Establishment of Individual Social Security Investment Program

(a)

In general

Title II of the Social Security Act is amended— (1)by inserting before section 201 the following:

Insurance benefits

; and

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

Individual Social Security Investment Program

251.

Definitions

For purposes of this part— (1)

Participant

The term participant means— (A)any individual who is born on or after January 1, 1984, and— (i)receives wages in any calendar year after December 31, 2005, on which there is imposed a tax under section 3101(a) of the Internal Revenue Code of 1986, or (ii)derives self-employment income for a taxable year beginning after December 31, 2005, on which there is imposed a tax under section 1401(a) of the Internal Revenue Code of 1986, and (B)any individual who is born on or after January 1, 1951, and before January 1, 1984, and who, pursuant to an election filed in accordance with section 259, is treated under such section as a participant under this part. (2)

Board

The term Board means the Individual Investment Board established under section 261. (3)

Executive Director

The term Executive Director means the Executive Director appointed under section 262. (4)

Part B totalization account

The term part B totalization account means an account established for a participant under section 252(d). (5)

Tier I Investment Fund

The term Tier I Investment Fund means the trust fund created under section 253. (6)

Tier II Investment Fund

The term Tier II Investment Fund means the trust fund created under section 254. (7)

Tier III investment account

The term Tier III investment account means a trust established pursuant to section 255.

252.

Individual investment of social security contributions; part B totalization accounts

(a)

Payments into Tier I Investment Fund

(1)

In general

During each calendar year, the Secretary of the Treasury shall deposit into the Tier I Investment Fund (established under section 253), 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 participant for such calendar year. (2)

Redirected social security contributions

For purposes of paragraph (1) the term redirected social security contributions of a participant for a calendar year means the product derived by multiplying— (A)the sum of the total wages paid to, and self-employment income derived by, the participant during such calendar year (taking into account limits imposed by the contribution and benefit base under section 230), by (B)6.2 percent. (3)

Transfers based on estimates

The amounts deposited pursuant to paragraph (1) shall be transferred in at least monthly payments from the Federal Old-Age and Survivors Insurance Trust Fund to the Tier I Investment Fund, such amounts to be determined on the basis of estimates, by the Commissioner of Social Security and certified to the Secretary of the Treasury under part A, of the wages paid to, and self-employment income derived by, participants, and proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than actual amounts. (4)

Separate accounting and crediting

(A)

In general

Subject to this paragraph, the Board shall provide, after the close of each calendar year, for prompt accounting of the amounts deposited in the Tier I Investment Fund with respect to each participant during such calendar year to such individual’s part B totalization account (established under subsection (d)), together with properly allocated increases and decreases in such amounts reflecting the net returns from investment of the balance of the Fund during such year under section 253. For purposes of determining such increases and decreases in such amounts for each calendar year, the amounts deposited into the Fund in connection with any participant during such calendar year shall be deemed to have been deposited on June 30 of such year. (B)

Crediting

Under such accounting, amounts deposited into the Fund during each calendar year with respect to the redirected social security taxes of each participant (including net returns and losses from the investment Fund attributed to such amounts under this paragraph) shall be credited to such participant’s part B totalization account not later than the end of the succeeding calendar year. (5)

Treatment of married individuals

(A)

In general

If, as of the end of a calendar year in which the amounts to be credited were deposited into the Fund, the participant is married and his or her spouse is a participant— (i)the amounts credited to the part B totalization account of the participant shall be limited to 50 percent of the amount of the redirected social security contributions of the participant for such year, and (ii)the part B totalization account of such spouse shall be credited with 50 percent of the amount of such redirected social security contributions. (B)

Reporting requirements

The Board may prescribe such reporting requirements applicable to participants regarding marital status as the Board considers necessary to carry out the provisions of subparagraph (A). (b)

Transfers into Tier II Investment Fund

(1)

In general

Upon the crediting to a participant’s part B totalization account of any amount held in the Tier I Investment Fund for any calendar year, the Board shall (except as provided in section 260(a)(2)) transfer the amount so credited to such account from the Tier I Investment Fund into the Tier II Investment Fund (established under section 254). (2)

Separate accounting and crediting

Subject to this paragraph, the Board shall provide for ongoing separate accounting in the participant’s part B totalization account of the amounts deposited in the Tier II Investment Fund with respect to such participant during each calendar year, together with any increases or decreases therein for such year so as to reflect the net returns and losses from investment thereof under section 254 while held in the Tier II Investment Fund during such year. (c)

Deposits to Tier III investment accounts

(1)

