I

106TH CONGRESS

1ST SESSION H. R. 1043

To amend title II of the Social Security Act to strengthen the Social Security

system to meet the challenges of the next century.

IN THE HOUSE OF REPRESENTATIVES

MARCH 9, 1999

Mr. NADLER (for himself and Ms. PELOSI) introduced the following bill; which

was referred to the Committee on Ways and Means

A BILL

To amend title II of the Social Security Act to strengthen

the Social Security system to meet the challenges of

the next century.

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.

4 This Act may be cited as the ‘‘Social Security Amend5 ments of 1999’’.
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1 SEC. 2. ADDITIONAL APPROPRIATION TO FEDERAL OLD2 AGE AND SURVIVORS INSURANCE TRUST

3 FUND.

4 Section 201 of the Social Security Act (42 U.S.C.

5 401) is amended by adding at the end the following new

6 subsection:

7 ‘‘(n)(1) There is hereby appropriated to the Federal

8 Old-Age and Survivors Insurance Trust Fund, in addition

9 to amounts appropriated under subsection (a), for each

10 fiscal year beginning on or after October 1, 1999, and end11 ing on or before September 30, 2014, amounts equal in

12 the aggregate to the applicable percentage of wages paid,

13 and self-employment income derived, in such fiscal year,

14 as specified in the following table:

‘‘Fiscal year: Applicable percentage:

2000 ......................................................................................... 2.20

2001 ......................................................................................... 1.75

2002 ......................................................................................... 2.20

2003 ......................................................................................... 2.08

2004 ......................................................................................... 2.41

2005 ......................................................................................... 2.55

2006 ......................................................................................... 3.07

2007 ......................................................................................... 3.43

2008 ......................................................................................... 3.79

2009 ......................................................................................... 4.12

2010 ......................................................................................... 4.32

2011 ......................................................................................... 4.49

2012 ......................................................................................... 4.58

2013 ......................................................................................... 4.61

2014 ......................................................................................... 4.51.

15 ‘‘(2) The amounts appropriated by paragraph (1)

16 shall be transferred from time to time from the general

17 fund in the Treasury to the Federal Old-Age and Sur18 vivors Insurance Trust Fund, such amounts to be deter-
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1 mined on the basis of estimates by the Secretary of the

2 Treasury; and proper adjustments shall be made in

3 amounts subsequently transferred to the extent prior esti4 mates were in excess of or were less than the required

5 amounts. All amounts transferred to the Trust Fund

6 under the preceding sentence shall be invested by the

7 Managing Trustee in the same manner and to the same

8 extent as the other assets of the Trust Fund.’’.

9 SEC. 2. INVESTMENT OF THE SOCIAL SECURITY TRUST

10 FUNDS.

11 (a) IN GENERAL.—Section 201(d) of the Social Secu12 rity Act (42 U.S.C. 401(d)) is amended to read as follows:

13 ‘‘(d)(1) It shall be the duty of the Managing Trustee

14 to invest such portion of each of the Trust Funds as is

15 not, in his judgment, required to meet current withdraw16 als. Subject to paragraph (2), such investments may be

17 made only in interest-bearing obligations of the United

18 States or in obligations guaranteed as to both principal

19 and interest by the United States. For such purpose such

20 obligations may be acquired (A) on original issue at the

21 issue price, or (B) by purchase of outstanding obligations

22 at the market price.

23 ‘‘(2)(A) The Managing Trustee of the Federal Old24 Age and Survivors Insurance Trust Fund shall establish

25 in such Trust Fund a Common Stock Investment Account.
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1 Such Account shall hold such amounts in such Trust Fund

2 as are deposited into such Account pursuant to this para3 graph, together with any dividends and capital gain de4 rived from the investment in accordance with this para5 graph of amounts maintained in such Account. For each

6 fiscal year, amounts held in such Account shall be invested

7 in common stock in accordance with the investment poli8 cies and other policies established by the Independent So9 cial Security Investment Oversight Board for such fiscal

10 year.

