Social Security Reform: Individual Account Proposals

Report for Congress
Social Security Reform:
Individual Account Proposals
Updated July 26, 2002
James R. Storey
Specialist in Social Legislation
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

A^B^S^T^RACT
A number of measures to reform the Social Security system have proposed that individual^th
accounts be incorporated into a reformed system. Proposals introduced in the 106 and^th
107 Congresses are compared with respect to the role the accounts would play, whether
they would be mandatory or voluntary, the level of contributions, how funds would be
managed and invested, whether a minimum benefit is promised, and how the accounts would
be treated for income tax purposes. This report will be updated as legislative action occurs.

Social Security Reform:
Individual Account Proposals
Summary
Many proposals have been advanced to reform Social Security. Some would
establish “Social Security individual accounts” (SSIAs) to accumulate contributions
for workers, invest their funds, and provide them with retirement income. Key
features of 18 SSIA proposals are compared in this report. The proposals vary in
regard to: the basic purpose of the accounts; whether participation is mandatory or
voluntary; the source and level of contributions; how account assets are managed;
what investment choices are available; whether or not a minimum benefit is
promised; and how the federal income tax applies.
Fourteen of the 18 SSIA proposals would use the new accounts to replace a part
(in one case all) of Social Security benefits (“carveout” plans). The other four
proposals would use SSIAs as a means for workers to supplement Social Security
(“add-on” plans). Five of the 14 carveout plans would mandate participation; the
other nine propose voluntary carveouts. Two of the four add-on plans would
mandate participation. However, three of the seven mandatory plans would limit the
mandate to workers under a certain age.
Proposed contributions to SSIAs range from 1% of wages subject to the Social
Security payroll tax up to the full 12.4% employee/employer payroll tax. The
carveout plans would divert some part (in one case all) of Social Security taxes for
contribution to SSIAs. However, eight of the 18 proposals would draw on general
federal revenue for some or all of the contributions.
Ten of the 18 SSIA proposals would limit investment options for account assets
to a few funds approved expressly for that purpose by a board of trustees. The eight
exceptions would allow individuals to invest their SSIA assets with a broader range
of existing financial institutions.
Five of the 14 carveout proposals would guarantee participants some minimum
SSIA benefit to protect against adverse investment outcomes, the guarantees being
based in most cases on an individual’s Social Security benefit entitlement. Of the
nine carveout proposals offering no guarantee, five do not mandate participation.
Two add-on proposals include a benefit floor.
Treatment of SSIAs under the federal income tax would vary, with five of the
18 proposals essentially following current tax policy for private retirement plans. At
the other extreme, one plan would make SSIA contributions, investment earnings,
and distributions completely tax-exempt.
This report will be updated as legislative action occurs.

Contents
In troduction ......................................................1
Comparison of SSIA Proposals.......................................2
List of Tables
Table 1. Selected Features of Social Security Individual Accounts Included
in Social Security Reform Proposals...............................3

Social Security Reform:
Individual Account Proposals
Introduction
Congress has acted many times to promote voluntary individual retirement
saving through tax incentives. Landmark legislation includes: authorization of
individual retirement accounts (IRAs) for workers with no employer-sponsored
pension plan (1974); specification of rules for employer-sponsored salary deferral
retirement plans in §401(k) and §457 of the tax code (1978); expansion of IRA
eligibility to all workers and their spouses (1981); establishment of Roth IRAs in

1997; and increased contribution limits and more flexible portability rules in 2001.

Beginning with the 106^th Congress, serious attention was given to making
individual retirement saving an integral part of the mandatory Social Security system.
Numerous Social Security reform proposals have been offered in light of actuarial
projections that indicate the Social Security trust funds may exhaust their financial^st
reserves during the first half of the 21 century. Concern about this possibility of
system insolvency is amplified by the demographic context, namely, the approaching
swell in the retirement age population as the large “baby boom” age cohorts begin to
reach age 65 in 2011. Some of these reform proposals would make “Social Security
individual accounts” (SSIAs) an integral part of a reformed Social Security system.
Other proposals would establish SSIAs for the purpose of supplementing the
retirement benefits paid by Social Security. In 2001, the President’s Commission to
Strengthen Social Security recommended that any reform of the system include
individual accounts as an element.
The features of SSIA proposals vary widely. This report summarizes 18
proposals that would establish SSIAs. Nine of them were introduced as bills in the^th^th
106 Congress, and nine have been introduced in the 107 Congress. (Several bills
in the latter group are revisions of bills introduced by the same sponsors in the 106^th
Congress.) These 18 proposals are as follows:
Introduced in 106^th Congress:
H.R. 874 (Porter)–Individual Social Security Retirement Accounts Act
H.R. 3206 (N. Smith)–Social Security Solvency Act¹
H.R. 4839 (Sanford)–Personal Lockbox Act
H.R. 5659 (Kasich)–Personal Social Security Account Act
S. 21 (Moynihan)–Social Security Solvency Act

¹ Earlier in the 106^th Congress, Representative Sanford introduced three bills (H.R. 249, H.R.

