I

107TH CONGRESS

1ST SESSION H. R. 2110

To provide for the establishment and maintenance of personal Social Security

investment accounts under the Social Security system.

IN THE HOUSE OF REPRESENTATIVES

JUNE 7, 2001

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

on Ways and Means

A BILL

To provide for the establishment and maintenance of personal Social Security investment accounts under the Social Security system.

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 ‘‘Retirement Security

5 Act of 2001’’.

6 SEC. 2. INDIVIDUAL RETIREMENT INVESTMENT PROGRAM

7 AND PERSONAL SOCIAL SECURITY INVEST8 MENT ACCOUNTS.

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

10 is amended—
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1 (1) by inserting before section 201 the fol2 lowing:

3 ‘‘PART A—INSURANCE BENEFITS’’;

4 and

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

6 ‘‘PART B—INDIVIDUAL RETIREMENT INVESTMENT

7 PROGRAM

8 ‘‘DEFINITIONS

9 ‘‘SEC. 251. For purposes of this part—

10 ‘‘(1) ACCOUNT HOLDER.—The term ‘account

11 holder’ means an individual for whom a personal So12 cial Security investment account is established under

13 section 252(b).

14 ‘‘(2) INVESTMENT ACCOUNT.—The term ‘in15 vestment account’ means a personal Social Security

16 investment account established under section 252(b).

17 ‘‘(3) TRUST FUND.—The term ‘Trust Fund’

18 means the Social Security Investment Trust Fund

19 established under section 260.

20 ‘‘(4) EXECUTIVE DIRECTOR.—The term ‘Execu21 tive Director’ means the Executive Director under

22 this part authorized to so serve under section

23 266(b).
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1 ‘‘(5) BOARD.—The term ‘Board’ means the

2 Board of Trustees of the Trust Fund authorized to

3 so serve under section 266(a).

4 ‘‘PERSONAL SOCIAL SECURITY INVESTMENT ACCOUNTS

5 ‘‘SEC. 252. (a) CERTIFICATION OF NEW ACCOUNT

6 HOLDERS.—Upon the issuance of a Social Security ac7 count number under section 205(c)(2) to an individual

8 born on or after July 1, 2002, the Commissioner of Social

9 Security shall certify to the Executive Director and the

10 Secretary of the Treasury the identity and Social Security

11 account number of such individual.

12 ‘‘(b) ESTABLISHMENT OF PERSONAL SOCIAL SECU13 RITY INVESTMENT ACCOUNTS.—Upon receipt of any cer14 tification under subsection (a) with respect to an indi15 vidual, the Executive Director shall establish a personal

16 Social Security investment account for such individual.

17 Amounts in the Social Security Investment Trust Fund

18 shall be credited by the Executive Director to the invest19 ment account in accordance with this part. The investment

20 account shall be identified to the account holder by means

21 of the account holder’s Social Security account number.

22 The Executive Director shall establish an investment ac23 count for each account holder not later than the later of

24 January 1, 2003, or 30 days after receipt of the certifi25 cation with respect to the account holder.
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1 ‘‘(c) INITIAL CONTRIBUTION.—Upon the establish2 ment of each account holder’s investment account, the

3 Secretary of the Treasury shall transfer, from amounts

4 not otherwise appropriated in the general fund of the

5 Treasury to the Trust Fund, for crediting by the Execu6 tive Director to such investment account under subsection

7 (b), an amount equal to $1,000.00.

8 ‘‘(d) INVESTMENT ACCOUNT BALANCE.—The bal9 ance in an account holder’s investment account at any

10 time is the excess of—

11 ‘‘(1) the sum of—

12 ‘‘(A) the contribution made to the Trust

13 Fund and credited to the investment account

14 pursuant to subsection (c);

15 ‘‘(B) all contributions made to the Trust

16 Fund and credited to the investment account

17 under section 253, and

18 ‘‘(C) the total amount of the allocations

19 made to and reductions made in the investment

20 account pursuant to subsection (e),

21 over

22 ‘‘(2) the amounts paid out of the Trust Fund

23 with respect to such individual under this part.

24 ‘‘(e) ALLOCATION OF EARNINGS AND LOSSES.—Pur25 suant to regulations prescribed by the Executive Director,
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1 the Executive Director shall allocate to each investment

2 account an amount equal to the net earnings and net

3 losses from each investment of sums in the Trust Fund

4 which are attributable, on a pro rata basis, to sums cred5 ited to such investment account, reduced by an appro6 priate share of the administrative expenses paid out of the

7 net earnings under section 256(d), as determined by the

8 Executive Director.

9 ‘‘(f) ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNT10 ANT.—

11 ‘‘(1) IN GENERAL.—The Executive Director

12 shall annually engage, on behalf of all account hold13 ers, an independent qualified public accountant, who

14 shall conduct an examination of all accounts and

15 other books and records maintained in the adminis16 tration of this part as the public accountant con17 siders necessary to enable the public accountant to

18 make the determination required by paragraph (2).

19 The examination shall be conducted in accordance

20 with generally accepted auditing standards and shall

21 involve such tests of the accounts, books, and

22 records as the public accountant considers necessary.

23 ‘‘(2) EXAMINATION AND REPORT.—The public

24 accountant conducting an examination under para25 graph (1) shall determine whether the accounts,
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1 books, and records referred to in such paragraph

2 have been maintained in conformity with generally

3 accepted accounting principles applied on a basis

4 consistent with the manner in which such principles

5 were applied during the examination conducted

6 under such paragraph during the preceding year.

7 The public accountant shall transmit to the Board

8 and the Comptroller General of the United States a

9 report on his examination, including his determina10 tion under this paragraph.

11 ‘‘(3) RELIANCE ON ACTUARY’S CERTIFI12 CATIONS.—In making a determination under para13 graph (2), a public accountant may rely on the cor14 rectness of any actuarial matter certified by an en15 rolled actuary if the public accountant states his re16 liance in the report transmitted to the Board under

17 such paragraph.

18 ‘‘(4) DEFINITION.—For the purposes of this

19 subsection, the term ‘‘qualified public accountant’’

20 shall have the same meaning as is provided in sec21 tion 103(a)(3)(D) of the Employee Retirement In22 come Security Act of 1974 (29 U.S.C.

23 1023(a)(3)(D)).

24 ‘‘(g) INFORMATION REQUIRED TO BE PROVIDED TO

25 ACCOUNT HOLDERS.—
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1 ‘‘(1) IN GENERAL.—The Board shall prescribe

2 regulations under which each account holder shall be

3 furnished with—

4 ‘‘(A) a periodic statement relating to the

5 account holder’s investment account; and

6 ‘‘(B) a summary description of the invest7 ment options under section 254 covering, and

8 an evaluation of, each such option for at least

9 the 5-year period preceding the date as of

10 which such evaluation is made.

11 ‘‘(2) TIMELY PROVISION OF INFORMATION.—In12 formation under this subsection shall be provided at

13 least 30 calendar days before the date provided for

14 each election under section 254(c), and in a manner

15 designed to facilitate informed decisionmaking with

16 respect to each such election.

17 ‘‘(h) ASSUMPTION OF RISK.—Each account holder

18 who elects to invest in the Fixed Income Investment Fund

19 or the Common Stock Index Investment Fund described

20 in paragraphs (2) and (3), respectively, of section 254(a)

21 shall sign an acknowledgement prescribed by the Execu22 tive Director which states that the account holder under23 stands that an investment in either such Fund is made

24 at the account holder’s risk, that the account holder is

25 not protected by the Government against any loss on such
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1 investment, and that a return on such investment is not

2 guaranteed by the Government.

