I

107TH CONGRESS

1ST SESSION H. R. 849

To provide for each American the opportunity to provide for his or her

retirement through a S.A.F.E. account, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 1, 2001

Mr. SESSIONS (for himself and Mr. SHADEGG) introduced the following bill;

which was referred to the Committee on Ways and Means, and in addition to the Committee on Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such

provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for each American the opportunity to provide

for his or her retirement through a S.A.F.E. account,

and for other purposes.

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

5 ‘‘Savings Account for Every American Act of 2001’’.

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

7 as follows:

Sec. 1. Short title and table of contents.
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TITLE I—PERSONAL RETIREMENT PROGRAM

Sec. 101. Definitions.

Sec. 102. S.A.F.E. account payroll deduction programs.

Sec. 103. Designation of S.A.F.E. accounts.

Sec. 104. Self-employed individuals.

Sec. 105. Elective participation.

Sec. 106. Penalties.

Sec. 107. Federal civilian and military personnel.

TITLE II—TAX-EXEMPT S.A.F.E. ACCOUNTS

Sec. 201. S.A.F.E. accounts.

Sec. 202. Effective date.

TITLE III—CONFORMING AMENDMENTS TO THE SOCIAL

SECURITY ACT AND THE INTERNAL REVENUE CODE OF 1986

Sec. 301. Reductions in and exemptions from FICA taxes and SECA taxes with

respect to eligible individuals.

Sec. 302. Exclusion of eligible individuals from old-age, survivors, and disability

insurance coverage.

Sec. 303. Information provided in social security account statements.

1 TITLE I—PERSONAL

2 RETIREMENT PROGRAM

3 SEC. 101. DEFINITIONS.

4 For purposes of this title—

5 (1) ACCOUNT HOLDER.—The term ‘‘account

6 holder’’ means, with respect to any S.A.F.E. ac7 count, the individual for whose benefit such account

8 is maintained.

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

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

11 legal holiday in the area involved.

12 (3) COVERED EMPLOYER.—The term ‘‘covered

13 employer’’ means, for any calendar year, a person

14 for whom an eligible individual is engaged in em15 ployment during the year.
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1 (4) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

2 individual’’ means any individual with respect to

3 whom there is in effect an election under section

4 105(a).

5 (5) EMPLOYMENT.—The term ‘‘employment’’

6 has the meaning provided in section 210 of the So7 cial Security Act.

8 (6) PRESCRIBED EMPLOYEE CONTRIBUTION.—

9 The term ‘‘prescribed employee contribution’’ means,

10 with respect to any eligible individual who is en11 gaged in employment for a covered employer during

12 any calendar year, an amount equal to 6.2 percent

13 of the wages received by such employee with respect

14 to such employment, to the extent that such wages

15 do not exceed, for such calendar year, the contribu16 tion and benefit base for such calendar year under

17 section 230 of the Social Security Act.

18 (7) PRESCRIBED SELF-EMPLOYMENT CON19 TRIBUTION.—The term ‘‘prescribed self-employment

20 contribution’’ means, with respect to the self-employ21 ment income of an eligible individual for any cal22 endar year, the excess (if any) of—

23 (A) 6.2 percent of the amount of such self24 employment income for such calendar year, to

25 the extent that such self-employment income
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1 does not exceed, for such calendar year, the

2 contribution and benefit base for such calendar

3 year under section 230 of the Social Security

4 Act, over

5 (B) the total of all prescribed employee

6 contributions and prescribed employer contribu7 tions payable with respect to such eligible indi8 vidual for such calendar year.

9 Effective with the commencement of the 16th cal10 endar year for which the eligible individual’s election

11 under section 105 is in effect, ‘‘12.4 percent’’ shall

12 be substituted for ‘‘6.2 percent’’ in subparagraph

13 (A).

14 (8) PRESCRIBED EMPLOYER CONTRIBUTION.—

15 The term ‘‘prescribed employer contribution’’ means,

16 with respect to any eligible individual who is en17 gaged in employment for a covered employer during

18 any calendar year, an amount equal to 6.2 percent

19 of the wages received by such employee with respect

20 to such employment, to the extent that such wages

21 do not exceed, for such calendar year, the contribu22 tion and benefit base for such calendar year under

23 section 230 of the Social Security Act.
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1 (9) S.A.F.E. ACCOUNT.—The term ‘‘S.A.F.E.

2 account’’ has the meaning provided in section 222(c)

3 of the Internal Revenue Code of 1986.

4 (10) SELF-EMPLOYMENT INCOME.—The term

5 ‘‘self-employment income’’ has the meaning provided

6 in section 211(b) of the Social Security Act.

7 (11) WAGES.—The term ‘‘wages’’ has the

8 meaning provided in section 209 of the Social Secu9 rity Act.

