I 

108TH CONGRESS 

1ST SESSION H. R. 3055

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

Code of 1986 to provide prospectively for personalized retirement security 

through personal retirement savings accounts to allow for more control 

by individuals over their Social Security retirement income, to amend 

such title and the Balanced Budget and Emergency Deficit Control 

Act of 1985 to protect Social Security surpluses, and to provide other 

reforms relating to benefits under such title II. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 10, 2003

Mr. SMITH of Michigan (for himself, Mr. KOLBE, Mr. STENHOLM, Mr. 

TOOMEY, Mr. SHADEGG, and Mr. FLAKE) 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 prospectively for personalized retirement security through personal retirement 

savings accounts to allow for more control by individuals 

over their Social Security retirement income, to amend 

such title and the Balanced Budget and Emergency Deficit Control Act of 1985 to protect Social Security surpluses, and to provide other reforms relating to benefits 

under such title II.

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; TABLE OF CONTENTS. 

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

3 ‘‘Social Security Solvency Act of 2003’’. 

4 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents. 

Sec. 2. Findings and purposes. 

TITLE I—INDIVIDUAL RETIREMENT SECURITY PROGRAM 

Sec. 101. Establishment of individual retirement security program. 

Sec. 102. Adjustments in amounts appropriated to the Federal Old-Age and 

Survivors Insurance Trust Fund based on reallocation percentage. 

Sec. 103. Adjustments to primary insurance amounts under part A of title II 

of the Social Security Act. 

Sec. 104. Personal retirement savings accounts. 

Sec. 105. Individual retirement security program refundable credit. 

TITLE II—SOCIAL SECURITY SURPLUS PROTECTION 

Sec. 201. Regulation of flow of funds between the General Fund and the Social 

Security Trust Funds. 

TITLE III—SOCIAL SECURITY BENEFIT REFORMS 

Sec. 301. Gradual increase in retirement age and early retirement age. 

Sec. 302. Adjustments to bend points in determining primary insurance 

amounts. 

Sec. 303. Information relating to benefit limitations provided in social security 

account statements. 

Sec. 304. Coverage of newly hired State and local employees. 

Sec. 305. Increase in monthly insurance benefits for widows and widowers. 

Sec. 306. Acceleration of increase in delayed retirement credit. 

Sec. 307. Authorization for reimbursement of Federal Disability Insurance 

Trust Fund for certain costs of disability insurance benefits. 

Sec. 308. Study to develop recommendations for providing for elections under 

which individuals may opt for exclusion from social security 

coverage. 

Sec. 309. Increase in number of years disregarded in determining average annual earnings on which benefit amounts are based where remunerative work is precluded by need to provide child care. 

Sec. 310. Exclusion of disabled adult children from reduction in benefits under 

the family maximum provisions. 

TITLE IV—RETIREMENT SECURITY 

Sec. 401. Pensions and individual retirement arrangement provisions of the 

Economic Growth and Tax Relief Reconciliation Act of 2001 

made permanent. 

Sec. 402. Acceleration of phase-ins of scheduled increases in IRA and pension 

plan contribution limits. 

Sec. 403. Refundable credit for premiums on qualified long-term care insurance 

contracts. 
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Sec. 404. Tax credit for taxpayers providing care for dependent parents in their 

households. 

Sec. 405. Nonrefundable tax credit for expenses of seniors for maintaining a 

principal residence.

1 SEC. 2. FINDINGS AND PURPOSES. 

2 (a) FINDINGS.—On July 15, 1999, the House Budget 

3 Committee Social Security Task Force adopted the fol4 lowing Findings by unanimous vote on July 15, 1999: 

5 (1) Time is the enemy of Social Security reform 

6 and we should move without delay. Prompt action 

7 will give us time to institute gradual reforms that 

8 allow workers to plan for their retirement and mini9 mizes the impact for current or near-term retirees. 

10 (2) The Social Security Trust Fund is a secure, 

11 legal entity comprised of U.S. Treasury Bonds 

12 backed by the full faith and credit of the U.S. Gov13 ernment. While the U.S. has never defaulted on any 

14 of its obligations, these represent a legal claim on 

15 future Federal revenue. Such securities will have to 

16 be redeemed from funds outside the Trust Fund 

17 itself. 

18 (3) Any reform must consider the effects on all 

19 generations, genders, and those currently receiving 

20 Social Security benefits. Since current demographic 

21 projections may very well underestimate future life 

22 expectancy, reform proposals should insure that the 
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1 intergenerational balance that has characterized this 

2 program remains intact. 

3 (4) No payroll tax increase. 

4 (5) A universal Social Security survivor and dis5 ability benefit program needs to be maintained. To 

6 shield the disabled and those who have been in the 

7 system a short time, general fund monies should be 

8 used to supplement program benefits. 

9 (6) Social Security surpluses should only be 

10 spent for Social Security and should support a re11 form program that encourages savings and overall 

12 economic growth. 

13 (7) Investment in the capital markets presents 

14 an opportunity to restore Social Security’s solvency. 

15 The investment income generated by savings-based 

16 reform should not be used for any purpose other 

17 than retirement. 

18 (8) Investments in personal accounts can be 

19 managed to minimize administrative costs, avoiding 

20 substantial reductions rates of return on investment. 

21 Individual investors can use guaranteed return secu22 rities and annuities to create a personal investment 

23 safety net that assures a stable retirement income 

24 for each worker. 
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1 (b) ADDITIONAL FINDINGS.—The Congress adds the 

2 following to the above Findings: 

3 (1) One of America’s most popular Government 

4 programs, Social Security, is in jeopardy. The 1998 

5 Board of Trustee’s report states that the current 

6 system faces an actuarial deficit of 2.09 percent of 

7 taxable payroll. According to the 1998 Board of 

8 Trustee’s report, the Social Security trust fund will 

9 begin to run a deficit by 2014 and will be exhausted 

10 by 2032. 

11 (2) Helping assure Americans retirement secu12 rity is a major national goal. 

13 (3) The Congress should strengthen Social Se14 curity to ensure Americans retirement security. The 

15 changes made to strengthen Social Security should 

16 create a solvent Social Security system, and avoid 

17 payroll tax increases. 

18 (4) The root causes of the weaknesses in the 

19 current Social Security system are its inadequate 

20 funding mechanism and changing demographics. So21 cial Security was designed in 1935 as a pay-as-you22 go system, in which current workers supported cur23 rent retirees. This design worked when America had 

24 42 workers per beneficiary in 1945, but that ratio 

25 has fallen over time. In 1999 there are only 3.2
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1 workers per beneficiary, and by 2060 the ratio is 

2 projected to fall to 1.8 workers per beneficary. To 

3 pay benefits to the rising number of retirees, the 

4 Government has levied increasing payroll taxes on 

5 workers. To maintain the program in its current 

6 form, the Government will have to continue to raise 

7 payroll taxes or substantially reduce benefits.

8 (5) The key to a more secure Social Security 

9 system is increased savings and private investment. 

10 We should move from a financing system based on 

11 the Federal Government’s power to tax workers to 

12 one based on savings and investment accounts 

13 owned and controlled by workers. 

14 (6) Allowing workers to take advantage of high15 er investment returns will increase their income in 

16 retirement. Over the last 100 years, the stock mar17 ket has earned roughly 7 percent after inflation 

18 compared to a yield of 1.5 to 2 percent after infla19 tion projects by the Social Security Administration 

20 for workers’ payroll taxes. The difference is enor21 mous. For example, $1,000 invested for 50 years at 

22 2 percent becomes nearly $2,700. The same amount 

23 invested for 50 years at 7 percent becomes nearly 

24 $30,000. 
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1 (c) PURPOSES.—The purposes of this Act are as fol2 lows: 

3 (1) To give workers and retirees more owner4 ship and control over their retirement savings. 

5 (2) To improve the living standards of Amer6 ican seniors by allowing them to take advantage of 

7 low-risk investment opportunities that earn higher 

8 returns than those they can expect to realize under 

9 the current Social Security system. 

10 (3) To stimulate the American economy by in11 creasing savings and investment leading to higher 

12 productivity, more jobs, and better wages. 

13 (4) To ensure the solvency of the Social Secu14 rity system while maintaining an adequate reserve in 

15 the Social Security trust fund. 

16 TITLE I—INDIVIDUAL RETIRE17 MENT SECURITY PROGRAM 

18 SEC. 101. ESTABLISHMENT OF INDIVIDUAL RETIREMENT 

19 PROGRAM. 

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

21 is amended—

22 (1) by inserting before section 201 the fol23 lowing: 

24 ‘‘PART A—INSURANCE BENEFITS’’;

25 and 
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1 (2) by adding at the end the following new part:

2 ‘‘PART B—INDIVIDUAL RETIREMENT SECURITY

3 PROGRAM

4 ‘‘DEPOSITS TO PERSONAL RETIREMENT SAVINGS

5 ACCOUNTS

6 ‘‘SEC. 251. (a) DESIGNATION OF PERSONAL RETIRE7 MENT SAVINGS ACCOUNTS BY PARTICIPATING INDIVID8 UALS.—

9 ‘‘(1) IN GENERAL.—Under regulations pre10 scribed by the Board of Trustees, a participating in11 dividual, and the spouse of such an individual, upon 

12 the attainment of a minimum deposit balance in the 

13 Interim Investment Fund as described in subsection 

14 (b), may designate, in writing filed with the Com15 missioner of Social Security in such form and man16 ner as may be prescribed in such regulations, one or 

17 more personal retirement savings accounts to which 

18 deposits with respect to the individual or spouse are 

19 to be made under subsection (b). The individual or 

20 spouse may designate other personal retirement sav21 ings accounts in lieu of or in addition to accounts 

22 previously designated, in accordance with regulations 

23 of the Board of Trustees. 
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1 ‘‘(2) ELECTION NOT TO PARTICIPATE.—For 

2 provisions relating to election not to be a partici3 pating individual, see section 254(3)(B). 

4 ‘‘(b) DEPOSITS TO PERSONAL RETIREMENT SAVINGS

5 ACCOUNTS.—

6 ‘‘(1) IN GENERAL.—In any case in which the 

7 total amount in the Interim Investment Fund cred8 ited under section 252 to a participating individual 

9 as of the end of any annual reporting month, ad10 justed so as to reflect net earnings and net losses at11 tributable to such amount from investment of the 

12 balance in the Fund under section 252(c), equals or 

13 exceeds the minimum deposit amount, the Secretary 

14 of the Treasury shall, within 30 days after the end 

15 of such month, notify the individual of the amount 

16 credited to such individual in the Fund. If such total 

17 amount credited to such individual as of the end of 

18 such individual’s annual reporting month is at least 

19 equal to the minimum deposit amount, pursuant to 

20 the written election of such individual which is filed 

21 in accordance with regulations of the Board of 

22 Trustees and received by the Secretary of the Treas23 ury during the 90-day period following the individ24 ual’s annual reporting month, the Secretary of the 

25 Treasury shall transfer such total amount from such 
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1 Fund to such personal retirement savings accounts 

2 as are designated under subsection (a) with respect 

3 to such individual. 

4 ‘‘(2) DEFINITIONS.—For purposes of this sub5 section: 

6 ‘‘(A) ANNUAL REPORTING MONTH.—The 

7 term ‘annual reporting month’ means, in con8 nection with a participating individual, a cal9 endar month of the calendar year assigned to 

10 such individual as his or her annual reporting 

11 month according to a schedule that shall be 

12 prescribed in regulations of the Board of Trust13 ees. 

14 ‘‘(B) MINIMUM DEPOSIT BALANCE.—

15 ‘‘(i) IN GENERAL.—Subject to clause 

16 (ii), the term ‘minimum deposit balance’ 

17 means an amount equal to $2,500. 

18 ‘‘(ii) ADJUSTMENTS.—The Secretary 

19 of the Treasury shall adjust annually (ef20 fective for annual reporting months occur21 ring after December 2005) the dollar 

22 amount set forth in clause (i) under proce23 dures providing for adjustments in the 

24 same manner and to the same extent as 

25 adjustments are provided for under the
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1 procedures used to adjust benefit amounts 

2 under section 215(i)(2)(A), except that any 

3 amount so adjusted that is not a multiple 

4 of $1.00 shall be rounded to the nearest 

5 multiple of $1.00. 

6 ‘‘(c) LUMP SUM PAYMENT TO ESTATE UPON DEATH

7 OF ACCOUNT HOLDER.—Upon the death of the account 

8 holder, the amount of any assets in the personal retire9 ment savings account shall be transferred in a lump sum, 

10 under rules established by the Board of Trustees, to the 

11 account holder’s estate. 

12 ‘‘(d) PUBLIC EDUCATION EFFORT.—Under regula13 tions prescribed by the Board of Trustees, the Commis14 sioner of Social Security shall conduct a public education 

15 effort. Such effort shall include dissemination to partici16 pating individuals of information that will assist them in 

17 making educated investment decisions under the program 

18 established under this part. 

19 ‘‘INTERIM INVESTMENT FUND

20 ‘‘SEC. 252. (a) ESTABLISHMENT OF INTERIM IN21 VESTMENT FUND.—There is established in the Treasury 

22 of the United States an Interim Investment Fund. The 

23 Board of Trustees shall serve as trustees of such Fund. 

24 The Fund consists of all amounts derived from payments 

25 into the Fund under subsection (b) and remaining after 

26 investment of such amounts under subsection (c), includ-
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1 ing additional amounts derived as income from such in2 vestments. The amounts held in the Fund are appro3 priated and shall remain available without fiscal year limi4 tation to be held for investment under subsection (c), to 

5 pay the administrative expenses related to the Fund and 

6 to investment under subsection (c), and to make transfers 

7 to personal retirement savings accounts under section 

8 251(b)(1). 

9 ‘‘(b) PAYMENTS INTO INTERIM INVESTMENT

10 FUND.—

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

12 the Secretary of the Treasury shall deposit into the 

13 Interim Investment Fund, from amounts otherwise 

14 available in the general fund of the Treasury, a total 

15 amount equal, in the aggregate, to 100 percent of 

16 the redirected social security taxes for such calendar 

17 year of each individual who is a participating indi18 vidual for such calendar year. 

19 ‘‘(2) TRANSFERS BASED ON ESTIMATES.—The 

20 amounts deposited pursuant to paragraph (1) shall 

21 be transferred in at least monthly payments from 

22 the general fund in the Treasury to the Interim In23 vestment Fund, such amounts to be determined on 

24 the basis of estimates by the Secretary of the Treas25 ury of the taxes, specified in section 251(b)(1), paid 
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1 to or deposited into the Treasury; and proper adjust2 ments shall be made in amounts subsequently trans3 ferred to the extent prior estimates were in excess 

4 of or were less than actual amounts. 

