I 

110TH CONGRESS 

1ST SESSION H. R. 2002 

To amend title II of the Social Security Act and the Internal Revenue 

Code of 1986 to provide for enhanced retirement security in the form 

of an Individual Social Security Investment Program. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 23, 2007 

Mr. SAM JOHNSON of Texas introduced the following bill; which was referred 

to the Committee on Ways and Means 

A BILL 

To amend title II of the Social Security Act and the Internal 

Revenue Code of 1986 to provide for enhanced retirement security in the form of an Individual Social Security Investment Program. 

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 AND TABLE OF CONTENTS. 

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

5 ‘‘Individual Social Security Investment Program Act of 

6 2007’’. 

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

8 as follows: 


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Sec. 1. Short title and table of contents. 

Sec. 2. Establishment of Individual Social Security Investment Program. 

‘‘PART A—INSURANCE BENEFITS

‘‘PART B—INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM

‘‘Sec. 251. Definitions. 

‘‘Sec. 252. Individual investment of social security contributions; part B 

totalization accounts. 

‘‘Sec. 253. Tier I Investment Fund. 

‘‘Sec. 254. Tier II Investment Fund. 

‘‘Sec. 255. Tier III investment accounts. 

‘‘Sec. 256. Retirement distributions. 

‘‘Sec. 257. Recognition bonds. 

‘‘Sec. 258. Supplemental minimum benefit payments. 

‘‘Sec. 259. Election for participation. 

‘‘Sec. 260. Early distribution and termination of participation in program. 

‘‘Sec. 261. Individual Investment Board. 

‘‘Sec. 262. Executive Director of the Individual Investment Board. 

Sec. 3. Tax treatment of Individual Social Security Investment Program. 

Sec. 4. CPI-indexed benefits for Part A beneficiaries other than disability beneficiaries. 

Sec. 5. Maintenance of adequate balances in the Social Security Trust Funds. 

1 SEC. 2. ESTABLISHMENT OF INDIVIDUAL SOCIAL SECURITY 

2 INVESTMENT PROGRAM. 

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

4 is amended— 

5 (1) by inserting before section 201 the fol6 lowing: 

7 ‘‘PART A—INSURANCE BENEFITS’’; and 

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

9 ‘‘PART B—INDIVIDUAL SOCIAL SECURITY 

10 INVESTMENT PROGRAM 

11 ‘‘SEC. 251. DEFINITIONS. 

12 ‘‘For purposes of this part— 

13 ‘‘(1) PARTICIPANT.—The term ‘participant’ 

14 means— 


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1 ‘‘(A) any individual who is born on or after 

2 January 1, 1986, and— 

3 ‘‘(i) receives wages in any calendar 

4 year after December 31, 2007, on which 

5 there is imposed a tax under section 

6 3101(a) of the Internal Revenue Code of 

7 1986, or 

8 ‘‘(ii) derives self-employment income 

9 for a taxable year beginning after Decem10 ber 31, 2007, on which there is imposed a 

11 tax under section 1401(a) of the Internal 

12 Revenue Code of 1986, and 

13 ‘‘(B) any individual who is born on or after 

14 January 1, 1953, and before January 1, 1986, 

15 and who, pursuant to an election filed in ac16 cordance with section 259, is treated under 

17 such section as a participant under this part. 

18 ‘‘(2) BOARD.—The term ‘Board’ means the In19 dividual Investment Board established under section 

20 261. 

21 ‘‘(3) EXECUTIVE DIRECTOR.—The term ‘Execu22 tive Director’ means the Executive Director ap23 pointed under section 262. 


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1 ‘‘(4) PART B TOTALIZATION ACCOUNT.—The 

2 term ‘part B totalization account’ means an account 

3 established for a participant under section 252(d). 

4 ‘‘(5) TIER I INVESTMENT FUND.—The term 

5 ‘Tier I Investment Fund’ means the trust fund cre6 ated under section 253. 

7 ‘‘(6) TIER II INVESTMENT FUND.—The term 

8 ‘Tier II Investment Fund’ means the trust fund cre9 ated under section 254. 

10 ‘‘(7) TIER III INVESTMENT ACCOUNT.—The 

11 term ‘Tier III investment account’ means a trust es12 tablished pursuant to section 255. 

13 ‘‘SEC. 252. INDIVIDUAL INVESTMENT OF SOCIAL SECURITY 

14 CONTRIBUTIONS; PART B TOTALIZATION AC15 COUNTS. 

16 ‘‘(a) PAYMENTS INTO TIER I INVESTMENT FUND.— 

17 ‘‘(1) IN GENERAL.—During each calendar year, 

18 the Secretary of the Treasury shall deposit into the 

19 Tier I Investment Fund (established under section 

20 253), from amounts held in the Federal Old-Age and 

21 Survivors Insurance Trust Fund, a total amount 

22 equal, in the aggregate, to 100 percent of the redi23 rected social security contribution for such calendar 

24 year of each individual who is a participant for such 

25 calendar year. 


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1 ‘‘(2) REDIRECTED SOCIAL SECURITY CONTRIBU2 TIONS.—For purposes of paragraph (1) the term ‘re3 directed social security contributions’ of a partici4 pant for a calendar year means the product derived 

5 by multiplying— 

6 ‘‘(A) the sum of the total wages paid to, 

7 and self-employment income derived by, the 

8 participant during such calendar year (taking 

9 into account limits imposed by the contribution 

10 and benefit base under section 230), by 

11 ‘‘(B) 6.2 percent. 

12 ‘‘(3) TRANSFERS BASED ON ESTIMATES.—The 

13 amounts deposited pursuant to paragraph (1) shall 

14 be transferred in at least monthly payments from 

15 the Federal Old-Age and Survivors Insurance Trust 

16 Fund to the Tier I Investment Fund, such amounts 

17 to be determined on the basis of estimates, by the 

18 Commissioner of Social Security and certified to the 

19 Secretary of the Treasury under part A, of the 

20 wages paid to, and self-employment income derived 

21 by, participants, and proper adjustments shall be 

22 made in amounts subsequently transferred to the ex23 tent prior estimates were in excess of or were less 

24 than actual amounts. 


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1 ‘‘(4) SEPARATE ACCOUNTING AND CRED2 ITING.— 

3 ‘‘(A) IN GENERAL.—Subject to this para4 graph, the Board shall provide, after the close 

5 of each calendar year, for prompt accounting of 

6 the amounts deposited in the Tier I Investment 

7 Fund with respect to each participant during 

8 such calendar year to such individual’s part B 

9 totalization account (established under sub10 section (d)), together with properly allocated in11 creases and decreases in such amounts reflect12 ing the net returns from investment of the bal13 ance of the Fund during such year under sec14 tion 253. For purposes of determining such in15 creases and decreases in such amounts for each 

16 calendar year, the amounts deposited into the 

17 Fund in connection with any participant during 

18 such calendar year shall be deemed to have 

19 been deposited on June 30 of such year. 

20 ‘‘(B) CREDITING.—Under such accounting, 

21 amounts deposited into the Fund during each 

22 calendar year with respect to the redirected so23 cial security taxes of each participant (including 

24 net returns and losses from the investment 

25 Fund attributed to such amounts under this 


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1 paragraph) shall be credited to such partici2 pant’s part B totalization account not later 

3 than the end of the succeeding calendar year. 

4 ‘‘(5) TREATMENT OF MARRIED INDIVIDUALS.— 

5 ‘‘(A) IN GENERAL.—If, as of the end of a 

6 calendar year in which the amounts to be cred7 ited were deposited into the Fund, the partici8 pant is married and his or her spouse is a par9 ticipant— 

10 ‘‘(i) the amounts credited to the part 

11 B totalization account of the participant 

12 shall be limited to 50 percent of the 

13 amount of the redirected social security 

14 contributions of the participant for such 

15 year, and 

16 ‘‘(ii) the part B totalization account of 

17 such spouse shall be credited with 50 per18 cent of the amount of such redirected so19 cial security contributions. 

20 ‘‘(B) REPORTING REQUIREMENTS.—The 

21 Board may prescribe such reporting require22 ments applicable to participants regarding mar23 ital status as the Board considers necessary to 

24 carry out the provisions of subparagraph (A). 


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1 ‘‘(b) TRANSFERS INTO TIER II INVESTMENT

2 FUND.— 

3 ‘‘(1) IN GENERAL.—Upon the crediting to a 

4 participant’s part B totalization account of any 

5 amount held in the Tier I Investment Fund for any 

6 calendar year, the Board shall (except as provided in 

7 section 260(a)(2)) transfer the amount so credited 

8 to such account from the Tier I Investment Fund 

9 into the Tier II Investment Fund (established under 

10 section 254). 

11 ‘‘(2) SEPARATE ACCOUNTING AND CRED12 ITING.—Subject to this paragraph, the Board shall 

13 provide for ongoing separate accounting in the par14 ticipant’s part B totalization account of the amounts 

15 deposited in the Tier II Investment Fund with re16 spect to such participant during each calendar year, 

17 together with any increases or decreases therein for 

18 such year so as to reflect the net returns and losses 

19 from investment thereof under section 254 while 

20 held in the Tier II Investment Fund during such 

21 year. 

22 ‘‘(c) DEPOSITS TO TIER III INVESTMENT AC23 COUNTS.— 

24 ‘‘(1) IN GENERAL.—In any case in which, as of 

25 the end of any calendar year, the total balance in 


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1 the Tier II Investment Fund credited to the partici2 pant’s part B totalization account exceeds for the 

3 first time the minimum deposit balance, the Board 

4 shall, by regulation, provide for an opportunity for 

5 the participant to make, at any time thereafter, the 

6 participant’s first election of a Tier III investment 

7 account for investment of an amount credited to the 

8 participant’s part B totalization account. Such elec9 tion may be in lieu of or in addition to investment 

10 in any option available with respect to the Tier II 

11 Investment Fund. 

12 ‘‘(2) MINIMUM DEPOSIT BALANCE.— 

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), the term ‘minimum deposit balance’ 

15 means an amount equal to $10,000. 

16 ‘‘(B) ADJUSTMENTS.—The Board shall ad17 just annually (effective for years after Decem18 ber 2008) the dollar amount set forth in sub19 paragraph (A) under procedures providing for 

20 adjustments in the same manner and to the 

21 same extent as adjustments are provided for 

22 under the procedures used to adjust benefit 

23 amounts under section 215(i)(2)(A), except that 

24 any amount so adjusted that is not a multiple 


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1 of $1.00 shall be rounded to the nearest mul2 tiple of $1.00. 

