HR 1043 IH

To amend title II of the Social Security Act to strengthen the Social Security system to meet the challenges of the next century.

March 9, 1999

Mr. NADLER (for himself and Ms. PELOSI) introduced the following bill; which was referred to the Committee on Ways and Means

To amend title II of the Social Security Act to strengthen the Social Security system to meet the challenges of the next century.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Social Security Amendments of 1999'.

SEC. 2. ADDITIONAL APPROPRIATION TO FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND.

Section 201 of the Social Security Act (42 U.S.C. 401) is amended by adding at the end the following new subsection:

`(n)(1) There is hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund, in addition to amounts appropriated under subsection (a), for each fiscal year beginning on or after October 1, 1999, and ending on or before September 30, 2014, amounts equal in the aggregate to the applicable percentage of wages paid, and self-employment income derived, in such fiscal year, as specified in the following table:

2.20

1.75

2.20

2.08

2.41

2.55

3.07

3.43

3.79

4.12

4.32

4.49

4.58

4.61

4.51.

`(2) The amounts appropriated by paragraph (1) shall be transferred from time to time from the general fund in the Treasury to the Federal Old-Age and Survivors Insurance Trust Fund, such amounts to be determined on the basis of estimates by the Secretary of the Treasury; and proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than the required amounts. All amounts transferred to the Trust Fund under the preceding sentence shall be invested by the Managing Trustee in the same manner and to the same extent as the other assets of the Trust Fund.'.

SEC. 2. INVESTMENT OF THE SOCIAL SECURITY TRUST FUNDS.

(a) IN GENERAL- Section 201(d) of the Social Security Act (42 U.S.C. 401(d)) is amended to read as follows:

`(d)(1) It shall be the duty of the Managing Trustee to invest such portion of each of the Trust Funds as is not, in his judgment, required to meet current withdrawals. Subject to paragraph (2), such investments may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired (A) on original issue at the issue price, or (B) by purchase of outstanding obligations at the market price.

`(2)(A) The Managing Trustee of the Federal Old-Age and Survivors Insurance Trust Fund shall establish in such Trust Fund a Common Stock Investment Account. Such Account shall hold such amounts in such Trust Fund as are deposited into such Account pursuant to this paragraph, together with any dividends and capital gain derived from the investment in accordance with this paragraph of amounts maintained in such Account. For each fiscal year, amounts held in such Account shall be invested in common stock in accordance with the investment policies and other policies established by the Independent Social Security Investment Oversight Board for such fiscal year.

`(B) Subject to subparagraph (C), upon receipt by the Federal Old-Age and Survivors Insurance Trust Fund of any amount appropriated under subsection (n), the Managing Trustee shall deposit 40 percent of such amount into the Common Stock Investment Account of the Trust Fund.

`(C) The Managing Trustee shall limit deposits into the Common Stock Investment Account pursuant to subparagraph (B), and shall provide for withdrawals from such Account, to the extent necessary to ensure that the portion of the total amount held in the Federal Old-Age and Survivors Insurance Trust Fund which is maintained in such Account does not exceed 30 percent of the total amount held in such Trust Fund.

`(3)(A) 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 for purchase by the Trust Funds under paragraph (1).

`(B) Such obligations issued for purchase by the Trust Funds shall have maturities fixed with due regard for the needs of the Trust Funds and shall bear interest at a rate equal to the average market yield (computed by the Managing Trustee 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 four 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 of such obligations shall be the multiple of one-eighth of 1 per centum nearest such market yield.

`(C) Each obligation issued for purchase by the Trust Funds under subparagraph (A) shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Funds, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest.

`(D) The Managing Trustee may purchase interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, other than obligations issued for purchase by the Trust Funds, on original issue or at the market price, for purposes of investment of the amounts held in the Trust Funds only where he determines that the purchase of such other obligations is in the public interest.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply with respect to fiscal years beginning on or after October 1, 1999.

SEC. 3. RULES GOVERNING INVESTMENT OF FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND IN COMMON STOCK.

Title II of the Social Security Act is amended by adding at the end the following new section:

`INVESTMENT OF FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND IN COMMON STOCK

`SEC. 231. (a) SELECTION OF INDEX AND PORTFOLIO DESIGN-

`(1) SELECTION OF INDEX- The Independent Social Security Investment Oversight Board shall select, for purposes of investment of amounts held in the Common Stock Investment Account of the Federal Old-Age and Survivors Insurance Trust Fund, 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.

