354 
‘‘(3) other instruments or obligations selected 
by such asset managers, 
which return the amount invested and pay interest, at a 
specified rate or rates, on that amount during a specified 
period of time. 
‘‘(c) SEPARATE CREDITING TO PERSONAL SOCIAL 
SECURITY SAVINGS ACCOUNTS AND TRANSFERS TO THE 
TIER II INVESTMENT FUND OR TO TIER III INVESTMENT 
OPTIONS.— 
‘‘(1) CREDITING TO ACCOUNTS.— 
‘‘(A) IN GENERAL.—Subject to this para-
graph, the Board shall provide for prompt, sep-
arate crediting, as soon as practicable, of the 
amounts deposited in the Tier I Investment 
Fund to the personal social security savings ac-
count of each participating individual with re-
spect to the redirected social security contribu-
tions (as defined in section 252(b)(3)) of such 
participating individual. The Board shall in-
clude in such crediting, with respect to each 
such individual, any increases or decreases in 
such amounts so as to reflect the net returns 
and losses from investment of the balance of 
the Fund prior to such crediting. For purposes 
of determining such increases and decreases for 
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355 
each calendar year, the amounts deposited into 
the Fund in connection with such individual 
during such calendar year shall be deemed to 
have been deposited on June 30 of such year. 
‘‘(B) TREATMENT OF MARRIED PARTICI-
PATING INDIVIDUALS.—If the participating in-
dividual is married as of the end of the calendar 
year in which the amounts to be credited were 
deposited in the Tier I Investment Fund and 
the spouse is also a participating individual, the 
personal social security savings account of the 
participating individual and the personal social 
security savings account of his or her spouse 
shall each be credited with 50 percent of such 
amounts. 
‘‘(2) TRANSFERS
FROM
THE
TIER
I
INVEST-
MENT
FUND.—In accordance with elections filed 
with the Board by a participating individual, any 
amount credited to the personal social security sav-
ings account of such participating individual under 
paragraph (1) shall be promptly transferred to the 
Tier II Investment Fund of the Savings Fund for 
investment in accordance with section 256 and, to 
the extent available under section 257, to Tier III 
Investment Options in accordance with section 257. 
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356 
‘‘(d) TREATMENT OF AMOUNTS HELD IN TIER I IN-
VESTMENT FUND.—Subject to this part— 
‘‘(1) until amounts deposited into the Tier I In-
vestment Fund during any calendar year are cred-
ited to personal social security savings accounts, 
such amounts shall be treated as the unallocated 
property of all participating individuals with respect 
to whom amounts were deposited in the Fund dur-
ing such year, jointly held in trust for such partici-
pating individuals in the Savings Fund, and 
‘‘(2) amounts deposited into the Fund which 
are credited to the personal social security savings 
account of a participating individual shall be treated 
as property of the participating individual, held in 
trust for such participating individual in the Savings 
Fund. 
‘‘SEC. 256. TIER II INVESTMENT FUND. 
‘‘(a) ESTABLISHMENT
OF TIER II INVESTMENT 
FUND.— 
‘‘(1) IN GENERAL.—The Savings Fund shall in-
clude a separate fund to be known as the ‘Tier II 
Investment Fund’. 
‘‘(2) AMOUNTS IN FUND.—The Tier II Invest-
ment Fund consists of all amounts derived from 
payments into the Fund under section 255(c)(2) and 
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357 
remaining after investment of such amounts under 
subsection (b), including additional amounts derived 
as income from such investments. 
‘‘(3) USE OF FUNDS.—The amounts held in the 
Fund are appropriated and shall remain available 
without fiscal year limitation— 
‘‘(A) to be held for investment under sub-
section (b), 
‘‘(B) to pay the administrative expenses re-
lated to the Fund, and 
‘‘(C) to make transfers to Tier III Invest-
ment Options under section 257 or to make 
payments under section 258. 
‘‘(b) PAYMENTS INTO TIER II INVESTMENT FUND.— 
‘‘(1) IN GENERAL.—Upon the crediting under 
section 252 to the personal social security savings 
account of a participating individual of any amount 
held in the Tier I Investment Fund for any calendar 
year, the Board shall transfer from the Tier I In-
vestment Fund into the Tier II Investment Fund 
any amount so credited to such participating individ-
ual’s account which is not transferred to a Tier III 
Investment Option pursuant to an election under 
section 257(a). 
