I 

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.

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 ‘‘Individual Social Security Investment Program Act of 

6 2004’’. 
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1 (b) TABLE OF CONTENTS.—The table of contents is 

2 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.

3 SEC. 2. ESTABLISHMENT OF INDIVIDUAL SOCIAL SECURITY 

4 INVESTMENT PROGRAM. 

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

6 is amended—

7 (1) by inserting before section 201 the fol8 lowing: 

9 ‘‘PART A—INSURANCE BENEFITS’’; and 

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

11 ‘‘PART B—INDIVIDUAL SOCIAL SECURITY 

12 INVESTMENT PROGRAM 

13 ‘‘SEC. 251. DEFINITIONS. 

14 ‘‘For purposes of this part—
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1 ‘‘(1) PARTICIPANT.—The term ‘participant’ 

2 means—

3 ‘‘(A) any individual who is born on or after 

4 January 1, 1983, and—

5 ‘‘(i) receives wages in any calendar 

6 year after December 31, 2004, on which 

7 there is imposed a tax under section 

8 3101(a) of the Internal Revenue Code of 

9 1986, or 

10 ‘‘(ii) derives self-employment income 

11 for a taxable year beginning after Decem12 ber 31, 2004, on which there is imposed a 

13 tax under section 1401(a) of the Internal 

14 Revenue Code of 1986, and 

15 ‘‘(B) any individual who is born on or after 

16 January 1, 1950, and before January 1, 1983, 

17 and—

18 ‘‘(i)(I) receives wages in any calendar 

19 year ending before January 1, 2004, on 

20 which there is imposed a tax under section 

21 3101(a) of the Internal Revenue Code of 

22 1986, or 

23 ‘‘(II) derives self-employment income 

24 for a taxable year beginning before Janu25 ary 1, 2004, on which there is imposed a 
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1 tax under section 1401(a) of the Internal 

2 Revenue Code of 1986, and 

3 ‘‘(ii) has filed an election for partici4 pation in accordance with section 259. 

5 ‘‘(2) BOARD.—The term ‘Board’ means the In6 dividual Investment Board established under section 

7 261. 

8 ‘‘(3) EXECUTIVE DIRECTOR.—The term ‘Execu9 tive Director’ means the Executive Director ap10 pointed under section 262. 

11 ‘‘(4) PART B TOTALIZATION ACCOUNT.—The 

12 term ‘part B totalization account’ means an account 

13 established for a participant under section 252(d). 

14 ‘‘(5) TIER I INVESTMENT FUND.—The term 

15 ‘Tier I Investment Fund’ means the trust fund cre16 ated under section 253. 

17 ‘‘(6) TIER II INVESTMENT FUND.—The term 

18 ‘Tier II Investment Fund’ means the trust fund cre19 ated under section 254. 

20 ‘‘(7) TIER III INVESTMENT ACCOUNT.—The 

21 term ‘Tier III investment account’ means a trust es22 tablished pursuant to section 255. 
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1 ‘‘SEC. 252. INDIVIDUAL INVESTMENT OF SOCIAL SECURITY 

2 CONTRIBUTIONS; PART B TOTALIZATION AC3 COUNTS. 

4 ‘‘(a) PAYMENTS INTO TIER I INVESTMENT FUND.—

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

6 the Secretary of the Treasury shall deposit into the 

7 Tier I Investment Fund (established under section 

8 253), from amounts held in the Federal Old-Age and 

9 Survivors Insurance Trust Fund, a total amount 

10 equal, in the aggregate, to 100 percent of the redi11 rected social security contribution for such calendar 

12 year of each individual who is a participant for such 

13 calendar year. 

14 ‘‘(2) REDIRECTED SOCIAL SECURITY CONTRIBU15 TIONS.—For purposes of paragraph (1) the term ‘re16 directed social security contributions’ of a partici17 pant for a calendar year means the product derived 

18 by multiplying—

19 ‘‘(A) the sum of the total wages paid to, 

20 and self-employment income derived by, the 

21 participant during such calendar year (taking 

22 into account limits imposed by the contribution 

23 and benefit base under section 230), by 

24 ‘‘(B) 6.2 percent. 

25 ‘‘(3) TRANSFERS BASED ON ESTIMATES.—The 

26 amounts deposited pursuant to paragraph (1) shall 
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1 be transferred in at least monthly payments from 

2 the Federal Old-Age and Survivors Insurance Trust 

3 Fund to the Tier I Investment Fund, such amounts 

4 to be determined on the basis of estimates, by the 

5 Commissioner of Social Security and certified to the 

6 Secretary of the Treasury under part A, of the 

7 wages paid to, and self-employment income derived 

8 by, participants, and proper adjustments shall be 

9 made in amounts subsequently transferred to the ex10 tent prior estimates were in excess of or were less 

11 than actual amounts. 

12 ‘‘(4) SEPARATE ACCOUNTING AND CRED13 ITING.—

14 ‘‘(A) IN GENERAL.—Subject to this para15 graph, the Board shall provide, after the close 

16 of each calendar year, for prompt accounting of 

17 the amounts deposited in the Tier I Investment 

18 Fund with respect to each participant during 

19 such calendar year to such individual’s part B 

20 totalization account (established under sub21 section (d)), together with properly allocated in22 creases and decreases in such amounts reflect23 ing the net returns from investment of the bal24 ance of the Fund during such year under sec25 tion 253. For purposes of determining such in-
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1 creases and decreases in such amounts for each 

2 calendar year, the amounts deposited into the 

3 Fund in connection with any participant during 

4 such calendar year shall be deemed to have 

5 been deposited on June 30 of such year. 

6 ‘‘(B) CREDITING.—Under such accounting, 

7 amounts deposited into the Fund during each 

8 calendar year with respect to the redirected so9 cial security taxes of each participant (including 

10 net returns and losses from the investment 

11 Fund attributed to such amounts under this 

12 paragraph) shall be credited to such partici13 pant’s part B totalization account not later 

14 than the end of the succeeding calendar year. 

15 ‘‘(b) TRANSFERS INTO TIER II INVESTMENT

16 FUND.—

17 ‘‘(1) IN GENERAL.—Upon the crediting to a 

18 participant’s part B totalization account of any 

19 amount held in the Tier I Investment Fund for any 

20 calendar year, the Board shall (except as provided in 

21 section 260(a)(2)) transfer the amount so credited 

22 to such account from the Tier I Investment Fund 

23 into the Tier II Investment Fund (established under 

24 section 254). 
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1 ‘‘(2) SEPARATE ACCOUNTING AND CRED2 ITING.—Subject to this paragraph, the Board shall 

3 provide for ongoing separate accounting in the par4 ticipant’s part B totalization account of the amounts 

5 deposited in the Tier II Investment Fund with re6 spect to such participant during each calendar year, 

7 together with any increases or decreases therein for 

8 such year so as to reflect the net returns and losses 

9 from investment thereof under section 254 while 

10 held in the Tier II Investment Fund during such 

11 year. 

12 ‘‘(c) DEPOSITS TO TIER III INVESTMENT AC13 COUNTS.—

14 ‘‘(1) IN GENERAL.—In any case in which, as of 

15 the end of any calendar year, the total balance in 

16 the Tier II Investment Fund credited to the partici17 pant’s part B totalization account exceeds for the 

18 first time the minimum deposit balance, the Board 

19 shall, by regulation, provide for an opportunity for 

20 such participating individual to make, at any time 

21 thereafter, such individual’s first election of a Tier 

22 III investment account for investment of an amount 

23 credited to the participant’s part B totalization ac24 count. Such election may be in lieu of or in addition 
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1 to investment in any option available with respect to 

2 the Tier II Investment Fund. 

3 ‘‘(2) MINIMUM DEPOSIT BALANCE.—

4 ‘‘(A) IN GENERAL.—Subject to subpara5 graph (B), the term ‘minimum deposit balance’ 

6 means an amount equal to $10,000. 