`(2) PORTFOLIO DESIGN- Amounts held in the Common Stock Investment Account of the Federal Old-Age and Survivors Insurance Trust Fund shall be invested in a portfolio designed to replicate the performance of the index selected under paragraph (1). The portfolio shall be designed such that, to the extent practicable, the percentage of the balance in such 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.

`(c) NO VOTING RIGHTS IN SECURITIES- The Independent Social Security Investment Oversight Board and the Managing Trustee of the Federal Old-Age and Survivors Insurance Trust Fund may not exercise voting rights associated with the ownership of securities by the Trust Fund.

`(d) ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNTANT-

`(1) IN GENERAL- The Independent Social Security Investment Oversight Board shall annually engage, on behalf of the Federal Old-Age and Survivors Insurance Trust Fund, an independent qualified public accountant, who shall conduct an examination of all accounts and other books and records maintained in the administration of this section as the public accountant considers necessary to enable the public accountant to make the determination required by paragraph (2). The examination shall be conducted in accordance with generally accepted auditing standards and shall involve such tests of the accounts, books, and records as the public accountant considers necessary.

`(2) EXAMINATION AND REPORT- The public accountant conducting an examination under paragraph (1) shall determine whether the accounts, books, and records referred to in such paragraph have been maintained in conformity with generally accepted accounting principles applied on a basis consistent with the manner in which such principles were applied during the examination conducted under such paragraph during the preceding year. The public accountant shall transmit to the Board and the Comptroller General of the United States a report on his examination, including his determination under this paragraph.

`(3) DEFINITION- For the purposes of this subsection, the term `qualified public accountant' shall have the same meaning as is provided in section 103(a)(3)(D) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(a)(3)(D)).

`(e) FIDUCIARY RESPONSIBILITIES-

`(1) IN GENERAL- Under regulations of the Secretary of Labor, the provisions of sections 8477 and 8478 of title 5, United States Code, shall apply in connection with the amounts maintained in the Common Stock Investment Account of the Federal Old-Age and Survivors Insurance Trust Fund in the same manner and to the same extent as such provisions apply in connection with the Thrift Savings Fund.

`(2) INVESTIGATIVE AUTHORITY- Any authority available to the Secretary of Labor under section 504 of the Employee Retirement Income Security

Act of 1974 is hereby made available to the Secretary of Labor, and any officer designated by the Secretary of Labor, to determine whether any person has violated, or is about to violate, any provision applicable under paragraph (1).

`(3) EXCULPATORY PROVISIONS; INSURANCE-

`(A) IN GENERAL- Any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this section shall be void.

`(B) INSURANCE- Amounts held in the Federal Old-Age and Survivors Insurance Trust Fund available for administrative expenses shall be available and may be used at the discretion of the Independent Social Security Investment Oversight Board to purchase insurance to cover potential liability of persons who serve in a fiduciary capacity with respect to amounts maintained in the Common Stock Investment Account of such Trust Fund, without regard to whether a policy of insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary obligation.'.

SEC. 4. ESTABLISHMENT OF THE INDEPENDENT SOCIAL SECURITY INVESTMENT OVERSIGHT BOARD.

Title VII of the Social Security Act is amended by inserting after section 705 (42 U.S.C. 906) the following new section:

`INDEPENDENT SOCIAL SECURITY INVESTMENT OVERSIGHT BOARD

`SEC. 706. (a) There is established in the Social Security Administration an Independent Social Security Investment Oversight Board.

`(b) The Board shall be composed of a Chairman and four additional members. The Chairman and each additional member shall be appointed by the President, by and with the advice and consent to the Senate.

`(c) Members of the Board shall have substantial experience, training, and expertise in the management of financial investments and service in a fiduciary capacity.

`(d)(1) A member of the Board shall be appointed for a term of 10 years, except that of the members first appointed--

`(A) the member appointed as Chairman shall be appointed for a term of 10 years;

`(B) one member shall be appointed for a term of 8 years;

`(C) one member shall be appointed for a term of 6 years;

`(D) one member shall be appointed for a term of 4 years; and

`(E) one member shall be appointed for a term of 2 years,

as designated by the President at the time of appointment.

`(2)(A) 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 which applied with respect to the original appointment.

`(B) An individual chosen to fill a vacancy shall be appointed for the unexpired term of the member replaced.

`(C) The term of any member shall not expire before the date on which the member's successor takes office.

