percent
period', `5 percent period', `4 percent period', and `low-unemployment
period' mean, with respect to any State, the period which-
"(i) begins with the 3d week after the 1st week in which the
rate of insured unemployment in the State for the period con-
sisting of such week and the immediately preceding 12 weeks
falls in the applicable range, and
"(ii) ends with the 3d week after the 1st week in which the
rate of insured unemployment for the period consisting of such
week and the immediately preceding 12 weeks does not fall
within the applicable range.
"(B) For purposes of subparagraph (A), the applicable range is as
follows:
`In the case of a:
6-percent period .........................................
5percent period .........................................
4percent period .........................................
Low-employment .......................................
The applicable range is:
A rate equal to or exceeding 6 percent.
A rate equal to or exceeding 5 percent,
but less than 6 percent.
A rate equal to or exceeding 4 percent,
but less than 5 percent.
A rate less than 4 percent.
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"(0 No 6percent period, 5percent period, or 4percent period, as
the case may be, shall last for a period of less than 4 weeks unless
the State enters a period with a higher percentage designation.
"(D) For purposes of this subsection-
"(0 The rate of insured unemployment for any period shall be
determined in the same manner as determined for purposes of
section 203 of the Federal-State Extended Unemployment Com-
pensation Act of 1970.
"(ii) The amount of an individual's average weekly benefit
amount shall be determined in the same manner as determined
for purposes of section 202(b)(1)(C) of such Act. ".
(b)(1) Section 602(f)(2) of such Act is amended by inserting before
the period at the end thereof the following: " ' - except that in the case
of any individual who received such compensation for the week pre-
ceding the last week beginning after such date, such compensation
shall be payable to such individual for weeks beginning after such
date, but the total amount of such compensation payable for such
weeks shall be limited to 50 percent of the total amount which
would otherwise be payable for such weeks ".
(2) Section 605(2) of such Act is amended by inserting before the
semicolon the following: "(except as otherwise provided in section
602(f)(2))'
(c) Paragraph (3) of section 602(d) of the Federal Supplemental
Compensation Act of 1982 is amended to read as follows:
"(3) the maximum amount of Federal supplemental compen-
sation payable to any individual for whom an account is estab-
lished under subsection (e) shall not exceed the lesser of (A) the
amount established in such account for such individual, or (B)
in the case of an individual filing a claim under the interstate
benefit payment plan for Federal supplemental compensation,
the amount which would have been established in such account
if the amount established in such account were determined by
reference to the applicable limit under subparagraph (A)(ii) or
(D)(ii) of subsection (e)(2) applicable in the State in which the
individual is filing such interstate claim under the interstate
benefit payment plan for the week in which he is filing such
claim. "
SEC. 503. (a) The amendments made by this part shall apply to
weeks beginning after March 31, 1983.
(b) In the case of any eligible individual-
(1) to whom any Federal supplemental compensation was pay-
able for any week beginning before April 1, 1983, and
(2) who exhausted his rights to such compensation (by reason
of the payment of all the amount in his Federal supplemental
compensation account) before the first week beginning after
March 31, 1983,
such individual's eligibility for additional weeks of compensation
by reason of the amendments made by this part shall not be limited
or terminated by reason of any event, or failure to meet any require-
ment of law relating to eligibility for unemployment compensation,
occurring after the date of such exhaustion of rights and before
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April 1, 1983 (and the period after such exhaustion and before April
1, 1983, shall not be counted for purposes of determining the expira-
tion of the two years following the end of his benefit year for pur-
poses of section 602(b) of the Federal Supplemental Compensation
Act of 1982).
(c) The Secretary of Labor shall, at the earliest practicable date
after the date of the enactment of this Act, propose to each State
with which he has in effect an agreement under section 602 of the
Federal Supplemental Compensation Act of 1982 a modification of
such agreement designed to provide for the payment of Federal sup-
plemental compensation under such Act in accordance with the
amendments made by this part. Notwithstanding any other provi-
sion of law, if any State fails or refuses, within the 3-week period
beginning on the date the Secretary of Labor proposed such a modi-
fication to such State, to enter into such a modification of such
agreement, the Secretary of Labor shall terminate such agreement
effective with the end of the last week which ends on or before such
3-week period.
SEC. 504. Section 602 of the Federal Supplemental Compensation
Act of 1982 is amended by adding at the end thereof the following
new subsection:
"(g) The payment of Federal supplemental compensation shall not
be denied to any recipient (who submits documentation prescribed
by the Secretary) for any week because the recipient is in training or
attending an accredited educational institution on a substantially
full-time basis, or because of the application of State law to any
such recipient relating to the availability for work, the active search
for work, or the refusal to accept work on account of such training
or attendance, unless the State agency determines that such training
or attendance will not improve the opportunities for employment of
the recipient. ".
COORDINATION WITH TRADE READJUSTMENT PROGRAM
SEC. 505. Subsection (e) of section 602 of the Federal Supplemental
Compensation Act of 1982 is amended by adding at the end thereof
the following new paragraph:
"(5)(A) Except as provided in subparagraph (B), the maximum
amount of Federal supplemental compensation payable to an indi-
vidual shall not be reduced by reason of any trade readjustment al-
lowances to which the individual was entitled under the Trade Act
of 1974.
"(B) If an individual received any trade readjustment allowance
under the Trade Act of 1974 in respect of any benefit year, the maxi-
mum amount of Federal supplemental compensation payable under
this subtitle in respect of such benefit year shall be reduced (but not
below zero) so that (to the extent possible by making such a reduc-
tion) the aggregate amount of-
ii(i) regular compensation,
"(ii) extended compensation,
"(iii) trade readjustment allowances, and
"(iv) Federal supplemental compensation,
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payable in respect of such benefit year does not exceed the aggregate
amount which would have been so payable had the individual not
been entitled to any trade readjustment allowance. "
PART B-PROVISIONS RELATING TO INTEREST AND CREDIT
REDUCTIONS
SEC. 511. (a) Section 1202(b) of the Social Security Act is amended
by adding at the end thereof the following new paragraphs:
"(8)(A) With respect to interest due under this section on Septem-
ber 30 of 1983, 1984, or 1985 (other than interest previously deferred
under paragraph (3)(C)), a State may pay 80 percent of such interest
in four annual installments of at least 20 percent beginning with
the year after the year in which it is otherwise due, if such State
meets the criteria of subparagraph (B). No interest shall accrue on
such deferred interest.
"(B) To meet the criteria of this subparagraph a State must-
`(i) have taken no action since October 1, 1982, which would
reduce its net unemployment tax effort or the net solvency of its
unemployment system (as determined for purposes of section
3302(f) of the Internal Revenue Code of 1954); and
"(ii)(I) have taken an action (as certified by the Secretary of
Labor) after March 31, 1982, which would have increased reve-
nue liabilities and decreased benefits under the State's unem-
ployment compensation system (hereinafter referred to as a 'sol-
vency effort) by a combined total of the applicable percentage
(as compared to such revenues and benefits as would have been
in effect without such State action) for the calendar year for
which the deferral is requested; or
"(II) have had, for taxable year 1982, an average unemploy-
ment tax rate which was equal to or greater than 2.0 percent of
the total of the wages (as determined without any limitation on
amount) attributable to such State subject to contribution under
the State unemployment compensation law with respect to such
taxable years.
In the case of the first year for which there is a deferral (over a 4-
year period) of the interest otherwise payable for such year, the ap-
plicable percentage shall be 25 percent. In the case of the second
such year, the applicable percentage shall be 35 percent. In the case
of the second such year, the applicable percentage shall be 50 per-
cent.
"(C)(i) The base year is the first year for which deferral under this
provision is requested and subsequently granted. The Secretary of
Labor shall estimate the unemployment rate for the base year. To
determine whether a State meets the requirements of subparagraph
(B)(iiXI), the Secretary of Labor shall determine the percentage by
which the benefits and taxes in the base year with the application
of the action referred to in subparagraph (B)(iiXI) are lower or great-
er, as the case may be, than such benefits and taxes would have
been without the application of such action. In making this deter-
mination, the Secretary shall deem the application of the action re-
ferred to in subparagraph (B)(iiXI) to have been effective for the base
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year to the same extent as such action is effective for the year fol-
lowing the year for which the deferral is sought. Once a deferral is
approved under clause (ii)(I) of subparagraph (B) a State must con-
tinue to maintain its solvency effort. Failure to do so shall result in
the State being required to make immediate payment of all deferred
interest.
"(ii) Increases in the taxable wage base from $6,000 to $7,000 or
increases after 1984 in the maximum tax rate to 5.4 percent shall
not be counted for purposes of meeting the requirement of subpara-
graph (B).
"(D) In the case of a State which produces a solvency effort of 50
percent, 80 percent, and 90 percent rather than the 25 percent, 35
percent, 50 percent required under subparagraph (B), the interest
shall be computed at an interest rate which is 1 percentage point
less than the otherwise applicable interest rate.
"(9) Any interest otherwise due from a State on September 30 of a
calendar year after 1982 may be deferred (and no interest shall
accrue on such deferred interest) for a grace period of not to exceed 9
months if, for the most recent 12-month period for which data are
available before the date such interest is otherwise due, the State
had an average total unemployment rate of 13.5 percent or greater. "
(b) Section 1202(b)(7) of such Act is amended by striking out
and before January 1, 1988".
(c) Section 1202(b)(3)(C)(i) of the Social Security Act is amended by
striking the matter that follows clause (II) and inserting "No inter-
est shall accrue on deferred interest. "
SEC. 512. (a)(1) Section 3302(f) of the Internal Revenue Code of
1954 is amended by adding at the end thereof the following new
paragraph:
"(8) PARTIAL LIMITATION. -
"(A) In the case of a State which would meet the require-
ments of this subsection for a taxable year prior to 1987 but
for its failure to meet one of the requirements contained in
subparagraph (C) or (D) of paragraph (2), the reduction
under subsection (c)(2) in credits otherwise applicable to
taxpayers in such State for such taxable year and each sub-
sequent year (in a period of consecutive years for each of
which a credit reduction is in effect for taxpayers in such
State) shall be reduced by 0.1 percentage point.
"(B) In the case of a State which does not meet the re-
quirements of paragraph (2) but meets the requirements of
subparagraphs (A) and (B) of paragraph (2) and which also
meets the requirements of section 1202(b)(8XB) of the Social
Security Act with respect to such taxable year, the reduc-
tion under subsection (c)(2) in credits otherwise applicable
to taxpayers in such State for such taxable year and each
subsequent year (in a period of consecutive years for each of
which a credit reduction is in effect for taxpayers in such
State) shall be further reduced by an additional 0.1 per-
centage point.
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"(C) In no case shall the application of subparagraphs
(A) and (B) reduce the credit reduction otherwise applicable
under subsection (c)(2) below the limitation under para-
graph (1). "
(2) The amendment made by paragraph (1) shall apply with re-
spect to taxable year 1983 and taxable years thereafter.
(b) Section 3302()(1) of such Code is amended by striking out "be-
ginning before January 1, 1988, ".
AVERAGE EMPLOYER CONTRIBUTION RATE
SEC. 513. (a) Section 3302(d)(4XB) of the Internal Revenue Code of
1954 is amended to read as follows:
"(B)(i) for purposes of subparagraph (B) of subsection (c)(2),
the total of the wages (as determined without any limitation on
amount) attributable to such State subject to contributions
under this chapter with respect to such calendar year, and
"(ii) for purposes of subparagraph (C) of subsection (c)(2), the
total of the remuneration subject to contributions under the
State unemployment compensation law with respect to such cal-
endar year. "
(b) Section 3302(c)(2XBXi) of such Code is amended by striking out
"2.7" and inserting in lieu thereof "2.7 multiplied by a fraction, the
numerator of which is the wage base under this chapter and the de-
nominator of which is the estimated United States average annual
wage in covered employment for the calendar year in which the de-
termination is to be made".
(c) Section 3302(c)(2XB) of such Code is amended by inserting after
"(if any)" and following: ", multiplied by a fraction, the numerator
of which is the State's average annual wage in covered employment
for the calendar year in which the determination is made and the
denominator of which is the wage base under this chapter, ".
(d) The amendments made by this section shall be effective for
taxable year 1983 and taxable years thereafter.
DATE FOR PAYMENT OF INTEREST
SEC. 514. Section 1202(b)(3XA) of the Social Security Act is amend-
ed by striking out "not later than" and inserting in lieu thereof
`prior to".
PENALTY FOR FAILURE TO PAY INTEREST
SEC. 515. (a) Section 303(c) of the Social Security Act is amended
by striking out "or" at the end of paragraph (1), striking out the
period at the end of paragraph (2) and inserting `, or'; and adding
at the end thereof the following new paragraph:
"(3) that any interest required to be paid on advances under
title XII of this Act has not been paid by the date on which
such interest is required to be paid or has been paid directly or
indirectly (by an equivalent reduction in State unemployment
taxes or otherwise) by such State from amounts in such State's
unemployment fund, until such interest is properly paid. ".
(b) Section 3304(a) of the Internal Revenue Code of 1954 (relating
to certification of State unemployment compensation laws) is
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amended by redesignating paragraph (17) as paragraph (18) and by
inserting after paragraph (16) the following new paragraph:
"(17) any interest required to be paid on advances under title
XII of the Social Security Act shall be paid in a timely manner
and shall not be paid, directly or indirectly (by an equivalent
reduction in State unemployment taxes or otherwise) by such
State from amounts in such State's unemployment fund; and".
TREATMENT OF EMPLOYEES PROVIDING SERVICES TO EDUCATIONAL
INSTITUTIONS
SEC. 521. (a)(1) Section 3304(a)(6)(A) of the Internal Revenue Code
of 1954 is amended by adding at the end thereof the following new
clause:
"(v) with respect to services to which section 3309(a)(1) ap-
plies, if such services are provided to or on behalf of an educa-
tional institution, compensation may be denied under the same
circumstances as described in clauses (i) through (iv), and".
(2) Clauses (ii)(I), (iii), and (iv) of such section are each amended
by striking out "may be denied" and inserting in lieu thereof "shall
be denied '
(b)(1) Except as provided in paragraph (2), the amendments made
by this section shall apply in the case of compensation paid for
weeks beginning on or after April 1, 1984.
(2) In the case of a State with respect to which the Secretary of
Labor has determined that State legislation is required in order to
comply with the amendment made by this section, the amendment
made by this section shall apply in the case of compensation paid
for weeks which begin on or after April 1, 1984, and after the end of
the first session of the State legislature which begins after the date
of the enactment of this Act, or which began prior to the date of the
enactment of this Act and remained in session for at least twenty-
five calendar days after such date of enactment. For purposes of the
preceding sentence, the term "session" means a regular, special,
budget, or other session of a State legislature.
EXTENDED BENEFIT FOR INDIVIDUALS WHO ARE HOSPITALIZED OR ON
JURY DUTY
SEC. 522. (a) Clause (ii) of paragraph (3)(A) of section 202(a) of the
Federal-State Extended Unemployment Compensation Act of 1970 is
amended to read as follows:
"(ii) during which he fails to actively engage in seeking work,
unless such individual is not actively engaged in seeking work
because such individual is, as determined in accordance with
State law-
"(I) before any court of the United States or any State
pursuant to a lawfully issued summons to appear for jury
duty (as such term may be defined by the Secretary of
Labor), or
"(II) hospitalized for treatment of an emergency or a life-
threatening condition (as such term may be defined by such
Secretary),
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if such exemptions in clauses (I) and (II) apply to recipients of regu-
lar benefits, and the State chooses to apply such exemptions for re-
cipients of extended benefits; or".
(b) The amendment made by this section shall become effective on
the date of the enactment of this Act.
SEC. 523. (a) AMENDMENT OF THE INTERNAL REVENUE CODE OF
1954.-Paragraph (4) of section 3304(a) of the Internal Revenue Code
of 1954 (relating to requirements for approval of State unemploy-
ment compensation laws) is amended by striking out "and" at the
end of subparagraph (A), by adding "and" at the end of subpara-
graph (B), and by adding after subparagraph (B) the following new
subparagraph:
"(C) nothing in this paragraph shall be construed to pro-
hibit deducting an amount from unemployment compensa-
tion otherwise payable to an individual and using the
amount so deducted to pay for health insurance if the indi-
vidual elected to have such deduction made and such de-
duction was made under a program approved by the Secre-
tary of Labor;"
(b) AMENDMENT OF SOCIAL SECURITY ACT.-Paragraph (5) of sec-
tion 303(a) of the Social Security Act is amended by striking out ",-
and" at the end thereof and inserting in lieu thereof ": Provided
further, That nothing in this paragraph shall be construed to pro-
hibit deducting an amount from unemployment compensation other-
wise payable to an individual and using the amount so deducted to
pay for health insurance if the individual elected to have such de-
duction made and such deduction was made under a program ap-
proved by the Secretary of Labor; and".
(c) EFFECTIVE DATE.-The amendments made by this section shall
take effect on the date of the enactment of this Act.
TREATMENT OF CERTAIN ORGANIZATIONS RETROACTIVELY DETER-
MINED TO BE DESCRIBED IN SECTION 501(C)(3) OF THE INTERNAL
REVENUE CODE OF 1954
SEC. 524. If-
(1) an organization did not make an election to make pay-
ments (in lieu of contributions) as provided in section 3309(a)(2)
of the Internal Revenue Code of 1954 before April 1, 1972, be-
cause such organization, as of such date, was treated as an or-
ganization described in section 501(c)(4) of such Code,
(2) the Internal Revenue Service subsequently determined that
such organization was described in section 501(c)(3) of such
Code, and
(3) such organization made such an election before the earlier
of-
(A) the date 18 months after such election was first avail-
able to it under the State law, or
(B) January 1, 1984,
then section 3303(f) of such Code shall be applied with respect to
such organization as if it did not contain the requirement that the
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election be made before April 1, 1972, and by substituting "January
1, 1982" for "January 1, 1969".
TITLE VI-PROSPECTIVE PAYMENTS FOR MEDICARE
INPATIENT HOSPITAL SERVICES
MEDICARE PAYMENTS FOR INPATIENT HOSPITAL SERVICES ON THE
BASIS OF PROSPECTIVE RATES
SEC. 601. (a)(1) Subsection (a)(1) of section 1886 of the Social Secu-
rity Act is amended by adding at the end the following new subpar-
agraph:
"(D) Subparagraph (A) shall not apply to cost reporting periods
beginning on or after October 1, 1983. ".
(2) Subsection (a)(4) of such section is amended by adding at the
end the following new sentence: "Such term does not include costs of
approved educational activities, or, with respect to costs incurred in
cost reporting periods beginning prior to October 1, 1986, capital re-
lated costs, as defined by the Secretary. ".
(3) It is the intent of Congress that, in considering the implemen-
tation of a system for including capital-related costs under a pro-
spectively determined payment rate for inpatient hospital services,
costs related to capital projects for which expenditures are obligated
on or after the effective date of the implementation of such system,
may or may not be distinguished and treated differently from costs
of projects for which expenditures were obligated before such date.
(b) Section 1886(b) of such Act is amended-
(1) by striking out "Notwithstanding sections 1814(b), but sub-
ject to the provisions of sections" in paragraph (1) and inserting
in lieu thereof "Notwithstanding section 1814(b) but subject to
the provisions of section. "I-
(2) by inserting "(other than a subsection (d) hospital, as de-
fined in subsection (d)(1)(B))" in the matter before subparagraph
(A) of paragraph (1) after "of a hospital';-
(3) by inserting, in the matter in paragraph (1) following sub-
paragraph (B), "(other than on the basis of a DRG prospective
payment rate determined under subsection (d))" after `payable
under this title';-
(4) by repealing paragraph (2),-
(5) by inserting "and subsection (d) and except as provided in
subsection (e)" in paragraph (3)(B) after "subparagraph (A)"-
(6) by inserting "or fiscal year" after "cost reporting period"
each place it appears in paragraph (3)(B);
(7) by inserting "before the beginning of the period or year" in
paragraph (3)(B) after "estimated by the Secretary ';?
(8) by striking out "exceeds" in paragraph (3)(B) and inserting
in lieu thereof "will exceed';- and
(9) by amending paragraph (6), effective with respect to cost
reporting periods beginning on or after October 1, 1982, to read
as follows:
"(6) In the case of any hospital which becomes subject to the taxes
under section 3111 of the Internal Revenue Code of 1954, with re-
spect to any or all of its employees, for part or all of a cost reporting
period, and was not subject to such taxes with respect to any or all
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of its employees for all or part of the 12-month base cost reporting
period referred to in subsection (b)(3XAXi), the Secretary shall pro-
vide for an adjustment by increasing the base period amount de-
scribed in such subsection for such hospital by an amount equal to
the amount of such taxes which would have been paid or accrued by
such hospital for such base period if such hospital had been subject
to such taxes for all of such base period with respect to all its em-
ployees, minus the amount of any such taxes actually paid or ac-
crued for such base period. ".
(c)(1) Subsection (c)(1) of such section is amended-
(A) by striking out "and" at the end of subparagraph (B),
(B) by striking out the period at the end of subparagraph (C)
and inserting in lieu thereof, and
(C) by adding at the end the following:
"(D) the Secretary determines that the system will not pre-
clude an eligible organization (as defined in section 1876(b))
from negotiating directly with hospitals with respect to the or-
ganization's rate of payment for inpatient hospital services; and
"(E) the Secretary determines that the system requires hospi-
tals to meet the requirement of section 1866(a)(1)(G) and the
system provides for the exclusion of certain costs in accordance
with section 1862(a)(14) (except for such waivers thereof as the
Secretary provides by regulation).
The Secretary cannot deny the application of a State under this sub-
section on the ground that the State's hospital reimbursement con-
trol system is based on a payment methodology other than on the
basis of a diagnosis-related group or on the ground that the amount
of payments made under this title under such system must be less
than the amount of payments which would otherwise have been
made under this title not using such system. If the Secretary deter-
mines that the conditions described in subparagraph (C) are based
on maintaining payment amounts at no more than a specified per-
centage increase above the payment amounts in a base period, the
State has the option of applying such test (for inpatient hospital
services under part A) on an aggregate payment basis or on the basis
of the amount of payment per inpatient discharge or admission. If
the Secretary determines that the conditions described in subpara-
graph (C) are based on maintaining aggregate payment amounts
below a national average percentage increase in total payments
under part A for inpatient hospital services, the Secretary cannot
deny the application of a State under this subsection on the ground
that the State's rate of increase in such payments for such services
must be less than such national average rate of increase.
(2) Subsection (c)(3) of such section is amended--
(A) by striking out "requirement of paragraph (1)(A)" and in-
serting in lieu thereof "requirements of subparagraphs (A), (D),
and (E) of paragraph (1) and, if applicable, the requirements of
paragraph (5), ", and
(B) by inserting "(or, if applicable, in paragraph (5))" in sub-
paragraph (B) after `paragraph (1)".
(3) Subsection (c) of such section is further amended by adding at
the end the following new paragraphs:
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"(4) The Secretary shall approve the request of a State under para-
graph (1) with respect to a hospital reimbursement control system
if-
"(A) the requirements of subparagraphs (A), (B), (C), and (D)
of paragraph (1) have been met with respect to the system, and
"(B) with respect to that system a waiver of certain require-
ments of title XVIII of the Social Security Act has been ap-
proved on or before (and which is in effect as of) the date of the
enactment of the Social Security Act Amendments of 1983, pur-
suant to section 402(a) of the Social Security Amendments of
1967 or section 222(a) of the Social Security Amendments of
1972.
With respect to a State system described in this paragraph, the Sec-
retary shall judge the effectiveness of such system on the basis of its
rate of increase or inflation in inpatient hospital payments for indi-
viduals under this title, as compared to the national rate of increase
or inflation for such payments, with the State retaining the option
to have the test applied on the basis of the aggregate payment or
payments per inpatient admission or discharge during the three cost
reporting periods beginning on or after October 1, 1983, after which
such test, at the option of the Secretary, shall no longer apply, and
such State systems shall be treated in the same manner as under
other waivers.
"(5) The Secretary shall approve the request of a State under para-
graph (1) with respect to a hospital reimbursement control system
if-
"(A) the requirements of subparagraphs (A), (B), (C), (D), and
(E) of paragraph (1) have been met with respect to the system;
"(B) the Secretary determines that the system-
"(i) is operated directly by the State or by an entity desig-
nated pursuant to State law,
"(ii) provides for payment of hospitals covered under the
system under a methodology (which sets forth exceptions
and adjustments, as well as any method for changes in the
methodology) by which rates or amounts to be paid for hos-
pital services during a specified period are established
under the system prior to the defined rate period, and
"(iii) hospitals covered under the system will make such
reports (in lieu of cost and other reports, identified by the
Secretary, otherwise required under this title) as the Secre-
tary may require in order to properly monitor assurances
provided under this subsection;
"(C) the State has provided the Secretary with satisfactory as-
surances that operation of the system will not result in any
change in hospital admission practices which result in-
"(0 a significant reduction in the proportion of patients
(receiving hospital services covered under the system) who
have no third party coverage and who are unable to pay for
hospital services,
"(ii) a significant reduction in the proportion of individ-
uals admitted to hospitals for inpatient hospital services
for which payment is (or is likely to be) less than the antici-
pated charges for or costs of such services,
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`(iii) the refusal to admit patients who would be expected
to require unusually costly or prolonged treatment for rea-
sons other than those related to the appropriateness of the
care available at the hospital, or
"(iv) the refusal to provide emergency services to any
person who is in need of emergency services if the hospital
provides such services;
`(D) any change by the State in the system which has the
effect of materially reducing payments to hospitals can only
take effect upon 60 days notice to the Secretary and to the hos-
pitals the payment to which is likely to be materially affected
by the change; and
"(E) the State has provided the Secretary with satisfactory as-
surances that in the development of the system the State has
consulted with local governmental officials concerning the
impact of the system on public hospitals.
The Secretary shall response to requests of States under this para-
graph within 60 days of the date the request is submitted to the Sec-
retary.
"(6) If the Secretary determines that the assurances described in
paragraph (1)(C) have not been met with respect to any 36-month
period, the Secretary may reduce payments under this title to hospi-
tals under the system in an amount equal to the amount by which
the payments under this title under such system for such period ex-
ceeded the amount of payments which would otherwise have been
made under this title not using such system. ".
(d) Subsection (d) of such section, as added by section 110 of the
Tax Equity and Fiscal Responsibility Act of 1982, is amended-
(1) by striking out "section 1814(b)" in paragraph (2)(A) and
inserting in lieu thereof "subsection (b)", and
(2) by redesignating the subsection as subsection (j) and trans-
ferring and inserting such subsection at the end of section 1814
of the Social Security Act under the following heading:
"ELIMINATION OF LESSER-OF-COST-OR-CHARGES PROVISION".
(e) Such section 1886 is further amended by adding at the end the
following new subsections:
"(d)(1)(A) Notwithstanding section 1814(b) but subject to the provi-
sions of section 1813, the amount of the payment with respect to the
operating costs of inpatient hospital services (as defined in subsec-
tion (a)(4)) of a subsection (d) hospital (as defined in subparagraph
(B)) for inpatient hospital discharges in a cost reporting period or in
a fiscal year-
"(i) beginning on or after October 1, 1983, and before October
1, 1984, is equal to the sum of-
"(I) the target percentage (as defined in subparagraph (C))
of the hospital's target amount for the cost reporting period
(as defined in subsection (b)(3)(A), but determined without
the application of subsection (a)), and
"(II) the DRG percentage (as defined in subparagraph (C))
of the regional adjusted DRG prospective payment rate de-
termined under paragraph (2) for such discharges;
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"(ii) beginning on or after October 1, 1984, and before October
1, 1986, is equal to the sum of-
"(I) the target percentage (as defined in subparagraph (C))
of the hospital's target amount for the cost reporting period
(as defined in subsection (b)(3)(A), but determined without
the application of subsection (a)), and
"(II) the DRG percentage (as defined in subparagraph (C))
of the applicable combined adjusted DRG prospective pay-
ment rate determined under subparagraph (D) for such dis-
charges; or
"(iii) beginning on or after October 1, 1986, is equal to the na-
tional adjusted DRG prospective payment rate determined
under paragraph (3) for such discharges.
"(B) As used in this section, the term `subsection (d) hospital'
means a hospital located in one of the fifty States or the District of
Columbia other than-
"(i) a psychiatric hospital (as defined in section 1861(f)),
"(ii) a rehabilitation hospital (as defined by the Secretary),
"(iii) a hospital whose inpatients are predominantly individ-
uals under 18 years of age, or
"(iv) a hospital which has an average inpatient length of stay
(as determined by the Secretary) of greater than 25 days;
and, in accordance with regulations of the Secretary, does not in-
clude a psychiatric or rehabilitation unit of the hospital which is a
distinct part of the hospital (as defined by the Secretary).
"(C) For purposes of this subsection, for cost reporting periods be-
ginning, or discharges occurring-
"(i) on or after October 1, 1983, and before October 1, 1984, the
`target percentage' is 75 percent and the `DRG percentage' is 25
percent;
"(ii) on or after October 1, 1984, and before October 1, 1985,
the `target percentage' is 50 percent and the `DRG percentage' is
50 percent; and
"(iii) on or after October 1, 1985, and before October 1, 1986,
the `target percentage' is 25 percent and the `DRG percentage' is
75 percent.
"(D) For purposes of subparagraph (A)(ii)(II), the `applicable com-
bined adjusted DRG prospective payment rate' for cost reporting pe-
riods beginning, or discharges occurring-
"(0 on or after October 1, 1984, and before October 1, 1985, is
a combined rate consisting of 25 percent of the national adjust-
ed DRG prospective payment rate, and 75 percent of the region-
al adjusted DRG prospective payment rate, determined under
paragraph (3) for such discharges; and
"(ii) on or after October 1, 1985, and before October 1 1986, is
a combined rate consisting of 50 percent of the national adjust-
ed DRG prospective payment rate, and 50 percent of the region-
al adjusted DRG prospective payment rate, determined under
paragraph (3) for such discharges.
"(2) The Secretary shall determine a national adjusted DRG pro-
spective payment rate, for each inpatient hospital discharge in fiscal
year 1984 involving inpatient hospital services of a subsection (d)
hospital in the United States, and shall determine a regional ad-
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justed DRG prospective payment rate for such discharges in each
region, for which payment may be made under part A of this title.
Each such rate shall be determined for hospitals located in urban
or rural areas within the United States or within each such region,
respectively, as follows:
"(A) DETERMINING ALLOWABLE INDIVIDUAL HOSPITAL COSTS
FOR BASE PERIOD.-The Secretary shall determine the allowable
operating costs per discharge of inpatient hospital services for
the hospital for the most recent cost reporting period for which
data are available.
"(B) UPDATING FOR FISCAL YEAR 1984.-The Secretary shall
update each amount determined under subparagraph (A) for
fiscal year 1984 by-
"(i) updating for fiscal year 1983 by the estimated aver-
age rate of change of hospital costs industry-wide between
the cost reporting period used under such subparagraph
and fiscal year 1983 and the most recent case-mix data
available, and
"(ii) projecting for fiscal year 1984 by the applicable per-
centage increase (as defined in subsection (bX3XB)) for fiscal
year 1984.
`(C) STANDARDIZING AMOUNTS.-The Secretary shall stand-
ardize the amount updated under subparagraph (B) for each
hospital by-
`(i) excluding an estimate of indirect medical education
costs,
"(ii) adjusting for variations among hospitals by area
and region in the average hospital wage level, and
"(iii) adjusting for variations in case mix among hospi-
tals.
