(Sec. 3) Amends SSA title II to require, under new part B, that employers have in effect a social security payroll deduction plan for eligible employees who elect to enroll under it. Requires the plan to provide for employers to deduct five percent of the employee's wages, together with an employer contribution also equal to five percent of the employee's wages, for transfer to the employee's individual social security retirement (ISSR) account.
Requires self-employed individuals to contribute ten percent of their income to such accounts.
Makes employees between ages 18 and 61 who are not entitled to OASDI disability benefits eligible to elect to enroll under new part B. Entitles eligible individuals who attain age 62 to a supplemental minimum benefit payment to their ISSR accounts. Requires a trustee of an ISSR account to purchase, from amounts available in the account, disability insurance and preretirement survivor benefits for each account holder.
Sets forth penalties for failure to establish and maintain a social security payroll deduction plan.
Amends the IRC to require amounts deducted from employee wages to be shown on their wage receipts.
Amends the Employee Retirement Income Security Act of 1974 (ERISA) to exempt social security payroll deduction plans from certain requirements for employee benefit plans.
(Sec. 4) Amends the IRC to exclude from an individual's gross income: (1) any amount paid to an ISSR account as the employer's contribution; or (2) half of the amount paid to such an account of a self-employed individual. Exempts such accounts from taxation (except the excise tax on certain prohibited transactions). Provides for taxation of account distributions, to the extent they are includible in gross income, in the same manner as social security benefits. Imposes an excise tax on excess contributions to an account.
(Sec. 5) Amends SSA title II to declares that eligible individuals who have elected to establish ISSR accounts shall be deemed not entitled to OASDI benefits.
(Sec. 6) Directs the Commissioner of Social Security to certify to the Secretary of the Treasury whether an eligible individual was credited with wages and self-employment income under SSA title II part A immediately before the first calendar year for which the individual may distribute amounts from an ISSR account. Provides that, immediately upon receipt of such certification, the Secretary shall issue a contribution recognition bond to the trustee of the ISSR account held by such individual. Defines a contribution recognition bond as consisting of an obligation of the United States to make monthly payments into an ISSR account in an amount equal to the individual's primary insurance amount.
(Sec. 7) Provides for a phased-in increase in the social security retirement age, eventually to age 70 with respect to an individual who attains early retirement age after December 31, 2028.
(Sec. 8) Amends SSA title II to provide for the application of adjusted percentages to average indexed monthly earnings in determining primary insurance amounts.
(Sec. 9) Amends the Congressional Budget Act of 1974 to provide for off-budget treatment for specified social security reforms.
(Sec. 10) Directs the Office of Personnel Management to study and report to the President and Congress on the most appropriate and feasible means of providing for the application of this Act with respect to Federal civilian and military personnel.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 874 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 874
To reform Social Security by creating individual Social Security
retirement accounts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 25, 1999
Mr. Porter (for himself, Mr. Bachus, Mr. Sanford, Mr. Istook, Mr.
Shays, and Mr. Smith of Michigan) introduced the following bill; which
was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To reform Social Security by creating individual Social Security
retirement accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Individual Social Security
Retirement Accounts Act of 1999''.
SEC. 2. REDUCTION AND ELIMINATION OF SOCIAL SECURITY TAXES ON
INDIVIDUALS ELECTING TO PARTICIPATE IN INDIVIDUAL
RETIREMENT PROGRAM.
(a) Tax on Employees.--Subsection (a) of section 3101 of the
Internal Revenue Code of 1986 (relating to OASDI tax on employees) is
amended to read as follows:
``(a) Old-Age, Survivors, and Disability Insurance.--
``(1) Individuals covered under part a of title ii of the
social security act.--In addition to other taxes, there is
hereby imposed on the income of every individual who is not a
part B eligible individual a tax equal to 6.2 percent of the
wages (as defined in section 3121(a)) received by him with
respect to employment (as defined in section 3121(b)).
``(2) Transitional tax for part b eligible individuals.--In
addition to other taxes, there is hereby imposed on the income
of every individual who is a part B eligible individual a tax
equal to 1.2 percent with respect to wages (as defined in
section 3121(a)) received by him with respect to employment (as
defined in section 3121(b)), in the case of wages received
during the period of 10 years beginning with the first calendar
year for which such individual is a part B eligible
individual.''