10 SEC. 102. S.A.F.E. ACCOUNT PAYROLL DEDUCTION PRO11 GRAMS.

12 (a) IN GENERAL.—Each person who is a covered em13 ployer for any calendar year shall have in effect through14 out such calendar year a S.A.F.E. account payroll deduc15 tion program for such person’s employees who are eligible

16 individuals.

17 (b) REQUIREMENTS.—For purposes of this Act, the

18 term ‘‘S.A.F.E. account payroll deduction program’’

19 means a written program maintained by a covered em20 ployer if—

21 (1) under such program, the prescribed em22 ployee contribution is deducted from the wages of

23 each employee who is an eligible individual and paid

24 as a contribution on behalf of the employee to a
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1 S.A.F.E. account of such employee designated in ac2 cordance with section 103,

3 (2) under such program, the covered

4 employer—

5 (A) makes timely payment of the amount

6 so deducted as a contribution to the designated

7 S.A.F.E. account, and

8 (B) effective upon receipt from the eligible

9 individual of certification (in accordance with

10 regulations which shall be prescribed by the

11 Commissioner of Social Security) of the com12 mencement of the 16th calendar year for which

13 the eligible employee’s election under section

14 105 has been in effect, makes timely payment,

15 together with the amount so deducted, of the

16 prescribed employer contribution with respect to

17 the eligible individual,

18 under regulations of the Commissioner of Social Se19 curity applying the same principles relating to the

20 timeliness of payment as are applicable under chap21 ter 62 of the Internal Revenue Code of 1986 with

22 respect to taxes under chapter 21 of such Code, and

23 (3) the employer receives no compensation for

24 the cost of administering such program.
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1 (c) AMOUNTS OTHERWISE PAYABLE MAY BE ACCU2 MULATED BY EMPLOYER IN CERTAIN CASES.—If, under

3 the terms of the governing instruments creating a

4 S.A.F.E. account designated under section 103, contribu5 tions below a specified amount will not be accepted, the

6 requirements of subsection (b)(2) shall be treated as met

7 if amounts deducted from the wages of an employee who

8 is an eligible individual, together with prescribed employer

9 contributions (if any), are accumulated by the covered em10 ployer and paid to such account otherwise in accordance

11 with subsection (b)(2) with reference to the first day on

12 which the accumulated amount exceeds such specified

13 amount.

14 SEC. 103. DESIGNATION OF S.A.F.E. ACCOUNTS.

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

16 (b), a S.A.F.E. account to which contributions with re17 spect to any employee who is an eligible individual are re18 quired to be paid under section 102 shall be such an ac19 count designated by such employee to such employer not

20 later than 10 business days after the date on which such

21 employee becomes an employee of such employer. Any

22 such designation shall be made in such form and manner

23 as may be prescribed in regulations of the Commissioner

24 of Social Security.
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1 (b) DESIGNATION IN ABSENCE OF TIMELY DESIGNA2 TION BY EMPLOYEE.—In any case in which no timely des3 ignation of a S.A.F.E. account is made, the covered em4 ployer shall designate such account in accordance with

5 regulations of the Commissioner of Social Security.

6 (c) SUBSEQUENT SUBSTITUTION OF ACCOUNTS.—

7 The Commissioner of Social Security shall provide by reg8 ulation for subsequent designation of a S.A.F.E. account

9 by an account holder in lieu of an account previously des10 ignated by such account holder under this section.

11 SEC. 104. SELF-EMPLOYED INDIVIDUALS.

12 (a) IN GENERAL.—In the case of an eligible indi13 vidual who has self-employment income for any calendar

14 year, such individual shall make timely payments to a

15 S.A.F.E. account designated by such individual of the pre16 scribed self-employment contribution with respect to such

17 individual for such calendar year in accordance with regu18 lations of the Commissioner of Social Security, applying

19 the same principles relating to timeliness of payment as

20 are applicable under chapter 62 of the Internal Revenue

21 Code of 1986 with respect to taxes under chapter 2 of

22 such Code.

23 (b) DESIGNATION OF ACCOUNT.—The designation of

24 a S.A.F.E. account for payment of prescribed self-employ25 ment contributions shall be made in such form and man-
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1 ner as may be prescribed in regulations of the Commis2 sioner of Social Security.

3 (c) PERIODIC PAYMENT.—The Commissioner of So4 cial Security shall provide by regulation for periodic in5 stallment payments during the calendar year of prescribed

6 self-employment contributions for each eligible individual,

7 taking into account, as appropriate for each period, pre8 scribed employee contributions for such individual.

9 SEC. 105. ELECTIVE PARTICIPATION.

10 (a) ELECTION.—Any individual who has been as11 signed a social security account number under section

12 205(c)(2)(B) of the Social Security Act and has been paid

13 wages or has derived self-employment income, may, on or

14 after January 1, 2002, elect under this section to be an

15 eligible individual for purposes of this Act. Any such elec16 tion shall be made by filing with each employer (if any)

17 of the individual, the Commissioner of Social Security, and

18 the Secretary of the Treasury, in such form and manner

19 as shall be prescribed in regulations of the Commissioner

20 (in consultation with the Secretary of the Treasury), a

21 written and signed declaration of such individual’s inten22 tion to be treated as an eligible individual for purposes

23 of this Act. An election under this section shall be effective

24 with respect to wages paid, and self-employment income
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1 derived, on or after January 1 following the date of the

2 filing of the election.

