II 

108TH CONGRESS 

2D SESSION S. 2782 

To reform social security by establishing a Personal Social Security Savings 

Program. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 9, 2004 

Mr. SUNUNU introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To reform social security by establishing a Personal Social 

Security Savings Program. 

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Social Security Personal Savings Guarantee and Pros6 perity Act of 2004’’. 

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

8 as follows: 

Sec. 1. Short title and table of contents. 

Sec. 2. Establishment of Personal Social Security Investment Program. 

‘‘PART A—INSURANCE BENEFITS
2 

•S 2782 IS 

‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

‘‘Sec. 251. Definitions. 

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

‘‘Sec. 253. Participation in Program. 

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

‘‘Sec. 255. Benefit credit certificates. 

‘‘Sec. 256. Tier I Investment Fund. 

‘‘Sec. 257. Tier II Investment Fund. 

‘‘Sec. 258. Tier III Investment Options. 

‘‘Sec. 259. Personal social security savings annuity and other distributions. 

‘‘Sec. 260. Guarantee of promised benefits. 

‘‘Sec. 261. Personal Social Security Savings Account Board. 

‘‘Sec. 262. Executive Director. 

Sec. 3. Adjustments to primary insurance amounts. 

Sec. 4. General fund transfers to the Federal Old-Age and Survivors Insurance 

Trust Fund. 

Sec. 5. Tax treatment of accounts. 

Sec. 6. Self-Liquidating Social Security Transition Fund. 

Sec. 7. Issuance of Transition Fund Bonds. 

Sec. 8. Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings Program. 

Sec. 9. Budgetary treatment of social security. 

Sec. 10. Dedication of budget surpluses to saving social security. 

Sec. 11. National spending limitation. 

Sec. 12. Imposition of spending limitations on congressional budget resolutions. 

Sec. 13. Reduction of FICA rates resulting from Personal Social Security Savings Program. 

1 SEC. 2. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY 

2 INVESTMENT PROGRAM. 

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

4 is amended— 

5 (1) by inserting before section 201 the fol6 lowing: 

7 ‘‘PART A—INSURANCE BENEFITS’’; and 

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

9 ‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS 

10 PROGRAM 

11 ‘‘SEC. 251. DEFINITIONS. 

12 ‘‘For purposes of this part— 
3 

•S 2782 IS 

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

2 ‘participating individual’ has the meaning provided 

3 in section 253(a). 

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

5 Personal Social Security Savings Account Board es6 tablished under section 261. 

7 ‘‘(3) EXECUTIVE DIRECTOR.—The term ‘Execu8 tive Director’ means the Executive Director ap9 pointed under section 262. 

10 ‘‘(4) PERSONAL SOCIAL SECURITY SAVINGS AC11 COUNT.—The term ‘personal social security savings 

12 account’ means an account established under section 

13 254(a). 

14 ‘‘(5) PERSONAL SOCIAL SECURITY SAVINGS AN15 NUITY.—The term ‘personal social security savings 

16 annuity’ means an annuity approved by the Board 

17 under section 259(b)(3). 

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

19 means the Social Security Personal Savings Fund 

20 established under section 252. 

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

22 ‘Tier I Investment Fund’ means the trust fund cre23 ated under section 256. 
4 

•S 2782 IS 

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

2 ‘Tier II Investment Fund’ means the trust fund cre3 ated under section 257. 

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

5 ‘Tier III Investment Option’ means an investment 

6 option which is— 

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

8 by the Board under section 258(b); and 

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

10 258(c). 

11 ‘‘SEC. 252. SOCIAL SECURITY PERSONAL SAVINGS FUND. 

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

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

14 the Treasury of the United States a trust fund to 

15 be known as the ‘Social Security Personal Savings 

16 Fund’. 

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

18 shall consist of all amounts transferred to or depos19 ited into the Savings Fund under subsection (b), in20 creased by the total net earnings from investments 

21 of sums in the Savings Fund and reduced by the 

22 total net losses from investments of the Savings 

23 Fund. 

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

25 trustees of the Savings Fund. 
5 

•S 2782 IS 

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

2 This part constitutes budget authority in advance of 

3 appropriations Acts and represents the obligation of 

4 the Board to provide for the payment of amounts 

5 provided under this part. The amounts held in the 

6 Savings Fund are appropriated and shall remain 

7 available without fiscal year limitation. 

8 ‘‘(b) DEPOSITS INTO FUND.— 

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

10 the Secretary of the Treasury shall deposit into the 

11 Savings Fund, from amounts held in the Federal 

12 Old-Age and Survivors Insurance Trust Fund, a 

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

14 of the redirected social security contribution for such 

15 calendar year of each individual who is a partici16 pating individual for such calendar year. 

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

18 ‘‘(A) IN GENERAL.—The amounts depos19 ited pursuant to paragraph (1) shall be trans20 ferred in at least weekly payments from the 

21 Federal Old-Age and Survivors Insurance Trust 

22 Fund to the Savings Fund. 

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

24 amounts transferred under subparagraph (A) 

25 shall be determined on the basis of estimates, 
6 

•S 2782 IS 

1 made by the Commissioner of Social Security 

2 and certified to the Secretary of the Treasury, 

3 of the wages paid to, and self-employment in4 come derived by, participating individuals. 

5 Proper adjustments shall be made in amounts 

6 subsequently transferred to the extent prior es7 timates were in excess of or were less than ac8 tual amounts transferred. 

9 ‘‘(3) REDIRECTED SOCIAL SECURITY CONTRIBU10 TIONS.—For purposes of paragraph (1)— 

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

12 social security contributions’ means, with re13 spect to an individual for a calendar year, the 

14 sum of— 

15 ‘‘(i) the product derived by multi16 plying— 

17 ‘‘(I) the sum of the total wages 

18 paid to, and self-employment income 

19 derived by, such individual during 

20 such calendar year, to the extent such 

21 total wages and self-employment in22 come do not exceed the base amount 

23 for such calendar year; by 

24 ‘‘(II) 10 percent; and 
7 

•S 2782 IS 

1 ‘‘(ii) the product derived by multi2 plying— 

3 ‘‘(I) the sum of the total wages 

4 paid to, and self-employment income 

5 derived by, such individual during 

6 such calendar year, to the extent such 

7 total wages and self-employment in8 come exceed the base amount (taking 

9 into account the limits imposed by the 

10 contribution and benefit base under 

11 section 230); by 

12 ‘‘(II) 5 percent. 

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

14 subparagraph (A)— 

15 ‘‘(i) INITIAL BASE AMOUNT.—The 

16 base amount for calendar year 2005 is 

17 $10,000. 

18 ‘‘(ii) ADJUSTMENTS TO BASE

19 AMOUNT.—The base amount for any cal20 endar year after 2005 is the product de21 rived by multiplying $10,000 by a frac22 tion— 

23 ‘‘(I) the numerator of which is 

24 the national average wage index (as 
8 

•S 2782 IS 

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

2 of the 2 preceding calendar years; and 

3 ‘‘(II) the denominator of which is 

4 the national average wage index (as so 

5 defined) for 2003. 

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

7 are appropriated and shall remain available without fiscal 

8 year limitation— 

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

10 Fund of the Savings Fund and the Tier II Invest11 ment Fund of the Savings Fund under sections 256 

12 and 257, respectively; 

13 ‘‘(2) to transfer into Tier III Investment Op14 tions under section 258; 

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

16 section 259; and 

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

18 Board in accordance with subsection (e). 

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

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

21 credited to a participating individual’s personal so22 cial security savings account may not be used for, or 

23 diverted to, purposes other than for the exclusive 

24 benefit of the participating individual or the partici25 pating individual’s beneficiaries under this part. 
9 

•S 2782 IS 

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

2 Fund may not be assigned or alienated and are not 

3 subject to execution, levy, attachment, garnishment, 

4 or other legal process. 

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

6 Administrative expenses incurred to carry out this part 

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

8 conjunction with the allocation of investment earnings and 

9 losses under section 254(c). 

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

11 shall not be appropriated for any purpose other than the 

12 purposes specified in this part and may not be used for 

13 any other purpose. 

14 ‘‘SEC. 253. PARTICIPATION IN PROGRAM. 

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

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

17 individual— 

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

19 year after December 31, 2004, on which there is im20 posed a tax under section 3101(a) of the Internal 

21 Revenue Code of 1986, or 

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

23 taxable year beginning after December 31, 2004, on 

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

25 of the Internal Revenue Code of 1986, 
10 

•S 2782 IS 

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

2 and 

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

4 such individual’s status as a participating individual 

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

6 and has subsequently filed an election to reinstate 

7 such individual’s status as a participating individual 

8 under subsection (c). 

9 ‘‘(b) RENUNCIATION OF PARTICIPATION.— 

10 ‘‘(1) IN GENERAL.—An individual— 

11 ‘‘(A) who has not attained retirement age 

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

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

14 has been made from amounts credited to the in15 dividual’s personal social security savings ac16 count for the purchase of a personal social se17 curity savings annuity, 

18 may elect, in such form and manner as shall be pre19 scribed in regulations of the Board, to renounce 

20 such individual’s status as a ‘participating indi21 vidual’ for purposes of this part. Upon completion of 

22 the procedures provided for under paragraph (2), 

23 any such individual who has made such an election 

24 shall not be treated as a participating individual 

25 under this part, effective as if such individual had 
11 

•S 2782 IS 

1 never been a participating individual. The Board 

2 shall provide for immediate notification of such elec3 tion to the Commissioner of Social Security, the Sec4 retary of the Treasury, and the Executive Director. 

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

6 by regulation procedures governing the termination 

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

8 pursuant to an election under this subsection. Such 

9 procedures shall include— 

10 ‘‘(A) prompt closing of the individual’s per11 sonal social security savings account established 

12 under section 254, 

13 ‘‘(B) revocation of any benefit credit cer14 tificate assigned to the individual’s personal so15 cial security savings account under section 255, 

16 and 

17 ‘‘(C) prompt transfer to the Federal Old18 Age and Survivors Insurance Trust Fund as 

19 general receipts of any amount held in the Tier 

20 II Investment Fund of the Savings Fund or 

21 under a Tier III Investment Option pursuant to 

22 section 257 or 258 and credited to such individ23 ual’s personal social security savings account. 

24 ‘‘(c) REINSTATEMENT OF PARTICIPATION.— 
12 

•S 2782 IS 

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

2 filed an election under subsection (b) to renounce 

3 such individual’s status as a ‘participating indi4 vidual’ under this part may elect, in such form and 

5 manner as shall be prescribed in regulations of the 

6 Board, to reinstate such status. Such regulations 

7 shall provide for regular, periodic opportunities for 

8 the filing of such an election. The Board shall pro9 vide for immediate notification to the Commissioner 

10 of Social Security, the Secretary of the Treasury, 

11 and the Executive Director of such election. 

12 ‘‘(2) EFFECTIVENESS OF REINSTATEMENT.— 

13 An election under this subsection shall be effective 

14 with respect to wages earned, and self-employment 

15 income derived, on the earliest date on which the 

16 Board determines is practicable to make such elec17 tion effective following the date of the filing of the 

18 election. The individual filing the election shall be 

19 treated as becoming a participating individual under 

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

21 such individual first met the requirements of sub22 section (a) on such date. 

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

24 subsection shall be irrevocable. 
13 

•S 2782 IS 

1 ‘‘SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS AC2 COUNTS. 

3 ‘‘(a) ESTABLISHMENT OF PUBLICLY ADMINISTERED

4 SYSTEM OF PERSONAL SECURITY SAVINGS ACCOUNTS.— 

5 As soon as practicable after the later of January 1, 2005, 

6 or the date on which an individual becomes a participating 

7 individual under this part, the Executive Director shall es8 tablish a personal social security savings account for such 

9 individual. Such account shall be the means by which 

10 amounts held in the Tier I Investment Fund and the Tier 

11 II Investment Fund of the Savings Fund under sections 

12 256 and 257 and amounts held under Tier III Investment 

13 Options under section 258 are credited to such individual, 

14 under procedures which shall be established by the Board 

15 by regulation. Each account of a participating individual 

16 shall be identified to such participating individual by 

17 means of the participating individual’s social security ac18 count number. 

