Savings Account for Every American Act of 2018

To provide for each American the opportunity to provide for his or her retirement through a S.A.F.E. account, and for other purposes. 1. Short title and table of contents (a) Short title This Act may be cited as the Savings Account for Every American Act of 2018 (b) Table of contents The table of contents is as follows: Sec. 1. Short title and table of contents. TITLE I—Personal retirement program Sec. 101. Definitions. Sec. 102. S.A.F.E. account payroll deduction programs. Sec. 103. Designation of S.A.F.E. accounts. Sec. 104. Self-employed individuals. Sec. 105. Elective participation. Sec. 106. Penalties. Sec. 107. Federal civilian and military personnel. TITLE II—Tax-exempt S.A.F.E. accounts Sec. 201. S.A.F.E. accounts. Sec. 202. Effective date. TITLE III—Conforming amendments to the Social Security Act and the Internal Revenue Code of 1986 Sec. 301. Reductions in and exemptions from FICA taxes and SECA taxes with respect to eligible individuals. Sec. 302. Exclusion of eligible individuals from old-age, survivors, and disability insurance coverage. Sec. 303. Information provided in social security account statements. I Personal retirement program 101. Definitions For purposes of this title— (1) Account holder The term account holder (2) Business day The term business day (3) Covered employer The term covered employer (4) Eligible individual The term eligible individual (5) Employment The term employment (6) Prescribed employee contribution The term prescribed employee contribution wages (7) Prescribed self-employment contribution The term prescribed self-employment contribution (A) 6.2 percent of the amount of such self-employment income for such calendar year, to the extent that such self-employment income does not exceed, for such calendar year, the contribution and benefit base for such calendar year under section 230 of the Social Security Act (B) the total of all prescribed employee contributions and prescribed employer contributions payable with respect to such eligible individual for such calendar year. Effective with the commencement of the 16th calendar year for which the eligible individual’s election under section 105 is in effect, 12.4 percent 6.2 percent (8) Prescribed employer contribution The term prescribed employer contribution Social Security Act (9) S.A.F.E. account The term S.A.F.E. account section 222(c) (10) Self-employment income The term self-employment income Social Security Act (11) Wages The term wages Social Security Act 102. S.A.F.E. account payroll deduction programs (a) In general Each person who is a covered employer for any calendar year shall have in effect throughout such calendar year a S.A.F.E. account payroll deduction program for such person’s employees who are eligible individuals. (b) Requirements For purposes of this Act, the term S.A.F.E. account payroll deduction program (1) under such program, the prescribed employee contribution is deducted from the wages of each employee who is an eligible individual and paid as a contribution on behalf of the employee to a S.A.F.E. account of such employee designated in accordance with section 103, (2) under such program, the covered employer— (A) makes timely payment of the amount so deducted as a contribution to the designated S.A.F.E. account, and (B) effective upon receipt from the eligible individual of certification (in accordance with regulations which shall be prescribed by the Commissioner of Social Security) of the commencement of the 16th calendar year for which the eligible employee’s election under section 105 has been in effect, makes timely payment, together with the amount so deducted, of the prescribed employer contribution with respect to the eligible individual, under regulations of the Commissioner of Social Security applying the same principles relating to the timeliness of payment as are applicable under chapter 62 of the Internal Revenue Code of 1986 with respect to taxes under chapter 21 of such Code, and (3) the employer receives no compensation for the cost of administering such program. (c) Amounts otherwise payable may be accumulated by employer in certain cases If, under the terms of the governing instruments creating a S.A.F.E. account designated under section 103, contributions below a specified amount will not be accepted, the requirements of subsection (b)(2) shall be treated as met if amounts deducted from the wages of an employee who is an eligible individual, together with prescribed employer contributions (if any), are accumulated by the covered employer and paid to such account otherwise in accordance with subsection (b)(2) with reference to the first day on which the accumulated amount exceeds such specified amount. 103. Designation of S.A.F.E. accounts (a) In general Except as provided in subsection (b), a S.A.F.E. account to which contributions with respect to any employee who is an eligible individual are required to be paid under section 102 shall be such an account designated by such employee to such employer not later than 10 business days after the date on which such employee becomes an employee of such employer. Any such designation shall be made in such form and manner as may be prescribed in regulations of the Commissioner of Social Security. (b) Designation in absence of timely designation by employee In any case in which no timely designation of a S.A.F.E. account is made, the covered employer shall designate such account in accordance with regulations of the Commissioner of Social Security. (c) Subsequent substitution of accounts The Commissioner of Social Security shall provide by regulation for subsequent designation of a S.A.F.E. account by an account holder in lieu of an account previously designated by such account holder under this section. 