[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 540 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 540

        To strengthen and permanently preserve social security.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 7, 2005

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

_______________________________________________________________________

                                 A BILL


 
        To strengthen and permanently preserve social security.

    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 ``Saving Social 
Security Act of 2005''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
               TITLE I--INVESTMENT-BASED SOCIAL SECURITY

Sec. 101. Establishment of an investment-based option for social 
                            security benefits.
               ``Part B--Investment-Based Social Security

        ``Sec. 250. Definitions.
        ``Sec. 251. Election to waive eligibility.
        ``Sec. 252. Social security savings accounts for employees 
                            (SAFE accounts).
        ``Sec. 253. SAFE Investment Fund.
        ``Sec. 254. Distributions.
        ``Sec. 255. Social Security Investment Board.
Sec. 102. Adjustments to primary insurance amounts under part A of 
                            title II of the Social Security Act for 
                            investing workers with SAFE accounts.
Sec. 103. Tax treatment of investment-based social security.
Sec. 104. Study on use of private annuities for SAFE account 
                            distributions.
Sec. 105. Study regarding financial literacy.
                  TITLE II--DEBT-BASED SOCIAL SECURITY

                        Subtitle A--Adjustments

Sec. 201. Modification to retirement age.
Sec. 202. Modification of PIA factors to reflect changes in life 
                            expectancy.
Sec. 203. Actuarial adjustment for retirements.
         Subtitle B--Maintenance of Social Security Trust Funds

Sec. 211. Maintenance of adequate balances in the social security trust 
                            funds.

               TITLE I--INVESTMENT-BASED SOCIAL SECURITY

SEC. 101. ESTABLISHMENT OF AN INVESTMENT-BASED OPTION FOR SOCIAL 
              SECURITY BENEFITS.

    (a) In General.--Title II of the Social Security Act (42 U.S.C. 401 
et seq.) is amended--
            (1) by inserting before section 201 the following:

                ``PART A--DEBT-BASED SOCIAL SECURITY'';

        and
            (2) by adding at the end the following:

               ``PART B--INVESTMENT-BASED SOCIAL SECURITY

``SEC. 250. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Investing worker.--The term `investing worker' means 
        any individual--
                    ``(A) who after the date of enactment of this 
                part--
                            ``(i) receives wages on which there is 
                        imposed a tax under section 3101(a) of the 
                        Internal Revenue Code of 1986; or
                            ``(ii) derives self-employment income on 
                        which there is imposed a tax under section 
                        1401(a) of the Internal Revenue Code of 1986; 
                        and
                    ``(B) who was born on or after January 1, 1961, and 
                does not make an election to waive investment-based 
                social security under this part as provided under 
                section 251(a).
            ``(2) Social security savings accounts for employees (safe 
        account).--The term `social security savings accounts for 
        employees' or `SAFE Account' means an account established for 
        an investing worker within the SAFE Investment Fund under 
        section 252.
            ``(3) SAFE investment fund.--The term `SAFE Investment 
        Fund' or `Fund' means the fund established under section 253.
            ``(4) Social security investment board.--The term `Social 
        Security Investment Board' or `Board' means the board 
        established under section 254.
            ``(5) Commissioner.--The term `Commissioner' means the 
        Commissioner of Social Security.

``SEC. 251. ELECTION TO WAIVE ELIGIBILITY.

    ``(a) Election to Waive Eligibility for SAFE Accounts.--
            ``(1) In general.--Any individual may elect to waive 
        eligibility under this part in such form and manner as 
        prescribed by the Board at any time after such individual 
        attains the age of 18 and before such individual attains the 
        age of 25. Such election shall be irrevocable.
            ``(2) Individual born before january 1, 1981.--
        Notwithstanding paragraph (1), in the case of any individual 
        born after December 31, 1960, and before January 1, 1981, such 
        individual may elect to waive eligibility under this part in 
        such form and manner as prescribed by the Board at any time 
        before January 1, 2007. Such election shall be irrevocable.
    ``(b) Disposition of SAFE Account.--In the case of any individual 
who makes an election under paragraph (1), any assets in such 
individual's SAFE Account shall be paid to the Federal Old-Age and 
Survivors Insurance Trust Fund, and such individual's eligibility for 
benefits under part A shall be determined as if such Account had never 
been established.

``SEC. 252. SOCIAL SECURITY SAVINGS ACCOUNTS FOR EMPLOYEES (SAFE 
              ACCOUNTS).