(b) Tax on Employers.--Subsection (a) of section 3111 of the
Internal Revenue Code of 1986 (relating to OASDI tax on employers) is
amended to read as follows:
``(a) Old-Age, Survivors, and Disability Insurance.--
``(1) Individuals covered under part a of the social
security act.--In addition to other taxes, there is hereby
imposed on every employer, with respect to having in the
employer's employ individuals who are not part B eligible
individuals, an excise tax equal to 6.2 percent of the wages
(as defined in section 3121(a)) paid by him with respect to
employment (as defined in section 3121(b)).
``(2) Transitional tax for part b eligible individuals.--In
addition to other taxes, there is hereby imposed on every
employer an excise tax, with respect to having in the
employer's employ individuals who are part B eligible
individuals, equal to 1.2 percent of the wages (as defined in
section 3121(a)) paid by him with respect to employment (as
defined in section 3121(b)), in the case of wages received
during the period of 10 years beginning with the first calendar
year for which such individual is a part B eligible
individual.''
(c) Self-Employment Tax.--Subsection (a) of section 1401 of such
Code (relating to OASDI tax on self-employment income) is amended to
read as follows:
``(a) Old-Age, Survivors, and Disability Insurance.--
``(1) Individuals covered under part a of the social
security act.--In addition to other taxes, there shall be
imposed for each taxable year, on the self-employment income of
every individual who is not a part B eligible individual for
the calendar year ending with or during such taxable year, a
tax equal to 12.40 percent of the amount of the self-employment
income for such taxable year.
``(2) Transitional tax for part b eligible individuals.--In
addition to other taxes, there shall be imposed for each
taxable year, on the self-employment income of every part B
eligible individual for the calendar year ending with or during
such taxable year, a tax equal to 2.40 percent of the amount of
the self-employment income for such taxable year, in the case
of a taxable year ending during the period of 10 years
beginning with the first calendar year for which such
individual is a part B eligible individual.''
(d) Part B Eligible Individual.--
(1) Taxes on employees and employers.--Section 3121 of such
Code (relating to definitions) is amended by inserting after
subsection (s) the following new subsection:
``(t) Part B Eligible Individual.--For purposes of this chapter,
the term `part B eligible individual' means, for any calendar year, an
individual who is an eligible individual (as defined in section 257(3)
of the Social Security Act) for such calendar year.''.
(2) Self-employment tax.--Section 1402 of such Code
(relating to definitions) is amended by adding at the end the
following new subsection:
``(k) Part B Eligible Individual.--The term `part B eligible
individual' means, for any calendar year, an individual who is an
eligible individual (as defined in section 257(3) of the Social
Security Act) for such calendar year.''.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
remuneration paid after December 31, 2001.
(2) Self-employment tax.--The amendments made by
subsections (c) and (d)(2) shall apply to taxable years ending
after December 31, 2001.
SEC. 3. INDIVIDUAL SOCIAL SECURITY RETIREMENT ACCOUNTS FUNDED BY SOCIAL
SECURITY PAYROLL DEDUCTION PLANS AND CONTRIBUTIONS BY
SELF-EMPLOYED INDIVIDUALS.
(a) In General.--Title II of the Social Security Act is amended--
(1) by inserting before section 201 the following:
``Part A--Insurance Benefits'';
and
(2) by adding at the end the following new part:
``Part B--Individual Retirement Program
``social security payroll deduction plans
``Sec. 251. (a) In General.--Each person who is a covered employer
for any calendar year shall have in effect throughout such calendar
year a social security payroll deduction plan for such person's
employees who are eligible individuals and with respect to whose
employment by such employer during such calendar year there is, or
would be (but for the amendments made by section 2 of the Individual
Social Security Retirement Accounts Act of 1999), imposed an excise tax
under section 3111 of the Internal Revenue Code of 1986.
``(b) Requirements.--For purposes of this part, the term `social
security payroll deduction plan' means a written plan of a covered
employer if--
``(1) under such plan, 5 percent of the employee's wages is
deducted by the employer and paid to the employee's individual
social security retirement account within 10 business days
after the date of payment of such wages,
``(2) under such plan, the covered employer pays to the
individual social security retirement account, together with
the contribution paid pursuant to paragraph (1), an additional
amount equal to 5 percent of the employee's wages, and
``(3) the employer receives no compensation for the cost of
administering such plan.
