II 

109TH CONGRESS 

1ST SESSION S. 540 

To strengthen and permanently preserve social security. 

IN THE SENATE OF THE UNITED STATES 

MARCH 7, 2005 

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

to the Committee on Finance 

A BILL 

To strengthen and permanently preserve social security. 

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; TABLE OF CONTENTS. 

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

5 ‘‘Saving Social Security Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—INVESTMENT-BASED SOCIAL SECURITY 

Sec. 101. Establishment of an investment-based option for social security benefits. 

‘‘PART B—INVESTMENT-BASED SOCIAL SECURITY

‘‘Sec. 250. Definitions. 

‘‘Sec. 251. Election to waive eligibility. 
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‘‘Sec. 252. Social security savings accounts for employees (SAFE accounts). 

‘‘Sec. 253. SAFE Investment Fund. 

‘‘Sec. 254. Distributions. 

‘‘Sec. 255. Social Security Investment Board. 

Sec. 102. Adjustments to primary insurance amounts under part A of title II 

of the Social Security Act for investing workers with SAFE accounts. 

Sec. 103. Tax treatment of investment-based social security. 

Sec. 104. Study on use of private annuities for SAFE account distributions. 

Sec. 105. Study regarding financial literacy. 

TITLE II—DEBT-BASED SOCIAL SECURITY 

SUBTITLE A—ADJUSTMENTS

Sec. 201. Modification to retirement age. 

Sec. 202. Modification of PIA factors to reflect changes in life expectancy. 

Sec. 203. Actuarial adjustment for retirements. 

SUBTITLE B—MAINTENANCE OF SOCIAL SECURITY TRUST FUNDS

Sec. 211. Maintenance of adequate balances in the social security trust funds.

1 TITLE I—INVESTMENT-BASED 

2 SOCIAL SECURITY 

3 SEC. 101. ESTABLISHMENT OF AN INVESTMENT-BASED OP4 TION FOR SOCIAL SECURITY BENEFITS. 

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

6 (42 U.S.C. 401 et seq.) is amended— 

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

9 ‘‘PART A—DEBT-BASED SOCIAL SECURITY’’; 

10 and 

11 (2) by adding at the end the following: 

12 ‘‘PART B—INVESTMENT-BASED SOCIAL SECURITY 

13 ‘‘SEC. 250. DEFINITIONS. 

14 ‘‘For purposes of this part— 
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1 ‘‘(1) INVESTING WORKER.—The term ‘investing 

2 worker’ means any individual— 

3 ‘‘(A) who after the date of enactment of 

4 this part— 

5 ‘‘(i) receives wages on which there is 

6 imposed a tax under section 3101(a) of the 

7 Internal Revenue Code of 1986; or 

8 ‘‘(ii) derives self-employment income 

9 on which there is imposed a tax under sec10 tion 1401(a) of the Internal Revenue Code 

11 of 1986; and 

12 ‘‘(B) who was born on or after January 1, 

13 1961, and does not make an election to waive 

14 investment-based social security under this part 

15 as provided under section 251(a). 

16 ‘‘(2) SOCIAL SECURITY SAVINGS ACCOUNTS FOR

17 EMPLOYEES (SAFE ACCOUNT).—The term ‘social se18 curity savings accounts for employees’ or ‘SAFE Ac19 count’ means an account established for an investing 

20 worker within the SAFE Investment Fund under 

21 section 252. 

22 ‘‘(3) SAFE INVESTMENT FUND.—The term 

23 ‘SAFE Investment Fund’ or ‘Fund’ means the fund 

24 established under section 253. 
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1 ‘‘(4) SOCIAL SECURITY INVESTMENT BOARD.— 

2 The term ‘Social Security Investment Board’ or 

3 ‘Board’ means the board established under section 

4 254. 

5 ‘‘(5) COMMISSIONER.—The term ‘Commis6 sioner’ means the Commissioner of Social Security. 

7 ‘‘SEC. 251. ELECTION TO WAIVE ELIGIBILITY. 

8 ‘‘(a) ELECTION TO WAIVE ELIGIBILITY FOR SAFE 

9 ACCOUNTS.— 

10 ‘‘(1) IN GENERAL.—Any individual may elect to 

11 waive eligibility under this part in such form and 

12 manner as prescribed by the Board at any time after 

13 such individual attains the age of 18 and before 

14 such individual attains the age of 25. Such election 

15 shall be irrevocable. 

16 ‘‘(2) INDIVIDUAL BORN BEFORE JANUARY 1, 

17 1981.—Notwithstanding paragraph (1), in the case 

18 of any individual born after December 31, 1960, and 

19 before January 1, 1981, such individual may elect to 

20 waive eligibility under this part in such form and 

21 manner as prescribed by the Board at any time be22 fore January 1, 2007. Such election shall be irrev23 ocable. 

