To amend title II of the Social Security Act to establish an effective real annual rate of interest at 6 percent for special obligations issued to the Social Security trust funds.

Summary: Preserving Social Security Act of 2001 - Amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act with regard to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund to revise requirements for the issuance of obligations for purchase by the Funds. Establishes an effective annual rate of interest at six percent for such obligations.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preserving Social Security Act of 
2001.''

SEC. 2. INTEREST BORNE BY, AND INCREASES IN PAR VALUE OF, SPECIAL 
              OBLIGATIONS ISSUED TO THE SOCIAL SECURITY TRUST FUNDS.

    Section 201(d) of the Social Security Act (42 U.S.C. 401(d)) is 
amended--
            (1) by inserting ``(1)'' after ``(d)'';
            (2) by striking the fifth sentence and inserting the 
        following new sentences: ``Such obligations issued for purchase 
        by the Trust Funds shall have maturities fixed with due regard 
        for the needs of the Trust Funds and shall bear interest at an 
        effective annual rate equal to 6 percent, which shall be paid 
        to the Trust Funds semiannually. On June 30 and December 31 of 
        each calendar year, and (with respect to each obligation) on 
        its date of maturity (or date of redemption, if prior to 
        maturity), the Managing Trustee shall adjust (subject to 
        paragraph (2)) the par value of each obligation then held by 
        either of the Trust Funds and issued for purchase by such Trust 
        Fund so as to equal the product derived by multiplying the 
        current par value as of immediately before the applicable date 
        by the CPI adjustment factor (defined in paragraph (3)(A)) for 
        the obligation in connection with the month in which the 
        applicable date occurs (rounded, if not a multiple of $0.01, to 
        the nearest multiple of $0.01).''; and
            (3) by adding at the end the following new paragraphs:
    ``(2)(A) In any case in which the number of days in the actual 
adjustment period (defined in subparagraph (B)(i)) for an obligation 
differs from the number of days in the computation period (defined in 
subparagraph (B)(ii)) for the obligation, the amount by which the par 
value of an obligation is adjusted pursuant to paragraph (1) shall be 
an amount which bears the same ratio to the amount that would otherwise 
apply under paragraph (1) as the number of days in the actual 
adjustment period bears to the number of days in the computation 
period.
    ``(B) For purposes of subparagraph (A)--
            ``(i) The term `actual adjustment period' for an obligation 
        means the period beginning with--
                    ``(I) the date following the date of the last 
                previous adjustment in the par value of the obligation 
                under paragraph (1), or
                    ``(II) if no such adjustment in the par value of 
                the obligation has occurred, the date of the issuance 
                of the obligation,
        and ending with the date of the increase in par value to be 
        determined under paragraph (1).
            ``(ii) The term `computation period' for an obligation 
        means the period beginning with the date following the 
        adjustment reference month (defined in paragraph (3)(C)) for 
        the obligation and ending with the last date of the adjustment 
        computation month (defined in paragraph (3)(B)) for the 
        obligation.
    ``(3) For purposes of this subsection--
            ``(A) The term `CPI adjustment factor', for an obligation 
        in connection with any calendar month, means the ratio 
        (expressed as a percentage) of--
                    ``(i) the Consumer Price Index for the adjustment 
                computation month for the obligation in connection with 
                such calendar month to
                    ``(ii) the Consumer Price Index for the adjustment 
                reference month for the obligation in connection with 
                such calendar month.
            ``(B) The term `adjustment computation month' for an 
        obligation means, in connection with a month in which occurs 
        the date of an adjustment in par value of the obligation to be 
        determined under paragraph (1), the first of the 2 preceding 
        calendar months.
            ``(C) The term `adjustment reference month' for an 
        obligation means, in connection with a month in which occurs 
        the date of an adjustment in par value of the obligation to be 
        determined under paragraph (1)--
                    ``(i) the last adjustment computation month with 
                respect to which an adjustment in par value of the 
                obligation under paragraph (1) has occurred, or
                    ``(ii) if no such adjustment in the par value of 
                the obligation has occurred, the first of the 2 months 
                preceding the month in which such obligation was 
                issued.
            ``(D) The term `Consumer Price Index' means the Consumer 
        Price Index for Urban Wage Earners and Clerical Workers (CPI-
        W), issued by the Bureau of Labor Statistics of the Department 
        of Labor.''.

SEC. 3. EFFECTIVE DATE AND TRANSITIONAL RULE.

    (a) Effective Date.--The amendments made by this Act shall apply 
with respect to special obligations issued on or after January 1, 2002.
    (b) Transitional Rule.--On January 1, 2002, the Secretary of the 
Treasury shall redeem all obligations which are held on such date by 
the Federal Old-Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund and which were issued for purchase by 
the Trust Funds pursuant to section 201(d) of the Social Security Act. 
Upon the redemption of each such obligation, such Secretary shall 
immediately issue an obligation of the type authorized to be issued for 
purchase by the Trust Funds under such section 201(d) (as amended by 
this Act) with an initial par value equal to the par value of the 
redeemed obligation and with a date of maturity which is the same as 
the date of maturity of the redeemed obligation.