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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4895 Introduced in House (IH)]

108th CONGRESS
  2d Session
                                H. R. 4895

 To amend title II of the Social Security Act and the Internal Revenue 
Code of 1986 to provide for enhanced retirement security in the form of 
                   an Individual Investment Program.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             July 22, 2004

Mr. Sam Johnson of Texas (for himself, Mr. Toomey, Mr. Flake, Ms. Dunn, 
  Mr. Shadegg, Mr. Feeney, Mr. Smith of Michigan, Mr. Doolittle, Mr. 
 Burton of Indiana, Mr. Hoekstra, Mr. Otter, Mr. Bartlett of Maryland, 
  Mr. Franks of Arizona, Mr. Pitts, and Mr. Wilson of South Carolina) 
 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 enhanced retirement security in the form of 
                   an Individual Investment Program.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Individual Social 
Security Investment Program Act of 2004''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Establishment of Individual Social Security Investment Program.
        ``Part B--Individual Social Security Investment Program

        ``Sec. 251. Definitions.
        ``Sec. 252. Individual investment of social security 
                            contributions; part B totalization 
                            accounts.
        ``Sec. 253. Tier I Investment Fund.
        ``Sec. 254. Tier II Investment Fund.
        ``Sec. 255. Tier III investment accounts.
        ``Sec. 256. Retirement distributions.
        ``Sec. 257. Recognition bonds.
        ``Sec. 258. Supplemental minimum benefit payments.
        ``Sec. 259. Election for participation.
        ``Sec. 260. Early distribution and termination of participation 
                            in program.
        ``Sec. 261. Individual Investment Board.
        ``Sec. 262. Executive Director of the Individual Investment 
                            Board.
Sec. 3. Tax treatment of Individual Social Security Investment Program.
Sec. 4. Exclusion of Individual Investment Program participants from 
                            insurance benefits.
Sec. 5. CPI-indexed benefits for Part A beneficiaries other than 
                            disability beneficiaries.
Sec. 6. Maintenance of adequate balances in the Social Security Trust 
                            Funds.

SEC. 2. ESTABLISHMENT OF INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                  ``PART A--INSURANCE BENEFITS''; and

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

        ``PART B--INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM

``SEC. 251. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Participant.--The term `participant' means--
                    ``(A) any individual who is born on or after 
                January 1, 1983, and--
                            ``(i) receives wages in any calendar year 
                        after December 31, 2004, on which there is 
                        imposed a tax under section 3101(a) of the 
                        Internal Revenue Code of 1986, or
                            ``(ii) derives self-employment income for a 
                        taxable year beginning after December 31, 2004, 
                        on which there is imposed a tax under section 
                        1401(a) of the Internal Revenue Code of 1986, 
                        and
                    ``(B) any individual who is born on or after 
                January 1, 1950, and before January 1, 1983, and--
                            ``(i)(I) receives wages in any calendar 
                        year ending before January 1, 2004, on which 
                        there is imposed a tax under section 3101(a) of 
                        the Internal Revenue Code of 1986, or
                            ``(II) derives self-employment income for a 
                        taxable year beginning before January 1, 2004, 
                        on which there is imposed a tax under section 
                        1401(a) of the Internal Revenue Code of 1986, 
                        and
                            ``(ii) has filed an election for 
                        participation in accordance with section 259.
            ``(2) Board.--The term `Board' means the Individual 
        Investment Board established under section 261.
            ``(3) Executive director.--The term `Executive Director' 
        means the Executive Director appointed under section 262.
            ``(4) Part b totalization account.--The term `part B 
        totalization account' means an account established for a 
        participant under section 252(d).
            ``(5) Tier i investment fund.--The term `Tier I Investment 
        Fund' means the trust fund created under section 253.
            ``(6) Tier ii investment fund.--The term `Tier II 
        Investment Fund' means the trust fund created under section 
        254.
            ``(7) Tier iii investment account.--The term `Tier III 
        investment account' means a trust established pursuant to 
        section 255.

``SEC. 252. INDIVIDUAL INVESTMENT OF SOCIAL SECURITY CONTRIBUTIONS; 
              PART B TOTALIZATION ACCOUNTS.

