SOCIAL SECURITY ACT AMENDMENTS OF 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00003R000200120008-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 67
• Document Creation Date: December 21, 2016
• Document Release Date: October 6, 2008
• Sequence Number: 8
• Publication Date: March 16, 1983
• Content Type: OPEN SOURCE

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S 3000 CONGRESSIONAL RECORD - SENATE March 16, 1986
Sec. 414. Date for payment of interest. "(5) service performed in the employ of the (c) The amendments made by this section
Sec. 415. Recoupment of interest. United States or any instrumentality of the shall be effective with respect to remunera-
PART C-MISCELLANEOUS PROVISIONS United States, if such service- lion paid after December 31, 1983.
Sec. 421. Treatment of employees providing "(A) would not be included in the term (d) Notwithstanding any provision of sec-
services to educational institu- employment' for purposes of this subsection tion 3121(k) of the Internal Revenue Code of
tions. by reason of the provisions of paragraph (5) 1954 (or any other provision of law) the
Sec. 422. Extended benefits for individuals or (6) of this subsection as in effect. on,Janu- period for which a certificate is in effect
who are hospitalized or on jury ary 1, 1983, and under such section may not be terminated
duty. (B) is performed by an individual who on or after the date of the enactment of this
TITLE I-SOCIAL SECURITY has been continuously in the employ of the Act.
PART A-CHANGES IN COVERAGE !inc (incledludi nngg, , States or
solely a f o oru puu irpposes of of this is thereof DURATION OF AGREEMENT FOR COVERAGE OF
os
COVERAGE OF NEWLY HIRED FEDERAL EMPLOYEES graph, the receipt of benefits under the Civil STATE AND LOCAL EMPLOYEES
SEC 101. (a)(1) Section 210(a) of the Social Service Retirement and Disability Fund, or SEC. 103. (a) Subsection (g) of section 218
Security Act is amended by striking out any other benefits (based upon service as an of the Social Security Act is amended to
paragraphs (5) and (6) and inserting in lieu employee) under another retirement system read as follows:
thereof the following: established by a law of the United States for `Duration of Agreement
"(5) Service performed in the employ of employees of the Federal Government or `(g) No agreement under this section may
the United States or any instrumentality of members of the Uniformed Services as being
respect
the United States, if such service- in the employ' of the United States) since be ter entirety after with the date
"(A) would not be included in the term December 31, 1983 (and for this purpose an to any mincoverage ated inated, in its group, or or
p
e the enactment of the Social Security
mployment' for purposes of this subsection individual who returns to the performance Amendments enac nt of
by reason of the provisions of paragraph (5) of such service after a separation from such
or (6) of this subsection as in effect on Janu- service shall nevertheless be considered upon (b) The amendment made by subsection
ary 1, 1983, and such return as having been continuously in (a) shall apply to any agreement in effect
"(B) is performed by an individual who the employ of the United States or an instru- under section 218 of the Social Security Act
has been continuously in the employ of the mentality thereof, regardless of whether the on the date of the enactment of this Act,
United States or an instrumentality thereof period of such separation began before, on, without regard to whether a notice of termi-
(including, solely for purposes of this para- or after December 31, 1983, if the period of nation was in effect on such date, and to
graph, the receipt of benefits under the Civil such separation does not exceed 365 days); any agreement or modification thereof
Service Retirement and Disability Fund, or except that this paragraph shall not apply which may become effective under such sec-
any other benefits (based upon service as an with respect to- tion 218 after that date.
employee) under another retirement system "(i) service performed as the President or EXCLUSION OF SERVICES PERFORMED BY
established by a law of the United States for Vice President of the United States, MEMBERS OF CERTAIN RELIGIOUS SECTS
employees of the Federal Government or "(ii) service performed as a Member, Dele- SEC. 104. (a) Section 3121 of the Internal
members of the Uniformed Services as being gate, or Resident Commissioner of or to the Revenue Code of 1954 is 121 f by adding
'in the employ' of the United States) since Congress, at the end thereof the following new -
December 31, 1983 (and for this purpose an "(iii) service performed as the Commis- tion:
individual who returns to the performance stoner of Social Security, or "(vJ MEMBERS OF CERTAIN RELIGIOUS
of such service after a separation from such "(iv) any other service in the legislative
service shall nevertheless be considered upon branch of the Federal Government if such FAITHS.-
such return as having been continuously in service is performed by an individual who, "(1) EXEMPTION.-Any individual may file
the employ of the United States or an instru- on December 31, 1983, is not subject to sub- an application (in such form and manner,
mentality thereof regardless of whether the chapter III of chapter 83 of title 5, United and with such official, as may be prescribed
period of such separation began before, on, States Code; by regulations under this chapter) for an ex-
or after December 31, 1983, if the period of "(6) service performed in the employ of the emption from the tax imposed by this chap-
such separation does not exceed 365 days); United States or any instrumentality of the ter with respect to wages paid to such indi-
except that this paragraph shall not apply United States if such service is performed- vidual by an employer who is exempt from
with respect to- "(A) in a penal institution of the United the tax imposed under section 1401 by
"(i) service performed as the President or States by an inmate thereof;- reason of an exemption granted under sec-
Vice President of the United States, (B) by any individual as an employee in- tion 1402(g), if such individual is a member
"(it) service performed as a Member, Dele- cluded under section 5351(2) of title 5, of a recognized religious sect or division
gate, or Resident Commissioner of or to the United States Code (relating to certain in. thereof and is an adherent of established
Congress, terns, student nurses, and other student em- tenets or teachings of such sect or division
"(iii) service performed as the Commis- ployees of hospitals of the Federal Govern- by reason of which he is conscientiously op-
sionerofSocial Security, or went), other than as a medical or dental posed to acceptance of the benefits of any
"(iv) any other service in the legislative intern or a medical or dental resident in private or public insurance which makes
br?noh of the Federal Government if such training; or payments in the event of death, disability,
service is performed by an individual who, '(C) by any individual as an employee old-age, or retirement or makes payments
on December 31, 1983, is not subject to sub- serving on a temporary basis in case of fire, toward the cost of or provides services for,
chapter III of chapter 83 of title 5, United storm, earthquake, flood, or other similar medical care (including the benefits of any
States Code. emergency;: insurance system established by the Social
`(6) Service performed in the employ of (2) Section 3121(u)(1) of such Code is Security Act). Such exemption may be grant-
the United States or any instrumentality of amended to read as follows: ed only if the application contains or is ac-
the United States if such service is per. "(1) IN GENERAL.-For purposes of the taxes companied by-
formed- imposed by sections 3101(b) and 3111(b), "(A) such evidence of such individual's
"(A) in a penal institution of the United subsection (b) shall be applied without membership in, and adherence to the tenets
States by an inmate thereof,? regard to paragraph (5) thereof.": or teachings of the sect or division thereof as
"(B) by any individual as an employee in- (c) The amendments made by this section the Secretary may require for purposes of de-
cluded under section 5351(2) of title 5, shall be effective with respect to remunera- termining such individual's compliance
United States Code (relating to certain in- tion paid after December 31, 1983. with the preceding sentence, and
terns, student nurses, and other student em- (d) Nothing in this Act shall reduce the ac- "(B) his waiver of all benefits and other
ployees of hospitals of the Federal Govern- crued entitlements to future benefits under payments under titles II and XVIII of the
ment), other than as a medical or dental the Federal Retirement System of current Social Security Act on the basis of his wages
intern or a medical or dental resident in and retired Federal employees and their and self-employment income as well as all
training; or families. such benefits and other payments to him on
"(C) by any individual as an employee COVERAGE OF EMPLOYEES OF NONPROFIT the basis of the wages and self-employment
serving on a temporary basis in case of fire, ORGANIZATIONS income of any other person,
storm, earthquake, flood, or other similar SEC. 102. (a) Section 210(a)(8) of the Social and only if the Secretary of Health and
emergency;": Security Act is amended by striking out sub- Human Services finds that-
(2) Section 210(p) of such Act is amended paragraph (B) thereof and by striking out `Yi) such sect or division thereof has the
by striking out "provisions of-" and all "(A)" after "(8)": established tenets or teachings referred to in
that follows and inserting in lieu thereof (b)(1) Section 3121(b)(8) of the Internal the preceding sentence,
`provisions of subsection (a)(5).1. Revenue Code of 1954 is amended by strik- "(ii) it is the practice, and has been for a
(b)(1) Section 3121(b) of the Internal Reve- ing out subparagraph (B) thereof and by period of time which he deems to be substan-
nue Code of 1954 is amended by striking out striking out "W" after "(8)": tial, for members of such sect or division
paragraphs (5) and (6) and inserting in lieu (2) Subsection !k) of section 3121 of such thereof to make provision for their depend-
thereof the following: Code is repealed, ent members which in his judgment is rea-
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S 3002 CONGRESSIONAL RECORD - SENATE
vors benefit to any other individual, the
payment is deemed to be increased (for the
purpose of any computation under this
paragraph) by such reduction.
`Viii) If an individual to whom subpara-
graph (A) applies is eligible for a periodic
payment beginning with a month that is
subsequent to the month in which he be-
comes eligible for old-age or disability insur-
ance benefits, the amount of that payment
for purposes of subparagraph (B) shall be
deemed to be the amount to which he is, or
is deemed, to become entitled (subject to
clauses (i), (ii), and (iv) of this subpara-
graph) in such subsequent month.
"(iv) For purposes of this subparagraph,
the term Periodic payment' includes a pay-
ment payable in a lump sum if it is a com-
mutation of, or a substitute for, periodic
payments.
"(E) For purposes of subparagraph (B), the
applicable fraction is-
"(I) in the case of an individual who first
becomes eligible during 1984 to a monthly
periodic payment described in subpara-
graph (A), one-fifteenth,
"(ii) in the case of an individual who first
becomes eligible during 1985 to a monthly
periodic payment described in subpara-
graph (A), two-fifteenths,
'Viii) in the case of an individual who
first becomes eligible during 1986 to a
monthly periodic payment described in sub-
paragraph (A), one-fifth,
"(iv) in the case of an individual who first
becomes eligible during 1987 to a monthly
periodic payment described in subpara-
graph (A), four-fifteenths, and
"(v) in the case of an individual who first
becomes eligible during 1988 or thereafter to
a monthly periodic payment described in
subparagraph (A), one-third
"(F) This paragraph shall not apply in the
case of an individual who has more than 30
years of coverage (as defined in paragraph
(1)(C)(ii). In the case of an individual who
has more than 24 years of coverage (as so de-
fined), the figure '32 percent' in subpara-
graph (B) shall, if larger, be deemed to be-
"(t) 90 percent, in the case of an individu-
al who has 30 or more of such years of cover-
age;
`Vii) 80 percent, in the case of an individu-
al who has 29 of such years;
"(iii) 70 percent, in the case of an individ-
ual who has 28 of such years;
"(iv) 60 percent, in the case of an individ-
ual who has 27 of such years;
"(v) 50 percent, in the case of an individu-
al who has 26 of such years; and
"(vi) 40 percent in the case of an individ-
ual who has 25 of such years.":
(b) Section 215(d) of such Act is amended
by adding at the end thereof the following
new paragraph:
"(5)(A) In the case of an individual who
was not eligible for an old-age or disability
insurance benefit for December 1983 and
whose primary insurance amount is not
computed under paragraph (1) of subsection
(a) by reason of paragraph (4)(B)(ii) of that
subsection, and who first becomes eligible
after 1983 to a monthly periodic payment
(or a payment determined under subsection
(a)(7)(D)) based (in whole or in part) upon
his earnings in noncovered service of at
least one year's duration, his primary insur-
ance amount for purposes of his entitlement
to old-age or disability insurance benefits
shall be the primary insurance amount com-
puted or recomputed under this subsection
(without regard to this paragraph and
before the application of subsection (i)) re-
duced by an amount equal to the smaller
of-
"(i) one-half of the primary insurance
amount (computed without regard to this
varagraph and before the application of
subsection (i)l, or
`(ii) the applicable fraction (as deter-
mined under subparagraph (B)) of the por-
tion of the monthly periodic payment (or
payment determined under subsection
(a)(7)(D)) attributable to noncovered service
to which that individual is entitled (or
deemed to be entitled) for the initial month
of his eligibility for old-age or disability in-
surance benefits.
For purposes of the preceding sentence, the
portion of the monthly periodic payment at-
tributable to noncovered service shall be
that portion of such payment which bears
the same ratio to the amount of such pay-
ment as the number of months of service in
noncovered service to which such benefit is
attributable bears to the total number of
months of service to which such benefit is
attributable. The amount of such periodic
payment for purposes of clause (ii) shall be
periodically recomputed at such times as the
Secretary determines there has been a sig-
nificant change in the amount of such peri-
odic payment.
"(B) For purposes of subparagraph (A), the
applicable fraction is-
"(i) in the case of an individual who first
becomes eligible during 1984 to a monthly
periodic payment described in subpara-
graph (A), one-fifteenth,
'Vii) in the case of an individual who first
becomes eligible during 1985 to a monthly
periodic payment described in subpara-
graph (A), two-fifteenths,
"(iii) in the case of an individual who
first becomes eligible during 1986 to a
monthly periodic payment described in sub-
paragraph (A), one-fifth,
"(iv) in the case of an individual who first
becomes eligible during 1987 to a monthly
periodic payment described in subpara-
graph (A), four-fifteenths, and
"(v) in the case of an individual who first
becomes eligible during 1988 or thereafter to
a monthly periodic payment described in
subparagraph (A), one-third.
"(C) No primary insurance amount may
be reduced by reason of this paragraph
below the amount of the primary insurance
amount as determined under subsection
(a)(1)(C)(i). ".
(c) Section 215(f) of such Act is amended
by adding at the end the following new
paragraph:
"(9)(A) In the case of an individual who
first becomes eligible for a periodic payment
determined under subsection (a)(7)(A) or
(a)(7)(D) in a month subsequent to the first
month in which he becomes eligible for an
old-age or disability insurance benefit, and
whose primary insurance amount has been
computed without regard to either such sub-
section or subsection (d)(5), such individ-
ual's primary insurance amount shall be re-
computed, in accordance with either such
subsection or subsection (d)(5), as may be
applicable, effective with the first month of
his concurrent eligibility for either such
benefit and such periodic payment.
"(B) If an individual's primary insurance
amount has been computed under subsec-
tion (a)(7) or (d)(5), and it becomes neces-
sary to recompute that primary insurance
amount under this subsection-
"(i) so as to increase the monthly benefit
amount payable with respect to such pri-
mary insurance amount (other than in the
case of the individual's death), such in-
crease shall be determined 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 insurance amount shall be re-
computed without regard to (and as though
it had never been computed with regard to)
subsection (a)(7) or (d)(5).
March 16, 1983
"(C) In the case of any individual whose
primary insurance amount is subject to the
requirements of subsection (a)(7) or (d)(5),
the amount of such primary insurance
amount shall be recomputed as may be re-
quired under such subsections by reason of a
significant change in the amount of the rele-
vant periodic payment.":
(d) Sections 202(e)(2)(B)(i) and
202(f)(3)(B)(i) of such Act are each amended
by striking out "section 215(f)(5) or (6)" and
inserting in lieu thereof "section 215(f)(5),
215(f)(6), or 215(f)(9)(B)":
BENEFITS FOR SURVIVING DIVORCED SPOUSES
AND DISABLED WIDOWS AND WIDOWERS WHO
REMARRY
SEC. 113. (a)(1) Section 202(e)(3) of the
Social Security Act is repealed.
(2) Section 202(e)(4) of such Act is amend-
ed to read as follows:
"(4) For purposes of paragraph (1), if-
"(A) a widow or a surviving divorced wife
marries after attaining age 60, or
"(B) a disabled widow or disabled surviv-
ing divorced wife described in paragraph
(1)(B)(ii) marries after attaining age 50,
such marriage shall be deemed not to have
occurred. "
(b)(1) Section 202(f)(4) of such Act is re-
Pealed-
(2) Section 202(f)(5) of such Act is amend-
ed to read as follows:
"(5) For purposes of paragraph (1), if-
"(A) a widower marries after attaining
age 60, or
"(B) a disabled widower described in
paragraph (1)(B)(ii) marries after attaining
age 50,
such marriage shall be deemed not to have
occurred":
(c)(1) The amendments made by subsec-
tion (a) shall be effective with respect to
monthly benefits payable under title 11 of
the Social Security Act for months after De-
cember 1983.
(2) In the case of an individual who was
not entitled to a monthly benefit under title
11 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.
DETERMINATION OF PRIMARY INSURANCE AMOUNT
FOR DEFERRED SURVIVOR BENEFITS
SEC. 114. (a) Section 215(a) of the Social
Security Act is amended by adding at the
end thereof the following new paragraph:
"(8)(A) If a person is entitled to benefits
under subsection (e) or (f) of section 202 on
the basis of the wages and self-employment
income of a deceased individual whose pri-
mary insurance amount would otherwise be
determined under paragraph (1), the pri-
mary insurance amount of such deceased in-
dividual shall be determined, for purposes of
determining the amount of the benefit under
such subsection, as if such deceased individ-
ual died in the year in which the person en-
titled to benefits under such subsection first
became eligible for such benefits or, if earli-
er, the year in which such deceased individ-
ual would have attained age 62 if he had not
died (except that the actual year of death of
such deceased individual shall be used for
purposes of section 215(b)(2)(B)(ii)(II)).
"(B) Notwithstanding subparagraph (A),
if a person-
"(i) is entitled to benefits under subsection
(e) or (f) of section 202 on the basis of the
wages and self-employment income of a de-
ceased individual, and
"(ii) was entitled to benefits under this
title on the basis of the wages and self-em-
ployment income of such deceased individu-
al in the month before the month in which
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S3896 CONGRESSIONAL RECORD - SENATE March 16, 1988
mine whether the estimated OASDI trust following such calendar year shall be treated payer (whether or not such benefit was re-
fund ratio for the second calendar year fol- as exceeding the estimated. QASDI trust fund ceived during the taxable year).
lowing such calendar year will be- ratio fur ihn first . ,,..-..__- ,,,,. ,
(
le
yea v """' of use estimated subparagraph) any portion of, the repay-
ii/ less than the estimated OASDI trust
"(ii) balances in the Federal Old-Age menu referred to in subparagraph (A) would
fund ratio for the first calendar year follow- and Survivors Insurance Trust Fun4 the have been allowable as a deduction for the
ing the year in which such determination is Federal Disability Insurance Trust Fund, taxable year under section 165, such portion
made' and the Federal Hospital Insurance Trust shall be allowable as a deduction only to the
(B) If the Secretary finds that the OASDI Fund for such second following calendar extent it exceeds the social security benefits
trust fund ratio for the second calendar year year to the amounts estimated to be paid received by the taxpayer during the taxable
following such calendar year will be less from, all such Trust Funds during such year (and not. repaid during such taxable
than each of the ratios described in clauses second following calendar year exceeds the year).
(i) and (it) of subparagraph (A), the Secre- ratio of the estimated balances in all such "(3) TaR I RAILROAD RETIREMENT BENEFIT -
tary shall- Trust Funds to estimated payments from all For purposes of paragraph (1), the term 'tier
!i) notify the Congress on or before-July 1 such Trust Funds for such first following 1 railroad retirement benefit' means a
of such calendar year that, absent a change calendar year. _ monthly benefit under section 3(a), 4(a), or
of circumstances, it will be necessary to
subsection with, respect to benefits for TIER 1 RAILROAD RETIREMENT WHERE TAXPAYER RECEIVES LUMP-SUM PAY-
months after November of such calendar BENEFITS. MENT.-
year and (a) GENERAL RULE.-Part 1'1 of subchapter "(1) LIMITATION.-If-
"(ii) absent a change of circumstances B of chapter 1 of the Internal Revenue Code "(A) any portion of a lump-sum payment
before such cost-of-living increase is deter- of 1954 (relating to amounts specifically in- of social security benefits received during
mined that will allow the full amount of eluded in gross income) is amended by the taxable year is attributable to prior tax-
benefits otherwise payable to be paid in a redesignating section 86 as section 87 and able years, and
timely fashion, reduce the arhount of such by inserting after section 85 the following "(B) the taxpayer makes an election under
percentage increase (but not below zero) in new section: this subsection for the taxable year,
accordance with subparagraph (C) to the `SEC. 86. SOCIAL SECURITY AND TIER 1 RAIL- Men the amount included in gross income
extent necessary to ensure that the QASDI ROAD RETIREMENT BENEFITS. under this section for the taxable year by
trust fund ratio for the second ealendan year "(a) IN GENERAL.-Gross income for the reason of the receipt of such portion shah
following the calendar year in which the de- taxable year of any taxpayer described in not exceed the sum of the increases in gross
termination is made will not fall below the subsection (b) includes social security bene- income under this chapter for prior taxable
lower of- fits in an amount equal to the lesser of- years which would result solely from taking
"(1) 20.0 percent:, or "(1) one-half of thd4ocial security benefits into account such portion in the taxable
"(11) the QASDI trust fund ratio for the received during the taxable year, or years to which it is attributable.
calendar year following the calendar year in "(2) one-half of the excess described in sub- "(2) SPECIAL RULES.-
which the determination is made. section (b). I "(A) YEAR TO WHICH BENEFIT ATTRIBUTA+
"(C) In reducing a cost-of-living percent- "(b) TAXPAYERS To WHOM SUBSECTION (a) BLE.-For purposes of this subsection, a
age increase under subparagraph (B), the APPLIES.- social security benefit is attributable to a
Secretary shalt first apply such reduction to "(1) IN GENERA--A taxpayer is described taxable year if the generaft applicable pay-
the percentage increase otherwise payable in this subsection if- ment date for such, benefit occurred during
with respect to monthly benefits payable "(A) the sum of- such taxable year.
under this section that are based on a pri- "(I) the adjusted gross income of the tax- "(B) ELBCTIOM An election under this
mary insurance amount of $250 or more for payer for the taxable year, plus subsection shalt be made at such time and
the month preceding such cost-of-living in- "(ii) one-half of the social security benefits in such manner as the Secretary shall by reg?
crease; the percentage increase, applied to received during the taxable year, exceeds ulations prescribe. Such election, once
the primary insurance amount used to de- "(B) the base amount made, may be revoked only with the consent
termine all other monthly benefits shall not "(2) ADJUSTED GROss INcoME.-For pur- cif the Secretary,
be such as to increase such primary insur- poses of this subsection, the adjusted gross "(f) TREATMENT AS PENSION OR ANNUITY FOR
ance amounts above $250. If further reduc- income of the taxpayer for the taxable year CERTAIN PURPOSES.-For purposes of-
lion in outgo is required, a reduction in the shall be- "(1) section 43(c)12) (defining earned
percentage increase applicable with respect "(A) determined without regard to this sec- income),
to monthly benefits based on a primary in- tion and sections 221, 911, and 931, and "(2) section 21'9(f)(1) (defining compensa-
surance amount of less than $250 for such "(B) increased by the amount of interest of tion),
preceding month shall be made. the taxpayer which is exempt from tax for "(3) section 2211b)(2) (defining earned
"(D) For purposes of this paragraph, the the taxable year. income), and
term 'OASDI trust fund ratio' shall mean, 'Yc) BASE AMOUNT.-For purposes of this '(4) section 911(b)(1) (de)ining foreign
with respect to any calendar year, the ratio section, the term 'base amount' means- earned income),
01- "(1) except as otherwise provided in this
"(if-the. amount estimated by the Secretary subsection, $25,000, any social security benefit ;hall be treated
to be equal to the combined balance do the "(2) $32,000, in the case of a joint return,.' as an amount received as a pension or an-
Federal Old-Age and Survivors Insurance and nuity. ".
Trust Fund and the Federal Disability Inc. "(3) zero, in the case of a taxpayer who- (b) INFORMATION REPORTING.-Subpart B of
surance Trust Fund as of the start of buso- "(A) is married at the close of the taxable part III of subchapter A of chapter 61 of
Hess on January 1 of such -calendar year. year (within the meaning of section 143) but such Code (relating to information concern-
taking into account any cost-.ofrliving in- does not file a joint return for such year, ing transactions with other persons) is
crease that otherwise would be made unth and amended by adding at the end thereof the
respect to benefits paid during such year, "(B) does not live apart from his spouse at following new section:
and any actions possible to be taken under all times during, the taxable year. "SEC. 6050F. RETURNS RELATING TO SOCIAL
sections 201(1) and 1817(j)- (relating to inter "(d) SOCIAL SECURITY BENEFIT.- SECURITY'BENEFITS.
fund borrowing) and 201 (a) and (m) (relatF "(1) IN GENERAL.-For purposes of this sec- "(a) REQUIREMENT OF REPORTING.-The ap.
ing to normalized crediting of social aecu- Lion, the term 'social security benefit' means propriate Federal official shall make, a
rity taxes), to any amount received by the taxpayer by return, according to the forms and regula-
"(ii) the amount estimated by the Secre "- reason of entitlement to- lions prescribed by the Secretary, setting
tary to be. the total amount to be paid from "(A) a monthly benefit under title II of the forth-
such Trust Funds during such calendar year. Social Security Act (determined without "(1) the-
(other than payments of interest on, and re- regard to section 203(i) of the Social Secu- "(A) aggregate amount of social security
payments of loans from), such Trust Funds;, rity Act), or benefits paid with respect to any individual
and reducing the amount of any transfer to "(B) a tier 1 railroad retirement benefit. during any calendar year, and
the Railroad Retirement Account by the "(2) ADJUSTMENT FOR REPAYMENTS DURING "(B) aggregate amount of social security,
amount of any transfer to such account YEAR.- benefits repaid by such individual during
from any such Trust Fund. "(A) IN GENERAL.-For purposes of this see- such calendar year, and
"(E9 With respect to any calendar year be- Non, the amount of social security benefits "(2) the name and address of such individ-
grinning before January 1988 for which a de- received during any taxable year shall be re- ual.
termination is required to be made under duced by any repayment made by the tax- "(b) STATEMENTS To BE FURNISHED TO INDI-
subparagrapla (A), the estimated OASDI payer during the taxable year of a social se- VIDUALS WITH RESPECT TO WHOM INFORMATION
trust fund ratio for the second calendar year curity benefit previously received by the tax- 15 FURNISHED.-Every person making a
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S 3008 CONGRESSIONAL RECORD - SENATE March 16,198,Y
(3) EFFECTIVE DATE.-The amendments
made by this subsection shall-apply to remu-
neration paid during 1984.
