373 
‘‘(B) OPTION MUST MEET QUALITY FAC-
TORS.— 
‘‘(i) IN GENERAL.—The Tier III In-
vestment Option meets qualifications which 
shall be prescribed by the Board relating 
to the quality factors described in clause 
(ii). 
‘‘(ii) QUALITY FACTORS.—The quality 
factors described in this clause are— 
‘‘(I) the safety and soundness of 
the Tier III Investment Option’s pro-
posed investment policy; 
‘‘(II) the experience and record 
of performance of the proposed invest-
ment option, if any; 
‘‘(III) the experience and record 
of performance of the entity issuing or 
offering such option; and 
‘‘(IV) such other factors as the 
Board may determine appropriate. 
‘‘(d) CONSIDERATIONS FOR CERTIFICATION AND AP-
PROVAL.—In determining whether to certify an eligible en-
tity under subsection (b) or to approve a Tier III Invest-
ment Option under subsection (c), the Board shall— 
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‘‘(1) act in the best interests of the partici-
pating individuals; 
‘‘(2) base its determination solely on consider-
ations of balancing safety and soundness of the Tier 
III Investment Option with the maximization of re-
turns of such option; and 
‘‘(3) not base any determination related to the 
entity or option on political or other extraneous con-
siderations. 
‘‘(e) SPONSORSHIP OF TIER III INVESTMENT OP-
TIONS BY MEMBERSHIP AND LABOR ORGANIZATIONS.— 
‘‘(1) IN GENERAL.—A membership or labor or-
ganization (as defined by the Board) may sponsor 
Tier III Investment Options under contracts with el-
igible entities certified under subsection (b) who 
shall administer the investment option if such invest-
ment option is approved by the Board under sub-
section (c). 
‘‘(2) LIMITATION
TO
MEMBERSHIP.—A mem-
bership or labor organization (as so defined) may 
limit to the members of such organization participa-
tion in a Tier III Investment Option sponsored by 
such organization. 
‘‘(f) DISTRIBUTIONS IN CASE OF DEATH.—Upon the 
death of a participating individual, the amount of any as-
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sets held under a Tier III Investment Option credited to 
the personal social security savings account of such indi-
vidual shall be distributed in accordance with section 
258(e). 
‘‘SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY 
AND OTHER DISTRIBUTIONS. 
‘‘(a) DATE OF INITIAL DISTRIBUTION.—Except as 
provided in subsection (e), distributions may be made to 
a participating individual from amounts credited to the 
personal social security savings account of such individual 
only on or after the earliest of— 
‘‘(1) the date the participating individual at-
tains retirement age (as defined in section 216(l)(1)) 
or, if elected by the individual, early retirement age 
(as defined in section 216(l)(2)); or 
‘‘(2) the date on which the amount credited to 
the participating individual’s personal social security 
savings account is sufficient to purchase a personal 
social security savings annuity with a monthly ben-
efit that is at least equal to the minimum annuity 
payment 
amount 
(as 
defined 
in 
subsection 
(b)(4)(C)(iii)). 
‘‘(b) PERSONAL SOCIAL SECURITY SAVINGS ANNU-
ITIES.— 
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‘‘(1) NOTICE OF AVAILABLE ANNUITIES.—Not 
later than the date determined under subsection (a), 
the Board shall notify each participating individual 
of— 
‘‘(A) the most recent listing of personal so-
cial security savings annuities offered by the 
Annuity Issuance Authority under paragraph 
(2); and 
‘‘(B) the entitlement of the participating 
individual to purchase such an annuity. 
‘‘(2) ANNUITY ISSUANCE AUTHORITY.—There is 
established in the office of the Board an agency 
which shall be known as the ‘Annuity Issuance Au-
thority’. The Authority shall provide, in accordance 
with regulations of the Board, for the issuance of 
personal social security savings annuities for pur-
chase from the Authority under this section and to 
otherwise administer the issuance of such annuities 
in accordance with such regulations. 
‘‘(3) ANNUITY RESERVES ACCOUNT.—There is 
established in the Savings Fund an Annuity Re-
serves Account. The Account shall consist of all 
amounts received by the Authority from the pur-
chase of personal social security savings annuities 
under this section (plus such amounts as may be 
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377 
transferred to the Account under paragraph (5)(B)), 
increased by the total net earnings from investments 
of such reserves under subparagraph (A) of para-
graph (5) and reduced by the total net losses from 
investments of such reserves under such subpara-
graph. 
‘‘(4) PURCHASE OF ANNUITIES.— 
‘‘(A) SELECTION OF ANNUITY.—On a date 
elected by the participating individual, but no 
earlier than the date determined under sub-
section (a), a participating individual may pur-
chase a personal social security savings annuity 
selected from among the annuities offered by 
the Authority under paragraph (2). 
‘‘(B) TRANSFER
OF
ASSETS.—Upon the 
selection of an annuity by a participating indi-
vidual under subparagraph (A), the Board shall 
provide for the transfer of assets, credited to 
the personal social security savings account of 
the participating individual and held in the Tier 
II Investment Fund or under 1 or more Tier 
III Investment Options (or any combination 
thereof), in a total amount sufficient to pur-
chase the annuity selected by the participating 
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individual from annuities offered by the Author-
ity. 
‘‘(C) 
MINIMUM
ANNUITY
PAYMENT 
AMOUNT.— 
‘‘(i) IN
GENERAL.—Subject to sub-
paragraph (D), if, at the time a personal 
social security savings annuity is pur-
chased under subparagraph (A), the assets 
credited to the personal social security sav-
ings account of the participating individual 
are sufficient to purchase a personal social 
security savings annuity offered by the Au-
thority under paragraph (2) with a month-
ly annuity payment that is at least equal 
to the minimum annuity payment amount, 
the amount of the monthly annuity pay-
ment provided by such annuity may not be 
less then the minimum annuity payment 
amount. 