5 ‘‘(3) SEPARATE ACCOUNTING AND CRED6 ITING.—Subject to this paragraph, the Secretary of 

7 the Treasury shall provide for prompt, separate ac8 counting of the amounts deposited in the Interim In9 vestment Fund with respect to each individual dur10 ing each calendar year, together with any increases 

11 or decreases therein for such year so as to reflect 

12 the net returns and losses from investment thereof 

13 while held in the Fund during such year. Such ac14 counting shall also take into account any adjust15 ments made pursuant to paragraph (2). Under such 

16 accounting, amounts initially deposited into the 

17 Fund during each fiscal year with respect to the re18 directed social security taxes of each participating 

19 individual (including net returns and losses from the 

20 investment thereof) shall be credited, not later than 

21 the end of the succeeding fiscal year, as follows: 

22 ‘‘(A) If the participating individual is not 

23 married as of the end of the fiscal year in which 

24 the amounts to be credited were deposited, such 
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1 amount shall be credited to such participating 

2 individual. 

3 ‘‘(B) If the participating individual is mar4 ried as of the end of such fiscal year—

5 ‘‘(i) 50 percent of such amounts shall 

6 be credited to such participating individual, 

7 and 

8 ‘‘(ii) 50 percent of such amounts shall 

9 be credited to the individual who is the 

10 spouse of such individual as of the end of 

11 such fiscal year. 

12 ‘‘(4) REDIRECTED SOCIAL SECURITY TAXES.—

13 For purposes of paragraph (1), the term ‘redirected 

14 social security taxes’ of an individual for a calendar 

15 year means the product derived by multiplying—

16 ‘‘(A) the sum of the total taxes paid under 

17 sections 3101(a) and 3111(a) of the Internal 

18 Revenue Code of 1986 with respect to such in19 dividual during such calendar year, and the 

20 total taxes paid under section 1401(a) of such 

21 Code with respect to such individual during 

22 such calendar year, by 

23 ‘‘(B) the reallocation percentage declared 

24 for such calendar year under section 201(n)(2) 

25 of this Act. 
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1 ‘‘(c) INVESTMENT IN COMMON STOCK AND COR2 PORATE BONDS IN 3 ALTERNATIVE INVESTMENT AC3 COUNTS.—

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

5 of the Interim Investment Fund, the Board of 

6 Trustees shall divide the Fund into 3 investment ac7 counts. Such accounts shall consist of the 60/40 in8 vestment account, the 40/60 investment account, 

9 and the 80/20 investment account. The Board of 

10 Trustees shall contract with appropriate investment 

11 managers selected for investment of amounts held in 

12 each investment account. 

13 ‘‘(2) RULES RELATING TO THE 60/40 INVEST14 MENT ACCOUNT.—

15 ‘‘(A) DEFAULT INVESTMENT ACCOUNT.—

16 Except as provided in an election in effect 

17 under paragraph (3), amounts held in the In18 terim Investment Fund shall be credited to the 

19 60/40 investment account and invested as pro20 vided in subparagraph (B). 

21 ‘‘(B) INVESTMENT.—Each investment 

22 manager selected under paragraph (1) for in23 vestment of amounts held in the 60/40 invest24 ment account shall invest such amounts under 

25 regulations which shall be prescribed by the
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1 Board of Trustees so as to ensure, to the max2 imum extent practicable, that, of the total bal3 ance in the Fund credited to such account and 

4 available for investment (after allowing for ad5 ministrative expenses)—

6 ‘‘(i) 60 percent is invested in common 

7 stock in accordance with paragraph (4), 

8 and 

9 ‘‘(ii) 40 percent is invested in cor10 porate bonds in accordance with paragraph 

11 (5). 

12 ‘‘(3) ELECTION OF TRANSFERS TO THE 40/60

13 INVESTMENT ACCOUNT AND THE 80/20 INVESTMENT

14 ACCOUNT.—

15 ‘‘(A) IN GENERAL.—Pursuant to any indi16 vidual’s written election filed in accordance with 

17 regulations of the Board of Trustees and re18 ceived by the Secretary of the Treasury during 

19 the period beginning January 1 of each year 

20 and ending March 31 of such year, the Sec21 retary of the Treasury shall transfer to any of 

22 the investment accounts in the Interim Invest23 ment Fund (whichever is designated in such 

24 election), from either of the other investment 

25 accounts in the Interim Investment Fund, the 
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1 amount credited to such other investment ac2 count as of the end of the fiscal year ending on 

3 September 30 of the prior calendar year. 

4 ‘‘(B) INVESTMENT OF 40/60 INVESTMENT

5 ACCOUNT.—Each investment manager selected 

6 under paragraph (1) for investment of amounts 

7 held in the 40/60 investment account shall in8 vest such amounts under regulations which 

9 shall be prescribed by the Board of Trustees so 

10 as to ensure, to the maximum extent prac11 ticable, that, of the total balance in the Fund 

12 credited to such account and available for in13 vestment (after allowing for administrative ex14 penses)—

15 ‘‘(i) 40 percent is invested in common 

16 stock in accordance with paragraph (4), 

17 and 

18 ‘‘(ii) 60 percent is invested in cor19 porate bonds in accordance with paragraph 

20 (5). 

21 ‘‘(C) INVESTMENT OF 80/20 INVESTMENT

22 ACCOUNT.—Each investment manager selected 

23 under paragraph (1) for investment of amounts 

24 held in the 80/20 investment account shall in25 vest such amounts under regulations which 
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1 shall be prescribed by the Board of Trustees so 

2 as to ensure, to the maximum extent prac3 ticable, that, of the total balance in the Fund 

4 credited to such account and available for in5 vestment (after allowing for administrative ex6 penses)—

7 ‘‘(i) 80 percent is invested in common 

8 stock in accordance with paragraph (4), 

9 and 

10 ‘‘(ii) 20 percent is invested in cor11 porate bonds in accordance with paragraph 

12 (5). 

13 ‘‘(4) INVESTMENT IN COMMON STOCK.—In ac14 cordance with regulations which shall be prescribed 

15 by the Board of Trustees, the Board of Trustees 

16 shall establish standards which must be met by com17 mon stock selected for investment of the balance of 

18 the Interim Investment Fund pursuant to paragraph 

19 (2)(B)(i), (3)(B)(i), or (3)(C)(i). In conformity with 

20 such standards, the Board of Trustees shall select, 

21 for purposes of such investment, indices which are 

22 comprised of common stock the aggregate market 

23 value of which is, in each case, a reasonably broad 

24 representation of publicly held companies whose 

25 shares are traded on the equity markets. Amounts 
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1 invested in common stock by each investment man2 ager shall beheld in a portfolio designed to replicate 

3 the performance of one or more of such indices. 

4 ‘‘(5) INVESTMENT IN CORPORATE BONDS.—In 

5 accordance with regulations which shall be pre6 scribed by the Board of Trustees, the Board of 

7 Trustees shall establish standards which must be 

8 met by corporate bonds selected for investment of 

9 the balance of the Interim Investment Fund pursu10 ant to paragraph (2)(B)(ii), (3)(B)(ii), or (3)(C)(ii). 

11 Such standards shall take into account the com12 peting considerations of risk and return. Amounts 

13 invested in corporate bonds by each investment man14 ager shall be held in a portfolio which shall consist 

15 of a diverse range of corporate bonds, taking into 

16 full account the opposing considerations of risk and 

17 maximization of return. 

18 ‘‘(d) LUMP SUM PAYMENT TO ESTATE UPON DEATH

19 OF PARTICIPATING INDIVIDUAL.—Upon the death of a 

20 participating individual, the amount of any assets in the 

21 Interim Investment Fund credited to such individual shall 

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

23 the Board of Trustees, to such individual’s estate. 

24 ‘‘PERIODIC REPORTS BY ACCOUNT TRUSTEE

25 ‘‘SEC. 253. (a) IN GENERAL.—The trustee of a per26 sonal retirement savings account shall make periodic re-
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1 ports concerning the status of the account which shall 

2 meet the requirements of section 531(g)(2) of the Internal 

3 Revenue Code of 1986 and of this section. Each periodic 

4 report shall be furnished to the account holder on at least 

5 a semiannual basis on or before the 60th day following 

6 the period for which the report is required.

7 ‘‘(b) INFORMATION REQUIRED TO BE INCLUDED.—

8 The periodic report shall contain the following information 

9 for transactions occurring during the period for which the 

10 report is provided: 

11 ‘‘(1) The balance in the account. 

12 ‘‘(2) The rate of return for the period covered. 

13 ‘‘(3) The amount of authorized personal retire14 ment savings account contributions. 

15 ‘‘(4) The amount of distributions. 

16 ‘‘(5) The name and address of the trustee. 

17 ‘‘(6) Commission fees and fees for administra18 tive expenses charged in connection with the ac19 count. 

20 ‘‘(7) Other information which may be required 

21 from time to time by the Board of Trustees. 

22 The language of the report shall be written in a form so 

23 as to be understood by the average participating indi24 vidual.
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1 ‘‘(c) REPORTS TO BOARD OF TRUSTEES.—The 

2 Board of Trustees may require the periodic report to be 

3 filed with the Board at such time as the Board may speci4 fy in regulations under this section. 

5 ‘‘(d) FAILURE BY TRUSTEE TO MAKE TIMELY PERI6 ODIC REPORTS.—

7 ‘‘(1) IN GENERAL.—The trustee of a personal 

8 retirement savings account shall be subject to a civil 

9 penalty of not to exceed $100 a day from the date 

10 of such trustee’s failure or refusal to furnish the 

11 periodic report required to be furnished by the trust12 ee under this section until the date on which such 

13 report is furnished. 

14 ‘‘(2) PENALTIES ASSESSED BY BOARD OF

15 TRUSTEES.—Any civil penalty assessed by this sub16 section shall be imposed by the Board of Trustees 

17 and collected in a civil action. The Board of Trust18 ees may compromise the amount of any civil penalty 

19 imposed by this subsection. The Board of Trustees 

20 may waive the application of this subsection with re21 spect to any failure if the Board of Trustees deter22 mines that such failure is due to reasonable cause 

23 and not to intentional disregard of rules and regula24 tions. 

25 ‘‘DEFINITIONS

26 ‘‘SEC. 254. For purposes of this title—
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1 ‘‘(1) PERSONAL RETIREMENT SAVINGS AC2 COUNT.—The term ‘personal retirement savings ac3 count’ has the meaning provided in section 531 of 

4 the Internal Revenue Code of 1986. 

5 ‘‘(2) COVERED EMPLOYER.—The term ‘covered 

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

7 on whom an excise tax is imposed under section 

8 3111 of the Internal Revenue Code of 1986 with re9 spect to having an individual in his employ to whom 

10 wages are paid by such person during such calendar 

11 year. 

12 ‘‘(3) PARTICIPATING INDIVIDUAL.—

13 ‘‘(A) IN GENERAL.—The term ‘partici14 pating individual’ means any individual—

15 ‘‘(i) with respect to whose employment 

16 by a person who is a covered employer for 

17 any calendar year beginning after Decem18 ber 31, 2004, there is imposed an excise 

19 tax under section 3111 of the Internal 

20 Revenue Code of 1986, or 

21 ‘‘(ii) on whose self-employment income 

22 for a taxable year beginning after Decem23 ber 31, 2004, there is imposed a tax under 

24 section 1401(a) of the Internal Revenue 

25 Code of 1986, 
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1 and who has not filed an election for exemption 

2 under subparagraph (B). 

3 ‘‘(B) ELECTION FOR EXEMPTION.—

4 ‘‘(i) IN GENERAL.—An individual 

5 may, prior to attaining retirement age (as 

6 defined in section 216(l)) and receiving 

7 any distribution from a personal retire8 ment savings account, file with the Com9 missioner of Social Security under this 

10 subparagraph, in such form and manner as 

11 shall be prescribed in regulations of the 

12 Commissioner, a written form electing to 

13 be exempted from the status of ‘partici14 pating individual’ for purposes of this part. 

15 Upon completion of the procedures pro16 vided for under clause (ii), an individual 

17 who has filed such an election and has not 

18 received a distribution from a personal re19 tirement savings account shall not be 

20 treated as a participating individual under 

21 this part. Any such election shall be irrev22 ocable. 

23 ‘‘(ii) PROCEDURE.—The Board of 

24 Trustees shall prescribe by regulation pro25 cedures governing the termination of an in-
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1 dividual’s status as ‘participating indi2 vidual’ pursuant to an election for exemp3 tion filed under this subparagraph. Such 

4 procedures shall include—

5 ‘‘(I) prompt closing of all per6 sonal retirement savings accounts of 

7 such individual and prompt transfer 

8 to the Federal Old-Age and Survivors 

9 Insurance Trust Fund and the Fed10 eral Disability Insurance Trust Fund 

11 of the balance in such accounts, and 

12 ‘‘(II) prompt transfer to such 

13 Trust Funds of any amount credited 

14 to such person in the Interim Invest15 ment Fund. 

16 The Commissioner of Social Security shall 

17 determine, in accordance with such regula18 tions, the allocation between such Trust 

19 Funds of amounts transferred to such 

20 Trust Funds pursuant to this clause. 

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

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

23 legal holiday in the area involved. 

24 ‘‘(5) BOARD OF TRUSTEES.—
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1 ‘‘(A) IN GENERAL.—The term ‘Board of 

2 Trustees’ means the Board of Trustees of the 

3 Federal Old-Age and Survivors Insurance Trust 

4 Fund and the Federal Disability Insurance 

5 Trust Fund. 

6 ‘‘(B) ROLE OF SECRETARY OF THE TREAS7 URY.—

8 ‘‘(i) IN GENERAL.—In connection with 

9 the duties of the Board of Trustees under 

10 this part, the Secretary of the Treasury 

11 shall serve as Executive Director of the 

12 Board of Trustees. 

13 ‘‘(ii) STAFF.—Upon request of the 

14 Board of Trustees, the Secretary may de15 tail, on a reimbursable basis, any of the 

16 personnel of the Department of the Treas17 ury to the Board of Trustees to assist it in 

18 carrying out its duties under this part. 

19 ‘‘(iii) ADMINISTRATIVE SUPPORT.—

20 Upon the request of the Board, the Sec21 retary shall provide to the Board of Trust22 ees from the Department of the Treasury, 

23 on a reimbursable basis, the administrative 

24 support services necessary for the Board to
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1 carry out its responsibilities under this 

2 part.’’. 

3 (b) EFFECTIVE DATE AND NOTICE REQUIRE4 MENTS.—

5 (1) EFFECTIVE DATE.—The amendments made 

6 by subsection (a) shall apply with respect to wages 

7 paid after December 31, 2004, for pay periods end8 ing after such date and self-employment income for 

9 taxable years beginning after such date. 

10 (2) NOTICE REQUIREMENTS.—

11 (A) IN GENERAL.—Not later than October 

12 1, 2004, the Commissioner of Social Security, 

13 pursuant to direction by the Board of Trustees 

14 of the Federal Old-Age and Survivors Insurance 

15 Trust Fund and the Federal Disability Insur16 ance Trust Fund, shall—

17 (i) send to the last known address of 

18 each eligible individual a description of the 

19 program established by the amendments 

20 made by this Act, which shall be written in 

21 the form of a pamphlet in language which 

22 may be readily understood by the average 

23 worker, 

24 (ii) provide for toll-free access by tele25 phone from all localities in the United 
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1 States to the Social Security Administra2 tion and for a site on the Internet through 

3 which individuals may obtain information 

4 and answers to questions regarding such 

5 program, and 

6 (iii) provide information to the media 

7 in all localities of the United States about 

8 such program, such toll-free access by tele9 phone, and such site on the Internet. 

