SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Retired Americans Right of 
Employment Act II'' or ``RARE Act II''.

SEC. 2. ELIMINATION OF EARNINGS TEST FOR INDIVIDUALS WHO HAVE ATTAINED 
              EARLY RETIREMENT AGE.

    (a) In General.--Section 203 of the Social Security Act (42 U.S.C. 
403) is amended--
            (1) in subsection (c)(1), by striking ``the age of 
        seventy'' and inserting ``early retirement age (as defined in 
        section 216(l))'';
            (2) in paragraphs (1)(A) and (2) of subsection (d), by 
        striking ``the age of seventy'' each place it appears and 
        inserting ``early retirement age (as defined in section 
        216(l))'';
            (3) in subsection (f)(1)(B), by striking ``was age seventy 
        or over'' and inserting ``was at or above early retirement age 
        (as defined in section 216(l))'';
            (4) in subsection (f)(3)--
                    (A) by striking ``33\1/3\ percent'' and all that 
                follows through ``any other individual,'' and inserting 
                ``50 percent of such individual's earnings for such 
                year in excess of the product of the exempt amount as 
                determined under paragraph (8),''; and
                    (B) by striking ``age 70'' and inserting ``early 
                retirement age (as defined in section 216(l))'';
            (5) in subsection (h)(1)(A), by striking ``age 70'' each 
        place it appears and inserting ``early retirement age (as 
        defined in section 216(l))''; and
            (6) in subsection (j)--
                    (A) in the heading, by striking ``Age Seventy'' and 
                inserting ``Early Retirement Age''; and
                    (B) by striking ``seventy years of age'' and 
                inserting ``having attained early retirement age (as 
                defined in section 216(l))''.
    (b) Conforming Amendments Eliminating the Special Exempt Amount for 
Individuals Who Have Attained Age 62.--
            (1) Uniform exempt amount.--Section 203(f)(8)(A) of the 
        Social Security Act (42 U.S.C. 403(f)(8)(A)) is amended by 
        striking ``the new exempt amounts (separately stated for 
        individuals described in subparagraph (D) and for other 
        individuals) which are to be applicable'' and inserting ``a new 
        exempt amount which shall be applicable''.
            (2) Conforming amendments.--Section 203(f)(8)(B) of the 
        Social Security Act (42 U.S.C. 403(f)(8)(B)) is amended--
                    (A) in the matter preceding clause (i), by striking 
                ``Except'' and all that follows through ``whichever'' 
                and inserting ``The exempt amount which is applicable 
                for each month of a particular taxable year shall be 
                whichever'';
                    (B) in clauses (i) and (ii), by striking 
                ``corresponding'' each place it appears; and
                    (C) in the last sentence, by striking ``an exempt 
                amount'' and inserting ``the exempt amount''.
            (3) Repeal of basis for computation of special exempt 
        amount.--Section 203(f)(8)(D) of the Social Security Act (42 
        U.S.C. 403(f)(8)(D)) is repealed.
    (c) Additional Conforming Amendments.--
            (1) Elimination of redundant references to retirement 
        age.--Section 203 of the Social Security Act (42 U.S.C. 403) is 
        amended--
                    (A) in subsection (c), in the last sentence, by 
                striking ``nor shall any deduction'' and all that 
                follows and inserting ``nor shall any deduction be made 
                under this subsection from any widow's or widower's 
                insurance benefit if the widow, surviving divorced 
                wife, widower, or surviving divorced husband involved 
                became entitled to such benefit prior to attaining age 
                60.''; and
                    (B) in subsection (f)(1), by striking clause (D) 
                and inserting the following: ``(D) for which such 
                individual is entitled to widow's or widower's 
                insurance benefits if such individual became so 
                entitled prior to attaining age 60,''.
            (2) Conforming amendment to provisions for determining 
        amount of increase on account of delayed retirement.--Section 
        202(w)(2)(B)(ii) of the Social Security Act (42 U.S.C. 
        402(w)(2)(B)(ii)) is amended--
                    (A) by striking ``either''; and
                    (B) by striking ``or suffered deductions under 
                section 203(b) or 203(c) in amounts equal to the amount 
                of such benefit''.
    (d) Effective Date.--The amendments and repeals made by subsections 
(a), (b), and (c) shall apply with respect to taxable years ending 
after December 31, 2002.

SEC. 3. USE OF ALL YEARS IN COMPUTATION.

