I
105TH CONGRESS
1ST SESSION
H. R. 2768
To provide for the retirement of all Americans.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 29, 1997
Mr. SANFORD introduced the following bill; which was referred to the Commit-
tee on Ways and Means, and in addition to the Committees on Education
and the Workforce, Rules, and Banking and Financial Services, for a pe-
riod to be subsequently determined by the Speaker, in each case for con-
sideration of such provisions as fall within the jurisdiction of the commit-
tee concerned
A BILL
To provide for the retirement of all Americans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Personal Retirement Accounts Act of 1997’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title and table of contents.
Sec. 2. Definitions.
TITLE I—CONTRIBUTIONS TO PERSONAL RETIREMENT
ACCOUNTS
Sec. 101. Personal retirement account payroll deduction programs.
Sec. 102. Designation of personal retirement accounts.
Sec. 103. Self-employed individuals.
Sec. 104. Elective participation.
Sec. 105. Penalties.
TITLE II—PERSONAL RETIREMENT ACCOUNTS
Sec. 201. General requirements for personal retirement accounts.
Sec. 202. Investment requirements.
Sec. 203. Distribution requirements.
Sec. 204. Insurance requirements.
Sec. 205. Personal retirement account exempt from income tax.
Sec. 206. Tax treatment of distributions.
Sec. 207. Penalty on trustee for failure of personal retirement account to meet
requirement.
Sec. 208. Notification regarding insured depository institutions.
Sec. 209. Reports.
Sec. 210. Study on implementation of early retirement options.
TITLE III—CERTIFICATION OF FINANCIAL INSTITUTIONS OTHER
THAN INSURED DEPOSITORY INSTITUTIONS
Sec. 301. Certification of financial institutions by the Securities and Exchange
Commission.
Sec. 302. Access to records.
Sec. 303. Revocation of certification.
TITLE IV—PERSONAL RETIREMENT ACCOUNT INSURANCE
Sec. 401. Guarantees and supplemental minimum benefit payments.
Sec. 402. Assessments of qualified financial institutions by the Commission.
Sec. 403. Establishment of Social Security Savings Insurance Trust Fund.
Sec. 404. Institution of termination proceedings by the Commission.
Sec. 405. Liability upon termination of accounts.
Sec. 406. Insurance logo.
Sec. 407. Report by the Commission.
TITLE V—ENFORCEMENT AUTHORITY
Sec. 501. Cause of action.
Sec. 502. Jurisdiction and venue.
Sec. 503. Right of Securities and Exchange Commission to intervene.
Sec. 504. Awards of costs and expenses.
Sec. 505. Limitation on actions.
Sec. 506. Penalty for failure to timely provide required information.
Sec. 507. Actions by Securities and Exchange Commission.
TITLE VI—TRANSITION FROM COVERAGE FOR OLD-AGE AND
SURVIVORS INSURANCE BENEFITS UNDER TITLE II OF THE
SOCIAL SECURITY ACT
Sec. 601. Primary insurance amounts for transitional eligible individuals.
Sec. 602. Certification of covered status under the old-age, survivors, and dis-
ability insurance program.
Sec. 603. Reduction in FICA and SECA taxes with respect to eligible individ-
uals.
Sec. 604. Supplemental retirement benefits.
Sec. 605. Phased in increase in social security retirement age.
Sec. 606. Limitation in cost-of-living adjustments.
Sec. 607. Modification of CPI calculation for social security COLAs.
Sec. 608. Phased reduction in spousal benefits other than survivor’s benefits to
33 percent of primary insurance amount.
Sec. 609. Coverage of newly hired State and local employees.
Sec. 610. Adjustments in formula for determining primary insurance amount.
Sec. 611. Annual statement of accrued liability of the old–age and survivors in-
surance program.
TITLE VII—PROVISIONS RELATING TO FEDERAL CIVILIAN AND
MILITARY PERSONNEL
Sec. 701. Federal civilian and military personnel.
Sec. 702. Provisions relating to the continued operation of existing retirement
systems.
Sec. 703. Provisions relating to the new system.
TITLE VIII—SOCIAL SECURITY TRANSITION COMMISSION
Sec. 801. Establishment of Commission.
Sec. 802. Duties.
Sec. 803. Membership.
Sec. 804. Powers.
Sec. 805. Congressional consideration of recommendations.
Sec. 806. Definitions.
Sec. 807. Authorization of appropriations.
SEC. 2. DEFINITIONS.
For purposes of this Act—
(1) ACCOUNT
HOLDER.—The term ‘‘account
holder’’ means, with respect to any personal retire-
ment account, the individual for whose benefit such
account is maintained.
(2) BUSINESS DAY.—The term ‘‘business day’’
means any day other than a Saturday, Sunday, or
legal holiday in the area involved.
(3) COVERED EMPLOYER.—The term ‘‘covered
employer’’ means, for any calendar year, a person
for whom an eligible individual is engaged in em-
ployment during the year.
(4) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible
individual’’ means any individual who, as of January
1, 2000—
(A) is not entitled to an old-age insurance
benefit under section 202(a) of the Social Secu-
rity Act or to a disability insurance benefit
under section 223 of such Act, and
(B) has made the election under section
104(a).
(5) EMPLOYMENT.—The term ‘‘employment’’
has the meaning provided in section 210 of the So-
cial Security Act.
(6) MINIMUM ANNUITY AMOUNT; MINIMUM AN-
NUITY.—
(A) MINIMUM ANNUITY AMOUNT.—
(i) IN
GENERAL.—The term ‘‘mini-
mum annuity amount’’ means, as of any
date, the amount determined by the trust-
ee (under regulations issued by appropriate
regulatory agency) to be necessary to pur-
chase on such date an immediate annuity
which is a minimum annuity.
(ii) REDUCTION
TO
ACCOUNT
FOR
OLD-AGE
INSURANCE
BENEFITS.—In the
case of an eligible individual who is enti-
tled to old-age insurance benefits under
section 202 of the Social Security Act, the
minimum 
annuity 
amount 
determined
under clause (i) shall be reduced by the ac-
tuarial present value, as of the date re-
ferred to in clause (ii), of future old–age
insurance benefits payable to such individ-
ual under such section (determined by
using reasonable assumptions which shall
be prescribed by the Commission).
(iii) IMMEDIATE ANNUITY.—For pur-
poses of clause (i), the term ‘‘immediate
annuity’’ means an annuity—
(I) which is purchased with a sin-
gle premium or annuity consideration,
(II) the annuity starting date (as
defined in section 72(c)(4) of the In-
ternal Revenue Code of 1986) of
which commences no later than 1 year
from the date of the purchase of the
annuity, and
(III) which provides for a series
of substantially equal periodic pay-
ments (to be made not less frequently
than annually) during the annuity pe-
riod, subject to adjustment under sub-
paragraph (C).
(B) MINIMUM ANNUITY.—
(i) IN
GENERAL.—The term ‘‘mini-
mum annuity’’ means an annuity making
payments over the life (or life expectancy)
of the account holder which (on an annual
basis) equals $9,150.
(ii) JOINT
AND
SURVIVOR
ANNUITY
AND PRERETIREMENT SURVIVOR ANNUITY
REQUIREMENTS.—An annuity shall not be
treated as a minimum annuity within the
meaning of clause (i) unless the require-
ments of section 401(a)(11) of the Internal
Revenue Code of 1986 applicable to plans
are met with respect to such annuity.
(C) COST-OF-LIVING ADJUSTMENT.—
(i) IN GENERAL.—The Securities and
Exchange Commission shall—
(I) assume, in determining any
minimum annuity amount under sub-
paragraph (A), an annual adjustment
in the equal periodic payments re-
ferred 
to 
in 
subparagraph
(A)(iii)(III), and
(II) adjust annually after cal-
endar year 2000 the dollar amount
set forth in subparagraph (B)(i),
for increases in the cost of living in accord-
ance with regulations prescribed by the
Commission.
(ii) ADJUSTMENT METHOD.—The reg-
ulations shall provide for—
(I) in the case of assumptions
made pursuant to clause (i)(I), pro-
jected annual adjustments in the peri-
odic payments with respect to future
calendar years based on projected in-
creases in the Consumer Price Index
(published by the Bureau of Labor
Statistics) for the last calendar quar-
ter of each future calendar year over
such Index for the last calendar quar-
ter of the year in which the deter-
mination is made pursuant to sub-
paragraph (A)(i),
(II) in the case of adjustments
made pursuant to clause (i)(II), an
adjustment with respect to any cal-
endar year based on the increase in
such Consumer Price Index for the
calendar quarter ending September 30
of the preceding calendar year over
such Index for the calendar quarter
ending with September 30, 1999 (in
the case of adjustments made pursu-
ant to clause (i)(II)), and
(III) in either case, adjustment
procedures which are similar to the
procedures used to adjust benefit
amounts under section 215(i)(2)(A) of
the Social Security Act.
Any dollar amount in subparagraph (B)(i), as
in effect for any calendar year (taking into ac-
count any adjustments under this clause), shall
apply with respect to determinations under this
paragraph made during such calendar year of
minimum annuity amounts and of whether an
annuity is a minimum annuity.
(7) PERSONAL
RETIREMENT
ACCOUNT.—The
term ‘‘personal retirement account’’ has the meaning
provided in section 201.
(8) PRESCRIBED EMPLOYEE CONTRIBUTION.—
The term ‘‘prescribed employee contribution’’ means,
with respect to any eligible individual who is en-
gaged in employment for a covered employer, an
amount equal to 4.0 percent of the wages received
by such employee with respect to such employment.
(9) PRESCRIBED EMPLOYER CONTRIBUTION.—
The term ‘‘prescribed social security employer con-
tribution’’ means, with respect to a covered employer
for whom an eligible individual is engaged in em-
ployment, 4.0 percent of the wages paid by such em-
ployer to such individual with respect to employment
of such individual.
(10) PRESCRIBED
SELF-EMPLOYMENT
CON-
TRIBUTION.—The term ‘‘prescribed social security
self-employment contribution’’ means, with respect
to the self-employment income of an eligible individ-
ual for any calendar year, 8.0 percent of the amount
of such self-employment income for such calendar
year.
(11) QUALIFIED
FINANCIAL
INSTITUTION.—
The term ‘‘qualified financial institution’’ means any
financial institution if—
(A) such institution is an insured deposi-
tory institution (as defined in section 3(c)(2) of
the Federal Deposit Insurance Act) or an in-
sured credit union (as defined in section 102(7)
of the Federal Credit Union Act), or
(B) there is in effect a certification of the
financial institution by the Securities and Ex-
change Commission under title III.
(12) RETIREMENT AGE.—The term ‘‘retirement
age’’ has the meaning provided such term by section
216(l).
(13) SELF-EMPLOYMENT
INCOME.—The term
‘‘self-employment income’’ has the meaning provided
in section 211(b) of the Social Security Act.
(14) TRUSTEE-TO-TRUSTEE
TRANSFER.—The
term ‘‘trustee-to-trustee transfer’’ means a transfer
by the trustee from a personal retirement account
for the benefit of an individual to the trustee of an-
other such account for the benefit of such individual.
