I

104TH CONGRESS

2D SESSION H. R. 2952

To amend the Internal Revenue Code of 1986 and title II of the Social

Security Act to reduce social security taxes, to reduce old-age insurance

benefits by a corresponding amount, and to provide for the establishment

of individual social security retirement accounts funded by payroll deductions and employer contributions equal to the amount of the tax

reduction.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 1, 1996

Mr. PORTER (for himself, Mr. SHAYS, Mr. CALVERT, Mr. MANZULLO, and Mr.

PETRI) introduced the following bill; which was referred to the Committee

on Ways and Means, and in addition to the Committee on Economic and

Educational Opportunities, for a period to be subsequently determined by

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 and title

II of the Social Security Act to reduce social security

taxes, to reduce old-age insurance benefits by a corresponding amount, and to provide for the establishment

of individual social security retirement accounts funded

by payroll deductions and employer contributions equal

to the amount of the tax reduction.

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

2 This Act may be cited as the ‘‘Individual Social Secu3 rity Retirement Account Act of 1995’’.

4 SEC. 2. REDUCTION OF SOCIAL SECURITY TAXES.

5 (a) EMPLOYMENT TAXES.—

6 (1) TAX ON EMPLOYEES.—Subsection (a) of

7 section 3101 of the Internal Revenue Code of 1986

8 (relating to OASDI tax on employees) is amended by

9 adding at the end, after and below the table, the fol10 lowing new sentence:

11 ‘‘The rate of tax specified in the preceding table for any

12 calendar year shall be reduced by the authorized tax re13 duction for such calendar year determined under section

14 3128.’’

15 (2) TAX ON EMPLOYERS.—Subsection (a) of

16 section 3111 of such Code (relating to OASDI tax

17 on employers) is amended by adding at the end,

18 after and below the table, the following new sen19 tence:

20 ‘‘The rate of tax specified in the preceding table for any

21 calendar year shall be reduced by the authorized tax re22 duction for such calendar year determined under section

23 3128.’’

24 (3) AUTHORIZED TAX REDUCTION.—

25 (A) IN GENERAL.—Subchapter C of chap26 ter 21 of such Code is amended—
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1 (i) by redesignating section 3128 as

2 section 3129; and

3 (ii) by inserting after section 3127 the

4 following new section:

5 ‘‘SEC. 3128. AUTHORIZED TAX REDUCTION.

6 ‘‘(a) IN GENERAL.—Except as provided in subsection

7 (b), for purposes of sections 3101(a) and 3111(a), the

8 term ‘authorized tax reduction’ for any calendar year

9 means 50 percent of the sum of—

10 ‘‘(1) the excess of—

11 ‘‘(A) the total unadjusted OASI tax rate

12 for such calendar year (determined under sub13 section (c)), over

14 ‘‘(B) the adjusted cost rate (determined

15 under subsection (d)) for such calendar year,

16 plus

17 ‘‘(2) the value of the projected receipts for such

18 calendar year of the Federal Old-Age and Survivors

19 Insurance Trust Fund constituting amounts appro20 priated to such Trust Fund equivalent to tax liabil21 ities under chapter 1 of the Internal Revenue Code

22 of 1986 attributable to the application of sections 86

23 and 871(a)(3) of such Code to payments from such

24 Trust Fund, expressed as a percentage of the sum

25 of the projected total wages to be paid in such cal-
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1 endar year and self-employment income to be de2 rived in such calendar year.

3 ‘‘(b) DISREGARD OF DEMINIMIS REDUCTIONS.—In

4 any case in which the authorized tax reduction (as defined

5 in subsection (a)) for any calendar year does not exceed

6 0.2 percent, such authorized tax reduction shall be deemed

7 to be 0 percent.

