The Windfall Elimination Provision (WEP) in Social Security: Comparing Current Law with Proposed Proportional Formulas

Summary: Social Security is a work-based federal insurance program that provides income support to workers and their eligible family members in the event of a worker's retirement, disability, or death. About 6% of workers in paid employment or self-employment in 2019 were not covered by Social Security. A quarter of state and local government employees and most permanent civilian federal employees hired before January 1, 1984, were not covered, and these groups constituted the majority of noncovered workers.

Summary: For workers whose entire careers are covered by Social Security, the Social Security benefit formula is weighted to replace a greater share of career-average earnings (referred to as the replacement rate ) for low-paid workers than for high-paid workers. However, providing an appropriate replacement rate for beneficiaries whose careers are split between covered and noncovered employment (referred to hereinafter as split-career beneficiaries ) is challenging because years of noncovered earnings are marked as zeros in Social Security earnings records, so split-career beneficiaries appear to have low career-average earnings. Therefore, if there were no adjustment for noncovered earnings, split-career beneficiaries would receive a higher replacement rate than beneficiaries with the same earnings who spent their entire careers in covered employment. The windfall elimination provision (WEP) is a modified benefit formula that reduces certain retired or disabled workers' Social Security benefits if they also have earnings not covered by Social Security and are entitled to pension benefits based on those noncovered earnings. The WEP aims to provide split-career beneficiaries with approximately the same replacement rate as similar workers whose entire careers were covered by Social Security.

Summary: Some have argued, however, that the current-law WEP formula generally fails to accurately adjust affected workers' benefits. They say it overadjusts some affected workers' benefits (i.e., it reduces them by too much), giving them a lower replacement rate than similar workers whose entire careers were covered by Social Security. In contrast, they argue it underadjusts some other affected workers' benefits, giving them a higher replacement rate than similar workers whose entire careers were covered. Estimates in 2018 showed the current-law WEP overadjusted 69% of affected beneficiaries' benefits and underadjusted for the remaining 31%.

Summary: Legislative proposals have been introduced to substitute the WEP with a proportional formula that would calculate Social Security benefits based on earnings from both covered and noncovered employment. The proportional formula's supporters have argued it is a more accurate method to treat noncovered employment, because it would provide the same replacement rate for split-career beneficiaries and beneficiaries whose entire careers are covered by Social Security.

Summary: Compared with current law, a proportional formula would increase Social Security benefits for beneficiaries whose current-law WEP benefits are overadjusted and decrease benefits for those whose benefits are underadjusted. It would also decrease benefits for many beneficiaries with earnings from noncovered employment who are exempt from the current WEP reduction because they (1) have 30 or more years of substantial covered earnings, or (2) do not receive a pension based on noncovered earnings.

Summary: Proposals to establish a proportional formula have been discussed since the 1980s. However, applying the proportional formula requires a complete record of earnings from covered and noncovered employment, which were not readily available at that time. To obtain the complete earnings record, the Social Security Administration (SSA) would have needed a massive new operation system requiring extensive data reporting, maintenance, and correction processes, which could not have been accomplished quickly with limited costs. Therefore, the current-law WEP was enacted in 1983 as an approximate approach to adjust Social Security benefits for certain beneficiaries who had earnings in jobs not covered by Social Security. Today, SSA has 35 years of data on earnings from both covered and noncovered employment, implying that the proportional formula is now an option for Congress to consider. In 2019 (the 116 th Congress), H.R. 3934 and H.R. 4540 would replace the current-law WEP approach with a proportional formula for certain individuals who would become eligible for Social Security benefits in 2022 or later.

Social Security provides insured workers and their eligible family members with a measure of protection against the loss of income due to the worker's retirement, disability, or death. The amount of the monthly benefit payable to workers and their family members is based on the worker's career-average earnings from jobs covered by Social Security (i.e., jobs in which the worker's earnings were subject to the Social Security payroll tax). Although participation in Social Security is compulsory for most workers, about 6% of all workers in paid employment or self-employment are not covered by Social Security. Most noncovered workers are state and local government employees who are covered by alternative staff-retirement systems or permanent civilian federal employees hired before January 1, 1984, most of whom are covered by the Civil Service Retirement System (CSRS) or other alternative retirement plans.

Social Security benefits are designed to replace a certain percentage of a worker's career-average earnings (referred to as the replacement rate ) for those who remain in covered employment throughout their careers. The benefit formula is weighted to replace a greater share of career-average earnings (i.e., provide a higher replacement rate) for low-paid workers than for high-paid workers. However, providing an appropriate replacement rate for beneficiaries whose careers are split between covered and noncovered employment (referred to hereinafter as split-career beneficiaries ) is challenging because years of noncovered earnings are marked as zeros in Social Security earnings records, so split-career beneficiaries appear to have low career-average earnings. Therefore, without adjusting for noncovered earnings, split-career beneficiaries would receive a higher replacement rate than beneficiaries with the same earnings who spent their entire careers in Social Security-covered employment.

The windfall elimination provision (WEP) is a modified benefit formula that reduces Social Security benefits for certain retired or disabled workers who have earnings not covered by Social Security and are entitled to pension benefits based on those noncovered earnings (including certain foreign pensions). Its purpose is to remove an unintended advantage or windfall that these workers would otherwise receive as a result of the interaction between the regular Social Security benefit formula and the workers' relatively short careers in Social Security-covered employment. In December 2018, nearly 1.9 million people (or about 3% of all Social Security beneficiaries) were affected by the WEP.

Some argue that the current-law WEP formula generally fails to provide the correct benefit adjustment (reduction) to affected beneficiaries. It overadjusts the benefit for some affected workers by producing a relatively large benefit reduction that gives them a lower replacement rate than similar workers whose entire careers were covered by Social Security; in contrast, it underadjusts the benefit for some other affected beneficiaries by producing a relatively small benefit reduction, giving them a higher replacement rate than similar workers whose entire careers were covered by Social Security. Legislative proposals have been introduced to substitute the current WEP with a proportional formula that would provide the same replacement rate to split-career beneficiaries and beneficiaries whose entire careers are covered.

This report explains how the proportional formula would work and how it differs from the current-law WEP formula. It also discusses how Social Security benefits would change under the proportional formula for workers with different levels of earnings, years of noncovered earnings, and timing of those noncovered earnings (i.e., early career, midcareer, or late career). Lastly, this report concludes with historical and recent legislative proposals that are based on the proportional formula.

Among other requirements, a worker generally needs 40 earnings credits (10 years of Social Security-covered employment) to be eligible for a Social Security retired-worker benefit. The Social Security regular benefit formula applies three replacement factorsâ90%, 32%, and 15%âto three different brackets of a worker's average indexed monthly earnings (AIME), which is the monthly average of the 35 highest years of indexed covered earnings. The result is the primary insurance amount (PIA), which is the worker's basic benefit before any adjustments are made for factors such as cost-of-living adjustments (COLAs), early retirement, delayed retirement, or noncovered earnings. For workers who become eligible for benefits in 2020, the PIA is based on the formula in Table 1 . The dollar amounts in the table, known as bend points , are adjusted annually for average earnings growth.

Under current law, the WEP reduction is based on years of coverage (YOCs)âthe larger the number of YOCs, the lower the WEP reduction. For people with 20 or fewer YOCs who become eligible for benefits in 2020, the WEP reduces the first replacement factor from 90% to 40% (referred to as the WEP replacement factor in this report), resulting in a maximum benefit reduction of $480 (90% of $960 minus 40% of $960). A worker with an AIME of $1,500 who becomes eligible for Social Security benefits in 2020 would receive an unadjusted monthly benefit of $1,036.80 if all earnings are covered by Social Security, compared to a WEP-reduced monthly benefit of $556.80 if he or she has 20 or fewer YOCs (see Table 1 ). For each YOC in excess of 20, the WEP replacement factor increases by 5%. For example, the WEP factor is 45% for those with 21 YOCs and 50% for those with 22 YOCs. The WEP factor reaches 90% for those with 30 or more YOCs, and at that point it is phased out (see Figure 1 ).

The amount of substantial covered earnings needed for a YOC is $25,575 in 2020; the amount is adjusted annually by average wage growth. Workers with annual covered earnings below the level of substantial earnings do not receive a YOC. For example, a worker who earns $5,640 in 2020 (covered earnings) will receive four earnings credits for the purpose of Social Security eligibility, but will not qualify for a YOC for the WEP purpose. In December 2018, of the nearly 1.9 million beneficiaries affected by the WEP, nearly 1.6 million (84%) had 20 YOCs or fewer, and the remaining 0.3 million (16%) had 21-29 YOCs (see Figure 1 ).

