II

106TH CONGRESS

1ST SESSION S. 1103

To reform Social Security by creating personalized retirement accounts, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 24, 1999

Mr. GRAMS introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To reform Social Security by creating personalized retirement

accounts, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Personal Security and Wealth in Retirement Act of

6 1999’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Sense of Congress.

Sec. 4. Reduction and elimination of social security taxes on individuals participating in individual retirement program.
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Sec. 5. Personalized retirement accounts funded by individual retirement payroll deduction plans and contributions by self-employed individuals.

Sec. 6. Tax treatment of personalized retirement accounts.

Sec. 7. No coverage under OASDI of part B eligible individuals.

Sec. 8. Contribution recognition bonds.

Sec. 9. Administration of personalized retirement accounts.

Sec. 10. Dedication of on-budget surplus.

Sec. 11. Cap on increase in mandatory spending.

Sec. 12. Limitation on amounts expended by certain Government entities for

overhead expenses.

Sec. 13. Reduction in Federal discretionary spending and 10 year freeze.

Sec. 14. Sale of assets.

1 SEC. 2. FINDINGS.

2 Congress makes the following findings:

3 (1) It is vitally important for this Nation to

4 continue providing retirement income security for

5 every working American and their families.

6 (2) The social security retirement system based

7 on a pay-as-you-go model has failed to meet the

8 challenge of the demographic changes undergoing

9 this Nation, has produced a diminishing return for

10 today’s workers, and is projected to go bankrupt,

11 causing financial hardship for millions of baby

12 boomers and destroying the American dream for fu13 ture generations.

14 (3) A traditional approach of raising taxes or

15 reducing benefits to fix the social security retirement

16 system will not work because the magnitude of the

17 current crisis makes these bailout plans impossible,

18 and fundamental reform is needed to preserve social

19 security.
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1 (4) Social security reform must protect current

2 and future beneficiaries, including the disadvantaged

3 and disabled adults or children, who choose to stay

4 within the traditional social security system.

5 (5) Social security reform must give the Amer6 ican people freedom of choice in pursuing retirement

7 security, so that our social policy will not penalize

8 those Americans who are quite able to stand on their

9 own, while providing a safety net to catch those who

10 fall.

11 (6) Social security reform must preserve a safe12 ty net for disadvantaged Americans, so no covered

13 person is forced to live in poverty.

14 (7) Social security reform must make every

15 American better off and no one worse off in retire16 ment security than under the current system.

17 (8) Social security reform must enable workers

18 to build personal retirement savings, improve the

19 rate of return on their savings, increase capital own20 ership, and pass their savings on to their children.

21 (9) Social security reform must replace the cur22 rent pay-as-you-go financing scheme with a fully

23 funded system that will not only reduce inequality

24 among generations, but also will greatly increase our
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1 Nation’s savings and investment rates, and therefore

2 produce prosperity.

3 (10) Social security reform must not increase

4 the tax burden of the American people and incur

5 huge new national debt.

6 (11) There is a growing national consensus that

7 the best solution to avoiding the imminent social se8 curity crisis is to move from a social security retire9 ment system that is based on a pay-as-you-go model

10 to a market-based, personalized retirement program

11 that is fully funded and that offers each American

12 improved retirement security.

13 (12) A market-based personalized retirement

14 system that is fully funded will release unprece15 dented upward budget pressure, reduce ballooning

16 national debt, and ensure a sustainable, healthy, and

17 strong economy.

18 (13) A market-based personalized retirement

19 system can greatly increase retirement income and

20 build personal wealth for all Americans, including

21 low-income families, without redistribution of private

22 income.

23 (14) The return on current social security in24 vestment is quite disappointing for today’s workers,

25 and almost all workers in 2-earner families receive
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1 real returns under social security of approximately

2 1 percent, with some actually receiving negative re3 turns.

4 (15) Over the 70-year period from 1926

5 through 1996, the average real return on the Stand6 ard & Poors 500 stocks was 7.56 percent, and the

7 historical data supports the conclusion that a mar8 ket-based, personalized retirement system will

9 produce overall positive returns.

10 (16) Under a market-based, personalized retire11 ment system, the annual retirement benefits for 2

12 average-income, full-time working spouses could ex13 ceed, in 1998 dollars, $200,000, compared to

14 $33,000 under the current social security program;

15 for 1 spouse earning an average income, the benefit

16 could reach $140,000, while the current social secu17 rity program provides only $29,000. Low-income

18 families would also be better off, with annual bene19 fits as high as $100,000, while the current social se20 curity program provides only $18,000 in annual ben21 efits.

22 (17) No retirement investment, including social

23 security, is risk-free, but a well-structured and regu24 lated market-based, personalized retirement system

25 can reduce the risk to a minimum, so that it still
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1 provides workers of all income levels greater retire2 ment benefits than the current social security system

3 offers.

4 (18) A market-based, personalized retirement

5 system would provide a better safety net for every

6 working American and their families.

7 (19) A market-based, personalized retirement

8 system would allow Americans to control their funds

9 and resources and better plan for their retirement in

10 accordance with their needs.

11 (20) Although moving toward a market-based,

12 personalized retirement system may be costly, it is

13 still far less costly than allowing social security to

14 continue on its current course into disaster.

15 SEC. 3. SENSE OF CONGRESS.

16 It is the sense of Congress that—

17 (1) it is the right of American workers to

18 choose to remain in the current social security re19 tirement system and to be protected from that sys20 tem becoming insolvent; and

21 (2) the Federal Government should take all

22 necessary actions to guarantee that for those Ameri23 cans that choose to stay in the current social secu24 rity retirement system—
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1 (A) there shall be no increase in the nor2 mal retirement age; and

3 (B) there shall be no reduction in the

4 amount of social security benefits that they will

5 receive.

6 SEC. 4. REDUCTION AND ELIMINATION OF SOCIAL SECU7 RITY TAXES ON INDIVIDUALS PARTICIPATING

8 IN INDIVIDUAL RETIREMENT PROGRAM.

9 (a) TAX ON EMPLOYEES.—Subsection (a) of section

10 3101 of the Internal Revenue Code of 1986 (relating to

11 OASDI tax on employees) is amended to read as follows:

12 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR13 ANCE.—

14 ‘‘(1) INDIVIDUALS COVERED UNDER PART A OF

15 TITLE II OF THE SOCIAL SECURITY ACT.—In addi16 tion to other taxes, there is hereby imposed on the

17 income of every individual who is not a part B eligi18 ble individual a tax equal to 6.2 percent of the wages

19 (as defined in section 3121(a)) received by him with

20 respect to employment (as defined in section

21 3121(b)).

22 ‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE

23 INDIVIDUALS.—In addition to other taxes, there is

24 hereby imposed on the income of every individual

25 who is a part B eligible individual a tax equal to 1.2
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1 percent (reduced by .06 percentage point for each

2 calendar year beginning after 2000) with respect to

3 wages (as defined in section 3121(a)) received by

4 him with respect to employment (as defined in sec5 tion 3121(b)).’’

6 (b) TAX ON EMPLOYERS.—Subsection (a) of section

7 3111 of the Internal Revenue Code of 1986 (relating to

8 OASDI tax on employers) is amended to read as follows:

9 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR10 ANCE.—

11 ‘‘(1) INDIVIDUALS COVERED UNDER PART A OF

12 TITLE II OF THE SOCIAL SECURITY ACT.—In addi13 tion to other taxes, there is hereby imposed on every

14 employer, with respect to having in the employer’s

15 employ individuals who are not part B eligible indi16 viduals, an excise tax equal to 6.2 percent of the

17 wages (as defined in section 3121(a)) paid by him

18 with respect to employment (as defined in section

19 3121(b)).

20 ‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE

21 INDIVIDUALS.—In addition to other taxes, there is

22 hereby imposed on every employer an excise tax,

23 with respect to having in the employer’s employ indi24 viduals who are part B eligible individuals, equal to

25 1.2 percent (reduced by .06 percentage point for
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1 each calendar year beginning after 2000) of the

2 wages (as defined in section 3121(a)) paid by him

3 with respect to employment (as defined in section

4 3121(b)).’’