10 (B) ELIGIBLE INDIVIDUAL.—For purposes 

11 of this paragraph, the term ‘‘eligible individual’’ 

12 means an individual who, as of the date of the 

13 pamphlet sent pursuant to subparagraph (A), is 

14 indicated within the records of the Social Secu15 rity Administration as—

16 (i) not having attained age 65, and 

17 (ii) being credited with one or more 

18 quarters of coverage under section 213 of 

19 the Social Security Act. 

20 (C) MATTERS TO BE INCLUDED.—The 

21 Commissioner of Social Security shall include 

22 with the pamphlet sent to each eligible indi23 vidual pursuant to subparagraph (A)—

24 (i) a statement of the number of quar25 ters of coverage indicated in the records of 
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•HR 3055 IH 

1 the Social Security Administration as of 

2 the date of the description as credited to 

3 such individual under section 213 of the 

4 Social Security Act and the date as of 

5 which such records may be considered ac6 curate, and 

7 (ii) the number for toll-free access by 

8 telephone established by the Commissioner 

9 pursuant to subparagraph (A). 

10 SEC. 102. ADJUSTMENTS IN AMOUNTS APPROPRIATED TO 

11 THE FEDERAL OLD-AGE AND SURVIVORS IN12 SURANCE TRUST FUND BASED ON RE13 ALLOCATION PERCENTAGE. 

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

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

16 following new subsection: 

17 ‘‘Reduction in Appropriations to Federal Old-Age and 

18 Survivors Insurance Trust Fund Based on Realloca19 tion Percentage 

20 ‘‘(n)(1) Under regulations prescribed by the Board 

21 of Trustees of the Trust Funds (in consultation with the 

22 Secretary of the Treasury) to carry out this subsection, 

23 the amounts transferred from the general fund in the 

24 Treasury to each Trust Fund under subsections (a) and 
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•HR 3055 IH 

1 (b) during any calendar year shall be reduced by an 

2 amount equal to the product derived by multiplying—

3 ‘‘(A) the total amount which would (but for this 

4 subsection) be so transferred during such year, by 

5 ‘‘(B) the reallocation percentage for such year. 

6 ‘‘(2)(A) The Board of Trustees shall declare and pub7 lish in the Federal Register on or before July 1 of each 

8 calendar year the reallocation percentage for amounts oth9 erwise transferrable to the Trust Funds under this section 

10 during the next following calendar year. 

11 ‘‘(B) For purposes of this subsection, the term ‘re12 allocation percentage’ for amounts otherwise transferrable 

13 during any calendar year means—

14 ‘‘(i) in the case of calendar years preceding 

15 2026, 20.16 percent, 

16 ‘‘(ii) in the case of calendar years following 

17 2025 and preceding 2039, 22.18 percent, and 

18 ‘‘(iii) in the case of each calendar year following 

19 2038, the best estimate of the Board of Trustees of 

20 the maximum percentage by which the amounts de21 scribed in subparagraph (A) for the calendar year 

22 may be reduced so as to maintain a reserve in each 

23 Trust Fund as of the end of such calendar year 

24 equal to 15 percent of the amount of benefits pro-
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•HR 3055 IH 

1 jected to be paid from the Trust Fund during the 

2 next calendar year, except that such percentage—

3 ‘‘(I) shall be adjusted as necessary for the 

4 calendar year so as to avoid a reduction in the 

5 percentage below the percentage in effect for 

6 the preceding calendar year and to amortize 

7 any substantially deviant annual increase over 

8 the remaining calendar years ending with or 

9 prior to 2038 to the extent necessary, in ac10 cordance with regulations of the Board of 

11 Trustees, to avoid instability arising from such 

12 annual increase, and 

13 ‘‘(II) may not exceed for any year 64.52 

14 percent. 

15 In determining the percentage for any year under clause 

16 (iii), the Board of Trustees shall utilize the intermediate 

17 actuarial assumptions utilized by the Board of Trustees 

18 for its most recent annual report issued under subsection 

19 (c).’’. 

20 (b) RECOMMENDATIONS REGARDING REDUCTIONS IN

21 SOCIAL SECURITY TAXES.—In any case in which the 

22 Board of Trustees of the Federal Old-Age and Survivors 

23 Insurance Trust Fund and the Federal Disability Insur24 ance Trust Fund at any time estimates that the realloca25 tion percentage (as defined in section 201(n)(2)(B)(i) of
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•HR 3055 IH 

1 the Social Security Act) for any of the next following 5 

2 calendar years will equal 64.52 percent, the Board of 

3 Trustees shall include within its next annual report to the 

4 Congress and the President its recommendations for re5 ductions in taxes under chapters 2 and 21 of the Internal 

6 Revenue Code of 1986 so as to avoid unnecessary sur7 pluses in such Trust Funds. 

8 SEC. 103. ADJUSTMENTS TO PRIMARY INSURANCE 

9 AMOUNTS UNDER PART A OF TITLE II OF THE 

10 SOCIAL SECURITY ACT. 

11 (a) IN GENERAL.—Section 215 of the Social Security 

12 Act (42 U.S.C. 415) is amended by adding at the end the 

13 following new subsection: 

14 ‘‘Adjustment of Primary Insurance Amount in Relation 

15 to Deposits Made to Personal Retirement Savings 

16 Accounts

17 ‘‘(j)(1) Except as provided in paragraph (2), an indi18 vidual’s primary insurance amount as determined in ac19 cordance with this section (before adjustments made 

20 under subsection (i)) shall be equal to the excess (if any) 

21 of—

22 ‘‘(A) the amount which would be so determined 

23 without the application of this subsection, over 
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•HR 3055 IH 

1 ‘‘(B) the applicable monthly amount, which 

2 shall be determined under clause (i), (ii), or (iii) as 

3 follows: 

4 ‘‘(i) Except as provided in clauses (ii) and 

5 (iii), the applicable monthly amount shall be the 

6 initial monthly amount of an immediate joint 

7 and survivor annuity, determined on the basis 

8 of the total amount of the individual’s redi9 rected social security taxes (as defined in sec10 tion 252(a)(4)) for calendar years ending before 

11 the date of the determination of the individual’s 

12 primary insurance amount, plus 50 percent of 

13 the amounts paid to designated accounts of the 

14 individual for such calendar years under section 

15 3511(d) of the Internal Revenue Code of 1986, 

16 (indexed in the same manner as is applicable 

17 with respect to average indexed monthly earn18 ings under subsection (b)). 

19 ‘‘(ii) In the case of an individual who, as 

20 of the first day of the first month for which 

21 such primary insurance amount is determined, 

22 is married, the applicable monthly amount shall 

23 be the sum of—

‘‘(I) 2 24 ⁄3 of the initial monthly amount 

25 of an immediate joint and survivor annu-
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•HR 3055 IH 

1 ity, determined on the basis of the total 

2 amount of the individual’s redirected social 

3 security taxes (as defined in section 

4 252(a)(4)) for calendar years ending be5 fore the date of the determination of the 

6 individual’s primary insurance amount, 

7 plus 50 percent of the amounts paid to 

8 designated accounts of the individual for 

9 such calendar years under section 3511(d) 

10 of the Internal Revenue Code of 1986, (in11 dexed in the same manner as is applicable 

12 with respect to average indexed monthly 

13 earnings under subsection (b)); plus 

‘‘(II) 1 14 ⁄3 of the initial monthly amount 

15 of an immediate joint and survivor annu16 ity, determined on the basis of the total 

17 amount of the redirected social security 

18 taxes (as defined in section 252(a)(4)) of 

19 such individual’s spouse for calendar years 

20 ending before the date of the determina21 tion of the individual’s primary insurance 

22 amount, plus 50 percent of the amounts 

23 paid to designated accounts of the individ24 ual’s spouse for such calendar years under 

25 section 3511(d) of such Code, (indexed in 
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•HR 3055 IH 

1 the same manner as is applicable with re2 spect to average indexed monthly earnings 

3 under subsection (b)). 

4 ‘‘(iii) In the case of an individual who, as 

5 of the first day of the first month for which 

6 such primary insurance amount is determined, 

7 is divorced (and has not remarried since such 

8 divorce), the applicable monthly amount shall 

9 be the sum of—

‘‘(I) 1 10 ⁄2 of the initial monthly amount 

11 of an immediate joint and survivor annu12 ity, determined on the basis of the total 

13 amount of such individual’s redirected so14 cial security taxes (as defined in section 

15 252(a)(4)) for calendar years ending be16 fore the date of the determination of the 

17 individual’s primary insurance amount, 

18 plus 50 percent of the amounts paid to 

19 designated accounts of the individual for 

20 such calendar years under section 3511(d) 

21 of the Internal Revenue Code of 1986, (in22 dexed in the same manner as is applicable 

23 with respect to average indexed monthly 

24 earnings under subsection (b)); plus 
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•HR 3055 IH 

‘‘(II) 1 1 ⁄2 of the initial monthly amount 

2 of an immediate joint and survivor annu3 ity, determined on the basis of the total 

4 amount of the redirected social security 

5 taxes (as defined in section 252(a)(4)) of 

6 the individual’s former spouse in connec7 tion with such divorce for calendar years 

8 ending before the date of the determina9 tion of the individual’s primary insurance 

10 amount, plus 50 percent of the amounts 

11 paid to designated accounts of such former 

12 spouse for such calendar years under sec13 tion 3511(d) of such Code, (indexed in the 

14 same manner as is applicable with respect 

15 to average indexed monthly earnings under 

16 subsection (b)). 

17 ‘‘(2) In making determinations under this subsection, 

18 the Commissioner shall employ the intermediate assump19 tions used by the Board of Trustees of the Federal Old20 Age and Survivors Insurance Trust Fund and the Federal 

21 Disability Insurance Trust Fund in its most recent annual 

22 report, including mortality tables consistent with such as23 sumptions, except that the Commissioner shall assume an 

24 interest rate equal to the sum of the projected average 

25 market yield (as assumed by the Commissioner) on all 
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•HR 3055 IH 

1 marketable interest-bearing obligations of the United 

2 States forming a part of the public debt which are not

3 due or callable until after the expiration of 4 years, plus 

4 0.7 percent. 

5 ‘‘(3) In the case of an individual described in para6 graph (1) who becomes entitled to disability insurance 

7 benefits under section 223, such individual’s primary in8 surance amount shall be determined without regard to 

9 paragraph (1). 

10 ‘‘(4) For purposes of this subsection—

11 ‘‘(A) The term ‘immediate joint and survivor 

12 annuity’ means an annuity—

13 ‘‘(i) the annuity starting date (as defined 

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

15 Code of 1986) of which commences with the 

16 first month following the date of the determina17 tion, 

18 ‘‘(ii) which provides for a series of substan19 tially equal monthly payments over the life ex20 pectancy of the individual described in para21 graph (1), subject to annual percentage adjust22 ments equal to the annual percentage adjust23 ments taking effect under subsection (i), 

24 ‘‘(iii) which provides for a survivor annuity 

25 for such individual’s spouse in the form of a se-
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•HR 3055 IH 

1 ries of substantially equal monthly payments 

2 over the life expectancy of such spouse, the ini3 tial monthly payment of which is equal to the 

4 amount of the last monthly payment payable 

5 during the joint lives of such individual and 

6 such spouse, subject to annual percentage ad7 justments equal to the annual percentage ad8 justments taking effect under subsection (i), 

9 and 

10 ‘‘(iv) which is the actuarial equivalent of 

11 an immediate life annuity for the life of such 

12 individual. 

13 ‘‘(B) The term ‘immediate life annuity’ means 

14 an annuity—

15 ‘‘(i) the annuity starting date (as defined 

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

17 Code of 1986) of which commences with the 

18 first month following the date of the determina19 tion, and 

20 ‘‘(ii) which provides for a series of substan21 tially equal monthly payments over the life ex22 pectancy of the individual described in para23 graph (1), subject to annual percentage adjust24 ments equal to the annual percentage adjust25 ments taking effect under subsection (i).’’.
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•HR 3055 IH 

1 (b) CONFORMING AMENDMENT TO RAILROAD RE2 TIREMENT ACT OF 1974.—Section 1 of the Railroad Re3 tirement Act of 1974 (45 U.S.C. 231) is amended by add4 ing at the end the following: 

5 ‘‘(s) In applying applicable provisions of the Social 

6 Security Act for purposes of determining the amount of 

7 the annuity to which an individual is entitled under this 

8 Act, section 215(j) of the Social Security Act and part 

9 B of title II of such Act shall be disregarded.’’

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply with respect to computations and 

12 recomputations of primary insurance amounts occurring 

13 after December 31, 2004. 

14 SEC. 104. PERSONAL RETIREMENT SAVINGS ACCOUNTS. 

15 (a) DEDUCTION FOR CONTRIBUTIONS BY TAX16 PAYER.—Part VII of subchapter B of chapter 1 of the 

17 Internal Revenue Code of 1986 (relating to additional 

18 itemized deductions) is amended by redesignating section 

19 223 as section 224 and by inserting after section 222 the 

20 following new section: 

21 ‘‘SEC. 223. CONTRIBUTIONS TO PERSONAL RETIREMENT 

22 SAVINGS ACCOUNTS. 

23 ‘‘(a) IN GENERAL.—In the case of an individual who 

24 is an electing personal retirement savings account partici25 pant for the taxable year, there shall be allowed as a de-
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•HR 3055 IH 

1 duction an amount equal to 50 percent of the amount con2 tributed during such taxable year by such individual to 

3 a personal retirement savings account maintained for the 

4 benefit of such individual. 

5 ‘‘(b) LIMITATION.—The amount of contributions 

6 which may be taken into account under subsection (a) 

7 shall not exceed $2,000. 

8 ‘‘(c) ELECTING PERSONAL RETIREMENT SAVINGS

9 ACCOUNT PARTICIPANT.—An individual is an electing 

10 personal retirement savings account participant for any 

11 taxable year if any amount is deposited under section 

12 251(b) of the Social Security Act for such taxable year 

13 to a personal retirement savings account maintained for 

14 the benefit of such individual. 

15 ‘‘(d) SPECIAL RULES.—

16 ‘‘(1) NO DEDUCTION FOR TRUSTEE-TO-TRUST17 EE TRANSFERS.—No deduction shall be allowed for 

18 amounts transferred to an account in a rollover con19 tribution described in section 531(b)(2). 

20 ‘‘(2) TIME WHEN CONTRIBUTIONS DEEMED

21 MADE.—For purposes of this section, a taxpayer 

22 shall be deemed to have made a contribution to a 

23 personal retirement savings account on the last day 

24 of the preceding taxable year if the contribution is 

25 made on account of such taxable year and is made 
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•HR 3055 IH 

1 not later than the time prescribed by law for filing 

2 the return for such taxable year (not including ex3 tensions thereof).’’