``designation of individual social security retirement accounts
``Sec. 252. (a) In General.--Except as provided in subsection (b),
the individual social security retirement account to which
contributions with respect to any eligible individual are required to
be paid by a covered employer under section 251 shall be such an
account designated by such individual to such employer not later than
10 business days after the date on which such individual becomes an
employee of such employer. Each employer of an eligible individual
shall require the individual to designate such account as provided
under this subsection as a prerequisite for continued employment. Any
such designation shall be made in such form and manner as shall be
prescribed in regulations of the Commissioner of Social Security.
``(b) Subsequent Designation of Other Accounts.--The Commissioner
shall provide by regulation for subsequent designation from time to
time of another individual social security retirement account of an
eligible individual in lieu of the account previously designated under
this section.
``self-employed individuals
``Sec. 253. (a) In General.--Not later than 30 days after the close
of any taxable year for which an eligible individual has self-
employment income, such individual shall pay to an individual social
security retirement account designated by such individual an amount
equal to at least 10 percent of such income.
``(b) Designation of Account.--The designation of an individual
social security retirement account for payment of contributions under
this section shall be made in such form and manner as shall be
prescribed in regulations of the Commissioner of Social Security.
``election to become an eligible individual
``Sec. 254. (a) In General.--An individual--
``(1) who has attained age 18 and has not attained age 62,
and
``(2) who is not entitled to disability insurance benefits
under section 223,
may elect to become an eligible individual for purposes of this part.
An election under this section is an election filed in such form and
manner as shall be prescribed in regulations of the Commissioner,
consisting of a written and signed declaration of such individual's
intention to become an eligible individual for purposes of this part.
``(b) Requirements.--Any election under subsection (a) may take
effect for any calendar year after 2001 and must be so filed not later
than December 15 preceding the calendar year for which the election is
to take effect (or December 31 preceding such calendar year in the case
of an individual attaining age 18 after such December 15 and before
such calendar year).
``(c) Irrevocability.--Any election under subsection (a) shall be
irrevocable and shall be effective with respect to wages paid in
calendar years following the election and with respect to self-
employment income for taxable years ending during such calendar years.
``disability insurance and preretirement survivor benefits
``Sec. 255. (a) In General.--A trustee of an individual social
security retirement account shall purchase, from amounts available in
the account, disability insurance and preretirement survivor benefits
for each account holder in accordance with this section.
``(b) Disability Insurance.--Under regulations of the Commissioner
of Social Security, any policy for disability insurance purchased
pursuant to subsection (a) shall meet at least the same standards for
eligibility and benefit levels for account holders and their spouses,
surviving spouses, former spouses, and children, as are applicable for
beneficiaries under the disability insurance program under part A,
except that such benefits shall not terminate by reason of retirement.
``(c) Preretirement Survivor Benefits.--Under regulations of the
Commissioner of Social Security, any policy for preretirement survivor
benefits purchased pursuant to subsection (a) shall provide benefits to
beneficiaries of the account holders in such form and in such amounts
as are necessary, taking into account distributions from the account,
to meet at least the same standards for eligibility and benefit levels
applicable for widow's, widower's, and child's insurance benefits under
part A.
``entitlement to supplemental minimum benefit payment to account
``Sec. 256. (a) In General.--In any case in which--
``(1) an eligible individual attains age 62,
``(2) as of the date on which the individual attains age
62, no distributions have been made by the individual from any
individual social security retirement account, and
``(3) on such date, the balance in such individual's
individual social security retirement account (before any
distributions on such date) is less than the minimum retirement
annuity amount,
such individual, upon application to the Commissioner of Social
Security filed on or after such date in such form and manner as shall
be prescribed by the Commissioner, shall be entitled to a supplemental
minimum benefit payment to such account. Upon receipt of such
application, the Commissioner shall certify to the Secretary of the
Treasury the amount of such payment, and the Secretary shall pay the
amount of such payment to such account in accordance with such
certification from funds otherwise available in the general fund of the
Treasury.
``(b) Amount of Supplemental Minimum Benefit Payment.--The amount
of a supplemental minimum benefit payment payable to an eligible
individual's account under subsection (a) is the excess (if any) of--
``(1) the minimum retirement annuity amount, over
``(2) the balance in such account as of such date (taking
into account the present value of the future proceeds of any
contribution recognition bond issued to the trustee of the
individual's account pursuant to section 6 of the Individual
Social Security Retirement Accounts Act of 1999).