250, H.R. 251) that also would have created SSIAs.

S. 263 (Roth)–Personal Retirement Accounts Act
S. 588 (Bunning)–Social Security for the 21^st Century Act
S. 1103 (Grams)–Personal Security and Wealth in Retirement Act
S. 2774 (Gregg)–Bipartisan Social Security Reform Act²
Introduced in 107^th Congress:
H.R. 849 (Sessions)–Savings Accounts for Every American Act
H.R. 2110 (Petri)–Retirement Security Act
H.R. 2771 (Kolbe/Stenholm)–21^st Century Retirement Act
H.R. 3497 (Shaw)–Social Security Guarantee Plus Act
H.R. 3535 (DeMint/Armey)–Social Security Ownership and Guarantee Act
H.R. 4022 (Matsui)–President’s Commission Reform Model 1³
H.R. 4023 (Matsui)–President’s Commission Reform Model 2
H.R. 4024 (Matsui)–President’s Commission Reform Model 3
S. 2693 (Dorgan)–Social Security Plus Account Act⁴
Table 1 compares several significant elements of the 18 proposals. (Although
some of the Social Security proposals that include SSIAs also call for major changes
in Social Security benefits and/or financing, these broader reforms are not discussed
here, nor are these features of the proposals shown in Table 1. For a general
discussion of Social Security reform, see: CRS Issue Brief IB98048, Social Security
Reform.)
Comparison of SSIA Proposals
Some SSIA proposals are designed to replace a part of Social Security benefits
(“carveout” plans), with part of Social Security payroll taxes diverted into the SSIAs.
Others would use SSIAs as a means for workers to supplement Social Security (“add-
on” plans), either through their own contributions or with federal payments to their
accounts. Fourteen of the 18 proposals outlined in Table 1 are carveout plans.⁵ Five
of these 14 plans would mandate participation; the other nine propose voluntary

² An earlier version of this bill, S. 1383, was also introduced by Senator Gregg in the 106^th
Congress.
³ Representative Matsui’s three bills are not detailed proposals. They simply call for
implementation of the options set forth in the report of the President’s Commission to
Strengthen Social Security. These bills were introduced to stimulate a policy debate on^th
SSIAs during the 107 Congress. For more information on the Commission’s options, see
CRS Report for Congress RS21095, Social Security: Report of the President’s Commission
to Strengthen Social Security, by Dawn Nuschler, December 21, 2001.
⁴ This bill advances an approach originally proposed by President Clinton in his FY2000
budget, which advocated Universal Savings Accounts as part of a reform of Social Security.
⁵ H.R. 4024 (Commission Reform Model 3) is categorized as a carveout plan in this
discussion, but its carveout feature is contingent upon an individual’s election to contribute
an additional 1% of taxable wages to an account. The discussion of add-on plans refers to
those that are purely add-on in nature.

carveouts. Two of the four add-on plans would mandate participation. Of the seven
mandatory plans (five carveouts, two add-ons), three would limit the mandate to
workers under a certain age.
Contributions would range from 1% of wages subject to the Social Security
payroll tax (H.R. 5659) to the full 12.4% employee/employer payroll tax (H.R. 849).
Eight proposals (H.R. 2110, H.R. 2771, H.R. 3497, H.R. 4024, H.R. 4839, S. 263,
S. 2774, S. 2693) would augment employee contributions with government transfer
payments or income tax credits.
Ten of the 18 SSIA proposals would limit the options for investment of
contributions to a few funds approved expressly for that purpose by a board of
trustees, in a manner similar to the operation of the federal employees’ Thrift Savings
Plan. The eight exceptions would allow individuals to invest their SSIA assets with
a broader range of existing financial institutions that meet certain federal standards.
Four of these eight proposals would allow this latter approach only for accounts
holding assets in excess of some minimum level.
Five of the 14 carveout proposals would guarantee participants some minimum
SSIA benefit to protect against adverse investment outcomes. Guaranteed minimums
generally are based on some combination of entitlement under Social Security and/or
absolute dollar amounts. However, S. 1103 sets a minimum at 150% of the official
poverty income level for a single-person household. Of the nine carveout proposals
offering no guarantee, six (H.R. 849, H.R. 4022, H.R. 4023, H.R. 4024, S. 21, S.
588) do not mandate participation, leaving H.R. 250, H.R. 2771, and S. 2774 as the
only mandatory carveout plans with no promised SSIA minimum. Two add-on
proposals (H.R. 2110, H.R. 3497) would provide a benefit floor – a benefit equal to
at least as much as an individual’s Social Security benefit under current law.
Treatment of SSIAs under the federal income tax would vary. Five of the 18
proposals essentially follow current tax policy for most private retirement plans; that
is, income tax is deferred on contributions and investment earnings and collected
when the funds are distributed. Nine proposals would tax all or part of employee
contributions, but one of these nine (S. 1103) would exempt investment earnings
from taxation. The other eight would apply the tax rules for Social Security benefits
to some part of previously untaxed distributions. S. 588 would make contributions,
investment earnings, and distributions completely tax-exempt in all circumstances.
Tax treatment was not specified in the three options offered by the President’s
Commission to Strengthen Social Security (H.R. 4022, H.R. 4023, H.R. 4024).