3 (b) ELECTION INEFFECTIVE IF ENTITLED TO SO4 CIAL SECURITY BENEFITS.—Any election under this sec5 tion shall not take effect if, as of the effective date of the

6 election, the individual is entitled to an old-age insurance

7 benefit under section 202(a) of the Social Security Act or

8 to a disability insurance benefit under section 223 of such

9 Act.

10 (c) IRREVOCABILITY SUBJECT TO GRACE PERIOD.—

11 (1) IN GENERAL.—Unless revoked in accord12 ance with paragraph (2), an election under this sec13 tion shall be irrevocable.

14 (2) FIVE-YEAR GRACE PERIOD.—

15 (A) IN GENERAL.—An individual may re16 voke an election under this section by filing

17 with each employer (if any) of the individual,

18 the Commissioner of Social Security, and the

19 Secretary of the Treasury, in such form and

20 manner as shall be prescribed in regulations of

21 the Commissioner (in consultation with the Sec22 retary of the Treasury), a written and signed

23 revocation of the election at any time before the

24 end of the five-year period beginning with the

25 effective date of the election. A revocation
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1 under this subsection shall take effect January

2 1 following the date of the filing of the revoca3 tion, except that a revocation filed during the

4 90-day period beginning with the date of the

5 filing of the election shall take effect as of the

6 effective date of the election. Upon the effective

7 date of a revocation under this subsection, enti8 tlement to benefits under title II of the Social

9 Security Act shall be determined as if the re10 voked election had not occurred, except that, for

11 purposes of any such entitlement, wages paid,

12 and self-employment income derived, during the

13 period for which the election was in effect shall

14 not be taken into account. No subsequent elec15 tion under this section may take effect with re16 spect to an individual who has filed a revocation

17 under this subsection (except a revocation filed

18 during the 90-day period beginning with the

19 date of the filing of the election).

20 (B) REDUCTION IN BENEFITS.—The pri21 mary insurance amount, as determined under

22 section 215 of the Social Security Act, of any

23 individual who has filed a revocation under this

24 subsection before the end of the five-year period

25 described in subparagraph (A) (and after the
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1 90-day period referred to in subparagraph (A))

2 shall be reduced (except for purposes of deter3 mining benefits under section 223 of such Act,

4 and before any application of section 215(i) of

5 such Act) by the applicable percentage specified

6 in the following table:

If the first calendar year for

which the revocation is

effective is:

The applicable percentage is:

The first, second, or third calendar

year of such five-year period.

20 percent.

The fourth calendar year of such

five-year period.

40 percent.

The fifth calendar year of such

five-year period.

60 percent.

The calendar year following such

five-year period.

80 percent.

7 SEC. 106. PENALTIES.

8 (a) FAILURE TO ESTABLISH S.A.F.E. ACCOUNT

9 PAYROLL DEDUCTION PROGRAM.—Any covered employer

10 who fails to meet the requirements of section 102 for any

11 calendar year shall be subject to a civil penalty of not to

12 exceed—

13 (1) $250,000, in the case of an employer who

14 is an individual, or

15 (2) $500,000, in any other case.

16 (b) FAILURE TO MAKE DEDUCTIONS REQUIRED

17 UNDER PROGRAM.—Any covered employer who fails to

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

19 employee who is an eligible individual as required under

20 an applicable S.A.F.E. account payroll deduction program
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1 shall be subject to a civil penalty for each such failure

2 of not to exceed—

3 (1) $250,000, in the case of an employer who

4 is an individual, or

5 (2) $500,000, in any other case.

6 (c) FAILURE TO PAY DEDUCTED WAGES TO

7 S.A.F.E. ACCOUNT.—If an amount deducted under a

8 S.A.F.E. account payroll deduction program from the

9 wages of an employee who is an eligible individual is not

10 timely paid in full to the designated S.A.F.E. account in

11 accordance with section 102, the covered employer failing

12 to make such payment—

13 (1) shall be subject to a civil penalty for each

14 such failure of not to exceed—

15 (A) $250,000, in the case of an employer

16 who is an individual, or

17 (B) $500,000, in any other case, and

18 (2) shall be liable to the employee for interest

19 on the unpaid amount at a rate equal to 10 percent20 age points in excess of the Federal short-term rate

21 under section 1274(d)(1) of the Internal Revenue

22 Code of 1986, calculated from the last day by which

23 such amount was required to be so paid to the date

24 on which such amount is paid into the designated

25 S.A.F.E. account.
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1 (d) FAILURE TO PAY PRESCRIBED SELF-EMPLOY2 MENT CONTRIBUTIONS TO S.A.F.E. ACCOUNT.—Any eli3 gible individual failing to timely pay in full a prescribed