In general

In any case in which, as of the end of any calendar year, the total balance in the Tier II Investment Fund credited to the participant’s part B totalization account exceeds for the first time the minimum deposit balance, the Board shall, by regulation, provide for an opportunity for the participant to make, at any time thereafter, the participant’s first election of a Tier III investment account for investment of an amount credited to the participant’s part B totalization account. Such election may be in lieu of or in addition to investment in any option available with respect to the Tier II Investment Fund. (2)

Minimum deposit balance

(A)

In general

Subject to subparagraph (B), the term `minimum deposit balance' means an amount equal to $10,000. (B)

Adjustments

The Board shall adjust annually (effective for years after December 2006) 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. (3)

Subsequent investment

At any time after a participant’s first election of a Tier III investment account pursuant to paragraph (1), the participant may invest any portion of the balance credited to the participant’s part B totalization account in a Tier III investment account, the Tier II Investment Fund, or any combination thereof, as elected by the participant from time to time in accordance with regulations of the Board under this part. (d)

Accounting for total invested amounts by means of part B totalization accounts

(1)

Establishment of accounts

As soon as practicable after the later of January 1, 2006, or the date on which an individual becomes a participant under this part, the Executive Director shall establish and maintain a part B totalization account for the participant. Such account shall be the means by which amounts held in the Tier I Investment Fund, the Tier II Investment Fund, and any Tier III investment account of such participant are credited to such participant under this part, under procedures which shall be established by the Board by regulation. The part B totalization account of a participant shall be identified to such participant by means of the participant’s social security account number. (2)

Account balance

The balance in a participant’s part B totalization account at any time is the sum of— (A)any balance in the Tier I Investment Fund credited to such participant’s part B totalization account prior to transfer to the Tier II Investment Fund under section 252(b)(1); plus (B)the excess of— (i)all deposits in the Tier II Investment Fund credited to such participant’s part B totalization account under subsection (a) (including the proceeds of any sale by such participant, as provided in section 257(e), of any recognition bond issued in the name of the participant under section 257(b)), subject to such increases and reductions as may result from allocations made to and reductions made in the account pursuant to paragraph (3)(A) with respect to amounts in the Tier II Investment Fund; over (ii)amounts credited to such participant’s part B totalization account under subsection (a) paid out of the Tier II Investment Fund under this part; plus (C)the excess of— (i)the deposits to any Tier III investment account of such participant, subject to such increases and reductions as may result from allocations made to and reductions made in the Tier III investment account pursuant to paragraph (3)(B); over (ii)amounts paid out of such participant’s Tier III investment account under this part. (3)

Allocation of earnings and losses

Pursuant to regulations which shall be prescribed by the Board, the Executive Director shall allocate to the part B totalization account of each participant— (A)the net earnings and net losses from each investment of sums in the Tier II Investment Fund which are attributable to sums credited to such participant’s part B totalization account, and reductions equal to an appropriate share of the administrative expenses of the Tier II Investment Fund, as determined by the Executive Director; and (B)the net earnings and net losses from each investment of sums in any Tier III investment account of such participant, and reductions equal to the administrative expenses in connection with the Tier III investment account. (e)

Treatment of transfers

Transfers from the Federal Old-Age and Survivors Insurance Trust Fund to the Tier I Investment Fund and transfers among the Tier I Investment Fund, Tier II Investment Fund, and Tier III investment accounts under this part shall not be included in the totals of the budget of the United States Government as submitted by the President or of the congressional budget and shall be exempt from any general budget limitation imposed by statute on budget outlays of the United States Government.

253.

Tier I Investment Fund

(a)

Establishment of Tier I Investment Fund

There is established in the Treasury of the United States a trust fund to be known as the Tier I Investment Fund. The Board shall serve as trustees of such Fund. The Fund consists of all amounts derived from payments into the Fund under section 252(a) and remaining after investment of such amounts under subsection (b) of this section, including additional amounts derived as income from such investments. The amounts held in the Fund are appropriated and shall remain available without fiscal year limitation— (1)to be held for investment on behalf of participants under subsection (b), (2)to pay the administrative expenses related to the Fund and to investment under subsection (b), (3)to make transfers to the Tier II Investment Fund under section 252(b) or to Tier III investment accounts under section 252(c), (4)to make payments under section 260(a)(2), and (5)to make lump sum distributions under subsections (d) and (e). (b)

Investment of Fund balance

For purposes of investment of the Tier I Investment Fund, the Board shall contract with appropriate professional asset managers 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 certificates of deposit or 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)

Treatment of amounts held in Tier I Investment Fund

(1)

