[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1302 Introduced in Senate (IS)]






109th CONGRESS
  1st Session
                                S. 1302

To amend the Social Security Act and the Internal Revenue Code of 1986 
 to stop the Congress from spending Social Security surpluses on other 
Government programs by dedicating those surpluses to personal accounts 
         that can only be used to pay Social Security benefits.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 23, 2005

   Mr. DeMint (for himself, Mr. Santorum, Mr. Graham, Mr. Crapo, Mr. 
 Coburn, Mr. Sununu, Mr. Isakson, Mr. Enzi, Mr. Cornyn, Mr. Lott, Mr. 
Brownback, and Mr. Craig) introduced the following bill; which was read 
             twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Social Security Act and the Internal Revenue Code of 1986 
 to stop the Congress from spending Social Security surpluses on other 
Government programs by dedicating those surpluses to personal accounts 
         that can only be used to pay Social Security benefits.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Stop the Raid on 
Social Security Act of 2005''.
    (b) Table of Contents.--The table of contents is as follows:

Sec.  1. Short title; table of contents.
Sec.  2. Findings.
     TITLE I--SOCIAL SECURITY PERSONAL RETIREMENT ACCOUNTS PROGRAM

Sec.  101. Establishment of the Social Security Personal Retirement 
                            Accounts Program.
     ``Part B--Social Security Personal Retirement Accounts Program

        ``Sec.  251. Definitions.
        ``Sec.  252. Establishment of Program.
        ``Sec.  253. Participation in Program.
        ``Sec.  254. Social security personal retirement accounts .
        ``Sec.  255. Investment of accounts.
        ``Sec.  256. Distributions of account balance at retirement.
        ``Sec.  257. Additional rules relating to disposition of 
                            account assets.
        ``Sec.  258. Administration of the program.
Sec.  102. Annual account statements.
                        TITLE II--TAX TREATMENT

Sec.  201. Tax treatment of social security personal retirement 
                            accounts.
Sec.  202. Benefits taxable as Social Security benefits.
        ``Sec.  2059. Social security personal retirement accounts.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) President Franklin Roosevelt's January 17, 1935, 
        message on Social Security declared that, ``First, the system 
        adopted, except for the money necessary to initiate it, should 
        be self-sustaining in the sense that funds for the payment of 
        insurance benefits should not come from the proceeds of general 
        taxation.''.
            (2) Social Security's financial integrity is maintained by 
        requiring that benefit payments do not exceed the program's 
        dedicated tax revenues and the interest earned on the balances 
        in the Federal Old-Age and Survivors Insurance Trust Fund and 
        the Federal Disability Insurance Trust Fund over the long term.
            (3) The separation of Social Security from other budget 
        accounts also serves to protect Social Security benefits from 
        competing against other Federal programs for its funding 
        resources.
            (4) Comprehensive reforms should be enacted to--
                    (A) fix Social Security permanently;
                    (B) ensure that any use of general revenues for the 
                program is temporary; and
                    (C) provide for the eventual repayment of any 
                revenue transfers from the general fund to the Federal 
                Old-Age and Survivors Insurance Trust Fund and the 
                Federal Disability Insurance Trust Fund.

     TITLE I--SOCIAL SECURITY PERSONAL RETIREMENT ACCOUNTS PROGRAM

SEC. 101. ESTABLISHMENT OF THE SOCIAL SECURITY PERSONAL RETIREMENT 
              ACCOUNTS PROGRAM.

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

                    ``Part A--Insurance Benefits'';

        and
            (2) by adding at the end of such title the following new 
        part:

     ``Part B--Social Security Personal Retirement Accounts Program

                             ``definitions

    ``Sec. 251. For purposes of this part--
            ``(1) Participating individual.--The term `participating 
        individual' has the meaning provided in section 253(a).
            ``(2) Account assets.--The term `account assets' means, 
        with respect to a social security personal retirement account, 
        the total amount transferred to such account, increased by 
        earnings credited under this part and reduced by losses and 
        administrative expenses under this part.
            ``(3) Certified account manager.--The term `certified 
        account manager' means a person who is certified under section 
        258(b).
            ``(4) Board.--The term `Board' means the Social Security 
        Personal Savings Board established under section 258(a).
            ``(5) Commissioner.--The term `Commissioner' means the 
        Commissioner of Social Security.
            ``(6) Program.--The term `Program' means the Social 
        Security Personal Retirement Accounts Program established under 
        this part.

                       ``establishment of program

    ``Sec. 252. There is hereby established a Social Security Personal 
Retirement Accounts Program. The Program shall be governed by 
regulations which shall be prescribed by the Social Security Personal 
Savings Board. The Board, the Executive Director appointed by the 
Board, the Commissioner, and the Secretary of the Treasury shall 
consult with each other in issuing regulations relating to their 
respective duties under this part. Such regulations shall provide for 
appropriate exchange of information to assist them in performing their 
duties under this part.