"(D) COMPUTING URBAN AND RURAL AVERAGES.-The Secre-
tary shall compute an average of the standardized amounts de-
termined under subparagraph (C) for the United States and for
each region-
`(i) for all subsection (d) hospitals located in an urban
area within the United States or that region, respectively,
and
`(ii) for all subsection (d) hospitals located in a rural
area within the United States or that region, respectively.
For purposes of this subsection, the term `region' means one of
the nine census divisions, comprising the fifty States and the
District of Columbia, established by the Bureau of the Census
for statistical and reporting purposes; the term `urban area'
means an area within a Standard Metropolitan Statistical,
Area (as defined by the Office of Management and Budget) or
within such similar area as the Secretary has recognized under
subsection (a) by regulation; and the term `rural area' means
any area outside such an area or similar area.
"(E) REDUCING FOR VALUE OF OUTLIER PAYMENTS.-The Secre-
tary shall reduce each of the average standardized amounts de-
termined under subparagraph (D) by a proportion equal to the
proportion (estimated by the Secretary) of the amount of pay-
ments under this subsection based on DRG prospective payment
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rates which are additional payments described in paragraph
(5)(A) (relating to outlier payments).
"(F) MAINTAINING BUDGET NEUTRALITY.-The Secretary shall
adjust each of such average standardized amounts as may be
required under subsection (e)(1)(B) for that fiscal year.
"(G) COMPUTING DRG-SPECIFIC RATES FOR URBAN AND RURAL
HOSPITALS IN THE UNITED STATES AND IN EACH REGION.-For
each discharge classified within a diagnosis-related group, the
Secretary shall establish a national DRG prospective payment
rate and shall establish a regional DRG prospective payment
rate for each region, each of which is equal-
"(0 for hospitals located in an urban area in the United
States or in that region respectively, to the product of-
"(I) the average standardized amount (computed
under subparagraph (D), reduced under subparagraph
(E), and adjusted under subparagraph (F)) for hospitals
located in an urban area in the United States or that
region, and
"(II) the weighting factor (determined under para-
graph (4)(B)) for that diagnosis-related group; and
"(ii) for hospitals located in a rural area in the United
States or that region respectively, to the product of-
"(I) the average standardized amount (computed
under subparagraph (D), reduced under subparagraph
(E), and adjusted under subparagraph (F)) for hospitals
located in a rural area in the United States or that
region, and
"(II) the weighting factor (determined under para-
graph (4)(B)) for that diagnosis-related group.
"(H) ADJUSTING FOR DIFFERENT AREA WAGE LEVELS.-The
Secretary shall adjust the proportion (as estimated by the Secre-
tary from time to time) of hospitals' costs which are attrib-
utable to wages and wage-related costs, of the national and
regional DRG prospective payment rates computed under sub-
paragraph (G) for area differences in hospital wage levels by a
factor (established by the Secretary) reflecting the relative hospi-
tal wage level in the geographic area of the hospital compared
to the national average hospital wage level.
"(3) The Secretary shall determine a national adjusted DRG pro-
spective payment rate, for each inpatient hospital discharge in a
fiscal year after fiscal year 1984 involving inpatient hospital serv-
ices of a subsection (d) hospital in the United States, and shall de-
termine a regional adjusted DRG prospective payment rate for such
discharges in each region for which payment may be made under
part A of this title. Each such rate shall be determined for hospitals
located in urban or rural areas within the United States and
within each such region, respectively, as follows:
"(A) UPDATING PREVIOUS STANDARDIZED AMOUNTS.-The Sec-
retary shall compute an average standardized amount for hospi-
tals located in an urban area and for hospitals located in a
rural area within the the United States and for hospitals locat-
ed in an urban area and for hospitals located in a rural area
within each region, equal to the respective average standardized
amount computed for the previous fiscal year under paragraph
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(2)(D) or under this subparagraph, increased for fiscal year 1985
by the applicable percentage increase under subsection (b)(3XB),
and adjusted for subsequent fiscal years in accordance with the
final determination of the Secretary under subsection (e)(4), and
adjusted to reflect the most recent case-mix data available.
"(B) REDUCING FOR VALUE OF OUTLIER PAYMENTS.-The Secre-
tary shall reduce each of the average standardized amounts de-
termined under subparagraph (A) by a proportion equal to the
proportion (estimated by the Secretary) of the amount of pay-
ments under this subsection based on DRG prospective payment
amounts which are additional payments described in para-
graph (5)(A) (relating to outlier payments).
"(C) MAINTAINING BUDGET NEUTRALITY.-The Secretary shall
adjust each of such average standardized amounts as may be
required under subsection (e)(1)(B) for that fiscal year.
"(D) COMPUTING DRG-SPECIFIC RATES FOR URBAN AND RURAL
HOSPITALS.-For each discharge classified within a diagnosis-
related group, the Secretary shall establish for the fiscal year a
national DRG prospective payment rate and shall establish a
regional DRG prospective payment rate, for each region, each of
which is equal-
`(i) for hospitals located in an urban area in the United
States or that region (respectively), to the product of-
"(I) the average standardized amount (computed
under subparagraph (A), reduced under subparagraph
(B), and adjusted under subparagraph (C)) for the
fiscal year for hospitals located in an urban area in
the United States or that region, and
"(II) the weighting factor (determined under para-
graph (4)(B)) for that diagnosis-related group; and
"(ii) for hospitals located in a rural area in the United
States or that region (respectively), to the product of-
"(I) the average standardized amount (computed
under subparagraph (A), reduced under subparagraph
(B), and adjusted under subparagraph (C)) for the
fiscal year for hospitals located in a rural area in the
United States or that region, and
"(II) the weighting factor (determined under para-
graph (4)(B)) for that diagnosis-related group.
"(E) ADJUSTING FOR DIFFERENT AREA WAGE LEVELS.-The
Secretary shall adjust the proportion (as estimated by the Secre-
tary from time to time) of hospitals' costs which are attrib-
utable to wages and wage-related costs, of the DRG prospective
payment rates computed under subparagraph (D) for area dif-
ferences in hospital wage levels by a factor (established by the
Secretary) reflecting the relative hospital wage level in the geo-
graphic area of the hospital compared to the national average
hospital wage level.
"(4)(A) The Secretary shall establish a classification of inpatient
hospital discharges by diagnosis-related groups and a methodology
for classifying specific hospital discharges within these groups.
"(B) For each such diagnosis-related group the Secretary shall
assign an appropriate weighting factor which reflects the relative
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hospital resources used with respect to discharges classified within
that group compared to discharges classified within other groups.
"(C) The Secretary shall adjust the classifications and weighting
factors established under subparagraphs (A) and (B), for discharges
in fiscal year 1986 and at least every four fiscal years thereafter to
reflect changes in treatment patterns, technology, and other factors
which may change the relative use of hospital resources.
"(D) The Commission (established under subsection (e)(2)) shall
consult with and make recommendations to the Secretary with re-
spect to the need for adjustments under subparagraph (C), based
upon its evaluation of scientific evidence with respect to new prac-
tices, including the use of new technologies and treatment modali-
ties. The Commission shall report to the Congress with respect to its
evaluation of any adjustments made by the Secretary under subpar-
agraph (C).
`YSXAXi) The Secretary shall provide for an additional payment
for a subsection (d) hospital for any discharge in a diagnosis-related
group, the length of stay of which exceeds the mean length of stay
for discharges within that group by a fixed number of days, or ex-
ceeds such mean length of stay by some fixed number of standard
deviations, whichever is the fewer number of days.
`(ii) For cases which are not included in clause (i), a subsection
(d) hospital may request additional payments in any case where
charges, adjusted to cost, exceed a fixed multiple of the applicable
DRG prospective payment rate, or exceed such other fixed dollar
amount, whichever is greater.
"(iii) The amount of such additional payment under clauses (i)
and (ii) shall be determined by the Secretary and shall approximate
the marginal cost of care beyond the cutoff point applicable under
clause (i) or (ii).
"(iv) The total amount of the additional payments made under
this subparagraph for discharges in a fiscal year may not be less
than 5 percent nor more than 6 percent of the total payments pro-
jected or estimated to be made based on DRG prospective payment
rates for discharges in that year.
"(B) The Secretary shall provide for an additional payment
amount for subsection (d) hospitals with indirect costs of medical
education, in an amount computed in the same manner as the ad-
justment for such costs under regulations (in effect as of January 1,
1983) under subsection (a)(2), except that in the computation under
this subparagraph the Secretary shall use an educational adjust-
ment factor equal to twice the factor provided under such regula-
tions.
`(CXi) The Secretary shall provide for such exceptions and adjust-
ments to the payment amounts established under this subsection as
the Secretary deems appropriate to take into account the special
needs of regional and national referral centers (including those hos-
pitals of 500 or more beds located in rural areas), and of public or
other hospitals that serve a significantly disproportionate number of
patients who have low income or are entitled to benefits under part
A ofthis title.
`(ii) With respect to a subsection (d) hospital which is a `sole com-
munity hospital" payment under paragraph (1)(A) for any cost re-
porting period or fiscal year beginning on or after October 1, 1984,
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shall be determined under the formula provided in clause (i) of that
paragraph (except that any reference to paragraph (2) shall be
deemed, for this purpose, a reference to paragraph (3)). In the case of
a sole community hospital that experiences, in a cost reporting
period (beginning on or after October 1, 1983, and before October 1,
1986) compared to the previous cost reporting period, a decrease of
more than 5 percent in its total number of inpatient cases due to
circumstances beyond its control, the Secretary shall provide for
such adjustment to the payment amounts under this subsection as
may be necessary to fully compensate the hospital for the fixed costs
it incurs in the period in providing inpatient hospital services, in-
cluding the reasonable cost of maintaining necessary core staff and
services. For purposes of this subparagraph, the term `sole communi-
ty hospital' means a hospital that, by reason of factors such as iso-
lated location, weather conditions, travel conditions, or absence of
other hospitals (as determined by the Secretary), is the sole source of
inpatient hospital services reasonably available to individuals in a
geographical area who are entitled to benefits under part A.
`(iii) The Secretary shall provide by regulation for such other ex-
ceptions and adjustments to such payment amounts under this sub-
section as the Secretary deems appropriate (including exceptions and
adjustments that may be appropriate with respect to hospitals in-
volved extensively in treatment for and research on cancer).
"(iv) The Secretary may provide for such adjustments to the pay-
ment amounts under this subsection as the Secretary deems appro-
priate to take into account the unique circumstances of hospitals lo-
cated in Alaska and Hawaii.
`(D)(i) The Secretary shall estimate the amount of reimbursement
made for services described in section 1862(a)(14) with respect to
which payment was made under part B in the base reporting peri-
ods referred to in paragraph (2)(A) and with respect to which pay-
ment is no longer being made.
"(ii) The Secretary shall provide for an adjustment to the payment
for subsection (d) hospitals in each fiscal year so as appropriately to
reflect the net amount described in clause (i).
"(6) The Secretary shall provide for publication in the Federal
Register, on or before the September 1 before each fiscal year (begin-
ning with fiscal year 1984), of a description of the methodology and
data used in computing the adjusted DRG prospective payment
rates under this subsection, including any adjustments required
under subsection (e)(1XB).
"(7) There shall be no administrative or judicial review under sec-
tion 1878 or otherwise of-
"(A) the determination of the requirement, or the proportional
amount, of any adjustment effected pursuant to subsection
(e)(1), and
"(B) the establishment of diagnosis-related groups, of the
methodology for the classification of discharges within such
groups, and of the appropriate weighting factors thereof under
paragraph (4).
`(e)(1XA) For cost reporting periods of hospitals beginning in
fiscal year 1984 or fiscal year 1985, the Secretary shall provide for
such proportional adjustment in the applicable percentage increase
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(otherwise applicable to the periods under subsection (b)(3)(B)) as
may be necessary to assure that-
"(i) the aggregate payment amounts otherwise provided under
subsection (d)(1)(A)(i)(I) for that fiscal year for operating costs of
inpatient hospital services of hospitals (excluding payments
made under section 1866(a)(1)(F)),
are not greater or less than-
"(ii) the target percentage (as defined in subsection (d)(1)(0)
of the payment amounts which would have been payable for
such services for those same hospitals for that fiscal year under
this section under the law as in effect before the date of the en-
actment of the Social Security Act Amendments of 1983 (exclud-
ing payments made under section 1866(a)(1)(F));
except that the adjustment made under this subparagraph shall
apply only to subsection (d) hospitals and shall not apply for pur-
poses of making computations under subsection (d)(2)(B)(ii) or sub-
section (d)(3)(A).
"(B) For discharges occurring in fiscal year 1984 or fiscal year
1985, the Secretary shall provide under subsections (d)(2)(F) and
(d)(3)(C) for such equal proportional adjustment in each of the aver-
age standardized amounts otherwise computed for that fiscal year
as may be necessary to assure that-
`(i) the aggregate payment amounts otherwise provided under
subsection (d)(1)(A)(i)(II) and (d)(5) for that fiscal year for oper-
ating costs of inpatient hospital services of hospitals (excluding
payments made under section 1866(a)(1)(F)),
are not greater or less than-
"(ii) the DRG percentage (as defined in subsection (d)(1)(C)) of
the payment amounts which would have been payable for such
services for those same hospitals for that fiscal year under this
section under the law as in effect before the date of the enact-
ment of the Social Security Act Amendments of 1983 (excluding
payments made under section 1866(a)(1)(F)).
"(2) The Director of the Congressional Office of Technology Assess-
ment (hereafter in this subsection referred to as the `Director' and
the `Office, respectively) shall provide for appointment of a Prospec-
tive Payment Assessment Commission (hereafter in this subsection
referred to as the 'Commission 9, to be composed of independent ex-
perts selected by the Director. In addition to carrying out its func-
tions under subsection (d)(4)(D), the Commission shall review the ap-
plicable percentage increase factor described in subsection (b)(3)(B)
and make recommendations to the Secretary on the appropriate per-
centage change which should be effected for hospital inpatient dis-
charges under subsections (b) and (d) for fiscal years beginning with
fiscal year 1986. In making its recommendations, the Commission
shall take into account changes in the hospital market-basket de-
scribed in subsection (b)(3)(B), hospital productivity, technological
and scientific advances, the quality of health care provided in hos-
pitals (including the quality and skill level of professional nursing
required to maintain quality care), and long-term cost-effectiveness
in the provision of inpatient hospital services.
`(3) The Commission, not later than the April 1 before the begin-
ning of each fiscal year (beginning with fiscal year 1986), shall
report its recommendations to the Secretary on an appropriate
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change factor which should be used (instead of the applicable per-
centage increase described in subsection (b)(3)(B)) for inpatient hospi-
tal services for discharges in that fiscal year.
"(4) Taking into consideration the recommendations of the Com-
mission, the Secretary shall determine for each fiscal year (begin-
ning with fiscal year 1986) the percentage change which will apply
for purposes of this section as the applicable percentage increase
(otherwise described in subsection (b)(3)(B)) for discharges in that
fiscal year, and which will take into account amounts necessary for
the efficient and effective delivery of medically appropriate and nec-
essary care of high quality.
`(5) The Secretary shall cause to have published for public com-
ment in the Federal Register, not later than-
"(A) the June 1 before each fiscal year (beginning with fiscal
year 1986), the Secretary's proposed determination under para-
graph (4) for that fiscal year, and
"(B) the September 1 before such fiscal year after such consid-
eration of public comment on the proposal as is feasible in the
time available, the Secretary's final determination under such
paragraph for that year.
The Secretary shall include in the publication referred to in subpar-
agraph (A) for a fiscal year the report of the Commission's recom-
mendations submitted under paragraph (3) for that fiscal year.
"(6)(A) The Commission shall consist of 15 individuals. Members
of the Commission shall first be appointed no later than April 1,
1984, for a term of three years, except that the Director may provide
initially for such shorter terms as will insure that (on a continuing
basis) the terms of no more than seven members expire in any one
year.
"(B) The membership of the Commission shall provide expertise
and experience in the provision and financing of health care, in-
cluding but not limited to physicians and registered professional
nurses, employers, third party payors, individuals skilled in the con-
duct and interpretation of biomedical, health services, and health
economics research, and individuals having expertise in the re-
search and development of technological and scientific advances in
health care. The Director shall seek nominations from a wide range
of groups, including but not limited to-
it(i) national organizations representing physicians, including
medical specialty organizations and registered professional
nurses and other skilled health professionals;
"(ii) national organizations representing hospitals, including
teaching hospitals;
"(iii) national organizations representing manufacturers of
health care products; and
"(iv) national organizations representing the business commu-
nity, health benefit programs, labor, and the elderly.
"(C) Subject to such review as the Office deems necessary to assure
the efficient administration of the Commission, the Commission
may-
"(i) employ and fix the compensation of such personnel (not to
exceed 25) as may be necessary to carry out its duties;
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`(ii) seek such assistance and support as may be required in
the performance of its duties from appropriate Federal depart-
ments and agencies;
"(iii) enter into contracts or make other arrangements, as may
be necessary for the conduct of the work of the Commission;
"(iv) make advance, progress, and other payments which
relate to the work of the Commission;
"(v) provide transportation and subsistence for persons serv-
ing without compensation; and
"(vi) prescribe such rules and regulations as it deems neces-
sary with respect to the internal organization and operation of
the Commission.
"(D) While serving on the business of the Commission (including
traveltime), a member of the Commission shall be entitled to com-
pensation at the per diem equivalent of the rate provided for level
IV of the Executive Schedule under section 5315 of title 5, United
States Code; and while so serving away from home and his regular
place of business, a member may be allowed travel expenses, as au-
thorized by the Chairman of the Commission.
"(E) In order to identify medically appropriate patterns of health
resources use in accordance with paragraph (2), the Commission
shall collect and assess information on medical and surgical proce-
dures and services, including information on regional variations of
medical practice and lengths of hospitalization and on other pa-
tient-care data, giving special attention to treatment patterns for
conditions which appear to involve excessively costly or inappropri-
ate services not adding to the quality of care provided. In order to
assess the safety, efficacy, and cost-effectiveness of new and existing
medical and surgical procedures, the Commission shall, in coordina-
tion to the extent possible with the Secretary, collect and assess fac-
tual information, giving special attention to the needs of updating
existing diagnosis-related groups, establishing new diagnosis-related
groups, and making recommendations on relative weighting factors
for such groups to reflect appropriate differences in resource con-
sumption in delivering safe, efficacious, and cost-effective care. In
collecting and assessing information, the Commission shall-
"(0 utilize existing information, both published and unpub-
lished, where possible, collected and assessed either by its own
staff or under other arrangements made in accordance with this
paragraph;
"(ii) carry out, or award grants or contracts for, original re-
search and experimentation, including clinical research, where
existing information is inadequate for the development of
useful and valid guidelines by the Commission; and
"(iii) adopt procedures allowing any interested party to
submit information with respect to medical and surgical proce-
dures and services (including new practices, such as the use of
new technologies and treatment modalities), which information
the Commission shall consider in making reports and recom-
mendations to the Secretary and Congress.
"(F) The Commission shall have access to such relevant informa-
tion and data as may be available from appropriate Federal agen-
cies and shall assure that its activities, especially the conduct of
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original research and medical studies, are coordinated with the ac-
tivities of Federal agencies.
`(G)(i) The Office shall report annually to the Congress on the
functioning and progress of the Commission and on the status of
the assessment of medical procedures and services by the Commis-
sion.
`(ii) The Office shall have unrestricted access to all deliberations,
records, and data of the Commission, immediately upon its request.
`(iii) In order to carry out its duties under this paragraph, the
Office is authorized to expend reasonable and necessary funds as
mutually agreed upon by the Office and the Commission. The Office
shall be reimbursed for such funds by the Commission from the ap-
propriations made with respect to the Commission.
"(H) The Commission shall be subject to periodic audit by the
General Accounting Office.
`(IXi) There are authorized to be appropriated such sums as may
be necessary to carry out the provisions of this paragraph.
"(ii) Eighty-five percent of such appropriation shall be payable
from the Federal Hospital Insurance Trust Fund, and 15 percent of
such appropriation shall be payable from the Federal Supplemen-
tary Medical Insurance Trust Fund.":
`()(1) The Secretary shall maintain, for a period ending not earli-
er than September 30, 1988, a system for the reporting of costs of
hospitals receiving payments computed under subsection (d).
"(2) If the Secretary determines, based upon information supplied
by a utilization and quality control peer review organization under
part B of title XI, that a hospital, in order to circumvent the pay-
ment method established under subsection (b) or (d) of this section,
has taken an action that results in the admission of individuals en-
titled to benefits under part A unnecessarily, unnecessary multiple
admissions of the same such individuals, or other inappropriate
medical or other practices with respect to such individuals, the Sec-
retary may-
"(A) deny payment (in whole or in part) under part A with
respect to inpatient hospital services provided with respect to
such an unnecessary admission (or subsequent admission of the
same individual), or
"(B) require the hospital to take other corrective action neces-
sary to prevent or correct the inappropriate practice.
"(3) The provisions of paragraphs (2), (3), and (4) of section 1862(d)
shall apply to determinations under paragraph (2) of this subsection
in the same manner as they apply to determinations made under
section 1862(d)(l)?
"(g)(l) If the Congress does not enact legislation, after the date of
the enactment of this subsection and before October 1, 1986, respect-
ing the payment under this title for capital-related costs for inpa-
tient hospital services, no payment may be made under this title for
capital-related costs of capital expenditures (as defined in section
1122(g) and except as provided in section 1122(j)) for inpatient hospi-
tal services in a State, which expenditures are obligated after Sep-
tember 30, 1986, unless the State has an agreement with the Secre-
tary under section 1122(b) and under the agreement the State has
recommended approval of the capital expenditures.
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"(2) The Secretary shall provide that the amount which is allow-
able, with respect to reasonable costs of inpatient hospital services
for which payment may be made under this title, for a return on
equity capital for hospitals shall, for cost reporting periods begin-
ning on or after the date of the enactment of this subsection, be
equal to amounts otherwise allowable under regulations in effect on
March 1, 1983, except that the rate of return to be recognized shall
be equal to the average of the rates of interest, for each of the
months any part of which is included in the reporting period, on
obligations issued for purchase by the Federal Hospital Insurance
Trust Fund. ".
(f) Section 1862(a)(1) of the Social Security Act is amended-
(1) by striking out "(B) or (C)" and inserting in lieu thereof
"(B), (C), or (D)';
(2) by striking out "and" at the end of subparagraph (B);
(3) by striking out the semicolon at the end of subparagraph
(C) and inserting in lieu thereof a comma and "and" and
(4) by adding at the end thereof the following new subpara-
graph:
"(D) in the case of clinical care items and services provided
with the concurrence of the Secretary and with respect to re-
search and experimentation conducted by, or under contract
with, the Prospective Payment Assessment Commission or the
Secretary, which are not reasonable and necessary to carry out
the purposes of section 1886(e)(6); ".
(g) In determining whether a hospital is in an urban or rural area
for purposes of section 1886(d) of the Social Security Act, the Secre-
tary of Health and Human Services shall classify any hospital, lo-
cated in New England as being located in an urban area if such
hospital was classified as being located in an urban area under the
Standard Metropolitan Statistical Area system of classification in
effect in 1979.
SEC. 602. (a) Section 1153(b)(2) of the Social Security Act is
amended by adding at the end the following new subparagraph:
"(C) The twelve-month period referred to in subparagraph (A)
shall be deemed to begin not later than October 1983.
(b) Sections 1814(g) and 1835(e) of the Social Security Act are each
amended by inserting "(or would be if section 1886 did not apply)"
after "section 1861(v)(1)(D)".
(c) Section 1814(h)(2) of such Act is amended by striking out "the
reasonable costs for such services" and inserting in lieu thereof "the
amount that would be payable for such services under subsection (b)
and section 1886".
(d)(1) The matter in section 1861(v)(1XG)(i) of such Act following
subclause (III) is amended by striking out "on the basis of the rea-
sonable cost of" and inserting in lieu thereof "the amount otherwise
payable under part A with respect to".
(2) Section 1861(v)(2)(A) of such Act is amended by striking out
"an amount equal to the reasonable cost of" and inserting in lieu
thereof "the amount that would be taken into account with respect
to".
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(3) Section 1861(v)(2XB) of such Act is amended by striking out
"the equivalent of the reasonable cost of
(4) Section 1861(vX3) of such Act is amended by striking out "the
reasonable cost of such bed and board furnished in semiprivate ac-
commodations (termined pursuant to paragraph (1))" and insert-
ing in lieu thereof "the amount otherwise payable under this title
for such bed and board furnished in semiprivate accommodations ".
(e) Section 1862(a) of such Act is amended-
(1) by striking out "or" at the end of paragraph (12),
(2) by striking out the period at the end of paragraph (13) and
inserting in lieu thereof `; or"; and
(3) by adding at the end the following new paragraph:
"(14) which are other than physicians' services (as defined in
regulations specifically for purposes of this paragraph) and
which are furnished to an individual who is an inpatient of a
hospital by an entity other than the hospital, unless the services
are furnished under arrangements (as defined in section
1861(w)(1)) with the entity made by the hospital. ".
()(1) Section 1866(a)(1) of such Act is amended-
(A) by striking out "and" at the end of subparagraph (D),
(B) by striking out the period at the end of subparagraph (E),
and
(C) by adding at the end the following new subparagraphs:
"(F) in the case of hospitals which provide inpatient hospital
services for which payment may be made under subsection (c) or
(d) of section 1886, to maintain an agreement with a utilization
and quality control peer review organization (if there is such an
organization which has a contract with the Secretary under
part B of title XI for the area in which the hospital is located)
under which the organization will perform functions under
that part with respect to the review of the validity of diagnostic
information provided by such hospital, the completeness, ade-
quacy, and quality of care provided, the appropriateness of ad-
missions and discharges, and the appropriateness of care pro-
vided for which additional payments are sought under section
1886(d)(5), with respect to inpatient hospital services for which
payment may be made under part A of this title (and for pur-
poses of payment under this title, the cost of such agreement to
the hospital shall be considered a cost incurred by such hospital
in providing inpatient services under part A, and (i) shall be
paid directly by the Secretary to such organization on behalf of
such hospital in accordance with a rate per review established
by the Secretary, (ii) shall be transferred from the Trust Fund,
without regard to amounts appropriated in advance in appro-
priation Acts, in the same manner as transfers are made for
payment for services provided directly to beneficiaries, (iii) shall
be not less than an amount which reflects the rates per review
established in fiscal year 1982 for both direct and administra-
tive costs (adjusted for inflation), and (iv) shall not be less in
the aggregate for a fiscal year than the aggregate amount ex-
pended in fiscal year 1982 for direct and administrative costs
(adjusted for inflation),
"(G) in the case of hospitals which provide inpatient hospital
services for which payment may be made under subsection (b) or
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(d) of section 1886, not to charge any individual or any other
person for inpatient hospital services for which such individual
would be entitled to have payment made under part A but for a
denial or reduction of payments under section 1886()(2), and
`(H) in the case of hospitals which provide inpatient hospital
services for which payment may be made under this title, to
have all items and services (other than physicians' services as
defined in regulations for purposes of section 1862(a)(14)) (i) that
are furnished to an individual who is an inpatient of the hospi-
tal, and (ii) for which the individual is entitled to have pay-
ment made under this title, furnished by the hospital or other-
wise under arrangements (as defined in section 1861(w)(1)) made
by the hospital.':
(2) The matter in section 1866(a)(2XB)(ii) of such Act preceding
subclause (I) is amended by inserting "and except with respect to in-
patient hospital costs with respect to which amounts are payable
under section 1886(d)" after "(except with respect to emergency serv-
ices) ".
(g) Section 1876(g) of such Act is amended by adding at the end
the following:
"(4) A risk-sharing contract under this subsection may, at the
option of an eligible organization, provide that the Secretary-
"(A) will reimburse hospitals either for payment amounts de-
termined in accordance with section 1886, or for the reasonable
cost (as determined under section 1861(v)) or as applicable, of
inpatient hospital services furnished to individuals enrolled
with such organization pursuant to subsection (d), and
"(B) will deduct the amount of such reimbursement for, ay-
ment which would otherwise be made to such organization.
(h)(1) Section 1878(a) of such Act is amended-
(A) by inserting "and (except as provided in subsection (g)(2))
any hospital which receives payments in amounts computed
under section 1886(d) and which has submitted such reports
within such time as the Secretary may require in order to make
payment under such section may obtain a hearing with respect
to such payment by the Board" after "subsection (h)" in the
matter before paragraph (1),
(B) by inserting (i) ' after "(A)" in paragraph (1)(A),
(C) by inserting "or" at the end of paragraph (1)(A) and by
adding after such paragraph the following new clause:
"(ii) is dissatisfied with a final determination of the Sec-
retary as to the amount of the payment under section
1886(d)," ; and
(D) by striking out "(1)(A)" in paragraph (3) and inserting in
lieu thereof "(1)(A)(i), or with respect to appeals under para-
graph (1)(A)(ii), 180 days after notice of the Secretary's final de-
termination, ".
(2)(A) The last sentence of section 1878(f)(1) of the Social Security
Act is amended by inserting "(or, in an action brought jointly by
several providers, the judicial district in which the greatest number
of such providers are located) after "the judicial district in which
the provider is located".
(B) Section 1878(f)(1) of such Act is further amended by adding at
the end thereof the following new sentence: "Any appeal to the
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Board or action for judicial review by providers which are under
common ownership or control must be brought by such providers as
a group with respect to any matter involving an issue common to
such providers. ".
(3) Section 1878(g) of such Act is amended by inserting "(1)" after
"(g)" and by adding at the end the following new paragraph:
"(2) The determinations and other decisions described in section
1886(d)(7) shall not be reviewed by the Board or by any court pursu-
ant to an action brought under subsection (19 or otherwise." :
(4) The third sentence of section 1878(h) of such Act is amended
by striking out "cost reimbursement" and inserting in lieu thereof
`payment of providers of services".
(i) The first sentence of section 1881(b)(2XA) of such Act is amend-
ed by inserting "or section 1886 (if applicable)" after "section
1861(v)".
(j) Section 1887(a)(1XB) of such Act is amended by inserting "or on
the bases described in section 1886" after "on a reasonable cost
basis"
(k) The Secretary of Health and Human Services may, for any cost
reporting period beginning prior to October 1, 1986, waive the re-
quirements of sections 1862(a)(14) and 1866(a)(1XH) of the Social Se-
curity Act in the case of a hospital which has followed a practice,
since prior to October 1, 1982, of allowing direct billing under part
B of title XVIII of such Act for services (other than physician serv-
ices) so extensively, that immediate compliance with those require-
ments would threaten the stability of patient care. Any such waiver
shall provide that such billing may continue to be made under part
B of such title but that the payments to such hospital under part A
of such title shall be reduced by the amount of the billings for such
services under part B of such title. If such a waiver is granted, at
the end of the waiver period the Secretary may provide for such
methods of payments under part A as is appropriate, given the orga-
nizational structure of the institution.