3 ‘‘(3) SUBSEQUENT INVESTMENT.—At any time 

4 after a participant’s first election of a Tier III in5 vestment account pursuant to paragraph (1), the 

6 participant may invest any portion of the balance 

7 credited to the participant’s part B totalization ac8 count in a Tier III investment account, the Tier II 

9 Investment Fund, or any combination thereof, as 

10 elected by the participant from time to time in ac11 cordance with regulations of the Board under this 

12 part. 

13 ‘‘(d) ACCOUNTING FOR TOTAL INVESTED AMOUNTS

14 BY MEANS OF PART B TOTALIZATION ACCOUNTS.— 

15 ‘‘(1) ESTABLISHMENT OF ACCOUNTS.—As soon 

16 as practicable after the later of January 1, 2008, or 

17 the date on which an individual becomes a partici18 pant under this part, the Executive Director shall 

19 establish and maintain a part B totalization account 

20 for the participant. Such account shall be the means 

21 by which amounts held in the Tier I Investment 

22 Fund, the Tier II Investment Fund, and any Tier 

23 III investment account of such participant are cred24 ited to such participant under this part, under pro25 cedures which shall be established by the Board by 


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1 regulation. The part B totalization account of a par2 ticipant shall be identified to such participant by 

3 means of the participant’s social security account 

4 number. 

5 ‘‘(2) ACCOUNT BALANCE.—The balance in a 

6 participant’s part B totalization account at any time 

7 is the sum of— 

8 ‘‘(A) any balance in the Tier I Investment 

9 Fund credited to such participant’s part B to10 talization account prior to transfer to the Tier 

11 II Investment Fund under section 252(b)(1); 

12 plus 

13 ‘‘(B) the excess of— 

14 ‘‘(i) all deposits in the Tier II Invest15 ment Fund credited to such participant’s 

16 part B totalization account under sub17 section (a) (including the proceeds of any 

18 sale by such participant, as provided in 

19 section 257(e), of any recognition bond 

20 issued in the name of the participant 

21 under section 257(b)), subject to such in22 creases and reductions as may result from 

23 allocations made to and reductions made in 

24 the account pursuant to paragraph (3)(A) 


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1 with respect to amounts in the Tier II In2 vestment Fund; over 

3 ‘‘(ii) amounts credited to such partici4 pant’s part B totalization account under 

5 subsection (a) paid out of the Tier II In6 vestment Fund under this part; plus 

7 ‘‘(C) the excess of— 

8 ‘‘(i) the deposits to any Tier III in9 vestment account of such participant, sub10 ject to such increases and reductions as 

11 may result from allocations made to and 

12 reductions made in the Tier III investment 

13 account pursuant to paragraph (3)(B); 

14 over 

15 ‘‘(ii) amounts paid out of such partici16 pant’s Tier III investment account under 

17 this part. 

18 ‘‘(3) ALLOCATION OF EARNINGS AND LOSSES.— 

19 Pursuant to regulations which shall be prescribed by 

20 the Board, the Executive Director shall allocate to 

21 the part B totalization account of each participant— 

22 ‘‘(A) the net earnings and net losses from 

23 each investment of sums in the Tier II Invest24 ment Fund which are attributable to sums cred25 ited to such participant’s part B totalization acVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 count, and reductions equal to an appropriate 

2 share of the administrative expenses of the Tier 

3 II Investment Fund, as determined by the Ex4 ecutive Director; and 

5 ‘‘(B) the net earnings and net losses from 

6 each investment of sums in any Tier III invest7 ment account of such participant, and reduc8 tions equal to the administrative expenses in 

9 connection with the Tier III investment ac10 count. 

11 ‘‘(e) TREATMENT OF TRANSFERS.—Transfers from 

12 the Federal Old-Age and Survivors Insurance Trust Fund 

13 to the Tier I Investment Fund and transfers among the 

14 Tier I Investment Fund, Tier II Investment Fund, and 

15 Tier III investment accounts under this part shall not be 

16 included in the totals of the budget of the United States 

17 Government as submitted by the President or of the con18 gressional budget and shall be exempt from any general 

19 budget limitation imposed by statute on budget outlays of 

20 the United States Government. 

21 ‘‘SEC. 253. TIER I INVESTMENT FUND. 

22 ‘‘(a) ESTABLISHMENT OF TIER I INVESTMENT

23 FUND.—There is established in the Treasury of the 

24 United States a trust fund to be known as the ‘Tier I 

25 Investment Fund’. The Board shall serve as trustees of 


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1 such Fund. The Fund consists of all amounts derived from 

2 payments into the Fund under section 252(a) and remain3 ing after investment of such amounts under subsection (b) 

4 of this section, including additional amounts derived as in5 come from such investments. The amounts held in the 

6 Fund are appropriated and shall remain available without 

7 fiscal year limitation— 

8 ‘‘(1) to be held for investment on behalf of par9 ticipants under subsection (b), 

10 ‘‘(2) to pay the administrative expenses related 

11 to the Fund and to investment under subsection (b), 

12 ‘‘(3) to make transfers to the Tier II Invest13 ment Fund under section 252(b) or to Tier III in14 vestment accounts under section 252(c), 

15 ‘‘(4) to make payments under section 

16 260(a)(2), and 

17 ‘‘(5) to make lump sum distributions under 

18 subsections (d) and (e). 

19 ‘‘(b) INVESTMENT OF FUND BALANCE.—For pur20 poses of investment of the Tier I Investment Fund, the 

21 Board shall contract with appropriate professional asset 

22 managers selected for investment of amounts held in the 

23 Fund, so as to provide for investment of the balance of 

24 the Fund, in a manner providing broad diversification in 

25 accordance with regulations of the Board, in certificates 


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1 of deposit or other instruments or obligations selected by 

2 such asset managers, which return the amount invested 

3 and pay interest, at a specified rate or rates, on that 

4 amount during a specified period of time. 

5 ‘‘(c) TREATMENT OF AMOUNTS HELD IN TIER I IN6 VESTMENT FUND.— 

7 ‘‘(1) IN GENERAL.—Subject to this part— 

8 ‘‘(A) until amounts deposited into the Tier 

9 I Investment Fund during any calendar year 

10 are credited to part B totalization accounts, 

11 such amounts shall be treated as the 

12 unallocated property of all participants with re13 spect to whom amounts were deposited in the 

14 Fund during such year, jointly held in trust for 

15 such participants in the Fund, and 

16 ‘‘(B) amounts deposited into the Fund 

17 which are credited to a participant’s part B to18 talization account shall be treated as property 

19 of such participant, held in trust for such par20 ticipant in the Fund. 

21 ‘‘(2) LIMITATIONS ON USE OF FUNDS.— 

22 ‘‘(A) IN GENERAL.—Sums in the Tier I In23 vestment Fund credited to a participant’s part 

24 B totalization account may not be used for, or 

25 diverted to, purposes other than for the excluVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 sive benefit of the participant or the partici2 pant’s beneficiaries under this part. 

3 ‘‘(B) ASSIGNMENTS AND ALIENATION.— 

4 Sums in the Fund may not be assigned or 

5 alienated and are not subject to execution, levy, 

6 attachment, garnishment, or other legal proc7 ess. 

8 ‘‘(d) RETIREMENT DISTRIBUTION.—As soon as prac9 ticable after the commencement of the distribution under 

10 section 256 of assets credited to a participant’s part B 

11 totalization account, the amount of any assets in the Tier 

12 I Investment Fund credited to such account shall be dis13 tributed to such participant in a lump sum, under rules 

14 established by the Board. 

15 ‘‘(e) LUMP SUM PAYMENT TO ESTATE UPON DEATH

16 OF PARTICIPANT.—Upon the death of a participant, the 

17 amount of any assets in the Tier I Investment Fund cred18 ited to such participant’s part B totalization account shall 

19 be transferred in a lump sum, under rules established by 

20 the Board— 

21 ‘‘(1) in any case in which one or more bene22 ficiaries have been designated in advance, in accord23 ance with regulations which shall be prescribed by 

24 the Board, to such beneficiaries in accordance with 


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1 such designation as provided in such regulations, 

2 and 

3 ‘‘(2) in the case of any amount not distributed 

4 as described in paragraph (1), to such participant’s 

5 estate. 

6 ‘‘SEC. 254. TIER II INVESTMENT FUND. 

7 ‘‘(a) ESTABLISHMENT OF TIER II INVESTMENT

8 FUND.—There is established in the Treasury of the 

9 United States a trust fund to be known as the ‘Tier II 

10 Investment Fund’. The Board shall serve as trustees of 

11 such Fund. The Fund consists of all amounts derived from 

12 payments into the Fund under section 252(b)(1) and re13 maining after investment of such amounts under sub14 section (b) of this section, including additional amounts 

15 derived as income from such investments. The amounts 

16 held in the Fund are appropriated and shall remain avail17 able without fiscal year limitation— 

18 ‘‘(1) to be held for investment under subsection 

19 (b), 

20 ‘‘(2) to pay the administrative expenses related 

21 to the Fund and to investment under subsection (b), 

22 ‘‘(3) to make transfers to Tier III investment 

23 accounts under section 252(c)(1), 

24 ‘‘(4) to make retirement distributions in accord25 ance with section 256, and 


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1 ‘‘(5) to make lump sum distributions under sec2 tion 256 and subsection (e) of this section. 

3 ‘‘(b) INVESTMENT IN EQUITIES AND FIXED INCOME

4 INSTRUMENTS IN MANAGEMENT ACCOUNTS.— 

5 ‘‘(1) IN GENERAL.—For purposes of investment 

6 of the Tier II Investment Fund, the Board shall di7 vide the Fund into multiple management accounts. 

8 Such accounts shall consist of the 60/40 manage9 ment account and 2 or more additional management 

10 accounts providing for investment in each account in 

11 a combination of equities and fixed income instru12 ments in accordance with prescribed percentages, as 

13 provided in paragraph (2). The Board shall contract 

14 with appropriate investment managers selected for 

15 investment of amounts held in each management ac16 count. 

17 ‘‘(2) RULES RELATING TO MANAGEMENT AC18 COUNTS.— 

19 ‘‘(A) IN GENERAL.—The investment man20 ager selected for investment of amounts held in 

21 each management account referred to in para22 graph (1) shall invest such amounts under reg23 ulations which shall be prescribed by the Board 

24 so as to ensure, to the maximum extent prac25 ticable, that, of the total balance in the Fund 


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1 credited to such account and available for in2 vestment (after allowing for administrative ex3 penses)— 

4 ‘‘(i) the prescribed equities percentage 

5 is invested in equities in accordance with 

6 paragraph (4), and 

7 ‘‘(ii) the prescribed fixed income in8 strument percentage is invested in fixed in9 come instruments in accordance with para10 graph (5). 