24 ‘‘(b) DISPOSITION OF SAFE ACCOUNT.—In the case 

25 of any individual who makes an election under paragraph 
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1 (1), any assets in such individual’s SAFE Account shall 

2 be paid to the Federal Old-Age and Survivors Insurance 

3 Trust Fund, and such individual’s eligibility for benefits 

4 under part A shall be determined as if such Account had 

5 never been established. 

6 ‘‘SEC. 252. SOCIAL SECURITY SAVINGS ACCOUNTS FOR EM7 PLOYEES (SAFE ACCOUNTS). 

8 ‘‘(a) ESTABLISHMENT OF SAFE ACCOUNTS.—Not 

9 later than 30 days after the date on which an individual 

10 first becomes an investing worker, the Social Security In11 vestment Board shall establish a SAFE Account for such 

12 individual in the SAFE Investment Fund. 

13 ‘‘(b) CONTRIBUTIONS.— 

14 ‘‘(1) IN GENERAL.—The Secretary of the 

15 Treasury shall transfer from the Federal Old-Age 

16 and Survivors Insurance Trust Fund to the SAFE 

17 Investment Fund, for crediting by the Social Secu18 rity Investment Board to the SAFE Account of an 

19 investing worker, an amount equal to the SAFE Ac20 count contribution amount with respect to each in21 vesting worker. 

22 ‘‘(2) SAFE ACCOUNT CONTRIBUTION

23 AMOUNT.—For purposes of paragraph (1), the term 

24 ‘SAFE Account contribution amount’ means, with 
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1 respect to an investing worker for a calendar year, 

2 the product derived by multiplying— 

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

4 and self-employment income derived by, such 

5 individual during such calendar year; by 

6 ‘‘(B) 4 percent. 

7 ‘‘(c) DESIGNATION OF INVESTMENTS.— 

8 ‘‘(1) INITIAL DESIGNATION.— 

9 ‘‘(A) IN GENERAL.—Not later than 10 

10 days after an account is established for an in11 vesting worker under subsection (a), the invest12 ing worker shall designate to which investment 

13 funds within the SAFE Investment Fund con14 tributions to such account under subsection (b) 

15 shall be allocated. 

16 ‘‘(B) DEFAULT ALLOCATION.— 

17 ‘‘(i) IN GENERAL.—If no designation 

18 is made pursuant to paragraph (1), the 

19 Board shall allocate such contributions in 

20 accordance with the life-span investment 

21 option. 

22 ‘‘(ii) LIFE-SPAN INVESTMENT OP23 TION.—For purposes of this section, the 

24 life-span investment option shall provide 

25 for the management and investment of 
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1 funds within an investing worker’s SAFE 

2 account on the basis of the age of the in3 vesting worker in accordance with regula4 tions established by the Board. In estab5 lishing regulations with respect to the life6 span investment option under this sub7 paragraph, the Board shall consider— 

8 ‘‘(I) with respect to the youngest 

9 investing workers, investing 80 per10 cent of such funds in stocks and 20 

11 percent of such funds in bonds; and 

12 ‘‘(II) with respect to the oldest 

13 investing workers, investing 35 per14 cent of such funds in stocks and 65 

15 percent of such funds in bonds. 

16 ‘‘(2) SUBSEQUENT DESIGNATIONS.—At least 

17 twice each year, an investing worker may redesig18 nate the allocation of investments funds within the 

19 SAFE Investment Fund to which contributions with 

20 respect to such investing worker are allocated. 

21 ‘‘(d) TIME DESIGNATION TAKES EFFECT.—A des22 ignation under subsection (c) shall take effect with respect 

23 to contributions made beginning more than 14 days after 

24 the date of the designation. 
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1 ‘‘(e) INVESTING WORKER’S PROPERTY RIGHT IN THE

2 SAFE ACCOUNT.—Each SAFE Account designated by an 

3 investing worker is the sole property of the worker. 

4 ‘‘(f) FORM OF DESIGNATIONS.—Designations under 

5 this section shall be made— 

6 ‘‘(1) on W–4 forms (or any successor forms); or 

7 ‘‘(2) in such other manner as the Social Secu8 rity Investment Board may prescribe in order to en9 sure ease of administration. 

10 ‘‘SEC. 253. SAFE INVESTMENT FUND. 

11 ‘‘(a) IN GENERAL.—There shall be established and 

12 maintained in the Treasury of the United States a SAFE 

13 Investment Fund in the same manner as the Thrift Sav14 ings Fund under sections 8437 (excluding paragraphs (4) 

15 and (5) of subsection (c) thereof), 8438, and 8439 of title 

16 5, United States Code, insofar as such sections are not 

17 inconsistent with the provisions of this part. 

18 ‘‘(b) INVESTMENT EARNINGS REPORT.— 

19 ‘‘(1) IN GENERAL.—At least annually, the 

20 SAFE Investment Fund shall provide to each invest21 ing worker a SAFE Investment Status Report. Such 

22 report may be transmitted electronically upon the 

23 agreement of the investing worker under the terms 

24 and conditions established by the Social Security In25 vestment Board. 
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1 ‘‘(2) CONTENTS OF REPORT.—The SAFE In2 vestment Status Report, with respect to a SAFE Ac3 count, shall provide the following information: 

4 ‘‘(A) The total SAFE Account contribu5 tions made in the last quarter, the last year, 

6 and since the Account was established. 