(1) Effective October 1, 1984, section 1866(a)(l) of the Social Secu-
rity Act, as amended by subsection ()(1) of this section, is further
amended-
(1) by striking out "(if there is such an organization" in sub-
paragraph (F) and insert in lieu thereof `(with an organiza-
tion , and
(2) by adding at the end the following new sentence: `In the
case of a hospital which has an agreement in effect with an or-
ganization described in subparagraph (F), which organization's
contract with the Secretary under part B of title XI terminates
on or after October 1, 1984, the hospital shall not be determined
to be out of compliance with the requirement of such subpara-
graph during the six month period beginning on the date of the
termination of that contract.
REPORTS, EXPERIMENTS, AND DEMONSTRATION PROJECTS
SEC. 603. (a)(1) The Secretary of Health and Human Services
(hereinafter in this title referred to as the "Secretary') shall study,
develop, and report to the Congress within 18 months after the date
of the enactment of this Act on the method and proposals for legis-
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lation by which capital-related costs, such as return on net equity,
associated with inpatient hospital services can be included within
the prospective payment amounts computed under section 1886(d) of
the Social Security Act.
(2)(A) The Secretary shall study and report annually to the Con-
gress at the end of each year (beginning with 1984 and ending with
1987) on the impact, of the payment methodology under section
1886(d) of the Social Security Act during the previous year, classes
of hospitals, beneficiaries, and other payors for inpatient hospital
services, and other providers, and, in particular, on the impact of
computing DRG prospective payment rates by census division, rather
than exclusively on a national basis. Each such report shall include
such recommendations for such changes in legislation as the Secre-
tary deems appropriate.
(B) During fiscal year 1984, the Secretary shall begin the collec-
tion of data necessary to compute the amount of physician charges
attributable, by diagnosis-related groups, to physicians' services fur-
nished to inpatients of hospitals whose discharges are classified
within those groups. The Secretary shall include, in a report to Con-
gress in 1985, recommendations on the advisability and feasibility
of providing for determining the amount of the payments for physi-
cians' services furnished to hospital inpatients based on the DRG
type classification of the discharges of those inpatients, and legisla-
tive recommendations thereon.
(C) In the annual report to Congress under subparagraph (A) for
1985, the Secretary shall include the results of studies on-
(i) the feasibility and impact of eliminating or phasing out
separate urban and rural DRG prospective payment rates under
paragraph (3) of section 1886(d) of the Social Security Act;
(ii) whether and the method under which hospitals, not paid
based on amounts determined under such section, can be paid
for inpatient hospital services on a prospective basis as under
such section;
(iii) the appropriateness of the factors used under paragraph
(5)(A) of such section to compensate hospitals for the additional
expenses of outlier cases, and the application of severity of ill-
ness, intensity of care, or other modifications to the diagnosis-
related groups, and the advisability and feasibility of providing
for such modifications;
(iv) the feasibility and desirability of applying the payment
methodology under such section to payment by all payors for in-
patient hospital services; and
(v) the impact of such section on hospital admissions and the
feasibility of making a volume adjustment in the DRG prospec-
tive payment rates or requiring preadmission certification in
order to minimize the incentive to increase admissions.
Such report shall specifically include, with respect to the item de-
scribed in clause (iv), consideration of the extent of cost-shifting to
non-Federal payors and the impact of such cost-shifting on health
insurance costs and premiums borne by employers and employees.
(D) In the annual report to Congress under subparagraph (A) for
1986, the Secretary shall include the results of a study examining
the overall impact of State systems of hospital payment (either ap-
proved under section 1886(c) of the Social Security Act or under a
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waiver approved under section 402(a) of the Social Security Amend-
ments of 1967 or section 222(a) of the Social Security Amendments
of 1972), particularly assessing such systems' impact not only on the
medicare program but also on the medicaid program, on payments
and premiums under private health insurance plans, and on tax ex-
penditures.
(3)(A) The Secretary shall complete a study and make legislative
recommendations to the Congress with respect to an equitable
method of reimbursing sole community hospitals which takes into
account their unique vulnerability to substantial variations in occu-
pancy.
(B) In addition, the Secretary shall examine ways to coordinate
an information transfer between parts A and B of title XVIII of the
Social Security Act, particularly with respect to those cases where a
denial of coverage is made under part A of such title, and no ad-
justment is made in the reimbursement to the admitting physician
or physicians.
(C) The Secretary shall also report on the appropriate treatment of
uncompensated care costs, and adjustments that might be appropri-
ate for large teaching hospitals located in rural areas.
(D) The Secretary shall also report on the advisability of having
hospitals make available information on the cost of care to patients
financed by both public programs and private payors.
(E) The studies and reports described in this paragraph shall be
completed and submitted not later than April 1, 1985.
(4) The Secretary shall complete a study and make recommenda-
tions to the Congress, before April 1, 1984, with respect to a method
for including hospitals located outside of the fifty States and the
District of Columbia under a prospective payment system.
(b)(1) Except as provided in paragraph (2), the amendments made
by this title shall not affect the authority of the Secretary to devel-
op, carry out, or continue experiments and demonstration projects.
(2) The Secretary shall provide that, upon the request of a State
which has a demonstration project (or upon the request of a party to
demonstration project agreement), for payment of hospitals under
title XVIII of the Social Security Act approved under section 402(a)
of the Social Security Amendments of 1967 or section 222(a) of the
Social Security Amendments of 1972, which (A) is in effect as of
March 1, 1983, and (B) was entered into after August 1982, the
terms of the demonstration agreement shall be modified so that the
demonstration project is not required to maintain the rate of in-
crease in medicare hospital costs in that State below the national
rate of increase in medicare hospital costs.
(c) The Secretary shall approve, with appropriate terms and condi-
tions as defined by the Secretary, within 30 days after the date of
enactment of this Act-
(1) the risk-sharing application of On Lok Senior Health Serv-
ices (according to terms and conditions as specified by the Secre-
tary), dated July 2, 1982, for waivers, pursuant to section 222 of
the Social Security Amendments of 1972 and section 402(a) of
the Social Security Amendments of 1967, of certain require-
ments of title XVIII of the Social Security Act over a period of
36 months in order to carry out a long-term care demonstration
project, and
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(2) the application of the Department of Health Services,
State of California, dated November 1, 1982, pursuant to section
1115 of the Social Security Act, for the waiver of certain re-
quirements of title XIX of such Act over a period of 36 months
in order to carry out a demonstration project for capitated reim-
bursement for comprehensive long-term care services involving
On Lok Senior Health Services.
(d) The Secretary shall conduct demonstrations with hospitals in
areas with critical shortages of skilled nursing facilities to study
the feasibility of providing alternative systems of care or methods of
payment.
SEC. 604. (a)(1) Except as provided in section 602(l) and in para-
graph (2), the amendments made by the preceding provisions of this
title apply to items and services furnished by or under arrangements
with a hospital beginning with its first cost reporting period that
begins on or after October 1, 1983. A change in a hospital's cost re-
porting period that has been made after November 1982 shall be rec-
ognized for purposes of this section only if the Secretary finds good
cause for that change.
(2) Section 1866(a)(1)(F) of the Social Security Act (as added by
section 602(f)(1)(C) of this title), section 1862(a)(14) (as added by sec-
tion 602(e)(3) of this title) and sections 1886(a)(1) (G) and (H) of such
Act (as added by section 602(f)(1)(C) of this title) take effect on Octo-
ber 1, 1983.
(b) The Secretary shall make an appropriate reduction in the pay-
ment amount under section 1886(d) of the Social Security Act (as
amended by this title) for any discharge, if the admission has oc-
curred before a hospital's first cost reporting period that begins after
September 1983, to take into account amounts payable under title
XVIII of that Act (as in effect before the date of the enactment of
this Act) for items and services furnished before that period.
(c)(1) The Secretary shall cause to be published in the Federal
Register a notice of the interim final DRG prospective payment
rates established under subsection (d) of section 1886 of the Social
Security Act (as amended by this title) no later than September 1,
1983, and allow for a period of public comment thereon. Payment on
the basis of prospective rates shall become effective on October 1,
1983, without the necessity for consideration of comments received,
but the Secretary shall, by notice published in the Federal Register,
affirm or modify the amounts by December 31, 1983, after consider-
ing those comments.
(2) A modification under paragraph (1) that reduces a prospective
payment rate shall apply only to discharges occurring after 30 days
after the date the notice of the modification is published in the Fed-
eral Register.
(3) Rules to implement subsection (d) of section 1886 of the Social
Security Act (as so amended) shall be established in accordance
with the procedure described in this subsection.
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DELAY IN PROVISION RELATING TO HOSPITAL-BASED SKILLED NURSING
FACILITIES
SEC. 605. (a) Section 102 of the Tax Equity and Fiscal Responsibil-
ity Act of 1982 is amended by striking out "October 1, 1982" and
inserting in lieu thereof "October 1, 1983".
(b) The Secretary of Health and Human Services shall, prior to
December 31, 1983, complete a study and report to the Congress with
respect to (1) the effect which the implementation of section 102 of
the Tax Equity and Fiscal Responsibility Act of 1982 would have on
hospital-based skilled nursing facilities, given the differences (if
any) in the patient populations served by such facilities and by com-
munity-based skilled nursing facilities and (2) the impact on skilled
nursing facilities of hospital prospective payment systems, and rec-
ommendations concerning payment of skilled nursing facilities.
SHIFT IN MEDICARE PREMIUMS TO COINCIDE WITH COST-OF-LIVING
INCREASE
SEC. 606. (a) Section 1839 of the Social Security Act is amended by
striking out subsections (a), (b), and (c) and inserting in lieu thereof
the following:
`(a)(1) The Secretary shall, during September of 1983 and of each
year thereafter, determine the monthly actuarial rate for enrollees
age 65 and over which shall be applicable for the succeeding calen-
dar year. Such actuarial rate shall be the amount the Secretary esti-
mates to be necessary so that the aggregate amount for such calen-
dar year with respect to those enrollees who have attained retire
-
ment age will equal one-half of the total of the benefits and admin-
istrative costs which he estimates will be payable from the Federal
Supplementary Medical Insurance Trust Fund for services per-
formed and related administrative costs incurred in such calendar
year with respect to such enrollees. In calculating the monthly actu-
arial rate, the Secretary shall include an appropriate amount for a
contingency margin.
"(2) The monthly premium of each individual enrolled under this
part for each month after December 1983 shall, except as provided
in subsections (b) and (e), be the amount determined under para-
graph (3).
`(3) The Secretary shall, during September of 1983 and of each
year thereafter, determine and promulgate the monthly premium ap-
plicable for individuals enrolled under this part for the succeeding
calendar year. The monthly premium shall (exce t as otherwise pro-
vided in subsection (e)) be equal to the smaller of-
"(A) the monthly actuarial rate for enrollees age 65 and over,
determined according to paragraph (1) of this subsection, for
that calendar year, or
"(B) the monthly premium rate most recently promulgated by
the Secretary under this paragraph, increased by a percentage
determined as follows: The Secretary shall ascertain the pri-
mary insurance amount computed under section 215(a)(1), based
upon average indexed monthly earnings of $900, that applied to
individuals who became eligible for and entitled to old-age in-
surance benefits on November 1 of the year before the year of
the promulgation. He shall increase the monthly premium rate
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by the same percentage by which that primary insurance
amount is increased when, by reason of the law in effect at the
time the promulgation is made, it is so computed to apply to
those individuals for the following November 1.
Whenever the Secretary promulgates the dollar amount which shall
be applicable as the monthly premium for any period, he shall, at
the time such promulgation is announced, issue a public statement
setting forth the actuarial assumptions and bases employed by him
in arriving at the amount of an adequate actuarial rate for enroll-
ees who have attained retirement age as provided in paragraph (1)
and the derivation of the dollar amounts specified in this para-
graph.
"(4) The Secretary shall also, during September of 1983 and of
each year thereafter, determine the monthly actuarial rate for dis-
abled enrollees under age 65 which shall be applicable for the suc-
ceeding calendar year. Such actuarial rate shall be the amount the
Secretary estimates to be necessary so that the aggregate amount for
such calendar year with respect to disabled enrollees under age 65
will equal one-half of the total of the benefits and administrative
costs which he estimates will be payable from the Federal Supple-
mentary Medical Insurance Trust Fund for services performed and
related administrative costs incurred in such calendar year with re-
spect to such enrollees. In calculating the monthly actuarial rate
under this paragraph, the Secretary shall include an appropriate
amount for a contingency margin. ".
(2) Subsections (d), (e), (f), and (g) of section 1839 of such Act are
redesignated as subsections (b), (c), (d), and (e), respectively.
(3)(A) Section 1839(b) of such Act (as so redesignated) is amended
by striking out "subsection (b), (c), or (g)" and inserting in lieu there-
of "subsection (a) or (e)".
(B) Section 1839(d) of such Act (as so redesignated) is amended by
striking out `purposes of subsection (c)" and inserting in lieu thereof
`purposes of subsection (b)".
(C) Section 1839(e) of such Act (as so redesignated) is amended by
striking out "subsection (c)" and "subsection (c)(l)" and by inserting
in lieu thereof "subsection (a)" and "subsection (a)(l)"; respectively.
(D) Section 1818(c) of such Act is amended by striking out "subsec-
tion (c) of section 1839" and inserting in lieu thereof "subsection (a)
of section 1839".
(E) Section 1843(d)(1) of such Act is amended by striking out
"without any increase under subsection (c) thereof" and inserting in
lieu thereof "without any increase under subsection (b) thereof".
(F) Section 1844(a)(1)(A)(i) of such Act is amended-
(i) by striking out "1839(c)(1)" and inserting in lieu thereof
"1839(a)(1)';? and
(ii) by striking out "1839(c)(3) or 1839(g)" and inserting in lieu
thereof "1839(a)(3) or 1839(e)"
(G) Section 1844(a)(1XB)(i) of such Act is amended-
(i) by striking out "1839(c)(4)" and inserting in lieu thereof
"1839(a)(4)';? and
(ii) by striking out "1839(c)(3) or 1839(g)" and inserting in lieu
thereof "1839(a)(3) or 1839(e)"(H) Section 1876(a)(5) of such Act is amended-
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(i) in subparagraph (A)(ii) by striking out "1839(c)(1)" and in-
serting in lieu thereof "1839(a)(1)"; and
(ii) in subparagraph (B)(ii), by striking out "1839(c)(4)" and
inserting in lieu thereof "1839(a)(4)".
(b) Section 1818(d)(2) of such Act is amended-
(1) by striking out "during the last calendar quarter of each
year, beginning in 1973, " in the first sentence and inserting in
lieu thereof "during the next to last calendar quarter of each
year
(2) by striking out "the 12-month period commencing July 1 of
the next year" in the first sentence and inserting in lieu thereof
"the following calendar year"; and
(3) by striking out "for such next year" in the second sentence
and inserting in lieu thereof "for that following calendar year".
(c) The amendments made by this section shall apply to premiums
for months beginning with January 1984, and for months after June
1983 and before January 1984-
(1) the monthly premiums under part A and under part B of
title XVIII of the Social Security Act for individuals enrolled
under each respective part shall be the monthly premium under
that part for the month of June 1983, and
(2) the amount of the Government contributions under section
1844(a)(1) of such Act shall be computed on the basis of the ac-
tuarilly adequate rate which would have been in effect under
part B of title XVIII of such Act for such months without
regard to the amendments made by this section, but using the
amount of the premium in effect for the month of June 1983.
SECTION 1122 AMENDMENTS
SEC. 607. (a) Section 1122(c) of the Social Security Act is amended
by striking out "the Federal Hospital Insurance Trust Fund" and
inserting "the general fund in the Treasury".
(b)(1) Section 1122(g) of such Act is amended-
(A) by striking out "$100,000" the first place it appears and
inserting in lieu thereof "$600,000 (or such lesser amount as the
State may establish)"; and
(B) by striking out "$100,000" the second place it appears and
inserting in lieu thereof "the dollar amount specified in clause
(1)"
(2) Section 1861(z)(2) of such Act is amended by striking out
"$100,000" and inserting in lieu thereof "$600,000 (or such lesser
amount as may be established bey the State under section 1122(gX1)
in which the hospital is located)
(c) Section 1122 of such Act is amended by adding at the end
thereof the following:
"(j) A capital expenditure made by or on behalf of a health care
facility shall not be subject to review pursuant to this section if 75
percent of the patients who can reasonably be expected to use the
service with respect to which the capital expenditure is made will be
individuals enrolled in an eligible organization as defined in sec-
tion 1876(b), and if the Secretary determines that such capital ex-
penditure is for services and facilities which are needed by such or-
ganization in order to operate efficiently and economically and
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which are not otherwise readily accessible to such organization be-
cause-
"(1) the facilities do not provide common services at the same
site (as usually provided by the organization),
`(2) the facilities are not available under a contract of reason-
able duration,
"(3) full and equal medical staff privileges in the facilities
are not available,
"(4) arrangements with such facilities are not administrative-
ly feasible, or
"(5) the purchase of such services is more costly than if the
organization provided the services directly. ".
(d) Section 1861(z)(2) of such Act is amended by inserting "(A)"
after "(z)" and by adding at the end thereof the following new sub-
paragraph:
"(B) provides that such plan is submitted to the agency desig-
nated under section 1122(b), or if no such agency is designated,
to the appropriate health planning agency in the State (but this
subparagraph shall not apply in the case of a facility exempt
from review under section 1122 by reason of section 1122(j)); ".
And the Senate agree to the same.
DAN ROSTENKOWSKI,
J. J. PICKLE,
ANDREW JACOBS, Jr.,
HAROLD FORD,
JAMES M. SHANNON,
BARBER B. CONABLE, Jr.,
Managers on the Part of the House.
BOB DOLE,
JOHN DANFORTH,
JOHN H. CHAFEE,
JOHN HEINZ,
LLOYD BENTSEN,
DANIEL PATRICK MOYNIHAN,
Managers on the Part of the Senate.
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JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF
CONFERENCE
The managers on the part of the House and the Senate at the
conference on the disagreeing votes of the two Houses on the
amendment of the Senate to the bill (H.R. 1900) to assure the sol-
vency of the Social Security Trust Funds, to reform the medicare
reimbursement of hospitals, to extend the Federal supplemental
compensation program, and for other purposes, submit the follow-
ing joint statement to the House and the Senate in explanation of
the effect of the action agreed upon by the managers and recom-
mended in the accompanying conference report:
The Senate amendment struck out all of the House bill after the
enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment of
the Senate with an amendment which is a substitute for the House
bill and the Senate amendment. The differences between the House
bill, the Senate amendment, and the substitute agreed to in confer-
ence are noted below, except for clerical corrections, conforming
changes made necessary by agreements reached by the conferees,
and minor drafting and clarifying changes.
CONTENTS
1. PROVISIONS AFFECTING THE FINANCING OF THE SOCIAL SECURITY
SYSTEM
1. Extension of Coverage: Pap
a. Federal employees ............................................................................................. 117
b. Employees of nonprofit organizations ............................................................ 118
2. Termination of coverage by State and local governments ................................. 119
3. Windfall benefits ........................................................................................................ 120
4. Delay cost-of-living adjustment ............................................................................... 121
5. Taxation of benefits for higher income persons ................................................... 122
6. 1984-90 social security tax rates and 1984 credit:
a. FICA tax rates .................................................................................................... 123
b. Tax credit for 1984 FICA taxes ....................................................................... 124
c. 1984 employer FICA tax credit ........................................................................ 124
d. Tier I railroad retirement taxes ...................................................................... 125
7. Tax on self-employment income ............................................................................. 125
8. Credit for the elderly and disability income exlusion ........................................ 126
a. Credit for the elderly ......................................................................................... 126
b. Disability income exclusion .............................................................................. 127
9. Reallocation of OASI and DI trust funds .............................................................. 127
10. Benefits for certain widows and divorced and disabled women:
a. Surviving divorced or disabled spouse who remarries ................................ 129
b. Change in indexing deferred survivor benefits ............................................ 129
c. Independent entitlement for divorced spouses ............................................. 130
d. Increased benefits for disabled widows .......................................................... 130
11. Stabilizer .................................................................................................................... 131
12. Procedures to assure continued benefit payments (fail-safe):
a. Fixed monthly tax transfers ............................................................................ 132
b. Interfund borrowing .......................................................................................... 132
c. Authority to borrow from the general fund .................................................. 133
(115)
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13. Delayed retirement credit ......................................................................................
14. Reimbursement to trust funds for military wage credits and uncashed
OASDI checks:
a. Military wage credits ........................................................................................
b. Uncashed OASDI checks ..................................................................................
Page
134
134
135
II. ADDITIONAL PROVISIONS RELATING TO LONG-TERM FINANCING OF
THE SOCIAL SECURITY SYSTEM
1. Adjustments in the normal retirement age .......................................................... 136
III. MISCELLANEOUS AND TECHNICAL PROVISIONS
1. Cash management:
a. Float allowance revisions .................................................................................
b. Late State and local deposits ...........................................................................
c. Trust fund investment .......................................................................................
d. Treatment of trust funds under unified budget ...........................................
2. Elimination of gender-based distinctions:
a. Divorced husbands .............................................................................................
b. Remarriage of surviving spouse before age 60 .............................................
c. Illegitimae children ............................................................................................
d. Transitional insured status ..............................................................................
e. Prouty benefits ...................................................................................................
f. Fathers' insurance benefits ...............................................................................
g. Effect of marriage on childhood disability benefits .....................................
h. Effects of marriage on other dependents' or survivors' benefits ..............
i. Credit for military service .................................................................................
3. Coverage:
a. Foreign affiliates of American employers .....................................................
b. Foreign earned income exclusion ....................................................................
c. Elective or deferred compensation ..................................................................
d. Standby pay ........................................................................................................
e. Rowan decision ...................................................................................................
f. Simplified employee pension plans .................................................................
g. Withholding on sick pay ...................................................................................
h. Conforming amendments to FUTA ................................................................
i. International social security agreements .......................................................
j. State and local employee groups in Utah ......................................................
k. Effective dates of international social security agreements ......................
4. Additional amendments:
a. Maximum family benefits ................................................................................
b. Insured status requirements for disability insurance .................................
c. Illegitimate children of disabled beneficiaries ..............................................
d. One-month retroactivity of widows' benefits ................................................
e. Nonassignability of benefits .............................................................................
f. Benefit payments to deceased individuals .....................................................
g. SSA as an independent agency .......................................................................
h. Public pension offset .........................................................................................
i. Child-care dropout years ...................................................................................
j. Public members on board of trustees ..............................................................
k. Limitation on benefits to aliens ......................................................................
1. Prisoners' benefits ..............................................................................................
m. Accelerate State and local deposits ...............................................................
n. Exclusion from coverage of certain religious sects .....................................
o. Increase in FICA Tax Deposit Threshold ......................................................
p. Application of common paymaster rules .......................................................
q. Elective coverage for ministers as employees ...............................................
r. Study of social security option accounts ........................................................
s. Study of earnings sharing .................................................................................
t. Deceased beneficiaries checks ..........................................................................
u. VA data processing center ...............................................................................
v. Treasury study of individual retirement security accounts (IRSA) .........
w. Treatment of earnings of disabled blind individuals ..................................
x. Transitional benefits to widows and widowers .............................................
y. Banknote paper social security cards .............................................................
138
138
139
140
140
140
141
141
142
142
143
143
144
144
145
145
148
148
148
149
149
150
150
151
151
152
152
153
153
154
154
155
155
156
156
157
158
159
159
160
161
161
161
162
162
163
163
163
164
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117
IV. SUPPLEMENTAL SECURITY INCOME PROVISIONS P4e
1. Increase in Federal benefit standard ..................................................................... 164
2. Adjustment in Federal pass-through provisions .................................................. 165
3. SSI Eligibility for temporary residents of emergency shelters for the
homeless ....................................................................................................................... 166
4. Disregarding emergency and other in-kind assistance provided by nonprof-
it organizations ........................................................................................................... 166
5. Notification regarding SSI ....................................................................................... 167
V. UNEMPLOYMENT COMPENSATION PROVISIONS
1. Extension of Federal supplemental compensation program .............................
2. Limit on disqualification of FSC claimants in training .....................................
3. Deferral of interest provision ..................................................................................
4. Cap on credit reduction ............................................................................................
5. Average employer contribution rate ......................................................................
6. Date for payment of interest ...................................................................................
7. Penalty for failure to pay interest ..........................................................................
8. Treatment of employees providing services to educational institutions .........
9. Extended benefits for individuals who are hospitalized or on jury duty........
10. Option for voluntary health insurance deduction from unemployment
benefits .........................................................................................................................
11. Treatment of certain organizations that were retroactively granted
501(cX3) status .............................................................................................................
12. Waiver of penalty on withdrawals from IRA's by certain unemployed
workers .........................................................................................................................
13. Reemployment vouchers .........................................................................................
VI. MEDICARE HOSPITAL INSURANCE PROVISIONS
1. Prospective payment amount ..................................................................................
2. DRG rates ....................................................................................................................
3. Effective date/transition ..........................................................................................
4. Area wage adjustment ..............................................................................................
5. Initial payment level .................................................................................................
6. Annual updates ..........................................................................................................
7. Recalibration of DRG's .............................................................................................
8. Atypical cases/outliers ..............................................................................................
9. Capital expenses .........................................................................................................
10. Medical education expenses ...................................................................................
11. Exemptions exceptions, and adjustments ............................................................
12. Admissions and quality review .............................................................................
13. Payments to HMO's and CMP's ............................................................................
14. State cost control systems ......................................................................................
15. Administrative and judicial review ......................................................................
16. Studies and reports ..................................................................................................
17. Delay of single reimbursement limit for skilled nursing facilities (SNF's)..
18. On Lok demonstration .............................................................. ............................-
.
19. Appointment, membership and activities of expert commission ....................
SOCIAL SECURITY SYSTEM
1. EXTENSION OF COVERAGE
A. FEDERAL EMPLOYEES
167
170
171
172
174
175
175
175
176
177
177
178
178
179
179
180
182
183
185
187
188
189
192
192
196
198
199
202
203
205
205
205
Present law
Permanent civilian employees of the Federal government are not
covered by social security (OASDI). (Part-time temporary civilian
employees and members of the armed forces are covered by social
security.) By far the greatest number of Federal employees not cov-
ered by social security (2.7 million) participate in the Civil Service
Retirement System (CSRS) on a mandatory basis. Legislative
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branch employees are not covered by social security, and have the
option of not participating in CSRS. Members of Congress, the
President and the Vice-President are not covered under social secu-
rity. As of January 1, 1983, Federal employees are covered under
the medicare program and pay the medicare portion of the social
security payroll tax.
Presently, the compensation paid to Federal judges-either in
Senior (or inactive) status or in retirement-is not considered
wages and thus is not subject to social security taxes nor is it con-
sidered for purposes of the retirement test.
House bill
Provides for coverage under social security of the following
groups: (1) all Federal employees hired on or after January 1, 1984,
including those with previous periods of Federal Service if the
break in Federal service lasted at least 365 days; (2) legislative
branch employees on the same basis, as well as current employees
of the legislative branch who are not participating in the Civil
Service Retirement System as of December 31, 1983; (3) all Mem-
bers of Congress, the President and the Vice President effective
January 1, 1984; (4) all sitting Federal judges, and all executive
level and senior executive service political appointees, as of Janu-
ary 1, 1984. Federal judicial salaries would be reported as wages for
social security earnings test and payroll tax purposes.
Senate amendment
Would cover Federal employees hired on or after January 1,
1984, or upon the enactment of a supplemental Civil Service Re-
tirement System, whichever is later. Members of Congress, the
President, Vice President, and the Commissioner of Social Security
would be covered as of January 1, 1984.
The provision also states that "Nothing in this Act shall reduce
the accrued entitlement to future benefits under the Federal retire-
ment program system of current and retired Federal employees
and their families. The full faith and credit of the United States
Government is pledged hereby in support of the payment of said
accrued entitlements."
Conference agreement
The conference agreement follows the House bill, but also in-
cludes the Senate provision's statement "Nothing in this Act shall
reduce the accrued entitlement that to future benefits under the
Federal retirement program system of current and retired Federal
employees and their families."
I. PROVISIONS AFFECTING THE FINANCING OF THE SOCIAL
SECURITY SYSTEM
Present law
Participation in the social security system is optional for non-
profit organizations (charitable, religious, and educational). Most
such organizations have chosen to participate, but about 15 percent
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of employees of nonprofit organizations are presently not covered.
A nonprofit organization which has elected to participate can file
to withdraw from social security after it has been in the system for
8 years, and termination is effective two years after the end of the
calendar quarter in which the notice was filed.
House bill
Extends social security coverage on a mandatory basis to all em-
ployees of nonprofit organizations as of January 1, 1984. (Termina-
tions of coverage would not be permitted on or after March 31,
1983.) Nonprofit employees age 55 or older affected by this provi-
sion would be deemed to be fully insured for social security benefits
after acquiring a given number of quarters of coverage, according
to the following sliding scale:
If on January 1, 1984,
The number of
the person is-
quarters needed is-
Age 60 or over .........................................................................................................
6
Age 59 .......................................................................................................................
8
Age 58 .......................................................................................................................
12
Age 57 .......................................................................................................................
16
Age 55-56 .................................................................................................................
20
Senate amendment
Similar to House bill, except that terminations would not be per-
mitted after enactment. Also, does not include special provision
deeming persons to be fully insured under liberalized quarter-of-
coverage requirements.
Conference agreement
The Conference agreement follows the House bill.
2. TERMINATION OF COVERAGE BY STATE AND LOCAL GOVERNMENTS
Present law
Participation in social security is optional for State and local gov-
ernments. Once a government has chosen to join social security, it
may withdraw, after 5 years of coverage, by providing the Federal
government with two years advance notice of its intent to with-
draw. A notice of termination becomes effective at the end of the
calendar year two years after the notice is filed. Governments that
have withdrawn are not allowed to rejoin. (About 70 percent of all
State and local government employees are presently covered by
social security.)
House bill
Prohibits State and local governments from terminating coverage
for their employees if the termination has not taken effect by the
date legislation is enacted. In addition, allows State and local gov-
ernments which have withdrawn from the social security system to
voluntarily rejoin. Once having rejoined, the governmental entity
would be precluded from terminating coverage.
Senate amendment
Same as House bill.
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3. WINDFALL BENEFITS FOR PERSONS WITH PENSIONS FROM
NONCOVERED EMPLOYMENT
Present law
Social security benefits are determined through a formula based
on average lifetime earnings in jobs covered by social security. The
benefit formula is weighted so that persons with low average life-
time earnings receive a proportionally higher rate of return on
their contributions to social security than workers with relatively
high average lifetime earnings.
Workers with short periods of covered work also receive this ad-
vantage, because their few years of earnings are averaged over a
35-year period to determine their average monthly covered earn-
ings on which the benefit is based.
This high rate of return for persons who have spent a short
period of time in covered employment is what is often character-
ized as a "windfall" benefit.
House bill
(1) Applies a different benefit formula to workers who are eligi-
ble for a pension based wholly or in part on noncovered employ-
ment. Under the current formula, benefits are 90% of the first
$254 of average monthly earnings, 32% of earnings from $254 to
$1,538, and 15% of earnings above $1,538. The new formula appli-
cable to those with pensions from noncovered employment would
substitute 61% for the 90% factor. (2) Provides a guarantee that
the resulting reduction in the worker's social security benefit
cannot be more than one-half the amount of the noncovered pen-
sion. (3) This provision will be applicable to persons reaching age
60 after December 31, 1983.
