I 

109TH CONGRESS 

1ST SESSION H. R. 1776 

To reform Social Security by establishing a Personal Social Security Savings 

Program and to provide new limitations on the Federal Budget. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 21, 2005 

Mr. RYAN of Wisconsin (for himself, Mr. FEENEY, Mr. HENSARLING, Mr. 

MCHENRY, Mr. BARRETT of South Carolina, Mr. FRANKS of Arizona, 

and Mrs. NORTHUP) introduced the following bill; which was referred to 

the Committee on Ways and Means, and in addition to the Committees 

on the Budget and Rules, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To reform Social Security by establishing a Personal Social 

Security Savings Program and to provide new limitations 

on the Federal Budget. 

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Social Security Personal Savings Guarantee and Pros6 perity Act of 2005’’. 
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1 (b) TABLE OF CONTENTS.—The table of contents is 

2 as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM 

Sec. 101. Establishment of Personal Social Security Investment Program. 

‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

‘‘Sec. 251. Definitions. 

‘‘Sec. 252. Social Security Personal Savings Fund. 

‘‘Sec. 253. Participation in Program. 

‘‘Sec. 254. Personal social security savings accounts. 

‘‘Sec. 255. Tier I Investment Fund. 

‘‘Sec. 256. Tier II Investment Fund. 

‘‘Sec. 257. Tier III Investment Options. 

‘‘Sec. 258. Personal social security savings annuity and other distributions. 

‘‘Sec. 259. Guarantee of promised benefits. 

‘‘Sec. 260. Personal Social Security Savings Board. 

‘‘Sec. 261. Executive Director. 

Sec. 102. Monthly insurance benefits for participating individuals. 

Sec. 103. General fund transfers to the Federal Old-Age and Survivors Insurance Trust Fund. 

Sec. 104. Tax treatment of accounts. 

Sec. 105. Self-Liquidating Social Security Transition Fund. 

Sec. 106. Budgetary treatment of social security. 

Sec. 107. Dedication of budget surpluses to saving social security. 

Sec. 108. Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings Program. 

Sec. 109. Reduction of FICA rates resulting from Personal Social Security Savings Program. 

TITLE II—PUTTING A LID ON THE FEDERAL BUDGET 

Subtitle A—Spending safeguards on the growth of entitlements and 

mandatories 

Sec. 201. Spending caps on growth of entitlements and mandatories. 

Sec. 202. Exempt programs and activities. 

Sec. 203. Exceptions, limitations, and special rules. 

Sec. 204. Point of order. 

Sec. 205. Technical and conforming amendments. 

Subtitle B—Discretionary spending limits 

Sec. 211. Enforcing discretionary spending limits. 
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1 TITLE I—PERSONAL SOCIAL SE2 CURITY INVESTMENT PRO3 GRAM 

4 SEC. 101. ESTABLISHMENT OF PERSONAL SOCIAL SECU5 RITY INVESTMENT PROGRAM. 

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

7 is amended— 

8 (1) by inserting before section 201 the fol9 lowing: 

10 ‘‘PART A—INSURANCE BENEFITS’’; 

11 and 

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

13 ‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS 

14 PROGRAM 

15 ‘‘SEC. 251. DEFINITIONS. 

16 ‘‘For purposes of this part— 

17 ‘‘(1) PARTICIPATING INDIVIDUAL.—The term 

18 ‘participating individual’ has the meaning provided 

19 in section 253(a). 

20 ‘‘(2) BOARD.—The term ‘Board’ means the 

21 Personal Social Security Savings Board established 

22 under section 260. 

23 ‘‘(3) EXECUTIVE DIRECTOR.—The term ‘Execu24 tive Director’ means the Executive Director ap25 pointed under section 261. 
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1 ‘‘(4) PERSONAL SOCIAL SECURITY SAVINGS AC2 COUNT.—The term ‘personal social security savings 

3 account’ means an account established under section 

4 254(a). 

5 ‘‘(5) PERSONAL SOCIAL SECURITY SAVINGS AN6 NUITY.—The term ‘personal social security savings 

7 annuity’ means an annuity approved by the Board 

8 under section 258(b)(3). 

9 ‘‘(6) SAVINGS FUND.—The term ‘Savings Fund’ 

10 means the Social Security Personal Savings Fund 

11 established under section 252. 

12 ‘‘(7) TIER I INVESTMENT FUND.—The term 

13 ‘Tier I Investment Fund’ means the trust fund cre14 ated under section 255. 

15 ‘‘(8) TIER II INVESTMENT FUND.—The term 

16 ‘Tier II Investment Fund’ means the trust fund cre17 ated under section 256. 

18 ‘‘(9) TIER III INVESTMENT OPTION.—The term 

19 ‘Tier III Investment Option’ means an investment 

20 option which is— 

21 ‘‘(A) offered by an eligible entity certified 

22 by the Board under section 257(b); and 

23 ‘‘(B) approved by the Board under section 

24 257(c). 
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1 ‘‘SEC. 252. SOCIAL SECURITY PERSONAL SAVINGS FUND. 

2 ‘‘(a) ESTABLISHMENT OF SAVINGS FUND.— 

3 ‘‘(1) ESTABLISHMENT.—There is established in 

4 the Treasury of the United States a trust fund to 

5 be known as the ‘Social Security Personal Savings 

6 Fund’. 

7 ‘‘(2) AMOUNTS IN FUND.—The Savings Fund 

8 shall consist of— 

9 ‘‘(A) all amounts transferred to or depos10 ited into the Savings Fund under subsection 

11 (b), increased by the total net earnings from in12 vestments of sums in the Savings Fund attrib13 utable to such transferred or deposited 

14 amounts, and reduced by the total net losses 

15 from investments of such sums, and 

16 ‘‘(B) the reserves held in the Annuity Re17 serves Account established under section 

18 258(b)(3), increased by the total net earnings 

19 from investments of such reserves, and reduced 

20 by the total net losses from investments of such 

21 reserves. 

22 ‘‘(3) TRUSTEES.—The Board shall serve as 

23 trustees of the Savings Fund. 

24 ‘‘(4) BUDGET AUTHORITY; APPROPRIATION.— 

25 This part constitutes budget authority in advance of 

26 appropriations Acts and represents the obligation of 
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1 the Board to provide for the payment of amounts 

2 provided under this part. The amounts held in the 

3 Savings Fund are appropriated and shall remain 

4 available without fiscal year limitation. 

5 ‘‘(b) DEPOSITS INTO FUND.— 

6 ‘‘(1) IN GENERAL.—During each calendar year, 

7 the Secretary of the Treasury shall deposit into the 

8 Savings Fund, from amounts held in the Federal 

9 Old-Age and Survivors Insurance Trust Fund, a 

10 total amount equal, in the aggregate, to 100 percent 

11 of the redirected social security contribution for such 

12 calendar year of each individual who is a partici13 pating individual for such calendar year. 

14 ‘‘(2) TRANSFERS BASED ON ESTIMATES.— 

15 ‘‘(A) IN GENERAL.—The amounts depos16 ited pursuant to paragraph (1) shall be trans17 ferred in at least weekly payments from the 

18 Federal Old-Age and Survivors Insurance Trust 

19 Fund to the Savings Fund. 

20 ‘‘(B) DETERMINATION OF AMOUNTS.—The 

21 amounts transferred under subparagraph (A) 

22 shall be determined on the basis of estimates, 

23 made by the Commissioner of Social Security 

24 and certified to the Secretary of the Treasury, 

25 of the wages paid to, and self-employment in-
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1 come derived by, participating individuals. 

2 Proper adjustments shall be made in amounts 

3 subsequently transferred to the extent prior es4 timates were in excess of or were less than ac5 tual amounts transferred. 

6 ‘‘(3) REDIRECTED SOCIAL SECURITY CONTRIBU7 TIONS.—For purposes of paragraph (1)—— 

8 ‘‘(A) IN GENERAL.—The term ‘redirected 

9 social security contributions’ means, with re10 spect to an individual for a calendar year, the 

11 sum of— 

12 ‘‘(i) the product derived by multi13 plying— 

14 ‘‘(I) the sum of the total wages 

15 paid to, and self-employment income 

16 derived by, such individual during 

17 such calendar year, to the extent such 

18 total wages and self-employment in19 come do not exceed the base amount 

20 for such calendar year; by 

21 ‘‘(II) the applicable base percent22 age for the calendar year; and 

23 ‘‘(ii) the product derived by multi24 plying— 
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1 ‘‘(I) the sum of the total wages 

2 paid to, and self-employment income 

3 derived by, such individual during 

4 such calendar year, to the extent such 

5 total wages and self-employment in6 come exceed the base amount (taking 

7 into account the limits imposed by the 

8 contribution and benefit base under 

9 section 230); by 

10 ‘‘(II) the applicable supplemental 

11 percentage for the calendar year. 

12 ‘‘(B) BASE AMOUNT.—For purposes of 

13 subparagraph (A)— 

14 ‘‘(i) INITIAL BASE AMOUNT.—The 

15 base amount for calendar year 2006 is 

16 $10,000. 

17 ‘‘(ii) ADJUSTMENTS TO BASE

18 AMOUNT.—The base amount for any cal19 endar year after 2006 is the product de20 rived by multiplying $10,000 by a frac21 tion— 

22 ‘‘(I) the numerator of which is 

23 the national average wage index (as 

24 defined in section 209(k)) for the first 

25 of the 2 preceding calendar years; and 
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1 ‘‘(II) the denominator of which is 

2 the national average wage index (as so 

3 defined) for 2004. 

4 ‘‘(C) APPLICABLE BASE PERCENTAGE.— 

5 For purposes of subparagraph (A), the applica6 ble base percentage for a calendar year is— 

7 ‘‘(i) for calendar years after 2005 and 

8 before 2016, 5 percent; and 

9 ‘‘(ii) for calendar years after 2015, 10 

10 percent. 

11 ‘‘(D) APPLICABLE SUPPLEMENTAL PER12 CENTAGE.—For purposes of subparagraph (A), 

13 the applicable supplemental percentage for a 

14 calendar year is— 

15 ‘‘(i) for calendar years after 2005 and 

16 before 2016, 2.5 percent; and 

17 ‘‘(ii) for calendar years after 2015, 5 

18 percent. 

19 ‘‘(c) AVAILABILITY.—The sums in the Savings Fund 

20 are appropriated and shall remain available without fiscal 

21 year limitation— 

22 ‘‘(1) to invest funds in the Tier I Investment 

23 Fund of the Savings Fund and the Tier II Invest24 ment Fund of the Savings Fund under sections 255 

25 and 256, respectively; 
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1 ‘‘(2) to transfer into Tier III Investment Op2 tions under section 257; 

3 ‘‘(3) to make distributions in accordance with 

4 section 258; and 

5 ‘‘(4) to pay the administrative expenses of the 

6 Board in accordance with subsection (e). 

7 ‘‘(d) LIMITATIONS ON USE OF FUNDS.— 

8 ‘‘(1) IN GENERAL.—Sums in the Savings Fund 

9 credited to a participating individual’s personal so10 cial security savings account may not be used for, or 

11 diverted to, purposes other than for the exclusive 

12 benefit of the participating individual or the partici13 pating individual’s beneficiaries under this part. 

14 ‘‘(2) ASSIGNMENTS.—Sums in the Savings 

15 Fund may not be assigned or alienated and are not 

16 subject to execution, levy, attachment, garnishment, 

17 or other legal process. 

18 ‘‘(e) PAYMENT OF ADMINISTRATIVE EXPENSES.— 

19 Administrative expenses incurred to carry out this part 

20 shall be paid out of net earnings in the Savings Fund in 

21 conjunction with the allocation of investment earnings and 

22 losses under section 254(c). 

23 ‘‘(f) LIMITATION.—The sums in the Savings Fund 

24 shall not be appropriated for any purpose other than the 
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1 purposes specified in this part and may not be used for 

2 any other purpose. 

3 ‘‘SEC. 253. PARTICIPATION IN PROGRAM. 

4 ‘‘(a) PARTICIPATING INDIVIDUAL.—For purposes of 

5 this part, the term ‘participating individual’ means any 

6 individual— 

7 ‘‘(1)(A) who receives wages in any calendar 

8 year after December 31, 2005, on which there is im9 posed a tax under section 3101(a) of the Internal 

10 Revenue Code of 1986, or 

11 ‘‘(B) who derives self-employment income for a 

12 taxable year beginning after December 31, 2005, on 

13 which there is imposed a tax under section 1401(a) 

14 of the Internal Revenue Code of 1986, 

15 ‘‘(2) who is born on or after January 1, 1950, 

16 and 

17 ‘‘(3) who has not filed an election to renounce 

18 such individual’s status as a participating individual 

19 under subsection (b) or has filed such an election 

20 and has subsequently filed an election to reinstate 

21 such individual’s status as a participating individual 

22 under subsection (c). 

23 ‘‘(b) RENUNCIATION OF PARTICIPATION.— 

24 ‘‘(1) IN GENERAL.—An individual— 
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1 ‘‘(A) who has not attained retirement age 

2 (as defined in section 216(l)(1)), and 

3 ‘‘(B) with respect to whom no distribution 

4 has been made from amounts credited to the in5 dividual’s personal social security savings ac6 count for the purchase of a personal social se7 curity savings annuity, 

8 may elect, in such form and manner as shall be pre9 scribed in regulations of the Board, to renounce 

10 such individual’s status as a ‘participating indi11 vidual’ for purposes of this part. Upon completion of 

12 the procedures provided for under paragraph (2), 

13 any such individual who has made such an election 

14 shall not be treated as a participating individual 

15 under this part, effective as if such individual had 

16 never been a participating individual. The Board 

17 shall provide for immediate notification of such elec18 tion to the Commissioner of Social Security, the Sec19 retary of the Treasury, and the Executive Director. 

20 ‘‘(2) PROCEDURE.—The Board shall prescribe 

21 by regulation procedures governing the termination 

22 of an individual’s status as ‘participating individual’ 

23 pursuant to an election under this subsection. Such 

24 procedures shall include— 
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1 ‘‘(A) prompt closing of the individual’s per2 sonal social security savings account established 

3 under section 254, 

4 ‘‘(B) revocation of any benefit credit cer5 tificate assigned to the individual’s personal so6 cial security savings account under section 255, 

7 and 

8 ‘‘(C) prompt transfer to the Federal Old9 Age and Survivors Insurance Trust Fund as 

10 general receipts of any amount held in the Tier 

11 II Investment Fund of the Savings Fund or 

12 under a Tier III Investment Option pursuant to 

13 section 256 or 257 and credited to such individ14 ual’s personal social security savings account. 

15 ‘‘(c) REINSTATEMENT OF PARTICIPATION.— 

16 ‘‘(1) IN GENERAL.—Any individual who has 

17 filed an election under subsection (b) to renounce 

18 such individual’s status as a ‘participating indi19 vidual’ under this part may elect, in such form and 

20 manner as shall be prescribed in regulations of the 

21 Board, to reinstate such status. Such regulations 

22 shall provide for regular, periodic opportunities for 

23 the filing of such an election. The Board shall pro24 vide for immediate notification to the Commissioner 
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1 of Social Security, the Secretary of the Treasury, 

2 and the Executive Director of such election. 

3 ‘‘(2) EFFECTIVENESS OF REINSTATEMENT.— 

4 An election under this subsection shall be effective 

5 with respect to wages earned, and self-employment 

6 income derived, on the earliest date on which the 

7 Board determines is practicable to make such elec8 tion effective following the date of the filing of the 

9 election. The individual filing the election shall be 

10 treated as becoming a participating individual under 

11 this part on the effective date of the election as if 

12 such individual first met the requirements of sub13 section (a) on such date. 

14 ‘‘(3) IRREVOCABILITY.—An election under this 

15 subsection shall be irrevocable. 

16 ‘‘SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS AC17 COUNTS. 

18 ‘‘(a) ESTABLISHMENT OF PUBLICLY ADMINISTERED

19 SYSTEM OF PERSONAL SECURITY SAVINGS ACCOUNTS.— 

20 As soon as practicable after the later of January 1, 2006, 

21 or the date on which an individual becomes a participating 

22 individual under this part, the Executive Director shall es23 tablish a personal social security savings account for such 

24 individual. Such account shall be the means by which 

25 amounts held in the Tier I Investment Fund and the Tier 
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1 II Investment Fund of the Savings Fund under sections 

2 255 and 256 and amounts held under Tier III Investment 

3 Options under section 257 are credited to such individual, 

4 under procedures which shall be established by the Board 

5 by regulation. Each account of a participating individual 

6 shall be identified to such participating individual by 

7 means of the participating individual’s social security ac8 count number. 

9 ‘‘(b) ACCOUNT BALANCE.—The balance in a partici10 pating individual’s account at any time is the sum of— 

11 ‘‘(1) the balance in the Tier I Investment Fund 

12 of the Savings Fund credited to such participating 

13 individual prior to transfer of the credited amount to 

14 the Tier II Investment Fund of the Savings Fund; 

15 plus 

16 ‘‘(2) the excess of— 

17 ‘‘(A) all deposits in the Tier II Investment 

18 Fund of the Savings Fund credited to such par19 ticipating individual’s personal social security 

20 savings account, subject to such increases and 

21 reductions as may result from allocations made 

22 to and reductions made in the account pursuant 

23 to subsection (c)(1); over 

24 ‘‘(B) amounts paid out of the Tier II In25 vestment Fund in connection with amounts 
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1 credited to such participating individual’s per2 sonal social security savings account; plus 

3 ‘‘(3) the excess of— 

4 ‘‘(A) the deposits in the Tier III Invest5 ment Options credited to such participating in6 dividual’s personal social security savings ac7 count, subject to such increases and reductions 

8 as may result from amounts credited to, and re9 ductions made in, the account pursuant to sub10 section (c)(2); over 

11 ‘‘(B) amounts paid out of the Tier III In12 vestment Options of such participating indi13 vidual. 

14 The calculation made under paragraph (3) shall be made 

15 separately for each Tier III Investment Option of the par16 ticipating individual. The Board shall also hold for the 

17 participating individual any benefit credit certificate as18 signed to the participating individual’s personal social se19 curity savings account under section 255. 

20 ‘‘(c) ALLOCATION OF EARNINGS AND LOSSES.—Pur21 suant to regulations which shall be prescribed by the 

22 Board, the Executive Director shall allocate to each per23 sonal social security savings account an amount equal to 

24 the net earnings and net losses from each investment of 

25 sums— 
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1 ‘‘(1) in the Tier I Investment Fund and the 

2 Tier II Investment Fund which are attributable to 

3 sums credited to such account reduced by an appro4 priate share of the administrative expenses paid out 

5 of the net earnings, as determined by the Executive 

6 Director; and 

7 ‘‘(2) in the Tier III Investment Options which 

8 are attributable to sums credited to such account re9 duced by the administrative expenses paid out of the 

10 net earnings. 