3 ‘‘(i) TREATMENT OF MINORS AND INCOMPETENT IN4 DIVIDUALS.—An election under this part to be made by

5 a minor, or an individual mentally incompetent or under

6 other legal disability, may be made by the person who is

7 constituted guardian or other fiduciary by the law of the

8 State of residence of the individual or is otherwise legally

9 vested with the care of the individual or his estate. Pay10 ment under this part due a minor, or an individual men11 tally incompetent or under other legal disability, may be

12 made to the person who is constituted guardian or other

13 fiduciary by the law of the State of residence of the claim14 ant or is otherwise legally vested with the care of the

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

16 or other fiduciary of the individual under legal disability

17 has not been appointed under the law of the State of resi18 dence of the individual, if any other person, in the judg19 ment of the Executive Director, is responsible for the care

20 of such individual, any election under this part which may

21 otherwise be made by such individual may be made by

22 such person, any payment under this part which is other23 wise payable to such individual may be made to such per24 son, and the payment of an annuity payment under this

25 part to such person bars recovery by any other person.
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1 ‘‘CONTRIBUTIONS TO THE SOCIAL SECURITY INVESTMENT

2 TRUST FUND

3 ‘‘SEC. 253. (a) IN GENERAL.—The Executive Direc4 tor shall prescribe regulations under which each individual

5 who is eligible to claim a deduction under section 222 of

6 the Internal Revenue Code of 1986 for contributions to

7 a personal Social Security investment account shall be af8 forded a reasonable opportunity to make contributions to

9 the Trust Fund, for crediting to such account, either from

10 time to time or under arrangements providing for regular,

11 periodic contributions. Such arrangements may include ar12 rangements for contributions of wages by employers on be13 half of employees. Any such arrangement shall also pro14 vide individuals a reasonable opportunity to modify the

15 amount to be contributed under this part, or to terminate

16 such contributions.

17 ‘‘(b) LIMITATION ON CONTRIBUTIONS.—Notwith18 standing any other provision of this section, no contribu19 tion may be made under this section to any account for

20 any year to the extent that such contribution, when added

21 to prior contributions to such account for such year, ex22 ceeds $10,000.

23 ‘‘(c) CREDITING PROCEDURES.—Amounts contrib24 uted by (or on behalf of) an account holder under this

25 section shall be deposited in the Trust Fund to the credit
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1 of that account holder’s investment account in accordance

2 with such procedures as the Comptroller General of the

3 United States may, in consultation with the Executive Di4 rector, prescribe in regulations.

5 ‘‘(d) NONFORFEITABILITY OF CONTRIBUTIONS.—All

6 contributions made under this section shall be fully non7 forfeitable when made.

8 ‘‘INVESTMENT OF SOCIAL SECURITY INVESTMENT TRUST

9 FUND

10 ‘‘SEC. 254. (a) INVESTMENT FUNDS.—The Board

11 shall establish—

12 ‘‘(1) a Government Securities Investment Fund

13 under which sums in the Trust Fund are invested in

14 securities of the United States Government issued as

15 provided in subsection (e);

16 ‘‘(2) a Fixed Income Investment Fund under

17 which sums in the Trust Fund are invested in—

18 ‘‘(A) insurance contracts,

19 ‘‘(B) certificates of deposit, or

20 ‘‘(C) other instruments or obligations se21 lected by qualified professional asset managers,

22 which return the amount invested and pay in23 terest, at a specified rate or rates, on that

24 amount during a specified period of time;

25 ‘‘(3) a Common Stock Index Investment Fund

26 as provided in subsection (b); and
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1 ‘‘(4) such other investment fund or funds as the

2 Board may provide by regulation.

3 ‘‘(b) INDEX GOVERNING COMMON STOCK INDEX IN4 VESTMENT FUNDS.—

5 ‘‘(1) SELECTION OF INDEX.—The Board shall

6 select an index which is a commonly recognized

7 index comprised of common stock the aggregate

8 market value of which is a reasonably complete rep9 resentation of the United States equity markets.

10 ‘‘(2) PORTFOLIO DESIGN.—The Common Stock

11 Index Investment Fund shall be invested in a port12 folio designed to replicate the performance of the

13 index selected under paragraph (1). The portfolio

14 shall be designed such that, to the extent prac15 ticable, the percentage of the Common Stock Index

16 Investment Fund that is invested in each stock is

17 the same as the percentage determined by dividing

18 the aggregate market value of all shares of that

19 stock by the aggregate market value of all shares of

20 all stocks included in such index.

21 ‘‘(c) INVESTMENT ACCORDING TO ELECTIONS.—

22 ‘‘(1) IN GENERAL.—The Executive Director

23 shall invest the sums available in the Trust Fund for

24 investment as provided in elections made under sub25 section (d).
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1 ‘‘(2) DEFAULT INVESTMENT IN ABSENCE OF

2 ELECTION.—If an election has not been made with

3 respect to any sums in the Trust Fund available for

4 investment, the Executive Director shall invest such

5 sums in the Government Securities Investment

6 Fund.

7 ‘‘(d) SEMIANNUAL ELECTIONS.—

8 ‘‘(1) IN GENERAL.—At least twice each year, an

9 account holder may elect the investment funds re10 ferred to in subsection (a) into which the sums in

11 the Trust Fund credited to such account holder’s in12 vestment account are to be invested or reinvested.

13 ‘‘(2) INVESTMENT ACCORDING TO REGULA14 TIONS.—An election may be made under paragraph

15 (1) only in accordance with regulations prescribed by

16 the Executive Director and within such period as the

17 Executive Director shall provide in such regulations.

18 ‘‘(e) ISSUANCE OF SPECIAL OBLIGATIONS.—

19 ‘‘(1) AUTHORIZATION.—The Secretary of the

20 Treasury is authorized to issue special interest-bear21 ing obligations of the United States for purchase by

22 the Trust Fund for the Government Securities In23 vestment Fund.

24 ‘‘(2) REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—Obligations issued for

2 the purpose of this subsection shall have matu3 rities fixed with due regard to the needs of the

4 Trust Fund as determined by the Executive Di5 rector, and shall bear interest at a rate equal

6 to the average market yield (computed by the

7 Secretary of the Treasury on the basis of mar8 ket quotations as of the end of the calendar

9 month next preceding the date of issue of such

10 obligations) on all marketable interest-bearing

11 obligations of the United States then forming a

12 part of the public debt which are not due or

13 callable earlier than 4 years after the end of

14 such calendar month.

15 ‘‘(B) ROUNDING.—Any average market

16 yield computed under subparagraph (A) which

17 is not a multiple of one-eighth of 1 percent,

18 shall be rounded to the nearest multiple of one19 eighth of 1 percent.

20 ‘‘(f) NO VOTING RIGHTS IN SECURITIES.—The

21 Board, the Executive Director, and an account holder may

22 not exercise voting rights associated with the ownership

23 of securities by the Social Security Investment Trust

24 Fund.
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1 ‘‘DISTRIBUTIONS FROM THE SOCIAL SECURITY

2 INVESTMENT TRUST FUND

3 ‘‘SEC. 255. (a) IN GENERAL.—No distribution may

4 be made from the Social Security Investment Trust Fund

5 of any amount credited to the investment account of any

6 account holder, unless such distribution is in the form

7 of—

8 ‘‘(1) a benefit distribution described in sub9 section (b),

10 ‘‘(2) a distribution described in subsection (c),

11 or

12 ‘‘(3) a death distribution under subsection (d).

