‘‘(iii) ADMINISTRATIVE
SUPPORT.—
Upon the request of the Board, the Sec-
retary shall provide to the Board of Trust-
ees from the Department of the Treasury,
on a reimbursable basis, the administrative
support services necessary for the Board to
carry out its responsibilities under this
part.’’.
(b) EFFECTIVE
DATE
AND
NOTICE
REQUIRE-
MENTS.—
(1) EFFECTIVE DATE.—The amendments made
by subsection (a) shall apply with respect to wages
paid after December 31, 1998, for pay periods end-
ing after such date and self-employment income for
taxable years beginning after such date.
(2) NOTICE REQUIREMENTS.—
(A) IN GENERAL.—Not later than October
1, 1998, the Commissioner of Social Security,
pursuant to direction by the Board of Trustees
of the Federal Old-Age and Survivors Insurance
Trust Fund and the Federal Disability Insur-
ance Trust Fund, 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 (including a detailed de-
scription of the process of election under
section 252 of the Social Security 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 and for a site on the Internet through
which individuals may obtain information
and answers to questions regarding such
program, and
(iii) provide information to the media
in all localities of the United States about
such program, such toll-free access by tele-
phone, and such site on the Internet.
(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 21, 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
Commissioner of Social Security shall include
with the pamphlet sent to each eligible individ-
ual pursuant to subparagraph (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 Commissioner
pursuant to subparagraph (A).
SEC. 4. REDUCTION IN APPROPRIATIONS TO THE TRUST
FUNDS.
Section 201 of the Social Security Act (42 U.S.C.
401) is amended by adding at the end the following new
subsection:
‘‘Reduction in Appropriations to the Trust Funds
‘‘(n) Under regulations prescribed by the Board of
Trustees (in consultation with the Secretary of the Treas-
ury) to carry out this subsection, the amounts appro-
priated for any fiscal year under paragraphs (3) and (4)
of subsection (a), to the extent attributable to taxes paid
during such fiscal year with respect to an individual who
is for such fiscal year a covered employee or covered self-
employed individual (as defined in section 252), shall be
reduced by 20 percent.’’.
SEC. 5. 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 in Relation
to Deposits Made to Personal Retirement Savings
Accounts
‘‘(j)(1) Except as provided in paragraph (2), an indi-
vidual’s primary insurance amount as determined in ac-
cordance with this section (before adjustments made
under subsection (i)) shall be equal to the excess (if any)
of—
‘‘(A) the amount which would be so determined
without the application of this subsection, over
‘‘(B) the monthly amount of an immediate life
annuity, determined on the basis of 50 percent of
the total of all amounts which have been deposited
pursuant to section 251(c) (indexed in the same
manner as is applicable with respect to average in-
dexed monthly earnings under subsection (b)) into
all personal retirement savings accounts held by
such individual, plus accrued interest compounded
annually, assuming an interest rate of 3.7 percent
and 
using 
the 
mortality 
table 
used 
under
412(l)(7)(C)(ii) of the Internal Revenue Code of
1986.
‘‘(2) In the case of an individual described in para-
graph (1) who becomes entitled to disability insurance
benefits under section 223, such individual’s primary in-
surance amount shall be determined without regard to
paragraph (1).
‘‘(3) For purposes of this subsection, the term ‘imme-
diate life annuity’ means an annuity—
‘‘(A) the annuity starting date (as defined in
section 72(c)(4) of the Internal Revenue Code of
1986) of which commences with the first month fol-
lowing the date of the determination, and
‘‘(B) which provides for a series of substantially
equal monthly payments over the life expectancy of
the individual described in paragraph (1).’’.
(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, section 215(j) of the Social Security Act and part
B of title II of such Act shall be disregarded.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to computations and
recomputations of primary insurance amounts occurring
after December 31, 1998.
