Social Security Personal Savings Guarantee and Prosperity Act of 2005 - Amends title II (Old Age, Survivors, and Disability Insurance) (OASDI) of the Social Security Act (SSA) to establish: (1) a new part B (Personal Social Security Savings Program); and (2) the Social Security Personal Savings Fund in the Treasury, consisting of a separate Tier I Investment Fund and Tier II Investment Fund. Restricts participation in the program to certain individuals born on or after January 1, 1950. Allows a participating individual to elect to direct transfers from the Savings Fund, credited to his or her personal Social Security savings account, into one or more specified Tier III Investment Options. Prescribes requirements for personal Social Security savings annuity and other distributions. Establishes a Personal Social Security Savings Board to administer the program and set policies for the investment and management of the Savings Fund.
Provides for recapture of corporate tax on yields attributable to personal Social Security savings account investments.
Amends the Internal Revenue Code (IRC) to exempt the Social Security Personal Savings Fund and each Tier III Investment Option from income taxation. Excludes from gross income any qualified distribution from amounts credited to a personal Social Security savings account.
Amends SSA title II part B to create in the Treasury the Self-Liquidating Social Security Transition Fund.
Amends SSA title VII (Administration) to prohibit receipts and disbursements of the Social Security and related trust funds from being counted as new budget authority, outlays, receipts, or deficit or surplus.
Amends SSA title II to dedicate budget surpluses to saving Social Security.
Amends IRC to provide for a reduction of FICA rates resulting from the program.
Amends the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings Act) to provide for spending safeguards on the growth of entitlements and mandatories.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 857 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 857
To reform Social Security by establishing a Personal Social Security
Savings Program and to provide new limitations on the Federal Budget.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 20, 2005
Mr. Sununu (for himself, Mr. Brownback, and Mr. DeMint) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To reform Social Security by establishing a Personal Social Security
Savings Program and to provide new limitations on the Federal Budget.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Social Security
Personal Savings Guarantee and Prosperity Act of 2005''.
(b) Table of Contents.--The table of contents is as follows:
Sec. 1. Short title and table of contents.
TITLE I--PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM
Sec. 101. Establishment of Personal Social Security Investment Program.
``Part B--Personal Social Security Savings Program
``Sec. 251. Definitions.
``Sec. 252. Social Security Personal Savings Fund.
``Sec. 253. Participation in Program.
``Sec. 254. Personal social security savings accounts.
``Sec. 255. Tier I Investment Fund.
``Sec. 256. Tier II Investment Fund.
``Sec. 257. Tier III Investment Options.
``Sec. 258. Personal social security savings annuity and other
distributions.
``Sec. 259. Guarantee of promised benefits.
``Sec. 260. Personal Social Security Savings Board.
``Sec. 261. Executive Director.
Sec. 102. Monthly insurance benefits for participating individuals.
Sec. 103. General fund transfers to the Federal Old-Age and Survivors
Insurance Trust Fund.
Sec. 104. Tax treatment of accounts.
Sec. 105. Self-Liquidating Social Security Transition Fund.
Sec. 106. Budgetary treatment of social security.
Sec. 107. Dedication of budget surpluses to saving social security.
Sec. 108. Accounting for the Old-Age, Survivors, and Disability
Insurance Program and the Personal Social
Security Savings Program.
Sec. 109. Reduction of FICA rates resulting from Personal Social
Security Savings Program.
TITLE II--PUTTING A LID ON THE FEDERAL BUDGET
Subtitle A--Spending Safeguards on the Growth of Entitlements and
Mandatories
Sec. 201. Spending caps on growth of entitlements and mandatories.
Sec. 202. Exempt programs and activities.
Sec. 203. Exceptions, limitations, and special rules.
Sec. 204. Point of order.
Sec. 205. Technical and conforming amendments.
Subtitle B--Discretionary Spending Limits
Sec. 211. Enforcing discretionary spending limits.
TITLE I--PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM
SEC. 101. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY INVESTMENT PROGRAM.
(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--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM
``SEC. 251. DEFINITIONS.
``For purposes of this part--
``(1) Participating individual.--The term `participating
individual' has the meaning provided in section 253(a).
``(2) Board.--The term `Board' means the Personal Social
Security Savings Board established under section 260.
``(3) Executive director.--The term `Executive Director'
means the Executive Director appointed under section 261.
``(4) Personal social security savings account.--The term
`personal social security savings account' means an account
established under section 254(a).
``(5) Personal social security savings annuity.--The term
`personal social security savings annuity' means an annuity
approved by the Board under section 258(b)(3).
``(6) Savings fund.--The term `Savings Fund' means the
Social Security Personal Savings Fund established under section
252.
``(7) Tier i investment fund.--The term `Tier I Investment
Fund' means the trust fund created under section 255.
``(8) Tier ii investment fund.--The term `Tier II
Investment Fund' means the trust fund created under section
256.
``(9) Tier iii investment option.--The term `Tier III
Investment Option' means an investment option which is--
``(A) offered by an eligible entity certified by
the Board under section 257(b); and
``(B) approved by the Board under section 257(c).
``SEC. 252. SOCIAL SECURITY PERSONAL SAVINGS FUND.
``(a) Establishment of Savings Fund.--
``(1) Establishment.--There is established in the Treasury
of the United States a trust fund to be known as the `Social
Security Personal Savings Fund'.
``(2) Amounts in fund.--The Savings Fund shall consist of--
``(A) all amounts transferred to or deposited into
the Savings Fund under subsection (b), increased by the
total net earnings from investments of sums in the
Savings Fund attributable to such transferred or
deposited amounts, and reduced by the total net losses
from investments of such sums, and
``(B) the reserves held in the Annuity Reserves
Account established under section 258(b)(3), increased
by the total net earnings from investments of such
reserves, and reduced by the total net losses from
investments of such reserves.
``(3) Trustees.--The Board shall serve as trustees of the
Savings Fund.
``(4) Budget authority; appropriation.--This part
constitutes budget authority in advance of appropriations Acts
and represents the obligation of the Board to provide for the
payment of amounts provided under this part. The amounts held
in the Savings Fund are appropriated and shall remain available
without fiscal year limitation.
``(b) Deposits Into Fund.--
``(1) In general.--During each calendar year, the Secretary
of the Treasury shall deposit into the Savings Fund, from
amounts held in the Federal Old-Age and Survivors Insurance
Trust Fund, a total amount equal, in the aggregate, to 100
percent of the redirected social security contribution for such
calendar year of each individual who is a participating
individual for such calendar year.
``(2) Transfers based on estimates.--
``(A) In general.--The amounts deposited pursuant
to paragraph (1) shall be transferred in at least
weekly payments from the Federal Old-Age and Survivors
Insurance Trust Fund to the Savings Fund.
``(B) Determination of amounts.--The amounts
transferred under subparagraph (A) shall be determined
on the basis of estimates, made by the Commissioner of
Social Security and certified to the Secretary of the
Treasury, of the wages paid to, and self-employment
income derived by, participating individuals. Proper
adjustments shall be made in amounts subsequently
transferred to the extent prior estimates were in
excess of or were less than actual amounts transferred.
``(3) Redirected social security contributions.--For
purposes of paragraph (1)----
``(A) In general.--The term `redirected social
security contributions' means, with respect to an
individual for a calendar year, the sum of--
``(i) the product derived by multiplying--
``(I) the sum of the total wages
paid to, and self-employment income
derived by, such individual during such
calendar year, to the extent such total
wages and self-employment income do not
exceed the base amount for such
calendar year; by
``(II) the applicable base
percentage for the calendar year; and
``(ii) the product derived by multiplying--
``(I) the sum of the total wages
paid to, and self-employment income
derived by, such individual during such
calendar year, to the extent such total
wages and self-employment income exceed
the base amount (taking into account
the limits imposed by the contribution
and benefit base under section 230); by
``(II) the applicable supplemental
percentage for the calendar year.
``(B) Base amount.--For purposes of subparagraph
(A)--
``(i) Initial base amount.--The base amount
for calendar year 2006 is $10,000.
``(ii) Adjustments to base amount.--The
base amount for any calendar year after 2006 is
the product derived by multiplying $10,000 by a
fraction--
``(I) the numerator of which is the
national average wage index (as defined
in section 209(k)) for the first of the
2 preceding calendar years; and
``(II) the denominator of which is
the national average wage index (as so
defined) for 2004.
``(C) Applicable base percentage.--For purposes of
subparagraph (A), the applicable base percentage for a
calendar year is--
``(i) for calendar years after 2005 and
before 2016, 5 percent; and
``(ii) for calendar years after 2015, 10
percent.
``(D) Applicable supplemental percentage.--For
purposes of subparagraph (A), the applicable
supplemental percentage for a calendar year is--
``(i) for calendar years after 2005 and
before 2016, 2.5 percent; and
``(ii) for calendar years after 2015, 5
percent.
``(c) Availability.--The sums in the Savings Fund are appropriated
and shall remain available without fiscal year limitation--
``(1) to invest funds in the Tier I Investment Fund of the
Savings Fund and the Tier II Investment Fund of the Savings
Fund under sections 255 and 256, respectively;
``(2) to transfer into Tier III Investment Options under
section 257;
``(3) to make distributions in accordance with section 258;
and
``(4) to pay the administrative expenses of the Board in
accordance with subsection (e).
``(d) Limitations on Use of Funds.--
``(1) In general.--Sums in the Savings Fund credited to a
participating individual's personal social security savings
account may not be used for, or diverted to, purposes other
than for the exclusive benefit of the participating individual
or the participating individual's beneficiaries under this
part.
``(2) Assignments.--Sums in the Savings Fund may not be
assigned or alienated and are not subject to execution, levy,
attachment, garnishment, or other legal process.
``(e) Payment of Administrative Expenses.--Administrative expenses
incurred to carry out this part shall be paid out of net earnings in
the Savings Fund in conjunction with the allocation of investment
earnings and losses under section 254(c).
``(f) Limitation.--The sums in the Savings Fund shall not be
appropriated for any purpose other than the purposes specified in this
part and may not be used for any other purpose.
``SEC. 253. PARTICIPATION IN PROGRAM.
``(a) Participating Individual.--For purposes of this part, the
term `participating individual' means any individual--
``(1)(A) who receives wages in any calendar year after
December 31, 2005, on which there is imposed a tax under
section 3101(a) of the Internal Revenue Code of 1986, or
``(B) who derives self-employment income for a taxable year
beginning after December 31, 2005, on which there is imposed a
tax under section 1401(a) of the Internal Revenue Code of 1986,
``(2) who is born on or after January 1, 1950, and
``(3) who has not filed an election to renounce such
individual's status as a participating individual under
subsection (b) or has filed such an election and has
subsequently filed an election to reinstate such individual's
status as a participating individual under subsection (c).
``(b) Renunciation of Participation.--
``(1) In general.--An individual--
``(A) who has not attained retirement age (as
defined in section 216(l)(1)), and
``(B) with respect to whom no distribution has been
made from amounts credited to the individual's personal
social security savings account for the purchase of a
personal social security savings annuity,
may elect, in such form and manner as shall be prescribed in
regulations of the Board, to renounce such individual's status
as a `participating individual' for purposes of this part. Upon
completion of the procedures provided for under paragraph (2),
any such individual who has made such an election shall not be
treated as a participating individual under this part,
effective as if such individual had never been a participating
individual. The Board shall provide for immediate notification
of such election to the Commissioner of Social Security, the
Secretary of the Treasury, and the Executive Director.
``(2) Procedure.--The Board shall prescribe by regulation
procedures governing the termination of an individual's status
as `participating individual' pursuant to an election under
this subsection. Such procedures shall include--
``(A) prompt closing of the individual's personal
social security savings account established under
section 254,
``(B) revocation of any benefit credit certificate
assigned to the individual's personal social security
savings account under section 255, and
``(C) prompt transfer to the Federal Old-Age and
Survivors Insurance Trust Fund as general receipts of
any amount held in the Tier II Investment Fund of the
Savings Fund or under a Tier III Investment Option
pursuant to section 256 or 257 and credited to such
individual's personal social security savings account.
``(c) Reinstatement of Participation.--
``(1) In general.--Any individual who has filed an election
under subsection (b) to renounce such individual's status as a
`participating individual' under this part may elect, in such
form and manner as shall be prescribed in regulations of the
Board, to reinstate such status. Such regulations shall provide
for regular, periodic opportunities for the filing of such an
election. The Board shall provide for immediate notification to
the Commissioner of Social Security, the Secretary of the
Treasury, and the Executive Director of such election.
``(2) Effectiveness of reinstatement.--An election under
this subsection shall be effective with respect to wages
earned, and self-employment income derived, on the earliest
date on which the Board determines is practicable to make such
election effective following the date of the filing of the
election. The individual filing the election shall be treated
as becoming a participating individual under this part on the
effective date of the election as if such individual first met
the requirements of subsection (a) on such date.
``(3) Irrevocability.--An election under this subsection
shall be irrevocable.
``SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS ACCOUNTS.
``(a) Establishment of Publicly Administered System of Personal
Security Savings Accounts.--As soon as practicable after the later of
January 1, 2006, or the date on which an individual becomes a
participating individual under this part, the Executive Director shall
establish a personal social security savings account for such
individual. Such account shall be the means by which amounts held in
the Tier I Investment Fund and the Tier II Investment Fund of the
Savings Fund under sections 255 and 256 and amounts held under Tier III
Investment Options under section 257 are credited to such individual,
under procedures which shall be established by the Board by regulation.
Each account of a participating individual shall be identified to such
participating individual by means of the participating individual's
social security account number.
