dividual (determined under reasonable actuarial as-
sumptions) which, when added to the eligible individ-
ual’s monthly benefit under part A (if any), is at 
least equal to an amount equal to 1⁄12 of 185 percent 
of the poverty line (as defined in section 673(2) of 
the Community Services Block Grant Act (42 U.S.C. 
9902(2)) as in effect on such date for an individual) 
and adjusted annually thereafter by the CPI in-
crease percentage determined under section 215(i). 
‘‘(b) FORMS OF DISTRIBUTION.—
‘‘(1) REQUIRED MONTHLY PAYMENTS.—Except 
as provided in paragraph (2), beginning as of the 
date distributions begin to be made in accordance 
with subsection (a), the balance in the individual se-
curity account available to provide monthly pay-
ments not in excess of the amount described in sub-
section (a)(2) shall be paid, as elected by the ac-
count holder (in such form and manner as shall be 
prescribed in regulations of the Individual Security 
Fund Board or the Securities and Exchange Com-
mission, as applicable), by means of the purchase of 
annuities or equal monthly payments over the life 
expectancy of the eligible individual (determined 
under reasonable actuarial assumptions) in accord-
ance with requirements (which shall be provided in
regulations of the Board or Commission, as applica-
ble) similar to the requirements applicable to pay-
ments of benefits under subchapter III of chapter 84 
of title 5, United States Code. 
‘‘(2) PAYMENT OF EXCESS FUNDS.—To the ex-
tent funds remain in an eligible individual’s Feder-
ally-administered or privately-administered indi-
vidual security account (as the case may be) after 
the application of paragraph (1) and to the extent 
not inconsistent with the provisions of subchapter 
III of chapter 84 of title 5, United States Code, 
such funds shall be payable to the eligible individual 
in such manner and in such amounts as determined 
by the eligible individual. 
‘‘(c) DISTRIBUTION IN THE EVENT OF DEATH BE-
FORE THE DATE OF INITIAL DISTRIBUTION.—If the eligi-
ble individual dies before the date determined under sub-
section (a), the balance in such individual’s individual se-
curity account shall be distributed to the individual’s heirs 
under rules established by the Individual Security Fund 
Board or the Securities and Exchange Commission, as ap-
plicable.
‘‘Subpart 2—Individual Security Fund; Individual 
Security Fund Board 
‘‘INDIVIDUAL SECURITY FUND 
‘‘SEC. 261. There shall be established and maintained 
in the Treasury of the United States an Individual Secu-
rity Fund in the same manner as the Thrift Savings Fund 
under sections 8437 (excluding paragraphs (4) and (5) of 
subsection (c) thereof), 8438, and 8439 of title 5, United 
States Code. 
‘‘INDIVIDUAL SECURITY FUND BOARD 
‘‘SEC. 262. (a) ESTABLISHMENT.—There shall be es-
tablished and maintained in the Social Security Adminis-
tration an Individual Security Fund Board in the same 
manner as the Federal Retirement Thrift Investment 
Board under subchapter VII of chapter 84 of title 5, 
United States Code. 
‘‘(b) SPECIFIC INVESTMENT AND REPORTING DU-
TIES.—The Individual Security Fund Board shall manage 
and report on the activities of the Individual Security 
Fund and on Federally-administered individual security 
accounts in the same manner as the Federal Retirement 
Thrift Investment Board manages and reports on the 
Thrift Savings Fund and the individual accounts of such 
Fund under subchapter VII of chapter 84 of title 5, 
United States Code.
‘‘(c) BUDGETARY TREATMENT OF INDIVIDUAL SECU-
RITY FUND AND ACCOUNTS.—The receipts and disburse-
ments of the Individual Security Fund and any accounts 
within such Fund shall not be included in the totals of 
the budget of the United States Government as submitted 
by the President or of the congressional budget and shall 
be exempt from any general budget limitation imposed by 
statute on expenditures and net lending (budget outlays) 
of the United States Government. 
‘‘(d) EXECUTIVE DIRECTOR.—The Board shall ap-
point an Executive Director, without regard to the provi-
sions of law governing appointments in the competitive 
service. The Executive Director shall receive the same 
compensation, and shall have, with respect to the Indi-
vidual Security Fund and accounts within such Fund, the 
same duties and responsibilities, as does the Executive Di-
rector (appointed under section 8474(a) of title 5, United 
States Code) with respect to the Thrift Savings Fund and 
accounts within such Fund. 
