I
105TH CONGRESS
2D SESSION
H. R. 4256
To amend title II of the Social Security Act to provide for individual security
accounts funded by employee and employer Social Security payroll deduc-
tions, to extend the solvency of the old-age, survivors, and disability
insurance program, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 16, 1998
Mr. KOLBE (for himself, Mr. STENHOLM, Mr. CAMPBELL, Mr. SMITH of
Michigan, and Mr. SANFORD) introduced the following bill; which was re-
ferred to the Committee on Ways and Means, and in addition to the
Committee on Rules, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To amend title II of the Social Security Act to provide
for individual security accounts funded by employee and
employer Social Security payroll deductions, to extend
the solvency of the old-age, survivors, and disability in-
surance program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘21st Century Retirement Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Individual security accounts.
Sec. 3. Minimum social security benefit.
Sec. 4. Elimination of earnings test for individuals who have attained retire-
ment age.
Sec. 5. Reduction in the amount of certain transfers to Medicare Trust Fund.
Sec. 6. Coverage of newly hired State and local employees.
Sec. 7. Gradual increase in number of benefit computation years; use of all
years in computation.
Sec. 8. Actuarial adjustment for retirement.
Sec. 9. Improvements in process for cost-of-living adjustments.
Sec. 10. Phased reduction in spousal benefits other than survivor’s benefits to
33 percent of primary insurance amount.
Sec. 11. Adjustments to bend point amounts.
Sec. 12. Phased-in increase in social security retirement ages.
Sec. 13. Mechanism for remedying unforeseen deterioration in social security
solvency.
SEC. 2. INDIVIDUAL SECURITY ACCOUNTS.
(a) ESTABLISHMENT AND MAINTENANCE OF INDI-
VIDUAL SECURITY ACCOUNTS.—Title II of the Social Se-
curity Act (42 U.S.C. 401 et seq.) is amended—
(1) by inserting before section 201 the follow-
ing:
‘‘PART A—INSURANCE BENEFITS’’;
and
(2) by adding at the end the following:
‘‘PART B—INDIVIDUAL SECURITY ACCOUNTS
‘‘INDIVIDUAL SECURITY ACCOUNTS
‘‘SEC. 251. (a) ESTABLISHMENT.—The Commis-
sioner of Social Security, within 30 days of the receipt
of the first contribution received pursuant to subsection
(b) with respect to any individual, shall establish in the
name of such individual an individual security account.
The individual security account shall be identified to the
account holder by means of the account holder’s Social
Security account number.
‘‘(b) CONTRIBUTIONS.—The Secretary of the Treas-
ury shall transfer from the Federal Old-Age and Survivors
Insurance Trust Fund, for crediting by the Commissioner
of Social Security to an individual security account of an
individual, an amount equal to the sum of any amount
received by such Secretary on behalf of such individual
under section 3101(a)(2) or 1401(a)(2) of the Internal
Revenue Code of 1986.
‘‘(c) DESIGNATION OF INVESTMENT TYPE OF INDI-
VIDUAL SECURITY ACCOUNT.—
‘‘(1) DESIGNATION.—Each individual who is
employed or self-employed shall designate the invest-
ment type of individual security account to which
the contributions described in subsection (b) on be-
half of such individual are to be credited.
‘‘(2) FORM OF DESIGNATION.—The designation
described in paragraph (1) shall be made in such
manner and at such intervals as the Commissioner
of Social Security may prescribe in order to ensure
ease of administration and reductions in burdens on
employers.
‘‘(3) SPECIAL RULE FOR 1999.—Not later than
January 1, 1999, any individual that is employed or
self-employed as of such date shall execute the des-
ignation required under paragraph (1).
‘‘(4) DESIGNATION IN ABSENCE OF DESIGNA-
TION BY INDIVIDUAL.—In any case in which no des-
ignation of the individual security account is made,
the Commissioner of Social Security shall make the
designation of the individual security account in ac-
cordance with regulations that take into account the
competing objectives of maximizing returns on in-
vestments and minimizing the risk involved with
such investments.
‘‘DEFINITION OF INDIVIDUAL SECURITY ACCOUNT;
TREATMENT OF ACCOUNTS
‘‘SEC. 252. (a) INDIVIDUAL SECURITY ACCOUNT.—
In this part, the term ‘individual security account’ means
any individual security account in the Individual Security
Fund (established under section 254) which is adminis-
tered by the Individual Security Fund Board.
‘‘(b) TREATMENT OF ACCOUNT.—Except as other-
wise provided in this part, any individual security account
described in paragraph (1)(A) shall be treated in the same
manner as an individual account in the Thrift Savings
Fund under subchapter III of chapter 84 of title 5, United
States Code.