    ``(a) Establishment of SAFE Accounts.--Not later than 30 days after 
the date on which an individual first becomes an investing worker, the 
Social Security Investment Board shall establish a SAFE Account for 
such individual in the SAFE Investment Fund.
    ``(b) Contributions.--
            ``(1) In general.--The Secretary of the Treasury shall 
        transfer from the Federal Old-Age and Survivors Insurance Trust 
        Fund to the SAFE Investment Fund, for crediting by the Social 
        Security Investment Board to the SAFE Account of an investing 
        worker, an amount equal to the SAFE Account contribution amount 
        with respect to each investing worker.
            ``(2) SAFE account contribution amount.--For purposes of 
        paragraph (1), the term `SAFE Account contribution amount' 
        means, with respect to an investing worker for a calendar year, 
        the product derived by multiplying--
                    ``(A) the sum of the total wages paid to, and self-
                employment income derived by, such individual during 
                such calendar year; by
                    ``(B) 4 percent.
    ``(c) Designation of Investments.--
            ``(1) Initial designation.--
                    ``(A) In general.--Not later than 10 days after an 
                account is established for an investing worker under 
                subsection (a), the investing worker shall designate to 
                which investment funds within the SAFE Investment Fund 
                contributions to such account under subsection (b) 
                shall be allocated.
                    ``(B) Default allocation.--
                            ``(i) In general.--If no designation is 
                        made pursuant to paragraph (1), the Board shall 
                        allocate such contributions in accordance with 
                        the life-span investment option.
                            ``(ii) Life-span investment option.--For 
                        purposes of this section, the life-span 
                        investment option shall provide for the 
                        management and investment of funds within an 
                        investing worker's SAFE account on the basis of 
                        the age of the investing worker in accordance 
                        with regulations established by the Board. In 
                        establishing regulations with respect to the 
                        life-span investment option under this 
                        subparagraph, the Board shall consider--
                                    ``(I) with respect to the youngest 
                                investing workers, investing 80 percent 
                                of such funds in stocks and 20 percent 
                                of such funds in bonds; and
                                    ``(II) with respect to the oldest 
                                investing workers, investing 35 percent 
                                of such funds in stocks and 65 percent 
                                of such funds in bonds.
            ``(2) Subsequent designations.--At least twice each year, 
        an investing worker may redesignate the allocation of 
        investments funds within the SAFE Investment Fund to which 
        contributions with respect to such investing worker are 
        allocated.
    ``(d) Time Designation Takes Effect.--A designation under 
subsection (c) shall take effect with respect to contributions made 
beginning more than 14 days after the date of the designation.
    ``(e) Investing Worker's Property Right in the SAFE Account.--Each 
SAFE Account designated by an investing worker is the sole property of 
the worker.
    ``(f) Form of Designations.--Designations under this section shall 
be made--
            ``(1) on W-4 forms (or any successor forms); or
            ``(2) in such other manner as the Social Security 
        Investment Board may prescribe in order to ensure ease of 
        administration.

``SEC. 253. SAFE INVESTMENT FUND.

    ``(a) In General.--There shall be established and maintained in the 
Treasury of the United States a SAFE Investment Fund in the same manner 
as the Thrift Savings Fund under sections 8437 (excluding paragraphs 
(4) and (5) of subsection (c) thereof), 8438, and 8439 of title 5, 
United States Code, insofar as such sections are not inconsistent with 
the provisions of this part.
    ``(b) Investment Earnings Report.--
            ``(1) In general.--At least annually, the SAFE Investment 
        Fund shall provide to each investing worker a SAFE Investment 
        Status Report. Such report may be transmitted electronically 
        upon the agreement of the investing worker under the terms and 
        conditions established by the Social Security Investment Board.
            ``(2) Contents of report.--The SAFE Investment Status 
        Report, with respect to a SAFE Account, shall provide the 
        following information:
                    ``(A) The total SAFE Account contributions made in 
                the last quarter, the last year, and since the Account 
                was established.
                    ``(B) The amount and rate of return earned for each 
                period described in subparagraph (A).
                    ``(C) A projection of how much the investing worker 
                will have available on the date the worker attains 
                normal retirement age if such contributions and 
                earnings continue at the same rate during the remaining 
                period ending with such date.
    ``(c) Maximum Administrative Fee.--The SAFE Investment Fund shall 
charge each investing worker in the Fund a single, uniform annual 
administrative fee not to exceed 0.57 percent of the value of the 
assets invested in the worker's SAFE Account.