(15) WAGES.—The term ‘‘wages’’ has the
meaning provided in section 209 of the Social Secu-
rity Act.
TITLE 
I—CONTRIBUTIONS 
TO
PERSONAL RETIREMENT AC-
COUNTS
SEC. 101. PERSONAL RETIREMENT ACCOUNT PAYROLL DE-
DUCTION PROGRAMS.
(a) IN GENERAL.—Each person who is a covered em-
ployer for any calendar year shall have in effect through-
out such calendar year a personal retirement accounts
payroll deduction program for such person’s employees
who are eligible individuals.
(b) REQUIREMENTS.—For purposes of this title, the
term ‘‘personal retirement account payroll deduction pro-
gram’’ means a written program maintained by a covered
employer if—
(1) under such program, the prescribed em-
ployee contribution is deducted from the wages of
each employee who is an eligible individual and paid
as a contribution on behalf of the employee to a per-
sonal retirement account of such employee des-
ignated in accordance with section 102,
(2) under such program, the covered employer
makes timely payment of the amount so deducted as
a contribution to the designated personal retirement
account under regulations of the Securities and Ex-
change Commission applying the same principles re-
lating to the timeliness of payment as are applicable
under chapter 62 of the Internal Revenue Code of
1986 with respect to taxes under chapter 21 of such
Code,
(3) under such program, the covered employer
pays as a contribution to the personal retirement ac-
count, together with the contribution paid pursuant
to paragraph (2), the prescribed employer contribu-
tion with respect to the employee, and
(4) the employer receives no compensation for
the cost of administering such program.
(c) AMOUNT DEDUCTED MAY BE ACCUMULATED BY
EMPLOYER IN CERTAIN CASES.—If, under the terms of
the governing instruments creating a personal retirement
account selected under section 102, contributions below a
specified amount will not be accepted, the requirements
of subsection (b)(2) shall be treated as met if amounts
deducted from the wages of an employee who is an eligible
individual are accumulated by the covered employer and
paid to such account otherwise in accordance with sub-
section (b)(2) with reference to the first day on which the
accumulated amount exceeds such specified amount.
SEC. 102. DESIGNATION OF PERSONAL RETIREMENT AC-
COUNTS.
(a) IN GENERAL.—Except as provided in subsection
(b), the personal retirement accounts to which contribu-
tions with respect to any employee who is an eligible indi-
vidual are required to be paid under section 101 shall be
such an account designated by such employee to such em-
ployer not later than 10 business days after the date on
which such employee becomes an employee of such em-
ployer. Any such designation shall be made in such form
and manner as may be prescribed in regulations of the
Securities and Exchange Commission.
(b) DESIGNATION IN ABSENCE OF TIMELY DESIGNA-
TION BY EMPLOYEE.—In any case in which no timely des-
ignation of the personal retirement account is made, the
covered employer shall designate such account in accord-
ance with regulations of the Commission.
(c) SUBSEQUENT SUBSTITUTION OF ACCOUNTS.—
The Commission shall provide by regulation for subse-
quent designation of a personal retirement account by an
account holder in lieu of an account previously designated
by such account holder under this section.
SEC. 103. SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL.—In the case of an eligible individ-
ual who has self-employment income for any calendar
year, such individual shall make timely payments to a per-
sonal retirement account designated by such individual of
the prescribed self-employment contribution with respect
to such individual for such calendar year in accordance
with regulations of the Securities and Exchange Commis-
sion applying the same principles relating to timeliness of
payment as are applicable under chapter 62 of the Inter-
nal Revenue Code of 1986 with respect to taxes under
chapter 2 of such Code.
(b) DESIGNATION OF ACCOUNT.—The designation of
a personal retirement account for payment of prescribed
self-employment contributions shall be made in such form
and manner as may be prescribed in regulations of the
Securities and Exchange Commission.
SEC. 104. ELECTIVE PARTICIPATION.
(a) ELECTION FOR INCLUSION BY INDIVIDUALS.—
(1) IN GENERAL.—Any individual may, during
calendar year 1998, elect to be included in the defi-
nition of ‘‘eligible individual’’ under section 2(4), ir-
respective of whether such individual is (or may be
as of January 1, 2000) credited with one or more
quarters of coverage under section 213 of the Social
Security Act, by filing with the employer, the Social
Security Administration, and the Securities and Ex-
change Commission, in such form and manner as
shall be prescribed in regulations of the Administra-
tion (in consultation with the Commission), a writ-
ten and signed declaration of such individual’s inten-
tion to be treated as an eligible individual for pur-
poses of this title. Any such filing shall not be final
in the case of an individual who is engaged in em-
ployment as of December 31, 1998, unless a copy of
such filing is provided by the individual to the cov-
ered employer during such period.
(2) IRREVOCABILITY.—Any election under para-
graph (1) shall be irrevocable and shall be effective
with respect to wages paid, and self-employment in-
come derived, after December 31, 1999.
(3) SUBSEQUENT OPEN SEASONS.—The Com-
missioner of Social Security, in consultation with the
Securities and Exchange Commission, may provide
by regulation for subsequent periods of time during
which elections under paragraph (1) may be made
periodically (not more frequently that biennially), ef-
fective with respect to wages paid, and self-employ-
ment income derived, after one year after the close
of such periods.
SEC. 105. PENALTIES.
(a) FAILURE TO ESTABLISH PERSONAL RETIRE-
MENT ACCOUNT PAYROLL DEDUCTION PROGRAM.—Any
covered employer who fails to meet the requirements of
section 101 for any calendar year shall be subject to a
civil penalty of not to exceed—
(1) $250,000, in the case of an employer who
is an individual, or
(2) $500,000, in any other case.
(b) FAILURE TO MAKE DEDUCTIONS REQUIRED
UNDER PROGRAM.—Any covered employer who fails to
timely deduct in full the amount from the wages of an
employee who is an eligible individual as required under
an applicable personal retirement account payroll deduc-
tion program shall be subject to a civil penalty for each
such failure of not to exceed—
(1) $250,000, in the case of an employer who
is an individual, or
(2) $500,000, in any other case.
(c) FAILURE TO PAY DEDUCTED WAGES TO PER-
SONAL RETIREMENT ACCOUNT.—If an amount deducted
under a personal retirement account payroll deduction
program from the wages of an employee who is an eligible
individual is not timely paid in full to the designated per-
sonal retirement account in accordance with section 101,
the covered employer failing to make such payment—
(1) shall be subject to a civil penalty for each
such failure of not to exceed—
(A) $250,000, in the case of an employer
who is an individual, or
(B) $500,000, in any other case, and
(2) shall be liable to the employee for interest
on the unpaid amount at a rate equal to 10 percent-
age points in excess of the Federal short-term rate
under section 1274(d)(1) of the Internal Revenue
Code of 1986, calculated from the last day by which
such amount was required to be so paid to the date
on which such amount is paid into the designated
personal retirement account.
(d) FAILURE TO PAY PRESCRIBED SELF-EMPLOY-
MENT CONTRIBUTIONS TO PERSONAL RETIREMENT AC-
COUNT.—Any eligible individual failing to timely pay in
full a prescribed self-employment contribution to a des-
ignated personal retirement account as required under
section 103 shall be subject to a civil penalty for each such
failure of not to exceed $250,000, plus interest on the un-
paid amount at a rate equal to 10 percentage points in
excess of the Federal short-term rate under section
1274(d)(1) of the Internal Revenue Code of 1986, cal-
culated from the last day by which such amount was re-
quired to be so paid to the date on which such amount
is paid into the designated personal retirement account.
(e) RULES FOR APPLICATION OF SECTION.—
(1) PENALTIES ASSESSED BY SECURITIES AND
EXCHANGE COMMISSION.—Any civil penalty assessed
by this section shall be imposed by the Securities
and Exchange Commission and collected in a civil
action.
(2) COMPROMISES.—The Commission may com-
promise the amount of any civil penalty imposed by
this section.
(3) AUTHORITY TO WAIVE PENALTY IN CER-
TAIN CASES.—The Commission may waive the appli-
cation of this section with respect to any failure if
the Commission determines that such failure is due
to reasonable cause and not to intentional disregard
of rules and regulations.
TITLE II—PERSONAL
RETIREMENT ACCOUNTS
SEC. 201. GENERAL REQUIREMENTS FOR PERSONAL RE-
TIREMENT ACCOUNTS.
(a) IN GENERAL.—For purposes of this Act, the term
‘‘personal retirement account’’ means a trust created or
organized in the United States for the exclusive benefit
of an eligible individual or his beneficiaries, but only if
the written governing instrument creating the trust meets
the following requirements:
(1) No contribution may be made to such trust
unless—
(A) such contribution is made pursuant to
title I of this Act, subsection (c) or (d) of this
section, or section 401 of this Act, or
(B) such contribution is a trustee-to-trust-
ee transfer.
(2) The trustee is a qualified financial institu-
tion.
(3) The investment requirements of section 202
shall be met.
(4) The distribution limitations of section 203
shall be met.
(5) The insurance requirements of section 204
are met.
(6) The interest of an individual in the balance
in his account is nonforfeitable.
(7) The trustee makes an annual disclosure to
each beneficiary of all fees and other charges im-
posed by the trustee with respect to the trust.
(8) The trustee provides to the beneficiary—
(A) on a quarterly basis, an accounting of
all activity of the trust during the preceding
quarter, and
(B) on an annual basis, an accounting of
all activity of the trust during the preceding
year.
(b) AGGREGATION OF ACCOUNTS.—For purposes of
determining whether the requirements of sections 202 and
203 are met in a taxable year, a predecessor personal re-
tirement account and a successor personal retirement ac-
count of an account holder shall be treated as 1 account.
(c) CONTRIBUTIONS TO INDIVIDUAL’S NONWORKING
SPOUSE’S PERSONAL RETIREMENT ACCOUNT.—
(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
there shall be allowed as a deduction from gross in-
come qualified nonworking spousal contributions
made by such individual for the taxable year.
(2) MAXIMUM AMOUNT OF DEDUCTION.—The
amount allowable as a deduction under paragraph
(1) to any individual for any taxable year shall not
exceed—
(A) an amount equal to 5 percent of the
taxpayer’s adjusted gross income for the taxable
year, reduced (but not below zero) by
(B) the compensation of such individual’s
spouse that is includible in gross income for the
taxable year.
(3) INDIVIDUALS TO WHOM PARAGRAPH (1) AP-
PLIES.—Paragraph (1) shall apply to any individual
if—
(A) such individual files a joint return for
the taxable year, and
(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is greater than the compensa-
tion includible in the gross income of such indi-
vidual’s spouse for the taxable year.
(d) ADDITIONAL CONTRIBUTIONS TO INDIVIDUAL’S
OWN PERSONAL RETIREMENT ACCOUNT.—
(1) IN
GENERAL.—An individual may make
contributions to the personal retirement account of
the individual for the taxable year.
