II

106TH CONGRESS

1ST SESSION S. 21

To reduce social security payroll taxes, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. MOYNIHAN (for himself and Mr. KERREY) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To reduce social security payroll taxes, and for other

purposes.

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; TABLE OF CONTENTS.

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

5 ‘‘Social Security Solvency Act of 1999’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Modification of FICA rates to provide pay-as-you-go financing of social

security.

Sec. 3. Voluntary investment of payroll tax cut by employees.

Sec. 4. Increase of social security wage base.

Sec. 5. Cost-of-living adjustments.

Sec. 6. Tax treatment of social security payments.

Sec. 7. Coverage of newly hired State and local employees.
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Sec. 8. Increase in length of computation period from 35 to 38 years.

Sec. 9. Modification of PIA factors to reflect changes in life expectancy.

Sec. 10. Elimination of earnings test for individuals who have attained early retirement age.

Sec. 11. Social security kidsave accounts.

1 SEC. 2. MODIFICATION OF FICA RATES TO PROVIDE PAY2 AS-YOU-GO FINANCING OF SOCIAL SECURITY.

3 (a) IN GENERAL.—

4 (1) TAX ON EMPLOYEES.—Section 3101(a) of

5 the Internal Revenue Code of 1986 (relating to tax

6 on employees) is amended to read as follows:

7 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR8 ANCE.—

9 ‘‘(1) IN GENERAL.—In addition to other taxes,

10 there is hereby imposed on the income of every indi11 vidual a tax equal to the applicable percentage of the

12 wages (as defined in section 3121(a)) received by

13 him with respect to employment (as defined in sec14 tion 3121(b)).

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

16 of paragraph (1), the applicable percentage shall be

17 the percentage set forth in the following table:

‘‘In the case wages The applicable percentage

received during: shall be:

2000 through 2029 ............................................... 5.2

2030 through 2034 ............................................... 6.2

2035 through 2049 ............................................... 6.45

2050 through 2059 ............................................... 6.65

2060 or thereafter ................................................. 6.85 .’’
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1 (2) TAX ON EMPLOYERS.—Section 3111(a) of

2 such Code (relating to tax on employers) is amended

3 to read as follows:

4 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR5 ANCE.—

6 ‘‘(1) IN GENERAL.—In addition to other taxes,

7 there is hereby imposed on every employer an excise

8 tax, with respect to having individuals in his employ,

9 equal to the applicable percentage of the wages (as

10 defined in section 3121(a)) paid by him with respect

11 to employment (as defined in section 3121(b)).

12 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

13 of paragraph (1), the applicable percentage shall be

14 the percentage set forth in the following table:

‘‘In the case wages The applicable percentage

paid during: shall be:

2000 and 2001 ...................................................... 6.2

2002 through 2029 ............................................... 5.2

2030 through 2034 ............................................... 6.2

2035 through 2049 ............................................... 6.45

2050 through 2059 ............................................... 6.65

2060 or thereafter ................................................. 6.85 .’’

15 (3) SELF-EMPLOYMENT TAX.—Section 1401(a)

16 of such Code (relating to tax on self-employment in17 come) is amended to read as follows:

18 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR19 ANCE.—

20 ‘‘(1) IN GENERAL.—In addition to other taxes,

21 there is hereby imposed for each taxable year, on the
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1 self-employment income of every individual, a tax

2 equal to the applicable percentage of the amount of

3 the self-employment income for such taxable year.

4 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

5 of paragraph (1), the applicable percentage shall be

6 the percentage set forth in the following table:

‘‘In the case of a taxable year

Beginning after: And before:

The applicable

percentage

is:

December 31, 1999 .......... January 1, 2002 ............. 11.4

December 31, 2001 .......... January 1, 2030 ............. 10.4

December 31, 2029 .......... January 1, 2035 ............. 12.4

December 31, 2034 .......... January 1, 2050 ............. 12.9

December 31, 2049 .......... January 1, 2060 ............. 13.3

December 31, 2059 .......... ......................................... 13.7 .’’

7 (4) EFFECTIVE DATES.—

8 (A) EMPLOYEES AND EMPLOYERS.—The

9 amendments made by paragraphs (1) and (2)

10 apply to remuneration paid after December 31,

11 1999.

12 (B) SELF-EMPLOYED INDIVIDUALS.—The

13 amendment made by paragraph (3) applies to

14 taxable years beginning after December 31,

15 1999.

16 (b) REALLOCATION OF EMPLOYMENT TAXES.—

17 (1) REALLOCATION OF TAX ON EMPLOYEES

18 AND EMPLOYERS.—Section 201(b)(1) of the Social

19 Security Act (42 U.S.C. 401(b)(1)) is amended by
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1 striking ‘‘(Q) 1.70 per centum of the wages (as so

2 defined) paid after December 31, 1996, and before

3 January 1, 2000, and so reported, and (R) 1.80 per

4 centum of the wages (as so defined) paid after De5 cember 31, 1999, and so reported’’ and inserting

6 ‘‘(Q) 1.70 per centum of the wages (as so defined)

7 paid after December 31, 1996, and before January

8 1, 2000, and so reported, (R) 1.80 per centum of

9 the wages (as so defined) paid after December 31,

10 1999, and before January 1, 2030, and so reported,

11 (S) 2.15 per centum of the wages (as so defined)

12 paid after December 31, 2029, and before January

13 1, 2035, and so reported, (T) 2.23 per centum of

14 the wages (as so defined) paid after December 31,

15 2034, and before January 1, 2050, and so reported,

16 (U) 2.30 per centum of the wages (as so defined)

17 paid after December 31, 2049, and before January

18 1, 2060, and so reported, and (V) 2.39 per centum

19 of the wages (as so defined) paid after December

20 31, 2059, and so reported’’.

21 (2) REALLOCATION OF TAX ON SELF-EMPLOY22 MENT INCOME.—Section 201(b)(2) of such Act (42

23 U.S.C. 401(b)(2)) is amended by striking ‘‘(Q) 1.70

24 per centum of self-employment income (as so de25 fined) so reported for any taxable year beginning
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1 after December 31, 1996, and before January 1,

2 2000, and (R) 1.80 per centum of self-employment

3 income (as so defined) so reported for any taxable

4 year beginning after December 31, 1999’’ and in5 serting ‘‘(Q) 1.70 per centum of self-employment in6 come (as so defined) so reported for any taxable

7 year beginning after December 31, 1996, and before

8 January 1, 2000, (R) 1.80 per centum of self-em9 ployment income (as so defined) so reported for any

10 taxable year beginning after December 31, 1999,

11 and before January 1, 2030, (S) 2.15 per centum of

12 self-employment income (as so defined) so reported

13 for any taxable year beginning after December 31,

14 2029, and before January 1, 2035, (T) 2.23 per

15 centum of self-employment income (as so defined) so

16 reported for any taxable year beginning after De17 cember 31, 2034, and before January 1, 2050, (U)

18 2.30 per centum of self-employment income (as so

19 defined) so reported for any taxable year beginning

20 after December 31, 2049, and before January 1,

21 2060, and (V) 2.39 per centum of self-employment

22 income (as so defined) so reported for any taxable

23 year beginning after December 31, 2059’’.
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1 (c) FUTURE RATES AND ALLOCATION BETWEEN

2 TRUST FUNDS PROPOSED BY BOARD OF TRUSTEES FOR

3 LEGISLATIVE ACTION.—

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

5 Security Act (42 U.S.C. 401(c)) is amended in the

6 matter following paragraph (5) by striking ‘‘(as de7 fined by the Board of Trustees).’’ and inserting ‘‘(as

8 defined by the Board of Trustees. If such finding

9 shows that the combined Trust Funds are not in

10 close actuarial balance (as so defined), then such re11 port (beginning in April 2001) shall include a legis12 lative recommendation by the Board of Trustees

13 specifying new rates of tax under sections 3101(a),

14 3111(a), and 1401(a) of the Internal Revenue Code

15 of 1986, and the allocation of those rates between

16 the Trust Funds necessary in order to restore the

17 combined Trust Funds and each Trust Fund to ac18 tuarial balance. If such finding shows that the com19 bined Trust Funds are in close actuarial balance (as

20 so defined), but that 1 of the Trust Funds is not in

21 close actuarial balance, then such report (beginning

22 in April 2001) shall include a legislative rec23 ommendation by the Board of Trustees specifying a

24 new allocation of such rates of tax between the

25 Trust Funds, so that each Trust Fund is in close
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1 actuarial balance. Such recommendation shall be

2 considered by Congress under procedures described

3 in subsection (n)).’’.

4 (2) FAST-TRACK CONSIDERATION OF LEGISLA5 TIVE RECOMMENDATIONS.—Section 201 of such Act

6 (42 U.S.C. 401) is amended by adding at the end

7 the following new subsection:

8 ‘‘(n)(1) Any legislative recommendation included in

9 the report provided for in subsection (c) shall—

10 ‘‘(A) not later than 3 days after the Board of

11 Trustees submits such report, be introduced (by re12 quest) in the House of Representatives by the Ma13 jority Leader of the House and be introduced (by re14 quest) in the Senate by the Majority Leader of the

15 Senate; and

16 ‘‘(B) be given expedited consideration under the

17 same provisions and in the same way, subject to

18 paragraph (2), as a joint resolution under section

19 2908 of the Defense Base Closure and Realignment

20 Act of 1990 (10 U.S.C. 2678 note).

21 ‘‘(2) For purposes of applying paragraph (1) with re22 spect to such provisions, the following rules shall apply:

23 ‘‘(A) Section 2908(a) of the Defense Base Clo24 sure and Realignment Act of 1990 (10 U.S.C. 2678

25 note) shall not apply.
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1 ‘‘(B) Any reference to the resolution described

2 in subsection (a) shall be deemed to be a reference

3 to the legislative recommendation submitted under

4 subsection (c) of this Act.