    ``(a) Payments Into Tier I Investment Fund.--
            ``(1) In general.--During each calendar year, the Secretary 
        of the Treasury shall deposit into the Tier I Investment Fund 
        (established under section 253), from amounts held in the 
        Federal Old-Age and Survivors Insurance Trust Fund, a total 
        amount equal, in the aggregate, to 100 percent of the 
        redirected social security contribution for such calendar year 
        of each individual who is a participant for such calendar year.
            ``(2) Redirected social security contributions.--For 
        purposes of paragraph (1) the term `redirected social security 
        contributions' of a participant for a calendar year means the 
        product derived by multiplying--
                    ``(A) the sum of the total wages paid to, and self-
                employment income derived by, the participant during 
                such calendar year (taking into account limits imposed 
                by the contribution and benefit base under section 
                230), by
                    ``(B) 6.2 percent.
            ``(3) Transfers based on estimates.--The amounts deposited 
        pursuant to paragraph (1) shall be transferred in at least 
        monthly payments from the Federal Old-Age and Survivors 
        Insurance Trust Fund to the Tier I Investment Fund, such 
        amounts to be determined on the basis of estimates, by the 
        Commissioner of Social Security and certified to the Secretary 
        of the Treasury under part A, of the wages paid to, and self-
        employment income derived by, participants, and proper 
        adjustments shall be made in amounts subsequently transferred 
        to the extent prior estimates were in excess of or were less 
        than actual amounts.
            ``(4) Separate accounting and crediting.--
                    ``(A) In general.--Subject to this paragraph, the 
                Board shall provide, after the close of each calendar 
                year, for prompt accounting of the amounts deposited in 
                the Tier I Investment Fund with respect to each 
                participant during such calendar year to such 
                individual's part B totalization account (established 
                under subsection (d)), together with properly allocated 
                increases and decreases in such amounts reflecting the 
                net returns from investment of the balance of the Fund 
                during such year under section 253. For purposes of 
                determining such increases and decreases in such 
                amounts for each calendar year, the amounts deposited 
                into the Fund in connection with any participant during 
                such calendar year shall be deemed to have been 
                deposited on June 30 of such year.
                    ``(B) Crediting.--Under such accounting, amounts 
                deposited into the Fund during each calendar year with 
                respect to the redirected social security taxes of each 
                participant (including net returns and losses from the 
                investment Fund attributed to such amounts under this 
                paragraph) shall be credited to such participant's part 
                B totalization account not later than the end of the 
                succeeding calendar year.
    ``(b) Transfers Into Tier II Investment Fund.--
            ``(1) In general.--Upon the crediting to a participant's 
        part B totalization account of any amount held in the Tier I 
        Investment Fund for any calendar year, the Board shall (except 
        as provided in section 260(a)(2)) transfer the amount so 
        credited to such account from the Tier I Investment Fund into 
        the Tier II Investment Fund (established under section 254).
            ``(2) Separate accounting and crediting.--Subject to this 
        paragraph, the Board shall provide for ongoing separate 
        accounting in the participant's part B totalization account of 
        the amounts deposited in the Tier II Investment Fund with 
        respect to such participant during each calendar year, together 
        with any increases or decreases therein for such year so as to 
        reflect the net returns and losses from investment thereof 
        under section 254 while held in the Tier II Investment Fund 
        during such year.
    ``(c) Deposits to Tier III Investment Accounts.--
            ``(1) In general.--In any case in which, as of the end of 
        any calendar year, the total balance in the Tier II Investment 
        Fund credited to the participant's part B totalization account 
        exceeds for the first time the minimum deposit balance, the 
        Board shall, by regulation, provide for an opportunity for such 
        participating individual to make, at any time thereafter, such 
        individual's first election of a Tier III investment account 
        for investment of an amount credited to the participant's part 
        B totalization account. Such election may be in lieu of or in 
        addition to investment in any option available with respect to 
        the Tier II Investment Fund.
            ``(2) Minimum deposit balance.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                term `minimum deposit balance' means an amount equal to 
                $10,000.
                    ``(B) Adjustments.--The Board shall adjust annually 
                (effective for years after December 2005) the dollar 
                amount set forth in subparagraph (A) under procedures 
                providing for adjustments in the same manner and to the 
                same extent as adjustments are provided for under the 
                procedures used to adjust benefit amounts under section 
                215(i)(2)(A), except that any amount so adjusted that 
                is not a multiple of $1.00 shall be rounded to the 
                nearest multiple of $1.00.
            ``(3) Subsequent investment.--At any time after a 
        participant's first election of a Tier III investment account 
        pursuant to paragraph (1), the participant may invest any 
        portion of the balance credited to the participant's part B 
        totalization account in a Tier III investment account, the Tier 
        II Investment Fund, or any combination thereof, as elected by 
        the participant from time to time in accordance with 
        regulations of the Board under this part.
    ``(d) Accounting for Total Invested Amounts by Means of Part B 
Totalization Accounts.--
            ``(1) Establishment of accounts.--As soon as practicable 
        after the later of January 1, 2005, or the date on which an 
        individual becomes a participant under this part, the Executive 
        Director shall establish and maintain a part B totalization 
        account for such participant. Such account shall be the means 
        by which amounts held in the Tier I Investment Fund, the Tier 
        II Investment Fund, and any Tier III investment account of such 
        participant are credited to such participant under this part, 
        under procedures which shall be established by the Board by 
        regulation. The part B totalization account of a participant 
        shall be identified to such participant by means of the 
        participant's social security account number.
            ``(2) Account balance.--The balance in a participant's part 
        B totalization account at any time is the sum of--
                    ``(A) any balance in the Tier I Investment Fund 
                credited to such participant's part B totalization 
                account prior to transfer to the Tier II Investment 
                Fund under section 252(b)(1); plus
                    ``(B) the excess of--
                            ``(i) all deposits in the Tier II 
                        Investment Fund credited to such participant's 
                        part B totalization account under subsection 
                        (a) (including the proceeds of any sale by such 
                        participant, as provided in section 257(e), of 
                        any recognition bond issued in the name of the 
                        participant under section 257(b)), subject to 
                        such increases and reductions as may result 
                        from allocations made to and reductions made in 
                        the account pursuant to paragraph (3)(A) with 
                        respect to amounts in the Tier II Investment 
                        Fund; over
                            ``(ii) amounts credited to such 
                        participant's part B totalization account under 
                        subsection (a) paid out of the Tier II 
                        Investment Fund under this part; plus
                    ``(C) the excess of--
                            ``(i) the deposits to any Tier III 
                        investment account of such participant, subject 
                        to such increases and reductions as may result 
                        from allocations made to and reductions made in 
                        the Tier III investment account pursuant to 
                        paragraph (3)(B); over
                            ``(ii) amounts paid out of such 
                        participating individual's Tier III investment 
                        account under this part.
            ``(3) Allocation of earnings and losses.--Pursuant to 
        regulations which shall be prescribed by the Board, the 
        Executive Director shall allocate to the part B totalization 
        account of each participant an amount equal to the net earnings 
        and net losses from each investment of sums--
                    ``(A) in the Tier II Investment Fund which are 
                attributable to sums credited to such participant's 
                part B totalization account, reduced by an appropriate 
                share of the administrative expenses paid out of the 
                net earnings, as determined by the Executive Director; 
                and
                    ``(B) in any Tier III investment account of such 
                participant, reduced by administrative expenses.
    ``(e) Treatment of Transfers.--Transfers from the Federal Old-Age 
and Survivors Insurance Trust Fund to the Tier I Investment Fund and 
transfers among the Tier I Investment Fund, Tier II Investment Fund, 
and Tier III investment accounts under this part shall not be included 
in the totals of the budget of the United States Government as 
submitted by the President or of the congressional budget and shall be 
exempt from any general budget limitation imposed by statute on budget 
outlays of the United States Government.

``SEC. 253. TIER I INVESTMENT FUND.

    ``(a) Establishment of Tier I Investment Fund.--There is 
established in the Treasury of the United States a trust fund to be 
known as the `Tier I Investment Fund'. The Board shall serve as 
trustees of such Fund. The Fund consists of all amounts derived from 
payments into the Fund under section 252(a) and remaining after 
investment of such amounts under subsection (b) of this section, 
including additional amounts derived as income from such investments. 
The amounts held in the Fund are appropriated and shall remain 
available without fiscal year limitation--
            ``(1) to be held for investment on behalf of participants 
        under subsection (b),
            ``(2) to pay the administrative expenses related to the 
        Fund and to investment under subsection (b),
            ``(3) to make transfers to the Tier II Investment Fund 
        under section 252(b) or to Tier III investment accounts under 
        section 252(c),
            ``(4) to make payments under section 260(a)(2), and
            ``(5) to make lump sum distributions under subsections (c) 
        and (d).
    ``(b) Investment of Fund Balance.--For purposes of investment of 
the Tier I Investment Fund, the Board shall contract with appropriate 
professional asset managers selected for investment of amounts held in 
the Fund, so as to provide for investment of the balance of the Fund, 
in a manner providing broad diversification in accordance with 
regulations of the Board, in certificates of deposit or other 
instruments or obligations selected by such asset managers, which 
return the amount invested and pay interest, at a specified rate or 
rates, on that amount during a specified period of time.
    ``(c) Retirement Distribution.--As soon as practicable after the 
commencement of the distribution under section 256 of assets credited 
to a participant's part B totalization account, the amount of any 
assets in the Tier I Investment Fund credited to such account shall be 
distributed to such participant in a lump sum, under rules established 
by the Board.
    ``(d) Lump Sum Payment to Estate Upon Death of Participant.--Upon 
the death of a participant, the amount of any assets in the Tier I 
Investment Fund credited to such participant's part B totalization 
account shall be transferred in a lump sum, under rules established by 
the Board--
            ``(1) in any case in which one or more beneficiaries have 
        been designated in advance, in accordance with regulations 
        which shall be prescribed by the Board, to such beneficiaries 
        in accordance with such designation as provided in such 
        regulations, and
            ``(2) in the case of any amount not distributed as 
        described in paragraph (1), to such participant's estate.

