I 

108TH CONGRESS 

1ST SESSION H. R. 3177

To amend the Social Security Act and the Internal Revenue Code of 1986 

to preserve and strengthen the Social Security Program through the 

creation of individual Social Security accounts ensuring full benefits 

for all workers and their families, giving Americans ownership of their 

retirement, restoring long-term Social Security solvency, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 25, 2003

Mr. DEMINT introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL

To amend the Social Security Act and the Internal Revenue 

Code of 1986 to preserve and strengthen the Social 

Security Program through the creation of individual Social Security accounts ensuring full benefits for all workers and their families, giving Americans ownership of 

their retirement, restoring long-term Social Security solvency, and for other purposes.

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

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

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

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

5 as follows:

Sec. 1. Short title and table of contents. 

Sec. 2. Findings and purposes. 

Sec. 3. Individual social security account program and individual social security 

accounts. 

‘‘PART B—INDIVIDUAL SOCIAL SECURITY ACCOUNT PROGRAM

‘‘Sec. 251. Definitions. 

‘‘Sec. 252. Personal Savings Board. 

‘‘Sec. 253. Executive Director. 

‘‘Sec. 254. Social Security Personal Savings Fund. 

‘‘Sec. 255. Eligible individuals. 

‘‘Sec. 256. Individual social security accounts. 

‘‘Sec. 257. Prescribed social security deposits. 

‘‘Sec. 258. Investments in stock and Government obligations. 

‘‘Sec. 259. Accounting and information. 

‘‘Sec. 260. Account distributions. 

‘‘Sec. 261. Payments upon death of account owner. 

‘‘Sec. 262. Treatment of account balances and annuities. 

‘‘Sec. 263. Fiduciary responsibilities. 

Sec. 4. Conforming adjustments to monthly insurance benefits. 

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

Sec. 6. Taxation of Individual Social Security Account Program. 

Sec. 7. Report on private sector investment and management. 

Sec. 8. Maintenance of current levels of FICA and SECA taxes.

6 SEC. 2. FINDINGS AND PURPOSES. 

7 (a) FINDINGS.—The Congress finds the following: 

8 (1) Social Security is a defining American 

9 promise that must be kept. As one of the most suc10 cessful Government programs of the 20th Century, 

11 it must always honor its founding purpose of pro12 tecting the elderly from poverty and bringing dignity 

13 to retirement. 
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1 (2) Social Security’s retirement, survivors, and 

2 disability benefits help provide more than 

3 46,000,000 Americans of all ages income security, 

4 without which nearly 50 percent of seniors would 

5 live in poverty. 

6 (3) Social Security is of particular importance 

7 for low-income earners, for whom it may be their 

8 sole source of retirement income. In addition, it is 

9 especially important for widows and mothers caring 

10 for children, without which nearly 53 percent of 

11 these women would live in poverty. 

12 (4) Social Security is unsustainable in its 

13 present form. The 2003 Report of the Social Secu14 rity Board of Trustees projects that the system’s ob15 ligations will exceed its annual tax revenue starting 

16 in 2018. From 2018 to 2042, the Government is ob17 ligated to pay full benefits using general tax reve18 nues owed to the Social Security trust funds. How19 ever, this means that the long-term financing prob20 lem will begin in 2018. 

21 (5) The Social Security trust funds will not 

22 solve the problem. These trust fund balances are 

23 available to finance future benefit payments only in 

24 a bookkeeping sense. They do not consist of real eco25 nomic assets that can be drawn down in the future 
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1 to fund benefits. Instead, they are claims on the 

2 general budget that, when redeemed, will have to be 

3 financed by raising taxes, borrowing from the public, 

4 cutting spending, or reducing benefits. The existence 

5 of large trust fund balances does not, by itself, have 

6 any impact on the Government’s ability to pay bene7 fits. 

8 (6) Faster economic growth will not solve the 

9 problem. Under the Board of Trustees’ 2003 Report, 

10 Social Security’s yearly deficits will increase signifi11 cantly every year. By 2038, Social Security will re12 quire more than 1 trillion a year in addition to the 

13 money raised through payroll taxes. By 2078, the 

14 annual Social Security deficit will be as large as the 

15 national debt in 2003. Even worse, these deficits will 

16 stretch far beyond the 75-year budget window with 

17 no sign of returning to balance. No amount of eco18 nomic growth can overcome these substantial yearly 

19 deficits. 

20 (7) The primary reason for this financial short21 fall is demographic. In 1960 there were more than 

22 five workers paying into Social Security for every in23 dividual collecting benefits. Today, demographic 

24 changes have reduced the worker-to-beneficiary ratio 

25 to 3.4 to 1. By 2050, it will be just 2 to 1.
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1 (8) If reforms are not made, younger workers 

2 will receive lower benefits for every dollar they pay 

3 into the current system. The inflation-adjusted rate 

4 of return averaged more than 25 percent annually 

5 for Social Security’s first retirees in the 1940s, but 

6 are estimated to average roughly 4 percent for to7 day’s retirees, roughly 2 percent for ‘‘baby 

8 boomers,’’ and 1 percent for those who will be born 

9 40 years from now. Since these figures do not in10 clude the extra cost of meeting Social Security’s 

11 needs from 2018 to 2042, real rates of return for 

12 younger workers will likely be even lower. 

13 (9) If reforms are not made, Social Security 

14 payroll taxes will have to be raised to balance the 

15 system over the next 75 years. When Social Security 

16 was first started, its tax was never supposed to go 

17 higher than 6 percent. Today, it is over 12 percent 

18 and if something is not done, it will go over 18 per19 cent. Americans pay far too much into Social Secu20 rity for what they receive to have their payroll taxes 

21 raised again. 

22 (10) Inasmuch as payroll taxes already con23 stitute the single largest tax burden for most Amer24 ican families, payroll tax increases will further harm 

25 low and middle income American families and add to 
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1 the burden on employers. This would especially af2 fect small businesses and harm job creation. 

3 (11) If reforms are not made and payroll taxes 

4 are not raised, Social Security benefits will have to 

5 be cut by 35 percent to balance the system over the 

6 next 75 years. Seniors rely too heavily on Social Se7 curity for their retirement security and it would be 

8 unfair to reduce their promised benefits. 

9 (12) Social Security is currently a Government10 controlled, Government-owned program that does 

11 not save a penny for workers’ retirement. Instead, it 

12 requires each generation to support the generation 

13 that came before it. With demographic changes, this 

14 structure passes on higher taxes, fewer benefits, and 

15 lower rates of return to younger Americans. 

16 (13) In its current form, Social Security 

17 hinders wealth creation and accumulation. While So18 cial Security does an adequate job of providing some 

19 Americans a steady poverty level income, it should 

20 also allow workers to build a nest egg that they can 

21 use to improve their retirement income, provide free22 dom and security in retirement, send grandchildren 

23 to college, or leave wealth to the next generation. 

24 Americans should have more to show for a lifetime 

25 of work than a small monthly check. 
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1 (14) Social Security does not currently help the 

2 low-income workers enough. The average monthly 

3 Social Security benefit check hovers at the poverty 

4 level. Despite popular perceptions, this means that 

5 in retirement the poor barely have enough money to 

6 sustain themselves on a monthly basis, and nothing 

7 to leave their children after their death. 

8 (15) More than 50 percent of American house9 holds are invested in the economy. However, low-in10 come and working poor individuals do not have ac11 cess to the investment tools that help the middle 

12 class prosper and succeed. Personal Social Security 

13 savings accounts would allow even the poorest work14 ers to participate in a growing economy. 

15 (16) Social Security is currently unfair to mi16 norities. A survey by the Federal Reserve Board of 

17 Governors shows that the wealth gap between whites 

18 and African-Americans is growing, despite the fact 

19 that the income gap between them is decreasing. As 

20 a result, white households have five to ten times as 

21 much wealth as black households. If this trend con22 tinues, this lack of wealth will prevent African-Amer23 icans from having the assets necessary to prosper 

24 and succeed, prohibiting full participation in the 

25 American dream. Personal savings accounts can pro-
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1 vide a minimum level of investment that will help 

2 the poor build capital and wealth. 

3 (17) As a result of mortality differences, Afri4 can Americans receive nearly $21,000 less on a life5 time basis from Social Security’s retirement pro6 gram than whites with similar income and marital 

7 status. Because they are younger than the general 

8 population, disproportionate numbers of Hispanic 

9 Americans will enter retirement having received 

10 below the market rates of return from the Social Se11 curity program. 

12 (18) Social Security is currently unfair to 

13 women who do not work for the required amount of 

14 time or would receive very low benefits based on 

15 their own earnings. Many women who have paid into 

16 Social Security over their working lives find that 

17 their best option is to claim benefits on their hus18 band’s contributions rather than on their own work 

19 history. Consequently, they get no return on the 

20 money they paid into a system. Personal savings ac21 counts would allow women to build wealth with their 

22 own money, which can be combined with their hus23 band’s contributions for even larger benefit levels. 

24 (19) Social Security’s rigid benefit structure 

25 does not provide hard-working Americans with the 
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1 flexibility to plan and shape their retirements to best 

2 suit their various lifestyles and life expectancies. 

3 (20) Social Security is creating a culture of de4 pendency. As the population ages, more and more 

5 Americans are becoming dependent on the govern6 ment for their retirement income. This trend robs 

7 older Americans of their freedom, independence, and 

8 dignity. 