Two groups of beneficiaries with noncovered employment are exempt from the WEP: (1) those with 30 or more YOCs; and (2) those not receiving a pension based on those noncovered earnings. SSA's Office of the Chief Actuary estimated that roughly 18 million Social Security worker beneficiaries with some noncovered earnings were exempt from the current WEP in 2018. Among them, about 9.4 million (52%) had 30 or more YOCs. Additionally, a guarantee provision in the WEP ensures that the WEP reduction cannot exceed one-half of the pension based on the worker's noncovered employment.

Benefit Adjustments Under the Current-Law WEP

The regular Social Security benefit formula is progressive, replacing a greater share of career-average earnings for low-paid workers than for high-paid workers. For example, Table 2 displays five types of scaled workers with hypothetical lifetime earnings from low to high, whose earnings patterns are based on actual Social Security-insured workers' career earnings. The replacement rateâthe percentage of AIME replaced by the PIAâranges from 83.3% for a very low-earning worker whose entire career is covered to 60.5% for a low-earning worker, 44.8% for a medium-earning working, 37.2% for a high-earning worker, and 29.4% for a worker who earns the taxable maximum every year.

If a person has earnings not covered by Social Security, those noncovered earnings are shown as zeros in their Social Security earnings records, thus resulting in relatively lower career-average earnings. The regular formula cannot distinguish between workers who have low career-average earnings because they worked for many years at low earnings in covered employment and workers who appear to have low career-average earnings because they worked for many years in jobs not covered by Social Security. Therefore, without a PIA reduction for noncovered earnings, a worker who split his or her career between covered and noncovered employment might receive a higher replacement rate than a worker with the same level of earnings who spent an entire career in covered employment. For example, a low-scaled worker is estimated to have annual career-average earnings of $22,588. If all career earnings were covered, the worker would receive a 60.5% replacement rate in Social Security benefits. However, if the second half of the low-scaled worker's career was in noncovered employment, the worker would receive a replacement rate of 90.0% based on the regular benefit formula before adjusting for noncovered earnings (see Table 2 ). The WEP PIA addresses this problem by reducing the replacement rate for certain workers who have noncovered earnings. For example, the replacement rate would be adjusted from 90.0% to 40.0% for a low-scaled worker if the second half of his career was not covered by Social Security.

The WEP's original intent was to ensure that Social Security beneficiaries with some earnings from noncovered employment received the same replacement rate as workers who spent their entire careers in covered employment. However, the current-law WEP formula can only approximately achieve that goal.

The current-law WEP formula over adjust s benefits for certain affected beneficiaries by producing a relatively large benefit reduction, resulting in a lower replacement rate than a similar worker whose entire career was covered by Social Security would receive. For example, a very low-scaled worker who spent the second half of his or her career in noncovered employment would receive a replacement rate of 40.0% using the WEP formula, which is substantially lower than the replacement rate a very low-scaled worker whose entire career was covered by Social Security (83.3%) would receive. The magnitude of such benefit overadjustment is smaller for affected beneficiaries with relatively higher lifetime earnings. For example, if the second half of a high-scaled worker's career was not covered by Social Security, the worker would receive a WEP benefit replacing 34.4% of covered AIME, which is slightly lower than the replacement rate for high-scaled workers whose entire careers are covered by Social Security (37.2%).

In addition, the current-law WEP formula under adjust s Social Security benefits for some other beneficiaries by producing a relatively small benefit reduction, resulting in a higher replacement rate than a similar worker whose entire career is covered would receive. Such underadjustment usually applies to workers with significantly high lifetime earnings and some earnings not covered by Social Security. For example, a taxable-maximum worker who earned the taxable-maximum amount each year of work history is estimated to have career-average earnings of $123,232. If the second half of the taxable-maximum worker's career was not covered by Social Security, the worker would receive a 33.2% replacement rate in Social Security benefits under the WEP, compared to 29.4% if the entire career had been covered by Social Security (see Table 2 ).

How Would the Proportional Formula Work?

The proportional formula for the WEP would apply the regular Social Security benefit formula to all past earnings up to the taxable maximum from both covered and noncovered employment. The resulting benefit would then be multiplied by the ratio of career-average earnings (AIME) from covered employment only to career-average earnings (AIME) from both covered and noncovered employment. By concept, the PIA under the proportional formula (i.e., proportional PIA) would be as follows:

Proportional PIA=PIA for all EarningsÃAIME for Covered EarningsAIME for all Earnings

In other words, a Social Security benefit would be calculated based on a worker's combined covered and noncovered earnings, but only the portion based on covered earnings would be payable as a Social Security benefit.

Benefit Adjustments Under the Proportional Formula

Under the proportional formula, Social Security beneficiaries with some earnings from noncovered employment would receive the same replacement rate (ratio of PIA to AIME) for covered earnings as similarly situated workers who spent their entire careers in covered employment, regardless of earnings levels, years of covered earnings, or the timing of those covered earnings. Figure 3 illustrates this, showing that a medium-scaled worker would receive a 44.8% replacement rate under the proportional formula whether the worker's entire career or only half of the worker's career was covered by Social Security. This 44.8% replacement rate for the split-career worker would be lower than the windfall replacement rate under the regular PIA without any adjustment for noncovered earnings (60.2%), but higher than the rate under the current WEP PIA (35.9%), which overadjusts the benefit reduction for noncovered earnings.

The proportional formula would provide a higher benefit than the WEP for workers whose Social Security benefits are currently overadjusted, such as the very low-, low-, medium-, and high-scaled workers shown in Table 3 . Because scaled workers with relatively lower lifetime earnings receive a larger overadjustment under the current WEP, those workers would receive a larger monthly benefit increase under the proportional formula. For example, the monthly benefit increase under the proportional formula relative to the current WEP would be $213.90 for very low-scaled workers if their careers' second halves were not covered by Social Security, compared to $182.20 for low-scaled workers, $176.50 for medium-scaled workers, and $87.10 for high-scaled workers. In contrast, workers whose Social Security benefits are underadjusted by the current WEP, such as taxable-maximum workers, would receive a lower benefit under the proportional formula.

Comparing the Proportional Formula with Current Law

The proportional formula discussed above would differ from the current-law WEP formula in terms of monthly benefit amounts, improper payments, and notification to beneficiaries.

Given the current-law WEP formula's design, the proportional formula would increase Social Security benefits for some beneficiaries with noncovered employment and decrease benefits for others. Beneficiaries who would receive a lower benefit under the proportional formula than under current law include

beneficiaries with noncovered earnings who are exempt from the current-law WEP, such as those with 30 or more YOCs or those not receiving a noncovered pension; and beneficiaries whose benefits are underadjusted using the current WEP PIA, such as those who have relatively high lifetime earnings, are close to 30 YOCs, or are affected by the current-law guarantee provision.

If the proportional formula had applied to current beneficiaries in 2018, SSA's Office of the Chief Actuary (OCACT) estimates that about 1.1 million beneficiaries affected by the current WEP (or 69%) would have received a higher benefit and about 0.5 million beneficiaries affected by the current WEP (or 31%) would have received a lower benefit. In addition, 13.5 million beneficiaries with some noncovered earnings who were exempted from the current WEP in 2018 would have received a lower benefit under the proportional formula.

Exemptions and the Guarantee Provision Under Current Law

Beneficiaries who are eligible for either of the two exemptions to the current-law WEP would receive a lower benefit under the proportional formula. Beneficiaries with 30 or more YOCs are exempted from the current WEP, but under the proportional formula, workers with 30 or more YOCs and very few years of noncovered employment (even less than a year) would probably receive proportional reductions in their Social Security benefits. For example, a medium scaled-worker who earned 30 YOCs in his earlier career would not be affected by the current WEP even if he took a noncovered position afterward and was entitled to a noncovered pension (see case [1] in Table 4 ). In this case, the worker would receive an unreduced Social Security benefit of $1,707.30, which would be higher than the proportional PIA ($1,612.00) based on earnings from noncovered employment. SSA's OCACT estimates that, in 2018, roughly 9.4 million Social Security retired-worker and disabled-worker beneficiaries with some noncovered earnings were exempt from the current WEP because they had 30 or more YOCs. Because those beneficiaries have relatively few years of noncovered earnings, their benefit reductions under the proportional formula would be relatively small.