5 (c) SELF-EMPLOYMENT TAX.—Subsection (a) of sec6 tion 1401 of such Code (relating to OASDI tax on self7 employment income) is amended to read as follows:

8 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR9 ANCE.—

10 ‘‘(1) INDIVIDUALS COVERED UNDER PART A OF

11 THE SOCIAL SECURITY ACT.—In addition to other

12 taxes, there shall be imposed for each taxable year,

13 on the self-employment income of every individual

14 who is not a part B eligible individual for the cal15 endar year ending with or during such taxable year,

16 a tax equal to 12.40 percent of the amount of the

17 self-employment income for such taxable year.

18 ‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE

19 INDIVIDUALS.—In addition to other taxes, there

20 shall be imposed for each taxable year, on the self21 employment income of every part B eligible indi22 vidual for the calendar year ending with or during

23 such taxable year, a tax equal to 2.40 percent (re24 duced by .12 percentage point for each calendar year
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1 beginning after 2000) of the amount of the self-em2 ployment income for such taxable year.’’

3 (d) PART B ELIGIBLE INDIVIDUAL.—

4 (1) TAXES ON EMPLOYEES.—Section 3121 of

5 such Code (relating to definitions) is amended by in6 serting after subsection (s) the following new sub7 section:

8 ‘‘(t) PART B ELIGIBLE INDIVIDUAL.—For purposes

9 of this chapter, the term ‘part B eligible individual’ means,

10 for any calendar year, an individual who is an eligible indi11 vidual (as defined in section 257(3) of the Social Security

12 Act) for such calendar year.’’.

13 (2) SELF-EMPLOYMENT TAX.—Section 1402 of

14 such Code (relating to definitions) is amended by

15 adding at the end the following new subsection:

16 ‘‘(k) PART B ELIGIBLE INDIVIDUAL.—The term

17 ‘part B eligible individual’ means, for any calendar year,

18 an individual who is an eligible individual (as defined in

19 section 257(3) of the Social Security Act) for such cal20 endar year.’’.

21 (e) EFFECTIVE DATES.—

22 (1) IN GENERAL.—Except as otherwise pro23 vided in this subsection, the amendments made by

24 this section shall apply to remuneration paid after

25 December 31, 1999.
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1 (2) SELF-EMPLOYMENT TAX.—The amend2 ments made by subsections (c) and (d)(2) shall

3 apply to taxable years ending after December 31,

4 1999.

5 SEC. 5. PERSONALIZED RETIREMENT ACCOUNTS FUNDED

6 BY INDIVIDUAL RETIREMENT PAYROLL DE7 DUCTION PLANS AND CONTRIBUTIONS BY

8 SELF-EMPLOYED INDIVIDUALS.

9 (a) IN GENERAL.—Title II of the Social Security Act

10 is amended—

11 (1) by inserting before section 201 the fol12 lowing:

13 ‘‘PART A—INSURANCE BENEFITS’’;

14 and

15 (2) by adding at the end the following new part:

16 ‘‘PART B—INDIVIDUAL RETIREMENT PROGRAM

17 ‘‘INDIVIDUAL RETIREMENT PAYROLL DEDUCTION PLANS

18 ‘‘SEC. 251. (a) IN GENERAL.—Each person who is

19 a covered employer for any calendar year shall have in

20 effect throughout such calendar year an individual retire21 ment payroll deduction plan for such person’s employees

22 who are eligible individuals and with respect to whose em23 ployment by such employer during such calendar year

24 there is, or would be (but for the amendments made by

25 section 4 of the Personal Security and Wealth in Retire-
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1 ment Act of 1999), imposed an excise tax under section

2 3111 of the Internal Revenue Code of 1986.

3 ‘‘(b) REQUIREMENTS.—For purposes of this part, the

4 term ‘individual retirement payroll deduction plan’ means

5 a written plan of a covered employer if—

6 ‘‘(1) under such plan, 5 percent of the employ7 ee’s wages is deducted by the employer and paid to

8 the employee’s personalized retirement account with9 in 10 business days after the date of payment of

10 such wages,

11 ‘‘(2) under such plan, not more than an addi12 tional 20 percent of the employee’s wages (as des13 ignated by the employee) is deducted by the em14 ployer and paid to the employee’s personalized re15 tirement account or to the personalized retirement

16 account of the employee’s spouse, child, or grand17 child (or any combination designated by the em18 ployee) within 10 business days after the date of

19 payment of such wages,

20 ‘‘(3) under such plan, the covered employer

21 pays to the personalized retirement account, to22 gether with the contribution paid pursuant to para23 graphs (1) and (2), an additional amount equal to

24 5 percent of the employee’s wages,
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1 ‘‘(4) under such plan, the employee may des2 ignate that no contributions be deducted under para3 graph (1) for pay periods beginning after the date

4 on which the balance in such employee’s personalized

5 retirement account equals the minimum retirement

6 annuity amount (as defined in section 256(c)), and

7 ‘‘(5) the employer receives no compensation for

8 the cost of administering such plan.

9 ‘‘SELF-EMPLOYED INDIVIDUALS

10 ‘‘SEC. 252. Not later than 30 days after the close

11 of any taxable year for which an eligible individual has

12 self-employment income, such individual—

13 ‘‘(1) shall pay to a personalized retirement ac14 count designated by such individual an amount equal

15 to at least 10 percent of such income, and

16 ‘‘(2) may pay not more than an additional 20

17 percent of such income to such account or to the

18 personalized retirement account of the individual’s

19 spouse, child, or grandchild (or any combination des20 ignated by the individual).

21 ‘‘DESIGNATION OF PERSONALIZED RETIREMENT

22 ACCOUNTS

23 ‘‘SEC. 253. (a) IN GENERAL.—Except as otherwise

24 provided in this section, the personalized retirement ac25 count to which contributions with respect to any eligible

26 individual are required to be paid by a covered employer
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1 under section 251 shall be such an account designated by

2 such individual to such employer not later than 10 busi3 ness days after the date on which such individual becomes

4 an employee of such employer. Each employer of an eligi5 ble individual shall require the individual to designate such

6 account as provided under this subsection as a pre7 requisite for continued employment. Any such designation

8 shall be made in such form and manner as shall be pre9 scribed in regulations of the Commissioner of Social Secu10 rity.

11 ‘‘(b) DESIGNATION OF ACCOUNT BY SELF-EM12 PLOYED INDIVIDUALS.—The designation of a personalized

13 retirement account for payment of contributions under

14 section 252 shall be made in such form and manner as

15 shall be prescribed in regulations of the Commissioner of

16 Social Security.

17 ‘‘(c) SUBSEQUENT DESIGNATION OF OTHER AC18 COUNTS.—The Commissioner shall provide by regulation

19 for subsequent designation from time to time of another

20 personalized retirement account of an eligible individual

21 in lieu of the account previously designated under this sec22 tion.

23 ‘‘(d) OTHER DESIGNATIONS.—For purposes of con24 tributions under section 251(b)(2), an eligible individual

25 may designate a personalized retirement account, includ-
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1 ing an account for any non-working child of such indi2 vidual. Any such designation shall be made in such form

3 and manner as shall be prescribed in regulations of the

4 Commissioner of Social Security.

5 ‘‘ELECTION TO BECOME AN ELIGIBLE INDIVIDUAL

6 ‘‘SEC. 254. (a) IN GENERAL.—An individual (other

7 than an individual described in section 257(3)(A))—

8 ‘‘(1) who has not attained age 62, and

9 ‘‘(2) who is not entitled to disability insurance

10 benefits under section 223,

11 may elect to become an eligible individual for purposes of

12 this part. An election under this section is an election filed

13 in such form and manner as shall be prescribed in regula14 tions of the Commissioner, consisting of a written and

15 signed declaration of such individual’s intention to become

16 an eligible individual for purposes of this part.

17 ‘‘(b) REQUIREMENTS.—Any election under sub18 section (a) may take effect for any calendar year after

19 1999 and must be so filed not later than December 15

20 preceding the calendar year for which the election is to

21 take effect (or December 31 preceding such calendar year

22 in the case of an individual attaining age 18 after such

23 December 15 and before such calendar year).

24 ‘‘(c) LIMITED REVOCABILITY.—

25 ‘‘(1) IN GENERAL.—Except as provided in para26 graph (2), any election under subsection (a) shall be
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1 irrevocable and shall be effective with respect to

2 wages paid in calendar years following the election

3 and with respect to self-employment income for tax4 able years ending during such calendar years.

