[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 857 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 857

 To reform Social Security by establishing a Personal Social Security 
 Savings Program and to provide new limitations on the Federal Budget.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 20, 2005

Mr. Sununu (for himself, Mr. Brownback, and Mr. DeMint) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
 To reform Social Security by establishing a Personal Social Security 
 Savings Program and to provide new limitations on the Federal Budget.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Social Security 
Personal Savings Guarantee and Prosperity Act of 2005''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
          TITLE I--PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM

Sec. 101. Establishment of Personal Social Security Investment Program.
           ``Part B--Personal Social Security Savings Program

        ``Sec. 251. Definitions.
        ``Sec. 252. Social Security Personal Savings Fund.
        ``Sec. 253. Participation in Program.
        ``Sec. 254. Personal social security savings accounts.
        ``Sec. 255. Tier I Investment Fund.
        ``Sec. 256. Tier II Investment Fund.
        ``Sec. 257. Tier III Investment Options.
        ``Sec. 258. Personal social security savings annuity and other 
                            distributions.
        ``Sec. 259. Guarantee of promised benefits.
        ``Sec. 260. Personal Social Security Savings Board.
        ``Sec. 261. Executive Director.
Sec. 102. Monthly insurance benefits for participating individuals.
Sec. 103. General fund transfers to the Federal Old-Age and Survivors 
                            Insurance Trust Fund.
Sec. 104. Tax treatment of accounts.
Sec. 105. Self-Liquidating Social Security Transition Fund.
Sec. 106. Budgetary treatment of social security.
Sec. 107. Dedication of budget surpluses to saving social security.
Sec. 108. Accounting for the Old-Age, Survivors, and Disability 
                            Insurance Program and the Personal Social 
                            Security Savings Program.
Sec. 109. Reduction of FICA rates resulting from Personal Social 
                            Security Savings Program.
             TITLE II--PUTTING A LID ON THE FEDERAL BUDGET

   Subtitle A--Spending Safeguards on the Growth of Entitlements and 
                              Mandatories

Sec. 201. Spending caps on growth of entitlements and mandatories.
Sec. 202. Exempt programs and activities.
Sec. 203. Exceptions, limitations, and special rules.
Sec. 204. Point of order.
Sec. 205. Technical and conforming amendments.
               Subtitle B--Discretionary Spending Limits

Sec. 211. Enforcing discretionary spending limits.

          TITLE I--PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM

SEC. 101. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM.

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

                    ``PART A--INSURANCE BENEFITS'';

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

           ``PART B--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

``SEC. 251. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Participating individual.--The term `participating 
        individual' has the meaning provided in section 253(a).
            ``(2) Board.--The term `Board' means the Personal Social 
        Security Savings Board established under section 260.
            ``(3) Executive director.--The term `Executive Director' 
        means the Executive Director appointed under section 261.
            ``(4) Personal social security savings account.--The term 
        `personal social security savings account' means an account 
        established under section 254(a).
            ``(5) Personal social security savings annuity.--The term 
        `personal social security savings annuity' means an annuity 
        approved by the Board under section 258(b)(3).
            ``(6) Savings fund.--The term `Savings Fund' means the 
        Social Security Personal Savings Fund established under section 
        252.
            ``(7) Tier i investment fund.--The term `Tier I Investment 
        Fund' means the trust fund created under section 255.
            ``(8) Tier ii investment fund.--The term `Tier II 
        Investment Fund' means the trust fund created under section 
        256.
            ``(9) Tier iii investment option.--The term `Tier III 
        Investment Option' means an investment option which is--
                    ``(A) offered by an eligible entity certified by 
                the Board under section 257(b); and
                    ``(B) approved by the Board under section 257(c).

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

    ``(a) Establishment of Savings Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        of the United States a trust fund to be known as the `Social 
        Security Personal Savings Fund'.
            ``(2) Amounts in fund.--The Savings Fund shall consist of--
                    ``(A) all amounts transferred to or deposited into 
                the Savings Fund under subsection (b), increased by the 
                total net earnings from investments of sums in the 
                Savings Fund attributable to such transferred or 
                deposited amounts, and reduced by the total net losses 
                from investments of such sums, and
                    ``(B) the reserves held in the Annuity Reserves 
                Account established under section 258(b)(3), increased 
                by the total net earnings from investments of such 
                reserves, and reduced by the total net losses from 
                investments of such reserves.
            ``(3) Trustees.--The Board shall serve as trustees of the 
        Savings Fund.
            ``(4) Budget authority; appropriation.--This part 
        constitutes budget authority in advance of appropriations Acts 
        and represents the obligation of the Board to provide for the 
        payment of amounts provided under this part. The amounts held 
        in the Savings Fund are appropriated and shall remain available 
        without fiscal year limitation.
    ``(b) Deposits Into Fund.--
            ``(1) In general.--During each calendar year, the Secretary 
        of the Treasury shall deposit into the Savings Fund, from 
        amounts held in the Federal Old-Age and Survivors Insurance 
        Trust Fund, a total amount equal, in the aggregate, to 100 
        percent of the redirected social security contribution for such 
        calendar year of each individual who is a participating 
        individual for such calendar year.
            ``(2) Transfers based on estimates.--
                    ``(A) In general.--The amounts deposited pursuant 
                to paragraph (1) shall be transferred in at least 
                weekly payments from the Federal Old-Age and Survivors 
                Insurance Trust Fund to the Savings Fund.
                    ``(B) Determination of amounts.--The amounts 
                transferred under subparagraph (A) shall be determined 
                on the basis of estimates, made by the Commissioner of 
                Social Security and certified to the Secretary of the 
                Treasury, of the wages paid to, and self-employment 
                income derived by, participating individuals. Proper 
                adjustments shall be made in amounts subsequently 
                transferred to the extent prior estimates were in 
                excess of or were less than actual amounts transferred.
            ``(3) Redirected social security contributions.--For 
        purposes of paragraph (1)----
                    ``(A) In general.--The term `redirected social 
                security contributions' means, with respect to an 
                individual for a calendar year, the sum of--
                            ``(i) the product derived by multiplying--
                                    ``(I) the sum of the total wages 
                                paid to, and self-employment income 
                                derived by, such individual during such 
                                calendar year, to the extent such total 
                                wages and self-employment income do not 
                                exceed the base amount for such 
                                calendar year; by
                                    ``(II) the applicable base 
                                percentage for the calendar year; and
                            ``(ii) the product derived by multiplying--
                                    ``(I) the sum of the total wages 
                                paid to, and self-employment income 
                                derived by, such individual during such 
                                calendar year, to the extent such total 
                                wages and self-employment income exceed 
                                the base amount (taking into account 
                                the limits imposed by the contribution 
                                and benefit base under section 230); by
                                    ``(II) the applicable supplemental 
                                percentage for the calendar year.
                    ``(B) Base amount.--For purposes of subparagraph 
                (A)--
                            ``(i) Initial base amount.--The base amount 
                        for calendar year 2006 is $10,000.
                            ``(ii) Adjustments to base amount.--The 
                        base amount for any calendar year after 2006 is 
                        the product derived by multiplying $10,000 by a 
                        fraction--
                                    ``(I) the numerator of which is the 
                                national average wage index (as defined 
                                in section 209(k)) for the first of the 
                                2 preceding calendar years; and
                                    ``(II) the denominator of which is 
                                the national average wage index (as so 
                                defined) for 2004.
                    ``(C) Applicable base percentage.--For purposes of 
                subparagraph (A), the applicable base percentage for a 
                calendar year is--
                            ``(i) for calendar years after 2005 and 
                        before 2016, 5 percent; and
                            ``(ii) for calendar years after 2015, 10 
                        percent.
                    ``(D) Applicable supplemental percentage.--For 
                purposes of subparagraph (A), the applicable 
                supplemental percentage for a calendar year is--
                            ``(i) for calendar years after 2005 and 
                        before 2016, 2.5 percent; and
                            ``(ii) for calendar years after 2015, 5 
                        percent.
    ``(c) Availability.--The sums in the Savings Fund are appropriated 
and shall remain available without fiscal year limitation--
            ``(1) to invest funds in the Tier I Investment Fund of the 
        Savings Fund and the Tier II Investment Fund of the Savings 
        Fund under sections 255 and 256, respectively;
            ``(2) to transfer into Tier III Investment Options under 
        section 257;
            ``(3) to make distributions in accordance with section 258; 
        and
            ``(4) to pay the administrative expenses of the Board in 
        accordance with subsection (e).
    ``(d) Limitations on Use of Funds.--
            ``(1) In general.--Sums in the Savings Fund credited to a 
        participating individual's personal social security savings 
        account may not be used for, or diverted to, purposes other 
        than for the exclusive benefit of the participating individual 
        or the participating individual's beneficiaries under this 
        part.
            ``(2) Assignments.--Sums in the Savings Fund may not be 
        assigned or alienated and are not subject to execution, levy, 
        attachment, garnishment, or other legal process.
    ``(e) Payment of Administrative Expenses.--Administrative expenses 
incurred to carry out this part shall be paid out of net earnings in 
the Savings Fund in conjunction with the allocation of investment 
earnings and losses under section 254(c).
    ``(f) Limitation.--The sums in the Savings Fund shall not be 
appropriated for any purpose other than the purposes specified in this 
part and may not be used for any other purpose.

``SEC. 253. PARTICIPATION IN PROGRAM.

    ``(a) Participating Individual.--For purposes of this part, the 
term `participating individual' means any individual--
            ``(1)(A) who receives wages in any calendar year after 
        December 31, 2005, on which there is imposed a tax under 
        section 3101(a) of the Internal Revenue Code of 1986, or
            ``(B) who derives self-employment income for a taxable year 
        beginning after December 31, 2005, on which there is imposed a 
        tax under section 1401(a) of the Internal Revenue Code of 1986,
            ``(2) who is born on or after January 1, 1950, and
            ``(3) who has not filed an election to renounce such 
        individual's status as a participating individual under 
        subsection (b) or has filed such an election and has 
        subsequently filed an election to reinstate such individual's 
        status as a participating individual under subsection (c).
    ``(b) Renunciation of Participation.--
            ``(1) In general.--An individual--
                    ``(A) who has not attained retirement age (as 
                defined in section 216(l)(1)), and
                    ``(B) with respect to whom no distribution has been 
                made from amounts credited to the individual's personal 
                social security savings account for the purchase of a 
                personal social security savings annuity,
        may elect, in such form and manner as shall be prescribed in 
        regulations of the Board, to renounce such individual's status 
        as a `participating individual' for purposes of this part. Upon 
        completion of the procedures provided for under paragraph (2), 
        any such individual who has made such an election shall not be 
        treated as a participating individual under this part, 
        effective as if such individual had never been a participating 
        individual. The Board shall provide for immediate notification 
        of such election to the Commissioner of Social Security, the 
        Secretary of the Treasury, and the Executive Director.
            ``(2) Procedure.--The Board shall prescribe by regulation 
        procedures governing the termination of an individual's status 
        as `participating individual' pursuant to an election under 
        this subsection. Such procedures shall include--
                    ``(A) prompt closing of the individual's personal 
                social security savings account established under 
                section 254,
                    ``(B) revocation of any benefit credit certificate 
                assigned to the individual's personal social security 
                savings account under section 255, and
                    ``(C) prompt transfer to the Federal Old-Age and 
                Survivors Insurance Trust Fund as general receipts of 
                any amount held in the Tier II Investment Fund of the 
                Savings Fund or under a Tier III Investment Option 
                pursuant to section 256 or 257 and credited to such 
                individual's personal social security savings account.
    ``(c) Reinstatement of Participation.--
            ``(1) In general.--Any individual who has filed an election 
        under subsection (b) to renounce such individual's status as a 
        `participating individual' under this part may elect, in such 
        form and manner as shall be prescribed in regulations of the 
        Board, to reinstate such status. Such regulations shall provide 
        for regular, periodic opportunities for the filing of such an 
        election. The Board shall provide for immediate notification to 
        the Commissioner of Social Security, the Secretary of the 
        Treasury, and the Executive Director of such election.
            ``(2) Effectiveness of reinstatement.--An election under 
        this subsection shall be effective with respect to wages 
        earned, and self-employment income derived, on the earliest 
        date on which the Board determines is practicable to make such 
        election effective following the date of the filing of the 
        election. The individual filing the election shall be treated 
        as becoming a participating individual under this part on the 
        effective date of the election as if such individual first met 
        the requirements of subsection (a) on such date.
            ``(3) Irrevocability.--An election under this subsection 
        shall be irrevocable.

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

    ``(a) Establishment of Publicly Administered System of Personal 
Security Savings Accounts.--As soon as practicable after the later of 
January 1, 2006, or the date on which an individual becomes a 
participating individual under this part, the Executive Director shall 
establish a personal social security savings account for such 
individual. Such account shall be the means by which amounts held in 
the Tier I Investment Fund and the Tier II Investment Fund of the 
Savings Fund under sections 255 and 256 and amounts held under Tier III 
Investment Options under section 257 are credited to such individual, 
under procedures which shall be established by the Board by regulation. 
Each account of a participating individual shall be identified to such 
participating individual by means of the participating individual's 
social security account number.
    ``(b) Account Balance.--The balance in a participating individual's 
account at any time is the sum of--
            ``(1) the balance in the Tier I Investment Fund of the 
        Savings Fund credited to such participating individual prior to 
        transfer of the credited amount to the Tier II Investment Fund 
        of the Savings Fund; plus
            ``(2) the excess of--
                    ``(A) all deposits in the Tier II Investment Fund 
                of the Savings Fund credited to such participating 
                individual's personal social security savings account, 
                subject to such increases and reductions as may result 
                from allocations made to and reductions made in the 
                account pursuant to subsection (c)(1); over
                    ``(B) amounts paid out of the Tier II Investment 
                Fund in connection with amounts credited to such 
                participating individual's personal social security 
                savings account; plus
            ``(3) the excess of--
                    ``(A) the deposits in the Tier III Investment 
                Options credited to such participating individual's 
                personal social security savings account, subject to 
                such increases and reductions as may result from 
                amounts credited to, and reductions made in, the 
                account pursuant to subsection (c)(2); over
                    ``(B) amounts paid out of the Tier III Investment 
                Options of such participating individual.
The calculation made under paragraph (3) shall be made separately for 
each Tier III Investment Option of the participating individual. The 
Board shall also hold for the participating individual any benefit 
credit certificate assigned to the participating individual's personal 
social security savings account under section 255.
    ``(c) Allocation of Earnings and Losses.--Pursuant to regulations 
which shall be prescribed by the Board, the Executive Director shall 
allocate to each personal social security savings account an amount 
equal to the net earnings and net losses from each investment of sums--
            ``(1) in the Tier I Investment Fund and the Tier II 
        Investment Fund which are attributable to sums credited to such 
        account reduced by an appropriate share of the administrative 
        expenses paid out of the net earnings, as determined by the 
        Executive Director; and
            ``(2) in the Tier III Investment Options which are 
        attributable to sums credited to such account reduced by the 
        administrative expenses paid out of the net earnings.