19 ‘‘(b) ACCOUNT BALANCE.—The balance in a partici20 pating individual’s account at any time is the sum of— 

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

22 of the Savings Fund credited to such participating 

23 individual prior to transfer of the credited amount to 

24 the Tier II Investment Fund of the Savings Fund; 

25 plus 

26 ‘‘(2) the excess of— 
14 

•S 2782 IS 

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

2 Fund of the Savings Fund credited to such par3 ticipating individual’s personal social security 

4 savings account, subject to such increases and 

5 reductions as may result from allocations made 

6 to and reductions made in the account pursuant 

7 to subsection (c)(1); over 

8 ‘‘(B) amounts paid out of the Tier II In9 vestment Fund in connection with amounts 

10 credited to such participating individual’s per11 sonal social security savings account; plus 

12 ‘‘(3) the excess of— 

13 ‘‘(A) the deposits in the Tier III Invest14 ment Options credited to such participating in15 dividual’s personal social security savings ac16 count, subject to such increases and reductions 

17 as may result from amounts credited to, and re18 ductions made in, the account pursuant to sub19 section (c)(2); over 

20 ‘‘(B) amounts paid out of the Tier III In21 vestment Options of such participating indi22 vidual. 

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

24 separately for each Tier III Investment Option of the par25 ticipating individual. The Board shall also hold for the 
15 

•S 2782 IS 

1 participating individual any benefit credit certificate as2 signed to the participating individual’s personal social se3 curity savings account under section 255. 

4 ‘‘(c) ALLOCATION OF EARNINGS AND LOSSES.—Pur5 suant to regulations which shall be prescribed by the 

6 Board, the Executive Director shall allocate to each per7 sonal social security savings account an amount equal to 

8 the net earnings and net losses from each investment of 

9 sums— 

10 ‘‘(1) in the Tier I Investment Fund and the 

11 Tier II Investment Fund which are attributable to 

12 sums credited to such account reduced by an appro13 priate share of the administrative expenses paid out 

14 of the net earnings, as determined by the Executive 

15 Director; and 

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

17 are attributable to sums credited to such account re18 duced by the administrative expenses paid out of the 

19 net earnings. 

20 ‘‘SEC. 255. BENEFIT CREDIT CERTIFICATES. 

21 ‘‘(a) IN GENERAL.—As soon as is practicable after 

22 a personal social security savings account is established 

23 under this part with respect to any participating indi24 vidual, the Board shall certify the establishment of such 

25 account to the Secretary of the Treasury, and, upon re-
16 

•S 2782 IS 

1 ceipt of such certification, such Secretary shall assign to 

2 the account of such individual a benefit credit certificate. 

3 The benefit credit certificate shall be evidenced by a paper 

4 instrument provided to the participating individual setting 

5 forth the terms specified in this section, and stating on 

6 its face that the certificate shall be incontestable in the 

7 hands of the bearer, that the certificate is supported by 

8 the full faith and credit of the United States, and that 

9 the United States is pledged to the satisfaction of the 

10 terms of the certificate as provided in this section. 

11 ‘‘(b) VALUE.— 

12 ‘‘(1) FACE VALUE.—The benefit credit certifi13 cate shall have an initial face value equal to the total 

14 estimated actuarial present value of the future 

15 monthly insurance benefits under section 202 to 

16 which the participating individual would be entitled, 

17 and to which other individuals would be entitled 

18 under section 202 based on the participating individ19 ual’s wages and self-employment income, payable on 

20 or after the date on which such individual becomes 

21 entitled to old-age insurance benefits under section 

22 202(a) (or the date of such individual’s death, if ear23 lier) determined under current law as in effect on 

24 the date of the determination, using the assumptions 

25 provided under paragraph (2) and taking into ac-
17 

•S 2782 IS 

1 count the reduction in the participating individual’s 

2 primary insurance amount under section 215(j). 

3 ‘‘(2) ASSUMPTIONS.—The actuarial present 

4 value determined under paragraph (1) shall be de5 termined— 

6 ‘‘(A) taking into account solely wages and 

7 self-employment income credited to the partici8 pating individual as of the date of the deter9 mination (including any amounts creditable to 

10 such individual as of such date but not yet 

11 credited as of such date, as estimated in accord12 ance with regulations which shall be prescribed 

13 by the Board), 

14 ‘‘(B) assuming that the participating indi15 vidual would become entitled to old-age insur16 ance benefits under section 202(a) on the day 

17 such individual would attain retirement age (as 

18 defined in section 216(l)(1)), and 

19 ‘‘(C) using reasonable actuarial and eco20 nomic assumptions concerning mortality rates, 

21 discount rates, wage growth, and other relevant 

22 factors. 

23 ‘‘(3) ADJUSTMENT TO VALUE.—Not less than 

24 annually, the Board shall update the face value of 

25 the benefit credit certificate to reflect any changes in 
18 

•S 2782 IS 

1 the total estimated actuarial present value of the fu2 ture monthly benefits described in paragraph (1), as 

3 determined under this subsection as of the date of 

4 the update. 

5 ‘‘(c) REDEMPTION.—Redemption of a benefit credit 

6 certificate assigned to a participating individual’s personal 

7 social security savings account shall be obtained only by 

8 means of the receipt of benefits under section 202 by indi9 viduals entitled to such benefits under part A, based on 

10 the wages and self-employment income of such partici11 pating individual, on or after the date on which the par12 ticipating individual becomes entitled to old-age insurance 

13 benefits under section 202(a) (or the date of such individ14 ual’s death, if earlier), taking into account section 215(j). 

15 Payment of such benefits shall constitute full redemption 

16 of such certificate. 

17 ‘‘SEC. 256. TIER I INVESTMENT FUND. 

18 ‘‘(a) ESTABLISHMENT OF TIER I INVESTMENT

19 FUND.— 

20 ‘‘(1) IN GENERAL.—The Savings Fund shall in21 clude a separate fund to be known as the ‘Tier I In22 vestment Fund’. 

23 ‘‘(2) AMOUNTS IN FUND.—The Tier I Invest24 ment Fund consists of all amounts derived from 

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

•S 2782 IS 

1 remaining after investment of such amounts under 

2 subsection (b), including additional amounts derived 

3 as income from such investments. 

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

5 Fund are appropriated and shall remain available 

6 without fiscal year limitation— 

7 ‘‘(A) to be held for investment on behalf of 

8 participating individuals under subsection (b), 

9 ‘‘(B) to pay the administrative expenses re10 lated to the Fund, and 

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

12 under subsection (c)(2). 

13 ‘‘(b) INVESTMENT OF FUND BALANCE.—For pur14 poses of investment of the Tier I Investment Fund, the 

15 Board shall contract with appropriate professional asset 

16 managers, recordkeepers, and custodians selected for in17 vestment of amounts held in the Fund, so as to provide 

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

19 providing broad diversification in accordance with regula20 tions of the Board, in— 

21 ‘‘(1) insurance contracts, 

22 ‘‘(2) certificates of deposit, or 

23 ‘‘(3) other instruments or obligations selected 

24 by such asset managers, 
20 

•S 2782 IS 

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

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

3 period of time. 

4 ‘‘(c) SEPARATE CREDITING TO PERSONAL SOCIAL

5 SECURITY SAVINGS ACCOUNTS AND TRANSFERS TO THE

6 TIER II INVESTMENT FUND OR TO TIER III INVESTMENT

7 OPTIONS.— 

8 ‘‘(1) CREDITING TO ACCOUNTS.— 

9 ‘‘(A) IN GENERAL.—Subject to this para10 graph, the Board shall provide for prompt, sep11 arate crediting, as soon as practicable, of the 

12 amounts deposited in the Tier I Investment 

13 Fund to the personal social security savings ac14 count of each participating individual with re15 spect to the redirected social security contribu16 tions (as defined in section 252(b)(3)) of such 

17 participating individual. The Board shall in18 clude in such crediting, with respect to each 

19 such individual, any increases or decreases in 

20 such amounts so as to reflect the net returns 

21 and losses from investment of the balance of 

22 the Fund prior to such crediting. For purposes 

23 of determining such increases and decreases for 

24 each calendar year, the amounts deposited into 

25 the Fund in connection with such individual 
21 

•S 2782 IS 

1 during such calendar year shall be deemed to 

2 have been deposited on June 30 of such year. 

3 ‘‘(B) TREATMENT OF MARRIED PARTICI4 PATING INDIVIDUALS.—If the participating in5 dividual is married as of the end of the calendar 

6 year in which the amounts to be credited were 

7 deposited in the Tier I Investment Fund and 

8 the spouse is also a participating individual, the 

9 personal social security savings account of the 

10 participating individual and the personal social 

11 security savings account of his or her spouse 

12 shall each be credited with 50 percent of such 

13 amounts. 

14 ‘‘(2) TRANSFERS FROM THE TIER I INVEST15 MENT FUND.—In accordance with elections filed 

16 with the Board by a participating individual, any 

17 amount credited to the personal social security sav18 ings account of such participating individual under 

19 paragraph (1) shall be promptly transferred to the 

20 Tier II Investment Fund of the Savings Fund for 

21 investment in accordance with section 257 and, to 

22 the extent available under section 258, to Tier III 

23 Investment Options in accordance with section 258. 

24 ‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER I IN25 VESTMENT FUND.—Subject to this part— 
22 

•S 2782 IS 

1 ‘‘(1) until amounts deposited into the Tier I In2 vestment Fund during any calendar year are cred3 ited to personal social security savings accounts, 

4 such amounts shall be treated as the unallocated 

5 property of all participating individuals with respect 

6 to whom amounts were deposited in the Fund dur7 ing such year, jointly held in trust for such partici8 pating individuals in the Savings Fund, and 

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

10 are credited to the personal social security savings 

11 account of a participating individual shall be treated 

12 as property of the participating individual, held in 

13 trust for such participating individual in the Savings 

14 Fund. 

15 ‘‘SEC. 257. TIER II INVESTMENT FUND. 

16 ‘‘(a) ESTABLISHMENT OF TIER II INVESTMENT

17 FUND.— 

18 ‘‘(1) IN GENERAL.—The Savings Fund shall in19 clude a separate fund to be known as the ‘Tier II 

20 Investment Fund’. 

21 ‘‘(2) AMOUNTS IN FUND.—The Tier II Invest22 ment Fund consists of all amounts derived from 

23 payments into the Fund under section 256(c)(2) and 

24 remaining after investment of such amounts under 
23 

•S 2782 IS 

1 subsection (b), including additional amounts derived 

2 as income from such investments. 

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

4 Fund are appropriated and shall remain available 

5 without fiscal year limitation— 

6 ‘‘(A) to be held for investment under sub7 section (b), 

8 ‘‘(B) to pay the administrative expenses re9 lated to the Fund, and 

10 ‘‘(C) to make transfers to Tier III Invest11 ment Options under section 258 or to make 

12 payments under section 259. 

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

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

15 section 252 to the personal social security savings 

16 account of a participating individual of any amount 

17 held in the Tier I Investment Fund for any calendar 

18 year, the Board shall transfer from the Tier I In19 vestment Fund into the Tier II Investment Fund 

20 any amount so credited to such participating individ21 ual’s account which is not transferred to a Tier III 

22 Investment Option pursuant to an election under 

23 section 258(a). 

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

25 to this paragraph, the Board shall provide for ongo-
24 

•S 2782 IS 

1 ing separate crediting to each participating individ2 ual’s personal social security savings account of the 

3 amounts deposited in the Tier II Investment Fund 

4 with respect to such participating individual, to5 gether with any increases or decreases therein so as 

6 to reflect the net returns and losses from investment 

7 thereof while held in the Fund. 

8 ‘‘(c) INVESTMENT IN EQUITIES AND FIXED INCOME

9 INSTRUMENTS IN 3 ALTERNATIVE INVESTMENT AC10 COUNTS.— 

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

12 of the Tier II Investment Fund, the Board shall di13 vide the Fund into 3 investment accounts. Such ac14 counts shall consist of the 65/35 investment account, 

15 the 50/50 investment account, and the 80/20 invest16 ment account. The Board shall contract with appro17 priate investment managers, recordkeepers, and 

18 custodians selected for investment of amounts held 

19 in each investment account. 

20 ‘‘(2) RULES RELATING TO INVESTMENT AC21 COUNTS.— 

22 ‘‘(A) IN GENERAL.—The investment man23 ager, recordkeeper, and custodian selected for 

24 investment of amounts held in each investment 

25 account referred to paragraph (1) shall invest 
25 

•S 2782 IS 

1 such amounts under regulations which shall be 

2 prescribed by the Board so as to ensure, to the 

3 maximum extent practicable, that, of the total 

4 balance in the Fund credited to such account 

5 and available for investment (after allowing for 

6 administrative expenses)— 

7 ‘‘(i) the prescribed equities percentage 

8 is invested in equities in accordance with 

9 paragraph (4), and 

10 ‘‘(ii) the prescribed fixed income in11 struments percentage is invested in fixed 

12 income instruments in accordance with 

13 paragraph (5). 