(2) MAXIMUM AMOUNT OF CONTRIBUTIONS.—
The amount allowable as a contribution under para-
graph (1) to any individual for any taxable year
shall not exceed the amount in effect under section
415(c)(1) of the Internal Revenue Code of 1986 (re-
lating to limitation on contribution to defined con-
tribution plans), determined by substituting ‘‘indi-
vidual’s’’ for ‘‘participant’s’’ in subparagraph (B) of
such section 415(c)(1).
SEC. 202. INVESTMENT REQUIREMENTS.
(a) IN GENERAL.—The investment requirements of
this section are met with respect to a trust only if—
(1) the risk limitations of subsection (b) are
met,
(2) no asset of the trust is—
(A) a life insurance contract (except as
provided in section 204), or
(B) a collectible (as defined in section
408(m) of the Internal Revenue Code of 1986)
other 
than 
a 
coin 
described 
in 
section
408(m)(3) of such Code,
(3) no asset of the trust is commingled with
other property except in a common trust fund or
common investment fund,
(4) no person borrows any money under or by
use of such trust or uses any portion of such trust
as security for a loan.
(b) RISK LIMITATIONS.—The risk limitations of this
subsection are met only if so much of the balance in the
trust as does not exceed the minimum annuity amount is
invested in common stock having a moderate or lower risk,
as determined under regulations which shall be prescribed
by the Securities and Exchange Commission, and forming
a portfolio designed to replicate the performance of a com-
monly recognized index comprised of common stock the
aggregate market value of which is a reasonably complete
representation of the United States equity markets.
SEC. 203. DISTRIBUTION REQUIREMENTS.
(a) IN GENERAL.—The distribution requirements of
this section are met with respect to a trust only if—
(1) the distribution timing requirements of sub-
section (b) are met, and
(2) the distribution amount requirements of
subsection (c) are met.
(b) TIMING REQUIREMENTS.—
(1) IN GENERAL.—The distribution timing re-
quirements of this subsection are met only if—
(A) no distribution may be made from the
trust before the date the account holder attains
retirement age, unless the balance in the trust
immediately after the distribution is not less
than the minimum annuity amount, and
(B) no distribution may be made from the
trust before the date the account holder attains
age 62.
(2) EXCEPTIONS.—Paragraph (1) shall not
apply to—
(A) any trustee-to-trustee transfer, and
(B) any distribution made to a beneficiary
(or to the estate of the employee) on or after
the death of the account holder.
(c) AMOUNT REQUIREMENTS.—
(1) IN GENERAL.—The distribution amount re-
quirements of this subsection are met only if no dis-
tribution may be made from the trust on or after the
date the account holder attains retirement age un-
less the aggregate amount of distributions for any
year does not exceed the amount which would be
payable to the account holder from the trust under
a minimum annuity.
(2) EXCEPTIONS.—Paragraph (1) shall not
apply to any distribution if—
(A) subsection (b)(1) does not apply to
such distribution,
(B) the balance in the trust immediately
after the distribution is not less than the mini-
mum annuity amount, or
(C) the distribution is used to purchase a
minimum annuity.
(d) CROSS REFERENCE.—
For penalty on trustee for failure of trust to meet
the distribution requirements of this section, see
section 207.
SEC. 204. INSURANCE REQUIREMENTS.
(a) IN GENERAL.—The insurance requirements of
this section are met with respect to a trust only if the
trustee maintains for each calendar year insurance on the
life of each account holder who—
(1) is married, or
(2) has at least one dependent child with re-
spect to whom the same requirements are met as are
applicable under section 202(d)(1)(B) of the Social
Security Act with respect to an application filed
under section 202(d) of such Act.
(b) REQUIRED COVERAGE.—Insurance meets the re-
quirements of subsection (a) only if such insurance pro-
vides for a benefit payable upon the account holder’s death
to the account holder’s spouse (if any) and to each depend-
ent child (if any) described in subsection (a). Each such
benefit shall be equal to at least the product derived by
multiplying the average indexed monthly earnings (as de-
fined in section 215(b) of the Social Security Act) of the
account holder by 36.
SEC. 205. PERSONAL RETIREMENT ACCOUNT EXEMPT
FROM INCOME TAX.
Any personal retirement account is exempt from tax-
ation under subtitle A of the Internal Revenue Code of
1986. Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section 511 of
such Code (relating to imposition of tax on unrelated busi-
ness income of charitable, etc. organizations).
SEC. 206. TAX TREATMENT OF DISTRIBUTIONS.
(a) IN GENERAL.—Except as otherwise provided in
this section, any amount paid or distributed out of a per-
sonal retirement account shall be included in the gross in-
come of the account holder for the taxable year in which
the payment or distribution is received. Notwithstanding
any other provision of law, the basis of the account holder
in such account shall be zero.
(b) EXCEPTION FOR AMOUNTS USED TO ACQUIRE
MINIMUM OR MORE GENEROUS IMMEDIATE ANNUITY.—
No portion of a payment or distribution out of a personal
retirement account shall be included in gross income so
long as a sufficient portion of such payment or distribu-
tion is used within a reasonable period to acquire an im-
mediate annuity which provides payments which, on an
annual basis, are not less than the payments under a mini-
mum annuity purchased on the date of such acquisition.
(c) EXCEPTION FOR TRANSFERS INCIDENT TO DI-
VORCE.—The transfer of an individual’s interest in a per-
sonal retirement account to his spouse or former spouse
under a divorce or separation instrument described in sub-
paragraph (A) of section 71(b)(2) of the Internal Revenue
Code of 1986 is not to be considered a taxable transfer
for purposes of subtitle A of the Internal Revenue Code
of 1986, and such interest at the time of the transfer is
to be treated as a personal retirement account of such
spouse, and not of such individual. Thereafter such spouse
shall, for purposes of this title, be treated as the account
holder of such account.
SEC. 207. PENALTY ON TRUSTEE FOR FAILURE OF PER-
SONAL RETIREMENT ACCOUNT TO MEET RE-
QUIREMENT.
For purposes of section 4975 of the Internal Revenue
Code of 1986 (relating to tax on prohibited trans-
actions)—
(1) a personal retirement account shall be treat-
ed as a plan to which such section applies, and
(2) the term ‘‘prohibited transaction’’ includes
any failure of a personal retirement account to meet
any requirement of section 202 or 203.
SEC. 208. NOTIFICATION REGARDING INSURED DEPOSI-
TORY INSTITUTIONS.
(a) NOTIFICATION OF INSURED STATUS.—The rel-
evant Federal agency shall notify the Securities and Ex-
change Commission of the identity of each financial insti-
tution which is an insured depository institution or an in-
sured credit union not later than—
(1) in the case of financial institutions which
are insured depository institutions or insured credit
unions on the date of the enactment of this Act, 60
days after such date, or
(2) in any other case, 60 days after the date on
which the institution becomes an insured depository
institution or an insured credit union.
(b) NOTIFICATION OF TERMINATION OF INSURED
STATUS.—The relevant Federal agency shall notify the
Commission of the termination of a financial institution’s
status as an insured depository institution or an insured
credit union not later than the effective date of the termi-
nation of such status.
(c) RELEVANT FEDERAL AGENCY.—For purposes of
this section, the term ‘‘relevant Federal agency’’ means—
(1) in the case of an insured credit union (as
defined in section 101(7) of the Federal Credit
Union Act), the National Credit Union Administra-
tion Board, and
(2) in any other case, the appropriate Federal
banking agency (as defined in section 3(q) of the
Federal Deposit Insurance Act).
SEC. 208. REPORTS.
(a) IN GENERAL.—The trustee of a personal retire-
ment account shall make such reports regarding such ac-
count to the Securities and Exchange Commission and to
the account holder with respect to contributions (and the
years to which they relate), distributions, and such other
matters as the Commission may require under regulations.
(b) FILING AND FURNISHING OF REPORTS.—The re-
ports required by this section—
(1) shall be filed at such time and in such man-
ner as the Commission prescribes in the regulations
prescribed pursuant to subsection (a), and
(2) shall be furnished to individuals—
(A) not later than January 31 of the cal-
endar year following the calendar year to which
such reports relate, and
(B) in such manner as the Commission
prescribes in such regulations.
SEC. 210. STUDY ON IMPLEMENTATION OF EARLY RETIRE-
MENT OPTIONS.
(a) IN GENERAL.—As soon as practicable after the
date of the enactment of this Act, the Securities and Ex-
change Commission, in consultation with the Commis-
sioner of Social Security, shall conduct a study of the best
means of providing for options under which distributions
from a personal retirement account established under this
Act may commence in advance of the date on which the
account holder attains retirement age.
(b) MATTERS TO BE STUDIED.—The study con-
ducted pursuant to subsection (a) shall consider specifi-
cally—
(1) the extent to which minimum levels of as-
sets held in the account may need to be required as
a prerequisite for distribution of assets from the ac-
count at an age earlier than retirement age, and
(2) possible forms of distribution to which such
early distributions might be restricted,
in order to minimize any adverse affects that such early
distributions might have on retirement income security
and to forestall any likelihood of reliance by the account
holder in the future on other Federal or State benefit pro-
grams for financial support.
(c) REPORTS.—Not later than December 31 of each
calendar year beginning after the date of the enactment
of this Act and ending with 2003, the Commission shall
transmit to the President and to each House of the Con-
gress interim reports on the progress of the study being
conducted under subsection (a). Not later than December
31, 2004, the Commission shall submit to the President
and to each House of the Congress a final report on the
study conducted under subsection (a) setting forth the
Commission’s conclusions and recommendations. The re-
port shall include any recommendations for legislation
that the Commission considers necessary or appropriate,
together with suggested legislative language necessary to
carry out such recommendations.
TITLE 
III—CERTIFICATION 
OF
FINANCIAL 
INSTITUTIONS
OTHER THAN INSURED DE-
POSITORY INSTITUTIONS
SEC. 301. CERTIFICATION OF FINANCIAL INSTITUTIONS BY
THE SECURITIES AND EXCHANGE COMMIS-
SION.
(a) IN GENERAL.—Any financial institution may
apply to the Securities and Exchange Commission (in such
form and manner as shall be provided by the Commission
by regulation) for certification under this title.
(b) REVIEW REQUIREMENTS.—In reviewing any ap-
plication for certification under this title and determining
whether to approve the application for certification, the
Commission shall consider the following factors:
(1) The financial history and condition of the
financial institution.
(2) The adequacy of the financial institution’s
capital structure.
(3) The future earnings prospects of the finan-
cial institution.
(4) The general character and fitness of the
management of the financial institution.
(5) The risk presented by such financial institu-
tion to the Social Security Savings Guaranty Trust
Fund.
(6) 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.
(7) Whether the financial institution’s corporate
powers are consistent with the purposes of this Act.
(c) NOTICE OF DENIAL OF APPLICATION FOR CER-
TIFICATION.—If the Commission votes to deny any appli-
cation for certification by any financial institution, the
Commission shall promptly notify the financial institution
of the denial of such application, giving specific reasons
in writing for the Commission’s determination with ref-
erence to the factors described 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.
SEC. 302. ACCESS TO RECORDS.
