I 
108TH CONGRESS 
2D SESSION 
H. R. 3877
To amend title II of the Social Security Act and the Internal Revenue 
Code of 1986 to provide for an election by individuals eligible for old-
age insurance benefits under such title to waive payment of benefits 
based on their work record, to provide for income tax deductions based 
on the actuarial present value of benefits foregone by reason of such 
an election, and to provide that special Government obligations issued 
exclusively for purchase by the Social Security Trust Funds shall bear 
interest at the average market yield then prevailing for comparable obli-
gations issued in the private sector. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 2, 2004
Mr. OTTER introduced the following bill; which was referred to the Committee 
on Ways and Means 
A BILL 
To amend title II of the Social Security Act and the Internal 
Revenue Code of 1986 to provide for an election by 
individuals eligible for old-age insurance benefits under 
such title to waive payment of benefits based on their 
work record, to provide for income tax deductions based 
on the actuarial present value of benefits foregone by 
reason of such an election, and to provide that special 
Government obligations issued exclusively for purchase 
by the Social Security Trust Funds shall bear interest 
at the average market yield then prevailing for com-
parable obligations issued in the private sector.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Social Security Alter-
native Voluntary Expenditure Act of 2004’’. 
SEC. 2. ELECTION TO WAIVE PAYMENT OF SOCIAL SECU-
RITY BENEFITS. 
(a) IN GENERAL.—Title II of the Social Security Act 
is amended by adding after section 234 (42 U.S.C. 434) 
the following new section: 
‘‘ELECTION TO WAIVE PAYMENT OF BENEFITS 
‘‘In General 
‘‘SEC. 235. (a) An individual who is not entitled to 
old-age insurance benefits under section 202(a) but who 
is eligible for such benefits may elect to waive payment 
of all benefits under this title based on such individual’s 
wages and self-employment income. Such election shall be 
irrevocable and shall be made in such manner and form 
as the Commissioner of Social Security, in consultation 
with the Secretary of the Treasury, shall prescribe in regu-
lations. 
‘‘Effect of Election 
‘‘(b) Effective with the date of the filing of an election 
by an individual with the Commissioner under subsection 
(a), all benefits under this title based on the wages and
self-employment income of such individual shall not be 
payable to any person. 
‘‘Certification of Value of Refused Benefits 
‘‘(c)(1) An individual’s election filed with the Com-
missioner under subsection (a) shall indicate whether such 
individual intends to claim income tax deductions under 
section 224 of the Internal Revenue Code of 1986 in con-
nection with such election. In any case in which such indi-
vidual indicates such intention in such election, as soon 
as practicable after the date of the filing of such election, 
the Commissioner shall determine the actuarial present 
value of the future benefits which are not payable under 
this title based on such individual’s wages and self-employ-
ment income but which would be payable (upon prompt 
application therefor) if such individual had filed with the 
Commissioner, in lieu of the election, an application for 
old-age insurance benefits under section 202(a). 
‘‘(2) In the case of any person who, as of immediately 
before the date on which an individual makes an election 
under subsection (a), is a divorced spouse of such indi-
vidual, the Commissioner shall determine the actuarial 
present value of the future benefits which would have been 
payable to such divorced spouse (but for such election) 
under section 202(b)(5) or 202(c)(5) (based on current 
entitlement or upon timely and prompt filing on or after
such date of an application for such benefits under such 
section) on the basis of such individual’s wages and self-
employment income and future benefits which would have 
been payable to such divorced spouse under section 202(e) 
or 202(f) upon such individual’s death thereafter on the 
basis of such wages and self-employment income. 
‘‘(3) Upon making any determination under para-
graph (1) in connection with an election made under sub-
section (a), the Commissioner shall certify such deter-
mination to the Secretary of the Treasury and to the indi-
vidual making such election. Upon making any determina-
tion with respect to a divorced spouse under paragraph 
(2), the Commissioner shall certify such determination to 
such Secretary and such divorced spouse. 
‘‘(4) The Commissioner shall prescribe by regulation, 
in advance of making actuarial determinations under this 
subsection, reasonable actuarial assumptions and methods 
which shall be employed in making such determinations. 
Such regulations shall also require inclusion with any elec-
tion filed by an individual under subsection (a) such infor-
mation available to such individual as the Commissioner 
considers necessary for making determinations under this 
subsection.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to elections filed after 
180 days after the date of the enactment of this Act. 
SEC. 3. DEDUCTION FOR ACTUARIAL PRESENT VALUE OF 
WAIVED OLD-AGE INSURANCE BENEFITS. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by redesignating section 224 as section 225 and by insert-
ing after section 223 the following new section: 
‘‘SEC. 224. ACTUARIAL PRESENT VALUE OF WAIVED OLD-
AGE INSURANCE BENEFITS. 
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an 
individual, there shall be allowed as a deduction for each 
specified taxable year an amount equal to 20 percent of—
‘‘(1) in the case of an individual who elects to 
waive the payment of benefits under section 235(a) 
of the Social Security Act, the actuarial present 
value of future benefits determined by the Commis-
sioner of Social Security under section 235(c)(1) of 
such Act with respect to such individual, and 
‘‘(2) in the case of an individual who, as of im-
mediately before the date of the election referred to 
in paragraph (1), is a divorced spouse of an indi-
vidual referred to in paragraph (1), the actual 
present value of future benefits determined by the
Commissioner of Social Security under section 
235(c)(2) of such Act with respect to such divorced 
spouse. 
‘‘(b) SPECIFIED TAXABLE YEAR.—For purposes of 
this section, the term ‘specified taxable year’ means the 
taxable year which includes the date of the election re-
ferred to in subsection (a)(1) and each of the 4 succeeding 
taxable years.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 of such 
Code is amended by striking the last item and inserting 
the following new items:
‘‘Sec. 224. Actuarial present value of waived old-age insurance 
benefits. 
‘‘Sec. 225. Cross reference.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 4. INTEREST RATES FOR SPECIAL GOVERNMENT OBLI-
GATIONS ISSUED TO THE SOCIAL SECURITY 
TRUST FUNDS. 
(a) IN GENERAL.—The fifth sentence of section 
201(d) of the Social Security Act (42 U.S.C. 401(d)) is 
amended by striking ‘‘shall bear interest’’ and all that fol-
lows and inserting the following: ‘‘shall bear interest at 
a rate equal to the average of prevailing market yields for 
comparable obligations issued in the private sector (com-
puted by the Managing Trustee on the basis of market 
quotations as of the end of the calendar month next pre-
ceding the date of such issue).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to obligations issued 
after the date of the enactment of this Act.
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