8 ‘‘(c) TOTAL UNADJUSTED OASI TAX RATE.—

9 ‘‘(1) IN GENERAL.—Not later than November 1

10 of each calendar year, the Commissioner of Social

11 Security shall determine and publish in the Federal

12 Register the total unadjusted OASI tax rate for the

13 following calendar year. For purposes of this section,

14 the term ‘total unadjusted OASI tax rate’ for a cal15 endar year means the product derived by multiply16 ing—

17 ‘‘(A) the sum of the rates specified for

18 such calendar year under sections 3101(a) and

19 3111(a) (determined without regard to the last

20 sentence thereof), by

21 ‘‘(B) the OASI appropriation percentage

22 for such calendar year,

23 rounded, if not a multiple of 0.01 percent, to the

24 nearest multiple of 0.01 percent.
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1 ‘‘(2) OASI APPROPRIATION PERCENTAGE.—For

2 purposes of this subsection, the term ‘OASI appro3 priation percentage’ for any calendar year means the

4 quotient (expressed as a percentage) derived by di5 viding—

6 ‘‘(A) the total amount projected to be ap7 propriated to the Federal Old-Age and Survi8 vors Insurance Trust Fund under section

9 201(a) of the Social Security Act for the fiscal

10 year beginning October 1 preceding such cal11 endar year, by

12 ‘‘(B) the total amount projected to be ap13 propriated to such Trust Fund and the Federal

14 Disability Insurance Trust Fund under section

15 201 of such Act for such fiscal year,

16 rounded, if not a multiple of 1 percent, to the near17 est multiple of 1 percent.

18 ‘‘(d) ADJUSTED COST RATE.—

19 ‘‘(1) IN GENERAL.—Not later than November 1

20 of each calendar year, the Commissioner of Social

21 Security shall determine and publish in the Federal

22 Register the adjusted cost rate for the following cal23 endar year. For purposes of this section, the term

24 ‘adjusted cost rate’ for any calendar year means the
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1 quotient (expressed as a percentage) derived by di2 viding—

3 ‘‘(A) the adjusted projected OASI costs for

4 such calendar year, by

5 ‘‘(B) the sum of the projected total wages

6 to be paid in such calendar year and projected

7 self-employment income to be derived in such

8 calendar year.

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section—

11 ‘‘(A) ADJUSTED PROJECTED OASI

12 COSTS.—The term ‘adjusted projected OASI

13 costs’ for any calendar year means the sum

14 of—

15 ‘‘(i) the projected amount of annual

16 outlays from the Federal Old-Age and Sur17 vivors Insurance Trust Fund for such cal18 endar year, and

19 ‘‘(ii) the contingency reserve adjust20 ment for such calendar year.

21 ‘‘(B) CONTINGENCY RESERVE ADJUST22 MENT.—The term ‘contingency reserve adjust23 ment’ for any calendar year means the excess

24 of—
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1 ‘‘(i) 150 percent of the projected an2 nual outlays from the Federal Old-Age and

3 Survivors Insurance Trust Fund for such

4 calendar year, determined as of January 1

5 of such year, over

6 ‘‘(ii) the projected Trust Fund contin7 gency reserve percentage, determined as of

8 such date, of such projected annual out9 lays.

10 ‘‘(C) TRUST FUND CONTINGENCY RESERVE

11 PERCENTAGE.—The term ‘Trust Fund contin12 gency reserve percentage’ as of any date means

13 the quotient (expressed as a percentage) derived

14 by dividing—

15 ‘‘(i) the balance of the Federal Old16 Age and Survivors Insurance Trust Fund

17 as of such date, by

18 ‘‘(ii) the projected annual outlays

19 from the Trust Fund for the year com20 mencing on such date,

21 rounded, if not a multiple of 1 percent, to the

22 nearest multiple of 1 percent.’’

23 (B) CLERICAL AMENDMENT.—The table of

24 sections for subchapter C of chapter 21 of such

25 Code is amended by striking the item relating
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1 to section 3128 and inserting the following new

2 items:

‘‘Sec. 3128. Authorized tax reduction.

‘‘Sec. 3129. Short title.’’

3 (b) SELF-EMPLOYMENT TAXES.—

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

5 1401 of such Code (relating to OASDI tax on self6 employment income) is amended by adding at the

7 end, after and below the table, the following new

8 sentence:

9 ‘‘The rate of tax specified in the preceding table for any

10 taxable year shall be reduced by the authorized tax reduc11 tion, determined under section 1403, for the calendar year

12 in which such taxable year commences.’’

13 (2) AUTHORIZED TAX REDUCTION.—

14 (A) IN GENERAL.—Chapter 2 of such Code

15 is amended—

16 (i) by redesignating section 1403 as

17 section 1404; and

18 (ii) by inserting after section 1402 the

19 following new section:

20 ‘‘SEC. 1403. AUTHORIZED TAX REDUCTION.

