II 

109TH CONGRESS 

1ST SESSION S. 857 

To reform Social Security by establishing a Personal Social Security Savings 

Program and to provide new limitations on the Federal Budget. 

IN THE SENATE OF THE UNITED STATES 

APRIL 20, 2005 

Mr. SUNUNU (for himself, Mr. BROWNBACK, and Mr. DEMINT) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL

To reform Social Security by establishing a Personal Social 

Security Savings Program and to provide new limitations 

on the Federal Budget.

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Social Security Personal Savings Guarantee and Pros6 perity Act of 2005’’. 

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

8 as follows:

Sec. 1. Short title and table of contents. 

TITLE I—PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM 
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Sec. 101. Establishment of Personal Social Security Investment Program. 

‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

‘‘Sec. 251. Definitions. 

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

‘‘Sec. 253. Participation in Program. 

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

‘‘Sec. 255. Tier I Investment Fund. 

‘‘Sec. 256. Tier II Investment Fund. 

‘‘Sec. 257. Tier III Investment Options. 

‘‘Sec. 258. Personal social security savings annuity and other distributions. 

‘‘Sec. 259. Guarantee of promised benefits. 

‘‘Sec. 260. Personal Social Security Savings Board. 

‘‘Sec. 261. Executive Director. 

Sec. 102. Monthly insurance benefits for participating individuals. 

Sec. 103. General fund transfers to the Federal Old-Age and Survivors Insurance Trust Fund. 

Sec. 104. Tax treatment of accounts. 

Sec. 105. Self-Liquidating Social Security Transition Fund. 

Sec. 106. Budgetary treatment of social security. 

Sec. 107. Dedication of budget surpluses to saving social security. 

Sec. 108. Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings Program. 

Sec. 109. Reduction of FICA rates resulting from Personal Social Security Savings Program. 

TITLE II—PUTTING A LID ON THE FEDERAL BUDGET 

SUBTITLE A—SPENDING SAFEGUARDS ON THE GROWTH OF ENTITLEMENTS

AND MANDATORIES

Sec. 201. Spending caps on growth of entitlements and mandatories. 

Sec. 202. Exempt programs and activities. 

Sec. 203. Exceptions, limitations, and special rules. 

Sec. 204. Point of order. 

Sec. 205. Technical and conforming amendments. 

SUBTITLE B—DISCRETIONARY SPENDING LIMITS

Sec. 211. Enforcing discretionary spending limits.

1 TITLE I—PERSONAL SOCIAL SE2 CURITY INVESTMENT PRO3 GRAM 

4 SEC. 101. ESTABLISHMENT OF PERSONAL SOCIAL SECU5 RITY INVESTMENT PROGRAM. 

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

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

3 ‘‘PART A—INSURANCE BENEFITS’’; 

4 and 

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

6 ‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS 

7 PROGRAM 

8 ‘‘SEC. 251. DEFINITIONS. 

9 ‘‘For purposes of this part— 

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

11 ‘participating individual’ has the meaning provided 

12 in section 253(a). 

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

14 Personal Social Security Savings Board established 

15 under section 260. 

16 ‘‘(3) EXECUTIVE DIRECTOR.—The term ‘Execu17 tive Director’ means the Executive Director ap18 pointed under section 261. 

19 ‘‘(4) PERSONAL SOCIAL SECURITY SAVINGS AC20 COUNT.—The term ‘personal social security savings 

21 account’ means an account established under section 

22 254(a). 

23 ‘‘(5) PERSONAL SOCIAL SECURITY SAVINGS AN24 NUITY.—The term ‘personal social security savings 
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1 annuity’ means an annuity approved by the Board 

2 under section 258(b)(3). 

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

4 means the Social Security Personal Savings Fund 

5 established under section 252. 

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

7 ‘Tier I Investment Fund’ means the trust fund cre8 ated under section 255. 

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

10 ‘Tier II Investment Fund’ means the trust fund cre11 ated under section 256. 

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

13 ‘Tier III Investment Option’ means an investment 

14 option which is— 

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

16 by the Board under section 257(b); and 

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

18 257(c). 

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

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

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

22 the Treasury of the United States a trust fund to 

23 be known as the ‘Social Security Personal Savings 

24 Fund’. 
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1 ‘‘(2) AMOUNTS IN FUND.—The Savings Fund 

2 shall consist of— 

3 ‘‘(A) all amounts transferred to or depos4 ited into the Savings Fund under subsection 

5 (b), increased by the total net earnings from in6 vestments of sums in the Savings Fund attrib7 utable to such transferred or deposited 

8 amounts, and reduced by the total net losses 

9 from investments of such sums, and 

10 ‘‘(B) the reserves held in the Annuity Re11 serves Account established under section 

12 258(b)(3), increased by the total net earnings 

13 from investments of such reserves, and reduced 

14 by the total net losses from investments of such 

15 reserves. 

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

17 trustees of the Savings Fund. 

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

19 This part constitutes budget authority in advance of 

20 appropriations Acts and represents the obligation of 

21 the Board to provide for the payment of amounts 

22 provided under this part. The amounts held in the 

23 Savings Fund are appropriated and shall remain 

24 available without fiscal year limitation. 

25 ‘‘(b) DEPOSITS INTO FUND.— 
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1 ‘‘(1) IN GENERAL.—During each calendar year, 

2 the Secretary of the Treasury shall deposit into the 

3 Savings Fund, from amounts held in the Federal 

4 Old-Age and Survivors Insurance Trust Fund, a 

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

6 of the redirected social security contribution for such 

7 calendar year of each individual who is a partici8 pating individual for such calendar year. 

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

10 ‘‘(A) IN GENERAL.—The amounts depos11 ited pursuant to paragraph (1) shall be trans12 ferred in at least weekly payments from the 

13 Federal Old-Age and Survivors Insurance Trust 

14 Fund to the Savings Fund. 

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

16 amounts transferred under subparagraph (A) 

17 shall be determined on the basis of estimates, 

18 made by the Commissioner of Social Security 

19 and certified to the Secretary of the Treasury, 

20 of the wages paid to, and self-employment in21 come derived by, participating individuals. 

22 Proper adjustments shall be made in amounts 

23 subsequently transferred to the extent prior es24 timates were in excess of or were less than ac25 tual amounts transferred. 
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1 ‘‘(3) REDIRECTED SOCIAL SECURITY CONTRIBU2 TIONS.—For purposes of paragraph (1)—— 

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

4 social security contributions’ means, with re5 spect to an individual for a calendar year, the 

6 sum of— 

7 ‘‘(i) the product derived by multi8 plying— 

9 ‘‘(I) the sum of the total wages 

10 paid to, and self-employment income 

11 derived by, such individual during 

12 such calendar year, to the extent such 

13 total wages and self-employment in14 come do not exceed the base amount 

15 for such calendar year; by 

16 ‘‘(II) the applicable base percent17 age for the calendar year; and 

18 ‘‘(ii) the product derived by multi19 plying— 

20 ‘‘(I) the sum of the total wages 

21 paid to, and self-employment income 

22 derived by, such individual during 

23 such calendar year, to the extent such 

24 total wages and self-employment in25 come exceed the base amount (taking 
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1 into account the limits imposed by the 

2 contribution and benefit base under 

3 section 230); by 

4 ‘‘(II) the applicable supplemental 

5 percentage for the calendar year. 

6 ‘‘(B) BASE AMOUNT.—For purposes of 

7 subparagraph (A)— 

8 ‘‘(i) INITIAL BASE AMOUNT.—The 

9 base amount for calendar year 2006 is 

10 $10,000. 

11 ‘‘(ii) ADJUSTMENTS TO BASE

12 AMOUNT.—The base amount for any cal13 endar year after 2006 is the product de14 rived by multiplying $10,000 by a frac15 tion— 

16 ‘‘(I) the numerator of which is 

17 the national average wage index (as 

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

19 of the 2 preceding calendar years; and 

20 ‘‘(II) the denominator of which is 

21 the national average wage index (as so 

22 defined) for 2004. 

23 ‘‘(C) APPLICABLE BASE PERCENTAGE.—

24 For purposes of subparagraph (A), the applica25 ble base percentage for a calendar year is— 
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1 ‘‘(i) for calendar years after 2005 and 

2 before 2016, 5 percent; and 

3 ‘‘(ii) for calendar years after 2015, 10 

4 percent. 

5 ‘‘(D) APPLICABLE SUPPLEMENTAL PER6 CENTAGE.—For purposes of subparagraph (A), 

7 the applicable supplemental percentage for a 

8 calendar year is— 

9 ‘‘(i) for calendar years after 2005 and 

10 before 2016, 2.5 percent; and 

11 ‘‘(ii) for calendar years after 2015, 5 

12 percent. 

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

14 are appropriated and shall remain available without fiscal 

15 year limitation— 

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

17 Fund of the Savings Fund and the Tier II Invest18 ment Fund of the Savings Fund under sections 255 

19 and 256, respectively; 

20 ‘‘(2) to transfer into Tier III Investment Op21 tions under section 257; 

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

23 section 258; and 

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

25 Board in accordance with subsection (e). 
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1 ‘‘(d) LIMITATIONS ON USE OF FUNDS.— 

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

3 credited to a participating individual’s personal so4 cial security savings account may not be used for, or 

5 diverted to, purposes other than for the exclusive 

6 benefit of the participating individual or the partici7 pating individual’s beneficiaries under this part. 

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

9 Fund may not be assigned or alienated and are not 

10 subject to execution, levy, attachment, garnishment, 

11 or other legal process. 

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

13 Administrative expenses incurred to carry out this part 

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

15 conjunction with the allocation of investment earnings and 

16 losses under section 254(c). 

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

18 shall not be appropriated for any purpose other than the 

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

20 any other purpose. 

21 ‘‘SEC. 253. PARTICIPATION IN PROGRAM. 

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

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

24 individual— 
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1 ‘‘(1)(A) who receives wages in any calendar 

2 year after December 31, 2005, on which there is im3 posed a tax under section 3101(a) of the Internal 

4 Revenue Code of 1986, or 

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

6 taxable year beginning after December 31, 2005, on 

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

8 of the Internal Revenue Code of 1986, 

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

10 and 

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

12 such individual’s status as a participating individual 

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

14 and has subsequently filed an election to reinstate 

15 such individual’s status as a participating individual 

16 under subsection (c). 

17 ‘‘(b) RENUNCIATION OF PARTICIPATION.— 

18 ‘‘(1) IN GENERAL.—An individual— 

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

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

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

22 has been made from amounts credited to the in23 dividual’s personal social security savings ac24 count for the purchase of a personal social se25 curity savings annuity, 
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1 may elect, in such form and manner as shall be pre2 scribed in regulations of the Board, to renounce 

3 such individual’s status as a ‘participating indi4 vidual’ for purposes of this part. Upon completion of 

5 the procedures provided for under paragraph (2), 

6 any such individual who has made such an election 

7 shall not be treated as a participating individual 

8 under this part, effective as if such individual had 

9 never been a participating individual. The Board 

10 shall provide for immediate notification of such elec11 tion to the Commissioner of Social Security, the Sec12 retary of the Treasury, and the Executive Director. 

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

14 by regulation procedures governing the termination 

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

16 pursuant to an election under this subsection. Such 

17 procedures shall include— 

18 ‘‘(A) prompt closing of the individual’s per19 sonal social security savings account established 

20 under section 254, 

21 ‘‘(B) revocation of any benefit credit cer22 tificate assigned to the individual’s personal so23 cial security savings account under section 255, 

24 and 
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1 ‘‘(C) prompt transfer to the Federal Old2 Age and Survivors Insurance Trust Fund as 

3 general receipts of any amount held in the Tier 

4 II Investment Fund of the Savings Fund or 

5 under a Tier III Investment Option pursuant to 

6 section 256 or 257 and credited to such individ7 ual’s personal social security savings account. 

8 ‘‘(c) REINSTATEMENT OF PARTICIPATION.— 

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

10 filed an election under subsection (b) to renounce 

11 such individual’s status as a ‘participating indi12 vidual’ under this part may elect, in such form and 

13 manner as shall be prescribed in regulations of the 

14 Board, to reinstate such status. Such regulations 

15 shall provide for regular, periodic opportunities for 

16 the filing of such an election. The Board shall pro17 vide for immediate notification to the Commissioner 

18 of Social Security, the Secretary of the Treasury, 

19 and the Executive Director of such election. 

20 ‘‘(2) EFFECTIVENESS OF REINSTATEMENT.—

21 An election under this subsection shall be effective 

22 with respect to wages earned, and self-employment 

23 income derived, on the earliest date on which the 

24 Board determines is practicable to make such elec25 tion effective following the date of the filing of the 
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1 election. The individual filing the election shall be 

2 treated as becoming a participating individual under 

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

4 such individual first met the requirements of sub5 section (a) on such date. 

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

7 subsection shall be irrevocable. 

8 ‘‘SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS AC9 COUNTS. 

10 ‘‘(a) ESTABLISHMENT OF PUBLICLY ADMINISTERED

11 SYSTEM OF PERSONAL SECURITY SAVINGS ACCOUNTS.—

12 As soon as practicable after the later of January 1, 2006, 

13 or the date on which an individual becomes a participating 

14 individual under this part, the Executive Director shall es15 tablish a personal social security savings account for such 

16 individual. Such account shall be the means by which 

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

18 II Investment Fund of the Savings Fund under sections 

19 255 and 256 and amounts held under Tier III Investment 

20 Options under section 257 are credited to such individual, 

21 under procedures which shall be established by the Board 

22 by regulation. Each account of a participating individual 

23 shall be identified to such participating individual by 

24 means of the participating individual’s social security ac25 count number. 
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1 ‘‘(b) ACCOUNT BALANCE.—The balance in a partici2 pating individual’s account at any time is the sum of— 

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

4 of the Savings Fund credited to such participating 

5 individual prior to transfer of the credited amount to 

6 the Tier II Investment Fund of the Savings Fund; 

7 plus 

8 ‘‘(2) the excess of— 

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

10 Fund of the Savings Fund credited to such par11 ticipating individual’s personal social security 

12 savings account, subject to such increases and 

13 reductions as may result from allocations made 

14 to and reductions made in the account pursuant 

15 to subsection (c)(1); over 

16 ‘‘(B) amounts paid out of the Tier II In17 vestment Fund in connection with amounts 

18 credited to such participating individual’s per19 sonal social security savings account; plus 

20 ‘‘(3) the excess of— 

21 ‘‘(A) the deposits in the Tier III Invest22 ment Options credited to such participating in23 dividual’s personal social security savings ac24 count, subject to such increases and reductions 

25 as may result from amounts credited to, and re-
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1 ductions made in, the account pursuant to sub2 section (c)(2); over 

3 ‘‘(B) amounts paid out of the Tier III In4 vestment Options of such participating indi5 vidual. 

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

7 separately for each Tier III Investment Option of the par8 ticipating individual. The Board shall also hold for the 

9 participating individual any benefit credit certificate as10 signed to the participating individual’s personal social se11 curity savings account under section 255. 

12 ‘‘(c) ALLOCATION OF EARNINGS AND LOSSES.—Pur13 suant to regulations which shall be prescribed by the 

14 Board, the Executive Director shall allocate to each per15 sonal social security savings account an amount equal to 

16 the net earnings and net losses from each investment of 

17 sums— 

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

19 Tier II Investment Fund which are attributable to 

20 sums credited to such account reduced by an appro21 priate share of the administrative expenses paid out 

22 of the net earnings, as determined by the Executive 

23 Director; and 

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

25 are attributable to sums credited to such account re-
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1 duced by the administrative expenses paid out of the 

2 net earnings. 

3 ‘‘SEC. 255. TIER I INVESTMENT FUND. 

4 ‘‘(a) ESTABLISHMENT OF TIER I INVESTMENT

5 FUND.— 

6 ‘‘(1) IN GENERAL.—The Savings Fund shall in7 clude a separate fund to be known as the ‘Tier I In8 vestment Fund’. 

9 ‘‘(2) AMOUNTS IN FUND.—The Tier I Invest10 ment Fund consists of all amounts derived from 

11 payments into the Fund under section 252(b) and 

12 remaining after investment of such amounts under 

13 subsection (b), including additional amounts derived 

14 as income from such investments. 

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

16 Fund are appropriated and shall remain available 

17 without fiscal year limitation— 

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

19 participating individuals under subsection (b), 

20 ‘‘(B) to pay the administrative expenses re21 lated to the Fund, and 

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

23 under subsection (c)(2). 

24 ‘‘(b) INVESTMENT OF FUND BALANCE.—For pur25 poses of investment of the Tier I Investment Fund, the 
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1 Board shall contract with appropriate professional asset 

2 managers, recordkeepers, and custodians selected for in3 vestment of amounts held in the Fund, so as to provide 

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

5 providing broad diversification in accordance with regula6 tions of the Board, in— 

7 ‘‘(1) insurance contracts, 

8 ‘‘(2) certificates of deposit, or 

9 ‘‘(3) other instruments or obligations selected 

10 by such asset managers, 

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

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

13 period of time. 