``SEC. 254. DISTRIBUTIONS.

    ``(a) Date of Initial Distribution.--Except as provided in 
subsection (b)(4), distributions may only be made from a SAFE Account 
of an investing worker on and after the earliest of--
            ``(1) the date the investing worker attains normal 
        retirement age, as determined under section 216; or
            ``(2) the date on which funds in the investing worker's 
        SAFE Account are sufficient to transfer to the Federal Old-Age 
        and Survivors Insurance Trust Fund--
                    ``(A) an amount equal to the old-age insurance 
                amount (as calculated under subsection (b)(1)(B)); and
                    ``(B) an amount equal to the survivor's insurance 
                amount (as calculated under subsection (b)(2)(B)).
    ``(b) Form of Distribution.--
            ``(1) Federal annuity payment.--
                    ``(A) In general.--On the date determined under 
                subsection (a), so much of the balance in an investing 
                worker's SAFE Account as does not exceed the old-age 
                insurance amount shall be transferred to the Federal 
                Old-Age and Survivors Insurance Trust Fund and the 
                investing worker shall be entitled to a Federal annuity 
                payment.
                    ``(B) Old-age insurance amount.--For purposes of 
                this section, the old-age insurance amount is an amount 
                which is sufficient to provide a Federal annuity 
                payment which, when added to the investing worker's 
                monthly benefit under part A, is equal to one-twelfth 
                of 135 percent of the poverty line (as defined in 
                section 673(2) of the Community Services Block Grant 
                Act (42 U.S.C. 9902(2))).
                    ``(C) Federal annuity payment.--For purposes of 
                this section, the term `Federal annuity payment' means 
                a monthly payment from the Federal Old-Age and 
                Survivors Insurance Trust Fund in an amount determined 
                by the Social Security Investment Board based on the 
                amount transferred to the Federal Old-Age and Survivors 
                Insurance Trust Fund under subparagraph (A) and the 
                life expectancy of the investing worker (determined 
                under reasonable actuarial assumptions).
            ``(2) Family or survivor benefits for related 
        individuals.--
                    ``(A) In general.--On the date determined under 
                subsection (a), in the case of an investing worker 
                whose SAFE Account has funds in excess of the amount 
                required to be transferred under paragraph (1)(A), so 
                much of such excess funds as does not exceed the 
                survivor's insurance amount shall be transferred to the 
                Federal Old-Age and Survivors Insurance Trust Fund and 
                any related individual shall be entitled to a 
                survivor's payment at the time such related individual 
                meets the applicable requirements for a monthly payment 
                under section 202.
                    ``(B) Survivor's insurance amount.--For purposes of 
                this section, the survivor's insurance amount is an 
                amount, determined by the Social Security Investment 
                Board under rules established by such Board, which is 
                sufficient to provide survivor's payments to all 
                related individuals.
                    ``(C) Survivor's payment.--For purposes of this 
                section, the term `survivor's payment' means a monthly 
                payment from the Federal Old-Age and Survivors 
                Insurance Trust Fund in an amount which, when added to 
                such related individual's monthly benefit (or projected 
                monthly benefit) under this title, is equal to the 
                benefit such related individual would be entitled to 
                under section 202 if the investing worker had waived 
                the application of this part.
                    ``(D) Related individual.--For purposes of this 
                section, the term `related individual' means, with 
                respect to an investing worker, any individual entitled 
                to benefits under section 202 based on the wages or 
                self-employment income of such worker.
            ``(3) Payment of excess safe account funds.--To the extent 
        funds remain in an investing worker's SAFE Account after the 
        transfer required under paragraphs (1) and (2), such excess 
        assets shall be payable to the worker in such manner and in 
        such amounts as determined by the worker.
            ``(4) Distribution in the event of death.--If the investing 
        worker dies before the date determined under subsection (a), 
        the balance in the worker's SAFE Account shall be distributed 
        in the following manner:
                    ``(A) Not more than an amount equal to the 
                survivor's insurance amount shall be transferred to the 
                Federal Old-Age and Survivors Insurance Trust Fund.
                    ``(B) The remainder (if any) shall be distributed 
                in a lump sum, under rules established by the Social 
                Security Investment Board, to the investing worker's 
                estate, subject to applicable State laws.

``SEC. 255. SOCIAL SECURITY INVESTMENT BOARD.