7 ‘‘(B) ADJUSTMENTS.—The Board shall ad8 just annually (effective for years after Decem9 ber 2005) the dollar amount set forth in sub10 paragraph (A) under procedures providing for 

11 adjustments in the same manner and to the 

12 same extent as adjustments are provided for 

13 under the procedures used to adjust benefit 

14 amounts under section 215(i)(2)(A), except that 

15 any amount so adjusted that is not a multiple 

16 of $1.00 shall be rounded to the nearest mul17 tiple of $1.00. 

18 ‘‘(3) SUBSEQUENT INVESTMENT.—At any time 

19 after a participant’s first election of a Tier III in20 vestment account pursuant to paragraph (1), the 

21 participant may invest any portion of the balance 

22 credited to the participant’s part B totalization ac23 count in a Tier III investment account, the Tier II 

24 Investment Fund, or any combination thereof, as 

25 elected by the participant from time to time in ac-
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1 cordance with regulations of the Board under this 

2 part. 

3 ‘‘(d) ACCOUNTING FOR TOTAL INVESTED AMOUNTS

4 BY MEANS OF PART B TOTALIZATION ACCOUNTS.—

5 ‘‘(1) ESTABLISHMENT OF ACCOUNTS.—As soon 

6 as practicable after the later of January 1, 2005, or 

7 the date on which an individual becomes a partici8 pant under this part, the Executive Director shall 

9 establish and maintain a part B totalization account 

10 for such participant. Such account shall be the 

11 means by which amounts held in the Tier I Invest12 ment Fund, the Tier II Investment Fund, and any 

13 Tier III investment account of such participant are 

14 credited to such participant under this part, under 

15 procedures which shall be established by the Board 

16 by regulation. The part B totalization account of a 

17 participant shall be identified to such participant by 

18 means of the participant’s social security account 

19 number. 

20 ‘‘(2) ACCOUNT BALANCE.—The balance in a 

21 participant’s part B totalization account at any time 

22 is the sum of—

23 ‘‘(A) any balance in the Tier I Investment 

24 Fund credited to such participant’s part B to25 talization account prior to transfer to the Tier 
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1 II Investment Fund under section 252(b)(1); 

2 plus 

3 ‘‘(B) the excess of—

4 ‘‘(i) all deposits in the Tier II Invest5 ment Fund credited to such participant’s 

6 part B totalization account under sub7 section (a) (including the proceeds of any 

8 sale by such participant, as provided in 

9 section 257(e), of any recognition bond 

10 issued in the name of the participant 

11 under section 257(b)), subject to such in12 creases and reductions as may result from 

13 allocations made to and reductions made in 

14 the account pursuant to paragraph (3)(A) 

15 with respect to amounts in the Tier II In16 vestment Fund; over 

17 ‘‘(ii) amounts credited to such partici18 pant’s part B totalization account under 

19 subsection (a) paid out of the Tier II In20 vestment Fund under this part; plus 

21 ‘‘(C) the excess of—

22 ‘‘(i) the deposits to any Tier III in23 vestment account of such participant, sub24 ject to such increases and reductions as 

25 may result from allocations made to and 
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1 reductions made in the Tier III investment 

2 account pursuant to paragraph (3)(B); 

3 over 

4 ‘‘(ii) amounts paid out of such partici5 pating individual’s Tier III investment ac6 count under this part. 

7 ‘‘(3) ALLOCATION OF EARNINGS AND LOSSES.—

8 Pursuant to regulations which shall be prescribed by 

9 the Board, the Executive Director shall allocate to 

10 the part B totalization account of each participant 

11 an amount equal to the net earnings and net losses 

12 from each investment of sums—

13 ‘‘(A) in the Tier II Investment Fund which 

14 are attributable to sums credited to such par15 ticipant’s part B totalization account, reduced 

16 by an appropriate share of the administrative 

17 expenses paid out of the net earnings, as deter18 mined by the Executive Director; and 

19 ‘‘(B) in any Tier III investment account of 

20 such participant, reduced by administrative ex21 penses. 

22 ‘‘(e) TREATMENT OF TRANSFERS.—Transfers from 

23 the Federal Old-Age and Survivors Insurance Trust Fund 

24 to the Tier I Investment Fund and transfers among the 

25 Tier I Investment Fund, Tier II Investment Fund, and 
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1 Tier III investment accounts under this part shall not be 

2 included in the totals of the budget of the United States 

3 Government as submitted by the President or of the con4 gressional budget and shall be exempt from any general 

5 budget limitation imposed by statute on budget outlays of 

6 the United States Government. 

7 ‘‘SEC. 253. TIER I INVESTMENT FUND. 

8 ‘‘(a) ESTABLISHMENT OF TIER I INVESTMENT

9 FUND.—There is established in the Treasury of the 

10 United States a trust fund to be known as the ‘Tier I 

11 Investment Fund’. The Board shall serve as trustees of 

12 such Fund. The Fund consists of all amounts derived from 

13 payments into the Fund under section 252(a) and remain14 ing after investment of such amounts under subsection (b) 

15 of this section, including additional amounts derived as in16 come from such investments. The amounts held in the 

17 Fund are appropriated and shall remain available without 

18 fiscal year limitation—

19 ‘‘(1) to be held for investment on behalf of par20 ticipants under subsection (b), 

21 ‘‘(2) to pay the administrative expenses related 

22 to the Fund and to investment under subsection (b), 

23 ‘‘(3) to make transfers to the Tier II Invest24 ment Fund under section 252(b) or to Tier III in25 vestment accounts under section 252(c), 
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1 ‘‘(4) to make payments under section 

2 260(a)(2), and 

3 ‘‘(5) to make lump sum distributions under 

4 subsections (c) and (d). 

5 ‘‘(b) INVESTMENT OF FUND BALANCE.—For pur6 poses of investment of the Tier I Investment Fund, the 

7 Board shall contract with appropriate professional asset 

8 managers selected for investment of amounts held in the 

9 Fund, so as to provide for investment of the balance of 

10 the Fund, in a manner providing broad diversification in 

11 accordance with regulations of the Board, in certificates 

12 of deposit or other instruments or obligations selected by 

13 such asset managers, which return the amount invested 

14 and pay interest, at a specified rate or rates, on that 

15 amount during a specified period of time. 

16 ‘‘(c) RETIREMENT DISTRIBUTION.—As soon as prac17 ticable after the commencement of the distribution under 

18 section 256 of assets credited to a participant’s part B 

19 totalization account, the amount of any assets in the Tier 

20 I Investment Fund credited to such account shall be dis21 tributed to such participant in a lump sum, under rules 

22 established by the Board. 

23 ‘‘(d) LUMP SUM PAYMENT TO ESTATE UPON DEATH

24 OF PARTICIPANT.—Upon the death of a participant, the 

25 amount of any assets in the Tier I Investment Fund cred-
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1 ited to such participant’s part B totalization account shall 

2 be transferred in a lump sum, under rules established by 

3 the Board—

4 ‘‘(1) in any case in which one or more bene5 ficiaries have been designated in advance, in accord6 ance with regulations which shall be prescribed by 

7 the Board, to such beneficiaries in accordance with 

8 such designation as provided in such regulations, 

9 and 

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

11 as described in paragraph (1), to such participant’s 

12 estate. 

13 ‘‘SEC. 254. TIER II INVESTMENT FUND. 

14 ‘‘(a) ESTABLISHMENT OF TIER II INVESTMENT

15 FUND.—There is established in the Treasury of the 

16 United States a trust fund to be known as the ‘Tier II 

17 Investment Fund’. The Board shall serve as trustees of 

18 such Fund. The Fund consists of all amounts derived from 

19 payments into the Fund under section 252(b)(1) and re20 maining after investment of such amounts under sub21 section (b) of this section, including additional amounts 

22 derived as income from such investments. The amounts 

23 held in the Fund are appropriated and shall remain avail24 able without fiscal year limitation—
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1 ‘‘(1) to be held for investment under subsection 

2 (b), 

3 ‘‘(2) to pay the administrative expenses related 

4 to the Fund and to investment under subsection (b), 

5 ‘‘(3) to make transfers to Tier III investment 

6 accounts under section 252(c)(1), 

7 ‘‘(4) to make retirement distributions in accord8 ance with section 256, and 

9 ‘‘(5) to make lump sum distributions under sec10 tion 256 and subsection (c) of this section. 