``(b) Account Balance.--The balance in a participating individual's
account at any time is the sum of--
``(1) the balance in the Tier I Investment Fund of the
Savings Fund credited to such participating individual prior to
transfer of the credited amount to the Tier II Investment Fund
of the Savings Fund; plus
``(2) the excess of--
``(A) all deposits in the Tier II Investment Fund
of the Savings Fund credited to such participating
individual's personal social security savings account,
subject to such increases and reductions as may result
from allocations made to and reductions made in the
account pursuant to subsection (c)(1); over
``(B) amounts paid out of the Tier II Investment
Fund in connection with amounts credited to such
participating individual's personal social security
savings account; plus
``(3) the excess of--
``(A) the deposits in the Tier III Investment
Options credited to such participating individual's
personal social security savings account, subject to
such increases and reductions as may result from
amounts credited to, and reductions made in, the
account pursuant to subsection (c)(2); over
``(B) amounts paid out of the Tier III Investment
Options of such participating individual.
The calculation made under paragraph (3) shall be made separately for
each Tier III Investment Option of the participating individual. The
Board shall also hold for the participating individual any benefit
credit certificate assigned to the participating individual's personal
social security savings account under section 255.
``(c) Allocation of Earnings and Losses.--Pursuant to regulations
which shall be prescribed by the Board, the Executive Director shall
allocate to each personal social security savings account an amount
equal to the net earnings and net losses from each investment of sums--
``(1) in the Tier I Investment Fund and the Tier II
Investment Fund which are attributable to sums credited to such
account reduced by an appropriate share of the administrative
expenses paid out of the net earnings, as determined by the
Executive Director; and
``(2) in the Tier III Investment Options which are
attributable to sums credited to such account reduced by the
administrative expenses paid out of the net earnings.
``SEC. 255. TIER I INVESTMENT FUND.
``(a) Establishment of Tier I Investment Fund.--
``(1) In general.--The Savings Fund shall include a
separate fund to be known as the `Tier I Investment Fund'.
``(2) Amounts in fund.--The Tier I Investment Fund consists
of all amounts derived from payments into the Fund under
section 252(b) and remaining after investment of such amounts
under subsection (b), including additional amounts derived as
income from such investments.
``(3) Use of funds.--The amounts held in the Fund are
appropriated and shall remain available without fiscal year
limitation--
``(A) to be held for investment on behalf of
participating individuals under subsection (b),
``(B) to pay the administrative expenses related to
the Fund, and
``(C) to make transfers from the Fund under
subsection (c)(2).
``(b) Investment of Fund Balance.--For purposes of investment of
the Tier I Investment Fund, the Board shall contract with appropriate
professional asset managers, recordkeepers, and custodians selected for
investment of amounts held in the Fund, so as to provide for investment
of the balance of the Fund, in a manner providing broad diversification
in accordance with regulations of the Board, in--
``(1) insurance contracts,
``(2) certificates of deposit, or
``(3) other instruments or obligations selected by such
asset managers,
which return the amount invested and pay interest, at a specified rate
or rates, on that amount during a specified period of time.
``(c) Separate Crediting to Personal Social Security Savings
Accounts and Transfers to the Tier II Investment Fund or to Tier III
Investment Options.--
``(1) Crediting to accounts.--
``(A) In general.--Subject to this paragraph, the
Board shall provide for prompt, separate crediting, as
soon as practicable, of the amounts deposited in the
Tier I Investment Fund to the personal social security
savings account of each participating individual with
respect to the redirected social security contributions
(as defined in section 252(b)(3)) of such participating
individual. The Board shall include in such crediting,
with respect to each such individual, any increases or
decreases in such amounts so as to reflect the net
returns and losses from investment of the balance of
the Fund prior to such crediting. For purposes of
determining such increases and decreases for each
calendar year, the amounts deposited into the Fund in
connection with such individual during such calendar
year shall be deemed to have been deposited on June 30
of such year.
``(B) Treatment of married participating
individuals.--If the participating individual is
married as of the end of the calendar year in which the
amounts to be credited were deposited in the Tier I
Investment Fund and the spouse is also a participating
individual, the personal social security savings
account of the participating individual and the
personal social security savings account of his or her
spouse shall each be credited with 50 percent of such
amounts.
``(2) Transfers from the tier i investment fund.--In
accordance with elections filed with the Board by a
participating individual, any amount credited to the personal
social security savings account of such participating
individual under paragraph (1) shall be promptly transferred to
the Tier II Investment Fund of the Savings Fund for investment
in accordance with section 256 and, to the extent available
under section 257, to Tier III Investment Options in accordance
with section 257.
``(d) Treatment of Amounts Held in Tier I Investment Fund.--Subject
to this part--
``(1) until amounts deposited into the Tier I Investment
Fund during any calendar year are credited to personal social
security savings accounts, such amounts shall be treated as the
unallocated property of all participating individuals with
respect to whom amounts were deposited in the Fund during such
year, jointly held in trust for such participating individuals
in the Savings Fund, and
``(2) amounts deposited into the Fund which are credited to
the personal social security savings account of a participating
individual shall be treated as property of the participating
individual, held in trust for such participating individual in
the Savings Fund.
``SEC. 256. TIER II INVESTMENT FUND.
``(a) Establishment of Tier II Investment Fund.--
``(1) In general.--The Savings Fund shall include a
separate fund to be known as the `Tier II Investment Fund'.
``(2) Amounts in fund.--The Tier II Investment Fund
consists of all amounts derived from payments into the Fund
under section 255(c)(2) and remaining after investment of such
amounts under subsection (b), including additional amounts
derived as income from such investments.
``(3) Use of funds.--The amounts held in the Fund are
appropriated and shall remain available without fiscal year
limitation--
``(A) to be held for investment under subsection
(b),
``(B) to pay the administrative expenses related to
the Fund, and
``(C) to make transfers to Tier III Investment
Options under section 257 or to make payments under
section 258.
``(b) Payments Into Tier II Investment Fund.--
``(1) In general.--Upon the crediting under section 252 to
the personal social security savings account of a participating
individual of any amount held in the Tier I Investment Fund for
any calendar year, the Board shall transfer from the Tier I
Investment Fund into the Tier II Investment Fund any amount so
credited to such participating individual's account which is
not transferred to a Tier III Investment Option pursuant to an
election under section 257(a).
``(2) Ongoing separate crediting.--Subject to this
paragraph, the Board shall provide for ongoing separate
crediting to each participating individual's personal social
security savings account of the amounts deposited in the Tier
II Investment Fund with respect to such participating
individual, together with any increases or decreases therein so
as to reflect the net returns and losses from investment
thereof while held in the Fund.
``(c) Investment Accounts.--
``(1) In general.--For purposes of investment of the Tier
II Investment Fund, the Board shall divide the Fund into 6
investment accounts. The Board shall contract with appropriate
investment managers, recordkeepers, and custodians selected for
investment of amounts held in each investment account. Such
accounts shall consist of--
``(A) a Lifecycle Investment Account,
``(B) a Government Securities Investment Account,
``(C) a Fixed Income Investment Account,
``(D) a Common Stock Index Investment Account,
``(E) a Small Capitalization Stock Index Investment
Account, and
``(F) an International Stock Index Investment
Account.
``(2) Election of investment options.--
``(A) Default investment account.--Except as
provided in an election in effect under subparagraph
(B), amounts held in the Tier II Investment Fund shall
be credited to the Lifecycle Investment Account.
``(B) Election of transfers between investment
accounts.--In any case in which a participating
individual who has an amount in such individual's
personal social security savings account credited to
any of the investment accounts in the Tier II
Investment Fund files with the Secretary of the
Treasury a written election under this subparagraph,
not more frequently than annually and in accordance
with regulations of the Board, the Secretary of the
Treasury shall transfer the full amount so credited in
such investment account from such investment account to
any one of the other investment accounts in the Tier II
Investment Fund (whichever is designated in such
election).
``(d) Lifecyle Investment Account.--
``(1) In general.--The investment manager, recordkeeper,
and custodian selected for investment of amounts held in the
Lifecyle Investment Account shall invest such amounts under
regulations which shall be prescribed by the Board in a mix of
equities and fixed income instruments so as to ensure, to the
maximum extent practicable, that, of the total balance in the
Fund credited to such account and available for investment
(after allowing for administrative expenses), the percentage
invested in fixed income instruments by individuals in
designated cohorts, ranging in age up to those of at least
retirement age, will increase in a linear progression from 0
percent to 100 percent as the cohort approaches retirement age.
``(2) Investment in equities.--In accordance with
regulations which shall be prescribed by the Board, the Board
shall establish standards which must be met by equities
selected for investment in the Lifecycle Investment Account. In
conformity with such standards, the Board shall select, for
purposes of such investment, indices which are comprised of
equities the aggregate market value of which is, in each case,
a reasonably broad representation of companies whose shares are
traded on the equity markets. Amounts invested in equities
under an investment option shall be held in a portfolio
designed to replicate the performance of one or more of such
indices.
``(3) Investment in fixed income instruments.--In
accordance with regulations which shall be prescribed by the
Board, the Board shall establish standards which must be met by
fixed income instruments selected for investment in the
Lifecycle Investment Account. Such standards shall take into
account the competing considerations of risk and return.
Amounts invested in fixed income instruments in an investment
option shall be held in a portfolio which shall consist of a
diverse range of fixed income instruments, taking into full
account the opposing considerations of risk and maximization of
return.
``(e) Government Securities Investment Account.--
``(1) In general.--Amounts in the Government Securities
Investment Account shall be invested in securities of the
United States Government as provided in this subsection
``(2) Issuance of special obligations.--The Secretary of
the Treasury is authorized to issue special interest-bearing
obligations of the United States for purchase by the Tier II
Investment Fund for purposes of investment of amounts in the
Government Securities Investment Account. Such obligations
shall have maturities fixed with due regard to the needs of the
Fund as determined by the Board, 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. Any average market yield
computed under this paragraph which is not a multiple of one-
eighth of 1 percent shall be rounded to the nearest multiple of
one-eighth of 1 percent.
``(f) Fixed Income Investment Account.--Amounts in the Fixed Income
Investment Account shall be invested in instruments or obligations
which return the amount invested and pay interest, at a specified rate
or rates, on that amount during a specified period of time, consisting
of instruments or obligations in one or more of the following
categories:
``(1) insurance contracts;
``(2) certificates of deposit; or
``(3) other instruments or obligations selected by
qualified professional asset managers.
``(g) Common Stock Index Investment Account.--
``(1) Portfolio design.--Amounts held in the Common Stock
Investment Account shall be invested in a portfolio of common
stock designed to replicate the performance of the index
selected under paragraph (2). The portfolio shall be designed
such that, to the extent practicable, the percentage of the
balance in the Common Stock Index Investment Account 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.
``(2) Selection of index.--The Board shall select, for
purposes of investment of amounts held in the Common Stock
Investment Account, 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.
``(h) Small Capitalization Stock Index Investment Account.--
``(1) Portfolio design.--Amounts held in the Small
Capitalization Stock Index Investment Account shall be invested
in a portfolio of common stock designed to replicate the
performance of the index selected under paragraph (2). The
portfolio shall be designed such that, to the extent
practicable, the percentage of the balance in the Small
Capitalization Stock Index Investment Account 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.
``(2) Selection of index.--The Board shall select, for
purposes of investment of amounts held in the Small
Capitalization Stock Index Investment Account, 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 stocks included in the
Common Stock Index Investment Account.
``(i) International Stock Index Investment Account.--
``(1) Portfolio design.--Amounts held in the International
Stock Index Investment Account shall be invested in a portfolio
of stock designed to replicate the performance of the index
selected under paragraph (2). The portfolio shall be designed
such that, to the extent practicable, the percentage of the
balance in the International Stock Index Investment Account
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.
``(2) Selection of index.--The Board shall select, for
purposes of investment of amounts held in the International
Stock Index Investment Account, 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
international equity markets excluding the United States equity
markets.
``(j) Additional Investment Options.--The Board may from time to
time, as determined by regulation as appropriate to further the
purposes of this section, shall--
``(1) establish investment accounts in the Tier II
Investment Fund meeting the requirements of this section in
addition to those established by this section, and
``(2) terminate investment accounts in the Tier II
Investment Fund established pursuant to paragraph (1).
``(k) Disclosure of Administrative Costs.--The Board shall provide
to each participating individual an annual disclosure of the rate of
administrative costs chargeable with respect to investment in each
investment account in the Tier II Investment Fund. Such disclosure
shall be written in a manner calculated to be understood by the average
participating individual.
``(l) Treatment of Amounts Held in Tier II Investment Fund.--
Subject to this part, amounts deposited into, and held and accounted
for in, the Tier II Investment Fund with respect to any participating
individual shall continue to be treated as property of such
participating individual, held in trust for such participating
individual in the Fund.
``SEC. 257. TIER III INVESTMENT OPTIONS.
``(a) Election of Tier III Investment Options.--
``(1) In general.--A participating individual may elect to
direct transfers from amounts in the Savings Fund credited to
the personal social security savings account of such individual
into 1 or more Tier III Investment Options in accordance with
paragraph (2).
``(2) Commencement of tier iii investment options upon
attainment of election threshold.--In any case in which, as of
the end of any calendar year, the total balance in the Savings
Fund credited to a participating individual's personal social
security savings account exceeds for the first time the
election threshold, the Board shall, by regulation, provide for
an opportunity for such participating individual to make, at
any time thereafter, such individual's first election of one or
more of the Tier III Investment Options for investment of an
amount in the Savings Fund credited to such account. Such
election may be in lieu of or in addition to investment in the
options available with respect to the Tier II Investment Fund
of the Savings Fund.
``(3) Allocation of funds.--In the case of an election
under paragraph (1), funds credited to the personal social
security savings account of the participating individual and
elected for transfer to one or more Tier III Investment Options
shall be transferred to the Tier III Investment Options so
elected for such calendar year, in percentages specified in the
election by the participating individual for each applicable
portfolio.