4 self-employment contribution to a designated S.A.F.E. ac5 count as required under section 104 shall be subject to

6 a civil penalty for each such failure of not to exceed

7 $250,000, plus interest on the unpaid amount at a rate

8 equal to 10 percentage points in excess of the Federal

9 short-term rate under section 1274(d)(1) of the Internal

10 Revenue Code of 1986, calculated from the last day by

11 which such amount was required to be so paid to the date

12 on which such amount is paid into the designated

13 S.A.F.E. account.

14 (e) RULES FOR APPLICATION OF SECTION.—

15 (1) PENALTIES ASSESSED BY COMMISSIONER

16 OF SOCIAL SECURITY.—Any civil penalty assessed by

17 this section shall be imposed by the Commissioner of

18 Social Security and collected in a civil action.

19 (2) COMPROMISES.—The Commissioner may

20 compromise the amount of any civil penalty imposed

21 by this section.

22 (3) AUTHORITY TO WAIVE PENALTY IN CER23 TAIN CASES.—The Commissioner may waive the ap24 plication of this section with respect to any failure

25 if the Commissioner determines that such failure is
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1 due to reasonable cause and not to intentional dis2 regard of rules and regulations.

3 SEC. 107. FEDERAL CIVILIAN AND MILITARY PERSONNEL.

4 (a) IN GENERAL.—Not later than December 31,

5 2001, the Office of Personnel Management, after appro6 priate study, shall submit to the President and each House

7 of Congress a written report containing recommendations

8 on how to provide for the application of this Act with re9 spect to Federal civilian and military personnel.

10 (b) REQUIREMENTS.—The report—

11 (1) shall be prepared in consultation with the

12 Social Security Administration, the Securities and

13 Exchange Commission, and other appropriate agen14 cies; and

15 (2) shall be accompanied by draft legislation

16 which, if enacted, would carry out the recommenda17 tions contained in such report.

18 (c) PROVISIONS RELATING TO THE CONTINUED OP19 ERATION OF EXISTING RETIREMENT SYSTEMS.—To the

20 extent that the report and draft legislation relate to provi21 sions of law in effect before the date of enactment of this

22 Act, each shall address at least the following:

23 (1) FEDERAL EMPLOYEES’ RETIREMENT SYS24 TEM.—
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1 (A) Section 8401(11) of title 5, United

2 States Code (relating to the definition of an

3 ‘‘employee’’), which includes the requirement

4 that the individual concerned be someone whose

5 civilian service is employment for the purposes

6 of title II of the Social Security Act and chap7 ter 21 of the Internal Revenue Code of 1986.

8 (B) Section 8421 of such title (relating to

9 annuity supplement), which includes provisions

10 incorporating the notion of the period of time

11 for which the individual is or would be entitled

12 to old-age insurance benefits under title II of

13 the Social Security Act, and provisions for com14 puting the amount of such supplement based on

15 the amount of certain benefits to which the in16 dividual would be entitled under such Act.

17 (C) Section 8442 of such title (relating to

18 rights of a widow or widower), which includes

19 provisions under which a supplementary annu20 ity for a widow or widower is not payable to

21 anyone who would not be entitled to certain

22 benefits under the Social Security Act, and pro23 visions for the computation of any such annuity

24 based on the amount of certain benefits which
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1 would be payable to that individual under the

2 Social Security Act.

3 (D) Section 8443 of such title (relating to

4 rights of a child), which includes provisions

5 under which, as part of the formula for com6 puting the amount of a survivor annuity for a

7 child, there is incorporated the notion of the

8 amount of child’s insurance benefits which are

9 or would be payable under title II of the Social

10 Security Act.

11 (2) CIVIL SERVICE RETIREMENT SYSTEM.—

12 (A) Section 8334(k) of such title (relating

13 to special rules for determining deductions and

14 contributions for individuals subject to ‘‘offset15 83’’ treatment), which incorporates the notion

16 of the OASDI contribution made from Federal

17 wages of the individual concerned.

18 (B) Section 8349 of such title (relating to

19 offset based on certain benefits under the Social

20 Security Act), which incorporates notions relat21 ing to actual or constructive eligibility for bene22 fits under the Social Security Act, and the

23 amount of those benefits.

24 (3) COORDINATION PROVISIONS.—Provisions of

25 law involving a reduction or other adjustment in re-
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1 tirement benefits (or eligibility therefor), based on

2 any individual’s eligibility for benefits under title II

3 of the Social Security Act.

4 (4) OTHER RETIREMENT SYSTEMS.—Similar

5 provisions of law under other retirement systems

6 covering Federal civilian or military personnel.

7 (d) PROVISIONS RELATING TO THE NEW SYSTEM.—

8 To the extent that the report and draft legislation relate

9 to the implementation of any other title of this Act, each

10 shall address at least the following:

11 (1) What the specifications for the S.A.F.E. ac12 count payroll deduction program or programs cov13 ering Federal civilian and military personnel shall be

14 or, alternatively, how those specifications shall be de15 veloped.