``SEC. 255. TIER I INVESTMENT FUND.

    ``(a) Establishment of Tier I Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier I Investment Fund'.
            ``(2) Amounts in fund.--The Tier I Investment Fund consists 
        of all amounts derived from payments into the Fund under 
        section 252(b) and remaining after investment of such amounts 
        under subsection (b), including additional amounts derived as 
        income from such investments.
            ``(3) Use of funds.--The amounts held in the Fund are 
        appropriated and shall remain available without fiscal year 
        limitation--
                    ``(A) to be held for investment on behalf of 
                participating individuals under subsection (b),
                    ``(B) to pay the administrative expenses related to 
                the Fund, and
                    ``(C) to make transfers from the Fund under 
                subsection (c)(2).
    ``(b) Investment of Fund Balance.--For purposes of investment of 
the Tier I Investment Fund, the Board shall contract with appropriate 
professional asset managers, recordkeepers, and custodians selected for 
investment of amounts held in the Fund, so as to provide for investment 
of the balance of the Fund, in a manner providing broad diversification 
in accordance with regulations of the Board, in--
            ``(1) insurance contracts,
            ``(2) certificates of deposit, or
            ``(3) other instruments or obligations selected by such 
        asset managers,
which return the amount invested and pay interest, at a specified rate 
or rates, on that amount during a specified period of time.
    ``(c) Separate Crediting to Personal Social Security Savings 
Accounts and Transfers to the Tier II Investment Fund or to Tier III 
Investment Options.--
            ``(1) Crediting to accounts.--
                    ``(A) In general.--Subject to this paragraph, the 
                Board shall provide for prompt, separate crediting, as 
                soon as practicable, of the amounts deposited in the 
                Tier I Investment Fund to the personal social security 
                savings account of each participating individual with 
                respect to the redirected social security contributions 
                (as defined in section 252(b)(3)) of such participating 
                individual. The Board shall include in such crediting, 
                with respect to each such individual, any increases or 
                decreases in such amounts so as to reflect the net 
                returns and losses from investment of the balance of 
                the Fund prior to such crediting. For purposes of 
                determining such increases and decreases for each 
                calendar year, the amounts deposited into the Fund in 
                connection with such individual during such calendar 
                year shall be deemed to have been deposited on June 30 
                of such year.
                    ``(B) Treatment of married participating 
                individuals.--If the participating individual is 
                married as of the end of the calendar year in which the 
                amounts to be credited were deposited in the Tier I 
                Investment Fund and the spouse is also a participating 
                individual, the personal social security savings 
                account of the participating individual and the 
                personal social security savings account of his or her 
                spouse shall each be credited with 50 percent of such 
                amounts.
            ``(2) Transfers from the tier i investment fund.--In 
        accordance with elections filed with the Board by a 
        participating individual, any amount credited to the personal 
        social security savings account of such participating 
        individual under paragraph (1) shall be promptly transferred to 
        the Tier II Investment Fund of the Savings Fund for investment 
        in accordance with section 256 and, to the extent available 
        under section 257, to Tier III Investment Options in accordance 
        with section 257.
    ``(d) Treatment of Amounts Held in Tier I Investment Fund.--Subject 
to this part--
            ``(1) until amounts deposited into the Tier I Investment 
        Fund during any calendar year are credited to personal social 
        security savings accounts, such amounts shall be treated as the 
        unallocated property of all participating individuals with 
        respect to whom amounts were deposited in the Fund during such 
        year, jointly held in trust for such participating individuals 
        in the Savings Fund, and
            ``(2) amounts deposited into the Fund which are credited to 
        the personal social security savings account of a participating 
        individual shall be treated as property of the participating 
        individual, held in trust for such participating individual in 
        the Savings Fund.

``SEC. 256. TIER II INVESTMENT FUND.

    ``(a) Establishment of Tier II Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier II Investment Fund'.
            ``(2) Amounts in fund.--The Tier II Investment Fund 
        consists of all amounts derived from payments into the Fund 
        under section 255(c)(2) and remaining after investment of such 
        amounts under subsection (b), including additional amounts 
        derived as income from such investments.
            ``(3) Use of funds.--The amounts held in the Fund are 
        appropriated and shall remain available without fiscal year 
        limitation--
                    ``(A) to be held for investment under subsection 
                (b),
                    ``(B) to pay the administrative expenses related to 
                the Fund, and
                    ``(C) to make transfers to Tier III Investment 
                Options under section 257 or to make payments under 
                section 258.
    ``(b) Payments Into Tier II Investment Fund.--
            ``(1) In general.--Upon the crediting under section 252 to 
        the personal social security savings account of a participating 
        individual of any amount held in the Tier I Investment Fund for 
        any calendar year, the Board shall transfer from the Tier I 
        Investment Fund into the Tier II Investment Fund any amount so 
        credited to such participating individual's account which is 
        not transferred to a Tier III Investment Option pursuant to an 
        election under section 257(a).
            ``(2) Ongoing separate crediting.--Subject to this 
        paragraph, the Board shall provide for ongoing separate 
        crediting to each participating individual's personal social 
        security savings account of the amounts deposited in the Tier 
        II Investment Fund with respect to such participating 
        individual, together with any increases or decreases therein so 
        as to reflect the net returns and losses from investment 
        thereof while held in the Fund.
    ``(c) Investment Accounts.--
            ``(1) In general.--For purposes of investment of the Tier 
        II Investment Fund, the Board shall divide the Fund into 6 
        investment accounts. The Board shall contract with appropriate 
        investment managers, recordkeepers, and custodians selected for 
        investment of amounts held in each investment account. Such 
        accounts shall consist of--
                    ``(A) a Lifecycle Investment Account,
                    ``(B) a Government Securities Investment Account,
                    ``(C) a Fixed Income Investment Account,
                    ``(D) a Common Stock Index Investment Account,
                    ``(E) a Small Capitalization Stock Index Investment 
                Account, and
                    ``(F) an International Stock Index Investment 
                Account.
            ``(2) Election of investment options.--
                    ``(A) Default investment account.--Except as 
                provided in an election in effect under subparagraph 
                (B), amounts held in the Tier II Investment Fund shall 
                be credited to the Lifecycle Investment Account.
                    ``(B) Election of transfers between investment 
                accounts.--In any case in which a participating 
                individual who has an amount in such individual's 
                personal social security savings account credited to 
                any of the investment accounts in the Tier II 
                Investment Fund files with the Secretary of the 
                Treasury a written election under this subparagraph, 
                not more frequently than annually and in accordance 
                with regulations of the Board, the Secretary of the 
                Treasury shall transfer the full amount so credited in 
                such investment account from such investment account to 
                any one of the other investment accounts in the Tier II 
                Investment Fund (whichever is designated in such 
                election).
    ``(d) Lifecyle Investment Account.--
            ``(1) In general.--The investment manager, recordkeeper, 
        and custodian selected for investment of amounts held in the 
        Lifecyle Investment Account shall invest such amounts under 
        regulations which shall be prescribed by the Board in a mix of 
        equities and fixed income instruments so as to ensure, to the 
        maximum extent practicable, that, of the total balance in the 
        Fund credited to such account and available for investment 
        (after allowing for administrative expenses), the percentage 
        invested in fixed income instruments by individuals in 
        designated cohorts, ranging in age up to those of at least 
        retirement age, will increase in a linear progression from 0 
        percent to 100 percent as the cohort approaches retirement age.
            ``(2) Investment in equities.--In accordance with 
        regulations which shall be prescribed by the Board, the Board 
        shall establish standards which must be met by equities 
        selected for investment in the Lifecycle Investment Account. In 
        conformity with such standards, the Board shall select, for 
        purposes of such investment, indices which are comprised of 
        equities the aggregate market value of which is, in each case, 
        a reasonably broad representation of companies whose shares are 
        traded on the equity markets. Amounts invested in equities 
        under an investment option shall be held in a portfolio 
        designed to replicate the performance of one or more of such 
        indices.
            ``(3) Investment in fixed income instruments.--In 
        accordance with regulations which shall be prescribed by the 
        Board, the Board shall establish standards which must be met by 
        fixed income instruments selected for investment in the 
        Lifecycle Investment Account. Such standards shall take into 
        account the competing considerations of risk and return. 
        Amounts invested in fixed income instruments in an investment 
        option shall be held in a portfolio which shall consist of a 
        diverse range of fixed income instruments, taking into full 
        account the opposing considerations of risk and maximization of 
        return.
    ``(e) Government Securities Investment Account.--
            ``(1) In general.--Amounts in the Government Securities 
        Investment Account shall be invested in securities of the 
        United States Government as provided in this subsection
            ``(2) Issuance of special obligations.--The Secretary of 
        the Treasury is authorized to issue special interest-bearing 
        obligations of the United States for purchase by the Tier II 
        Investment Fund for purposes of investment of amounts in the 
        Government Securities Investment Account. Such obligations 
        shall have maturities fixed with due regard to the needs of the 
        Fund as determined by the Board, and shall bear interest at a 
        rate equal to the average market yield (computed by the 
        Secretary of the treasury on the basis of market quotations as 
        of the end of the calendar month next preceding the date of 
        issue of such obligations) on all 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 end of such calendar month. Any average market yield 
        computed under this paragraph which is not a multiple of one-
        eighth of 1 percent shall be rounded to the nearest multiple of 
        one-eighth of 1 percent.
    ``(f) Fixed Income Investment Account.--Amounts in the Fixed Income 
Investment Account shall be invested in instruments or obligations 
which return the amount invested and pay interest, at a specified rate 
or rates, on that amount during a specified period of time, consisting 
of instruments or obligations in one or more of the following 
categories:
            ``(1) insurance contracts;
            ``(2) certificates of deposit; or
            ``(3) other instruments or obligations selected by 
        qualified professional asset managers.
    ``(g) Common Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the Common Stock 
        Investment Account shall be invested in a portfolio of common 
        stock designed to replicate the performance of the index 
        selected under paragraph (2). The portfolio shall be designed 
        such that, to the extent practicable, the percentage of the 
        balance in the Common Stock Index Investment Account that is 
        invested in each stock is the same as the percentage determined 
        by dividing the aggregate market value of all shares of that 
        stock by the aggregate market value of all shares of all stocks 
        included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the Common Stock 
        Investment Account, an index which is a commonly recognized 
        index comprised of common stock the aggregate market value of 
        which is a reasonably complete representation of the United 
        States equity markets.
    ``(h) Small Capitalization Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the Small 
        Capitalization Stock Index Investment Account shall be invested 
        in a portfolio of common stock designed to replicate the 
        performance of the index selected under paragraph (2). The 
        portfolio shall be designed such that, to the extent 
        practicable, the percentage of the balance in the Small 
        Capitalization Stock Index Investment Account that is invested 
        in each stock is the same as the percentage determined by 
        dividing the aggregate market value of all shares of that stock 
        by the aggregate market value of all shares of all stocks 
        included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the Small 
        Capitalization Stock Index Investment Account, an index which 
        is a commonly recognized index comprised of common stock the 
        aggregate market value of which represents the United States 
        equity markets excluding the common stocks included in the 
        Common Stock Index Investment Account.
    ``(i) International Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the International 
        Stock Index Investment Account shall be invested in a portfolio 
        of stock designed to replicate the performance of the index 
        selected under paragraph (2). The portfolio shall be designed 
        such that, to the extent practicable, the percentage of the 
        balance in the International Stock Index Investment Account 
        that is invested in each stock is the same as the percentage 
        determined by dividing the aggregate market value of all shares 
        of that stock by the aggregate market value of all shares of 
        all stocks included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the International 
        Stock Index Investment Account, an index which is a commonly 
        recognized index comprised of common stock the aggregate market 
        value of which is a reasonably complete representation of the 
        international equity markets excluding the United States equity 
        markets.
    ``(j) Additional Investment Options.--The Board may from time to 
time, as determined by regulation as appropriate to further the 
purposes of this section, shall--
            ``(1) establish investment accounts in the Tier II 
        Investment Fund meeting the requirements of this section in 
        addition to those established by this section, and
            ``(2) terminate investment accounts in the Tier II 
        Investment Fund established pursuant to paragraph (1).
    ``(k) Disclosure of Administrative Costs.--The Board shall provide 
to each participating individual an annual disclosure of the rate of 
administrative costs chargeable with respect to investment in each 
investment account in the Tier II Investment Fund. Such disclosure 
shall be written in a manner calculated to be understood by the average 
participating individual.
    ``(l) Treatment of Amounts Held in Tier II Investment Fund.--
Subject to this part, amounts deposited into, and held and accounted 
for in, the Tier II Investment Fund with respect to any participating 
individual shall continue to be treated as property of such 
participating individual, held in trust for such participating 
individual in the Fund.

``SEC. 257. TIER III INVESTMENT OPTIONS.