21 ‘‘(a) IN GENERAL.—Except as provided in subsection

22 (b), for purposes of sections 1401(a), the term ‘authorized

23 tax reduction’ for any calendar year means the sum of—

24 ‘‘(1) the excess of—
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1 ‘‘(A) the total unadjusted OASI tax rate

2 for such calendar year (determined under sec3 tion 3128(c)), over

4 ‘‘(B) the adjusted cost rate for such cal5 endar year (determined under section 3128(d)),

6 plus

7 ‘‘(2) the value of the projected receipts for such

8 calendar year of the Federal Old-Age and Survivors

9 Insurance Trust Fund constituting amounts appro10 priated to such Trust Fund equivalent to tax liabil11 ities under chapter 1 of the Internal Revenue Code

12 of 1986 attributable to the application of sections 86

13 and 871(a)(3) of such Code to payments from such

14 Trust Fund, expressed as a percentage of the sum

15 of the projected total wages to be paid in such cal16 endar year and the projected self-employment in17 come to be derived in such calendar year.

18 ‘‘(b) DISREGARD OF DEMINIMIS REDUCTIONS.—In

19 any case in which the authorized tax reduction (as defined

20 in subsection (a)) for any year does not exceed 0.4 per21 cent, such authorized tax reduction shall be deemed to be

22 0 percent.’’

23 (B) CLERICAL AMENDMENT.—The table of

24 sections for chapter 2 of such Code is amended
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1 by striking the item relating to section 1403

2 and inserting the following new items:

‘‘Sec. 1403. Authorized tax reduction.

‘‘Sec. 1404. Miscellaneous provisions.’’

3 (b) EFFECTIVE DATE.—The amendments made by

4 this section shall apply with respect to remuneration paid

5 after December 31, 1996, and with respect to earnings

6 from self-employment attributable to taxable years begin7 ning after such date.

8 SEC. 3. CORRESPONDING ADJUSTMENT TO OLD-AGE IN9 SURANCE BENEFITS.

10 (a) IN GENERAL.—Section 202(a) of the Social Secu11 rity Act (42 U.S.C. 202(a)) is amended—

12 (1) by redesignating subparagraphs (A) and

13 (B) as clauses (i) and (ii), respectively;

14 (2) by redesignating paragraphs (1), (2), and

15 (3) as subparagraphs (A), (B), and (C), respectively;

16 (3) in clause (i) (as redesignated), by striking

17 ‘‘paragraphs (1), (2), and (3)’’ and inserting ‘‘sub18 paragraphs (A), (B), and (C)’’;

19 (4) in clause (ii) (as redesignated), by striking

20 ‘‘paragraphs (1) and (2)’’ and inserting ‘‘subpara21 graphs (A) and (B)’’, and by striking ‘‘paragraph

22 (3)’’ and inserting ‘‘subparagraph (C)’’;

23 (5) by striking ‘‘(a) Every’’ and inserting

24 ‘‘(a)(1) Every’’;
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1 (6) in the matter following clause (ii) (as redes2 ignated), by striking ‘‘subsection (q) and subsection

3 (w)’’ and inserting ‘‘paragraph (2) and subsections

4 (q) and (w)’’; and

5 (7) by adding at the end the following new

6 paragraph:

7 ‘‘(2)(A) An individual’s monthly benefit determined

8 under paragraph (1) shall be reduced by the authorized

9 benefit reduction for such individual. The reduction in an

10 individual’s benefit under this paragraph shall be applied

11 after any reduction or deduction otherwise applicable

12 under this title to benefits based on such individual’s

13 wages and self-employment income.