Senate amendment
Similar to House provision, except substitutes a 32% factor in
benefit formula, phased in over a 5-year period as follows:
First factor in
Year of first eligibility under
OASDI:
formula
(percent)
1984
....................................................................................................................
78.4
1985
....................................................................................................................
66.8
1986
....................................................................................................................
55.2
1987
....................................................................................................................
43.6
1988 and after .................................................................................................. 32.0
Provides a guarantee that the resulting reduction in the worker's
social security benefit cannot be more than one-third of the portion
of the worker's pension based on service which was not covered.
Provides further a guarantee that persons with 30 years or more
of covered service would not be affected. For persons with less than
30 but more than 24 years of substantial social security employ-
ment, the 90% factor in the benefit formula would be reduced by
10 percentage points for each year below 30 years of covered em-
ployment. This would not reduce benefits by more than the regular
windfall provision, however. (A year of substantial employment
would be a year in which covered earnings were at least 25 percent
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of the wage base. For years after 1977, the base used would be the
1977 base with adjustments for increased earnings after that date.)
The provision provides for periodically recomputing the offset
based on changes in the pension rate. The provision also provides
that pensions based on noncovered employment of less than a year
would not be subject to the offset.
The provision would be effective on January 1, 1984, for retired
or disabled workers who first become eligible for a noncovered pen-
sion and for social security after 1983.
Conference agreement
The conference agreement follows the House bill with the follow-
ing amendments:
1. Substitutes 40 percent as the first bracket formula amount.
2. Phases in this reduction over a 5-year period: 80% in the first
year, 70% in the second year, 60% in the third year, 50% in the
fourth year, and fully effective in the fifth year.
3. Exempts the following groups:
a. all current employees newly covered by the bill, i.e. those cur-
rent Federal employees covered by the bill, and nonprofit employ-
ees except those employees whose past employment for a nonprofit
organization had been covered, but whose employment for that or-
ganization was not covered on December 31, 1983;
b. those with service which was not covered until 1957;
c. those with 30 years or more of covered work; in addition, for
persons with less than 30 but more than 24 years of substantial
social security employment, the 90% factor in the benefit formula
would be reduced by 10 percentage points for each year below 30
years of covered employment. (Senate provision); and
d. those with railroad retirement pensions.
4. Amends the effective date to apply to those first eligible for
social security benefits and for government pensions after 1985.
Present law
(a) Social security benefits are adjusted automatically every June
(July check) to reflect increases in the consumer price index. This
cost-of-living adjustment is measured from the average CPI of the
first quarter of the previous year in which a benefit increase was
provided to the average of the first quarter of the current year. No
cost-of-living increase is provided in any year in which the increase
in the CPI is less than 3 percent.
House bill
Delays the June 1983 cost-of-living adjustment until December
(January 1984 check), and provides all subsequent cost-of-living ad-
justments in December (January checks). This adjustment would be
based on the CPI for the first quarter of 1983 over that for the first
quarter of 1982. All subsequent adjustments would be based on the
CPI increase from the third quarter of the last year in which a
cost-of-living adjustment was provided to the third quarter of the
current year. For the December 1983 adjustment only, the 3 per-
cent trigger is waived.
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Senate amendment
Same as House bill. (A floor amendment also provides that the
OASDI COLA delay be accompanied by a corresponding delay in a
1982 Reconciliation Act provision to round down certain veterans'
pensions.)
Conference agreement
The conference agreement follows the Senate Amendment.
(b) The medicare monthly premium for part B physician coverage
increases each July 1. (For those people receiving social security
cash benefits, the premium is deducted from their checks.)
House bill
Also, postpones from July 1, 1983, to January 1, 1984, and to
each January thereafter, the effective date of increases in medicare
premiums to coincide with the proposed delay in the cost-of-living
increases in social security cash benefit payments. For the six-
month period from July 1, 1983 to January 1, 1984, the general rev-
enue contribution would replace the lost premium revenue.
Senate amendment
Similar provision except that the general revenue contribution
would not replace lost premium revenue.
Conference agreement
The conference agreement follows the House bill.
5. TAXATION OF SOCIAL SECURITY (OASDI) BENEFITS FOR HIGHER-
INCOME PERSONS
Present law
Social security benefits and railroad retirement benefits are ex-
cluded from gross income for purposes of the Federal income tax.
House bill
Beginning in 1984, a portion of social security and tier I railroad
retirement benefits would be included in taxable income for tax-
payers whose adjusted gross income combined with 50 percent of
their benefits exceeds a base amount. The base amount would be
$25,000 for an individual, $32,000 for a married couple filing a joint
return and zero for married persons filing separate returns. The
amount of benefits that could be included in taxable income would
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 proceeds from the taxation of benefits, as estimated by the
Treasury Department, would be transferred to the appropriate
trust funds at first of quarter. An annual report from the Secretary
of the Treasury concerning the transfers would be required.
Special rules would be provided to adjust for repayments by indi-
viduals of benefits previously received and subsequently deter-
mined to be overpayments. Special rules also would be provided for
attributing appropriate portions of lump-sum benefit payments to
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the years for which they had been paid. Benefits subject to tax
would include any workmen's compensation receipt of which
caused a reduction in disability benefits. (Proceeds from the tax-
ation of these benefits would be deposited in either the social secu-
rity or railroad retirement account.)
Annual information returns would be filed by the Social Security
Administration and the Railroad Retirement Board with the IRS
and furnished to individual beneficiaries.
The 50 percent of social security benefits received by non-resi-
dent aliens would be subject to the 30 percent withholding tax (or a
lower rate if so fixed by treaty) applicable to periodic payments
made to such individuals under current law. (The IRS would be au-
thorized to disclose to SSA and RRB certain tax return information
for purposes of administering this provision.)
Senate amendment
Same as House bill, except that interest on tax-exempt bonds is
added to adjusted gross income for the purpose of determining
whether an individual's income exceeds the base amount above
which a portion of benefits would be subject to tax; transfers to
trust funds are made in the middle of the quarter; and that bene-
fits subject to tax do not include certain worker's compensation
benefits.
Conference agreement
The conference agreement follows the House bill on timing of
transfers to the trust funds and treatment of certain worker's com-
pensation benefits, and the Senate Amendment concerning tax
exempt interest.
Present law
Several increases in payroll tax rates are already scheduled to
take effect between 1984 and 1990 as indicated below:
Employer-Employee Rate (Each)
OASDI HI OASDI-HI
1984 ............................................................................................................................................ 5.4 1.30 6.70
1985 ............................................................................................................................................ 5.7 1.35 7.05
1986 ............................................................................................................................................ 5.7 1.45 7.15
1987 ............................................................................................................................................ 5.7 1.45 7.15
1988 ............................................................................................................................................ 5.7 1.45 7.15
1989 ............................................................................................................................................ 5.7 1.45 7.15
1990 ............................................................ ................................................................................ 6.2 1.45 7.65
House bill
Advances the payroll tax increase scheduled for 1985 to 1984 and
part of the increase scheduled for 1990 to 1988, as indicated below:
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Employer-Employee Rate (Each)
OASDI HI OASDI-HI
1984 ............................................................................................................................................ 5.70 1.30 7.00
1985 ............................................................................................................................................ 5.70 1.35 7.05
1986 ............................................................................................................................................ 5.70 1.45 7.15
1987 ............................................................................................................................................ 5.70 1.45 7.15
1988 ............................................................................................................................................ 6.06 1.45 7.51
1989 ............................................................................................................................................ 6.06 1.45 7.51
1990 ............................................................................................................................................ 6.20 1.45 7.65
Senate amendment
Same as House bill.
Present law
No deduction or credit is available for employee FICA taxes.
House bill
A credit of 0.3% of wages would be allowed against 1984 employ-
ee FICA taxes to reduce the net FICA rate to 6.70%. Appropri-
ations to Trust Funds would be based on a 7.00% rate. Employee's
annual withholding statements (form W-2) would indicate the net
amount of FICA tax (i.e., the 6.7% of taxable wages actually de-
ducted from their paychecks).
Senate amendment
Same as House bill except that employee's annual wage state-
ments (Form W-2) would indicate both the gross FICA tax (7.0% of
taxable wages) and the FICA credit (0.3% of taxable wages).
Conference agreement
The conference agreement follows the House bill.
Present law
No deduction or credit is available for employer FICA taxes.
House bill
No provision.
Senate amendment
Employers who employ no more than 5 employees at any time
during 1984 would be allowed a credit against FICA of 0.3% of tax-
able wages paid during that year. The credit would be limited to
$300 per employer. All trades or businesses tinder common control
would be considered to be one employer for the purpose of deter-
mining the number of employees.
Conference agreement
The conference agreement follows the House bill.
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Present law
The rates of the Tier I railroad retirement taxes are the same as
the rates of the corresponding FICA taxes.
House bill
Conforming changes would be made in Tier I railroad retirement
tax rates and the credit against 1984 employee taxes would be al-
lowed against employee railroad taxes.
Senate amendment
Same as House bill.
Present law
The Self-Employment Contributions Act (SECA) imposes two
taxes (OASDI and HI) on self-employed individuals. Currently, self-
employed persons pay an OASDI tax at a rate approximately equal
to 75 percent of the combined employer-employee rate and an HI
tax at a rate that is 50 percent of the combined employer-employee
rate.
No deduction or credit is available for SECA taxes.
House bill
Beginning in 1984, the OASDHI rates for self-employed persons
would be equal to the combined employer-employee OASDHI rate.
For 1984, self-employed persons would be allowed a credit (com-
parable to the credit allowed employers against the FICA tax)
against SECA tax equal to 0.3 percent of net self-employment
income. In addition, beginning in 1984, self-employed persons
would be entitled to a permanent credit against SECA tax For
1984-87, the amount of the credit would be 1.8 percent of net self-
employment income. For 1988 and subsequent years, the credit
would be 1.9 percent. the SECA tax credit may be directly taken
into account in computing SECA liability for a taxable year and es-
timated tax payments for that year.
Appropriations to the trust funds would be based on the full
SECA tax rates without regard to the credit allowed against such
taxes.
Senate amendment
Same as House bill, except that the total credit rate would be 2.9
percent of self-employment income in 1984, 2.5 percent in 1985, 2.2
percent in 1986, 2.1 percent in 1987, 1988, and 1989, and 2.3 percent
in 1990 and thereafter.
Conference agreement
The Conference agreement provides that:
a. The SECA credits for 1984 through 1989 would be as follows:
1984: 2.7 percent.
1985: 2.3 percent.
1986-89: 2.0 percent.
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b. Effective in 1990 and thereafter, the credit would terminate
and be replaced with a system designed to achieve parity between
employees and the self-employed. Under this system:
1. The base of the self-employment tax would be adjusted
downward to reflect the fact that employees do not pay FICA
tax on the value of the employer's FICA tax.
2. A deduction would be allowed for income tax purposes, for
half of SECA Liability, to allow for the fact that employees do
not pay income tax on the value of the employer's FICA tax.
Present law
1. Eligible individuals and credit rate.-Individuals age 65 or
over, or under 65 and with income from a public retirement
system, are eligible for a credit equal to 15 percent of a base
amount.
2. Base amount.-The initial amount of the base is:
$2,500-married with one spouse eligible or unmarried.
$3,750-married, joint return, both spouses eligible.
$1,875-married filing separately.
For individuals under age 65, the initial amount is limited to
income from a public retirement system.
The initial amount is reduced by:
1. Pensions or annuities received under Social Security, Rail-
road Retirement, and certain other pensions and annuities oth-
erwise excluded from gross income, and
2. One-half of the excess of adjusted gross income over:
$7,500-single returns.
$10,000-married, joint return.
$5,000-married, separate return.
This reduction does not apply to individuals under age 65. In-
stead, the initial amount is reduced by certain amounts of earned
income.
House bill
1. Eligible individuals and credit rate.-Same as present law,
except that individuals under age 65 are eligible only if they re-
tired with a permanent and total disability and have disability
income from a public or private employer on account of that dis-
ability.
2. Base amount.-The initial base amount is:
$5,000-married with one spouse eligible or unmarried.
$7,500-married, joint return, both spouses eligible.
$3,750-married filing separately.
For individuals under age 65, the initial amount is limited to dis-
ability income.
1. Pensions or annuities received under social security, Railroad
Retirement, and certain other pensions and annuities otherwise ex-
cluded from gross income (as under present law). In addition, social
security and railroad disability benefits also reduce the initial
amount.
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2. One-half of adjusted gross income over:
$7,500-single returns.
$10,000-married, joint return,
$5,000-married, separate return.
The same rules for reducing the initial amount would apply to
all eligible individuals.
Conference agreement
The conference agreement follows the House bill with technical
amendment.
Present law
Amounts received under an employer's disability income plan
generally are includible in gross income to the extent attributable
to employer contributions. However, permanently and totally dis-
abled individuals who have retired on disability and are under 65
may exclude such income within certain limits. The excluded
amount is limited to $100 per week and is reduced by the excess of
adjusted gross income over $15,000.
House bill
The disability income exclusion is repealed. Affected individuals
are made eligible for the credit for elderly and disabled persons to
the extent of disability income (see above).
Effective date.-The provision applies to taxable years beginning
after December 31, 1983.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
9. REALLOCATION OF OASI AND DI TRUST FUNDS
Present law
The OASDI tax rate is allocated as indicated below:
Employees and employers, each:
1984 .....................................................................................................................................................
4.575
0.825
1985-89 ...............................................................................................................................................
4.750
0.950
1990 and after .....................................................................................................................................
5.100
1.100
Self employed:
1984 .....................................................................................................................................................
6.8125
1.2375
1985-89 ...............................................................................................................................................
7.1250
1.4250
1990 and after .....................................................................................................................................
7.6500
1.6500
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House bill
OASDI tax allocated so that both funds will have about the same
fund ratios, as indicated below:
Employees and employers, each:
1983 .....................................................................................................................................................
4.775
0.625
1984-87 ...............................................................................................................................................
5.200
.500
1988-89 ...............................................................................................................................................
5.560
.500
1990 .....................................................................................................................................................
5.600
.600
Self-employed persons:
1983 .....................................................................................................................................................
7.1125
.9375
1984-87 ...............................................................................................................................................
10.4000
1.0000
1988-89 ...............................................................................................................................................
11.1200
1.0000
1990 .....................................................................................................................................................
11.2000
1.2000
Senate amendment
The OASDI tax would be allocated so that both funds will have
about the same fund ratios as indicated below:
Employers and employees, each:
1984 ................................................................................................................................
5.075
0.625
5.1
1984 to 1987 ..................................................................................................................
5.20
.50
5.7
1988 to 1989 ..................................................................................................................
5.53
.53
6.06
1990 to 1999 ..................................................................................................................
5.60
.60
6.20
2000 and later .................................................................................................................
5.55
.65
6.20
Self-employed persons:
1983 ................................................................................................................................
10.4625
.9375
11.40
1984 to 1987 ..................................................................................................................
10.40
1.00
11.40
1988 to 1989 ..................................................................................................................
11.06
1.06
12.12
1990 to 1999 ..................................................................................................................
11.20
1.20
12.40
2000 and later .................................................................................................................
11.10
1.30
12.40
Conference agreement
The conference agreement provides for the following allocation:
Total for
OASDI and OAST DI OASDI HI
HI
Employees and employers, each
1982 ................................................................................................................ 6.70 4.575 0.825 5.40 1.30
1983 ................................................................................................................ 6.70 4.775 .625 5.40 1.30
1984 ................................................................................................................ 7.00 5.200 .500 5.70 1.30
1985 ................................................................................................................ 7.05 5.200 .500 5.70 1.35
1986-81 .......................................................................................................... 7.15 5.200 .500 5.70 1.45
1988-89 .......................................................................................................... 7.51 5.530 .530 6.06 1.45
1990-99 .......................................................................................................... 7.65 5.600 .600 6.20 1.45
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Total for
OASDI and
OASI
DI
OASDI
HI
HI
2000 and later ................................................................................................. 7.65
5.490
.710
6.20
1.45
Self-employed persons
1982
................................................................................................................ 9.35
6.8125
1.2375
8.05
1.30
1983
................................................................................................................ 9.35
7.1125
.9375
8.05
1.30
1984
................................................................................................................ 14.00
10.4000
1.0000
11.40
2.60
1985
................................................................................................................ 14.10
10.4000
1.0000
11.40
2.70
1986-87 .......................................................................................................... 14.30
10.4000
1.0000
11.40
2.90
1988-89 .......................................................................................................... 15.02
11.0600
1.0600
12.12
2.90
1990-99 .......................................................................................................... 15.30
11.2000
1.2000
12.40
2.90
2000 and later ................................................................................................. 15.30
10.9800
1.4200
12.40
2.90
10. BENEFITS FOR CERTAIN WIDOWS, DIVORCED, AND DISABLED
WOMEN
A. BENEFITS FOR SURVIVING DIVORCED OR DISABLED SPOUSE WHO
REMARRIES
Present law
Current law permits the continuation of benefits for surviving
spouses who remarry after age 60. However, benefits for disabled
widow(er)s and disabled surviving divorced spouses (payable from
age 50 to 60) and for surviving divorced spouses (payable at age 60)
are terminated if the individual remarries.
House bill
Allows the continuation of benefits for disabled and surviving di-
vorced spouses upon remarriage if that marriage takes place after
the age of first eligibility for benefits. Effective for benefits for
months after December 1983.
(No change would be made in the current dual entitlement provi-
sion of the law which allows an individual to receive only the high-
est benefit for which such individual is eligible.)
Senate amendment
Same as House bill.
Present law
Survivor benefits are based on the amount of benefits that would
have been payable to the deceased worker as determined by apply-
ing a benefit formula to the worker's earnings in covered em-
ployment. Such earnings are indexed to reflect economy-wide wage
increases through the second year before the death of the worker.
Beginning with the year of death, benefit levels are indexed to
price changes.
Should the worker die long before retirement age, the benefit to
which the widowed spouse ultimately becomes eligible in old-age
(or at disability) is based on outdated wages. Thus, women who
become widowed at a relatively young age, but do not become eligi-
ble for benefits for many years, are deprived of their husband's un-
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realized earnings as well as the economy-wide wage increases that
may have occurred since the death of their husbands.
House bill
In the case of deferred survivor benefits, continues indexing the
worker's earnings to reflect economy-wide wage increases rather
than price increases. Such wage indexing would apply through the
year the worker would have reached age 60, or two years before
the survivor becomes eligible for aged or disabled widow's benefits,
whichever is earlier. Effective for newly eligible survivors after De-
cember 1984.
Senate amendment
Same as House bill.
Present law
A divorced spouse, eligible for benefits at age 62, may not begin
to draw social security benefits until the former spouse begins to
draw benefits. For some divorced women, this means that they
must wait several years beyond their own retirement age (because
their former spouse delays retirement or otherwise fails to apply
for benefits) before they can begin to draw benefits.
House bill
Allows divorced spouses (who have been divorced for at least 2
years) to draw benefits at age 62 if the former spouse is eligible for
retirement benefits, whether or not benefits have been claimed or
suspended because of substantial employment. Effective for bene-
fits for months after December 1984.
Senate amendment
Same as House bill except for technical difference.
Conference agreement
The conference agreement follows the Senate Amendment.
Present law
Social Security benefits for widows and widowers are first pay-
able at age 60. Benefits are payable in full (i.e., 100 percent of the
worker's primary insurance amount) at age 65, and at reduced
rates at ages 60-64 (i.e., phasing up from 71.5 percent of the pri-
mary insurance amount at age 60). Benefits are also payable at re-
duced rates to disabled widows and widowers aged 50-59 (i.e., phas-
ing up from 50 percent of the primary insurance amount at age
50).
House bill
Increases benefits of disabled widow(er)s age 50-59 to 71.5 per-
cent of the primary insurance amount, the amount to which
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widow(er)s are entitled at age 60. Effective for benefits for disabled
widows and widowers for months after December 1983.
Senate amendment
Same as House bill.
Present law
Social security benefits are adjusted automatically every June to
reflect increases in the Consumer Price Index. Such adjustments
are made without regard to the status of the trust fund reserves.
Income to the social security system depends on the level of
wages on which social security contributions are made. When in-
creases in prices outrun increases in wages, income to the trust
fund falls behind increases in benefit payments. Cash flow prob-
lems may then result, depending on whether accumulated fund re-
serves are sufficient to make up the gap between income and out-
lays.
There is no mechanism under current law to adjust trust fund
outlays and revenues to take account of economic fluctuations.
House bill
Beginning with 1988, if the fund ratio of the combined OASDI
Trust Funds as of the beginning of a year is less than 20.0%, the
automatic cost-of-living (COLA) adjustment would be based on the
lower of the CPI increase or the increase in average wages. Subse-
quently, when the balance in the trust funds has risen to at least
32 percent of estimated annual outlays, "catch-up" benefit pay-
ments would be made during the following year, as supplements to
monthly benefits otherwise payable, to the extend necessary to in-
crease overall benefit levels in order to make up for any losses in
inflation protection that result from basing COLA's on wages
rather than prices. Such payments would be made only to the
extent that sufficient funds are available over those needed to
maintain a fund ratio of 32.0%
Senate amendment
Similar to House bill, except that the catch-up payments would
supplement monthy benefits otherwise payable to make up for the
cumulative dollar losses that could result from basing the adjust-
ment on wages rather than prices.
Conference agreement
The conference agreement follows the House bill with an amend-
ment to provide that the stabilizer would take effect with respect
to the cost-of-living increase payable in January 1985 if the trust
funds ratio at the end of 1984 is less 15 percent. Beginning in 1989
the stabilizer would take effect if the trust fund ratio falls below 20
percent.
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12. PROCEDURES To ASSURE CONTINUED BENEFIT PAYMENTS (FAIL-
SAFE)
Present law
a. Social security benefits are financed by a payroll tax fixed in
the law. While benefits are paid out within the first five days of
each month, payroll tax revenues are estimated daily by the Treas-
ury, and credited to the trust fund accounts each day.
House bill
Fixed Monthly Tax Transfers: Provides for a revision of account-
ing procedures under which the Treasury would credit to the
OASDHI trust funds, at the beginning of each month the amount
of payroll tax revenues estimated to be received during the month.
These amounts would be invested by the trust funds as all other
trust fund assets are invested; interest will also be paid by the
trust funds on amounts transferred to the trust funds in advance of
procedures in effect on January 1, 1983. Effective on the first day
of the month following enactment.
Senate amendment
Similar to House provision, except that tax receipts would only
be advanced for months the Secretary of the Treasury determines
that the balances of the OASDI trust funds are less than 20% of
outgo. Also, the interest paid to the General Treasury on the excess
sums so transferred would be at the rate equal to the average 91-
day Treasury bill rate during the month, with such interest being
payable at the end of each month.
Effective.-On enactment through 1989.
Conference agreement
The conference agreement follows the House bill.
Present law
b. Interfund borrowing was authorized during 1982, but this au-
thority terminated at the end of the year.
House bill
Interfund borrowing: Authorizes interfund benefit borrowing be-
tween the OASI, DI and HI funds for calendar years 1983-87, with
provisions for repayment to the lending fund(s) 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 would be permitted only to the extent there
is sufficient balance in the lending fund to meet its own obliga-
tions.
Senate amendment
Similar to House bill, except that (1) interest would be paid
monthly to HI on any outstanding loans to OASDI; (2) OASDI
could not borrow from HI in any month in which the HI trust fund
ratio is under 10 percent (with no more to be borrowed than would
reduce such ratio to 10 percent); (3) in 1983-87, OASDI would repay
loans from HI whenever the OASDI fund ratio at the end of the
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year exceeds 15 percent; and (4) in 1988-89, OASDI would repay
HI, in 24 equal monthly payments, the loan balance outstanding at
the end of 1987 (plus interest on any outstanding loan balance).
Faster payment would be authorized.
Similar protections would be provided for the OASI and DI trust
funds in the event that HI were to borrow from OASDI.
Conference agreement
The conference agreement follows the Senate Amendment.
Present law
c. If at any point revenues from the payroll tax exceed amounts
needed for benefit payments, the excess is placed in the trust fund
reserve. If revenues fall short of the amount needed, the reserves
are drawn on to make up the difference. If the reserves are not
adequate to make up the shortfall, under current law the trust
funds have no way of making benefit payments on time. (Thus, it is
considered critical to have at least one month's benefit payments
in reserve at the beginning of each month, and to have enough of a
reserve to continue benefit payments through any decline in rev-
enues during the year.) The Board of Trustees is required to report
immediately to the Congress if any of the trust funds is unduly
small.
House bill
Managing Trustee Report to the Congress Concerning Trust Fund
Shortfalls: Requires the Board of Trustees to report immediately to
the Congress whenever it is of the opinion that the amount of any
of the trust funds may become unduly small and recommend a spe-
cific legislative plan to adjust the inflow and outgo of funds to
remedy this shortfall with due regard to the economic situation
that created the problem and the amount of time available to act
in a prudent manner. It is the intent that such legislative action
would be effective only so long as is necessary to restore the fund
to solvency.
Senate amendment
Requires the Secretary of Health and Human Services to make
an annual evaluation of the projected balances in the OASDHI
trust funds, taking into account cost-of-living increases. If at the
start of any year after 1984 the OASDHI reserve ratio is projected
to decline from the start of the next year to the start of the follow-
ing year and to then be less than 20 percent of a year's benefits,
the Secretary would be required to notify the Congress by the pre-
ceding July 1 that action to limit the next COLA will be necessary.
If no action is taken, the Secretary would be required to scale back
the COLA to the extent necessary to prevent a decline in the re-
serve ratio. (For years after 1987, the fund ratios only for OASDI
would be considered.)
Insofar as possible, the limitation of the COLA would be applied
to people whose benefits are based on a primary benefit level of
more than $250 per month. The determination as to whether a lim-
itation on the cost-of-living increase was necessary would be made
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only after taking into account all other statutory provisions for as-
suring adequate funds.
Effective for determinations beginning July 1, 1984.
Conference agreement
The conference agreement follows the House bill with an amend-
ment under which the Trustee's report to the Congress must pro-
vide specific information as to the extent to which benefits would
have to be reduced, payroll taxes increased, or some combination
thereof, in order to restore the trust fund to solvency.
Present law
Persons who delay retiring-and claiming social security bene-
fits-beyond age 65 receive increases in their benefits amounting to
3 percent per year for each year they delay retirement up to age
72.
House bill
Gradually increases the delayed retirement credit from 3 percent
to 8 percent per year for persons who attain age 65 between 1990
and 2008. In order to conform to the reduction in the age at which
the earnings test no longer applies, lowers the age after which the
delayed retirement credit will no longer be given from age 72 to 70
for those who attain age 70 after December 1983.
Senate amendment
Similar to House bill except would first apply to people attaining
age 62 in 1990, rather than 65 in 1990, and would be fully phased
in by 1995. In addition, would remove the upper age limit on re-
ceipt of delayed retirement credits, effective January 1984 (floor
amendment).
Conference agreement
The conference agreement follows the House bill.
14. REIMBURSEMENT TO TRUST FUNDS FOR MILITARY WAGE CREDITS
AND UNCASHED OASDI CHECKS
Present law
Gratuitous military wage credits are provided to persons who
served in the military after September 16, 1940. Although members
of the armed forces were compulsorily covered under social secu-
rity in 1957, wage credits continue to be provided to military per-
sonnel in recognition of the value of non-cash compensation re-
ceived.
The cost of the additional benefits and the administrative ex-
penses arising from these non-contributory wage credits are borne
by the General fund on a retroactive reimbursement basis (i.e., the
costs are reimbursed only after benefits have been paid).
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House bill
Provides for a lump-sum payment to the OASDI trust funds from
the General Fund for: (i) The present value of the estimated addi-
tional benefits arising from the gratuitous military service wage
credits for service before 1957; (ii) the amount of the combined em-
ployer-employee OASDI taxes on the gratuitous military service
wage credits for service after 1956 and before 1983. In addition, the
HI trust fund would be credited with the combined employer-em-
ployee HI taxes on gratuitous military wage credits for services
after 1965 and before 1983. (In the future, the trust funds would be
reimbursed on a current basis for such employer-employee taxes on
such wage credits for service after 1982.)
Senate amendment
Similar to House bill, except that the lump sum reimbursement
for the post 1956 wage credits includes 1983. Also, the initial trans-
fer for pre-1957 military wage credits would be provided through
the normal appropriations process.
Conference agreement
The conference agreement follows the Senate amendment, except
with respect to the appropriation process for pre-1957 military
wage credits.
Present law
The trust funds are not credited for any uncashed OASDI benefit
checks. Instead, the value of benefit checks which are not cashed
remains in the General Fund of the Treasury.
House bill
Provides for a lump-sum payment to the OASDI trust funds from
the General Fund representing the amount of uncashed benefit
checks which have been issued in the past plus appropriate
amounts of interest. In addition, requires the implementation of a
procedure under which: (1) the Treasury Department would make
it possible to distinguish OASDI checks from other government
checks; and (2) the trust funds would be credited on a regular basis
with an amount equal to the value of all OASDI benefit checks
which have not been negotiated for a period of 6 months.
Senate amendment
Similar to House bill, except that unnegotiated checks are de-
fined to be those outstanding for a period 12 months after issuance,
and no interest is payable to the trust funds on unnegotiated
checks. Also, transfers to the trust funds would be subject to the
annual appropriation process.
Conference agreement
The conference agreement follows the House bill; except for the
Senate amendment making the transfers subject to the annual ap-
propriations process. I
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II. ADDITIONAL PROVISIONS RELATING TO LONG-TERM
FINANCING OF THE SOCIAL SECURITY SYSTEM
1. ADJUSTMENTS IN THE NORMAL RETIREMENT AGE
Present law
Normal retirement age (i.e., the age at which full retirement
benefits can be received) is age 65. Early retirement benefits are
available at age 62 at a rate of 80 percent of the full benefit. Medi-
care and SSI benefits are also available at age 65. Unreduced re-
tirement benefits are available to workers, spouses, and widows
and widowers at age 65. Actuarially reduced benefits are available
at age 62 for workers and spouses and at age 60 for widows and
widowers.
In computing social security benefits, a worker's earnings under
social security are averaged and a benefit formula is applied to
those average indexed monthly earnings (AIME) to arrive at the
initial basic benefit amount called the primary insurance amount
(PIA). The PIA is the amount a worker is eligible to receive at 65.
Dependents' and survivors' benefits are based on the worker's PIA.
The formula for a worker who becomes eligible for benefits in
1983 is: 90 percent of the first $254 of AIME, plus 32 percent of the
AIME from $254 through $1,528, plus 15 percent of the AIME over
$1,528.
The two dollar figures in the formula, $254 and $1,528, are raised
(indexed) each year to reflect increases in average wages in the
economy. Thus, a new formula is created each year for the new
group of workers becoming eligible for benefits in that year.
The annual adjustment of the benefit formula by the full amount
of the increase in average wages leads to higher initial benefits
over time and to replacement rates-the percentage of a worker's
prior earnings that are replaced by his social security benefit-that
remain at approximately the same level.
Social security beneficiaries under age 70 who work and have
earnings are subject to a one dollar reduction in benefits for every
two dollars of earnings, when their earnings exceed certain exempt
amounts. For 1983, the annual exempt amount is $6,600 for people
age 65 and older. The annual exempt amount is increased each
year according to increases in wages.
House bill
(1) Raises the normal retirement age to 67 in two steps.