9 (21) Social Security does not currently offer 

10 Americans any guarantee that they will receive their 

11 benefits. According to the United States Supreme 

12 Court, Americans do not own their Social Security 

13 benefits. In fact, the Court has said that Congress 

14 has the right ‘‘to alter, amend, or repeal any provi15 sion’’ of Social Security at any time. Americans have 

16 only a tenuous promise that Congress can change at 

17 any time, by any amount, and for any reason. 

18 (22) Personal savings accounts would transform 

19 Social Security from an IOU into real assets that in20 dividuals could own and pass along to their children. 

21 Personal savings accounts would enable Social Secu22 rity to start saving real economic assets for the first 

23 time, locking them away so they cannot be spent on 

24 non-Social Security programs.
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1 (23) Personal savings accounts would generate 

2 higher returns on the payroll taxes currently paid 

3 into Social Security, drastically reducing the finan4 cial shortfall in the system and paving the way for 

5 a fully funded system that is permanently self-sus6 taining. 

7 (24) Personal savings accounts would correct 

8 Social Security’s inequities for the poor, minorities, 

9 and women by offering everyone ownership, inde10 pendence, and access to wealth. 

11 (b) PURPOSES.—The Congress finds that it must act 

12 to reform the Social Security system so that—

13 (1) Social Security benefits are not changed for 

14 current retirees and near-retirees; 

15 (2) payroll taxes and other Social Security 

16 taxes are not increased; 

17 (3) Social Security surpluses are not used for 

18 other programs; 

19 (4) Social Security taxes are only used to ben20 efit workers; 

21 (5) the Government will not invest in the stock 

22 market; 

23 (6) Social Security’s disability and survivors 

24 components are maintained; 
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1 (7) the current Social Security safety net is 

2 preserved and strengthened through individually 

3 owned, voluntary personal savings accounts; 

4 (8) the current safety net is strengthened to 

5 give all workers with a personal savings account the 

6 opportunity to receive more than their currently 

7 promised benefits; 

8 (9) low-income workers will be allowed to save 

9 a larger portion of their payroll taxes than higher in10 come workers, helping many low-income Americans 

11 accumulate savings sufficient to pay retirement in12 come higher than the current system; 

13 (10) younger workers are empowered with gen14 erous savings that offer them the ability to com15 pletely own their retirement benefits; 

16 (11) the transition to a funded system is fi17 nanced from the general budget, which has taken 

18 money from Social Security for years; and 

19 (12) the long-term solvency of the system is 

20 guaranteed for at least 75 years, and cash-flow defi21 cits are completely eliminated, making Social Secu22 rity permanently self-sustaining. 
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1 SEC. 3. INDIVIDUAL SOCIAL SECURITY ACCOUNT PROGRAM 

2 AND INDIVIDUAL SOCIAL SECURITY AC3 COUNTS. 

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

5 is amended—

6 (1) by inserting before section 201 the fol7 lowing: 

8 ‘‘PART A—INSURANCE BENEFITS’’; 

9 and 

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

11 ‘‘PART B—INDIVIDUAL SOCIAL SECURITY ACCOUNT

12 PROGRAM

13 ‘‘DEFINITIONS

14 ‘‘SEC. 251. For purposes of this part—

15 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

16 individual’ means an individual described in section 

17 255(a) with respect to whom an election filed under 

18 section 255(b) renouncing such status has not been 

19 filed or has not taken effect, or with respect to 

20 whom an election filed under section 255(c) rein21 stating such status has taken effect. 

22 ‘‘(2) ACCOUNT OWNER.—The term ‘account 

23 owner’ means an eligible individual holding an indi24 vidual social security account. 

25 ‘‘(3) INDIVIDUAL SOCIAL SECURITY AC26 COUNT.—The term ‘‘individual social security ac-
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1 count’’ means an account established under section 

2 256. 

3 ‘‘(4) ACCOUNT.—The term ‘account’ means an 

4 individual social security account. 

5 ‘‘(5) ACCOUNT BALANCE.—The term ‘account 

6 balance’ means, in connection with an individual so7 cial security account, the amount in the Savings 

8 Fund credited to such account. 

9 ‘‘(6) SAVINGS FUND.—The term ‘Savings Fund’ 

10 means the Social Security Personal Savings Fund 

11 established under section 252.

12 ‘‘(7) EXECUTIVE DIRECTOR.—The term ‘Execu13 tive Director’ means the Executive Director ap14 pointed under section 253. 

15 ‘‘(8) BOARD.—The term ‘Board’ means the 

16 Personal Savings Board established under section 

17 252. 

18 ‘‘(9) DISTRIBUTION BASE.—The term ‘distribu19 tion base’ has the meaning provided such term 

20 under section 260(c). 

21 ‘‘(10) ELIGIBILITY FOR MONTHLY INSURANCE

22 BENEFITS.—An individual shall be deemed ‘eligible’ 

23 for a benefit under section 202 for a month if, upon 

24 filing application therefor in such month, such indi-
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1 vidual would be entitled to such benefit for such 

2 month. 

3 ‘‘PERSONAL SAVINGS BOARD

4 ‘‘SEC. 252. (a) ESTABLISHMENT.—There is estab5 lished in the executive branch of the Government a Per6 sonal Savings Board. 

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

8 of—

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

10 whom 1 shall be designated by the President as 

11 Chairman; and 

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

13 whom—

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

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

18 Leader of the House of Representatives; and 

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

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

22 in consultation with the Minority Leader of the 

23 Senate. 

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

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

26 consent of the Senate.
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1 ‘‘(d) MEMBERSHIP REQUIREMENTS.—Members of 

2 the Board shall have substantial experience, training, and 

3 expertise in the management of financial investments and 

4 pension benefit plans. 

5 ‘‘(e) LENGTH OF APPOINTMENTS.—

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

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

8 members first appointed under subsection (b)—

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

10 a term of 4 years; 

11 ‘‘(B) the members appointed under sub12 section (b)(2) shall be appointed for terms of 3 

13 years; and 

14 ‘‘(C) the remaining members shall be ap15 pointed for terms of 2 years. 

16 ‘‘(2) VACANCIES.—

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

18 Board shall be filled in the manner in which the 

19 original appointment was made and shall be 

20 subject to any conditions that applied with re21 spect to the original appointment. 

22 ‘‘(B) COMPLETION OF TERM.—An indi23 vidual chosen to fill a vacancy shall be ap24 pointed for the unexpired term of the member 

25 replaced. 
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1 ‘‘(3) EXPIRATION.—The term of any member 

2 shall not expire before the date on which the mem3 ber’s successor takes office. 

4 ‘‘(f) DUTIES.—The Board shall—

5 ‘‘(1) administer the program established under 

6 this part; 

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

8 management of the Savings Fund, including policies 

9 applicable to the outside entities and qualified pro10 fessional asset managers with responsibility for man11 aging the investment of account balances under sec12 tion 258, that shall provide for—

13 ‘‘(A) prudent investments suitable for ac14 cumulating funds for payment of retirement in15 come; and 

16 ‘‘(B) low administrative costs.

17 ‘‘(3) review the performance of investments 

18 made for the Savings Fund; 

19 ‘‘(4) review and approve the budget of the 

20 Board; and 

21 ‘‘(5) comply with the provisions of section 263. 

22 ‘‘(g) ADMINISTRATIVE PROVISIONS.—

23 ‘‘(1) IN GENERAL.—The Board may—

24 ‘‘(A) adopt, alter, and use a seal; 
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1 ‘‘(B) except as provided in paragraph (2), 

2 direct the Executive Director to take such ac3 tion as the Board considers appropriate to 

4 carry out the provisions of this part and the 

5 policies of the Board; 

6 ‘‘(C) upon the concurring votes of 4 mem7 bers, remove the Executive Director from office 

8 for good cause shown; 

9 ‘‘(D) provide to the Executive Director 

10 such resources as are necessary to carry out the 

11 requirements of section 253; and 

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

13 necessary to carry out the functions of the 

14 Board. 

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

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

17 month; and 

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

19 Chairman. 

20 ‘‘(3) EXERCISE OF POWERS.—

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

22 paragraph (1)(C) and section 253(a)(1), the 

23 Board shall perform the functions and exercise 

24 the powers of the Board on a majority vote of 

25 a quorum of the Board. Three members of the 
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1 Board shall constitute a quorum for the trans2 action of business. 

3 ‘‘(B) VACANCIES.—A vacancy on the 

4 Board shall not impair the authority of a 

5 quorum of the Board to perform the functions 

6 and exercise the powers of the Board. 

7 ‘‘(4) LIMITATION ON INVESTMENTS.—Except in 

8 the case of investments required by section 258 to 

9 be invested in special Trust Fund obligations, the 

10 Board may not direct the Executive Director or any 

11 account trustee to invest or to cause to be invested

12 any sums in the Savings Fund in a specific asset 

13 or to dispose of or cause to be disposed of any spe14 cific asset of the Savings Fund. 

15 ‘‘(h) COMPENSATION.—

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

17 who is not an officer or employee of the Federal 

18 Government shall be compensated at the daily rate 

19 of basic pay for level IV of the Executive Schedule 

20 for each day during which such member is engaged 

21 in performing a function of the Board. 

