I

103D CONGRESS

1ST SESSION H. R. 306

To amend the Internal Revenue Code of 1986 and title II of the Social

Security Act to reduce social security taxes and to provide for the

establishment of individual social security retirement accounts funded

by payroll deductions and employer contributions equal to the amount

of the tax reduction.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. PORTER introduced the following bill; which was referred jointly to the

Committees on Ways and Means and Education and Labor

A BILL

To amend the Internal Revenue Code of 1986 and title

II of the Social Security Act to reduce social security

taxes and to provide for the establishment of individual

social security retirement accounts funded by payroll deductions and employer contributions equal to the amount

of the tax reduction.

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 ‘‘Individual Social Secu5 rity Retirement Account Act of 1993’’.
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1 SEC. 2. REDUCTION OF SOCIAL SECURITY TAXES.

2 (a) TAX ON EMPLOYEES.—Subsection (a) of section

3 3101 of the Internal Revenue Code of 1986 (relating to

4 OASDI tax on employees) is amended by striking the table

5 and inserting the following:

‘‘In cases of wages The rate

received during: shall be:

1993 or 1994 ............................................................. 6.2 percent

1995 or thereafter ..................................................... 5.2 percent.’’

6 (b) TAX ON EMPLOYERS.—Subsection (a) of section

7 3111 of such Code (relating to OASDI tax on employers)

8 is amended by striking the table and inserting the follow9 ing:

‘‘In cases of wages The rate

paid during: shall be:

1993 or 1994 ............................................................. 6.2 percent

1995 or thereafter ..................................................... 5.2 percent.’’

10 (c) TAX ON SELF-EMPLOYED.—Subsection (a) of

11 section 1401 of such Code of (relating to OASDI tax on

12 self-employment income) is amended by striking the table

13 and inserting the following:

‘‘In the case of a taxable year:

Beginning after: And before: Percent:

December 31, 1992 ................... January 1, 1995 ...................... 12.4

December 31, 1994 ................... .................................................. 10.4.’’

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

15 this section shall apply with respect to remuneration paid

16 after December 31, 1994, and with respect to earnings

17 from self-employment attributable to taxable years begin18 ning after such date.
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1 SEC. 3. INDIVIDUAL SOCIAL SECURITY RETIREMENT AC2 COUNTS FUNDED BY SOCIAL SECURITY PAY3 ROLL DEDUCTION PLANS.

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

5 is amended—

6 (1) by inserting before section 201 the follow7 ing:

8 ‘‘PART A—INSURANCE BENEFITS’’;

9 and

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

11 ‘‘PART B—INDIVIDUAL RETIREMENT PROGRAM

12 ‘‘SOCIAL SECURITY PAYROLL DEDUCTION PLANS

13 ‘‘SEC. 251. (a) IN GENERAL.—Each person who is

14 a covered employer for any calendar year shall have in

15 effect throughout such calendar year a social security pay16 roll deduction plan for such person’s eligible employees.

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

18 term ‘social security payroll deduction plan’ means a writ19 ten plan of a covered employer if—

20 ‘‘(1) under such plan, the prescribed social se21 curity employee contribution is deducted from each

22 eligible employee’s wages and paid to an individual

23 social security retirement account of such employee

24 designated in accordance with section 252,

25 ‘‘(2) under such plan, the covered employer

26 pays the amount so deducted to the designated indi-
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1 vidual social security retirement account within 10

2 business days after the payment of the wages from

3 which the amount was deducted,

4 ‘‘(3) under such plan, the covered employer

5 pays to the individual social security retirement ac6 count, together with the contribution paid pursuant

7 to paragraph (2), the prescribed social security em8 ployer contribution with respect to the eligible em9 ployee, and

10 ‘‘(4) the employer receives no compensation for

11 the cost of administering such plan.

12 ‘‘(c) AMOUNT DEDUCTED MAY BE ACCUMULATED

13 BY EMPLOYER IN CERTAIN CASES.—If, under the terms

14 of an individual social security retirement account selected

15 under section 252, contributions below a specified amount

16 will not be accepted, the requirements of subsection (b)(2)

17 shall be treated as met if amounts deducted from the

18 wages of an eligible employee are accumulated by the cov19 ered employer and paid to such plan not later than 10

20 business days after the first day on which the accumulated

21 amount exceeds such specified amount.

22 ‘‘DESIGNATION OF INDIVIDUAL SOCIAL SECURITY

23 RETIREMENT ACCOUNTS

24 ‘‘SEC. 252. (a) IN GENERAL.—Except as provided in

25 subsection (b), the individual social security retirement ac26 count to which contributions with respect to any eligible
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1 employee are required to be paid under section 251 shall

2 be such an account designated by such employee to such

3 employer not later than 10 business days after the date

4 on which such employee becomes an eligible employee of

5 such employer. Any such designation shall be made in

6 such form and manner as may be prescribed in regula7 tions of the Secretary.

8 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES9 IGNATION BY EMPLOYEE.—In any case in which no timely

10 designation of the individual social security retirement ac11 count is made, the covered employer shall designate such

12 account in accordance with regulations of the Secretary.

