[Congressional Record Volume 145, Number 9 (Wednesday, January 20, 1999)]
[Senate]
[Page S791]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROTH:
  S. 263. A bill to amend the Social Security Act to establish the 
Personal Retirement Accounts Program; to the Committee on Finance.


              the personal retirement accounts act of 1999

  Mr. ROTH. Mr. President, I rise today to introduce the Personal 
Retirement Accounts Act of 1999. This legislation has a simple but 
powerful purpose--to establish personal retirement accounts for working 
Americans. In my view, these accounts promise to give working Americans 
not only a more secure retirement future but a new stake in the 
nation's economic growth. And, as I will describe, these accounts may 
provide the model for future Social Security reform.
  Just a few years ago personal retirement accounts were an exotic and 
even controversial concept. But no longer! Today, personal retirement 
accounts are a bipartisan, even mainstream, idea.
  In 1997, a majority of a Clinton administration task force on Social 
Security endorsed the concept.
  In the last Congress, two comprehensive Social Security reform 
proposals, one introduced by Senator Moynihan, the ranking Democrat on 
the Finance Committee; the other by Senators Gregg and Breaux, had as a 
central element personal retirement accounts.
  Mr. President, let me explain why retirement accounts find so much 
support--not only in Congress but among the American people. With even 
conservative investment, such accounts have the potential to provide 
Americans with a substantial retirement nest egg. And an estate that 
can be left to children and grandchildren.
  Creating these accounts would also give the majority of Americans who 
do not own any investment assets a new stake in America's economic 
growth--because that growth will be returned directly to their benefit. 
More Americans will be the owners of capital--not just workers.
  Creating these accounts may encourage Americans to save more. Today, 
Americans save less than people in almost every other industrial 
country. But personal retirement accounts will demonstrate to all 
Americans the magic of compound interest as even small savings grow 
significantly over time.
  Lastly, creating these accounts will help Americans to better prepare 
for retirement. According to the Congressional Research Service, 60 
percent of Americans are not actively participating in a retirement 
program other than Social Security. A recent survey found that only 
about 45 percent of working Americans have tried to calculate how much 
they will need for retirement. It is my belief that retirement accounts 
will prompt Americans--particularly Baby Boomers--to think more about 
retirement planning.
  Mr. President, let me describe a few of the features of my bill. 
First, the program would run for 5 years, from 2000 to 2004, utilizing 
half the budget surplus projected by the Congressional Budget Office.
  Each year, working Americans who earned a minimum of four quarters of 
Social Security coverage--$3,000 in 2000--would receive a deposit in 
his or her account. About 128 million Americans would receive a deposit 
in 2000.
  The formula for sharing the surplus among the accounts is 
progressive. Each eligible individual would receive a minimum amount of 
$250 per year, plus an additional amount based on how much they paid in 
payroll taxes.
  Over the life of the program, a minimum wage earner--someone earning 
$12,400 this year--would receive about $1,850. That amount is equal to 
a 35-percent rebate of his or her payroll taxes.
  An average wage earner--earning $27,600--would receive about $2,590--
equal to a 22-percent rebate of payroll taxes. And an individual who 
paid the maximum Social Security tax would get $4,560, a 16-percent 
rebate of payroll taxes. These figures do not include any investment 
income--or deductions for the costs of running the program.
  Account holders would have three investment choices--prudent choices 
that balance risk and return. The three choices are a ``stock index 
fund''--a mutual fund that reflects the overall performance of the 
stock market; a fund that invests in corporate bonds and other ``fixed 
income'' securities; and a fund that invests in U.S. Treasury bonds.
  However, my legislation also provides for a study of additional 
investment options--of other types of investment funds and investment 
managers.
  An account holder would become eligible for benefits when he or she 
signs up for Social Security. An individual could choose between an 
annuity or annual payments based on life expectancy.
  The bill also provides a number of features to ensure the program is 
properly run. First, the program would be neither ``on'' budget nor 
``off'' budget--instead, the program would be outside the Federal 
budget. The money in the program could be used for no other purpose 
than retirement benefits and the program's operating expenses.

  Second, the program would be supervised by a new, independent 
Personal Retirement Board, with members appointed by the President and 
Congressional leaders and subject to Senate confirmation. Board 
officials would be fiduciaries, and required by law to act only in the 
best financial interests of beneficiaries.
  Lastly, the stock funds would be managed by private sector investment 
managers. To insulate companies represented in the stock funds from 
politics, no Board official or other government employee and would be 
eligible to vote company proxies--only the investment managers.
  Mr. President, the design of this personal retirement accounts plan 
follows a proven model--the Federal Thrift Savings Plan. Back in 1983, 
when I was Chairman of the Governmental Affairs Committee, the 
retirement program for Federal employees needed to be revamped. One of 
the new elements we added was the Federal Thrift Savings Plan--a 
defined contribution employee benefit plan--that has been a great 
success.
  Many Americans will undoubtedly ask, ``What size nest egg might grow 
in my personal account?'' According to an analysis done by Social 
Security's actuaries, someone earning the minimum wage would have an 
account worth about $2,145 in 2004, assuming a 7.5 percent interest 
rate. For the average wage earner, the account would be worth about 
$2,990, and for the individual paying the maximum Social Security tax, 
about $5,250.
  Of course, over the long-term, accounts can grow significantly. For 
the minimum wage earner after 40 years--in 2039, his or her account 
would be worth about $27,000. The average wage earner would have 
$38,000; and the person paying the maximum payroll tax, $66,000.
  Mr. President, some might ask, ``Why start with personal retirement 
accounts, rather than comprehensive Social Security reform?'' Indeed, 
my bill will not affect the current Social Security program. Personal 
retirement accounts are an exciting concept, but still a big job, 
requiring careful work by the Finance Committee.
  Personal retirement accounts also enjoy broad support, unlike many 
other Social Security reform proposals. So let's get these accounts up 
and running, proven and tested, while Congress considers carefully 
protecting and preserving Social Security for the long term.
  Mr. President, in closing, let me add that personal retirement 
accounts have another big promise. Such accounts--if later made a part 
of Social Security or even as a permanent supplemental program--may 
help restore the confidence of the American people in this important 
national program. Polls show that Social Security is among the most 
popular government programs, deservedly so. But many Americans--
particularly young Americans--seem to have lost confidence in Social 
Security. They believe that there will be no benefits for them when 
they retire. Personal retirement accounts will provide the 
accountability and assurances that Americans are asking for.
  I encourage my colleagues to take a careful look at my bill, and I 
invite members to co-sponsor it.
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