(A) Raises retirement age to 66 by increasing the age for full
benefits by two months a year for six years so that provision would
be fully effective beginning with those attaining age 62 in 2005 (66
in 2009).
(B) Raises retirement age from 66 to 67 by increasing the age for
full benefits by two months a year for six years so that the provi-
sion would be fully effective beginning with those attaining age 62
in 2022 (67 in 2027).
(2) Age 62 benefits would be maintained at an ultimate rate of 70
percent of full benefits. (After age for full retirement is changed to
67.) No changes would be made in Medicare or SSI benefits.
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(3) Requires the Secretary, by January 1, 1986, to conduct and
submit with recommendations to Congress a comprehensive study
and analysis of the implications of the change in retirement age for
those individuals affected by this change who, because they are en-
gaging in physically demanding employment or because they are
unable to extend their working careers for health reasons, may not
benefit from improvements in longevity.
(4) Makes no changes in the current law earnings test.
Senate amendment
(1) Raises the normal retirement age to 66, by increasing the age
for full benefits one month a year for 12 years (between 2000 and
2011) so that the provision would be fully effective beginning with
those attaining age 66 in 2015. The first age of eligibility for Medi-
care would shift in tandem with the new retirement age.
(2) Early retirement benefits would continue to be payable at age
62, but at an ultimate rate of 75 percent of full benefits (after age
for full retirement is changed to 66.)
(3) Requires the 1987 Social Security Advisory council to study
the effect of raising the retirement age and requires recommenda-
tions on changes to the DI, SSI and unemployment compensation
programs to meet the special needs of older workers. In addition,
provides for the appointment, subject to approval by the Chairmen
of the Committees on Finance and Ways and Means, of Council
representatives of organized labor and experts on the problems of
older workers, disability and unemployment and the labor market.
(4) Between 2000 and 2007, gradually reduces initial benefit
levels by 5.3 percent for future beneficiaries. The percentage fac-
tors in the benefit formula would be reduced by two-thirds of one
percent each year for 8 years, beginning with those first becoming
eligible in the year 2000, and would be fully effective for those be-
coming eligible in 2007. The benefit factor reduction would be
phased-in under the following schedule:
Up to the first Between the
bend point first and
is- second bend
points is--
Above the
second bend
point is-
1979-99 (current law) ..................................................................................................
90.0
32.0
15.0
2000
................................................................................................................................
89.4
31.8
14.9
2001
................................................................................................................................
88.8
31.6
14.8
2002
................................................................................................................................
88.2
31.4
14.7
2003
................................................................................................................................
87.6
31.1
14.6
2004
................................................................................................................................
87.0
30.9
14.5
2005
................................................................................................................................
86.4
30.7
14.4
2006
................................................................................................................................
85.8
30.5
14.3
2007 and after ................................................................................................................
85.2
30.3
14.2
(5) Gradually phases out, beginning in 1990, the retirement earn-
ings test for people 65 and older. The exempt amount of earnings
(as it would be automatically increased by wage trends) would be
further increased by $3,000 in 1990 and by a further $3,000 in each
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of the next four years, with the earnings test (for people 65 and
older) completely eliminated in 1995.
Conference agreement
The conference agreement follows the House Bill except for a
Senate amendment, effective beginning in 1990, to reduce the earn-
ings test offset for those age 65 and older to one dollar for every
three dollars earned over the annual exempt amount.
III. MISCELLANEOUS AND TECHNICAL PROVISIONS
1. CASH MANAGEMENT
A. FLOAT ALLOWANCE REVISION
Present law
Social security benefit checks are issued to beneficiaries on the
third day of each month. Current Treasury procedures allow a two-
day float before trust fund monies are actually transferred to the
Treasury in order to pay the checks which have been issued.
House bill
Requires the Secretaries of Treasury and Health and Human
Services to conduct a study consisting of two separate investiga-
tions. The first concerns the actual average length of time between
the issuance of benefit checks and their redemption; the second
would deal with the feasibility and desirability of providing for the
transfer on a daily basis to the general fund from the appropriate
trust fund amounts equal to the amounts of benefit checks which
are paid by the Federal Reserve Banks on that day.
The Secretary of the Treasury would be required to promulgate
regulations to implement the changes found appropriate by these
investigations.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
The annual interest rate charged on late payments of social secu-
rity contributions due on the earnings of State and local employees
is 6 percent per annum.
House bill
Changes the rate of interest charged on late payments of social
security contributions due on the earnings of state and local em-
ployees to a rate equal to the average interest rate earned by new
special obligations of the trust funds during the period of the delin-
quency. (Effective with respect to payments due for wages paid
after Dec. 31, 1983.)
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Senate amendment
No provision.
Conference agreement
The conference agreement follows the Senate Amendment.
Current law
Payroll tax revenues which are in excess of the amount neces-
sary to pay current benefits generally must be invested in "special
issue" obligations available for purchase only by the trust funds.
Such obligations have maturities fixed with due regard for the
needs of the trust funds and bear an interest rate equal to the
average market yield on all marketable, interest bearing obliga-
tions of the U.S. which are not due or callable within 4 years.
House bill
Requires the managing trustee of the Social Security Trust
Funds to redeem most current trust fund investments and make all
future investments in a new type of Treasury public debt obliga-
tion bearing interest at a rate that varies from month to month.
For each month, the interest rate on the new type of obligation
will be equal to the higher of (1) the average market yield over the
preceding month on all public-debt obligations (other than "flower
bonds") with maturities of more than 4 years or (2) the average
market yield for similar obligations with 4 years or less to maturi-
ty.
Requires that annual reports of the Social Security Boards of
Trustees to the Congress include a certification by the chief actu-
ary of the Social Security Administration that the reports meet
generally accepted standards within the actuarial profession.
Allows the 1983 annual reports to be filed any time before 45
days after enactment.
Senate amendment
Similar to House bill, except that the interest rate to be applied
to the social security investments would be the same long-term,
special-issue rate used under current law. The redeemed invest-
ments and all future funds would be invested in special depository
accounts, rather than new special issue obligations.
Also, requires actuarial statement, but does not have to certify
the reasonableness of the assumptions and cost estimates underly-
ing the trustee's report (floor amendment).
No provision.
Conference agreement
Both Houses recede with respect to trust fund investment proce-
dures. With respect to the actuarial statement and the delay of the
1983 Trustees' report, the conference agreement follows the House
bill, with an amendment providing that the certification shall not
refer to economic assumptions underlying the Trustees' report.
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D. SEPARATE TREATMENT OF TRUST FUND OPERATIONS UNDER UNIFIED
BUDGET
Present law
Beginning with 1969, the financial operations of the social secu-
rity trust funds have been included in the unified budget of the
Federal Government.
House bill
Provides for the display of OASI, DI, HI and SMI fund operations
as a separate function within the budget. Beginning with fiscal
year 1989, these trust fund operations (except for SMI) would be re-
moved from the unified budget.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill except that the
trust fund operations would not be removed from the unified
budget until fiscal year 1992.
2. ELIMINATION OF GENDER-BASED DISTINCTIONS UNDER THE OLD-
AGE, SURVIVORS, AND DISABILITY INSURANCE PROGRAM
Unless otherwise noted, the proposed amendments concerning
the elimination of gender-based distinctions would be effective with
respect to benefits payable for months after the month of enact-
ment.
Present law
The Social Security Act provides for the payment of benefits to
aged divorced wives and aged or disabled surviving divorced wives
but benefits are not provided for similarly situated men.
House bill
Amends the statute to confrom to court decisions by providing
social security benefits for aged divorced husbands and aged or dis-
abled surviving divorced husbands based on their former wives
earnings records. (SSA is currently complying with court decisions.)
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
Widows and widowers who remarry before age 60 are treated dif-
ferently with.respect to their eligibility for benefits based on their
deceased spouses earnings. A woman may qualify for benefits as a
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surviving spouse, even though she has remarried, so long as she is
not married at the time she applies for benefits. A man, however,
under current law loses forever his eligibility as a surviving spouse
of his deceased wife worker if he remarries before age 60. Since the
decision of Mertz v. Harris (1980), SSA has paid benefits to remar-
ried widowers on the same basis as to remarried widows.
House bill
Amends the statute to conform to court decisions by making the
requirements for widowers' and widows' benefits consistent. (SSA is
currently complying with the aforementioned court decisions.)
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
An illegitimate child may be eligible for benefits based upon a
man's earnings, without regard to the appropriate State intestate
laws, if among other things, the man has been decreed by a court
to be the father of the child, or the man is shown by evidence satis-
factory to the Secretary to be the father of the child. Similar provi-
sions do not currently apply when an illegitimate child claims a
benefit based upon his mother's earnings.
House bill
Provides that illegitimate children would be eligible for benefits
based on their mother's earnings as they are currently for benefits
based on their father's earnings.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
Certain workers who attained age 72 before 1969 are eligible for
social security benefits under transitional insured status provisions
which require fewer quarters of coverage than would ordinarily be
required. Wives and widows of eligible male workers who reached
72 prior to 1969 also are eligible for benefits under this provision,
but husbands and widowers of eligible female workers are not.
House bill
Extends to husbands and widowers the transitionally insured
status provisions which currently apply to wives and widows.
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Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
Special payments are provided to persons who attained age 72
before 1968 and who have no quarters of coverage and to persons
age 72 in 1968 or after who have at least three quarters of coverage
for every year after 1966 and before the year of attainment of age
72. However, even though each spouse must meet the same eligibil-
ity requirements if he or she were not married, once the eligibility
of both is determined, the couple is treated as if the husband were
the retired worker and the wife were the dependent. The benefit is
allocated so that the husband is paid two-thirds of the benefit and
the wife is paid one-third.
House bill
Provides that where both husband and wife each qualify for
Prouty benefits under Section 228 of the Social Security Act, each
would receive a full monthly benefit.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
A young wife, widowed mother or surviving divorced mother who
has an entitled child under age 16 in her care receives a benefit for
both herself and her child based upon the earnings of her husband.
Under the law a similarly situated father cannot qualify for bene-
fits based on his retired, disabled, or deceased wife's earnings.
House bill
Amends the statute to conform to court decisions by providing
social security benefits for a father who has in his care an entitled
child of his retired, disabled, or deceased wife (or deceased former
wife). (SSA is currently complying with the aforementioned court
decisions.)
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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G. EFFECT OF MARRIAGE ON CHILDHOOD DISABILITY AND OTHER
DEPENDENTS' OR SURVIVORS' BENEFITS
Present law
When a childhood disability beneficiary is married to another
childhood disability beneficiary or to a disabled worker beneficiary,
and the disability benefits of one of the beneficiaries is terminated
because the beneficiary recovers or engages in substantial work,
the continued eligibility of the other spouse depends upon the
spouse's sex. A woman's childhood disability benefits end when her
husband's disability benefits end. However, a man's childhood dis-
ability benefits are not terminated when his wife's disability bene-
fits end.
House bill
Continues the benefits of a childhood disability beneficiary, re-
gardless of sex, when the beneficiary's spouse is no longer eligible
for benefits as a childhood disability beneficiary or disabled worker
beneficiary.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
H. EFFECTS OF MARRIAGE ON OTHER DEPENDENTS' OR SURVIVORS'
BENEFITS
Present law
If a childhood disability beneficiary or disabled worker benefici-
ary marries a person receiving certain kinds of social security de-
pendent or survivor benefits, the benefits of each individual contin-
ue. If the disabled beneficiary is a male and he recovers or engages
in substantial work and his benefits are terminated, his wife's
benefits also end. If, however, the disabled beneficiary is a woman,
her husband's benefits are not terminated when her disability
benefits end.
House bill
Continues social security payments to an individual, regardless
of sex, who is receiving dependents' or survivors' benefits, when his
or her spouse is no longer eligible for childhood disability benefits
or benefits as a disabled worker.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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Present law
A widow (but not a widower) is permitted, under certain circum-
stances, 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.
House bill
Allows widowers to exercise the option to waive the right to a
civil service survivor's annuity in the same way as is currently per-
mitted for widows.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
3. COVERAGE
A. FOREIGN AFFILIATES OF AMERICAN EMPLOYERS
Present law
Work by a U.S. citizen outside the U.S. for a foreign subsidiary of
a domestic corporation is covered by social security if the domestic
corporation arranges for coverage by entering into a voluntary
agreement with the Internal Revenue Service; the agreement ap-
plies to all citizens subsequently employed by the subsidiary if
their work would be covered if performed in the U.S.
A "foreign subsidiary" of a domestic corporation is defined as a
foreign corporation of which: not less than 20 percent of its voting
stock is owned by a domestic corporation; or more than 50 percent
of its voting stock is owned by another foreign corporation and at
least 20 percent of the latter corporation's voting stock is owned by
a domestic corporation.
A domestic corporation which has entered into a voluntary
agreement providing for social security coverage of U.S. citizens
employed by its foreign subsidiary can also elect to include such
U.S. citizens in its qualified pension, profit-sharing, stock bonus,
etc. plans. A similar rule applies to U.S. citizens employed by a do-
mestic corporation's domestic subsidiary that operates primarily
abroad.
House bill
Broadens the availability of social-security coverage to American
citizens working abroad by: (1) permitting coverage of American
citizens working outside the United States for a foreign affiliate of
an American employer; and (2) reducing the ownership interest in
the foreign affiliate that is required to be held by the American
employer from 20 percent to 10 percent (either directly or through
one or more entities). These changes would be effective upon enact-
ment.
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In addition, coverage would be extended to include employees of
American employers and affiliates who are residents of the United
States as well as American citizens. (This provision applies general-
ly to remuneration paid after December 31, 1983.)
Conforming changes would be made in the provisions relating to
the extension of coverage under qualified pension. profit-sharinf,
stock bonus, etc. plans for employees of a domestic corporation s
subsidiary.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
Present law
U.S. citizens and resident aliens who are not residents of a for-
eign country for a full year compute their net self-employment
income for purposes of social security taxes (SECA) without regard
to the foreign earned income exclusion. However, no coverage is
provided for these taxable earnings.
U.S. citizens who are residents of a foreign country compute
their net self-employment income excluding amounts which are
also excluded for income tax purposes by the foreign earned
income exclusion.
House bill
Provides that foreign earned income which is currently subject to
social security self-employment tax would be creditable for social
security coverage purposes, effective with respect to taxable years
beginning after December 31, 1981.
Provides that all net self-employment income would be computed
for SECA purposes without regard to the foreign income exclusion,
effective with respect to remuneration paid after December 31,
1983.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
C. INCLUDING ELECTIVE FRINGE BENEFITS AND NONQUALIFIED
DEFERRED COMPENSATION IN THE SOCIAL SECURITY WAGE BASE
Present law
(1) Cash or deferred arrangements (Code section 401(k)).-Under a
cash or deferred arrangement forming a part of a qualified profit-
sharing or stock bonus plan, a covered employee may elect to have
the employer contribute an amount to the plan on the employee's
behalf or to receive such amount directly in cash. Amounts contrib-
uted to the plan pursuant to the election are treated as employer
18-370 0 - 83 - 10
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contributions and are excluded from the employee's taxable income
and social security wage base.
(2) Cafeteria plans (Code section 125).-Under a cafeteria plan of
an employer, an employee may choose among various benefits in-
cluding cash, taxable benefits and nontaxable benefits (including a
cash or deferred arrangement) offered under the plan. If certain re-
quirements are met, amounts applied toward nontaxable benefits
are excluded from the employee's taxable income and generally
from the social security wage base.
(3) Tax-sheltered annuities (Code section 403(b)). -Subject to cer-
tain limitations, amounts paid by the employer for the purchase of
a tax-sheltered annuity for an eligible employee are excluded from
the employee's taxable income and social security wage base. Tax-
sheltered annuities may be purchased for employees of educational
institutions and certain tax-exempt organizations. Tax-sheltered
annuities may be purchased pursuant to a salary reduction agree-
ment.
(4) Nonqualified deferred compensation plans.-Amounts de-
ferred under a nonqualified deferred compensation plan generally
are taxable when they are paid or when there is no substantial risk
of forfeiture, depending upon whether or not the plan is unfunded
or funded. However, if the plan is a retirement plan or the
amounts are paid on account of retirement, the amounts are gener-
ally excludible from FICA and FUTA. These plans may be utilized
by (1) taxable employers to provide retirement benefits in excess of
those permitted under tax-qualified retirement plans or coverage
limited primarily to highly compensated or management employ-
ees, (2) tax-exempt employers, and (3) State and local governments.
House bill
(1) An employer's plan contributions on behalf of an employee
under a qualified cash or deferred arrangement would be includible
in the social security wage base for tax and coverage purposes to
the extent that the employee could have elected to receive cash in
lieu of the contribution, effective for remuneration paid after Dec.
31, 1983.
(2) Amounts subject to an employee's designation under a cafete-
ria plan would be includible in the social security wage base to the
extent that such amounts may be paid to the employee in cash or
property or applied to provide a benefit for the employee not ex-
cluded from the FICA wage base effective for remuneration paid
after Dec. 31, 1983.
(3) Amounts paid by an employer for a tax-sheltered annuity for
an employee will be includible in the social security wage base.
(4) No provision.
Senate amendment
(1) Same as House bill.
(2) Same as House bill, except applies only to cafeteria plans
which include a cash-or-deferred arrangement as one of the option-
al fringe benefits.
(3) Any amounts paid by an employer to a tax-sheltered annuity
by reason of a salary reduction agreement between the employer
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and the employee would be includible in the social security wage
base.
(4) The amount deferred under a (nonqualified) compensation
plan will be includible in the social security wage base as of the
later of (1) when the services are performed or (2) when there is no
substantial risk of forfeiture of the rights to the amounts. In the
case of a governmental plan, a deferred compensation plan will
only include certain nonqualified plans of State and local govern-
ments.
Conference agreement
(1) The conference agreement generally follows the House bill
and the Senate amendment with respect to qualified cash or de-
ferred arrangements. Employer contributions to these arrange-
ments will be taxable for FICA and FUTA purposes whether or not
the cash or deferred arrangement is part of a cafeteria plan. A
transition rule is provided to exclude certain remuneration paid
after the effective date of this provision if paid pursuant to certain
elective deferrals made before January 1, 1984 (January 1, 1985,
with respect to FUTA taxes).
(2) The conference agreement contains no other provision con-
cerning the inclusion of amounts applied toward nontaxable (for
FICA purposes) benefits in a cafeteria plan.
(3) The conference agreement generally follows the Senate
amendment by providing that employer contributions to a section
403(b) annuity contract would be included in the wage base if made
by reason of a salary reduction agreement (whether evidenced by a
written agreement or otherwise). For this purpose, the conferees
intend that employment arrangements, which under the facts and
circumstances are determined to be individually negotiated, would
be treated as salary reduction agreements. Of course; the mere fact
that only one individual is receiving employer contributions (e.g.,
where the employer has only a few employees, only one of whom is
a member of a class eligible for such contributions) is not, by itself,
to be considered proof of individual negotiation.
(4) With respect to nonqualified deferred compensation plans, the
conference agreement generally follows the Senate amendment
that includes amounts deferred in the employee's FICA and FUTA
wage base when services are performed or, if later, when there is a
lapse of a substantial risk of forfeiture (within the meaning of sec.
83) of the employee's right to those amounts. As under present law,
amounts treated as employer contributions under a State pick-up
plan (sec. 414(h)(2)) or amounts deferred under eligible State and
local deferred compensation arrangements are includible in the
wage base when deferred. The conference agreement provides that
any payment to, or on behalf of, an employee or his beneficiary
under certain supplemental retirement plans, which provide cost-
of-living adjustments to the pension benefits under tax-qualified
plans, will not be included in the wage base. Finally, under the
conference agreement, in the case of certain agreements, in exist-
ence on March 24, 1983, between a nonqualified deferred compensa-
tion plan and an individual, the provision would only apply to serv-
ices performed after December 31, 1983 (December 31, 1984, for
FUTA purposes).
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Present law
Any payment (other than vacation or sick pay made to an em-
ployee after the month in which he or she attains age 62, where
the employee did not work for the employer in the period in which
such payment is made, is excluded from the definition of wages for
both benefit and tax purposes.
House bill
Includes in the statutory definition of wages, payments made to
an individual with the expectation that he or she will subsequently
render services (effective with respect to calendar years beginning
after the sixth month after date of enactment).
Senate amendment
Same as House bill, except it would be effective for remuneration
paid after 1983.
Conference agreement
The conference agreement follows the Senate amendment.
E. CODIFICATION OF ROWAN DECISION WITH RESPECT TO MEALS AND
LODGING
Present law
In Rowan Companies, Inc. v. United States, 452 U.S. 247 (1981),
the Supreme Court stated that the definition of "wages" for FICA
purposes must be interpreted in regulations in the same manner as
for income-tax withholding purposes. At issue in Rowan Compa-
nies, Inc. was-the exclusion, for FICA tax purposes, of employer
provided meals and lodging from gross income under code sec. 119.
House bill
With the exception of the value of meals and lodging provided
for the convenience of the employer, the determination of whether
or not amounts are includible in the social security wage base is to
be made without regard to whether such amounts are treated as
wages for income tax withholding purposes. In addition, the bill
provides that the definition of wages for social security tax and
benefit purposes is revised to exclude the value of employer pro-
vided meals and lodging if such value is excluded from the employ-
ee's gross income. The provision applies to remuneration paid after
December 31, 1983.
Senate amendment
Same as House bill.
F. EXCLUSION OF EMPLOYER PAYMENTS MADE UNDER SIMPLIFIED
EMPLOYEE PENSION PLANS
Present law
In 1978, the Internal Revenue Code was amended to exclude
from wages for social security tax purposes employer payments to
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or on behalf of an employee under a simplified employee pension
(SEP) plan. However, no corresponding change was made to the
Social Security Act definition of covered wages.
House bill
Amends the Social Security Act to exclude in the definition of
covered wages for social security coverage purposes employer con-
tributions to a simplified employee pension (SEP) plan. Effective
with respect to remuneration paid after December 31, 1983.
Senate amendment
Same as House bill, except also changes definition for FUTA pur-
poses effective January 1, 1985.
Conference agreement
The conference agreement follows the Senate amendment.
Present law
Present law includes in the definition of wages for the purpose of
social security and railroad retirement taxes, payments made
under a sick pay plan to an employee or any of his dependents by a
third-party on account of the employee's illness.
Proposed Treasury regulations would require a third-party payor
(for example, an insurance company) to withhold social security or
railroad retirement taxes on the sick pay payments they make as if
they were paying wages. However, the third-party payor would be
permitted to shift responsibility for the employer's portion of the
tax to the last employer for whom the employee worked.
House bill
Provides that, to the extent permitted in regulations, a multi-em-
ployer plan which makes sick pay payments will be treated as the
agent of the employer for whom services are normally rendered.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the Senate amendment.
H. CONFORMING AMENDMENTS TO FUTA WAGE BASE
Present law
The definition of wages subject to tax under the Federal Unem-
ployment Tax Act (FUTA) is similar to the definition of wages sub-
ject to FICA.
House bill
No provision.
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Senate amendment
The bill amends FUTA to conform to changes made in the FICA
wage base by this bill and P.L. 97-123 with respect to elective com-
pensation, standby pay, the Rowan decision, simplified employee
pensions, and sick pay (items above).
Conference agreement
The conference agreement follows the Senate amendment.
Present law
An international Social Security agreement is to establish
"methods and conditions for determining under which system [i.e.,
the foreign system or our own] employment, self-employment, or
other service shall result in a period of coverage". However,
through an inadvertent drafting error earnings that are intended
to be covered under the U.S. system pursuant to an international
social security agreement are not covered because U.S. social secu-
rity taxes cannot be imposed on the earnings.
House bill
Provides for the imposition of social security taxes if an interna-
tional social security agreement provides for coverage under the
U.S. social security system. (Effective for taxable years after the
date of enactment.)
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
J. STATE AND LOCAL EMPLOYEE GROUPS IN UTAH
Present law
Utah is 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 have changed
since the provision was enacted.
House bill
Amends the provision in the Social Security Act listing entities
for which Utah may arrange social security coverage to provide
that coverage would not be affected by a subsequent change in the
name of any of the entities.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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K. EFFECTIVE DATES OF INTERNATIONAL SOCIAL SECURITY AGREEMENTS
Present law
Totalization agreements can only become effective after the expi-
ration of a period during which each House of the Congress has
been in session on each of 90 days. (This has been interpreted to
mean that both Houses of Congress must be in session on a particu-
lar day for it to count in the 90-day calculation.
House bill
Provides that totalization agreements can become effective after
the expiration of a period during which only one House of the Con-
gress must be in session on each of 60 days.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
A. TECHNICAL AND CONFORMING AMENDMENTS TO THE MAXIMUM
FAMILY BENEFIT PROVISIONS
Present law
When children are simultaneously entitled to benefits on the
records of two or more workers, the Maximum Family Benefits
payable on each record are combined for the purposes of determin-
ing the benefits payable to those children. The law contains a limit,
however, on the highest possible combined Maximum Family Bene-
fit, sometimes referred to as the super maximum. Whenever the
wage base increases (in January of every year), the super maxi-
mum is recomputed. In addition, in June of each year the super
maximum is increased when the cost-of-living adjustment is made
in general benefit levels. Thus, families whose benefits are limited
by the super maximum can have their benefits unexpectedly in-
creased or decreased each January when the super maximum is re-
computed.
House bill
Provides that after initial entitlement, a family's super maxi-
mum would be adjusted each year when a cost-of-living increase is
provided to everyone on the benefit rolls.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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B. RELAXATION OF INSURED STATUS REQUIREMENTS FOR CERTAIN
WORKERS PREVIOUSLY ENTITLED TO DISABILITY INSURANCE BENEFITS
Present law
Workers who are disabled before age 31 have a lower insured
status requirement than older workers. However, such a worker
who recovers from his or her disability and subsequently becomes
disabled again at age 31 or later may have difficulty establishing
entitlement to disability benefits at that time because he or she
has not had sufficient time to obtain the necessary 20 quarters of
coverage before the subsequent disability.
House bill
Provides that a worker who had a period of disability which
began before age 31, recovered, and then became disabled again at
age 31 or later would again be insured for disability benefits if he/
she had quarters of coverage in half the calendar quarters after
age 21 and through the quarter in which the later period of disabil-
ity began (up to a maximum of 20 out of 40 quarters). Effective gen-
erally for applications filed after enactment.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
C. ILLEGITIMATE CHILDREN OF DISABLED BENEFICIARIES-FIRST MONTH
OF ENTITLEMENT
Present law
The first month for which certain benefits are paid is delayed
from the month during which the individual satisfied the various
entitlement conditions to the first month throughout which those
conditions were satisfied. This provision does not apply to the bene-
fits of illegitimate children of retired beneficiaries. However, this
provision does apply to the illegitimate children of disabled work-
ers.
House bill
Provides social security monthly benefits to the illegitimate child
of a disabled worker for a month in which the child satisfied all
other entitlement conditions but was not eligible for benefits be-
cause the acknowledgment or court decree or order establishing
parenthood occurred later than the first day of that month. Effec-
tive on enactment.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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D. ONE-MONTH RETROACTIVITY OF WIDOW'S AND WIDOWER'S BENEFITS
Present law
The payment of retroactive benefits is prohibited if such pay-
ment would require the lowering of future benefits.
House bill
Allows an aged widow or widower to receive actuarially reduced
benefits for the month in which the insured spouse died, if the ap-
plication is filed in the following month, even though the retroac-
tive payment would result in lower future monthly benefits than
would be the case if benefits were not paid retroactively. Effective
for applications filed after the second month following the month
of enactment.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
E. CLARIFY THE PROVISION IN SOCIAL SECURITY LAW EXEMPTING
BENEFITS UNDER SSA-ADMINISTERED PROGRAMS FROM ASSIGNMENT
Present law
Since 1935, the Social Security Act has prohibited the transfer or
assignment of any future social security or SSI benefits payable
and further states that no money payable or rights existing under
the Act shall be subject to execution, levy, attachment, garnish-
ment, 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 a
Chapter XIII bankruptcy and have ordered SSA in several hundred
cases to send all or part of a debtor's benefit check to the trustee in
bankruptcy.
House bill
Specifically provides that social security and SSI benefits may
not be assigned notwithstanding any other provisions of law, in-
cluding P.L. 95-598, the "Bankruptcy Reform Act of 1978". Effec-
tive on enactment.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
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F. USE OF DEATH CERTIFICATES TO PREVENT ERRONEOUS BENEFIT
PAYMENTS TO DECEASED INDIVIDUALS
Present law
There are currently no well-developed procedures or arrange-
ments to permit SSA to determine on a timely basis when a benefi-
ciary has died.
House bill
Provides authority for the Secretary of HHS to contract with
states for death certificate information. This information would be
matched with SSA benefit records to help insure that benefit pay-
ments are promptly terminated when the beneficiary dies.
Senate amendment
Similar to House except incorporates GAO and SSA comments.
Conference agreement
The conference agreement follows the Senate amendment.
Present law
The Social Security Administration is currently part of the De-
partment of Health and Human Services.
House bill
Authorizes a feasibility and implementation study with respect
to establishing SSA as an independent agency. Such study shall in-
clude but not be limited to the following points: the feasibility of
changing the current status of SSA; how to manage the transition;
what authorities would need to be transferred or amended; what
programs would be involved; what agency administrative relation-
ships would need to be adjusted, etc. The study would be conducted
(in consultation with the Commissioner of Social Security) by a
panel of administrative experts appointed by the House Committee
on Ways and Means and the Senate Committee on Finance, with a
report and recommendations to be submitted to the Committees no
later than January 1, 1984.
Senate amendment
Similar to the House provision except-
(1) commission would be appointed by the President with
advice and consent of the Senate,
(2) report would be due no later than April 1, 1984, and
(3) implementation, not feasibility, of independent SSA, is in-
cluded in study mandate.
Conference agreement
The conference agreement provides for the following:
In keeping with the recommendations of the National Commis-
sion on Social Security Reform, a study shall be conducted with re-
spect to the establishment of the Social Security Administration as
an independent agency under a bipartisan board appointed by the
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President, by and with the advice and consent of the Senate. The
study shall be conducted by a Commission consisting of experts
widely recognized in the fields of government administration, social
insurance, and labor relations. The study shall address, analyze
and report to the Congress on: how to manage the transition, what
authorities would need to be transferred or amended, the
program(s) which should be included within the jurisdiction of the
new agency, the legal and other relationships of the Social Security
Administration with other organizations which would be required
as a result of establishing the Social Security Administration as an
independent agency, and any other details which may be necessary
for the development of appropriate legislation to establish the
Social Security Administration as an independent agency.
The study would be conducted (in consultation with the Commis-
sioner of Social Security) by a panel of experts appointed by the
House Committee on Ways and Means and the Senate Committee
on Finance, with a report and recommendations to be submitted to
the Committees no later than April 1, 1984.
Present law
Under a provision enacted in 1977, people becoming eligible for a
public pension on their own account after November 1982, will gen-
erally have the amount of any social security dependents or survi-
vors' benefits reduced dollar-for-dollar on account of that public
pension.
Under a provision adopted last year, persons who become eligible
for a public pension after November 1982 and before June 1983
who meet a "one-half support" dependency test are exempt from
the offset.
House bill
For persons who become eligible for public pension after June
1983, the amount of the public pension used for purposes of the
offset against social security benefits would be one-third of the
public pension.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill except that the
percentage of the public pension to be used for purposes of the
offset would be two-thirds.