    ``(a) Establishment.--There is established within the Social 
Security Administration a Social Security Investment Board (in this Act 
referred to as the `Board').
    ``(b) Composition.--The Board shall be composed of--
            ``(1) 2 members from the private sector appointed by the 
        President, of whom 1 shall be designated by the President as 
        Chairman;
            ``(2) the Secretary of the Treasury;
            ``(3) the Chairman of the Federal Reserve Board; and
            ``(4) the Chairman of the Securities and Exchange 
        Commission.
    ``(c) Advice and Consent.--Appointments under subsection (b)(1) 
shall be made by and with the advice and consent of the Senate.
    ``(d) Membership Requirements.--Members of the Board appointed 
under subsection (b)(1) shall have substantial experience, training, 
and expertise in finance, investments, or insurance.
    ``(e) Length of Appointments.--
            ``(1) Terms.--A member of the Board appointed under 
        subsection (b)(1) shall be appointed for a term of 6 years, 
        except that of the members first appointed under subsection 
        (b)(1)--
                    ``(A) the Chairman shall be appointed for a term of 
                6 years; and
                    ``(B) the remaining member shall be appointed for a 
                term of 3 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 earlier of--
                    ``(A) the date on which the member's successor 
                takes office; or
                    ``(B) 1 year after the member's term is scheduled 
                to expire.
    ``(f) Duties.--The Board shall--
            ``(1) maintain SAFE Accounts and the SAFE Investment Fund 
        in the same manner as the Thrift Savings Accounts and the 
        Thrift Savings Fund are maintained by the Thrift Savings Board;
            ``(2) review and approve the budget of the Board;
            ``(3) establish policies for the administration of this 
        part; and
            ``(4) carry out any other duties specified under this part.
    ``(g) Administrative Provisions.--
            ``(1) In general.--The Board may--
                    ``(A) adopt, alter, and use a seal;
                    ``(B) 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;
                    ``(C) upon the concurring votes of 4 members, 
                remove the Executive Director from office for good 
                cause shown; and
                    ``(D) 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 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.
    ``(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.
    ``(i) Appointment of Executive Director.--
            ``(1) In general.--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.
            ``(2) Requirements.--The Executive Director shall have 
        substantial experience, training, and expertise in finance, 
        investments, and insurance.
            ``(3) Duties.--The Executive Director shall--
                    ``(A) carry out the policies established by the 
                Board;
                    ``(B) invest and manage the SAFE Investment Fund in 
                accordance with the investment policies established by 
                the Board;
                    ``(C) administer the provisions this part; and
                    ``(D) prescribe such regulations (other than 
                regulations relating to fiduciary responsibilities) as 
                may be necessary for the administration of this part.
            ``(4) Administrative authority.--The Executive Director 
        may--
                    ``(A) appoint such personnel as may be necessary to 
                carry out the provisions of this part;
                    ``(B) subject to approval by the Board, procure the 
                services of experts and consultants under section 3109 
                of title 5, United States Code;
                    ``(C) 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 such part and the policies of the Board;
                    ``(D) make such payments out of sums described in 
                subsection (l) as the Executive Director determines are 
                necessary to carry out the provisions of such part and 
                the policies of the Board;
                    ``(E) 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;
                    ``(F) 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
                    ``(G) take such other actions as are appropriate to 
                carry out the functions of the Executive Director.
    ``(j) Discharge of Responsibilities.--The members of the Board 
shall discharge their responsibilities solely in the interest of SAFE 
Account holders and beneficiaries under this part.
    ``(k) Annual Independent Audit.--The Board shall annually engage an 
independent qualified public accountant to audit the activities of the 
Board.
    ``(l) Source of Funds.--Payments authorized under this section 
shall be paid from administrative fees charged in accordance with 
section 253(c).
    ``(m) 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.
    ``(n) 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.''.
    (b) Effective Date and Notice Requirements.--
            (1) Effective date.--The amendments made by this section 
        shall apply to designations of accounts made with respect to 
        payroll periods beginning on or after January 1, 2007.
            (2) Notice requirements.--
                    (A) In general.--Not later than January 1, 2007, 
                the Commissioner of Social Security shall--
                            (i) send to the last known address of each 
                        eligible individual a description of the 
                        program established by the amendments made by 
                        this section, that shall be written in the form 
                        of a pamphlet in language that may be readily 
                        understood by the average worker;
                            (ii) provide for toll-free access by 
                        telephone from all localities in the United 
                        States and access by the Internet to the Social 
                        Security Administration through which 
                        individuals may obtain information and answers 
                        to questions regarding such program; and
                            (iii) provide information to the media in 
                        all localities of the United States about such 
                        program and such toll-free access by telephone 
                        and access by Internet.
                    (B) Eligible individual.--For purposes of this 
                paragraph, the term ``eligible individual'' means an 
                individual who, as of the date of the pamphlet sent 
                pursuant to subparagraph (A), is indicated within the 
                records of the Social Security Administration as being 
                credited with 1 or more quarters of coverage under 
                section 213 of the Social Security Act (42 U.S.C. 413).
                    (C) Matters to be included.--The Commissioner of 
                Social Security shall include with the pamphlet sent to 
                each eligible individual pursuant to subparagraph (A)--
                            (i) a statement of the number of quarters 
                        of coverage indicated in the records of the 
                        Social Security Administration as of the date 
                        of the description as credited to such 
                        individual under section 213 of such Act and 
                        the date as of which such records may be 
                        considered accurate; and
                            (ii) the number for toll-free access by 
                        telephone established by the Commissioner 
                        pursuant to subparagraph (A)(ii).