14 ‘‘(B) PRESCRIBED PERCENTAGES.—For 

15 purposes of subparagraph (A)— 

16 ‘‘(i) THE 65/35 INVESTMENT AC17 COUNT.—In the case of the 65/35 invest18 ment account— 

19 ‘‘(I) the prescribed equities per20 centage is 65 percent, and 

21 ‘‘(II) the prescribed fixed income 

22 instruments percentage is 35 percent. 

23 ‘‘(ii) THE 50/50 INVESTMENT AC24 COUNT.—In the case of the 50/50 invest25 ment account— 
26 

•S 2782 IS 

1 ‘‘(I) the prescribed equities per2 centage is 50 percent, and 

3 ‘‘(II) the prescribed fixed income 

4 instruments percentage is 50 percent. 

5 ‘‘(iii) THE 80/20 INVESTMENT AC6 COUNT.—In the case of the 80/20 invest7 ment account— 

8 ‘‘(I) the prescribed equities per9 centage is 80 percent, and 

10 ‘‘(II) the prescribed fixed income 

11 instruments percentage is 20 percent. 

12 ‘‘(3) ELECTION OF INVESTMENT OPTIONS.— 

13 ‘‘(A) DEFAULT INVESTMENT ACCOUNT.— 

14 Except as provided in an election in effect 

15 under subparagraph (B), amounts held in the 

16 Tier II Investment Fund shall be credited to 

17 the 65/35 investment account. 

18 ‘‘(B) ELECTION OF TRANSFERS BETWEEN

19 INVESTMENT ACCOUNTS.—In any case in which 

20 a participating individual who has an amount in 

21 such individual’s personal social security sav22 ings account credited to any of the investment 

23 accounts in the Tier II Investment Fund files 

24 with the Secretary of the Treasury a written 

25 election under this subparagraph, not more fre-
27 

•S 2782 IS 

1 quently than annually and in accordance with 

2 regulations of the Board, the Secretary of the 

3 Treasury shall transfer the full amount so cred4 ited in such investment account from such in5 vestment account to any one of the other invest6 ment accounts in the Tier II Investment Fund 

7 (whichever is designated in such election). 

8 ‘‘(4) INVESTMENT IN EQUITIES.—In accordance 

9 with regulations which shall be prescribed by the 

10 Board, the Board shall establish standards which 

11 must be met by equities selected for investment of 

12 the balance of the Tier II Investment Fund pursu13 ant to paragraph (2)(A)(i). In conformity with such 

14 standards, the Board shall select, for purposes of 

15 such investment, indices which are comprised of eq16 uities the aggregate market value of which is, in 

17 each case, a reasonably broad representation of com18 panies whose shares are traded on the equity mar19 kets. Amounts invested in equities under an invest20 ment option shall be held in a portfolio designed to 

21 replicate the performance of one or more of such in22 dices. 

23 ‘‘(5) INVESTMENT IN FIXED INCOME INSTRU24 MENTS.—In accordance with regulations which shall 

25 be prescribed by the Board, the Board shall estab-
28 

•S 2782 IS 

1 lish standards which must be met by fixed income 

2 instruments selected for investment of the balance of 

3 the Tier II Investment Fund pursuant to paragraph 

4 (2)(A)(ii). Such standards shall take into account 

5 the competing considerations of risk and return. 

6 Amounts invested in fixed income instruments in an 

7 investment option shall be held in a portfolio which 

8 shall consist of a diverse range of fixed income in9 struments, taking into full account the opposing con10 siderations of risk and maximization of return. 

11 ‘‘(6) DISCLOSURE OF ADMINISTRATIVE

12 COSTS.—The Executive Director shall provide to 

13 each participating individual an annual disclosure of 

14 the rate of administrative costs chargeable with re15 spect to investment in each investment account in 

16 the Tier II Investment Fund. Such disclosure shall 

17 be written in a manner calculated to be understood 

18 by the average participating individual. 

19 ‘‘(d) ADJUSTMENT OF PRESCRIBED PERCENTAGES

20 AND ALLOWANCE OF ADDITIONAL INVESTMENT AC21 COUNTS.— 

22 ‘‘(1) IN GENERAL.—The Board may from time 

23 to time, as determined by regulation as appropriate 

24 to further the purposes of this section, shall— 
29 

•S 2782 IS 

1 ‘‘(A) prescribe by regulation adjustments 

2 to the prescribed percentages for each invest3 ment account, 

4 ‘‘(B) establish investment accounts in the 

5 Tier II Investment Fund meeting the require6 ments of this section in addition to those estab7 lished by this section, and 

8 ‘‘(C) terminate investment accounts in the 

9 Tier II Investment Fund. 

10 ‘‘(2) 80 PERCENT LIMIT ON EQUITIES.—No in11 vestment account in the Tier II Investment Fund, 

12 after any exercise of the Board’s authority under 

13 paragraph (1), may be invested otherwise than in a 

14 combination of equities and fixed income invest15 ments or have a prescribed equities percentage of 

16 more than 80 percent. 

17 ‘‘(e) TREATMENT OF AMOUNTS HELD IN TIER II IN18 VESTMENT FUND.—Subject to this part, amounts depos19 ited into, and held and accounted for in, the Tier II In20 vestment Fund with respect to any participating individual 

21 shall continue to be treated as property of such partici22 pating individual, held in trust for such participating indi23 vidual in the Fund. 
30 

•S 2782 IS 

1 ‘‘SEC. 258. TIER III INVESTMENT OPTIONS. 

2 ‘‘(a) ELECTION OF TIER III INVESTMENT OP3 TIONS.— 

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

5 may elect to direct transfers from amounts in the 

6 Savings Fund credited to the personal social security 

7 savings account of such individual into 1 or more 

8 Tier III Investment Options in accordance with 

9 paragraph (2). 

10 ‘‘(2) COMMENCEMENT OF TIER III INVESTMENT

11 OPTIONS UPON ATTAINMENT OF ELECTION THRESH12 OLD.—In any case in which, as of the end of any 

13 calendar year, the total balance in the Savings Fund 

14 credited to a participating individual’s personal so15 cial security savings account exceeds for the first 

16 time the election threshold, the Board shall, by regu17 lation, provide for an opportunity for such partici18 pating individual to make, at any time thereafter, 

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

20 Tier III Investment Options for investment of an 

21 amount in the Savings Fund credited to such ac22 count. Such election may be in lieu of or in addition 

23 to investment in the options available with respect to 

24 the Tier II Investment Fund of the Savings Fund. 

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

26 an election under paragraph (1), funds credited to 
31 

•S 2782 IS 

1 the personal social security savings account of the 

2 participating individual and elected for transfer to 

3 one or more Tier III Investment Options shall be 

4 transferred to the Tier III Investment Options so 

5 elected for such calendar year, in percentages speci6 fied in the election by the participating individual for 

7 each applicable portfolio. 

8 ‘‘(4) ELECTION THRESHOLD.— 

9 ‘‘(A) IN GENERAL.—Subject to subpara10 graph (B), for purposes of this subsection the 

11 term ‘election threshold’ means an amount 

12 equal to $7,000. 

13 ‘‘(B) ADJUSTMENTS.—The Board shall ad14 just annually (effective for annual reporting 

15 months occurring after December 2005) the 

16 dollar amount set forth in subparagraph (A) 

17 under procedures providing for adjustments in 

18 the same manner and to the same extent as ad19 justments are provided for under the proce20 dures used to adjust benefit amounts under sec21 tion 215(i)(2)(A), except that any amount so 

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

23 rounded to the nearest multiple of $1.00. 

24 ‘‘(5) SUBSEQUENT INVESTMENT OF AMOUNTS

25 HELD IN TIER III INVESTMENT OPTIONS.—Any 
32 

•S 2782 IS 

1 amounts held in one or more Tier III Investment 

2 Options may be— 

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

4 more other Tier III Investment Options, subject 

5 to applicable regulations of the Board and the 

6 terms governing the affected Tier III Invest7 ment Options, and 

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

9 annually, to the Tier II Investment Fund, for 

10 deposit in the applicable investment account 

11 then selected by the participating individual 

12 under section 257. 

13 ‘‘(b) CERTIFICATION OF ELIGIBLE ENTITIES.— 

14 ‘‘(1) IN GENERAL.—The Board shall certify eli15 gible entities to offer Tier III Investment Options 

16 under this part. 

17 ‘‘(2) APPLICATION.—Any eligible entity that de18 sires to be certified by the Board to offer a Tier III 

19 Investment Option shall submit an application to the 

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

21 such information as the Board may require. 

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

23 Board shall not certify an eligible entity unless such 

24 eligible entity agrees to the following requirements: 
33 

•S 2782 IS 

1 ‘‘(A) SEPARATE ACCOUNTING.—Each eligi2 ble entity shall, with respect to each Tier III 

3 Investment Option offered by such eligible enti4 ty to participating individuals— 

5 ‘‘(i) establish separate accounts for 

6 the contributions of each participating in7 dividual, and any earnings properly allo8 cable to the contributions, and 

9 ‘‘(ii) maintain separate recordkeeping 

10 with respect to each account. 

11 ‘‘(B) TREATMENT OF AMOUNTS HELD IN

12 FUND.—Amounts deposited into, and held and 

13 accounted for in, a Tier III Investment Option 

14 with respect to any participating individual 

15 shall be treated as property of such partici16 pating individual, held in trust for such partici17 pating individual. 

18 ‘‘(C) TRUST REQUIREMENTS.—Amounts 

19 held and accounted for with respect to a partici20 pating individual shall be held in a trust created 

21 or organized in the United States for the exclu22 sive benefit of such individual or his bene23 ficiaries. 

24 ‘‘(D) EXEMPTION FROM THIRD PARTY

25 CLAIMS.—Each Tier III Investment Option 
34 

•S 2782 IS 

1 shall be exempt from any and all third party 

2 claims against the eligible entity. 

3 ‘‘(E) DISCLOSURE OF ADMINISTRATIVE

4 COSTS.—Each eligible entity offering a Tier III 

5 Investment Option under this section shall pro6 vide to each participating individual an annual 

7 disclosure of the rate of administrative costs 

8 chargeable with respect to investment in such 

9 Option. Such disclosure shall be written in a 

10 manner calculated to be understood by the av11 erage participating individual. The Board shall 

12 provide for coordination of disclosures with re13 spect to Tier III Investment Options under this 

14 subparagraph so as to assist participating indi15 viduals in comparing alternative Options based 

16 on administrative costs. 

17 ‘‘(F) REPORTING TO THE EXECUTIVE DI18 RECTOR AND THE BOARD.—Each eligible entity 

19 shall provide reports to the Executive Director 

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

21 and containing such information as the Board 

22 may require. 

23 ‘‘(4) ELIGIBLE ENTITY DEFINED.—For pur24 poses of this section, the term ‘eligible entity’ means 

25 any investment company (as defined in section 3 of 
35 

•S 2782 IS 

1 the Investment Company Act of 1940) or other per2 son that the Board determines appropriate to offer 

3 Tier III Investment Options under this part. 

4 ‘‘(c) APPROVAL OF TIER III INVESTMENT OP5 TIONS.— 

6 ‘‘(1) IN GENERAL.—No funds may be trans7 ferred into a Tier III Investment Option unless the 

8 Board has approved an application submitted under 

9 paragraph (2) with respect to the option. 

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

11 III Investment Option an eligible entity certified 

12 under subsection (b)(1) seeks to offer, such entity 

13 shall submit an application to the Board at such 

14 time, in such manner, and containing such informa15 tion as the Board may require. 

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

17 Board may not approve an application submitted 

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

19 Investment Option unless the following requirements 

20 are met: 

21 ‘‘(A) MUST BE OFFERED BY CERTIFIED

22 ELIGIBLE ENTITY.—The Tier III Investment 

23 Option is offered by an eligible entity certified 

24 under subsection (b). 
36 

•S 2782 IS 

1 ‘‘(B) APPROPRIATE ALLOCATION OF IN2 VESTMENTS BETWEEN EQUITIES AND FIXED IN3 COME INSTRUMENTS.—The amount credited to 

4 a participating individual’s personal social secu5 rity savings account which is held for invest6 ment in any Tier III Investment Option is in7 vested in a combination of equities and fixed in8 come instruments so as to ensure, to the max9 imum extent practicable, that the percentage of 

10 such amount invested in equities is not more 

11 than 85 percent and not less than 45 percent. 

