[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2782 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2782

 To reform social security by establishing a Personal Social Security 
                            Savings Program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 9, 2004

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

_______________________________________________________________________

                                 A BILL


 
 To reform social security by establishing a Personal Social Security 
                            Savings Program.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Social Security 
Personal Savings Guarantee and Prosperity Act of 2004''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Establishment of Personal Social Security 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.

SEC. 2. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                  ``PART A--INSURANCE BENEFITS''; and

            (2) by adding at the end the following new part:

           ``PART B--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

``SEC. 251. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Participating individual.--The term `participating 
        individual' has the meaning provided in section 253(a).
            ``(2) Board.--The term `Board' means the Personal Social 
        Security Savings Account Board established under section 261.
            ``(3) Executive director.--The term `Executive Director' 
        means the Executive Director appointed under section 262.
            ``(4) Personal social security savings account.--The term 
        `personal social security savings account' means an account 
        established under section 254(a).
            ``(5) Personal social security savings annuity.--The term 
        `personal social security savings annuity' means an annuity 
        approved by the Board under section 259(b)(3).
            ``(6) Savings fund.--The term `Savings Fund' means the 
        Social Security Personal Savings Fund established under section 
        252.
            ``(7) Tier i investment fund.--The term `Tier I Investment 
        Fund' means the trust fund created under section 256.
            ``(8) Tier ii investment fund.--The term `Tier II 
        Investment Fund' means the trust fund created under section 
        257.
            ``(9) Tier iii investment option.--The 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).

``SEC. 252. SOCIAL SECURITY PERSONAL SAVINGS FUND.

    ``(a) Establishment of Savings Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        of the United States a trust fund to be known as the `Social 
        Security Personal Savings Fund'.
            ``(2) Amounts in fund.--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) Trustees.--The Board shall serve as trustees of the 
        Savings Fund.
            ``(4) Budget authority; appropriation.--This 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) Deposits Into Fund.--
            ``(1) In general.--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) In general.--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) Determination of amounts.--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 contributions.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--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) Base amount.--For purposes of subparagraph 
                (A)--
                            ``(i) Initial base amount.--The base amount 
                        for calendar year 2005 is $10,000.
                            ``(ii) Adjustments to base amount.--The 
                        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) Availability.--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) In general.--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) Assignments.--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 Expenses.--Administrative 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) Limitation.--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.

``SEC. 253. PARTICIPATION IN PROGRAM.

    ``(a) Participating Individual.--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) In general.--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) Procedure.--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) In general.--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 reinstatement.--An 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) Irrevocability.--An election under this subsection 
        shall be irrevocable.

``SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS ACCOUNTS.

    ``(a) Establishment of Publicly Administered System of Personal 
Security Savings Accounts.--As 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) Account Balance.--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 Losses.--Pursuant 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.

``SEC. 255. BENEFIT CREDIT CERTIFICATES.

    ``(a) In General.--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) Value.--
            ``(1) Face value.--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) Assumptions.--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) Adjustment to value.--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.--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.

``SEC. 256. TIER I INVESTMENT FUND.

    ``(a) Establishment of Tier I Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier I Investment Fund'.
            ``(2) Amounts in fund.--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) Use of funds.--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 Balance.--For 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) Crediting to accounts.--
                    ``(A) In general.--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 
                individuals.--If 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 fund.--In 
        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 Fund.--Subject 
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.

``SEC. 257. TIER II INVESTMENT FUND.

    ``(a) Establishment of Tier II Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier II Investment Fund'.
            ``(2) Amounts in fund.--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) Use of funds.--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) In general.--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 crediting.--Subject 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) In general.--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) In general.--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) Prescribed percentages.--For purposes of 
                subparagraph (A)--
                            ``(i) The 65/35 investment account.--In 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 account.--In 
                        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 account.--In 
                        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 account.--Except 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 
                accounts.--In 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) Investment in equities.--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 instruments.--In 
        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 costs.--The 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) In general.--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 equities.--No 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 Fund.--
Subject 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.

``SEC. 258. TIER III INVESTMENT OPTIONS.