11 ‘‘(b) INVESTMENT IN EQUITIES AND FIXED INCOME

12 INSTRUMENTS IN MANAGEMENT ACCOUNTS.—

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

14 of the Tier II Investment Fund, the Board shall di15 vide the Fund into multiple management accounts. 

16 Such accounts shall consist of the 60/40 manage17 ment account and 2 or more additional management 

18 accounts providing for investment in each account in 

19 a combination of equities and fixed income instru20 ments in accordance with prescribed percentages, as 

21 provided in paragraph (2). The Board shall contract 

22 with appropriate investment managers selected for 

23 investment of amounts held in each management ac24 count. 
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1 ‘‘(2) RULES RELATING TO MANAGEMENT AC2 COUNTS.—

3 ‘‘(A) IN GENERAL.—The investment man4 ager selected for investment of amounts held in 

5 each management account referred to in para6 graph (1) shall invest such amounts under reg7 ulations which shall be prescribed by the Board 

8 so as to ensure, to the maximum extent prac9 ticable, that, of the total balance in the Fund 

10 credited to such account and available for in11 vestment (after allowing for administrative ex12 penses)—

13 ‘‘(i) the prescribed equities percentage 

14 is invested in equities in accordance with 

15 paragraph (4), and 

16 ‘‘(ii) the prescribed fixed income in17 strument percentage is invested in fixed in18 come instruments in accordance with para19 graph (5). 

20 ‘‘(B) PRESCRIBED PERCENTAGES.—For 

21 purposes of subparagraph (A)—

22 ‘‘(i) THE 60/40 MANAGEMENT AC23 COUNT.—In the case of the 60/40 manage24 ment account—
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1 ‘‘(I) the prescribed equities per2 centage is 60 percent, and 

3 ‘‘(II) the prescribed fixed income 

4 instrument percentage is 40 percent. 

5 ‘‘(ii) OTHER MANAGEMENT AC6 COUNTS.—In the case of any other man7 agement account—

8 ‘‘(I) the prescribed equities per9 centage is a prescribed percentage not 

10 in excess of 80 percent, and 

11 ‘‘(II) the prescribed fixed income 

12 instrument percentage is the remain13 ing percentage of the amount invested 

14 in the management account. 

15 ‘‘(3) ELECTION OF MANAGEMENT ACCOUNTS.—

16 ‘‘(A) DEFAULT MANAGEMENT ACCOUNT.—

17 Except as provided in an election in effect 

18 under subparagraph (B), amounts held in the 

19 Tier II Investment Fund shall be credited to 

20 the 60/40 management account. 

21 ‘‘(B) ELECTION OF TRANSFERS BETWEEN

22 MANAGEMENT ACCOUNTS.—Pursuant to the 

23 written election, filed in accordance with regula24 tions of the Board and received by the Sec25 retary of the Treasury during an applicable 
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1 election month by a participant who has an 

2 amount credited to such participant’s part B 

3 totalization account invested in any of the man4 agement accounts in the Tier II Investment 

5 Fund, the Secretary of the Treasury shall 

6 transfer such amount from such account to any 

7 of the other management accounts in the Tier 

8 II Investment Fund (whichever is designated in 

9 such election). 

10 ‘‘(C) APPLICABLE ELECTION MONTH.—For 

11 purposes of subparagraph (B), the term ‘appli12 cable election month’, in connection with a par13 ticipant, means—

14 ‘‘(i) the calendar month in which oc15 curs the anniversary of such participant’s 

16 birth, and 

17 ‘‘(ii) the 6th calendar month following 

18 such month. 

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

20 with regulations which shall be prescribed by the 

21 Board, the Board shall establish standards which 

22 must be met by equities selected for investment of 

23 amounts in any management account in the Tier II 

24 Investment Fund pursuant to paragraph (2)(A)(i). 

25 In conformity with such standards, the Board shall 
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1 select, for purposes of such investment, indices 

2 which are comprised of equities the aggregate mar3 ket value of which is, in each case, a reasonably 

4 broad representation of companies whose shares are 

5 traded on the equity markets. Amounts invested in 

6 equities by each investment manager shall be held in 

7 a portfolio designed to replicate the performance of 

8 one or more of such indices. 

9 ‘‘(5) INVESTMENT IN FIXED INCOME INSTRU10 MENTS.—In accordance with regulations which shall 

11 be prescribed by the Board, the Board shall estab12 lish standards which must be met by fixed income 

13 instruments selected for investment of amounts in 

14 any management account in the Tier II Investment 

15 Fund pursuant to paragraph (2)(A)(ii). Such stand16 ards shall take into account the competing consider17 ations of risk and return. Amounts invested in fixed 

18 income instruments by each investment manager 

19 shall be held in a portfolio which shall consist of a 

20 diverse range of fixed income instruments, taking 

21 into full account the opposing considerations of risk 

22 and maximization of return. 

23 ‘‘(c) PERIODIC REPORTS BY BOARD.—

24 ‘‘(1) IN GENERAL.—The Board shall make peri25 odic reports concerning the status of the investment 
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1 in the Tier II Investment Fund of amounts credited 

2 to each participant’s part B totalization account. 

3 Each periodic report shall be furnished to the partic4 ipant on at least a semiannual basis on or before the 

5 60th day following the period for which the report 

6 is required. 

7 ‘‘(2) INFORMATION REQUIRED TO BE IN8 CLUDED.—The periodic report shall contain the fol9 lowing information for transactions occurring during 

10 the period for which the report is provided: 

11 ‘‘(A) The balance in the Tier II Investment 

12 Fund credited to the participant’s part B total13 ization account. 

14 ‘‘(B) The rate of return on such balance 

15 for the period covered, set forth separately for 

16 each management account in the case of an in17 vestment in 2 or more management accounts 

18 during the period. 

19 ‘‘(C) The amount of authorized contribu20 tions made to the Tier II management account 

21 and credited to the participant’s part B total22 ization account. 

23 ‘‘(D) The name and address of the Board. 

24 ‘‘(E) Commission fees and fees for admin25 istrative expenses charged in connection with 
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1 the investment in the Tier II Improvement 

2 Fund during the period. 

3 ‘‘(F) Other information which may be re4 quired from time to time by the Board. 

5 The language of the report shall be written in a 

6 form so as to be understood by the average partici7 pant. 

8 ‘‘(d) LUMP SUM PAYMENT TO ESTATE UPON DEATH

9 OF PARTICIPANT.—Upon the death of a participant, the 

10 amount of any assets in the Tier II Investment Fund cred11 ited to such participant’s part B totalization account shall 

12 be transferred in a lump sum, under rules established by 

13 the Board—

14 ‘‘(1) in any case in which one or more bene15 ficiaries have been designated in advance, in accord16 ance with regulations which shall be prescribed by 

17 the Board, to such beneficiaries in accordance with 

18 such designation as provided in such regulations, 

19 and 

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

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

22 estate. 

23 ‘‘SEC. 255. TIER III INVESTMENT ACCOUNTS. 

24 ‘‘(a) DESIGNATION OF TIER II INVESTMENT AC25 COUNTS.—Under regulations prescribed by the Board, a 
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1 participant, upon the initial attainment of a minimum de2 posit balance in amounts in the Tier II Investment Fund 

3 credited to the participant’s part B totalization account, 

4 as described in section 252(c), may designate to the 

5 Board, in such form and manner as shall be prescribed 

6 in such regulations, a Tier III investment account to 

7 which deposits with respect to the individual are to be 

8 made under section 252(c). The individual may designate 

9 another Tier III investment account in lieu of any account 

10 previously designated, in accordance with regulations of 

11 the Board. 

12 ‘‘(b) DEFINITION.—For purposes of this part, the 

13 term ‘Tier III investment account’ means a trust created 

14 or organized in the United States for the exclusive benefit 

15 of a participant or his beneficiaries, but only if the written 

16 governing instrument creating the trust meets the fol17 lowing requirements: 

18 ‘‘(1) RESTRICTED CONTRIBUTIONS.—No con19 tribution will be accepted unless it is in the form of 

20 a deposit to the account pursuant to section 

21 252(c)(1). 

