[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4181 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 4181

  To reform Social Security retirement and Medicare by establishing a 
Personal Social Security Savings Program to create a safer, healthier, 
 more secure, and more prosperous retirement for all Americans and to 
                 reduce the burden on young Americans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 14, 2007

  Mr. Flake introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
  Education and Labor, Budget, Energy and Commerce, and Rules, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
  To reform Social Security retirement and Medicare by establishing a 
Personal Social Security Savings Program to create a safer, healthier, 
 more secure, and more prosperous retirement for all Americans and to 
                 reduce the burden on young Americans.

    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 ``Securing Medicare 
and Retirement for Tomorrow Act of 2007'' or as the ``SMART Act of 
2007''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Establishment of Personal Social Security Savings Program.
                      ``Part A--Insurance Benefits

           ``Part B--Personal Social Security Savings Program

        ``Sec. 251. Definitions.
        ``Sec. 252. Establishment and maintenance of personal social 
                            security accounts.
        ``Sec. 253. Designation of qualified social security mutual 
                            funds.
        ``Sec. 254. Distribution of social security retirement 
                            benefits.
        ``Sec. 255. Enforcement of contribution requirements.
        ``Sec. 256. Personal Accounts Management and Review Board.
Sec. 3. Medicare program revision.
Sec. 4. Employment taxes, tax on self-employment income.
Sec. 5. Tax treatment of distributions.
Sec. 6. Federal budget reforms.
Sec. 7. Change in Consumer Price Index used for cost-of-living 
                            increases.

SEC. 2. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

    (a) In General.--Title II of the Social Security Act (42 U.S.C. 401 
et seq.) is amended--
            (1) by inserting before section 201 (42 U.S.C. 401) 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' means any individual--
                    ``(A)(i) who has received wages on which there is 
                imposed a tax under section 3101(a) of the Internal 
                Revenue Code of 1986, or
                    ``(ii) who has derived self-employment income on 
                which there is imposed a tax under section 1401(a) of 
                such Code, and
                    ``(B) who has not attained retirement age as of 
                January 1 of the calendar year following the date of 
                the enactment of the SMART Act of 2007.
            ``(2) Employer.--The term `employer' means an employer 
        within the meaning of section 3111 of the Internal Revenue Code 
        of 1986.
            ``(3) Part a retirement benefit.--The term `part A 
        retirement benefit' means, in connection with a participating 
        individual--
                    ``(A) an old-age insurance benefit provided under 
                section 202(a); and
                    ``(B) a wife's or husband's insurance benefit under 
                subsection (b) or (c) of section 202 based on the wages 
                and self-employment income of the participating 
                individual.
            ``(4) Part b benefit.--The term `part B benefit' means, in 
        connection with a participating individual, the total amount 
        which is credited to all personal social security accounts of 
        the participating individual as of the date on which the 
        participating individual attains retirement age (or, if 
        earlier, dies).
            ``(5) Board.--The term `Board' means the Personal Accounts 
        Management and Review Board established under section 255.
            ``(6) Personal social security account.--
                    ``(A) In general.--The term `personal social 
                security account' of an individual means a trust 
                (established pursuant to section 252) created or 
                organized in the United States for the exclusive 
                benefit of a participating individual or such 
                individual's beneficiaries, but only if the written 
                governing instrument creating the trust meets the 
                following requirements:
                            ``(i) Except in the case of amounts 
                        transferred from other personal social security 
                        accounts pursuant to a merger or transfer 
                        authorized under subsection (e) or (f) of 
                        section 252, no contribution will be accepted 
                        unless it is in cash.
                            ``(ii) The trustee is--
                                    ``(I) a bank (as defined in 
                                subparagraph (B)), or
                                    ``(II) such other person who 
                                demonstrates to the satisfaction of the 
                                Board that the manner in which such 
                                other person will administer the trust 
                                will be consistent with the 
                                requirements of this part.
                            ``(iii) The written governing instrument 
                        provides for investment of the assets of the 
                        trust in accordance with the provisions of this 
                        part. No amount of the assets of the trust will 
                        be invested in any form or manner other than as 
                        authorized by this part.
                            ``(iv) The interest of an individual in the 
                        balance of the individual's account is 
                        nonforfeitable, except as provided in 
                        subsections (e) and (f)(3) of section 254.
                            ``(v) The assets of the trust will not be 
                        commingled with other property.
                    ``(B) Bank.--For purposes of subparagraph (A)(ii), 
                the term `bank' means--
                            ``(i) any bank (as defined in section 581 
                        of the Internal Revenue Code of 1986),
                            ``(ii) an insured credit union (within the 
                        meaning of paragraph (6) or (7) of section 101 
                        of the Federal Credit Union Act), and
                            ``(iii) a corporation which, under the laws 
                        of the State of its incorporation, is subject 
                        to supervision and examination by the 
                        Commissioner of Banking or other officer of 
                        such State in charge of the administration of 
                        the banking laws of such State.
            ``(7) Part b personal social security contribution.--The 
        term `part B personal social security contribution' for any 
        calendar year means an amount equal to the sum of--
                    ``(A) the amount of the taxes imposed under section 
                3101(a) of the Internal Revenue Code of 1986 (without 
                regard to subsection (d) thereof) on the wages paid to 
                such individual during such calendar year, plus
                    ``(B) 50 percent of the amount of the taxes imposed 
                under section 1401(a) of such Code (without regard to 
                subsections (d) and (e) thereof) on the self-employment 
                income derived by such individual during the taxable 
                year ending with or during such calendar year.
            ``(8) Qualified social security annuity.--The term 
        `qualified social security annuity' is an annuity approved by 
        the Board for purchase pursuant to section 254(d) with amounts 
        available as part B benefits.
            ``(9) Qualified social security mutual fund.--The term 
        `qualified social security mutual fund' means an entity so 
        designated pursuant to section 253.
            ``(10) Retirement age.--The term `retirement age' has the 
        meaning provided under section 216(l).
            ``(11) Social security escrow fund.--The term `Social 
        Security Escrow Fund' means the fund established under section 
        201(a).

``SEC. 252. ESTABLISHMENT AND MAINTENANCE OF PERSONAL SOCIAL SECURITY 
              ACCOUNTS.

    ``(a) Funding and Investment of Personal Social Security 
Accounts.--
            ``(1) Employees.--Not later than each due date for payment 
        by any employer, pursuant to subtitle C of the Internal Revenue 
        Code of 1986, of the taxes imposed under section 3101(a) of 
        such Code on the wages paid to any participating individual, 
        such employer shall--
                    ``(A) make the payment required under subsection 
                (b)(2)(B) to the participating individual's personal 
                social security account established under subsection 
                (b)(1), and
                    ``(B) provide for investment, under the terms of 
                the account, of the amount paid to the account in a 
                qualified social security mutual fund designated by 
                such individual as provided in subsection (d).
            ``(2) Self-employed persons.--Not later than 15 days after 
        each due date for payment of taxes imposed under section 1401 
        of the Internal Revenue Code of 1986 on self-employment income 
        derived by any participating individual during any taxable 
        year, such participating individual shall--
                    ``(A) pay an amount equal to such participating 
                individual's part B personal social security 
                contribution described in section 251(7)(B) into such 
                individual's personal social security account 
                established pursuant to subsection (c)(1), and
                    ``(B) provide for investment of such amount in a 
                qualified social security mutual fund designated by 
                such individual as provided in subsection (d).
            ``(3) Effect of audits or errors regarding transfers.--In 
        the event of any transfer of an incorrect amount under this 
        subsection, proper adjustments shall be made in amounts 
        subsequently transferred pursuant to this subsection to the 
        extent the incorrect amount was in excess of or was less than 
        the correct amount, in accordance with regulations prescribed 
        by the Board.
    ``(b) Establishment of Accounts by Employers.--
            ``(1) In general.--Each employer shall establish and 
        maintain for each participating individual employed by such 
        employer a personal social security account under a social 
        security payroll deduction plan.
            ``(2) Requirements of plan.--For purposes of this part, the 
        term `social security payroll deduction plan' means, in 
        connection with a participating individual, a written plan of 
        an employer with respect to which the following requirements 
        are met:
                    ``(A) Such individual is an employee of such 
                employer and the plan applies only with respect to 
                wages paid by such employer to such individual.
                    ``(B) Under such plan, the portion of such wages 
                consisting of each such participating individual's part 
                B personal social security contribution described in 
                section 251(7)(A) for the calendar year will be 
                deducted from such individual's wages and paid to a 
                personal social security account maintained by such 
                employer for such individual, in accordance with 
                subsection (a)(1).
                    ``(C) The employer receives no compensation for the 
                cost of administering such plan.
                    ``(D) The employer does not make any endorsement 
                with respect to any qualified social security mutual 
                funds selected by the employer for purposes of 
                investment under subsection (d) of amounts held in any 
                personal social security account.
    ``(c) Participation by Self-Employed Individuals.--Each 
participating individual who receives self-employment income for any 
taxable year beginning on or after January 1 of the calendar following 
the date of the enactment of the SMART Act of 2007 shall, in such form 
and manner as shall be prescribed in regulations of the Board, 
establish and maintain a personal social security account for purposes 
of holding and investing such participating individual's part B 
personal social security contribution described in section 251(7)(B) 
for such taxable year, in accordance with subsection (a)(2).
    ``(d) Investment of Personal Social Security Account Funds.--
            ``(1) Investment in qualified social security mutual 
        funds.--Except as provided in paragraph (4), amounts held 
        during any calendar year in a participating individual's 
        personal social security account maintained by such 
        individual's employer shall be invested during such year only 
        in one qualified social security mutual fund designated by the 
        participating individual to such employer in accordance with 
        this subsection not later than November 30 of the preceding 
        year.
            ``(2) Selection of funds by employers.--
                    ``(A) In general.--Except as provided in paragraph 
                (4), in connection with the investment of amounts held 
                during any calendar year in personal social security 
                accounts maintained by an employer, such employer shall 
                select, not later than November 1 of the preceding 
                year, 5 qualified social security mutual funds from 
                among which the participating individual for whom each 
                account is maintained may make the designations 
                required under paragraph (1). During the 15-day period 
                beginning on such November 1, each employer shall 
                provide to each participating individual employed by 
                such employer during such period a current prospectus 
                regarding each of the 5 qualified social security 
                mutual funds selected by the employer, together with 
                such supplemental information as may be selected by the 
                employer and such information as may be required by the 
                Board.
                    ``(B) Default fund.--The employer shall designate 
                one of the qualified social security mutual funds 
                selected pursuant to subparagraph (A) as the default 
                fund. In the case of the failure of a participating 
                individual to make a timely designation of a qualified 
                social security mutual fund pursuant to paragraph (1), 
                the individual shall be deemed to have designated the 
                default fund as the qualified social security mutual 
                fund in which amounts held in the individual's personal 
                social security account will be invested.
            ``(3) Self-employed individuals.--
                    ``(A) General rule.--Except as provided in 
                paragraph (4), in the case of amounts held by any 
                participating individual in a personal social security 
                account maintained pursuant to subsection (c) during 
                any calendar year, the participating individual shall 
                invest such amounts during such calendar year in one 
                qualified social security mutual fund designated by 
                such individual not later than November 30 preceding 
                such year, in such form and manner as shall be 
                prescribed by the Board. In any case in which any such 
                participating individual does not make a timely 
                designation in accordance with the preceding sentence 
                with respect to amounts held during any calendar year, 
                the terms governing the personal social security 
                account shall provide for designation of a qualified 
                social security mutual fund as the default mutual fund 
                in which amounts held in the account will be invested.
                    ``(B) Treatment of self-employed individuals who 
                are employers.--Notwithstanding subparagraph (A), in 
                any case in which a participating individual described 
                in subparagraph (A) in connection with investment of 
                amounts described in subparagraph (A) during any 
                calendar year is an employer of participating 
                individuals who has, pursuant to paragraph (2), 
                selected qualified social security mutual funds for 
                investment by such participating individuals during 
                such calendar year, any designation by such employer 
                under subparagraph (A) of a qualified social security 
                mutual fund for investment of such amounts described in 
                subparagraph (A) during such calendar year shall be 
                from those qualified social security mutual funds so 
                selected pursuant to paragraph (2).
            ``(4) Newly established accounts.--In the case of a newly 
        established personal social security account maintained by an 
        employer for an employee pursuant to subsection (b) or by a 
        self-employed individual pursuant to subsection (c), the 
        requirements of the preceding paragraphs of this subsection 
        shall be treated as satisfied in a timely manner with respect 
        to amounts held in the account during the calendar year in 
        which the account is established and the next following 
        calendar year if such amounts are invested as otherwise 
        provided in such paragraphs within 30 days after the date of 
        the establishment of such account.
    ``(e) Multiple Personal Social Security Accounts.--
            ``(1) In general.--In any case in which--
                    ``(A) payments are required to be made under 
                subsection (b)(1) during any calendar year by 2 or more 
                employers in connection with the same participating 
                individual, or
                    ``(B) payments are required to be made during any 
                calendar year by 1 or more employers under subsection 
                (b)(1) in connection with a participating individual 
                and by such participating individual under subsection 
                (c)(1),
        separate personal social security accounts may be maintained by 
        or for such participating individual for purposes of accepting 
        payments made by each employer and by the participating 
        individual.
            ``(2) Merger of accounts.--The Board shall prescribe by 
        regulation procedures by which a participating individual may 
        merge 2 or more personal social security accounts of such 
        participating individual into a single personal social security 
        account.
    ``(f) Transfers Between Accounts Upon Termination of Employment.--
            ``(1) In general.--Not later than 90 days after the date of 
        the termination of employment of a participating individual by 
        an employer, such individual shall, in accordance with 
        regulations of the Board, arrange for disinvestment of amounts 
        held in the personal social security account established by 
        such employer for such individual and transfer of the amounts 
        held in such account to--
                    ``(A) any personal social security account 
                established by the employer in connection with 
                subsequent employment of such individual commencing 
                within such 90-day period, or
                    ``(B) in any case in which, during such 90-day 
                period, no personal social security account is 
                established in connection with subsequent employment of 
                such individual, a personal social security account 
                established by such individual as provided in 
                subsection (b)(1) as if such individual were self-
                employed.
            ``(2) Disregard of certain breaks in service.--The Board 
        shall provide rules for determining whether an individual's 
        employment has been terminated for purposes of this subsection 
        under which breaks in service for any period occurring on a 
        seasonal or other regular basis each year are disregarded in 
        the case of any type of service with respect to which the 
        customary period of employment during each calendar year 
        excludes such period.
            ``(3) Procedure.--In accordance with regulations of the 
        Board, in the case of any termination of employment by an 
        employer of a participating employee, the terms of the personal 
        social security account of the participating employee 
        maintained by such employer and of the qualified social 
        security mutual fund designated for purposes of investment of 
        amounts held in such account shall provide for any 
        disinvestment and transfer required under paragraph (1).
    ``(g) Distributions.--Distributions of amounts held in personal 
social security accounts (other than reasonable investment fees and 
administrative expenses) shall be made--
            ``(1) only as provided in section 254(d) (except as 
        otherwise provided in section 254(e)), or
            ``(2) for purposes of effecting mergers of accounts 
        pursuant to subsection (e)(2) or transfers to other personal 
        social security accounts pursuant to subsection (f).
    ``(h) Property Rights of Participating Individual.--Amounts held in 
a participating individual's personal social security account--
            ``(1) are the property of such participating individual, 
        and
            ``(2) except as provided in subsections (e)(2) and (f)(3) 
        of section 254, shall not be transferrable or assignable, at 
        law or in equity, and shall not be subject to execution, levy, 
        attachment, garnishment, or other legal process, or to the 
        operation of any bankruptcy or insolvency law.