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

23 be paid travel, per diem, and other necessary ex24 penses under subchapter I of chapter 57 of title 5, 

25 United States Code, while traveling away from such 
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1 member’s home or regular place of business in the 

2 performance of the duties of the Board. 

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

4 under this subsection shall be paid from the Savings 

5 Fund. 

6 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem7 bers of the Board shall discharge their responsibilities 

8 solely in the interest of account owners and beneficiaries 

9 under this part. 

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

11 shall annually engage an independent qualified public ac12 countant to audit the activities of the Board. 

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

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

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

16 an annual budget of the expenses and other items relating 

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

18 in the budget required to be transmitted to Congress 

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

20 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA21 TIONS.—The Board may submit to the President, and, at 

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

23 any legislative recommendations of the Board relating to 

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

25 of law.
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1 ‘‘EXECUTIVE DIRECTOR

2 ‘‘SEC 253. (a) APPOINTMENT OF EXECUTIVE DIREC3 TOR.—

4 ‘‘(1) IN GENERAL.—The Board shall appoint, 

5 without regard to the provisions of law governing 

6 appointments in the competitive service, an Execu7 tive Director by action agreed to by a majority of 

8 the members of the Board. 

9 ‘‘(2) REQUIREMENTS.—The Executive Director 

10 shall have substantial experience, training, and ex11 pertise in the management of financial investments 

12 and pension benefit plans. 

13 ‘‘(b) DUTIES.—The Executive Director shall—

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

15 Board; 

16 ‘‘(2) invest and manage the Savings Fund in 

17 accordance with the investment policies and other 

18 policies established by the Board;

19 ‘‘(3) provide for the distribution of individual 

20 social security account balances in accordance with 

21 this part (including the purchase of annuity con22 tracts with assets of the Savings Fund to the extent 

23 provided under section 260(b)(5)); 

24 ‘‘(4) administer the provisions of this part re25 lating to the Savings Fund; and 
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1 ‘‘(5) prescribe such regulations (other than reg2 ulations relating to fiduciary responsibilities) as may 

3 be necessary for the administration of this part re4 lating to the Savings Fund. 

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

6 Director may—

7 ‘‘(1) appoint such personnel as may be nec8 essary to carry out the provisions of this part relat9 ing to the Savings Fund; 

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

11 the services of experts and consultants under section 

12 3109 of title 5, United States Code; 

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

14 the United States Postal Service, or the Postal Rate 

15 Commission any information necessary to carry out 

16 the provisions of this part and the policies of the 

17 Board relating to the Savings Fund; 

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

19 Savings Fund as the Executive Director determines 

20 are necessary to carry out the provisions of this part 

21 and the policies of the Board; 

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

23 expenses of individuals appointed under paragraphs 

24 (1), (2), and (6) from the Savings Fund; 
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1 ‘‘(6) accept and use the services of individuals 

2 employed intermittently in the Government service 

3 and reimburse such individuals for travel expenses, 

4 authorized by section 5703 of title 5, United States 

5 Code, including per diem as authorized by section 

6 5702 of such title; 

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

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

9 Executive Director’s functions to such employees 

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

12 such functions to such employees under the Board 

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

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

16 to carry out the functions of the Executive Director. 

17 ‘‘SOCIAL SECURITY PERSONAL SAVINGS FUND

18 ‘‘SEC. 254. (a) ESTABLISHMENT OF SAVINGS

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

20 United States a Social Security Personal Savings Fund, 

21 consisting of all amounts transferred to or deposited in 

22 the Savings Fund in accordance with section 257, in23 creased by the total net earnings from investments of 

24 sums in the Savings Fund or reduced by the total net 

25 losses from investments of the Savings Fund, and reduced 
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1 by the total amount of payments made from the Savings 

2 Fund (including payments for administrative expenses). 

3 ‘‘(b) AVAILABILITY.—The sums in the Savings Fund 

4 are appropriated and shall remain available without fiscal 

5 year limitation—

6 ‘‘(1) to invest under section 258; 

7 ‘‘(2) to make distributions in accordance with 

8 sections 260 and 261; 

9 ‘‘(3) to pay the administrative expenses of the 

10 Board; and

11 ‘‘(4) to purchase insurance as provided in sec12 tion 263(c). 

13 ‘‘(c) LIMITATIONS ON USE OF FUNDS.—

14 ‘‘(1) IN GENERAL.—Sums in the Savings Fund 

15 credited to an individual social security account in 

16 the Savings Fund may not be used for, or diverted 

17 to, purposes other than for the exclusive benefit of 

18 the account owner or the account owner’s bene19 ficiaries under this part.

20 ‘‘(2) ASSIGNMENTS.—Except as provided in 

21 paragraph (3), sums in the Savings Fund may not 

22 be assigned or alienated and are not subject to exe23 cution, levy, attachment, garnishment, or other legal 

24 process. 
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1 ‘‘(3) SUPPORT OBLIGATIONS.—Moneys due or 

2 payable from the Savings Fund to any account 

3 owner shall be subject to legal process for the en4 forcement of the account owner’s legal obligations to 

5 provide child support or make alimony payments as 

6 provided in section 459 or for the enforcement of a 

7 court order or other similar process in the nature of 

8 a garnishment for the enforcement of a judgment 

9 rendered against the account owner for physically, 

10 sexually, or emotionally abusing a child. 

11 ‘‘(d) PAYMENT OF ADMINISTRATIVE EXPENSES.—

12 Administrative expenses incurred to carry out this part 

13 shall be paid out of net earnings in the Savings Fund in 

14 conjunction with the allocation of investment earnings and 

15 losses under section 256(c). 

16 ‘‘(e) LIMITATION.—The sums in the Savings Fund 

17 shall not be appropriated for any purpose other than the 

18 purposes specified in this section and may not be used for 

19 any other purpose. 

20 ‘‘ELIGIBLE INDIVIDUALS

21 ‘‘Sec. 255. (a) STATUS AS ELIGIBLE INDIVIDUAL.—

22 Except as otherwise provided in this section, any indi23 vidual who—

24 ‘‘(1) was born on or after January 1, 1950, 

25 ‘‘(2) has attained age 18, and
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1 ‘‘(3) has been assigned a social security account 

2 number under section 205(c), 

3 shall be an eligible individual under this part. 

4 ‘‘(b) RENUNCIATION OF STATUS AS ELIGIBLE INDI5 VIDUAL.—

6 ‘‘(1) IN GENERAL.—Within 540 days after the 

7 later of January 1, 2005, or the date on which an 

8 eligible individual first meets all requirements of 

9 subsection (a), such individual may elect to renounce 

10 such individual’s status under this part as an ‘eligi11 ble individual’ by filing an election under this sub12 section. 

13 ‘‘(2) REQUIREMENTS.—An election under this 

14 subsection must be filed with the Commissioner, in 

15 such form and manner as shall be prescribed in reg16 ulations of the Commissioner, and shall consist of a 

17 written and signed declaration of such individual’s 

18 intention to renounce such individual’s status as an 

19 eligible individual under this part. The Commis20 sioner shall provide for immediate notification to the 

21 Board and the Executive Director of such election. 

22 ‘‘(3) TERMINATION OF STATUS.—An election 

23 under this subsection shall be effective with respect 

24 to wages earned, and self-employment income de25 rived, on or after January 1 following the date of 
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1 the filing of the election. On and after the effective 

2 date of the election the individual filing the election 

3 shall cease to be an eligible individual under this 

4 part, any individual social security account estab5 lished for such individual shall be closed, and any 

6 balance in such account shall be paid into the Fed7 eral Old-Age and Survivor’s Insurance Trust Fund 

8 as general receipts. 

9 ‘‘(c) REINSTATEMENT.—

10 ‘‘(1) IN GENERAL.—Any individual who has 

11 filed an election under subsection (b) to renounce 

12 such individual’s status as an eligible individual 

13 under this part may elect under this subsection to 

14 reinstate such individual’s status as an eligible indi15 vidual. 

16 ‘‘(2) REQUIREMENTS.—An election by an indi17 vidual under this subsection must be filed with the 

18 Commissioner, in such form and manner as shall be 

19 prescribed in regulations of the Commissioner, con20 sisting of a written and signed declaration of such 

21 individual’s intention to reinstate such individual’s 

22 status as an eligible individual under this part. Such 

23 regulations shall provide for regular, periodic oppor24 tunities for the filing of such an election. The Com25 missioner shall provide for immediate notification to 
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1 the Board and the Executive Director of such elec2 tion. 

3 ‘‘(3) TERMINATION OF STATUS.—An election 

4 under this subsection shall be effective with respect 

5 to wages earned, and self-employment income de6 rived, on or after January 1 following the date of 

7 the filing of the election. The individual filing the 

8 election shall be treated as becoming an eligible indi9 vidual under this part on the effective date of the 

10 election as if such individual first met the require11 ments of subsection (a) on such date. 

12 ‘‘(4) IRREVOCABILITY.—An election under this 

13 subsection shall be irrevocable. 

