I 
108TH CONGRESS 
1ST SESSION H. R. 3177
To amend the Social Security Act and the Internal Revenue Code of 1986 
to preserve and strengthen the Social Security Program through the 
creation of individual Social Security accounts ensuring full benefits 
for all workers and their families, giving Americans ownership of their 
retirement, restoring long-term Social Security solvency, and for other 
purposes. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 25, 2003
Mr. DEMINT introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Social Security Act and the Internal Revenue 
Code of 1986 to preserve and strengthen the Social 
Security Program through the creation of individual So-
cial Security accounts ensuring full benefits for all work-
ers and their families, giving Americans ownership of 
their retirement, restoring long-term Social Security sol-
vency, 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 AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Social Security Savings Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows:
Sec. 1. Short title and table of contents. 
Sec. 2. Findings and purposes. 
Sec. 3. Individual social security account program and individual social security 
accounts. 
‘‘PART B—INDIVIDUAL SOCIAL SECURITY ACCOUNT PROGRAM 
‘‘Sec. 251. Definitions. 
‘‘Sec. 252. Personal Savings Board. 
‘‘Sec. 253. Executive Director. 
‘‘Sec. 254. Social Security Personal Savings Fund. 
‘‘Sec. 255. Eligible individuals. 
‘‘Sec. 256. Individual social security accounts. 
‘‘Sec. 257. Prescribed social security deposits. 
‘‘Sec. 258. Investments in stock and Government obligations. 
‘‘Sec. 259. Accounting and information. 
‘‘Sec. 260. Account distributions. 
‘‘Sec. 261. Payments upon death of account owner. 
‘‘Sec. 262. Treatment of account balances and annuities. 
‘‘Sec. 263. Fiduciary responsibilities. 
Sec. 4. Conforming adjustments to monthly insurance benefits. 
Sec. 5. Maintenance of adequate balances in the Social Security Trust Funds. 
Sec. 6. Taxation of Individual Social Security Account Program. 
Sec. 7. Report on private sector investment and management. 
Sec. 8. Maintenance of current levels of FICA and SECA taxes.
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—The Congress finds the following: 
(1) Social Security is a defining American 
promise that must be kept. As one of the most suc-
cessful Government programs of the 20th Century, 
it must always honor its founding purpose of pro-
tecting the elderly from poverty and bringing dignity 
to retirement.
(2) Social Security’s retirement, survivors, and 
disability 
benefits 
help 
provide 
more 
than 
46,000,000 Americans of all ages income security, 
without which nearly 50 percent of seniors would 
live in poverty. 
(3) Social Security is of particular importance 
for low-income earners, for whom it may be their 
sole source of retirement income. In addition, it is 
especially important for widows and mothers caring 
for children, without which nearly 53 percent of 
these women would live in poverty. 
(4) Social Security is unsustainable in its 
present form. The 2003 Report of the Social Secu-
rity Board of Trustees projects that the system’s ob-
ligations will exceed its annual tax revenue starting 
in 2018. From 2018 to 2042, the Government is ob-
ligated to pay full benefits using general tax reve-
nues owed to the Social Security trust funds. How-
ever, this means that the long-term financing prob-
lem will begin in 2018. 
(5) The Social Security trust funds will not 
solve the problem. These trust fund balances are 
available to finance future benefit payments only in 
a bookkeeping sense. They do not consist of real eco-
nomic assets that can be drawn down in the future
to fund benefits. Instead, they are claims on the 
general budget that, when redeemed, will have to be 
financed by raising taxes, borrowing from the public, 
cutting spending, or reducing benefits. The existence 
of large trust fund balances does not, by itself, have 
any impact on the Government’s ability to pay bene-
fits. 
(6) Faster economic growth will not solve the 
problem. Under the Board of Trustees’ 2003 Report, 
Social Security’s yearly deficits will increase signifi-
cantly every year. By 2038, Social Security will re-
quire more than 1 trillion a year in addition to the 
money raised through payroll taxes. By 2078, the 
annual Social Security deficit will be as large as the 
national debt in 2003. Even worse, these deficits will 
stretch far beyond the 75-year budget window with 
no sign of returning to balance. No amount of eco-
nomic growth can overcome these substantial yearly 
deficits. 
(7) The primary reason for this financial short-
fall is demographic. In 1960 there were more than 
five workers paying into Social Security for every in-
dividual collecting benefits. Today, demographic 
changes have reduced the worker-to-beneficiary ratio 
to 3.4 to 1. By 2050, it will be just 2 to 1.
(8) If reforms are not made, younger workers 
will receive lower benefits for every dollar they pay 
into the current system. The inflation-adjusted rate 
of return averaged more than 25 percent annually 
for Social Security’s first retirees in the 1940s, but 
are estimated to average roughly 4 percent for to-
day’s 
retirees, 
roughly 
percent 
for 
‘‘baby 
boomers,’’ and 1 percent for those who will be born 
40 years from now. Since these figures do not in-
clude the extra cost of meeting Social Security’s 
needs from 2018 to 2042, real rates of return for 
younger workers will likely be even lower. 
(9) If reforms are not made, Social Security 
payroll taxes will have to be raised to balance the 
system over the next 75 years. When Social Security 
was first started, its tax was never supposed to go 
higher than 6 percent. Today, it is over 12 percent 
and if something is not done, it will go over 18 per-
cent. Americans pay far too much into Social Secu-
rity for what they receive to have their payroll taxes 
raised again. 
(10) Inasmuch as payroll taxes already con-
stitute the single largest tax burden for most Amer-
ican families, payroll tax increases will further harm 
low and middle income American families and add to
the burden on employers. This would especially af-
fect small businesses and harm job creation. 
(11) If reforms are not made and payroll taxes 
are not raised, Social Security benefits will have to 
be cut by 35 percent to balance the system over the 
next 75 years. Seniors rely too heavily on Social Se-
curity for their retirement security and it would be 
unfair to reduce their promised benefits. 
(12) Social Security is currently a Government-
controlled, Government-owned program that does 
not save a penny for workers’ retirement. Instead, it 
requires each generation to support the generation 
that came before it. With demographic changes, this 
structure passes on higher taxes, fewer benefits, and 
lower rates of return to younger Americans. 
(13) In its current form, Social Security 
hinders wealth creation and accumulation. While So-
cial Security does an adequate job of providing some 
Americans a steady poverty level income, it should 
also allow workers to build a nest egg that they can 
use to improve their retirement income, provide free-
dom and security in retirement, send grandchildren 
to college, or leave wealth to the next generation. 
Americans should have more to show for a lifetime 
of work than a small monthly check.
(14) Social Security does not currently help the 
low-income workers enough. The average monthly 
Social Security benefit check hovers at the poverty 
level. Despite popular perceptions, this means that 
in retirement the poor barely have enough money to 
sustain themselves on a monthly basis, and nothing 
to leave their children after their death. 
(15) More than 50 percent of American house-
holds are invested in the economy. However, low-in-
come and working poor individuals do not have ac-
cess to the investment tools that help the middle 
class prosper and succeed. Personal Social Security 
savings accounts would allow even the poorest work-
ers to participate in a growing economy. 
(16) Social Security is currently unfair to mi-
norities. A survey by the Federal Reserve Board of 
Governors shows that the wealth gap between whites 
and African-Americans is growing, despite the fact 
that the income gap between them is decreasing. As 
a result, white households have five to ten times as 
much wealth as black households. If this trend con-
tinues, this lack of wealth will prevent African-Amer-
icans from having the assets necessary to prosper 
and succeed, prohibiting full participation in the 
American dream. Personal savings accounts can pro-
vide a minimum level of investment that will help 
the poor build capital and wealth. 
(17) As a result of mortality differences, Afri-
can Americans receive nearly $21,000 less on a life-
time basis from Social Security’s retirement pro-
gram than whites with similar income and marital 
status. Because they are younger than the general 
population, disproportionate numbers of Hispanic 
Americans will enter retirement having received 
below the market rates of return from the Social Se-
curity program. 
(18) Social Security is currently unfair to 
women who do not work for the required amount of 
time or would receive very low benefits based on 
their own earnings. Many women who have paid into 
Social Security over their working lives find that 
their best option is to claim benefits on their hus-
band’s contributions rather than on their own work 
history. Consequently, they get no return on the 
money they paid into a system. Personal savings ac-
counts would allow women to build wealth with their 
own money, which can be combined with their hus-
band’s contributions for even larger benefit levels. 
(19) Social Security’s rigid benefit structure 
does not provide hard-working Americans with the
flexibility to plan and shape their retirements to best 
suit their various lifestyles and life expectancies. 
(20) Social Security is creating a culture of de-
pendency. As the population ages, more and more 
Americans are becoming dependent on the govern-
ment for their retirement income. This trend robs 
older Americans of their freedom, independence, and 
dignity. 
(21) Social Security does not currently offer 
Americans any guarantee that they will receive their 
benefits. According to the United States Supreme 
Court, Americans do not own their Social Security 
benefits. In fact, the Court has said that Congress 
has the right ‘‘to alter, amend, or repeal any provi-
sion’’ of Social Security at any time. Americans have 
only a tenuous promise that Congress can change at 
any time, by any amount, and for any reason. 
(22) Personal savings accounts would transform 
Social Security from an IOU into real assets that in-
dividuals could own and pass along to their children. 
Personal savings accounts would enable Social Secu-
rity to start saving real economic assets for the first 
time, locking them away so they cannot be spent on 
non-Social Security programs.
(23) Personal savings accounts would generate 
higher returns on the payroll taxes currently paid 
into Social Security, drastically reducing the finan-
cial shortfall in the system and paving the way for 
a fully funded system that is permanently self-sus-
taining. 
(24) Personal savings accounts would correct 
Social Security’s inequities for the poor, minorities, 
and women by offering everyone ownership, inde-
pendence, and access to wealth. 
(b) PURPOSES.—The Congress finds that it must act 
to reform the Social Security system so that—
(1) Social Security benefits are not changed for 
current retirees and near-retirees; 
(2) payroll taxes and other Social Security 
taxes are not increased; 
(3) Social Security surpluses are not used for 
other programs; 
(4) Social Security taxes are only used to ben-
efit workers; 
(5) the Government will not invest in the stock 
market; 
(6) Social Security’s disability and survivors 
components are maintained;
(7) the current Social Security safety net is 
preserved and strengthened through individually 
owned, voluntary personal savings accounts; 
(8) the current safety net is strengthened to 
give all workers with a personal savings account the 
opportunity to receive more than their currently 
promised benefits; 
(9) low-income workers will be allowed to save 
a larger portion of their payroll taxes than higher in-
come workers, helping many low-income Americans 
accumulate savings sufficient to pay retirement in-
come higher than the current system; 
(10) younger workers are empowered with gen-
erous savings that offer them the ability to com-
pletely own their retirement benefits; 
(11) the transition to a funded system is fi-
nanced from the general budget, which has taken 
money from Social Security for years; and 
(12) the long-term solvency of the system is 
guaranteed for at least 75 years, and cash-flow defi-
cits are completely eliminated, making Social Secu-
rity permanently self-sustaining.
SEC. 3. INDIVIDUAL SOCIAL SECURITY ACCOUNT PROGRAM 
AND 
INDIVIDUAL 
SOCIAL 
SECURITY 
AC-
COUNTS. 
(a) IN GENERAL.—Title II of the Social Security Act 
is amended—
(1) by inserting before section 201 the fol-
lowing: 
‘‘PART A—INSURANCE BENEFITS’’; 
and 
(2) by adding at the end the following new part: 
‘‘PART B—INDIVIDUAL SOCIAL SECURITY ACCOUNT 
PROGRAM 
‘‘DEFINITIONS 
‘‘SEC. 251. For purposes of this part—
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 
individual’ means an individual described in section 
255(a) with respect to whom an election filed under 
section 255(b) renouncing such status has not been 
filed or has not taken effect, or with respect to 
whom an election filed under section 255(c) rein-
stating such status has taken effect. 
‘‘(2) ACCOUNT
OWNER.—The term ‘account 
owner’ means an eligible individual holding an indi-
vidual social security account. 
‘‘(3) 
INDIVIDUAL
SOCIAL
SECURITY
AC-
COUNT.—The term ‘‘individual social security ac-
count’’ means an account established under section 
256. 
‘‘(4) ACCOUNT.—The term ‘account’ means an 
individual social security account. 
‘‘(5) ACCOUNT BALANCE.—The term ‘account 
balance’ means, in connection with an individual so-
cial security account, the amount in the Savings 
Fund credited to such account. 
‘‘(6) SAVINGS FUND.—The term ‘Savings Fund’ 
means the Social Security Personal Savings Fund 
established under section 252.
‘‘(7) EXECUTIVE DIRECTOR.—The term ‘Execu-
tive Director’ means the Executive Director ap-
pointed under section 253. 
‘‘(8) BOARD.—The term ‘Board’ means the 
Personal Savings Board established under section 
252. 
‘‘(9) DISTRIBUTION BASE.—The term ‘distribu-
tion base’ has the meaning provided such term 
under section 260(c). 
‘‘(10) ELIGIBILITY FOR MONTHLY INSURANCE 
BENEFITS.—An individual shall be deemed ‘eligible’ 
for a benefit under section 202 for a month if, upon 
filing application therefor in such month, such indi-
vidual would be entitled to such benefit for such 
month. 
‘‘PERSONAL SAVINGS BOARD 
‘‘SEC. 252. (a) ESTABLISHMENT.—There is estab-
lished in the executive branch of the Government a Per-
sonal Savings Board. 
‘‘(b) COMPOSITION.—The Board shall be composed 
of—
‘‘(1) 3 members appointed by the President, of 
whom 1 shall be designated by the President as 
Chairman; and 
‘‘(2) 2 members appointed by the President, of 
whom—
‘‘(A) 1 shall be appointed by the President 
after taking into consideration the recommenda-
tion made by the Speaker of the House of Rep-
resentatives in consultation with the Minority 
Leader of the House of Representatives; and 
‘‘(B) 1 shall be appointed by the President 
after taking into consideration the recommenda-
tion made by the Majority Leader of the Senate 
in consultation with the Minority Leader of the 
Senate. 
‘‘(c) ADVICE AND CONSENT.—Appointments under 
subsection (b) shall be made by and with the advice and 
consent of the Senate.
‘‘(d) MEMBERSHIP REQUIREMENTS.—Members of 
the Board shall have substantial experience, training, and 
expertise in the management of financial investments and 
pension benefit plans. 
‘‘(e) LENGTH OF APPOINTMENTS.—
‘‘(1) TERMS.—A member of the Board shall be 
appointed for a term of 4 years, except that of the 
members first appointed under subsection (b)—
‘‘(A) the Chairman shall be appointed for 
a term of 4 years; 
‘‘(B) the members appointed under sub-
section (b)(2) shall be appointed for terms of 3 
years; and 
‘‘(C) the remaining members shall be ap-
pointed for terms of 2 years. 
‘‘(2) VACANCIES.—
‘‘(A) IN
GENERAL.—A vacancy on the 
Board shall be filled in the manner in which the 
original appointment was made and shall be 
subject to any conditions that applied with re-
spect to the original appointment. 
‘‘(B) COMPLETION
OF
TERM.—An indi-
vidual chosen to fill a vacancy shall be ap-
pointed for the unexpired term of the member 
replaced.
‘‘(3) EXPIRATION.—The term of any member 
shall not expire before the date on which the mem-
ber’s successor takes office. 
‘‘(f) DUTIES.—The Board shall—
‘‘(1) administer the program established under 
this part; 
‘‘(2) establish policies for the investment and 
management of the Savings Fund, including policies 
applicable to the outside entities and qualified pro-
fessional asset managers with responsibility for man-
aging the investment of account balances under sec-
tion 258, that shall provide for—
‘‘(A) prudent investments suitable for ac-
cumulating funds for payment of retirement in-
come; and 
‘‘(B) low administrative costs.
‘‘(3) review the performance of investments 
made for the Savings Fund; 
‘‘(4) review and approve the budget of the 
Board; and 
‘‘(5) comply with the provisions of section 263. 
‘‘(g) ADMINISTRATIVE PROVISIONS.—
‘‘(1) IN GENERAL.—The Board may—
‘‘(A) adopt, alter, and use a seal;
‘‘(B) except as provided in paragraph (2), 
direct the Executive Director to take such ac-
tion as the Board considers appropriate to 
carry out the provisions of this part and the 
policies of the Board; 
‘‘(C) upon the concurring votes of 4 mem-
bers, remove the Executive Director from office 
for good cause shown; 
‘‘(D) provide to the Executive Director 
such resources as are necessary to carry out the 
requirements of section 253; and 
‘‘(E) take such other actions as may be 
necessary to carry out the functions of the 
Board. 
‘‘(2) MEETINGS.—The Board shall meet—
‘‘(A) not less than once during each 
month; and 
‘‘(B) at additional times at the call of the 
Chairman. 
‘‘(3) EXERCISE OF POWERS.—
‘‘(A) IN GENERAL.—Except as provided in 
paragraph (1)(C) and section 253(a)(1), the 
Board shall perform the functions and exercise 
the powers of the Board on a majority vote of 
a quorum of the Board. Three members of the
Board shall constitute a quorum for the trans-
action of business. 
‘‘(B) VACANCIES.—A vacancy on the 
Board shall not impair the authority of a 
quorum of the Board to perform the functions 
and exercise the powers of the Board. 
‘‘(4) LIMITATION ON INVESTMENTS.—Except in 
the case of investments required by section 258 to 
be invested in special Trust Fund obligations, the 
Board may not direct the Executive Director or any 
account trustee to invest or to cause to be invested
any sums in the Savings Fund in a specific asset 
or to dispose of or cause to be disposed of any spe-
cific asset of the Savings Fund. 
‘‘(h) COMPENSATION.—
‘‘(1) IN GENERAL.—Each member of the Board 
who is not an officer or employee of the Federal 
Government shall be compensated at the daily rate 
of basic pay for level IV of the Executive Schedule 
for each day during which such member is engaged 
in performing a function of the Board. 
‘‘(2) EXPENSES.—A member of the Board shall 
be paid travel, per diem, and other necessary ex-
penses under subchapter I of chapter 57 of title 5, 
United States Code, while traveling away from such
member’s home or regular place of business in the 
performance of the duties of the Board. 
‘‘(3) SOURCE OF FUNDS.—Payments authorized 
under this subsection shall be paid from the Savings 
Fund. 
‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem-
bers of the Board shall discharge their responsibilities 
solely in the interest of account owners and beneficiaries 
under this part. 
‘‘(j) ANNUAL INDEPENDENT AUDIT.—The Board 
shall annually engage an independent qualified public ac-
countant to audit the activities of the Board. 
‘‘(k) SUBMISSION OF BUDGET TO CONGRESS.—The 
Board shall prepare and submit to the President, and, at 
the same time, to the appropriate committees of Congress, 
an annual budget of the expenses and other items relating 
to the Board which shall be included as a separate item 
in the budget required to be transmitted to Congress 
under section 1105 of title 31, United States Code.
‘‘(l) SUBMISSION
OF LEGISLATIVE RECOMMENDA-
TIONS.—The Board may submit to the President, and, at 
the same time, shall submit to each House of Congress, 
any legislative recommendations of the Board relating to 
any of its functions under this part or any other provision 
of law.
‘‘EXECUTIVE DIRECTOR 
‘‘SEC 253. (a) APPOINTMENT OF EXECUTIVE DIREC-
TOR.—
‘‘(1) IN GENERAL.—The Board shall appoint, 
without regard to the provisions of law governing 
appointments in the competitive service, an Execu-
tive Director by action agreed to by a majority of 
the members of the Board. 
‘‘(2) REQUIREMENTS.—The Executive Director 
shall have substantial experience, training, and ex-
pertise in the management of financial investments 
and pension benefit plans. 
‘‘(b) DUTIES.—The Executive Director shall—
‘‘(1) carry out the policies established by the 
Board; 
‘‘(2) invest and manage the Savings Fund in 
accordance with the investment policies and other 
policies established by the Board;
‘‘(3) provide for the distribution of individual 
social security account balances in accordance with 
this part (including the purchase of annuity con-
tracts with assets of the Savings Fund to the extent 
provided under section 260(b)(5)); 
‘‘(4) administer the provisions of this part re-
lating to the Savings Fund; and
‘‘(5) prescribe such regulations (other than reg-
ulations relating to fiduciary responsibilities) as may 
be necessary for the administration of this part re-
lating to the Savings Fund. 
‘‘(c) ADMINISTRATIVE AUTHORITY.—The Executive 
Director may—
‘‘(1) appoint such personnel as may be nec-
essary to carry out the provisions of this part relat-
ing to the Savings Fund; 
‘‘(2) subject to approval by the Board, procure 
the services of experts and consultants under section 
3109 of title 5, United States Code; 
‘‘(3) secure directly from an Executive agency, 
the United States Postal Service, or the Postal Rate 
Commission any information necessary to carry out 
the provisions of this part and the policies of the 
Board relating to the Savings Fund; 
‘‘(4) make such payments out of sums in the 
Savings Fund as the Executive Director determines 
are necessary to carry out the provisions of this part 
and the policies of the Board; 
‘‘(5) pay the compensation, per diem, and travel 
expenses of individuals appointed under paragraphs 
(1), (2), and (6) from the Savings Fund;
‘‘(6) accept and use the services of individuals 
employed intermittently in the Government service 
and reimburse such individuals for travel expenses, 
authorized by section 5703 of title 5, United States 
Code, including per diem as authorized by section 
5702 of such title; 
‘‘(7) except as otherwise expressly prohibited by 
law or the policies of the Board, delegate any of the 
Executive Director’s functions to such employees 
under the Board as the Executive Director may des-
ignate and authorize such successive redelegations of 
such functions to such employees under the Board 
as the Executive Director may consider to be nec-
essary or appropriate; and 
‘‘(8) take such other actions as are appropriate 
to carry out the functions of the Executive Director. 
‘‘SOCIAL SECURITY PERSONAL SAVINGS FUND 
‘‘SEC. 254. (a) ESTABLISHMENT
OF
SAVINGS 
FUND.—There is established in the Treasury of the 
United States a Social Security Personal Savings Fund, 
consisting of all amounts transferred to or deposited in 
the Savings Fund in accordance with section 257, in-
creased by the total net earnings from investments of 
sums in the Savings Fund or reduced by the total net 
losses from investments of the Savings Fund, and reduced
by the total amount of payments made from the Savings 
Fund (including payments for administrative expenses). 
‘‘(b) AVAILABILITY.—The sums in the Savings Fund 
are appropriated and shall remain available without fiscal 
year limitation—
‘‘(1) to invest under section 258; 
‘‘(2) to make distributions in accordance with 
sections 260 and 261; 
‘‘(3) to pay the administrative expenses of the 
Board; and
‘‘(4) to purchase insurance as provided in sec-
tion 263(c). 
‘‘(c) LIMITATIONS ON USE OF FUNDS.—
‘‘(1) IN GENERAL.—Sums in the Savings Fund 
credited to an individual social security account in 
the Savings Fund may not be used for, or diverted 
to, purposes other than for the exclusive benefit of 
the account owner or the account owner’s bene-
ficiaries under this part.
‘‘(2) ASSIGNMENTS.—Except as provided in 
paragraph (3), sums in the Savings Fund may not 
be assigned or alienated and are not subject to exe-
cution, levy, attachment, garnishment, or other legal 
process.
‘‘(3) SUPPORT OBLIGATIONS.—Moneys due or 
payable from the Savings Fund to any account 
owner shall be subject to legal process for the en-
forcement of the account owner’s legal obligations to 
provide child support or make alimony payments as 
provided in section 459 or for the enforcement of a 
court order or other similar process in the nature of 
a garnishment for the enforcement of a judgment 
rendered against the account owner for physically, 
sexually, or emotionally abusing a child. 
‘‘(d) PAYMENT OF ADMINISTRATIVE EXPENSES.—
Administrative expenses incurred to carry out this part 
shall be paid out of net earnings in the Savings Fund in 
conjunction with the allocation of investment earnings and 
losses under section 256(c). 
‘‘(e) LIMITATION.—The sums in the Savings Fund 
shall not be appropriated for any purpose other than the 
purposes specified in this section and may not be used for 
any other purpose. 
‘‘ELIGIBLE INDIVIDUALS 
‘‘Sec. 255. (a) STATUS AS ELIGIBLE INDIVIDUAL.—
Except as otherwise provided in this section, any indi-
vidual who—
‘‘(1) was born on or after January 1, 1950, 
‘‘(2) has attained age 18, and
‘‘(3) has been assigned a social security account 
number under section 205(c), 
shall be an eligible individual under this part. 
‘‘(b) RENUNCIATION OF STATUS AS ELIGIBLE INDI-
VIDUAL.—
‘‘(1) IN GENERAL.—Within 540 days after the 
later of January 1, 2005, or the date on which an 
eligible individual first meets all requirements of 
subsection (a), such individual may elect to renounce 
such individual’s status under this part as an ‘eligi-
ble individual’ by filing an election under this sub-
section. 
‘‘(2) REQUIREMENTS.—An election under this 
subsection must be filed with the Commissioner, in 
such form and manner as shall be prescribed in reg-
ulations of the Commissioner, and shall consist of a 
written and signed declaration of such individual’s 
intention to renounce such individual’s status as an 
eligible individual under this part. The Commis-
sioner shall provide for immediate notification to the 
Board and the Executive Director of such election. 
‘‘(3) TERMINATION
OF
STATUS.—An election 
under this subsection shall be effective with respect 
to wages earned, and self-employment income de-
rived, on or after January 1 following the date of
the filing of the election. On and after the effective 
date of the election the individual filing the election 
shall cease to be an eligible individual under this 
part, any individual social security account estab-
lished for such individual shall be closed, and any 
balance in such account shall be paid into the Fed-
eral Old-Age and Survivor’s Insurance Trust Fund 
as general receipts. 
‘‘(c) REINSTATEMENT.—
‘‘(1) IN
GENERAL.—Any individual who has 
filed an election under subsection (b) to renounce 
such individual’s status as an eligible individual 
under this part may elect under this subsection to 
reinstate such individual’s status as an eligible indi-
vidual. 
‘‘(2) REQUIREMENTS.—An election by an indi-
vidual under this subsection must be filed with the 
Commissioner, in such form and manner as shall be 
prescribed in regulations of the Commissioner, con-
sisting of a written and signed declaration of such 
individual’s intention to reinstate such individual’s 
status as an eligible individual under this part. Such 
regulations shall provide for regular, periodic oppor-
tunities for the filing of such an election. The Com-
missioner shall provide for immediate notification to
the Board and the Executive Director of such elec-
tion. 
‘‘(3) TERMINATION
OF
STATUS.—An election 
under this subsection shall be effective with respect 
to wages earned, and self-employment income de-
rived, on or after January 1 following the date of 
the filing of the election. The individual filing the 
election shall be treated as becoming an eligible indi-
vidual under this part on the effective date of the 
election as if such individual first met the require-
ments of subsection (a) on such date. 
‘‘(4) IRREVOCABILITY.—An election under this 
subsection shall be irrevocable. 
‘‘INDIVIDUAL SOCIAL SECURITY ACCOUNTS 
‘‘SEC. 256. (a) ESTABLISHMENT OF A PUBLICLY AD-
MINISTERED SYSTEM OF INDIVIDUAL SOCIAL SECURITY 
ACCOUNTS.—As soon as practicable after the later of Jan-
uary 1, 2004, or the date on which an individual becomes 
an eligible individual under this part, the Executive Direc-
tor shall establish in the Savings Fund an individual social 
security account for such individual. Each account shall 
be identified to its account owner by means of the account 
owner’s social security account number. The Savings 
Fund shall accept any prescribed social security deposit 
made with respect to any eligible individual as provided 
in section 257. The Executive Director shall credit such
deposit to such individual’s individual social security ac-
count. 
‘‘(b) ACCOUNT BALANCE.—The balance in an ac-
count owner’s account at any time is the excess of—
‘‘(1) the sum of all deposits and contributions 
described in subsection (a) credited to such account, 
subject to such increases and reductions as may re-
sult from allocations made to and reductions made 
in the account pursuant to subsection (c), over 
‘‘(2) amounts credited to such account and paid 
out of the Savings Fund with respect to such ac-
count owner under this part. 
‘‘(c) ALLOCATION OF EARNINGS AND LOSSES.—Pur-
suant to regulations which shall be prescribed by the 
Board, the Executive Director shall allocate to each indi-
vidual social security account an amount equal to the net 
earnings and net losses from each investment of sums in 
the Social Security Personal Savings Fund which are at-
tributable, on a pro rata basis, to sums credited to such 
account, reduced by an appropriate share of the adminis-
trative expenses paid out of the net earnings, as deter-
mined by the Executive Director. 
‘‘PRESCRIBED SOCIAL SECURITY DEPOSITS 
‘‘SEC. 257. (a) IN GENERAL.—As soon as prac-
ticable, the Secretary of the Treasury shall transfer 
amounts equivalent to 100 percent of the prescribed social
security deposit for each eligible individual for each year 
from the Federal Old-Age and Survivors Insurance Trust 
Fund to the Social Security Personal Savings Fund, for 
subsequent crediting with respect to such individual under 
section 256. Such transfers shall be made in periodic in-
stallments, such installments to be determined, to the ex-
tent necessary, on the basis of estimates by the Commis-
sioner of Social Security of wages and self-employment in-
come, which shall be certified to the Secretary of the 
Treasury. Proper adjustments shall be made in amounts 
transferred for subsequent periods to the extent that 
amounts transferred for prior periods were greater or less 
than the proper amounts. Upon determining the actual 
amount of the prescribed social security deposit for an eli-
gible individual for each year, the Executive Director shall 
promptly credit such amount to such individual’s indi-
vidual social security account under section 256. Prior to 
such crediting of amounts held in the Savings Fund to 
individual social security accounts, such amounts shall be 
invested by the Executive Director as provided in section 
258 in accordance with regulations of the Board. 
‘‘(b) PRESCRIBED SOCIAL SECURITY DEPOSITS.—
For purposes of this part, the prescribed social security 
deposit for an eligible individual for any calendar year is 
an amount equal to the sum of—
‘‘(1) the product derived by multiplying—
‘‘(A) such individual’s wages paid, and 
self-employment income derived, in such cal-
endar year (as certified to the Secretary of the 
Treasury by the Commissioner of Social Secu-
rity) not in excess of the contribution and ben-
efit base for such calendar year, by 
‘‘(B) such individual’s transfer percentage 
for such calendar year, and 
‘‘(2) the net return on the investment, in ac-
cordance with section 258, of amounts equivalent to 
the product determined under paragraph (1) during 
the period such amounts were held in the Savings 
Fund prior to deposit in such individual’s individual 
social security account. 
‘‘(c) TRANSFER PERCENTAGE.—For purposes of sub-
section (b)(1)(B), the term ‘transfer percentage’ of an in-
dividual for a calendar year means the excess of—
‘‘(1) 8.00 percent, over 
‘‘(2) the product derived by multiplying—
‘‘(A) 5.00 percent, by 
‘‘(B) a fraction—
‘‘(i) the numerator of which is the 
amount of such individual’s wages paid, 
and self-employment income derived, in
such calendar year (as certified to the Sec-
retary of the Treasury by the Commis-
sioner of Social Security) not in excess of 
the contribution and benefit base (deter-
mined under section 230) for such cal-
endar year, and 
‘‘(ii) the denominator of which is the 
contribution and benefit base (so deter-
mined) for such calendar year, 
rounded, if not a multiple of 0.01 percent, to the 
nearest multiple of 0.01 percent. 
‘‘INVESTMENTS IN COMMON STOCK AND GOVERNMENT 
OBLIGATIONS 
‘‘SEC. 258. (a) IN GENERAL.—Any balance held in 
an individual social security account under this part and 
the balance of any other amounts held by the Savings 
Fund which are not necessary for immediate withdrawal 
shall be invested as provided in this section. 
‘‘(b) INVESTMENT
MIX
BETWEEN
STOCK
AND 
BONDS.—Except to the extent otherwise elected by the ac-
count owner under subsection (e) with respect to the bal-
ance credited to the account owner’s account, the Execu-
tive Director shall invest each balance referred to in sub-
section (a) under regulations which shall be prescribed by 
the Board so as to ensure, to the maximum extent prac-
ticable, that, of the total balance available for investment 
(after allowing for administrative expenses)—
‘‘(1) 35 percent is invested in United States 
Government obligations in accordance with sub-
section (c), and 
‘‘(2) the remainder is invested in common stock 
in accordance with subsection (d). 
‘‘(c) INVESTMENT IN SOCIAL SECURITY TRANSITION 
BONDS AND OTHER UNITED STATES TREASURY OBLIGA-
TIONS.—
‘‘(1) PURCHASE BY THE BOARD OF SOCIAL SE-
CURITY
TRANSITION
BONDS.—To the extent nec-
essary to provide for investment of the portion of the 
account balance required to be invested as provided 
in subsection (b)(1), the Executive Director shall 
purchase Social Security Transition Bonds made 
available by the Managing Trustee of the Federal 
Old-Age and Survivors Insurance Trust Fund for 
purchase pursuant to paragraph (2) . 
‘‘(2) ISSUANCE OF BONDS.—To the extent de-
termined necessary by the Managing Trustee of the 
Federal Old-Age and Survivors Insurance Trust 
Fund to avoid a negative cash flow for such Trust 
Fund, the Managing Trustee shall issue special obli-
gations of such Trust Fund (to be known as ‘Social
Security Transition Bonds’) for purchase by the Ex-
ecutive Director under paragraph (1), in such forms 
and denominations, bearing such maturities, and 
subject to such terms and conditions as may be pre-
scribed by the Managing Trustee. 
‘‘(3) PURCHASE
OF
OUTSTANDING
MARKET-
ABLE LONG-TERM TREASURY SECURITIES.—To the 
extent that purchase of Social Security Transition 
Bonds made available pursuant to paragraph (2) is 
insufficient to provide for investment in full of the 
portion of the account balance required to be in-
vested as provided in subsection (b)(1), the Execu-
tive Director shall invest the account balance in 
United States Treasury bills issued under chapter 
31 of title 31, United States Code, bearing interest 
at a rate at least equal to the average market yield 
(computed by the Managing Trustee on the basis of 
market quotations as of the end of the calendar 
month next preceding the date of issue of such obli-
gations) on all marketable interest-bearing obliga-
tions 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. 
‘‘(d) INVESTMENT IN COMMON STOCK.—
‘‘(1) IN GENERAL.—The Board shall establish 
by regulation standards which must be met by com-
mon stock selected for investment of the portion of 
any balance required to be invested in common stock 
under subsection (b). 
‘‘(2) STANDARD OPTION.—In conformity with 
such standards, the Board shall select, for purposes 
of such investment, an index which is a commonly 
recognized index comprised of common stock the ag-
gregate market value of which is a reasonably com-
plete representation of the United States equity 
markets. Except to the extent otherwise elected by 
an account owner under subsection (e) with respect 
to the balance credited to the account owner’s ac-
count, the amount of any balance which is required 
to be invested in common stock under subsection 
(b)(2) shall be invested in a portfolio designed to 
replicate the performance of such index. Such port-
folio shall be referred to as the ‘Standard Option’ 
for such calendar year. 
‘‘(e) ANNUAL OPPORTUNITY
TO ELECT ALTER-
NATIVE INVESTMENT OPTIONS.—
‘‘(1) ELECTION OF APPLICABLE PORTFOLIOS.—
‘‘(A) IN GENERAL.—In any case in which, 
as of the end of the second quarter of any cal-
endar year, the balance of an individual social 
security account exceeds the election threshold 
specified in subparagraph (B) for such calendar 
year, the Board shall provide by regulation for 
an opportunity, during the third quarter of 
such calendar year, for such account owner to 
elect one or both portfolios described in para-
graph (2) as applicable portfolios, in connection 
with such account, for the following calendar 
year, in lieu of or in addition to the Standard 
Option. In the case of such an election, 
amounts in the account invested in stock shall 
be allocated during such calendar year among 
the portfolio or portfolios so elected for such 
calendar year, in percentages specified in the 
election by the account owner for each applica-
ble portfolio. 
‘‘(B) ELECTION
THRESHOLD.—The elec-
tion threshold specified in this subparagraph 
for calendar year 2005 is $5,000. The Execu-
tive Director shall, on or before November 1 of 
2005 and of every year thereafter, determine 
and publish in the Federal Register the election 
threshold for the succeeding calendar year. 
Such election threshold shall be the larger of—
‘‘(i) the amount in effect for the cal-
endar year in which the determination 
under this subparagraph is made, or 
‘‘(ii) the product of $5,000 and the 
ratio of the national average wage index 
(as defined in section 209(k)(1)) for the 
calendar year before the year in which the 
determination under this subparagraph is 
made to the national average wage index 
(as so defined) for 2003, 
with such product, if not a multiple of $10, 
being rounded to the next higher multiple of 
$10 where such amount is a multiple of $5 but 
not of $10 and to the nearest multiple of $10 
in any other case. 
‘‘(2) ADDITIONAL OPTIONS.—For purposes of 
paragraph (1)—
‘‘(A) SMALL
CAPITALIZATION
OPTION.—
The Board shall select an index which is a com-
monly recognized index comprised of small cap-
italization stock the aggregate market value of 
which is a representation of publicly held com-
panies whose shares are traded on the small 
capitalization equity markets of the United 
States. The Board shall select for each calendar
year a portfolio of stock included in such index 
designed to replicate the performance of such 
index. Such portfolio shall be referred to as the 
‘Small Capitalization Option’ for such calendar 
year. The portfolio shall be designed such that, 
to the extent practicable, the percentage of the 
total amount of the Savings Fund invested in 
such portfolio that is invested in each stock is 
the same as the percentage determined by di-
viding 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. 
‘‘(B) MEDIUM CAPITALIZATION OPTION.—
The Board shall select an index which is a com-
monly recognized index comprised of medium 
capitalization stock the aggregate market value 
of which is a representation of publicly held 
companies whose shares are traded on the me-
dium capitalization equity markets of the 
United States. The Board shall select for each 
calendar year a portfolio of stock included in 
such index designed to replicate the perform-
ance of such index. Such portfolio shall be re-
ferred to as the ‘Medium Capitalization Option’ 
for such calendar year. The portfolio shall be
designed such that, to the extent practicable, 
the percentage of the total amount of the Sav-
ings Fund invested in such portfolio that is in-
vested in each stock is the same as the percent-
age determined by dividing the aggregate mar-
ket value of all shares of that stock by the ag-
gregate market value of all shares of all stocks 
included in such index. 
‘‘(3) 
PUBLICATION
OF
AVAILABLE
PORT-
FOLIOS.—
‘‘(A) IN GENERAL.—The Board shall pub-
lish, prior to the third quarter of each calendar 
year, the Board’s determination of the relative 
breadth of diversification represented by the 
Standard Option, the Small Capitalization Op-
tion, and the Medium Capitalization Option for 
the following calendar year pursuant to this 
subsection. 
‘‘(B) DEFAULT
PORTFOLIO.—The Board 
shall clearly identify, in each publication of the 
3 options for a calendar year, the portfolio 
which is the Standard Option for such calendar 
year. In any case in which an account owner 
fails to make an election for a calendar year for 
any portion of the balance in the account, the
portfolio so identified by the Board as the 
Standard Option shall serve as the applicable 
portfolio for such calendar year in connection 
with such portion of the account. 
‘‘(4) VARIATION FROM THE STANDARD MIX BE-
TWEEN STOCKS AND BONDS.—In accordance with 
regulations of the Board, in connection with any 
election under paragraph (1) for a calendar year, the 
account owner may also elect to vary for such cal-
endar year, from the Standard Mix specified in sub-
section (b), the allocation of the total balance in the 
account available for investment (after allowing for 
administrative expenses) between Social Security 
Transition Bonds and stock. 
‘‘(5) ELECTIONS EFFECTIVE FOR SUBSEQUENT 
YEARS.—Any election made under this subsection 
for any calendar year shall remain in effect for sub-
sequent calendar years until an election providing 
otherwise is made under this subsection. 
‘‘(6) INFORMATIONAL ELECTION FORMS.—Elec-
tions under this subsection shall be made on a form 
which shall be prescribed by the Board. Such form 
shall include a statement, in language formulated so 
as to be understood by the typical eligible individual, 
which describes the extent to which risk of loss
under the program established under this part may 
be avoided under section 235 by maintaining invest-
ments under the Standard Option and in accordance 
with the Standard Mix. Each eligible individual who 
elects to invest in the Small Capitalization Option or 
the Medium Capitalization Option, or to vary the al-
location of investment from the Standard Mix under 
subsection (b), shall sign an acknowledgement con-
tained in such form which states that the individual 
understands that, while there is a chance that an 
election to invest in either such option or an election 
of such a variance may result in increased returns 
on investment, such an election is made at the indi-
vidual’s risk, that the individual is not protected 
against any loss on such investment or by reason of 
such variance, and that a return on any such invest-
ment is not guaranteed by the Government. 
‘‘(f) LIMITATION ON VOTING RIGHTS.—The Board, 
the Executive Director, and any account owner may not 
exercise voting rights associated with the ownership of se-
curities held in the Savings Fund. 
‘‘ACCOUNTING AND INFORMATION 
‘‘SEC. 259. (a) ANNUAL, INDEPENDENT AUDITS.—
‘‘(1) INDEPENDENT ACCOUNTANT.—The Exec-
utive Director shall annually engage, on behalf of all 
account owners under this part, an independent
qualified public accountant, who shall conduct an ex-
amination of all accounts and other books and 
records maintained by the Executive Director under 
this part as the public accountant considers nec-
essary to enable the public accountant to make the 
determination required by paragraph (2). The exam-
ination shall be conducted in accordance with gen-
erally accepted auditing standards and shall involve 
such tests of the accounts, books, and records as the 
public accountant considers necessary. 
‘‘(2) DETERMINATION REQUIRED.—The public 
accountant conducting an examination under para-
graph (1) shall determine whether the accounts, 
books, and records referred to in such paragraph 
have been maintained in conformity with generally 
accepted accounting principles applied on a basis 
consistent with the manner in which such principles 
were applied during the examination conducted 
under such paragraph during the preceding year. 
The public accountant shall transmit to the Board 
a report on his examination, including his deter-
mination under this paragraph. 
‘‘(3) RELIANCE
ON
ACTUARIAL
MATTER.—In 
making a determination under paragraph (2), a pub-
lic accountant may rely on the correctness of any ac-
tuarial matter certified by an accredited actuary if 
the public accountant states his reliance in the re-
port transmitted to the Board under such para-
graph. 
‘‘(4) DEFINITION.—In this subsection, the term 
‘qualified public accountant’ shall have the same 
meaning as provided in section 103(a)(3)(D) of the 
Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1023(a)(3)(D)). 
‘‘(b) STATEMENTS.—
‘‘(1) IN GENERAL.—The Board shall prescribe 
regulations under which each account owner under 
this part shall be furnished by the Executive Direc-
tor with a periodic statement relating to the account 
owner’s account, setting forth—
‘‘(A) the current account balance, 
‘‘(B) a summary description of the invest-
ments made pursuant to section 258, and 
‘‘(C) an evaluation of the performance of 
such investments over the 5-year period pre-
ceding the date as of which such evaluation is 
made. 
‘‘(2) TIMING.—Information under this sub-
section shall be provided at least annually. 
‘‘ACCOUNT DISTRIBUTIONS 
‘‘SEC. 260. (a) IN GENERAL.—Subject to this part—
‘‘(1) AVAILABILITY
OF
WITHDRAWALS.—On 
and after the date on which an account owner be-
comes entitled to old-age insurance benefits under 
section 202(a), the entire balance in the account 
owner’s individual social security account shall be 
available for withdrawal in a distribution meeting 
the requirements of this section. 
‘‘(2) DISTRIBUTION OF BALANCES IN EXCESS 
OF THE DISTRIBUTION BASE.—Any amount with-
drawn by the account owner pursuant to paragraph 
(1) which is in excess of the distribution base shall 
be payable to the account owner in such manner and 
in such amounts as may be determined by the ac-
count owner (in such form and manner as shall be 
prescribed in regulations of the Board to provide for 
efficient and effective payment). 
‘‘(3) 
DISTRIBUTION
OF
BALANCES
REP-
RESENTING
THE
DISTRIBUTION
BASE.—On and 
after the first date as of which an account owner be-
comes entitled to old-age insurance benefits under 
section 202(a) and has requested commencement of 
distribution of the account owner’s distribution base, 
the Executive Director shall provide for withdrawal 
of the portion of the account balance which is not 
in excess of the distribution base of the account
owner in accordance with subsections (b) through 
(e). 
‘‘(b) DISTRIBUTION OF AMOUNTS IN DISTRIBUTION 
BASE IN MONTHLY ANNUITY PAYMENTS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, effective upon the date referred 
to in subsection (a)(3), the Executive Director shall 
transfer so much of the account balance as is not in 
excess of the distribution base of the account owner 
from the account owner’s account to amounts other-
wise held in the Savings Fund. In exchange for the 
amounts transferred, the Executive Director shall 
provide, payable from the Saving Fund—
‘‘(A) if the covered individual is not mar-
ried on such date, an immediate single life an-
nuity for the account owner, payable in monthly 
installments, or 
‘‘(B) if the account owner is married on 
such date, an immediate annuity for the joint 
lives of the covered individual and the covered 
individual’s spouse, payable in monthly install-
ments, together with a survivor annuity to the 
one of them who survives the other of them for 
the life of the survivor payable in monthly in-
stallments equal to 662⁄3 percent of the monthly
payment of the annuity that would be payable 
if both spouses remained alive. 
The annuity shall be payable in amounts so as to 
have an actuarial present value equal to such dis-
tribution base, as determined on the basis of gen-
erally accepted actuarial assumptions. 
‘‘(2) COST OF LIVING ADJUSTMENTS.—Any an-
nuity provided for under this subsection shall pro-
vide for annual indexing of the monthly payments 
according to the Consumer Price Index for All 
Urban Consumers (United States city average), pub-
lished by the Bureau of Labor Statistics. 
‘‘(3) OPTIONAL CASH DISTRIBUTION.—
‘‘(A) IN GENERAL.—Effective on the date 
referred to in subsection (a)(3), in lieu of a dis-
tribution of the account balance as described in 
the preceding provisions of this subsection, the
account owner may elect, in such form and 
manner as shall be prescribed by the Executive 
Director—
‘‘(i) an annuity determined under this 
subsection by substituting in paragraph (1) 
for references to the distribution base ref-
erences to the reduced distribution base 
described in subparagraph (B), and
‘‘(ii) a distribution from the account 
in cash equal to the excess of the balance 
in the account over such reduced distribu-
tion base. 
‘‘(B) REDUCTION IN AMOUNT AVAILABLE 
FOR
ANNUITY
FORM
OF
DISTRIBUTION.—For 
purposes of subparagraph (A), the amount of 
the reduced distribution base is an amount 
equal to the greater of—
‘‘(i) 35 percent of the balance in the 
account, or 
‘‘(ii) an amount necessary (as deter-
mined by the Executive Director) to fund 
an annuity providing annual payments in 
the amount of—
‘‘(I) $8,950, in any case in which 
no individual other than the account 
owner is eligible for benefits under 
section 202 based on the wages and 
self-employment income of the ac-
count owner, or 
‘‘(II) $12,120, in any other case. 
‘‘(C) COST-OF-LIVING ADJUSTMENT.—The 
Secretary shall adjust, for 2005 and for each 
calendar year thereafter, each dollar amount
specified in subparagraph (B)(ii) for increases 
in the cost-of-living in accordance with regula-
tions prescribed by the Secretary. Such regula-
tions shall provide for an adjustment with re-
spect to each calendar year based on the in-
crease in the Consumer Price Index for All 
Urban Consumers (United States city average), 
published by the Bureau of Labor Statistics, for 
the calendar quarter ending September 30 of 
the preceding calendar year over such index for 
the calendar quarter ending September 30, 
2003. Any increase under this clause which is 
not a multiple of $10 shall be rounded to the 
next higher multiple of $10 where such product 
is a multiple of $5 but not of $10 and to the 
nearest multiple of $10 in any other case. 
‘‘(D) 
INVESTMENT
OF
PERCENT 
AMOUNT IN BONDS.—In the case of a cash dis-
tribution under this paragraph, the investment 
of a portion of the account balance equivalent 
to the 35 percent amount determined under 
subparagraph (B)(i) shall remain invested solely 
in the form described in section 258(d). 
‘‘(4) PURCHASE OF ANNUITIES.—The Executive 
Director shall, on an ongoing basis, survey the avail-
ability for purchase in the private sector of annuity 
contracts which would effectively assist in the dis-
tribution of individual social security accounts under 
this subsection. If the Executive Director determines 
that the return on investment of funds held in the 
private sector for the purpose of funding such annu-
ity contracts would be (taking into account applica-
ble administrative expenses) at least equivalent to 
the rate of return on funds held in the Savings 
Fund pending distribution as described in paragraph 
(1), the Executive Director shall provide by regula-
tion for the purchase of such annuity contracts as 
a means of providing for payment of the monthly 
payment amounts otherwise prescribed under para-
graph (2). Any such annuity contract shall provide 
for investment of amounts held to fund the annuity 
in the manner prescribed in section 258(b)(1). 
‘‘(c) DISTRIBUTION BASE.—For purposes of this sec-
tion, the distribution base of an account owner is the actu-
arial present value of the expected future benefits payable 
under section 202 on the basis of the wages and self-em-
ployment income of the account owner (determined with-
out regard to section 215(a)(8)). The actuarial present 
value determined under this subsection shall be deter-
mined as of the date described in subsection (a)(3). In
making assumptions under this subsection, the Executive 
Director shall take into account the reasonably anticipated 
period for which each beneficiary will remain eligible for 
benefits under section 202 based on the account owner’s 
wages and self-employment income and the current ex-
pected life expectancy of such beneficiary. 
‘‘(d) TREATMENT OF DIVORCE, ANNULMENT, AND 
LEGAL SEPARATION.—
‘‘(1) REALLOCATION
OF
ACCOUNT
BALANCES 
ATTRIBUTABLE
TO
PRESCRIBED
SOCIAL
SECURITY 
DEPOSITS.—
‘‘(A) IN GENERAL.—Upon the issuance of 
a court decree of divorce or annulment in the 
case of an account owner and the account own-
er’s spouse before the date of the commence-
ment of any distribution from the account own-
er’s individual social security account under 
subsections (a) and (b), 50 percent of the 
amount in such account which is attributable to 
prescribed social security deposits under section 
257(b) for calendar years ending during the pe-
riod of marriage (and earnings thereon) shall be 
transferred from such account to the individual 
social security account of such spouse. In any 
case in which the spouse is not an eligible indi-
vidual, such spouse shall be deemed an eligible 
individual upon the date of the decree, and the 
transfer provided for under this paragraph shall 
be made upon the establishment of the spouse’s 
individual social security account. This para-
graph shall apply in connection with such a de-
cree only if notice of such decree was received 
by the Executive Director before the date of the 
commencement of the distribution. 
‘‘(B) 
REVOCATION
OF
STATUS
BY 
SPOUSE.—A spouse who is deemed an eligible 
individual under subparagraph (A) may, during 
the 540-day period beginning on the date of the 
decree of divorce or annulment, revoke his or 
her status as an eligible individual in a form 
and manner which shall be prescribed in regula-
tions of the Board. Upon such a revocation, the 
spouse’s individual social security account shall 
be closed and any amounts theretofore depos-
ited in the account shall be transferred to the 
Federal Old-Age and Survivors Insurance Trust 
Fund. 
‘‘(2) TREATMENT OF ANNUITY PAYMENTS.—
‘‘(A) IN GENERAL.—Subsections (a) and 
(b) shall be subject to the terms of any court
decree, order, or agreement described in sub-
paragraph (B). 
‘‘(B) COURT DECREE, ORDER, OR AGREE-
MENT DESCRIBED.—A court decree, order, or 
agreement described in this clause is, with re-
spect to an account owner, a court decree of di-
vorce, annulment, or legal separation issued in 
the case of such account owner and such ac-
count owner’s spouse or any court order or 
court-approved property settlement agreement 
incident to such decree if— 
‘‘(i) the decree, order, or agreement 
expressly relates to any annuity under sub-
section (b)(3), and 
‘‘(ii) notice of the decree, order, or 
agreement has been received by the Execu-
tive Director and, with respect to any an-
nuity payment, such notice was received 
before the date on which payment is made. 
‘‘(3) 2 OR MORE CASES.—The Board shall 
prescribe regulations under which this sub-
section shall be applied in any case in which the 
Executive Director receives notice of 2 or more 
decrees, orders, or agreements referred to in 
paragraph (1) or (2).
‘‘(e) LUMP-SUM PAYMENT REQUIRED FOR MINIMAL 
AMOUNTS.—Notwithstanding the preceding provisions of 
this section, if, upon entitlement of an account owner to 
old-age insurance benefits under section 202(a), the ac-
count balance is below $5,000, the entire account balance 
shall be distributed to the account owner in a single lump-
sum amount. 
‘‘PAYMENTS UPON DEATH OF ACCOUNT OWNER 
‘‘SEC. 261. (a) DISTRIBUTION IN THE ABSENCE OF 
ELIGIBLE WIDOW OR WIDOWER.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, upon the account owner’s death 
prior to the date described in section 260(a)(3), the 
account shall be payable in equal monthly install-
ments (subject to paragraph (3)) to each individual 
(if any) who is a potential beneficiary under section 
202 based on the wages and self-employment income 
of the account owner. 
‘‘(2) DETERMINATION OF MONTHLY PAYMENT 
AMOUNTS.—
‘‘(A) IN GENERAL.—The amounts payable 
to each individual under paragraph (1) in con-
nection with an individual social security ac-
count shall be determined so that the actuarial 
present value (as of the date referred to in sub-
section (a)(3)) of the future payments to each
individual bears the same ratio to the actuarial 
present value (as of such date) of the total 
amount to be so payable to all individuals in 
connection with such account as the actuarial 
present value (as of such date) of the benefits 
for which such individual is (or will be) eligible 
based on such wages and self-employment in-
come (determined without regard to section 
215(a)(8)) bears to the account owner’s dis-
tribution base (determined as if the date of the 
account owner’s death were a date described in 
section 260(a)(3) and without any applicable 
reduction under section 260(b)(4)). 
