1.Short title and table of contents
(a)This Act may be cited as the Social Security Personal Savings Guarantee and Prosperity Act of 2004
.
(b)The table of contents is as follows:
Sec. 1. Short title and table of contents
Sec. 2. Establishment of Personal Social Security Investment Program
Part A—Insurance Benefits
Part B—Personal Social Security Savings Program
Sec. 251. Definitions
Sec. 252. Social Security Personal Savings Fund
Sec. 253. Participation in Program
Sec. 254. Personal social security savings accounts
Sec. 255. Benefit credit certificates
Sec. 256. Tier I Investment Fund
Sec. 257. Tier II Investment Fund
Sec. 258. Tier III Investment Options
Sec. 259. Personal social security savings annuity and other distributions
Sec. 260. Guarantee of promised benefits
Sec. 261. Personal Social Security Savings Account Board
Sec. 262. Executive Director
Sec. 3. Adjustments to primary insurance amounts
Sec. 4. General fund transfers to the Federal Old-Age and Survivors Insurance Trust Fund
Sec. 5. Tax treatment of accounts
Sec. 6. Self-Liquidating Social Security Transition Fund
Sec. 7. Issuance of Transition Fund Bonds
Sec. 8. Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings Program
Sec. 9. Budgetary treatment of social security
Sec. 10. Dedication of budget surpluses to saving social security
Sec. 11. National spending limitation
Sec. 12. Imposition of spending limitations on congressional budget resolutions
Sec. 13. Reduction of FICA rates resulting from Personal Social Security Savings Program
2.Establishment of Personal Social Security Investment Program
(a)Title II of the Social Security Act is amended—
(1)by inserting before section 201 the following:
A; and
(2)by adding at the end the following new part:
BPersonal Social Security Savings Program
251.For purposes of this part—
(1)The term participating individual
has the meaning provided in section 253(a).
(2)The term Board
means the Personal Social Security Savings Account Board established under section 261.
(3)The term Executive Director
means the Executive Director appointed under section 262.
(4)Personal social security savings accountThe term personal social security savings account
means an account established under section 254(a).
(5)Personal social security savings annuityThe term personal social security savings annuity
means an annuity approved by the Board under section 259(b)(3).
(6)The term Savings Fund
means the Social Security Personal Savings Fund established under section 252.
(7)The term Tier I Investment Fund
means the trust fund created under section 256.
(8)The term Tier II Investment Fund
means the trust fund created under section 257.
(9)Tier III Investment OptionThe term Tier III Investment Option
means an investment option which is—
(A)offered by an eligible entity certified by the Board under section 258(b); and
(B)approved by the Board under section 258(c).
252.Social Security Personal Savings Fund
(a)Establishment of Savings Fund
(1)There is established in the Treasury of the United States a trust fund to be known as the Social Security Personal Savings Fund
.
(2)The Savings Fund shall consist of all amounts transferred to or deposited into the Savings Fund under subsection (b), increased by the total net earnings from investments of sums in the Savings Fund and reduced by the total net losses from investments of the Savings Fund.
(3)The Board shall serve as trustees of the Savings Fund.
(4)Budget authority; appropriationThis part constitutes budget authority in advance of appropriations Acts and represents the obligation of the Board to provide for the payment of amounts provided under this part. The amounts held in the Savings Fund are appropriated and shall remain available without fiscal year limitation.
(b)
(1)During each calendar year, the Secretary of the Treasury shall deposit into the Savings Fund, from amounts held in the Federal Old-Age and Survivors Insurance Trust Fund, a total amount equal, in the aggregate, to 100 percent of the redirected social security contribution for such calendar year of each individual who is a participating individual for such calendar year.
(2)Transfers based on estimates
(A)The amounts deposited pursuant to paragraph (1) shall be transferred in at least weekly payments from the Federal Old-Age and Survivors Insurance Trust Fund to the Savings Fund.
(B)The amounts transferred under subparagraph (A) shall be determined on the basis of estimates, made by the Commissioner of Social Security and certified to the Secretary of the Treasury, of the wages paid to, and self-employment income derived by, participating individuals. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than actual amounts transferred.
(3)Redirected social security contributionsFor purposes of paragraph (1)——
(A)The term redirected social security contributions
means, with respect to an individual for a calendar year, the sum of—
(i)the product derived by multiplying—
(I)the sum of the total wages paid to, and self-employment income derived by, such individual during such calendar year, to the extent such total wages and self-employment income do not exceed the base amount for such calendar year; by
(II)10 percent; and
(ii)the product derived by multiplying—
(I)the sum of the total wages paid to, and self-employment income derived by, such individual during such calendar year, to the extent such total wages and self-employment income exceed the base amount (taking into account the limits imposed by the contribution and benefit base under section 230); by
(II)5 percent.
(B)For purposes of subparagraph (A)—
(i)The base amount for calendar year 2005 is $10,000.
(ii)Adjustments to base amountThe base amount for any calendar year after 2005 is the product derived by multiplying $10,000 by a fraction—
(I)the numerator of which is the national average wage index (as defined in section 209(k)) for the first of the 2 preceding calendar years; and
(II)the denominator of which is the national average wage index (as so defined) for 2003.
(c)The sums in the Savings Fund are appropriated and shall remain available without fiscal year limitation—
(1)to invest funds in the Tier I Investment Fund of the Savings Fund and the Tier II Investment Fund of the Savings Fund under sections 256 and 257, respectively;
(2)to transfer into Tier III Investment Options under section 258;
(3)to make distributions in accordance with section 259; and
(4)to pay the administrative expenses of the Board in accordance with subsection (e).
(d)Limitations on use of funds
(1)Sums in the Savings Fund credited to a participating individual’s personal social security savings account may not be used for, or diverted to, purposes other than for the exclusive benefit of the participating individual or the participating individual’s beneficiaries under this part.
(2)Sums in the Savings Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process.
(e)Payment of administrative expensesAdministrative expenses incurred to carry out this part shall be paid out of net earnings in the Savings Fund in conjunction with the allocation of investment earnings and losses under section 254(c).
(f)The sums in the Savings Fund shall not be appropriated for any purpose other than the purposes specified in this part and may not be used for any other purpose.
253.
(a)For purposes of this part, the term participating individual
means any individual—
(1)
(A)who receives wages in any calendar year after December 31, 2004, on which there is imposed a tax under section 3101(a) of the Internal Revenue Code of 1986, or
(B)who derives self-employment income for a taxable year beginning after December 31, 2004, on which there is imposed a tax under section 1401(a) of the Internal Revenue Code of 1986,
(2)who is born on or after January 1, 1950, and
(3)who has not filed an election to renounce such individual’s status as a participating individual under subsection (b) or has filed such an election and has subsequently filed an election to reinstate such individual’s status as a participating individual under subsection (c).
(b)Renunciation of participation
(1)An individual—
(A)who has not attained retirement age (as defined in section 216(l)(1)), and
(B)with respect to whom no distribution has been made from amounts credited to the individual’s personal social security savings account for the purchase of a personal social security savings annuity,may elect, in such form and manner as shall be prescribed in regulations of the Board, to renounce such individual’s status as a participating individual
for purposes of this part. Upon completion of the procedures provided for under paragraph (2), any such individual who has made such an election shall not be treated as a participating individual under this part, effective as if such individual had never been a participating individual. The Board shall provide for immediate notification of such election to the Commissioner of Social Security, the Secretary of the Treasury, and the Executive Director.
(2)The Board shall prescribe by regulation procedures governing the termination of an individual's status as participating individual
pursuant to an election under this subsection. Such procedures shall include—
(A)prompt closing of the individual’s personal social security savings account established under section 254,
(B)revocation of any benefit credit certificate assigned to the individual’s personal social security savings account under section 255, and
(C)prompt transfer to the Federal Old-Age and Survivors Insurance Trust Fund as general receipts of any amount held in the Tier II Investment Fund of the Savings Fund or under a Tier III Investment Option pursuant to section 257 or 258 and credited to such individual’s personal social security savings account.
(c)Reinstatement of participation
(1)Any individual who has filed an election under subsection (b) to renounce such individual's status as a participating individual
under this part may elect, in such form and manner as shall be prescribed in regulations of the Board, to reinstate such status. Such regulations shall provide for regular, periodic opportunities for the filing of such an election. The Board shall provide for immediate notification to the Commissioner of Social Security, the Secretary of the Treasury, and the Executive Director of such election.
(2)Effectiveness of reinstatementAn election under this subsection shall be effective with respect to wages earned, and self-employment income derived, on the earliest date on which the Board determines is practicable to make such election effective following the date of the filing of the election. The individual filing the election shall be treated as becoming a participating individual under this part on the effective date of the election as if such individual first met the requirements of subsection (a) on such date.
(3)An election under this subsection shall be irrevocable.
254.Personal social security savings accounts
(a)Establishment of publicly administered system of personal security savings accountsAs soon as practicable after the later of January 1, 2005, or the date on which an individual becomes a participating individual under this part, the Executive Director shall establish a personal social security savings account for such individual. Such account shall be the means by which amounts held in the Tier I Investment Fund and the Tier II Investment Fund of the Savings Fund under sections 256 and 257 and amounts held under Tier III Investment Options under section 258 are credited to such individual, under procedures which shall be established by the Board by regulation. Each account of a participating individual shall be identified to such participating individual by means of the participating individual’s social security account number.