13 ‘‘(c) SUBSEQUENT DESIGNATION OF OTHER AC14 COUNTS.—The Secretary shall provide by regulation for

15 subsequent designation of other individual social security

16 retirement accounts of an eligible employee in lieu of or

17 in addition to accounts previously designated under this

18 section.

19 ‘‘SELF-EMPLOYED INDIVIDUALS

20 ‘‘SEC. 253. (a) IN GENERAL.—Not later than 30

21 days after the close of any taxable year for which there

22 is imposed a tax under section 1401(a) of the Internal

23 Revenue Code of 1986 on the self-employment income of

24 an individual, such individual shall pay to an individual

25 social security retirement account designated by such indi26 vidual the prescribed social security self-employment con-
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1 tribution with respect to such individual for such taxable

2 year.

3 ‘‘(b) DESIGNATION OF ACCOUNT.—The designation

4 of an individual social security retirement account for pay5 ment of prescribed social security self-employment con6 tributions shall be made in such form and manner as may

7 be prescribed in regulations of the Secretary.

8 ‘‘DEFINITIONS

9 ‘‘SEC. 254. For purposes of this part—

10 ‘‘(1) INDIVIDUAL SOCIAL SECURITY RETIRE11 MENT ACCOUNT.—The term ‘individual social secu12 rity retirement account’ means any individual retire13 ment account (as defined in section 408(a) of the

14 Internal Revenue Code of 1986) which is adminis15 tered or issued by a bank (as defined in section

16 408(n) of such Code) and which meets the require17 ments of section 408A of such Code.

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

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

20 on whom an excise tax is imposed under section

21 3111 of the Internal Revenue Code of 1986 with re22 spect to having an individual in his employ to whom

23 wages were paid by such person during such cal24 endar year.

25 ‘‘(3) ELIGIBLE EMPLOYEE.—The term ‘eligible

26 employee’ means, in connection with any person who
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1 is a covered employer for any calendar year, any in2 dividual with respect to whose employment by such

3 employer during such calendar year there is imposed

4 an excise tax under section 3111 of the Internal

5 Revenue Code of 1986.

6 ‘‘(4) PRESCRIBED SOCIAL SECURITY EMPLOYEE

7 CONTRIBUTION.—The term ‘prescribed social secu8 rity employee contribution’ means, with respect to

9 any eligible employee of a covered employer, an

10 amount equal to 1 percent of the wages received by

11 such employee with respect to employment by such

12 employer.

13 ‘‘(5) PRESCRIBED SOCIAL SECURITY EMPLOYER

14 CONTRIBUTION.—The term ‘prescribed social secu15 rity employer contribution’ means, with respect to a

16 covered employer of any eligible employee, 1 percent

17 of the wages paid by such employer to such em18 ployee with respect to employment of such employee.

19 ‘‘(6) PRESCRIBED SOCIAL SECURITY SELF20 EMPLOYMENT CONTRIBUTION.—The term ‘pre21 scribed social security self-employment contribution’

22 means, with respect to the self-employment income

23 of an individual for any taxable year, 2 percent of

24 the amount of such self-employment income for such

25 taxable year.
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1 ‘‘(7) BUSINESS DAY.—The term ‘business day’

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

3 legal holiday in the area involved.

4 ‘‘PENALTIES

5 ‘‘SEC. 255. (a) FAILURE TO ESTABLISH SOCIAL SE6 CURITY PAYROLL DEDUCTION PLAN.—Any covered em7 ployer who fails to meet the requirements of section 251

8 for any calendar year shall be subject to a civil penalty

9 of not to exceed the greater of—

10 ‘‘(1) $50,000, or

11 ‘‘(2) $1,000 for each eligible employee of such

12 employer as of the beginning of such calendar year.

13 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

14 UNDER PLAN.—Any covered employer who fails to timely

15 deduct in full the amount from the wages of an eligible

16 employee required under an applicable social security pay17 roll deduction plan shall be subject to a civil penalty of

18 not to exceed $50 for each such failure.

19 ‘‘(c) FAILURE TO PAY DEDUCTED WAGES TO INDI20 VIDUAL SOCIAL SECURITY RETIREMENT ACCOUNT.—If

21 an amount deducted from the wages of an eligible em22 ployee under a social security payroll deduction plan is not

23 timely paid in full to the designated individual social secu24 rity retirement account in accordance with section 251—
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1 ‘‘(1) the covered employer failing to make such

2 payment shall be subject to a civil penalty of not to

3 exceed 20 percent of the unpaid amount, and

4 ‘‘(2) shall be liable to the eligible employee for

5 interest on the unpaid amount at a rate equal to

6 133 percent of the Federal short-term rate under

7 section 1274(d)(1) of the Internal Revenue Code of

8 1986, calculated from the last day by which such

9 amount was required to be so paid to the date on

10 which such amount is paid into the designated indi11 vidual social security retirement account.