``SEC. 254. TIER II INVESTMENT FUND.

    ``(a) Establishment of Tier II Investment Fund.--There is 
established in the Treasury of the United States a trust fund to be 
known as the `Tier II Investment Fund'. The Board shall serve as 
trustees of such Fund. The Fund consists of all amounts derived from 
payments into the Fund under section 252(b)(1) and remaining after 
investment of such amounts under subsection (b) of this section, 
including additional amounts derived as income from such investments. 
The amounts held in the Fund are appropriated and shall remain 
available without fiscal year limitation--
            ``(1) to be held for investment under subsection (b),
            ``(2) to pay the administrative expenses related to the 
        Fund and to investment under subsection (b),
            ``(3) to make transfers to Tier III investment accounts 
        under section 252(c)(1),
            ``(4) to make retirement distributions in accordance with 
        section 256, and
            ``(5) to make lump sum distributions under section 256 and 
        subsection (c) of this section.
    ``(b) Investment in Equities and Fixed Income Instruments in 
Management Accounts.--
            ``(1) In general.--For purposes of investment of the Tier 
        II Investment Fund, the Board shall divide the Fund into 
        multiple management accounts. Such accounts shall consist of 
        the 60/40 management account and 2 or more additional 
        management accounts providing for investment in each account in 
        a combination of equities and fixed income instruments in 
        accordance with prescribed percentages, as provided in 
        paragraph (2). The Board shall contract with appropriate 
        investment managers selected for investment of amounts held in 
        each management account.
            ``(2) Rules relating to management accounts.--
                    ``(A) In general.--The investment manager selected 
                for investment of amounts held in each management 
                account referred to in paragraph (1) shall invest such 
                amounts under regulations which shall be prescribed by 
                the Board so as to ensure, to the maximum extent 
                practicable, that, of the total balance in the Fund 
                credited to such account and available for investment 
                (after allowing for administrative expenses)--
                            ``(i) the prescribed equities percentage is 
                        invested in equities in accordance with 
                        paragraph (4), and
                            ``(ii) the prescribed fixed income 
                        instrument percentage is invested in fixed 
                        income instruments in accordance with paragraph 
                        (5).
                    ``(B) Prescribed percentages.--For purposes of 
                subparagraph (A)--
                            ``(i) The 60/40 management account.--In the 
                        case of the 60/40 management account--
                                    ``(I) the prescribed equities 
                                percentage is 60 percent, and
                                    ``(II) the prescribed fixed income 
                                instrument percentage is 40 percent.
                            ``(ii) Other management accounts.--In the 
                        case of any other management account--
                                    ``(I) the prescribed equities 
                                percentage is a prescribed percentage 
                                not in excess of 80 percent, and
                                    ``(II) the prescribed fixed income 
                                instrument percentage is the remaining 
                                percentage of the amount invested in 
                                the management account.
            ``(3) Election of management accounts.--
                    ``(A) Default management account.--Except as 
                provided in an election in effect under subparagraph 
                (B), amounts held in the Tier II Investment Fund shall 
                be credited to the 60/40 management account.
                    ``(B) Election of transfers between management 
                accounts.--Pursuant to the written election, filed in 
                accordance with regulations of the Board and received 
                by the Secretary of the Treasury during an applicable 
                election month by a participant who has an amount 
                credited to such participant's part B totalization 
                account invested in any of the management accounts in 
                the Tier II Investment Fund, the Secretary of the 
                Treasury shall transfer such amount from such account 
                to any of the other management accounts in the Tier II 
                Investment Fund (whichever is designated in such 
                election).
                    ``(C) Applicable election month.--For purposes of 
                subparagraph (B), the term `applicable election month', 
                in connection with a participant, means--
                            ``(i) the calendar month in which occurs 
                        the anniversary of such participant's birth, 
                        and
                            ``(ii) the 6th calendar month following 
                        such month.
            ``(4) Investment in equities.--In accordance with 
        regulations which shall be prescribed by the Board, the Board 
        shall establish standards which must be met by equities 
        selected for investment of amounts in any management account in 
        the Tier II Investment Fund pursuant to paragraph (2)(A)(i). In 
        conformity with such standards, the Board shall select, for 
        purposes of such investment, indices which are comprised of 
        equities the aggregate market value of which is, in each case, 
        a reasonably broad representation of companies whose shares are 
        traded on the equity markets. Amounts invested in equities by 
        each investment manager shall be held in a portfolio designed 
        to replicate the performance of one or more of such indices.
            ``(5) Investment in fixed income instruments.--In 
        accordance with regulations which shall be prescribed by the 
        Board, the Board shall establish standards which must be met by 
        fixed income instruments selected for investment of amounts in 
        any management account in the Tier II Investment Fund pursuant 
        to paragraph (2)(A)(ii). Such standards shall take into account 
        the competing considerations of risk and return. Amounts 
        invested in fixed income instruments by each investment manager 
        shall be held in a portfolio which shall consist of a diverse 
        range of fixed income instruments, taking into full account the 
        opposing considerations of risk and maximization of return.
    ``(c) Periodic Reports by Board.--
            ``(1) In general.--The Board shall make periodic reports 
        concerning the status of the investment in the Tier II 
        Investment Fund of amounts credited to each participant's part 
        B totalization account. Each periodic report shall be furnished 
        to the participant on at least a semiannual basis on or before 
        the 60th day following the period for which the report is 
        required.
            ``(2) Information required to be included.--The periodic 
        report shall contain the following information for transactions 
        occurring during the period for which the report is provided:
                    ``(A) The balance in the Tier II Investment Fund 
                credited to the participant's part B totalization 
                account.
                    ``(B) The rate of return on such balance for the 
                period covered, set forth separately for each 
                management account in the case of an investment in 2 or 
                more management accounts during the period.
                    ``(C) The amount of authorized contributions made 
                to the Tier II management account and credited to the 
                participant's part B totalization account.
                    ``(D) The name and address of the Board.
                    ``(E) Commission fees and fees for administrative 
                expenses charged in connection with the investment in 
                the Tier II Improvement Fund during the period.
                    ``(F) Other information which may be required from 
                time to time by the Board.
        The language of the report shall be written in a form so as to 
        be understood by the average participant.
    ``(d) Lump Sum Payment to Estate Upon Death of Participant.--Upon 
the death of a participant, the amount of any assets in the Tier II 
Investment Fund credited to such participant's part B totalization 
account shall be transferred in a lump sum, under rules established by 
the Board--
            ``(1) in any case in which one or more beneficiaries have 
        been designated in advance, in accordance with regulations 
        which shall be prescribed by the Board, to such beneficiaries 
        in accordance with such designation as provided in such 
        regulations, and
            ``(2) in the case of any amount not distributed as 
        described in paragraph (1), to such individual's estate.

``SEC. 255. TIER III INVESTMENT ACCOUNTS.