‘‘INDIVIDUAL SECURITY ACCOUNT DISTRIBUTIONS
‘‘SEC. 253. (a) DATE OF INITIAL DISTRIBUTION.—
Except as provided in subsection (c), distributions may
only be made from an individual security account of an
individual on and after the earliest of—
‘‘(1) the date the individual attains normal re-
tirement age, as determined under section 216 (or
early retirement age (as so determined) if elected by
such individual), or
‘‘(2) the date on which funds in the individual’s
individual security account are sufficient to provide
a monthly payment over the life expectancy of the
individual (determined under reasonable actuarial
assumptions) which, when added to the individual’s
monthly benefit under part A (if any), is at least
equal to an amount equal to 1⁄12 of the poverty line
(as defined in section 673(2) of the Community
Services Block Grant Act (42 U.S.C. 9902(2) and
determined on such date for a family of the size in-
volved) and adjusted annually thereafter by the ad-
justment determined under section 215(i).
‘‘(b) FORMS OF DISTRIBUTION.—
‘‘(1) REQUIRED MONTHLY PAYMENTS.—Except
as provided in paragraph (2), beginning with the
date determined under subsection (a), the balance in
an individual security account available to provide
monthly payments not in excess of the amount de-
scribed in subsection (a)(2) shall be paid, as elected
by the account holder (in such form and manner as
shall be prescribed in regulations of the Individual
Security Fund Board), by means of the purchase of
annuities or otherwise in accordance with require-
ments (which shall be provided in regulations of the
Board) similar to the requirements applicable to an-
nuities under section 8434 of title 5, United States
Code (relating to annuities; methods of payment;
election; purchase) and section 8435 of such title
(relating to protections for spouses and former
spouses) and providing for indexing for inflation.
‘‘(2) PAYMENT OF EXCESS FUNDS.—To the ex-
tent funds remain in an individual’s individual secu-
rity account after the application of paragraph (1),
such funds shall be payable to the individual in such
manner and in such amounts as determined by the
individual, subject to the provisions of subchapter
III of chapter 84 of title 5, United States Code.
‘‘(c) DISTRIBUTION IN THE EVENT OF DISABILITY
OR DEATH BEFORE THE DATE OF INITIAL DISTRIBU-
TION.—If the individual becomes disabled or dies before
the date determined under subsection (a), the balance in
such individual’s individual security account shall be dis-
tributed under the provisions of subchapter III of chapter
84 of title 5, United States Code.
‘‘INDIVIDUAL SECURITY FUND
‘‘SEC. 254. (a) ESTABLISHMENT.—There is estab-
lished and maintained in the Treasury of the United
States an Individual Security Fund in the same manner
as the Thrift Savings Fund under sections 8437, 8438,
and 8439 of title 5, United States Code.
‘‘(b) INDIVIDUAL SECURITY FUND BOARD.—
‘‘(1) IN GENERAL.—There is established and
operated in the Social Security Administration an
Individual Security Fund Board in the same manner
as the Federal Retirement Thrift Investment Board
under subchapter VII of chapter 84 of title 5,
United States Code.
‘‘(2) SPECIFIC
INVESTMENT
AND
REPORTING
DUTIES.—
‘‘(A) IN GENERAL.—The Individual Secu-
rity Fund Board shall manage and report on
the activities of the Individual Security Fund
and the individual security accounts of such
Fund in the same manner as the Federal Re-
tirement Thrift Investment Board manages and
reports on the Thrift Savings Fund and the in-
dividual accounts of such Fund under sub-
United States Government as submitted by the President
or of the congressional budget and shall be exempt from
any general budget limitation imposed by statute on ex-
penditures and net lending (budget outlays) of the United
States Government.’’.
(b) MODIFICATION OF FICA RATES.—
(1) EMPLOYEES.—Section 3101(a) of the Inter-
nal Revenue Code of 1986 (relating to tax on em-
ployees) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—In addition to other taxes,
there is hereby imposed on the income of every indi-
vidual a tax equal to 4.2 percent of the wages (as
defined in section 3121(a)) received by such individ-
ual with respect to employment (as defined in sec-
tion 3121(b)).
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—
‘‘(A) IN GENERAL.—In addition to other
taxes, there is hereby imposed on the income of
every individual an individual security account
contribution equal to the sum of—
‘‘(i) 2 percent of the wages (as so de-
fined) received by such individual with re-
spect to employment (as so defined), plus
‘‘(ii) so much of such wages (not to
exceed $2,000) as designated by the indi-
vidual in the same manner as described in
section 251(c) of the Social Security Act.
‘‘(B) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
calendar year beginning after 1999, the
dollar amount in subparagraph (A)(ii)
shall be increased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year, determined by
substituting ‘calendar year 1998’ for
‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(ii) 
ROUNDING.—If 
any 
dollar
amount after being increased under clause
(i) is not a multiple of $10, such dollar
amount shall be rounded to the nearest
multiple of $10.’’.