14 ‘‘(B) For purposes of this paragraph, the term ‘au15 thorized benefit reduction’ for an individual means one16 twelfth of an annuity, stated as an annual amount—

17 ‘‘(i) which has the actuarial present value (de18 termined as of January 1 of the calendar year in

19 which such individual attains retirement age (as de20 fined in section 216(l)) of the aggregate of all reduc21 tions in taxes under the last sentence of sections

22 1401(a), 3101(a), and 3111(a) of the Internal Reve23 nue Code of 1986 (including reductions in taxes

24 under sections 3201(a) and 3221(a) of such Code)

25 with respect to such individual’s wages (including
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1 compensation referred to in such sections 3201(a)

2 and 3221(a)) paid, and self-employment income de3 rived, prior to such month, rounded, if not a mul4 tiple of $1, to the nearest multiple of $1,

5 ‘‘(ii) which shall be increased by the Commis6 sioner in accordance with subparagraph (C), and

7 ‘‘(iii) which shall be adjusted by the Commis8 sioner annually for increases in the cost of living, in

9 accordance with regulations prescribed by the Com10 missioner providing for adjustment procedures simi11 lar to the procedures used to adjust benefit amounts

12 under section 215(i)(2)(A).

13 ‘‘(C) With respect to all individuals who attain age

14 62 in any calendar year and who become entitled to old15 age insurance benefits in or after such year, the Commis16 sioner of Social Security may increase the authorized ben17 efit reductions for such individuals under subparagraph

18 (B) to the extent necessary to compensate appropriately

19 for the value of amounts credited to the individual social

20 security retirement accounts of individuals who would have

21 attained age 62 in such calendar year but died before at22 taining such age. Any authorized benefit reduction so ad23 justed which is not a multiple of $1 shall be rounded to

24 the nearest multiple of $1.
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1 ‘‘(D) In deriving the authorized benefit reduction

2 under this paragraph, the Commissioner of Social Security

3 shall utilize generally accepted actuarial assumptions

4 which shall be prescribed in regulations of the Commis5 sioner, except that—

6 ‘‘(i) determinations shall be made on a gender7 neutral basis,

8 ‘‘(ii) for purposes of determing the actuarial

9 present value referred to in subparagraph (B)(i), the

10 Commissioner shall assume, for the cohort of old-age

11 insurance beneficiaries born during each calendar

12 year, a discount rate equal to the implicit rate of re13 turn for all individuals in such cohort which would

14 be represented by their old-age insurance benefits if

15 reductions under this paragraph were not applied,

16 determined solely on the basis of total unadjusted

17 OASI tax rates (as defined in section 3128(c)(1) of

18 the Internal Revenue Code of 1986) in effect from

19 year to year, and

20 ‘‘(iii) interest with respect to the annuity shall

21 be computed for any month at the rate used for

22 such month under section 201(d), adjusted for pro23 jected inflation.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to months after De3 cember 1996.

4 SEC. 4. INDIVIDUAL SOCIAL SECURITY RETIREMENT AC5 COUNTS FUNDED BY SOCIAL SECURITY PAY6 ROLL DEDUCTION PLANS.

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

8 is amended—

9 (1) by inserting before section 201 the follow10 ing:

11 ‘‘PART A—INSURANCE BENEFITS’’;

12 and

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

14 ‘‘PART B—INDIVIDUAL RETIREMENT PROGRAM

15 ‘‘SOCIAL SECURITY PAYROLL DEDUCTION PLANS

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

17 a covered employer for any calendar year shall have in

18 effect throughout such calendar year a social security pay19 roll deduction plan for such person’s eligible employees.

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

21 term ‘social security payroll deduction plan’ means a writ22 ten plan of a covered employer if—

23 ‘‘(1) under such plan, the prescribed social se24 curity employee contribution is deducted from each

25 eligible employee’s wages and paid to an individual
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1 social security retirement account of such employee

2 designated in accordance with section 252,

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

4 pays the amount so deducted to the designated indi5 vidual social security retirement account within 10

6 business days after the payment of the wages from

7 which the amount was deducted,

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

9 pays to the individual social security retirement ac10 count, together with the contribution paid pursuant

11 to paragraph (2), the prescribed social security em12 ployer contribution with respect to the eligible em13 ployee, and

14 ‘‘(4) the employer receives no compensation for

15 the cost of administering such plan.