    ``(a) Designation of Tier II Investment Accounts.--Under 
regulations prescribed by the Board, a participant, upon the initial 
attainment of a minimum deposit balance in amounts in the Tier II 
Investment Fund credited to the participant's part B totalization 
account, as described in section 252(c), may designate to the Board, in 
such form and manner as shall be prescribed in such regulations, a Tier 
III investment account to which deposits with respect to the individual 
are to be made under section 252(c). The individual may designate 
another Tier III investment account in lieu of any account previously 
designated, in accordance with regulations of the Board.
    ``(b) Definition.--For purposes of this part, the term `Tier III 
investment account' means a trust created or organized in the United 
States for the exclusive benefit of a participant or his beneficiaries, 
but only if the written governing instrument creating the trust meets 
the following requirements:
            ``(1) Restricted contributions.--No contribution will be 
        accepted unless it is in the form of a deposit to the account 
        pursuant to section 252(c)(1).
            ``(2) Trustee requirements.--The trustee is--
                    ``(A) a bank (as defined in section 581 of the 
                Internal Revenue Code of 1986),
                    ``(B) an insured credit union (as defined in 
                section 101(6) of the Federal Credit Union Act),
                    ``(C) a corporation which, under the laws of the 
                State of its incorporation, is subject to supervision 
                and examination by the Commissioner of Banking or other 
                officer of such State in charge of the administration 
                of the banking laws of such State,
                    ``(D) a regulated investment company (as defined in 
                section 851 of the Internal Revenue Code of 1986) for 
                which an election is in effect under section 851(b)(1) 
                of such Code, or
                    ``(E) any other person designated by the Board 
                under regulations prescribed under this paragraph,
        but only if the trustee demonstrates to the satisfaction of the 
        Board that its portfolio assets either replicate the assets of 
        a broad-based index of equities or fixed income instruments 
        which is approved by the Board or are of a type that the Board 
        has determined not to involve high risks for the investor, and 
        that the manner in which it will administer the trust will be 
        consistent with the requirements of this section.
            ``(3) Nonforfeitability.--The interest of an individual in 
        the balance of his account is nonforfeitable.
            ``(4) Diversification.--The investment options made 
        available to participants by the trustee include reasonably 
        diversified options of equities, fixed income instruments, or a 
        combination of both.
            ``(5) Separation of assets.--The assets of the trust will 
        not be commingled with other property except in a common trust 
        fund or common investment fund.
    ``(c) Investment Standards.--The trustee of a Tier III investment 
account shall invest amounts credited to the part B totalization 
account of a participant which are held in such account in accordance 
with standards which shall be prescribed by the Board by regulation. 
Such standards shall ensure that investments made available to 
participants by the trustee are reasonably diversified, that assets 
held in a Tier III investment account are nonforfeitable, and that the 
trustee complies with applicable fiduciary requirements.
    ``(d) Periodic Reports by Account Trustee.--
            ``(1) In general.--The trustee of a participant's Tier III 
        investment account shall, in accordance with regulations of the 
        Board, make periodic reports concerning the status of the 
        account which shall meet the requirements of this section. Each 
        periodic report shall be furnished to the participant on at 
        least a semiannual basis on or before the 60th day following 
        the period for which the report is required.
            ``(2) Information required to be included.--The periodic 
        report shall contain the following information for transactions 
        occurring during the period for which the report is provided:
                    ``(A) The balance in the Tier III investment 
                account.
                    ``(B) The rate of return for the period covered.
                    ``(C) The amount of authorized account 
                contributions.
                    ``(D) The name and address of the trustee.
                    ``(E) Commission fees and fees for administrative 
                expenses charged in connection with the account.
                    ``(F) Other information which may be required from 
                time to time by the Board.
        The language of the report shall be written in a form so as to 
        be understood by the average participant.
            ``(3) Reports to board.--The Board may require the periodic 
        report to be filed with the Board at such time as the Board may 
        specify in regulations under this section, except that at least 
        1 periodic report filed annually with Board shall provide 
        information with respect to the account as of December 31 
        preceding the date of the issuance of the report.
            ``(4) Failure by trustee to make timely periodic reports.--
                    ``(A) In general.--The trustee of a Tier III 
                investment account shall be subject to a civil penalty 
                of not to exceed $100 a day from the date of such 
                trustee's failure or refusal to furnish the periodic 
                report required to be furnished by the trustee under 
                this subsection until the date on which such report is 
                furnished.
                    ``(B) Penalties assessed by board.--Any civil 
                penalty assessed by this paragraph shall be imposed by 
                the Board and collected in a civil action. The Board 
                may compromise the amount of any civil penalty imposed 
                by this paragraph. The Board may waive the application 
                of this paragraph with respect to any failure if the 
                Board determines that such failure is due to reasonable 
                cause and not to intentional disregard of rules and 
                regulations.
    ``(e) Lump Sum Payment to Estate Upon Death of Account Holder.--
Upon the death of a participant who has an amount credited to such 
participant's part B totalization account invested in a Tier III 
investment account, such amount shall be distributed in a lump sum 
distribution, under rules established by the Board--
            ``(1) in any case in which one or more beneficiaries have 
        been designated in advance, in accordance with regulations 
        which shall be prescribed by the Board, to such beneficiaries 
        in accordance with such designation as provided in such 
        regulations, and
            ``(2) in the case of any amount not distributed as 
        described in paragraph (1), to the participant's estate.

``SEC. 256. RETIREMENT DISTRIBUTIONS.

