[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 321 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 321

To amend the Internal Revenue Code of 1986 and the Social Security Act 
  to provide for personal investment plans funded by employee social 
  security payroll deductions, to extend the solvency of the old-age, 
  survivors, and disability insurance program, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 13, 1997

   Mr. Gregg introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 and the Social Security Act 
  to provide for personal investment plans funded by employee social 
  security payroll deductions, to extend the solvency of the old-age, 
  survivors, and disability insurance program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Strengthening Social Security Act of 
1997''.

SEC. 2. PORTION OF SOCIAL SECURITY TAXES ON EMPLOYEES DEPOSITED INTO 
              PERSONAL INVESTMENT PLANS.

    (a) Dedication of Employee Taxes and Self-Employment Taxes.--
            (1) Tax on employees.--Section 3101(a) of the Internal 
        Revenue Code of 1986 (relating to OASDI tax on employees) is 
        amended--
                    (A) by striking the period at the end of the table 
                and inserting a semicolon; and
                    (B) by adding after and below the table the 
                following:
``except that, in the case of an eligible employee (as defined in 
section 255(3) of the Social Security Act), the rate of tax under this 
subsection shall be 5.2 percent with respect to wages paid on or after 
December 31, 1997, for pay periods ending after such date.''.
            (2) Self-employment tax.--Section 1401(a) of such Code 
        (relating to OASDI tax on self-employment income) is amended--
                    (A) by striking the period at the end of the table 
                and inserting a semicolon; and
                    (B) by adding after and below the table the 
                following:
``except that, in the case of an eligible self-employed individual (as 
defined in section 255(4) of the Social Security Act), the rate of tax 
under this subsection shall be 11.4 percent of the amount of the self-
employment income in the case of a taxable year beginning after 
December 31, 1997.''.
            (3) Effective Date.--
                    (A) Employee tax.--The amendments made by paragraph 
                (1) apply to remuneration paid after December 31, 1997.
                    (B) Self-employment tax.--The amendments made by 
                paragraph (2) apply to taxable years beginning after 
                December 31, 1997.
    (b) Personal Investment Plans.--
            (1) In general.--Title II of the Social Security Act (42 
        U.S.C. 401 et seq.) is amended--
                    (A) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';

        and
                    (B) by adding at the end the following:

                  ``Part B--Personal Investment Plans

             ``personal investment payroll deduction plans

    ``Sec. 251. (a) In General.--Each person who is a covered employer 
for a calendar year shall have in effect a personal investment payroll 
deduction plan for such calendar year for such person's eligible 
employees.
    ``(b) Personal Investment Payroll Deduction Plans.--For purposes of 
this part, the term `personal investment payroll deduction plan' means 
a written plan of an employer--
            ``(1) which applies only with respect to wages of eligible 
        employees,
            ``(2) under which, the personal investment plan 
        contributions will be deducted from the employee's wages and 
        paid to the Social Security Administration with respect to a 
        personal investment plan designated in accordance with section 
        252(a),
            ``(3) under which, the employer is required to pay the 
        amount so deducted with respect to the specified personal 
        investment plan within 10 business days after the payment of 
        the wages from which the amount was deducted,
            ``(4) under which, the employer receives no compensation 
        for the cost of administering such plan, and
            ``(5) under which, the employer does not make any 
        endorsement with respect to any personal investment plan.
    ``(c) Amounts Deducted May Be Accumulated by Employer in Certain 
Cases.--If, under the terms of a personal investment plan designated 
under section 252(a), 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 such employee are accumulated 
by the employer and paid to such plan not later than 10 business days 
after the first day on which the accumulated amount exceeds such 
specified amount.