11 ‘‘SEC. 255. TIER I INVESTMENT FUND. 

12 ‘‘(a) ESTABLISHMENT OF TIER I INVESTMENT

13 FUND.— 

14 ‘‘(1) IN GENERAL.—The Savings Fund shall in15 clude a separate fund to be known as the ‘Tier I In16 vestment Fund’. 

17 ‘‘(2) AMOUNTS IN FUND.—The Tier I Invest18 ment Fund consists of all amounts derived from 

19 payments into the Fund under section 252(b) and 

20 remaining after investment of such amounts under 

21 subsection (b), including additional amounts derived 

22 as income from such investments. 

23 ‘‘(3) USE OF FUNDS.—The amounts held in the 

24 Fund are appropriated and shall remain available 

25 without fiscal year limitation— 
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1 ‘‘(A) to be held for investment on behalf of 

2 participating individuals under subsection (b), 

3 ‘‘(B) to pay the administrative expenses re4 lated to the Fund, and 

5 ‘‘(C) to make transfers from the Fund 

6 under subsection (c)(2). 

7 ‘‘(b) INVESTMENT OF FUND BALANCE.—For pur8 poses of investment of the Tier I Investment Fund, the 

9 Board shall contract with appropriate professional asset 

10 managers, recordkeepers, and custodians selected for in11 vestment of amounts held in the Fund, so as to provide 

12 for investment of the balance of the Fund, in a manner 

13 providing broad diversification in accordance with regula14 tions of the Board, in— 

15 ‘‘(1) insurance contracts, 

16 ‘‘(2) certificates of deposit, or 

17 ‘‘(3) other instruments or obligations selected 

18 by such asset managers, 

19 which return the amount invested and pay interest, at a 

20 specified rate or rates, on that amount during a specified 

21 period of time. 

22 ‘‘(c) SEPARATE CREDITING TO PERSONAL SOCIAL

23 SECURITY SAVINGS ACCOUNTS AND TRANSFERS TO THE

24 TIER II INVESTMENT FUND OR TO TIER III INVESTMENT

25 OPTIONS.— 
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1 ‘‘(1) CREDITING TO ACCOUNTS.— 

2 ‘‘(A) IN GENERAL.—Subject to this para3 graph, the Board shall provide for prompt, sep4 arate crediting, as soon as practicable, of the 

5 amounts deposited in the Tier I Investment 

6 Fund to the personal social security savings ac7 count of each participating individual with re8 spect to the redirected social security contribu9 tions (as defined in section 252(b)(3)) of such 

10 participating individual. The Board shall in11 clude in such crediting, with respect to each 

12 such individual, any increases or decreases in 

13 such amounts so as to reflect the net returns 

14 and losses from investment of the balance of 

15 the Fund prior to such crediting. For purposes 

16 of determining such increases and decreases for 

17 each calendar year, the amounts deposited into 

18 the Fund in connection with such individual 

19 during such calendar year shall be deemed to 

20 have been deposited on June 30 of such year. 

21 ‘‘(B) TREATMENT OF MARRIED PARTICI22 PATING INDIVIDUALS.—If the participating in23 dividual is married as of the end of the calendar 

24 year in which the amounts to be credited were 

25 deposited in the Tier I Investment Fund and 
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1 the spouse is also a participating individual, the 

2 personal social security savings account of the 

3 participating individual and the personal social 

4 security savings account of his or her spouse 

5 shall each be credited with 50 percent of such 

6 amounts. 

7 ‘‘(2) TRANSFERS FROM THE TIER I INVEST8 MENT FUND.—In accordance with elections filed 

9 with the Board by a participating individual, any 

10 amount credited to the personal social security sav11 ings account of such participating individual under 

12 paragraph (1) shall be promptly transferred to the 

13 Tier II Investment Fund of the Savings Fund for 

14 investment in accordance with section 256 and, to 

15 the extent available under section 257, to Tier III 

16 Investment Options in accordance with section 257. 

17 ‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER I IN18 VESTMENT FUND.—Subject to this part— 

19 ‘‘(1) until amounts deposited into the Tier I In20 vestment Fund during any calendar year are cred21 ited to personal social security savings accounts, 

22 such amounts shall be treated as the unallocated 

23 property of all participating individuals with respect 

24 to whom amounts were deposited in the Fund dur-
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1 ing such year, jointly held in trust for such partici2 pating individuals in the Savings Fund, and 

3 ‘‘(2) amounts deposited into the Fund which 

4 are credited to the personal social security savings 

5 account of a participating individual shall be treated 

6 as property of the participating individual, held in 

7 trust for such participating individual in the Savings 

8 Fund. 

9 ‘‘SEC. 256. TIER II INVESTMENT FUND. 

10 ‘‘(a) ESTABLISHMENT OF TIER II INVESTMENT

11 FUND.— 

12 ‘‘(1) IN GENERAL.—The Savings Fund shall in13 clude a separate fund to be known as the ‘Tier II 

14 Investment Fund’. 

15 ‘‘(2) AMOUNTS IN FUND.—The Tier II Invest16 ment Fund consists of all amounts derived from 

17 payments into the Fund under section 255(c)(2) and 

18 remaining after investment of such amounts under 

19 subsection (b), including additional amounts derived 

20 as income from such investments. 

21 ‘‘(3) USE OF FUNDS.—The amounts held in the 

22 Fund are appropriated and shall remain available 

23 without fiscal year limitation— 

24 ‘‘(A) to be held for investment under sub25 section (b), 
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1 ‘‘(B) to pay the administrative expenses re2 lated to the Fund, and 

3 ‘‘(C) to make transfers to Tier III Invest4 ment Options under section 257 or to make 

5 payments under section 258. 

6 ‘‘(b) PAYMENTS INTO TIER II INVESTMENT FUND.— 

7 ‘‘(1) IN GENERAL.—Upon the crediting under 

8 section 252 to the personal social security savings 

9 account of a participating individual of any amount 

10 held in the Tier I Investment Fund for any calendar 

11 year, the Board shall transfer from the Tier I In12 vestment Fund into the Tier II Investment Fund 

13 any amount so credited to such participating individ14 ual’s account which is not transferred to a Tier III 

15 Investment Option pursuant to an election under 

16 section 257(a). 

17 ‘‘(2) ONGOING SEPARATE CREDITING.—Subject 

18 to this paragraph, the Board shall provide for ongo19 ing separate crediting to each participating individ20 ual’s personal social security savings account of the 

21 amounts deposited in the Tier II Investment Fund 

22 with respect to such participating individual, to23 gether with any increases or decreases therein so as 

24 to reflect the net returns and losses from investment 

25 thereof while held in the Fund. 
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1 ‘‘(c) INVESTMENT ACCOUNTS.— 

2 ‘‘(1) IN GENERAL.—For purposes of investment 

3 of the Tier II Investment Fund, the Board shall di4 vide the Fund into 6 investment accounts. The 

5 Board shall contract with appropriate investment 

6 managers, recordkeepers, and custodians selected for 

7 investment of amounts held in each investment ac8 count. Such accounts shall consist of— 

9 ‘‘(A) a Lifecycle Investment Account, 

10 ‘‘(B) a Government Securities Investment 

11 Account, 

12 ‘‘(C) a Fixed Income Investment Account, 

13 ‘‘(D) a Common Stock Index Investment 

14 Account, 

15 ‘‘(E) a Small Capitalization Stock Index 

16 Investment Account, and 

17 ‘‘(F) an International Stock Index Invest18 ment Account. 

19 ‘‘(2) ELECTION OF INVESTMENT OPTIONS.— 

20 ‘‘(A) DEFAULT INVESTMENT ACCOUNT.— 

21 Except as provided in an election in effect 

22 under subparagraph (B), amounts held in the 

23 Tier II Investment Fund shall be credited to 

24 the Lifecycle Investment Account. 
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1 ‘‘(B) ELECTION OF TRANSFERS BETWEEN

2 INVESTMENT ACCOUNTS.—In any case in which 

3 a participating individual who has an amount in 

4 such individual’s personal social security sav5 ings account credited to any of the investment 

6 accounts in the Tier II Investment Fund files 

7 with the Secretary of the Treasury a written 

8 election under this subparagraph, not more fre9 quently than annually and in accordance with 

10 regulations of the Board, the Secretary of the 

11 Treasury shall transfer the full amount so cred12 ited in such investment account from such in13 vestment account to any one of the other invest14 ment accounts in the Tier II Investment Fund 

15 (whichever is designated in such election). 

16 ‘‘(d) LIFECYLE INVESTMENT ACCOUNT.— 

17 ‘‘(1) IN GENERAL.—The investment manager, 

18 recordkeeper, and custodian selected for investment 

19 of amounts held in the Lifecyle Investment Account 

20 shall invest such amounts under regulations which 

21 shall be prescribed by the Board in a mix of equities 

22 and fixed income instruments so as to ensure, to the 

23 maximum extent practicable, that, of the total bal24 ance in the Fund credited to such account and avail25 able for investment (after allowing for administrative 
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1 expenses), the percentage invested in fixed income 

2 instruments by individuals in designated cohorts, 

3 ranging in age up to those of at least retirement 

4 age, will increase in a linear progression from 0 per5 cent to 100 percent as the cohort approaches retire6 ment age. 

7 ‘‘(2) INVESTMENT IN EQUITIES.—In accordance 

8 with regulations which shall be prescribed by the 

9 Board, the Board shall establish standards which 

10 must be met by equities selected for investment in 

11 the Lifecycle Investment Account. In conformity 

12 with such standards, the Board shall select, for pur13 poses of such investment, indices which are com14 prised of equities the aggregate market value of 

15 which is, in each case, a reasonably broad represen16 tation of companies whose shares are traded on the 

17 equity markets. Amounts invested in equities under 

18 an investment option shall be held in a portfolio de19 signed to replicate the performance of one or more 

20 of such indices. 

21 ‘‘(3) INVESTMENT IN FIXED INCOME INSTRU22 MENTS.—In accordance with regulations which shall 

23 be prescribed by the Board, the Board shall estab24 lish standards which must be met by fixed income 

25 instruments selected for investment in the Lifecycle 
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1 Investment Account. Such standards shall take into 

2 account the competing considerations of risk and re3 turn. Amounts invested in fixed income instruments 

4 in an investment option shall be held in a portfolio 

5 which shall consist of a diverse range of fixed income 

6 instruments, taking into full account the opposing 

7 considerations of risk and maximization of return. 

8 ‘‘(e) GOVERNMENT SECURITIES INVESTMENT AC9 COUNT.— 

10 ‘‘(1) IN GENERAL.—Amounts in the Govern11 ment Securities Investment Account shall be in12 vested in securities of the United States Government 

13 as provided in this subsection 

14 ‘‘(2) ISSUANCE OF SPECIAL OBLIGATIONS.— 

15 The Secretary of the Treasury is authorized to issue 

16 special interest-bearing obligations of the United 

17 States for purchase by the Tier II Investment Fund 

18 for purposes of investment of amounts in the Gov19 ernment Securities Investment Account. Such obliga20 tions shall have maturities fixed with due regard to 

21 the needs of the Fund as determined by the Board, 

22 and shall bear interest at a rate equal to the average 

23 market yield (computed by the Secretary of the 

24 treasury on the basis of market quotations as of the 

25 end of the calendar month next preceding the date 
27 

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1 of issue of such obligations) on all marketable inter2 est-bearing obligations of the United States then 

3 forming a part of the public debt which are not due 

4 or callable earlier than 4 years after the end of such 

5 calendar month. Any average market yield computed 

6 under this paragraph which is not a multiple of one7 eighth of 1 percent shall be rounded to the nearest 

8 multiple of one-eighth of 1 percent. 

9 ‘‘(f) FIXED INCOME INVESTMENT ACCOUNT.— 

10 Amounts in the Fixed Income Investment Account shall 

11 be invested in instruments or obligations which return the 

12 amount invested and pay interest, at a specified rate or 

13 rates, on that amount during a specified period of time, 

14 consisting of instruments or obligations in one or more 

15 of the following categories: 

16 ‘‘(1) insurance contracts; 

17 ‘‘(2) certificates of deposit; or 

18 ‘‘(3) other instruments or obligations selected 

19 by qualified professional asset managers. 

20 ‘‘(g) COMMON STOCK INDEX INVESTMENT AC21 COUNT.— 

22 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

23 Common Stock Investment Account shall be invested 

24 in a portfolio of common stock designed to replicate 

25 the performance of the index selected under para-
28 

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1 graph (2). The portfolio shall be designed such that, 

2 to the extent practicable, the percentage of the bal3 ance in the Common Stock Index Investment Ac4 count that is invested in each stock is the same as 

5 the percentage determined by dividing the aggregate 

6 market value of all shares of that stock by the ag7 gregate market value of all shares of all stocks in8 cluded in such index. 

9 ‘‘(2) SELECTION OF INDEX.—The Board shall 

10 select, for purposes of investment of amounts held in 

11 the Common Stock Investment Account, an index 

12 which is a commonly recognized index comprised of 

13 common stock the aggregate market value of which 

14 is a reasonably complete representation of the 

15 United States equity markets. 

16 ‘‘(h) SMALL CAPITALIZATION STOCK INDEX INVEST17 MENT ACCOUNT.— 

18 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

19 Small Capitalization Stock Index Investment Ac20 count shall be invested in a portfolio of common 

21 stock designed to replicate the performance of the 

22 index selected under paragraph (2). The portfolio 

23 shall be designed such that, to the extent prac24 ticable, the percentage of the balance in the Small 

25 Capitalization Stock Index Investment Account that 
29 

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1 is invested in each stock is the same as the percent2 age determined by dividing the aggregate market 

3 value of all shares of that stock by the aggregate 

4 market value of all shares of all stocks included in 

5 such index. 

6 ‘‘(2) SELECTION OF INDEX.—The Board shall 

7 select, for purposes of investment of amounts held in 

8 the Small Capitalization Stock Index Investment Ac9 count, an index which is a commonly recognized 

10 index comprised of common stock the aggregate 

11 market value of which represents the United States 

12 equity markets excluding the common stocks in13 cluded in the Common Stock Index Investment Ac14 count. 

15 ‘‘(i) INTERNATIONAL STOCK INDEX INVESTMENT

16 ACCOUNT.— 

17 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

18 International Stock Index Investment Account shall 

19 be invested in a portfolio of stock designed to rep20 licate the performance of the index selected under 

21 paragraph (2). The portfolio shall be designed such 

22 that, to the extent practicable, the percentage of the 

23 balance in the International Stock Index Investment 

24 Account that is invested in each stock is the same 

25 as the percentage determined by dividing the aggre-
30 

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1 gate market value of all shares of that stock by the 

2 aggregate market value of all shares of all stocks in3 cluded in such index. 

4 ‘‘(2) SELECTION OF INDEX.—The Board shall 

5 select, for purposes of investment of amounts held in 

6 the International Stock Index Investment Account, 

7 an index which is a commonly recognized index com8 prised of common stock the aggregate market value 

9 of which is a reasonably complete representation of 

10 the international equity markets excluding the 

11 United States equity markets. 

12 ‘‘(j) ADDITIONAL INVESTMENT OPTIONS.—The 

13 Board may from time to time, as determined by regulation 

14 as appropriate to further the purposes of this section, 

15 shall— 

16 ‘‘(1) establish investment accounts in the Tier 

17 II Investment Fund meeting the requirements of 

18 this section in addition to those established by this 

19 section, and 

20 ‘‘(2) terminate investment accounts in the Tier 

21 II Investment Fund established pursuant to para22 graph (1). 

23 ‘‘(k) DISCLOSURE OF ADMINISTRATIVE COSTS.—The 

24 Board shall provide to each participating individual an an25 nual disclosure of the rate of administrative costs charge-
31 

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1 able with respect to investment in each investment account 

2 in the Tier II Investment Fund. Such disclosure shall be 

3 written in a manner calculated to be understood by the 

4 average participating individual. 

5 ‘‘(l) TREATMENT OF AMOUNTS HELD IN TIER II IN6 VESTMENT FUND.—Subject to this part, amounts depos7 ited into, and held and accounted for in, the Tier II In8 vestment Fund with respect to any participating individual 

9 shall continue to be treated as property of such partici10 pating individual, held in trust for such participating indi11 vidual in the Fund. 

12 ‘‘SEC. 257. TIER III INVESTMENT OPTIONS. 

13 ‘‘(a) ELECTION OF TIER III INVESTMENT OP14 TIONS.— 

15 ‘‘(1) IN GENERAL.—A participating individual 

16 may elect to direct transfers from amounts in the 

17 Savings Fund credited to the personal social security 

18 savings account of such individual into 1 or more 

19 Tier III Investment Options in accordance with 

20 paragraph (2). 

21 ‘‘(2) COMMENCEMENT OF TIER III INVESTMENT

22 OPTIONS UPON ATTAINMENT OF ELECTION THRESH23 OLD.—In any case in which, as of the end of any 

24 calendar year, the total balance in the Savings Fund 

25 credited to a participating individual’s personal so-
32 

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1 cial security savings account exceeds for the first 

2 time the election threshold, the Board shall, by regu3 lation, provide for an opportunity for such partici4 pating individual to make, at any time thereafter, 

5 such individual’s first election of one or more of the 

6 Tier III Investment Options for investment of an 

7 amount in the Savings Fund credited to such ac8 count. Such election may be in lieu of or in addition 

9 to investment in the options available with respect to 

10 the Tier II Investment Fund of the Savings Fund. 

11 ‘‘(3) ALLOCATION OF FUNDS.—In the case of 

12 an election under paragraph (1), funds credited to 

13 the personal social security savings account of the 

14 participating individual and elected for transfer to 

15 one or more Tier III Investment Options shall be 

16 transferred to the Tier III Investment Options so 

17 elected for such calendar year, in percentages speci18 fied in the election by the participating individual for 

19 each applicable portfolio. 

20 ‘‘(4) ELECTION THRESHOLD.— 

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graph (B), for purposes of this subsection the 

23 term ‘election threshold’ means an amount 

24 equal to $25,000. 
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1 ‘‘(B) ADJUSTMENTS.—The Board shall ad2 just annually (effective for annual reporting 

3 months occurring after December 2006) the 

4 dollar amount set forth in subparagraph (A) 

5 under procedures providing for adjustments in 

6 the same manner and to the same extent as ad7 justments are provided for under the proce8 dures used to adjust benefit amounts under sec9 tion 215(i)(2)(A), except that any amount so 

10 adjusted that is not a multiple of $1.00 shall be 

11 rounded to the nearest multiple of $1.00. 

