I
106TH CONGRESS
1ST SESSION
H. R. 874
To reform Social Security by creating individual Social Security retirement
accounts.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 25, 1999
Mr. PORTER (for himself, Mr. BACHUS, Mr. SANFORD, Mr. ISTOOK, Mr.
SHAYS, and Mr. SMITH of Michigan) introduced the following bill; which
was referred to the Committee on Ways and Means
A BILL
To reform Social Security by creating individual Social
Security retirement accounts.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Individual Social Secu-
rity Retirement Accounts Act of 1999’’.
SEC. 2. REDUCTION AND ELIMINATION OF SOCIAL SECU-
RITY TAXES ON INDIVIDUALS ELECTING TO
PARTICIPATE IN INDIVIDUAL RETIREMENT
PROGRAM.
(a) TAX ON EMPLOYEES.—Subsection (a) of section
3101 of the Internal Revenue Code of 1986 (relating to
OASDI tax on employees) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) INDIVIDUALS COVERED UNDER PART A OF
TITLE II OF THE SOCIAL SECURITY ACT.—In addi-
tion to other taxes, there is hereby imposed on the
income of every individual who is not a part B eligi-
ble individual a tax equal to 6.2 percent of the wages
(as defined in section 3121(a)) received by him with
respect to employment (as defined in section
3121(b)).
‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE
INDIVIDUALS.—In addition to other taxes, there is
hereby imposed on the income of every individual
who is a part B eligible individual a tax equal to 1.2
percent with respect to wages (as defined in section
3121(a)) received by him with respect to employ-
ment (as defined in section 3121(b)), in the case of
wages received during the period of 10 years begin-
ning with the first calendar year for which such indi-
vidual is a part B eligible individual.’’
(b) TAX ON EMPLOYERS.—Subsection (a) of section
3111 of the Internal Revenue Code of 1986 (relating to
OASDI tax on employers) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) INDIVIDUALS COVERED UNDER PART A OF
THE SOCIAL SECURITY ACT.—In addition to other
taxes, there is hereby imposed on every employer,
with respect to having in the employer’s employ indi-
viduals who are not part B eligible individuals, an
excise tax equal to 6.2 percent of the wages (as de-
fined in section 3121(a)) paid by him with respect
to employment (as defined in section 3121(b)).
‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE
INDIVIDUALS.—In addition to other taxes, there is
hereby imposed on every employer an excise tax,
with respect to having in the employer’s employ indi-
viduals who are part B eligible individuals, equal to
1.2 percent of the wages (as defined in section
3121(a)) paid by him with respect to employment
(as defined in section 3121(b)), in the case of wages
received during the period of 10 years beginning
with the first calendar year for which such individual
is a part B eligible individual.’’
(c) SELF-EMPLOYMENT TAX.—Subsection (a) of sec-
tion 1401 of such Code (relating to OASDI tax on self-
employment income) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) INDIVIDUALS COVERED UNDER PART A OF
THE SOCIAL SECURITY ACT.—In addition to other
taxes, there shall be imposed for each taxable year,
on the self-employment income of every individual
who is not a part B eligible individual for the cal-
endar year ending with or during such taxable year,
a tax equal to 12.40 percent of the amount of the
self-employment income for such taxable year.
‘‘(2) TRANSITIONAL TAX FOR PART B ELIGIBLE
INDIVIDUALS.—In addition to other taxes, there
shall be imposed for each taxable year, on the self-
employment income of every part B eligible individ-
ual for the calendar year ending with or during such
taxable year, a tax equal to 2.40 percent of the
amount of the self-employment income for such tax-
able year, in the case of a taxable year ending dur-
ing the period of 10 years beginning with the first
calendar year for which such individual is a part B
eligible individual.’’
(d) PART B ELIGIBLE INDIVIDUAL.—
(1) TAXES ON EMPLOYEES AND EMPLOYERS.—
Section 3121 of such Code (relating to definitions)
is amended by inserting after subsection (s) the fol-
lowing new subsection:
‘‘(t) PART B ELIGIBLE INDIVIDUAL.—For purposes
of this chapter, the term ‘part B eligible individual’ means,
for any calendar year, an individual who is an eligible indi-
vidual (as defined in section 257(3) of the Social Security
Act) for such calendar year.’’.
(2) SELF-EMPLOYMENT TAX.—Section 1402 of
such Code (relating to definitions) is amended by
adding at the end the following new subsection:
‘‘(k) PART B ELIGIBLE INDIVIDUAL.—The term
‘part B eligible individual’ means, for any calendar year,
an individual who is an eligible individual (as defined in
section 257(3) of the Social Security Act) for such cal-
endar year.’’.