16 (2) Which agencies or instrumentalities of the

17 Federal Government shall be responsible for oper18 ating or maintaining which aspects of the program

19 or programs referred to in paragraph (1).

20 (3) Which penalty provisions are appropriate or

21 inappropriate with respect to the Federal Govern22 ment in its capacity as a ‘‘covered employer’’, sub23 ject to what modifications (if any).
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1 TITLE II—TAX-EXEMPT S.A.F.E.

2 ACCOUNTS

3 SEC. 201. S.A.F.E. ACCOUNTS.

4 (a) IN GENERAL.—Part VII of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 additional itemized deductions for individuals) is amended

7 by redesignating section 222 as section 223 and by insert8 ing after section 221 the following new section:

9 ‘‘SEC. 222. S.A.F.E. ACCOUNTS.

10 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi11 vidual, there shall be allowed as a deduction the aggregate

12 amount paid in cash during the taxable year by or on be13 half of such individual to a S.A.F.E. account of such indi14 vidual.

15 ‘‘(b) LIMITATION.—The amount allowable as a de16 duction under subsection (a) for any taxable year shall not

17 exceed 6.2 percent of the lesser of—

18 ‘‘(1) the contribution and benefit base (as de19 termined under section 230 of the Social Security

20 Act) for the calendar year which ends with or within

21 such taxable year, or

22 ‘‘(2) the sum of—

23 ‘‘(A) the amount of wages (as defined in

24 section 3121(a)) received during such calendar

25 year, and
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1 ‘‘(B) the amount of the self-employment

2 income (as defined in section 1402) of such in3 dividual for the taxable year.

4 Effective with the commencement of the 16th calendar

5 year for which the individual’s election under section 105

6 of the Savings Account for Every American Act of 2001

7 is effective, the limitation under the preceding sentence

8 shall be increased by any prescribed employer contribution

9 paid to a personal retirement account of such individual

10 pursuant to section 102(b)(2)(B) of such Act and the por11 tion of any prescribed self-employment contribution paid

12 to such an account which is attributable to the increase

13 in such contribution required by the last sentence of sec14 tion 101(7) of such Act.

15 ‘‘(c) S.A.F.E. ACCOUNT.—For purposes of this sec16 tion, the term ‘S.A.F.E. account’ means a trust created

17 or organized in the United States exclusively for the ben18 efit of an individual or his beneficiaries, but only if the

19 written governing instrument creating the trust meets the

20 following requirements:

21 ‘‘(1) Except in the case of rollover contributions

22 from another S.A.F.E. account of such individual—

23 ‘‘(A) no contribution will be accepted un24 less it is in cash,
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1 ‘‘(B) contributions will not be accepted for

2 the taxable year in excess of 6.2 percent of the

3 contribution and benefit base (as determined

4 under section 230 of the Social Security Act)

5 for the calendar year which ends with or within

6 such taxable year, and

7 ‘‘(C) any contributions with respect to an

8 account holder which are not accepted pursuant

9 to this paragraph are promptly refunded di10 rectly to the account holder.

11 In the case of any such individual, effective for tax12 able years beginning with or after the 16th calendar

13 year for which the individual’s election under section

14 105 of the Savings Account for Every American Act

15 of 2001 is effective, ‘12.4 percent’ shall be sub16 stituted for ‘6.2 percent’ in subparagraph (B).

17 ‘‘(2) The trustee is a bank (as defined in sec18 tion 408(n)) or such other person who demonstrates

19 to the satisfaction of the Secretary that the manner

20 in which such other person will administer the trust

21 will be consistent with the requirements of this sec22 tion.

23 ‘‘(3) No part of the trust funds will be invested

24 in life insurance contracts.
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1 ‘‘(4) The interest of an individual in the bal2 ance in his account is nonforfeitable.

3 ‘‘(5) The assets of the trust will not be commin4 gled with other property except in a common trust

5 fund or common investment fund.

6 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

7 ‘‘(1) IN GENERAL.—Except as otherwise pro8 vided in this subsection, any amount distributed out

9 of a S.A.F.E. account shall be included in gross in10 come of the distributee for the taxable year in which

11 the distribution is received. Notwithstanding any

12 other provision of this title (including chapters 11

13 and 12), the basis of any person in such an account

14 is zero.

15 ‘‘(2) EXCEPTIONS FOR DISTRIBUTIONS AFTER

AGE 591 16 ⁄2 OR DEATH.—Paragraph (1) shall not apply

17 to any distribution out of a S.A.F.E. account—

18 ‘‘(A) made on or after the date on which

the account beneficiary attains age 591 19 ⁄2, or

20 ‘‘(B) made to the account beneficiary (or

21 to the estate of the beneficiary) on or after the

22 death of the account beneficiary.