"f4) 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
pursuant to subsection !dl 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) DEPosrrs IN RAILROAD RETIREMENT AC-
coUNT-For purposes of subsection (a) of
section 15 of the Railroad Retirement Act of
1974, amounts allowed as a credit under
Revenue Code of 1954 shall be treated as FUND - under this paragraph for such year, will
amounts covered into the Treasury under SEC. 141. (a) Section 201(b)(1) of the Social reduce the OASDI trust fund ratio to 15 per-
subsection (a) of section 3201 of such Code. Security Act is amended by striking out cent; and
(6) STATEMENTS FURNISHED TO EMPLOYEES.- clauses (K) through (M) and inserting in `(II) does not exceed the outstanding bal-
Any written statement which is required to lieu thereof the following., "(K) 1.65 per ance of such loan.
be furnished to an employee under section centum of the wages (as so defined) paid "(ii) Amounts required to be transferred
6051(a) with respect to remuneration paid after December 31, 1981, and before January under clause (il shall be transferred on the
during 1984 shall include- 1, 1984, and so reported, (L) 1 per centum of last day of the first month _of the year suc-
(A) the total amount which would have the wages (as so defined) paid after Decem- ceeding the year in which the determination
been deducted and withheld as a tax under ber 31, 1983, and before January 1, 1988, and described in clause (i) is made.
section 3101 if the credit -allowable under so reported, (M) 1.06 per centum of the "(iii) For purposes of this subparagraph,
section 3510 had not been taken into ac- wages .(as so defined) paid after December the term 'OASDI trust fund ratio' means,
count, and 31, 1987, and before January 1, 1990, and so with respect to any calendar year, the ratio
(B) the amount of the credit allowable reported, (N) 1.20 per centum of the wages of-
under section 3510. (as so defined) paid after December 31, 1989, "(I) the combined balance in the Federal
SEC. 133. TAXES ON SELF-EMPLOYMENT and before January 1, 2000, and (M) 1.30 per Old Age and Survivors Insurance Trust
INCOME; CREDIT AGAINST SUCH centum of the wages (as so defined) paid Fund and the Federal Disability Insurance
TAXES. after December 31, 1999, and so reported, ". Trust Fund, reduced by the outstanding
(a) INCREASE IN RATES.-Subsections (a) (b) Section 201(b)(2) of such Act is amend- amount of any loan (including interest
and (b) of section 1401 of the Internal Reve- ed by striking out clauses (K) through (M) thereon) theretofore made to either such
nue Code of 1954 (relating to rates of tax on and inserting in lieu thereof the following: Fund from the Federal Hospital Insurance
self-employment income) are amended to "(K) 1.2375 per centum of the amount of Trust Fund, as of the last day of such calen-
read as follows: self-employment income (as so defined) so dar year, to
"(a) OLD-AGE, SURVIVORS, AND DISABILITY reported for any taxable year beginning `YII) the amount estimated by the Secre-
INSURANcE.-In addition to other taxes, there after December 31, 1981, and before January tary to be the total amount to be paid from
shall be imposed for each taxable year, on 1, 1984, (L) 1 per centum of the amount of the Federal Old Age and Survivors Insur-
the self-employment income of every indi- self-employment income (as so defined) so ance Trust Fund and the Federal Disability
vidual, a tax equal to the following percent reported for any taxable year beginning Insurance Trust Fund during the calendar
of the amount of the self-employment after December 31, 1983, and before January year following such calendar year for all
income for such taxable year: 1 1988
(M) 1 06 er ce t th
P n um
f
`(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 years The applicable
beginning in: percentage is:
1984 .................................................. 2.9
1985 ........ .......... 2.5
1986 .................................................. 2.2
1987, 1988, or 1989 ......................... 2.1
1990 or thereafter ........................... 2.3.
(c) EFFECTIVE DATE.-The amendments
made by this section shall apply to taxable
years beginning after December 31, 1983.
PART D-MISCELLANEOUS FINANCING
PROVISIONS
,
o
a amount purposes authorized by section 201 (other
of self-employment income (as so defined) so than payments of interest on, and repay-
reported for any taxable year beginning ments of, loans from the Federal Hospital
after December 31, 1987, and before January Insurance Trust Fund under paragraph (1)),
1, 1990, (NI 1.20 per centum of the self-em- but excludin
t
g any
ransfer payments be-
December 31, 1983...... January 1, 1988..... 11.40 ployment income (as so defined) so reported tween such trust funds, and reducing the
December 31, 1987...... January 1, 1990..... 12.12 for any taxable year beginning after Decem- amount of any transfer to the Railroad Re-
December 31, 1989 .......................................... 12.40 ber 31, 1989, and before January 1, 2000, and tirement Account by the amount of any
(M) 1 30 per centu th
m
f
"(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 in-
dividual a tax equal to the following per-
cent of the amount of the self-employment
income for such taxable year:
o
a amount w self- transfers into either such trust fund from
employment income (as so defined) so re- that Account.
ported for any taxable year beginning after "(C)(i) The full amount of all loans made
December 31, 1999,": under paragraph (1) (whether made before
INTERFUND BORROWING EXTENSION Or after January 1, 1983) shall be repaid at
SEC. 142. (a)(1) Section 201(l)(1) of the the earliest feasible date and in any event
Social Security Act is amended- no later than December 31, 1989.
(A) by striking out "January 1983" and in- "(ii) For the period after December 31,
serting in lieu thereof `January 1988';? and 1987, and before January 1, 1990
the Man-
,
(B) by inserting after "or" the second aging Trustee shall transfer each month to
Beginning after. And before: Percent place it appears `, subject to paragraph the Federal Hospital Insurance Trust Fund
(5),'. from any Trust Fund with an am t t
o
un
December 31, 1983...... January 1, 1985 ..... 2.60
December 31. 1984...... January t 1986 9 7n
(b) CREDIT AGAINST SELF-EMPLOYMENT
TAXES.-Section 1401 of such Code is amend-
ed by redesignating subsection (c) as subsec-
tion (d) and by inserting after subsection (b)
the following new subsection:
"!C) CREDIT AGAINST TAXES IMPOSED BY THIS
SECTION.-
"(1) IN GENERAL.-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.
ou -
(2) (A) Section 201(1)(2) of such Act is
standing on a loan made from the Federal
amended- Hospital Insurance Trust Fund under para-
(i) by striking out from time to time" and graph (1) an amount equal to one twenty-
inserting in lieu thereof "on the last day of fourth of the amount owed to the Federal
each month after such loan is made', Hospital Insurance Trust Fund by such
(ii) by striking out "interest" and insert- Trust Fund at the beginning of such period
ing in lieu thereof "the total interest ac- (plus the interest accrued on the outstan.d-
crued to such day'- and ing balance of such loan during such
(iii) by striking out "the loan were an in- month).":
vestment under subsection (dl" and insert- (4) Section 201(l) of such Act is f
th
ur
er
ing in lieu thereof "such amount had re- amended by adding at the end thereof the
mained in the Depositary Account estab- following new paragraph:
lished with respect to such lending Trust "(5)(A) No amounts may be borrowed from
Fund under subsection (d) or section the Federal Hospital Insurance Trust Fund
1817(c)" under paragraph (1) during any month if
(B) The amendment made by this para- the Hospital Insurance Trust Fund ratio for
graph shall apply with respect to months be- such month is less than 10 percent.
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ginning more than thirty days after the date
of enactment of this Act.
(3) Section 201(1)(3) of such Act is amend.
ed-
(A) by inserting "(A) " after the paragraph
designation; and
(B) by adding at the end thereof the fol-
lowing new subparagraphs:
"(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 Insur-
ance Trust Fund, the Managing Trustee de-
termines that the OASDI trust fund ratio ex-
ceeds 15 percent, he shall transfer from the
borrowing Trust Fund to the Federal Hospi-
tal Insurance Trust Fund an amount that-
"(I) together with any amounts trans-
ferred from another borrowing Trust Fund
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S 3010 CONGRESSIONAL RECORD - SENATE March 16, 1988
termines necessary to compensate for such this title and title*XVIII. Any amounts de- inserting in lieu thereof the following new
revision.': termined to be needed for transfer shall be subsections:
PAYMENTS TO TRUST FUNDS OF AMOUNTS EQUIVA- transferred by the Secretary of the Treasury "(c) There is hereby created on the books
LENT TO TAXES ON SERVICE IN THE UNIFORMED into the appropriate Trust Fund from the of the Treasury of the United States an ac-
SERVICES PERFORMED AFTER 1956 general fund in the Treasury, or out of the count to be known as the Hospital Insur-
SEC. 145. (a) Section 229(b) of the Social. appropriate Trust Fund into the general ance Depositary Account.
Security Act is amended to read as follows: fund in the Treasury, as may be appropri- "(d) The Managing Trustee shall deposit
"(b) There are authorized to be appropri. ate. There are authorized to be appropriated that portion of the Federal Hospital Insur-
ated to each of the Trust Funds, consisting to such Trust Funds sums equal to the ance Trust Fund not required to meet cur-
of the Federal Old-Age and Survivors Insur- amounts to be transferred in accordance rent withdrawals from such Trust Fund in
ance Trust, the Federal Disability Insurance with this subparagraph into such Trust the Hospital Insurance Depositary Account.
Trust Fund, and the Federal Hospital Insur- Funds. "(e)(l) The Secretary of the Treasury may
ance Trust Ftind, for transfer on July 1 of TRUST FUND INVESTMENT PROCEDURE apply moneys deposited in the account pur-
each calendar year to such Trust Fund from SEC. 146. (a) Section 201 of the Social Se- suant to subsection (d) in any way in which
amounts in the general fund in the Treasury curity Act is amended by striking out sub- he is authorized by law to apply moneys in
not otherwise appropriated, an amount sections (d), (e), and (f) and inserting in lieu the general fund of the Treasury.
equal to the total of the additional amounts thereof the following new subsections. (2)(A) Moneys deposited in the account
which would be appropriated to such Trust "(d) There are hereby created on the books pursuant to subsection (d) shall be treated
Fund for the fiscal year ending September 30 of the Treasury of the United States an ac- as indebtedness of the United States for pur-
of such calendar year under section 201 or count to be known as the Old Age and Survi- poses of section 1305(2) of title 31, United
1817 of this Act if the amounts of the addi- vors Insurance Depositary Account and an States Code, and shall earn interest, payable
tional wages deemed to have been paid for account to be known as the Disability Insur- monthly, in an amount equal to the product
such calendar year by reason of subsection ance Depositary Account obtained-by multiplying the average balance
(a) constituted remuneration for employ- "(e) The Managing Trustee shall deposit of moneys in the account for such month by
ment (as defined in section 3121Yb) of the that portion of the Federal Old-Age and Sur- the average market yield (computed by the
Internal Revenue Code of 1954) for purposes vivors Insurance Trust Fund not required to Managing Trustee on the basis of market
of the taxes imposed by sections 3101 and meet current withdrawals from such Trust quotations as of the end of each business
3111 of the Internal Revenue Code of 1954. Fund in the Old-Age and Survivors Insur- day of such month) on all marketable inter-
Amounts authorized to be appropriated ance Depositary Account and that portion est-bearing obligations of the United States
under this subsection for transfer on July 1 of the Federal Disability Insurance Trust then forming a part of the public debt which
of each calendar year shall be determined on Fund not required to meet current with- are not due or callable until after the expira-
the basis of estimates of the Secretary of the drawals from such Trust Fund in the Dis. tion of four years from the end of such
wages deemed to be paid for such calendar ability Insurance Depositary Account. month, except that 'flower bonds' shall not
year under subsection (a); and proper ad- "(f)(1) The Secretary of the Treasury may be included in such computation.
justments shall be made in amounts author- apply moneys deposited in an account pun "(B) For purposes of this paragraph, the
ized to be appropriated for subsequent suant to subsection (e) in any way in which term. 'flower bond' means a United States
transfer to the extent prior estimates were in he is authorized by law to apply moneys in Treasury bond which was issued before
excess of or were less than such wages so the general fund of the Treasury. March 4, 1971, and which may, at the option
deemed to be paid.", "(2)(A) Moneys deposited in an account of the duly constituted representatives of the
(b) The amendment made by subsection pursuant to subsection (e) shall be treated as estate of a deceased individual; be redeemed
(a) shall be effective with respect to wages indebtedness of the United States for pur- at par (face) value, plus accrued interest to
deemed to have been paid for calendar years poses of section 1305(21 of title 31, United the date of payment, if-
after 1983. States Code, and shall earn interest, payable "(i) it was owned by such deceased indi-
(c)(1) Within thirty days after the date of monthly, in an amount equal to the product vidual at the time of his death,
the enactment of this Act, the Secretary of obtained by multiplying the average balance "(ii) it is part of the estate of such de-
Health and Human Services shall determine of moneys in the account for such month by ceased individual, and
the additional amounts which would have the average market yield (computed by the "(iii) such representatives authorize the
been appropriated into the Federal Old-Age Managing Trustee on the basis of market Secretary of the Treasury to apply the entire
and Survivors Insurance Trust Fund, the quotations as of the end of each business Proceeds of the redemption of such bond to
Federal Disability Insurance Trust Fund, day of such month) on all marketable inter- the payment of Federal estate taxes.
and the Federal Hospital Insurance Trust est-bearing obligations of the United States "(3) The Managing Trustee may withdraw
Fund under sections 201 and 1817 of the then forming a part of the public debt which moneys deposited in the account pursuant
Social Security Act, if the additional wages are not due or callable until after the expira- to subsection (d) whenever he determines
deemed to have been paid under section tion of four years from the end of such that such moneys are necessary to meet cur-
229(a) of the Social Security Act prior to month, except that 'flower bonds' shall not rent withdrawals from the Trust Fund, and
1984 had constituted remuneration for em- be included in such computation. the Secretary of the Treasury may sell obli-
ployment (as defined in section 3121(b) of "(B) For purposes of this paragraph, the gations of the United States in the market in
the Internal Revenue Code of 1954) for pur- term 'flower bond' means a United States an amount not to exceed the amount of such
Poses of the taxes imposed by sections 3101 Treasury bond which was issued before withdrawal if he determines that such with-
and 3111 of the Internal Revenue Code of March 4, 1971 and which may, at the option drawal necessitates an increase in the gener-
1954, and the amount of interest which of the duly constituted representatives of the al fund of the Treasury by an amount not
would have been earned on such amounts if estate of a deceased individual, be redeemed exceeding such amount.':
they had been so appropriated. at par (face) value, plus accrued interest to (c) Section 1841 of such Act is amended by
(2)(A) The Secretary of the Treasury shall, the date of payment, if- striking out subsections (c), (d), and (e) and
within thirty days after the date of the en- "(i) it was owned by such deceased indi- inserting in lieu thereof the following new
actment of this Act, transfer into each such vidual at the time of his death, subsections:
Trust Fund, from the general fund in the "(ii) it is part of the estate of such de- "(c) There is hereby established on the
Treasury, an amount equal to the amount ceased individual, and books of the Treasury an account to be
determined with respect to such Trust Fund "(iii) such representatives authorize the known as the Supplementary Medical Insur-
under paragraph (1), less any amount ap- Secretary of the Treasury to apply the entire ance Depositary Account
propriated into such Trust Fund under the Proceeds of the redemption of such bond to "(d) The Managing Trustee shall deposit
provisions of section 229(b) of the Social Se- the payment of Federal estate taxes. that portion of the Federal Supplementary
curity Act prior to the date of the determina- "(3) The Managing Trustee may withdraw Medical Insurance Trust Fund not required
tion made under paragraph (1) with respect moneys deposited in an account pursuant to to meet current withdrawals from such
to wages deemed to have been paid for calen- subsection (e) whenever he determines that Trust Fund in the Supplementary Medical
dar years prior to 1984. There are hereby ap- such moneys are necessary to meet current Insurance Depositary Account
propriated into such Trust Funds sums withdrawals from the Trust Fund which de- "(e)(1) The Secretary of the Treasury may
equal to the amounts to be transferred in ac- posited such moneys and the Secretary of apply moneys deposited in the account pur-
cordance with this subparagraph into such the Treasury may sell obligations of the suant to subsection (d) in any way in which
Trust Funds. United States in the market in an amount he is authorized by law to apply moneys in
(B) The Secretary shall revise the amount not to exceed the amount of such withdraw- the general fund of the Treasury.
determined under subparagraph (A) within al if he determines that such withdrawal ne- "(2)(A) Moneys deposited in the account
one year after the date of the transfer made cessitates an increase in the general fund of pursuant to subsection (d) shall be treated
under paragraph (1), as warranted by data the Treasury by an amoynt not exceeding as indebtedness of the United States for pur-
which may become available to him after such amount.": poses of section 1305(2) of title 31, United
the date of the transfer under subparagraph (b) Section 1817 of such Act is amended by States Cods and shall earn interest, payable
(A) based upon actual benefits paid under striking out subsections (c), (d), and (e) and monthly, in an amount equal to the product
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83012 CONGRESSIONAL RECORD - SENATE March 16, 1988
`fit) deferred under a plan described in (3) Subsection (b) of section 3306 of such (3) Section 209 of such Act is amended-
subsection (e)(1), (eh2J(D), or (e)(2)(E) of Code (defining wages) is amended- (A) in subsection (b), by striking out para-
section 457, or (A) in paragraph (2), by striking out sub- graph (1) and reddesignating paragraphs (2),
"(iii) which is treated as wages under sub- paragraph (A) and redesignating subpara- (3), and (4) as paragraphs (1), (2), and (3),
section (a)(5)(SJ by reason of a salary reduc- graphs (B), (C), and (D) as subparagraphs respectively,
tion agreement": (A), (B), and (C), respectively, (B) by striking out subsections (c) and (i),
(2) Paragraph (5J of section 3121(a) of (B) by striking out paragraphs (3) and (8), and
such Code (defining wages) is amended- and (C) in subsection (m)(1)-
(AJ by striking out "or" at the end of sub- (C) in paragraph (10)(A)- (i) by inserting "or" after 'death,'; and
Paragraph (C), (ii by inserting "or" after 'death,'; and (ii) by striking out "or (C) retirement after
(B) by striking out the semicolon at the (ii) by striking out "or (iii) retirement attaining arc age specified in the plan re-.
end of subparagraph (D) and inserting in after attaining an age specified in the plan (erred to in paragraph (2) or in a pension
lieu thereof a comma and or", and referred to in subparagraph (B) or in a pen- plan of the employer,":
(C) by adding at the end thereof the follow- sion Plan of the employer,': (d)(1) Except as provided in paragraph
ing new subparagraph: (4)(A) Subparagraph (A) of section (2), the amendments made by this section
"(B) under an annuity contract described 3306(b)(2) of such Code, as redesignated by shall apply to remuneration paid after De-
in section 403(b), other than a payment for paragraph (31(A), is amended to read as fol- cember 31, 1983.
the purchase of such contract which is made lows:
by reason of a salary reduction agreement;". "(A) sickness or accident disability (but, (2) The amendments made by subsection
(3) Subsection (al of section 3121 of such in the case of payments made to an employ- (b) shall apply to remuneration paid after
Code (defining wages) is amended- ee or any of his dependents, this subpara- December 31, 1984.
(A) in paragraph (21, by striking out sub- graph 'shall exclude from the term 'wages' CODIFICATION OF ROWAN DECISION WITH
paragraph (A) and redesignating subpara- only payments which are received under a RESPECT TO MEALS AND LODGING
graphs (B), (C), and (D) as subparagraphs workman's compensation law), or': SEC. 151. (a)(1) Subsection (a) of section
(A), (B), and (C), respectively, (B) Subsection (b) of section 3306 of such 3121 of the Internal Revenue Code of 1954
(B) by striking out paragraphs (3) and (9), Code (defining wages) is amended by adding (defining wages) is amended by striking out
(C) in paragraph (13)(A)- at the end thereof the following new flush "or" at the end of paragraph (17), by strik-
(i) by inserting "or" after 'death,'; and sentence: ing out the period at the end of paragraph
(ii) by striking out "or (iii) retirement "Except as otherwise provided in regula- (18) and inserting in lieu thereof ':' or';' and
after attaining an age specified in the plan tions prescribed by the Secretary, any third by inserting after paragraph (18) the follow-
referred to in subparagraph (B) or in a pen- party which makes a payment included in ing new paragraph:
sion plan of the employer,'; and wages solely by reason of the parenthetical "(19) the value of any meals or lodging
(D) by striking out "subparagraph (B)" in matter contained in subparagraph (A) of furnished by or on behalf of the employer if
the last sentence thereof and inserting in paragraph (2) shall be treated for purposes at the time of such furnishing it,is reason-
lieu thereof "subparagraph (A)". of this chapter and chapter 22 as the em- able to believe that the employee will be able
(b)(1) Section 3306 of the Internal Reve- ployer with respect to such wages.': to exclude such items from income under
nue Code of 1954 (relating to definitions) is (C) Rules similar to the rules of subsec- section 119.
amended by adding at the end thereof the tions (d) and (e) of section 3 of the Act enti- (2) Section 209 of the Social Security Act
following new subsection: tled "An Act to amend the Omnibus Recon- is amended by striking out "or" at the end
(r) TAm7mv r of CERTAIN DR rRR,wD Com- ciliation Act of 1981 to restore minimum of subsection (p), by striking out the period
PENsAnYON Ala SALARY RZDUCrYON ARRANGE- benefits under the Social Security Act" at the end of subsection (q) and inserting in
Hinz- (Public Law 97-123), approved December 29, lieu thereof "; or", and by inserting after
"(1) Cxnrwr EMPLOYER CONTRIBU77Oxs 1981, shall apply in the administration of subsection (q) the following new subsection:
TREAT= As WAGas.-Nothing in any pans- section 3308(b)(2)(A) of such Code (as "(r) The value of any meals or lodging fur-
graph of subsection (b) (other than pare- amended by subparagraph (A)). Wished by or on behalf of the employer if at
graph (1)) shall exclude from the term (CHI) Section 209 of the Social Security the time of such furnishing it is reasonable
'wages' any employer contribution- Act is amended by adding at the end thereof to believe that the employee will be able to
"(A) under a qualified cash or deferred ar- (as amended by this Act) the following new sec-
rangement (as defined in section 401(k)) to paragraphs; Lion 119 such items from Income under o
the extent not included in gross income by ' "Nothing in any of the foregoing provi- tier 119 of the Internal Revenue Code of
reason ofsection 402(a)(8), or sions of this section (other than subsection 1954.':
(B) under a cafeteria plan (as defined in (a)) shall exclude from the term 'wages' any (b)(1) Subsection (a) of section 3121
section 125(d)) which includes an arrange- employer contribution- such Codes amended by inserting after
er
runt described in subparagraph (A) to the "(1) under a qualified cash or deferred ar- paragraph (19) (as added by subsection (a)
exter~t the employee had the right to choose rangement (as defined in section 401(k)) to of this section) the following new sentence.,
cash, property, or other benefits which the extent not included in gross income by "Nothing in the regulations prescribed for
would be wages for purposes of this chapter. reason ofsection 402(a)(8), or Purposes of chapter 24 (relating to income
"(2) GOVERNMENTAL PLANS.-For Purposes "(2) under a cafeteria plan (as defined in tax withholding) which provides an exclu-
of subsection (b)- section 125(d)) which includes an arrange- sion from 'wages' as used in such chapter
"(A) IN GENERAL.-Except as provided in ment described in paragraph (1) to the shall be construed to require a similar exclu-
subparagraph (B). the term 'wages' shall not extent the employee had the right to choose sion from 'wages' in the regulations pre-
include any payment to or from a Govern- cash, property, or other benefits which scribed for purposes of this chapter. ",
mental plan, (within the meaning of section would be wages for purposes of this chapter. (2) Section 209 of the Social Security Act
414(d)). 'For purposes of this section- is amended by inserting immediately after
"(B) EXCEPTIONS.-The term 'wages' shall "(1) the term 'wages' shall not include any subsection (r) (as added by subsection (a) of
include any amount- payment to or from a governmental plan this section) the following new sentence:
"(il deferred under a plan described in sec- (within the meaning of section 414(d) of the "Nothing in the regulations prescribed for
tion 457(a) (at the time the services which Internal Revenue Code of 1954); except that Purposes of chapter 24 of the Internal Reve-
relate to such payment were performed), "(2) the term 'wages' shall include any nue Code of 1954 (relating to income tax
"(ii) deferred under a plan described in amount- withholding) which provides an exclusion
subsection (e)(1), (e)(2)(D), or (e)(2)(E) of "(A) deferred under a plan described in from 'wages' as used in such chapter shall be
section 457, or section 457(x) of such Code (at the time the construed to require a similar exclusion
"(iii) which is treated as wages under sub- services which relate to such payment were from 'wages' in the regulations prescribed
section (b)(5)(E) by reason of a salary reduc- performed), for purposes of this title.":
tion agreement. ". "(B) deferred under a plan described in (c) Subsection (b) of section 3306 of the In-
(2) Paragraph (5) of section 3306(b) of subsection (e)(1), (e)(2)(D), or (e)(2)(E) of ternal Revenue Code of 1954 (defining
such Code (defining wages) is amended- section 457 of such Code, or wages) is amended-
(A) by striking out "or" at the end of sub- "(C) which is treated as wages under sub- (1) by striking out "or" at the end of para-
paragraph (C), section (e)(5) by reason of a salary reduc- graph (12),
(B) by striking out the semicolon at the tion agreement.": (2) by striking out the period at the end of
end of subparagraph (D) and inserting in (2) Subsection (e) of section 209 of such paragraph (13) and inserting in lieu thereof
lieu thereof a comma and "or", and Act is amended by adding before the semi- ", or",
(C) by adding at the end thereof the follow- colon at the end thereof the following: ", or (3) by adding immediately after para-
ing new subparagraph: (5) under an annuity contract described in graph (13) the following new paragraph: "(14) the value of any "M under an annuity
section 03(b)Qother than contract
in
a payment or pf 1954,4other than a payment Revenue
for the pure furnished by or on behalf ofe the employer if
the purchase of such contract which is made chase of such contract which is made by at the time of such furnishing it is reason-
by reason of a salary reduction agreement;". reason of a salary reduction agreement;". able to believe that the employee will be able
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S 3016 CONGRESSIONAL RECORD - SENATE March 16, 1989
or after October 1. 1983, and before October ized amounts otherwise computed for that provide initially for such shorter terms as
1, 1986, be less than such payments to such fiscal year as may be necessary to assure will insure that (on a continuing basis) the
hospital for the preceding cost reporting that- terms of no more than seven members shall
period. For purposes of this subparagraph, "(i) the aggregate payment amounts other- expire in any one year. Members of the Com-
the tern 'sole community hospital' means a wise provided ' under subsection mission shall be eligible for reappointment
hospital that, by reason of factors such as (d)(1)(A)(i)(11) and (d)(5) for that fiscal year for no more than two consecutive terms.
isolated location, weather conditions, travel for operating costs of inpatient hospital "(B) The membership of the Commission
conditions, or absence of other hospitals (as services of hospitals, shall provide expertise and experience in the
determined by the Secretary), is the sole are not greater or less than- provision and financing of health care, in-
source of inpatient hospital services reason- "(ii) the DRG percentage (as defined in cluding but not limited to physicians and
ably available to individuals in a geographi- subsection (d)(1)(C)) of the payment registered professional nurses, employers,
cal area who are entitled to benefits under amounts which would have been payable for third party payors, and individuals skilled
part A. such services for those same hospitals for in the conduct and interpretation of biome-
"(iii) The Secretary may provide for such that fiscal year under this section under the dical, health services, and health economics
adjustments to the payment amounts as the law as in effect before the date of the enact- research. The Director shall seek nomina-
Secretary deems appropriate to take into ac- ment of the Social Security Act Amendments tions from a wide range of groups, including
count the unique circumstances of hospitals of 1983. but not limited to-
located in Alaska and Hawaii. "(2) The Secretary shall provide for ap- "H) national organizations representing
"(D)(i) The Secretary shall estimate the pointment of a Commission of independent physicians, including medical specialty or-
amount of reimbursement made for services experts, selected by the Office of Technology ganizations and registered professional
described in section 1862(a)(14) with respect Assessment (hereinafter in this subsection nurses and other skilled health profession-
to which payment was made under part B referred to as the 'Commission') to review als,
in the base reporting periods referred to in the applicable percentage increase factor de- "(ii) national organizations representing
paragraph (2)(A) and with respect to which scribed in subsection (b)(3)(B) and make hospitals, including teaching hospitals; and
payment is no longer being made. recommendations to the Secretary on the ap- "'iii) national organizations representing
"(ii) The Secretary shall provide for an ad- propriate percentage increase which should the business community, health benefit pro-
justment to the payment for subsection (d) be effected for hospital inpatient discharges grams, labor, and the elderly.
hospitals in each fiscal year so as appropri- under subsections (b) and (d) for fiscal years
ately to reflect the net amount described in beginning with fiscal year 1985. In making "(C) The Commission may employ such
clause (U). its recommendations, the Commission shall personnel (not to exceed 50) as may be neces-
"(E) This paragraph shall apply only to take into account changes in the hospital sary to carry out its duties. Subject to ap-
subsection (d) hospitals that receive pay- market-basket described in subsection proval by the Director, the Commission shall
ments in amounts computed under this sub- (b)(3)(B), hospital productivity, technologi- appoint one of the members of its staff as
section. cal and scientific advances, the quality of Executive Director. The Commission is au-
"(6) The Secretary shall provide for publi- health care provided in hospitals (including thorized to seek such assistance and support
cation in the Federal Register, on or before the quality and skill level of professional as may be required in the performance of its
the September 1 before each fiscal year (be- nursing required to maintain quality care), duties from appropriate Federal depart-
ginning with fiscal year 1984), of a descrip- and long-term cost-effectiveness in the pro- menns and agencies. Such assistance may
tion of the methodology and data used in vision of inpatient hospital services. include the provision of detailees, office
computing the adjusted DRG prospective "(3) The Commission, not later than the space, and related services, with or without
payment rates under this subsection, includ- April 1 before the beginning of each fiscal reimbursement, as agreed upon by the Com-
ing any adjustments required under subsec- year (beginning with fiscal year 1985), shall mission and the head of the appropriate de-
tion (e)(1)(B). report its recommendations to the Secretary partment or agency.
