[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3069 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 3069

To provide for each American the opportunity to provide for his or her 
     retirement through a S.A.F.E. account, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 24, 2005

 Mr. Sessions introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
 Government Reform, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To provide for each American the opportunity to provide for his or her 
     retirement through a S.A.F.E. account, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Savings Account 
for Every American Act of 2005''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
                  TITLE I--PERSONAL RETIREMENT PROGRAM

Sec. 101. Definitions.
Sec. 102. S.A.F.E. account payroll deduction programs.
Sec. 103. Designation of S.A.F.E. accounts.
Sec. 104. Self-employed individuals.
Sec. 105. Elective participation.
Sec. 106. Penalties.
Sec. 107. Federal civilian and military personnel.
                 TITLE II--TAX-EXEMPT S.A.F.E. ACCOUNTS

Sec. 201. S.A.F.E. accounts.
Sec. 202. Effective date.
  TITLE III--CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT AND THE 
                     INTERNAL REVENUE CODE OF 1986

Sec. 301. Reductions in and exemptions from FICA taxes and SECA taxes 
                            with respect to eligible individuals.
Sec. 302. Exclusion of eligible individuals from old-age, survivors, 
                            and disability insurance coverage.
Sec. 303. Information provided in social security account statements.

                  TITLE I--PERSONAL RETIREMENT PROGRAM

SEC. 101. DEFINITIONS.

    For purposes of this title--
            (1) Account holder.--The term ``account holder'' means, 
        with respect to any S.A.F.E. account, the individual for whose 
        benefit such account is maintained.
            (2) Business day.--The term ``business day'' means any day 
        other than a Saturday, Sunday, or legal holiday in the area 
        involved.
            (3) Covered employer.--The term ``covered employer'' means, 
        for any calendar year, a person for whom an eligible individual 
        is engaged in employment during the year.
            (4) Eligible individual.--The term ``eligible individual'' 
        means any individual with respect to whom there is in effect an 
        election under section 105(a).
            (5) Employment.--The term ``employment'' has the meaning 
        provided in section 210 of the Social Security Act.
            (6) Prescribed employee contribution.--The term 
        ``prescribed employee contribution'' means, with respect to any 
        eligible individual who is engaged in employment for a covered 
        employer during any calendar year, an amount equal to 6.2 
        percent of the wages received by such employee with respect to 
        such employment, to the extent that such wages do not exceed, 
        for such calendar year, the contribution and benefit base for 
        such calendar year under section 230 of the Social Security 
        Act.
            (7) Prescribed self-employment contribution.--The term 
        ``prescribed self-employment contribution'' means, with respect 
        to the self-employment income of an eligible individual for any 
        calendar year, the excess (if any) of--
                    (A) 6.2 percent of the amount of such self-
                employment income for such calendar year, to the extent 
                that such self-employment income does not exceed, for 
                such calendar year, the contribution and benefit base 
                for such calendar year under section 230 of the Social 
                Security Act, over
                    (B) the total of all prescribed employee 
                contributions and prescribed employer contributions 
                payable with respect to such eligible individual for 
                such calendar year.
        Effective with the commencement of the 16th calendar year for 
        which the eligible individual's election under section 105 is 
        in effect, ``12.4 percent'' shall be substituted for ``6.2 
        percent'' in subparagraph (A).
            (8) Prescribed employer contribution.--The term 
        ``prescribed employer contribution'' means, with respect to any 
        eligible individual who is engaged in employment for a covered 
        employer during any calendar year, an amount equal to 6.2 
        percent of the wages received by such employee with respect to 
        such employment, to the extent that such wages do not exceed, 
        for such calendar year, the contribution and benefit base for 
        such calendar year under section 230 of the Social Security 
        Act.
            (9) S.A.F.E. account.--The term ``S.A.F.E. account'' has 
        the meaning provided in section 222(c) of the Internal Revenue 
        Code of 1986.
            (10) Self-employment income.--The term ``self-employment 
        income'' has the meaning provided in section 211(b) of the 
        Social Security Act.
            (11) Wages.--The term ``wages'' has the meaning provided in 
        section 209 of the Social Security Act.