104. Self-employed individuals (a) In general In the case of an eligible individual who has self-employment income for any calendar year, such individual shall make timely payments to a S.A.F.E. account designated by such individual of the prescribed self-employment contribution with respect to such individual for such calendar year in accordance with regulations of the Commissioner of Social Security, applying the same principles relating to timeliness of payment as are applicable under chapter 62 (b) Designation of account The designation of a S.A.F.E. account for payment of prescribed self-employment contributions shall be made in such form and manner as may be prescribed in regulations of the Commissioner of Social Security. (c) Periodic payment The Commissioner of Social Security shall provide by regulation for periodic installment payments during the calendar year of prescribed self-employment contributions for each eligible individual, taking into account, as appropriate for each period, prescribed employee contributions for such individual. 105. Elective participation (a) Election Any individual who has been assigned a social security account number under section 205(c)(2)(B) of the Social Security Act (b) Election ineffective if entitled to social security benefits Any election under this section shall not take effect if, as of the effective date of the election, the individual is entitled to an old-age insurance benefit under section 202(a) of the Social Security Act (c) Irrevocability subject to grace period (1) In general Unless revoked in accordance with paragraph (2), an election under this section shall be irrevocable. (2) Two-year grace period (A) In general An individual may revoke an election under this section by filing with the Commissioner of Social Security, the Secretary of the Treasury, and each person (if any) who is an employer of such individual on the date of the filing, in such form and manner as shall be prescribed in regulations of the Commissioner (in consultation with the Secretary of the Treasury), a written and signed revocation of the election at any time before the end of the two-year period beginning with the effective date of the election. A revocation under this subsection shall take effect January 1 following the date of the filing of the revocation, except that a revocation filed during the 90-day period beginning with the date of the filing of the election shall take effect as of the effective date of the election. Upon the effective date of a revocation under this subsection, entitlement to benefits under title II of the Social Security Act (B) Reduction in benefits The primary insurance amount, as determined under section 215 of the Social Security Act 106. Penalties (a) Failure To establish S.A.F.E. account payroll deduction program Any covered employer who fails to meet the requirements of section 102 for any calendar year shall be subject to a civil penalty of not to exceed— (1) $250,000, in the case of an employer who is an individual, or (2) $500,000, in any other case. (b) Failure To make deductions required under program Any covered employer who fails to timely deduct in full the amount from the wages of an employee who is an eligible individual as required under an applicable S.A.F.E. account payroll deduction program shall be subject to a civil penalty for each such failure of not to exceed— (1) $250,000, in the case of an employer who is an individual, or (2) $500,000, in any other case. (c) Failure To pay deducted wages to S.A.F.E. account If an amount deducted under a S.A.F.E. account payroll deduction program from the wages of an employee who is an eligible individual is not timely paid in full to the designated S.A.F.E. account in accordance with section 102, the covered employer failing to make such payment— (1) shall be subject to a civil penalty for each such failure of not to exceed— (A) $250,000, in the case of an employer who is an individual, or (B) $500,000, in any other case, and (2) shall be liable to the employee for interest on the unpaid amount at a rate equal to 10 percentage points in excess of the Federal short-term rate under section 1274(d)(1) (d) Failure To pay prescribed self-Employment contributions to S.A.F.E. account Any eligible individual failing to timely pay in full a prescribed self-employment contribution to a designated S.A.F.E. account as required under section 104 shall be subject to a civil penalty for each such failure of not to exceed $250,000, plus interest on the unpaid amount at a rate equal to 10 percentage points in excess of the Federal short-term rate under section 1274(d)(1) (e) Rules for application of section (1) Penalties assessed by Commissioner of Social Security Any civil penalty assessed by this section shall be imposed by the Commissioner of Social Security and collected in a civil action. (2) Compromises The Commissioner may compromise the amount of any civil penalty imposed by this section. (3) Authority to waive penalty in certain cases The Commissioner may waive the application of this section with respect to any failure if the Commissioner determines that such failure is due to reasonable cause and not to intentional disregard of rules and regulations. 