5 ‘‘(2) LIMITED REVOCATION.—

6 ‘‘(A) IN GENERAL.—Within 10 years of

7 the date of an election under subsection (a), an

8 individual may revoke such an election in favor

9 of coverage under part A in such form and

10 manner as shall be prescribed in regulations of

11 the Commissioner and upon payment of the

12 amount described in subparagraph (B) from

13 such individual’s personalized retirement ac14 count (or otherwise) to the Commissioner for

15 deposit in the trust funds under part A.

16 ‘‘(B) AMOUNT OF PAYMENT.—The amount

17 described in this subparagraph is equal to the

18 sum of—

19 ‘‘(i) the amount which would have

20 been paid (without regard to an election

21 under subsection (a)) by the individual and

22 the individual’s employer under sections

23 3101(a)(1) and 3111(a)(1) or section

24 1401(a)(1) during the period of such an

25 election, less the amount paid by such indi-
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1 vidual and such individual’s employer

2 under sections 3101(a)(2) and 3111(a)(2)

3 or section 1401(a)(2) during such period,

4 plus

5 ‘‘(ii) interest on the amount deter6 mined under clause (i) at the rate of re7 turn earned by the trust funds under part

8 A on such an amount during the period of

9 such an election.

10 ‘‘(C) CANCELLATION OF CONTRIBUTION

11 RECOGNITION BOND.—Upon the revocation of

12 an election under subsection (a), any contribu13 tion recognition bond issued to the trustee of

14 the individual’s personalized retirement account

15 pursuant to section 8 of the Personal Security

16 and Wealth in Retirement Act of 1999 shall be

17 canceled.

18 ‘‘(D) NO FURTHER ELECTIONS AL19 LOWED.—Upon the revocation of an election

20 under subsection (a), the individual may not

21 make any further elections under subsection

22 (a).

23 ‘‘DISABILITY INSURANCE; PRERETIREMENT SURVIVOR

24 BENEFITS; TREATMENT IN THE EVENT OF DIVORCE

25 ‘‘SEC. 255. (a) IN GENERAL.—A trustee of a person26 alized retirement account shall purchase, from amounts
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1 available in the account, disability insurance and preretire2 ment survivor benefits for each account holder in accord3 ance with this section.

4 ‘‘(b) DISABILITY INSURANCE.—Under regulations of

5 the Commissioner of Social Security, any policy for dis6 ability insurance purchased pursuant to subsection (a)

7 shall meet at least the same standards for eligibility and

8 benefit levels for account holders and their spouses, sur9 viving spouses, former spouses, and children, as are appli10 cable for beneficiaries under the disability insurance pro11 gram under part A, except that such benefits shall not

12 terminate by reason of retirement.

13 ‘‘(c) PRERETIREMENT SURVIVOR BENEFITS.—Under

14 regulations of the Commissioner of Social Security, any

15 policy for preretirement survivor benefits purchased pur16 suant to subsection (a) shall provide benefits to bene17 ficiaries of the account holders in such form and in such

18 amounts as are necessary, taking into account distribu19 tions from the account, to meet at least the same stand20 ards for eligibility and benefit levels applicable for wid21 ow’s, widower’s, and child’s insurance benefits under part

22 A.

23 ‘‘(d) TREATMENT IN THE EVENT OF DIVORCE.—

24 Notwithstanding any other provision of Federal or State

25 law, all assets in an individual’s personalized retirement
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1 account on the date of marriage and throughout such mar2 riage shall be considered community property.

3 ‘‘ENTITLEMENT TO SUPPLEMENTAL MINIMUM BENEFIT

4 PAYMENT TO ACCOUNT

5 ‘‘SEC. 256. (a) IN GENERAL.—In any case in

6 which—

7 ‘‘(1) an eligible individual attains normal retire8 ment age,

9 ‘‘(2) as of the date on which the individual at10 tains normal retirement age, no distributions have

11 been made by the individual from any personalized

12 retirement account, and

13 ‘‘(3) on such date, the balance in such individ14 ual’s personalized retirement account (before any

15 distributions on such date) is less than the minimum

16 retirement annuity amount,

17 such individual, upon application to the Commissioner of

18 Social Security filed on or after such date in such form

19 and manner as shall be prescribed by the Commissioner,

20 shall be entitled to a supplemental minimum benefit pay21 ment to such account. Upon receipt of such application,

22 the Commissioner shall certify to the Secretary of the

23 Treasury the amount of such payment, and the Secretary

24 shall pay the amount of such payment to such account

25 in accordance with such certification from funds otherwise

26 available in the general fund of the Treasury.
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1 ‘‘(b) AMOUNT OF SUPPLEMENTAL MINIMUM BEN2 EFIT PAYMENT.—The amount of a supplemental min3 imum benefit payment payable to an eligible individual’s

4 account under subsection (a) is the excess (if any) of—

5 ‘‘(1) the minimum retirement annuity amount,

6 over

7 ‘‘(2) the balance in such account as of such

8 date (taking into account the present value of the

9 future proceeds of any contribution recognition bond

10 issued to the trustee of the individual’s account pur11 suant to section 8 of the Personal Security and

12 Wealth in Retirement Act of 1999).

13 ‘‘(c) DEFINITIONS.—For purposes of this section—

14 ‘‘(1) MINIMUM RETIREMENT ANNUITY

15 AMOUNT.—The term ‘minimum retirement annuity

16 amount’ means the amount (determined under regu17 lations of the Commissioner of Social Security) nec18 essary to purchase a minimum retirement annuity

19 on the date of the application filed pursuant to sub20 section (a).

21 ‘‘(2) MINIMUM RETIREMENT ANNUITY.—The

22 term ‘minimum retirement annuity’ means an imme23 diate annuity making payments over the life expect24 ancy of the account holder which (on a monthly

basis) are equal to an amount equal to 1 25 ⁄12 of 150
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1 percent of the poverty line determined on such date

2 for a family of 1 individual and adjusted annually

3 thereafter by the adjustment determined under sec4 tion 215(i).

5 ‘‘(3) IMMEDIATE ANNUITY.—The term ‘imme6 diate annuity’ means an annuity—

7 ‘‘(A) which is purchased with a single pre8 mium, and

9 ‘‘(B) the annuity starting date (as defined

10 in paragraph (4) of section 72(c) of the Inter11 nal Revenue Code of 1986) of which commences

12 on the 1st day of the month beginning after the

13 date of the purchase of the annuity.

14 ‘‘(4) POVERTY LINE.—The term ‘poverty line’

15 has the meaning given that term in section 673(2)

16 of the Community Services Block Grant Act (42

17 U.S.C. 9902(2)), including any revision required by

18 such section.

19 ‘‘DEFINITIONS

20 ‘‘SEC. 257. For purposes of this part—

21 ‘‘(1) PERSONALIZED RETIREMENT ACCOUNT.—

22 The term ‘personalized retirement account’ means

23 any personalized retirement account (as defined in

24 section 408B of the Internal Revenue Code of

25 1986).

26 ‘‘(2) COVERED EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—The term ‘covered em2 ployer’ means, for any calendar year, any per3 son on whom an excise tax is, or would be (but

4 for the amendments made by the Personal Se5 curity and Wealth in Retirement Act of 1999),

6 imposed under section 3111 of the Internal

7 Revenue Code of 1986 with respect to having

8 an individual in his employ to whom wages were

9 paid by such person during such calendar year.

10 ‘‘(B) GOVERNMENTAL ENTITIES.—Under

11 regulations of the Commissioner of Social Secu12 rity, in applying subparagraph (A) with respect

13 to employment by governmental entities, each

14 such governmental entity shall be treated as a

15 person described in subparagraph (A) in the

16 same manner and to the same extent as such

17 person is treated under chapter 21 of the Inter18 nal Revenue Code of 1986 for purposes of sec19 tion 3111 of such Code.

20 ‘‘(3) ELIGIBLE INDIVIDUAL.—The term ‘eligible

21 individual’ means—

22 ‘‘(A) an individual who attains age 25 in

23 any calendar year after 1999, or

24 ‘‘(B) with respect to a calendar year, an

25 individual with respect to whom an election,
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1 filed with the Commissioner of Social Security

2 under section 254, is in effect for such calendar

3 year.