13 ‘‘(b) BENEFIT DISTRIBUTION.—

14 ‘‘(1) IN GENERAL.—A distribution from an in15 vestment account is in the form of a benefit distribu16 tion referred to in subsection (a)(1) if such distribu17 tion constitutes payment (in whole or in part) of a

18 monthly insurance benefit under part A based on the

19 wages and self-employment income of the account

20 holder.

21 ‘‘(2) PAYMENT OF MONTHLY INSURANCE BENE22 FITS.—Notwithstanding section 201(h), benefit pay23 ments required to be made under part A, other than

24 benefit payments required to be made under section

25 223 or 226 and benefit payments required to be
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1 made under subsection (b), (c), or (d) of section 202

2 to account holders entitled to benefits on the basis

3 of the wages and self-employment income of any

4 such account holder entitled to disability insurance

5 benefits, shall be made from amounts in the Trust

6 Fund credited to such account holder’s investment

7 account, except to the extent that such benefit pay8 ments exceed the balance credited to such account

9 holder’s investment account. Any amount of such

10 benefit payments in excess of the balance in such ac11 count holder’s investment account shall be payable

12 as provided in section 201(h). The Commissioner of

13 Social Security shall provide for certification to the

14 Executive Director for payment of such benefits

15 from the Trust Fund, and the Executive Director

16 shall make such payments from the Trust Fund in

17 accordance with such certification.

18 ‘‘(c) ANNUITIES AND LUMP SUM PAYMENTS.—A dis19 tribution referred to in subsection (a)(2) is described in

20 this subsection if—

21 ‘‘(1) the distribution is at the election of the ac22 count holder made (in such form and manner as

23 shall be prescribed by the Executive Director) on or

24 after the date of the commencement of such account
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1 holder’s entitlement to old-age insurance benefits

2 under section 202(a),

3 ‘‘(2) the amount of each distribution is in an

4 amount, as determined by the Executive Director,

5 which is not greater than the excess of—

6 ‘‘(A) the balance credited to such account

7 holder’s investment account, over

8 ‘‘(B) the amount necessary to provide for

9 benefit distributions as required under sub10 section (a)(1), and

11 ‘‘(3) the distributions shall be paid in the form

12 of annuities and other payments under section 256.

13 ‘‘(d) DEATH DISTRIBUTION.—

14 ‘‘(1) IN GENERAL.—A distribution from an in15 vestment account is in the form of a death distribu16 tion if such distribution is in the amount remaining

17 credited to the account holder as of the date of such

18 account holder’s death and, except as provided in

19 paragraph (2), is distributed in the same manner as

20 is provided for distribution of benefit payments

21 under section 204(d).

22 ‘‘(2) PORTION OF ACCOUNT BALANCE ATTRIB23 UTABLE TO FEDERAL CONTRIBUTION RETURNED TO

24 UNITED STATES.—The portion of the amount re25 maining credited to the account holder as of the
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1 date of such account holder’s death which is attrib2 utable to the contribution made under section 252(c)

3 shall be paid to the Secretary of the Treasury for

4 deposit into the general fund of the Treasury as mis5 cellaneous receipts. For purposes of the preceding

6 sentence, distributions from a personal social secu7 rity investment account shall be treated as first

8 made from amounts attributable to the contribution

9 made under section 252(c) and then from other

10 amounts.

11 ‘‘ANNUITIES AND LUMP SUM PAYMENTS PAYABLE FROM

12 THE SOCIAL SECURITY INVESTMENT TRUST FUND

13 ‘‘SEC. 256. (a) IN GENERAL.—An account holder

14 who is entitled to old-age insurance benefits under section

15 202(a) is entitled as provided in this section to the amount

16 of the balance in the account holder’s investment account

17 available for distribution under this section in accordance

18 with section 255.

19 ‘‘(b) ALTERNATIVE FORMS OF DISTRIBUTION.—Sub20 ject to section 258, any account holder who is entitled to

21 old-age insurance benefits under section 202(a) is entitled

22 and may elect—

23 ‘‘(1) to receive an immediate annuity from the

24 Trust Fund;

25 ‘‘(2) to defer the commencement of the pay26 ment of an annuity from the Trust Fund until such
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1 date as the account holder specifies, but not later

2 than April 1 of the year following the year in which

the account holder becomes 701 3 ⁄2 years of age;

4 ‘‘(3) to withdraw the amount of the balance in

5 the account holder’s investment account in the Trust

6 Fund in one or more substantially equal payments

7 to be made not less frequently than annually and to

8 commence before April 1 of the year following the

year in which the account holder becomes 701 9 ⁄2

10 years of age; or

11 ‘‘(4) to transfer the amount of the balance in

12 the account holder’s investment account in the Trust

13 Fund to an eligible retirement plan as provided in

14 subsection (c).

15 ‘‘(c) TRANSFERS TO ELIGIBLE RETIREMENT

16 PLANS.—

17 ‘‘(1) IN GENERAL.—The Executive Director

18 shall make each transfer elected under subsection

19 (b)(4) directly to an eligible retirement plan or plans

20 (as defined in section 402(c)(8)(B) of the Internal

21 Revenue Code of 1986) identified by the account

22 holder for whom the transfer is made.

23 ‘‘(2) TRANSFER CONTINGENT UPON RECEIPT

24 OF NECESSARY INFORMATION.—A transfer may not

25 be made for an account holder under paragraph (1)
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1 until the Executive Director receives from such ac2 count holder the information required by the Execu3 tive Director specifically to identify the eligible re4 tirement plan or plans to which the transfer is to be

5 made.

6 ‘‘(d) MODIFICATION OF ELECTIONS.—

7 ‘‘(1) IN GENERAL.—Subject to paragraph

8 (3)(A) and subsections (a) and (d) of section 258,

9 an account holder may change an election previously

10 made under this section.

11 ‘‘(2) MODIFICATION OF DATE FOR DELAYED

12 DISTRIBUTIONS.—Subject to paragraph (3)(B) and

13 section 258(d), an account holder who has made an

14 election pursuant to subsection (b)(2) may modify

15 the date specified in such election or in a previous

16 modification under this paragraph.

17 ‘‘(3) LIMITATIONS.—

18 ‘‘(A) MODIFICATIONS DISALLOWED UPON

19 COMMENCEMENT OF DISTRIBUTION.—An ac20 count holder may not change an election under

21 this section on or after the date on which a

22 payment is made in accordance with such elec23 tion or, in the case of an election to receive an

24 annuity, the date on which an annuity contract
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1 is purchased to provide for the annuity elected

2 by the account holder.

3 ‘‘(B) OTHER LIMITATIONS.—A modifica4 tion of a date may not be made under para5 graph (2) on or after the date on which an an6 nuity contract is purchased to provide for the

7 annuity involved, and may not specify a date

8 for the commencement of an annuity earlier

9 than 90 days after the date on which the modi10 fication is submitted to the Executive Director

11 (or such period shorter than 90 days as the Ex12 ecutive Director may by regulation prescribe).

13 ‘‘(e) DEFAULT MEANS OF DISTRIBUTION.—

14 ‘‘(1) LUMP SUM DISTRIBUTIONS OF MINIMAL

15 AMOUNTS.—Notwithstanding subsection (b), if an

16 account holder becomes entitled to old-age insurance

17 benefits under section 202(a) and the balance in

18 such account holder’s investment account is $3,500

19 or less, the Executive Director shall pay the balance

20 to the account holder in a single payment unless the

21 account holder elects, at such time and otherwise in

22 such manner as the Executive Director prescribes,

23 one of the options available under subsection (b).