(e) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to remuneration paid after
December 31, 2001.
(2) SELF-EMPLOYMENT
TAX.—The amend-
ments made by subsections (c) and (d)(2) shall
apply to taxable years ending after December 31,
2001.
SEC. 3. INDIVIDUAL SOCIAL SECURITY RETIREMENT AC-
COUNTS FUNDED BY SOCIAL SECURITY PAY-
ROLL DEDUCTION PLANS AND CONTRIBU-
TIONS BY SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL.—Title II of the Social Security Act
is amended—
(1) by inserting before section 201 the follow-
ing:
‘‘PART A—INSURANCE BENEFITS’’;
and
(2) by adding at the end the following new part:
‘‘PART B—INDIVIDUAL RETIREMENT PROGRAM
‘‘SOCIAL SECURITY PAYROLL DEDUCTION PLANS
‘‘SEC. 251. (a) IN GENERAL.—Each person who is
a covered employer for any calendar year shall have in
effect throughout such calendar year a social security pay-
roll deduction plan for such person’s employees who are
eligible individuals and with respect to whose employment
by such employer during such calendar year there is, or
would be (but for the amendments made by section 2 of
the Individual Social Security Retirement Accounts Act of
1999), imposed an excise tax under section 3111 of the
Internal Revenue Code of 1986.
‘‘(b) REQUIREMENTS.—For purposes of this part, the
term ‘social security payroll deduction plan’ means a writ-
ten plan of a covered employer if—
‘‘(1) under such plan, 5 percent of the employ-
ee’s wages is deducted by the employer and paid to
the employee’s individual social security retirement
account within 10 business days after the date of
payment of such wages,
‘‘(2) under such plan, the covered employer
pays to the individual social security retirement ac-
count, together with the contribution paid pursuant
to paragraph (1), an additional amount equal to 5
percent of the employee’s wages, and
‘‘(3) the employer receives no compensation for
the cost of administering such plan.
‘‘DESIGNATION OF INDIVIDUAL SOCIAL SECURITY
RETIREMENT ACCOUNTS
‘‘SEC. 252. (a) IN GENERAL.—Except as provided in
subsection (b), the individual social security retirement ac-
count to which contributions with respect to any eligible
individual are required to be paid by a covered employer
under section 251 shall be such an account designated by
such individual to such employer not later than 10 busi-
ness days after the date on which such individual becomes
an employee of such employer. Each employer of an eligi-
ble individual shall require the individual to designate such
account as provided under this subsection as a pre-
requisite for continued employment. Any such designation
shall be made in such form and manner as shall be pre-
scribed in regulations of the Commissioner of Social Secu-
rity.
‘‘(b) SUBSEQUENT DESIGNATION
OF OTHER AC-
COUNTS.—The Commissioner shall provide by regulation
for subsequent designation from time to time of another
individual social security retirement account of an eligible
individual in lieu of the account previously designated
under this section.
‘‘SELF-EMPLOYED INDIVIDUALS
‘‘SEC. 253. (a) IN GENERAL.—Not later than 30
days after the close of any taxable year for which an eligi-
ble individual has self-employment income, such individual
shall pay to an individual social security retirement ac-
count designated by such individual an amount equal to
at least 10 percent of such income.
‘‘(b) DESIGNATION OF ACCOUNT.—The designation
of an individual social security retirement account for pay-
ment of contributions under this section shall be made in
such form and manner as shall be prescribed in regula-
tions of the Commissioner of Social Security.
‘‘ELECTION TO BECOME AN ELIGIBLE INDIVIDUAL
‘‘SEC. 254. (a) IN GENERAL.—An individual—
‘‘(1) who has attained age 18 and has not at-
tained age 62, and
‘‘(2) who is not entitled to disability insurance
benefits under section 223,
may elect to become an eligible individual for purposes of
this part. An election under this section is an election filed
in such form and manner as shall be prescribed in regula-
tions of the Commissioner, consisting of a written and
signed declaration of such individual’s intention to become
an eligible individual for purposes of this part.
‘‘(b) REQUIREMENTS.—Any election under sub-
section (a) may take effect for any calendar year after
2001 and must be so filed not later than December 15
preceding the calendar year for which the election is to
take effect (or December 31 preceding such calendar year
in the case of an individual attaining age 18 after such
December 15 and before such calendar year).
‘‘(c) IRREVOCABILITY.—Any election under sub-
section (a) shall be irrevocable and shall be effective with
respect to wages paid in calendar years following the elec-
tion and with respect to self-employment income for tax-
able years ending during such calendar years.