``SEC. 253. DESIGNATION OF QUALIFIED SOCIAL SECURITY MUTUAL FUNDS.

    ``(a) In General.--The Board shall establish a program for 
designating entities as qualified social security mutual funds for 
purposes of investment of amounts held in personal social security 
accounts.
    ``(b) Application Process.--An entity may be designated by the 
Board as a qualified social security mutual fund only upon the filing 
by such entity of an application to the Board at such time, in such 
manner, and containing such information as the Board may require.
    ``(c) Minimum Qualifications of Qualified Social Security Mutual 
Funds.--
            ``(1) In general.--An entity may be designated by the Board 
        as a qualified social security mutual fund only if such 
        entity--
                    ``(A) is an investment company;
                    ``(B) is registered with the Securities and 
                Exchange Commission as an investment company and has 
                been so registered for no fewer than 10 years;
                    ``(C) has been publicly traded or available to the 
                public for purchase and redemption for no fewer than 10 
                years;
                    ``(D) at the time of application, has a market 
                capitalization of at least $100,000,000;
                    ``(E) has not been subject to civil or criminal 
                penalty with respect to its securities or investment 
                operations by any government agency within the past 10 
                years; and
                    ``(F) is managed by a corporation, partnership, 
                limited liability company, or other person that--
                            ``(i) is incorporated, created, or 
                        organized in the United States, and
                            ``(ii) has not been subject to civil or 
                        criminal penalty with respect to its securities 
                        or investment operations by any government 
                        agency within the past 10 years.
            ``(2) Investment company.--For purposes of this subsection, 
        the term `investment company' has the meaning provided in 
        section 3 of the Investment Company Act of 1940.
    ``(d) Operational Requirements of Qualified Social Security Mutual 
Funds.--Each qualified social security mutual fund shall--
            ``(1) comply with all regulations prescribed by the Board;
            ``(2) enter into any agreement with the Board that the 
        Board may require;
            ``(3) provide the Commissioner of Social Security with such 
        information as the Commissioner may require to meet the 
        requirements of section 254(b);
            ``(4) comply with all securities laws (as defined in 
        section 3(a)(47) of the Securities Exchange Act of 1934);
            ``(5) comply with the fiduciary standards established by 
        section 404(a) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1104(a));
            ``(6) maintain its registration described in subsection 
        (c)(1);
            ``(7) invest in the securities of no fewer than 50 issuers;
            ``(8) allow no single security to account for more than 5 
        percent of the fund's net asset value;
            ``(9) invest solely in securities issued by corporations, 
        trusts, partnerships, or limited liability companies whose 
        principal place of business is located in the United States 
        (or, in the case of investments made in investment companies, 
        solely in investment companies in which at least 90 percent of 
        the underlying securities are those of corporations, trusts, 
        partnerships, or limited liability companies whose principal 
        place of business is located in the United States);
            ``(10) not invest in government securities;
            ``(11) provide quarterly statements to each participating 
        individual invested in the qualified social security mutual 
        fund of the value of the participating individual's investment 
        and the change in value during the preceding quarter and 
        preceding year (if applicable); and
            ``(12) provide to the Board (in a form prescribed by the 
        Board) at least the following information--
                    ``(A) not later than March 1 of each calendar year, 
                the value of each participating individual's investment 
                in the qualified social security mutual fund at the end 
                of the preceding calendar year;
                    ``(B) within 30 days after any transfer to another 
                qualified social security mutual fund, notification of 
                such transfer; and
                    ``(C) within 30 days after any distribution to a 
                participating individual, notification of such 
                distribution.
    ``(e) Required Number and Types of Qualified Social Security Mutual 
Funds.--
            ``(1) Minimum number.--The Board shall take such actions as 
        are necessary to maintain a number of entities designated as 
        qualified social security mutual funds of not fewer than 150.
            ``(2) Type.--The Board shall ensure that, of entities which 
        are currently designated qualified social security mutual funds 
        as of any time--
                    ``(A) not fewer than 75 maintain a portfolio 
                invested solely in common stocks; and
                    ``(B) not fewer than 50 maintain a portfolio 
                invested in a mix of bonds and debentures and common 
                stocks such that at least 50 percent (by value) is 
                invested in common stocks.
    ``(f) Criteria for Designation as Qualified Social Security Mutual 
Fund.--
            ``(1)  Limitation on common investment managers.--Under 
        regulations which shall be prescribed by the Board, not more 
        than 15 entities managed by the same investment manager may be 
        currently treated as of any time as qualified social security 
        mutual funds. For purposes of this paragraph, the reference to 
        an investment manager shall include a reference to any 
        affiliated person thereof (as defined in section 2(a)(3) of the 
        Investment Company Act of 1940).
            ``(2) Criteria for designation.--In determining whether to 
        designate an entity as a qualified social security mutual fund, 
        the Board shall include in matters taken into account at least 
        the following:
                    ``(A) the investment fees and administrative 
                expenses that such entity will incur;
                    ``(B) the financial performance of such entity;
                    ``(C) appropriateness of the entity's 
                diversification; and
                    ``(D) the administrative efficiency and accuracy of 
                the entity.
            ``(3) Additional criteria.--The Board may establish 
        additional criteria for designation as a qualified social 
        security mutual fund and shall publish such criteria in advance 
        of initiating the application process.
    ``(g) Enforcement; Loss of Designation as Qualified Social Security 
Mutual Fund.--
            ``(1) Loss of designation for non-compliance.--The Board 
        shall withdraw the designation of any entity as a qualified 
        social security mutual fund if the entity fails to 
        substantially comply with this section. Any such withdrawal 
        shall be effective immediately upon a finding of non-compliance 
        by the Board, after notice and opportunity for an 
        administrative hearing.
            ``(2) Intermediate or additional sanctions.--
                    ``(A) In general.--The Board may impose fines on 
                any person who manages a qualified social security 
                mutual fund for any violation of this section with 
                respect to such fund. Any such fine may not exceed the 
                investment fees and other income to such person arising 
                from the management of the qualified social security 
                mutual fund for the 3 preceding calendar years (or, in 
                the case of a qualified social security mutual fund 
                that has not been so designated for the 3 preceding 
                years, 3 times the projected or actual investment fees 
                and other income arising from the management of the 
                qualified social security mutual fund for the most 
                recent calendar year for which such fund was so 
                designated). Such fines may be imposed in addition to 
                loss of designation as a qualified social security 
                mutual fund or in lieu of loss of such designation, at 
                the discretion of the Board.
                    ``(B) Enforcement.--The Board may bring a civil 
                action against any person referred to in subparagraph 
                (A) to enforce any fine imposed under such 
                subparagraph. Such action may be brought in the United 
                States District Court for the District of Columbia or 
                in any district court of the United States within the 
                jurisdiction of which such person resides or does 
                business, and process may be served in any district 
                where such person resides, does business, or may be 
                found.
            ``(3) Loss of designation for poor performance.--The Board 
        may withdraw the designation of those qualified social security 
        mutual funds, equal in number to 10 percent of the total number 
        of qualified social security mutual funds, determined annually 
        by the Board to be the lowest performing, except that the 
        designation of any such fund may be withdrawn under this 
        paragraph only if the Board determines that the entity that 
        would be newly designated by the Board as a replacement would 
        be more qualified. The determination of performance shall be 
        made by comparing total return, taking into account, together 
        with any other factors determined relevant by the Board, all 
        investment income, gains or losses, administrative expenses, 
        and investment fees over a period of time to be determined by 
        the Board. A withdrawal under this paragraph shall be effective 
        at the end of the calendar year in which the withdrawal 
        determination is made, after notice and opportunity for an 
        administrative hearing.
            ``(4) Transfers.--The Board shall seek instructions by mail 
        from all participating individuals whose personal social 
        security account is invested, in whole or in part, in a 
        qualified social security mutual fund that has had its 
        designation withdrawn pursuant to paragraph (1) or (3) 
        regarding other qualified social security mutual funds to which 
        the participating individual would like the invested funds 
        transferred. If such instructions are not received by the Board 
        within 45 days (in case of a withdrawal of designation under 
        paragraph (1)) or within 1 year (in the case of a withdrawal of 
        designation under paragraph (3)), then the distribution shall 
        be made to a randomly selected qualified social security mutual 
        fund that is invested in a mix of bonds and debentures and 
        common stocks such that at least 80 percent (by value) is 
        invested in common stocks.

