I 

108TH CONGRESS 

2D SESSION H. R. 3877

To amend title II of the Social Security Act and the Internal Revenue 

Code of 1986 to provide for an election by individuals eligible for oldage insurance benefits under such title to waive payment of benefits 

based on their work record, to provide for income tax deductions based 

on the actuarial present value of benefits foregone by reason of such 

an election, and to provide that special Government obligations issued 

exclusively for purchase by the Social Security Trust Funds shall bear 

interest at the average market yield then prevailing for comparable obligations issued in the private sector. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 2, 2004

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

on Ways and Means 

A BILL

To amend title II of the Social Security Act and the Internal 

Revenue Code of 1986 to provide for an election by 

individuals eligible for old-age insurance benefits under 

such title to waive payment of benefits based on their 

work record, to provide for income tax deductions based 

on the actuarial present value of benefits foregone by 

reason of such an election, and to provide that special 

Government obligations issued exclusively for purchase 

by the Social Security Trust Funds shall bear interest 

at the average market yield then prevailing for comparable obligations issued in the private sector.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Social Security Alter5 native Voluntary Expenditure Act of 2004’’. 

6 SEC. 2. ELECTION TO WAIVE PAYMENT OF SOCIAL SECU7 RITY BENEFITS. 

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

9 is amended by adding after section 234 (42 U.S.C. 434) 

10 the following new section: 

11 ‘‘ELECTION TO WAIVE PAYMENT OF BENEFITS

12 ‘‘In General 

13 ‘‘SEC. 235. (a) An individual who is not entitled to 

14 old-age insurance benefits under section 202(a) but who 

15 is eligible for such benefits may elect to waive payment 

16 of all benefits under this title based on such individual’s 

17 wages and self-employment income. Such election shall be 

18 irrevocable and shall be made in such manner and form 

19 as the Commissioner of Social Security, in consultation 

20 with the Secretary of the Treasury, shall prescribe in regu21 lations. 

22 ‘‘Effect of Election 

23 ‘‘(b) Effective with the date of the filing of an election 

24 by an individual with the Commissioner under subsection 

25 (a), all benefits under this title based on the wages and 
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1 self-employment income of such individual shall not be 

2 payable to any person. 

3 ‘‘Certification of Value of Refused Benefits 

4 ‘‘(c)(1) An individual’s election filed with the Com5 missioner under subsection (a) shall indicate whether such 

6 individual intends to claim income tax deductions under 

7 section 224 of the Internal Revenue Code of 1986 in con8 nection with such election. In any case in which such indi9 vidual indicates such intention in such election, as soon 

10 as practicable after the date of the filing of such election, 

11 the Commissioner shall determine the actuarial present 

12 value of the future benefits which are not payable under 

13 this title based on such individual’s wages and self-employ14 ment income but which would be payable (upon prompt 

15 application therefor) if such individual had filed with the 

16 Commissioner, in lieu of the election, an application for 

17 old-age insurance benefits under section 202(a). 

18 ‘‘(2) In the case of any person who, as of immediately 

19 before the date on which an individual makes an election 

20 under subsection (a), is a divorced spouse of such indi21 vidual, the Commissioner shall determine the actuarial 

22 present value of the future benefits which would have been 

23 payable to such divorced spouse (but for such election) 

24 under section 202(b)(5) or 202(c)(5) (based on current 

25 entitlement or upon timely and prompt filing on or after 
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1 such date of an application for such benefits under such 

2 section) on the basis of such individual’s wages and self3 employment income and future benefits which would have 

4 been payable to such divorced spouse under section 202(e) 

5 or 202(f) upon such individual’s death thereafter on the 

6 basis of such wages and self-employment income. 

7 ‘‘(3) Upon making any determination under para8 graph (1) in connection with an election made under sub9 section (a), the Commissioner shall certify such deter10 mination to the Secretary of the Treasury and to the indi11 vidual making such election. Upon making any determina12 tion with respect to a divorced spouse under paragraph 

13 (2), the Commissioner shall certify such determination to 

14 such Secretary and such divorced spouse. 

15 ‘‘(4) The Commissioner shall prescribe by regulation, 

16 in advance of making actuarial determinations under this 

17 subsection, reasonable actuarial assumptions and methods 

18 which shall be employed in making such determinations. 

19 Such regulations shall also require inclusion with any elec20 tion filed by an individual under subsection (a) such infor21 mation available to such individual as the Commissioner 

22 considers necessary for making determinations under this 

23 subsection.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply with respect to elections filed after 

3 180 days after the date of the enactment of this Act. 

4 SEC. 3. DEDUCTION FOR ACTUARIAL PRESENT VALUE OF 

5 WAIVED OLD-AGE INSURANCE BENEFITS. 

6 (a) IN GENERAL.—Part VII of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 is amended 

8 by redesignating section 224 as section 225 and by insert9 ing after section 223 the following new section: 

10 ‘‘SEC. 224. ACTUARIAL PRESENT VALUE OF WAIVED OLD11 AGE INSURANCE BENEFITS. 

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

13 individual, there shall be allowed as a deduction for each 

14 specified taxable year an amount equal to 20 percent of—

15 ‘‘(1) in the case of an individual who elects to 

16 waive the payment of benefits under section 235(a) 

17 of the Social Security Act, the actuarial present 

18 value of future benefits determined by the Commis19 sioner of Social Security under section 235(c)(1) of 

20 such Act with respect to such individual, and 

21 ‘‘(2) in the case of an individual who, as of im22 mediately before the date of the election referred to 

23 in paragraph (1), is a divorced spouse of an indi24 vidual referred to in paragraph (1), the actual 

25 present value of future benefits determined by the 
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1 Commissioner of Social Security under section 

2 235(c)(2) of such Act with respect to such divorced 

3 spouse. 

4 ‘‘(b) SPECIFIED TAXABLE YEAR.—For purposes of 

5 this section, the term ‘specified taxable year’ means the 

6 taxable year which includes the date of the election re7 ferred to in subsection (a)(1) and each of the 4 succeeding 

8 taxable years.’’. 

9 (b) CONFORMING AMENDMENT.—The table of sec10 tions for part VII of subchapter B of chapter 1 of such 

11 Code is amended by striking the last item and inserting 

12 the following new items:

‘‘Sec. 224. Actuarial present value of waived old-age insurance 

benefits. 

‘‘Sec. 225. Cross reference.’’.

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

14 this section shall apply to taxable years ending after the 

15 date of the enactment of this Act. 

16 SEC. 4. INTEREST RATES FOR SPECIAL GOVERNMENT OBLI17 GATIONS ISSUED TO THE SOCIAL SECURITY 

18 TRUST FUNDS. 

19 (a) IN GENERAL.—The fifth sentence of section 

20 201(d) of the Social Security Act (42 U.S.C. 401(d)) is 

21 amended by striking ‘‘shall bear interest’’ and all that fol22 lows and inserting the following: ‘‘shall bear interest at 

23 a rate equal to the average of prevailing market yields for 

24 comparable obligations issued in the private sector (com-
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1 puted by the Managing Trustee on the basis of market 

2 quotations as of the end of the calendar month next pre3 ceding the date of such issue).’’. 

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

5 this section shall apply with respect to obligations issued 

6 after the date of the enactment of this Act.

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