I

103D CONGRESS

2D SESSION H. R. 3803

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

to reduce social security taxes and to provide for social security individual

retirement accounts funded by social security payroll deductions.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 3, 1994

Mr. THOMAS of California 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 the Social

Security Act to reduce social security taxes and to provide for social security individual retirement accounts

funded by social security payroll deductions.

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 Individ5 ual Retirement Act of 1994’’.
2

•HR 3803 IH

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—

5 (1) by striking the last item in the table and in6 serting the following:

‘‘1990, 1991, 1992, 1993, or 1994 .......................................... 6.20 percent

‘‘1995 or thereafter .................................................................. 6.06 percent;’’;

7 and

8 (2) by adding after and below the table the fol9 lowing:

10 ‘‘except that, in the case of an eligible employee (as de11 fined in section 255(3) of the Social Security Act), the

12 rate of tax under this subsection shall be 0.0 percent with

13 respect to wages paid after December 31, 1994, for pay

14 periods ending after such date.’’

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

16 3111 of such Code (relating to OASDI tax on employers)

17 is amended by striking the last item in the table and in18 serting the following:

‘‘1990, 1991, 1992, 1993, or 1994 .......................................... 6.20 percent

‘‘1995 or thereafter .................................................................. 6.06 percent.’’

19 (c) SELF-EMPLOYMENT TAX.—Subsection (a) of sec20 tion 1401 of such Code (relating to OASDI tax on self21 employment income) is amended—
3

•HR 3803 IH

1 (1) by striking the last item in the table and in2 serting the following:

‘‘December 31, 1989 ................. January 1, 1994 ........................ 12.40

‘‘December 31, 1994 ................. .................................................... 12.12;’’

3 and

4 (2) by adding after and below the table the fol5 lowing:

6 ‘‘except that, in the case of an eligible self-employed indi7 vidual (as defined in section 255(4) of the Social Security

8 Act), the rate of tax under this subsection shall be 6.6

9 percent of the amount of the self-employment income in

10 the case of a taxable year after December 31, 1994.’’

11 (d) EFFECTIVE DATES.—

12 (1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the amendments made by

14 this section shall apply to remuneration paid after

15 December 31, 1994.

16 (2) SELF-EMPLOYMENT TAX.—The amend17 ments made by subsection (c) shall apply to taxable

18 years beginning after December 31, 1994.

19 SEC. 3. INDIVIDUAL RETIREMENT PROGRAM AND SOCIAL

20 SECURITY INDIVIDUAL RETIREMENT AC21 COUNTS.

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

23 is amended—
4

•HR 3803 IH

1 (1) by inserting before section 201 the follow2 ing:

3 ‘‘PART A—INSURANCE BENEFITS’’;

4 and

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

6 ‘‘PART B—INDIVIDUAL RETIREMENT PROGRAM

7 ‘‘SOCIAL SECURITY PAYROLL DEDUCTION PLANS

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

9 a covered employer for a calendar year shall have in effect

10 a social security payroll deduction plan for such calendar

11 year for such person’s eligible employees.

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

13 term ‘social security payroll deduction plan’ means a writ14 ten plan of an employer if—

15 ‘‘(1) the plan applies only with respect to wages

16 of eligible employees,

17 ‘‘(2) under such plan, the prescribed social se18 curity contributions will be deducted from the em19 ployee’s wages and paid to a social security individ20 ual retirement account designated in accordance

21 with section 252(a),

22 ‘‘(3) under such plan, the employer is required

23 to pay the amount so deducted to the specified social

24 security individual retirement account within 10
5

•HR 3803 IH

1 business days after the payment of the wages from

2 which the amount was deducted,

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

4 the cost of administering such plan, and

5 ‘‘(5) in the case of a plan under which there is

6 more than 1 social security individual retirement ac7 count, the employer does not make any endorsement

8 with respect to any such accounts.

9 ‘‘(c) AMOUNTS DEDUCTED MAY BE ACCUMULATED

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

11 of a social security individual retirement account des12 ignated under section 252(a), contributions below a speci13 fied amount will not be accepted, the requirements of sub14 section (b)(2) shall be treated as met if amounts deducted

15 from the wages of such employee are accumulated by the

16 employer and paid to such plan not later than 10 business

17 days after the first day on which the accumulated amount

18 exceeds such specified amount.