                       ``participation in program

    ``Sec. 253. (a) Participating Individual.--For purposes of this 
part, the term `participating individual' means any individual--
            ``(1) who is credited under part A with wages paid after 
        December 31, 2005, or self-employment income derived in any 
        taxable year ending after such date,
            ``(2) who is born on or after January 1, 1950, and
            ``(3) who has not filed an election to renounce such 
        individual's status as a participating individual under 
        subsection (b).
    ``(b) Renunciation of Participation.--
            ``(1) In general.--An individual--
                    ``(A) who has not attained retirement age (as 
                defined in section 216(l)(1)), and
                    ``(B) with respect to whom no distribution has been 
                made from amounts credited to the individual's social 
                security personal retirement account,
        may elect, in such form and manner as shall be prescribed in 
        regulations of the Board, to renounce such individual's status 
        as a `participating individual' for purposes of this part. Upon 
        completion of the procedures provided for under paragraph (2), 
        any such individual who has made such an election shall not be 
        treated as a participating individual under this part, 
        effective as if such individual had never been a participating 
        individual. The Board shall provide for immediate notification 
        of such election to the Commissioner of Social Security, the 
        Secretary of the Treasury, and the Executive Director.
            ``(2) Procedure.--The Board shall prescribe by regulation 
        procedures governing the termination of an individual's status 
        as `participating individual' pursuant to an election under 
        this subsection. Such procedures shall include--
                    ``(A) prompt closing of the individual's social 
                security personal retirement account established under 
                section 254, and
                    ``(B) prompt transfer to the Federal Old-Age and 
                Survivors Insurance Trust Fund as general receipts of 
                any amount held for investment in such individual's 
                social security personal retirement account.
            ``(3) Irrevocability.--An election under this subsection 
        shall be irrevocable.

             ``social security personal retirement accounts

    ``Sec. 254. (a) Establishment of Accounts.--Under regulations which 
shall be prescribed by the Board in consultation with the Secretary of 
the Treasury--
            ``(1) the Board shall establish a social security personal 
        retirement account for each participating individual (for whom 
        a social security personal retirement account has not otherwise 
        been established under this part) upon initial receipt of a 
        transfer under subsection (b) with respect to such 
        participating individual, and
            ``(2) in any case described in paragraph (2) of section 
        257(b), the Board shall establish a social security personal 
        retirement account for the divorced spouse referred to in such 
        paragraph (2).
    ``(b) Transfers to Social Security Personal Retirement Accounts.--
            ``(1) In general.--Under regulations which shall be 
        prescribed by the Secretary of the Treasury in consultation 
        with the Board, as soon as practicable during the 1-year period 
        after each calendar year, the Secretary of the Treasury shall 
        transfer to each participating individual's social security 
        personal retirement account, from amounts held in the Federal 
        Old-Age and Survivors Insurance Trust Fund, amounts equivalent 
        to the personal retirement account deposit with respect to such 
        participating individual for such calendar year.
            ``(2) Personal retirement account deposit.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the personal retirement account deposit for a calendar 
                year with respect to a participating individual is the 
                product derived by multiplying--
                            ``(i) the sum of--
                                    ``(I) the total amount of wages 
                                paid to the participating individual 
                                during such calendar year on which 
                                there was imposed a tax under section 
                                3101(a) of the Internal Revenue Code of 
                                1986, and
                                    ``(II) the total amount of self-
                                employment income derived by the 
                                participating individual during the 
                                taxable year ending during such 
                                calendar year on which there was 
                                imposed a tax under section 1401(a) of 
                                the Internal Revenue Code of 1986, by
                            ``(ii) the surplus percentage for such 
                        calendar year determined under subparagraph 
                        (B),
                increased by deemed interest on each amount transferred 
                for such calendar year for the period commencing with 
                July 1 of such calendar year and the ending on the date 
                on which such amount is transferred, computed at an 
                annual rate equal to the average annual rate of return 
                on investments of amounts in the Government Securities 
                Investment Fund for such calendar year and the 
                preceding 2 calendar years (except that, for purposes 
                of the first 3 calendar years for which deemed interest 
                is computed, this sentence shall be applied by 
                substituting `Federal Old-Age and Survivors Insurance 
                Trust Fund' for `Government Securities Investment 
                Fund') and decreased by the administrative offset 
                amount determined under subparagraph (D).
                    ``(B) Surplus percentage.--For purposes of 
                subparagraph (A)(ii), the surplus percentage for a 
                calendar year is the ratio (expressed as a percentage) 
                of--
                            ``(i) the net surplus in the Federal Old-
                        Age and Survivors Insurance Trust Fund for such 
                        year, to
                            ``(ii) the sum of--
                                    ``(I) the total amount of wages 
                                paid to participating individuals 
                                during such calendar year under section 
                                3101(a) of the Internal Revenue Code of 
                                1986, and
                                    ``(II) the total amount of self-
                                employment income derived during 
                                taxable years ending during such 
                                calendar year by participating 
                                individuals under section 1401(a) of 
                                such Code.
                    ``(C) Net trust fund surplus.--For purposes of 
                subparagraph (B), the term `net surplus' in connection 
                with the Federal Old-Age and Survivors Insurance Trust 
                Fund for a calendar year means the excess, if any, of--
                            ``(i) the sum of--
                                    ``(I) the total amounts which are 
                                appropriated to such Trust Fund under 
                                clauses (3) and (4) of section 201(a) 
                                and attributable to such calendar year, 
                                and
                                    ``(II) the total amounts which are 
                                appropriated to such Trust Fund under 
                                section 121 of the Social Security 
                                Amendments of 1983 and attributable to 
                                such calendar year, over
                            ``(ii) the amount estimated by the 
                        Commissioner of Social Security to be the total 
                        amount to be paid from such Trust Fund during 
                        such calendar year for all purposes authorized 
                        by section 201 (other than payments of interest 
                        on, and repayments of, loans from the Federal 
                        Hospital Insurance Trust Fund under section 
                        201(l)(1), but reducing the amount of any 
                        transfer to the Railroad Retirement Account by 
                        the amount of any transfers into such Trust 
                        Fund from such Account).
                    ``(D) Administrative offset amount.--For purposes 
                of subparagraph (A), the administrative offset amount 
                determined with respect to a personal retirement 
                account deposit for a calendar year is the amount equal 
                to the product of--
                            ``(i) the amount of such deposit determined 
                        for that year without regard to a reduction 
                        under this subparagraph; and
                            ``(ii) the administrative cost percentage 
                        attributable to the Program determined by the 
                        Board for that year (including reasonable 
                        administration fees charged by certified 
                        account managers under the Program), but in no 
                        event to exceed 30 basis points per year of the 
                        assets under management).
            ``(3) Transition rule.--Notwithstanding paragraph (1), 
        amounts payable to social security personal retirement accounts 
        under paragraph (1) with respect to the first calendar year 
        described in paragraph (1) ending after the date of the 
        enactment of the Stop the Raid on Social Security Act of 2005 
        shall be paid by the Secretary of the Treasury as soon as 
        practicable after such Secretary determines that the 
        administrative mechanisms necessary to provide for accurate and 
        efficient payment of such amounts have been established.
            ``(4) Transfer of general revenues to ensure continued 
        solvency of federal old-age and survivors insurance trust 
        fund.--Whenever the Secretary of the Treasury makes a transfer 
        under paragraph (1), the Secretary of the Treasury also shall 
        transfer, to the extent necessary, from amounts otherwise 
        available in the general fund of the Treasury, such amounts as 
        are necessary to maintain a 100 percent ratio of assets of the 
        Federal Old-Age and Survivors Insurance Trust Fund and the 
        Federal Disability Insurance Trust Fund to the annual amount 
        required to pay the full amount of benefits payable under part 
        A for each year occurring during the period that begins with 
        the year in which such transfer is made and ends with 2041.
    ``(c) Requirements for Accounts.--The following requirements shall 
be met with respect to each social security personal retirement 
account:
            ``(1) Amounts transferred to the account consist solely of 
        amounts transferred pursuant to this part.
            ``(2) In accordance with section 255, the account assets 
        are held for purposes of investment under the Program by a 
        certified account manager designated by (or on behalf of) the 
        participating individual for whom such account is established 
        under the Program.
            ``(3) Disposition of the account assets is made solely in 
        accordance with sections 256 and 257.
    ``(d) Accounting of Receipts and Disbursements Under the Program.--
The Board shall provide by regulation for an accounting system for 
purposes of this part--
            ``(1) which shall be maintained by or under the Executive 
        Director,
            ``(2) which shall provide for crediting of earnings from, 
        and debiting of losses and administrative expenses from, 
        amounts held in social security personal retirement accounts, 
        and
            ``(3) under which receipts and disbursements under the 
        Program which are attributable to each account are separately 
        accounted for with respect to such account.
    ``(e) Correction of Erroneous Transfers.--The Board, in 
consultation with the Commissioner, shall provide by regulation rules 
similar to paragraphs (4) through (7) and (9) of section 205(c) and 
section 205(g) with respect to the correction of erroneous or omitted 
transfers of amounts to social security personal retirement accounts.