(b)The balance in a participating individual’s account at any time is the sum of—
(1)the balance in the Tier I Investment Fund of the Savings Fund credited to such participating individual prior to transfer of the credited amount to the Tier II Investment Fund of the Savings Fund; plus
(2)the excess of—
(A)all deposits in the Tier II Investment Fund of the Savings Fund credited to such participating individual’s personal social security savings account, subject to such increases and reductions as may result from allocations made to and reductions made in the account pursuant to subsection (c)(1); over
(B)amounts paid out of the Tier II Investment Fund in connection with amounts credited to such participating individual’s personal social security savings account; plus
(3)the excess of—
(A)the deposits in the Tier III Investment Options credited to such participating individual’s personal social security savings account, subject to such increases and reductions as may result from amounts credited to, and reductions made in, the account pursuant to subsection (c)(2); over
(B)amounts paid out of the Tier III Investment Options of such participating individual.The calculation made under paragraph (3) shall be made separately for each Tier III Investment Option of the participating individual. The Board shall also hold for the participating individual any benefit credit certificate assigned to the participating individual’s personal social security savings account under section 255.
(c)Allocation of earnings and lossesPursuant to regulations which shall be prescribed by the Board, the Executive Director shall allocate to each personal social security savings account an amount equal to the net earnings and net losses from each investment of sums—
(1)in the Tier I Investment Fund and the Tier II Investment Fund which are attributable to sums credited to such account reduced by an appropriate share of the administrative expenses paid out of the net earnings, as determined by the Executive Director; and
(2)in the Tier III Investment Options which are attributable to sums credited to such account reduced by the administrative expenses paid out of the net earnings.
255.Benefit credit certificates
(a)As soon as is practicable after a personal social security savings account is established under this part with respect to any participating individual, the Board shall certify the establishment of such account to the Secretary of the Treasury, and, upon receipt of such certification, such Secretary shall assign to the account of such individual a benefit credit certificate. The benefit credit certificate shall be evidenced by a paper instrument provided to the participating individual setting forth the terms specified in this section, and stating on its face that the certificate shall be incontestable in the hands of the bearer, that the certificate is supported by the full faith and credit of the United States, and that the United States is pledged to the satisfaction of the terms of the certificate as provided in this section.
(b)
(1)The benefit credit certificate shall have an initial face value equal to the total estimated actuarial present value of the future monthly insurance benefits under section 202 to which the participating individual would be entitled, and to which other individuals would be entitled under section 202 based on the participating individual’s wages and self-employment income, payable on or after the date on which such individual becomes entitled to old-age insurance benefits under section 202(a) (or the date of such individual’s death, if earlier) determined under current law as in effect on the date of the determination, using the assumptions provided under paragraph (2) and taking into account the reduction in the participating individual’s primary insurance amount under section 215(j).
(2)The actuarial present value determined under paragraph (1) shall be determined—
(A)taking into account solely wages and self-employment income credited to the participating individual as of the date of the determination (including any amounts creditable to such individual as of such date but not yet credited as of such date, as estimated in accordance with regulations which shall be prescribed by the Board),
(B)assuming that the participating individual would become entitled to old-age insurance benefits under section 202(a) on the day such individual would attain retirement age (as defined in section 216(l)(1)), and
(C)using reasonable actuarial and economic assumptions concerning mortality rates, discount rates, wage growth, and other relevant factors.
(3)Not less than annually, the Board shall update the face value of the benefit credit certificate to reflect any changes in the total estimated actuarial present value of the future monthly benefits described in paragraph (1), as determined under this subsection as of the date of the update.
(c)Redemption of a benefit credit certificate assigned to a participating individual’s personal social security savings account shall be obtained only by means of the receipt of benefits under section 202 by individuals entitled to such benefits under part A, based on the wages and self-employment income of such participating individual, on or after the date on which the participating individual becomes entitled to old-age insurance benefits under section 202(a) (or the date of such individual’s death, if earlier), taking into account section 215(j). Payment of such benefits shall constitute full redemption of such certificate.
256.
(a)Establishment of Tier I Investment Fund
(1)The Savings Fund shall include a separate fund to be known as the Tier I Investment Fund
.
(2)The Tier I Investment Fund consists of all amounts derived from payments into the Fund under section 252(b) and remaining after investment of such amounts under subsection (b), including additional amounts derived as income from such investments.
(3)The amounts held in the Fund are appropriated and shall remain available without fiscal year limitation—
(A)to be held for investment on behalf of participating individuals under subsection (b),
(B)to pay the administrative expenses related to the Fund, and
(C)to make transfers from the Fund under subsection (c)(2).
(b)Investment of Fund balanceFor purposes of investment of the Tier I Investment Fund, the Board shall contract with appropriate professional asset managers, recordkeepers, and custodians selected for investment of amounts held in the Fund, so as to provide for investment of the balance of the Fund, in a manner providing broad diversification in accordance with regulations of the Board, in—
(1)insurance contracts,
(2)certificates of deposit, or
(3)other instruments or obligations selected by such asset managers,which return the amount invested and pay interest, at a specified rate or rates, on that amount during a specified period of time.
(c)Separate crediting to personal social security savings accounts and transfers to the Tier II Investment Fund or to Tier III Investment Options
(1)
(A)Subject to this paragraph, the Board shall provide for prompt, separate crediting, as soon as practicable, of the amounts deposited in the Tier I Investment Fund to the personal social security savings account of each participating individual with respect to the redirected social security contributions (as defined in section 252(b)(3)) of such participating individual. The Board shall include in such crediting, with respect to each such individual, any increases or decreases in such amounts so as to reflect the net returns and losses from investment of the balance of the Fund prior to such crediting. For purposes of determining such increases and decreases for each calendar year, the amounts deposited into the Fund in connection with such individual during such calendar year shall be deemed to have been deposited on June 30 of such year.
(B)Treatment of married participating individualsIf the participating individual is married as of the end of the calendar year in which the amounts to be credited were deposited in the Tier I Investment Fund and the spouse is also a participating individual, the personal social security savings account of the participating individual and the personal social security savings account of his or her spouse shall each be credited with 50 percent of such amounts.
(2)Transfers from the Tier I Investment FundIn accordance with elections filed with the Board by a participating individual, any amount credited to the personal social security savings account of such participating individual under paragraph (1) shall be promptly transferred to the Tier II Investment Fund of the Savings Fund for investment in accordance with section 257 and, to the extent available under section 258, to Tier III Investment Options in accordance with section 258.
(d)Treatment of amounts held in Tier I Investment FundSubject to this part—
(1)until amounts deposited into the Tier I Investment Fund during any calendar year are credited to personal social security savings accounts, such amounts shall be treated as the unallocated property of all participating individuals with respect to whom amounts were deposited in the Fund during such year, jointly held in trust for such participating individuals in the Savings Fund, and
(2)amounts deposited into the Fund which are credited to the personal social security savings account of a participating individual shall be treated as property of the participating individual, held in trust for such participating individual in the Savings Fund.
257.
(a)Establishment of Tier II Investment Fund
(1)The Savings Fund shall include a separate fund to be known as the Tier II Investment Fund
.
(2)The Tier II Investment Fund consists of all amounts derived from payments into the Fund under section 256(c)(2) and remaining after investment of such amounts under subsection (b), including additional amounts derived as income from such investments.
(3)The amounts held in the Fund are appropriated and shall remain available without fiscal year limitation—
(A)to be held for investment under subsection (b),
(B)to pay the administrative expenses related to the Fund, and
(C)to make transfers to Tier III Investment Options under section 258 or to make payments under section 259.
(b)Payments into Tier II Investment Fund
(1)Upon the crediting under section 252 to the personal social security savings account of a participating individual of any amount held in the Tier I Investment Fund for any calendar year, the Board shall transfer from the Tier I Investment Fund into the Tier II Investment Fund any amount so credited to such participating individual’s account which is not transferred to a Tier III Investment Option pursuant to an election under section 258(a).
(2)Ongoing separate creditingSubject to this paragraph, the Board shall provide for ongoing separate crediting to each participating individual’s personal social security savings account of the amounts deposited in the Tier II Investment Fund with respect to such participating individual, together with any increases or decreases therein so as to reflect the net returns and losses from investment thereof while held in the Fund.
(c)Investment in equities and fixed income instruments in 3 alternative investment accounts
(1)For purposes of investment of the Tier II Investment Fund, the Board shall divide the Fund into 3 investment accounts. Such accounts shall consist of the 65/35 investment account, the 50/50 investment account, and the 80/20 investment account. The Board shall contract with appropriate investment managers, recordkeepers, and custodians selected for investment of amounts held in each investment account.