16 ‘‘(c) AMOUNT DEDUCTED MAY BE ACCUMULATED

17 BY EMPLOYER IN CERTAIN CASES.—If, under the terms

18 of an individual social security retirement account selected

19 under section 252, contributions below a specified amount

20 will not be accepted, the requirements of subsection (b)(2)

21 shall be treated as met if amounts deducted from the

22 wages of an eligible employee are accumulated by the cov23 ered employer and paid to such plan not later than 10

24 business days after the first day on which the accumulated

25 amount exceeds such specified amount.
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1 ‘‘DESIGNATION OF INDIVIDUAL SOCIAL SECURITY

2 RETIREMENT ACCOUNTS

3 ‘‘SEC. 252. (a) IN GENERAL.—Except as provided in

4 subsection (b), the individual social security retirement ac5 count to which contributions with respect to any eligible

6 employee are required to be paid under section 251 shall

7 be such an account designated by such employee to such

8 employer not later than 10 business days after the date

9 on which such employee becomes an eligible employee of

10 such employer. Any such designation shall be made in

11 such form and manner as may be prescribed in regula12 tions of the Commissioner of Social Security.

13 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES14 IGNATION BY EMPLOYEE.—In any case in which no timely

15 designation of the individual social security retirement ac16 count is made, the covered employer shall designate such

17 account in accordance with regulations of the Commis18 sioner.

19 ‘‘(c) SUBSEQUENT DESIGNATION OF OTHER AC20 COUNTS.—The Commissioner shall provide by regulation

21 for subsequent designation of other individual social secu22 rity retirement accounts of an eligible employee in lieu of

23 or in addition to accounts previously designated under this

24 section.
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1 ‘‘SELF-EMPLOYED INDIVIDUALS

2 ‘‘SEC. 253. (a) IN GENERAL.—Not later than 30

3 days after the close of any taxable year for which there

4 is imposed a tax under section 1401(a) of the Internal

5 Revenue Code of 1986 on the self-employment income of

6 an individual, such individual shall pay to an individual

7 social security retirement account designated by such indi8 vidual the prescribed social security self-employment con9 tribution with respect to such individual for such taxable

10 year.

11 ‘‘(b) DESIGNATION OF ACCOUNT.—The designation

12 of an individual social security retirement account for pay13 ment of prescribed social security self-employment con14 tributions shall be made in such form and manner as may

15 be prescribed in regulations of the Commissioner of Social

16 Security.

17 ‘‘DEFINITIONS

18 ‘‘SEC. 254. For purposes of this part—

19 ‘‘(1) INDIVIDUAL SOCIAL SECURITY RETIRE20 MENT ACCOUNT.—The term ‘individual social secu21 rity retirement account’ means any individual retire22 ment account (as defined in section 408(a) of the

23 Internal Revenue Code of 1986) which is adminis24 tered or issued by a bank (as defined in section

25 408(n) of such Code) and which meets the require26 ments of section 408A of such Code.
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1 ‘‘(2) COVERED EMPLOYER.—The term ‘covered

2 employer’ means, for any calendar year, any person

3 on whom an excise tax is imposed under section

4 3111 or 3221 of the Internal Revenue Code of 1986

5 with respect to having an individual in his employ to

6 whom wages were paid by such person during such

7 calendar year.

8 ‘‘(3) ELIGIBLE EMPLOYEE.—THE TERM ‘ELIGI9 BLE EMPLOYEE’ MEANS, IN CONNECTION WITH ANY

10 PERSON WHO IS A COVERED EMPLOYER FOR ANY

11 CALENDAR YEAR, ANY INDIVIDUAL WITH RESPECT

12 TO WHOSE EMPLOYMENT BY SUCH EMPLOYER DUR13 ING SUCH CALENDAR YEAR THERE IS IMPOSED AN

14 EXCISE TAX UNDER SECTION 3111 OR 3221 OF THE

15 INTERNAL REVENUE CODE OF 1986.

16 ‘‘(4) PRESCRIBED SOCIAL SECURITY EMPLOYEE

17 CONTRIBUTION.—The term ‘prescribed social secu18 rity employee contribution’ means, with respect to

19 any eligible employee of a covered employer, an

20 amount equal to the product derived by multiply21 ing—

22 ‘‘(A) the wages received by such employee

23 with respect to employment by such employer,

24 by
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1 ‘‘(B) the rate of the authorized tax reduc2 tion specified in section 3128(a) of the Internal

3 Revenue Code of 1986,

4 rounded, if not a multiple of $1, to the nearest mul5 tiple of $1.