(a) IN GENERAL.—The Securities and Exchange
Commission may from time to time require any certified
financial institution to file such reports as the Commission
may deem advisable for purposes of this title.
(b) REPORTS BY CERTIFIED FINANCIAL INSTITU-
TIONS.—
(1) IN GENERAL.—Each such report shall con-
tain a declaration by the president, by a vice presi-
dent, by the cashier or the treasurer, or by any other
officer designated by the board of directors or trust-
ees of the reporting certified financial institution to
make such declaration, that the report is true and
correct to the best of his knowledge and belief. The
correctness of such report shall be attested by the
signatures of at least two directors or trustees of the
reporting certified financial institution other than
the officer making such declaration, with a declara-
tion that the report has been examined by them and
to be the best of their knowledge and belief is true
and correct. At the time of making such reports
each certified financial institution shall furnish to
the Commission a copy thereof containing such
signed declaration and attestations. Nothing in this
paragraph shall be construed to preclude any Fed-
eral or State agency or instrumentality from requir-
ing a certified financial institution under its jurisdic-
tion to make additional reports at any time.
(2) INFORMATION
TO
BE
PROVIDED.—In the
reports required to be made by paragraph (1), each
certified financial institution shall report the total
amount of the liability of the institution for balances
maintained in personal retirement accounts for
which such institution serves as trustee.
(3) DATA COLLECTIONS.—In addition to or in
connection with any other report required under this
subsection, the Commission shall take such action as
may be necessary to ensure that—
(A) each certified financial institution
maintains; and
(B) the Commission receives on a regular
basis from such institution,
information on the total amount of all liability of the
institution for balances maintained in personal re-
tirement accounts for which such institution serves
as trustee. In prescribing reporting and other re-
quirements for the collection of actual and accurate
information pursuant to this paragraph, the Com-
mission shall minimize the regulatory burden im-
posed upon certified financial institutions while tak-
ing into account the benefit of the information to the
Commission in carrying out its functions under this
title.
SEC. 303. REVOCATION OF CERTIFICATION.
(a) VOLUNTARY REVOCATION.—Any financial insti-
tution may revoke such institution’s status as a certified
financial institution if such institution provides written no-
tice to the Securities and Exchange Commission of the in-
stitution’s intent to revoke such status not less than 90
days before the effective date of such revocation.
(b) INVOLUNTARY REVOCATION.—
(1) NOTICE TO PRIMARY REGULATOR.—
(A) IN GENERAL.—If the Commission de-
termines that—
(i) a certified financial institution or
the directors or trustees of a certified fi-
nancial institution have engaged or are en-
gaging in unsafe or unsound practices in
conducting the business of the institution,
(ii) a certified financial institution is
in an unsafe or unsound condition to con-
tinue operations as a certified financial in-
stitution, or
(iii) a certified financial institution or
the directors or trustees of the institution
have violated any applicable law, regula-
tion, order, condition imposed in writing by
the Commission in connection with the ap-
proval of any application or other request
by the institution, or written agreement
entered into between the institution and
the Commission,
and the Commission determines that any unsafe
or unsound practice or condition or any viola-
tion specified in such notice requires the revoca-
tion of the certified status of the certified finan-
cial institution, the Commission shall take the
actions required under subparagraph (B).
(B) REQUIRED ACTIONS.—If the Commis-
sion makes the determination under subpara-
graph (A) with respect to a certified financial
institution, the Commission shall—
(i) serve written notice to the certified
financial institution of the Commission’s
intention to revoke the certified status of
the institution;
(ii) provide the certified financial in-
stitution with a statement of the charges
on the basis of which the determination to
revoke such institution’s certified status
was made; and
(iii) notify the certified financial insti-
tution of the date (not less than 30 days
after notice under this paragraph) and
place for a hearing before the Commission
(or any person designated by the Commis-
sion) with respect to the revocation of the
institution’s certified status.
(2) HEARING; REVOCATION.—If, on the basis of
the evidence presented at a hearing before the Com-
mission (or any person designated by the Commis-
sion for such purpose), in which all issues shall be
determined on the record pursuant to section 554 of
title 5, United States Code, and the written findings
of the Commission (or such person) with respect to
such evidence (which shall be conclusive), the Com-
mission finds that any unsafe or unsound practice or
condition or any violation specified in the notice to
a certified financial institution under paragraph (1)
has been established, the Commission may issue an
order revoking the certified status of such institution
effective as of a date subsequent to such finding.
(3) APPEARANCE; CONSENT TO REVOCATION.—
Unless the institution appears at the hearing by a
duly authorized representative, it shall be deemed to
have consented to the revocation of its status as a
certified financial institution and revocation of such
status thereupon may be ordered.
(4) PUBLICATION
OF
NOTICE
OF
REVOCA-
TION.—The Commission may publish notice of such
revocation and the institution shall give notice of
such revocation to the account holder of each per-
sonal retirement account for which the institution
serves as trustee at his last address of record on the
books of the institution, in such manner and at such
time as the Commission may find to be necessary
and may order for the protection of account holders.
(5) TEMPORARY
CONTINUANCE
OF
CERTIFI-
CATION AS OF REVOCATION.—After the Commission
has determined under the provisions of this sub-
section that the certified status of any financial in-
stitution is to be revoked, the certification of the in-
stitution shall continue for a period of at least 6
months or up to 2 years, within the discretion of the
Commission. No further contributions may be made
to any personal retirement account for which the in-
stitution serves as trustee after the date of such de-
termination of the Commission, and the institution
shall not advertise or hold itself out as being a quali-
fied financial institution unless in the same connec-
tion it shall also state with equal prominence that
such contributions may not be made. Such institu-
tion shall, in all other respects, be subject to the du-
ties and obligations of a qualified financial institu-
tion for the period referred to in the first sentence
of this paragraph from the date of such revocation,
and the Commission shall have the same powers and
rights with respect to such institution as in the case
of a qualified financial institution.
(6) TEMPORARY
SUSPENSION
OF
CERTIFI-
CATION.—
(A) IN GENERAL.—If the Commission ini-
tiates a revocation proceeding under paragraph
(1), and the Commission, after consultation
with any appropriate regulatory agency with ju-
risdiction over the financial institution, finds
that the institution has no tangible capital
under the capital guidelines or regulations of
regulatory agency, the Commission may issue a
temporary order suspending certification of the
institution.
(B) EFFECTIVE
PERIOD
OF
TEMPORARY
ORDER.—Any order issued under subparagraph
(A) shall become effective not earlier than 10
days from the date of service upon the institu-
tion and, unless set aside, limited, or suspended
by a court in proceedings authorized under this
paragraph, such temporary order shall remain
effective and enforceable until an order of the
Commission under paragraph (2) becomes final
or until the Commission dismisses the proceed-
ings under paragraph (2).
(C) JUDICIAL REVIEW.—Before the close
of the 10-day period beginning on the date any
temporary order has been served upon the insti-
tution under subparagraph (A), the institution
may apply to the United States District Court
for the District of Columbia, or the United
States district court for the judicial district in
which the home office of the institution is lo-
cated, for an injunction setting aside, limiting,
or suspending the enforcement, operation, or ef-
fectiveness of such order, and such court shall
have jurisdiction to issue such injunction.
(D) PUBLICATION OF ORDER.—The insti-
tution shall give notice of such order to the ac-
count holder of each personal retirement ac-
count for which the institution serves as trustee
in such manner and at such times as the Com-
mission may find to be necessary and may
order for the protection of account holders.
(E) NOTICE BY COMMISSION.—If the Com-
mission determines that the institution has not
substantially complied with the notice to con-
tributors required by the Commission, the Com-
mission may provide such notice in such man-
ner as the Commission may find to be nec-
essary and appropriate.
(7) FINAL
DECISIONS
TO
REVOKE
CERTIFI-
CATION.—Any decision by the Commission to—
(A) issue a temporary order revoking cer-
tification; or
(B) issue a final order revoking certifi-
cation;
shall be made by the Commission and may not be
delegated.
(8) JUDICIAL REVIEW.—Any party to any pro-
ceeding under this subsection to which a financial
institution is a party may obtain a review of any
order served pursuant to this subsection by the filing
in the court of appeals of the United States for the
circuit in which the home office of the financial in-
stitution is located, or in the United States Court of
Appeals for the District of Columbia Circuit, within
30 days after the date of service of such order, a
written petition praying that the order of the Com-
mission 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 there-
upon the Commission 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 paragraph shall not, unless specifically
ordered by the court, operate as a stay of any order
issued by the Commission.
TITLE 
IV—PERSONAL 
RETIRE-
MENT ACCOUNT INSURANCE
SEC. 401. GUARANTEES AND SUPPLEMENTAL MINIMUM
BENEFIT PAYMENTS.
(a) DISTRIBUTIONS FROM PERSONAL RETIREMENT
ACCOUNTS GUARANTEED.—In any case in which the Se-
curities and Exchange Commission declares an insurable
event with respect to a qualified financial institution serv-
ing as trustee of a personal retirement account, subject
to the limitations contained in subsection (b), the Commis-
sion shall guarantee, in accordance with this section, the
timely distribution of the balance in such account to the
account holder in accordance with the terms governing
such account and the provisions of this Act.
(b) LIMITATION.—The amount of any account bal-
ance, the distribution of which is subject to the Commis-
sion’s guarantee under subsection (a), shall not exceed the
minimum annuity amount.
(c) AGGREGATE LIMIT ON AMOUNT GUARANTEED.—
Notwithstanding the preceding provisions of this section,
no person shall receive from the Commission, pursuant to
a guarantee by the Commission with respect to all per-
sonal retirement accounts for which such person is the ac-
count holder, an amount which, in the aggregate, exceeds
the minimum annuity amount.
(d) INSURABLE EVENT.—For purposes of subsection
(a), any of the following shall constitute an insurable event
with respect to a qualified financial institution serving as
trustee of a personal retirement account:
(1) the termination of the qualified status of a
the institution;
(2) inability of the qualified financial institution
to make full distributions of the balance in the ac-
count when due; and
(3) termination of the account under section
405.
(e) MINIMUM DISTRIBUTION LEVEL GUARANTEE.—
In addition to the guarantee provided under subsection
(a), the Commission shall guarantee a minimum distribu-
tion from the account as of the normal retirement date
in the amount of the minimum annuity amount, notwith-
standing that the balance in the account as of such date
is less than the minimum annuity amount, if—
(1) the account holder was not credited with
any quarters of coverage under section 213 of the
Social Security Act as of January 1, 2000,
(2) as of the normal retirement date, no dis-
tributions have been made by the individual from
such account holder’s personal retirement account,
(3) the Commission determines that the failure
of the balance in the account to attain the level of
the minimum annuity amount as of the normal re-
tirement date is due to inadvertent and substantial
investment losses occurring during the 90-day period
ending with such date.
(f) ALTERNATIVE GUARANTEE ARRANGEMENTS.—
The Commission shall also provide for a range of alter-
native guarantee arrangements providing for timely dis-
tribution of all, or a larger portion, of the balance in the
personal retirement account to the account holder, which
may be elected by the account holder upon payment to
the commission of supplemental premiums.
