I
109th CONGRESS
1st Session
H. R. 1800
IN THE HOUSE OF REPRESENTATIVES
April 21, 2005
Mr. Petri introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To provide for the establishment and maintenance of personal Social Security investment accounts under the Social Security system.
Short title and table of contents
Short title
This Act may be cited as the Retirement Security Act of 2005
.
Table of contents
The table of contents is as follows:
Sec. 1. Short title and table of contents
Sec. 2. Individual retirement investment program and personal Social Security investment accounts
Part A—Insurance Benefits
Part B—Individual Retirement Investment Program
Sec. 251. Definitions
Sec. 252. Personal Social Security investment accounts
Sec. 253. Contributions to the Social Security Investment Trust Fund
Sec. 254. Investment of Social Security Investment Trust Fund
Sec. 255. Distributions from the Social Security Investment Trust Fund
Sec. 256. Annuities and lump sum payments payable from the Social Security Investment Trust Fund
Sec. 257. Payment of annuities
Sec. 258. Protections for spouses and former spouses
Sec. 259. Administrative provisions
Sec. 260. Social Security Investment Trust Fund
Sec. 261. Waiver, allotment and assignment of payments
Sec. 262. Application for annuity or other payments
Sec. 263. Court orders
Sec. 264. Withholding of State income taxes
Sec. 265. Tax treatment of the Social Security Investment Trust Fund
Sec. 266. Administration
Sec. 3. Financing of Government contributions to accounts
Sec. 4. Tax treatment of individual retirement investment program and personal Social Security investment accounts
Individual retirement investment program and personal Social Security investment accounts
In general
Title II of the Social Security Act is amended—
by inserting before section 201 the following:
Insurance Benefits
; and
by adding at the end the following new part:
Individual Retirement Investment Program
Definitions
For purposes of this part—
Account holder
The term account holder means an individual for whom a personal Social Security investment account is established under section 252(b).
Investment account
The term investment account means a personal Social Security investment account established under section 252(b).
Trust Fund
The term Trust Fund means the Social Security Investment Trust Fund established under section 260.
Executive Director
The term Executive Director means the Executive Director under this part authorized to so serve under section 266(b).
Board
The term Board means the Board of Trustees of the Trust Fund authorized to so serve under section 266(a).
Personal Social Security investment accounts
Certification of new account holders
Upon the issuance of a Social Security account number under section 205(c)(2) to an individual born on or after January 1, 2006, the Commissioner of Social Security shall certify to the Executive Director and the Secretary of the Treasury the identity and Social Security account number of such individual.
Establishment of personal Social Security investment accounts
Upon receipt of any certification under subsection (a) with respect to an individual, the Executive Director shall establish a personal Social Security investment account for such individual. Amounts in the Social Security Investment Trust Fund shall be credited by the Executive Director to the investment account in accordance with this part. The investment account shall be identified to the account holder by means of the account holder’s Social Security account number. The Executive Director shall establish an investment account for each account holder not later than the later of January 1, 2007, or 30 days after receipt of the certification with respect to the account holder.
Initial contribution
Upon the establishment of each account holder’s investment account, the Secretary of the Treasury shall transfer, from amounts not otherwise appropriated in the general fund of the Treasury to the Trust Fund, for crediting by the Executive Director to such investment account under subsection (b), an amount equal to $1,000.00.
Investment account balance
The balance in an account holder’s investment account at any time is the excess of—
the sum of—
the contribution made to the Trust Fund and credited to the investment account pursuant to subsection (c);
all contributions made to the Trust Fund and credited to the investment account under section 253, and
the total amount of the allocations made to and reductions made in the investment account pursuant to subsection (e), over
the amounts paid out of the Trust Fund with respect to such individual under this part.
Allocation of earnings and losses
Pursuant to regulations prescribed by the Executive Director, the Executive Director shall allocate to each investment account an amount equal to the net earnings and net losses from each investment of sums in the Trust Fund which are attributable, on a pro rata basis, to sums credited to such investment account, reduced by an appropriate share of the administrative expenses paid out of the net earnings under section 256(d), as determined by the Executive Director.
Engagement of qualified public accountant
In general
The Executive Director shall annually engage, on behalf of all account holders, an independent qualified public accountant, who shall conduct an examination of all accounts and other books and records maintained in the administration of this part as the public accountant considers necessary to enable the public accountant to make the determination required by paragraph (2). The examination shall be conducted in accordance with generally accepted auditing standards and shall involve such tests of the accounts, books, and records as the public accountant considers necessary.
Examination and report
The public accountant conducting an examination under paragraph (1) shall determine whether the accounts, books, and records referred to in such paragraph have been maintained in conformity with generally accepted accounting principles applied on a basis consistent with the manner in which such principles were applied during the examination conducted under such paragraph during the preceding year. The public accountant shall transmit to the Board and the Comptroller General of the United States a report on his examination, including his determination under this paragraph.
Reliance on actuary’s certifications
In making a determination under paragraph (2), a public accountant may rely on the correctness of any actuarial matter certified by an enrolled actuary if the public accountant states his reliance in the report transmitted to the Board under such paragraph.
Definition
For the purposes of this subsection, the term qualified public accountant shall have the same meaning as is provided in section 103(a)(3)(D) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(a)(3)(D)).