6 ‘‘(5) PRESCRIBED SOCIAL SECURITY EMPLOYER

7 CONTRIBUTION.—The term ‘prescribed social secu8 rity employer contribution’ means, with respect to a

9 covered employer of any eligible employee, an

10 amount equal to the product derived by multiply11 ing—

12 ‘‘(A) the wages paid by such employer to

13 such employee with respect to employment of

14 such employee, by

15 ‘‘(B) the rate of the authorized tax reduc16 tion specified in section 3128(a) of the Internal

17 Revenue Code of 1986,

18 rounded, if not a multiple of $1, to the nearest mul19 tiple of $1.

20 ‘‘(6) PRESCRIBED SOCIAL SECURITY SELF21 EMPLOYMENT CONTRIBUTION.—The term ‘pre22 scribed social security self-employment contribution’

23 means, with respect to the self-employment income

24 of an individual for any taxable year, an amount

25 equal to the product derived by multiplying—
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1 ‘‘(A) the the amount of such self-employ2 ment income for such taxable year, by

3 ‘‘(B) the rate of the authorized tax reduc4 tion specified in section 1403(a) of the Internal

5 Revenue Code of 1986,

6 rounded, if not a multiple of $1, to the nearest mul7 tiple of $1.

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

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

10 legal holiday in the area involved.

11 ‘‘(8) WAGES.—In the case of a covered em12 ployer referred to in section 3221 of the Internal

13 Revenue Code of 1986, the term ‘wages’ includes

14 compensation referred to in such section 3221.

15 ‘‘PENALTIES

16 ‘‘SEC. 255. (a) FAILURE TO ESTABLISH SOCIAL SE17 CURITY PAYROLL DEDUCTION PLAN.—Any covered em18 ployer who fails to meet the requirements of section 251

19 for any calendar year shall be subject to a civil penalty

20 of not to exceed the greater of—

21 ‘‘(1) $50,000, or

22 ‘‘(2) $1,000 for each eligible employee of such

23 employer as of the beginning of such calendar year.

24 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

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

26 deduct in full the amount from the wages of an eligible
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1 employee required under an applicable social security pay2 roll deduction plan shall be subject to a civil penalty of

3 not to exceed $50 for each such failure.

4 ‘‘(c) FAILURE TO PAY DEDUCTED WAGES TO INDI5 VIDUAL SOCIAL SECURITY RETIREMENT ACCOUNT.—If

6 an amount deducted from the wages of an eligible em7 ployee under a social security payroll deduction plan is not

8 timely paid in full to the designated individual social secu9 rity retirement account in accordance with section 251—

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

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

12 exceed 20 percent of the unpaid amount, and

13 ‘‘(2) shall be liable to the eligible employee for

14 interest on the unpaid amount at a rate equal to

15 133 percent of the Federal short-term rate under

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

17 1986, calculated from the last day by which such

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

19 which such amount is paid into the designated indi20 vidual social security retirement account.

21 ‘‘(d) FAILURE TO PAY PRESCRIBED SOCIAL SECU22 RITY SELF-EMPLOYMENT CONTRIBUTIONS TO INDIVID23 UAL SOCIAL SECURITY RETIREMENT ACCOUNT.—Any in24 dividual failing to timely pay in full a prescribed social

25 security self-employment contribution to a designated indi-
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1 vidual social security retirement account as required under

2 section 253 shall be subject to a civil penalty of not to

3 exceed 20 percent of the unpaid amount, plus interest on

4 the unpaid amount at a rate equal to 133 percent of the

5 Federal short-term rate under section 1274(d)(1) of the

6 Internal Revenue Code of 1986, calculated from the last

7 day by which such amount was required to be so paid to

8 the date on which such amount is paid into the designated

9 individual social security retirement account.

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

11 ‘‘(1) PENALTIES ASSESSED BY COMMISSIONER

12 OF SOCIAL SECURITY.—Any civil penalty assessed by

13 this section shall be imposed by the Commissioner of

14 Social Security and collected in a civil action.

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

16 compromise the amount of any civil penalty imposed

17 by this section.

18 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER19 TAIN CASES.—The Commissioner may waive the ap20 plication of this section with respect to any failure

21 if the Commissioner determines that such failure is

22 due to reasonable cause and not to intentional dis23 regard of rules and regulations.’’.