4 ‘‘(4) BUSINESS DAY.—The term ‘business day’

5 means any day other than a Saturday, Sunday, or

6 legal holiday in the area involved.

7 ‘‘PENALTIES

8 ‘‘SEC. 258. (a) FAILURE TO ESTABLISH INDIVIDUAL

9 RETIREMENT PAYROLL DEDUCTION PLAN.—Any covered

10 employer who fails to meet the requirements of section

11 251 or 253 for any calendar year shall be subject to a

12 civil penalty of not to exceed the greater of—

13 ‘‘(1) $50,000, or

14 ‘‘(2) $1,000 for each eligible individual of such

15 employer as of the beginning of such calendar year.

16 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

17 UNDER PLAN.—Any covered employer who fails to timely

18 deduct in full the amount from the wages of an eligible

19 individual required under an applicable individual retire20 ment payroll deduction plan shall be subject to a civil pen21 alty of not to exceed $50 for each such failure.

22 ‘‘(c) FAILURE TO PAY DEDUCTED WAGES TO PER23 SONALIZED RETIREMENT ACCOUNT.—If an amount de24 ducted from the wages of an eligible individual under an

25 individual retirement payroll deduction plan is not timely
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1 paid in full to the designated personalized retirement ac2 count in accordance with section 251—

3 ‘‘(1) the covered employer failing to make such

4 payment shall be subject to a civil penalty of not to

5 exceed 20 percent of the unpaid amount, in addition

6 to any penalty under subsection (a), and

7 ‘‘(2) shall be liable to the eligible individual for

8 interest on the unpaid amount at a rate equal to

9 133 percent of the Federal short-term rate under

10 section 1274(d)(1) of the Internal Revenue Code of

11 1986, calculated from the last day by which such

12 amount was required to be so paid to the date on

13 which such amount is paid into the designated per14 sonalized retirement account.

15 ‘‘(d) FAILURE BY SELF-EMPLOYED INDIVIDUALS TO

16 PAY CONTRIBUTIONS.—Any individual failing to timely

17 pay in full a prescribed individual retirement self-employ18 ment contribution to a designated personalized retirement

19 account as required under section 252 shall be subject to

20 a civil penalty of not to exceed 20 percent of the unpaid

21 amount, plus interest on the unpaid amount at a rate

22 equal to 133 percent of the Federal short-term rate under

23 section 1274(d)(1) of the Internal Revenue Code of 1986,

24 calculated from the last day by which such amount was

25 required to be so paid to the date on which such amount
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1 is paid into the designated personalized retirement ac2 count.

3 ‘‘(e) RULES FOR APPLICATION OF SECTION.—

4 ‘‘(1) PENALTIES ASSESSED BY COMMISSIONER

5 OF SOCIAL SECURITY.—Any civil penalty assessed by

6 this section shall be imposed by the Commissioner of

7 Social Security and collected in a civil action.

8 ‘‘(2) COMPROMISES.—The Commissioner may

9 compromise the amount of any civil penalty imposed

10 by this section.

11 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER12 TAIN CASES.—The Commissioner may waive the ap13 plication of this section with respect to any failure

14 if the Commissioner determines that such failure is

15 due to reasonable cause and not to intentional dis16 regard of rules and regulations.’’.

17 (b) AMOUNTS DEDUCTED TO BE SHOWN ON W–2

18 STATEMENTS.—Subsection (a) of section 6051 of the In19 ternal Revenue Code of 1986 (relating to receipts for em20 ployees) is amended—

21 (1) by striking ‘‘and’’ at the end of paragraph

22 (8),

23 (2) by striking the period at the end of para24 graph (9) and inserting ‘‘, and’’, and
26

•S 1103 IS

1 (3) by inserting after paragraph (9) the fol2 lowing new paragraph:

3 ‘‘(10) the total amount deducted from the em4 ployee’s wages under an individual retirement pay5 roll deduction plan established under part B of title

6 II of the Social Security Act.’’.

7 (c) EXEMPTION FROM ERISA REQUIREMENTS.—

8 Subsection (b) of section 4 of the Employee Retirement

9 Income Security Act of 1974 (29 U.S.C. 1003(b)) is

10 amended—

11 (1) by striking ‘‘or’’ at the end of paragraph

12 (4);

13 (2) by striking the period at the end of para14 graph (5) and inserting ‘‘; or’’; and

15 (3) by adding at the end the following new

16 paragraph:

17 ‘‘(6) such plan is an individual retirement pay18 roll deduction plan established under part B of title

19 II of the Social Security Act.’’.

20 (d) CONFORMING AMENDMENTS.—Section 201(h) of

21 such Act (42 U.S.C. 401(h)) is amended—

22 (1) by striking ‘‘All other’’ in the second sen23 tence and inserting ‘‘Except as provided in section

24 256, all other’’; and
27

•S 1103 IS

1 (2) by adding at the end the following new sen2 tence: ‘‘Any reference in this part to benefits under

3 this title shall be deemed a reference to benefits en4 titlement to which arises under this part.’’.

5 SEC. 6. TAX TREATMENT OF PERSONALIZED RETIREMENT

6 ACCOUNTS.

7 (a) IN GENERAL.—Subpart A of part I of subchapter

8 D of chapter 1 of the Internal Revenue Code of 1986 (re9 lating to pension, profit-sharing, stock bonus plans, etc.)

10 is amended by inserting after section 408A the following

11 new section:

12 ‘‘SEC. 408B. PERSONALIZED RETIREMENT ACCOUNTS.

13 ‘‘(a) GENERAL RULE.—Gross income shall not

14 include—

15 ‘‘(1) any amount paid to a personalized retire16 ment account as the employer’s contribution under

17 section 251(b)(3) of the Social Security Act, or

‘‘(2) 1 18 ⁄2 of the amount paid to a personalized

19 retirement account under section 252(a) of the So20 cial Security Act.

21 ‘‘(b) PERSONALIZED RETIREMENT ACCOUNT.—For

22 purposes of this title, the term ‘personalized retirement

23 account’ means a trust created or organized in the United

24 States for the exclusive benefit of an eligible individual (as

25 defined in section 257(3) of the Social Security Act) or
28

•S 1103 IS

1 his beneficiaries, but only if the written governing instru2 ment creating the trust meets the following requirements:

3 ‘‘(1) No contribution will be accepted, other

4 than—

5 ‘‘(A) a contribution under paragraph (1),

6 (2), or (3) of section 251(b), or subsection (a)

7 of section 252, of the Social Security Act,

8 ‘‘(B) a contribution recognition bond, and

9 the proceeds thereof, issued under section 8 of

10 the Personal Security and Wealth in Retire11 ment Act of 1999, and

12 ‘‘(C) a supplemental minimum benefit pay13 ment under section 256 of the Social Security

14 Act.

15 ‘‘(2) Except as provided in paragraph (12), no

16 amount may be paid or distributed from such

17 trust—

18 ‘‘(A) before the earlier of the date on

19 which the account holder attains normal retire20 ment age (determined under section 216(l) of

21 the Social Security Act) or the date on which

22 the account holder dies, or

23 ‘‘(B) if the account holder has not attained

24 normal retirement age and the balance in the

25 account immediately after the payment or dis-
29

•S 1103 IS

1 tribution of such amount would be less than the

2 minimum retirement annuity amount (as de3 fined in subsection (b)(2)).

4 ‘‘(3) The trustee is a qualified investment firm

5 or financial institution approved by the Federal Per6 sonal Retirement Investment Board under section 9

7 of the Personal Security and Wealth in Retirement

8 Act of 1999.

9 ‘‘(4) No part of the trust fund is invested in life

10 insurance contracts.

11 ‘‘(5) The interest of an individual in the bal12 ance in his account vests immediately and is non13 forfeitable.

14 ‘‘(6) The assets of the trust will not be commin15 gled with other property except in a common trust

16 fund or common investment fund, which fund is

17 comprised only of assets of personalized retirement

18 accounts.

19 ‘‘(7) Under the terms governing the account,

20 contributions will be accepted irrespective of the

21 amount of the contribution.