``(c) Definitions.--For purposes of this section--
``(1) Minimum retirement annuity amount.--The term `minimum
retirement annuity amount' means the amount (determined under
regulations of the Commissioner of Social Security) necessary
to purchase a minimum retirement annuity on the date of the
application filed pursuant to subsection (a).
``(2) Minimum retirement annuity.--The term `minimum
retirement annuity' means an immediate annuity making payments
over the life expectancy of the account holder which (on a
monthly basis) are equal to the lesser of--
``(A) an amount equal to 95 percent of the account
holder's initial primary insurance amount (determined
under section 215 as if section 202(y) did not apply
and the account holder applied for old-age insurance
benefits on the date of the application filed pursuant
to subsection (a)), or
``(B) 40 percent of the account holder's average
indexed monthly earnings (as so determined),
``(3) Immediate annuity.--The term `immediate annuity'
means an annuity--
``(A) which is purchased with a single premium, and
``(B) the annuity starting date (as defined in
paragraph (4) of section 72(c) of the Internal Revenue
Code of 1986) of which commences on the 1st day of the
month beginning after the date of the purchase of the
annuity.
``definitions
``Sec. 257. For purposes of this part--
``(1) Individual social security retirement account.--The
term `individual social security retirement account' means any
individual social security retirement account (as defined in
section 408B of the Internal Revenue Code of 1986).
``(2) Covered employer.--
``(A) In general.--The term `covered employer'
means, for any calendar year, any person on whom an
excise tax is, or would be (but for the amendments made
by the Individual Social Security Retirement Accounts
Act of 1999), imposed under section 3111 of the
Internal Revenue Code of 1986 with respect to having an
individual in his employ to whom wages were paid by
such person during such calendar year.
``(B) Governmental entities.--Under regulations of
the Commissioner of Social Security, in applying
subparagraph (A) with respect to employment by
governmental entities, each such governmental entity
shall be treated as a person described in subparagraph
(A) in the same manner and to the same extent as such
person is treated under chapter 21 of the Internal
Revenue Code of 1986 for purposes of section 3111 of
such Code.
``(3) Eligible individual.--The term `eligible individual'
means, with respect to a calendar year, an individual with
respect to whom an election, filed with the Commissioner of
Social Security under section 254, is in effect for such
calendar year.
``(4) Business day.--The term `business day' means any day
other than a Saturday, Sunday, or legal holiday in the area
involved.
``penalties
``Sec. 258. (a) Failure To Establish Social Security Payroll
Deduction Plan.--Any covered employer who fails to meet the
requirements of section 251 or 252 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) Failure To Make Deductions Required Under Plan.--Any covered
employer who fails to timely deduct in full the amount from the wages
of an eligible 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) Failure To Pay Deducted Wages to Individual Social Security
Retirement Account.--If an amount deducted from the wages of an
eligible individual under a social security payroll deduction plan is
not timely paid in full to the designated individual social security
retirement account in accordance with section 251--
``(1) the covered employer failing to make such payment
shall be subject to a civil penalty of not to exceed 20 percent
of the unpaid amount, in addition to any penalty under
subsection (a), and
``(2) shall be liable to the eligible individual for
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 to the date on
which such amount is paid into the designated individual social
security retirement account.
``(d) Failure by Self-Employed Individuals To Pay Contributions.--
Any individual failing to timely pay in full a prescribed social
security self-employment contribution to a designated individual social
security retirement account as required under section 253 shall be
subject to a civil penalty of not to exceed 20 percent of the unpaid
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 to the date on which such amount
is paid into the designated individual social security retirement
account.
``(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.''.
(b) 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.''.
(c) 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.''.
(d) 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.''.
SEC. 4. TAX TREATMENT OF INDIVIDUAL SOCIAL SECURITY RETIREMENT
ACCOUNTS.
(a) In General.--Subpart A of part I of subchapter D of chapter 1
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section
408A the following new section:
``SEC. 408B. INDIVIDUAL SOCIAL SECURITY RETIREMENT ACCOUNTS.
``(a) General Rule.--Gross income shall not include--
``(1) any amount paid to an individual social security
retirement account as the employer's contribution under section
251(b)(3) of the Social Security Act, or
``(2) \1/2\ of the amount paid to an individual social
security retirement account under section 253(a) of the Social
Security Act.