5 ‘‘(C) Any reference to the Committee on Na6 tional Security of the House of Representatives shall

7 be deemed to be a reference to the Committee on

8 Ways and Means of the House of Representatives

9 and any reference to the Committee on Armed Serv10 ices of the Senate shall be deemed to be a reference

11 to the Committee on Finance of the Senate.

12 ‘‘(D) Any reference to the date on which the

13 President transmits a report shall be deemed to be

14 a reference to the date on which the recommenda15 tion is submitted under subsection (c).’’.

16 (d) CONFORMING AMENDMENTS TO FERS TO PRO17 TECT PAYROLL TAX CUT.—The table contained in section

18 8422(a)(3) of title 5, United States Code, is amended—

19 (1) by striking ‘‘7’’ the second place it appears

20 and inserting ‘‘6’’;

21 (2) by striking ‘‘7.4’’ and inserting ‘‘6.4’’;

22 (3) by striking ‘‘7.5’’ the first, third, fifth, and

23 seventh places it appears and inserting ‘‘6.5’’;

24 (4) by striking ‘‘7.9’’ each place it appears and

25 inserting ‘‘6.9’’; and
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1 (5) by striking ‘‘8’’ each place it appears and

2 inserting ‘‘7’’.

3 SEC. 3. VOLUNTARY INVESTMENT OF PAYROLL TAX CUT BY

4 EMPLOYEES.

5 (a) VOLUNTARY INVESTMENT OF PAYROLL TAX

6 CUT.—

7 (1) IN GENERAL.—Title II of the Social Secu8 rity Act (42 U.S.C. 401 et seq.) is amended—

9 (A) by inserting before section 201 the fol10 lowing:

11 ‘‘PART A—INSURANCE BENEFITS’’;

12 and

13 (B) by adding at the end the following:

14 ‘‘PART B—VOLUNTARY INVESTMENT ACCOUNTS

15 ‘‘EMPLOYEE ELECTION AND DESIGNATION OF VOL16 UNTARY INVESTMENT ACCOUNT UNDER PAYROLL

17 DEDUCTION PLAN

18 ‘‘SEC. 251. (a) IN GENERAL.—An individual who is

19 an employee of a covered employer may elect to participate

20 in the employer’s voluntary investment account payroll de21 duction plan either—

22 ‘‘(1) not later than 10 business days after the

23 individual becomes an employee of the employer, or

24 ‘‘(2) during any open enrollment period.
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1 The Commissioner shall by regulation provide for at least

2 1 open enrollment period annually.

3 ‘‘(b) PERIOD OF ELECTION.—

4 ‘‘(1) TIME ELECTION TAKES EFFECT.—An elec5 tion under subsection (a) shall take effect with re6 spect to the first pay period beginning more than 14

7 days after the date of the election.

8 ‘‘(2) TERMINATION.—An election under sub9 section (a) shall terminate—

10 ‘‘(A) upon the termination of employment

11 of the employee of the covered employer, or

12 ‘‘(B) with respect to pay periods beginning

13 more than 14 days after the employee termi14 nates such election.

15 ‘‘(c) DESIGNATION OF VOLUNTARY INVESTMENT AC16 COUNT.—

17 ‘‘(1) INITIAL ELECTION.—An employee shall, at

18 the time an election is made under subsection (a),

19 designate the voluntary investment account to which

20 voluntary investment account contributions on behalf

21 of the employee are to be deposited.

22 ‘‘(2) CHANGES.—The Commissioner shall by

23 regulation provide the time and manner by which an

24 employee or a person described in section 254(d) on

25 behalf of such employee may—
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1 ‘‘(A) designate another voluntary invest2 ment account to which contributions are to be

3 deposited, and

4 ‘‘(B) transfer amounts from one such ac5 count to another.

6 ‘‘(d) FORM OF ELECTIONS.—Elections under this

7 section shall be made—

8 ‘‘(1) on W–4 forms (or any successor forms), or

9 ‘‘(2) in such other manner as the Commissioner

10 may prescribe in order to ensure ease of administra11 tion and reductions in burdens on employers.

12 ‘‘VOLUNTARY INVESTMENT ACCOUNT PAYROLL

13 DEDUCTION PLANS

14 ‘‘SEC. 252. (a) IN GENERAL.—Each person who is

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

16 a voluntary investment account payroll deduction plan for

17 such calendar year for such person’s electing employees.

18 ‘‘(b) VOLUNTARY INVESTMENT ACCOUNT PAYROLL

19 DEDUCTION PLANS.—For purposes of this part, the term

20 ‘voluntary investment account payroll deduction plan’

21 means a written plan of an employer—

22 ‘‘(1) which applies only with respect to wages of

23 any employee who elects to become an electing em24 ployee in accordance with section 251,

25 ‘‘(2) under which the voluntary investment ac26 count contributions under section 3101(a) of the In-
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1 ternal Revenue Code of 1986 will be deducted from

2 an electing employee’s wages and, together with such

3 contributions under section 3111(a) of such Code on

4 behalf of such employee, will be paid to the Social

5 Security Administration for deposit in 1 or more vol6 untary investment accounts designated by such em7 ployee in accordance with section 251,

8 ‘‘(3) under which the employer is required to

9 pay the amount so contributed with respect to the

10 specified voluntary investment account of the elect11 ing employee within the same time period as other

12 taxes under sections 3101 and 3111 with respect to

13 the wages of such employee,

14 ‘‘(4) under which the employer receives no com15 pensation for the cost of administering such plan,

16 and

17 ‘‘(5) under which the employer does not make

18 any endorsement with respect to any voluntary in19 vestment account.

20 ‘‘(c) PENALTIES FOR FAILURE TO ESTABLISH VOL21 UNTARY INVESTMENT ACCOUNT PAYROLL DEDUCTION

22 PLAN.—

23 ‘‘(1) IN GENERAL.—Any covered employer who

24 fails to meet the requirements of this section for any
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1 calendar year shall be subject to a civil penalty of

2 not to exceed the greater of—

3 ‘‘(A) $2,500, or

4 ‘‘(B) $100 for each electing employee of

5 such employer as of the beginning of such cal6 endar year.

7 ‘‘(2) RULES FOR APPLICATION OF SUB8 SECTION.—

9 ‘‘(A) PENALTIES ASSESSED BY COMMIS10 SIONER.—Any civil penalty assessed by this

11 subsection shall be imposed by the Commis12 sioner of Social Security and collected in a civil

13 action.

14 ‘‘(B) COMPROMISES.—The Commissioner

15 may compromise the amount of any civil pen16 alty imposed by this subsection.

17 ‘‘(C) AUTHORITY TO WAIVE PENALTY IN

18 CERTAIN CASES.—The Commissioner may waive

19 the application of this subsection with respect

20 to any failure if the Commissioner determines

21 that such failure is due to reasonable cause and

22 not to intentional disregard of rules and regula23 tions.

24 ‘‘PARTICIPATION BY SELF-EMPLOYED INDIVIDUALS

25 ‘‘SEC. 253. An individual shall make an election to

26 become an electing self-employed individual, designate a
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1 voluntary investment account, and have in effect a vol2 untary investment account payroll deduction plan under

3 rules similar to the rules under sections 251 and 252.

4 ‘‘DEFINITIONS AND SPECIAL RULES

5 ‘‘SEC. 254. (a) VOLUNTARY INVESTMENT AC6 COUNT.—For purposes of this part—

7 ‘‘(1) a voluntary investment account described

8 in this paragraph is a voluntary investment account

9 in the Voluntary Investment Fund (established

10 under section 255),

11 ‘‘(2) a voluntary investment account described

12 in this paragraph is an individual retirement plan

13 (as defined in section 7701(a)(37) of the Internal

14 Revenue Code of 1986), other than a Roth IRA (as

15 defined in section 408A(b) of such Code), which is

16 designated by the electing employee as a voluntary

17 investment account (in such manner as the Sec18 retary of the Treasury may prescribe) and which is

19 administered or issued by a bank or other person re20 ferred to in section 408(a)(2) of such Code, and

21 ‘‘(3) a voluntary investment account described

22 in this paragraph is a KidSave Account (as de23 scribed in paragraph (1) or (2) of section 262(a)) of

24 the electing employee, which is designated by the

25 electing employee as a voluntary investment account
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1 (in such manner as the Secretary of the Treasury

2 may prescribe).

3 ‘‘(b) TREATMENT OF ACCOUNTS.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2)—

6 ‘‘(A) any voluntary investment account de7 scribed in paragraph (1) of subsection (a) shall

8 be treated in the same manner as an account

9 in the Thrift Savings Fund under subchapter

10 III of chapter 84 of title 5, United States Code,

11 ‘‘(B) any voluntary investment account de12 scribed in paragraph (2) of subsection (a) shall

13 be treated in the same manner as an individual

14 retirement plan (as so defined), and

15 ‘‘(C) any voluntary investment account de16 scribed in paragraph (3) of subsection (a) shall

17 be treated in the same manner as the des18 ignated KidSave Account would have been

19 treated under section 262(b).