``designation of personal investment plans under payroll deduction plan

    ``Sec. 252. (a) In General.--Except as provided in subsection (b), 
the personal investment plan to which the personal investment plan 
contributions with respect to any employee are required to be paid 
under section 251 shall be a personal investment plan designated by the 
employee to the employer not later than 10 business days after the date 
on which the employee becomes an employee of such employer. Any such 
designation shall be made in such form and manner as may be prescribed 
in regulations of the Commissioner of Social Security.
    ``(b) Designation in Absence of Timely Designation by Employee.--In 
any case in which no timely designation of the personal investment plan 
is made, the employer shall make the designation of the personal 
investment plan in accordance with regulations of the Commissioner of 
Social Security.

              ``participation by self-employed individuals

    ``Sec. 253. (a) In General.--Each eligible self-employed individual 
who receives self-employment income in any taxable year, shall, in such 
form and manner as shall be prescribed in regulations of the 
Commissioner of Social Security, deposit with the Social Security 
Administration with respect to a personal investment plan maintained by 
such individual the personal investment plan contribution for such 
taxable year. Such deposit shall be made within 10 business days after 
the receipt by such individual of such self-employment income.
    ``(b) Amounts Payable May Be Accumulated in Certain Cases.--If, 
under the terms of a personal investment plan maintained under 
subsection (a), contributions below a specified amount will not be 
accepted, the requirements of subsection (a) shall be treated as met if 
amounts otherwise payable under subsection (a) are accumulated by the 
individual and paid to such plan not later than 10 business days after 
the first day on which the accumulated amount exceeds such specified 
amount.

  ``designation of plans of surviving spouses and surviving divorced 
                                spouses

    ``Sec. 254. (a) In General.--Except as otherwise provided in this 
section, in the case of a deceased individual with respect to whom a 
personal investment plan was established and maintained pursuant to 
section 252 or 253, the trustee of such plan shall transfer the balance 
in such plan to a personal investment plan maintained by an eligible 
survivor if such plan is designated by the eligible survivor to the 
trustee not later than 20 business days after the date of such 
individual's death. Any such designation shall be made in such form and 
manner as may be prescribed in regulations of the Commissioner of 
Social Security.
    ``(b) Exception in Case of Written Consent to Transfer to Another 
Beneficiary.--In any case in which the eligible survivor of a deceased 
individual has consented in writing to a transfer by such individual of 
the balance in such individual's personal investment plan to another 
beneficiary, the trustee of such plan shall transfer the balance in 
such plan to such beneficiary within the period of 20 business days 
following the date of such individual's death.
    ``(c) Designation in Absence of Timely Designation or Consent by 
Eligible Survivor.--In any case in which, upon the expiration of the 
20-day period described in subsection (a), there is an eligible 
survivor but no timely designation is made by the eligible survivor 
under subsection (a) and no consent has been made pursuant to 
subsection (b), the trustee shall make the designation of the personal 
investment plan under subsection (a) on behalf of such eligible 
survivor, in accordance with regulations of the Commissioner of Social 
Security.
    ``(d) Disposition of Plan Balance if no Eligible Survivor Exists.--
In any case in which, upon the expiration of the 20-day period 
described in subsection (a), no timely designation under subsection (c) 
has been made and there is no eligible survivor, the trustee of the 
deceased individual's plan shall transfer the balance in such plan to 
the estate of the deceased individual.
    ``(e) Period for Transfer by Trustee.--In the case of a transfer by 
a trustee under subsection (a), (c), or (d), the trustee shall transfer 
the balance in the personal investment plan of the deceased individual 
within the period of 20 business days following the expiration of the 
20-day period described in such subsection.