14 ‘‘INDIVIDUAL SOCIAL SECURITY ACCOUNTS

15 ‘‘SEC. 256. (a) ESTABLISHMENT OF A PUBLICLY AD16 MINISTERED SYSTEM OF INDIVIDUAL SOCIAL SECURITY

17 ACCOUNTS.—As soon as practicable after the later of Jan18 uary 1, 2004, or the date on which an individual becomes 

19 an eligible individual under this part, the Executive Direc20 tor shall establish in the Savings Fund an individual social 

21 security account for such individual. Each account shall 

22 be identified to its account owner by means of the account 

23 owner’s social security account number. The Savings 

24 Fund shall accept any prescribed social security deposit 

25 made with respect to any eligible individual as provided 

26 in section 257. The Executive Director shall credit such 
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1 deposit to such individual’s individual social security ac2 count. 

3 ‘‘(b) ACCOUNT BALANCE.—The balance in an ac4 count owner’s account at any time is the excess of—

5 ‘‘(1) the sum of all deposits and contributions 

6 described in subsection (a) credited to such account, 

7 subject to such increases and reductions as may re8 sult from allocations made to and reductions made 

9 in the account pursuant to subsection (c), over 

10 ‘‘(2) amounts credited to such account and paid 

11 out of the Savings Fund with respect to such ac12 count owner under this part. 

13 ‘‘(c) ALLOCATION OF EARNINGS AND LOSSES.—Pur14 suant to regulations which shall be prescribed by the 

15 Board, the Executive Director shall allocate to each indi16 vidual social security account an amount equal to the net 

17 earnings and net losses from each investment of sums in 

18 the Social Security Personal Savings Fund which are at19 tributable, on a pro rata basis, to sums credited to such 

20 account, reduced by an appropriate share of the adminis21 trative expenses paid out of the net earnings, as deter22 mined by the Executive Director. 

23 ‘‘PRESCRIBED SOCIAL SECURITY DEPOSITS

24 ‘‘SEC. 257. (a) IN GENERAL.—As soon as prac25 ticable, the Secretary of the Treasury shall transfer 

26 amounts equivalent to 100 percent of the prescribed social 
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1 security deposit for each eligible individual for each year 

2 from the Federal Old-Age and Survivors Insurance Trust 

3 Fund to the Social Security Personal Savings Fund, for 

4 subsequent crediting with respect to such individual under 

5 section 256. Such transfers shall be made in periodic in6 stallments, such installments to be determined, to the ex7 tent necessary, on the basis of estimates by the Commis8 sioner of Social Security of wages and self-employment in9 come, which shall be certified to the Secretary of the 

10 Treasury. Proper adjustments shall be made in amounts 

11 transferred for subsequent periods to the extent that 

12 amounts transferred for prior periods were greater or less 

13 than the proper amounts. Upon determining the actual 

14 amount of the prescribed social security deposit for an eli15 gible individual for each year, the Executive Director shall 

16 promptly credit such amount to such individual’s indi17 vidual social security account under section 256. Prior to 

18 such crediting of amounts held in the Savings Fund to 

19 individual social security accounts, such amounts shall be 

20 invested by the Executive Director as provided in section 

21 258 in accordance with regulations of the Board. 

22 ‘‘(b) PRESCRIBED SOCIAL SECURITY DEPOSITS.—

23 For purposes of this part, the prescribed social security 

24 deposit for an eligible individual for any calendar year is 

25 an amount equal to the sum of—
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1 ‘‘(1) the product derived by multiplying—

2 ‘‘(A) such individual’s wages paid, and 

3 self-employment income derived, in such cal4 endar year (as certified to the Secretary of the 

5 Treasury by the Commissioner of Social Secu6 rity) not in excess of the contribution and ben7 efit base for such calendar year, by 

8 ‘‘(B) such individual’s transfer percentage 

9 for such calendar year, and 

10 ‘‘(2) the net return on the investment, in ac11 cordance with section 258, of amounts equivalent to 

12 the product determined under paragraph (1) during 

13 the period such amounts were held in the Savings 

14 Fund prior to deposit in such individual’s individual 

15 social security account. 

16 ‘‘(c) TRANSFER PERCENTAGE.—For purposes of sub17 section (b)(1)(B), the term ‘transfer percentage’ of an in18 dividual for a calendar year means the excess of—

19 ‘‘(1) 8.00 percent, over 

20 ‘‘(2) the product derived by multiplying—

21 ‘‘(A) 5.00 percent, by 

22 ‘‘(B) a fraction—

23 ‘‘(i) the numerator of which is the 

24 amount of such individual’s wages paid, 

25 and self-employment income derived, in 
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1 such calendar year (as certified to the Sec2 retary of the Treasury by the Commis3 sioner of Social Security) not in excess of 

4 the contribution and benefit base (deter5 mined under section 230) for such cal6 endar year, and 

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

8 contribution and benefit base (so deter9 mined) for such calendar year, 

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

11 nearest multiple of 0.01 percent. 

12 ‘‘INVESTMENTS IN COMMON STOCK AND GOVERNMENT

13 OBLIGATIONS

14 ‘‘SEC. 258. (a) IN GENERAL.—Any balance held in 

15 an individual social security account under this part and 

16 the balance of any other amounts held by the Savings 

17 Fund which are not necessary for immediate withdrawal 

18 shall be invested as provided in this section. 

19 ‘‘(b) INVESTMENT MIX BETWEEN STOCK AND

20 BONDS.—Except to the extent otherwise elected by the ac21 count owner under subsection (e) with respect to the bal22 ance credited to the account owner’s account, the Execu23 tive Director shall invest each balance referred to in sub24 section (a) under regulations which shall be prescribed by 

25 the Board so as to ensure, to the maximum extent prac-
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1 ticable, that, of the total balance available for investment 

2 (after allowing for administrative expenses)—

3 ‘‘(1) 35 percent is invested in United States 

4 Government obligations in accordance with sub5 section (c), and 

6 ‘‘(2) the remainder is invested in common stock 

7 in accordance with subsection (d). 

8 ‘‘(c) INVESTMENT IN SOCIAL SECURITY TRANSITION

9 BONDS AND OTHER UNITED STATES TREASURY OBLIGA10 TIONS.—

11 ‘‘(1) PURCHASE BY THE BOARD OF SOCIAL SE12 CURITY TRANSITION BONDS.—To the extent nec13 essary to provide for investment of the portion of the 

14 account balance required to be invested as provided 

15 in subsection (b)(1), the Executive Director shall 

16 purchase Social Security Transition Bonds made 

17 available by the Managing Trustee of the Federal 

18 Old-Age and Survivors Insurance Trust Fund for 

19 purchase pursuant to paragraph (2) . 

20 ‘‘(2) ISSUANCE OF BONDS.—To the extent de21 termined necessary by the Managing Trustee of the 

22 Federal Old-Age and Survivors Insurance Trust 

23 Fund to avoid a negative cash flow for such Trust 

24 Fund, the Managing Trustee shall issue special obli25 gations of such Trust Fund (to be known as ‘Social 
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1 Security Transition Bonds’) for purchase by the Ex2 ecutive Director under paragraph (1), in such forms 

3 and denominations, bearing such maturities, and 

4 subject to such terms and conditions as may be pre5 scribed by the Managing Trustee. 

6 ‘‘(3) PURCHASE OF OUTSTANDING MARKET7 ABLE LONG-TERM TREASURY SECURITIES.—To the 

8 extent that purchase of Social Security Transition 

9 Bonds made available pursuant to paragraph (2) is 

10 insufficient to provide for investment in full of the 

11 portion of the account balance required to be in12 vested as provided in subsection (b)(1), the Execu13 tive Director shall invest the account balance in 

14 United States Treasury bills issued under chapter 

15 31 of title 31, United States Code, bearing interest 

16 at a rate at least equal to the average market yield 

17 (computed by the Managing Trustee on the basis of 

18 market quotations as of the end of the calendar 

19 month next preceding the date of issue of such obli20 gations) on all marketable interest-bearing obliga21 tions of the United States then forming a part of the 

22 public debt which are not due or callable earlier than 

23 4 years after the end of such calendar month. 

24 ‘‘(d) INVESTMENT IN COMMON STOCK.—
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1 ‘‘(1) IN GENERAL.—The Board shall establish 

2 by regulation standards which must be met by com3 mon stock selected for investment of the portion of 

4 any balance required to be invested in common stock 

5 under subsection (b). 

6 ‘‘(2) STANDARD OPTION.—In conformity with 

7 such standards, the Board shall select, for purposes 

8 of such investment, an index which is a commonly 

9 recognized index comprised of common stock the ag10 gregate market value of which is a reasonably com11 plete representation of the United States equity 

12 markets. Except to the extent otherwise elected by 

13 an account owner under subsection (e) with respect 

14 to the balance credited to the account owner’s ac15 count, the amount of any balance which is required 

16 to be invested in common stock under subsection 

17 (b)(2) shall be invested in a portfolio designed to 

18 replicate the performance of such index. Such port19 folio shall be referred to as the ‘Standard Option’ 

20 for such calendar year. 

21 ‘‘(e) ANNUAL OPPORTUNITY TO ELECT ALTER22 NATIVE INVESTMENT OPTIONS.—

23 ‘‘(1) ELECTION OF APPLICABLE PORTFOLIOS.—

24 ‘‘(A) IN GENERAL.—In any case in which, 

25 as of the end of the second quarter of any cal-
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1 endar year, the balance of an individual social 

2 security account exceeds the election threshold 

3 specified in subparagraph (B) for such calendar 

4 year, the Board shall provide by regulation for 

5 an opportunity, during the third quarter of 

6 such calendar year, for such account owner to 

7 elect one or both portfolios described in para8 graph (2) as applicable portfolios, in connection 

9 with such account, for the following calendar 

10 year, in lieu of or in addition to the Standard 

11 Option. In the case of such an election, 

12 amounts in the account invested in stock shall 

13 be allocated during such calendar year among 

14 the portfolio or portfolios so elected for such 

15 calendar year, in percentages specified in the 

16 election by the account owner for each applica17 ble portfolio. 