11 ‘‘(B) PRESCRIBED PERCENTAGES.—For 

12 purposes of subparagraph (A)— 

13 ‘‘(i) THE 60/40 MANAGEMENT AC14 COUNT.—In the case of the 60/40 manage15 ment account— 

16 ‘‘(I) the prescribed equities per17 centage is 60 percent, and 

18 ‘‘(II) the prescribed fixed income 

19 instrument percentage is 40 percent. 

20 ‘‘(ii) OTHER MANAGEMENT AC21 COUNTS.—In the case of any other man22 agement account— 

23 ‘‘(I) the prescribed equities per24 centage is a prescribed percentage not 

25 in excess of 80 percent, and 


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1 ‘‘(II) the prescribed fixed income 

2 instrument percentage is the remain3 ing percentage of the amount invested 

4 in the management account. 

5 ‘‘(3) ELECTION OF MANAGEMENT ACCOUNTS.— 

6 ‘‘(A) DEFAULT MANAGEMENT ACCOUNT.— 

7 Except as provided in an election in effect 

8 under subparagraph (B), amounts held in the 

9 Tier II Investment Fund shall be credited to 

10 the 60/40 management account. 

11 ‘‘(B) ELECTION OF TRANSFERS BETWEEN

12 MANAGEMENT ACCOUNTS.—Pursuant to the 

13 written election, filed in accordance with regula14 tions of the Board and received by the Sec15 retary of the Treasury during an applicable 

16 election month by a participant who has an 

17 amount credited to such participant’s part B 

18 totalization account invested in any of the man19 agement accounts in the Tier II Investment 

20 Fund, the Secretary of the Treasury shall 

21 transfer such amount from such account to any 

22 of the other management accounts in the Tier 

23 II Investment Fund (whichever is designated in 

24 such election). 


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1 ‘‘(C) APPLICABLE ELECTION MONTH.—For 

2 purposes of subparagraph (B), the term ‘appli3 cable election month’, in connection with a par4 ticipant, means— 

5 ‘‘(i) the calendar month in which oc6 curs the anniversary of such participant’s 

7 birth, and 

8 ‘‘(ii) the 6th calendar month following 

9 such month. 

10 ‘‘(4) INVESTMENT IN EQUITIES.—In accordance 

11 with regulations which shall be prescribed by the 

12 Board, the Board shall establish standards which 

13 must be met by equities selected for investment of 

14 amounts in any management account in the Tier II 

15 Investment Fund pursuant to paragraph (2)(A)(i). 

16 In conformity with such standards, the Board shall 

17 select, for purposes of such investment, indices 

18 which are comprised of equities the aggregate mar19 ket value of which is, in each case, a reasonably 

20 broad representation of companies whose shares are 

21 traded on the equity markets. Amounts invested in 

22 equities by each investment manager shall be held in 

23 a portfolio designed to replicate the performance of 

24 one or more of such indices. 


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1 ‘‘(5) INVESTMENT IN FIXED INCOME INSTRU2 MENTS.—In accordance with regulations which shall 

3 be prescribed by the Board, the Board shall estab4 lish standards which must be met by fixed income 

5 instruments selected for investment of amounts in 

6 any management account in the Tier II Investment 

7 Fund pursuant to paragraph (2)(A)(ii). Such stand8 ards shall take into account the competing consider9 ations of risk and return. Amounts invested in fixed 

10 income instruments by each investment manager 

11 shall be held in a portfolio which shall consist of a 

12 diverse range of fixed income instruments, taking 

13 into full account the opposing considerations of risk 

14 and maximization of return. 

15 ‘‘(c) PERIODIC REPORTS BY BOARD.— 

16 ‘‘(1) IN GENERAL.—The Board shall make peri17 odic reports concerning the status of the investment 

18 in the Tier II Investment Fund of amounts credited 

19 to each participant’s part B totalization account. 

20 Each periodic report shall be furnished to the partic21 ipant on at least a semiannual basis on or before the 

22 60th day following the period for which the report 

23 is required. 

24 ‘‘(2) INFORMATION REQUIRED TO BE IN25 CLUDED.—The periodic report shall contain the folVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 lowing information for transactions occurring during 

2 the period for which the report is provided: 

3 ‘‘(A) The balance in the Tier II Investment 

4 Fund credited to the participant’s part B total5 ization account. 

6 ‘‘(B) The rate of return on such balance 

7 for the period covered, set forth separately for 

8 each management account in the case of an in9 vestment in 2 or more management accounts 

10 during the period. 

11 ‘‘(C) The amount of authorized contribu12 tions made to the Tier II management account 

13 and credited to the participant’s part B total14 ization account. 

15 ‘‘(D) The name and address of the Board. 

16 ‘‘(E) Commission fees and fees for admin17 istrative expenses charged in connection with 

18 the investment in the Tier II Investment Fund 

19 during the period. 

20 ‘‘(F) Other information which may be re21 quired from time to time by the Board. 

22 The language of the report shall be written in a 

23 form so as to be understood by the average partici24 pant. 


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1 ‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER II IN2 VESTMENT FUND.— 

3 ‘‘(1) IN GENERAL.—Subject to this part, 

4 amounts deposited into the Tier II Investment Fund 

5 which are credited to a participant’s part B total6 ization account shall be treated as property of such 

7 participant, held in trust for such participant in the 

8 Fund. 

9 ‘‘(2) LIMITATIONS ON USE OF FUNDS.— 

10 ‘‘(A) IN GENERAL.—Sums in the Tier II 

11 Investment Fund credited to a participants part 

12 B totalization account may not be used for, or 

13 diverted to, purposes other than for the exclu14 sive benefit of the participant or the partici15 pant’s beneficiaries under this part. 

16 ‘‘(B) ASSIGNMENTS AND ALIENATION.— 

17 Sums in the Fund may not be assigned or 

18 alienated and are not subject to execution, levy, 

19 attachment, garnishment, or other legal proc20 ess. 

21 ‘‘(e) LUMP SUM PAYMENT TO ESTATE UPON DEATH

22 OF PARTICIPANT.—Upon the death of a participant, the 

23 amount of any assets in the Tier II Investment Fund cred24 ited to such participant’s part B totalization account shall 


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1 be transferred in a lump sum, under rules established by 

2 the Board— 

3 ‘‘(1) in any case in which one or more bene4 ficiaries have been designated in advance, in accord5 ance with regulations which shall be prescribed by 

6 the Board, to such beneficiaries in accordance with 

7 such designation as provided in such regulations, 

8 and 

9 ‘‘(2) in the case of any amount not distributed 

10 as described in paragraph (1), to such individual’s 

11 estate. 

12 ‘‘SEC. 255. TIER III INVESTMENT ACCOUNTS. 

13 ‘‘(a) DESIGNATION OF TIER II INVESTMENT AC14 COUNTS.—Under regulations prescribed by the Board, a 

15 participant, upon the initial attainment of a minimum de16 posit balance in amounts in the Tier II Investment Fund 

17 credited to the participant’s part B totalization account, 

18 as described in section 252(c), may designate to the 

19 Board, in such form and manner as shall be prescribed 

20 in such regulations, a Tier III investment account to 

21 which deposits with respect to the individual are to be 

22 made under section 252(c). The individual may designate 

23 another Tier III investment account in lieu of any account 

24 previously designated, in accordance with regulations of 

25 the Board. 


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1 ‘‘(b) DEFINITION.—For purposes of this part, the 

2 term ‘Tier III investment account’ means a trust created 

3 or organized in the United States for the exclusive benefit 

4 of a participant or his beneficiaries, but only if the written 

5 governing instrument creating the trust meets the fol6 lowing requirements: 

7 ‘‘(1) RESTRICTED CONTRIBUTIONS.—No con8 tribution will be accepted unless it is in the form of 

9 a deposit to the account pursuant to section 

10 252(c)(1). 

11 ‘‘(2) TRUSTEE REQUIREMENTS.—The trustee 

12 is— 

13 ‘‘(A) a bank (as defined in section 581 of 

14 the Internal Revenue Code of 1986), 

15 ‘‘(B) an insured credit union (as defined in 

16 section 101(6) of the Federal Credit Union 

17 Act), 

18 ‘‘(C) a corporation which, under the laws 

19 of the State of its incorporation, is subject to 

20 supervision and examination by the Commis21 sioner of Banking or other officer of such State 

22 in charge of the administration of the banking 

23 laws of such State, 

24 ‘‘(D) a regulated investment company (as 

25 defined in section 851 of the Internal Revenue 


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1 Code of 1986) for which an election is in effect 

2 under section 851(b)(1) of such Code, or 

3 ‘‘(E) any other person designated by the 

4 Board under regulations prescribed under this 

5 paragraph, 

6 but only if the trustee demonstrates to the satisfac7 tion of the Board that its portfolio assets either rep8 licate the assets of a broad-based index of equities 

9 or fixed income instruments which is approved by 

10 the Board or are of a type that the Board has deter11 mined not to involve high risks for the investor, and 

12 that the manner in which it will administer the trust 

13 will be consistent with the requirements of this sec14 tion. 

15 ‘‘(3) NONFORFEITABILITY.—The interest of an 

16 individual in the balance of his account is nonforfeit17 able. 

18 ‘‘(4) DIVERSIFICATION.—The investment op19 tions made available to participants by the trustee 

20 include reasonably diversified options of equities, 

21 fixed income instruments, or a combination of both. 

22 ‘‘(5) SEPARATION OF ASSETS.—The assets of 

23 the trust will not be commingled with other property 

24 except in a common trust fund or common invest25 ment fund. 


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1 ‘‘(c) INVESTMENT STANDARDS.—The trustee of a 

2 Tier III investment account shall invest amounts credited 

3 to the part B totalization account of a participant which 

4 are held in such account in accordance with standards 

5 which shall be prescribed by the Board by regulation. Such 

6 standards shall ensure that investments made available to 

7 participants by the trustee are reasonably diversified, that 

8 assets held in a Tier III investment account are nonforfeit9 able, and that the trustee complies with applicable fidu10 ciary requirements. 

11 ‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER III 

12 INVESTMENT ACCOUNTS.— 

13 ‘‘(1) IN GENERAL.—Subject to this part, 

14 amounts deposited into a participant’s Tier III in15 vestment account are the property of such partici16 pant, held in trust for such participant by the trust17 ee of such account. 