22 ‘‘(2) TRUSTEE REQUIREMENTS.—The trustee 

23 is—

24 ‘‘(A) a bank (as defined in section 581 of 

25 the Internal Revenue Code of 1986), 
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1 ‘‘(B) an insured credit union (as defined in 

2 section 101(6) of the Federal Credit Union 

3 Act), 

4 ‘‘(C) a corporation which, under the laws 

5 of the State of its incorporation, is subject to 

6 supervision and examination by the Commis7 sioner of Banking or other officer of such State 

8 in charge of the administration of the banking 

9 laws of such State, 

10 ‘‘(D) a regulated investment company (as 

11 defined in section 851 of the Internal Revenue 

12 Code of 1986) for which an election is in effect 

13 under section 851(b)(1) of such Code, or 

14 ‘‘(E) any other person designated by the 

15 Board under regulations prescribed under this 

16 paragraph, 

17 but only if the trustee demonstrates to the satisfac18 tion of the Board that its portfolio assets either rep19 licate the assets of a broad-based index of equities 

20 or fixed income instruments which is approved by 

21 the Board or are of a type that the Board has deter22 mined not to involve high risks for the investor, and 

23 that the manner in which it will administer the trust 

24 will be consistent with the requirements of this sec25 tion. 
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1 ‘‘(3) NONFORFEITABILITY.—The interest of an 

2 individual in the balance of his account is nonforfeit3 able. 

4 ‘‘(4) DIVERSIFICATION.—The investment op5 tions made available to participants by the trustee 

6 include reasonably diversified options of equities, 

7 fixed income instruments, or a combination of both. 

8 ‘‘(5) SEPARATION OF ASSETS.—The assets of 

9 the trust will not be commingled with other property 

10 except in a common trust fund or common invest11 ment fund. 

12 ‘‘(c) INVESTMENT STANDARDS.—The trustee of a 

13 Tier III investment account shall invest amounts credited 

14 to the part B totalization account of a participant which 

15 are held in such account in accordance with standards 

16 which shall be prescribed by the Board by regulation. Such 

17 standards shall ensure that investments made available to 

18 participants by the trustee are reasonably diversified, that 

19 assets held in a Tier III investment account are nonforfeit20 able, and that the trustee complies with applicable fidu21 ciary requirements. 

22 ‘‘(d) PERIODIC REPORTS BY ACCOUNT TRUSTEE.—

23 ‘‘(1) IN GENERAL.—The trustee of a partici24 pant’s Tier III investment account shall, in accord25 ance with regulations of the Board, make periodic 
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1 reports concerning the status of the account which 

2 shall meet the requirements of this section. Each 

3 periodic report shall be furnished to the participant 

4 on at least a semiannual basis on or before the 60th 

5 day following the period for which the report is re6 quired. 

7 ‘‘(2) INFORMATION REQUIRED TO BE IN8 CLUDED.—The periodic report shall contain the fol9 lowing information for transactions occurring during 

10 the period for which the report is provided: 

11 ‘‘(A) The balance in the Tier III invest12 ment account. 

13 ‘‘(B) The rate of return for the period cov14 ered. 

15 ‘‘(C) The amount of authorized account 

16 contributions. 

17 ‘‘(D) The name and address of the trustee. 

18 ‘‘(E) Commission fees and fees for admin19 istrative expenses charged in connection with 

20 the account. 

21 ‘‘(F) Other information which may be re22 quired from time to time by the Board. 

23 The language of the report shall be written in a 

24 form so as to be understood by the average partici25 pant. 
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1 ‘‘(3) REPORTS TO BOARD.—The Board may re2 quire the periodic report to be filed with the Board 

3 at such time as the Board may specify in regulations 

4 under this section, except that at least 1 periodic re5 port filed annually with Board shall provide informa6 tion with respect to the account as of December 31 

7 preceding the date of the issuance of the report. 

8 ‘‘(4) FAILURE BY TRUSTEE TO MAKE TIMELY

9 PERIODIC REPORTS.—

10 ‘‘(A) IN GENERAL.—The trustee of a Tier 

11 III investment account shall be subject to a civil 

12 penalty of not to exceed $100 a day from the 

13 date of such trustee’s failure or refusal to fur14 nish the periodic report required to be furnished 

15 by the trustee under this subsection until the 

16 date on which such report is furnished. 

17 ‘‘(B) PENALTIES ASSESSED BY BOARD.—

18 Any civil penalty assessed by this paragraph 

19 shall be imposed by the Board and collected in 

20 a civil action. The Board may compromise the 

21 amount of any civil penalty imposed by this 

22 paragraph. The Board may waive the applica23 tion of this paragraph with respect to any fail24 ure if the Board determines that such failure is 
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1 due to reasonable cause and not to intentional 

2 disregard of rules and regulations. 

3 ‘‘(e) LUMP SUM PAYMENT TO ESTATE UPON DEATH

4 OF ACCOUNT HOLDER.—Upon the death of a participant 

5 who has an amount credited to such participant’s part B 

6 totalization account invested in a Tier III investment ac7 count, such amount shall be distributed in a lump sum 

8 distribution, under rules established by the Board—

9 ‘‘(1) in any case in which one or more bene10 ficiaries have been designated in advance, in accord11 ance with regulations which shall be prescribed by 

12 the Board, to such beneficiaries in accordance with 

13 such designation as provided in such regulations, 

14 and 

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

16 as described in paragraph (1), to the participant’s 

17 estate. 

18 ‘‘SEC. 256. RETIREMENT DISTRIBUTIONS. 

19 ‘‘(a) IN GENERAL.—Except as provided in this sec20 tion, amounts credited to a participant’s part B total21 ization account may be distributed to the participant only 

22 on and after the participant’s retirement date. Such dis23 tribution shall be in the form of—

24 ‘‘(1) an individual social security annuity meet25 ing the requirements of subsection (b), 
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•HR 4895 IH 

1 ‘‘(2) a programmed withdrawal meeting the re2 quirements of subsection (c), or 

3 ‘‘(3) a combination, meeting the requirements 

4 of subsection (d), of an individual social security an5 nuity (meeting the requirements of paragraph (2)) 

6 and a lump sum distribution. 

7 Not later than the date on which the participant attains 

8 age 62, and at any other time upon the request of the 

9 participant, the Board shall notify the participant of the 

10 most recent listing of forms of distribution approved under 

11 this section and the entitlement (if any) of the participant 

12 to such a distribution. 

13 ‘‘(b) RETIREMENT DATE.—For purposes of this sec14 tion, the term ‘retirement date’, in connection with a par15 ticipant, means the earlier of—

16 ‘‘(1) any date as of which the participant has 

17 attained retirement age (as defined in section 

18 216(l)(1)), or 

19 ‘‘(2) the date designated for distribution of the 

20 balance in the participant’s part B totalization ac21 count pursuant to section 260. 

22 ‘‘(c) PURCHASE OF ANNUITIES.—

23 ‘‘(1) IN GENERAL.—

24 ‘‘(A) SELECTION OF ANNUITY.—On the 

25 participant’s retirement date, the participant 
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•HR 4895 IH 

1 may purchase an individual social security an2 nuity selected from among the annuities ap3 proved by the Board under paragraph (2). 

4 ‘‘(B) TRANSFER OF ASSETS.—Upon the 

5 selection by a participant under subparagraph 

6 (A), the Board shall provide for the transfer of 

7 all assets credited to the participant’s part B 

8 totalization account and determined under reg9 ulations of the Board to be available for dis10 tribution to purchase the annuity selected by 

11 the individual. 

12 ‘‘(2) APPROVAL OF INDIVIDUAL SOCIAL SECU13 RITY ANNUITIES.—

14 ‘‘(A) CERTIFICATION OF ISSUERS.—

15 ‘‘(i) IN GENERAL.—The Board shall 

16 certify issuers eligible to enter into annuity 

17 contracts with participants under this sub18 section. 

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

20 desires to be certified by the Board to 

21 issue an individual social security annuity 

22 shall submit an application to the Board at 

23 such time, in such manner, and containing 

24 such information as the Board may re25 quire. 
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1 ‘‘(iii) SEPARATION FROM OTHER OP2 ERATIONS.—As a condition of certification 

3 under this subparagraph, each issuer shall 

4 maintain each individual social security an5 nuity issued by such issuer separate from 

6 all other operations of the issuer. 

