H.R. 1700 — Social Security Expansion Act

This section designates the Act as the “Social Security Expansion Act” and sets forth the table of contents.

This section revises the Social Security primary insurance amount (PIA) formula—used to calculate old-age, survivors, and disability benefits—by (1) increasing the percentage of average indexed monthly earnings (AIME) subject to the first bend point to 95 percent (from 90 percent), and (2) increasing the first bend point amount by 18 percent for individuals who initially become eligible for old-age or disability benefits (or die before eligibility) after 2025. (As background, the PIA applies a progressive formula of 90 percent of the first portion of AIME (up to a wage-indexed bend point, approximately $1,174 in 2024), 32 percent of the next portion (up to a second bend point, approximately $7,078 in 2024), and 15 percent thereafter.) The changes apply to monthly benefits payable for months in calendar years beginning on or after January 1, 2026, and require the Social Security Administration to recompute all PIAs, including by applying the 18 percent increase to the first bend point amount for an individual's original year of eligibility if before 2026. (Thus, the revisions increase replacement rates and expand the higher-rate tier for most beneficiaries, with larger proportional gains for low-wage workers.)

This section directs the Bureau of Labor Statistics to publish monthly, beginning July of the calendar year following enactment, the Consumer Price Index for Elderly Consumers (CPI-E) authorized under the Older Americans Amendments Act of 1987. It revises the Social Security Act to define the Consumer Price Index used for cost-of-living adjustments (COLAs) to Old-Age, Survivors, and Disability Insurance (OASDI) benefits, Supplemental Security Income (SSI) benefits, and special benefits for certain World War II veterans as CPI-E (from CPI for Urban Wage Earners and Clerical Workers (CPI-W)), including under pre-1979 law provisions. (As background, SSA §215(i) provides automatic annual COLAs if the CPI for the third calendar quarter rises at least 0.1% from the prior year, affecting approximately 72 million beneficiaries.) It specifies that adjustments under other laws keyed to Social Security COLA changes continue using the prior CPI definition. The amendments apply to COLA computation quarters ending on or after September 30 of the second calendar year following enactment.

This section amends the primary insurance amount (PIA) computation formula in SSA §215(a)(1)—which determines Social Security old-age and disability benefits—effective for individuals becoming eligible (or dying before eligibility) after 2025, to establish a new alternative minimum PIA equal to the greater of (1) the existing special minimum PIA under subparagraph (C) (i.e., a benefit floor for workers with 11+ years of generally low earnings) or (2) for individuals with more than 10 years of work (i.e., years credited with 4 quarters of coverage), a percentage of 1/12th the applicable annual poverty guideline amount (initially the 2025 poverty guideline for a single individual, indexed annually thereafter by the national average wage index relative to 2024) ranging from 6.25% (11 years) to 125% (30+ years) according to the specified table. (As background, the existing special minimum PIA currently provides $1,066.40 monthly for 30+ years of low earnings in 2025; this alternative minimum rewards any years of covered work and could exceed 100% of poverty for career workers.) It further requires the Commissioner of Social Security to recompute all prior PIAs originally computed for months before November 2025 as necessary to implement this change and makes a conforming amendment to the national average wage index definition in SSA §209(k)(1).

This section expands eligibility for Social Security child's insurance benefits to full-time students at an educational institution—including institutions of higher education as defined in section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002)—through the month before attaining age 22 (previously limited to full-time elementary or secondary school students through the month before age 19), if the child is of an individual entitled to disability insurance benefits or who dies a fully or currently insured individual. Eligibility for children of old-age insurance benefit recipients remains limited to full-time elementary or secondary school students through the month before age 19. The section (1) revises termination months in paragraphs (1)(E)-(G) and (6)(A), (D), and (E) to conform to the new criteria; (2) adds definitions in paragraph (7)(E) and (F) deeming full-time students throughout the month, excluding those paid by an employer to attend school or incarcerated pursuant to a felony conviction committed after the effective date, and addressing periods of nonattendance; and (3) makes conforming changes throughout paragraph (1) and paragraph (6)(A). (As background, child's insurance benefits provide monthly payments to eligible unmarried children of retired, disabled, or deceased workers. Thus, the changes extend benefits to postsecondary students up to age 22 in disability and survivor cases.)