20 ‘‘(2) EXCEPTIONS.—

21 ‘‘(A) CONTRIBUTION LIMIT.—The aggre22 gate amount of contributions for any taxable

23 year to all voluntary investment accounts of an

24 electing employee shall not exceed the aggregate

25 amount of contributions made pursuant to sec-
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1 tions 3101(a)(3), 3111(a)(3), and 1401(a)(3) of

2 the Internal Revenue Code of 1986 and paid

3 pursuant to section 252 or 253 on behalf of

4 such employee.

5 ‘‘(B) NO DEDUCTION ALLOWED.—No de6 duction shall be allowed under section 219 of

7 the Internal Revenue Code of 1986 for a con8 tribution to a voluntary investment account.

9 ‘‘(C) ROLLOVER CONTRIBUTIONS.—No

10 rollover contribution may be made to a vol11 untary investment account unless it is from an12 other voluntary investment account or a

13 KidSave Account (as described in paragraph

14 (1) or (2) of section 262(a)). A rollover de15 scribed in the preceding sentence shall not be

16 taken into account for purposes of subpara17 graph (A).

18 ‘‘(D) DISTRIBUTIONS ALLOWED TO SOCIAL

19 SECURITY BENEFICIARIES.—Notwithstanding

20 any other provision of law, distributions may

21 only be made from a voluntary investment ac22 count of an electing employee on or after the

23 earlier of—

24 ‘‘(i) the date on which the employee

25 begins receiving benefits under this title, or
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1 ‘‘(ii) the date of the employee’s death.

2 ‘‘(c) OTHER DEFINITIONS.—For purposes of this

3 part—

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

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

6 on whom an excise tax is imposed under section

7 3111 of the Internal Revenue Code of 1986 with re8 spect to having an individual in the person’s employ

9 to whom wages are paid by such person during such

10 calendar year.

11 ‘‘(2) ELECTING EMPLOYEE.—The term ‘electing

12 employee’ means an individual with respect to whom

13 an election under section 251 is in effect.

14 ‘‘(3) ELECTING SELF-EMPLOYED INDIVID15 UAL.—The term ‘electing self-employed individual’

16 means an individual with respect to whom an elec17 tion under section 253 is in effect.

18 ‘‘(d) TREATMENT OF INCOMPETENT INDIVIDUALS.—

19 Any designation under section 251(c)(2) to be made by

20 an individual mentally incompetent or under other legal

21 disability may be made by the person who is constituted

22 guardian or other fiduciary by the law of the State of resi23 dence of the individual or is otherwise legally vested with

24 the care of the individual or his estate. Payment under

25 this part due an individual mentally incompetent or under
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1 other legal disability may be made to the person who is

2 constituted guardian or other fiduciary by the law of the

3 State of residence of the claimant or is otherwise legally

4 vested with the care of the claimant or his estate. In any

5 case in which a guardian or other fiduciary of the individ6 ual under legal disability has not been appointed under

7 the law of the State of residence of the individual, if any

8 other person, in the judgment of the Commissioner, is re9 sponsible for the care of such individual, any designation

10 under section 251(c)(2) which may otherwise be made by

11 such individual may be made by such person, any payment

12 under this part which is otherwise payable to such individ13 ual may be made to such person, and the payment of an

14 annuity payment under this part to such person bars re15 covery by any other person.

16 ‘‘VOLUNTARY INVESTMENT FUND

17 ‘‘SEC. 255. (a) ESTABLISHMENT.—There is estab18 lished and maintained in the Treasury of the United

19 States a Voluntary Investment Fund in the same manner

20 as the Thrift Savings Fund under sections 8437, 8438,

21 and 8439 of title 5, United States Code.

22 ‘‘(b) VOLUNTARY INVESTMENT FUND BOARD.—

23 ‘‘(1) IN GENERAL.—There is established and

24 operated in the Social Security Administration a

25 Voluntary Investment Fund Board in the same man26 ner as the Federal Retirement Thrift Investment
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1 Board under subchapter VII of chapter 84 of title

2 5, United States Code.

3 ‘‘(2) SPECIFIC INVESTMENT DUTIES.—The Vol4 untary Investment Fund shall be managed by the

5 Voluntary Investment Fund Board in the same man6 ner as the Thrift Savings Fund is managed under

7 subchapter VIII of chapter 84 of title 5, United

8 States Code.’’.

9 (2) EXEMPTION FROM ERISA REQUIRE10 MENTS.—Section 4(b) of the Employee Retirement

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

12 amended—

13 (A) in paragraph (4), by striking ‘‘or’’;

14 (B) in paragraph (5), by striking the pe15 riod and inserting ‘‘; or’’; and

16 (C) by inserting after paragraph (5) the

17 following:

18 ‘‘(6) such plan is a voluntary investment ac19 count payroll deduction plan established under part

20 B of title II of the Social Security Act.’’.

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

23 (A) EFFECTIVE DATE.—The amendments

24 made by this subsection (and any voluntary in25 vestment account payroll deduction plan re-
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1 quired thereunder) apply with respect to wages

2 paid after December 31, 2001, for pay periods

3 beginning after such date and self-employment

4 income for taxable years beginning after such

5 date.

6 (B) NOTICE REQUIREMENTS.—

7 (i) IN GENERAL.—Not later than Oc8 tober 1, 2001, the Commissioner of Social

9 Security shall—

10 (I) send to the last known ad11 dress of each eligible individual a de12 scription of the program established

13 by the amendments made by this sub14 section, which shall be written in the

15 form of a pamphlet in language which

16 may be readily understood by the av17 erage worker,

18 (II) provide for toll-free access by

19 telephone from all localities in the

20 United States and access by the Inter21 net to the Social Security Administra22 tion through which individuals may

23 obtain information and answers to

24 questions regarding such program,

25 and
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1 (III) provide information to the

2 media in all localities of the United

3 States about such program and such

4 toll-free access by telephone and ac5 cess by Internet.

6 (ii) ELIGIBLE INDIVIDUAL.—For pur7 poses of this subparagraph, the term ‘‘eli8 gible individual’’ means an individual who,

9 as of the date of the pamphlet sent pursu10 ant to clause (i), is indicated within the

11 records of the Social Security Administra12 tion as being credited with 1 or more quar13 ters of coverage under section 213 of the

14 Social Security Act (42 U.S.C. 413).

15 (iii) MATTERS TO BE INCLUDED.—

16 The Commissioner shall include with the

17 pamphlet sent to each eligible individual

18 pursuant to clause (i)—

19 (I) a statement of the number of

20 quarters of coverage indicated in the

21 records of the Social Security Admin22 istration as of the date of the descrip23 tion as credited to such individual

24 under section 213 of such Act and the
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1 date as of which such records may be

2 considered accurate, and

3 (II) the number for toll-free ac4 cess by telephone established by the

5 Commissioner pursuant to clause (i).

6 (b) CONFORMING AMENDMENTS TO PAYROLL TAX

7 PROVISIONS.—

8 (1) EMPLOYEES VOLUNTARY INVESTMENT CON9 TRIBUTIONS.—Section 3101(a) of the Internal Reve10 nue Code of 1986 (relating to tax on employees), as

11 amended by section 2(a)(1), is amended by adding

12 at the end the following:

13 ‘‘(3) VOLUNTARY INVESTMENT ACCOUNT CON14 TRIBUTION.—In the case of an electing employee (as

15 defined in section 254(c)(2) of the Social Security

16 Act), in addition to other taxes, there is hereby im17 posed on the income of such employee a voluntary

18 investment account contribution equal to 1 percent

19 of the wages (as so defined) received by him with re20 spect to employment (as so defined).’’.

21 (2) EMPLOYERS MATCHING CONTRIBUTIONS.—

22 Section 3111(a) of such Code (relating to tax on em23 ployers), as amended by section 2(a)(2), is amended

24 by adding at the end the following:
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1 ‘‘(3) MATCHING CONTRIBUTION TO EMPLOYEE

2 VOLUNTARY INVESTMENT ACCOUNT CONTRIBU3 TION.—In the case of an employer having in his em4 ploy an electing employee (as defined in section

5 254(c)(2) of the Social Security Act), in addition to

6 other taxes, there is hereby imposed on such em7 ployer a voluntary investment account contribution

8 equal to 1 percent of the wages (as so defined) paid

9 by him with respect to employment (as so defined)

10 of such employee.’’.

11 (3) SELF-EMPLOYMENT VOLUNTARY INVEST12 MENT ACCOUNT CONTRIBUTIONS.—Section 1401(a)

13 of such Code (relating to tax on self-employment in14 come), as amended by section 2(a)(3), is amended

15 by adding at the end the following:

16 ‘‘(3) VOLUNTARY INVESTMENT ACCOUNT CON17 TRIBUTION.—In the case of an electing self-em18 ployed individual (as defined in section 254(c)(3) of

19 the Social Security Act), in addition to other taxes,

20 there is hereby imposed for each taxable year, on the

21 self-employment income of such individual, a vol22 untary investment account contribution equal to 2

23 percent of the amount of the self-employment in24 come for such taxable year.’’.

25 (4) EFFECTIVE DATES.—
25

•S 21 IS

1 (A) EMPLOYEES AND EMPLOYERS.—The

2 amendments made by paragraphs (1) and (2)

3 apply to remuneration paid after December 31,

4 2001.

5 (B) SELF-EMPLOYED INDIVIDUALS.—The

6 amendment made by paragraph (3) applies to

7 taxable years beginning after December 31,

8 2001.