14 ‘‘(c) SEPARATE CREDITING TO PERSONAL SOCIAL

15 SECURITY SAVINGS ACCOUNTS AND TRANSFERS TO THE

16 TIER II INVESTMENT FUND OR TO TIER III INVESTMENT

17 OPTIONS.— 

18 ‘‘(1) CREDITING TO ACCOUNTS.— 

19 ‘‘(A) IN GENERAL.—Subject to this para20 graph, the Board shall provide for prompt, sep21 arate crediting, as soon as practicable, of the 

22 amounts deposited in the Tier I Investment 

23 Fund to the personal social security savings ac24 count of each participating individual with re25 spect to the redirected social security contribu-
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1 tions (as defined in section 252(b)(3)) of such 

2 participating individual. The Board shall in3 clude in such crediting, with respect to each 

4 such individual, any increases or decreases in 

5 such amounts so as to reflect the net returns 

6 and losses from investment of the balance of 

7 the Fund prior to such crediting. For purposes 

8 of determining such increases and decreases for 

9 each calendar year, the amounts deposited into 

10 the Fund in connection with such individual 

11 during such calendar year shall be deemed to 

12 have been deposited on June 30 of such year. 

13 ‘‘(B) TREATMENT OF MARRIED PARTICI14 PATING INDIVIDUALS.—If the participating in15 dividual is married as of the end of the calendar 

16 year in which the amounts to be credited were 

17 deposited in the Tier I Investment Fund and 

18 the spouse is also a participating individual, the 

19 personal social security savings account of the 

20 participating individual and the personal social 

21 security savings account of his or her spouse 

22 shall each be credited with 50 percent of such 

23 amounts. 

24 ‘‘(2) TRANSFERS FROM THE TIER I INVEST25 MENT FUND.—In accordance with elections filed 
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1 with the Board by a participating individual, any 

2 amount credited to the personal social security sav3 ings account of such participating individual under 

4 paragraph (1) shall be promptly transferred to the 

5 Tier II Investment Fund of the Savings Fund for 

6 investment in accordance with section 256 and, to 

7 the extent available under section 257, to Tier III 

8 Investment Options in accordance with section 257. 

9 ‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER I IN10 VESTMENT FUND.—Subject to this part— 

11 ‘‘(1) until amounts deposited into the Tier I In12 vestment Fund during any calendar year are cred13 ited to personal social security savings accounts, 

14 such amounts shall be treated as the unallocated 

15 property of all participating individuals with respect 

16 to whom amounts were deposited in the Fund dur17 ing such year, jointly held in trust for such partici18 pating individuals in the Savings Fund, and 

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

20 are credited to the personal social security savings 

21 account of a participating individual shall be treated 

22 as property of the participating individual, held in 

23 trust for such participating individual in the Savings 

24 Fund. 
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1 ‘‘SEC. 256. TIER II INVESTMENT FUND. 

2 ‘‘(a) ESTABLISHMENT OF TIER II INVESTMENT

3 FUND.— 

4 ‘‘(1) IN GENERAL.—The Savings Fund shall in5 clude a separate fund to be known as the ‘Tier II 

6 Investment Fund’. 

7 ‘‘(2) AMOUNTS IN FUND.—The Tier II Invest8 ment Fund consists of all amounts derived from 

9 payments into the Fund under section 255(c)(2) and 

10 remaining after investment of such amounts under 

11 subsection (b), including additional amounts derived 

12 as income from such investments. 

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

14 Fund are appropriated and shall remain available 

15 without fiscal year limitation— 

16 ‘‘(A) to be held for investment under sub17 section (b), 

18 ‘‘(B) to pay the administrative expenses re19 lated to the Fund, and 

20 ‘‘(C) to make transfers to Tier III Invest21 ment Options under section 257 or to make 

22 payments under section 258. 

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

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

25 section 252 to the personal social security savings 

26 account of a participating individual of any amount 
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1 held in the Tier I Investment Fund for any calendar 

2 year, the Board shall transfer from the Tier I In3 vestment Fund into the Tier II Investment Fund 

4 any amount so credited to such participating individ5 ual’s account which is not transferred to a Tier III 

6 Investment Option pursuant to an election under 

7 section 257(a). 

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

9 to this paragraph, the Board shall provide for ongo10 ing separate crediting to each participating individ11 ual’s personal social security savings account of the 

12 amounts deposited in the Tier II Investment Fund 

13 with respect to such participating individual, to14 gether with any increases or decreases therein so as 

15 to reflect the net returns and losses from investment 

16 thereof while held in the Fund. 

17 ‘‘(c) INVESTMENT ACCOUNTS.— 

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

19 of the Tier II Investment Fund, the Board shall di20 vide the Fund into 6 investment accounts. The 

21 Board shall contract with appropriate investment 

22 managers, recordkeepers, and custodians selected for 

23 investment of amounts held in each investment ac24 count. Such accounts shall consist of— 

25 ‘‘(A) a Lifecycle Investment Account, 
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1 ‘‘(B) a Government Securities Investment 

2 Account, 

3 ‘‘(C) a Fixed Income Investment Account, 

4 ‘‘(D) a Common Stock Index Investment 

5 Account, 

6 ‘‘(E) a Small Capitalization Stock Index 

7 Investment Account, and 

8 ‘‘(F) an International Stock Index Invest9 ment Account. 

10 ‘‘(2) ELECTION OF INVESTMENT OPTIONS.— 

11 ‘‘(A) DEFAULT INVESTMENT ACCOUNT.—

12 Except as provided in an election in effect 

13 under subparagraph (B), amounts held in the 

14 Tier II Investment Fund shall be credited to 

15 the Lifecycle Investment Account. 

16 ‘‘(B) ELECTION OF TRANSFERS BETWEEN

17 INVESTMENT ACCOUNTS.—In any case in which 

18 a participating individual who has an amount in 

19 such individual’s personal social security sav20 ings account credited to any of the investment 

21 accounts in the Tier II Investment Fund files 

22 with the Secretary of the Treasury a written 

23 election under this subparagraph, not more fre24 quently than annually and in accordance with 

25 regulations of the Board, the Secretary of the 
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1 Treasury shall transfer the full amount so cred2 ited in such investment account from such in3 vestment account to any one of the other invest4 ment accounts in the Tier II Investment Fund 

5 (whichever is designated in such election). 

6 ‘‘(d) LIFECYLE INVESTMENT ACCOUNT.— 

7 ‘‘(1) IN GENERAL.—The investment manager, 

8 recordkeeper, and custodian selected for investment 

9 of amounts held in the Lifecyle Investment Account 

10 shall invest such amounts under regulations which 

11 shall be prescribed by the Board in a mix of equities 

12 and fixed income instruments so as to ensure, to the 

13 maximum extent practicable, that, of the total bal14 ance in the Fund credited to such account and avail15 able for investment (after allowing for administrative 

16 expenses), the percentage invested in fixed income 

17 instruments by individuals in designated cohorts, 

18 ranging in age up to those of at least retirement 

19 age, will increase in a linear progression from 0 per20 cent to 100 percent as the cohort approaches retire21 ment age. 

22 ‘‘(2) INVESTMENT IN EQUITIES.—In accordance 

23 with regulations which shall be prescribed by the 

24 Board, the Board shall establish standards which 

25 must be met by equities selected for investment in 
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1 the Lifecycle Investment Account. In conformity 

2 with such standards, the Board shall select, for pur3 poses of such investment, indices which are com4 prised of equities the aggregate market value of 

5 which is, in each case, a reasonably broad represen6 tation of companies whose shares are traded on the 

7 equity markets. Amounts invested in equities under 

8 an investment option shall be held in a portfolio de9 signed to replicate the performance of one or more 

10 of such indices. 

11 ‘‘(3) INVESTMENT IN FIXED INCOME INSTRU12 MENTS.—In accordance with regulations which shall 

13 be prescribed by the Board, the Board shall estab14 lish standards which must be met by fixed income 

15 instruments selected for investment in the Lifecycle 

16 Investment Account. Such standards shall take into 

17 account the competing considerations of risk and re18 turn. Amounts invested in fixed income instruments 

19 in an investment option shall be held in a portfolio 

20 which shall consist of a diverse range of fixed income 

21 instruments, taking into full account the opposing 

22 considerations of risk and maximization of return. 

23 ‘‘(e) GOVERNMENT SECURITIES INVESTMENT AC24 COUNT.— 
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1 ‘‘(1) IN GENERAL.—Amounts in the Govern2 ment Securities Investment Account shall be in3 vested in securities of the United States Government 

4 as provided in this subsection 

5 ‘‘(2) ISSUANCE OF SPECIAL OBLIGATIONS.—

6 The Secretary of the Treasury is authorized to issue 

7 special interest-bearing obligations of the United 

8 States for purchase by the Tier II Investment Fund 

9 for purposes of investment of amounts in the Gov10 ernment Securities Investment Account. Such obliga11 tions shall have maturities fixed with due regard to 

12 the needs of the Fund as determined by the Board, 

13 and shall bear interest at a rate equal to the average 

14 market yield (computed by the Secretary of the 

15 treasury on the basis of market quotations as of the 

16 end of the calendar month next preceding the date 

17 of issue of such obligations) on all marketable inter18 est-bearing obligations of the United States then 

19 forming a part of the public debt which are not due 

20 or callable earlier than 4 years after the end of such 

21 calendar month. Any average market yield computed 

22 under this paragraph which is not a multiple of one23 eighth of 1 percent shall be rounded to the nearest 

24 multiple of one-eighth of 1 percent. 
27

•S 857 IS

1 ‘‘(f) FIXED INCOME INVESTMENT ACCOUNT.—

2 Amounts in the Fixed Income Investment Account shall 

3 be invested in instruments or obligations which return the 

4 amount invested and pay interest, at a specified rate or 

5 rates, on that amount during a specified period of time, 

6 consisting of instruments or obligations in one or more 

7 of the following categories: 

8 ‘‘(1) insurance contracts; 

9 ‘‘(2) certificates of deposit; or 

10 ‘‘(3) other instruments or obligations selected 

11 by qualified professional asset managers. 

12 ‘‘(g) COMMON STOCK INDEX INVESTMENT AC13 COUNT.— 

14 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

15 Common Stock Investment Account shall be invested 

16 in a portfolio of common stock designed to replicate 

17 the performance of the index selected under para18 graph (2). The portfolio shall be designed such that, 

19 to the extent practicable, the percentage of the bal20 ance in the Common Stock Index Investment Ac21 count that is invested in each stock is the same as 

22 the percentage determined by dividing the aggregate 

23 market value of all shares of that stock by the ag24 gregate market value of all shares of all stocks in25 cluded in such index. 
28

•S 857 IS

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

2 select, for purposes of investment of amounts held in 

3 the Common Stock Investment Account, an index 

4 which is a commonly recognized index comprised of 

5 common stock the aggregate market value of which 

6 is a reasonably complete representation of the 

7 United States equity markets. 

8 ‘‘(h) SMALL CAPITALIZATION STOCK INDEX INVEST9 MENT ACCOUNT.— 

10 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

11 Small Capitalization Stock Index Investment Ac12 count shall be invested in a portfolio of common 

13 stock designed to replicate the performance of the 

14 index selected under paragraph (2). The portfolio 

15 shall be designed such that, to the extent prac16 ticable, the percentage of the balance in the Small 

17 Capitalization Stock Index Investment Account that 

18 is invested in each stock is the same as the percent19 age determined by dividing the aggregate market 

20 value of all shares of that stock by the aggregate 

21 market value of all shares of all stocks included in 

22 such index. 

23 ‘‘(2) SELECTION OF INDEX.—The Board shall 

24 select, for purposes of investment of amounts held in 

25 the Small Capitalization Stock Index Investment Ac-
29

•S 857 IS

1 count, an index which is a commonly recognized 

2 index comprised of common stock the aggregate 

3 market value of which represents the United States 

4 equity markets excluding the common stocks in5 cluded in the Common Stock Index Investment Ac6 count. 

7 ‘‘(i) INTERNATIONAL STOCK INDEX INVESTMENT

8 ACCOUNT.— 

9 ‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 

10 International Stock Index Investment Account shall 

11 be invested in a portfolio of stock designed to rep12 licate the performance of the index selected under 

13 paragraph (2). The portfolio shall be designed such 

14 that, to the extent practicable, the percentage of the 

15 balance in the International Stock Index Investment 

16 Account that is invested in each stock is the same 

17 as the percentage determined by dividing the aggre18 gate market value of all shares of that stock by the 

19 aggregate market value of all shares of all stocks in20 cluded in such index. 

21 ‘‘(2) SELECTION OF INDEX.—The Board shall 

22 select, for purposes of investment of amounts held in 

23 the International Stock Index Investment Account, 

24 an index which is a commonly recognized index com25 prised of common stock the aggregate market value 
30

•S 857 IS

1 of which is a reasonably complete representation of 

2 the international equity markets excluding the 

3 United States equity markets. 

4 ‘‘(j) ADDITIONAL INVESTMENT OPTIONS.—The 

5 Board may from time to time, as determined by regulation 

6 as appropriate to further the purposes of this section, 

7 shall— 

8 ‘‘(1) establish investment accounts in the Tier 

9 II Investment Fund meeting the requirements of 

10 this section in addition to those established by this 

11 section, and 

12 ‘‘(2) terminate investment accounts in the Tier 

13 II Investment Fund established pursuant to para14 graph (1). 

15 ‘‘(k) DISCLOSURE OF ADMINISTRATIVE COSTS.—The 

16 Board shall provide to each participating individual an an17 nual disclosure of the rate of administrative costs charge18 able with respect to investment in each investment account 

19 in the Tier II Investment Fund. Such disclosure shall be 

20 written in a manner calculated to be understood by the 

21 average participating individual. 

22 ‘‘(l) TREATMENT OF AMOUNTS HELD IN TIER II IN23 VESTMENT FUND.—Subject to this part, amounts depos24 ited into, and held and accounted for in, the Tier II In25 vestment Fund with respect to any participating individual 
31

•S 857 IS

1 shall continue to be treated as property of such partici2 pating individual, held in trust for such participating indi3 vidual in the Fund. 

4 ‘‘SEC. 257. TIER III INVESTMENT OPTIONS. 

5 ‘‘(a) ELECTION OF TIER III INVESTMENT OP6 TIONS.— 

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

8 may elect to direct transfers from amounts in the 

9 Savings Fund credited to the personal social security 

10 savings account of such individual into 1 or more 

11 Tier III Investment Options in accordance with 

12 paragraph (2). 

13 ‘‘(2) COMMENCEMENT OF TIER III INVESTMENT

14 OPTIONS UPON ATTAINMENT OF ELECTION THRESH15 OLD.—In any case in which, as of the end of any 

16 calendar year, the total balance in the Savings Fund 

17 credited to a participating individual’s personal so18 cial security savings account exceeds for the first 

19 time the election threshold, the Board shall, by regu20 lation, provide for an opportunity for such partici21 pating individual to make, at any time thereafter, 

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

23 Tier III Investment Options for investment of an 

24 amount in the Savings Fund credited to such ac25 count. Such election may be in lieu of or in addition 
32

•S 857 IS

1 to investment in the options available with respect to 

2 the Tier II Investment Fund of the Savings Fund. 

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

4 an election under paragraph (1), funds credited to 

5 the personal social security savings account of the 

6 participating individual and elected for transfer to 

7 one or more Tier III Investment Options shall be 

8 transferred to the Tier III Investment Options so 

9 elected for such calendar year, in percentages speci10 fied in the election by the participating individual for 

11 each applicable portfolio. 

12 ‘‘(4) ELECTION THRESHOLD.— 

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), for purposes of this subsection the 

15 term ‘election threshold’ means an amount 

16 equal to $25,000. 

17 ‘‘(B) ADJUSTMENTS.—The Board shall ad18 just annually (effective for annual reporting 

19 months occurring after December 2006) the 

20 dollar amount set forth in subparagraph (A) 

21 under procedures providing for adjustments in 

22 the same manner and to the same extent as ad23 justments are provided for under the proce24 dures used to adjust benefit amounts under sec25 tion 215(i)(2)(A), except that any amount so 
33

•S 857 IS

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

2 rounded to the nearest multiple of $1.00. 

3 ‘‘(5) SUBSEQUENT INVESTMENT OF AMOUNTS

4 HELD IN TIER III INVESTMENT OPTIONS.—Any 

5 amounts held in one or more Tier III Investment 

6 Options may be— 

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

8 more other Tier III Investment Options, subject 

9 to applicable regulations of the Board and the 

10 terms governing the affected Tier III Invest11 ment Options, and 

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

13 annually, to the Tier II Investment Fund, for 

14 deposit in the applicable investment account 

15 then selected by the participating individual 

16 under section 256. 

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

18 ‘‘(1) IN GENERAL.—The Board shall certify eli19 gible entities to offer Tier III Investment Options 

20 under this part. 

21 ‘‘(2) APPLICATION.—Any eligible entity that de22 sires to be certified by the Board to offer a Tier III 

23 Investment Option shall submit an application to the 

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

25 such information as the Board may require. 
34

•S 857 IS

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

2 Board shall not certify an eligible entity unless such 

3 eligible entity agrees to the following requirements: 

4 ‘‘(A) SEPARATE ACCOUNTING.—Each eligi5 ble entity shall, with respect to each Tier III 

6 Investment Option offered by such eligible enti7 ty to participating individuals— 

8 ‘‘(i) establish separate accounts for 

9 the contributions of each participating in10 dividual, and any earnings properly allo11 cable to the contributions, and 

12 ‘‘(ii) maintain separate recordkeeping 

13 with respect to each account. 