‘‘(ii) 
CONSTRUCTION.—Nothing 
in 
this subparagraph shall be construed to 
prohibit a participating individual from 
using personal social security savings ac-
count assets to purchase a personal social 
security savings annuity offered by the Au-
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thority under paragraph (2) which provides 
for a monthly payment in excess of the 
minimum amount required under clause 
(i). 
‘‘(iii) MINIMUM
ANNUITY
PAYMENT 
AMOUNT DEFINED.—For purposes of this 
part, the term ‘minimum annuity payment 
amount’ means, as of any date, an amount 
equal to the monthly equivalent of 150 per-
cent of the poverty line for an individual 
(as in effect on such date), determined 
under the poverty guidelines of the Depart-
ment of Health and Human Services 
issued under sections 652 and 673(2) of 
the Omnibus Budget Reconciliation Act of 
1981. 
‘‘(D) PURCHASE
OF
ANNUITIES
IN
THE 
EVENT OF INSUFFICIENT ASSETS.—If a partici-
pating individual desires, or is required under 
subsection (f), to purchase a personal social se-
curity savings annuity under subsection (b) on 
or after the date determined under subsection 
(a)(1) and the assets of the personal social se-
curity savings account of such individual are in-
sufficient to purchase a personal social security 
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380 
savings annuity that provides for a monthly 
payment that is at least equal to the minimum 
annuity payment amount (as defined in para-
graph (4)(C)(iii)), the participating individual 
shall purchase a personal social security savings 
annuity with a monthly payment equal to the 
maximum amount that the participating indi-
vidual’s personal social security savings account 
can fund, as determined in accordance with reg-
ulations which shall be prescribed by the Au-
thority, and that otherwise meets the require-
ments of this subsection (including the cost-of- 
living protection requirement of subsection 
(c)(1)(C)), and the Authority shall provide for 
appropriate certification to the Secretary of the 
Treasury with respect to the participating indi-
vidual’s eligibility for guarantee payments 
under section 259. 
‘‘(5) MAINTENANCE
OF
RESERVES
FOR
PAY-
MENT OF ANNUITIES.— 
‘‘(A) INVESTMENT
OF
RESERVES.—For 
purposes of investment of reserves held in the 
Annuity Reserves Account, the Authority shall 
contract with appropriate investment managers, 
recordkeepers, and custodians selected by the 
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381 
Authority for investment of such reserves. Such 
reserves shall be invested under regulations 
which shall be prescribed by the Authority so as 
to ensure, to the maximum extent practicable, 
that, of the total balance of the reserves (after 
payment of administrative expenses to such 
managers, recordkeepers, and custodians)— 
‘‘(i) 65 percent is invested in equities 
in the same manner and under the same 
standards as are provided in section 
256(c)(4), and 
‘‘(ii) 35 percent is invested in fixed in-
come instruments in the same manner and 
under the same standards as are provided 
in section 256(c)(5). 
‘‘(B) PROVISION FOR FULL PAYMENT OF 
ANNUITIES.—Payment of personal social secu-
rity savings annuities in accordance with the 
terms of such annuities shall be made, irrespec-
tive of the sufficiency of reserves in the Annuity 
Reserves Fund attributable to funds obtained 
from the purchase of such annuities. In the 
event of any impending insufficiency in the An-
nuity Reserves Account for the next fiscal year, 
the Authority shall certify to the Secretary of 
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382 
the Treasury the amount of such insufficiency, 
and the Secretary of the Treasury shall transfer 
from the Federal Old-Age and Survivors Insur-
ance Trust Fund to the Annuity Reserves Ac-
count the amount of the insufficiency, as so cer-
tified, in such installments, made prior to or 
during such fiscal year, as are necessary to 
eliminate in advance such insufficiency. 
‘‘(c) PERSONAL SOCIAL SECURITY SAVINGS ANNU-
ITY.— 
‘‘(1) IN GENERAL.—For purposes of this part, 
the term ‘personal social security savings annuity’ 
means an annuity that meets the following require-
ments: 
‘‘(A) The annuity starting date (as defined 
in section 72(c)(4) of the Internal Revenue 
Code of 1986) commences on the first day of 
the month beginning after the date of the pur-
chase of the annuity. 
‘‘(B) The terms of the annuity provide— 
‘‘(i) for a monthly payment to the 
participating individual during the life of 
the participating individual equal to at 
least 
the 
minimum 
annuity 
payment 
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383 
amount 
(as 
defined 
in 
subsection 
(b)(4)(C)(iii)), or 
‘‘(ii) in the case of an annuity pur-
chased under subparagraph (D) of sub-
section (b)(4), the maximum monthly pay-
ment determined under regulations pre-
scribed under such subparagraph. 
‘‘(C) The terms of the annuity include pro-
cedures providing for adjustments in the 
amount of the monthly payments in the same 
manner and to the same extent as adjustments 
are provided for under the procedures used to 
adjust 
benefit 
amounts 
under 
section 
215(i)(2)(A). Nothing in this subparagraph 
shall be construed to preclude the terms gov-
erning such an annuity from providing for ad-
justments in the amount of monthly payments 
resulting in a payment for any month greater 
than the payment for that month that would re-
sult from adjustments required under the pre-
ceding sentence (b)(4)(D). 