    ``(a) In General.--Except as provided in this section, amounts 
credited to a participant's part B totalization account may be 
distributed to the participant only on and after the participant's 
retirement date. Such distribution shall be in the form of--
            ``(1) an individual social security annuity meeting the 
        requirements of subsection (b),
            ``(2) a programmed withdrawal meeting the requirements of 
        subsection (c), or
            ``(3) a combination, meeting the requirements of subsection 
        (d), of an individual social security annuity (meeting the 
        requirements of paragraph (2)) and a lump sum distribution.
Not later than the date on which the participant attains age 62, and at 
any other time upon the request of the participant, the Board shall 
notify the participant of the most recent listing of forms of 
distribution approved under this section and the entitlement (if any) 
of the participant to such a distribution.
    ``(b) Retirement Date.--For purposes of this section, the term 
`retirement date', in connection with a participant, means the earlier 
of--
            ``(1) any date as of which the participant has attained 
        retirement age (as defined in section 216(l)(1)), or
            ``(2) the date designated for distribution of the balance 
        in the participant's part B totalization account pursuant to 
        section 260.
    ``(c) Purchase of Annuities.--
            ``(1) In general.--
                    ``(A) Selection of annuity.--On the participant's 
                retirement date, the participant may purchase an 
                individual social security annuity selected from among 
                the annuities approved by the Board under paragraph 
                (2).
                    ``(B) Transfer of assets.--Upon the selection by a 
                participant under subparagraph (A), the Board shall 
                provide for the transfer of all assets credited to the 
                participant's part B totalization account and 
                determined under regulations of the Board to be 
                available for distribution to purchase the annuity 
                selected by the individual.
            ``(2) Approval of individual social security annuities.--
                    ``(A) Certification of issuers.--
                            ``(i) In general.--The Board shall certify 
                        issuers eligible to enter into annuity 
                        contracts with participants under this 
                        subsection.
                            ``(ii) Application.--Any issuer that 
                        desires to be certified by the Board to issue 
                        an individual social security annuity shall 
                        submit an application to the Board at such 
                        time, in such manner, and containing such 
                        information as the Board may require.
                            ``(iii) Separation from other operations.--
                        As a condition of certification under this 
                        subparagraph, each issuer shall maintain each 
                        individual social security annuity issued by 
                        such issuer separate from all other operations 
                        of the issuer.
                            ``(iv) Exemption from third party claims.--
                        Each individual social security annuity shall 
                        be exempt from any and all third party claims 
                        against the issuer.
                    ``(B) Approval of individual social security 
                annuities.--
                            ``(i) In general.--No funds may be 
                        transferred into an individual social security 
                        annuity unless the Board has approved an 
                        application submitted under clause (ii) with 
                        respect to the annuity.
                            ``(ii) Application.--With respect to each 
                        individual social security annuity that an 
                        issuer certified under subparagraph (A)(i) 
                        seeks to issue, such issuer shall submit an 
                        application to the Board at such time, in such 
                        manner, and containing such information as the 
                        Board may require.
                            ``(iii) Qualifications for approval.--The 
                        Board may not approve an application under 
                        clause (i) unless the individual social 
                        security annuity that is the subject of the 
                        application meets qualifications which shall be 
                        specified in regulations of the Board. Such 
                        qualifications shall include the safety and 
                        soundness of the annuity, the experience and 
                        record of performance of the issuer issuing the 
                        annuity, and such other factors as the Board 
                        may determine appropriate.
    ``(d) Programmed Withdrawal.--On the participant's retirement date, 
the participant may elect distribution under this section of the 
balance credited to the participant's part B totalization account as 
provided in this subsection. Such distribution shall be in the form of 
a combination of--
            ``(1) equal annual or more frequent periodic installments 
        of the principal portion of the balance over twice his or her 
        life expectancy, and
            ``(2) any distribution of any remaining balance in 
        accordance with this section.
    ``(e) Combination of Lump Sum Payment and Annuity.--On the 
participant's retirement date, the participant may elect distribution 
under this section of the balance credited to the participant's part B 
totalization account as provided in this subsection. Such distribution 
shall be in the form of a combination of a lump sum payment and an 
annuity approved under subsection (b). Any such lump sum payment shall 
be limited to the extent necessary to ensure that remaining funds 
credited to the account are sufficient to provide, through the purchase 
of such an annuity, a monthly payment over the life expectancy of the 
participant (determined under reasonable actuarial assumptions) which 
is at least, on an annual basis, equal to 120 percent of the poverty 
line (as determined on such date, for an individual, under section 
673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2))).
    ``(f) Lump Sum Distributions of De Minimis Amounts.--In any case in 
which, as of the date on which the participant attains retirement age 
(as defined in section 216(l)(1)), a distribution under this section 
has not commenced, and the total amount of the assets credited to the 
participant's part B totalization account is less than the minimum 
deposit balance (as defined in section 252(c)(2)(B)), the preceding 
provisions of this section shall not apply, and such assets shall be 
distributed to the participant in a lump sum upon the request of the 
participant, under rules established by the Board.
    ``(g) Protection From Assignment or Alienation.--Payments in the 
form of distributions from the Tier II Investment Fund or a Tier III 
investment account may not be assigned or alienated.

``SEC. 257. RECOGNITION BONDS.

    ``(a) Certification of Credited Wages and Self-Employment Income.--
Not later than July 1 following the effective date of an election to 
become a participant filed by an individual under section 259, the 
Commissioner of Social Security shall certify to the Secretary of the 
Treasury whether such individual was, as of immediately before such 
effective date, credited with wages and self-employment income under 
part A.
    ``(b) Issuance of Bond.--Immediately upon receipt of certification 
under subsection (a) that an individual is credited with wages and 
self-employment income under part A, the Secretary of the Treasury 
shall issue a recognition bond in the name of such individual as an 
obligation of the United States, which shall be deposited in the Tier 
II Investment Fund and held in such Fund for such individual together 
with such individual's part B totalization account. The purposes for 
which obligations of the United States may be issued under chapter 31 
of title 31, United States Code, are hereby extended to authorize the 
issuance of public debt obligations consisting of recognition bonds 
issued under this paragraph. Each such obligation shall be evidenced by 
a paper instrument issued by the Secretary of the Treasury setting 
forth the terms specified in this section, and stating on its face that 
the obligation shall be incontestable in the hands of the bearer, that 
the obligation is supported by the full faith and credit of the United 
States, and that the United States is pledged to the payment of the 
obligation, in accordance with the provisions of this section.
    ``(c) Calculation of Face Value.--
            ``(1) In general.--The face value of a recognition bond 
        issued in the name of an individual under this section shall be 
        the actuarial present value of the future monthly insurance 
        benefits under part A to which such individual would have been 
        entitled, and to which other individuals would have been 
        entitled under part A based on such individual's wages and 
        self-employment income, determined under then current law but 
        as if section 215(j) did not apply and subject to paragraph (2) 
        of this subsection.
            ``(2) Assumptions.--The actuarial present value determined 
        under paragraph (1) shall be determined--
                    ``(A) taking into account solely wages and self-
                employment income credited to such individual as of the 
                effective date of the election referred to in 
                subsection (a),
                    ``(B) assuming that such individual would become 
                entitled to disability insurance benefits under section 
                223 (in lieu of old-age insurance benefits under 
                section 202(a)) on the day such individual would attain 
                retirement age (as defined in section 216(l)), except 
                that, in computing average indexed monthly earnings 
                under section 215(b), the number of such individual's 
                benefit computation years shall be determined without 
                regard to any reduction in the number of elapsed years 
                under section 215(b)(2)(A), and
                    ``(C) using reasonable actuarial assumptions, 
                including reasonable current age-specific and gender-
                specific expected mortality rates.
    ``(d) Redemption.--A bond issued in the name of any participant 
under this section shall be redeemable (by the participant or other 
person bearing the bond after sale or resale pursuant to subsection 
(e)) on or after the date on which such participant would attain 
retirement age (as defined in section 216(l)(1)), for the amount of the 
face value.
    ``(e) Negotiability and Crediting of Proceeds to Part B 
Totalization Account.--A recognition bond issued in the name of a 
participant under this section shall not be taken into account in 
determining the amount credited to the participant's part B 
totalization account. Such bond shall be fully tradable on the 
secondary markets under such procedures as may be provided in 
regulations of the Board, and any amount derived by the participant 
from the sale of such bond shall be deposited in the Tier II Investment 
Fund and shall be included in the total amount credited to such 
participant's part B totalization account.

``SEC. 258. SUPPLEMENTAL MINIMUM BENEFIT PAYMENTS.