(2)Rules relating to investment accounts
(A)The investment manager, recordkeeper, and custodian selected for investment of amounts held in each investment account referred to paragraph (1) shall invest such amounts under regulations which shall be prescribed by the Board so as to ensure, to the maximum extent practicable, that, of the total balance in the Fund credited to such account and available for investment (after allowing for administrative expenses)—
(i)the prescribed equities percentage is invested in equities in accordance with paragraph (4), and
(ii)the prescribed fixed income instruments percentage is invested in fixed income instruments in accordance with paragraph (5).
(B)For purposes of subparagraph (A)—
(i)The 65/35 investment accountIn the case of the 65/35 investment account—
(I)the prescribed equities percentage is 65 percent, and
(II)the prescribed fixed income instruments percentage is 35 percent.
(ii)The 50/50 investment accountIn the case of the 50/50 investment account—
(I)the prescribed equities percentage is 50 percent, and
(II)the prescribed fixed income instruments percentage is 50 percent.
(iii)The 80/20 investment accountIn the case of the 80/20 investment account—
(I)the prescribed equities percentage is 80 percent, and
(II)the prescribed fixed income instruments percentage is 20 percent.
(3)Election of investment options
(A)Default investment accountExcept as provided in an election in effect under subparagraph (B), amounts held in the Tier II Investment Fund shall be credited to the 65/35 investment account.
(B)Election of transfers between investment accountsIn any case in which a participating individual who has an amount in such individual’s personal social security savings account credited to any of the investment accounts in the Tier II Investment Fund files with the Secretary of the Treasury a written election under this subparagraph, not more frequently than annually and in accordance with regulations of the Board, the Secretary of the Treasury shall transfer the full amount so credited in such investment account from such investment account to any one of the other investment accounts in the Tier II Investment Fund (whichever is designated in such election).
(4)In accordance with regulations which shall be prescribed by the Board, the Board shall establish standards which must be met by equities selected for investment of the balance of the Tier II Investment Fund pursuant to paragraph (2)(A)(i). In conformity with such standards, the Board shall select, for purposes of such investment, indices which are comprised of equities the aggregate market value of which is, in each case, a reasonably broad representation of companies whose shares are traded on the equity markets. Amounts invested in equities under an investment option shall be held in a portfolio designed to replicate the performance of one or more of such indices.
(5)Investment in fixed income instrumentsIn accordance with regulations which shall be prescribed by the Board, the Board shall establish standards which must be met by fixed income instruments selected for investment of the balance of the Tier II Investment Fund pursuant to paragraph (2)(A)(ii). Such standards shall take into account the competing considerations of risk and return. Amounts invested in fixed income instruments in an investment option shall be held in a portfolio which shall consist of a diverse range of fixed income instruments, taking into full account the opposing considerations of risk and maximization of return.
(6)Disclosure of administrative costsThe Executive Director shall provide to each participating individual an annual disclosure of the rate of administrative costs chargeable with respect to investment in each investment account in the Tier II Investment Fund. Such disclosure shall be written in a manner calculated to be understood by the average participating individual.
(d)Adjustment of prescribed percentages and allowance of additional investment accounts
(1)The Board may from time to time, as determined by regulation as appropriate to further the purposes of this section, shall—
(A)prescribe by regulation adjustments to the prescribed percentages for each investment account,
(B)establish investment accounts in the Tier II Investment Fund meeting the requirements of this section in addition to those established by this section, and
(C)terminate investment accounts in the Tier II Investment Fund.
(2)80 percent limit on equitiesNo investment account in the Tier II Investment Fund, after any exercise of the Board’s authority under paragraph (1), may be invested otherwise than in a combination of equities and fixed income investments or have a prescribed equities percentage of more than 80 percent.
(e)Treatment of amounts held in Tier II Investment FundSubject to this part, amounts deposited into, and held and accounted for in, the Tier II Investment Fund with respect to any participating individual shall continue to be treated as property of such participating individual, held in trust for such participating individual in the Fund.
258.Tier III Investment Options
(a)Election of Tier III Investment Options
(1)A participating individual may elect to direct transfers from amounts in the Savings Fund credited to the personal social security savings account of such individual into 1 or more Tier III Investment Options in accordance with paragraph (2).
(2)Commencement of Tier III investment options upon attainment of election thresholdIn any case in which, as of the end of any calendar year, the total balance in the Savings Fund credited to a participating individual’s personal social security savings account exceeds for the first time the election threshold, the Board shall, by regulation, provide for an opportunity for such participating individual to make, at any time thereafter, such individual’s first election of one or more of the Tier III Investment Options for investment of an amount in the Savings Fund credited to such account. Such election may be in lieu of or in addition to investment in the options available with respect to the Tier II Investment Fund of the Savings Fund.
(3)In the case of an election under paragraph (1), funds credited to the personal social security savings account of the participating individual and elected for transfer to one or more Tier III Investment Options shall be transferred to the Tier III Investment Options so elected for such calendar year, in percentages specified in the election by the participating individual for each applicable portfolio.
(4)
(A)Subject to subparagraph (B), for purposes of this subsection the term `election threshold' means an amount equal to $7,000.
(B)The Board shall adjust annually (effective for annual reporting months occurring after December 2005) the dollar amount set forth in subparagraph (A) under procedures providing for adjustments in the same manner and to the same extent as adjustments are provided for under the procedures used to adjust benefit amounts under section 215(i)(2)(A), except that any amount so adjusted that is not a multiple of $1.00 shall be rounded to the nearest multiple of $1.00.
(5)Subsequent investment of amounts held in Tier III Investment OptionsAny amounts held in one or more Tier III Investment Options may be—
(A)transferred at any time to one or more other Tier III Investment Options, subject to applicable regulations of the Board and the terms governing the affected Tier III Investment Options, and
(B)transferred, not more frequently than annually, to the Tier II Investment Fund, for deposit in the applicable investment account then selected by the participating individual under section 257.
(b)Certification of eligible entities
(1)The Board shall certify eligible entities to offer Tier III Investment Options under this part.
(2)Any eligible entity that desires to be certified by the Board to offer a Tier III Investment Option shall submit an application to the Board at such time, in such manner, and containing such information as the Board may require.
(3)Requirements for approvalThe Board shall not certify an eligible entity unless such eligible entity agrees to the following requirements:
(A)Each eligible entity shall, with respect to each Tier III Investment Option offered by such eligible entity to participating individuals—
(i)establish separate accounts for the contributions of each participating individual, and any earnings properly allocable to the contributions, and
(ii)maintain separate recordkeeping with respect to each account.
(B)Treatment of amounts held in FundAmounts deposited into, and held and accounted for in, a Tier III Investment Option with respect to any participating individual shall be treated as property of such participating individual, held in trust for such participating individual.
(C)Amounts held and accounted for with respect to a participating individual shall be held in a trust created or organized in the United States for the exclusive benefit of such individual or his beneficiaries.
(D)Exemption from third party claimsEach Tier III Investment Option shall be exempt from any and all third party claims against the eligible entity.
(E)Disclosure of administrative costsEach eligible entity offering a Tier III Investment Option under this section shall provide to each participating individual an annual disclosure of the rate of administrative costs chargeable with respect to investment in such Option. Such disclosure shall be written in a manner calculated to be understood by the average participating individual. The Board shall provide for coordination of disclosures with respect to Tier III Investment Options under this subparagraph so as to assist participating individuals in comparing alternative Options based on administrative costs.
(F)Reporting to the Executive Director and the BoardEach eligible entity shall provide reports to the Executive Director and the Board at such time, in such manner, and containing such information as the Board may require.
(4)For purposes of this section, the term eligible entity
means any investment company (as defined in section 3 of the Investment Company Act of 1940) or other person that the Board determines appropriate to offer Tier III Investment Options under this part.
(c)Approval of Tier III Investment Options
(1)No funds may be transferred into a Tier III Investment Option unless the Board has approved an application submitted under paragraph (2) with respect to the option.
(2)With respect to each Tier III Investment Option an eligible entity certified under subsection (b)(1) seeks to offer, such entity shall submit an application to the Board at such time, in such manner, and containing such information as the Board may require.
(3)Qualifications for approvalThe Board may not approve an application submitted under paragraph (2) in connection with a Tier III Investment Option unless the following requirements are met:
(A)Must be offered by certified eligible entityThe Tier III Investment Option is offered by an eligible entity certified under subsection (b).
(B)Appropriate allocation of investments between equities and fixed income instrumentsThe amount credited to a participating individual’s personal social security savings account which is held for investment in any Tier III Investment Option is invested in a combination of equities and fixed income instruments so as to ensure, to the maximum extent practicable, that the percentage of such amount invested in equities is not more than 85 percent and not less than 45 percent.
(C)
(i)The Tier III Investment Option meets qualifications which shall be prescribed by the Board relating to the quality factors described in clause (ii).
(ii)The quality factors described in this clause are—
(I)the safety and soundness of the Tier III Investment Option's proposed investment policy;
(II)the experience and record of performance of the proposed investment option, if any;
(III)the experience and record of performance of the entity issuing or offering such option; and
(IV)such other factors as the Board may determine appropriate.