    ``(a) Election of Tier III Investment Options.--
            ``(1) In general.--A participating individual may elect to 
        direct transfers from amounts in the Savings Fund credited to 
        the personal social security savings account of such individual 
        into 1 or more Tier III Investment Options in accordance with 
        paragraph (2).
            ``(2) Commencement of tier iii investment options upon 
        attainment of election threshold.--In any case in which, as of 
        the end of any calendar year, the total balance in the Savings 
        Fund credited to a participating individual's personal social 
        security savings account exceeds for the first time the 
        election threshold, the Board shall, by regulation, provide for 
        an opportunity for such participating individual to make, at 
        any time thereafter, such individual's first election of one or 
        more of the Tier III Investment Options for investment of an 
        amount in the Savings Fund credited to such account. Such 
        election may be in lieu of or in addition to investment in the 
        options available with respect to the Tier II Investment Fund 
        of the Savings Fund.
            ``(3) Allocation of funds.--In the case of an election 
        under paragraph (1), funds credited to the personal social 
        security savings account of the participating individual and 
        elected for transfer to one or more Tier III Investment Options 
        shall be transferred to the Tier III Investment Options so 
        elected for such calendar year, in percentages specified in the 
        election by the participating individual for each applicable 
        portfolio.
            ``(4) Election threshold.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                purposes of this subsection the term `election 
                threshold' means an amount equal to $25,000.
                    ``(B) Adjustments.--The Board shall adjust annually 
                (effective for annual reporting months occurring after 
                December 2006) the dollar amount set forth in 
                subparagraph (A) under procedures providing for 
                adjustments in the same manner and to the same extent 
                as adjustments are provided for under the procedures 
                used to adjust benefit amounts under section 
                215(i)(2)(A), except that any amount so adjusted that 
                is not a multiple of $1.00 shall be rounded to the 
                nearest multiple of $1.00.
            ``(5) Subsequent investment of amounts held in tier iii 
        investment options.--Any amounts held in one or more Tier III 
        Investment Options may be--
                    ``(A) transferred at any time to one or more other 
                Tier III Investment Options, subject to applicable 
                regulations of the Board and the terms governing the 
                affected Tier III Investment Options, and
                    ``(B) transferred, not more frequently than 
                annually, to the Tier II Investment Fund, for deposit 
                in the applicable investment account then selected by 
                the participating individual under section 256.
    ``(b) Certification of Eligible Entities.--
            ``(1) In general.--The Board shall certify eligible 
        entities to offer Tier III Investment Options under this part.
            ``(2) Application.--Any eligible entity that desires to be 
        certified by the Board to offer a Tier III Investment Option 
        shall submit an application to the Board at such time, in such 
        manner, and containing such information as the Board may 
        require.
            ``(3) Requirements for approval.--The Board shall not 
        certify an eligible entity unless such eligible entity agrees 
        to the following requirements:
                    ``(A) Separate accounting.--Each eligible entity 
                shall, with respect to each Tier III Investment Option 
                offered by such eligible entity to participating 
                individuals--
                            ``(i) establish separate accounts for the 
                        contributions of each participating individual, 
                        and any earnings properly allocable to the 
                        contributions, and
                            ``(ii) maintain separate recordkeeping with 
                        respect to each account.
                    ``(B) Treatment of amounts held in fund.--Amounts 
                deposited into, and held and accounted for in, a Tier 
                III Investment Option with respect to any participating 
                individual shall be treated as property of such 
                participating individual, held in trust for such 
                participating individual.
                    ``(C) Trust requirements.--Amounts held and 
                accounted for with respect to a participating 
                individual shall be held in a trust created or 
                organized in the United States for the exclusive 
                benefit of such individual or his beneficiaries.
                    ``(D) Exemption from third party claims.--Each Tier 
                III Investment Option shall be exempt from any and all 
                third party claims against the eligible entity.
                    ``(E) Disclosure of administrative costs.--Each 
                eligible entity offering a Tier III Investment Option 
                under this section shall provide to each participating 
                individual an annual disclosure of the rate of 
                administrative costs chargeable with respect to 
                investment in such Option. Such disclosure shall be 
                written in a manner calculated to be understood by the 
                average participating individual. The Board shall 
                provide for coordination of disclosures with respect to 
                Tier III Investment Options under this subparagraph so 
                as to assist participating individuals in comparing 
                alternative Options based on administrative costs.
                    ``(F) Reporting to the executive director and the 
                board.--Each eligible entity shall provide reports to 
                the Executive Director and the Board at such time, in 
                such manner, and containing such information as the 
                Board may require.
            ``(4) Eligible entity defined.--For purposes of this 
        section, the term `eligible entity' means any investment 
        company (as defined in section 3 of the Investment Company Act 
        of 1940) or other person that the Board determines appropriate 
        to offer Tier III Investment Options under this part.
    ``(c) Approval of Tier III Investment Options.--
            ``(1) In general.--No funds may be transferred into a Tier 
        III Investment Option unless the Board has approved an 
        application submitted under paragraph (2) with respect to the 
        option.
            ``(2) Application.--With respect to each Tier III 
        Investment Option that an eligible entity certified under 
        subsection (b)(1) seeks to offer, such entity shall submit an 
        application to the Board at such time, in such manner, and 
        containing such information as the Board may require.
            ``(3) Qualifications for approval.--The Board may not 
        approve an application submitted under paragraph (2) in 
        connection with a Tier III Investment Option unless the 
        following requirements are met:
                    ``(A) Option must be offered by certified eligible 
                entity.--The Tier III Investment Option is offered by 
                an eligible entity certified under subsection (b).
                    ``(B) Option must meet quality factors.--
                            ``(i) In general.--The Tier III Investment 
                        Option meets qualifications which shall be 
                        prescribed by the Board relating to the quality 
                        factors described in clause (ii).
                            ``(ii) Quality factors.--The quality 
                        factors described in this clause are--
                                    ``(I) the safety and soundness of 
                                the Tier III Investment Option's 
                                proposed investment policy;
                                    ``(II) the experience and record of 
                                performance of the proposed investment 
                                option, if any;
                                    ``(III) the experience and record 
                                of performance of the entity issuing or 
                                offering such option; and
                                    ``(IV) such other factors as the 
                                Board may determine appropriate.
    ``(d) Considerations for Certification and Approval.--In 
determining whether to certify an eligible entity under subsection (b) 
or to approve a Tier III Investment Option under subsection (c), the 
Board shall--
            ``(1) act in the best interests of the participating 
        individuals;
            ``(2) base its determination solely on considerations of 
        balancing safety and soundness of the Tier III Investment 
        Option with the maximization of returns of such option; and
            ``(3) not base any determination related to the entity or 
        option on political or other extraneous considerations.
    ``(e) Sponsorship of Tier III Investment Options by Membership and 
Labor Organizations.--
            ``(1) In general.--A membership or labor organization (as 
        defined by the Board) may sponsor Tier III Investment Options 
        under contracts with eligible entities certified under 
        subsection (b) who shall administer the investment option if 
        such investment option is approved by the Board under 
        subsection (c).
            ``(2) Limitation to membership.--A membership or labor 
        organization (as so defined) may limit to the members of such 
        organization participation in a Tier III Investment Option 
        sponsored by such organization.
    ``(f) Distributions in Case of Death.--Upon the death of a 
participating individual, the amount of any assets held under a Tier 
III Investment Option credited to the personal social security savings 
account of such individual shall be distributed in accordance with 
section 258(e).

``SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY AND OTHER 
              DISTRIBUTIONS.

    ``(a) Date of Initial Distribution.--Except as provided in 
subsection (e), distributions may be made to a participating individual 
from amounts credited to the personal social security savings account 
of such individual only on or after the earliest of--
            ``(1) the date the participating individual attains 
        retirement age (as defined in section 216(l)(1)) or, if elected 
        by the individual, early retirement age (as defined in section 
        216(l)(2)); or
            ``(2) the date on which the amount credited to the 
        participating individual's personal social security savings 
        account is sufficient to purchase a personal social security 
        savings annuity with a monthly benefit that is at least equal 
        to the minimum annuity payment amount (as defined in subsection 
        (b)(4)(C)(iii)).
    ``(b) Personal Social Security Savings Annuities.--
            ``(1) Notice of available annuities.--Not later than the 
        date determined under subsection (a), the Board shall notify 
        each participating individual of--
                    ``(A) the most recent listing of personal social 
                security savings annuities offered by the Annuity 
                Issuance Authority under paragraph (2); and
                    ``(B) the entitlement of the participating 
                individual to purchase such an annuity.
            ``(2) Annuity issuance authority.--There is established in 
        the office of the Board an agency which shall be known as the 
        `Annuity Issuance Authority'. The Authority shall provide, in 
        accordance with regulations of the Board, for the issuance of 
        personal social security savings annuities for purchase from 
        the Authority under this section and to otherwise administer 
        the issuance of such annuities in accordance with such 
        regulations.
            ``(3) Annuity reserves account.--There is established in 
        the Savings Fund an Annuity Reserves Account. The Account shall 
        consist of all amounts received by the Authority from the 
        purchase of personal social security savings annuities under 
        this section (plus such amounts as may be transferred to the 
        Account under paragraph (5)(B)), increased by the total net 
        earnings from investments of such reserves under subparagraph 
        (A) of paragraph (5) and reduced by the total net losses from 
        investments of such reserves under such subparagraph.
            ``(4) Purchase of annuities.--
                    ``(A) Selection of annuity.--On a date elected by 
                the participating individual, but no earlier than the 
                date determined under subsection (a), a participating 
                individual may purchase a personal social security 
                savings annuity selected from among the annuities 
                offered by the Authority under paragraph (2).
                    ``(B) Transfer of assets.--Upon the selection of an 
                annuity by a participating individual under 
                subparagraph (A), the Board shall provide for the 
                transfer of assets, credited to the personal social 
                security savings account of the participating 
                individual and held in the Tier II Investment Fund or 
                under 1 or more Tier III Investment Options (or any 
                combination thereof), in a total amount sufficient to 
                purchase the annuity selected by the participating 
                individual from annuities offered by the Authority.
                    ``(C) Minimum annuity payment amount.--
                            ``(i) In general.--Subject to subparagraph 
                        (D), if, at the time a personal social security 
                        savings annuity is purchased under subparagraph 
                        (A), the assets credited to the personal social 
                        security savings account of the participating 
                        individual are sufficient to purchase a 
                        personal social security savings annuity 
                        offered by the Authority under paragraph (2) 
                        with a monthly annuity payment that is at least 
                        equal to the minimum annuity payment amount, 
                        the amount of the monthly annuity payment 
                        provided by such annuity may not be less then 
                        the minimum annuity payment amount.
                            ``(ii) Construction.--Nothing in this 
                        subparagraph shall be construed to prohibit a 
                        participating individual from using personal 
                        social security savings account assets to 
                        purchase a personal social security savings 
                        annuity offered by the Authority under 
                        paragraph (2) which provides for a monthly 
                        payment in excess of the minimum amount 
                        required under clause (i).
                            ``(iii) Minimum annuity payment amount 
                        defined.--For purposes of this part, the term 
                        `minimum annuity payment amount' means, as of 
                        any date, an amount equal to the monthly 
                        equivalent of 150 percent of the poverty line 
                        for an individual (as in effect on such date), 
                        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.
                            ``(iv) Deemed total part a monthly benefit 
                        amount.--For purposes of clause (iii), the term 
                        `deemed total part A monthly benefit amount' 
                        means, with respect to a participating 
                        individual, the total amount which would be 
                        payable as monthly insurance benefits under 
                        section 202 for the month in which the 
                        participating individual attains or would 
                        attain early retirement age (as defined in 
                        section 216(l)(2)), based on the participating 
                        individual's wages and self-employment income, 
                        if the participating individual applied for 
                        old-age insurance benefits under section 202(a) 
                        during such month and all other individuals who 
                        would therefore be eligible for benefits under 
                        section 202 for such month based on such wages 
                        and self-employment income applied for such 
                        benefits during such month.
                            ``(v) Assumptions.--
                                    ``(I) Earnings and longevity.--In 
                                the case of a participating individual 
                                with respect to whom determinations 
                                under this subparagraph are made prior 
                                to the month described in clause (iv), 
                                the participating individual's average 
                                indexed monthly earnings (within the 
                                meaning of section 215(b)) for such 
                                month shall be projected, under 
                                regulations which shall be prescribed 
                                by the Board, on the basis of 
                                reasonable actuarial assumptions, and 
                                the Board shall assume the survival 
                                through the end of such month of all 
                                other individuals described in clause 
                                (iv).
                                    ``(II) Projected investment 
                                returns.--For purposes of making 
                                actuarial determinations relating to 
                                the amounts of annuities offered by the 
                                Authority under this section and the 
                                amounts necessary for the purchase of 
                                such annuities, the Authority shall 
                                project returns from the investment, in 
                                accordance with paragraph (5)(A), of 
                                the reserves held in the Annuities 
                                Reserves Account. The projection by the 
                                Authority of such returns shall be made 
                                under assumptions of long-term average 
                                returns of equities and fixed income 
                                instruments which shall be issued 
                                annually by the Board of Trustees of 
                                the Federal Old-Age and Survivors 
                                Insurance Trust Fund and the Federal 
                                Disability Insurance Trust Fund, based 
                                on analysis of historical market 
                                returns.
                    ``(D) Purchase of annuities in the event of 
                insufficient assets.--If a participating individual 
                desires, or is required under subsection (f) , to 
                purchase a personal social security savings annuity 
                under subsection (b) on or after the date determined 
                under subsection (a)(1) and the assets of the personal 
                social security savings account of such individual are 
                insufficient to purchase a personal social security 
                savings annuity that provides for a monthly payment 
                that is at least equal to the minimum annuity payment 
                amount (as defined in paragraph (4)(C)(iii)), the 
                participating individual shall purchase a personal 
                social security savings annuity with a monthly payment 
                equal to the maximum amount that the participating 
                individual's personal social security savings account 
                can fund, as determined in accordance with regulations 
                which shall be prescribed by the Authority, and that 
                otherwise meets the requirements of this subsection 
                (including the cost-of-living protection requirement of 
                subsection (c)(1)(C)), and the Authority shall provide 
                for appropriate certification to the Secretary of the 
                Treasury with respect to the participating individual's 
                eligibility for guarantee payments under section 259.
            ``(5) Maintenance of reserves for payment of annuities.--
                    ``(A) Investment of reserves.--For purposes of 
                investment of reserves held in the Annuity Reserves 
                Account, the Authority shall contract with appropriate 
                investment managers, recordkeepers, and custodians 
                selected by the Authority for investment of such 
                reserves. Such reserves shall be invested under 
                regulations which shall be prescribed by the Authority 
                so as to ensure, to the maximum extent practicable, 
                that, of the total balance of the reserves (after 
                payment of administrative expenses to such managers, 
                recordkeepers, and custodians)--
                            ``(i) 65 percent is invested in equities in 
                        the same manner and under the same standards as 
                        are provided in section 256(c)(4), and
                            ``(ii) 35 percent is invested in fixed 
                        income instruments in the same manner and under 
                        the same standards as are provided in section 
                        256(c)(5).
                    ``(B) Provision for full payment of annuities.--
                Payment of personal social security savings annuities 
                in accordance with the terms of such annuities shall be 
                made, irrespective of the sufficiency of reserves in 
                the Annuity Reserves Fund attributable to funds 
                obtained from the purchase of such annuities. In the 
                event of any impending insufficiency in the Annuity 
                Reserves Account for the next fiscal year, the 
                Authority shall certify to the Secretary of the 
                Treasury the amount of such insufficiency, and the 
                Secretary of the Treasury shall transfer from the 
                Federal Old-Age and Survivors Insurance Trust Fund to 
                the Annuity Reserves Account the amount of the 
                insufficiency, as so certified, in such installments, 
                made prior to or during such fiscal year, as are 
                necessary to eliminate in advance such insufficiency.
    ``(c) Personal Social Security Savings Annuity.--
            ``(1) In general.--For purposes of this part, the term 
        `personal social security savings annuity' means an annuity 
        that meets the following requirements:
                    ``(A) 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.
                    ``(B) The terms of the annuity provide--
                            ``(i) for a monthly payment to the 
                        participating individual during the life of the 
                        participating individual equal to at least the 
                        minimum annuity payment amount (as defined in 
                        subsection (b)(4)(C)(iii)), or
                            ``(ii) in the case of an annuity purchased 
                        under subparagraph (D) of subsection (b)(4), 
                        the maximum monthly payment determined under 
                        regulations prescribed under such subparagraph.
                    ``(C) The terms of the annuity include procedures 
                providing for adjustments in the amount of the monthly 
                payments in the same manner and to the same extent as 
                adjustments are provided for under the procedures used 
                to adjust benefit amounts under section 215(i)(2)(A). 
                Nothing in this subparagraph shall be construed to 
                preclude the terms governing such an annuity from 
                providing for adjustments in the amount of monthly 
                payments resulting in a payment for any month greater 
                than the payment for that month that would result from 
                adjustments required under the preceding 
                sentence.(b)(4)(D)
                    ``(D) The terms of the annuity include such other 
                terms and conditions as the Board requires for the 
                protection of the annuitant.
            ``(2) Exemption from third party claims.--Each personal 
        social security savings annuity shall be exempt from any and 
        all third party claims against the issuer.
    ``(d) Right to Use Excess Personal Social Security Savings Account 
Assets.--To the extent assets credited to a participating individual's 
personal social security savings account remain after the purchase of 
an annuity under subsection (b), the remaining assets shall be payable 
to the participating individual at such time, in such manner, and in 
such amounts as the participating individual may specify, subject to 
subsection (f).
    ``(e) Distributions in Case of Death.--If the participating 
individual dies before all amounts which are held in the Tier I 
Investment Fund or the Tier II Investment Fund of the Savings Fund or 
held under a Tier III Investment Option and which are credited to the 
personal social security savings account of the individual are 
otherwise distributed in accordance with this section, such amounts 
shall be distributed, under regulations which shall be prescribed by 
the Board--
            ``(1) in any case in which one or more beneficiaries have 
        been designated in advance, to such beneficiaries in accordance 
        with such designation as provided in such regulations, and
            ``(2) in the case of any amount not distributed as 
        described in paragraph (1), to such individual's estate.
    ``(f) Date of Final Distribution.--All amounts credited to the 
personal social security savings account of an individual shall be 
distributed, by means of the purchase of annuities or otherwise in a 
manner consistent with the requirements of this section, not later than 
5 years after the date the individual attains retirement age (as 
defined in section 216(l)). The Board shall provide by regulation for 
means of distribution necessary to ensure compliance with the 
requirements of this subsection.