SEC. 102. S.A.F.E. ACCOUNT PAYROLL DEDUCTION PROGRAMS.

    (a) In General.--Each person who is a covered employer for any 
calendar year shall have in effect throughout such calendar year a 
S.A.F.E. account payroll deduction program for such person's employees 
who are eligible individuals.
    (b) Requirements.--For purposes of this Act, the term ``S.A.F.E. 
account payroll deduction program'' means a written program maintained 
by a covered employer if--
            (1) under such program, the prescribed employee 
        contribution is deducted from the wages of each employee who is 
        an eligible individual and paid as a contribution on behalf of 
        the employee to a S.A.F.E. account of such employee designated 
        in accordance with section 103,
            (2) under such program, the covered employer--
                    (A) makes timely payment of the amount so deducted 
                as a contribution to the designated S.A.F.E. account, 
                and
                    (B) effective upon receipt from the eligible 
                individual of certification (in accordance with 
                regulations which shall be prescribed by the 
                Commissioner of Social Security) of the commencement of 
                the 16th calendar year for which the eligible 
                employee's election under section 105 has been in 
                effect, makes timely payment, together with the amount 
                so deducted, of the prescribed employer contribution 
                with respect to the eligible individual,
        under regulations of the Commissioner of Social Security 
        applying the same principles relating to the timeliness of 
        payment as are applicable under chapter 62 of the Internal 
        Revenue Code of 1986 with respect to taxes under chapter 21 of 
        such Code, and
            (3) the employer receives no compensation for the cost of 
        administering such program.
    (c) Amounts Otherwise Payable May Be Accumulated by Employer in 
Certain Cases.--If, under the terms of the governing instruments 
creating a S.A.F.E. account designated under section 103, contributions 
below a specified amount will not be accepted, the requirements of 
subsection (b)(2) shall be treated as met if amounts deducted from the 
wages of an employee who is an eligible individual, together with 
prescribed employer contributions (if any), are accumulated by the 
covered employer and paid to such account otherwise in accordance with 
subsection (b)(2) with reference to the first day on which the 
accumulated amount exceeds such specified amount.

SEC. 103. DESIGNATION OF S.A.F.E. ACCOUNTS.

    (a) In General.--Except as provided in subsection (b), a S.A.F.E. 
account to which contributions with respect to any employee who is an 
eligible individual are required to be paid under section 102 shall be 
such an account designated by such employee to such employer not later 
than 10 business days after the date on which such employee becomes an 
employee of such employer. Any such designation shall be made in such 
form and manner as may be prescribed in regulations of the Commissioner 
of Social Security.
    (b) Designation in Absence of Timely Designation by Employee.--In 
any case in which no timely designation of a S.A.F.E. account is made, 
the covered employer shall designate such account in accordance with 
regulations of the Commissioner of Social Security.
    (c) Subsequent Substitution of Accounts.--The Commissioner of 
Social Security shall provide by regulation for subsequent designation 
of a S.A.F.E. account by an account holder in lieu of an account 
previously designated by such account holder under this section.

SEC. 104. SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--In the case of an eligible individual who has 
self-employment income for any calendar year, such individual shall 
make timely payments to a S.A.F.E. account designated by such 
individual of the prescribed self-employment contribution with respect 
to such individual for such calendar year in accordance with 
regulations of the Commissioner of Social Security, applying the same 
principles relating to timeliness of payment as are applicable under 
chapter 62 of the Internal Revenue Code of 1986 with respect to taxes 
under chapter 2 of such Code.
    (b) Designation of Account.--The designation of a S.A.F.E. account 
for payment of prescribed self-employment contributions shall be made 
in such form and manner as may be prescribed in regulations of the 
Commissioner of Social Security.
    (c) Periodic Payment.--The Commissioner of Social Security shall 
provide by regulation for periodic installment payments during the 
calendar year of prescribed self-employment contributions for each 
eligible individual, taking into account, as appropriate for each 
period, prescribed employee contributions for such individual.