9 SEC. 4. INCREASE OF SOCIAL SECURITY WAGE BASE.

10 (a) IN GENERAL.—Section 230 of the Social Security

11 Act (42 U.S.C. 430) is amended—

12 (1) in subsection (b)—

13 (A) in paragraph (1), by striking

14 ‘‘$60,600’’ and inserting ‘‘$99,900’’; and

15 (B) in paragraph (2), by striking ‘‘1992’’

16 and inserting ‘‘2002’’; and

17 (2) in subsection (c)—

18 (A) by striking ‘‘(1)’’ and all that follows

19 through ‘‘$29,700.’’ and inserting ‘‘the ‘con20 tribution and benefit base’ with respect to re21 muneration paid (and taxable years begin22 ning)—

23 ‘‘(1) in 2002 shall be $87,000,

24 ‘‘(2) in 2003 shall be $94,000, and

25 ‘‘(3) in 2004 shall be $99,900.’’; and
26

•S 21 IS

1 (B) by striking ‘‘specified in clause (2) of

2 the preceding sentence’’ and inserting ‘‘specified

3 in the preceding sentence’’.

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

5 this section take effect on January 1, 2002.

6 SEC. 5. COST-OF-LIVING ADJUSTMENTS.

7 (a) COST-OF-LIVING BOARD.—Title XI of the Social

8 Security Act (42 U.S.C. 1301 et seq.) is amended by add9 ing at the end the following:

10 ‘‘PART D—COST-OF-LIVING ADJUSTMENTS

11 ‘‘DETERMINATION OF INFLATION ADJUSTMENT

12 ‘‘SEC. 1180. (a) MODIFICATION OF COST-OF-LIVING

13 ADJUSTMENT.—

14 ‘‘(1) IN GENERAL.—Notwithstanding any other

15 provision of law, any cost-of-living adjustment de16 scribed in subsection (e) shall be reduced by the ap17 plicable percentage point.

18 ‘‘(2) APPLICABLE PERCENTAGE POINT.—In this

19 section, the term ‘applicable percentage point’

20 means—

21 ‘‘(A) except as provided in subparagraph

22 (B), 1 percentage point; or

23 ‘‘(B) the applicable percentage point

24 adopted by the Cost-of-Living Board under sub25 section (b) for the calendar year.
27

•S 21 IS

1 ‘‘(b) COST-OF-LIVING BOARD DETERMINATION.—

2 ‘‘(1) IN GENERAL.—The Cost-of-Living Board

3 established under section 1181 shall for each cal4 endar year after 1999 determine if a new applicable

5 percentage point is necessary to replace the applica6 ble percentage point described in subsection

7 (a)(2)(A) to ensure an accurate cost-of-living adjust8 ment which shall apply to any cost-of-living adjust9 ment taking effect during such year.

10 ‘‘(2) ADOPTION OR REJECTION OF NEW APPLI11 CABLE PERCENTAGE POINT.—

12 ‘‘(A) ADOPTION.—

13 ‘‘(i) IN GENERAL.—If the Cost-of-Liv14 ing Board adopts by majority vote a new

15 applicable percentage point under para16 graph (1), then, for purposes of subsection

17 (a)(1), the new applicable percentage point

18 shall remain in effect during the following

19 calendar year.

20 ‘‘(ii) APPROPRIATE ADJUSTMENTS.—

21 The Cost-of-Living Board shall make ap22 propriate adjustments to the applicable

23 percentage point applied to any cost-of-liv24 ing adjustment if—
28

•S 21 IS

1 ‘‘(I) the period during which the

2 change in the cost-of-living is meas3 ured for such adjustment is different

4 than the period used by the Cost-of5 Living Board; or

6 ‘‘(II) the adjustment is based on

7 a component of an index rather than

8 the entire index.

9 ‘‘(B) REJECTION.—If the Cost-of-Living

10 Board fails by majority vote to adopt a new ap11 plicable percentage point under paragraph (1)

12 for any calendar year, then the applicable per13 centage point for such calendar year shall be

14 the applicable percentage point described in

15 subsection (a)(2)(A).

16 ‘‘(c) REPORT.—Not later than November 1 of each

17 calendar year, the Cost-of-Living Board shall submit a re18 port to the President and Congress containing a detailed

19 statement with respect to the new applicable percentage

20 point (if any) agreed to by the Board under subsection

21 (b).

22 ‘‘(d) JUDICIAL REVIEW.—Any determination by the

23 Cost-of Living Board under subsection (b) shall not be

24 subject to judicial review.
29

•S 21 IS

1 ‘‘(e) COST-OF-LIVING ADJUSTMENT DESCRIBED.—A

2 cost-of-living adjustment described in this subsection is

3 any cost-of-living adjustment for a calendar year after

4 1999 determined by reference to a percentage change in

5 a consumer price index or any component thereof (as pub6 lished by the Bureau of Labor Statistics of the Depart7 ment of Labor and determined without regard to this sec8 tion) and used in any of the following:

9 ‘‘(1) The Internal Revenue Code of 1986.

10 ‘‘(2) Titles II, XVIII, and XIX of this Act.

11 ‘‘(3) Any other Federal program (not including

12 programs under title XVI of this Act).

13 ‘‘COST-OF-LIVING BOARD

14 ‘‘SEC. 1181. (a) ESTABLISHMENT OF BOARD.—

15 ‘‘(1) ESTABLISHMENT.—There is established a

16 board to be known as the Cost-of-Living Board (in

17 this section referred to as the ‘Board’).

18 ‘‘(2) MEMBERSHIP.—

19 ‘‘(A) COMPOSITION.—The Board shall be

20 composed of 5 members of whom—

21 ‘‘(i) 1 shall be the Chairman of the

22 Board of Governors of the Federal Reserve

23 System;

24 ‘‘(ii) 1 shall be the Chairman of the

25 President’s Council of Economic Advisers;

26 and
30

•S 21 IS

1 ‘‘(iii) 3 shall be appointed by the

2 President, by and with the advice and con3 sent of the Senate.

4 The President shall consult with the leadership

5 of the House of Representatives and the Senate

6 in the appointment of the Board members

7 under clause (iii).

8 ‘‘(B) EXPERTISE.—The members of the

9 Board appointed under subparagraph (A)(iii)

10 shall be experts in the field of economics and

11 should be familiar with the issues related to the

12 calculation of changes in the cost of living. In

13 appointing members under subparagraph

14 (A)(iii), the President shall consider

15 appointing—

16 ‘‘(i) former members of the Presi17 dent’s Council of Economic Advisers;

18 ‘‘(ii) former Treasury department offi19 cials;

20 ‘‘(iii) former members of the Board of

21 Governors of the Federal Reserve System;

22 ‘‘(iv) other individuals with relevant

23 prior government experience in positions

24 requiring appointment by the President

25 and Senate confirmation; and
31

•S 21 IS

1 ‘‘(v) academic experts in the field of

2 price statistics.

3 ‘‘(C) DATE.—

4 ‘‘(i) NOMINATIONS.—Not later than

5 30 days after the date of enactment of the

6 Social Security Solvency Act of 1999, the

7 President shall submit the nominations of

8 the members of the Board described in

9 subparagraph (A)(iii) to the Senate.

10 ‘‘(ii) SENATE ACTION.—Not later

11 than 60 days after the Senate receives the

12 nominations under clause (i), the Senate

13 shall vote on confirmation of the nomina14 tions.

15 ‘‘(3) TERMS AND VACANCIES.—

16 ‘‘(A) TERMS.—A member of the Board ap17 pointed under paragraph (2)(A)(iii) shall be ap18 pointed for a term of 5 years, except that of the

19 members first appointed under that

20 paragraph—

21 ‘‘(i) 1 member shall be appointed for

22 a term of 1 year;

23 ‘‘(ii) 1 member shall be appointed for

24 a term of 3 years; and
32

•S 21 IS

1 ‘‘(iii) 1 member shall be appointed for

2 a term of 5 years.

3 ‘‘(B) VACANCIES.—

4 ‘‘(i) IN GENERAL.—A vacancy on the

5 Board shall be filled in the manner in

6 which the original appointment was made

7 and shall be subject to any conditions

8 which applied with respect to the original

9 appointment.

10 ‘‘(ii) FILLING UNEXPIRED TERM.—An

11 individual chosen to fill a vacancy shall be

12 appointed for the unexpired term of the

13 member replaced.

14 ‘‘(C) EXPIRATION OF TERMS.—The term

15 of any member appointed under paragraph

16 (2)(A)(iii) shall not expire before the date on

17 which the member’s successor takes office.

18 ‘‘(4) INITIAL MEETING.—Not later than 30

19 days after the date on which all members of the

20 Board have been appointed, the Board shall hold its

21 first meeting. Subsequent meetings shall be deter22 mined by the Board by majority vote.

23 ‘‘(5) OPEN MEETINGS.—Notwithstanding sec24 tion 552b of title 5, United States Code, or section

25 10 of the Federal Advisory Committee Act (5 U.S.C.
33

•S 21 IS

1 App.), the Board may, by majority vote, close any

2 meeting of the Board to the public otherwise re3 quired to be open under that section. The Board

4 shall make the records of any such closed meeting

5 available to the public not later than 30 days of that

6 meeting.

7 ‘‘(6) QUORUM.—A majority of the members of

8 the Board shall constitute a quorum, but a lesser

9 number of members may hold hearings.

10 ‘‘(7) CHAIRPERSON AND VICE CHAIRPERSON.—

11 The Board shall select a Chairperson and Vice

12 Chairperson from among the members appointed

13 under paragraph (2)(A)(iii).