107. Federal civilian and military personnel (a) In general Not later than the last day of the calendar year during which the date of enactment of this Act occurs, the Office of Personnel Management, after appropriate study, shall submit to the President and each House of Congress a written report containing recommendations on how to provide for the application of this Act with respect to Federal civilian and military personnel. (b) Requirements The report— (1) shall be prepared in consultation with the Social Security Administration, the Securities and Exchange Commission, and other appropriate agencies; and (2) shall be accompanied by draft legislation which, if enacted, would carry out the recommendations contained in such report. (c) Provisions relating to the continued operation of existing retirement systems To the extent that the report and draft legislation relate to provisions of law in effect before the date of enactment of this Act, each shall address at least the following: (1) Federal employees retirement system (A) Section 8401(11) of title 5, United States Code (relating to the definition of an employee Social Security Act chapter 21 (B) Section 8421 of such title (relating to annuity supplement), which includes provisions incorporating the notion of the period of time for which the individual is or would be entitled to old-age insurance benefits under title II of the Social Security Act (C) Section 8442 of such title (relating to rights of a widow or widower), which includes provisions under which a supplementary annuity for a widow or widower is not payable to anyone who would not be entitled to certain benefits under the Social Security Act Social Security Act (D) Section 8443 of such title (relating to rights of a child), which includes provisions under which, as part of the formula for computing the amount of a survivor annuity for a child, there is incorporated the notion of the amount of child’s insurance benefits which are or would be payable under title II of the Social Security Act (2) Civil service retirement system (A) Section 8334(k) of such title (relating to special rules for determining deductions and contributions for individuals subject to offset-83 (B) Section 8349 of such title (relating to offset based on certain benefits under the Social Security Act Social Security Act (3) Coordination provisions Provisions of law involving a reduction or other adjustment in retirement benefits (or eligibility therefor), based on any individual’s eligibility for benefits under title II of the Social Security Act (4) Other retirement systems Similar provisions of law under other retirement systems covering Federal civilian or military personnel. (d) Provisions relating to the new system To the extent that the report and draft legislation relate to the implementation of any other title of this Act, each shall address at least the following: (1) What the specifications for the S.A.F.E. account payroll deduction program or programs covering Federal civilian and military personnel shall be or, alternatively, how those specifications shall be developed. (2) Which agencies or instrumentalities of the Federal Government shall be responsible for operating or maintaining which aspects of the program or programs referred to in paragraph (1). (3) Which penalty provisions are appropriate or inappropriate with respect to the Federal Government in its capacity as a covered employer II Tax-exempt S.A.F.E. accounts 201. S.A.F.E. accounts (a) In general Part VII of subchapter B of chapter 1 224. S.A.F.E. accounts (a) Deduction allowed In the case of an individual, there shall be allowed as a deduction the aggregate amount paid in cash during the taxable year by or on behalf of such individual to a S.A.F.E. account of such individual. (b) Limitation The amount allowable as a deduction under subsection (a) for any taxable year shall not exceed 6.2 percent of the lesser of— (1) the contribution and benefit base (as determined under section 230 of the Social Security Act (2) the sum of— (A) the amount of wages (as defined in section 3121(a)) received during such calendar year, and (B) the amount of the self-employment income (as defined in section 1402) of such individual for the taxable year. Effective with the commencement of the 16th calendar year for which the individual’s election under section 105 of the Savings Account for Every American Act of 2018 (c) S.A.F.E. account For purposes of this section, the term S.A.F.E. account (1) Except in the case of rollover contributions from another S.A.F.E. account of such individual— (A) no contribution will be accepted unless it is in cash, (B) contributions will not be accepted for the taxable year in excess of 6.2 percent of the contribution and benefit base (as determined under section 230 of the Social Security Act (C) any contributions with respect to an account holder which are not accepted pursuant to this paragraph are promptly refunded directly to the account holder. In the case of any such individual, effective for taxable years beginning with or after the 16th calendar year for which the individual’s election under section 105 of the Savings Account for Every American Act of 2018 12.4 percent 6.2 percent (2) The trustee is a bank (as defined in section 408(n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section. (3) No part of the trust funds will be invested in life insurance contracts. (4) The interest of an individual in the balance in his account is nonforfeitable. (5) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund. (d) Tax treatment of distributions (1) In general Except as otherwise provided in this subsection, any amount distributed out of a S.A.F.E. account shall be included in gross income of the distributee for the taxable year in which the distribution is received. Notwithstanding any other provision of this title (including chapters 11 and 12), the basis of any person in such an account is zero. (2) Exceptions for distributions after age 59 1/2 Paragraph (1) shall not apply to any