``SEC. 254. DISTRIBUTION OF SOCIAL SECURITY RETIREMENT BENEFITS.

    ``(a) Election of Part A Retirement Benefits in Lieu of Part B 
Benefits at Retirement.--
            ``(1) In general.--Unless a participating individual 
        elects, not later than 30 days after the date on which such 
        individual attains retirement age (and not later than the date 
        on which such individual commences distribution from his or her 
        personal social security account as provided in subsection (d), 
        if such date is earlier than the date on which such individual 
        attains retirement age), part A retirement benefits based on 
        such individual's wages and self-employment income, such 
        individual shall be deemed to have elected to receive part B 
        benefits and to have forfeited any entitlement of such 
        individual or such individual's wife, husband, divorced wife, 
        or divorced husband to such part A retirement benefits. Any 
        such election may be made only in a form and manner which shall 
        be prescribed by the Commissioner of Social Security. If such 
        individual makes a timely election of part A retirement 
        benefits, such individual shall be deemed to have forfeited 
        such individual's part B benefits. No such election of part A 
        retirement benefits may be made by any individual attaining 
        retirement age after the end of the period of 42 calendar years 
        following the date of the enactment of the SMART Act of 2007. 
        Any such election shall be effective only if it is in writing 
        and signed by the participating individual, his or her wife or 
        husband (if any), and each divorced wife or divorced husband of 
        such individual (if any). A deemed election of part B benefits 
        under this paragraph shall take effect only upon the mailing of 
        a written notice of such deemed election to the spouse (if any) 
        and each former spouse (if any) of such deemed election, in 
        such form as shall be prescribed by the Commissioner, to the 
        last known mailing address of such spouse or former spouse.
            ``(2) Disposition of part b benefits of participating 
        individuals electing part a retirement benefits.--Not later 
        than 30 days after an election by a participating individual 
        under paragraph (1) of part A retirement benefits, the 
        Commissioner of Social Security shall notify the qualified 
        social security mutual fund in which amounts held in any 
        personal social security account of such individual are 
        invested that such individual has elected part A retirement 
        benefits. Not later than 30 days after receiving such notice, 
        the qualified social security mutual fund shall transfer the 
        amount of such individual's part B benefits to the Social 
        Security Escrow Fund, and such amount shall be treated as a 
        part of the balance of such Fund.
    ``(b) Information To Be Provided to Participating Individuals.--
            ``(1) In general.--During--
                    ``(A) the 90-day period beginning 180 days before 
                the date on which any participating individual attains 
                retirement age, and
                    ``(B) the 90-day period following a request filed 
                by a participating individual with the Commissioner, in 
                such form and manner as shall be prescribed by the 
                Commissioner, after 180 days before the date on which 
                the individual attains age 62,
        the Commissioner of Social Security shall provide such 
        individual with a retirement distribution estimate described in 
        paragraph (2). The Commissioner shall not be required to 
        respond to more than 1 request described in subparagraph (B) 
        made by a participating individual during any 1-year period.
            ``(2) Retirement distribution estimate.--The retirement 
        distribution estimate described in this paragraph is the 
        Commissioner's written estimate of--
                    ``(A) the part A retirement benefits that the 
                participating individual would receive, and the part A 
                retirement benefits that any other individual would 
                receive on the basis of the wages and self-employment 
                income of such participating individual, if the 
                participating individual elected part A retirement 
                benefits pursuant to subsection (a);
                    ``(B) the part B benefits that the participating 
                individual would receive (including any transitional 
                part A retirement benefits under subsection (c) of such 
                participating individual and each individual receiving 
                on the basis of such participating individual's wages 
                and self-employment income) if such participating 
                individual does not make an election of part A 
                retirement benefits pursuant to subsection (a);
                    ``(C) the estimated amount of the median qualified 
                social security annuity that the part B benefits could 
                purchase, given the current insurance market, if such 
                benefits were used entirely to purchase such an 
                annuity; and
                    ``(D) the maximum permissible annual withdrawal of 
                such part B benefits allowable under subsection (d).
    ``(c) Transitional Part A Retirement Benefits.--Notwithstanding 
subsection (a), a participating individual born before 1968 who does 
not elect part A retirement benefits pursuant to subsection (a), and 
each individual who would be entitled to any such benefit on the basis 
of such participating individual's wages and self-employment income if 
such participating individual had made such an election, shall be 
entitled to a transitional part A retirement benefit. The transitional 
part A retirement benefit shall be equal to the product of the part A 
retirement benefit that would have been received if such an election 
had been made and the part A retirement benefit percentage set forth in 
connection with the participating individual's year of birth, as set 
forth in the following table:


 
 
 
``If the year of birth is:               The part A retirement benefit
                                          percentage is:
  1944.................................  98 percent
  1945.................................  96 percent
  1946.................................  94 percent
  1947.................................  92 percent
  1948.................................   90 percent
  1949.................................  87 percent
  1950.................................  84 percent
  1951.................................  81 percent
  1952.................................  78 percent
  1953.................................  75 percent
  1954.................................  71 percent
  1955.................................  67 percent
  1956.................................  63 percent
  1957.................................  59 percent
  1958.................................  55 percent
  1959.................................  50 percent
  1960.................................  45 percent
  1961.................................  40 percent
  1962.................................  35 percent
  1963.................................   30 percent
  1964.................................  24 percent
  1965.................................  18 percent
  1966.................................  12 percent
  1967.................................  6 percent

    ``(d) Distributions of Part B Benefits and Distribution Limits.--
            ``(1) In general.--Subject to the limitations provided in 
        this subsection, a participating individual who has not made a 
        timely election of part A retirement benefits under subsection 
        (a) may withdraw from any personal social security account of 
        such individual all or any portion of the balance in such 
        account.
            ``(2) Minimum age for withdrawal.--Withdrawals by an 
        individual from such individual's personal social security 
        account may be made only after such individual has attained age 
        62.
            ``(3) Annual 10-percent limitation.--
                    ``(A) In general.--Except as provided in subsection 
                (f) and paragraph (4), the maximum permissible total 
                withdrawal during any 1-year period by a participating 
                individual from all of such individual's personal 
                social security accounts is 10 percent of the aggregate 
                value of the amounts held in such accounts at the close 
                of the preceding calendar year.
                    ``(B) Limitation with respect to qualified social 
                security mutual fund.--The terms governing the 
                qualified social security mutual fund in which are 
                invested a participating individual's part B benefits 
                held in any personal social security account shall 
                prohibit distributions to such individual during any 1-
                year period of such part B benefits to the extent that 
                the total amount of such distributions exceed 10 
                percent of the value of the part B benefits held in 
                such account at the close of the preceding calendar 
                year.
                    ``(C) Interchange of information.--The Board shall 
                provide by regulation for the interchange of 
                information between the managers of personal social 
                security accounts and between qualified social security 
                mutual funds that is necessary to implement the 
                requirements of this paragraph.
            ``(4) Purchase of qualified social security annuities.--
                    ``(A) In general.--Notwithstanding the paragraph 
                (3), a participating individual may use any withdrawal 
                permitted under paragraph (2) to purchase, in 
                accordance with regulations which shall be prescribed 
                by the Board, a qualified social security annuity.
                    ``(B) Qualified social security annuity.--For 
                purposes of this paragraph, the term `qualified social 
                security annuity' means an annuity contract between an 
                insurance company and a participating individual that 
                complies with the following requirements:
                            ``(i) The annuity contract is offered by an 
                        insurance company whose principal place of 
                        business is located in the United States.
                            ``(ii) The annuity contract is offered by 
                        an insurance company approved for its safety 
                        and soundness by the Board.
                            ``(iii) The insurance company entering into 
                        the annuity contract has insured the risk that 
                        it will be unable to meet its obligations with 
                        a reinsurance company (whose principal place of 
                        business may be located inside or outside the 
                        United States) that will meet the obligations 
                        of the primary insurer in the event it cannot 
                        and has been approved by the Board for its 
                        safety and soundness.
                            ``(iv) If the annuitant is a married person 
                        at the time of the issuance of the annuity, the 
                        annuity is in the form of a qualified joint and 
                        survivor annuity. For purposes of this clause, 
                        the term `qualified joint and survivor annuity' 
                        means an annuity--
                                    ``(I) which is for the life of the 
                                participating individual, with a 
                                survivor annuity for the life of the 
                                spouse which is not less than 50 
                                percent of (and is not greater than 100 
                                percent of) the amount of the annuity 
                                which is payable during the joint lives 
                                of the participating individual and the 
                                spouse, and
                                    ``(II) which is the actuarial 
                                equivalent of a single annuity for the 
                                life of the participating individual.
                            ``(v) The terms of the annuity contract 
                        must have been approved as fair and reasonable 
                        by the Board.
    ``(e) Part B Benefits Subject to Domestic Relations Orders.--
            ``(1) In general.--A participating individual's part B 
        benefits (including any qualified social security annuity 
        purchased with part B benefits) shall be subject to, and 
        payable in accordance with the requirements of, any qualified 
        domestic relations order.
            ``(2) Qualified domestic relations order.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified domestic 
                relations order' means a domestic relations order--
                            ``(i) which creates or recognizes the 
                        existence of an alternate payee's right to, or 
                        assigns to an alternate payee the right to, 
                        receive all or a portion of the part B benefits 
                        payable with respect to a participating 
                        individual, and
                            ``(ii) with respect to which the 
                        requirements of paragraphs (3) and (4) are met.
                    ``(B) Domestic relations order.--The term `domestic 
                relations order' means any judgment, decree, or order 
                (including approval of a property settlement agreement) 
                which--
                            ``(i) relates to the provision of child 
                        support, alimony payments, or marital property 
                        rights to a spouse, former spouse, child, or 
                        other dependent of a participating individual, 
                        and
                            ``(ii) is made pursuant to a State domestic 
                        relations law (including a community property 
                        law).
            ``(3) Requirements.--A domestic relations order meets the 
        requirements of this paragraph only if--
                    ``(A) such order clearly specifies--
                            ``(i) the name and the last known mailing 
                        address (if any) of the participating 
                        individual and the name and mailing address of 
                        each alternate payee covered by the order,
                            ``(ii) the amount or percentage of the 
                        participating individual's part B benefits to 
                        be paid from the participating individual's 
                        personal social security account (including any 
                        qualified social security mutual fund in which 
                        they are invested) or qualified social security 
                        annuity to each such alternate payee, or the 
                        manner in which such amount or percentage is to 
                        be determined,
                            ``(iii) the number of payments or period to 
                        which such order applies, and
                            ``(iv) each personal social security 
                        account or qualified social security annuity to 
                        which such order applies, and
                    ``(B) such order is directed at--
                            ``(i) one or more qualified social security 
                        mutual funds in which amounts credited to the 
                        participating individual's personal social 
                        security account are invested, or
                            ``(ii) if some or all of the participating 
                        individual's part B benefits have been used to 
                        purchase a qualified social security annuity, 
                        the insurance company offering such annuity.
            ``(4) Required scope.--A domestic relations order meets the 
        requirements of this paragraph only if such order--
                    ``(A) does not require the provision of any type or 
                form of benefit, or any option, not otherwise provided 
                under the terms of the personal social security account 
                (including the qualified social security mutual fund) 
                or the qualified social security annuity,
                    ``(B) does not require payments from the account or 
                annuity of increased benefits (determined on the basis 
                of actuarial value), and
                    ``(C) does not require the payment of part B 
                benefits to an alternate payee which are required to be 
                paid to another alternate payee under another order 
                previously determined to be a qualified domestic 
                relations order.
            ``(5) Timing and form requirements.--A domestic relations 
        order shall not be treated as failing to meet the requirements 
        of subparagraph (A) of paragraph (4) solely because such order 
        requires that payment of benefits be made to an alternate 
        payee--
                    ``(A) on or after the date on which the 
                participating attains (or would have attained) 
                retirement age,
                    ``(B) as if the participating individual had 
                attained retirement age on the date on which such 
                payment is to begin under such order (but taking into 
                account only the present value of benefits actually 
                accrued), and
                    ``(C) in any form in which such benefits may be 
                paid to the participating individual under this part 
                (other than in the form of a joint and survivor annuity 
                with respect to the alternate payee and his or her 
                subsequent spouse).
            ``(6) Responsibilities of qualified social security mutual 
        funds and insurance companies.--
                    ``(A) Actions required upon receipt of order.--In 
                the case of any domestic relations order received by 
                any person that is a qualified social security mutual 
                fund or insurance company referred to in paragraph 
                (3)(B) with respect to a personal social security 
                account maintained for a participating individual--
                            ``(i) such person shall promptly notify the 
                        participating individual and each alternate 
                        payee of the receipt of such order and such 
                        person's procedures for determining the 
                        qualified status of domestic relations orders, 
                        and
                            ``(ii) within a reasonable period after 
                        receipt of such order, such person shall 
                        determine whether such order is a qualified 
                        domestic relations order and notify the 
                        participant and each alternate payee of such 
                        determination.
                    ``(B) Procedures for determining qualified 
                status.--Each person referred to in subparagraph (A) 
                shall establish reasonable procedures to determine the 
                qualified status of domestic relations orders with 
                respect to personal social security accounts and to 
                administer distributions of part B benefits under such 
                qualified orders. Such procedures--
                            ``(i) shall be in writing,
                            ``(ii) shall provide for the notification 
                        of each alternate payee specified in a domestic 
                        relations order as entitled to payment of part 
                        B benefits with respect to the personal social 
                        security account (at the address included in 
                        the domestic relations order) of such 
                        procedures promptly upon receipt by such person 
                        of the domestic relations order, and
                            ``(iii) shall permit an alternate payee to 
                        designate a representative for receipt of 
                        copies of notices that are sent to the 
                        alternate payee with respect to a domestic 
                        relations order.
    ``(f) Distribution Upon Death of Participating Individual.--
            ``(1) In general.--If the participating individual dies 
        before all amounts consisting of such individual's part B 
        benefits held in a personal social security account are 
        otherwise distributed in accordance with this section, subject 
        to paragraph (3), such amounts shall be distributed, under 
        regulations which shall be prescribed by the Board--
                    ``(A) 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
                    ``(B) in the case of any amount not distributed as 
                described in paragraph (1), to such individual's 
                estate.
            ``(2) Spousal rights.--Notwithstanding any beneficiary 
        designation made by a participating individual pursuant to 
        paragraph (1), subject to paragraph (3), a surviving spouse of 
        the participating individual shall be entitled to not less than 
        one half of the deceased participating individual's part B 
        benefits payable from the personal social security account. In 
        any case in which compliance with the preceding sentence 
        results in remaining amounts in the personal social security 
        account which are insufficient to provide for distribution to 
        other beneficiaries as provided in the terms governing the 
        account, distributions to such other beneficiaries shall be 
        reduced as necessary on a pro rata basis.
            ``(3) Application towards debts.--Upon the death of the 
        accountholder for a personal social security account, the 
        amount in such account shall be passed through to the estate of 
        such deceased accountholder and, as part of such estate, shall 
        be available, in accordance with State law, to pay debts of the 
        accountholder, including debts of medical creditors of the 
        accountholder.