SEC. 105. ELECTIVE PARTICIPATION.

    (a) Election.--Any individual who has been assigned a social 
security account number under section 205(c)(2)(B) of the Social 
Security Act and has been paid wages or has derived self-employment 
income, may, on or after January 1, 2006, elect under this section to 
be an eligible individual for purposes of this Act. Any such election 
shall be made by filing with each employer (if any) of the individual, 
the Commissioner of Social Security, and the Secretary of the Treasury, 
in such form and manner as shall be prescribed in regulations of the 
Commissioner (in consultation with the Secretary of the Treasury), a 
written and signed declaration of such individual's intention to be 
treated as an eligible individual for purposes of this Act. An election 
under this section shall be effective with respect to wages paid, and 
self-employment income derived, on or after January 1 following the 
date of the filing of the election.
    (b) Election Ineffective If Entitled to Social Security Benefits.--
Any election under this section shall not take effect if, as of the 
effective date of the election, the individual is entitled to an old-
age insurance benefit under section 202(a) of the Social Security Act 
or to a disability insurance benefit under section 223 of such Act.
    (c) Irrevocability Subject to Grace Period.--
            (1) In general.--Unless revoked in accordance with 
        paragraph (2), an election under this section shall be 
        irrevocable.
            (2) Five-year grace period.--
                    (A) In general.--An individual may revoke an 
                election under this section by filing with each 
                employer (if any) of the individual, the Commissioner 
                of Social Security, and the Secretary of the Treasury, 
                in such form and manner as shall be prescribed in 
                regulations of the Commissioner (in consultation with 
                the Secretary of the Treasury), a written and signed 
                revocation of the election at any time before the end 
                of the five-year period beginning with the effective 
                date of the election. A revocation under this 
                subsection shall take effect January 1 following the 
                date of the filing of the revocation, except that a 
                revocation filed during the 90-day period beginning 
                with the date of the filing of the election shall take 
                effect as of the effective date of the election. Upon 
                the effective date of a revocation under this 
                subsection, entitlement to benefits under title II of 
                the Social Security Act shall be determined as if the 
                revoked election had not occurred, except that, for 
                purposes of any such entitlement, wages paid, and self-
                employment income derived, during the period for which 
                the election was in effect shall not be taken into 
                account. No subsequent election under this section may 
                take effect with respect to an individual who has filed 
                a revocation under this subsection (except a revocation 
                filed during the 90-day period beginning with the date 
                of the filing of the election).
                    (B) Reduction in benefits.--The primary insurance 
                amount, as determined under section 215 of the Social 
                Security Act, of any individual who has filed a 
                revocation under this subsection before the end of the 
                five-year period described in subparagraph (A) (and 
                after the 90-day period referred to in subparagraph 
                (A)) shall be reduced (except for purposes of 
                determining benefits under section 223 of such Act, and 
                before any application of section 215(i) of such Act) 
                by the applicable percentage specified in the following 
                table:


 
   If the first calendar year for which the          The applicable
          revocation is effective is:                percentage is:
 
The first, second, or third calendar year of                 20 percent
 such five-year period........................
The fourth calendar year of such five-year                   40 percent
 period.......................................
The fifth calendar year of such five-year                    60 percent
 period.......................................
The calendar year following such five-year                  80 percent.
 period.......................................
 

SEC. 106. PENALTIES.