    ``(a) Election of Tier III Investment Options.--
            ``(1) In general.--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 threshold.--In 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) Allocation of funds.--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) Election threshold.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                purposes of this subsection the term `election 
                threshold' means an amount equal to $7,000.
                    ``(B) Adjustments.--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 options.--Any 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) In general.--The Board shall certify eligible 
        entities to offer Tier III Investment Options under this part.
            ``(2) Application.--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 approval.--The Board shall not 
        certify an eligible entity unless such eligible entity agrees 
        to the following requirements:
                    ``(A) Separate accounting.--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 fund.--Amounts 
                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) Trust requirements.--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 claims.--Each Tier 
                III Investment Option shall be exempt from any and all 
                third party claims against the eligible entity.
                    ``(E) Disclosure of administrative costs.--Each 
                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 
                board.--Each 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) Eligible entity defined.--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) In general.--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) Application.--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 approval.--The 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 
                entity.--The Tier III Investment Option is offered by 
                an eligible entity certified under subsection (b).
                    ``(B) Appropriate allocation of investments between 
                equities and fixed income instruments.--The 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) Quality factors met.--
                            ``(i) In general.--The Tier III Investment 
                        Option meets qualifications which shall be 
                        prescribed by the Board relating to the quality 
                        factors described in clause (ii).
                            ``(ii) Quality factors.--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 Approval.--In 
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) In general.--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) Limitation to membership.--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 Death.--Upon 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).

``SEC. 259. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY AND OTHER 
              DISTRIBUTIONS.

    ``(a) Date of Initial Distribution.--Except 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 annuities.--Not 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) Purchase of annuities.--
                    ``(A) Selection of annuity.--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) Transfer of assets.--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) In general.--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 than the minimum annuity payment amount.
                            ``(ii) Construction.--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 
                        defined.--For 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) In general.--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) Assumptions.--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) Certification of issuers.--
                            ``(i) In general.--The Board shall certify 
                        issuers eligible to enter into annuity 
                        contracts with participating individuals under 
                        this part.
                            ``(ii) Application.--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) Separate accounting.--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 claims.--
                        Each 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) In general.--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) Application.--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) In general.--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) Quality factors.--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 
                                requirement.--The 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 Assets.--
If 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 
Assets.--To 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 Death.--If 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 Annuity.--For 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)).

``SEC. 260. GUARANTEE OF PROMISED BENEFITS.

    ``(a) In General.--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) Guaranty Payment.--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 general.--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) Definition.--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)).

``SEC. 261. PERSONAL SOCIAL SECURITY SAVINGS ACCOUNT BOARD.

    ``(a) Establishment.--There is established in the executive branch 
of the Government a Personal Social Security Savings Account Board.
    ``(b) Composition.--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) Advice and Consent.--Appointments under subsection (b) shall 
be made by and with the advice and consent of the Senate.
    ``(d) Membership Requirements.--Members of the Board shall have 
substantial experience, training, and expertise in the management of 
financial investments and pension benefit plans.
    ``(e) Length of Appointments.--
            ``(1) Terms.--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) Vacancies.--
                    ``(A) In general.--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) Completion of term.--An individual chosen to 
                fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
            ``(3) Expiration.--The term of any member shall not expire 
        before the date on which the member's successor takes office.
    ``(f) Duties.--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) In general.--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) Meetings.--The Board shall meet--
                    ``(A) not less than once during each month; and
                    ``(B) at additional times at the call of the 
                Chairman.
            ``(3) Exercise of powers.--
                    ``(A) In general.--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) Vacancies.--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 investments.--The 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) Compensation.--
            ``(1) In general.--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) Expenses.--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) Source of funds.--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 Responsibilities.--The members of the Board 
shall discharge their responsibilities solely in the interest of the 
participating individuals and their beneficiaries under this part.
    ``(j) Annual Independent Audit.--The Board shall annually engage an 
independent qualified public accountant to audit the activities of the 
Board.
    ``(k) Submission of Budget to Congress.--The 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 Recommendations.--The 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.

``SEC. 262. EXECUTIVE DIRECTOR.

    ``(a) Appointment of Executive Director.--The 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) Duties.--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) Administrative Authority.--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) Effective Date.--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.

SEC. 3. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS.

    (a) In General.--Section 215 of the Social Security Act (42 U.S.C. 
415) is amended by adding at the end the following new subsection:

 ``Adjustment of Primary Insurance Amount in Relation to Deposits Made 
              to Personal Social Security Savings Accounts

    ``(j)(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).''.

SEC. 4. GENERAL FUND TRANSFERS TO THE FEDERAL OLD-AGE AND SURVIVORS 
              INSURANCE TRUST FUND.

    (a) Recapture of Corporate Tax on Account Yields.--
            (1) In general.--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) Initial assumptions.--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 general.--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) Accommodation for low oasdi balance ratio.--
        Notwithstanding 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) Termination year.--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) OASDI trust fund ratio.--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).