14 ‘‘(b) POWERS OF THE BOARD.—

15 ‘‘(1) HEARINGS.—The Board may hold such

16 hearings, sit and act at such times and places, take

17 such testimony, and receive such evidence as the

18 Board considers advisable to carry out the purposes

19 of this part.

20 ‘‘(2) INFORMATION FROM FEDERAL AGEN21 CIES.—The Board may secure directly from any

22 Federal department or agency such information as

23 the Board considers necessary to carry out the pro24 visions of this part, including the published and un25 published data and analytical products of the Bu-
34

•S 21 IS

1 reau of Labor Statistics. Upon request of the Chair2 person of the Board, the head of such department

3 or agency shall furnish such information to the

4 Board.

5 ‘‘(3) POSTAL SERVICES.—The Board may use

6 the United States mails in the same manner and

7 under the same conditions as other departments and

8 agencies of the Federal Government.

9 ‘‘(4) GIFTS.—The Board may accept, use, and

10 dispose of gifts or donations of services or property.

11 ‘‘(c) BOARD PERSONNEL MATTERS.—

12 ‘‘(1) COMPENSATION OF MEMBERS.—Each

13 member of the Board who is not otherwise an officer

14 or employee of the Federal Government shall be

15 compensated at a rate equal to the daily equivalent

16 of the annual rate of basic pay prescribed for level

17 III of the Executive Schedule under section 5315 of

18 title 5, United States Code, for each day (including

19 travel time) during which such member is engaged

20 in the performance of the duties of the Board. All

21 members of the Board who otherwise are officers or

22 employees of the United States shall serve without

23 compensation in addition to that received for their

24 services as officers or employees of the United

25 States.
35

•S 21 IS

1 ‘‘(2) TRAVEL EXPENSES.—The members of the

2 Board shall be allowed travel expenses, including per

3 diem in lieu of subsistence, at rates authorized for

4 employees of agencies under subchapter I of chapter

5 57 of title 5, United States Code, while away from

6 their homes or regular places of business in the per7 formance of services for the Board.

8 ‘‘(3) STAFF.—

9 ‘‘(A) IN GENERAL.—The Chairperson of

10 the Board may, without regard to the civil serv11 ice laws and regulations, appoint and terminate

12 an executive director and such other additional

13 personnel as may be necessary to enable the

14 Board to perform its duties. The employment of

15 an executive director shall be subject to con16 firmation by the Board.

17 ‘‘(B) COMPENSATION.—The Chairperson

18 of the Board may fix the compensation of the

19 executive director and other personnel without

20 regard to the provisions of chapter 51 and sub21 chapter III of chapter 53 of title 5, United

22 States Code, relating to classification of posi23 tions and General Schedule pay rates, except

24 that the rate of pay for the executive director

25 and other personnel may not exceed the rate
36

•S 21 IS

1 payable for level IV of the Executive Schedule

2 under section 5316 of such title.

3 ‘‘(4) DETAIL OF GOVERNMENT EMPLOYEES.—

4 Any Federal Government employee may be detailed

5 to the Board without additional reimbursement

6 (other than the employee’s regular compensation),

7 and such detail shall be without interruption or loss

8 of civil service status or privilege.

9 ‘‘(5) PROCUREMENT OF TEMPORARY AND

10 INTERMITTENT SERVICES.—The Chairperson of the

11 Board may procure temporary and intermittent serv12 ices under section 3109(b) of title 5, United States

13 Code, at rates for individuals which do not exceed

14 the daily equivalent of the annual rate of basic pay

15 prescribed for level V of the Executive Schedule

16 under section 5316 of such title.

17 ‘‘(d) TERMINATION.—Section 14 of the Federal Advi18 sory Committee Act (5 U.S.C. App.) shall not apply to

19 the Board.

20 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to the Board such sums

22 as are necessary to carry out the purposes of this part.’’.

23 (c) TERMINATION OF WAGE INDEX ADJUSTMENT.—

24 Section 215(i)(1)(C) of the Social Security Act (42 U.S.C.

25 415(i)(1)(C)) is amended—
37

•S 21 IS

1 (1) in clause (i)—

2 (A) by inserting ‘‘and before 2000’’ after

3 ‘‘after 1988’’; and

4 (B) by inserting ‘‘, or in any calendar year

5 after 1999, the CPI increase percentage’’; and

6 (2) in clause (ii), by inserting ‘‘and before

7 2000’’ after ‘‘after 1988’’.

8 SEC. 6. TAX TREATMENT OF SOCIAL SECURITY PAYMENTS.

9 (a) IN GENERAL.—Section 86(a) of the Internal Rev10 enue Code of 1986 (relating to social security and tier 1

11 railroad retirement benefits) is amended to read as fol12 lows:

13 ‘‘(a) INCOME INCLUSION.—

14 ‘‘(1) GENERAL RULE.—Notwithstanding section

15 207 of the Social Security Act, social security bene16 fits shall be included in the gross income of a tax17 payer for any taxable year in the manner provided

18 under section 72.

19 ‘‘(2) TRANSITION RULES.—

20 ‘‘(A) IN GENERAL.—Notwithstanding para21 graph (1), with respect to any taxable year be22 ginning in 2000, 2001, 2002, or 2003, gross in23 come of the taxpayer shall include social secu24 rity benefits in an amount equal to the greater

25 of—
38

•S 21 IS

1 ‘‘(i) the applicable percentage of the

2 amount which would have been included

3 under paragraph (1) for such year, or

4 ‘‘(ii) the amount which would have

5 been included under this section for such

6 year if the amendments made by section 6

7 of the Social Security Solvency Act of

8 1999 had not been enacted.

9 ‘‘(B) APPLICABLE PERCENTAGE.—For

10 purposes of subparagraph (A)(i), the applicable

11 percentage for any taxable year shall be deter12 mined in accordance with the following table:

‘‘In the case of any taxable

year beginning in—

The applicable percentage is:

2000 ......................................................................................... 20

2001 ......................................................................................... 40

2002 ......................................................................................... 60

2003 ......................................................................................... 80.’’.

13 (b) CONFORMING AMENDMENTS.—Section 86 of the

14 Internal Revenue Code of 1986 is amended by striking

15 subsections (b), (c), and (e) and by redesignating sub16 sections (d) and (f) as subsections (b) and (c), respec17 tively.

18 (c) TRANSFERS TO TRUST FUNDS.—Paragraph

19 (1)(A) of section 121(e) of the Social Security Amend20 ments of 1983, as amended by section 13215(c)(1) of the

21 Omnibus Budget Reconciliation Act of 1993, is amended

22 by striking ‘‘1993.’’ and inserting ‘‘1993, plus (iii) the
39

•S 21 IS

1 amounts equivalent to the aggregate increase in tax liabil2 ities under chapter 1 of the Internal Revenue Code of

3 1986 which is attributable to the amendments to section

4 86 of such Code made by section 6 of the Social Security

5 Solvency Act of 1999.’’.

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

7 this section apply to taxable years ending after December

8 31, 1999.

9 SEC. 7. COVERAGE OF NEWLY HIRED STATE AND LOCAL

10 EMPLOYEES.

11 (a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—

12 (1) IN GENERAL.—Paragraph (7) of section

13 210(a) of the Social Security Act (42 U.S.C.

14 410(a)(7)) is amended to read as follows:

15 ‘‘(7) Excluded State or local government em16 ployment (as defined in subsection (s));’’.

17 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

18 EMPLOYMENT.—

19 (A) IN GENERAL.—Section 210 of such

20 Act (42 U.S.C. 410) is amended by adding at

21 the end the following new subsection:

22 ‘‘Excluded State or Local Government Employment

23 ‘‘(s)(1) IN GENERAL.—The term ‘excluded State or

24 local government employment’ means any service per25 formed in the employ of a State, of any political subdivi-
40

•S 21 IS

1 sion thereof, or of any instrumentality of any one or more

2 of the foregoing which is wholly owned thereby, if—

3 ‘‘(A)(i) such service would be excluded from the

4 term ‘employment’ for purposes of this title if the

5 preceding provisions of this section as in effect on

6 December 31, 2001, had remained in effect, and (ii)

7 the requirements of paragraph (2) are met with re8 spect to such service, or

9 ‘‘(B) the requirements of paragraph (3) are met

10 with respect to such service.

11 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

12 WHICH CONTINUES.—

13 ‘‘(A) IN GENERAL.—The requirements of this

14 paragraph are met with respect to service for any

15 employer if—

16 ‘‘(i) such service is performed by an

17 individual—

18 ‘‘(I) who was performing substantial

19 and regular service for remuneration for

20 that employer before January 1, 2002,

21 ‘‘(II) who is a bona fide employee of

22 that employer on December 31, 2001, and

23 ‘‘(III) whose employment relationship

24 with that employer was not entered into
41

•S 21 IS

1 for purposes of meeting the requirements

2 of this subparagraph, and

3 ‘‘(ii) the employment relationship with that

4 employer has not been terminated after Decem5 ber 31, 2001.

6 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES AND

7 INSTRUMENTALITIES.—For purposes of subpara8 graph (A), under regulations (consistent with regula9 tions established under section 3121(t)(2)(B) of the

10 Internal Revenue Code of 1986)—

11 ‘‘(i) all agencies and instrumentalities of a

12 State (as defined in section 218(b)) or of the

13 District of Columbia shall be treated as a single

14 employer, and

15 ‘‘(ii) all agencies and instrumentalities of a

16 political subdivision of a State (as so defined)

17 shall be treated as a single employer and shall

18 not be treated as described in clause (i).