12 ‘‘(C) QUALITY FACTORS MET.— 

13 ‘‘(i) IN GENERAL.—The Tier III In14 vestment Option meets qualifications which 

15 shall be prescribed by the Board relating 

16 to the quality factors described in clause 

17 (ii). 

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

19 factors described in this clause are— 

20 ‘‘(I) the safety and soundness of 

21 the Tier III Investment Option’s pro22 posed investment policy; 

23 ‘‘(II) the experience and record 

24 of performance of the proposed invest25 ment option, if any; 
37 

•S 2782 IS 

1 ‘‘(III) the experience and record 

2 of performance of the entity issuing or 

3 offering such option; and 

4 ‘‘(IV) such other factors as the 

5 Board may determine appropriate. 

6 ‘‘(d) CONSIDERATIONS FOR CERTIFICATION AND AP7 PROVAL.—In determining whether to certify an eligible en8 tity under subsection (b) or to approve a Tier III Invest9 ment Option under subsection (c), the Board shall— 

10 ‘‘(1) act in the best interests of the partici11 pating individuals; 

12 ‘‘(2) base its determination solely on consider13 ations of balancing safety and soundness of the Tier 

14 III Investment Option with the maximization of re15 turns of such option; and 

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

17 entity or option on political or other extraneous con18 siderations. 

19 ‘‘(e) SPONSORSHIP OF TIER III INVESTMENT OP20 TIONS BY MEMBERSHIP AND LABOR ORGANIZATIONS.— 

21 ‘‘(1) IN GENERAL.—A membership or labor or22 ganization (as defined by the Board) may sponsor 

23 Tier III Investment Options under contracts with el24 igible entities certified under subsection (b) who 

25 shall administer the investment option if such invest-
38 

•S 2782 IS 

1 ment option is approved by the Board under sub2 section (c). 

3 ‘‘(2) LIMITATION TO MEMBERSHIP.—A mem4 bership or labor organization (as so defined) may 

5 limit to the members of such organization participa6 tion in a Tier III Investment Option sponsored by 

7 such organization. 

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

9 death of a participating individual, the amount of any as10 sets held under a Tier III Investment Option credited to 

11 the personal social security savings account of such indi12 vidual shall be distributed in accordance with section 

13 259(e). 

14 ‘‘SEC. 259. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY 

15 AND OTHER DISTRIBUTIONS. 

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

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

18 a participating individual only from amounts credited to 

19 the personal social security savings account of such indi20 vidual on and after the earliest of— 

21 ‘‘(1) the date the participating individual at22 tains retirement age (as defined in section 216(l)(1)) 

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

24 (as defined in section 216(l)(2)); or 
39 

•S 2782 IS 

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

2 the participating individual’s personal social security 

3 savings account is sufficient to purchase a personal 

4 social security savings annuity with a monthly ben5 efit that is at least equal to the minimum annuity 

6 payment amount (as defined in subsection 

7 (b)(2)(C)(iii)). 

8 ‘‘(b) PERSONAL SOCIAL SECURITY SAVINGS ANNU9 ITIES.— 

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

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

12 the Board shall notify each participating individual 

13 of— 

14 ‘‘(A) the most recent listing of personal so15 cial security savings annuities approved by the 

16 Board under paragraph (3); and 

17 ‘‘(B) the entitlement of the participating 

18 individual to purchase such an annuity. 

19 ‘‘(2) PURCHASE OF ANNUITIES.— 

20 ‘‘(A) SELECTION OF ANNUITY.—Subject to 

21 subparagraph (C), on the date elected by the 

22 participating individual, but no earlier than the 

23 date determined under subsection (a), a partici24 pating individual may purchase a personal so25 cial security savings annuity selected from 
40 

•S 2782 IS 

1 among the annuities approved by the Board 

2 under paragraph (3). 

3 ‘‘(B) TRANSFER OF ASSETS.—Upon the 

4 selection of an annuity by a participating indi5 vidual under subparagraph (A), the Board shall 

6 provide for the transfer of assets, credited to 

7 the personal social security savings account of 

8 the participating individual and held in the Tier 

9 II Investment Fund or under 1 or more Tier 

10 III Investment Options (or any combination 

11 thereof), in a total amount sufficient to pur12 chase the annuity selected by the participating 

13 individual under such subparagraph. 

14 ‘‘(C) MINIMUM ANNUITY PAYMENT

15 AMOUNT.— 

16 ‘‘(i) IN GENERAL.—If, at the time a 

17 personal social security savings annuity is 

18 purchased under subparagraph (A), the as19 sets credited to the personal social security 

20 savings account of the participating indi21 vidual are sufficient to purchase a personal 

22 social security savings annuity approved by 

23 the Board under paragraph (3) with a 

24 monthly payment that is at least equal to 

25 the minimum annuity payment amount, 
41 

•S 2782 IS 

1 the amount of the monthly benefit pro2 vided by such annuity may not be less than 

3 the minimum annuity payment amount. 

4 ‘‘(ii) CONSTRUCTION.—Nothing in 

5 this subparagraph shall be construed to 

6 prohibit a participating individual from 

7 using personal social security savings ac8 count assets to purchase a personal social 

9 security savings annuity which provides for 

10 a monthly payment in excess of the min11 imum amount required under clause (i). 

12 ‘‘(iii) MINIMUM ANNUITY PAYMENT

13 AMOUNT DEFINED.—For purposes of this 

14 part, the term ‘minimum annuity payment 

15 amount’ means, in connection with any 

16 participating individual, the excess of— 

17 ‘‘(I) the deemed total part A 

18 monthly benefit amount with respect 

19 to the participating individual, deter20 mined as if section 215(j) did not 

21 apply, over 

22 ‘‘(II) the deemed total part A 

23 monthly benefit amount with respect 

24 to the participating individual, deter-
42 

•S 2782 IS 

1 mined with the application of section 

2 215(j). 

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

5 ‘‘(I) IN GENERAL.—For purposes 

6 of clause (iii), the term ‘deemed total 

7 part A monthly benefit amount’ 

8 means, with respect to a participating 

9 individual, the total amount which 

10 would be payable as monthly insur11 ance benefits under section 202 for 

12 the month in which the participating 

13 individual attains or would attain 

14 early retirement age (as defined in 

15 section 216(l)(2)), based on the par16 ticipating individual’s wages and self17 employment income, if the partici18 pating individual applied for old-age 

19 insurance benefits under section 

20 202(a) during such month and all 

21 other individuals who would therefore 

22 be eligible for benefits under section 

23 202 for such month based on such 

24 wages and self-employment income 
43 

•S 2782 IS 

1 applied for such benefits during such 

2 month. 

3 ‘‘(II) ASSUMPTIONS.—For pur4 poses of this clause, in the case of a 

5 participating individual with respect 

6 to whom determinations under this 

7 clause are made prior to the month 

8 described in subclause (I), the partici9 pating individual’s average indexed 

10 monthly earnings (within the meaning 

11 of section 215(b)) for such month 

12 shall be projected, under regulations 

13 which shall be prescribed by the 

14 Board, on the basis of reasonable ac15 tuarial assumptions, and the Board 

16 shall assume the survival through the 

17 end of such month of all other individ18 uals described in subclause (I). 

19 ‘‘(3) APPROVAL OF PERSONAL SOCIAL SECU20 RITY SAVINGS ANNUITIES AND ISSUERS.— 

21 ‘‘(A) CERTIFICATION OF ISSUERS.— 

22 ‘‘(i) IN GENERAL.—The Board shall 

23 certify issuers eligible to enter into annuity 

24 contracts with participating individuals 

25 under this part. 
44 

•S 2782 IS 

1 ‘‘(ii) APPLICATION.—Any issuer that 

2 desires to be certified by the Board to 

3 issue a personal social security savings an4 nuity shall submit an application to the 

5 Board at such time, in such manner, and 

6 containing such information as the Board 

7 may require. 

8 ‘‘(iii) SEPARATE ACCOUNTING.—As a 

9 condition of certification under paragraph 

10 (1), each issuer shall, with respect to each 

11 personal social security savings annuity 

12 issued by such issuer to participating indi13 viduals— 

14 ‘‘(I) establish a separate account 

15 for each participating individual, and 

16 ‘‘(II) maintain separate record17 keeping with respect to each account. 

18 ‘‘(iv) EXEMPTION FROM THIRD PARTY

19 CLAIMS.—Each personal social security 

20 savings annuity shall be exempt from any 

21 and all third party claims against the 

22 issuer. 

23 ‘‘(B) APPROVAL OF PERSONAL SOCIAL SE24 CURITY SAVINGS ANNUITIES.— 
45 

•S 2782 IS 

1 ‘‘(i) IN GENERAL.—No funds may be 

2 used to purchase a personal social security 

3 savings annuity unless the Board has ap4 proved an application submitted under 

5 clause (ii) with respect to the annuity. 

6 ‘‘(ii) APPLICATION.—With respect to 

7 each personal social security savings annu8 ity that an issuer certified under subpara9 graph (A)(i) seeks to issue, such issuer 

10 shall submit an application to the Board at 

11 such time, in such manner, and containing 

12 such information as the Board may re13 quire. 

14 ‘‘(iii) QUALIFICATIONS FOR AP15 PROVAL.— 

16 ‘‘(I) IN GENERAL.—The Board 

17 may not approve an application under 

18 clause (i) unless the personal social 

19 security savings annuity that is the 

20 subject of the application meets quali21 fications which shall be prescribed by 

22 the Board relating to the quality fac23 tors described in subclause (II) and 

24 the application demonstrates that the 
46 

•S 2782 IS 

1 cost-of-living protection requirement 

2 described in subclause (III) are met. 

3 ‘‘(II) QUALITY FACTORS.—The 

4 quality factors described in this sub5 paragraph include the safety and 

6 soundness of the annuity, the experi7 ence and record of performance of the 

8 issuer issuing the annuity, and such 

9 other factors as the Board may deter10 mine appropriate. 

11 ‘‘(III) COST-OF-LIVING PROTEC12 TION REQUIREMENT.—The cost-of-liv13 ing requirement of this subclause is 

14 met only if the terms governing the 

15 annuity include procedures providing 

16 for adjustments in the amount of the 

17 monthly payments in the same man18 ner and to the same extent as adjust19 ments are provided for under the pro20 cedures used to adjust benefit 

21 amounts under section 215(i)(2)(A). 

22 Nothing in this subclause shall be 

23 construed to preclude the terms gov24 erning such an annuity from pro25 viding for adjustments in the amount 
47 

•S 2782 IS 

1 of monthly payments resulting in a 

2 payment for any month greater than 

3 the payment for that month that 

4 would result from adjustments re5 quired under the preceding sentence. 

6 ‘‘(c) PURCHASE OF ANNUITIES IN THE EVENT OF IN7 SUFFICIENT ASSETS.—If a participating individual desires 

8 to purchase a personal social security savings annuity 

9 under subsection (b) on or after the date determined 

10 under subsection (a)(1) and the assets of the personal so11 cial security savings account of such individual are insuffi12 cient to purchase a personal social security savings annu13 ity that provides for a monthly payment that is at least 

14 equal to the minimum annuity payment amount (as de15 fined in subsection (b)(2)(C)(iii)), the participating indi16 vidual shall purchase the largest personal social security 

17 savings annuity that the participating individual’s per18 sonal social security savings account can fund and that 

19 otherwise meets the requirements of subsection (b) (in20 cluding the cost-of-living protection requirement of sub21 section (b)(3)(B)(iii)(III), and the Board shall provide for 

22 appropriate certification to the Secretary of the Treasury 

23 with respect to the participating individual’s eligibility for 

24 guarantee payments under section 260. 
48 

•S 2782 IS 

1 ‘‘(d) RIGHT TO USE EXCESS PERSONAL SOCIAL SE2 CURITY SAVINGS ACCOUNT ASSETS.—To the extent assets 

3 credited to a participating individual’s personal social se4 curity savings account remain after the purchase of an an5 nuity under subsection (b), the remaining assets shall be 

6 payable to the participating individual at such time, in 

7 such manner, and in such amounts as the participating 

8 individual may specify. 