"(7) There shall be no administrative or on an appropriate increase factor which "(D) While serving on the business of the
judicial review under section 1878 or other- should be used (instead of the applicable Commission (including traveltime), a
wise of- percentage increase described in, subsection member of the Commission shall be entitled
"(A) the determination of the requirement, (b)(3)(B)) for inpatient hospital services for to compensation at the per diem equivalent
or the proportional amount, of any adjust- discharges in that fiscal year. of the rate provided for level IV of the Ex-
ment effected pursuant to subsection (e)(1), "(4) Taking into consideration the recom- ecutive Schedule under section 5315 of title
and mendations of the Commission, the Secre- 5, United States Code; and while so serving
"(B) the establishment of diagnosis-related tarp shall determine for each fiscal year (be. away from home and his regular place of
groups, of the methodology for the classifica- ginning with fiscal year 1986) the percent- business, a member may be allowed travel
tion of discharges within such groups, and age increase which will apply for purposes expenses, including per diem in lieu of sub-
of the appropriate ,weighting factors thereof of this section as the applicable percentage sistence, as authorized by the Chairman of
under paragraph (4). increase (otherwise described in subsection the Commission.
"(e)(1)(A) For cost reporting periods of (b)(3)(B)) for discharges in that fiscal year, "(E) The Executive Director shall be com-
hospitals beginning in fiscal year 1984 or and which will assure adequate compensa- pensated at the rate provided for level IV of
fiscal year 1985, the Secretary shall provide tion for the efficient and effective delivery of the Executive Schedule under section 5315 of
for such proportional adjustment in the ap- medically appropriate and necessary care of title 5, United States Code.
plicable percentage increase (otherwise ap- high quality. `(F) The Executive Director shall, in ac-
plicable to the periods under subsection "(5) The Secretary shall cause to have pub- cordance with such policies as the Commis-
(b)(3)(B)) as may be necessary to assure lished in the Federal Register, not later sion may prescribe, appoint and fix the
that- than- rates of compensation of such personnel as
"li) the aggregate payment amounts other- "(A) the June 1 before each fiscal year (be- may be necessary to carry out the provisions
wise provided under subsection ginning with fiscal year 1985), the Secre- of this part. Such rates of compensation
(d)(1)(A)(i)(I) and (d)(5) for that fiscal year tary's proposed determination under para- may not exceed the level specified in subpar-
for operating costs of inpatient hospital graph (4) for that fiscal year, and agraph (E).
services of hospitals, "(B) the September 1 before such fiscal "(G) The Commission shall have the au-
are not greater or less than- year, the Secretary's final determination thority to-
"(ii) the target percentage (as defined in under such paragraph for that year. "(i1 enter into contracts or make other ar-
subsection (d)(1)(C)) of the payment The Secretary shall include in the publica. rangements, as may be necessary for the
amounts which would have been payable for tion referred to in subparagraph (A) for a conduct of the work of the Commission,
such services for those same hospitals for fiscal year the report of the Commission's with any competent personnel or organiza-
that fiscal year under this section under the recommendations submitted under para- tion, with or without reimbursement, with-
law as in effect before the date of the enact- graph (3) for that fiscal year. out performance or other bonds, and with-
ment of the Social Security Act Amendments "(6)(A) The Commission shall consist of out regard to section 3709 of the Revised
of 1983; fifteen individuals selected and appointed Statutes (41 U.S.C. 5);
except that the adjustment made under this by the Director of the Congressional Office "(ii) make advance, progress, and other
subparagraph shall apply only to subsection of Technology Assessment (hereafter in this payments which relate to the work of the
(d) hospitals and shall not apply for pur- part referred to as the 'Director' and the Commission without regard to the provi-
poses of making computations under subsec- 'Office, respectively). Such appointments sions of section 3324 of title 31, United
tion (d)(2)(B)(ii) or subsection (0(3)(A). shall be without regard to the provisions of States Code;
"(B) For discharges occurring in fiscal title 5, United States Code, governing ap- "(iii) accept services of voluntary and un-
year 1984 or ftaral year 1985, the Secretary pointments in the competitive service. Mem- compensated personnel that are necessary
shall provide f. -der subsections (d)(2)(F) bers of the Commission shall be appointed for the conduct of the work of the Commis-
and (d)(3)(C) f - such equal proportional no later than April 1, 1984, for a term of sion and provide transportation and sub-
adjustment in ev 4 of the average standard, three years, except that the Director may sistence as authorized by section 5703 of
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S 3018 CONGRESSIONAL RECORD - SENATE
"(A) will reimburse hospitals for payment
amounts determined in accordance with sec-
tion 1836, as applicable, of inpatient hospi-
tal services furnished to individuals en-
rolled with such organization pursuant to
subsection (d), and
"(B) will deduct the amount of such reim-
bursement for payment which would other-
wise be made to such organization.:
(g)(1) Section 1878(a) of such Act is
amended-
(A) by inserting "and (except as provided
in subsection (g)(2)) any hospital which re-
ceives payments in amounts computed
under section 1886(d) and which has sub-
mitted such reports within such time as the
Secretary may require in order to make pay-
ment under such section may obtain a hear-
ing with respect to such payment by the
Board" after "subsection (h)" in the matter
before paragraph (1),
(B) by inserting "W" after "(A)" in para-
graph (1)(A),
(C) by inserting "or" at the end of para-
graph (1)(A) and by adding after such para-
graph the following new clause:
"(ii) is dissatisfied with a final determina-
tion of the Secretary 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 paragraph
(1)(.4)(ii), 180 days after notice of the Secre-
tary's final determination,".
(2)(A) The last sentence of section
1878(f)(i) of the Social Security Act is
amended by inserting "(or, in an action
brought jointly. by several providers, the ju-
dicial district in which the greatest number
of such providers are located) after "the ju-
dicial district in which the provider is locat-
ed":
(B) Section 1878(f)(1) of such Act is fur-
ther amended by adding at the end thereof
the following new sentence: "Any appeal to
the Board or action for judicial review by
providers which are under common owner-
ship or control must be brought by such pro-
viders as a group with respect to any matter
involving an issue common to such provid-
ers:':
(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 deci-
sions described in section 1886(d)(7) shall
not be reviewed by the Board or by any
court pursuant to an action brought under
subsection U) or otherwise,".
(4) The third sentence.ofsection 1878(h) of
such Act is amended striking out "cost reim-
bursement" and inserting in lieu thereof
"Payment of providers of services":
(h) The first sentence of section
1881 (b)(2)(A) of such Act is amended by in-
serting "or section 1886 (if applicable)"
after "section 1861(v)"
(i) Section 1887(a)(1)(B) of such Act is
amended by inserting "or on the bases de-
scribed in section 1886" after "on a reason-
able cost basis':
(j) The Secretary may, for any cost report-
ing period beginning prior to October 1,
1986, waive the requirements of sections
1862(a)(14) and 1866(a)(1)(H) of the Social
Security Act in the case of a hospital which
has followed a practice of allowing direct
billing under part B of title XVIII of such
Act for services (other than physician serv-
ices) so extensively, that immediate compli-
ance with those requirements would threat-
en the stability of patient care. Any such
waiver shall provide that such billing may
continue to be made under part B 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. 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 organizational
structure of the institution.
REPORTS, EXPERIMENTS, AND DEMONSTRATION
PROJECTS
SEC. 303. (a)(1) The Secretary of Health
and Human Services (hereinafter in this
title referred to as the "Secretary") shall
study and report to the Congress within 18
months after the date of the enactment of
this Act on the method by which capital-re-
lated costs, such as return on net equity, as-
sociated with inpatient hospital services
can be included within the prospective pay-
ment amounts computed under section
1886(d) of the Social Security Act.
(2)(A) The Secretary shall study and report
annually to the Congress at the end of each
year (beginning with 1984 and ending with
1987) on the impact, of the payment method-
ology under section 1886(d) of the Social Se-
curity Act during the previous year, classes
of hospitals, beneficiaries, and other payors
for inpatient hospital services, and other
providers,
(B) During fiscal year 1984, the Secretary
shall begin the collection of data necessary
to compute the amount of physician charges
attributable, by diagnosis-related groups, to
Physicians' services furnished to inpatients
of hospitals whose discharges are classified
within those groups. The*ecretary shall in-
clude, in a report to Congress in 1985, legis-
lative recommendations on the advisability
and feasibility of providing for determining
the amount of the payments for physicians'
services furnished to hospital inpatients
based on the DRG classification of the dis-
charges of those inpatients.
(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 eliminat-
ing or phasing out separate urban and rural
DRG prospective payment rates under para-
graph (3) of section 1886(d) of the Social Se-
curity Act;
(ii) whether and the method under which
hospitals, not paid based on amounts deter-
mined under such section, can be paid for
inpatient hospital services on a prospective
basis as under such section;
(iii) the application of severity of illness,
intensity of care, or other modifications to
the diagnosis-related groups, and the advis-
ability and feasibility of providing for such
modifications; and
(iv) the feasibility and desirability of ap-
Plying the Payment methodology under such
section to payment by all payors for inpa-
tient hospital services.
(3) Prior to April 1, 1985, the Secretary
shall complete a study and make legislative
recommendations to the Congress with re-
spect to an equitable method of reimbursing
sole community hospitals which takes into
account their unique vulnerability to sub-
stantial variations in occupancy. In addi-
tion, the Secretary shall examine ways to co-
ordinate an information transfer between
parts A and B, particularly with respect to
those cases where a denial of coverage is
made under part A, and no adjustment is
made in the reimbursement to the admitting
Physician, or physicians. The Secretary also
reports on the appropriate treatment of un-
compensated care costs, and adjustments
that might be appropriate for large teaching
hospitals located in rural areas. The Secre-
tary shall also on the advisability of having
hospitals make available information on the
cost of care to patients financed by both
public programs and private payors.
(4) The Secretary shall complete a study
and make recommendations to the Congress,
before April 1, 1984, with respect to whether
March 16, 1983
hospitals located outside of the fifty States
and the District of Columbia should be in-
cluded 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
develop, carry out, or continue experiments
and demonstration projects.
(2) The Secretary shall provide that, upon
the request of a State which has a demon-
stration project, 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 agree-
ment shall be modified so that the percent-
age by which such demonstration project is
required to maintain the rate of increase in
medicare hospital costs in that State below
the national rate of increase in medicare
hospital costs shall be decreased by one-half
of one percentage point per contract year,
beginning with the contract year beginning
in 1983.
(c) The Secretary shall approve, with ap-
propriate terms and conditions 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 Services (according to terms
and conditions as specified by the Secre-
tary), dated July 2, 1982, for waivers, pursu-
ant to section' 222 of the Social Security
Amendments of 1972 and section 402(a) of
the Social Security Amendments of 1967, of
certain requirements 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
(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 requirements of title XIX of such Act
over a period of 36 months in order to carry
out a demonstration project for capitated
reimbursement for comprehensive long-term
care services involving On Lok Senior
Health Services.
(d) The Secretary shall continue demon-
strations with hospitals in areas with criti-
cal shortages of skilled nursing facilities to
study the feasibility of providing alternative
systems of care or methods of payment.
EFFECTIVE DATES
SEC. 304. (a)(1) Except as provided in
paragraph (2), the amendments made by the
preceding provisions of this title apply to
items and services furnished by or under ar-
rangements with a hospital beginning with
its first cost reporting period that begins on
or after October 1, 1983. A change in a hospi-
tal's cost reporting period that has been
made after November 1982 shall be recog-
nized for purposes of this section only if the
Secretary finds good cause for that change.
(2) Section 1866(a)(1)(F) of the Social Se-
curity Act (as added by section 302(f)(1)(C)
of this title), section 1862(a)(14) (as added
by section 302(e)(3) of this title) and sec-
tions 1886(a)(1) (G) and (H) of such Act (as
added by section 302(f)(1)(C) of this title)
take effect on October 1, 1983.
(b) The Secretary shall make an appropri-
ate reduction in the payment amount under
section 1886(d) of the Social Security Act (as
amended by this title) for any discharge, if
the admission has occurred before a hospi-
tal'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 enact-
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S3020 CONGRESSIONAL RECORD - SENATE
"(ii) the applicable limit determined
under the following table times his average
weekly benefit amount for his benefit year,
'7s do me of The appilenble
weeks dsning a limit is
6-percent period .......................... 14
5-percent period......... ................. 12
4-percent period ........................... 10
Low-unemployment period...... 8
"(B) Notwithstanding the provisions of
clause (ii) of subparagraph (A), the applica-
ble limit under such clause shall not be
lower than 4 less than the number of weeks
applicable to such State under this para-
graph as in effect for the week beginning
March 27, 1983, to the amendments made by
the Social Security Amendments of 1983.
"(C) In the case of any account from
which Federal supplemental compensation
was payable to an individual for a week be-
ginning before April 1, 1983, the amount es-
tablished in such account shall be equal to
the lesser of the subparagraph (A) entitle-
ment or the sum of-
"M the subparagraph (A) entitlement re-
duced (but not below zero) by the aggregate
amount of Federal supplemental compensa-
tion paid to such individual for weeks be-
ginning before April 1,1983, plus
"(ii) such individual's additional entitle-
ment,
"(D) For purposes of subparagraph (C)
and this subparagraph-
"W The term 'subparagraph (A) entitle-
ment' means the amount which would have
been established in the account if subpara-
graph (A) had applied to such account.
"(ii) The term 'additional entitlement'
means the applicable limit determined
under the following table times the individ-
ual's average weekly benefit amount for his
benefit year.
"In the cuss of The applicable
weeks daring a: limit is.
6-percent period ........................ 8
5-percent period ........................ 6
4-percent period .....................>... 4
Low-employment period ........... 4
"(D) Except as provided in subparagraph
(C)(i), for purposes of determining the
amount of Federal supplemental compensa-
tion payable for weeks beginning after
March 31, 1983, from an account described
in subparagraph (C), no reduction in such
account shall be made by reason of any Fed-
eral supplemental compensation paid to the
individual for weeks beginning before April
1, 1983
"(3)(A) For purposes of this subsection, the
terms '8-percent period, '5-percent period,
'4-percent period, and low-unemployment
period' mean, with respect to any State, the
period which-
"({) begins with the 3d week after the 1st
week in which the rate of insured unemploy-
ment in the State for the period consisting
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 unemploy-
ment 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 tike caw of ar The applkablt carpe b:
6-percent period..... A rate equal to or exceed-
ing 6 percent.
5-percent period.............. A rate equal to or exceed-
ing 5 percent but less
than 6 percent
4-percent period...........?? A rate equal to or exceed-
ing 4 percent but less
than 5 percent.
Low-employment period. A rate less than 4 per-
cent.
March 16, 1983
"(C) No 6-percent period, 5-percent period, with which he has in effect an agreement
ar 4-percent period, as the case may be, shall under section 602 of the Federal Supplemen-
last for a period of less than 4 weeks unless tai Compensation Act of 1982 a modifica-
the State enters a period with a higher per- tion of such agreement designed to provide
centage designation, for the payment of Federal supplemental
(D) For purposes of this subsection- compensation under such Act in accordance
"(if The rate of insured unemployment for with the amendments made by this part.
any period shall be determined in the same Notwithstanding any other provision of
manner as determined for, purposes of sec- law, if any State fails or refuses, within the
tion 203 of the Federal-State Extended Un- 3-week period beginning on the date the Sec-
employment Compensation Act of 197a retary of Labor proposed such a modifica-
(ii) The amount of an individual's aver- tion to such State, to enter into such a modi-
age weekly benefit amount shall be deter- fication of such agreement, the Secretary of
mined in the same manner as determined Labor shall terminate such agreement effec-
for purposes of section 202(b)(1)(C) of such tive with the end of the last week which ends
Act.': >-f- s.. r..-r. ......ti _--
amended by inserting before the period at PART B-PROVISIONS RELATING To INTEREST
the end thereof the following., '; except that AND CREDIT REDUCTIONS
in the case of any individual who received DEFERRAL OF INTEREST
such compensation for the week preceding SEc. 411. (a) Section 1202(b) of the Social
the last week beginning after such date, such Security Act is amended by adding at the
compensation shall be payable to such indi- end thereof the following new paragraph:
vidual for weeks beginning after such date, "(8)(A) With respect to interest due under
but the total amount of such compensation this section for any year after December 31,
payable for such weeks shall be limited to 50 1982, and before January 1, 1986, a State
percent of the total amount which would may pay 80 percent of such interest in four
otherwise be payable for such weeks". annual installments of at least 20 percent
(2) Section 605(2) of such Act is amended beginning with the year after the year in
by inserting before the semicolon the follow- which it is otherwise due, if such State
ing: "(except as otherwise provided in sec- meets the criteria of subparagraph (B). In-
(c)(1) 602(fe(2J)": terest shall accrue on such deferred interest
(c)(1) Section 602(b)V1) of such Act is in the same manner as under paragraph
amended by striking out and" at the end of (3)(C).
subparagraph (B), adding "and" at the end 'yB) To meet the criteria of this subpara-
of subparagraph (C), and inserting after
subparagraph (C) the following. graph a State must-
"(D) had at least 26- weeks of full-time in- "(i) have taken no action since October 1,
sured employment, during his base period or 1982, which would reduce its net unemploy-
the equivalent in insured wages during his ment tax effort or the net solvency of its un-
base period (as determined using a method- employment system (as determined for pur-
ology equivalent to that used under section poses of section 3302(f) of the Internal Reve-
20Z(a)(5) of the Federal-State Extended Un- nue Code of 1954); and
employment Compensation Act of 1970);': "(ii) have taken an action (as certified by
(21 The amendment made by paragraph the Secretary of Labor) after October 1, 1982,
(1) shall apply only to individuals who first which will increase revenues and decrease
became eligible for Federal supplemental benefits under the State's unemployment
compensation for weeks beginning on or compensation system (hereinafter referred
after Aprill, 1983. to as a `solvency effort') by a combined total
(d) Paragraph (3) of section 802(d) of the of the applicable percentage (as compared to
Federal Supplemental Compensation Act of such revenues and benefits as they would
1982 (as amended by section 544(d) of the have been - in effect without such State
Highway Revenue Act of 1982) is amended action).
by striking out "subsection (e)(2)(A)(ii)" In the case of the first year for which there
and inserting in lien thereof "subparagraph is a deferral (over a 4-year period) of the in-
(A)(ii) or (C)(ii)(II) of subsection (e)(2)": - terest otherwise payable for such year, the
EFFECTIVE DATE applicable percentage shall be 30 percent. In
SEc. 403. (a) The amendments made by the case of the second such year, the applica-
this part shall apply to weeks beginning ble percentage shall be 40 percent. in the
after March 31, 1983. case of the third such year, the applicable
(b) In the case of any eligible individual- percentage shall be 50 percent.
(1) to whom any Federal supplemental "(C)(i) The base year is the first year for
compensation was payable for any week be- which deferral under this provision is grant-
ginning before April 1, 1983, and ed. The Secretary of Labor shall estimate the
(2) who exhausted his rights to such com- unemployment rate for the base year. To de-
pensation (by reason of the payment of all termine whether a State meets the require-
the amount in his Federal supplemental ments of subparagraph (B)(ii), the Secretary
compensation account) before the first week of Labor shall determine the percentage by
beginning after March 31, 1993, which the benefits and taxes in the base year
such individual's eligibility for additional with the application of the action referred
weeks of compensation by reason of the to in subparagraph (B)(ii) are lower or
amendments made by this part shall not be greater, as the case may be, than such bene-
limited or terminated by reason of any fits and taxes would have been without the
event, -or failure to meet any requirement of application of such action. In making this
law relating to eligibility for unemployment determination, the Secretary shall deem the
compensation, occurring after the date of application of the action referred to in sub-
such exhaustion of rights and before April 1, paragraph (B)(ii) to have been effective for
1983 (and the period after such exhaustion the base year to the same extent as such
and before April 1, 1983, shall not be counted action is effective for the year following the
for purposes of determining the expiration base year. Once a deferral is approved a
of the two years following the end of his State must continue to maintain its solven-
benefit year for purposes of section 602(b) of cy effort. Failure to do so shall result in the
the Federal Supplemental Compensation Act State being required to make immediate
of 1982). payment of all deferred interest.
(c) The Secretary of Labor shall, at the ear- "(ii)? Increases in- the taxable wage base
liest practicable date after the date of the en- from $6,000 to $7,000 or increases after 1984
actment of this Act, propose to each State, in the maximum tax rate to 5.4 percent shall
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people with long periods of covered' in 1986, 2.1 percent in 1987 through ADDITrONAZ PROVISIONS aECOM1RENDED BY TNN
employment. 1989, and 2.3. percent in 1990 and RATIONAL COMMISSION
I might note that that is the one thereafter. In addition to these provisions,
minor chaff in the House-passed S:____ which constitute the bipartisan con-
bill-to phase In that particular provi- To help stabilize the financial condi- sensus, this bill contains three other
sion. tion of social security, this bill in- recommendation- made by the Nation-
COLA cludes the recommendation of the Na- al Commission. These were approved
Second, on the beneff side, the tional Commission. to trigger a new unanimously in November. First, trust
annual cost-al-living adjustment of method of indexing, benefits if. reserves fund investment procedures would be
social security benefits and SS1 pay- are crftirshylow. Ong in 1988, if revised so as to. improve the level of
meats would be delayed by 6 months,. reserves fall below 20 percent of public understanding.
from July to, January, To protect the annual outgo, the annual COLA would I might say I see the distinguished
needy elderly during the transition to, be based on the lower of the Increase Senator from Mississippi in the Cham-
u " pran
mum payment under the $SI program - - -- `- --- _- I_ C; -?_ .--up'-'-
would be increased by *W per month Sion would ld again; anefiir eifc cafes for any
y
($30 for couples). This would allow the prigs w reduction repay In benefit -
income of all SSI recipients to rise by creases. This would help their belp prevent insin-
$20 a month beginning in July even vency when prices grow more rapidly
thou
h his or h
COLA i
d
l
g
er
s
e
ayed.
REVENVA PROVISIONS
Also, for beneficiaries with high in-
comes, half of social security benefits,
would be included in taxable income-
The "notch" resulting under the Com-
mission recommendation was eliminat-
ed by specifying that half of social se-
curity benefits be added to the Individ-
ual'S adjusted gross income and his
income from tax-exempt obligations to
determine whether any of his benefits
will be subject to taxation. Counting-
adjusted gross income, tax-exempt in-
terest, and half of social security- bene'
fits in this manner, tire thresholds In
the committee bill are then $25,000 for
an individual and $32,000 for a couple.
The lesser of one-half of social secu-
rity benefits or one-half of income
above the thresholds would be subject
to income taxes. In no ease would an
individual's benefits be taxed If his
income was below $20,000 (or if a cou-
ple's adjusted gross income was below
$25,000). -
In addition, part of the payroll tax
increases now scheduled by law would
be accelerated, as recommended by the
National Commission. The 1985 in-
crease In the OASDI rate would take
place in 1984, and part of the 1990 In-
crease would take place in 1988. A
direct credit against FICA tax would
exactly offset the increase in the em-
ployee's tax In 1984 so that the accel-
eration In the rate increase originally
set for 1985 will increase trust fund re-
ceipts without increasing an employ-
ee's tax liability.
For the self-employed, the OASDHI
than wages, as they have in the last 5
years.
EQUITY PROVISIONS
Also Included in the bill are provi-
sions which would increase outlays
somewhat, but they improve the
equity of the system considerably for
women and for the elderly who contin-
ue to work. As recommended by the
National Commission, benefit adequa-
cy is improved for widows and widow-
ers and for disabled widows and wid-
owers. Eligibility requirements are
eased for divorced widows and widow-
ers, and. for divorced disabled widows
and widowers. For the elderly who,
continue to work and who do not now
receive an actuarially fair increase in
benefits when they- delay retirement,
the delayed retirement credit would be
increased from.3 percent to 8 percent
a year.
Along these same lines, two addition-
al provisions were added by the Fi-,
nance Committee. First, people who
leave the work force to care for a child
under 3 will be allowdd to drop up to 2
extra years of earnings in the compu-
tation of their earnings history. This
change would help acknowledge the
economic contribution of spouses in
the home by eliminating part of the fi-
nancial penalty they now suffer when
they are out of the work force..
Second, the bill would gradually phase
out the retirement earnings test for
people 65 and older. This is a broadly
supported change that would remove a
strong disincentive for the elderly who
wish to continue working beyond 65.
tax rates on self-employed income ACCOuNTaNG CHANGES
would be Increased so as to equalize Two accounting changes recom-
his or her contribution to the social se- mended by the Caaimission are includ-
curity trust funds with the combined ed in the bill that would improve the
contribution paid by workers. and their treatment of the social- security trust
employers. The tax on the self-em- funds. First, the trust funds would be
ployed-now about 1.5 times the em- reimbursed for all forgone taxes and
ployee's OASDI tax and the same as interest on account of gratuitous wage
the employee's HI tax-would be made credits provided to people with mils-
equal to the combined employee-em- tart' service. Presently, the trust funds
plover rates. To offset partially the in- are not reimbursed until the addition-
creased tax burden this provision im- al benefits are paid. Second, the trust
poses on the self employed, the com- funds would be credited with the value
mittee bill would provide a credit of all checks which have remained un-
against self-employment taxes equal negotiated for 1 year or longer. Pres-
to 2.9 percent of self-employment ently, such checks remain a drain on
income subject to self-employment tax the trust funds even If they are never
in 1984, 2.5 percent in 1985, 2.2 percent cashed.
ber. It was through his efforts and the
efforts of the distinguished Senator
from Wisconsin that this provision
was added and agreed to by the Na-
tional Commission. We will be discuss-
ing that more In length later and will
notify the distinguished Senator from
Mississippi.
Mr. STENNIS. I thank the Senator.
Mr. DOLE. We appreciate the Sena-
tor calling that to our attention last
year.
In the future, any excess reserves
would be invested on a month-to-
month basis at a rate equal to the
average interest rate paid on long-
term Government bonds. Second, two
public members would be added to the
Social Security Board of Trustees.
Presently, the Board is composed of
the Secretaries of Treasury, Labor,,
and Health and Human Services.
I guess that was a recommendation
that the Commission felt should have
been adopted; and we have adopted it.
Third, salary reductions made under
salary-reduction plans qualifying
under section 401(k) of the Internal
Revenue Code would, as recommended
by the National Commission, be in-
cluded in taxable wages for purposes
of OASDHI, as would - certain other
forms of noncash: compensation at the
time the employee elects to forego cur-
rent cash for a noncash benefit.
In particular, under the committee
bill, amounts deferred under a quali-
fied "cash or deferred" plan or a tax-
sheltered annuity by reason of a
salary reduction agreement would be
includible in the FICA wage base. Sim-
ilarly, amounts used to fund fringe
benefits under a cafeteria plait would
be included in the wage base If the em-
ployee had - an option under the plan
to defer income pursuant to a cash or
deferred plan. Amounts deferred
under an eligible State deferred com-
pensation plan would be included in
the FICA wage base in the year the re-
lated services were performed. Other
nonqualified deferred compensation
would be included in the FICA wage
base when it becomes available to the
employee. These changes should pre-
vent future decreases in OASDHI tax
income and benefit credits that might
otherwise occur from increased use of
deferred compensation arrangements.
I must say we think that is a rather
significant provision for the future.
PAIL-SAFE PROVISIONS
The National Commission ui ani-
mously recommended that the social
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In addition to these two adjust-
ments, we have also provided an insti-
tution the opportunity to apply to the
Secretary for additional payments
where the length of stay for a particu-
lar case is unusually long, or the cost
unusually high as compared to the
DRG rate. The House bill only pro-
vides for special treatment for long
lengths of stay.
Our bill also contains a provision re-
quiring that the Secretary make ad-
justments or exceptions as he deems
appropriate to take into account the
special circumstances of hospitals
caring for a large number of low-
income patients. Sole community pro-
viders are given special treatment, as
are psychiatric hospitals, , childrens
hospitals, and rehabilitation hospitals.