In general

Subject to this part— (A)until amounts deposited into the Tier I Investment Fund during any calendar year are credited to part B totalization accounts, such amounts shall be treated as the unallocated property of all participants with respect to whom amounts were deposited in the Fund during such year, jointly held in trust for such participants in the Fund, and (B)amounts deposited into the Fund which are credited to a participant’s part B totalization account shall be treated as property of such participant, held in trust for such participant in the Fund. (2)

Limitations on use of funds

(A)

In general

Sums in the Tier I Investment Fund credited to a participant’s part B totalization account may not be used for, or diverted to, purposes other than for the exclusive benefit of the participant or the participant’s beneficiaries under this part. (B)

Assignments and alienation

Sums in the Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process. (d)

Retirement distribution

As soon as practicable after the commencement of the distribution under section 256 of assets credited to a participant’s part B totalization account, the amount of any assets in the Tier I Investment Fund credited to such account shall be distributed to such participant in a lump sum, under rules established by the Board. (e)

Lump sum payment to estate upon death of participant

Upon the death of a participant, the amount of any assets in the Tier I Investment Fund credited to such participant’s part B totalization account shall be transferred in a lump sum, under rules established by the Board— (1)in any case in which one or more beneficiaries have been designated in advance, in accordance with regulations which shall be prescribed by the Board, 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 participant’s estate.

254.

Tier II Investment Fund

(a)

Establishment of Tier II Investment Fund

There is established in the Treasury of the United States a trust fund to be known as the Tier II Investment Fund. The Board shall serve as trustees of such Fund. The Fund consists of all amounts derived from payments into the Fund under section 252(b)(1) and remaining after investment of such amounts under subsection (b) of this section, including additional amounts derived as income from such investments. The amounts held in the Fund are appropriated and shall remain available without fiscal year limitation— (1)to be held for investment under subsection (b), (2)to pay the administrative expenses related to the Fund and to investment under subsection (b), (3)to make transfers to Tier III investment accounts under section 252(c)(1), (4)to make retirement distributions in accordance with section 256, and (5)to make lump sum distributions under section 256 and subsection (e) of this section. (b)

Investment in equities and fixed income instruments in management accounts

(1)

In general

For purposes of investment of the Tier II Investment Fund, the Board shall divide the Fund into multiple management accounts. Such accounts shall consist of the 60/40 management account and 2 or more additional management accounts providing for investment in each account in a combination of equities and fixed income instruments in accordance with prescribed percentages, as provided in paragraph (2). The Board shall contract with appropriate investment managers selected for investment of amounts held in each management account. (2)

Rules relating to management accounts

(A)

In general

The investment manager selected for investment of amounts held in each management account referred to in 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 instrument percentage is invested in fixed income instruments in accordance with paragraph (5). (B)

Prescribed percentages

For purposes of subparagraph (A)— (i)

The 60/40 management account

In the case of the 60/40 management account— (I)the prescribed equities percentage is 60 percent, and (II)the prescribed fixed income instrument percentage is 40 percent. (ii)

Other management accounts

In the case of any other management account— (I)the prescribed equities percentage is a prescribed percentage not in excess of 80 percent, and (II)the prescribed fixed income instrument percentage is the remaining percentage of the amount invested in the management account. (3)

Election of management accounts

(A)

Default management 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 60/40 management account. (B)

Election of transfers between management accounts

Pursuant to the written election, filed in accordance with regulations of the Board and received by the Secretary of the Treasury during an applicable election month by a participant who has an amount credited to such participant’s part B totalization account invested in any of the management accounts in the Tier II Investment Fund, the Secretary of the Treasury shall transfer such amount from such account to any of the other management accounts in the Tier II Investment Fund (whichever is designated in such election). (C)

Applicable election month

For purposes of subparagraph (B), the term applicable election month, in connection with a participant, means— (i)the calendar month in which occurs the anniversary of such participant’s birth, and (ii) the 6th calendar month following such month. (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 amounts in any management account in 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 by each investment manager 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 amounts in any management account in 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 by each investment manager 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. (c)

Periodic reports by Board

(1)

In general

The Board shall make periodic reports concerning the status of the investment in the Tier II Investment Fund of amounts credited to each participant’s part B totalization account. Each periodic report shall be furnished to the participant on at least a semiannual basis on or before the 60th day following the period for which the report is required. (2)

Information required to be included

The periodic report shall contain the following information for transactions occurring during the period for which the report is provided: (A)The balance in the Tier II Investment Fund credited to the participant’s part B totalization account. (B)The rate of return on such balance for the period covered, set forth separately for each management account in the case of an investment in 2 or more management accounts during the period. (C)The amount of authorized contributions made to the Tier II management account and credited to the participant’s part B totalization account. (D)The name and address of the Board. (E)Commission fees and fees for administrative expenses charged in connection with the investment in the Tier II Investment Fund during the period. (F)Other information which may be required from time to time by the Board.

