Adjustments to primary insurance amount formula and inclusion of surplus earnings for benefit determinations

(a) Increase in percentage factor for lowest portion of earnings used To determine primary insurance amounts 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) Inclusion of surplus average indexed monthly earnings in determination of primary insurance amounts (1) In general Section 215(a)(1)(A) of the Social Security Act (42 U.S.C. 415(a)(1)(A)) is amended— (A) in clauses (i), (ii), and (iii), by inserting basic before average indexed monthly earnings each place it appears; (B) in clause (ii), by striking and at the end; (C) in clause (iii), by adding and at the end; and (D) by inserting after clause (iii) the following new clause: (iv) 5 percent of the individual’s surplus average indexed monthly earnings,. (2) Bend point adjustments Section 215(a)(1)(B) of such Act (42 U.S.C. 415(a)(1)(B)) is amended— (A) in clause (i), by inserting For individuals who initially become eligible for old-age or disability insurance benefits, or who die (before becoming eligible for such benefits), in the calendar year 2026, the amount established for purposes of clause (ii) of subparagraph (A) shall be $6,300. after the period; (B) in clause (ii)— (i) by redesignating subclauses (I) and (II) as items (aa) and (bb), respectively; (ii) by striking For individuals and inserting (I) Subject to subclause (II), for individuals; and (iii) by adding at the end the following new subclause: (II) For individuals who initially become eligible for old-age or disability insurance benefits, or who die (before becoming eligible for such benefits), in any calendar year after 2026, the amount established for purposes of clause (ii) of subparagraph (A) shall equal the product of the amount established with respect to calendar year 2026 under clause (i) of this subparagraph and the quotient obtained by dividing— (aa) the national average wage index (as defined in section 209(k)(1)) for the second calendar year preceding the calendar year for which the determination is made, by (bb) the national average wage index (as so defined) for 2024.; (C) by redesignating clause (iii) as clause (iv); and (D) by inserting after clause (ii) the following new clause: (iii) For individuals who initially become eligible for old-age or disability insurance benefits, or who die (before becoming eligible for such benefits) in any calendar year after 2030, the amount determined under clause (ii) of this subparagraph for purposes of subparagraph (A)(i) for such calendar year shall be increased by— (I) for calendar year 2031, 1 percent; (II) for each of calendar years 2032 through 2044, the percent determined under this clause for the preceding year increased by 1 percentage point; and (III) for calendar year 2045 and each year thereafter, 15 percent.. (3) Recomputation of benefits for existing beneficiaries Section 215(f) of the Social Security Act (42 U.S.C. 415(f)) is amended by adding at the end the following new paragraph: (10) Recomputation of primary insurance amount for individuals who became eligible for benefits before 2026 (A) The Commissioner of Social Security shall recompute the primary insurance amounts applicable to beneficiaries whose benefits are based on a primary insurance amount that was computed under this section effective prior to January 2026. Such recomputation shall be effective January 2026. (B) In recomputing the primary insurance amount applicable to a beneficiary under this paragraph, the Commissioner of Social Security shall calculate the primary insurance amount of the individual under subsection (a)(1) as in effect on the date that such primary insurance amount was initially computed, except that the Commissioner shall substitute for the amount that applied under subparagraph (B)(ii) of such subsection on such date an amount equal to the product of— (i) the amount that applied under such subparagraph on such date; and (ii) the ratio of— (I) 6,300; to (II) 6,002. (C) Each amount determined under subparagraph (B) shall be rounded to the nearest $1, except that any amount so established which is a multiple of $0.50 but not of $1 shall be rounded to the next higher $1. (D) If a primary insurance amount applicable to a beneficiary, as recomputed under this paragraph, is lower than the primary insurance amount applicable to such beneficiary as it was originally computed, such higher primary insurance amount shall continue to apply to such beneficiary.. (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 striking An individual's and inserting (A) An individual's; 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)— (i) by striking subparagraph (B) and inserting subparagraph (C); and (ii) by inserting and determination of basic average indexed monthly income under paragraph (1)(A) 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 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 this section 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 2030.