18 ‘‘(B) ELECTION THRESHOLD.—The elec19 tion threshold specified in this subparagraph 

20 for calendar year 2005 is $5,000. The Execu21 tive Director shall, on or before November 1 of 

22 2005 and of every year thereafter, determine 

23 and publish in the Federal Register the election 

24 threshold for the succeeding calendar year. 

25 Such election threshold shall be the larger of— 
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1 ‘‘(i) the amount in effect for the cal2 endar year in which the determination 

3 under this subparagraph is made, or 

4 ‘‘(ii) the product of $5,000 and the 

5 ratio of the national average wage index 

6 (as defined in section 209(k)(1)) for the 

7 calendar year before the year in which the 

8 determination under this subparagraph is 

9 made to the national average wage index 

10 (as so defined) for 2003, 

11 with such product, if not a multiple of $10, 

12 being rounded to the next higher multiple of 

13 $10 where such amount is a multiple of $5 but 

14 not of $10 and to the nearest multiple of $10 

15 in any other case. 

16 ‘‘(2) ADDITIONAL OPTIONS.—For purposes of 

17 paragraph (1)—

18 ‘‘(A) SMALL CAPITALIZATION OPTION.—

19 The Board shall select an index which is a com20 monly recognized index comprised of small cap21 italization stock the aggregate market value of 

22 which is a representation of publicly held com23 panies whose shares are traded on the small 

24 capitalization equity markets of the United 

25 States. The Board shall select for each calendar 
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1 year a portfolio of stock included in such index 

2 designed to replicate the performance of such 

3 index. Such portfolio shall be referred to as the 

4 ‘Small Capitalization Option’ for such calendar 

5 year. The portfolio shall be designed such that, 

6 to the extent practicable, the percentage of the 

7 total amount of the Savings Fund invested in 

8 such portfolio that is invested in each stock is 

9 the same as the percentage determined by di10 viding the aggregate market value of all shares 

11 of that stock by the aggregate market value of 

12 all shares of all stocks included in such index. 

13 ‘‘(B) MEDIUM CAPITALIZATION OPTION.—

14 The Board shall select an index which is a com15 monly recognized index comprised of medium 

16 capitalization stock the aggregate market value 

17 of which is a representation of publicly held 

18 companies whose shares are traded on the me19 dium capitalization equity markets of the 

20 United States. The Board shall select for each 

21 calendar year a portfolio of stock included in 

22 such index designed to replicate the perform23 ance of such index. Such portfolio shall be re24 ferred to as the ‘Medium Capitalization Option’ 

25 for such calendar year. The portfolio shall be 
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1 designed such that, to the extent practicable, 

2 the percentage of the total amount of the Sav3 ings Fund invested in such portfolio that is in4 vested in each stock is the same as the percent5 age determined by dividing the aggregate mar6 ket value of all shares of that stock by the ag7 gregate market value of all shares of all stocks 

8 included in such index. 

9 ‘‘(3) PUBLICATION OF AVAILABLE PORT10 FOLIOS.—

11 ‘‘(A) IN GENERAL.—The Board shall pub12 lish, prior to the third quarter of each calendar 

13 year, the Board’s determination of the relative 

14 breadth of diversification represented by the 

15 Standard Option, the Small Capitalization Op16 tion, and the Medium Capitalization Option for 

17 the following calendar year pursuant to this 

18 subsection. 

19 ‘‘(B) DEFAULT PORTFOLIO.—The Board 

20 shall clearly identify, in each publication of the 

21 3 options for a calendar year, the portfolio 

22 which is the Standard Option for such calendar 

23 year. In any case in which an account owner 

24 fails to make an election for a calendar year for 

25 any portion of the balance in the account, the
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1 portfolio so identified by the Board as the 

2 Standard Option shall serve as the applicable 

3 portfolio for such calendar year in connection 

4 with such portion of the account. 

5 ‘‘(4) VARIATION FROM THE STANDARD MIX BE6 TWEEN STOCKS AND BONDS.—In accordance with 

7 regulations of the Board, in connection with any 

8 election under paragraph (1) for a calendar year, the 

9 account owner may also elect to vary for such cal10 endar year, from the Standard Mix specified in sub11 section (b), the allocation of the total balance in the 

12 account available for investment (after allowing for 

13 administrative expenses) between Social Security 

14 Transition Bonds and stock. 

15 ‘‘(5) ELECTIONS EFFECTIVE FOR SUBSEQUENT

16 YEARS.—Any election made under this subsection 

17 for any calendar year shall remain in effect for sub18 sequent calendar years until an election providing 

19 otherwise is made under this subsection. 

20 ‘‘(6) INFORMATIONAL ELECTION FORMS.—Elec21 tions under this subsection shall be made on a form 

22 which shall be prescribed by the Board. Such form 

23 shall include a statement, in language formulated so 

24 as to be understood by the typical eligible individual, 

25 which describes the extent to which risk of loss 
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1 under the program established under this part may 

2 be avoided under section 235 by maintaining invest3 ments under the Standard Option and in accordance 

4 with the Standard Mix. Each eligible individual who 

5 elects to invest in the Small Capitalization Option or 

6 the Medium Capitalization Option, or to vary the al7 location of investment from the Standard Mix under 

8 subsection (b), shall sign an acknowledgement con9 tained in such form which states that the individual 

10 understands that, while there is a chance that an 

11 election to invest in either such option or an election 

12 of such a variance may result in increased returns 

13 on investment, such an election is made at the indi14 vidual’s risk, that the individual is not protected 

15 against any loss on such investment or by reason of 

16 such variance, and that a return on any such invest17 ment is not guaranteed by the Government. 

18 ‘‘(f) LIMITATION ON VOTING RIGHTS.—The Board, 

19 the Executive Director, and any account owner may not 

20 exercise voting rights associated with the ownership of se21 curities held in the Savings Fund. 

22 ‘‘ACCOUNTING AND INFORMATION

23 ‘‘SEC. 259. (a) ANNUAL, INDEPENDENT AUDITS.—

24 ‘‘(1) INDEPENDENT ACCOUNTANT.—The Exec25 utive Director shall annually engage, on behalf of all 

26 account owners under this part, an independent 
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1 qualified public accountant, who shall conduct an ex2 amination of all accounts and other books and 

3 records maintained by the Executive Director under 

4 this part as the public accountant considers nec5 essary to enable the public accountant to make the 

6 determination required by paragraph (2). The exam7 ination shall be conducted in accordance with gen8 erally accepted auditing standards and shall involve 

9 such tests of the accounts, books, and records as the 

10 public accountant considers necessary. 

11 ‘‘(2) DETERMINATION REQUIRED.—The public 

12 accountant conducting an examination under para13 graph (1) shall determine whether the accounts, 

14 books, and records referred to in such paragraph 

15 have been maintained in conformity with generally 

16 accepted accounting principles applied on a basis 

17 consistent with the manner in which such principles 

18 were applied during the examination conducted 

19 under such paragraph during the preceding year. 

20 The public accountant shall transmit to the Board 

21 a report on his examination, including his deter22 mination under this paragraph. 

23 ‘‘(3) RELIANCE ON ACTUARIAL MATTER.—In 

24 making a determination under paragraph (2), a pub25 lic accountant may rely on the correctness of any ac-
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•HR 3177 IH 

1 tuarial matter certified by an accredited actuary if 

2 the public accountant states his reliance in the re3 port transmitted to the Board under such para4 graph. 

5 ‘‘(4) DEFINITION.—In this subsection, the term 

6 ‘qualified public accountant’ shall have the same 

7 meaning as provided in section 103(a)(3)(D) of the 

8 Employee Retirement Income Security Act of 1974 

9 (29 U.S.C. 1023(a)(3)(D)). 

10 ‘‘(b) STATEMENTS.—

11 ‘‘(1) IN GENERAL.—The Board shall prescribe 

12 regulations under which each account owner under 

13 this part shall be furnished by the Executive Direc14 tor with a periodic statement relating to the account 

15 owner’s account, setting forth—

16 ‘‘(A) the current account balance, 

17 ‘‘(B) a summary description of the invest18 ments made pursuant to section 258, and 

19 ‘‘(C) an evaluation of the performance of 

20 such investments over the 5-year period pre21 ceding the date as of which such evaluation is 

22 made. 

23 ‘‘(2) TIMING.—Information under this sub24 section shall be provided at least annually. 

25 ‘‘ACCOUNT DISTRIBUTIONS

26 ‘‘SEC. 260. (a) IN GENERAL.—Subject to this part—
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1 ‘‘(1) AVAILABILITY OF WITHDRAWALS.—On 

2 and after the date on which an account owner be3 comes entitled to old-age insurance benefits under 

4 section 202(a), the entire balance in the account 

5 owner’s individual social security account shall be 

6 available for withdrawal in a distribution meeting 

7 the requirements of this section. 