23 ‘‘(3) EXCEPTIONS FOR DISTRIBUTIONS TO PUR24 CHASE CERTAIN INSURANCE.—Paragraph (1) shall

25 not apply to any distribution out of a S.A.F.E. ac-
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1 count to the account beneficiary to the extent such

2 distributions do not exceed the sum of the expenses

3 paid or incurred during the taxable year for—

4 ‘‘(A) any qualified long-term care insur5 ance contract (but only to the extent of eligible

6 long-term care premiums (as defined in section

7 213(d)(10)),

8 ‘‘(B) disability insurance, or

9 ‘‘(C) term life insurance.

10 ‘‘(4) EXCEPTIONS FOR CERTAIN OTHER DIS11 TRIBUTIONS.—Rules similar to the rules of para12 graphs (3), (4), (5), and (6) of section 408(d) shall

13 apply for purposes of this section.

14 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

15 ‘‘(1) EXEMPTION FROM TAX.—A S.A.F.E. ac16 count is exempt from taxation under this subtitle

17 unless such account has ceased to be a S.A.F.E. ac18 count by reason of paragraph (2). Notwithstanding

19 the preceding sentence, any such account is subject

20 to the taxes imposed by section 511 (relating to im21 position of tax on unrelated business income of char22 itable, etc. organizations).

23 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar

24 to the rules of paragraphs (2) and (4) of section

25 408(e) shall apply to S.A.F.E. accounts, and any
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1 amount treated as distributed under such rules shall

2 be treated as not used to pay expenses described in

3 subsection (d)(3).

4 ‘‘(f) ADDITIONAL TAX ON AMOUNTS INCLUDED IN

5 GROSS INCOME.—If any distribution from a S.A.F.E. ac6 count is includible in gross income of the account bene7 ficiary, the tax liability of such beneficiary under this

8 chapter for the taxable year in which the distribution is

9 received shall be increased by an amount equal to 20 per10 cent of the amount of the distribution.

11 ‘‘(g) OTHER DEFINITION AND SPECIAL RULES.—

12 ‘‘(1) ACCOUNT BENEFICIARY.—For purposes of

13 this section, the term ‘account beneficiary’ means

14 the individual for whose benefit the S.A.F.E. ac15 count was established.

16 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar

17 to the following rules shall apply for purposes of this

18 section:

19 ‘‘(A) Section 219(d)(2) (relating to no de20 duction for rollovers).

21 ‘‘(B) Section 219(f)(3) (relating to time

22 when contributions deemed made).

23 ‘‘(C) Section 219(f)(5) (relating to em24 ployer payments).
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1 ‘‘(D) Section 408(g) (relating to commu2 nity property laws).

3 ‘‘(E) Section 408(h) (relating to custodial

4 accounts).

5 ‘‘(h) REPORTS.—The trustee of a S.A.F.E. account

6 shall make such reports regarding such account to the

7 Secretary and to the individual for whose benefit the ac8 count is maintained with respect to contributions, dis9 tributions, and such other matters as the Secretary may

10 require under regulations. The reports required by this

11 subsection shall be filed at such time and in such manner

12 and furnished to such individuals at such time and in such

13 manner as may be required by those regulations.’’.

14 (b) DEDUCTION ALLOWED IN ARRIVING AT AD15 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

16 such Code is amended by inserting after paragraph (17)

17 the following new paragraph:

18 ‘‘(18) S.A.F.E. ACCOUNT CONTRIBUTIONS.—

19 The deduction allowed by section 222.’’.

20 (c) TAX ON EXCESS CONTRIBUTIONS.—

21 (1) Subsection (a) of section 4973 of such Code

22 (relating to tax on excess contributions to individual

23 retirement accounts, etc.) is amended by striking

24 ‘‘or’’ at the end of paragraph (3), by inserting ‘‘or’’
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1 at the end of paragraph (4), and by inserting after

2 paragraph (4) the following new paragraph:

3 ‘‘(5) a S.A.F.E. account (within the meaning of

4 section 222(c)),’’.

5 (2) Section 4973 of such Code is amended by

6 adding at the end the following new subsection:

7 ‘‘(g) EXCESS CONTRIBUTIONS TO S.A.F.E. AC8 COUNTS.—For purposes of this section, in the case of

9 S.A.F.E. accounts (within the meaning of section 222(c)),

10 the term ‘excess contributions’ means the sum of—

11 ‘‘(1) the excess (if any) of—

12 ‘‘(A) the aggregate amount contributed for

13 the taxable year to the accounts (other than

14 rollover contributions), over

15 ‘‘(B) the amount allowable as a deduction

16 under section 222 for such contributions, and

17 ‘‘(2) the amount determined under this sub18 section for the preceding taxable year, reduced by

19 the sum of—

20 ‘‘(A) the distributions out of the accounts

21 which were included in gross income under

22 rules similar to the rules of section 408(d)(5)

23 which apply to such accounts by reason of sec24 tion 222(d)(4), and

25 ‘‘(B) the excess (if any) of—
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1 ‘‘(i) the maximum amount allowable

2 as a deduction under section 222(b) for

3 the taxable year, over

4 ‘‘(ii) the amount contributed to the

5 accounts for the taxable year.