SEC. 102. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS UNDER PART A OF 
              TITLE II OF THE SOCIAL SECURITY ACT FOR INVESTING WORKERS 
              WITH SAFE ACCOUNTS.

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

 ``Adjustment of Primary Insurance Amount in Relation to Deposits Made 
                            to SAFE Accounts

    ``(j)(1) Except as provided in paragraph (2), an individual's 
primary insurance amount as determined in accordance with this section 
(before adjustments made under subsection (i)) shall be equal to--
            ``(A) the amount which would be so determined without the 
        application of this subsection, multiplied by
            ``(B) 1 minus the ratio of--
                    ``(i) the sum of--
                            ``(I) the total of all amounts which have 
                        been credited pursuant to section 252(b) to the 
                        SAFE Account held by such individual; plus
                            ``(II) accrued interest on such amounts 
                        compounded annually up to the date of initial 
                        benefit entitlement based on the earning of the 
                        individual's SAFE Account, assuming an interest 
                        rate equal to the projected interest rate of 
                        the Federal Old-Age and Survivors Trust Fund; 
                        to
                    ``(ii) the expected present value of all future 
                benefits paid based on the individual's earnings, as of 
                the date of initial benefit entitlement based on such 
                earnings, assuming future mortality and interest rates 
                for the Federal Old-Age and Survivors Trust Fund used 
                in the intermediate projections of the most recent 
                Board of Trustees report under section 201.
    ``(2) In the case of an individual who becomes entitled to 
disability insurance benefits under section 223, such individual's 
primary insurance amount shall be determined without regard to 
paragraph (1).''.
    (b) Conforming Amendment to Railroad Retirement Act of 1974.--
Section 1 of the Railroad Retirement Act of 1974 (45 U.S.C. 231) is 
amended by adding at the end the following:
    ``(s) In applying applicable provisions of the Social Security Act 
for purposes of determining the amount of the annuity to which an 
individual is entitled under this Act, section 215(j) of the Social 
Security Act and part B of title II of such Act shall be 
disregarded.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to computations and recomputations of primary 
insurance amounts occurring after December 31, 2006.

SEC. 103. TAX TREATMENT OF INVESTMENT-BASED SOCIAL SECURITY.

    (a) In General.--
            (1) In general.--Subchapter F of chapter 1 of the Internal 
        Revenue Code of 1986 (relating to exempt organizations) is 
        amended by adding at the end the following new part:

              ``PART IX--INVESTMENT-BASED SOCIAL SECURITY

        ``Sec. 530A. Investment-based social security.

``SEC. 530A. INVESTMENT-BASED SOCIAL SECURITY.