I understand the distinguished Sena-
tor from Texas will offer an amend-
ment to assist those institutions that
serve as regional or national referral
centers, an amendment we are certain-
ly willing to accept.
By summarizing these exceptions
and adjustments the Senator from
Kansas wants to make it clear that
every attempt has been made to iden-
tify and resolve those legitimate con-
cerns raised by institutions across the
country.
As I said at the outset, this is a new
program, and we are not sure of all
the answers. These provisions give us a
chance to test out some answers to
some specific problems, while getting
the system into place.
INDUSTRY SUPPORT
The hospital industry has made it
clear that they want to move ahead
with this system. They do not like the
current system of controls any more
than we do. They want a system that
finally puts some incentives for effi-
ciency into place. They are, of course,
concerned that we treat hospitals equi-
tably, but also believe that our recom-
mendations go a long way toward re-
solving some of these concerns.
MAJOR PROVISIONS OF THE PROSPECTIVE
PROPOSAL
DIAGNOSTIC-RELATED GROUPS AND RATES
Under the committee amendment,
the Secretary is required to determine
prospectively a payment amount for
each medicare hospital discharge.
DRG rates would be established for
urban and rural areas both nationally
and in each of four census regions.
These rates would be increased for
fiscal year 1984 and fiscal year 1985 by
the marketbasket plus 1 percentage
point. Adjustments for future years
would be decided upon by the Secre-
tary, based in part upon recommenda-
tions made by an independent commis-
sion.
Changes in the relative weights of
the DRG's would be made at least
every 5 years to reflect changes in
treatment patterns, technology, and
other factors which may change the
relative use of hospital resources. The
independent commission mentioned
earlier will also assist the Secretary in
making these changes.
OUTLIERS
Another major provision is the one
that deals with outliers, the unusually
costly cases or those with particularly
long lengths of stay. As noted earlier,
our proposal is more generous in deal-
ing with these costs.
EXCLUSION OF CAPITAL-RELATED EXPENSES AND
MEDICAL EDUCATION EXPENSES
In the case of capital costs and
direct education costs, we will continue
to reimburse hospitals as we do under
current law until October 1, 1986,
after which time capital costs will no
longer be "passed through."
In the case of indirect medical ex-
penses the proposal doubles the cur-
rent teaching adjustment.
EFFECTIVE DATE/TRANSITION
The proposal would be in effect for
individual hospital accounting years
beginning on or after October 1, 1983.
The bill also provides for a 3-year
transition from the current system to
a full national DEG system. During
the transition the hospitals would be
paid a mixed rate based on their his-
torical costs, a national DRO rate and
a regional DRG rate. This transition
provides ample opportunity to the
hospitals to adjust to the new system.
EXEMPTIONS, EXCEPTIONS, AND ADJUSTMENTS
As noted earlier in my comments,
certain hospitals are excluded from
the prospective system and adjust-
ments and exceptions are provided for
others to accommodate certain con-
cerns, such as unusual `patient case-
loads or geographic location.
PEER REVIEW
The proposal includes a requirement
that hospitals contract with a profes-
sional review organization selected by
the Secretary under title XI of the
Social Security Act. It will be particu-
larly important that a monitoring
system be in place in conjunction with
a payment program that pays an es-
tablished rate per diagnosis. We will
want to continue to insure that appro-
priate and necessary services are pro-
vided.
STATE COST CONTROL PROGRAMS
The States will continue to be able
to design and implement State pay-
ment systems.. In fact, the language
contained in the proposal strengthens
the case of States applying for medi-
care waivers as long as they meet the
requirements established by the stat-
ute.
We continue to be interested in ex-
amining the State systems, believing
that there are a great many ways one
might go about addressing the prob-
lem of rising hospital costs, and that
the Federal Government might still
have a great deal to learn.
ADMINISTRATIVE AND JUDICIAL REVIEW
The committee amendment contin-
ues to provide the opportunity for in-
stitutions to seek administrative and
judicial review in all cases except
those that relate to the establishment
of diagnosis-related groups, of the
methodology for the classification of
March 16, 1983
discharges within such groups, and of
the appropriate weighting factors.
STUDIES AND REPORTS
Mr. President, the last major provi-
sion of title III deals with studies and
reports. The committee has asked that
the Secretary complete a number of
studies on issues of concern to us in es-
tablishing this new prospective
system.
Of particular note are the studies
and reports dealing with the severity
of illness, intensity of care, or other
such modifications to the diagnosis re-
lated groups. These issues are critical
to our efforts to insure that institu-
tions receive a DRG payment that is
reasonably sensitive to the care being
provided to patients.
COMMISSION
There is one other aspect of title III
that bears noting. This is the creation
of a Commission of experts to assist
the Secretary in making adjustments
to the DRG's and in examining those
changes in the health care industry
that have a bearing on health care de-
livery and the cost of care.
The Commission will help us look at
such important issues as variations in
treatment practices, resource usage,
and medically appropriate patterns of
care. Because this Commission would
be made up of a mix of experts, for ex-
ample, nurses, physicians, employers,
and hospital administrators, they will
be able to explore a number of diverse
issues, such as the role of nutrition in
the treatment of a patient and its
impact on the overall use of services.
Changes in technology will be par-
ticularly important for us to track. We
certainly do not want to discourage
the kind of innovation we have come
to expect from the health care indus-
try. The introduction of a new treat-
ment modality or a new piece of equip-
ment can have enormous implications
for a particular DRG and its. so-called
weight. We want to make sure, that
changes in the DRG's really follow
changes in the industry.
NEED FOR ACTION
Like the other aspects of S. 1, this
title should be given every considera-
tion by my colleagues. It is clearly
time to move away from the old ineffi-
cient cost based reimbursement
system, to one that puts some incen-
tives in place. These provisions do ex-
actly that.
UNEMPLOYMENT COMPENSATION PROVISIONS
The Finance Committee included
four provisions in S. 1 dealing with the
unemployment insurance system. The
first provision would provide a 6-
month extension of the Federal sup-
plemental compensation (FSC) pro-
gram currently scheduled to expire on
March 31, 1983. Two provisions deal
with coverage and eligibility issues,
and the final provision provides some
relief from the interest and loan re-
quirements of current law. The House-
passed bill, H.R. 1900, includes only
the extension of FSC.
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s ms CONGRESSIONAL RECORD - SENATE March 111, 1989
TABLE 3.-EMOTED CHMI6ES IN 01 S 1 , Dl MD If) TRW FUND 911RAYS AND IN( RESULTING FROM S. 1, THE SOCIAL. SECURITY ACT AMENDMENTS OF 19831-Continued
0 122 230 296 361 438
OASY:..._........_._._.........__......_..._.__..........._......_ ..._ __........._.._......._........_._... ...................................._......................... _................. _......... .... -1,519 -3,272 -3,575 -3,753 -3,908 -4,274
DI..._...._..........._........_._..._ .............._.................... ...... _........_..........._.........................._.............................._.......................................... ........... -185 -399 -423 -424 -434 -469
.......... _.._._. ............. _..._................ _.._..._....... ...... __............ -1 7N 101 1"a ? f77 . ~.n ? ~.e
Trost Mod 111L ondM
U. 56 Want t OAST' ................ .......... __..................... _................ ........ ........ .........................................._................................................................................... 0 780 2,769 3,316 3,885 4,594
OCA too speedup
OASI ..........................................._............................................................................................._..............................................................................................._.......................... 0 5,476 1,974 0 0 8631
5604 D tax I..._. masers: .......... __ --~ ... _ r ..._ _._.._..... a ........ _._....... _- 0 966 463 0 0 1.764
51g--.._..-.. ..__ ... ..........................................................................................................._...._........_..................._........ 0 ID 85 175 2,525 2.441 2,608 2.912
_...__ ._. ......__ ................................................ .........._........................... _............................................... ....... _ _
111..... _..._ ............. -........ .............. _......... _....... _.._......... _................................................. __.._.....__.._ __._.............................................. _..... _ 377 1162 1034 160534 597
5 1670
Rkeer nerly rYed ball aaOener
0161 __. .. ... .. ...._... ............................. ...................................._._............._._.......................................... I 164 314 56 94 1% 56 774 1111
p-----.. _ _ ...-... _ .. _... ..- ...... ~. _ _._ .._- :...._._...._ _
ow naienlN a8enitdfeos _ ......
_..~.. -_. ........... .......................................................................................................................... 0 711 IM 1126 1.4?7 1d63
OL-.._... ... ..... ...__............ _.
1US 21118 11 ..............__.,........__._ ._......... _ ......_... ............................ . ...... __-_ 0 216 326 1977 390
6605
testa aaNlx
~...-- -...._ -. - ..-~ .. _.._. _ _. _.._.__.. _ _._ ......_.._..... .._....._....... . ..................... _...-...._...._ 14800 -381 -3$5 -110 -220 -210
~.._._..._.. -. .._.. _ _ _ _ _ ___._ .. __ ....~ .._~.. _ _ ~... `-.. ~..._ _ . _ . ._......... _._...._ 0 -60 _ - _35 -35
uhhaeYw tlx .._................._ ..............._..................._..............._.......... _ .. _ _ ~. _ _._ .. ..._ _. ..... _. ........ _. ...... - -60 -35
.... .. ............................................................................................................. ._...__........................... 680 43 43 43 43 43
01 ................. .................. ...._........_...._.............._.._................_.._...................................................................................................... .......................................................... 120 7 7 7 7 7
S>bb spetlhd 0A5611L._............_....._...__..._....__._.... ._......._ ......................................... _........................................................................................................................... 0 1,600 200 136 104 200
Total income changes:
_ ...................._............................ ........................._................. ..__.. 19.900 10.487 9.734 8,393 2.00 9.653 22,023
3218 523 1,515 1.771 5 2,215
Total .............................................................................................................................. _._._._.....-............................................................ 23,190 11,010 11,252 10,164 11,678 24,238
Total ashy and mmme Odhmms to trust Mods:
OASM ................. _...................................... ........................................... _...................................................................................... _.............................. ................... ...... ..__ 21.604 14J58 13.732 12,570 13.995 24761
0" ..................................................................................................................................................................................................................................................................
Estimated interest imohe: 14,894 14,681 15,250 14,341 16,020 18.981
OASDI 290 2,948 4,428 5.559 6142 7,710
OASDIO.......... _.__........ .......... _.._......... ....... ............................................................................................................................................................................ 335 3,333 4,928 6,201 7117 8,682
TOW MW iuaease in trust funds: .............. .._ ..................... ............... .............. ...._._..._....__
04851 ............. _............... ._............... _.......................................... _........................... _......................... .................. ...... _._............ . ............. _-__ ._._. 21894 11106 16.160 18.129 20,437 34,531
0030111 .............. _.....
Assumes no reatoraSon between OAST and 01 lust funds.
' Assam all re uhus allocated to OAST Crud 4100
Sauce: C80 estimates based on Febr ary 1983 economic assumptiahs.
A section by section description for the
basis of the estimates for the provisions in
this bill having major cost impact is given
below. These estimates were prepared from
a draft of the bill before Committee amend-
ments were added and from mark-up docu-
ments. No bill as amended has been re-
ceived.
PROVISIONS AFPZCTINO THE FINANCING OF THE
SOCIAL SECURITY SYSTEM
Cover new Federal employees
This provision extends Social Security
coverage to all new permanent federal civil-
ian employees as of January 1, 1984. The
proposal Is expected to cover about 150,000
new permanent federal entrants per year
through 1988. The proposal raises $61 mil-
lion in unified budget revenues in fiscal year
year 1984 and $1.7 billion in revenues from
fiscal year 1984 through 1988.
This provision assumes no change in the
current Civil Service Retirement system for
those federal workers newly covered by
Social Security. No impact of any Civil Serv-
ice change is given in this estimate.
The estimate is based on CBO's current
economic and federal employment assump-
tions.
Cover workers in nonprofit organizations
The provision requires mandatory cover-
age of all employees of nonprofit institu-
tions and organisations. Approximately 20
percent of employees of nonprofit organiza-
tions and institutions are not currently cov-
ered by Social Security. Covering the last 20
percent of nonprofit employees raises $1 bil-
lion in fiscal year 1984 and $8.7 billion in
fiscal years 1984 through 1988.
The extension of mandatory coverage to
all non-profit employees result in an income
tax offset against the incresae in OASDHI
revenues. The offset equals 25 percent of
the employer contribution and reduces
income tax revenues. Income tax revenues
are estimated to fall because it is assumed
that non-profit employers pans the entire
payroll tax increase onto their employees In
the form of lower wages and salaries.
The estimate was based on CBO's econom-
ic assumptions using the Social Security Ad-
ministration's short-term revenue forecast-
ing model.
Termination of State and local coverage
Currently, state and local governments
can terminate Social Security coverage upon
giving two years notice of their intention to
withdraw, And then doing so. This provision
would prohibit any such withdrawals, effec-
tive with the bill's enactment.
CBO's current law revenue estimates do
not assume reductions in trust fund income
that could result from withdrawals of cer-
tain state and local governments. Thus,
there would be no revenue gain to the CBO
baseline estimates from prohibiting such
withdrawals.
Delay payment of annual cost?of-living ad-
justment from July to January of each
year
This section delays the payment of future
cost-of-living adjustments (COLA's) for
Social Security for six months, from July to
January of each year. In addition, the provi-
sion changes the base period from which
the COLA is calculated.
The COLA is measured by the growth in
the Consumer Price Index (CPI) from the
first calendar quarter of the previous year
to the tirst quarter of the current year.
Whenever the increase is greater than three
percent, an adjustment to the benefits paid
each July is made. The July, 1981 COLA
will be paid in January, 1984 under this pro-
vision, and will be based on the current law
indexing period. Subsequent adjustments
will be based on the CPI growth from the
third quarter of one year to the next. The
table below shows the CBO COLA assump-
tions under current law and under this pro-
vision.
ASSUMED PERCENTAGE INCREASE IN SOCIAL SECURITY
BENEFITS UNDER CURRENT LAWS AND UNDER S. I
Cefaat law-J m ............_............ 4.1 4.6 4.5 4.2 4.0 3.8
pr1DQ69d-Jaohary .......................... 0.0 4.1 4.6 4.4 4.1 3.8
This bill also guarantees that a January,
1984 COLA will be given, even if the rate of
inflation is so low that the adjustment is
less than three percent. Since CEO's cur-
rent economic assumptions have this COLA
adjustment at 4.1 percent In 1984, this
clause has no cost effect.
The change in the COLA base of payment
is expected to save $24 billion in Social Se-
curity benefits over the period, and an addi-
tional $1.3 billion in SSI and other benefits
directly linked to this COLA. These COLA
changes would increase food costs by $240
million over the period as Incomes of food
stamp recipients decline.
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S 3032 CONGRESSIONAL RECORD - SENATE March 16, 1988
(Supplemental Medical Insurance) premium vision those individuals who have a long his-
increase would also be shifted to a calendar tory of substantial work under the social se-
year basis. curity program. People who have thirty or
Under the Committee amendment, the more years of covered employment in which
SSI COLA would also be shifted to a calen- they paid social security taxes on at least 25
dar year basis and would be measured in the percent of the maximum taxable earnings
same way as for OASDI purposes
would have their b
fit
t
d
.
ene
s compu
e
under Slant,,ge (1)
Effective date. For cost-of-living adjust- the regular provisions without any reduc- tong range. negligible.
t
th
i
men
o
erw
se payable in July 1983 checks. tion under the windfall provision. People
OASDI SAVINGS with less than 30 but more than 24 years of
substantial social security employment
OASDI COST
[In billions, calendar years]
1984 1985 1986 1987 1988 1989 19a
-
89
Changes in indexing for deferred survivor
benefits
(Section 114 of the Bill)
Present law
Survivor benefits (for widows, widowers,
and surviving children) are based on the de-
ceased worker's earnings in covered employ-
ment. 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 the
spouse is eligible for benefits, the benefit to
which the widowed spouse ultimately be-
comes 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 eligible for benefits for
many years, are deprived of their husband's
unrealized earnings as well as the economy-
wide wage increases that may have occurred
since the death of their husbands.
Committee amendment
The Committee amendment would pro-
vide that deferred widow and widower bene-
fits would continue to be based on earnings
indexed to wages as under present law, how-
ever, this wage indexing would continue
after the death of the worker. This is the
same as the recommendation of the Nation-
al Commission on Social Security Reform.
In addition, the Committee amendment
would specify that 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. In no case would benefits be lower
than under present law.
Effective date.-For persons becoming eli-
gible for survivors benefits after December
31, 1984.
1989 198
89
would have the windfall reduction applied
on a phased in basis under which the first
factor in the benefit formula would be re-
duced by 10 percentage points for each year
below thirty years of covered employment.
Short range......... $3.2 $52 $5.4 $5.5 $6.2 86.7 $7.3 $39.4 This would not reduce benefits by more
long range: 30 percent of taxable paying. than the regular windfall provision howev-
SST COSTS (CBO ESTIMATES)
[In millions, fiscal years]
Eliminate "windfall" benefits
(Section 112 of the Bill)
Present law
Social security benefits for workers with
low average earnings are a relatively high
proportion (up to 90 percent) of their aver-
age earnings under social security. No dis-
tinction is currently made between persons
who have a lifetime of low earnings and
those who have low average earnings only
because they worked few years in covered
employment (possibly at high wages) and
many years in employment not covered by
social security. Both groups receive the
heavily weighted social security benefit in-
tended for the first group. The heavily
weighted benefit paid to the second group is
often referred to as a "windfall".
The present law benefit formula for per-
sons who reach age 62 or who become dis-
abled before age 62 in 1983 is: 90 percent of
the first $254 of average indexed monthly
earnings in covered employment (AIMS),
plus 32 percent of AIME over $254 and up
to $1,528, plus 15 percent of AIMS in excess
of $1,528.
Committee amendment
The Committee amendment would reduce
(but not eliminate) social security benefits
for retired and disabled workers who first
become eligible for a pension based on non-
covered employment after 1983. For such
workers who do not have a long record of
substantial work under social security, the
heavily weighted 90 percent factor in the
benefit formula would be replaced by a
factor of 32 percent, phased in over a five
year period as follows:
Benefit factor
Year of first eligibility under
OASDI: Percent
1984
.......................................................
78.4
1985
.......................................................
66.8
1986
.......................................................
55.2
1987
.......................................................
43 *6
1988 and after ..................................... 32.0
To moderate the impact of this provision
on people with small pensions from non-cov-
ered employment, social security benefits
could in no case be reduced by more than
one-third of the portion of the worker's pen-
sion based on service which was non-covered
employment. The offset would not apply to
persons with pensions based on one year or
less of non-covered employment.
In addition, the Committee amendment
exempts from any reduction under this pro-
er. (A year of substantial employment is a
year in which covered earnings were at least
25 percent of the wage base. For years after
1977, the base used would be the 1977 base
with adjustments for increased earnings
after that date.)
Survivor benefits would not be affected by
this provision.
The National Commission on Social Secu-
rity Reform recommended modifying the
social security benefit formula so as to elim-
inate windfall benefits received by workers
who in the future receive social security as
well as pensions from non-covered employ-
ment. (No specific formula was recommend-
ed.)
Effective date.-January 1, 1984, for re-
tired or disabled workers who first become
eligible for a non-covered pension after
1983.
OASDI SAVINGS
[In billions, calendar years]
1984 1985 1986 1987
1988
1989
1 8
89
Shat range .....................
(1)
$0.1
$0.1
$0.3
Long range .05 percent
of taxable payroll.
Benefits for divorced or disabled widowers
or widows who remarry
(Section 113 of the Bill)
Present law
Current law permits the continuation of
benefits for widows and widowers who re-
marry after 60, the age of first eligibility for
benefits. If the widow(er) marries after age
60, he or she receives the benefits to which
he or she is entitled as a wage earner,
widow(er) or spouse, whichever is larger.
However, benefits for disabled widow(er)s
and disabled surviving divorced spouses
(payable from age 50 to 60) and for surviv-
ing divorced spouses (payable at age 60) are
terminated if the individual remarries.
Committee amendment
The Committee amendment would pro-
vide that benefits continue to be paid to cer-
tain beneficiaries upon remarriage if that
marriage takes place after the age of first
eligibility. Benefits would be payable to: dis-
abled widow(er)s and disabled surviving di-
vorced spouses who remarry after age 50,
and surviving divorced spouses who remarry
after 60. No change would be made in the
current dual entitlement provision of the
law which allows only the highest benefit to
which an individual is eligible to be drawn.
This is comparable to the present law treat-
ment of widows and widowers.
This amendment is the same as the rec-
ommendation -of the National Commission
on Social Security Reform.
Effective date.-For benefits payable for
months after December 1983.
OASDI CAST
On billions, calendar years]
1984
1985'
1986
1987
1988
1989
1994
89
Shat range .................................
(')
(')
(')
(')
(')
(')
Long range: - OS
percent of taxable
payroll.
Independent eligibility for divorced spouses
(Section 115 of the Bill)
Present law
A divorced spouse, eligible for benefits at
age 62, may not begin to draw social security
benefits until the worker begins to draw
benefits. For some divorced women, this
means that they may have to wait several
years beyond their own retirement age
(either because their ex-spouse delays re-
tirement or otherwise fails to apply for
benefits) before they can begin to draw
benefits.
Committee amendment
The Committee amendment would allow
divorced spouses (who have been divorced
for a significant period) to draw benefits at
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S 3034 CONGRESSIONAL RECORD - SENATE
Committee amendment
The Committee amendment 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 date.-For persons first eligible
for benefits after 1983.
OASDI COST
[Ii b88ons, calendar years]
(Shhnoart-range:.......... . (') -$0.1 -$0.1 -$0.2 -$0.4 -$0.5 -$1.3
pw-
.04 MUM
Of taxabe
(2) benefits would continue until total
benefits paid to the wage earner and de-
pendents equal taxes paid by the wage
earner.
Effective dates.-This amendment would
apply to new eligibles on or after January 1,
1985.
OASDI SAVINGS
[Debars in b98ar calsidar years)
1983 1984 1985 1986 1987 1988 1989 19&3
89
Shod range......... (') (') C) (') (') (') (') (')
Long range.. .01 percent of taxable payro8.
' Savings of less than $50 she".
Prisoners benefits
(Section 123 of the Bill)
Present law
Persons imprisoned for the conviction of a
felony may not receive student benefits
(which are being phased out anyway), and
are not eligibility for- disability benefits
unless they are participating in a court-ap-
proved rehabilitation program. (Dependents
benefits are not affected.) Also, impair-
ments resulting from the commission of a
crime cannot be the basis for disability
benefits and impairments occurring during
imprisonment cannot be the basis for dis-
ability benefits during the period of impris-
onment.
Presently, benefits may continue to be
paid to incarcerated felons who are either
retired workers, widow or widower benefici-
aries, spouses of retired or disabled workers,
and to those DI beneficiaries in a court-ap-
proved rehabilitation program.
Committee amendment
The Committee amendment would expand
present law to eliminate all benefits to
felons during their period of incarceration.
Benefits of dependents and survivors of in-
carcerated felons would not be affected.
Effective date.-Applicable to benefits
paid for the month after enactment.
OASDI Cost: Negligible.
Eliminate benefits to aliens
(Section 124 of the Bill)
Present law
There are no citizenship or residence re-
quirements for receiving social security cash
benefits (OASDI). Any alien in the U.S.-
whether legally or illegally, or as a perma-
nent or temporary resident-is eligible for
benefits provided he has engaged in covered
employment and otherwise meets the eligi-
bility requirements. Dependents and survi-
vors are also eligible for benefits regardless
of their immigration status or that of the
insured worker.
About $1 billion is being paid annually to
the 314,000 beneficiaries who reside abroad.
About 70% of these beneficiaries are aliens.
Committee amendment
The Committee amendment provides that,
in the future, benefits would be eliminated
to alien workers, their dependents and sur-
vivors who reside abroad. No benefits would
be paid to alien dependents of alien workers
who were acquired (through marriage, birth
or adoption) while outside the United
States. However, benefits would be paid
under the following conditions:
(1) the worker is the citizen of a country
with which the United States has a treaty
or totalization agreement which provides
for reciprocity of social security coverage;
and
(Section 1.25 of the Bill)
Present law
Presently, there are no "fail-safe" provi-
sions in the social security system that
ensure benefit payments can be met on an
ongoing basis in the face of adverse econom-
ic conditions. (The Board of Trustees is re-
quired to report immediately to the Con-
gress if any of the trust funds is "unduly
small".)
Committee amendment
Under the Committee amendment, the
Secretary of Health and Human Services
would be required to make an annual evalu-
ation of the projected balances in the cash
benefits trust funds, taking into account
future cost-of-living increases. If the cash
benefits (OASDI) fund reserves are project-
ed to decline from the start of the next year
to the start of the following year and to
then be less than 20 percent of a year's
benefits, the Secretary would be required to
notify the Congress and if no action is
taken, to scale back the COLA to the extent
necessary to prevent a decline which would
leave the reserves below that level.
Insofar as possible, the limitation on the
COLA would be applied to people' whose
benefits are based on a primary benefit level
of more than $250 per month. The determi-
nation as to whether a limitation on the
cost-of-living increase was necessary would
be made only after taking into account all
other statutory provisions for assuring ade-
quate funds. The Secretary would have to
notify Congress by July 1 of each year in
which he finds that action to limit the next
cost-of-living increase would be required
under this provision. Since cost-of-living in-
creases will be reflected in the January
checks, this would give Congress several
months in which to provide additional fund-
ing or to address the problem in any other
manner the Congress might find to be ap-
propriate.
The Committee views this provision as a
last resort which would come into play only
after all other authorities for maintaining
trust fund solvency had been exercised.
Thus, for example, other provisions in this
legislation for such procedures as interfund
borrowing and normalization of tax trans-
fers would be invoked before this provision
would be operative to the extent that such
procedures are authorized by law. Under
current projections such measures should
be sufficient to keep fund balances from de-
clining to dangerous levels. If however, un-
expected adverse situations should develop,
this provision would assure that sufficient
reserves were maintained so that regular,
timely payment of monthly benefit checks
would not be placed in jeopardy.
This provision would implement the rec-
ommendation of the National Commission
on Social Security Reform that this social
security financing legislation include provi-
sion for a "fail-safe" mechanism.
March 16, 1988
Effective date.-Determinations beginning
July 1, 1984.
OASDI Cost Impact: This provision is not
expected to be utilized under the 1983
Trustees intermediate (II-B) assumptions.
PART C-REVENUE PROVISIONS
A. Taxation of social security and railroad
retirement benefits (sec. 181 of the bill, new
Code secs. 86 and 6050, and Code sees. 861,
871, 1441, and 6103)
Present law
Under present law, social security benefits
are excluded from the gross income of the
recipient. Their exclusion is based upon a
series of administrative rulings issued by the
Internal Revenue Service in 1938 and 1941
(see I.T. 3194, 1938-1 C.B. 114, 3229, 1938-2
C.B. 136, and I.T. 3447, 1941-1 C.B. 191).
Railroad retirement benefits are excluded
from gross income under the Railroad Re-
tirement Act.
In general, the gross amount of fixed or
determinable annual or periodic income
(which is not effectively connected with a
U.S. trade or business) received by a nonres-
ident alien from U.S. sources is subject to a
30-percent tax (Code sec. 871); this tax is
collected by withholding (sec. 1441). A pen-
sion for services performed in the United
States would be U.S.-source income and the
gross amount of a U.S.-source pension is
subject to the 30-percent withholding or a
lower rate if so provided by treaty. The U.S.
Model Income Tax Treaty, as well as a
number of actual tax treaties to which the
United States is a party, provides reciprocal-
ly that pensions received by a resident of
one country from sources in the other coun-
try are taxable only by the country of resi-
dence. However, the United States has re-
served the right to tax social security bene-
fits in the U.S. Model Income Tax Treaty
and a number of actual tax treaties.
