To amend title II of the Social Security Act and the Internal Revenue Code of 1986 to provide for an election by individuals eligible for old-age insurance benefits under such title to waive payment of benefits based on their work record, to provide for income tax deductions based on the actuarial present value of benefits foregone by reason of such an election, and to provide that special Government obligations issued exclusively for purchase by the Social Security Trust Funds shall bear interest at the average market yield then prevailing for comparable obligations issued in the private sector.

Summary: Social Security Alternative Voluntary Expenditure Act of 2003 - Amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act to authorize individuals eligible for OASDI benefits to elect to waive payment of all benefits based on their wages and self-employment income.

Amends the Internal Revenue Code to allow a deduction of 20 percent of the actuarial present value of future benefits foregone by reason of such an election. Provides a tax deduction, as well, for the divorced spouse of an individual making a waiver under this Act.

Amends SSA title II to require special Government obligations issued for purchase by the social security trust funds to bear interest at the average market yield then prevailing for comparable obligations issued in the private sector.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Social Security Alternative 
Voluntary Expenditure Act of 2003''.

SEC. 2. ELECTION TO WAIVE PAYMENT OF SOCIAL SECURITY BENEFITS.

    (a) In General.--Title II of the Social Security Act is amended by 
adding after section 234 (42 U.S.C. 434) the following new section:

                ``election to waive payment of benefits

                              ``In General

    ``Sec. 235. (a) An individual who is not entitled to old-age 
insurance benefits under section 202(a) but who is eligible for such 
benefits may elect to waive payment of all benefits under this title 
based on such individual's wages and self-employment income. Such 
election shall be irrevocable and shall be made in such manner and form 
as the Commissioner of Social Security, in consultation with the 
Secretary of the Treasury, shall prescribe in regulations.

                          ``Effect of Election

    ``(b) Effective with the date of the filing of an election by an 
individual with the Commissioner under subsection (a), all benefits 
under this title based on the wages and self-employment income of such 
individual shall not be payable to any person.

              ``Certification of Value of Refused Benefits

    ``(c)(1) An individual's election filed with the Commissioner under 
subsection (a) shall indicate whether such individual intends to claim 
income tax deductions under section 223 of the Internal Revenue Code of 
1986 in connection with such election. In any case in which such 
individual indicates such intention in such election, as soon as 
practicable after the date of the filing of such election, the 
Commissioner shall determine the actuarial present value of the future 
benefits which are not payable under this title based on such 
individual's wages and self-employment income but which would be 
payable (upon prompt application therefor) if such individual had filed 
with the Commissioner, in lieu of the election, an application for old-
age insurance benefits under section 202(a).
    ``(2) In the case of any person who, as of immediately before the 
date on which an individual makes an election under subsection (a), is 
a divorced spouse of such individual, the Commissioner shall determine 
the actuarial present value of the future benefits which would have 
been payable to such divorced spouse (but for such election) under 
section 202(b)(5) or 202(c)(5) (based on current entitlement or upon 
timely and prompt filing on or after such date of an application for 
such benefits under such section) on the basis of such individual's 
wages and self-employment income and future benefits which would have 
been payable to such divorced spouse under section 202(e) or 202(f) 
upon such individual's death thereafter on the basis of such wages and 
self-employment income.
    ``(3) Upon making any determination under paragraph (1) in 
connection with an election made under subsection (a), the Commissioner 
shall certify such determination to the Secretary of the Treasury and 
to the individual making such election. Upon making any determination 
with respect to a divorced spouse under paragraph (2), the Commissioner 
shall certify such determination to such Secretary and such divorced 
spouse.
    ``(4) The Commissioner shall prescribe by regulation, in advance of 
making actuarial determinations under this subsection, reasonable 
actuarial assumptions and methods which shall be employed in making 
such determinations. Such regulations shall also require inclusion with 
any election filed by an individual under subsection (a) such 
information available to such individual as the Commissioner considers 
necessary for making determinations under this subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to elections filed after 180 days after the date of the 
enactment of this Act.

SEC. 3. DEDUCTION FOR ACTUARIAL PRESENT VALUE OF WAIVED OLD-AGE 
              INSURANCE BENEFITS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 223 
as section 224 and by inserting after section 222 the following new 
section:

``SEC. 223. ACTUARIAL PRESENT VALUE OF WAIVED OLD-AGE INSURANCE 
              BENEFITS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction for each specified taxable year an 
amount equal to 20 percent of--
            ``(1) in the case of an individual who elects to waive the 
        payment of benefits under section 235(a) of the Social Security 
        Act, the actuarial present value of future benefits determined 
        by the Commissioner of Social Security under section 235(c)(1) 
        of such Act with respect to such individual, and
            ``(2) in the case of an individual who, as of immediately 
        before the date of the election referred to in paragraph (1), 
        is a divorced spouse of an individual referred to in paragraph 
        (1), the actual present value of future benefits determined by 
        the Commissioner of Social Security under section 235(c)(2) of 
        such Act with respect to such divorced spouse.
    ``(b) Specified Taxable Year.--For purposes of this section, the 
term `specified taxable year' means the taxable year which includes the 
date of the election referred to in subsection (a)(1) and each of the 4 
succeeding taxable years.''.
    (b) Conforming Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 223. Actuarial present value of 
                                        waived old-age insurance 
                                        benefits.
                              ``Sec. 224. Cross reference.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 4. INTEREST RATES FOR SPECIAL GOVERNMENT OBLIGATIONS ISSUED TO THE 
              SOCIAL SECURITY TRUST FUNDS.

    (a) In General.--The fifth sentence of section 201(d) of the Social 
Security Act (42 U.S.C. 401(d)) is amended by striking ``shall bear 
interest'' and all that follows and inserting the following: ``shall 
bear interest at a rate equal to the average of prevailing market 
yields for comparable obligations issued in the private sector 
(computed by the Managing Trustee on the basis of market quotations as 
of the end of the calendar month next preceding the date of such 
issue).''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to obligations issued after the date of the enactment of 
this Act.