                             ``definitions

    ``Sec. 255. For purposes of this part--
            ``(1) Personal investment plan.--The term `personal 
        investment plan' means--
                    ``(A) any personal investment retirement plan in 
                the Personal Investment Fund (established under section 
                257) which is administered by the Personal Investment 
                Board, or
                    ``(B) any individual retirement plan (as defined in 
                section 7701(a)(37) of the Internal Revenue Code of 
                1986) which is administered or issued by a bank or 
                other person referred to in section 408(a)(2) of such 
                Code,
        under terms which restrict deposits to personal investment plan 
        contributions made to the plan pursuant to section 251 or 253 
        and transfers made to the plan pursuant to section 254, and 
        under which distributions may only be made on or after the date 
        on which the individual attains age 59\1/2\, made to a 
        beneficiary (or to the estate of the individual) on or after 
        the death of the individual, or attributable to the 
        individual's becoming disabled within the meaning of section 
        223(d).
            ``(2) Covered employer.--The term `covered employer' means, 
        for any calendar year, any person on whom an excise tax is 
        imposed under section 3111 of the Internal Revenue Code of 1986 
        with respect to having an individual in the person's employ to 
        whom wages are paid by such person during such calendar year.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, in connection with any person who is a covered employer 
        for any calendar year beginning after December 31, 1997, any 
        individual--
                    ``(A) with respect to whose employment by such 
                employer during such calendar year there is imposed an 
                excise tax under section 3111 of the Internal Revenue 
                Code of 1986, and
                    ``(B) who does not attain age 55 during such 
                calendar year.
            ``(4) Eligible self-employed individual.--The term 
        `eligible self-employed individual' means any individual--
                    ``(A) on whose self-employment income for a taxable 
                year beginning after December 31, 1997, there is 
                imposed a tax under section 1401(a) of the Internal 
                Revenue Code of 1986, and
                    ``(B) who does not attain age 55 during such 
                taxable year.
            ``(5) Personal investment plan contribution.--The term 
        `personal investment plan contribution' means--
                    ``(A) with respect to any eligible employee of a 
                covered employer, an amount equal to 1 percent of the 
                wages received by such employee with respect to 
                employment by such employer, and
                    ``(B) with respect to the self-employment income of 
                an individual for any taxable year, an amount equal to 
                1 percent of such income for such taxable year.
            ``(6) Eligible survivor.--The term `eligible survivor' of a 
        deceased individual means such individual's spouse or, if there 
        is no such spouse, such individual's last surviving divorced 
        spouse. Such term shall not include any such surviving divorced 
        spouse who is married on the date of the deceased individual's 
        death.
            ``(7) Business day.--The term `business day' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.

                              ``penalties

    ``Sec. 256. (a) Failure To Establish Personal Investment Payroll 
Deduction Plan.--Any covered employer who fails to meet the 
requirements of section 251 for any calendar year shall be subject to a 
civil penalty of not to exceed the greater of--
            ``(1) $5,000, or
            ``(2) $100 for each eligible employee of such employer as 
        of the beginning of such calendar year.
    ``(b) Failure To Make Deductions Required Under Plan.--Any covered 
employer who fails to deduct an amount from the wages of an eligible 
employee in accordance with a personal investment payroll deduction 
plan shall be subject to a civil penalty of not to exceed $500 for each 
such failure.
    ``(c) Failure by Employer To Make Timely Payments to Personal 
Investment Plan.--If an amount deducted from the wages of an eligible 
employee under a personal investment payroll deduction plan is not paid 
to the Social Security Administration with respect to the specified 
personal investment plan within the time prescribed by section 251--
            ``(1) the employer shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount so deducted, and
            ``(2) shall be liable to the employee for interest on the 
        amount so deducted at the underpayment rate determined under 
        section 6621 of the Internal Revenue Code of 1986 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 specified personal 
        investment plan.
    ``(d) Failure by Eligible Self-Employed Individual To Make Timely 
Payments to Personal Investment Plan.--If a personal investment plan 
contribution is not paid by an eligible self-employed individual to the 
Social Security Administration with respect to a personal investment 
plan maintained by the individual within the time prescribed by section 
253, such individual shall be subject to a civil penalty of not to 
exceed 50 percent of the amount of such contribution.
    ``(e) Failure by Trustee To Make Timely Transfers.--If the balance 
in the personal investment plan of a deceased individual is not 
transferred by the trustee within the time prescribed by section 254--
            ``(1) the trustee shall be subject to a civil penalty of 
        not to exceed 50 percent of the amount of the balance, and
            ``(2) shall be liable for interest on the balance at the 
        underpayment rate determined under section 6621 of the Internal 
        Revenue Code of 1986 from the last day by which such balance 
        was required to be so transferred to the date on which such 
        balance is transferred.
    ``(f) Rules for Application of Section.--
            ``(1) Penalties assessed by commissioner.--Any civil 
        penalty assessed by this section shall be imposed by the 
        Commissioner of Social Security and collected in a civil 
        action.
            ``(2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            ``(3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.