6 For purposes of this subsection, any contribution

7 which is distributed out of the S.A.F.E. account in

8 a distribution to which the rules similar to the rules

9 of section 408(d)(4) which apply to such accounts by

10 reason of section 222(d)(4) shall be treated as an

11 amount not contributed.’’.

12 (d) TAX ON PROHIBITED TRANSACTIONS.—

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

14 4975(e) of such Code (relating to prohibited trans15 actions) is amended by striking ‘‘or’’ at the end of

16 subparagraph (E), by redesignating subparagraph

17 (F) as subparagraph (G), and by inserting after sub18 paragraph (E) the following new subparagraph:

19 ‘‘(F) a S.A.F.E. account described in sec20 tion 222(c), or’’.

21 (2) SPECIAL RULE.—Subsection (c) of section

22 4975 of such Code is amended by adding at the end

23 the following new paragraph:

24 ‘‘(6) SPECIAL RULE FOR S.A.F.E. ACCOUNTS.—

25 An individual for whose benefit a S.A.F.E. account
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1 is established shall be exempt from the tax imposed

2 by this section with respect to any transaction con3 cerning such account (which would otherwise be tax4 able under this section) if section 222(e)(2) applies

5 with respect to such transaction.’’.

6 (e) FAILURE TO PROVIDE REPORTS ON S.A.F.E. AC7 COUNTS.—Paragraph (2) of section 6693(a) of such Code

8 (relating to failure to provide reports on individual retire9 ment accounts or annuities) is amended by striking ‘‘and’’

10 at the end of subparagraph (C), by striking the period at

11 the end of subparagraph (D) and inserting ‘‘, and’’, and

12 by adding at the end the following new subparagraph:

13 ‘‘(E) Section 222(h) (relating to S.A.F.E.

14 accounts).’’.

15 (f) CLERICAL AMENDMENTS.—

16 (1) The table of sections for part VII of sub17 chapter B of chapter 1 of such Code is amended by

18 striking the item relating to section 222 and insert19 ing the following new items:

‘‘Sec. 222. S.A.F.E. accounts.

‘‘Sec. 223. Cross references.’’.

20 (2) The table of sections for chapter 43 of such

21 Code is amended by striking the item relating to sec22 tion 4973 and inserting the following new item:

‘‘Sec. 4973. Tax on excess contributions to certain tax-favored accounts and annuities, etc.’’.
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1 SEC. 202. EFFECTIVE DATE.

2 The amendments made by this title shall apply to

3 contributions made for taxable years beginning after De4 cember 31, 2001.

5 TITLE III—CONFORMING

6 AMENDMENTS TO THE SO7 CIAL SECURITY ACT AND THE

8 INTERNAL REVENUE CODE

9 OF 1986

10 SEC. 301. REDUCTIONS IN AND EXEMPTIONS FROM FICA

11 TAXES AND SECA TAXES WITH RESPECT TO

12 ELIGIBLE INDIVIDUALS.

13 (a) FICA TAX ON EMPLOYEES.—Section 3101 of the

14 Internal Revenue Code of 1986 (relating to OASDI tax

15 on employees) is amended—

16 (1) in subsection (a), by striking ‘‘In addition’’

17 and inserting ‘‘Subject to subsection (c), in addi18 tion’’;

19 (2) by redesignating subsection (c) as sub20 section (d); and

21 (3) by inserting after subsection (b) the fol22 lowing new subsection:

23 ‘‘(c) EXEMPTION FROM OASDI TAX FOR ELIGIBLE

24 INDIVIDUALS.—Subsection (a) shall not apply with re25 spect to wages received by an eligible individual (as de-
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1 fined in section 101(4) of the Savings Account for Every

2 American Act of 2001).’’

3 (b) FICA TAX ON EMPLOYERS.—Section 3111 of

4 such Code (relating to OASDI tax on employees) is

5 amended—

6 (1) in subsection (a), by striking ‘‘In addition’’

7 and inserting ‘‘Subject to subsection (c), in addi8 tion’’;

9 (2) by redesignating subsection (c) as sub10 section (d); and

11 (3) by inserting after subsection (b) the fol12 lowing new subsection:

13 ‘‘(c) EXEMPTION FROM OASDI TAX WITH RESPECT

14 TO ELIGIBLE INDIVIDUALS.—In the case of an eligible in15 dividual (as defined in section 101(4) of the Savings Ac16 count for Every American Act of 2001), effective with the

17 16th calendar year for which such individual’s election

18 under section 105 of such Act is effective, subsection (a)

19 shall not apply with respect to wages received by such indi20 vidual.’’