4 (b) PERSONAL RETIREMENT SAVINGS ACCOUNTS.—

5 Subchapter F of chapter 1 of such Code (relating to ex6 empt organizations) is amended by adding at the end the 

7 following new part: 

8 ‘‘PART IX—PERSONAL RETIREMENT SAVINGS 

9 ACCOUNTS

‘‘Sec. 531. Personal retirement savings accounts.

10 ‘‘SEC. 531. PERSONAL RETIREMENT SAVINGS ACCOUNTS. 

11 ‘‘(a) GENERAL RULE.—Gross income shall not in12 clude any amount deposited in a personal retirement sav13 ings account under section 251(b) of the Social Security 

14 Act. 

15 ‘‘(b) PERSONAL RETIREMENT SAVINGS ACCOUNT.—

16 ‘‘(1) IN GENERAL.—For purposes of this title, 

17 the term ‘personal retirement savings account’ 

18 means a trust created or organized in the United 

19 States for the exclusive benefit of an individual or 

20 his beneficiaries, but only if the written governing 

21 instrument creating the trust meets the following re22 quirements: 

23 ‘‘(A) No contribution will be accepted 

24 other than—
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1 ‘‘(i) deposits under section 251(b) of 

2 the Social Security Act, 

3 ‘‘(ii) amounts paid under section 

4 3511(d), 

5 ‘‘(iii) contributions made in cash, ex6 cept that contributions under this subpara7 graph may not be accepted for any taxable 

8 year in excess of $2,000, and 

9 ‘‘(iv) a contribution which is a rollover 

10 contribution described in paragraph (2).

11 ‘‘(B) Except as provided in paragraph (3) 

12 and subsection (f)(2), no amount may be paid 

13 or distributed from such trust—

14 ‘‘(i) before the date on which the account holder attains age 591 15 ⁄2 or dies, or 

16 ‘‘(ii) in a manner not meeting the re17 quirements of subsection (d). 

18 ‘‘(C) The trustee of which is a regulated 

19 investment company (as defined in section 851) 

20 which is approved by the Secretary for purposes 

21 of this section. 

22 ‘‘(D) The interest of an individual in the 

23 balance in his account is nonforfeitable. 

24 ‘‘(2) TRANSFER PURSUANT TO ELECTION FOR

25 EXEMPTION.—If the account holder makes an elec-
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•HR 3055 IH 

1 tion of exemption under section 254(3)(B) of the So2 cial Security Act, so much of the amounts in the 

3 personal retirement savings account as are attrib4 utable to contributions under section 251(b) of such 

5 Act, and payments under section 3511(d), and earn6 ings thereon, shall be paid to the Federal Old-Age 

7 and Survivors Insurance Trust Fund and the Fed8 eral Disability Insurance Trust Fund in accordance 

9 with the regulations under such section 254(3)(B). 

10 ‘‘(3) ROLLOVER CONTRIBUTIONS.—For pur11 poses of paragraph (1)(A), a rollover contribution is 

12 described in this paragraph if such contribution is—

13 ‘‘(A) a direct trustee-to-trustee transfer de14 scribed in subsection (f)(2), or 

15 ‘‘(B) a transfer from an eligible retirement 

16 plan (as defined in section 402(c)(8)) to the 

17 personal retirement savings account if no 

18 amount is includible in gross income by reason 

19 of such transfer, determined by treating such 

20 account as the same type of plan as the plan 

21 from which such transfer were made. 

22 ‘‘(c) INVESTMENT REQUIREMENTS.—

23 ‘‘(1) IN GENERAL.—Amounts in a personal re24 tirement savings account may be invested only in 

25 regulated investment companies (as defined in sec-
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•HR 3055 IH 

1 tion 851) which are approved by the Secretary for 

2 purposes of this section. 

3 ‘‘(2) CRITERIA FOR SECRETARIAL APPROVAL.—

4 The Secretary may approve a regulated investment 

5 company for purposes of this section only if—

6 ‘‘(A) an election is in effect under section 

7 851(b)(1) for such company, and 

8 ‘‘(B) the portfolio assets of such com9 pany—

10 ‘‘(i) replicate the assets of a broad11 based index of stocks which is approved by 

12 the Secretary, or 

13 ‘‘(ii) are of a type determined by the 

14 Secretary not to involve high risks for the 

15 investor.

16 ‘‘(3) DIVERSIFICATION REQUIRED.—To the ex17 tent possible, the Secretary shall approve under sub18 paragraph (B)(i) funds in each of the following 4 

19 categories: domestic stocks, domestic bonds, stocks 

20 of companies having small capitalization, and foreign 

21 stocks. Nothing in this subsection shall be construed 

22 to preclude the use of managed funds devised so as 

23 to minimize risk. 

24 ‘‘(4) CONSIDERATION OF MANAGEMENT

25 COSTS.—The Secretary shall take into account man-
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•HR 3055 IH 

1 agement costs in determining whether to approve a 

2 company for purposes of this section. 

3 ‘‘(d) DISTRIBUTION REQUIREMENTS.—

4 ‘‘(1) IN GENERAL.—The requirements of this 

5 subsection are met with respect to distributions from 

6 a personal retirement savings account (other than 

7 reasonable administrative fees meeting such require8 ments as may be prescribed in regulations of the 

9 Secretary) only if such distributions are in accord10 ance with a payment option under paragraph (2). 

11 The preceding sentence shall not apply to direct 

12 trustee-to-trustee transfers described in subsection 

13 (f)(2) or distributions to a deceased account holder’s 

14 estate under section 251(c) of the Social Security 

15 Act. 

16 ‘‘(2) PAYMENT OPTIONS.—The payment options 

17 under this paragraph are the following: 

18 ‘‘(A) LIFETIME OPTION.—Distributions in 

19 equal annual or more frequent periodic install20 ments payable to the account holder in equal 

21 annual or more frequent periodic installments 

22 over the life of the account holder. The trustee 

23 of the account shall be liable under the terms 

24 of the account to the account holder for the 

25 timely payment of such periodic payments. 
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1 ‘‘(B) NONLIFETIME OPTION.—

2 ‘‘(i) IN GENERAL.—Distributions in 

3 equal annual or more frequent periodic in4 stallments of interest only, or of interest 

5 and principal. Any such payment of equal 

6 installments shall continue until—

7 ‘‘(I) payment ceases at the direc8 tion of the account holder to the 

9 trustee, 

10 ‘‘(II) payment continues in ac11 cordance with this subparagraph but 

12 at an adjusted level at the direction of 

13 the account holder to the trustee, or 

14 ‘‘(III) the distribution converts to 

15 an option described in subparagraph 

16 (A) at the direction of the account 

17 holder to the trustee. 

18 ‘‘(ii) LIMITATIONS.—Payments from 

19 the account under a distribution described 

20 in clause (i) shall be limited as of any date 

21 to the extent necessary to ensure that 

22 funds in the account are sufficient at all 

23 times to provide a monthly payment over 

24 the life expectancy of the account holder 

25 (determined under reasonable actuarial as-
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•HR 3055 IH 

1 sumptions) which, when added to the ac2 count holder’s monthly benefit under part 

3 A (if any), is at least equal to an amount 

equal to 1 4 ⁄12 of the poverty line (as deter5 mined under section 673(2) of the Commu6 nity Services Block Grant Act (42 U.S.C. 

7 9902(2)) and determined on such date for 

8 a family of the size involved). 

9 ‘‘(C) ADDITIONAL OPTIONS.—Distributions 

10 in any other manner permitted under regula11 tions prescribed by the Secretary. 

12 ‘‘(e) ACCOUNT EXEMPT FROM TAX.—

13 ‘‘(1) GENERAL RULE.—Any personal retirement 

14 savings account is exempt from taxation under this 

15 subtitle. Notwithstanding the preceding sentence, 

16 any such account is subject to the taxes imposed by 

17 section 511 (relating to imposition of tax on unre18 lated business income of charitable, etc. organiza19 tions). 

20 ‘‘(2) APPLICATION OF PROHIBITED TRANS21 ACTIONS RULES, ETC.—Rules similar to the rules of 

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

23 apply to personal retirement savings accounts. 

24 ‘‘(f) DISTRIBUTIONS TAXED AS IF SOCIAL SECURITY

25 BENEFITS.—
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1 ‘‘(1) GENERAL RULE.—Amounts paid or dis2 tributed from a personal retirement savings account 

3 shall be includible in gross income only if so includ4 ible under section 86, determined by treating such 

5 amounts as social security benefits (as defined in 

6 such section). 

7 ‘‘(2) TRUSTEE-TO-TRUSTEE TRANSFERS.—No 

8 amount shall be includible in gross income by reason 

9 of a direct trustee-to-trustee transfer between per10 sonal retirement savings accounts of the same indi11 vidual. 

12 ‘‘(3) RETURN OF EXCESS CONTRIBUTIONS.—

13 Paragraph (1) shall not apply to the distribution of 

14 any contribution (other than a deposit made under 

15 section 251(b) of the Social Security Act) made dur16 ing a taxable year to the extent that such contribu17 tion exceeds the dollar amount specified in sub18 section (b)(1)(B) if—

19 ‘‘(A) such distribution is received on or be20 fore the last day prescribed by law (including 

21 extensions) for filing such individual’s return 

22 for such taxable year, 

23 ‘‘(B) such contribution is not taken into 

24 account in determining the deduction allowed 

25 under section 223, and
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1 ‘‘(C) such distribution is accompanied by 

2 the amount of net income attributable to such 

3 contribution. 

4 Any net income described in subparagraph (C) shall 

5 be included in gross income for the taxable year in 

6 which such contribution is made. 

7 ‘‘(g) CERTAIN OTHER RULES TO APPLY.—The fol8 lowing rules shall apply to personal retirement savings ac9 counts in the same manner that such rules apply to indi10 vidual retirement accounts: 

11 ‘‘(1) Section 408(h) (relating to custodial ac12 counts). 

13 ‘‘(2) Section 408(i) (relating to reports). 

14 ‘‘(h) TREATMENT AFTER DEATH OF ACCOUNT

15 HOLDER.—A personal retirement savings account shall 

16 cease to be such on the date of the account holder’s death, 

17 but no amount shall be includible in gross income by rea18 son of such cessation.’’

19 (c) DEDUCTION ALLOWED WHETHER OR NOT TAX20 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 

21 of section 62 of such Code is amended by inserting after 

22 paragraph (18) the following new paragraph: 

23 ‘‘(19) PERSONAL RETIREMENT SAVINGS AC24 COUNTS.—The deduction allowed by section 223.’’

25 (d) TA X ON EXCESS CONTRIBUTIONS.—
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1 (1) IN GENERAL.—Subsection (a) of section 

2 4973 of such Code is amended by striking ‘‘or’’ at 

3 the end of paragraph (3), by adding ‘‘or’’ at the end 

4 of paragraph (4), and by inserting after paragraph 

5 (4) the following new paragraph: 

6 ‘‘(5) a personal retirement savings account (as 

7 defined in section 531),’’. 

8 (2) EXCESS CONTRIBUTION DEFINED.—Section 

9 4973 of such Code is amended by adding at the end 

10 the following new subsection: 

11 ‘‘(g) EXCESS CONTRIBUTIONS TO PERSONAL RE12 TIREMENT SAVINGS ACCOUNTS.—For purposes of this 

13 section—

14 ‘‘(1) IN GENERAL.—In the case of personal re15 tirement savings accounts maintained for the benefit 

16 of any 1 beneficiary, the term ‘excess contributions’ 

17 means the amount by which the amount contributed 

18 for the taxable year to such accounts exceeds 

19 $2,000.

20 ‘‘(2) SPECIAL RULES.—For purposes of para21 graph (1), the following contributions shall not be 

22 taken into account: 

23 ‘‘(A) Any contributions under section 

24 251(b) of the Social Security Act. 

25 ‘‘(B) Any trustee-to-trustee transfer.’’
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1 (e) CONFORMING AMENDMENTS.—

2 (1) Paragraph (1) of section 4975(e) of such 

3 Code (relating to tax on prohibited transactions) is 

4 amended by redesignating subparagraph (F) as sub5 paragraph (G), by striking ‘‘or’’ at the end of sub6 paragraph (E), and by inserting after subparagraph 

7 (E) the following new subparagraph: 

8 ‘‘(F) a personal retirement savings account 

9 described in section 531(b), or’’. 

10 (2) Paragraph (2) of section 6693(a) of such 

11 Code (relating to failure to provide reports on cer12 tain tax favored accounts or annuities) is amended 

13 by redesignating subparagraphs (C) and (D) as sub14 paragraphs (D) and (E), respectively, and by insert15 ing after subparagraph (B) the following new sub16 paragraph: 

17 ‘‘(C) section 531(g)(2) (relating to per18 sonal retirement savings accounts),’’. 

19 (f) CLERICAL AMENDMENTS.—

20 (1) The table of sections for part VII of sub21 chapter B of chapter 1 of such Code is amended by 

22 striking the last item and inserting the following 

23 new items:

‘‘Sec. 223. Contributions to personal retirement savings accounts. 

‘‘Sec. 224. Cross reference.’’
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1 (2) The table of parts for subchapter F of 

2 chapter 1 of such Code is amended by adding after 

3 the item relating to part VIII the following new 

4 item:

‘‘Part IX—Personal retirement savings accounts.’’.

5 (g) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2004. 

8 SEC. 105. INDIVIDUAL RETIREMENT SECURITY PROGRAM 

9 REFUNDABLE CREDIT. 

10 (a) IN GENERAL.—Chapter 25 of the Internal Rev11 enue Code of 1986 (relating to general provisions relating 

12 to employment taxes) is amended by adding at the end 

13 the following new section: 

14 ‘‘SEC. 3511. INDIVIDUAL RETIREMENT SECURITY PROGRAM 

15 REFUNDABLE CREDIT. 

16 ‘‘(a) IN GENERAL.—The designated account of each 

17 participating individual shall receive for each calendar 

18 year the lesser of—

19 ‘‘(1) the credit amount, or 

20 ‘‘(2) the amount of compensation includible in 

21 the such individual’s gross income for such year. 

22 ‘‘(b) CREDIT AMOUNT.—

23 ‘‘(1) IN GENERAL.—For purposes of subsection 

24 (a), the term ‘credit amount’ means—
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1 ‘‘(A) $300 in the case of modified adjusted 

2 gross income for the taxable year greater than 

3 $5,000 but less than or equal to $25,000, 

4 ‘‘(B) $150 in the case of modified adjusted 

5 gross income for the taxable year greater than 

6 $25,000 but less than or equal to $35,000, and 

7 ‘‘(C) zero in any other case. 

8 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

9 For purposes of paragraph (1), the term ‘modified 

10 adjusted gross income’ means adjusted gross income 

11 determined without regard to sections 911, 931, and 

12 933. 

13 ‘‘(c) COMPENSATION.—For purposes of subsection 

14 (a), the term ‘compensation’ means with respect to an in15 dividual—

16 ‘‘(1) wages (as defined in section 3121(a)) re17 ceived by such individual during such year on which 

18 tax is imposed by section 3101, and 

19 ‘‘(2) self-employment income (as defined in 

20 1402(b)) of such individual for the taxable year of 

21 such individual ending in such calendar year on 

22 which tax is imposed by section 1401. 