11 ‘‘(B) Subject to subparagraph (C), upon receipt by

12 the Federal Old-Age and Survivors Insurance Trust Fund

13 of any amount appropriated under subsection (n), the

14 Managing Trustee shall deposit 40 percent of such

15 amount into the Common Stock Investment Account of

16 the Trust Fund.

17 ‘‘(C) The Managing Trustee shall limit deposits into

18 the Common Stock Investment Account pursuant to sub19 paragraph (B), and shall provide for withdrawals from

20 such Account, to the extent necessary to ensure that the

21 portion of the total amount held in the Federal Old-Age

22 and Survivors Insurance Trust Fund which is maintained

23 in such Account does not exceed 30 percent of the total

24 amount held in such Trust Fund.
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1 ‘‘(3)(A) The purposes for which obligations of the

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

3 United States Code, are hereby extended to authorize the

4 issuance at par of public-debt obligations for purchase by

5 the Trust Funds under paragraph (1).

6 ‘‘(B) Such obligations issued for purchase by the

7 Trust Funds shall have maturities fixed with due regard

8 for the needs of the Trust Funds and shall bear interest

9 at a rate equal to the average market yield (computed by

10 the Managing Trustee on the basis of market quotations

11 as of the end of the calendar month next preceding the

12 date of such issue) on all marketable interest-bearing obli13 gations of the United States then forming a part of the

14 public debt which are not due or callable until after the

15 expiration of four years from the end of such calendar

16 month; except that where such average market yield is not

17 a multiple of one-eighth of 1 per centum, the rate of inter18 est of such obligations shall be the multiple of one-eighth

19 of 1 per centum nearest such market yield.

20 ‘‘(C) Each obligation issued for purchase by the

21 Trust Funds under subparagraph (A) shall be evidenced

22 by a paper instrument in the form of a bond, note, or

23 certificate of indebtedness issued by the Secretary of the

24 Treasury setting forth the principal amount, date of matu25 rity, and interest rate of the obligation, and stating on
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1 its face that the obligation shall be incontestable in the

2 hands of the Trust Funds, that the obligation is supported

3 by the full faith and credit of the United States, and that

4 the United States is pledged to the payment of the obliga5 tion with respect to both principal and interest.

6 ‘‘(D) The Managing Trustee may purchase interest7 bearing obligations of the United States or obligations

8 guaranteed as to both principal and interest by the United

9 States, other than obligations issued for purchase by the

10 Trust Funds, on original issue or at the market price, for

11 purposes of investment of the amounts held in the Trust

12 Funds only where he determines that the purchase of such

13 other obligations is in the public interest.’’.

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

15 subsection (a) shall apply with respect to fiscal years be16 ginning on or after October 1, 1999.

17 SEC. 3. RULES GOVERNING INVESTMENT OF FEDERAL OLD18 AGE AND SURVIVORS INSURANCE TRUST

19 FUND IN COMMON STOCK.

20 Title II of the Social Security Act is amended by add21 ing at the end the following new section:

22 ‘‘INVESTMENT OF FEDERAL OLD-AGE AND SURVIVORS

23 INSURANCE TRUST FUND IN COMMON STOCK

24 ‘‘SEC. 231. (a) SELECTION OF INDEX AND PORT25 FOLIO DESIGN.—
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1 ‘‘(1) SELECTION OF INDEX.—The Independent

2 Social Security Investment Oversight Board shall se3 lect, for purposes of investment of amounts held in

4 the Common Stock Investment Account of the Fed5 eral Old-Age and Survivors Insurance Trust Fund,

6 an index which is a commonly recognized index com7 prised of common stock the aggregate market value

8 of which is a reasonably complete representation of

9 the United States equity markets.

10 ‘‘(2) PORTFOLIO DESIGN.—Amounts held in the

11 Common Stock Investment Account of the Federal

12 Old-Age and Survivors Insurance Trust Fund shall

13 be invested in a portfolio designed to replicate the

14 performance of the index selected under paragraph

15 (1). The portfolio shall be designed such that, to the

16 extent practicable, the percentage of the balance in

17 such Account that is invested in each stock is the

18 same as the percentage determined by dividing the

19 aggregate market value of all shares of that stock by

20 the aggregate market value of all shares of all stocks

21 included in such index.