distribution out of a S.A.F.E. account— (A) made on or after the date on which the account beneficiary attains age 59 1/2 (B) made to the account beneficiary (or to the estate of the beneficiary) on or after the death of the account beneficiary. (3) Exceptions for distributions to purchase certain insurance Paragraph (1) shall not apply to any distribution out of a S.A.F.E. account to the account beneficiary to the extent such distributions do not exceed the sum of the expenses paid or incurred during the taxable year for— (A) any qualified long-term care insurance contract (but only to the extent of eligible long-term care premiums (as defined in section 213(d)(10)), (B) disability insurance, or (C) term life insurance. (4) Exceptions for certain other distributions Rules similar to the rules of paragraphs (3), (4), (5), and (6) of section 408(d) shall apply for purposes of this section. (e) Tax treatment of accounts (1) Exemption from tax A S.A.F.E. account is exempt from taxation under this subtitle unless such account has ceased to be a S.A.F.E. account by reason of paragraph (2). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations). (2) Account terminations Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to S.A.F.E. accounts, and any amount treated as distributed under such rules shall be treated as not used to pay expenses described in subsection (d)(3). (f) Additional tax on amounts included in gross income If any distribution from a S.A.F.E. account is includible in gross income of the account beneficiary, the tax liability of such beneficiary under this chapter for the taxable year in which the distribution is received shall be increased by an amount equal to 20 percent of the amount of the distribution. (g) Other definition and special rules (1) Account beneficiary For purposes of this section, the term account beneficiary (2) Certain rules to apply Rules similar to the following rules shall apply for purposes of this section: (A) Section 219(d)(2) (relating to no deduction for rollovers). (B) Section 219(f)(3) (relating to time when contributions deemed made). (C) Section 219(f)(5) (relating to employer payments). (D) Section 408(g) (relating to community property laws). (E) Section 408(h) (relating to custodial accounts). (h) Reports The trustee of a S.A.F.E. account shall make such reports regarding such account to the Secretary and to the individual for whose benefit the account is maintained with respect to contributions, distributions, and such other matters as the Secretary may by regulation prescribe. The reports required by this subsection shall be filed at such time and in such manner, and furnished to such individuals at such time and in such manner, as may be required by such regulations. . (b) Deduction allowed in arriving at adjusted gross income Subsection (a) of section 62 of such Code is amended by inserting at the end the following new paragraph: (22) S.A.F.E. account contributions The deduction allowed by section 224. . (c) Tax on excess contributions (1) Subsection (a) of section 4973 of such Code (relating to tax on excess contributions to individual retirement accounts, etc.) is amended by striking or or (7) a S.A.F.E. account (within the meaning of section 224(c)), . (2) Section 4973 of such Code is amended by adding at the end the following new subsection: (i) Excess contributions to S.A.F.E. accounts For purposes of this section, in the case of S.A.F.E. accounts (within the meaning of section 224(c)), the term excess contributions (1) the excess (if any) of— (A) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions), over (B) the amount allowable as a deduction under section 224 for such contributions, and (2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of— (A) the distributions out of the accounts which were included in gross income under rules similar to the rules of section 408(d)(5) which apply to such accounts by reason of section 224(d)(4), and (B) the excess (if any) of— (i) the maximum amount allowable as a deduction under section 224(b) for the taxable year, over (ii) the amount contributed to the accounts for the taxable year. For purposes of this subsection, any contribution which is distributed out of the S.A.F.E. account in a distribution to which the rules similar to the rules of section 408(d)(4) which apply to such accounts by reason of section 224(d)(4) shall be treated as an amount not contributed. . (d) Tax on prohibited transactions (1) In general Paragraph (1) of section 4975(e) of such Code (relating to prohibited transactions) is amended by striking or (G) a S.A.F.E. account described in section 224(c), or . (2) Special rule Subsection (c) of section 4975 of such Code is amended by adding at the end the following new paragraph: (7) Special rule for S.A.F.E. accounts An individual for whose benefit a S.A.F.E. account is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 224(e)(2) applies with respect to such transaction. . (e) Failure To provide reports on S.A.F.E. accounts Paragraph (2) of section 6693(a) of such Code (relating to failure to provide reports on individual retirement accounts or annuities) is amended by striking and , and (G) Section 224(h) (relating to S.A.F.E. accounts). . (f) Clerical amendments (1) The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 224 and inserting the following new items: Sec. 224. S.A.F.E. accounts. Sec. 225. Cross references. . (2) The table of sections for chapter 43 of such Code is amended by striking the item relating to section 4973 and inserting the following new item: Sec. 4973. Tax on excess contributions to certain tax-favored accounts and annuities, etc. . 