23 ‘‘(d) PAYMENT TO DESIGNATED ACCOUNT.—Not24 withstanding any other provision of this title, the Sec25 retary, as soon as practicable, shall transfer from amounts 
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1 otherwise available in the general fund of the Treasury, 

2 amounts equal to the amount required to be paid under 

3 subsection (a) to the designated account of each partici4 pating individual in accordance with regulations which the 

5 Secretary shall prescribe to carry out this section. 

6 ‘‘(e) OTHER DEFINITIONS AND SPECIAL RULE.—For 

7 purposes of this section—

8 ‘‘(1) DESIGNATED ACCOUNT.—The term ‘des9 ignated account’ means the separate account in the 

10 Interim Investment Fund provided for under section 

11 252 of the Social Security Act or, in lieu thereof, the 

12 personal retirement savings account of the partici13 pating individual designated under section 251 of 

14 the Social Security Act. 

15 ‘‘(2) PARTICIPATING INDIVIDUAL.—The term 

16 ‘participating individual’ shall have the meaning 

17 given to such term by section 254 of the Social Se18 curity Act. 

19 ‘‘(3) SPECIAL RULE RELATING TO AGREEMENTS

20 BY AMERICAN EMPLOYERS OF FOREIGN AFFILI21 ATES.—Any amounts paid pursuant to an agreement 

22 under section 3121(l) (relating to agreements en23 tered into by American employers with respect to 

24 foreign affiliates) which are equivalent to the taxes 
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1 referred to in subsection (b)(1)(A) shall be treated 

2 as taxes referred to in such subsection.’’. 

3 (b) CONFORMING AMENDMENT.—The table of sec4 tions for chapter 25 of such Code is amended by adding 

5 at the end the following new item:

‘‘Sec. 3511. Individual retirement security program refundable 

credit.’’.

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to remuneration received, and net 

8 earnings for self-employment for services performed, after 

9 December 31, 2004. 

10 TITLE II—SOCIAL SECURITY 

11 SURPLUS PROTECTION 

12 SEC. 201. REGULATION OF FLOW OF FUNDS BETWEEN THE 

13 GENERAL FUND AND THE SOCIAL SECURITY 

14 TRUST FUNDS. 

15 Section 201 of the Social Security Act (as amended 

16 by the preceding provisions of this Act) is amended further 

17 by adding at the end the following new subsection: 

18 ‘‘Additional Transfers Between the General Fund and 

19 the Trust Funds 

20 ‘‘(o)(1) In addition to the amounts otherwise appro21 priated to the Federal Old-Age and Survivors Insurance 

22 Trust Fund and the Federal Disability Insurance Trust 

23 Fund for each fiscal year after fiscal year 2006 and before 

24 fiscal year 2014, there is hereby appropriated to such 
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1 Trust Funds for each such fiscal year the applicable

2 amount for such fiscal year. Amounts appropriated to 

3 such Trust Funds under this paragraph shall be distrib4 uted between the Trust Funds for any fiscal year in the 

5 same proportion as amounts are appropriated to such 

6 Trust Funds under subsections (a) and (b). The amounts 

7 appropriated by this paragraph shall be transferred from 

8 time to time during the fiscal year from the general fund 

9 in the Treasury to the Trust Funds, such amounts to be 

10 determined on the basis of estimates by the Secretary of 

11 the Treasury, and proper adjustments shall be made in 

12 amounts subsequently transferred to the extent prior esti13 mates were in excess of or were less than the actual 

14 amounts. All amounts transferred to each Trust Fund 

15 under this paragraph shall be invested by the Managing 

16 Trustee in the same manner and to the same extent as 

17 the other assets of such Trust Fund. 

18 ‘‘(2) For purposes of paragraph (1), the applicable 

19 amount for any fiscal year is the amount set forth in the 

20 following table:

‘‘In the case of fiscal year— The amount is—

2007 ............................................................................................. $21 billion

2008 ............................................................................................. $47 billion

2009 ............................................................................................. $78 billion

2010 .............................................................................................$106 billion

2011 .............................................................................................$147 billion

2012 .............................................................................................$184 billion

2013 .............................................................................................$283 billion.
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1 ‘‘(3)(A) The Board of Trustees shall determine, prior 

2 to the beginning of each calendar year after 2018—

3 ‘‘(i) the projected reduction under subsection 

4 (n) in the the amount which would (but for sub5 section (n)) be transferred during such year from 

6 the general fund in the Treasury to the Trust Funds 

7 under subsections (a) and (b), 

8 ‘‘(ii) the projected payroll for such year, and 

9 ‘‘(iii) whether there will be a surplus appropria10 tion (as defined in subparagraph (E)(ii)) to the Fed11 eral Old-Age and Survivors Insurance Trust Fund 

12 for such year and the amount of such surplus appro13 priation. 

14 Projections under this paragraph shall be based on the 

15 best estimates of the Board of Trustees. 

16 ‘‘(B) In any case in which, for any calendar year after 

17 2018, the projected reduction determined under subpara18 graph (A)(i) exceeds 5 percent of the projected payroll de19 termined under subparagraph (A)(ii), if the Board of 

20 Trustees determines under subparagraph (A)(iii) that 

21 there will be a surplus appropriation to the Federal Old22 Age and Survivors Insurance Trust Fund for such year, 

23 the Board of Trustees shall certify such determinations 

24 to the Secretary of the Treasury prior to such year, and 

25 such Secretary shall, during such year, transfer from such 
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1 Trust Fund to the general fund of the Treasury an 

2 amount equal to such surplus appropriation. 

3 ‘‘(C) The transfers required under subparagraph (B) 

4 shall be made from time to time during the year from the 

5 Trust Funds to the general fund of the Treasury, such 

6 amounts to be determined on the basis of the estimates 

7 made by the Board of Trustees under subparagraph (A). 

8 The Board of Trustees may, during the year, certify re9 vised estimates under subparagraph (A) for the year, and, 

10 upon certification of such revised estimates to such Sec11 retary, proper adjustments shall be made in amounts sub12 sequently transferred to the extent the prior estimates 

13 were in excess of or were less than the latest estimated 

14 amounts. 

15 ‘‘(D) In any case in which the transfer of any amount 

16 to the general fund of the Treasury from either Trust 

17 Fund pursuant to subparagraph (B) for any calendar year 

18 would (but for this subparagraph) cause—

19 ‘‘(i) the total amount transferred from such 

20 Trust Fund pursuant to subparagraph (B) (includ21 ing accrued net earnings thereon) to exceed 

22 ‘‘(ii) the total amount transferred to such Trust 

23 Fund pursuant to paragraph (1) (including accrued 

24 net earnings thereon), 
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1 the amount of such transfer shall be limited to the extent 

2 necessary to ensure that the total amount described in 

3 clause (i) does not exceed the total amount described in 

4 clause (ii), and this paragraph shall not be effective for 

5 subsequent calendar years in connection with such Trust 

6 Fund. 

7 ‘‘(E) For purposes of this paragraph—

8 ‘‘(i) The term ‘social security payroll’ for any 

9 year means the sum of the wages (as defined in sec10 tion 3121 of the Internal Revenue Code of 1986) re11 ported to the Secretary of the Treasury or his dele12 gate during such year pursuant to subtitle F of such 

13 Code and the self-employment income (as defined in 

14 section 1402 of such Code) reported to the Secretary 

15 of the Treasury or his delegate during such year 

16 pursuant to subtitle F of such Code. 

17 ‘‘(ii) The term ‘surplus appropriation’ for any 

18 year, in connection with the Federal Old-Age and 

19 Survivors Insurance Trust Fund, means the excess 

20 of—

21 ‘‘(I) the total amount transferred to such 

22 Trust Fund during such year pursuant to ap23 propriations under paragraphs (3) and (4) of 

24 subsection (a), after reduction under subsection 

25 (n), over 
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1 ‘‘(II) the total amount necessary to be 

2 transferred to such Trust Fund during such 

3 year so as to maintain a reserve in such Trust 

4 Fund as of the end of such year equal to 50 

5 percent of the amount of benefits paid from the 

6 Trust Fund during such year.’’. 

7 TITLE III—SOCIAL SECURITY 

8 BENEFIT REFORMS 

9 SEC. 301. GRADUAL INCREASE IN RETIREMENT AGE AND 

10 EARLY RETIREMENT AGE. 

11 (a) NORMAL RETIREMENT AGE.—Section 216(l) of 

12 the Social Security Act (42 U.S.C. 416(l) is amended—

13 (1) in paragraph (1), by striking subparagraphs 

14 (A), (B), (C), (D), and (E) and inserting the fol15 lowing:

16 ‘‘(A) with respect to an individual who at17 tains age 62 (or in the case of a widow’s or 

18 widower’s insurance benefit, age 60) before 

19 January 1, 2000, 65 years of age; 

20 ‘‘(B) with respect to an individual who at21 tains age 62 (or in the case of a widow’s or 

22 widower’s insurance benefit, age 60) after De23 cember 31, 1999 and before January 1, 2011, 

65 years of age plus 2 24 ⁄12 of the number of 

25 months in the period beginning with January 
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1 2000 and ending with December of the year in 

2 which the individual attains age 62 (or in the 

3 case of a widow’s or widower’s insurance ben4 efit, age 60); 

5 ‘‘(C) with respect to an individual who at6 tains age 62 (or in the case of a widow’s or 

7 widower’s insurance benefit, age 60) after De8 cember 31, 2010, and before January 1, 2012, 

9 67 years of age; and 

10 ‘‘(D) with respect to an individual who at11 tains age 62 (or in the case of a widow’s or 

12 widower’s insurance benefit, age 60) after December 31, 2011, 67 years of age plus 1 13 ⁄24 of 

14 the number of months in the period beginning 

15 with January 2012 and ending with December 

16 of the year in which the individual attains age 

17 62 (rounded down to a full month).’’; and 

18 (2) by striking paragraph (3). 

19 SEC. 302. ADJUSTMENTS TO BEND POINTS IN DETER20 MINING PRIMARY INSURANCE AMOUNTS. 

21 (a) ADDITIONAL BEND POINT.—Section 

22 215(a)(1)(A) of the Social Security Act (42 U.S.C. 

23 415(a)(1)(A)) is amended—

24 (1) in clause (ii), by striking ‘‘and’’ at the end; 
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1 (2) in clause (iii), by striking ‘‘clause (ii),’’ and 

2 inserting the following: ‘‘clause (ii) but do not exceed 

3 the amount established for purposes of this clause 

4 by subparagraph (B), and’’; and 

5 (3) by inserting after clause (iii) the following 

6 new clause: 

7 ‘‘(iv) the applicable percentage of the individ8 ual’s average indexed monthly earnings to the extent 

9 that such earnings exceed the amount established 

10 for purposes of clause (iii), determined, in connec11 tion with the calendar year in which the individual 

12 initially becomes eligible for old-age or disability in13 surance benefits, or dies (before becoming eligible 

14 for such benefits), in accordance with the following 

15 table:

‘‘Calendar year: Applicable Percentage: 

2005 ......................................................................................... 13 percent

2006 ......................................................................................... 11 percent

2007 ......................................................................................... 9 percent

2008 ......................................................................................... 7 percent

After 2008 ................................................................................ 5 percent,’’.

16 (b) INITIAL LEVEL OF ADDITIONAL BEND POINT.—

17 Section 215(a)(1)(B)(i) of such Act (42 U.S.C. 

18 415(a)(1)(B)(i)) is amended by adding at the end the fol19 lowing new sentence: ‘‘For individuals who initially become 

20 eligible for old-age or disability insurance benefits, or who 

21 die (before becoming eligible for such benefit), in the cal-
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1 endar year 2004, the amount established for purposes of 

2 clause (iii) of subparagraph (A) shall be $3,720.’’. 

3 (c) ANNUAL ADJUSTMENTS TO PIA FORMULA.—

4 (1) IN GENERAL.—Section 215(a)(1)(B) of 

5 such Act (42 U.S.C. 415(a)(1)(B)) is amended fur6 ther—

7 (A) by redesignating clause (iii) as clause 

8 (x); 

9 (B) in clause (ii), by inserting ‘‘for pur10 poses of clauses (i) and (ii) of subparagraph 

11 (A)’’ after ‘‘each of the amounts so estab12 lished’’; 

13 (C) by inserting after clause (ii) the fol14 lowing new clauses: 

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

16 old-age or disability insurance benefits, or who die (before 

17 becoming eligible for such benefits), in any calendar year 

18 after 2004, effective for such calendar year, each of the 

19 amounts established under clause (i) for purposes of 

20 clauses (ii) and (iii) of subparagraph (A) shall equal the 

21 corresponding amount in effect for the preceding calendar 

22 year, increased by the same percentage as the percentage 

23 by which the Consumer Price Index for the calendar quar24 ter ending with September 30 of such preceding calendar 

25 year exceeds the Consumer Price Index for the calendar 
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1 quarter ending with the preceding September 30. For pur2 poses of this clause, the Consumer Price Index for a cal3 endar quarter shall be the arithmetical mean of the Con4 sumer Price Index for Wage Earners and Clerical Workers 

5 (CPI-W), as prepared by the Department of Labor, for 

6 the 3 months in such quarter. 

7 ‘‘(iv) For individuals who initially become eligible for 

8 old-age or disability insurance benefits, or who die (before 

9 becoming eligible for such benefits), in any calendar year 

10 after 2004, the amount established under clause (i) for 

11 purposes of clause (iii) of subparagraph (A) shall equal 

12 the product of the corresponding amount established with 

13 respect to the calendar year 2002 under clause (i) of this 

14 subparagraph and the quotient obtained by dividing—

15 ‘‘(I) the national average wage index (as de16 fined in section 209(k)(1)) for the second calendar 

17 year preceding the calendar year for which the de18 termination is made, by 

19 ‘‘(II) the national average wage index (as so de20 fined) for 2002. 

21 ‘‘(v) For individuals who initially become eligible for 

22 old-age or disability insurance benefits, or who die (before 

23 becoming eligible for such benefits), in any calendar year 

24 after 2004, effective for such calendar year—
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1 ‘‘(I) the percentage in effect under clause (ii) of 

2 subparagraph (A) shall be equal to the product de3 rived by multiplying the percentage in effect under 

4 such clause for the preceding calendar year by 0.98, 

5 and 

6 ‘‘(II) the percentage in effect under clause (iii) 

7 of subparagraph (A) shall be equal to the product 

8 derived by multiplying the percentage in effect under 

9 such clause for the preceding calendar year by 

10 0.975. 

11 ‘‘(vi) For individuals who initially become eligible for 

12 old-age or disability insurance benefits, or who die (before 

13 becoming eligible for such benefits), in any calendar year 

14 after 2009, effective for such calendar year, the percent15 age in effect under clause (iv) of subparagraph (A) shall 

16 be equal to the product derived by multiplying the percent17 age in effect under such clause for the preceding calendar 

18 year by 0.975. 