(g) SUBSTITUTION OF PRIVATE INSURANCE.—The
Commission shall provide by regulation for substitution,
at the election of the account holder, of private insurance
secured by the account holder or by the trustee of the ac-
count holder’s personal retirement account, providing for
a guarantee of timely distribution of the balance in the
account to the account holder, which is at least equivalent
to the guarantee provided for under subsection (a)
(h) PAYMENT OF GUARANTEES.—To the extent that
amounts subject to a guarantee provided for under sub-
section (a), (e), (f), or (g) are not payable from the per-
sonal retirement account, such amounts shall be payable
from the Social Security Savings Insurance Trust Fund.
(i) ENTITLEMENT
TO SUPPLEMENTAL MINIMUM
BENEFIT PAYMENT TO ACCOUNT.—
(1) IN GENERAL.—In any case in which—
(A) an account holder attains retirement
age and, as of the normal retirement date, is a
fully insured individual (as defined in section
214(a) of the Social Security Act),
(B) as of the normal retirement date, no
distributions have been made by the individual
from such account holder’s personal retirement
account,
(C) as of the normal retirement date, the
balance in the personal retirement account (be-
fore any distributions on such date) is less than
the minimum annuity amount, and
(D) the guarantee under subsection (e)
does not apply with respect to the balance in
the personal retirement account,
the account holder, upon application to the Commis-
sion filed by the account holder or the trustee of the
account on or after the normal retirement date and
in such form and manner as shall be prescribed by
the Commission, shall be entitled to a supplemental
minimum benefit payment to such account. Upon re-
ceipt of such application, the Commission shall cer-
tify to the Secretary of the Treasury the amount of
such payment, and the Secretary shall pay the
amount of such payment to such account in accord-
ance with such certification from funds otherwise
available in the general fund of the Treasury.
(2) AMOUNT OF SUPPLEMENTAL MINIMUM BEN-
EFIT
PAYMENT.—The amount of a supplemental
minimum benefit payment payable to an eligible in-
dividual’s account under paragraph (1) is the excess
(if any) of—
(A) the minimum annuity amount as of
the normal retirement date, over
(B) the balance in such account as of such
date.
(j) PROTECTION FROM ASSIGNMENT
OR ALIEN-
ATION.—Any amount subject to any guarantee provided
for under subsection (a), (e), (f), or (g) and any
supplmental minimum benefit payment under subsection
(i) may not be assigned or alienated.
(k) NORMAL RETIREMENT DATE.—For purposes of
this section, the term ‘‘normal retirement date’’ means,
in connection with an account holder, the date on which
the account holder attains retirement age (or, if such date
is not a business day, the date which is the first business
day thereafter).
SEC. 402. ASSESSMENTS OF QUALIFIED FINANCIAL INSTI-
TUTIONS BY THE COMMISSION.
(a) RISK-BASED ASSESSMENT SYSTEM.—
(1) RISK-BASED
ASSESSMENT
SYSTEM
RE-
QUIRED.—The Securities and Exchange Commission
shall, by regulation, establish a risk-based assess-
ment system for qualified financial institutions serv-
ing as trustee of a personal retirement account.
(2) PRIVATE REINSURANCE AUTHORIZED.—In
carrying out this section, the Commission may—
(A) obtain private reinsurance covering not
more than 10 percent of any loss the Commis-
sion incurs with respect to a qualified financial
institution serving as trustee of a personal re-
tirement account; and
(B) base that institution’s semiannual as-
sessment (in whole or in part) on the cost of
the reinsurance.
(3) RISK-BASED
ASSESSMENT
SYSTEM
DE-
FINED.—For purposes of this section, the term
‘‘risk-based assessment system’’ means a system for
calculating a qualified financial institution’s semi-
annual assessment based on—
(A) the probability that the Social Security
Savings Guarantee Trust Fund will incur a loss
with respect to the institution, taking into con-
sideration the risks attributable to—
(i) different categories and concentra-
tions of assets;
(ii) different categories and concentra-
tions of liabilities, both insured and unin-
sured, contingent and noncontingent; and
(iii) any other factors the Commission
determines are relevant to assessing such
probability;
(B) the likely amount of any such loss; and
(C) the revenue needs of the Trust Fund.
(4) SEPARATE
ASSESSMENT
SYSTEMS.—The
Commission may establish separate risk-based as-
sessment systems for large and small qualified finan-
cial institutions.
(b) SETTING ASSESSMENTS.—
(1) ACHIEVING AND MAINTAINING DESIGNATED
RESERVE RATIO.—
(A) IN GENERAL.—The Commission shall
set semiannual assessments for qualified finan-
cial institutions—
(i) to maintain the reserve ratio of the
Trust Fund at the designated reserve
ratio; or
(ii) if the reserve ratio is less than the
designated reserve ratio, to increase the re-
serve ratio to the designated reserve ratio
as provided in subsection (c).
(B) FACTORS
TO
BE
CONSIDERED.—In
carrying out subparagraph (A), the Commission
shall consider the Trust Fund’s—
(i) expected operating expenses,
(ii) case resolution expenditures and
income,
(iii) the effect of assessments on earn-
ings and capital of qualified financial insti-
tutions, and
(iv) any other factors that the Com-
mission may deem appropriate.
(C) MINIMUM
ASSESSMENT.—The semi-
annual assessment for each qualified financial
institution shall be not less than $1,000.
(D) DESIGNATED
RESERVE
RATIO
DE-
FINED.—The designated reserve ratio of the
Trust Fund for each year shall be—
(i) 1.25 percent of so much of the
total of the estimated balances in personal
retirement accounts as is subject to the
Commission’s guarantee under this title, in
the aggregate; or
(ii) a higher percentage of estimated
balances in such accounts that the Com-
mission determines to be justified for that
year by circumstances raising a significant
risk of substantial future losses to the
Trust Fund.
(2) NOTICE OF ASSESSMENTS.—The Commis-
sion shall notify each qualified financial institution
of that institution’s semiannual assessment.
(3) SPECIAL
RULE
UNTIL
THE
TRUST
FUND
ACHIEVES
THE
DESIGNATED
RESERVE
RATIO.—
Until the Trust Fund achieves the designated re-
serve ratio, the Commission may provide for uniform
percentage increases in assessments on qualified fi-
nancial institutions under the risk-based assessment
system authorized under subsection (a) to not more
than 10 basis points above the assessments on quali-
fied financial institutions under that system which
would be necessary, if the Trust Fund had achieved
the designated reserve ratio, to maintain the reserve
ratio of the Trust Fund at the designated reserve
ratio.
(c) SPECIAL RULE FOR RECAPITALIZING UNDER-
CAPITALIZED TRUST FUND.—
(1) IN GENERAL.—If the reserve ratio of the
Trust Fund is less than the designated reserve ratio
under subsection (b)(1)(D), the Commission shall
set semiannual assessment rates for qualified finan-
cial institutions—
(A) that are sufficient to increase the re-
serve ratio for the Trust Fund to the des-
ignated reserve ratio not later than 1 year after
such rates are set; or
(B) in accordance with a schedule promul-
gated by the Commission under paragraph (2).
(2) RECAPITALIZATION SCHEDULE.—For pur-
poses of paragraph (1)(B), the Commission shall by
regulation promulgate a schedule that specifies, at
semiannual intervals, target reserve ratios for the
Trust Fund, culminating in a reserve ratio that is
equal to the designated reserve ratio not later than
15 years after the date on which the schedule is im-
plemented.
(d) SEMIANNUAL PERIOD DEFINED.—For purposes
of this section, the term ‘‘semiannual period’’ means a pe-
riod beginning on January 1 of any calendar year and end-
ing on June 30 of the same year, or a period beginning
on July 1 of any calendar year and ending on December
31 of the same year.
(e) RECORDS TO BE MAINTAINED.—Each qualified
financial institution shall maintain all records that the
Commission may require for verifying the correctness of
the institution’s semiannual assessments. No qualified fi-
nancial institution shall be required to retain those records
for that purpose for a period of more than 5 years from
the date of the filing of any certified statement, except
that when there is a dispute between the qualified finan-
cial institution and the Commission over the amount of
any assessment, the institution shall retain the records
until final determination of the issue.
(f) EMERGENCY SPECIAL ASSESSMENTS.—In addi-
tion to the other assessments on qualified financial institu-
tions under this section, the Commission may impose one
or more special assessments on qualified financial institu-
tions in an amount determined by the Commission if the
amount of any such assessment is necessary—
(1) to provide sufficient assessment income to
repay amounts borrowed from the Secretary of the
Treasury under section 403(c) amounts due during
the period with respect to which such assessment is
imposed; or
(2) for any other purpose the Commission may
deem necessary.
(g) CERTIFIED STATEMENTS; PAYMENTS.—
(1) CERTIFIED STATEMENTS REQUIRED.—
(A) IN GENERAL.—Each qualified financial
institution shall file with the Commission a cer-
tified statement containing such information as
the Commission may require for determining
the institution’s semiannual assessment.
(B) FORM OF CERTIFICATION.—The cer-
tified statement required under subparagraph
(A) shall—
(i) be in such form and set forth such
supporting information as the Commission
shall prescribe; and
(ii) be certified by the president of the
qualified financial institution or any other
officer designated by its board of directors
or trustees that to the best of his or her
knowledge and belief, the statement is
true, correct and complete, and in accord-
ance with this Act and regulations issued
hereunder.
(2) PAYMENTS REQUIRED.—
(A) IN GENERAL.—Each qualified financial
institution shall pay to the Commission the
semiannual assessment imposed under sub-
section (b).
(B) FORM OF PAYMENT.—The payments
required under subparagraph (A) shall be made
in such manner and at such time or times as
the Commission shall prescribe by regulation.
(3) NEWLY INSURED INSTITUTIONS.—To facili-
tate the administration of this section, the Commis-
sion may waive the requirements of paragraphs (1)
and (2) for the semiannual period in which a finan-
cial institution becomes a qualified financial institu-
tion.
(4) PENALTY
FOR
FAILURE
TO
MAKE
ACCU-
RATE CERTIFIED STATEMENT.—
(A) FIRST TIER.—Any qualified financial
institution which—
(i) maintains procedures reasonably
adapted to avoid any inadvertent error
and, unintentionally and as a result of
such an error, fails to submit the certified
statement under paragraph (1) within the
period of time required under paragraph
(1) or submits a false or misleading
cer-
tified statement; or
(ii) submits the statement at a time
which is minimally after the time required
in such paragraph,
shall be subject to a penalty of not more than
$2,000 for each day during which such failure
continues or such false and misleading informa-
tion is not corrected. The institution shall have
the burden of proving that an error was inad-
vertent or that a statement was inadvertently
submitted late.
(B) SECOND TIER.—Any qualified finan-
cial institution which fails to submit the cer-
tified statement under paragraph (1) within the
period of time required under paragraph (1) or
submits a false or misleading certified state-
ment in a manner not described in subpara-
graph (A) shall be subject to a penalty of not
more than $20,000 for each day during which
such failure continues or such false and mis-
leading information is not corrected.