Reasons for change
The Committee believes that the present
policy of excluding all social security bene-
fits from a recipient's gross income is inap-
propriate. The committee believes, further,
that social security benefits are in the
nature of benefits received under other re-
tirement systems, which are subject to tax-
ation to the extent they exceed a worker's
after-tax contributions and that taxing a
portion of social security benefits will im-
prove tax equity by treating more nearly
equally all forms of retirement and other
income that are designed to replace lost
wages (for example, unemployment compen-
sation and sick pay). Furthermore, by
taxing social security benefits and appropri-
ating these revenues to the appropriate
trust funds, the financial solvency of the
social security trust funds will be strength-
ened.
Because Tier 1 benefits provided under
the Railroad Retirement Act are largely
equivalent to social security benefits, the
committee believes that corresponding
changes also should be made in the tax
treatment of these benefits. That is, a por-
tion of railroad retirement benefits also
should be subject to income taxation.
By taxing only a portion of social security
and railroad retirement benefits (that is, up
to one-half of benefits in excess of a certain
base amount), the Committee's bill assures
that lower-income individuals, many of
whom rely upon their benefits to afford
basic necessities, will not be taxed on their
benefits. The maximum proportion of bene-
fits taxed is one-half in recognition of the
fact that social security benefits are partial-
ly financed by after-tax employee contribu-
tions. The bill's method for taxing benefits
assures that only those taxpayers who have
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S 3036 CONGRESSIONAL RECORD - SENATE March 16, 1988
ury need not take account of certain provi-
sions of the tax law that might affect an in-
dividual's tax liability (e.g., income averag-
ing, loss carrybacks, etc.) if these provisions
are judged to have an inconsequential effect
on the estimates.
The Secretary of the Treasury will be re-
quired to submit annual reports to the Con-
gress and to the Secretary of Health and
Human Services and the Railroad Retire-
ment Board concerning (1) the transfers
made during the year, and the methodology
used in determining the amount of the
transfers and the funds or account to which
made, and (2) the anticipated operation of
the transfer mechanism during the next
five years.
Taxation of Tier One railroad retirement
benefits
The Committee's bill provides that rail-
road retirement "Tier 1" benefits are sub-
ject to taxation to the came extent and in
the same manner as monthly benefits pay-
able under title II of the Social Security
Act. As a result of this change, certain
amounts will be transferred regularly to the
Railroad Retirement Account.
Under the financial interchange between
railroad retirement and social security. how-
ever. the social security trust funds are
placed in the same position tlkey would have
been in if railroad employment were covered
under social security. Therefore, the com-
mittee understands that existing law re-
quires that the proceeds of income taxes on
those railroad retirement benefits which-are
strict equivalent to social security benefits
are to be credited to the social security trust
funds through adjustments in the financial
interchange. This will produce exactly the
same result as if the social security system
had paid that portion of the tier I benefits
which are strictly equivalent to social secu-
rity benefits and had received the proceeds
of the income tax on these benefits.
Effective date
In general. the provisions will apply to
benefits received after December 31, 1983, in
taxable years ending that date. However,
the provisions will not apply to benefits re-
ceived after December 31, 1983, if the gener-
ally applicable payment date of these bene-
fits was before January 1, 1984.
B. Acceleration of Increases in FICA
taxes; 1984 employee tax credit (sec. 132 of
the bill: secs. 3101, 3111, and new sec. 3510
of the code).
Present law
Under present law, several increases in
social security payroll tax (FICA) rates are
already scheduled to take effect between
1985 and 1990, as shown in the following
table:
I
EMPLOYER-EMPLOYEE RATE (EACH)
OASDI
HI
OASDI-HI
1984 .....................................................................
5.4
1.30
6.70
1985 .....................................................................
5.7
1.35
7.05
1987
............................... _............. __..._..._......
5.7
1.45
7.15
1968
.....................................................................
5.7
1.45
7.15
1989
.....................................................................
5.7
1 45
7
15
1990...... ............ _............ _ ................ ............
6.2
.
1.45
.
7.65
Reasons for change
In conjunction with other changes in the
law which are designed to help insure the
solvency of the OASDI Trust Funds, the
committee has found it necessary to ad-
vance the OASDI increase scheduled for
1985 to 1984 and part of the increase sched-
uled for 1990 to 1988. In order to cushion
the impact on workers of the first change, a
one-time tax credit is provided to employees
equal to the 1984 increase in the employees
FICA tax.
Explanation of provision
The bill provides a new schedule of
OASDI rates leaves HI rates unchanged.
The new OASDI rates and combined
OASDHI rates are as follows:
ployee FICA tax nor the SECA tax is de-
ductible.
Reasons for change
The committee is concerned that, under
the current system, self-employed individ-
uals pay into the social security system less
than employers and employees, taken to-
gether, contribute for equal benefits. Thus,
571
1.30
7.00
1985..... _ .. -.~ -
5.70
1.35
7.05
1986 .....................................................................
5.70
1.45
7.15
870
L45
7.1
1988.,_ ..~._..._...._._...__...._
L96
L45
7.51
1989._ .._._....____....___.._
6.06
1.45
7.51
1990 ..................................... _..............................
6.20
1.45
7.65
Because railroad retirement (RR) payroll
taxes are linked to the rates for social sec u-
rity, the committee's bill also provides simi-
lar increases in the corresponding railroad
retirement taxes.
The bill provides employees a credit equal
to 0.3 percent of compensation subject to
the FICA and RR taxes and to payments of
amounts equivalent to FICA taxes under
section 218 of the Social Security Act. Be-
cause the credit is to be taken into account
at the time the tax is collected (by dedue-
tion from the employees' wages or other-
wise), the net OASDI employee tax rate for
1984 will be &40 percent However. employ-
ees' annual wage statements are to show the
gross FICA tax (7.00 percent of wages) and
the credit amount (0.3 percent of wages)
separately. As under present law, the appro-
priation of funds into, for example, the
OASDI trust funds will be based on the
gross OASDI employee tax rate, which will
be 5.70 percent and, thus, will not be affect-
ed by the credit.
Effective date-These provisions will
apply. to remuneration paid after December
31, 1983.
C. Self-employment income tax and credit
(secs. 133 of the bill and secs. 43, 184. 275,
401, 1401, and 1402 of the Code).
income tax deduction for his share of the
payroll tax paid on behalf of an employee
and Federal revenues would be reduced
thereby, the social security trust funds re-
ceived less than is necesary to provide bene-
fits to self-employed individuals. This dis-
parity in receipts contributes to the finan-
cial difficulties of the social secuirty system.
Explanation of provisions
Under the bill, the OASDI rate on self-
employment income will be equal to the
combined employer-employee OASDI rate,
and the HI tax rate on self-employment
income will be equal to the combined em-
ployer-employee HI rate. In order to cush-
ion the impact of the increase, the bill pro-
vides a permanent credit against SECA
taxes.
The OASDI tax rate on self-employment
income will be:
6e01nrog ails: and bdork paced
December 31, 1983.. _ _..._ kmary 1, 1988 _. _ ....., 11.40
December 31, 1987......__ January 1, 1990...._ .. 12.12
December 31 12.40
The HI rate for self-employed persons will
be:
Present Law
December 31, 19$3.._____.__ reap 1
2.60
December 31, January 1
1986
2
70
The Self-Employment Contributions Act
,
..._..._..._ _
.
on self-employed individuals. Self-employed
persons pay an OASDI tax rate that Is equal
to approximately 75 percent of the com-
bined employer-employee rate and an HI
tax rate that is equal to 50 percent of the
combined employer-employee rate.
The presently scheduled OASDI rates for
self-employment income are as follows:
December ~a,.;ru 3.,1 ,989 nor .............. * .". y 1, m u..........................
, 1 .............................................................................
a' Da
9.30
Degbming after: cwt before.
percent:
December 31, 1980.... _ ................... January 1, 1985......... ................ 1.30
December 31, 1984 ......................... January 1, 1986.......................> 1.35
December 31, 1985 ......................... ......................................... .... 1.45
Under present law, the expenses of com-
pensation or purchased services, including
wages, the employer FICA tax, and pay-
ments to self-employed individuals are de-
ductible, for income tax purposes, as busi-
ness expenses. However, neither the em-
Beginning in 1984, self-employed persons
will be entitled to a permanent credit
against SECA tax. For 1984, the credit will
be 2.9 percent of self-employment income.
For 1985, the credit will be 2.5 percent. For
1986, the credit will be 2.2 percent. For
1987-89, the credit will be 2.1 percent. For
1990 and subsequent years, the rate of the
credit will be 2.3 percent. The SECA tax
credits may be taken directly into account
in computing SECA liability for a taxable
year and estimated tax payments for that
year.
The SECA tax credits will not reduce the
revenues of the social security trust funds,
since under the Social Security Act, appro-
priations into the trust funds will be based
on the SECA tax rates specified above with-
out regard to the credits allowed against
such taxes.
Effective date.-The provisions will be ef-
fective for taxable years beginning after De-
cember 31, 1983.
Reallocation of OASDI tax rate
(Section 141 of the Bill)
Present law
The tax rate allocation between OASI and
DI is fixed in the law. The following table
displays the allocation for employers, em-
ployees and the self-employed:
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CONGRESSIONAL RECORD - SENATE March 16, 1989
The amendment would require the Man-
aging Trustee to: (1) redeem all present spe-
cial issues at their face amount; (2) redeem
all flower bonds (marketable government
bonds which, for Inheritance tax purposes,
are redeemable at par) at their current
market values; and (3) invest, on a monthly
basis, the redeemed investments and all
future funds only in separate depository ac-
counts for each of the trust funds.
This Is similar to the recommendation of
the National Commission on Social Security
Reform, except that the Commission recom-
mended investing in special issues.
Effective.-The first day of the first
month beginning more than 30 days after
the date of enactment.
Revenue Gain.- No significant gain or
loss anticipated.
Public members on board of trustees
(Section 147 of the gill)
Present law
The Board of Trustees of the four social
security trust funds (Old-Age and Survivors
Insurance, Disability Insurance, Hospital In-
surance, and Supplemental Medical Insur-
ance) consists of, ex officio, the Secretaries
of the Treasury, Health and Human Serv-
ices, and Labor, with the Secretary of the
Treasury serving as the managing trustee.
Among other responsibilities, the Board of
Trustees Is required to report to Congress
each year on the operation and status of the
trust funds, review the general policies fol-
lowed in managing the trust funds, and rec-
ommend changes in such policies.
Committee amendment
The Committee amendment would add
two public members to the Board of Trust-
ees 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. Public members
would not be considered fiduciaries and
would not be personally liable for actions
taken in such capacity with respect to the
trust funds.
The National Commission on Social Secu-
rity Reform also proposed that the Board of
Trustees of the OASDI trust funds be ex-
panded to include two public members.
Effective.-On enactment.
Cost-None.
Accelerate State and local deposits
(Section 148 of the Bill)
Present law
Requires the deposit of withheld social se-
curity 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 de-
posits of social security taxes and income
taxes are made by private employers is de-
termined under regulations Issued by Treas-
ury and vary in accordance with the tax lia-
bility 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 with-
held income taxes, deposits of social secu-
rity taxes continue to be treated differently.
Committee amendment
The Committee amendment would apply
the same social security tax deposit require-
ments to State and local governments that
now apply to private employers.
Effective date.-Effective for deposits re-
quired to be made after December 1983.
OASDI REVENUES
Fs Miss, ca lr yeas]
1984 1985 1986 1987 1988 1989 1983-
89
range .................... $1.4
lpg-range: Negligible.
$0.1
$0.1
$0.1
$0.3
$0.2
$2.2
Triggered normalization of tax transfers
(Section 149 of the Bill)
Present law
Under current procedures, social security
taxes are transferred to the trust funds on a
daily basis on Treasury estimates of
amounts collected. OASDI benefit pay-
ments, however, are concentrated at the
start of the month creating the need for
high balances In the OASDI trust funds
during the first week of the month.
Committee amendment
The Committee amendment provides that,
when at the start of any month, the Secre-
tary of Treasury determines that the re-
serves of the OASDI trust funds are inad-
equate to meet 154 months of benefits (re-
serves less than 12% of outgo), the Secre-
tary would be. required to credit the trust
funds on the first day of the next month
with the full payroll tax revenues estimated
for the month. Interest would be paid to the
General Treasury on the excess sums so
transferred, at a rate equal to the average
91-day Treasury bill rate during the month,
with such interest being payable at the end
ofbach month.
Effective.-On enactment through 1987
(when the authority for interfund borrow-
ing expires).
Cost.-Negligible.
Treatment of certain deferred compensa-
tion and salary reduction arrangements (sec.
150 of the bill and sec. 3121(a) of the Code).
Present law
Cash or deferred arrangements.-Under a
qualified cash or deferred arrangement (sec.
401(k)) forming a part of a tax-qualified
profit-sharing or stock bonus plan, a cov-
ered employee may elect to have the em-
ployer contribute an amount to the plan on
the employee's behalf or to receive such .
amount directly from the employer in cash.
Amounts distributed under a tax-sheltered
annuity generally are includible in the re-
cipient's income, but are excluded from the
social security wage base.
Cafeteria plans
Under an employer's cafeteria plan (sec.
125), a covered employee may choose among
various benefits, which may include cash,
taxable benefits, or nontaxable benefits. If
certain requirements are met, amounts ap-
plied under a cafeteria plan toward nontax-
able benefits (e.g., accident and health bene-
fits or plan contributions under a qualified
cash or deferred arrangement) are excluded
from the employee's income and generally
from the social security wage base. Taxable
benefits chosen by the employee (e.g., cash)
are includible in income and generally in-
cludible in the wage base.
Eligible State deferred compensation plans
Under an eligible State deferred compen-
sation plan (sec. 457(a)), an employee of a
State or local government or a rural electric
cooperative may elect to defer compensa-
tion, subject to certain limits. Amounts de-
ferred under an eligible plan are excluded
from income until paid to the employee
under the plan. Eligible State deferred com-
pensation plans generally are not retire-
ment plans for purposes of the rules defin-
ing "wages" includible in the social security
wage base. (For example, the Income tax
rules for eligible plans permit distributions
to an employee after age 5954 without
regard to whether the employee is retired.)
Thus, amounts deferred are includible In
the social security wage base at the time of
the deferral if the plan is not a retirement
plan.
Non-qualified deferred compensation plans
Under present law (sec. 812(a)), standby
pay or payments made to an employee on
account of retirement, either on an individu-
al basis or under a plan or system of the em-
ployer providing for employees generally,
may be excluded from the social security
wage base without regard to whether the
payments are under a tax-qualified retire-
ment plan (sec. 401(a) or 403(a)) or other
tax-favored retirement savings program
(e.g., a tax-sheltered annuity (sec. 403(b)).
Amounts contributed to the plan pursuant Reasons for change
to the employee's election are treated as em- Generally, if an employee receives cash
ployer contributions to the plan and are ex- and then chooses to use these funds for per-
cluded from the employee's taxable income sonal savings or benefits, the amount of
and social security wage base. cash received is subject to FICA This Is
employee Amounts a distributed plan with respectr an true, for example, for contributions to an in-
are e includible in the recipient's i but geneerally dividual retirement account (IRA) even if
are excluded from the social security wage e the employer transmits the funds directly
d
base to the IRA account:
.
Tax-sheltered annuities Under cash or deferred arrangements, cer-
- V- a -+, -a.v, Yo6-0A=JbVLVU d.IAululbaeS ria plans, and eligible State deferred coma
(sec. 403(b)) may be purchased on an indi- pensation plans, the employer contributes
vidual basis for employees of public schools funds which are set aside by individual em-
or tax-exempt religious, charitable, and ployees for individual savings arrangements,
other organizations described in section and thus, the committee believes that such
501(c)(3). Subject to certain limitations, employer contributions should be included
amounts paid by the employer to purchase in the FICA base, as is the case for IRA con-
the annuity are excluded from the employ- tributions. Otherwise, individuals could, in
ee's income. A tax-sheltered annuity may be
effect, control which portion of their com-
salary purchased for reduction an employee pursuant to a pensation was to be included in the social
salary agreement between the em- security wage base. This would make the
plover and the employee.
The Internal Revenue Service has ruled system partially elective and would under. that amounts paid for a tax-sheltered annu- mine the FICA tax base.
ity pursuant to a salary reduction agree- The committee also believes that it is ap-
ment are includible In the employee's social social ate to exclude payments from the
security wage base, even - though such social security wage base where the pay-
amounts may not be subject to income tax ments are made from a tax-qualified or
withholding. The validity of the ruling post- other tax-favored retirement plan. However,
tion is in doubt in light of the Supreme the committee does not believe that such
Court decision in Rowan Companies, Inc. T. tax-favored treatment under the FICA tax
United States (see following section of this rules generally should be extended to de.
report). ferred compensation plans which do not
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CONGRESSIONAL RECORD - SENATE March 16, 1989
ESTIMATED REVENUE EFFECTS OF CERTAIN COMMITTEE PROVISIONS'-Continued
(In millions of dollars]
Fiscal year ...................................................... _.................................................................... 564 1,715 1,949 2,393 2,886 3,634 13,141
In addition to the orevisions shown the committee estimates that the provisions regarding the inclusion in the FICA wage base of amounts received under certain deferred compensation and salary reducti on agreements will increase rece
ipts
of the social trust tunas by $2.0 billion dung calendar years 1984 to 1989. meuswe.
' These estimates are rmsistent wim the II-B assumptions used by the Social Security Administration in preparing the Trust Fund estimates shown elsewhere in this report.
' These amounts are estimated to be transferred to the Social Security Trust Funds during the calendar year shown.
4 These amounts are estimated to be transferred to cite Railroad Retirement Account during the calendar year shown.
TITLE II OF THE BILL
INCREASE THE 881 PAYMENT STANDARD AND
MODIFY PASS-THROUGH REQUIREMENTS
(Sections 201 and 202 of the Bill)
Present law
The first $20 of income received by an in-
dividual in a month is disregarded in deter-
mining SSI eligiblity and benefit amount.
The income may be earned or unearned
(except for some income based on need,
such as veterans' pensions, which is fully
counted). The disregard was provided in the
original statute in 1972 to ensure that per-
sons who had contributed toward an entitle-
ment, such as OASDI, were better off than
those who had not. The amount of the dis-
regard has not been increased since 1972.
Committee amendment
The Committee amendments would:
A. Increase the SSI payment standard ap-
plicable to all individuals by $20 ($30.00 for
a couple) per month, effective July 1983;
and
B. To help protect the States from in-
creased costs resulting from this provision,
expand current law to allow States to meet
the "pass through" requirement for 1983 if
they pass through the equivalent of the
COLA that would have occurred under cur-
rent law rather than the proposed monthly
payment increase. Presently, State which
provide payments to supplement the Feder-
al SSI payment are required to pass
through to recipients any Federal SSI cost-
of-living increases. States have two basic op-
tions for meeting the pass through require-
ments: 1) they may maintain the supple-
mentary payment levels that were in effect
for categories of individual recipients in De-
cember 1976, or 2) they may make State
supplementary payments in any current 12-
month period that are no less, in the aggre-
gate, than were made in the previous 12-
month period.
The National Commission on Social Secu-
rity Reform recommended that, effective
July 1983, the SSI disregard be increased by
$30 per month for OASDI income (not
other income) in determining an individual's
SSI eligibility and benefit amount. The
effect would have been to increase by $30
the monthly income of those individuals
who are entitled to both OASDI and SSI.
Presently, the maximum Federal SSI pay-
ment is $284 monthly for an individual and
$426 monthly for a couple. After certain dis-
regards, the amount of SSI actually re-
ceived by an individual is reduced on 'ac-
count of other income. -
SSI ALERT which became effective on September 12,
(Section 203 of the Bill) 1982, expires March 31, 1983.
Present law As originally enacted, the FSC program
Currently, there is no statutory require- provided 10, 8, or 6 additional weeks of
ment that OASDI beneficiaries be contacted ante benefits. The Surface Transportation Assist-
and informed of potential eligibility for Act of 1982 (Public lic Law 97-424) in-
Supplemental Security Income (SSI) pay-
ments. However, since the beginning of the FSC benefits to 16, 14, 12, or 8, depending
SSI program, the Social Security Adminis- on the State where the individual filed for
tration has undertaken a number of out- or received the additional benefits.
reach efforts to identify those potentially Beginning with the week of January 9,
eligible. SSA routinely provides information 1983, the FSC program began providing the
about 581 eligibility and takes applications following maximum weeks of benefits:
for SSI payments at the time of application (1) 16 weeks in States with an insured un-
for OASDI benefits if the applicant is po- employment rate (IUR) of at least 6.0 per-
tentially eligible for SSI payments. In addi- cent (measured as the average over a
tion, many State agencies and other private moving 13 week period);
relief groups routinely refer clients to SSA. (2) 14 weeks in States that were triggered
Presently, about 6.9 percent of elderly social on the extended benefits program between
security recipients also receive SSI. June 1, 1982 and January 6, 1983;
Committee amendment (3) 12 weeks in remaining States with a 13
The Committee amendment would require week average IUR of at least 4.5 percent;
the Secretary of Health and Human Serv- (4) 10 weeks in remaining States with a 13
ices to notify, on a one-time basis, all elderly week average IUR of at least 3.5 through 4.4
OASDI beneficiaries who are potentially eli- percent; and
gible of the availability of SSI and encour- (5) 8 weeks in all other States.
age them to contact their district offices. In In order to qualify for FSC, a worker must
addition, the provision would require that have worked at least 20 weeks or earned its
the same information be included with the equivalent in wages in his base year, usually
notification to OASDI beneficiaries of up- defined as the first four of the last five com-
coming eligibility for Supplemental Medical pleted calendar quarters before he filed his
Insurance claim for regular State benefits. He must
Despite the current and past activities of also have exhausted the regular and ex-
the Social Security Administration to make tended benefits to which he is entitled. In
persons potentially eligible for SSI aware of addition, his benefit year must have ended
the existence of the program, the Commit- on or after June 1. 1982 or he must have
tee believes that there may be currently been eligible for extended benefits for any
needy OASDI beneficiaries who have been week beginning on or after June 1, 1982.
on the social security rolls for a period of If an individual is eligible for FSC bene-
time who may have applied for social secu- fits, the number of weeks of FSC he may re-
rity prior to the availability of SSI or who Cleve is determined in relation to the
may not have been eligible at the time they number of weeks of regular State benefits
applied but whose circumstances have since to which he was entitled. An eligible individ-
changed, ual may receive FSC for the lesser of (a) 65
The Committee provision would alert percent of the number of weeks of regular
those OASDI beneficiaries to the avallabil- State benefits to which he was entitled or
ity of the SSI program and would, in the (b) the maximum number of weeks of FSC
future, also provide notification to those ap benefits provided in the State. In the case of
proaching the age of eligibility (age 65) an interstate claim for FSC, the individual
through information contained with a eligible for the lesser of (a) the maximum
notice of future eligibility for Supplemental number of weeks of FSC payable to him in
Medical Insurance which is mailed approxi- the State in which he receives the benefits
mately three months before a beneficiary or (b) the maximum number of weeks pay-
attains age 65. able to him in his former State.
Effective date.-Notification to those on Committee amendment
the rolls must be made before July 1, 1984. The committee amendment would extend
Cost-Unable to estimate. FSC for 6 months from April 1, 1983
TITLE IV OF THE BILL through September 30, 1983. To qualify for
UNEMPLOYMENT COMPENSATION PROVISIONS FSC, an individual would need at least 26
Extension of Federal supplemental weeks of work or its equivalent in wages in
compensation (FSC) program his base year. This restriction would apply
Present law The number of weeks available in each
T
E
it
ax
qu
y and Fiscal Responsibility State would be:
SSI COST (BASED ON C60 ESTIMATES)
) Act of 1982 (Public Law 97-248) established (1) Basic FSC Benefits.-Individuals who
On millions, fiscal years) the FSC Program. This program provides begin receiving FSC on or after April 1, 1983
additional weeks of unemployment compen- could receive up to a maximum of:
1983 1984 1985 1986 1987 1988 sation at the same weekly benefit amount to (1) 14 weeks in States with IUR at 6 per-
individuals who have exhausted their State cent and above;
$20 payment standard increase....... $250 $750 $845 $840 $875 $935 benefits and any extended benefits to which (2) 12 weeks in States with IUR at 5 per-
they were entitled. The FSC program, cent to 5.9 percent;
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83044 CONGRESSIONAL RECORD - SENATE March 16, 1989
the age at which full retirement benefits even when narrowly perceived, partic- were able to replicate the experience
can be received from 65 to 67. ular'interests differ. of the period 1977 to 1982, given the
The Senate Finance Committee bill. I would like to make one statement hypothetical existence of the COLA
which will come to the Senate floor this
then about the bill before us. In the adjustment part of this stabilizer.
week, provides additional protection for the
better long-term plan for shoring up the pOW1 to deal with the long-term prop- note that had we had such a stabilizer
program. The retirement age would be post- lem, as it has been designated, by a in effect in 1977 we would not be on
poned by only one year and the needed sav- proposal to raise the tax rates in the the floor today. There would be no
inks would come from a slight reduction in year 2010. This proposal did not re- shortage in the fund. On the other
benefits for all new retirees. This is a much ceive the approval of the committee. It hand, we might not be on the floor
fairer approach than that taken by the received the approval of a bipartisan today making changes that are in
into early re minority of two, and with that in mind
House, people who are forced heavy
those themselves wholly desirable-desirable
tirement by disability or job los. I thereupon proposed to both mem- because there are improvements in the
The Senate version also allows people who bens who had voted for that to vote for system in this legislation. The Senator
go on working after age 65 to draw full the final proposal, and I do not mean from Kansas mentioned but two-the
Social Security benefits starting in the next to propose the matter on the floor. 2 years of credit that are the dropout
decade. This is a sweetener for high-income I think the judgment of the Senate, credit so called for women who are in
beneficiaries who would now have to pay as reflected in the Finance Committee, the work force but leave to care for
taxes on their benefits, but it would also should be settled. Similarly in the children and the gradual elimination with help aeoseems l elytithe Senatet apps rmo House Committee on Ways and Means of the earnings test for persons over
the measure this week, the conferees will be there was a proposal to deal with the 65 who continue to work.
in a happy position. They will need only to long-term problem of shortfall by a Mr. President, I depart just a
reconcile relatively small differences be- Combination of a reduction in benefits t 1r_
tween two measures,' each of which is a basi-
cally fair and responsible approach to deal-
ing with an issue that can, without qualifi-
cation, be rated as the most politically sensi-
tive one on the American scene.
Note also that this has been accomplished
without round-the-clock floor battles and
encampments of the elderly staked out in
the halls of Congress-and with admirable
disregard for the million-dollar campaign of
misleading argument launched by federal
and postal workers' lobbies. It's enough to
make you feel optimistic about the future of
the republic.
Mr. MOYNIHAN. It comments upon
the success of the Finance Committee,
in the view of the Post, in fact improv-
ing upon a measure which the House
passed which, in turn, improved on the
proposals of the Commission.
With respect to a repeated theme of
my friend's colleague's remarks that
none of us would necessarily approve
any of the details and many would dis-
approve of all, and yet together. the
weakness of each provision is the
strength of the whole, a wonderful
phrase, may I point out that in the
House of Representatives Senator
Psr~t, as he is referred to in that
body, moved in the final House floor
consideration an arrangement which
would deal with the long-term prob-
lem without Increasing the age of re-
tirement. This had been a matter of
the deepest concern and conviction on
the part of Senator Pzri'sa for a very
long while, and yet his measure lost
and a measure did pass which would
raise that age to 67, a measure never
contemplated by the Commission, and
which he and I and others opposed in
the Commission, and yet even so
Ci.auues Pause voted for this measure
on final passage. That is what is at
stake.
What is at stake is the stability and
confidence in the singlemost impor-
tant social program of the United
States today, and the stability of the
system as well, and in that context
confidence in our ability to make hard
choices, to say no even% to our best
friends when we judge the public in-
trest to be otherwise because the
public interest is everyone's interest,
and an increase in taxes, and again
while that was overwhelmingly ap-
proved in the Ways and Means Com-
mittee, it was not voted on on the
floor, and I think it is well to proceed
from where we are and not to raise
that alternative either, and I will not
do that. I will vote for the proposal as
it emerged from the Finance Commit-
tee and hope it will not in any signifi-
cant way be changed.
I would like to make several points
that may not be as widely recognized
or in some cases simply only recently
have been established that are impor-
tant In this matter.