The other exemption applies to beneficiaries with noncovered earnings who do not receive a pension based on those noncovered earnings. Those beneficiaries could receive a lower benefit under the proportional formula because their earnings from noncovered employment could reduce the proportion of overall career-average earnings from covered jobs. For example, under current law, a medium-scaled worker who worked in a noncovered position from age 55 to age 61 but received no noncovered pension benefits would be exempt from the WEP and receive a Social Security benefit equal to $1,551.10 (see case [2] in Table 4 ). This amount would be higher than the benefit computed by the proportional formula ($1,432.80) because those seven years of noncovered employment would proportionally reduce the Social Security benefit. Estimates from OCACT find that about 8.6 million Social Security retired-worker and disabled-worker beneficiaries with some noncovered earnings and less than 30 YOCs were exempt from the current WEP in 2018 because they had no pension based on those noncovered earnings.

In addition, the guarantee provision under current law limits benefit reductions by ensuring that the WEP reduction cannot exceed one-half of the noncovered pension benefit. This provision typically leads to small benefit reductions for beneficiaries who receive small pension benefits based on relatively short careers in noncovered employment. The proportional formula would not limit reductions in this way, so those workers' benefits would be lower under the proportional formula than under the WEP. For example, a low-scaled worker who worked in a noncovered position from age 52 to age 61 and received a monthly benefit from a noncovered pension equal to $100 would receive a WEP reduction of no more than $50 under current law (see case [3] in Table 4 ). Therefore, this worker would receive $896.10 under the current WEP, but $770.90 under the proportional formula with no guarantee provision.

In addition to the exemptions and the guarantee provision, whether a worker with noncovered earnings would receive a lower Social Security benefit under the proportional formula relative to current law also depends on YOCs based on substantial earnings. The number of YOCs determines the WEP replacement factor under current law (see Figure 1 ). In general, the larger the number of YOCs, the higher the WEP replacement factor. Workers who have employment not covered by Social Security also need to earn the substantial covered amount ($25,575 in 2020) to receive one YOC, which is much higher than the earnings required for Social Security eligibility ($5,640 in 2020). Because of the WEP's higher YOC earnings threshold, workers with relatively lower covered earnings who are affected by the WEP may be entitled to Social Security benefits based on earnings credits but not qualify for a YOC for WEP purposes.

Although YOCs are a critical factor for determining the PIA under the current-law WEP, they are not relevant for the proportional formula. To compare monthly benefits based on the two formulas by YOCs, Figure 4 shows a medium-scaled worker's monthly benefit amounts under the current WEP PIA and the proportional PIA. If the medium-scaled worker took a job covered by Social Security in the earlier part of her career and the number of YOCs was relatively small (less than 27 for a medium-scaled worker), the proportional formula would provide a higher benefit than the current WEP. However, if the number of YOCs were relatively large (more than 27 for a medium-scaled worker), the proportional formula would provide a lower benefit than the currentâlaw WEP.

Two reasons may explain why the proportional formula would provide a lower benefit than the current-law WEP at the higher level of YOCs. First, current law exempts beneficiaries from the WEP if they have 30 or more YOCs, resulting in a higher benefit amount than under the proportional formula. Second, when YOCs are close to 30, the current-law WEP replacement factor is relatively large, such as 85% for 29 YOCs (see Figure 1 ), so the current-law WEP PIA underadjusts and produces a higher benefit than the proportional formula.

The monthly benefit difference between the proportional formula and the current-law WEP formula also depends on earning levels. For example, the very low- and low-scaled workers in Figure 5 had fewer than 20 YOCs because their annual earnings were typically less than the substantial earnings required for a YOC. They would receive a current-law WEP PIA based on the lowest WEP replacement factor (40%). Therefore, the proportional PIA for these workers would generally be higher than the WEP PIA, because the 40% WEP replacement factor overreduces their Social Security benefits for noncovered earnings. The proportional PIA would also be higher than the WEP PIA for medium- and high-scaled workers with relatively fewer YOCs, such as Figure 5 's medium-scaled workers with fewer than 29 years of covered earnings and high-scaled workers with YOCs between 11 and 22. However, as YOCs increase, the WEP replacement factor goes up, so the WEP PIA is higher than the proportional PIA for medium- and high-scaled workers with more YOCs. For workers with substantially high earnings, such as taxable maximum workers, the proportional PIA would generally be lower than the WEP PIA.

The size of the monthly benefit difference between the proportional PIA and the WEP PIA also depends on the timing of covered and noncovered employment. Figure 6 compares three medium-scaled workers with 20 years of covered employment in early career, midcareer, and late career, respectively. Because early-career earnings are relatively lower than earnings in later years, a medium-scaled worker whose early career is covered by Social Security would tend to have a lower WEP PIA, a lower proportional PIA, and a lower monthly benefit difference between the two formulas than a medium-scaled worker with covered earnings at midcareer or late career. This example indicates that the WEP PIA and proportional PIA amounts depend on the timing of noncovered employment, as well as earning levels from both covered and noncovered employment.

The current-law WEP and the proportional formula differ not only in benefit calculation, but also in administration and associated costs.

SSA's ability to administer the current WEP depends in large part on the type of noncovered employment on which a beneficiary's pension is based. For most federal retirees and survivors, SSA relies primarily on noncovered pension data matched from the Office of Personnel Management (OPM). However, for state or local retirees and certain retirees with foreign pensions, SSA relies primarily on beneficiaries to self-report noncovered pension amounts. Based on the information matched and provided, SSA determines whether and to what extent to apply the WEP. Unreported state and local government pensions lead to improper payments. According to SSA, WEP has been a leading cause of computational errors related to overpayments. For FY2013 through FY2017, WEP accounted for 63% of reported computation overpayment errors, and average overpayments related to WEP totaled approximately $520 million annually.

In contrast, the proportional formula is applied based on covered and noncovered earnings records, which are reported to SSA on Internal Revenue Service (IRS) Form W-2. Without other provisions, benefits based solely on the proportional formula would likely have fewer errors compared to benefits computed with the current-law WEP formula.

The annual Social Security statements that SSA makes available to all eligible workers provide benefit estimates based only on covered employment, with no estimates of the WEP adjustment because SSA is not provided with information on receipt of noncovered pensions until an individual self-reports this benefit when applying for Social Security. Because of this limitation, beneficiaries have argued that they were not given sufficient notice of how much their benefits would be reduced due to the WEP. To address this issue, the Social Security Protection Act of 2004 ( P.L. 108-203 ) requires state and local government employers to disclose the WEP's effect to affected employees hired on or after January 1, 2005. SSA also responded to those communication issues by inserting a description of the WEP into the statement beginning in 2007.

However, communication challenges remain. The statement provides no estimates of the current WEP adjustment. The WEP adjustment is difficult to estimate without information on noncovered pensions, which is generally not available until the worker is entitled to such pension at a later date.

Compared to the current WEP, the estimate of noncovered earnings used in the proportional formula and the corresponding proportional PIA would be relatively easier to include in the statement. The proportional PIA estimate would have to be based on certain assumptions regarding future employment type, but it would not require noncovered pension information.

Legislative Proposals Based on the Proportional Formula

In 1981, proposals to address Social Security benefits for individuals receiving pensions from noncovered employment were discussed as part of broad reform efforts to address Social Security's financing issues, which were a major concern at the time.

Some of the proposals called for worker PIA computations to use both covered and noncovered earnings, and for the PIA based on combined earnings to then be reduced by the ratio of noncovered earnings to combined earnings. This method is commonly referred to as the proportional formula , as discussed earlier in this report. This proposal was recommended by the National Commission on Social Security and included in Section 301 of H.R. 3207 , the Social Security Amendments of 1981 as introduced in the 97 th Congress.

Other proposals called for a modified benefit formula that would change the first replacement factor in the regular benefit formula for workers with pensions based on noncovered work, which is similar to current law. For example, a May 1981 Reagan Administration proposal would have substituted the 90% replacement factor in the regular benefit formula with a 32% replacement factor for affected beneficiaries. The proposal would have guaranteed that the Social Security benefit reduction could not exceed one-half of the noncovered pension.

In January 1983, the National Commission on Social Security Reform (NCSSR, better known as the Greenspan Commission) recommended eliminating the windfall portion of benefits for individuals who received a pension based on noncovered employment. The two methods discussed above were suggested: (1) the proportional formula based on covered and noncovered earnings, and (2) the modified benefit formula, substituting the 90% replacement factor with 32%.