14 ‘‘(B) TREATMENT OF AMOUNTS HELD IN

15 FUND.—Amounts deposited into, and held and 

16 accounted for in, a Tier III Investment Option 

17 with respect to any participating individual 

18 shall be treated as property of such partici19 pating individual, held in trust for such partici20 pating individual. 

21 ‘‘(C) TRUST REQUIREMENTS.—Amounts 

22 held and accounted for with respect to a partici23 pating individual shall be held in a trust created 

24 or organized in the United States for the exclu-
35

•S 857 IS

1 sive benefit of such individual or his bene2 ficiaries. 

3 ‘‘(D) EXEMPTION FROM THIRD PARTY

4 CLAIMS.—Each Tier III Investment Option 

5 shall be exempt from any and all third party 

6 claims against the eligible entity. 

7 ‘‘(E) DISCLOSURE OF ADMINISTRATIVE

8 COSTS.—Each eligible entity offering a Tier III 

9 Investment Option under this section shall pro10 vide to each participating individual an annual 

11 disclosure of the rate of administrative costs 

12 chargeable with respect to investment in such 

13 Option. Such disclosure shall be written in a 

14 manner calculated to be understood by the av15 erage participating individual. The Board shall 

16 provide for coordination of disclosures with re17 spect to Tier III Investment Options under this 

18 subparagraph so as to assist participating indi19 viduals in comparing alternative Options based 

20 on administrative costs. 

21 ‘‘(F) REPORTING TO THE EXECUTIVE DI22 RECTOR AND THE BOARD.—Each eligible entity 

23 shall provide reports to the Executive Director 

24 and the Board at such time, in such manner, 
36

•S 857 IS

1 and containing such information as the Board 

2 may require. 

3 ‘‘(4) ELIGIBLE ENTITY DEFINED.—For pur4 poses of this section, the term ‘eligible entity’ means 

5 any investment company (as defined in section 3 of 

6 the Investment Company Act of 1940) or other per7 son that the Board determines appropriate to offer 

8 Tier III Investment Options under this part. 

9 ‘‘(c) APPROVAL OF TIER III INVESTMENT OP10 TIONS.— 

11 ‘‘(1) IN GENERAL.—No funds may be trans12 ferred into a Tier III Investment Option unless the 

13 Board has approved an application submitted under 

14 paragraph (2) with respect to the option. 

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

16 III Investment Option that an eligible entity cer17 tified under subsection (b)(1) seeks to offer, such 

18 entity shall submit an application to the Board at 

19 such time, in such manner, and containing such in20 formation as the Board may require. 

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

22 Board may not approve an application submitted 

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

24 Investment Option unless the following requirements 

25 are met: 
37

•S 857 IS

1 ‘‘(A) OPTION MUST BE OFFERED BY CER2 TIFIED ELIGIBLE ENTITY.—The Tier III In3 vestment Option is offered by an eligible entity 

4 certified under subsection (b). 

5 ‘‘(B) OPTION MUST MEET QUALITY FAC6 TORS.— 

7 ‘‘(i) IN GENERAL.—The Tier III In8 vestment Option meets qualifications which 

9 shall be prescribed by the Board relating 

10 to the quality factors described in clause 

11 (ii). 

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

13 factors described in this clause are— 

14 ‘‘(I) the safety and soundness of 

15 the Tier III Investment Option’s pro16 posed investment policy; 

17 ‘‘(II) the experience and record 

18 of performance of the proposed invest19 ment option, if any; 

20 ‘‘(III) the experience and record 

21 of performance of the entity issuing or 

22 offering such option; and 

23 ‘‘(IV) such other factors as the 

24 Board may determine appropriate. 
38

•S 857 IS

1 ‘‘(d) CONSIDERATIONS FOR CERTIFICATION AND AP2 PROVAL.—In determining whether to certify an eligible en3 tity under subsection (b) or to approve a Tier III Invest4 ment Option under subsection (c), the Board shall— 

5 ‘‘(1) act in the best interests of the partici6 pating individuals; 

7 ‘‘(2) base its determination solely on consider8 ations of balancing safety and soundness of the Tier 

9 III Investment Option with the maximization of re10 turns of such option; and 

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

12 entity or option on political or other extraneous con13 siderations. 

14 ‘‘(e) SPONSORSHIP OF TIER III INVESTMENT OP15 TIONS BY MEMBERSHIP AND LABOR ORGANIZATIONS.— 

16 ‘‘(1) IN GENERAL.—A membership or labor or17 ganization (as defined by the Board) may sponsor 

18 Tier III Investment Options under contracts with el19 igible entities certified under subsection (b) who 

20 shall administer the investment option if such invest21 ment option is approved by the Board under sub22 section (c). 

23 ‘‘(2) LIMITATION TO MEMBERSHIP.—A mem24 bership or labor organization (as so defined) may 

25 limit to the members of such organization participa-
39

•S 857 IS

1 tion in a Tier III Investment Option sponsored by 

2 such organization. 

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

4 death of a participating individual, the amount of any as5 sets held under a Tier III Investment Option credited to 

6 the personal social security savings account of such indi7 vidual shall be distributed in accordance with section 

8 258(e). 

9 ‘‘SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY 

10 AND OTHER DISTRIBUTIONS. 

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

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

13 a participating individual from amounts credited to the 

14 personal social security savings account of such individual 

15 only on or after the earliest of— 

16 ‘‘(1) the date the participating individual at17 tains retirement age (as defined in section 216(l)(1)) 

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

19 (as defined in section 216(l)(2)); or 

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

21 the participating individual’s personal social security 

22 savings account is sufficient to purchase a personal 

23 social security savings annuity with a monthly ben24 efit that is at least equal to the minimum annuity 
40

•S 857 IS

1 payment amount (as defined in subsection 

2 (b)(4)(C)(iii)). 

3 ‘‘(b) PERSONAL SOCIAL SECURITY SAVINGS ANNU4 ITIES.— 

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

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

7 the Board shall notify each participating individual 

8 of— 

9 ‘‘(A) the most recent listing of personal so10 cial security savings annuities offered by the 

11 Annuity Issuance Authority under paragraph 

12 (2); and 

13 ‘‘(B) the entitlement of the participating 

14 individual to purchase such an annuity. 

15 ‘‘(2) ANNUITY ISSUANCE AUTHORITY.—There is 

16 established in the office of the Board an agency 

17 which shall be known as the ‘Annuity Issuance Au18 thority’. The Authority shall provide, in accordance 

19 with regulations of the Board, for the issuance of 

20 personal social security savings annuities for pur21 chase from the Authority under this section and to 

22 otherwise administer the issuance of such annuities 

23 in accordance with such regulations. 

24 ‘‘(3) ANNUITY RESERVES ACCOUNT.—There is 

25 established in the Savings Fund an Annuity Re-
41

•S 857 IS

1 serves Account. The Account shall consist of all 

2 amounts received by the Authority from the pur3 chase of personal social security savings annuities 

4 under this section (plus such amounts as may be 

5 transferred to the Account under paragraph (5)(B)), 

6 increased by the total net earnings from investments 

7 of such reserves under subparagraph (A) of para8 graph (5) and reduced by the total net losses from 

9 investments of such reserves under such subpara10 graph. 

11 ‘‘(4) PURCHASE OF ANNUITIES.— 

12 ‘‘(A) SELECTION OF ANNUITY.—On a date 

13 elected by the participating individual, but no 

14 earlier than the date determined under sub15 section (a), a participating individual may pur16 chase a personal social security savings annuity 

17 selected from among the annuities offered by 

18 the Authority under paragraph (2). 

19 ‘‘(B) TRANSFER OF ASSETS.—Upon the 

20 selection of an annuity by a participating indi21 vidual under subparagraph (A), the Board shall 

22 provide for the transfer of assets, credited to 

23 the personal social security savings account of 

24 the participating individual and held in the Tier 

25 II Investment Fund or under 1 or more Tier 
42

•S 857 IS

1 III Investment Options (or any combination 

2 thereof), in a total amount sufficient to pur3 chase the annuity selected by the participating 

4 individual from annuities offered by the Author5 ity. 

6 ‘‘(C) MINIMUM ANNUITY PAYMENT

7 AMOUNT.— 

8 ‘‘(i) IN GENERAL.—Subject to sub9 paragraph (D), if, at the time a personal 

10 social security savings annuity is pur11 chased under subparagraph (A), the assets 

12 credited to the personal social security sav13 ings account of the participating individual 

14 are sufficient to purchase a personal social 

15 security savings annuity offered by the Au16 thority under paragraph (2) with a month17 ly annuity payment that is at least equal 

18 to the minimum annuity payment amount, 

19 the amount of the monthly annuity pay20 ment provided by such annuity may not be 

21 less then the minimum annuity payment 

22 amount. 

23 ‘‘(ii) CONSTRUCTION.—Nothing in 

24 this subparagraph shall be construed to 

25 prohibit a participating individual from 
43

•S 857 IS

1 using personal social security savings ac2 count assets to purchase a personal social 

3 security savings annuity offered by the Au4 thority under paragraph (2) which provides 

5 for a monthly payment in excess of the 

6 minimum amount required under clause 

7 (i). 

8 ‘‘(iii) MINIMUM ANNUITY PAYMENT

9 AMOUNT DEFINED.—For purposes of this 

10 part, the term ‘minimum annuity payment 

11 amount’ means, as of any date, an amount 

12 equal to the monthly equivalent of 150 per13 cent of the poverty line for an individual 

14 (as in effect on such date), determined 

15 under the poverty guidelines of the Depart16 ment of Health and Human Services 

17 issued under sections 652 and 673(2) of 

18 the Omnibus Budget Reconciliation Act of 

19 1981. 

20 ‘‘(iv) DEEMED TOTAL PART A MONTH21 LY BENEFIT AMOUNT.—For purposes of 

22 clause (iii), the term ‘deemed total part A 

23 monthly benefit amount’ means, with re24 spect to a participating individual, the 

25 total amount which would be payable as 
44

•S 857 IS

1 monthly insurance benefits under section 

2 202 for the month in which the partici3 pating individual attains or would attain 

4 early retirement age (as defined in section 

5 216(l)(2)), based on the participating indi6 vidual’s wages and self-employment in7 come, if the participating individual ap8 plied for old-age insurance benefits under 

9 section 202(a) during such month and all 

10 other individuals who would therefore be 

11 eligible for benefits under section 202 for 

12 such month based on such wages and self13 employment income applied for such bene14 fits during such month. 

15 ‘‘(v) ASSUMPTIONS.— 

16 ‘‘(I) EARNINGS AND LON17 GEVITY.—In the case of a partici18 pating individual with respect to 

19 whom determinations under this sub20 paragraph are made prior to the 

21 month described in clause (iv), the 

22 participating individual’s average in23 dexed monthly earnings (within the 

24 meaning of section 215(b)) for such 

25 month shall be projected, under regu-
45

•S 857 IS

1 lations which shall be prescribed by 

2 the Board, on the basis of reasonable 

3 actuarial assumptions, and the Board 

4 shall assume the survival through the 

5 end of such month of all other individ6 uals described in clause (iv). 

7 ‘‘(II) PROJECTED INVESTMENT

8 RETURNS.—For purposes of making 

9 actuarial determinations relating to 

10 the amounts of annuities offered by 

11 the Authority under this section and 

12 the amounts necessary for the pur13 chase of such annuities, the Authority 

14 shall project returns from the invest15 ment, in accordance with paragraph 

16 (5)(A), of the reserves held in the An17 nuities Reserves Account. The projec18 tion by the Authority of such returns 

19 shall be made under assumptions of 

20 long-term average returns of equities 

21 and fixed income instruments which 

22 shall be issued annually by the Board 

23 of Trustees of the Federal Old-Age 

24 and Survivors Insurance Trust Fund 

25 and the Federal Disability Insurance 
46

•S 857 IS

1 Trust Fund, based on analysis of his2 torical market returns. 

3 ‘‘(D) PURCHASE OF ANNUITIES IN THE

4 EVENT OF INSUFFICIENT ASSETS.—If a partici5 pating individual desires, or is required under 

6 subsection (f) , to purchase a personal social se7 curity savings annuity under subsection (b) on 

8 or after the date determined under subsection 

9 (a)(1) and the assets of the personal social se10 curity savings account of such individual are in11 sufficient to purchase a personal social security 

12 savings annuity that provides for a monthly 

13 payment that is at least equal to the minimum 

14 annuity payment amount (as defined in para15 graph (4)(C)(iii)), the participating individual 

16 shall purchase a personal social security savings 

17 annuity with a monthly payment equal to the 

18 maximum amount that the participating indi19 vidual’s personal social security savings account 

20 can fund, as determined in accordance with reg21 ulations which shall be prescribed by the Au22 thority, and that otherwise meets the require23 ments of this subsection (including the cost-of24 living protection requirement of subsection 

25 (c)(1)(C)), and the Authority shall provide for 
47

•S 857 IS

1 appropriate certification to the Secretary of the 

2 Treasury with respect to the participating indi3 vidual’s eligibility for guarantee payments 

4 under section 259. 

5 ‘‘(5) MAINTENANCE OF RESERVES FOR PAY6 MENT OF ANNUITIES.— 

7 ‘‘(A) INVESTMENT OF RESERVES.—For 

8 purposes of investment of reserves held in the 

9 Annuity Reserves Account, the Authority shall 

10 contract with appropriate investment managers, 

11 recordkeepers, and custodians selected by the 

12 Authority for investment of such reserves. Such 

13 reserves shall be invested under regulations 

14 which shall be prescribed by the Authority so as 

15 to ensure, to the maximum extent practicable, 

16 that, of the total balance of the reserves (after 

17 payment of administrative expenses to such 

18 managers, recordkeepers, and custodians)— 

19 ‘‘(i) 65 percent is invested in equities 

20 in the same manner and under the same 

21 standards as are provided in section 

22 256(c)(4), and 

23 ‘‘(ii) 35 percent is invested in fixed in24 come instruments in the same manner and 
48

•S 857 IS

1 under the same standards as are provided 

2 in section 256(c)(5). 

3 ‘‘(B) PROVISION FOR FULL PAYMENT OF

4 ANNUITIES.—Payment of personal social secu5 rity savings annuities in accordance with the 

6 terms of such annuities shall be made, irrespec7 tive of the sufficiency of reserves in the Annuity 

8 Reserves Fund attributable to funds obtained 

9 from the purchase of such annuities. In the 

10 event of any impending insufficiency in the An11 nuity Reserves Account for the next fiscal year, 

12 the Authority shall certify to the Secretary of 

13 the Treasury the amount of such insufficiency, 

14 and the Secretary of the Treasury shall transfer 

15 from the Federal Old-Age and Survivors Insur16 ance Trust Fund to the Annuity Reserves Ac17 count the amount of the insufficiency, as so cer18 tified, in such installments, made prior to or 

19 during such fiscal year, as are necessary to 

20 eliminate in advance such insufficiency. 

21 ‘‘(c) PERSONAL SOCIAL SECURITY SAVINGS ANNU22 ITY.— 

23 ‘‘(1) IN GENERAL.—For purposes of this part, 

24 the term ‘personal social security savings annuity’ 
49

•S 857 IS

1 means an annuity that meets the following require2 ments: 

3 ‘‘(A) The annuity starting date (as defined 

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

5 Code of 1986) commences on the first day of 

6 the month beginning after the date of the pur7 chase of the annuity. 

8 ‘‘(B) The terms of the annuity provide— 

9 ‘‘(i) for a monthly payment to the 

10 participating individual during the life of 

11 the participating individual equal to at 

12 least the minimum annuity payment 

13 amount (as defined in subsection 

14 (b)(4)(C)(iii)), or 

15 ‘‘(ii) in the case of an annuity pur16 chased under subparagraph (D) of sub17 section (b)(4), the maximum monthly pay18 ment determined under regulations pre19 scribed under such subparagraph. 

20 ‘‘(C) The terms of the annuity include pro21 cedures providing for adjustments in the 

22 amount of the monthly payments in the same 

23 manner and to the same extent as adjustments 

24 are provided for under the procedures used to 

25 adjust benefit amounts under section 
50

•S 857 IS

1 215(i)(2)(A). Nothing in this subparagraph 

2 shall be construed to preclude the terms gov3 erning such an annuity from providing for ad4 justments in the amount of monthly payments 

5 resulting in a payment for any month greater 

6 than the payment for that month that would re7 sult from adjustments required under the pre8 ceding sentence.(b)(4)(D) 

9 ‘‘(D) The terms of the annuity include 

10 such other terms and conditions as the Board 

11 requires for the protection of the annuitant. 

12 ‘‘(2) EXEMPTION FROM THIRD PARTY

13 CLAIMS.—Each personal social security savings an14 nuity shall be exempt from any and all third party 

15 claims against the issuer. 