22 ‘‘(8) Except as otherwise required by the Per23 sonal Security and Wealth in Retirement Act of

24 1999, the same requirements as are applicable with

25 respect to trusts under paragraph (9) of section
30

•S 1103 IS

1 401(a) (relating to required distributions) are met

2 with respect to the account.

3 ‘‘(9) Except as otherwise required by the Per4 sonal Security and Wealth in Retirement Act of

5 1999, the same requirements as are applicable with

6 respect to trusts under paragraph (11) of section

7 401(a) (relating to joint and survivor annuity and

8 preretirement survivor annuity) are met with respect

9 to the account (disregarding subparagraph (B)

10 thereof), as if the annuity starting date with respect

11 to the account holder is the earliest date on which

12 amounts may be distributed under paragraph (2).

13 ‘‘(10) The account holder certifies that such

14 trust is the only personalized retirement account of

15 the holder.

16 ‘‘(11) Under terms governing the account,

17 amounts may be distributed from such trust to pur18 chase disability insurance or a policy providing for

19 preretirement survivor benefits under section 255 of

20 the Social Security Act.

21 Paragraphs (1), (2), and (8) shall not apply to a direct

22 trustee-to-trustee transfer to a successor personalized re23 tirement account of the same individual.

24 ‘‘(c) REQUIREMENTS.—
31

•S 1103 IS

1 ‘‘(1) REQUIREMENTS RELATING TO TRUSTEE.—

2 Under the terms of a personalized retirement ac3 count, the trustee of the account shall, with respect

4 to the account, have the status of a fiduciary (within

5 the meaning of the first sentence of section 3(21)(A)

6 of the Employee Income Security in Retirement Act

7 of 1974). The trustee shall, with respect to the ac8 count, be treated as a fiduciary for purposes of sec9 tion 4975(e) (as applicable under subsection (e)(3)).

10 ‘‘(2) MINIMUM RETIREMENT ANNUITY

11 AMOUNT.—For purposes of subsection (b)(2)—

12 ‘‘(A) IN GENERAL.—The term ‘minimum

13 retirement annuity amount’ means the amount

14 (determined under regulations of the Commis15 sioner of Social Security) necessary to purchase

16 a minimum retirement annuity on the date of

17 the payment or distribution referred to in sub18 section (b)(2).

19 ‘‘(B) MINIMUM RETIREMENT ANNUITY.—

20 For purposes of subparagraph (A), the term

21 ‘minimum retirement annuity’ means an imme22 diate annuity making payments over the life ex23 pectancy of the account holder which (on a

24 monthly basis) are equal to an amount equal to

1 25 ⁄12 of 150 percent of the poverty line deter-
32

•S 1103 IS

1 mined on such date for a family of 1 individual

2 and adjusted annually thereafter by the adjust3 ment determined under section 215(i).

4 ‘‘(C) IMMEDIATE ANNUITY.—The term

5 ‘immediate annuity’ means an annuity—

6 ‘‘(i) which is purchased with a single

7 premium, and

8 ‘‘(ii) the annuity starting date (as de9 fined in paragraph (4) of section 72(c)) of

10 which commences on the 1st day of the

11 month beginning after the date of the pur12 chase of the annuity.

13 ‘‘(D) POVERTY LINE.—The term ‘poverty

14 line’ has the meaning given that term in section

15 673(2) of the Community Services Block Grant

16 Act (42 U.S.C. 9902(2), including any revision

17 required by such section.

18 ‘‘(3) INVESTMENT IN COLLECTIBLES TREATED

19 AS A DISTRIBUTION.—For purposes of this section,

20 subsection (m) of section 408 shall apply.

21 ‘‘(d) ACCOUNT EXEMPT FROM TAX.—

22 ‘‘(1) GENERAL RULE.—Except as provided in

23 paragraph (2), any personalized retirement account

24 is exempt from taxation under this title. Notwith25 standing the preceding sentence, any such account is
33

•S 1103 IS

1 subject to the taxes imposed by section 511 (relating

2 to imposition of tax on unrelated business income

3 of charitable, etc. organizations).

4 ‘‘(2) APPLICATION OF PROHIBITED TRANS5 ACTIONS RULES, ETC.—Rules similar to the rules of

6 paragraphs (2), (3), and (4) of section 408(e) shall

7 apply to personalized retirement accounts.

8 ‘‘(e) TAXATION OF DISTRIBUTIONS.—

9 ‘‘(1) IN GENERAL.—No amount paid or distrib10 uted from a personalized retirement account shall be

11 includible in gross income.

12 ‘‘(2) TREATMENT OF ROLLOVERS.—No amount

13 shall be includible in gross income by reason of a di14 rect trustee-to-trustee transfer from a personalized

15 retirement account of an individual to a successor

16 personalized retirement account of the same indi17 vidual if such transfer is made in accordance with

18 section 408(d)(3)(A)(i).

19 ‘‘(3) TREATMENT OF DISABILITY INSURANCE

20 AND PRERETIREMENT BENEFIT POLICY PRE21 MIUMS.—No amount shall be includible in gross in22 come to the extent that such amount is a premium

23 for the purchase of disability insurance or a policy

24 providing for preretirement survivor benefits pursu25 ant to section 255 of the Social Security Act.
34

•S 1103 IS

1 ‘‘(4) TREATMENT OF COLLECTIBLES.—

2 Amounts treated as a distribution under subsection

3 (c)(3) shall be includible in gross income and para4 graph (1) of section 72(t) shall apply to such

5 amounts.

6 ‘‘(e) CERTAIN OTHER RULES TO APPLY.—The fol7 lowing rules shall apply to personalized retirement ac8 counts in the same manner that such rules apply to indi9 vidual retirement accounts:

10 ‘‘(1) Section 408(h) (relating to custodial ac11 counts).

12 ‘‘(2) Sections 408(i) and 6693 (relating to re13 ports).

14 ‘‘(3) Section 4975 (relating to prohibited trans15 actions).’’.

16 (b) EXCESS CONTRIBUTIONS.—

17 (1) IN GENERAL.—Subsection (a) of section

18 4973 of the Internal Revenue Code of 1986 is

19 amended by striking ‘‘or’’ at the end of paragraph

20 (3), by inserting ‘‘or’’ at the end of paragraph (4),

21 and by inserting after paragraph (4) the following

22 new paragraph:

23 ‘‘(5) a personalized retirement account (as de24 fined in section 408B),’’.
35

•S 1103 IS

1 (2) EXCESS CONTRIBUTIONS DEFINED.—Sec2 tion 4973 of such Code is amended by adding at the

3 end the following new subsection:

4 ‘‘(g) EXCESS CONTRIBUTIONS TO PERSONALIZED

5 RETIREMENT ACCOUNTS.—For purposes of this section,

6 in the case of contributions to a personalized retirement

7 account (within the meaning of section 408B(b)), the term

8 ‘excess contributions’ means with respect to a taxable year

9 the sum of—

10 ‘‘(1) the excess (if any) of—

11 ‘‘(A) the amount contributed for the tax12 able year to such account (other than a quali13 fied rollover contribution described in section

14 408B(e)(2)), over

15 ‘‘(B) the amount allowable as a contribu16 tion for that taxable year under section

17 408B(b)(1), and

18 ‘‘(2) the amount determined under this sub19 section for the preceding taxable year, reduced by

20 the sum of—

21 ‘‘(A) the distributions out of the account

22 for such taxable year, and

23 ‘‘(B) the excess (if any) of the maximum

24 amount allowable as a contribution under sec25 tion 408B(b)(1) for such taxable year over the
36

•S 1103 IS

1 amount contributed to the account for the tax2 able year.

3 For purposes of this subsection, any contribution which

4 is distributed from a personalized retirement account in

5 a distribution described in section 408(d)(4) shall be treat6 ed as an amount not contributed.’’.

7 (c) CLERICAL AMENDMENT.—The table of sections

8 for subpart A of part I of subchapter D of chapter 1 of

9 such Code is amended by inserting after the item relating

10 to section 408A the following new item:

‘‘Sec. 408B. Personalized retirement accounts.’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1999.

14 SEC. 7. NO COVERAGE UNDER OASDI OF PART B ELIGIBLE

15 INDIVIDUALS.

16 (a) OLD-AGE AND SURVIVORS INSURANCE BENE17 FITS.—Section 202 of the Social Security Act (42 U.S.C.