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

10 participating individual dies before all amounts which are 

11 held in the Tier I Investment Fund or the Tier II Invest12 ment Fund of the Savings Fund or held under a Tier III 

13 Investment Option and which are credited to the personal 

14 social security savings account of the individual are other15 wise distributed in accordance with this section, such 

16 amounts shall be distributed, under regulations which 

17 shall be prescribed by the Board— 

18 ‘‘(1) in any case in which one or more bene19 ficiaries have been designated in advance, to such 

20 beneficiaries in accordance with such designation as 

21 provided in such regulations, and 

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

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

24 estate. 
49 

•S 2782 IS 

1 ‘‘(f) PERSONAL SOCIAL SECURITY SAVINGS ANNU2 ITY.—For purposes of this part, the term ‘personal social 

3 security savings annuity’ means an annuity that meets the 

4 following requirements: 

5 ‘‘(1) The annuity starting date (as defined in 

6 section 72(c)(4) of the Internal Revenue Code of 

7 1986) commences on the first day of the month be8 ginning after the date of the purchase of the annu9 ity. 

10 ‘‘(2) The terms of the annuity provide, except 

11 in any case described in subsection (c), for a month12 ly payment to the participating individual during the 

13 life of the participating individual equal to at least 

14 the minimum annuity payment amount (as defined 

15 in subsection (b)(2)(C)(iii)). 

16 ‘‘(3) The terms of the annuity include such 

17 terms and conditions as the Board requires for the 

18 protection of the annuitant (including terms meeting 

19 the cost-of-living requirement of subsection 

20 (b)(3)(B)(iii)(III)). 

21 ‘‘SEC. 260. GUARANTEE OF PROMISED BENEFITS. 

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

23 the date on which a participating individual attains retire24 ment age (as defined in section 216(l)(1)), the monthly 

25 payment under a participating individual’s personal social 
50 

•S 2782 IS 

1 security savings annuity is less than the minimum annuity 

2 payment amount (as defined in section 259(b)(2)(C)(iii)), 

3 adjusted as provided in section 259(b)(3)(B)(iii)(III), the 

4 Board shall so certify to the Secretary of the Treasury 

5 and, upon receipt of such certification, such Secretary 

6 shall provide to the participating individual, from amounts 

7 in the Federal Old-Age and Survivors Insurance Trust 

8 Fund, a guaranty payment for such month to supplement 

9 the personal social security savings annuity and to guar10 antee full payment of such individual’s monthly promised 

11 benefits. 

12 ‘‘(b) GUARANTY PAYMENT.—For purposes of sub13 section (a), a participating individual’s guaranty payment 

14 for any month is equal to the excess of— 

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

16 defined in section 259(b)(2)(C)(iii)), adjusted as 

17 provided in section 259(b)(3)(B)(iii)(III); over 

18 ‘‘(2) the payment for such month of the per19 sonal social security savings annuity purchased by 

20 the participating individual. 

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

22 BENEFIT LEVELS.— 

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

24 any month ending after the date on which a partici-
51 

•S 2782 IS 

1 pating individual attains retirement age (as defined 

2 in section 216(l)(1))— 

3 ‘‘(A) such individual’s assumed total nor4 mal retirement part A benefit for such month, 

5 determined without the application of section 

6 215(j), exceeds— 

7 ‘‘(B) the sum of— 

8 ‘‘(i) such individual’s assumed total 

9 normal retirement part A benefit for such 

10 month, determined with the application of 

11 section 215(j), plus 

12 ‘‘(ii) the monthly payment payable for 

13 such month under such individual’s per14 sonal social security savings annuity, 

15 the Secretary of the Treasury shall pay to such indi16 vidual for such month, from amounts in the Federal 

17 Old-Age and Survivors Insurance Trust Fund, an 

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

19 amount described in subparagraph (A) over the 

20 amount described in subparagraph (B). 

21 ‘‘(2) DEFINITION.—For purposes of this sub22 section, the term ‘assumed total normal retirement 

23 part A benefit’ means, in connection with a partici24 pating individual, the total amount of monthly insur25 ance benefits under section 202 based on such indi-
52 

•S 2782 IS 

1 vidual’s wages and self-employment income (ad2 justed by taking into account adjustments under sec3 tion 215(i)) that would have been payable if such in4 dividual applied for old-age insurance benefits under 

5 section 202(a) during the month in which such indi6 vidual attains retirement age (as defined in section 

7 216(l)(1)). 

8 ‘‘SEC. 261. PERSONAL SOCIAL SECURITY SAVINGS ACCOUNT 

9 BOARD. 

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

11 executive branch of the Government a Personal Social Se12 curity Savings Account Board. 

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

14 of— 

15 ‘‘(1) 3 members appointed by the President, of 

16 whom 1 shall be designated by the President as 

17 Chairman; and 

18 ‘‘(2) 2 members appointed by the President, of 

19 whom— 

20 ‘‘(A) 1 shall be appointed by the President 

21 after taking into consideration the recommenda22 tion made by the Speaker of the House of Rep23 resentatives in consultation with the Minority 

24 Leader of the House of Representatives; and 
53 

•S 2782 IS 

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

2 after taking into consideration the recommenda3 tion made by the Majority Leader of the Senate 

4 in consultation with the Minority Leader of the 

5 Senate. 

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

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

8 consent of the Senate. 

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

10 the Board shall have substantial experience, training, and 

11 expertise in the management of financial investments and 

12 pension benefit plans. 

13 ‘‘(e) LENGTH OF APPOINTMENTS.— 

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

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

16 members first appointed under subsection (b)— 

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

18 a term of 4 years; 

19 ‘‘(B) the members appointed under sub20 section (b)(2) shall be appointed for terms of 3 

21 years; and 

22 ‘‘(C) the remaining members shall be ap23 pointed for terms of 2 years. 

24 ‘‘(2) VACANCIES.— 
54 

•S 2782 IS 

1 ‘‘(A) IN GENERAL.—A vacancy on the 

2 Board shall be filled in the manner in which the 

3 original appointment was made and shall be 

4 subject to any conditions that applied with re5 spect to the original appointment. 

6 ‘‘(B) COMPLETION OF TERM.—An indi7 vidual chosen to fill a vacancy shall be ap8 pointed for the unexpired term of the member 

9 replaced. 

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

11 shall not expire before the date on which the mem12 ber’s successor takes office. 

13 ‘‘(f) DUTIES.—The Board shall— 

14 ‘‘(1) administer the program established under 

15 this part; 

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

17 management of the Savings Fund, including the 

18 Tier I Investment Fund and the Tier II Investment 

19 Fund, and amounts held under Tier III Investment 

20 Options, including policies applicable to the asset 

21 managers, recordkeepers, and custodians with re22 sponsibility for managing the investment of amounts 

23 credited to personal social security investment ac24 counts, and for the management and operation of 
55 

•S 2782 IS 

1 personal social security savings annuities, which 

2 shall provide for— 

3 ‘‘(A) prudent investments suitable for ac4 cumulating funds for payment of retirement in5 come; 

6 ‘‘(B) sound management practices; and 

7 ‘‘(C) low administrative costs; 

8 ‘‘(3) review the performance of investments 

9 made for the Tier I Investment Fund and the Tier 

10 II Investment Fund; 

11 ‘‘(4) review the performance of investments 

12 made under Tier III Investment Options; 

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

14 personal social security savings annuities; 

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

16 Board; and 

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

18 part 4 of subtitle B of title I of the Employee Re19 tirement Income Security Act of 1974 (relating to fi20 duciary responsibility) in connection with any exer21 cise of discretion in connection with the assets of the 

22 Savings Fund. 

23 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

24 ‘‘(1) IN GENERAL.—The Board may— 

25 ‘‘(A) adopt, alter, and use a seal; 
56 

•S 2782 IS 

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

2 direct the Executive Director to take such ac3 tion as the Board considers appropriate to 

4 carry out the provisions of this part and the 

5 policies of the Board in accordance with delega6 tions under this part; 

7 ‘‘(C) upon the concurring votes of 4 mem8 bers, remove the Executive Director from office 

9 for good cause shown; 

10 ‘‘(D) provide to the Executive Director 

11 such resources as are necessary to carry out the 

12 duties of the Executive Director; and 

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

14 necessary to carry out the functions of the 

15 Board. 

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

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

18 month; and 

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

20 Chairman. 

21 ‘‘(3) EXERCISE OF POWERS.— 

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

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

24 functions and exercise the powers of the Board 

25 on a majority vote of a quorum of the Board. 
57 

•S 2782 IS 

1 Three members of the Board shall constitute a 

2 quorum for the transaction of business. 

3 ‘‘(B) VACANCIES.—A vacancy on the 

4 Board shall not impair the authority of a 

5 quorum of the Board to perform the functions 

6 and exercise the powers of the Board. 

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

8 Board may not direct any person to invest or to 

9 cause to be invested any sums in the Tier II Invest10 ment Fund or any personal social security invest11 ment account in a specific asset or to dispose of or 

12 cause to be disposed of any specific asset of such 

13 Fund or any such account. 

14 ‘‘(h) COMPENSATION.— 

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

16 who is not an officer or employee of the Federal 

17 Government shall be compensated at the daily rate 

18 of basic pay for level IV of the Executive Schedule 

19 for each day during which such member is engaged 

20 in performing a function of the Board. 

21 ‘‘(2) EXPENSES.—A member of the Board shall 

22 be paid travel, per diem, and other necessary ex23 penses under subchapter I of chapter 57 of title 5, 

24 United States Code, while traveling away from such 
58 

•S 2782 IS 

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

2 performance of the duties of the Board. 

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

4 under this subsection shall be paid from the Tier I 

5 Investment Fund or the Tier II Investment Fund, 

6 as determined appropriate by the Board. 

7 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem8 bers of the Board shall discharge their responsibilities 

9 solely in the interest of the participating individuals and 

10 their beneficiaries under this part. 

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

12 shall annually engage an independent qualified public ac13 countant to audit the activities of the Board. 

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

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

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

17 an annual budget of the expenses and other items relating 

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

19 in the budget required to be transmitted to Congress 

20 under section 1105 of title 31, United States Code. 

21 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA22 TIONS.—The Board may submit to the President, and, at 

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

24 any legislative recommendations of the Board relating to 
59 

•S 2782 IS 

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

2 of law. 

3 ‘‘SEC. 262. EXECUTIVE DIRECTOR. 

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

5 Board shall appoint, without regard to the provisions of 

6 law governing appointments in the competitive service, an 

7 Executive Director by action agreed to by a majority of 

8 the members of the Board. 

9 ‘‘(b) DUTIES.—The Executive Director shall, as de10 termined appropriate by the Board— 

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

12 Board; 

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

14 Fund and the Tier II Investment Fund in accord15 ance with the investment policies and other policies 

16 established by the Board; 

17 ‘‘(3) administer the provisions of this part re18 lating to the Tier I Investment Fund and the Tier 

19 II Investment Fund; and 

20 ‘‘(4) prescribe such regulations (other than reg21 ulations relating to fiduciary responsibilities) as may 

22 be necessary for the administration of this part re23 lating to the Tier I Investment Fund and the Tier 

24 II Investment Fund. 
60 

•S 2782 IS 

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

2 Director may, within the scope of the duties of the Execu3 tive Director as determined by the Board— 

4 ‘‘(1) appoint such personnel as may be nec5 essary to carry out the provisions of this part relat6 ing to the Tier I Investment Fund and the Tier II 

7 Investment Fund; 

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

9 the services of experts and consultants under section 

10 3109 of title 5, United States Code; 

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

12 the United States Postal Service, or the Postal Rate 

13 Commission any information necessary to carry out 

14 the provisions of this part and the policies of the 

15 Board relating to the Tier I Investment Fund and 

16 the Tier II Investment Fund; 

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

18 Tier I Investment Fund and the Tier II Investment 

19 Fund as the Executive Director determines, in ac20 cordance with regulations of the Board, are nec21 essary to carry out the provisions of this part and 

22 the policies of the Board; 

23 ‘‘(5) pay the compensation, per diem, and travel 

24 expenses of individuals appointed under paragraphs 

25 (1), (2), and (6) from the Tier I Investment Fund 
61 

•S 2782 IS 

1 or the Tier II Investment Fund, in accordance with 

2 regulations of the Board; 

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

4 employed intermittently in the Government service 

5 and reimburse such individuals for travel expenses, 

6 authorized by section 5703 of title 5, United States 

7 Code, including per diem as authorized by section 

8 5702 of such title; 

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

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

11 Executive Director’s functions to such employees 

12 under the Board as the Executive Director may des13 ignate and authorize such successive redelegations of 

14 such functions to such employees under the Board 

15 as the Executive Director may consider to be nec16 essary or appropriate; and 

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

18 to carry out the functions of the Executive Direc19 tor.’’. 