7 ‘‘(iv) EXEMPTION FROM THIRD PARTY

8 CLAIMS.—Each individual social security 

9 annuity shall be exempt from any and all 

10 third party claims against the issuer. 

11 ‘‘(B) APPROVAL OF INDIVIDUAL SOCIAL

12 SECURITY ANNUITIES.—

13 ‘‘(i) IN GENERAL.—No funds may be 

14 transferred into an individual social secu15 rity annuity unless the Board has approved 

16 an application submitted under clause (ii) 

17 with respect to the annuity. 

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

19 each individual social security annuity that 

20 an issuer certified under subparagraph 

21 (A)(i) seeks to issue, such issuer shall sub22 mit an application to the Board at such 

23 time, in such manner, and containing such 

24 information as the Board may require. 
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1 ‘‘(iii) QUALIFICATIONS FOR AP2 PROVAL.—The Board may not approve an 

3 application under clause (i) unless the indi4 vidual social security annuity that is the 

5 subject of the application meets qualifica6 tions which shall be specified in regulations 

7 of the Board. Such qualifications shall in8 clude the safety and soundness of the an9 nuity, the experience and record of per10 formance of the issuer issuing the annuity, 

11 and such other factors as the Board may 

12 determine appropriate. 

13 ‘‘(d) PROGRAMMED WITHDRAWAL.—On the partici14 pant’s retirement date, the participant may elect distribu15 tion under this section of the balance credited to the par16 ticipant’s part B totalization account as provided in this 

17 subsection. Such distribution shall be in the form of a 

18 combination of—

19 ‘‘(1) equal annual or more frequent periodic in20 stallments of the principal portion of the balance 

21 over twice his or her life expectancy, and 

22 ‘‘(2) any distribution of any remaining balance 

23 in accordance with this section. 

24 ‘‘(e) COMBINATION OF LUMP SUM PAYMENT AND

25 ANNUITY.—On the participant’s retirement date, the par-
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•HR 4895 IH 

1 ticipant may elect distribution under this section of the 

2 balance credited to the participant’s part B totalization 

3 account as provided in this subsection. Such distribution 

4 shall be in the form of a combination of a lump sum pay5 ment and an annuity approved under subsection (b). Any 

6 such lump sum payment shall be limited to the extent nec7 essary to ensure that remaining funds credited to the ac8 count are sufficient to provide, through the purchase of 

9 such an annuity, a monthly payment over the life expect10 ancy of the participant (determined under reasonable ac11 tuarial assumptions) which is at least, on an annual basis, 

12 equal to 120 percent of the poverty line (as determined 

13 on such date, for an individual, under section 673(2) of 

14 the Community Services Block Grant Act (42 U.S.C. 

15 9902(2))). 

16 ‘‘(f) LUMP SUM DISTRIBUTIONS OF DE MINIMIS

17 AMOUNTS.—In any case in which, as of the date on which 

18 the participant attains retirement age (as defined in sec19 tion 216(l)(1)), a distribution under this section has not 

20 commenced, and the total amount of the assets credited 

21 to the participant’s part B totalization account is less than 

22 the minimum deposit balance (as defined in section 

23 252(c)(2)(B)), the preceding provisions of this section 

24 shall not apply, and such assets shall be distributed to the 
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•HR 4895 IH 

1 participant in a lump sum upon the request of the partici2 pant, under rules established by the Board. 

3 ‘‘(g) PROTECTION FROM ASSIGNMENT OR ALIEN4 ATION.—Payments in the form of distributions from the 

5 Tier II Investment Fund or a Tier III investment account 

6 may not be assigned or alienated. 

7 ‘‘SEC. 257. RECOGNITION BONDS. 

8 ‘‘(a) CERTIFICATION OF CREDITED WAGES AND

9 SELF-EMPLOYMENT INCOME.—Not later than July 1 fol10 lowing the effective date of an election to become a partici11 pant filed by an individual under section 259, the Commis12 sioner of Social Security shall certify to the Secretary of 

13 the Treasury whether such individual was, as of imme14 diately before such effective date, credited with wages and 

15 self-employment income under part A. 

16 ‘‘(b) ISSUANCE OF BOND.—Immediately upon receipt 

17 of certification under subsection (a) that an individual is 

18 credited with wages and self-employment income under 

19 part A, the Secretary of the Treasury shall issue a recogni20 tion bond in the name of such individual as an obligation 

21 of the United States, which shall be deposited in the Tier 

22 II Investment Fund and held in such Fund for such indi23 vidual together with such individual’s part B totalization 

24 account. The purposes for which obligations of the United 

25 States may be issued under chapter 31 of title 31, United 
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•HR 4895 IH 

1 States Code, are hereby extended to authorize the issuance 

2 of public debt obligations consisting of recognition bonds 

3 issued under this paragraph. Each such obligation shall 

4 be evidenced by a paper instrument issued by the Sec5 retary of the Treasury setting forth the terms specified 

6 in this section, and stating on its face that the obligation 

7 shall be incontestable in the hands of the bearer, that the 

8 obligation is supported by the full faith and credit of the 

9 United States, and that the United States is pledged to 

10 the payment of the obligation, in accordance with the pro11 visions of this section. 

12 ‘‘(c) CALCULATION OF FACE VALUE.—

13 ‘‘(1) IN GENERAL.—The face value of a rec14 ognition bond issued in the name of an individual 

15 under this section shall be the actuarial present 

16 value of the future monthly insurance benefits under 

17 part A to which such individual would have been en18 titled, and to which other individuals would have 

19 been entitled under part A based on such individ20 ual’s wages and self-employment income, determined 

21 under then current law but as if section 215(j) did 

22 not apply and subject to paragraph (2) of this sub23 section. 
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•HR 4895 IH 

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

2 value determined under paragraph (1) shall be de3 termined—

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

5 self-employment income credited to such indi6 vidual as of the effective date of the election re7 ferred to in subsection (a), 

8 ‘‘(B) assuming that such individual would 

9 become entitled to disability insurance benefits 

10 under section 223 (in lieu of old-age insurance 

11 benefits under section 202(a)) on the day such 

12 individual would attain retirement age (as de13 fined in section 216(l)), except that, in com14 puting average indexed monthly earnings under 

15 section 215(b), the number of such individual’s 

16 benefit computation years shall be determined 

17 without regard to any reduction in the number 

18 of elapsed years under section 215(b)(2)(A), 

19 and 

20 ‘‘(C) using reasonable actuarial assump21 tions, including reasonable current age-specific 

22 and gender-specific expected mortality rates. 

23 ‘‘(d) REDEMPTION.—A bond issued in the name of 

24 any participant under this section shall be redeemable (by 

25 the participant or other person bearing the bond after sale 
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•HR 4895 IH 

1 or resale pursuant to subsection (e)) on or after the date 

2 on which such participant would attain retirement age (as 

3 defined in section 216(l)(1)), for the amount of the face 

4 value. 

5 ‘‘(e) NEGOTIABILITY AND CREDITING OF PROCEEDS

6 TO PART B TOTALIZATION ACCOUNT.—A recognition 

7 bond issued in the name of a participant under this section 

8 shall not be taken into account in determining the amount 

9 credited to the participant’s part B totalization account. 

10 Such bond shall be fully tradable on the secondary mar11 kets under such procedures as may be provided in regula12 tions of the Board, and any amount derived by the partici13 pant from the sale of such bond shall be deposited in the 

14 Tier II Investment Fund and shall be included in the total 

15 amount credited to such participant’s part B totalization 

16 account. 

17 ‘‘SEC. 258. SUPPLEMENTAL MINIMUM BENEFIT PAYMENTS. 