In the same year, SSA offered comments on the two methods. The agency indicated that the proportional formula would be the most conceptually appropriate, but would require SSA to maintain detailed records on workers' noncovered earnings in a manner comparable to the current covered earnings record operations, which would have required extensive data reporting, maintenance, and correction processes, and could likely not have been done with limited cost at that time. In contrast, SSA indicated the modified benefit formula based on the replacement factor would achieve the proportional formula's approximate results and be vastly easier to administer. SSA also recommended lowering the 90% replacement factor to 61% (the midpoint between the 90% factor and the 32% factor), as the 32% replacement factor would overadjust for the windfall.

In March 1983, Congress incorporated the NCSSR's recommendations (with some modifications), along with additional provisions to resolve the remaining long-range deficit, into the Social Security Amendments of 1983 ( P.L. 98-21 ). The conference agreed that the 90% replacement factor in the regular benefit formula would be substituted with a 40% replacement factor (phased in over five years), as in current law.

Since 2004, various bills have been introduced to replace the current WEP formula with the proportional formula based on both covered and noncovered earnings. Partly because all covered and noncovered earnings have been reported to SSA on Form W-2 since 1978, sufficient earnings records are now available to apply the proportional formula. Thus, a previous major area of concern for administering a proportional formula has been alleviated.

Legislative proposals based on the proportional formula usually address two essential questions: (1) whether the proportional formula would be applied to beneficiaries affected by the current WEP; and (2) how to treat beneficiaries who would receive a lower benefit under the proportional formula compared to current law. For the first question, proposals either apply the proportional formula to all current and future affected beneficiaries, or apply the proportional formula only to certain future beneficiaries and provide an additional monthly benefit (usually referred to as a rebate ) to those affected by the current WEP. For the second question, some proposals include a no-benefit-cut provision such that the beneficiary would receive a benefit based on the higher of the current WEP formula and the proportional formula.

For example, S. 113 and H.R. 2797 in the 112 th Congress would have applied the proportional formula to all beneficiaries (both current and future beneficiaries) after 1985 and provided a no-benefit-cut or hold harmless provision to beneficiaries who had worked in noncovered positions prior to one year after the bill's enactment. In a somewhat different approach, H.R. 3934 and H.R. 4540 in the 116 th Congress would apply the proportional formula to beneficiaries becoming eligible after a certain date, such as December 31, 2021; provide a rebate to beneficiaries affected by the current-law WEP; and mandate a no-benefit-cut provision for some or all future beneficiaries. The above two bills introduced in the 116 th Congress also include provisions to require SSA to show noncovered as well as covered earnings records on Social Security statements and to require studies on ways to facilitate data exchanges between SSA and state and local governments to improve current-law WEP administration.


Rural Development Provisions in the 2018 Farm Bill (P.L. 115-334)

Summary: The U.S. Department of Agriculture's (USDA) Rural Development agency (RD) administers programs to support rural infrastructure and economic development. This includes programs focused on rural housing, rural business development, rural water and energy infrastructure, and, more recently, rural broadband deployment. Congress considers reauthorizing these programs in periodic omnibus farm bills. In December 2018, President Trump signed the 2018 farm bill (Agriculture Improvement Act of 2018, P.L. 115-334 ) into law. This legislation reauthorizes and amends RD programs, establishes new rural development programs and initiatives, and repeals other programs.

Summary: Economic trends and social issues prevalent in rural America during the drafting of a farm bill typically influence the law's rural development provisions. Issues that influenced the rural development provisions of the 2018 farm bill include:

Summary: rural population decline; the changing nature of rural employment, especially the decline in agriculture and manufacturing employment; rural health challenges, including an increasing number of rural hospital closures and increasing rates of drug overdose deaths related to opioids; aging rural infrastructure and a lack of access to broadband internet in rural areas; and a shift among some scholars and policymakers toward regional approaches to rural economic development.

Summary: The 2018 farm bill establishes new rural development programs and initiatives. Among the new provisions, the law directs USDA to temporarily prioritize funding under certain rural development programs for projects that address substance use disorder. It also authorizes USDA to make similar temporary prioritizations in the future, to respond to public health disruptions in rural areas. P.L. 115-334 also establishes a new rural broadband program to finance middle mile infrastructure âinfrastructure that connects a local network to the internet backbone. The law also authorizes a new grant program to support high-wage jobs and new businesses in rural areas. P.L. 115-334 directs USDA to establish Tribal Promise Zones, which are to receive priority consideration for certain federal grant programs. Other new rural development provisions relate to broadband deployment, precision agriculture, and rural community development.

Summary: P.L. 115-334 reauthorizes and amends a number of existing rural development programs. It adds a grant component to the Rural Broadband Access Loan Program and increases the authorization of appropriations from $25 million to $350 million per year for FY2019-FY2023. To be eligible for newly authorized grants, at least 90% of households in a service area must lack access to sufficient broadband service. The law also amends eligibility criteria for program loans, raising the percentage of households in an eligible service area that must lack access to sufficient broadband service from 15% to 50% of households. P.L. 115-334 codifies the Community Connect Grant Program and authorizes appropriations of $50 million per year for FY2019-FY2023. It also increases the authorizations of appropriations for the Emergency and Imminent Community Water Assistance Program, the Rural Decentralized Water Systems Program (formerly the Household Well Water Systems Program), and water and wastewater technical assistance and training programs. The law also amends the Cushion of Credit Program to terminate deposit authority and incrementally reduce the interest rate that accrues to borrowers.

Summary: P.L. 115-334 amends certain definitions of rural used to determine eligibility for RD programs. It amends the definition of rural for certain housing and broadband programs to exclude incarcerated populations and the first 1,500 people residing on a military base. It also increases to 50,000 the maximum population of communities eligible for guaranteed loans under the Community Facilities and Water and Waste Disposal programs. The law reestablishes the position of Under Secretary of Agriculture for Rural Development as a permanent position within USDA, subject to Senate confirmation. USDA had eliminated the position in 2017 and replaced it with the Assistant to the Secretary for Rural Development, a position that did not require Senate confirmation. The 2018 farm bill also repeals the Rural Telephone Bank and grants to rural broadcasting systems, among other programs.

While periodic, omnibus farm bills focus on agricultural and food policy, they also contain provisions addressing rural community and economic development. The U.S. Department of Agriculture (USDA), through its Rural Development agency (RD), administers a broad portfolio of programs focused on rural housing, rural infrastructure, and rural business and employment. Congress considers reauthorizing and amending many of these programs in periodic farm bills. The most recent is the Agriculture Improvement Act of 2018 (2018 farm bill, P.L. 115-334 ). The 2018 farm bill generally authorizes programs and funding levels for the period FY2019-FY2023, though some provisions apply to different periods, such as FY2019-FY2025.

Since 1973, farm bills have included a title dedicated to rural development. The Rural Development title (Title VI) of the 2018 farm bill generally addresses (1) rural infrastructure, including housing, electrical generation and transmission, water and wastewater, and more recently, broadband deployment; (2) rural economic development; and (3) rural business creation and expansion. The Miscellaneous title (Title XII) also includes certain rural development provisions related to RD personnel, federal task forces or working groups, and other federal rural development programs. Programs authorized in other titles of P.L. 115-334 may benefit rural areas, especially rural areas with economies reliant on agriculture. However, most rural development provisions in the Rural Development and Miscellaneous titles specifically target rural areas.

A number of issues influenced the rural development provisions of the 2018 farm bill. Many rural communities have experienced decreasing populations over the last decade. In addition, some rural residents struggle to access employment opportunities, especially in high-wage jobs. The ongoing opioid crisis and an increasing number of rural hospital closures have raised concerns about the health of rural residents. Aging infrastructure, such as electric or drinking water infrastructure, also presents a challenge to some rural communities. The digital divide âlower rates of broadband access in rural areas compared to urban areasâhas raised concerns that rural residents may be less able to access opportunities and services such as distance learning, telemedicine, and e-commerce. In addition, policymakers and scholars have increasingly examined regional approaches to rural economic development rather than approaches focused on individual communities.

The 2018 farm bill includes new provisions and programs related to rural broadband deployment, health care, and community development. The law also reauthorizes and amends existing programs related to broadband deployment, other rural infrastructure, and community development. P.L. 115-334 amends multiple definitions of rural used to determine eligibility for RD programs. The law also amends programs that address regional approaches to rural economic development. Further, P.L. 115-334 repeals some rural development programs and makes technical corrections to statutory language authorizing other programs.