18 ‘‘(2) ASSIGNMENTS AND ALIENATION.—Sums 

19 in, and payments from, the account may not be as20 signed or alienated and are not subject to execution, 

21 levy, attachment, garnishment, or other legal proc22 ess. 

23 ‘‘(e) PERIODIC REPORTS BY ACCOUNT TRUSTEE.— 

24 ‘‘(1) IN GENERAL.—The trustee of a partici25 pant’s Tier III investment account shall, in accordVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 ance with regulations of the Board, make periodic 

2 reports concerning the status of the account which 

3 shall meet the requirements of this section. Each 

4 periodic report shall be furnished to the participant 

5 on at least a semiannual basis on or before the 60th 

6 day following the period for which the report is re7 quired. 

8 ‘‘(2) INFORMATION REQUIRED TO BE IN9 CLUDED.—The periodic report shall contain the fol10 lowing information for transactions occurring during 

11 the period for which the report is provided: 

12 ‘‘(A) The balance in the Tier III invest13 ment account. 

14 ‘‘(B) The rate of return for the period cov15 ered. 

16 ‘‘(C) The amount of authorized account 

17 contributions. 

18 ‘‘(D) The name and address of the trustee. 

19 ‘‘(E) Commission fees and fees for admin20 istrative expenses charged in connection with 

21 the account. 

22 ‘‘(F) Other information which may be re23 quired from time to time by the Board. 


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1 The language of the report shall be written in a 

2 form so as to be understood by the average partici3 pant. 

4 ‘‘(3) REPORTS TO BOARD.—The Board may re5 quire the periodic report to be filed with the Board 

6 at such time as the Board may specify in regulations 

7 under this section, except that at least 1 periodic re8 port filed annually with Board shall provide informa9 tion with respect to the account as of December 31 

10 preceding the date of the issuance of the report. 

11 ‘‘(4) FAILURE BY TRUSTEE TO MAKE TIMELY

12 PERIODIC REPORTS.— 

13 ‘‘(A) IN GENERAL.—The trustee of a Tier 

14 III investment account shall be subject to a civil 

15 penalty of not to exceed $100 a day from the 

16 date of such trustee’s failure or refusal to fur17 nish the periodic report required to be furnished 

18 by the trustee under this subsection until the 

19 date on which such report is furnished. 

20 ‘‘(B) PENALTIES ASSESSED BY BOARD.— 

21 Any civil penalty assessed by this paragraph 

22 shall be imposed by the Board and collected in 

23 a civil action. The Board may compromise the 

24 amount of any civil penalty imposed by this 

25 paragraph. The Board may waive the applicaVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 tion of this paragraph with respect to any fail2 ure if the Board determines that such failure is 

3 due to reasonable cause and not to intentional 

4 disregard of rules and regulations. 

5 ‘‘(f) LUMP SUM PAYMENT TO ESTATE UPON DEATH

6 OF ACCOUNT HOLDER.—Upon the death of a participant 

7 who has an amount credited to such participant’s part B 

8 totalization account invested in a Tier III investment ac9 count, such amount shall be distributed in a lump sum 

10 distribution, under rules established by the Board— 

11 ‘‘(1) in any case in which one or more bene12 ficiaries have been designated in advance, in accord13 ance with regulations which shall be prescribed by 

14 the Board, to such beneficiaries in accordance with 

15 such designation as provided in such regulations, 

16 and 

17 ‘‘(2) in the case of any amount not distributed 

18 as described in paragraph (1), to the participant’s 

19 estate. 

20 ‘‘SEC. 256. RETIREMENT DISTRIBUTIONS. 

21 ‘‘(a) IN GENERAL.—Except as provided in this sec22 tion, amounts credited to a participant’s part B total23 ization account may be distributed to the participant only 

24 on and after the participant’s retirement date. Such dis25 tribution shall be in the form of— 


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1 ‘‘(1) an individual social security annuity meet2 ing the requirements of subsection (c), 

3 ‘‘(2) a programmed withdrawal meeting the re4 quirements of subsection (d), or 

5 ‘‘(3) a combination, meeting the requirements 

6 of subsection (e), of an individual social security an7 nuity (meeting the requirements of subsection (b)) 

8 and a lump sum distribution. 

9 Not later than the date on which the participant attains 

10 age 62, and at any other time upon the request of the 

11 participant, the Board shall notify the participant of the 

12 most recent listing of forms of distribution approved under 

13 this section and the entitlement (if any) of the participant 

14 to such a distribution. 

15 ‘‘(b) RETIREMENT DATE.—For purposes of this sec16 tion, the term ‘retirement date’, in connection with a par17 ticipant, means the earlier of— 

18 ‘‘(1) any date as of which the participant has 

19 attained retirement age (as defined in section 

20 216(l)(1)), or 

21 ‘‘(2) the date designated for distribution of the 

22 balance in the participant’s part B totalization ac23 count pursuant to section 260. 

24 ‘‘(c) PURCHASE OF ANNUITIES.— 

25 ‘‘(1) IN GENERAL.— 


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1 ‘‘(A) SELECTION OF ANNUITY.—On the 

2 participant’s retirement date, the participant 

3 may purchase an individual social security an4 nuity selected from among the annuities ap5 proved by the Board under paragraph (2). 

6 ‘‘(B) TRANSFER OF ASSETS.—Upon the 

7 selection by a participant under subparagraph 

8 (A), the Board shall provide for the transfer of 

9 all assets credited to the participant’s part B 

10 totalization account and determined under reg11 ulations of the Board to be available for dis12 tribution to purchase the annuity selected by 

13 the individual. 

14 ‘‘(2) APPROVAL OF INDIVIDUAL SOCIAL SECU15 RITY ANNUITIES.— 

16 ‘‘(A) CERTIFICATION OF ISSUERS.— 

17 ‘‘(i) IN GENERAL.—The Board shall 

18 certify issuers eligible to enter into annuity 

19 contracts with participants under this sub20 section. 

21 ‘‘(ii) APPLICATION.—Any issuer that 

22 desires to be certified by the Board to 

23 issue an individual social security annuity 

24 shall submit an application to the Board at 

25 such time, in such manner, and containing 


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1 such information as the Board may re2 quire. 

3 ‘‘(iii) SEPARATION FROM OTHER OP4 ERATIONS.—As a condition of certification 

5 under this subparagraph, each issuer shall 

6 maintain each individual social security an7 nuity issued by such issuer separate from 

8 all other operations of the issuer. 

9 ‘‘(iv) EXEMPTION FROM THIRD PARTY

10 CLAIMS.—Each individual social security 

11 annuity shall be exempt from any and all 

12 third party claims against the issuer. 

13 ‘‘(B) APPROVAL OF INDIVIDUAL SOCIAL

14 SECURITY ANNUITIES.— 

15 ‘‘(i) IN GENERAL.—No funds may be 

16 transferred into an individual social secu17 rity annuity unless the Board has approved 

18 an application submitted under clause (ii) 

19 with respect to the annuity. 

20 ‘‘(ii) APPLICATION.—With respect to 

21 each individual social security annuity that 

22 an issuer certified under subparagraph 

23 (A)(i) seeks to issue, such issuer shall sub24 mit an application to the Board at such 


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1 time, in such manner, and containing such 

2 information as the Board may require. 

3 ‘‘(iii) QUALIFICATIONS FOR AP4 PROVAL.— 

5 ‘‘(I) IN GENERAL.—The Board 

6 may not approve an application under 

7 clause (i) unless the individual social 

8 security annuity that is the subject of 

9 the application meets qualifications 

10 which shall be specified in regulations 

11 of the Board. Such qualifications shall 

12 include the safety and soundness of 

13 the annuity, the experience and record 

14 of performance of the issuer issuing 

15 the annuity, and such other factors as 

16 the Board may determine appropriate. 

17 ‘‘(II) COST-OF-LIVING ADJUST18 MENTS.—The Board may not approve 

19 an application under clause (i) unless 

20 the terms of the annuity include pro21 cedures providing for adjustments in 

22 the amount of the monthly payments 

23 in the same manner and to the same 

24 extent as adjustments are provided for 

25 under the procedures used to adjust 


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1 benefit amounts under section 

2 215(i)(2)(A). Nothing in this sub3 clause shall be construed to preclude 

4 the terms governing such an annuity 

5 from providing for adjustments in the 

6 amount of monthly payments result7 ing in a payment for any month 

8 greater than the payment for that 

9 month that would result from adjust10 ments required under the preceding 

11 sentence. 

12 ‘‘(d) PROGRAMMED WITHDRAWAL.— 

13 ‘‘(1) IN GENERAL.—On the participant’s retire14 ment date, the participant may elect distribution 

15 under this section of the balance credited to the par16 ticipant’s part B totalization account as provided in 

17 this subsection. Such distribution shall be in the 

18 form of a combination of— 

19 ‘‘(A) equal annual or more frequent peri20 odic installments of the principal portion of the 

21 balance over twice his or her life expectancy 

22 (subject to adjustments under paragraph (2)), 

23 and 

24 ‘‘(B) any distribution of any remaining 

25 balance in accordance with this section. 


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1 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—Any dis2 tribution under paragraph (1)(A) shall, in accord3 ance with regulations which shall be prescribed by 

4 the Board, provide for adjustments in the periodic 

5 payments in the same manner and to the same ex6 tent as adjustments are provided for under the pro7 cedures used to adjust benefit amounts under sec8 tion 215(i)(2)(A). Nothing in this paragraph shall be 

9 construed to preclude the terms governing such dis10 tribution from providing for adjustments in the 

11 amount of monthly payments resulting in a payment 

12 for any month greater than the payment for that 

13 month that would result from adjustments required 

14 under the preceding sentence. 

15 ‘‘(3) LIMITATION.—Any distribution described 

16 in paragraph (1)(B) shall be limited to the extent 

17 necessary to ensure that remaining funds credited to 

18 the account are sufficient to provide periodic install19 ments under paragraph (1) at least, on an annual 

20 basis, equal to (determined under reasonable actu21 arial assumptions) 100 percent of the poverty line 

22 for an individual (determined under the poverty 

23 guidelines of the Department of Health and Human 

24 Services issued under sections 652 and 673(2) of the 

25 Omnibus Budget Reconciliation Act of 1981). 


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1 ‘‘(e) COMBINATION OF LUMP SUM PAYMENT AND

2 ANNUITY.—On the participant’s retirement date, the par3 ticipant may elect distribution under this section of the 

4 balance credited to the participant’s part B totalization 

5 account as provided in this subsection. Such distribution 

6 shall be in the form of a combination of a lump sum pay7 ment and an annuity approved under subsection (c). Any 

8 such lump sum payment shall be limited to the extent nec9 essary to ensure that remaining funds credited to the ac10 count are sufficient to provide, through the purchase of 

11 such an annuity, a monthly payment over the life expect12 ancy of the participant (determined under reasonable ac13 tuarial assumptions) which is at least, on an annual basis, 

14 equal to 100 percent of the poverty line for an individual 

15 (determined under the poverty guidelines of the Depart16 ment of Health and Human Services issued under sections 

17 652 and 673(2) of the Omnibus Budget Reconciliation Act 

18 of 1981). 

