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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 824 Introduced in Senate (IS)]

  1st Session
                                 S. 824

To amend the Internal Revenue Code of 1986 and the Social Security Act 
  to provide for personal investment plans funded by employee social 
                      security payroll deductions.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                 May 18 (legislative day, May 15), 1995

Mr. Kerrey (for himself and Mr. Simpson) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 and the Social Security Act 
  to provide for personal investment plans funded by employee social 
                      security payroll deductions.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Personal Investment Plan Act of 
1995''.

SEC. 2. OPTIONAL REDUCTION OF SOCIAL SECURITY TAXES ON EMPLOYEES.

    (a) Tax on Employees.--Subsection (a) of section 3101 of the 
Internal Revenue Code of 1986 (relating to OASDI tax on employees) is 
amended--
            (1) by striking the period at the end of the table and 
        inserting a semicolon; and
            (2) by adding after and below the table the following:
``except that, in the case of an eligible employee (as defined in 
section 255(3) of the Social Security Act), the rate of tax under this 
subsection shall be 4.2 percent with respect to wages paid on or after 
January 1 of the calendar year in which an election is in effect under 
such section, for pay periods ending after such date.''.
    (b) Self-Employment Tax.--Subsection (a) of section 1401 of such 
Code (relating to OASDI tax on self-employment income) is amended--
            (1) by striking the period at the end of the table and 
        inserting a semicolon; and
            (2) by adding after and below the table the following:
``except that, in the case of an eligible self-employed individual (as 
defined in section 255(4) of the Social Security Act), the rate of tax 
under this subsection shall be 10.4 percent of the amount of the self-
employment income in the case of a taxable year in which an election is 
in effect under such section.''.
    (c) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        remuneration paid after December 31, 1995.
            (2) Self-employment tax.--The amendments made by subsection 
        (b) shall apply to taxable years beginning after December 31, 
        1995.

SEC. 3. PERSONAL INVESTMENT PLANS.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';
        and
            (2) by adding at the end the following new part:
                  ``Part B--Personal Investment Plans

             ``personal investment payroll deduction plans

    ``Sec. 251. (a) In General.--Each person who is a covered employer 
for a calendar year shall have in effect a personal investment payroll 
deduction plan for such calendar year for such person's eligible 
employees.
    ``(b) Requirements.--For purposes of this part, the term `personal 
investment payroll deduction plan' means a written plan of an employer 
if--
            ``(1) the plan applies only with respect to wages of 
        eligible employees,
            ``(2) under such plan, the personal investment plan 
        contributions will be deducted from the employee's wages and 
        paid to the Social Security Administration with respect to a 
        personal investment plan designated in accordance with section 
        252(a),
            ``(3) under such plan, the employer is required to pay the 
        amount so deducted with respect to the specified personal 
        investment plan within 10 business days after the payment of 
        the wages from which the amount was deducted,
            ``(4) the employer receives no compensation for the cost of 
        administering such plan, and
            ``(5) the employer does not make any endorsement with 
        respect to any plan.
    ``(c) Amounts Deducted May Be Accumulated by Employer in Certain 
Cases.--If, under the terms of a personal investment plan designated 
under section 252(a), contributions below a specified amount will not 
be accepted, the requirements of subsection (b)(2) shall be treated as 
met if amounts deducted from the wages of such employee are accumulated 
by the employer and paid to such plan not later than 10 business days 
after the first day on which the accumulated amount exceeds such 
specified amount.

``designation of personal investment plans under payroll deduction plan

    ``Sec. 252. (a) In General.--Except as provided in subsection (b), 
the personal investment plan with respect to which the personal 
investment plan contributions with respect to any employee are required 
to be paid under section 251 shall be a personal investment plan 
designated by the employee to the employer not later than 10 business 
days after the date on which the employee becomes an employee of such 
employer. Any such designation shall
 be made in such form and manner as may be prescribed in regulations of 
the Commissioner of Social Security.
    ``(b) Designation in Absence of Timely Designation by Employee.--In 
any case in which no timely designation of the personal investment plan 
is made, the employer shall make the designation of the personal 
investment plan in accordance with regulations of the Commissioner of 
Social Security.