16 ‘‘(d) RIGHT TO USE EXCESS PERSONAL SOCIAL SE17 CURITY SAVINGS ACCOUNT ASSETS.—To the extent assets 

18 credited to a participating individual’s personal social se19 curity savings account remain after the purchase of an an20 nuity under subsection (b), the remaining assets shall be 

21 payable to the participating individual at such time, in 

22 such manner, and in such amounts as the participating 

23 individual may specify, subject to subsection (f). 

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

25 participating individual dies before all amounts which are 
51

•S 857 IS

1 held in the Tier I Investment Fund or the Tier II Invest2 ment Fund of the Savings Fund or held under a Tier III 

3 Investment Option and which are credited to the personal 

4 social security savings account of the individual are other5 wise distributed in accordance with this section, such 

6 amounts shall be distributed, under regulations which 

7 shall be prescribed by the Board— 

8 ‘‘(1) in any case in which one or more bene9 ficiaries have been designated in advance, to such 

10 beneficiaries in accordance with such designation as 

11 provided in such regulations, and 

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

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

14 estate. 

15 ‘‘(f) DATE OF FINAL DISTRIBUTION.—All amounts 

16 credited to the personal social security savings account of 

17 an individual shall be distributed, by means of the pur18 chase of annuities or otherwise in a manner consistent 

19 with the requirements of this section, not later than 5 

20 years after the date the individual attains retirement age 

21 (as defined in section 216(l)). The Board shall provide by 

22 regulation for means of distribution necessary to ensure 

23 compliance with the requirements of this subsection. 
52

•S 857 IS

1 ‘‘SEC. 259. GUARANTEE OF PROMISED BENEFITS. 

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

3 the date on which a participating individual attains retire4 ment age (as defined in section 216(l)(1)), the monthly 

5 payment under a participating individual’s personal social 

6 security savings annuity is less than the minimum annuity 

7 payment amount (as defined in section 258(b)(4)(C)(iii)), 

8 adjusted as provided in section 258(c)(1)(C), the Annuity 

9 Issuance Authority shall so certify to the Secretary of the 

10 Treasury and, upon receipt of such certification, such Sec11 retary shall provide to the participating individual, from 

12 amounts in the Federal Old-Age and Survivors Insurance 

13 Trust Fund, a guaranty payment for such month to sup14 plement the personal social security savings annuity and 

15 to guarantee full payment of such individual’s monthly 

16 promised benefits. 

17 ‘‘(b) GUARANTY PAYMENT.—For purposes of sub18 section (a), a participating individual’s guaranty payment 

19 for any month is equal to the excess of— 

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

21 defined in section 258(b)(4)(C)(iii)), adjusted as 

22 provided in section 258(c)(1)(C); over 

23 ‘‘(2) the payment for such month of the per24 sonal social security savings annuity purchased by 

25 the participating individual. 
53

•S 857 IS

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

2 BENEFIT LEVELS.— 

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

4 any month ending after the date on which a partici5 pating individual attains retirement age (as defined 

6 in section 216(l)(1))— 

7 ‘‘(A) such individual’s assumed total nor8 mal retirement part A benefit for such month, 

9 exceeds 

10 ‘‘(B) the monthly payment payable for 

11 such month under such individual’s personal so12 cial security savings annuity, 

13 the Secretary of the Treasury shall pay to such indi14 vidual for such month, from amounts in the Federal 

15 Old-Age and Survivors Insurance Trust Fund, an 

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

17 amount described in subparagraph (A) over the 

18 amount described in subparagraph (B). 

19 ‘‘(2) DEFINITION.—For purposes of this sub20 section, the term ‘assumed total normal retirement 

21 part A benefit’ means, in connection with a partici22 pating individual, the total amount of monthly insur23 ance benefits under section 202 based on such indi24 vidual’s wages and self-employment income (ad-
54

•S 857 IS

1 justed by taking into account adjustments under sec2 tion 215(i)) that would have been payable if— 

3 ‘‘(A) section 202(z) did not apply, and 

4 ‘‘(B) such individual applied for old-age in5 surance benefits under section 202(a) during 

6 the month in which such individual attains re7 tirement age (as defined in section 216(l)(1)). 

8 ‘‘SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD. 

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

10 executive branch of the Government a Personal Social Se11 curity Savings Board. 

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

13 of— 

14 ‘‘(1) 3 members appointed by the President, of 

15 whom 1 shall be designated by the President as 

16 Chairman; and 

17 ‘‘(2) 2 members appointed by the President, of 

18 whom— 

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

20 after taking into consideration the recommenda21 tion made by the Speaker of the House of Rep22 resentatives in consultation with the Minority 

23 Leader of the House of Representatives; and 

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

25 after taking into consideration the recommenda-
55

•S 857 IS

1 tion made by the Majority Leader of the Senate 

2 in consultation with the Minority Leader of the 

3 Senate. 

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

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

6 consent of the Senate. 

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

8 the Board shall have substantial experience, training, and 

9 expertise in the management of financial investments and 

10 pension benefit plans. 

11 ‘‘(e) LENGTH OF APPOINTMENTS.— 

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

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

14 members first appointed under subsection (b)— 

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

16 a term of 4 years; 

17 ‘‘(B) the members appointed under sub18 section (b)(2) shall be appointed for terms of 3 

19 years; and 

20 ‘‘(C) the remaining members shall be ap21 pointed for terms of 2 years. 

22 ‘‘(2) VACANCIES.— 

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

24 Board shall be filled in the manner in which the 

25 original appointment was made and shall be 
56

•S 857 IS

1 subject to any conditions that applied with re2 spect to the original appointment. 

3 ‘‘(B) COMPLETION OF TERM.—An indi4 vidual chosen to fill a vacancy shall be ap5 pointed for the unexpired term of the member 

6 replaced. 

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

8 shall not expire before the date on which the mem9 ber’s successor takes office. 

10 ‘‘(f) DUTIES.—The Board shall— 

11 ‘‘(1) administer the program established under 

12 this part; 

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

14 management of the Savings Fund, including the 

15 Tier I Investment Fund and the Tier II Investment 

16 Fund, and amounts held under Tier III Investment 

17 Options, including policies applicable to the asset 

18 managers, recordkeepers, and custodians with re19 sponsibility for managing the investment of amounts 

20 credited to personal social security investment ac21 counts, and for the management and operation of 

22 personal social security savings annuities, which 

23 shall provide for— 
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•S 857 IS

1 ‘‘(A) prudent investments suitable for ac2 cumulating funds for payment of retirement in3 come; 

4 ‘‘(B) sound management practices; and 

5 ‘‘(C) low administrative costs; 

6 ‘‘(3) review the performance of investments 

7 made for the Tier I Investment Fund and the Tier 

8 II Investment Fund; 

9 ‘‘(4) review the performance of investments 

10 made under Tier III Investment Options; 

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

12 personal social security savings annuities; 

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

14 Board; and 

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

16 part 4 of subtitle B of title I of the Employee Re17 tirement Income Security Act of 1974 (relating to fi18 duciary responsibility) in connection with any exer19 cise of discretion in connection with the assets of the 

20 Savings Fund. 

21 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

22 ‘‘(1) IN GENERAL.—The Board may— 

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

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

25 direct the Executive Director to take such ac-
58

•S 857 IS

1 tion as the Board considers appropriate to 

2 carry out the provisions of this part and the 

3 policies of the Board in accordance with delega4 tions under this part; 

5 ‘‘(C) upon the concurring votes of 4 mem6 bers, remove the Executive Director from office 

7 for good cause shown; 

8 ‘‘(D) provide to the Executive Director 

9 such resources as are necessary to carry out the 

10 duties of the Executive Director; and 

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

12 necessary to carry out the functions of the 

13 Board. 

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

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

16 month; and 

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

18 Chairman. 

19 ‘‘(3) EXERCISE OF POWERS.— 

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

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

22 functions and exercise the powers of the Board 

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

24 Three members of the Board shall constitute a 

25 quorum for the transaction of business. 
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•S 857 IS

1 ‘‘(B) VACANCIES.—A vacancy on the 

2 Board shall not impair the authority of a 

3 quorum of the Board to perform the functions 

4 and exercise the powers of the Board. 

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

6 Board may not direct any person to invest or to 

7 cause to be invested any sums in the Tier II Invest8 ment Fund or any personal social security invest9 ment account in a specific asset or to dispose of or 

10 cause to be disposed of any specific asset of such 

11 Fund or any such account. 

12 ‘‘(h) COMPENSATION.— 

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

14 who is not an officer or employee of the Federal 

15 Government shall be compensated at the daily rate 

16 of basic pay for level IV of the Executive Schedule 

17 for each day during which such member is engaged 

18 in performing a function of the Board. 

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

20 be paid travel, per diem, and other necessary ex21 penses under subchapter I of chapter 57 of title 5, 

22 United States Code, while traveling away from such 

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

24 performance of the duties of the Board. 
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•S 857 IS

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

2 under this subsection shall be paid from the Tier I 

3 Investment Fund or the Tier II Investment Fund, 

4 as determined appropriate by the Board. 

5 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem6 bers of the Board shall discharge their responsibilities 

7 solely in the interest of the participating individuals and 

8 their beneficiaries under this part. 

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

10 shall annually engage an independent qualified public ac11 countant to audit the activities of the Board. 

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

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

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

15 an annual budget of the expenses and other items relating 

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

17 in the budget required to be transmitted to Congress 

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

19 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA20 TIONS.—The Board may submit to the President, and, at 

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

22 any legislative recommendations of the Board relating to 

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

24 of law. 
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•S 857 IS

1 ‘‘SEC. 261. EXECUTIVE DIRECTOR. 

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

3 Board shall appoint, without regard to the provisions of 

4 law governing appointments in the competitive service, an 

5 Executive Director by action agreed to by a majority of 

6 the members of the Board. 

7 ‘‘(b) DUTIES.—The Executive Director shall, as de8 termined appropriate by the Board— 

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

10 Board; 

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

12 Fund and the Tier II Investment Fund in accord13 ance with the investment policies and other policies 

14 established by the Board; 

15 ‘‘(3) administer the provisions of this part re16 lating to the Tier I Investment Fund and the Tier 

17 II Investment Fund; and 

18 ‘‘(4) prescribe such regulations (other than reg19 ulations relating to fiduciary responsibilities) as may 

20 be necessary for the administration of this part re21 lating to the Tier I Investment Fund and the Tier 

22 II Investment Fund. 

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

24 Director may, within the scope of the duties of the Execu25 tive Director as determined by the Board— 
62

•S 857 IS

1 ‘‘(1) appoint such personnel as may be nec2 essary to carry out the provisions of this part relat3 ing to the Tier I Investment Fund and the Tier II 

4 Investment Fund; 

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

6 the services of experts and consultants under section 

7 3109 of title 5, United States Code; 

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

9 the United States Postal Service, or the Postal Rate 

10 Commission any information necessary to carry out 

11 the provisions of this part and the policies of the 

12 Board relating to the Tier I Investment Fund and 

13 the Tier II Investment Fund; 

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

15 Tier I Investment Fund and the Tier II Investment 

16 Fund as the Executive Director determines, in ac17 cordance with regulations of the Board, are nec18 essary to carry out the provisions of this part and 

19 the policies of the Board; 

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

21 expenses of individuals appointed under paragraphs 

22 (1), (2), and (6) from the Tier I Investment Fund 

23 or the Tier II Investment Fund, in accordance with 

24 regulations of the Board; 
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•S 857 IS

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

2 employed intermittently in the Government service 

3 and reimburse such individuals for travel expenses, 

4 authorized by section 5703 of title 5, United States 

5 Code, including per diem as authorized by section 

6 5702 of such title; 

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

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

9 Executive Director’s functions to such employees 

10 under the Board as the Executive Director may des11 ignate and authorize such successive redelegations of 

12 such functions to such employees under the Board 

13 as the Executive Director may consider to be nec14 essary or appropriate; and 

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

16 to carry out the functions of the Executive Direc17 tor.’’. 

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

19 this section shall apply with respect to wages paid after 

20 December 31, 2005, for pay periods ending after such 

21 date and self-employment income for taxable years begin22 ning after such date. 
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•S 857 IS

1 SEC. 102. MONTHLY INSURANCE BENEFITS FOR PARTICI2 PATING INDIVIDUALS. 

3 Section 202 of the Social Security Act (42 U.S.C. 

4 402) is amended by adding at the end the following new 

5 subsection: 

6 ‘‘Benefits for Participants Under Part B 

7 ‘‘(z)(1) Notwithstanding the preceding provisions of 

8 this section— 

9 ‘‘(A) a participating individual under the Per10 sonal Social Security Savings Accounts Program 

11 under part B shall not be entitled to old-age insur12 ance benefits under subsection (a); and 

13 ‘‘(B) except as provided in paragraph (2), no 

14 individual shall be entitled to benefits under this sec15 tion on the basis of the wages and self-employment 

16 income of such a participating individual. 

17 ‘‘(2) In the case of any such participating individual 

18 who dies before such individual purchases a personal social 

19 security savings annuity under section 258, paragraph 

20 (1)(B) shall not apply with respect to child’s insurance 

21 benefits under subsection (d), widow’s insurance benefits 

22 under subsection (e), widower’s insurance benefits under 

23 subsection (f), mother’s and father’s insurance benefits 

24 under subsection (g), and parent’s insurance benefits 

25 under subsection (h).’’. 
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•S 857 IS

1 SEC. 103. GENERAL FUND TRANSFERS TO THE FEDERAL 

2 OLD-AGE AND SURVIVORS INSURANCE TRUST 

3 FUND. 

4 (a) RECAPTURE OF CORPORATE TAX ON ACCOUNT

5 YIELDS.— 

6 (1) IN GENERAL.—Section 201 of the Social 

7 Security Act (42 U.S.C. 401) is amended by adding 

8 at the end the following new subsection: 

9 ‘‘Recapture of Corporate Tax on Yields From Personal 

10 Social Security Savings Account Investments 

11 ‘‘(o) The Secretary of the Treasury, in consultation 

12 with the Personal Social Security Savings Board, shall es13 timate and transfer to the Federal Old-Age and Survivors 

14 Insurance Trust Fund within 3 months after the end of 

15 each fiscal year an amount equal to the recapture amount 

16 for such fiscal year. For purposes of the preceding sen17 tence, the recapture amount for any fiscal year shall be 

18 equal to the amount of corporate tax receipts under the 

19 Internal Revenue Code of 1986 deposited in the Treasury 

20 for that fiscal year which are attributable to personal so21 cial security savings account investments under part B of 

22 this title.’’. 

23 (2) EFFECTIVE DATE.—The amendment made 

24 by paragraph (1) shall apply with respect to fiscal 

25 years beginning after September 30, 2005. 
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•S 857 IS

1 (3) INITIAL ASSUMPTIONS.—In determining the 

2 recapture amount under section 201(o) of the Social 

3 Security Act (added by paragraph (1)) for fiscal 

4 years 2006 and 2007, the Secretary of the Treasury 

5 shall make the following assumptions concerning the 

6 total amount of taxable capital in the United States 

7 represented by the total assets held by personal so8 cial security savings accounts established under part 

9 B of title II of the Social Security Act: 

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

11 net addition to national investments. 

12 (B) Of the amount described in subpara13 graph (A), 90 percent will be invested in the 

14 United States and subject to taxation under the 

15 Internal Revenue Code of 1986. 

16 (C) Of the amount described in subpara17 graph (B), 95 percent will be subject to the 

18 Federal corporate tax. 

19 (D) The amount described in subpara20 graph (C) is subject to the statutory tax rate of 

21 35 percent (resulting in an effective corporate 

22 tax rate of 23.9 percent on the earnings of all 

23 such total assets). 

24 (b) RECAPTURE OF GOVERNMENT SAVINGS OVER

25 BASELINE.— 
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•S 857 IS

1 (1) IN GENERAL.—Section 201 of the Social 

2 Security Act (as amended by subsection (a)) is 

3 amended further by adding at the end the following 

4 new subsection: 

5 ‘‘Recapture of Government Savings Over Baseline 

6 ‘‘(p)(1) IN GENERAL.—The Secretary of the Treas7 ury, in consultation with the Personal Social Security Sav8 ings Board, shall estimate and transfer to the Federal 

9 Old-Age and Survivors Insurance Trust Fund within 3 

10 months after the end of each fiscal year an amount equal 

11 to the spending reductions amount for such fiscal year. 

12 For purposes of the preceding sentence, the spending re13 ductions amount shall be an amount equal to— 

14 ‘‘(A) for any fiscal year in the period beginning 

15 with fiscal year 2006 and ending with fiscal year 

16 2013, the excess of— 

17 ‘‘(i) 20 percent of the gross domestic prod18 uct (as determined by the Congressional Budget 

19 Office) for the fiscal year for which the deter20 mination is made; over 

21 ‘‘(ii) the product of— 

22 ‘‘(I) 20 percent of the gross domestic 

23 product (as so determined) for the fiscal 

24 year for which the determination is made; 

25 and 
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•S 857 IS

1 ‘‘(II) 0.99, factored a number of times 

2 equal to the number of fiscal years during 

3 such period which end with or before the 

4 fiscal year for which the determination is 

5 made; and 

6 ‘‘(B) for any fiscal year beginning after fiscal 

7 year 2013 and ending with the termination year— 

8 ‘‘(i) the amount determined under sub9 paragraph (A) for fiscal year 2013; increased 

10 by 

11 ‘‘(ii) the rate of growth of the gross domes12 tic product (as so determined) over the period 

13 beginning with fiscal year 2014 and ending 

14 with the fiscal year for which the determination 

15 is made. 