This report provides a brief overview of federal rural development programs. It then analyzes issues that influenced the development of rural development provisions in the 2018 farm bill. Next, the report details new rural development programs and entities created and changes made to existing rural development programs, in P.L. 115-334 . The Appendix provides a side-by-side comparison of each provision in the Rural Development title, as well as each rural development provision in the Miscellaneous title, of the 2018 farm bill with prior law.

The Rural Development Policy Act of 1980 ( P.L. 96-355 ) named USDA as the lead federal agency for rural development. RD is the mission area within USDA responsible for rural infrastructure and economic development assistance. Three agencies comprise RD: the Rural Business-Cooperative Service, the Rural Housing Service, and the Rural Utilities Service (RUS). RD programs are largely loan and grant programs that assist communities with small populations to finance development projects.

Many RD programs have statutory authority in the Consolidated Farm and Rural Development Act of 1972 (the ConAct, P.L. 87-128) or the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.). RD programs typically rely on annual appropriations for funding, but omnibus farm bills also authorize mandatory funding for some RD programs. The most recent of these, the 2018 farm bill, reauthorizes or amends existing RD programs and authorizes new RD programs by amending the ConAct, the Rural Electrification Act, or other authorizing legislation. The 2018 farm bill also authorizes some rural development programs or entities administered outside USDA. For example, the law authorizes the Federal Communications Commission (FCC) to establish a new task force on precision agriculture connectivity. It also reauthorizes federal regional commissions, such as the Appalachian Regional Commission.

Issues Influencing the 2018 Farm Bill's Rural Development Provisions

A number of economic and social issues in rural America influenced the rural development provisions of the 2018 farm bill. Rural policy issues that influenced the 2018 farm bill include:

rural population decline; rural underemployment; rural health issues, including the ongoing opioid crisis and an increasing rate of hospital closures in rural areas; aging rural infrastructure and a lack of access to broadband internet in rural areas; and a shift among some scholars and policymakers towards supporting regional approaches to rural economic development.

Between 2010 and 2017, the number of people living in nonmetropolitan counties declined by approximately 223,000. Additionally, over 1,300 nonmetropolitan counties experienced population loss ( Figure 2 ). While the overall U.S. rural population declined, rates of population change varied among rural areas. Populations declined in many rural counties dependent on agriculture and manufacturing, while populations increased in many rural counties dependent on recreation. Population decline results from a combination of out-migration, declining birth rates, and increased mortality. Research has attributed rural out-migration to many factors, including lack of employment opportunities and less access to education, health care, and cultural amenities. Congress sought to address rural population decline in the 2018 farm bill through rural infrastructure, business development, and community development.

Historically, agriculture and rural policy were closely linked due to the high percentage of rural Americans employed in agriculture. This link has weakened due to the changing nature of rural employment. In 2017, the agriculture sector accounted for 5.6% of rural jobs, down from 6.8% in 2001. In addition, USDA estimates that approximately 80% of total farm household income in 2019 will come from off-farm activities. Manufacturing has also been an important source of employment in rural areas, being responsible for a larger share of jobs in rural counties than in urban counties. In 2017, manufacturing employed 10.8% of the rural workforce, declining from 14.1% in 2001. Congress sought to address rural employment in the 2018 farm bill through entrepreneurship, business development, broadband deployment, and access to credit.

Rural health issues also influenced the 2018 farm bill's rural development provisions. Policymakers continue to look for solutions to address the opioid epidemic that began in the 1990s. Though this epidemic has affected urban, suburban, and rural areas, the drug overdose death rate in rural areas increased at a faster rate than in urban areas between 1990 and 2015. In addition, many scholars and interest groups have asserted that the federal government's approach to mitigating the opioid crisis in rural areas should differ from the strategy for urban areas. While federal, state, and local governments have addressed the epidemic, drug overdose rates remain high. In addition, a rise in the number of rural hospital closures has increased concerns about access to health care in rural areas. According to the U.S. Government Accountability Office (GAO), 64 rural hospitals closed between 2013 and 2017, more than twice as many as during the previous five-year period. These hospital closures will likely result in rural residents having to travel greater distances for emergency medical care. In the 2018 farm bill, Congress included provisions related to refinancing of rural hospital debt, funding for opioid abuse prevention and treatment, and coordination of federal rural health efforts.

Aging infrastructure continues to be a concern for rural areas. According to GAO, "many rural communities face significant challenges in financing the costs of replacing or upgrading aging and obsolete drinking water and wastewater infrastructure." Because communities typically pay for drinking water infrastructure through rates charged to users, more sparsely populated communities have difficulty financing major infrastructure construction or upgrades. Some rural communities also lack the resources to assess infrastructure needs. Similar challenges exist to upgrading and maintaining rural housing and electricity infrastructure. The 2018 farm bill includes provisions related to rural infrastructure loan and grant programs, technical assistance for infrastructure planning, and prioritizing water infrastructure funding to address a public health crisis.

Additionally, scholars and policymakers have asserted that access to broadband internet is important for economic and community development in rural areas. According to the most recent FCC deployment data, as of December 2017, 26% of Americans in rural areas and 32% of Americans on tribal lands lack access to broadband at speeds of at least 25 megabits per second (Mbps) download and 3 Mbps upload. In comparison, 1.7% of Americans in urban areas lack access to broadband at 25/3 Mbps. The 2018 farm law includes provisions related to broadband deployment, federal program coordination, and the use of broadband for precision agriculture.

Some scholars and policymakers increasingly support a regional approach to rural economic development. Rather than focus on individual towns or communities, which may compete for jobs and residents, a regional approach draws on the strengths and opportunities of different localities within a region and involves coordination across communities. The 2018 farm bill contained provisions related to federal regional commissions, technical assistance for regional planning, and prioritizing projects that support a strategic community development plan.

Rural Development Provisions in the Agriculture Improvement Act of 2018 (P.L. 115-334)

This section summarizes the rural development provisions in the 2018 farm bill. It provides an overview of new rural development provisions. It also summarizes provisions that reauthorize or amend federal statutes related to existing rural development programs and requirements. In addition to amending programs, the farm bill authorizes programs to receive mandatory or discretionary funding. Congress controls the level of discretionary funding through the subsequent enactment of annual appropriations. Congress controls the level of mandatory funding outside of the appropriations process based on payments made as a direct consequence of statutory requirements. Most RD programs rely on discretionary funding.

Section 6101 directs USDA to set aside at least 20% of annual funds appropriated for the Distance Learning and Telemedicine Program for FY2019-FY2025 for telemedicine projects that provide substance use disorder treatment services. It also directs USDA to prioritize funding for Community Facilities Direct Loans and Grants and Rural Health and Safety Education Grants for projects that provide substance use disorder treatment, education, and prevention. The provision also authorizes the Secretary of Agriculture to temporarily prioritize assistance under certain RD programs to help rural communities respond to a significant public health disruption .

Section 6202 of the 2018 farm bill authorizes a new rural broadband deployment program to fund middle mile infrastructure . Middle mile infrastructure is infrastructure that does not connect directly to an end user (such as a business or household) but rather connects a local network to the larger internet backbone. The provision authorizes $10 million per year for loans and grants for FY2019-FY2023, subject to annual appropriations.

Section 6208 adds a new section to the Rural Electrification Act that addresses environmental reviews for rural broadband programs. The new language authorizes USDA to obligate, but not disburse, loan or grant funds before the completion of an environmental, historical, or other review. The funds may be obligated if USDA determines that a subsequent review will be adequate and easily accomplished. Section 6213 authorizes USDA to use existing regulations for the Rural Broadband Access and Community Connect programs for up to one year until USDA issues a final rule implementing the 2018 farm bill changes.

Section 6212 establishes procedures for federal broadband program coordination . It directs the National Telecommunications and Information Administration (NTIA) at the U.S. Department of Commerce to assist USDA with verifying applicant eligibility for USDA rural broadband programs. The provision also directs USDA and the FCC to coordinate before providing broadband assistance to prevent duplication. It requires USDA, NTIA, and the FCC to submit a report to Congress within one year of the farm bill's enactment on how to best coordinate federal broadband programs and activities.

Section 6214 establishes a Broadband Integration Working Group to conduct a survey of all current federal assistance for broadband deployment. The provision also directs the working group to make recommendations to address regulatory barriers and incentivize investment in broadband deployment and adoption. The working group includes numerous federal agencies. The administrator of RUS, Assistant Secretary for Communications and Information at the Department of Commerce, director of the National Economic Council, and director of the Office of Science and Technology Policy at the White House co-chair the working group. Section 12511 directs the FCC to establish a task force on precision agriculture . Duties of the task force include identifying and measuring current gaps in broadband internet access on agricultural land and making policy recommendations to promote broadband deployment on unserved agricultural land.