19 ‘‘DESIGNATION OF ACCOUNTS UNDER PAYROLL

20 DEDUCTION PLAN

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

22 subsection (b), the social security individual retirement ac23 count to which the prescribed social security contributions

24 with respect to any employee are required to be paid under

25 section 251 shall be a social security individual retirement
6

•HR 3803 IH

1 account designated by the employee to the employer not

2 later than the later of—

3 ‘‘(1) 10 business days after the date on which

4 the employee becomes an employee of such employer,

5 or

6 ‘‘(2) December 31, 1994.

7 Any such designation shall be made in such form and

8 manner as may be prescribed in regulations of the Sec9 retary.

10 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES11 IGNATION BY EMPLOYEE.—In any case in which no timely

12 designation of the social security individual retirement ac13 count is made, the employer shall make the designation

14 of the social security individual retirement account in ac15 cordance with regulations of the Secretary.

16 ‘‘PARTICIPATION BY SELF-EMPLOYED INDIVIDUALS

17 ‘‘SEC. 253. (a) IN GENERAL.—Each eligible self-em18 ployed individual who receives self-employment income for

19 any taxable year beginning after December 31, 1994,

20 shall, in such form and manner as shall be prescribed in

21 regulations of the Secretary, deposit in a social security

22 individual retirement account maintained by such individ23 ual the prescribed social security contribution for such tax24 able year. Such deposit shall be made within 10 business

25 days after the receipt by such individual of such self-em26 ployment income.
7

•HR 3803 IH

1 ‘‘(b) AMOUNTS PAYABLE MAY BE ACCUMULATED IN

2 CERTAIN CASES.—If, under the terms of a social security

3 individual retirement account maintained under subsection

4 (a), contributions below a specified amount will not be ac5 cepted, the requirements of subsection (a) shall be treated

6 as met if amounts otherwise payable under subsection (a)

7 are accumulated by the individual and paid to such ac8 count not later than 10 business days after the first day

9 on which the accumulated amount exceeds such specified

10 amount.

11 ‘‘DESIGNATION OF ACCOUNTS OF SURVIVING SPOUSES

12 AND SURVIVING DIVORCED SPOUSES

13 ‘‘SEC. 254. (a) IN GENERAL.—Except as provided in

14 subsection (b), in the case of a deceased individual with

15 respect to whom a social security individual retirement ac16 count was established and maintained pursuant to section

17 252 or 253, the trustee of such account shall transfer the

18 balance in such account to a social security individual re19 tirement account maintained by an eligible survivor if such

20 account is designated by the eligible survivor to the trustee

21 not later than 20 business days after the date of such indi22 vidual’s death. Any such designation shall be made in such

23 form and manner as may be prescribed in regulations of

24 the Secretary.

25 ‘‘(b) DESIGNATION IN ABSENCE OF TIMELY DES26 IGNATION BY ELIGIBLE SURVIVOR.—In any case in which,
8

•HR 3803 IH

1 upon the expiration of such 20-day period, there is an eli2 gible survivor but no timely designation of a social security

3 individual retirement account is made by the eligible survi4 vor under subsection (a), the trustee shall make the des5 ignation of the social security individual retirement ac6 count under subsection (a) on behalf of such eligible survi7 vor, in accordance with regulations of the Secretary.

8 ‘‘(c) DISPOSITION OF ACCOUNT BALANCE WHERE

9 NO ELIGIBLE SURVIVOR EXISTS.—In any case in which,

10 upon the expiration of such 20-day period no timely des11 ignation under subsection (b) has been made and there

12 is no eligible survivor, the trustee of the deceased individ13 ual’s account shall transfer the balance in such account

14 to the Federal Old-Age and Survivors Insurance Trust

15 Fund within the period of 20 business days following the

16 expiration of such 20-day period.

17 ‘‘DEFINITIONS

18 ‘‘SEC. 255. For purposes of this part—

19 ‘‘(1) SOCIAL SECURITY INDIVIDUAL RETIRE20 MENT ACCOUNT.—The term ‘social security individ21 ual retirement account’ means any individual retire22 ment account (as defined in section 408(a) of the

23 Internal Revenue Code of 1986) which is adminis24 tered or issued by a bank (as defined in section

25 408(n) of such Code) under terms which restrict de26 posits to prescribed social security contributions
9

•HR 3803 IH

1 made to the account pursuant to section 251 or 253

2 and transfers made to the account pursuant to sec3 tion 254.

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

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

6 on whom an excise tax is imposed under section

7 3111 of the Internal Revenue Code of 1986 with re8 spect to having an individual in his employ to whom

9 wages are paid by such person during such calendar

10 year.