The language of the report shall be written in a form so as to be understood by the average participant.

(d)

Treatment of amounts held in Tier II Investment Fund

(1)

In general

Subject to this part, amounts deposited into the Tier II Investment Fund which are credited to a participant’s part B totalization account shall be treated as property of such participant, held in trust for such participant in the Fund. (2)

Limitations on use of funds

(A)

In general

Sums in the Tier II Investment Fund credited to a participants part B totalization account may not be used for, or diverted to, purposes other than for the exclusive benefit of the participant or the participant’s beneficiaries under this part. (B)

Assignments and alienation

Sums in the Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process. (e)

Lump sum payment to estate upon death of participant

Upon the death of a participant, the amount of any assets in the Tier II Investment Fund credited to such participant’s part B totalization account shall be transferred in a lump sum, under rules established by the Board— (1)in any case in which one or more beneficiaries have been designated in advance, in accordance with regulations which shall be prescribed by the Board, 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.

255.

Tier III investment accounts

(a)

Designation of Tier II investment accounts

Under regulations prescribed by the Board, a participant, upon the initial attainment of a minimum deposit balance in amounts in the Tier II Investment Fund credited to the participant’s part B totalization account, as described in section 252(c), may designate to the Board, in such form and manner as shall be prescribed in such regulations, a Tier III investment account to which deposits with respect to the individual are to be made under section 252(c). The individual may designate another Tier III investment account in lieu of any account previously designated, in accordance with regulations of the Board. (b)

Definition

For purposes of this part, the term Tier III investment account means a trust created or organized in the United States for the exclusive benefit of a participant or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements: (1)

Restricted contributions

No contribution will be accepted unless it is in the form of a deposit to the account pursuant to section 252(c)(1). (2)

Trustee requirements

The trustee is— (A)a bank (as defined in section 581 of the Internal Revenue Code of 1986), (B)an insured credit union (as defined in section 101(6) of the Federal Credit Union Act), (C)a corporation which, under the laws of the State of its incorporation, is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such State, (D)a regulated investment company (as defined in section 851 of the Internal Revenue Code of 1986) for which an election is in effect under section 851(b)(1) of such Code, or (E)any other person designated by the Board under regulations prescribed under this paragraph,

but only if the trustee demonstrates to the satisfaction of the Board that its portfolio assets either replicate the assets of a broad-based index of equities or fixed income instruments which is approved by the Board or are of a type that the Board has determined not to involve high risks for the investor, and that the manner in which it will administer the trust will be consistent with the requirements of this section.

(3)

Nonforfeitability

The interest of an individual in the balance of his account is nonforfeitable. (4)

Diversification

The investment options made available to participants by the trustee include reasonably diversified options of equities, fixed income instruments, or a combination of both. (5)

Separation of assets

The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund. (c)

Investment standards

The trustee of a Tier III investment account shall invest amounts credited to the part B totalization account of a participant which are held in such account in accordance with standards which shall be prescribed by the Board by regulation. Such standards shall ensure that investments made available to participants by the trustee are reasonably diversified, that assets held in a Tier III investment account are nonforfeitable, and that the trustee complies with applicable fiduciary requirements. (d)

Treatment of amounts held in Tier III investment accounts

(1)

In general

Subject to this part, amounts deposited into a participant’s Tier III investment account are the property of such participant, held in trust for such participant by the trustee of such account. (2)

Assignments and alienation

Sums in, and payments from, the account may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process. (e)

Periodic reports by account trustee

(1)

In general

The trustee of a participant’s Tier III investment account shall, in accordance with regulations of the Board, make periodic reports concerning the status of the account which shall meet the requirements of this section. Each periodic report shall be furnished to the participant on at least a semiannual basis on or before the 60th day following the period for which the report is required. (2)

Information required to be included

The periodic report shall contain the following information for transactions occurring during the period for which the report is provided: (A)The balance in the Tier III investment account. (B)The rate of return for the period covered. (C)The amount of authorized account contributions. (D)The name and address of the trustee. (E)Commission fees and fees for administrative expenses charged in connection with the account. (F)Other information which may be required from time to time by the Board.

The language of the report shall be written in a form so as to be understood by the average participant.