202. Effective date The amendments made by this title shall apply to contributions made for taxable years beginning on or after the first day of the first calendar year beginning after the date of enactment of this Act. III Conforming amendments to the Social Security Act and the Internal Revenue Code of 1986 301. Reductions in and exemptions from FICA taxes and SECA taxes with respect to eligible individuals (a) FICA tax on employees Section 3101 (1) in subsection (a), by striking In addition Subject to subsection (c), in addition (2) by redesignating subsection (c) as subsection (d); and (3) by inserting after subsection (b) the following new subsection: (c) Exemption from OASDI tax for eligible individuals Subsection (a) shall not apply with respect to wages received by an eligible individual (as defined in section 101(4) of the Savings Account for Every American Act of 2018 . (b) FICA tax on employers Section 3111 of such Code (relating to OASDI tax on employees) is amended— (1) in subsection (a), by striking In addition Subject to subsection (c), in addition (2) by redesignating subsection (c) as subsection (d); and (3) by inserting after subsection (b) the following new subsection: (c) Exemption from OASDI tax with respect to eligible individuals In the case of an eligible individual (as defined in section 101(4) of the Savings Account for Every American Act of 2018 . (c) Reduction In and exemption from self-Employment tax Subsection (a) of section 1401 of such Code (relating to OASDI tax on self-employment income) is amended— (1) in subsection (a), by striking In addition Subject to subsection (c), in addition (2) by redesignating subsection (c) as subsection (d); and (3) by inserting after subsection (b) the following new subsection: (c) Adjustment to OASDI tax (1) Reduction In the case of an eligible individual (as defined in section 101(4) of the Savings Account for Every American Act of 2018 (2) Exemption In the case of such an eligible individual, effective for taxable years beginning with or during the 16th calendar year for which such individual’s election under such section 105 is effective, subsection (a) shall not apply. . (d) Effective date The amendments made by this section shall apply with respect to wages received on or after the first day of the first calendar year beginning after the date of enactment of this Act, and with respect to self-employment income for taxable years beginning after such first day. 302. Exclusion of eligible individuals from old-age, survivors, and disability insurance coverage (a) Monthly insurance benefits under Section 202 Section 202 of the Social Security Act 42 U.S.C. 402 (aa) Limitation on payment to eligible individuals under Savings Account for Every American Act of 2018 (1) Notwithstanding any other provision of this title, no monthly benefits shall be paid under this section based on the wages and self-employment income of an eligible individual (as defined in section 101(4) of the Savings Account for Every American Act of 2018 (2) Determinations of entitlement to hospital insurance benefits under section 226 or 226A shall be made without regard to paragraph (1). . (b) Disability insurance benefits under Section 223 Section 223 of such Act ( 42 U.S.C. 423 (k) Limitation on payment to eligible individuals under Savings Account for every American Act of 2007 (1) Notwithstanding any other provision of this title, no monthly benefits shall be paid under this section based on the wages and self-employment income of an eligible individual (as defined in section 101(4) of the Savings Account for Every American Act of 2018 (2) Determinations of entitlement to hospital insurance benefits under section 226 or 226A shall be made without regard to paragraph (1). . 303. Information provided in social security account statements (a) In general Section 1143 of the Social Security Act 42 U.S.C. 1320b–13 1143. Social Security Account Statement (a) Provision of annual statements The Commissioner of Social Security shall provide an annual social security account statement (hereinafter in this section referred to as the statement (b) Contents of statement Each statement shall contain— (1) the amount of wages paid to and self-employment income derived by the eligible individual as shown by the records of the Commissioner; (2) an estimate of the aggregate of the employer, employee, and self-employment contributions of the eligible individual for old-age, survivors, and disability insurance as shown by the records of the Commissioner; (3) a separate estimate of the aggregate of the employer, employee, and self-employment contributions of the eligible individual for hospital insurance as shown by the records of the Commissioner; and (4) an estimate of the potential monthly retirement, disability, survivor, and auxiliary benefits payable on the eligible individual’s account together with a description of the benefits payable under the Medicare program of title XVIII. (c) Eligible individual For purposes of this section, the term eligible individual (1) has a social security account number, and (2) has wages or net earnings from self-employment. . (b) Effective date The amendment made by subsection (a) shall apply with respect to statements provided on or after the first day of the first calendar year beginning after the date of enactment of this Act.

Summary: Savings Account for Every American Act of 2018 This bill provides for the establishment of tax-exempt savings accounts, which individuals may elect to participate in instead of Social Security. The bill requires (1) employers to maintain payroll deduction programs for the accounts, and (2) employees and employers to make specified contributions to the accounts.