(d)Considerations for certification and approvalIn determining whether to certify an eligible entity under subsection (b) or to approve a Tier III Investment Option under subsection (c), the Board shall—
(1)act in the best interests of the participating individuals;
(2)base its determination solely on considerations of balancing safety and soundness of the Tier III Investment Option with the maximization of returns of such option; and
(3)not base any determination related to the entity or option on political or other extraneous considerations.
(e)Sponsorship of Tier III Investment Options by Membership and Labor Organizations
(1)A membership or labor organization (as defined by the Board) may sponsor Tier III Investment Options under contracts with eligible entities certified under subsection (b) who shall administer the investment option if such investment option is approved by the Board under subsection (c).
(2)A membership or labor organization (as so defined) may limit to the members of such organization participation in a Tier III Investment Option sponsored by such organization.
(f)Distributions in case of deathUpon the death of a participating individual, the amount of any assets held under a Tier III Investment Option credited to the personal social security savings account of such individual shall be distributed in accordance with section 259(e).
259.Personal social security savings annuity and other distributions
(a)Date of initial distributionExcept as provided in subsection (e), distributions may be made to a participating individual only from amounts credited to the personal social security savings account of such individual on and after the earliest of—
(1)the date the participating individual attains retirement age (as defined in section 216(l)(1)) or, if elected by the individual, early retirement age (as defined in section 216(l)(2)); or
(2)the date on which the amount credited to the participating individual's personal social security savings account is sufficient to purchase a personal social security savings annuity with a monthly benefit that is at least equal to the minimum annuity payment amount (as defined in subsection (b)(2)(C)(iii)).
(b)Personal social security savings annuities
(1)Notice of available annuitiesNot later than the date determined under subsection (a), the Board shall notify each participating individual of—
(A)the most recent listing of personal social security savings annuities approved by the Board under paragraph (3); and
(B)the entitlement of the participating individual to purchase such an annuity.
(2)
(A)Subject to subparagraph (C), on the date elected by the participating individual, but no earlier than the date determined under subsection (a), a participating individual may purchase a personal social security savings annuity selected from among the annuities approved by the Board under paragraph (3).
(B)Upon the selection of an annuity by a participating individual under subparagraph (A), the Board shall provide for the transfer of assets, credited to the personal social security savings account of the participating individual and held in the Tier II Investment Fund or under 1 or more Tier III Investment Options (or any combination thereof), in a total amount sufficient to purchase the annuity selected by the participating individual under such subparagraph.
(C)Minimum annuity payment amount
(i)If, at the time a personal social security savings annuity is purchased under subparagraph (A), the assets credited to the personal social security savings account of the participating individual are sufficient to purchase a personal social security savings annuity approved by the Board under paragraph (3) with a monthly payment that is at least equal to the minimum annuity payment amount, the amount of the monthly benefit provided by such annuity may not be less then the minimum annuity payment amount.
(ii)Nothing in this subparagraph shall be construed to prohibit a participating individual from using personal social security savings account assets to purchase a personal social security savings annuity which provides for a monthly payment in excess of the minimum amount required under clause (i).
(iii)Minimum annuity payment amount definedFor purposes of this part, the term minimum annuity payment amount
means, in connection with any participating individual, the excess of—
(I)the deemed total part A monthly benefit amount with respect to the participating individual, determined as if section 215(j) did not apply, over
(II)the deemed total part A monthly benefit amount with respect to the participating individual, determined with the application of section 215(j).
(iv)Deemed total part a monthly benefit amount
(I)For purposes of clause (iii), the term deemed total part A monthly benefit amount
means, with respect to a participating individual, the total amount which would be payable as monthly insurance benefits under section 202 for the month in which the participating individual attains or would attain early retirement age (as defined in section 216(l)(2)), based on the participating individual’s wages and self-employment income, if the participating individual applied for old-age insurance benefits under section 202(a) during such month and all other individuals who would therefore be eligible for benefits under section 202 for such month based on such wages and self-employment income applied for such benefits during such month.
(II)For purposes of this clause, in the case of a participating individual with respect to whom determinations under this clause are made prior to the month described in subclause (I), the participating individual’s average indexed monthly earnings (within the meaning of section 215(b)) for such month shall be projected, under regulations which shall be prescribed by the Board, on the basis of reasonable actuarial assumptions, and the Board shall assume the survival through the end of such month of all other individuals described in subclause (I).
(3)Approval of personal social security savings annuities and issuers
(A)
(i)The Board shall certify issuers eligible to enter into annuity contracts with participating individuals under this part.
(ii)Any issuer that desires to be certified by the Board to issue a personal social security savings annuity shall submit an application to the Board at such time, in such manner, and containing such information as the Board may require.
(iii)As a condition of certification under paragraph (1), each issuer shall, with respect to each personal social security savings annuity issued by such issuer to participating individuals—
(I)establish a separate account for each participating individual, and
(II)maintain separate recordkeeping with respect to each account.
(iv)Exemption from third party claimsEach personal social security savings annuity shall be exempt from any and all third party claims against the issuer.
(B)Approval of personal social security savings annuities
(i)No funds may be used to purchase a personal social security savings annuity unless the Board has approved an application submitted under clause (ii) with respect to the annuity.
(ii)With respect to each personal social security savings annuity that an issuer certified under subparagraph (A)(i) seeks to issue, such issuer shall submit an application to the Board at such time, in such manner, and containing such information as the Board may require.
(iii)Qualifications for approval
(I)The Board may not approve an application under clause (i) unless the personal social security savings annuity that is the subject of the application meets qualifications which shall be prescribed by the Board relating to the quality factors described in subclause (II) and the application demonstrates that the cost-of-living protection requirement described in subclause (III) are met.
(II)The quality factors described in this subparagraph include the safety and soundness of the annuity, the experience and record of performance of the issuer issuing the annuity, and such other factors as the Board may determine appropriate.
(III)Cost-of-living protection requirementThe cost-of-living requirement of this subclause is met only if the terms governing the annuity include procedures providing for adjustments in the amount of the monthly payments in the same manner and to the same extent as adjustments are provided for under the procedures used to adjust benefit amounts under section 215(i)(2)(A). Nothing in this subclause shall be construed to preclude the terms governing such an annuity from providing for adjustments in the amount of monthly payments resulting in a payment for any month greater than the payment for that month that would result from adjustments required under the preceding sentence.
(c)Purchase of annuities in the event of insufficient assetsIf a participating individual desires to purchase a personal social security savings annuity under subsection (b) on or after the date determined under subsection (a)(1) and the assets of the personal social security savings account of such individual are insufficient to purchase a personal social security savings annuity that provides for a monthly payment that is at least equal to the minimum annuity payment amount (as defined in subsection (b)(2)(C)(iii)), the participating individual shall purchase the largest personal social security savings annuity that the participating individual's personal social security savings account can fund and that otherwise meets the requirements of subsection (b) (including the cost-of-living protection requirement of subsection (b)(3)(B)(iii)(III), and the Board shall provide for appropriate certification to the Secretary of the Treasury with respect to the participating individual’s eligibility for guarantee payments under section 260.
(d)Right to use excess personal social security savings account assetsTo the extent assets credited to a participating individual's personal social security savings account remain after the purchase of an annuity under subsection (b), the remaining assets shall be payable to the participating individual at such time, in such manner, and in such amounts as the participating individual may specify.
(e)Distributions in case of deathIf the participating individual dies before all amounts which are held in the Tier I Investment Fund or the Tier II Investment Fund of the Savings Fund or held under a Tier III Investment Option and which are credited to the personal social security savings account of the individual are otherwise distributed in accordance with this section, such amounts shall be distributed, under regulations which shall be prescribed by the Board—
(1)in any case in which one or more beneficiaries have been designated in advance, to such beneficiaries in accordance with such designation as provided in such regulations, and
(2)in the case of any amount not distributed as described in paragraph (1), to such individual's estate.
(f)Personal social security savings annuityFor purposes of this part, the term `personal social security savings annuity' means an annuity that meets the following requirements:
(1)The annuity starting date (as defined in section 72(c)(4) of the Internal Revenue Code of 1986) commences on the first day of the month beginning after the date of the purchase of the annuity.
(2)The terms of the annuity provide, except in any case described in subsection (c), for a monthly payment to the participating individual during the life of the participating individual equal to at least the minimum annuity payment amount (as defined in subsection (b)(2)(C)(iii)).
(3)The terms of the annuity include such terms and conditions as the Board requires for the protection of the annuitant (including terms meeting the cost-of-living requirement of subsection (b)(3)(B)(iii)(III)).
260.Guarantee of promised benefits
(a)If, for any month ending after the date on which a participating individual attains retirement age (as defined in section 216(l)(1)), the monthly payment under a participating individual's personal social security savings annuity is less than the minimum annuity payment amount (as defined in section 259(b)(2)(C)(iii)), adjusted as provided in section 259(b)(3)(B)(iii)(III), the Board shall so certify to the Secretary of the Treasury and, upon receipt of such certification, such Secretary shall provide to the participating individual, from amounts in the Federal Old-Age and Survivors Insurance Trust Fund, a guaranty payment for such month to supplement the personal social security savings annuity and to guarantee full payment of such individual's monthly promised benefits.