(3)

Reports to Board

The Board may require the periodic report to be filed with the Board at such time as the Board may specify in regulations under this section, except that at least 1 periodic report filed annually with Board shall provide information with respect to the account as of December 31 preceding the date of the issuance of the report. (4)

Failure by trustee to make timely periodic reports

(A)

In general

The trustee of a Tier III investment account shall be subject to a civil penalty of not to exceed $100 a day from the date of such trustee's failure or refusal to furnish the periodic report required to be furnished by the trustee under this subsection until the date on which such report is furnished. (B)

Penalties assessed by Board

Any civil penalty assessed by this paragraph shall be imposed by the Board and collected in a civil action. The Board may compromise the amount of any civil penalty imposed by this paragraph. The Board may waive the application of this paragraph with respect to any failure if the Board determines that such failure is due to reasonable cause and not to intentional disregard of rules and regulations. (f)

Lump sum payment to estate upon death of account holder

Upon the death of a participant who has an amount credited to such participant’s part B totalization account invested in a Tier III investment account, such amount shall be distributed in a lump sum distribution, under rules established by the Board— (1)in any case in which one or more beneficiaries have been designated in advance, in accordance with regulations which shall be prescribed by the Board, 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 the participant’s estate.

256.

Retirement distributions

(a)

In general

Except as provided in this section, amounts credited to a participant’s part B totalization account may be distributed to the participant only on and after the participant’s retirement date. Such distribution shall be in the form of— (1)an individual social security annuity meeting the requirements of subsection (c), (2)a programmed withdrawal meeting the requirements of subsection (d), or (3)a combination, meeting the requirements of subsection (e), of an individual social security annuity (meeting the requirements of subsection (b)) and a lump sum distribution.

Not later than the date on which the participant attains age 62, and at any other time upon the request of the participant, the Board shall notify the participant of the most recent listing of forms of distribution approved under this section and the entitlement (if any) of the participant to such a distribution.

(b)

Retirement date

For purposes of this section, the term retirement date, in connection with a participant, means the earlier of— (1)any date as of which the participant has attained retirement age (as defined in section 216(l)(1)), or (2)the date designated for distribution of the balance in the participant’s part B totalization account pursuant to section 260. (c)

Purchase of annuities

(1)

In general

(A)

Selection of annuity

On the participant’s retirement date, the participant may purchase an individual social security annuity selected from among the annuities approved by the Board under paragraph (2). (B)

Transfer of assets

Upon the selection by a participant under subparagraph (A), the Board shall provide for the transfer of all assets credited to the participant’s part B totalization account and determined under regulations of the Board to be available for distribution to purchase the annuity selected by the individual. (2)

Approval of individual social security annuities

(A)

Certification of issuers

(i)

In general

The Board shall certify issuers eligible to enter into annuity contracts with participants under this subsection. (ii)

Application

Any issuer that desires to be certified by the Board to issue an individual social security annuity shall submit an application to the Board at such time, in such manner, and containing such information as the Board may require. (iii)

Separation from other operations

As a condition of certification under this subparagraph, each issuer shall maintain each individual social security annuity issued by such issuer separate from all other operations of the issuer. (iv)

Exemption from third party claims

Each individual social security annuity shall be exempt from any and all third party claims against the issuer. (B)

Approval of individual social security annuities

(i)

In general

No funds may be transferred into an individual social security annuity unless the Board has approved an application submitted under clause (ii) with respect to the annuity. (ii)

Application

With respect to each individual social security 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 individual social security annuity that is the subject of the application meets qualifications which shall be specified in regulations of the Board. Such qualifications shall 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. (II)

Cost-of-living adjustments

The Board may not approve an application under clause (i) unless the terms of 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. (d)

Programmed withdrawal

(1)

In general

Cost-of-living adjustments

Any distribution under paragraph (1)(A) shall, in accordance with regulations which shall be prescribed by the Board, provide for adjustments in the periodic 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 paragraph shall be construed to preclude the terms governing such distribution 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. (3)

Limitation

Any distribution described in paragraph (1)(B) shall be limited to the extent necessary to ensure that remaining funds credited to the account are sufficient to provide periodic installments under paragraph (1) at least, on an annual basis, equal to (determined under reasonable actuarial assumptions) 100 percent of the poverty line for an individual (determined under the poverty guidelines of the Department of Health and Human Services issued under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981). (e)

Combination of lump sum payment and annuity

On the participant’s retirement date, the participant may elect distribution under this section of the balance credited to the participant’s part B totalization account as provided in this subsection. Such distribution shall be in the form of a combination of a lump sum payment and an annuity approved under subsection (c). Any such lump sum payment shall be limited to the extent necessary to ensure that remaining funds credited to the account are sufficient to provide, through the purchase of such an annuity, a monthly payment over the life expectancy of the participant (determined under reasonable actuarial assumptions) which is at least, on an annual basis, equal to 100 percent of the poverty line for an individual (determined under the poverty guidelines of the Department of Health and Human Services issued under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981). (f)

Lump sum distributions of de minimis amounts

In any case in which, as of the date on which the participant attains retirement age (as defined in section 216(l)(1)), a distribution under this section has not commenced, and the total amount of the assets credited to the participant’s part B totalization account is less than the minimum deposit balance (as defined in section 252(c)(2)), the preceding provisions of this section shall not apply, and such assets shall be distributed to the participant in a lump sum upon the request of the participant, under rules established by the Board. (g)

Protection from assignment or alienation

Distributions under this section may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process.