    (a) Failure to Establish S.A.F.E. Account Payroll Deduction 
Program.--Any covered employer who fails to meet the requirements of 
section 102 for any calendar year shall be subject to a civil penalty 
of not to exceed--
            (1) $250,000, in the case of an employer who is an 
        individual, or
            (2) $500,000, in any other case.
    (b) Failure to Make Deductions Required Under Program.--Any covered 
employer who fails to timely deduct in full the amount from the wages 
of an employee who is an eligible individual as required under an 
applicable S.A.F.E. account payroll deduction program shall be subject 
to a civil penalty for each such failure of not to exceed--
            (1) $250,000, in the case of an employer who is an 
        individual, or
            (2) $500,000, in any other case.
    (c) Failure to Pay Deducted Wages to S.A.F.E. Account.--If an 
amount deducted under a S.A.F.E. account payroll deduction program from 
the wages of an employee who is an eligible individual is not timely 
paid in full to the designated S.A.F.E. account in accordance with 
section 102, the covered employer failing to make such payment--
            (1) shall be subject to a civil penalty for each such 
        failure of not to exceed--
                    (A) $250,000, in the case of an employer who is an 
                individual, or
                    (B) $500,000, in any other case, and
            (2) shall be liable to the employee for interest on the 
        unpaid amount at a rate equal to 10 percentage points in excess 
        of the Federal short-term rate under section 1274(d)(1) of the 
        Internal Revenue Code of 1986, calculated from the last day by 
        which such amount was required to be so paid to the date on 
        which such amount is paid into the designated S.A.F.E. account.
    (d) Failure to Pay Prescribed Self-Employment Contributions to 
S.A.F.E. Account.--Any eligible individual failing to timely pay in 
full a prescribed self-employment contribution to a designated S.A.F.E. 
account as required under section 104 shall be subject to a civil 
penalty for each such failure of not to exceed $250,000, plus interest 
on the unpaid amount at a rate equal to 10 percentage points in excess 
of the Federal short-term rate under section 1274(d)(1) of the Internal 
Revenue Code of 1986, calculated from the last day by which such amount 
was required to be so paid to the date on which such amount is paid 
into the designated S.A.F.E. account.
    (e) Rules for Application of Section.--
            (1) Penalties assessed by commissioner of social 
        security.--Any civil penalty assessed by this section shall be 
        imposed by the Commissioner of Social Security and collected in 
        a civil action.
            (2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            (3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.

SEC. 107. FEDERAL CIVILIAN AND MILITARY PERSONNEL.

    (a) In General.--Not later than December 31, 2005, the Office of 
Personnel Management, after appropriate study, shall submit to the 
President and each House of Congress a written report containing 
recommendations on how to provide for the application of this Act with 
respect to Federal civilian and military personnel.
    (b) Requirements.--The report--
            (1) shall be prepared in consultation with the Social 
        Security Administration, the Securities and Exchange 
        Commission, and other appropriate agencies; and
            (2) shall be accompanied by draft legislation which, if 
        enacted, would carry out the recommendations contained in such 
        report.
    (c) Provisions Relating to the Continued Operation of Existing 
Retirement Systems.--To the extent that the report and draft 
legislation relate to provisions of law in effect before the date of 
enactment of this Act, each shall address at least the following:
            (1) Federal employees' retirement system.--
                    (A) Section 8401(11) of title 5, United States Code 
                (relating to the definition of an ``employee''), which 
                includes the requirement that the individual concerned 
                be someone whose civilian service is employment for the 
                purposes of title II of the Social Security Act and 
                chapter 21 of the Internal Revenue Code of 1986.
                    (B) Section 8421 of such title (relating to annuity 
                supplement), which includes provisions incorporating 
                the notion of the period of time for which the 
                individual is or would be entitled to old-age insurance 
                benefits under title II of the Social Security Act, and 
                provisions for computing the amount of such supplement 
                based on the amount of certain benefits to which the 
                individual would be entitled under such Act.
                    (C) Section 8442 of such title (relating to rights 
                of a widow or widower), which includes provisions under 
                which a supplementary annuity for a widow or widower is 
                not payable to anyone who would not be entitled to 
                certain benefits under the Social Security Act, and 
                provisions for the computation of any such annuity 
                based on the amount of certain benefits which would be 
                payable to that individual under the Social Security 
                Act.
                    (D) Section 8443 of such title (relating to rights 
                of a child), which includes provisions under which, as 
                part of the formula for computing the amount of a 
                survivor annuity for a child, there is incorporated the 
                notion of the amount of child's insurance benefits 
                which are or would be payable under title II of the 
                Social Security Act.
            (2) Civil service retirement system.--
                    (A) Section 8334(k) of such title (relating to 
                special rules for determining deductions and 
                contributions for individuals subject to ``offset-83'' 
                treatment), which incorporates the notion of the OASDI 
                contribution made from Federal wages of the individual 
                concerned.
                    (B) Section 8349 of such title (relating to offset 
                based on certain benefits under the Social Security 
                Act), which incorporates notions relating to actual or 
                constructive eligibility for benefits under the Social 
                Security Act, and the amount of those benefits.
            (3) Coordination provisions.--Provisions of law involving a 
        reduction or other adjustment in retirement benefits (or 
        eligibility therefor), based on any individual's eligibility 
        for benefits under title II of the Social Security Act.
            (4) Other retirement systems.--Similar provisions of law 
        under other retirement systems covering Federal civilian or 
        military personnel.
    (d) Provisions Relating to the New System.--To the extent that the 
report and draft legislation relate to the implementation of any other 
title of this Act, each shall address at least the following:
            (1) What the specifications for the S.A.F.E. account 
        payroll deduction program or programs covering Federal civilian 
        and military personnel shall be or, alternatively, how those 
        specifications shall be developed.
            (2) Which agencies or instrumentalities of the Federal 
        Government shall be responsible for operating or maintaining 
        which aspects of the program or programs referred to in 
        paragraph (1).
            (3) Which penalty provisions are appropriate or 
        inappropriate with respect to the Federal Government in its 
        capacity as a ``covered employer'', subject to what 
        modifications (if any).