18 402) is amended by adding at the end the following new

19 subsection:

20 ‘‘(z) Notwithstanding the preceding provisions of this

21 section, an eligible individual under part B (within the

22 meaning of section 257(3)) shall be deemed (except for

23 purposes of sections 226 and 226A) not entitled to bene24 fits under this section for any month ending after the date

25 the individual becomes such an eligible individual, and (ex-
37

•S 1103 IS

1 cept for purposes of sections 226 and 226A) no other indi2 vidual shall be deemed entitled to benefits under this sec3 tion for any month ending after such date based on the

4 wages or self-employment income of such eligible indi5 vidual. The preceding sentence shall not apply to an indi6 vidual who revokes an election under section 254(c)(2).’’.

7 (b) DISABILITY INSURANCE BENEFITS.—Section 223

8 of such Act (42 U.S.C. 423) is amended by adding at the

9 end the following new subsection:

10 ‘‘Limitation on Payments to Part B Eligible Individuals

11 ‘‘(j) Notwithstanding the preceding provisions of this

12 section, an eligible individual under part B (within the

13 meaning of section 257(3)) shall be deemed (except for

14 purposes of sections 226 and 226A) not entitled to bene15 fits under this section for any month ending after the date

16 the individual becomes such an eligible individual, and (ex17 cept for purposes of sections 226 and 226A) no other indi18 vidual shall be deemed entitled to benefits under section

19 202 for any month ending after such date based on the

20 wages or self-employment income of such eligible indi21 vidual. The preceding sentence shall not apply to an indi22 vidual who revokes an election under section 254(c)(2).’’.

23 SEC. 8. CONTRIBUTION RECOGNITION BONDS.

24 (a) CERTIFICATION OF CREDITED WAGES AND SELF25 EMPLOYMENT INCOME.—
38

•S 1103 IS

1 (1) IN GENERAL.—Subject to paragraph (2),

2 not later than July 1 of the first calendar year for

3 which an individual is an eligible individual (as de4 fined in section 257(3) of the Social Security Act),

5 the Commissioner of Social Security shall certify to

6 the Secretary of the Treasury whether such indi7 vidual was, as of immediately before such first cal8 endar year, credited with wages and self-employment

9 income under part A of title II of the Social Security

10 Act.

11 (2) NONAPPLICATION.—No eligible individual

12 (as so defined) who has not attained age 30 shall be

13 eligible to be issued a contribution recognition bond

14 under this section.

15 (b) ISSUANCE OF BOND.—

16 (1) IN GENERAL.—Immediately upon receipt of

17 certification under subsection (a) that such indi18 vidual is so credited, the Secretary of the Treasury

19 shall issue a contribution recognition bond to the

20 trustee of the personalized retirement account held

21 by such individual. Such bond shall consist of an ob22 ligation of the United States to pay each month into

23 the personalized retirement account held by such in24 dividual, commencing with the applicable initial

25 month, an amount, subject to paragraph (2), equal
39

•S 1103 IS

1 to such individual’s primary insurance amount, de2 termined under section 215 of the Social Security

3 Act as if section 202(y) of such Act did not apply

4 and such individual had applied for old-age insur5 ance benefits under section 202(a) of such Act for

6 such month, and by taking into account average in7 dexed monthly earnings based solely on those wages

8 and self-employment income that were credited as

9 described in subsection (a).

10 (2) ADJUSTMENTS TO AMOUNTS.—In the case

11 of—

12 (A) an individual who has attained age 50,

13 upon the first day of the applicable initial

14 month, the amount determined under para15 graph (1) shall be increased by an amount

16 equal to the interest accrued on such amount,

17 at a rate equal to the rate applicable for a

18 United States Treasury obligation with a 30-

19 year term, during the period that begins with

20 the date the contribution recognition bond is

21 issued and ends with the first day of the appli22 cable initial month; and

23 (B) an individual who has attained age 30

24 but has not attained age 50, upon the first day

25 of the applicable initial month, the amount de-
40

•S 1103 IS

1 termined under paragraph (1) shall be in2 creased by an amount equal to the percentage

3 change in the Consumer Price Index for All4 Urban Consumers during the period that begins

5 with the date the contribution recognition bond

6 is issued and ends with the first day of the ap7 plicable initial month.

8 (c) APPLICABLE INITIAL MONTH.—For purposes of

9 subsection (b), the applicable initial month in connection

10 with any individual is the later of—

11 (1) the month in which such individual attains

12 age 62, or

13 (2) the month in which such individual first

14 commences distributions from such individual’s per15 sonalized retirement account.

16 (d) ADDITIONAL PROVISIONS.—The purposes for

17 which obligations of the United States may be issued

18 under chapter 31 of title 31, United States Code, are here19 by extended to authorize the issuance of public debt obli20 gations consisting of contribution recognition bonds issued

21 under this section. Each such obligation shall be evidenced

22 by a paper instrument in the form of a bond issued by

23 the Secretary setting forth the terms specified in this sub24 section, and stating on its face that the obligation shall

25 be incontestable in the hands of the trustee of such ac-
41

•S 1103 IS

1 count, that the obligation is supported by the full faith

2 and credit of the United States, and that the United

3 States is pledged to the payment of the obligation, to the

4 credit of such account, in accordance with the provisions

5 of this section.

6 SEC. 9. ADMINISTRATION OF PERSONALIZED RETIREMENT

7 ACCOUNTS.

8 (a) ESTABLISHMENT OF FEDERAL PERSONAL RE9 TIREMENT INVESTMENT BOARD.—

10 (1) IN GENERAL.—There is established as an

11 independent agency of the United States the Federal

12 Personal Retirement Investment Board (in this sec13 tion referred to as the ‘‘Board’’).

14 (2) COMPOSITION.—The Board shall be com15 posed of 9 members appointed by the President, of

16 whom 1 shall be designated by the President as

17 Chairman.

18 (3) ADVICE AND CONSENT.—Appointments

19 under paragraph (2) shall be made by and with the

20 advice and consent of the Senate.

21 (4) MEMBERSHIP REQUIREMENTS.—

22 (A) EXPERIENCE; GEOGRAPHICAL REP23 RESENTATION.—Members of the Board ap24 pointed under paragraph (2) shall have sub25 stantial experience, training, and expertise in fi-
42

•S 1103 IS

1 nance, investments, or insurance and shall be

2 selected to represent each of the Federal re3 serve districts created in accordance with sec4 tion 2 of the Federal Reserve Act (12 U.S.C.

5 222).

6 (B) NO GOVERNMENT OFFICERS OR EM7 PLOYEES.—No individual who is an officer or

8 employee of the United States may be ap9 pointed to serve as a member of the Board.

10 (C) NO COMPENSATION.—Members of the

11 Board shall serve without compensation except

12 that such members shall be paid travel, per

13 diem, and other necessary expenses under sub14 chapter I of chapter 57 of title 5, United States

15 Code, while traveling away from such member’s

16 home or regular place of business in the per17 formance of the duties of the Board.

18 (5) LENGTH OF APPOINTMENTS.—

19 (A) TERMS.—A member of the Board ap20 pointed under paragraph (2) shall be appointed

21 for not more than 2 terms of 6 years each.

22 (B) VACANCIES.—

23 (i) IN GENERAL.—A vacancy on the

24 Board shall be filled in the manner in

25 which the original appointment was made
43

•S 1103 IS

1 and shall be subject to any conditions that

2 applied with respect to the original ap3 pointment.

4 (ii) COMPLETION OF TERM.—An indi5 vidual chosen to fill a vacancy shall be ap6 pointed for the unexpired term of the

7 member replaced.

8 (C) EXPIRATION.—The term of any mem9 ber shall not expire before the date on which

10 the member’s successor takes office.