``(4) Election threshold.--
``(A) In general.--Subject to subparagraph (B), for
purposes of this subsection the term `election
threshold' means an amount equal to $25,000.
``(B) Adjustments.--The Board shall adjust annually
(effective for annual reporting months occurring after
December 2006) the dollar amount set forth in
subparagraph (A) under procedures providing for
adjustments in the same manner and to the same extent
as adjustments are provided for under the procedures
used to adjust benefit amounts under section
215(i)(2)(A), except that any amount so adjusted that
is not a multiple of $1.00 shall be rounded to the
nearest multiple of $1.00.
``(5) Subsequent investment of amounts held in tier iii
investment options.--Any amounts held in one or more Tier III
Investment Options may be--
``(A) transferred at any time to one or more other
Tier III Investment Options, subject to applicable
regulations of the Board and the terms governing the
affected Tier III Investment Options, and
``(B) transferred, not more frequently than
annually, to the Tier II Investment Fund, for deposit
in the applicable investment account then selected by
the participating individual under section 256.
``(b) Certification of Eligible Entities.--
``(1) In general.--The Board shall certify eligible
entities to offer Tier III Investment Options under this part.
``(2) Application.--Any eligible entity that desires to be
certified by the Board to offer a Tier III Investment Option
shall submit an application to the Board at such time, in such
manner, and containing such information as the Board may
require.
``(3) Requirements for approval.--The Board shall not
certify an eligible entity unless such eligible entity agrees
to the following requirements:
``(A) Separate accounting.--Each eligible entity
shall, with respect to each Tier III Investment Option
offered by such eligible entity to participating
individuals--
``(i) establish separate accounts for the
contributions of each participating individual,
and any earnings properly allocable to the
contributions, and
``(ii) maintain separate recordkeeping with
respect to each account.
``(B) Treatment of amounts held in fund.--Amounts
deposited into, and held and accounted for in, a Tier
III Investment Option with respect to any participating
individual shall be treated as property of such
participating individual, held in trust for such
participating individual.
``(C) Trust requirements.--Amounts held and
accounted for with respect to a participating
individual shall be held in a trust created or
organized in the United States for the exclusive
benefit of such individual or his beneficiaries.
``(D) Exemption from third party claims.--Each Tier
III Investment Option shall be exempt from any and all
third party claims against the eligible entity.
``(E) Disclosure of administrative costs.--Each
eligible entity offering a Tier III Investment Option
under this section shall provide to each participating
individual an annual disclosure of the rate of
administrative costs chargeable with respect to
investment in such Option. Such disclosure shall be
written in a manner calculated to be understood by the
average participating individual. The Board shall
provide for coordination of disclosures with respect to
Tier III Investment Options under this subparagraph so
as to assist participating individuals in comparing
alternative Options based on administrative costs.
``(F) Reporting to the executive director and the
board.--Each eligible entity shall provide reports to
the Executive Director and the Board at such time, in
such manner, and containing such information as the
Board may require.
``(4) Eligible entity defined.--For purposes of this
section, the term `eligible entity' means any investment
company (as defined in section 3 of the Investment Company Act
of 1940) or other person that the Board determines appropriate
to offer Tier III Investment Options under this part.
``(c) Approval of Tier III Investment Options.--
``(1) In general.--No funds may be transferred into a Tier
III Investment Option unless the Board has approved an
application submitted under paragraph (2) with respect to the
option.
``(2) Application.--With respect to each Tier III
Investment Option that an eligible entity certified under
subsection (b)(1) seeks to offer, such entity shall submit an
application to the Board at such time, in such manner, and
containing such information as the Board may require.
``(3) Qualifications for approval.--The Board may not
approve an application submitted under paragraph (2) in
connection with a Tier III Investment Option unless the
following requirements are met:
``(A) Option must be offered by certified eligible
entity.--The Tier III Investment Option is offered by
an eligible entity certified under subsection (b).
``(B) Option must meet quality factors.--
``(i) In general.--The Tier III Investment
Option meets qualifications which shall be
prescribed by the Board relating to the quality
factors described in clause (ii).
``(ii) Quality factors.--The quality
factors described in this clause are--
``(I) the safety and soundness of
the Tier III Investment Option's
proposed investment policy;
``(II) the experience and record of
performance of the proposed investment
option, if any;
``(III) the experience and record
of performance of the entity issuing or
offering such option; and
``(IV) such other factors as the
Board may determine appropriate.
``(d) Considerations for Certification and Approval.--In
determining whether to certify an eligible entity under subsection (b)
or to approve a Tier III Investment Option under subsection (c), the
Board shall--
``(1) act in the best interests of the participating
individuals;
``(2) base its determination solely on considerations of
balancing safety and soundness of the Tier III Investment
Option with the maximization of returns of such option; and
``(3) not base any determination related to the entity or
option on political or other extraneous considerations.
``(e) Sponsorship of Tier III Investment Options by Membership and
Labor Organizations.--
``(1) In general.--A membership or labor organization (as
defined by the Board) may sponsor Tier III Investment Options
under contracts with eligible entities certified under
subsection (b) who shall administer the investment option if
such investment option is approved by the Board under
subsection (c).
``(2) Limitation to membership.--A membership or labor
organization (as so defined) may limit to the members of such
organization participation in a Tier III Investment Option
sponsored by such organization.
``(f) Distributions in Case of Death.--Upon the death of a
participating individual, the amount of any assets held under a Tier
III Investment Option credited to the personal social security savings
account of such individual shall be distributed in accordance with
section 258(e).
``SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY AND OTHER
DISTRIBUTIONS.
``(a) Date of Initial Distribution.--Except as provided in
subsection (e), distributions may be made to a participating individual
from amounts credited to the personal social security savings account
of such individual only on or after the earliest of--
``(1) the date the participating individual attains
retirement age (as defined in section 216(l)(1)) or, if elected
by the individual, early retirement age (as defined in section
216(l)(2)); or
``(2) the date on which the amount credited to the
participating individual's personal social security savings
account is sufficient to purchase a personal social security
savings annuity with a monthly benefit that is at least equal
to the minimum annuity payment amount (as defined in subsection
(b)(4)(C)(iii)).
``(b) Personal Social Security Savings Annuities.--
``(1) Notice of available annuities.--Not later than the
date determined under subsection (a), the Board shall notify
each participating individual of--
``(A) the most recent listing of personal social
security savings annuities offered by the Annuity
Issuance Authority under paragraph (2); and
``(B) the entitlement of the participating
individual to purchase such an annuity.
``(2) Annuity issuance authority.--There is established in
the office of the Board an agency which shall be known as the
`Annuity Issuance Authority'. The Authority shall provide, in
accordance with regulations of the Board, for the issuance of
personal social security savings annuities for purchase from
the Authority under this section and to otherwise administer
the issuance of such annuities in accordance with such
regulations.
``(3) Annuity reserves account.--There is established in
the Savings Fund an Annuity Reserves Account. The Account shall
consist of all amounts received by the Authority from the
purchase of personal social security savings annuities under
this section (plus such amounts as may be transferred to the
Account under paragraph (5)(B)), increased by the total net
earnings from investments of such reserves under subparagraph
(A) of paragraph (5) and reduced by the total net losses from
investments of such reserves under such subparagraph.
``(4) Purchase of annuities.--
``(A) Selection of annuity.--On a date elected by
the participating individual, but no earlier than the
date determined under subsection (a), a participating
individual may purchase a personal social security
savings annuity selected from among the annuities
offered by the Authority under paragraph (2).
``(B) Transfer of assets.--Upon the selection of an
annuity by a participating individual under
subparagraph (A), the Board shall provide for the
transfer of assets, credited to the personal social
security savings account of the participating
individual and held in the Tier II Investment Fund or
under 1 or more Tier III Investment Options (or any
combination thereof), in a total amount sufficient to
purchase the annuity selected by the participating
individual from annuities offered by the Authority.
``(C) Minimum annuity payment amount.--
``(i) In general.--Subject to subparagraph
(D), if, at the time a personal social security
savings annuity is purchased under subparagraph
(A), the assets credited to the personal social
security savings account of the participating
individual are sufficient to purchase a
personal social security savings annuity
offered by the Authority under paragraph (2)
with a monthly annuity payment that is at least
equal to the minimum annuity payment amount,
the amount of the monthly annuity payment
provided by such annuity may not be less then
the minimum annuity payment amount.
``(ii) Construction.--Nothing in this
subparagraph shall be construed to prohibit a
participating individual from using personal
social security savings account assets to
purchase a personal social security savings
annuity offered by the Authority under
paragraph (2) which provides for a monthly
payment in excess of the minimum amount
required under clause (i).
``(iii) Minimum annuity payment amount
defined.--For purposes of this part, the term
`minimum annuity payment amount' means, as of
any date, an amount equal to the monthly
equivalent of 150 percent of the poverty line
for an individual (as in effect on such date),
determined under the poverty guidelines of the
Department of Health and Human Services issued
under sections 652 and 673(2) of the Omnibus
Budget Reconciliation Act of 1981.
``(iv) Deemed total part a monthly benefit
amount.--For purposes of clause (iii), the term
`deemed total part A monthly benefit amount'
means, with respect to a participating
individual, the total amount which would be
payable as monthly insurance benefits under
section 202 for the month in which the
participating individual attains or would
attain early retirement age (as defined in
section 216(l)(2)), based on the participating
individual's wages and self-employment income,
if the participating individual applied for
old-age insurance benefits under section 202(a)
during such month and all other individuals who
would therefore be eligible for benefits under
section 202 for such month based on such wages
and self-employment income applied for such
benefits during such month.
``(v) Assumptions.--
``(I) Earnings and longevity.--In
the case of a participating individual
with respect to whom determinations
under this subparagraph are made prior
to the month described in clause (iv),
the participating individual's average
indexed monthly earnings (within the
meaning of section 215(b)) for such
month shall be projected, under
regulations which shall be prescribed
by the Board, on the basis of
reasonable actuarial assumptions, and
the Board shall assume the survival
through the end of such month of all
other individuals described in clause
(iv).
``(II) Projected investment
returns.--For purposes of making
actuarial determinations relating to
the amounts of annuities offered by the
Authority under this section and the
amounts necessary for the purchase of
such annuities, the Authority shall
project returns from the investment, in
accordance with paragraph (5)(A), of
the reserves held in the Annuities
Reserves Account. The projection by the
Authority of such returns shall be made
under assumptions of long-term average
returns of equities and fixed income
instruments which shall be issued
annually by the Board of Trustees of
the Federal Old-Age and Survivors
Insurance Trust Fund and the Federal
Disability Insurance Trust Fund, based
on analysis of historical market
returns.
``(D) Purchase of annuities in the event of
insufficient assets.--If a participating individual
desires, or is required under subsection (f) , to
purchase a personal social security savings annuity
under subsection (b) on or after the date determined
under subsection (a)(1) and the assets of the personal
social security savings account of such individual are
insufficient to purchase a personal social security
savings annuity that provides for a monthly payment
that is at least equal to the minimum annuity payment
amount (as defined in paragraph (4)(C)(iii)), the
participating individual shall purchase a personal
social security savings annuity with a monthly payment
equal to the maximum amount that the participating
individual's personal social security savings account
can fund, as determined in accordance with regulations
which shall be prescribed by the Authority, and that
otherwise meets the requirements of this subsection
(including the cost-of-living protection requirement of
subsection (c)(1)(C)), and the Authority shall provide
for appropriate certification to the Secretary of the
Treasury with respect to the participating individual's
eligibility for guarantee payments under section 259.
``(5) Maintenance of reserves for payment of annuities.--
``(A) Investment of reserves.--For purposes of
investment of reserves held in the Annuity Reserves
Account, the Authority shall contract with appropriate
investment managers, recordkeepers, and custodians
selected by the Authority for investment of such
reserves. Such reserves shall be invested under
regulations which shall be prescribed by the Authority
so as to ensure, to the maximum extent practicable,
that, of the total balance of the reserves (after
payment of administrative expenses to such managers,
recordkeepers, and custodians)--
``(i) 65 percent is invested in equities in
the same manner and under the same standards as
are provided in section 256(c)(4), and
``(ii) 35 percent is invested in fixed
income instruments in the same manner and under
the same standards as are provided in section
256(c)(5).
``(B) Provision for full payment of annuities.--
Payment of personal social security savings annuities
in accordance with the terms of such annuities shall be
made, irrespective of the sufficiency of reserves in
the Annuity Reserves Fund attributable to funds
obtained from the purchase of such annuities. In the
event of any impending insufficiency in the Annuity
Reserves Account for the next fiscal year, the
Authority shall certify to the Secretary of the
Treasury the amount of such insufficiency, and the
Secretary of the Treasury shall transfer from the
Federal Old-Age and Survivors Insurance Trust Fund to
the Annuity Reserves Account the amount of the
insufficiency, as so certified, in such installments,
made prior to or during such fiscal year, as are
necessary to eliminate in advance such insufficiency.
``(c) Personal Social Security Savings Annuity.--
``(1) In general.--For purposes of this part, the term
`personal social security savings annuity' means an annuity
that meets the following requirements:
``(A) The annuity starting date (as defined in
section 72(c)(4) of the Internal Revenue Code of 1986)
commences on the first day of the month beginning after
the date of the purchase of the annuity.
``(B) The terms of the annuity provide--
``(i) for a monthly payment to the
participating individual during the life of the
participating individual equal to at least the
minimum annuity payment amount (as defined in
subsection (b)(4)(C)(iii)), or
``(ii) in the case of an annuity purchased
under subparagraph (D) of subsection (b)(4),
the maximum monthly payment determined under
regulations prescribed under such subparagraph.
``(C) The terms of the annuity include procedures
providing for adjustments in the amount of the monthly
payments in the same manner and to the same extent as
adjustments are provided for under the procedures used
to adjust benefit amounts under section 215(i)(2)(A).