First of all, with respect to the con-
stituents, the beneficiaries from social
security. It is commonly stated that
there are some 36 million to 37 million
beneficiaries of social security and
there are some 110 million or 115 mil-
lion persons paying into the system
for the support of the beneficiaries.
Not so, Mr. President. Every person
in the system, whether still actively
employed and paying into it or retired
and receiving from it, is a beneficiary
of it, because social security provides
the protections of insurance, life in-
surance, disability insurance, care of
the widowed and the orphaned, for ev-
erybody involved. No person would
deny that an insurance of that quality
is a real benefit. In consequence of
which I think it would be more widely
understood that we are all benefici-
aries of the system, those of us who
are fortunate enough to. be members
of it, a condition which we hope that
by the end of this legislation will be
made universal.
The original 1935 legislation left out
a number of groups. One by one they
have been Included. Now, with inclu-
sion of Federal employees and, indeed,
employees of the Social Security Ad-
ministration, coverage will be as near
to a reasonable possibility, universal.
A second point I would like to make
is about the stabilizer, as we have
come to call it, and the Senator from
Kansas described It. I would like to
note that during the course of the in-
formal negotiations in January, we
momen om any rigorous statement
to an anecdotal one, but it is impor-
tant. One of the great public men of
the middle years of this century was
Paul Appleby, confidant of President
Roosevelt, Deputy Director of the
Budget under President Roosevelt and
President Truman, a great writer and
teacher in public administration, a
great American in every sense of that
word. After a long life of public service
and later dean of the Maxwell School
at Syracuse, he retired. As most such
men who had given their life to public
service, he had no savings. He had
only social security and the fact that
he was still in demand for consulting
and other duties, lecturing that he
could carry out.
I remember, in my early years in
Washington in the 1960's, how that
great man had to make every decision
about what he could do, where he
could speak, in terms of would he lose
his social security benefits if somehow
he went over that $6,000 limit. It was
lower than that then. That will be
behind us and ought to be.
I would note that there are a
number of provisions that we are spe-
cifically correcting, such as inequities
in the present system with regard to
older women, and they too are addi.
tions to the system.
Finally, Mr. President, in order that
we may have some sense of the magni-
tude of the measures we put in force
today or tomorrow or the next day-
and we must put them in force In this
period in the Congress, else we cannot
make the technical adjustments at the
Social Security Administration to send
out the June checks as they will be re-
quired-I would like to offer for the
Rxcoxn, Mr. President, estimates of
the cumulative OASDI surpluses
which this measure will bring about.
We asked the Office of Actuary at the
Social Security Administration to esti-
mate the period during which the
funds will increase from year to year
until the first moment, the first year,
at which it could be estimated they
will decline. And the Office of Actuary
reports to us that from the year 1982
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S 3046 CONGRESSIONAL RECORD - SENATE
American family consisted of a man
who was a full-time worker and his
wife who was a full-time lifelong
homemaker. The labor force participa-
tion was less than 17 percent and
fewer than 1 in 12 marriages ended in
divorce. The social security benefit
structure was thus established on the
concept of a lfelong couple with one
wage earner and a dependent spouse.
The situation has dramatically
changed over the past 50 years and
the typical family of the thirties and
forties is not the typical family of
today. Women have become a major
part of America's work force, enrich-
ing the world of work with their con-
tributions and productivity, despite
continuing wage discrimination and
employment barriers. The percentage
of married women in the work force
exceeds 50 percent and it has been es-
timated that 90 percent of all women
spend some portion of their lives in
the work force, many of them moving
in and out of the roles of wage earners
and homemakers as the needs of their
families change. It is no longer true
that women are likely to be either life-
long homemakers or lifelong wage
earners; these roles are combined and
interchanged throughout a lifetime.
Similarly, we must recognize, like it
or not, that the status of marriage has
changed dramatically over the past 50
years. Today, one in three marriages
ends in divorce.
Mr. President, depsite these massive
changes in our society, the social secu-
rity system has continued to operate
on the basis of a philosophy designed
for an era when most women did not
work and when most women were part
of a lifelong marriage. Consequently,
the current system works well only for
those women whose family and work
patterns have not changed from the
thirties and forties. For the vast ma-
jority of women and families that no
longer fit into that pattern, the
system fails to provide either ade-
quately or equitably for their needs.
Both homemakers and women in the
labor force are inadequately protected
under the current system.
Women who work outside of the
home often find that their social secu-
rity benefits are no higher than they
would be if they had never paid into
the system. Members of two-earner
families often find that they receive
lower social security benefits than
one-earner families with precisely the
same lifetime earnings records.
The inequities of the current system
can be even more acute for those
women who have been full-time home-
makers and are displaced from that
role, either by divorce or the death of
a spouse. After years of work as a
homemaker, a divorced women may
find herself without any work record
of her own and eligible for social secu-
rity benefits only as a dependent
spouse-at 50 percent of what her
former spouse receives. A homemaker
also receives no protection against dis-
ability under the current system.
A woman who drops out of the labor
force for child rearing is also penalized
since the current system rewards con-
tinuous work patterns. Each year she
remains out of the work force to care
for her children can reduce her ulti-
mate social security benefits.
Mr. President,- under the earnings-
sharing concept, the combined earn-
ings of a couple would be divided
equally. Each spouse would have a sep-
arate social security account and
would accrue credits equally during
the period of their marriage. Home-
makers would receive disability and re-
tirement benefit protection in their
own right. The current bias against
two-earner families would be eliminat-
ed. Women who enter and leave the
work force to fill necesary child-rear-
ing roles Would no longer be penalized
by gaps in their social security cover-
age.
Mr. President, the earnings-sharing
concept represents a fair and equitable
approach to revising the social secu-
rity system to reflect the changing
role and needs of women and their
families.
The PRESIDING OFFICER. The
Senator from Kansas.
Mr. DOLE. Mr. President, I thank
the distinguished Senator from Cali-
fornia. The only question the Senator
from Kansas had was the date. That
has been changed to January 1, 1984.
Mr. CRANSTON. That is correct.
Mr. DOLE. As the Senator knows,
the consensus package of the National
Commission included some of the rec-
ommendations to improve the equity
of the social security system for
women. In addition, it includes a provi-
sion offered by Senator ARMSTRONG
that has already been referred to,
which will allow people who are out of
the work force caring for children
under 3 to drop up to 2 years of earn-
ings in the computation of their earn-
ings history.
I think this is a good amendment
which I support. It does take it beyond
the study stage. It indicates we shall
develop in consultation with the
Senate Committee on Finance and the
House Committee on Ways and Means
proposals for earnings sharing legisla-
tion described in section (b). That has
been made part of the record.
I am prepared to accept the amend-
ment. I thank the distinguished Sena-
tor from California not just for the
amendment, but for his past interest
in this problem. This is an area of dis-
crimination or inequity, whatever we
may call it. The Senator from Califor-
nia has been in the forefront in trying
to correct it.
Mr. CRANSTON. I thank the Sena-
tor from Kansas very much.
Mr. MOYNIHAN. Mr. President,
may I simply associate myself with the
views of the chairman of the Finance
Committee. This is a matter that the
Commission did very much concern
itself with. The amendment of the
Senator from California will put that
concern into statutory language and
March 16; 1.9 &Y
set about a process by which we will be
able to do this in the context of time
and when we will more than likely
have the funds. That is a necessary
combination.
Mr. CRANSTON. I thank my friend
from New York.
Mr. President, I move adoption of
the amendment.
The PRESIDING OFFICER. Is
there further debate? If not, the ques-
tion is on agreeing to the amendment.
The amendment (UP No. 68) was
agreed to.
Mr. CRANSTON. Mr. President, I
move to reconsider the vote by which
the amendment was agreed to.
Mr. DOLE. Mr. President, I move to
lay that motion on the table.
The motion to lay on the table was
agreed to.
UP AMENDMENT NO. 69
(Purpose: To conform certain Veterans' Ad-
ministration pension law to accommodate
the proposed six-month delay in cost-of-
living adjustments)
Mr. DOLE. Mr. President, I send a
technical amendment to the desk on
behalf of the distinguished Senator
from Wyoming (Mr. SIMPSON) and ask
for its immediate consideration.
The PRESIDING OFFICER. The
clerk will report.
The legislative clerk read as follows:
The Senator from Kansas (Mr. DOLE), for
himself and Mr. SiMPsoN, proposes unprint-
ed amendment numbered 69.
Mr. DOLE. Mr. President, I ask
unanimous consent that further read-
ing of the amendment be dispensed
with.
The PRESIDING OFFICER. With-
out objection, it is so ordered.
The amendment is as follows:
On page 75, between lines 7 and 8, insert
the following: (e) Section 403(b) of the Om-
nibus Reconciliation Act of 1982 (Public
Law 97-253) is amended to read as follows:
"(b)(1) Except as f rovided 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.".
Mr. DOLE. Mr. President, this
amendment will not in any way alter
the substance of the package of social
security reform we are considering
today. It will simply conform VA pen-
sion law to those reforms. It will affect
only the payment of certain veterans'
benefits, not the payment of any
social security benefits. Its sole pur-
pose is to protect VA pensioners from
any reduction in their monthly bene-
fits.
I think the Senator from California
should be added as a cosponsor to the
amendment.
Mr. CRANSTON. Yes.
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nancing of OAS'D'I by $165.5 billion
over the next 7 years under Intermedi-
ate assumptions. With only a modest
improvement In the economy, this
amount will be sufficient to pay bene-
fit checks on time throughout the rest
of the decade without resorting to any
of the various failure provisions In
the bill.
However, in the past the Congress
has been overly optimistic in its fi-
nancing assumptions. The 1977
amendments were based upon interme-
diate assumptions which projected
surpluses is OASDI beginning In 1980,
with reserves accumubLting to 7
months of outgo by 1967. Instead, be-
cause of several years of unanticipated
double-digit inflation, declining real
wages, and high unemployment, defi-
cits continued in OASDI, drawing re-
serves down to 1 month's payout by
the end of 1982.
The significant departure from pre-
vious social security financing efforts
in this financing package is that It is,
in fact, going to do more than merely
enable social security to squeak
through the decade under some kind
of middling or, if you will, intermedi-
ate assumptions. The bill contains,
through the direct financing measures
that have been well recorded. a
number of fail-safe provisions designed
to w into effect whenever reserve
levels become dangerously low. The
first failsafe Is the automatic crediting
of the trust funds with a full month's
revenue whenever reserves fall below
12 percent of annual outgo.
This tax transfer enables the trust
funds to continue making timely bene-
fit payments as long as monthly rev-
enues will cover the checks. The
second fail-safe is authorization to
continue borrowing among the three
trust funds until 1987. If these two
provisions are insufficient to finance
benefit payments. the third fail-safe, a
graduated COLA reduction. would be
triggered into effect, with appropriate
notice.
The short-run financing safeguards
in this package are important because
they should enable social security to
continue making timely benefit pay-
ments even if economic conditions,
contrary to expectation, deteriorate
through the rest of the decade. Even
under the social security's trustees
most pessimistic economic assump-
tions, only the use of normalized tax
transfers would be necessary to enable
social security to continue making
benefit payments without interruption
throughout the decade.
So, Mr. President, in sum, what we
have achieved is a new effort to plan
for the worst, and it is significant be-
cause, in the past, we have always
planned while hoping for the best.
Mr. President, that has not, as we
know, been good enough. This effort
today before us reverses a good deal of
wishful thinking, that I wish we had
not done.
The bill before us provides adequate
short-term financing for social secu-
rity without placing an undue burden
on any single group of beneficiaries or
taxpayers. Ultimately, there is no
painless solution to social security's fi-
nancing problems, but this package
spreads the pain that there is as
evenly as possible. About a third of
the $105.5- billion in new financing
would affect employers and workers, a
third would affect other accounts in
the budget, and a third would affect
beneficiaries. Because the financial
burdens are broadly. shared, they are
minimal for any particular group of
individuals.
In addition, the timing and sequence
for implementing the various propos-
als in the package is designed to cush-
ion their impact. The substantial im-
mediate financing need in social secu-
rity would be met primarily through
transfers from other accounts In the
budget-$19.2 billion would be trans-
ferred from the general fund in the
first year alone. Significant payroll
tax increases would be postponed until
the last 2 years of the decade to avoid
any adverse consequences for econom-
ic recovery. The sequencing of this fi-
nancing package makes It possible to
provide sufficient revenues in the
early years without drastic or immedi-
ate changes In the structure of the
system.
I would like to say a few words about
long-term financing.
More Impressive than the success of
this legislation In resolving the short-
term financing problem in social secu-
rity Is the fact that it would totally
eliminate the long-term deficit cur-
rently forecast under intermediate as-
sumptions, for the first time in a
decade. The Congress has faced a pro-
jected 75-year deficit In OASDI con-
tinuously since 1972. Enacting the
Senate bill would actually leave the
trust funds with an unheard of long-
run surplus of 0.06 percent of taxable
payroll. Enactment of this bill would
thus do .more to restore public confi-
dence in social security than any other
single action the Congress could take.
Two-thirds of the financing improve-
ments in the long run come from pro-
posals which are included primarily to
meet the immediate financing needs of
the program. The other third comes
from a combination of proposals de-
signed specifically to resolve the long-
term financing problem. This long-
term solvency package incorporates
four changes which in combination
improve the financing of the program
by an estimated 0.74 percent of tax-
able payroll over the next 75 years.
These changes are: One, to gradually
raise the age of normal retirement
from 85 to 66 between 2003 and 2015,
leaving the early retirement age at 62;
two, to gradually reduce relative bene-
fit levels in OASDI by 5.3 percent be-
tween 2000 and 2008 so that by 2008
workers on average would receive 40
percent of their preretirement earn-
ings from social security, instead of
the 42 percent anticipated under cur-
rent law; three, to gradually phase out
the earnings limit for persons 65 and
older beginning in 1990, by raising the
limit by $3,000 a year over the indexed
amount until the earnings limit is
completely eliminated In 1995; and
four, to allow persons who leave the
labor force to care for a child under 3
to include 2 additional dropout years
in computing their social security
benefits.
Splitting the long-run solution be-
tween raising the retirement age and
reducing replacement rates spreads
the added costs of financing the pro-
jected growth In thg beneficiary popu-
lation equitably among those who will
be beneficiaries in the 21st century,
and provides adequate advance notice
to all who will be affected in those
years. There are sound arguments in
favor of each of these adjustments. By
combining them, it Is possible to make
only minor adjustments to assure that
adequate social security benefits are
available for all those who will rely
upon them 30 or 40 years from now.
One element of the long-run solu-
tion is to raise the normal retirement
age by only 1 year. This increase in re-
tirement age is only a partial response
to increases in life expectancy which
have occurred over the past 40 years
and are expected to continue over the
next 60. For men aged 65, life expec-
tancy has increased by 2 years since
1940 and is expected, under intermedi-
a>;e assumptions, to Increase by an-
other 3 years before 2040. For women
aged 65, life expectancy has increased
by 5 years since 1940 and is expected
to increase by another 4 years before
2040. An increase of 1 year in the
normal retirement age is a modest re-
sponse to this change.
I was very pleased with the third
paragraph in today's Washington Post
editorial, which I am going to quote. It
says:
The Senate Finance Committee bill.
which will come to the Senate floor this
week, provides additional protection for the
fund in the event of severe recessions and a
better long-term plan for shoring up the
program. The retirement age would be post-
poned by only one year and the needed sav-
ings would come from a slight reduction in
benefits for all new retirees. This is a much
fairer approach than that taken by the
House, which would put a heavy burden on
those people who are forced into early re-
tirement by disability or job loss.
Mr. President, that is exactly right.
We have a far better bill than the
House, which mandates that the re-
tirement age eventually change from
age 65, not to age 68 but to age 67.
What we have done to pick up the ad-
ditional money is, in effect, lower the
so-called replacement rate by about 5
percent. What that means in English
is that, in comparison to the roughly
42 percent of earnings replacement-
preretirement earnings replacement
that people now get from social secu-
rity-that percentage, instead of being
42 percent, will be about 40 percent re-
placemeri , a very small change,
indeed. That change would be gradual-
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S 3050 CONGRESSIONAL RECORD - SENATE
represent a blend of proposals to
achieve a fair and balanced package of
reforms to insure the continued viabil-
ity of the social security program.
In conclusion, the most serious prob-
lem in social security has not been the
financing shortfall, but the crisis in
public confidence. In the last few
years, the proportion of the popula-
tion between 18 and 49 with little or
no confidence in the future of social
security has grown from just under
half to over three-quarters. This mas-
sive loss in public confidence should be
genuine cause for alarm because the
whole social insurance system rests
upon a compact across generations.
Younger workers pay taxes to finance
benefits to today's retired and disabled
beneficiaries with the expectation that
younger generations of the future will
do the same for them when it is their
turn to retire. Growing doubts about
the future of social security threaten
to undermine the willingness of work-
ers to support the payroll tax upon
which the entire system rests.
The bill before us represents a dra-
matic step toward restoring public
confidence in social security. For the
first time in more than a decade, with
the enactment of this legislation,
there will be no long-run or short-run
financing shortfall in social security.
In addition, despite the years of public
debate and political stalemate leading
up to this legislation, the Congress has
demonstrated this year that it can
work quickly and in a bipartisan fash-
ion when necessary to. maintain this
important social institution. The com-
mitment to preserving the social secu-
rity system which we demonstrate by
our actions this week will be an impor-
tant indicator to today's younger
workers that social security is as per-
manent as the Government which op-
erates it.
I think, Mr. President, that our bill
achieves a good balance. I hope we do
not retreat from the position in this
bill in conference, and that we fight
very hard to retain the ability of
people who, having retired, will not
see their earnings taken away and
offset their social security.
We, as you know, do eliminate in
this legislation, starting in 1990, the
so-called earnings test, to which I say
good riddance, because it has achieved
a good deal of confusion, discomfort,
and even heartbreak for many rather
fearful senior citizens who have wor-
ried that if they earned, somehow, $1
dollar more than the $5,500 or $6,000
the law permits without an offset,
they somehow were doing something
wrong. I also think that the provision
added by the Senator from Colorado
in the additional dropout years for
women is a very important step for-
ward.
So, Mr. President, in sum, I hope my
Colleagues will support this measure.
It represents an enormous amount of
work. It is something that all members
of the Finance Committee made major
contributions to. I do not think any of
us would labor under the illusion that
it is totally perfect. We do not know
how to write perfect legislation yet
and probably never will, but this is as
good a product as has been my privi-
lege to work on behalf of, and I do
urge my friends and colleagues to sup-
port it.
The PRESIDING OFFICER. The
Senator from New York.
Mr. MOYNIHAN. Mr. President,
before the senior Senator from Penn-
sylvania may have to leave the floor, I
should like to have him hear from me
in person just this one statement. He
called attention to the editorial com-
ment in this morning's Washington
Post which, very accurately in my
view, states that the provisions that
the Senate Finance Committee made
to resolve the long-term gap in the
deficit, that period which appears in
the outer third of the 75-year period,
are superior to those that emerged
from the House.
What the Senator from Pennsylva-
nia did not say is that it is he who fa-
shioned that provision, and it was his
efforts, his ability, to see the parts of
compromise, bring a coalition togeth-
er, that not only passed the measure
in the Finance Committee but earlier I
observed, that although alternative ar-
rangements had been contemplated by
the Democratic members of the Com-
mission, we would not offer them. We
would support the measure as was re-
ported. And whilst I thank him for his
extraordinarily generous remarks
about the Senator from New York, I
would like to put the record clear
about who did this job. It was the Sen-
ator from Pennsylvania.
I should like to add one other note.
We have been doing some quick calcu-
lations on the subject of what Keynes
called "the miracle of compound inter-
est," and I would report to the Senator
and to the Chamber that if real wages
rise 1.5 percent in the next 30 years,
which is a very modest rise, certainly
historically attained, real wages will be
56 percent higher than they are now.
If as a result of the changes in this
program, the wage replacement rate of
benefits is 40 percent rather than 42,
we will still be working from about a
50 percent higher base, so that real
benefits will be very considerably
higher. I again thank him for his gen-
erority.
Mr. HEINZ. If the Senator will yield,
the Senator is absolutely correct; I
had meant to say this, but I do thank
the Senator for his kind words. He is
quite right about the miracle of com-
pound interest. I had left that our of
my explanation not because I am to-
tally, unaware of compound interest.
Mr. MOYNIHAN. Oh, no, the Sena-
tor stated it. We just did the calcula-
tion.
Mr. HENIZ. It is very true that what
we have before us is a very happy
prospect for future generations of
Americans, one that they did not nec-
essarily face a year ago when we faced
March 16, 1989
as a Congress the issue of social secu-
rity in some disarray and confusion.
I thank my friend from New York
for all his very kind words.
Mr. DOLE. Will the Senator from
Pennsylvania yield?
Mr. HEINZ. I would be happy to
yield.
Mr. DOLE. I also extend my thanks
to the distinguished Senator from
Pennsylvania, and I think the record
should reflect that when we were
trying to figure out what to do in Al-
exandria, Va., last November after a 3-
day session in the Ramada Inn there,
as I recall, it was the Senator from
Pennsylvania who first broached the
idea of sort of splitting it down the
middle, at least getting us to think
about how we are going to bring all
the factions together. And that
became sort of the starting point of
the negotiations that started again in
January.
For that effort we will be eternally
grateful to the distinguished Senator
from Pennsylvania, and we appreciate
this constructive action not only at
every Commission meeting but par-
ticularly that particular day when we
seemed to be bogged down and not
really going anywhere. Even though
we did not adopt that specific recom-
mendation, it became the basis for the
compromise which was ultimately
adopted by the Commission. I thank
the distinguished Senator from Penn-
sylvania.
Mr. HEINZ. I thank the Senator
from Kansas.
Mr. ARMSTRONG. Mr. President, I
want to join others who have spoken
in complimenting the members of the
Senate Finance Committee, especially
its distinguished chairman, for produc-
ing this legislation, a feat which many
thought would be impossible, even
quite recently.
I must say that the scholarship and
resourcefulness of the chairman of the
committee, Mr. Doi s, is well-known to
this body; but in this particular in-
stance he has performed a near mir-
acle by the leadership he has given to
the Senate, not only in his steward-
ship of the Finance Committee but
also in the way he helped shepherd
this matter through the National
Commission on Social Security
Reform.
I also join the Senator from New
York in congratulating the Senator
from Pennsylvania. I agree with what
he has said and Senator Do12 has said
about the pivotal role JOHN HEINZ has
played not only during the past few
weeks but also from the start, and es-
pecially through the crucial-and at
one point quite dark-days of the Na-
tional Commission on Social Security
Reform, when many were wringing
their hands and, privately at least,
confiding that this would not work
out.
The Senator from Pennsylvania did
not lose faith. He made many propos-
als which formed the basis for further
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Now that does not say that there
still could not be an unforeseen event
intervene, but within the reasonable
range of economic projections I think
we can be confident that the benefit
restraint which has been enacted, to-
gether with the increase in the age
and the fail-safe mechanism which has
been described earlier, can assure with
a very high degree of certainty that
social security will not be running
short of money any time in the near
future, perhaps for the remainder of
our lives.
In my opinion, that is critical for
reasons that have already been stated.
The Senator from Pennsylvania
pointed out that many people, particu-
larly younger workers, have expressed
great criticism about whether or not
social security was on a sound basis,
whether it would be there when they
retire. It is really crucial, in my opin-
ion, that we secure public faith and
confidence in the social security
system because younger workers are
not going to willingly pay taxes month
after month, particularly rising taxes,
into a system if they do not have the
confidence at least when they get to
the retirement age there will be some-
thing there for them to retire to.
Second, it is crucial for us to shore
up public confidence because of the
experience we had in 1977. At that
time it was believed, and I am sure in
good faith, that the action taken by
Congress would put social security on
a sound basis for a half century or
more, and we were assured that that
was the case. Five years later we were
right back in the same dilemma that
we had been in in 1977. I just do not
think we can afford to have a repeti-
tion of that and come back in 1985,
1986, 1987, 1988 or 1989 or any time I
hope within the service of the Senator
from Colorado in this body, ever come
back to this issue again.
The second concern that I felt about
the long-term outlook for social secu-
rity was the need to do something to
raise the normal retirement age.
The idea of gradually increasing in
some way or another the normal age
of retirement had been previously rec-
ommended prior to the consideration
of the National Commission on Social
Security Reform by the Advisory
Council on Social Security, the Presi-
dent's Commission on Pension Policy,
the Council of Economic Develop-
ment, the U.S. Chamber of Commerce,
the American Association of Pension
Actuaries, the National Association of
Homebuilders, the National Associ-
ation of Wholesalers and Distributors,
the American Council of Life Insur-
ance, the National Association of Life
Underwriters, and for that matter by
committees of Congress.
And each of these committees and
groups had recommended that in one
way or another we should increase the
normal retirement age. The need to do
so is obvious, it seems to me, and in
fact I am convinced that the center-
piece of any kind of permanent sound
social security reform must be gradu-
ally increasing the retirement age.
The need to do so is emphasized by
the fact that the life expectancies of
persons in this country have been
rising and rising very rapidly so much
so, Mr. President, that a person who is
71 years old today has the same life
expectancy that someone who was 65
had at the time social security was en-
acted.
If we do nothing about increasing
the age in some way, not drastically,
not abruptly, but surely over time, if
we do nothing, it will be impossible, in
my opinion, for us to have a sound re-
tirement system because the combina-
tion of taxes and/or benefit restraints
that are implied if we keep funding
longer and longer years of retirement
when people are working fewer and
fewer years is simply untenable, and
we are right at the outer limits of that
at the present time.
There are several proposals for in-
creasing the age which have been sug-
gested. Frankly, just about any of
them are acceptable to me, provided
that they are not abrupt, that they do
not disrupt the retirement planning of
people who are at or close to retire-
ment and, second, that they get the
job done over a gradual phase-in
period of time.
I see in the Chamber the Senator
from Idaho who I think may even
offer an amendment on this subject,
and I will support him. His amend-
ment he can explain to the Senate,
but it has to do with gradually increas-
ing the retirement age over a 36-year
period, I believe, doing it at the rate of
1 year each month.
Mr. SYMMS. One month each year.
Mr. ARMSTRONG. I beg the Sena-
tor's pardon. The Senator is correct,
raising the retirement age by 1 month
in each of the next 36 years so that 36
years from now people would retire at
age 68 normally rather than age 65.
The House of Representatives adopt-
ed a slightly different approach which
raises normal retirement age to 67,
phased in after the turn of the cen-
tury.
My our favorite proposal, as many
Senators have heard me discuss
before, was item F-12, option F-12 in
the Commission book which simply
said that after the turn of the century
we would increase the normal retire-
ment age from 65 to 66 and thereafter
index future changes in the retire-
ment age changes in longevity.
The actual proposal which is recom-
mended to us by the Finance Commit-
tee is a combination of raising the re-
tirement age from 65 to 66 gradually
after the turn of the century and
making the kind of changes in the re-
placement ratio which have been de-
scribed earlier by the Senator from
Pennsylvania.
In fact, it was he who engineered the
compromise which worked out the var-
ious conflicting points of view which
has led the Finance Committee to rec-
ommend this formula.
March 16,1.98.?
It is not my favorite approach. In
my opinion option F-12 remains the
best of these several ideas. But I think
that the compromise which the Sena-
tor from Pennsylvania put together in
the committee and is now the Finance
Committee amendment on this subject
is a good one and I intend to support
it.
I say to my friend from Idaho that if
he offers his amendment I intend to
support that also, but it underscores
the point that the issue is in some way
gradually raising the retirment age
and I am fairly flexible about exactly
how to do it.
The third area of broad concern to
me is the need for benefit restraint.
We have not done as much in that
area as I would like, although I have
pointed out one aspect of the compro-
mise put together by the Senator from
Pennsylvania is a very modest degree
of benefit restraint after the turn of
the century to lower the replacement
ratios.
In addition, the Commission has rec-
ommended a brief delay in the cost-of-
living adjustment during this decade.
That is not a very great degree of
benefit restraint. It is a little some-
thing. In fact, it is priced out to be $39
billion over the decade. That is the
amount of savings from a 6-month
cost-of-living adjustment delay.