8 ‘‘(2) DISTRIBUTION OF BALANCES IN EXCESS

9 OF THE DISTRIBUTION BASE.—Any amount with10 drawn by the account owner pursuant to paragraph 

11 (1) which is in excess of the distribution base shall 

12 be payable to the account owner in such manner and 

13 in such amounts as may be determined by the ac14 count owner (in such form and manner as shall be 

15 prescribed in regulations of the Board to provide for 

16 efficient and effective payment). 

17 ‘‘(3) DISTRIBUTION OF BALANCES REP18 RESENTING THE DISTRIBUTION BASE.—On and 

19 after the first date as of which an account owner be20 comes entitled to old-age insurance benefits under 

21 section 202(a) and has requested commencement of 

22 distribution of the account owner’s distribution base, 

23 the Executive Director shall provide for withdrawal 

24 of the portion of the account balance which is not 

25 in excess of the distribution base of the account
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1 owner in accordance with subsections (b) through 

2 (e). 

3 ‘‘(b) DISTRIBUTION OF AMOUNTS IN DISTRIBUTION

4 BASE IN MONTHLY ANNUITY PAYMENTS.—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this section, effective upon the date referred 

7 to in subsection (a)(3), the Executive Director shall 

8 transfer so much of the account balance as is not in 

9 excess of the distribution base of the account owner 

10 from the account owner’s account to amounts other11 wise held in the Savings Fund. In exchange for the 

12 amounts transferred, the Executive Director shall 

13 provide, payable from the Saving Fund—

14 ‘‘(A) if the covered individual is not mar15 ried on such date, an immediate single life an16 nuity for the account owner, payable in monthly 

17 installments, or 

18 ‘‘(B) if the account owner is married on 

19 such date, an immediate annuity for the joint 

20 lives of the covered individual and the covered 

21 individual’s spouse, payable in monthly install22 ments, together with a survivor annuity to the 

23 one of them who survives the other of them for 

24 the life of the survivor payable in monthly installments equal to 662 25 ⁄3 percent of the monthly 
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1 payment of the annuity that would be payable 

2 if both spouses remained alive. 

3 The annuity shall be payable in amounts so as to 

4 have an actuarial present value equal to such dis5 tribution base, as determined on the basis of gen6 erally accepted actuarial assumptions. 

7 ‘‘(2) COST OF LIVING ADJUSTMENTS.—Any an8 nuity provided for under this subsection shall pro9 vide for annual indexing of the monthly payments 

10 according to the Consumer Price Index for All 

11 Urban Consumers (United States city average), pub12 lished by the Bureau of Labor Statistics. 

13 ‘‘(3) OPTIONAL CASH DISTRIBUTION.—

14 ‘‘(A) IN GENERAL.—Effective on the date 

15 referred to in subsection (a)(3), in lieu of a dis16 tribution of the account balance as described in 

17 the preceding provisions of this subsection, the

18 account owner may elect, in such form and 

19 manner as shall be prescribed by the Executive 

20 Director—

21 ‘‘(i) an annuity determined under this 

22 subsection by substituting in paragraph (1) 

23 for references to the distribution base ref24 erences to the reduced distribution base 

25 described in subparagraph (B), and 
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1 ‘‘(ii) a distribution from the account 

2 in cash equal to the excess of the balance 

3 in the account over such reduced distribu4 tion base. 

5 ‘‘(B) REDUCTION IN AMOUNT AVAILABLE

6 FOR ANNUITY FORM OF DISTRIBUTION.—For 

7 purposes of subparagraph (A), the amount of 

8 the reduced distribution base is an amount 

9 equal to the greater of—

10 ‘‘(i) 35 percent of the balance in the 

11 account, or 

12 ‘‘(ii) an amount necessary (as deter13 mined by the Executive Director) to fund 

14 an annuity providing annual payments in 

15 the amount of—

16 ‘‘(I) $8,950, in any case in which 

17 no individual other than the account 

18 owner is eligible for benefits under 

19 section 202 based on the wages and 

20 self-employment income of the ac21 count owner, or 

22 ‘‘(II) $12,120, in any other case. 

23 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—The 

24 Secretary shall adjust, for 2005 and for each 

25 calendar year thereafter, each dollar amount 
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1 specified in subparagraph (B)(ii) for increases 

2 in the cost-of-living in accordance with regula3 tions prescribed by the Secretary. Such regula4 tions shall provide for an adjustment with re5 spect to each calendar year based on the in6 crease in the Consumer Price Index for All 

7 Urban Consumers (United States city average), 

8 published by the Bureau of Labor Statistics, for 

9 the calendar quarter ending September 30 of 

10 the preceding calendar year over such index for 

11 the calendar quarter ending September 30, 

12 2003. Any increase under this clause which is 

13 not a multiple of $10 shall be rounded to the 

14 next higher multiple of $10 where such product 

15 is a multiple of $5 but not of $10 and to the 

16 nearest multiple of $10 in any other case. 

17 ‘‘(D) INVESTMENT OF 35 PERCENT

18 AMOUNT IN BONDS.—In the case of a cash dis19 tribution under this paragraph, the investment 

20 of a portion of the account balance equivalent 

21 to the 35 percent amount determined under 

22 subparagraph (B)(i) shall remain invested solely 

23 in the form described in section 258(d). 

24 ‘‘(4) PURCHASE OF ANNUITIES.—The Executive 

25 Director shall, on an ongoing basis, survey the avail-
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1 ability for purchase in the private sector of annuity 

2 contracts which would effectively assist in the dis3 tribution of individual social security accounts under 

4 this subsection. If the Executive Director determines 

5 that the return on investment of funds held in the 

6 private sector for the purpose of funding such annu7 ity contracts would be (taking into account applica8 ble administrative expenses) at least equivalent to 

9 the rate of return on funds held in the Savings 

10 Fund pending distribution as described in paragraph 

11 (1), the Executive Director shall provide by regula12 tion for the purchase of such annuity contracts as 

13 a means of providing for payment of the monthly 

14 payment amounts otherwise prescribed under para15 graph (2). Any such annuity contract shall provide 

16 for investment of amounts held to fund the annuity 

17 in the manner prescribed in section 258(b)(1). 

18 ‘‘(c) DISTRIBUTION BASE.—For purposes of this sec19 tion, the distribution base of an account owner is the actu20 arial present value of the expected future benefits payable 

21 under section 202 on the basis of the wages and self-em22 ployment income of the account owner (determined with23 out regard to section 215(a)(8)). The actuarial present 

24 value determined under this subsection shall be deter25 mined as of the date described in subsection (a)(3). In
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1 making assumptions under this subsection, the Executive 

2 Director shall take into account the reasonably anticipated 

3 period for which each beneficiary will remain eligible for 

4 benefits under section 202 based on the account owner’s 

5 wages and self-employment income and the current ex6 pected life expectancy of such beneficiary. 

7 ‘‘(d) TREATMENT OF DIVORCE, ANNULMENT, AND

8 LEGAL SEPARATION.—

9 ‘‘(1) REALLOCATION OF ACCOUNT BALANCES

10 ATTRIBUTABLE TO PRESCRIBED SOCIAL SECURITY

11 DEPOSITS.—

12 ‘‘(A) IN GENERAL.—Upon the issuance of 

13 a court decree of divorce or annulment in the 

14 case of an account owner and the account own15 er’s spouse before the date of the commence16 ment of any distribution from the account own17 er’s individual social security account under 

18 subsections (a) and (b), 50 percent of the 

19 amount in such account which is attributable to 

20 prescribed social security deposits under section 

21 257(b) for calendar years ending during the pe22 riod of marriage (and earnings thereon) shall be 

23 transferred from such account to the individual 

24 social security account of such spouse. In any 

25 case in which the spouse is not an eligible indi-
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1 vidual, such spouse shall be deemed an eligible 

2 individual upon the date of the decree, and the 

3 transfer provided for under this paragraph shall 

4 be made upon the establishment of the spouse’s 

5 individual social security account. This para6 graph shall apply in connection with such a de7 cree only if notice of such decree was received 

8 by the Executive Director before the date of the 

9 commencement of the distribution. 

10 ‘‘(B) REVOCATION OF STATUS BY

11 SPOUSE.—A spouse who is deemed an eligible 

12 individual under subparagraph (A) may, during 

13 the 540-day period beginning on the date of the 

14 decree of divorce or annulment, revoke his or 

15 her status as an eligible individual in a form 

16 and manner which shall be prescribed in regula17 tions of the Board. Upon such a revocation, the 

18 spouse’s individual social security account shall 

19 be closed and any amounts theretofore depos20 ited in the account shall be transferred to the 

21 Federal Old-Age and Survivors Insurance Trust 

22 Fund. 

23 ‘‘(2) TREATMENT OF ANNUITY PAYMENTS.—

24 ‘‘(A) IN GENERAL.—Subsections (a) and 

25 (b) shall be subject to the terms of any court 
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1 decree, order, or agreement described in sub2 paragraph (B). 

3 ‘‘(B) COURT DECREE, ORDER, OR AGREE4 MENT DESCRIBED.—A court decree, order, or 

5 agreement described in this clause is, with re6 spect to an account owner, a court decree of di7 vorce, annulment, or legal separation issued in 

8 the case of such account owner and such ac9 count owner’s spouse or any court order or 

10 court-approved property settlement agreement 

11 incident to such decree if— 

12 ‘‘(i) the decree, order, or agreement 

13 expressly relates to any annuity under sub14 section (b)(3), and 

15 ‘‘(ii) notice of the decree, order, or 

16 agreement has been received by the Execu17 tive Director and, with respect to any an18 nuity payment, such notice was received 

19 before the date on which payment is made. 