‘‘Subpart 3—Certified Institutions 
‘‘CERTIFICATION OF INSTITUTIONS BY SECURITIES AND 
EXCHANGE COMMISSION 
‘‘SEC. 271. (a) IN GENERAL.—For purposes of this 
part, any institution that is engaged, in a fiduciary capac-
ity, in the business of maintaining accounts for individuals
for purposes of investment may apply to the Securities and 
Exchange Commission (in such form and manner as the 
Commission shall by regulation require) for certification 
under this subpart. 
‘‘(b) REVIEW REQUIREMENTS.—In reviewing any ap-
plication for certification under this subpart and deter-
mining whether to approve the application for certifi-
cation, the Commission shall consider the following fac-
tors: 
‘‘(1) The financial history and condition of the 
institution. 
‘‘(2) The adequacy of the institution’s capital 
structure. 
‘‘(3) The future earnings prospects of the insti-
tution. 
‘‘(4) The general character and fitness of the 
management of the institution. 
‘‘(5) The convenience and needs of individuals 
who are account holders with respect to personal re-
tirement accounts for which the institution is to 
serve as trustee. 
‘‘(6) Whether the institution’s corporate powers 
are consistent with the purposes of this part.
‘‘(7) The institution’s disclosure policies, includ-
ing with respect to its administrative fees, invest-
ment policies, and investment activities. 
‘‘(8) The appropriateness of—
‘‘(A) the fund or funds that such institu-
tion proposes to offer for purposes of this part, 
and 
‘‘(B) the criteria by which such institution 
will make future decisions regarding the selec-
tion of new funds or the making of any other 
modifications in the investment options offered 
by such institution for purposes of this part, as 
determined based on guidelines established by 
the Commission for purposes of this paragraph. 
‘‘(c) NOTICE OF DENIAL OF APPLICATION FOR CER-
TIFICATION.—If the Commission votes to deny any appli-
cation for certification by any institution, the Commission 
shall promptly notify the institution of the denial of such 
application, giving specific reasons in writing for the Com-
mission’s determination with reference to the factors de-
scribed in subsection (b). 
‘‘(d) NONDELEGATION REQUIREMENT.—The author-
ity of the Commission to make any determination to deny 
any application under this section may not be delegated 
by the Commission.
‘‘REVOCATION OF CERTIFICATION 
‘‘SEC. 272. (a) IN GENERAL.—The Securities and 
Exchange Commission shall prescribe regulations in ac-
cordance with which the certified status of an institution 
may be voluntarily or involuntarily revoked. 
‘‘(b) JUDICIAL REVIEW.—Any party to any involun-
tary revocation proceeding under this section to which an 
institution is a party may obtain a review of any order 
served pursuant to this section by the filing in the court 
of appeals of the United States for the circuit in which 
the home office of the institution is located, or in the 
United States Court of Appeals for the District of Colum-
bia Circuit, within 30 days after the date of service of such 
order, a written petition praying that the order of the 
Commission be modified, terminated, or set aside. A copy 
of such petition shall be forthwith transmitted by the clerk 
of the court to the Commission, and thereupon the Com-
mission shall file in the court the record in the proceeding, 
as provided in section 2112 of title 28, United States 
Code. Upon the filing of such petition, such court shall 
have jurisdiction, which upon the filing of the record shall 
be exclusive, to affirm, modify, terminate, or set aside, in 
whole or in part, the order of the Commission. Review of 
such proceedings shall be had as provided in chapter 7 
of title 5, United States Code. The judgment and decree
of the court shall be final, except that the judgment and 
decree shall be subject to review by the Supreme Court 
upon certiorari, as provided in section 1254 of title 28, 
United States Code. The commencement of proceedings 
for judicial review under this subsection shall not, unless 
specifically ordered by the court, operate as a stay of any 
order issued by the Commission. 
‘‘FIDUCIARY DUTIES 
‘‘SEC. 273. (a) IN GENERAL.—In the case of a pri-
vately-administered individual security account which does 
not form part of an individual account plan covered under 
part 4 of subtitle B of title I of the Employee Retirement 
Income Security Act of 1974, rules similar to the rules 
of such part 4 applicable to individual account plans cov-
ered under such part 4 shall apply with respect to a pri-
vately-administered individual security account and the 
terms of any arrangement under which such account is 
maintained. 
‘‘(b) GENERAL REQUIREMENTS.—In applying under 
subsection (a) the rules of part 4 of subtitle B of title 
I of the Employee Retirement Income Security Act of 
1974 in the case of a privately-administered individual se-
curity account, references in such part to the Secretary 
of Labor shall be deemed to be references to the Securities 
and Exchange Commission, references in such part to a 
participants or beneficiary in connection with an indi-
vidual account plan covered under such part shall be 
deemed to be references to the account holder with respect 
to the privately-administered individual security account, 
and references in such part to the plan administrator or 
plan sponsor in connection with an individual account plan 
covered under such part shall be deemed to be references 
to the trustee of the privately-administered individual se-
curity account. 