19 ‘‘(vii)(I) Subject to section 201(p), in the case of an 

20 individual who is entitled to disability insurance benefits 

21 and to whom this clause applies, this subparagraph shall 

22 apply as if the amendments made by the Social Security 

23 Solvency Act of 2003 had not been enacted. 

24 ‘‘(II) This clause applies to any individual who first 

25 becomes eligible for such benefits in 2004, and whose aver-
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1 age indexed monthly earnings (determined under sub2 section (b)) do not exceed the amount established for pur3 poses of this subclause by clause (viii). 

4 ‘‘(III) This clause also applies to any individual who 

5 first becomes eligible for such benefits in any year after 

6 2004, and whose average indexed monthly earnings (deter7 mined under subsection (b)) do not exceed the dollar 

8 amount referred to in subclause (II), after applying 

9 clauses (ii) and (iii) of subsection (a)(1)(B) to such dollar 

10 amount, in connection with such year, in the same manner 

11 and to the same extent as they apply to dollar amounts 

12 in subsection (a)(1)(B)(i), except that, for purposes of this 

13 subclause, the references in such clauses to 1979 and 

14 1977 shall be deemed to be references to 2004 and 2002, 

15 respectively. 

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

17 disability insurance benefits in calendar year 2004, the 

18 amount established for purposes of subclause (II) of clause 

(vii) shall be $1,6662 19 ⁄3. For individuals who initially be20 come eligible for disability insurance benefits in any cal21 endar year after 2004, the dollar amount so established 

shall equal the product of $1,6662 22 ⁄3 and the quotient ob23 tained by dividing—

24 ‘‘(I) the national average wage index (as de25 fined in section 209(k)(1)) for the second calendar 
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1 year preceding the calendar year for which the de2 termination is made, by 

3 ‘‘(II) the national average wage index (as so de4 fined) for 2002. 

5 ‘‘(ix) Subject to section 201(p), in the case of an indi6 vidual who is entitled to disability insurance benefits, who 

7 first becomes eligible for such benefits in any year after 

8 2003, and to whom clause (vii) does not apply, the pri9 mary insurance amount of such individual shall not be less 

10 than the primary insurance amount that would be deter11 mined for such individual under this section if such indi12 vidual’s average indexed monthly earnings (determined 

13 under subsection (b)) were equal to the dollar amount re14 ferred to in clause (vii) in connection with such year.’’; 

15 and 

16 (D) in clause (x) (as redesignated), by 

17 striking ‘‘amount’’ and inserting ‘‘dollar 

18 amount’’, by striking ‘‘clause (ii)’’ and inserting 

19 ‘‘clauses (ii) and (iii)’’, and by adding at the 

20 end the following new sentence: ‘‘Each percent21 age established under clause (v) for any cal22 endar year shall be rounded to the nearest 

23 0.001 percent, except that any percentage so 

24 established which is a multiple of 0.0005 per-
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1 cent but not of 0.001 percent shall be rounded 

2 to the next higher 0.001 percent.’’. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply with respect to pri5 mary insurance amounts of individuals initially be6 coming eligible for old-age or disability insurance 

7 benefits, or dying, after December 31, 2003. 

8 (d) MAXIMUM PERCENT REDUCTION IN PRIMARY IN9 SURANCE AMOUNTS.—

10 (1) IN GENERAL.—Section 215(a)(1) of such 

11 Act (42 U.S.C. 415(a)(1)) is amended further by 

12 adding at the end the following new subparagraph: 

13 ‘‘(E)(i) Except in any case described in clause (iii), 

14 an individual’s primary insurance amount as otherwise de15 termined under this section shall in no case be less than 

16 such individual’s primary insurance amount determined 

17 under this section as if the amendments made by section 

18 302 of the Social Security Solvency Act of 2003 had not 

19 been enacted, reduced by the maximum percent reduction 

20 specified, in connection with the specified year in which 

21 such individual initially becomes eligible for old-age insur22 ance benefits and in connection with the specified next 

23 higher amount of the annual equivalent of average indexed 

24 monthly earnings (determined under subsection (b)), in 

25 the following table:
•HR 3055 IH ‘‘Year of initial eligibility Average indexed monthly earnings (annual equivalent) $5,000 $10,000 $15,000 $20,000 $21,000 $22,000 $23,000 $

2005 ...................................................... 0.0 0.0 0.0 0.0 1.0 2.0 3.0 2006 ...................................................... 0.0 0.0 0.0 0.0 1.0 2.0 3.0 2007 ...................................................... 1.0 1.0 1.0 1.0 2.0 3.0 4.0 2008 ...................................................... 2.0 2.0 2.0 2.0 3.0 4.0 5.0 2009 ...................................................... 3.0 3.0 3.0 3.0 4.0 5.0 6.0 2010 ...................................................... 4.0 4.0 4.0 4.0 5.0 6.0 7.0 2011 ...................................................... 5.0 5.0 5.0 5.0 6.0 7.0 8.0 2012 ...................................................... 6.0 6.0 6.0 6.0 7.0 8.0 9.0 2013 ...................................................... 7.0 7.0 7.0 7.0 8.0 9.0 10.0 2014 ...................................................... 8.0 8.0 8.0 8.0 9.0 10.0 11.0 2015 ...................................................... 9.0 9.0 9.0 9.0 10.0 11.0 12.0 2016 ...................................................... 10.0 10.0 10.0 10.0 11.0 12.0 13.0 2017 ...................................................... 11.0 11.0 11.0 11.0 12.0 13.0 14.0 2018 or later year ................................. 12.0 12.0 12.0 12.0 13.0 14.0 15.0 
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1 ‘‘(ii) Each of the dollar amounts set forth in the table 

2 under clause (i) in connection with any year after 2005 

3 shall be deemed to be the product derived by multiplying 

4 such dollar amount by the quotient obtained by dividing—

5 ‘‘(I) the national average wage index (as de6 fined in section 209(k)(1)) for the second calendar 

7 year preceeding such calendar year, by 

8 ‘‘(II) the national average wage index (as so de9 fined) for 2003. 

10 ‘‘(iii) In the case of an individual who becomes enti11 tled to old-age insurance benefits by reason entitlement 

12 to disability insurance benefits for the month preceding 

13 the month in which such individual attains retirement age 

14 (as described in section 202(a)(3)), the individual’s pri15 mary insurance amount shall be the sum of—

16 ‘‘(I) the product derived by multiplying the in17 dividual’s primary insurance amount (as determined 

18 without regard to the amendments made by section 

19 302 of the Social Security Solvency Act of 2003) by 

20 the individual’s disability period ratio, plus 

21 ‘‘(II) the product derived by multiplying the in22 dividual’s primary insurance amount (as determined 

23 under this section as amended by section 302 of the 

24 Social Security Solvency Act of 2003) by the excess 

25 of 1 over the individual’s disability period ratio. 
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1 For purposes of this clause, the term ‘disability period 

2 ratio’ means, in connection with an individual, the ratio 

3 of the total number of years excluded under section 

4 215(b)(2)(B)(iii), by reason of 1 or more periods of dis5 ability, in determining thereunder the individual’s number 

6 of elapsed years, to the sum of such number of excluded 

7 years plus such number of elapsed years.’’. 

8 (2) EFFECTIVE DATE.—The amendment made 

9 by this subsection shall apply with respect to bene10 fits for months after November 2003. 

11 SEC. 303. INFORMATION RELATING TO BENEFIT LIMITA12 TIONS PROVIDED IN SOCIAL SECURITY AC13 COUNT STATEMENTS. 

14 (a) IN GENERAL.—Section 1143 of the Social Secu15 rity Act (42 U.S.C. 1320b–13) is amended—

16 (1) in the heading for subsection (a), by strik17 ing ‘‘Upon Request’’ and inserting ‘‘of Annual 

18 Statements’’; 

19 (2) in subsection (a)(1), by striking ‘‘Begin20 ning’’ and all that follows and inserting the fol21 lowing: ‘‘The Commissioner of Social Security shall 

22 provide an annual social security account statement 

23 (hereinafter in this section referred to as the ‘state24 ment’) to each eligible individual for whom a mailing 
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1 address can be determined through such methods as 

2 the Commissioner determines to be appropriate.’’; 

3 (3) in subsection (a)(2)(A), by striking ‘‘at the 

4 date of the request’’; 

5 (4) in subsection (a)(2)(B), by striking ‘‘on the 

6 date of the request’’; 

7 (5) in subsection (a)(2)(C), by striking ‘‘on the 

8 date of the request’’ and by striking ‘‘and’’ at the 

9 end; 

10 (6) in subsection (a)(2)(D), by inserting ‘‘in the 

11 case of individuals not receiving benefits,’’ after 

12 ‘‘(D)’’, and by striking ‘‘title XVIII.’’ and inserting 

13 ‘‘title XVIII; and’’; 

14 (7) by adding after subparagraph (D) the fol15 lowing: 

16 ‘‘(E) a table setting forth an estimate, in rela17 tion to 1980 and every 10th year thereafter through 

18 2030, of the following information: 

19 ‘‘(i) the total amount of the current ad20 justed values of all employee, employer, and 

21 self-employment contributions made with re22 spect to the wages and self-employment income 

23 of the average earner retiring at retirement age 

24 in each such year;
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1 ‘‘(ii) the total amount of the current ad2 justed values of the social security old-age or 

3 survivors benefits (as defined in section 

4 202(y)(3)(D)) paid for all prior months on the 

5 basis of the wages and self-employment income 

6 of the average earner retiring at retirement age 

7 in each such year; and 

8 ‘‘(iii) the total amount of the current ad9 justed values of the monthly benefits which will 

10 have been paid under such subsections, as of 

11 the time of the death of the average earner re12 tiring at retirement age in each such year, on 

13 the basis of his or her wages and self-employ14 ment income, as projected under the inter15 mediate actuarial assumptions utilized by the 

16 Board of Trustees of the Federal Old-Age and 

17 Survivors Insurance Trust Fund for its most 

18 recent annual report issued under section 

19 201(c). 

20 For purposes of subparagraph (E), the term ‘current ad21 justed value’ has the meaning provided in section 

22 202(y)(3)(C).’’; 

23 (8) by striking subsection (b); 

24 (9) in subsection (c)—
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1 (A) by striking the heading and inserting 

2 the following: 

3 ‘‘Required Estimates of Benefits’’; 

4 (B) by striking ‘‘(c)(1) By not later’’ and 

5 all that follows through ‘‘With respect to’’ in 

6 paragraph (2) and inserting ‘‘(b) With respect 

7 to’’; and 

8 (C) by adding at the end the following new 

9 sentence: ‘‘The Commissioner shall provide such 

10 estimates of retirement benefit amounts to eligi11 ble individuals who have not attained age 50 

12 upon request.’’; and 

13 (10) by adding at the end the following new 

14 subsection: 

15 ‘‘Inclusion of Statements to Retirees With Other Mailings 

16 ‘‘(c) The Commissioner of Social Security shall en17 sure that statements provided to eligible individuals who 

18 are receiving benefits under title II are included to the 

19 maximum extent practicable with mailings otherwise made 

20 to such individuals. The Commissioner shall consult with 

21 the Secretary of the Treasury in carrying out the require22 ment of this subsection and such Secretary shall provide 

23 such appropriate assistance to the Commissioner as is nec24 essary to carry out such requirements.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall apply with respect to statements pro3 vided on or after October 1, 2004. 

4 SEC. 304. COVERAGE OF NEWLY HIRED STATE AND LOCAL 

5 EMPLOYEES. 

6 (a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—

7 (1) IN GENERAL.—Paragraph (7) of section 

8 210(a) of the Social Security Act (42 U.S.C. 

9 410(a)(7)) is amended to read as follows: 

10 ‘‘(7) Excluded State or local government em11 ployment (as defined in subsection (s));’’. 

12 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

13 EMPLOYMENT.—

14 (A) IN GENERAL.—Section 210 of such 

15 Act (42 U.S.C. 410) is amended by adding at 

16 the end the following new subsection: 

17 ‘‘Excluded State or Local Government Employment 

18 ‘‘(s)(1) IN GENERAL.—The term ‘excluded State or 

19 local government employment’ means any service per20 formed in the employ of a State, of any political subdivi21 sion thereof, or of any instrumentality of any one or more 

22 of the foregoing which is wholly owned thereby, if—

23 ‘‘(A)(i) such service would be excluded from the 

24 term ‘employment’ for purposes of this title if the 
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1 preceding provisions of this section as in effect in 

2 December 2004 had remained in effect, and 

3 ‘‘(ii) the requirements of paragraph (2) are met 

4 with respect to such service, or 

5 ‘‘(B) the requirements of paragraph (3) are met 

6 with respect to such service. 

7 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

8 WHICH CONTINUES.—

9 ‘‘(A) IN GENERAL.—The requirements of this 

10 paragraph are met with respect to service for any 

11 employer if—

12 ‘‘(i) such service is performed by an indi13 vidual—

14 ‘‘(I) who was performing substantial 

15 and regular service for remuneration for 

16 that employer before January 1, 2004,

17 ‘‘(II) who was a bona fide employee of 

18 that employer on December 31, 2003, and 

19 ‘‘(III) whose employment relationship 

20 with that employer was not entered into 

21 for purposes of meeting the requirements 

22 of this subparagraph, and 

23 ‘‘(ii) the employment relationship with that 

24 employer has not been terminated after Decem25 ber 31, 2003. 
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1 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND

2 INSTRUMENTALITIES.—For purposes of subpara3 graph (A), under regulations (consistent with regula4 tions established under section 3121(t)(2)(B) of the 

5 Internal Revenue Code of 1986)—

6 ‘‘(i) all agencies and instrumentalities of a 

7 State (as defined in section 218(b)) or of the 

8 District of Columbia shall be treated as a single 

9 employer, and 

10 ‘‘(ii) all agencies and instrumentalities of a 

11 political subdivision of a State (as so defined) 

12 shall be treated as a single employer and shall 

13 not be treated as described in clause (i). 

14 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

15 ‘‘(A) IN GENERAL.—The requirements of this 

16 paragraph are met with respect to service if such 

17 service is performed—

18 ‘‘(i) by an individual who is employed by a 

19 State or political subdivision thereof to relieve 

20 such individual from unemployment, 

21 ‘‘(ii) in a hospital, home, or other institu22 tion by a patient or inmate thereof as an em23 ployee of a State or political subdivision thereof 

24 or of the District of Columbia,
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1 ‘‘(iii) by an individual, as an employee of 

2 a State or political subdivision thereof or of the 

3 District of Columbia, serving on a temporary 

4 basis in case of fire, storm, snow, earthquake, 

5 flood, or other similar emergency, 

6 ‘‘(iv) by any individual as an employee in7 cluded under section 5351(2) of title 5, United 

8 States Code (relating to certain interns, student 

9 nurses, and other student employees of hos10 pitals of the District of Columbia Government), 

11 other than as a medical or dental intern or a 

12 medical or dental resident in training, 

13 ‘‘(v) by an election official or election 

14 worker if the remuneration paid in a calendar 

15 year for such service is less than $1,000 with 

16 respect to service performed during 2004, and 

17 the adjusted amount determined under sub18 paragraph (C) for any subsequent year with re19 spect to service performed during such subse20 quent year, except to the extent that service by 

21 such election official or election worker is in22 cluded in employment under an agreement 

23 under section 218, or 

24 ‘‘(vi) by an employee in a position com25 pensated solely on a fee basis which is treated 
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1 pursuant to section 211(c)(2)(E) as a trade or 

2 business for purposes of inclusion of such fees 

3 in net earnings from self-employment. 