16 ‘‘(2) ACCOMMODATION FOR LOW OASDI BALANCE

17 RATIO.—Notwithstanding paragraph (1)(B), in any case 

18 in which the OASDI trust fund ratio is less than 125 per19 cent as of the end of the fiscal year preceding each fiscal 

20 year during any period of 1 or more fiscal years referred 

21 to in paragraph (1)(B) and preceding the termination 

22 year— 

23 ‘‘(A) the spending reductions amount for each 

24 fiscal year during such period shall be the excess 

25 of— 
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•S 857 IS

1 ‘‘(i) 20 percent of the gross domestic prod2 uct (as projected by the Department of Com3 merce) for the fiscal year for which the deter4 mination is made; over 

5 ‘‘(ii) the product of— 

6 ‘‘(I) 20 percent of the gross domestic 

7 product (as so projected) for the fiscal year 

8 for which the determination is made; and 

9 ‘‘(II) 0.99, factored a number of times 

10 equal to the number of fiscal years during 

11 such period which end with or before the 

12 fiscal year for which the determination is 

13 made plus the number of fiscal years dur14 ing the period described in paragraph 

15 (1)(A), and 

16 ‘‘(B) paragraph (1)(B) shall apply with respect 

17 to subsequent fiscal years by substituting for the 

18 reference, in paragraph (1)(B)(i), to fiscal year 2013 

19 a reference to the last fiscal year in such period. 

20 ‘‘(3) TERMINATION YEAR.—For purposes of para21 graph (1)(B), the ‘termination year’ is the first fiscal year, 

22 after fiscal year 2013— 

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

24 at least 125 percent; and 
70

•S 857 IS

1 ‘‘(B) on the last day of which there are no out2 standing transition obligations of the Self-Liqui3 dating Social Security Transition Fund under sec4 tion 262. 

5 ‘‘(4) OASDI TRUST FUND RATIO.—In paragraph 

6 (2)(A), the term ‘OASDI trust fund ratio’ means, for a 

7 fiscal year, the ratio (expressed as a percentage) of— 

8 ‘‘(A) the combined balance in the Federal Old9 Age and Survivors Insurance Trust Fund and the 

10 Federal Disability Insurance Trust Fund, as of the 

11 last day of such fiscal year; over 

12 ‘‘(B) the amount estimated by the Commis13 sioner of Social Security to be the total amount to 

14 be paid from such Trust Funds during the fiscal 

15 year following such fiscal year for all purposes au16 thorized by this section (excluding any transfer pay17 ments between such Trust Funds and reducing the 

18 amount of any transfer to the Railroad Retirement 

19 Account by the amount of any transfers into either 

20 such Trust Fund from such Account).’’. 

21 (2) EFFECTIVE DATE.—The amendment made 

22 by paragraph (1) shall apply with respect to fiscal 

23 years beginning after September 30, 2005. 

24 SEC. 104. TAX TREATMENT OF ACCOUNTS. 

25 (a) IN GENERAL.— 
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•S 857 IS

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

2 of the Internal Revenue Code of 1986 (relating to 

3 exempt organizations) is amended by adding at the 

4 end the following new part: 

5 ‘‘PART IX—PERSONAL SOCIAL SECURITY 

6 SAVINGS PROGRAM

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

7 ‘‘SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PRO8 GRAM. 

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

10 Savings Fund and each Tier III Investment Option are 

11 exempt from taxation under this subtitle. Notwithstanding 

12 the preceding sentence, sums in a personal social security 

13 savings account which are attributable to a Tier III Op14 tion shall be subject to the taxes imposed by section 511 

15 (relating to imposition of tax on unrelated business income 

16 of charitable, etc. organizations). 

17 ‘‘(b) DISTRIBUTIONS.— 

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

19 from— 

20 ‘‘(A) amounts credited to a personal social 

21 security savings account from the Social Secu22 rity Personal Savings Fund or attributable to a 

23 Tier III Investment Option, or 
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•S 857 IS

1 ‘‘(B) a personal social security savings an2 nuity, 

3 shall not be included in the gross income of the dis4 tributee. 

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

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

7 means a distribution which meets the requirements 

8 of section 258 of the Social Security Act and which 

9 is not a guaranty payment (as defined by section 

10 259 of such Act). 

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

12 ‘‘(1) PERSONAL SOCIAL SECURITY SAVINGS AC13 COUNT.—The term ‘personal social security savings 

14 account’ means an account established under section 

15 254(a) of the Social Security Act. 

16 ‘‘(2) PERSONAL SOCIAL SECURITY SAVINGS AN17 NUITY.—The term ‘personal social security savings 

18 annuity’ means an annuity approved by the Personal 

19 Social Security Savings Board under section 

20 258(b)(3) of the Social Security Act. 

21 ‘‘(3) SOCIAL SECURITY PERSONAL SAVINGS

22 FUND.—The term ‘Social Security Personal Savings 

23 Fund’ means the Savings Fund established under 

24 section 252 of the Social Security Act. 
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•S 857 IS

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

2 ‘Tier III Investment Option’ has the meaning given 

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

4 Act. 

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

6 includible in the gross estate of any individual for pur7 poses of chapter 11 by reason of an interest in the Tier 

8 I Investment Fund or the Tier II Investment Fund of the 

9 Savings Fund or held under a Tier III Investment Option 

10 and which is credited to the personal social security sav11 ings account of the individual.’’. 

12 (2) CONFORMING AMENDMENT.—Section 

13 86(d)(1)(A) of such Code is amended by inserting 

14 ‘‘part A of’’ after ‘‘under’’. 

15 (3) CLERICAL AMENDMENT.—The table of 

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

17 amended by adding after the item relating to part 

18 VIII the following new item:

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

19 (b) GUARANTY PAYMENTS.—Paragraph (1) of sec20 tion 86(d) of the Internal Revenue Act of 1986, as amend21 ed by subsection (b), is amended by striking ‘‘or’’ at the 

22 end of subparagraph (A), by striking the period and in23 serting ‘‘, or’’ at the end of subparagraph (B), and by 

24 adding at the end the following new subparagraph: 
74

•S 857 IS

1 ‘‘(C) a guaranty payment under section 

2 259(a), and a payment of an additional amount 

3 under section 259(c), of the Social Security 

4 Act.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2005. 

8 SEC. 105. SELF-LIQUIDATING SOCIAL SECURITY TRANSI9 TION FUND. 

10 Part B of title II of the Social Security Act (as added 

11 by section 101 of this Act) is amended by adding at the 

12 end the following new section: 

13 ‘‘SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSI14 TION FUND. 

15 ‘‘(a) ESTABLISHMENT.—There is hereby created on 

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

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

18 Transition Fund (in this section referred to as the ‘Transi19 tion Fund’). 

20 ‘‘(b) BOARD OF TRUSTEES.— 

21 ‘‘(1) ESTABLISHMENT.—With respect to the 

22 Transition Fund, there is hereby created a body to 

23 be known as the Board of Trustees of the Transition 

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

25 Trustees’) composed of the Commissioner of Social 
75

•S 857 IS

1 Security, the Secretary of the Treasury, and the 

2 members of the Personal Social Security Savings 

3 Board. 

4 ‘‘(2) DUTIES.—The Board of Trustees shall— 

5 ‘‘(A) provide for the issuance of obligations 

6 by the Transition Fund pursuant to subsection 

7 (c), 

8 ‘‘(B) provide for the receipt and manage9 ment of amounts paid into the Transition Fund 

10 pursuant to subsection (d), 

11 ‘‘(C) use all funds paid into the Transition 

12 Fund to redeem obligations issued under sub13 section (c) as soon as practicable, 

14 ‘‘(D) report to Congress not later than the 

15 first day of April of each year on the operation 

16 and status of the Transition Fund during the 

17 preceding fiscal year and on its expected oper18 ation and status during the current fiscal year 

19 and the next 2 fiscal years, and 

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

21 managing the Transition Fund, and recommend 

22 changes in such policies, including necessary 

23 changes in the provisions of law which govern 

24 the way in which the Transition Fund is to be 

25 managed. 
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•S 857 IS

1 ‘‘(3) MEETINGS.—The Board of Trustees shall 

2 meet not less frequently than once each calendar 

3 year. 

4 ‘‘(c) ISSUANCE OF TRANSITION FUND BONDS.— 

5 ‘‘(1) ISSUANCE.— 

6 ‘‘(A) IN GENERAL.—The purposes for 

7 which obligations of the United States may be 

8 issued under chapter 31 of title 31, United 

9 States Code, are hereby extended to authorize 

10 the issuance at par of public-debt obligations by 

11 the Transition Fund. 

12 ‘‘(B) REQUIRED ISSUANCE.—Beginning on 

13 January 1, 2006, whenever any obligation held 

14 in the Federal Old-Age and Survivors Insurance 

15 Trust Fund or the Federal Disability Insurance 

16 Trust Fund is repaid from the general fund of 

17 the Treasury to either of such Trust Funds, the 

18 Transition Fund shall issue an obligation under 

19 this subsection in an amount equal to the 

20 amount of interest and principal so repaid. 

21 ‘‘(C) TRANSFER OF PROCEEDS TO GEN22 ERAL FUND OF THE TREASURY.—Proceeds 

23 from the issuance of any obligation issued 

24 under this section shall be transferred to the 

25 general fund of the Treasury. 
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•S 857 IS

1 ‘‘(D) ACCOUNTING.—The debt owed on 

2 any obligation issued under this section shall be 

3 considered to be debt of the Transition Fund 

4 and shall be accounted for in such manner. 

5 ‘‘(2) MATURITIES AND INTEREST RATE.—Such 

6 obligations issued by the Transition Fund for pur7 chase by the public shall have maturities fixed with 

8 due regard for the needs of the Transition Fund and 

9 shall bear interest at a rate equal to the average 

10 market yield (computed by the Secretary of the 

11 Treasury on the basis of market quotations as of the 

12 end of the calendar month next preceding the date 

13 of such issue) on all marketable interest-bearing ob14 ligations of the United States then forming a part 

15 of the public debt which are not due or callable until 

16 after the expiration of 4 years from the end of such 

17 calendar month, except that where such average 

18 market yield is not a multiple of one-eighth of 1 per 

19 centum, the rate of interest on such obligations shall 

20 be the multiple of one-eighth of 1 per centum near21 est such market yield. 

22 ‘‘(3) REPAYMENT OF OBLIGATIONS.—Obliga23 tions issued under this subsection may be redeemed 

24 only by funds in the Transition Fund. 

25 ‘‘(d) DEPOSIT OF OASDI TRUST FUND SURPLUS.— 
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•S 857 IS

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

2 the Transition Fund for the fiscal year beginning in 

3 2030, and for each fiscal year thereafter, out of any 

4 moneys in the Federal Old-Age and Survivors Insur5 ance Trust Fund, amounts equivalent to the OASDI 

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

7 the preceding fiscal year. 

8 ‘‘(2) TRANSFERS BASED ON ESTIMATES.—The 

9 amounts appropriated by paragraph (1) shall be 

10 transferred from time to time from the Federal Old11 Age and Survivors Insurance Trust Fund to the 

12 Transition Fund, such amounts to be determined on 

13 the basis of estimates by the Commissioner of Social 

14 Security. Proper adjustments shall be made in 

15 amounts subsequently transferred to the extent prior 

16 estimates were in excess of or were less than such 

17 surplus. 

18 ‘‘(3) OASDI TRUST FUND SURPLUS DE19 FINED.—In this section, the term ‘OASDI trust 

20 fund surplus’ for a fiscal year means the dollar 

21 amount by which the Federal Old-Age and Survivors 

22 Insurance Trust Fund could be reduced as of the 

23 end of such fiscal year so as to result in an OASDI 

24 trust fund ratio (as defined in section 201(p)(4)) for 

25 such fiscal year equal to 125 percent. 
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•S 857 IS

1 ‘‘(4) RULE OF CONSTRUCTION.—This section 

2 shall not be construed to require redemption of obli3 gations of the Trust Fund for the purpose of mak4 ing transfers to the Transition Fund under this sec5 tion or for any other purpose other than to provide 

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

7 the Social Security Act. 

8 ‘‘(e) REDEMPTION OF OBLIGATIONS UPON DEPOSIT

9 OF FUNDS.—Obligations issued under subsection (c) may 

10 be redeemed only by funds in the Transition Fund. The 

11 Board of Trustees shall provide for the redemption of such 

12 obligations as soon as possible with funds deposited into 

13 the Transition Fund pursuant to subsection (d). 

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

15 the obligations issued under subsection (c) have been re16 deemed, any balance remaining in the Transition Fund 

17 as of such date shall be deposited in the Federal Old-Age 

18 and Survivors Insurance Trust Fund, the terms of the 

19 Board of Trustees shall end, the Transition Fund shall 

20 cease to exist, and this section shall be repealed.’’. 

21 SEC. 106. BUDGETARY TREATMENT OF SOCIAL SECURITY. 

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

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

24 ‘‘BUDGETARY TREATMENT OF SOCIAL SECURITY

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

26 other provision of law and except as provided in subsection 
80

•S 857 IS

1 (b), the receipts and disbursements of the Federal Old2 Age and Survivors Insurance Trust Fund, the Federal 

3 Disability Insurance Trust Fund, the Social Security Per4 sonal Savings Fund, and the Self-Liquidating Social Secu5 rity Transition Fund (including transfers to and from ei6 ther such Trust Fund or such Savings Fund or such Tran7 sition Fund relating to the acquisition or redemption of 

8 obligations acquired by either such Trust Fund or such 

9 Savings Fund or such Transition Fund) and the taxes im10 posed under sections 1401 and 3101 of the Internal Rev11 enue Code of 1986 shall not be counted as new budget 

12 authority, outlays, receipts, or deficit or surplus for pur13 poses of the budget of the Government as submitted by 

14 the President or the congressional budget or be reported 

15 as new budget authority, outlays, receipts, or deficit or 

16 surplus in any report of the Congressional Budget Office 

17 or any other agency or instrumentality of the Government 

18 ‘‘(b) MATTERS INCLUDED IN THE BUDGET.—Sub19 section (a) shall not apply with respect to the following: 

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

21 Treasury to the Federal Old-Age and Survivors In22 surance Trust Fund under section 201(o) (relating 

23 to recapture of corporate tax on account yields), 

24 which shall be treated as an expenditure of the Gov25 ernment; 
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•S 857 IS

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

2 Treasury to the Federal Old-Age and Survivors In3 surance Trust Fund under section 201(p) (relating 

4 to recapture of Government savings over baseline), 

5 which shall be treated as an expenditure of the Gov6 ernment; 

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

8 Treasury to the Federal Old-Age and Survivors In9 surance Trust Fund or the Federal Disability Insur10 ance Trust Fund under section 121(e) of the Social 

11 Security Amendments of 1983 (relating to appro12 priation of amounts equivalent to taxes on social se13 curity benefits) (42 U.S.C. 401 note), which shall be 

14 treated as an expenditure of the Government; and 

15 ‘‘(4) revenues from taxes imposed under chap16 ter 1 of the Internal Revenue Code of 1986, to the 

17 extent attributable to section 86 of such Code (relat18 ing to taxation of social security and tier 1 railroad 

19 retirement benefits), which shall be treated as a re20 ceipt of the Government.’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 13301 of the Budget Enforcement 

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

24 repealed. 
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•S 857 IS

1 (2) Section 405 of the Congressional Budget 

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

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

4 the Social Security Act’’ after ‘‘Notwith5 standing any other provision of law’’; and 

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

7 and all that follows through ‘‘Funds,’’ and in8 serting ‘‘section’’ . 

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

10 this section shall apply with respect to fiscal years begin11 ning on or after October 1, 2005. 

12 SEC. 107. DEDICATION OF BUDGET SURPLUSES TO SAVING 

13 SOCIAL SECURITY. 

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

15 Act (as amended by section 103 of this Act) is amended 

16 further by adding at the end the following new subsection: 

17 ‘‘Transfer of Total Budget Surpluses to Trust Fund 

18 ‘‘(q) In the case of any fiscal year for which the total 

19 amount treated as income of the Federal Government in 

20 the total budget of the United States have exceeded the 

21 total amount treated as expenditures of the Federal Gov22 ernment in the total budget of the United States (as deter23 mined by the Director of the Office of Management and 

24 Budget without regard to section 710), not later than 3 

25 months after the end of such fiscal year, the Secretary 
83

•S 857 IS

1 of the Treasury shall transfer from the general fund of 

2 the Treasury to the Federal Old-Age and Survivors Insur3 ance Trust Fund an amount equal to the lesser of— 

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

5 Trust Fund during such fiscal year to the Social Se6 curity Personal Savings Fund under section 252(b) 

7 (relating to deposit of amounts equal to redirected 

8 social security contributions), or 

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

10 treated as receipts exceeded such total amount treat11 ed as expenditures.’’. 