19 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

20 ‘‘(A) IN GENERAL.—The requirements of this

21 paragraph are met with respect to service if such

22 service is performed—

23 ‘‘(i) by an individual who is employed by a

24 State or political subdivision thereof to relieve

25 such individual from unemployment,
42

•S 21 IS

1 ‘‘(ii) in a hospital, home, or other institu2 tion by a patient or inmate thereof as an em3 ployee of a State or political subdivision thereof

4 or of the District of Columbia,

5 ‘‘(iii) by an individual, as an employee of

6 a State or political subdivision thereof or of the

7 District of Columbia, serving on a temporary

8 basis in case of fire, storm, snow, earthquake,

9 flood, or other similar emergency,

10 ‘‘(iv) by any individual as an employee in11 cluded under section 5351(2) of title 5, United

12 States Code (relating to certain interns, student

13 nurses, and other student employees of hos14 pitals of the District of Columbia Government),

15 other than as a medical or dental intern or a

16 medical or dental resident in training,

17 ‘‘(v) by an election official or election

18 worker if the remuneration paid in a calendar

19 year for such service is less than $1,000 with

20 respect to service performed during 2002, and

21 the adjusted amount determined under sub22 paragraph (C) for any subsequent year with re23 spect to service performed during such subse24 quent year, except to the extent that service by

25 such election official or election worker is in-
43

•S 21 IS

1 cluded in employment under an agreement

2 under section 218, or

3 ‘‘(vi) by an employee in a position com4 pensated solely on a fee basis which is treated

5 pursuant to section 211(c)(2)(E) as a trade or

6 business for purposes of inclusion of such fees

7 in net earnings from self-employment.

8 ‘‘(B) DEFINITIONS.—As used in this para9 graph, the terms ‘State’ and ‘political subdivision’

10 have the meanings given those terms in section

11 218(b).

12 ‘‘(C) ADJUSTMENTS TO DOLLAR AMOUNT FOR

13 ELECTION OFFICIALS AND ELECTION WORKERS.—

14 For each year after 2002, the Secretary shall adjust

15 the amount referred to in subparagraph (A)(v) at

16 the same time and in the same manner as is pro17 vided under section 215(a)(1)(B)(ii) with respect to

18 the amounts referred to in section 215(a)(1)(B)(i),

19 except that—

20 ‘‘(i) for purposes of this subparagraph,

21 1999 shall be substituted for the calendar year

22 referred to in section 215(a)(1)(B)(ii)(II), and

23 ‘‘(ii) such amount as so adjusted, if not a

24 multiple of $50, shall be rounded to the nearest

25 multiple of $50.
44

•S 21 IS

1 The Commissioner of Social Security shall determine

2 and publish in the Federal Register each adjusted

3 amount determined under this subparagraph not

4 later than November 1 preceding the year for which

5 the adjustment is made.’’.

6 (B) CONFORMING AMENDMENTS.—

7 (i) Subsection (k) of section 210 of

8 such Act (42 U.S.C. 410(k)) (relating to

9 covered transportation service) is repealed.

10 (ii) Section 210(p) of such Act (42

11 U.S.C. 410(p)) is amended—

12 (I) in paragraph (2), by striking

13 ‘‘service is performed’’ and all that

14 follows and inserting ‘‘service is serv15 ice described in subsection (s)(3)(A).’’;

16 and

17 (II) in paragraph (3)(A), by in18 serting ‘‘under subsection (a)(7) as in

19 effect on December 31, 2001’’ after

20 ‘‘section’’.

21 (iii) Section 218(c)(6) of such Act (42

22 U.S.C. 418(c)(6)) is amended—

23 (I) by striking subparagraph (C);
45

•S 21 IS

1 (II) by redesignating subpara2 graphs (D) and (E) as subparagraphs

3 (C) and (D), respectively; and

4 (III) by striking subparagraph

5 (F) and inserting the following:

6 ‘‘(E) service which is included as employment

7 under section 210(a).’’

8 (b) AMENDMENTS TO THE INTERNAL REVENUE

9 CODE OF 1986.—

10 (1) IN GENERAL.—Paragraph (7) of section

11 3121(b) of the Internal Revenue Code of 1986 (re12 lating to employment) is amended to read as follows:

13 ‘‘(7) excluded State or local government em14 ployment (as defined in subsection (t));’’.

15 (2) EXCLUDED STATE OR LOCAL GOVERNMENT

16 EMPLOYMENT.—Section 3121 of such Code is

17 amended by inserting after subsection (s) the follow18 ing new subsection:

19 ‘‘(t) EXCLUDED STATE OR LOCAL GOVERNMENT EM20 PLOYMENT.—

21 ‘‘(1) IN GENERAL.—For purposes of this chap22 ter, the term ‘excluded State or local government

23 employment’ means any service performed in the

24 employ of a State, of any political subdivision there-
46

•S 21 IS

1 of, or of any instrumentality of any one or more of

2 the foregoing which is wholly owned thereby, if—

3 ‘‘(A)(i) such service would be excluded

4 from the term ‘employment’ for purposes of this

5 chapter if the provisions of subsection (b)(7) as

6 in effect on December 31, 2001, had remained

7 in effect, and (ii) the requirements of para8 graph (2) are met with respect to such service,

9 or

10 ‘‘(B) the requirements of paragraph (3)

11 are met with respect to such service.

12 ‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT

13 WHICH CONTINUES.—

14 ‘‘(A) IN GENERAL.—The requirements of

15 this paragraph are met with respect to service

16 for any employer if—

17 ‘‘(i) such service is performed by an

18 individual—

19 ‘‘(I) who was performing sub20 stantial and regular service for remu21 neration for that employer before Jan22 uary 1, 2002,

23 ‘‘(II) who is a bona fide employee

24 of that employer on December 31,

25 2001, and
47

•S 21 IS

1 ‘‘(III) whose employment rela2 tionship with that employer was not

3 entered into for purposes of meeting

4 the requirements of this subpara5 graph, and

6 ‘‘(ii) the employment relationship with

7 that employer has not been terminated

8 after December 31, 2001.

9 ‘‘(B) TREATMENT OF MULTIPLE AGENCIES

10 AND INSTRUMENTALITIES.—For purposes of

11 subparagraph (A), under regulations—

12 ‘‘(i) all agencies and instrumentalities

13 of a State (as defined in section 218(b) of

14 the Social Security Act) or of the District

15 of Columbia shall be treated as a single

16 employer, and

17 ‘‘(ii) all agencies and instrumentalities

18 of a political subdivision of a State (as so

19 defined) shall be treated as a single em20 ployer and shall not be treated as de21 scribed in clause (i).

22 ‘‘(3) EXCEPTION FOR CERTAIN SERVICES.—

23 ‘‘(A) IN GENERAL.—The requirements of

24 this paragraph are met with respect to service

25 if such service is performed—
48

•S 21 IS

1 ‘‘(i) by an individual who is employed

2 by a State or political subdivision thereof

3 to relieve such individual from unemploy4 ment,

5 ‘‘(ii) in a hospital, home, or other in6 stitution by a patient or inmate thereof as

7 an employee of a State or political subdivi8 sion thereof or of the District of Columbia,

9 ‘‘(iii) by an individual, as an employee

10 of a State or political subdivision thereof

11 or of the District of Columbia, serving on

12 a temporary basis in case of fire, storm,

13 snow, earthquake, flood, or other similar

14 emergency,

15 ‘‘(iv) by any individual as an employee

16 included under section 5351(2) of title 5,

17 United States Code (relating to certain in18 terns, student nurses, and other student

19 employees of hospitals of the District of

20 Columbia Government), other than as a

21 medical or dental intern or a medical or

22 dental resident in training,

23 ‘‘(v) by an election official or election

24 worker if the remuneration paid in a cal25 endar year for such service is less than
49

•S 21 IS

1 $1,000 with respect to service performed

2 during 2002, and the adjusted amount de3 termined under section 210(s)(3)(C) of the

4 Social Security Act for any subsequent

5 year with respect to service performed dur6 ing such subsequent year, except to the ex7 tent that service by such election official or

8 election worker is included in employment

9 under an agreement under section 218 of

10 the Social Security Act, or

11 ‘‘(vi) by an employee in a position

12 compensated solely on a fee basis which is

13 treated pursuant to section 1402(c)(2)(E)

14 as a trade or business for purposes of in15 clusion of such fees in net earnings from

16 self-employment.

17 ‘‘(B) DEFINITIONS.—As used in this para18 graph, the terms ‘State’ and ‘political subdivi19 sion’ have the meanings given those terms in

20 section 218(b) of the Social Security Act.’’.

21 (3) CONFORMING AMENDMENTS.—

22 (A) Subsection (j) of section 3121 of such

23 Code (relating to covered transportation serv24 ice) is repealed.
50

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1 (B) Paragraph (2) of section 3121(u) of

2 such Code (relating to application of hospital

3 insurance tax to Federal, State, and local em4 ployment) is amended—

5 (i) in subparagraph (B), by striking

6 ‘‘service is performed’’ in clause (ii) and all

7 that follows through the end of such sub8 paragraph and inserting ‘‘service is service

9 described in subsection (t)(3)(A).’’; and

10 (ii) in subparagraph (C)(i), by insert11 ing ‘‘under subsection (b)(7) as in effect

12 on December 31, 2001’’ after ‘‘chapter’’.

13 (c) EFFECTIVE DATE.—Except as otherwise provided

14 in this section, the amendments made by this section shall

15 apply with respect to service performed after December

16 31, 2001.