                 TITLE II--TAX-EXEMPT S.A.F.E. ACCOUNTS

SEC. 201. S.A.F.E. ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 222 as 
section 223 and by inserting after section 221 the following new 
section:

``SEC. 222. S.A.F.E. ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction the aggregate amount paid in cash during the 
taxable year by or on behalf of such individual to a S.A.F.E. account 
of such individual.
    ``(b) Limitation.--The amount allowable as a deduction under 
subsection (a) for any taxable year shall not exceed 6.2 percent of the 
lesser of--
            ``(1) the contribution and benefit base (as determined 
        under section 230 of the Social Security Act) for the calendar 
        year which ends with or within such taxable year, or
            ``(2) the sum of--
                    ``(A) the amount of wages (as defined in section 
                3121(a)) received during such calendar year, and
                    ``(B) the amount of the self-employment income (as 
                defined in section 1402) of such individual for the 
                taxable year.
Effective with the commencement of the 16th calendar year for which the 
individual's election under section 105 of the Savings Account for 
Every American Act of 2005 is effective, the limitation under the 
preceding sentence shall be increased by any prescribed employer 
contribution paid to a personal retirement account of such individual 
pursuant to section 102(b)(2)(B) of such Act and the portion of any 
prescribed self-employment contribution paid to such an account which 
is attributable to the increase in such contribution required by the 
last sentence of section 101(7) of such Act.
    ``(c) S.A.F.E. Account.--For purposes of this section, the term 
`S.A.F.E. account' means a trust created or organized in the United 
States exclusively for the benefit of an individual or his 
beneficiaries, but only if the written governing instrument creating 
the trust meets the following requirements:
            ``(1) Except in the case of rollover contributions from 
        another S.A.F.E. account of such individual--
                    ``(A) no contribution will be accepted unless it is 
                in cash,
                    ``(B) contributions will not be accepted for the 
                taxable year in excess of 6.2 percent of the 
                contribution and benefit base (as determined under 
                section 230 of the Social Security Act) for the 
                calendar year which ends with or within such taxable 
                year, and
                    ``(C) any contributions with respect to an account 
                holder which are not accepted pursuant to this 
                paragraph are promptly refunded directly to the account 
                holder.
        In the case of any such individual, effective for taxable years 
        beginning with or after the 16th calendar year for which the 
        individual's election under section 105 of the Savings Account 
        for Every American Act of 2005 is effective, `12.4 percent' 
        shall be substituted for `6.2 percent' in subparagraph (B).
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or such other person who demonstrates to the satisfaction of 
        the Secretary that the manner in which such other person will 
        administer the trust will be consistent with the requirements 
        of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance in his 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount distributed out of a S.A.F.E. account 
        shall be included in gross income of the distributee for the 
        taxable year in which the distribution is received. 
        Notwithstanding any other provision of this title (including 
        chapters 11 and 12), the basis of any person in such an account 
        is zero.
            ``(2) Exceptions for distributions after age 59\1/2\ or 
        death.--Paragraph (1) shall not apply to any distribution out 
        of a S.A.F.E. account--
                    ``(A) made on or after the date on which the 
                account beneficiary attains age 59\1/2\, or
                    ``(B) made to the account beneficiary (or to the 
                estate of the beneficiary) on or after the death of the 
                account beneficiary.
            ``(3) Exceptions for distributions to purchase certain 
        insurance.--Paragraph (1) shall not apply to any distribution 
        out of a S.A.F.E. account to the account beneficiary to the 
        extent such distributions do not exceed the sum of the expenses 
        paid or incurred during the taxable year for--
                    ``(A) any qualified long-term care insurance 
                contract (but only to the extent of eligible long-term 
                care premiums (as defined in section 213(d)(10)),
                    ``(B) disability insurance, or
                    ``(C) term life insurance.
            ``(4) Exceptions for certain other distributions.--Rules 
        similar to the rules of paragraphs (3), (4), (5), and (6) of 
        section 408(d) shall apply for purposes of this section.
    ``(e) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--A S.A.F.E. account is exempt 
        from taxation under this subtitle unless such account has 