Information required to be provided to account holders
In general
The Board shall prescribe regulations under which each account holder shall be furnished with—
a periodic statement relating to the account holder’s investment account; and
a summary description of the investment options under section 254 covering, and an evaluation of, each such option for at least the 5-year period preceding the date as of which such evaluation is made.
Timely provision of information
Information under this subsection shall be provided at least 30 calendar days before the date provided for each election under section 254(f), and in a manner designed to facilitate informed decisionmaking with respect to each such election.
Assumption of risk
Each account holder who elects to invest in the Fixed Income Investment Fund, the Common Stock Index Investment Fund, the Small Capitalization Stock Index Investment Fund, or the International Stock Index Investment Fund described in paragraphs (2), (3), (4), and (5), respectively, of section 254(a) shall sign an acknowledgement prescribed by the Executive Director which states that the account holder understands that an investment in either such Fund is made at the account holder’s risk, that the account holder is not protected by the Government against any loss on such investment, and that a return on such investment is not guaranteed by the Government.
Treatment of minors and incompetent individuals
An election under this part to be made by a minor, or an individual mentally incompetent or under other legal disability, may be made by the person who is constituted guardian or other fiduciary by the law of the State of residence of the individual or is otherwise legally vested with the care of the individual or his estate. Payment under this part due a minor, or an individual mentally incompetent or under other legal disability, may be made to the person who is constituted guardian or other fiduciary by the law of the State of residence of the claimant or is otherwise legally vested with the care of the claimant or his estate. In any case in which a guardian or other fiduciary of the individual under legal disability has not been appointed under the law of the State of residence of the individual, if any other person, in the judgment of the Executive Director, is responsible for the care of such individual, any election under this part which may otherwise be made by such individual may be made by such person, any payment under this part which is otherwise payable to such individual may be made to such person, and the payment of an annuity payment under this part to such person bars recovery by any other person.
Contributions to the Social Security Investment Trust Fund
In general
The Executive Director shall prescribe regulations under which each individual who is eligible to claim a deduction under section 224 of the Internal Revenue Code of 1986 for contributions to a personal Social Security investment account shall be afforded a reasonable opportunity to make contributions to the Trust Fund, for crediting to such account, either from time to time or under arrangements providing for regular, periodic contributions. Such arrangements may include arrangements for contributions of wages by employers on behalf of employees. Any such arrangement shall also provide individuals a reasonable opportunity to modify the amount to be contributed under this part, or to terminate such contributions.
Limitation on contributions
Notwithstanding any other provision of this section, no contribution may be made under this section to any account for any year to the extent that such contribution, when added to prior contributions to such account for such year, exceeds $10,000.
Crediting procedures
Amounts contributed by (or on behalf of) an account holder under this section shall be deposited in the Trust Fund to the credit of that account holder’s investment account in accordance with such procedures as the Comptroller General of the United States may, in consultation with the Executive Director, prescribe in regulations.
Nonforfeitability of contributions
All contributions made under this section shall be fully nonforfeitable when made.
Investment of Social Security Investment Trust Fund
Investment funds
The Board shall establish—
a Government Securities Investment Fund under which sums in the Trust Fund are invested in securities of the United States Government issued as provided in subsection (e);
a Fixed Income Investment Fund under which sums in the Trust Fund are invested in—
insurance contracts,
certificates of deposit, or
other instruments or obligations selected by qualified professional asset managers,
a Common Stock Index Investment Fund as provided in subsection (b);
a Small Capitalizaion Stock Index Investment Fund as provided in subsection (c); and
an International Stock Index Investment Fund as provided in subsection (d).
Index governing Common Stock Index Investment Funds
Selection of index
The Board shall select an index which is a commonly recognized index comprised of common stock the aggregate market value of which is a reasonably complete representation of the United States equity markets.
Portfolio design
The Common Stock Index Investment Fund shall be invested in a portfolio designed to replicate the performance of the index selected under paragraph (1). The portfolio shall be designed such that, to the extent practicable, the percentage of the Common Stock Index Investment Fund that is invested in each stock is the same as the percentage determined by dividing the aggregate market value of all shares of that stock by the aggregate market value of all shares of all stocks included in such index.
Index governing Small Capitalization Stock Index Investment Funds
Selection of index
The Board shall select an index which is a commonly recognized index comprised of common stock the aggregate market value of which represents the United States equity markets, excluding the Common Stock Index Investment Fund.
Portfolio design
The Small Capitalization Stock Index Investment Fund shall be invested in a portfolio designed to replicate the performance of the index selected under paragraph (1). The portfolio shall be designed such that, to the extent practicable, the percentage of the Small Capitalization Stock Index Investment Fund that is invested in each stock is the same as the percentage determined by dividing the aggregate market value of all shares of that stock by the aggregate market value of all shares of all stocks included in such index.
Index governing International Stock Index Investment Funds
Selection of index
The Board shall select an index which is a commonly recognized index comprised of stock the aggregate market value of which is a reasonably complete representation of the international equity markets excluding the United States equity markets.
Portfolio design
The International Stock Index Investment Fund shall be invested in a portfolio designed to replicate the performance of the index selected under paragraph (1). The portfolio shall be designed such that, to the extent practicable, the percentage of the International Stock Index Investment Fund that is invested in each stock is the same as the percentage determined by dividing the aggregate market value of all shares of that stock by the aggregate market value of all shares of all stocks included in such index.