    (a) Use of All Years of Earnings in Benefit Computation.--Section 
215(b)(2)(B) of the Social Security Act (42 U.S.C. 415(b)(2)(B)) is 
amended by striking clauses (i) and (ii) and inserting the following:
            ``(i)(I) for calendar years before 2010, the term `benefit 
        computation years' means those computation base years equal in 
        number to the number determined under subparagraph (A) plus the 
        applicable number of years determined under subclause (III), 
        for which the total of such individual's wages and self-
        employment income, after adjustment under paragraph (3), is the 
        largest;
            ``(II) for calendar years after 2009, the term `benefit 
        computation years' means all of the computation base years; and
            ``(III) for purposes of subclause (I), the applicable 
        number of years is the number of years specified in connection 
        with the year in which such individual reaches early retirement 
        age (as defined in section 216(l)(2)), or, if earlier, the 
        calendar year in which such individual dies, as set forth in 
        the following table:

``If such calendar year is:         The applicable number of years is:
        Before 2001............................................       0
        2001...................................................       1
        2002...................................................       2
        2003...................................................       3
        2004...................................................       4
        2005...................................................       5
        2006...................................................       6
        2007...................................................       7
        2008...................................................       8
        2009...................................................      9;
            ``(ii) the term `computation base years' means the calendar 
        years after 1950, except that such term excludes any calendar 
        year entirely included in a period of disability; and''.
    (b) Conforming Amendment.--Section 215(b)(1)(B) of the Social 
Security Act (42 U.S.C. 415(b)(1)(B)) is amended by striking ``in those 
years'' and inserting ``in an individual's benefit computation years 
determined under paragraph (2)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to benefit computation years beginning after December 31, 2000.

SEC. 4. ACTUARIAL ADJUSTMENT FOR RETIREMENT.

    (a) Early Retirement.--
            (1) In general.--Section 202(q) of the Social Security Act 
        (42 U.S.C. 402(q)) is amended--
                    (A) in paragraph (1)(A), by striking ``\5/9\'' and 
                inserting ``the applicable fraction (determined under 
                paragraph (12))''; and
                    (B) by adding at the end the following:
    ``(12) For purposes of paragraph (1)(A), the `applicable fraction' 
for an individual who attains the age of 62 in--
            ``(A) any year before 2001, is \5/9\;
            ``(B) 2001, is \7/12\;
            ``(C) 2002, is \11/18\;
            ``(D) 2003, is \23/36\;
            ``(E) 2004, is \2/3\; and
            ``(F) 2005 or any succeeding year, is \25/36\.''.
            (2) Months beyond first 36 months.--Section 202(q) of such 
        Act (42 U.S.C. 402(q)(9)) (as amended by paragraph (1)) is 
        amended--
                    (A) in paragraph (9)(A), by striking ``five-
                twelfths'' and inserting ``the applicable fraction 
                (determined under paragraph (13))''; and
                    (B) by adding at the end the following:
    ``(13) For purposes of paragraph (9)(A), the `applicable fraction' 
for an individual who attains the age of 62 in--
            ``(A) any year before 2001, is \5/12\;
            ``(B) 2001, is \16/36\;
            ``(C) 2002, is \16/36\;
            ``(D) 2003, is \17/36\;
            ``(E) 2004, is \17/36\; and
            ``(F) 2005 or any succeeding year, is \1/2\.''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply to individuals who attain the age of 62 in 
        years after 1999.
    (b) Delayed Retirement.--Section 202(w)(6) of the Social Security 
Act (42 U.S.C. 402(w)(6)) is amended--
            (1) in subparagraph (C), by striking ``and'' at the end;
            (2) in subparagraph (D), by striking ``2004.'' and 
        inserting ``2004 and before 2007;''; and
            (3) by adding at the end the following:
            ``(E) \17/24\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2006 and before 
        2009;
            ``(F) \3/4\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2008 and before 
        2011;
            ``(G) \19/24\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2010 and before 
        2013; and
            ``(H) \5/6\ of 1 percent in the case of an individual who 
        attains the age of 62 in a calendar year after 2012.''.

SEC. 5. NONREFUNDABLE CREDIT FOR INDIVIDUALS WHO WORK BEYOND NORMAL 
              RETIREMENT AGE.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25A the 
following:

``SEC. 25B. CREDIT FOR INDIVIDUALS WHO WORK BEYOND NORMAL RETIREMENT 
              AGE.

    ``(a) In General.--In the case of a qualified individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the lesser of--
            ``(1) 10 percent of the amount of such tax, or
            ``(2) the earned income (as defined in section 32(b)(2)) of 
        such individual for such taxable year.
    ``(b) Application With Other Credits.--In determining any credit 
allowed under this subpart, the tax imposed by this chapter shall 
(before any other reductions) be reduced by the credit allowed under 
subsection (a).
    ``(c) Qualified Individual.--For purposes of this section, the term 
`qualified individual' means any individual who has attained retirement 
age (as defined in section 216(l)(1) of the Social Security Act) before 
the close of the taxable year.''.
    (b) Conforming Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 25A the 
following:

                              ``Sec. 25B. Credit for individuals who 
                                        work beyond normal retirement 
                                        age.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.
Amends the Internal Revenue Code to allow a nonrefundable credit against income tax for qualified individuals who have attained early retirement age.
RARE Act II