Adjustments to bend points in determining primary insurance amount and inclusion of surplus earnings for benefit determinations

(a) Adjustments relating to first bend point (1) Increase in first bend point factor (A) In general Section 215(a)(1)(A)(i) of the Social Security Act (42 U.S.C. 415(a)(1)(A)(i)) is amended by striking 90 percent and inserting 95 percent. (B) Effective date; application rule The amendment made by subparagraph (A) shall apply with respect to computations or recomputations of primary insurance amounts made on or after January 1, 2032, except that section 215(a)(1)(A)(i) of the Social Security Act shall be applied by making the following substitutions for 95 percent for computations and recomputations made in the following calendar years: (i) For calendar year 2032, by substituting 91 percent. (ii) For calendar year 2033, by substituting 92 percent. (iii) For calendar year 2034, by substituting 93 percent. (iv) For calendar year 2035, by substituting 94 percent. (2) Increase in first bend point Section 215(a)(1)(B) of such Act (42 U.S.C. 415(a)(1)(B)) is amended— (A) by redesignating clause (iii) as clause (iv); and (B) by inserting after clause (ii) the following new clause: (iii) With respect to computations or recomputations of primary insurance amounts made on or after January 1, 2032, the amount determined under clause (i) of this subparagraph for purposes of subparagraph (A)(i) for such calendar year shall be increased by— (I) for calendar year 2033, 1 percent, (II) for each of calendar years 2034 through 2046, the percent determined under this clause for the preceding year increased by 1 percentage point, and (III) for calendar year 2047 and each year thereafter, 15 percent.. (3) Application of increase; recomputations The amendments made by this subsection shall apply with respect to every individual who becomes entitled to old-age or disability insurance benefits under title II of the Social Security Act, or who dies (before becoming so entitled), in any calendar year. Notwithstanding section 215(f)(1) of the Social Security Act, the Commissioner of Social Security shall recompute the primary insurance amount of each such individual on the first day of each calendar year during the period beginning with calendar year 2032 and ending with calendar year 2047 to the extent necessary to carry out the amendments made by this section. (b) Inclusion of surplus average indexed monthly earnings in determination of primary insurance amounts Section 215(a)(1)(A) of the Social Security Act (42 U.S.C. 415(a)(1)(A)) is amended— (1) in clauses (i), (ii), and (iii), by inserting basic before average indexed monthly earnings each place it appears; (2) in clause (ii), by striking and at the end; (3) in clause (iii), by adding and at the end; and (4) by inserting after clause (iii) the following new clause: (iv) 5 percent of the individual’s surplus average indexed monthly earnings,. (c) Basic AIME and surplus AIME (1) Basic AIME Section 215(b)(1) of such Act (42 U.S.C. 415(b)(1)) is amended— (A) by inserting basic before average; and (B) in subparagraph (A), by striking paragraph (3) and inserting paragraph (3)(A) and by inserting before the comma the following: to the extent such total does not exceed the contribution and benefit base for the applicable year. (2) Surplus AIME (A) In general Section 215(b)(1) of such Act (as amended by paragraph (1)) is amended— (i) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively; (ii) by inserting (A) after (b)(1); and (iii) by adding at the end the following new subparagraph: (B) (i) An individual’s surplus average indexed monthly earnings shall be equal to the quotient obtained by dividing— (I) the total (after adjustment under paragraph (3)(B)) of such individual’s surplus earnings (determined under clause (ii)) for such individual’s benefit computation years (determined under paragraph (2)), by (II) the number of months in those years. (ii) For purposes of clause (i) and paragraph (3)(B), an individual’s surplus earnings for a benefit computation year are the total of such individual’s wages paid in and self-employment income credited to such benefit computation year, to the extent such total (before adjustment under paragraph (3)(B)) exceeds the contribution and benefit base for such year.. (B) Conforming amendment The heading for section 215(b) of such Act is amended by striking Average Indexed Monthly Earnings and inserting Basic Average Indexed Monthly Earnings; Surplus Average Indexed Monthly Earnings. (3) Adjustment of surplus earnings for purposes of determining surplus AIME Section 215(b)(3) of such Act (42 U.S.C. 415(b)(3)) is amended— (A) in subparagraph (A), by striking subparagraph (B) and inserting subparagraph (C) and by inserting and determination of basic average indexed monthly income after paragraph (2); (B) by redesignating subparagraph (B) as subparagraph (C); and (C) by inserting after subparagraph (A) the following new subparagraph: (B) For purposes of determining under paragraph (1)(B) an individual’s surplus average indexed monthly earnings, the individual’s surplus earnings (described in paragraph (2)(B)(ii)) for a benefit computation year shall be deemed to be equal to the product of— (i) the individual’s surplus earnings for such year (as determined without regard to this subparagraph), and (ii) the quotient described in subparagraph (A)(ii).. (d) Effective date The amendments made by subsections (b) and (c) shall apply with respect to individuals who initially become eligible (within the meaning of section 215(a)(3)(B) of the Social Security Act) for old-age or disability insurance benefits under title II of the Social Security Act, or who die (before becoming eligible for such benefits), in any calendar year after 2032.