‘‘(B) ELECTION OF PARTICIPATION.—
‘‘(i) IN GENERAL.—The requirements
of subparagraph (A)(ii) shall be deemed
satisfied in the case of an individual who
does not otherwise meet such requirements
if such individual files with the employer
and the Secretary, in such form and man-
ner as shall be prescribed in regulations of
the Secretary, a written and signed dec-
laration of such individual’s intention to be
treated as an eligible employee for pur-
poses of this title and such election meets
the requirements of clause (ii).
‘‘(ii) REQUIREMENTS.—Any election
under clause (i) must be so filed not later
than December 15, 1994, and must des-
ignate the social security individual retire-
ment account to which the prescribed so-
cial security contributions with respect to
such individual are to be paid.
‘‘(iii) IRREVOCABILITY.—Any election
under clause (i) shall be irrevocable and
shall be effective with respect to wages
paid after December 31, 1994, for pay pe-
riods ending after such date.
‘‘(4) ELIGIBLE SELF-EMPLOYED INDIVIDUAL.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘eligible self-employed indi-
vidual’ means any individual—
‘‘(i) on whose self-employment income
for a taxable year beginning after Decem-
ber 31, 1994, there is imposed a tax under
section 1401(a) of the Internal Revenue
Code of 1986, and
‘‘(ii) who, as of January 1, 1995, has
not been credited under part A with any
quarters of coverage (within the meaning
of section 213(a)(2)).
‘‘(B) ELECTION OF PARTICIPATION.—
‘‘(i) IN GENERAL.—The requirements
of subparagraph (A)(ii) shall be deemed
satisfied in the case of an individual who
does not otherwise meet such requirements
if such individual files with the Secretary,
in such form and manner as shall be pre-
scribed in regulations of the Secretary, a
written and signed declaration of such in-
dividual’s intention to be treated as an eli-
gible self-employed individual for purposes
of this title and such election meets the re-
quirements of clause (ii).
‘‘(ii) REQUIREMENTS.—Any election
under clause (i) must be so filed not later
than December 15, 1994, and must des-
ignate the social security individual retire-
ment account to which the prescribed so-
cial security contributions with respect to
such individual are to be paid.
‘‘(iii) IRREVOCABILITY.—Any election
under clause (i) shall be irrevocable and
shall be effective with respect to self-em-
ployment income for taxable years begin-
ning after December 31, 1994.
‘‘(5) PRESCRIBED SOCIAL SECURITY CONTRIBU-
TION.—The term ‘prescribed social security con-
tribution’ means—
‘‘(A) with respect to wages paid to an em-
ployee, an amount equal to the amount of tax
payable by the employer based on such wages
under section 3111 of the Internal Revenue
Code of 1986 with respect to having such em-
ployee in his employ, and
‘‘(B) with respect to self-employment in-
come received by an individual, an amount
equal to the amount of tax payable by the indi-
vidual based on such self-employment income
under section 1401(a) of such Code.
‘‘(6) ELIGIBLE SURVIVOR.—The term ‘eligible
survivor’ of a deceased individual means such indi-
vidual’s widow or, if there is no such widow, such in-
dividual’s last surviving divorced wife or surviving
divorced husband. Such term shall not include any
such surviving divorced wife or surviving divorced
husband who is married on the date of the deceased
individual’s death.
‘‘(7) BUSINESS DAY.—The term ‘business day’
means any day other than a Saturday, Sunday, or
legal holiday in the area involved.
‘‘PENALTIES
‘‘SEC. 256. (a) FAILURE TO ESTABLISH INDIVIDUAL
RETIREMENT PAYROLL DEDUCTION PLAN.—Any covered
employer who fails to meet the requirements of section
251 for any calendar year shall be subject to a civil penalty
of not to exceed the greater of—
‘‘(1) $5,000, or
‘‘(2) $100 for each eligible employee 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 deduct
an amount from the wages of an eligible employee in ac-
cordance with an applicable social security payroll deduc-
tion plan shall be subject to a civil penalty of not to exceed
$500 for each such failure.
‘‘(c) FAILURE BY EMPLOYER TO MAKE TIMELY PAY-
MENTS TO SOCIAL SECURITY INDIVIDUAL RETIREMENT
ACCOUNT.—If an amount deducted from the wages of an
eligible employee under a social security payroll deduction
plan is not paid to the specified social security individual
retirement account within the time prescribed by section
251—
‘‘(1) the employer shall be subject to a civil
penalty of not to exceed 50 percent of the amount
so deducted, and
‘‘(2) shall be liable to the employee for interest
on the amount so deducted at the underpayment
rate determined under section 6621 of the Internal
Revenue Code of 1986 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 specified so-
cial security individual retirement account.
‘‘(d) FAILURE BY ELIGIBLE SELF-EMPLOYED INDI-
VIDUAL TO MAKE TIMELY PAYMENTS TO SOCIAL SECU-
RITY INDIVIDUAL RETIREMENT ACCOUNT.—If a pre-
scribed social security contribution is not paid by an eligi-
ble self-employed individual to a social security individual
retirement account maintained by the individual within
the time prescribed by section 253, such individual shall
be subject to a civil penalty of not to exceed 50 percent
of the amount of such contribution.