12 ‘‘(5) SUBSEQUENT INVESTMENT OF AMOUNTS

13 HELD IN TIER III INVESTMENT OPTIONS.—Any 

14 amounts held in one or more Tier III Investment 

15 Options may be— 

16 ‘‘(A) transferred at any time to one or 

17 more other Tier III Investment Options, subject 

18 to applicable regulations of the Board and the 

19 terms governing the affected Tier III Invest20 ment Options, and 

21 ‘‘(B) transferred, not more frequently than 

22 annually, to the Tier II Investment Fund, for 

23 deposit in the applicable investment account 

24 then selected by the participating individual 

25 under section 256. 
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1 ‘‘(b) CERTIFICATION OF ELIGIBLE ENTITIES.— 

2 ‘‘(1) IN GENERAL.—The Board shall certify eli3 gible entities to offer Tier III Investment Options 

4 under this part. 

5 ‘‘(2) APPLICATION.—Any eligible entity that de6 sires to be certified by the Board to offer a Tier III 

7 Investment Option shall submit an application to the 

8 Board at such time, in such manner, and containing 

9 such information as the Board may require. 

10 ‘‘(3) REQUIREMENTS FOR APPROVAL.—The 

11 Board shall not certify an eligible entity unless such 

12 eligible entity agrees to the following requirements: 

13 ‘‘(A) SEPARATE ACCOUNTING.—Each eligi14 ble entity shall, with respect to each Tier III 

15 Investment Option offered by such eligible enti16 ty to participating individuals— 

17 ‘‘(i) establish separate accounts for 

18 the contributions of each participating in19 dividual, and any earnings properly allo20 cable to the contributions, and 

21 ‘‘(ii) maintain separate recordkeeping 

22 with respect to each account. 

23 ‘‘(B) TREATMENT OF AMOUNTS HELD IN

24 FUND.—Amounts deposited into, and held and 

25 accounted for in, a Tier III Investment Option 
35 

•HR 1776 IH 

1 with respect to any participating individual 

2 shall be treated as property of such partici3 pating individual, held in trust for such partici4 pating individual. 

5 ‘‘(C) TRUST REQUIREMENTS.—Amounts 

6 held and accounted for with respect to a partici7 pating individual shall be held in a trust created 

8 or organized in the United States for the exclu9 sive benefit of such individual or his bene10 ficiaries. 

11 ‘‘(D) EXEMPTION FROM THIRD PARTY

12 CLAIMS.—Each Tier III Investment Option 

13 shall be exempt from any and all third party 

14 claims against the eligible entity. 

15 ‘‘(E) DISCLOSURE OF ADMINISTRATIVE

16 COSTS.—Each eligible entity offering a Tier III 

17 Investment Option under this section shall pro18 vide to each participating individual an annual 

19 disclosure of the rate of administrative costs 

20 chargeable with respect to investment in such 

21 Option. Such disclosure shall be written in a 

22 manner calculated to be understood by the av23 erage participating individual. The Board shall 

24 provide for coordination of disclosures with re25 spect to Tier III Investment Options under this 
36 

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1 subparagraph so as to assist participating indi2 viduals in comparing alternative Options based 

3 on administrative costs. 

4 ‘‘(F) REPORTING TO THE EXECUTIVE DI5 RECTOR AND THE BOARD.—Each eligible entity 

6 shall provide reports to the Executive Director 

7 and the Board at such time, in such manner, 

8 and containing such information as the Board 

9 may require. 

10 ‘‘(4) ELIGIBLE ENTITY DEFINED.—For pur11 poses of this section, the term ‘eligible entity’ means 

12 any investment company (as defined in section 3 of 

13 the Investment Company Act of 1940) or other per14 son that the Board determines appropriate to offer 

15 Tier III Investment Options under this part. 

16 ‘‘(c) APPROVAL OF TIER III INVESTMENT OP17 TIONS.— 

18 ‘‘(1) IN GENERAL.—No funds may be trans19 ferred into a Tier III Investment Option unless the 

20 Board has approved an application submitted under 

21 paragraph (2) with respect to the option. 

22 ‘‘(2) APPLICATION.—With respect to each Tier 

23 III Investment Option that an eligible entity cer24 tified under subsection (b)(1) seeks to offer, such 

25 entity shall submit an application to the Board at 
37 

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1 such time, in such manner, and containing such in2 formation as the Board may require. 

3 ‘‘(3) QUALIFICATIONS FOR APPROVAL.—The 

4 Board may not approve an application submitted 

5 under paragraph (2) in connection with a Tier III 

6 Investment Option unless the following requirements 

7 are met: 

8 ‘‘(A) OPTION MUST BE OFFERED BY CER9 TIFIED ELIGIBLE ENTITY.—The Tier III In10 vestment Option is offered by an eligible entity 

11 certified under subsection (b). 

12 ‘‘(B) OPTION MUST MEET QUALITY FAC13 TORS.— 

14 ‘‘(i) IN GENERAL.—The Tier III In15 vestment Option meets qualifications which 

16 shall be prescribed by the Board relating 

17 to the quality factors described in clause 

18 (ii). 

19 ‘‘(ii) QUALITY FACTORS.—The quality 

20 factors described in this clause are— 

21 ‘‘(I) the safety and soundness of 

22 the Tier III Investment Option’s pro23 posed investment policy; 
38 

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1 ‘‘(II) the experience and record 

2 of performance of the proposed invest3 ment option, if any; 

4 ‘‘(III) the experience and record 

5 of performance of the entity issuing or 

6 offering such option; and 

7 ‘‘(IV) such other factors as the 

8 Board may determine appropriate. 

9 ‘‘(d) CONSIDERATIONS FOR CERTIFICATION AND AP10 PROVAL.—In determining whether to certify an eligible en11 tity under subsection (b) or to approve a Tier III Invest12 ment Option under subsection (c), the Board shall— 

13 ‘‘(1) act in the best interests of the partici14 pating individuals; 

15 ‘‘(2) base its determination solely on consider16 ations of balancing safety and soundness of the Tier 

17 III Investment Option with the maximization of re18 turns of such option; and 

19 ‘‘(3) not base any determination related to the 

20 entity or option on political or other extraneous con21 siderations. 

22 ‘‘(e) SPONSORSHIP OF TIER III INVESTMENT OP23 TIONS BY MEMBERSHIP AND LABOR ORGANIZATIONS.— 

24 ‘‘(1) IN GENERAL.—A membership or labor or25 ganization (as defined by the Board) may sponsor 
39 

•HR 1776 IH 

1 Tier III Investment Options under contracts with el2 igible entities certified under subsection (b) who 

3 shall administer the investment option if such invest4 ment option is approved by the Board under sub5 section (c). 

6 ‘‘(2) LIMITATION TO MEMBERSHIP.—A mem7 bership or labor organization (as so defined) may 

8 limit to the members of such organization participa9 tion in a Tier III Investment Option sponsored by 

10 such organization. 

11 ‘‘(f) DISTRIBUTIONS IN CASE OF DEATH.—Upon the 

12 death of a participating individual, the amount of any as13 sets held under a Tier III Investment Option credited to 

14 the personal social security savings account of such indi15 vidual shall be distributed in accordance with section 

16 258(e). 

17 ‘‘SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY 

18 AND OTHER DISTRIBUTIONS. 

19 ‘‘(a) DATE OF INITIAL DISTRIBUTION.—Except as 

20 provided in subsection (e), distributions may be made to 

21 a participating individual from amounts credited to the 

22 personal social security savings account of such individual 

23 only on or after the earliest of— 

24 ‘‘(1) the date the participating individual at25 tains retirement age (as defined in section 216(l)(1)) 
40 

•HR 1776 IH 

1 or, if elected by the individual, early retirement age 

2 (as defined in section 216(l)(2)); or 

3 ‘‘(2) the date on which the amount credited to 

4 the participating individual’s personal social security 

5 savings account is sufficient to purchase a personal 

6 social security savings annuity with a monthly ben7 efit that is at least equal to the minimum annuity 

8 payment amount (as defined in subsection 

9 (b)(4)(C)(iii)). 

10 ‘‘(b) PERSONAL SOCIAL SECURITY SAVINGS ANNU11 ITIES.— 

12 ‘‘(1) NOTICE OF AVAILABLE ANNUITIES.—Not 

13 later than the date determined under subsection (a), 

14 the Board shall notify each participating individual 

15 of— 

16 ‘‘(A) the most recent listing of personal so17 cial security savings annuities offered by the 

18 Annuity Issuance Authority under paragraph 

19 (2); and 

20 ‘‘(B) the entitlement of the participating 

21 individual to purchase such an annuity. 

22 ‘‘(2) ANNUITY ISSUANCE AUTHORITY.—There is 

23 established in the office of the Board an agency 

24 which shall be known as the ‘Annuity Issuance Au25 thority’. The Authority shall provide, in accordance 
41 

•HR 1776 IH 

1 with regulations of the Board, for the issuance of 

2 personal social security savings annuities for pur3 chase from the Authority under this section and to 

4 otherwise administer the issuance of such annuities 

5 in accordance with such regulations. 

6 ‘‘(3) ANNUITY RESERVES ACCOUNT.—There is 

7 established in the Savings Fund an Annuity Re8 serves Account. The Account shall consist of all 

9 amounts received by the Authority from the pur10 chase of personal social security savings annuities 

11 under this section (plus such amounts as may be 

12 transferred to the Account under paragraph (5)(B)), 

13 increased by the total net earnings from investments 

14 of such reserves under subparagraph (A) of para15 graph (5) and reduced by the total net losses from 

16 investments of such reserves under such subpara17 graph. 

18 ‘‘(4) PURCHASE OF ANNUITIES.— 

19 ‘‘(A) SELECTION OF ANNUITY.—On a date 

20 elected by the participating individual, but no 

21 earlier than the date determined under sub22 section (a), a participating individual may pur23 chase a personal social security savings annuity 

24 selected from among the annuities offered by 

25 the Authority under paragraph (2). 
42 

•HR 1776 IH 

1 ‘‘(B) TRANSFER OF ASSETS.—Upon the 

2 selection of an annuity by a participating indi3 vidual under subparagraph (A), the Board shall 

4 provide for the transfer of assets, credited to 

5 the personal social security savings account of 

6 the participating individual and held in the Tier 

7 II Investment Fund or under 1 or more Tier 

8 III Investment Options (or any combination 

9 thereof), in a total amount sufficient to pur10 chase the annuity selected by the participating 

11 individual from annuities offered by the Author12 ity. 

13 ‘‘(C) MINIMUM ANNUITY PAYMENT

14 AMOUNT.— 

15 ‘‘(i) IN GENERAL.—Subject to sub16 paragraph (D), if, at the time a personal 

17 social security savings annuity is pur18 chased under subparagraph (A), the assets 

19 credited to the personal social security sav20 ings account of the participating individual 

21 are sufficient to purchase a personal social 

22 security savings annuity offered by the Au23 thority under paragraph (2) with a month24 ly annuity payment that is at least equal 

25 to the minimum annuity payment amount, 
43 

•HR 1776 IH 

1 the amount of the monthly annuity pay2 ment provided by such annuity may not be 

3 less then the minimum annuity payment 

4 amount. 

5 ‘‘(ii) CONSTRUCTION.—Nothing in 

6 this subparagraph shall be construed to 

7 prohibit a participating individual from 

8 using personal social security savings ac9 count assets to purchase a personal social 

10 security savings annuity offered by the Au11 thority under paragraph (2) which provides 

12 for a monthly payment in excess of the 

13 minimum amount required under clause 

14 (i). 

15 ‘‘(iii) MINIMUM ANNUITY PAYMENT

16 AMOUNT DEFINED.—For purposes of this 

17 part, the term ‘minimum annuity payment 

18 amount’ means, as of any date, an amount 

19 equal to the monthly equivalent of 150 per20 cent of the poverty line for an individual 

21 (as in effect on such date), determined 

22 under the poverty guidelines of the Depart23 ment of Health and Human Services 

24 issued under sections 652 and 673(2) of 
44 

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1 the Omnibus Budget Reconciliation Act of 

2 1981. 

3 ‘‘(iv) DEEMED TOTAL PART A MONTH4 LY BENEFIT AMOUNT.—For purposes of 

5 clause (iii), the term ‘deemed total part A 

6 monthly benefit amount’ means, with re7 spect to a participating individual, the 

8 total amount which would be payable as 

9 monthly insurance benefits under section 

10 202 for the month in which the partici11 pating individual attains or would attain 

12 early retirement age (as defined in section 

13 216(l)(2)), based on the participating indi14 vidual’s wages and self-employment in15 come, if the participating individual ap16 plied for old-age insurance benefits under 

17 section 202(a) during such month and all 

18 other individuals who would therefore be 

19 eligible for benefits under section 202 for 

20 such month based on such wages and self21 employment income applied for such bene22 fits during such month. 

23 ‘‘(v) ASSUMPTIONS.— 

24 ‘‘(I) EARNINGS AND LON25 GEVITY.—In the case of a partici-
45 

•HR 1776 IH 

1 pating individual with respect to 

2 whom determinations under this sub3 paragraph are made prior to the 

4 month described in clause (iv), the 

5 participating individual’s average in6 dexed monthly earnings (within the 

7 meaning of section 215(b)) for such 

8 month shall be projected, under regu9 lations which shall be prescribed by 

10 the Board, on the basis of reasonable 

11 actuarial assumptions, and the Board 

12 shall assume the survival through the 

13 end of such month of all other individ14 uals described in clause (iv). 

15 ‘‘(II) PROJECTED INVESTMENT

16 RETURNS.—For purposes of making 

17 actuarial determinations relating to 

18 the amounts of annuities offered by 

19 the Authority under this section and 

20 the amounts necessary for the pur21 chase of such annuities, the Authority 

22 shall project returns from the invest23 ment, in accordance with paragraph 

24 (5)(A), of the reserves held in the An25 nuities Reserves Account. The projec-
46 

•HR 1776 IH 

1 tion by the Authority of such returns 

2 shall be made under assumptions of 

3 long-term average returns of equities 

4 and fixed income instruments which 

5 shall be issued annually by the Board 

6 of Trustees of the Federal Old-Age 

7 and Survivors Insurance Trust Fund 

8 and the Federal Disability Insurance 

9 Trust Fund, based on analysis of his10 torical market returns. 

11 ‘‘(D) PURCHASE OF ANNUITIES IN THE

12 EVENT OF INSUFFICIENT ASSETS.—If a partici13 pating individual desires, or is required under 

14 subsection (f), to purchase a personal social se15 curity savings annuity under subsection (b) on 

16 or after the date determined under subsection 

17 (a)(1) and the assets of the personal social se18 curity savings account of such individual are in19 sufficient to purchase a personal social security 

20 savings annuity that provides for a monthly 

21 payment that is at least equal to the minimum 

22 annuity payment amount (as defined in para23 graph (4)(C)(iii)), the participating individual 

24 shall purchase a personal social security savings 

25 annuity with a monthly payment equal to the 
47 

•HR 1776 IH 

1 maximum amount that the participating indi2 vidual’s personal social security savings account 

3 can fund, as determined in accordance with reg4 ulations which shall be prescribed by the Au5 thority, and that otherwise meets the require6 ments of this subsection (including the cost-of7 living protection requirement of subsection 

8 (c)(1)(C)), and the Authority shall provide for 

9 appropriate certification to the Secretary of the 

10 Treasury with respect to the participating indi11 vidual’s eligibility for guarantee payments 

12 under section 259. 

13 ‘‘(5) MAINTENANCE OF RESERVES FOR PAY14 MENT OF ANNUITIES.— 

15 ‘‘(A) INVESTMENT OF RESERVES.—For 

16 purposes of investment of reserves held in the 

17 Annuity Reserves Account, the Authority shall 

18 contract with appropriate investment managers, 

19 recordkeepers, and custodians selected by the 

20 Authority for investment of such reserves. Such 

21 reserves shall be invested under regulations 

22 which shall be prescribed by the Authority so as 

23 to ensure, to the maximum extent practicable, 

24 that, of the total balance of the reserves (after 
48 

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1 payment of administrative expenses to such 

2 managers, recordkeepers, and custodians)— 

3 ‘‘(i) 65 percent is invested in equities 

4 in the same manner and under the same 

5 standards as are provided in section 

6 256(c)(4), and 

7 ‘‘(ii) 35 percent is invested in fixed in8 come instruments in the same manner and 

9 under the same standards as are provided 

10 in section 256(c)(5). 

11 ‘‘(B) PROVISION FOR FULL PAYMENT OF

12 ANNUITIES.—Payment of personal social secu13 rity savings annuities in accordance with the 

14 terms of such annuities shall be made, irrespec15 tive of the sufficiency of reserves in the Annuity 

16 Reserves Fund attributable to funds obtained 

17 from the purchase of such annuities. In the 

18 event of any impending insufficiency in the An19 nuity Reserves Account for the next fiscal year, 

20 the Authority shall certify to the Secretary of 

21 the Treasury the amount of such insufficiency, 

22 and the Secretary of the Treasury shall transfer 

23 from the Federal Old-Age and Survivors Insur24 ance Trust Fund to the Annuity Reserves Ac25 count the amount of the insufficiency, as so cer-
49 

•HR 1776 IH 

1 tified, in such installments, made prior to or 

2 during such fiscal year, as are necessary to 

3 eliminate in advance such insufficiency. 

4 ‘‘(c) PERSONAL SOCIAL SECURITY SAVINGS ANNU5 ITY.— 

6 ‘‘(1) IN GENERAL.—For purposes of this part, 

7 the term ‘personal social security savings annuity’ 

8 means an annuity that meets the following require9 ments: 

10 ‘‘(A) The annuity starting date (as defined 

11 in section 72(c)(4) of the Internal Revenue 

12 Code of 1986) commences on the first day of 

13 the month beginning after the date of the pur14 chase of the annuity. 

15 ‘‘(B) The terms of the annuity provide— 

16 ‘‘(i) for a monthly payment to the 

17 participating individual during the life of 

18 the participating individual equal to at 

19 least the minimum annuity payment 

20 amount (as defined in subsection 

21 (b)(4)(C)(iii)), or 

22 ‘‘(ii) in the case of an annuity pur23 chased under subparagraph (D) of sub24 section (b)(4), the maximum monthly pay-
50 

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1 ment determined under regulations pre2 scribed under such subparagraph. 