22 ‘‘(c) NO VOTING RIGHTS IN SECURITIES.—The Inde23 pendent Social Security Investment Oversight Board and

24 the Managing Trustee of the Federal Old-Age and Sur25 vivors Insurance Trust Fund may not exercise voting
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1 rights associated with the ownership of securities by the

2 Trust Fund.

3 ‘‘(d) ENGAGEMENT OF QUALIFIED PUBLIC AC4 COUNTANT.—

5 ‘‘(1) IN GENERAL.—The Independent Social Se6 curity Investment Oversight Board shall annually

7 engage, on behalf of the Federal Old-Age and Sur8 vivors Insurance Trust Fund, an independent quali9 fied public accountant, who shall conduct an exam10 ination of all accounts and other books and records

11 maintained in the administration of this section as

12 the public accountant considers necessary to enable

13 the public accountant to make the determination re14 quired by paragraph (2). The examination shall be

15 conducted in accordance with generally accepted au16 diting standards and shall involve such tests of the

17 accounts, books, and records as the public account18 ant considers necessary.

19 ‘‘(2) EXAMINATION AND REPORT.—The public

20 accountant conducting an examination under para21 graph (1) shall determine whether the accounts,

22 books, and records referred to in such paragraph

23 have been maintained in conformity with generally

24 accepted accounting principles applied on a basis

25 consistent with the manner in which such principles
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1 were applied during the examination conducted

2 under such paragraph during the preceding year.

3 The public accountant shall transmit to the Board

4 and the Comptroller General of the United States a

5 report on his examination, including his determina6 tion under this paragraph.

7 ‘‘(3) DEFINITION.—For the purposes of this

8 subsection, the term ‘qualified public accountant’

9 shall have the same meaning as is provided in sec10 tion 103(a)(3)(D) of the Employee Retirement In11 come Security Act of 1974 (29 U.S.C.

12 1023(a)(3)(D)).

13 ‘‘(e) FIDUCIARY RESPONSIBILITIES.—

14 ‘‘(1) IN GENERAL.—Under regulations of the

15 Secretary of Labor, the provisions of sections 8477

16 and 8478 of title 5, United States Code, shall apply

17 in connection with the amounts maintained in the

18 Common Stock Investment Account of the Federal

19 Old-Age and Survivors Insurance Trust Fund in the

20 same manner and to the same extent as such provi21 sions apply in connection with the Thrift Savings

22 Fund.

23 ‘‘(2) INVESTIGATIVE AUTHORITY.—Any author24 ity available to the Secretary of Labor under section

25 504 of the Employee Retirement Income Security
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1 Act of 1974 is hereby made available to the Sec2 retary of Labor, and any officer designated by the

3 Secretary of Labor, to determine whether any person

4 has violated, or is about to violate, any provision ap5 plicable under paragraph (1).

6 ‘‘(3) EXCULPATORY PROVISIONS; INSURANCE.—

7 ‘‘(A) IN GENERAL.—Any provision in an

8 agreement or instrument which purports to re9 lieve a fiduciary from responsibility or liability

10 for any responsibility, obligation, or duty under

11 this section shall be void.

12 ‘‘(B) INSURANCE.—Amounts held in the

13 Federal Old-Age and Survivors Insurance Trust

14 Fund available for administrative expenses shall

15 be available and may be used at the discretion

16 of the Independent Social Security Investment

17 Oversight Board to purchase insurance to cover

18 potential liability of persons who serve in a fi19 duciary capacity with respect to amounts main20 tained in the Common Stock Investment Ac21 count of such Trust Fund, without regard to

22 whether a policy of insurance permits recourse

23 by the insurer against the fiduciary in the case

24 of a breach of a fiduciary obligation.’’.
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1 SEC. 4. ESTABLISHMENT OF THE INDEPENDENT SOCIAL SE2 CURITY INVESTMENT OVERSIGHT BOARD.