17 SEC. 8. INCREASE IN LENGTH OF COMPUTATION PERIOD

18 FROM 35 TO 38 YEARS.

19 Section 215(b)(2)(B) of the Social Security Act (42

20 U.S.C. 415(b)(2)) is amended—

21 (1) in clause (ii), by striking ‘‘and’’ at the end;

22 (2) in clause (iii)—

23 (A) by striking ‘‘age 62’’ and inserting

24 ‘‘the applicable age’’; and
51

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1 (B) by striking the period at the end and

2 inserting ‘‘; and’’; and

3 (3) by adding at the end the following:

4 ‘‘(iv) the term ‘applicable age’ means with re5 spect to individuals who attain age 62—

6 ‘‘(I) before 2002, age 62;

7 ‘‘(II) in 2002, age 63;

8 ‘‘(III) in 2003, age 64; and

9 ‘‘(IV) after 2003, age 65.’’.

10 SEC. 9. MODIFICATION OF PIA FACTORS TO REFLECT

11 CHANGES IN LIFE EXPECTANCY.

12 (a) MODIFICATION OF PIA FACTORS.—Section

13 215(a)(1) of the Social Security Act (42 U.S.C.

14 415(a)(1)(B)) is amended by redesignating subparagraph

15 (D) as subparagraph (F) and by inserting after subpara16 graph (C) the following:

17 ‘‘(D) For individuals who initially become eligible for

18 old-age insurance benefits in any calendar year after 1999,

19 each of the percentages under clauses (i), (ii), and (iii)

20 of subparagraph (A) shall be multiplied the applicable

21 number of times by .988 (.997, for any calendar year after

22 2017). For purposes of the preceding sentence, the term

23 ‘applicable number of times’ means a number equal to the

24 lesser of 66 or the number of years beginning with 2000

25 and ending with the year of initial eligibility.
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1 ‘‘(E) For any individual who initially becomes eligible

2 for disability insurance benefits in any calendar year after

3 1999, the primary insurance amount for such individual

4 shall be equal to the greater of—

5 ‘‘(i) such amount as determined under this

6 paragraph, or

7 ‘‘(ii) such amount as determined under this

8 paragraph without regard to subparagraph (D)

9 thereof.’’.

10 (b) RESTORATION OF NORMAL RETIREMENT AGE AT

11 65.—

12 (1) IN GENERAL.—Section 216(l)(1) of the So13 cial Security Act (42 U.S.C. 416(l)(1)) is amended

14 to read as follows:

15 ‘‘(l)(1) The term ‘retirement age’ means 65 years of

16 age.’’.

17 (2) CONFORMING AMENDMENTS.—

18 (A) Section 216(l) of the Social Security

19 Act (42 U.S.C. 416(l)) is amended by striking

20 paragraph (3).

21 (B) Section 202(q) of such Act (42 U.S.C.

22 402(q)) is amended—

23 (i) in paragraph (1), by striking

24 ‘‘Subject to paragraph (9), if’’ and insert25 ing ‘‘If’’; and
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•S 21 IS

1 (ii) by striking paragraph (9).

2 (c) STUDY OF THE EFFECT OF INCREASES IN LIFE

3 EXPECTANCY.—

4 (1) STUDY PLAN.—Not later than February 15,

5 2001, the Commissioner of Social Security shall sub6 mit to Congress a detailed study plan for evaluating

7 the effects of increases in life expectancy on the ex8 pected level of retirement income from social secu9 rity, pensions, and other sources. The study plan

10 shall include a description of the methodology, data,

11 and funding that will be required in order to provide

12 to Congress not later than February 15, 2006—

13 (A) an evaluation of trends in mortality

14 and their relationship to trends in health sta15 tus, among individuals approaching eligibility

16 for social security retirement benefits;

17 (B) an evaluation of trends in labor force

18 participation among individuals approaching eli19 gibility for social security retirement benefits

20 and among individuals receiving retirement ben21 efits, and of the factors that influence the

22 choice between retirement and participation in

23 the labor force;

24 (C) an evaluation of changes, if any, in the

25 social security disability program that would re-
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1 duce the impact of changes in the retirement

2 income of workers in poor health or physically

3 demanding occupations;

4 (D) an evaluation of the methodology used

5 to develop projections for trends in mortality,

6 health status, and labor force participation

7 among individuals approaching eligibility for so8 cial security retirement benefits and among in9 dividuals receiving retirement benefits; and

10 (E) an evaluation of such other matters as

11 the Commissioner deems appropriate for evalu12 ating the effects of increases in life expectancy.

13 (2) REPORT ON RESULTS OF STUDY.—Not later

14 than February 15, 2006, the Commissioner of Social

15 Security shall provide to Congress an evaluation of

16 the implications of the trends studied under para17 graph (1), along with recommendations, if any, of

18 the extent to which the conclusions of such evalua19 tions indicate that projected increases in life expect20 ancy require modification in the social security dis21 ability program and other income support programs.
55

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1 SEC. 10. ELIMINATION OF EARNINGS TEST FOR INDIVID2 UALS WHO HAVE ATTAINED EARLY RETIRE3 MENT AGE.

4 (a) IN GENERAL.—Section 203 of the Social Security

5 Act (42 U.S.C. 403) is amended—

6 (1) in subsection (c)(1), by striking ‘‘the age of

7 seventy’’ and inserting ‘‘early retirement age (as de8 fined in section 216(l))’’;

9 (2) in paragraphs (1)(A) and (2) of subsection

10 (d), by striking ‘‘the age of seventy’’ each place it

11 appears and inserting ‘‘early retirement age (as de12 fined in section 216(l))’’;

13 (3) in subsection (f)(1)(B), by striking ‘‘was

14 age seventy or over’’ and inserting ‘‘was at or above

15 early retirement age (as defined in section 216(l))’’;

16 (4) in subsection (f)(3)—

(A) by striking ‘‘331 17 ⁄3 percent’’ and all

18 that follows through ‘‘any other individual,’’

19 and inserting ‘‘50 percent of such individual’s

20 earnings for such year in excess of the product

21 of the exempt amount as determined under

22 paragraph (8),’’; and

23 (B) by striking ‘‘age 70’’ and inserting

24 ‘‘early retirement age (as defined in section

25 216(l))’’;
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1 (5) in subsection (h)(1)(A), by striking ‘‘age

2 70’’ each place it appears and inserting ‘‘early re3 tirement age (as defined in section 216(l))’’; and

4 (6) in subsection (j)—

5 (A) in the heading, by striking ‘‘Age Sev6 enty’’ and inserting ‘‘Early Retirement Age’’;

7 and

8 (B) by striking ‘‘seventy years of age’’ and

9 inserting ‘‘having attained early retirement age

10 (as defined in section 216(l))’’.

11 (b) CONFORMING AMENDMENTS ELIMINATING THE

12 SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE

13 ATTAINED AGE 62.—

14 (1) UNIFORM EXEMPT AMOUNT.—Section

15 203(f)(8)(A) of the Social Security Act (42 U.S.C.

16 403(f)(8)(A)) is amended by striking ‘‘the new ex17 empt amounts (separately stated for individuals de18 scribed in subparagraph (D) and for other individ19 uals) which are to be applicable’’ and inserting ‘‘a

20 new exempt amount which shall be applicable’’.

21 (2) CONFORMING AMENDMENTS.—Section

22 203(f)(8)(B) of the Social Security Act (42 U.S.C.

23 403(f)(8)(B)) is amended—

24 (A) in the matter preceding clause (i), by

25 striking ‘‘Except’’ and all that follows through
57

•S 21 IS

1 ‘‘whichever’’ and inserting ‘‘The exempt amount

2 which is applicable for each month of a particu3 lar taxable year shall be whichever’’;

4 (B) in clauses (i) and (ii), by striking ‘‘cor5 responding’’ each place it appears; and

6 (C) in the last sentence, by striking ‘‘an

7 exempt amount’’ and inserting ‘‘the exempt

8 amount’’.

9 (3) REPEAL OF BASIS FOR COMPUTATION OF

10 SPECIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of

11 the Social Security Act (42 U.S.C. 403(f)(8)(D)) is

12 repealed.

13 (c) ADDITIONAL CONFORMING AMENDMENTS.—

14 (1) ELIMINATION OF REDUNDANT REFERENCES

15 TO RETIREMENT AGE.—Section 203 of the Social

16 Security Act (42 U.S.C. 403) is amended—

17 (A) in subsection (c), in the last sentence,

18 by striking ‘‘nor shall any deduction’’ and all

19 that follows and inserting ‘‘nor shall any deduc20 tion be made under this subsection from any

21 widow’s or widower’s insurance benefit if the

22 widow, surviving divorced wife, widower, or sur23 viving divorced husband involved became enti24 tled to such benefit prior to attaining age 60.’’;

25 and
58

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1 (B) in subsection (f)(1), by striking clause

2 (D) and inserting the following: ‘‘(D) for which

3 such individual is entitled to widow’s or widow4 er’s insurance benefits if such individual be5 came so entitled prior to attaining age 60,’’.

6 (2) CONFORMING AMENDMENT TO PROVISIONS

7 FOR DETERMINING AMOUNT OF INCREASE ON AC8 COUNT OF DELAYED RETIREMENT.—Section

9 202(w)(2)(B)(ii) of the Social Security Act (42

10 U.S.C. 402(w)(2)(B)(ii)) is amended—

11 (A) by striking ‘‘either’’; and

12 (B) by striking ‘‘or suffered deductions

13 under section 203(b) or 203(c) in amounts

14 equal to the amount of such benefit’’.