18 ‘‘(a) IN GENERAL.—In any case in which—

19 ‘‘(1) a participant attains retirement age (as 

20 defined in section 216(l)(1)), 

21 ‘‘(2) as of the date such participant attains 

22 such age, no distribution from amounts credited to 

23 the participant’s part B totalization account has 

24 been made to the participant under section 260, and 
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•HR 4895 IH 

1 ‘‘(3) as of such date, the balance in the partici2 pant’s part B totalization account does not exceed 

3 the minimum annuity amount, 

4 the Board shall promptly notify the participant of the par5 ticipant’s eligibility for a supplemental minimum benefit 

6 payment under this section. The participant, upon applica7 tion to the Board filed by the participant on or after such 

8 date and in such form and manner as shall be prescribed 

9 by the Board, shall be entitled to a supplemental minimum 

10 benefit payment either to the Tier II Investment Fund (to 

11 the credit of the participant’s part B totalization account) 

12 or to the participant’s Tier III investment account, as may 

13 be specified by the participant in such application. Upon 

14 receipt of such application, the Board shall certify to the 

15 Secretary of the Treasury the amount of such payment, 

16 and such Secretary shall pay the amount of such payment 

17 to such Fund or such Tier III investment account in ac18 cordance with such certification from funds otherwise 

19 available in the general fund of the Treasury. 

20 ‘‘(b) AMOUNT OF SUPPLEMENTAL MINIMUM BEN21 EFIT PAYMENT.—The amount of a supplemental min22 imum benefit payment payable with respect to a partici23 pant under subsection (a) is the excess (if any) of—

24 ‘‘(1) the minimum annuity amount as of the 

25 date described in subsection (a), over 
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•HR 4895 IH 

1 ‘‘(2) the amount credited to the participant’s 

2 part B totalization account. 

3 ‘‘(c) MARRIED COUPLES.—In the case of any 2 par4 ticipants who are married, subsection (a) shall apply with 

5 respect to each such participant, upon the joint written 

6 request of such participants, by totalling the balances in 

7 the accounts referred to in subsection (a) of both such in8 dividuals. 

9 ‘‘(d) PROTECTION FROM ASSIGNMENT OR ALIEN10 ATION.—Any supplemental minimum benefit payment 

11 under this section may not be assigned or alienated. 

12 ‘‘(e) MINIMUM ANNUITY AMOUNT.—

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, the term ‘minimum annuity amount’ means an 

15 amount necessary to purchase, as of the date de16 scribed in subsection (a), an immediate life annuity 

17 which provides for payments which are, on an an18 nual basis, at least equal to 120 percent of the pov19 erty line (as in effect on such date, for an individual, 

20 under section 673(2) of the Community Services 

21 Block Grant Act (42 U.S.C. 9902(2))). 

22 ‘‘(2) IMMEDIATE LIFE ANNUITY.—For purposes 

23 of paragraph (1), the term ‘immediate life annuity’ 

24 means an annuity—
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•HR 4895 IH 

1 ‘‘(A) the annuity starting date (as defined 

2 in section 72(c)(4) of the Internal Revenue 

3 Code of 1986) of which commences with the 

4 first month following the date described in sub5 section (a), and 

6 ‘‘(B) which provides for a series of sub7 stantial equal annual payments over the life ex8 pectancy of the participant. 

9 ‘‘SEC. 259. ELECTION FOR PARTICIPATION. 

10 ‘‘(a) IN GENERAL.—Any individual who—

11 ‘‘(1) is not a participant (within the meaning of 

12 section 251(1)(A)), 

13 ‘‘(2) meets the requirements of clause (i) of sec14 tion 251(1)(B), 

15 ‘‘(3) has not attained retirement age (as de16 fined in section 216(l)(1)), and 

17 ‘‘(4) has not become entitled to old-age insur18 ance benefits under section 202(a), 

19 may file with the Board under this section, in such form 

20 and manner as shall be prescribed in regulations of the 

21 Board, a written form electing the status of ‘participant’ 

22 for purposes of this part. On and after the effective date 

23 of the election, such individual shall be treated as a partic24 ipant under this part. 
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•HR 4895 IH 

1 ‘‘(b) EFFECTIVE DATE OF ELECTION.—An election 

2 under this section shall take effect on January 1 of the 

3 first calendar year beginning after 60 days after the date 

4 of the filing of the election in accordance with subsection 

5 (a). 

6 ‘‘(c) IRREVOCABILITY.—Any election under this sec7 tion shall be irrevocable. 

8 ‘‘SEC. 260. EARLY DISTRIBUTION AND TERMINATION OF 

9 PARTICIPATION IN PROGRAM. 

10 ‘‘(a) IN GENERAL.—In any case in which the amount 

11 credited to a participant’s part B totalization account as 

12 of any date prior to the date on which the participant at13 tains retirement age (as defined in section 216(l)(1)) 

14 equals at least the amount necessary to purchase an im15 mediate life annuity which provides for payments which 

16 are, on an annual basis, at least equal to 120 percent of 

17 the poverty line (as in effect on such date, for an indi18 vidual, under section 673(2) of the Community Services 

19 Block Grant Act (42 U.S.C. 9902(2))), the Board shall 

20 promptly so inform the participant, and, upon application 

21 of the participant filed with the Board under this section 

22 in accordance with regulations of the Board—

23 ‘‘(1) the Board shall commence distribution 

24 under section 256 of the amount credited to such 

25 participant’s part B totalization account, and 
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•HR 4895 IH 

1 ‘‘(2) in lieu of the transfer, after the date of the 

2 commencement of such distribution, of any amount 

3 credited to such participant’s part B totalization ac4 count from the Tier I Investment Fund to the Tier 

5 II Investment Fund or a Tier III investment ac6 count, the Board shall provide for the direct pay7 ment of such amount to the participant. 

8 ‘‘(b) IMMEDIATE LIFE ANNUITY.—For purposes of 

9 subsection (a), the term ‘immediate life annuity’ means 

10 an annuity—

11 ‘‘(1) the annuity starting date (as defined in 

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

13 1986) of which commences with the first month fol14 lowing the date referred to in subsection (a), and 

15 ‘‘(2) which provides for a series of substantial 

16 equal annual payments over the life expectancy of 

17 the participant. 

18 ‘‘(c) MARRIED COUPLES.—In the case of any 2 par19 ticipants who are married, subsection (a) shall apply with 

20 respect to each such participant, upon the joint written 

21 request of such participants, by totalling the balances in 

22 the accounts referred to in subsection (a) of both such in23 dividuals. 
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•HR 4895 IH 

1 ‘‘SEC. 261. INDIVIDUAL INVESTMENT BOARD. 

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

3 executive branch of the Government an Individual Invest4 ment Board. 

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

6 of—

7 ‘‘(1) 3 members appointed by the President, of 

8 whom 1 shall be designated by the President as 

9 Chairman; and 

10 ‘‘(2) 2 members appointed by the President, of 

11 whom—

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

13 after taking into consideration the recommenda14 tion made by the Speaker of the House of Rep15 resentatives in consultation with the Minority 

16 Leader of the House of Representatives; and 

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

18 after taking into consideration the recommenda19 tion made by the Majority Leader of the Senate 

20 in consultation with the Minority Leader of the 

21 Senate. 

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

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

24 consent of the Senate. 

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

26 the Board shall have substantial experience, training, and 
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•HR 4895 IH 

1 expertise in the management of financial investments and 

2 pension benefit plans. 

3 ‘‘(e) LENGTH OF APPOINTMENTS.—

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

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

6 members first appointed under subsection (b)—

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

8 a term of 4 years; 

9 ‘‘(B) the members appointed under sub10 section (b)(2) shall be appointed for terms of 3 

11 years; and 

12 ‘‘(C) the remaining members shall be ap13 pointed for terms of 2 years. 

14 ‘‘(2) VACANCIES.—

15 ‘‘(A) IN GENERAL.—A vacancy on the 

16 Board shall be filled in the manner in which the 

17 original appointment was made and shall be 

18 subject to any conditions that applied with re19 spect to the original appointment. 

20 ‘‘(B) COMPLETION OF TERM.—An indi21 vidual chosen to fill a vacancy shall be ap22 pointed for the unexpired term of the member 

23 replaced. 
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1 ‘‘(3) EXPIRATION.—The term of any member 

2 shall not expire before the date on which the mem3 ber’s successor takes office. 