Investment according to elections
In general
The Executive Director shall invest the sums available in the Trust Fund for investment as provided in elections made under subsection (f).
Default investment in absence of election
If an election has not been made with respect to any sums in the Trust Fund available for investment, the Executive Director shall invest such sums in the Government Securities Investment Fund.
Semiannual elections
In general
At least twice each year, an account holder may elect the investment funds referred to in subsection (a) into which the sums in the Trust Fund credited to such account holder’s investment account are to be invested or reinvested.
Investment according to regulations
An election may be made under paragraph (1) only in accordance with regulations prescribed by the Executive Director and within such period as the Executive Director shall provide in such regulations.
Issuance of special obligations
Authorization
The Secretary of the Treasury is authorized to issue special interest-bearing obligations of the United States for purchase by the Trust Fund for the Government Securities Investment Fund.
Requirements
In general
Obligations issued for the purpose of this subsection shall have maturities fixed with due regard to the needs of the Trust Fund as determined by the Executive Director, and shall bear interest at a rate equal to the average market yield (computed by the Secretary of the Treasury on the basis of market quotations as of the end of the calendar month next preceding the date of issue of such obligations) on all marketable interest-bearing obligations of the United States then forming a part of the public debt which are not due or callable earlier than 4 years after the end of such calendar month.
Rounding
Any average market yield computed under subparagraph (A) which is not a multiple of one-eighth of 1 percent, shall be rounded to the nearest multiple of one-eighth of 1 percent.
No voting rights in securities
The Board, the Executive Director, and an account holder may not exercise voting rights associated with the ownership of securities by the Social Security Investment Trust Fund.
Distributions from the Social Security Investment Trust Fund
In general
No distribution may be made from the Social Security Investment Trust Fund of any amount credited to the investment account of any account holder, unless such distribution is in the form of—
a benefit distribution described in subsection (b),
a distribution described in subsection (c), or
a death distribution under subsection (d).
Benefit distribution
In general
A distribution from an investment account is in the form of a benefit distribution referred to in subsection (a)(1) if such distribution constitutes payment (in whole or in part) of a monthly insurance benefit under part A based on the wages and self-employment income of the account holder.
Payment of monthly insurance benefits
Notwithstanding section 201(h), benefit payments required to be made under part A, other than benefit payments required to be made under section 223 or 226 and benefit payments required to be made under subsection (b), (c), or (d) of section 202 to account holders entitled to benefits on the basis of the wages and self-employment income of any such account holder entitled to disability insurance benefits, shall be made from amounts in the Trust Fund credited to such account holder’s investment account, except to the extent that such benefit payments exceed the balance credited to such account holder’s investment account. Any amount of such benefit payments in excess of the balance in such account holder’s investment account shall be payable as provided in section 201(h). The Commissioner of Social Security shall provide for certification to the Executive Director for payment of such benefits from the Trust Fund, and the Executive Director shall make such payments from the Trust Fund in accordance with such certification.
Annuities and lump sum payments
A distribution referred to in subsection (a)(2) is described in this subsection if—
the distribution is at the election of the account holder made (in such form and manner as shall be prescribed by the Executive Director) on or after the date of the commencement of such account holder’s entitlement to old-age insurance benefits under section 202(a),
the amount of each distribution is in an amount, as determined by the Executive Director, which is not greater than the excess of—
the balance credited to such account holder’s investment account, over
the amount necessary to provide for benefit distributions as required under subsection (a)(1), and
the distributions shall be paid in the form of annuities and other payments under section 256.
Death distribution
In general
A distribution from an investment account is in the form of a death distribution if such distribution is in the amount remaining credited to the account holder as of the date of such account holder’s death and, except as provided in paragraph (2), is distributed in the same manner as is provided for distribution of benefit payments under section 204(d).
Portion of account balance attributable to Federal contribution returned to United States
The portion of the amount remaining credited to the account holder as of the date of such account holder’s death which is attributable to the contribution made under section 252(c) shall be paid to the Secretary of the Treasury for deposit into the general fund of the Treasury as miscellaneous receipts. For purposes of the preceding sentence, distributions from a personal social security investment account shall be treated as first made from amounts attributable to the contribution made under section 252(c) and then from other amounts.
Annuities and lump sum payments payable from the Social Security Investment Trust Fund
In general
An account holder who is entitled to old-age insurance benefits under section 202(a) is entitled as provided in this section to the amount of the balance in the account holder’s investment account available for distribution under this section in accordance with section 255.
Alternative forms of distribution
Subject to section 258, any account holder who is entitled to old-age insurance benefits under section 202(a) is entitled and may elect—
to receive an immediate annuity from the Trust Fund;
to defer the commencement of the payment of an annuity from the Trust Fund until such date as the account holder specifies, but not later than April 1 of the year following the year in which the account holder becomes 701/2 years of age;
to withdraw the amount of the balance in the account holder’s investment account in the Trust Fund in one or more substantially equal payments to be made not less frequently than annually and to commence before April 1 of the year following the year in which the account holder becomes 701/2 years of age; or
to transfer the amount of the balance in the account holder’s investment account in the Trust Fund to an eligible retirement plan as provided in subsection (c).