11 ‘‘(3) ELIGIBLE EMPLOYEE.—

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), the term ‘eligible employee’ means,

14 in connection with any person who is a covered

15 employer for any calendar year, any individ16 ual—

17 ‘‘(i) with respect to whose employment

18 by such employer during such calendar

19 year there is imposed an excise tax under

20 section 3111 of the Internal Revenue Code

21 of 1986, and

22 ‘‘(ii) who, as of January 1, 1995, has

23 not been credited under part A with any

24 quarters of coverage (within the meaning

25 of section 213(a)(2)).
10

•HR 3803 IH

1 ‘‘(B) ELECTION OF PARTICIPATION.—

2 ‘‘(i) IN GENERAL.—The requirements

3 of subparagraph (A)(ii) shall be deemed

4 satisfied in the case of an individual who

5 does not otherwise meet such requirements

6 if such individual files with the employer

7 and the Secretary, in such form and man8 ner as shall be prescribed in regulations of

9 the Secretary, a written and signed dec10 laration of such individual’s intention to be

11 treated as an eligible employee for pur12 poses of this title and such election meets

13 the requirements of clause (ii).

14 ‘‘(ii) REQUIREMENTS.—Any election

15 under clause (i) must be so filed not later

16 than December 15, 1994, and must des17 ignate the social security individual retire18 ment account to which the prescribed so19 cial security contributions with respect to

20 such individual are to be paid.

21 ‘‘(iii) IRREVOCABILITY.—Any election

22 under clause (i) shall be irrevocable and

23 shall be effective with respect to wages

24 paid after December 31, 1994, for pay pe25 riods ending after such date.
11

•HR 3803 IH

1 ‘‘(4) ELIGIBLE SELF-EMPLOYED INDIVIDUAL.—

2 ‘‘(A) IN GENERAL.—Subject to subpara3 graph (B), the term ‘eligible self-employed indi4 vidual’ means any individual—

5 ‘‘(i) on whose self-employment income

6 for a taxable year beginning after Decem7 ber 31, 1994, there is imposed a tax under

8 section 1401(a) of the Internal Revenue

9 Code of 1986, and

10 ‘‘(ii) who, as of January 1, 1995, has

11 not been credited under part A with any

12 quarters of coverage (within the meaning

13 of section 213(a)(2)).

14 ‘‘(B) ELECTION OF PARTICIPATION.—

15 ‘‘(i) IN GENERAL.—The requirements

16 of subparagraph (A)(ii) shall be deemed

17 satisfied in the case of an individual who

18 does not otherwise meet such requirements

19 if such individual files with the Secretary,

20 in such form and manner as shall be pre21 scribed in regulations of the Secretary, a

22 written and signed declaration of such in23 dividual’s intention to be treated as an eli24 gible self-employed individual for purposes
12

•HR 3803 IH

1 of this title and such election meets the re2 quirements of clause (ii).

3 ‘‘(ii) REQUIREMENTS.—Any election

4 under clause (i) must be so filed not later

5 than December 15, 1994, and must des6 ignate the social security individual retire7 ment account to which the prescribed so8 cial security contributions with respect to

9 such individual are to be paid.

10 ‘‘(iii) IRREVOCABILITY.—Any election

11 under clause (i) shall be irrevocable and

12 shall be effective with respect to self-em13 ployment income for taxable years begin14 ning after December 31, 1994.

15 ‘‘(5) PRESCRIBED SOCIAL SECURITY CONTRIBU16 TION.—The term ‘prescribed social security con17 tribution’ means—

18 ‘‘(A) with respect to wages paid to an em19 ployee, an amount equal to the amount of tax

20 payable by the employer based on such wages

21 under section 3111 of the Internal Revenue

22 Code of 1986 with respect to having such em23 ployee in his employ, and

24 ‘‘(B) with respect to self-employment in25 come received by an individual, an amount
13

•HR 3803 IH

1 equal to the amount of tax payable by the indi2 vidual based on such self-employment income

3 under section 1401(a) of such Code.

4 ‘‘(6) ELIGIBLE SURVIVOR.—The term ‘eligible

5 survivor’ of a deceased individual means such indi6 vidual’s widow or, if there is no such widow, such in7 dividual’s last surviving divorced wife or surviving

8 divorced husband. Such term shall not include any

9 such surviving divorced wife or surviving divorced

10 husband who is married on the date of the deceased

11 individual’s death.

12 ‘‘(7) BUSINESS DAY.—The term ‘business day’

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

14 legal holiday in the area involved.