Section 6419 authorizes USDA to make grants to eligible entities to provide technical assistance and training to support applications for Rural Business-Cooperative Service programs . Eligible entities may use grants to assist communities in planning for business and economic development needs, identifying public and private financing options, and preparing applications and materials to request financial assistance. The law authorizes appropriations of $5 million per year for the program for FY2019-FY2023. Section 6302 directs USDA to provide technical assistance to t ribal entities to improve the entities' access to RD programs. The provision requires technical assistance to address the unique challenges faced by tribal governments, producers, businesses, and tribally designated housing entities in accessing RD programs.

Section 12510 directs USDA to establish Tribal Promise Zones that are to receive priority consideration for federal grant programs and initiatives. Criteria for Tribal Promise Zones include unemployment rates, poverty rates, vacancy rates, household income, and the effectiveness of a competitiveness plan submitted by nominating entities. Prior to the 2018 farm bill's enactment, the federal government had designated certain tribal areas as Tribal Promise Zones under an existing Promise Zones initiative at the Department of Housing and Urban Development (HUD). Section 12510 directs the Secretary of Agriculture to re-designate any previously designated Tribal Promise Zone.

Section 6424 establishes a new Rural Innovation Stronger Economy Grant Program to establish job accelerators in rural regions. Grant awards may be between $500,000 and $2 million, and applicants must provide at least 20% of project funds. Eligible applicants may use funds for a variety of purposes, including linking rural communities and entrepreneurs to markets, facilitating the repatriation of high-wage jobs to the United States, and identifying and building assets in rural communities. The provision authorizes annual appropriations of $10 million per year for FY2019-FY2023.

Section 6306 creates a Council on Rural Community Innovation and Economic Development , comprised of various executive branch departments and agencies, to coordinate federal engagement with rural stakeholders and make recommendations to streamline and leverage federal investments in rural areas. The provision also establishes a Rural Smart Communities Working Group and a Jobs Accelerator Working Group within the council.

Section 6103 authorizes USDA to use loans or loan guarantees under certain rural business or infrastructure programs to refinance rural hospital debt . Congress permits USDA to assist a rural hospital with refinancing debt if "the assistance would help preserve access to a health service in a rural community, meaningfully improve the financial position of the hospital, and otherwise meet the financial feasibility and adequacy of security requirements of the Rural Development Agency." Section 12409 directs USDA to establish a Rural Health Liaison who would integrate rural health activities across USDA, coordinate with the Secretary of Health and Human Services, and provide technical assistance to USDA outreach, extension, and county offices.

Section 6201 reauthorizes and makes a number of amendments to the Rural Broadband Access Program (also known as the Farm Bill Loan Program):

Increases authorized funding for the program from $25 million to $350 million per year for the period FY2019-FY2023. Authorizes 3%-5% of annual program funding for technical assistance and training to applicants applying to provide broadband service to communities that lack broadband at speeds of at least 10/1 Mbps. Adds a grant component to the program to the existing direct and guaranteed loan components. To be eligible for a grant, at least 90% of households in the proposed service area âthe area in which an applicant proposes to deploy broadbandâmust lack access to broadband at minimum speeds. Applicants must provide matching funds of 25%-75% of the project cost, depending on the population density of the proposed service area. Amends the eligibility criteria for loans to require at least 50% of households in proposed service areas to lack access to broadband service at minimum speeds. Under prior law, this threshold was 15% of households. Increases the minimum acceptable broadband speeds for the program from 4/1 Mbps to 25/3 Mbps. These minimum speeds determine both eligibility criteria and buildout requirements. USDA uses the minimum speeds to determine whether areas lack sufficient broadband service and are therefore eligible for program funding (see above two bullet points). USDA also requires all loan or grant recipients to provide broadband service that meets the minimum speeds. Directs USDA to prioritize applications that serve communities with a population of fewer than 10,000 residents; serve communities experiencing out-migration; provide broadband to cropland and ranchland for use in precision agriculture; and were developed with, and received funding from, community stakeholders, among other prioritization criteria. Increases the maximum time to complete buildout of broadband infrastructure to five years. Under prior law, the maximum buildout time was three years from when USDA made assistance available. Directs USDA to establish broadband buildout requirements âthe level of internet service an applicant must provide for the duration of a project agreement. Section 6201 also directs USDA to project minimum acceptable service standards for projects with agreements of 5-10, 11-15, 16-20, and more than 20 years. Applicants must demonstrate the ability to furnish or improve service in order to meet the broadband buildout requirements. The conference report contains language further explaining congressional intent. Authorizes USDA to provide payment assistance for certain loan and grant recipients. This includes reduced interest rates or allowing borrowers to defer payments. Directs USDA to charge fees to lenders in amounts that reduce the cost of subsidies for guaranteed loans but are not a barrier to program participation. Moves certain provisions regarding notice requirements, default and deobligation, and service area assessment to other sections of the Rural Electrification Act and makes amendments to these relocated provisions. These provisions still apply to the Rural Broadband Access Program. Section 6201 also removes language regarding paperwork reduction, the preapplication process, and the number of application evaluation periods per year.

Section 6102 reauthorizes the Distance Learning and Telemedicine Program through FY2023 and increases the authorization for annual appropriations from $75 million to $82 million per year. Section 6204 codifies the Community Connect Program and authorizes funding of $50 million per year for FY2019-FY2023. Previously, Congress had authorized the program in annual Agriculture appropriations bills.

Section 6203 reauthorizes the Rural Gigabit Network Pilot Program and renames it the Innovative Broadband Advancement Program . Congress authorizes USDA to provide loans or grants to decrease the cost of broadband deployment and increase broadband speeds. Eligible applicants must agree to complete project buildout within five years and increase broadband speeds to at least the minimum broadband buildout requirements established for the Rural Broadband Access Program. Congress authorizes appropriations of $10 million per year for FY2019-FY2023.

Section 6205 establishes criteria for outdated broadband systems . Beginning October 1, 2020, USDA must consider any portion of a service territory that is subject to an outstanding USDA grant agreement to be unserved if broadband speeds in that portion of a service territory are less than 10/1 Mbps. The provision includes an exception for broadband service providers that have constructed, or begun to construct, broadband facilities that meet the minimum speeds for the Rural Broadband Access Program. As mentioned earlier in this section, Section 6201 set minimum broadband speeds for the Rural Broadband Access Program at 25/3 Mbps.

Section 6207 creates a new section of the Rural Electrification Act that addresses public notices, service area assessments, and reporting requirements under USDA rural broadband programs. The provision includes both new language and language moved from other sections of the Rural Electrification Act. It moves language related to public notice requirements, service area assessments, and reporting from the section of the Rural Electrification Act that authorizes the Rural Broadband Access Program to this newly created section. Moving this language makes it applicable to certain other programs authorized in the Rural Electrification Act in addition to the Rural Broadband Access Program.

Section 6207 also makes the following amendments:

Directs USDA to publish information on applications and funding awards for rural broadband programs in a searchable database on the RUS website. The database must be available to the public. Gives internet service providers at least 45 days to respond to a public notice of application, in contrast to at least 15 days under prior law. Providers may submit information on any broadband service the provider currently offers in the area identified in an application. This information helps USDA determine whether a proposed area meets program eligibility requirements. Exempts from certain Freedom of Information Act requirements information submitted by internet service providers in response to public notices. Includes language regarding assessing unserved communities for Rural Broadband Access Program eligibility. Under the program, USDA gives priority to unserved communities âcommunities that lack residential broadband service at speeds of at least 10/1 Mbps. Section 6207 directs USDA to coordinate with the FCC and NTIA, obtain data from any other relevant source, and perform site-specific testing to verify that communities given priority are eligible for program funding. Requires loan or grant recipients to report annually to USDA, rather than semiannually as under prior law. The provision also adds reporting requirements for middle mile projects. It directs USDA to submit a single report to Congress each year detailing assistance provided under all USDA rural broadband loan and grant programs. Authorizes not less than 3% and not more than 5% of funding appropriated for certain rural broadband programs be set aside for oversight, reporting, and accountability measures.