(C) THIRD
TIER.—Notwithstanding sub-
paragraphs (A) and (B), if any qualified finan-
cial institution knowingly or with reckless dis-
regard for the accuracy of any certified state-
ment described in paragraph (1) submits a false
or misleading certified statement under para-
graph (1), the Commission may assess a pen-
alty of not more than $1,000,000 or not more
than 1 percent of the total assets of the institu-
tion, whichever is less, per day for each day
during which the failure continues or the false
or misleading information in such statement is
not corrected.
(h) PENALTIES FOR LATE PAYMENT.—If any assess-
ment or penalty under this section is not paid when it is
due the Commission is authorized to assess a late payment
charge of not more than 100 percent of the payment which
was not timely paid. The preceding sentence shall not
apply to any payment made within 60 days after the date
on which a payment is due, if before such date, the person
required to make such payment obtains a waiver from the
Commission based upon a showing of substantial hardship
arising from the timely payment. The Commission is au-
thorized to grant a waiver under this subsection upon ap-
plication made by such person, but the Commission may
not grant a waiver if it appears that such person will be
unable to make the payment within 60 days after the date
on which it is due. If any payment is not made by the
last date prescribed for a payment, interest on the amount
of such payment at the rate imposed under section
6601(a) of the Internal Revenue Code of 1986 (relating
to interest on underpayment, nonpayment, or extensions
of time for payment of tax) shall be paid for the period
from such last date to the date paid.
(i) CIVIL ACTION.—If any person required to make
such payment fails to make the payment when due, the
Commission is authorized to bring a civil action in any
district court of the United States within the jurisdiction
of which the assets of the personal retirement account are
located, the account is administered, or in which a defend-
ant resides or is found for the recovery of the amount of
the unpaid amount (including penalties and interest), and
process may be served in any other district. The district
courts of the United States shall have jurisdiction over ac-
tions brought under this subsection by the Commission
without regard to the amount in controversy.
(j) GUARANTEE PRESERVED.—The Commission shall
not cease its guarantee on account of the failure of any
person to pay any amount when due under this section.
SEC. 403. ESTABLISHMENT OF SOCIAL SECURITY SAVINGS
INSURANCE TRUST FUND.
(a) ESTABLISHMENT.—There is established on the
books of the Treasury of the United States a Social Secu-
rity Savings Insurance Trust Fund to be used by the Se-
curities and Exchange Commission in carrying out its du-
ties under this title. Whenever in this title reference is
made to the term ‘‘Trust Fund’’ the reference shall be
considered to refer to the Trust Fund established under
this subsection.
(b) FLOW OF FUNDS.—
(1) CREDITS
TO
TRUST
FUND.—The Trust
Fund shall be credited with the appropriate portion
of—
(A) funds borrowed under subsection (c),
(B) assessments, penalties, and interest
collected under this title,
(C) earnings on investments of the Trust
Fund or on assets credited to the Trust Fund
under this subsection,
(D) attorney’s fees awarded to the Com-
mission, and
(E) receipts from any other operations
under this title.
(2) DEBITS
FROM
TRUST
FUND.—Subject to
the provisions of subsection (a), the Trust Fund
shall be available—
(A) for making such payments as the Com-
mission determines are necessary to pay
amounts guaranteed under section 301,
(B) to purchase assets from a qualified fi-
nancial institution ceasing to be a qualified fi-
nancial institution when the Commission deter-
mines such purchase will best protect the inter-
ests of the Commission,
(C) to repay to the Secretary of the Treas-
ury such sums as may be borrowed (together
with interest thereon) under subsection (c),
(D) to pay the operational and administra-
tive expenses of the Commission under this
title, including reimbursement of the expenses
incurred by the Department of the Treasury in
maintaining the funds, and the Comptroller
General in auditing the Commission, and
(E) to pay to account holders the amounts
which are guaranteed by the Commission under
this title with respect to any personal retire-
ment account maintained by a financial institu-
tion which is unable to pay such amounts when
due.
(3) INVESTMENT OF TRUST FUND ASSETS.—
Whenever the Commission determines that the mon-
eys of the Trust Fund are in excess of current
needs, it may request the investment of such
amounts as it determines advisable by the Secretary
of the Treasury in obligations issued or guaranteed
by the United States but, until all borrowings under
subsection (c) have been repaid, the obligations in
which such excess moneys are invested may not yield
a rate of return in excess of the rate of interest pay-
able on such borrowings.
(c) ISSUANCE OF OBLIGATIONS.—The Commission is
authorized to issue to the Secretary of the Treasury notes
or other obligations in an aggregate amount of not to ex-
ceed $100,000,000, in such forms and denominations,
bearing such maturities, and subject to such terms and
conditions as may be prescribed by the Secretary of the
Treasury. Such notes or other obligations shall bear inter-
est at a rate determined by the Secretary of the Treasury,
taking into consideration the current average market yield
on outstanding marketable obligations of the United
States of comparable maturities during the month preced-
ing the issuance of such notes or other obligations of the
Commission. The Secretary of the Treasury is authorized
and directed to purchase any notes or other obligations
issued by the Commission under this subsection, and for
that purpose he is authorized to use as a public debt trans-
action the proceeds from the sale of any securities issued
under chapter 31 of title 31, United States Code, and the
purposes for which securities may be issued under that
chapter are extended to include any purchase of such
notes and obligations. The Secretary of the Treasury may
at any time sell any of the notes or other obligations ac-
quired by him under this subsection. All redemptions, pur-
chases, and sales by the Secretary of the Treasury of such
notes or other obligations shall be treated as public debt
transactions of the United States.
(d) DEDICATED AMOUNTS.—Amounts in the Trust
Fund may be used only for the purposes for which the
Trust Fund was established and may not be used to make
loans to (or on behalf of) any other fund or to finance
any other activity of the Commission. None of the funds
borrowed under subsection (c) may be used to make loans
to (or on behalf of) any other fund.
(e) VOTING OF STOCK.—Any stock in a person liable
to the Commission under this title which is paid to the
Commission by such person or a member of such person’s
controlled group in satisfaction of such person’s liability
under this title may be voted only by the custodial trustees
or outside money managers of the Commission.
SEC. 404. INSTITUTION OF TERMINATION PROCEEDINGS BY
THE COMMISSION.
(a) IN GENERAL.—The Securities and Exchange
Commission may institute proceedings under this section
to terminate a personal retirement account whenever it de-
termines that the possible long-run loss of the Commission
with respect to the account may reasonably be expected
to increase unreasonably if the account is not terminated.
The Commission shall as soon as practicable institute pro-
ceedings under this section to terminate a personal retire-
ment account whenever the Commission determines that
an insurable event under paragraph (1) or (2) of section
401(d) has occurred. The Commission may prescribe a
simplified procedure to follow in terminating personal re-
tirement accounts as long as that procedure includes sub-
stantial safeguards for the rights of the account holder.
Notwithstanding any other provision of this title, the Com-
mission is authorized to pool assets of terminated personal
retirement accounts for purposes of administration, invest-
ment, payment of liabilities of all such accounts, and such
other purposes as it determines to be appropriate in the
administration of this title.
(b) INITIAL APPOINTMENT OF ALTERNATIVE TRUST-
EE.—
(1) IN GENERAL.—Whenever the Commission
makes a determination under subsection (a) with re-
spect to a personal retirement account, it may, upon
notice to the financial institution serving as trustee
of the account, apply to the appropriate United
States district court for the appointment of an alter-
native trustee to administer the account pending the
issuance of a decree under subsection (c) ordering
the termination of the account. If within 3 business
days after the filing of an application under this
subsection, or such other period as the court may
order, the financial institution consents to the ap-
pointment of an alternative trustee, or fails to show
why an alternative trustee should not be appointed,
the court may grant the application and appoint an
alternative trustee to administer the account in ac-
cordance with the terms governing the account until
the Commission determines that the account should
be terminated or that termination is unnecessary.
The Commission may request that it be appointed
as trustee of the account in any case.
(2) STANDARD
FOR
COURT
APPOINTMENT.—
Notwithstanding any other provision of this Act,
upon the petition of a qualified financial institution
or the Commission, the appropriate United States
district court may appoint an alternative trustee in
accordance with the provisions of this section if the
interests of the account holder with respect to the
personal retirement account is maintained would be
better served by the appointment of the alternative
trustee.
(3) APPOINTMENT
BY
AGREEMENT
BETWEEN
PARTIES.—The Commission and the qualified finan-
cial institution may agree to the appointment of an
alternative trustee without proceeding in accordance
with the requirements of paragraphs (1) and (2).
(c) TERMINATION PROCEEDINGS.—
(1) IN
GENERAL.—If the Commission is re-
quired under subsection (a) to commence proceed-
ings under this section with respect to a personal re-
tirement account or, after issuing a notice under this
section to the qualified financial institution serving
as trustee of the account, has determined that the
account should be terminated, the Commission may,
upon notice to the institution, apply to the appro-
priate United States district court for a decree adju-
dicating that the account must be terminated in
order to protect the interests of the account holder
with respect to the account or to avoid any unrea-
sonable deterioration of the financial condition of the
account or any unreasonable increase in the liability
of the Trust Fund. If the alternative trustee ap-
pointed under subsection (b) disagrees with the de-
termination of the Commission under the preceding
sentence, he may intervene in the proceeding relat-
ing to the application for the decree, or make appli-
cation for such decree himself. Upon granting a de-
cree for which the Commission or alternative trustee
has applied under this subsection, the court shall au-
ments governing the account, regulations of the
Commission and the Securities and Exchange
Commission, and applicable rules of law;
(D) to limit payment of assets in the ac-
count to assets guaranteed under this title as
appropriate or to continue payment of some or
all of the assets in the account which were
being paid prior to his appointment;
(E) to do such other acts as he deems nec-
essary to continue operation of the account
without increasing the potential liability of the
Commission, if such acts may be done under
the documents governing the account; and
(F) to require the financial institution to
furnish any information with respect to the ac-
count which the alternative trustee may reason-
ably need in order to administer the account.
(2) TIME LIMITATION ON ALTERNATIVE TRUST-
EESHIP WHERE TERMINATION DOES NOT ENSUE.—
If the court to which application is made under sub-
section (c) dismisses the application with prejudice,
or if the Commission fails to apply for a decree
under subsection (c) within 30 days after the date
on which the alternative trustee is appointed under
subsection (b), the alternative trustee shall transfer
all assets and records of the account held by him
to the financial institution which had been serving
as trustee of the account within 3 business days
after such dismissal or the expiration of such 30-
day period, and shall not be liable to the financial
institution or any other person for his acts as alter-
native trustee except for willful misconduct, or for
conduct in violation of any other provision of this
Act. The 30-day period referred to in this paragraph
may be extended as provided by agreement between
the financial institution and the Commission or by
court order obtained by the Commission.