3 Title VII of the Social Security Act is amended by

4 inserting after section 705 (42 U.S.C. 906) the following

5 new section:

6 ‘‘INDEPENDENT SOCIAL SECURITY INVESTMENT

7 OVERSIGHT BOARD

8 ‘‘SEC. 706. (a) There is established in the Social Se9 curity Administration an Independent Social Security In10 vestment Oversight Board.

11 ‘‘(b) The Board shall be composed of a Chairman and

12 four additional members. The Chairman and each addi13 tional member shall be appointed by the President, by and

14 with the advice and consent to the Senate.

15 ‘‘(c) Members of the Board shall have substantial ex16 perience, training, and expertise in the management of fi17 nancial investments and service in a fiduciary capacity.

18 ‘‘(d)(1) A member of the Board shall be appointed

19 for a term of 10 years, except that of the members first

20 appointed—

21 ‘‘(A) the member appointed as Chairman shall

22 be appointed for a term of 10 years;

23 ‘‘(B) one member shall be appointed for a term

24 of 8 years;
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1 ‘‘(C) one member shall be appointed for a term

2 of 6 years;

3 ‘‘(D) one member shall be appointed for a term

4 of 4 years; and

5 ‘‘(E) one member shall be appointed for a term

6 of 2 years,

7 as designated by the President at the time of appointment.

8 ‘‘(2)(A) A vacancy on the Board shall be filled in the

9 manner in which the original appointment was made and

10 shall be subject to any conditions which applied with re11 spect to the original appointment.

12 ‘‘(B) An individual chosen to fill a vacancy shall be

13 appointed for the unexpired term of the member replaced.

14 ‘‘(C) The term of any member shall not expire before

15 the date on which the member’s successor takes office.

16 ‘‘(3) An individual appointed as a member of the

17 Board may be removed from office only pursuant to a

18 finding by the President of neglect of duty or malfeasance

19 in office.

20 ‘‘(e) The member of the Board designated by the

21 President as Chairman shall serve as Chairman for a term

22 of 4 years (or until the expiration of his term as member

23 of the Board, if earlier). A member serving as Chairman

24 may be reappointed as Chairman.

25 ‘‘(f) The Board shall—
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1 ‘‘(1) establish policies for investments in com2 mon stock of amounts in the Common Stock Invest3 ment Account of the Federal Old-Age and Survivors

4 Insurance Trust Fund under section 201(d)(2),

5 including—

6 ‘‘(A) the risk and return parameters for

7 such investments; and

8 ‘‘(B) the number and structure of the port9 folios in which such investments are main10 tained;

11 ‘‘(2) review bids from, and select managers for,

12 such investments;

13 ‘‘(3) annually review the performance of each

14 investment manager selected pursuant to paragraph

15 (2) and provide for reallocation of funds among

16 them by the Managing Trustee as appropriate;

17 ‘‘(4) report annually to each House of the Con18 gress and to the President regarding the earnings on

19 such investments and publish such reports annually

20 in the Federal Register; and

21 ‘‘(5) review and approve the budget of the

22 Board.

23 ‘‘(g)(1) The Board may—

24 ‘‘(A) adopt, alter, and use a seal;
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1 ‘‘(B) establish policies with which the Managing

2 Trustee of the Federal Old-Age and Survivors Insur3 ance Trust Fund is required to comply under section

4 201(d)(2); and

5 ‘‘(C) take such other actions as may be nec6 essary to carry out the functions of the Board.

7 ‘‘(2) The policies of the Board may not require the

8 Managing Trustee to invest or to cause to be invested any

9 sums in the Federal Old-Age and Survivors Insurance

10 Trust Fund in a specific asset or to dispose of or cause

11 to be disposed of any specific asset of such Trust Fund.

12 ‘‘(h)(1) The Board shall meet—

13 ‘‘(A) not less than once during each month; and

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

15 Chairman.

16 ‘‘(2)(A) The Board shall perform the functions and

17 exercise the powers of the Board on a majority vote of

18 a quorum of the Board.

19 ‘‘(B) A vacancy on the Board shall not impair the

20 authority of a quorum of the Board to perform the func21 tions and exercise the powers of the Board.