‘‘DISABILITY INSURANCE AND PRERETIREMENT
SURVIVOR BENEFITS
‘‘SEC. 255. (a) IN GENERAL.—A trustee of an indi-
vidual social security retirement account shall purchase,
from amounts available in the account, disability insur-
ance and preretirement survivor benefits for each account
holder in accordance with this section.
‘‘(b) DISABILITY INSURANCE.—Under regulations of
the Commissioner of Social Security, any policy for dis-
ability insurance purchased pursuant to subsection (a)
shall meet at least the same standards for eligibility and
benefit levels for account holders and their spouses, surviv-
ing spouses, former spouses, and children, as are applica-
ble for beneficiaries under the disability insurance pro-
gram under part A, except that such benefits shall not
terminate by reason of retirement.
‘‘(c) PRERETIREMENT SURVIVOR BENEFITS.—Under
regulations of the Commissioner of Social Security, any
policy for preretirement survivor benefits purchased pur-
suant to subsection (a) shall provide benefits to bene-
ficiaries of the account holders in such form and in such
amounts as are necessary, taking into account distribu-
tions from the account, to meet at least the same stand-
ards for eligibility and benefit levels applicable for wid-
ow’s, widower’s, and child’s insurance benefits under part
A.
‘‘ENTITLEMENT TO SUPPLEMENTAL MINIMUM BENEFIT
PAYMENT TO ACCOUNT
‘‘SEC. 256. (a) IN GENERAL.—In any case in
which—
‘‘(1) an eligible individual attains age 62,
‘‘(2) as of the date on which the individual at-
tains age 62, no distributions have been made by the
individual from any individual social security retire-
ment account, and
‘‘(3) on such date, the balance in such individ-
ual’s individual social security retirement account
(before any distributions on such date) is less than
the minimum retirement annuity amount,
such individual, upon application to the Commissioner of
Social Security filed on or after such date in such form
and manner as shall be prescribed by the Commissioner,
shall be entitled to a supplemental minimum benefit pay-
ment to such account. Upon receipt of such application,
the Commissioner shall certify to the Secretary of the
Treasury the amount of such payment, and the Secretary
shall pay the amount of such payment to such account
in accordance with such certification from funds otherwise
available in the general fund of the Treasury.
‘‘(b) AMOUNT OF SUPPLEMENTAL MINIMUM BENE-
FIT PAYMENT.—The amount of a supplemental minimum
benefit payment payable to an eligible individual’s account
under subsection (a) is the excess (if any) of—
‘‘(1) the minimum retirement annuity amount,
over
‘‘(2) the balance in such account as of such
date (taking into account the present value of the
future proceeds of any contribution recognition bond
issued to the trustee of the individual’s account pur-
suant to section 6 of the Individual Social Security
Retirement Accounts Act of 1999).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) 
MINIMUM
RETIREMENT
ANNUITY
AMOUNT.—The term ‘minimum retirement annuity
amount’ means the amount (determined under regu-
lations of the Commissioner of Social Security) nec-
essary to purchase a minimum retirement annuity
on the date of the application filed pursuant to sub-
section (a).
‘‘(2) MINIMUM
RETIREMENT
ANNUITY.—The
term ‘minimum retirement annuity’ means an imme-
diate annuity making payments over the life expect-
ancy of the account holder which (on a monthly
basis) are equal to the lesser of—
‘‘(A) an amount equal to 95 percent of the
account holder’s initial primary insurance
amount (determined under section 215 as if
section 202(y) did not apply and the account
holder applied for old-age insurance benefits on
the date of the application filed pursuant to
subsection (a)), or
‘‘(B) 40 percent of the account holder’s av-
erage indexed monthly earnings (as so deter-
mined),
‘‘(3) IMMEDIATE ANNUITY.—The term ‘imme-
diate annuity’ means an annuity—
‘‘(A) which is purchased with a single pre-
mium, and
‘‘(B) the annuity starting date (as defined
in paragraph (4) of section 72(c) of the Inter-
nal Revenue Code of 1986) of which commences
on the 1st day of the month beginning after the
date of the purchase of the annuity.
‘‘DEFINITIONS
‘‘SEC. 257. For purposes of this part—
‘‘(1) INDIVIDUAL
SOCIAL
SECURITY
RETIRE-
MENT ACCOUNT.—The term ‘individual social secu-
rity retirement account’ means any individual social
security retirement account (as defined in section
408B of the Internal Revenue Code of 1986).
‘‘(2) COVERED EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘covered em-
ployer’ means, for any calendar year, any per-
son on whom an excise tax is, or would be (but
for the amendments made by the Individual So-
cial Security Retirement Accounts Act of 1999),
imposed under section 3111 of the Internal
Revenue Code of 1986 with respect to having
an individual in his employ to whom wages were
paid by such person during such calendar year.