``(b) Individual Social Security Retirement Account.--For purposes
of this title, the term `individual social security retirement account'
means a trust created or organized in the United States for the
exclusive benefit of an eligible individual (as defined in section
257(3) of the Social Security Act) or his beneficiaries, but only if
the written governing instrument creating the trust meets the following
requirements:
``(1) No contribution will be accepted, other than--
``(A) a contribution under paragraph (1) or (2) of
section 251(b), or subsection (a) of section 253, of
the Social Security Act,
``(B) in any taxable year, an aggregate amount not
exceeding twice the total amount of contributions
described in subparagraph (A) made in such taxable
year,
``(C) a contribution recognition bond, and the
proceeds thereof, issued under section 6 of the
Individual Social Security Retirement Accounts Act of
1999, and
``(D) a supplemental minimum benefit payment under
section 256 of the Social Security Act.
``(2) Except as provided in paragraph (12), no amount may
be paid or distributed from such trust--
``(A) before the earlier of the date on which the
account holder attains age 59\1/2\ or the date on which
the account holder dies, or
``(B) if the account holder has not died and the
balance in the account immediately after the payment or
distribution of such amount would be less than the
early distribution annuity amount (as defined in subsection (c)(2)).
Nothing in subparagraph (B) shall be construed to preclude the
distribution of all or any portion of the balance in the
account if such distribution is used exclusively for the
purpose of purchasing an annuity under which payments are made
in substantially equal periodic payments (not less frequently
than annually) made for the life expectancy of the account
holder.
``(3) The trustee is a bank (as defined in section 408(n))
or such other person who demonstrates to the satisfaction of
the Secretary that the manner in which such other person will
administer the trust will be consistent with the requirements
of this section.
``(4) The trustee has registered with the Commissioner of
Social Security (in such form and manner as the Commissioner
may require) as a trustee of individual social security
retirement accounts.
``(5) No part of the trust fund is invested in life
insurance contracts.
``(6) The interest of an individual in the balance in his
account is nonforfeitable.
``(7) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund, which fund is comprised only of assets of
individual social security retirement accounts.
``(8) Under the terms governing the account, contributions
will be accepted irrespective of the amount of the
contribution.
``(9) The same requirements as are applicable with respect
to trusts under paragraph (9) of section 401(a) (relating to
required distributions) are met with respect to the account.
``(10) The same requirements as are applicable with respect
to trusts under paragraph (11) of section 401(a) (relating to
joint and survivor annuity and preretirement survivor annuity)
are met with respect to the account (disregarding subparagraph
(B) thereof), as if the annuity starting date with respect to
the account holder is the earliest date on which amounts may be
distributed under paragraph (2).
``(11) The account holder certifies that such trust is the
only individual social security retirement account of the
holder.
``(12) Under terms governing the account, amounts may be
distributed from such trust to purchase disability insurance or
a policy providing for preretirement survivor benefits under
section 255 of the Social Security Act.
Paragraphs (1), (2), and (10) shall not apply to a direct trustee-to-
trustee transfer to a successor individual social security retirement
account of the same individual.
``(c) Requirements.--
``(1) Requirements relating to trustee.--
``(A) Trustee.--A trustee meets the requirements of
subsection (b)(3) if--
``(i) the trustee is in business
exclusively as a trustee of individual social
security retirement accounts, and
``(ii) the trustee is of good character and
is a substantial concern, produces evidence of
financial capability, demonstrates financial
soundness, and provides appropriate surety.
``(B) Replacement of trustee in case of
bankruptcy.--In the case of a trustee of an individual
social security retirement account with respect to
which there is filed a bankruptcy petition (or upon the
initiation of a similar judicial proceeding) against
the trustee, the Secretary shall designate a successor
trustee.
``(C) Status as fiduciary.--Under the terms of an
individual social security retirement account, the
trustee of the account shall, with respect to the
account, have the status of a fiduciary (within the
meaning of the first sentence of section 3(21)(A) of
the Employee Retirement Income Security Act of 1974).
The trustee shall, with respect to the account, be
treated as a fiduciary for purposes of section 4975(e)
(as applicable under subsection (f)(3)).
``(2) Early distribution annuity amount.--For purposes of
subsection (b)(2)--
``(A) In general.--The term `early distribution
annuity amount' means the amount (determined under
regulations of the Secretary) necessary to purchase a
minimum annuity on the date of the payment or
distribution referred to in subsection (b)(2).