This has to be measured, I think,
against the fact that we are projecting
cost-of-living adjustment benefit pay-
ments between now and the end of the
decade of $259 billion. In other words,
we are going to pay out about $2 tril-
lion in benefits between now and 1990
and a part of that will be $259 billion
arising from COLA adjustments.
To save only $39 billion on COLA ad-
justments in this decade does not seem
to me to be very burdensome. In fact,
it does not seem to me to be, frankly,
enough either from an economic
standpoint or from the standpoint of
justice. And here is why I think it
would really be just to save a bit more
than $39 billion.
During the last decade the cost-of-
living adjustments in social security
have risen about twice as fast as have
the wages and salaries on which these
benefits are based and significantly
have gone up about 50 percent faster
than the consumer price index which
is the presently accepted measure of
the cost of living for retirees.
So I think both economic issues and
fairness issues could have called for a
greater degree of restraint in the cost-
of-living adjustment. However, I do
note with satisfaction the proposal
which was adopted and recommended
by the Finance Committee for a grad-
uated cost-of-living adjustment benefit
restraint when the trust fund is in a
less than 20 percent reserve ratio con-
dition and when reserves are dropping.
That proposal which has been de-
scribed earlier I think by the Senator
from Kansas simply says that when
the trust fund gets into trouble, when
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CONGRESSIONAL RECORD - SENATE March 16, 1989
benefits now, we have no intention of
doing so." You will remember we con-
sidered this matter on a number of oc-
casions here in the Senate and have
resoundingly affirmed our desire not
to tax benefits, so I think in doing so
we are making a mistake, and really it
is unfortunate that the Finance Com-
mittee has so recommended.
Mr. President, I also want to clarify
one aspect of the benefit tax issue be-
cause I am not going to offer an
amendment on that specific subject,
but I want to make it absolutely clear
if somebody has the notion this is only
going to be a tax on the rich. It is only
7 percent of the beneficiaries who are
going to be taxed as a result of the
amendment which is proposed by the
Senate Finance Committee, and that
is perfectly true the first year. But I
want to point out to you that the
threshold of taxation is not indexed,
and if we have the same kind of infla-
tion in the next few years that we
have had in the last few years, it will
not be very long until everybody's
benefits, or at least the largest major-
ity of benefits, will be subject to tax-
ation. Maybe that is a good thing.
Some people think so. It is in fact the
agenda of some people to get all of
those benefits taxed, and if that is
their desire, then I do not quarrel with
it, but I do not like the notion that is
abroad that somehow this is only
going to be a tax on a handful of
upper income, wealthy, affluent social
security recipients, because in a very
few years, ? unless our economic per-
formance with respect to inflation is
better than I think it is going to be,
everybody's benefits are going to be
subject to taxation.
Mr. President, I also regret the tax
increase in this legislation as it falls on
the self-employed many of whom
frankly are in no position to take any
tax increase, least of all the huge jolt
that is contemplated by this legisla-
tion. I wish we could phase that in dif-
ferently. I wish we could put it off al-
together, particularly for farmers and
others whose income is either very low
or in some cases nonexistent. In many
cases I think we are talking about
people who will really have a great
problem in coming up with additional
tax revenues and we are talking about
several hundreds of dollars a year in
some cases.
.Mr. BOSCHWITZ. Will you yield for
a question?
Mr. ARMSTRONG. Yes.
Mr. BOSCHWITZ. In the event a
tax credit is. given to a farmer who, let
us say, has no income and as a result
has no tax paid, can that tax credit be
carried forward or backward?
Mr. ARMSTRONG. I would say to
the Senator from Minnesota that it is
my impression that it was not a carry-
forward, carry-back kind of credit.
But, frankly, we discussed that issue
so many different times and in so
many different formats that I would
want to be positive before I give him
that assurance. Can staff clarify that
for me?
Mr. HEINZ. If the Senator will yield,
my recollection is that the tax credit is
not against income taxes. It is against
social security taxes.
Mr. ARMSTRONG.- The Senator is
correct.
Mr. HEINZ. And, therefore, if you
are paying any social security taxes,
you get the credits right then and
there. Therefore, it is not necessary in
this instance to carry it forward and
back.
Mr. ARMSTRONG. The Senator's
point is well taken. I thank him for re-
freshing our recollections.
Mr. President, I wish to conclude my
remarks very quickly. I appreciate the
attention of my colleagues and the op-
portunity to share with them my gen-
eral concerns about the legislation.
Let me mention quickly three
amendments which I will propound at
a later time and invite the attention of
Members to those.
First is an amendment to delete the
payroll-tax increase contained in this
bill as recommended by the Senate Fi-
nance Committee. I anticipate that
that may be subject to some contro-
versy, but I have heard expressions of
interest in this amendment by Sena-
tors from both sides of the. aisle. It is
my hope that we can see fit to do that,
to grant at least that modest allevi-
ation of the heavy tax burden suggest-
ed by this legislation.
The second amendment which I
expect to offer I believe will not be
controversial and I hope will be ac-
ceptable to all Senators. It will simply
give some deposit date relief to small
businesses. As the Senate knows, at
present how often you are required to
make deposits into the trust funds to
the Government depends on the
amount of withholdings and there are
several thresholds. If you have $3,000
a month in withholding taxes, you de-
posit on pne schedule.
If you have $5,000, you have another
schedule.
Very large business concerns can be
required to deposit as often as. eight
times per month. Now, for a small
business, for a little company, that is
almost an impossibility just adminis-
tratively. So Congress wisely put a
threshold in there that if you fall
below a certain point you do not get
into the multiple times per month re-
porting requirement. You can deposit
the 15th of the month following the
calendar month in which the earnings
are withheld.
So the purpose of my amendment is
to simply continue that system but to
raise slightly the threshold at which
you fall into the once-a-month report-
ing rather than the four, five, six,
seven, eight times a month reporting. I
trust that it will not be controversial.
The final amendment which I will
submit has to do with nonprofit corpo-
rations. This legislation brings every
nonprofit corporation under social se-
curity for the first time. As you know,
at the present time, it is optional.
Some 90 percent of the nonprofit cor-
porations have agreed that they want
to be covered by social security, but
among the 10 percent who have not
are some who will be seriously injured
if we do not modify, at least in some
degree, the provision as it now appears
in the Senate Finance Committee rec-
ommendation. That just says on Janu-
ary 1, 1984, you are in, without any
chance to adjust, without any phase-
in, without any consideration of what
kind of problems it is going to cause
for the programs involved, and with-
out any consideration of how hard it is
going to be to unscramble any existing
pension plans they may have. We just,
without notice, without warning,
change the ground rules.
That is going to be a serious problem
for some of these organizations. Many
of them, by the way, are quite small-
a number of them are not-but some
of them are literally organizations
that have four or five employees doing
meals-on-wheels or various kinds of
missionary work, youth activities, com-
munity services, and that kind of
thing. So if we suddenly impose a 15-
percent payroll burden-and that is
what we are talking about here-it is
going to mean, - if they have five em-
ployees, some of these community or-
ganizations are going to have to lay
somebody off and their program will
be reduced accordingly.
Well, I do not object at all to the
notion that they ought to be covered,
but I do think that that is moving too
abruptly. So the proposal in my
amendment will be to treat nonprofit
in the same way we are treating the
Government. You know that we are
covering the Federal workers for the
first time in this proposal but we are
not saying on January 1 that they are
all covered. We are saying they will be
phased in, that as new employees
come onto the Federal employment
rolls then they have to be covered by
social . security and that is exactly
what I am suggesting for the new
hires of nonprofits, that they be given
exactly the same treatment as Federal
employees.
So those are the three amendments
that I will offer. I must admit that I
could offer many other amendments,
but we have come a long way and I am
restrained in the proposals I am going
to bring to the floor partly by the fact
that my colleagues on the Finance
Committee have been kind enough to
accommodate me in adopting a
number of other amendments I have
offered. For that, I am grateful.
I just close as I began by saluting
the chairman and the other members
of the committee and those who have
worked so hard on the this bill. I think
we are making good progress and I, for
one, hope this really does prove to be a
once-in-a-lifetime proposition. I hope
that within 2 weeks we will have a bill
on the President's desk and that he
will sign it and that there will be no
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CONGRESSIONAL RECORD - SENATE S 3055
extraneous amendments attached to it
and that we never have to revisit this
issue again anytime.
Mr. MOYNIHAN. Mr. President,
may I share the prayerful wish and
expectation of my friend and col-
league in this matter-never again.
May I thank him for his great cour-
tesy and his characteristic generosity.
He observes, Just by indirection, that
the committee - adopted a number of
his proposals. As he knows, the one
that I think will most impact upon the
lives of present and future retirees is
the abolition of the earnings test,
which is a tax on benefits. It is not as
horrendous as it once was. In the long
history ? of this program there was a
period near 1940 where, if you earned
$1, you lost every penny of your social
security benefits. .
Finally, Mr. President, I say to the
Senator from Colorado that in the
change in the actuarial estimates be-
tween 1982 and 1983 of plus 0.29 per-
cent of payroll over that 75 years, it is
interesting to note that 0.16, more
than half, is a change in the demo-
graphic assumptions. I do not think we
can know what families 50 years from
now, new families, will be like.
The other was the opting-out as-
sumptions of which I think we have
effectively taken care.
Mr. ARMSTRONG. Will the Sena-
tor yield?
Mr. MOYNIHAN. Yes.
Mr. ARMSTONG. Mr. President, I
think the Senator's point is well taken.
I share his feelings that these demo-
graphic projections are, in a sense, un-
knowable. But I believe it is significant
that the bill we bring to the floor ful-
fills everything that could be asked of
prudent trustees.
Now, I suppose we could imagine cre-
ating a system that was double-funded
or triple-funded, but that would not be
prudent. The prudent thing is to get
our best estimates of what the need is,
then fulfill that, not 90? percent of it
or 80 percent of it or half of it, but the
whole need, recognizing that future
generations will have to keep an eye
on this thing. I am reasonably confi-
dent, if enacted in the form that we
have before us or close to that, that
we have done our Job and we will not
have to come back again. I think that
is the landmark that is set here.
Mr. MOYNIHAN. That is what is
necessary. I thank the Senator.
Exurarr 1
AN Iss,mracr Com'xoeass
Social Security's rescue legislation comes
before the Senate today, well on its way
toward passage. The Senate bill and one
passed by the House last week both contain
important concessions to economic reality,
something Congress has resisted for two
years. But the historic compromise both
sides are so pleased with still tilts against.
workers and savers. And there remains some
danger that the tilt will become a water-
logged list by the time it reaches the presi-
dent's desk.
Congress' idea of a compromise, as usual,
relies heavily on tax increases. The Social
security payroll tax boost scheduled for
1985 will come a year early and there'll be
another early bump in 1988, not to mention
a brand new tax on middled come benefits.
Where the two bills disagree is on how bene-
fit costs will be controlled, if they are to be
controlled at all. Both houses finally accept-
ed the principle of raising the retirement
an and lowering benefits for early retirees
after the year 2000. But while that's a step
toward actuarial sanity, the immediate
future interests us more.
A small cut in Social Security's burgeon.
ing cost will come from postponing this
year's eost-of-living increase six months.
Where the two houses don't agree' is on
what happens the next time Social Security
starts running low on money. The House
proposes to meet that contingency by index-
ing cost-of-living adjustments to either
prices or wages, whichever is lower (some-
thing that should have been done long ago
as a matter of course). Senate Finance, in its
wisdom, would meet this contingency by
having Social Security administrators notify
Congress six months in advance that the till
is running dangerously low. If Congress
didn't act in that six months, let's say by
taking another bite out of the workers' pay-
checks, then the shortage would be made up
by stretchipg out cost-of-living adjustments
in benefits. Our trust in future Congresses
is such that we would prefer the House ver-
sion, and now, not in 1988 as the bill pro-
H w likely is the fund to run short again?
Very likely, we're afraid. The tax boost
scheduled for next year will raise labor
costs, killing jobs and cutting revenues. And
we are not convinced that attempts to limit
Medicare reimbursements will succeed in
containing burgeoning Medicare costs to the
extent its backers advertise. So don't be too
surprised if Social Security has to activate,
sooner. rather than later, the "fall-sate"
provision, assuming there Is one in the final
bill. Yet another innovation in the legislation
of .both the houses to a provision to tax
Social Security benefits. In other words, a
system that currently transfers income
from workers to nonworkers will become,
additionally, a system that transfers income
from retirees who saved for their old age to
retirees who did not As Paul Craig Roberts
wrote on this page last Friday, a retired
couple with an income of $36,000 will find
themselves paying the same marginal tax
rate as a working couple with an income of
$175,000. Young workers are getting hit
with rising payroll taxes. Middle-class retir-
ees are getting hit with a tax on their sav-
ings.
We wonder if the politicians who have
been playing Social Security for cheap votes
these many years understand where they
are heading. At this rate, Social Security
soon will become little more than a welfare
program. When that happens, it will sud-
denly be politically vulnerable. There will
be no trouble at. all summoning up the votes
to cut benefits then because neither middle-
class workers nor middleclass retirees will
have any stake in preserving the system.
That could happen even before some of the
senior members of both houses decide to lay
down the burdens of office.
We respectfully suggest that the full
Senate give the bill careful thought today.
The public, we suspect, is getting very
boring 'with being told every six years that
Social Security is finally on sound footing,
only to be Informed a few years later that
it's going to cost more money. Today's mar-
velous compromise will only be marvelous if
the bill that finally lands on the preeleent's
desk has controls on benefit growth that
match its bite out of payrolls and savings.
We'll see.
Mr. LONG. Mr.. President, first let
me begin by thanking the distin-
guished chairman of the committee
(Mr. Dora), the Senator from New
York (Mr. MOY*nux), the Senator
from Colorado (Mr. Amts'moxo), and
the Senator from Pennsylvania (Mr.
Haixz) for the long hours and labori-
ous, dedicated effort they have put
into serving on the Commission and
making it possible to bring this bill
before the Senate.
This bill represents a combination of
the views of all those on the Commis-
sion. Some parts of it I very much
agree with it, and some parts of it I do
not agree with.
Mr. President. I voted in committee
to order the social security financing
bill favorably reported. I did so with
reservations.
I voted to order the bill favorably re-
ported because the Senate and the
Congress need to act now to assure the
continued financing of the social secu-
rity system. The bill reported by the
committee generally follows the rec-
ommendations of the Social Security
Commission. But the committee bill
does two important things the Com-
mission recommended be done even
though they failed to reach a consen-
sus on how these two things should be
done.
First, the Finance Committee bill in-
cludes provisions to eliminate the
long-range deficit in the social security
cash benefit programs. It does this
through a combination of gradually
raising the retirement age to 66 and
gradually modifying the social security
benefit formula, both beginning with
the year 2000.
Second, the Finance Committee bill
includes a contingency plan to deal
with situations which might arise
when cash benefit trust fund reserves
are less than 20 percent of annual
outgo' and are projected to decline.
This provision is designed to avoid the
kind of crisis situation we now face
where a decline in the trust fund re-
serves jeopardizes the continued
prompt payment of benefit checks.
Now let me express my reservations
about the Finance Committee bill.
6SNERAL TUND PIIIANCINO _
I am concerned that the Finance
Committee bill relies so heavily on the
use of general fund financing for the
rest of this decade. Depending on what
one categorizes as general fund financ-
ing, perhaps almost one-third of the
short-range financing package repre-
sents an infusion of general revenues
to shore up social security financing.
For the future, this action provides a
dangerous precedent. There would be
a strong temptation to simple increase
this general fund portion when the
need arises. For example, in the Fi-
nance Committee it was decided that
the increased payroll 'tax burden on
the self-employed was too severe. The
committee solution was to scale back
the payroll tax increase on the self-
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S 3056 CONGRESSIONAL RECORD - SENATE
employed and make up the difference
with general funds.
This, in effect, is a matter of saying
that whenever the cost goes up, just
add it to the Federal deficit and be
done with it. Of course, Mr. President,
if we continue to do that type of thing,
it will eventually lead to where the
Federal Government itself cannot
assure the value of its currency and
where eventually our money would
have no value. After all, if we cannot
find the revenues or cannot find the
courage to vote for a tax to pay the
benefits under this program that is
the essential income of some 36 n4I-
lion people, then I doubt that the Con-
gress can find the revenues to finance
anything in the Federal Government.
EXTENDING COVERAGE
In extending mandatory social secu-
rity coverage to new Federal employ-
ees and employees of all nonprofit or-
ganizations, the committee bill simply
assumes that by the end of the year,
the Congress and the nonprofit orga-
nizations will be able to modify their
existing survivorship, retirement and
disability benefits to take into account
social security coverage.
Federal employee organizations do
not share that confidence. For all they
know, much of the income security
they count on through their existing
plans may disappear. Nothing in the
Finance Committee bill provides them
any assurance that the impact on ex-
isting protections will not be severe.
In another area relating to coverage,
the Congress has always taken a posi-
tion that under the Constitution. Fed-
eral law cannot mandate social secu-
rity coverage of State and local gov-
ernment employees. For this reason,
those State and local governments
that wish to voluntarily join the social
security system pay contributions
rather than taxes, and they can with-
draw from social security coverage
after giving 2 years' notice.
The committee bill would prohibit
those State and local governments
which have opted for social security
coverage from terminating coverage
for their employees. Aside from the
constitutional question, which will ul-
timately be resolved in the courts, I
believe it is unfair for the Federal
Government to unilaterally change
the agreements which State and local
governments entered into on a volun-
tary basis, especially when they
reached that agreement with the Fed-
eral Government itself.
I believe this is particularly unfair to
those units of government which have
already given notice of their intent to
terminate. Many of these entities, re-
lying on the word of the Federal Gov-
ernment, have already expanded great
effort and expense in setting up alter-
native retirement programs.
TAXING SOCIAL SECURITY HEIfLTITS
Under the committee bill, half the
social security benefits would be taxed
if an individual's income exceeds
$25,000 or a couple's income exceeds
$32,000. However, the committee bill,
unlike the House bill, would include
tax-exempt income for purposes of
measuring whether total income ex-
ceeds the threshold above which social
security benefits would be taxed. The
effect of this is that for the first time
tax-exempt Income would be taxed.
While the impact of this provision
might be small in terms of the number
of people affected, the principle is a
big one. It suggests that Congress,
which has not been willing to tax
State and local bond interests directly,
is willing to do so if the tax is dis-
guised as a tax on something else. This
point will not be lost on those in the
Treasury Department who have long
sought ways to tax State and local
bond interest.
PROSPECTIVE REIMBURSEMENT UNDER MEDICARE
Up to this point, I have discussed my
reservations that related to social se-
curity provisions of the bill. But I am
equally concerned about two provi-
sions whose descriptions were not even
available to committee members until
the day of our markup session.
The first provision would completely
change our method of reimbursing
hospitals under the medicare program.
Many hospitals would do better under
the new system, but many would do
worse, perhaps even to the point of
having to close. When the committee
acted, it did not have the information
It would need to determine which hos-
pitals were winners and which were
losers, and whether winning or losing
had any relationship to the hospital's
efficiency. An administration spokes-
man at the committee hearing could
not even answer my question what the
level of reimbursement would be for
the diagnosis-related groups which
serve as the new basis for reimburse-
ment.
This new provision will not achieve
budget savings in the next 2 years. It
will not solve the hospital insurance
trust fund financing problem. In my
view, we should not be considering this
fundamental change in medicare until
we are in a better position to know the
impact it will have on hospitals in our
States. I fear that if we enact this pro-
vision now, we will soon find that it re-
sults in situations that we do not
intend and that we will need to
change.
Mr. President, I have been told that
this provision would cause the hospi-
tals in the State of Louisiana to gain
as much as 15 percent in medicare re-
imbursement. That, of course, would
be partly at the expense of hospitals
in other States. On the surface you
would think the Senator from Louisi-
ana would be in here advocating that
kind of change. But I also note that
while gaining 15 percent, and while a
majority of the Louisiana hospitals
would get an increase, about one-third
of them would get a cut, and that cut
would be about 20 percent.
The information provided to me, Mr.
President, is not adequate to tell me
on what basis those hospitals would
face a cut, or to give those people a
March 16, 1983
chance to make their case and defend
themselves against the consequences.
Other States are going to find that
their hospitals are not receiving an in-
crease in net income like Louisiana
would receive, and that more than
one-third of their hospitals take a cut,
and they will not know what the
impact will be until the bill goes into
effect and their hospital people come
to Washington to complain about mat-
ters that could have been more care-
fully considered and matters which
could have been corrected before they
were enacted into law.
It has been my experience as a Sena-
tor for more than 30 years in this body
that it is a lot better to find out about
the problems and to try to take care of
them in advance, than it is to pass a
major bill without knowing what you
are doing or how it is going to impact
upon great numbers of people, and
then try to take care of the many
problems that will arise after the
measure has become law and all the
growing pains become obvious.
I think we would have done much
better to have had a great deal more
information before acting. This could
have been available if we had taken
even a few more months to develop
this proposal and see how it would
work throughout the 50 States in the
Union.
UNEMPLOYMENT COMPENSATION STATE LOANS
Mr. President, a second area con-
cerns loans to States under the unem-
ployment compensation program. The
committee approved major provisions
affecting loans to States under the un-
employment compensation program.
Like hospital reimbursement, this pro-
vision bears no relationship to social
security. Unlike prospective reim-
bursement, there is no equivalent pro-
vision in the House bill.
When we enacted legislation impos-
ing interest on State loans, we intend-
ed that this interest would serve as an
incentive for a State legislature to un-
dertake reform to insure its unemploy-
ment program's fiscal soundness. I am
particularly concerned that under the
committee bill, if a State fails to repay
the interest it owes the Federal Gov-
ernment, the Federal employer tax in
that State would be raised by one-
tenth of 1 percent. I fear that States
will see this automatic increase in em-
ployer taxes as a signal that Congress
intends the tax increase as an alterna-
tive to program reform.
I believe that if the committee had
spent the time it should have spent
considering this provision, it would
have wanted to make clear that pay-
ment of interest is a compliance issue.
This means that a State would need to
take legislative action to assure the fi-
nancial solvency of its unemployment
compensation funds and not simply
fail to act so that a Federal employ-
ment tax increase would go into effect.
IMPROVING TEE BILL
When the National Commission on
Social Security Reform issued its
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S 3058 CONGRESSIONAL RECORD - SENATE
that and paying taxes on it. Yet, with
respect to social security, I have seen
figures that say that there are up to
275,000 to 300,000 millionaires who. are
drawing the maximum social security
benefits and yet have been continually
realizing the benefits of the cost-of-
living adjustments that have outpaced
the scale of the wage index of the
people who are paying in on the other
end of the chain letter.
So I think the committee, the Com-
mission, all deserve some credit that
they did look'to that problem. The so-
lution that they came up with was to
tax the benefits. I would have pre-
ferred to limit the future increases in
those benefits rather than taxing
them, but at least I would have to say
that we should compliment the com-
mittee for recognizing that problem.
Now, with respect to the long-term
solution where the large unfunded lia-
bility in the program lies, those fig-
ures, when we heard testimony before
the committee, ranged anywhere from
$1 trillion to $2 trillion. It depends on
whose econometric models you want to
look at. But we all recognize that
there is a huge unfunded liability out
there in the year 2020, 2010, past the
turn of the century, that has to be
reckoned with. Most people agree, be-
cause of the statistics and the evidence
that people are living longer, that we
should do something in a gradual way
to raise the retirement age.
I have to say that I am pleased that
the committee recognized this and did
do something to that effect. I think
that we should be a little more aggres-
sive. We should recognize the problem
is here now. People are living longer.
All evidence statistically supports
that. Therefore, at the proper time I
intend to offer an amendment which
will raise the retirement age starting
in 1984 1 month every year for 36
years. That will put the retirement
age for maximum benefits at age 68
and for early retirement at age 65. I
think that would take care of the long-
term problem.
But then, Mr. President, I believe
there is still one area where we are
sadly lacking, and that is the opportu-
nity to encourage Americans to save. I
think we could do something with re-
spect to this that would be very simple
and we should be doing it now.
One of the biggest problems that the
social security system has brought
upon the American economy is it has
been a failure for the American people
to save money with which to rebuild
the tools and equipment that are nec-
essary to drive' a growing, strengthen-
ing, noninflationary economy. The
way the system works is that those
workers' savings get taxed in a regres-
sive tax off the front of their income.
It is paid out to the beneficiaries. The
money never ends up in savings ac-
counts, never ends up in the banks
where it can be lent to increase the
tools and equipment that provide the
jobs and backbone of America's great
productive might.
So what I suggest we do, and I will
offer an amendment to this effect, is
provide a social security option ac-
count (SSOA) for those people who
can afford to do it. Individuals would
be able to contribute up to 20 percent
of their social security wage base into
their own personalized SSOA over and
above what the IRA laws. now allow.
For every $1,000 contributed, individ-
uals would forfiet one-half percent of
their social security benefits in the
future.
Now, you ask the question, "Would
they still have to pay social security
taxes?" Yes, they would, because the
way the chain letter works we cannot
allow people out. But how does that
worker afford to do that? That deci-
sion would rest with each individual's
ability to save, but I think we would
find that many Americans would
choose a tax deduction on the front
end even if it would actually reduce
their social security benefits in the
future. Future Congresses, 40 or 50
years from now, will not be faced with
the same political dilemma that this
Congress is faced with, Mr. President.
The problem we have here, let us
face it, is that there are 36 million
Americans out there receiving bene-
fits. Congress has to be conscious of
that, and we are in fact sensitive to
the fact that those 36 million people
are our constituents; and we have to
be sensitive to their wishes because,
after all, those of us in this body do
work for the people. I am not faulting
that, but I think it would be an imagi-
native and ingenious way for us to ac-
tually develop savings in the private
sector today.
In addition to savings in the private
sector today, we could end up develop-
ing a constituency of people who own
their own retirement accounts. They
would be exchanging the privilege of
owning their own accounts for future
social security benefits. So that 40 or
50 years from now, we could remove
some of this political pressure we have
felt these many years.
That is why this problem has not
been faced. We have to allow it to go
to crisis proportions before we face it.
There are other things I would like
to see in this system, but we want to
address the short-term problem in
order to get away from raising payroll
taxes.
There is no doubt in my mind and in
the minds of many economists in this
country that this speeding up of the
payroll taxes and the drain this is
going to have on the private sector is
going to exacerbate the unemploy-
ment problems in the United States;
because when you look at where those
payroll taxes are going in the near
future, it is a tremendous burden on
small business and on the working
people just to pay the social security
taxes. The result of this will be less
jobs offered in the private sector be-
cause of the excessive, regressive tax
that comes with this solution.
March 16, 1989
As to the long-term problem, I urge
this body to carefully look at my
amendment which will be offered to
raise the retirement age in 1984 1
month every year for 36 years. That
will cause-no dislocation to an individ-
ual. It will allow people to plan their
futures. It will be a very gradual
change.
People are living longer. All the sta-
tistical evidence and other evidence
point to the fact that people are
healthier, are living longer. That is a
compliment to our society. It is a good
thing. But we need to start now and
not put it off to the year 2000, and we
should address the retirement age.
Third, Mr. President, I wish to offer
an amendment which will address the
problem of the lack of opportunities
that most working Americans have in
order to have their private retirement
account. We could offer this as an al-
ternative. It would take years and
years, and I do not expect it to change
in my lifetime, but at some point in
the future we could remove the politi-
cal pressure of those Americans totally
dependent on the social security
system, the ever-increasing pressure to
raise benefits, raise benefits-and the
benefits, frankly, have been raised
much faster than the ability of the
people to pay those benefits.
I say to my colleagues, "Look around
in your States. How many people do
you see receiving social security whose
grandchildren are not as well off as
the recipients of the social security?"
Yet, the entire pressure in Congress
and the entire pressure that has been
focused on is that, somehow, all we
have to do is to raise the payroll tax
and we will not have to touch any
future benefits.