7 ‘‘(B) The amount and rate of return 

8 earned for each period described in subpara9 graph (A). 

10 ‘‘(C) A projection of how much the invest11 ing worker will have available on the date the 

12 worker attains normal retirement age if such 

13 contributions and earnings continue at the 

14 same rate during the remaining period ending 

15 with such date. 

16 ‘‘(c) MAXIMUM ADMINISTRATIVE FEE.—The SAFE 

17 Investment Fund shall charge each investing worker in the 

18 Fund a single, uniform annual administrative fee not to 

19 exceed 0.57 percent of the value of the assets invested in 

20 the worker’s SAFE Account. 

21 ‘‘SEC. 254. DISTRIBUTIONS. 

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

23 provided in subsection (b)(4), distributions may only be 

24 made from a SAFE Account of an investing worker on 

25 and after the earliest of— 
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1 ‘‘(1) the date the investing worker attains nor2 mal retirement age, as determined under section 

3 216; or 

4 ‘‘(2) the date on which funds in the investing 

5 worker’s SAFE Account are sufficient to transfer to 

6 the Federal Old-Age and Survivors Insurance Trust 

7 Fund— 

8 ‘‘(A) an amount equal to the old-age insur9 ance amount (as calculated under subsection 

10 (b)(1)(B)); and 

11 ‘‘(B) an amount equal to the survivor’s in12 surance amount (as calculated under subsection 

13 (b)(2)(B)). 

14 ‘‘(b) FORM OF DISTRIBUTION.— 

15 ‘‘(1) FEDERAL ANNUITY PAYMENT.— 

16 ‘‘(A) IN GENERAL.—On the date deter17 mined under subsection (a), so much of the bal18 ance in an investing worker’s SAFE Account as 

19 does not exceed the old-age insurance amount 

20 shall be transferred to the Federal Old-Age and 

21 Survivors Insurance Trust Fund and the invest22 ing worker shall be entitled to a Federal annu23 ity payment. 

24 ‘‘(B) OLD-AGE INSURANCE AMOUNT.—For 

25 purposes of this section, the old-age insurance 
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1 amount is an amount which is sufficient to pro2 vide a Federal annuity payment which, when 

3 added to the investing worker’s monthly benefit 

4 under part A, is equal to one-twelfth of 135 

5 percent of the poverty line (as defined in section 

6 673(2) of the Community Services Block Grant 

7 Act (42 U.S.C. 9902(2))). 

8 ‘‘(C) FEDERAL ANNUITY PAYMENT.—For 

9 purposes of this section, the term ‘Federal an10 nuity payment’ means a monthly payment from 

11 the Federal Old-Age and Survivors Insurance 

12 Trust Fund in an amount determined by the 

13 Social Security Investment Board based on the 

14 amount transferred to the Federal Old-Age and 

15 Survivors Insurance Trust Fund under sub16 paragraph (A) and the life expectancy of the in17 vesting worker (determined under reasonable 

18 actuarial assumptions). 

19 ‘‘(2) FAMILY OR SURVIVOR BENEFITS FOR RE20 LATED INDIVIDUALS.— 

21 ‘‘(A) IN GENERAL.—On the date deter22 mined under subsection (a), in the case of an 

23 investing worker whose SAFE Account has 

24 funds in excess of the amount required to be 

25 transferred under paragraph (1)(A), so much of 
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1 such excess funds as does not exceed the sur2 vivor’s insurance amount shall be transferred to 

3 the Federal Old-Age and Survivors Insurance 

4 Trust Fund and any related individual shall be 

5 entitled to a survivor’s payment at the time 

6 such related individual meets the applicable re7 quirements for a monthly payment under sec8 tion 202. 

9 ‘‘(B) SURVIVOR’S INSURANCE AMOUNT.— 

10 For purposes of this section, the survivor’s in11 surance amount is an amount, determined by 

12 the Social Security Investment Board under 

13 rules established by such Board, which is suffi14 cient to provide survivor’s payments to all re15 lated individuals. 

16 ‘‘(C) SURVIVOR’S PAYMENT.—For pur17 poses of this section, the term ‘survivor’s pay18 ment’ means a monthly payment from the Fed19 eral Old-Age and Survivors Insurance Trust 

20 Fund in an amount which, when added to such 

21 related individual’s monthly benefit (or pro22 jected monthly benefit) under this title, is equal 

23 to the benefit such related individual would be 

24 entitled to under section 202 if the investing 

25 worker had waived the application of this part. 
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1 ‘‘(D) RELATED INDIVIDUAL.—For pur2 poses of this section, the term ‘related indi3 vidual’ means, with respect to an investing 

4 worker, any individual entitled to benefits under 

5 section 202 based on the wages or self-employ6 ment income of such worker. 