20 ‘‘(3) 2 OR MORE CASES.—The Board shall 

21 prescribe regulations under which this sub22 section shall be applied in any case in which the 

23 Executive Director receives notice of 2 or more 

24 decrees, orders, or agreements referred to in 

25 paragraph (1) or (2). 
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1 ‘‘(e) LUMP-SUM PAYMENT REQUIRED FOR MINIMAL

2 AMOUNTS.—Notwithstanding the preceding provisions of 

3 this section, if, upon entitlement of an account owner to 

4 old-age insurance benefits under section 202(a), the ac5 count balance is below $5,000, the entire account balance 

6 shall be distributed to the account owner in a single lump7 sum amount. 

8 ‘‘PAYMENTS UPON DEATH OF ACCOUNT OWNER

9 ‘‘SEC. 261. (a) DISTRIBUTION IN THE ABSENCE OF

10 ELIGIBLE WIDOW OR WIDOWER.—

11 ‘‘(1) IN GENERAL.—Except as otherwise pro12 vided in this section, upon the account owner’s death 

13 prior to the date described in section 260(a)(3), the 

14 account shall be payable in equal monthly install15 ments (subject to paragraph (3)) to each individual 

16 (if any) who is a potential beneficiary under section 

17 202 based on the wages and self-employment income 

18 of the account owner. 

19 ‘‘(2) DETERMINATION OF MONTHLY PAYMENT

20 AMOUNTS.—

21 ‘‘(A) IN GENERAL.—The amounts payable 

22 to each individual under paragraph (1) in con23 nection with an individual social security ac24 count shall be determined so that the actuarial 

25 present value (as of the date referred to in sub26 section (a)(3)) of the future payments to each 
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1 individual bears the same ratio to the actuarial 

2 present value (as of such date) of the total 

3 amount to be so payable to all individuals in 

4 connection with such account as the actuarial 

5 present value (as of such date) of the benefits 

6 for which such individual is (or will be) eligible 

7 based on such wages and self-employment in8 come (determined without regard to section 

9 215(a)(8)) bears to the account owner’s dis10 tribution base (determined as if the date of the 

11 account owner’s death were a date described in 

12 section 260(a)(3) and without any applicable 

13 reduction under section 260(b)(4)). 

14 ‘‘(B) ASSUMPTIONS.—In determining the 

15 monthly amount to be payable to each indi16 vidual, the Executive Director shall take into 

17 account the reasonably anticipated period for 

18 which such individual will remain eligible for 

19 benefits under section 202 based on the account 

20 owner’s wages and self-employment income and 

21 the current expected life expectancy of such in22 dividual. 

23 ‘‘(b) TREATMENT OF SURVIVING SPOUSES ELIGIBLE

24 FOR WIDOW’S OR WIDOWER’S INSURANCE BENEFITS.—
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1 ‘‘(1) IN GENERAL.—In any case in which the 

2 account owner is survived by a spouse who is an eli3 gible individual and who is also eligible for widow’s 

4 or widower’s insurance benefits under subsection (e) 

5 or (f) of section 202 based on the account owner’s 

6 wages and self-employment income, subsection (a) 

7 shall not apply, and the account balance remaining 

8 at the time of the account owner’s death shall be 

9 transferred to the individual social security account 

10 of such surviving spouse. 

11 ‘‘(2) SPOUSES WHO ARE NOT ELIGIBLE INDI12 VIDUALS.—

13 ‘‘(A) IN GENERAL.—In any case in which 

14 the surviving spouse is eligible for widow’s or 

15 widower’s insurance benefits under subsection 

16 (e) or (f) of section 202 based on the account 

17 owner’s wages and self-employment income but 

18 is not an eligible individual, such spouse shall 

19 be deemed an eligible individual upon the date 

20 of the account owner’s death, and the transfer 

21 provided for under this subsection shall be 

22 made upon the establishment of the spouse’s in23 dividual social security account. 

24 ‘‘(B) REVOCATION OF STATUS BY

25 SPOUSE.—A spouse who is deemed an eligible 
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1 individual under subparagraph (A) may, during 

2 the 540-day period beginning on the date of the 

3 account owner’s death, revoke his or her status 

4 as an eligible individual in a form and manner 

5 which shall be prescribed in regulations of the 

6 Board. Upon such a revocation, the spouse’s in7 dividual social security account shall be closed 

8 and any amounts theretofore deposited in the 

9 account shall be distributed, among all individ10 uals who are potential beneficiaries (including 

11 the spouse) under section 202 based on the 

12 wages and self-employment income of the de13 ceased account owner, in the same manner as 

14 is provided for distributions from the deceased 

15 account owner’s account under subsection (a). 

16 ‘‘(c) TREATMENT OF ACCOUNT BALANCE IN THE AB17 SENCE OF SURVIVING POTENTIAL BENEFICIARIES.—In 

18 any case in which, upon the account holder’s death, no 

19 distribution from the account holder’s individual social se20 curity account is provided for under subsection (a) or (b), 

21 the balance in the account shall be distributed to the es22 tate of the account owner. 

23 ‘‘(d) BAR ON OTHER RECOVERIES.—A payment 

24 made in accordance with subsection (a) shall bar any other 
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1 recovery by the individual receiving the payment and any 

2 other individual. 

3 ‘‘TREATMENT OF ACCOUNT BALANCES AND ANNUITIES

4 ‘‘SEC. 262. For purposes of this part, amounts held 

5 in individual social security accounts and annuities pay6 able under section 261 shall be treated as the personal 

7 property of the account owners and annuitants, respec8 tively, and shall be held in trust by the Board for the ac9 count owners and annuitants, respectively. 

10 ‘‘FIDUCIARY RESPONSIBILITIES

11 ‘‘SEC. 263. (a) IN GENERAL.—Under regulations of 

12 the Secretary of Labor, the provisions of sections 8477 

13 and 8478 of title 5, United States Code, shall apply in 

14 connection with the Savings Fund and the individual so15 cial security accounts maintained in such Fund in the 

16 same manner and to the same extent as such provisions 

17 apply in connection with the Thrift Savings Fund and ac18 counts maintained in the Thrift Savings Fund. 

19 ‘‘(b) INVESTIGATIVE AUTHORITY.—Any authority 

20 available to the Secretary of Labor under section 504 of 

21 the Employee Retirement Income Security Act of 1974 is 

22 hereby made available to the Secretary of Labor, and any 

23 officer designated by the Secretary of Labor, to determine 

24 whether any person has violated, or is about to violate, 

25 any provision applicable under subsection (a). 

26 ‘‘(c) EXCULPATORY PROVISIONS; INSURANCE.—
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1 ‘‘(1) IN GENERAL.—Any provision in an agree2 ment or instrument which purports to relieve a fidu3 ciary from responsibility or liability for any responsi4 bility, obligation, or duty under this part shall be 

5 void. 

6 ‘‘(2) INSURANCE.—Amounts in the Savings 

7 Fund available for administrative expenses shall be 

8 available and may be used at the discretion of the 

9 Board to purchase insurance to cover potential li10 ability of persons who serve in a fiduciary capacity 

11 with respect to the Fund and individual social secu12 rity accounts maintained therein, without regard to 

13 whether a policy of insurance permits recourse by 

14 the insurer against the fiduciary in the case of a 

15 breach of a fiduciary obligation.’’. 

16 (b) CONFORMING AMENDMENTS AND RULE OF CON17 STRUCTION.—

18 (1) CONFORMING AMENDMENTS.—

19 (A) The Social Security Act is amended—

20 (i) in part A of title II (as redesig21 nated by subsection (a)), by striking ‘‘this 

22 title’’ each place it appears and inserting 

23 ‘‘this part’’; 

24 (ii) by striking ‘‘title II’’ each place it 

25 appears (except in sections 1110(a)(3), 
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1 1129A(d)(2), 1136(g), 1147(a)(1), 

2 1148(h)(4)(A), 1148(j)(1)(A), 1148(k), 

3 1612(b)(8), and 1613(a)(10)) and insert4 ing ‘‘part A of title II’’; 

5 (iii) by striking ‘‘title II or XVI’’ each 

6 place it appears in sections 1110(a)(3), 

7 1129A(d)(2), and 1136(g) and inserting 

8 ‘‘part A of title II or title XVI’’; and 

9 (iv) by striking ‘‘title II or VIII’’ in 

10 section 1147(a)(1) and inserting ‘‘part A 

11 of title II or title VIII’’. 

12 (B) The Internal Revenue Code of 1986 is 

13 amended by striking ‘‘title II’’ each place it ap14 pears (except in sections 142(h)(1), 

15 410(b)(3)(B), 451(d), 912(1)(C), and 912(2)) 

16 and inserting ‘‘part A of title II’’. 

17 (C) The Railroad Retirement Act of 1974 

18 is amended by striking ‘‘title II’’ each place it 

19 appears (except in sections 15(a) and 19(c)(3)) 

20 and inserting ‘‘part A of title II’’. 