Section 6210 authorizes recipients of certain RD loans, loan guarantees, or grants authorized by the Rural Electrification Act or the ConAct to use up to 10% of the award amount for rural broadband infrastructure projects . Recipients can use funding only for projects in areas that lack broadband service at speeds of at least 25/3 Mbps. The provision also directs USDA not to provide funding if it would result in competitive harm to another recipient of RD loans or grants.

Section 6206 moves language regarding default and deobligation from the section authorizing the Rural Broadband Access Program to a new section of the Rural Electrification Act. It also authorizes USDA to establish a deferral period of not shorter than the project buildout period in order to support the financial feasibility of a project.

Section 6209 moves existing language regarding refinancing telecommunications loans to a new section of the Rural Electrification Act and amends this language. Prior law allowed a loan recipient to use any USDA telecommunications loan to refinance another USDA telecommunications loan if refinancing would support broadband deployment in rural areas. The amended language allows a loan recipient to refinance any outstanding loan that would have been used for an eligible telecommunications purpose under the Rural Electrification Act.

Sections 6211 and 6502 of P.L. 115-334 amend Section 922 of the Rural Electrification Act, which authorizes USDA to make loans for rural telephone service . Section 6211 authorizes telephone loans to be used to refinance other loans authorized by the Rural Electrification Act. It removes the limit that 40% or less of the telephone loan may be used to refinance other loans. Section 6502 removes the word rural from the section title of the Rural Electrification Act, amending it to read, "Loans for telephone service." Section 6502 also removes the requirement for loan applicants to submit to USDA a certificate of convenience from a state regulatory body.

Section 6403 amends the Water and Wastewater Revolving Loan Fund Program . It increases the maximum project award amount from $100,000 to $200,000 and decreases the authorization of annual appropriations from $30 million to $15 million per year for FY2019-FY2023. Section 6404 amends the Rural Water and Wastewater Technical Assistance Program . It increases the authorization of annual appropriations to between 3%-5% of annual appropriations for Water and Waste Disposal Grants, as opposed to 1%-3% under prior law. It also amends eligible projects to include addressing the long-term sustainability of water and wastewater systems and contamination of drinking and surface water.

Section 6405 reauthorizes the Rural Water and Wastewater Circuit Rider Program. It also increases the authorization of annual appropriations from $20 million to $25 million per year for FY2019-FY2023. Section 6408 reauthorizes grants for water systems for rural and Native villages in Alaska . It amends the eligible grant recipients to include Native villages, as defined in the Alaska Native Claims Settlement Act, and consortiums formed pursuant to the Department of Interior and Related Agencies Appropriations Act, 1998 ( P.L. 105-83 ). Section 6408 authorizes USDA to set aside up to 2% of annual program funds for consortiums to provide training and technical assistance for water and waste disposal operation and management.

Section 6409 reauthorizes and amends the Household Well Water Systems Grant Program . It also authorizes subgrants, as well as previously authorized subloans. It limits subloans and subgrants to a maximum of $15,000 for each water well system or decentralized wastewater system. Section 6409 amends the definition of eligible individual to include one whose household incomes does not exceed 60% of the median nonmetropolitan household income for the state or territory. It also increases the authorization of annual appropriations from $5 million to $20 million per year for FY2019-FY2023.

Section 6407 reauthorizes the Emergency and Imminent Community Water Assistance Grant Program . The law funds this program through both a set-aside of Rural Water and Wastewater Grant funding and a standalone appropriation. Section 6407 increases the set-aside from 3%-5% to 5%-7% of annual Rural Water and Wastewater Grant funding. It also increases the authorization for the standalone appropriation from $35 million to $50 million per year for FY2019-FY2023. This provision also directs USDA to prioritize projects that address water contamination posing a threat to human health or the environment. It increases the maximum grant amount from $500,000 to $1 million for projects that respond to a significant decline in water quality or quantity.

Section 6407 also establishes an Interagency Task Force on Rural Water Quality to examine drinking water and surface water contamination in rural communities, particularly those in close proximity to active or decommissioned military installations in the United States. The task force must be composed of representatives from certain federal agencies and state and community stakeholders. The task force is to submit a report to relevant committees and make recommendations to address water contamination issues.

Section 6303 amends the Rural Energy Savings Program to authorize financing of off-grid and renewable energy storage systems. It also directs USDA to streamline borrower accounting requirements and to publish an annual report on the program. It increases the maximum interest rate for program loans from 3% to 5%. It also directs USDA to exclude any debt incurred under the program in the calculation of a borrower's eligibility for other loans made under the Rural Electrification Act. The provision also reauthorizes annual appropriations of $75 million per year for FY2019-FY2023.

Section 6501 authorizes USDA to refinance electric and telephone loans made by RUS. It also directs USDA to enter into a memorandum of understanding with the Department of Energy, under which the Department of Energy will provide technical assistance to USDA on making electric and telephone loans. Section 6505 reauthorizes USDA's ability to guarantee payments on bonds and notes issued for electrification or telephone purposes . It amends the purpose of bond or note guarantees to be for financing utility infrastructure. It also adds terms for bond or note guarantees, including a 30-year maximum length. Section 6505 removes the prohibition on guarantees for bonds or notes that will finance electricity generation. It also directs USDA to continue carrying out specified sections of the Rural Electrification Act until the full implementation of any new regulations required by the 2018 farm bill.

Section 6506 reauthorizes the use of certain telecommunications loans for expansion of 911 access . It also amends the eligible loan purposes to include multiuse emergency communications networks that provide critical transportation-related information services. Section 6507 authorizes USDA to make or guarantee electric loans for cybersecurity and grid security improvements . Section 6418 authorizes USDA to collect loan fees for certain loans authorized by the ConAct in such amounts as to bring down the costs of loan subsidies. It also specifies that loan fees shall be consistent with current practices in the marketplace and shall not act as a barrier to participation in the loan programs.

The 2018 farm bill also reauthorizes additional programs through FY2023. Section 6406 reauthorizes Tribal College and University Essential Community Facilities Grants, Section 6410 reauthorizes Solid Waste Management Grants, and Section 6412 reauthorizes grants for National Oceanic and Atmospheric Administration Weather Radio Transmitters.

Section 6422 reauthorizes the Rural Microentrepreneur Assistance Program through FY2023. It eliminates mandatory funding for the program (previously $3 million per year) and decreases the authorization of appropriations from $40 million to $20 million per year for FY2019-FY2023. It also adds a minimum grant amount of 20% of the total outstanding balance of microloans made by the intermediary, subject to availability of funding. Section 6412 reauthorizes the Rural Cooperative Development Grant Program through FY2023. It also directs academic institutions conducting research under the program to include economic census data in their research on the economic impacts of cooperatives.

Section 6427 reauthorizes appropriations of $20 million per year for the Rural Business Investment Program through FY2023. Section 6426 amends the program by revising the definitions of development venture capital and equity capital . The provision also removes the $500 maximum amount for fees, replacing it with language authorizing USDA to charge "such fees as the Secretary [of Agriculture] considers appropriate, so long as those fees are proportionally equal for each rural business investment company." It also prohibits rural business investment companies from investing in entities that are not otherwise eligible for Farm Credit System financing if a Farm Credit System institution holds more than 50% of the shares of the investment company. Under prior law, this threshold was 25%. Section 6426 also prohibits USDA from requiring that an entity applying to be a rural business investment company provide investment or capital beyond the requirements listed in statute.

Section 6416 reauthorizes appropriations of $25 million per year through FY2023 for the Intermediary Relending Program . The provision also sets a maximum loan amount that an intermediary may make for a project at the lesser of $400,000 or 50% of the loan made by USDA to the intermediary. It adds criteria for evaluating applications, directs USDA to establish a schedule for the return of equity contributions, and directs USDA to reduce the administrative requirements on intermediaries.

Section 6503 amends the Cushion of Credit Program to terminate all deposit authority into cushion of credit accounts effective December 20, 2018. It reduces the interest rate for borrowers from 5% per year to 4% per year for FY2021 and then to the applicable one-year Treasury rate thereafter. The provision allows a borrower to reduce the cushion of credit account balance in order to prepay loans made or guaranteed under the Rural Electrification Act. Borrowers may make these prepayments through September 2020. The provision prohibits collection of prepayment premiums from borrowers. Section 6503 also authorizes such sums as necessary from the U.S. Treasury to cover any loan modification costs.

Section 6504 reauthorizes and amends the Rural Economic Development Loan and Grant Program . It moves language regarding the program from the section of the Rural Electrification Act authorizing the Cushion of Credit Program to a new section of the act. Section 6504 authorizes annual appropriations of $10 million per year for FY2019-FY2023. It also provides for mandatory funding, financed through the Commodity Credit Corporation, of $5 million per year for FY2022 and FY2023.

Section 12608 reauthorizes the Rural Emergency Medical Service Training and Equipment Assistance Program and authorizes annual appropriations of such sums as necessary for FY2019-FY2023. It amends eligibility to include only emergency medical service agencies operated by a local or tribal government and tax-exempt emergency medical services agencies. It also amends eligible grant activities to include public education concerning first aid, illness prevention, and emergency preparedness. The provision amends prioritization criteria and decreases the matching requirement for grants from 25% to 10% of the grant amount. It also amends the definition of emergency medical services to include medical care delivered outside of a medical facility under emergency conditions resulting from a natural disaster.

The 2018 farm bill also reauthorizes the following programs through FY2023. Section 6411 reauthorizes Rural Business Development Grants, Section 6413 reauthorizes Loans for Locally or Regionally Produced Agricultural Food Products, Section 6414 reauthorizes the Appropriate Technology Transfer for Rural Areas Program, and Section 6423 reauthorizes Delta Health Care Services Grants.

The 2018 farm bill includes three provisions that amend the definition of rural for certain RD programs. USDA uses population thresholds to determine whether an area is rural for the purposes of RD programs. Rural population thresholds vary across RD programs. Section 6301 amends the ConAct to direct USDA to exclude individuals incarcerated on a long-term or regional basis and the first 1,500 individuals residing on a military base when determining whether an area is a rural area for certain RD programs . It also amends the Rural Electrification Act and the Food, Agriculture, Conservation, and Trade Act of 1990 to exclude the same populations when determining whether an area is a rural area for certain RD broadband programs .

Section 6305 amends the definition s of rural and rural area in the Housing Act of 1949 . The amended definition allows any area classified as rural or a rural area prior to 1990 to remain so until the next decennial census, if the area has a population between 10,000 and 35,000 and has "a serious lack of mortgage credit for lower and moderate-income families." Section 6402 amends the definition of rural for determining eligibility for guaranteed loans under the Water and Waste Disposal and the Community Facilities programs. It increases the population threshold for guaranteed loans to 50,000 or fewer. Under prior law, the population thresholds were 10,000 or fewer for Water and Waste Disposal Guaranteed Loans and 20,000 or fewer for Community Facilities Guaranteed Loans. Section 6402 also directs USDA to prioritize guaranteed loan applications for areas with a population of 10,000 or fewer for the Water and Waste Disposal Program and 20,000 or fewer for the Community Facilities Program. The population thresholds for grant and direct loan eligibility remain unchanged at 10,000 or fewer for the Water and Waste Disposal Program and 20,000 or fewer for the Community Facilities Program.

Section 6401 amends the Strategic Economic and Community Development provision of the ConAct. This provision allows USDA to prioritize funding under certain RD programs for projects that support multijurisdictional strategic community development plans. Section 6401 expands the provision to apply to all RD programs as determined by the Secretary of Agriculture. It increases the portion of funding USDA may reserve for projects under this section from 10% to 15% of program funding made available for a fiscal year. Section 6401 also authorizes annual appropriations of $5 million for FY2019-FY2023 for technical assistance to rural communities in developing strategic community investment plans.

Sections 6425 and 6304 reauthorize and amend federal regional commissions and authorities. Section 6425 reauthorizes the Delta Regional Authority through October 1, 2023. It also reauthorizes annual appropriations of $30 million per year for the authority for FY2019-FY2023. Section 6304 reauthorizes three federal regional commissions âthe Southeast Crescent Regional Commission, the Southwest Border Regional Commission, and the Northern Border Regional Commissionâand increases authorized appropriations for each commission from $30 million to $33 million per year through FY2023. Federal statute directs the commissions to set aside 40% of grant funding in a given fiscal year for certain eligible activities, including transportation, telecommunications, or other public infrastructure. Section 6304 adds promoting development of renewable and alternative energy sources as an eligible activity for set-aside funding. The 2018 farm bill did not reauthorize the Northern Great Plains Regional Authority .

Section 6304 also authorizes a new State Capacity Building Grant Program for the Northern Border Regional Commission . Congress authorizes the commission to provide grants to Maine, New Hampshire, New York, or Vermont for economic development activities. An eligible state must submit to the commission an annual work plan that includes the purpose of the grant. Section 6304 authorizes appropriations of $5 million per year for FY2019-FY2023 for the grant program.

Section 6415 reauthorizes the Rural Economic Area Partnership (REAP) Program through FY2023. USDA has established REAP Zones to address critical issues related to economic growth, employment, and isolation. REAP Zones typically consist of multiple counties within a state and receive technical assistance and funding from USDA for strategic planning and community development activities. Section 6420 reauthorizes the National Rural Development Partnership through FY2023. This partnership, coordinated by USDA, includes state rural development councils and a national coordinating committee. State rural development councils facilitate collaboration among local government, private sector, and nonprofit entities in planning and implementing programs related to rural development. The national coordinating committee oversees and provides support for state rural development council activities.

Section 12407 amends the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 ( P.L. 103-354 ) to reestablish the Under Secretary of Agriculture for Rural Development as a permanent position within USDA. USDA eliminated the Under Secretary position in a 2017 reorganization, replacing it with an Assistant to the Secretary for Rural Development who reported directly to the Secretary of Agriculture and was not a Senate-confirmed position. The Under Secretary position reports to the Deputy Secretary of Agriculture and requires Senate confirmation.

USDA asserted that the 2017 reorganization "recognizes and promotes the importance of rural development by placing it under the direct oversight of the Secretary." However, some stakeholder organizations opposed eliminating the Under Secretary position. For example, a letter to the House and Senate Agriculture Appropriations subcommittees signed by 578 organizations stated that RD "needs the time and attention of a management team led by an Under Secretary who is empowered to direct and administer rural development programs and field staff."

Section 6417 grants the Secretary of Agriculture and the Secretary's designees access to certain information from the Department of Health and Human Services in order to verify income for individuals participating in certain Rural Housing Service programs . Prior law granted the HUD Secretary access to certain information to verify income of participants for certain HUD housing programs. Section 6417 allows the Secretary of Agriculture and the Secretary's designees access to the same information, subject to the same requirements, as the HUD Secretary.

Sections 6601 through 6603 repeal certain rural development programs. Section 6602 repeals the Rural Telephone Bank. Section 6603 repeals all sections of the Launching our Communities' Access to Local Television Act of 2000 (Title X of H.R. 5548 , as enacted by Section 1(a)(2) of P.L. 106-553 ) except Section 1008 of the act. Section 6601 of the 2018 farm bill repeals the following programs, which were previously authorized in the ConAct or the Rural Electrification Act:

Multijurisdictional regional planning organizations (Section 306(a)(23) of the ConAct), Grants to broadcasting systems (Section 310B(f) of the ConAct), Rural telework organizations (Section 379 of the ConAct), Historical barn preservation (Section 379A of the ConAct), Grants to train farm workers in new technologies and to train farm workers in specialized skills necessary for high-value crops (Section 379C of the ConAct), Grants to the Delta Regional Agricultural Economic Development Program (Section 379D of the ConAct), Grants for expansion of employment opportunities for individuals with disabilities in rural areas (Section 379F of the ConAct), Regional rural collaborative investment program (Subtitle I of the ConAct), Certain electric and telephone loans (Section 314 of the Rural Electrification Act), and The National Center for Rural Telecommunications Assessment (Section 602 of the Rural Electrification Act).

Sections 6701 and 6702 make technical corrections to the ConAct and Rural Electrification Act. Section 6701 amends the ConAct to correct the reference to the definition of Indian tribe for the Community Facilities Loan and Grant Program. It also clarifies the eligible activities for Rural Business Development Grants. Further, Section 6701 amends the ConAct to include Alabama as a participating state in the Delta Regional Authority. Congress initially made this amendment in the Consolidated Appropriations Act, 2001 ( P.L. 106-554 , Â§1(a)(4)). However, the amendment did not take effect at the time because it referred to the incorrect authorizing legislation. Section 6701 of the 2018 farm bill directs the correction to take effect as if included in P.L. 106-554 . Section 6702 corrects misspellings in the Rural Electrification Act.

Appendix. Comparison of Rural Development Provisions in Titles VI and XII of the 2018 Farm Bill (P.L. 115-334) with Prior Law