3 ‘‘(C) The terms of the annuity include pro4 cedures providing for adjustments in the 

5 amount of the monthly payments in the same 

6 manner and to the same extent as adjustments 

7 are provided for under the procedures used to 

8 adjust benefit amounts under section 

9 215(i)(2)(A). Nothing in this subparagraph 

10 shall be construed to preclude the terms gov11 erning such an annuity from providing for ad12 justments in the amount of monthly payments 

13 resulting in a payment for any month greater 

14 than the payment for that month that would re15 sult from adjustments required under the pre16 ceding sentence (b)(4)(D). 

17 ‘‘(D) The terms of the annuity include 

18 such other terms and conditions as the Board 

19 requires for the protection of the annuitant. 

20 ‘‘(2) EXEMPTION FROM THIRD PARTY

21 CLAIMS.—Each personal social security savings an22 nuity shall be exempt from any and all third party 

23 claims against the issuer. 

24 ‘‘(d) RIGHT TO USE EXCESS PERSONAL SOCIAL SE25 CURITY SAVINGS ACCOUNT ASSETS.—To the extent assets 
51 

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1 credited to a participating individual’s personal social se2 curity savings account remain after the purchase of an an3 nuity under subsection (b), the remaining assets shall be 

4 payable to the participating individual at such time, in 

5 such manner, and in such amounts as the participating 

6 individual may specify, subject to subsection (f). 

7 ‘‘(e) DISTRIBUTIONS IN CASE OF DEATH.—If the 

8 participating individual dies before all amounts which are 

9 held in the Tier I Investment Fund or the Tier II Invest10 ment Fund of the Savings Fund or held under a Tier III 

11 Investment Option and which are credited to the personal 

12 social security savings account of the individual are other13 wise distributed in accordance with this section, such 

14 amounts shall be distributed, under regulations which 

15 shall be prescribed by the Board— 

16 ‘‘(1) in any case in which one or more bene17 ficiaries have been designated in advance, to such 

18 beneficiaries in accordance with such designation as 

19 provided in such regulations, and 

20 ‘‘(2) in the case of any amount not distributed 

21 as described in paragraph (1), to such individual’s 

22 estate. 

23 ‘‘(f) DATE OF FINAL DISTRIBUTION.—All amounts 

24 credited to the personal social security savings account of 

25 an individual shall be distributed, by means of the pur-
52 

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1 chase of annuities or otherwise in a manner consistent 

2 with the requirements of this section, not later than 5 

3 years after the date the individual attains retirement age 

4 (as defined in section 216(l)). The Board shall provide by 

5 regulation for means of distribution necessary to ensure 

6 compliance with the requirements of this subsection. 

7 ‘‘SEC. 259. GUARANTEE OF PROMISED BENEFITS. 

8 ‘‘(a) IN GENERAL.—If, for any month ending after 

9 the date on which a participating individual attains retire10 ment age (as defined in section 216(l)(1)), the monthly 

11 payment under a participating individual’s personal social 

12 security savings annuity is less than the minimum annuity 

13 payment amount (as defined in section 258(b)(4)(C)(iii)), 

14 adjusted as provided in section 258(c)(1)(C), the Annuity 

15 Issuance Authority shall so certify to the Secretary of the 

16 Treasury and, upon receipt of such certification, such Sec17 retary shall provide to the participating individual, from 

18 amounts in the Federal Old-Age and Survivors Insurance 

19 Trust Fund, a guaranty payment for such month to sup20 plement the personal social security savings annuity and 

21 to guarantee full payment of such individual’s monthly 

22 promised benefits. 

23 ‘‘(b) GUARANTY PAYMENT.—For purposes of sub24 section (a), a participating individual’s guaranty payment 

25 for any month is equal to the excess of— 
53 

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1 ‘‘(1) the minimum annuity payment amount (as 

2 defined in section 258(b)(4)(C)(iii)), adjusted as 

3 provided in section 258(c)(1)(C); over 

4 ‘‘(2) the payment for such month of the per5 sonal social security savings annuity purchased by 

6 the participating individual. 

7 ‘‘(c) PROTECTION OF PART A NORMAL RETIREMENT

8 BENEFIT LEVELS.— 

9 ‘‘(1) IN GENERAL.—In any case in which, for 

10 any month ending after the date on which a partici11 pating individual attains retirement age (as defined 

12 in section 216(l)(1))— 

13 ‘‘(A) such individual’s assumed total nor14 mal retirement part A benefit for such month, 

15 exceeds 

16 ‘‘(B) the monthly payment payable for 

17 such month under such individual’s personal so18 cial security savings annuity, 

19 the Secretary of the Treasury shall pay to such indi20 vidual for such month, from amounts in the Federal 

21 Old-Age and Survivors Insurance Trust Fund, an 

22 additional amount (if any) equal to the excess of the 

23 amount described in subparagraph (A) over the 

24 amount described in subparagraph (B). 
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1 ‘‘(2) DEFINITION.—For purposes of this sub2 section, the term ‘assumed total normal retirement 

3 part A benefit’ means, in connection with a partici4 pating individual, the total amount of monthly insur5 ance benefits under section 202 based on such indi6 vidual’s wages and self-employment income (ad7 justed by taking into account adjustments under sec8 tion 215(i)) that would have been payable if— 

9 ‘‘(A) section 202(z) did not apply, and 

10 ‘‘(B) such individual applied for old-age in11 surance benefits under section 202(a) during 

12 the month in which such individual attains re13 tirement age (as defined in section 216(l)(1)). 

14 ‘‘SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD. 

15 ‘‘(a) ESTABLISHMENT.—There is established in the 

16 executive branch of the Government a Personal Social Se17 curity Savings Board. 

18 ‘‘(b) COMPOSITION.—The Board shall be composed 

19 of— 

20 ‘‘(1) 3 members appointed by the President, of 

21 whom 1 shall be designated by the President as 

22 Chairman; and 

23 ‘‘(2) 2 members appointed by the President, of 

24 whom— 
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1 ‘‘(A) 1 shall be appointed by the President 

2 after taking into consideration the recommenda3 tion made by the Speaker of the House of Rep4 resentatives in consultation with the Minority 

5 Leader of the House of Representatives; and 

6 ‘‘(B) 1 shall be appointed by the President 

7 after taking into consideration the recommenda8 tion made by the Majority Leader of the Senate 

9 in consultation with the Minority Leader of the 

10 Senate. 

11 ‘‘(c) ADVICE AND CONSENT.—Appointments under 

12 subsection (b) shall be made by and with the advice and 

13 consent of the Senate. 

14 ‘‘(d) MEMBERSHIP REQUIREMENTS.—Members of 

15 the Board shall have substantial experience, training, and 

16 expertise in the management of financial investments and 

17 pension benefit plans. 

18 ‘‘(e) LENGTH OF APPOINTMENTS.— 

19 ‘‘(1) TERMS.—A member of the Board shall be 

20 appointed for a term of 4 years, except that of the 

21 members first appointed under subsection (b)— 

22 ‘‘(A) the Chairman shall be appointed for 

23 a term of 4 years; 
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1 ‘‘(B) the members appointed under sub2 section (b)(2) shall be appointed for terms of 3 

3 years; and 

4 ‘‘(C) the remaining members shall be ap5 pointed for terms of 2 years. 

6 ‘‘(2) VACANCIES.— 

7 ‘‘(A) IN GENERAL.—A vacancy on the 

8 Board shall be filled in the manner in which the 

9 original appointment was made and shall be 

10 subject to any conditions that applied with re11 spect to the original appointment. 

12 ‘‘(B) COMPLETION OF TERM.—An indi13 vidual chosen to fill a vacancy shall be ap14 pointed for the unexpired term of the member 

15 replaced. 

16 ‘‘(3) EXPIRATION.—The term of any member 

17 shall not expire before the date on which the mem18 ber’s successor takes office. 

19 ‘‘(f) DUTIES.—The Board shall— 

20 ‘‘(1) administer the program established under 

21 this part; 

22 ‘‘(2) establish policies for the investment and 

23 management of the Savings Fund, including the 

24 Tier I Investment Fund and the Tier II Investment 

25 Fund, and amounts held under Tier III Investment 
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1 Options, including policies applicable to the asset 

2 managers, recordkeepers, and custodians with re3 sponsibility for managing the investment of amounts 

4 credited to personal social security investment ac5 counts, and for the management and operation of 

6 personal social security savings annuities, which 

7 shall provide for— 

8 ‘‘(A) prudent investments suitable for ac9 cumulating funds for payment of retirement in10 come; 

11 ‘‘(B) sound management practices; and 

12 ‘‘(C) low administrative costs; 

13 ‘‘(3) review the performance of investments 

14 made for the Tier I Investment Fund and the Tier 

15 II Investment Fund; 

16 ‘‘(4) review the performance of investments 

17 made under Tier III Investment Options; 

18 ‘‘(5) review the management and operation of 

19 personal social security savings annuities; 

20 ‘‘(6) review and approve the budget of the 

21 Board; and 

22 ‘‘(7) comply with the fiduciary requirements of 

23 part 4 of subtitle B of title I of the Employee Re24 tirement Income Security Act of 1974 (relating to fi25 duciary responsibility) in connection with any exer-
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1 cise of discretion in connection with the assets of the 

2 Savings Fund. 

3 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

4 ‘‘(1) IN GENERAL.—The Board may— 

5 ‘‘(A) adopt, alter, and use a seal; 

6 ‘‘(B) except as provided in paragraph (4), 

7 direct the Executive Director to take such ac8 tion as the Board considers appropriate to 

9 carry out the provisions of this part and the 

10 policies of the Board in accordance with delega11 tions under this part; 

12 ‘‘(C) upon the concurring votes of 4 mem13 bers, remove the Executive Director from office 

14 for good cause shown; 

15 ‘‘(D) provide to the Executive Director 

16 such resources as are necessary to carry out the 

17 duties of the Executive Director; and 

18 ‘‘(E) take such other actions as may be 

19 necessary to carry out the functions of the 

20 Board. 

21 ‘‘(2) MEETINGS.—The Board shall meet— 

22 ‘‘(A) not less than once during each 

23 month; and 

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

25 Chairman. 
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1 ‘‘(3) EXERCISE OF POWERS.— 

2 ‘‘(A) IN GENERAL.—Except as provided in 

3 paragraph (1)(C), the Board shall perform the 

4 functions and exercise the powers of the Board 

5 on a majority vote of a quorum of the Board. 

6 Three members of the Board shall constitute a 

7 quorum for the transaction of business. 

8 ‘‘(B) VACANCIES.—A vacancy on the 

9 Board shall not impair the authority of a 

10 quorum of the Board to perform the functions 

11 and exercise the powers of the Board. 

12 ‘‘(4) LIMITATIONS ON INVESTMENTS.—The 

13 Board may not direct any person to invest or to 

14 cause to be invested any sums in the Tier II Invest15 ment Fund or any personal social security invest16 ment account in a specific asset or to dispose of or 

17 cause to be disposed of any specific asset of such 

18 Fund or any such account. 

19 ‘‘(h) COMPENSATION.— 

20 ‘‘(1) IN GENERAL.—Each member of the Board 

21 who is not an officer or employee of the Federal 

22 Government shall be compensated at the daily rate 

23 of basic pay for level IV of the Executive Schedule 

24 for each day during which such member is engaged 

25 in performing a function of the Board. 
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1 ‘‘(2) EXPENSES.—A member of the Board shall 

2 be paid travel, per diem, and other necessary ex3 penses under subchapter I of chapter 57 of title 5, 

4 United States Code, while traveling away from such 

5 member’s home or regular place of business in the 

6 performance of the duties of the Board. 

7 ‘‘(3) SOURCE OF FUNDS.—Payments authorized 

8 under this subsection shall be paid from the Tier I 

9 Investment Fund or the Tier II Investment Fund, 

10 as determined appropriate by the Board. 

11 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem12 bers of the Board shall discharge their responsibilities 

13 solely in the interest of the participating individuals and 

14 their beneficiaries under this part. 

15 ‘‘(j) ANNUAL INDEPENDENT AUDIT.—The Board 

16 shall annually engage an independent qualified public ac17 countant to audit the activities of the Board. 

18 ‘‘(k) SUBMISSION OF BUDGET TO CONGRESS.—The 

19 Board shall prepare and submit to the President, and, at 

20 the same time, to the appropriate committees of Congress, 

21 an annual budget of the expenses and other items relating 

22 to the Board which shall be included as a separate item 

23 in the budget required to be transmitted to Congress 

24 under section 1105 of title 31, United States Code. 
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1 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA2 TIONS.—The Board may submit to the President, and, at 

3 the same time, shall submit to each House of Congress, 

4 any legislative recommendations of the Board relating to 

5 any of its functions under this part or any other provision 

6 of law. 

7 ‘‘SEC. 261. EXECUTIVE DIRECTOR. 

8 ‘‘(a) APPOINTMENT OF EXECUTIVE DIRECTOR.—The 

9 Board shall appoint, without regard to the provisions of 

10 law governing appointments in the competitive service, an 

11 Executive Director by action agreed to by a majority of 

12 the members of the Board. 

13 ‘‘(b) DUTIES.—The Executive Director shall, as de14 termined appropriate by the Board— 

15 ‘‘(1) carry out the policies established by the 

16 Board; 

17 ‘‘(2) invest and manage the Tier I Investment 

18 Fund and the Tier II Investment Fund in accord19 ance with the investment policies and other policies 

20 established by the Board; 

21 ‘‘(3) administer the provisions of this part re22 lating to the Tier I Investment Fund and the Tier 

23 II Investment Fund; and 

24 ‘‘(4) prescribe such regulations (other than reg25 ulations relating to fiduciary responsibilities) as may 
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1 be necessary for the administration of this part re2 lating to the Tier I Investment Fund and the Tier 

3 II Investment Fund. 

4 ‘‘(c) ADMINISTRATIVE AUTHORITY.—The Executive 

5 Director may, within the scope of the duties of the Execu6 tive Director as determined by the Board— 

7 ‘‘(1) appoint such personnel as may be nec8 essary to carry out the provisions of this part relat9 ing to the Tier I Investment Fund and the Tier II 

10 Investment Fund; 

11 ‘‘(2) subject to approval by the Board, procure 

12 the services of experts and consultants under section 

13 3109 of title 5, United States Code; 

14 ‘‘(3) secure directly from an Executive agency, 

15 the United States Postal Service, or the Postal Rate 

16 Commission any information necessary to carry out 

17 the provisions of this part and the policies of the 

18 Board relating to the Tier I Investment Fund and 

19 the Tier II Investment Fund; 

20 ‘‘(4) make such payments out of sums in the 

21 Tier I Investment Fund and the Tier II Investment 

22 Fund as the Executive Director determines, in ac23 cordance with regulations of the Board, are nec24 essary to carry out the provisions of this part and 

25 the policies of the Board; 
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1 ‘‘(5) pay the compensation, per diem, and travel 

2 expenses of individuals appointed under paragraphs 

3 (1), (2), and (6) from the Tier I Investment Fund 

4 or the Tier II Investment Fund, in accordance with 

5 regulations of the Board; 

6 ‘‘(6) accept and use the services of individuals 

7 employed intermittently in the Government service 

8 and reimburse such individuals for travel expenses, 

9 authorized by section 5703 of title 5, United States 

10 Code, including per diem as authorized by section 

11 5702 of such title; 

12 ‘‘(7) except as otherwise expressly prohibited by 

13 law or the policies of the Board, delegate any of the 

14 Executive Director’s functions to such employees 

15 under the Board as the Executive Director may des16 ignate and authorize such successive redelegations of 

17 such functions to such employees under the Board 

18 as the Executive Director may consider to be nec19 essary or appropriate; and 

20 ‘‘(8) take such other actions as are appropriate 

21 to carry out the functions of the Executive Direc22 tor.’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply with respect to wages paid after 

25 December 31, 2005, for pay periods ending after such 
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1 date and self-employment income for taxable years begin2 ning after such date. 

3 SEC. 102. MONTHLY INSURANCE BENEFITS FOR PARTICI4 PATING INDIVIDUALS. 

5 Section 202 of the Social Security Act (42 U.S.C. 

6 402) is amended by adding at the end the following new 

7 subsection: 

8 ‘‘Benefits for Participants Under Part B 

9 ‘‘(z)(1) Notwithstanding the preceding provisions of 

10 this section— 

11 ‘‘(A) a participating individual under the Per12 sonal Social Security Savings Accounts Program 

13 under part B shall not be entitled to old-age insur14 ance benefits under subsection (a); and 

15 ‘‘(B) except as provided in paragraph (2), no 

16 individual shall be entitled to benefits under this sec17 tion on the basis of the wages and self-employment 

18 income of such a participating individual. 

19 ‘‘(2) In the case of any such participating individual 

20 who dies before such individual purchases a personal social 

21 security savings annuity under section 258, paragraph 

22 (1)(B) shall not apply with respect to child’s insurance 

23 benefits under subsection (d), widow’s insurance benefits 

24 under subsection (e), widower’s insurance benefits under 

25 subsection (f), mother’s and father’s insurance benefits 
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1 under subsection (g), and parent’s insurance benefits 

2 under subsection (h).’’. 

3 SEC. 103. GENERAL FUND TRANSFERS TO THE FEDERAL 

4 OLD-AGE AND SURVIVORS INSURANCE TRUST 

5 FUND. 

6 (a) RECAPTURE OF CORPORATE TAX ON ACCOUNT

7 YIELDS.— 

8 (1) IN GENERAL.—Section 201 of the Social 

9 Security Act (42 U.S.C. 401) is amended by adding 

10 at the end the following new subsection: 

11 ‘‘Recapture of Corporate Tax on Yields From Personal 

12 Social Security Savings Account Investments 

13 ‘‘(o) The Secretary of the Treasury, in consultation 

14 with the Personal Social Security Savings Board, shall es15 timate and transfer to the Federal Old-Age and Survivors 

16 Insurance Trust Fund within 3 months after the end of 

17 each fiscal year an amount equal to the recapture amount 

18 for such fiscal year. For purposes of the preceding sen19 tence, the recapture amount for any fiscal year shall be 

20 equal to the amount of corporate tax receipts under the 

21 Internal Revenue Code of 1986 deposited in the Treasury 

22 for that fiscal year which are attributable to personal so23 cial security savings account investments under part B of 

24 this title.’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply with respect to fiscal 

3 years beginning after September 30, 2005. 

4 (3) INITIAL ASSUMPTIONS.—In determining the 

5 recapture amount under section 201(o) of the Social 

6 Security Act (added by paragraph (1)) for fiscal 

7 years 2006 and 2007, the Secretary of the Treasury 

8 shall make the following assumptions concerning the 

9 total amount of taxable capital in the United States 

10 represented by the total assets held by personal so11 cial security savings accounts established under part 

12 B of title II of the Social Security Act: 

13 (A) 80 percent of such total assets are a 

14 net addition to national investments. 