7 ‘‘(3) PAYMENT OF EXCESS SAFE ACCOUNT

8 FUNDS.—To the extent funds remain in an investing 

9 worker’s SAFE Account after the transfer required 

10 under paragraphs (1) and (2), such excess assets 

11 shall be payable to the worker in such manner and 

12 in such amounts as determined by the worker. 

13 ‘‘(4) DISTRIBUTION IN THE EVENT OF

14 DEATH.—If the investing worker dies before the date 

15 determined under subsection (a), the balance in the 

16 worker’s SAFE Account shall be distributed in the 

17 following manner: 

18 ‘‘(A) Not more than an amount equal to 

19 the survivor’s insurance amount shall be trans20 ferred to the Federal Old-Age and Survivors In21 surance Trust Fund. 

22 ‘‘(B) The remainder (if any) shall be dis23 tributed in a lump sum, under rules established 

24 by the Social Security Investment Board, to the 
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1 investing worker’s estate, subject to applicable 

2 State laws. 

3 ‘‘SEC. 255. SOCIAL SECURITY INVESTMENT BOARD. 

4 ‘‘(a) ESTABLISHMENT.—There is established within 

5 the Social Security Administration a Social Security In6 vestment Board (in this Act referred to as the ‘Board’). 

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

8 of— 

9 ‘‘(1) 2 members from the private sector ap10 pointed by the President, of whom 1 shall be des11 ignated by the President as Chairman; 

12 ‘‘(2) the Secretary of the Treasury; 

13 ‘‘(3) the Chairman of the Federal Reserve 

14 Board; and 

15 ‘‘(4) the Chairman of the Securities and Ex16 change Commission. 

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

18 subsection (b)(1) shall be made by and with the advice 

19 and consent of the Senate. 

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

21 the Board appointed under subsection (b)(1) shall have 

22 substantial experience, training, and expertise in finance, 

23 investments, or insurance. 

24 ‘‘(e) LENGTH OF APPOINTMENTS.— 
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1 ‘‘(1) TERMS.—A member of the Board ap2 pointed under subsection (b)(1) shall be appointed 

3 for a term of 6 years, except that of the members 

4 first appointed under subsection (b)(1)— 

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

6 a term of 6 years; and 

7 ‘‘(B) the remaining member shall be ap8 pointed for a term of 3 years. 

9 ‘‘(2) VACANCIES.— 

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

11 Board shall be filled in the manner in which the 

12 original appointment was made and shall be 

13 subject to any conditions that applied with re14 spect to the original appointment. 

15 ‘‘(B) COMPLETION OF TERM.—An indi16 vidual chosen to fill a vacancy shall be ap17 pointed for the unexpired term of the member 

18 replaced. 

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

20 shall not expire before the earlier of— 

21 ‘‘(A) the date on which the member’s suc22 cessor takes office; or 

23 ‘‘(B) 1 year after the member’s term is 

24 scheduled to expire. 

25 ‘‘(f) DUTIES.—The Board shall— 
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1 ‘‘(1) maintain SAFE Accounts and the SAFE 

2 Investment Fund in the same manner as the Thrift 

3 Savings Accounts and the Thrift Savings Fund are 

4 maintained by the Thrift Savings Board; 

5 ‘‘(2) review and approve the budget of the 

6 Board; 

7 ‘‘(3) establish policies for the administration of 

8 this part; and 

9 ‘‘(4) carry out any other duties specified under 

10 this part. 

11 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

12 ‘‘(1) IN GENERAL.—The Board may— 

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

14 ‘‘(B) direct the Executive Director to take 

15 such action as the Board considers appropriate 

16 to carry out the provisions of this part and the 

17 policies of the Board; 

18 ‘‘(C) upon the concurring votes of 4 mem19 bers, remove the Executive Director from office 

20 for good cause shown; and 

21 ‘‘(D) take such other actions as may be 

22 necessary to carry out the functions of the 

23 Board. 

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

25 ‘‘(A) not less than once each month; and 
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1 ‘‘(B) at additional times at the call of the 

2 Chairman. 

3 ‘‘(3) EXERCISE OF POWERS.— 

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

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

6 functions and exercise the powers of the Board 

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

8 Three members of the Board shall constitute a 

9 quorum for the transaction of business. 

10 ‘‘(B) VACANCIES.—A vacancy on the 

11 Board shall not impair the authority of a 

12 quorum of the Board to perform the functions 

13 and exercise the powers of the Board. 

14 ‘‘(h) COMPENSATION.— 

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

16 who is not an officer or employee of the Federal 

17 Government shall be compensated at the daily rate 

18 of basic pay for level IV of the Executive Schedule 

19 for each day during which such member is engaged 

20 in performing a function of the Board. 

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

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

24 United States Code, while traveling away from such 
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1 member’s home or regular place of business in the 

2 performance of the duties of the Board. 