(3) 
ADDITIONAL
POWERS
UPON
TERMI-
NATION.—If the court to which an application is
made under subsection (c) issues the decree re-
quested in such application, in addition to the pow-
ers described in paragraph (1), the alternative trust-
ee shall have the power—
(A) to collect for the account any amounts
due the account, including but not limited to
the power to collect from the persons obligated
to meet the contribution requirements of title I
or the terms of the documents governing the ac-
count;
(B) to receive any payment made by the
Commission to the account under this title;
(C) to commence, prosecute, or defend on
behalf of the financial institution or the account
any suit or proceeding involving the account;
(D) to issue, publish, or file such notices,
statements, and reports as may be required by
the Commission or any order of the court;
(E) to liquidate the assets of the account
and perform the transfer of such assets to a
successor personal retirement account as pro-
vided in subsection (c)(2);
(F) to recover payments inappropriately
made from the account; and
(G) to do such other acts as may be nec-
essary to comply with this Act or any order of
the court and to protect the interests of the ac-
count holder of the terminated account.
(4) NOTICE
OF
PROCEEDINGS.—As soon as
practicable after his appointment, the alternative
trustee shall give notice to interested parties of the
institution of proceedings under this section to de-
termine whether the account should be terminated or
to terminate the account, whichever is applicable.
For purposes of this paragraph, the term ‘‘interested
party’’ means—
(A) the financial institution,
(B) the account holder with respect to the
account was maintained, including the bene-
ficiary of the account holder who is deceased,
(C) each person who may be subject to li-
ability under section 406, and
(D) each person who may be liable for pay-
ments to the account.
(5) ADDITIONAL DUTIES.—Except to the extent
inconsistent with the provisions of this Act, or as
may be otherwise ordered by the court, an alter-
native trustee appointed under this section shall be
subject to the same duties as those of a trustee
under section 704 of title 11, United States Code,
and shall be, with respect to the account, a fiduciary
within the meaning of paragraph (21) of section 3
of the Employee Retirement Income Security Act of
1974 and under section 4975(e) of the Internal Rev-
enue Code of 1986 (except to the extent that the
provisions of this title are inconsistent with the re-
quirements applicable under part 4 of subtitle B of
title I of such Act and of such section 4975).
(f) COORDINATION WITH BANKRUPTCY OR OTHER
INSOLVENCY PROCEEDINGS.—An application by the Com-
mission under this section may be filed notwithstanding
the pendency in the same or any other court of any bank-
ruptcy, mortgage foreclosure, or equity receivership pro-
ceeding, or any proceeding to reorganize, conserve, or liq-
uidate the personal retirement account or the financial in-
stitution, or its assets, or any proceeding to enforce a lien
against assets of the account or the institution.
(g) COURT JURISDICTION.—Upon the filing of an ap-
plication for the appointment of an alternative trustee or
the issuance of a decree under this section, the court to
which an application is made shall have exclusive jurisdic-
tion of the account involved and its assets wherever lo-
cated with the powers, to the extent consistent with the
purposes of this section, of a court of the United States
having jurisdiction over cases under chapter 11 of title 11
of the United States Code. Pending an adjudication under
subsection (c), such court shall stay, and upon appoint-
ment by it of an alternative trustee, as provided in this
section, such court shall continue the stay of, any pending
mortgage foreclosure, equity receivership, or other pro-
ceeding to reorganize, conserve, or liquidate the account
or its assets and any other suit against any receiver, con-
servator, or trustee of the account or the financial institu-
tion, or its assets. Pending such adjudication and upon
the appointment by it of such alternative trustee, the court
may stay any proceeding to enforce a lien against property
of the account or the financial institution or any other suit
against the account or the financial institution.
(h) VENUE AND PROCESS.—An action under this
subsection may be brought in the judicial district where
the financial institution serving as trustee of the personal
retirement account is located or does business or where
any asset of the account or the institution is situated. A
district court in which such action is brought may issue
process with respect to such action in any other judicial
district.
(i) COMPENSATION AND PERSONNEL FOR ALTER-
NATIVE TRUSTEES.—
(1) COMPENSATION.—The amount of com-
pensation paid to each alternative trustee appointed
under the provisions of this section shall require the
prior approval of the Commission, and, in the case
of an alternative trustee appointed by a court, the
consent of that court.
(2) APPOINTMENT
AND
RETENTION
OF
PER-
SONNEL.—Alternative trustees appointed under this
section shall appoint, retain, and compensate ac-
countants, actuaries, and other professional service
personnel in accordance with regulations prescribed
by the Commission.
SEC. 405. LIABILITY UPON TERMINATION OF ACCOUNTS.
(a) IN GENERAL.—In any case in which a personal
retirement account is terminated in a proceeding insti-
tuted by the Securities and Exchange Commission under
section 405, each person who is the financial institution
serving as trustee of the account on the termination date
or a member of the financial institution’s controlled group
shall incur liability to the Commission under this section.
The liability under this section of all such persons shall
be joint and several.
(b) AMOUNT
OF LIABILITY.—The liability to the
Commission of a person described in subsection (a) shall
be the total amount of the assets of the account which
are guaranteed by the Commission and which are not
available for payment from the account, calculated from
the termination date in accordance with regulations pre-
scribed by the Commission.
(c) PAYMENT OF LIABILITY.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the liability to the Commission under this
section shall be due and payable to the Commission
as of the termination date, in cash or securities ac-
ceptable to the Commission.
(2) SPECIAL RULE.—Payment of so much of
the liability as exceeds 30 percent of the collective
net worth of all persons described in subsection (a)
(including interest) shall be made under commer-
cially reasonable terms prescribed by the Commis-
sion. The parties involved shall make a reasonable
effort to reach agreement on such commercially rea-
sonable terms. Any such terms prescribed by the
Commission shall provide for deferral of 50 percent
of any amount of liability otherwise payable for any
year under this paragraph if a person subject to
such liability demonstrates to the satisfaction of the
Commission that no person subject to such liability
has any individual pre-tax profits for such person’s
fiscal year ending during such year.
(3) ALTERNATIVE ARRANGEMENTS.—The Com-
mission and any person liable under this section may
agree to alternative arrangements for the satisfac-
tion of liability to the Commission under this sub-
section.
(d) DEFINITIONS.—
(1) COLLECTIVE NET WORTH OF PERSONS SUB-
JECT TO LIABILITY.—
(A) IN
GENERAL.—The collective net
worth of persons subject to liability in connec-
tion with the termination of a personal retire-
ment account consists of the sum of the individ-
ual net worths of all persons who—
(i) have individual net worths which
are greater than zero, and
(ii) are (as of the termination date)
the financial institution or members of the
financial institution’s controlled group.
(B) DETERMINATION
OF
NET
WORTH.—
For purposes of this paragraph, the net worth
of a person is—
(i) determined on whatever basis best
reflects, in the determination of the Com-
mission, the current status of the person’s
operations and prospects at the time cho-
sen for determining the net worth of the
person, and
(ii) increased by the amount of any
transfers of assets made by the person
which are determined by the Commission
to be improper under the circumstances,
including any such transfers which would
be inappropriate under title 11, United
States Code, if the person were a debtor in
a case under chapter 7 of such title.
(C) TIMING
OF
DETERMINATION.—For
purposes of this paragraph, determinations of
net worth shall be made as of a day chosen by
the Commission (during the 120-day period
ending with the termination date) and shall be
computed without regard to any liability under
this section.
(2) PRE-TAX
PROFITS.—The term ‘‘pre-tax
profits’’ means, for any fiscal year of any person,
such person’s consolidated net income (excluding any
extraordinary charges to income and including any
extraordinary credits to income) for such fiscal year,
as shown on audited financial statements prepared
in accordance with generally accepted accounting
principles, before provision for or deduction of Fed-
eral or other income tax and any amounts required
to be paid for such fiscal year under this section.
The Commission may by regulation require such in-
formation to be filed on such forms as may be nec-
essary to determine the existence and amount of
such pre-tax profits.
(3) CONTROLLED GROUP.—
(A) IN GENERAL.—The term ‘‘controlled
group’’ means, in connection with any person,
a group consisting of such person and all other
persons under common control with such per-
son.
(B) COMMON CONTROL.—The determina-
tion of whether two or more persons are under
‘‘common control’’ shall be made under regula-
tions of the Commission which are consistent
and coextensive with regulations prescribed for
similar purposes by the Secretary of the Treas-
ury under subsections (b) and (c) of section
414 of the Internal Revenue Code of 1986.
(4) TERMINATION
DATE.—The term ‘‘termi-
nation date’’ means—
(A) the date established by the Commis-
sion (or the alternative trustee appointed under
section 405(b)(2), if any) and agreed to by the
financial institution serving as trustee of the
terminated personal retirement account imme-
diately before the termination, or
(B) if no agreement is reached, the date
established by the court.
SEC. 406. INSURANCE LOGO.
(a) IN GENERAL.—Each qualified financial institu-
tion, while serving as trustee for a personal retirement ac-
count subject to the guarantee of the Securities and Ex-
change Commission under this title, shall display at each
place of business maintained by such institution a sign
containing only the following items:
(1) A statement that insured contributions to
personal retirement accounts maintained by the in-
stitution are backed by the full faith and credit of
the United States Government.
(2) A statement that amounts contributed to
such accounts are federally insured to the amount
necessary to purchase a minimum annuity.
(3) A patriotic symbol defined by the Commis-
sion by regulation.
The sign shall not contain any reference to a Government
agency and shall accord each item substantially equal
prominence. No person may display such a sign unless
such person is a qualified financial institution.
(b) REGULATIONS.—The Commission shall prescribe
regulations to carry out the purposes of this section, in-
cluding regulations governing the manner of display or use
of such signs. Initial regulations under this section shall
be prescribed not later than December 31, 1998.
(c) PENALTIES.—For each day a qualified financial
institution continues to violate any provision of this sec-
tion or any lawful provisions of regulations prescribed
under this section, it shall be subject to a penalty of not
more than $100, which the Commission shall recover for
its use.
SEC. 407. REPORT BY THE COMMISSION.
As soon as practicable after the close of each fiscal
year the Securities and Exchange Commission shall trans-
mit to the President and the Congress a report relative
to the conduct of its business under this title for that fiscal
year. The report shall include financial statements setting
forth the result of its operations under this title (including
the source and application of its funds) for the fiscal year
and shall include an actuarial evaluation of the expected
operations and status of the Trust Fund for the next five
years (including a detailed statement of the actuarial as-
sumptions and methods used in making such evaluation).
TITLE V—ENFORCEMENT
AUTHORITY
SEC. 501. CAUSE OF ACTION.
The account holder with respect to a personal retire-
ment account who is adversely affected by an act or prac-
tice of any party (other than the Securities and Exchange
Commission or any officer or employee thereof) in viola-
tion of any provision of this Act, 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.
SEC. 502. JURISDICTION AND VENUE.
The district courts of the United States shall have
exclusive jurisdiction of civil actions under this title. Such
actions may be brought in the district where the personal
retirement account is administered, where the violation
took place, or where a defendant resides or may be found,
and process may be served in any other district where a
defendant resides or may be found. The district courts of
the United States shall have jurisdiction, without regard
to the amount in controversy or the citizenship of the par-
ties, to grant the relief provided for in section 501 in any
action.