15 (B) Of the amount described in subpara16 graph (A), 90 percent will be invested in the 

17 United States and subject to taxation under the 

18 Internal Revenue Code of 1986. 

19 (C) Of the amount described in subpara20 graph (B), 95 percent will be subject to the 

21 Federal corporate tax. 

22 (D) The amount described in subpara23 graph (C) is subject to the statutory tax rate of 

24 35 percent (resulting in an effective corporate 
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1 tax rate of 23.9 percent on the earnings of all 

2 such total assets). 

3 (b) RECAPTURE OF GOVERNMENT SAVINGS OVER

4 BASELINE.— 

5 (1) IN GENERAL.—Section 201 of the Social 

6 Security Act (as amended by subsection (a)) is 

7 amended further by adding at the end the following 

8 new subsection: 

9 ‘‘Recapture of Government Savings Over Baseline 

10 ‘‘(p)(1) IN GENERAL.—The Secretary of the Treas11 ury, in consultation with the Personal Social Security Sav12 ings Board, shall estimate and transfer to the Federal 

13 Old-Age and Survivors Insurance Trust Fund within 3 

14 months after the end of each fiscal year an amount equal 

15 to the spending reductions amount for such fiscal year. 

16 For purposes of the preceding sentence, the spending re17 ductions amount shall be an amount equal to— 

18 ‘‘(A) for any fiscal year in the period beginning 

19 with fiscal year 2006 and ending with fiscal year 

20 2013, the excess of— 

21 ‘‘(i) 20 percent of the gross domestic prod22 uct (as determined by the Congressional Budget 

23 Office) for the fiscal year for which the deter24 mination is made; over 

25 ‘‘(ii) the product of— 
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1 ‘‘(I) 20 percent of the gross domestic 

2 product (as so determined) for the fiscal 

3 year for which the determination is made; 

4 and 

5 ‘‘(II) 0.99, factored a number of times 

6 equal to the number of fiscal years during 

7 such period which end with or before the 

8 fiscal year for which the determination is 

9 made; and 

10 ‘‘(B) for any fiscal year beginning after fiscal 

11 year 2013 and ending with the termination year— 

12 ‘‘(i) the amount determined under sub13 paragraph (A) for fiscal year 2013; increased 

14 by 

15 ‘‘(ii) the rate of growth of the gross domes16 tic product (as so determined) over the period 

17 beginning with fiscal year 2014 and ending 

18 with the fiscal year for which the determination 

19 is made. 

20 ‘‘(2) ACCOMMODATION FOR LOW OASDI BALANCE

21 RATIO.—Notwithstanding paragraph (1)(B), in any case 

22 in which the OASDI trust fund ratio is less than 125 per23 cent as of the end of the fiscal year preceding each fiscal 

24 year during any period of 1 or more fiscal years referred 
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1 to in paragraph (1)(B) and preceding the termination 

2 year— 

3 ‘‘(A) the spending reductions amount for each 

4 fiscal year during such period shall be the excess 

5 of— 

6 ‘‘(i) 20 percent of the gross domestic prod7 uct (as projected by the Department of Com8 merce) for the fiscal year for which the deter9 mination is made; over 

10 ‘‘(ii) the product of— 

11 ‘‘(I) 20 percent of the gross domestic 

12 product (as so projected) for the fiscal year 

13 for which the determination is made; and 

14 ‘‘(II) 0.99, factored a number of times 

15 equal to the number of fiscal years during 

16 such period which end with or before the 

17 fiscal year for which the determination is 

18 made plus the number of fiscal years dur19 ing the period described in paragraph 

20 (1)(A), and 

21 ‘‘(B) paragraph (1)(B) shall apply with respect 

22 to subsequent fiscal years by substituting for the 

23 reference, in paragraph (1)(B)(i), to fiscal year 2013 

24 a reference to the last fiscal year in such period. 
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1 ‘‘(3) TERMINATION YEAR.—For purposes of para2 graph (1)(B), the ‘termination year’ is the first fiscal year, 

3 after fiscal year 2013— 

4 ‘‘(A) for which the OASDI trust fund ratio is 

5 at least 125 percent; and 

6 ‘‘(B) on the last day of which there are no out7 standing transition obligations of the Self-Liqui8 dating Social Security Transition Fund under sec9 tion 262. 

10 ‘‘(4) OASDI TRUST FUND RATIO.—In paragraph 

11 (2)(A), the term ‘OASDI trust fund ratio’ means, for a 

12 fiscal year, the ratio (expressed as a percentage) of— 

13 ‘‘(A) the combined balance in the Federal Old14 Age and Survivors Insurance Trust Fund and the 

15 Federal Disability Insurance Trust Fund, as of the 

16 last day of such fiscal year; over 

17 ‘‘(B) the amount estimated by the Commis18 sioner of Social Security to be the total amount to 

19 be paid from such Trust Funds during the fiscal 

20 year following such fiscal year for all purposes au21 thorized by this section (excluding any transfer pay22 ments between such Trust Funds and reducing the 

23 amount of any transfer to the Railroad Retirement 

24 Account by the amount of any transfers into either 

25 such Trust Fund from such Account).’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply with respect to fiscal 

3 years beginning after September 30, 2005. 

4 SEC. 104. TAX TREATMENT OF ACCOUNTS. 

5 (a) IN GENERAL.— 

6 (1) IN GENERAL.—Subchapter F of chapter 1 

7 of the Internal Revenue Code of 1986 (relating to 

8 exempt organizations) is amended by adding at the 

9 end the following new part: 

10 ‘‘PART IX—PERSONAL SOCIAL SECURITY 

11 SAVINGS PROGRAM 

‘‘Sec. 530A. Personal social security savings program. 

12 ‘‘SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PRO13 GRAM. 

14 ‘‘(a) GENERAL RULE.—The Social Security Personal 

15 Savings Fund and each Tier III Investment Option are 

16 exempt from taxation under this subtitle. Notwithstanding 

17 the preceding sentence, sums in a personal social security 

18 savings account which are attributable to a Tier III Op19 tion shall be subject to the taxes imposed by section 511 

20 (relating to imposition of tax on unrelated business income 

21 of charitable, etc. organizations). 

22 ‘‘(b) DISTRIBUTIONS.— 

23 ‘‘(1) IN GENERAL.—Any qualified distribution 

24 from— 
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1 ‘‘(A) amounts credited to a personal social 

2 security savings account from the Social Secu3 rity Personal Savings Fund or attributable to a 

4 Tier III Investment Option, or 

5 ‘‘(B) a personal social security savings an6 nuity, 

7 shall not be included in the gross income of the dis8 tributee. 

9 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes 

10 of paragraph (1), the term ‘qualified distribution’ 

11 means a distribution which meets the requirements 

12 of section 258 of the Social Security Act and which 

13 is not a guaranty payment (as defined by section 

14 259 of such Act). 

15 ‘‘(c) DEFINITIONS.—For purposes of this section— 

16 ‘‘(1) PERSONAL SOCIAL SECURITY SAVINGS AC17 COUNT.—The term ‘personal social security savings 

18 account’ means an account established under section 

19 254(a) of the Social Security Act. 

20 ‘‘(2) PERSONAL SOCIAL SECURITY SAVINGS AN21 NUITY.—The term ‘personal social security savings 

22 annuity’ means an annuity approved by the Personal 

23 Social Security Savings Board under section 

24 258(b)(3) of the Social Security Act. 
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1 ‘‘(3) SOCIAL SECURITY PERSONAL SAVINGS

2 FUND.—The term ‘Social Security Personal Savings 

3 Fund’ means the Savings Fund established under 

4 section 252 of the Social Security Act. 

5 ‘‘(4) TIER III INVESTMENT OPTION.—The term 

6 ‘Tier III Investment Option’ has the meaning given 

7 such term by section 251(9) of the Social Security 

8 Act. 

9 ‘‘(d) ESTATE TAX TREATMENT.—No amount shall be 

10 includible in the gross estate of any individual for pur11 poses of chapter 11 by reason of an interest in the Tier 

12 I Investment Fund or the Tier II Investment Fund of the 

13 Savings Fund or held under a Tier III Investment Option 

14 and which is credited to the personal social security sav15 ings account of the individual.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 86(d)(1)(A) of such Code is amended by inserting 

18 ‘‘part A of’’ after ‘‘under’’. 

19 (3) CLERICAL AMENDMENT.—The table of 

20 parts for subchapter F of chapter 1 of such Code is 

21 amended by adding after the item relating to part 

22 VIII the following new item: 

‘‘PART IX. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM’’. 

23 (b) GUARANTY PAYMENTS.—Paragraph (1) of sec24 tion 86(d) of the Internal Revenue Act of 1986, as amend25 ed by subsection (b), is amended by striking ‘‘or’’ at the 
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1 end of subparagraph (A), by striking the period and in2 serting ‘‘, or’’ at the end of subparagraph (B), and by 

3 adding at the end the following new subparagraph: 

4 ‘‘(C) a guaranty payment under section 

5 259(a), and a payment of an additional amount 

6 under section 259(c), of the Social Security 

7 Act.’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2005. 

11 SEC. 105. SELF-LIQUIDATING SOCIAL SECURITY TRANSI12 TION FUND. 

13 Part B of title II of the Social Security Act (as added 

14 by section 101 of this Act) is amended by adding at the 

15 end the following new section: 

16 ‘‘SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSI17 TION FUND. 

18 ‘‘(a) ESTABLISHMENT.—There is hereby created on 

19 the books of the Treasury of the United States a trust 

20 fund to be known as the Self-Liquidating Social Security 

21 Transition Fund (in this section referred to as the ‘Transi22 tion Fund’). 

23 ‘‘(b) BOARD OF TRUSTEES.— 

24 ‘‘(1) ESTABLISHMENT.—With respect to the 

25 Transition Fund, there is hereby created a body to 
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1 be known as the Board of Trustees of the Transition 

2 Fund (in this section referred to as the ‘Board of 

3 Trustees’) composed of the Commissioner of Social 

4 Security, the Secretary of the Treasury, and the 

5 members of the Personal Social Security Savings 

6 Board. 

7 ‘‘(2) DUTIES.—The Board of Trustees shall— 

8 ‘‘(A) provide for the issuance of obligations 

9 by the Transition Fund pursuant to subsection 

10 (c), 

11 ‘‘(B) provide for the receipt and manage12 ment of amounts paid into the Transition Fund 

13 pursuant to subsection (d), 

14 ‘‘(C) use all funds paid into the Transition 

15 Fund to redeem obligations issued under sub16 section (c) as soon as practicable, 

17 ‘‘(D) report to Congress not later than the 

18 first day of April of each year on the operation 

19 and status of the Transition Fund during the 

20 preceding fiscal year and on its expected oper21 ation and status during the current fiscal year 

22 and the next 2 fiscal years, and 

23 ‘‘(E) review the general policies followed in 

24 managing the Transition Fund, and recommend 

25 changes in such policies, including necessary 
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1 changes in the provisions of law which govern 

2 the way in which the Transition Fund is to be 

3 managed. 

4 ‘‘(3) MEETINGS.—The Board of Trustees shall 

5 meet not less frequently than once each calendar 

6 year. 

7 ‘‘(c) ISSUANCE OF TRANSITION FUND BONDS.— 

8 ‘‘(1) ISSUANCE.— 

9 ‘‘(A) IN GENERAL.—The purposes for 

10 which obligations of the United States may be 

11 issued under chapter 31 of title 31, United 

12 States Code, are hereby extended to authorize 

13 the issuance at par of public-debt obligations by 

14 the Transition Fund. 

15 ‘‘(B) REQUIRED ISSUANCE.—Beginning on 

16 January 1, 2006, whenever any obligation held 

17 in the Federal Old-Age and Survivors Insurance 

18 Trust Fund or the Federal Disability Insurance 

19 Trust Fund is repaid from the general fund of 

20 the Treasury to either of such Trust Funds, the 

21 Transition Fund shall issue an obligation under 

22 this subsection in an amount equal to the 

23 amount of interest and principal so repaid. 

24 ‘‘(C) TRANSFER OF PROCEEDS TO GEN25 ERAL FUND OF THE TREASURY.—Proceeds 
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1 from the issuance of any obligation issued 

2 under this section shall be transferred to the 

3 general fund of the Treasury. 

4 ‘‘(D) ACCOUNTING.—The debt owed on 

5 any obligation issued under this section shall be 

6 considered to be debt of the Transition Fund 

7 and shall be accounted for in such manner. 

8 ‘‘(2) MATURITIES AND INTEREST RATE.—Such 

9 obligations issued by the Transition Fund for pur10 chase by the public shall have maturities fixed with 

11 due regard for the needs of the Transition Fund and 

12 shall bear interest at a rate equal to the average 

13 market yield (computed by the Secretary of the 

14 Treasury on the basis of market quotations as of the 

15 end of the calendar month next preceding the date 

16 of such issue) on all marketable interest-bearing ob17 ligations of the United States then forming a part 

18 of the public debt which are not due or callable until 

19 after the expiration of 4 years from the end of such 

20 calendar month, except that where such average 

21 market yield is not a multiple of one-eighth of 1 per 

22 centum, the rate of interest on such obligations shall 

23 be the multiple of one-eighth of 1 per centum near24 est such market yield. 
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1 ‘‘(3) REPAYMENT OF OBLIGATIONS.—Obliga2 tions issued under this subsection may be redeemed 

3 only by funds in the Transition Fund. 

4 ‘‘(d) DEPOSIT OF OASDI TRUST FUND SURPLUS.— 

5 ‘‘(1) IN GENERAL.—There are appropriated to 

6 the Transition Fund for the fiscal year beginning in 

7 2030, and for each fiscal year thereafter, out of any 

8 moneys in the Federal Old-Age and Survivors Insur9 ance Trust Fund, amounts equivalent to the OASDI 

10 trust fund surplus (as defined in paragraph (2)) for 

11 the preceding fiscal year. 

12 ‘‘(2) TRANSFERS BASED ON ESTIMATES.—The 

13 amounts appropriated by paragraph (1) shall be 

14 transferred from time to time from the Federal Old15 Age and Survivors Insurance Trust Fund to the 

16 Transition Fund, such amounts to be determined on 

17 the basis of estimates by the Commissioner of Social 

18 Security. Proper adjustments shall be made in 

19 amounts subsequently transferred to the extent prior 

20 estimates were in excess of or were less than such 

21 surplus. 

22 ‘‘(3) OASDI TRUST FUND SURPLUS DE23 FINED.—In this section, the term ‘OASDI trust 

24 fund surplus’ for a fiscal year means the dollar 

25 amount by which the Federal Old-Age and Survivors 
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1 Insurance Trust Fund could be reduced as of the 

2 end of such fiscal year so as to result in an OASDI 

3 trust fund ratio (as defined in section 201(p)(4)) for 

4 such fiscal year equal to 125 percent. 

5 ‘‘(4) RULE OF CONSTRUCTION.—This section 

6 shall not be construed to require redemption of obli7 gations of the Trust Fund for the purpose of mak8 ing transfers to the Transition Fund under this sec9 tion or for any other purpose other than to provide 

10 for payment of benefits under part A of title II of 

11 the Social Security Act. 

12 ‘‘(e) REDEMPTION OF OBLIGATIONS UPON DEPOSIT

13 OF FUNDS.—Obligations issued under subsection (c) may 

14 be redeemed only by funds in the Transition Fund. The 

15 Board of Trustees shall provide for the redemption of such 

16 obligations as soon as possible with funds deposited into 

17 the Transition Fund pursuant to subsection (d). 

18 ‘‘(f) SUNSET.—On the first date as of which all of 

19 the obligations issued under subsection (c) have been re20 deemed, any balance remaining in the Transition Fund 

21 as of such date shall be deposited in the Federal Old-Age 

22 and Survivors Insurance Trust Fund, the terms of the 

23 Board of Trustees shall end, the Transition Fund shall 

24 cease to exist, and this section shall be repealed.’’. 
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1 SEC. 106. BUDGETARY TREATMENT OF SOCIAL SECURITY. 

2 (a) IN GENERAL.—Section 710 of the Social Security 

3 Act (42 U.S.C. 911) is amended to read as follows: 

4 ‘‘BUDGETARY TREATMENT OF SOCIAL SECURITY

5 ‘‘SEC. 710. (a) IN GENERAL.—Notwithstanding any 

6 other provision of law and except as provided in subsection 

7 (b), the receipts and disbursements of the Federal Old8 Age and Survivors Insurance Trust Fund, the Federal 

9 Disability Insurance Trust Fund, the Social Security Per10 sonal Savings Fund, and the Self-Liquidating Social Secu11 rity Transition Fund (including transfers to and from ei12 ther such Trust Fund or such Savings Fund or such Tran13 sition Fund relating to the acquisition or redemption of 

14 obligations acquired by either such Trust Fund or such 

15 Savings Fund or such Transition Fund) and the taxes im16 posed under sections 1401 and 3101 of the Internal Rev17 enue Code of 1986 shall not be counted as new budget 

18 authority, outlays, receipts, or deficit or surplus for pur19 poses of the budget of the Government as submitted by 

20 the President or the congressional budget or be reported 

21 as new budget authority, outlays, receipts, or deficit or 

22 surplus in any report of the Congressional Budget Office 

23 or any other agency or instrumentality of the Government 

24 ‘‘(b) MATTERS INCLUDED IN THE BUDGET.—Sub25 section (a) shall not apply with respect to the following: 
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1 ‘‘(1) transfers from the general fund of the 

2 Treasury to the Federal Old-Age and Survivors In3 surance Trust Fund under section 201(o) (relating 

4 to recapture of corporate tax on account yields), 

5 which shall be treated as an expenditure of the Gov6 ernment; 

7 ‘‘(2) transfers from the general fund of the 

8 Treasury to the Federal Old-Age and Survivors In9 surance Trust Fund under section 201(p) (relating 

10 to recapture of Government savings over baseline), 

11 which shall be treated as an expenditure of the Gov12 ernment; 

13 ‘‘(3) transfers from the general fund of the 

14 Treasury to the Federal Old-Age and Survivors In15 surance Trust Fund or the Federal Disability Insur16 ance Trust Fund under section 121(e) of the Social 

17 Security Amendments of 1983 (relating to appro18 priation of amounts equivalent to taxes on social se19 curity benefits) (42 U.S.C. 401 note), which shall be 

20 treated as an expenditure of the Government; and 

21 ‘‘(4) revenues from taxes imposed under chap22 ter 1 of the Internal Revenue Code of 1986, to the 

23 extent attributable to section 86 of such Code (relat24 ing to taxation of social security and tier 1 railroad 
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1 retirement benefits), which shall be treated as a re2 ceipt of the Government.’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 13301 of the Budget Enforcement 

5 Act of 1990 (2 U.S.C. 632; 2 U.S.C. 632 note) is 

6 repealed. 