Transfers to eligible retirement plans
In general
The Executive Director shall make each transfer elected under subsection (b)(4) directly to an eligible retirement plan or plans (as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986) identified by the account holder for whom the transfer is made.
Transfer contingent upon receipt of necessary information
A transfer may not be made for an account holder under paragraph (1) until the Executive Director receives from such account holder the information required by the Executive Director specifically to identify the eligible retirement plan or plans to which the transfer is to be made.
Modification of elections
In general
Subject to paragraph (3)(A) and subsections (a) and (d) of section 258, an account holder may change an election previously made under this section.
Modification of date for delayed distributions
Subject to paragraph (3)(B) and section 258(d), an account holder who has made an election pursuant to subsection (b)(2) may modify the date specified in such election or in a previous modification under this paragraph.
Limitations
Modifications disallowed upon commencement of distribution
An account holder may not change an election under this section on or after the date on which a payment is made in accordance with such election or, in the case of an election to receive an annuity, the date on which an annuity contract is purchased to provide for the annuity elected by the account holder.
Other limitations
A modification of a date may not be made under paragraph (2) on or after the date on which an annuity contract is purchased to provide for the annuity involved, and may not specify a date for the commencement of an annuity earlier than 90 days after the date on which the modification is submitted to the Executive Director (or such period shorter than 90 days as the Executive Director may by regulation prescribe).
Default means of distribution
Lump sum distributions of minimal amounts
Notwithstanding subsection (b), if an account holder becomes entitled to old-age insurance benefits under section 202(a) and the balance in such account holder’s investment account is $3,500 or less, the Executive Director shall pay the balance to the account holder in a single payment unless the account holder elects, at such time and otherwise in such manner as the Executive Director prescribes, one of the options available under subsection (b).
Default annuity commencement date
Unless otherwise elected under this section, and subject to paragraph (1), the balance in an account holder’s investment account shall be paid as an annuity commencing for the account holder on February 1 of the year following the year in which the account holder becomes entitled to old-age insurance benefits under section 202(a).
Payment of annuities
Methods of payment
The Board shall prescribe methods of payment of annuities under this part. The methods of payment prescribed under this subsection shall include, but not be limited to—
a method which provides for the payment of a monthly annuity only to an annuitant during the life of the annuitant;
a method which provides for the payment of a monthly annuity to an annuitant for the joint lives of the annuitant and the spouse of the annuitant and an appropriate monthly annuity to the one of them who survives the other of them for the life of the survivor;
a method described in paragraph (1) which provides for automatic adjustments in the amount of the annuity payable so long as the amount of the annuity payable in any one year shall not be less than the amount payable in the previous year;
a method described in paragraph (2) which provides for automatic adjustments in the amount of the annuity payable so long as the amount of the annuity payable in any one year shall not be less than the amount payable in the previous year; and
a method which provides for the payment of a monthly annuity—
to the annuitant for the joint lives of the annuitant and an individual who is designated by the annuitant under regulations prescribed by the Executive Director and (i) is a former spouse of the annuitant, or (ii) has an insurable interest in the annuitant; and
to the one of them who survives the other of them for the life of the survivor.
Requirement of election
Subject to section 258(c), under such regulations as the Executive Director shall prescribe, an account holder who elects under section 256 to receive an annuity under this part shall elect, on or before the date on which an annuity contract is purchased to provide for that annuity, one of the methods of payment prescribed under subsection (a).
Continued period of 5 years availability for eliminated methods
Notwithstanding an elimination of a method of payment by the Board, an account holder may elect the eliminated method if the elimination of such method became effective less than 5 years before the date on which the annuity commences.
Contracts for purchase of annuities
Time limit for entering into contract
Not earlier than 90 days (or such shorter period as the Executive Director may by regulation prescribe) before an annuity is to commence under this part, the Executive Director shall expend the balance in the annuitant’s account to purchase an annuity contract from any entity which, in the normal course of its business, sells and provides annuities.
Assurance of provision of annuity
The Executive Director shall assure, by contract entered into with each entity from which an annuity contract is purchased under paragraph (1), that the annuity shall be provided in accordance with the provisions of this part.
Terms and conditions
An annuity contract purchased under paragraph (1) shall include such terms and conditions as the Executive Director requires for the protection of the annuitant.
Bonding
The Executive Director shall require, from each entity from which an annuity contract is purchased under paragraph (1), a bond or proof of financial responsibility sufficient to protect the annuitant.
Exemption from local taxation of amounts paid to purchase annuities
In general
No tax, fee, or other monetary payment may be imposed or collected by any State, or by any political subdivision or other governmental authority thereof, on, or with respect to, any amount paid to purchase an annuity contract under this section.
Taxation of issuer permitted
Paragraph (1) shall not be construed to exempt any company or other entity issuing an annuity contract under this section from the imposition, payment, or collection of a tax, fee, or other monetary payment on the net income or profit accruing to or realized by that entity from the sale of an annuity contract under this section if that tax, fee, or payment is applicable to a broad range of business activity.
Protections for spouses and former spouses
Requirement of spousal consent
In general
A married account holder may make an election under subsection (b)(3) or (b)(4) of section 256 or change an election previously made under subsection (b)(1) or (b)(2) of such section only if the account holder and the account holder’s spouse jointly waive, by written election, any right which the spouse may have to a survivor annuity with respect to such account holder under section 257 or subsection (b).