15 ‘‘PENALTIES

16 ‘‘SEC. 256. (a) FAILURE TO ESTABLISH INDIVIDUAL

17 RETIREMENT PAYROLL DEDUCTION PLAN.—Any covered

18 employer who fails to meet the requirements of section

19 251 for any calendar year shall be subject to a civil penalty

20 of not to exceed the greater of—

21 ‘‘(1) $5,000, or

22 ‘‘(2) $100 for each eligible employee of such

23 employer as of the beginning of such calendar year.

24 ‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED

25 UNDER PLAN.—Any covered employer who fails to deduct

26 an amount from the wages of an eligible employee in ac-
14

•HR 3803 IH

1 cordance with an applicable social security payroll deduc2 tion plan shall be subject to a civil penalty of not to exceed

3 $500 for each such failure.

4 ‘‘(c) FAILURE BY EMPLOYER TO MAKE TIMELY PAY5 MENTS TO SOCIAL SECURITY INDIVIDUAL RETIREMENT

6 ACCOUNT.—If an amount deducted from the wages of an

7 eligible employee under a social security payroll deduction

8 plan is not paid to the specified social security individual

9 retirement account within the time prescribed by section

10 251—

11 ‘‘(1) the employer shall be subject to a civil

12 penalty of not to exceed 50 percent of the amount

13 so deducted, and

14 ‘‘(2) shall be liable to the employee for interest

15 on the amount so deducted at the underpayment

16 rate determined under section 6621 of the Internal

17 Revenue Code of 1986 from the last day by which

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

19 on which such amount is paid into the specified so20 cial security individual retirement account.

21 ‘‘(d) FAILURE BY ELIGIBLE SELF-EMPLOYED INDI22 VIDUAL TO MAKE TIMELY PAYMENTS TO SOCIAL SECU23 RITY INDIVIDUAL RETIREMENT ACCOUNT.—If a pre24 scribed social security contribution is not paid by an eligi25 ble self-employed individual to a social security individual
15

•HR 3803 IH

1 retirement account maintained by the individual within

2 the time prescribed by section 253, such individual shall

3 be subject to a civil penalty of not to exceed 50 percent

4 of the amount of such contribution.

5 ‘‘(e) FAILURE BY TRUSTEE TO MAKE TIMELY

6 TRANSFERS.—If the balance in the social security individ7 ual retirement account of a deceased individual is not

8 transferred by the trustee within the time prescribed by

9 section 254—

10 ‘‘(1) the trustee shall be subject to a civil pen11 alty of not to exceed 50 percent of the amount of

12 the balance, and

13 ‘‘(2) shall be liable—

14 ‘‘(A) in the case of a transfer required to

15 be made to another social security individual re16 tirement account, to the widow or the surviving

17 divorced wife or surviving divorced husband (as

18 the case may be), or

19 ‘‘(B) in the case of a transfer required to

20 be made to the Federal Old-Age and Survivors

21 Insurance Trust Fund, to such Trust Fund,

22 for interest on the balance at the underpayment rate

23 determined under section 6621 of the Internal Reve24 nue Code of 1986 from the last day by which such

25 balance was required to be so transferred to the date
16

•HR 3803 IH

1 on which such balance is transferred to the des2 ignated social security individual retirement account.

3 ‘‘(f) RULES FOR APPLICATION OF SECTION.—

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

5 Any civil penalty assessed by this section shall be

6 imposed by the Secretary and collected in a civil ac7 tion.

8 ‘‘(2) COMPROMISES.—The Secretary may com9 promise the amount of any civil penalty imposed by

10 this section.

11 ‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER12 TAIN CASES.—The Secretary may waive the applica13 tion of this section with respect to any failure if the

14 Secretary determines that such failure is due to rea15 sonable cause and not to intentional disregard of

16 rules and regulations.’’

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

18 STATEMENTS.—Subsection (a) of section 6051 of the In19 ternal Revenue Code of 1986 (relating to receipts for em20 ployees) is amended—

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

22 (6);

23 (2) by striking the period at the end of para24 graph (7) and inserting ‘‘, and’’; and
17

•HR 3803 IH

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

2 paragraph:

3 ‘‘(8) the total amount deducted from the em4 ployee’s wages under a social security payroll deduc5 tion plan established under part B of title II of the

6 Social Security Act.’’

7 (c) EXEMPTION FROM ERISA REQUIREMENTS.—

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

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

10 amended—

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

12 (4);

13 (2) by striking the period at the end of para14 graph (5) and inserting ‘‘; or’’; and

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

16 paragraph:

17 ‘‘(6) such plan is a social security payroll de18 duction plan established under part B of title II of

19 the Social Security Act and does not provide for em20 ployer contributions.’’