SEC. 503. RIGHT OF SECURITIES AND EXCHANGE COMMIS-
SION TO INTERVENE.
A copy of the complaint or notice of appeal in any
action under this title shall be served upon the Securities
and Exchange Commission by certified mail. The relevant
Federal agency, the Commission, and the Commission
shall have the right in its discretion to intervene in any
action.
SEC. 504. AWARDS OF COSTS AND EXPENSES.
In any action brought under this title, the court in
its discretion may award all or a portion of the costs and
expenses incurred in connection with such action, includ-
ing reasonable attorney’s fees, to any party who prevails
or substantially prevails in such action.
SEC. 505. LIMITATION ON ACTIONS.
(f) IN GENERAL.—Except as provided in subsection
(c), an action under this title 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).
SEC. 506. PENALTY FOR FAILURE TO TIMELY PROVIDE RE-
QUIRED INFORMATION.
The Securities and Exchange Commission may assess
a penalty, payable to it, against any person who fails to
provide any notice or other material information required
under this Act or any regulations prescribed under this
Act within the applicable time limit specified therein. Such
penalty shall not exceed $1,000 for each day for which
such failure continues.
SEC. 507. ACTIONS BY SECURITIES AND EXCHANGE COM-
MISSION.
If any person is assessed under this Act and fails to
pay the assessment when due, or any person otherwise
fails to meet any requirement of this Act, 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 appropriate equitable relief to re-
dress the violation or enforce the provisions of this Act,
and process may be served in any other district. The dis-
trict courts of the United States shall have jurisdiction
over actions brought under this subsection by the Commis-
sion without regard to the amount in controversy.
TITLE 
VI—TRANSITION 
FROM
COVERAGE 
FOR 
OLD-AGE
AND SURVIVORS INSURANCE
BENEFITS UNDER TITLE II OF
THE SOCIAL SECURITY ACT
SEC. 601. PRIMARY INSURANCE AMOUNTS FOR TRANSI-
TIONAL ELIGIBLE INDIVIDUALS.
(a) IN GENERAL.—Section 215(a) of the Social Secu-
rity Act (42 U.S.C. 415(a)) is amended by adding at the
end the following new paragraph:
‘‘(8) Notwithstanding the preceding provisions of this
subsection, the primary insurance amount of an eligible
individual (as defined in section 2(4) of the Personal Re-
tirement Accounts Act of 1997) shall be determined, effec-
tive for January 2000, as otherwise provided under this
section—
‘‘(A) if such individual has not attained age 62
as of January 1, 2000, as though such individual
had attained such age on such date, and
‘‘(B) as though such individual had filed appli-
cation for old-age insurance benefits in January
2000.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to monthly insur-
ance benefits under part A of title II of the Social Security
Act (as redesignated by this Act) for which applications
are filed after December 31, 1999.
SEC. 602. CERTIFICATION OF COVERED STATUS UNDER
THE OLD-AGE, SURVIVORS, AND DISABILITY
INSURANCE PROGRAM.
Not later than July 1, 2000, the Commissioner of So-
cial Security shall provide a written certification to each
individual who has a social security account number, who
has been credited with wages or net earnings from self-
employment. Such certification shall indicate to each re-
cipient whether such recipient is or is not an eligible indi-
vidual and a description of the benefits available to such
individual under part A of title II of the Social Security
Act based on such individual’s status as an eligible individ-
ual or otherwise.
SEC. 603. REDUCTION IN FICA AND SECA TAXES WITH RE-
SPECT TO ELIGIBLE INDIVIDUALS.
(a) TAX ON EMPLOYEES.—Section 3101 of the Inter-
nal Revenue Code of 1986 (relating to OASDI tax on em-
ployees) is amended—
(1) in subsection (a), by striking ‘‘In addition’’
and inserting ‘‘Subject to subsection (c), in addi-
tion’’;
(2) by redesignating subsection (c) as sub-
section (d); and
(3) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c) REDUCTION IN OASDI TAX.—In the case of an
eligible individual (as defined in section 104(3) of the Per-
sonal Retirement Accounts Act of 1997), the rate of tax
under subsection (a) shall be 2.90 percent.’’
(b) TAX
ON EMPLOYERS.—Section 3111 of such
Code (relating to OASDI tax on employers) is amended—
(1) in subsection (a), by striking ‘‘In addition’’
and inserting ‘‘Subject to subsection (c), in addi-
tion’’;
(2) by redesignating subsection (c) as sub-
section (d); and
(3) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(d) REDUCTION IN OASDI TAX.—The rate of tax
under subsection (a) with respect to having in the employ-
er’s employ an eligible individual (as defined in section
104(3) of the Personal Retirement Accounts Act of 1997)
shall be 2.90 percent.’’
(c) SELF-EMPLOYMENT TAX.—Subsection (a) of sec-
tion 1401 of such Code (relating to OASDI tax on self-
employment income) is amended—
(1) in subsection (a), by striking ‘‘In addition’’
and inserting ‘‘Subject to subsection (c), in addi-
tion’’;
(2) by redesignating subsection (c) as sub-
section (d); and
(3) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c) REDUCTION IN OASDI TAX.—In the case of an
eligible individual (as defined in section 104(3) of the Per-
sonal Retirement Accounts Act of 1997), the rate of tax
under subsection (a) with respect to self-employment in-
come for taxable years ending after December 31, 1999,
shall be 5.80 percent.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to wages received
after December 31, 1999, and with respect to self-employ-
ment income for taxable years ending after such date.
SEC. 604. SUPPLEMENTAL RETIREMENT BENEFITS.
(a) IN GENERAL.—Section 202 of the Social Security
Act (42 U.S.C. 402) is amended by adding at the end the
following new subsection:
‘‘Supplemental Retirement Benefits
‘‘(y)(1) Every individual—
‘‘(A) who is a fully insured individual
‘‘(B) who has attained retirement age (as de-
fined in section 216(l)),
‘‘(C) who is an eligible individual (as defined in
section 104(3) of the Personal Retirement Accounts
Act of 1997),
‘‘(D) to whom no distribution has been made
from any personal retirement account established
under title I of the Personal Retirement Accounts
Act of 1997, and
‘‘(E) whose personal retirement account holds,
as of the date on which the individual attains retire-
ment age, total assets equal, in the aggregate, to
less than the minimum annuity amount (as defined
in section 2(b) of the Personal Retirement Accounts
Act of 1997),
shall be entitled to a supplemental old-age benefit for each
month, beginning with the month in which such individual
attains retirement age and ending with the month preced-
ing the month in which he dies.
‘‘(2) Such individual’s supplemental retirement bene-
fit for any month shall be equal to the excess of—
‘‘(A) the minimum annuity amount (as defined
in section 2(6)(A) of the Personal Retirement Ac-
counts Act of 1997) for the month, over
‘‘(B) the amount which would be payable as a
monthly periodic payment of an immediate annuity
(as defined in section 202(b)(5) of the Personal Re-
tirement Accounts Act of 1997) purchased with the
total balance, in the aggregate, of all personal retire-
ment accounts maintained for such individual under
title I of such Act, determined as of the date on
which such individual attains retirement age.
‘‘(3) There are authorized to be appropriated sums
sufficient to carry out this section.’’.
(b) CONFORMING AMENDMENT.—Section 201(h) of
such Act (42 U.S.C. 401(h)) is amended by striking ‘‘sec-
tion 226’’ and inserting ‘‘sections 202(y) and 226’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to months beginning
on or after January 1, 2000.
SEC. 605. PHASED IN INCREASE IN SOCIAL SECURITY RE-
TIREMENT AGE.
Section 216(l) of the Social Security Act (42 U.S.C.
416(l) is amended—
(1) by striking subparagraphs (B), (C), (D),
and (E) of paragraph (1) and inserting the following
new subparagraphs:
‘‘(B) with respect to an individual who attains
early retirement age (as determined under para-
graph (2)) after December 31, 1999, and before
January 1, 2029, 65 years of age plus 2⁄12 of the
number of months in the period beginning with Jan-
uary 2000 and ending with December of the year in
which the individual attains early retirement age (as
so determined); and
‘‘(C) with respect to an individual who attains
early retirement age (as so determined) after De-
cember 31, 2028, 70 years of age.’’; and
(2) by striking paragraph (3).
SEC. 606. LIMITATION IN COST-OF-LIVING ADJUSTMENTS.
(a) REDUCTION IN INCREASES APPLIED TO HIGHER
PRIMARY INSURANCE AMOUNTS.—
(1) IN GENERAL.—Section 215(i)(2)(A) of the
Social Security Act (42 U.S.C. 415(i)(2)(A)) is
amended—
(A) by redesignating clause (iii) as clause
(vii); and
(B) in clause (ii), by striking ‘‘The in-
crease shall’’ in the matter following subclause
(III) and all that follows through ‘‘Any in-
crease’’ and inserting the following:
‘‘(iii) With respect to the amounts described in sub-
clauses (I) and (III) of clause (ii) and primary insurance
amounts described in subclause (II) of clause (ii) of indi-
in eligibility of less than 12 consecutive months shall
not be taken into account.’’.
SEC. 609. COVERAGE OF NEWLY HIRED STATE AND LOCAL
EMPLOYEES.
(a) AMENDMENTS TO THE SOCIAL SECURITY ACT.—
(1) IN
GENERAL.—Paragraph (7) of section
210(a) of the Social Security Act (42 U.S.C.
410(a)(7)) is amended to read as follows:
‘‘(7) Excluded State or local government em-
ployment (as defined in subsection (s));’’.
(2) EXCLUDED STATE OR LOCAL GOVERNMENT
EMPLOYMENT.—
(A) IN
GENERAL.—Section 210 of such
Act (42 U.S.C. 410) is amended by adding at
the end the following new subsection:
‘‘Excluded State or Local Government Employment
‘‘(s)(1) IN GENERAL.—The term ‘excluded State or
local government employment’ means any service per-
formed in the employ of a State, of any political subdivi-
sion thereof, or of any instrumentality of any one or more
of the foregoing which is wholly owned thereby, if—
‘‘(A)(i) such service would be excluded from the
term ‘employment’ for purposes of this title if the
preceding provisions of this section as in effect in
October 1997 had remained in effect, and (ii) the re-
105
employment’ means any service performed in the
employ of a State, of any political subdivision there-
of, or of any instrumentality of any one or more of
the foregoing which is wholly owned thereby, if—
‘‘(A)(i) such service would be excluded
from the term ‘employment’ for purposes of this
chapter if the provisions of subsection (b)(7) as
in effect in December 1999 had remained in ef-
fect, and
‘‘(ii) the requirements of paragraph (2) are
met with respect to such service, or
‘‘(B) the requirements of paragraph (3)
are met with respect to such service.
‘‘(2) EXCEPTION FOR CURRENT EMPLOYMENT
WHICH CONTINUES.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to service
for any employer if—
‘‘(i) such service is performed by an
individual—
‘‘(I) who was performing sub-
stantial and regular service for remu-
neration for that employer before Jan-
uary 1, 2000,