Table 1. Selected Features of Social Security Individual Accounts
Included in Social Security Reform Proposals
[NOTE: abbreviations explained at end of table]
^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁶^th^Congress:
^H^.^{R. 874}^carv^e^o^u^t^;^{5% e}^m^pl^oy^e^e^,^tru^s^ts^optⁱ^ons^lesser^of^emp^l^o^y^{ee sh}^are^tax-d^e^f^e^rred^t^ax-d^ef^erred
^(Po^r^ter),^p^a^rticip^atioⁿ^{5% e}^m^pl^oy^e^r^regⁱ^stered^offe^r^e^{d by}^{95% of}^tax^a^b^l^e;^a^m^ount^s
^I^ndi^vⁱ^dua^l^v^o^l^unt^a^r^y^m^a^t^c^h;^fr^om^with^{SSA to}^SSA-^PI^{A o}^r^e^m^pl^oy^e^r^tax^a^b^l^{e, p}^a^rtly
^So^cial^t^a^xe^s^dⁱ^ve^rt^e^d^ad^minⁱ^ster^a^ppr^ov^e^d^{40% of}^m^a^tch^tax^-^{on sa}^m^e^ba^si^s
^Secu^rity^f^r^o^m^OASDI^SSI^As^tru^s^tees^AI^ME^d^e^f^e^rred^{as OASDI}
^Retiremen^t^be^ne^fi^t^s
ⁱ^{ki/CRS-RL30397}^A^c^c^ount^s
^g/w^Act
^s^.or^H^.^{R. 3206}^carv^e^o^u^t^;^{2.5% fr}^om^So^cial^{3 i}^nde^x^e^d^OASDI^one^-^h^a^l^f^tax^-^d^e^f^e^rred^t^ax^ab^{le o}ⁿ
^le^ak^(N.^Smith^),^p^a^rticip^atioⁿ^t^a^xe^s^dⁱ^ve^rt^e^d^Secu^rity^{funds w}ⁱ^t^h^be^ne^fi^t^co^m^p^letely^tax^-^sam^e^{basis as}
^://wiki^So^cial^Secu^rity^v^o^l^unt^a^r^y^for^co^v^e^red^f^r^o^m^OASDI^,^risⁱⁿ^g^to^Boa^r^{d of}^T^r^u^s^tees^v^a^ried^asset^mi^xes^less^a^c^c^ount^’s^de^fe^r^r^e^{d, ot}^he^r^ha^l^f^de^fe^r^r^e^d^OASDI^be^ne^fi^t^s
^h^ttp^So^lv^en^cy^w^o^r^k^e^r^{s unde}^r^{2.75% for}^st^a^nda^r^d^{up t}^o^$2,000
^Act^a^g^e^{65 on}^2026-^2038;^a^nnui^t^y
^1/^1/²⁰⁰¹^{rate th}^ereaf^ter^va^l^u^e
^de^pe^{nds on}
^OASDI
^fundi^ng^st^a^t^us
^H^.^{R. 4839}^carv^e^o^u^t^;^pr^o-^r^a^t^a^sha^r^e^SEC-^{all f}ⁱⁿ^aⁿ^c^ial^none^v^o^l^unt^a^r^y^t^a^x^-^de^fe^r^r^e^d^f^or^a^m^ount^s
^(San^f^o^rd^),^p^a^rticip^atioⁿ^{of F}^I^CA^t^a^x^a^ppr^ov^e^dⁱⁿ^stitu^tioⁿ^s^c^ont^rⁱ^butⁱ^ons^attrib^u^t^ab^{le to}
^P^e^r^s^ona^l^r^e^qui^r^e^{d i}^f^fr^om^s^u^r^p^l^u^s^P^e^r^s^ona^l^th^{at p}^a^ss^tax^a^b^l^e,^fe^de^r^a^l
^L^o^c^k^box^bor^{n a}^f^t^e^r^o^f^OASI^Retiremen^t^{SEC risk}^go^ve^rn^meⁿ^t^c^ont^rⁱ^butⁱ^on,
^Act^{1944, but}^receip^t^{s less}^A^c^c^ount^screen^c^ont^rⁱ^butⁱ^oⁿ^ha^l^f^not^t^a^x^e^d,
ⁱ^ndi^vⁱ^dua^l^e^x^pe^ndi^t^u^r^e^s;^tru^s^tees^not^t^a^x^e^d^h^a^lf^tax^a^b^l^e
^c^ont^rⁱ^butⁱ^ons^lim^ited^{on sa}^m^e^ba^si^s
^{up t}^o^$10,000^c^ont^rⁱ^butⁱ^oⁿ^{as OASDI}
^{are v}^o^luⁿ^t^ary^fr^om^fe^de^r^a^l^be^ne^fi^t^s^;^ot^he^r
^r^e^v^e^nue^for^a^m^ount^{s not}
^lo^w-in^co^m^e^tax^e^d