21 (2) RULE OF CONSTRUCTION.—In each provi22 sion of Federal law (other than provisions amended 

23 or added by the amendments made by this Act), any 

24 reference to title II of the Social Security Act shall 
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1 be deemed a reference to part A of title II of such 

2 Act (as redesignated by subsection (a)). 

3 SEC. 4. CONFORMING ADJUSTMENTS TO MONTHLY INSUR4 ANCE BENEFITS. 

5 (a) IN GENERAL.—Part A of title II of the Social 

6 Security Act (as amended by section 3 of this Act) is 

7 amended by adding after section 234 the following new 

8 section: 

9 ‘‘PART B OFFSETS TO MONTHLY INSURANCE BENEFITS

10 ‘‘Benefit Reductions 

11 ‘‘SEC. 235. (a) Notwithstanding the preceding provi12 sions of this part, for purposes of determining any benefit 

13 under this part for any month based on the wages and 

14 self-employment income of an individual who is an eligible 

15 individual under part B, the Executive Director appointed 

16 under section 253 shall determine and certify to the Com17 missioner of Social Security the total amount of monthly 

18 payments which would be payable for such month under 

19 part B, from amounts in the Social Security Savings Fund 

20 allocated to such individual’s individual social security ac21 count, in the distribution of amounts not in excess of such 

22 individual’s distribution base, if the investment in stock 

23 of amounts allocated to such account had been invested 

24 solely under the Standard Option described in section 

25 258(c)(2) and solely in accordance with the Standard Mix 

26 under section 258(b). Such determination shall be made, 
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1 irrespective of the extent to which such amounts may have 

2 been invested under the Small Capitalization Option or 

3 Medium Capitalization Option described in section 

4 258(e)(2) or a variance from the Standard Mix may have 

5 been elected under section 258(e)(4). The Commissioner 

6 shall reduce such benefit by the amount of the applicable 

7 part B offset in connection with such individual applicable 

8 to such benefit. 

9 ‘‘Applicable Part B Offset 

10 ‘‘(b)(1) For purposes of subsection (a), the applicable 

11 part B offset is—

12 ‘‘(A) in the case of a benefit based on the wages 

13 and self-employment income of an individual born on 

14 or after January 1, 1981, the full part B offset in 

15 connection with such individual allocable to such 

16 benefit, determined under paragraph (2), or 

17 ‘‘(B) in the case of a benefit based on the 

18 wages and self employment income of an individual 

19 born before January 1, 1981, the reduced part B 

20 offset in connection with such individual allocable to 

21 such benefit, determined under paragraph (3). 

22 ‘‘(2) For purposes of paragraph (1)(A), the full part 

23 B offset in connection with an individual allocable to a 

24 monthly insurance benefit under this part is the portion 

25 of the total amount of monthly payments payable for such 
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1 month under part B in the distribution of amounts not 

2 in excess of such individual’s distribution base which bears 

3 the same ratio to such total amount as the amount of such 

4 benefit bears to the total of benefits payable for such 

5 month under this part on the basis of such individual’s 

6 wages and self-employment income. 

7 ‘‘(3)(A) For purposes of paragraph (1)(B) the re8 duced part B offset in connection with an individual allo9 cable to a monthly insurance benefit under this part is 

10 the product derived by multiplying—

11 ‘‘(i) the portion of the total amount described 

12 in subsection (a) which would be payable for such 

13 month under part B in the distribution of amounts 

14 not in excess of such individual’s distribution base 

15 which bears the same ratio to such total amount as 

16 the amount of such benefit bears to the total of ben17 efits payable for such month under this part on the 

18 basis of such individual’s wages and self-employment 

19 income, by 

20 ‘‘(ii) the reduction factor determined under sub21 paragraph (B) in connection with such individual. 

22 ‘‘(B) The reduction factor determined under this sub23 paragraph, in connection with any individual, is the excess 

24 of—

25 ‘‘(i) 1, over
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1 ‘‘(ii) the product derived by multiplying—

‘‘(I) 0.00331 2 ⁄3, by 

3 ‘‘(II) the number of calendar years during 

4 the period beginning with the calendar year in 

5 which such individual was born and ending with 

6 calendar year 1980.’’. 

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

8 this section shall apply with respect to benefits for months 

9 after November 2004. 

10 SEC. 5. MAINTENANCE OF ADEQUATE BALANCES IN THE 

11 SOCIAL SECURITY TRUST FUNDS. 

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

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

14 following new subsection: 

15 ‘‘(n) In addition to amounts otherwise appropriated 

16 under the preceding provisions of this section to the Trust 

17 Funds established under this section, there is hereby ap18 propriated for each fiscal year to each of such Trust 

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

20 not otherwise appropriated, such sums as may be nec21 essary from time to time to maintain the balance ratio 

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

23 calendar year commencing during such fiscal year, at not 

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

25 the preceding sentence shall be determined by the Com-
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1 missioner of Social Security and certified by the Commis2 sioner to each House of the Congress not later than Octo3 ber 1 of such fiscal year. In making such determination 

4 and certification, the Commissioner shall use the inter5 mediate actuarial assumptions used by the Board of 

6 Trustees of the Trust Funds in its most recent annual 

7 report to the Congress prepared pursuant to subsection 

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

9 any such certification to the Secretary of the Treasury, 

10 and upon receipt thereof, such Secretary shall promptly 

11 take appropriate actions in accordance with the certifi12 cation.’’. 

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

14 subsection (a) shall apply with respect to fiscal years be15 ginning after the date of the enactment of this Act. 

16 SEC. 6. TAXATION OF INDIVIDUAL SOCIAL SECURITY AC17 COUNT PROGRAM. 

18 (a) IN GENERAL.—Subchapter F of chapter 1 of the 

19 Internal Revenue Code of 1986 (relating to exempt organi20 zations) is amended by adding at the end the following 

21 new part: 

22 ‘‘PART IX—INDIVIDUAL SOCIAL SECURITY 

23 ACCOUNT PROGRAM

‘‘Sec. 531. Social Security Personal Savings Fund and individual 

social security accounts.
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1 ‘‘SEC. 531. SOCIAL SECURITY PERSONAL SAVINGS FUND 

2 AND INDIVIDUAL SOCIAL SECURITY AC3 COUNTS. 

4 ‘‘(a) EXEMPTION FROM TAX.—The Social Security 

5 Personal Savings Fund, and each individual social security 

6 account, is exempt from taxation under this subtitle. Not7 withstanding the preceding sentence, such Fund and ac8 counts are subject to the taxes imposed by section 511 

9 (relating to imposition of tax on unrelated business income 

10 of charitable, etc. organizations). 

11 ‘‘(b) DISTRIBUTIONS FROM INDIVIDUAL SOCIAL SE12 CURITY ACCOUNTS.—

13 ‘‘(1) DISTRIBUTIONS ON ACCOUNT OF

14 DEATH.—Any distribution from an individual social 

15 security account on account of the death of the ac16 count owner shall not be includible in gross income. 

17 ‘‘(2) INCOME INCLUSION AS SOCIAL SECURITY

18 BENEFITS.—

‘‘For treatment of certain distributions as social 

security benefits, see section 86.

19 ‘‘(c) INDIVIDUAL SOCIAL SECURITY ACCOUNTS.—

20 For purposes of this section, the term ‘individual social 

21 security account’ means an account established under sec22 tion 256 of the Social Security Act.’’. 

23 (b) DISTRIBUTIONS TAXED AS SOCIAL SECURITY

24 BENEFIT.—Paragraph (1) of section 86(d) of such Code 
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1 (defining social security benefit) is amended by striking 

2 ‘‘or’’ at the end of subparagraph (A), by redesignating 

3 subparagraph (B) as subparagraph (C), and by inserting 

4 after subparagraph (A) the following new subparagraph: 

5 ‘‘(B) a distribution under section 260 of 

6 the Social Security Act, or’’. 

7 (c) CONFORMING AMENDMENT.—The table of parts 

8 for Subchapter F of chapter 1 of such Code is amended 

9 by adding at the end the following new item:

‘‘Part IX. Individual social security account program.’’.

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2004.

13 SEC. 7. REPORT ON PRIVATE SECTOR INVESTMENT AND 

14 MANAGEMENT. 

15 (a) STUDY.—As soon as practicable after the date of 

16 the enactment of this Act, the Social Security Advisory 

17 Board shall undertake a study of the manner and extent 

18 to which, upon attainment of balances in individual social 

19 security accounts sufficient to minimize the administrative 

20 costs involved, investment of amounts held in such ac21 counts may be managed in the private sector by approved 

22 account managers. In carrying out the study, the Advisory 

23 Board shall consult with such public and private entities 

24 as it deems necessary and appropriate. 
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1 (b) REPORT.—Not later than 5 years after the date 

2 of the enactment of this Act, the Social Security Advisory 

3 Board shall report to each House of the Congress and to 

4 the President the results of the study required under sub5 section (a). Such report shall include such recommenda6 tions for administrative and legislative changes as the 

7 Board may consider appropriate. 

8 SEC. 8. MAINTENANCE OF CURRENT LEVELS OF FICA AND 

9 SECA TAXES. 

10 Nothing in this Act shall be construed to affect the 

11 levels of taxes under chapter 21 of the Internal Revenue 

12 Code of 1986 (the Federal Insurance Contributions Act) 

13 or chapter 2 of such Code (the Self-Employment Contribu14 tions Act of 1954).

Æ