19 ‘‘(f) LUMP SUM DISTRIBUTIONS OF DE MINIMIS

20 AMOUNTS.—In any case in which, as of the date on which 

21 the participant attains retirement age (as defined in sec22 tion 216(l)(1)), a distribution under this section has not 

23 commenced, and the total amount of the assets credited 

24 to the participant’s part B totalization account is less than 

25 the minimum deposit balance (as defined in section 


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1 252(c)(2)), the preceding provisions of this section shall 

2 not apply, and such assets shall be distributed to the par3 ticipant in a lump sum upon the request of the participant, 

4 under rules established by the Board. 

5 ‘‘(g) PROTECTION FROM ASSIGNMENT OR ALIEN6 ATION.—Distributions under this section may not be as7 signed or alienated and are not subject to execution, levy, 

8 attachment, garnishment, or other legal process. 

9 ‘‘SEC. 257. RECOGNITION BONDS. 

10 ‘‘(a) CERTIFICATION OF CREDITED WAGES AND

11 SELF-EMPLOYMENT INCOME.—Not later than July 1 fol12 lowing the effective date of an election to become a partici13 pant filed by an individual under section 259, the Commis14 sioner of Social Security shall certify to the Secretary of 

15 the Treasury whether such individual was, as of imme16 diately before such effective date, credited with wages and 

17 self-employment income under part A. 

18 ‘‘(b) ISSUANCE OF BOND.—Immediately upon receipt 

19 of certification under subsection (a) that an individual is 

20 credited with wages and self-employment income under 

21 part A, the Secretary of the Treasury shall issue a recogni22 tion bond in the name of such individual as an obligation 

23 of the United States, which shall be deposited in the Tier 

24 II Investment Fund and held in such Fund for such indi25 vidual together with such individual’s part B totalization 


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1 account. The purposes for which obligations of the United 

2 States may be issued under chapter 31 of title 31, United 

3 States Code, are hereby extended to authorize the issuance 

4 of public debt obligations consisting of recognition bonds 

5 issued under this paragraph. Each such obligation shall 

6 be evidenced by a paper instrument issued by the Sec7 retary of the Treasury setting forth the terms specified 

8 in this section, and stating on its face that the obligation 

9 shall be incontestable in the hands of the bearer, that the 

10 obligation is supported by the full faith and credit of the 

11 United States, and that the United States is pledged to 

12 the payment of the obligation, in accordance with the pro13 visions of this section. 

14 ‘‘(c) CALCULATION OF FACE VALUE.— 

15 ‘‘(1) IN GENERAL.—The face value of a rec16 ognition bond issued in the name of an individual 

17 under this section shall be the actuarial present 

18 value of the future monthly insurance benefits under 

19 part A to which such individual would have been en20 titled, and to which other individuals would have 

21 been entitled under part A based on such individ22 ual’s wages and self-employment income, determined 

23 under then current law but as if section 215(j) did 

24 not apply and subject to paragraph (2) of this sub25 section. 


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1 ‘‘(2) ASSUMPTIONS.—The actuarial present 

2 value determined under paragraph (1) shall be de3 termined— 

4 ‘‘(A) taking into account solely wages and 

5 self-employment income credited to such indi6 vidual as of the effective date of the election re7 ferred to in subsection (a), 

8 ‘‘(B) assuming that such individual would 

9 become entitled to disability insurance benefits 

10 under section 223 (in lieu of old-age insurance 

11 benefits under section 202(a)) on the day such 

12 individual would attain retirement age (as de13 fined in section 216(l)), except that, in com14 puting average indexed monthly earnings under 

15 section 215(b), the number of such individual’s 

16 benefit computation years shall be determined 

17 without regard to any reduction in the number 

18 of elapsed years under section 215(b)(2)(A), 

19 and 

20 ‘‘(C) using reasonable actuarial assump21 tions, including reasonable current age-specific 

22 and gender-specific expected mortality rates. 

23 ‘‘(d) REDEMPTION.—A bond issued in the name of 

24 any participant under this section shall be redeemable (by 

25 the participant or other person bearing the bond after sale 


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1 or resale pursuant to subsection (e)) on or after the date 

2 on which such participant would attain retirement age (as 

3 defined in section 216(l)(1)), for the amount of the face 

4 value. 

5 ‘‘(e) NEGOTIABILITY AND CREDITING OF PROCEEDS

6 TO PART B TOTALIZATION ACCOUNT.—A recognition 

7 bond issued in the name of a participant under this section 

8 shall not be taken into account in determining the amount 

9 credited to the participant’s part B totalization account. 

10 Such bond shall be fully tradable on the secondary mar11 kets under such procedures as may be provided in regula12 tions of the Board, and any amount derived by the partici13 pant from the sale of such bond shall be deposited in the 

14 Tier II Investment Fund and shall be included in the total 

15 amount credited to such participant’s part B totalization 

16 account. 

17 ‘‘SEC. 258. SUPPLEMENTAL MINIMUM BENEFIT PAYMENTS. 

18 ‘‘(a) IN GENERAL.—In any case in which— 

19 ‘‘(1) a participant attains retirement age (as 

20 defined in section 216(l)(1)), 

21 ‘‘(2) as of the date such participant attains 

22 such age, no distribution from amounts credited to 

23 the participant’s part B totalization account has 

24 been made to the participant under section 260, and 


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1 ‘‘(3) as of such date, the balance in the partici2 pant’s part B totalization account (subject to sub3 section (e)) is less than the minimum annuity 

4 amount, 

5 the Board shall promptly notify the participant of the par6 ticipant’s eligibility for a supplemental minimum benefit 

7 payment under this section. The participant, upon applica8 tion to the Board filed by the participant on or after such 

9 date and in such form and manner as shall be prescribed 

10 by the Board, shall be entitled to a supplemental minimum 

11 benefit payment either to the Tier II Investment Fund (to 

12 the credit of the participant’s part B totalization account) 

13 or to the participant’s Tier III investment account, as may 

14 be specified by the participant in such application. Upon 

15 receipt of such application, the Board shall certify to the 

16 Secretary of the Treasury the amount of such payment, 

17 and such Secretary shall pay the amount of such payment 

18 to such Fund or such Tier III investment account in ac19 cordance with such certification from funds otherwise 

20 available in the general fund of the Treasury. 

21 ‘‘(b) AMOUNT OF SUPPLEMENTAL MINIMUM BEN22 EFIT PAYMENT.—The amount of a supplemental min23 imum benefit payment payable with respect to a partici24 pant under subsection (a) is, subject to subsection (d), the 

25 excess (if any) of— 


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1 ‘‘(1) the minimum annuity amount as of the 

2 date described in subsection (a), over 

3 ‘‘(2) the amount credited to the participant’s 

4 part B totalization account, (subject to subsection 

5 (e)). 

6 ‘‘(c) MINIMUM ANNUITY AMOUNT.— 

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, the term ‘minimum annuity amount’ means an 

9 amount, determined as of the date described in sub10 section (a), necessary to purchase an immediate life 

11 annuity which provides for monthly payments which 

12 are, on an annual basis, at least equal to the appli13 cable percentage of the poverty line as of such date 

14 for an individual (determined under the poverty 

15 guidelines of the Department of Health and Human 

16 Services issued under sections 652 and 673(2) of the 

17 Omnibus Budget Reconciliation Act of 1981). 

18 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

19 of paragraph (1), the applicable percentage, in con20 nection a participant, shall be the excess of— 

21 ‘‘(A) 100 percent, over 

22 ‘‘(B) the product derived by multiplying— 

23 ‘‘(i) 1.0 percentage point, by 

24 ‘‘(ii) the excess (not less than zero) 

25 of— 


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1 ‘‘(I) 140, over 

2 ‘‘(II) the number of such partici3 pant’s quarters of coverage under part 

4 A of this title. 

5 ‘‘(3) IMMEDIATE LIFE ANNUITY.—For purposes 

6 of paragraph (1), the term ‘immediate life annuity’ 

7 means an annuity— 

8 ‘‘(A) the annuity starting date (as defined 

9 in section 72(c)(4) of the Internal Revenue 

10 Code of 1986) of which commences with the 

11 first month following the date described in sub12 section (a), and 

13 ‘‘(B) which provides for a series of sub14 stantial equal annual payments over the life ex15 pectancy of the participant. 

16 ‘‘(4) ASSUMPTIONS.—Determinations of the 

17 minimum annuity amount under this subsection 

18 shall be based on reasonable actuarial assumptions 

19 which shall be prescribed by the Board (including 

20 among such assumptions reasonable charges for ad21 ministrative costs). 

22 ‘‘(d) NEED-BASED CASH BENEFITS TAKEN INTO

23 ACCOUNT.— 

24 ‘‘(1) IN GENERAL.—Under regulations which 

25 shall be prescribed by the Board, in any case in 


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1 which a participant is entitled to, or eligible for, 

2 need-based cash benefits for any month, the supple3 mental minimum benefit payments otherwise payable 

4 to such participant for such month, as determined 

5 under subsection (a), shall be reduced by the total 

6 amount of such recognized governmental cash bene7 fits for such month. 

8 ‘‘(2) NEED-BASED CASH BENEFITS.—For pur9 poses of paragraph (1), the term ‘need-based cash 

10 benefit’ for any month means— 

11 ‘‘(A) a supplemental security income ben12 efit under title XVI for such month, and 

13 ‘‘(B) a monthly cash benefit payable to 

14 such participant for such month under any 

15 other need-based assistance program of the 

16 United States or of any State (or political sub17 division thereof, as defined in section 

18 218(b)(2)). 