Nothing in this subparagraph shall be construed to
preclude the terms governing such an annuity from
providing for adjustments in the amount of monthly
payments resulting in a payment for any month greater
than the payment for that month that would result from
adjustments required under the preceding
sentence.(b)(4)(D)
``(D) The terms of the annuity include such other
terms and conditions as the Board requires for the
protection of the annuitant.
``(2) Exemption from third party claims.--Each personal
social security savings annuity shall be exempt from any and
all third party claims against the issuer.
``(d) Right to Use Excess Personal Social Security Savings Account
Assets.--To the extent assets credited to a participating individual's
personal social security savings account remain after the purchase of
an annuity under subsection (b), the remaining assets shall be payable
to the participating individual at such time, in such manner, and in
such amounts as the participating individual may specify, subject to
subsection (f).
``(e) Distributions in Case of Death.--If the participating
individual dies before all amounts which are held in the Tier I
Investment Fund or the Tier II Investment Fund of the Savings Fund or
held under a Tier III Investment Option and which are credited to the
personal social security savings account of the individual are
otherwise distributed in accordance with this section, such amounts
shall be distributed, under regulations which shall be prescribed by
the Board--
``(1) in any case in which one or more beneficiaries have
been designated in advance, to such beneficiaries in accordance
with such designation as provided in such regulations, and
``(2) in the case of any amount not distributed as
described in paragraph (1), to such individual's estate.
``(f) Date of Final Distribution.--All amounts credited to the
personal social security savings account of an individual shall be
distributed, by means of the purchase of annuities or otherwise in a
manner consistent with the requirements of this section, not later than
5 years after the date the individual attains retirement age (as
defined in section 216(l)). The Board shall provide by regulation for
means of distribution necessary to ensure compliance with the
requirements of this subsection.
``SEC. 259. GUARANTEE OF PROMISED BENEFITS.
``(a) In General.--If, for any month ending after the date on which
a participating individual attains retirement age (as defined in
section 216(l)(1)), the monthly payment under a participating
individual's personal social security savings annuity is less than the
minimum annuity payment amount (as defined in section
258(b)(4)(C)(iii)), adjusted as provided in section 258(c)(1)(C), the
Annuity Issuance Authority shall so certify to the Secretary of the
Treasury and, upon receipt of such certification, such Secretary shall
provide to the participating individual, from amounts in the Federal
Old-Age and Survivors Insurance Trust Fund, a guaranty payment for such
month to supplement the personal social security savings annuity and to
guarantee full payment of such individual's monthly promised benefits.
``(b) Guaranty Payment.--For purposes of subsection (a), a
participating individual's guaranty payment for any month is equal to
the excess of--
``(1) the minimum annuity payment amount (as defined in
section 258(b)(4)(C)(iii)), adjusted as provided in section
258(c)(1)(C); over
``(2) the payment for such month of the personal social
security savings annuity purchased by the participating
individual.
``(c) Protection of Part A Normal Retirement Benefit Levels.--
``(1) In general.--In any case in which, for any month
ending after the date on which a participating individual
attains retirement age (as defined in section 216(l)(1))--
``(A) such individual's assumed total normal
retirement part A benefit for such month, exceeds
``(B) the monthly payment payable for such month
under such individual's personal social security
savings annuity,
the Secretary of the Treasury shall pay to such individual for
such month, from amounts in the Federal Old-Age and Survivors
Insurance Trust Fund, an additional amount (if any) equal to
the excess of the amount described in subparagraph (A) over the
amount described in subparagraph (B).
``(2) Definition.--For purposes of this subsection, the
term `assumed total normal retirement part A benefit' means, in
connection with a participating individual, the total amount of
monthly insurance benefits under section 202 based on such
individual's wages and self-employment income (adjusted by
taking into account adjustments under section 215(i)) that
would have been payable if--
``(A) section 202(z) did not apply, and
``(B) such individual applied for old-age insurance
benefits under section 202(a) during the month in which
such individual attains retirement age (as defined in
section 216(l)(1)).
``SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD.
``(a) Establishment.--There is established in the executive branch
of the Government a Personal Social Security Savings Board.
``(b) Composition.--The Board shall be composed of--
``(1) 3 members appointed by the President, of whom 1 shall
be designated by the President as Chairman; and
``(2) 2 members appointed by the President, of whom--
``(A) 1 shall be appointed by the President after
taking into consideration the recommendation made by
the Speaker of the House of Representatives in
consultation with the Minority Leader of the House of
Representatives; and
``(B) 1 shall be appointed by the President after
taking into consideration the recommendation made by
the Majority Leader of the Senate in consultation with
the Minority Leader of the Senate.
``(c) Advice and Consent.--Appointments under subsection (b) shall
be made by and with the advice and consent of the Senate.
``(d) Membership Requirements.--Members of the Board shall have
substantial experience, training, and expertise in the management of
financial investments and pension benefit plans.
``(e) Length of Appointments.--
``(1) Terms.--A member of the Board shall be appointed for
a term of 4 years, except that of the members first appointed
under subsection (b)--
``(A) the Chairman shall be appointed for a term of
4 years;
``(B) the members appointed under subsection (b)(2)
shall be appointed for terms of 3 years; and
``(C) the remaining members shall be appointed for
terms of 2 years.
``(2) Vacancies.--
``(A) In general.--A vacancy on the Board shall be
filled in the manner in which the original appointment
was made and shall be subject to any conditions that
applied with respect to the original appointment.
``(B) Completion of term.--An individual chosen to
fill a vacancy shall be appointed for the unexpired
term of the member replaced.
``(3) Expiration.--The term of any member shall not expire
before the date on which the member's successor takes office.
``(f) Duties.--The Board shall--
``(1) administer the program established under this part;
``(2) establish policies for the investment and management
of the Savings Fund, including the Tier I Investment Fund and
the Tier II Investment Fund, and amounts held under Tier III
Investment Options, including policies applicable to the asset
managers, recordkeepers, and custodians with responsibility for
managing the investment of amounts credited to personal social
security investment accounts, and for the management and
operation of personal social security savings annuities, which
shall provide for--
``(A) prudent investments suitable for accumulating
funds for payment of retirement income;
``(B) sound management practices; and
``(C) low administrative costs;
``(3) review the performance of investments made for the
Tier I Investment Fund and the Tier II Investment Fund;
``(4) review the performance of investments made under Tier
III Investment Options;
``(5) review the management and operation of personal
social security savings annuities;
``(6) review and approve the budget of the Board; and
``(7) comply with the fiduciary requirements of part 4 of
subtitle B of title I of the Employee Retirement Income
Security Act of 1974 (relating to fiduciary responsibility) in
connection with any exercise of discretion in connection with
the assets of the Savings Fund.
``(g) Administrative Provisions.--
``(1) In general.--The Board may--
``(A) adopt, alter, and use a seal;
``(B) except as provided in paragraph (4), direct
the Executive Director to take such action as the Board
considers appropriate to carry out the provisions of
this part and the policies of the Board in accordance
with delegations under this part;
``(C) upon the concurring votes of 4 members,
remove the Executive Director from office for good
cause shown;
``(D) provide to the Executive Director such
resources as are necessary to carry out the duties of
the Executive Director; and
``(E) take such other actions as may be necessary
to carry out the functions of the Board.
``(2) Meetings.--The Board shall meet--
``(A) not less than once during each month; and
``(B) at additional times at the call of the
Chairman.
``(3) Exercise of powers.--
``(A) In general.--Except as provided in paragraph
(1)(C), the Board shall perform the functions and
exercise the powers of the Board on a majority vote of
a quorum of the Board. Three members of the Board shall
constitute a quorum for the transaction of business.
``(B) Vacancies.--A vacancy on the Board shall not
impair the authority of a quorum of the Board to
perform the functions and exercise the powers of the
Board.
``(4) Limitations on investments.--The Board may not direct
any person to invest or to cause to be invested any sums in the
Tier II Investment Fund or any personal social security
investment account in a specific asset or to dispose of or
cause to be disposed of any specific asset of such Fund or any
such account.
``(h) Compensation.--
``(1) In general.--Each member of the Board who is not an
officer or employee of the Federal Government shall be
compensated at the daily rate of basic pay for level IV of the
Executive Schedule for each day during which such member is
engaged in performing a function of the Board.
``(2) Expenses.--A member of the Board shall be paid
travel, per diem, and other necessary expenses under subchapter
I of chapter 57 of title 5, United States Code, while traveling
away from such member's home or regular place of business in
the performance of the duties of the Board.
``(3) Source of funds.--Payments authorized under this
subsection shall be paid from the Tier I Investment Fund or the
Tier II Investment Fund, as determined appropriate by the
Board.
``(i) Discharge of Responsibilities.--The members of the Board
shall discharge their responsibilities solely in the interest of the
participating individuals and their beneficiaries under this part.
``(j) Annual Independent Audit.--The Board shall annually engage an
independent qualified public accountant to audit the activities of the
Board.
``(k) Submission of Budget to Congress.--The Board shall prepare
and submit to the President, and, at the same time, to the appropriate
committees of Congress, an annual budget of the expenses and other
items relating to the Board which shall be included as a separate item
in the budget required to be transmitted to Congress under section 1105
of title 31, United States Code.
``(l) Submission of Legislative Recommendations.--The Board may
submit to the President, and, at the same time, shall submit to each
House of Congress, any legislative recommendations of the Board
relating to any of its functions under this part or any other provision
of law.
``SEC. 261. EXECUTIVE DIRECTOR.
``(a) Appointment of Executive Director.--The Board shall appoint,
without regard to the provisions of law governing appointments in the
competitive service, an Executive Director by action agreed to by a
majority of the members of the Board.
``(b) Duties.--The Executive Director shall, as determined
appropriate by the Board--
``(1) carry out the policies established by the Board;
``(2) invest and manage the Tier I Investment Fund and the
Tier II Investment Fund in accordance with the investment
policies and other policies established by the Board;
``(3) administer the provisions of this part relating to
the Tier I Investment Fund and the Tier II Investment Fund; and
``(4) prescribe such regulations (other than regulations
relating to fiduciary responsibilities) as may be necessary for
the administration of this part relating to the Tier I
Investment Fund and the Tier II Investment Fund.
``(c) Administrative Authority.--The Executive Director may, within
the scope of the duties of the Executive Director as determined by the
Board--
``(1) appoint such personnel as may be necessary to carry
out the provisions of this part relating to the Tier I
Investment Fund and the Tier II Investment Fund;
``(2) subject to approval by the Board, procure the
services of experts and consultants under section 3109 of title
5, United States Code;
``(3) secure directly from an Executive agency, the United
States Postal Service, or the Postal Rate Commission any
information necessary to carry out the provisions of this part
and the policies of the Board relating to the Tier I Investment
Fund and the Tier II Investment Fund;
``(4) make such payments out of sums in the Tier I
Investment Fund and the Tier II Investment Fund as the
Executive Director determines, in accordance with regulations
of the Board, are necessary to carry out the provisions of this
part and the policies of the Board;
``(5) pay the compensation, per diem, and travel expenses
of individuals appointed under paragraphs (1), (2), and (6)
from the Tier I Investment Fund or the Tier II Investment Fund,
in accordance with regulations of the Board;
``(6) accept and use the services of individuals employed
intermittently in the Government service and reimburse such
individuals for travel expenses, authorized by section 5703 of
title 5, United States Code, including per diem as authorized
by section 5702 of such title;
``(7) 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
``(8) take such other actions as are appropriate to carry
out the functions of the Executive Director.''.
(b) Effective Date.--The amendments made by this section shall
apply with respect to wages paid after December 31, 2005, for pay
periods ending after such date and self-employment income for taxable
years beginning after such date.
SEC. 102. MONTHLY INSURANCE BENEFITS FOR PARTICIPATING INDIVIDUALS.
Section 202 of the Social Security Act (42 U.S.C. 402) is amended
by adding at the end the following new subsection:
``Benefits for Participants Under Part B
``(z)(1) Notwithstanding the preceding provisions of this section--
``(A) a participating individual under the Personal Social
Security Savings Accounts Program under part B shall not be
entitled to old-age insurance benefits under subsection (a);
and
``(B) except as provided in paragraph (2), no individual
shall be entitled to benefits under this section on the basis
of the wages and self-employment income of such a participating
individual.
``(2) In the case of any such participating individual who dies
before such individual purchases a personal social security savings
annuity under section 258, paragraph (1)(B) shall not apply with
respect to child's insurance benefits under subsection (d), widow's
insurance benefits under subsection (e), widower's insurance benefits
under subsection (f), mother's and father's insurance benefits under
subsection (g), and parent's insurance benefits under subsection
(h).''.
SEC. 103. GENERAL FUND TRANSFERS TO THE FEDERAL OLD-AGE AND SURVIVORS
INSURANCE TRUST FUND.
(a) Recapture of Corporate Tax on Account Yields.--
(1) In general.--Section 201 of the Social Security Act (42
U.S.C. 401) is amended by adding at the end the following new
subsection:
``Recapture of Corporate Tax on Yields From Personal Social Security
Savings Account Investments
``(o) The Secretary of the Treasury, in consultation with the
Personal Social Security Savings Board, shall estimate and transfer to
the Federal Old-Age and Survivors Insurance Trust Fund within 3 months
after the end of each fiscal year an amount equal to the recapture
amount for such fiscal year. For purposes of the preceding sentence,
the recapture amount for any fiscal year shall be equal to the amount
of corporate tax receipts under the Internal Revenue Code of 1986
deposited in the Treasury for that fiscal year which are attributable
to personal social security savings account investments under part B of
this title.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply with respect to fiscal years beginning after
September 30, 2005.
