This bill is very much as you suggest. Here is my understanding of how it would work: During a transition period, for new workers and those who opt out, 1.2% of payroll from employees and 1.2% of payroll from employers goes to fund promised benefits. Employees receive no return from these funds. This is how the ongoing promised retirement benefits are financed during the transition. As the transistion becomes more complete, this payroll deduction can be reduced and ultimately eliminated. Ongoing unearned benefits such as disability are financed by general revenues. 5% of payroll from employees and 5% of payroll from employers goes into individually owned accounts, invested in a choice of funds. An all-government-bonds fund is one choice. Premiums for survivors' and disability insurance are taken from the individual accounts. There is no minimum retirement age. The only requirement to retire is that there are sufficient funds in the account to purchase an immediate life annuity with COLA at the minimum retirement income level. For those who reach 'normal' retirement age and have insufficient funds, the government will 'top off' the account from general revenues. This is the safety net. Those who opt out will receive recognition of all Social Security contributions in the form of recognition bonds which will add the inflation-adjusted value of earned Social Security benefits to their accounts at normal retirement age. They will not receive Social Security benefits.
As you can see by following this through, once the transition is complete, the remaining system will be simple and easy to understand. 5% + 5% deposited in your individual account. Pay for your own disability and survivors' insurance. The account is your property and can be willed. Retire as soon as you can afford to. If you never accumulate enough to retire, the government will kick in the difference.
By contrast, those proposals which keep Social Security intact and add some form of individual accounts add a lot more complications to a system which is already too complicated.