7 (2) Section 405 of the Congressional Budget 

8 Act of 1974 (2 U.S.C. 655) is amended— 

9 (A) by inserting ‘‘other than section 710 of 

10 the Social Security Act’’ after ‘‘Notwith11 standing any other provision of law’’; and 

12 (B) by striking ‘‘section, not including’’ 

13 and all that follows through ‘‘Funds,’’ and in14 serting ‘‘section’’. 

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

16 this section shall apply with respect to fiscal years begin17 ning on or after October 1, 2005. 

18 SEC. 107. DEDICATION OF BUDGET SURPLUSES TO SAVING 

19 SOCIAL SECURITY. 

20 (a) IN GENERAL.—Section 201 of the Social Security 

21 Act (as amended by section 103 of this Act) is amended 

22 further by adding at the end the following new subsection: 

23 ‘‘Transfer of Total Budget Surpluses to Trust Fund 

24 ‘‘(q) In the case of any fiscal year for which the total 

25 amount treated as income of the Federal Government in 
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1 the total budget of the United States have exceeded the 

2 total amount treated as expenditures of the Federal Gov3 ernment in the total budget of the United States (as deter4 mined by the Director of the Office of Management and 

5 Budget without regard to section 710), not later than 3 

6 months after the end of such fiscal year, the Secretary 

7 of the Treasury shall transfer from the general fund of 

8 the Treasury to the Federal Old-Age and Survivors Insur9 ance Trust Fund an amount equal to the lesser of— 

10 ‘‘(1) the total amount transferred from the 

11 Trust Fund during such fiscal year to the Social Se12 curity Personal Savings Fund under section 252(b) 

13 (relating to deposit of amounts equal to redirected 

14 social security contributions), or 

15 ‘‘(2) the amount by which such total amount 

16 treated as receipts exceeded such total amount treat17 ed as expenditures.’’. 

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

19 subsection (a) shall apply with respect to fiscal years be20 ginning after September 30, 2005. 
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1 SEC. 108. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, 

2 AND DISABILITY INSURANCE PROGRAM AND 

3 THE PERSONAL SOCIAL SECURITY SAVINGS 

4 PROGRAM. 

5 Title VII of the Social Security Act is amended by 

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

7 new section: 

8 ‘‘ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DIS9 ABILITY INSURANCE PROGRAM AND THE INDIVIDUAL

10 SOCIAL SECURITY INVESTMENT PROGRAM

11 ‘‘Social Security Lockbox Budget 

12 ‘‘SEC. 706. (a) At the time of the transmittal to the 

13 Congress by the President of the budget of the United 

14 States Government, the President shall transmit to each 

15 House of the Congress a separate report (to be known as 

16 the ‘Social Security Lockbox Budget’) detailing the per17 formance during the preceding fiscal year of each of the 

18 accounts established under subsection (b). Such report 

19 shall set forth, as determined as of the end of the year— 

20 ‘‘(1) the amount of the balance of each account, 

21 ‘‘(2) the amount of the total charges and the 

22 amount of the total credits to each account for the 

23 year, and 

24 ‘‘(3) the amount of the total for the year of 

25 each category of charges and credits itemized in sub26 section (b). 
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1 ‘‘Establishment of Accounts 

2 ‘‘(b) For purposes of accounting for certain receipts 

3 and disbursement of the Treasury of the United States 

4 in connection with the Old-Age, Survivors, and Disability 

5 Insurance Program under part A of title II of the Social 

6 Security Act and the Individual Social Security Invest7 ment Program under part B of such title, the Secretary 

8 of the Treasury shall establish and maintain a Social Se9 curity Part A Account, a Social Security Part B Account, 

10 and a Self-Liquidating Social Security Transition Fund 

11 Account. 

12 ‘‘Credits and Charges to the Social Security Part A 

13 Account 

14 ‘‘(c)(1) For each fiscal year, the Social Security Part 

15 A Account shall be credited with the sum of— 

16 ‘‘(A) all receipts during the year by the Federal 

17 Old-Age and Survivors Insurance Trust Fund and 

18 the Federal Disability Insurance Trust Fund under 

19 section 201 (including amounts received as interest 

20 on notes and obligations purchased by the Trust 

21 Funds under section 201(d) of such Act, and exclud22 ing amounts received in redemption of such notes 

23 and obligations and amounts received by either such 

24 Trust Fund as transfers from the other such Trust 

25 Fund), and 
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1 ‘‘(B) all receipts during the year by the Federal 

2 Old-Age and Survivors Insurance Trust Fund and 

3 the Federal Disability Insurance Trust Fund under 

4 section 121(e) of the Social Security Amendments of 

5 1983 (relating to appropriation of amounts equiva6 lent to taxes on social security benefits) (42 U.S.C. 

7 401 note). 

8 ‘‘(2) For each fiscal year, the Social Security Part 

9 A Account shall be charged with the sum of— 

10 ‘‘(A) all benefits paid during the year from the 

11 Federal Old-Age and Survivors Insurance Trust 

12 Fund and the Federal Disability Insurance Trust 

13 Fund under part A of title II of the Social Security 

14 Act, 

15 ‘‘(B) all redirected social security contributions 

16 transferred during the year to the Social Security 

17 Personal Savings Fund under section 252(b), 

18 ‘‘(C) all other expenditures during the year 

19 from the Trust Funds under part A of title II (ex20 cluding amounts expended as transfers by either 

21 such Trust Fund to the other such Trust Fund and 

22 amounts paid for the purchase of notes and obliga23 tions under section 201(d)), and 

24 ‘‘(D) all transfers from the Federal Old-Age 

25 and Survivors Insurance Trust Fund to the Self-Liq-
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1 uidating Social Security Transition Fund under sec2 tion 262(d). 

3 ‘‘Charges and Credits to the Social Security Part B 

4 Account 

5 ‘‘(d)(1) For each fiscal year, the Social Security Part 

6 B Account shall be credited with— 

7 ‘‘(A) all redirected social security contributions 

8 transferred during the year to the Personal Social 

9 Security Savings Fund under section 252(b) of the 

10 Social Security Act, and 

11 ‘‘(B) any net increase in the Tier I Investment 

12 Fund attributable to investment for the fiscal year, 

13 any net increase in the Tier II Investment Fund at14 tributable to investment for the fiscal year, and the 

15 total amount of any net increases in Tier III Invest16 ment Options attributable to investment for the fis17 cal year. 

18 ‘‘(2) For each fiscal year, the Social Security Part 

19 B Account shall be charged with— 

20 ‘‘(A) all administrative costs incurred for the 

21 fiscal year with respect to the Tier I Investment 

22 Fund, the Tier II Investment Fund, and the Tier III 

23 Investment Options, 

24 ‘‘(B) any net decrease in the Tier I Investment 

25 Fund attributable to investment for the fiscal year, 
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1 any net decrease in the Tier II Investment Fund at2 tributable to investment for the fiscal year, and the 

3 total amount of any net decreases in Tier III Invest4 ment Options attributable to investment for the fis5 cal year, and 

6 ‘‘(C) annuity payments made during the year 

7 under section 258 from the Annuity Reserve Ac8 count in the Savings Fund. 

9 ‘‘Charges and Credits to the Self-Liquidating Social 

10 Security Transition Fund Account 

11 ‘‘(e)(1) For each fiscal year, the Self-Liquidating So12 cial Security Transition Account shall be credited with— 

13 ‘‘(A) all transfers to the Transition Fund from 

14 the Federal Old-Age and Survivors Insurance Trust 

15 Fund under section 262(b), and 

16 ‘‘(B) all amounts expended during the fiscal 

17 year from the Trust Funds in the redemption under 

18 section 262(e) of obligations issued by the Transi19 tion fund under section 262(c). 

20 ‘‘(2) For each fiscal year, the Self-Liquidating Social 

21 Security Transition Fund Account shall be charged with 

22 the total amount of obligations issued during the fiscal 

23 year by the Transition Fund under section 262(c)’’. 
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1 SEC. 109. REDUCTION OF FICA RATES RESULTING FROM 

2 PERSONAL SOCIAL SECURITY SAVINGS PRO3 GRAM. 

4 (a) EMPLOYEE CONTRIBUTION.—Section 3101 of the 

5 Internal Revenue Code of 1986 (relating to tax on employ6 ees) is amended by adding at the end the following new 

7 subsection: 

8 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS9 ABILITY INSURANCE TAX RATE.— 

10 ‘‘(1) IN GENERAL.—In any year which follows 

11 a reduction year and each year thereafter, the rate 

12 of tax imposed under subsection (a) shall be reduced 

13 by the reduction percentage. 

14 ‘‘(2) REDUCTION YEAR.—For purposes of this 

15 section— 

16 ‘‘(A) IN GENERAL.—The term ‘reduction 

17 year’ means any year after the transition year 

18 in which the OASDI rate ratio exceeds 125 per19 cent. 

20 ‘‘(B) TRANSITION YEAR.—The term ‘tran21 sition year’ means the first full calendar year 

22 following the termination year (as defined in 

23 section 201(p)(3) of the Social Security Act). 

24 ‘‘(3) REDUCTION PERCENTAGE.—For purposes 

25 of this section, the term ‘reduction percentage’ 

26 means the excess of— 
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1 ‘‘(A) the rate in effect under subsection (a) 

2 for the reduction year, over 

3 ‘‘(B) the rate (rounded up to the nearest 

4 one tenth of a percent) under which the OASDI 

5 rate ratio for the reduction year would have 

6 been 125 percent if— 

7 ‘‘(i) such rate had been applicable 

8 under subsection (a) and section 3111(a) 

9 during such year, and 

10 ‘‘(ii) the rate under section 1401(a) 

11 during such year were twice such rate. 

12 ‘‘(4) OASDI RATE RATIO.—The term ‘OASDI 

13 rate ratio’ means, with respect to any calendar year, 

14 the ratio— 

15 ‘‘(A) the numerator of which is the com16 bined balance in the Old-Age and Survivors In17 surance Trust Fund and the Federal Disability 

18 Insurance Trust Fund, as of the last day of 

19 such calendar year, and 

20 ‘‘(B) the denominator of which is the 

21 amount paid from such Trust Funds during 

22 such calendar year for all purposes authorized 

23 by section 201 of the Social Security Act (ex24 cluding any transfer payments between such 

25 Trust Funds and reducing the amount of any 
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1 transfer to the Railroad Retirement Account by 

2 the amount of any transfers into either such 

3 Trust Fund from such Account). 

4 ‘‘(5) LIMITATION ON REDUCTION.—Paragraph 

5 (1) shall not apply to any reduction to the extent 

6 that such reduction would cause the rate of tax im7 posed under subsection (a) to be less than 4.95 per8 cent.’’. 

9 (b) EMPLOYER CONTRIBUTION.—Section 3111 of the 

10 Internal Revenue Code of 1986 (relating to tax on employ11 ers) is amended by adding at the end the following new 

12 subsection: 

13 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS14 ABILITY INSURANCE TAX RATE.— 

15 ‘‘(1) IN GENERAL.—In any year which follows 

16 a reduction year and each year thereafter, the rate 

17 of tax imposed under subsection (a) shall be reduced 

18 by the reduction percentage. 

19 ‘‘(2) REDUCTION YEAR; REDUCTION PERCENT20 AGE.—For purposes of this section, the terms ‘re21 duction year’ and ‘reduction percentage’ have the 

22 meanings given such terms by section 3101(d). 

23 ‘‘(3) LIMITATION ON REDUCTION.—Paragraph 

24 (1) shall not apply to any reduction to the extent 

25 that such reduction would cause the rate of tax im-
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1 posed under subsection (a) to be less than 4.95 per2 cent.’’. 

3 (c) SELF-EMPLOYMENT CONTRIBUTION.—Section 

4 1401 of the Internal Revenue Code of 1986 (relating to 

5 tax on self-employment income) is amended by adding at 

6 the end the following new subsection: 

7 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS8 ABILITY INSURANCE TAX RATE.— 

9 ‘‘(1) IN GENERAL.—In any year which follows 

10 a reduction year and each year thereafter, the rate 

11 of tax imposed under subsection (a) shall be reduced 

12 by the reduction percentage. 

13 ‘‘(2) REDUCTION YEAR; REDUCTION PERCENT14 AGE.—For purposes of this section, the terms ‘re15 duction year’ and ‘reduction percentage’ have the 

16 meanings given such terms by section 3101(d). 

17 ‘‘(3) LIMITATION ON REDUCTION.—Paragraph 

18 (1) shall not apply to any reduction to the extent 

19 that such reduction would cause the rate of tax im20 posed under subsection (a) to be less than 9.9 per21 cent.’’. 
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1 TITLE II—PUTTING A LID ON 

2 THE FEDERAL BUDGET 

3 Subtitle A—Spending Safeguards 

4 on the Growth of Entitlements 

5 and Mandatories 

6 SEC. 201. SPENDING CAPS ON GROWTH OF ENTITLEMENTS 

7 AND MANDATORIES. 

8 (a) CONTROL OF ENTITLEMENTS AND

9 MANDATORIES.—The Balanced Budget and Emergency 

10 Deficit Control Act of 1985 is amended by adding after 

11 section 252 the following new section: 

12 ‘‘SEC. 252A. ENFORCING CONTROLS ON DIRECT SPENDING. 

13 ‘‘(a) CAP ON GROWTH OF ENTITLEMENTS.—Effec14 tive for fiscal year 2007 and for each ensuing fiscal year, 

15 the total level of direct spending for all direct spending 

16 programs, projects, and activities (excluding social secu17 rity) for any such fiscal year shall not exceed the total 

18 level of spending for all such programs, projects, and ac19 tivities for the previous fiscal year after the direct spend20 ing for each such program, project, or activity is increased 

21 by the higher of the change in the Consumer Price Index 

22 for All Urban Consumers or the inflator (if any) applicable 

23 to that program, project, or activity and the growth in 

24 eligible population for such, project, or activity. 
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1 ‘‘(b) SEQUESTRATION.—Within 15 days after Con2 gress adjourns to end a session (other than of the second 

3 session of the One Hundred Ninth Congress), and on the 

4 same day as a sequestration (if any) under section 251, 

5 there shall be a sequestration to reduce the amount of di6 rect spending for the fiscal year beginning in the year the 

7 Congress adjourns by any amount necessary to reduce 

8 such spending to the level set forth in subsection (a) un9 less that amount is less than $250,000,000. 

10 ‘‘(c) UNIFORM REDUCTIONS; LIMITATIONS.—The 

11 amount required to be sequestered for the fiscal year 

12 under subsection (a) shall be obtained from nonexempt di13 rect spending accounts by actions taken in the following 

14 order: 

15 ‘‘(1) FIRST.—The reductions in the programs 

16 specified in section 255(a) (National Wool Act and 

17 special milk), section 255(b) (student loans), and 

18 section 255(c) (foster care and adoption assistance) 

19 shall be made. 

20 ‘‘(2) SECOND.—Any additional reductions that 

21 may be required shall be achieved by reducing each 

22 remaining nonexempt direct spending account by the 

23 uniform percentage necessary to achieve those addi24 tional reductions, except that— 
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1 ‘‘(A) the low-income programs specified in 

2 section 255(d) shall not be reduced by more 

3 than 2 percent; 

4 ‘‘(B) the retirement and veterans benefits 

5 specified in sections 255(f), (g), and (h) shall 

6 not be reduced by more than 2 percent in the 

7 manner specified in that section; and 

8 ‘‘(C) the medicare programs shall not be 

9 reduced by more than 2 percent in the manner 

10 specified in section 255(i). 

11 The limitations set forth in subparagraphs (A), (B), 

12 and (C) shall be applied iteratively, and after each 

13 iteration the uniform percentage applicable to all 

14 other programs under this paragraph shall be in15 creased (if necessary) to a level sufficient to achieve 

16 the reductions required by this paragraph. 

17 ‘‘(d) EXCLUSION OF MEDICARE PRESCRIPTION

18 DRUG PROGRAM UNTIL FULLY OPERATIONAL.—For pur19 poses of this section with respect to the limitation under 

20 subsection (a) for a fiscal year before fiscal year 2008, 

21 direct spending programs and direct spending shall not 

22 be construed to include part D of title XVIII of the Social 

23 Security Act (or spending under part C of such title that 

24 is attributable to such part D).’’. 
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1 (b) TABLE OF CONTENTS AMENDMENT.—The table 

2 of contents set forth in 250(c) of the Balanced Budget 

3 and Emergency Deficit Control Act of 1985 is amended 

4 by adding after the item relating to section 252 the fol5 lowing new item: 

‘‘252A. Enforcing controls on direct spending.’’. 

6 SEC. 202. EXEMPT PROGRAMS AND ACTIVITIES. 

7 Section 255 of the Balanced Budget and Emergency 

8 Deficit Control Act of 1985 is amended to read as follows: 

9 ‘‘SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES. 

10 ‘‘(a) SOCIAL SECURITY BENEFITS; TIER I RAILROAD

11 RETIREMENT BENEFITS; AND CERTAIN MEDICARE BEN12 EFITS.—(1) Benefits payable under the old-age, survivors, 

13 and disability insurance program established under title 

14 II of the Social Security Act, and benefits payable under 

15 section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retire16 ment Act of 1974, shall be exempt from reduction under 

17 any order issued under this part. 