                        ``investment of accounts

    ``Sec. 255. (a) Designation of Certified Account Managers.--Under 
the Program, a certified account manager shall be designated by or on 
behalf of each participating individual to hold for investment under 
this section such individual's social security personal retirement 
account assets.
    ``(b) Procedure for Designation.--Any designation made under 
subsection (a) shall be made in such form and manner as shall be 
prescribed in regulations prescribed by the Board. Such regulations 
shall provide for annual selection periods during which participating 
individuals may make designations pursuant to subsection (a). 
Designations made pursuant to subsection (a) during any such period 
shall be irrevocable for the one-year period following such period, 
except that such regulations shall provide for such interim 
designations as may be necessitated by the decertification of a 
certified account manager. Such regulations shall provide for such 
designations made by the Board on behalf of a participating individual 
in any case in which a timely designation is not made by the 
participating individual.
    ``(c) Investment.--Any balance held in a participating individual's 
social security personal retirement account under this part which is 
not necessary for immediate withdrawal shall be invested on behalf of 
such participating individual by the certified account manager as 
follows:
            ``(1) Investment in marketable government securities.--In a 
        representative mix of fixed marketable interest-bearing 
        obligations of the United States then forming a part of the 
        public debt which are not due or callable earlier than 4 years 
        after the date of investment.
            ``(2) Additional and alternative investments.--Beginning 
        with 2008, in such additional and alternative investment 
        options in broad-based index funds that are similar to the 
        index fund investment options available within the Thrift 
        Savings Fund established under section 8437 of title 5, United 
        States Code, as the Board determines would be prudent sources 
        of retirement income that could yield greater amounts of income 
        than the investment described in paragraph (1) and a 
        participating individual may elect.

