Upon retirement, the account balance would be distributed in the form of an annuity. PSA accounts would be privately managed and could be invested in a range of financial instruments. As in the Individual Account proposal, participation in this individual account system would be mandatory. Unlike that proposal, however, workers would not be required to annuitize their accumulations at retirement. There would be a transition period in which workers would be moved from the current system to this new two-tier system.
Proponents propose to fund the transition by issuing bonds.
Distributions from the PSA accounts, however, would not be subject to taxation.