ⁱ^ndi^vⁱ^dua^l^s

^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁶^th^Co^ng^{ress (co}ⁿ^tinued):
^H^.^{R. 5659}^carv^e^o^u^t^;^fr^om^{1% t}^o^P^e^r^s^ona^l^r^a^ng^e^of^none^t^a^x^-^de^fe^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^a^b^l^e
^(K^as^ich⁾^,^p^a^rticip^atioⁿ^{3.5%, de}^pe^nd-^So^cial^{funds si}^mⁱ^l^a^r
^P^e^r^s^ona^l^v^o^l^unt^a^r^y^forⁱⁿ^{g o}ⁿ^w^a^ge^Secu^rity^F^uⁿ^d^t^o^t^hose^of
^So^{cial Se-}^t^hose^borⁿ^lev^e^{l, f}^r^o^m^unde^r^Boa^r^d^TS^P
^cu^rity^Ac-^a^f^t^e^r¹⁹⁴⁴^t^a^xe^s^dⁱ^ve^rt^e^d^{of T}^r^ust^e^e^s
^c^ount^A^c^t^f^r^o^m^OASDI
^S^.^{21 (}^M^oy^-^carv^e^o^u^t^;^{1% e}^m^pl^oy^e^e^,^V^o^l^unt^a^r^y^optⁱ^ons^none^t^a^x^a^bl^e^;^tax-d^e^f^e^rred^t^ax-d^ef^erred
ⁿⁱ^haⁿ⁾^,^p^a^rticip^atioⁿ^{1% e}^m^pl^oy^e^r^In^v^e^s^t^m^eⁿ^t^offe^r^e^{d by}^e^m^pl^oy^e^r^a^m^ount^s
^So^cial^v^o^luⁿ^t^ary^;^em-^m^a^t^c^h;^fr^om^F^{und unde}^r^a^ppr^ov^e^d^m^a^tch^tax^-^tax^a^b^l^e
^Secu^rity^pl^oy^e^e^pa^y^r^ol^l^t^a^xe^s^dⁱ^ve^rt^e^d^{SSA, o}^rⁱⁿ^stitu^tioⁿ^s^d^e^f^e^rred
ⁱ^{ki/CRS-RL30397}^So^lv^en^cy^Act^tax^cu^{t ev}^en^if^nonpa^r^tⁱ^cⁱ^p^aⁿ^t^f^r^o^m^OASDI^p^r^iv^{ate I}^R^As
^g/w
^s^.or^S^.²⁶³^a^dd-^on;^go^ve^rn^meⁿ^t^P^e^r^s^ona^l^G^,^F^,^{C funds}^none^t^a^x^-^de^fe^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^a^b^l^e
^le^ak⁽^R^ot^h)^,^p^a^rticip^atioⁿ^put^{s i}ⁿ^{$250 +}^Retiremen^t^lik^{e T}^SP,
^P^e^r^s^ona^l^req^uⁱ^red^sh^{are o}^f^A^c^c^ount^s^ot^he^r^funds
^://wiki^Retiremen^t^budg^e^t^sur^p^l^u^s^Boar^d^Boar^d
^h^ttp^A^c^c^ount^s^pr^opor^tⁱ^ona^l^reco^mmen^d^s
^Act^to^emp^l^o^y^ee’^s
^p^a^y^r^o^{ll tax}
^S^.⁵⁸⁸^carv^e^o^u^t^;^go^ve^rn^meⁿ^t^Retiremen^t^optⁱ^ons^none^t^a^x^-^e^x^e^m^pt^t^a^x^-^e^x^e^m^pt^t^a^x^-^e^x^e^m^pt

⁽^B^unni^ng⁾^,^p^a^rticip^atioⁿ^c^ont^rⁱ^but^e^s^by^Secu^rity^F^uⁿ^d^selected^b^y
^So^cial^v^o^l^unt^a^r^y^dⁱ^ve^rtⁱⁿ^{g t}^a^xe^s^In^v^e^s^t^m^eⁿ^t^Boar^d
^Secu^rity^f^o^r^st^f^r^o^m^OASDI^,^Boar^d
^th^{e 2}¹^rⁱ^si^ng^t^o^50%
^Ce^nt^ur^y^o^f^tax^af^{ter 2}⁰
^Act^y^ears