              ``participation by self-employed individuals

    ``Sec. 253. (a) In General.--Each eligible self-employed individual 
who receives self-employment income beginning on or after January 1 of 
the taxable year in which an election is in effect under section 255, 
shall, in such form and manner as shall be prescribed in regulations of 
the Commissioner of Social Security, deposit with the Social Security 
Administration with respect to a personal investment plan maintained by 
such individual the personal investment plan contribution for such 
taxable year. Such deposit shall be made within 10 business days after 
the receipt by such individual of such self-employment income.
    ``(b) Amounts Payable May Be Accumulated in Certain Cases.--If, 
under the terms of a personal investment plan maintained under 
subsection (a), contributions below a specified amount will not be 
accepted, the requirements of subsection (a) shall be treated as met if 
amounts otherwise payable under subsection (a) are accumulated by the 
individual and paid to such plan not later than 10 business days after 
the first day on which the accumulated amount exceeds such specified 
amount.

  ``designation of plans of surviving spouses and surviving divorced 
                                spouses

    ``Sec. 254. (a) In General.--Except as provided in subsection (b), 
in the case of a deceased individual with respect to whom a personal 
investment plan was established and maintained pursuant to section 252 
or 253, the trustee of such plan shall transfer the balance in such 
plan to a personal investment plan maintained by an eligible survivor 
if such plan is designated by the eligible survivor to the trustee not 
later than 20 business days after the date of such individual's death. 
Any such designation shall be made in such form and manner as may be 
prescribed in regulations of the Commissioner of Social Security.
    ``(b) Designation in Absence of Timely Designation by Eligible 
Survivor.--In any case in which, upon the expiration of such 20-day 
period, there is an eligible survivor but no timely designation of a 
personal investment plan is made by the eligible survivor under 
subsection (a), the trustee shall make the designation of the personal 
investment plan under subsection (a) on behalf of such eligible 
survivor, in accordance with regulations of the Commissioner of Social 
Security.
    ``(c) Disposition of Plan Balance Where No Eligible Survivor 
Exists.--In any case in which, upon the expiration of such 20-day 
period no timely designation under subsection (b) has been made and 
there is no eligible survivor, the trustee of the deceased individual's 
plan shall transfer the balance in such plan to the Federal Old-Age and 
Survivors Insurance Trust Fund within the period of 20 business days 
following the expiration of such 20-day period.