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

13 subsection (a) shall apply with respect to fiscal years be14 ginning after September 30, 2005. 

15 SEC. 108. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, 

16 AND DISABILITY INSURANCE PROGRAM AND 

17 THE PERSONAL SOCIAL SECURITY SAVINGS 

18 PROGRAM. 

19 Title VII of the Social Security Act is amended by 

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

21 new section: 
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•S 857 IS

1 ‘‘ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DIS2 ABILITY INSURANCE PROGRAM AND THE INDIVIDUAL

3 SOCIAL SECURITY INVESTMENT PROGRAM. 

4 ‘‘Social Security Lockbox Budget. 

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

6 Congress by the President of the budget of the United 

7 States Government, the President shall transmit to each 

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

9 the ‘Social Security Lockbox Budget’) detailing the per10 formance during the preceding fiscal year of each of the 

11 accounts established under subsection (b). Such report 

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

13 ‘‘(1) the amount of the balance of each account, 

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

15 amount of the total credits to each account for the 

16 year, and 

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

18 each category of charges and credits itemized in sub19 section (b). 

20 ‘‘Establishment of Accounts 

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

22 and disbursement of the Treasury of the United States 

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

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

25 Security Act and the Individual Social Security Invest-
85

•S 857 IS

1 ment Program under part B of such title, the Secretary 

2 of the Treasury shall establish and maintain a Social Se3 curity Part A Account, a Social Security Part B Account, 

4 and a Self-Liquidating Social Security Transition Fund 

5 Account. 

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

7 ACCOUNT

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

9 A Account shall be credited with the sum of— 

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

11 Old-Age and Survivors Insurance Trust Fund and 

12 the Federal Disability Insurance Trust Fund under 

13 section 201 (including amounts received as interest 

14 on notes and obligations purchased by the Trust 

15 Funds under section 201(d) of such Act, and exclud16 ing amounts received in redemption of such notes 

17 and obligations and amounts received by either such 

18 Trust Fund as transfers from the other such Trust 

19 Fund), and 

20 ‘‘(B) all receipts during the year by the Federal 

21 Old-Age and Survivors Insurance Trust Fund and 

22 the Federal Disability Insurance Trust Fund under 

23 section 121(e) of the Social Security Amendments of 

24 1983 (relating to appropriation of amounts equiva-
86

•S 857 IS

1 lent to taxes on social security benefits) (42 U.S.C. 

2 401 note). 

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

4 A Account shall be charged with the sum of— 

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

6 Federal Old-Age and Survivors Insurance Trust 

7 Fund and the Federal Disability Insurance Trust 

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

9 Act, 

10 ‘‘(B) all redirected social security contributions 

11 transferred during the year to the Social Security 

12 Personal Savings Fund under section 252(b), 

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

14 from the Trust Funds under part A of title II (ex15 cluding amounts expended as transfers by either 

16 such Trust Fund to the other such Trust Fund and 

17 amounts paid for the purchase of notes and obliga18 tions under section 201(d)), and 

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

20 and Survivors Insurance Trust Fund to the Self-Liq21 uidating Social Security Transition Fund under sec22 tion 262(d). 
87

•S 857 IS

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

2 Account 

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

4 B Account shall be credited with— 

5 ‘‘(A) all redirected social security contributions 

6 transferred during the year to the Personal Social 

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

8 Social Security Act, and 

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

10 Fund attributable to investment for the fiscal year, 

11 any net increase in the Tier II Investment Fund at12 tributable to investment for the fiscal year, and the 

13 total amount of any net increases in Tier III Invest14 ment Options attributable to investment for the fis15 cal year. 

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

17 B Account shall be charged with— 

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

19 fiscal year with respect to the Tier I Investment 

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

21 Investment Options, 

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

23 Fund attributable to investment for the fiscal year, 

24 any net decrease in the Tier II Investment Fund at25 tributable to investment for the fiscal year, and the 
88

•S 857 IS

1 total amount of any net decreases in Tier III Invest2 ment Options attributable to investment for the fis3 cal year, and 

4 ‘‘(C) annuity payments made during the year 

5 under section 258 from the Annuity Reserve Ac6 count in the Savings Fund. 

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

8 Security Transition Fund Account 

9 ‘‘(e)(1) For each fiscal year, the Self-Liquidating So10 cial Security Transition Account shall be credited with— 

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

12 the Federal Old-Age and Survivors Insurance Trust 

13 Fund under section 262(b), and 

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

15 year from the Trust Funds in the redemption under 

16 section 262(e) of obligations issued by the Transi17 tion fund under section 262(c). 

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

19 Security Transition Fund Account shall be charged with 

20 the total amount of obligations issued during the fiscal 

21 year by the Transition Fund under section 262(c)’’. 
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•S 857 IS

1 SEC. 109. REDUCTION OF FICA RATES RESULTING FROM 

2 PERSONAL SOCIAL SECURITY SAVINGS PRO3 GRAM. 

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

5 Internal Revenue Code of 1986 (relating to tax on employ6 ees) is amended by adding at the end the following new 

7 subsection: 

8 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS9 ABILITY INSURANCE TAX RATE.— 

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

11 a reduction year and each year thereafter, the rate 

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

13 by the reduction percentage. 

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

15 section— 

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

17 year’ means any year after the transition year 

18 in which the OASDI rate ratio exceeds 125 per19 cent. 

20 ‘‘(B) TRANSITION YEAR.—The term ‘tran21 sition year’ means the first full calendar year 

22 following the termination year (as defined in 

23 section 201(p)(3) of the Social Security Act). 

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

25 of this section, the term ‘reduction percentage’ 

26 means the excess of— 
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•S 857 IS

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

2 for the reduction year, over 

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

4 one tenth of a percent) under which the OASDI 

5 rate ratio for the reduction year would have 

6 been 125 percent if— 

7 ‘‘(i) such rate had been applicable 

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

9 during such year, and 

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

11 during such year were twice such rate. 

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

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

14 the ratio— 

15 ‘‘(A) the numerator of which is the com16 bined balance in the Old-Age and Survivors In17 surance Trust Fund and the Federal Disability 

18 Insurance Trust Fund, as of the last day of 

19 such calendar year, and 

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

21 amount paid from such Trust Funds during 

22 such calendar year for all purposes authorized 

23 by section 201 of the Social Security Act (ex24 cluding any transfer payments between such 

25 Trust Funds and reducing the amount of any 
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•S 857 IS

1 transfer to the Railroad Retirement Account by 

2 the amount of any transfers into either such 

3 Trust Fund from such Account). 

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

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

6 that such reduction would cause the rate of tax im7 posed under subsection (a) to be less than 4.95 per8 cent.’’. 

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

10 Internal Revenue Code of 1986 (relating to tax on employ11 ers) is amended by adding at the end the following new 

12 subsection: 

13 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS14 ABILITY INSURANCE TAX RATE.— 

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

16 a reduction year and each year thereafter, the rate 

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

18 by the reduction percentage. 

19 ‘‘(2) REDUCTION YEAR; REDUCTION PERCENT20 AGE.—For purposes of this section, the terms ‘re21 duction year’ and ‘reduction percentage’ have the 

22 meanings given such terms by section 3101(d). 

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

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

25 that such reduction would cause the rate of tax im-
92

•S 857 IS

1 posed under subsection (a) to be less than 4.95 per2 cent.’’. 

3 (c) SELF-EMPLOYMENT CONTRIBUTION.—Section 

4 1401 of the Internal Revenue Code of 1986 (relating to 

5 tax on self-employment income) is amended by adding at 

6 the end the following new subsection: 

7 ‘‘(d) REDUCTION IN OLD-AGE, SURVIVORS, AND DIS8 ABILITY INSURANCE TAX RATE.— 

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

10 a reduction year and each year thereafter, the rate 

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

12 by the reduction percentage. 

13 ‘‘(2) REDUCTION YEAR; REDUCTION PERCENT14 AGE.—For purposes of this section, the terms ‘re15 duction year’ and ‘reduction percentage’ have the 

16 meanings given such terms by section 3101(d). 

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

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

19 that such reduction would cause the rate of tax im20 posed under subsection (a) to be less than 9.9 per21 cent.’’. 
93

•S 857 IS

1 TITLE II—PUTTING A LID ON 

2 THE FEDERAL BUDGET 

3 Subtitle A—Spending Safeguards 

4 on the Growth of Entitlements 

5 and Mandatories 

6 SEC. 201. SPENDING CAPS ON GROWTH OF ENTITLEMENTS 

7 AND MANDATORIES. 

8 (a) CONTROL OF ENTITLEMENTS AND

9 MANDATORIES.—The Balanced Budget and Emergency 

10 Deficit Control Act of 1985 is amended by adding after 

11 section 252 the following new section: 

12 ‘‘SEC. 252A. ENFORCING CONTROLS ON DIRECT SPENDING. 

13 ‘‘(a) CAP ON GROWTH OF ENTITLEMENTS.—Effec14 tive for fiscal year 2007 and for each ensuing fiscal year, 

15 the total level of direct spending for all direct spending 

16 programs, projects, and activities (excluding social secu17 rity) for any such fiscal year shall not exceed the total 

18 level of spending for all such programs, projects, and ac19 tivities for the previous fiscal year after the direct spend20 ing for each such program, project, or activity is increased 

21 by the higher of the change in the Consumer Price Index 

22 for All Urban Consumers or the inflator (if any) applicable 

23 to that program, project, or activity and the growth in 

24 eligible population for such, project, or activity. 
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•S 857 IS

1 ‘‘(b) SEQUESTRATION.—Within 15 days after Con2 gress adjourns to end a session (other than of the second 

3 session of the One Hundred Ninth Congress), and on the 

4 same day as a sequestration (if any) under section 251, 

5 there shall be a sequestration to reduce the amount of di6 rect spending for the fiscal year beginning in the year the 

7 Congress adjourns by any amount necessary to reduce 

8 such spending to the level set forth in subsection (a) un9 less that amount is less than $250,000,000. 

10 ‘‘(c) UNIFORM REDUCTIONS; LIMITATIONS.—The 

11 amount required to be sequestered for the fiscal year 

12 under subsection (a) shall be obtained from nonexempt di13 rect spending accounts by actions taken in the following 

14 order: 

15 ‘‘(1) FIRST.—The reductions in the programs 

16 specified in section 255(a) (National Wool Act and 

17 special milk), section 255(b) (student loans), and 

18 section 255(c) (foster care and adoption assistance) 

19 shall be made. 

20 ‘‘(2) SECOND.—Any additional reductions that 

21 may be required shall be achieved by reducing each 

22 remaining nonexempt direct spending account by the 

23 uniform percentage necessary to achieve those addi24 tional reductions, except that— 
95

•S 857 IS

1 ‘‘(A) the low-income programs specified in 

2 section 255(d) shall not be reduced by more 

3 than 2 percent; 

4 ‘‘(B) the retirement and veterans benefits 

5 specified in sections 255(f), (g), and (h) shall 

6 not be reduced by more than 2 percent in the 

7 manner specified in that section; and 

8 ‘‘(C) the medicare programs shall not be 

9 reduced by more than 2 percent in the manner 

10 specified in section 255(i). 

11 The limitations set forth in subparagraphs (A), (B), 

12 and (C) shall be applied iteratively, and after each 

13 iteration the uniform percentage applicable to all 

14 other programs under this paragraph shall be in15 creased (if necessary) to a level sufficient to achieve 

16 the reductions required by this paragraph. 

17 ‘‘(d) EXCLUSION OF MEDICARE PRESCRIPTION

18 DRUG PROGRAM UNTIL FULLY OPERATIONAL.—For pur19 poses of this section with respect to the limitation under 

20 subsection (a) for a fiscal year before fiscal year 2008, 

21 direct spending programs and direct spending shall not 

22 be construed to include part D of title XVIII of the Social 

23 Security Act (or spending under part C of such title that 

24 is attributable to such part D).’’. 
96

•S 857 IS

1 (b) TABLE OF CONTENTS AMENDMENT.—The table 

2 of contents set forth in 250(c) of the Balanced Budget 

3 and Emergency Deficit Control Act of 1985 is amended 

4 by adding after the item relating to section 252 the fol5 lowing new item:

‘‘Sec. 252A. Enforcing controls on direct spending.’’.

6 SEC. 202. EXEMPT PROGRAMS AND ACTIVITIES. 

7 Section 255 of the Balanced Budget and Emergency 

8 Deficit Control Act of 1985 is amended to read as follows: 

9 ‘‘SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES. 

10 ‘‘(a) SOCIAL SECURITY BENEFITS; TIER I RAILROAD

11 RETIREMENT BENEFITS; AND CERTAIN MEDICARE BEN12 EFITS.—(1) Benefits payable under the old-age, survivors, 

13 and disability insurance program established under title 

14 II of the Social Security Act, and benefits payable under 

15 section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retire16 ment Act of 1974, shall be exempt from reduction under 

17 any order issued under this part. 

18 ‘‘(2) Payments made under part A of title XVIII (re19 lating to part A medicare hospital insurance benefits) of 

20 the Social Security Act and payments made under part 

21 C of such title (relating to the Medicare Advantage pro22 gram) insofar as they are attributable to part A of such 

23 title shall be exempt from reduction under any order 

24 issued under this part. 
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•S 857 IS

1 ‘‘(b) DESCRIPTIONS AND LISTS.—The following 

2 budget accounts or activities shall be exempt from seques3 tration: 

4 ‘‘(1) net interest; 

5 ‘‘(2) all payments to trust funds from excise 

6 taxes or other receipts or collections properly cred7 itable to those trust funds; 

8 ‘‘(3) all payments from one Federal direct 

9 spending budget account to another Federal budget 

10 account; and all intragovernmental funds including 

11 those from which funding is derived primarily from 

12 other Government accounts, except to the extent 

13 that such funds are augmented by direct appropria14 tions for the fiscal year for which the order is in ef15 fect; 

16 ‘‘(4) activities resulting from private donations, 

17 bequests, or voluntary contributions to the Govern18 ment; 

19 ‘‘(5) payments from any revolving fund or 

20 trust-revolving fund (or similar activity) that pro21 vides deposit insurance or other Government insur22 ance, Government guarantees, or any other form of 

23 contingent liability, to the extent those payments re24 sult from contractual or other legally binding com-
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•S 857 IS

1 mitments of the Government at the time of any se2 questration; 

3 ‘‘(6) credit liquidating and financing accounts; 

4 ‘‘(7) the following accounts, which largely fulfill 

5 requirements of the Constitution or otherwise make 

6 payments to which the Government is committed:

7 ‘‘Administration of Territories, Northern Mar8 iana Islands Covenant grants (14–0412–0–1–806); 

9 ‘‘Armed Forces Retirement Home Trust Fund, 

10 payment of claims (84–8930–0–7–705); 

11 ‘‘Bureau of Indian Affairs, miscellaneous pay12 ments to Indians (14–2303–0–1–452); 

13 ‘‘Bureau of Indian Affairs, miscellaneous trust 

14 funds, tribal trust funds (14–9973–0–7–999); 

15 ‘‘Claims, defense; 

16 ‘‘Claims, judgments, and relief act (20–1895–

17 0–1–806); 

18 ‘‘Compact of Free Association, economic assist19 ance pursuant to Public Law 99–658 (14–0415–0–

20 1–806); 

21 ‘‘Compensation of the President (11–0001–0–

22 1–802); 

23 ‘‘Customs Service, miscellaneous permanent ap24 propriations (20–9992–0–2–852); 
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•S 857 IS

1 ‘‘Eastern Indian land claims settlement fund 

2 (14–2202–0–1–806); 

3 ‘‘Farm Credit Administration, Limitation on 

4 Administration Expenses (78–4131–0–3–351); 

5 ‘‘Farm Credit System Financial Assistance Cor6 poration, interest payments (20–1850–0–1–351); 

7 ‘‘Internal Revenue collections of Puerto Rico 

8 (20–5737–0–2–852); 

9 ‘‘Panama Canal Commission, operating ex10 penses and capital outlay (95–5190–0–2–403); 

11 ‘‘Payments of Vietnam and USS Pueblo pris12 oner-of-war claims (15–0104–0–1–153); 

13 ‘‘Payments to copyright owners (03–5175–0–2–

14 376); 

15 ‘‘Payments to health care trust funds (75–

16 0580–0–1–571); 

17 ‘‘Payments to social security trust funds (75–

18 0404–0–1–651); 

19 ‘‘Payments to the United States territories, fis20 cal assistance (14–0418–0–1–801); 

21 ‘‘Payments to widows and heirs of deceased 

22 Members of Congress (00–0215–0–1–801); 

23 ‘‘Pension Benefit Guaranty Corporation Fund 

24 (16–4204–0–3–601); 

25 ‘‘Salaries of Article III judges; 
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•S 857 IS

1 ‘‘Washington Metropolitan Area Transit Au2 thority, interest payments (46–0300–0–1–401); 

3 ‘‘(8) the following noncredit special, revolving, 

4 or trust-revolving funds:

5 ‘‘Coinage profit fund (20–5811–0–2–803); 

6 ‘‘Comptroller of the Currency; 

7 ‘‘Director of the Office of Thrift Supervision; 

8 ‘‘Exchange Stabilization Fund (20–4444–0–3–

9 155); 

10 ‘‘Federal Housing Finance Board; 

11 ‘‘Foreign Military Sales trust fund (11–82232–

12 0–7–155); 

13 ‘‘National Credit Union Administration, central 

14 liquidating facility (25–4470–0–3–373); 

15 ‘‘National Credit Union Administration, credit 

16 union insurance fund (25–4468–0–3–373); 

17 ‘‘National Credit Union Administration oper18 ating fund (25–4056–0–3–373); and 

19 ‘‘Resolution Trust Corporation Revolving Fund 

20 (22–4055–0–3–373); 

21 ‘‘(9) Thrift Savings Fund; 

22 ‘‘(10) appropriations for the District of Colum23 bia to the extent they are appropriations of locally 

24 raised funds; 
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•S 857 IS

1 ‘‘(11)(A) any amount paid as regular unemploy2 ment compensation by a State from its account in 

3 the Unemployment Trust Fund (established by sec4 tion 904(a) of the Social Security Act); 

5 ‘‘(B) any advance made to a State from the 

6 Federal unemployment account (established by sec7 tion 904(g) of such Act) under title XII of such Act 

8 and any advance appropriated to the Federal unem9 ployment account pursuant to section 1203 of such 

10 Act; and 

11 ‘‘(C) any payment made from the Federal Em12 ployees Compensation Account (as established under 

13 section 909 of such Act) for the purpose of carrying 

14 out chapter 85 of title 5, United States Code, and 

15 funds appropriated or transferred to or otherwise 

16 deposited in such Account; and 

17 ‘‘(12)(A) FDIC, Bank Insurance Fund (51–

18 4064–0–3–373); 

19 ‘‘(B) FDIC, FSLIC Resolution Fund (51–

20 4065–0–3–373); and 

21 ‘‘(C) FDIC, Savings Association Insurance 

22 Fund (51–4066–0–3–373). 

23 ‘‘(c) FEDERAL RETIREMENT AND DISABILITY AC24 COUNTS.—The following Federal retirement and disability 
102

•S 857 IS

1 accounts shall be exempt from reduction under any order 

2 issued under this part:

3 ‘‘Civil service retirement and disability fund (24–

4 8135–0–7–602). 