‘‘(c) LIMITATION ON LIABILITY.—Any account holder 
who issues an instruction to the trustee of the account 
directing an investment of funds held in the account shall 
sign an acknowledgement prescribed by the Securities and 
Exchange Commission which states that the account hold-
er understands that an investment of any amount in the 
account is made at the account holder’s risk, that the ac-
count holder is not protected by the Government or by 
the trustee against any loss on such investment, and that 
a return on such investment is not guaranteed by the Gov-
ernment or by the trustee. Notwithstanding the preceding 
provisions of this section and any other provision of Fed-
eral or State law, the trustee of a privately-administered 
individual security account shall not be liable for losses 
suffered in connection with any investment of assets held 
in the account unless it is shown by clear and convincing 
evidence that the trustee did not act in the manner in
which a reasonable trustee would act under the cir-
cumstances then prevailing in evaluating the risk and re-
ward properties of the investment option involved. 
‘‘Subpart 4—Enforcement 
‘‘CAUSE OF ACTION 
‘‘SEC. 281. The account holder with respect to a pri-
vately-administered individual security account who is ad-
versely affected by an act or practice of any party (other 
than the Securities and Exchange Commission, the Social 
Security Administration, the Department of the Treasury, 
or any officer or employee of any of the foregoing) in viola-
tion of any provision of this part, may bring an action—
‘‘(1) to enjoin such act or practice, or 
‘‘(2) to obtain other appropriate equitable relief 
(A) to redress such violation or (B) to enforce such 
provision. 
‘‘JURISDICTION AND VENUE 
‘‘SEC. 282. Civil actions under this subpart may be 
brought in the district courts of the United States in the 
district where the privately-administered individual secu-
rity account is administered, where the violation took 
place, or where a defendant resides or may be found, and 
process may be served in any district where a defendant 
resides or may be found. The district courts of the United 
State shall have jurisdiction, without regard to the amount
in controversy or the citizenship of the parties, to grant 
the relief provided for in section 281 in any action. 
‘‘RIGHT OF SECURITIES AND EXCHANGE COMMISSION TO 
INTERVENE 
‘‘SEC. 283. A copy of the complaint or notice of ap-
peal in any action under this subpart shall be served upon 
the Securities and Exchange Commission by certified mail. 
The Commission shall each have the right to intervene in 
any action. 
‘‘AWARDS OF COSTS AND EXPENSES 
‘‘SEC. 284. In any action brought under this subpart, 
the court in its discretion may award all or a portion of 
the costs and expenses incurred in connection with such 
action, including reasonable attorney’s fees, to any party 
who prevails or substantially prevails in such action. 
‘‘LIMITATION ON ACTIONS 
‘‘SEC. 285. (a) IN GENERAL.—Except as provided in 
subsection (c), an action under this subpart may not be 
brought after the later of—
‘‘(1) 6 years after the date on which the cause 
of action arose, or 
‘‘(2) 3 years after the applicable date specified 
in subsection (b). 
‘‘(b) APPLICABLE DATE.—The applicable date speci-
fied in this subsection is the earliest date on which the
plaintiff acquired or should have acquired actual knowl-
edge of the existence of such cause of action. 
‘‘(c) CASES OF FRAUD OR CONCEALMENT.—In the 
case of fraud or concealment, the period described in sub-
section (a)(2) shall be extended to 6 years after the appli-
cable date specified in subsection (b). 
‘‘PENALTY FOR FAILURE TO TIMELY PROVIDE REQUIRED 
INFORMATION 
‘‘SEC. 286. The Securities and Exchange Commission 
may assess a penalty, payable to it, against any person 
who fails to provide any notice or other material informa-
tion required under this part or any regulations prescribed 
under this part within the applicable time limit specified 
therein. Such penalty shall not exceed $1,000 for each day 
for which such failure continues. 
‘‘ACTIONS BY SECURITIES AND EXCHANGE COMMISSION 
‘‘SEC. 287. If any person is assessed under this sub-
part and fails to pay the assessment when due, or any 
person otherwise fails to meet any requirement of this 
part, the Securities and Exchange Commission may bring 
a civil action in any district court of the United States 
within the jurisdiction of which such person’s assets are 
located or in which such person resides or is found for 
the recovery of the amount of the assessment or for appro-
priate equitable relief to redress the violation or enforce 
the provisions of this part, and process may be served in
any other district. The district courts of the United States 
shall have jurisdiction over actions brought under this sec-
tion by the Commission without regard to the amount in 
controversy. 