                             ``definitions

    ``Sec. 255. For purposes of this part--
            ``(1) Personal investment plan.--The term `personal 
        investment plan' means--
                    ``(A) any personal investment retirement plan in 
                the Personal Investment Fund (established under section 
                257) which is administered by the Personal Investment 
                Board, or
                    ``(B) any individual retirement plan (as defined in 
                section 7701(a)(37) of the Internal Revenue Code of 
                1986) which is administered or issued by a bank (as 
                defined in section 408(n) of such Code),
        under terms which restrict deposits to personal investment plan 
        contributions made to the plan pursuant to section 251 or 253 
        and transfers made to the plan pursuant to section 254, and 
        under which distributions may only be made on or after the date 
        on which the individual attains age 59\1/2\, made to a 
        beneficiary (or to the estate of the individual) on or after 
        the death of the individual, or attributable to the 
        individual's becoming disabled within the meaning of section 
        223(d).
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in his employ to whom 
        wages are paid by such person during such calendar year.
            ``(3) Eligible employee.--
                    ``(A) In general.--The term `eligible employee' 
                means, in connection with any person who is a covered 
                employer for any calendar year beginning after December 
                31, 1995, any individual--
                            ``(i) with respect to whose employment by 
                        such employer during such calendar year there 
                        is imposed an excise tax under section 3111 of 
                        the Internal Revenue Code of 1986, and
                            ``(ii) who files with the employer and the 
                        Commissioner of Social Security, in such form 
                        and manner as shall be prescribed in 
                        regulations of the Commissioner, a written and 
                        signed declaration of such individual's 
                        intention to be treated as an eligible employee 
                        for purposes of this title and such election 
                        meets the requirements of subparagraph (B).
                    ``(B) Requirements.--Any election under 
                subparagraph (A)(ii) must be so filed not later than 
                December 15 preceding the calendar year in which such 
                election is to take effect, and must designate the 
                personal investment plan to which the personal 
                investment plan contributions with respect to such 
                individual are to be paid.
                    ``(C) Irrevocability.--Any election under 
                subparagraph (A)(ii) shall be irrevocable and shall be 
                effective with respect to wages paid on or after 
                January 1 of the calendar year in which such election 
                is to take effect, for pay periods ending on or after 
                such date.
            ``(4) Eligible self-employed individual.--
                    ``(A) In general.--The term `eligible self-employed 
                individual' means any individual--
                            ``(i) on whose self-employment income for a 
                        taxable year beginning after December 31, 1995, 
                        there is imposed a tax under section 1401(a) of 
                        the Internal Revenue Code of 1986, and
                            ``(ii) who files with the Commissioner of 
                        Social Security, in such form and manner as 
                        shall be prescribed in regulations of the 
                        Commissioner, a written and signed declaration 
                        of such individual's intention to be treated as 
                        an eligible self-employed individual for 
                        purposes of this title and such election meets 
                        the requirements of subparagraph (B).
                    ``(B) Requirements.--Any election under 
                subparagraph (A)(ii) must be so filed not later than 
                December 15 preceding the taxable year in which such 
                election is to take effect, and must designate the 
                personal investment plan to which the personal 
                investment plan contributions with respect to such 
                individual are to be paid.
                    ``(C) Irrevocability.--Any election under 
                subparagraph (A)(ii) shall be irrevocable and shall be 
                effective with respect to self-employment income 
                beginning on or after the first day of the taxable year 
                in which such election is to take effect, for pay 
                periods ending on or after such date.
            ``(5) Personal investment plan contribution.--The term 
        `personal investment plan contribution' means--
                    ``(A) with respect to any eligible employee of a 
                covered employer, an amount equal to 2 percent of the 
                wages received by such employee with respect to 
                employment by such employer, and
                    ``(B) with respect to the self-employment income of 
                an individual for any taxable year, an amount equal to 
                2 percent of such income for such taxable year.
            ``(6) Eligible survivor.--The term `eligible survivor' of a 
        deceased individual means such individual's widow or, if there 
        is no such widow, such individual's last surviving divorced 
        wife or surviving divorced husband. Such term shall not include 
        any such surviving divorced wife or surviving divorced husband 
        who is married on the date of the deceased individual's death.
            ``(7) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.