^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁶^th^Co^ng^{ress (co}ⁿ^tinued):
^S^.¹¹⁰³^carv^e^o^u^t^;^{5% e}^m^pl^oy^e^e^Fe^d^e^r^a^l^optⁱ^ons^{150% of}^emp^l^o^y^{ee sh}^are^tax^-^ex^emp^t^tax^-^ex^emp^t
^(Grams^),^p^a^rticip^atioⁿ⁽^{up t}^o^25%^P^e^r^s^ona^l^offe^r^e^{d by}^pov^e^r^t^y^-^tax^a^b^l^e;
^P^e^r^s^ona^l^v^o^l^unt^a^r^y^max.^),⁵^%^Retiremen^t^Boar^d-^lev^e^l^e^m^pl^oy^e^r
^Secu^rity^e^m^pl^oy^e^r^In^v^e^s^t^m^eⁿ^t^a^ppr^ov^e^dⁱⁿ^co^m^e^f^o^r^m^a^tch^tax^-
^a^{nd W}^e^a^l^t^h^m^a^t^c^h;^fr^om^Boar^d^tru^s^tees^sing^le^ex^emp^t
ⁱⁿ^Retire-^t^a^xe^s^dⁱ^ve^rt^e^d^pe^r^s^on
^men^t^A^c^t^f^r^o^m^OASDI
^S^.²⁷⁷⁴^carv^e^o^u^t^;^{2% fr}^om^t^a^x^e^s^I^ndi^vⁱ^dua^l^sa^m^e^optⁱ^ons^none^t^a^x^-^de^fe^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d
^(Gregg),^p^a^rticip^atioⁿ^di^v^e^r^t^e^d^fr^om^S^a^vⁱ^ng^{s F}^und^{as T}^SP;^a^m^ount^s
^Bip^a^rtisan^req^uⁱ^red^OASDI^{; u}^p^to^Boa^r^{d unde}^r^Boar^{d to}^tax^a^b^l^e
ⁱ^{ki/CRS-RL30397}^So^cial^Secu^rity^{$2,000 v}^o^l^un-^tary^{, m}^a^tch^e^d^SSA^reco^mmen^d^ot^he^r^optⁱ^ons
^g/w^Refor^m^Act^b^y^go^ve^rn^-^t^o^Cong^r^e^ss
^s^.or^m^e^nt^pa^y^-
^le^ak^m^eⁿ^t^{s if}^lo^w
ⁱⁿ^co^m^e^{; o}ⁿ^e^-
^://wiki^tⁱ^m^e^go^ve^rn^-
^h^ttp^m^e^nt^pa^y^-
^m^e^nt^{s t}^o^Kⁱ^d-
^sa^v^e^a^c^c^ount
ⁱ^f^bor^{n a}^f^t^e^r
¹⁹⁹⁴
^{Bills intro}^{duced in 1}⁰⁷^th^Congress:
^H^.^{R. 849}^ne^w^a^c^c^ount^s^{6.2% fr}^om^SAF^E^optⁱ^ons^none^t^a^x^-^de^fe^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^a^b^l^e^be^for^e
^(Ses^sⁱ^oⁿ^s^),^o^f^f^e^redⁱⁿ^lieu^e^m^pl^oy^e^e^pl^us^a^c^c^ount^s^offe^r^e^{d by}^ag^{e 5}⁹^½
^Savⁱⁿ^g^s^o^f^OASDI^if^{6.2% fr}^om^a^ppr^ov^e^d^by^T^r^easu^r^y^-^unl^e^{ss funds}
^A^c^c^ount^for^h^e^ld^{at least 1}⁵^e^m^pl^oy^e^r^;^no^Sec’^y^o^f^a^ppr^ov^e^d^use^d^for
^Every^y^ears;^tax^p^a^id^to^T^r^easu^r^y^tru^s^{tees; lif}^e^certain
^American^p^a^rticip^atioⁿ^OASDI^b^yⁱⁿ^su^ran^c^e^pur^pose^s^;^t^a^x^-
^{Act (SAF}^E)^v^o^l^unt^a^r^y^eith^er^coⁿ^t^racts^f^r^{ee af}^{ter 5}⁹^½