`(3) An individual appointed as a member of the Board may be removed from office only pursuant to a finding by the President of neglect of duty or malfeasance in office.

`(e) The member of the Board designated by the President as Chairman shall serve as Chairman for a term of 4 years (or until the expiration of his term as member of the Board, if earlier). A member serving as Chairman may be reappointed as Chairman.

`(f) The Board shall--

`(1) establish policies for investments in common stock of amounts in the Common Stock Investment Account of the Federal Old-Age and Survivors Insurance Trust Fund under section 201(d)(2), including--

`(A) the risk and return parameters for such investments; and

`(B) the number and structure of the portfolios in which such investments are maintained;

`(2) review bids from, and select managers for, such investments;

`(3) annually review the performance of each investment manager selected pursuant to paragraph (2) and provide for reallocation of funds among them by the Managing Trustee as appropriate;

`(4) report annually to each House of the Congress and to the President regarding the earnings on such investments and publish such reports annually in the Federal Register; and

`(5) review and approve the budget of the Board.

`(g)(1) The Board may--

`(A) adopt, alter, and use a seal;

`(B) establish policies with which the Managing Trustee of the Federal Old-Age and Survivors Insurance Trust Fund is required to comply under section 201(d)(2); and

`(C) take such other actions as may be necessary to carry out the functions of the Board.

`(2) The policies of the Board may not require the Managing Trustee to invest or to cause to be invested any sums in the Federal Old-Age and Survivors Insurance Trust Fund in a specific asset or to dispose of or cause to be disposed of any specific asset of such Trust Fund.

`(h)(1) The Board shall meet--

`(A) not less than once during each month; and

`(B) at additional times at the call of the Chairman.

`(2)(A) The Board shall perform the functions and exercise the powers of the Board on a majority vote of a quorum of the Board.

`(B) 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.

`(3) Three members of the Board shall constitute a quorum for the transaction of business.

`(4)(A) 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 payable for level IV of the Executive Schedule for each day during which such member is engaged in performing a function of the Board.

`(B) 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.

`(C) Payments authorized under this paragraph shall be paid from the Federal Old-Age and Survivors Insurance Trust Fund.

`(5) The accrued annual leave of any officer or employee of the Federal Government who is a member of the Board shall not be charged for any time used in performing services for the Board.

`(i) The members of the Board shall discharge their responsibilities solely in the interest of the Federal Old-Age and Survivors Insurance Trust Fund in connection with investments of amounts in the Common Stock Investment Account of such Trust Fund under section 201(d)(2).

`(j) 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 the Congress under section 1105 of title 31, United States Code.

`(k) 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 section.'.

SEC. 5. ADJUSTMENTS TO CONTRIBUTION AND BENEFIT BASE.

(a) IN GENERAL- So much of section 230 of the Social Security Act (42 U.S.C. 430) as precedes subsection (d) is amended to read as follows:

`CONTRIBUTION AND BENEFIT BASE

`SEC. 230. (a) The amount of the contribution and benefit base with respect to remuneration paid (and taxable years beginning) in calendar year 2000 shall be $99,600.

`(b) The Commissioner of Social Security shall determine and publish in the Federal Register on or before November 1 of each calendar year (after 1999) the contribution and benefit base determined under subparagraph (c) which shall be effective with respect to remuneration paid after such calendar year and taxable years beginning after such year.

`(c)(1) Subject to paragraph (2), the amount of the contribution and benefit base referred to in subsection (b) shall be the amount of the contribution and benefit base in effect in the year in which the determination is made or, if larger, the amount determined under paragraph (2).

`(2)(A) In advance of determining and publishing, in each calendar year consisting of calendar year 2001 or any calendar year thereafter, the contribution and benefit base which shall be effective with respect to remuneration paid after such calendar year and taxable years beginning after such year, the Commissioner shall estimate as accurately as practicable the minimum contribution and benefit base which would be necessary to have in effect with respect to remuneration paid in the next calendar year and taxable years beginning in such next calendar year to ensure that 90 percent of the total of all remuneration paid in such next calendar year and all net earnings from self-employment derived during such taxable years would consist of wages and self-employment income.

`(B) In any case in which a minimum contribution and benefit base estimated under subparagraph (A) is greater than the corresponding contribution and benefit base which would otherwise be in effect under subsection (b), such estimated contribution and benefit base shall be deemed the contribution and benefit base so in effect, in lieu of such corresponding contribution and benefit base.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply with respect to remuneration paid, and taxable years beginning, after 1999.

END