18 ‘‘(2) Payments made under part A of title XVIII (re19 lating to part A medicare hospital insurance benefits) of 

20 the Social Security Act and payments made under part 

21 C of such title (relating to the Medicare Advantage pro22 gram) insofar as they are attributable to part A of such 

23 title shall be exempt from reduction under any order 

24 issued under this part. 
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1 ‘‘(b) DESCRIPTIONS AND LISTS.—The following 

2 budget accounts or activities shall be exempt from seques3 tration: 

4 ‘‘(1) net interest; 

5 ‘‘(2) all payments to trust funds from excise 

6 taxes or other receipts or collections properly cred7 itable to those trust funds; 

8 ‘‘(3) all payments from one Federal direct 

9 spending budget account to another Federal budget 

10 account; and all intragovernmental funds including 

11 those from which funding is derived primarily from 

12 other Government accounts, except to the extent 

13 that such funds are augmented by direct appropria14 tions for the fiscal year for which the order is in ef15 fect; 

16 ‘‘(4) activities resulting from private donations, 

17 bequests, or voluntary contributions to the Govern18 ment; 

19 ‘‘(5) payments from any revolving fund or 

20 trust-revolving fund (or similar activity) that pro21 vides deposit insurance or other Government insur22 ance, Government guarantees, or any other form of 

23 contingent liability, to the extent those payments re24 sult from contractual or other legally binding com-
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1 mitments of the Government at the time of any se2 questration; 

3 ‘‘(6) credit liquidating and financing accounts; 

4 ‘‘(7) the following accounts, which largely fulfill 

5 requirements of the Constitution or otherwise make 

6 payments to which the Government is committed: 

7 ‘‘Administration of Territories, Northern 

8 Mariana Islands Covenant grants (14–0412–0– 

9 1–806); 

10 ‘‘Armed Forces Retirement Home Trust 

11 Fund, payment of claims (84–8930–0–7–705); 

12 ‘‘Bureau of Indian Affairs, miscellaneous 

13 payments to Indians (14–2303–0–1–452); 

14 ‘‘Bureau of Indian Affairs, miscellaneous 

15 trust funds, tribal trust funds (14–9973–0–7– 

16 999); 

17 ‘‘Claims, defense; 

18 ‘‘Claims, judgments, and relief act (20– 

19 1895–0–1–806); 

20 ‘‘Compact of Free Association, economic 

21 assistance pursuant to Public Law 99–658 (14– 

22 0415–0–1–806); 

23 ‘‘Compensation of the President (11– 

24 0001–0–1–802); 
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1 ‘‘Customs Service, miscellaneous perma2 nent appropriations (20–9992–0–2–852); 

3 ‘‘Eastern Indian land claims settlement 

4 fund (14–2202–0–1–806); 

5 ‘‘Farm Credit Administration, Limitation 

6 on Administration Expenses (78–4131–0–3– 

7 351); 

8 ‘‘Farm Credit System Financial Assistance 

9 Corporation, interest payments (20–1850–0–1– 

10 351); 

11 ‘‘Internal Revenue collections of Puerto 

12 Rico (20–5737–0–2–852); 

13 ‘‘Panama Canal Commission, operating ex14 penses and capital outlay (95–5190–0–2–403); 

15 ‘‘Payments of Vietnam and USS Pueblo 

16 prisoner-of-war claims (15–0104–0–1–153); 

17 ‘‘Payments to copyright owners (03–5175– 

18 0–2–376); 

19 ‘‘Payments to health care trust funds (75– 

20 0580–0–1–571); 

21 ‘‘Payments to social security trust funds 

22 (75–0404–0–1–651); 

23 ‘‘Payments to the United States terri24 tories, fiscal assistance (14–0418–0–1–801); 
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1 ‘‘Payments to widows and heirs of de2 ceased Members of Congress (00–0215–0–1– 

3 801); 

4 ‘‘Pension Benefit Guaranty Corporation 

5 Fund (16–4204–0–3–601); 

6 ‘‘Salaries of Article III judges; 

7 ‘‘Washington Metropolitan Area Transit 

8 Authority, interest payments (46–0300–0–1– 

9 401); 

10 ‘‘(8) the following noncredit special, revolving, 

11 or trust-revolving funds: 

12 ‘‘Coinage profit fund (20–5811–0–2–803); 

13 ‘‘Comptroller of the Currency; 

14 ‘‘Director of the Office of Thrift Super15 vision; 

16 ‘‘Exchange Stabilization Fund (20–4444– 

17 0–3–155); 

18 ‘‘Federal Housing Finance Board; 

19 ‘‘Foreign Military Sales trust fund (11– 

20 82232–0–7–155); 

21 ‘‘National Credit Union Administration, 

22 central liquidating facility (25–4470–0–3–373); 

23 ‘‘National Credit Union Administration, 

24 credit union insurance fund (25–4468–0–3– 

25 373); 
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1 ‘‘National Credit Union Administration op2 erating fund (25–4056–0–3–373); and 

3 ‘‘Resolution Trust Corporation Revolving 

4 Fund (22–4055–0–3–373); 

5 ‘‘(9) Thrift Savings Fund; 

6 ‘‘(10) appropriations for the District of Colum7 bia to the extent they are appropriations of locally 

8 raised funds; 

9 ‘‘(11)(A) any amount paid as regular unemploy10 ment compensation by a State from its account in 

11 the Unemployment Trust Fund (established by sec12 tion 904(a) of the Social Security Act); 

13 ‘‘(B) any advance made to a State from the 

14 Federal unemployment account (established by sec15 tion 904(g) of such Act) under title XII of such Act 

16 and any advance appropriated to the Federal unem17 ployment account pursuant to section 1203 of such 

18 Act; and 

19 ‘‘(C) any payment made from the Federal Em20 ployees Compensation Account (as established under 

21 section 909 of such Act) for the purpose of carrying 

22 out chapter 85 of title 5, United States Code, and 

23 funds appropriated or transferred to or otherwise 

24 deposited in such Account; and 
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1 ‘‘(12)(A) FDIC, Bank Insurance Fund (51– 

2 4064–0–3–373); 

3 ‘‘(B) FDIC, FSLIC Resolution Fund (51– 

4 4065–0–3–373); and 

5 ‘‘(C) FDIC, Savings Association Insurance 

6 Fund (51–4066–0–3–373). 

7 ‘‘(c) FEDERAL RETIREMENT AND DISABILITY AC8 COUNTS.—The following Federal retirement and disability 

9 accounts shall be exempt from reduction under any order 

10 issued under this part: 

11 ‘‘Civil service retirement and disability fund 

12 (24–8135–0–7–602). 

13 ‘‘Black Lung Disability Trust Fund (20–8144– 

14 0–7–601). 

15 ‘‘Foreign Service Retirement and Disability 

16 Fund (19–8186–0–7–602). 

17 ‘‘District of Columbia Judicial Retirement and 

18 Survivors Annuity Fund (20–8212–0–7–602). 

19 ‘‘Judicial Survivors’ Annuities Fund (10–8110– 

20 0–7–602). 

21 ‘‘Payments to the Railroad Retirement Ac22 counts (60–0113–0–1–601). 

23 ‘‘Tax Court Judges Survivors Annuity Fund 

24 (23–8115–0–7–602). 
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1 ‘‘Employees Life Insurance Fund (24–8424–0– 

2 8–602). 

3 ‘‘(d) FEDERAL ADMINISTRATIVE EXPENSES.— 

4 ‘‘(1) Notwithstanding any provision of law 

5 other than paragraph (3), administrative expenses 

6 incurred by the departments and agencies, including 

7 independent agencies, of the Government in connec8 tion with any program, project, activity, or account 

9 shall be subject to reduction pursuant to any seques10 tration order, without regard to any exemption, ex11 ception, limitation, or special rule otherwise applica12 ble with respect to such program, project, activity, 

13 or account, and regardless of whether the program, 

14 project, activity, or account is self-supporting and 

15 does not receive appropriations. 

16 ‘‘(2) Payments made by the Government to re17 imburse or match administrative costs incurred by a 

18 State or political subdivision under or in connection 

19 with any program, project, activity, or account shall 

20 not be considered administrative expenses of the 

21 Government for purposes of this section, and shall 

22 be subject to sequestration to the extent (and only 

23 to the extent) that other payments made by the Gov24 ernment under or in connection with that program, 

25 project, activity, or account are subject to that re-
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1 duction or sequestration; except that Federal pay2 ments made to a State as reimbursement of admin3 istrative costs incurred by that State under or in 

4 connection with the unemployment compensation 

5 programs specified in subsection (a)(11) shall be 

6 subject to reduction or sequestration under this part 

7 notwithstanding the exemption otherwise granted to 

8 such programs under that subsection. 

9 ‘‘(3) Notwithstanding any other provision of 

10 law, the administrative expenses of the following 

11 programs shall be exempt from sequestration: 

12 ‘‘(A) Comptroller of the Currency. 

13 ‘‘(B) Federal Deposit Insurance Corpora14 tion. 

15 ‘‘(C) Office of Thrift Supervision. 

16 ‘‘(D) National Credit Union Administra17 tion. 

18 ‘‘(E) National Credit Union Administra19 tion, central liquidity facility. 

20 ‘‘(F) Federal Retirement Thrift Invest21 ment Board. 

22 ‘‘(G) Resolution Funding Corporation. 

23 ‘‘(H) Resolution Trust Corporation. 

24 ‘‘(I) Board of Governors of the Federal 

25 Reserve System. 
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1 ‘‘(e) VETERANS’ PROGRAMS.—The following pro2 grams shall be exempt from reduction under any order 

3 issued under this part: 

4 ‘‘General Post Funds (36–8180–0–7–705). 

5 ‘‘Veterans Insurance and Indemnities (36– 

6 0120–0–1–701). 

7 ‘‘Service-Disabled Veterans Insurance Funds 

8 (36–4012–0–3–701). 

9 ‘‘Veterans Reopened Insurance Fund (36– 

10 4010–0–3–701). 

11 ‘‘Servicemembers’ Group Life Insurance Fund 

12 (36–4009–0–3–701). 

13 ‘‘Post-Vietnam Era Veterans Education Ac14 count (36–8133–0–7–702). 

15 ‘‘National Service Life Insurance Fund (36– 

16 8132–0–7–701). 

17 ‘‘United States Government Life Insurance 

18 Fund (36–8150–0–7–701). 

19 ‘‘Veterans Special Life Insurance Fund (36– 

20 8455–0–8–701). 

21 ‘‘(f) OPTIONAL EXEMPTION OF DEFENSE AND

22 HOMELAND SECURITY ACCOUNTS.— 

23 ‘‘(1) IN GENERAL.—The President may, with 

24 respect to any defense or homeland security account, 

25 exempt that account from sequestration or provide 
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1 for a lower uniform percentage reduction than would 

2 otherwise apply. 

3 ‘‘(2) LIMITATION.—The President may not use 

4 the authority provided by paragraph (1) unless the 

5 President notifies the Congress of the manner in 

6 which such authority will be exercised on or before 

7 the date specified in section 254(a) for the budget 

8 year.’’. 

9 SEC. 203. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES. 

10 (a) IN GENERAL.—Section 256 of the Balanced 

11 Budget and Emergency Deficit Control Act of 1985 is 

12 amended to read as follows: 

13 ‘‘SEC. 256. EXCEPTIONS, LIMITATIONS, AND SPECIAL 

14 RULES. 

15 ‘‘(a) NATIONAL WOOL ACT AND THE SPECIAL MILK

16 PROGRAM.—Automatic spending increases are increases 

17 in outlays due to changes in indexes in the following pro18 grams: 

19 ‘‘(1) National Wool Act; and 

20 ‘‘(2) Special milk program. 

21 In those programs all amounts other than the automatic 

22 spending increases shall be exempt from reduction under 

23 any sequestration order. 

24 ‘‘(b) STUDENT LOANS.—For all student loans under 

25 part B or D of title IV of the Higher Education Act of 
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1 1965 made during the period when a sequestration order 

2 under section 254 is in effect as required by section 252 

3 or 253, origination fees under sections 438(c)(2) and 

4 455(c) of that Act shall each be increased by 0.50 percent5 age point. 

6 ‘‘(c) FOSTER CARE AND ADOPTION ASSISTANCE

7 PROGRAMS.—Any sequestration order shall make the re8 duction otherwise required under the foster care and adop9 tion assistance programs (established by part E of title 

10 IV of the Social Security Act) only with respect to pay11 ments and expenditures made by States in which increases 

12 in foster care maintenance payment rates or adoption as13 sistance payment rates (or both) are to take effect during 

14 the fiscal year involved, and only to the extent that the 

15 required reduction can be accomplished by applying a uni16 form percentage reduction to the Federal matching pay17 ments that each such State would otherwise receive under 

18 section 474 of that Act (for such fiscal year) for that por19 tion of the State’s payments attributable to the increases 

20 taking effect during that year. No State’s matching pay21 ments from the Government for foster care maintenance 

22 payments or for adoption assistance maintenance pay23 ments may be reduced by a percentage exceeding the ap24 plicable domestic sequestration percentage. No State may, 

25 after the date of the enactment of this Act, make any 
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1 change in the timetable for making payments under a 

2 State plan approved under part E of title IV of the Social 

3 Security Act which has the effect of changing the fiscal 

4 year in which expenditures under such part are made. 

5 ‘‘(d) LOW-INCOME PROGRAMS.—(1) Benefit pay6 ments or payments to States or other entities for the pro7 grams listed in paragraph (2) shall not be reduced by 

8 more than 2 percent under any sequestration order. When 

9 reduced under an end-of-session sequestration order, those 

10 benefit reductions shall occur starting with the payment 

11 made at the start of January. When reduced under a with12 in-session sequestration order, those benefit reductions 

13 shall occur starting with the next periodic payment. 

14 ‘‘(2) The programs referred to in paragraph (1) are 

15 the following: 

16 ‘‘Child Nutrition (12–3539–0–1–605). 

17 ‘‘Food Stamp Programs (12–3505–0–1–605). 

18 ‘‘Grants to States for Medicaid (75–0512–0–1– 

19 551). 

20 ‘‘State Children’s Health Insurance Fund (75– 

21 0515–0–1–551). 

22 ‘‘Supplemental Security Income Program (75– 

23 0406–0–1–609). 

24 ‘‘Temporary Assistance for Needy Families 

25 (75–1552–0–1–609). 
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1 ‘‘Special supplemental nutrition program for 

2 women, infants, and children (WIC) (12–3510–0–1– 

3 605). 

4 ‘‘(e) VETERANS’ MEDICAL CARE.—The maximum 

5 permissible reduction in budget authority for Veterans’ 

6 medical care (36–0160–0–1–703) for any fiscal year, pur7 suant to an order issued under section 254, shall be 2 

8 percent. 

9 ‘‘(f) FEDERAL RETIREMENT PROGRAMS.— 

10 ‘‘(1) For each of the programs listed in para11 graph (2) and except as provided in paragraph (3), 

12 monthly (or other periodic) benefit payments shall 

13 be reduced by the uniform percentage applicable to 

14 direct spending sequestrations for such programs, 

15 which shall in no case exceed 2 percent under any 

16 sequestration order. When reduced under an end-of17 session sequestration order, those benefit reductions 

18 shall occur starting with the payment made at the 

19 start of January or 7 weeks after the order is 

20 issued, whichever is later. When reduced under a 

21 within-session sequestration order, those benefit re22 ductions shall occur starting with the next periodic 

23 payment. 

24 ‘‘(2) The programs subject to paragraph (1) 

25 are: 
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1 ‘‘Central Intelligence Agency Retirement 

2 and Disability Fund (56–3400–0–1–054). 

3 ‘‘Comptrollers General Retirement System 

4 (05–0107–0–1–801)Payments to the Foreign 

5 Service Retirement and Disability Fund (72– 

6 1036–0–1–153). 

7 ‘‘Judicial Officer’ Retirement Fund (10– 

8 8122–0–7–602). 

9 ‘‘Claims Judges’ Retirement Fund (10– 

10 8124–0–7–602). 

11 ‘‘Pensions for former Presidents (47– 

12 0105–0–1–802). 

13 ‘‘National Oceanic and Atmospheric Ad14 ministration Retirement (13–1450–0–1–306). 

15 ‘‘Railroad Industry Pension Fund (60– 

16 8011–0–7–601). 

17 ‘‘Retired pay, Coast Guard (70–0602–0–1– 

18 403). 

19 ‘‘Retirement pay and medical benefits for 

20 commissioned officers, Public Health Service 

21 (75–0379–0–1–551). 

22 ‘‘Payments to Civil Service Retirement and 

23 Disability Fund (24–0200–0–1–805). 

24 ‘‘Payments to the Foreign Service Retire25 ment and Disability Fund (72–1036–0–1–153). 
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1 ‘‘Payments to Judiciary Trust Funds (10– 

2 0941–0–1–752). 

3 ‘‘(g) VETERANS PROGRAMS.—To achieve the total 

4 percentage reduction required by any order issued under 

5 this part, the percentage reduction that shall apply to pay6 ments under the following programs shall in no event ex7 ceed 2 percent: 

8 ‘‘Canteen Service Revolving Fund (36–4014–0– 

9 3–705). 

10 ‘‘Medical Center Research Organizations (36– 

11 4026–0–3–703). 

12 ‘‘Disability Compensation Benefits (36–0102– 

13 0–1–701). 

14 ‘‘Education Benefits (36–0137–0–1–702). 

15 ‘‘Vocational Rehabilitation and Employment 

16 Benefits (36–0135–0–1–702). 

17 ‘‘Pensions Benefits (36–0154–0–1–701). 

18 ‘‘Burial Benefits (36–0139–0–1–701). 

19 ‘‘Guaranteed Transitional Housing Loans For 

20 Homeless Veterans Program Account (36–1119–0– 

21 1–704). 

22 ‘‘Housing Direct Loan Financing Account (36– 

23 4127–0–1–704). 

24 ‘‘Housing Guaranteed Loan Financing Account 

25 (36–4129–0–3–704) 
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1 ‘‘Vocational Rehabilitation and Education Di2 rect Loan Financing Account (36–4259–0–3–702). 

3 ‘‘(h) MILITARY HEALTH AND RETIREMENT.—To 

4 achieve the total percentage reduction in military retire5 ment required by any order issued under this part, the 

6 percentage reduction that shall apply to payments under 

7 the Military retirement fund (97–8097–0–7–602), pay8 ments to the military retirement fund (97–0040–0–1– 

9 054), and the Defense Health Program (97–0130–0–1– 

10 051) shall in no event exceed 2 percent. 

11 ‘‘(i) MEDICARE PROGRAM.— 

12 ‘‘(1) CALCULATION OF REDUCTION IN INDI13 VIDUAL PAYMENT AMOUNTS.—To achieve the total 

14 percentage reduction in those programs required by 

15 any order issued under this part, the percentage re16 duction that shall apply to payments under the 

17 health insurance programs under title XVIII of the 

18 Social Security Act (other than payments described 

19 in section 255(a)(2)) that are subject to such order 

20 for services furnished after any sequestration order 

21 is issued shall be such that the reduction made in 

22 payments under that order shall achieve the required 

23 total percentage reduction in those payments for 

24 that fiscal year as determined on a 12-month basis. 

25 However, the percentage reduction under any such 
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1 program shall in no case exceed 2 percent under any 

2 sequestration order. 

3 ‘‘(2) TIMING OF APPLICATION OF REDUC4 TIONS.—If a reduction is made under paragraph (1) 

5 in payment amounts pursuant to a sequestration 

6 order, the reduction shall be applied to payment for 

7 services furnished after the effective date of the 

8 order. 