(2) SELF-EMPLOYED.—Section 1401(a) of the
Internal Revenue Code of 1986 (relating to tax on
self-employment income) is amended to read as fol-
lows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—In addition to other taxes,
there is hereby imposed for each taxable year, on the
self-employment income of every individual, a tax
equal to 10.4 percent of the amount of the self-em-
ployment income for such taxable year.
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION
TO INDIVIDUAL SECURITY ACCOUNTS.—
‘‘(A) IN GENERAL.—In addition to other
taxes, there is hereby imposed for each taxable
year, on the self-employment income of every
individual, an individual security account con-
tribution equal to the sum of—
‘‘(i) 2 percent of the amount of the
self-employment income for each individual
for such taxable year; and
‘‘(ii) so much of such self-employment
income (not to exceed $2,000) as des-
ignated by the individual in the same man-
ner as described in section 251(c) of the
Social Security Act.
‘‘(B) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning after 1999, the dol-
lar amount in subparagraph (A)(ii) shall
be increased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year in which the tax-
able year begins, determined by sub-
stituting ‘calendar year 1998’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(ii) 
ROUNDING.—If 
any 
dollar
amount after being increased under clause
(i) is not a multiple of $10, such dollar
amount shall be rounded to the nearest
multiple of $10.’’.
(3) EFFECTIVE DATES.—
(A) EMPLOYEES.—The amendment made
by paragraph (1) applies to remuneration paid
after December 31, 1998.
(B) SELF-EMPLOYED
INDIVIDUALS.—The
amendment made by paragraph (2) applies to
taxable years beginning after December 31,
1998.
SEC. 3. MINIMUM SOCIAL SECURITY BENEFIT.
Section 215 of the Social Security Act (42 U.S.C.
415) is amended by adding at the end the following:
‘‘Minimum Monthly Insurance Benefit
‘‘(j)(1) Notwithstanding the preceding provisions of
this section—
‘‘(A) the primary insurance amount of a quali-
fied individual shall be equal to the greater of—
‘‘(i) the primary insurance amount deter-
mined under this section (without regard to this
subsection), or
‘‘(ii) 1⁄12 of the applicable percentage of
the applicable poverty line, and
‘‘(B) any recomputation of the primary insur-
ance amount of a qualified individual shall not result
in a primary insurance amount less than the pri-
mary insurance amount as in effect immediately
prior to such recomputation.
‘‘(2) For purposes of this subsection—
‘‘(A) The term ‘qualified individual’ means an
individual—
‘‘(i) who initially becomes eligible for old-
age or disability insurance benefits, or dies (be-
fore becoming eligible for such benefits) for a
month beginning after December 31, 2005 (or
whose primary insurance amount is recomputed
under this section for a month beginning after
such date), and
‘‘(ii) who has, as of such individual’s initial
month of eligibility or month of death, at least
80 quarters of coverage.
‘‘(B) The term ‘applicable poverty line’ means,
in connection with an individual, the poverty line (as
defined in section 673(2) of the Community Services
Block Grant Act (42 U.S.C. 9902(2)), including any
revision required by such section) for a family of the
size of such individual’s family.
‘‘(C)(i) The term ‘applicable percentage’ means,
for computations and recomputations of a qualified
individual’s primary insurance amount under this
section occurring in any calendar year specified in
the table under clause (ii), the sum of—
‘‘(I) the applicable base percentage speci-
fied in such table in connection with such year,
plus
appears and inserting ‘‘retirement age (as defined in
section 216(l))’’;
(3) in subsection (f)(1)(B), by striking ‘‘was
age seventy or over’’ and inserting ‘‘was at or above
retirement age (as defined in section 216(l))’’;
(4) in subsection (f)(3)—
(A) by striking ‘‘331⁄3 percent’’ and all
that follows through ‘‘any other individual,’’
and inserting ‘‘50 percent of such individual’s
earnings for such year in excess of the product
of the exempt amount as determined under
paragraph (8),’’; and
(B) by striking ‘‘age 70’’ and inserting
‘‘retirement age (as defined in section 216(l))’’;
(5) in subsection (h)(1)(A), by striking ‘‘age
70’’ each place it appears and inserting ‘‘retirement
age (as defined in section 216(l))’’; and
(6) in subsection (j)—
(A) in the heading, by striking ‘‘Age Sev-
enty’’ and inserting ‘‘Retirement Age’’; and
(B) by striking ‘‘seventy years of age’’ and
inserting ‘‘having attained retirement age (as
defined in section 216(l))’’.