12 ‘‘(d) FAILURE TO PAY PRESCRIBED SOCIAL SECU13 RITY SELF-EMPLOYMENT CONTRIBUTIONS TO INDIVID14 UAL SOCIAL SECURITY RETIREMENT ACCOUNT.—Any in15 dividual failing to timely pay in full a prescribed social

16 security self-employment contribution to a designated indi17 vidual social security retirement account as required under

18 section 253 shall be subject to a civil penalty of not to

19 exceed 20 percent of the unpaid amount, plus interest on

20 the unpaid amount at a rate equal to 133 percent of the

21 Federal short-term rate under section 1274(d)(1) of the

22 Internal Revenue Code of 1986, calculated from the last

23 day by which such amount was required to be so paid to

24 the date on which such amount is paid into the designated

25 individual social security retirement account.
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1 ‘‘(e) RULES FOR APPLICATION OF SECTION.—

2 ‘‘(1) PENALTIES ASSESSED BY SECRETARY.—

3 Any civil penalty assessed by this section shall be

4 imposed by the Secretary and collected in a civil

5 action.

6 ‘‘(2) COMPROMISES.—The Secretary may com7 promise the amount of any civil penalty imposed by

8 this section.

9 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER10 TAIN CASES.—The Secretary may waive the applica11 tion of this section with respect to any failure if the

12 Secretary determines that such failure is due to rea13 sonable cause and not to intentional disregard of

14 rules and regulations.’’.

15 (b) AMOUNTS DEDUCTED TO BE SHOWN ON W–2

16 STATEMENTS.—Subsection (a) of section 6051 of the In17 ternal Revenue Code of 1986 (relating to receipts for em18 ployees) is amended—

19 (1) by striking ‘‘and’’ at the end of paragraph

20 (8),

21 (2) by striking the period at the end of para22 graph (9) and inserting ‘‘, and’’, and

23 (3) by inserting after paragraph (9) the follow24 ing new paragraph:
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1 ‘‘(10) the total amount deducted from the em2 ployee’s wages under a social security payroll deduc3 tion plan established under part B of title II of the

4 Social Security Act.’’

5 (c) EXEMPTION FROM ERISA REQUIREMENTS.—

6 Subsection (b) of section 4 of the Employee Retirement

7 Income Security Act of 1974 (29 U.S.C. 1003(b)) is

8 amended—

9 (1) by striking ‘‘or’’ at the end of paragraph

10 (4);

11 (2) by striking the period at the end of para12 graph (5) and inserting ‘‘; or’’; and

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

14 paragraph:

15 ‘‘(6) such plan is a social security payroll de16 duction plan established under part B of title II of

17 the Social Security Act.’’.

18 (d) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by

20 subsection (a) shall apply with respect to wages paid

21 in calendar years beginning on or after January 1,

22 1995.

23 (2) TRANSITIONAL RULE.—Notwithstanding

24 section 252(a) of the Social Security Act (as added

25 by this Act), the initial designations of individual so-
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1 cial security retirement accounts with respect to eli2 gible employees employed by covered employers as of

3 January 1, 1995, pursuant to such section may be

4 made at any time not later than January 15, 1995.

5 SEC. 4. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY

6 RETIREMENT ACCOUNTS.

7 (a) IN GENERAL.—Subpart A of part I of subchapter

8 D of chapter 1 of the Internal Revenue Code of 1986 (re9 lating to pension, profit-sharing, stock bonus plans, etc.)

10 is amended by inserting after section 408 the following

11 new section:

12 ‘‘SEC. 408A. INDIVIDUAL SOCIAL SECURITY RETIREMENT

13 ACCOUNTS.

14 ‘‘(a) GENERAL RULE.—Except as provided in this

15 section, an individual social security retirement account

16 shall be treated for purposes of this title in the same man17 ner as an individual retirement plan.

18 ‘‘(b) INDIVIDUAL SOCIAL SECURITY RETIREMENT

19 ACCOUNT.—For purposes of this section, the term ‘indi20 vidual social security retirement account’ means an ac21 count established and administered in accordance with

22 part B of title II of the Social Security Act (relating to

23 individual retirement program).

24 ‘‘(c) CONTRIBUTION RULES.—
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1 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

2 shall be allowed under section 219 for a contribution

3 to an individual social security retirement account.

4 ‘‘(2) CONTRIBUTION LIMIT.—No amount, other

5 than a prescribed contribution under part B of title

6 II of the Social Security Act, may be accepted as a

7 contribution to an individual social security retire8 ment account.

9 ‘‘(d) TREATMENT OF ROLLOVERS.—Section

10 408(d)(3)(A)(i) shall apply to any amount distributed

11 from an individual social security retirement account only

12 to the extent such amount is paid into another such ac13 count for the benefit of the individual for whom the ac14 count from which such amount is transferred was main15 tained.’’

16 (b) CLERICAL AMENDMENT.—The table of sections

17 for such subpart A is amended by inserting after the item

18 relating to section 408 the following new item:

‘‘Sec. 408A. Individual social security retirement accounts.’’

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

20 this section shall apply to taxable years beginning after

21 December 31, 1994.

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