            ``distributions of account balance at retirement

    ``Sec. 256. (a) Part A and Social Security Personal Retirement 
Account Benefits Combined.--Upon the date on which a participating 
individual becomes entitled to old-age insurance benefits under section 
202(a), the Executive Director shall determine the total amount which 
would (but for this section) be payable as benefits under subsection 
(a), (b), (c), or (h) of section 202, subsection (e) or (f) of section 
202 other than on the basis of disability, or any combination thereof, 
to any individual who is a participant on the basis of the wages and 
self-employment income of such individual or any other individual under 
part A for any month and provide for the following distributions from 
the individual's social security personal retirement account (in 
accordance with regulations which shall be prescribed by the Board):
            ``(1) Part a benefit provides at least a poverty-level 
        annual benefit.--If such total amount would be sufficient to 
        purchase a minimum annuity, the participating individual shall 
        elect to have the Executive Director provide for the 
        distribution of the balance in the participating individual's 
        social security personal retirement account in the form of--
                    ``(A) a lump-sum payment; or
                    ``(B) an annuity which meets the requirements of 
                subsection (b) (other than the requirement that the 
                annuity provides for payments which, on an annual 
                basis, are equal to at least the minimum annuity 
                amount), the terms of which provide for a monthly 
                payment equal to the maximum amount that such account 
                can fund.
            ``(2) Part a benefit combined with account balance provides 
        at least a poverty-level benefit.--
                    ``(A) In general.--If such total amount when 
                combined with all or a portion of the balance in the 
                participating individual's social security personal 
                retirement account would be sufficient to purchase a 
                minimum annuity, the Executive Director shall, subject 
                to subparagraph (B)--
                            ``(i) use such amount of the balance in a 
                        participating individual's social security 
                        personal retirement account as is necessary to 
                        purchase an annuity which meets the 
                        requirements of subsection (b) (other than the 
                        requirement that the annuity provides for 
                        payments which, on an annual basis, are equal 
                        to at least the minimum annuity amount), the 
                        terms of which provide for an annual payment 
                        that, when combined with the total amount of 
                        annual old-age insurance benefits payable to 
                        the participating individual, is equal to the 
                        annual amount that a minimum annuity would pay 
                        to the individual; and
                            ``(ii) provide for the distribution of any 
                        remaining balance in the participating 
                        individual's social security personal 
                        retirement account in the form of a lump-sum 
                        payment.
                    ``(B) Option for increased annuity.--A 
                participating individual may elect to have the 
                Executive Director use the balance of the individual's 
                social security personal retirement account to purchase 
                an annuity which meets the requirements of subsection 
                (b), the terms of which provide for the maximum monthly 
                payment that such account can fund, in lieu of using 
                only a portion of such balance to purchase an annuity 
                which provides a monthly payment equal to the amount 
                described in subparagraph (A)(i).
            ``(3) Distribution in event of failure to obtain at least a 
        poverty-level benefit.--If such total amount when combined with 
        all of the balance in the participating individual's social 
        security personal retirement account would not be sufficient to 
        purchase a minimum annuity, the participating individual may 
        elect to have the Executive Director--
                    ``(A) distribute the balance in the participating 
                individual's social security personal retirement 
                account in the form of a lump-sum payment; or
                    ``(B) if such balance is sufficient to purchase an 
                annuity which meets the requirements of subsection (b) 
                (other than the requirement that the annuity provides 
                for payments which, on an annual basis, are equal to at 
                least the minimum annuity amount), purchase such an 
                annuity on behalf of the individual.
    ``(b) Minimum Annuity Defined.--For purposes of this subsection, 
the term `minimum annuity' means an annuity that meets the following 
requirements:
            ``(1) The annuity starting date (as defined in section 
        72(c)(4) of the Internal Revenue Code of 1986) commences on the 
        first day of the month beginning after the date of the purchase 
        of the annuity.
            ``(2) The terms of the annuity provide for a series of 
        substantially equal annual payments, subject to adjustment as 
        provided in subsection (d), payable monthly to the 
        participating individual during the life of the participating 
        individual which are, on an annual basis, equal to at least the 
        minimum annuity amount.
    ``(c) Minimum Annuity Amount.--For purposes of this subsection, the 
term `minimum annuity amount' means an amount 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).
    ``(d) Cost of Living Adjustment.--The terms of any annuity 
described in subsection (b) shall include provision for increases in 
the monthly annuity amounts thereunder determined in the same manner 
and at the same rate as primary insurance amounts are increased under 
section 215(i).
    ``(e) Assumptions.--The assumptions under subsection (b) include 
the probability of survival for persons born in the same year as the 
participating individual (and the spouse, in the case of a joint 
annuity), future projection of investment earnings based on investment 
of the account assets, and expected price inflation. Determinations 
under this subsection shall be made in accordance with regulations 
which shall be prescribed by the Board, otherwise using generally 
accepted actuarial assumptions, except that no differentiation shall be 
made in such assumptions on the basis of sex, race, health status, or 
other characteristics other than age. Such assumptions may include, for 
determinations made prior to 2009, an assumed interest rate reflecting 
investment earnings of the Federal Old-Age and Survivors Insurance 
Trust Fund.
    ``(f) Offset of Part A Benefits.--Notwithstanding any other 
provision of this title, in the case of a participating individual to 
which subsection (a)(1) applies, the total amount of monthly old-age 
insurance benefits payable as benefits under subsection (a), (b), (c), 
or (h) of section 202, subsection (e) or (f) of section 202 other than 
on the basis of disability, or any combination thereof, to such 
individual determined under subsection (a) shall be reduced so that the 
amount of such monthly old-age insurance benefits payable to the 
individual does not exceed the amount equal to the difference between--
                            ``(i) such monthly old-age insurance 
                        benefits (determined without regard to a 
                        reduction under this subsection); and
                            ``(ii) the ratio of--
                                    ``(I) what would have been the 
                                monthly annuity payment payable to the 
                                individual from an annuity if the 
                                individual's personal retirement 
                                account balance had earned the rate of 
                                return specified in section 
                                254(b)(2)(A); to
                                    ``(II) the expected present value 
                                of all future potential benefits 
                                payable under section 202 on the basis 
                                of the wages or self-employment income 
                                of the participating individual 
                                (determined as of the date the 
                                participating individual becomes 
                                entitled to old-age benefits under 
                                section 202(a)).