‘‘(B) GOVERNMENTAL
ENTITIES.—Under
regulations of the Commissioner of Social Secu-
rity, in applying subparagraph (A) with respect
to employment by governmental entities, each
such governmental entity shall be treated as a
person described in subparagraph (A) in the
same manner and to the same extent as such
person is treated under chapter 21 of the Inter-
nal Revenue Code of 1986 for purposes of sec-
tion 3111 of such Code.
‘‘(3) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means, with respect to a calendar year,
an individual with respect to whom an election, filed
with the Commissioner of Social Security under sec-
tion 254, is in effect for such calendar year.
‘‘(4) BUSINESS DAY.—The term ‘business day’
means any day other than a Saturday, Sunday, or
legal holiday in the area involved.
‘‘PENALTIES
‘‘SEC. 258. (a) FAILURE TO ESTABLISH SOCIAL SE-
CURITY PAYROLL DEDUCTION PLAN.—Any covered em-
ployer who fails to meet the requirements of section 251
or 252 for any calendar year shall be subject to a civil
penalty of not to exceed the greater of—
‘‘(1) $50,000, or
‘‘(2) $1,000 for each eligible individual of such
employer as of the beginning of such calendar year.
‘‘(b) FAILURE TO MAKE DEDUCTIONS REQUIRED
UNDER PLAN.—Any covered employer who fails to timely
deduct in full the amount from the wages of an eligible
individual required under an applicable social security pay-
roll deduction plan shall be subject to a civil penalty of
not to exceed $50 for each such failure.
‘‘(c) FAILURE TO PAY DEDUCTED WAGES TO INDI-
VIDUAL SOCIAL SECURITY RETIREMENT ACCOUNT.—If
an amount deducted from the wages of an eligible individ-
ual under a social security payroll deduction plan is not
timely paid in full to the designated individual social secu-
rity retirement account in accordance with section 251—
‘‘(1) the covered employer failing to make such
payment shall be subject to a civil penalty of not to
exceed 20 percent of the unpaid amount, in addition
to any penalty under subsection (a), and
‘‘(2) shall be liable to the eligible individual for
interest on the unpaid amount at a rate equal to
133 percent of the Federal short-term rate under
section 1274(d)(1) of the Internal Revenue Code of
1986, calculated from the last day by which such
amount was required to be so paid to the date on
which such amount is paid into the designated indi-
vidual social security retirement account.
‘‘(d) FAILURE BY SELF-EMPLOYED INDIVIDUALS TO
PAY CONTRIBUTIONS.—Any individual failing to timely
pay in full a prescribed social security self-employment
contribution to a designated individual social security re-
tirement account as required under section 253 shall be
subject to a civil penalty of not to exceed 20 percent of
the unpaid amount, plus interest on the unpaid amount
at a rate equal to 133 percent of the Federal short-term
rate under section 1274(d)(1) of the Internal Revenue
Code of 1986, calculated from the last day by which such
amount was required to be so paid to the date on which
such amount is paid into the designated individual social
security retirement account.
‘‘(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 CER-
TAIN CASES.—The Commissioner may waive the ap-
plication of this section with respect to any failure
if the Commissioner determines that such failure is
due to reasonable cause and not to intentional dis-
regard of rules and regulations.’’.
(b) AMOUNTS DEDUCTED TO BE SHOWN ON W–2
STATEMENTS.—Subsection (a) of section 6051 of the In-
ternal Revenue Code of 1986 (relating to receipts for em-
ployees) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(8),
(2) by striking the period at the end of para-
graph (9) and inserting ‘‘, and’’, and
(3) by inserting after paragraph (9) the follow-
ing new paragraph:
‘‘(10) the total amount deducted from the em-
ployee’s wages under a social security payroll deduc-
tion plan established under part B of title II of the
Social Security Act.’’.
(c) EXEMPTION FROM ERISA REQUIREMENTS.—
Subsection (b) of section 4 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1003(b)) is
amended—
(1) by striking ‘‘or’’ at the end of paragraph
(4);
(2) by striking the period at the end of para-
graph (5) and inserting ‘‘; or’’; and
(3) by adding at the end the following new
paragraph:
‘‘(6) such plan is a social security payroll de-
duction plan established under part B of title II of
the Social Security Act.’’.
(d) CONFORMING AMENDMENTS.—Section 201(h) of
such Act (42 U.S.C. 401(h)) is amended—
(1) by striking ‘‘All other’’ in the second sen-
tence and inserting ‘‘Except as provided in section
256, all other’’; and
(2) by adding at the end the following new sen-
tence: ‘‘Any reference in this part to benefits under
this title shall be deemed a reference to benefits en-
titlement to which arises under this part.’’.