    ``(a) In General.--In any case in which--
            ``(1) a participant attains retirement age (as defined in 
        section 216(l)(1)),
            ``(2) as of the date such participant attains such age, no 
        distribution from amounts credited to the participant's part B 
        totalization account has been made to the participant under 
        section 260, and
            ``(3) as of such date, the balance in the participant's 
        part B totalization account does not exceed the minimum annuity 
        amount,
the Board shall promptly notify the participant of the participant's 
eligibility for a supplemental minimum benefit payment under this 
section. The participant, upon application to the Board filed by the 
participant on or after such date and in such form and manner as shall 
be prescribed by the Board, shall be entitled to a supplemental minimum 
benefit payment either to the Tier II Investment Fund (to the credit of 
the participant's part B totalization account) or to the participant's 
Tier III investment account, as may be specified by the participant in 
such application. Upon receipt of such application, the Board shall 
certify to the Secretary of the Treasury the amount of such payment, 
and such Secretary shall pay the amount of such payment to such Fund or 
such Tier III investment account in accordance with such certification 
from funds otherwise available in the general fund of the Treasury.
    ``(b) Amount of Supplemental Minimum Benefit Payment.--The amount 
of a supplemental minimum benefit payment payable with respect to a 
participant under subsection (a) is the excess (if any) of--
            ``(1) the minimum annuity amount as of the date described 
        in subsection (a), over
            ``(2) the amount credited to the participant's part B 
        totalization account.
    ``(c) Married Couples.--In the case of any 2 participants who are 
married, subsection (a) shall apply with respect to each such 
participant, upon the joint written request of such participants, by 
totalling the balances in the accounts referred to in subsection (a) of 
both such individuals.
    ``(d) Protection From Assignment or Alienation.--Any supplemental 
minimum benefit payment under this section may not be assigned or 
alienated.
    ``(e) Minimum Annuity Amount.--
            ``(1) In general.--For purposes of this section, the term 
        `minimum annuity amount' means an amount necessary to purchase, 
        as of the date described in subsection (a), an immediate life 
        annuity which provides for payments which are, on an annual 
        basis, at least equal to 120 percent of the poverty line (as in 
        effect on such date, for an individual, under section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 9902(2))).
            ``(2) Immediate life annuity.--For purposes of paragraph 
        (1), the term `immediate life annuity' means an annuity--
                    ``(A) the annuity starting date (as defined in 
                section 72(c)(4) of the Internal Revenue Code of 1986) 
                of which commences with the first month following the 
                date described in subsection (a), and
                    ``(B) which provides for a series of substantial 
                equal annual payments over the life expectancy of the 
                participant.

``SEC. 259. ELECTION FOR PARTICIPATION.

    ``(a) In General.--Any individual who--
            ``(1) is not a participant (within the meaning of section 
        251(1)(A)),
            ``(2) meets the requirements of clause (i) of section 
        251(1)(B),
            ``(3) has not attained retirement age (as defined in 
        section 216(l)(1)), and
            ``(4) has not become entitled to old-age insurance benefits 
        under section 202(a),
may file with the Board under this section, in such form and manner as 
shall be prescribed in regulations of the Board, a written form 
electing the status of `participant' for purposes of this part. On and 
after the effective date of the election, such individual shall be 
treated as a participant under this part.
    ``(b) Effective Date of Election.--An election under this section 
shall take effect on January 1 of the first calendar year beginning 
after 60 days after the date of the filing of the election in 
accordance with subsection (a).
    ``(c) Irrevocability.--Any election under this section shall be 
irrevocable.

``SEC. 260. EARLY DISTRIBUTION AND TERMINATION OF PARTICIPATION IN 
              PROGRAM.

    ``(a) In General.--In any case in which the amount credited to a 
participant's part B totalization account as of any date prior to the 
date on which the participant attains retirement age (as defined in 
section 216(l)(1)) equals at least the amount necessary to purchase an 
immediate life annuity which provides for payments which are, on an 
annual basis, at least equal to 120 percent of the poverty line (as in 
effect on such date, for an individual, under section 673(2) of the 
Community Services Block Grant Act (42 U.S.C. 9902(2))), the Board 
shall promptly so inform the participant, and, upon application of the 
participant filed with the Board under this section in accordance with 
regulations of the Board--
            ``(1) the Board shall commence distribution under section 
        256 of the amount credited to such participant's part B 
        totalization account, and
            ``(2) in lieu of the transfer, after the date of the 
        commencement of such distribution, of any amount credited to 
        such participant's part B totalization account from the Tier I 
        Investment Fund to the Tier II Investment Fund or a Tier III 
        investment account, the Board shall provide for the direct 
        payment of such amount to the participant.
    ``(b) Immediate Life Annuity.--For purposes of subsection (a), the 
term `immediate life annuity' means an annuity--
            ``(1) the annuity starting date (as defined in section 
        72(c)(4) of the Internal Revenue Code of 1986) of which 
        commences with the first month following the date referred to 
        in subsection (a), and
            ``(2) which provides for a series of substantial equal 
        annual payments over the life expectancy of the participant.
    ``(c) Married Couples.--In the case of any 2 participants who are 
married, subsection (a) shall apply with respect to each such 
participant, upon the joint written request of such participants, by 
totalling the balances in the accounts referred to in subsection (a) of 
both such individuals.

``SEC. 261. INDIVIDUAL INVESTMENT BOARD.