(b) CONFORMING AMENDMENTS ELIMINATING THE
SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE
ATTAINED RETIREMENT AGE.—
(1) 
UNIFORM
EXEMPT
AMOUNT.—Section
203(f)(8)(A) of the Social Security Act (42 U.S.C.
403(f)(8)(A)) is amended by striking ‘‘the new ex-
empt amounts (separately stated for individuals de-
scribed in subparagraph (D) and for other individ-
uals) which are to be applicable’’ and inserting ‘‘a
new exempt amount which shall be applicable’’.
(2) 
CONFORMING
AMENDMENTS.—Section
203(f)(8)(B) of such Act (42 U.S.C. 403(f)(8)(B))
is amended—
(A) in the matter preceding clause (i), by
striking ‘‘Except’’ and all that follows through
‘‘whichever’’ and inserting ‘‘The exempt amount
which is applicable for each month of a particu-
lar taxable year shall be whichever’’;
(B) in clauses (i) and (ii), by striking ‘‘cor-
responding’’ each place it appears; and
(C) in the last sentence, by striking ‘‘an
exempt amount’’ and inserting ‘‘the exempt
amount’’.
(3) REPEAL OF BASIS FOR COMPUTATION OF
SPECIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of
such Act (42 U.S.C. 403(f)(8)(D)) is repealed.
(c) ADDITIONAL CONFORMING AMENDMENTS.—
(1) ELIMINATION OF REDUNDANT REFERENCES
TO RETIREMENT AGE.—Section 203 of the Social
Security Act (42 U.S.C. 403) is amended—
(A) in subsection (c), in the last sentence,
by striking ‘‘nor shall any deduction’’ and all
that follows and inserting ‘‘nor shall any deduc-
tion be made under this subsection from any
widow’s or widower’s insurance benefit if the
widow, surviving divorced wife, widower, or sur-
viving divorced husband involved became enti-
tled to such benefit prior to attaining age 60.’’;
and
(B) in subsection (f)(1), by striking sub-
paragraph (D) and inserting the following: ‘‘(D)
for which such individual is entitled to widow’s
or widower’s insurance benefits if such individ-
ual became so entitled prior to attaining age
60,’’.
(2) CONFORMING AMENDMENT TO PROVISIONS
FOR DETERMINING AMOUNT OF INCREASE ON AC-
COUNT
OF
DELAYED
RETIREMENT.—Section
202(w)(2)(B)(ii) 
of 
such 
Act 
(42 
U.S.C.
402(w)(2)(B)(ii)) is amended—
(A) by striking ‘‘either’’; and
(B) by striking ‘‘or suffered deductions
under section 203(b) or 203(c) in amounts
equal to the amount of such benefit’’.
(3) 
PROVISIONS
RELATING
TO
EARNINGS
TAKEN INTO ACCOUNT IN DETERMINING SUBSTAN-
TIAL GAINFUL ACTIVITY OF BLIND INDIVIDUALS.—
The second sentence of section 223(d)(4) of such
Act (42 U.S.C. 423(d)(4)) is amended by striking
‘‘if section 102 of the Senior Citizens’ Right to
Work Act of 1996 had not been enacted’’ and insert-
ing the following: ‘‘if the amendments to section 203
made by section 102 of the Senior Citizens’ Right to
Work Act of 1996 and by the 21st Century Retire-
ment Act of 1998 had not been enacted’’.
(d) EFFECTIVE DATE.—The amendments and re-
peals made by this section shall apply with respect to tax-
able years ending after December 31, 1997.
SEC. 5. REDUCTION IN THE AMOUNT OF CERTAIN TRANS-
FERS TO MEDICARE TRUST FUND.
Subparagraph (A) of section 121(e)(1) of the Social
Security Amendments of 1983, as amended by section
13215(c)(1) of the Omnibus Budget Reconciliation Act of
1993, is amended—
(1) in clause (ii), by striking ‘‘the amounts’’
and inserting ‘‘the applicable percentage of the
amounts’’; and
(2) by adding at the end the following: ‘‘For
purposes of clause (ii), the applicable percentage for
a year is equal to 100 percent, reduced (but not
below zero) by 10 percentage points for each year
after 2009.’’.
SEC. 6. COVERAGE OF NEWLY HIRED STATE AND LOCAL
EMPLOYEES.
(a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—
(1) IN
GENERAL.—Paragraph (7) of section
210(a) of the Social Security Act (42 U.S.C.
410(a)(7)) is amended to read as follows:
‘‘(7) Excluded State or local government em-
ployment (as defined in subsection (s));’’.
(2) EXCLUDED STATE OR LOCAL GOVERNMENT
EMPLOYMENT.—
(A) IN
GENERAL.—Section 210 of such
Act (42 U.S.C. 410) is amended by adding at
the end the following: