H.R. 2909 — You Earned It, You Keep It Act

This section repeals the requirement under IRC §86 to include Social Security and equivalent Tier I Railroad Retirement benefits in gross income for taxable years beginning after the date of enactment. (Thus, such benefits become fully nontaxable.) It further appropriates from the general Treasury to each Social Security trust fund (including the Federal Hospital Insurance Trust Fund) and Railroad Retirement fund an amount equal to the reduction in tax transfers to that fund attributable to the repeal.

This section repeals the existing statutory wage caps in the Internal Revenue Code and Social Security Act and establishes new rules for remuneration above the contribution and benefit base (CBB)—currently $168,600 for 2024 and adjusted annually for national average wage growth—for calendar years after 2025 in which the CBB is less than $250,000. Under the new rules, such remuneration is excluded from wages up to $250,000 per individual (aggregating remuneration from related employers) but included above $250,000; parallel rules apply to railroad retirement taxes; and, for self-employment income, the amount subject to OASDI tax is limited to the CBB (reduced by wages up to the CBB) plus total compensation (wages plus net self-employment earnings) above the greater of $250,000 or wages paid. (Thus, total earnings subject to the 12.4% OASDI payroll tax equal the CBB plus earnings above $250,000, creating an exclusion for earnings between the CBB and $250,000.)

This section revises the primary insurance amount (PIA) formula under the Old-Age, Survivors, and Disability Insurance (OASDI) program to include, for individuals initially eligible for old-age or disability benefits, or who die before eligibility, after 2025, an additional amount equal to 2% of excess average indexed monthly earnings (AIME)—defined as AIME derived from wages or self-employment income after 2025 exceeding the higher of $250,000 or the OASDI contribution and benefit base. (As background, the PIA determines OASDI benefit amounts using three progressive bend points applied to an individual's AIME: 90% of the first bracket, 32% of the second, and 15% of the remainder; this adds a fourth bend point at 2% for earnings above the redefined threshold, with all prior calculations now based on "basic" AIME limited to the contribution and benefit base.) The section also modifies the OASDI family maximum benefit formula to base it on the sum of 85% of basic AIME and 1% of excess AIME (from the prior 85% of total AIME); makes conforming terminology changes throughout the PIA computation process; and limits application of certain indexing rules to periods before 2026. Finally, the section deems OASDI benefits not to exceed pre-enactment levels for purposes of determining eligibility and benefit amounts under Supplemental Security Income (SSI), Medicaid, or the Children's Health Insurance Program (CHIP).