‘‘(D) The terms of the annuity include 
such other terms and conditions as the Board 
requires for the protection of the annuitant. 
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384 
‘‘(2) 
EXEMPTION
FROM
THIRD
PARTY 
CLAIMS.—Each personal social security savings an-
nuity shall be exempt from any and all third party 
claims against the issuer. 
‘‘(d) RIGHT TO USE EXCESS PERSONAL SOCIAL SE-
CURITY SAVINGS ACCOUNT ASSETS.—To the extent assets 
credited to a participating individual’s personal social se-
curity savings account remain after the purchase of an an-
nuity under subsection (b), the remaining assets shall be 
payable to the participating individual at such time, in 
such manner, and in such amounts as the participating 
individual may specify, subject to subsection (f). 
‘‘(e) DISTRIBUTIONS IN CASE OF DEATH.—If the 
participating individual dies before all amounts which are 
held in the Tier I Investment Fund or the Tier II Invest-
ment Fund of the Savings Fund or held under a Tier III 
Investment Option and which are credited to the personal 
social security savings account of the individual are other-
wise distributed in accordance with this section, such 
amounts shall be distributed, under regulations which 
shall be prescribed by the Board— 
‘‘(1) in any case in which one or more bene-
ficiaries have been designated in advance, to such 
beneficiaries in accordance with such designation as 
provided in such regulations, and 
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385 
‘‘(2) in the case of any amount not distributed 
as described in paragraph (1), to such individual’s 
estate. 
‘‘(f) DATE OF FINAL DISTRIBUTION.—All amounts 
credited to the personal social security savings account of 
an individual shall be distributed, by means of the pur-
chase of annuities or otherwise in a manner consistent 
with the requirements of this section, not later than 5 
years after the date the individual attains retirement age 
(as defined in section 216(l)). The Board shall provide by 
regulation for means of distribution necessary to ensure 
compliance with the requirements of this subsection. 
‘‘SEC. 259. GUARANTEE OF ACCOUNT SAVINGS. 
‘‘(a) IN GENERAL.—If, as of immediately before the 
month for which the first monthly payment under a par-
ticipating individual’s personal social security savings an-
nuity is paid, the amount credited to such individual’s per-
sonal social security savings account is less that the sum 
of all deposits made to the account under section 252(b), 
adjusted as provided in subsection (b), the Annuity 
Issuance Authority shall so certify to the Secretary of the 
Treasury and, upon receipt of such certification, such Sec-
retary shall transfer to such individual’s Tier I Investment 
Fund, from amounts in the Federal Old-Age and Sur-
vivors Insurance Trust Fund, an amount equal to the ex-
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389 
‘‘(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 the 
Tier I Investment Fund and the Tier II Investment 
Fund, and amounts held under Tier III Investment 
Options, including policies applicable to the asset 
managers, recordkeepers, and custodians with re-
sponsibility for managing the investment of amounts 
credited to personal social security investment ac-
counts, and for the management and operation of 
personal social security savings annuities, which 
shall provide for— 
‘‘(A) prudent investments suitable for ac-
cumulating funds for payment of retirement in-
come; 
‘‘(B) sound management practices; and 
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‘‘(C) low administrative costs; 
‘‘(3) review the performance of investments 
made for the Tier I Investment Fund and the Tier 
II Investment Fund; 
‘‘(4) review the performance of investments 
made under Tier III Investment Options; 
‘‘(5) review the management and operation of 
personal social security savings annuities; 
‘‘(6) review and approve the budget of the 
Board; and 
‘‘(7) comply with the fiduciary requirements of 
part 4 of subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 (relating to fi-
duciary responsibility) in connection with any exer-
cise of discretion in connection with the assets of the 
Savings Fund. 
‘‘(g) ADMINISTRATIVE PROVISIONS.— 
‘‘(1) IN GENERAL.—The Board may— 
‘‘(A) adopt, alter, and use a seal; 
‘‘(B) except as provided in paragraph (4), 
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 in accordance with delega-
tions under this part; 
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391 
‘‘(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 
duties of the Executive Director; 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), 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 transaction 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. 
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392 
‘‘(4) LIMITATIONS
ON
INVESTMENTS.—The 
Board may not direct any person to invest or to 
cause to be invested any sums in the Tier II Invest-
ment Fund or any personal social security invest-
ment account in a specific asset or to dispose of or 
cause to be disposed of any specific asset of such 
Fund or any such account. 
‘‘(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 Tier I 
Investment Fund or the Tier II Investment Fund, 
as determined appropriate by the Board. 
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393 
‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem-
bers of the Board shall discharge their responsibilities 
solely in the interest of the participating individuals and 
their 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. 
‘‘SEC. 261. EXECUTIVE DIRECTOR. 
‘‘(a) APPOINTMENT OF EXECUTIVE DIRECTOR.—The 
Board shall appoint, without regard to the provisions of 
law governing appointments in the competitive service, an 
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394 
Executive Director by action agreed to by a majority of 
the members of the Board. 
‘‘(b) DUTIES.—The Executive Director shall, as de-
termined appropriate by the Board— 
‘‘(1) carry out the policies established by the 
Board; 
‘‘(2) invest and manage the Tier I Investment 
Fund and the Tier II Investment Fund in accord-
ance with the investment policies and other policies 
established by the Board; 
‘‘(3) administer the provisions of this part re-
lating to the Tier I Investment Fund and the Tier 
II Investment Fund; and 
‘‘(4) 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 Tier I Investment Fund and the Tier 
II Investment Fund. 
‘‘(c) ADMINISTRATIVE AUTHORITY.—The Executive 
Director may, within the scope of the duties of the Execu-
tive Director as determined by the Board— 
‘‘(1) appoint such personnel as may be nec-
essary to carry out the provisions of this part relat-
ing to the Tier I Investment Fund and the Tier II 
Investment Fund; 
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‘‘(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 Tier I Investment Fund and 
the Tier II Investment Fund; 
‘‘(4) make such payments out of sums in the 
Tier I Investment Fund and the Tier II Investment 
Fund as the Executive Director determines, in ac-
cordance with regulations of the Board, are nec-
essary 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 Tier I Investment Fund 
or the Tier II Investment Fund, in accordance with 
regulations of the Board; 
‘‘(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 
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396 
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 Direc-
tor.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to wages paid after 
December 31, 2011, for pay periods ending after such 
date and self-employment income for taxable years begin-
ning after such date. 
SEC. 403. MONTHLY INSURANCE BENEFITS FOR PARTICI-
PATING INDIVIDUALS. 
Section 202 of the Social Security Act (42 U.S.C. 
402) is amended by adding at the end the following new 
subsection: 
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‘‘Benefits for Participants Under Part B 
‘‘(z)(1) Notwithstanding the preceding provisions of 
this section— 
‘‘(A) a participating individual under the Per-
sonal Social Security Savings Program under part B 
shall not be entitled to old-age insurance benefits 
under subsection (a); and 
‘‘(B) except as provided in paragraph (2), no 
individual shall be entitled to benefits under this sec-
tion on the basis of the wages and self-employment 
income of such a participating individual. 
‘‘(2) In the case of any such participating individual 
who dies before such individual purchases a personal social 
security savings annuity under section 258, paragraph 
(1)(B) shall not apply with respect to child’s insurance 
benefits under subsection (d), widow’s insurance benefits 
under subsection (e), widower’s insurance benefits under 
subsection (f), mother’s and father’s insurance benefits 
under subsection (g), and parent’s insurance benefits 
under subsection (h).’’. 
SEC. 404. TAX TREATMENT OF ACCOUNTS. 
(a) IN GENERAL.— 
(1) IN GENERAL.—Subchapter F of chapter 1 
of the Internal Revenue Code of 1986 (relating to 
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exempt organizations) is amended by adding at the 
end the following new part: 
‘‘PART IX—PERSONAL SOCIAL SECURITY 
SAVINGS PROGRAM 
‘‘Sec. 530A. Personal social security savings program. 
‘‘SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PRO-
GRAM. 
‘‘(a) GENERAL RULE.—The Social Security Personal 
Savings Fund and each Tier III Investment Option are 
exempt from taxation under this subtitle. Notwithstanding 
the preceding sentence, sums in a personal social security 
savings account which are attributable to a Tier III Op-
tion shall be subject to the taxes imposed by section 511 
(relating to imposition of tax on unrelated business income 
of charitable, etc. organizations). 
‘‘(b) DISTRIBUTIONS.— 
‘‘(1) IN GENERAL.—Any qualified distribution 
from— 
‘‘(A) amounts credited to a personal social 
security savings account from the Social Secu-
rity Personal Savings Fund or attributable to a 
Tier III Investment Option, or 
‘‘(B) a personal social security savings an-
nuity, 
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shall not be included in the gross income of the dis-
tributee. 
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes 
of paragraph (1), the term ‘qualified distribution’ 
means a distribution which meets the requirements 
of section 258 of the Social Security Act and which 
is not a guaranty payment (as defined by section 
259 of such Act). 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) PERSONAL SOCIAL SECURITY SAVINGS AC-
COUNT.—The term ‘personal social security savings 
account’ means an account established under section 
254(a) of the Social Security Act. 
‘‘(2) PERSONAL SOCIAL SECURITY SAVINGS AN-
NUITY.—The term ‘personal social security savings 
annuity’ means an annuity approved by the Personal 
Social Security Savings Board under section 
258(b)(3) of the Social Security Act. 
‘‘(3) SOCIAL
SECURITY
PERSONAL
SAVINGS 
FUND.—The term ‘Social Security Personal Savings 
Fund’ means the Savings Fund established under 
section 252 of the Social Security Act. 
‘‘(4) TIER III INVESTMENT OPTION.—The term 
‘Tier III Investment Option’ has the meaning given 
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such term by section 251(9) of the Social Security 
Act. 
‘‘(d) ESTATE TAX TREATMENT.—No amount shall be 
includible in the gross estate of any individual for pur-
poses of chapter 11 by reason of an interest in the Tier 
I Investment Fund or the Tier II Investment Fund of the 
Savings Fund or held under a Tier III Investment Option 
and which is credited to the personal social security sav-
ings account of the individual.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
86(d)(1)(A) of such Code is amended by inserting 
‘‘part A of’’ after ‘‘under’’. 
(3) CLERICAL
AMENDMENT.—The table of 
parts for subchapter F of chapter 1 of such Code is 
amended by adding after the item relating to part 
VIII the following new item: 
‘‘PART IX. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.’’. 
(b) GUARANTY PAYMENTS.—Paragraph (1) of sec-
tion 86(d) of the Internal Revenue Act of 1986, as amend-
ed by subsection (a)(2), is amended by striking ‘‘or’’ at 
the end of subparagraph (A), by striking the period and 
inserting ‘‘, or’’ at the end of subparagraph (B), and by 
adding at the end the following new subparagraph: 
‘‘(C) a guaranty payment under section 
259(a), and a payment of an additional amount 
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401 
under section 259(c), of the Social Security 
Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 405. SELF-LIQUIDATING SOCIAL SECURITY TRANSI-
TION FUND. 
Part B of title II of the Social Security Act (as added 
by section 101 of this Act) is amended by adding at the 
end the following new section: 
‘‘SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSI-
TION FUND. 
‘‘(a) ESTABLISHMENT.—There is hereby created on 
the books of the Treasury of the United States a trust 
fund to be known as the Self-Liquidating Social Security 
Transition Fund (in this section referred to as the ‘Transi-
tion Fund’). 
‘‘(b) BOARD OF TRUSTEES.— 
‘‘(1) ESTABLISHMENT.—With respect to the 
Transition Fund, there is hereby created a body to 
be known as the Board of Trustees of the Transition 
Fund (in this section referred to as the ‘Board of 
Trustees’) composed of the Commissioner of Social 
Security, the Secretary of the Treasury, and the 
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members of the Personal Social Security Savings 
Board. 
‘‘(2) DUTIES.—The Board of Trustees shall— 
‘‘(A) provide for the issuance of obligations 
by the Transition Fund pursuant to subsection 
(c), 
‘‘(B) provide for the receipt and manage-
ment of amounts paid into the Transition Fund 
pursuant to subsection (d), 
‘‘(C) use all funds paid into the Transition 
Fund to redeem obligations issued under sub-
section (c) as soon as practicable, 
‘‘(D) report to Congress not later than the 
first day of April of each year on the operation 
and status of the Transition Fund during the 
preceding fiscal year and on its expected oper-
ation and status during the current fiscal year 
and the next 2 fiscal years, and 
‘‘(E) review the general policies followed in 
managing the Transition Fund, and recommend 
changes in such policies, including necessary 
changes in the provisions of law which govern 
the way in which the Transition Fund is to be 
managed. 
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403 
‘‘(3) MEETINGS.—The Board of Trustees shall 
meet not less frequently than once each calendar 
year. 
‘‘(c) ISSUANCE OF TRANSITION FUND BONDS.— 
‘‘(1) ISSUANCE.— 
‘‘(A) IN
GENERAL.—The purposes for 
which obligations of the United States may be 
issued under chapter 31 of title 31, United 
States Code, are hereby extended to authorize 
the issuance at par of public-debt obligations by 
the Transition Fund. 
‘‘(B) REQUIRED ISSUANCE.—Beginning on 
January 1, 2012, whenever any obligation held 
in the Federal Old-Age and Survivors Insurance 
Trust Fund or the Federal Disability Insurance 
Trust Fund is repaid from the general fund of 
the Treasury to either of such Trust Funds, the 
Transition Fund shall issue an obligation under 
this subsection in an amount equal to the 
amount of interest and principal so repaid. 
‘‘(C) TRANSFER
OF
PROCEEDS
TO
GEN-
ERAL
FUND
OF
THE
TREASURY.—Proceeds 
from the issuance of any obligation issued 
under this section shall be transferred to the 
general fund of the Treasury. 
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‘‘(D) ACCOUNTING.—The debt owed on 
any obligation issued under this section shall be 
considered to be debt of the Transition Fund 
and shall be accounted for in such manner. 
‘‘(2) MATURITIES AND INTEREST RATE.—Such 
obligations issued by the Transition Fund for pur-
chase by the public shall have maturities fixed with 
due regard for the needs of the Transition Fund and 
shall bear interest at a rate equal to the average 
market yield (computed by the Secretary of the 
Treasury on the basis of market quotations as of the 
end of the calendar month next preceding the date 
of such issue) on all marketable interest-bearing ob-
ligations of the United States then forming a part 
of the public debt which are not due or callable until 
after the expiration of 4 years from the end of such 
calendar month, except that where such average 
market yield is not a multiple of one-eighth of 1 per 
centum, the rate of interest on such obligations shall 
be the multiple of one-eighth of 1 per centum near-
est such market yield. 
‘‘(3) REPAYMENT
OF
OBLIGATIONS.—Obliga-
tions issued under this subsection may be redeemed 
only by funds in the Transition Fund. 
‘‘(d) DEPOSIT OF OASDI TRUST FUND SURPLUS.— 
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405 
‘‘(1) IN GENERAL.—In advance of the initial re-
payment from the general fund of the Treasury de-
scribed in subsection (c)(1)(B), the Chief Actuary of 
the Social Security Administration shall certify to 
the Secretary of the Treasury the date of such re-
payment. There are appropriated to the Transition 
Fund for the fiscal year during which such date oc-
curs, and for each fiscal year thereafter, out of any 
moneys in the Federal Old-Age and Survivors Insur-
ance Trust Fund, amounts equivalent to the OASDI 
trust fund surplus (as defined in paragraph (2)) for 
the preceding fiscal year. 
‘‘(2) TRANSFERS BASED ON ESTIMATES.—The 
amounts appropriated by paragraph (1) shall be 
transferred from time to time from the Federal Old- 
Age and Survivors Insurance Trust Fund to the 
Transition Fund, such amounts to be determined on 
the basis of estimates by the Commissioner of Social 
Security. Proper adjustments shall be made in 
amounts subsequently transferred to the extent prior 
estimates were in excess of or were less than such 
surplus. 
‘‘(3) OASDI 
TRUST
FUND
SURPLUS
DE-
FINED.—In this section, the term ‘OASDI trust 
fund surplus’ for a fiscal year means the dollar 
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406 
amount by which the Federal Old-Age and Survivors 
Insurance Trust Fund could be reduced as of the 
end of such fiscal year so as to result in an OASDI 
trust fund ratio (as defined in section 201(p)(4)) for 
such fiscal year equal to 125 percent. 
‘‘(4) RULE
OF
CONSTRUCTION.—This section 
shall not be construed to require redemption of obli-
gations of the Trust Fund for the purpose of mak-
ing transfers to the Transition Fund under this sec-
tion or for any other purpose other than to provide 
for payment of benefits under part A of title II of 
the Social Security Act. 
‘‘(e) REDEMPTION OF OBLIGATIONS UPON DEPOSIT 
OF FUNDS.—Obligations issued under subsection (c) may 
be redeemed only by funds in the Transition Fund. The 
Board of Trustees shall provide for the redemption of such 
obligations as soon as possible with funds deposited into 
the Transition Fund pursuant to subsection (d). 
‘‘(f) SUNSET.—On the first date as of which all of 
the obligations issued under subsection (c) have been re-
deemed, any balance remaining in the Transition Fund 
as of such date shall be deposited in the Federal Old-Age 
and Survivors Insurance Trust Fund, the terms of the 
Board of Trustees shall end, the Transition Fund shall 
cease to exist, and this section shall be repealed.’’. 
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407 
SEC. 406. BUDGETARY TREATMENT OF SOCIAL SECURITY. 
(a) IN GENERAL.—Section 710 of the Social Security 
Act (42 U.S.C. 911) is amended to read as follows: 
‘‘BUDGETARY TREATMENT OF SOCIAL SECURITY 
‘‘SEC. 710. 
‘‘Notwithstanding any other provision of law and ex-
cept as provided in subsection (b), the receipts and dis-
bursements shall be treated in the same manner as section 
13301 of the Budget Enforcement Act of 1990.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to fiscal years begin-
ning on or after October 1, 2011. 
SEC. 407. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, 
AND DISABILITY INSURANCE PROGRAM AND 
THE PERSONAL SOCIAL SECURITY SAVINGS 
PROGRAM. 
Title VII of the Social Security Act is amended by 
inserting after section 705 (42 U.S.C. 906) the following 
new section: 
‘‘ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DIS-
ABILITY INSURANCE PROGRAM AND THE PERSONAL 
SOCIAL SECURITY SAVINGS PROGRAM 
‘‘Social Security Lockbox Budget 
‘‘SEC. 706. (a) At the time of the transmittal to the 
Congress by the President of the budget of the United 
States Government, the President shall transmit to each 
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House of the Congress a separate report (to be known as 
the ‘Social Security Lockbox Budget’) detailing the per-
formance during the preceding fiscal year of each of the 
accounts established under subsection (b). Such report 
shall set forth, as determined as of the end of the year— 
‘‘(1) the amount of the balance of each account, 
‘‘(2) the amount of the total charges and the 
amount of the total credits to each account for the 
year, and 
‘‘(3) the amount of the total for the year of 
each category of charges and credits itemized in sub-
section (b). 
‘‘Establishment of Accounts 
‘‘(b) For purposes of accounting for certain receipts 
and disbursement of the Treasury of the United States 
in connection with the Old-Age, Survivors, and Disability 
Insurance Program under part A of title II of the Social 
Security Act and the Personal Security Savings Program 
under part B of such title, the Secretary of the Treasury 
shall establish and maintain a Social Security Part A Ac-
count, a Social Security Part B Account, and a Self-Liqui-
dating Social Security Transition Fund Account. 
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‘‘Credits and Charges to the Social Security Part A 
Account 
‘‘(c)(1) For each fiscal year, the Social Security Part 
A Account shall be credited with the sum of— 
‘‘(A) all receipts during the year by the Federal 
Old-Age and Survivors Insurance Trust Fund and 
the Federal Disability Insurance Trust Fund under 
section 201 (including amounts received as interest 
on notes and obligations purchased by the Trust 
Funds under section 201(d) of such Act, and exclud-
ing amounts received in redemption of such notes 
and obligations and amounts received by either such 
Trust Fund as transfers from the other such Trust 
Fund), and 
‘‘(B) all receipts during the year by the Federal 
Old-Age and Survivors Insurance Trust Fund and 
the Federal Disability Insurance Trust Fund under 
section 121(e) of the Social Security Amendments of 
1983 (relating to appropriation of amounts equiva-
lent to taxes on social security benefits) (42 U.S.C. 
401 note). 
‘‘(2) For each fiscal year, the Social Security Part 
A Account shall be charged with the sum of— 
‘‘(A) all benefits paid during the year from the 
Federal Old-Age and Survivors Insurance Trust 
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410 
Fund and the Federal Disability Insurance Trust 
Fund under part A of title II of the Social Security 
Act, 
‘‘(B) all redirected social security contributions 
transferred during the year to the Social Security 
Personal Savings Fund under section 252(b), 
‘‘(C) all other expenditures during the year 
from the Trust Funds under part A of title II (ex-
cluding amounts expended as transfers by either 
such Trust Fund to the other such Trust Fund and 
amounts paid for the purchase of notes and obliga-
tions under section 201(d)), and 
‘‘(D) all transfers from the Federal Old-Age 
and Survivors Insurance Trust Fund to the Self-Liq-
uidating Social Security Transition Fund under sec-
tion 262(d). 
‘‘Charges and Credits to the Social Security Part B 
Account 
‘‘(d)(1) For each fiscal year, the Social Security Part 
B Account shall be credited with— 
‘‘(A) all redirected social security contributions 
transferred during the year to the Personal Social 
Security Savings Fund under section 252(b) of the 
Social Security Act, and 
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‘‘(B) any net increase in the Tier I Investment 
Fund attributable to investment for the fiscal year, 
any net increase in the Tier II Investment Fund at-
tributable to investment for the fiscal year, and the 
total amount of any net increases in Tier III Invest-
ment Options attributable to investment for the fis-
cal year. 
‘‘(2) For each fiscal year, the Social Security Part 
B Account shall be charged with— 
‘‘(A) all administrative costs incurred for the 
fiscal year with respect to the Tier I Investment 
Fund, the Tier II Investment Fund, and the Tier III 
Investment Options, 
‘‘(B) any net decrease in the Tier I Investment 
Fund attributable to investment for the fiscal year, 
any net decrease in the Tier II Investment Fund at-
tributable to investment for the fiscal year, and the 
total amount of any net decreases in Tier III Invest-
ment Options attributable to investment for the fis-
cal year, and 
‘‘(C) annuity payments made during the year 
under section 258 from the Annuity Reserve Ac-
count in the Savings Fund. 
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412 
‘‘Charges and Credits to the Self-Liquidating Social 
Security Transition Fund Account 
‘‘(e)(1) For each fiscal year, the Self-Liquidating So-
cial Security Transition Account shall be credited with— 
‘‘(A) all transfers to the Transition Fund from 
the Federal Old-Age and Survivors Insurance Trust 
Fund under section 262(b), and 
‘‘(B) all amounts expended during the fiscal 
year from the Trust Funds in the redemption under 
section 262(e) of obligations issued by the Transi-
tion fund under section 262(c). 
‘‘(2) For each fiscal year, the Self-Liquidating Social 
Security Transition Fund Account shall be charged with 
the total amount of obligations issued during the fiscal 
year by the Transition Fund under section 262(c)’’. 
SEC. 408. PROGRESSIVE INDEXING OF BENEFITS FOR OLD- 
AGE, WIFE’S, AND HUSBAND’S INSURANCE 
BENEFITS. 
(a) IN GENERAL.—Section 215(a) of the Social Secu-
rity Act (42 U.S.C. 415(a)) is amended— 
(1) by striking ‘‘The’’ in paragraph (1)(A) and 
inserting ‘‘In the case of any benefit other than an 
applicable benefit to which paragraph (2) applies, 
the’’, and 
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(2) by redesignating paragraphs (2) through 
(7) as paragraphs (3) through (8), respectively, and 
by inserting after paragraph (1) the following new 
paragraph: 
‘‘(2)(A) In the case of an applicable benefit with re-
spect to any individual who initially becomes eligible for 
old-age insurance benefits or who dies (before becoming 
eligible for such benefits) in calendar year 2018 or later, 
the primary insurance amount of the individual shall be 
equal to the sum of— 
‘‘(i) 90 percent of the individual’s average in-
dexed monthly earning (determined under subsection 
(b)) to the extent that such earnings do not exceed 
the amount established for purposes of paragraph 
(1)(A)(i) by paragraph (1)(B); 
‘‘(ii) 32 percent of the individual’s average in-
dexed monthly earnings to the extent that such 
earnings exceed the amount established for purposes 
of paragraph (1)(A)(i) by paragraph (1)(B) but do 
not exceed the amount established for purposes of 
this clause by subparagraph (B); 
‘‘(iii) 32 percent (reduced as provided in sub-
paragraph (C)) of the individual’s average indexed 
monthly earnings to the extent that such earnings 
exceed the amount established for purposes of clause 
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414 
(ii) but do not exceed the amount established for 
purposes of paragraph (1)(A)(ii) by paragraph 
(1)(B); and 
‘‘(iv) 15 percent (reduced as provided in sub-
paragraph (C)) of the individual’s average indexed 
monthly earnings to the extent that such earnings 
exceed the amount established for purposes of para-
graph (1)(A)(ii) by paragraph (1)(B). 
‘‘(B)(i) For purposes of subparagraph (A)(ii), the 
amount established under this subparagraph for calendar 
year 2016 shall be the level of average indexed monthly 
earnings determined by the Chief Actuary of the Social 
Security Administration under clause (ii) as being at the 
30th percentile for the period of calendar years 2007 
through 2009. 
‘‘(ii) For purposes of clause (i), the average indexed 
monthly earnings for the period of calendar years 2007 
through 2009 shall be determined by— 
‘‘(I) determining the average indexed monthly 
earnings for each individual who initially became eli-
gible for old-age insurance benefits or who died (be-
fore becoming eligible for such benefits) during such 
period, except that in determining such average in-
dexed monthly earnings under subsection (b), sub-
section (b)(3)(A)(ii)(I) shall be applied by sub-
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415 
stituting calendar year 2004 for the second calendar 
year described in such subsection; and 
‘‘(II) multiplying the amount determined for 
each individual under subclause (I) by the quotient 
obtained by dividing the national average wage index 
(as defined in section 209(k)(1)) for the calendar 
year 2016 by such index for the calendar year 2004. 
‘‘(iii) For purposes of subparagraph (A)(ii), the 
amount established under this subparagraph for any cal-
endar year after 2018 shall be equal to the product of 
the amount in effect under clause (i) with respect to cal-
endar year 2018 and the quotient obtained by dividing— 
‘‘(I) the national average wage index (as de-
fined in section 209(k)(1)) for the second calendar 
year preceding the calendar year for which the de-
termination is being made, by 
‘‘(II) the national average wage index (as so de-
fined) for 2016. 
‘‘(iv) The amount established under this subpara-
graph for any calendar year shall be rounded to the near-
est $1, except that any amount so established which is 
a multiple of $0.50 but not of $1 shall be rounded to the 
next higher $1. 
‘‘(C)(i) Except as provided in clause (ii), in the case 
of any calendar year after 2017, each of the percentages 
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416 
to which this subparagraph applies by reason of clauses 
(iii) or (iv) of subparagraph (A) shall be a percentage 
equal to such percentage multiplied by the quotient ob-
tained by dividing— 
‘‘(I) the difference of the maximum CPI-in-
dexed benefit amount for such year over the amount 
determined under this paragraph for an individual 
whose average indexed monthly earnings are equal 
to the amount established for purposes of subpara-
graph (A)(ii) for such year, by 
‘‘(II) the difference of the maximum wage-in-
dexed benefit amount for such year over the amount 
determined under this paragraph for an individual 
whose average indexed monthly earnings are equal 
to the amount established for purposes of subpara-
graph (A)(ii) for such year. 
‘‘(ii)(I) In the case of any calendar year which is a 
positive balance year, clause (i) shall not apply and each 
of the percentages to which this subparagraph applies by 
reason of clause (iii) or (iv) of subparagraph (B) shall be 
a percentage equal to the percentage determined under 
this subparagraph for the preceding year (determined 
after the application of this subparagraph). 
‘‘(II) In the case of any calendar year after a positive 
balance year which is not a positive balance year, this sub-
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417 
paragraph shall be applied by substituting ‘the second cal-
endar year preceding the most recent positive balance 
year’ for ‘2015’ each place it appears in clause (iv). 
‘‘(iii) For purposes of clause (i), the maximum wage- 
indexed benefit amount for any calendar year shall be 
equal to the amount determined under this paragraph (de-
termined without regard to any reduction under this sub-
paragraph) for an individual with wages paid in and self- 
employment income credited to each computation base 
year in an amount equal to the contribution and benefit 
base for each calendar year. 
‘‘(iv) For purposes of clause (i), the maximum CPI- 
indexed benefit amount for any calendar year shall be an 
amount equal to the amount determined under clause (iii) 
for such year multiplied by a fraction— 
‘‘(I) the numerator of which is the ratio (round-
ed to the nearest one-thousandth of 1 percent) of 
the Consumer Price Index for the second preceding 
year to such index for 2015; and 
‘‘(II) the denominator of which is the ratio 
(rounded to the nearest one-thousandth of 1 per-
cent) of the national wage index (as defined in sec-
tion 209(k)(1)) for the second year preceding such 
year to such index for 2015. 
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418 
‘‘(v)(I) For purposes of this subparagraph, a positive 
balance year is a calendar year following any calendar year 
after 2082 for which the Chief Actuary of the Social Secu-
rity Administration certifies to the Secretary of the Treas-
ury and the Congress that the combined balance ratio of 
the Federal Old-Age and Survivors Trust Fund and the 
Federal Disability Insurance Trust Fund is not less than 
100 percent for such year. 
‘‘(II) For purposes of subclause (I), the combined 
balance ratio of the Federal Old-Age and Survivors Trust 
Fund and the Federal Disability Insurance Trust Fund 
for any calendar year is the ratio of the combined balance 
of such Trust Funds as of the last day of such calendar 
year (reduced by any transfer made pursuant to section 
201(o) in such calendar year) to the amount estimated 
by the Commissioner of Social Security under section 
201(l)(3)(B)(iii)(II) to be paid from such Trust Funds 
during the calendar year following such calendar year for 
all purposes authorized by section 201 (determined as if 
such following calendar year were a positive balance year). 
‘‘(D) For purposes of this paragraph, rules similar 
to the rules of subparagraphs (C) and (D) of paragraph 
(1) shall apply. 
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‘‘(E) For purposes of this paragraph, the term ‘appli-
cable benefit’ means any benefit under section 202 other 
than— 
‘‘(i) a child’s insurance benefit under section 
202(d) with respect to a child of an individual who 
has died; 
‘‘(ii) a widow’s insurance benefit under section 
202(e) with respect to a widow who has not attained 
age 60 and is under a disability (as defined in sec-
tion 223(d)) which began before the end of the pe-
riod specified in section 202(e)(4); 
‘‘(iii) a widower’s insurance benefit under sec-
tion 202(f) with respect to a widower who has not 
attained age 60 and is under a disability (as defined 
in section 223(d)) which began before the end of the 
period specified in section 202(f)(4); and 
‘‘(iv) a mother’s and father’s insurance benefit 
under section 202(g).’’. 
(b) TREATMENT OF DISABLED BENEFICIARIES.— 
Section 215(a) of such Act (as amended by subsection (a)) 
is amended further by adding at the end the following new 
paragraph: 
‘‘(9)(A) Notwithstanding the preceding provisions of 
this subsection, in the case of an individual who has or 
has had a period of disability and who initially becomes 
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eligible for old-age insurance benefits or who dies (before 
becoming eligible for such benefits) in any calendar year 
in or after 2018, the primary insurance amount of such 
individual shall be the sum of— 
‘‘(i) the amount determined under subpara-
graph (B); and 
‘‘(ii) the product derived by multiplying— 
‘‘(I) the excess of the amount determined 
under subparagraph (C) over the amount deter-
mined under subparagraph (B), by 
‘‘(II) the adjustment factor for such indi-
vidual determined under subparagraph (D). 
‘‘(B) The amount determined under this subpara-
graph is the amount of such individual’s primary insur-
ance amount as determined under this section without re-
gard to this paragraph. 
‘‘(C) The amount determined under this subpara-
graph is the amount of such individual’s primary insur-
ance amount as determined under this section as in effect 
with respect to individuals becoming eligible for old-age 
or disability insurance benefits under section 202(a) on 
the date of the enactment of the Social Security Personal 
Savings Guarantee and Prosperity Act of 2010. 
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