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358 
‘‘(2) ONGOING SEPARATE CREDITING.—Subject 
to this paragraph, the Board shall provide for ongo-
ing separate crediting to each participating individ-
ual’s personal social security savings account of the 
amounts deposited in the Tier II Investment Fund 
with respect to such participating individual, to-
gether with any increases or decreases therein so as 
to reflect the net returns and losses from investment 
thereof while held in the Fund. 
‘‘(c) INVESTMENT ACCOUNTS.— 
‘‘(1) IN GENERAL.—For purposes of investment 
of the Tier II Investment Fund, the Board shall di-
vide the Fund into 6 investment accounts. The 
Board shall contract with appropriate investment 
managers, recordkeepers, and custodians selected for 
investment of amounts held in each investment ac-
count. Such accounts shall consist of— 
‘‘(A) a Lifecycle Investment Account, 
‘‘(B) a Government Securities Investment 
Account, 
‘‘(C) a Fixed Income Investment Account, 
‘‘(D) a Common Stock Index Investment 
Account, 
‘‘(E) a Small Capitalization Stock Index 
Investment Account, and 
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359 
‘‘(F) an International Stock Index Invest-
ment Account. 
‘‘(2) ELECTION OF INVESTMENT OPTIONS.— 
‘‘(A) DEFAULT INVESTMENT ACCOUNT.— 
Except as provided in an election in effect 
under subparagraph (B), amounts held in the 
Tier II Investment Fund shall be credited to 
the Lifecycle Investment Account. 
‘‘(B) ELECTION OF TRANSFERS BETWEEN 
INVESTMENT ACCOUNTS.—In any case in which 
a participating individual who has an amount in 
such individual’s personal social security sav-
ings account credited to any of the investment 
accounts in the Tier II Investment Fund files 
with the Secretary of the Treasury a written 
election under this subparagraph, not more fre-
quently than annually and in accordance with 
regulations of the Board, the Secretary of the 
Treasury shall transfer the full amount so cred-
ited in such investment account from such in-
vestment account to any one of the other invest-
ment accounts in the Tier II Investment Fund 
(whichever is designated in such election). 
‘‘(d) LIFECYLE INVESTMENT ACCOUNT.— 
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360 
‘‘(1) IN GENERAL.—The investment manager, 
recordkeeper, and custodian selected for investment 
of amounts held in the Lifecyle Investment Account 
shall invest such amounts under regulations which 
shall be prescribed by the Board in a mix of equities 
and fixed income instruments so as to ensure, to the 
maximum extent practicable, that, of the total bal-
ance in the Fund credited to such account and avail-
able for investment (after allowing for administrative 
expenses), the percentage invested in fixed income 
instruments by individuals in designated cohorts, 
ranging in age up to those of at least retirement 
age, will increase in a linear progression from 0 per-
cent to 100 percent as the cohort approaches retire-
ment age. 
‘‘(2) INVESTMENT IN EQUITIES.—In accordance 
with regulations which shall be prescribed by the 
Board, the Board shall establish standards which 
must be met by equities selected for investment in 
the Lifecycle Investment Account. In conformity 
with such standards, the Board shall select, for pur-
poses of such investment, indices which are com-
prised of equities the aggregate market value of 
which is, in each case, a reasonably broad represen-
tation of companies whose shares are traded on the 
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361 
equity markets. Amounts invested in equities under 
an investment option shall be held in a portfolio de-
signed to replicate the performance of one or more 
of such indices. 
‘‘(3) INVESTMENT IN FIXED INCOME INSTRU-
MENTS.—In accordance with regulations which shall 
be prescribed by the Board, the Board shall estab-
lish standards which must be met by fixed income 
instruments selected for investment in the Lifecycle 
Investment Account. Such standards shall take into 
account the competing considerations of risk and re-
turn. Amounts invested in fixed income instruments 
in an investment option shall be held in a portfolio 
which shall consist of a diverse range of fixed income 
instruments, taking into full account the opposing 
considerations of risk and maximization of return. 