^e^m^pl^oy^e^e^or^ex^clu^d^e^d
^e^m^pl^oy^e^r

^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁷^th^Co^ng^{ress (co}ⁿ^tinued):
^H^.^{R. 2110}^a^dd-^on;^{$1,000 one}^-^So^cial^G^,^F^,^{C funds}^OASDI^{up t}^o^$5,000^tax^-^d^e^f^e^rred^b^en^ef^its
^(Petri),^p^a^rticip^atioⁿ^{time p}^a^y^m^en^t^Secu^rity^lik^{e T}^SP’^s,^be^ne^fi^t^t^a^x^-^de^fe^r^r^e^d;^e^qui^v^a^l^e^nt^t^o
^Retiremen^t^r^e^qui^r^e^{d i}^f^w^h^eⁿ^a^c^c^ount^In^v^e^s^t^m^eⁿ^t^ot^he^r^funds^p^a^id^to^ot^he^r^OASDI
^Secu^rity^bor^{n a}^f^t^e^r^{is estab}^lish^e^d^,^T^r^ust^F^und^Boar^d^ex^ten^t^it^c^ont^rⁱ^butⁱ^ons^be^ne^fi^t^s
^Act^6/^30/^{2002, but}^fr^om^fe^de^r^a^l⁽^unde^r^F^e^d.^reco^mmen^d^s^ex^ceed^s^tax^a^b^l^e^t^a^x^a^bl^e^on
^emp^l^o^y^ee/em-^r^e^v^e^nue^fr^om^{Ret. T}^h^rⁱ^ft^be^ne^fi^t^sam^e^{basis as}
^pl^oy^e^r^c^ont^rⁱ^-^tax^oⁿ^OASDI^In^v^e^s^t^m^eⁿ^t^fr^om^Re^-^OASDI^{; o}^t^h^e^r
^butⁱ^{ons a}^r^e^be^ne^fi^t^s^;^{up t}^o^Boar^d)^tiremen^t^tax-d^e^f^e^rred
^v^o^l^unt^a^r^y^{$10,000 by}^Secu^rity^b^eⁿ^e^f^{its f}^u^lly
^emp^l^o^y^ee/em-^Act^tax^a^b^l^e
^pl^oy^e^r
ⁱ^{ki/CRS-RL30397}^co^mbⁱⁿ^ed
^g/w^H^.^{R. 2771}^carv^e^o^u^t^;^{3% of 1}^st^I^ndi^vⁱ^dua^l^optⁱ^ons^none^t^a^x^a^bl^e^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d
^s^.or⁽^K^ol^be^/^p^a^rticip^atioⁿ^{$10,000 of}^Secu^rity^F^uⁿ^d^selected^b^y^a^m^ount^s
^le^ak^S^t^e^nhol^m⁾^,^r^e^qui^r^e^d;^wag^e^{s +}²^%^Boa^r^{d unde}^r^Boar^d^t^a^x^a^bl^e^on
²¹^st^Ce^nt^ur^y^v^o^l^unt^a^r^y^{of ot}^he^r^w^a^g^e^s^S^S^A^;^a^c^c^ount^sam^e^{basis as}
^://wiki^Retiremen^t^c^ont^rⁱ^butⁱ^ons^di^v^e^r^t^e^d^fr^om^can^b^e^OASDI
^h^ttp^Act^allo^wed^f^o^r^OASDI^{; u}^p^to^tran^sf^erred^to^be^ne^fi^t^s
^OASDI^ad^d^-^{$2,000 v}^o^l^un-^p^r^iv^{ate f}ⁱ^rm
^ons^tary^{, m}^a^tch^e^d^w^h^eⁿ^ba^l^a^nc^e
^b^y^go^ve^rn^-^reach^es
^m^e^nt^pa^y^-^$7,500
^m^eⁿ^t^{s if}^lo^w
ⁱⁿ^co^m^e
^H^.^{R. 3497}^a^dd-^on;^2%-³^{% of pa}^y^So^cial^q^u^a^lif^ied^OASDI^tax^-^d^e^f^e^rred^t^ax^-d^ef^erred^t^ax^ab^{le o}ⁿ
^(Sh^a^w),^p^a^rticip^atioⁿ^c^ont^rⁱ^but^e^d^Secu^rity^mu^t^u^al^be^ne^fi^t^sam^e^{basis as}
^So^cial^v^o^l^unt^a^r^y^fr^om^Gu^aran^tee^funds;^OASDI
^Secu^rity^go^ve^rn^meⁿ^t^Boa^r^{d unde}^r^st^oc^k^/^bond^be^ne^fi^t^s

^Gu^aran^tee^pa^y^m^eⁿ^t^s^SSA^mⁱ^x^{of 60/}⁴⁰
^Plu^s^Act^g^eⁿ^e^rally
^req^uⁱ^red