``(B) Minimum annuity.--For purposes of
subparagraph (A), the term `minimum annuity' means an
immediate annuity making payments over the life
expectancy of the account holder which (on a monthly
basis) are equal to the lesser of--
``(i) an amount equal to 95 percent of the
account holder's initial primary insurance
amount, determined under section 215 of the
Social Security Act--
``(I) as if section 202(y) of such
Act did not apply, and
``(II) as if the account holder
applied for old-age insurance benefits
on the date of the payment or
distribution referred to in subsection
(b)(2), or
``(ii) 40 percent of the account holder's
average indexed monthly earnings (as so
determined),
``(C) Immediate annuity.--For purposes of
subparagraph (B), the term `immediate annuity' means an
annuity--
``(i) which is purchased with a single
premium, and
``(ii) the annuity starting date (as
defined in paragraph (4) of section 72(c) of
the Internal Revenue Code of 1986) of which
commences on the 1st day of the month beginning
after the date of the purchase of the annuity.
``(3) Investment in collectibles treated as a
distribution.--For purposes of this section, subsection (m) of
section 408 shall apply.
``(d) Account Exempt From Tax.--
``(1) General rule.--Except as provided in paragraph (2),
any individual social security retirement account is exempt
from taxation under this subtitle. Notwithstanding the
preceding sentence, any such account is subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable, etc. organizations).
``(2) Application of prohibited transactions rules, etc.--
Rules similar to the rules of paragraphs (2), (3), and (4) of
section 408(e) shall apply to individual social security
retirement accounts.
``(e) Taxation of Distributions.--
``(1) In general.--
``(A) Income exclusion.--In the case of any amount
paid or distributed from an individual social security
retirement account--
``(i) the social security benefit amount
shall be includible in gross income only if so
includible under section 86, determined by
treating the social security benefit amount as
social security benefits (as defined in such
section), and
``(ii) the supplemental retirement amount
shall be includible in gross income to the
extent that such amount is so includible under
section 72, determined by treating the
individual social security retirement account
as an individual retirement plan in accordance
with section 408(d)(2).
``(B) Social security benefit amount.--For purposes
of subparagraph (A), the term `social security benefit
amount' means the amount which bears the same ratio to
the amount of the payment or distribution as the sum of
the amounts contributed to the individual social
security retirement account under subparagraphs (A),
(C), and (D) of subsection (b)(1) bears to the total
amount contributed to such account under subsection
(b)(1).
``(C) Supplemental retirement amount.--For purposes
of subparagraph (A), the term `supplemental retirement
amount' means the amount which bears the same ratio to
the amount of the payment or distribution as the sum of
the amounts contributed to the individual social
security retirement account under subparagraph (B) of
subsection (b)(1) bears to the total amount contributed
to such account under subsection (b)(1).
``(2) Treatment of rollovers.--No amount shall be
includible in gross income by reason of a direct trustee-to-
trustee transfer from an individual social security retirement
account of an individual to a successor individual social
security retirement account of the same individual if such
transfer is made in accordance with section 408(d)(3)(A)(i).
``(3) Treatment of disability insurance and preretirement
benefit policy premiums.--No amount shall be includible in
gross income to the extent that such amount is a premium for
the purchase of disability insurance or a policy providing for
preretirement survivor benefits pursuant to section 255 of the
Social Security Act.
``(4) Treatment of collectibles.--Amounts treated as a
distribution under subsection (c)(3) shall be includible in
gross income and paragraph (1) of section 72(t) shall apply to
such amounts.
``(f) Certain Other Rules To Apply.--The following rules shall
apply to individual social security retirement accounts in the same
manner that such rules apply to individual retirement accounts:
``(1) Section 408(h) (relating to custodial accounts).
``(2) Sections 408(i) and 6693 (relating to reports).
``(3) Section 4975 (relating to prohibited
transactions).''.
(b) Excess Contributions.--
(1) In general.--Subsection (a) of section 4973 of the
Internal Revenue Code of 1986 is amended by striking ``or'' at
the end of paragraph (3), by inserting ``or'' at the end of
paragraph (4), and by inserting after paragraph (4) the
following new paragraph:
``(5) an individual social security retirement account (as
defined in section 408B),''.