22 ‘‘(3) Three members of the Board shall constitute a

23 quorum for the transaction of business.

24 ‘‘(4)(A) Each member of the Board who is not an

25 officer or employee of the Federal Government shall be
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1 compensated at the daily rate of basic pay payable for level

2 IV of the Executive Schedule for each day during which

3 such member is engaged in performing a function of the

4 Board.

5 ‘‘(B) A member of the Board shall be paid travel,

6 per diem, and other necessary expenses under subchapter

7 I of chapter 57 of title 5, United States Code, while travel8 ing away from such member’s home or regular place of

9 business in the performance of the duties of the Board.

10 ‘‘(C) Payments authorized under this paragraph shall

11 be paid from the Federal Old-Age and Survivors Insurance

12 Trust Fund.

13 ‘‘(5) The accrued annual leave of any officer or em14 ployee of the Federal Government who is a member of the

15 Board shall not be charged for any time used in perform16 ing services for the Board.

17 ‘‘(i) The members of the Board shall discharge their

18 responsibilities solely in the interest of the Federal Old19 Age and Survivors Insurance Trust Fund in connection

20 with investments of amounts in the Common Stock Invest21 ment Account of such Trust Fund under section

22 201(d)(2).

23 ‘‘(j) The Board shall prepare and submit to the Presi24 dent, and, at the same time, to the appropriate committees

25 of Congress, an annual budget of the expenses and other
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1 items relating to the Board which shall be included as a

2 separate item in the budget required to be transmitted to

3 the Congress under section 1105 of title 31, United States

4 Code.

5 ‘‘(k) The Board may submit to the President, and,

6 at the same time, shall submit to each House of Congress,

7 any legislative recommendations of the Board relating to

8 any of its functions under this section.’’.

9 SEC. 5. ADJUSTMENTS TO CONTRIBUTION AND BENEFIT

10 BASE.

11 (a) IN GENERAL.—So much of section 230 of the So12 cial Security Act (42 U.S.C. 430) as precedes subsection

13 (d) is amended to read as follows:

14 ‘‘CONTRIBUTION AND BENEFIT BASE

15 ‘‘SEC. 230. (a) The amount of the contribution and

16 benefit base with respect to remuneration paid (and tax17 able years beginning) in calendar year 2000 shall be

18 $99,600.

19 ‘‘(b) The Commissioner of Social Security shall deter20 mine and publish in the Federal Register on or before No21 vember 1 of each calendar year (after 1999) the contribu22 tion and benefit base determined under subparagraph (c)

23 which shall be effective with respect to remuneration paid

24 after such calendar year and taxable years beginning after

25 such year.
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1 ‘‘(c)(1) Subject to paragraph (2), the amount of the

2 contribution and benefit base referred to in subsection (b)

3 shall be the amount of the contribution and benefit base

4 in effect in the year in which the determination is made

5 or, if larger, the amount determined under paragraph (2).

6 ‘‘(2)(A) In advance of determining and publishing, in

7 each calendar year consisting of calendar year 2001 or any

8 calendar year thereafter, the contribution and benefit base

9 which shall be effective with respect to remuneration paid

10 after such calendar year and taxable years beginning after

11 such year, the Commissioner shall estimate as accurately

12 as practicable the minimum contribution and benefit base

13 which would be necessary to have in effect with respect

14 to remuneration paid in the next calendar year and taxable

15 years beginning in such next calendar year to ensure that

16 90 percent of the total of all remuneration paid in such

17 next calendar year and all net earnings from self-employ18 ment derived during such taxable years would consist of

19 wages and self-employment income.

20 ‘‘(B) In any case in which a minimum contribution

21 and benefit base estimated under subparagraph (A) is

22 greater than the corresponding contribution and benefit

23 base which would otherwise be in effect under subsection

24 (b), such estimated contribution and benefit base shall be
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1 deemed the contribution and benefit base so in effect, in

2 lieu of such corresponding contribution and benefit base.’’.

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

4 subsection (a) shall apply with respect to remuneration

5 paid, and taxable years beginning, after 1999.

Æ