3 ‘‘(i) APPOINTMENT OF EXECUTIVE DIRECTOR.— 

4 ‘‘(1) IN GENERAL.—The Board shall appoint, 

5 without regard to the provisions of law governing 

6 appointments in the competitive service, an Execu7 tive Director by action agreed to by a majority of 

8 the members of the Board. 

9 ‘‘(2) REQUIREMENTS.—The Executive Director 

10 shall have substantial experience, training, and ex11 pertise in finance, investments, and insurance. 

12 ‘‘(3) DUTIES.—The Executive Director shall— 

13 ‘‘(A) carry out the policies established by 

14 the Board; 

15 ‘‘(B) invest and manage the SAFE Invest16 ment Fund in accordance with the investment 

17 policies established by the Board; 

18 ‘‘(C) administer the provisions this part; 

19 and 

20 ‘‘(D) prescribe such regulations (other 

21 than regulations relating to fiduciary respon22 sibilities) as may be necessary for the adminis23 tration of this part. 

24 ‘‘(4) ADMINISTRATIVE AUTHORITY.—The Exec25 utive Director may— 
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1 ‘‘(A) appoint such personnel as may be 

2 necessary to carry out the provisions of this 

3 part; 

4 ‘‘(B) subject to approval by the Board, 

5 procure the services of experts and consultants 

6 under section 3109 of title 5, United States 

7 Code; 

8 ‘‘(C) secure directly from an executive 

9 agency, the United States Postal Service, or the 

10 Postal Rate Commission any information nec11 essary to carry out the provisions of such part 

12 and the policies of the Board; 

13 ‘‘(D) make such payments out of sums de14 scribed in subsection (l) as the Executive Direc15 tor determines are necessary to carry out the 

16 provisions of such part and the policies of the 

17 Board; 

18 ‘‘(E) accept and use the services of individ19 uals employed intermittently in the Government 

20 service and reimburse such individuals for trav21 el expenses, as authorized by section 5703 of 

22 title 5, United States Code, including per diem 

23 as authorized by section 5702 of such title; 

24 ‘‘(F) except as otherwise expressly prohib25 ited by law or the policies of the Board, dele-
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1 gate any of the Executive Director’s functions 

2 to such employees under the Board as the Ex3 ecutive Director may designate and authorize 

4 such successive redelegations of such functions 

5 to such employees under the Board as the Ex6 ecutive Director may consider to be necessary 

7 or appropriate; and 

8 ‘‘(G) take such other actions as are appro9 priate to carry out the functions of the Execu10 tive Director. 

11 ‘‘(j) DISCHARGE OF RESPONSIBILITIES.—The mem12 bers of the Board shall discharge their responsibilities 

13 solely in the interest of SAFE Account holders and bene14 ficiaries under this part. 

15 ‘‘(k) ANNUAL INDEPENDENT AUDIT.—The Board 

16 shall annually engage an independent qualified public ac17 countant to audit the activities of the Board. 

18 ‘‘(l) SOURCE OF FUNDS.—Payments authorized 

19 under this section shall be paid from administrative fees 

20 charged in accordance with section 253(c). 

21 ‘‘(m) SUBMISSION OF BUDGET TO CONGRESS.—The 

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

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

24 an annual budget of the expenses and other items relating 

25 to the Board which shall be included as a separate item 
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1 in the budget required to be transmitted to Congress 

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

3 ‘‘(n) SUBMISSION OF LEGISLATIVE RECOMMENDA4 TIONS.—The Board may submit to the President, and, at 

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

6 any legislative recommendations of the Board relating to 

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

8 of law.’’. 

9 (b) EFFECTIVE DATE AND NOTICE REQUIRE10 MENTS.— 

11 (1) EFFECTIVE DATE.—The amendments made 

12 by this section shall apply to designations of ac13 counts made with respect to payroll periods begin14 ning on or after January 1, 2007. 

15 (2) NOTICE REQUIREMENTS.— 

16 (A) IN GENERAL.—Not later than January 

17 1, 2007, the Commissioner of Social Security 

18 shall— 

19 (i) send to the last known address of 

20 each eligible individual a description of the 

21 program established by the amendments 

22 made by this section, that shall be written 

23 in the form of a pamphlet in language that 

24 may be readily understood by the average 

25 worker; 
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1 (ii) provide for toll-free access by tele2 phone from all localities in the United 

3 States and access by the Internet to the 

4 Social Security Administration through 

5 which individuals may obtain information 

6 and answers to questions regarding such 

7 program; and 

8 (iii) provide information to the media 

9 in all localities of the United States about 

10 such program and such toll-free access by 

11 telephone and access by Internet. 

12 (B) ELIGIBLE INDIVIDUAL.—For purposes 

13 of this paragraph, the term ‘‘eligible individual’’ 

14 means an individual who, as of the date of the 

15 pamphlet sent pursuant to subparagraph (A), is 

16 indicated within the records of the Social Secu17 rity Administration as being credited with 1 or 

18 more quarters of coverage under section 213 of 

19 the Social Security Act (42 U.S.C. 413). 