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

25 STATEMENTS.—Subsection (a) of section 6051 of the In-
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1 ternal Revenue Code of 1986 (relating to receipts for em2 ployees) is amended—

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

4 (8),

5 (2) by striking the period at the end of para6 graph (9) and inserting ‘‘, and’’, and

7 (3) by inserting after paragraph (9) the follow8 ing new paragraph:

9 ‘‘(10) the total amount deducted from the em10 ployee’s wages under a social security payroll deduc11 tion plan established under part B of title II of the

12 Social Security Act.’’

13 (c) EXEMPTION FROM ERISA REQUIREMENTS.—

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

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

16 amended—

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

18 (4);

19 (2) by striking the period at the end of para20 graph (5) and inserting ‘‘; or’’; and

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

22 paragraph:

23 ‘‘(6) such plan is a social security payroll de24 duction plan established under part B of title II of

25 the Social Security Act.’’.
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1 (d) EFFECTIVE DATE.—

2 (1) IN GENERAL.—The amendments made by

3 subsection (a) shall apply with respect to wages paid

4 in calendar years beginning on or after January 1,

5 1997.

6 (2) TRANSITIONAL RULE.—Notwithstanding

7 section 252(a) of the Social Security Act (as added

8 by this Act), the initial designations of individual so9 cial security retirement accounts with respect to eli10 gible employees employed by covered employers as of

11 January 1, 1997, pursuant to such section may be

12 made at any time not later than January 15, 1997.

13 SEC. 5. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY

14 RETIREMENT ACCOUNTS.

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

16 D of chapter 1 of the Internal Revenue Code of 1986 (re17 lating to pension, profit-sharing, stock bonus plans, etc.)

18 is amended by inserting after section 408 the following

19 new section:

20 ‘‘SEC. 408A. INDIVIDUAL SOCIAL SECURITY RETIREMENT

21 ACCOUNTS.

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

23 section, an individual social security retirement account

24 shall be treated for purposes of this title in the same man25 ner as an individual retirement plan.
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1 ‘‘(b) INDIVIDUAL SOCIAL SECURITY RETIREMENT

2 ACCOUNT.—For purposes of this section, the term ‘indi3 vidual social security retirement account’ means an ac4 count established and administered in accordance with

5 part B of title II of the Social Security Act (relating to

6 individual retirement program).

7 ‘‘(c) CONTRIBUTION RULES.—

8 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

9 shall be allowed under section 219 for a contribution

10 to an individual social security retirement account.

11 ‘‘(2) CONTRIBUTION LIMIT.—No amount, other

12 than a prescribed contribution under part B of title

13 II of the Social Security Act, may be accepted as a

14 contribution to an individual social security retire15 ment account.

16 ‘‘(d) TREATMENT OF ROLLOVERS.—Section

17 408(d)(3)(A)(i) shall apply to any amount distributed

18 from an individual social security retirement account only

19 to the extent such amount is paid into another such ac20 count for the benefit of the individual for whom the ac21 count from which such amount is transferred was main22 tained.’’

23 (b) CLERICAL AMENDMENT.—The table of sections

24 for such subpart A is amended by inserting after the item

25 relating to section 408 the following new item:

‘‘Sec. 408A. Individual social security retirement accounts.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1996.

4 SEC. 6. SUNSET OF PROVISIONS UPON EQUALIZATION OF

5 RECEIPTS AND DISBURSEMENTS OF THE

6 TRUST FUND.

7 In any case in which the authorized tax reduction (as

8 defined in section 3128 of the Internal Revenue Code of

9 1986, as amended by this Act) for any year is (or is

10 deemed to be) 0 percent for each calendar year of any

11 period of 3 consecutive calendar years commencing on or

12 after January 1, 1997—

13 (1) sections 2 and 3 and the amendments made

14 thereby shall cease to be effective with respect to re15 muneration paid after such period and with respect

16 to earnings from self-employment attributable to

17 taxable years beginning after such period,

18 (2) effective with respect to such remuneration

19 and such earnings, the provisions amended by sec20 tions 2 and 3 shall read as if the amendments made

21 by this section had not been enacted, and

22 (3) section 251, subsections (a) and (b) of sec23 tion 252, and section 253 of the Social Security Act

24 (added by this Act) shall cease to be effective with

25 respect to wages paid for services rendered after
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1 such period, and self-employment income derived

2 after such period.

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