21 (c) REDUCTION IN AND EXEMPTION FROM SELF-EM22 PLOYMENT TAX.—Subsection (a) of section 1401 of such

23 Code (relating to OASDI tax on self-employment income)

24 is amended—
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1 (1) in subsection (a), by striking ‘‘In addition’’

2 and inserting ‘‘Subject to subsection (c), in addi3 tion’’;

4 (2) by redesignating subsection (c) as sub5 section (d); and

6 (3) by inserting after subsection (b) the fol7 lowing new subsection:

8 ‘‘(c) ADJUSTMENT TO OASDI TAX.—

9 ‘‘(1) REDUCTION.—In the case of an eligible in10 dividual (as defined in section 101(4) of the Savings

11 Account for Every American Act of 2001), for tax12 able years beginning with or during the 1st 15 cal13 endar years for which such individual’s election is in

14 effect under section 105 of such Act, the rate of tax

15 under subsection (a) shall be 6.20 percent.

16 ‘‘(2) EXEMPTION.—In the case of such an eligi17 ble individual, effective for taxable years beginning

18 with or during the 16th calendar year for which

19 such individual’s election under such section 105 is

20 effective, subsection (a) shall not apply.’’

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

22 this section shall apply with respect to wages received

23 after December 31, 2002, and with respect to self-employ24 ment income for taxable years beginning after such date.
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1 SEC. 302. EXCLUSION OF ELIGIBLE INDIVIDUALS FROM

2 OLD-AGE, SURVIVORS, AND DISABILITY IN3 SURANCE COVERAGE.

4 (a) MONTHLY INSURANCE BENEFITS UNDER SEC5 TION 202.—Section 202 of the Social Security Act (42

6 U.S.C. 402) is amended by adding at the end the following

7 new subsection:

8 ‘‘Limitation on Payment to Eligible Individuals Under

9 Savings Account for Every American Act of 2001

10 ‘‘(z)(1) Notwithstanding any other provision of this

11 title, no monthly benefits shall be paid under this section

12 based on the wages and self-employment income of an eli13 gible individual (as defined in section 101(4) of the Sav14 ings Account for Every American Act of 2001).

15 ‘‘(2) Determinations of entitlement to hospital insur16 ance benefits under section 226 or 226A shall be made

17 without regard to paragraph (1).’’.

18 (b) DISABILITY INSURANCE BENEFITS UNDER SEC19 TION 223.—Section 223 of such Act (42 U.S.C. 423) is

20 amended by adding at the end the following new sub21 section:

22 ‘‘Limitation on Payment to Eligible Individuals Under

23 Savings Account for Every American Act of 2001

24 ‘‘(k)(1) Notwithstanding any other provision of this

25 title, no monthly benefits shall be paid under this section

26 based on the wages and self-employment income of an eli-
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1 gible individual (as defined in section 101(4) of the Sav2 ings Account for Every American Act of 2001).

3 ‘‘(2) Determinations of entitlement to hospital insur4 ance benefits under section 226 or 226A shall be made

5 without regard to paragraph (1).’’.

6 SEC. 303. INFORMATION PROVIDED IN SOCIAL SECURITY

7 ACCOUNT STATEMENTS.

8 (a) IN GENERAL.—Section 1143 of the Social Secu9 rity Act (42 U.S.C. 1320b–13) is amended to read as fol10 lows:

11 ‘‘SOCIAL SECURITY ACCOUNT STATEMENTS

12 ‘‘Provision of Annual Statements

13 ‘‘SEC. 1143. (a) The Commissioner of Social Security

14 shall provide an annual social security account statement

15 (hereinafter in this section referred to as the ‘statement’)

16 to each eligible individual who is not receiving benefits

17 under title II and for whom a mailing address can be de18 termined through such methods as the Commissioner de19 termines to be appropriate.

20 ‘‘Contents of Statement

21 ‘‘(b) Each statement shall contain—

22 ‘‘(1) the amount of wages paid to and self-em23 ployment income derived by the eligible individual as

24 shown by the records of the Commissioner;

25 ‘‘(2) an estimate of the aggregate of the em26 ployer, employee, and self-employment contributions
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1 of the eligible individual for old-age, survivors, and

2 disability insurance as shown by the records of the

3 Commissioner;

4 ‘‘(3) a separate estimate of the aggregate of the

5 employer, employee, and self-employment contribu6 tions of the eligible individual for hospital insurance

7 as shown by the records of the Commissioner; and

8 ‘‘(4) an estimate of the potential monthly re9 tirement, disability, survivor, and auxiliary benefits

10 payable on the eligible individual’s account together

11 with a description of the benefits payable under the

12 medicare program of title XVIII.

13 ‘‘Eligible Individual

14 ‘‘(c) For purposes of this section, the term ‘‘eligible

15 individual’’ means an individual who—

16 ‘‘(1) has a social security account number, and

17 ‘‘(2) has wages or net earnings from self-em18 ployment.’’.

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

20 subsection (a) shall apply with respect to statements pro21 vided on or after October 1, 2002.

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