To amend title II of the Social Security Act to provide for individual security accounts funded by employee and employer Social Security payroll deductions, to extend the solvency of the old-age, survivors, and disability insurance program, and for other purposes.

February 24, 2004

Mr. KOLBE (for himself and Mr. STENHOLM) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on 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

To amend title II of the Social Security Act to provide for individual security accounts funded by employee and employer Social Security payroll deductions, to extend the solvency of the old-age, survivors, and disability insurance program, and for other purposes.

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 `Bipartisan Retirement Security Act of 2004'.

(b) Table of Contents- The table of contents is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Individual security accounts.

Sec. 3. Minimum social security benefit.

Sec. 4. Reduction in the amount of certain transfers to medicare trust fund.

Sec. 5. Revised formula for average indexed monthly earnings.

Sec. 6. Actuarial adjustment for retirement.

Sec. 7. CPI overstatement.

Sec. 8. Adjustments to bend points in determining primary insurance amounts.

Sec. 9. Adjustment to benefit formula factors.

Sec. 10. Modification to PIA formula to reflect changes to life expectancy.

Sec. 11. Treatment of disabled beneficiaries.

Sec. 12. Maintenance of benefit and contribution base.

Sec. 13. Acceleration of increase in social security eligibility age.

Sec. 14. Mechanism for remedying unforeseen deterioration in social security solvency.

Sec. 15. Increase in widow's and widower's insurance benefits.

Sec. 16. Limitation on benefits of married couple to level of maximum worker benefits.

SEC. 2. INDIVIDUAL SECURITY ACCOUNTS.

(a) Establishment and Maintenance of Individual Security Accounts-

(1) In general- Title II of the Social Security Act (42 U.S.C. 401 et seq.) is amended--

(A) by inserting before section 201 the following:

`PART A--INSURANCE BENEFITS';

and

(B) by adding at the end the following:

`PART B--INDIVIDUAL SECURITY SYSTEM

`Subpart 1--Individual Security Accounts

`FEDERALLY-ADMINISTERED INDIVIDUAL SECURITY ACCOUNT

`SEC. 251. (a) Establishment-

`(1) In general- Within 30 days after receiving the first contribution under subsection (b) with respect to an eligible individual, the Commissioner of Social Security shall establish an individual security account for such individual in the Individual Security Fund. Each account shall be identified to its account holder by means of the account holder's social security account number.

`(2) Eligible individual- For purposes of this part, the term `eligible individual' means any individual born after December 31, 1949.

`(b) Contributions-

`(1) In general- The Secretary of the Treasury shall transfer from the Federal Old-Age and Survivors Insurance Trust Fund, for crediting by the Commissioner of Social Security to the individual security account of an eligible individual, an amount equal to the sum of any amount received by such Secretary on behalf of such individual under section 3101(a)(2) or 1401(a)(2) of the Internal Revenue Code of 1986.

`(2) Other contributions- For provisions relating to additional contributions credited to individual security accounts, see sections 54(d) and 6402(l) of the Internal Revenue Code of 1986.

`(c) Crediting Requirements- Except as otherwise provided in section 252, contributions under subsection (b) on behalf of an eligible individual shall be credited--

`(1) to the individual security account established for such individual under subsection (a); and

`(2) in accordance with the allocation in effect with respect to such individual under subsection (d).

`(d) Allocation and Other Designations-

`(1) In general- The Commissioner of Social Security shall prescribe regulations in accordance with which any eligible individual who is employed or self-employed may designate--

`(A) in the event that 2 or more investment options are available in the Individual Security Fund--

`(i) the option or options to which such individual wishes to have such individual's contributions under subsection (b) credited; and

`(ii) if such individual designates more than 1 option under clause (i), how such individual wishes for those contributions to be allocated; and

`(B) the amount of wages or self-employment income such individual wishes to designate for purposes of section 3101(a)(2)(C) or 1401(a)(2)(C) of the Internal Revenue Code of 1986 (as applicable), if any.

`(2) Default allocation- In the absence of a required designation under paragraph (1)(A), contributions on behalf of the individual involved shall be allocated in such manner as the Commissioner of Social Security shall prescribe, taking into account the competing objectives of maximizing returns on investments and minimizing the risk involved with such investments.

`(3) Form of designation- Any designation under paragraph (1) shall be made in such manner and at such intervals as the Commissioner of Social Security may prescribe in order to ensure ease of administration and to avoid creating an undue burden on employers.

`(4) Special rule for 2006- Not later than January 1, 2006, any eligible individual who is employed or self-employed as of such date shall execute all designations required under paragraph (1).