257.

Recognition bonds

(a)

Certification of credited wages and self-employment income

Not later than July 1 following the effective date of an election to become a participant filed by an individual under section 259, the Commissioner of Social Security shall certify to the Secretary of the Treasury whether such individual was, as of immediately before such effective date, credited with wages and self-employment income under part A. (b)

Issuance of bond

Immediately upon receipt of certification under subsection (a) that an individual is credited with wages and self-employment income under part A, the Secretary of the Treasury shall issue a recognition bond in the name of such individual as an obligation of the United States, which shall be deposited in the Tier II Investment Fund and held in such Fund for such individual together with such individual’s part B totalization account. 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 of public debt obligations consisting of recognition bonds issued under this paragraph. Each such obligation shall be evidenced by a paper instrument issued by the Secretary of the Treasury setting forth the terms specified in this section, and stating on its face that the obligation shall be incontestable in the hands of the bearer, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation, in accordance with the provisions of this section. (c)

Calculation of face value

(1)

In general

The face value of a recognition bond issued in the name of an individual under this section shall be the actuarial present value of the future monthly insurance benefits under part A to which such individual would have been entitled, and to which other individuals would have been entitled under part A based on such individual’s wages and self-employment income, determined under then current law but as if section 215(j) did not apply and subject to paragraph (2) of this subsection. (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 such individual as of the effective date of the election referred to in subsection (a), (B)assuming that such individual would become entitled to disability insurance benefits under section 223 (in lieu of old-age insurance benefits under section 202(a)) on the day such individual would attain retirement age (as defined in section 216(l)), except that, in computing average indexed monthly earnings under section 215(b), the number of such individual’s benefit computation years shall be determined without regard to any reduction in the number of elapsed years under section 215(b)(2)(A), and (C)using reasonable actuarial assumptions, including reasonable current age-specific and gender-specific expected mortality rates. (d)

Redemption

A bond issued in the name of any participant under this section shall be redeemable (by the participant or other person bearing the bond after sale or resale pursuant to subsection (e)) on or after the date on which such participant would attain retirement age (as defined in section 216(l)(1)), for the amount of the face value. (e)

Negotiability and crediting of proceeds to part B totalization account

A recognition bond issued in the name of a participant under this section shall not be taken into account in determining the amount credited to the participant’s part B totalization account. Such bond shall be fully tradable on the secondary markets under such procedures as may be provided in regulations of the Board, and any amount derived by the participant from the sale of such bond shall be deposited in the Tier II Investment Fund and shall be included in the total amount credited to such participant’s part B totalization account.

258.

Supplemental minimum benefit payments

(a)

In general

In any case in which— (1)a participant attains retirement age (as defined in section 216(l)(1)), (2)as of the date such participant attains such age, no distribution from amounts credited to the participant’s part B totalization account has been made to the participant under section 260, and (3)as of such date, the balance in the participant’s part B totalization account (subject to subsection (e)) is less than the minimum annuity amount,

the Board shall promptly notify the participant of the participant’s eligibility for a supplemental minimum benefit payment under this section. The participant, upon application to the Board filed by the participant on or after such date and in such form and manner as shall be prescribed by the Board, shall be entitled to a supplemental minimum benefit payment either to the Tier II Investment Fund (to the credit of the participant’s part B totalization account) or to the participant’s Tier III investment account, as may be specified by the participant in such application. Upon receipt of such application, the Board shall certify to the Secretary of the Treasury the amount of such payment, and such Secretary shall pay the amount of such payment to such Fund or such Tier III investment account in accordance with such certification from funds otherwise available in the general fund of the Treasury.