SEC. 4. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY
RETIREMENT ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 of the Internal Revenue Code of 1986 (re-
lating to pension, profit-sharing, stock bonus plans, etc.)
is amended by inserting after section 408A the following
new section:
‘‘SEC. 408B. INDIVIDUAL SOCIAL SECURITY RETIREMENT
ACCOUNTS.
‘‘(a) GENERAL
RULE.—Gross income shall not
include—
‘‘(1) any amount paid to an individual social se-
curity retirement account as the employer’s con-
tribution under section 251(b)(3) of the Social Secu-
rity Act, or
‘‘(2) 1⁄2 of the amount paid to an individual so-
cial security retirement account under section 253(a)
of the Social Security Act.
‘‘(b) INDIVIDUAL SOCIAL SECURITY RETIREMENT
ACCOUNT.—For purposes of this title, the term ‘individual
social security retirement account’ means a trust created
or organized in the United States for the exclusive benefit
of an eligible individual (as defined in section 257(3) of
the Social Security Act) or his beneficiaries, but only if
the written governing instrument creating the trust meets
the following requirements:
‘‘(1) No contribution will be accepted, other
than—
‘‘(A) a contribution under paragraph (1)
or (2) of section 251(b), or subsection (a) of
section 253, of the Social Security Act,
‘‘(B) in any taxable year, an aggregate
amount not exceeding twice the total amount of
contributions described in subparagraph (A)
made in such taxable year,
‘‘(C) a contribution recognition bond, and
the proceeds thereof, issued under section 6 of
the Individual Social Security Retirement Ac-
counts Act of 1999, and
‘‘(D) a supplemental minimum benefit pay-
ment under section 256 of the Social Security
Act.
‘‘(2) Except as provided in paragraph (12), no
amount may be paid or distributed from such
trust—
‘‘(A) before the earlier of the date on
which the account holder attains age 591⁄2 or
the date on which the account holder dies, or
‘‘(B) if the account holder has not died
and the balance in the account immediately
after the payment or distribution of such
amount would be less than the early distribu-
tion annuity amount (as defined in subsection
(c)(2)).
Nothing in subparagraph (B) shall be construed to
preclude the distribution of all or any portion of the
balance in the account if such distribution is used
exclusively for the purpose of purchasing an annuity
under which payments are made in substantially
equal periodic payments (not less frequently than
annually) made for the life expectancy of the ac-
count holder.
‘‘(3) The trustee is a bank (as defined in sec-
tion 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 sec-
tion.
‘‘(4) The trustee has registered with the Com-
missioner of Social Security (in such form and man-
ner as the Commissioner may require) as a trustee
of individual social security retirement accounts.
‘‘(5) No part of the trust fund is invested in life
insurance contracts.
‘‘(6) The interest of an individual in the bal-
ance in his account is nonforfeitable.
‘‘(7) The assets of the trust will not be commin-
gled with other property except in a common trust
fund or common investment fund, which fund is
comprised only of assets of individual social security
retirement accounts.
‘‘(8) Under the terms governing the account,
contributions will be accepted irrespective of the
amount of the contribution.
‘‘(9) The same requirements as are applicable
with respect to trusts under paragraph (9) of section
401(a) (relating to required distributions) are met
with respect to the account.
‘‘(10) The same requirements as are applicable
with respect to trusts under paragraph (11) of sec-
tion 401(a) (relating to joint and survivor annuity
and preretirement survivor annuity) are met with re-
spect to the account (disregarding subparagraph (B)
thereof), as if the annuity starting date with respect
to the account holder is the earliest date on which
amounts may be distributed under paragraph (2).
‘‘(11) The account holder certifies that such
trust is the only individual social security retirement
account of the holder.
‘‘(12) Under terms governing the account,
amounts may be distributed from such trust to pur-
chase disability insurance or a policy providing for
preretirement survivor benefits under section 255 of
the Social Security Act.
Paragraphs (1), (2), and (10) shall not apply to a direct
trustee-to-trustee transfer to a successor individual social
security retirement account of the same individual.
‘‘(c) REQUIREMENTS.—
‘‘(1) REQUIREMENTS RELATING TO TRUSTEE.—
‘‘(A) TRUSTEE.—A trustee meets the re-
quirements of subsection (b)(3) if—
‘‘(i) the trustee is in business exclu-
sively as a trustee of individual social secu-
rity retirement accounts, and
‘‘(ii) the trustee is of good character
and is a substantial concern, produces evi-
dence of financial capability, demonstrates
financial soundness, and provides appro-
priate surety.