Exception
Paragraph (1) shall not apply to an election or change of election by an account holder who establishes to the satisfaction of the Executive Director (at the time of the election or change and in accordance with regulations prescribed by the Executive Director)—
that the spouse’s whereabouts cannot be determined; or
that, due to exceptional circumstances, requiring the spouse’s waiver would otherwise be inappropriate.
Joint and survivor annuity form applies unless otherwise elected
In general
Notwithstanding any election under subsection (b) of section 257, the method described in subsection (a)(2) of such section (or, if more than one form of such method is available, the form which the Board determines to be the one which provides for a surviving spouse a survivor annuity most closely approximating the annuity of a surviving spouse under section 8442 of title 5, United States Code) shall be deemed the applicable method under such subsection (b) in the case of an account holder who is married on the date on which an annuity contract is purchased to provide for the account holder’s annuity under this part.
Exception
Paragraph (1) shall not apply if—
a joint waiver of such method is made, in writing, by the account holder and the spouse; or
the account holder waives such method, in writing, after establishing to the satisfaction of the Executive Director that circumstances described under subsection (a)(2) (A) or (B) make the requirement of a joint waiver inappropriate.
Elections and other changes subject to court orders
In general
An election, change of election, or modification of the commencement date of a deferred annuity shall not be effective under this part to the extent that the election, change, modification, or transfer conflicts with any court decree, order, or agreement described in paragraph (2).
Requirements
A court decree, order, or agreement referred to in paragraph (1) is, with respect to an account holder, a court decree of divorce, annulment, or legal separation issued in the case of the account holder and any former spouse of the account holder or any court order or court-approved property settlement agreement incident to the decree if—
the decree, order, or agreement expressly relates to any portion of the balance in the account holder’s investment account; and
notice of the decree, order, or agreement was received by the Executive Director before—
the date on which payment is made, or
in the case of an annuity, the date on which an annuity contract is purchased to provide for the annuity,
Treatment of 2 or more court orders
The Executive Director shall prescribe regulations under which this subsection shall be applied in any case in which the Executive Director receives two or more decrees, orders, or agreements referred to in paragraph (1).
Rights of former spouses
In general
Subject to paragraphs (2) through (7), a former spouse of a deceased account holder who died as a fully insured individual is entitled to a survivor annuity under this subsection if and to the extent that—
an election under section 257(a)(5), or
any court decree, order, or agreement (described in subsection (c)(2), without regard to subparagraph (B) of such subsection) which relates to such deceased account holder and such former spouse,
Written notice required
Paragraph (1) shall apply only to payments made by the Executive Director after the date on which the Executive Director receives written notice of the election, decree, order, or agreement, and such additional information and documentation as the Executive Director may require.
Limitation on amount
The amount of the survivor annuity payable from the Trust Fund to a former spouse of a deceased account holder under this section may not exceed the excess, if any, of—
the amount of the survivor annuity determined for a surviving spouse of the deceased account holder under the method described in subsection (b)(1), over
the total amount of all other survivor annuities payable under this part to other former spouses of such deceased account holder based on the order of precedence provided in paragraph (4).
Order of precedence
If more than one former spouse of a deceased account holder is entitled to a survivor annuity pursuant to this subsection, the amount of each such survivor annuity shall be limited appropriately to carry out paragraph (3) in the order of precedence established for the entitlements by the chronological order of the dates on which elections are properly made pursuant to section 257(a)(5) and the dates on which the court decrees, orders, or agreements applicable to the entitlement were issued, as the case may be.
Rules for commencement and termination under court orders
The commencement and termination of an annuity payable under this section shall be governed by the terms of the applicable order, decree, agreement, or election, as the case may be, except that any such annuity—
shall not commence before—
the day after the account holder dies; or
the first day of the second month beginning after the date on which the Executive Director receives written notice of the order, decree, agreement, or election, as the case may be, together with such additional information or documentation as the Executive Director may prescribe;
shall terminate no later than the last day of the month before the former spouse remarries before becoming 55 years of age or dies.
Restriction on modifications
For purposes of this part, a modification in a decree, order, agreement, or election referred to in this section shall not be effective—
if such modification is made after the retirement or death of the account holder or annuitant concerned; and
to the extent that such modification involves an annuity under this part.
Court orders subject to previous joint waivers
For the purposes of this section, a court decree, order, or agreement or an election referred to in subsection (a) shall not be effective, in the case of a former spouse, to the extent that the election is inconsistent with any joint waiver previously executed with respect to such former spouse under subsection (a)(2) or (b)(2).
Exclusive recovery
Any payment under this subsection to any individual bars recovery by any other individual.
Waivers and modifications subject to prescribed procedures
Waivers and notifications required by this section and waivers of the requirements for such waivers and notifications (as authorized by this section) may be made only in accordance with procedures prescribed by the Executive Director.
Inapplicability to minimal account balances
None of the provisions of this section requiring notification to, or the consent or waiver of, a spouse or former spouse of an account holder shall apply in any case in which the balance in the account holder’s investment account is $3,500 or less.
Applicable court orders
The protections provided by this section are in addition to the protections provided by section 263.
Administrative provisions
Payments and transfers in accordance with election
The Executive Director shall make or provide for payments and transfers in accordance with an election of an account holder under section 256 or 257(b) or, if applicable, in accordance with section 258.