5 ‘‘Black Lung Disability Trust Fund (20–8144–0–7–

6 601). 

7 ‘‘Foreign Service Retirement and Disability Fund 

8 (19–8186–0–7–602). 

9 ‘‘District of Columbia Judicial Retirement and Sur10 vivors Annuity Fund (20–8212–0–7–602). 

11 ‘‘Judicial Survivors’ Annuities Fund (10–8110–0–7–

12 602). 

13 ‘‘Payments to the Railroad Retirement Accounts 

14 (60–0113–0–1–601). 

15 ‘‘Tax Court Judges Survivors Annuity Fund (23–

16 8115–0–7–602). 

17 ‘‘Employees Life Insurance Fund (24–8424–0–8–

18 602). 

19 ‘‘(d) FEDERAL ADMINISTRATIVE EXPENSES.— 

20 ‘‘(1) Notwithstanding any provision of law 

21 other than paragraph (3), administrative expenses 

22 incurred by the departments and agencies, including 

23 independent agencies, of the Government in connec24 tion with any program, project, activity, or account 

25 shall be subject to reduction pursuant to any seques-
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•S 857 IS

1 tration order, without regard to any exemption, ex2 ception, limitation, or special rule otherwise applica3 ble with respect to such program, project, activity, 

4 or account, and regardless of whether the program, 

5 project, activity, or account is self-supporting and 

6 does not receive appropriations. 

7 ‘‘(2) Payments made by the Government to re8 imburse or match administrative costs incurred by a 

9 State or political subdivision under or in connection 

10 with any program, project, activity, or account shall 

11 not be considered administrative expenses of the 

12 Government for purposes of this section, and shall 

13 be subject to sequestration to the extent (and only 

14 to the extent) that other payments made by the Gov15 ernment under or in connection with that program, 

16 project, activity, or account are subject to that re17 duction or sequestration; except that Federal pay18 ments made to a State as reimbursement of admin19 istrative costs incurred by that State under or in 

20 connection with the unemployment compensation 

21 programs specified in subsection (a)(11) shall be 

22 subject to reduction or sequestration under this part 

23 notwithstanding the exemption otherwise granted to 

24 such programs under that subsection. 
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1 ‘‘(3) Notwithstanding any other provision of 

2 law, the administrative expenses of the following 

3 programs shall be exempt from sequestration: 

4 ‘‘(A) Comptroller of the Currency. 

5 ‘‘(B) Federal Deposit Insurance Corpora6 tion. 

7 ‘‘(C) Office of Thrift Supervision. 

8 ‘‘(D) National Credit Union Administra9 tion. 

10 ‘‘(E) National Credit Union Administra11 tion, central liquidity facility. 

12 ‘‘(F) Federal Retirement Thrift Invest13 ment Board. 

14 ‘‘(G) Resolution Funding Corporation. 

15 ‘‘(H) Resolution Trust Corporation. 

16 ‘‘(I) Board of Governors of the Federal 

17 Reserve System. 

18 ‘‘(e) VETERANS’ PROGRAMS.—The following pro19 grams shall be exempt from reduction under any order 

20 issued under this part:

21 ‘‘General Post Funds (36–8180–0–7–705). 

22 ‘‘Veterans Insurance and Indemnities (36–0120–0–

23 1–701). 

24 ‘‘Service-Disabled Veterans Insurance Funds (36–

25 4012–0–3–701). 
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•S 857 IS

1 ‘‘Veterans Reopened Insurance Fund (36–4010–0–3–

2 701). 

3 ‘‘Servicemembers’ Group Life Insurance Fund (36–

4 4009–0–3–701). 

5 ‘‘Post-Vietnam Era Veterans Education Account 

6 (36–8133–0–7–702). 

7 ‘‘National Service Life Insurance Fund (36–8132–0–

8 7–701). 

9 ‘‘United States Government Life Insurance Fund 

10 (36–8150–0–7–701). 

11 ‘‘Veterans Special Life Insurance Fund (36–8455–0–

12 8–701). 

13 ‘‘(f) OPTIONAL EXEMPTION OF DEFENSE AND

14 HOMELAND SECURITY ACCOUNTS.— 

15 ‘‘(1) IN GENERAL.—The President may, with 

16 respect to any defense or homeland security account, 

17 exempt that account from sequestration or provide 

18 for a lower uniform percentage reduction than would 

19 otherwise apply. 

20 ‘‘(2) LIMITATION.—The President may not use 

21 the authority provided by paragraph (1) unless the 

22 President notifies the Congress of the manner in 

23 which such authority will be exercised on or before 

24 the date specified in section 254(a) for the budget 

25 year.’’. 
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•S 857 IS

1 SEC. 203. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES. 

2 (a) IN GENERAL.—Section 256 of the Balanced 

3 Budget and Emergency Deficit Control Act of 1985 is 

4 amended to read as follows: 

5 ‘‘SEC. 256. EXCEPTIONS, LIMITATIONS, AND SPECIAL 

6 RULES. 

7 ‘‘(a) NATIONAL WOOL ACT AND THE SPECIAL MILK

8 PROGRAM.—Automatic spending increases are increases 

9 in outlays due to changes in indexes in the following pro10 grams: 

11 ‘‘(1) National Wool Act; and 

12 ‘‘(2) Special milk program. 

13 In those programs all amounts other than the automatic 

14 spending increases shall be exempt from reduction under 

15 any sequestration order. 

16 ‘‘(b) STUDENT LOANS.—For all student loans under 

17 part B or D of title IV of the Higher Education Act of 

18 1965 made during the period when a sequestration order 

19 under section 254 is in effect as required by section 252 

20 or 253, origination fees under sections 438(c)(2) and 

21 455(c) of that Act shall each be increased by 0.50 percent22 age point. 

23 ‘‘(c) FOSTER CARE AND ADOPTION ASSISTANCE

24 PROGRAMS.—Any sequestration order shall make the re25 duction otherwise required under the foster care and adop26 tion assistance programs (established by part E of title 
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•S 857 IS

1 IV of the Social Security Act) only with respect to pay2 ments and expenditures made by States in which increases 

3 in foster care maintenance payment rates or adoption as4 sistance payment rates (or both) are to take effect during 

5 the fiscal year involved, and only to the extent that the 

6 required reduction can be accomplished by applying a uni7 form percentage reduction to the Federal matching pay8 ments that each such State would otherwise receive under 

9 section 474 of that Act (for such fiscal year) for that por10 tion of the State’s payments attributable to the increases 

11 taking effect during that year. No State’s matching pay12 ments from the Government for foster care maintenance 

13 payments or for adoption assistance maintenance pay14 ments may be reduced by a percentage exceeding the ap15 plicable domestic sequestration percentage. No State may, 

16 after the date of the enactment of this Act, make any 

17 change in the timetable for making payments under a 

18 State plan approved under part E of title IV of the Social 

19 Security Act which has the effect of changing the fiscal 

20 year in which expenditures under such part are made. 

21 ‘‘(d) LOW-INCOME PROGRAMS.—(1) Benefit pay22 ments or payments to States or other entities for the pro23 grams listed in paragraph (2) shall not be reduced by 

24 more than 2 percent under any sequestration order. When 

25 reduced under an end-of-session sequestration order, those 
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•S 857 IS

1 benefit reductions shall occur starting with the payment 

2 made at the start of January. When reduced under a with3 in-session sequestration order, those benefit reductions 

4 shall occur starting with the next periodic payment. 

5 ‘‘(2) The programs referred to in paragraph (1) are 

6 the following:

7 ‘‘Child Nutrition (12–3539–0–1–605). 

8 ‘‘Food Stamp Programs (12–3505–0–1–605). 

9 ‘‘Grants to States for Medicaid (75–0512–0–1–551). 

10 ‘‘State Children’s Health Insurance Fund (75–0515–

11 0–1–551). 

12 ‘‘Supplemental Security Income Program (75–0406–

13 0–1–609). 

14 ‘‘Temporary Assistance for Needy Families (75–

15 1552–0–1–609). 

16 ‘‘Special supplemental nutrition program for women, 

17 infants, and children (WIC) (12–3510–0–1–605). 

18 ‘‘(e) VETERANS’ MEDICAL CARE.—The maximum 

19 permissible reduction in budget authority for Veterans’ 

20 medical care (36–0160–0–1–703) for any fiscal year, pur21 suant to an order issued under section 254, shall be 2 

22 percent. 

23 ‘‘(f) FEDERAL RETIREMENT PROGRAMS.— 

24 ‘‘(1) For each of the programs listed in para25 graph (2) and except as provided in paragraph (3), 
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•S 857 IS

1 monthly (or other periodic) benefit payments shall 

2 be reduced by the uniform percentage applicable to 

3 direct spending sequestrations for such programs, 

4 which shall in no case exceed 2 percent under any 

5 sequestration order. When reduced under an end-of6 session sequestration order, those benefit reductions 

7 shall occur starting with the payment made at the 

8 start of January or 7 weeks after the order is 

9 issued, whichever is later. When reduced under a 

10 within-session sequestration order, those benefit re11 ductions shall occur starting with the next periodic 

12 payment. 

13 ‘‘(2) The programs subject to paragraph (1) 

14 are:

15 ‘‘Central Intelligence Agency Retirement and 

16 Disability Fund (56–3400–0–1–054). 

17 ‘‘Comptrollers General Retirement System (05–

18 0107–0–1–801)Payments to the Foreign Service Re19 tirement and Disability Fund (72–1036–0–1–153). 

20 ‘‘Judicial Officer’ Retirement Fund (10–8122–

21 0–7–602). 

22 ‘‘Claims Judges’ Retirement Fund (10–8124–

23 0–7–602). 

24 ‘‘Pensions for former Presidents (47–0105–0–

25 1–802). 
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•S 857 IS

1 ‘‘National Oceanic and Atmospheric Adminis2 tration Retirement (13–1450–0–1–306). 

3 ‘‘Railroad Industry Pension Fund (60–8011–0–

4 7–601). 

5 ‘‘Retired pay, Coast Guard (70–0602–0–1–

6 403). 

7 ‘‘Retirement pay and medical benefits for com8 missioned officers, Public Health Service (75–0379–

9 0–1–551). 

10 ‘‘Payments to Civil Service Retirement and Dis11 ability Fund (24–0200–0–1–805). 

12 ‘‘Payments to the Foreign Service Retirement 

13 and Disability Fund (72–1036–0–1–153). 

14 ‘‘Payments to Judiciary Trust Funds (10–

15 0941–0–1–752). 

16 ‘‘(g) VETERANS PROGRAMS.—To achieve the total 

17 percentage reduction required by any order issued under 

18 this part, the percentage reduction that shall apply to pay19 ments under the following programs shall in no event ex20 ceed 2 percent:

21 ‘‘Canteen Service Revolving Fund (36–4014–0–3–

22 705). 

23 ‘‘Medical Center Research Organizations (36–4026–

24 0–3–703). 
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•S 857 IS

1 ‘‘Disability Compensation Benefits (36–0102–0–1–

2 701). 

3 ‘‘Education Benefits (36–0137–0–1–702). 

4 ‘‘Vocational Rehabilitation and Employment Benefits 

5 (36–0135–0–1–702). 

6 ‘‘Pensions Benefits (36–0154–0–1–701). 

7 ‘‘Burial Benefits (36–0139–0–1–701). 

8 ‘‘Guaranteed Transitional Housing Loans For Home9 less Veterans Program Account (36–1119–0–1–704). 

10 ‘‘Housing Direct Loan Financing Account (36–4127–

11 0–1–704). 

12 ‘‘Housing Guaranteed Loan Financing Account (36–

13 4129–0–3–704). 

14 ‘‘Vocational Rehabilitation and Education Direct 

15 Loan Financing Account (36–4259–0–3–702). 

16 ‘‘(h) MILITARY HEALTH AND RETIREMENT.—To 

17 achieve the total percentage reduction in military retire18 ment required by any order issued under this part, the 

19 percentage reduction that shall apply to payments under 

20 the Military retirement fund (97–8097–0–7–602), pay21 ments to the military retirement fund (97–0040–0–1–

22 054), and the Defense Health Program (97–0130–0–1–

23 051) shall in no event exceed 2 percent. 

24 ‘‘(i) MEDICARE PROGRAM.— 
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•S 857 IS

1 ‘‘(1) CALCULATION OF REDUCTION IN INDI2 VIDUAL PAYMENT AMOUNTS.—To achieve the total 

3 percentage reduction in those programs required by 

4 any order issued under this part, the percentage re5 duction that shall apply to payments under the 

6 health insurance programs under title XVIII of the 

7 Social Security Act (other than payments described 

8 in section 255(a)(2)) that are subject to such order 

9 for services furnished after any sequestration order 

10 is issued shall be such that the reduction made in 

11 payments under that order shall achieve the required 

12 total percentage reduction in those payments for 

13 that fiscal year as determined on a 12-month basis. 

14 However, the percentage reduction under any such 

15 program shall in no case exceed 2 percent under any 

16 sequestration order. 

17 ‘‘(2) TIMING OF APPLICATION OF REDUC18 TIONS.—If a reduction is made under paragraph (1) 

19 in payment amounts pursuant to a sequestration 

20 order, the reduction shall be applied to payment for 

21 services furnished after the effective date of the 

22 order. 

23 ‘‘(3) NO INCREASE IN BENEFICIARY CHARGES

24 IN ASSIGNMENT-RELATED CASES.—If a reduction in 

25 payment amounts is made under paragraph (1) for 
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•S 857 IS

1 services for which payment under part B of title 

2 XVIII of the Social Security Act is made on the 

3 basis of an assignment described in section 

4 1842(b)(3)(B)(ii), in accordance with section 

5 1842(b)(6)(B), or under the procedure described in 

6 section 1870(f)(1) of such Act, the person furnishing 

7 the services shall be considered to have accepted 

8 payment of the reasonable charge for the services, 

9 less any reduction in payment amount made pursu10 ant to a sequestration order, as payment in full. 

11 ‘‘(4) APPLICATION TO PARTS C AND D.—The 

12 reductions otherwise required under parts C and D 

13 of title XVIII of the Social Security Act with respect 

14 to a fiscal year shall be applied to the calendar year 

15 that begins after the end of the fiscal year to which 

16 the applicable sequestration order applies. 

17 ‘‘(j) FEDERAL PAY.— 

18 ‘‘(1) IN GENERAL.—For purposes of any order 

19 issued under section 254, new budget authority to 

20 pay Federal personnel shall be reduced by the appli21 cable uniform percentage, but no sequestration order 

22 may reduce or have the effect of reducing the rate 

23 of pay to which any individual is entitled under any 

24 statutory pay system (as increased by any amount 

25 payable under section 5304 of title 5, United States 
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•S 857 IS

1 Code, or section 302 of the Federal Employees Pay 

2 Comparability Act of 1990) or the rate of any ele3 ment of military pay to which any individual is enti4 tled under title 37, United States Code, or any in5 crease in rates of pay which is scheduled to take ef6 fect under section 5303 of title 5, United States 

7 Code, section 1009 of title 37, United States Code, 

8 or any other provision of law. 