4 ‘‘(f) DUTIES.—The Board shall—

5 ‘‘(1) administer the program established under 

6 this part; 

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

8 management of the Tier I Investment Fund, the 

9 Tier II Investment Fund, and Tier III investment 

10 accounts, including policies applicable to the asset 

11 managers with responsibility for managing the in12 vestment of individual investment account balances, 

13 and for the management and operation of individual 

14 social security annuities purchased with Tier II In15 vestment Fund assets, which shall provide for—

16 ‘‘(A) prudent investments suitable for ac17 cumulating funds for payment of retirement in18 come; 

19 ‘‘(B) sound management practices; and 

20 ‘‘(C) low administrative costs; 

21 ‘‘(3) review the performance of investments 

22 made for the Tier I Investment Fund and the Tier 

23 II Investment Fund; 
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•HR 4895 IH 

1 ‘‘(4) review the management and operation of 

2 individual social security annuities purchased with 

3 Tier II Investment Fund assets; 

4 ‘‘(5) review the performance of investments 

5 made under Tier III investment accounts; 

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

7 Board; and 

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

9 part 4 of subtitle B of title I of the Employee Re10 tirement Income Security Act of 1974 (relating to fi11 duciary responsibility) in connection with any exer12 cise of discretion in connection with the assets of the 

13 Tier I Investment Fund or the Tier II Investment 

14 Fund. 

15 ‘‘(g) ADMINISTRATIVE PROVISIONS.—

16 ‘‘(1) IN GENERAL.—The Board may—

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

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

19 direct the Executive Director to take such ac20 tion as the Board considers appropriate to 

21 carry out the provisions of this part and the 

22 policies of the Board in accordance with delega23 tions under this part; 
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•HR 4895 IH 

1 ‘‘(C) upon the concurring votes of 4 mem2 bers, remove the Executive Director from office 

3 for good cause shown; 

4 ‘‘(D) provide to the Executive Director 

5 such resources as are necessary to carry out the 

6 duties of the Executive Director; and 

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

8 necessary to carry out the functions of the 

9 Board. 

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

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

12 month; and 

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

14 Chairman. 

15 ‘‘(3) EXERCISE OF POWERS.—

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

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

18 functions and exercise the powers of the Board 

19 on a majority vote of a quorum of the Board. 

20 Three members of the Board shall constitute a 

21 quorum for the transaction of business. 

22 ‘‘(B) VACANCIES.—A vacancy on the 

23 Board shall not impair the authority of a 

24 quorum of the Board to perform the functions 

25 and exercise the powers of the Board. 
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•HR 4895 IH 

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

2 Board may not direct any person to invest or to 

3 cause to be invested any sums in the Tier II Invest4 ment Fund or any Tier III investment account in a 

5 specific asset or to dispose of or cause to be disposed 

6 of any specific asset of such Fund or any such ac7 count. 

8 ‘‘(h) COMPENSATION.—

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

10 who is not an officer or employee of the Federal 

11 Government shall be compensated at the daily rate 

12 of basic pay for level IV of the Executive Schedule 

13 for each day during which such member is engaged 

14 in performing a function of the Board. 

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

16 be paid travel, per diem, and other necessary ex17 penses under subchapter I of chapter 57 of title 5, 

18 United States Code, while traveling away from such 

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

20 performance of the duties of the Board. 

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

22 under this subsection shall be paid from the Tier I 

23 Investment Fund or the Tier II Investment Fund, 

24 as determined appropriate by the Board. 
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•HR 4895 IH 

1 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem2 bers of the Board shall discharge their responsibilities 

3 solely in the interest of the participants and their bene4 ficiaries under this part. 

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

6 shall annually engage an independent qualified public ac7 countant to audit the activities of the Board. 

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

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

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

11 an annual budget of the expenses and other items relating 

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

13 in the budget required to be transmitted to Congress 

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

15 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA16 TIONS.—The Board may submit to the President, and, at 

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

18 any legislative recommendations of the Board relating to 

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

20 of law. 

21 ‘‘SEC. 262. EXECUTIVE DIRECTOR OF THE INDIVIDUAL IN22 VESTMENT BOARD. 

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

24 Board shall appoint, without regard to the provisions of 

25 law governing appointments in the competitive service, an 
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•HR 4895 IH 

1 Executive Director by action agreed to by a majority of 

2 the members of the Board. 

3 ‘‘(b) DUTIES.—The Executive Director shall, as de4 termined appropriate by the Board—

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

6 Board; 

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

8 Fund and the Tier II Investment Fund in accord9 ance with the investment policies and other policies 

10 established by the Board; 

11 ‘‘(3) administer the provisions of this part re12 lating to the Tier I Investment Fund and the Tier 

13 II Investment Fund; and 

14 ‘‘(4) prescribe such regulations (other than reg15 ulations relating to fiduciary responsibilities) as may 

16 be necessary for the administration of this part re17 lating to the Tier I Investment Fund and the Tier 

18 II Investment Fund. 

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

20 Director may, within the scope of the duties of the Execu21 tive Director as determined by the Board—

22 ‘‘(1) appoint such personnel as may be nec23 essary to carry out the provisions of this part relat24 ing to the Tier I Investment Fund and the Tier II 

25 Investment Fund; 
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•HR 4895 IH 

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

2 the services of experts and consultants under section 

3 3109 of title 5, United States Code; 

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

5 the United States Postal Service, or the Postal Rate 

6 Commission any information necessary to carry out 

7 the provisions of this part and the policies of the 

8 Board relating to the Tier I Investment Fund and 

9 the Tier II Investment Fund; 

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

11 Tier I Investment Fund and the Tier II Investment 

12 Fund as the Executive Director determines, in ac13 cordance with regulations of the Board, are nec14 essary to carry out the provisions of this part and 

15 the policies of the Board; 

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

17 expenses of individuals appointed under paragraphs 

18 (1), (2), and (6) from the Tier I Investment Fund 

19 or the Tier II Investment Fund, in accordance with 

20 regulations of the Board; 

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

22 employed intermittently in the Government service 

23 and reimburse such individuals for travel expenses, 

24 authorized by section 5703 of title 5, United States 
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1 Code, including per diem as authorized by section 

2 5702 of such title; 

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

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

5 Executive Director’s functions to such employees 

6 under the Board as the Executive Director may des7 ignate and authorize such successive redelegations of 

8 such functions to such employees under the Board 

9 as the Executive Director may consider to be nec10 essary or appropriate; and 

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

12 to carry out the functions of the Executive Direc13 tor.’’. 

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

15 this section shall apply with respect to wages paid after 

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

17 date and self-employment income for taxable years begin18 ning after such date. 

19 SEC. 3. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY 

20 INVESTMENT PROGRAM. 

21 (a) TAXATION WITH RESPECT TO ELEMENTS OF

22 THE PROGRAM.—

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

24 of the Internal Revenue Code of 1986 (relating to 
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1 exempt organizations) is amended by adding at the 

2 end the following new part: 

3 ‘‘PART IX—INDIVIDUAL SOCIAL SECURITY 

4 INVESTMENT PROGRAM

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

5 ‘‘SEC. 530A. INDIVIDUAL SOCIAL SECURITY INVESTMENT 

6 PROGRAM. 

7 ‘‘(a) GENERAL RULE.—Any fund created, account 

8 established, or annuity under part B of title II of the So9 cial Security Act is exempt from taxation under this sub10 title. Notwithstanding the preceding sentence, any such 

11 fund or account is subject to the taxes imposed by section 

12 511 (relating to imposition of tax on unrelated business 

13 income of charitable, etc. organizations). 

14 ‘‘(b) RECOGNITION BONDS.—Gross income shall not 

15 include—

16 ‘‘(1) the value of a recognition bond issued to 

17 a participant under section 257(b) of the Social Se18 curity Act which is deposited in the Tier II Invest19 ment Fund and held for such participant under such 

20 section, 

21 ‘‘(2) proceeds from the sale of a recognition 

22 bond of a participant under section 257(e) of the 

23 Social Security Act which are deposited in the Tier 
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1 II Investment Fund and held for such participant 

2 under section 257(b) of such Act, and 

3 ‘‘(3) proceeds from the redemption of a recogni4 tion bond of a participant under section 257(d) of 

5 the Social Security Act deposited in the Tier II In6 vestment Fund to the credit of such participant’s 

7 part B totalization account under part B of title II 

8 of such Act. 