Present law
In computing a worker's covered earnings history under social
security (upon which family benefits are based), up to five years of
low earnings are dropped.
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House bill
No provision.
Senate amendment
The provision would allow up to two additional years to be
dropped for persons who leave the workforce to care for a child
under 3 in the home. To qualify for a child-care drop year, the
worker can have no earnings at all during the year.
Effective for persons first eligible for benefits after 1983.
Conference agreement
The conference agreement follows the House bill.
Present law
The Board of Trustees of the four social security trust funds (Old-
Age and Survivors Insurance, Disability Insurance, Hospital Insur-
ance, and Supplemental Medical Insurance) consists of, ex officio,
the Secretaries of the Treasury, Health and Human Services, and
Labor, with the Secretary of the Treasury serving as the managing
trustee. Among other responsibilities, the Board of Trustees is re-
quired to report to Congress each year on the operation and status
of the trust funds, review the general policies followed in managing
the trust funds, and recommend changes in such policies.
House bill
No provision.
Senate amendment
Add two public members to the Board of Trustees of the OASDI,
HI, and SMI trust funds. The public members would be nominated
by the President and confirmed by the Senate. The two public
members could not be from the same political party. Trustees
would not be considered fiduciaries and would not be personally
liable for actions taken in such capacity with respect to the trust
funds.
Effective upon enactment.
Conference agreement
The conference agreement follows the Senate Amendment.
Present law
There are no citizenship or residence requirements for receiving
social security cash benefits (OASDI). Any alien in the U.S.-
whether legally or illegally, or as a permanent or temporary resi-
dent-is eligible for benefits provided he has engaged in covered
employment and otherwise meets the eligibility requirements. De-
pendents and survivors are also eligible for benefits regardless of
their immigration status or that of the insured worker.
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House bill
No provision.
Senate amendment
Limitations would be placed on the payment of benefits to alien
workers, their dependents and survivors who reside abroad. Bene-
fits would continue to be paid only under the following conditions:
(1) the worker is the citizen of a country with which the
United States has a treaty or totalization agreement; and
(2) until total benefits paid to the wage earner (after any
income taxes paid) and dependents equal social security taxes
payable by the wage earner plus interest.
This provision would apply to new eligibles on or after January
1, 1985.
In addition, prohibits the payment of social security benefits to
noncitizens who are unable to establish at the time they apply for
benefits that they had ever been legally admitted to work in the
United States.
Effective for those first eligible after December 1983.
Also, in the case of beneficiaries who are under final orders of
exclusion, departure or voluntary departure in lieu of deportation
and can be shown by the Attorney General to have earned social
security credits during periods of illegal work, those credits would
not be used in computing social security benefits, thereby potential-
ly eliminating benefits. (Floor amendment.)
Conference agreement
The conference agreement would suspend the payment of bene-
fits to any alien receiving benefits as a dependent or survivor of an
insured worker (whether or not the worker is a U.S. citizen) when
the alien beneficiary has been outside the U.S. for six consecutive
calendar months. Alien auxiliary beneficiaries who could prove
that they had lived in the U.S. for a total of at least five years
during which their relationship with the worker was the same as
the relationship upon which eligibility for benefits is based (e.g.,
spouse, child, parent) would be exempt from the suspension of
benefits. Children would be deemed to meet the 5-year residence re-
quirement if the residence requirement could be met by the child's
parents.
Present law
Persons imprisoned for the conviction of a felony may not receive
student benefits (which are being phased out anyway), and are not
eligible for disability benefits unless they are participating in a
court-approved rehabilitation program. (Dependents benefits are
not affected.) Also, impairments resulting from the commission of a
crime cannot be the basis for disability benefits and impairments
occurring during imprisonment cannot be the basis for disability
benefits during the period of imprisonment.
Presently, benefits may continue to be paid to incarcerated felons
who are either retired workers, widow or widower beneficiaries,
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spouses of retired or disabled workers, and to those DI beneficiaries
in a court-approved rehabilitation program.
House bill
No provision.
Senate amendment
The provision would eliminate all benefits to felons during their
period of incarceration. In addition, would prohibit payments to in-
mates of facilities for the criminally insane (Floor amendment).
Benefits of dependents and survivors of incarcerated felons would
not be affected.
Effective for benefits paid for the month after enactment.
Conference agreement
The conference agreement follows the Senate amendment, with
an amendment providing that the limitation on prisoner's benefits
will only extend the provision in current law applying to disability
insurance benefits to old age and survivors' insurance benefits.
Present law
Requires the deposit of withheld social security taxes for State
and local employees within thirty days after the end of the month
in which the applicable wages were paid.
By contrast, the frequency with which deposits of social security
taxes and income taxes are made by private employers is deter-
mined under regulations issued by Treasury and vary in accord-
ance with the tax liability of the employer. Deposits are required
as frequently as every week for employers with large liabilities and
as infrequently as every three months for employers with smaller
liabilities.
Although State and local governments are now governed by the
same rules as private employers with regard to depositing withheld
income taxes, deposits of social security taxes continue to be treat-
ed differently.
House bill
No provision.
Senate amendment
The provision would apply the same social security tax deposit
requirements to State and local governments that now apply to pri-
vate employers.
Effective for deposits required to be made after December 1983.
Conference agreement
Under the conference agreement State and local governments
would be required to deposit withheld social security taxes on a bi-
weekly (i.e. every two weeks) basis.
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N. EXCLUSION FROM SOCIAL SECURITY COVERAGE FOR SERVICES
PERFORMED BY MEMBERS OF CERTAIN RELIGIOUS SECTS
Present law
In general, social security (FICA) tax is imposed on every individ-
ual who receives wages with respect to employment. In addition,
social security.tax is imposed on employers who pay wages with re-
spect to employment. There is no exemption, under present law, for
employers or employees who are members of religious sects that
oppose the social security system. However, present law does pro-
vide an exemption from self-employment tax (SECA) for members
of religious sects that are conscientiously opposed to the acceptance
of private or public insurance and which make provision for the
care of their dependent members.
House bill
No provision.
Senate amendment
The provision will exempt from social security tax wages paid by
individuals who are exempt from self-employment taxes because of
their religious beliefs to individuals who are members of religious
sects that conscientiously oppose the acceptance of private or
public insurance and which make provisions for the care of their
dependent members. This exemption applies both to the employer
and employee portion of social security tax.
The exemption applies only in the case of religious sects that
have been in existence at all times since December 31, 1950.
Effective for remuneration paid after 1983.
Conference agreement
The conference agreement follows the House bill.
0. INCREASE IN FICA AND WITHHOLDING TAX DEPOSIT THRESHOLD
Present law
In general, employers that have $500 or more of undeposited
FICA and withholding taxes at the end of any month must deposit
those taxes within 15 days after the end of that month. However,
employers that have $3,000 or more of undeposited taxes at the end
of any eighth-monthly period must deposit those taxes within 3
days after the close of the eighth-monthly period.
House bill
No provision.
Senate bill
Eighth-monthly deposits for any month will not be required until
the employer has at least $5,000 of undeposited taxes. Once this
$5,000 threshold is reached, the employer will be required to make
further eighth-monthly deposits so long as there is $3,000 or more
of undeposited taxes at the end of any eighth-monthly period fall-
ing within the same month.
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The provision is effective for months beginning after December
31, 1983. (Floor amendment.)
Conference agreement
The conference agreement follows the House bill.
P. APPLICATION OF COMMON PAYMASTER RULES TO CERTAIN NONPROFIT
ORGANIZATIONS EMPLOYING MEDICAL SCHOOL FACULTY MEMBERS
Present law
Present law generally requires an employer to pay FICA taxes
with respect to a given employee only up to the amount of annual
wages referred to as the wage base. Thus, if an employee works for
more than one employer during the year and if his annual wages
exceed the tax base, employer FICA taxes, taking into account all
the employers for whom the individual worked, may be paid on
amounts in excess of the wage base.
There is a "common paymaster" exception to these general rules
which provides that if two or more related corporations concurrent-
ly employ the same individual and compensate him through a
common paymaster that is one of the corporations, then the
common paymaster is considered to be the only employer regard-
less of the fact that the individual performed services for other re-
lated corporations. Under one of the tests provided in regulations,
two corporations are related if 30 percent or more of one corpora-
tion's employees are concurrently employees of the other corpora-
tion.
House bill
No provision.
Senate bill
A State university that employs health care professionals as fac-
ulty members at a medical school and a tax-exempt faculty prac-
tice plan that employs faculty members of the medical school
would be deemed to be related corporations for purposes of the
common paymaster rules, provided that 30 percent or more of the
employees of the plan are concurrently employed by the medical
school. Remuneration that is disbursed by the faculty practice plan
to an individual employed by both the plan and the university
which, when added to remuneration actually disbursed by the uni-
versity, exceeds the contribution and benefit base will be deemed to
have been actually disbursed by the university as a common pay-
master and not to have been disbursed by the faculty practice plan.
The provision is effective on enactment (Floor amendment.)
Conference agreement
The conference agreement follows the Senate amendment.
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Q. ELECTIVE COVERAGE FOR MINISTERS AS EMPLOYEES
Present law
Under present law, ministers are not employees for social secu-
rity tax (FICA) purposes. However, ministers generally are subject
to the self-employment (SECA) tax.
House bill
No provision.
Senate amendment
The provision allows ministers and their churches to treat serv-
ices performed by ministers as employment for FICA tax purposes.
Remuneration for such services would not be subject to the SECA
tax. Once made, this election is irrevocable.
The provision is effective with respect to service performed on or
after the first calendar quarter beginning after the date of enact-
ment. (Floor amendment.)
Conference agreement
The conference agreement follows the House bill.
R. STUDY OF FEASIBILITY OF IMPLEMENTING SOCIAL SECURITY OPTION
ACCOUNTS
Present law
No provision.
House bill
No provision.
Senate amendment
Requires an 18-month study by Treasury of a plan to permit
workers to have part of their (and their employers') social security
taxes allocated to an IRA type account. The designated deposits
would be tax deductible. Subsequent social security benefits would
be reduced to take IRA deposits into account. (Floor amendment.)
Conference agreement
The conference agreement follows the House bill.
S. EARNINGS SHARING IMPLEMENTATION STUDY (SECTION 161 OF
SENATE AMENDMENT)
Present law
Earnings are credited for social security purposes to the record of
the worker to whom they are paid.
House bill
No provision.
Senate amendment
By January 1, 1984, requires the Secretary of Health and Human
Services to report to the House Committee on Ways and Means
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and the Senate Committee on Finance on proposals that combine
earnings of a husband and wife during the period of their marriage
and divide them equally for social security benefit purposes. The
study will analyze the impact of earnings sharing proposals on
social security beneficiaries, and include recommendations (1) to
provide adequate protection to particular classes of beneficiaries
where necessary and (2) with respect to a feasible time period for
implementation. In addition, the study will include cost estimates.
(Floor amendment.)
Conference agreement
The conference agreement follows the Senate amendment with
an amendment to delay the date to July 1, 1984.
Present law
OASDI checks do not include a notice stating that cashing of a
check to deceased individuals constitutes a felony.
House bill
No provision.
Senate amendment
Requires that all checks issued, and the envelopes in which they
are mailed, include a notice that cashing or attempted cashing of a
check which was erroneously issued to a deceased person consti-
tutes a felony punishable under section 208 of the Social Security
Act. Effective for checks issued for months after December 1983.
(Floor amendment.)
Conference agreement
The conference agreement follows the House bill.
U. ADMINISTRATIVE REORGANIZATION OF VETERANS' ADMINISTRATION
LOS ANGELES DATA PROCESSING CENTER
Present law
The Veterans' Administration is generally prohibited from reduc-
ing the staff at any of its offices by more than 10 percent in any
fiscal year without advance notice to the Congress approximately 8
months prior to the beginning of that fiscal year.
House bill
No provision.
Senate amendment
Waives the requirements of veterans law (section 210(b)(2)(A) of
title 38, USC) in the planned administrative reorganization at the
Veterans Administration Los Angeles Data Processing Center in-
volving the transfer of 25 full-time equivalent employees.
Conference agreement
The conference agreement follows the Senate Amendment.
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V. TREASURY STUDY OF INDIVIDUAL RETIREMENT SECURITY ACCOUNTS
(IRSA )
Present law
No provision.
House bill
No provision.
Senate amendment
Treasury would study the feasibility of implementing IRSA's
which would be similar to an IRA. Individuals would establish and
fund the IRSA and receive a tax credit limited to 20 percent of the
individual's social security taxes, with a proportionate reduction in
Old-Age and Survivors and Disability benefits. The study would be
submitted to Congress before July 1, 1984.
Conference agreement
The conference agreement follows House bill.
W. TREATMENT OF EARNINGS OF DISABLED BLIND INDIVIDUALS
Present law
Blind disabled individuals are regarded as demonstrating the
ability to engage in substantial gainful activity if their earnings
exceed the exempt amount under the earnings test for individuals
age 65 and over.
House bill
No provision.
Senate amendment
Provides that no individual who is blind shall be regarded as
having demonstrated an ability to engage in substantial gainful ac-
tivity solely on the basis of earnings; the benefits of such individ-
uals shall be reduced in accordance with the earnings test for indi-
viduals age 65 and over. This would be effective for people applying
for benefits after enactment.
Under a related amendment, the SGA level for the blind would
be phased out as the earnings test is phased out for individual 65
and older (between 1990 and 1995).
Conference agreement
The conference agreement follows the House bill.
Present law
Nondisabled widow(er)s who do not have a child in their care are
first eligible for benefits at age 60. If disabled, such widow(er)s are
eligible for benefits at age 50 or older. Widow(er)s with a child in
care are eligible for benefits regardless of their age.
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House bill
No provision.
Senate amendment
Provide 6 months of benefits to persons widowed between the
ages of 55 and 60. The benefit amount would be 71.5 percent of the
worker's primary insurance amount (i.e., unreduced from the bene-
fit payable at age 60). Effective for monthly benefits after date of
enactment.
Conference agreement
The conference agreement follows House bill.
Present law
No provision.
House bill
No provision.
Senate amendment
Requires that new and replacement social security cards be
issued on banknote-quality paper beginning not later than 193 days
after enactment.
Conference agreement
The conference agreement follows the Senate Amendment.
TITLE IV-SUPPLEMENTAL SECURITY INCOME (SSI)
PROVISIONS
Present law
The current maximum monthly SSI benefit is $284.30 for a single
person and $426.40 for married couples. Benefits are indexed to the
Consumer Price Index (CPI). Cost-of-living increases are provided
annually in July if the CPI for the first quarter of the calendar
year increases by at least 3 percent over the first quarter of the
previous year. Benefits are increased by the same percentage as
social security benefits. This occurs through a reference in the SSI
law to the social security cost-of-living provision. For example, the
current payment level of $284.30 per individual, which became ef-
fective July 1982, represents an increase of 7.4 percent (or $19.60
monthly) from the previous July 1981 level of $264.70.
House bill
The Federal SSI benefit payment is increased by $20 per month
for individuals and $30 per month for couples, effective July 1,
1983.
The next Federal SSI cost-of-living adjustment (COLA) is delayed
from July 1983 until January 1984. Federal SSI benefits will be ad-
justed in January 1984, and every January thereafter, by the same
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percentage and under the same procedures as OASDI benefits. The
provision to pay the lower of the increase in wages or prices, which
is applicable to OASDI benefit increases beginning in 1988, would
apply to SSI. As with title II, the 1983 COLA, to be paid in Janu-
ary, 1984, will be provided even if the CPI increase is less than 3
percent.
Senate amendment
Same as the House bill, (with technical correction), except that
the provision to pay the lower of the increase in wages or prices,
which would be applicable to OASDI benefit increases beginning in
1988, would not apply to SSI.
Conference agreement
The conference agreement follows the Senate amendment.
2. ADJUSTMENT IN FEDERAL PASS-THROUGH PROVISIONS
Present law
P.L. 94-585, enacted October 21, 1976, established Federal SSI
"pass-through" requirements, effective with the cost-of-living in-
crease provided in July 1977. These provisions provide States with
two options for meeting the pass-through requirements.
(1) Aggregate spending level option.-A State may make State
supplementary payments in any current 12-month period that are
no less, in the aggregate, than were made in the previous 12-month
period (17 States use this option); or
(2) Individual payment level option.-A State may maintain the
supplementary payment levels that were in effect for categories of
individual recipients in December 1976. (All other States use this
measure, except Texas and West Virginia which have no State sup-
plementation program.)
An amendment in P.L. 97-248 allows a State that shifts from the
aggregate spending option to the individual payment level option
to maintain State supplementation levels in effect in the previous
December rather than the levels in December 1976.
House bill
States would be allowed the following options in meeting the
pass-through requirement:
(1) Aggregate spending level option.-Same as present law.
(2) Individual payment level option.-Current law is modified (a)
by substituting the State supplementary payment levels in effect in
March 1983 for those in effect in December 1976 as the levels that
States must maintain in complying with the payment level pass-
through requirement and, (b) with regard to the $20/$30 increase
in the Federal SSI standard in July 1983, by requiring States to
pass-through only as much as would have been required if the SSI
COLA were not changed from July 1983 to January 1984.
Senate amendment
States would be allowed the following options in meeting the
pass-through requirements:
(1) Aggregate spending level option.-Same as present law.
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(2) Individual payment level option.-The payment levels that
must be maintained would be either (a) those in effect in December
1976, or the previous December, as under current law; or (b) those
in effect in March 1983, as provided in the House bill. In other
words, the March 1983 supplementary payment levels would be an
additional option for complying with the payment level pass-
through provision, rather than a substitute for the December 1976
levels as under the House bill.
Conference agreement
The conference agreement follows the House bill.
3. SSI ELIGIBILITY FOR TEMPORARY RESIDENTS OF EMERGENCY
SHELTERS FOR THE HOMELESS
Present law
Under current law, aged, blind or disabled individuals who are
residents of private emergency shelters are eligible for SSI. Howev-
er, such residents of public shelters cannot receive SSI.
House bill
Aged, blind or disabled individuals who are temporary residents
of public emergency shelters could receive SSI payments for a
period of up to three months during any 12-month period.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
4. DISREGARDING OF EMERGENCY AND OTHER IN-KIND ASSISTANCE
PROVIDED BY NONPROFIT ORGANIZATIONS
Present law
SSI: In-kind assistance (other than assistance to meet home
energy needs) that is provided by a private nonprofit organization
to aged, blind, or disabled individuals must generally be counted as
income under the SSI program.
AFDC: Under HHS rules, States have the authority to decide
whether or not to count in-kind assistance as income under the
AFDC program. There is no provision in the AFDC statute (other
than in the case of home energy assistance) which specifically pro-
vides that authority.
House bill
SSI: Effective upon enactment until September 30, 1984, any sup-
port or maintenance assistance provided in-kind by a private non-
profit organization to aged, blind, or disabled individuals must be
disregarded under the SSI program, if the State determines that
the assistance is provided on the basis of need for such support or
maintenance.
AFDC: The AFDC statute would be amended to give States spe-
cific authority, at their option, to disregard such assistance in de-
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termining AFDC benefits. This would be effective upon enactment
until September 30, 1984.
Senate amendment
No provision
Conference agreement
The conference agreement follows the House bill.
5. NOTIFICATION REGARDING SSI
Present law
Currently, there is no statutory requirement that OASDI
beneficiaries be contacted and informed of potential eligibility for
Supplemental Security Income (SSI) payments. However, since the
beginning of the SSI program, the Social Security Administration
has undertaken a number of outreach efforts to identify those po-
tentially eligible. SSA routinely provides information about SSI eli-
gibility and takes applications for SSI payments at the time of ap-
plication for OASDI benefits, if the applicant is potentially eligible
for SSI payments. In addition, many State agencies and other pri-
vate relief groups routinely refer clients to SSA. Presently, about
6.9 percent of elderly social security recipients also receive SSI.
House bill
No provision.
Senate amendment
Prior to July 1, 1984, the Secretary of Health and Human Serv-
ices would be required to notify, on a one-time basis, all elderly
OASDI beneficiaries who are potentially eligible, of the availability
of SSI and encourage them to contact their district offices. In addi-
tion, the provision would require that the same information be in-
cluded with the notification to OASDI beneficiaries of upcoming
eligibility for Supplemental Medical Insurance.
Conference agreement
The conference agreement follows the Senate amendment.
TITLE V-UNEMPLOYMENT COMPENSATION (UC)
PROVISIONS
1. EXTENSION OF FEDERAL SUPPLEMENTAL COMPENSATION (FSC)
PROGRAM
Present law
Under the current FSC program, which became effective on Sep-
tember 12, 1982, and expires March 31, 1983, additional weeks of
Federally financed unemployment compensation benefits are pro-
vided to jobless workers who have exhausted all other State and
Federal unemployment benefits. The number of weeks of FSC bene-
fits that jobless workers may receive depends on (a) the number of
weeks of State unemployment benefits received by each claimant,
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and (b) the State in which the claimant qualified for or receives the
benefits.
As originally enacted, the FSC program, depending upon State
insured unemployment rates (IUR),' provided a maximum of 10, 8,
or 6 additional weeks of benefits. As amended by provisions con-
tained in the Surface Transportation Assistance Act of 1982 (P.L.
97-424), beginning with the week of January 9, 1983, the FSC pro-
gram provides the following maximum weeks of benefits:
(1) 16 weeks in States with a 13 week average insured unemploy-
ment rate (IUR) of at least 6.0 percent;
(2) 14 weeks in States that were triggered on the extended bene-
fits program between June 1, 1982 and January 6, 1983;
(3) 12 weeks in the remaining States that have a 13 week average
IUR of at least 4.5 percent;
(4) 10 weeks in the remaining States that have a 13 week average
IUR from 3.5 percent to 4.4 percent; and,
(5) 8 weeks in all other States.
The number of weeks of FSC a qualified individual may receive
is the lesser of 65 percent of the number of weeks of regular State
benefits he received or the maximum number of weeks of FSC pay-
able in the State. In the case of an interstate claim for FSC, the
individual is eligible for the lesser of (a) the maximum number of
weeks of FSC payable to him in the State in which he receives the
benefits or (b) the maximum number of weeks payable to him in
the State in which he qualified for FSC benefits.
To qualify for FSC an individual must have exhausted all State
and extended benefits to which he is entitled, and he must meet
State and extended benefit qualification requirements. This means
he must have worked at least 20 weeks or have the equivalent in
wages during the base period.
House bill
The FSC program is extended for 6 months, from April 1, 1983
through September 30, 1983.
Effective April 1, 1983, FSC benefits would be payable as follows:
(a) Basic FSC Benefits.-Individuals who begin receiving FSC on
or after April 1, 1983 could receive up to a maximum of:
(1) 14 weeks in States with average IUR 6.0 percent and above;
(2) 13 weeks in States with average IUR 5.0 to 5.9 percent;
(3) 11 weeks in States with average IUR 4.5 to 4.9 percent;
(4) 10 weeks in States with average IUR 3.5 to 4.4 percent;
(5) 8 weeks in all other States.
(b) Additional FSC Benefits.-Individuals who exhaust FSC on or
before April 1, 1983 could receive additional weeks equal to three-
fourths of the basic FSC entitlement payable in the State, up to a
maximum of:
(1) 10 weeks in the 14 basic week States (average IUR 6.0 or
above);
1 The Insured Unemployment Rate (IUR) is the percentage of workers covered under the
State unemployment compensation law who are claiming State unemployment benefits in a par-
ticular week. The number of weeks of FSC payable in a State depends upon the average IUR
measured over a moving 13 week period.
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(2) 8 weeks in the 13 and 11 basic week States (average IUR 4.5
to 5.9);
(3) 6 weeks in the 10 and 8 basic week States (average IUR 4.4
and below).
(c) Transitional FSC Benefits.-Individuals who begin receiving
FSC before April 1, 1983 and have some FSC entitlement remain-
ing after that date, could also receive additional weeks under (b)
above. However, the combination of their remaining basic FSC en-
titlement received after April 1, 1983, and the additional weeks
provided in (b), cannot exceed the maximum number of weeks of
basic FSC benefits payable in the State, shown in (a) above.
Section 503 provides for the coordination of the FSC extension
with the Trade Readjustment program.
Senate amendment
The FSC program is extended for 6 months from April 1, 1983
through September 30, 1983.
Effective April 1, 1983, FSC benefits would be payable as follows:
(a) Basic FSC Benefits.-Individuals would begin receiving FSC
on or after April 1, 1983 could receive up to a maximum of:
(1) 14 weeks in States with average IUR 6.0 percent and above;
(2) 12 weeks in States with average IUR 5.0 to 5.9 percent;
(3) 10 weeks in States with average IUR 4.0 to 4.9 percent;
(4) 8 weeks in all other States.
The maximum number of weeks payable in a State after April 1,
1983 could be no more than 4 weeks less than the maximum
number payable on March 27, 1983.
(b) Additional FSC Benefits.-Individuals who exhaust FSC on or
before April 1, 1983 could receive additional weeks of FSC benefits
up to a maximum of:
(1) 8 weeks in States with IUR at 6.0 and above
(2) 6 weeks in States with IUR at 5.0 to 5.9
(3) 4 weeks in all other States.
(c) Transitional FSC Benefits.-Individuals who begin receiving
FSC before April 1, 1983 and have some FSC entitlement remain-
ing after that date, could also receive addditional weeks under (b)
above. However, the combination of their remaining basic FSC en-
titlement received after April 1, 1983, and the additional weeks
provided in (b), cannot exceed the maximum number of weeks of
basic FSC benefits payable in the State, shown in (a) above.
(d) Phaseout FSC Benefits.-Individuals who have not exhausted
their FSC entitlement on September 30, 1983, when the program
expires, would be eligible to receive up to 50 percent of their re-
maining FSC entitlement. No new claimants would be added to the
FSC program on or after September 30, 1983.
(e) New Qualification Requirement.-Claimants must have
worked 26 weeks or have earned the equivalent in wages during
their base period to qualify for FSC. This applies only to claimants
becoming eligible for FSC on or after April 1, 1983.
Conference agreement
(a) Basic FSC Benefits.-The conference agreement follows the
Senate amendment with a modification in the provision under
which the maximum number of weeks payable in a State after
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April 1, 1983 could be no more than 4 weeks less than the maxi-
mum number of weeks payable under the FSC law in effect as of
March 27, 1983. Under the modification, this provision would apply
only in those States where the maximum number of FSC weeks
payable for the first week beginning after March 27, 1983 or, if
later, the first week FSC benefits provided under this bill are pay-
able was more than 4 weeks less than the maximum number of
weeks payable under the FSC law in effect on March 27, 1983.
(b) Additional FSC Benefits.-The conference agreement follows
the House bill with the following adjustment: 10 additional weeks
would be payable in States with average IUR at 6.0 percent and
above; 8 additional weeks would be payable in States with average
IUR at 4.0 to 5.9 percent; and, 8 additional weeks would be payable
in all other States.
(c) Transitional FSC Benefits.-The conference agreement follows
the House bill.
(d) Phaseout FSC Benefits.-The conference agreement follows
the Senate amendment.
(e) New Qualification Requirement.-The conference agreement
follows the House bill.
(f) Coordination of FSC and Trade Readjustment Assistance.-
The conference agreement follows the House bill.
2. LIMITATION ON DISQUALIFICATION OF FSC CLAIMANTS WHO
ENROLL IN TRAINING
Present law
The Federal Unemployment Tax Act provides, as a condition for
employers in a State to receive the normal FUTA tax credit, that
the State law not deny unemployment compensation to otherwise
eligible claimants for any week during which they are attending a
training course with the approval of the State agency. Many States
frequently disapprove of training, however. In addition, State laws
must provide that individuals in approved training must not be
denied benefits because they are unavailable for work, are not ac-
tively searching for work, or have refused suitable work.
House bill
No provision.
Senate amendment
Would prohibit the denial of FSC to any otherwise eligible claim-
ant for any week because: (1) the claimant is attending training or
an accredited educational institution on a full-time basis; or (2) be-
cause of State law requirements that the claimant must be availa-
ble for work, actively searching for work, or must not have refused
work during the training, unless the State agency determines that
the training will not improve the claimant's employment opportu-
nities.
Effective upon enactment.
Conference agreement
The conference agreement follows the Senate amendment.
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Present law
Present law imposes interest of up to 10 percent per year on Fed-
eral unemployment compensation loans obtained by the States
after April 1, 1982, except for "cash flow" loans that States repay
by the end of the fiscal year in which the loans were obtained. A
State with high unemployment can defer payment of, and extend
the payment for, 75 percent of interest charges due in any year.
The State must pay one-third of the deferred amount in each of the
three years following the fiscal year for which it is due. Interest is
charged on the deferred interest. In order to qualify for this defer-
ral and extension of the payment period, the State insured unem-
ployment rate must have equaled or exceeded 7.5 percent during
the first 6 months of the preceding calendar year.
House bill
No provision.
Senate amendment
(a) The Senate amendment makes the provisions imposing inter-
est on loans to States permanent.
(b) The amendment also allows States to defer 80 percent of the
interest due for a fiscal year, effective for interest accrued in fiscal
years 1983, 1984, and 1985. The deferred amount would be payable
in 4 installments in the succeeding years equal to at least 20 per-
cent of the original amount of interet due. A State would be re-
quired to meet conditions 1 and 2(A) or 2(B) below to qualify for the
deferral:
(1) no action has been taken to reduce its tax effort or trust fund
solvency; and
(2)(A) action (certified by the Secretary of Labor) has been taken
after March 31, 1982 which increases revenues and decreases bene-
fits by a total of 25 percent in the calendar year immediately fol-
lowing the fiscal year for which the first deferral is requested; and,
deferral of interest due for the years immediately following the
year in which the first year change is effective may be received if
changes of 35 and 50 percent are made; or,
(B) for taxable year 1982, total State UC tax revenues equaled at
least 2 percent of total wages paid by employers covered under the
State UC law.
(c) Interest will not be charged against any interest for which
payment is deferred under current law deferral provisions or those
added by this bill and summarized in (b) above.
(d) The amendment allows a State to delay for up to nine months
the payment of interest due for any calendar year after 1982
during which the average total unemployment rate in the State
was 13.5 percent or higher. The average total unemployment rate
for a State shall be computed using the 12-month period for which
the most recent information is available prior to the month in
which the interest is due. Interest will not be charged against in-
terest for which payment is delayed.
(e) The amendment allows States to receive a discounted interest
rate that would be one percentage point below the interest rate
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that would otherwise apply. This would be authorized for interest
accrued only for fiscal years 1983, 1984, and 1985. It would be avail-
able under the same conditions as the new deferral above, except
the required percentage changes in (2) would be higher at 50, 80,
and 90 percent, respectively.
For purposes of determining whether a State meets the condi-
tions in (2) above, the Secretary of Labor will provide an estimate
of the unemployment rate for the base year, the calendar year in
which the deferral is requested. The level of benefits and revenue
liabilities will be determined using the State law in effect before
passage of the legislation. The estimate of changes as a result of
new legislation will be made from the base year in each year for
which a deferral is requested. Changes in State law which auto-
matically provide for increases in benefit amounts will be consid-
ered as if they were in effect in the base year for purposes of deter-
mining the change occuring as a result of new legislation. The Sec-
retary of Labor may use historical growth rates for indexed items
if appropriate. Once a deferral is approved, a State must continue
to maintain its solvency effort. Failure to do so would result in im-
mediate payment of all deferred interest.