Elections and modifications of deferred commencement dates in writing
Any election, change of election, or modification of a deferred annuity commencement date made under this part shall be in writing and shall be filed with the Executive Director in accordance with regulations prescribed by the Executive Director.
Social Security Investment Trust Fund
In general
There is established in the Treasury of the United States a Social Security Investment Trust Fund.
Amount comprising the Trust Fund
The Trust Fund consists of the sum of all amounts contributed under sections 252(c) and 253, increased by the total net earnings from investments of sums in the Trust Fund under section 254 or reduced by the total net losses from investments of the Trust Fund under such section, and reduced by the total amount of payments made from the Trust Fund (including payments for administrative expenses).
Appropriation of Trust Fund amounts
The sums in the Trust Fund are appropriated and shall remain available without fiscal year limitation—
to invest under section 254;
to make distributions or purchase annuity contracts under this part;
to pay the administrative expenses incurred in carrying out this part under subsection (d); and
to purchase insurance as provided in subsection (h)(3)(B).
Administrative expenses
Administrative expenses incurred to carry out this part shall be paid out of net earnings in the Trust Fund.
Assignment or alienation and related matters
Exclusive benefit of the account holder
Subject to subsection (d) and paragraphs (2) and (3), sums in the Trust Fund credited to the account of any account holder may not be used for, or diverted to, purposes other than for the exclusive benefit of the account holder or other persons to whom distributions are made under section 255.
Immunity from assignment, alienation, and certain other legal process
Except as provided in paragraph (3), sums in the Trust Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process.
Exceptions
Moneys due or payable from the Trust Fund to any person and, in the case of an account holder, the balance in the individual account of the account holder, shall be subject to legal process for the enforcement of the legal obligations of such person or account holder to provide child support or make alimony payments as provided in section 459 or relating to the enforcement of a judgment for physically, sexually, or emotionally abusing a child as provided under section 263.
Exclusive appropriation
The sums in the Trust Fund shall not be appropriated for any purpose other than the purposes specified in this section and may not be used for any other purpose.
Contributions and earnings held in trust for account holders
All sums contributed to the Trust Fund by an account holder and all net earnings in the Trust Fund attributable to investment of such sums are held in the Trust Fund in trust for such account holder.
Fiduciary responsibilities; enforcement under the Secretary of Labor
In general
Under regulations of the Secretary of Labor, the provisions of sections 8477 and 8478 of title 5, United States Code, shall apply in connection with the Trust Fund in the same manner and to the same extent as such provisions apply in connection with the Thrift Savings Fund.
Investigative authority
Any authority available to the Secretary of Labor under section 504 of the Employee Retirement Income Security Act of 1974 is hereby made available to the Secretary of Labor, and any officer designated by the Secretary of Labor, to determine whether any person has violated, or is about to violate, any provision applicable under paragraph (1).
Exculpatory provisions; insurance
In general
Any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void.
Insurance
The Trust Fund shall be available and may be used at the discretion of the Executive Director to purchase insurance to cover potential liability of persons who serve in a fiduciary capacity with respect to the Trust Fund, without regard to whether a policy of insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary obligation.
Waiver, allotment and assignment of payments
Waiver of entitlement
An individual entitled to an annuity or other payment payable from the Trust Fund may decline to accept all or any part of the amount of the payment by a waiver signed and filed with the Executive Director. The waiver may be revoked in writing at any time. Payment of the annuity waived may not be made for the period during which the waiver is in effect.
Allotments or assignments
An individual entitled to an annuity or other payment payable from the Trust Fund may make allotments or assignments of amounts from the annuity or other payment for such purposes as the Executive Director considers appropriate.
Application for annuity or other payments
Applications required
No payment of an annuity or other payment from the Social Security Investment Trust Fund under this part may be made unless an application for payment of the annuity or other payment is received by the Executive Director before the one hundred and fifteenth anniversary of the birth of the account holder.
Applications with respect to deceased account holders
Notwithstanding subsection (a), after the death of an account holder, a payment of the annuity or other payment shall not be paid unless an application therefor is received by the Executive Director within 30 years after the death or other event which establishes the entitlement to the annuity or other payment.
Court orders
Alternative payees under court orders
Payments under this part which would otherwise be made to an account holder or an annuitant shall be paid (in whole or in part) by the Executive Director to another person if and to the extent expressly provided for in the terms of—
any court decree of divorce, annulment, or legal separation, or the terms of any court order or court-approved property settlement agreement incident to any court decree of divorce, annulment, or legal separation; or
any court order or other similar process in the nature of garnishment for the enforcement of a judgment rendered against such account holder or annuitant, for physically, sexually, or emotionally abusing a child.
Written notice requirements
Subsection (a) shall apply only to payments made by the Executive Director under this part after the date on which the Executive Director receives written notice of such decree, order, other legal process, or agreement, and such additional information and documentation as the Executive Director may require.
Definitions
For the purpose of this section—
the term judgment rendered for physically, sexually, or emotionally abusing a child means any legal claim perfected through a final enforceable judgment, which claim is based in whole or in part upon the physical, sexual, or emotional abuse of a child, whether or not that abuse is accompanied by other actionable wrongdoing, such as sexual exploitation or gross negligence; and
the term child means an individual under 18 years of age.