This section revises the exclusion from wages under IRC §3121(a)(1) for Social Security (OASDI) payroll taxes imposed by §§3101(a) and 3111(a) such that, in calendar years when the contribution and benefit base is less than $250,000, only remuneration exceeding the base but not exceeding $250,000 is excluded (previously, all remuneration exceeding the base was excluded). (Thus, remuneration up to the base and exceeding $250,000 becomes subject to the 12.4% combined payroll tax rate.) (1) adds successor employer rules under new §3121(aa) treating predecessor remuneration as paid by the successor for this purpose; (2) makes parallel changes to railroad retirement taxes under §3231(e)(2)(A)(i), excluding only compensation exceeding the applicable base but not exceeding $250,000 when that base is below $250,000. The amendments apply to remuneration paid on or after January 1 of the first calendar year beginning after enactment.

This section revises the formula limiting net earnings from self-employment subject to the Social Security portion of self-employment tax (12.4% under section 1401(a)) for taxable years beginning in calendar years when the contribution and benefit base (i.e., maximum annual earnings subject to Social Security payroll and self-employment taxes) is less than $250,000, effectively increasing the combined cap on wages plus such net earnings to $250,000 (from the contribution and benefit base). (Thus, it subjects additional self-employment earnings above the contribution and benefit base to the tax, net of any wages between the base and $250,000.) The amendments apply to net earnings from self-employment and remuneration paid on or after January 1 of the first calendar year beginning after enactment.

This section increases the rate of the Net Investment Income Tax (NIIT) to 16.2% (from 3.8%) on the net investment income of certain high-income individuals, estates, and trusts. (As background, the NIIT generally applies to taxpayers with modified adjusted gross income exceeding $200,000 for single filers or $250,000 for married filing jointly ($13,050 threshold for estates and trusts in 2024), and taxes items such as interest, dividends, capital gains, annuities, royalties, rents, and passive business income.) It further (1) expands net investment income to include income from active trades or businesses (previously excluded unless derived from specified financial trading businesses) by applying rules similar to passive activity loss rules under section 469(c)(5) and (6); (2) denies the deduction for net operating losses under section 172 in computing net investment income; and (3) excludes items taken into account in determining self-employment income taxed under section 1401 or wages taxed under section 3101 (employee share). The changes apply to taxable years beginning after enactment.

This section establishes the Social Security Trust Fund (SSTF) by directing the transfer of all securities and balances from the Federal Old-Age and Survivors Insurance Trust Fund (OASI) and Federal Disability Insurance Trust Fund (DI) to the SSTF on January 1 of the first calendar year following enactment. (As background, the OASI and DI trust funds separately finance Old-Age, Survivors, and Disability Insurance (OASDI) benefits under the Social Security Act from dedicated payroll and self-employment taxes.) The SSTF receives annual appropriations equal to 100% of taxes under IRC chapters 21 (FICA taxes on wages, excluding Medicare portions under §§3101(b) and 3111(b)) and 2 (self-employment taxes, excluding Medicare portion under §1401(b)) and 62% of net investment income taxes under IRC §1411; amounts are transferred from the general fund based on Treasury estimates with subsequent adjustments. If SSTF assets are inadequate for monthly obligations, the Treasury must transfer amounts as under prior law effective October 1, 1990, with interest charged to the SSTF. This section also (1) excludes SSTF activities (instead of OASI and DI activities) from on-budget treatment under 2 U.S.C. §655(a), (2) requires the annual Board of Trustees report to include actuarial analyses of benefit costs for disabled beneficiaries and auxiliaries, retired beneficiaries and auxiliaries, and survivor beneficiaries, (3) updates statutory references from the two trust funds to the singular SSTF, and (4) provides for continuity of the existing Board of Trustees. (Thus, the SSTF maintains Social Security's off-budget status in federal budgeting.)