    ``(a) Establishment.--There is established in the executive branch 
of the Government an Individual Investment Board.
    ``(b) Composition.--The Board shall be composed of--
            ``(1) 3 members appointed by the President, of whom 1 shall 
        be designated by the President as Chairman; and
            ``(2) 2 members appointed by the President, of whom--
                    ``(A) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the Speaker of the House of Representatives in 
                consultation with the Minority Leader of the House of 
                Representatives; and
                    ``(B) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the Majority Leader of the Senate in consultation with 
                the Minority Leader of the Senate.
    ``(c) Advice and Consent.--Appointments under subsection (b) shall 
be made by and with the advice and consent of the Senate.
    ``(d) Membership Requirements.--Members of the Board shall have 
substantial experience, training, and expertise in the management of 
financial investments and pension benefit plans.
    ``(e) Length of Appointments.--
            ``(1) Terms.--A member of the Board shall be appointed for 
        a term of 4 years, except that of the members first appointed 
        under subsection (b)--
                    ``(A) the Chairman shall be appointed for a term of 
                4 years;
                    ``(B) the members appointed under subsection (b)(2) 
                shall be appointed for terms of 3 years; and
                    ``(C) the remaining members shall be appointed for 
                terms of 2 years.
            ``(2) Vacancies.--
                    ``(A) In general.--A vacancy on the Board shall be 
                filled in the manner in which the original appointment 
                was made and shall be subject to any conditions that 
                applied with respect to the original appointment.
                    ``(B) Completion of term.--An individual chosen to 
                fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
            ``(3) Expiration.--The term of any member shall not expire 
        before the date on which the member's successor takes office.
    ``(f) Duties.--The Board shall--
            ``(1) administer the program established under this part;
            ``(2) establish policies for the investment and management 
        of the Tier I Investment Fund, the Tier II Investment Fund, and 
        Tier III investment accounts, including policies applicable to 
        the asset managers with responsibility for managing the 
        investment of individual investment account balances, and for 
        the management and operation of individual social security 
        annuities purchased with Tier II Investment Fund assets, which 
        shall provide for--
                    ``(A) prudent investments suitable for accumulating 
                funds for payment of retirement income;
                    ``(B) sound management practices; and
                    ``(C) low administrative costs;
            ``(3) review the performance of investments made for the 
        Tier I Investment Fund and the Tier II Investment Fund;
            ``(4) review the management and operation of individual 
        social security annuities purchased with Tier II Investment 
        Fund assets;
            ``(5) review the performance of investments made under Tier 
        III investment accounts;
            ``(6) review and approve the budget of the Board; and
            ``(7) comply with the fiduciary requirements of part 4 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974 (relating to fiduciary responsibility) in 
        connection with any exercise of discretion in connection with 
        the assets of the Tier I Investment Fund or the Tier II 
        Investment Fund.
    ``(g) Administrative Provisions.--
            ``(1) In general.--The Board may--
                    ``(A) adopt, alter, and use a seal;
                    ``(B) except as provided in paragraph (4), direct 
                the Executive Director to take such action as the Board 
                considers appropriate to carry out the provisions of 
                this part and the policies of the Board in accordance 
                with delegations under this part;
                    ``(C) upon the concurring votes of 4 members, 
                remove the Executive Director from office for good 
                cause shown;
                    ``(D) provide to the Executive Director such 
                resources as are necessary to carry out the duties of 
                the Executive Director; and
                    ``(E) take such other actions as may be necessary 
                to carry out the functions of the Board.
            ``(2) Meetings.--The Board shall meet--
                    ``(A) not less than once during each month; and
                    ``(B) at additional times at the call of the 
                Chairman.
            ``(3) Exercise of powers.--
                    ``(A) In general.--Except as provided in paragraph 
                (1)(C), the Board shall perform the functions and 
                exercise the powers of the Board on a majority vote of 
                a quorum of the Board. Three members of the Board shall 
                constitute a quorum for the transaction of business.
                    ``(B) Vacancies.--A vacancy on the Board shall not 
                impair the authority of a quorum of the Board to 
                perform the functions and exercise the powers of the 
                Board.
            ``(4) Limitations on investments.--The Board may not direct 
        any person to invest or to cause to be invested any sums in the 
        Tier II Investment Fund or any Tier III investment account in a 
        specific asset or to dispose of or cause to be disposed of any 
        specific asset of such Fund or any such account.
    ``(h) Compensation.--
            ``(1) In general.--Each member of the Board who is not an 
        officer or employee of the Federal Government shall be 
        compensated at the daily rate of basic pay for level IV of the 
        Executive Schedule for each day during which such member is 
        engaged in performing a function of the Board.
            ``(2) Expenses.--A member of the Board shall be paid 
        travel, per diem, and other necessary expenses under subchapter 
        I of chapter 57 of title 5, United States Code, while traveling 
        away from such member's home or regular place of business in 
        the performance of the duties of the Board.
            ``(3) Source of funds.--Payments authorized under this 
        subsection shall be paid from the Tier I Investment Fund or the 
        Tier II Investment Fund, as determined appropriate by the 
        Board.
    ``(i) Discharge of Responsibilities.--The members of the Board 
shall discharge their responsibilities solely in the interest of the 
participants and their beneficiaries under this part.
    ``(j) Annual Independent Audit.--The Board shall annually engage an 
independent qualified public accountant to audit the activities of the 
Board.
    ``(k) Submission of Budget to Congress.--The Board shall prepare 
and submit to the President, and, at the same time, to the appropriate 
committees of Congress, an annual budget of the expenses and other 
items relating to the Board which shall be included as a separate item 
in the budget required to be transmitted to Congress under section 1105 
of title 31, United States Code.
    ``(l) Submission of Legislative Recommendations.--The Board may 
submit to the President, and, at the same time, shall submit to each 
House of Congress, any legislative recommendations of the Board 
relating to any of its functions under this part or any other provision 
of law.

``SEC. 262. EXECUTIVE DIRECTOR OF THE INDIVIDUAL INVESTMENT BOARD.

    ``(a) Appointment of Executive Director.--The Board shall appoint, 
without regard to the provisions of law governing appointments in the 
competitive service, an Executive Director by action agreed to by a 
majority of the members of the Board.
    ``(b) Duties.--The Executive Director shall, as determined 
appropriate by the Board--
            ``(1) carry out the policies established by the Board;
            ``(2) invest and manage the Tier I Investment Fund and the 
        Tier II Investment Fund in accordance with the investment 
        policies and other policies established by the Board;
            ``(3) administer the provisions of this part relating to 
        the Tier I Investment Fund and the Tier II Investment Fund; and
            ``(4) prescribe such regulations (other than regulations 
        relating to fiduciary responsibilities) as may be necessary for 
        the administration of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund.
    ``(c) Administrative Authority.--The Executive Director may, within 
the scope of the duties of the Executive Director as determined by the 
Board--
            ``(1) appoint such personnel as may be necessary to carry 
        out the provisions of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund;
            ``(2) subject to approval by the Board, procure the 
        services of experts and consultants under section 3109 of title 
        5, United States Code;
            ``(3) secure directly from an Executive agency, the United 
        States Postal Service, or the Postal Rate Commission any 
        information necessary to carry out the provisions of this part 
        and the policies of the Board relating to the Tier I Investment 
        Fund and the Tier II Investment Fund;
            ``(4) make such payments out of sums in the Tier I 
        Investment Fund and the Tier II Investment Fund as the 
        Executive Director determines, in accordance with regulations 
        of the Board, are necessary to carry out the provisions of this 
        part and the policies of the Board;
            ``(5) pay the compensation, per diem, and travel expenses 
        of individuals appointed under paragraphs (1), (2), and (6) 
        from the Tier I Investment Fund or the Tier II Investment Fund, 
        in accordance with regulations of the Board;
            ``(6) accept and use the services of individuals employed 
        intermittently in the Government service and reimburse such 
        individuals for travel expenses, authorized by section 5703 of 
        title 5, United States Code, including per diem as authorized 
        by section 5702 of such title;
            ``(7) except as otherwise expressly prohibited by law or 
        the policies of the Board, delegate any of the Executive 
        Director's functions to such employees under the Board as the 
        Executive Director may designate and authorize such successive 
        redelegations of such functions to such employees under the 
        Board as the Executive Director may consider to be necessary or 
        appropriate; and
            ``(8) take such other actions as are appropriate to carry 
        out the functions of the Executive Director.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to wages paid after December 31, 2004, for pay 
periods ending after such date and self-employment income for taxable 
years beginning after such date.

SEC. 3. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM.

    (a) Taxation With Respect to Elements of the Program.--
            (1) In general.--Subchapter F of chapter 1 of the Internal 
        Revenue Code of 1986 (relating to exempt organizations) is 
        amended by adding at the end the following new part:

        ``PART IX--INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM

``Sec. 530A. Individual Social Security Investment Program.

``SEC. 530A. INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM.

