Social Security Individual Retirement Act of 1996

Social Security Individual Retirement Act of 1996 - Amends the Internal Revenue Code to reduce the social security taxes on employees, employers, and the self-employed for 1997 and thereafter.

Amends title II (Old-Age, Survivors and Disability Insurance) of the Social Security Act (SSA) to require employers to have in effect a social security payroll deduction plan for employees. Requires such plan to provide for employers to deduct the prescribed social security employee contribution for transfer to a social security individual retirement account of the employee.

Provides for self-employed individuals to deposit into such accounts the prescribed social security contributions. Requires transfer of the social security individual retirement account of a deceased individual to a similar account maintained by the decedent's eligible survivor.

Sets forth penalties for failure to establish and maintain such accounts.

Requires amounts deducted from employee wages to be shown on W-2 forms.

Amends the Employee Retirement Income Security Act of 1974 (ERISA) to exempt social security payroll deduction plans which do not provide for employer contributions from provisions governing employee benefit plans.

Provides for: (1) adjustments in the primary insurance amounts of employees and self-employed individuals with social security individual retirement accounts under SSA title II; and (2) the tax treatment of such accounts in a manner similar to individual retirement accounts.