‘‘CRIMINAL PENALTY FOR FRAUD OR INTENTIONAL MIS-
REPRESENTATION
IN
CONNECTION
WITH
INVEST-
MENT OPTIONS 
‘‘SEC. 288. Any person who makes, or causes to be 
made, a statement or representation of a material fact for 
use in selecting an investment option that the person 
knows or should know is false or misleading or knows or 
should know omits a material fact or makes such a state-
ment with knowing disregard for the truth shall upon con-
viction be fined not more than $500,000 or imprisoned 
for not more than 5 years, or both.’’. 
(2) AUTHORIZATION FOR FUNDING OF INITIAL 
COSTS.—There are authorized to be appropriated to 
the Individual Security Fund Board, for each of fis-
cal years 2006 and 2007, such sums as may be nec-
essary to pay for the expenses incurred during such 
fiscal year in the administration of part B of title 
II of the Social Security Act during such fiscal year. 
(b) MODIFICATION OF FICA RATES.—
(1) EMPLOYEES.—Section 3101(a) of the Inter-
nal Revenue Code of 1986 (relating to tax on em-
ployees) is amended to read as follows:
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—
‘‘(A) INDIVIDUALS COVERED UNDER PART 
A OF TITLE II OF THE SOCIAL SECURITY ACT.—
In addition to other taxes, there is hereby im-
posed on the income of every individual who is 
not a part B eligible individual a tax equal to 
6.2 percent of the wages received by him with 
respect to employment. 
‘‘(B) INDIVIDUALS COVERED UNDER PART 
B OF TITLE II OF THE SOCIAL SECURITY ACT.—
‘‘(i) IN
GENERAL.—In addition to 
other taxes, there is hereby imposed on the 
income of every part B eligible individual a 
tax equal to the applicable percentage of 
the wages received by such individual with 
respect to employment. 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the term ‘applicable 
percentage’ means the excess of 6.2 per-
cent, over 
‘‘(I) 3 percent, in the case of the 
first $10,000 of such wages received 
in the calendar year, and
‘‘(II) 2 percent, in the case of 
any additional such wages received in 
the calendar year. 
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION 
TO INDIVIDUAL SECURITY ACCOUNTS.—In addition 
to other taxes, there is hereby imposed on the in-
come of every part B eligible individual for the cal-
endar year an individual security account contribu-
tion equal to the sum of—
‘‘(A) 3 percent of so much of the wages as 
does not exceed the first $10,000 received in 
such calendar year by such individual with re-
spect to employment, 
‘‘(B) 2 percent of the excess of—
‘‘(i) such wages, over 
‘‘(ii) the wages taken into account 
under subparagraph (A), plus 
‘‘(C) so much of such wages (not to exceed 
$5,000) as is designated by the individual in 
the same manner as described in section 251(d) 
of the Social Security Act. 
‘‘(3) INFLATION ADJUSTMENTS.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2006, the $10,000
amount in paragraphs (1) and (2) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the wage increase percentage (if 
any) for such year. 
‘‘(B) DESIGNATED
CONTRIBUTIONS.—In 
the case of any calendar year beginning after 
2006, the $5,000 amount in paragraph (2)(C) 
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the percentage increase (if any) 
for such year determined under section 
215(i) of the Social Security Act. 
‘‘(C) ROUNDING.—If any dollar amount 
after being increased under subparagraph (A) 
or (B) is not a multiple of $10, such dollar 
amount shall be rounded to the nearest multiple 
of $10. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) WAGES.—The term ‘wages’ shall have 
the meaning given to such term by section 
3121(a).
‘‘(B) EMPLOYMENT.—The term ‘employ-
ment’ shall have the meaning given to such 
term by section 3121(b). 
‘‘(C) WAGE INCREASE PERCENTAGE.—The 
term ‘wage increase percentage’, with respect to 
a calendar year, means the percentage increase 
which would become effective under section 
215(i)(2) of the Social Security Act for such 
year if such increase were determined as de-
scribed in section 215(i)(5)(A)(i) of such Act.’’. 
(2) SELF-EMPLOYED.—Section 1401(a) of the 
Internal Revenue Code of 1986 (relating to tax on 
self-employment income) is amended to read as fol-
lows: 
‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR-
ANCE.—
‘‘(1) IN GENERAL.—
‘‘(A) INDIVIDUALS COVERED UNDER PART 
A OF THE SOCIAL SECURITY ACT.—In addition 
to other taxes, there shall be imposed for each 
taxable year, on the self-employment income of 
every individual who is not a part B eligible in-
dividual for the calendar year ending with or 
during such taxable year, a tax equal to 12.40