(3) Initial assumptions.--In determining the recapture
amount under section 201(o) of the Social Security Act (added
by paragraph (1)) for fiscal years 2006 and 2007, the Secretary
of the Treasury shall make the following assumptions concerning
the total amount of taxable capital in the United States
represented by the total assets held by personal social
security savings accounts established under part B of title II
of the Social Security Act:
(A) 80 percent of such total assets are a net
addition to national investments.
(B) Of the amount described in subparagraph (A), 90
percent will be invested in the United States and
subject to taxation under the Internal Revenue Code of
1986.
(C) Of the amount described in subparagraph (B), 95
percent will be subject to the Federal corporate tax.
(D) The amount described in subparagraph (C) is
subject to the statutory tax rate of 35 percent
(resulting in an effective corporate tax rate of 23.9
percent on the earnings of all such total assets).
(b) Recapture of Government Savings Over Baseline.--
(1) In general.--Section 201 of the Social Security Act (as
amended by subsection (a)) is amended further by adding at the
end the following new subsection:
``Recapture of Government Savings Over Baseline
``(p)(1) In general.--The Secretary of the Treasury, in
consultation with the Personal Social Security Savings Board, shall
estimate and transfer to the Federal Old-Age and Survivors Insurance
Trust Fund within 3 months after the end of each fiscal year an amount
equal to the spending reductions amount for such fiscal year. For
purposes of the preceding sentence, the spending reductions amount
shall be an amount equal to--
``(A) for any fiscal year in the period beginning with
fiscal year 2006 and ending with fiscal year 2013, the excess
of--
``(i) 20 percent of the gross domestic product (as
determined by the Congressional Budget Office) for the
fiscal year for which the determination is made; over
``(ii) the product of--
``(I) 20 percent of the gross domestic
product (as so determined) for the fiscal year
for which the determination is made; and
``(II) 0.99, factored a number of times
equal to the number of fiscal years during such
period which end with or before the fiscal year
for which the determination is made; and
``(B) for any fiscal year beginning after fiscal year 2013
and ending with the termination year--
``(i) the amount determined under subparagraph (A)
for fiscal year 2013; increased by
``(ii) the rate of growth of the gross domestic
product (as so determined) over the period beginning
with fiscal year 2014 and ending with the fiscal year
for which the determination is made.
``(2) Accommodation for low oasdi balance ratio.--Notwithstanding
paragraph (1)(B), in any case in which the OASDI trust fund ratio is
less than 125 percent as of the end of the fiscal year preceding each
fiscal year during any period of 1 or more fiscal years referred to in
paragraph (1)(B) and preceding the termination year--
``(A) the spending reductions amount for each fiscal year
during such period shall be the excess of--
``(i) 20 percent of the gross domestic product (as
projected by the Department of Commerce) for the fiscal
year for which the determination is made; over
``(ii) the product of--
``(I) 20 percent of the gross domestic
product (as so projected) for the fiscal year
for which the determination is made; and
``(II) 0.99, factored a number of times
equal to the number of fiscal years during such
period which end with or before the fiscal year
for which the determination is made plus the
number of fiscal years during the period
described in paragraph (1)(A), and
``(B) paragraph (1)(B) shall apply with respect to
subsequent fiscal years by substituting for the reference, in
paragraph (1)(B)(i), to fiscal year 2013 a reference to the
last fiscal year in such period.
``(3) Termination year.--For purposes of paragraph (1)(B), the
`termination year' is the first fiscal year, after fiscal year 2013--
``(A) for which the OASDI trust fund ratio is at least 125
percent; and
``(B) on the last day of which there are no outstanding
transition obligations of the Self-Liquidating Social Security
Transition Fund under section 262.
``(4) OASDI trust fund ratio.--In paragraph (2)(A), the term `OASDI
trust fund ratio' means, for a fiscal year, the ratio (expressed as a
percentage) of--
``(A) the combined balance in the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund, as of the last day of such fiscal year;
over
``(B) the amount estimated by the Commissioner of Social
Security to be the total amount to be paid from such Trust
Funds during the fiscal year following such fiscal year for all
purposes authorized by this section (excluding any transfer
payments between such Trust Funds and reducing the amount of
any transfer to the Railroad Retirement Account by the amount
of any transfers into either such Trust Fund from such
Account).''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply with respect to fiscal years beginning after
September 30, 2005.
SEC. 104. TAX TREATMENT OF ACCOUNTS.
(a) In General.--
(1) In general.--Subchapter F of chapter 1 of the Internal
Revenue Code of 1986 (relating to exempt organizations) is
amended by adding at the end the following new part:
``PART IX--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM
``Sec. 530A. Personal social security savings program
``SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.
``(a) General Rule.--The Social Security Personal Savings Fund and
each Tier III Investment Option are exempt from taxation under this
subtitle. Notwithstanding the preceding sentence, sums in a personal
social security savings account which are attributable to a Tier III
Option shall be subject to the taxes imposed by section 511 (relating
to imposition of tax on unrelated business income of charitable, etc.
organizations).
``(b) Distributions.--
``(1) In general.--Any qualified distribution from--
``(A) amounts credited to a personal social
security savings account from the Social Security
Personal Savings Fund or attributable to a Tier III
Investment Option, or
``(B) a personal social security savings annuity,
shall not be included in the gross income of the distributee.
``(2) Qualified distribution.--For purposes of paragraph
(1), the term `qualified distribution' means a distribution
which meets the requirements of section 258 of the Social
Security Act and which is not a guaranty payment (as defined by
section 259 of such Act).
``(c) Definitions.--For purposes of this section--
``(1) Personal social security savings account.--The term
`personal social security savings account' means an account
established under section 254(a) of the Social Security Act.
``(2) Personal social security savings annuity.--The term
`personal social security savings annuity' means an annuity
approved by the Personal Social Security Savings Board under
section 258(b)(3) of the Social Security Act.
``(3) Social security personal savings fund.--The term
`Social Security Personal Savings Fund' means the Savings Fund
established under section 252 of the Social Security Act.
``(4) Tier iii investment option.--The term `Tier III
Investment Option' has the meaning given such term by section
251(9) of the Social Security Act.
``(d) Estate Tax Treatment.--No amount shall be includible in the
gross estate of any individual for purposes of chapter 11 by reason of
an interest in the Tier I Investment Fund or the Tier II Investment
Fund of the Savings Fund or held under a Tier III Investment Option and
which is credited to the personal social security savings account of
the individual.''.
(2) Conforming amendment.--Section 86(d)(1)(A) of such Code
is amended by inserting ``part A of'' after ``under''.
(3) Clerical amendment.--The table of parts for subchapter
F of chapter 1 of such Code is amended by adding after the item
relating to part VIII the following new item:
``Part IX. Personal Social Security Savings Program.''.
(b) Guaranty Payments.--Paragraph (1) of section 86(d) of the
Internal Revenue Act of 1986, as amended by subsection (b), is amended
by striking ``or'' at the end of subparagraph (A), by striking the
period and inserting ``, or'' at the end of subparagraph (B), and by
adding at the end the following new subparagraph:
``(C) a guaranty payment under section 259(a), and
a payment of an additional amount under section 259(c),
of the Social Security Act.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.
SEC. 105. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.
Part B of title II of the Social Security Act (as added by section
101 of this Act) is amended by adding at the end the following new
section:
``SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.
``(a) Establishment.--There is hereby created on the books of the
Treasury of the United States a trust fund to be known as the Self-
Liquidating Social Security Transition Fund (in this section referred
to as the `Transition Fund').
``(b) Board of Trustees.--
``(1) Establishment.--With respect to the Transition Fund,
there is hereby created a body to be known as the Board of
Trustees of the Transition Fund (in this section referred to as
the `Board of Trustees') composed of the Commissioner of Social
Security, the Secretary of the Treasury, and the members of the
Personal Social Security Savings Board.
``(2) Duties.--The Board of Trustees shall--
``(A) provide for the issuance of obligations by
the Transition Fund pursuant to subsection (c),
``(B) provide for the receipt and management of
amounts paid into the Transition Fund pursuant to
subsection (d),
``(C) use all funds paid into the Transition Fund
to redeem obligations issued under subsection (c) as
soon as practicable,
``(D) report to Congress not later than the first
day of April of each year on the operation and status
of the Transition Fund during the preceding fiscal year
and on its expected operation and status during the
current fiscal year and the next 2 fiscal years, and
``(E) review the general policies followed in
managing the Transition Fund, and recommend changes in
such policies, including necessary changes in the
provisions of law which govern the way in which the
Transition Fund is to be managed.
``(3) Meetings.--The Board of Trustees shall meet not less
frequently than once each calendar year.
``(c) Issuance of Transition Fund Bonds.--
``(1) Issuance.--
``(A) In general.--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 at par of public-
debt obligations by the Transition Fund.
``(B) Required issuance.--Beginning on January 1,
2006, whenever any obligation held in the Federal Old-
Age and Survivors Insurance Trust Fund or the Federal
Disability Insurance Trust Fund is repaid from the
general fund of the Treasury to either of such Trust
Funds, the Transition Fund shall issue an obligation
under this subsection in an amount equal to the amount
of interest and principal so repaid.
``(C) Transfer of proceeds to general fund of the
treasury.--Proceeds from the issuance of any obligation
issued under this section shall be transferred to the
general fund of the Treasury.
``(D) Accounting.--The debt owed on any obligation
issued under this section shall be considered to be
debt of the Transition Fund and shall be accounted for
in such manner.
``(2) Maturities and interest rate.--Such obligations
issued by the Transition Fund for purchase by the public shall
have maturities fixed with due regard for the needs of the
Transition Fund 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 such issue) on all marketable
interest-bearing obligations of the United States then forming
a part of the public debt which are not due or callable until
after the expiration of 4 years from the end of such calendar
month, except that where such average market yield is not a
multiple of one-eighth of 1 per centum, the rate of interest on
such obligations shall be the multiple of one-eighth of 1 per
centum nearest such market yield.
``(3) Repayment of obligations.--Obligations issued under
this subsection may be redeemed only by funds in the Transition
Fund.
``(d) Deposit of OASDI Trust Fund Surplus.--
``(1) In general.--There are appropriated to the Transition
Fund for the fiscal year beginning in 2030, and for each fiscal
year thereafter, out of any moneys in the Federal Old-Age and
Survivors Insurance Trust Fund, amounts equivalent to the OASDI
trust fund surplus (as defined in paragraph (2)) for the
preceding fiscal year.
``(2) Transfers based on estimates.--The amounts
appropriated by paragraph (1) shall be transferred from time to
time from the Federal Old-Age and Survivors Insurance Trust
Fund to the Transition Fund, such amounts to be determined on
the basis of estimates by the Commissioner of Social Security.
Proper adjustments shall be made in amounts subsequently
transferred to the extent prior estimates were in excess of or
were less than such surplus.
``(3) OASDI trust fund surplus defined.--In this section,
the term `OASDI trust fund surplus' for a fiscal year means the
dollar amount by which the Federal Old-Age and Survivors
Insurance Trust Fund could be reduced as of the end of such
fiscal year so as to result in an OASDI trust fund ratio (as
defined in section 201(p)(4)) for such fiscal year equal to 125
percent.
``(4) Rule of construction.--This section shall not be
construed to require redemption of obligations of the Trust
Fund for the purpose of making transfers to the Transition Fund
under this section or for any other purpose other than to
provide for payment of benefits under part A of title II of the
Social Security Act.
``(e) Redemption of Obligations Upon Deposit of Funds.--Obligations
issued under subsection (c) may be redeemed only by funds in the
Transition Fund. The Board of Trustees shall provide for the redemption
of such obligations as soon as possible with funds deposited into the
Transition Fund pursuant to subsection (d).
``(f) Sunset.--On the first date as of which all of the obligations
issued under subsection (c) have been redeemed, any balance remaining
in the Transition Fund as of such date shall be deposited in the
Federal Old-Age and Survivors Insurance Trust Fund, the terms of the
Board of Trustees shall end, the Transition Fund shall cease to exist,
and this section shall be repealed.''.
SEC. 106. BUDGETARY TREATMENT OF SOCIAL SECURITY.
(a) In General.--Section 710 of the Social Security Act (42 U.S.C.
911) is amended to read as follows:
``budgetary treatment of social security
``Sec. 710. (a) In General.--Notwithstanding any other provision of
law and except as provided in subsection (b), the receipts and
disbursements of the Federal Old-Age and Survivors Insurance Trust
Fund, the Federal Disability Insurance Trust Fund, the Social Security
Personal Savings Fund, and the Self-Liquidating Social Security
Transition Fund (including transfers to and from either such Trust Fund
or such Savings Fund or such Transition Fund relating to the
acquisition or redemption of obligations acquired by either such Trust
Fund or such Savings Fund or such Transition Fund) and the taxes
imposed under sections 1401 and 3101 of the Internal Revenue Code of
1986 shall not be counted as new budget authority, outlays, receipts,
or deficit or surplus for purposes of the budget of the Government as
submitted by the President or the congressional budget or be reported
as new budget authority, outlays, receipts, or deficit or surplus in
any report of the Congressional Budget Office or any other agency or
instrumentality of the Government
``(b) Matters Included in the Budget.--Subsection (a) shall not
apply with respect to the following:
``(1) transfers from the general fund of the Treasury to
the Federal Old-Age and Survivors Insurance Trust Fund under
section 201(o) (relating to recapture of corporate tax on
account yields), which shall be treated as an expenditure of
the Government;
``(2) transfers from the general fund of the Treasury to
the Federal Old-Age and Survivors Insurance Trust Fund under
section 201(p) (relating to recapture of Government savings
over baseline), which shall be treated as an expenditure of the
Government;
``(3) transfers from the general fund of the Treasury to
the Federal Old-Age and Survivors Insurance Trust Fund or the
Federal Disability Insurance Trust Fund under section 121(e) of
the Social Security Amendments of 1983 (relating to
appropriation of amounts equivalent to taxes on social security
benefits) (42 U.S.C. 401 note), which shall be treated as an
expenditure of the Government; and
``(4) revenues from taxes imposed under chapter 1 of the
Internal Revenue Code of 1986, to the extent attributable to
section 86 of such Code (relating to taxation of social
security and tier 1 railroad retirement benefits), which shall
be treated as a receipt of the Government.''.