24 ‘‘(2) DEFAULT ANNUITY COMMENCEMENT

25 DATE.—Unless otherwise elected under this section,
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1 and subject to paragraph (1), the balance in an ac2 count holder’s investment account shall be paid as

3 an annuity commencing for the account holder on

4 February 1 of the year following the year in which

5 the account holder becomes entitled to old-age insur6 ance benefits under section 202(a).

7 ‘‘PAYMENT OF ANNUITIES

8 ‘‘SEC. 257. (a) METHODS OF PAYMENT.—The Board

9 shall prescribe methods of payment of annuities under this

10 part. The methods of payment prescribed under this sub11 section shall include, but not be limited to—

12 ‘‘(1) a method which provides for the payment

13 of a monthly annuity only to an annuitant during

14 the life of the annuitant;

15 ‘‘(2) a method which provides for the payment

16 of a monthly annuity to an annuitant for the joint

17 lives of the annuitant and the spouse of the annu18 itant and an appropriate monthly annuity to the one

19 of them who survives the other of them for the life

20 of the survivor;

21 ‘‘(3) a method described in paragraph (1) which

22 provides for automatic adjustments in the amount of

23 the annuity payable so long as the amount of the

24 annuity payable in any one year shall not be less

25 than the amount payable in the previous year;
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1 ‘‘(4) a method described in paragraph (2) which

2 provides for automatic adjustments in the amount of

3 the annuity payable so long as the amount of the an4 nuity payable in any one year shall not be less than

5 the amount payable in the previous year; and

6 ‘‘(5) a method which provides for the payment

7 of a monthly annuity—

8 ‘‘(A) to the annuitant for the joint lives of

9 the annuitant and an individual who is des10 ignated by the annuitant under regulations pre11 scribed by the Executive Director and (i) is a

12 former spouse of the annuitant, or (ii) has an

13 insurable interest in the annuitant; and

14 ‘‘(B) to the one of them who survives the

15 other of them for the life of the survivor.

16 ‘‘(b) REQUIREMENT OF ELECTION.—Subject to sec17 tion 258(c), under such regulations as the Executive Di18 rector shall prescribe, an account holder who elects under

19 section 256 to receive an annuity under this part shall

20 elect, on or before the date on which an annuity contract

21 is purchased to provide for that annuity, one of the meth22 ods of payment prescribed under subsection (a).

23 ‘‘(c) CONTINUED PERIOD OF 5 YEARS AVAILABILITY

24 FOR ELIMINATED METHODS.—Notwithstanding an elimi25 nation of a method of payment by the Board, an account
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1 holder may elect the eliminated method if the elimination

2 of such method became effective less than 5 years before

3 the date on which the annuity commences.

4 ‘‘(d) CONTRACTS FOR PURCHASE OF ANNUITIES.—

5 ‘‘(1) TIME LIMIT FOR ENTERING INTO CON6 TRACT.—Not earlier than 90 days (or such shorter

7 period as the Executive Director may by regulation

8 prescribe) before an annuity is to commence under

9 this part, the Executive Director shall expend the

10 balance in the annuitant’s account to purchase an

11 annuity contract from any entity which, in the nor12 mal course of its business, sells and provides annu13 ities.

14 ‘‘(2) ASSURANCE OF PROVISION OF ANNUITY.—

15 The Executive Director shall assure, by contract en16 tered into with each entity from which an annuity

17 contract is purchased under paragraph (1), that the

18 annuity shall be provided in accordance with the

19 provisions of this part.

20 ‘‘(3) TERMS AND CONDITIONS.—An annuity

21 contract purchased under paragraph (1) shall in22 clude such terms and conditions as the Executive

23 Director requires for the protection of the annuitant.

24 ‘‘(4) BONDING.—The Executive Director shall

25 require, from each entity from which an annuity
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1 contract is purchased under paragraph (1), a bond

2 or proof of financial responsibility sufficient to pro3 tect the annuitant.

4 ‘‘(e) EXEMPTION FROM LOCAL TAXATION OF

5 AMOUNTS PAID TO PURCHASE ANNUITIES.—

6 ‘‘(1) IN GENERAL.—No tax, fee, or other mone7 tary payment may be imposed or collected by any

8 State, or by any political subdivision or other gov9 ernmental authority thereof, on, or with respect to,

10 any amount paid to purchase an annuity contract

11 under this section.

12 ‘‘(2) TAXATION OF ISSUER PERMITTED.—Para13 graph (1) shall not be construed to exempt any com14 pany or other entity issuing an annuity contract

15 under this section from the imposition, payment, or

16 collection of a tax, fee, or other monetary payment

17 on the net income or profit accruing to or realized

18 by that entity from the sale of an annuity contract

19 under this section if that tax, fee, or payment is ap20 plicable to a broad range of business activity.

21 ‘‘PROTECTIONS FOR SPOUSES AND FORMER SPOUSES

22 ‘‘SEC. 258. (a) REQUIREMENT OF SPOUSAL CON23 SENT.—

24 ‘‘(1) IN GENERAL.—A married account holder

25 may make an election under subsection (b)(3) or

26 (b)(4) of section 256 or change an election pre-
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1 viously made under subsection (b)(1) or (b)(2) of

2 such section only if the account holder and the ac3 count holder’s spouse jointly waive, by written elec4 tion, any right which the spouse may have to a sur5 vivor annuity with respect to such account holder

6 under section 257 or subsection (b).

7 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

8 apply to an election or change of election by an ac9 count holder who establishes to the satisfaction of

10 the Executive Director (at the time of the election

11 or change and in accordance with regulations pre12 scribed by the Executive Director)—

13 ‘‘(A) that the spouse’s whereabouts cannot

14 be determined; or

15 ‘‘(B) that, due to exceptional cir16 cumstances, requiring the spouse’s waiver would

17 otherwise be inappropriate.

18 ‘‘(b) JOINT AND SURVIVOR ANNUITY FORM APPLIES

19 UNLESS OTHERWISE ELECTED.—

20 ‘‘(1) IN GENERAL.—Notwithstanding any elec21 tion under subsection (b) of section 257, the method

22 described in subsection (a)(2)(B) of such section (or,

23 if more than one form of such method is available,

24 the form which the Board determines to be the one

25 which provides for a surviving spouse a survivor an-
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1 nuity most closely approximating the annuity of a

2 surviving spouse under section 8442 of title 5,

3 United States Code) shall be deemed the applicable

4 method under such subsection (b) in the case of an

5 account holder who is married on the date on which

6 an annuity contract is purchased to provide for the

7 account holder’s annuity under this part.

8 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

9 apply if—

10 ‘‘(A) a joint waiver of such method is

11 made, in writing, by the account holder and the

12 spouse; or

13 ‘‘(B) the account holder waives such meth14 od, in writing, after establishing to the satisfac15 tion of the Executive Director that cir16 cumstances described under subsection (a)(2)

17 (A) or (B) make the requirement of a joint

18 waiver inappropriate.

19 ‘‘(c) ELECTIONS AND OTHER CHANGES SUBJECT TO

20 COURT ORDERS.—

21 ‘‘(1) IN GENERAL.—An election, change of elec22 tion, or modification of the commencement date of

23 a deferred annuity shall not be effective under this

24 part to the extent that the election, change, modi-
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1 fication, or transfer conflicts with any court decree,

2 order, or agreement described in paragraph (2).