        ceased to be a S.A.F.E. account by reason of paragraph (2). 
        Notwithstanding the preceding sentence, any such account is 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to 
        S.A.F.E. accounts, and any amount treated as distributed under 
        such rules shall be treated as not used to pay expenses 
        described in subsection (d)(3).
    ``(f) Additional Tax on Amounts Included in Gross Income.--If any 
distribution from a S.A.F.E. account is includible in gross income of 
the account beneficiary, the tax liability of such beneficiary under 
this chapter for the taxable year in which the distribution is received 
shall be increased by an amount equal to 20 percent of the amount of 
the distribution.
    ``(g) Other Definition and Special Rules.--
            ``(1) Account beneficiary.--For purposes of this section, 
        the term `account beneficiary' means the individual for whose 
        benefit the S.A.F.E. account was established.
            ``(2) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 219(d)(2) (relating to no deduction 
                for rollovers).
                    ``(B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(C) Section 219(f)(5) (relating to employer 
                payments).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
    ``(h) Reports.--The trustee of a S.A.F.E. account shall make such 
reports regarding such account to the Secretary and to the individual 
for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''.
    (b) Deduction Allowed in Arriving at Adjusted Gross Income.--
Subsection (a) of section 62 of such Code is amended by inserting after 
paragraph (17) the following new paragraph:
            ``(18) S.A.F.E. account contributions.--The deduction 
        allowed by section 222.''.
    (c) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 of such Code (relating 
        to tax on excess contributions to individual retirement 
        accounts, etc.) is amended by striking ``or'' at the end of 
        paragraph (3), by inserting ``or'' at the end of paragraph (4), 
        and by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) a S.A.F.E. account (within the meaning of section 
        222(c)),''.
            (2) Section 4973 of such Code is amended by adding at the 
        end the following new subsection:
    ``(g) Excess Contributions to S.A.F.E. Accounts.--For purposes of 
this section, in the case of S.A.F.E. accounts (within the meaning of 
section 222(c)), the term `excess contributions' means the sum of--
            ``(1) the excess (if any) of--
                    ``(A) the aggregate amount contributed for the 
                taxable year to the accounts (other than rollover 
                contributions), over
                    ``(B) the amount allowable as a deduction under 
                section 222 for such contributions, and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year, reduced by the sum of--
                    ``(A) the distributions out of the accounts which 
                were included in gross income under rules similar to 
                the rules of section 408(d)(5) which apply to such 
                accounts by reason of section 222(d)(4), and
                    ``(B) the excess (if any) of--
                            ``(i) the maximum amount allowable as a 
                        deduction under section 222(b) for the taxable 
                        year, over
                            ``(ii) the amount contributed to the 
                        accounts for the taxable year.
        For purposes of this subsection, any contribution which is 
        distributed out of the S.A.F.E. account in a distribution to 
        which the rules similar to the rules of section 408(d)(4) which 
        apply to such accounts by reason of section 222(d)(4) shall be 
        treated as an amount not contributed.''.
    (d) Tax on Prohibited Transactions.--
            (1) In general.--Paragraph (1) of section 4975(e) of such 
        Code (relating to prohibited transactions) is amended by 
        striking ``or'' at the end of subparagraph (E), by 
        redesignating subparagraph (F) as subparagraph (G), and by 
        inserting after subparagraph (E) the following new 
        subparagraph:
                    ``(F) a S.A.F.E. account described in section 
                222(c), or''.
            (2) Special rule.--Subsection (c) of section 4975 of such 
        Code is amended by adding at the end the following new 
        paragraph:
            ``(6) Special rule for s.a.f.e. accounts.--An individual 
        for whose benefit a S.A.F.E. account is established shall be 
        exempt from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if section 222(e)(2) applies with 
        respect to such transaction.''.
    (e) Failure to Provide Reports on S.A.F.E. Accounts.--Paragraph (2) 
of section 6693(a) of such Code (relating to failure to provide reports 
on individual retirement accounts or annuities) is amended by striking 
``and'' at the end of subparagraph (C), by striking the period at the 
end of subparagraph (D) and inserting ``, and'', and by adding at the 
end the following new subparagraph:
                    ``(E) Section 222(h) (relating to S.A.F.E. 
                accounts).''.
    (f) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 222 and inserting the following new items:

``Sec. 222. S.A.F.E. accounts.
``Sec. 223. Cross references.''.
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following new item:

``Sec. 4973. Tax on excess contributions to certain tax-favored 
                            accounts and annuities, etc.''.

SEC. 202. EFFECTIVE DATE.

    The amendments made by this title shall apply to contributions made 
for taxable years beginning after December 31, 2005.

  TITLE III--CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT AND THE 
                     INTERNAL REVENUE CODE OF 1986

SEC. 301. REDUCTIONS IN AND EXEMPTIONS FROM FICA TAXES AND SECA TAXES 
              WITH RESPECT TO ELIGIBLE INDIVIDUALS.

    (a) FICA Tax on Employees.--Section 3101 of the Internal Revenue 
Code of 1986 (relating to OASDI tax on employees) is amended--
            (1) in subsection (a), by striking ``In addition'' and 
        inserting ``Subject to subsection (c), in addition'';
            (2) by redesignating subsection (c) as subsection (d); and
            (3) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Exemption From OASDI Tax for Eligible Individuals.--
Subsection (a) shall not apply with respect to wages received by an 
eligible individual (as defined in section 101(4) of the Savings 
Account for Every American Act of 2005).''
    (b) FICA Tax on Employers.--Section 3111 of such Code (relating to 
OASDI tax on employees) is amended--
            (1) in subsection (a), by striking ``In addition'' and 
        inserting ``Subject to subsection (c), in addition'';
            (2) by redesignating subsection (c) as subsection (d); and
            (3) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Exemption From OASDI Tax With Respect to Eligible 
Individuals.--In the case of an eligible individual (as defined in 
section 101(4) of the Savings Account for Every American Act of 2005), 
effective with the 16th calendar year for which such individual's 
election under section 105 of such Act is effective, subsection (a) 
shall not apply with respect to wages received by such individual.''
    (c) Reduction in and Exemption From Self-Employment Tax.--
Subsection (a) of section 1401 of such Code (relating to OASDI tax on 
self-employment income) is amended--
            (1) in subsection (a), by striking ``In addition'' and 
        inserting ``Subject to subsection (c), in addition'';
            (2) by redesignating subsection (c) as subsection (d); and
            (3) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Adjustment to OASDI Tax.--
            ``(1) Reduction.--In the case of an eligible individual (as 
        defined in section 101(4) of the Savings Account for Every 
        American Act of 2005), for taxable years beginning with or 
        during the 1st 15 calendar years for which such individual's 
        election is in effect under section 105 of such Act, the rate 
        of tax under subsection (a) shall be 6.20 percent.
            ``(2) Exemption.--In the case of such an eligible 
        individual, effective for taxable years beginning with or 
        during the 16th calendar year for which such individual's 
        election under such section 105 is effective, subsection (a) 
        shall not apply.''
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to wages received after December 31, 2006, and with 
respect to self-employment income for taxable years beginning after 
such date.