(b) Conforming Amendments.--
(1) Section 13301 of the Budget Enforcement Act of 1990 (2
U.S.C. 632; 2 U.S.C. 632 note) is repealed.
(2) Section 405 of the Congressional Budget Act of 1974 (2
U.S.C. 655) is amended--
(A) by inserting ``other than section 710 of the
Social Security Act'' after ``Notwithstanding any other
provision of law''; and
(B) by striking ``section, not including'' and all
that follows through ``Funds,'' and inserting
``section'' .
(c) Effective Date.--The amendments made by this section shall
apply with respect to fiscal years beginning on or after October 1,
2005.
SEC. 107. DEDICATION OF BUDGET SURPLUSES TO SAVING SOCIAL SECURITY.
(a) In General.--Section 201 of the Social Security Act (as amended
by section 103 of this Act) is amended further by adding at the end the
following new subsection:
``Transfer of Total Budget Surpluses to Trust Fund
``(q) In the case of any fiscal year for which the total amount
treated as income of the Federal Government in the total budget of the
United States have exceeded the total amount treated as expenditures of
the Federal Government in the total budget of the United States (as
determined by the Director of the Office of Management and Budget
without regard to section 710), not later than 3 months after the end
of such fiscal year, the Secretary of the Treasury shall transfer from
the general fund of the Treasury to the Federal Old-Age and Survivors
Insurance Trust Fund an amount equal to the lesser of--
``(1) the total amount transferred from the Trust Fund
during such fiscal year to the Social Security Personal Savings
Fund under section 252(b) (relating to deposit of amounts equal
to redirected social security contributions), or
``(2) the amount by which such total amount treated as
receipts exceeded such total amount treated as expenditures.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply with respect to fiscal years beginning after September 30, 2005.
SEC. 108. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DISABILITY
INSURANCE PROGRAM AND THE PERSONAL SOCIAL SECURITY
SAVINGS PROGRAM.
Title VII of the Social Security Act is amended by inserting after
section 705 (42 U.S.C. 906) the following new section:
``accounting for the old-age, survivors, and disability insurance
program and the individual social security investment program.
``Social Security Lockbox Budget.
``Sec. 706. (a) At the time of the transmittal to the Congress by
the President of the budget of the United States Government, the
President shall transmit to each House of the Congress a separate
report (to be known as the `Social Security Lockbox Budget') detailing
the performance during the preceding fiscal year of each of the
accounts established under subsection (b). Such report shall set forth,
as determined as of the end of the year--
``(1) the amount of the balance of each account,
``(2) the amount of the total charges and the amount of the
total credits to each account for the year, and
``(3) the amount of the total for the year of each category
of charges and credits itemized in subsection (b).
``Establishment of Accounts
``(b) For purposes of accounting for certain receipts and
disbursement of the Treasury of the United States in connection with
the Old-Age, Survivors, and Disability Insurance Program under part A
of title II of the Social Security Act and the Individual Social
Security Investment Program under part B of such title, the Secretary
of the Treasury shall establish and maintain a Social Security Part A
Account, a Social Security Part B Account, and a Self-Liquidating
Social Security Transition Fund Account.
``Credits and Charges to the Social Security Part A Account
``(c)(1) For each fiscal year, the Social Security Part A Account
shall be credited with the sum of--
``(A) all receipts during the year by the Federal Old-Age
and Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund under section 201 (including amounts
received as interest on notes and obligations purchased by the
Trust Funds under section 201(d) of such Act, and excluding
amounts received in redemption of such notes and obligations
and amounts received by either such Trust Fund as transfers
from the other such Trust Fund), and
``(B) all receipts during the year by the Federal Old-Age
and Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund under section 121(e) of the Social
Security Amendments of 1983 (relating to appropriation of
amounts equivalent to taxes on social security benefits) (42
U.S.C. 401 note).
``(2) For each fiscal year, the Social Security Part A Account
shall be charged with the sum of--
``(A) all benefits paid during the year from the Federal
Old-Age and Survivors Insurance Trust Fund and the Federal
Disability Insurance Trust Fund under part A of title II of the
Social Security Act,
``(B) all redirected social security contributions
transferred during the year to the Social Security Personal
Savings Fund under section 252(b),
``(C) all other expenditures during the year from the Trust
Funds under part A of title II (excluding amounts expended as
transfers by either such Trust Fund to the other such Trust
Fund and amounts paid for the purchase of notes and obligations
under section 201(d)), and
``(D) all transfers from the Federal Old-Age and Survivors
Insurance Trust Fund to the Self-Liquidating Social Security
Transition Fund under section 262(d).
``Charges and Credits to the Social Security Part B Account
``(d)(1) For each fiscal year, the Social Security Part B Account
shall be credited with--
``(A) all redirected social security contributions
transferred during the year to the Personal Social Security
Savings Fund under section 252(b) of the Social Security Act,
and
``(B) any net increase in the Tier I Investment Fund
attributable to investment for the fiscal year, any net
increase in the Tier II Investment Fund attributable to
investment for the fiscal year, and the total amount of any net
increases in Tier III Investment Options attributable to
investment for the fiscal year.
``(2) For each fiscal year, the Social Security Part B Account
shall be charged with--
``(A) all administrative costs incurred for the fiscal year
with respect to the Tier I Investment Fund, the Tier II
Investment Fund, and the Tier III Investment Options,
``(B) any net decrease in the Tier I Investment Fund
attributable to investment for the fiscal year, any net
decrease in the Tier II Investment Fund attributable to
investment for the fiscal year, and the total amount of any net
decreases in Tier III Investment Options attributable to
investment for the fiscal year, and
``(C) annuity payments made during the year under section
258 from the Annuity Reserve Account in the Savings Fund.
``Charges and Credits to the Self-Liquidating Social Security
Transition Fund Account
``(e)(1) For each fiscal year, the Self-Liquidating Social Security
Transition Account shall be credited with--
``(A) all transfers to the Transition Fund from the Federal
Old-Age and Survivors Insurance Trust Fund under section
262(b), and
``(B) all amounts expended during the fiscal year from the
Trust Funds in the redemption under section 262(e) of
obligations issued by the Transition fund under section 262(c).
``(2) For each fiscal year, the Self-Liquidating Social Security
Transition Fund Account shall be charged with the total amount of
obligations issued during the fiscal year by the Transition Fund under
section 262(c)''.
SEC. 109. REDUCTION OF FICA RATES RESULTING FROM PERSONAL SOCIAL
SECURITY SAVINGS PROGRAM.
(a) Employee Contribution.--Section 3101 of the Internal Revenue
Code of 1986 (relating to tax on employees) is amended by adding at the
end the following new subsection:
``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax
Rate.--
``(1) In general.--In any year which follows a reduction
year and each year thereafter, the rate of tax imposed under
subsection (a) shall be reduced by the reduction percentage.
``(2) Reduction year.--For purposes of this section--
``(A) In general.--The term `reduction year' means
any year after the transition year in which the OASDI
rate ratio exceeds 125 percent.
``(B) Transition year.--The term `transition year'
means the first full calendar year following the
termination year (as defined in section 201(p)(3) of
the Social Security Act).
``(3) Reduction percentage.--For purposes of this section,
the term `reduction percentage' means the excess of--
``(A) the rate in effect under subsection (a) for
the reduction year, over
``(B) the rate (rounded up to the nearest one tenth
of a percent) under which the OASDI rate ratio for the
reduction year would have been 125 percent if--
``(i) such rate had been applicable under
subsection (a) and section 3111(a) during such
year, and
``(ii) the rate under section 1401(a)
during such year were twice such rate.
``(4) OASDI rate ratio.--The term `OASDI rate ratio' means,
with respect to any calendar year, the ratio--
``(A) the numerator of which is the combined
balance in the Old-Age and Survivors Insurance Trust
Fund and the Federal Disability Insurance Trust Fund,
as of the last day of such calendar year, and
``(B) the denominator of which is the amount paid
from such Trust Funds during such calendar year for all
purposes authorized by section 201 of the Social
Security Act (excluding any transfer payments between
such Trust Funds and reducing the amount of any
transfer to the Railroad Retirement Account by the
amount of any transfers into either such Trust Fund
from such Account).
``(5) Limitation on reduction.--Paragraph (1) shall not
apply to any reduction to the extent that such reduction would
cause the rate of tax imposed under subsection (a) to be less
than 4.95 percent.''.
(b) Employer Contribution.--Section 3111 of the Internal Revenue
Code of 1986 (relating to tax on employers) is amended by adding at the
end the following new subsection:
``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax
Rate.--
``(1) In general.--In any year which follows a reduction
year and each year thereafter, the rate of tax imposed under
subsection (a) shall be reduced by the reduction percentage.
``(2) Reduction year; reduction percentage.--For purposes
of this section, the terms `reduction year' and `reduction
percentage' have the meanings given such terms by section
3101(d).
``(3) Limitation on reduction.--Paragraph (1) shall not
apply to any reduction to the extent that such reduction would
cause the rate of tax imposed under subsection (a) to be less
than 4.95 percent.''.
(c) Self-Employment Contribution.--Section 1401 of the Internal
Revenue Code of 1986 (relating to tax on self-employment income) is
amended by adding at the end the following new subsection:
``(d) Reduction in Old-Age, Survivors, and Disability Insurance Tax
Rate.--
``(1) In general.--In any year which follows a reduction
year and each year thereafter, the rate of tax imposed under
subsection (a) shall be reduced by the reduction percentage.
``(2) Reduction year; reduction percentage.--For purposes
of this section, the terms `reduction year' and `reduction
percentage' have the meanings given such terms by section
3101(d).
``(3) Limitation on reduction.--Paragraph (1) shall not
apply to any reduction to the extent that such reduction would
cause the rate of tax imposed under subsection (a) to be less
than 9.9 percent.''.
TITLE II--PUTTING A LID ON THE FEDERAL BUDGET
Subtitle A--Spending Safeguards on the Growth of Entitlements and
Mandatories
SEC. 201. SPENDING CAPS ON GROWTH OF ENTITLEMENTS AND MANDATORIES.
(a) Control of Entitlements and Mandatories.--The Balanced Budget
and Emergency Deficit Control Act of 1985 is amended by adding after
section 252 the following new section:
``SEC. 252A. ENFORCING CONTROLS ON DIRECT SPENDING.
``(a) Cap on Growth of Entitlements.--Effective for fiscal year
2007 and for each ensuing fiscal year, the total level of direct
spending for all direct spending programs, projects, and activities
(excluding social security) for any such fiscal year shall not exceed
the total level of spending for all such programs, projects, and
activities for the previous fiscal year after the direct spending for
each such program, project, or activity is increased by the higher of
the change in the Consumer Price Index for All Urban Consumers or the
inflator (if any) applicable to that program, project, or activity and
the growth in eligible population for such, project, or activity.
``(b) Sequestration.--Within 15 days after Congress adjourns to end
a session (other than of the second session of the One Hundred Ninth
Congress), and on the same day as a sequestration (if any) under
section 251, there shall be a sequestration to reduce the amount of
direct spending for the fiscal year beginning in the year the Congress
adjourns by any amount necessary to reduce such spending to the level
set forth in subsection (a) unless that amount is less than
$250,000,000.
``(c) Uniform Reductions; Limitations.--The amount required to be
sequestered for the fiscal year under subsection (a) shall be obtained
from nonexempt direct spending accounts by actions taken in the
following order:
``(1) First.--The reductions in the programs specified in
section 255(a) (National Wool Act and special milk), section
255(b) (student loans), and section 255(c) (foster care and
adoption assistance) shall be made.
``(2) Second.--Any additional reductions that may be
required shall be achieved by reducing each remaining nonexempt
direct spending account by the uniform percentage necessary to
achieve those additional reductions, except that--
``(A) the low-income programs specified in section
255(d) shall not be reduced by more than 2 percent;
``(B) the retirement and veterans benefits
specified in sections 255(f), (g), and (h) shall not be
reduced by more than 2 percent in the manner specified
in that section; and
``(C) the medicare programs shall not be reduced by
more than 2 percent in the manner specified in section
255(i).
The limitations set forth in subparagraphs (A), (B), and (C)
shall be applied iteratively, and after each iteration the
uniform percentage applicable to all other programs under this
paragraph shall be increased (if necessary) to a level
sufficient to achieve the reductions required by this
paragraph.
``(d) Exclusion of Medicare Prescription Drug Program Until Fully
Operational.--For purposes of this section with respect to the
limitation under subsection (a) for a fiscal year before fiscal year
2008, direct spending programs and direct spending shall not be
construed to include part D of title XVIII of the Social Security Act
(or spending under part C of such title that is attributable to such
part D).''.
(b) Table of Contents Amendment.--The table of contents set forth
in 250(c) of the Balanced Budget and Emergency Deficit Control Act of
1985 is amended by adding after the item relating to section 252 the
following new item:
``Sec. 252A. Enforcing controls on direct spending.''.
SEC. 202. EXEMPT PROGRAMS AND ACTIVITIES.
Section 255 of the Balanced Budget and Emergency Deficit Control
Act of 1985 is amended to read as follows:
``SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES.
``(a) Social Security Benefits; Tier I Railroad Retirement
Benefits; and Certain Medicare Benefits.--(1) Benefits payable under
the old-age, survivors, and disability insurance program established
under title II of the Social Security Act, and benefits payable under
section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retirement Act of
1974, shall be exempt from reduction under any order issued under this
part.