3 ‘‘(2) REQUIREMENTS.—A court decree, order,

4 or agreement referred to in paragraph (1) is, with

5 respect to an account holder, a court decree of di6 vorce, annulment, or legal separation issued in the

7 case of the account holder and any former spouse of

8 the account holder or any court order or court-ap9 proved property settlement agreement incident to

10 the decree if—

11 ‘‘(A) the decree, order, or agreement ex12 pressly relates to any portion of the balance in

13 the account holder’s investment account; and

14 ‘‘(B) notice of the decree, order, or agree15 ment was received by the Executive Director

16 before—

17 ‘‘(i) the date on which payment is

18 made, or

19 ‘‘(ii) in the case of an annuity, the

20 date on which an annuity contract is pur21 chased to provide for the annuity,

22 in accordance with the election, change, modi23 fication, or contribution referred to in para24 graph (1).
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1 ‘‘(3) TREATMENT OF 2 OR MORE COURT OR2 DERS.—The Executive Director shall prescribe regu3 lations under which this subsection shall be applied

4 in any case in which the Executive Director receives

5 two or more decrees, orders, or agreements referred

6 to in paragraph (1).

7 ‘‘(d) RIGHTS OF FORMER SPOUSES.—

8 ‘‘(1) IN GENERAL.—Subject to paragraphs (2)

9 through (7), a former spouse of a deceased account

10 holder who died as a fully insured individual is enti11 tled to a survivor annuity under this subsection if

12 and to the extent that—

13 ‘‘(A) an election under section 257(a)(5),

14 or

15 ‘‘(B) any court decree, order, or agreement

16 (described in subsection (c)(2), without regard

17 to subparagraph (B) of such subsection) which

18 relates to such deceased account holder and

19 such former spouse,

20 expressly provides for such survivor annuity.

21 ‘‘(2) WRITTEN NOTICE REQUIRED.—Paragraph

22 (1) shall apply only to payments made by the Execu23 tive Director after the date on which the Executive

24 Director receives written notice of the election, de25 cree, order, or agreement, and such additional infor-
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1 mation and documentation as the Executive Director

2 may require.

3 ‘‘(3) LIMITATION ON AMOUNT.—The amount of

4 the survivor annuity payable from the Trust Fund

5 to a former spouse of a deceased account holder

6 under this section may not exceed the excess, if any,

7 of—

8 ‘‘(A) the amount of the survivor annuity

9 determined for a surviving spouse of the de10 ceased account holder under the method de11 scribed in subsection (b)(1), over

12 ‘‘(B) the total amount of all other survivor

13 annuities payable under part to other former

14 spouses of such deceased account holder based

15 on the order of precedence provided in para16 graph (4).

17 ‘‘(4) ORDER OF PRECEDENCE.—If more than

18 one former spouse of a deceased account holder is

19 entitled to a survivor annuity pursuant to this sub20 section, the amount of each such survivor annuity

21 shall be limited appropriately to carry out paragraph

22 (3) in the order of precedence established for the en23 titlements by the chronological order of the dates on

24 which elections are properly made pursuant to sec25 tion 257(a)(5) and the dates on which the court de-
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1 crees, orders, or agreements applicable to the entitle2 ment were issued, as the case may be.

3 ‘‘(5) RULES FOR COMMENCEMENT AND TERMI4 NATION UNDER COURT ORDERS.—The commence5 ment and termination of an annuity payable under

6 this section shall be governed by the terms of the ap7 plicable order, decree, agreement, or election, as the

8 case may be, except that any such annuity—

9 ‘‘(A) shall not commence before—

10 ‘‘(i) the day after the account holder

11 dies; or

12 ‘‘(ii) the first day of the second month

13 beginning after the date on which the Ex14 ecutive Director receives written notice of

15 the order, decree, agreement, or election,

16 as the case may be, together with such ad17 ditional information or documentation as

18 the Executive Director may prescribe;

19 whichever is later; and

20 ‘‘(B) shall terminate no later than the last

21 day of the month before the former spouse re22 marries before becoming 55 years of age or

23 dies.

24 ‘‘(6) RESTRICTION ON MODIFICATIONS.—For

25 purposes of this part, a modification in a decree,
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1 order, agreement, or election referred to in this sec2 tion shall not be effective—

3 ‘‘(A) if such modification is made after the

4 retirement or death of the account holder or an5 nuitant concerned; and

6 ‘‘(B) to the extent that such modification

7 involves an annuity under this part.

8 ‘‘(7) COURT ORDERS SUBJECT TO PREVIOUS

9 JOINT WAIVERS.—For the purposes of this section,

10 a court decree, order, or agreement or an election re11 ferred to in subsection (a) shall not be effective, in

12 the case of a former spouse, to the extent that the

13 election is inconsistent with any joint waiver pre14 viously executed with respect to such former spouse

15 under subsection (a)(2) or (b)(2).

16 ‘‘(8) EXCLUSIVE RECOVERY.—Any payment

17 under this subsection to any individual bars recovery

18 by any other individual.

19 ‘‘(e) WAIVERS AND MODIFICATIONS SUBJECT TO

20 PRESCRIBED PROCEDURES.—Waivers and notifications

21 required by this section and waivers of the requirements

22 for such waivers and notifications (as authorized by this

23 section) may be made only in accordance with procedures

24 prescribed by the Executive Director.
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1 ‘‘(f) INAPPLICABILITY TO MINIMAL ACCOUNT BAL2 ANCES.—None of the provisions of this section requiring

3 notification to, or the consent or waiver of, a spouse or

4 former spouse of an account holder shall apply in any case

5 in which the balance in the account holder’s investment

6 account is $3,500 or less.

7 ‘‘(g) APPLICABLE COURT ORDERS.—The protections

8 provided by this section are in addition to the protections

9 provided by section 263.

10 ‘‘ADMINISTRATIVE PROVISIONS

11 ‘‘SEC. 259. (a) PAYMENTS AND TRANSFERS IN AC12 CORDANCE WITH ELECTION.—The Executive Director

13 shall make or provide for payments and transfers in ac14 cordance with an election of an account holder under sec15 tion 256 or 257(b) or, if applicable, in accordance with

16 section 258.

17 ‘‘(b) ELECTIONS AND MODIFICATIONS OF DEFERRED

18 COMMENCEMENT DATES IN WRITING.—Any election,

19 change of election, or modification of a deferred annuity

20 commencement date made under this part shall be in writ21 ing and shall be filed with the Executive Director in ac22 cordance with regulations prescribed by the Executive Di23 rector.
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1 ‘‘SOCIAL SECURITY INVESTMENT TRUST FUND

2 ‘‘SEC. 260. (a) IN GENERAL.—There is established

3 in the Treasury of the United States a Social Security In4 vestment Trust Fund.

5 ‘‘(b) AMOUNT COMPRISING THE TRUST FUND.—The

6 Trust Fund consists of the sum of all amounts contributed

7 under sections 252(c) and 253, increased by the total net

8 earnings from investments of sums in the Trust Fund

9 under section 254 or reduced by the total net losses from

10 investments of the Trust Fund under such section, and

11 reduced by the total amount of payments made from the

12 Trust Fund (including payments for administrative ex13 penses).

14 ‘‘(c) APPROPRIATION OF TRUST FUND AMOUNTS.—

15 The sums in the Trust Fund are appropriated and shall

16 remain available without fiscal year limitation—

17 ‘‘(1) to invest under section 254;

18 ‘‘(2) to make distributions or purchase annuity

19 contracts under this part;

20 ‘‘(3) to pay the administrative expenses in21 curred in carrying out this part under subsection

22 (d); and

23 ‘‘(4) to purchase insurance as provided in sub24 section (h)(3)(B).
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1 ‘‘(d) ADMINISTRATIVE EXPENSES.—Administrative

2 expenses incurred to carry out this part shall be paid out

3 of net earnings in the Trust Fund.