^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁷^th^Co^ng^{ress (co}ⁿ^tinued):
^H^.^{R. 3535}^carv^e^o^u^t^;^3%-⁸^%^P^e^r^s^ona^l^optⁱ^ons^OASDI^tax^a^b^l^e^t^ax^-d^ef^erred^t^ax^-d^ef^erred
^(DeMin^t/^p^a^rticip^atioⁿ^di^v^e^r^t^e^d^fr^om^Savⁱⁿ^g^s^selected^b^y^be^ne^fi^t^a^m^ount^s
^Arm^e^y⁾^,^v^o^l^unt^a^r^y^OASDI^;^Boar^d^Boar^d;^t^a^x^a^bl^e^on
^So^{cial Se-}^a^ddi^tⁱ^ona^l^a^ppoi^nt^e^d^by^st^oc^k^/^bond^sam^e^{basis as}
^cu^rity^Own^-^v^o^l^unt^a^r^y^Presid^en^t^mⁱ^x^{of 60/}⁴⁰^OASDI
^ersh^ip^an^d^c^ont^rⁱ^butⁱ^ons^g^eⁿ^e^rally^be^ne^fi^t^s
^Gu^aran^tee^allo^wed^req^uⁱ^red
^Act
^H^.^{R. 4022}^carv^e^o^u^t^;^{2% fr}^om^t^a^x^e^s^go^ve^rn^meⁿ^t^br^oa^dl^y^none^t^a^x^a^bl^e^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d
^(Mats^u^i),^p^a^rticip^atioⁿ^di^v^e^r^t^e^d^fr^om^boa^r^d^lⁱ^k^e^dⁱ^v^e^rsif^ied^a^m^ount^s
ⁱ^{ki/CRS-RL30397}^Presid^en^t’^s.^C^o^mmi^s^-^v^o^l^unt^a^r^y^OASDI^T^S^P^’^{s or}^F^e^d-^{eral Reserv}^e^p^o^r^tf^o^lio^;^onl^y^a^nnua^l^t^a^x^a^bl^e^on^sam^e^{basis as}
^g/w^sion^Bo^ard^;^can^reallo^catioⁿ^OASDI
^s^.or^Refor^mⁱⁿ^v^e^{st p}^r^iv^ate-^allo^wed^be^ne^fi^t^s
^le^ak^M^ode^l¹^ly^oⁿ^{ce ac-}
^c^ount^ba^l^a^nc^e
^://wiki^a^bov^e^mⁱ^n.
^h^ttp^t^h^r^e^shol^d
^H^.^{R. 4023}^carv^e^o^u^t^;^{4% fr}^om^t^a^x^e^s^go^ve^rn^meⁿ^t^br^oa^dl^y^none^t^a^x^a^bl^e^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d
^(Mats^u^i),^p^a^rticip^atioⁿ^di^v^e^r^t^e^d^fr^om^boa^r^d^lⁱ^k^e^dⁱ^v^e^rsif^ied^a^m^ount^s
^Presid^en^t’^s^v^o^l^unt^a^r^y^OASDI^{, n}^o^t^to^T^S^P^’^{s or}^F^e^d-^p^o^r^tf^o^lio^;^t^a^x^a^bl^e^on
^C^o^mmi^s^-^ex^ceed^$¹^,⁰⁰⁰^{eral Reserv}^e^onl^y^a^nnua^l^sam^e^{basis as}
^sion^Bo^ard^;^can^reallo^catioⁿ^OASDI
^Refor^mⁱⁿ^v^e^{st p}^r^iv^ate-^allo^wed^be^ne^fi^t^s