`(e) Periodic Statements to Account Holder-

`(1) In general- The Individual Security Fund Board shall prescribe regulations under which each individual for whom an individual security account is maintained under this section shall be furnished with--

`(A) a periodic statement relating to the individual's account, including, for any reporting period as of the end of which the individual's account balance is at least equal to the minimum balance amount (within the meaning of section 252), clear and conspicuous notice to that effect;

`(B) a summary description of any investment options or other choices which may be available to such individual under this section or under section 252 (as applicable); and

`(C) any forms and information necessary to make a designation under subsection (d) or section 252 (as applicable).

`(2) Informed decisionmaking- All information, materials, and other matter furnished under this subsection shall be furnished to the account holder at such times and in such manner as the Board considers appropriate in order to permit informed decisionmaking.

`PRIVATELY-ADMINISTERED INDIVIDUAL SECURITY ACCOUNT

`SEC. 252. (a) Definitions- For purposes of this part--

`(1) Minimum deposit amount-

`(A) In general- The term `minimum deposit amount' means an amount equal to $7,500, as adjusted under subparagraph (B).

`(B) Adjustment- The Secretary of the Treasury shall adjust annually (effective for periods beginning after December 2003) the dollar amount set forth in subparagraph (A) under procedures providing for adjustments in the same manner and to the same extent as adjustments are provided for under the procedures used to adjust benefit amounts under section 215(i)(2)(A), except that any amount so adjusted that is not a multiple of $10 shall be rounded to the nearest multiple of $10.

`(2) Federally-administered individual security account- The term `Federally-administered individual security account' means an individual security account maintained, in accordance with applicable provisions of this part, in the Individual Security Fund.

`(3) Privately-administered individual security account- The term `privately-administered individual security account' means an individual security account maintained, in accordance with applicable provisions of this part, by a certified institution.

`(4) Certified institution- The term `certified institution' refers to an investment firm, credit union, insurance company, or other certified institution under subpart 3.

`(b) Option to Designate a Privately-Administered Individual Security Account-

`(1) In general- Under regulations prescribed by the Individual Security Fund Board, whenever the balance in an individual's Federally-administered individual security account is at least equal to the minimum deposit amount, such individual shall be eligible to designate a privately-administered individual security account (established and maintained on such individual's behalf) to serve as such individual's individual security account under this part, in lieu of such individual's Federally-administered individual security account.

`(2) Effect of designation- If an individual makes a designation under paragraph (1)--

`(A) the entire balance in the individual's Federally-administered individual security account shall be promptly transferred to the privately-administered individual security account specified by such individual in such designation; and

`(B) that privately-administered individual security account shall, for all purposes, be treated as the electing individual's individual security account, subject to paragraph (4).

`(3) Regulatory management of private investment- A designation under this subsection shall not be effective unless it is made in such time, form, and manner as the Individual Security Fund Board prescribes. The Individual Security Fund Board shall--

`(A) maintain individual account records, and

`(B) combine account transactions with certified institutions maintaining privately-administered individual security accounts in aggregate amounts,

in the same manner as is applicable with respect to records and account transactions with respect to Federally administered individual security accounts.

`(4) Subsequent designations- The Individual Security Fund Board shall provide by regulation opportunity for subsequent designation, from time to time, of another individual security account in lieu of the account previously designated under this section, subject to the following:

`(A) Options available- The account designated under this paragraph may be either within--

`(i) another certified institution, subject to subparagraph (B); or

`(ii) the Individual Security Fund.

`(B) Minimum balance- In order to make a designation referred to in subparagraph (A)(i), the balance in the individual's individual security account must be at least equal to the minimum deposit amount. No minimum balance requirement under this subparagraph shall apply in the case of a designation referred to in subparagraph (A)(ii).

`(C) Only 1 account permitted at any time- An individual may not, at any time, concurrently maintain--

`(i) a privately-administered individual security account with each of 2 or more certified institutions; or

`(ii) a privately-administered and a Federally-administered individual security account.

`(D) Effect- A designation under this paragraph has (with respect to the individual's respective accounts, before and after such designation) the same effect as results following a designation under paragraph (2) (with respect to the Federally-administered and privately-administered accounts involved).