21 (d) EFFECTIVE DATE AND NOTICE REQUIRE22 MENTS.—

23 (1) EFFECTIVE DATE.—The amendments made

24 by subsection (a) (and any social security payroll de25 duction plan required thereunder) shall apply with
18

•HR 3803 IH

1 respect to wages paid after December 31, 1994, for

2 pay periods ending after such date and self-employ3 ment income for taxable years beginning after such

4 date.

5 (2) NOTICE REQUIREMENTS.—

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

7 1, 1994, the Secretary of Health and Human

8 Services shall—

9 (i) send to the last known address of

10 each eligible individual a description of the

11 program established by the amendments

12 made by this Act, which shall be written in

13 the form of a pamphlet in language which

14 may be readily understood by the average

15 worker,

16 (ii) provide for toll-free access by tele17 phone from all localities in the United

18 States to the Social Security Administra19 tion through which individuals may obtain

20 information and answers to questions re21 garding such program, and

22 (iii) provide information to the media

23 in all localities of the United States about

24 such program and such toll-free access by

25 telephone.
19

•HR 3803 IH

1 (B) ELIGIBLE INDIVIDUAL.—For purposes

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

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

4 pamphlet sent pursuant to subparagraph (A), is

5 indicated within the records of the Social Secu6 rity Administration as—

7 (i) not having attained age 65, and

8 (ii) being credited with one or more

9 quarters of coverage under section 213 of

10 the Social Security Act.

11 (C) MATTERS TO BE INCLUDED.—The

12 Secretary shall include with the pamphlet sent

13 to each eligible individual pursuant to subpara14 graph (A)—

15 (i) a statement of the number of quar16 ters of coverage indicated in the records of

17 the Social Security Administration as of

18 the date of the description as credited to

19 such individual under section 213 of the

20 Social Security Act and the date as of

21 which such records may be considered ac22 curate, and

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

24 telephone established by the Secretary pur25 suant to subparagraph (A).
20

•HR 3803 IH

1 SEC. 4. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS

2 UNDER PART A OF TITLE II OF THE SOCIAL

3 SECURITY ACT.

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

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

6 following new subsection:

7 ‘‘Adjustment of Primary Insurance Amount of Eligible

8 Employees and Eligible Self-Employed Individuals

9 Under Part B

10 ‘‘(j)(1) Except as provided in paragraph (3), in the

11 case of an individual who is—

12 ‘‘(A) an eligible employee, as defined under

13 paragraph (3)(A) of section 255 without regard to

14 paragraph (3)(B) of such section, or

15 ‘‘(B) an eligible self-employed individual, as de16 fined under paragraph (4)(A) of section 255 without

17 regard to paragraph (4)(B) of such section,

18 such individual’s primary insurance amount as determined

19 in accordance with this section (before adjustments made

20 under subsection (i)) shall be equal to 50 percent of the

21 amount which would be so determined if this subsection

22 did not apply.

23 ‘‘(2) Except as provided in paragraph (3), in the case

24 of an individual who is—
21

•HR 3803 IH

1 ‘‘(A) an eligible employee as defined in para2 graph (3) of section 255 solely by reason of an elec3 tion under paragraph (3)(B) of such section, or

4 ‘‘(B) an eligible self-employed individual as de5 fined in paragraph (4) of section 255 solely by rea6 son of an election under paragraph (4)(B) of such

7 section,

8 such individual’s primary insurance amount as determined

9 in accordance with this section (before adjustments made

10 under subsection (i)) shall be equal to the product derived

11 by multiplying—

12 ‘‘(i) the amount which would be so determined

13 if this subsection did not apply, by

14 ‘‘(ii) the applicable percentage determined

15 under the following table:

‘‘If the number of such individual’s

quarters of coverage (within the

meaning of section 213(a)(2)) as of The applicable

January 1, 1995, is: percentage is:

Less than 21 ............................................................. 50 percent.

More than 20 but less than 61 ................................. 60 percent.

More than 60 but less than 101 ............................... 70 percent.

More than 100 but less than 141 ............................. 80 percent.

More than 141 ........................................................... 90 percent.

16 ‘‘(3)(A) In the case of an individual who is an eligible

17 employee as defined in paragraph (3) of section 255 or

18 an eligible self-employed individual as defined in para19 graph (4) of section 255 becomes entitled to disability in20 surance benefits under section 223, such individual’s pri-
22

•HR 3803 IH

1 mary insurance amount shall be determined without re2 gard to paragraphs (1) and (2).