``SEC. 255. ENFORCEMENT OF CONTRIBUTION REQUIREMENTS.

    ``(a) Penalties for Failure To Establish Social Security Payroll 
Deduction Plan.--Any employer who fails to meet the requirements of 
section 252(b) for any calendar year shall be subject to a civil 
penalty of not to exceed the greater of--
            ``(1) $50,000, or
            ``(2) $1,000 for each eligible individual of such employer 
        as of the beginning of such calendar year.
    ``(b) Penalties for Failure To Make Deductions Required Under 
Plan.--Any employer who fails to timely deduct in full, pursuant to 
section 252(a)(1), the amount from the wages of a participating 
individual required under an applicable social security payroll 
deduction plan, shall be subject to a civil penalty of not to exceed 
$50 for each such failure.
    ``(c) Penalties for Failure To Pay Deducted Wages to Individual 
Social Security Retirement Account.--
            ``(1) In general.--Any employer who--
                    ``(A) fails to timely pay in full, in accordance 
                with section 252(a)(1), such individual's part B 
                personal social security contribution described in 
                section 251(7)(B) to a personal social security account 
                established and maintained for such individual pursuant 
                to section 252(b), or
                    ``(B) fails to timely provide for investment of any 
                such amount, pursuant to section 252(d),
        shall be liable as described in paragraph (2).
            ``(2) Liability.--In the case of any failure described in 
        paragraph (1) by an employer to pay or invest any amount 
        deducted from the wages of a participating individual under a 
        social security payroll deduction plan, the employer--
                    ``(A) shall be subject to a civil penalty of not to 
                exceed 20 percent of the unpaid or uninvested amount, 
                in addition to any penalty under subsection (a), and
                    ``(B) shall be liable to the participating 
                individual for interest on the unpaid or uninvested 
                amount at a rate equal to 133 percent of the Federal 
                short-term rate under section 1274(d)(1) of the 
                Internal Revenue Code of 1986, calculated from the last 
                day by which such amount was required to be so paid or 
                invested to the date on which such amount is so paid or 
                invested.
    ``(d) Penalties for Failure by Self-Employed Individuals To Pay 
Contributions.--
            ``(1) In general.--Any individual who--
                    ``(A) fails to timely pay in full, as required 
                under section 252(a)(2), such individual's part B 
                personal social security contribution described in 
                section 251(7)(B) to a personal social security account 
                established and maintained by such individual pursuant 
                to section 252(c), or
                    ``(B) fails to timely provide for investment of any 
                such amount, pursuant to section 252(d),
        shall be liable as described in paragraph (2).
            ``(2) Liability.--In the case of any failure described in 
        paragraph (1) by an individual to pay an amount or provide for 
        investment of such amount, the individual shall be subject to a 
        civil penalty of not to exceed 20 percent of the unpaid or 
        uninvested amount, plus interest on the unpaid amount at a rate 
        equal to 133 percent of the Federal short-term rate under 
        section 1274(d)(1) of the Internal Revenue Code of 1986, 
        calculated from the last day by which such amount was required 
        to be so paid or invested to the date on which such amount is 
        so paid or invested.
    ``(e) Rules for Application of Section.--
            ``(1) Penalties assessed by commissioner of social 
        security.--Any civil penalty assessed by this section shall be 
        imposed by the Commissioner of Social Security and collected in 
        a civil action.
            ``(2) Compromises.--The Commissioner may compromise the 
        amount of any civil penalty imposed by this section.
            ``(3) Authority to waive penalty in certain cases.--The 
        Commissioner may waive the application of this section with 
        respect to any failure if the Commissioner determines that such 
        failure is due to reasonable cause and not to intentional 
        disregard of rules and regulations.

``SEC. 256. PERSONAL ACCOUNTS MANAGEMENT AND REVIEW BOARD.

    ``(a) Personal Accounts Management and Review Board Established.--
There is hereby established, as an independent agency in the executive 
branch of the Government, a Personal Accounts Management and Review 
Board.
    ``(b) Composition and Appointment.--
            ``(1) In general.--The Board shall be comprised of 9 
        trustees--
                    ``(A) 3 of whom are Government trustees described 
                in paragraph (2), and
                    ``(B) 6 of whom are independent trustees appointed 
                under paragraph (3).
            ``(2) Government trustees.--
                    ``(A) In general.--Of the Government trustees--
                            ``(i) 1 trustee shall be an officer or 
                        employee of the Social Security Administration 
                        who shall be appointed by the Commissioner of 
                        Social Security, shall serve at the pleasure of 
                        the Commissioner, and shall remain, while 
                        serving as a member, as an officer or employee 
                        of the Social Security Administration,
                            ``(ii) 1 trustee shall be the Secretary of 
                        the Treasury, who shall serve ex officio, and
                            ``(iii) 1 trustee shall be an officer or 
                        employee of the Securities and Exchange 
                        Commission who shall be appointed by the 
                        Chairman of the Commission, shall serve at the 
                        pleasure of the Chairman of the Commission, and 
                        shall remain, while serving as a member, as an 
                        officer or employee of the Commission.
                    ``(B) No additional compensation.--Government 
                trustees shall receive no additional compensation for 
                service on the Board, subject to paragraph (4).
            ``(3) Independent trustees.--
                    ``(A) In general.--The independent trustees shall 
                be appointed by the President, by and with the advice 
                and consent of the Senate, of whom one shall be 
                designated by the President as Chairman.
                    ``(B) Length of appointments.--
                            ``(i) Terms.--An independent trustee shall 
                        be appointed for a term of 3 years, except that 
                        of the members first appointed under 
                        subparagraph (A)--
                                    ``(I) the Chairman and one other 
                                independent trustee shall be appointed 
                                for a term of 3 years,
                                    ``(II) two other independent 
                                trustees shall be appointed for a term 
                                of 2 years, and
                                    ``(III) the two remaining 
                                independent trustees shall be appointed 
                                for a term of one year.
                            ``(ii) Vacancies.--
                                    ``(I) 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.
                                    ``(II) Completion of term.--An 
                                individual chosen to fill a vacancy 
                                shall be appointed for the unexpired 
                                term of the trustee replaced.
                            ``(iii) Expiration.--The term of any 
                        trustee shall not expire before the date on 
                        which the trustee's successor takes office.
                    ``(C) Commencement of terms.--The terms of the 
                independent trustees first appointed under this 
                paragraph shall commence on July 1 of the calendar year 
                following the date of the enactment of the SMART Act of 
                2007.
            ``(4) Expenses.--A trustee shall be paid travel, per diem, 
        and other necessary expenses under subchapter I of chapter 57 
        of title 5 of the United States Code while traveling away from 
        such trustee's home or regular place of business in the 
        performance of duties for the Board.
    ``(c) Duties.--The Personal Accounts Management and Review Board 
shall--
            ``(1) operate the Social Security Escrow Fund;
            ``(2) carry out its duties and responsibilities under this 
        title;
            ``(3) designate and regulate qualified social security 
        mutual funds;
            ``(4) designate and regulate qualified social security 
        annuities; and
            ``(5) make such recommendations to the President and the 
        Congress as it may from time to time deem advisable with 
        respect to the operation of the programs established under this 
        title (relating to the old age, survivors, and disability 
        insurance program and the personal social security savings 
        program), title VIII (relating to special benefits relating to 
        certain World War II veterans), title XVI (relating to 
        supplemental security income for the aged, blind, and 
        disabled), title XVIII (relating to Medicare), and title XIX 
        (relating to Medicaid).
The power of the Board to regulate qualified social security mutual 
funds and qualified social security annuities shall not be construed to 
limit the regulatory authority of other Federal and State agencies that 
may regulate such funds or annuities.
    ``(d) Seal.--The Board may adopt, alter, and use a seal.
    ``(e) Exercise of Powers.--
            ``(1) Action by quorum.--The Board shall perform the duties 
        and exercise the powers of the Board on a majority vote of a 
        quorum of the Board. Two of the Government trustees plus four 
        of the independent trustees shall constitute a quorum for the 
        transaction of business.
            ``(2) 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.
    ``(f) Meetings.--The Board shall meet--
            ``(1) not less than once during each month, and
            ``(2) at additional times at the call of the Chairman or a 
        quorum of the Board.
    ``(g) Limitations on Investments.--The Board may not direct any 
person to invest or to cause to be invested any amounts held in the 
personal social security account of any individual in a specific 
qualified social security mutual fund or to dispose of or cause to be 
disposed of any such investment.
    ``(h) Discharge of Responsibilities.--The trustees shall discharge 
their responsibilities solely in the interest of the participating 
individuals and their beneficiaries under this part.''.
    (b) Social Security Escrow Fund.--
            (1) Merger of federal old-age and survivors insurance trust 
        fund and federal disability insurance trust fund into social 
        security escrow fund.--Section 201 is amended by striking all 
        that precedes subsection (g) and inserting the following:

                     ``social security escrow fund

             ``Establishment of Social Security Escrow Fund

    ``Sec. 201. (a)(1) In General.--There is established in the 
Treasury of the United States a trust fund to be known as the `Social 
Security Escrow Fund'.
    ``(2) Balance of Fund.--
            ``(A) In general.--Subject to subparagraph (B), the Social 
        Security Escrow Fund shall consist of--
                    ``(i) the securities held by the Federal Old-Age 
                and Survivors Insurance Trust Fund and the Federal 
                Disability Insurance Trust Fund and the amount standing 
                to the credit of such Trust Funds on January 1, 2008, 
                which securities and amount the Secretary of the 
                Treasury shall transfer to the Social Security Escrow 
                Fund,
                    ``(ii) such gifts and bequests as may be made as 
                provided in subsection (i)(1), and
                    ``(iii) all amounts transferred to or deposited 
                into the Social Security Escrow Fund pursuant to 
                subsection (b).
            ``(B) Investments and disbursements.--The balance in the 
        Social Security Escrow Fund shall reflect the performance of 
        investments of amounts in the Social Security Escrow Fund 
        attributable to transferred or deposited amounts described in 
        subparagraph (A) and reductions incurred through any 
        disbursements from the Social Security Escrow Fund pursuant to 
        subsection (d).
    ``(3) Trustees.--The Personal Accounts Management and Review Board 
(hereinafter in this section referred to as the `Board') shall serve as 
trustees of the Social Security Escrow Fund. The Secretary of the 
Treasury shall serve as Managing Trustee of the Social Security Escrow 
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 Social Security Escrow Fund 
are hereby appropriated for payment of such amounts and shall remain 
available without fiscal year limitation.

              ``Deposits Into Social Security Escrow Fund

    ``(b)(1) In General.--During each calendar year, the Secretary of 
the Treasury shall deposit into the Social Security Escrow Fund, from 
amounts available in the general fund of the Treasury, a total amount 
equal to the sum of--
            ``(A) 100 percent of the employer contribution (as defined 
        in paragraph (3)) for the calendar year;
            ``(B) the amount of the taxes imposed under section 3101(b) 
        of the Internal Revenue Code of 1986 on the wages paid during 
        the calendar year and the amount of the taxes imposed under 
        section 1401(b) of such Code on self-employment income derived 
        during taxable years ending with or during the calendar year;
            ``(C) amounts received pursuant to section 254(a) (relating 
        to disposition of part B benefits of participating individuals 
        electing to receive part A retirement benefits);
            ``(D) the budget reform amount (as defined in section 6(a) 
        of the SMART Act of 2007) for the fiscal year ending during 
        such calendar year; and
            ``(E) all amounts appropriated for periods during such 
        calendar year pursuant to section 1601 (relating to 
        supplemental security income).
    ``(2) Transfers Based on Estimates.--
            ``(A) In general.--The amounts deposited pursuant to 
        paragraph (1) shall be transferred in at least monthly 
        installments to the Social Security Escrow Fund.
            ``(B) Determination of amounts.--The amounts transferred 
        under subparagraph (A) shall be transferred from time to time 
        from the general fund of the Treasury, such amounts to be 
        determined on the basis of estimates, made by the Commissioner 
        of Social Security based on the best information available and 
        certified to the Secretary of the Treasury, of the total amount 
        specified in paragraph (1). Proper adjustments shall be made in 
        amounts subsequently transferred to the extent prior estimates 
        were in excess of or were less than the actual amounts to be 
        transferred. The Secretary of the Treasury and the Board shall 
        timely provide to the Commissioner of Social Security any 
        information requested by the Commissioner that the Commissioner 
        deems necessary to make the estimates and determinations 
        required by this subparagraph.
    ``(3) Employer Contribution.--For purposes of paragraph (1)(A), the 
term `employer contribution' means, for any calendar year, the sum of--
            ``(A) the amount of the taxes imposed under section 3111 of 
        the Internal Revenue Code of 1986 with respect to the wages 
        paid during the calendar year, and
            ``(B) 50 percent of the amount of the taxes imposed under 
        section 1401 of such Code on self-employment income derived 
        during taxable years ending with or during such calendar year.

    ``Investment of Amounts Held in the Social Security Escrow Fund

    ``(c) The Board shall invest the amounts held in the Social 
Security Escrow Fund in a diversified portfolio of investment grade 
bonds and debentures issued by corporations, partnerships, limited 
liability companies, or trusts, whose principal places of business are 
located in the United States.

            ``Disbursements From Social Security Escrow Fund

    ``(d)(1) In General.--Except as provided in this section, the sums 
in the Social Security Escrow Fund shall be available for disbursement 
solely--
            ``(A) for payment by the Board, in accordance with 
        certifications by the Commissioner of Social Security pursuant 
        to section 205(i), of--
                    ``(i) part A retirement benefits;
                    ``(ii) monthly insurance benefits under subsections 
                (d), (e), (f), (g), and (h) of section 202;
                    ``(iii) disability insurance benefits under section 
                223;
                    ``(iv) lump sum death benefits under section 
                202(i);
            ``(B) for payment by the Board, in accordance with 
        certifications which shall be made by the Commissioner of 
        Social Security, of supplemental security income benefits under 
        title XVI;
            ``(C) for transfers to the Federal Hospital Insurance Trust 
        Fund, in the amount of Medicare benefits provided under part A 
        of title XVIII;
            ``(D) for administrative expenses payable pursuant to 
        subsection (f); and
            ``(E) to the extent there are excess funds as of the end of 
        any fiscal year, for transfer to the general fund of the 
        Treasury pursuant to paragraph (2)(A).
    ``(2) Treatment of Excess Funds in the Social Security Escrow 
Fund.--
            ``(A) In general.--In any case in which there are excess 
        funds in the Social Security Escrow Fund as of the end of any 
        fiscal year, the Secretary of the Treasury shall, as soon as 
        practicable after the end of such fiscal year, transfer from 
        the such Fund to the general fund of the Treasury an amount 
        equal to the amount of such excess funds.
            ``(B) Budgetary rules in connection with excess funds.--For 
        budgetary rules relating to excess funds in the Social Security 
        Escrow Fund, see section 316 of the Congressional Budget Act of 
        1974 (relating to dedication of social security surpluses to 
        reduction in the public debt).
    ``(3) Excess Funds.--For purposes of this subsection, the term 
`excess funds' means, in connection with any fiscal year, funds held by 
the Social Security Escrow Fund as of the end of the fiscal year in 
excess of $100 billion that the Commissioner of Social Security 
determines will not be necessary in the Social Security Escrow Fund, 
taking into account projected receipts of such Fund and projected 
outlays of such Fund, to meet the obligations set forth in 
subparagraphs (A) through (D) of paragraph (1) within the next 20 
years.
    ``(4) Limitation.--The sums in the Social Security Escrow Fund 
shall not be appropriated for any purpose other than the purposes 
specified in this section and may not be used for any other purpose.

                         ``Borrowing Authorized

    ``(e) If the amounts held by Social Security Escrow Fund are 
insufficient to pay the disbursements authorized and required by this 
section, the Board may issue to the Secretary of the Treasury notes or 
other obligations in an aggregate amount equal to the amount of the 
insufficiency, in such forms and denominations, bearing such 
maturities, and subject to such terms and conditions as may be 
prescribed by such Secretary. Such notes or other obligations shall 
bear interest at a rate determined by such Secretary, taking into 
consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities 
during the month preceding the issuance of such notes or other 
obligations of the Board. Such Secretary shall purchase any notes or 
other obligations issued by the Board under this subsection, and for 
that purpose such Secretary may use as a public debt transaction the 
proceeds from the sale of any securities issued under chapter 31 of 
title 31, United States Code, and the purposes for which securities may 
be issued under that chapter are extended to include any purchase of 
such notes and obligations. Such Secretary may at any time sell any of 
the notes or other obligations acquired by such Secretary under this 
subsection. All redemptions, purchases, and sales by such Secretary of 
such notes or other obligations shall be treated as public debt 
transactions of the United States.