                              ``penalties

    ``Sec. 256. (a) Failure To Establish Personal Investment Payroll 
Deduction Plan.--Any covered employer who fails to meet the 
requirements of section 251 for any calendar year shall be subject to a 
civil penalty of not to exceed the greater of--
            ``(1) $5,000, or
            ``(2) $100 for each eligible employee of such employer as 
        of the beginning of such calendar year.
    ``(b) Failure To Make Deductions Required Under Plan.--Any covered 
employer who fails to deduct an amount from the wages of an eligible 
employee in accordance with a personal investment payroll deduction 
plan shall be subject to a civil penalty of not to exceed $500 for each 
such failure.
    ``(c) Failure by Employer To Make Timely Payments With Respect to 
Personal Investment Plan.--If an amount deducted from the wages of an 
eligible employee under a social security payroll deduction plan is not 
paid to the Social Security Administration with respect to the 
specified personal investment plan within the time prescribed by 
section 251--
            ``(1) the employer shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount so deducted, and
            ``(2) shall be liable to the employee for interest on the 
        amount so deducted at the underpayment rate determined under 
        section 6621 of the Internal Revenue Code of 1986 from the last 
        day by which such amount was required to be so paid to the date 
        on which such amount is paid into the specified personal 
        investment plan.
    ``(d) Failure by Eligible Self-Employed Individual To Make Timely 
Payments to Personal Investment Plan.--If a personal investment plan 
contribution is not paid by an eligible self-employed individual to the 
Social Security Administration with respect to a personal investment 
plan maintained by the individual within the time prescribed by section 
253, such individual shall be subject to a civil penalty of not to 
exceed 50 percent of the amount of such contribution.
    ``(e) Failure by Trustee To Make Timely Transfers.--If the balance 
in the personal investment plan of a deceased individual is not 
transferred by the trustee within the time prescribed by section 254--
            ``(1) the trustee shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount of the balance, and
            ``(2) shall be liable--
                    ``(A) in the case of a transfer required to be made 
                to another personal investment plan, to the widow or 
                the surviving divorced wife or surviving divorced 
                husband (as the case may be), or
                    ``(B) in the case of a transfer required to be made 
                to the Federal Old-Age and Survivors Insurance Trust 
                Fund, to such Trust Fund,
        for interest on the balance at the underpayment rate determined 
        under section 6621 of the Internal Revenue Code of 1986 from 
        the last day by which such balance was required to be so 
        transferred to the date on which such balance is transferred to 
        the designated personal investment plan.
    ``(f) Rules for Application of Section.--
            ``(1) Penalties assessed by commissioner.--Any civil 
        penalty assessed by this section shall be imposed by the 
        Commissioner of Social Security and collected in a civil 
        action.
            ``(2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            ``(3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.

                       ``personal investment fund

    ``Sec. 257. (a) Establishment.--There is hereby established and 
maintained in the Treasury of the United States a Personal Investment 
Fund in the same manner as the Thrift Savings Fund under sections 8437, 
8438, and 8439 of title 5, United States Code.
    ``(b) Personal Investment Fund Board.--
            ``(1) In general.--There is established and operated in the 
        Social Security Administration a Personal Investment Fund Board 
        in the same manner as the Federal Retirement Thrift Investment 
        Board under subchapter VII of chapter 84 of title 5, United 
        States Code.
            ``(2) Specific investment duties.--The Personal Investment 
        Fund shall be managed by the Personal Investment Fund Board in 
        the same manner as the Thrift Savings Fund is managed under 
        subchapter VIII of chapter 84 of title 5, United States 
        Code.''.
    (b) Amounts Deducted To Be Shown on W-2 Statements.--Subsection (a) 
of section 6051 of the Internal Revenue Code of 1986 (relating to 
receipts for employees) is amended--
            (1) by striking ``and'' at the end of paragraph (9);
            (2) by striking the period at the end of paragraph (10) and 
        inserting ``, and''; and
            (3) by adding at the end the following new paragraph:
            ``(11) the total amount deducted from the employee's wages 
        under a personal investment payroll deduction plan established 
        under part B of title II of the Social Security Act.''.
    (c) Exemption From ERISA Requirements.--Subsection (b) of section 4 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1003(b)) is amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; or''; and
            (3) by adding at the end the following new paragraph:
            ``(6) such plan is a personal investment payroll deduction 
        plan established under part B of title II of the Social 
        Security Act and does not provide for employer 
        contributions.''.
    (d) Effective Date and Notice Requirements.--
            (1) Effective date.--The amendments made by subsection (a) 
        (and any personal investment payroll deduction plan required 
        thereunder) shall apply with respect to wages paid after 
        December 31, 1995, for pay periods ending after such date and 
        self-employment income for taxable years beginning after such 
        date.
            (2) Notice requirements.--
                    (A) In general.--Not later than October 1, 1995, 
                the Commissioner of Social Security shall--
                            (i) send to the last known address of each 
                        eligible individual a description of the 
                        program established by the amendments made by 
                        this section, which shall be written in the 
                        form of a pamphlet in language which may be 
                        readily understood by the average worker,
                            (ii) provide for toll-free access by 
                        telephone from all localities in the United 
                        States to the Social Security Administration 
                        through which individuals may obtain 
                        information and answers to questions regarding 
                        such program, and
                            (iii) provide information to the media in 
                        all localities of the United States about such 
                        program and such toll-free access by telephone.
                    (B) Eligible individual.--For purposes of this 
                paragraph, the term ``eligible individual'' means an 
                individual who, as of the date of the pamphlet sent 
                pursuant to subparagraph (A), is indicated within the 
                records of the Social Security Administration as being 
                credited with one or more quarters of coverage under 
                section 213 of the Social Security Act.
                    (C) Matters to be included.--The Commissioner shall 
                include with the pamphlet sent to each eligible 
                individual pursuant to subparagraph (A)--
                            (i) a statement of the number of quarters 
                        of coverage indicated in the records of the 
                        Social Security Administration as of the date 
                        of the description as credited to such 
                        individual under section 213 of the Social 
                        Security Act and the date as of which such 
                        records may be considered accurate, and
                            (ii) the number for toll-free access by 
                        telephone established by the Commissioner 
                        pursuant to subparagraph (A).