3 ‘‘(B) Effective upon the attainment by an individual

4 described in subparagraph (A) of retirement age (as de5 fined in section 216(l)(1)), such individual’s primary in6 surance amount as determined in accordance with this sec7 tion (before subsequent adjustments made under sub8 section (i)) shall be equal the product derived by multiply9 ing—

10 ‘‘(i) the amount which would be so determined

11 if this subsection did not apply, by

12 ‘‘(ii) the applicable percentage determined

13 under the following table:

‘‘If the number of such individual’s

quarters of coverage (within the

meaning of section 213(a)(2)) as of

the date on which such individual The applicable

attains normal retirement age is: percentage is:

Less than 9 ............................................................... 100 percent.

More than 8 but less than 21 ................................... 90 percent.

More than 20 but less than 61 ................................. 80 percent.

More than 60 but less than 101 ............................... 70 percent.

More than 100 but less than 141 ............................. 60 percent.

More than 140 ........................................................... 50 percent.’’

14 (b) CONFORMING AMENDMENT TO RAILROAD RE15 TIREMENT ACT OF 1974.—Section 1 of the Railroad Re16 tirement Act of 1974 (45 U.S.C. 231) is amended by add17 ing at the end the following:

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

19 Security Act for purposes of determining the amount of

20 the annuity to which an individual is entitled under this
23

•HR 3803 IH

1 Act, such individual shall not be treated as an ‘eligible

2 individual’ as defined in section 253(4) of the Social Secu3 rity Act.’’

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

5 this section shall apply with respect to months after De6 cember 1994.

7 SEC. 5. TAX TREATMENT OF SOCIAL SECURITY INDIVIDUAL

8 RETIREMENT ACCOUNTS.

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

10 D of chapter 1 of the Internal Revenue Code of 1986 (re11 lating to pension, profit-sharing, stock bonus plans, etc.)

12 is amended by inserting after section 408 the following

13 new section:

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

15 ACCOUNTS.

16 ‘‘(a) GENERAL RULE.—A social security individual

17 retirement account shall be treated under this title in the

18 same manner as any individual retirement plan, except to

19 the extent otherwise provided in this section.

20 ‘‘(b) SOCIAL SECURITY INDIVIDUAL RETIREMENT

21 ACCOUNT.—For purposes of this title, the term ‘social se22 curity individual retirement account’ means an individual

23 retirement account (as defined in section 408(a)) which

24 is administered or issued by a bank (as defined in section

25 408(n)) under terms which restrict deposits to prescribed
24

•HR 3803 IH

1 social security contributions made to the account pursuant

2 to section 251 or 253 of the Social Security Act and trans3 fers made to the account pursuant to section 254 of such

4 Act.

5 ‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.—For

6 purposes of this title—

7 ‘‘(1) EXCLUSION FOR QUALIFIED DISTRIBU8 TIONS.—

9 ‘‘(A) IN GENERAL.—In the case of a quali10 fied distribution from a social security individ11 ual retirement account, the amount of such dis12 tribution shall not be includable in gross in13 come.

14 ‘‘(B) QUALIFIED DISTRIBUTION.—For

15 purposes of subparagraph (A), the term ‘quali16 fied distribution’ means any distribution made

17 on or after the date on which the individual at18 tains retirement age (as defined in section

19 216(l)(1) of the Social Security Act).

20 ‘‘(2) PENALTY FOR NONQUALIFIED DISTRIBU21 TIONS.—In the case of a distribution not subject to

22 paragraph (1), section 72(t) shall be applied—

23 ‘‘(A) by substituting ‘50 percent’ for ‘10

24 percent’ in paragraph (1) thereof, and
25

•HR 3803 IH

1 ‘‘(B) without regard to paragraph (2)

2 thereof.

3 ‘‘(3) ROLLOVERS.—Section 408(d)(3)(A)(i)

4 shall apply to any amount distributed from a social

5 security individual retirement account only to the ex6 tent such amount is paid into another such account

7 for the benefit of the individual for whom the ac8 count from which such amount is transferred was

9 maintained.’’

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

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

12 relating to section 408 the following new item:

‘‘Sec. 408A. Social security individual retirement accounts.’’

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

14 this section shall apply to taxable years beginning after

15 December 31, 1994.

Æ

16 HR 3803 IH——2

17 HR 3803 IH——3