               ``Government Accountability Office Report

    ``(f)(1) In General.--The Comptroller General of the United States 
shall annually audit the financial statements of the Social Security 
Escrow Fund and report to each House of the Congress on--
            ``(A) the operations of the Social Security Escrow Fund,
            ``(B) the reasonableness of the administrative expenses 
        incurred,
            ``(C) the advisability of the investments made with funds 
        in the Social Security Escrow Fund, and
            ``(D) such other matters as the Comptroller General may 
        deem desirable.
    ``(2) Recommendations.--The Secretary of the Treasury, the 
Commissioner of Social Security, and the Board shall timely provide the 
Comptroller General with whatever information is requested by the 
Comptroller General. The Comptroller General shall, in the Comptroller 
General's report, make recommendations to each House of the Congress 
and the Board as he deems appropriate or advisable.''.
            (2) Conforming amendments; rule of construction.--
                    (A) Amendments to section 201.--Section 201 of such 
                Act is amended further--
                            (i) in subsection (g)(1)(A), by striking 
                        ``Managing Trustee of the Trust Funds'' and all 
                        that follows through ``into the Treasury'' and 
                        inserting ``Secretary of the Treasury shall pay 
                        from the Social Security Escrow Fund, the 
                        Federal Hospital Insurance Trust Fund, and the 
                        Federal Supplementary Insurance Trust Fund 
                        (hereinafter in this paragraph referred to as 
                        the `Trust Funds') into the Treasury'';
                            (ii) by striking ``Managing Trustee'' each 
                        place such term otherwise appears and inserting 
                        ``Secretary of the Treasury'';
                            (iii) by striking the last 2 sentences of 
                        subsection (g)(1)(A);
                            (iv) in subsection (g)(1)(B)(i), by 
                        striking subclauses (II) and (III) and 
                        inserting the following:
                            ``(II) the portion of such costs which 
                        should have been borne by the Social Security 
                        Escrow Fund,'',
                        and by redesignating subclasses (IV) and (V) as 
                        subclauses (III) and (IV), respectively;
                            (v) in subsection (g)(1)(C), by striking 
                        ``Secretary shall'' and inserting ``Secretary 
                        of Health and Human Services shall'';
                            (vi) in subsection (g)(1)(C)(ii), by 
                        inserting ``of Health and Human Services'' 
                        after ``Secretary'';
                            (vii) in subsection (g)(1)(D), by inserting 
                        ``of Health and Human Services'' after 
                        ``Secretary'';
                            (viii) in subsection (g)(2), by striking 
                        the last sentence;
                            (ix) in subsection (g)(4), by striking 
                        ``Board of Trustees of such Trust Funds'' and 
                        inserting ``Board'', and by striking ``Boards 
                        of Trustees of such Trust Funds consider such 
                        action advisable, they'' and inserting ``Board 
                        considers such action advisable, the Board'';
                            (x) by striking subsection (h);
                            (xi) in subsection (i)(1), by striking 
                        ``the Federal Old-Age and Survivors Insurance 
                        Trust Fund, the Federal Disability Insurance 
                        Trust Fund,'' and inserting ``the Social 
                        Security Escrow Fund,'';
                            (xii) in subsection (i)(2)(B), by striking 
                        ``Federal Old-Age and Survivors Insurance Trust 
                        Fund'' and inserting ``Social Security Escrow 
                        Fund'';
                            (xiii) in subsection (j), by striking ``the 
                        Federal Old-Age and Survivors Insurance Trust 
                        Fund, or the Federal Disability Insurance Trust 
                        Fund (as determined appropriate by the 
                        Commissioner of Social Security)'' and 
                        inserting ``the Social Security Escrow Fund'';
                            (xiv) in subsection (k), by striking ``the 
                        Federal Disability Insurance Trust Fund and the 
                        Federal Old-Age Insurance Trust Fund, as 
                        determined appropriate by the Commissioner of 
                        Social Security'' and inserting ``the Social 
                        Security Escrow Fund'';
                            (xv) by striking subsection (l);
                            (xvi) in subsection (m)(3), by striking 
                        ``one of the Trust Funds'' and inserting ``the 
                        Social Security Escrow Fund'', and by striking 
                        ``such Trust Fund'' each place it appears and 
                        inserting ``such Fund'';
                            (xvii) by striking subsection (n); and
                            (xviii) by redesignating subsections (i), 
                        (j), (k), and (m) (as amended by this 
                        subparagraph) as subsections (h), (i), (j), and 
                        (k), respectively.
                    (B) Other conforming amendments.--
                            (i) Title II of the Social Security Act is 
                        amended--
                                    (I) in section 202(x)(2)(B)(iii) 
                                (42 U.S.C. 402(x)(2)(B)(iii)), by 
                                striking ``the Federal Old-Age and 
                                Survivors Insurance Trust Fund and the 
                                Federal Disability Insurance Trust 
                                Fund, as appropriate,'' and inserting 
                                ``the Social Security Escrow Fund'';
                                    (II) in section 206(d)(5) (42 
                                U.S.C. 406(d)(5)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund and the Federal Disability 
                                Insurance Trust Fund, as appropriate'' 
                                and inserting ``the Social Security 
                                Escrow Fund'';
                                    (III) in section 208(b)(5) (42 
                                U.S.C. 408(b)(5)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, or the Federal Disability 
                                Insurance Trust Fund, as appropriate'' 
                                and inserting ``the Social Security 
                                Escrow Fund'';
                                    (IV) in section 215(i)(1)(F) (42 
                                U.S.C. 415(i)(1)(F)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund'' each place it appears and 
                                inserting ``the Social Security Escrow 
                                Fund'';
                                    (V) in section 217(g)(1)(A) (42 
                                U.S.C. 417(g)(1)(A)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, the Federal Disability 
                                Insurance Trust Fund, and'' and 
                                inserting ``the Social Security Escrow 
                                Fund and'';
                                    (VI) in section 221(e) (42 U.S.C. 
                                421(e)), by striking the last sentence;
                                    (VII) in section 222(d)(1) (42 
                                U.S.C. 422(d)(1)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund and the Federal Disability 
                                Insurance Trust Fund'' and inserting 
                                ``the Social Security Escrow Fund'';
                                    (VIII) by striking section 
                                222(d)(4) (42 U.S.C. 422(d)(4)) and 
                                inserting the following:
            ``(4) The Commissioner of Social Security shall determine 
        according to such methods and procedures as the Commissioner 
        may deem appropriate the total amount to be reimbursed by money 
        paid from the Social Security Escrow Fund for the cost of 
        services under this subsection.''; and
                                    (IX) in section 228(g) (42 U.S.C. 
                                428(g)), by striking ``the Federal Old-
                                Age and Survivors Insurance Trust 
                                Fund'' and inserting ``the Social 
                                Security Escrow Fund''.
                            (ii) Title VII of such Act is amended--
                                    (I) in section 703(j) (42 U.S.C. 
                                903(j)), by striking ``the Federal 
                                Disability Insurance Trust Fund, the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund,'' and inserting ``the 
                                Social Security Escrow Fund'';
                                    (II) in section 709 (42 U.S.C. 
                                910), by striking ``the Board of 
                                Trustees of the Federal Old-Age and 
                                Survivors Insurance Trust Fund and the 
                                Federal Disability Insurance Trust 
                                Fund, the Federal Hospital Insurance 
                                Trust Fund, or the Federal 
                                Supplementary Medical Insurance Trust 
                                Fund determines at any time that the 
                                balance ratio of any such Trust Fund'' 
                                in subsection (a) and inserting ``the 
                                Personal Accounts Management and Review 
                                Board or the Board of Trustees of the 
                                Federal Hospital Insurance Trust Fund 
                                or the Federal Supplementary Medical 
                                Insurance Trust Fund determines at any 
                                time that the balance ratio of the 
                                trust fund consisting of the Social 
                                Security Escrow Fund (in the case of 
                                the Personal Accounts Management and 
                                Review Board) or either the Federal 
                                Hospital Insurance Trust Fund or the 
                                Federal Supplementary Medical Insurance 
                                Trust Fund (in the case of such Board 
                                of Trustees)'', by striking ``for 
                                amounts which will be paid from the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund and the Federal Disability 
                                Insurance Trust Fund,'' and inserting 
                                ``for amounts which will be paid from 
                                the Social Security Escrow Fund,'' and 
                                by striking ``Trust Fund'' each other 
                                place it appears and inserting ``trust 
                                fund''; and
                                    (III) in section 710(a) (42 U.S.C. 
                                911(a)) by striking ``the Federal Old-
                                Age and Survivors Insurance Trust Fund 
                                and the Federal Disability Insurance 
                                Trust Fund'' and inserting ``the Social 
                                Security Escrow Fund''.
                            (iii) Title XI of such Act is amended--
                                    (I) in section 1106 (42 U.S.C. 
                                1306), by striking by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, the Federal Disability 
                                Insurance Trust Fund'' and inserting 
                                ``the Social Security Escrow Fund,'';
                                    (II) in section 1129(e)(2)(A) (42 
                                U.S.C. 1320a-8(e)(2)(A)), by striking 
                                ``shall be transferred'' and all that 
                                follows and inserting ``shall be 
                                transferred to the Secretary of the 
                                Treasury, and such amounts shall be 
                                deposited by such Secretary into the 
                                Social Security Escrow Fund.'';
                                    (III) in section 1145(c) (42 U.S.C. 
                                1320b-15(c)), by striking paragraphs 
                                (1) and (2) and inserting the 
                                following:
            ``(1) the Social Security Escrow Fund;'',
                                and by redesignating paragraphs (3) and 
                                (4) as paragraphs (2) and (3), 
                                respectively; and
                                    (IV) in section 1148(j)(1)(A) (42 
                                U.S.C. 1320b-19(j)(1)(A)), by striking 
                                ``the Federal Old-Age and Survivors 
                                Insurance Trust Fund and the Federal 
                                Disability Insurance Trust Fund'' and 
                                inserting ``the Social Security Escrow 
                                Fund'', and by striking the last 
                                sentence.
                            (iv) Title XVIII of such Act is amended--
                                    (I) in section 1817in section 
                                1817(g) (42 U.S.C. 1395i(g)), by 
                                striking ``from the Federal Old-Age and 
                                Survivors Insurance Trust Fund and from 
                                the Federal Disability Insurance Trust 
                                Fund'' and inserting ``from the Social 
                                Security Escrow Fund'';
                                    (II) in section 1817(j)(1) (42 
                                U.S.C. 1395i(j)(1)), by striking ``from 
                                either the Federal Old-Age and 
                                Survivors Insurance Trust Fund or the 
                                Federal Disability Insurance Trust 
                                Fund'' and inserting ``from the Social 
                                Security Escrow Fund'';
                                    (III) in section 1817(j)(3)(B)(i) 
                                (42 U.S.C. 1395i(j)(3)(B)(i)), by 
                                striking ``the Federal Old-Age and 
                                Survivors Insurance Trust Fund or the 
                                Federal Disability Insurance Trust 
                                Fund'' and inserting ``the Social 
                                Security Escrow Fund'';
                                    (IV) in section 1817(j)(3)(B)(i) 
                                (42 U.S.C. 1395i(j)(3)(B)(i)), by 
                                striking ``the Federal Old-Age and 
                                Survivors Insurance Trust Fund and the 
                                Federal Disability Insurance Trust 
                                Fund'' and inserting ``the Social 
                                Security Escrow Fund'';
                                    (V) in section 1817(j)(5)(B)(i) (42 
                                U.S.C. 1395i(j)(5)(B)(i)), by striking 
                                ``the Federal Old-Age and Survivors 
                                Insurance Trust Fund and the Federal 
                                Disability Insurance Trust Fund'' and 
                                inserting ``the Social Security Escrow 
                                Fund'';
                                    (VI) in section 1817(j)(3)(B)(ii) 
                                (42 U.S.C. 1395i(j)(3)(B)(ii)), by 
                                striking ``the Federal Old-Age and 
                                Survivors Insurance Trust Fund and the 
                                Federal Disability Insurance Trust 
                                Fund'' and inserting ``the Social 
                                Security Escrow Fund'';
                                    (VII) in section 1817, by adding at 
                                the end the following new subsection:
    ``(l) Transfers From Social Security Escrow Fund.--There are hereby 
transferred periodically to the Trust Fund from the Social Security 
Escrow Fund amounts provided under section 201(d)(1)(C).'';
                                    (VIII) in section 1840(a)(2) (42 
                                U.S.C. 1395s(a)(2)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund and the Federal Disability 
                                Insurance Trust Fund'' and inserting 
                                ``the Social Security Escrow Fund''; 
                                and
                                    (IX) in section 1841(f) (42 U.S.C. 
                                1395t(f)), by striking ``from the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund and from the Federal 
                                Disability Insurance Trust Fund'' and 
                                inserting ``from the Social Security 
                                Escrow Fund''.
                            (v) Amendments to the railroad retirement 
                        act of 1974.--Section 7 of the Railroad 
                        Retirement Act of 1974 (45 U.S.C. 231e) is 
                        amended--
                                    (I) in subsection (b)(2) (45 U.S.C. 
                                231e(b)(2)), by striking ``the Managing 
                                Trustee of the Federal Old-Age and 
                                Survivors Insurance Trust Fund and the 
                                Federal Disability Insurance Trust 
                                Fund'' and inserting ``the Secretary of 
                                the Treasury'';
                                    (II) in subsection (c)(2) (45 
                                U.S.C. 231e(c)(2)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, the Federal Disability 
                                Insurance Trust Fund, and the Federal 
                                Hospital Insurance Trust Fund would 
                                place each such Trust Fund'' and 
                                inserting ``either of the trust funds 
                                consisting of the Social Security 
                                Escrow Fund and the Federal Hospital 
                                Insurance Trust Fund would place such 
                                trust fund'', by striking ``from the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, the Federal Disability 
                                Insurance Trust Fund, or the Federal 
                                Hospital Insurance Trust or to any such 
                                Trust Fund'' and inserting ``from the 
                                Social Security Escrow Fund or the 
                                Federal Hospital Insurance Trust Fund 
                                or to either such trust fund'' and by 
                                striking ``Trust Fund'' each other 
                                place it appears and inserting ``trust 
                                fund''; and
                                    (III) in subsection (c)(4) (45 
                                U.S.C. 231(c)(4)), by striking ``the 
                                Federal Old-Age and Survivors Insurance 
                                Trust Fund, the Federal Disability 
                                Insurance Trust Fund, and the Federal 
                                Hospital Insurance Trust Fund'' and 
                                inserting ``the trust funds consisting 
                                of the Social Security Escrow Fund and 
                                the Federal Hospital Insurance Trust 
                                Fund'', and by striking ``Trust Funds'' 
                                each place it appears and inserting 
                                ``trust funds''.
                            (vi) Rule of construction.--Whenever any 
                        reference is made in any provision of law 
                        (other than this title or a provision of law 
                        amended by this title), regulation, rule, 
                        record, or document to the Federal Old-Age and 
                        Survivors Insurance Trust Fund, the Federal 
                        Disability Insurance Trust Fund, or both such 
                        Trust Funds, such reference shall be considered 
                        a reference to the Social Security Escrow Fund.
    (c) Amounts Deducted To Be Shown on W-2 Statements.--Subsection (a) 
of section 6051 of the Internal Revenue Code of 1986 (relating to 
receipts for employees) is amended--
            (1) by striking `and' at the end of paragraph (8);
            (2) by striking the period at the end of paragraph (9) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (9) the following new 
        paragraph:
            ``(10) the total amount deducted from the employee's wages 
        under a social security payroll deduction plan established 
        under part B of title II of the Social Security Act.''.
    (d) Exemption From ERISA Requirements.--Subsection (b) of section 4 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1003(b)) is amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; or''; and
            (3) by adding at the end the following new paragraph:
            ``(6) such plan is a social security payroll deduction plan 
        established under part B of title II of the Social Security 
        Act.''.
    (e) Compensation of Personal Accounts Management and Review 
Board.--
            (1) Compensation of chairman.--Section 5314 of title 5 of 
        the United States Code (relating to positions at level III of 
        the Executive Schedule) is amended by adding at the end the 
        following ``.''
            ``Chairman, Personal Accounts Management and Review 
        Board.''.
            (2) Compensation of independent trustees.--Section 5315 of 
        such title 5 (relating to positions at level IV of the 
        Executive Schedule) is amended by adding at the end the 
        following:
            ``Independent Trustee (other than Chairman), Personal 
        Accounts Management and Review Board.''.
    (f) Conforming Amendments.--Section 201(h) of such Act (42 U.S.C. 
401(h)) is amended--
            (1) by striking ``All other'' in the second sentence and 
        inserting ``Except as provided in section 256, all other''; and
            (2) by adding at the end the following new sentence: ``Any 
        reference in this part to benefits under this title shall be 
        deemed a reference to benefits entitlement to which arises 
        under this part.''.
    (g) Effective Date.--The amendments made by this section shall take 
effect January 1 of the calendar year following the date of the 
enactment of this Act.

