I

107TH CONGRESS

1ST SESSION H. R. 1320

To amend title II of the Social Security Act to establish an effective real

annual rate of interest at 6 percent for special obligations issued to

the Social Security trust funds.

IN THE HOUSE OF REPRESENTATIVES

MARCH 29, 2001

Mr. SABO introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend title II of the Social Security Act to establish

an effective real annual rate of interest at 6 percent

for special obligations issued to the Social Security trust

funds.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Preserving Social Se5 curity Act of 2001.’’
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1 SEC. 2. INTEREST BORNE BY, AND INCREASES IN PAR

2 VALUE OF, SPECIAL OBLIGATIONS ISSUED TO

3 THE SOCIAL SECURITY TRUST FUNDS.

4 Section 201(d) of the Social Security Act (42 U.S.C.

5 401(d)) is amended—

6 (1) by inserting ‘‘(1)’’ after ‘‘(d)’’;

7 (2) by striking the fifth sentence and inserting

8 the following new sentences: ‘‘Such obligations

9 issued for purchase by the Trust Funds shall have

10 maturities fixed with due regard for the needs of the

11 Trust Funds and shall bear interest at an effective

12 annual rate equal to 6 percent, which shall be paid

13 to the Trust Funds semiannually. On June 30 and

14 December 31 of each calendar year, and (with re15 spect to each obligation) on its date of maturity (or

16 date of redemption, if prior to maturity), the Man17 aging Trustee shall adjust (subject to paragraph

18 (2)) the par value of each obligation then held by ei19 ther of the Trust Funds and issued for purchase by

20 such Trust Fund so as to equal the product derived

21 by multiplying the current par value as of imme22 diately before the applicable date by the CPI adjust23 ment factor (defined in paragraph (3)(A)) for the

24 obligation in connection with the month in which the

25 applicable date occurs (rounded, if not a multiple of

26 $0.01, to the nearest multiple of $0.01).’’; and
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1 (3) by adding at the end the following new

2 paragraphs:

3 ‘‘(2)(A) In any case in which the number of days in

4 the actual adjustment period (defined in subparagraph

5 (B)(i)) for an obligation differs from the number of days

6 in the computation period (defined in subparagraph

7 (B)(ii)) for the obligation, the amount by which the par

8 value of an obligation is adjusted pursuant to paragraph

9 (1) shall be an amount which bears the same ratio to the

10 amount that would otherwise apply under paragraph (1)

11 as the number of days in the actual adjustment period

12 bears to the number of days in the computation period.

13 ‘‘(B) For purposes of subparagraph (A)—

14 ‘‘(i) The term ‘actual adjustment period’ for an

15 obligation means the period beginning with—

16 ‘‘(I) the date following the date of the last

17 previous adjustment in the par value of the ob18 ligation under paragraph (1), or

19 ‘‘(II) if no such adjustment in the par

20 value of the obligation has occurred, the date of

21 the issuance of the obligation,

22 and ending with the date of the increase in par value

23 to be determined under paragraph (1).

24 ‘‘(ii) The term ‘computation period’ for an obli25 gation means the period beginning with the date fol-
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1 lowing the adjustment reference month (defined in

2 paragraph (3)(C)) for the obligation and ending with

3 the last date of the adjustment computation month

4 (defined in paragraph (3)(B)) for the obligation.

5 ‘‘(3) For purposes of this subsection—

6 ‘‘(A) The term ‘CPI adjustment factor’, for an

7 obligation in connection with any calendar month,

8 means the ratio (expressed as a percentage) of—

9 ‘‘(i) the Consumer Price Index for the ad10 justment computation month for the obligation

11 in connection with such calendar month to

12 ‘‘(ii) the Consumer Price Index for the ad13 justment reference month for the obligation in

14 connection with such calendar month.

15 ‘‘(B) The term ‘adjustment computation month’

16 for an obligation means, in connection with a month

17 in which occurs the date of an adjustment in par

18 value of the obligation to be determined under para19 graph (1), the first of the 2 preceding calendar

20 months.

21 ‘‘(C) The term ‘adjustment reference month’

22 for an obligation means, in connection with a month

23 in which occurs the date of an adjustment in par

24 value of the obligation to be determined under para25 graph (1)—
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1 ‘‘(i) the last adjustment computation

2 month with respect to which an adjustment in

3 par value of the obligation under paragraph (1)

4 has occurred, or

5 ‘‘(ii) if no such adjustment in the par value

6 of the obligation has occurred, the first of the

7 2 months preceding the month in which such

8 obligation was issued.

9 ‘‘(D) The term ‘Consumer Price Index’ means

10 the Consumer Price Index for Urban Wage Earners

11 and Clerical Workers (CPI-W), issued by the Bureau

12 of Labor Statistics of the Department of Labor.’’.

13 SEC. 3. EFFECTIVE DATE AND TRANSITIONAL RULE.

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

15 this Act shall apply with respect to special obligations

16 issued on or after January 1, 2002.

17 (b) TRANSITIONAL RULE.—On January 1, 2002, the

18 Secretary of the Treasury shall redeem all obligations

19 which are held on such date by the Federal Old-Age and

20 Survivors Insurance Trust Fund and the Federal Dis21 ability Insurance Trust Fund and which were issued for

22 purchase by the Trust Funds pursuant to section 201(d)

23 of the Social Security Act. Upon the redemption of each

24 such obligation, such Secretary shall immediately issue an

25 obligation of the type authorized to be issued for purchase
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1 by the Trust Funds under such section 201(d) (as amend2 ed by this Act) with an initial par value equal to the par

3 value of the redeemed obligation and with a date of matu4 rity which is the same as the date of maturity of the re5 deemed obligation.

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