(2) Excess contributions defined.--Section 4973 of such
Code is amended by adding at the end the following new
subsection:
``(g) Excess Contributions to Individual Social Security Retirement
Accounts.--For purposes of this section, in the case of contributions
to an individual social security retirement account (within the meaning
of section 408B(b)), the term `excess contributions' means with respect
to a taxable year the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year
to such account (other than a qualified rollover
contribution described in section 408B(e)(2)), over
``(B) the amount allowable as a contribution for
that taxable year under section 408B(b)(1), and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the account for such
taxable year, and
``(B) the excess (if any) of the maximum amount
allowable as a contribution under section 408B(b)(1)
for such taxable year over the amount contributed to
the account for the taxable year.
For purposes of this subsection, any contribution which is distributed
from an individual social security retirement account in a distribution
described in section 408(d)(4) shall be treated as an amount not
contributed.''.
(c) Clerical Amendment.--The table of sections for subpart A of
part I of subchapter D of chapter 1 of such Code is amended by
inserting after the item relating to section 408A the following new
item:
``Sec. 408B. Individual social security
retirement accounts.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 5. NO COVERAGE UNDER OASDI UPON ELECTION TO BE ELIGIBLE INDIVIDUAL
UNDER PART B.
(a) Old-Age and Survivors Insurance Benefits.--Section 202 of the
Social Security Act (42 U.S.C. 402) is amended by adding at the end the
following new subsection:
``(y) Notwithstanding the preceding provisions of this section, an
individual who has made an election under section 254 to be an eligible
individual under part B shall be deemed (except for purposes of
sections 226 and 226A) not entitled to benefits under this section for
any month ending after the date of the election, and (except for
purposes of sections 226 and 226A) no other individual shall be deemed
entitled to benefits under this section for any month ending after the
date of the election based on the wages or self-employment income of
the individual who made the election.''.
(b) Disability Insurance Benefits.--Section 223 of such Act (42
U.S.C. 423) is amended by adding at the end the following new
subsection:
``(j) Notwithstanding the preceding provisions of this section, an
individual who has made an election under section 254 to be an eligible
individual under part B shall be deemed (except for purposes of
sections 226 and 226A) not entitled to benefits under this section for
any month ending after the date of the election, and (except for
purposes of sections 226 and 226A) no other individual shall be deemed
entitled to benefits under section 202 for any month ending after the
date of the election based on the wages or self-employment income of an
individual who has made such an election.''.
SEC. 6. CONTRIBUTION RECOGNITION BONDS.
(a) Certification of Credited Wages and Self-Employment Income.--
Not later than July 1 of the first calendar year for which an
individual is an eligible individual (as defined in section 257(3) of
the Social Security Act), the Commissioner of Social Security shall
certify to the Secretary of the Treasury whether such individual was,
as of immediately before such first calendar year, credited with wages
and self-employment income under part A of title II of the Social
Security Act.
(b) Issuance of Bond.--Immediately upon receipt of certification
under subsection (a) that such individual is so credited, the Secretary
of the Treasury shall issue a contribution recognition bond to the
trustee of the individual social security retirement account held by
such individual. Such bond shall consist of an obligation of the United
States to pay each month into the individual social security retirement
account held by such individual, commencing with the applicable initial
month, an amount equal to such individual's primary insurance amount,
determined under section 215 of the Social Security Act as if section
202(y) of such Act did not apply and such individual had applied for
old-age insurance benefits under section 202(a) of such Act for such
month, and by taking into account average indexed monthly earnings
based solely on those wages and self-employment income that were
credited as described in subsection (a).
(c) Applicable Initial Month.--For purposes of subsection (b), the
applicable initial month in connection with any individual is the later
of--
(1) the month in which such individual attains age 62, or
(2) the month in which such individual first commences
distributions from such individual's individual social security
retirement account.
(d) Additional Provisions.--The purposes for which obligations of
the United States may be issued under chapter 31 of title 31, United
States Code, are hereby extended to authorize the issuance of public
debt obligations consisting of contribution recognition bonds issued
under this section. Each such obligation shall be evidenced by a paper
instrument in the form of a bond issued by the Secretary setting forth
the terms specified in this subsection, and stating on its face that
the obligation shall be incontestable in the hands of the trustee of
such account, that the obligation is supported by the full faith and
credit of the United States, and that the United States is pledged to
the payment of the obligation, to the credit of such account, in
accordance with the provisions of this section.
SEC. 7. PHASED IN INCREASE IN SOCIAL SECURITY RETIREMENT AGE.