4 ‘‘(e) ASSIGNMENT OR ALIENATION AND RELATED

5 MATTERS.—

6 ‘‘(1) EXCLUSIVE BENEFIT OF THE ACCOUNT

7 HOLDER.—Subject to subsection (d) and paragraphs

8 (2) and (3), sums in the Trust Fund credited to the

9 account of any account holder may not be used for,

10 or diverted to, purposes other than for the exclusive

11 benefit of the account holder or other persons to

12 whom distributions are made under section 255.

13 ‘‘(2) IMMUNITY FROM ASSIGNMENT, ALIEN14 ATION, AND CERTAIN OTHER LEGAL PROCESS.—Ex15 cept as provided in paragraph (3), sums in the

16 Trust Fund may not be assigned or alienated and

17 are not subject to execution, levy, attachment, gar18 nishment, or other legal process. For the purposes of

19 this paragraph, a loan made from the Trust Fund

20 to an account holder shall not be considered to be

21 an assignment or alienation.

22 ‘‘(3) EXCEPTIONS.—Moneys due or payable

23 from the Trust Fund to any person and, in the case

24 of an account holder, the balance in the individual

25 account of the account holder, shall be subject to
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1 legal process for the enforcement of the legal obliga2 tions of such person or account holder to provide

3 child support or make alimony payments as provided

4 in section 459 or relating to the enforcement of a

5 judgment for physically, sexually, or emotionally

6 abusing a child as provided under section 263.

7 ‘‘(f) EXCLUSIVE APPROPRIATION.—The sums in the

8 Trust Fund shall not be appropriated for any purpose

9 other than the purposes specified in this section and may

10 not be used for any other purpose.

11 ‘‘(g) CONTRIBUTIONS AND EARNINGS HELD IN

12 TRUST FOR ACCOUNT HOLDERS.—All sums contributed

13 to the Trust Fund by an account holder and all net earn14 ings in the Trust Fund attributable to investment of such

15 sums are held in the Trust Fund in trust for such account

16 holder.

17 ‘‘(h) FIDUCIARY RESPONSIBILITIES; ENFORCEMENT

18 UNDER THE SECRETARY OF LABOR.—

19 ‘‘(1) IN GENERAL.—Under regulations of the

20 Secretary of Labor, the provisions of sections 8477

21 and 8478 of title 5, United States Code, shall apply

22 in connection with the Trust Fund in the same man23 ner and to the same extent as such provisions apply

24 in connection with the Thrift Savings Fund.
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1 ‘‘(2) INVESTIGATIVE AUTHORITY.—Any author2 ity available to the Secretary of Labor under section

3 504 of the Employee Retirement Income Security

4 Act of 1974 is hereby made available to the Sec5 retary of Labor, and any officer designated by the

6 Secretary of Labor, to determine whether any person

7 has violated, or is about to violate, any provision ap8 plicable under paragraph (1).

9 ‘‘(3) EXCULPATORY PROVISIONS; INSURANCE.—

10 ‘‘(A) IN GENERAL.—Any provision in an

11 agreement or instrument which purports to re12 lieve a fiduciary from responsibility or liability

13 for any responsibility, obligation, or duty under

14 this part shall be void.

15 ‘‘(B) INSURANCE.—The Trust Fund shall

16 be available and may be used at the discretion

17 of the Executive Director to purchase insurance

18 to cover potential liability of persons who serve

19 in a fiduciary capacity with respect to the Trust

20 Fund, without regard to whether a policy of in21 surance permits recourse by the insurer against

22 the fiduciary in the case of a breach of a fidu23 ciary obligation.

24 ‘‘WAIVER, ALLOTMENT AND ASSIGNMENT OF PAYMENTS

25 ‘‘SEC. 261. (a) WAIVER OF ENTITLEMENT.—An indi26 vidual entitled to an annuity or other payment payable
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1 from the Trust Fund may decline to accept all or any part

2 of the amount of the payment by a waiver signed and filed

3 with the Executive Director. The waiver may be revoked

4 in writing at any time. Payment of the annuity waived

5 may not be made for the period during which the waiver

6 is in effect.

7 ‘‘(b) ALLOTMENTS OR ASSIGNMENTS.—An individual

8 entitled to an annuity or other payment payable from the

9 Trust Fund may make allotments or assignments of

10 amounts from the annuity or other payment for such pur11 poses as the Executive Director considers appropriate.

12 ‘‘APPLICATION FOR ANNUITY OR OTHER PAYMENTS

13 ‘‘SEC. 262. (a) APPLICATIONS REQUIRED.—No pay14 ment of an annuity or other payment from the Social Se15 curity Investment Trust Fund under this part may be

16 made unless an application for payment of the annuity or

17 other payment is received by the Executive Director before

18 the one hundred and fifteenth anniversary of the birth of

19 the account holder.

20 ‘‘(b) APPLICATIONS WITH RESPECT TO DECEASED

21 ACCOUNT HOLDERS.—Notwithstanding subsection (a),

22 after the death of an account holder, a payment of the

23 annuity or other payment shall not be paid unless an ap24 plication therefor is received by the Executive Director

25 within 30 years after the death or other event which estab26 lishes the entitlement to the annuity or other payment.
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1 ‘‘COURT ORDERS

2 ‘‘SEC. 263. (a) ALTERNATIVE PAYEES UNDER

3 COURT ORDERS.—Payments under this part which would

4 otherwise be made to an account holder or an annuitant

5 shall be paid (in whole or in part) by the Executive Direc6 tor to another person if and to the extent expressly pro7 vided for in the terms of—

8 ‘‘(1) any court decree of divorce, annulment, or

9 legal separation, or the terms of any court order or

10 court-approved property settlement agreement inci11 dent to any court decree of divorce, annulment, or

12 legal separation; or

13 ‘‘(2) any court order or other similar process in

14 the nature of garnishment for the enforcement of a

15 judgment rendered against such account holder or

16 annuitant, for physically, sexually, or emotionally

17 abusing a child.

18 In the event that the Executive Director, as the case may

19 be, is served with more than 1 decree, order, or other legal

20 process with respect to the same moneys due or payable

21 to any individual, such moneys shall be available to satisfy

22 such processes on a first-come, first-served basis, with any

23 such process being satisfied out of such moneys as remain

24 after the satisfaction of all such processes which have been

25 previously served.
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1 ‘‘(b) WRITTEN NOTICE REQUIREMENTS.—Sub2 section (a) shall apply only to payments made by the Exec3 utive Director under this part after the date on which the

4 Executive Director receives written notice of such decree,

5 order, other legal process, or agreement, and such addi6 tional information and documentation as the Executive

7 Director may require.

8 ‘‘(c) DEFINITIONS.—For the purpose of this

9 section—

10 ‘‘(1) the term ‘judgment rendered for phys11 ically, sexually, or emotionally abusing a child’

12 means any legal claim perfected through a final en13 forceable judgment, which claim is based in whole or

14 in part upon the physical, sexual, or emotional abuse

15 of a child, whether or not that abuse is accompanied

16 by other actionable wrongdoing, such as sexual ex17 ploitation or gross negligence; and

18 ‘‘(2) the term ‘child’ means an individual under

19 18 years of age.