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

21 this section shall apply with respect to wages paid after 

22 December 31, 2004, for pay periods ending after such 

23 date and self-employment income for taxable years begin24 ning after such date. 
62 

•S 2782 IS 

1 SEC. 3. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS. 

2 (a) IN GENERAL.—Section 215 of the Social Security 

3 Act (42 U.S.C. 415) is amended by adding at the end the 

4 following new subsection: 

5 ‘‘Adjustment of Primary Insurance Amount in Relation 

6 to Deposits Made to Personal Social Security Sav7 ings Accounts 

8 ‘‘(j)(1) Except as provided in paragraph (3), the pri9 mary insurance amount of a participating individual under 

10 the Personal Social Security Savings Accounts Program 

11 under part B of this title, as determined in accordance 

12 with this section before adjustments made under sub13 section (i), shall be equal to the product derived by multi14 plying— 

15 ‘‘(A) the primary insurance amount as deter16 mined before the application of this subsection; by 

17 ‘‘(B) a fraction— 

18 ‘‘(i) the numerator of which is the excess 

19 of— 

20 ‘‘(I) the total of amount of redirected 

21 social security contributions (as defined in 

22 section 252(b)(3)) that would have been 

23 transferred to the Social Security Personal 

24 Savings Fund in connection with such indi25 vidual for each year after such individual 

26 attained the age of 18 had the individual 
63 

•S 2782 IS 

1 been a participating individual on the date 

2 such individual attained the age of 18, over 

3 ‘‘(II) the present value of the actual 

4 total amount of redirected social security 

5 contributions (as so defined) deposited in 

6 the Social Security Personal Savings Fund 

7 in connection with such individual for each 

8 year during which such individual was a 

9 participating individual, 

10 assuming for each year the present value of the 

11 amount determined for such year, and 

12 ‘‘(ii) the denominator of which is the 

13 amount described in clause (i)(I), 

14 rounded to the next higher multiple of $0.10 where such 

15 product is a multiple of $0.05 but not a multiple of $0.10 

16 and to the nearest multiple of $0.10 in any other case. 

17 ‘‘(2) In determining the present values for purposes 

18 of paragraph (1), the Commissioner of Social Security 

19 shall assume an annual interest rate for any period equal 

20 to the average annual yield on investments of the Federal 

21 Old-Age and Survivors Insurance Trust Fund for such pe22 riod under section 201(d). 

23 ‘‘(3) In the case of a participating individual who be24 comes entitled to disability insurance benefits under sec-
64 

•S 2782 IS 

1 tion 223, such individual’s primary insurance amount 

2 shall be determined without regard to paragraph (1). 

3 ‘‘(4) In the case of an individual who becomes entitled 

4 to benefits under section 202, other than old-age insur5 ance benefits under section 202(a), on the basis of the 

6 wages and self-employment income of a participating indi7 vidual who dies before such participating individual pur8 chases a personal social security savings annuity under 

9 section 259, such participating individual’s primary insur10 ance amount shall be determined under this section with11 out regard to paragraph (1).’’. 

12 SEC. 4. GENERAL FUND TRANSFERS TO THE FEDERAL OLD13 AGE AND SURVIVORS INSURANCE TRUST 

14 FUND. 

15 (a) RECAPTURE OF CORPORATE TAX ON ACCOUNT

16 YIELDS.— 

17 (1) IN GENERAL.—In the case of fiscal years 

18 beginning after September 30, 2004, the Secretary 

19 of the Treasury, in consultation with the Personal 

20 Social Security Savings Account Board, shall esti21 mate and transfer to the Federal Old-Age and Sur22 vivors Insurance Trust Fund established under sec23 tion 201 of the Social Security Act (42 U.S.C. 401) 

24 within 3 months after the end of each fiscal year an 

25 amount equal to the recapture amount for such fis-
65 

•S 2782 IS 

1 cal year. For purposes of the preceding sentence, the 

2 recapture amount for any fiscal year shall be equal 

3 to the amount of corporate tax receipts under the 

4 Internal Revenue Code of 1986 deposited in the 

5 Treasury for that fiscal year which are attributable 

6 to personal social security savings account invest7 ments under part B of title II of the Social Security 

8 Act. 

9 (2) INITIAL ASSUMPTIONS.—In determining the 

10 recapture amount under subsection (a) for fiscal 

11 years 2005 and 2006, the Secretary of the Treasury 

12 shall make the following assumptions concerning the 

13 total amount of taxable capital in the United States 

14 represented by the total assets held by personal so15 cial security savings accounts established under part 

16 B of title II of the Social Security Act: 

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

18 net addition to national investments. 

19 (B) Of the amount described in subpara20 graph (A), 90 percent will be invested in the 

21 United States and subject to taxation under the 

22 Internal Revenue Code of 1986. 

23 (C) Of the amount described in subpara24 graph (B), 95 percent will be subject to the 

25 Federal corporate tax. 
66 

•S 2782 IS 

1 (D) The amount described in subpara2 graph (C) is subject to the statutory tax rate of 

3 35 percent (resulting in an effective corporate 

4 tax rate of 23.9 percent on the earnings of all 

5 such total assets). 

6 (b) RECAPTURE OF GOVERNMENT SAVINGS OVER

7 BASELINE.— 

8 (1) IN GENERAL.—In the case of fiscal years 

9 beginning after September 30, 2004, the Secretary 

10 of the Treasury, in consultation with the Personal 

11 Social Security Savings Account Board, shall esti12 mate and transfer to the Federal Old-Age and Sur13 vivors Insurance Trust Fund established under sec14 tion 201 of the Social Security Act (42 U.S.C. 401) 

15 within 3 months after the end of each fiscal year an 

16 amount equal to the spending reductions amount for 

17 such fiscal year. For purposes of the preceding sen18 tence, the spending reductions amount shall be an 

19 amount equal to— 

20 (A) for any fiscal year in the period begin21 ning with fiscal year 2005 and ending with fis22 cal year 2012, the excess of— 

23 (i) 20 percent of the gross domestic 

24 product (as determined by the Congres-
67 

•S 2782 IS 

1 sional Budget Office) for the fiscal year for 

2 which the determination is made; over 

3 (ii) the product of— 

4 (I) 20 percent of the gross do5 mestic product (as so determined) for 

6 the fiscal year for which the deter7 mination is made; and 

8 (II) 0.99, factored a number of 

9 times equal to the number of fiscal 

10 years during such period which end 

11 with or before the fiscal year for 

12 which the determination is made; and 

13 (B) for any fiscal year beginning after fis14 cal year 2012 and ending with the termination 

15 year— 

16 (i) the amount determined under sub17 paragraph (A) for fiscal year 2012; in18 creased by 

19 (ii) the rate of growth of the gross do20 mestic product (as so determined) over the 

21 period beginning with fiscal year 2013 and 

22 ending with the fiscal year for which the 

23 determination is made. 

24 (2) ACCOMMODATION FOR LOW OASDI BALANCE

25 RATIO.—Notwithstanding paragraph (1)(B), in any 
68 

•S 2782 IS 

1 case in which the OASDI trust fund ratio is less 

2 than 125 percent as of the end of the fiscal year 

3 preceding each fiscal year during any period of 1 or 

4 more fiscal years referred to in paragraph (1)(B) 

5 and preceding the termination year— 

6 (A) the spending reductions amount for 

7 each fiscal year during such period shall be the 

8 excess of— 

9 (i) 20 percent of the gross domestic 

10 product (as projected by the Department 

11 of Commerce) for the fiscal year for which 

12 the determination is made; over 

13 (ii) the product of— 

14 (I) 20 percent of the gross do15 mestic product (as so projected) for 

16 the fiscal year for which the deter17 mination is made; and 

18 (II) 0.99, factored a number of 

19 times equal to the number of fiscal 

20 years during such period which end 

21 with or before the fiscal year for 

22 which the determination is made plus 

23 the number of fiscal years during the 

24 period described in paragraph (1)(A), 

25 and 
69 

•S 2782 IS 

1 (B) paragraph (1)(B) shall apply with re2 spect to subsequent fiscal years by substituting 

3 for the reference, in paragraph (1)(B)(i), to fis4 cal year 2012 a reference to the last fiscal year 

5 in such period. 

6 (3) TERMINATION YEAR.—For purposes of 

7 paragraph (1)(B), the ‘‘termination year’’ is the first 

8 fiscal year, after fiscal year 2012— 

9 (A) for which the OASDI trust fund ratio 

10 is at least 125 percent; and 

11 (B) on the last day of which there are no 

12 outstanding transition obligations of the Self13 Liquidating Social Security Transition Fund 

14 under section 6. 

15 (4) OASDI TRUST FUND RATIO.—In paragraph 

16 (2)(A), the term ‘‘OASDI trust fund ratio’’ means, 

17 for a fiscal year, the ratio (expressed as a percent18 age) of— 

19 (A) the combined balance in the Federal 

20 Old-Age and Survivors Insurance Trust Fund 

21 and the Federal Disability Insurance Trust 

22 Fund, as of the last day of such fiscal year; 

23 over 

24 (B) the amount estimated by the Commis25 sioner of Social Security to be the total amount 
70 

•S 2782 IS 

1 to be paid from such Trust Funds during the 

2 fiscal year following such fiscal year for all pur3 poses authorized by section 201 of the Social 

4 Security Act (excluding any transfer payments 

5 between such Trust Funds and reducing the 

6 amount of any transfer to the Railroad Retire7 ment Account by the amount of any transfers 

8 into either such Trust Fund from such Ac9 count). 

10 SEC. 5. TAX TREATMENT OF ACCOUNTS. 

11 (a) IN GENERAL.— 

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

13 of the Internal Revenue Code of 1986 (relating to 

14 exempt organizations) is amended by adding at the 

15 end the following new part: 

16 ‘‘PART IX—PERSONAL SOCIAL SECURITY 

17 SAVINGS PROGRAM 

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

18 ‘‘SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PRO19 GRAM. 

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

21 Savings Fund and each Tier III Investment Option are 

22 exempt from taxation under this subtitle. Notwithstanding 

23 the preceding sentence, a personal social security savings 

24 account is subject to the taxes imposed by section 511 (re-
71 

•S 2782 IS 

1 lating to imposition of tax on unrelated business income 

2 of charitable, etc. organizations). 

3 ‘‘(b) DISTRIBUTIONS.— 

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

5 from amounts credited to a personal social security 

6 savings account from the Social Security Personal 

7 Savings Fund or held in a Tier III Investment Op8 tion shall not be included in the gross income of the 

9 distributee. 

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

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

12 means a distribution which meets the requirements 

13 of section 259 of the Social Security Act and which 

14 is not a guaranty payment (as defined by section 

15 260 of such Act). 

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

17 ‘‘(1) PERSONAL SOCIAL SECURITY SAVINGS AC18 COUNT.—The term ‘personal social security savings 

19 account’ means an account established under section 

20 254(a) of the Social Security Act. 

21 ‘‘(2) SOCIAL SECURITY PERSONAL SAVINGS

22 FUND.—The term ‘Social Security Personal Savings 

23 Fund’ means the Savings Fund established under 

24 section 252 of the Social Security Act. 
72 

•S 2782 IS 

1 ‘‘(3) TIER III INVESTMENT OPTION.—The term 

2 ‘Tier III Investment Option’ has the meaning given 

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

4 Act. 

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

6 includible in the gross estate of any individual for pur7 poses of chapter 11 by reason of a distribution in the case 

8 of death under section 259(e) of the Social Security Act.’’. 

9 (2) CONFORMING AMENDMENT.—Section 

10 86(d)(1)(A) of such Code is amended by inserting 

11 ‘‘part A of’’ after ‘‘under’’. 

12 (3) CLERICAL AMENDMENT.—The table of 

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

14 amended by adding after the item relating to part 

15 VIII the following new item: 

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

16 (b) GUARANTY PAYMENTS.—Paragraph (1) of sec17 tion 86(d) of the Internal Revenue Act of 1986, as amend18 ed by subsection (b), is amended by striking ‘‘or’’ at the 

19 end of subparagraph (A), by striking the period and in20 serting ‘‘, or’’ at the end of subparagraph (B), and by 

21 adding at the end the following new subparagraph: 

22 ‘‘(C) a guaranty payment under section 

23 260(a), and a payment of an additional amount 

24 under section 260(c), of the Social Security 

25 Act.’’. 
73 

•S 2782 IS 

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2004. 