‘‘(e) FAILURE
BY TRUSTEE TO MAKE TIMELY
TRANSFERS.—If the balance in the social security individ-
ual retirement account of a deceased individual is not
transferred by the trustee within the time prescribed by
section 254—
‘‘(1) the trustee shall be subject to a civil pen-
alty of not to exceed 50 percent of the amount of
the balance, and
‘‘(2) shall be liable—
‘‘(A) in the case of a transfer required to
be made to another social security individual re-
tirement account, to the widow or the surviving
divorced wife or surviving divorced husband (as
the case may be), or
‘‘(B) in the case of a transfer required to
be made to the Federal Old-Age and Survivors
Insurance Trust Fund, to such Trust Fund,
for interest on the balance at the underpayment rate
determined under section 6621 of the Internal Reve-
nue Code of 1986 from the last day by which such
balance was required to be so transferred to the date
on which such balance is transferred to the des-
ignated social security individual retirement account.
‘‘(f) RULES FOR APPLICATION OF SECTION.—
‘‘(1) PENALTIES ASSESSED BY SECRETARY.—
Any civil penalty assessed by this section shall be
imposed by the Secretary and collected in a civil ac-
tion.
‘‘(2) COMPROMISES.—The Secretary may com-
promise the amount of any civil penalty imposed by
this section.
‘‘(3) AUTHORITY TO WAIVE PENALTY IN CER-
TAIN CASES.—The Secretary may waive the applica-
tion of this section with respect to any failure if the
Secretary determines that such failure is due to rea-
sonable cause and not to intentional disregard 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
(6);
(2) by striking the period at the end of para-
graph (7) and inserting ‘‘, and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(8) 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 and does not provide for em-
ployer contributions.’’
(d) EFFECTIVE
DATE
AND
NOTICE
REQUIRE-
MENTS.—
(1) EFFECTIVE DATE.—The amendments made
by subsection (a) (and any social security payroll de-
duction plan required thereunder) shall apply with
respect to wages paid after December 31, 1994, for
pay periods ending after such date and self-employ-
ment income for taxable years beginning after such
date.
(2) NOTICE REQUIREMENTS.—
(A) IN GENERAL.—Not later than October
1, 1994, the Secretary of Health and Human
Services shall—
(i) send to the last known address of
each eligible individual a description of the
program established by the amendments
made by this Act, which shall be written in
the form of a pamphlet in language which
may be readily understood by the average
worker,
(ii) provide for toll-free access by tele-
phone from all localities in the United
States to the Social Security Administra-
tion through which individuals may obtain
information and answers to questions re-
garding such program, and
(iii) provide information to the media
in all localities of the United States about
such program and such toll-free access by
telephone.
(B) ELIGIBLE INDIVIDUAL.—For purposes
of this paragraph, the term ‘‘eligible individual’’
means an individual who, as of the date of the
pamphlet sent pursuant to subparagraph (A), is
indicated within the records of the Social Secu-
rity Administration as—
(i) not having attained age 65, and
(ii) being credited with one or more
quarters of coverage under section 213 of
the Social Security Act.
(C) MATTERS
TO
BE
INCLUDED.—The
Secretary shall include with the pamphlet sent
to each eligible individual pursuant to subpara-
graph (A)—
(i) a statement of the number of quar-
ters of coverage indicated in the records of
the Social Security Administration as of
the date of the description as credited to
such individual under section 213 of the
Social Security Act and the date as of
which such records may be considered ac-
curate, and
(ii) the number for toll-free access by
telephone established by the Secretary pur-
suant to subparagraph (A).
SEC. 4. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS
UNDER PART A OF TITLE II OF THE SOCIAL
SECURITY ACT.
(a) IN GENERAL.—Section 215 of the Social Security
Act (42 U.S.C. 415) is amended by adding at the end the
following new subsection:
‘‘Adjustment of Primary Insurance Amount of Eligible
Employees and Eligible Self-Employed Individuals
Under Part B
‘‘(j)(1) Except as provided in paragraph (3), in the
case of an individual who is—
‘‘(A) an eligible employee, as defined under
paragraph (3)(A) of section 255 without regard to
paragraph (3)(B) of such section, or
‘‘(B) an eligible self-employed individual, as de-
fined under paragraph (4)(A) of section 255 without
regard to paragraph (4)(B) of such section,
such individual’s primary insurance amount as determined
in accordance with this section (before adjustments made
under subsection (i)) shall be equal to 50 percent of the
amount which would be so determined if this subsection
did not apply.