       ``additional rules relating disposition of account assets

    ``Sec. 257. (a) Splitting of Account Assets Upon Divorce After 1 
Year of Marriage.--
            ``(1) In general.--Upon the divorce of a participating 
        individual for whom a social security personal retirement 
        account has been established under this part, from a spouse to 
        whom the participating individual had been married for at least 
        1 year, the Board shall direct the appropriate certified 
        account manager to transfer--
                    ``(A) from the social security personal retirement 
                account of the participating individual,
                    ``(B) to the social security personal retirement 
                account of the divorced spouse,
        an amount equal to one-half of the amount of net accruals 
        (including earnings) during the time of the marriage in the 
        social security personal retirement account of the 
        participating individual.
            ``(2) Treatment of divorced spouse who is not a 
        participating individual.--In the case of a divorced spouse 
        referred to in paragraph (1) who, as of the time of the 
        divorce, is not a participating individual and for whom a 
        social security personal retirement account has not been 
        established--
                    ``(A) the divorced spouse shall be deemed a 
                participating individual for purposes of this part, and
                    ``(B) the Board shall establish a social security 
                personal retirement account for the divorced spouse and 
                shall direct the appropriate certified account manager 
                to perform the such transfer.
            ``(3) Preemption.--The provisions of this subsection shall 
        supersede any provision of law of any State or political 
        subdivision thereof which is inconsistent with the requirements 
        of this subsection.
    ``(b) Closing of Account Upon the Death of the Participating 
Individual.--
            ``(1) In general.--Upon the death of a participating 
        individual, the Executive Director shall close out any 
        remaining balance in the participating individual's social 
        security personal retirement account. In closing out the 
        account, the Executive Director shall certify to the certified 
        account manager the amount of the account assets, and, upon 
        receipt of such certification, the certified account manager 
        shall transfer from such account an amount equal to such 
        certified amount to the Secretary of the Treasury for 
        subsequent transfer to--
                    ``(A) the social security personal retirement 
                account of the surviving spouse of such participating 
                individual,
                    ``(B) if there is no such surviving spouse, to such 
                other person as may be designated by the participating 
                individual in accordance with regulations which shall 
                be prescribed by the Board, or
                    ``(C) if there is no such designated person, to the 
                estate of such participating individual.
            ``(2) Treatment of surviving spouse who is not a 
        participating individual.--In the case of a surviving spouse 
        referred to in paragraph (1) who, as of the time of the death 
        of the participating individual, is not a participating 
        individual and for whom a social security personal retirement 
        account has not been established--
                    ``(A) the surviving spouse shall be deemed a 
                participating individual for purposes of this part, and
                    ``(B) the Board shall establish a social security 
                personal retirement account for the surviving spouse 
                and shall direct the appropriate certified account 
                manager to perform the such transfer.
    ``(c) Closing of Account of Participating Individuals Who Are 
Ineligible for Benefits Upon Attaining Retirement Age.--In any case in 
which, as of the date on which a participating individual attains 
retirement age (as defined in section 216(l)), such individual is not 
eligible for an old-age insurance benefit under section 202(a), the 
Commissioner shall so certify to the Executive Director and, upon 
receipt of such certification, the Executive Director shall close out 
the participating individual's social security personal retirement 
account. In closing out the account, the Executive Director shall 
certify to the certified account manager the amount of the account 
assets, and upon receipt of such certification from the Executive 
Director, the account manager shall transfer from such account an 
amount equal to such certified amount to the Secretary of the Treasury 
for subsequent transfer to the participating individual.
    ``(d) Administrative Expenses.--
            ``(1) In general.--Under regulations which shall be 
        prescribed by the Board, account assets are available in 
        accordance with section 254(b)(2)(D)(ii) for payment of the 
        reasonable administrative costs of the Program (including 
        reasonable administration fees charged by certified account 
        managers under the Program), but in no event to exceed 30 basis 
        points per year of the assets under management.
            ``(2) Temporary authorization of appropriations for startup 
        administrative costs.--For any such administrative costs that 
        remain after applying paragraph (1) for each of the first five 
        fiscal years that end after the date of the enactment of this 
        part, there are authorized to be appropriated such sums as may 
        be necessary for each of such fiscal years.