SEC. 302. EXCLUSION OF ELIGIBLE INDIVIDUALS FROM OLD-AGE, SURVIVORS, 
              AND DISABILITY INSURANCE COVERAGE.

    (a) Monthly Insurance Benefits Under Section 202.--Section 202 of 
the Social Security Act (42 U.S.C. 402) is amended by adding at the end 
the following new subsection:

 ``Limitation on Payment to Eligible Individuals Under Savings Account 
                     for Every American Act of 2005

    ``(z)(1) Notwithstanding any other provision of this title, no 
monthly benefits shall be paid under this section based on the wages 
and self-employment income of an eligible individual (as defined in 
section 101(4) of the Savings Account for Every American Act of 2005).
    ``(2) Determinations of entitlement to hospital insurance benefits 
under section 226 or 226A shall be made without regard to paragraph 
(1).''.
    (b) Disability Insurance Benefits Under Section 223.--Section 223 
of such Act (42 U.S.C. 423) is amended by adding at the end the 
following new subsection:

 ``Limitation on Payment to Eligible Individuals Under Savings Account 
                     for Every American Act of 2005

    ``(k)(1) Notwithstanding any other provision of this title, no 
monthly benefits shall be paid under this section based on the wages 
and self-employment income of an eligible individual (as defined in 
section 101(4) of the Savings Account for Every American Act of 2005).
    ``(2) Determinations of entitlement to hospital insurance benefits 
under section 226 or 226A shall be made without regard to paragraph 
(1).''.

SEC. 303. INFORMATION PROVIDED IN SOCIAL SECURITY ACCOUNT STATEMENTS.

    (a) In General.--Section 1143 of the Social Security Act (42 U.S.C. 
1320b-13) is amended to read as follows:

                  ``social security account statement

                    ``Provision of Annual Statements

    ``Sec. 1143. (a) The Commissioner of Social Security shall provide 
an annual social security account statement (hereinafter in this 
section referred to as the `statement') to each eligible individual who 
is not receiving benefits under title II and for whom a mailing address 
can be determined through such methods as the Commissioner determines 
to be appropriate.

                        ``Contents of Statement

    ``(b) Each statement shall contain--
            ``(1) the amount of wages paid to and self-employment 
        income derived by the eligible individual as shown by the 
        records of the Commissioner;
            ``(2) an estimate of the aggregate of the employer, 
        employee, and self-employment contributions of the eligible 
        individual for old-age, survivors, and disability insurance as 
        shown by the records of the Commissioner;
            ``(3) a separate estimate of the aggregate of the employer, 
        employee, and self-employment contributions of the eligible 
        individual for hospital insurance as shown by the records of 
        the Commissioner; and
            ``(4) an estimate of the potential monthly retirement, 
        disability, survivor, and auxiliary benefits payable on the 
        eligible individual's account together with a description of 
        the benefits payable under the medicare program of title XVIII.

                         ``Eligible Individual

    ``(c) For purposes of this section, the term `eligible individual' 
means an individual who--
            ``(1) has a social security account number, and
            ``(2) has wages or net earnings from self-employment.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to statements provided on or after October 1, 2006.
                                 <all>