‘‘(2) Except as provided in paragraph (3), in the case
of an individual who is—
‘‘(A) an eligible employee as defined in para-
graph (3) of section 255 solely by reason of an elec-
tion under paragraph (3)(B) of such section, or
‘‘(B) an eligible self-employed individual as de-
fined in paragraph (4) of section 255 solely by rea-
son of an election under paragraph (4)(B) of such
section,
such individual’s primary insurance amount as determined
in accordance with this section (before adjustments made
under subsection (i)) shall be equal to the product derived
by multiplying—
‘‘(i) the amount which would be so determined
if this subsection did not apply, by
‘‘(ii) the applicable percentage determined
under the following table:
‘‘If the number of such individual’s
quarters of coverage (within the
meaning of section 213(a)(2)) as of
The applicable
January 1, 1995, is:
percentage is:
Less than 21 .............................................................
50 percent.
More than 20 but less than 61 .................................
60 percent.
More than 60 but less than 101 ...............................
70 percent.
More than 100 but less than 141 .............................
80 percent.
More than 141 ...........................................................
90 percent.
‘‘(3)(A) In the case of an individual who is an eligible
employee as defined in paragraph (3) of section 255 or
an eligible self-employed individual as defined in para-
graph (4) of section 255 becomes entitled to disability in-
surance benefits under section 223, such individual’s pri-
mary insurance amount shall be determined without re-
gard to paragraphs (1) and (2).
‘‘(B) Effective upon the attainment by an individual
described in subparagraph (A) of retirement age (as de-
fined in section 216(l)(1)), such individual’s primary in-
surance amount as determined in accordance with this sec-
tion (before subsequent adjustments made under sub-
section (i)) shall be equal the product derived by multiply-
ing—
‘‘(i) the amount which would be so determined
if this subsection did not apply, by
‘‘(ii) the applicable percentage determined
under the following table:
‘‘If the number of such individual’s
quarters of coverage (within the
meaning of section 213(a)(2)) as of
the date on which such individual
The applicable
attains normal retirement age is:
percentage is:
Less than 9 ...............................................................
100 percent.
More than 8 but less than 21 ...................................
90 percent.
More than 20 but less than 61 .................................
80 percent.
More than 60 but less than 101 ...............................
70 percent.
More than 100 but less than 141 .............................
60 percent.
More than 140 ...........................................................
50 percent.’’
(b) CONFORMING AMENDMENT TO RAILROAD RE-
TIREMENT ACT OF 1974.—Section 1 of the Railroad Re-
tirement Act of 1974 (45 U.S.C. 231) is amended by add-
ing at the end the following:
‘‘(s) In applying applicable provisions of the Social
Security Act for purposes of determining the amount of
the annuity to which an individual is entitled under this
Act, such individual shall not be treated as an ‘eligible
individual’ as defined in section 253(4) of the Social Secu-
rity Act.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to months after De-
cember 1994.
SEC. 5. TAX TREATMENT OF SOCIAL SECURITY INDIVIDUAL
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 408 the following
new section:
‘‘SEC. 408A. SOCIAL SECURITY INDIVIDUAL RETIREMENT
ACCOUNTS.
‘‘(a) GENERAL RULE.—A social security individual
retirement account shall be treated under this title in the
same manner as any individual retirement plan, except to
the extent otherwise provided in this section.
‘‘(b) SOCIAL SECURITY INDIVIDUAL RETIREMENT
ACCOUNT.—For purposes of this title, the term ‘social se-
curity individual retirement account’ means an individual
retirement account (as defined in section 408(a)) which
is administered or issued by a bank (as defined in section
408(n)) under terms which restrict deposits to prescribed
social security contributions made to the account pursuant
to section 251 or 253 of the Social Security Act and trans-
fers made to the account pursuant to section 254 of such
Act.
‘‘(c) TAX TREATMENT
OF DISTRIBUTIONS.—For
purposes of this title—
‘‘(1) EXCLUSION
FOR
QUALIFIED
DISTRIBU-
TIONS.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied distribution from a social security individ-
ual retirement account, the amount of such dis-
tribution shall not be includable in gross in-
come.
‘‘(B) 
QUALIFIED
DISTRIBUTION.—For
purposes of subparagraph (A), the term ‘quali-
fied distribution’ means any distribution made
on or after the date on which the individual at-
tains retirement age (as defined in section
216(l)(1) of the Social Security Act).
‘‘(2) PENALTY FOR NONQUALIFIED DISTRIBU-
TIONS.—In the case of a distribution not subject to
paragraph (1), section 72(t) shall be applied—
‘‘(A) by substituting ‘50 percent’ for ‘10
percent’ in paragraph (1) thereof, and
‘‘(B) without regard to paragraph (2)
thereof.
‘‘(3) 
ROLLOVERS.—Section 
408(d)(3)(A)(i)
shall apply to any amount distributed from a social
security individual retirement account only to the ex-
tent such amount is paid into another such account
for the benefit of the individual for whom the ac-
count from which such amount is transferred was
maintained.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 408 the following new item:
‘‘Sec. 408A. Social security individual retirement accounts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
Æ
HR 3803 IH——2
HR 3803 IH——3