SUMMARY OF THE RETIREMENT SECURITY ACT

Bill Introduction Press Conference

Representative Nick Smith

September 10, 2003

10:30 am, 2200 Rayburn H.O.B.

> *The Program*

-   The trust fund continues.

-   The Retirement Security Act would allow workers to create, on a
    voluntary basis, accounts, funded from their payroll taxes.

-   The accounts would start at 2.5% of income and would reach 8% of
    income by 2075.

-   Workers would own the money in their accounts.

-   Investments would be limited, widely-diversified, and investment
    providers would be subject to government oversight.

-   The government would supplement the accounts of low-income workers
    making less than \$35,000 a year to ensure that they build up
    significant savings.

> *Traditional Social Security*

-   People choosing to participate in the voluntary account program
    would continue to receive benefits directly from the government.

-   Those benefits would be offset based on the amount of money
    deposited into their accounts, not on the amount of money earned in
    the accounts.

-   This means that workers could expect to earn more from their account
    than the offset.

> *Worker Accounts*

-   All worker accounts would be owned by the worker and invested
    through pools supervised by the government.

-   Regulations would be instituted to prevent people from taking undue
    risks.

-   Until an account balance reaches \$2,500, a worker would be limited
    to choosing one of three funds: an 80% bond/20% index stock fund, a
    60%/40% fund, and a 40%/60% fund.

-   After the balance reaches \$2,500, workers would have access to
    additional safe funds as determined by the Secretary of Treasury.

*Fairness for Women*

-   For married couples, account contributions would be pooled and then
    divided equally between husband and wife.

-   It would increase surviving spouse benefits to 110% of the higher
    earning spouse's benefit.

-   Stay-at-home mothers with kids under five would receive retirement
    credit.

*Social Security Solvency*

-   The Retirement Security Act has been scored by the Social Security
    actuaries to restore long-term solvency to Social Security.

-   There would be no increases in the retirement age, changes in
    benefits for seniors or near-seniors, or changes in the Social
    Security COLA.

-   Solvency would be achieved by recouping a portion of the higher
    returns from worker accounts and slowing the increase in benefits
    for the highest-earning retirees.

-   This bill would also call for a loan of \$900 billion from the
    general fund to Social Security to ease the transition. The loan
    would be repaid when the program regains solvency.

*Retirement Security*

-   The bill also includes a title designed to enhance retirement
    security outside of the Social Security program.

-   It would increase contribution limits for IRAs, 401(k)'s, and
    pension plans.

-   It would create a 33% tax credit for the purchase of long-term care
    insurance up to \$1,000 (\$2,000 for a couple).

-   It would create another tax credit to make it easier for low-income
    seniors to live at home or with family, rather than going to
    retirement care. Low-income seniors would be eligible for \$1,000
    for expenses related to living in their own home, and households
    caring for dependent parents would also be eligible for a \$1,000
    credit for expenses.