(b)

Amount of supplemental minimum benefit payment

The amount of a supplemental minimum benefit payment payable with respect to a participant under subsection (a) is, subject to subsection (d), the excess (if any) of— (1)the minimum annuity amount as of the date described in subsection (a), over (2)the amount credited to the participant’s part B totalization account, (subject to subsection (e)). (c)

Minimum annuity amount

(1)

In general

For purposes of this section, the term minimum annuity amount means an amount, determined as of the date described in subsection (a), necessary to purchase an immediate life annuity which provides for monthly payments which are, on an annual basis, at least equal to the applicable percentage of the poverty line as of such date for an individual (determined under the poverty guidelines of the Department of Health and Human Services issued under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981). (2)

Applicable percentage

For purposes of paragraph (1), the applicable percentage, in connection a participant, shall be the excess of— (A)100 percent, over (B)the product derived by multiplying— (i)1.0 percentage point, by (ii)the excess (not less than zero) of— (I)140, over (II)the number of such participant’s quarters of coverage under part A of this title. (3)

Immediate life annuity

For purposes of paragraph (1), the term immediate life annuity means an annuity— (A)the annuity starting date (as defined in section 72(c)(4) of the Internal Revenue Code of 1986) of which commences with the first month following the date described in subsection (a), and (B)which provides for a series of substantial equal annual payments over the life expectancy of the participant. (4)

Assumptions

Determinations of the minimum annuity amount under this subsection shall be based on reasonable actuarial assumptions which shall be prescribed by the Board (including among such assumptions reasonable charges for administrative costs). (d)

Need-based cash benefits taken into account

(1)

In general

Under regulations which shall be prescribed by the Board, in any case in which a participant is entitled to, or eligible for, need-based cash benefits for any month, the supplemental minimum benefit payments otherwise payable to such participant for such month, as determined under subsection (a), shall be reduced by the total amount of such recognized governmental cash benefits for such month. (2)

Need-based cash benefits

For purposes of paragraph (1), the term need-based cash benefit for any month means— (A)a supplemental security income benefit under title XVI for such month, and (B)a monthly cash benefit payable to such participant for such month under any other need-based assistance program of the United States or of any State (or political subdivision thereof, as defined in section 218(b)(2)). (3)

Conversion to monthly benefits

For purposes of this subsection, any periodic benefit which otherwise is described in paragraph (2)(B), but which is paid on other than a monthly basis, shall be allocated on a basis equivalent to a monthly benefit (as determined by the Board), and such equivalent monthly benefit shall constitute a monthly cash benefit for purposes of paragraph (2)(B). For purposes of this paragraph, the term periodic benefit includes a benefit payable in a lump sum if it is a commutation of, or a substitute for, periodic payments. (4)

Affect on other laws

To the extent that any provision of law of the United States or of any State (or political subdivision thereof, as defined in section 218(b)(2)) providing for need-based cash benefits takes into account supplemental minimum benefit payments under this section in determining eligibility for such need-based benefits or the amount thereof, this section supersedes such provision and such provision shall be null and void as against public policy. (e)

Treatment of periodic payments based on noncovered governmental service

(1)

In general

In any case in which a participant is eligible for a periodic payment which is based in whole or in part on the participant’s earnings for noncovered governmental service, for purposes of subsection (b)(2), the amount credited to such participant’s part B totalization account shall be deemed to be equal to the amount derived by multiplying— (A)the amount credited to such participant’s part B totalization account (as determined without regard to this subsection), by (B)a fraction— (i)the numerator of which is an amount equal to the individual’s adjusted average indexed monthly earnings (as determined under paragraph (3)), and (ii)the denominator of which is the individual’s average indexed monthly earnings (determined on 215(b) without regard to paragraph (3)),

rounded, if not a multiple of $0.10, to the next lower multiple of $0.10.

(2)

Noncovered governmental service

For purposes of this subsection, the term noncovered governmental service means service for the Federal Government or for a State (or political subdivision thereof, as defined in section 218(b)(2)) which does not constitute employment as defined in section 210, except that such term does not include service as a member of a uniformed service (as defined in section 210(m)). (3)

Adjusted average indexed monthly earnings

(A)

In general

For purposes of paragraph (1)(B)(i), the adjusted average indexed monthly earnings of a participant is the amount of the participant’s average indexed monthly earnings (determined under section 215(b)), adjusted by treating all noncovered governmental service performed after 1950 on which a periodic benefit referred to in paragraph (1) is based as employment as defined in section 210 for purposes of this title (together with all other service performed by such individual consisting of employment as so defined). (B)

Methodology

For purposes of determining average indexed monthly earnings as described in subparagraph (A), the Commissioner of Social Security shall provide by regulation for a method for determining the amount of wages derived from service performed after 1950 and which is to be treated as employment solely for purposes of subparagraph (A). Such method shall provide for reliance on employment records which are provided to the Commissioner and which constitute a reasonable basis for treatment of service as employment for such purposes, together with such other information received by the Commissioner as the Commissioner may consider appropriate as a reasonable basis for treatment of service as employment for such purposes. (4)

Cooperation by Commissioner

The Commissioner of Social Security shall provide to the Board such assistance and information as the Board may require for purposes of this subsection. (f)

Married couples

In the case of any 2 participants who are married, subsection (a) shall apply with respect to each such participant, upon the joint written request of such participants, by totalling the balances in the accounts referred to in subsection (a) of both such individuals. (g)

Protection from assignment or alienation

Any supplemental minimum benefit payment under this section may not be assigned or alienated.