SEC. 5. TAX TREATMENT OF ACCOUNTS.

    (a) In General.--
            (1) In general.--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:

          ``PART IX--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

``Sec. 530A. Personal social security savings program.

``SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

    ``(a) General Rule.--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) Distributions.--
            ``(1) In general.--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) Qualified distribution.--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) Definitions.--For purposes of this section--
            ``(1) Personal social security savings account.--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 fund.--The term 
        `Social Security Personal Savings Fund' means the Savings Fund 
        established under section 252 of the Social Security Act.
            ``(3) Tier iii investment option.--The term `Tier III 
        Investment Option' has the meaning given such term by section 
        251(9) of the Social Security Act.
    ``(d) Estate Tax Treatment.--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) Conforming amendment.--Section 86(d)(1)(A) of such Code 
        is amended by inserting ``part A of'' after ``under''.
            (3) Clerical amendment.--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) Guaranty Payments.--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) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 6. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

    (a) Establishment.--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) In general.--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 defined.--In 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) Rule of construction.--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 Estimates.--The 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) Board of Trustees.--
            (1) Establishment.--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) Meetings.--The Board of Trustees shall meet not less 
        frequently than once each calendar year.
            (3) Duties.--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) Policy Declaration.--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) Sunset.--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.

SEC. 7. ISSUANCE OF TRANSITION FUND BONDS.

    (a) Issuance.--
            (1) In general.--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) Required issuance.--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) Transfer of proceeds.--Proceeds from the issuance of 
        any obligation issued under this section shall be transferred 
        to the general fund of the Treasury.
            (4) Accounting.--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 Rate.--Such 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) Repayment of Obligations.--Only funds in the Transition Fund 
may be used to redeem obligations issued under this section.

SEC. 8. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE 
              PROGRAM AND THE PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

    Title VII of the Social Security Act is amended by inserting after 
section 705 (42 U.S.C. 906) the following new section:

   ``accounting for the old-age, survivors, and disability insurance 
     program and the individual social security investment program

                    ``Social Security Lockbox Budget

    ``Sec. 706. (a) At 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).

                      ``Establishment of Accounts

    ``(b) For 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.

      ``Credits and Charges to the Social Security Part A Account

    ``(c)(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.

      ``Charges and Credits to the Social Security Part B Account

    ``(d)(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.

     ``Charges and Credits to the Self-Liquidating Social Security 
                        Transition Fund Account

    ``(e)(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.''.

SEC. 9. BUDGETARY TREATMENT OF SOCIAL SECURITY.

    (a) In General.--Section 710 of the Social Security Act (42 U.S.C. 
911) is amended to read as follows:

                ``budgetary treatment of social security

    ``Sec. 710. (a) In General.--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 Budget.--Subsection (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) Conforming Amendments.--
            (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) Effective Date.--The amendments made by this section shall 
apply with respect to fiscal years beginning on or after October 1, 
2005.

SEC. 10. DEDICATION OF BUDGET SURPLUSES TO SAVING SOCIAL SECURITY.

    Section 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.''.

SEC. 11. NATIONAL SPENDING LIMITATION.

    (a) In General.--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.''.

SEC. 12. IMPOSITION OF SPENDING LIMITATIONS ON CONGRESSIONAL BUDGET 
              RESOLUTIONS.

    (a) Contents of Congressional Budget Resolutions.--Section 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 Order.--Section 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.''.

SEC. 13. REDUCTION OF FICA RATES RESULTING FROM PERSONAL SOCIAL 
              SECURITY SAVINGS PROGRAM.

    (a) Employee Contribution.--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 general.--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.--For purposes of this section--
                    ``(A) In general.--The term `reduction year' means 
                any year after the transition year in which the OASDI 
                rate ratio exceeds 125 percent.
                    ``(B) Transition year.--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) Reduction percentage.--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) OASDI rate ratio.--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) Limitation on reduction.--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) Employer Contribution.--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 general.--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 percentage.--For purposes 
        of this section, the terms `reduction year' and `reduction 
        percentage' have the meanings given such terms by section 
        3101(d).
            ``(3) Limitation on reduction.--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 Contribution.--Section 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 general.--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 percentage.--For purposes 
        of this section, the terms `reduction year' and `reduction 
        percentage' have the meanings given such terms by section 
        3101(d).
            ``(3) Limitation on reduction.--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.''.
                                 <all>