SEC. 3. MEDICARE PROGRAM REVISION.

    (a) In General.--Title XVIII of the Social Security Act is amended 
by inserting after section 1808 the following new section:

   ``medicare program revisions in connection with establishment of 
                   personal social security accounts

    ``Sec. 1809.  (a) Phase-in of Increased Coinsurance.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, there is hereby imposed, with respect to the amount of 
        benefits for items and services furnished in a year (beginning 
        with 2032) under this title, coinsurance in the participation 
        percentage specified in paragraph (2) for the year. Such 
        coinsurance shall apply after the application of any cost-
        sharing (including deductibles and copayments) that are 
        otherwise applicable under this title.
            ``(2) Participation percentage.--The participation 
        percentage for any year shall be determined in accordance with 
        the following:


 
 
 
``Participation percentage               Year
  2.00 percent.........................  2032
  4.00 percent.........................  2033
  6.00 percent.........................  2034
  8.00 percent.........................  2035
  11.00 percent........................  2036
  14.00 percent........................  2037
  17.00 percent........................  2038
  20.00 percent........................  2039
  24.00 percent........................  2040
  28.00 percent........................  2041
  32.00 percent........................  2042
  36.00 percent........................  2043
  40.00 percent........................  2044
  45.00 percent........................  2045
  50.00 percent........................  2046
  55.00 percent........................  2047
  60.00 percent........................  2048
  65.00 percent........................  2049
  70.00 percent........................  2050
  75.00 percent........................  2051
   80.00 percent.......................  2052
  85.00 percent........................  2053
   90.00 percent.......................  2054
  95.00 percent........................  2055
  100.00 percent.......................  2056

    ``(b) Rules Relating to Application of Additional Coinsurance.--
            ``(1) Part d.--In applying subsection (a) under part D (and 
        under part C to MA-PD plans)--
                    ``(A) the standard prescription drug coverage under 
                section 1860D-2(b) shall be modified through the 
                application of the additional coinsurance under 
                subsection (a); and
                    ``(B) in applying section 1860D-14, such 
                coinsurance shall be treated as beneficiary coinsurance 
                described in section 1860D-2(b)(2).
            ``(2) Medicare savings program.--In applying title XIX, the 
        additional coinsurance under subsection (a) shall be treated as 
        coinsurance described in section 1905(p)(3)(B).
            ``(3) Medigap.--The benefits required of medicare 
        supplemental policies under section 1882 shall be determined 
        without regard to such additional coinsurance and no payments 
        shall be made under such a policy for such additional 
        coinsurance.
            ``(4) Group health plans.--Unless otherwise specifically 
        provided after the date of the enactment of this section, no 
        provision of any group health plan that refers to coinsurance 
        or cost-sharing under this title shall be treated as including 
        such additional coinsurance.
            ``(5) Coverage.--Nothing in this section shall be construed 
        as preventing the payment of additional coinsurance under 
        subsection (a) from being made--
                    ``(A) from proceeds from a personal social security 
                account under section 252; or
                    ``(B) from coverage under a high deductible health 
                plan (as defined in section 223(c)(2) of the Internal 
                Revenue Code of 1986) or under any other health policy 
                or plan, other than a medicare supplemental policy.
    ``(c) Limitation on Reelection of Part B or Part D Coverage.--On or 
after January 1, 2032, if an individual is eligible for coverage under 
part B or part D and--
            ``(1) does not elect such coverage, or
            ``(2) elects such coverage and subsequently change the 
        election so as to no longer have such coverage,
such an election shall be irrevocable and the individual may not 
subsequently elect the respective coverage.''.
    (b) Requirement for High Deductible Insurance for Medicare 
Retirees.--
            (1) In general.--For each month (beginning with January 
        following the period of 25 calendar years following the date of 
        the enactment of this Act) in which an individual is 65 years 
        of age or older and is eligible for benefits under part A, or 
        to enroll for benefits under part B, of title XVIII of the 
        Social Security Act, the individual is required to be enrolled 
        under a high deductible health plan (as defined in section 
        223(c)(2) of the Internal Revenue Code of 1986) or under 
        another health benefits plan that includes benefits at least as 
        comprehensive as those provided in such a high deductible 
        health plan.
            (2) Imposition of tax on failure to obtain coverage.--
        Subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by adding at the end the following new part:

 ``PART VIII--TAX ON FAILURE OF MEDICARE RETIREES TO OBTAIN QUALIFIED 
                       HEALTH INSURANCE COVERAGE

``Sec. 59B. Failure of Medicare retirees to obtain qualified health 
                            insurance coverage.

``SEC. 59B. FAILURE OF MEDICARE RETIREES TO OBTAIN QUALIFIED HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--In the case of any individual who is eligible 
for benefits under part A, or to enroll for benefits under part B, of 
title XVIII of the Social Security Act, there is hereby imposed a tax 
with respect to each month beginning in the taxable year with respect 
to which such individual is not covered under qualified health 
insurance at all times during such month.
    ``(b) Amount of Tax.--The tax imposed under subsection (a) with 
respect to any individual for any month shall be equal to the greater 
of--
            ``(1) the amount determined by the Secretary of Health and 
        Human Services to be equal to the cost of coverage under a high 
        deductible health plan for such month, or
            ``(2) \1/12\ of the increase in such individual's tax 
        liability which would occur under section 1 for the taxable 
        year in which such month begins if section 139B did not apply 
        for such taxable year.
    ``(c) Exception for Months Before Individual Attains Age 65.--
Subsection (a) shall not apply with respect to any individual for any 
month unless such individual has attained age 65 as of the first day of 
such month.
    ``(d) Qualified Health Insurance.--For purposes of this section, 
the term `qualified health insurance' means a high deductible health 
plan (as defined in section 223(c)(2) of the Internal Revenue Code of 
1986) or another health benefits plan that includes benefits at least 
as comprehensive as those provided in such a high deductible health 
plan.''.
            (3) Notification of treasury by hhs of failures.--If the 
        Secretary of Health and Human Services determines that an 
        individual has failed to meet the requirement of paragraph (1) 
        for a month, the Secretary shall inform the Secretary of the 
        Treasury of such fact.
            (4) Availability of tax receipts.--Amounts collected under 
        section 59B of the Internal Revenue Code of 1986 shall be 
        deposited into an account in the Treasury that shall be 
        available to the Secretary of Health and Human Services to 
        reimburse hospitals and other health care providers for bad 
        debts related to the provision of health care services to 
        individuals with respect to whom a tax is imposed under such 
        section.

SEC. 4. EMPLOYMENT TAXES, TAX ON SELF-EMPLOYMENT INCOME.

    (a) FICA Tax on Employers.--Section 3111 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subsection:
    ``(d) Reduction in Rate of Tax to Reflect Funding of Social 
Security Escrow Fund.--
            ``(1) In general.--If the Secretary makes the certification 
        described in paragraph (2) in any calendar year, the rate of 
        tax imposed by subsection (a) shall be reduced by the Secretary 
        for the next calendar year to a rate such that--
                    ``(A) the Social Security Escrow Fund is projected 
                not to have excess funds during such next calendar 
                year, and
                    ``(B) the rate of tax imposed by section 1401(a) is 
                equal to the sum of the tax imposed by subsection (a) 
                and section 3101(a).
            ``(2) Certification.--If in any calendar year the Social 
        Security Escrow Fund is projected--
                    ``(A) to have excess funds during the next calendar 
                year, and
                    ``(B) to have no need to borrow funds for the next 
                10 calendar years,
        then the Secretary shall certify such projection not later than 
        September 30th of calendar year in which such projection was 
        made.
            ``(3) Excess funds.--For purposes of this subsection, the 
        term `excess funds' means that the Social Security Escrow Fund 
        will not have a balance below $100 billion at any time during 
        the calendar year.''.
    (b) Tax on Self-Employment Income.--Section 1401 of such Code is 
amended by adding at the end the following new subsections:
    ``(d) Reduction in Rate of Tax To Reflect Funding of Social 
Security Escrow Fund.--
            ``(1) In general.--If the Secretary makes the certification 
        described in paragraph (2) in any calendar year, the rate of 
        tax imposed by subsection (a) shall be reduced by the Secretary 
        for taxable years beginning in the next calendar year to a rate 
        such that--
                    ``(A) the Social Security Escrow Fund is projected 
                not to have excess funds during such next calendar 
                year, and
                    ``(B) the rate of tax imposed by subsection (a) is 
                equal to the sum of the tax imposed by section 3111(a) 
                and section 3101(a).
            ``(2) Certification.--If in any calendar year the Social 
        Security Escrow Fund is projected by the Social Security 
        Administration--
                    ``(A) to have excess funds during the next calendar 
                year, and
                    ``(B) to have no need to borrow funds for the next 
                10 calendar years,
        then the Secretary shall certify such projection not later than 
        September 30th of calendar year in which such projection was 
        made.
            ``(3) Excess funds.--For purposes of the preceding 
        paragraph, excess funds means that the Social Security Escrow 
        Fund will not have a balance below $100 billion at any time 
        during the calendar year.
    ``(e) Reduction in Rate of Tax To Reflect Funding of Personal 
Social Security Account.--The amount of the tax which would (but for 
this subsection) be imposed by subsection (a) on the self-employment 
income of an individual for a taxable year shall be reduced (but not 
below zero) by any amount the self-employed individual deposits in the 
personal social security account of the individual under section 
251(b)(1) of the Social Security Act for the taxable year.''.
    (c) FICA Tax on Employees.--Section 3101 of such Code is amended by 
adding at the end the following new subsection:
    ``(d) Reduction in Rate of Tax To Reflect Funding of Personal 
Social Security Account.--The amount of the tax which would (but for 
this subsection) be imposed by subsection (a) on the income of any 
individual for any calendar year shall be reduced (but not below zero) 
by any amount the employer of such individual pays to the individual's 
personal social security account under section 251(a)(2)(B) of the 
Social Security Act for the calendar year.''.
    (d) Social Security and Medicare Contributions Not Required With 
Respect to Retirees.--
            (1) Section 3101 of such Code is amended by adding at the 
        end the following new subsection:
    ``(e) No FICA Tax With Respect to Individual Who Has Attained 
Retirement Age.--The tax imposed by this section shall not be imposed 
on the income of any individual who has attained retirement age (as 
defined in section 216(l) of the Social Security Act).''.
            (2) Section 3111 of such Code, as amended by this section, 
        is amended by adding at the end the following new subsection:
    ``(e) No FICA Tax With Respect to Individual Who Has Attained 
Retirement Age.--The tax imposed by this section shall not be imposed 
with respect to the wages of any individual who has attained retirement 
age (as defined in section 216(l) of the Social Security Act).''.
            (3) Section 1401 of such Code, as amended by this section, 
        is amended by adding at the end the following new subsection:
    ``(f) No SECA Tax With Respect to Individual Who Has Attained 
Retirement Age.--The tax imposed by this section shall not be imposed 
on the self-employment income of any individual who has attained 
retirement age (as defined in section 216(l) of the Social Security 
Act).''.