4 SEC. 6. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION 

5 FUND. 

6 (a) ESTABLISHMENT.—There is hereby created on 

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

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

9 Transition Fund (in this section referred to as the ‘‘Tran10 sition Fund’’). 

11 (b) DEPOSIT OF OASDI TRUST FUND SURPLUS.— 

12 (1) IN GENERAL.—There are appropriated to 

13 the Transition Fund for the fiscal year beginning in 

14 2030, and for each fiscal year thereafter, out of any 

15 moneys in the Federal Old-Age and Survivors Insur16 ance Trust Fund, amounts equivalent to the OASDI 

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

18 the preceding fiscal year. 

19 (2) OASDI TRUST FUND SURPLUS DEFINED.— 

20 In this section, the term ‘‘OASDI trust fund sur21 plus’’ for a fiscal year means the dollar amount by 

22 which the Federal Old-Age and Survivors Insurance 

23 Trust Fund could be reduced as of the end of such 

24 fiscal year so as to result in an OASDI trust fund 
74 

•S 2782 IS 

1 ratio (as defined in section 5(b)(3)) for such fiscal 

2 year equal to 125 percent. 

3 (3) RULE OF CONSTRUCTION.—This section 

4 shall not be construed to require redemption of obli5 gations of the Trust Fund for the purpose of mak6 ing transfers to the Transition Fund under this sec7 tion or for any other purpose other than to provide 

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

9 the Social Security Act. 

10 (c) TRANSFERS BASED ON ESTIMATES.—The 

11 amounts appropriated by subsection (c)(1) shall be trans12 ferred from time to time from the Federal Old-Age and 

13 Survivors Insurance Trust Fund to the Transition Fund, 

14 such amounts to be determined on the basis of estimates 

15 by the Commissioner of Social Security. Proper adjust16 ments shall be made in amounts subsequently transferred 

17 to the extent prior estimates were in excess of or were 

18 less than such surplus. 

19 (d) BOARD OF TRUSTEES.— 

20 (1) ESTABLISHMENT.—With respect to the 

21 Transition Fund, there is hereby created a body to 

22 be known as the Board of Trustees of the Transition 

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

24 Trustees’’) composed of the Commissioner of Social 

25 Security, the Secretary of the Treasury, and the 
75 

•S 2782 IS 

1 members of the Personal Social Security Savings Ac2 count Board established under section 261 of the 

3 Social Security Act. 

4 (2) MEETINGS.—The Board of Trustees shall 

5 meet not less frequently than once each calendar 

6 year. 

7 (3) DUTIES.—The duties of the Board of 

8 Trustees are as follows: 

9 (A) Use all funds paid into the Transition 

10 Fund to redeem obligations issued under sec11 tion 8 as soon as practicable. 

12 (B) Report to Congress not later than the 

13 first day of April of each year on the operation 

14 and status of the Transition Fund during the 

15 preceding fiscal year and on its expected oper16 ation and status during the current fiscal year 

17 and the next 2 fiscal years. 

18 (C) Review the general policies followed in 

19 managing the Transition Fund, and recommend 

20 changes in such policies, including necessary 

21 changes in the provisions of law which govern 

22 the way in which the Transition Fund is to be 

23 managed. 

24 (e) POLICY DECLARATION.—It is hereby declared the 

25 policy of the United States that all obligations issued 
76 

•S 2782 IS 

1 under section 8 are to be redeemed by the Transition 

2 Fund as soon as possible. 

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

4 obligations issued under section 8 have been redeemed, 

5 any balance remaining in the Transition Fund as of such 

6 date shall be deposited in the Federal Old-Age and Sur7 vivors Insurance Trust Fund, the terms of the Board of 

8 Trustees shall end, and this section shall be repealed. 

9 SEC. 7. ISSUANCE OF TRANSITION FUND BONDS. 

10 (a) ISSUANCE.— 

11 (1) IN GENERAL.—The purposes for which obli12 gations of the United States may be issued under 

13 chapter 31 of title 31, United States Code, are here14 by extended to authorize the issuance at par of pub15 lic-debt obligations by the Self-Liquidating Social 

16 Security Transition Fund (in this section referred to 

17 as the ‘‘Transition Fund’’). 

18 (2) REQUIRED ISSUANCE.—Beginning on Janu19 ary 1, 2005, whenever any obligation held in the 

20 Federal Old-Age and Survivors Insurance Trust 

21 Fund or the Federal Disability Insurance Trust 

22 Fund is repaid from the general fund of the Treas23 ury to either of such Trust Funds, the Transition 

24 Fund shall issue an obligation under this subsection 
77 

•S 2782 IS 

1 in an amount equal to the amount of interest and 

2 principal so repaid. 

3 (3) TRANSFER OF PROCEEDS.—Proceeds from 

4 the issuance of any obligation issued under this sec5 tion shall be transferred to the general fund of the 

6 Treasury. 

7 (4) ACCOUNTING.—The debt owed on any obli8 gation issued under this section shall be considered 

9 to be debt of the Transition Fund and shall be ac10 counted for in such manner. 

11 (b) MATURITIES AND INTEREST RATE.—Such obliga12 tions issued by the Transition Fund for purchase by the 

13 public shall have maturities fixed with due regard for the 

14 needs of the Transition Fund and shall bear interest at 

15 a rate equal to the average market yield (computed by the 

16 Secretary of the Treasury on the basis of market 

17 quotations as of the end of the calendar month next pre18 ceding the date of such issue) on all marketable interest19 bearing obligations of the United States then forming a 

20 part of the public debt which are not due or callable until 

21 after the expiration of 4 years from the end of such cal22 endar month, except that where such average market yield 

23 is not a multiple of one-eighth of 1 per centum, the rate 

24 of interest on such obligations shall be the multiple of one25 eighth of 1 per centum nearest such market yield. 
78 

•S 2782 IS 

1 (c) REPAYMENT OF OBLIGATIONS.—Only funds in 

2 the Transition Fund may be used to redeem obligations 

3 issued under this section. 

4 SEC. 8. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND 

5 DISABILITY INSURANCE PROGRAM AND THE 

6 PERSONAL SOCIAL SECURITY SAVINGS PRO7 GRAM. 

8 Title VII of the Social Security Act is amended by 

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

10 new section: 

11 ‘‘ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DIS12 ABILITY INSURANCE PROGRAM AND THE INDIVIDUAL

13 SOCIAL SECURITY INVESTMENT PROGRAM

14 ‘‘Social Security Lockbox Budget 

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

16 Congress by the President of the budget of the United 

17 States Government, the President shall transmit to each 

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

19 the ‘Social Security Lockbox Budget’) detailing the per20 formance of the Social Security Part A Account, the Social 

21 Security Part B Account, and the Self-Liquidating Social 

22 Security Transition Fund Account (established under sub23 section (b)) during the preceding fiscal year. Such report 

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

25 ‘‘(1) the amount of the balance of each account, 
79 

•S 2782 IS 

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

2 amount of the total credits to each account for the 

3 year, and 

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

5 each category of charges and credits itemized in sub6 section (b). 

7 ‘‘Establishment of Accounts 

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

9 and disbursement of the Treasury of the United States 

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

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

12 Security Act and the Individual Social Security Invest13 ment Program under part B of such title, the Secretary 

14 of the Treasury shall establish and maintain a Social Se15 curity Part A Account, a Social Security Part B Account, 

16 and a Self-Liquidating Social Security Transition Fund 

17 Account. 

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

19 Account 

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

21 A Account shall be credited with the sum of— 

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

23 Old-Age and Survivors Insurance Trust Fund and 

24 the Federal Disability Insurance Trust Fund under 

25 section 201 of the Social Security Act (including 
80 

•S 2782 IS 

1 amounts received as interest on notes and obliga2 tions purchased by the Trust Funds under section 

3 201(d) of such Act, and excluding amounts received 

4 in redemption of such notes and obligations and 

5 amounts received by either such Trust Fund as 

6 transfers from the other such Trust Fund), 

7 ‘‘(B) all amounts transferred during the year 

8 from the general fund of the Treasury to the Fed9 eral Old-Age and Survivors Insurance Trust Fund 

10 as recapture of corporate tax yields under section 

11 5(a), 

12 ‘‘(C) all amounts transferred during the year 

13 from the general fund of the Treasury to the Fed14 eral Old-Age and Survivors Insurance Trust Fund 

15 as recapture of Government savings over the base16 line under section 5(b), 

17 ‘‘(D) all amounts transferred during the year 

18 from the general fund of the Treasury to the Fed19 eral Old-Age and Survivors Insurance Trust Fund 

20 under section 11 (relating to dedication of budget 

21 surpluses to saving social security), and 

22 ‘‘(E) all receipts during the year by the Federal 

23 Old-Age and Survivors Insurance Trust Fund and 

24 the Federal Disability Insurance Trust Fund under 

25 section 121(e) of the Social Security Amendments of 
81 

•S 2782 IS 

1 1983 (relating to appropriation of amounts equiva2 lent to taxes on social security benefits) (42 U.S.C. 

3 401 note). 

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

5 A Account shall be charged with the sum of— 

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

7 Federal Old-Age and Survivors Insurance Trust 

8 Fund and the Federal Disability Insurance Trust 

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

10 Act, 

11 ‘‘(B) all redirected social security contributions 

12 transferred during the year to the Social Security 

13 Personal Savings Fund under section 252(b) of the 

14 Social Security Act, 

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

16 from the Trust Funds under part A of title II (ex17 cluding amounts expended as transfers by either 

18 such Trust Fund to the other such Trust Fund and 

19 amounts paid for the purchase of notes and obliga20 tions under section 201(d) of the Social Security 

21 Act), and 

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

23 and Survivors Insurance Trust Fund to the Self-Liq24 uidating Social Security Transition Fund under sec-
82 

•S 2782 IS 

1 tion 6 of the Social Security Personal Savings and 

2 Prosperity Act of 2004. 

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

4 Account 

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

6 B Account shall be credited with— 

7 ‘‘(A) all redirected social security contributions 

8 transferred during the year to the Personal Social 

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

10 Social Security Act, and 

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

12 Fund attributable to investment for the fiscal year, 

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

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

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

19 B Account shall be charged with— 

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

21 fiscal year with respect to the Tier I Investment 

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

23 Investment Options, 

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

25 Fund attributable to investment for the fiscal year, 
83 

•S 2782 IS 

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

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

6 ‘‘(C) all amounts distributed during the year 

7 under section 259 from the Tier I Investment Fund, 

8 the Tier II Investment Fund, and the Tier III In9 vestment Options. 

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

11 Security Transition Fund Account 

12 ‘‘(e)(1) For each fiscal year, the Self-Liquidating So13 cial Security Transition Account shall be credited with— 

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

15 the Federal Old-Age and Survivors Insurance Trust 

16 Fund under section 6(b) of the Social Security Per17 sonal Savings Guarantee and Prosperity Act of 

18 2004, and 

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

20 year from the Trust Funds in the redemption under 

21 section 7(e) of such Act of obligations issued by the 

22 Transition Fund under section 8 of such Act. 

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

24 Security Transition Fund Account shall be charged with 

25 the total amount of obligations issued during the fiscal 
84 

•S 2782 IS 

1 year by the Transition Fund under section 7 of the Social 

2 Security Personal Savings Guarantee and Prosperity Act 

3 of 2004.’’. 