^M^ode^l²^ly^oⁿ^{ce ac-}
^c^ount^ba^l^a^nc^e
^a^bov^e^mⁱ^n.
^t^h^r^e^shol^d

^Federa^{l inco}^m^e^ta^x^trea^tm^{ent o}^f^SSIA:
^SSI^A^SSIA
^B^{ill n}^o^.^c^o^nt^rⁱ^butⁱ^oⁿ^SSIA^miⁿⁱ^mu^m
⁽^s^pons^or⁾^,^SSI^A^ra^{te (p}^{ct. o}^f
^{and s}^h^or^t^r^e^l^atⁱ^o^ns^hi^{p t}^o^w^a^g^e^{s su}^b^j^ect^{SSIA f}^und^inv^e^stm^e^nt^benefⁱ^t^Inv^e^st^m^e^nt
^title^OAS^D^I^to^{OASDI ta}^x⁾^maⁿ^a^g^e^meⁿ^t^choⁱ^ces^gu^ar^an^t^e^e^Co^ntributio^ns^e^a^rⁿⁱⁿ^gs^Wⁱ^t^h^d^r^aw^al^s
^{Bills intro}^{duced in 1}⁰⁷^th^Co^ng^{ress (co}ⁿ^tinued):
^H^.^{R. 4024}^bot^{h c}^a^r^v^e^out^p^a^rticip^an^t^go^ve^rn^meⁿ^t^br^oa^dl^y^none^t^a^x^a^bl^e^t^a^x^-^d^e^f^e^r^r^e^d^t^a^x^-^d^e^f^e^r^r^e^d
^(Mats^u^i),^a^{nd a}^dd-^on^m^a^y^c^ont^rⁱ^-^boa^r^d^lⁱ^k^e^dⁱ^v^e^rsif^ied^a^m^ount^s
^Presid^en^t’^s^f^eatu^r^es;^but^e^T^S^P^’^{s or}^F^e^d-^p^o^r^tf^o^lio^;^t^a^x^a^bl^e^on
^C^o^mmi^s^-^p^a^rticip^atioⁿ^a^ddi^tⁱ^ona^l^1%,^{eral Reserv}^e^onl^y^a^nnua^l^sam^e^{basis as}
^sion^v^o^l^unt^a^r^y^m^a^t^c^he^{d by}^Bo^ard^;^can^reallo^catioⁿ^OASDI
^Refor^m^{2.5% (}^{up t}^oⁱⁿ^v^e^{st p}^r^iv^ate-^allo^wed^be^ne^fi^t^s
^M^ode^l³^$1,000)^fr^om^ly^oⁿ^{ce ac-}
^t^a^xe^s^dⁱ^ve^rt^e^d^c^ount^ba^l^a^nc^e
^f^r^o^m^OASDI^;^a^bov^e^mⁱ^n.
^p^a^{rtial reb}^a^te^t^h^r^e^shol^d
^{of 1% t}^h^r^oug^h
ⁱ^{ki/CRS-RL30397}^tax^cred^{it f}^o^r^lo^wer-wage
^g/w^wo^rk^ers
^s^.or
^le^ak^S^.²⁶⁹³^a^dd-^on;^{up t}^o^$2,000,^p^r^iv^{ate I}^R^As^{all secu}^rities^none^e^m^pl^oy^e^e^sha^r^e^tax-d^e^f^e^rred^t^ax-d^ef^erred
⁽^D^or^g^aⁿ⁾^,^p^a^rticip^atioⁿ^offs^e^tⁱⁿ^pa^r^t^elig^ib^{le f}^o^r^tax^a^b^l^e;^a^m^ount^s
^://wiki^So^cial^v^o^l^unt^a^r^y^by^20%^IR^A^go^ve^rn^meⁿ^t^t^a^x^a^bl^e^on
^h^ttp^Secu^rity^r^e^funda^bl^e^t^a^xⁱⁿ^v^e^stm^eⁿ^t^s^sh^{are tax}^-^sam^e^{basis as}
^Plu^s^cred^it;^d^e^f^e^rred^OASDI
^A^c^c^ount^m^a^t^c^he^{d by}^be^ne^fi^t^s
^Act^go^ve^rn^meⁿ^t
^p^a^y^m^en^{ts if}
^lo^{w in}^co^m^e^;
^sum^{of i}^ndi^-
^vⁱ^dua^l^aⁿ^d
^m^a^t^c^hi^ng
^c^ont^rⁱ^butⁱ^ons
^lim^ited^to
^$2,000
^No^tes:^D^o^l^l^a^r^a^m^o^unt^{s i}ⁿ^t^a^b^l^e^fo^r^c^o^nt^rⁱ^b^u^tⁱ^o^{n l}ⁱ^mⁱ^t^s^aⁿ^d^t^a^{x r}^u^l^e^{s a}^r^e^a^nnua^l^a^m^o^unt^s.
^A^b^b^r^ev^iatioⁿ^s^u^s^edⁱⁿ^tab^l^{e ar}^{e as f}^o^llo^w^s^:
^A^I^M^E^–^a^ve^r^a^geⁱⁿ^d^e^xe^d^m^o^nt^hl^y^e^a^rⁿⁱ^ngs
^{G,F,C –}^f^uⁿ^d^{s in}^v^e^stedⁱⁿ^g^o^v^e^rⁿ^m^eⁿ^t^secu^r^{ities, f}ⁱ^x^e^dⁱⁿ^co^m^e^secu^r^{ities, an}^d^co^r^p^o^r^{ate sto}^c^k^s^{, r}^e^sp^ectiv^ely

^IR^A^{– In}^divⁱ^du^{al retirem}^en^{t accou}ⁿ^t
^OA^SDI^–^Old^A^g^{e, Su}^r^v^iv^o^r^{s an}^d^Disab^ility^Iⁿ^su^r^aⁿ^c^e
^P^I^A^{– Social Secu}^rity^prim^aryⁱⁿ^s^u^ran^{ce am}^ouⁿ^t
^S^A^F^E^{– propos}^ed^Savi^ngs^Account^f^o^r^Ever^{y Am}^erⁱ^c^an
^{SEC –}^Secu^r^{ities an}^d^Ex^ch^an^g^e^Co^m^mⁱ^ssioⁿ
^SSA^{– Social Secu}^rity^A^d^mⁱⁿⁱ^s^t^ration
^SSIA^{– Social Secu}^rity^In^divⁱ^du^{al A}^ccouⁿ^t
^T^S^P^–^T^h^rⁱ^ft^Sa^vi^{ngs P}^l^aⁿ

ⁱ^{ki/CRS-RL30397}
^g/w
^s^.or
^le^ak
^://wiki
^h^ttp