Withholding of State income taxes
Withholding agreements
The Executive Director shall, in accordance with this section, enter into an agreement with any State within 120 days of a request for agreement from the proper State official. The agreement shall provide that the Executive Director shall withhold State income tax in the case of the monthly annuity of any annuitant who voluntarily requests, in writing, such withholding. The amounts withheld during any calendar quarter shall be held in the Trust Fund and disbursed to the States during the month following that calendar quarter.
No multiple requests
An annuitant may have in effect at any time only one request for withholding under this section, and an annuitant may not have more than two such requests in effect during any one calendar year.
Changes and revocations
Subject to subsection (b), an annuitant may change the State designated by that annuitant for purposes of having withholdings made, and may request that the withholdings be remitted in accordance with such change. An annuitant also may revoke any request of that annuitant for withholding. Any change in the State designated or revocation is effective on the first day of the month after the month in which the request or the revocation is processed by the Executive Director, but in no event later than on the first day of the second month beginning after the day on which such request or revocation is received by the Executive Director.
Reservations to the united states; repayments of erroneous withholdings
This section does not give the consent of the United States to the application of a statute which imposes more burdensome requirements on the United States than on employers generally, or which subjects the United States or any annuitant to a penalty or liability because of this section. The Executive Director may not accept pay from a State for services performed in withholding State income taxes from annuities. Any amount erroneously withheld from an annuity and paid to a State by the Executive Director shall be repaid by the State in accordance with regulations issued by the Executive Director.
Definition
For the purpose of this section, the term annuitant includes a survivor who is receiving an annuity from the Trust Fund.
Tax treatment of the Social Security Investment Trust Fund
The Trust Fund shall be exempt from taxation under subtitle A of the Internal Revenue Code of 1986.
Administration
Board of trustees
In general
The Federal Retirement Thrift Investment Board established by section 8472(a) of title 5, United States Code, shall also serve as the Board of Trustees of the Social Security Investment Trust Fund.
Duties
It shall be the duty of the Board to—
hold the Trust Fund;
report to the Congress not later than the first day of April of each year on the operation and status of the Trust Fund during the preceding fiscal year and on its expected operation and status during the next ensuing 5 fiscal years;
develop investment policies which provide for—
prudent investments suitable for accumulating funds for payment of retirement income, and
low administrative costs;
recommend improvements in administrative procedures and policies designed to effectuate the proper coordination of the program established under this part with the old-age, survivors, and disability insurance program established under part A; and
review the general policies followed in managing the Trust Fund and recommend changes in such policies, including necessary changes in the provisions of the law which govern the way in which the Trust Funds are to be managed and invested.
Executive Director
In general
The Executive Director appointed under section 8474(a) of title 5, United States Code, shall also serve as Executive Director under this part.
Duties
The Executive Director shall—
carry out the policies established by the Board under this part;
invest and manage the Trust Fund in accordance with the investment policies and other policies established by the Board under this part;
purchase annuity contracts and provide for the payment of other benefits under this part;
administer the provisions of this part; and
prescribe such regulations (other than regulations relating to fiduciary responsibilities) as may be necessary for the administration of this part.
Authorized functions
The Executive Director may—
prescribe such regulations as may be necessary to carry out the responsibilities of the Executive Director under this part, other than regulations relating to fiduciary responsibilities;
appoint such personnel as may be necessary to carry out the provisions of this part;
subject to approval by the Board, procure the services of experts and consultants under section 3109 of title 5, United States Code;
secure directly from other agencies and instrumentalities of the Federal Government any information necessary to carry out the provisions of this part and policies of the Board under this part;
make such payments out of sums in the Trust Fund as the Executive Director determines are necessary to carry out the provisions of this part and the policies of the Board under this part;
pay the compensation, per diem, and travel expenses of individuals appointed under subparagraphs (B), (C), and (G) from the Trust Fund;
accept and use the services of individuals employed intermittently in the Government service and reimburse such individuals for travel expenses, as authorized by section 5703 of title 5, United States Code, including per diem as authorized by section 5702 of such title;
except as otherwise expressly prohibited by law or the policies of the Board, delegate any of the Executive Director’s functions to such employees under the Board as the Executive Director may designate and authorize such successive redelegations of such functions to such employees under the Board as the Executive Director may consider to be necessary or appropriate; and
take such other actions as are appropriate to carry out the functions of the Executive Director.
Source of compensation
Notwithstanding paragraph (3) of section 8476(d) of title 5, United States Code, basic pay paid for any fiscal year as compensation to each member of the Board (and each officer and employee of the Board) shall be paid from the Trust Fund (in lieu of the Thrift Savings Fund) in an amount which bears the same ratio to the total amount of basic pay paid to such member (or officer or employee) for such fiscal year as the balance in the Trust Fund as of the beginning of such fiscal year bears to the total amount of such balance and the balance in the Thrift Savings Fund as of the beginning of such fiscal year.
.
Conforming amendments
Section 201(h) of such Act (42 U.S.C. 401(h)) is amended—
by striking All other
in the second sentence and inserting Except as provided in section 255, all other
; and
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.
.
Effective date
The amendments made by this section shall apply with respect to payments of old-age insurance benefits for months after December 2006.