``SEC. 259. GUARANTEE OF PROMISED BENEFITS.

    ``(a) In General.--If, for any month ending after the date on which 
a participating individual attains retirement age (as defined in 
section 216(l)(1)), the monthly payment under a participating 
individual's personal social security savings annuity is less than the 
minimum annuity payment amount (as defined in section 
258(b)(4)(C)(iii)), adjusted as provided in section 258(c)(1)(C), the 
Annuity Issuance Authority shall so certify to the Secretary of the 
Treasury and, upon receipt of such certification, such Secretary shall 
provide to the participating individual, from amounts in the Federal 
Old-Age and Survivors Insurance Trust Fund, a guaranty payment for such 
month to supplement the personal social security savings annuity and to 
guarantee full payment of such individual's monthly promised benefits.
    ``(b) Guaranty Payment.--For purposes of subsection (a), a 
participating individual's guaranty payment for any month is equal to 
the excess of--
            ``(1) the minimum annuity payment amount (as defined in 
        section 258(b)(4)(C)(iii)), adjusted as provided in section 
        258(c)(1)(C); over
            ``(2) the payment for such month of the personal social 
        security savings annuity purchased by the participating 
        individual.
    ``(c) Protection of Part A Normal Retirement Benefit Levels.--
            ``(1) In general.--In any case in which, for any month 
        ending after the date on which a participating individual 
        attains retirement age (as defined in section 216(l)(1))--
                    ``(A) such individual's assumed total normal 
                retirement part A benefit for such month, exceeds
                    ``(B) the monthly payment payable for such month 
                under such individual's personal social security 
                savings annuity,
        the Secretary of the Treasury shall pay to such individual for 
        such month, from amounts in the Federal Old-Age and Survivors 
        Insurance Trust Fund, an additional amount (if any) equal to 
        the excess of the amount described in subparagraph (A) over the 
        amount described in subparagraph (B).
            ``(2) Definition.--For purposes of this subsection, the 
        term `assumed total normal retirement part A benefit' means, in 
        connection with a participating individual, the total amount of 
        monthly insurance benefits under section 202 based on such 
        individual's wages and self-employment income (adjusted by 
        taking into account adjustments under section 215(i)) that 
        would have been payable if--
                    ``(A) section 202(z) did not apply, and
                    ``(B) such individual applied for old-age insurance 
                benefits under section 202(a) during the month in which 
                such individual attains retirement age (as defined in 
                section 216(l)(1)).

``SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD.

    ``(a) Establishment.--There is established in the executive branch 
of the Government a Personal Social Security Savings Board.
    ``(b) Composition.--The Board shall be composed of--
            ``(1) 3 members appointed by the President, of whom 1 shall 
        be designated by the President as Chairman; and
            ``(2) 2 members appointed by the President, of whom--
                    ``(A) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the Speaker of the House of Representatives in 
                consultation with the Minority Leader of the House of 
                Representatives; and
                    ``(B) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the Majority Leader of the Senate in consultation with 
                the Minority Leader of the Senate.
    ``(c) Advice and Consent.--Appointments under subsection (b) shall 
be made by and with the advice and consent of the Senate.
    ``(d) Membership Requirements.--Members of the Board shall have 
substantial experience, training, and expertise in the management of 
financial investments and pension benefit plans.
    ``(e) Length of Appointments.--
            ``(1) Terms.--A member of the Board shall be appointed for 
        a term of 4 years, except that of the members first appointed 
        under subsection (b)--
                    ``(A) the Chairman shall be appointed for a term of 
                4 years;
                    ``(B) the members appointed under subsection (b)(2) 
                shall be appointed for terms of 3 years; and
                    ``(C) the remaining members shall be appointed for 
                terms of 2 years.
            ``(2) Vacancies.--
                    ``(A) In general.--A vacancy on the Board shall be 
                filled in the manner in which the original appointment 
                was made and shall be subject to any conditions that 
                applied with respect to the original appointment.
                    ``(B) Completion of term.--An individual chosen to 
                fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
            ``(3) Expiration.--The term of any member shall not expire 
        before the date on which the member's successor takes office.
    ``(f) Duties.--The Board shall--
            ``(1) administer the program established under this part;
            ``(2) establish policies for the investment and management 
        of the Savings Fund, including the Tier I Investment Fund and 
        the Tier II Investment Fund, and amounts held under Tier III 
        Investment Options, including policies applicable to the asset 
        managers, recordkeepers, and custodians with responsibility for 
        managing the investment of amounts credited to personal social 
        security investment accounts, and for the management and 
        operation of personal social security savings annuities, which 
        shall provide for--
                    ``(A) prudent investments suitable for accumulating 
                funds for payment of retirement income;
                    ``(B) sound management practices; and
                    ``(C) low administrative costs;
            ``(3) review the performance of investments made for the 
        Tier I Investment Fund and the Tier II Investment Fund;
            ``(4) review the performance of investments made under Tier 
        III Investment Options;
            ``(5) review the management and operation of personal 
        social security savings annuities;
            ``(6) review and approve the budget of the Board; and
            ``(7) comply with the fiduciary requirements of part 4 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974 (relating to fiduciary responsibility) in 
        connection with any exercise of discretion in connection with 
        the assets of the Savings Fund.
    ``(g) Administrative Provisions.--
            ``(1) In general.--The Board may--
                    ``(A) adopt, alter, and use a seal;
                    ``(B) except as provided in paragraph (4), direct 
                the Executive Director to take such action as the Board 
                considers appropriate to carry out the provisions of 
                this part and the policies of the Board in accordance 
                with delegations under this part;
                    ``(C) upon the concurring votes of 4 members, 
                remove the Executive Director from office for good 
                cause shown;
                    ``(D) provide to the Executive Director such 
                resources as are necessary to carry out the duties of 
                the Executive Director; and
                    ``(E) take such other actions as may be necessary 
                to carry out the functions of the Board.
            ``(2) Meetings.--The Board shall meet--
                    ``(A) not less than once during each month; and
                    ``(B) at additional times at the call of the 
                Chairman.
            ``(3) Exercise of powers.--
                    ``(A) In general.--Except as provided in paragraph 
                (1)(C), the Board shall perform the functions and 
                exercise the powers of the Board on a majority vote of 
                a quorum of the Board. Three members of the Board shall 
                constitute a quorum for the transaction of business.
                    ``(B) Vacancies.--A vacancy on the Board shall not 
                impair the authority of a quorum of the Board to 
                perform the functions and exercise the powers of the 
                Board.
            ``(4) Limitations on investments.--The Board may not direct 
        any person to invest or to cause to be invested any sums in the 
        Tier II Investment Fund or any personal social security 
        investment account in a specific asset or to dispose of or 
        cause to be disposed of any specific asset of such Fund or any 
        such account.
    ``(h) Compensation.--
            ``(1) In general.--Each member of the Board who is not an 
        officer or employee of the Federal Government shall be 
        compensated at the daily rate of basic pay for level IV of the 
        Executive Schedule for each day during which such member is 
        engaged in performing a function of the Board.
            ``(2) Expenses.--A member of the Board shall be paid 
        travel, per diem, and other necessary expenses under subchapter 
        I of chapter 57 of title 5, United States Code, while traveling 
        away from such member's home or regular place of business in 
        the performance of the duties of the Board.
            ``(3) Source of funds.--Payments authorized under this 
        subsection shall be paid from the Tier I Investment Fund or the 
        Tier II Investment Fund, as determined appropriate by the 
        Board.
    ``(i) Discharge of Responsibilities.--The members of the Board 
shall discharge their responsibilities solely in the interest of the 
participating individuals and their beneficiaries under this part.
    ``(j) Annual Independent Audit.--The Board shall annually engage an 
independent qualified public accountant to audit the activities of the 
Board.
    ``(k) Submission of Budget to Congress.--The Board shall prepare 
and submit to the President, and, at the same time, to the appropriate 
committees of Congress, an annual budget of the expenses and other 
items relating to the Board which shall be included as a separate item 
in the budget required to be transmitted to Congress under section 1105 
of title 31, United States Code.
    ``(l) Submission of Legislative Recommendations.--The Board may 
submit to the President, and, at the same time, shall submit to each 
House of Congress, any legislative recommendations of the Board 
relating to any of its functions under this part or any other provision 
of law.

``SEC. 261. EXECUTIVE DIRECTOR.

    ``(a) Appointment of Executive Director.--The Board shall appoint, 
without regard to the provisions of law governing appointments in the 
competitive service, an Executive Director by action agreed to by a 
majority of the members of the Board.
    ``(b) Duties.--The Executive Director shall, as determined 
appropriate by the Board--
            ``(1) carry out the policies established by the Board;
            ``(2) invest and manage the Tier I Investment Fund and the 
        Tier II Investment Fund in accordance with the investment 
        policies and other policies established by the Board;
            ``(3) administer the provisions of this part relating to 
        the Tier I Investment Fund and the Tier II Investment Fund; and
            ``(4) prescribe such regulations (other than regulations 
        relating to fiduciary responsibilities) as may be necessary for 
        the administration of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund.
    ``(c) Administrative Authority.--The Executive Director may, within 
the scope of the duties of the Executive Director as determined by the 
Board--
            ``(1) appoint such personnel as may be necessary to carry 
        out the provisions of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund;
            ``(2) subject to approval by the Board, procure the 
        services of experts and consultants under section 3109 of title 
        5, United States Code;
            ``(3) secure directly from an Executive agency, the United 
        States Postal Service, or the Postal Rate Commission any 
        information necessary to carry out the provisions of this part 
        and the policies of the Board relating to the Tier I Investment 
        Fund and the Tier II Investment Fund;
            ``(4) make such payments out of sums in the Tier I 
        Investment Fund and the Tier II Investment Fund as the 
        Executive Director determines, in accordance with regulations 
        of the Board, are necessary to carry out the provisions of this 
        part and the policies of the Board;
            ``(5) pay the compensation, per diem, and travel expenses 
        of individuals appointed under paragraphs (1), (2), and (6) 
        from the Tier I Investment Fund or the Tier II Investment Fund, 
        in accordance with regulations of the Board;
            ``(6) accept and use the services of individuals employed 
        intermittently in the Government service and reimburse such 
        individuals for travel expenses, authorized by section 5703 of 
        title 5, United States Code, including per diem as authorized 
        by section 5702 of such title;
            ``(7) except as otherwise expressly prohibited by law or 
        the policies of the Board, delegate any of the Executive 
        Director's functions to such employees under the Board as the 
        Executive Director may designate and authorize such successive 
        redelegations of such functions to such employees under the 
        Board as the Executive Director may consider to be necessary or 
        appropriate; and
            ``(8) take such other actions as are appropriate to carry 
        out the functions of the Executive Director.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to wages paid after December 31, 2005, for pay 
periods ending after such date and self-employment income for taxable 
years beginning after such date.

SEC. 102. MONTHLY INSURANCE BENEFITS FOR PARTICIPATING INDIVIDUALS.

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

                ``Benefits for Participants Under Part B

    ``(z)(1) Notwithstanding the preceding provisions of this section--
            ``(A) a participating individual under the Personal Social 
        Security Savings Accounts Program under part B shall not be 
        entitled to old-age insurance benefits under subsection (a); 
        and
            ``(B) except as provided in paragraph (2), no individual 
        shall be entitled to benefits under this section on the basis 
        of the wages and self-employment income of such a participating 
        individual.
    ``(2) In the case of any such participating individual who dies 
before such individual purchases a personal social security savings 
annuity under section 258, paragraph (1)(B) shall not apply with 
respect to child's insurance benefits under subsection (d), widow's 
insurance benefits under subsection (e), widower's insurance benefits 
under subsection (f), mother's and father's insurance benefits under 
subsection (g), and parent's insurance benefits under subsection 
(h).''.

SEC. 103. GENERAL FUND TRANSFERS TO THE FEDERAL OLD-AGE AND SURVIVORS 
              INSURANCE TRUST FUND.