(b)For purposes of subsection (a), a participating individual's guaranty payment for any month is equal to the excess of—
(1)the minimum annuity payment amount (as defined in section 259(b)(2)(C)(iii)), adjusted as provided in section 259(b)(3)(B)(iii)(III); over
(2)the payment for such month of the personal social security savings annuity purchased by the participating individual.
(c)Protection of part a normal retirement benefit levels
(1)In any case in which, for any month ending after the date on which a participating individual attains retirement age (as defined in section 216(l)(1))—
(A)such individual’s assumed total normal retirement part A benefit for such month, determined without the application of section 215(j), exceeds—
(B)the sum of—
(i)such individual’s assumed total normal retirement part A benefit for such month, determined with the application of section 215(j), plus
(ii)the monthly payment payable for such month under such individual’s personal social security savings annuity,the Secretary of the Treasury shall pay to such individual for such month, from amounts in the Federal Old-Age and Survivors Insurance Trust Fund, an additional amount (if any) equal to the excess of the amount described in subparagraph (A) over the amount described in subparagraph (B).
(2)For purposes of this subsection, the term assumed total normal retirement part A benefit
means, in connection with a participating individual, the total amount of monthly insurance benefits under section 202 based on such individual’s wages and self-employment income (adjusted by taking into account adjustments under section 215(i)) that would have been payable if such individual applied for old-age insurance benefits under section 202(a) during the month in which such individual attains retirement age (as defined in section 216(l)(1)).
261.Personal Social Security Savings Account Board
(a)There is established in the executive branch of the Government a Personal Social Security Savings Account Board.
(b)The Board shall be composed of—
(1)3 members appointed by the President, of whom 1 shall be designated by the President as Chairman; and
(2)2 members appointed by the President, of whom—
(A)1 shall be appointed by the President after taking into consideration the recommendation made by the Speaker of the House of Representatives in consultation with the Minority Leader of the House of Representatives; and
(B)1 shall be appointed by the President after taking into consideration the recommendation made by the Majority Leader of the Senate in consultation with the Minority Leader of the Senate.
(c)Appointments under subsection (b) shall be made by and with the advice and consent of the Senate.
(d)Members of the Board shall have substantial experience, training, and expertise in the management of financial investments and pension benefit plans.
(e)
(1)A member of the Board shall be appointed for a term of 4 years, except that of the members first appointed under subsection (b)—
(A)the Chairman shall be appointed for a term of 4 years;
(B)the members appointed under subsection (b)(2) shall be appointed for terms of 3 years; and
(C)the remaining members shall be appointed for terms of 2 years.
(2)
(A)A vacancy on the Board shall be filled in the manner in which the original appointment was made and shall be subject to any conditions that applied with respect to the original appointment.
(B)An individual chosen to fill a vacancy shall be appointed for the unexpired term of the member replaced.
(3)The term of any member shall not expire before the date on which the member's successor takes office.
(f)The Board shall—
(1)administer the program established under this part;
(2)establish policies for the investment and management of the Savings Fund, including the Tier I Investment Fund and the Tier II Investment Fund, and amounts held under Tier III Investment Options, including policies applicable to the asset managers, recordkeepers, and custodians with responsibility for managing the investment of amounts credited to personal social security investment accounts, and for the management and operation of personal social security savings annuities, which shall provide for—
(A)prudent investments suitable for accumulating funds for payment of retirement income;
(B)sound management practices; and
(C)low administrative costs;
(3)review the performance of investments made for the Tier I Investment Fund and the Tier II Investment Fund;
(4)review the performance of investments made under Tier III Investment Options;
(5)review the management and operation of personal social security savings annuities;
(6)review and approve the budget of the Board; and
(7)comply with the fiduciary requirements of part 4 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (relating to fiduciary responsibility) in connection with any exercise of discretion in connection with the assets of the Savings Fund.
(g)Administrative provisions
(1)The Board may—
(A)adopt, alter, and use a seal;
(B)except as provided in paragraph (4), direct the Executive Director to take such action as the Board considers appropriate to carry out the provisions of this part and the policies of the Board in accordance with delegations under this part;
(C)upon the concurring votes of 4 members, remove the Executive Director from office for good cause shown;
(D)provide to the Executive Director such resources as are necessary to carry out the duties of the Executive Director; and
(E)take such other actions as may be necessary to carry out the functions of the Board.
(2)The Board shall meet—
(A)not less than once during each month; and
(B)at additional times at the call of the Chairman.
(3)
(A)Except as provided in paragraph (1)(C), the Board shall perform the functions and exercise the powers of the Board on a majority vote of a quorum of the Board. Three members of the Board shall constitute a quorum for the transaction of business.
(B)A vacancy on the Board shall not impair the authority of a quorum of the Board to perform the functions and exercise the powers of the Board.
(4)Limitations on investmentsThe Board may not direct any person to invest or to cause to be invested any sums in the Tier II Investment Fund or any personal social security investment account in a specific asset or to dispose of or cause to be disposed of any specific asset of such Fund or any such account.
(h)
(1)Each member of the Board who is not an officer or employee of the Federal Government shall be compensated at the daily rate of basic pay for level IV of the Executive Schedule for each day during which such member is engaged in performing a function of the Board.
(2)A member of the Board shall be paid travel, per diem, and other necessary expenses under subchapter I of chapter 57 of title 5, United States Code, while traveling away from such member's home or regular place of business in the performance of the duties of the Board.
(3)Payments authorized under this subsection shall be paid from the Tier I Investment Fund or the Tier II Investment Fund, as determined appropriate by the Board.
(i)Discharge of responsibilitiesThe members of the Board shall discharge their responsibilities solely in the interest of the participating individuals and their beneficiaries under this part.
(j)The Board shall annually engage an independent qualified public accountant to audit the activities of the Board.
(k)Submission of budget to CongressThe Board shall prepare and submit to the President, and, at the same time, to the appropriate committees of Congress, an annual budget of the expenses and other items relating to the Board which shall be included as a separate item in the budget required to be transmitted to Congress under section 1105 of title 31, United States Code.
(l)Submission of legislative recommendationsThe Board may submit to the President, and, at the same time, shall submit to each House of Congress, any legislative recommendations of the Board relating to any of its functions under this part or any other provision of law.
262.
(a)Appointment of Executive DirectorThe Board shall appoint, without regard to the provisions of law governing appointments in the competitive service, an Executive Director by action agreed to by a majority of the members of the Board.
(b)The Executive Director shall, as determined appropriate by the Board—
(1)carry out the policies established by the Board;
(2)invest and manage the Tier I Investment Fund and the Tier II Investment Fund in accordance with the investment policies and other policies established by the Board;
(3)administer the provisions of this part relating to the Tier I Investment Fund and the Tier II Investment Fund; and
(4)prescribe such regulations (other than regulations relating to fiduciary responsibilities) as may be necessary for the administration of this part relating to the Tier I Investment Fund and the Tier II Investment Fund.
(c)The Executive Director may, within the scope of the duties of the Executive Director as determined by the Board—
(1)appoint such personnel as may be necessary to carry out the provisions of this part relating to the Tier I Investment Fund and the Tier II Investment Fund;
(2)subject to approval by the Board, procure the services of experts and consultants under section 3109 of title 5, United States Code;
(3)secure directly from an Executive agency, the United States Postal Service, or the Postal Rate Commission any information necessary to carry out the provisions of this part and the policies of the Board relating to the Tier I Investment Fund and the Tier II Investment Fund;
(4)make such payments out of sums in the Tier I Investment Fund and the Tier II Investment Fund as the Executive Director determines, in accordance with regulations of the Board, are necessary to carry out the provisions of this part and the policies of the Board;
(5)pay the compensation, per diem, and travel expenses of individuals appointed under paragraphs (1), (2), and (6) from the Tier I Investment Fund or the Tier II Investment Fund, in accordance with regulations of the Board;
(6)accept and use the services of individuals employed intermittently in the Government service and reimburse such individuals for travel expenses, authorized by section 5703 of title 5, United States Code, including per diem as authorized by section 5702 of such title;
(7)except as otherwise expressly prohibited by law or the policies of the Board, delegate any of the Executive Director's functions to such employees under the Board as the Executive Director may designate and authorize such successive redelegations of such functions to such employees under the Board as the Executive Director may consider to be necessary or appropriate; and
(8)take such other actions as are appropriate to carry out the functions of the Executive Director..
(b)The amendments made by this section shall apply with respect to wages paid after December 31, 2004, for pay periods ending after such date and self-employment income for taxable years beginning after such date.