20 ‘‘WITHHOLDING OF STATE INCOME TAXES

21 ‘‘SEC. 264. (a) WITHHOLDING AGREEMENTS.—The

22 Executive Director shall, in accordance with this section,

23 enter into an agreement with any State within 120 days

24 of a request for agreement from the proper State official.

25 The agreement shall provide that the Executive Director

26 shall withhold State income tax in the case of the monthly
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1 annuity of any annuitant who voluntarily requests, in writ2 ing, such withholding. The amounts withheld during any

3 calendar quarter shall be held in the Trust Fund and dis4 bursed to the States during the month following that cal5 endar quarter.

6 ‘‘(b) NO MULTIPLE REQUESTS.—An annuitant may

7 have in effect at any time only one request for withholding

8 under this section, and an annuitant may not have more

9 than two such requests in effect during any one calendar

10 year.

11 ‘‘(c) CHANGES AND REVOCATIONS.—Subject to sub12 section (b), an annuitant may change the State designated

13 by that annuitant for purposes of having withholdings

14 made, and may request that the withholdings be remitted

15 in accordance with such change. An annuitant also may

16 revoke any request of that annuitant for withholding. Any

17 change in the State designated or revocation is effective

18 on the first day of the month after the month in which

19 the request or the revocation is processed by the Executive

20 Director, but in no event later than on the first day of

21 the second month beginning after the day on which such

22 request or revocation is received by the Executive Direc23 tor.

24 ‘‘(d) RESERVATIONS TO THE UNITED STATES; RE25 PAYMENTS OF ERRONEOUS WITHHOLDINGS.—This sec-
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1 tion does not give the consent of the United States to the

2 application of a statute which imposes more burdensome

3 requirements on the United States than on employers gen4 erally, or which subjects the United States or any annu5 itant to a penalty or liability because of this section. The

6 Executive Director may not accept pay from a State for

7 services performed in withholding State income taxes from

8 annuities. Any amount erroneously withheld from an an9 nuity and paid to a State by the Executive Director shall

10 be repaid by the State in accordance with regulations

11 issued by the Executive Director.

12 ‘‘(e) DEFINITION.—For the purpose of this section,

13 the term ‘annuitant’ includes a survivor who is receiving

14 an annuity from the Trust Fund.

15 ‘‘TAX TREATMENT OF THE SOCIAL SECURITY

16 INVESTMENT TRUST FUND

17 ‘‘SEC. 265. The Trust Fund shall be exempt from

18 taxation under subtitle A of the Internal Revenue Code

19 of 1986.

20 ‘‘ADMINISTRATION

21 ‘‘SEC. 266. (a) BOARD OF TRUSTEES.—

22 ‘‘(1) IN GENERAL.—The Federal Retirement

23 Thrift Investment Board established by section

24 8472(a) of title 5, United States Code, shall also

25 serve as the Board of Trustees of the Social Security

26 Investment Trust Fund.
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1 ‘‘(2) DUTIES.—It shall be the duty of the

2 Board to—

3 ‘‘(A) hold the Trust Fund;

4 ‘‘(B) report to the Congress not later than

5 the first day of April of each year on the oper6 ation and status of the Trust Fund during the

7 preceding fiscal year and on its expected oper8 ation and status during the next ensuing 5 fis9 cal years;

10 ‘‘(C) develop investment policies which pro11 vide for—

12 ‘‘(i) prudent investments suitable for

13 accumulating funds for payment of retire14 ment income, and

15 ‘‘(ii) low administrative costs;

16 ‘‘(D) recommend improvements in adminis17 trative procedures and policies designed to ef18 fectuate the proper coordination of the program

19 established under this part with the old-age,

20 survivors, and disability insurance program es21 tablished under part A; and

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

23 managing the Trust Fund and recommend

24 changes in such policies, including necessary

25 changes in the provisions of the law which gov-
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1 ern the way in which the Trust Funds are to

2 be managed and invested.

3 ‘‘(b) EXECUTIVE DIRECTOR.—

4 ‘‘(1) IN GENERAL.—The Executive Director ap5 pointed under section 8474(a) of title 5, United

6 States Code, shall also serve as Executive Director

7 under this part.

8 ‘‘(2) DUTIES.—The Executive Director shall—

9 ‘‘(A) carry out the policies established by

10 the Board under this part;

11 ‘‘(B) invest and manage the Trust Fund in

12 accordance with the investment policies and

13 other policies established by the Board under

14 this part;

15 ‘‘(C) purchase annuity contracts and pro16 vide for the payment of other benefits under

17 this part;

18 ‘‘(D) administer the provisions of this part;

19 and

20 ‘‘(E) prescribe such regulations (other

21 than regulations relating to fiduciary respon22 sibilities) as may be necessary for the adminis23 tration of this part.

24 ‘‘(3) AUTHORIZED FUNCTIONS.—The Executive

25 Director may—
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1 ‘‘(A) prescribe such regulations as may be

2 necessary to carry out the responsibilities of the

3 Executive Director under this part, other than

4 regulations relating to fiduciary responsibilities;

5 ‘‘(B) appoint such personnel as may be

6 necessary to carry out the provisions of this

7 part;

8 ‘‘(C) subject to approval by the Board,

9 procure the services of experts and consultants

10 under section 3109 of title 5, United States

11 Code;

12 ‘‘(D) secure directly from other agencies

13 and instrumentalities of the Federal Govern14 ment any information necessary to carry out

15 the provisions of this part and policies of the

16 Board under this part;

17 ‘‘(E) make such payments out of sums in

18 the Trust Fund as the Executive Director de19 termines are necessary to carry out the provi20 sions of this part and the policies of the Board

21 under this part;

22 ‘‘(F) pay the compensation, per diem, and

23 travel expenses of individuals appointed under

24 subparagraphs (B), (C), and (G) from the

25 Trust Fund;
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1 ‘‘(G) accept and use the services of individ2 uals employed intermittently in the Government

3 service and reimburse such individuals for trav4 el expenses, as authorized by section 5703 of

5 title 5, United States Code, including per diem

6 as authorized by section 5702 of such title;

7 ‘‘(H) except as otherwise expressly prohib8 ited by law or the policies of the Board, dele9 gate any of the Executive Director’s functions

10 to such employees under the Board as the Ex11 ecutive Director may designate and authorize

12 such successive redelegations of such functions

13 to such employees under the Board as the Ex14 ecutive Director may consider to be necessary

15 or appropriate; and

16 ‘‘(I) take such other actions as are appro17 priate to carry out the functions of the Execu18 tive Director.

19 ‘‘(c) SOURCE OF COMPENSATION.—Notwithstanding

20 paragraph (3) of section 8476(d) of title 5, United States

21 Code, basic pay paid for any fiscal year as compensation

22 to each member of the Board (and each officer and em23 ployee of the Board) shall be paid from the Trust Fund

24 (in lieu of the Thrift Savings Fund) in an amount which

25 bears the same ratio to the total amount of basic pay paid
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1 to such member (or officer or employee) for such fiscal

2 year as the balance in the Trust Fund as of the beginning

3 of such fiscal year bears to the total amount of such bal4 ance and the balance in the Thrift Savings Fund as of

5 the beginning of such fiscal year.’’.

6 (b) CONFORMING AMENDMENTS.—Section 201(h) of

7 such Act (42 U.S.C. 401(h)) is amended—

8 (1) by striking ‘‘All other’’ in the second sen9 tence and inserting ‘‘Except as provided in section

10 255, all other’’; and

11 (2) by adding at the end the following new sen12 tence: ‘‘Any reference in this part to benefits under

13 this title shall be deemed a reference to benefits en14 titlement to which arises under this part.’’.