20 (C) MATTERS TO BE INCLUDED.—The 

21 Commissioner of Social Security shall include 

22 with the pamphlet sent to each eligible indi23 vidual pursuant to subparagraph (A)— 

24 (i) a statement of the number of quar25 ters of coverage indicated in the records of 
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1 the Social Security Administration as of 

2 the date of the description as credited to 

3 such individual under section 213 of such 

4 Act and the date as of which such records 

5 may be considered accurate; and 

6 (ii) the number for toll-free access by 

7 telephone established by the Commissioner 

8 pursuant to subparagraph (A)(ii). 

9 SEC. 102. ADJUSTMENTS TO PRIMARY INSURANCE 

10 AMOUNTS UNDER PART A OF TITLE II OF THE 

11 SOCIAL SECURITY ACT FOR INVESTING 

12 WORKERS WITH SAFE ACCOUNTS. 

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

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

15 following: 

16 ‘‘Adjustment of Primary Insurance Amount in Relation 

17 to Deposits Made to SAFE Accounts 

18 ‘‘(j)(1) Except as provided in paragraph (2), an indi19 vidual’s primary insurance amount as determined in ac20 cordance with this section (before adjustments made 

21 under subsection (i)) shall be equal to— 

22 ‘‘(A) the amount which would be so determined 

23 without the application of this subsection, multiplied 

24 by 

25 ‘‘(B) 1 minus the ratio of— 
24 

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1 ‘‘(i) the sum of— 

2 ‘‘(I) the total of all amounts which 

3 have been credited pursuant to section 

4 252(b) to the SAFE Account held by such 

5 individual; plus 

6 ‘‘(II) accrued interest on such 

7 amounts compounded annually up to the 

8 date of initial benefit entitlement based on 

9 the earning of the individual’s SAFE Ac10 count, assuming an interest rate equal to 

11 the projected interest rate of the Federal 

12 Old-Age and Survivors Trust Fund; to 

13 ‘‘(ii) the expected present value of all fu14 ture benefits paid based on the individual’s 

15 earnings, as of the date of initial benefit entitle16 ment based on such earnings, assuming future 

17 mortality and interest rates for the Federal 

18 Old-Age and Survivors Trust Fund used in the 

19 intermediate projections of the most recent 

20 Board of Trustees report under section 201. 

21 ‘‘(2) In the case of an individual who becomes entitled 

22 to disability insurance benefits under section 223, such in23 dividual’s primary insurance amount shall be determined 

24 without regard to paragraph (1).’’. 
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1 (b) CONFORMING AMENDMENT TO RAILROAD RE2 TIREMENT ACT OF 1974.—Section 1 of the Railroad Re3 tirement Act of 1974 (45 U.S.C. 231) is amended by add4 ing at the end the following: 

5 ‘‘(s) In applying applicable provisions of the Social 

6 Security Act for purposes of determining the amount of 

7 the annuity to which an individual is entitled under this 

8 Act, section 215(j) of the Social Security Act and part 

9 B of title II of such Act shall be disregarded.’’. 

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

11 this section shall apply with respect to computations and 

12 recomputations of primary insurance amounts occurring 

13 after December 31, 2006. 

14 SEC. 103. TAX TREATMENT OF INVESTMENT-BASED SOCIAL 

15 SECURITY. 

16 (a) IN GENERAL.— 

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

18 of the Internal Revenue Code of 1986 (relating to 

19 exempt organizations) is amended by adding at the 

20 end the following new part: 

21 ‘‘PART IX—INVESTMENT-BASED SOCIAL 

22 SECURITY 

‘‘Sec. 530A. Investment-based social security. 
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1 ‘‘SEC. 530A. INVESTMENT-BASED SOCIAL SECURITY. 

2 ‘‘(a) GENERAL RULE.—The SAFE Investment Fund 

3 and each SAFE Account are exempt from taxation under 

4 this subtitle. Notwithstanding the preceding sentence, a 

5 personal social security savings account is subject to the 

6 taxes imposed by section 511 (relating to imposition of 

7 tax on unrelated business income of charitable, etc. orga8 nizations). 

9 ‘‘(b) DISTRIBUTIONS.— 

10 ‘‘(1) FEDERAL ANNUITY PAYMENT.—Any Fed11 eral annuity payment (as defined under section 

12 254(b)(1) of the Social Security Act) shall be treat13 ed as a social security benefit for purposes of section 

14 86. 

15 ‘‘(2) DISTRIBUTION OF EXCESS ASSETS.—Any 

16 distribution from a SAFE Account under section 

17 254(b)(3) of the Social Security Act shall be includ18 ible in gross income under rules under section 72. 

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

20 ‘‘(1) SAFE ACCOUNT.—The term ‘SAFE Ac21 count’ means an account established under section 

22 252(a) of the Social Security Act. 