19 ‘‘(3) CONVERSION TO MONTHLY BENEFITS.— 

20 For purposes of this subsection, any periodic benefit 

21 which otherwise is described in paragraph (2)(B), 

22 but which is paid on other than a monthly basis, 

23 shall be allocated on a basis equivalent to a monthly 

24 benefit (as determined by the Board), and such 

25 equivalent monthly benefit shall constitute a monthly 


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1 cash benefit for purposes of paragraph (2)(B). For 

2 purposes of this paragraph, the term ‘periodic ben3 efit’ includes a benefit payable in a lump sum if it 

4 is a commutation of, or a substitute for, periodic 

5 payments. 

6 ‘‘(4) AFFECT ON OTHER LAWS.—To the extent 

7 that any provision of law of the United States or of 

8 any State (or political subdivision thereof, as defined 

9 in section 218(b)(2)) providing for need-based cash 

10 benefits takes into account supplemental minimum 

11 benefit payments under this section in determining 

12 eligibility for such need-based benefits or the amount 

13 thereof, this section supersedes such provision and 

14 such provision shall be null and void as against pub15 lic policy. 

16 ‘‘(e) TREATMENT OF PERIODIC PAYMENTS BASED

17 ON NONCOVERED GOVERNMENTAL SERVICE.— 

18 ‘‘(1) IN GENERAL.—In any case in which a par19 ticipant is eligible for a periodic payment which is 

20 based in whole or in part on the participant’s earn21 ings for noncovered governmental service, for pur22 poses of subsection (b)(2), the amount credited to 

23 such participant’s part B totalization account shall 

24 be deemed to be equal to the amount derived by 

25 multiplying— 


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1 ‘‘(A) the amount credited to such partici2 pant’s part B totalization account (as deter3 mined without regard to this subsection), by 

4 ‘‘(B) a fraction— 

5 ‘‘(i) the numerator of which is an 

6 amount equal to the individual’s adjusted 

7 average indexed monthly earnings (as de8 termined under paragraph (3)), and 

9 ‘‘(ii) the denominator of which is the 

10 individual’s average indexed monthly earn11 ings (determined on 215(b) without regard 

12 to paragraph (3)), 

13 rounded, if not a multiple of $0.10, to the next lower 

14 multiple of $0.10. 

15 ‘‘(2) NONCOVERED GOVERNMENTAL SERVICE.— 

16 For purposes of this subsection, the term ‘non17 covered governmental service’ means service for the 

18 Federal Government or for a State (or political sub19 division thereof, as defined in section 218(b)(2)) 

20 which does not constitute ‘employment’ as defined in 

21 section 210, except that such term does not include 

22 service as a member of a uniformed service (as de23 fined in section 210(m)). 

24 ‘‘(3) ADJUSTED AVERAGE INDEXED MONTHLY

25 EARNINGS.— 


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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (1)(B)(i), the adjusted average indexed 

3 monthly earnings of a participant is the amount 

4 of the participant’s average indexed monthly 

5 earnings (determined under section 215(b)), ad6 justed by treating all noncovered governmental 

7 service performed after 1952 on which a peri8 odic benefit referred to in paragraph (1) is 

9 based as ‘employment’ as defined in section 210 

10 for purposes of this title (together with all other 

11 service performed by such individual consisting 

12 of ‘employment’ as so defined). 

13 ‘‘(B) METHODOLOGY.—For purposes of 

14 determining average indexed monthly earnings 

15 as described in subparagraph (A), the Commis16 sioner of Social Security shall provide by regu17 lation for a method for determining the amount 

18 of wages derived from service performed after 

19 1952 and which is to be treated as ‘employ20 ment’ solely for purposes of subparagraph (A). 

21 Such method shall provide for reliance on em22 ployment records which are provided to the 

23 Commissioner and which constitute a reason24 able basis for treatment of service as ‘employ25 ment’ for such purposes, together with such 


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1 other information received by the Commissioner 

2 as the Commissioner may consider appropriate 

3 as a reasonable basis for treatment of service as 

4 ‘employment’ for such purposes. 

5 ‘‘(4) COOPERATION BY COMMISSIONER.—The 

6 Commissioner of Social Security shall provide to the 

7 Board such assistance and information as the Board 

8 may require for purposes of this subsection. 

9 ‘‘(f) MARRIED COUPLES.—In the case of any 2 par10 ticipants who are married, subsection (a) shall apply with 

11 respect to each such participant, upon the joint written 

12 request of such participants, by totalling the balances in 

13 the accounts referred to in subsection (a) of both such in14 dividuals. 

15 ‘‘(g) PROTECTION FROM ASSIGNMENT OR ALIEN16 ATION.—Any supplemental minimum benefit payment 

17 under this section may not be assigned or alienated. 

18 ‘‘SEC. 259. ELECTION FOR PARTICIPATION. 

19 ‘‘(a) IN GENERAL.—Any individual who— 

20 ‘‘(1) is born on or after January 1, 1953, and 

21 before January 1, 1986, 

22 ‘‘(2) has not attained retirement age (as de23 fined in section 216(l)(1)), and 

24 ‘‘(3) has not become entitled to old-age insur25 ance benefits under section 202(a), 


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1 may file with the Board under this section, in such form 

2 and manner as shall be prescribed in regulations of the 

3 Board, a written form electing the status of ‘participant’ 

4 for purposes of this part. On and after the effective date 

5 of the election, such individual shall be treated as a partic6 ipant under this part with respect to wages received in 

7 any calendar year beginning on or after such date and 

8 self-employment income for any taxable year beginning on 

9 or after such effective date. 

10 ‘‘(b) EFFECTIVE DATE OF ELECTION.—An election 

11 under this section shall take effect on January 1 of the 

12 first calendar year beginning after 60 days after the date 

13 of the filing of the election in accordance with subsection 

14 (a). 

15 ‘‘(c) IRREVOCABILITY.—Any election under this sec16 tion shall be irrevocable. 

17 ‘‘SEC. 260. EARLY DISTRIBUTION AND TERMINATION OF 

18 PARTICIPATION IN PROGRAM. 

19 ‘‘(a) IN GENERAL.—In any case in which the amount 

20 credited to a participant’s part B totalization account as 

21 of any date prior to the date on which the participant at22 tains retirement age (as defined in section 216(l)(1)) ac23 crues to a level equal to at least the amount necessary 

24 to purchase under section 256(c) (as if such date were 

25 the participant’s retirement date) an immediate life annuVerDate Aug 31 2005 21:31 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\H2002.IH H2002

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1 ity which provides for payments which are, on an annual 

2 basis, at least equal to 100 percent of the poverty line 

3 as of such date for an individual (determined under the 

4 poverty guidelines of the Department of Health and 

5 Human Services issued under sections 652 and 673(2) of 

6 the Omnibus Budget Reconciliation Act of 1981), the 

7 Board shall promptly so inform the participant, and, upon 

8 application of the participant filed with the Board under 

9 this section in accordance with regulations of the Board— 

10 ‘‘(1) the Board shall, at the election of the par11 ticipant, either— 

12 ‘‘(A) commence distribution of the total 

13 amount credited to such participant’s part B 

14 totalization account in the form of an annuity 

15 purchased under section 256(c), or 

16 ‘‘(B) provide for consolidation of the total 

17 amount credited to such account in the Tier II 

18 Investment Fund and investment of such 

19 amount in fixed-income instruments meeting 

20 the requirements of section 254(c), until dis21 tribution of such amount is made under sub22 paragraph (A) or section 256, and 

23 ‘‘(2) in lieu of the transfer, from the Tier I In24 vestment Fund to the Tier II Investment Fund or 

25 a Tier III investment account, of any remaining 


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1 amount credited to such participant’s part B total2 ization account after the date of the distribution or 

3 consolidation under paragraph (1), the Board shall 

4 provide for the direct payment of such remaining 

5 credited amount to the participant. 

6 ‘‘(b) IMMEDIATE LIFE ANNUITY.—For purposes of 

7 subsection (a), the term ‘immediate life annuity’ means 

8 an annuity— 

9 ‘‘(1) the annuity starting date (as defined in 

10 section 72(c)(4) of the Internal Revenue Code of 

11 1986) of which commences with the first month fol12 lowing the date referred to in subsection (a), and 

13 ‘‘(2) which provides for a series of substantially 

14 equal annual payments over the life expectancy of 

15 the participant. 

16 ‘‘(c) MARRIED COUPLES.—In the case of any 2 par17 ticipants who are married, subsection (a) shall apply with 

18 respect to each such participant, upon the joint written 

19 request of such participants, by totalling the balances in 

20 the accounts referred to in subsection (a) of both such in21 dividuals. 

22 ‘‘(d) TREATMENT OF PERIODIC PAYMENTS BASED

23 ON GOVERNMENTAL SERVICE.—Section 258(e) shall 

24 apply for purposes of this section in determining the 


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1 amount credited to a participant’s part B totalization ac2 count. 

3 ‘‘SEC. 261. INDIVIDUAL INVESTMENT BOARD. 

4 ‘‘(a) ESTABLISHMENT.—There is established in the 

5 executive branch of the Government an Individual Invest6 ment Board. 

7 ‘‘(b) COMPOSITION.—The Board shall be composed 

8 of— 

9 ‘‘(1) 3 members appointed by the President, of 

10 whom 1 shall be designated by the President as 

11 Chairman; and 

12 ‘‘(2) 2 members appointed by the President, of 

13 whom— 

14 ‘‘(A) 1 shall be appointed by the President 

15 after taking into consideration the recommenda16 tion made by the Speaker of the House of Rep17 resentatives in consultation with the Minority 

18 Leader of the House of Representatives; and 

19 ‘‘(B) 1 shall be appointed by the President 

20 after taking into consideration the recommenda21 tion made by the Majority Leader of the Senate 

22 in consultation with the Minority Leader of the 

23 Senate. 


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1 ‘‘(c) ADVICE AND CONSENT.—Appointments under 

2 subsection (b) shall be made by and with the advice and 

3 consent of the Senate. 

4 ‘‘(d) MEMBERSHIP REQUIREMENTS.—Members of 

5 the Board shall have substantial experience, training, and 

6 expertise in the management of financial investments and 

7 pension benefit plans. 

8 ‘‘(e) LENGTH OF APPOINTMENTS.— 

9 ‘‘(1) TERMS.—A member of the Board shall be 

10 appointed for a term of 4 years, except that of the 

11 members first appointed under subsection (b)— 

12 ‘‘(A) the Chairman shall be appointed for 

13 a term of 4 years; 

14 ‘‘(B) the members appointed under sub15 section (b)(2) shall be appointed for terms of 3 

16 years; and 

17 ‘‘(C) the remaining members shall be ap18 pointed for terms of 2 years. 