I am saying that we do not have to
take benefits away from anybody. We
have to get the wage index and the
benefit levels back into balance, and
they are presently out of balance. The
only way I can see to do that is to
delay the COLA until December of
1985 and then put it on the sound
footing of the wage index and the
price index. Then we will have a
system with solvency for the future,
and then we will in fact see a restora-
tion of the long-term capital markets
in this country. Once the long-term
capital markets are restored in this
country, we will see activity in the
steel mills in-Pennsylvania, activity in
the chemical plants in New Jersey, we
will see building taking place, and the
farms, the fields, and the forests will
be rejuvenated. We will restore the
true noninflationary growth in the
United States.
However, I do not believe that will
happen if we always walk into this
Chamber and have our compromise so-
lution of raising taxes to solve the
problem because we do not have the
political will to really bite the bullet
on the problem, and that is that the
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graph (9) shall not apply and, with respect
to an individual applying for or receiving
disability retirement benefits, the reduction
period and adjusted reduction period for
any such benefit shall be determined under
paragraph (7) as though retirement age (as
otherwise defined in section 216(1)) were
age 65.".
(4) Section 226(b)(2)(A) of such Act is
amended-
(A) by inserting "or 234" after "benefits
under section 202" in subsection (a)(2)(A);
and
(B) by adding after "or" at the end of sub-
section (bX2)(A) the following new clause:
"(iv) disability retirement benefits under
section 234, or".
(c) The amendments made by this section
shall apply only with respect to benefits for
months after December 1999.
Mr. BRADLEY. Mr. President, I ask
unanimous consent that a factsheet
explaining the amendment be printed
in the REcoitD at the conclusion of my
statement.
The PRESIDING OFFICER. With-
out objection, it is so ordered.
(See exhibit 1.)
Mr. BRADLEY. Mr. President, the
amendment I am offering today,
which was developed by Congressman
Row WYDEN and myself, establishes a
new social security program to aid
older workers with major health prob-
lems. Under our proposal, beginning in
the year 2000, a limited number of
workers between the ages of 62 and 66
would receive a new "disability-retire-
ment" benefit if they are unable to
work in their current occupation be-
cause of poor health.
It is imperative that we take this
step in conjunction with any increase
in the social security retirement age.
If the retirement age is increased, as
now seems likely, it will mean a hard-
ship for many older workers who
cannot stay in their jobs because of
poor health and also cannot qualify
for regular disability insurance bene-
fits. These workers should not be
shortchanged in any way, but that will
happen in a lot of cases unless steps
are taken to protect these workers.
My amendment would allow workers
to qualify for these benefits if they
can demonstrate inability to perform
the major occupation they had held
during the 10-year period before the
onset of their disability. If workers
had not worked at any one occupation
for at least 2 years, then their work
history would be examined to deter-
mine if their medical condition pre-
vents them from using skills or abili-
ties comparable to those required by
work they had previously performed.
Mr. President, it should be pointed
out that the definition of "work" or
"occupation" does not necessarily
mean the same job or the same em-
ployer, but rather the same general
occupation or type of work requiring
the same skills. It must also be pointed
out that the program will not take
effect until the year 2000; Congress
has the next 17 years to formulate a
more exact definition of eligibility.
This program would be considered a
separate OASI program, with benefits
payable from the OASI trust fund.
Benefits for this program would be
paid according to the OASI current
law schedule for reduced benefits at
ages under 65 and with full benefits
paid at age 65. In effect, these workers
would be "held harmless" to the pro-
posed increase in the retirement age
and reduction in early retirement
benefits.
Mr. President, a majority of the
members of the Social Security Com-
mission, including Senators DoLE and
HEINZ, recommended that the retire-
ment age be raised. In addition, these
same members recommended a liberal-
ization of the disability program for
those aged 62 and above.
I quote from the Commission report:
Disability benefits are now available
under somewhat less stringent definitions
for those aged 60-64. However because some
workers, particularly those in physically de-
manding employment, may not benefit from
improvements in mortality and be able to
work longer, we assume that the disability
benefits program will be improved prior to
the implementation of this recommendation
to take into account the special problems of
those between age 62 and the normal retire-
ment age who are unable to extend their
working careers for health reasons.
Mr. President, the Finance Commit-
tee raised the retirement age but did
not make improvements to the disabil-
ity program. My amendment merely
follows through on the recommenda-
tions made by a majority of the mem-
bers of the Social Security Commis-
sion's actuaries rough estimate is that
only about 10 percent of future retir-
ees would fit into this category. There-
fore, the long-term cost of this change
is minimal-0.04 percent of payroll-
and this additional cost can clearly be
accommodated in the bill before us
now because the savings in the Fi-
nance Committee bill exceed by 0.08
percent the level necessary to achieve
long-term solvency.
Mr. President, I believe that this
proposal is a fair one. If we must raise
the social security retirement age, we
need to develop a safety net for older
workers who, for health reasons,
simply cannot keep working. I urge my
colleagues to adopt the amendment.
EXHIBIT 1
BRADLEY DISABILITY-RETIREMENT
AMENDMENT
WHAT IS THE PROGRAM?
The Amendment would establish a new
program that will allow a limited group of
workers aged 62 up to the "normal retire-
ment" age (i.e. the age at which full OASI
benefits are allowed) to qualify for "disabil-
ity retirement benefits". This new program
would not start to take effect until the year
2000-the year that the Social Security re-
tirement age is scheduled to increase.
WHY DO WE NEED THIS PROGRAM?
There are many older workers whose
health is too "good" to qualify for the regu-
lar disability insurance program, but too
poor to allow them to keep working in the
occupation for which they are trained. Rais-
ing the retirement age and reducing early
retirement benefits for these older workers
amounts to a significant cut in benefits be-
cause their poor health simply won't let
them keep working.
WHO WOULD BE ELIGIBLE FOR THE PROGRAM?
Workers qualify for these benefits if they
can demonstrate inability to perform the
major occupation they had held during the
10 year period before the onset of their dis-
ability. If workers had not worked at any
one occupation for at least 2 years, then
their work history would be examined to de-
termine if their medical condition prevents
them from using skills or abilities compara-
ble to those required by work they had pre-
viously performed with some regularity and
over a substantial period of time.
"Work" or "occupation" does not neces-
sarily mean the same Job for the same em-
ployer, but rather the same general occupa-
tion or type of work requiring the same
skills.
It must also be pointed out that the pro-
gram will not take effect until the year
2000; Congress has the next 17 years to for-
mulate a more exact definition of eligibility.
WHAT ARE THE LEVEL OP BENEFITS TO BE PAID?
This program would be considered a sepa-
rate OASI program, with benefits payable
from the OASI trust. fund. Benefits for this
program would be paid according to the
OASI current law schedule for reduced
benefits at ages under 65 and with full bene-
fits paid at age 65.
GIST anent law, 00 Finance
vex of ben tit
nervefin
pwd of
62 ................. _..................... .......... 80 75
63 .............. _....... -.................. ........... 86.7 80
64 ............................ ---.... ................ 93.3 81
65 ....................................................... 100 93
WHAT ARE THE LONG TERM COSTS OF THE
PROPOSAL?
The rough estimate by the Social Security
Administration's actuaries is 0.04 percent of
payroll. Adoption of the amendment will
not lead to insolvency, since the savings in
the Senate Finance Committee bill exceed
the level necessary to achieve long term sol-
vency by 0.08 percent.
Mr. DOLE. Mr. President, I thank
the distinguished Senator from New
Jersey.
I have indicated to the Senate that
we have only had an opportunity to
see the amendment for about 30 to 45
minutes. I know of no objection. It
may depend on what other amend-
ments might be adopted. Plus we wish
the time to analyze it carefully on our
side.
I am wondering if the Senator from
New Jersey might be willing to let us
set this amendment aside, give our
staff and social security people a
chance to review it carefully, and then
we could either call it back up or in
some way dispose of it. If we can agree
on it, or with some modification, it
could be accepted.
I have not checked either with the
distinguished ranking minority
member, Senator Lowo. But we would
certainly be willing to look at it care-
fully the next 24 hours.
Mr. BRADLEY. Mr. President, I
would have no objection to temporar-
ily laying the amendment aside until
the next order of business is disposed
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of, and then this amendment would be
pending again. and it would be my
hope that by that time maybe by to-
morrow we could resolve this. I know
that the chairman as he stated in the
Commission report expresses consider-
able interest to meet this problem, and
I have every expectation we will be
able to solve it.
Therefore, I ask unanimous consent
that the amendment be temporarily
laid aside until the next order of busi-
ness is disposed of and then this
amendment again be pending.
The PRESIDING OFFICER. With-
out objection, it is so ordered.
Mr. DOLE. Mr. President, I appreci-
ate the cooperation of the Senator
from New Jersey.
It may be that other Members have
amendments which we can agree upon.
If so, we could dispose of those amend-
ments. It is my understanding we may
want to adjourn between 6 and 7,
nearer 6.
But I would say to Members who
may be in their offices or members of
the staff if there are noncontroversial
amendments, we would like very much
to dispose of this yet this afternoon,
and we hope to come in-there has not
been an order yet-but early tomorrow
morning and go until some time late
tomorrow afternoon and hopefully
during the remainder of the day and
all day tomorrow we can, first of all,
dispose of noncontroversial amend-
ments We believe there are a number
that can be agreed upon. There are
some we cannot agree upon. There
may be rollcall votes sometime after 1
p.m. tomorrow afternoon.
Mr. BENTSEN. Mr. President, as an
original cosponsor of S. 1, I want to
join my colleagues in commending
Senator Dora, the distinguished chair-
man of the Finance Committee, Sena-
tor Moyirnisx, and others who have
helped fashion a reasonable, effective,
and broadly accepted proposal to ad-
dress the difficult problem of financ-
ing our social security system.
This compromise, Mr. President, is
of obvious and urgent importance to
152 million American workers who
have put their trust in the commit-
ments undertaken by this Govern-
ment. For millions of our people social
security spells the difference between
dignity and despair for the future, and
I am convinced that the compromise
being considered by the Senate comes
down squarely on the side of dignity.
There is another, equally important
dimension to this legislation. It pro-
vides the most striking evidence I have
seen in sometime that the American
political system, despite the strains of
partisanship accentuated by an eco-
nomic environment of prolonged reces-
sion, is still capable of acting-rapidly,
effectively, and with unity-to serve
the vital interests of our people.
The social security package is a clas-
sic in the art of bringing the diverse
elements of America together in the
search for honest answers to the diffi-
cult problems facing our Nation. No
party, I am sure, is perfectly satisfied
with this formulation. Everyone has
been asked to sacrifice, to take up a
part of the burden, to pay more, to
defer increases, to suffer a little so
that millions of older Americans will
have to suffer much lees.'
I sincerely hope, Mr. President, that
the obvious element of bipartisanship
and good will so evident in our delib-
erations on the social security package
can serve as the groundwork for
broader sustained effort to respond to
America's pressing economic problems
and help us establish an agenda for
the future.
With this compromise the Congress
will be taking a giant step toward re-
moving social security as a conten-
tious, partisan, emotional issue in
future elections. I sincerely believe
this formulation reflects great credit
on those who had the courage and
foresight to bring it to the floor.
I commend my colleagues on both
sides of the aisle for a fob well done. I
am pleased to be an original cosponsor
of this legislation and I urge its
prompt approval by the Senate.
Mr. DOLE. Mr. President, I do not
see anyone rushing in with an amend-
ment.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The
clerk will call the roll.
The legislative clerk proceeded to
call the roll.
Mr. GRASSLEY. Mr. President, I
ask unanimous consent that the order
for a quorum call be rescinded.
The PRESIDING OFFICER. With-
out objection, it is so ordered.
Mr. GRASSLEY. Mr. President, so
far today we have heard a few hours'
debate on this very important issue
and I want to take this opportunity to
give you my views on the entire pack-
age, and to relay what I consider to be
its strengths and weaknesses.
As this body begins consideration of
the Social Security Act Amendments
of 1983, I would like to share my hopes
and goals, which have guided me
throughout my involvement in this
issue. The first goal, one which we all
share, is to adopt a comprehensive
package that will insure a sound social
security system for as long into the
future as we can predict.
Second, we must adopt a well-bal-
anced plan that is fair, one which calls
on all who are touched by this system
to share in the sacrifices required to
restore it to solvency.
When I first heard the National
Commission's recommendations I was
less than pleased. In my view the plan
relied far too heavily on tax increases
and it was far too short on reform. !43r
misgivings were based on my past ex-
perience as a Member of the House of
Representatives during deliberation of
those very important 1977 social secu-
rity amendments. At that time we
heard promises from the House Demo-
cratic leadership and from the Demo-
cratic President that adoption of the
1977 bill would guarantee adequate fi-
nancing for social security until the
year 2030.
Here we are, only a little over 5
years later, still wrestling with the
issue of social security. If ' Congress has
learned anything about this issue over
the years it should be evident that
continual reliance on tax increases
does little to address the real problems
with our social security system. Tax
increases do not correct the generosity
of past Congresses which greatly ex-
panded benefits, nor do tax increases
address the demographic changes
which have radically affected the pro-
gram.
Furthermore, greater and more
taxes merely exacerbate our economic
situation of prices increasing more
rapidly than wages and of continued
high unemployment.
We are rapidly approaching the
limit which taxpayers can afford to
pay for social security. I would argue
that in many instances that threshold
has already been crossed. Demograph-
ic changes are such that in 1950 we
had 16% workers supporting each re-
tiree but by the year 2000 each retiree
will be supported by less than 8 work-
ers. Obviously the answer to this situa-
tion is not further tax increases.
I fully recognize the difficulty in
trying to predict into the future what
economic conditions will exist, but we
surely must do a better job this go-
around than we did : in 1977 when we
passed those incredibly high taxes.
If we must err in our economic fore-
cast it is far better to err on the side of
conservatism.
The bill reported out of the Senate
Finance Committee not only closes the
long-term deficit but also has a slight
surplus over the course of the 75-year
estimates. This cushion, this surplus,
is a prudent measure.
My only hope is that present or fur-
ture Members of this body do not see
those extra dollars and decide it is
time-to vote for a few more sweeteners
in the social security benefits struc-
ture.
In order to close that long-term gap,
my colleagues and I on the Finance
Committee adopted what I believe to
be a balanced and fair plan. First, the
retirement age would be gradually in-
creased to age 66 but would not be in-
dexed. I know many individuals who
felt the retirement age should be in-
creased but were troubled by the
thought of continual increases
through the indexing process.
Second, the outside earnings limita-
tion would be phased out in our
Senate Finance Committee plan. I
have long been an advocate of repeal
of this current law which penalizes the
effort of elderly individuals to contin-
ue to be productive members of society
in their later years.
Finally, our committee adopted a
measure which would slightly reduce
the initial benefit workers would re-
ceive upon retirement,
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These measures are a fair approach
to reconciling the long-term deficit. It
recognizes the trend toward increased
longevity, yet balances the needs of
those individuals, who must retire due
to illness or disability.
The long-range benefit change is
structured to minimize any impact on
future retirees, and it should be
stressed these provisions do not
impact in any way on those individuals
currently retired nor those for whom
retirement is imminent. The adoption
of these changes by the Senate Fi-
nance Committee greatly improves the
overall balance and fairness of the
original Commission report.
Additional changes approved by the
Finance Committee also serve to make
the plan more palatable to those of us
who feel workers are burdened with
enough taxes.
Senator LoNG offered an excellent
fail-safe plan which is exceedingly
fair, and will indeed function as a true
fail-safe mechanism should trust fund
reserves be below 20 percent of annual
outgo, and be projected to decline. The
Secretary of Health and Human Serv-
ices would be authorized to reduce the
annual cost-of-living adjustment to
the extent necessary to prevent a fur-
ther decline in reserves. However, the
Secretary must first inform Congress
of the impending action, so Congress
would have ample time to enact an al-
ternative solution.
One other change the committee has
recommended is to provide some relief
to the self-employed of this Nation
who will be hard hit with additional
taxes in 1984. These individuals who
serve as the backbone of our economy,
and are pivotal in a recovery, would
have been dramatically affected by
the Commission's original proposal.
While we did not eliminate the provi-
sion to equalize the self-employed tax
rates with the combined employer-em-
ployee amount, we approved the use of
SECA tax credits to help ameliorate
the impact, particularly in the first
year.
These changes, approved by the Fi-
nance Committee, greatly enhanced
the overall package, so that a lot of
people who might not otherwise vote
for this bill on the floor of the Senate
may now be able to do that. To give
the Commission its due, their original
report laid a strong foundation for
Members of both Houses of Congress
from which to make their final recom-
mendations. Without the Commis-
sion's leadership and diligence, I fear
the discussion on social security would
be far more acrimonious.
I must register some concerns with
portions of the package I find most
trouble@ome. The authorization of
continued interfund borrowing, no
matter how carefully structured, spells
nothing but trouble. It is our duty to
develop a package that will actually
solve the funding crisis. In my mind,
this fall-back provision merely means
we were not able to make some hard
decisions and legislate all the needed
changes to solve the problem of the
social security system. It also has
grave implications for the solvency of
the medicare fund. and conversely, for
the O.A.S.D.I. fund should medicare
be forced to borrow from its larger
sister prior to 1988.
The combination of the interfund
borrowing authority and the use of
certain accounting "gimmicks" are
more than Just a little disturbing. The
so-called normalization of tax trans-
fers is a thin disguise for general reve-
nue borrowing, albeit for a month at a
time. I would, however, like to state
that the Senate's version of this
scheme is far better than what the
House adopted in their version of the
Commission recommendations. At
least the normalization mechanism is
triggered in our bill with a time cer-
tain payment, including interest.
The integration of the civil service
system with social security poses an-
other problem. While we have heard
from the distinguished Senator from
Alaska (Mr. SxxvENS) that the formu-
lation of a supplemental plan for new
Federal employees is not an insur-
mountable problem, such assurances
do little to placate this Nation's civil
servants. Congress must work in ear-
nest, and as expeditiously as prudence
allows, to develop an adequate and fair
retirement program for Federal work-
ers who are hired after the first of
next year. We also have the solemn
obligation to those currently in Feder-
al employ that we are solidly and com-
pletely committed to their right to ac-
crued entitlements to future benefits
under the Federal retirement system.
One final point I would like to make
on the completeness of this package is
the adequacy of financing over the
next decade because I have some
doubts about how adequate that is.
We have heard comments from a wide
variety of. sources that the package
provides for a razor thin margin
within the next few years. I am deeply
troubled by reports that this package
may not be sufficient to cover the
short-term funding problem. I refer to
my earlier remark that it would be far
better to be overly conservative in our
estimates to guarantee a solvent
system. While I find such a possibility
abhorrent, the plan reported out of
the Finance Committee, does provide
for a fail-safe plan which would be im-
plemented should the system face a
crisis in the next few years. Should we
receive further indications that the
bill not be adequate to remedy the
problem, prompt and honest action
must be initiated to guarantee we do
not fall into the same trap we did in
1977.
While many of the provisions con-
tained in S. 1 are distasteful, I am well
aware that no social security plan
could have been embraced by so many
different groups and elected officials
had it not been broad based, and con-
tained a mix of the sweet and the
sour. The heavy reliance on tax in-
creases, and back door general revenue
financing are difficult for me to
accept. Balanced against those provi-
sions are the 6-month COLA delay, re-
duction of windfall benefits and the
long-term changes which I feel are
necessary if we are to ever get a
handle on the phenomenal growth in
this program.
I am particularly pleased the pack-
age includes several women's equity
provisions. All of which are paid for, I
might add. Finally, several provisions
which the Finance Committee saw fit
to include are the elimination of pris-
oners' benefits, and the limitation of
benefits to nonresident aliens. These
provisions accomplish the much
needed goal of returning a sense of
equity and fairness to the social secu-
rity system.
The bill we are debating today is far
more than a measure to provide ade-
quate funding for social security. It is
an opportunity for this Congress to re-
store some faith and confidence in the
entire social security program, and
perhaps restore some credibility in
this Congress and its ability to take
action.
Although far from perfect, this bill
is the culmination of tremendous ef-
forts of all those individuals who par-
ticipated in one way or another to
fashion a concensus plan. My col-
leagues on the Senate Finance Com-
mittee who served on the National
Commission deserve the highest praise
and appreciation from Members of
this body as do their able staff mem-
bers. The private sector individuals
who so freely gave of their time to
work for a reform measure also de-
serve our thanks. The President, and
other elected officials demonstrated
their ability to compromise and bend a
little, to insure the economic security
of today's and tomorrow's retirees. Fi-
nally, special thanks need to go to
Robert Myers for his tireless efforts
and seemingly endless patience.
After careful and thorough evalua-
tion, I am supporting this compromise
plan as presented here today. I realize
many individuals and special interest
groups find particular provisions in-
cluded in the package to be sufficient-
ly onerous that the plan cannot have
their support. I can only say that we
must evaluate the package in its en-
tirety and with the ultimate goal of a
safe and secure social security system.
With those thoughts in mind, I lend
my support to this plan.
Mr. DOLE. Mr. President, I appreci-
ate the statement of the Senator from
Iowa. I wish to thank the Senator
from Iowa, a member of the commit-
tee, for his assistance in what he has
described as maybe not a perfect solu-
tion but certainly one that I believe
was improved in the Senate Finance
Committee with the assistance of the
Senator from Iowa.
We?believe that we have a good com-
promise. We believe that it will pass
the Senate hopefully without any sig-
nificant change and that we can go to
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The PRESIDING OFFICER. With-
out objection, it is so ordered.
SOCIAL SECURITY BENEFITS TO THE DECEASED
? Mr. HUMPHREY. Mr. President, as
the Senate turns attention to the long-
awaited social security reform pack-
age, I plan to offer two amendments to
address the problem of erroneous
benefit payments to deceased individ-
uals. Many of our constituents were
justifiably angered by the disclosure
late in 1981 that over $60 million in
benefits had been routinely mailed,
for as long as 15 years, to over 8,000 in-
dividuals listed as dead on medicare re-
cords. In one documented incident, a
gulf coast widow forged her deceased
husband's signature, cashed his bene-
fit checks, and told investigators that
he was at sea on a shrimp boat. In an-
other, a wealthy middle-aged business-
man cashed his father's social security
checks for many months after his
death, explaining to investigators that
he needed to maintain cash flow for
his business. I believe we need to take
action to stem this hemmorhage of
the trust funds.
The first amendment I plan to offer
focuses attention on those individuals
who criminally negotiate the errron-
eously issued checks. The Secretaries
of Treasury and Health and Human
Services would be required to provide
that all title II benefit checks, and the
envelopes in which they are mailed,
bear a printed legend warning that the
cashing or attempted cashing of a
check which was erroneously issued
for payment of benefits to a deceased
individual constitutes a felony punish-
able under the provisions of section
208 of the Social Security Act by a
maximum penalty of $5,000 fine and 5
years imprisonment. I believe it would
be wise to plainly warn potential
felons of the nature and consequences
of such an act, in order to give them
pause to reconsider an act of disre-
spect both for the dead and for the
taxpayers who fill the trust fund cof-
fers
The second amendment I plan to
offer would add a provision directing
the Secretary of Health and Human
Services to establish a program under
which the States voluntarily contract
with the Secretary to periodically fur-
nish information concerning individ-
uals with respect to whom death certif-
icates--or equivalent documents-
have been filed. The Secretary would
be required to compare this informa-
tion with SSA files, and to make neces-
sary corrections.
Mr. President, my amendment is es-
sentially the same as an existing provi-
sion of the House-passed reform bill-
which reflects the efforts of Repre-
sentative WILLIS GnnnsoN-and dif-
fers only in that it incorporates cer-
tain modifications recommended by
GAO and SSA. The amendment stipu-
lates that administrative funds are to
be used for payments to the States,
and that the Secretary may enter into
information sharing agreements with
Federal and State administrators of
other benefit programs, provided that
such agencies provide reimbursement
for reasonable costs. Finally, the
amendment provides that information
provided under this section to the Sec-
retary may not be used for any other
purpose, and that the Secretary shall
report to Congress next year on the
status of the program.
Mr. President, I am hopeful that
these proposals will receive the sup-
SENATE TO CONVENE AT 9 A.M.
THURSDAY
Mr. STEVENS. Mr. President, is
there a time for convening tomorrow?
The PRESIDING OFFICER. The
convening time is 9 a.m.
DIRECTOR OF LEGAL COUNSEL
TO REPRESENT SENATOR
CRANSTON
Mr. STEVENS. Mr. President, as in
morning business, I send to the desk a
resolution in behalf of Senators BARER
and BY" and Ask for its immediate
consideration.
The PRESIDING OFFICER. The
resolution will be stated.
The assistant legislative clerk read
as follows:
A resolution (S. Res. 92) to direct the
Senate Legal Counsel to represent Senator
Alan Cranston in Glenridge, Ltd. aka Glen-
ridge Apartments v. Mary Anne Kramer aka
Mary Ann Kramer, No. 834036.
Mr. STEVENS. Mr. President, this is
a technical matter. I ask for its imme-
diate consideration.
The PRESIDING OFFICER. Is
there objection to the present consid-
eration of the resolution?
There being no objection, the Senate
proceeded to consider the resolution.
Mr. BAKER. Mr. President, this res-
olution would authorize and direct the
Senate Legal Counsel to represent
Senator ALAN CRANSTON and employ-
ees in his office in response to a sub-
pena duces tecum which has been
served upon the custodian of records
for Senator CRANSTON by the plaintiff
in the case of Glenridge, Ltd. against
Mary Anne Kramer, now pending in
Municipal Court for the City and
County of San Francisco in California.
The subpena directs Senator CRAN-
STON to produce communications from
a citizen on topics of legislative and
constituent concern. At Senator CRAN-
STON'S request, the Senate Legal Coun-
sel would be directed to assert all privi-
leges to which Senator CRANSTON may
be entitled in order to protect the con-
fidentiality of citizen and constituent
communications to members.
The PRESIDING OFFICER. The
question is on agreeing to the resolu-
tion.
The resolution (S. Res. 92) was
agreed to.
The preamble was agreed to.
The resolution with its preamble, is
as follows:
S. RES. 92
Whereas, in the case of Glenridge, Ltd. v.
Mary Anne Kramer, No. 834036, pending in
the Municipal Court for the City and
County of San Francisco in California, a
subpoena duces tecum has been served upon
the custodian of records for Senator Alan
Cranston ordering him to produce docu-
ments;
Whereas, pursuant to sections 703(a) and
704(a) of the Ethics in Government Act of
1978, 2 U.S.C. ? 288b(a) and 288c(a)(2)
(Supp. V 1981), the Senate may direct its
counsel to defend any member or employee
of the Senate in any proceeding with re-
spect to any subpoena or order directed to
such member or employee in his official or
representative capacity: Now, therefore, be
it
Resolved, That the Senate Legal Counsel
is directed to represent Senator Cranston
and employees in his office regarding any
subpoena or order in the case of Glenridge,
Ltd v. Mary Anne Kramer.
Mr. STEVENS. Mr. President, I
move to reconsider the vote by which
the resolution was agreed to.
Mr. DOLE. I move to lay that
motion on the table.
The motion to lay on the table was
agreed to.
BILL HELD AT DESK-H.R. 1936
Mr. STEVENS. Mr. President, I ask
unanimous consent that once the
Senate receives from the House of
Representatives H.R. 1936, a bill deal-
ing with bonuses, enlistment and reen-
listment of the armed services, it be
held at the desk pending further con-
sideration.
The PRESIDING OFFICER. With-
out objection, it is so ordered.
ROUTINE MORNING BUSINESS
(During today's proceedings state-
ments were delivered or submitted and
routine morning business was trans-
acted, as follows:)
PRESIDENT RICHARD SHEARER
OF ALDERSON-BROADDUS COL-
LEGE PROVIDES EDUCATIONAL
LEADERSHIP
Mr. RANDOLPH. Mr. President, I
call attention to a distinguished West
Virginian, a resident of our State for
the past 32 years. Dr. Richard Shear-
er.
Dr. Shearer will be retiring this
summer after completing 32 years as
President of Alderson-Broaddus Col-
lege in Philippi, W. Va. He came to
A-B in 1951 at the age of 30. He, at the
time, was the youngest college presi-
dent in the Nation.
Alderson-Broaddus is a 4-year liberal
arts and science institution which is
affiliated with the West Virginia Bap-
tist Convention and the American
Baptist Churches, USA. The college
offers a strong career-oriented pro-
gram with a dedicated emphasis on a
Christian environment. Its programs
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