SEC. 4. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS UNDER PART A OF TITLE 
              II OF THE SOCIAL SECURITY ACT.

    (a) In General.--Section 215 of the Social Security Act (42 U.S.C. 
415) is amended by adding at the end the following new subsection:

  ``Adjustment of Primary Insurance Amount of Eligible Employees and 
            Eligible Self-Employed Individuals Under Part B

    ``(j)(1) Except as provided in paragraph (2), in the case of an 
individual who is--
            ``(A) an eligible employee, as defined under paragraph (3) 
        of section 255, or
            ``(B) an eligible self-employed individual, as defined 
        under paragraph (4) of section 255,
such individual's primary insurance amount shall be determined under 
subsection (a)(1)(A) (before subsequent adjustments made under 
subsection (i)), by substituting the first, second, and third primary 
insurance amount factors determined in the following table for the 
primary insurance amount factors `90', `32', and `15' in clauses (i), 
(ii), and (iii), respectively:

      

                                                                        
------------------------------------------------------------------------
                                The PIA factors for such individual are:
 ``If individual's age in 1996 -----------------------------------------
              is:                  First:        Second:       Third:   
------------------------------------------------------------------------
25 and under..................           90            14           2 
26 to 35......................           90            21           8 
35 to 45......................           90            26          12 
45 and over...................           90            29         14.'' 
------------------------------------------------------------------------

    ``(2)(A) In the case of an individual who is an eligible employee 
as defined in paragraph (3) of section 255 or an eligible self-employed 
individual as defined in paragraph (4) of section 255 becomes entitled 
to disability insurance benefits under section 223, such individual's 
primary insurance amount shall be determined without regard to 
paragraph (1).
    ``(B) Effective upon the attainment by an individual described in 
subparagraph (A) of retirement age (as defined in section 216(l)(1)), 
such individual's primary insurance amount as determined in accordance 
with this section (before subsequent adjustments made under subsection 
(i)) shall be determined under paragraph (1).''.

    (b) Conforming Amendment to Railroad Retirement Act of 1974.--
Section 1 of the Railroad Retirement Act of 1974 (45 U.S.C. 231) is 
amended by adding at the end the following:
    ``(s) In applying applicable provisions of the Social Security Act 
for purposes of determining the amount of the annuity to which an 
individual is entitled under this Act, such individual shall not be 
treated as an `eligible individual' as defined in section 253(4) of the 
Social Security Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to months after December 1995.
                                 <all>
S 824 IS----2
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