SEC. 6. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
(a) DEDUCTION
FOR
CONTRIBUTIONS
BY
TAX-
PAYER.—Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to additional
itemized deductions) is amended by redesignating section
222 as section 223 and by inserting after section 221 the
following new section:
‘‘SEC. 222. CONTRIBUTIONS TO PERSONAL RETIREMENT
SAVINGS ACCOUNTS.
‘‘(a) IN GENERAL.—In the case of an individual who
is an electing personal retirement savings account partici-
pant for the taxable year, there shall be allowed as a de-
duction an amount equal to 50 percent of the amount con-
tributed during such taxable year by such individual to
a personal retirement savings account maintained for the
benefit of such individual.
‘‘(b) LIMITATION.—The amount of contributions
which may be taken into account under subsection (a)
shall not exceed $2,000.
‘‘(c) ELECTING PERSONAL RETIREMENT SAVINGS
ACCOUNT PARTICIPANT.—An individual is an electing
personal retirement savings account participant for any
taxable year if any amount is deposited under section
251(c) of the Social Security Act for such taxable year
to a personal retirement savings account maintained for
the benefit of such individual.
‘‘(d) SPECIAL RULES.—
‘‘(1) NO DEDUCTION FOR TRUSTEE-TO-TRUST-
EE TRANSFERS.—No deduction shall be allowed for
amounts transferred to an account under section
408B(f)(2).
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
personal retirement savings account on the last day
of the preceding taxable year if the contribution is
made on account of such taxable year and is made
not later than the time prescribed by law for filing
the return for such taxable year (not including ex-
tensions thereof).’’
(b) PERSONAL RETIREMENT SAVINGS ACCOUNTS.—
Subpart A of part I of subchapter D of chapter 1 of such
Code (relating to pension, profit-sharing, stock bonus
plans, etc.) is amended by inserting after section 408A
the following new section:
‘‘SEC. 408B. PERSONAL RETIREMENT SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any amount deposited in a personal retirement sav-
ings account under section 251(c) of the Social Security
Act.
‘‘(b) PERSONAL RETIREMENT SAVINGS ACCOUNT.—
For purposes of this title, the term ‘personal retirement
savings account’ means a trust created or organized in the
United States for the exclusive benefit of an individual or
his beneficiaries, but only if the written governing instru-
ment creating the trust meets the following requirements:
‘‘(1) No contribution will be accepted other
than—
‘‘(A) deposits under sections 251(c) of the
Social Security Act, and
‘‘(B) contributions made in cash, except
that contributions under this subparagraph may
not be accepted for any taxable year in excess
of $2,000.
‘‘(2) No amount may be paid or distributed
from such trust—
‘‘(A) before the date on which the account
holder attains age 591⁄2, becomes entitled to
disability insurance benefits under section 223
of the Social Security Act, or dies, or
‘‘(B) in a manner not meeting the require-
ments of subsection (d).
‘‘(3) The trustee of which is a regulated invest-
ment company (as defined in section 851) which is
approved by the Secretary for purposes of this sec-
tion.
‘‘(4) The interest of an individual in the bal-
ance in his account is nonforfeitable.
Paragraphs (1) and (2) shall not apply to direct trustee-
to-trustee transfers described in subsection (f)(2).
‘‘(c) INVESTMENT REQUIREMENTS.—
‘‘(1) IN GENERAL.—Amounts in a personal re-
tirement savings account may be invested only in
regulated investment companies (as defined in sec-
tion 851) which are approved by the Secretary for
purposes of this section.
‘‘(2) CRITERIA FOR SECRETARIAL APPROVAL.—
The Secretary may approve a regulated investment
company for purposes of this section only if—
‘‘(A) an election is in effect under section
851(b)(1) for such company, and
‘‘(B) the portfolio assets of such com-
pany—
‘‘(i) replicate the assets of a broad-
based index of stocks which is approved by
the Secretary, or
‘‘(ii) are of a type determined by the
Secretary not to involve high risks for the
investor.
