To amend title II of the Social Security Act and the Internal Revenue Code of 1986 to provide for an election by individuals eligible for old-age insurance benefits under such title to waive payment of benefits based on their work record, to provide for income tax deductions based on the actuarial present value of benefits foregone by reason of such an election, and to provide that special Government obligations issued exclusively for purchase by the Social Security Trust Funds shall bear interest at the average market yield then prevailing for comparable obligations issued in the private sector.

October 8, 2003

Mr. OTTER introduced the following bill; which was referred to the Committee on Ways and Means

To amend title II of the Social Security Act and the Internal Revenue Code of 1986 to provide for an election by individuals eligible for old-age insurance benefits under such title to waive payment of benefits based on their work record, to provide for income tax deductions based on the actuarial present value of benefits foregone by reason of such an election, and to provide that special Government obligations issued exclusively for purchase by the Social Security Trust Funds shall bear interest at the average market yield then prevailing for comparable obligations issued in the private sector.

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 `Social Security Alternative Voluntary Expenditure Act of 2003'.

SEC. 2. ELECTION TO WAIVE PAYMENT OF SOCIAL SECURITY BENEFITS.

(a) IN GENERAL- Title II of the Social Security Act is amended by adding after section 234 (42 U.S.C. 434) the following new section:

`ELECTION TO WAIVE PAYMENT OF BENEFITS

`In General

`SEC. 235. (a) An individual who is not entitled to old-age insurance benefits under section 202(a) but who is eligible for such benefits may elect to waive payment of all benefits under this title based on such individual's wages and self-employment income. Such election shall be irrevocable and shall be made in such manner and form as the Commissioner of Social Security, in consultation with the Secretary of the Treasury, shall prescribe in regulations.

`Effect of Election

`(b) Effective with the date of the filing of an election by an individual with the Commissioner under subsection (a), all benefits under this title based on the wages and self-employment income of such individual shall not be payable to any person.

`Certification of Value of Refused Benefits

`(c)(1) An individual's election filed with the Commissioner under subsection (a) shall indicate whether such individual intends to claim income tax deductions under section 223 of the Internal Revenue Code of 1986 in connection with such election. In any case in which such individual indicates such intention in such election, as soon as practicable after the date of the filing of such election, the Commissioner shall determine the actuarial present value of the future benefits which are not payable under this title based on such individual's wages and self-employment income but which would be payable (upon prompt application therefor) if such individual had filed with the Commissioner, in lieu of the election, an application for old-age insurance benefits under section 202(a).

`(2) In the case of any person who, as of immediately before the date on which an individual makes an election under subsection (a), is a divorced spouse of such individual, the Commissioner shall determine the actuarial present value of the future benefits which would have been payable to such divorced spouse (but for such election) under section 202(b)(5) or 202(c)(5) (based on current entitlement or upon timely and prompt filing on or after such date of an application for such benefits under such section) on the basis of such individual's wages and self-employment income and future benefits which would have been payable to such divorced spouse under section 202(e) or 202(f) upon such individual's death thereafter on the basis of such wages and self-employment income.

`(3) Upon making any determination under paragraph (1) in connection with an election made under subsection (a), the Commissioner shall certify such determination to the Secretary of the Treasury and to the individual making such election. Upon making any determination with respect to a divorced spouse under paragraph (2), the Commissioner shall certify such determination to such Secretary and such divorced spouse.

`(4) The Commissioner shall prescribe by regulation, in advance of making actuarial determinations under this subsection, reasonable actuarial assumptions and methods which shall be employed in making such determinations. Such regulations shall also require inclusion with any election filed by an individual under subsection (a) such information available to such individual as the Commissioner considers necessary for making determinations under this subsection.'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply with respect to elections filed after 180 days after the date of the enactment of this Act.

SEC. 3. DEDUCTION FOR ACTUARIAL PRESENT VALUE OF WAIVED OLD-AGE INSURANCE BENEFITS.

(a) IN GENERAL- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 223 as section 224 and by inserting after section 222 the following new section:

`SEC. 223. ACTUARIAL PRESENT VALUE OF WAIVED OLD-AGE INSURANCE BENEFITS.

`(a) ALLOWANCE OF DEDUCTION- In the case of an individual, there shall be allowed as a deduction for each specified taxable year an amount equal to 20 percent of--

`(1) in the case of an individual who elects to waive the payment of benefits under section 235(a) of the Social Security Act, the actuarial present value of future benefits determined by the Commissioner of Social Security under section 235(c)(1) of such Act with respect to such individual, and

`(2) in the case of an individual who, as of immediately before the date of the election referred to in paragraph (1), is a divorced spouse of an individual referred to in paragraph (1), the actual present value of future benefits determined by the Commissioner of Social Security under section 235(c)(2) of such Act with respect to such divorced spouse.

`(b) SPECIFIED TAXABLE YEAR- For purposes of this section, the term `specified taxable year' means the taxable year which includes the date of the election referred to in subsection (a)(1) and each of the 4 succeeding taxable years.'.

(b) CONFORMING AMENDMENT- The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

`Sec. 223. Actuarial present value of waived old-age insurance benefits.

`Sec. 224. Cross reference.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 4. INTEREST RATES FOR SPECIAL GOVERNMENT OBLIGATIONS ISSUED TO THE SOCIAL SECURITY TRUST FUNDS.

(a) IN GENERAL- The fifth sentence of section 201(d) of the Social Security Act (42 U.S.C. 401(d)) is amended by striking `shall bear interest' and all that follows and inserting the following: `shall bear interest at a rate equal to the average of prevailing market yields for comparable obligations issued in the private sector (computed by the Managing Trustee on the basis of market quotations as of the end of the calendar month next preceding the date of such issue).'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply with respect to obligations issued after the date of the enactment of this Act.

END