23 ‘‘(2) SAFE INVESTMENT FUND.—The term 

24 ‘SAFE Investment Fund’ means the fund estab25 lished under section 253 of the Social Security 

26 Act.’’. 
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1 (2) CLERICAL AMENDMENT.—The table of 

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

3 amended by adding after the item relating to part 

4 VIII the following new item:

‘‘PART IX. INVESTMENT-BASED SOCIAL SECURITY.’’.

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2006. 

8 SEC. 104. STUDY ON USE OF PRIVATE ANNUITIES FOR SAFE 

9 ACCOUNT DISTRIBUTIONS. 

10 (a) IN GENERAL.—The Social Security Investment 

11 Board shall conduct a study on the use of annuities pro12 vided by private-sector financial institutions for the dis13 tribution of SAFE account funds under section 254 of the 

14 Social Security Act. 

15 (b) REPORT.—Not later than 3 years after the date 

16 of the enactment of this Act, the Social Security Invest17 ment Board shall submit to the Committee on Finance 

18 of the Senate and the Committee on Ways and Means of 

19 the House of Representatives a report describing the re20 sults of the study under subsection (a). 

21 SEC. 105. STUDY REGARDING FINANCIAL LITERACY. 

22 (a) STUDY.— 

23 (1) IN GENERAL.—The Social Security Invest24 ment Board shall conduct a thorough study of all 
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1 matters relating to programs to increase the finan2 cial literacy of Americans. 

3 (2) MATTERS STUDIED.—The matters studied 

4 by the Social Security Investment Board shall in5 clude— 

6 (A) existing Federal and non-Federal fi7 nancial literacy programs, including a review 

8 and performance evaluation of such programs; 

9 (B) the coordination of existing Federal 

10 and non-Federal financial education efforts; and 

11 (C) ideas for new public initiatives to in12 crease the financial literacy of all Americans. 

13 (b) RECOMMENDATIONS.—The Social Security In14 vestment Board shall develop recommendations on— 

15 (1) streamlining existing financial literacy pro16 grams; 

17 (2) increasing financial literacy for all Ameri18 cans; and 

19 (3) new avenues for public-private partnerships 

20 in financial literacy. 

21 (c) REPORT.—Not later than 6 months after the date 

22 of the enactment of this Act, the Social Security Invest23 ment Board shall submit a report to the President and 

24 to Congress which shall contain a detailed statement of 

25 the findings and conclusions of the Social Security Invest-
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1 ment Board, together with its recommendations for such 

2 legislation and administrative actions as it considers ap3 propriate. 

4 TITLE II—DEBT-BASED SOCIAL 

5 SECURITY 

6 Subtitle A—Adjustments 

7 SEC. 201. MODIFICATION TO RETIREMENT AGE. 

8 Section 215(l)(1) of the Social Security Act (42 

9 U.S.C. 416(l)(1)) is amended— 

10 (1) by striking ‘‘and’’ at the end of subpara11 graph (D); 

12 (2) by inserting ‘‘and before January 1, 2023,’’ 

13 after ‘‘December 31, 2021,’’ in subparagraph (E); 

14 (3) by striking the period at the end of sub15 paragraph (E) and by inserting ‘‘; and’’; and 

16 (4) by adding at the end the following: 

17 ‘‘(F) with respect to an individual who at18 tains early retirement age after December 31, 

19 2022, 68 years of age.’’. 

20 SEC. 202. MODIFICATION OF PIA FACTORS TO REFLECT 

21 CHANGES IN LIFE EXPECTANCY. 

22 Section 215(a)(1) of the Social Security Act (42 

23 U.S.C. 415(a)(1)(B)) is amended by redesignating sub24 paragraph (D) as subparagraph (F) and by inserting after 

25 subparagraph (C) the following: 
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1 ‘‘(D)(i) For individuals who initially become eligible 

2 for old-age insurance benefits in any calendar year after 

3 2023, each of the percentages under clauses (i), (ii), and 

4 (iii) of subparagraph (A) shall be multiplied by the appli5 cable factor for such year with respect to each year after 

6 2023 and before the year following the year of initial eligi7 bility. 

8 ‘‘(ii) For purposes of clause (i), the term ‘applicable 

9 factor’ means the actuarial number, expressed as a per10 centage and determined by the Commissioner of Social Se11 curity after taking into account the actuarial reduction 

12 under section 202(q) (without regard to the amendments 

13 made by section 203 of the Saving Social Security Act 

14 of 2005), representing the historical increase in longevity 

15 of life for the most recent year. 

16 ‘‘(E) For any individual who initially becomes eligible 

17 for disability insurance benefits in any calendar year after 

18 2023, the primary insurance amount for such individual 

19 shall be equal to the greater of— 

20 ‘‘(i) such amount as determined under this 

21 paragraph, or 

22 ‘‘(ii) such amount as determined under this 

23 paragraph without regard to subparagraph (D) 

24 thereof.’’. 
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1 SEC. 203. ACTUARIAL ADJUSTMENT FOR RETIREMENTS. 