4 SEC. 9. BUDGETARY TREATMENT OF SOCIAL SECURITY. 

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

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

7 ‘‘BUDGETARY TREATMENT OF SOCIAL SECURITY

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

9 other provision of law and except as provided in subsection 

10 (b), the receipts and disbursements of the Federal Old11 Age and Survivors Insurance Trust Fund, the Federal 

12 Disability Insurance Trust Fund, and the Social Security 

13 Personal Savings Fund (including transfers to and from 

14 the Federal Old-Age and Survivors Insurance Trust Fund 

15 or the Federal Disability Insurance Trust Fund relating 

16 to the acquisition or redemption of obligations acquired 

17 under section 201(d) of the Social Security Act) and the 

18 taxes imposed under sections 1401 and 3101 of the Inter19 nal Revenue Code of 1986 shall not be counted as new 

20 budget authority, outlays, receipts, or deficit or surplus 

21 for purposes of the budget of the Government as sub22 mitted by the President or the congressional budget or be 

23 reported as new budget authority, outlays, receipts, or def24 icit or surplus in any report of the Congressional Budget 

25 Office or any other agency or instrumentality of the Gov26 ernment. 
85 

•S 2782 IS 

1 ‘‘(b) MATTERS INCLUDED IN THE BUDGET.—Sub2 section (a) shall not apply with respect to the following: 

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

4 Treasury to the Federal Old-Age and Survivors In5 surance Trust Fund under section 4(a) of the Social 

6 Security Personal Savings Guarantee and Prosperity 

7 Act of 2004 (relating to recapture of corporate tax 

8 on account yields), which shall be treated as an ex9 penditure of the Government; 

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

11 Treasury to the Federal Old-Age and Survivors In12 surance Trust Fund under section 4(b) of the Social 

13 Security Personal Savings Guarantee and Prosperity 

14 Act of 2004 (relating to recapture of Government 

15 savings over baseline), which shall be treated as an 

16 expenditure of the Government; 

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

18 Treasury to the Federal Old-Age and Survivors In19 surance Trust Fund or the Federal Disability Insur20 ance Trust Fund under section 121(e) of the Social 

21 Security Amendments of 1983 (relating to appro22 priation of amounts equivalent to taxes on social se23 curity benefits) (42 U.S.C. 401 note), which shall be 

24 treated as an expenditure of the Government; and 
86 

•S 2782 IS 

1 ‘‘(4) revenues from taxes imposed under chap2 ter 1 of the Internal Revenue Code of 1986, to the 

3 extent attributable to section 86 of such Code (relat4 ing to taxation of social security and tier 1 railroad 

5 retirement benefits), which shall be treated as a re6 ceipt of the Government.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 13301 of the Budget Enforcement 

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

10 repealed. 

11 (2) Section 405 of the Congressional Budget 

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

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

14 the Social Security Act’’ after ‘‘Notwith15 standing any other provision of law’’; and 

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

17 and all that follows through ‘‘Funds,’’ and in18 serting ‘‘section’’ . 

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

20 this section shall apply with respect to fiscal years begin21 ning on or after October 1, 2005. 
87 

•S 2782 IS 

1 SEC. 10. DEDICATION OF BUDGET SURPLUSES TO SAVING 

2 SOCIAL SECURITY. 

3 Section 201 of the Social Security Act (as amended 

4 by section 103 of this Act) is amended further by adding 

5 at the end the following new subsection: 

6 ‘‘(p) In the case of any fiscal year beginning after 

7 September 30, 2005, for which the total amount treated 

8 as income of the Federal Government in the total budget 

9 of the United States have exceeded the total amount treat10 ed as expenditures of the Federal Government in the total 

11 budget of the United States (as determined by the Direc12 tor of the Office of Management and Budget), not later 

13 than 3 months after the end of such fiscal year, the Sec14 retary of the Treasury shall transfer from the general fund 

15 of the Treasury to the Federal Old-Age and Survivors In16 surance Trust Fund an amount equal to the lesser of— 

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

18 Trust Fund during such fiscal year to the Social Se19 curity Personal Savings Fund under section 252(b), 

20 or 

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

22 treated as receipts exceeded such total amount treat23 ed as expenditures.’’. 
88 

•S 2782 IS 

1 SEC. 11. NATIONAL SPENDING LIMITATION. 

2 (a) IN GENERAL.—Section 1105 of title 31, United 

3 States Code, is amended by adding at the end the fol4 lowing new subsection: 

5 ‘‘(i)(1) The budget transmitted pursuant to sub6 section (a) for a fiscal year shall not provide for total ex7 penditures for the fiscal year for which the budget is sub8 mitted which are greater than the national spending limi9 tation specified under paragraph (3). 

10 ‘‘(2) For purposes of this section, the term ‘total ex11 penditures’ means, for any fiscal year, the sum of— 

12 ‘‘(A) the net expenditures of the budget of the 

13 United States for the fiscal year plus all expendi14 tures which are chargeable to the Social Security 

15 Part A Account in the Social Security Lockbox 

16 Budget for the fiscal year under section 706(c)(2) of 

17 the Social Security Act; plus 

18 ‘‘(B) the amount of the reduction in the total 

19 amount of expenditures which are chargeable to the 

20 Social Security Part A Account in the Social Secu21 rity Lockbox Budget for the fiscal year which is at22 tributable to adjustments to primary insurance 

23 amounts under section 215(j) of the Social Security 

24 Act. 

25 ‘‘(3)(A) For each fiscal year during the period begin26 ning with fiscal year 2005 and ending with fiscal year 
89 

•S 2782 IS 

1 2012, the national spending limitation shall be equal to 

2 the product derived by multiplying— 

3 ‘‘(i) 20 percent of the GDP for the fiscal year 

4 for which the determination is made, by 

5 ‘‘(ii) 0.99, factored a number of times equal to 

6 the number of fiscal years during such period which 

7 end with or before the fiscal year for which the de8 termination is made. 

9 ‘‘(B) For each fiscal year during the period beginning 

10 with fiscal year 2013 and ending with fiscal year 2017, 

11 the national spending limitation shall be equal to— 

12 ‘‘(i) the amount of national spending limitation 

13 under this subsection for fiscal year 2012, increased 

14 by 

15 ‘‘(ii) the rate of growth in the GDP over the pe16 riod beginning with fiscal year 2013 and ending with 

17 the fiscal year for which the determination is made. 

18 ‘‘(C) For each fiscal year during the period beginning 

19 with fiscal year 2018 and ending with the termination 

20 year, the national spending limitation shall be equal to— 

21 ‘‘(i) the amount of the national spending limita22 tion under this subsection for fiscal year 2018, in23 creased by 

24 ‘‘(ii) the sum of— 
90 

•S 2782 IS 

1 ‘‘(I) the rate of growth in the GDP over 

2 the period beginning with fiscal year 2018 and 

3 ending with the fiscal year for which the deter4 mination is made, plus 

5 ‘‘(II) 1.75 percentage points for each fiscal 

6 year during the period described in subclause 

7 (I). 

8 ‘‘(D) Notwithstanding subparagraphs (B) and (C), in 

9 any case in which the OASDI trust fund ratio is less than 

10 125 percent as of the end of the fiscal year preceding each 

11 fiscal year during any period of 1 or more fiscal years re12 ferred to in such subparagraphs and preceding the termi13 nation year, the national spending limitation for each fis14 cal year during such period shall be the product of— 

15 ‘‘(i) 20 percent of the GDP for the fiscal year 

16 for which the determination is made; and 

17 ‘‘(ii) 0.99, factored a number of times equal to 

18 the number of fiscal years during such period which 

19 end with or before the fiscal year for which the de20 termination is made plus the total number of fiscal 

21 years referred to in subparagraph (A), 

22 plus, if subparagraph (C) applied to the fiscal year pre23 ceding such period, the increase (if any) under subpara24 graph (C) in the national spending limitation for such fis25 cal year attributable to subparagraph (C)(ii)(II). 
91 

•S 2782 IS 

1 ‘‘(4) For purposes of this subsection, the term ‘termi2 nation year’ is the first fiscal year, after fiscal year 

3 2017— 

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

5 at least 125 percent; and 

6 ‘‘(B) on the last day of which there are no out7 standing transition obligations of the Self-Liqui8 dating Social Security Transition Fund under sec9 tion 6 of the Social Security Personal Savings Guar10 antee and Prosperity Act of 2004. 

11 ‘‘(5) For purposes of this subsection, the term ‘GDP’ 

12 means the gross domestic product, as projected by the De13 partment of Commerce.’’. 

14 SEC. 12. IMPOSITION OF SPENDING LIMITATIONS ON CON15 GRESSIONAL BUDGET RESOLUTIONS. 

16 (a) CONTENTS OF CONGRESSIONAL BUDGET RESO17 LUTIONS.—Section 301(a) of the Congressional Budget 

18 Act of 1974 is amended by adding at the end the following 

19 new sentence: ‘‘The concurrent resolution on the budget 

20 for fiscal year 2006 or for any ensuing fiscal year shall 

21 be consistent with the spending limitation specified in sec22 tion 1105(i) of title 31, United States Code.’’. 

23 (b) SPENDING LIMITATION POINT OF ORDER.—Sec24 tion 312 of the Congressional Budget Act of 1974 is 
92 

•S 2782 IS 

1 amended by adding at the end the following new sub2 section: 

3 ‘‘(g) SPENDING LIMITATION POINT OF ORDER.—(1) 

4 It shall not be in order in the House of Representatives 

5 or the Senate to consider any concurrent resolution on the 

6 budget for fiscal year 2006 or for any fiscal year there7 after, or any amendment thereto or conference report 

8 thereon, that is not consistent with the spending limitation 

9 specified in section 1105(i) of title 31, United States Code. 

10 ‘‘(2) Paragraph (1) may be waived or suspended in 

11 the House of Representatives or the Senate only by the 

12 affirmative vote of two-thirds of the Members, duly chosen 

13 and sworn. An affirmative vote of two-thirds of the Mem14 bers, duly chosen and sworn, shall be required in the Sen15 ate to sustain an appeal of the ruling of the chair on such 

16 point of order. Appeals in the Senate from the decisions 

17 of the chair relating to paragraph (1) shall be limited to 

18 one hour, to be equally divided between, and controlled 

19 by, the mover and the manager of the concurrent resolu20 tion.’’. 

21 SEC. 13. REDUCTION OF FICA RATES RESULTING FROM 

22 PERSONAL SOCIAL SECURITY SAVINGS PRO23 GRAM. 

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

25 Internal Revenue Code of 1986 (relating to tax on employ-
93 

•S 2782 IS 

1 ees) is amended by adding at the end the following new 

2 subsection: 

3 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS4 ABILITY INSURANCE TAX RATE.— 

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

6 a reduction year and each year thereafter, the rate 

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

8 by the reduction percentage. 

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

10 section— 

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

12 year’ means any year after the transition year 

13 in which the OASDI rate ratio exceeds 125 per14 cent. 

15 ‘‘(B) TRANSITION YEAR.—The term ‘tran16 sition year’ means the first full calendar year 

17 following the termination year (as defined in 

18 section 4(b)(2) of the Social Security Personal 

19 Savings Guarantee and Prosperity Act of 

20 2004). 

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

22 of this section, the term ‘reduction percentage’ 

23 means the excess of— 

24 ‘‘(A) the rate in effect under subsection (a) 

25 for the reduction year, over 
94 

•S 2782 IS 

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

2 one tenth of a percent) under which the OASDI 

3 rate ratio for the reduction year would have 

4 been 125 percent if— 

5 ‘‘(i) such rate had been applicable 

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

7 during such year, and 

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

9 during such year were twice such rate. 

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

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

12 the ratio— 

13 ‘‘(A) the numerator of which is the com14 bined balance in the Old-Age and Survivors In15 surance Trust Fund and the Federal Disability 

16 Insurance Trust Fund, as of the last day of 

17 such calendar year, and 

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

19 amount paid from such Trust Funds during 

20 such calendar year for all purposes authorized 

21 by section 201 of the Social Security Act (ex22 cluding any transfer payments between such 

23 Trust Funds and reducing the amount of any 

24 transfer to the Railroad Retirement Account by 
95 

•S 2782 IS 

1 the amount of any transfers into either such 

2 Trust Fund from such Account). 

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

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

5 that such reduction would cause the rate of tax im6 posed under subsection (a) to be less than 4.95 per7 cent.’’. 

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

9 Internal Revenue Code of 1986 (relating to tax on employ10 ers) is amended by adding at the end the following new 

11 subsection: 

12 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS13 ABILITY INSURANCE TAX RATE.— 

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

15 a reduction year and each year thereafter, the rate 

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

17 by the reduction percentage. 

18 ‘‘(2) REDUCTION YEAR; REDUCTION PERCENT19 AGE.—For purposes of this section, the terms ‘re20 duction year’ and ‘reduction percentage’ have the 

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

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

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

24 that such reduction would cause the rate of tax im-
96 

•S 2782 IS 

1 posed under subsection (a) to be less than 4.95 per2 cent.’’. 

3 (c) SELF-EMPLOYMENT CONTRIBUTION.—Section 

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

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

6 the end the following new subsection: 

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

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

10 a reduction year and each year thereafter, the rate 

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

12 by the reduction percentage. 

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

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

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

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

19 that such reduction would cause the rate of tax im20 posed under subsection (a) to be less than 9.9 per21 cent.’’. 

Æ