259.

Election for participation

(a)

In general

Any individual who— (1)is born on or after January 1, 1951, and before January 1, 1984, (2)has not attained retirement age (as defined in section 216(l)(1)), and (3)has not become entitled to old-age insurance benefits under section 202(a),

may file with the Board under this section, in such form and manner as shall be prescribed in regulations of the Board, a written form electing the status of participant for purposes of this part. On and after the effective date of the election, such individual shall be treated as a participant under this part with respect to wages received in any calendar year beginning on or after such date and self-employment income for any taxable year beginning on or after such effective date.

(b)

Effective date of election

An election under this section shall take effect on January 1 of the first calendar year beginning after 60 days after the date of the filing of the election in accordance with subsection (a). (c)

Irrevocability

Any election under this section shall be irrevocable.

260.

Early distribution and termination of participation in program

(a)

In general

In any case in which the amount credited to a participant’s part B totalization account as of any date prior to the date on which the participant attains retirement age (as defined in section 216(l)(1)) accrues to a level equal to at least the amount necessary to purchase under section 256(c) (as if such date were the participant’s retirement date) an immediate life annuity which provides for payments which are, on an annual basis, at least equal to 100 percent of the poverty line as of such date for an individual (determined under the poverty guidelines of the Department of Health and Human Services issued under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981), the Board shall promptly so inform the participant, and, upon application of the participant filed with the Board under this section in accordance with regulations of the Board— (1)the Board shall, at the election of the participant, either— (A)commence distribution of the total amount credited to such participant’s part B totalization account in the form of an annuity purchased under section 256(c), or (B)provide for consolidation of the total amount credited to such account in the Tier II Investment Fund and investment of such amount in fixed-income instruments meeting the requirements of section 254(c), until distribution of such amount is made under subparagraph (A) or section 256, and (2)in lieu of the transfer, from the Tier I Investment Fund to the Tier II Investment Fund or a Tier III investment account, of any remaining amount credited to such participant’s part B totalization account after the date of the distribution or consolidation under paragraph (1), the Board shall provide for the direct payment of such remaining credited amount to the participant. (b)

Immediate life annuity

For purposes of subsection (a), the term immediate life annuity means an annuity— (1)the annuity starting date (as defined in section 72(c)(4) of the Internal Revenue Code of 1986) of which commences with the first month following the date referred to in subsection (a), and (2)which provides for a series of substantially equal annual payments over the life expectancy of the participant. (c)

Married couples

Treatment of periodic payments based on governmental service

Section 258(e) shall apply for purposes of this section in determining the amount credited to a participant’s part B totalization account.

261.

Individual Investment Board

(a)

Establishment

There is established in the executive branch of the Government an Individual Investment 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 Tier I Investment Fund, the Tier II Investment Fund, and Tier III investment accounts, including policies applicable to the asset managers with responsibility for managing the investment of individual investment account balances, and for the management and operation of individual social security annuities purchased with Tier II Investment Fund assets, 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 management and operation of individual social security annuities purchased with Tier II Investment Fund assets; (5)review the performance of investments made under Tier III investment accounts; (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 Tier I Investment Fund or the Tier II Investment 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 Tier III 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 participants 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.

262.

Executive Director of the Individual Investment Board

(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, 2005, for pay periods ending after such date and self-employment income for taxable years beginning after such date. (c)

Study regarding treatment of spouses where one spouse is not a participant

As soon as practicable after the date of the enactment of this Act, the Individual Investment Board shall undertake a study of the appropriate treatment of spouses in cases in which both spouses are not participants in the Individual Social Security Investment Program. The Board shall transmit the results of its study to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate not later than 6 months after the first meeting of the Board. Such results shall include such recommendations for legislative changes as the Board determines appropriate. (d)

Treatment of noncitizens

Nothing in the amendments made by this section shall be construed to result in the crediting, for any purpose under part B of title II of the Social Security Act, of any amount based on the wages and self-employment income of any individual who is not a citizen or national of the United States in any case in which such wages and self-employment income would not be credited under part A of such title if section 215(j) of such Act did not apply in the case of such individual.