4 ‘‘(B) DEFINITIONS.—As used in this para5 graph, the terms ‘State’ and ‘political subdivision’ 

6 have the meanings given those terms in section 

7 218(b). 

8 ‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR

9 ELECTION OFFICIALS AND ELECTION WORKERS.—

10 For each year after 2004, the Commissioner of So11 cial Security shall adjust the amount referred to in 

12 subparagraph (A)(v) at the same time and in the 

13 same manner as is provided under section 

14 215(a)(1)(B)(ii) with respect to the amounts re15 ferred to in section 215(a)(1)(B)(i), except that—

16 ‘‘(i) for purposes of this subparagraph, 

17 1999 shall be substituted for the calendar year 

18 referred to in section 215(a)(1)(B)(ii)(II), and 

19 ‘‘(ii) such amount as so adjusted, if not a 

20 multiple of $100, shall be rounded to the next 

21 higher multiple of $100 where such amount is 

22 a multiple of $50 and to the nearest multiple 

23 of $100 in any other case. 

24 The Commissioner of Social Security shall determine 

25 and publish in the Federal Register each adjusted
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1 amount determined under this subparagraph not 

2 later than November 1 preceding the year for which 

3 the adjustment is made.’’. 

4 (B) CONFORMING AMENDMENTS.—

5 (i) Subsection (k) of section 210 of 

6 such Act (42 U.S.C. 410(k)) (relating to 

7 covered transportation service) is repealed.

8 (ii) Section 210(p) of such Act (42 

9 U.S.C. 410(p)) is amended—

10 (I) in paragraph (2), by striking 

11 ‘‘service is performed’’ and all that 

12 follows and inserting ‘‘service is serv13 ice described in subsection (s)(3)(A).’’; 

14 and 

15 (II) in paragraph (3)(A), by in16 serting ‘‘under subsection (a)(7) as in 

17 effect in December 2003’’ after ‘‘sec18 tion’’. 

19 (iii) Section 218(c)(6) of such Act (42 

20 U.S.C. 418(c)(6)) is amended—

21 (I) by striking subparagraph (C); 

22 (II) by redesignating subpara23 graphs (D) and (E) as subparagraphs 

24 (C) and (D), respectively; and 
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1 (III) by striking subparagraph 

2 (F) and inserting the following: 

3 ‘‘(E) service which is included as employment 

4 under section 210(a).’’

5 (b) AMENDMENTS TO THE INTERNAL REVENUE

6 CODE OF 1986.—

7 (1) IN GENERAL.—Paragraph (7) of section 

8 3121(b) of the Internal Revenue Code of 1986 (re9 lating to employment) is amended to read as follows: 

10 ‘‘(7) excluded State or local government em11 ployment (as defined in subsection (t));’’. 

12 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

13 EMPLOYMENT.—Section 3121 of such Code is 

14 amended by inserting after subsection (s) the fol15 lowing new subsection:

16 ‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM17 PLOYMENT.—

18 ‘‘(1) IN GENERAL.—For purposes of this chap19 ter, the term ‘excluded State or local government 

20 employment’ means any service performed in the 

21 employ of a State, of any political subdivision there22 of, or of any instrumentality of any one or more of 

23 the foregoing which is wholly owned thereby, if—

24 ‘‘(A)(i) such service would be excluded 

25 from the term ‘employment’ for purposes of this 
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1 chapter if the provisions of subsection (b)(7) as 

2 in effect in December 2003 had remained in ef3 fect, and (ii) the requirements of paragraph (2) 

4 are met with respect to such service, or 

5 ‘‘(B) the requirements of paragraph (3) 

6 are met with respect to such service. 

7 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

8 WHICH CONTINUES.—

9 ‘‘(A) IN GENERAL.—The requirements of 

10 this paragraph are met with respect to service 

11 for any employer if—

12 ‘‘(i) such service is performed by an 

13 individual—

14 ‘‘(I) who was performing sub15 stantial and regular service for remu16 neration for that employer before Jan17 uary 1, 2004, 

18 ‘‘(II) who was a bona fide em19 ployee of that employer on December 

20 31, 2003, and 

21 ‘‘(III) whose employment rela22 tionship with that employer was not 

23 entered into for purposes of meeting 

24 the requirements of this subpara25 graph, and
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1 ‘‘(ii) the employment relationship with 

2 that employer has not been terminated 

3 after December 31, 2003. 

4 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES

5 AND INSTRUMENTALITIES.—For purposes of 

6 subparagraph (A), under regulations—

7 ‘‘(i) all agencies and instrumentalities 

8 of a State (as defined in section 218(b) of 

9 the Social Security Act) or of the District 

10 of Columbia shall be treated as a single 

11 employer, and 

12 ‘‘(ii) all agencies and instrumentalities 

13 of a political subdivision of a State (as so 

14 defined) shall be treated as a single em15 ployer and shall not be treated as de16 scribed in clause (i). 

17 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

18 ‘‘(A) IN GENERAL.—The requirements of 

19 this paragraph are met with respect to service 

20 if such service is performed—

21 ‘‘(i) by an individual who is employed 

22 by a State or political subdivision thereof 

23 to relieve such individual from unemploy24 ment, 
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1 ‘‘(ii) in a hospital, home, or other in2 stitution by a patient or inmate thereof as 

3 an employee of a State or political subdivi4 sion thereof or of the District of Columbia, 

5 ‘‘(iii) by an individual, as an employee 

6 of a State or political subdivision thereof 

7 or of the District of Columbia, serving on 

8 a temporary basis in case of fire, storm, 

9 snow, earthquake, flood, or other similar 

10 emergency, 

11 ‘‘(iv) by any individual as an employee 

12 included under section 5351(2) of title 5, 

13 United States Code (relating to certain in14 terns, student nurses, and other student 

15 employees of hospitals of the District of 

16 Columbia Government), other than as a 

17 medical or dental intern or a medical or 

18 dental resident in training, 

19 ‘‘(v) by an election official or election 

20 worker if the remuneration paid in a cal21 endar year for such service is less than 

22 $1,000 with respect to service performed 

23 during 2004, and the adjusted amount de24 termined under section 210(s)(3)(C) of the 

25 Social Security Act for any subsequent
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1 year with respect to service performed dur2 ing such subsequent year, except to the ex3 tent that service by such election official 

4 or election worker is included in employ5 ment under an agreement under section 

6 218 of the Social Security Act, or 

7 ‘‘(vi) by an employee in a position 

8 compensated solely on a fee basis which is 

9 treated pursuant to section 1402(c)(2)(E) 

10 as a trade or business for purposes of in11 clusion of such fees in net earnings from 

12 self-employment. 

13 ‘‘(B) DEFINITIONS.—As used in this para14 graph, the terms ‘State’ and ‘political subdivi15 sion’ have the meanings given those terms in 

16 section 218(b) of the Social Security Act.’’.

17 (3) CONFORMING AMENDMENTS.—

18 (A) Subsection (j) of such section 3121 

19 (relating to covered transportation service) is 

20 repealed. 

21 (B) Paragraph (2) of section 3121(u) of 

22 such Code (relating to application of hospital 

23 insurance tax to Federal, State, and local em24 ployment) is amended—
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1 (i) in subparagraph (B), by striking 

2 ‘‘service is performed’’ in clause (ii) and all 

3 that follows through the end of such sub4 paragraph and inserting ‘‘service is service 

5 described in subsection (t)(3)(A).’’; and

6 (ii) in subparagraph (C)(i), by insert7 ing ‘‘under subsection (b)(7) as in effect in 

8 December 2004’’ after ‘‘chapter’’. 

9 (c) EFFECTIVE DATE.—Except as otherwise provided 

10 in this section, the amendments made by this section shall 

11 apply with respect to service performed after December 

12 31, 2004.

13 SEC. 305. INCREASE IN MONTHLY INSURANCE BENEFITS 

14 FOR WIDOWS AND WIDOWERS. 

15 (a) OLD-AGE INSURANCE BENEFITS.—Section 

16 202(a) of the Social Security Act (42 U.S.C. 402(a)) is 

17 amended by adding at the end the following new sentence: 

18 ‘‘For any month ending after the month in which the indi19 vidual is a widow, widower, surviving divorced wife, or sur20 viving divorced husband in connection with any deceased 

21 spouse and has not remarried since the death of such de22 ceased spouse, the individual’s old-age insurance benefit 

23 shall be increased to 110 percent of the individual’s pri24 mary insurance amount for such month.’’. 
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1 (b) WIDOW’S INSURANCE BENEFITS.—Section 

2 202(e)(2) of such Act (42 U.S.C. 402(e)(2)) is amended—

3 (1) in subparagraph (A), by striking ‘‘the pri4 mary insurance amount’’ and inserting ‘‘110 percent 

5 of the primary insurance amount’’; 

6 (2) in subparagraph (D)(i), by inserting ‘‘110 

7 percent of’’ before ‘‘the amount’’; and 

(3) in subparagraph (D)(ii), by striking ‘‘821 8 ⁄2

percent’’ and inserting ‘‘901 9 ⁄4 percent’’. 

10 (c) WIDOWER’S INSURANCE BENEFITS.—Section 

11 202(f)(3) of such Act (42 U.S.C. 402(f)(3)) is amended—

12 (1) in subparagraph (A), by striking ‘‘the pri13 mary insurance amount’’ and inserting ‘‘110 percent 

14 of the primary insurance amount’’; 

15 (2) in subparagraph (D)(i), by inserting ‘‘110 

16 percent of’’ before ‘‘the amount’’; and 

(3) in subparagraph (D)(ii), by striking ‘‘821 17 ⁄2

percent’’ and inserting ‘‘901 18 ⁄4 percent’’. 

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

20 this section shall apply with respect to benefits for months 

21 after December 2004. 

22 SEC. 306. ACCELERATION OF INCREASE IN DELAYED RE23 TIREMENT CREDIT. 

24 (a) IN GENERAL.—Section 202(w) of the Social Se25 curity Act (42 U.S.C. 402(w)) is amended—
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1 (1) in paragraph (1)(A), by striking ‘‘the appli2 cable percentage (as determined under paragraph 

(6))’’ and inserting ‘‘2 3 ⁄3 of 1 percent’’; and 

4 (2) by striking paragraph (6). 

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

6 this section shall apply with respect to individuals who at7 tain retirement age after calendar year 2004. 

8 SEC. 307. AUTHORIZATION FOR REIMBURSEMENT OF FED9 ERAL DISABILITY INSURANCE TRUST FUND 

10 FOR CERTAIN COSTS OF DISABILITY INSUR11 ANCE BENEFITS. 

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

13 Act (as amended by the preceding provisions of this Act) 

14 is amended further by adding at the end the following new 

15 subsection: 

16 ‘‘Reimbursement of Federal Disability Insurance Trust 

17 Fund for Certain Costs of Disability Insurance Benefits 

18 ‘‘(p) Clauses (vi) and (vii) of section 215(a)(1)(B) 

19 shall apply with respect to benefits paid during any fiscal 

20 year only to the extent provided for in advance in an Ap21 propriation Act providing for reimbursement of the Fed22 eral Disability Insurance Trust Fund for any portion of 

23 such benefits representing a net increase resulting from 

24 the operation of such clauses. The Commissioner of Social 

25 Security shall report to each House of the Congress as 
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1 soon as practicable before each fiscal year the Commis2 sioner’s determination of the amounts necessary to provide 

3 for any such net increase for such fiscal year.’’.

4 SEC. 308. STUDY TO DEVELOP RECOMMENDATIONS FOR 

5 PROVIDING FOR ELECTIONS UNDER WHICH 

6 INDIVIDUALS MAY OPT FOR EXCLUSION 

7 FROM SOCIAL SECURITY COVERAGE. 

8 (a) IN GENERAL.—As soon as practicable after the 

9 date of the enactment of this Act, the Commissioner of 

10 Social Security shall conduct a thorough and comprehen11 sive study of the most appropriate and feasible means of 

12 providing for elections under which individuals may opt 

13 for exclusion from coverage under the old-age, survivors, 

14 and disability insurance program under part A of title II 

15 of the Social Security Act and chapters 2 and 21 of the 

16 Internal Revenue Code of 1986. 

17 (b) REQUIREMENTS.—In conducting the study pursu18 ant to this section, the Commissioner shall prepare and 

19 make full use, as appropriate, of such econometric models 

20 and actuarial analyses as are necessary to carry out such 

21 study. Such study shall take into account the extent to 

22 which the old-age, survivors, and disability insurance pro23 gram may accommodate such elections and the terms and 

24 conditions for such elections which would most effectively 

25 permit such accommodation. The Commissioner shall con-
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1 duct the study pursuant to this section in consultation 

2 with the Board of Trustees of the Federal Old-Age and 

3 Survivors Insurance Trust Fund and the Federal Dis4 ability Insurance Trust Fund and with other appropriate 

5 departments and agencies of the Federal Government, and 

6 such other departments and agencies shall provide to the 

7 Commissioner such assistance, on a reimbursable basis, as 

8 may be necessary and appropriate. 

9 (c) REPORT.—Not later than 180 days after the date 

10 of the enactment of this Act, the Commissioner of Social 

11 Security shall submit to the Committee on Ways and 

12 Means of the House of Representatives and the Committee 

13 on Finance of the Senate a written report containing a 

14 recommendation, or alternative recommendations, for pro15 viding for elections described in subsection (a). Such re16 port shall contain a complete description of the models and 

17 analyses used in carrying out the study pursuant to this 

18 section and shall be accompanied by draft legislation 

19 which, if enacted, would carry out the recommendations 

20 contained in the report.
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1 SEC. 309. INCREASE IN NUMBER OF YEARS DISREGARDED 

2 IN DETERMINING AVERAGE ANNUAL EARN3 INGS ON WHICH BENEFIT AMOUNTS ARE 

4 BASED WHERE REMUNERATIVE WORK IS 

5 PRECLUDED BY NEED TO PROVIDE CHILD 

6 CARE. 

7 (a) IN GENERAL.—Section 215(b)(2) of the Social 

8 Security Act (42 U.S.C. 415(b)(2)) is amended—

9 (1) by striking the period at the end of clause 

10 (ii) of subparagraph (A) and inserting a comma; 

11 (2) by striking ‘‘Clause (ii), once’’ after and 

12 below clause (ii) of subparagraph (A) and inserting 

13 the following: 

14 ‘‘and reduced further to the extent provided in subpara15 graph (B). Clause (ii), once’’; 

16 (3) by striking ‘‘If an individual’’ in the matter 

17 following clause (ii) of subparagraph (A) and all that 

18 follows through the end of subparagraph (A); 

19 (4) by redesignating subparagraph (B) as sub20 paragraph (F); and 

21 (5) by inserting after subparagraph (A) the fol22 lowing new subparagraphs: 

23 ‘‘(B) Subject to subparagraph (C), in any case in 

24 which—

25 ‘‘(i) in any calendar year which is included in 

26 an individual’s computation base years, such indi-
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1 vidual is living with a child (of such individual or his 

2 or her spouse) under the age of 13, 

3 ‘‘(ii) such calendar year is not disregarded pur4 suant to subparagraphs (A) and (E) (in determining 

5 such individual’s benefit computation years) by rea6 son of the reduction in the number of such individ7 ual’s elapsed years under subparagraph (A), and 

8 ‘‘(iii) during such calendar year, such individual 

9 submits to the Commissioner of Social Security, in 

10 such form as the Commissioner shall prescribe by 

11 regulations, a written statement that the require12 ments of clause (i) are met with respect to such cal13 endar year, 

14 then the number by which such elapsed years are reduced 

15 under this paragraph pursuant to subparagraph (A) shall 

16 be increased by one (up to a combined total not exceeding 

17 5) for each such calendar year. 