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section: 

11 ‘‘(A) The term ‘statutory pay system’ shall 

12 have the meaning given that term in section 

13 5302(1) of title 5, United States Code. 

14 ‘‘(B) The term ‘elements of military pay’ 

15 means— 

16 ‘‘(i) the elements of compensation of 

17 members of the uniformed services speci18 fied in section 1009 of title 37, United 

19 States Code, 

20 ‘‘(ii) allowances provided members of 

21 the uniformed services under sections 403a 

22 and 405 of such title, and 

23 ‘‘(iii) cadet pay and midshipman pay 

24 under section 203(c) of such title. 
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•S 857 IS

1 ‘‘(C) The term ‘uniformed services’ shall 

2 have the meaning given that term in section 

3 101(3) of title 37, United States Code. 

4 ‘‘(k) CHILD SUPPORT ENFORCEMENT PROGRAM.—

5 Any sequestration order shall accomplish the full amount 

6 of any required reduction in expenditures under sections 

7 455 and 458 of the Social Security Act by reducing the 

8 Federal matching rate for State administrative costs 

9 under such program, as specified (for the fiscal year in10 volved) in section 455(a) of such Act, to the extent nec11 essary to reduce such expenditures by that amount. 

12 ‘‘(l) EXTENDED UNEMPLOYMENT COMPENSATION.—

13 (1) A State may reduce each weekly benefit payment made 

14 under the Federal-State Extended Unemployment Com15 pensation Act of 1970 for any week of unemployment oc16 curring during any period with respect to which payments 

17 are reduced under an order issued under this title by a 

18 percentage not to exceed the percentage by which the Fed19 eral payment to the State under section 204 of such Act 

20 is to be reduced for such week as a result of such order. 

21 ‘‘(2) A reduction by a State in accordance with sub22 paragraph (A) shall not be considered as a failure to fulfill 

23 the requirements of section 3304(a)(11) of the Internal 

24 Revenue Code of 1954. 

25 ‘‘(m) COMMODITY CREDIT CORPORATION.— 
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•S 857 IS

1 ‘‘(1) POWERS AND AUTHORITIES OF THE COM2 MODITY CREDIT CORPORATION.—This title shall not 

3 restrict the Commodity Credit Corporation in the 

4 discharge of its authority and responsibility as a cor5 poration to buy and sell commodities in world trade, 

6 to use the proceeds as a revolving fund to meet 

7 other obligations and otherwise operate as a corpora8 tion, the purpose for which it was created. 

9 ‘‘(2) REDUCTION IN PAYMENTS MADE UNDER

10 CONTRACTS.—(A) Payments and loan eligibility 

11 under any contract entered into with a person by the 

12 Commodity Credit Corporation prior to the time any 

13 sequestration order has been issued shall not be re14 duced by an order subsequently issued. Subject to 

15 subparagraph (B), after any sequestration order is 

16 issued for a fiscal year, any cash payments made by 

17 the Commodity Credit Corporation— 

18 ‘‘(i) under the terms of any one-year con19 tract entered into in or after such fiscal year 

20 and after the issuance of the order; and 

21 ‘‘(ii) out of an entitlement account, to any 

22 person (including any producer, lender, or guar23 antee entity) shall be subject to reduction under 

24 the order. 
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•S 857 IS

1 ‘‘(B) Each contract entered into with producers 

2 or producer cooperatives with respect to a particular 

3 crop of a commodity and subject to reduction under 

4 subparagraph (A) shall be reduced in accordance 

5 with the same terms and conditions. If some, but 

6 not all, contracts applicable to a crop of a com7 modity have been entered into prior to the issuance 

8 of any sequestration order, the order shall provide 

9 that the necessary reduction in payments under con10 tracts applicable to the commodity be uniformly ap11 plied to all contracts for succeeding crops of the 

12 commodity, under the authority provided in para13 graph (3). 

14 ‘‘(3) DELAYED REDUCTION IN OUTLAYS PER15 MISSIBLE.—Notwithstanding any other provision of 

16 this title, if any sequestration order is issued with 

17 respect to a fiscal year, any reduction under the 

18 order applicable to contracts described in paragraph 

19 (2) may provide for reductions in outlays for the ac20 count involved to occur in the fiscal years following 

21 the fiscal year to which the order applies. 

22 ‘‘(4) UNIFORM PERCENTAGE RATE OF REDUC23 TION AND OTHER LIMITATIONS.—All reductions de24 scribed in paragraph (2) that are required to be 
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•S 857 IS

1 made in connection with any sequestration order 

2 with respect to a fiscal year— 

3 ‘‘(A) shall be made so as to ensure that 

4 outlays for each program, project, activity, or 

5 account involved are reduced by a percentage 

6 rate that is uniform for all such programs, 

7 projects, activities, and accounts, and may not 

8 be made so as to achieve a percentage rate of 

9 reduction in any such item exceeding the rate 

10 specified in the order; and 

11 ‘‘(B) with respect to commodity price sup12 port and income protection programs, shall be 

13 made in such manner and under such proce14 dures as will attempt to ensure that— 

15 ‘‘(i) uncertainty as to the scope of 

16 benefits under any such program is mini17 mized; 

18 ‘‘(ii) any instability in market prices 

19 for agricultural commodities resulting from 

20 the reduction is minimized; and 

21 ‘‘(iii) normal production and mar22 keting relationships among agricultural 

23 commodities (including both contract and 

24 non-contract commodities) are not dis25 torted. 
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•S 857 IS

1 In meeting the criterion set out in clause (iii) 

2 of subparagraph (B) of the preceding sentence, 

3 the President shall take into consideration that 

4 reductions under an order may apply to pro5 grams for two or more agricultural commodities 

6 that use the same type of production or mar7 keting resources or that are alternative com8 modities among which a producer could choose 

9 in making annual production decisions. 

10 ‘‘(5) CERTAIN AUTHORITY NOT TO BE LIM11 ITED.—Nothing in this title shall limit or reduce in 

12 any way any appropriation that provides the Com13 modity Credit Corporation with funds to cover the 

14 Corporation’s net realized losses. 

15 ‘‘(n) POSTAL SERVICE FUND.—Notwithstanding any 

16 other provision of law, any sequestration of the Postal 

17 Service Fund shall be accomplished by a payment from 

18 that Fund to the General Fund of the Treasury, and the 

19 Postmaster General of the United States shall make the 

20 full amount of that payment during the fiscal year to 

21 which the presidential sequestration order applies. 

22 ‘‘(o) EFFECTS OF SEQUESTRATION.—The effects of 

23 sequestration shall be as follows: 

24 ‘‘(1) Budgetary resources sequestered from any 

25 account other than an entitlement trust, special, or 
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•S 857 IS

1 revolving fund account shall revert to the Treasury 

2 and be permanently canceled. 

3 ‘‘(2) Except as otherwise provided, the same 

4 percentage sequestration shall apply to all programs, 

5 projects, and activities within a budget account (with 

6 programs, projects, and activities as delineated in 

7 the appropriation Act or accompanying report for 

8 the relevant fiscal year covering that account, or for 

9 accounts not included in appropriation Acts, as de10 lineated in the most recently submitted President’s 

11 budget). 

12 ‘‘(3) Administrative regulations or similar ac13 tions implementing a sequestration shall be made 

14 within 120 days of the sequestration order. To the 

15 extent that formula allocations differ at different 

16 levels of budgetary resources within an account, pro17 gram, project, or activity, the sequestration shall be 

18 interpreted as producing a lower total appropriation, 

19 with that lower appropriation being obligated as 

20 though it had been the pre-sequestration appropria21 tion and no sequestration had occurred. 

22 ‘‘(4) Except as otherwise provided, obligations 

23 in sequestered direct spending accounts shall be re24 duced in the fiscal year in which a sequestration oc25 curs and in all succeeding fiscal years. 
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•S 857 IS

1 ‘‘(5) If an automatic spending increase is se2 questered, the increase (in the applicable index) that 

3 was disregarded as a result of that sequestration 

4 shall not be taken into account in any subsequent 

5 fiscal year. 

6 ‘‘(6) Except as otherwise provided, sequestra7 tion in accounts for which obligations are indefinite 

8 shall be taken in a manner to ensure that obliga9 tions in the fiscal year of a sequestration and suc10 ceeding fiscal years are reduced, from the level that 

11 would actually have occurred, by the applicable se12 questration percentage.’’. 

13 (b) CONFORMING AMENDMENT.—The table of con14 tents set forth in 250(c) of the Balanced Budget and 

15 Emergency Deficit Control Act of 1985 is amended by 

16 amending the item relating to section 256 to read as fol17 lows:

‘‘Sec. 256. Exceptions, limitations, and special rules.’’.

18 SEC. 204. POINT OF ORDER. 

19 (a) ENTITLEMENT POINT OF ORDER.—Section 312 

20 of the Congressional Budget Act of 1974 is amended by 

21 adding at the end the following new subsection: 

22 ‘‘(g) ENTITLEMENT POINT OF ORDER.—It shall not 

23 be in order in the House of Representatives or the Senate 

24 to consider any bill, joint resolution, amendment, or con25 ference report that— 
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•S 857 IS

1 ‘‘(1) increases aggregate level of direct spending 

2 for any ensuing fiscal year or 

3 ‘‘(2) includes any provision that has the effect 

4 of modifying the application of section 252A of the 

5 Balanced Budget and Emergency Deficit Control 

6 Act of 1985 to any entitlement program subject to 

7 sequestration or exempt from sequestration under 

8 such Act.’’. 

9 SEC. 205. TECHNICAL AND CONFORMING AMENDMENTS. 

10 The Balanced Budget and Emergency Deficit Control 

11 Act of 1985 is amended as follows: 

12 (1) Section 251(a)(1) is amended by inserting 

13 ‘‘, section 252A,’’ after ‘‘section 252’’. 

14 (2) Section 254(c)(4)(B) is amended by insert15 ing ‘‘or section 252A’’ after ‘‘section 252’’. 

16 (3) Section 254(c) is amended by redesignating 

17 paragraph (5) as paragraph (6) and by inserting 

18 after paragraph (4) the following new paragraph: 

19 ‘‘(5) DIRECT SPENDING CONTROL SEQUESTRA20 TION REPORTS.—The preview reports shall set forth, 

21 for the current year and the budget year, estimates 

22 for each of the following: 

23 ‘‘(A) The total level of direct spending for 

24 all programs, projects, and activities (excluding 

25 social security). 
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•S 857 IS

1 ‘‘(B) The sequestration percentage or (if 

2 the required sequestration percentage is greater 

3 than the maximum allowable percentage for 

4 medicare) percentages necessary to comply with 

5 section 252A.’’. 

6 (4) Section 254(f) is amended by redesignating 

7 paragraphs (4) and (5) as paragraphs (5) and (6) 

8 and by inserting after paragraph (3) the following 

9 new paragraph: 

10 ‘‘(4) DIRECT SPENDING CONTROL SEQUESTRA11 TION REPORTS.—The final reports shall contain all 

12 the information required in the direct spending con13 trol sequestration preview reports. In addition, these 

14 reports shall contain, for the budget year, for each 

15 account to be sequestered, estimates of the baseline 

16 level of sequesterable budgetary resources and re17 sulting outlays and the amount of budgetary re18 sources to be sequestered and resulting outlay reduc19 tions. The reports shall also contain estimates of the 

20 effects on outlays of the sequestration in each out21 year for direct spending programs.’’. 

22 (5) Section 258C(a)(1) is amended by inserting 

23 ‘‘, 252A,’’ after ‘‘section 252’’. 
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•S 857 IS

1 Subtitle B—Discretionary 

2 Spending Limits 

3 SEC. 211. ENFORCING DISCRETIONARY SPENDING LIMITS. 

4 (a) DISCRETIONARY SPENDING LIMITS.—Sections 

5 251(b) and (c) of the Balanced Budget and Emergency 

6 Deficit Control of Act of 1985 are amended to read as 

7 follows: 

8 ‘‘(b) DISCRETIONARY SPENDING LIMIT.—As used in 

9 this part, the term ‘discretionary spending limit’ means— 

10 ‘‘(1) with respect to fiscal year 2007— 

11 ‘‘(A) $861,577,682,000 in new budget au12 thority of which no more than 

13 $412,947,276,000 shall be for functions other 

14 than National Defense (050); and 

15 ‘‘(B) $lllll in outlays of which no 

16 more than $lllll shall be for functions 

17 other than National Defense (050); 

18 ‘‘(2) with respect to fiscal year 2008— 

19 ‘‘(A) $880,532,400,000 in new budget au20 thority of which no more than 

21 $422,032,100,000 shall be for functions other 

22 than National Defense (050); and 

23 ‘‘(B) $lllll in outlays of which no 

24 more than $lllll shall be for functions 

25 other than National Defense (050); 
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•S 857 IS

1 ‘‘(3) with respect to fiscal year 2009— 

2 ‘‘(A) $899,904,100,000 in new budget au3 thority of which no more than 

4 $431,316,800,000 shall be for functions other 

5 than National Defense (050); and 

6 ‘‘(B) $lllll in outlays of which no 

7 more than $lllll shall be for functions 

8 other than National Defense (050); 

9 ‘‘(4) with respect to fiscal year 2010— 

10 ‘‘(A) $919,702,000,000 in new budget au11 thority of which no more than 

12 $440,805,800,000 shall be for functions other 

13 than National Defense (050); and 

14 ‘‘(B) $lllll in outlays of which no 

15 more than $lllll shall be for functions 

16 other than National Defense (050); 

17 ‘‘(5) with respect to fiscal year 2011— 

18 ‘‘(A) $939,935,400,000 in new budget au19 thority of which no more than 

20 $450,503,500,000 shall be for functions other 

21 than National Defense (050); and 

22 ‘‘(B) $lllll in outlays of which no 

23 more than $lllll shall be for functions 

24 other than National Defense (050); 

25 ‘‘(6) with respect to fiscal year 2012— 
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•S 857 IS

1 ‘‘(A) $960,614,000,000 in new budget au2 thority of which no more than 

3 $460,414,600,000 shall be for functions other 

4 than National Defense (050); and 

5 ‘‘(B) $lllll in outlays of which no 

6 more than $lllll shall be for functions 

7 other than National Defense (050); 

8 ‘‘(7) with respect to fiscal year 2013— 

9 ‘‘(A) $981,747,500,000 in new budget au10 thority of which no more than 

11 $470,543,700,000 shall be for functions other 

12 than National Defense (050); and 

13 ‘‘(B) $lllll in outlays of which no 

14 more than $lllll shall be for functions 

15 other than National Defense (050); 

16 ‘‘(8) with respect to fiscal year 2014— 

17 ‘‘(A) $1,003,346,000,000 in new budget 

18 authority of which no more than 

19 $480,895,700,000 shall be for functions other 

20 than National Defense (050); and 

21 ‘‘(B) $lllll in outlays of which no 

22 more than $lllll shall be for functions 

23 other than National Defense (050); and 

24 ‘‘(9) with respect to fiscal year 2015— 
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•S 857 IS

1 ‘‘(A) $1,025,419,600,000 in new budget 

2 authority of which no more than 

3 $491,475,400,000 shall be for functions other 

4 than National Defense (050); and 

5 ‘‘(B) $lllll in outlays of which no 

6 more than $lllll shall be for functions 

7 other than National Defense (050).’’. 

8 (b) DISCRETIONARY SPENDING LIMIT POINT OF

9 ORDER.—Section 312 of the Congressional Budget Act of 

10 1974 (as amended by section 204) is further amended by 

11 adding at the end the following new subsection: 

12 ‘‘(h) DISCRETIONARY SPENDING LIMIT POINT OF

13 ORDER.—It shall not be in order in the House of Rep14 resentatives or the Senate to consider any bill, joint resolu15 tion, amendment, or conference report that— 

16 ‘‘(1) increases the discretionary spending limits 

17 for any ensuing fiscal year after the budget year; or 

18 ‘‘(2) would cause the discretionary spending 

19 limits for the budget year to be breached.’’. 

20 (c) ADVANCE APPROPRIATION POINT OF ORDER.—

21 Section 312 of the Congressional Budget Act of 1974 (as 

22 amended by subsection (b)) is further amended by adding 

23 at the end the following new subsection: 

24 ‘‘(i) ADVANCE APPROPRIATION POINT OF ORDER.—

25 It shall not be in order in the House of Representatives 
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1 or the Senate to consider any appropriation bill or joint 

2 resolution, or amendment thereto or conference report 

3 thereon, that provides advance discretionary new budget 

4 authority that first becomes available for any fiscal year 

5 after the budget year at an amount for any program, 

6 project, or activity above the amount of appropriations for 

7 fiscal year 2006 for such program, project, or activity.’’. 

8 (d) EXTENSION OF GRAMM-RUDMAN.—Section 

9 275(b) of the Balanced Budget and Emergency Deficit 

10 Control of Act of 1985 is amended by striking ‘‘2002’’ 

11 and inserting ‘‘2015’’ and by striking ‘‘2006’’ and insert12 ing ‘‘2019’’.

Æ