19 ‘‘(2) VACANCIES.— 

20 ‘‘(A) IN GENERAL.—A vacancy on the 

21 Board shall be filled in the manner in which the 

22 original appointment was made and shall be 

23 subject to any conditions that applied with re24 spect to the original appointment. 


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1 ‘‘(B) COMPLETION OF TERM.—An indi2 vidual chosen to fill a vacancy shall be ap3 pointed for the unexpired term of the member 

4 replaced. 

5 ‘‘(3) EXPIRATION.—The term of any member 

6 shall not expire before the date on which the mem7 ber’s successor takes office. 

8 ‘‘(f) DUTIES.—The Board shall— 

9 ‘‘(1) administer the program established under 

10 this part; 

11 ‘‘(2) establish policies for the investment and 

12 management of the Tier I Investment Fund, the 

13 Tier II Investment Fund, and Tier III investment 

14 accounts, including policies applicable to the asset 

15 managers with responsibility for managing the in16 vestment of individual investment account balances, 

17 and for the management and operation of individual 

18 social security annuities purchased with Tier II In19 vestment Fund assets, which shall provide for— 

20 ‘‘(A) prudent investments suitable for ac21 cumulating funds for payment of retirement in22 come; 

23 ‘‘(B) sound management practices; and 

24 ‘‘(C) low administrative costs; 


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1 ‘‘(3) review the performance of investments 

2 made for the Tier I Investment Fund and the Tier 

3 II Investment Fund; 

4 ‘‘(4) review the management and operation of 

5 individual social security annuities purchased with 

6 Tier II Investment Fund assets; 

7 ‘‘(5) review the performance of investments 

8 made under Tier III investment accounts; 

9 ‘‘(6) review and approve the budget of the 

10 Board; and 

11 ‘‘(7) comply with the fiduciary requirements of 

12 part 4 of subtitle B of title I of the Employee Re13 tirement Income Security Act of 1974 (relating to fi14 duciary responsibility) in connection with any exer15 cise of discretion in connection with the assets of the 

16 Tier I Investment Fund or the Tier II Investment 

17 Fund. 

18 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

19 ‘‘(1) IN GENERAL.—The Board may— 

20 ‘‘(A) adopt, alter, and use a seal; 

21 ‘‘(B) except as provided in paragraph (4), 

22 direct the Executive Director to take such ac23 tion as the Board considers appropriate to 

24 carry out the provisions of this part and the 


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1 policies of the Board in accordance with delega2 tions under this part; 

3 ‘‘(C) upon the concurring votes of 4 mem4 bers, remove the Executive Director from office 

5 for good cause shown; 

6 ‘‘(D) provide to the Executive Director 

7 such resources as are necessary to carry out the 

8 duties of the Executive Director; and 

9 ‘‘(E) take such other actions as may be 

10 necessary to carry out the functions of the 

11 Board. 

12 ‘‘(2) MEETINGS.—The Board shall meet— 

13 ‘‘(A) not less than once during each 

14 month; and 

15 ‘‘(B) at additional times at the call of the 

16 Chairman. 

17 ‘‘(3) EXERCISE OF POWERS.— 

18 ‘‘(A) IN GENERAL.—Except as provided in 

19 paragraph (1)(C), the Board shall perform the 

20 functions and exercise the powers of the Board 

21 on a majority vote of a quorum of the Board. 

22 Three members of the Board shall constitute a 

23 quorum for the transaction of business. 

24 ‘‘(B) VACANCIES.—A vacancy on the 

25 Board shall not impair the authority of a 


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1 quorum of the Board to perform the functions 

2 and exercise the powers of the Board. 

3 ‘‘(4) LIMITATIONS ON INVESTMENTS.—The 

4 Board may not direct any person to invest or to 

5 cause to be invested any sums in the Tier II Invest6 ment Fund or any Tier III investment account in a 

7 specific asset or to dispose of or cause to be disposed 

8 of any specific asset of such Fund or any such ac9 count. 

10 ‘‘(h) COMPENSATION.— 

11 ‘‘(1) IN GENERAL.—Each member of the Board 

12 who is not an officer or employee of the Federal 

13 Government shall be compensated at the daily rate 

14 of basic pay for level IV of the Executive Schedule 

15 for each day during which such member is engaged 

16 in performing a function of the Board. 

17 ‘‘(2) EXPENSES.—A member of the Board shall 

18 be paid travel, per diem, and other necessary ex19 penses under subchapter I of chapter 57 of title 5, 

20 United States Code, while traveling away from such 

21 member’s home or regular place of business in the 

22 performance of the duties of the Board. 

23 ‘‘(3) SOURCE OF FUNDS.—Payments authorized 

24 under this subsection shall be paid from the Tier I 


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1 Investment Fund or the Tier II Investment Fund, 

2 as determined appropriate by the Board. 

3 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem4 bers of the Board shall discharge their responsibilities 

5 solely in the interest of the participants and their bene6 ficiaries under this part. 

7 ‘‘(j) ANNUAL INDEPENDENT AUDIT.—The Board 

8 shall annually engage an independent qualified public ac9 countant to audit the activities of the Board. 

10 ‘‘(k) SUBMISSION OF BUDGET TO CONGRESS.—The 

11 Board shall prepare and submit to the President, and, at 

12 the same time, to the appropriate committees of Congress, 

13 an annual budget of the expenses and other items relating 

14 to the Board which shall be included as a separate item 

15 in the budget required to be transmitted to Congress 

16 under section 1105 of title 31, United States Code. 

17 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA18 TIONS.—The Board may submit to the President, and, at 

19 the same time, shall submit to each House of Congress, 

20 any legislative recommendations of the Board relating to 

21 any of its functions under this part or any other provision 

22 of law. 


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1 ‘‘SEC. 262. EXECUTIVE DIRECTOR OF THE INDIVIDUAL IN2 VESTMENT BOARD. 

3 ‘‘(a) APPOINTMENT OF EXECUTIVE DIRECTOR.—The 

4 Board shall appoint, without regard to the provisions of 

5 law governing appointments in the competitive service, an 

6 Executive Director by action agreed to by a majority of 

7 the members of the Board. 

8 ‘‘(b) DUTIES.—The Executive Director shall, as de9 termined appropriate by the Board— 

10 ‘‘(1) carry out the policies established by the 

11 Board; 

12 ‘‘(2) invest and manage the Tier I Investment 

13 Fund and the Tier II Investment Fund in accord14 ance with the investment policies and other policies 

15 established by the Board; 

16 ‘‘(3) administer the provisions of this part re17 lating to the Tier I Investment Fund and the Tier 

18 II Investment Fund; and 

19 ‘‘(4) prescribe such regulations (other than reg20 ulations relating to fiduciary responsibilities) as may 

21 be necessary for the administration of this part re22 lating to the Tier I Investment Fund and the Tier 

23 II Investment Fund. 

24 ‘‘(c) ADMINISTRATIVE AUTHORITY.—The Executive 

25 Director may, within the scope of the duties of the Execu26 tive Director as determined by the Board— 


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1 ‘‘(1) appoint such personnel as may be nec2 essary to carry out the provisions of this part relat3 ing to the Tier I Investment Fund and the Tier II 

4 Investment Fund; 

5 ‘‘(2) subject to approval by the Board, procure 

6 the services of experts and consultants under section 

7 3109 of title 5, United States Code; 

8 ‘‘(3) secure directly from an Executive agency, 

9 the United States Postal Service, or the Postal Rate 

10 Commission any information necessary to carry out 

11 the provisions of this part and the policies of the 

12 Board relating to the Tier I Investment Fund and 

13 the Tier II Investment Fund; 

14 ‘‘(4) make such payments out of sums in the 

15 Tier I Investment Fund and the Tier II Investment 

16 Fund as the Executive Director determines, in ac17 cordance with regulations of the Board, are nec18 essary to carry out the provisions of this part and 

19 the policies of the Board; 

20 ‘‘(5) pay the compensation, per diem, and travel 

21 expenses of individuals appointed under paragraphs 

22 (1), (2), and (6) from the Tier I Investment Fund 

23 or the Tier II Investment Fund, in accordance with 

24 regulations of the Board; 


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1 ‘‘(6) accept and use the services of individuals 

2 employed intermittently in the Government service 

3 and reimburse such individuals for travel expenses, 

4 authorized by section 5703 of title 5, United States 

5 Code, including per diem as authorized by section 

6 5702 of such title; 

7 ‘‘(7) except as otherwise expressly prohibited by 

8 law or the policies of the Board, delegate any of the 

9 Executive Director’s functions to such employees 

10 under the Board as the Executive Director may des11 ignate and authorize such successive redelegations of 

12 such functions to such employees under the Board 

13 as the Executive Director may consider to be nec14 essary or appropriate; and 

15 ‘‘(8) take such other actions as are appropriate 

16 to carry out the functions of the Executive Direc17 tor.’’. 

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

19 this section shall apply with respect to wages paid after 

20 December 31, 2007, for pay periods ending after such 

21 date and self-employment income for taxable years begin22 ning after such date. 

23 (c) STUDY REGARDING TREATMENT OF SPOUSES

24 WHERE ONE SPOUSE IS NOT A PARTICIPANT.—As soon 

25 as practicable after the date of the enactment of this Act, 


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1 the Individual Investment Board shall undertake a study 

2 of the appropriate treatment of spouses in cases in which 

3 both spouses are not participants in the Individual Social 

4 Security Investment Program. The Board shall transmit 

5 the results of its study to the Committee on Ways and 

6 Means of the House of Representatives and the Committee 

7 on Finance of the Senate not later than 6 months after 

8 the first meeting of the Board. Such results shall include 

9 such recommendations for legislative changes as the 

10 Board determines appropriate. 

11 (d) TREATMENT OF NONCITIZENS.—Nothing in the 

12 amendments made by this section shall be construed to 

13 result in the crediting, for any purpose under part B of 

14 title II of the Social Security Act, of any amount based 

15 on the wages and self-employment income of any indi16 vidual who is not a citizen or national of the United States 

17 in any case in which such wages and self-employment in18 come would not be credited under part A of such title if 

19 section 215(j) of such Act did not apply in the case of 

20 such individual. 

21 SEC. 3. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY 

22 INVESTMENT PROGRAM. 

23 (a) TAXATION WITH RESPECT TO ELEMENTS OF

24 THE PROGRAM.— 


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1 (1) IN GENERAL.—Subchapter F of chapter 1 

2 of the Internal Revenue Code of 1986 (relating to 

3 exempt organizations) is amended by adding at the 

4 end the following new part: 

5 ‘‘PART IX—INDIVIDUAL SOCIAL SECURITY 

6 INVESTMENT PROGRAM 

‘‘Sec. 530A. Individual Social Security Investment Program. 