18 ‘‘(C)(i) No calendar year shall be disregarded by rea19 son of subparagraph (B) (in determining such individual’s 

20 benefit computation years) unless the individual had no 

21 earnings as described in section 203(f)(5) for such year. 

22 ‘‘(ii) No calendar year shall be disregarded by reason 

23 of subparagraph (B) (in determining such individual’s 

24 benefit computation years) in connection with a child re25 ferred to in subparagraph (B)(i) unless the individual was 
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1 living with the child substantially throughout the period 

2 in such year in which the child was alive and under the 

3 age of 13 in such year. 

4 ‘‘(iii) The particular calendar years to be disregarded 

5 under this subparagraph (in determining such benefit 

6 computation years) shall be those years (not otherwise dis7 regarded under subparagraph (A)) which, before the appli8 cation of subsection (f), meet the conditions of the pre9 ceding provisions of this subparagraph. 

10 ‘‘(iv) This subparagraph shall apply only to the extent 

11 that its application would not result in a lower primary 

12 insurance amount. 

13 ‘‘(D) The number of an individual’s benefit computa14 tion years as determined under this paragraph shall in no 

15 case be less than 2.’’. 

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

17 this section shall apply only with respect to computation 

18 base years after 2003. 

19 SEC. 310. EXCLUSION OF DISABLED ADULT CHILDREN 

20 FROM REDUCTION IN BENEFITS UNDER THE 

21 FAMILY MAXIMUM PROVISIONS. 

22 (a) IN GENERAL.—Section 203(a)(3) of the Social 

23 Security Act (42 U.S.C. 403(a)(3)) is amended by adding 

24 at the end the following new subparagraph: 
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1 ‘‘(E) When any of the individuals who are entitled 

2 to benefits on the basis of the wages and self-employment 

3 income of any insured individual and to whom this sub4 section applies is entitled to child’s insurance benefits 

5 under section 202(d) on the basis of such wages and self6 employment income and is described in section 

7 202(d)(1)(G), the benefit to which he or she is so entitled 

8 for any month shall be determined without regard to this 

9 subsection, and the benefits of all other individuals who 

10 are entitled for such month to monthly benefits under sec11 tion 202 on the basis of the wages and self-employment 

12 income of such insured individual shall be determined as 

13 if no such child were entitled to benefits for such month.’’. 

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

15 this section shall apply with respect to benefits for months 

16 after December 2003. 

17 TITLE IV—RETIREMENT 

18 SECURITY 

19 SEC. 401. PENSIONS AND INDIVIDUAL RETIREMENT AR20 RANGEMENT PROVISIONS OF THE ECONOMIC 

21 GROWTH AND TAX RELIEF RECONCILIATION 

22 ACT OF 2001 MADE PERMANENT. 

23 (a) IN GENERAL.—Section 901 of the Economic 

24 Growth and Tax Relief Reconciliation Act of 2001 is 
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1 amended by adding at the end the following new sub2 section: 

3 ‘‘(c) EXCEPTION.—Subsections (a) and (b) shall not 

4 apply to the provisions of, and amendments made by, sub5 titles (A) through (F) of title VI (relating to pension and 

6 individual retirement arrangement provisions).’’. 

7 (b) CONFORMING AMENDMENTS.—Section 901(b) of 

8 such Act is amended—

9 (1) by striking ‘‘and the Employee Retirement 

10 Income Security Act of 1974’’ in the text, and 

11 (2) by striking ‘‘OF CERTAIN LAWS’’ in the 

12 heading. 

13 SEC. 402. ACCELERATION OF PHASE-INS OF SCHEDULED 

14 INCREASES IN IRA AND PENSION PLAN CON15 TRIBUTION LIMITS. 

16 (a) IRA CONTRIBUTION LIMIT.—

17 (1) DEDUCTIBLE AMOUNT.—Subparagraph (A) 

18 of section 219(b)(5) of the Internal Revenue Code of 

19 1986 is amended to read as follows: 

20 ‘‘(A) IN GENERAL.—The deductible 

21 amount shall be $5,000.’’. 

22 (2) CATCH-UP AMOUNT.—Subparagraph (B) of 

23 section 219(b)(5) of such Code is amended to read 

24 as follows:
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•HR 3055 IH 

1 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI2 VIDUALS 50 OR OLDER.—In the case of an indi3 vidual who has attained the age of 50 before 

4 the close of the taxable year, the dollar amount 

5 in effect under paragraph (1)(A) for such tax6 able year (determined without regard to this 

7 paragraph) shall be increased by $1,000.’’. 

8 (b) ELECTIVE DEFERRALS.—Subparagraph (B) of 

9 section 402(g)(1) of such Code is amended by striking 

10 ‘‘the amount determined’’ and all that follows and insert11 ing ‘‘$15,000.’’. 

12 (c) DEFERRED COMPENSATION PLANS OF STATE

13 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI14 ZATIONS.—Subparagraph (A) of section 457(e)(15) of 

15 such Code is amended by striking ‘‘the amount deter16 mined’’ and all that follows and inserting ‘‘$15,000.’’. 

17 (d) SIMPLE RETIREMENT ACCOUNTS.—Clause (i) of 

18 section 408(p)(2)(E) of such Code is amended by striking 

19 ‘‘the amount determined’’ and all that follows and insert20 ing ‘‘$10,000.’’. 

21 (e) CATCH-UP CONTRIBUTIONS.—Subparagraph (B) 

22 of section 414(v)(2)(B) of such Code is amended—

23 (1) in clause (i) by striking ‘‘determined’’ and 

24 all that follows and inserting ‘‘$5,000.’’, and 
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1 (2) in clause (ii) by striking ‘‘determined’’ and 

2 all that follows and inserting ‘‘$2,500.’’. 

3 (f) CONFORMING CHANGES TO RELATED COLA 

4 PROVISIONS.—

5 (1) IRAS.—Clause (i) of section 219(b)(5)(C) 

6 of such Code is amended—

7 (A) by striking ‘‘2008’’ and inserting 

8 ‘‘2005’’, and 

9 (B) by striking ‘‘2007’’ and inserting 

10 ‘‘2004’’. 

11 (2) ELECTIVE DEFERRALS.—Paragraph (4) of 

12 section 402(g) of such Code is amended—

13 (A) by striking ‘‘2006’’ and inserting 

14 ‘‘2005’’, and 

15 (B) by striking ‘‘2005’’ and inserting 

16 ‘‘2004’’. 

17 (3) DEFERRED COMPENSATION PLANS OF

18 STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT

19 ORGANIZATIONS.—Subparagraph (B) of section 

20 457(e)(15) of such Code is amended—

21 (A) by striking ‘‘2006’’ and inserting 

22 ‘‘2005’’, and 

23 (B) by striking ‘‘2005’’ and inserting 

24 ‘‘2004’’. 

25
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1 (4) CATCH-UP CONTRIBUTIONS.—Subparagraph 

2 (C) of section 414(v)(2) of such Code is amended—

3 (A) by striking ‘‘2006’’ and inserting 

4 ‘‘2005’’, and 

5 (B) by striking ‘‘2005’’ and inserting 

6 ‘‘2004’’. 

7 (g) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to years beginning after December 

9 31, 2004. 

10 SEC. 403. REFUNDABLE CREDIT FOR PREMIUMS ON QUALI11 FIED LONG-TERM CARE INSURANCE CON12 TRACTS. 

13 (a) IN GENERAL.—Subpart C of part IV of sub14 chapter A of chapter 1 of the Internal Revenue Code of 

15 1986 (relating to refundable credits) is amended by redes16 ignating section 36 as section 37 and by inserting after 

17 section 35 the following new section: 

18 ‘‘SEC. 36. PREMIUMS ON QUALIFIED LONG-TERM CARE IN19 SURANCE CONTRACTS. 

20 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in21 dividual, there shall be allowed as a credit against the tax 

22 imposed by this chapter for the taxable year an amount 

23 equal to 33 percent of the amount of the eligible long24 term care premiums (as defined in section 213(d)(10)) 

25 paid during the taxable year for coverage for the taxpayer, 
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1 his spouse, and dependents under a qualified long-term 

2 care insurance contract (as defined in section 7702B(b)). 

3 ‘‘(b) DOLLAR LIMITATION.—The amount of the cred4 it allowed to a taxpayer under subsection (a) shall not ex5 ceed $1,000 ($2,000 in the case of a joint return). 

6 ‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.—

7 Any amount paid by a taxpayer for any qualified long8 term care insurance contract to which subsection (a) ap9 plies shall not be taken into account in computing the 

10 amount allowable to the taxpayer as a deduction under 

11 section 162(l) or 213(a).’’. 

12 (b) TECHNICAL AMENDMENTS.—

13 (1) Paragraph (2) of section 1324(b) of title 

14 31, United States Code, is amended by inserting ‘‘or 

15 from section 36 of such Code’’ before the period at 

16 the end. 

17 (2) The table of sections for subpart C of part 

18 IV of subchapter A of chapter 1 of the Internal Rev19 enue Code of 1986 is amended by striking the item 

20 relating to section 35 and inserting the following 

21 new items:

‘‘Sec. 36. Premiums on qualified long-term care insurance contracts. 

‘‘Sec. 37. Overpayment of taxes.’’.
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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, 2004. 

4 SEC. 404. TAX CREDIT FOR TAXPAYERS PROVIDING CARE 

5 FOR DEPENDENT PARENTS IN THEIR HOUSE6 HOLDS. 

7 (a) IN GENERAL.—Subpart A of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 (relating to nonrefundable personal credits) is 

10 amended by inserting after section 25B the following new 

11 section: 

12 ‘‘SEC. 25C. CREDIT FOR TAXPAYERS PROVIDING CARE FOR 

13 DEPENDENT PARENTS IN THEIR HOUSE14 HOLDS. 

15 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in16 dividual who maintains a household which includes as a 

17 member one or more qualified persons, there shall be al18 lowed as a credit against the tax imposed by this chapter 

19 for the taxable year an amount equal to the qualified care 

20 expenses. 

21 ‘‘(b) LIMITATION.—The amount of the credit allowed 

22 by subsection (a) shall not exceed $1,000 for each quali23 fied person. 

24 ‘‘(c) QUALIFIED PERSON.—For purposes of this sec25 tion, the term ‘qualified person’ means any individual—
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1 ‘‘(1) who is a father or mother of the taxpayer, 

2 his spouse, or his former spouse or who is an ances3 tor of such a father or mother, 

4 ‘‘(2) for whom the taxpayer is allowed an ex5 emption amount under section 151, and 

6 ‘‘(3) whose name and TIN are included on the 

7 taxpayer’s return for the taxable year. 

8 For purposes of paragraph (1), a stepfather or stepmother 

9 shall be treated as a father or mother. 

10 ‘‘(d) QUALIFIED CARE EXPENSES.—For purposes of 

11 this section, the term ‘qualified care expenses’ means the 

12 amount paid or incurred by the taxpayer to provide care 

13 for a qualified person in the principal residence of the tax14 payer. No amount shall be taken into account under this 

15 section with respect to a qualified person for any expense 

16 incurred for a period during which such person is receiving 

17 qualified long-term care services (as defined in section 

18 7702B(c)(1)) outside of such residence. 

19 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—A credit shall 

20 not be allowed under this section for any expense for which 

21 a credit or deduction is claimed under any other provision 

22 of this title.

23 ‘‘(f) SPECIAL RULES.—For purposes of this section, 

24 rules similar to the rules of paragraphs (1), (2), (3), and 

25 (4) of section 21(e) shall apply.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for subpart A of part IV of subchapter A of chapter 1 

3 of such Code is amended by inserting after the item relat4 ing to section 25B the following new item:

‘‘Sec. 25C. Credit for taxpayers providing care for dependent parents in their households.’’

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2004. 

8 SEC. 405. NONREFUNDABLE TAX CREDIT FOR EXPENSES OF 

9 SENIORS FOR MAINTAINING A PRINCIPAL 

10 RESIDENCE. 

11 (a) IN GENERAL.—Subpart A of part IV of sub12 chapter A of chapter 1 of the Internal Revenue Code of 

13 1986 (relating to nonrefundable personal credits) is 

14 amended by inserting after section 25C the following new 

15 section: 

16 ‘‘SEC. 25D. EXPENSES OF SENIORS FOR MAINTAINING A 

17 PRINCIPAL RESIDENCE. 

18 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli19 gible individual, at the election of the taxpayer there shall 

20 be allowed as a credit against the tax imposed by this sub21 title for the taxable year an amount equal to qualified resi22 dence expenses. 
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1 ‘‘(b) DOLLAR LIMITATION.—The amount allowed as 

2 a credit by subsection (a) for the taxable year shall not 

3 exceed $1,000. 

4 ‘‘(c) QUALIFIED RESIDENCE EXPENSES.—For pur5 poses of this section, the term ‘qualified residence ex6 penses’ means the amount paid or incurred by the tax7 payer for the maintenance of the principal residence of 

8 the taxpayer. No amount shall be taken into account 

9 under this section for any expense incurred for a period 

10 during which the taxpayer is receiving qualified long-term 

11 care services (as defined in section 7702B(c)(1)) outside 

12 of such residence. 

13 ‘‘(d) ELIGIBLE INDIVIDUAL.—The term ‘eligible indi14 vidual’ means an individual who has attained age 65 as 

15 of the end of the taxable year. 

16 ‘‘(e) SPECIAL RULES.—

17 ‘‘(1) DOUBLE BENEFIT.—A credit shall not be 

18 allowed under this section for any expense for which 

19 a credit or deduction is claimed under any other pro20 vision of this title. 

21 ‘‘(2) ELECTION.—A taxpayer who claims the 

22 credit under section 25C for a taxable year shall not 

23 be eligible to make an election under this section for 

24 such year.’’. 
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1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for subpart A of part IV of subchapter A of chapter 

3 1 of such Code is amended by inserting after the item 

4 relating to section 25C the following new item:

‘‘Sec. 25D. Expenses of seniors for maintaining a principal residence.’’

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2004.

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