11 (6) DUTIES.—The Board shall—

12 (A) establish requirements for the approval

13 of qualified investment firms and financial in14 stitutions to serve as trustees of personalized

15 retirement accounts, including the requirements

16 that—

17 (i) the firm or institution is in busi18 ness exclusively as a trustee of personal19 ized retirement accounts, and

20 (ii) the firm or institution is of good

21 character and is a substantial concern,

22 produces evidence of financial capability,

23 demonstrates financial soundness, and pro24 vides appropriate surety;
44

•S 1103 IS

1 (B) establish policies for the investment

2 and management of personalized retirement ac3 counts, including the requirement that any

4 trustee shall guarantee a minimum return of

5 2.5 percent per year for each of the investment

6 funds managed by the entity that are eligible

7 investment vehicles for personalized retirement

8 accounts (based on an average of the total re9 turn on each such fund over any consecutive 3-

10 year period and determined according to rules

11 and regulations of the Securities and Exchange

12 Commission that apply to the calculation of

13 minimum rates of return);

14 (C) designate, through the Federal Per15 sonal Retirement Deposit Corporation estab16 lished in accordance with subsection (b), a suc17 cessor trustee, in the case of a trustee of a per18 sonalized retirement account with respect to

19 which there is filed a bankruptcy petition (or

20 upon the initiation of a similar judicial pro21 ceeding) against the trustee;

22 (D) maintain and disseminate to eligible

23 individuals, through such Corporation, a list of

24 approved qualified investment firms and finan-
45

•S 1103 IS

1 cial institutions that may serve as trustees of

2 personalized retirement accounts;

3 (E) provide, through such Corporation, an

4 annual open season during which an eligible in5 dividual may select an approved qualified in6 vestment firm or financial institution to serve

7 as the trustee of the individual’s personalized

8 retirement account; and

9 (F) provide, through such Corporation,

10 guidance for eligible individuals (as defined in

11 section 257(3) of the Social Security Act) re12 garding risk management for the investment of

13 personalized retirement accounts.

14 (7) ADMINISTRATIVE PROVISIONS.—

15 (A) IN GENERAL.—The Board may—

16 (i) adopt, alter, and use a seal;

17 (ii) direct the Executive Director to

18 take such action as the Board considers

19 appropriate to carry out the provisions of

20 this part and the policies of the Board;

21 (iii) upon the concurring votes of 5

22 members, remove the Executive Director

23 from office for good cause shown; and
46

•S 1103 IS

1 (iv) take such other actions as may be

2 necessary to carry out the functions of the

3 Board.

4 (8) MEETINGS.—The Board shall meet—

5 (i) not less than once during each

6 quarter; and

7 (ii) at additional times at the call of

8 the Chairman.

9 (9) EXERCISE OF POWERS.—

10 (i) IN GENERAL.—Except as provided

11 in paragraph (7)(A)(iii), the Board shall

12 perform the functions and exercise the

13 powers of the Board on a majority vote of

14 a quorum of the Board. 7 members of the

15 Board shall constitute a quorum for the

16 transaction of business.

17 (ii) VACANCIES.—A vacancy on the

18 Board shall not impair the authority of a

19 quorum of the Board to perform the func20 tions and exercise the powers of the Board.

21 (10) APPOINTMENT OF EXECUTIVE DIREC22 TOR.—

23 (A) IN GENERAL.—The Board shall ap24 point, without regard to the provisions of law

25 governing appointments in the competitive serv-
47

•S 1103 IS

1 ice, an Executive Director by action agreed to

2 by a majority of the members of the Board.

3 (B) REQUIREMENTS.—The Executive Di4 rector shall have substantial experience, train5 ing, and expertise in finance, investments, and

6 insurance.

7 (C) DUTIES.—The Executive Director

8 shall—

9 (i) carry out the policies established

10 by the Board;

11 (ii) administer the provisions of this

12 section; and

13 (iii) prescribe such regulations (other

14 than regulations relating to fiduciary re15 sponsibilities) as may be necessary for the

16 administration of this section.

17 (D) ADMINISTRATIVE AUTHORITY.—The

18 Executive Director may—

19 (i) appoint such personnel as may be

20 necessary to carry out the provisions of

21 this section;

22 (ii) subject to approval by the Board,

23 procure the services of experts and consult24 ants under section 3109 of title 5, United

25 States Code;
48

•S 1103 IS

1 (iii) secure directly from an Executive

2 agency, the United States Postal Service,

3 or the Postal Rate Commission any infor4 mation necessary to carry out the provi5 sions of this section and the policies of the

6 Board;

7 (iv) make such payments out of

8 amounts appropriated in accordance with

9 paragraph (13) as the Executive Director

10 determines are necessary to carry out the

11 provisions of this section and the policies

12 of the Board;

13 (v) accept and use the services of indi14 viduals employed intermittently in the Gov15 ernment service and reimburse such indi16 viduals for travel expenses, as authorized

17 by section 5703 of title 5, United States

18 Code, including per diem as authorized by

19 section 5702 of such title;

20 (vi) except as otherwise expressly pro21 hibited by law or the policies of the Board,

22 delegate any of the Executive Director’s

23 functions to such employees under the

24 Board as the Executive Director may des25 ignate and authorize such successive re-
49

•S 1103 IS

1 delegations of such functions to such em2 ployees under the Board as the Executive

3 Director may consider to be necessary or

4 appropriate; and

5 (vii) take such other actions as are

6 appropriate to carry out the functions of

7 the Executive Director.

8 (11) DISCHARGE OF RESPONSIBILITIES.—The

9 members of the Board shall discharge their respon10 sibilities solely in the interest of personalized retire11 ment account holders and beneficiaries.

12 (12) ANNUAL INDEPENDENT AUDIT.—The

13 Board shall annually engage an independent quali14 fied public accountant to audit the activities of the

15 Board.

16 (13) AUTHORIZATION OF APPROPRIATIONS.—

17 There is authorized to be appropriated such sums as

18 may be necessary to carry out this section.

19 (14) SUBMISSION OF BUDGET TO CONGRESS.—

20 The Board shall prepare and submit to the Presi21 dent, and, at the same time, to the appropriate com22 mittees of Congress, an annual budget of the ex23 penses and other items relating to the Board which

24 shall be included as a separate item in the budget
50

•S 1103 IS

1 required to be transmitted to Congress under section

2 1105 of title 31, United States Code.

3 (b) PLAN FOR THE ESTABLISHMENT OF THE FED4 ERAL PERSONAL RETIREMENT DEPOSIT CORPORA5 TION.—

6 (1) IN GENERAL.—Not later than 90 days after

7 the date of enactment of this Act, the Board, in con8 sultation with the Commissioner of Social Security,

9 shall submit to Congress a legislative proposal for

10 the establishment of an independent corporation to

11 be known as the ‘‘Federal Personal Retirement De12 posit Corporation’’ (in this subsection referred to as

13 the ‘‘Corporation’’).

14 (2) ORGANIZATION AND STRUCTURE.—The leg15 islative proposal required under paragraph (1) shall

16 establish and organize the Corporation in a manner

17 similar to the establishment and organization of the

18 Federal Home Loan Mortgage Corporation under

19 the Federal Home Loan Mortgage Corporation Act

20 (12 U.S.C. 1451 et seq.).

21 (3) PURPOSES.—The legislative proposal re22 quired under paragraph (1) shall authorize the

23 Corporation—

24 (A) to receive amounts received under an

25 individual retirement payroll deduction plan es-
51

•S 1103 IS

1 tablished in accordance with section 251(b) of

2 the Social Security Act (as added by section 4

3 of the Personal Security and Wealth in Retire4 ment Act of 1999) and to quarterly distribute

5 such amounts to personalized retirement ac6 counts under the management and supervision

7 of approved qualified investment firms and fi8 nancial institutions; and

9 (B) to carry out the responsibilities de10 scribed in subparagraphs (C), (D), (E), and (F)

11 of subsection (a)(6).

12 (4) PRIVATIZATION OF PART OF THE SOCIAL

13 SECURITY ADMINISTRATION.—The legislative pro14 posal required under paragraph (1) shall provide—

15 (A) for the privatization of those divisions

16 of the Social Security Administration that the

17 Board and the Commissioner of Social Security

18 determine would be best suited to carry out the

19 duties of the Corporation; and

20 (B) for the eventual dissolution of the re21 tirement benefits division of the Social Security

22 Administration after 100 percent of the popu23 lation are eligible individuals for purposes of

24 part B of title II of the Social Security Act (as

25 added by section 4).
52

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1 SEC. 10. DEDICATION OF ON-BUDGET SURPLUS.

2 (a) CREATION OF ACCOUNT.—There is established

3 within the Treasury a special reserve account to be known

4 as the ‘‘Personalized Retirement Social Security Account’’

5 (hereinafter in this section referred to as the ‘‘account’’).