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

16 this section shall apply with respect to payments of old17 age insurance benefits for months after December 2002.

18 SEC. 3. FINANCING OF INITIAL GOVERNMENT CONTRIBU19 TIONS BY MEANS OF REDUCTION IN APPRO20 PRIATIONS TO TRUST FUNDS OF TAXES ON

21 RETIREMENT BENEFITS.

22 Section 121(e) of the Social Security Amendments of

23 1983 (42 U.S.C. 401 note) is amended—
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1 (1) by striking ‘‘less (ii) the amounts’’ in para2 graph (1) and inserting ‘‘less (ii) the sum of (I) the

3 amounts’’;

4 (2) by inserting before the period at the end of

5 paragraph (1) the following: ‘‘, and (II) the amounts

6 equivalent to the aggregate of initial contributions to

7 investment accounts to be made pursuant to section

8 252(c) of the Social Security Act’’; and

9 (3) by inserting before the period at the end of

10 the second sentence of paragraph (2) the following:

11 ‘‘and initial contributions to investment accounts

12 pursuant to section 252(c) of the Social Security Act

13 estimated to be made during such quarter’’.

14 SEC. 4. TAX TREATMENT OF AMOUNTS CONTRIBUTED TO,

15 AND DISTRIBUTIONS FROM, PERSONAL SO16 CIAL SECURITY INVESTMENT ACCOUNTS.

17 (a) IN GENERAL.—Part VII of subchapter B of chap18 ter 1 of the Internal Revenue Code of 1986 (relating to

19 additional itemized deductions for individuals) is amended

20 by redesignating section 222 as section 223 and by insert21 ing after section 221 the following new section:

22 ‘‘SEC. 222. PERSONAL SOCIAL SECURITY INVESTMENT AC23 COUNTS.

24 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an

25 individual, there shall be allowed as a deduction for the
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1 taxable year an amount equal to the amount contributed

2 in cash for such taxable year to the personal social security

3 investment account of any eligible individual.

4 ‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.—

5 ‘‘(1) IN GENERAL.—The amount allowable as a

6 deduction under subsection (a) for any taxable year

7 for contributions to the personal social security in8 vestment account of an eligible individual shall not

9 exceed $5,000.

10 ‘‘(2) SPECIAL RULE.—If the account holder of

11 any personal social security investment account

12 makes a contribution to such account for any tax13 able year, no other taxpayer shall be allowed a de14 duction for any amount contributed to such account

15 for such taxable year.

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

17 ‘‘(1) PERSONAL SOCIAL SECURITY INVESTMENT

18 ACCOUNT.—The term ‘personal social security in19 vestment account’ means an account established

20 under section 252 of the Social Security Act.

21 ‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible

22 individual’ means, with respect to the taxpayer—

23 ‘‘(A) the taxpayer,

24 ‘‘(B) the taxpayer’s spouse, and
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1 ‘‘(C) any individual with respect to whom

2 a deduction under section 151(c) is allowed to

3 the taxpayer.

4 Subparagraph (B) shall not apply unless the tax5 payer files a joint return for the taxable year.

6 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

7 ‘‘(1) IN GENERAL.—Except as otherwise pro8 vided in this subsection, any amount paid or distrib9 uted out of a personal social security investment ac10 count shall be included in gross income by the payee

11 or distributee, as the case may be, in the manner

12 provided under section 72.

13 ‘‘(2) SPECIAL RULES FOR APPLYING SECTION

14 72.—For purposes of applying section 72 to any

15 amount described in paragraph (1)—

16 ‘‘(A) all personal social security investment

17 accounts of the same individual shall be treated

18 as 1 contract,

19 ‘‘(B) all distributions during any taxable

20 year shall be treated as 1 distribution, and

21 ‘‘(C) the value of the contract, income on

22 the contract, and investment in the contract

23 shall be computed as of the close of the cal24 endar year in which the taxable year begins.
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1 For purposes of subparagraph (C), the value of the

2 contract shall be increased by the amount of any dis3 tributions during the calendar year.

4 ‘‘(3) TREATMENT OF DISTRIBUTIONS OF SO5 CIAL SECURITY BENEFITS.—

6 ‘‘(A) IN GENERAL.—Notwithstanding para7 graph (1), the amount of any benefit distribu8 tion described in section 255(b) of the Social

9 Security Act shall be included in gross income

10 (to the extent provided in section 86) as if such

11 distribution were a social security benefit (as

12 defined in section 86).

13 ‘‘(B) ALLOCATION OF INVESTMENT IN THE

14 CONTRACT.—For purposes of section 72, the

15 portion of the account which the Executive Di16 rector (as defined in section 251 of the Social

17 Security Act) determines is necessary to fund

18 the benefit distributions referred to in subpara19 graph (A) for the taxable year and all suc20 ceeding taxable years shall be treated as a sepa21 rate contract with respect to which no premium

22 or other consideration was paid.

23 ‘‘(4) CROSS REFERENCE.—

‘‘For excise tax on certain distributions, see section 72(t).

24 ‘‘(e) SPECIAL RULES.—
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1 ‘‘(1) TIME WHEN CONTRIBUTIONS DEEMED

2 MADE.—For purposes of this section, a taxpayer

3 shall be deemed to have made a contribution to a

4 personal social security investment account on the

5 last day of the preceding taxable year if the con6 tribution is made on account of such taxable year

7 and is made not later than the time prescribed by

8 law for filing the return for such taxable year (not

9 including extensions thereof).

10 ‘‘(2) BENEFICIARY MUST BE UNDER AGE

701 11 ⁄2.—No deduction shall be allowed under this sec12 tion with respect to any contribution to personal so13 cial security investment account if the account holder has attained age 701 14 ⁄2 before the close of such

15 holder’s taxable year for which the contribution was

16 made.’’

17 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX18 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

19 of section 62 of such Code is amended by inserting after

20 paragraph (17) the following new paragraph:

21 ‘‘(18) PERSONAL SOCIAL SECURITY INVEST22 MENT ACCOUNT CONTRIBUTIONS.—The deduction

23 allowed by section 222.’’.

24 (c) CONFORMING AMENDMENTS.—
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1 (1) PENALTY FOR FAILURE TO MEET MINIMUM

2 DISTRIBUTION REQUIREMENT.—Subsection (c) of

3 section 4974 of such Code is amended by striking

4 ‘‘or’’ at the end of paragraph (4), by striking the pe5 riod at the end of paragraph (5) and inserting ‘‘,

6 or’’, and by inserting after paragraph (5) the fol7 lowing new paragraph:

8 ‘‘(6) any personal social security investment ac9 count (as defined in section 222(c)).’’.

10 (2) TREATMENT LIKE INDIVIDUAL RETIREMENT

11 PLAN UNDER EXCISE TAX ON CERTAIN PREMATURE

12 DISTRIBUTIONS.—Subparagraph (A) of section

13 72(t)(3) of such Code is amended—

14 (A) by inserting ‘‘or from a personal social

15 security investment account (as defined in sec16 tion 222(c))’’ before the period at the end, and

17 (B) by inserting ‘‘OR FROM PERSONAL SO18 CIAL SECURITY INVESTMENT ACCOUNTS’’ after

19 ‘‘PLANS’’ in the subparagraph heading.

20 (d) CLERICAL AMENDMENT.—The table of sections

21 for part VII of subchapter B of chapter 1 of such Code

22 is amended by striking the last item and inserting the fol23 lowing new items:

‘‘Sec. 222. Personal social security investment accounts.

‘‘Sec. 223. Cross reference.’’.
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2002.

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