‘‘(B) REPLACEMENT OF TRUSTEE IN CASE
OF BANKRUPTCY.—In the case of a trustee of
an individual social security retirement account
with respect to which there is filed a bank-
ruptcy petition (or upon the initiation of a simi-
lar judicial proceeding) against the trustee, the
Secretary shall designate a successor trustee.
‘‘(C) STATUS AS FIDUCIARY.—Under the
terms of an individual social security retirement
account, the trustee of the account shall, with
respect to the account, have the status of a fi-
duciary (within the meaning of the first sen-
tence of section 3(21)(A) of the Employee Re-
tirement Income Security Act of 1974). The
trustee shall, with respect to the account, be
treated as a fiduciary for purposes of section
4975(e) (as applicable under subsection (f)(3)).
‘‘(2) 
EARLY
DISTRIBUTION
ANNUITY
AMOUNT.—For purposes of subsection (b)(2)—
‘‘(A) IN GENERAL.—The term ‘early dis-
tribution annuity amount’ means the amount
(determined under regulations of the Secretary)
necessary to purchase a minimum annuity on
the date of the payment or distribution referred
to in subsection (b)(2).
‘‘(B) MINIMUM
ANNUITY.—For purposes
of subparagraph (A), the term ‘minimum annu-
ity’ means an immediate annuity making pay-
ments over the life expectancy of the account
holder which (on a monthly basis) are equal to
the lesser of—
‘‘(i) an amount equal to 95 percent of
the account holder’s initial primary insur-
ance amount, determined under section
215 of the Social Security Act—
‘‘(I) as if section 202(y) of such
Act did not apply, and
‘‘(II) as if the account holder ap-
plied for old-age insurance benefits on
the date of the payment or distribu-
tion referred to in subsection (b)(2),
or
‘‘(ii) 40 percent of the account hold-
er’s average indexed monthly earnings (as
so determined),
‘‘(C) IMMEDIATE ANNUITY.—For purposes
of subparagraph (B), the term ‘immediate an-
nuity’ means an annuity—
‘‘(i) which is purchased with a single
premium, and
‘‘(ii) the annuity starting date (as de-
fined in paragraph (4) of section 72(c) of
the Internal Revenue Code of 1986) of
which commences on the 1st day of the
month beginning after the date of the pur-
chase of the annuity.
‘‘(3) INVESTMENT IN COLLECTIBLES TREATED
AS A DISTRIBUTION.—For purposes of this section,
subsection (m) of section 408 shall apply.
‘‘(d) ACCOUNT EXEMPT FROM TAX.—
‘‘(1) GENERAL RULE.—Except as provided in
paragraph (2), any individual social security retire-
ment account is exempt from taxation under this
subtitle. Notwithstanding the preceding sentence,
any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unre-
lated business income of charitable, etc. organiza-
tions).
‘‘(2) APPLICATION
OF
PROHIBITED
TRANS-
ACTIONS RULES, ETC.—Rules similar to the rules of
paragraphs (2), (3), and (4) of section 408(e) shall
apply to individual social security retirement ac-
counts.
‘‘(e) TAXATION OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—
‘‘(A) INCOME EXCLUSION.—In the case of
any amount paid or distributed from an individ-
ual social security retirement account—
‘‘(i) the social security benefit amount
shall be includible in gross income only if
so includible under section 86, determined
by treating the social security benefit
amount as social security benefits (as de-
fined in such section), and
‘‘(ii) 
the 
supplemental 
retirement
amount shall be includible in gross income
to the extent that such amount is so in-
cludible under section 72, determined by
treating the individual social security re-
tirement account as an individual retire-
ment plan in accordance with section
408(d)(2).
‘‘(B) 
SOCIAL
SECURITY
BENEFIT
AMOUNT.—For purposes of subparagraph (A),
the term ‘social security benefit amount’ means
the amount which bears the same ratio to the
amount of the payment or distribution as the
sum of the amounts contributed to the individ-
ual social security retirement account under
subparagraphs (A), (C), and (D) of subsection
(b)(1) bears to the total amount contributed to
such account under subsection (b)(1).
‘‘(C) 
SUPPLEMENTAL
RETIREMENT
AMOUNT.—For purposes of subparagraph (A),
the term ‘supplemental retirement amount’
means the amount which bears the same ratio
to the amount of the payment or distribution as
the sum of the amounts contributed to the indi-
vidual social security retirement account under
subparagraph (B) of subsection (b)(1) bears to
the total amount contributed to such account
under subsection (b)(1).
‘‘(2) TREATMENT OF ROLLOVERS.—No amount
shall be includible in gross income by reason of a di-
rect trustee-to-trustee transfer from an individual
social security retirement account of an individual to
a successor individual social security retirement ac-
count of the same individual if such transfer is made
in accordance with section 408(d)(3)(A)(i).