    ``(a) General Rule.--The SAFE Investment Fund and each SAFE Account 
are exempt from taxation under this subtitle. Notwithstanding the 
preceding sentence, a personal social security savings account is 
subject to the taxes imposed by section 511 (relating to imposition of 
tax on unrelated business income of charitable, etc. organizations).
    ``(b) Distributions.--
            ``(1) Federal annuity payment.--Any Federal annuity payment 
        (as defined under section 254(b)(1) of the Social Security Act) 
        shall be treated as a social security benefit for purposes of 
        section 86.
            ``(2) Distribution of excess assets.--Any distribution from 
        a SAFE Account under section 254(b)(3) of the Social Security 
        Act shall be includible in gross income under rules under 
        section 72.
    ``(c) Definitions.--For purposes of this section--
            ``(1) SAFE account.--The term `SAFE Account' means an 
        account established under section 252(a) of the Social Security 
        Act.
            ``(2) SAFE investment fund.--The term `SAFE Investment 
        Fund' means the fund established under section 253 of the 
        Social Security Act.''.
            (2) Clerical amendment.--The table of parts for subchapter 
        F of chapter 1 of such Code is amended by adding after the item 
        relating to part VIII the following new item:

            ``Part IX. Investment-Based Social Security.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 104. STUDY ON USE OF PRIVATE ANNUITIES FOR SAFE ACCOUNT 
              DISTRIBUTIONS.

    (a) In General.--The Social Security Investment Board shall conduct 
a study on the use of annuities provided by private-sector financial 
institutions for the distribution of SAFE account funds under section 
254 of the Social Security Act.
    (b) Report.--Not later than 3 years after the date of the enactment 
of this Act, the Social Security Investment Board shall submit to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
of the House of Representatives a report describing the results of the 
study under subsection (a).

SEC. 105. STUDY REGARDING FINANCIAL LITERACY.

    (a) Study.--
            (1) In general.--The Social Security Investment Board shall 
        conduct a thorough study of all matters relating to programs to 
        increase the financial literacy of Americans.
            (2) Matters studied.--The matters studied by the Social 
        Security Investment Board shall include--
                    (A) existing Federal and non-Federal financial 
                literacy programs, including a review and performance 
                evaluation of such programs;
                    (B) the coordination of existing Federal and non-
                Federal financial education efforts; and
                    (C) ideas for new public initiatives to increase 
                the financial literacy of all Americans.
    (b) Recommendations.--The Social Security Investment Board shall 
develop recommendations on--
            (1) streamlining existing financial literacy programs;
            (2) increasing financial literacy for all Americans; and
            (3) new avenues for public-private partnerships in 
        financial literacy.
    (c) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Social Security Investment Board shall 
submit a report to the President and to Congress which shall contain a 
detailed statement of the findings and conclusions of the Social 
Security Investment Board, together with its recommendations for such 
legislation and administrative actions as it considers appropriate.

                  TITLE II--DEBT-BASED SOCIAL SECURITY

                        Subtitle A--Adjustments

SEC. 201. MODIFICATION TO RETIREMENT AGE.

    Section 215(l)(1) of the Social Security Act (42 U.S.C. 416(l)(1)) 
is amended--
            (1) by striking ``and'' at the end of subparagraph (D);
            (2) by inserting ``and before January 1, 2023,'' after 
        ``December 31, 2021,'' in subparagraph (E);
            (3) by striking the period at the end of subparagraph (E) 
        and by inserting ``; and''; and
            (4) by adding at the end the following:
                    ``(F) with respect to an individual who attains 
                early retirement age after December 31, 2022, 68 years 
                of age.''.

SEC. 202. MODIFICATION OF PIA FACTORS TO REFLECT CHANGES IN LIFE 
              EXPECTANCY.

    Section 215(a)(1) of the Social Security Act (42 U.S.C. 
415(a)(1)(B)) is amended by redesignating subparagraph (D) as 
subparagraph (F) and by inserting after subparagraph (C) the following:
    ``(D)(i) For individuals who initially become eligible for old-age 
insurance benefits in any calendar year after 2023, each of the 
percentages under clauses (i), (ii), and (iii) of subparagraph (A) 
shall be multiplied by the applicable factor for such year with respect 
to each year after 2023 and before the year following the year of 
initial eligibility.
    ``(ii) For purposes of clause (i), the term `applicable factor' 
means the actuarial number, expressed as a percentage and determined by 
the Commissioner of Social Security after taking into account the 
actuarial reduction under section 202(q) (without regard to the 
amendments made by section 203 of the Saving Social Security Act of 
2005), representing the historical increase in longevity of life for 
the most recent year.
    ``(E) For any individual who initially becomes eligible for 
disability insurance benefits in any calendar year after 2023, the 
primary insurance amount for such individual shall be equal to the 
greater of--
            ``(i) such amount as determined under this paragraph, or
            ``(ii) such amount as determined under this paragraph 
        without regard to subparagraph (D) thereof.''.