    (a) Recapture of Corporate Tax on Account Yields.--
            (1) 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:

 ``Recapture of Corporate Tax on Yields From Personal Social Security 
                      Savings Account Investments

    ``(o) The Secretary of the Treasury, in consultation with the 
Personal Social Security Savings Board, shall estimate and transfer to 
the Federal Old-Age and Survivors Insurance Trust Fund within 3 months 
after the end of each fiscal year an amount equal to the recapture 
amount for such fiscal year. For purposes of the preceding sentence, 
the recapture amount for any fiscal year shall be equal to the amount 
of corporate tax receipts under the Internal Revenue Code of 1986 
deposited in the Treasury for that fiscal year which are attributable 
to personal social security savings account investments under part B of 
this title.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply with respect to fiscal years beginning after 
        September 30, 2005.
            (3) Initial assumptions.--In determining the recapture 
        amount under section 201(o) of the Social Security Act (added 
        by paragraph (1)) for fiscal years 2006 and 2007, the Secretary 
        of the Treasury shall make the following assumptions concerning 
        the total amount of taxable capital in the United States 
        represented by the total assets held by personal social 
        security savings accounts established under part B of title II 
        of the Social Security Act:
                    (A) 80 percent of such total assets are a net 
                addition to national investments.
                    (B) Of the amount described in subparagraph (A), 90 
                percent will be invested in the United States and 
                subject to taxation under the Internal Revenue Code of 
                1986.
                    (C) Of the amount described in subparagraph (B), 95 
                percent will be subject to the Federal corporate tax.
                    (D) The amount described in subparagraph (C) is 
                subject to the statutory tax rate of 35 percent 
                (resulting in an effective corporate tax rate of 23.9 
                percent on the earnings of all such total assets).
    (b) Recapture of Government Savings Over Baseline.--
            (1) In general.--Section 201 of the Social Security Act (as 
        amended by subsection (a)) is amended further by adding at the 
        end the following new subsection:

            ``Recapture of Government Savings Over Baseline

    ``(p)(1) In general.--The Secretary of the Treasury, in 
consultation with the Personal Social Security Savings Board, shall 
estimate and transfer to the Federal Old-Age and Survivors Insurance 
Trust Fund within 3 months after the end of each fiscal year an amount 
equal to the spending reductions amount for such fiscal year. For 
purposes of the preceding sentence, the spending reductions amount 
shall be an amount equal to--
            ``(A) for any fiscal year in the period beginning with 
        fiscal year 2006 and ending with fiscal year 2013, the excess 
        of--
                    ``(i) 20 percent of the gross domestic product (as 
                determined by the Congressional Budget Office) for the 
                fiscal year for which the determination is made; over
                    ``(ii) the product of--
                            ``(I) 20 percent of the gross domestic 
                        product (as so determined) for the fiscal year 
                        for which the determination is made; and
                            ``(II) 0.99, factored a number of times 
                        equal to the number of fiscal years during such 
                        period which end with or before the fiscal year 
                        for which the determination is made; and
            ``(B) for any fiscal year beginning after fiscal year 2013 
        and ending with the termination year--
                    ``(i) the amount determined under subparagraph (A) 
                for fiscal year 2013; increased by
                    ``(ii) the rate of growth of the gross domestic 
                product (as so determined) over the period beginning 
                with fiscal year 2014 and ending with the fiscal year 
                for which the determination is made.
    ``(2) Accommodation for low oasdi balance ratio.--Notwithstanding 
paragraph (1)(B), in any case in which the OASDI trust fund ratio is 
less than 125 percent as of the end of the fiscal year preceding each 
fiscal year during any period of 1 or more fiscal years referred to in 
paragraph (1)(B) and preceding the termination year--
            ``(A) the spending reductions amount for each fiscal year 
        during such period shall be the excess of--
                    ``(i) 20 percent of the gross domestic product (as 
                projected by the Department of Commerce) for the fiscal 
                year for which the determination is made; over
                    ``(ii) the product of--
                            ``(I) 20 percent of the gross domestic 
                        product (as so projected) for the fiscal year 
                        for which the determination is made; and
                            ``(II) 0.99, factored a number of times 
                        equal to the number of fiscal years during such 
                        period which end with or before the fiscal year 
                        for which the determination is made plus the 
                        number of fiscal years during the period 
                        described in paragraph (1)(A), and
            ``(B) paragraph (1)(B) shall apply with respect to 
        subsequent fiscal years by substituting for the reference, in 
        paragraph (1)(B)(i), to fiscal year 2013 a reference to the 
        last fiscal year in such period.
    ``(3) Termination year.--For purposes of paragraph (1)(B), the 
`termination year' is the first fiscal year, after fiscal year 2013--
            ``(A) for which the OASDI trust fund ratio is at least 125 
        percent; and
            ``(B) on the last day of which there are no outstanding 
        transition obligations of the Self-Liquidating Social Security 
        Transition Fund under section 262.
    ``(4) OASDI trust fund ratio.--In paragraph (2)(A), the term `OASDI 
trust fund ratio' means, for a fiscal year, the ratio (expressed as a 
percentage) of--
            ``(A) the combined balance in the Federal Old-Age and 
        Survivors Insurance Trust Fund and the Federal Disability 
        Insurance Trust Fund, as of the last day of such fiscal year; 
        over
            ``(B) the amount estimated by the Commissioner of Social 
        Security to be the total amount to be paid from such Trust 
        Funds during the fiscal year following such fiscal year for all 
        purposes authorized by this section (excluding any transfer 
        payments between such Trust Funds and reducing the amount of 
        any transfer to the Railroad Retirement Account by the amount 
        of any transfers into either such Trust Fund from such 
        Account).''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply with respect to fiscal years beginning after 
        September 30, 2005.

SEC. 104. TAX TREATMENT OF ACCOUNTS.

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

          ``PART IX--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

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

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

    ``(a) General Rule.--The Social Security Personal Savings Fund and 
each Tier III Investment Option are exempt from taxation under this 
subtitle. Notwithstanding the preceding sentence, sums in a personal 
social security savings account which are attributable to a Tier III 
Option shall be subject to the taxes imposed by section 511 (relating 
to imposition of tax on unrelated business income of charitable, etc. 
organizations).
    ``(b) Distributions.--
            ``(1) In general.--Any qualified distribution from--
                    ``(A) amounts credited to a personal social 
                security savings account from the Social Security 
                Personal Savings Fund or attributable to a Tier III 
                Investment Option, or
                    ``(B) a personal social security savings annuity,
        shall not be included in the gross income of the distributee.
            ``(2) Qualified distribution.--For purposes of paragraph 
        (1), the term `qualified distribution' means a distribution 
        which meets the requirements of section 258 of the Social 
        Security Act and which is not a guaranty payment (as defined by 
        section 259 of such Act).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Personal social security savings account.--The term 
        `personal social security savings account' means an account 
        established under section 254(a) of the Social Security Act.
            ``(2) Personal social security savings annuity.--The term 
        `personal social security savings annuity' means an annuity 
        approved by the Personal Social Security Savings Board under 
        section 258(b)(3) of the Social Security Act.
            ``(3) Social security personal savings fund.--The term 
        `Social Security Personal Savings Fund' means the Savings Fund 
        established under section 252 of the Social Security Act.
            ``(4) Tier iii investment option.--The term `Tier III 
        Investment Option' has the meaning given such term by section 
        251(9) of the Social Security Act.
    ``(d) Estate Tax Treatment.--No amount shall be includible in the 
gross estate of any individual for purposes of chapter 11 by reason of 
an interest in the Tier I Investment Fund or the Tier II Investment 
Fund of the Savings Fund or held under a Tier III Investment Option and 
which is credited to the personal social security savings account of 
the individual.''.
            (2) Conforming amendment.--Section 86(d)(1)(A) of such Code 
        is amended by inserting ``part A of'' after ``under''.
            (3) Clerical amendment.--The table of parts for subchapter 
        F of chapter 1 of such Code is amended by adding after the item 
        relating to part VIII the following new item:

        ``Part IX. Personal Social Security Savings Program.''.

    (b) Guaranty Payments.--Paragraph (1) of section 86(d) of the 
Internal Revenue Act of 1986, as amended by subsection (b), is amended 
by striking ``or'' at the end of subparagraph (A), by striking the 
period and inserting ``, or'' at the end of subparagraph (B), and by 
adding at the end the following new subparagraph:
                    ``(C) a guaranty payment under section 259(a), and 
                a payment of an additional amount under section 259(c), 
                of the Social Security Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 105. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

    Part B of title II of the Social Security Act (as added by section 
101 of this Act) is amended by adding at the end the following new 
section:

``SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

    ``(a) Establishment.--There is hereby created on the books of the 
Treasury of the United States a trust fund to be known as the Self-
Liquidating Social Security Transition Fund (in this section referred 
to as the `Transition Fund').
    ``(b) Board of Trustees.--
            ``(1) Establishment.--With respect to the Transition Fund, 
        there is hereby created a body to be known as the Board of 
        Trustees of the Transition Fund (in this section referred to as 
        the `Board of Trustees') composed of the Commissioner of Social 
        Security, the Secretary of the Treasury, and the members of the 
        Personal Social Security Savings Board.
            ``(2) Duties.--The Board of Trustees shall--
                    ``(A) provide for the issuance of obligations by 
                the Transition Fund pursuant to subsection (c),
                    ``(B) provide for the receipt and management of 
                amounts paid into the Transition Fund pursuant to 
                subsection (d),
                    ``(C) use all funds paid into the Transition Fund 
                to redeem obligations issued under subsection (c) as 
                soon as practicable,
                    ``(D) report to Congress not later than the first 
                day of April of each year on the operation and status 
                of the Transition Fund during the preceding fiscal year 
                and on its expected operation and status during the 
                current fiscal year and the next 2 fiscal years, and
                    ``(E) review the general policies followed in 
                managing the Transition Fund, and recommend changes in 
                such policies, including necessary changes in the 
                provisions of law which govern the way in which the 
                Transition Fund is to be managed.
            ``(3) Meetings.--The Board of Trustees shall meet not less 
        frequently than once each calendar year.
    ``(c) Issuance of Transition Fund Bonds.--
            ``(1) Issuance.--
                    ``(A) In general.--The purposes for which 
                obligations of the United States may be issued under 
                chapter 31 of title 31, United States Code, are hereby 
                extended to authorize the issuance at par of public-
                debt obligations by the Transition Fund.
                    ``(B) Required issuance.--Beginning on January 1, 
                2006, whenever any obligation held in the Federal Old-
                Age and Survivors Insurance Trust Fund or the Federal 
                Disability Insurance Trust Fund is repaid from the 
                general fund of the Treasury to either of such Trust 
                Funds, the Transition Fund shall issue an obligation 
                under this subsection in an amount equal to the amount 
                of interest and principal so repaid.
                    ``(C) Transfer of proceeds to general fund of the 
                treasury.--Proceeds from the issuance of any obligation 
                issued under this section shall be transferred to the 
                general fund of the Treasury.
                    ``(D) Accounting.--The debt owed on any obligation 
                issued under this section shall be considered to be 
                debt of the Transition Fund and shall be accounted for 
                in such manner.
            ``(2) Maturities and interest rate.--Such obligations 
        issued by the Transition Fund for purchase by the public shall 
        have maturities fixed with due regard for the needs of the 
        Transition Fund and shall bear interest at a rate equal to the 
        average market yield (computed by the Secretary of the Treasury 
        on the basis of market quotations as of the end of the calendar 
        month next preceding the date of such issue) on all marketable 
        interest-bearing obligations of the United States then forming 
        a part of the public debt which are not due or callable until 
        after the expiration of 4 years from the end of such calendar 
        month, except that where such average market yield is not a 
        multiple of one-eighth of 1 per centum, the rate of interest on 
        such obligations shall be the multiple of one-eighth of 1 per 
        centum nearest such market yield.
            ``(3) Repayment of obligations.--Obligations issued under 
        this subsection may be redeemed only by funds in the Transition 
        Fund.
    ``(d) Deposit of OASDI Trust Fund Surplus.--
            ``(1) In general.--There are appropriated to the Transition 
        Fund for the fiscal year beginning in 2030, and for each fiscal 
        year thereafter, out of any moneys in the Federal Old-Age and 
        Survivors Insurance Trust Fund, amounts equivalent to the OASDI 
        trust fund surplus (as defined in paragraph (2)) for the 
        preceding fiscal year.
            ``(2) Transfers based on estimates.--The amounts 
        appropriated by paragraph (1) shall be transferred from time to 
        time from the Federal Old-Age and Survivors Insurance Trust 
        Fund to the Transition Fund, such amounts to be determined on 
        the basis of estimates by the Commissioner of Social Security. 
        Proper adjustments shall be made in amounts subsequently 
        transferred to the extent prior estimates were in excess of or 
        were less than such surplus.
            ``(3) OASDI trust fund surplus defined.--In this section, 
        the term `OASDI trust fund surplus' for a fiscal year means the 
        dollar amount by which the Federal Old-Age and Survivors 
        Insurance Trust Fund could be reduced as of the end of such 
        fiscal year so as to result in an OASDI trust fund ratio (as 
        defined in section 201(p)(4)) for such fiscal year equal to 125 
        percent.
            ``(4) Rule of construction.--This section shall not be 
        construed to require redemption of obligations of the Trust 
        Fund for the purpose of making transfers to the Transition Fund 
        under this section or for any other purpose other than to 
        provide for payment of benefits under part A of title II of the 
        Social Security Act.
    ``(e) Redemption of Obligations Upon Deposit of Funds.--Obligations 
issued under subsection (c) may be redeemed only by funds in the 
Transition Fund. The Board of Trustees shall provide for the redemption 
of such obligations as soon as possible with funds deposited into the 
Transition Fund pursuant to subsection (d).
    ``(f) Sunset.--On the first date as of which all of the obligations 
issued under subsection (c) have been redeemed, any balance remaining 
in the Transition Fund as of such date shall be deposited in the 
Federal Old-Age and Survivors Insurance Trust Fund, the terms of the 
Board of Trustees shall end, the Transition Fund shall cease to exist, 
and this section shall be repealed.''.

SEC. 106. BUDGETARY TREATMENT OF SOCIAL SECURITY.

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

                ``budgetary treatment of social security

    ``Sec. 710. (a) In General.--Notwithstanding any other provision of 
law and except as provided in subsection (b), the receipts and 
disbursements of the Federal Old-Age and Survivors Insurance Trust 
Fund, the Federal Disability Insurance Trust Fund, the Social Security 
Personal Savings Fund, and the Self-Liquidating Social Security 
Transition Fund (including transfers to and from either such Trust Fund 
or such Savings Fund or such Transition Fund relating to the 
acquisition or redemption of obligations acquired by either such Trust 
Fund or such Savings Fund or such Transition Fund) and the taxes 
imposed under sections 1401 and 3101 of the Internal Revenue Code of 
1986 shall not be counted as new budget authority, outlays, receipts, 
or deficit or surplus for purposes of the budget of the Government as 
submitted by the President or the congressional budget or be reported 
as new budget authority, outlays, receipts, or deficit or surplus in 
any report of the Congressional Budget Office or any other agency or 
instrumentality of the Government
    ``(b) Matters Included in the Budget.--Subsection (a) shall not 
apply with respect to the following:
            ``(1) transfers from the general fund of the Treasury to 
        the Federal Old-Age and Survivors Insurance Trust Fund under 
        section 201(o) (relating to recapture of corporate tax on 
        account yields), which shall be treated as an expenditure of 
        the Government;
            ``(2) transfers from the general fund of the Treasury to 
        the Federal Old-Age and Survivors Insurance Trust Fund under 
        section 201(p) (relating to recapture of Government savings 
        over baseline), which shall be treated as an expenditure of the 
        Government;
            ``(3) transfers from the general fund of the Treasury to 
        the Federal Old-Age and Survivors Insurance Trust Fund or the 
        Federal Disability Insurance Trust Fund under section 121(e) of 
        the Social Security Amendments of 1983 (relating to 
        appropriation of amounts equivalent to taxes on social security 
        benefits) (42 U.S.C. 401 note), which shall be treated as an 
        expenditure of the Government; and
            ``(4) revenues from taxes imposed under chapter 1 of the 
        Internal Revenue Code of 1986, to the extent attributable to 
        section 86 of such Code (relating to taxation of social 
        security and tier 1 railroad retirement benefits), which shall 
        be treated as a receipt of the Government.''.
    (b) Conforming Amendments.--
            (1) Section 13301 of the Budget Enforcement Act of 1990 (2 
        U.S.C. 632; 2 U.S.C. 632 note) is repealed.
            (2) Section 405 of the Congressional Budget Act of 1974 (2 
        U.S.C. 655) is amended--
                    (A) by inserting ``other than section 710 of the 
                Social Security Act'' after ``Notwithstanding any other 
                provision of law''; and
                    (B) by striking ``section, not including'' and all 
                that follows through ``Funds,'' and inserting 
                ``section'' .
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to fiscal years beginning on or after October 1, 
2005.

