I 
111TH CONGRESS 
1ST SESSION 
H. R. 107 
To reform Social Security retirement and Medicare by establishing a Personal 
Social Security Savings Program to create a safer, healthier, more secure, 
and more prosperous retirement for all Americans and to reduce the 
burden on young Americans. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 6, 2009 
Mr. FLAKE (for himself, Ms. FOXX, and Ms. JACKSON-LEE of Texas) intro-
duced the following bill; which was referred to the Committee on Ways 
and Means, and in addition to the Committees on Education and Labor, 
the Budget, Energy and Commerce, and Rules, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such 
provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To reform Social Security retirement and Medicare by estab-
lishing a Personal Social Security Savings Program to 
create a safer, healthier, more secure, and more pros-
perous retirement for all Americans and to reduce the 
burden on young Americans. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Securing Medicare and Retirement for Tomorrow Act of 
2009’’ or as the ‘‘SMART Act of 2009’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Establishment of Personal Social Security Savings Program. 
‘‘PART A—INSURANCE BENEFITS 
‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS PROGRAM 
‘‘Sec. 251. Definitions. 
‘‘Sec. 252. Establishment and maintenance of personal social security ac-
counts. 
‘‘Sec. 253. Designation of qualified social security mutual funds. 
‘‘Sec. 254. Distribution of social security retirement benefits. 
‘‘Sec. 255. Enforcement of contribution requirements. 
‘‘Sec. 256. Personal Accounts Management and Review Board. 
Sec. 3. Medicare program revision. 
Sec. 4. Employment taxes, tax on self-employment income. 
Sec. 5. Tax treatment of distributions. 
Sec. 6. Federal budget reforms. 
Sec. 7. Change in Consumer Price Index used for cost-of-living increases. 
SEC. 2. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY 
SAVINGS PROGRAM. 
(a) IN GENERAL.—Title II of the Social Security Act 
(42 U.S.C. 401 et seq.) is amended— 
(1) by inserting before section 201 (42 U.S.C. 
401) the following: 
‘‘PART A—INSURANCE BENEFITS’’; 
and 
(2) by adding at the end the following new part: 
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‘‘PART B—PERSONAL SOCIAL SECURITY SAVINGS 
PROGRAM 
‘‘SEC. 251. DEFINITIONS. 
‘‘For purposes of this part— 
‘‘(1) PARTICIPATING
INDIVIDUAL.—The term 
‘participating individual’ means any individual— 
‘‘(A)(i) who has received wages on which 
there is imposed a tax under section 3101(a) of 
the Internal Revenue Code of 1986, or 
‘‘(ii) who has derived self-employment in-
come on which there is imposed a tax under 
section 1401(a) of such Code, and 
‘‘(B) who has not attained retirement age 
as of January 1 of the calendar year following 
the date of the enactment of the SMART Act 
of 2009. 
‘‘(2) EMPLOYER.—The term ‘employer’ means 
an employer within the meaning of section 3111 of 
the Internal Revenue Code of 1986. 
‘‘(3) PART
A
RETIREMENT
BENEFIT.—The 
term ‘part A retirement benefit’ means, in connec-
tion with a participating individual— 
‘‘(A) an old-age insurance benefit provided 
under section 202(a); and 
‘‘(B) a wife’s or husband’s insurance ben-
efit under subsection (b) or (c) of section 202 
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based on the wages and self-employment income 
of the participating individual. 
‘‘(4) PART B BENEFIT.—The term ‘part B ben-
efit’ means, in connection with a participating indi-
vidual, the total amount which is credited to all per-
sonal social security accounts of the participating in-
dividual as of the date on which the participating in-
dividual attains retirement age (or, if earlier, dies). 
‘‘(5) BOARD.—The term ‘Board’ means the 
Personal Accounts Management and Review Board 
established under section 255. 