3.Adjustments to primary insurance amounts
(a)Section 215 of the Social Security Act (42 U.S.C. 415) is amended by adding at the end the following new subsection:
(j)Adjustment of primary insurance amount in relation to deposits made to personal social security savings accounts
(1)Except as provided in paragraph (3), the primary insurance amount of a participating individual under the Personal Social Security Savings Accounts Program under part B of this title, as determined in accordance with this section before adjustments made under subsection (i), shall be equal to the product derived by multiplying—
(A)the primary insurance amount as determined before the application of this subsection; by
(B)a fraction—
(i)the numerator of which is the excess of—
(I)the total of amount of redirected social security contributions (as defined in section 252(b)(3)) that would have been transferred to the Social Security Personal Savings Fund in connection with such individual for each year after such individual attained the age of 18 had the individual been a participating individual on the date such individual attained the age of 18, over
(II)the present value of the actual total amount of redirected social security contributions (as so defined) deposited in the Social Security Personal Savings Fund in connection with such individual for each year during which such individual was a participating individual,assuming for each year the present value of the amount determined for such year, and
(ii)the denominator of which is the amount described in clause (i)(I),rounded to the next higher multiple of $0.10 where such product is a multiple of $0.05 but not a multiple of $0.10 and to the nearest multiple of $0.10 in any other case.
(2)In determining the present values for purposes of paragraph (1), the Commissioner of Social Security shall assume an annual interest rate for any period equal to the average annual yield on investments of the Federal Old-Age and Survivors Insurance Trust Fund for such period under section 201(d).
(3)In the case of a participating individual who becomes entitled to disability insurance benefits under section 223, such individual's primary insurance amount shall be determined without regard to paragraph (1).
(4)In the case of an individual who becomes entitled to benefits under section 202, other than old-age insurance benefits under section 202(a), on the basis of the wages and self-employment income of a participating individual who dies before such participating individual purchases a personal social security savings annuity under section 259, such participating individual’s primary insurance amount shall be determined under this section without regard to paragraph (1)..
4.General fund transfers to the Federal Old-Age and Survivors Insurance Trust Fund
(a)Recapture of corporate tax on account yields
(1)In the case of fiscal years beginning after September 30, 2004, the Secretary of the Treasury, in consultation with the Personal Social Security Savings Account Board, shall estimate and transfer to the Federal Old-Age and Survivors Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) within 3 months after the end of each fiscal year an amount equal to the recapture amount for such fiscal year. For purposes of the preceding sentence, the recapture amount for any fiscal year shall be equal to the amount of corporate tax receipts under the Internal Revenue Code of 1986 deposited in the Treasury for that fiscal year which are attributable to personal social security savings account investments under part B of title II of the Social Security Act.
(2)In determining the recapture amount under subsection (a) for fiscal years 2005 and 2006, the Secretary of the Treasury shall make the following assumptions concerning the total amount of taxable capital in the United States represented by the total assets held by personal social security savings accounts established under part B of title II of the Social Security Act:
(A)80 percent of such total assets are a net addition to national investments.
(B)Of the amount described in subparagraph (A), 90 percent will be invested in the United States and subject to taxation under the Internal Revenue Code of 1986.
(C)Of the amount described in subparagraph (B), 95 percent will be subject to the Federal corporate tax.
(D)The amount described in subparagraph (C) is subject to the statutory tax rate of 35 percent (resulting in an effective corporate tax rate of 23.9 percent on the earnings of all such total assets).
(b)Recapture of Government savings over baseline
(1)In the case of fiscal years beginning after September 30, 2004, the Secretary of the Treasury, in consultation with the Personal Social Security Savings Account Board, shall estimate and transfer to the Federal Old-Age and Survivors Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) within 3 months after the end of each fiscal year an amount equal to the spending reductions amount for such fiscal year. For purposes of the preceding sentence, the spending reductions amount shall be an amount equal to—
(A)for any fiscal year in the period beginning with fiscal year 2005 and ending with fiscal year 2012, the excess of—
(i)20 percent of the gross domestic product (as determined by the Congressional Budget Office) for the fiscal year for which the determination is made; over
(ii)the product of—
(I)20 percent of the gross domestic product (as so determined) for the fiscal year for which the determination is made; and
(II)0.99, factored a number of times equal to the number of fiscal years during such period which end with or before the fiscal year for which the determination is made; and
(B)for any fiscal year beginning after fiscal year 2012 and ending with the termination year—
(i)the amount determined under subparagraph (A) for fiscal year 2012; increased by
(ii)the rate of growth of the gross domestic product (as so determined) over the period beginning with fiscal year 2013 and ending with the fiscal year for which the determination is made.
(2)Accomodation for low OASDI balance ratioNotwithstanding paragraph (1)(B), in any case in which the OASDI trust fund ratio is less than 125 percent as of the end of the fiscal year preceding each fiscal year during any period of 1 or more fiscal years referred to in paragraph (1)(B) and preceding the termination year—
(A)the spending reductions amount for each fiscal year during such period shall be the excess of—
(i)20 percent of the gross domestic product (as projected by the Department of Commerce) for the fiscal year for which the determination is made; over
(ii)the product of—
(I)20 percent of the gross domestic product (as so projected) for the fiscal year for which the determination is made; and
(II)0.99, factored a number of times equal to the number of fiscal years during such period which end with or before the fiscal year for which the determination is made plus the number of fiscal years during the period described in paragraph (1)(A), and
(B)paragraph (1)(B) shall apply with respect to subsequent fiscal years by substituting for the reference, in paragraph (1)(B)(i), to fiscal year 2012 a reference to the last fiscal year in such period.
(3)For purposes of paragraph (1)(B), the termination year
is the first fiscal year, after fiscal year 2012—
(A)for which the OASDI trust fund ratio is at least 125 percent; and
(B)on the last day of which there are no outstanding transition obligations of the Self-Liquidating Social Security Transition Fund under section 6.
(4)In paragraph (2)(A), the term OASDI trust fund ratio
means, for a fiscal year, the ratio (expressed as a percentage) of—
(A)the combined balance in the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, as of the last day of such fiscal year; over
(B)the amount estimated by the Commissioner of Social Security to be the total amount to be paid from such Trust Funds during the fiscal year following such fiscal year for all purposes authorized by section 201 of the Social Security Act (excluding any transfer payments between such Trust Funds and reducing the amount of any transfer to the Railroad Retirement Account by the amount of any transfers into either such Trust Fund from such Account).
5.Tax treatment of accounts
(a)
(1)Subchapter F of chapter 1 of the Internal Revenue Code of 1986 (relating to exempt organizations) is amended by adding at the end the following new part:
IXPersonal Social Security Savings Program
Sec. 530A. Personal social security savings program
530A.Personal social security savings program
(a)The Social Security Personal Savings Fund and each Tier III Investment Option are exempt from taxation under this subtitle. Notwithstanding the preceding sentence, a personal social security savings account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).
(b)
(1)Any qualified distribution from amounts credited to a personal social security savings account from the Social Security Personal Savings Fund or held in a Tier III Investment Option shall not be included in the gross income of the distributee.
(2)For purposes of paragraph (1), the term qualified distribution
means a distribution which meets the requirements of section 259 of the Social Security Act and which is not a guaranty payment (as defined by section 260 of such Act).
(c)For purposes of this section—
(1)Personal social security savings accountFor purposes of this section, the term personal social security savings account
means an account established under section 254(a) of the Social Security Act.
(2)Social Security Personal Savings FundThe term Social Security Personal Savings Fund
means the Savings Fund established under section 252 of the Social Security Act.
(3)Tier III Investment OptionThe term Tier III Investment Option
has the meaning given such term by section 251(9) of the Social Security Act.
(d)No amount shall be includible in the gross estate of any individual for purposes of chapter 11 by reason of a distribution in the case of death under section 259(e) of the Social Security Act. .
(2)Section 86(d)(1)(A) of such Code is amended by inserting part A of
after under
.
(3)The table of parts for subchapter F of chapter 1 of such Code is amended by adding after the item relating to part VIII the following new item:
Part IX. Personal Social Security Savings Program..
(b)Paragraph (1) of section 86(d) of the Internal Revenue Act of 1986, as amended by subsection (b), is amended by striking or
at the end of subparagraph (A), by striking the period and inserting , or
at the end of subparagraph (B), and by adding at the end the following new subparagraph:
(C)a guaranty payment under section 260(a), and a payment of an additional amount under section 260(c), of the Social Security Act..
(c)The amendments made by this section shall apply to taxable years beginning after December 31, 2004.
6.Self-Liquidating Social Security Transition Fund
(a)There is hereby created on the books of the Treasury of the United States a trust fund to be known as the Self-Liquidating Social Security Transition Fund (in this section referred to as the Transition Fund
).
(b)Deposit of OASDI Trust Fund surplus
(1)There are appropriated to the Transition Fund for the fiscal year beginning in 2030, and for each fiscal year thereafter, out of any moneys in the Federal Old-Age and Survivors Insurance Trust Fund, amounts equivalent to the OASDI trust fund surplus (as defined in paragraph (2)) for the preceding fiscal year.
(2)OASDI Trust Fund surplus definedIn this section, the term OASDI trust fund surplus
for a fiscal year means the dollar amount by which the Federal Old-Age and Survivors Insurance Trust Fund could be reduced as of the end of such fiscal year so as to result in an OASDI trust fund ratio (as defined in section 5(b)(3)) for such fiscal year equal to 125 percent.
(3)This section shall not be construed to require redemption of obligations of the Trust Fund for the purpose of making transfers to the Transition Fund under this section or for any other purpose other than to provide for payment of benefits under part A of title II of the Social Security Act.