Financing of Government contributions to accounts
Primary financing from social security contributions of individuals working illegally in the United States
Section 201(a) of the Social Security Act (42 U.S.C. 401(a)) is amended, in the matter following clause (4)—
by striking The amounts appropriated by clauses (3) and (4)
and inserting the following: So much of the amounts described in clauses (3) and (4) for any fiscal year as are attributable to wages paid to, and self-employment income derived by, individuals with respect to whom the criterion specified in section 214(c) is not satisfied in determining such individuals’ quarters of coverage, as determined by the Secretary of the Treasury in consultation with the Commissioner of Social Security, shall be reduced by the amounts equivalent to the aggregate of initial contributions to investment accounts made during such fiscal year pursuant to section 252(c). The amounts appropriated by clauses (3) and (4)
;
by inserting and initial contributions to investment accounts to be made pursuant to section 252(c)
after paid to or deposited into the Treasury
; and
by striking the taxes specified in such clauses (3) and (4) of this subsection
and inserting the amounts required to be transferred
.
Secondary financing from taxes on social security benefits
Section 121(e) of the Social Security Amendments of 1983 (42 U.S.C. 401 note) is amended—
by striking less (ii) the amounts
in paragraph (1) and inserting less (ii) the sum of (I) the amounts
;
by inserting before the period at the end of paragraph (1) the following: , and (II) the amounts equivalent to the excess (if any) of the aggregate of initial contributions to investment accounts to be made pursuant to section 252(c) of the Social Security Act for any fiscal year over the amount of the reduction for such fiscal year described in the first sentence following clause (4) of section 201(a) of the Social Security Act
; and
by inserting before the period at the end of the second sentence of paragraph (2) the following: and initial contributions to investment accounts pursuant to section 252(c) of the Social Security Act estimated to be made during such quarter
.
Tax treatment of individual retirement investment program and personal Social Security investment accounts
Social Security Investment Trust Fund
Section 7701 of the Internal Revenue Code of 1986 (relating to definitions) is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:
Tax treatment of the Social Security Investment Trust Fund
The Social Security Investment Trust Fund established under section 260 of the Social Security Act shall be exempt from taxation under subtitle A of the Internal Revenue Code of 1986.
.
Personal Social Security investment accounts
Part VII of subchapter B of chapter 1 of such Code (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:
Personal Social Security investment accounts
Allowance of deduction
In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the amount contributed in cash for such taxable year to the personal social security investment account of any eligible individual.
Maximum amount of deduction
In general
The amount allowable as a deduction under subsection (a) for any taxable year for contributions to the personal social security investment account of an eligible individual shall not exceed $5,000.
Special rule
If the account holder of any personal social security investment account makes a contribution to such account for any taxable year, no other taxpayer shall be allowed a deduction for any amount contributed to such account for such taxable year.
Definitions
For purposes of this section—
Personal Social Security investment account
The term personal social security investment account means an account established under section 252 of the Social Security Act.
Eligible individual
The term eligible individual means, with respect to the taxpayer—
the taxpayer,
the taxpayer’s spouse, and
any individual with respect to whom a deduction under section 151(c) (determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) is allowed to the taxpayer.
Tax treatment of distributions
In general
Except as otherwise provided in this subsection, any amount paid or distributed out of a personal social security investment account shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72.
Special rules for applying Section 72
For purposes of applying section 72 to any amount described in paragraph (1)—
all personal social security investment accounts of the same individual shall be treated as 1 contract,
all distributions during any taxable year shall be treated as 1 distribution, and
the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins.
Treatment of distributions of Social Security benefits
In general
Notwithstanding paragraph (1), the amount of any benefit distribution described in section 255(b) of the Social Security Act shall be included in gross income (to the extent provided in section 86) as if such distribution were a social security benefit (as defined in section 86).
Allocation of investment in the contract
For purposes of section 72, the portion of the account which the Executive Director (as defined in section 251 of the Social Security Act) determines is necessary to fund the benefit distributions referred to in subparagraph (A) for the taxable year and all succeeding taxable years shall be treated as a separate contract with respect to which no premium or other consideration was paid.
Cross reference
For excise tax on certain distributions, see section 72(t).
Special rules
Time when contributions deemed made
For purposes of this section, a taxpayer shall be deemed to have made a contribution to a personal social security investment account on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).
Beneficiary must be under age 701/2
No deduction shall be allowed under this section with respect to any contribution to a personal social security investment account if the account holder has attained age 701/2 before the close of such holder’s taxable year for which the contribution was made.
.
Deduction allowed whether or not taxpayer itemizes other deductions
Subsection (a) of section 62 of such Code is amended—
by redesignating the second paragraph (19) as paragraph (20); and
by inserting after paragraph (20) (as redesignated) the following new paragraph:
Personal Social Security investment account contributions
The deduction allowed by section 224.
.
Conforming amendments
Penalty for failure to meet minimum distribution requirement
Subsection (c) of section 4974 of such Code is amended by striking or
at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting , or
, and by inserting after paragraph (5) the following new paragraph:
any personal social security investment account (as defined in section 224(c)).
.
Treatment like individual retirement plan under excise tax on certain premature distributions
Subparagraph (A) of section 72(t)(3) of such Code is amended—
by inserting or from a personal social security investment account (as defined in section 224(c))
before the period at the end, and
by inserting or from personal social security investment accounts
after plans
in the subparagraph heading.
Clerical amendment
The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2006.