                    ``administration of the program

    ``Sec. 258. (a) General Provisions.--
            ``(1) Establishment and duties of the social security 
        personal savings board.--
                    ``(A) Establishment.--There is established within 
                the Social Security Administration a Social Security 
                Personal Savings Board.
                    ``(B) Number and appointment.--The Board shall be 
                composed of 6 members as follows:
                            ``(i) two members appointed by the 
                        President who may not be of the same political 
                        party;
                            ``(ii) one member appointed by the Speaker 
                        of the House of Representatives, in 
                        consultation with the Chairman of the Committee 
                        on Ways and Means of the House of 
                        Representatives;
                            ``(iii) one member appointed by the 
                        minority leader of the House of 
                        Representatives, in consultation with the 
                        ranking member of the Committee on Ways and 
                        Means of the House of Representatives;
                            ``(iv) one member appointed by the majority 
                        leader of the Senate, in consultation with the 
                        Chairman of the Committee on Finance of the 
                        Senate; and
                            ``(v) one member appointed by the minority 
                        leader of the Senate, in consultation with the 
                        ranking member of the Committee on Finance of 
                        the Senate.
                    ``(C) Advice and consent.--Appointments under this 
                paragraph 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) Terms.--
                            ``(i) In general.--Each member shall be 
                        appointed for a term of 4 years, except as 
                        provided in clauses (ii) and (iii). The initial 
                        members shall be appointed not later than 90 
                        days after the date of the enactment of this 
                        section.
                            ``(ii) Terms of initial appointees.--Of the 
                        members first appointed under each clause of 
                        subparagraph (B), one of the members appointed 
                        under subparagraph (B)(i) (as designated by the 
                        President at the time of appointment) and the 
                        members appointed under clauses (iii) and (v) 
                        of subparagraph (B) shall be appointed for a 
                        term of 2 years, and the remaining members 
                        shall be appointed for a term of 4 years.
                            ``(iii) Vacancies.--Any member appointed to 
                        fill a vacancy occurring before the expiration 
                        of the term for which the member's predecessor 
                        was appointed shall be appointed only for the 
                        remainder of that term. A member may serve 
                        after the expiration of that member's term 
                        until a successor has taken office. A vacancy 
                        in the Board shall be filled in the manner in 
                        which the original appointment was made.
                    ``(F) Powers and duties of the board.--
                            ``(i) In general.--The Board shall have 
                        powers and duties solely as provided in this 
                        part. The Board shall prescribe by regulation 
                        the terms of the Social Security Personal 
                        Retirement Accounts Program established under 
                        this part, including policies for investment 
                        under the Program of account assets, and 
                        policies for the certification and 
                        decertification of account managers under the 
                        Program, which shall include consideration of 
                        the appropriateness of the marketing materials 
                        and plans of such person.
                            ``(ii) Budgetary requirements.--The Board 
                        shall prepare and submit to the President and 
                        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 the Congress under section 1105 
                        of title 31, United States Code. The Board 
                        shall provide for low administrative costs such 
                        that, to the extent practicable, overall 
                        administrative costs of the Program do not 
                        exceed 30 basis points in relation to assets 
                        under management under the Program.
                            ``(iii) Additional authorities of the 
                        board.--The Board may--
                                    ``(I) adopt, alter, and use a seal;
                                    ``(II) establish policies with 
                                which the Commissioner shall comply 
                                under this part;
                                    ``(III) appoint and remove the 
                                Executive Director, as provided in 
                                paragraph (2); and
                                    ``(IV) beginning with 2008, provide 
                                for such additional and alternative 
                                investment options for participating 
                                individuals as the Board determines 
                                would be prudent sources of retirement 
                                income that would yield greater amounts 
                                of retirement income than the 
                                investment described in section 
                                255(c)(1).
                            ``(iv) Independence of certified account 
                        managers.--The policies of the Board may not 
                        require a certified account manager to invest 
                        or to cause to be invested any account assets 
                        in a specific asset or to dispose of or cause 
                        to be disposed of any specific asset so held.
                            ``(v) Meetings of the board.--The Board 
                        shall meet at the call of the Chairman or upon 
                        the request of a quorum of the Board. The Board 
                        shall perform the functions and exercise the 
                        powers of the Board on a majority vote of a 
                        quorum of the Board. Four members of the Board 
                        shall constitute a quorum for the transaction 
                        of business.
                            ``(vi) Compensation of board members.--
                                    ``(I) 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. Any 
                                member who is such an officer or 
                                employee shall not suffer any loss of 
                                pay or deduction from annual leave on 
                                the basis of any time used by such 
                                member in performing such a function.
                                    ``(II) Travel, per diem, and 
                                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.
                            ``(vii) Standard for board's discharge of 
                        responsibilities.--The members of the Board 
                        shall discharge their responsibilities solely 
                        in the interest of participating individuals 
                        and the Program.
                            ``(viii) Annual report.--The Board shall 
                        submit an annual report to the President, to 
                        each House of the Congress, and to the Board of 
                        Trustees of the Federal Old-Age and Survivors 
                        Insurance Trust Fund and the Federal Disability 
                        Insurance Trust Fund regarding the financial 
                        and operating condition of the Program.
                            ``(ix) Public accountant.--
                                    ``(I) Definition.--For purposes of 
                                this subparagraph, the term `qualified 
                                public accountant' shall have the same 
                                meaning as provided in section 
                                103(a)(3)(D) of the Employee Retirement 
                                Income Security Act of 1974 (29 U.S.C. 
                                1023(a)(3)(D)).
                                    ``(II) Engagement.--The Executive 
                                Director, in consultation with the 
                                Board, shall annually engage, on behalf 
                                of all individuals for whom a social 
                                security personal retirement account is 
                                established under this part, an 
                                independent qualified public 
                                accountant, who shall conduct an 
                                examination of all records maintained 
                                in the administration of this part that 
                                the public accountant considers 
                                necessary.
                                    ``(III) Duties.--The public 
                                accountant conducting an examination 
                                under clause (ii) shall determine 
                                whether the records referred to in such 
                                clause have been maintained in 
                                conformity with generally accepted 