Increases in the taxable wage base from $6,000 to $7,000 after
calendar year 1982 and increases in the maximum FUTA tax rate
to 5.4 percent after calendar year 1984 will not be counted for pur-
poses of meeting condition (2).
States will not be penalized or rewarded if economic events
change from those used in the base year for computing eligibility
under conditions (2).
Conference agreement
The conference agreement follows the Senate amendment.
Present law
The Federal Unemployment Tax Act (FUTA) imposes a Federal
unemployment compensation (UC) tax on employers in all States at
a rate of 3.5 percent on a taxable wage base of $7,000. However,
employers in States generally receive a FUTA tax credit of 2.7 per-
cent, resulting in a net Federal tax rate of 0.8 percent. States with
insufficient State unemployment compensation revenues to meet
State unemployment compensation obligations may borrow from
the Federal Unemployment Account. If a State defaults on its
loans from the Federal account, employers in the State begin to
lose the FUTA tax credit at the rate of at least .3 percent a year.
For example, because of overdue Federal UC loans, sixteen States
are experiencing a reduction in the 2.7 percent credit for tax year
1982.
Specifically, if a Federal UC loan is not entirely repaid by the
State by the second January 1 after the State receives the loan and
remains unpaid on the following November 10 of that year, the
FUTA tax credit applicable for that year for the State's employers
is reduced by .3 percent. For each succeeding year in which the
loan remains outstanding, the reduction is at least an additional .3
percent (i.e., .6, .9, 1.2 percent, etc.). Additional offset credit reduc-
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tions may apply to a State beginning in the second year of repay-
ment if certain criteria are not met. Under legislation enacted in
the 1970's, credit reductions were not imposed from 1975-1980 for
States satisfying specific requirements.
The 1981 Budget Reconciliation Act made two major changes in
loan payment conditions, effective from January 1, 1981 to Decem-
ber 31, 1987: (1) interest of up to 10 percent is charged on loans
made after April 1, 1982 (except those made for "cash flow" pur-
poses and repaid by the end of the fiscal year in which they occur);
and (2) States were allowed to "cap" the automatic FUTA credit re-
ductions if certain solvency requirements are met.
In a State that qualifies for the cap, the tax credit reduction is
limited to the higher of 0.6 percent, or the rate that was in effect
for the State for the preceding calendar year.
The cap provisions are designed to give States additional time to
make legislative and administrative changes necessary to restore
the State trust funds to solvency. These provisions lengthen the re-
payment period, but do not reduce a State's total liability.
In order to qualify for the cap on the automatic credit reductions
a State must demonstrate that:
(1) the net solvency of its UI system has not diminished (effective
for taxable years 1981-1987);
(2) there have been no decreases in its unemployment tax effort
(effective for taxable years 1981-1987);
(3) its average tax rate for the calendar year equals or exceeds its
average benefit cost rate for the prior five years (effective for tax-
able years 1983-1987); and
(4) the outstanding loan balance as of September 30 of the tax
year in question is not greater than on the third preceding taxable
year (effective for taxable years 1983-1987 the comparable year for
taxable year 1983, however, is 1981).
House bill
No provision.
Senate amendment
(a) Makes the credit reduction cap provisions in present law per-
manent.
(b) A State would still be required to meet all four conditions in
present law to qualify for the full credit reduction cap. The amend-
ment would, however, provide two lower annual credit reductions,
if a State does not qualify for the total cap:
(1) If a State meets the first two present law credit reduction cap
conditions and either of the remaining two conditions, the annual
credit reduction would be reduced by 0.1 percentage points from
what it would have been if the State had not qualified for a cap;
and
(2) If a State meets the first two credit reduction cap conditions
and qualifies for the interest deferral as a result of substantial
changes in its unemployment compensation law, the annual credit
reduction would be reduced by 0.2 percentage points from what it
would have been if the State had not qualified for a cap. A substan-
tial change in action (certified by the Secretary of Labor) taken
after March 31, 1982 which increases revenues and decreases bene-
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fits by a total of 25 percent in the calendar year immediately fol-
lowing the fiscal year for which the first interest deferral is re-
quested. Deferral of interest due for the years immediately follow-
ing the year in which the first year change is effective may be re-
ceived if changes of 35 and 50 percent are made.
The lower credit reductions would be authorized only for taxable
years 1983, 1984, and 1985 liabilities. Credits earned during this
period would be applied in determining the State's offset credit re-
duction for years after 1985.
The January 1st of each year for which a State qualifies for a
partial limitation on the offset credit reduction will be taken into
account for purposes of determining future offset credit reduction.
The credit reduction applicable in each subsequent year after the
partial limitation is in effect would continue to be reduced by the
amount by which the offset credit was reduced.
Conference agreement
The conference agreement follows the Senate amendment.
5. AVERAGE EMPLOYER CONTRIBUTION RATE
Present law
Present law provides that a State, in the second year in which
the offset credit reduction is imposed to repay outstanding loans,
may be subject to an additional credit reduction equal to the
amount by which the State's average tax rate is lower than 2.7 per-
cent. The average tax rate and the 2.7 percent are computed from
the ratio of taxes collected to State and Federal taxable wages, re-
spectively. Taxable wages are determined by the taxable wage
base. Any wages above the taxable wage base are therefore not in-
cluded.
In States where the taxable wage base exceeds the Federal tax-
able base of $7,000, the ratio of the State's UC tax revenues to the
State's taxable wages will be lower than it would be if the taxable
wage base was $7,000. This could activate the additional credit re-
duction in the second year even though these States have relatively
higher tax efforts.
House bill
No provision.
Senate amendment
Changes the calculations so that all wages instead of just taxable
wages are counted in the denominators of the- State tax rates and
the 2.7 percent. Each State's tax rate on all wages subject to contri-
butions under the Federal Unemployment Tax Act (FUTA) is com-
pared to an estimate of the national percentage of all wages subject
to FUTA contributions that 2.7 percent of taxable wages repre-
sents. The 2.7 percent factor is calculated as the product of 2.7 per-
cent and the ratio of the Federal taxable wage base ($7,000) and
the estimated United States average annual wage in covered em-
ployment for the calendar year in which the determination is
made.
Effective for taxable years beginning with 1983.
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Conference agreement
The conference agreement follows the Senate amendment.
6. DATE FOR PAYMENT OF INTEREST
Present law
Present law requires that interest is due no later than the first
day of the next fiscal year. If the next fiscal year falls on a week-
end, interest is due in the prior fiscal year. Otherwise, it is due on
the first day of the next fiscal year.
House bill
No provision.
Senate amendment
Requires payment of interest before the first day of the next
fiscal year.
Effective on date of enactment.
Conference agreement
The conference agreement follows the Senate amendment.
7. PENALTY FOR FAILURE To PAY INTEREST
Present law
If a State does not pay interest when it is due, there are no pro-
visions in present law through which the Federal government can
penalize the State or enforce the collection of interest charges.
House bill
No provision.
Senate amendment
Provides that, if a State fails to pay interest charges when they
are due, (a) Federal unemployment compensation and employment
service administrative funds will be withheld and (b) the State's
unemployment compensation program will lose its Federal certifi-
cation, which will result in employers in the State losing eligibility
for the credit against the Federal unemployment tax.
Effective upon enactment.
Conference agreement
The conference agreement follows the Senate amendment.
8. TREATMENT OF EMPLOYEES PROVIDING SERVICES TO EDUCATIONAL
INSTITUTIONS
Present law
The Federal Unemployment Tax Act (FUTA) covers employees of
educational institutions. FUTA requires States to deny benefits be-
tween academic years or terms to certain professional employees
working in instructional, research, and principal administrative ca-
pacities if they have a reasonable assurance of returning to work
in the next academic year or term. FUTA gives the States the
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option of applying the same denial of benefits provision to non-
professional employees of educational institutions.
House bill
No provision.
Senate amendment
(a) States would be required to deny benefits between academic
years or terms to nonprofessional employees of educational institu-
tions if the employees have a reasonable assurance of returning to
work in the next academic year or term;
(b) States would be required to deny benefits between terms to
individuals performing services on behalf of an educational institu-
tion or an educational service agency even though not employed by
either the institution or agency.
The provisions would be effective on or after April 1, 1984. States
in which there is no legislative session before that date, however,
would be given additional time to comply with this provision.
Conference agreement
The conference agreement follows the Senate amendment in (a)
above that requires States to deny benefits between terms to non-
professional employees of educational institutions. The conference
agreement follows the Senate amendment in (b) above with the
modification that it would be optional to the States to extend the
between term denial to individuals performing services on behalf of
an educational institution or an educational service agency even
though not employed by either the institution or the agency.
9. EXTENDED BENEFITS FOR INDIVIDUALS WHO ARE HOSPITALIZED OR
ON JURY DUTY
Present law
Present law disqualifies claimants from receiving Extended
Benefits or Federal Supplemental Compensation if they are not ac-
tively seeking work. Moreover, the disqualified claimant must go
back to work for at least 4 weeks and earn at least 4 times his
weekly benefit amount before he can qualify again for Extended
Benefits or Federal Supplemental Compensation.
House bill
No provision.
Senate amendment
Permits States to determine weekly eligibility based on availabil-
ity for work for claimants of Extended Benefits and FSC who are
serving on jury duty or are hospitalized for treatment of an emer-
gency or life-threatening condition. A State must treat these indi-
viduals in accordance with their own State unemployment compen-
sation law.
Effective upon enactment.
Conference agreement
The conference agreement follows the Senate amendment.
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10. OPTION FOR VOLUNTARY HEALTH INSURANCE DEDUCTION FROM
UNEMPLOYMENT BENEFITS
Present law
Section 3304(a)(4) of the Federal Unemployment Tax Act prohib-
its States from withdrawing money from the State unemployment
trust fund for anything except the payment of unemployment com-
pensation benefits or to refund certain taxes erroneously paid by
employers.
House bill
Provides States the option of deducting an amount from the un-
employment compensation benefits otherwise payable to an indi-
vidual and using the amount deducted to pay for health insurance,
if the individual elects to have such a deduction made from his
benefits.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill.
11. TREATMENT OF CERTAIN ORGANIZATIONS WHO WERE
RETROACTIVELY GRANTED 501(c)(3) STATUS
Present law
Unemployment insurance coverage was extended to employees of
certain nonprofit organizations in 1970 and then extended to em-
ployees of generally all nonprofit organizations in 1976.
Under the 1970 and 1976 amendments, nonprofit organizations
were given the option of financing unemployment benefits paid to
their former employees through the State unemployment payroll
tax system that applies to private employers (contribution method)
or by retroactively reimbursing the State trust fund for the amount
of benefits paid to their former employees (reimbursement method).
Nonprofit employers who had voluntarily covered their employ-
ees prior to the 1970 or 1976 amendments and financed benefit
costs by the contribution method, and after enactment of the 1970
or 1976 amendments chose to switch to the reimbursement method
of financing, were permitted to apply any accumulated balance in
their accounts toward costs incurred in the future and paid for on
a reimbursement basis. The authority to make such a transfer,
however, was available for a limited period of time that expired
shortly after enactment of the 1976 and 1970 amendments.
House bill
Allows a nonprofit organization that elects to switch from the
contribution to the reimbursement method of financing unemploy-
ment benefits to apply any accumulated balance in its State unem-
ployment account to costs incurred after it switches to the reim-
bursement method, under the following conditions:
(1) the organization did not elect to switch to the reimburse-
ment method under prior authority because during these peri-
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ods the organization was treated as a 501(c)(4) organization by
the IRS, but the organization has been subsequently deter-
mined by the IRS to be a 501(c)(3) organization; and,
(2) the organization elects to switch to the reimbursement
method before the earlier of 18 months after such election was
first available to it under State law or January 1, 1984.
Senate amendments
No provision.
Conference agreement
The conference agreement follows the House bill.
12. WAIVER OF PENALTY TAX ON WITHDRAWALS FROM INDIVIDUAL
RETIREMENT ACCOUNTS (IRA'S) BY CERTAIN UNEMPLOYED WORKERS
Present law
An individual generally is subject to a penalty tax equal to 10
percent of any distribution from an individual retirement account
(IRA) to the individual for whose benefit the IRA was established if
the individual is less than age 591/2 when the distribution is made.
However, the penalty tax does not apply if the distribution is at-
tributable to the individual's becoming permanently and totally
disabled.
House bill
No provision.
Senate amendment
The 10 percent penalty tax would not apply in the case of distri-
butions from an IRA to an individual who has at least 20 quarters
of coverage under social security, and who has received, within the
preceding 12-month period, regular unemployment compensation
under State law, and has exhausted all rights to such compensation
in his most recent benefit year. The amendment would apply to
withdrawals after the date of enactment.
Conference agreement
The conference agreement follows the House bill.
13. REEMPLOYMENT VOUCHERS
Present law
No provision.
House bill
No provision.
Senate amendment
Would permit claimants of Federal Supplemental Compensation
(FSC) to offer a voucher equal to 75 percent of their maximum po-
tential FSC benefits to prospective employers in lieu of FSC bene-
fits no later than one month after they become eligible for FSC. If
the employer hires the claimant, the State agency will certify the
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employer's use of the following portions of the voucher's face value
in payment of Federal employment taxes (FUTA and FICA): (1) 25
percent within the first month of employment; (2) 25 percent in
each of the next groups of three months of employment. If a claim-
ant cannot use the voucher or only uses a portion, he would receive
the balance of his maximum potential FSC benefits, reduced by the
payments made to employer or the amount of FSC he would have
received for the period.
The employer must certify that the employment under the
voucher meets the following conditions: (1) the employee will be
employed for an average of at least 30 hours per week during the
payment period; (2) displacement of current employees, including
reduced nonovertime hours, will not occur; and (3) the employee
will not be hired to fill a vacancy created by laying off or terminat-
ing a regular employee.
Also, no "payment" may be made to a claimant's base year em-
ployer.
Effective upon enactment.
Conference agreement
The conference agreement follows the House bill.
TITLE VI. PROSPECTIVE PAYMENTS FOR MEDICARE
INPATIENT HOSPITAL SERVICES
Present law
Under present law, medicare payment amounts are retrospec-
tively determined based upon a hospital's reasonable costs, subject
to the limits established by TEFRA. Certain reimbursement limits
are applied to (1) hospital inpatient operating costs ("section 223"
limits) and (2) the rate of increase in inpatient operating costs (this
limit expires after fiscal year 1985).
House bill
Under the House bill, the Secretary would be required to deter-
mine prospectively a payment amount for each hospital discharge.
Hospital cases (discharges) would be classified into "diagnosis relat-
ed groups" (DRG's).
Senate amendment
Same as the House bill.
Present law
No provision.
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House bill
Under the House bill, separate payment rates would apply to
urban and rural areas in each of the 9 census divisions (the 50
States and the District of Columbia).
Senate amendment
Under the Senate amendment, separate payment rates would
apply to urban and rural areas in each of the 4 census regions (the
50 States and the District of Columbia).
Conference agreement
The conference agreement follows the House bill.
Present law
No provision.
House bill
Under the house bill, regional adjustments (i.e., by census divi-
sions) would no longer apply after the fourth year of the program.
Senate amendment
Under the Senate amendment, regional adjustments (i.e., by
census regions) would no longer apply after the third year of the
program.
Conference agreement
The conference agreement follows the Senate amendment as it
applies to the 9 census divisions.
Present law
Under present law, the section 223 limits are authorized indefi-
nitely; the rate of increase limits will not apply to hospital cost re-
porting periods beginning on or after October 1, 1985.
House bill
Under the House bill, implementation of the new prospective
payment system would be phased in over a 3-year period, starting
with each hospital's first cost reporting period beginning on or
after October 1, 1983. During year one, 25% of the payment would
be based on regional DRG rates; 75% of the payment would be
based on each hospital's cost base. In year two, 50% of the payment
would be based on regional DRG rates and 50% on each hospital's
cost base. In year three, 75% of the payment would be based on
regional DRG rates and 25% would be based on each hospital's cost
base. In year four, 100% of the payment would be determined
under the DRG payment methodology. In year five, 100% of the
payment would be determined under a national DRG payment
methodology.
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Senate amendment
The Senate amendment contains a similar provision, except that
during year one, 25% of the payment would be based on a combina-
tion of national and regional DRG rates (25% national, 75% region-
al); 75% would be based on each hospital's cost base. In year two,
50% of the payment would be based on a combination of national
and regional DRG rates (50% each); 50% would be based on each
hospital's cost base. In year three, 75% of the payment would be
based on a combination of national and regional DRG rates (75%
national, 25% regional); 25% would be based on each hospital's cost
base. In year four, 100% of the payment would be determined
under the national DRG payment methodology.
Conference agreement
The conference agreement follows the Senate amendment with
modifications. Under the agreement, implementation of the pros-
pective payment system would be phased-in over a 3-year period.
During year one, 25% of the payment would be based on regional
DRG rates; 75% would be based on each hospital's cost base. In
year two, 50% of the payment would be based on a blend of nation-
al and regional DRG rates (25% national, 75% regional); 50% of
the payment would be based on each hospital's cost base. In year
three, 75% of the payment would be based on a blend of national
and regional DRG rates (50% national, 50% regional); 25% of the
payment would be based on each hospital's cost base. In year four,
100% of the payment would be determined under the national
DRG payment methodology.
B. CALCULATION OF COST-BASED PORTION OF PAYMENT
Present law
No provision.
House bill
Under the House bill, for the first 2 reporting periods, the calcu-
lation of that portion of a hospital's payment which is cost-based
would be the lesser of the hospital's payment under the rate of in-
crease limits, without the penalties and bonuses of present law, or
the section 223 limits without regard to any exemptions, exceptions
or adjustments thereto. For the third reporting period, the calcula-
tion of the cost-based portion would be the hospital's payment
under the rate of increase limit only.
Senate amendment
Same provision, except the Section 223 limits would not apply.
Conference agreement
The conference agreement follows the Senate amendment. The
managers note that during the phase-in period, some portion of the
prospective payment rate will be related to each hospital's own ex-
perience in a base cost reporting year. The managers recognize
that, in some cases, the Secretary will have to use estimates to
adjust some portions of the hospital's base year experience to make
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it comparable to inpatient operating costs that will be paid under
the prospective system-e.g., FICA taxes that would have been paid
if the hospital had been in the social security system or the adjust-
ment needed to exclude the nursing differential which is no longer
payable. Since the hospital's specific portion of the rate must be de-
termined in advance of the hospital's first fiscal year under the
system, the managers expect the Secretary will use the best data
available at that time to determine operating costs for the purposes
of the phase-in.
Present law
Under present law, hospitals are required to file annual cost re-
ports which are used to determine the amount of each hospital's
reasonable cost reimbursement.
House bill
Under the House bill, the Secretary would be required to main-
tain a system of cost reporting during the period of transition to
the new prospective payment system and for at least two years
after full implementation of the new payment program (at least
until the end of fiscal year 1988).
Senate amendment
No provision.
Conference agreement
The conference agreement follows the House bill. The managers
intend that the Secretary consider the needs of the States prior to
changing cost-reporting requirements. Many States use the medic-
aid cost reports for purposes of reimbursement under the medicaid
program. It is the managers' intention that extensive cost reports
be maintained, at least during the first year of implementation, in
order to allow States time to adjust their medicaid reporting re-
quirements.
Present law
Under present law, an adjustor, using Bureau of Labor Statistics
data for hospital wages, is used under current section 223 limits to
adjust for area differences in hospital wage levels.
House bill
Under the House bill, DRG rates would be adjusted for area dif-
ferences in hospital wage levels compared to the national average
hospital wage level.
Senate amendment
Under the Senate amendment, DRG rates would be adjusted for
area differences in hospital wage levels compared to the national
or regional average hospital wage levels as appropriate.
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Conference agreement
The conference agreement follows the House bill.
5. INITIAL PAYMENT LEVEL
A. GENERAL
Present law
Under present law, medicare payments to hospitals are made ac-
cording to the lower of actual reasonable costs, the section 223 total
cost limits, or the rate of increase limits added by TEFRA. The
TEFRA rate of increase limits are based on each hospital's histori-
cal costs. These costs are updated by the marketbasket of goods and
services purchased by hospitals, plus 1 percentage point.
House bill
Under the House bill, the rates for each DRG would be derived
from historical medicare cost data for each hospital. The rates
would be updated to fiscal year 1983 by the estimated industry-
wide actual increase in hospital costs. The rates would be further
updated for fiscal year 1984 by the increase in the marketbasket
plus 1 percentage point. In fiscal year 1984, the DRG rates would
be reduced, as may be required, to achieve budget neutrality in re-
lationship to the reimbursement levels that would have applied
under the TEFRA legislation.
Senate amendment
Same as the House bill.
B. SERVICES COVERED
Present law
Under present law, services provided to medicare beneficiaries
who are inpatients of a hospital are ordinarily billed under part A
and reimbursed on a reasonable cost basis. However, some pay-
ments for certain non-physician services rendered to inpatients are
billed by suppliers of services under part B on a reasonable charge
basis.
House bill
Under the House bill, effective October 1, 1983, all non-physician
services provided in an inpatient setting would be paid only as in-
patient hospital services under part A, except as provided below.
The Secretary is given authority to waive these restrictions, and
to provide for adjustments in the DRG payments rates, for hospi-
tals which can demonstrate to the Secretary that their practices
prior to October 1, 1982, were such that their services were exten-
sively billed independently under part B. Such hospitals could be
permitted, by the Secretary, to continue such billing arrangements
during the transition period for phasing-in the prospective payment
system. Such arrangements would not be recognized once the pros-
pective payment system is fully implemented. The Secretary would
estimate, each year, amounts that would have been reimbursed
under part B for inpatient hospital services (other than physician
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services) and include, each year, in the base rate for determining
the DRG payment rates an approximation of this amount.
Senate amendment
The Senate amendment would also provide payment for all non-
physician services provided to hospital inpatients, effective October
1, 1983, only as inpatient hospital services, except that the Secre-
tary may waive these restrictions during the transition period in
the case of hospitals that have allowed direct billing under part B
so extensively that immediate compliance with such restrictions
would threaten the stability of patient care. The Secretary could
allow continued payment of part B billings as long as he or she
subsequently deducted the total amount for these billings from the
payments made under the prospective system to the hospital. If
such a waiver is granted, the Secretary, at the end of the transi-
tion, may provide for such methods of payment under part A as is
appropriate given the organizational structure of the institution.
Conference agreement
The conference agreement follows the Senate amendment with a
modification requiring the Secretary to define, by regulation for
this purpose, non-physician services which would be considered in-
patient hospital services covered by prospective DRG-based pay-
ments.
Present law
Under present law, a downward adjustment is made to a hospi-
tal's medicare payment to account for a hospital's withdrawal from
the Social Security system.
House bill
Under the House bill, the provision in present law would be re-
pealed.
Senate amendment
Under the Senate amendment, the provision also would be re-
pealed. In addition, in setting the initial payment rates, the Secre-
tary would be required to recognize the payroll costs some hospitals
will incur as the result of being required to enter the Social Secu-
rity system, by adjusting base costs for individual hospitals and by
adjusting the DRG prospective rates to include these additional
costs.
Conference agreement
The conference agreement follows the Senate amendment.
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185
6. ANNUAL UPDATES
A. ANNUAL INCREASE
Present law
Under present law, the rate of increase limits are updated by the
increase in a marketbasket of goods and services purchased by hos-
pitals, plus 1 percentage point.
House bill
Under the House bill, for fiscal year 1985, payment amounts
from the previous fiscal year would be increased by the marketbas-
ket, plus 1 percentage point. There would be an overall budget lim-
itation to maintain budget neutrality for fiscal year 1985.
Senate amendment
Same as the House bill.
B. SECRETARY'S DETERMINATION OF ANNUAL INCREASE FACTOR
Present law
No provision.
House bill
Under the House bill, taking into consideration the recommenda-
tions of the panel, the Secretary must determine, for each fiscal
year beginning with fiscal year 1986, the appropriate increase
factor.
Senate amendment
Under the Senate amendment, taking into consideration the rec-
ommendations of the commission, the Secretary must determine,
for each fiscal year beginning with fiscal year 1986, the increase
factor; such factor must assure adequate compensation for the effi-
cient and effective delivery of medically appropriate and necessary
care of high quality.
Conference agreement
The conference agreement follows the Senate amendment with a
modification which requires that the Secretary, in determining the
increase factor, must take into account amounts necessary for the
efficient and effective delivery of medically appropriate and neces-
sary care of high quality.
C. PUBLICATION OF SECRETARY'S DETERMINATION
Present law
No provision.
House bill
Under the House bill, the Secretary must publish in the Federal
Register (1) not later than the June 1 before each fiscal year begin-
ning with fiscal year 1986, his or her determination of the proposed
increase factor and (2) not later than the September 1 before such
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fiscal year, his or her final determination of the increase factor.
The Secretary must include in the publication due by June 1 the
report of the panel's recommendations for that fiscal year.
Senate amendment
Same as the House bill.
D. EXPERT PANEL/COMMISSION'S DETERMINATION OF ANNUAL INCREASE
FACTOR
Present law
No provision.
House bill
The House bill requires the Secretary to appoint a panel of inde-
pendent experts to review the increase factor and make recommen-
dations to the Secretary on the appropriate percentage increase for
fiscal years beginning with fiscal year 1986. The panel must take
into account changes in the marketbasket, hospital productivity,
technological and scientific advances, quality of care, and utiliza-
tion of relatively costly, though effective, methods of care.
Senate amendment
The Senate amendment contains a similar provision, except the
review of the increase factor and recommendations to the Secre-
tary would be conducted by a commission selected by the Office of
Technology Assessment, and would begin with fiscal year 1986.
Conference agreement
The conference agreement follows the Senate amendment.
E. EXPERT PANEL/COMMISSION'S REPORT ON ANNUAL INCREASE FACTOR
Present law
No provision.
House bill
Under the House bill, the panel must report its recommenda-
tions on the increase factor to the Secretary not later than May 1
before the beginning of each fiscal year, beginning with fiscal year
1986.
Senate amendment
Under the Senate amendment, the commission must report its
recommendations on the increase factor to the Secretary not later
than April 1 before the beginning of each fiscal year, beginning
with fiscal year 1986.
Conference agreement
The conference agreement follows the Senate amendment.
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7. RECALIBRATION OF DRG's
A. SECRETARY'S DETERMINATION OF DRG RECALIBRATION
Present law
No provision.
House bill
Under the House bill, the Secretary would be required to estab-
lish (and would be permitted from time to time to make changes
in) a system of classification of inpatient hospital discharges by
DRGs and a methodology for classifying specific hospital discharges
within the DRGs. For each DRG, the Secretary would be required
to assign (and would be permitted from time to time to recompute)
an appropriate weighting factor which reflects the relative hospital
resources used for discharges classified within that DRG compared
to resources used for discharges classified in other DRGs.
Senate amendment
The Senate amendment contains a similar provision except the
Secretary would be required to adjust the classifications and
weighting factors at least once every 3 years to reflect changes in
treatment patterns, technology, and other factors which may
change the relative use of hospital resources.
Conference agreement
The conference agreement follows the Senate amendment with a
modification requiring the Secretary to adjust the DRG classifica-
tions and weighting factors for fiscal year 1986 and subsequently,
as necessary, but no less often than once every four years.
B. EXPERT COMMISSION'S DETERMINATION OF DRG RECALIBRATION
Present law
No provision.
House bill
No provision.
Senate amendment
Under the Senate amendment, the commission would be required
to consult with, and make recommendations to, the Secretary with
respect to changes in the DRGs, based on its evaluation of scientific
evidence with respect to new practices, including the use of new
technologies and treatment modalities. The commission must
report to Congress its evaluation of any adjustments to the DRGs
made by the Secretary.
Conference agreement
The conference agreement follows the Senate amendment.
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8. ATYPICAL CASES/OUTLIERS
A. BASIS FOR OUTLIER PAYMENTS
Present law
No provision.
House bill
Under the House bill, the Secretary would be required to make
additional payments where the length of stay for any case in a
DRG exceeds, by more than 30 days, the average length of stay for
cases within the same DRG. In addition, if a case has some other
unusual length of stay or unusual cost, the Secretary could provide
additional payment amounts.
Senate amendment
Under the Senate amendment, the Secretary would be required
to make additional payments where (1) the length of stay exceeds
the mean length of stay by some fixed number of days or (2) by a
certain number of standard deviations, whichever is less. Hospitals
would be permitted to appeal for additional payments for cases
where charges adjusted to costs are equal to or greater than some
multiple of the DRG rates or some dollar criterion, whichever is
greater.
Conference agreement
The conference agreement follows the Senate amendment. The
managers are equally concerned that adjustments may be required
for cases which have an unusually short length of stay or which
are significantly less costly than the DRG payment. The Secretary
would be required to report on this with recommendations on how
to address this issue.
Present law
No provision.
House bill
Under the House bill, the additional payment amounts per case
would be determined by the Secretary.
Senate amendment
Under the Senate amendment, the amount of additional pay-
ments would be determined by the Secretary and approximate the
marginal cost of care beyond the outlier cut-off criteria (days or
dollar amounts).
Conference agreement
The conference agreement follows the Senate amendment.
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Present law
No provision.
House bill
Under the House bill, the Secretary would be required to provide
additional payments for outlier cases amounting to not less than 4
percent of total DRG related payments.
Senate amendment
Under the Senate amendment, the Secretary would be required
to provide additional payments for outlier cases amounting to not
less than 5 percent, and not more than 6 percent, of total projected
or estimated DRG related payments.
Conference agreement
The conference agreement follows the Senate amendment.
Present law
Under present law, medicare reimburses hospitals for the reason-
able costs of capital (including depreciation, interest and rent).
House bill
Under the House bill, capital expenses, as defined by the Secre-
tary, would be specifically excluded from the prospective payment
proposal and would continue to be reimbursed on a reasonable cost
basis.
Senate amendment
Under the Senate amendment, capital expenses, as defined by
the Secretary, would be specifically excluded from the prospective
payment system until October 1, 1986, during which time they
would continue to be reimbursed on a reasonable cost basis. After
October 1, 1986, such expenses would no longer be excluded.
Conference agreement
The conference agreement follows the Senate amendment. The
managers intend that capital, as defined by the Secretary, includes
return on equity. The managers also note that the Secretary is re-
quired to complete, within 18 months, a thorough review of the
methods by which capital, including return on equity, can be incor-
porated into the prospective payment system. The managers expect
that additional legislation will be enacted by Congress to deal with
capital-related issues under the prospective payment system before
October 1, 1986. However, if the Secretary has implemented a
system of prospective payment for capital without legislative action
and the mandatory section 1122 capital planning approval provi-
sion has gone into effect, the conferees intend that the Secretary
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will adjust the prospective payment for capital to reflect a disap-
proval project under section 1122.
Present law
Under present law, medicare reimburses proprietary institutions
a return on equity.
House bill
The House bill provides for the phase-out of return on equity for
hospitals under the prospective payment system over the three-
year transition period during which the cost-based payment is
being phased out (75% in the first year, 50% in the second year
and 25% in the third year). No payment for a return on equity
would be made for cost reporting periods beginning on or after Oc-
tober 1, 1986.
Senate amendment
No provision.
Conference agreement
Under the conference agreement, effective with respect to cost
reporting periods beginning on or after the date of enactment, the
rate of return on equity will be reduced from one and one-half
times to an amount equal to the rate of interest paid by the Feder-
al Treasury on the assets of the Hospital Insurance Trust Fund.