‘‘(3) TREATMENT
OF
DISABILITY
INSURANCE
AND
PRERETIREMENT
BENEFIT
POLICY
PRE-
MIUMS.—No amount shall be includible in gross in-
come to the extent that such amount is a premium
for the purchase of disability insurance or a policy
providing for preretirement survivor benefits pursu-
ant to section 255 of the Social Security Act.
‘‘(4) 
TREATMENT
OF
COLLECTIBLES.—
Amounts treated as a distribution under subsection
(c)(3) shall be includible in gross income and para-
graph (1) of section 72(t) shall apply to such
amounts.
‘‘(f) CERTAIN OTHER RULES TO APPLY.—The fol-
lowing rules shall apply to individual social security retire-
ment accounts in the same manner that such rules apply
to individual retirement accounts:
‘‘(1) Section 408(h) (relating to custodial ac-
counts).
‘‘(2) Sections 408(i) and 6693 (relating to re-
ports).
‘‘(3) Section 4975 (relating to prohibited trans-
actions).’’.
(b) EXCESS CONTRIBUTIONS.—
(1) IN
GENERAL.—Subsection (a) of section
4973 of the Internal Revenue Code of 1986 is
amended by striking ‘‘or’’ at the end of paragraph
(3), by inserting ‘‘or’’ at the end of paragraph (4),
and by inserting after paragraph (4) the following
new paragraph:
‘‘(5) an individual social security retirement ac-
count (as defined in section 408B),’’.
(2) EXCESS
CONTRIBUTIONS
DEFINED.—Sec-
tion 4973 of such Code is amended by adding at the
end the following new subsection:
‘‘(g) EXCESS CONTRIBUTIONS TO INDIVIDUAL SO-
CIAL SECURITY RETIREMENT ACCOUNTS.—For purposes
of this section, in the case of contributions to an individual
social security retirement account (within the meaning of
section 408B(b)), the term ‘excess contributions’ means
with respect to a taxable year the sum of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to such account (other than a quali-
fied rollover contribution described in section
408B(e)(2)), over
‘‘(B) the amount allowable as a contribu-
tion for that taxable year under section
408B(b)(1), and
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by
the sum of—
‘‘(A) the distributions out of the account
for such taxable year, and
‘‘(B) the excess (if any) of the maximum
amount allowable as a contribution under sec-
tion 408B(b)(1) for such taxable year over the
amount contributed to the account for the tax-
able year.
For purposes of this subsection, any contribution which
is distributed from an individual social security retirement
account in a distribution described in section 408(d)(4)
shall be treated as an amount not contributed.’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter D of chapter 1 of
such Code is amended by inserting after the item relating
to section 408A the following new item:
‘‘Sec. 408B. Individual social security retirement accounts.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 5. NO COVERAGE UNDER OASDI UPON ELECTION TO
BE ELIGIBLE INDIVIDUAL UNDER PART B.
(a) OLD-AGE AND SURVIVORS INSURANCE BENE-
FITS.—Section 202 of the Social Security Act (42 U.S.C.
402) is amended by adding at the end the following new
subsection:
‘‘(y) Notwithstanding the preceding provisions of this
section, an individual who has made an election under sec-
tion 254 to be an eligible individual under part B shall
be deemed (except for purposes of sections 226 and 226A)
not entitled to benefits under this section for any month
ending after the date of the election, and (except for pur-
poses of sections 226 and 226A) no other individual shall
be deemed entitled to benefits under this section for any
month ending after the date of the election based on the
wages or self-employment income of the individual who
made the election.’’.
(b) DISABILITY INSURANCE BENEFITS.—Section 223
of such Act (42 U.S.C. 423) is amended by adding at the
end the following new subsection:
‘‘(j) Notwithstanding the preceding provisions of this
section, an individual who has made an election under sec-
tion 254 to be an eligible individual under part B shall
be deemed (except for purposes of sections 226 and 226A)
not entitled to benefits under this section for any month
ending after the date of the election, and (except for pur-
poses of sections 226 and 226A) no other individual shall
be deemed entitled to benefits under section 202 for any
month ending after the date of the election based on the
wages or self-employment income of an individual who has
made such an election.’’.
SEC. 6. CONTRIBUTION RECOGNITION BONDS.
(a) CERTIFICATION OF CREDITED WAGES AND SELF-
EMPLOYMENT INCOME.—Not later than July 1 of the first
calendar year for which an individual is an eligible individ-
ual (as defined in section 257(3) of the Social Security
Act), the Commissioner of Social Security shall certify to
the Secretary of the Treasury whether such individual
was, as of immediately before such first calendar year,
credited with wages and self-employment income under
part A of title II of the Social Security Act.