9 For purposes of this subsection, the term ‘Tier II Invest10 ment Fund’ has the meaning given such term by section 

11 251(6) of the Social Security Act. 

12 ‘‘(c) DISTRIBUTIONS.—A distribution from any fund 

13 or account, or any annuity payment, under part B of title 

14 II of the Social Security Act shall not be included in the 

15 gross income of the distributee or payee.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 86(d)(1)(A) of such Code is amended by inserting 

18 ‘‘part A of’’ after ‘‘under’’. 

19 (3) CLERICAL AMENDMENT.—The table of 

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

21 amended by adding after the item relating to part 

22 VIII the following new item:

‘‘PART IX. INDIVIDUAL SOCIAL SECURITY INVESTMENT PROGRAM’’.

23 (4) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to taxable years begin25 ning after December 31, 2004. 
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1 (b) EXCLUSION OF INDIVIDUAL INVESTMENT PRO2 GRAM PARTICIPANTS FROM INSURANCE BENEFITS.—Sec3 tion 215 of the Social Security Act (42 U.S.C. 415) is 

4 amended by adding at the end the following new sub5 section: 

6 ‘‘Exclusion of Individual Investment Program 

7 Participants 

8 ‘‘(j)(1) Except as provided in paragraph (3), a partic9 ipant (as defined in section 251(1)) in the Individual So10 cial Security Investment Program under part B shall not 

11 be credited with wages or self-employment income under 

12 this part. 

13 ‘‘(2) In the case of an individual who becomes a par14 ticipant under part B pursuant to an election filed under 

15 section 259, paragraph (1) shall apply with respect to 

16 wages paid in calendar years beginning on or after the 

17 effective date of the election and with respect to self-em18 ployment income derived in taxable years ending after 

19 such date. 

20 ‘‘(3) Paragraph (1) shall not apply in connection with 

21 the determination of any such participant’s entitlement to 

22 disability insurance benefits under section 223, the deter23 mination of such participant’s primary insurance amount 

24 in connection with such entitlement, and the determina-
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1 tion during such entitlement of benefits based on such 

2 participant’s wages and self-employment income.’’. 

3 SEC. 4. CPI-INDEXED BENEFITS FOR PART A BENE4 FICIARIES OTHER THAN DISABILITY BENE5 FICIARIES. 

6 (a) COMPUTATION OF BEND POINTS.—Section 

7 215(a)(1)(B) of the Social Security Act (42 U.S.C. 

8 415(a)(1)(B)) is amended—

9 (1) by redesignating clause (iii) as clause (vi); 

10 (2) in clause (ii), by striking ‘‘For individuals’’ 

11 and inserting ‘‘Subject to clause (iii), for individ12 uals’’; 

13 (3) by inserting after clause (ii) the following 

14 new clauses: 

15 ‘‘(iii) For individuals who initially become eligible for 

16 old-age insurance benefits, or who die (before becoming 

17 eligible for such benefits), in any calendar year after 2012, 

18 each of the amounts so established under the preceding 

19 provisions of this subparagraph shall be equal to the prod20 uct derived by multiplying such amount (as determined 

21 before the application of this clause) by the quotient de22 rived by dividing—

23 ‘‘(I) the applicable change in the CPI for the 

24 first of the 2 preceding calendar years, by 
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1 ‘‘(II) applicable change in the national average 

2 wage index for the first of the 2 preceding calendar 

3 years. 

4 ‘‘(iv) For purposes of clause (iii)(I), the term ‘appli5 cable change in the CPI’ for a calendar year means the 

6 excess of—

7 ‘‘(I) the arithmetical mean of the Consumer 

8 Price Index for Urban Wage Earners and Clerical 

9 Workers (issued by the Bureau of Labor Statistics) 

10 for the 12 months in such calendar year, over 

11 ‘‘(II) the arithmetical mean of such Consumer 

12 Price Index for the 12 months in calendar year 

13 2011. 

14 ‘‘(v) For purposes of clause (iii)(II), the term ‘appli15 cable change in the national average wage index’ for a cal16 endar year means the excess of—

17 ‘‘(I) the national average wage index (as de18 fined in section 209(k)(1)) for such calendar year, 

19 over 

20 ‘‘(II) the national average wage index (as so de21 fined) for calendar year 2011.’’; and 

22 (4) in clause (vi) (as redesignated), by striking 

23 ‘‘under clause (ii)’’ and inserting ‘‘under the pre24 ceding provisions of this subparagraph’’. 
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1 (b) SUBSTITUTION OF CPI FOR NATIONAL AVERAGE

2 WAGE INDEX IN COMPUTING AVERAGE INDEXED MONTH3 LY EARNINGS.—

4 (1) IN GENERAL.—Section 215(b)(3) of such 

5 Act (42 U.S.C. 415(b)(3)) is amended—

6 (A) in subparagraph (A)(ii)(I), by striking 

7 ‘‘national average wage index (as defined in sec8 tion 209(k)(1))’’ and inserting ‘‘national aver9 age wage index (as defined in section 

10 209(k)(1)) (for determinations of disability in11 surance benefits and other benefits based on 

12 the wages and self-employment income of an in13 dividual entitled to disability insurance benefits) 

14 or the consumer price index (for determinations 

15 of other benefits)’’; 

16 (B) in subparagraph (A)(ii)(II), by striking 

17 ‘‘national average wage index (as so defined)’’ 

18 and inserting ‘‘national average wage index (as 

19 so defined) (for determinations of disability in20 surance benefits and other benefits based on 

21 the wages and self-employment income of an in22 dividual entitled to disability insurance benefits) 

23 or the consumer price index (for determinations 

24 of other benefits)’’; 
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1 (C) by redesignating subparagraph (B) as 

2 subparagraph (C); and 

3 (D) by inserting after subparagraph (A) 

4 the following new subparagraph: 

5 ‘‘(B) For purposes of this paragraph, the term ‘con6 sumer price index’ for a calendar year means the arithmet7 ical mean of the Consumer Price Index for Urban Wage 

8 Earners and Clerical Workers (issued by the Bureau of 

9 Labor Statistics) for the 12 months in such calendar 

10 year.’’. 

11 (2) EFFECTIVE DATE.—The amendments made 

12 by this subsection shall apply with respect to the av13 erage indexed monthly earnings of individuals at14 taining age 62, or dying before attaining such age, 

15 on or after January 1, 2012. 

16 SEC. 5. MAINTENANCE OF ADEQUATE BALANCES IN THE 

17 SOCIAL SECURITY TRUST FUNDS. 

18 (a) IN GENERAL.—Section 201 of the Social Security 

19 Act (42 U.S.C. 401) is amended by adding at the end the 

20 following new subsection: 

21 ‘‘(n) In addition to amounts otherwise appropriated 

22 under the preceding provisions of this section to the Trust 

23 Funds established under this section, there is hereby ap24 propriated for each fiscal year to each of such Trust 

25 Funds, from amounts in the general fund of the Treasury 
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1 not otherwise appropriated, such sums as may be nec2 essary from time to time to maintain the balance ratio 

3 (as defined in section 709(b)) of such Trust Fund, for the 

4 calendar year commencing during such fiscal year, at not 

5 less than 100 percent. The sums to be appropriated under 

6 the preceding sentence shall be determined by the Com7 missioner of Social Security and certified by the Commis8 sioner to each House of the Congress not later than Octo9 ber 1 of such fiscal year. In making such determination 

10 and certification, the Commissioner shall use the inter11 mediate actuarial assumptions used by the Board of 

12 Trustees of the Trust Funds in its most recent annual 

13 report to the Congress prepared pursuant to subsection 

14 (c)(2). The Commissioner shall also transmit a copy of 

15 any such certification to the Secretary of the Treasury, 

16 and upon receipt thereof, such Secretary shall promptly 

17 take appropriate actions in accordance with the certifi18 cation.’’. 

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

20 subsection (a) shall apply with respect to fiscal years be21 ginning after the date of the enactment of this Act.

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