SEC. 107. DEDICATION OF BUDGET SURPLUSES TO SAVING SOCIAL SECURITY.

    (a) In General.--Section 201 of the Social Security Act (as amended 
by section 103 of this Act) is amended further by adding at the end the 
following new subsection:

           ``Transfer of Total Budget Surpluses to Trust Fund

    ``(q) In the case of any fiscal year for which the total amount 
treated as income of the Federal Government in the total budget of the 
United States have exceeded the total amount treated as expenditures of 
the Federal Government in the total budget of the United States (as 
determined by the Director of the Office of Management and Budget 
without regard to section 710), not later than 3 months after the end 
of such fiscal year, the Secretary of the Treasury shall transfer from 
the general fund of the Treasury to the Federal Old-Age and Survivors 
Insurance Trust Fund an amount equal to the lesser of--
            ``(1) the total amount transferred from the Trust Fund 
        during such fiscal year to the Social Security Personal Savings 
        Fund under section 252(b) (relating to deposit of amounts equal 
        to redirected social security contributions), or
            ``(2) the amount by which such total amount treated as 
        receipts exceeded such total amount treated as expenditures.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning after September 30, 2005.

SEC. 108. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DISABILITY 
              INSURANCE PROGRAM AND THE PERSONAL SOCIAL SECURITY 
              SAVINGS PROGRAM.

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

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

                   ``Social Security Lockbox Budget.

    ``Sec. 706. (a) At the time of the transmittal to the Congress by 
the President of the budget of the United States Government, the 
President shall transmit to each House of the Congress a separate 
report (to be known as the `Social Security Lockbox Budget') detailing 
the performance during the preceding fiscal year of each of the 
accounts established under subsection (b). Such report shall set forth, 
as determined as of the end of the year--
            ``(1) the amount of the balance of each account,
            ``(2) the amount of the total charges and the amount of the 
        total credits to each account for the year, and
            ``(3) the amount of the total for the year of each category 
        of charges and credits itemized in subsection (b).

                      ``Establishment of Accounts

    ``(b) For purposes of accounting for certain receipts and 
disbursement of the Treasury of the United States in connection with 
the Old-Age, Survivors, and Disability Insurance Program under part A 
of title II of the Social Security Act and the Individual Social 
Security Investment Program under part B of such title, the Secretary 
of the Treasury shall establish and maintain a Social Security Part A 
Account, a Social Security Part B Account, and a Self-Liquidating 
Social Security Transition Fund Account.

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

    ``(c)(1) For each fiscal year, the Social Security Part A Account 
shall be credited with the sum of--
            ``(A) all receipts during the year by the Federal Old-Age 
        and Survivors Insurance Trust Fund and the Federal Disability 
        Insurance Trust Fund under section 201 (including amounts 
        received as interest on notes and obligations purchased by the 
        Trust Funds under section 201(d) of such Act, and excluding 
        amounts received in redemption of such notes and obligations 
        and amounts received by either such Trust Fund as transfers 
        from the other such Trust Fund), and
            ``(B) all receipts during the year by the Federal Old-Age 
        and Survivors Insurance Trust Fund and the Federal Disability 
        Insurance Trust Fund under section 121(e) of the Social 
        Security Amendments of 1983 (relating to appropriation of 
        amounts equivalent to taxes on social security benefits) (42 
        U.S.C. 401 note).
    ``(2) For each fiscal year, the Social Security Part A Account 
shall be charged with the sum of--
            ``(A) all benefits paid during the year from the Federal 
        Old-Age and Survivors Insurance Trust Fund and the Federal 
        Disability Insurance Trust Fund under part A of title II of the 
        Social Security Act,
            ``(B) all redirected social security contributions 
        transferred during the year to the Social Security Personal 
        Savings Fund under section 252(b),
            ``(C) all other expenditures during the year from the Trust 
        Funds under part A of title II (excluding amounts expended as 
        transfers by either such Trust Fund to the other such Trust 
        Fund and amounts paid for the purchase of notes and obligations 
        under section 201(d)), and
            ``(D) all transfers from the Federal Old-Age and Survivors 
        Insurance Trust Fund to the Self-Liquidating Social Security 
        Transition Fund under section 262(d).

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

    ``(d)(1) For each fiscal year, the Social Security Part B Account 
shall be credited with--
            ``(A) all redirected social security contributions 
        transferred during the year to the Personal Social Security 
        Savings Fund under section 252(b) of the Social Security Act, 
        and
            ``(B) any net increase in the Tier I Investment Fund 
        attributable to investment for the fiscal year, any net 
        increase in the Tier II Investment Fund attributable to 
        investment for the fiscal year, and the total amount of any net 
        increases in Tier III Investment Options attributable to 
        investment for the fiscal year.
    ``(2) For each fiscal year, the Social Security Part B Account 
shall be charged with--
            ``(A) all administrative costs incurred for the fiscal year 
        with respect to the Tier I Investment Fund, the Tier II 
        Investment Fund, and the Tier III Investment Options,
            ``(B) any net decrease in the Tier I Investment Fund 
        attributable to investment for the fiscal year, any net 
        decrease in the Tier II Investment Fund attributable to 
        investment for the fiscal year, and the total amount of any net 
        decreases in Tier III Investment Options attributable to 
        investment for the fiscal year, and
            ``(C) annuity payments made during the year under section 
        258 from the Annuity Reserve Account in the Savings Fund.

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

    ``(e)(1) For each fiscal year, the Self-Liquidating Social Security 
Transition Account shall be credited with--
            ``(A) all transfers to the Transition Fund from the Federal 
        Old-Age and Survivors Insurance Trust Fund under section 
        262(b), and
            ``(B) all amounts expended during the fiscal year from the 
        Trust Funds in the redemption under section 262(e) of 
        obligations issued by the Transition fund under section 262(c).
    ``(2) For each fiscal year, the Self-Liquidating Social Security 
Transition Fund Account shall be charged with the total amount of 
obligations issued during the fiscal year by the Transition Fund under 
section 262(c)''.

SEC. 109. REDUCTION OF FICA RATES RESULTING FROM PERSONAL SOCIAL 
              SECURITY SAVINGS PROGRAM.

    (a) Employee Contribution.--Section 3101 of the Internal Revenue 
Code of 1986 (relating to tax on employees) is amended by adding at the 
end the following new subsection:
    ``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax 
Rate.--
            ``(1) In general.--In any year which follows a reduction 
        year and each year thereafter, the rate of tax imposed under 
        subsection (a) shall be reduced by the reduction percentage.
            ``(2) Reduction year.--For purposes of this section--
                    ``(A) In general.--The term `reduction year' means 
                any year after the transition year in which the OASDI 
                rate ratio exceeds 125 percent.
                    ``(B) Transition year.--The term `transition year' 
                means the first full calendar year following the 
                termination year (as defined in section 201(p)(3) of 
                the Social Security Act).
            ``(3) Reduction percentage.--For purposes of this section, 
        the term `reduction percentage' means the excess of--
                    ``(A) the rate in effect under subsection (a) for 
                the reduction year, over
                    ``(B) the rate (rounded up to the nearest one tenth 
                of a percent) under which the OASDI rate ratio for the 
                reduction year would have been 125 percent if--
                            ``(i) such rate had been applicable under 
                        subsection (a) and section 3111(a) during such 
                        year, and
                            ``(ii) the rate under section 1401(a) 
                        during such year were twice such rate.
            ``(4) OASDI rate ratio.--The term `OASDI rate ratio' means, 
        with respect to any calendar year, the ratio--
                    ``(A) the numerator of which is the combined 
                balance in the Old-Age and Survivors Insurance Trust 
                Fund and the Federal Disability Insurance Trust Fund, 
                as of the last day of such calendar year, and
                    ``(B) the denominator of which is the amount paid 
                from such Trust Funds during such calendar year for all 
                purposes authorized by section 201 of the Social 
                Security Act (excluding any transfer payments between 
                such Trust Funds and reducing the amount of any 
                transfer to the Railroad Retirement Account by the 
                amount of any transfers into either such Trust Fund 
                from such Account).
            ``(5) Limitation on reduction.--Paragraph (1) shall not 
        apply to any reduction to the extent that such reduction would 
        cause the rate of tax imposed under subsection (a) to be less 
        than 4.95 percent.''.
    (b) Employer Contribution.--Section 3111 of the Internal Revenue 
Code of 1986 (relating to tax on employers) is amended by adding at the 
end the following new subsection:
    ``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax 
Rate.--
            ``(1) In general.--In any year which follows a reduction 
        year and each year thereafter, the rate of tax imposed under 
        subsection (a) shall be reduced by the reduction percentage.
            ``(2) Reduction year; reduction percentage.--For purposes 
        of this section, the terms `reduction year' and `reduction 
        percentage' have the meanings given such terms by section 
        3101(d).
            ``(3) Limitation on reduction.--Paragraph (1) shall not 
        apply to any reduction to the extent that such reduction would 
        cause the rate of tax imposed under subsection (a) to be less 
        than 4.95 percent.''.
    (c) Self-Employment Contribution.--Section 1401 of the Internal 
Revenue Code of 1986 (relating to tax on self-employment income) is 
amended by adding at the end the following new subsection:
    ``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax 
Rate.--
            ``(1) In general.--In any year which follows a reduction 
        year and each year thereafter, the rate of tax imposed under 
        subsection (a) shall be reduced by the reduction percentage.
            ``(2) Reduction year; reduction percentage.--For purposes 
        of this section, the terms `reduction year' and `reduction 
        percentage' have the meanings given such terms by section 
        3101(d).
            ``(3) Limitation on reduction.--Paragraph (1) shall not 
        apply to any reduction to the extent that such reduction would 
        cause the rate of tax imposed under subsection (a) to be less 
        than 9.9 percent.''.

             TITLE II--PUTTING A LID ON THE FEDERAL BUDGET

   Subtitle A--Spending Safeguards on the Growth of Entitlements and 
                              Mandatories

SEC. 201. SPENDING CAPS ON GROWTH OF ENTITLEMENTS AND MANDATORIES.

    (a) Control of Entitlements and Mandatories.--The Balanced Budget 
and Emergency Deficit Control Act of 1985 is amended by adding after 
section 252 the following new section:

``SEC. 252A. ENFORCING CONTROLS ON DIRECT SPENDING.

    ``(a) Cap on Growth of Entitlements.--Effective for fiscal year 
2007 and for each ensuing fiscal year, the total level of direct 
spending for all direct spending programs, projects, and activities 
(excluding social security) for any such fiscal year shall not exceed 
the total level of spending for all such programs, projects, and 
activities for the previous fiscal year after the direct spending for 
each such program, project, or activity is increased by the higher of 
the change in the Consumer Price Index for All Urban Consumers or the 
inflator (if any) applicable to that program, project, or activity and 
the growth in eligible population for such, project, or activity.
    ``(b) Sequestration.--Within 15 days after Congress adjourns to end 
a session (other than of the second session of the One Hundred Ninth 
Congress), and on the same day as a sequestration (if any) under 
section 251, there shall be a sequestration to reduce the amount of 
direct spending for the fiscal year beginning in the year the Congress 
adjourns by any amount necessary to reduce such spending to the level 
set forth in subsection (a) unless that amount is less than 
$250,000,000.
    ``(c) Uniform Reductions; Limitations.--The amount required to be 
sequestered for the fiscal year under subsection (a) shall be obtained 
from nonexempt direct spending accounts by actions taken in the 
following order:
            ``(1) First.--The reductions in the programs specified in 
        section 255(a) (National Wool Act and special milk), section 
        255(b) (student loans), and section 255(c) (foster care and 
        adoption assistance) shall be made.
            ``(2) Second.--Any additional reductions that may be 
        required shall be achieved by reducing each remaining nonexempt 
        direct spending account by the uniform percentage necessary to 
        achieve those additional reductions, except that--
                    ``(A) the low-income programs specified in section 
                255(d) shall not be reduced by more than 2 percent;
                    ``(B) the retirement and veterans benefits 
                specified in sections 255(f), (g), and (h) shall not be 
                reduced by more than 2 percent in the manner specified 
                in that section; and
                    ``(C) the medicare programs shall not be reduced by 
                more than 2 percent in the manner specified in section 
                255(i).
        The limitations set forth in subparagraphs (A), (B), and (C) 
        shall be applied iteratively, and after each iteration the 
        uniform percentage applicable to all other programs under this 
        paragraph shall be increased (if necessary) to a level 
        sufficient to achieve the reductions required by this 
        paragraph.
    ``(d) Exclusion of Medicare Prescription Drug Program Until Fully 
Operational.--For purposes of this section with respect to the 
limitation under subsection (a) for a fiscal year before fiscal year 
2008, direct spending programs and direct spending shall not be 
construed to include part D of title XVIII of the Social Security Act 
(or spending under part C of such title that is attributable to such 
part D).''.
    (b) Table of Contents Amendment.--The table of contents set forth 
in 250(c) of the Balanced Budget and Emergency Deficit Control Act of 
1985 is amended by adding after the item relating to section 252 the 
following new item:

``Sec. 252A. Enforcing controls on direct spending.''.

SEC. 202. EXEMPT PROGRAMS AND ACTIVITIES.

    Section 255 of the Balanced Budget and Emergency Deficit Control 
Act of 1985 is amended to read as follows:

``SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES.