2 (a) IN GENERAL.—Section 202(q) of the Social Secu3 rity Act (42 U.S.C. 402(q)) is amended— 

(1) in paragraph (1)(A), by striking ‘‘5 4 ⁄9’’ and 

5 inserting ‘‘the applicable old-age benefit fraction (de6 termined under paragraph (12)(A))’’, and by striking ‘‘25 7 ⁄36’’ and inserting ‘‘the applicable spousal 

8 benefit fraction (determined under paragraph 

9 (12)(B))’’; and 

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

11 ‘‘(12) For purposes of paragraph (1)(A)— 

12 ‘‘(A) the ‘applicable old-age benefit fraction’ for 

13 an individual who attains the age of 62 in— 

‘‘(i) any year before 2024, is 5 14 ⁄9; 

‘‘(ii) 2024, is 7 15 ⁄12; 

‘‘(iii) 2025, is 11 16 ⁄18; 

‘‘(iv) 2026, is 23 17 ⁄36; 

‘‘(v) 2027, is 2 18 ⁄3; and 

‘‘(vi) 2028 or any succeeding year, is 25 19 ⁄36; 

20 and 

21 ‘‘(B) the ‘applicable spousal benefit fraction’ for 

22 an individual who becomes eligible for wife’s or hus23 band’s insurance benefits in— 

‘‘(i) any year before 2024, is 25 24 ⁄36; 

‘‘(ii) 2024, is 13 25 ⁄18; 

‘‘(iii) 2025, is 27 26 ⁄36; 
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‘‘(iv) 2026, is 7 1 ⁄9; 

‘‘(v) 2027, is 29 2 ⁄36; and 

‘‘(vi) 2028 or any succeeding year, is 5 3 ⁄6.’’. 

4 (b) MONTHS BEYOND FIRST 36 MONTHS.—Section 

5 202(q) of such Act (42 U.S.C. 402(q)) (as amended by 

6 subsection (a)) is amended— 

7 (1) in paragraph (9)(A), by striking ‘‘five8 twelfths’’ and inserting ‘‘the applicable fraction (de9 termined under paragraph (13))’’; and 

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

11 ‘‘(13) For purposes of paragraph (9)(A), the ‘applica12 ble fraction’ for an individual who becomes eligible for old13 age, wife’s, or husband’s insurance benefits in— 

‘‘(A) any year before 2024, is 5 14 ⁄12; 

‘‘(B) 2024, is 16 15 ⁄36; 

‘‘(C) 2025, is 16 16 ⁄36; 

‘‘(D) 2026, is 17 17 ⁄36; 

‘‘(E) 2027, is 17 18 ⁄36; and 

‘‘(F) 2028 or any succeeding year, is 1 19 ⁄2.’’. 

20 (c) ELIGIBILITY.—Section 202(q) of such Act (as 

21 amended by the preceding provisions of this section) is 

22 amended further by adding at the end the following new 

23 paragraph: 

24 ‘‘(14) For purposes of this subsection, an individual 

25 shall be deemed eligible for a benefit for a month if, upon 
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1 filing application therefor in such month, such individual 

2 would be entitled to such benefit for such month.’’. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this subsection shall apply to individuals who, in connec5 tion with old-age, wife’s, and husband’s insurance benefits 

6 under title II of the Social Security Act, become eligible 

7 for such benefits (within the meaning of section 

8 202(q)(14) of such Act (as amended by this subsection)) 

9 in years after 2023. 

10 Subtitle B—Maintenance of Social 

11 Security Trust Funds 

12 SEC. 211. MAINTENANCE OF ADEQUATE BALANCES IN THE 

13 SOCIAL SECURITY TRUST FUNDS. 

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

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

16 following new subsection: 

17 ‘‘(o) In addition to amounts otherwise appropriated 

18 under the preceding provisions of this section to the Trust 

19 Funds established under this section, there is hereby ap20 propriated for each fiscal year to each of such Trust 

21 Funds, from amounts in the general fund of the Treasury 

22 not otherwise appropriated, such sums as may be nec23 essary from time to time to maintain the balance ratio 

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

25 calendar year commencing during such fiscal year, at not 
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1 less than 100 percent. The sums to be appropriated under 

2 the preceding sentence shall be determined by the Com3 missioner of Social Security and certified by the Commis4 sioner to each House of the Congress not later than Octo5 ber 1 of such fiscal year. In making such determination 

6 and certification, the Commissioner shall use the inter7 mediate actuarial assumptions used by the Board of 

8 Trustees of the Trust Funds in its most recent annual 

9 report to the Congress prepared pursuant to subsection 

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

11 any such certification to the Secretary of the Treasury, 

12 and upon receipt thereof, such Secretary shall promptly 

13 take appropriate actions in accordance with the certifi14 cation.’’. 

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

16 subsection (a) shall apply with respect to fiscal years be17 ginning after the date of the enactment of this Act. 

Æ