(c)Transfers based on estimatesThe amounts appropriated by subsection (c)(1) shall be transferred from time to time from the Federal Old-Age and Survivors Insurance Trust Fund to the Transition Fund, such amounts to be determined on the basis of estimates by the Commissioner of Social Security. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than such surplus.
(d)
(1)With respect to the Transition Fund, there is hereby created a body to be known as the Board of Trustees of the Transition Fund (in this section referred to as the Board of Trustees
) composed of the Commissioner of Social Security, the Secretary of the Treasury, and the members of the Personal Social Security Savings Account Board established under section 261 of the Social Security Act.
(2)The Board of Trustees shall meet not less frequently than once each calendar year.
(3)The duties of the Board of Trustees are as follows:
(A)Use all funds paid into the Transition Fund to redeem obligations issued under section 8 as soon as practicable.
(B)Report to Congress not later than the first day of April of each year on the operation and status of the Transition Fund during the preceding fiscal year and on its expected operation and status during the current fiscal year and the next 2 fiscal years.
(C)Review the general policies followed in managing the Transition Fund, and recommend changes in such policies, including necessary changes in the provisions of law which govern the way in which the Transition Fund is to be managed.
(e)It is hereby declared the policy of the United States that all obligations issued under section 8 are to be redeemed by the Transition Fund as soon as possible.
(f)On the first date as of which all of the obligations issued under section 8 have been redeemed, any balance remaining in the Transition Fund as of such date shall be deposited in the Federal Old-Age and Survivors Insurance Trust Fund, the terms of the Board of Trustees shall end, and this section shall be repealed.
7.Issuance of Transition Fund Bonds
(a)
(1)The purposes for which obligations of the United States may be issued under chapter 31 of title 31, United States Code, are hereby extended to authorize the issuance at par of public-debt obligations by the Self-Liquidating Social Security Transition Fund (in this section referred to as the Transition Fund
).
(2)Beginning on January 1, 2005, whenever any obligation held in the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund is repaid from the general fund of the Treasury to either of such Trust Funds, the Transition Fund shall issue an obligation under this subsection in an amount equal to the amount of interest and principal so repaid.
(3)Proceeds from the issuance of any obligation issued under this section shall be transferred to the general fund of the Treasury.
(4)The debt owed on any obligation issued under this section shall be considered to be debt of the Transition Fund and shall be accounted for in such manner.
(b)Maturities and interest rateSuch obligations issued by the Transition Fund for purchase by the public shall have maturities fixed with due regard for the needs of the Transition Fund and shall bear interest at a rate equal to the average market yield (computed by the Secretary of the Treasury on the basis of market quotations as of the end of the calendar month next preceding the date of such issue) on all marketable interest-bearing obligations of the United States then forming a part of the public debt which are not due or callable until after the expiration of 4 years from the end of such calendar month, except that where such average market yield is not a multiple of one-eighth of 1 per centum, the rate of interest on such obligations shall be the multiple of one-eighth of 1 per centum nearest such market yield.
(c)Only funds in the Transition Fund may be used to redeem obligations issued under this section.
8.Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings ProgramTitle VII of the Social Security Act is amended by inserting after section 705 (42 U.S.C. 906) the following new section:
706.Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Individual Social Security Investment Program
(a)Social Security Lockbox BudgetAt the time of the transmittal to the Congress by the President of the budget of the United States Government, the President shall transmit to each House of the Congress a separate report (to be known as the Social Security Lockbox Budget
) detailing the performance of the Social Security Part A Account, the Social Security Part B Account, and the Self-Liquidating Social Security Transition Fund Account (established under subsection (b)) during the preceding fiscal year. Such report shall set forth, as determined as of the end of the year—
(1)the amount of the balance of each account,
(2)the amount of the total charges and the amount of the total credits to each account for the year, and
(3)the amount of the total for the year of each category of charges and credits itemized in subsection (b).
(b)Establishment of accountsFor purposes of accounting for certain receipts and disbursement of the Treasury of the United States in connection with the Old-Age, Survivors, and Disability Insurance Program under part A of title II of the Social Security Act and the Individual Social Security Investment Program under part B of such title, the Secretary of the Treasury shall establish and maintain a Social Security Part A Account, a Social Security Part B Account, and a Self-Liquidating Social Security Transition Fund Account.
(c)Credits and charges to the Social Security Part A Account
(1)For each fiscal year, the Social Security Part A Account shall be credited with the sum of—
(A)all receipts during the year by the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund under section 201 of the Social Security Act (including amounts received as interest on notes and obligations purchased by the Trust Funds under section 201(d) of such Act, and excluding amounts received in redemption of such notes and obligations and amounts received by either such Trust Fund as transfers from the other such Trust Fund),
(B)all amounts transferred during the year from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund as recapture of corporate tax yields under section 5(a),
(C)all amounts transferred during the year from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund as recapture of Government savings over the baseline under section 5(b),
(D)all amounts transferred during the year from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund under section 11 (relating to dedication of budget surpluses to saving social security), and
(E)all receipts during the year by the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund under section 121(e) of the Social Security Amendments of 1983 (relating to appropriation of amounts equivalent to taxes on social security benefits) (42 U.S.C. 401 note).
(2)For each fiscal year, the Social Security Part A Account shall be charged with the sum of—
(A)all benefits paid during the year from the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund under part A of title II of the Social Security Act,
(B)all redirected social security contributions transferred during the year to the Social Security Personal Savings Fund under section 252(b) of the Social Security Act,
(C)all other expenditures during the year from the Trust Funds under part A of title II (excluding amounts expended as transfers by either such Trust Fund to the other such Trust Fund and amounts paid for the purchase of notes and obligations under section 201(d) of the Social Security Act), and
(D)all transfers from the Federal Old-Age and Survivors Insurance Trust Fund to the Self-Liquidating Social Security Transition Fund under section 6 of the Social Security Personal Savings and Prosperity Act of 2004.
(d)Charges and credits to the Social Security Part B Account
(1)For each fiscal year, the Social Security Part B Account shall be credited with—
(A)all redirected social security contributions transferred during the year to the Personal Social Security Savings Fund under section 252(b) of the Social Security Act, and
(B)any net increase in the Tier I Investment Fund attributable to investment for the fiscal year, any net increase in the Tier II Investment Fund attributable to investment for the fiscal year, and the total amount of any net increases in Tier III Investment Options attributable to investment for the fiscal year.
(2)For each fiscal year, the Social Security Part B Account shall be charged with—
(A)all administrative costs incurred for the fiscal year with respect to the Tier I Investment Fund, the Tier II Investment Fund, and the Tier III Investment Options,
(B)any net decrease in the Tier I Investment Fund attributable to investment for the fiscal year, any net decrease in the Tier II Investment Fund attributable to investment for the fiscal year, and the total amount of any net decreases in Tier III Investment Options attributable to investment for the fiscal year, and
(C)all amounts distributed during the year under section 259 from the Tier I Investment Fund, the Tier II Investment Fund, and the Tier III Investment Options.
(e)Charges and credits to the Self-Liquidating Social Security Transition Fund Account
(1)For each fiscal year, the Self-Liquidating Social Security Transition Account shall be credited with—
(A)all transfers to the Transition Fund from the Federal Old-Age and Survivors Insurance Trust Fund under section 6(b) of the Social Security Personal Savings Guarantee and Prosperity Act of 2004, and
(B)all amounts expended during the fiscal year from the Trust Funds in the redemption under section 7(e) of such Act of obligations issued by the Transition Fund under section 8 of such Act.
(2)For each fiscal year, the Self-Liquidating Social Security Transition Fund Account shall be charged with the total amount of obligations issued during the fiscal year by the Transition Fund under section 7 of the Social Security Personal Savings Guarantee and Prosperity Act of 2004..
9.Budgetary treatment of social security
(a)Section 710 of the Social Security Act (42 U.S.C. 911) is amended to read as follows:
710.Budgetary treatment of social security
(a)Notwithstanding any other provision of law and except as provided in subsection (b), the receipts and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Social Security Personal Savings Fund (including transfers to and from the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund relating to the acquisition or redemption of obligations acquired under section 201(d) of the Social Security Act) and the taxes imposed under sections 1401 and 3101 of the Internal Revenue Code of 1986 shall not be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of the budget of the Government as submitted by the President or the congressional budget or be reported as new budget authority, outlays, receipts, or deficit or surplus in any report of the Congressional Budget Office or any other agency or instrumentality of the Government
(b)Matters included in the budgetSubsection (a) shall not apply with respect to the following:
(1)transfers from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund under section 4(a) of the Social Security Personal Savings Guarantee and Prosperity Act of 2004 (relating to recapture of corporate tax on account yields), which shall be treated as an expenditure of the Government;
(2)transfers from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund under section 4(b) of the Social Security Personal Savings Guarantee and Prosperity Act of 2004 (relating to recapture of Government savings over baseline), which shall be treated as an expenditure of the Government;
(3)transfers from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund under section 121(e) of the Social Security Amendments of 1983 (relating to appropriation of amounts equivalent to taxes on social security benefits) (42 U.S.C. 401 note), which shall be treated as an expenditure of the Government; and
(4)revenues from taxes imposed under chapter 1 of the Internal Revenue Code of 1986, to the extent attributable to section 86 of such Code (relating to taxation of social security and tier 1 railroad retirement benefits), which shall be treated as a receipt of the Government..