9 ‘‘(3) NO INCREASE IN BENEFICIARY CHARGES

10 IN ASSIGNMENT-RELATED CASES.—If a reduction in 

11 payment amounts is made under paragraph (1) for 

12 services for which payment under part B of title 

13 XVIII of the Social Security Act is made on the 

14 basis of an assignment described in section 

15 1842(b)(3)(B)(ii), in accordance with section 

16 1842(b)(6)(B), or under the procedure described in 

17 section 1870(f)(1) of such Act, the person furnishing 

18 the services shall be considered to have accepted 

19 payment of the reasonable charge for the services, 

20 less any reduction in payment amount made pursu21 ant to a sequestration order, as payment in full. 

22 ‘‘(4) APPLICATION TO PARTS C AND D.—The 

23 reductions otherwise required under parts C and D 

24 of title XVIII of the Social Security Act with respect 

25 to a fiscal year shall be applied to the calendar year 
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1 that begins after the end of the fiscal year to which 

2 the applicable sequestration order applies. 

3 ‘‘(j) FEDERAL PAY.— 

4 ‘‘(1) IN GENERAL.—For purposes of any order 

5 issued under section 254, new budget authority to 

6 pay Federal personnel shall be reduced by the appli7 cable uniform percentage, but no sequestration order 

8 may reduce or have the effect of reducing the rate 

9 of pay to which any individual is entitled under any 

10 statutory pay system (as increased by any amount 

11 payable under section 5304 of title 5, United States 

12 Code, or section 302 of the Federal Employees Pay 

13 Comparability Act of 1990) or the rate of any ele14 ment of military pay to which any individual is enti15 tled under title 37, United States Code, or any in16 crease in rates of pay which is scheduled to take ef17 fect under section 5303 of title 5, United States 

18 Code, section 1009 of title 37, United States Code, 

19 or any other provision of law. 

20 ‘‘(2) DEFINITIONS.—For purposes of this sub21 section: 

22 ‘‘(A) The term ‘statutory pay system’ shall 

23 have the meaning given that term in section 

24 5302(1) of title 5, United States Code. 
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1 ‘‘(B) The term ‘elements of military pay’ 

2 means— 

3 ‘‘(i) the elements of compensation of 

4 members of the uniformed services speci5 fied in section 1009 of title 37, United 

6 States Code, 

7 ‘‘(ii) allowances provided members of 

8 the uniformed services under sections 403a 

9 and 405 of such title, and 

10 ‘‘(iii) cadet pay and midshipman pay 

11 under section 203(c) of such title. 

12 ‘‘(C) The term ‘uniformed services’ shall 

13 have the meaning given that term in section 

14 101(3) of title 37, United States Code. 

15 ‘‘(k) CHILD SUPPORT ENFORCEMENT PROGRAM.— 

16 Any sequestration order shall accomplish the full amount 

17 of any required reduction in expenditures under sections 

18 455 and 458 of the Social Security Act by reducing the 

19 Federal matching rate for State administrative costs 

20 under such program, as specified (for the fiscal year in21 volved) in section 455(a) of such Act, to the extent nec22 essary to reduce such expenditures by that amount. 

23 ‘‘(l) EXTENDED UNEMPLOYMENT COMPENSATION.— 

24 (1) A State may reduce each weekly benefit payment made 

25 under the Federal-State Extended Unemployment Com-
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1 pensation Act of 1970 for any week of unemployment oc2 curring during any period with respect to which payments 

3 are reduced under an order issued under this title by a 

4 percentage not to exceed the percentage by which the Fed5 eral payment to the State under section 204 of such Act 

6 is to be reduced for such week as a result of such order. 

7 ‘‘(2) A reduction by a State in accordance with sub8 paragraph (A) shall not be considered as a failure to fulfill 

9 the requirements of section 3304(a)(11) of the Internal 

10 Revenue Code of 1954. 

11 ‘‘(m) COMMODITY CREDIT CORPORATION.— 

12 ‘‘(1) POWERS AND AUTHORITIES OF THE COM13 MODITY CREDIT CORPORATION.—This title shall not 

14 restrict the Commodity Credit Corporation in the 

15 discharge of its authority and responsibility as a cor16 poration to buy and sell commodities in world trade, 

17 to use the proceeds as a revolving fund to meet 

18 other obligations and otherwise operate as a corpora19 tion, the purpose for which it was created. 

20 ‘‘(2) REDUCTION IN PAYMENTS MADE UNDER

21 CONTRACTS.—(A) Payments and loan eligibility 

22 under any contract entered into with a person by the 

23 Commodity Credit Corporation prior to the time any 

24 sequestration order has been issued shall not be re25 duced by an order subsequently issued. Subject to 
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1 subparagraph (B), after any sequestration order is 

2 issued for a fiscal year, any cash payments made by 

3 the Commodity Credit Corporation— 

4 ‘‘(i) under the terms of any one-year con5 tract entered into in or after such fiscal year 

6 and after the issuance of the order; and 

7 ‘‘(ii) out of an entitlement account, to any 

8 person (including any producer, lender, or guar9 antee entity) shall be subject to reduction under 

10 the order. 

11 ‘‘(B) Each contract entered into with producers 

12 or producer cooperatives with respect to a particular 

13 crop of a commodity and subject to reduction under 

14 subparagraph (A) shall be reduced in accordance 

15 with the same terms and conditions. If some, but 

16 not all, contracts applicable to a crop of a com17 modity have been entered into prior to the issuance 

18 of any sequestration order, the order shall provide 

19 that the necessary reduction in payments under con20 tracts applicable to the commodity be uniformly ap21 plied to all contracts for succeeding crops of the 

22 commodity, under the authority provided in para23 graph (3). 

24 ‘‘(3) DELAYED REDUCTION IN OUTLAYS PER25 MISSIBLE.—Notwithstanding any other provision of 
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1 this title, if any sequestration order is issued with 

2 respect to a fiscal year, any reduction under the 

3 order applicable to contracts described in paragraph 

4 (2) may provide for reductions in outlays for the ac5 count involved to occur in the fiscal years following 

6 the fiscal year to which the order applies. 

7 ‘‘(4) UNIFORM PERCENTAGE RATE OF REDUC8 TION AND OTHER LIMITATIONS.—All reductions de9 scribed in paragraph (2) that are required to be 

10 made in connection with any sequestration order 

11 with respect to a fiscal year— 

12 ‘‘(A) shall be made so as to ensure that 

13 outlays for each program, project, activity, or 

14 account involved are reduced by a percentage 

15 rate that is uniform for all such programs, 

16 projects, activities, and accounts, and may not 

17 be made so as to achieve a percentage rate of 

18 reduction in any such item exceeding the rate 

19 specified in the order; and 

20 ‘‘(B) with respect to commodity price sup21 port and income protection programs, shall be 

22 made in such manner and under such proce23 dures as will attempt to ensure that— 
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1 ‘‘(i) uncertainty as to the scope of 

2 benefits under any such program is mini3 mized; 

4 ‘‘(ii) any instability in market prices 

5 for agricultural commodities resulting from 

6 the reduction is minimized; and 

7 ‘‘(iii) normal production and mar8 keting relationships among agricultural 

9 commodities (including both contract and 

10 non-contract commodities) are not dis11 torted. 

12 In meeting the criterion set out in clause (iii) 

13 of subparagraph (B) of the preceding sentence, 

14 the President shall take into consideration that 

15 reductions under an order may apply to pro16 grams for two or more agricultural commodities 

17 that use the same type of production or mar18 keting resources or that are alternative com19 modities among which a producer could choose 

20 in making annual production decisions. 

21 ‘‘(5) CERTAIN AUTHORITY NOT TO BE LIM22 ITED.—Nothing in this title shall limit or reduce in 

23 any way any appropriation that provides the Com24 modity Credit Corporation with funds to cover the 

25 Corporation’s net realized losses. 
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1 ‘‘(n) POSTAL SERVICE FUND.—Notwithstanding any 

2 other provision of law, any sequestration of the Postal 

3 Service Fund shall be accomplished by a payment from 

4 that Fund to the General Fund of the Treasury, and the 

5 Postmaster General of the United States shall make the 

6 full amount of that payment during the fiscal year to 

7 which the presidential sequestration order applies. 

8 ‘‘(o) EFFECTS OF SEQUESTRATION.—The effects of 

9 sequestration shall be as follows: 

10 ‘‘(1) Budgetary resources sequestered from any 

11 account other than an entitlement trust, special, or 

12 revolving fund account shall revert to the Treasury 

13 and be permanently canceled. 

14 ‘‘(2) Except as otherwise provided, the same 

15 percentage sequestration shall apply to all programs, 

16 projects, and activities within a budget account (with 

17 programs, projects, and activities as delineated in 

18 the appropriation Act or accompanying report for 

19 the relevant fiscal year covering that account, or for 

20 accounts not included in appropriation Acts, as de21 lineated in the most recently submitted President’s 

22 budget). 

23 ‘‘(3) Administrative regulations or similar ac24 tions implementing a sequestration shall be made 

25 within 120 days of the sequestration order. To the 
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1 extent that formula allocations differ at different 

2 levels of budgetary resources within an account, pro3 gram, project, or activity, the sequestration shall be 

4 interpreted as producing a lower total appropriation, 

5 with that lower appropriation being obligated as 

6 though it had been the pre-sequestration appropria7 tion and no sequestration had occurred. 

8 ‘‘(4) Except as otherwise provided, obligations 

9 in sequestered direct spending accounts shall be re10 duced in the fiscal year in which a sequestration oc11 curs and in all succeeding fiscal years. 

12 ‘‘(5) If an automatic spending increase is se13 questered, the increase (in the applicable index) that 

14 was disregarded as a result of that sequestration 

15 shall not be taken into account in any subsequent 

16 fiscal year. 

17 ‘‘(6) Except as otherwise provided, sequestra18 tion in accounts for which obligations are indefinite 

19 shall be taken in a manner to ensure that obliga20 tions in the fiscal year of a sequestration and suc21 ceeding fiscal years are reduced, from the level that 

22 would actually have occurred, by the applicable se23 questration percentage.’’. 

24 (b) CONFORMING AMENDMENT.—The table of con25 tents set forth in 250(c) of the Balanced Budget and 
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1 Emergency Deficit Control Act of 1985 is amended by 

2 amending the item relating to section 256 to read as fol3 lows: 

‘‘256. Exceptions, limitations, and special rules.’’. 

4 SEC. 204. POINT OF ORDER. 

5 (a) ENTITLEMENT POINT OF ORDER.—Section 312 

6 of the Congressional Budget Act of 1974 is amended by 

7 adding at the end the following new subsection: 

8 ‘‘(g) ENTITLEMENT POINT OF ORDER.—It shall not 

9 be in order in the House of Representatives or the Senate 

10 to consider any bill, joint resolution, amendment, or con11 ference report that— 

12 ‘‘(1) increases aggregate level of direct spending 

13 for any ensuing fiscal year or 

14 ‘‘(2) includes any provision that has the effect 

15 of modifying the application of section 252A of the 

16 Balanced Budget and Emergency Deficit Control 

17 Act of 1985 to any entitlement program subject to 

18 sequestration or exempt from sequestration under 

19 such Act.’’. 

20 SEC. 205. TECHNICAL AND CONFORMING AMENDMENTS. 

21 The Balanced Budget and Emergency Deficit Control 

22 Act of 1985 is amended as follows: 

23 (1) Section 251(a)(1) is amended by inserting 

24 ‘‘, section 252A,’’ after ‘‘section 252’’. 
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1 (2) Section 254(c)(4)(B) is amended by insert2 ing ‘‘or section 252A’’ after ‘‘section 252’’. 

3 (3) Section 254(c) is amended by redesignating 

4 paragraph (5) as paragraph (6) and by inserting 

5 after paragraph (4) the following new paragraph: 

6 ‘‘(5) DIRECT SPENDING CONTROL SEQUESTRA7 TION REPORTS.—The preview reports shall set forth, 

8 for the current year and the budget year, estimates 

9 for each of the following: 

10 ‘‘(A) The total level of direct spending for 

11 all programs, projects, and activities (excluding 

12 social security). 

13 ‘‘(B) The sequestration percentage or (if 

14 the required sequestration percentage is greater 

15 than the maximum allowable percentage for 

16 medicare) percentages necessary to comply with 

17 section 252A.’’. 

18 (4) Section 254(f) is amended by redesignating 

19 paragraphs (4) and (5) as paragraphs (5) and (6) 

20 and by inserting after paragraph (3) the following 

21 new paragraph: 

22 ‘‘(4) DIRECT SPENDING CONTROL SEQUESTRA23 TION REPORTS.—The final reports shall contain all 

24 the information required in the direct spending con25 trol sequestration preview reports. In addition, these 
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1 reports shall contain, for the budget year, for each 

2 account to be sequestered, estimates of the baseline 

3 level of sequesterable budgetary resources and re4 sulting outlays and the amount of budgetary re5 sources to be sequestered and resulting outlay reduc6 tions. The reports shall also contain estimates of the 

7 effects on outlays of the sequestration in each out8 year for direct spending programs.’’. 

9 (5) Section 258C(a)(1) is amended by inserting 

10 ‘‘, 252A,’’ after ‘‘section 252’’. 

11 Subtitle B—Discretionary 

12 Spending Limits 

13 SEC. 211. ENFORCING DISCRETIONARY SPENDING LIMITS. 

14 (a) DISCRETIONARY SPENDING LIMITS.—Sections 

15 251(b) and (c) of the Balanced Budget and Emergency 

16 Deficit Control of Act of 1985 are amended to read as 

17 follows: 

18 ‘‘(b) DISCRETIONARY SPENDING LIMIT.—As used in 

19 this part, the term ‘discretionary spending limit’ means— 

20 ‘‘(1) with respect to fiscal year 2007— 

21 ‘‘(A) $861,577,682,000 in new budget au22 thority of which no more than 

23 $412,947,276,000 shall be for functions other 

24 than National Defense (050); and 
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1 ‘‘(B) $lllll in outlays of which no 

2 more than $lllll shall be for functions 

3 other than National Defense (050); 

4 ‘‘(2) with respect to fiscal year 2008— 

5 ‘‘(A) $880,532,400,000 in new budget au6 thority of which no more than 

7 $422,032,100,000 shall be for functions other 

8 than National Defense (050); and 

9 ‘‘(B) $lllll in outlays of which no 

10 more than $lllll shall be for functions 

11 other than National Defense (050); 

12 ‘‘(3) with respect to fiscal year 2009— 

13 ‘‘(A) $899,904,100,000 in new budget au14 thority of which no more than 

15 $431,316,800,000 shall be for functions other 

16 than National Defense (050); and 

17 ‘‘(B) $lllll in outlays of which no 

18 more than $lllll shall be for functions 

19 other than National Defense (050); 

20 ‘‘(4) with respect to fiscal year 2010— 

21 ‘‘(A) $919,702,000,000 in new budget au22 thority of which no more than 

23 $440,805,800,000 shall be for functions other 

24 than National Defense (050); and 
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1 ‘‘(B) $lllll in outlays of which no 

2 more than $lllll shall be for functions 

3 other than National Defense (050); 

4 ‘‘(5) with respect to fiscal year 2011— 

5 ‘‘(A) $939,935,400,000 in new budget au6 thority of which no more than 

7 $450,503,500,000 shall be for functions other 

8 than National Defense (050); and 

9 ‘‘(B) $lllll in outlays of which no 

10 more than $lllll shall be for functions 

11 other than National Defense (050); 

12 ‘‘(6) with respect to fiscal year 2012— 

13 ‘‘(A) $960,614,000,000 in new budget au14 thority of which no more than 

15 $460,414,600,000 shall be for functions other 

16 than National Defense (050); and 

17 ‘‘(B) $lllll in outlays of which no 

18 more than $lllll shall be for functions 

19 other than National Defense (050); 

20 ‘‘(7) with respect to fiscal year 2013— 

21 ‘‘(A) $981,747,500,000 in new budget au22 thority of which no more than 

23 $470,543,700,000 shall be for functions other 

24 than National Defense (050); and 
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1 ‘‘(B) $lllll in outlays of which no 

2 more than $lllll shall be for functions 

3 other than National Defense (050); 

4 ‘‘(8) with respect to fiscal year 2014— 

5 ‘‘(A) $1,003,346,000,000 in new budget 

6 authority of which no more than 

7 $480,895,700,000 shall be for functions other 

8 than National Defense (050); and 

9 ‘‘(B) $lllll in outlays of which no 

10 more than $lllll shall be for functions 

11 other than National Defense (050); and 

12 ‘‘(9) with respect to fiscal year 2015— 

13 ‘‘(A) $1,025,419,600,000 in new budget 

14 authority of which no more than 

15 $491,475,400,000 shall be for functions other 

16 than National Defense (050); and 

17 ‘‘(B) $lllll in outlays of which no 

18 more than $lllll shall be for functions 

19 other than National Defense (050).’’. 

20 (b) DISCRETIONARY SPENDING LIMIT POINT OF

21 ORDER.—Section 312 of the Congressional Budget Act of 

22 1974 (as amended by section 204) is further amended by 

23 adding at the end the following new subsection: 

24 ‘‘(h) DISCRETIONARY SPENDING LIMIT POINT OF

25 ORDER.—It shall not be in order in the House of Rep-
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•HR 1776 IH 

1 resentatives or the Senate to consider any bill, joint resolu2 tion, amendment, or conference report that— 

3 ‘‘(1) increases the discretionary spending limits 

4 for any ensuing fiscal year after the budget year; or 

5 ‘‘(2) would cause the discretionary spending 

6 limits for the budget year to be breached.’’. 

7 (c) ADVANCE APPROPRIATION POINT OF ORDER.— 

8 Section 312 of the Congressional Budget Act of 1974 (as 

9 amended by subsection (b)) is further amended by adding 

10 at the end the following new subsection: 

11 ‘‘(i) ADVANCE APPROPRIATION POINT OF ORDER.— 

12 It shall not be in order in the House of Representatives 

13 or the Senate to consider any appropriation bill or joint 

14 resolution, or amendment thereto or conference report 

15 thereon, that provides advance discretionary new budget 

16 authority that first becomes available for any fiscal year 

17 after the budget year at an amount for any program, 

18 project, or activity above the amount of appropriations for 

19 fiscal year 2006 for such program, project, or activity.’’. 

20 (d) EXTENSION OF GRAMM-RUDMAN.—Section 

21 275(b) of the Balanced Budget and Emergency Deficit 

22 Control of Act of 1985 is amended by striking ‘‘2002’’ 

23 and inserting ‘‘2015’’ and by striking ‘‘2006’’ and insert24 ing ‘‘2019’’. 

Æ