    ``(a) Social Security Benefits; Tier I Railroad Retirement 
Benefits; and Certain Medicare Benefits.--(1) Benefits payable under 
the old-age, survivors, and disability insurance program established 
under title II of the Social Security Act, and benefits payable under 
section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retirement Act of 
1974, shall be exempt from reduction under any order issued under this 
part.
    ``(2) Payments made under part A of title XVIII (relating to part A 
medicare hospital insurance benefits) of the Social Security Act and 
payments made under part C of such title (relating to the Medicare 
Advantage program) insofar as they are attributable to part A of such 
title shall be exempt from reduction under any order issued under this 
part.
    ``(b) Descriptions and Lists.--The following budget accounts or 
activities shall be exempt from sequestration:
            ``(1) net interest;
            ``(2) all payments to trust funds from excise taxes or 
        other receipts or collections properly creditable to those 
        trust funds;
            ``(3) all payments from one Federal direct spending budget 
        account to another Federal budget account; and all 
        intragovernmental funds including those from which funding is 
        derived primarily from other Government accounts, except to the 
        extent that such funds are augmented by direct appropriations 
        for the fiscal year for which the order is in effect;
            ``(4) activities resulting from private donations, 
        bequests, or voluntary contributions to the Government;
            ``(5) payments from any revolving fund or trust-revolving 
        fund (or similar activity) that provides deposit insurance or 
        other Government insurance, Government guarantees, or any other 
        form of contingent liability, to the extent those payments 
        result from contractual or other legally binding commitments of 
        the Government at the time of any sequestration;
            ``(6) credit liquidating and financing accounts;
            ``(7) the following accounts, which largely fulfill 
        requirements of the Constitution or otherwise make payments to 
        which the Government is committed:
            ``Administration of Territories, Northern Mariana Islands 
        Covenant grants (14-0412-0-1-806);
            ``Armed Forces Retirement Home Trust Fund, payment of 
        claims (84-8930-0-7-705);
            ``Bureau of Indian Affairs, miscellaneous payments to 
        Indians (14-2303-0-1-452);
            ``Bureau of Indian Affairs, miscellaneous trust funds, 
        tribal trust funds (14-9973-0-7-999);
            ``Claims, defense;
            ``Claims, judgments, and relief act (20-1895-0-1-806);
            ``Compact of Free Association, economic assistance pursuant 
        to Public Law 99-658 (14-0415-0-1-806);
            ``Compensation of the President (11-0001-0-1-802);
            ``Customs Service, miscellaneous permanent appropriations 
        (20-9992-0-2-852);
            ``Eastern Indian land claims settlement fund (14-2202-0-1-
        806);
            ``Farm Credit Administration, Limitation on Administration 
        Expenses (78-4131-0-3-351);
            ``Farm Credit System Financial Assistance Corporation, 
        interest payments (20-1850-0-1-351);
            ``Internal Revenue collections of Puerto Rico (20-5737-0-2-
        852);
            ``Panama Canal Commission, operating expenses and capital 
        outlay (95-5190-0-2-403);
            ``Payments of Vietnam and USS Pueblo prisoner-of-war claims 
        (15-0104-0-1-153);
            ``Payments to copyright owners (03-5175-0-2-376);
            ``Payments to health care trust funds (75-0580-0-1-571);
            ``Payments to social security trust funds (75-0404-0-1-
        651);
            ``Payments to the United States territories, fiscal 
        assistance (14-0418-0-1-801);
            ``Payments to widows and heirs of deceased Members of 
        Congress (00-0215-0-1-801);
            ``Pension Benefit Guaranty Corporation Fund (16-4204-0-3-
        601);
            ``Salaries of Article III judges;
            ``Washington Metropolitan Area Transit Authority, interest 
        payments (46-0300-0-1-401);
            ``(8) the following noncredit special, revolving, or trust-
        revolving funds:
            ``Coinage profit fund (20-5811-0-2-803);
            ``Comptroller of the Currency;
            ``Director of the Office of Thrift Supervision;
            ``Exchange Stabilization Fund (20-4444-0-3-155);
            ``Federal Housing Finance Board;
            ``Foreign Military Sales trust fund (11-82232-0-7-155);
            ``National Credit Union Administration, central liquidating 
        facility (25-4470-0-3-373);
            ``National Credit Union Administration, credit union 
        insurance fund (25-4468-0-3-373);
            ``National Credit Union Administration operating fund (25-
        4056-0-3-373); and
            ``Resolution Trust Corporation Revolving Fund (22-4055-0-3-
        373);
            ``(9) Thrift Savings Fund;
            ``(10) appropriations for the District of Columbia to the 
        extent they are appropriations of locally raised funds;
            ``(11)(A) any amount paid as regular unemployment 
        compensation by a State from its account in the Unemployment 
        Trust Fund (established by section 904(a) of the Social 
        Security Act);
            ``(B) any advance made to a State from the Federal 
        unemployment account (established by section 904(g) of such 
        Act) under title XII of such Act and any advance appropriated 
        to the Federal unemployment account pursuant to section 1203 of 
        such Act; and
            ``(C) any payment made from the Federal Employees 
        Compensation Account (as established under section 909 of such 
        Act) for the purpose of carrying out chapter 85 of title 5, 
        United States Code, and funds appropriated or transferred to or 
        otherwise deposited in such Account; and
            ``(12)(A) FDIC, Bank Insurance Fund (51-4064-0-3-373);
            ``(B) FDIC, FSLIC Resolution Fund (51-4065-0-3-373); and
            ``(C) FDIC, Savings Association Insurance Fund (51-4066-0-
        3-373).
    ``(c) Federal Retirement and Disability Accounts.--The following 
Federal retirement and disability accounts shall be exempt from 
reduction under any order issued under this part:
    ``Civil service retirement and disability fund (24-8135-0-7-602).
    ``Black Lung Disability Trust Fund (20-8144-0-7-601).
    ``Foreign Service Retirement and Disability Fund (19-8186-0-7-602).
    ``District of Columbia Judicial Retirement and Survivors Annuity 
Fund (20-8212-0-7-602).
    ``Judicial Survivors' Annuities Fund (10-8110-0-7-602).
    ``Payments to the Railroad Retirement Accounts (60-0113-0-1-601).
    ``Tax Court Judges Survivors Annuity Fund (23-8115-0-7-602).
    ``Employees Life Insurance Fund (24-8424-0-8-602).
    ``(d) Federal Administrative Expenses.--
            ``(1) Notwithstanding any provision of law other than 
        paragraph (3), administrative expenses incurred by the 
        departments and agencies, including independent agencies, of 
        the Government in connection with any program, project, 
        activity, or account shall be subject to reduction pursuant to 
        any sequestration order, without regard to any exemption, 
        exception, limitation, or special rule otherwise applicable 
        with respect to such program, project, activity, or account, 
        and regardless of whether the program, project, activity, or 
        account is self-supporting and does not receive appropriations.
            ``(2) Payments made by the Government to reimburse or match 
        administrative costs incurred by a State or political 
        subdivision under or in connection with any program, project, 
        activity, or account shall not be considered administrative 
        expenses of the Government for purposes of this section, and 
        shall be subject to sequestration to the extent (and only to 
        the extent) that other payments made by the Government under or 
        in connection with that program, project, activity, or account 
        are subject to that reduction or sequestration; except that 
        Federal payments made to a State as reimbursement of 
        administrative costs incurred by that State under or in 
        connection with the unemployment compensation programs 
        specified in subsection (a)(11) shall be subject to reduction 
        or sequestration under this part notwithstanding the exemption 
        otherwise granted to such programs under that subsection.
            ``(3) Notwithstanding any other provision of law, the 
        administrative expenses of the following programs shall be 
        exempt from sequestration:
                    ``(A) Comptroller of the Currency.
                    ``(B) Federal Deposit Insurance Corporation.
                    ``(C) Office of Thrift Supervision.
                    ``(D) National Credit Union Administration.
                    ``(E) National Credit Union Administration, central 
                liquidity facility.
                    ``(F) Federal Retirement Thrift Investment Board.
                    ``(G) Resolution Funding Corporation.
                    ``(H) Resolution Trust Corporation.
                    ``(I) Board of Governors of the Federal Reserve 
                System.
    ``(e) Veterans' Programs.--The following programs shall be exempt 
from reduction under any order issued under this part:
    ``General Post Funds (36-8180-0-7-705).
    ``Veterans Insurance and Indemnities (36-0120-0-1-701).
    ``Service-Disabled Veterans Insurance Funds (36-4012-0-3-701).
    ``Veterans Reopened Insurance Fund (36-4010-0-3-701).
    ``Servicemembers' Group Life Insurance Fund (36-4009-0-3-701).
    ``Post-Vietnam Era Veterans Education Account (36-8133-0-7-702).
    ``National Service Life Insurance Fund (36-8132-0-7-701).
    ``United States Government Life Insurance Fund (36-8150-0-7-701).
    ``Veterans Special Life Insurance Fund (36-8455-0-8-701).
    ``(f) Optional Exemption of Defense and Homeland Security 
Accounts.--
            ``(1) In general.--The President may, with respect to any 
        defense or homeland security account, exempt that account from 
        sequestration or provide for a lower uniform percentage 
        reduction than would otherwise apply.
            ``(2) Limitation.--The President may not use the authority 
        provided by paragraph (1) unless the President notifies the 
        Congress of the manner in which such authority will be 
        exercised on or before the date specified in section 254(a) for 
        the budget year.''.

SEC. 203. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.

    (a) In General.--Section 256 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended to read as follows:

``SEC. 256. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.