To the extent possible, the Secretary shall approve
under subparagraph (B)(i) funds in each of the fol-
lowing 4 categories: domestic stocks, domestic bonds,
stocks of companies having small capitalization, and
foreign stocks. The Secretary shall take into account
management costs in determining whether to ap-
prove a company for purposes of this section.
‘‘(d) DISTRIBUTION REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met with respect to distributions from
a personal retirement savings account only if such
distributions are in accordance with a payment op-
tion under paragraph (2). The preceding sentence
shall not apply to direct trustee-to-trustee transfers
described in subsection (f)(2).
‘‘(2) PAYMENT OPTIONS.—The payment options
under this paragraph are the following:
‘‘(A) LIFETIME OPTION.—Distributions in
equal annual or more frequent periodic install-
ments over a stated period of 10, 15, or 20
years, payable to the account holder. The trust-
ee of the account shall be liable under the terms
of the account to the account holder for the
timely payment of periodic payments during the
stated period. If the account holder survives the
stated period, the terms governing the account
shall provide for continuing distributions for the
life of the account holder in annual or more fre-
quent periodic payments for the life of the ac-
count holder or (if earlier) until exhaustion of
the account balance.
‘‘(B) NONLIFETIME
OPTION.—Distribu-
tions in equal annual or more frequent periodic
installments of interest only, or of interest and
principal. Any such payment of equal install-
ments shall continue until—
‘‘(i) payment ceases at the direction of
the account holder to the trustee,
‘‘(ii) payment continues in accordance
with this subparagraph but at an adjusted
level at the direction of the account holder
to the trustee, or
‘‘(iii) the distribution converts to an
option described in subparagraph (A) at
the direction of the account holder to the
trustee.
‘‘(C) ADDITIONAL OPTIONS.—Distributions
in any other manner permitted under regula-
tions prescribed by the Secretary.
‘‘(e) ACCOUNT EXEMPT FROM TAX.—
‘‘(1) GENERAL RULE.—Any personal retirement
savings 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 personal retirement savings accounts.
‘‘(f) DISTRIBUTIONS TAXED AS IF SOCIAL SECURITY
BENEFITS.—
‘‘(1) GENERAL RULE.—Amounts paid or dis-
tributed from a personal retirement savings account
shall be includible in gross income only if so includ-
ible under section 86, determined by treating such
amounts as social security benefits (as defined in
such section).
‘‘(2) TRUSTEE-TO-TRUSTEE
TRANSFERS.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer between per-
sonal retirement savings accounts of the same indi-
vidual.
‘‘(3) RETURN
OF
EXCESS
CONTRIBUTIONS.—
Paragraph (1) shall not apply to the distribution of
any contribution (other than a deposit made under
section 251(c) of the Social Security Act) made dur-
ing a taxable year to the extent that such contribu-
tion exceeds the dollar amount specified in sub-
section (b)(1)(B) if—
‘‘(A) such distribution is received on or be-
fore the last day prescribed by law (including
extensions) for filing such individual’s return
for such taxable year,
‘‘(B) such contribution is not taken into
account in determining the deduction allowed
under section 222, and
‘‘(C) such distribution is accompanied by
the amount of net income attributable to such
contribution.
Any net income described in subparagraph (C) shall
be included in gross income for the taxable year in
which such contribution is made.
‘‘(g) CERTAIN OTHER RULES TO APPLY.—The fol-
lowing rules shall apply to personal retirement savings ac-
counts in the same manner that such rules apply to indi-
vidual retirement accounts:
‘‘(1) Section 408(h) (relating to custodial ac-
counts).
‘‘(2) Section 408(i) (relating to reports).
‘‘(h) TREATMENT
AFTER
DEATH
OF
ACCOUNT
HOLDER.—A personal retirement savings account shall
cease to be such on the date of the account holder’s death,
but no amount shall be includible in gross income by rea-
son of such cessation.’’