``(2) Payments made under part A of title XVIII (relating to part A
medicare hospital insurance benefits) of the Social Security Act and
payments made under part C of such title (relating to the Medicare
Advantage program) insofar as they are attributable to part A of such
title shall be exempt from reduction under any order issued under this
part.
``(b) Descriptions and Lists.--The following budget accounts or
activities shall be exempt from sequestration:
``(1) net interest;
``(2) all payments to trust funds from excise taxes or
other receipts or collections properly creditable to those
trust funds;
``(3) all payments from one Federal direct spending budget
account to another Federal budget account; and all
intragovernmental funds including those from which funding is
derived primarily from other Government accounts, except to the
extent that such funds are augmented by direct appropriations
for the fiscal year for which the order is in effect;
``(4) activities resulting from private donations,
bequests, or voluntary contributions to the Government;
``(5) payments from any revolving fund or trust-revolving
fund (or similar activity) that provides deposit insurance or
other Government insurance, Government guarantees, or any other
form of contingent liability, to the extent those payments
result from contractual or other legally binding commitments of
the Government at the time of any sequestration;
``(6) credit liquidating and financing accounts;
``(7) the following accounts, which largely fulfill
requirements of the Constitution or otherwise make payments to
which the Government is committed:
``Administration of Territories, Northern Mariana Islands
Covenant grants (14-0412-0-1-806);
``Armed Forces Retirement Home Trust Fund, payment of
claims (84-8930-0-7-705);
``Bureau of Indian Affairs, miscellaneous payments to
Indians (14-2303-0-1-452);
``Bureau of Indian Affairs, miscellaneous trust funds,
tribal trust funds (14-9973-0-7-999);
``Claims, defense;
``Claims, judgments, and relief act (20-1895-0-1-806);
``Compact of Free Association, economic assistance pursuant
to Public Law 99-658 (14-0415-0-1-806);
``Compensation of the President (11-0001-0-1-802);
``Customs Service, miscellaneous permanent appropriations
(20-9992-0-2-852);
``Eastern Indian land claims settlement fund (14-2202-0-1-
806);
``Farm Credit Administration, Limitation on Administration
Expenses (78-4131-0-3-351);
``Farm Credit System Financial Assistance Corporation,
interest payments (20-1850-0-1-351);
``Internal Revenue collections of Puerto Rico (20-5737-0-2-
852);
``Panama Canal Commission, operating expenses and capital
outlay (95-5190-0-2-403);
``Payments of Vietnam and USS Pueblo prisoner-of-war claims
(15-0104-0-1-153);
``Payments to copyright owners (03-5175-0-2-376);
``Payments to health care trust funds (75-0580-0-1-571);
``Payments to social security trust funds (75-0404-0-1-
651);
``Payments to the United States territories, fiscal
assistance (14-0418-0-1-801);
``Payments to widows and heirs of deceased Members of
Congress (00-0215-0-1-801);
``Pension Benefit Guaranty Corporation Fund (16-4204-0-3-
601);
``Salaries of Article III judges;
``Washington Metropolitan Area Transit Authority, interest
payments (46-0300-0-1-401);
``(8) the following noncredit special, revolving, or trust-
revolving funds:
``Coinage profit fund (20-5811-0-2-803);
``Comptroller of the Currency;
``Director of the Office of Thrift Supervision;
``Exchange Stabilization Fund (20-4444-0-3-155);
``Federal Housing Finance Board;
``Foreign Military Sales trust fund (11-82232-0-7-155);
``National Credit Union Administration, central liquidating
facility (25-4470-0-3-373);
``National Credit Union Administration, credit union
insurance fund (25-4468-0-3-373);
``National Credit Union Administration operating fund (25-
4056-0-3-373); and
``Resolution Trust Corporation Revolving Fund (22-4055-0-3-
373);
``(9) Thrift Savings Fund;
``(10) appropriations for the District of Columbia to the
extent they are appropriations of locally raised funds;
``(11)(A) any amount paid as regular unemployment
compensation by a State from its account in the Unemployment
Trust Fund (established by section 904(a) of the Social
Security Act);
``(B) any advance made to a State from the Federal
unemployment account (established by section 904(g) of such
Act) under title XII of such Act and any advance appropriated
to the Federal unemployment account pursuant to section 1203 of
such Act; and
``(C) any payment made from the Federal Employees
Compensation Account (as established under section 909 of such
Act) for the purpose of carrying out chapter 85 of title 5,
United States Code, and funds appropriated or transferred to or
otherwise deposited in such Account; and
``(12)(A) FDIC, Bank Insurance Fund (51-4064-0-3-373);
``(B) FDIC, FSLIC Resolution Fund (51-4065-0-3-373); and
``(C) FDIC, Savings Association Insurance Fund (51-4066-0-
3-373).
``(c) Federal Retirement and Disability Accounts.--The following
Federal retirement and disability accounts shall be exempt from
reduction under any order issued under this part:
``Civil service retirement and disability fund (24-8135-0-7-602).
``Black Lung Disability Trust Fund (20-8144-0-7-601).
``Foreign Service Retirement and Disability Fund (19-8186-0-7-602).
``District of Columbia Judicial Retirement and Survivors Annuity
Fund (20-8212-0-7-602).
``Judicial Survivors' Annuities Fund (10-8110-0-7-602).
``Payments to the Railroad Retirement Accounts (60-0113-0-1-601).
``Tax Court Judges Survivors Annuity Fund (23-8115-0-7-602).
``Employees Life Insurance Fund (24-8424-0-8-602).
``(d) Federal Administrative Expenses.--
``(1) Notwithstanding any provision of law other than
paragraph (3), administrative expenses incurred by the
departments and agencies, including independent agencies, of
the Government in connection with any program, project,
activity, or account shall be subject to reduction pursuant to
any sequestration order, without regard to any exemption,
exception, limitation, or special rule otherwise applicable
with respect to such program, project, activity, or account,
and regardless of whether the program, project, activity, or
account is self-supporting and does not receive appropriations.
``(2) Payments made by the Government to reimburse or match
administrative costs incurred by a State or political
subdivision under or in connection with any program, project,
activity, or account shall not be considered administrative
expenses of the Government for purposes of this section, and
shall be subject to sequestration to the extent (and only to
the extent) that other payments made by the Government under or
in connection with that program, project, activity, or account
are subject to that reduction or sequestration; except that
Federal payments made to a State as reimbursement of
administrative costs incurred by that State under or in
connection with the unemployment compensation programs
specified in subsection (a)(11) shall be subject to reduction
or sequestration under this part notwithstanding the exemption
otherwise granted to such programs under that subsection.
``(3) Notwithstanding any other provision of law, the
administrative expenses of the following programs shall be
exempt from sequestration:
``(A) Comptroller of the Currency.
``(B) Federal Deposit Insurance Corporation.
``(C) Office of Thrift Supervision.
``(D) National Credit Union Administration.
``(E) National Credit Union Administration, central
liquidity facility.
``(F) Federal Retirement Thrift Investment Board.
``(G) Resolution Funding Corporation.
``(H) Resolution Trust Corporation.
``(I) Board of Governors of the Federal Reserve
System.
``(e) Veterans' Programs.--The following programs shall be exempt
from reduction under any order issued under this part:
``General Post Funds (36-8180-0-7-705).
``Veterans Insurance and Indemnities (36-0120-0-1-701).
``Service-Disabled Veterans Insurance Funds (36-4012-0-3-701).
``Veterans Reopened Insurance Fund (36-4010-0-3-701).
``Servicemembers' Group Life Insurance Fund (36-4009-0-3-701).
``Post-Vietnam Era Veterans Education Account (36-8133-0-7-702).
``National Service Life Insurance Fund (36-8132-0-7-701).
``United States Government Life Insurance Fund (36-8150-0-7-701).
``Veterans Special Life Insurance Fund (36-8455-0-8-701).
``(f) Optional Exemption of Defense and Homeland Security
Accounts.--
``(1) In general.--The President may, with respect to any
defense or homeland security account, exempt that account from
sequestration or provide for a lower uniform percentage
reduction than would otherwise apply.
``(2) Limitation.--The President may not use the authority
provided by paragraph (1) unless the President notifies the
Congress of the manner in which such authority will be
exercised on or before the date specified in section 254(a) for
the budget year.''.
SEC. 203. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.
(a) In General.--Section 256 of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended to read as follows:
``SEC. 256. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.
``(a) National Wool Act and the Special Milk Program.--Automatic
spending increases are increases in outlays due to changes in indexes
in the following programs:
``(1) National Wool Act; and
``(2) Special milk program.
In those programs all amounts other than the automatic spending
increases shall be exempt from reduction under any sequestration order.
``(b) Student Loans.--For all student loans under part B or D of
title IV of the Higher Education Act of 1965 made during the period
when a sequestration order under section 254 is in effect as required
by section 252 or 253, origination fees under sections 438(c)(2) and
455(c) of that Act shall each be increased by 0.50 percentage point.
``(c) Foster Care and Adoption Assistance Programs.--Any
sequestration order shall make the reduction otherwise required under
the foster care and adoption assistance programs (established by part E
of title IV of the Social Security Act) only with respect to payments
and expenditures made by States in which increases in foster care
maintenance payment rates or adoption assistance payment rates (or
both) are to take effect during the fiscal year involved, and only to
the extent that the required reduction can be accomplished by applying
a uniform percentage reduction to the Federal matching payments that
each such State would otherwise receive under section 474 of that Act
(for such fiscal year) for that portion of the State's payments
attributable to the increases taking effect during that year. No
State's matching payments from the Government for foster care
maintenance payments or for adoption assistance maintenance payments
may be reduced by a percentage exceeding the applicable domestic
sequestration percentage. No State may, after the date of the enactment
of this Act, make any change in the timetable for making payments under
a State plan approved under part E of title IV of the Social Security
Act which has the effect of changing the fiscal year in which
expenditures under such part are made.
``(d) Low-Income Programs.--(1) Benefit payments or payments to
States or other entities for the programs listed in paragraph (2) shall
not be reduced by more than 2 percent under any sequestration order.
When reduced under an end-of-session sequestration order, those benefit
reductions shall occur starting with the payment made at the start of
January. When reduced under a within-session sequestration order, those
benefit reductions shall occur starting with the next periodic payment.
``(2) The programs referred to in paragraph (1) are the following:
``Child Nutrition (12-3539-0-1-605).
``Food Stamp Programs (12-3505-0-1-605).
``Grants to States for Medicaid (75-0512-0-1-551).
``State Children's Health Insurance Fund (75-0515-0-1-551).
``Supplemental Security Income Program (75-0406-0-1-609).
``Temporary Assistance for Needy Families (75-1552-0-1-609).
``Special supplemental nutrition program for women, infants, and
children (WIC) (12-3510-0-1-605).
``(e) Veterans' Medical Care.--The maximum permissible reduction in
budget authority for Veterans' medical care (36-0160-0-1-703) for any
fiscal year, pursuant to an order issued under section 254, shall be 2
percent.
``(f) Federal Retirement Programs.--
``(1) For each of the programs listed in paragraph (2) and
except as provided in paragraph (3), monthly (or other
periodic) benefit payments shall be reduced by the uniform
percentage applicable to direct spending sequestrations for
such programs, which shall in no case exceed 2 percent under
any sequestration order. When reduced under an end-of-session
sequestration order, those benefit reductions shall occur
starting with the payment made at the start of January or 7
weeks after the order is issued, whichever is later. When
reduced under a within-session sequestration order, those
benefit reductions shall occur starting with the next periodic
payment.
``(2) The programs subject to paragraph (1) are:
``Central Intelligence Agency Retirement and Disability
Fund (56-3400-0-1-054).
``Comptrollers General Retirement System (05-0107-0-1-
801)Payments to the Foreign Service Retirement and Disability
Fund (72-1036-0-1-153).
``Judicial Officer' Retirement Fund (10-8122-0-7-602).
``Claims Judges' Retirement Fund (10-8124-0-7-602).
``Pensions for former Presidents (47-0105-0-1-802).
``National Oceanic and Atmospheric Administration
Retirement (13-1450-0-1-306).
``Railroad Industry Pension Fund (60-8011-0-7-601).
``Retired pay, Coast Guard (70-0602-0-1-403).
``Retirement pay and medical benefits for commissioned
officers, Public Health Service (75-0379-0-1-551).
``Payments to Civil Service Retirement and Disability Fund
(24-0200-0-1-805).
``Payments to the Foreign Service Retirement and Disability
Fund (72-1036-0-1-153).
``Payments to Judiciary Trust Funds (10-0941-0-1-752).
``(g) Veterans Programs.--To achieve the total percentage reduction
required by any order issued under this part, the percentage reduction
that shall apply to payments under the following programs shall in no
event exceed 2 percent:
``Canteen Service Revolving Fund (36-4014-0-3-705).
``Medical Center Research Organizations (36-4026-0-3-703).
``Disability Compensation Benefits (36-0102-0-1-701).
``Education Benefits (36-0137-0-1-702).
``Vocational Rehabilitation and Employment Benefits (36-0135-0-1-
702).
``Pensions Benefits (36-0154-0-1-701).
``Burial Benefits (36-0139-0-1-701).
``Guaranteed Transitional Housing Loans For Homeless Veterans
Program Account (36-1119-0-1-704).
``Housing Direct Loan Financing Account (36-4127-0-1-704).
``Housing Guaranteed Loan Financing Account (36-4129-0-3-704).
``Vocational Rehabilitation and Education Direct Loan Financing
Account (36-4259-0-3-702).
``(h) Military Health and Retirement.--To achieve the total
percentage reduction in military retirement required by any order
issued under this part, the percentage reduction that shall apply to
payments under the Military retirement fund (97-8097-0-7-602), payments
to the military retirement fund (97-0040-0-1-054), and the Defense
Health Program (97-0130-0-1-051) shall in no event exceed 2 percent.