    ``(a) National Wool Act and the Special Milk Program.--Automatic 
spending increases are increases in outlays due to changes in indexes 
in the following programs:
            ``(1) National Wool Act; and
            ``(2) Special milk program.
In those programs all amounts other than the automatic spending 
increases shall be exempt from reduction under any sequestration order.
    ``(b) Student Loans.--For all student loans under part B or D of 
title IV of the Higher Education Act of 1965 made during the period 
when a sequestration order under section 254 is in effect as required 
by section 252 or 253, origination fees under sections 438(c)(2) and 
455(c) of that Act shall each be increased by 0.50 percentage point.
    ``(c) Foster Care and Adoption Assistance Programs.--Any 
sequestration order shall make the reduction otherwise required under 
the foster care and adoption assistance programs (established by part E 
of title IV of the Social Security Act) only with respect to payments 
and expenditures made by States in which increases in foster care 
maintenance payment rates or adoption assistance payment rates (or 
both) are to take effect during the fiscal year involved, and only to 
the extent that the required reduction can be accomplished by applying 
a uniform percentage reduction to the Federal matching payments that 
each such State would otherwise receive under section 474 of that Act 
(for such fiscal year) for that portion of the State's payments 
attributable to the increases taking effect during that year. No 
State's matching payments from the Government for foster care 
maintenance payments or for adoption assistance maintenance payments 
may be reduced by a percentage exceeding the applicable domestic 
sequestration percentage. No State may, after the date of the enactment 
of this Act, make any change in the timetable for making payments under 
a State plan approved under part E of title IV of the Social Security 
Act which has the effect of changing the fiscal year in which 
expenditures under such part are made.
    ``(d) Low-Income Programs.--(1) Benefit payments or payments to 
States or other entities for the programs listed in paragraph (2) shall 
not be reduced by more than 2 percent under any sequestration order. 
When reduced under an end-of-session sequestration order, those benefit 
reductions shall occur starting with the payment made at the start of 
January. When reduced under a within-session sequestration order, those 
benefit reductions shall occur starting with the next periodic payment.
    ``(2) The programs referred to in paragraph (1) are the following:
    ``Child Nutrition (12-3539-0-1-605).
    ``Food Stamp Programs (12-3505-0-1-605).
    ``Grants to States for Medicaid (75-0512-0-1-551).
    ``State Children's Health Insurance Fund (75-0515-0-1-551).
    ``Supplemental Security Income Program (75-0406-0-1-609).
    ``Temporary Assistance for Needy Families (75-1552-0-1-609).
    ``Special supplemental nutrition program for women, infants, and 
children (WIC) (12-3510-0-1-605).
    ``(e) Veterans' Medical Care.--The maximum permissible reduction in 
budget authority for Veterans' medical care (36-0160-0-1-703) for any 
fiscal year, pursuant to an order issued under section 254, shall be 2 
percent.
    ``(f) Federal Retirement Programs.--
            ``(1) For each of the programs listed in paragraph (2) and 
        except as provided in paragraph (3), monthly (or other 
        periodic) benefit payments shall be reduced by the uniform 
        percentage applicable to direct spending sequestrations for 
        such programs, which shall in no case exceed 2 percent under 
        any sequestration order. When reduced under an end-of-session 
        sequestration order, those benefit reductions shall occur 
        starting with the payment made at the start of January or 7 
        weeks after the order is issued, whichever is later. When 
        reduced under a within-session sequestration order, those 
        benefit reductions shall occur starting with the next periodic 
        payment.
            ``(2) The programs subject to paragraph (1) are:
            ``Central Intelligence Agency Retirement and Disability 
        Fund (56-3400-0-1-054).
            ``Comptrollers General Retirement System (05-0107-0-1-
        801)Payments to the Foreign Service Retirement and Disability 
        Fund (72-1036-0-1-153).
            ``Judicial Officer' Retirement Fund (10-8122-0-7-602).
            ``Claims Judges' Retirement Fund (10-8124-0-7-602).
            ``Pensions for former Presidents (47-0105-0-1-802).
            ``National Oceanic and Atmospheric Administration 
        Retirement (13-1450-0-1-306).
            ``Railroad Industry Pension Fund (60-8011-0-7-601).
            ``Retired pay, Coast Guard (70-0602-0-1-403).
            ``Retirement pay and medical benefits for commissioned 
        officers, Public Health Service (75-0379-0-1-551).
            ``Payments to Civil Service Retirement and Disability Fund 
        (24-0200-0-1-805).
            ``Payments to the Foreign Service Retirement and Disability 
        Fund (72-1036-0-1-153).
            ``Payments to Judiciary Trust Funds (10-0941-0-1-752).
    ``(g) Veterans Programs.--To achieve the total percentage reduction 
required by any order issued under this part, the percentage reduction 
that shall apply to payments under the following programs shall in no 
event exceed 2 percent:
    ``Canteen Service Revolving Fund (36-4014-0-3-705).
    ``Medical Center Research Organizations (36-4026-0-3-703).
    ``Disability Compensation Benefits (36-0102-0-1-701).
    ``Education Benefits (36-0137-0-1-702).
    ``Vocational Rehabilitation and Employment Benefits (36-0135-0-1-
702).
    ``Pensions Benefits (36-0154-0-1-701).
    ``Burial Benefits (36-0139-0-1-701).
    ``Guaranteed Transitional Housing Loans For Homeless Veterans 
Program Account (36-1119-0-1-704).
    ``Housing Direct Loan Financing Account (36-4127-0-1-704).
    ``Housing Guaranteed Loan Financing Account (36-4129-0-3-704).
    ``Vocational Rehabilitation and Education Direct Loan Financing 
Account (36-4259-0-3-702).
    ``(h) Military Health and Retirement.--To achieve the total 
percentage reduction in military retirement required by any order 
issued under this part, the percentage reduction that shall apply to 
payments under the Military retirement fund (97-8097-0-7-602), payments 
to the military retirement fund (97-0040-0-1-054), and the Defense 
Health Program (97-0130-0-1-051) shall in no event exceed 2 percent.
    ``(i) Medicare Program.--
            ``(1) Calculation of reduction in individual payment 
        amounts.--To achieve the total percentage reduction in those 
        programs required by any order issued under this part, the 
        percentage reduction that shall apply to payments under the 
        health insurance programs under title XVIII of the Social 
        Security Act (other than payments described in section 
        255(a)(2)) that are subject to such order for services 
        furnished after any sequestration order is issued shall be such 
        that the reduction made in payments under that order shall 
        achieve the required total percentage reduction in those 
        payments for that fiscal year as determined on a 12-month 
        basis. However, the percentage reduction under any such program 
        shall in no case exceed 2 percent under any sequestration 
        order.
            ``(2) Timing of application of reductions.--If a reduction 
        is made under paragraph (1) in payment amounts pursuant to a 
        sequestration order, the reduction shall be applied to payment 
        for services furnished after the effective date of the order.
            ``(3) No increase in beneficiary charges in assignment-
        related cases.--If a reduction in payment amounts is made under 
        paragraph (1) for services for which payment under part B of 
        title XVIII of the Social Security Act is made on the basis of 
        an assignment described in section 1842(b)(3)(B)(ii), in 
        accordance with section 1842(b)(6)(B), or under the procedure 
        described in section 1870(f)(1) of such Act, the person 
        furnishing the services shall be considered to have accepted 
        payment of the reasonable charge for the services, less any 
        reduction in payment amount made pursuant to a sequestration 
        order, as payment in full.
            ``(4) Application to parts c and d.--The reductions 
        otherwise required under parts C and D of title XVIII of the 
        Social Security Act with respect to a fiscal year shall be 
        applied to the calendar year that begins after the end of the 
        fiscal year to which the applicable sequestration order 
        applies.
    ``(j) Federal Pay.--
            ``(1) In general.--For purposes of any order issued under 
        section 254, new budget authority to pay Federal personnel 
        shall be reduced by the applicable uniform percentage, but no 
        sequestration order may reduce or have the effect of reducing 
        the rate of pay to which any individual is entitled under any 
        statutory pay system (as increased by any amount payable under 
        section 5304 of title 5, United States Code, or section 302 of 
        the Federal Employees Pay Comparability Act of 1990) or the 
        rate of any element of military pay to which any individual is 
        entitled under title 37, United States Code, or any increase in 
        rates of pay which is scheduled to take effect under section 
        5303 of title 5, United States Code, section 1009 of title 37, 
        United States Code, or any other provision of law.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) The term `statutory pay system' shall have 
                the meaning given that term in section 5302(1) of title 
                5, United States Code.
                    ``(B) The term `elements of military pay' means--
                            ``(i) the elements of compensation of 
                        members of the uniformed services specified in 
                        section 1009 of title 37, United States Code,
                            ``(ii) allowances provided members of the 
                        uniformed services under sections 403a and 405 
                        of such title, and
                            ``(iii) cadet pay and midshipman pay under 
                        section 203(c) of such title.
                    ``(C) The term `uniformed services' shall have the 
                meaning given that term in section 101(3) of title 37, 
                United States Code.
    ``(k) Child Support Enforcement Program.--Any sequestration order 
shall accomplish the full amount of any required reduction in 
expenditures under sections 455 and 458 of the Social Security Act by 
reducing the Federal matching rate for State administrative costs under 
such program, as specified (for the fiscal year involved) in section 
455(a) of such Act, to the extent necessary to reduce such expenditures 
by that amount.
    ``(l) Extended Unemployment Compensation.--(1) A State may reduce 
each weekly benefit payment made under the Federal-State Extended 
Unemployment Compensation Act of 1970 for any week of unemployment 
occurring during any period with respect to which payments are reduced 
under an order issued under this title by a percentage not to exceed 
the percentage by which the Federal payment to the State under section 
204 of such Act is to be reduced for such week as a result of such 
order.
    ``(2) A reduction by a State in accordance with subparagraph (A) 
shall not be considered as a failure to fulfill the requirements of 
section 3304(a)(11) of the Internal Revenue Code of 1954.
    ``(m) Commodity Credit Corporation.--
            ``(1) Powers and authorities of the commodity credit 
        corporation.--This title shall not restrict the Commodity 
        Credit Corporation in the discharge of its authority and 
        responsibility as a corporation to buy and sell commodities in 
        world trade, to use the proceeds as a revolving fund to meet 
        other obligations and otherwise operate as a corporation, the 
        purpose for which it was created.
            ``(2) Reduction in payments made under contracts.--(A) 
        Payments and loan eligibility under any contract entered into 
        with a person by the Commodity Credit Corporation prior to the 
        time any sequestration order has been issued shall not be 
        reduced by an order subsequently issued. Subject to 
        subparagraph (B), after any sequestration order is issued for a 
        fiscal year, any cash payments made by the Commodity Credit 
        Corporation--
                    ``(i) under the terms of any one-year contract 
                entered into in or after such fiscal year and after the 
                issuance of the order; and
                    ``(ii) out of an entitlement account, to any person 
                (including any producer, lender, or guarantee entity) 
                shall be subject to reduction under the order.
            ``(B) Each contract entered into with producers or producer 
        cooperatives with respect to a particular crop of a commodity 
        and subject to reduction under subparagraph (A) shall be 
        reduced in accordance with the same terms and conditions. If 
        some, but not all, contracts applicable to a crop of a 
        commodity have been entered into prior to the issuance of any 
        sequestration order, the order shall provide that the necessary 
        reduction in payments under contracts applicable to the 
        commodity be uniformly applied to all contracts for succeeding 
        crops of the commodity, under the authority provided in 
        paragraph (3).
            ``(3) Delayed reduction in outlays permissible.--
        Notwithstanding any other provision of this title, if any 
        sequestration order is issued with respect to a fiscal year, 
        any reduction under the order applicable to contracts described 
        in paragraph (2) may provide for reductions in outlays for the 
        account involved to occur in the fiscal years following the 
        fiscal year to which the order applies.
            ``(4) Uniform percentage rate of reduction and other 
        limitations.--All reductions described in paragraph (2) that 
        are required to be made in connection with any sequestration 
        order with respect to a fiscal year--
                    ``(A) shall be made so as to ensure that outlays 
                for each program, project, activity, or account 
                involved are reduced by a percentage rate that is 
                uniform for all such programs, projects, activities, 
                and accounts, and may not be made so as to achieve a 
                percentage rate of reduction in any such item exceeding 
                the rate specified in the order; and
                    ``(B) with respect to commodity price support and 
                income protection programs, shall be made in such 
                manner and under such procedures as will attempt to 
                ensure that--
                            ``(i) uncertainty as to the scope of 
                        benefits under any such program is minimized;
                            ``(ii) any instability in market prices for 
                        agricultural commodities resulting from the 
                        reduction is minimized; and
                            ``(iii) normal production and marketing 
                        relationships among agricultural commodities 
                        (including both contract and non-contract 
                        commodities) are not distorted.
                In meeting the criterion set out in clause (iii) of 
                subparagraph (B) of the preceding sentence, the 
                President shall take into consideration that reductions 
                under an order may apply to programs for two or more 
                agricultural commodities that use the same type of 
                production or marketing resources or that are 
                alternative commodities among which a producer could 
                choose in making annual production decisions.
            ``(5) Certain authority not to be limited.--Nothing in this 
        title shall limit or reduce in any way any appropriation that 
        provides the Commodity Credit Corporation with funds to cover 
        the Corporation's net realized losses.
    ``(n) Postal Service Fund.--Notwithstanding any other provision of 
law, any sequestration of the Postal Service Fund shall be accomplished 
by a payment from that Fund to the General Fund of the Treasury, and 
the Postmaster General of the United States shall make the full amount 
of that payment during the fiscal year to which the presidential 
sequestration order applies.
    ``(o) Effects of Sequestration.--The effects of sequestration shall 
be as follows:
            ``(1) Budgetary resources sequestered from any account 
        other than an entitlement trust, special, or revolving fund 
        account shall revert to the Treasury and be permanently 
        canceled.
            ``(2) Except as otherwise provided, the same percentage 
        sequestration shall apply to all programs, projects, and 
        activities within a budget account (with programs, projects, 
        and activities as delineated in the appropriation Act or 
        accompanying report for the relevant fiscal year covering that 
        account, or for accounts not included in appropriation Acts, as 
        delineated in the most recently submitted President's budget).
            ``(3) Administrative regulations or similar actions 
        implementing a sequestration shall be made within 120 days of 
        the sequestration order. To the extent that formula allocations 
        differ at different levels of budgetary resources within an 
        account, program, project, or activity, the sequestration shall 
        be interpreted as producing a lower total appropriation, with 
        that lower appropriation being obligated as though it had been 
        the pre-sequestration appropriation and no sequestration had 
        occurred.
            ``(4) Except as otherwise provided, obligations in 
        sequestered direct spending accounts shall be reduced in the 
        fiscal year in which a sequestration occurs and in all 
        succeeding fiscal years.
            ``(5) If an automatic spending increase is sequestered, the 
        increase (in the applicable index) that was disregarded as a 
        result of that sequestration shall not be taken into account in 
        any subsequent fiscal year.
            ``(6) Except as otherwise provided, sequestration in 
        accounts for which obligations are indefinite shall be taken in 
        a manner to ensure that obligations in the fiscal year of a 
        sequestration and succeeding fiscal years are reduced, from the 
        level that would actually have occurred, by the applicable 
        sequestration percentage.''.
    (b) Conforming Amendment.--The table of contents set forth in 
250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 
is amended by amending the item relating to section 256 to read as 
follows:

``Sec. 256. Exceptions, limitations, and special rules.''.

SEC. 204. POINT OF ORDER.

    (a) Entitlement Point of Order.--Section 312 of the Congressional 
Budget Act of 1974 is amended by adding at the end the following new 
subsection:
    ``(g) Entitlement Point of Order.--It shall not be in order in the 
House of Representatives or the Senate to consider any bill, joint 
resolution, amendment, or conference report that--
            ``(1) increases aggregate level of direct spending for any 
        ensuing fiscal year or
            ``(2) includes any provision that has the effect of 
        modifying the application of section 252A of the Balanced 
        Budget and Emergency Deficit Control Act of 1985 to any 
        entitlement program subject to sequestration or exempt from 
        sequestration under such Act.''.

SEC. 205. TECHNICAL AND CONFORMING AMENDMENTS.

    The Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended as follows:
            (1) Section 251(a)(1) is amended by inserting ``, section 
        252A,'' after ``section 252''.
            (2) Section 254(c)(4)(B) is amended by inserting ``or 
        section 252A'' after ``section 252''.
            (3) Section 254(c) is amended by redesignating paragraph 
        (5) as paragraph (6) and by inserting after paragraph (4) the 
        following new paragraph:
            ``(5) Direct spending control sequestration reports.--The 
        preview reports shall set forth, for the current year and the 
        budget year, estimates for each of the following:
                    ``(A) The total level of direct spending for all 
                programs, projects, and activities (excluding social 
                security).
                    ``(B) The sequestration percentage or (if the 
                required sequestration percentage is greater than the 
                maximum allowable percentage for medicare) percentages 
                necessary to comply with section 252A.''.
            (4) Section 254(f) is amended by redesignating paragraphs 
        (4) and (5) as paragraphs (5) and (6) and by inserting after 
        paragraph (3) the following new paragraph:
            ``(4) Direct spending control sequestration reports.--The 
        final reports shall contain all the information required in the 
        direct spending control sequestration preview reports. In 
        addition, these reports shall contain, for the budget year, for 
        each account to be sequestered, estimates of the baseline level 
        of sequesterable budgetary resources and resulting outlays and 
        the amount of budgetary resources to be sequestered and 
        resulting outlay reductions. The reports shall also contain 
        estimates of the effects on outlays of the sequestration in 
        each outyear for direct spending programs.''.
            (5) Section 258C(a)(1) is amended by inserting ``, 252A,'' 
        after ``section 252''.

               Subtitle B--Discretionary Spending Limits

SEC. 211. ENFORCING DISCRETIONARY SPENDING LIMITS.

    (a) Discretionary Spending Limits.--Sections 251(b) and (c) of the 
Balanced Budget and Emergency Deficit Control of Act of 1985 are 
amended to read as follows:
    ``(b) Discretionary Spending Limit.--As used in this part, the term 
`discretionary spending limit' means--
            ``(1) with respect to fiscal year 2007--
                    ``(A) $861,577,682,000 in new budget authority of 
                which no more than $412,947,276,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(2) with respect to fiscal year 2008--
                    ``(A) $880,532,400,000 in new budget authority of 
                which no more than $422,032,100,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(3) with respect to fiscal year 2009--
                    ``(A) $899,904,100,000 in new budget authority of 
                which no more than $431,316,800,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(4) with respect to fiscal year 2010--
                    ``(A) $919,702,000,000 in new budget authority of 
                which no more than $440,805,800,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(5) with respect to fiscal year 2011--
                    ``(A) $939,935,400,000 in new budget authority of 
                which no more than $450,503,500,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(6) with respect to fiscal year 2012--
                    ``(A) $960,614,000,000 in new budget authority of 
                which no more than $460,414,600,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(7) with respect to fiscal year 2013--
                    ``(A) $981,747,500,000 in new budget authority of 
                which no more than $470,543,700,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050);
            ``(8) with respect to fiscal year 2014--
                    ``(A) $1,003,346,000,000 in new budget authority of 
                which no more than $480,895,700,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050); and
            ``(9) with respect to fiscal year 2015--
                    ``(A) $1,025,419,600,000 in new budget authority of 
                which no more than $491,475,400,000 shall be for 
                functions other than National Defense (050); and
                    ``(B) $_____ in outlays of which no more than 
                $_____ shall be for functions other than National 
                Defense (050).''.
    (b) Discretionary Spending Limit Point of Order.--Section 312 of 
the Congressional Budget Act of 1974 (as amended by section 204) is 
further amended by adding at the end the following new subsection:
    ``(h) Discretionary Spending Limit Point of Order.--It shall not be 
in order in the House of Representatives or the Senate to consider any 
bill, joint resolution, amendment, or conference report that--
            ``(1) increases the discretionary spending limits for any 
        ensuing fiscal year after the budget year; or
            ``(2) would cause the discretionary spending limits for the 
        budget year to be breached.''.
    (c) Advance Appropriation Point of Order.--Section 312 of the 
Congressional Budget Act of 1974 (as amended by subsection (b)) is 
further amended by adding at the end the following new subsection:
    ``(i) Advance Appropriation Point of Order.--It shall not be in 
order in the House of Representatives or the Senate to consider any 
appropriation bill or joint resolution, or amendment thereto or 
conference report thereon, that provides advance discretionary new 
budget authority that first becomes available for any fiscal year after 
the budget year at an amount for any program, project, or activity 
above the amount of appropriations for fiscal year 2006 for such 
program, project, or activity.''.
    (d) Extension of Gramm-Rudman.--Section 275(b) of the Balanced 
Budget and Emergency Deficit Control of Act of 1985 is amended by 
striking ``2002'' and inserting ``2015'' and by striking ``2006'' and 
inserting ``2019''.
                                 <all>