(c) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by inserting after
paragraph (17) the following new paragraph:
‘‘(18) PERSONAL
RETIREMENT
SAVINGS
AC-
COUNTS.—The deduction allowed by section 222.’’
(d) TAX ON EXCESS CONTRIBUTIONS.—
(1) IN
GENERAL.—Subsection (a) of section
4973 of such Code is amended by striking ‘‘or’’ at
the end of paragraph (4), by adding ‘‘or’’ at the end
of paragraph (5), and by inserting after paragraph
(5) the following new paragraph:
‘‘(6) a personal retirement savings account (as
defined in section 408B),’’.
(2) EXCESS CONTRIBUTION DEFINED.—Section
4973 is amended by adding at the end the following
new subsection:
‘‘(g) EXCESS CONTRIBUTIONS
TO PERSONAL RE-
TIREMENT SAVINGS ACCOUNTS.—For purposes of this
section—
‘‘(1) IN GENERAL.—In the case of personal re-
tirement savings accounts maintained for the benefit
of any 1 beneficiary, the term ‘excess contributions’
means the amount by which the amount contributed
for the taxable year to such accounts exceeds
$2,000.
‘‘(2) SPECIAL RULES.—For purposes of para-
graph (1), the following contributions shall not be
taken into account:
‘‘(A) Any contributions under section
251(c) of the Social Security Act.
‘‘(B) Any trustee-to-trustee transfer.’’
(e) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 4975(e) of such
Code (relating to tax on prohibited transactions) is
amended by redesignating subparagraph (F) as sub-
paragraph (G), by striking ‘‘or’’ at the end of sub-
paragraph (E), and by inserting after subparagraph
(E) the following new subparagraph:
‘‘(F) a personal retirement savings account
described in section 408B(b), or’’.
(2) Paragraph (2) of section 6693(a) of such
Code (relating to failure to provide reports on cer-
tain tax favored accounts or annuities) is amended
by redesignating subparagraphs (C) and (D) as sub-
paragraphs (D) and (E), respectively, and by insert-
ing after subparagraph (B) the following new sub-
paragraph:
‘‘(C) section 408B(g)(2) (relating to per-
sonal retirement savings accounts),’’.
(f) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 222. Contributions to personal retirement savings accounts.
‘‘Sec. 223. Cross reference.’’
(2) 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 sec-
tion 408A the following new item:
‘‘Sec. 408B. Personal retirement savings accounts.’’
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 7. INTERIM AND FINAL REPORTS.
Not later than February 1, 1999, and annually there-
after through February 1, 2009, the Board of Trustees
of the Federal Old-Age and Survivors Insurance Trust
Fund shall submit to each House of the Congress an in-
terim report on the operation of the amendments made
by this Act. Not later than August 1, 2009, Board of
Trustees shall submit to each House of the Congress a
final report on the operation of such amendments. The
Board of Trustees shall include in each report its assess-
ment of the effectiveness of such amendments and its rec-
ommendations for legislative and administrative changes.
SEC. 8. INVESTMENT OF SOCIAL SECURITY TRUST FUNDS
IN 
MARKETABLE 
SECURITIES 
IN 
FISCAL
YEAR 1999.
During fiscal year 1999, all obligations purchased by
the Managing Trustee of the Federal Old-Age and Sur-
vivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund for purposes of investment of such
Trust Funds pursuant to section 201(d) of the Social Se-
curity Act shall consist of obligations other than obliga-
tions issued pursuant to such section solely for purchase
by such Trust Funds. Such obligations purchased during
such fiscal year may be purchased on original issue at the
issue price or by purchase of outstanding obligations at
the market price, except that the Managing Trustee shall
ensure that, to the extent practicable, such obligations
have maturities, and bear interest at a rate, comparable
to the maturities and interest rates required under such
section in connection with obligations issued solely for pur-
chase by such Trust Funds, subject to an option to redeem
such obligations at any time at the purchase price.
Æ