7 ‘‘SEC. 530A. INDIVIDUAL SOCIAL SECURITY INVESTMENT 

8 PROGRAM. 

9 ‘‘(a) GENERAL RULE.—Any fund created, account 

10 established, or annuity under part B of title II of the So11 cial Security Act is exempt from taxation under this sub12 title. Notwithstanding the preceding sentence, any such 

13 fund or account is subject to the taxes imposed by section 

14 511 (relating to imposition of tax on unrelated business 

15 income of charitable, etc. organizations). 

16 ‘‘(b) RECOGNITION BONDS.—Gross income shall not 

17 include— 

18 ‘‘(1) the value of a recognition bond issued to 

19 a participant under section 257(b) of the Social Se20 curity Act which is deposited in the Tier II Invest21 ment Fund and held for such participant under such 

22 section, 

23 ‘‘(2) proceeds from the sale of a recognition 

24 bond of a participant under section 257(e) of the 


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1 Social Security Act which are deposited in the Tier 

2 II Investment Fund and held for such participant 

3 under section 257(b) of such Act, and 

4 ‘‘(3) proceeds from the redemption of a recogni5 tion bond of a participant under section 257(d) of 

6 the Social Security Act deposited in the Tier II In7 vestment Fund to the credit of such participant’s 

8 part B totalization account under part B of title II 

9 of such Act. 

10 For purposes of this subsection, the term ‘Tier II Invest11 ment Fund’ has the meaning given such term by section 

12 251(6) of the Social Security Act. 

13 ‘‘(c) DISTRIBUTIONS.—A distribution from any fund 

14 or account, or any annuity payment, under part B of title 

15 II of the Social Security Act shall not be included in the 

16 gross income of the distributee or payee.’’. 

17 (2) CONFORMING AMENDMENT.—Section 

18 86(d)(1)(A) of such Code is amended by inserting 

19 ‘‘part A of’’ after ‘‘under’’. 

20 (3) CLERICAL AMENDMENT.—The table of 

21 parts for subchapter F of chapter 1 of such Code is 

22 amended by adding after the item relating to part 

23 VIII the following new item: 

‘‘PART IX. INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM.’’. 


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1 (4) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to taxable years begin3 ning after December 31, 2007. 

4 (b) EXCLUSION OF INDIVIDUAL INVESTMENT PRO5 GRAM PARTICIPANTS FROM INSURANCE BENEFITS.—Sec6 tion 215 of the Social Security Act (42 U.S.C. 415) is 

7 amended by adding at the end the following new sub8 section: 

9 ‘‘Exclusion of Individual Investment Program 

10 Participants 

11 ‘‘(j)(1) Except as provided in paragraph (3), a partic12 ipant (as defined in section 251(1)) in the Individual So13 cial Security Investment Program under part B shall not 

14 be credited with wages or self-employment income under 

15 this part for purposes of determining benefits under the 

16 old-age, survivors, and disability insurance program under 

17 this part. 

18 ‘‘(2) In the case of an individual who becomes a par19 ticipant under part B pursuant to an election filed under 

20 section 259, paragraph (1) shall apply with respect to 

21 wages paid in calendar years beginning on or after the 

22 effective date of the election and with respect to self-em23 ployment income derived in taxable years ending after 

24 such date. 


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1 ‘‘(3)(A) Paragraph (1) shall not apply in connection 

2 with the determination of any such participant’s entitle3 ment to disability insurance benefits under section 223(a), 

4 the determination of such participant’s primary insurance 

5 amount in connection with such entitlement, and the de6 termination during such entitlement of benefits based on 

7 such participant’s wages and self-employment income. 

8 ‘‘(B) In any case in which the first month of such 

9 participant’s entitlement to old-age insurance benefits 

10 under section 202(a) immediately follows the last month 

11 of such participant’s entitlement to disability insurance 

12 benefits, during such participant’s entitlement to old-age 

13 insurance benefits, such participant’s primary insurance 

14 amount shall not be less than the excess of— 

15 ‘‘(i) such participant’s primary insurance 

16 amount, determined as if paragraph (1) did not 

17 apply, over 

18 ‘‘(ii) the monthly payment which would be pay19 able to such participant under a life annuity under 

20 section 256(c) commencing with such first month of 

21 entitlement and providing for a series of substan22 tially equal annual payments over the life expectancy 

23 of the participant. 

24 ‘‘(4) Paragraph (1) shall not apply in connection with 

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1 tion 202(d) or mother’s or father’s insurance benefits 

2 under section 202(g) based on such participant’s wages 

3 and self-employment income.’’. 

4 SEC. 4. CPI-INDEXED BENEFITS FOR PART A BENE5 FICIARIES OTHER THAN DISABILITY BENE6 FICIARIES. 

7 (a) COMPUTATION OF BEND POINTS.—Section 

8 215(a)(1)(B) of the Social Security Act (42 U.S.C. 

9 415(a)(1)(B)) is amended— 

10 (1) by redesignating clause (iii) as clause (vi); 

11 (2) in clause (ii), by striking ‘‘For individuals’’ 

12 and inserting ‘‘Subject to clause (iii), for individ13 uals’’; 

14 (3) by inserting after clause (ii) the following 

15 new clauses: 

16 ‘‘(iii) For individuals who initially become eligible for 

17 old-age insurance benefits, or who die (before becoming 

18 eligible for such benefits), in any calendar year after 2015, 

19 each of the amounts so established under the preceding 

20 provisions of this subparagraph shall be equal to the prod21 uct derived by multiplying such amount (as determined 

22 before the application of this clause) by the quotient de23 rived by dividing— 

24 ‘‘(I) the applicable change in the CPI for the 

25 first of the 2 preceding calendar years, by 


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1 ‘‘(II) applicable change in the national average 

2 wage index for the first of the 2 preceding calendar 

3 years. 

4 ‘‘(iv) For purposes of clause (iii)(I), the term ‘appli5 cable change in the CPI’ for a calendar year means the 

6 excess of— 

7 ‘‘(I) the arithmetical mean of the Consumer 

8 Price Index for Urban Wage Earners and Clerical 

9 Workers (issued by the Bureau of Labor Statistics) 

10 for the 12 months in such calendar year, over 

11 ‘‘(II) the arithmetical mean of such Consumer 

12 Price Index for the 12 months in calendar year 

13 2014. 

14 ‘‘(v) For purposes of clause (iii)(II), the term ‘appli15 cable change in the national average wage index’ for a cal16 endar year means the excess of— 

17 ‘‘(I) the national average wage index (as de18 fined in section 209(k)(1)) for such calendar year, 

19 over 

20 ‘‘(II) the national average wage index (as so de21 fined) for calendar year 2014.’’; and 

22 (4) in clause (vi) (as redesignated), by striking 

23 ‘‘under clause (ii)’’ and inserting ‘‘under the pre24 ceding provisions of this subparagraph’’. 


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1 (b) SUBSTITUTION OF CPI FOR NATIONAL AVERAGE

2 WAGE INDEX IN COMPUTING AVERAGE INDEXED MONTH3 LY EARNINGS.— 

4 (1) IN GENERAL.—Section 215(b)(3) of such 

5 Act (42 U.S.C. 415(b)(3)) is amended— 

6 (A) in subparagraph (A)(ii)(I), by striking 

7 ‘‘national average wage index (as defined in sec8 tion 209(k)(1))’’ and inserting ‘‘national aver9 age wage index (as defined in section 

10 209(k)(1)) (for determinations of disability in11 surance benefits and other benefits based on 

12 the wages and self-employment income of an in13 dividual entitled to disability insurance benefits) 

14 or the consumer price index (for determinations 

15 of other benefits)’’; 

16 (B) in subparagraph (A)(ii)(II), by striking 

17 ‘‘national average wage index (as so defined)’’ 

18 and inserting ‘‘national average wage index (as 

19 so defined) (for determinations of disability in20 surance benefits and other benefits based on 

21 the wages and self-employment income of an in22 dividual entitled to disability insurance benefits) 

23 or the consumer price index (for determinations 

24 of other benefits)’’; 


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1 (C) by redesignating subparagraph (B) as 

2 subparagraph (C); and 

3 (D) by inserting after subparagraph (A) 

4 the following new subparagraph: 

5 ‘‘(B) For purposes of this paragraph, the term ‘con6 sumer price index’ for a calendar year means the arithmet7 ical mean of the Consumer Price Index for Urban Wage 

8 Earners and Clerical Workers (issued by the Bureau of 

9 Labor Statistics) for the 12 months in such calendar 

10 year.’’. 

11 (2) EFFECTIVE DATE.—The amendments made 

12 by this subsection shall apply with respect to the av13 erage indexed monthly earnings of individuals at14 taining age 62, or dying before attaining such age, 

15 on or after January 1, 2015. 

16 SEC. 5. MAINTENANCE OF ADEQUATE BALANCES IN THE 

17 SOCIAL SECURITY TRUST FUNDS. 

18 (a) IN GENERAL.—Section 201 of the Social Security 

19 Act (42 U.S.C. 401) is amended by adding at the end the 

20 following new subsection: 

21 ‘‘(o) In addition to amounts otherwise appropriated 

22 under the preceding provisions of this section to the Trust 

23 Funds established under this section, there is hereby ap24 propriated for each fiscal year to each of such Trust 

25 Funds, from amounts in the general fund of the Treasury 


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73 

•HR 2002 IH

1 not otherwise appropriated, such sums as may be nec2 essary from time to time to maintain the balance ratio 

3 (as defined in section 709(b)) of such Trust Fund, for the 

4 calendar year commencing during such fiscal year, at not 

5 less than 100 percent. The sums to be appropriated under 

6 the preceding sentence shall be determined by the Com7 missioner of Social Security and certified by the Commis8 sioner to each House of the Congress not later than Octo9 ber 1 of such fiscal year. In making such determination 

10 and certification, the Commissioner shall use the inter11 mediate actuarial assumptions used by the Board of 

12 Trustees of the Trust Funds in its most recent annual 

13 report to the Congress prepared pursuant to subsection 

14 (c)(2). The Commissioner shall also transmit a copy of 

15 any such certification to the Secretary of the Treasury, 

16 and upon receipt thereof, such Secretary shall promptly 

17 take appropriate actions in accordance with the certifi18 cation.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 subsection (a) shall apply with respect to fiscal years be21 ginning after the date of the enactment of this Act. 

Æ 


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