(b)
(1)Section 13301 of the Budget Enforcement Act of 1990 (2 U.S.C. 632; 2 U.S.C. 632 note) is repealed.
(2)Section 405 of the Congressional Budget Act of 1974 (2 U.S.C. 655) is amended—
(A)by inserting other than section 710 of the Social Security Act
after Notwithstanding any other provision of law
; and
(B)by striking section, not including
and all that follows through Funds,
and inserting section
.
(c)The amendments made by this section shall apply with respect to fiscal years beginning on or after October 1, 2005.
10.Dedication of budget surpluses to saving social securitySection 201 of the Social Security Act (as amended by section 103 of this Act) is amended further by adding at the end the following new subsection:
(p)In the case of any fiscal year beginning after September 30, 2005, for which the total amount treated as income of the Federal Government in the total budget of the United States have exceeded the total amount treated as expenditures of the Federal Government in the total budget of the United States (as determined by the Director of the Office of Management and Budget), not later than 3 months after the end of such fiscal year, the Secretary of the Treasury shall transfer from the general fund of the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund an amount equal to the lesser of—
(1)the total amount transferred from the Trust Fund during such fiscal year to the Social Security Personal Savings Fund under section 252(b), or
(2)the amount by which such total amount treated as receipts exceeded such total amount treated as expenditures..
11.National spending limitation
(a)Section 1105 of title 31, United States Code, is amended by adding at the end the following new subsection:
(i)
(1)The budget transmitted pursuant to subsection (a) for a fiscal year shall not provide for total expenditures for the fiscal year for which the budget is submitted which are greater than the national spending limitation specified under paragraph (3).
(2)For purposes of this section, the term total expenditures
means, for any fiscal year, the sum of—
(A)the net expenditures of the budget of the United States for the fiscal year plus all expenditures which are chargeable to the Social Security Part A Account in the Social Security Lockbox Budget for the fiscal year under section 706(c)(2) of the Social Security Act; plus
(B)the amount of the reduction in the total amount of expenditures which are chargeable to the Social Security Part A Account in the Social Security Lockbox Budget for the fiscal year which is attributable to adjustments to primary insurance amounts under section 215(j) of the Social Security Act.
(3)
(A)For each fiscal year during the period beginning with fiscal year 2005 and ending with fiscal year 2012, the national spending limitation shall be equal to the product derived by multiplying—
(i)20 percent of the GDP for the fiscal year for which the determination is made, by
(ii)0.99, factored a number of times equal to the number of fiscal years during such period which end with or before the fiscal year for which the determination is made.
(B)For each fiscal year during the period beginning with fiscal year 2013 and ending with fiscal year 2017, the national spending limitation shall be equal to—
(i)the amount of national spending limitation under this subsection for fiscal year 2012, increased by
(ii)the rate of growth in the GDP over the period beginning with fiscal year 2013 and ending with the fiscal year for which the determination is made.
(C)For each fiscal year during the period beginning with fiscal year 2018 and ending with the termination year, the national spending limitation shall be equal to—
(i)the amount of the national spending limitation under this subsection for fiscal year 2018, increased by
(ii)the sum of—
(I)the rate of growth in the GDP over the period beginning with fiscal year 2018 and ending with the fiscal year for which the determination is made, plus
(II)1.75 percentage points for each fiscal year during the period described in subclause (I).
(D)Notwithstanding subparagraphs (B) and (C), in any case in which the OASDI trust fund ratio is less than 125 percent as of the end of the fiscal year preceding each fiscal year during any period of 1 or more fiscal years referred to in such subparagraphs and preceding the termination year, the national spending limitation for each fiscal year during such period shall be the product of—
(i)20 percent of the GDP for the fiscal year for which the determination is made; and
(ii)0.99, factored a number of times equal to the number of fiscal years during such period which end with or before the fiscal year for which the determination is made plus the total number of fiscal years referred to in subparagraph (A), plus, if subparagraph (C) applied to the fiscal year preceding such period, the increase (if any) under subparagraph (C) in the national spending limitation for such fiscal year attributable to subparagraph (C)(ii)(II).
(4)For purposes of this subsection, the term termination year
is the first fiscal year, after fiscal year 2017—
(A)for which the OASDI trust fund ratio is at least 125 percent; and
(B)on the last day of which there are no outstanding transition obligations of the Self-Liquidating Social Security Transition Fund under section 6 of the Social Security Personal Savings Guarantee and Prosperity Act of 2004.
(5)For purposes of this subsection, the term GDP
means the gross domestic product, as projected by the Department of Commerce..
12.Imposition of spending limitations on congressional budget resolutions
(a)Contents of congressional budget resolutionsSection 301(a) of the Congressional Budget Act of 1974 is amended by adding at the end the following new sentence: The concurrent resolution on the budget for fiscal year 2006 or for any ensuing fiscal year shall be consistent with the spending limitation specified in section 1105(i) of title 31, United States Code.
.
(b)Spending limitation point of orderSection 312 of the Congressional Budget Act of 1974 is amended by adding at the end the following new subsection:
(g)Spending limitation point of order
(1)It shall not be in order in the House of Representatives or the Senate to consider any concurrent resolution on the budget for fiscal year 2006 or for any fiscal year thereafter, or any amendment thereto or conference report thereon, that is not consistent with the spending limitation specified in section 1105(i) of title 31, United States Code.
(2)Paragraph (1) may be waived or suspended in the House of Representatives or the Senate only by the affirmative vote of two-thirds of the Members, duly chosen and sworn. An affirmative vote of two-thirds of the Members, duly chosen and sworn, shall be required in the Senate to sustain an appeal of the ruling of the chair on such point of order. Appeals in the Senate from the decisions of the chair relating to paragraph (1) shall be limited to one hour, to be equally divided between, and controlled by, the mover and the manager of the concurrent resolution..
13.Reduction of FICA rates resulting from Personal Social Security Savings Program
(a)Section 3101 of the Internal Revenue Code of 1986 (relating to tax on employees) is amended by adding at the end the following new subsection:
(d)Reduction in old-age, survivors, and disability insurance tax rate
(1)In any year which follows a reduction year and each year thereafter, the rate of tax imposed under subsection (a) shall be reduced by the reduction percentage.
(2)For purposes of this section—
(A)The term reduction year
means any year after the transition year in which the OASDI rate ratio exceeds 125 percent.
(B)The term transition year
means the first full calendar year following the termination year (as defined in section 4(b)(2) of the Social Security Personal Savings Guarantee and Prosperity Act of 2004).
(3)For purposes of this section, the term reduction percentage
means the excess of—
(A)the rate in effect under subsection (a) for the reduction year, over
(B)the rate (rounded up to the nearest one tenth of a percent) under which the OASDI rate ratio for the reduction year would have been 125 percent if—
(i)such rate had been applicable under subsection (a) and section 3111(a) during such year, and
(ii)the rate under section 1401(a) during such year were twice such rate.
(4)The term OASDI rate ratio
means, with respect to any calendar year, the ratio—
(A)the numerator of which is the combined balance in the Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, as of the last day of such calendar year, and
(B)the denominator of which is the amount paid from such Trust Funds during such calendar year for all purposes authorized by section 201 of the Social Security Act (excluding any transfer payments between such Trust Funds and reducing the amount of any transfer to the Railroad Retirement Account by the amount of any transfers into either such Trust Fund from such Account).
(5)Paragraph (1) shall not apply to any reduction to the extent that such reduction would cause the rate of tax imposed under subsection (a) to be less than 4.95 percent..
(b)Section 3111 of the Internal Revenue Code of 1986 (relating to tax on employers) is amended by adding at the end the following new subsection:
(d)Reduction in old-age, survivors, and disability insurance tax rate
(1)In any year which follows a reduction year and each year thereafter, the rate of tax imposed under subsection (a) shall be reduced by the reduction percentage.
(2)Reduction year; reduction percentageFor purposes of this section, the terms reduction year
and reduction percentage
have the meanings given such terms by section 3101(d).
(3)Paragraph (1) shall not apply to any reduction to the extent that such reduction would cause the rate of tax imposed under subsection (a) to be less than 4.95 percent..
(c)Self-Employment ContributionSection 1401 of the Internal Revenue Code of 1986 (relating to tax on self-employment income) is amended by adding at the end the following new subsection:
(d)Reduction in old-age, survivors, and disability insurance tax rate
(1)In any year which follows a reduction year and each year thereafter, the rate of tax imposed under subsection (a) shall be reduced by the reduction percentage.
(2)Reduction year; reduction percentageFor purposes of this section, the terms reduction year
and reduction percentage
have the meanings given such terms by section 3101(d).
(3)Paragraph (1) shall not apply to any reduction to the extent that such reduction would cause the rate of tax imposed under subsection (a) to be less than 9.9 percent..