‘‘(6) PERSONAL SOCIAL SECURITY ACCOUNT.— 
‘‘(A) IN
GENERAL.—The term ‘personal 
social security account’ of an individual means 
a trust (established pursuant to section 252) 
created or organized in the United States for 
the exclusive benefit of a participating indi-
vidual or such individual’s beneficiaries, but 
only if the written governing instrument cre-
ating the trust meets the following require-
ments: 
‘‘(i) Except in the case of amounts 
transferred from other personal social se-
curity accounts pursuant to a merger or 
transfer authorized under subsection (e) or 
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(f) of section 252, no contribution will be 
accepted unless it is in cash. 
‘‘(ii) The trustee is— 
‘‘(I) a bank (as defined in sub-
paragraph (B)), or 
‘‘(II) such other person who dem-
onstrates to the satisfaction of the 
Board that the manner in which such 
other person will administer the trust 
will be consistent with the require-
ments of this part. 
‘‘(iii) The written governing instru-
ment provides for investment of the assets 
of the trust in accordance with the provi-
sions of this part. No amount of the assets 
of the trust will be invested in any form or 
manner other than as authorized by this 
part. 
‘‘(iv) The interest of an individual in 
the balance of the individual’s account is 
nonforfeitable, except as provided in sub-
sections (e) and (f)(3) of section 254. 
‘‘(v) The assets of the trust will not 
be commingled with other property. 
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‘‘(B) BANK.—For purposes of subpara-
graph (A)(ii), the term ‘bank’ means— 
‘‘(i) any bank (as defined in section 
581 of the Internal Revenue Code of 
1986), 
‘‘(ii) an insured credit union (within 
the meaning of paragraph (6) or (7) of 
section 101 of the Federal Credit Union 
Act), and 
‘‘(iii) a corporation which, under the 
laws of the State of its incorporation, is 
subject to supervision and examination by 
the Commissioner of Banking or other offi-
cer of such State in charge of the adminis-
tration of the banking laws of such State. 
‘‘(7) PART B PERSONAL SOCIAL SECURITY CON-
TRIBUTION.—The term ‘part B personal social secu-
rity contribution’ for any calendar year means an 
amount equal to the sum of— 
‘‘(A) the amount of the taxes imposed 
under section 3101(a) of the Internal Revenue 
Code of 1986 (without regard to subsection (d) 
thereof) on the wages paid to such individual 
during such calendar year, plus 
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‘‘(B) 50 percent of the amount of the taxes 
imposed under section 1401(a) of such Code 
(without regard to subsections (d) and (e) 
thereof) on the self-employment income derived 
by such individual during the taxable year end-
ing with or during such calendar year. 
‘‘(8) QUALIFIED SOCIAL SECURITY ANNUITY.— 
The term ‘qualified social security annuity’ is an an-
nuity approved by the Board for purchase pursuant 
to section 254(d) with amounts available as part B 
benefits. 
‘‘(9) QUALIFIED
SOCIAL
SECURITY
MUTUAL 
FUND.—The term ‘qualified social security mutual 
fund’ means an entity so designated pursuant to sec-
tion 253. 
‘‘(10) RETIREMENT
AGE.—The term ‘retire-
ment age’ has the meaning provided under section 
216(l). 
‘‘(11) SOCIAL SECURITY ESCROW FUND.—The 
term ‘Social Security Escrow Fund’ means the fund 
established under section 201(a). 
‘‘SEC. 252. ESTABLISHMENT AND MAINTENANCE OF PER-
SONAL SOCIAL SECURITY ACCOUNTS. 
‘‘(a) FUNDING AND INVESTMENT OF PERSONAL SO-
CIAL SECURITY ACCOUNTS.— 
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‘‘(1) EMPLOYEES.—Not later than each due 
date for payment by any employer, pursuant to sub-
title C of the Internal Revenue Code of 1986, of the 
taxes imposed under section 3101(a) of such Code 
on the wages paid to any participating individual, 
such employer shall— 
‘‘(A) make the payment required under 
subsection (b)(2)(B) to the participating indi-
vidual’s personal social security account estab-
lished under subsection (b)(1), and 
‘‘(B) provide for investment, under the 
terms of the account, of the amount paid to the 
account in a qualified social security mutual 
fund designated by such individual as provided 
in subsection (d). 