``(i) Medicare Program.--
``(1) Calculation of reduction in individual payment
amounts.--To achieve the total percentage reduction in those
programs required by any order issued under this part, the
percentage reduction that shall apply to payments under the
health insurance programs under title XVIII of the Social
Security Act (other than payments described in section
255(a)(2)) that are subject to such order for services
furnished after any sequestration order is issued shall be such
that the reduction made in payments under that order shall
achieve the required total percentage reduction in those
payments for that fiscal year as determined on a 12-month
basis. However, the percentage reduction under any such program
shall in no case exceed 2 percent under any sequestration
order.
``(2) Timing of application of reductions.--If a reduction
is made under paragraph (1) in payment amounts pursuant to a
sequestration order, the reduction shall be applied to payment
for services furnished after the effective date of the order.
``(3) No increase in beneficiary charges in assignment-
related cases.--If a reduction in payment amounts is made under
paragraph (1) for services for which payment under part B of
title XVIII of the Social Security Act is made on the basis of
an assignment described in section 1842(b)(3)(B)(ii), in
accordance with section 1842(b)(6)(B), or under the procedure
described in section 1870(f)(1) of such Act, the person
furnishing the services shall be considered to have accepted
payment of the reasonable charge for the services, less any
reduction in payment amount made pursuant to a sequestration
order, as payment in full.
``(4) Application to parts c and d.--The reductions
otherwise required under parts C and D of title XVIII of the
Social Security Act with respect to a fiscal year shall be
applied to the calendar year that begins after the end of the
fiscal year to which the applicable sequestration order
applies.
``(j) Federal Pay.--
``(1) In general.--For purposes of any order issued under
section 254, new budget authority to pay Federal personnel
shall be reduced by the applicable uniform percentage, but no
sequestration order may reduce or have the effect of reducing
the rate of pay to which any individual is entitled under any
statutory pay system (as increased by any amount payable under
section 5304 of title 5, United States Code, or section 302 of
the Federal Employees Pay Comparability Act of 1990) or the
rate of any element of military pay to which any individual is
entitled under title 37, United States Code, or any increase in
rates of pay which is scheduled to take effect under section
5303 of title 5, United States Code, section 1009 of title 37,
United States Code, or any other provision of law.
``(2) Definitions.--For purposes of this subsection:
``(A) The term `statutory pay system' shall have
the meaning given that term in section 5302(1) of title
5, United States Code.
``(B) The term `elements of military pay' means--
``(i) the elements of compensation of
members of the uniformed services specified in
section 1009 of title 37, United States Code,
``(ii) allowances provided members of the
uniformed services under sections 403a and 405
of such title, and
``(iii) cadet pay and midshipman pay under
section 203(c) of such title.
``(C) The term `uniformed services' shall have the
meaning given that term in section 101(3) of title 37,
United States Code.
``(k) Child Support Enforcement Program.--Any sequestration order
shall accomplish the full amount of any required reduction in
expenditures under sections 455 and 458 of the Social Security Act by
reducing the Federal matching rate for State administrative costs under
such program, as specified (for the fiscal year involved) in section
455(a) of such Act, to the extent necessary to reduce such expenditures
by that amount.
``(l) Extended Unemployment Compensation.--(1) A State may reduce
each weekly benefit payment made under the Federal-State Extended
Unemployment Compensation Act of 1970 for any week of unemployment
occurring during any period with respect to which payments are reduced
under an order issued under this title by a percentage not to exceed
the percentage by which the Federal payment to the State under section
204 of such Act is to be reduced for such week as a result of such
order.
``(2) A reduction by a State in accordance with subparagraph (A)
shall not be considered as a failure to fulfill the requirements of
section 3304(a)(11) of the Internal Revenue Code of 1954.
``(m) Commodity Credit Corporation.--
``(1) Powers and authorities of the commodity credit
corporation.--This title shall not restrict the Commodity
Credit Corporation in the discharge of its authority and
responsibility as a corporation to buy and sell commodities in
world trade, to use the proceeds as a revolving fund to meet
other obligations and otherwise operate as a corporation, the
purpose for which it was created.
``(2) Reduction in payments made under contracts.--(A)
Payments and loan eligibility under any contract entered into
with a person by the Commodity Credit Corporation prior to the
time any sequestration order has been issued shall not be
reduced by an order subsequently issued. Subject to
subparagraph (B), after any sequestration order is issued for a
fiscal year, any cash payments made by the Commodity Credit
Corporation--
``(i) under the terms of any one-year contract
entered into in or after such fiscal year and after the
issuance of the order; and
``(ii) out of an entitlement account, to any person
(including any producer, lender, or guarantee entity)
shall be subject to reduction under the order.
``(B) Each contract entered into with producers or producer
cooperatives with respect to a particular crop of a commodity
and subject to reduction under subparagraph (A) shall be
reduced in accordance with the same terms and conditions. If
some, but not all, contracts applicable to a crop of a
commodity have been entered into prior to the issuance of any
sequestration order, the order shall provide that the necessary
reduction in payments under contracts applicable to the
commodity be uniformly applied to all contracts for succeeding
crops of the commodity, under the authority provided in
paragraph (3).
``(3) Delayed reduction in outlays permissible.--
Notwithstanding any other provision of this title, if any
sequestration order is issued with respect to a fiscal year,
any reduction under the order applicable to contracts described
in paragraph (2) may provide for reductions in outlays for the
account involved to occur in the fiscal years following the
fiscal year to which the order applies.
``(4) Uniform percentage rate of reduction and other
limitations.--All reductions described in paragraph (2) that
are required to be made in connection with any sequestration
order with respect to a fiscal year--
``(A) shall be made so as to ensure that outlays
for each program, project, activity, or account
involved are reduced by a percentage rate that is
uniform for all such programs, projects, activities,
and accounts, and may not be made so as to achieve a
percentage rate of reduction in any such item exceeding
the rate specified in the order; and
``(B) with respect to commodity price support and
income protection programs, shall be made in such
manner and under such procedures as will attempt to
ensure that--
``(i) uncertainty as to the scope of
benefits under any such program is minimized;
``(ii) any instability in market prices for
agricultural commodities resulting from the
reduction is minimized; and
``(iii) normal production and marketing
relationships among agricultural commodities
(including both contract and non-contract
commodities) are not distorted.
In meeting the criterion set out in clause (iii) of
subparagraph (B) of the preceding sentence, the
President shall take into consideration that reductions
under an order may apply to programs for two or more
agricultural commodities that use the same type of
production or marketing resources or that are
alternative commodities among which a producer could
choose in making annual production decisions.
``(5) Certain authority not to be limited.--Nothing in this
title shall limit or reduce in any way any appropriation that
provides the Commodity Credit Corporation with funds to cover
the Corporation's net realized losses.
``(n) Postal Service Fund.--Notwithstanding any other provision of
law, any sequestration of the Postal Service Fund shall be accomplished
by a payment from that Fund to the General Fund of the Treasury, and
the Postmaster General of the United States shall make the full amount
of that payment during the fiscal year to which the presidential
sequestration order applies.
``(o) Effects of Sequestration.--The effects of sequestration shall
be as follows:
``(1) Budgetary resources sequestered from any account
other than an entitlement trust, special, or revolving fund
account shall revert to the Treasury and be permanently
canceled.
``(2) Except as otherwise provided, the same percentage
sequestration shall apply to all programs, projects, and
activities within a budget account (with programs, projects,
and activities as delineated in the appropriation Act or
accompanying report for the relevant fiscal year covering that
account, or for accounts not included in appropriation Acts, as
delineated in the most recently submitted President's budget).
``(3) Administrative regulations or similar actions
implementing a sequestration shall be made within 120 days of
the sequestration order. To the extent that formula allocations
differ at different levels of budgetary resources within an
account, program, project, or activity, the sequestration shall
be interpreted as producing a lower total appropriation, with
that lower appropriation being obligated as though it had been
the pre-sequestration appropriation and no sequestration had
occurred.
``(4) Except as otherwise provided, obligations in
sequestered direct spending accounts shall be reduced in the
fiscal year in which a sequestration occurs and in all
succeeding fiscal years.
``(5) If an automatic spending increase is sequestered, the
increase (in the applicable index) that was disregarded as a
result of that sequestration shall not be taken into account in
any subsequent fiscal year.
``(6) Except as otherwise provided, sequestration in
accounts for which obligations are indefinite shall be taken in
a manner to ensure that obligations in the fiscal year of a
sequestration and succeeding fiscal years are reduced, from the
level that would actually have occurred, by the applicable
sequestration percentage.''.
(b) Conforming Amendment.--The table of contents set forth in
250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985
is amended by amending the item relating to section 256 to read as
follows:
``Sec. 256. Exceptions, limitations, and special rules.''.
SEC. 204. POINT OF ORDER.
(a) Entitlement Point of Order.--Section 312 of the Congressional
Budget Act of 1974 is amended by adding at the end the following new
subsection:
``(g) Entitlement Point of Order.--It shall not be in order in the
House of Representatives or the Senate to consider any bill, joint
resolution, amendment, or conference report that--
``(1) increases aggregate level of direct spending for any
ensuing fiscal year or
``(2) includes any provision that has the effect of
modifying the application of section 252A of the Balanced
Budget and Emergency Deficit Control Act of 1985 to any
entitlement program subject to sequestration or exempt from
sequestration under such Act.''.
SEC. 205. TECHNICAL AND CONFORMING AMENDMENTS.
The Balanced Budget and Emergency Deficit Control Act of 1985 is
amended as follows:
(1) Section 251(a)(1) is amended by inserting ``, section
252A,'' after ``section 252''.
(2) Section 254(c)(4)(B) is amended by inserting ``or
section 252A'' after ``section 252''.
(3) Section 254(c) is amended by redesignating paragraph
(5) as paragraph (6) and by inserting after paragraph (4) the
following new paragraph:
``(5) Direct spending control sequestration reports.--The
preview reports shall set forth, for the current year and the
budget year, estimates for each of the following:
``(A) The total level of direct spending for all
programs, projects, and activities (excluding social
security).
``(B) The sequestration percentage or (if the
required sequestration percentage is greater than the
maximum allowable percentage for medicare) percentages
necessary to comply with section 252A.''.
(4) Section 254(f) is amended by redesignating paragraphs
(4) and (5) as paragraphs (5) and (6) and by inserting after
paragraph (3) the following new paragraph:
``(4) Direct spending control sequestration reports.--The
final reports shall contain all the information required in the
direct spending control sequestration preview reports. In
addition, these reports shall contain, for the budget year, for
each account to be sequestered, estimates of the baseline level
of sequesterable budgetary resources and resulting outlays and
the amount of budgetary resources to be sequestered and
resulting outlay reductions. The reports shall also contain
estimates of the effects on outlays of the sequestration in
each outyear for direct spending programs.''.
(5) Section 258C(a)(1) is amended by inserting ``, 252A,''
after ``section 252''.
Subtitle B--Discretionary Spending Limits
SEC. 211. ENFORCING DISCRETIONARY SPENDING LIMITS.
(a) Discretionary Spending Limits.--Sections 251(b) and (c) of the
Balanced Budget and Emergency Deficit Control of Act of 1985 are
amended to read as follows:
``(b) Discretionary Spending Limit.--As used in this part, the term
`discretionary spending limit' means--
``(1) with respect to fiscal year 2007--
``(A) $861,577,682,000 in new budget authority of
which no more than $412,947,276,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(2) with respect to fiscal year 2008--
``(A) $880,532,400,000 in new budget authority of
which no more than $422,032,100,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(3) with respect to fiscal year 2009--
``(A) $899,904,100,000 in new budget authority of
which no more than $431,316,800,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(4) with respect to fiscal year 2010--
``(A) $919,702,000,000 in new budget authority of
which no more than $440,805,800,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(5) with respect to fiscal year 2011--
``(A) $939,935,400,000 in new budget authority of
which no more than $450,503,500,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(6) with respect to fiscal year 2012--
``(A) $960,614,000,000 in new budget authority of
which no more than $460,414,600,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(7) with respect to fiscal year 2013--
``(A) $981,747,500,000 in new budget authority of
which no more than $470,543,700,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050);
``(8) with respect to fiscal year 2014--
``(A) $1,003,346,000,000 in new budget authority of
which no more than $480,895,700,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050); and
``(9) with respect to fiscal year 2015--
``(A) $1,025,419,600,000 in new budget authority of
which no more than $491,475,400,000 shall be for
functions other than National Defense (050); and
``(B) $_____ in outlays of which no more than
$_____ shall be for functions other than National
Defense (050).''.
(b) Discretionary Spending Limit Point of Order.--Section 312 of
the Congressional Budget Act of 1974 (as amended by section 204) is
further amended by adding at the end the following new subsection:
``(h) Discretionary Spending Limit Point of Order.--It shall not be
in order in the House of Representatives or the Senate to consider any
bill, joint resolution, amendment, or conference report that--
``(1) increases the discretionary spending limits for any
ensuing fiscal year after the budget year; or
``(2) would cause the discretionary spending limits for the
budget year to be breached.''.
(c) Advance Appropriation Point of Order.--Section 312 of the
Congressional Budget Act of 1974 (as amended by subsection (b)) is
further amended by adding at the end the following new subsection:
``(i) Advance Appropriation Point of Order.--It shall not be in
order in the House of Representatives or the Senate to consider any
appropriation bill or joint resolution, or amendment thereto or
conference report thereon, that provides advance discretionary new
budget authority that first becomes available for any fiscal year after
the budget year at an amount for any program, project, or activity
above the amount of appropriations for fiscal year 2006 for such
program, project, or activity.''.
(d) Extension of Gramm-Rudman.--Section 275(b) of the Balanced
Budget and Emergency Deficit Control of Act of 1985 is amended by
striking ``2002'' and inserting ``2015'' and by striking ``2006'' and
inserting ``2019''.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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