                       ``personal investment fund

    ``Sec. 257. (a) Establishment.--There is established and maintained 
in the Treasury of the United States a Personal Investment Fund in the 
same manner as the Thrift Savings Fund under sections 8437, 8438, and 
8439 of title 5, United States Code.
    ``(b) Personal Investment Fund Board.--
            ``(1) In general.--There is established and operated in the 
        Social Security Administration a Personal Investment Fund Board 
        in the same manner as the Federal Retirement Thrift Investment 
        Board under subchapter VII of chapter 84 of title 5, United 
        States Code.
            ``(2) Specific investment duties.--The Personal Investment 
        Fund shall be managed by the Personal Investment Fund Board in 
        the same manner as the Thrift Savings Fund is managed under 
        subchapter VIII of chapter 84 of title 5, United States 
        Code.''.
            (2) Amounts deducted to be shown on w-2 statements.--
        Section 6051(a) of the Internal Revenue Code of 1986 (relating 
        to receipts for employees), as amended by section 301(c)(3) of 
        the Health Insurance Portability and Accountability Act of 
        1996, is amended--
                    (A) in paragraph (10), by striking ``and'';
                    (B) in paragraph (11), by striking the period and 
                inserting ``, and''; and
                    (C) by inserting after paragraph (11) the 
                following:
            ``(12) the total amount deducted from the employee's wages 
        under a personal investment payroll deduction plan established 
        under part B of title II of the Social Security Act.''.
            (3) Exemption from erisa requirements.--Section 4(b) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1003(b)) is amended--
                    (A) in paragraph (4), by striking ``or'';
                    (B) in paragraph (5), by striking the period and 
                inserting ``; or''; and
                    (C) by inserting after paragraph (5) the following:
            ``(6) such plan is a personal investment payroll deduction 
        plan established under part B of title II of the Social 
        Security Act and does not provide for employer 
        contributions.''.
            (4) Effective date and notice requirements.--
                    (A) Effective date.--The amendments made by this 
                subsection (and any personal investment payroll 
                deduction plan required thereunder) apply with respect 
                to wages paid after December 31, 1997, for pay periods 
                ending after such date and self-employment income for 
                taxable years beginning after such date.
                    (B) Notice requirements.--
                            (i) In general.--Not later than October 1, 
                        1997, the Commissioner of Social Security 
                        shall--
                                    (I) send to the last known address 
                                of each eligible individual a 
                                description of the program established 
                                by the amendments made by this section, 
                                which shall be written in the form of a 
                                pamphlet in language which may be 
                                readily understood by the average 
                                worker,
                                    (II) provide for toll-free access 
                                by telephone from all localities in the 
                                United States to the Social Security 
                                Administration through which 
                                individuals may obtain information and 
                                answers to questions regarding such 
                                program, and
                                    (III) provide information to the 
                                media in all localities of the United 
                                States about such program and such 
                                toll-free access by telephone.
                            (ii) Eligible individual.--For purposes of 
                        this subparagraph, the term ``eligible 
                        individual'' means an individual who, as of the 
                        date of the pamphlet sent pursuant to clause 
                        (i), is indicated within the records of the 
                        Social Security Administration as--
                                    (I) not having attained age 55, and
                                    (II) being credited with 1 or more 
                                quarters of coverage under section 213 
                                of the Social Security Act (42 U.S.C. 
                                413).
                            (iii) Matters to be included.--The 
                        Commissioner shall include with the pamphlet 
                        sent to each eligible individual pursuant to 
                        clause (i)--
                                    (I) a statement of the number of 
                                quarters of coverage indicated in the 
                                records of the Social Security 
                                Administration as of the date of the 
                                description as credited to such 
                                individual under section 213 of such 
                                Act and the date as of which such 
                                records may be considered accurate, and
                                    (II) the number for toll-free 
                                access by telephone established by the 
                                Commissioner pursuant to clause (i).
    (c) Adjustments to Primary Insurance Amounts.--
            (1) In general.--Section 215 of the Social Security Act (42 
        U.S.C. 415) is amended by adding at the end the following:

  ``Adjustment of Primary Insurance Amount of Eligible Employees and 
            Eligible Self-Employed Individuals Under Part B

    ``(j)(1) Except as provided in paragraph (2), in the case of an 
individual who is--
            ``(A) an eligible employee, as defined under section 
        255(3), or
            ``(B) an eligible self-employed individual, as defined 
        under section 255(4),
such individual's primary insurance amount shall be determined under 
subsection (a)(1)(A) (before subsequent adjustments made under 
subsection (i)), by substituting the first, second, and third primary 
insurance amount factors determined in the following table for the 
primary insurance amount factors `90', `32', and `15' in clauses (i), 
(ii), and (iii), respectively:

      

                                                                        
------------------------------------------------------------------------
                                The PIA factors for such individual are:
 ``If individual's age in 1998 -----------------------------------------
              is:                  First:        Second:       Third:   
------------------------------------------------------------------------
25 and under..................           90            23             9 
26 to 35......................           90            26            12 
35 to 45......................           90            29            13 
45 to 55......................           90            30            14 
55 and over...................           90            32           15. 
------------------------------------------------------------------------

    ``(2)(A) In the case of an individual described in paragraph (1) 
who has not attained age 55 in 1998 and who becomes entitled to 
disability insurance benefits under section 223 or dies before 
attaining age 62, such individual's second and third primary insurance 
amount factors shall equal such factors contained in the table in 
paragraph (1) for individuals who have attained age 55 or over in 1998, 
reduced by the amount described in subparagraph (B).
    ``(B) The amount described in this subparagraph is equal to--
            ``(i) the excess of--
                    ``(I) the second (or third) primary insurance 
                amount factor contained in the table in paragraph (1) 
                for individuals who have attained age 55 or over in 
                1998, over
                    ``(II) the second (or third) primary insurance 
                amount factor contained in such table for individuals 
                of the age of the individual in 1998; multiplied by--
            ``(ii) the fraction--
                    ``(I) the numerator of which is the number of years 
                such individual is alive and not disabled after age 21 
                (or after 1998, if later) and before age 62, and
                    ``(II) the denominator of which is 40 (or the 
                number of years after 1998 and before the year the 
                individual attains age 62, if less).''.
            (2) Conforming amendment to railroad retirement act of 
        1974.--Section 1 of the Railroad Retirement Act of 1974 (45 
        U.S.C. 231) is amended by adding at the end the following:
    ``(s) In applying applicable provisions of the Social Security Act 
for purposes of determining the amount of the annuity to which an 
individual is entitled under this Act, such individual shall not be 
treated as an `eligible individual' as defined in section 253(4) of the 
Social Security Act.''.
            (3) Effective date.--The amendments made by this subsection 
        apply with respect to months after December 1997.

SEC. 3. PHASED IN INCREASE IN SOCIAL SECURITY RETIREMENT AGES.