(b) ISSUANCE OF BOND.—Immediately upon receipt
of certification under subsection (a) that such individual
is so credited, the Secretary of the Treasury shall issue
a contribution recognition bond to the trustee of the indi-
vidual social security retirement account held by such indi-
vidual. Such bond shall consist of an obligation of the
United States to pay each month into the individual social
security retirement account held by such individual, com-
mencing with the applicable initial month, an amount
equal to such individual’s primary insurance amount, de-
termined under section 215 of the Social Security Act as
if section 202(y) of such Act did not apply and such indi-
vidual had applied for old-age insurance benefits under
section 202(a) of such Act for such month, and by taking
into account average indexed monthly earnings based sole-
ly on those wages and self-employment income that were
credited as described in subsection (a).
(c) APPLICABLE INITIAL MONTH.—For purposes of
subsection (b), the applicable initial month in connection
with any individual is the later of—
(1) the month in which such individual attains
age 62, or
(2) the month in which such individual first
commences distributions from such individual’s indi-
vidual social security retirement account.
(d) ADDITIONAL PROVISIONS.—The purposes for
which obligations of the United States may be issued
under chapter 31 of title 31, United States Code, are here-
by extended to authorize the issuance of public debt obli-
gations consisting of contribution recognition bonds issued
under this section. Each such obligation shall be evidenced
by a paper instrument in the form of a bond issued by
the Secretary setting forth the terms specified in this sub-
section, and stating on its face that the obligation shall
be incontestable in the hands of the trustee of such ac-
count, that the obligation is supported by the full faith
and credit of the United States, and that the United
States is pledged to the payment of the obligation, to the
credit of such account, in accordance with the provisions
of this section.
SEC. 7. PHASED IN INCREASE IN SOCIAL SECURITY RETIRE-
MENT AGE.
Section 216(l) of the Social Security Act (42 U.S.C.
416(l) is amended—
(1) by striking subparagraphs (B), (C), (D),
and (E) of paragraph (1) and inserting the following
new subparagraphs:
‘‘(B) with respect to an individual who attains
early retirement age (as determined under para-
graph (2)) after December 31, 1999, and before
January 1, 2029, 65 years of age plus 2⁄12 of the
number of months in the period beginning with Jan-
uary 2000 and ending with December of the year in
which the individual attains early retirement age (as
so determined); and
‘‘(C) with respect to an individual who attains
early retirement age after December 31, 2028, 70
years of age.’’; and
(2) by striking paragraph (3).
SEC. 8. ADJUSTED PERCENTAGES APPLIED TO AVERAGE
INDEXED MONTHLY EARNINGS IN DETERMIN-
ING PRIMARY INSURANCE AMOUNTS.
(a) IN GENERAL.—Section 215(a)(1)(B) of the So-
cial Security Act (42 U.S.C. 415(a)(1)(B)) is amended by
adding at the end the following new clause:
‘‘(iii) For purposes of determinations made under
this subsection taking effect in each calendar year after
2001, each percentage specified in clauses (i), (ii), and (iii)
of subparagraph (A) shall be replaced with a percentage
equal to the product derived by multiplying—
‘‘(I) the percentage in effect for purposes of de-
terminations made under this subsection in the prior
calendar year, by
‘‘(II) the applicable index ratio,
rounded to the nearest one-tenth of 1 percent.
‘‘(iv) For purposes of clause (iii), the applicable index
ratio in connection with determinations made under this
subsection in any calendar year, means a ratio—
‘‘(I) the numerator of which is 100 percent plus
the percentage (rounded to the nearest one-tenth of
1 percent) by which the Consumer Price Index for
December of the preceding calendar year exceeds the
Consumer Price Index for December of the next
prior calendar year, and
‘‘(II) the denominator of which is 100 percent
plus the percentage (rounded to the nearest one-
tenth of 1 percent) by which the national average
wage index (as defined in section 209(k)(1)) for the
preceding calendar year exceeds such index for the
next prior calendar year.’’.
(b) CONFORMING AMENDMENT.—Section 209(k)(1)
of such Act (42 U.S.C. 409(k)(1)) is amended by inserting
‘‘215(a)(1)(B)(iii),’’ after ‘‘215(a)(1)(B)(ii),’’.
SEC. 9. OFF-BUDGET TREATMENT FOR SOCIAL SECURITY
REFORMS.
(a) IN GENERAL.—In determining any new budget
authority, outlays, receipts, deficit, or surplus for purposes
of—
(1) the budget of the United States Govern-
ment as submitted by the President,