Section 216(l) of the Social Security Act (42 U.S.C. 416(l) is
amended--
(1) by striking subparagraphs (B), (C), (D), and (E) of
paragraph (1) and inserting the following new subparagraphs:
``(B) with respect to an individual who attains early
retirement age (as determined under paragraph (2)) after
December 31, 1999, and before January 1, 2029, 65 years of age
plus \2/12\ of the number of months in the period beginning
with January 2000 and ending with December of the year in which
the individual attains early retirement age (as so determined);
and
``(C) with respect to an individual who attains early
retirement age after December 31, 2028, 70 years of age.''; and
(2) by striking paragraph (3).
SEC. 8. ADJUSTED PERCENTAGES APPLIED TO AVERAGE INDEXED MONTHLY
EARNINGS IN DETERMINING PRIMARY INSURANCE AMOUNTS.
(a) In General.--Section 215(a)(1)(B) of the Social Security Act
(42 U.S.C. 415(a)(1)(B)) is amended by adding at the end the following
new clause:
``(iii) For purposes of determinations made under this subsection
taking effect in each calendar year after 2001, each percentage
specified in clauses (i), (ii), and (iii) of subparagraph (A) shall be
replaced with a percentage equal to the product derived by
multiplying--
``(I) the percentage in effect for purposes of
determinations made under this subsection in the prior calendar
year, by
``(II) the applicable index ratio,
rounded to the nearest one-tenth of 1 percent.
``(iv) For purposes of clause (iii), the applicable index ratio in
connection with determinations made under this subsection in any
calendar year, means a ratio--
``(I) the numerator of which is 100 percent plus the
percentage (rounded to the nearest one-tenth of 1 percent) by
which the Consumer Price Index for December of the preceding
calendar year exceeds the Consumer Price Index for December of
the next prior calendar year, and
``(II) the denominator of which is 100 percent plus the
percentage (rounded to the nearest one-tenth of 1 percent) by
which the national average wage index (as defined in section
209(k)(1)) for the preceding calendar year exceeds such index
for the next prior calendar year.''.
(b) Conforming Amendment.--Section 209(k)(1) of such Act (42 U.S.C.
409(k)(1)) is amended by inserting ``215(a)(1)(B)(iii),'' after
``215(a)(1)(B)(ii),''.
SEC. 9. OFF-BUDGET TREATMENT FOR SOCIAL SECURITY REFORMS.
(a) In General.--In determining any new budget authority, outlays,
receipts, deficit, or surplus for purposes of--
(1) the budget of the United States Government as submitted
by the President,
(2) the congressional budget, or
(3) the Balanced Budget and Emergency Deficit Control Act
of 1985,
any receipts or disbursements of the general fund of the Treasury and
any indebtedness incurred by the Federal Government pursuant to the
operation of the provisions of this Act or the amendments made thereby
(other than administrative expenses of the Social Security
Administration or the Department of the Treasury) shall not be taken
into account.
(b) Rules of Construction.--Nothing in this Act (or the amendments
made thereby) shall--
(1) affect the status as private property of amounts
contributed to individual social security retirement accounts
pursuant to section 251 or 253 of the Social Security Act
(added by this Act) and any income attributable to such
contributions, or
(2) supersede or otherwise affect the provisions of section
710 of the Social Security Act (relating to budgetary treatment
of the social security trust funds) or section 13301 of the
Budget Enforcement Act of 1990 (relating to off-budget status
of OASDI trust funds).
(c) Exclusion of Program for Social Security Reforms From
Congressional Budget.--Section 301(a) of the Congressional Budget Act
of 1974 is amended in the last sentence by inserting ``or of the
operation of the provisions of the Individual Social Security
Retirement Accounts Act of 1999 (and the amendments made thereby)''
after ``1986''.
SEC. 10. STUDY RELATING TO FEDERAL CIVILIAN AND MILITARY PERSONNEL.
(a) In General.--Not later than December 31, 2000, the Office of
Personnel Management, after appropriate study, shall submit to the
President and each House of the Congress a written report containing
recommendations for the most appropriate and feasible means of
providing for the application of this Act with respect to Federal
civilian and military personnel.
(b) Requirements.--The report--
(1) shall be prepared in consultation with the Social
Security Administration and other appropriate agencies, and
(2) shall be accompanied by draft legislation which, if
enacted, would carry out the recommendations contained in such
report.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E291)
Referred to the House Committee on Ways and Means.
Referred to the Subcommittee on Social Security.
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