SEC. 5. TAX TREATMENT OF DISTRIBUTIONS.

    (a) In General.--
            (1) Paragraph (1) of Section 86(d) of the Internal Revenue 
        Code of 1986 (relating to social security benefit) is amended 
        by adding at the end the following new flush sentence:
        ``Such term does not include any distribution from a personal 
        social security account or any amount received as an annuity 
        under a qualified social security annuity.''.
            (2) Part III of subchapter B of chapter 1 of such Code 
        (relating to items specifically excluded from gross income) is 
        amended by inserting after section 139A the following new 
        section:

``SEC. 139B. DISTRIBUTIONS FROM PERSONAL SOCIAL SECURITY ACCOUNTS AND 
              QUALIFIED SOCIAL SECURITY ANNUITIES.

    ``Gross income shall not include any distribution from a personal 
social security account or any amount received as an annuity under a 
qualified social security annuity, including any disinvestment and 
transfer pursuant to section 252(f) of the Social Security Act.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions and amounts received as an annuity after the 
date of the enactment of this Act.

SEC. 6. FEDERAL BUDGET REFORMS.

    (a) Annual Transfer of Budget Reform Amount.--Not later than 
November 30 of each calendar year beginning after the date of the 
enactment of this Act, the Secretary of Treasury shall transfer, from 
funds available in the general fund of the Treasury to the Social 
Security Escrow Fund, the budget reform amount (if any) for the fiscal 
year ending on September 30 of such year. Such budget reform amount for 
each such fiscal year is hereby appropriated, and shall remain 
available without fiscal year limitation, for the purposes set forth in 
section 252(b)(1)(D) of the Social Security Act (as amended by this 
Act).
    (b) Budget Reform Amount Defined.--For purposes of this section, 
the term ``budget reform amount'' means, for any fiscal year, any tax 
revenues received by the Government of the United States during the 
previous fiscal year in excess of the target revenue amount for such 
previous fiscal year.
    (c) Target Revenue Amount.--For purposes of this section, the 
target revenue amount for a fiscal year is the amount set forth in 
connection with such fiscal year in the following table:


 
 
 
For the following fiscal year:           The target revenue amount is:
  2006.................................  $1,956,015,000
  2007.................................  $2,029,298,000
  2008.................................  $2,096,757,000
  2009.................................  $2,164,269,000
  2010.................................  $2,226,583,000
  2011.................................  $2,289,781,000
  2012.................................  $2,351,340,000
  2013.................................  $2,414,388,000
  2014.................................  $2,476,624,000
  2015.................................  $2,539,686,000
  2016.................................  $2,602,374,000
  2017.................................  $2,661,620,000
  2018.................................  $2,713,839,000
  2019.................................  $2,759,941,000
  2020.................................  $2,801,574,000
  2021.................................  $2,844,392,000
  2022.................................  $2,883,904,000
  2023.................................  $2,930,783,000
  2024.................................  $2,979,408,000
  2025.................................  $3,025,851,000
  2026.................................  $3,076,055,000
  2027.................................  $3,125,712,000
  2028.................................  $3,176,333,000
  2029.................................  $3,223,483,000
  2030.................................  $3,274,179,000
  2031.................................  $3,323,715,000
  2032.................................  $3,372,756,000
  2033.................................  $3,426,555,000
  2034.................................  $3,485,485,000
  2035.................................  $3,541,705,000
  2036.................................  $3,599,813,000
  2037.................................  $3,666,494,000
  2038.................................  $3,735,584,000
  2039.................................  $3,809,846,000
  2040.................................  $3,883,455,000
  2041.................................  $3,955,701,000
  2042.................................  $4,033,543,000
  2043.................................  $4,113,343,000
  2044.................................  $4,188,523,000
  2045.................................  $4,270,982,000
  2046.................................  $4,351,604,000
  2047.................................  $4,434,549,000
  2048.................................  $4,517,034,000
  2049.................................  $4,600,903,000
  2050.................................  $4,689,922,000
  2051.................................  $4,783,922,000
  2052.................................  $4,873,926,000
  2053.................................  $4,969,960,000
  2054.................................  $5,062,068,000
  2055.................................  $5,159,031,000
  2056.................................  $5,256,136,000
  2057.................................  $5,354,613,000
  2058.................................  $5,447,721,000
  2059.................................  $5,549,438,000
  2060.................................  $5,651,129,000
  2061.................................  $5,752,442,000
  2062.................................  $5,864,053,000
  2063.................................  $5,978,264,000
  2064.................................  $6,091,036,000
  2065.................................  $6,217,270,000
  2066.................................  $6,338,021,000
  2067.................................  $6,454,702,000
  2068.................................  $6,577,762,000
  2069.................................  $6,698,285,000
  2070.................................  $6,819,665,000

    (d) Dedication of Social Security Surpluses to Reduction in the 
Public Debt.--
            (1) In general.--Title III of the Congressional Budget Act 
        of 1974 is amended by adding at the end the following new 
        section:

 ``dedication of social security surpluses to reduction in the public 
                                  debt

    ``Sec. 316.  (a) In General.--
            ``(1) Concurrent resolutions on the budget.--It shall not 
        be in order in the House of Representatives or the Senate to 
        consider any concurrent resolution on the budget, or an 
        amendment thereto or conference report thereon, that would set 
        forth a deficit for any fiscal year for which there are 
        projected excess assets in the Social Security Escrow Fund.
            ``(2) Spending and tax legislation.--It shall not be in 
        order in the House of Representatives or the Senate to consider 
        any bill, joint resolution, amendment, motion, or conference 
        report if--
                    ``(A) the enactment of that bill or resolution, as 
                reported;
                    ``(B) the adoption and enactment of that amendment; 
                or
                    ``(C) the enactment of that bill or resolution in 
                the form recommended in that conference report,
        would cause a deficit for any fiscal year for which there are 
        projected excess assets in the Social Security Escrow Fund.
    ``(b) Enforcement.--
            ``(1) Budgetary levels with respect to concurrent 
        resolutions on the budget.--For purposes of enforcing any point 
        of order under subsection (a)(1), the extent to which there is 
        a deficit for any fiscal year shall be determined on the basis 
        of budgetary aggregates set forth in the later of the 
        concurrent resolution on the budget, as reported, or in the 
        conference report on the concurrent resolution on the budget, 
        adjusted to the maximum extent allowable under all procedures 
        that allow budgetary aggregates to be adjusted for legislation 
        that would cause a decrease in any surplus or an increase in 
        any deficit for any fiscal year covered by the concurrent 
        resolution on the budget (other than procedures described in 
        paragraph (2)(A)(ii)).
            ``(2) Current levels with respect to spending and tax 
        legislation.--
                    ``(A) In general.--For purposes of enforcing 
                subsection (a)(2), the extent to which there is a 
                deficit for any fiscal year shall be--
                            ``(i) calculated using the following 
                        assumptions--
                                    ``(I) direct spending and revenue 
                                levels at the baseline levels 
                                underlying the most recently agreed to 
                                concurrent resolution on the budget; 
                                and
                                    ``(II) for the budget year, 
                                discretionary spending levels at 
                                current law levels and, for outyears, 
                                discretionary spending levels at the 
                                baseline levels underlying the most 
                                recently agreed to concurrent 
                                resolution on the budget; and
                            ``(ii) adjusted for changes in the surplus 
                        or deficit levels set forth in the most 
                        recently agreed to concurrent resolution on the 
                        budget pursuant to procedures in such 
                        resolution that authorize adjustments in 
                        budgetary aggregates for updated economic and 
                        technical assumptions in the mid-session report 
                        of the Director of the Congressional Budget 
                        Office.
                Such revisions shall be included in the first current 
                level report on the congressional budget submitted for 
                publication in the Congressional Record after the 
                release of such mid-session report.
                    ``(B) Adjustment in assumed revenue levels to 
                reflect projected excess assets in social security 
                escrow fund.--For any fiscal year for which there are 
                projected excess assets in the Social Security Escrow 
                Fund, the amount of revenue levels assumed under 
                subparagraph (A) shall be reduced, below the amount 
                which would otherwise be assumed but for this 
                subparagraph, by the amount of such projected excess 
                assets.
                    ``(C) Excess assets.--For purposes of this 
                paragraph, the term `excess assets' shall, in 
                connection with any fiscal year, have the meaning 
                provided in 201(d)(3) of the Social Security Act in 
                connection with such fiscal year.
    ``(c) Waiver and Appeal.--Subsection (a) may be waived or suspended 
in the Senate only by an affirmative vote of three-fifths of the 
Members, duly chosen and sworn. An affirmative vote of three-fifths of 
the Members of the Senate, duly chosen and sworn, shall be required in 
the Senate to sustain an appeal of the ruling of the Chair on a point 
of order raised under this section.''.
            (2) Conforming amendment.--The item relating to section 316 
        in the table of contents set forth in section 1(b) of the 
        Congressional Budget and Impoundment Control Act of 1974 is 
        amended to read as follows:

``Sec. 316. Dedication of social security surpluses to reduction in the 
                            public debt.''.

SEC. 7. CHANGE IN CONSUMER PRICE INDEX USED FOR COST-OF-LIVING 
              INCREASES.

    (a) In General.--Section 215(i)(1)(D) of the Social Security Act 
(42 U.S.C. 415(i)(1)(D)) is amended by striking ``Consumer Price 
Index'' and inserting ``Chained Consumer Price Index for all Urban 
Consumers''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to increases under section 215(i)(2)(A)(ii) of the 
Social Security Act effective with the month of December of each 
calendar year beginning after the date of the enactment of this Act.
                                 <all>