                                accounting principles. The public 
                                accountant shall transmit to the Board 
                                a report on his examination.
                                    ``(IV) Reliance on certified 
                                actuarial matters.--In making a 
                                determination under clause (iii), a 
                                public accountant may rely on the 
                                correctness of any actuarial matter 
                                certified by an enrolled actuary if the 
                                public accountant states his reliance 
                                in the report transmitted to the Board 
                                under such clause.
            ``(2) Executive director.--
                    ``(A) Appointment and removal.--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. The Executive Director shall 
                have substantial experience, training, and expertise in 
                the management of financial investments and pension 
                benefit plans. The Board may, with the concurrence of 4 
                members of the Board, remove the Executive Director 
                from office for good cause shown.
                    ``(B) Powers and duties of executive director.--The 
                Executive Director shall--
                            ``(i) carry out the policies established by 
                        the Board,
                            ``(ii) administer the provisions of this 
                        part in accordance with the policies of the 
                        Board,
                            ``(iii) in consultation with the Board, 
                        prescribe such regulations (other than 
                        regulations relating to fiduciary 
                        responsibilities) as may be necessary for the 
                        administration of this part, and
                            ``(iv) meet from time to time with the 
                        Board upon request of the Board.
                    ``(C) Administrative authorities of executive 
                director.--The Executive Director may--
                            ``(i) appoint such personnel as may be 
                        necessary to carry out the provisions of this 
                        part,
                            ``(ii) subject to approval by the Board, 
                        procure the services of experts and consultants 
                        under section 3109 of title 5, United States 
                        Code,
                            ``(iii) secure directly from any agency or 
                        instrumentality of the Federal Government any 
                        information which, in the judgment of the 
                        Executive Director, is necessary to carry out 
                        the provisions of this part and the policies of 
                        the Board, and which shall be provided by such 
                        agency or instrumentality upon the request of 
                        the Executive Director,
                            ``(iv) pay the compensation, per diem, and 
                        travel expenses of individuals appointed under 
                        clauses (i), (ii), and (v) of this 
                        subparagraph, subject to such limits as may be 
                        established by the Board,
                            ``(v) accept and use the services of 
                        individuals employed intermittently in the 
                        Government service and reimburse such 
                        individuals for travel expenses, as authorized 
                        by section 5703 of title 5, United States Code, 
                        including per diem as authorized by section 
                        5702 of such title, and
                            ``(vi) 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.
            ``(3) Role of the commissioner of social security.--The 
        Commissioner shall--
                    ``(A) prescribe such regulations (supplementary to 
                and consistent with the regulations prescribed by the 
                Board and the Executive Director) as may be necessary 
                for carrying out the duties of the Commissioner under 
                this part,
                    ``(B) meet from time to time with, and provide 
                information to, the Board upon request of the Board 
                regarding matters relating to the Social Security 
                Personal Retirement Accounts Program, and
                    ``(C) in consultation with the Board and utilizing 
                available Federal agencies and resources, develop a 
                campaign to educate workers about the Program.
    ``(b) Certification and Oversight of Account Managers.--
            ``(1) Certification by the board.--
                    ``(A) In general.--Any person that is a qualified 
                professional asset manager (as defined in section 
                8438(a)(8) of title 5, United States Code) may apply to 
                the Board (in such form and manner as shall be provided 
                by the Board by regulation) for certification under 
                this subsection as a certified account manager. In 
                making certification decisions, the Board shall 
                consider the applicant's general character and fitness, 
                financial history and future earnings prospects, and 
                ability to serve participating individuals under the 
                Program, and such other criteria as the Board deems 
                necessary to carry out this part. Certification of any 
                person under this subsection shall be contingent upon 
                entry into a contractual arrangement between the Board 
                and such person.
                    ``(B) Nondelegation requirement.--The authority of 
                the Board to make any determination to deny any 
                application under this subsection may not be delegated 
                by the Board.
            ``(2) Oversight of certified account managers.--
                    ``(A) Role of regulatory agencies.--The Board may 
                enter into cooperative arrangements with Federal and 
                State regulatory agencies identified by the Board as 
                having jurisdiction over persons eligible for 
                certification under this subsection so as to ensure 
                that the provisions of this part are enforced with 
                respect to certified account managers in a manner 
                consistent with and supportive of the requirements of 
                other provisions of Federal law applicable to them. 
                Such Federal regulatory agencies shall cooperate with 
                the Board to the extent that the Board determines that 
                such cooperation is necessary and appropriate to ensure 
                that the provisions of this part are effectively 
                implemented.
                    ``(B) Access to records.--The Board may from time 
                to time require any certified account manager to file 
                such reports as the Board may specify by regulation as 
                necessary for the administration of this part. In 
                prescribing such regulations, the Board shall minimize 
                the regulatory burden imposed upon certified account 
                managers while taking into account the benefit of the 
                information to the Board in carrying out its functions 
                under this part.
            ``(3) Revocation of certification.--The Board shall 
        provide, in the contractual arrangements entered into under 
        this subsection with each certified account manager, for 
        revocation of such person's status as a certified account 
        manager upon determination by the Board of such person's 
        failure to comply with the requirements of such contractual 
        arrangements. Such arrangements shall include provision for 
        notice and opportunity for review of any such revocation.
    ``(c) Fiduciary Responsibilities.--
            ``(1) In general.--Rules similar to the provisions of 
        section 8477 of title 5, United States Code (relating to 
        fiduciary responsibilities; liability and penalties) shall 
        apply in connection with account assets, in accordance with 
        regulations which shall be issued by the Board. The Board shall 
        issue regulations with respect to the investigative authority 
        of appropriate Federal agencies in cases involving account 
        assets.
            ``(2) Exculpatory provisions voided.--Any provision in an 
        agreement or instrument which purports to relieve a fiduciary 
        from responsibility or liability for any responsibility, 
        obligation, or duty under this part shall be void.
    ``(d) Civil Actions by Board.--If any person fails to meet any 
requirement of this part or of any contract entered into under this 
part, the Board may bring a civil action in any district court of the 
United States within the jurisdiction of which such person's assets are 
located or in which such person resides or is found, without regard to 
the amount in controversy, for appropriate relief to redress the 
violation or enforce the provisions of this part, and process in such 
an action may be served in any district.
    ``(e) Preemption of Inconsistent State Law.--A provision of this 
part shall not be construed to preempt any provision of the law of any 
State or political subdivision thereof, or prevent a State or political 
subdivision thereof from enacting any provision of law with respect to 
the subject matter of this part, except to the extent that such 
provision of State law is inconsistent with this part, and then only to 
the extent of the inconsistency.''.
    (b) Conforming Amendment to Part A.--Section 202 of such Act (42 
U.S.C. 402) is amended by adding at the end the following new 
subsection:

                       ``Adjustments Under Part B

    ``(z) The amount of benefits under subsection (a), (b), (c), or 
(h), subsection (e) or (f) other than on the basis of disability, or 
any combination thereof which are otherwise payable under this part 
shall be subject to adjustment as provided under section 256(f).''.
    (c) Additional Conforming Amendments.--(1) Section 701(b) of the 
Social Security Act (42 U.S.C. 901(b)) is amended by striking ``title 
II'' and inserting ``part A of title II, the Social Security Personal 
Retirement Accounts Program under part B of title II,''.
    (2) Section 702(a)(4) of the Social Security Act (42 U.S.C. 
902(a)(4)) is amended by inserting ``other than those of the Social 
Security Personal Savings Board'' after ``Administration'', and by 
striking ``thereof'' and inserting ``of the Administration in 
connection with the exercise of such powers and the discharge of such 
duties''.

SEC. 102. ANNUAL ACCOUNT STATEMENTS.

    Section 1143 of the Social Security Act (42 U.S.C. 1320b-13) is 
amended by adding at the end the following new subsection:

     ``Performance of Social Security Personal Retirement Accounts

    ``(d) Beginning not later than 1 year after the date of the first 
deposit is made to an eligible individual's Social Security personal 
retirement account, each statement provided to such eligible individual 
under this section shall include information determined by the Social 
Security Personal Savings Board as sufficient to fully inform such 
eligible individual annually of the balance, investment performance, 
and administrative expenses of such account.''.

                        TITLE II--TAX TREATMENT

SEC. 201. TAX TREATMENT OF SOCIAL SECURITY PERSONAL RETIREMENT 
              ACCOUNTS.

    Section 7701 of the Internal Revenue Code of 1986 (relating to 
definitions) is amended by redesignating subsection (o) as subsection 
(p) and by inserting after subsection (n) the following new subsection:
    ``(o) Tax Treatment of Social Security Personal Retirement 
Accounts.--All social security personal retirement accounts established 
under part B of title II of the Social Security Act shall be exempt 
from taxation under this title.''.

SEC. 202. BENEFITS TAXABLE AS SOCIAL SECURITY BENEFITS.

    (a) Special Rules Relating to Distribution of Closed Account Under 
Section 257(d) of Social Security Act.--Section 86(a) of such Code (as 
amended by paragraph (2)) is amended by adding at the end the following 
new paragraph:
            ``(4) Extension of paragraph (2)(b) to distributions of 
        closed account under section 257(d) of social security act.--
        Notwithstanding any other provision of this subsection, in the 
        case of any amount received pursuant to the closing of an 
        account under section 257(d) of the Social Security Act, 
        paragraph (2)(B) shall apply to such amounts, and for such 
        purposes the amount allocated to the investment in the contract 
        shall be zero.''.
    (b) Effective Date.--The amendments made by this subsection shall 
apply to taxable years beginning after the end of the calendar year in 
which this Act is enacted.
    (c) Estate Tax Not To Apply to Assets of Social Security Personal 
Retirement Accounts.--
            (1) In general.--Part IV of subchapter A of chapter 11 of 
        such Code (relating to taxable estate) is amended by adding at 
        the end the following new section:

``SEC. 2059. SOCIAL SECURITY PERSONAL RETIREMENT ACCOUNTS.

    ``For purposes of the tax imposed by section 2001, the value of the 
taxable estate shall be determined by deducting from the value of the 
gross estate an amount equal to the value of the assets of a social 
security personal retirement account transferred from such account by 
the Secretary under section 257 of the Social Security Act.''.
            (2) Clerical amendment.--The table of sections for part IV 
        of subchapter A of chapter 11 of such Code is amended by adding 
        at the end the following new item:

``Sec. 2059. Social security personal retirement accounts.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to decedents dying in or after the calendar year in 
        which this Act is enacted.
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