Present law
No provision.
House bill
The House bill expresses the intent of Congress that, in imple-
menting a system for including capital-related costs under a pro-
spective payment system, costs related to capital projects initiated
on or after March 1, 1983, may be distinguished and treated differ-
ently from projects initiated before such date.
Senate amendment
The Senate amendment expresses the intent of Congress that, in
implementing a system for including capital-related costs under a
prospective payment system, costs related to capital projects initi-
ated on or after the effective date of the implementation of such
system may or may not be distinguished and treated differently
from projects initiated before such date.
Conference agreement
The conference agreement follows the Senate amendment. The
managers believe no assurances can be given that, under a new
system of paying for capital, projects obligated (as defined by regu-
lations under section 1122) after the date of enactment of this legis-
lation will continue to be paid on a reasonable cost basis.
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Present law
Under present law, the Secretary is authorized to exclude from
reimbursement to providers certain costs related to capital expend-
itures that have been disapproved by a section 1122 planning
agency.
House bill
Under the House bill, at the end of 3 years, medicare would not
make payment for a new capital project unless the State had a sec-
tion 1122 capital approval process and the capital expenditures had
been recommended by the State under such mechanism.
Senate amendment
The Senate amendment changes for cost reporting periods prior
to October 1, 1986: (1) the financing of reviews of capital projects
from the Hospital Insurance Trust Fund to general revenues; (2) in-
creases the amount of capital projects that is subject to the 1122
approval process from $100,000 to $600,000; (3) exempts from the
review process expenditures made by or on behalf of a health care
facility where 75 percent of the patients using the services of such
facility are enrollees in HMO's or CMP's and such expenditures
are for services and facilities needed by such organization to oper-
ate efficiently; and (4) requires hospitals to make their overall ex-
penditure plans and capital budgets available to section 1122 agen-
cies.
Conference agreement
The conference agreement follows the provision in the House bill
with the following modification: the requirement that medicare
payment for new capital projects be conditional on section 1122 ap-
proval would be effective October 1, 1986, only if no legislation
were enacted by that date which includes capital-related costs in
the prospective reimbursement system. In addition, effective upon
enactment: (1) the financing of reviews of capital projects would be
made from general revenues; (2) the maximum threshold a State
may use for determining which capital projects are subject to the
section 1122 review process would be increased from $100,000 to
$600,000; States would be permitted to set a lower threshold;, (3) in
order for a health care facility, where 75 percent of the patients
are HMO or CMP enrollees, to be exempt from the section 1122
review process because needed services and facilities are not other-
wise readily accessible, the organization must establish that one of
the following five conditions is met:
(a) the facilities are geographically dispersed
(b) the facilities are not available under a contract of reason-
able duration
(c) full and equal medical staff privileges are not available
(d) the arrangements are not administratively feasible, or
(e) the services are more costly than if provided by the HMO
or CMP; and
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(4) hospitals would be required to make their overall expenditure
plans and capital budgets available to the section 1122 or other
appropriate agency.
Present law
Under present law, medicare reimburses direct medical educa-
tion expenses, such as the salaries of interns and residents in ap-
proved education programs, on the basis of reasonable cost.
House bill
Under the House bill, direct medical expenses for approved edu-
cational programs would be specifically excluded from payment de-
terminations under the prospective payment system and would be
paid on the basis of reasonable cost.
Senate amendment
Same as the House bill.
Present law
Under present law, the section 223 limits provide an adjustment
to recognize individual hospital differences in indirect costs due to
approved teaching activities.
House bill
Under the House bill, the Secretary is required to provide addi-
tional payment amounts under the prospective payment system for
hospitals with indirect costs of medical education. The adjustment
for such payment amounts would equal twice the section 223 ad-
justment, provided under regulations, in effect as of Jan. 1, 1983,
for such costs.
Senate amendment
Same as the House bill.
11. EXEMPTIONS, EXCEPTIONS, AND ADJUSTMENTS
A. PAYMENTS TO EXEMPTED HOSPITALS AND HOSPITAL UNITS
Present law
No provision.
House bill
Under the House bill, hospitals or units of hospitals exempted
from the prospective payment system would be subject to the sec-
tion 223 limits (until hospital cost reporting periods beginning on
or after October 1, 1985) and the rate of increase limits applicable
under current law.
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Senate amendment
The Senate amendment contains a similar provision, except the
section 223 limits would no longer apply for hospital cost reporting
periods beginning on or after October 1, 1983.
Conference agreement
The conference agreement follows the Senate amendment.
B. PSYCHIATRIC, LONG-TERM CARE, AND CHILDREN'S HOSPITALS
Present law
Under present law, section 223 limits do not apply to children's
hospitals, long-term care hospitals or to rural hospitals with less
than 50 beds. In addition, the Secretary is required to provide ex-
emptions, exceptions, and adjustments to the section 223 limits as
he or she deems appropriate to take into account the special needs
of psychiatric hospitals.
House bill
Under the House bill, psychiatric, long-term care, children's and
rehabilitation hospitals would be specifically exempted from the
prospective payment system. Upon request of a hospital, rehabilita-
tion and psychiatric units which are distinct parts of acute care
hospitals would also be specifically exempted.
Senate amendment
The Senate amendment contains a similar provision, except (1)
hospitals would not have to request exemptions for distinct parts of
rehabilitation or psychiatric units and (2) exemptions of any such
hospitals or hospital units would no longer apply when the Secre-
tary determines that adequate data of clinical and statistical sig-
nificance is available to include these institutions and units under
the prospective payment system.
Conference agreement
The conference agreement follows the provision in the House bill
with a modification that deletes the provision which conditions
granting of an exemption on the receipt by the Secretary of a re-
quest from a hospital.
1. Payments
Present law
Under present law, the Secretary is required to provide exemp-
tions, exceptions, and adjustments to the section 223 limits as he or
she deems appropriate to take into account the special needs of
sole community hospitals.
House bill
Under the House bill, the Secretary would be authorized to pro-
vide exceptions and adjustments to take into account the special
needs of sole community hospitals.
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Senate amendment
Under the Senate amendment, payments to sole community hos-
pitals for hospital cost reporting periods beginning on or after Octo-
ber 1, 1983, would be on the same basis, as payments to all other
providers in the first year of the transition period: 25% of the pay-
ment would be based on a blend of national and regional DRG
rates (25% national, 75% regional); 75% would be based on each
hospital's own cost base. In no case would total medicare payments
in those cost reporting years beginning on or after October 1, 1983,
and before October 1, 1986, be less than the payments made in the
preceding year.
Conference agreement
The conference agreement follows the provision in the Senate
bill with modifications: (1) Conforms the basis of payment to the
first-year blend of payment rates applicable to other hospitals
agreed to by the conferees (item 3a); and (2) where a sole communi-
ty hospital experiences a change of more than 5 percent in its total
volume over a previous year, due to circumstances beyond its con-
trol, the Secretary would be required to provide, for 3 years, an ad-
justment to fully compensate the hospital for the fixed costs it
incurs and for the reasonable cost of maintenance of core staff and
services.
2. Definition
Present law
No provision.
House bill
Under the House bill, "sole community hospitals" are defined as
those that, by reason of factors such as isolated location or absence
of other hospitals (as determined by the Secretary), is the sole
source of inpatient hospital services reasonably available in a geo-
graphical area to part A medicare beneficiaries.
Senate amendment
The Senate amendment contains a similar provision, except in-
cludes weather and travel conditions in the list of factors defining
a sole community hospital.
Conference agreement
The conference agreement follows the Senate amendment.
Present law
Under present law, the Secretary is required to provide exemp-
tions, exceptions, and adjustments to the section 223 limits as he or
she deems appropriate to take into account the special needs of
public and other hospitals that serve a disproportionate number of
low income or part A medicare beneficiaries.
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House bill
Under the House bill, the Secretary would be required to provide
exceptions and adjustments, as he or she deems appropriate, to
take into account the special needs of public or other hospitals that
serve a disproportionately large number of low-income or part A
medicare beneficiaries.
Senate amendment
The Senate amendment contains a similar provision, except also
applies to regional and national referral centers (including very
large mute care hospitals in rural areas).
Conference agreement
The conference agreement follows the Senate amendment.
Present law
Under present law, the Secretary is required to provide exemp-
tions, exceptions, and adjustments to the "section 223" and the rate
of increase limits as he or she deems appropriate to take into ac-
count the special needs of new hospitals, risk-based health mainte-
nance organizations, hospitals providing atypical or essential serv-
ices and to take account of extraordinary circumstances beyond a
hospital's control; and for other purposes.
House bill
Under the House bill, the Secretary is required to provide, by
regulation, for such exceptions and adjustments as he or she deems
appropriate (including those that may be appropriate with respect
to public and teaching hospitals and hospitals involved extensively
in treatment for, and research on, cancer).
Senate amendment
No provision.
Conference agreement
The conference agreement follows the provision in the House bill
with a modification which deletes the requirement with respect to
public and teaching hospitals. The conferees wish to make it clear
that this authority permits the Secretary to provide for such excep-
tions and adjustments as may be appropriate with respect to hospi-
tals experiencing special problems because of their location in a
particular census division.
Present law
Under regulation, special adjustments are provided to the section
223 limits for hospitals in Alaska and Hawaii.
House bill
Under the House bill, the Secretary is authorized to provide ad-
justments to the DRG payment amounts as he or she deems appro-
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priate to take into account the unique circumstances of hospitals
located in Alaska and Hawaii.
Senate amendment
Same as the House bill.
G. HOSPITALS IN TERRITORIES, INCLUDING PUERTO RICO
Present law
No provision.
House bill
The House bill exempts from the prospective payment system
hospitals located outside the fifty States or the District of Columbia
(e.g., the territories, including Puerto Rico).
Senate amendment
Same as the House bill. (See study section.)
12. ADMISSIONS AND QUALITY REVIEW
A. CONTRACTS WITH PROFESSIONAL REVIEW ORGANIZATIONS
Present law
Present law (title XI of the Social Security Act) requires the Sec-
retary to enter into contracts for utilization and quality control
peer review with professional review organizations (PROs) or other
review organizations, including medicare intermediaries (subject to
certain conditions and limitations).
House bill
Under the House bill, effective October 1, 1984, as a condition for
receipt of medicare payments, a hospital receiving payments ac-
cording to the prospective DRG rates would be required to contract
with a peer review organization, in the area, designated by the Sec-
retary under Title XI for the review of admissions, discharges, and
quality of care with respect to medicare hospital inpatient services.
The 12-month waiting period for intermediaries to qualify as
review organizations as specified in present law would begin on the
date the Secretary enters into contracts or on October 1, 1983,
whichever is earlier.
Senate amendment
Under the Senate amendment, hospitals receiving payments
under the prospective payment system would be required to enter
into an agreement with a peer review organization (if such as orga-
nization has a contract with the Secretary under title XI for the
area in which the hospital is located). The purpose of this contract
is to provide for the review of the validity of the diagnostic infor-
mation provided by such hospitals, the completeness and adequacy
of the care provided, the appropriateness of admissions, and the ap-
propriateness of care provided to patients designated by the hospi-
tals as outliers. These reviews would be covered as a hospital cost
of care under part A but the PRO would be paid by the Secretary
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on behalf of the hospital on the basis of a rate per review estab-
lished by the Secretary. The amount expended will be no less than
an amount which reflects the rates per review established in fiscal
year 1982 for both direct and administrative costs, adjusted for in-
flation, and will be expended from the trust fund and not subject to
appropriations.
Conference agreement
The conference agreement follows the Senate amendment with
modifications. Under the agreement, (1) hospitals receiving pay-
ments under the prospective payment system would be required
from the date of enactment through September 30, 1983, to con-
tract with a professional review organization (PRO), if there is a
PRO in the area which has contracted with the Secretary under
title XI: (2) such hospitals would be required, on or after October 1,
1984, to contract with a PRO, in the area, designated by the Secre-
tary under title XI as a condition of receiving payments under the
medicare program (if the Secretary has not contracted with a PRO
in the area such hospitals would not receive payment); (3) the 12-
month waiting period for intermediaries to qualify as PROs (as
specified in present law) would begin on the date the Secretary
enters into contracts or on October 1, 1983, whichever is earlier as
in the House bill; (4) where a contract between the Secretary and a
PRO is terminated after October 1, 1984, the Secretary would be
required to enter into a new contract with a PRO in that area
within 6 months of such termination, during which period hospitals
would not be penalized because no PRO exists in the area, and (5)
the amount expended for review purposes must also be no less than
an amount equal to the total expenditures made during 1982 for
review costs adjusted for inflation.
B. MONITORING SYSTEM ESTABLISHED BY THE SECRETARY
Present law
No provision.
House bill
Under the House bill, the Secretary would be required to estab-
lish a system for monitoring admissions and discharges of both hos-
pitals receiving prospective payment and hospitals reimbursed on a
cost basis, utilizing HCFA, medicare intermediaries, professional
review organizations/professional standards review organizations,
or such other medical review authority, to review admissions and
discharge practices and quality of care.
Senate amendment
No provision.
Conference agreement
The conference agreement strikes the provision in the House bill
but modifies the review requirements of professional review organi-
zations (PROs) to include review of patterns admissions and dis-
charges and quality of care of hospitals receiving medicare pay-
ments.
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C. PENALTIES FOR UNACCEPTABLE PRACTICES
Present law
No provision.
House bill
Under the House bill, the Secretary would be authorized to take
corrective action where hospitals, paid according to the prospective
rates or on a cost basis, were determined to be engaged in unaccep-
table admissions, medical, or other practices. The Secretary would
be permitted to disallow part or all of the medicare payment with
respect to an unnecessary or multiple admissions, or to require hos-
pitals to take other corrective action necessary where a provider
was determined to have engaged in such practices.
Senate amendment
No provision.
Conference agreement
The conference agreement follows the provision in the House bill
with a modification which authorizes the Secretary to take such
corrective action based on the findings of the PRO.
13. PAYMENTS TO HMO's AND CMP'S
Present law
Current law provides that health maintenance organizations
(HMO's) and competitive medical plans (CMP's) may be reimbursed
either on the basis of reasonable costs or under a risk-based con-
tract, a payment equal to 95% of the adjusted average per capita
cost (AAPCC) for medicare enrollees in the HMO's area.
House bill
Under the House bill, the proposal would permit, at its election,
an HMO or a CMP that receives medicare payments on a risk basis
to choose to have the Secretary directly pay hospitals for inpatient
hospital services furnished to medicare enrollees of the HMO or
CMP. The payment amount would be at the DRG rate (or on the
basis of reasonable cost, as applicable) and would be deducted from
medicare payments to the HMO or CMP.
Senate amendment
Similar provision.
Conference agreement
The conference agreement follows the provision in the House bill
with a technical amendment.
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14. STATE COST CONTROL SYSTEMS
A. AUTHORITY UNDER PRE-TEFRA LEGISLATION
Present law
Under present law, the Secretary has authority to establish
medicare demonstration projects. There are currently four State-
wide medicare demonstrations (MD, NJ, NY, and MA) and one
area-wide (Rochester, NY) demonstration.
House bill
Under the House bill, the Secretary would be expressly author-
ized to continue to develop, carry out, or maintain medicare experi-
ments and demonstration projects.
Senate amendment
Same as the House bill.
Present law
Present law authorizes the Secretary, at the request of a State,
to pay for medicare services according to the State's hospital cost
control system if such system-
(1) applies to substantially all non-acute care hospitals in the
State;
(2) applies to at least 75% of all inpatient revenues or expenses
in the State;
(3) provides assurances that payors, hospital employees and pa-
tients are treated equitably; and
(4) provides assurances that the State's system will not result in
greater medicare expenditures over a three-year period than would
otherwise have been made. (To date, no State systems have been
approved under this authority).
House bill
Under the House bill, the Secretary would be prohibited from (1)
denying a State application on the ground that the State's system
is based on a payment methodology other than DRGs, or (2) requir-
ing that medicare expenditures under the State's system be less
than the expenditures which would have been made under the Fed-
eral prospective payment system. It includes the 4 requirements in
TEFRA for approval of a State system and adds a fifth require-
ment: if the Secretary determines that the State system will not
preclude an HMO or CMP from negotiating directly with hospitals
with respect to payment for inpatient hospital services.
Senate amendment
The Senate amendment contains the same provision, except adds
a sixth requirement that States must provide for a prohibition on
payments under part B for nonphysician services provided to inpa-
tients.
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Conference agreement
The conference agreement follows the Senate amendment with a
modification under which the Secretary would be required to issue
regulations setting forth the conditions under which States could
waive restrictions under State systems relating to payments for
certain non-physician services provided to hospital inpatients.
Present law
No provision.
House bill
Under the House bill, for those States which currently have a
medicare waiver the Secretary would be required to continue the
State program if, and for so long as, the conditions described above
are met.
Senate amendment
Same as the House bill.
Present law
No provision.
House bill
Under the House bill, the Secretary would be required to ap-
prove any State program which meets the following 6 requirements
in addition to the conditions indicated above, that the system: (1) is
operated directly by the State or an entity designated by State law;
(2) is prospective; (3) provides for hospitals to make such reports as
the Secretary requires; (4) provides satisfactory assurances that it
will not result in admissions practices which will reduce treatment
to low income, high cost, or emergency patients; (5) will not reduce
payments without 60 days notice to the Secretary and to hospitals;
and (6) provides satisfactory assurances that, in the development of
its program, the State has consulted with local officials concerning
the impact of the program on publicly owned hospitals.
The Secretary would be required to respond to requests from
States applying under these 11 conditions within 60 days of the
date the request is submitted.
Senate amendment
Same as the House bill.
Present law
Under current demonstration project agreements between the
Secretary and the States of New York and Massachusetts, the
States are required to maintain a rate of increase in medicare hos-
pital costs which is 1.5 percent below the national rate of increase
in such costs.
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House bill
Under the House bill, the Secretary would be required, upon re-
quest of a State, to modify the terms of an existing demonstration
agreement (entered into after August 1982 and in effect as of
March 1, 1983-New York and Massachusetts) so that the demon-
stration project is not required to maintain the rate of increase in
medicare hospital costs in that State below the national rate of in-
crease in such costs.
Senate amendment
The Senate amendment contains a similar provision, except pro-
vides that such demonstration agreements be modified so that the
percentage by which such project is required to maintain a rate of
increase in such costs in that State below the national rate of in-
crease be decreased by one-half of one percentage point for the con-
tract year, beginning in 1983, by an additional one-half of 1 per-
centage point for the contract year beginning in 1984, and by an
additional one-quarter of 1 percentage point for the contract year
beginning in 1985.
Conference agreement
The conference agreement follows the House bill with a modifica-
tion permitting either the State or the party to the agreement to
request a modification of the contract.
F. JUDGING THE EFFECTIVENESS OF STATE SYSTEMS
Present law
No provision.
House bill
No provision.
Senate amendment
Under the Senate amendment, during the 3 cost reporting peri-
ods beginning on or after October 1, 1983, for existing State sys-
tems, the Secretary must judge their effectiveness on the basis of
their rate of increase or inflation in medicare inpatient hospital
payments compared to the national rate of increase or inflation for
such payments. The State would retain the option to have the test
applied on the basis of either aggregate payments per inpatient ad-
mission or discharge. After the transition period, this test would no
longer apply, and such State systems would be treated in the same
fashion as other waivered systems.
Conference agreement
The conference agreement follows the Senate amendment.
G. REDUCTION IN PAYMENTS TO HOSPITALS WHICH EXCEED
EXPENDITURE LIMITS
Present law
No provision.
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House bill
No provision.
Senate amendment
Under the Senate amendment, if the Secretary determines that
the amounts paid over a three-year period under a State system
exceed what medicare would have otherwise paid over the same
three-year period, the Secretary may reduce subsequent payments
to hospitals under the State system by that amount.
Conference agreement
The conference agreement follows the Senate amendment. The
managers expect that the Secretary will provide a State, at least
annually, with such information as is needed to keep the hospitals
in a State fully informed, on an estimated or other basis, of the
projected potential liabilities that could result if medicare expendi-
tures in the State exceed the medicare expenditures which would
have been made in the absence of the State system.
Present law
Under present law, a provider may request administrative
review of a final decision of a fiscal intermediary by the Provider
Reimbursement Review Board (PRRB). A provider may appeal the
PRRB decision to Federal court or, where it involves a question of
law or regulation which the PRRB does not have the authority to
review, the provider may appeal directly to Federal court.
House bill
Under the House bill, permits administrative and judicial review
in all cases except the narrow items necessary to maintain budget
neutrality: (1) the level of the payment amount, and (2) the estab-
lishment of the DRG classifications.
Senate amendment
Same as the House bill.
Present law
Under present law, an individual provider may bring suit in the
judicial district in which it is located or the District of Columbia.
Groups may bring suit only in the District of Columbia.
House bill
No provision.
Senate amendment
The Senate amendment permits action to be brought jointly by
several providers in a judicial district in which the greatest
number of such providers is located. Any appeals to the PRRB for
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action for judicial review brought by providers which are under
common ownership or control would have to be brought by provid-
ers as a group with respect to any matter involving an issue
common to such providers.
Conference agreement
The conference agreement follows the Senate amendment.
16. STUDIES, REPORTS, AND DEMONSTRATIONS
Present law
No provision.
House bill
Under the House bill, the Secretary is required to study and
report to Congress on various topics.
Senate amendment
Under the Senate amendment, the Secretary is also required to
study and report to Congress on various topics.
Conference agreement
The conference agreement requires the Secretary to study and
report to Congress on the following:
a. Capital-related costs-the method by which capital-related
costs, such as return on net equity, associated with inpatient hospi-
tal services can be included in the prospective payment system; due
within 18 months after enactment.
b. Skilled nursing facilities (SNFs)-
1. The impact of hospital prospective payment systems on skilled
nursing facilities and recommendations concerning SNFs; due at
the end of 1983.
2. Requires the Secretary to conduct demonstrations with hospi-
tals in areas with critical shortages of SNFs to study the feasibility
of providing alternative systems of care or methods of payment.
3. The effect that the implementation of section 102 of TEFRA
would have on hospital-based SNFs, given the differences (if any) in
the patient populations served by such facilities and by community-
based SNFs; due prior to December 31, 1983.
c. Impact of the prospective payment methodology-the impact of
the prospective payment methodology during the previous year on
classes of hospitals, beneficiaries, other payors for inpatient hospi-
tal services, other providers, and the impact of computing averages
by census division, rather than national averages; must include the
Secretary's recommendations for changes in legislation, as appro-
priate; due annually at the end of each year for 1984 through 1987.
d. Physician's services to hospital inpatients-during fiscal year
1984, requires the Secretary to begin the collection of data necessary
to compute, by DRGs, the amount of physician charges for services
furnished to hospital inpatients classified in those DRGs; requires
the Secretary to include, in a report to Congress in 1985, recom-
mendations on the advisability and feasibility of providing for the
determination of payments based on a DRG-type classification for
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physician's services furnished to hospital inpatients and legislative
recommendations.
e. Urban/rural rates-the feasibility and impact of eliminating
or phasing out separate urban and rural DRG prospective payment
rates; due at the end of 1985 as part of the 1985 annual report.
f. Prospective payments for hospitals not included in the
system-whether, and the method under which, hospitals not paid
under the prospective system can be paid on a prospective basis for
inpatient services; due at the end of 1985 as part of the 1985
annual report.
g. Payments for outliers/intensity-the appropriateness of the
factors used to compensate hospitals for the additional expenses of
outlier cases; application of severity of illness, intensity of care, or
other modifications to DRG's, and the advisability and feasibility
for providing for such modifications; due by the end of 1985 as part
of the 1985 annual report.
h. Payments for all payers-the feasibility and desirability of ap-
plying a prospective payment methodology to payment by all
payers for inpatient hospital services, including consideration of
the extent of cost-shifting to non-Federal payers, and the impact of
such cost-shifting on health insurance costs and premiums borne
by employers and employees; due by January 1, 1985.
i. Impact on admissions-the impact of the prospective payment
methodology on hospital admissions and the feasibility of making a
volume adjustment in the DRG rates or requiring preadmission
certification in order to minimize the incentive to increase admis-
sions; due by the end of 1985 as part of the 1985 annual report.
j. Impact of State systems-the overall impact of State hospital
payment systems, approved under either section 1886(c) or other
provisions of the Social Security Act, on the medicare and medicaid
programs, on payments and premiums under private health insur-
ance plans, and on tax expenditures; due at the end of 1986 as part
of the 1986 annual report.
k. Sole community hospitals, information transfer between parts
A and B, uncompensated care, and making hospital cost informa-
tion available-requires the Secretary to study and make legisla-
tive recommendations to Congress on an equitable method of reim-
bursing sole community hospitals, taking into account their unique
vulnerability to substantial variations in occupancy; requires the
Secretary to examine ways to coordinate an information transfer
between parts A and B of medicare, particularly where a denial of
coverage is made in the reimbursement to the admitting
physician(s); the Secretary also reports on the appropriate treat-
ment of uncompensated care costs and adjustments that might be
appropriate for large teaching hospitals; the Secretary also reports
on the advisability of having hospitals make available information
on the costs of care to patients financed by both public programs
and private payors; due prior to April 1, 1985.
1. The territories, including Puerto Rico-requires the Secretary
to study and make recommendations to Congress on the method for
including hospitals located outside of the 50 States and the District
of Columbia under a prospective payment system; due before April
1, 1984.
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17. DELAY OF SINGLE REIMBURSEMENT LIMIT FOR SKILLED NURSING
FACILITIES (SNFs)
Present law
Under present law, the Secretary is required to establish a single
reimbursement limit for both hospital-based and free-standing
SNFs to be effective for cost reporting periods beginning on or after
October 1, 1982.
House bill
No provision.
Senate amendment
The Senate amendment delays the effective date for the single
reimbursement limit for SNFs from cost reporting periods begin-
ning on or after October 1, 1982, to cost reporting periods begin-
ning on or after October 1, 1983.
Conference agreement
The conference agreement follows the Senate amendment.
18. ON LOK DEMONSTRATION
Present Law
No provision.
House bill
No provision.
Senate amendment
Under the Senate amendment, the Secretary would be required
to approve, with appropriate terms and conditions as defined by
the Secretary, within 30 days of enactment: (1) the risk-sharing ap-
plication of On Lok Senior Health Services (dated July 2, 1982) for
waivers of certain medicare requirements over a period of 36
months in order to carry out a long-term demonstration project,
and (b) the application of the California Department of Health
Services (dated November 1, 1982) for the waiver of certain medic-
aid requirements over a period of 36 months in order to carry out a
demonstration project for capitated reimbursement for comprehen-
sive long-term care services involving On Lok Senior Health Serv-
ices.
Conference agreement
The conference agreement follows the Senate amendment.
19. APPOINTMENT, MEMBERSHIP AND ACTIVITIES OF THE EXPERT
COMMISSION
A. APPOINTMENT
Present law
No provision.
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House bill
No similar provision.
Senate amendment
Under the Senate amendment, the Secretary is required to pro-
vide for the appointment of a commission of 15 independent ex-
perts, selected and appointed by the Director of the Office of Tech-
nology Assessment (OTA). Commission members must be appointed
no later than April 1, 1984, for a 3-year term, except that the OTA
Director may provide initially for shorter terms to insure that the
terms of no more than 7 members will expire in one year. Commis-
sion members would be eligible for reappointment for no more
than 2 consecutive terms.
The commission's membership must provide expertise and expe-
rience in the provision and financing of health care including, but
not limited to, physicians and registered professional nurses, em-
ployers, third-party payors, and individuals skilled in biomedical,
health services, health economics research, and individuals having
expertise in the research and development of technological and sci-
entific advances in health care. The OTA Director must seek nomi-
nations from a wide range of groups including, but not limited to,
(a) national organizations representing physicians, including medi-
cal specialty organizations and registered professional nurses and
other skilled health professionals; (b) national organizations repre-
senting hospitals, including teaching hospitals; and (c) national or-
ganizations representing the business community, health benefits
programs, labor, the elderly and national organizations represent-
ing manufacturers of health care products.
The commission may employ such personnel (not to exceed 50) as
may be necessary to carry out its duties. Subject to approval by the
OTA Director, the commission must appoint one of its staff mem-
bers as Executive Director. The commission is authorized to seek
assistance and support from appropriate Federal departments and
agencies as required. Establishes compensation rates for members
of the commission, the Executive Director, and staff.
The Commission is authorized to enter into contracts; make ad-
vance, progress, and other payments; accept services of voluntary
and uncompensated personnel; acquire, hold, and dispose of real
and personal property; and prescribe rules and regulations.
The commission is required to have access to relevant informa-
tion and data available from Federal agencies and to maintain con-
fidentiality of all confidential information. Establishes a Federal
Liaison Committee, consisting of delegates from appropriate Feder-
al agencies, to arrange for the acquisition of information, coordi-
nate its activities with those of Federal agencies, and advise the
commission on the activities of Federal agencies. The Administra-
tor of HCFA would be chairman of the committee, and the commit-
tee would meet not less than 6 times a year.
OTA must report to Congress on the functioning and progress of
the commission and the status of assessment of medical procedures
and services by the commission. Such reports must be annual for
the first 3 years and biannual thereafter, by March 15 of each year.
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There are authorized to be appropriated such sums as may be
necessary to carry out the activities of the commission and the
committee, 85% payable from the HI Trust Fund and 15% from
the SMI Trust Fund.
In order to identify medically appropriate patterns of health re-
sources use, the commission of independent experts would be re-
quired to collect and assess information, medical and surgical pro-
cedures and services, including information on regional variations
of medical practice and lengths of hospitalization and on other pa-
tient care data, giving special attention to treatment patterns for
conditions appearing to involve excessively costly or inappropriate
services not adding to the quality of care provided. Requires the
commission, in coordination to the extent possible with the Secre-
tary, in order to assess the safety, efficacy, and cost-effectiveness of
new and existing medical and surgical procedures, to collect and
assess factual information, giving special attention to the needs of
updating existing DRGs, establishing new DRGs, and making rec-
ommendations on relative DRG weights to reflect appropriate dif-
ferences in resource consumption in delivering safe, efficatious, and
cost-effective care. In collecting and assessing information, the com-
mission must (1) use existing data where possible, collected and as-
sessed either by its own staff or under other arrangements, and (2)
carry out, or award grants or contracts for, original research where
existing information is inadequate for the development of useful
and valid guidelines by the commission.
With the concurrence of the Secretary, payment is permitted
under part A or part B of medicare for expenses incurred for clini-
cal care items and services with respect to research and demonstra-
tion conducted by the Secretary or the commission.
Conference agreement
The conference agreement follows the Senate amendment with
numerous modifications designed to provide greater flexibility in
the operation of the Commission, to reduce its maximum staffing
from 50 to 25 individuals, and to provide for OTA oversight of the
Commission's administrative activities.
DAN ROSTENKOWSKI,
J. J. PICKLE,
ANDREW JACOBS, Jr.,
HAROLD FORD,
JAMES M. SHANNON,
BARBER B. CONABLE, Jr.,
Managers on the Part of the House.
BOB DOLE,
JOHN DANFORTH,
JOHN H. CHAFEE,
JOHN HEINZ,
LLOYD BENTSEN,
DANIEL P. MOYNIHAN,
Managers on the Part of the Senate.
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