    ``(a) General Rule.--Any fund created, account established, or 
annuity under part B of title II of the Social Security Act is exempt 
from taxation under this subtitle. Notwithstanding the preceding 
sentence, any such fund or account is subject to the taxes imposed by 
section 511 (relating to imposition of tax on unrelated business income 
of charitable, etc. organizations).
    ``(b) Recognition Bonds.--Gross income shall not include--
            ``(1) the value of a recognition bond issued to a 
        participant under section 257(b) of the Social Security Act 
        which is deposited in the Tier II Investment Fund and held for 
        such participant under such section,
            ``(2) proceeds from the sale of a recognition bond of a 
        participant under section 257(e) of the Social Security Act 
        which are deposited in the Tier II Investment Fund and held for 
        such participant under section 257(b) of such Act, and
            ``(3) proceeds from the redemption of a recognition bond of 
        a participant under section 257(d) of the Social Security Act 
        deposited in the Tier II Investment Fund to the credit of such 
        participant's part B totalization account under part B of title 
        II of such Act.
For purposes of this subsection, the term `Tier II Investment Fund' has 
the meaning given such term by section 251(6) of the Social Security 
Act.
    ``(c) Distributions.--A distribution from any fund or account, or 
any annuity payment, under part B of title II of the Social Security 
Act shall not be included in the gross income of the distributee or 
payee.''.
            (2) Conforming amendment.--Section 86(d)(1)(A) of such Code 
        is amended by inserting ``part A of'' after ``under''.
            (3) Clerical amendment.--The table of parts for subchapter 
        F of chapter 1 of such Code is amended by adding after the item 
        relating to part VIII the following new item:

      ``Part IX. Individual Social Security Investment Program''.

            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2004.
    (b) Exclusion of Individual Investment Program Participants From 
Insurance Benefits.--Section 215 of the Social Security Act (42 U.S.C. 
415) is amended by adding at the end the following new subsection:

       ``Exclusion of Individual Investment Program Participants

    ``(j)(1) Except as provided in paragraph (3), a participant (as 
defined in section 251(1)) in the Individual Social Security Investment 
Program under part B shall not be credited with wages or self-
employment income under this part.
    ``(2) In the case of an individual who becomes a participant under 
part B pursuant to an election filed under section 259, paragraph (1) 
shall apply with respect to wages paid in calendar years beginning on 
or after the effective date of the election and with respect to self-
employment income derived in taxable years ending after such date.
    ``(3) Paragraph (1) shall not apply in connection with the 
determination of any such participant's entitlement to disability 
insurance benefits under section 223, the determination of such 
participant's primary insurance amount in connection with such 
entitlement, and the determination during such entitlement of benefits 
based on such participant's wages and self-employment income.''.

SEC. 4. CPI-INDEXED BENEFITS FOR PART A BENEFICIARIES OTHER THAN 
              DISABILITY BENEFICIARIES.

    (a) Computation of Bend Points.--Section 215(a)(1)(B) of the Social 
Security Act (42 U.S.C. 415(a)(1)(B)) is amended--
            (1) by redesignating clause (iii) as clause (vi);
            (2) in clause (ii), by striking ``For individuals'' and 
        inserting ``Subject to clause (iii), for individuals'';
            (3) by inserting after clause (ii) the following new 
        clauses:
    ``(iii) For individuals who initially become eligible for old-age 
insurance benefits, or who die (before becoming eligible for such 
benefits), in any calendar year after 2012, each of the amounts so 
established under the preceding provisions of this subparagraph shall 
be equal to the product derived by multiplying such amount (as 
determined before the application of this clause) by the quotient 
derived by dividing--
            ``(I) the applicable change in the CPI for the first of the 
        2 preceding calendar years, by
            ``(II) applicable change in the national average wage index 
        for the first of the 2 preceding calendar years.
    ``(iv) For purposes of clause (iii)(I), the term `applicable change 
in the CPI' for a calendar year means the excess of--
            ``(I) the arithmetical mean of the Consumer Price Index for 
        Urban Wage Earners and Clerical Workers (issued by the Bureau 
        of Labor Statistics) for the 12 months in such calendar year, 
        over
            ``(II) the arithmetical mean of such Consumer Price Index 
        for the 12 months in calendar year 2011.
    ``(v) For purposes of clause (iii)(II), the term `applicable change 
in the national average wage index' for a calendar year means the 
excess of--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1)) for such calendar year, over
            ``(II) the national average wage index (as so defined) for 
        calendar year 2011.''; and
            (4) in clause (vi) (as redesignated), by striking ``under 
        clause (ii)'' and inserting ``under the preceding provisions of 
        this subparagraph''.
    (b) Substitution of CPI for National Average Wage Index in 
Computing Average Indexed Monthly Earnings.--
            (1) In general.--Section 215(b)(3) of such Act (42 U.S.C. 
        415(b)(3)) is amended--
                    (A) in subparagraph (A)(ii)(I), by striking 
                ``national average wage index (as defined in section 
                209(k)(1))'' and inserting ``national average wage 
                index (as defined in section 209(k)(1)) (for 
                determinations of disability insurance benefits and 
                other benefits based on the wages and self-employment 
                income of an individual entitled to disability 
                insurance benefits) or the consumer price index (for 
                determinations of other benefits)'';
                    (B) in subparagraph (A)(ii)(II), by striking 
                ``national average wage index (as so defined)'' and 
                inserting ``national average wage index (as so defined) 
                (for determinations of disability insurance benefits 
                and other benefits based on the wages and self-
                employment income of an individual entitled to 
                disability insurance benefits) or the consumer price 
                index (for determinations of other benefits)'';
                    (C) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (D) by inserting after subparagraph (A) the 
                following new subparagraph:
    ``(B) For purposes of this paragraph, the term `consumer price 
index' for a calendar year means the arithmetical mean of the Consumer 
Price Index for Urban Wage Earners and Clerical Workers (issued by the 
Bureau of Labor Statistics) for the 12 months in such calendar year.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply with respect to the average indexed monthly 
        earnings of individuals attaining age 62, or dying before 
        attaining such age, on or after January 1, 2012.

SEC. 5. MAINTENANCE OF ADEQUATE BALANCES IN THE SOCIAL SECURITY TRUST 
              FUNDS.

    (a) In General.--Section 201 of the Social Security Act (42 U.S.C. 
401) is amended by adding at the end the following new subsection:
    ``(n) In addition to amounts otherwise appropriated under the 
preceding provisions of this section to the Trust Funds established 
under this section, there is hereby appropriated for each fiscal year 
to each of such Trust Funds, from amounts in the general fund of the 
Treasury not otherwise appropriated, such sums as may be necessary from 
time to time to maintain the balance ratio (as defined in section 
709(b)) of such Trust Fund, for the calendar year commencing during 
such fiscal year, at not less than 100 percent. The sums to be 
appropriated under the preceding sentence shall be determined by the 
Commissioner of Social Security and certified by the Commissioner to 
each House of the Congress not later than October 1 of such fiscal 
year. In making such determination and certification, the Commissioner 
shall use the intermediate actuarial assumptions used by the Board of 
Trustees of the Trust Funds in its most recent annual report to the 
Congress prepared pursuant to subsection (c)(2). The Commissioner shall 
also transmit a copy of any such certification to the Secretary of the 
Treasury, and upon receipt thereof, such Secretary shall promptly take 
appropriate actions in accordance with the certification.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning after the date of the 
enactment of this Act.
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