I
105TH CONGRESS
1ST SESSION
H. R. 2929
To reform Social Security by creating individual Social Security retirement
accounts.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 8, 1997
Mr. PORTER introduced the following bill; which was referred to the Commit-
tee on Ways and Means, and in addition to the Committees on Education
and the Workforce, and the Budget, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
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 1997’’.
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, 1999.
(2) SELF-EMPLOYMENT
TAX.—The amend-
ments made by subsections (c) and (d)(2) shall
apply to taxable years ending after December 31,
1999.
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
‘‘(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 1997),
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 in-
clude—
‘‘(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: