irrespective of the extent to which such amounts may have 
been invested under the Small Capitalization Option or 
Medium Capitalization Option described in section 
258(e)(2) or a variance from the Standard Mix may have 
been elected under section 258(e)(4). The Commissioner 
shall reduce such benefit by the amount of the applicable 
part B offset in connection with such individual applicable 
to such benefit. 
‘‘Applicable Part B Offset 
‘‘(b)(1) For purposes of subsection (a), the applicable 
part B offset is—
‘‘(A) in the case of a benefit based on the wages 
and self-employment income of an individual born on 
or after January 1, 1981, the full part B offset in 
connection with such individual allocable to such 
benefit, determined under paragraph (2), or 
‘‘(B) in the case of a benefit based on the 
wages and self employment income of an individual 
born before January 1, 1981, the reduced part B 
offset in connection with such individual allocable to 
such benefit, determined under paragraph (3). 
‘‘(2) For purposes of paragraph (1)(A), the full part 
B offset in connection with an individual allocable to a 
monthly insurance benefit under this part is the portion 
of the total amount of monthly payments payable for such
month under part B in the distribution of amounts not 
in excess of such individual’s distribution base which bears 
the same ratio to such total amount as the amount of such 
benefit bears to the total of benefits payable for such 
month under this part on the basis of such individual’s 
wages and self-employment income. 
‘‘(3)(A) For purposes of paragraph (1)(B) the re-
duced part B offset in connection with an individual allo-
cable to a monthly insurance benefit under this part is 
the product derived by multiplying—
‘‘(i) the portion of the total amount described 
in subsection (a) which would be payable for such 
month under part B in the distribution of amounts 
not in excess of such individual’s distribution base 
which bears the same ratio to such total amount as 
the amount of such benefit bears to the total of ben-
efits payable for such month under this part on the 
basis of such individual’s wages and self-employment 
income, by 
‘‘(ii) the reduction factor determined under sub-
paragraph (B) in connection with such individual. 
‘‘(B) The reduction factor determined under this sub-
paragraph, in connection with any individual, is the excess 
of—
‘‘(i) 1, over
‘‘(ii) the product derived by multiplying—
‘‘(I) 0.00331⁄3, by 
‘‘(II) the number of calendar years during 
the period beginning with the calendar year in 
which such individual was born and ending with 
calendar year 1980.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to benefits for months 
after November 2004. 
SEC. 5. MAINTENANCE OF ADEQUATE BALANCES IN THE 
SOCIAL SECURITY TRUST FUNDS. 
(a) IN GENERAL.—Section 201 of the Social Security 
Act (42 U.S.C. 401) is amended by adding at the end the 
following new subsection: 
‘‘(n) In addition to amounts otherwise appropriated 
under the preceding provisions of this section to the Trust 
Funds established under this section, there is hereby ap-
propriated for each fiscal year to each of such Trust 
Funds, from amounts in the general fund of the Treasury 
not otherwise appropriated, such sums as may be nec-
essary from time to time to maintain the balance ratio 
(as defined in section 709(b)) of such Trust Fund, for the 
calendar year commencing during such fiscal year, at not 
less than 100 percent. The sums to be appropriated under 
the preceding sentence shall be determined by the Com-
missioner of Social Security and certified by the Commis-
sioner to each House of the Congress not later than Octo-
ber 1 of such fiscal year. In making such determination 
and certification, the Commissioner shall use the inter-
mediate actuarial assumptions used by the Board of 
Trustees of the Trust Funds in its most recent annual 
report to the Congress prepared pursuant to subsection 
(c)(2). The Commissioner shall also transmit a copy of 
any such certification to the Secretary of the Treasury, 
and upon receipt thereof, such Secretary shall promptly 
take appropriate actions in accordance with the certifi-
cation.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply with respect to fiscal years be-
ginning after the date of the enactment of this Act. 
SEC. 6. TAXATION OF INDIVIDUAL SOCIAL SECURITY AC-
COUNT PROGRAM. 
(a) IN GENERAL.—Subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 (relating to exempt organi-
zations) is amended by adding at the end the following 
new part: 
‘‘PART IX—INDIVIDUAL SOCIAL SECURITY 
ACCOUNT PROGRAM
‘‘Sec. 531. Social Security Personal Savings Fund and individual 
social security accounts.
‘‘SEC. 531. SOCIAL SECURITY PERSONAL SAVINGS FUND 
AND 
INDIVIDUAL 
SOCIAL 
SECURITY 
AC-
COUNTS. 
‘‘(a) EXEMPTION FROM TAX.—The Social Security 
Personal Savings Fund, and each individual social security 
account, is exempt from taxation under this subtitle. Not-
withstanding the preceding sentence, such Fund and ac-
counts are subject to the taxes imposed by section 511 
(relating to imposition of tax on unrelated business income 
of charitable, etc. organizations). 
‘‘(b) DISTRIBUTIONS FROM INDIVIDUAL SOCIAL SE-
CURITY ACCOUNTS.—
‘‘(1) 
DISTRIBUTIONS
ON
ACCOUNT
OF 
DEATH.—Any distribution from an individual social 
security account on account of the death of the ac-
count owner shall not be includible in gross income. 
‘‘(2) INCOME INCLUSION AS SOCIAL SECURITY 
BENEFITS.—
‘‘For treatment of certain distributions as social 
security benefits, see section 86.
‘‘(c) INDIVIDUAL SOCIAL SECURITY ACCOUNTS.—
For purposes of this section, the term ‘individual social 
security account’ means an account established under sec-
tion 256 of the Social Security Act.’’. 
(b) DISTRIBUTIONS TAXED
AS SOCIAL SECURITY 
BENEFIT.—Paragraph (1) of section 86(d) of such Code
(defining social security benefit) is amended by striking 
‘‘or’’ at the end of subparagraph (A), by redesignating 
subparagraph (B) as subparagraph (C), and by inserting 
after subparagraph (A) the following new subparagraph: 
‘‘(B) a distribution under section 260 of 
the Social Security Act, or’’. 
(c) CONFORMING AMENDMENT.—The table of parts 
for Subchapter F of chapter 1 of such Code is amended 
by adding at the end the following new item:
‘‘Part IX. Individual social security account program.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004.
SEC. 7. REPORT ON PRIVATE SECTOR INVESTMENT AND 
MANAGEMENT. 
(a) STUDY.—As soon as practicable after the date of 
the enactment of this Act, the Social Security Advisory 
Board shall undertake a study of the manner and extent 
to which, upon attainment of balances in individual social 
security accounts sufficient to minimize the administrative 
costs involved, investment of amounts held in such ac-
counts may be managed in the private sector by approved 
account managers. In carrying out the study, the Advisory 
Board shall consult with such public and private entities 
as it deems necessary and appropriate.
(b) REPORT.—Not later than 5 years after the date 
of the enactment of this Act, the Social Security Advisory 
Board shall report to each House of the Congress and to 
the President the results of the study required under sub-
section (a). Such report shall include such recommenda-
tions for administrative and legislative changes as the 
Board may consider appropriate. 
SEC. 8. MAINTENANCE OF CURRENT LEVELS OF FICA AND 
SECA TAXES. 
Nothing in this Act shall be construed to affect the 
levels of taxes under chapter 21 of the Internal Revenue 
Code of 1986 (the Federal Insurance Contributions Act) 
or chapter 2 of such Code (the Self-Employment Contribu-
tions Act of 1954).
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