    (a) Normal Retirement Age.--Section 216(l) of the Social Security 
Act (42 U.S.C. 416(l) is amended--
            (1) in paragraph (1), by striking subparagraphs (B), (C), 
        (D), and (E) and inserting the following:
            ``(B)(i)(I) except as provided in clause (ii), with respect 
        to an individual who attains age 62 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 January 2000 and 
        ending with December of the year in which the individual 
attains age 62,
            ``(II) with respect to an individual who attains age 62 
        after December 31, 2028, 70 years of age, and
            ``(III) with respect to an individual who attains age 62 
        after December 31, 2029, 70 years of age plus \1/24\ of the 
        number of months in the period beginning with January 2030 and 
        ending with December of the year in which the individual 
        attains age 62 (rounded down to a full month); and
            ``(ii) in the case of widow's or widower's insurance 
        benefits, with respect to an individual who attains age 60 
        after December 31, 1999, and before January 1, 2029, 63 years 
        of age plus \2/12\ of the number of months in the period 
        beginning with January 2000 and ending with December of the 
        year in which the individual attains age 60,
            ``(II) with respect to an individual who attains age 60 
        after December 31, 2028, 68 years of age, and
            ``(III) with respect to an individual who attains age 60 
        after December 31, 2029, 68 years of age plus \1/24\ of the 
        number of months in the period beginning with January 2030 and 
        ending with December of the year in which the individual 
        attains age 60 (rounded down to a full month).''; and
            (2) by striking paragraph (3).
    (b) Early Retirement Age.--Section 216(l)(2) of the Social Security 
Act (42 U.S.C. 416(l)(2)) is amended to read as follows:
    ``(2) The term `early retirement age' means--
            ``(A) except as otherwise provided in this paragraph, age 
        62 in the case of an old-age, wife's, or husband's insurance 
        benefit, and age 60 in the case of a widow's or widower's 
        insurance benefit;
            ``(B)(i)(I) except as provided in clause (ii), with respect 
        to an individual who attains age 62 after December 31, 1999, 
        and before January 1, 2017, 62 years of age plus \2/12\ of the 
        number of months in the period beginning with January 2000 and 
        ending with December of the year in which the individual 
        attains age 62,
            ``(II) with respect to an individual who attains age 62 
        after December 31, 2016, 65 years of age, and
            ``(III) with respect to an individual who attains age 62 
        after December 31, 2029, 65 years of age plus \1/24\ of the 
        number of months in the period beginning with January 2030 and 
        ending with December of the year in which the individual 
        attains age 62 (rounded down to a full month); and
            ``(ii)(I) in the case of widow's and widower's insurance 
        benefits, with respect to an individual who attains age 60 
        after December 31, 1999, and before January 1, 2017, 60 years 
        of age plus \2/12\ of the number of months in the period 
        beginning with January 2000 and ending with December of the 
        year in which the individual attains age 60,
            ``(II) with respect to such an individual who attains age 
        60 after December 31, 2016, 63 years of age, and
            ``(III) with respect to such an individual who attains age 
        60 after December 31, 2029, 63 years of age plus \1/24\ of the 
        number of months in the period beginning with January 2030 and 
        ending with December of the year in which the individual 
        attains age 60 (rounded down to a full month).''.
    (c) Reduction in Benefits for Early Retirees Maintained at Current 
Level.--Section 202(q)(9)(A) of the Social Security Act (42 U.S.C. 
402(q)(9)(A)) is amended by inserting ``, but in no event shall be 
greater than 30 percent'' before the semicolon.

SEC. 4. MODIFICATION OF CPI CALCULATION FOR SOCIAL SECURITY COLAS.

    Notwithstanding any other provision of title II of the Social 
Security Act, with respect to calculations made after December 31, 
1997, with respect to any cost-of-living calculation under such title, 
the Bureau of Labor Statistics of the Department of Labor shall reduce 
the annual percentage change in the Consumer Price Indexes, as 
determined without regard to this section, by .5 percentage point.
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