Text: H.R.2929 — 105th Congress (1997-1998)

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Introduced in House (11/08/1997)


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[Congressional Bills 105th Congress]
[From the U.S. Government Printing Office]
[H.R. 2929 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 2929

   To reform Social Security by creating individual Social Security 
                          retirement accounts.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 8, 1997

  Mr. Porter introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
    Education and the Workforce, and the Budget, 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

_______________________________________________________________________

                                 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 1997''.

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, 1999.
            (2) Self-employment tax.--The amendments made by 
        subsections (c) and (d)(2) shall apply to taxable years ending 
        after December 31, 1999.

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 1997), 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 1999 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 1997).
    ``(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 1997), 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 
                1997, 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 attained age 62 
                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)).
            ``(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, 1999.

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 1999, 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 1997 (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, 1998, 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>