‘‘(B) ASSUMPTIONS.—In determining the 
monthly amount to be payable to each indi-
vidual, the Executive Director shall take into 
account the reasonably anticipated period for 
which such individual will remain eligible for 
benefits under section 202 based on the account 
owner’s wages and self-employment income and 
the current expected life expectancy of such in-
dividual. 
‘‘(b) TREATMENT OF SURVIVING SPOUSES ELIGIBLE 
FOR WIDOW’S OR WIDOWER’S INSURANCE BENEFITS.—
‘‘(1) IN GENERAL.—In any case in which the 
account owner is survived by a spouse who is an eli-
gible individual and who is also eligible for widow’s 
or widower’s insurance benefits under subsection (e) 
or (f) of section 202 based on the account owner’s 
wages and self-employment income, subsection (a) 
shall not apply, and the account balance remaining 
at the time of the account owner’s death shall be 
transferred to the individual social security account 
of such surviving spouse. 
‘‘(2) SPOUSES WHO ARE NOT ELIGIBLE INDI-
VIDUALS.—
‘‘(A) IN GENERAL.—In any case in which 
the surviving spouse is eligible for widow’s or 
widower’s insurance benefits under subsection 
(e) or (f) of section 202 based on the account 
owner’s wages and self-employment income but 
is not an eligible individual, such spouse shall 
be deemed an eligible individual upon the date 
of the account owner’s death, and the transfer 
provided for under this subsection shall be 
made upon the establishment of the spouse’s in-
dividual social security account. 
‘‘(B) 
REVOCATION
OF
STATUS
BY 
SPOUSE.—A spouse who is deemed an eligible
individual under subparagraph (A) may, during 
the 540-day period beginning on the date of the 
account owner’s death, revoke his or her status 
as an eligible individual in a form and manner 
which shall be prescribed in regulations of the 
Board. Upon such a revocation, the spouse’s in-
dividual social security account shall be closed 
and any amounts theretofore deposited in the 
account shall be distributed, among all individ-
uals who are potential beneficiaries (including 
the spouse) under section 202 based on the 
wages and self-employment income of the de-
ceased account owner, in the same manner as 
is provided for distributions from the deceased 
account owner’s account under subsection (a). 
‘‘(c) TREATMENT OF ACCOUNT BALANCE IN THE AB-
SENCE OF SURVIVING POTENTIAL BENEFICIARIES.—In 
any case in which, upon the account holder’s death, no 
distribution from the account holder’s individual social se-
curity account is provided for under subsection (a) or (b), 
the balance in the account shall be distributed to the es-
tate of the account owner. 
‘‘(d) BAR
ON OTHER RECOVERIES.—A payment 
made in accordance with subsection (a) shall bar any other
recovery by the individual receiving the payment and any 
other individual. 
‘‘TREATMENT OF ACCOUNT BALANCES AND ANNUITIES 
‘‘SEC. 262. For purposes of this part, amounts held 
in individual social security accounts and annuities pay-
able under section 261 shall be treated as the personal 
property of the account owners and annuitants, respec-
tively, and shall be held in trust by the Board for the ac-
count owners and annuitants, respectively. 
‘‘FIDUCIARY RESPONSIBILITIES 
‘‘SEC. 263. (a) IN GENERAL.—Under regulations of 
the Secretary of Labor, the provisions of sections 8477 
and 8478 of title 5, United States Code, shall apply in 
connection with the Savings Fund and the individual so-
cial security accounts maintained in such Fund in the 
same manner and to the same extent as such provisions 
apply in connection with the Thrift Savings Fund and ac-
counts maintained in the Thrift Savings Fund. 
‘‘(b) INVESTIGATIVE AUTHORITY.—Any authority 
available to the Secretary of Labor under section 504 of 
the Employee Retirement Income Security Act of 1974 is 
hereby made available to the Secretary of Labor, and any 
officer designated by the Secretary of Labor, to determine 
whether any person has violated, or is about to violate, 
any provision applicable under subsection (a). 
‘‘(c) EXCULPATORY PROVISIONS; INSURANCE.—
‘‘(1) IN GENERAL.—Any provision in an agree-
ment or instrument which purports to relieve a fidu-
ciary from responsibility or liability for any responsi-
bility, obligation, or duty under this part shall be 
void. 
‘‘(2) INSURANCE.—Amounts in the Savings 
Fund available for administrative expenses shall be 
available and may be used at the discretion of the 
Board to purchase insurance to cover potential li-
ability of persons who serve in a fiduciary capacity 
with respect to the Fund and individual social secu-
rity accounts maintained therein, without regard to 
whether a policy of insurance permits recourse by 
the insurer against the fiduciary in the case of a 
breach of a fiduciary obligation.’’. 
(b) CONFORMING AMENDMENTS AND RULE OF CON-
STRUCTION.—
(1) CONFORMING AMENDMENTS.—
(A) The Social Security Act is amended—
(i) in part A of title II (as redesig-
nated by subsection (a)), by striking ‘‘this 
title’’ each place it appears and inserting 
‘‘this part’’; 
(ii) by striking ‘‘title II’’ each place it 
appears (except in sections 1110(a)(3),
1129A(d)(2), 
1136(g), 
1147(a)(1), 
1148(h)(4)(A), 
1148(j)(1)(A), 
1148(k), 
1612(b)(8), and 1613(a)(10)) and insert-
ing ‘‘part A of title II’’; 
(iii) by striking ‘‘title II or XVI’’ each 
place it appears in sections 1110(a)(3), 
1129A(d)(2), and 1136(g) and inserting 
‘‘part A of title II or title XVI’’; and 
(iv) by striking ‘‘title II or VIII’’ in 
section 1147(a)(1) and inserting ‘‘part A 
of title II or title VIII’’. 
(B) The Internal Revenue Code of 1986 is 
amended by striking ‘‘title II’’ each place it ap-
pears 
(except 
in 
sections 
142(h)(1), 
410(b)(3)(B), 451(d), 912(1)(C), and 912(2)) 
and inserting ‘‘part A of title II’’. 
(C) The Railroad Retirement Act of 1974 
is amended by striking ‘‘title II’’ each place it 
appears (except in sections 15(a) and 19(c)(3)) 
and inserting ‘‘part A of title II’’. 
(2) RULE OF CONSTRUCTION.—In each provi-
sion of Federal law (other than provisions amended 
or added by the amendments made by this Act), any 
reference to title II of the Social Security Act shall
be deemed a reference to part A of title II of such 
Act (as redesignated by subsection (a)). 
SEC. 4. CONFORMING ADJUSTMENTS TO MONTHLY INSUR-
ANCE BENEFITS. 
(a) IN GENERAL.—Part A of title II of the Social 
Security Act (as amended by section 3 of this Act) is 
amended by adding after section 234 the following new 
section: 
‘‘PART B OFFSETS TO MONTHLY INSURANCE BENEFITS 
‘‘Benefit Reductions 
‘‘SEC. 235. (a) Notwithstanding the preceding provi-
sions of this part, for purposes of determining any benefit 
under this part for any month based on the wages and 
self-employment income of an individual who is an eligible 
individual under part B, the Executive Director appointed 
under section 253 shall determine and certify to the Com-
missioner of Social Security the total amount of monthly 
payments which would be payable for such month under 
part B, from amounts in the Social Security Savings Fund 
allocated to such individual’s individual social security ac-
count, in the distribution of amounts not in excess of such 
individual’s distribution base, if the investment in stock 
of amounts allocated to such account had been invested 
solely under the Standard Option described in section 
258(c)(2) and solely in accordance with the Standard Mix 
under section 258(b). Such determination shall be made,