`DISTRIBUTIONS FROM INDIVIDUAL SECURITY ACCOUNTS

`SEC. 253. (a) Date of Earliest Distribution- Except as provided in subsection (c), distributions may not be made from the Federally-administered or privately-administered individual security account of an eligible individual (as the case may be) before the earlier of--

`(1) the date the eligible individual attains normal retirement age, as determined under section 216 (or early retirement age, as so determined, if elected by such individual), or

`(2) the date on which funds in the eligible individual's account are sufficient to provide a monthly payment over the life expectancy of the eligible individual (determined under reasonable actuarial assumptions) which, when added to the eligible individual's monthly benefit under part A (if any), is at least equal to an amount equal to 1/12 of 185 percent of the poverty line (as defined in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2) and determined on such date for a family of the size involved) and adjusted annually thereafter by the adjustment determined under section 215(i).

`(b) Forms of Distribution-

`(1) Required monthly payments- Except as provided in paragraph (2), beginning as of the date distributions begin to be made in accordance with subsection (a), the balance in the individual security account available to provide monthly payments not in excess of the amount described in subsection (a)(2) shall be paid, as elected by the account holder (in such form and manner as shall be prescribed in regulations of the Individual Security Fund Board or the Securities and Exchange Commission, as applicable), by means of the purchase of annuities or equal monthly payments over the life expectancy of the eligible individual (determined under reasonable actuarial assumptions) in accordance with requirements (which shall be provided in regulations of the Board or Commission, as applicable) similar to the requirements applicable to payments of benefits under subchapter III of chapter 84 of title 5, United States Code.

`(2) Payment of excess funds- To the extent funds remain in an eligible individual's Federally-administered or privately-administered individual security account (as the case may be) after the application of paragraph (1) and to the extent not inconsistent with the provisions of subchapter III of chapter 84 of title 5, United States Code, such funds shall be payable to the eligible individual in such manner and in such amounts as determined by the eligible individual.

`(c) Distribution in the Event of Death Before the Date of Initial Distribution- If the eligible individual dies before the date determined under subsection (a), the balance in such individual's individual security account shall be distributed to the individual's heirs under rules established by the Individual Security Fund Board or the Securities and Exchange Commission, as applicable.

`Subpart 2--Individual Security Fund; Individual Security Fund Board

`INDIVIDUAL SECURITY FUND

`SEC. 261. There shall be established and maintained in the Treasury of the United States an Individual Security Fund in the same manner as the Thrift Savings Fund under sections 8437 (excluding paragraphs (4) and (5) of subsection (c) thereof), 8438, and 8439 of title 5, United States Code.

`INDIVIDUAL SECURITY FUND BOARD

`SEC. 262. (a) Establishment- There shall be established and maintained in the Social Security Administration an Individual Security Fund Board in the same manner as the Federal Retirement Thrift Investment Board under subchapter VII of chapter 84 of title 5, United States Code.

`(b) Specific Investment and Reporting Duties- The Individual Security Fund Board shall manage and report on the activities of the Individual Security Fund and on Federally-administered individual security accounts in the same manner as the Federal Retirement Thrift Investment Board manages and reports on the Thrift Savings Fund and the individual accounts of such Fund under subchapter VII of chapter 84 of title 5, United States Code.

`(c) Budgetary Treatment of Individual Security Fund and Accounts- The receipts and disbursements of the Individual Security Fund and any accounts within such Fund shall not be included in the totals of the budget of the United States Government as submitted by the President or of the congressional budget and shall be exempt from any general budget limitation imposed by statute on expenditures and net lending (budget outlays) of the United States Government.

`(d) Commissioner of Social Security as Executive Director- The Commissioner of Social Security shall have, with respect to the Individual Security Fund and accounts within such Fund, the same duties and responsibilities as does the Executive Director (appointed under section 8474(a) of title 5, United States Code) with respect to the Thrift Savings Fund and accounts within such Fund.

`Subpart 3--Certified Institutions

`CERTIFICATION OF INSTITUTIONS BY SECURITIES AND EXCHANGE COMMISSION

`SEC. 271. (a) In General- For purposes of this part, any institution that is engaged, in a fiduciary capacity, in the business of maintaining accounts for individuals for purposes of investment may apply to the Securities and Exchange Commission (in such form and manner as the Commission shall by regulation require) for certification under this subpart.

`(b) Review Requirements- In reviewing any application for certification under this subpart and determining whether to approve the application for certification, the Commission shall consider the following factors:

`(1) The financial history and condition of the institution.

`(2) The adequacy of the institution's capital structure.

`(3) The future earnings prospects of the institution.

`(4) The general character and fitness of the management of the institution.

`(5) The convenience and needs of individuals who are account holders with respect to personal retirement accounts for which the institution is to serve as trustee.

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