‘‘(e) GOVERNMENT SECURITIES INVESTMENT AC-
COUNT.— 
‘‘(1) IN
GENERAL.—Amounts in the Govern-
ment Securities Investment Account shall be in-
vested in securities of the United States Government 
as provided in this subsection 
‘‘(2) ISSUANCE
OF
SPECIAL
OBLIGATIONS.— 
The Secretary of the Treasury is authorized to issue 
special interest-bearing obligations of the United 
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362 
States for purchase by the Tier II Investment Fund 
for purposes of investment of amounts in the Gov-
ernment Securities Investment Account. Such obliga-
tions shall have maturities fixed with due regard to 
the needs of the Fund as determined by the Board, 
and shall bear interest at a rate equal to the average 
market yield (computed by the Secretary of the 
treasury on the basis of market quotations as of the 
end of the calendar month next preceding the date 
of issue of such obligations) on all marketable inter-
est-bearing obligations of the United States then 
forming a part of the public debt which are not due 
or callable earlier than 4 years after the end of such 
calendar month. Any average market yield computed 
under this paragraph which is not a multiple of one- 
eighth of 1 percent shall be rounded to the nearest 
multiple of one-eighth of 1 percent. 
‘‘(f) FIXED
INCOME
INVESTMENT
ACCOUNT.— 
Amounts in the Fixed Income Investment Account shall 
be invested in instruments or obligations which return the 
amount invested and pay interest, at a specified rate or 
rates, on that amount during a specified period of time, 
consisting of instruments or obligations in one or more 
of the following categories: 
‘‘(1) insurance contracts; 
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363 
‘‘(2) certificates of deposit; or 
‘‘(3) other instruments or obligations selected 
by qualified professional asset managers. 
‘‘(g) COMMON
STOCK
INDEX
INVESTMENT
AC-
COUNT.— 
‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 
Common Stock Investment Account shall be invested 
in a portfolio of common stock designed to replicate 
the performance of the index selected under para-
graph (2). The portfolio shall be designed such that, 
to the extent practicable, the percentage of the bal-
ance in the Common Stock Index Investment Ac-
count that is invested in each stock is the same as 
the percentage determined by dividing the aggregate 
market value of all shares of that stock by the ag-
gregate market value of all shares of all stocks in-
cluded in such index. 
‘‘(2) SELECTION OF INDEX.—The Board shall 
select, for purposes of investment of amounts held in 
the Common Stock Investment Account, an index 
which is a commonly recognized index comprised of 
common stock the aggregate market value of which 
is a reasonably complete representation of the 
United States equity markets. 
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364 
‘‘(h) SMALL CAPITALIZATION STOCK INDEX INVEST-
MENT ACCOUNT.— 
‘‘(1) PORTFOLIO DESIGN.—Amounts held in the 
Small Capitalization Stock Index Investment Ac-
count shall be invested in a portfolio of common 
stock designed to replicate the performance of the 
index selected under paragraph (2). The portfolio 
shall be designed such that, to the extent prac-
ticable, the percentage of the balance in the Small 
Capitalization Stock Index Investment Account that 
is invested in each stock is the same as the percent-
age determined by dividing the aggregate market 
value of all shares of that stock by the aggregate 
market value of all shares of all stocks included in 
such index. 
‘‘(2) SELECTION OF INDEX.—The Board shall 
select, for purposes of investment of amounts held in 
the Small Capitalization Stock Index Investment Ac-
count, an index which is a commonly recognized 
index comprised of common stock the aggregate 
market value of which represents the United States 
equity markets excluding the common stocks in-
cluded in the Common Stock Index Investment Ac-
count. 
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as appropriate to further the purposes of this section, 
shall— 
‘‘(1) establish investment accounts in the Tier 
II Investment Fund meeting the requirements of 
this section in addition to those established by this 
section, and 
‘‘(2) terminate investment accounts in the Tier 
II Investment Fund established pursuant to para-
graph (1). 
‘‘(k) DISCLOSURE OF ADMINISTRATIVE COSTS.—The 
Board shall provide to each participating individual an an-
nual disclosure of the rate of administrative costs charge-
able with respect to investment in each investment account 
in the Tier II Investment Fund. Such disclosure shall be 
written in a manner calculated to be understood by the 
average participating individual. 
‘‘(l) TREATMENT OF AMOUNTS HELD IN TIER II IN-
VESTMENT FUND.—Subject to this part, amounts depos-
ited into, and held and accounted for in, the Tier II In-
vestment Fund with respect to any participating individual 
shall continue to be treated as property of such partici-
pating individual, held in trust for such participating indi-
vidual in the Fund. 
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