15 (3) PROVISIONS RELATING TO EARNINGS

16 TAKEN INTO ACCOUNT IN DETERMINING SUBSTAN17 TIAL GAINFUL ACTIVITY OF BLIND INDIVIDUALS.—

18 The second sentence of section 223(d)(4) of such

19 Act (42 U.S.C. 423(d)(4)) is amended by striking

20 ‘‘if section 102 of the Senior Citizens’ Right to

21 Work Act of 1996 had not been enacted’’ and insert22 ing the following: ‘‘if the amendments to section 203

23 made by section 102 of the Senior Citizens’ Right to

24 Work Act of 1996 and by the Social Security Sol25 vency Act of 1999 had not been enacted’’.
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1 (d) STUDY OF THE EFFECT OF TAKING EARNINGS

2 INTO ACCOUNT IN DETERMINING SUBSTANTIAL GAINFUL

3 ACTIVITY OF DISABLED INDIVIDUALS.—

4 (1) IN GENERAL.—Not later than February 15,

5 2001, the Commissioner of Social Security shall con6 duct a study on the effect that taking earnings into

7 account in determining substantial gainful activity of

8 individuals receiving disability insurance benefits has

9 on the incentive for such individuals to work and

10 submit to Congress a report on the study.

11 (2) CONTENTS OF STUDY.—The study con12 ducted under paragraph (1) shall include the evalua13 tion of—

14 (A) the effect of the current limit on earn15 ings on the incentive for individuals receiving

16 disability insurance benefits to work;

17 (B) the effect of increasing the earnings

18 limit or changing the manner in which disability

19 insurance benefits are reduced or terminated as

20 a result of substantial gainful activity (includ21 ing reducing the benefits gradually when the

22 earnings limit is exceeded) on—

23 (i) the incentive to work; and

24 (ii) the financial status of the Federal

25 Disability Insurance Trust Fund;
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1 (C) the effect of extending eligibility for

2 the Medicare program to individuals during the

3 period in which disability insurance benefits of

4 the individual are gradually reduced as a result

5 of substantial gainful activity and extending

6 such eligibility for a fixed period of time after

7 the benefits are terminated on—

8 (i) the incentive to work; and

9 (ii) the financial status of the Federal

10 Hospital Insurance Trust Fund and the

11 Federal Supplementary Medical Insurance

12 Trust Fund; and

13 (D) the relationship between the effect of

14 substantial gainful activity limits on blind indi15 viduals receiving disability insurance benefits

16 and other individuals receiving disability insur17 ance benefits.

18 (3) CONSULTATION.—The analysis under para19 graph (2)(C) shall be done in consultation with the

20 Administrator of the Health Care Financing Admin21 istration.

22 (e) EFFECTIVE DATE.—The amendments and re23 peals made by subsections (a), (b), and (c) shall apply with

24 respect to taxable years ending after December 31, 2002.
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1 SEC. 11. SOCIAL SECURITY KIDSAVE ACCOUNTS.

2 Title II of the Social Security Act (42 U.S.C. 401

3 et seq.), as amended by section 3(a), is amended by adding

4 at the end the following:

5 ‘‘PART C—KIDSAVE ACCOUNTS

6 ‘‘KIDSAVE ACCOUNTS

7 ‘‘SEC. 261. (a) ESTABLISHMENT.—The Commis8 sioner of Social Security shall establish in the name of

9 each individual born on or after January 1, 1995, a

10 KidSave Account described in paragraph (1) of section

11 262(a), upon the later of—

12 ‘‘(1) the date of enactment of this part, or

13 ‘‘(2) the date of the issuance of a Social Secu14 rity account number under section 205(c)(2) to such

15 individual.

16 The KidSave Account shall be identified to the account

17 holder by means of the account holder’s Social Security

18 account number.

19 ‘‘(b) CONTRIBUTIONS.—

20 ‘‘(1) IN GENERAL.—There are appropriated

21 such sums as are necessary in order for the Sec22 retary of the Treasury to transfer from the general

23 fund of the Treasury for crediting by the Commis24 sioner to each account holder’s KidSave Account

25 under subsection (a), an amount equal to the sum

26 of—
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•S 21 IS

1 ‘‘(A) in the case of any individual born on

2 or after January 1, 2000, $1000.00, on the

3 date of the establishment of such individual’s

4 KidSave Account, and

5 ‘‘(B) in the case of any individual born on

6 or after January 1, 1995, $500.00, on the 1st,

7 2nd, 3rd, 4th, and 5th birthdays of such indi8 vidual occurring on or after January 1, 2000.

9 ‘‘(2) ADJUSTMENT FOR INFLATION.—For any

10 calendar year after 2009, each of the dollar amounts

11 under paragraph (1) shall be increased by the cost12 of-living adjustment determined under section 215(i)

13 for the calendar year.

14 ‘‘(c) DESIGNATIONS REGARDING KIDSAVE AC15 COUNTS.—

16 ‘‘(1) INITIAL DESIGNATIONS OF INVESTMENT

17 VEHICLE.—A person described in subsection (d)

18 shall, on behalf of the individual described in sub19 section (a), designate the investment vehicle for the

20 KidSave Account to which contributions on behalf of

21 such individual are to be deposited. Such designation

22 shall be made on the application for such individ23 ual’s Social Security account number.

24 ‘‘(2) CHANGES IN INVESTMENT VEHICLES OR

25 TYPES OF KIDSAVE ACCOUNTS.—The Commissioner
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1 shall by regulation provide the time and manner by

2 which—

3 ‘‘(A) an individual or a person described in

4 subsection (d) on behalf of such individual may

5 change 1 or more investment vehicles for a

6 KidSave Account described in paragraph (1) of

7 section 262(a), and

8 ‘‘(B) an individual or a person described in

9 subsection (d) on behalf of such individual may

10 designate a KidSave Account described in para11 graph (2) of section 262(a) or a voluntary in12 vestment account described in paragraph (1) or

13 (2) of section 254(a) of the individual to which

14 all or a portion of the amounts in an existing

15 KidSave Account described in paragraph (1) of

16 section 262(a) are to be transferred.

17 ‘‘(d) TREATMENT OF MINORS AND INCOMPETENT IN18 DIVIDUALS.—Any designation under subsection (c) to be

19 made by a minor, or an individual mentally incompetent

20 or under other legal disability, may be made by the person

21 who is constituted guardian or other fiduciary by the law

22 of the State of residence of the individual or is otherwise

23 legally vested with the care of the individual or his estate.

24 Payment under this part due a minor, or an individual

25 mentally incompetent or under other legal disability, may
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1 be made to the person who is constituted guardian or

2 other fiduciary by the law of the State of residence of the

3 claimant or is otherwise legally vested with the care of the

4 claimant or his estate. In any case in which a guardian

5 or other fiduciary of the individual under legal disability

6 has not been appointed under the law of the State of resi7 dence of the individual, if any other person, in the judg8 ment of the Commissioner, is responsible for the care of

9 such individual, any designation under subsection (c)

10 which may otherwise be made by such individual may be

11 made by such person, any payment under this part which

12 is otherwise payable to such individual may be made to

13 such person, and the payment of an annuity payment

14 under this part to such person bars recovery by any other

15 person.

16 ‘‘DEFINITIONS AND SPECIAL RULES

17 ‘‘SEC. 262. (a) KIDSAVE ACCOUNTS.—For purposes

18 of this part—

19 ‘‘(1) a KidSave Account described in this para20 graph is a KidSave Account in the Voluntary Invest21 ment Fund (established under section 255(a)), and

22 ‘‘(2) a Kidsave Account described in this para23 graph is any individual retirement plan (as defined

24 in section 7701(a)(37) of the Internal Revenue Code

25 of 1986), other than a Roth IRA (as defined in sec26 tion 408A(b) of such Code), which is designated by
65

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1 an individual as a KidSave Account (in such manner

2 as the Secretary of the Treasury may prescribe) and

3 which is administered or issued by a bank or other

4 person referred to in section 408(a)(2) of such Code.

5 ‘‘(b) TREATMENT OF ACCOUNTS.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2)—

8 ‘‘(A) any KidSave Account described in

9 subsection (a)(1) shall be treated in the same

10 manner as an account in the Thrift Savings

11 Fund under subchapter III of chapter 84 of

12 title 5, United States Code, and

13 ‘‘(B) any KidSave Account described in

14 subsection (a)(2) shall be treated in the same

15 manner as an individual retirement plan (as so

16 defined).

17 ‘‘(2) EXCEPTIONS.—

18 ‘‘(A) CONTRIBUTION LIMIT.—The aggre19 gate amount of contributions for any taxable

20 year to all KidSave Accounts of an individual

21 shall not exceed the contribution made pursuant

22 to section 261(b) for such year on behalf of

23 such individual.

24 ‘‘(B) ROLLOVER CONTRIBUTIONS.—No

25 rollover contribution may be made to a KidSave
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1 Account unless it is from another KidSave Ac2 count. A rollover described in the preceding sen3 tence shall not be taken into account for pur4 poses of subparagraph (A).

5 ‘‘(C) DISTRIBUTIONS.—Notwithstanding

6 any other provision of law, distributions may

7 only be made from a KidSave Account of an in8 dividual on or after the earlier of—

9 ‘‘(i) the date on which the individual

10 begins receiving benefits under this title, or

11 ‘‘(ii) the date of the individual’s

12 death.’’.

Æ