SEC. 203. ACTUARIAL ADJUSTMENT FOR RETIREMENTS.

    (a) In General.--Section 202(q) of the Social Security Act (42 
U.S.C. 402(q)) is amended--
            (1) in paragraph (1)(A), by striking ``\5/9\'' and 
        inserting ``the applicable old-age benefit fraction (determined 
        under paragraph (12)(A))'', and by striking ``\25/36\'' and 
        inserting ``the applicable spousal benefit fraction (determined 
        under paragraph (12)(B))''; and
            (2) by adding at the end the following:
    ``(12) For purposes of paragraph (1)(A)--
            ``(A) the `applicable old-age benefit fraction' for an 
        individual who attains the age of 62 in--
                    ``(i) any year before 2024, is \5/9\;
                    ``(ii) 2024, is \7/12\;
                    ``(iii) 2025, is \11/18\;
                    ``(iv) 2026, is \23/36\;
                    ``(v) 2027, is \2/3\; and
                    ``(vi) 2028 or any succeeding year, is \25/36\; and
            ``(B) the `applicable spousal benefit fraction' for an 
        individual who becomes eligible for wife's or husband's 
        insurance benefits in--
                    ``(i) any year before 2024, is \25/36\;
                    ``(ii) 2024, is \13/18\;
                    ``(iii) 2025, is \27/36\;
                    ``(iv) 2026, is \7/9\;
                    ``(v) 2027, is \29/36\; and
                    ``(vi) 2028 or any succeeding year, is \5/6\.''.
    (b) Months Beyond First 36 Months.--Section 202(q) of such Act (42 
U.S.C. 402(q)) (as amended by subsection (a)) is amended--
            (1) in paragraph (9)(A), by striking ``five-twelfths'' and 
        inserting ``the applicable fraction (determined under paragraph 
        (13))''; and
            (2) by adding at the end the following:
    ``(13) For purposes of paragraph (9)(A), the `applicable fraction' 
for an individual who becomes eligible for old-age, wife's, or 
husband's insurance benefits in--
            ``(A) any year before 2024, is \5/12\;
            ``(B) 2024, is \16/36\;
            ``(C) 2025, is \16/36\;
            ``(D) 2026, is \17/36\;
            ``(E) 2027, is \17/36\; and
            ``(F) 2028 or any succeeding year, is \1/2\.''.
    (c) Eligibility.--Section 202(q) of such Act (as amended by the 
preceding provisions of this section) is amended further by adding at 
the end the following new paragraph:
    ``(14) For purposes of this subsection, an individual shall be 
deemed eligible for a benefit for a month if, upon filing application 
therefor in such month, such individual would be entitled to such 
benefit for such month.''.
    (d) Effective Date.--The amendments made by this subsection shall 
apply to individuals who, in connection with old-age, wife's, and 
husband's insurance benefits under title II of the Social Security Act, 
become eligible for such benefits (within the meaning of section 
202(q)(14) of such Act (as amended by this subsection)) in years after 
2023.

         Subtitle B--Maintenance of Social Security Trust Funds

SEC. 211. MAINTENANCE OF ADEQUATE BALANCES IN THE SOCIAL SECURITY TRUST 
              FUNDS.

    (a) In General.--Section 201 of the Social Security Act (42 U.S.C. 
401) is amended by adding at the end the following new subsection:
    ``(o) In addition to amounts otherwise appropriated under the 
preceding provisions of this section to the Trust Funds established 
under this section, there is hereby appropriated for each fiscal year 
to each of such Trust Funds, from amounts in the general fund of the 
Treasury not otherwise appropriated, such sums as may be necessary from 
time to time to maintain the balance ratio (as defined in section 
709(b)) of such Trust Fund, for the calendar year commencing during 
such fiscal year, at not less than 100 percent. The sums to be 
appropriated under the preceding sentence shall be determined by the 
Commissioner of Social Security and certified by the Commissioner to 
each House of the Congress not later than October 1 of such fiscal 
year. In making such determination and certification, the Commissioner 
shall use the intermediate actuarial assumptions used by the Board of 
Trustees of the Trust Funds in its most recent annual report to the 
Congress prepared pursuant to subsection (c)(2). The Commissioner shall 
also transmit a copy of any such certification to the Secretary of the 
Treasury, and upon receipt thereof, such Secretary shall promptly take 
appropriate actions in accordance with the certification.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning after the date of the 
enactment of this Act.
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