‘‘(2) SELF-EMPLOYED
PERSONS.—Not later 
than 15 days after each due date for payment of 
taxes imposed under section 1401 of the Internal 
Revenue Code of 1986 on self-employment income 
derived by any participating individual during any 
taxable year, such participating individual shall— 
‘‘(A) pay an amount equal to such partici-
pating individual’s part B personal social secu-
rity contribution described in section 251(7)(B) 
into such individual’s personal social security 
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account established pursuant to subsection 
(c)(1), and 
‘‘(B) provide for investment of such 
amount in a qualified social security mutual 
fund designated by such individual as provided 
in subsection (d). 
‘‘(3) EFFECT OF AUDITS OR ERRORS REGARD-
ING TRANSFERS.—In the event of any transfer of an 
incorrect amount under this subsection, proper ad-
justments shall be made in amounts subsequently 
transferred pursuant to this subsection to the extent 
the incorrect amount was in excess of or was less 
than the correct amount, in accordance with regula-
tions prescribed by the Board. 
‘‘(b) ESTABLISHMENT OF ACCOUNTS BY EMPLOY-
ERS.— 
‘‘(1) IN GENERAL.—Each employer shall estab-
lish and maintain for each participating individual 
employed by such employer a personal social security 
account under a social security payroll deduction 
plan. 
‘‘(2) REQUIREMENTS OF PLAN.—For purposes 
of this part, the term ‘social security payroll deduc-
tion plan’ means, in connection with a participating 
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individual, a written plan of an employer with re-
spect to which the following requirements are met: 
‘‘(A) Such individual is an employee of 
such employer and the plan applies only with 
respect to wages paid by such employer to such 
individual. 
‘‘(B) Under such plan, the portion of such 
wages consisting of each such participating in-
dividual’s part B personal social security con-
tribution described in section 251(7)(A) for the 
calendar year will be deducted from such indi-
vidual’s wages and paid to a personal social se-
curity account maintained by such employer for 
such individual, in accordance with subsection 
(a)(1). 
‘‘(C) The employer receives no compensa-
tion for the cost of administering such plan. 
‘‘(D) The employer does not make any en-
dorsement with respect to any qualified social 
security mutual funds selected by the employer 
for purposes of investment under subsection (d) 
of amounts held in any personal social security 
account. 
‘‘(c) PARTICIPATION BY SELF-EMPLOYED INDIVID-
UALS.—Each participating individual who receives self- 
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employment income for any taxable year beginning on or 
after January 1 of the calendar following the date of the 
enactment of the SMART Act of 2009 shall, in such form 
and manner as shall be prescribed in regulations of the 
Board, establish and maintain a personal social security 
account for purposes of holding and investing such partici-
pating individual’s part B personal social security con-
tribution described in section 251(7)(B) for such taxable 
year, in accordance with subsection (a)(2). 
‘‘(d) INVESTMENT OF PERSONAL SOCIAL SECURITY 
ACCOUNT FUNDS.— 
‘‘(1) INVESTMENT IN QUALIFIED SOCIAL SECU-
RITY MUTUAL FUNDS.—Except as provided in para-
graph (4), amounts held during any calendar year in 
a participating individual’s personal social security 
account maintained by such individual’s employer 
shall be invested during such year only in one quali-
fied social security mutual fund designated by the 
participating individual to such employer in accord-
ance with this subsection not later than November 
30 of the preceding year. 
‘‘(2) SELECTION OF FUNDS BY EMPLOYERS.— 
‘‘(A) IN GENERAL.—Except as provided in 
paragraph (4), in connection with the invest-
ment of amounts held during any calendar year 
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