6 The Secretary of the Treasury shall transfer funds in the

7 account to the Federal Old-Age and Survivors Insurance

8 Trust Fund established under section 201 of the Social

9 Security Act (42 U.S.C. 401 et seq.) upon the request of

10 the Managing Trustees of such Trust Fund.

11 (b) DEDICATION OF SURPLUS.—The Secretary of the

12 Treasury shall pay into the account annually at the end

13 of each fiscal year during the fiscal-year period beginning

14 on October 1, 1999, and ending on September 30, 2009,

15 amounts totalling, in the aggregate, the projected and ac16 tual surplus, if any, in the total budget of the United

17 States Government for that fiscal-year period.

18 (c) DEFINITION OF TOTAL BUDGET OF THE UNITED

19 STATES GOVERNMENT.—As used in this section, the term

20 ‘‘total budget of the United States Government’’ means

21 all spending and receipt accounts of the United States

22 Government that are designated as on-budget accounts.

23 SEC. 11. CAP ON INCREASE IN MANDATORY SPENDING.

24 (a) IN GENERAL.—Effective beginning with fiscal

25 year 2000 and fiscal years thereafter, the growth of each

26 individual mandatory program except Social Security shall
53

•S 1103 IS

1 not exceed a level that is adjusted for beneficiary and in2 flation growth.

3 (b) CONGRESSIONAL BUDGET.—

4 (1) BUDGET RESOLUTION.—The congressional

5 budget resolution for a fiscal year shall not provide

6 mandatory funding levels that exceed levels estab7 lished in subsection (a).

8 (2) POINT OF ORDER.—It shall not be in order

9 in the Senate or the House of Representatives to

10 consider any bill, resolution, amendment, or con11 ference report if such bill, resolution, amendment, or

12 conference report would cause mandatory funding

13 levels to exceed levels established in subsection (a).

14 This point of order may only be waived or suspended

15 by a vote of three-fifths of the Members, duly chosen

16 and sworn.

17 (c) IMPLEMENTATION.—

18 (1) PRESIDENT’S REPORT AND RECOMMENDA19 TIONS.—If in any fiscal year the President projects

20 that the spending for any mandatory program will

21 exceed the level established under subsection (a), the

22 President shall, before April 15 of each fiscal year,

23 recommend to the Congress legislative changes, in24 cluding changes in eligibility for benefits, to address
54

•S 1103 IS

1 the mandatory spending overages, if any, in the

2 prior, current, or budget year.

3 (2) CONGRESS ACTS.—Within 10 days after the

4 President’s recommendations are submitted, the

5 Congress shall make relevant changes in laws to re6 duce the mandatory spending to the cap levels as re7 quired under subsection (a).

8 (3) SEQUESTER.—Notwithstanding any other

9 provision of law, if the Congress fails to make such

10 changes in laws, there shall be a sequester in any

11 fiscal year to reduce spending for mandatory pro12 grams except Social Security if such an individual

13 program exceeded the cap levels established in sub14 section (a). Such sequester shall institute pro rata

15 reduction of all benefit payments made under pro16 grams subject to the provisions of this Act.

17 (d) DEFINITION.—For purposes of this section, the

18 term ‘‘individual mandatory program’’ means a program

19 that makes payments to any person, business, or unit of

20 government that seeks the payments and that meets eligi21 bility criteria established by law. The term includes—

22 (1) Farm Price Supports;

23 (2) Family Social Services-Foster Care and

24 Adoption Assistance;

25 (3) Guaranteed Student Loan Program;
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•S 1103 IS

1 (4) Medicaid;

2 (5) Hospital Insurance;

3 (6) Supplemental Medical Insurance;

4 (7) Railroad Retirement;

5 (8) Civil Service Pensions;

6 (9) Military Pensions;

7 (10) Unemployment Compensation;

8 (11) Child Nutrition Program;

9 (12) Supplemental Security Income;

10 (13) Family Support Pay;

11 (14) Veteran’s Compensation and Pensions;

12 (15) Food Stamps;

13 (16) Housing Assistance;

14 (17) Vocational Rehabilitation;

15 (18) Readjustment Benefits;

16 (19) FDIC and FSLIC; and

17 (20) other mandatory spending programs under

18 categories established by the Congressional Budget

19 Office.

20 SEC 12. LIMITATION ON AMOUNTS EXPENDED BY CERTAIN

21 GOVERNMENT ENTITIES FOR OVERHEAD EX22 PENSES.

23 (a) DEFINITIONS.—In this section:
56

•S 1103 IS

1 (1) COVERED GOVERNMENT ENTITY.—The

2 term ‘‘covered government entity’’ means an entity

3 of the executive or judicial branch of Government.

4 (2) OVERHEAD EXPENSES.—The term ‘‘over5 head expenses’’ means the items specified in the fol6 lowing object classifications set forth in Circular No.

7 A–11, Office of Management and Budget, July

8 1990:

9 (A) Contractual services and supplies (ob10 ject class 20):

11 (i) Travel and transportation of per12 sons (object class 21.0).

13 (ii) Transportation of things (object

14 class 22.0).

15 (ii) Rental payments to GSA (object

16 class 23.1).

17 (iv) Rental payments to others (object

18 class 23.2).

19 (v) Communications, utilities, and

20 miscellaneous charges (object class 23.3).

21 (vi) Printing and reproduction (object

22 class 24.0).

23 (vii) Other services (object class 25.0).

24 (viii) Supplies and materials (object

25 class 26.0).
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•S 1103 IS

1 (B) Acquisition of capital assets (object

2 class 30.0):

3 (i) Equipment (object class 31.0), ex4 cluding funds for foreign assistance.

5 (ii) Land and structures (object class

6 32.0).

7 (iii) Investments and loans (object

8 class 33.0), excluding funds for foreign as9 sistance.

10 (b) RULE FOR FISCAL YEARS 2000 THROUGH

11 2010.—Notwithstanding any other provision of law, with

12 respect to fiscal year 2000 and each of the 10 fiscal years

13 thereafter, a covered government entity may not obligate

14 or expend for overhead expenses an amount that exceeds

15 the amounts obligated and expended by that entity for

16 such expenses for fiscal year 1999, reduced by 15 percent.

17 (c) NONAPPLICATION OF RULES.—The rule stated in

18 subsections (b) shall not apply to the Department of De19 fense or the United States Postal Service.

20 (d) ADJUSTMENTS TO DISCRETIONARY CAPS.—The

21 discretionary spending limits for fiscal years 2000 through

22 2011 shall be reduced for purposes of the Congressional

23 Budget Act of 1974 and the Balanced Budget and Emer24 gency Deficit Control Act of 1985 to take into account

25 the requirements of this section.
58

•S 1103 IS

1 SEC. 13. REDUCTION IN FEDERAL DISCRETIONARY SPEND2 ING AND 10 YEAR FREEZE.

3 (a) PRESIDENT.—Not later than 5 days after the

4 date of enactment of this Act, the President shall reduce

5 the discretionary spending limits under section 251(c) of

6 the Balanced Budget and Emergency Deficit Reduction

7 Act of 1985 (2 U.S.C. 901(c))—

8 (1) for fiscal year 2000 by 5 percent; and

9 (2) for each of the fiscal years 2001 through

10 2010 to a level equal to the levels provided for fiscal

11 year 2000 after the reduction required by paragraph

12 (1).

13 (b) CONGRESSIONAL COMMITTEES.—Not later than

14 5 days after the date of enactment of this Act, the chairs

15 of the Committees on the Budget of the Senate and the

16 House of Representatives shall revise levels under section

17 311(a) of the Congressional Budget Act of 1974 (2 U.S.C.

18 642(a)) and adjust the committee allocations under sec19 tion 302(a) of that Act (2 U.S.C. 633(a)) to reflect the

20 amount referred to in subsection (a).

21 SEC. 14. SALE OF ASSETS.

22 Not later than 120 days after the date of enactment

23 of this Act, the President shall sell, redeem, or otherwise

24 dispose of such Federally-owned lands, loans, and other

25 Federal assets so as to yield an amount equal to

26 $268,000,000,000 which shall then be deposited into the
59

•S 1103 IS

1 Personalized Retirement Social Security Account created

2 under section 10.

Æ