Summary of Cong. Mark Sanford's Social Security Rebate Bill

Each year, every working American would receive his or her share of the Social Security surplus, which would be directly deposited into each person's personal retirement account (PRA).

In 1998, each working American would have had 24% of the Social Security taxes he or she paid rebated back to a PRA. Instead, last year Washington spent $30 billion of the $100 billion Social Security surplus on government programs and the rest went toward the national debt. None went for reform.

With this bill, raiding the Social Security surplus would no longer be possible.

• Reduction of Social Security Liability

Money rebated to the accounts would be considered early payment of future Social Security benefits, thus reducing the program's $9 trillion future debt.

• Preservation of the Trust Fund

The trust fund will continue to grow as long as Social Security is running surpluses.

• Use of Existing Financial Institutions

The bill would work within America's existing financial structure, e.g. banks, brokerage houses.

• Limited, Prudent Investment Options

Using the 401(k) model, each PRA would contain a conservative balance of stocks, bonds, and Treasury securities that would be selected by a (non-government) plan administrator.

• Additional Contribution Options

People could add an extra $10,000, without restrictions, in after-tax contributions to the accounts. The earnings on the after-tax contributions would be tax-free, like a Roth IRA.

• Wealth Creation for Generations

The bill allows people to pass on Social Security benefits to their children and grandchildren.

• Protections for Low-Income Workers

For roughly the lowest 20% of income earners, the rebates to the PRA would not count as early payment of their future benefits. Therefore, they would receive the same government benefits upon retirement as promised under current law.

• Solutions to Administrative Fees for Small Accounts

For the first two years a low-wage earner has a PRA, he would receive an automatic refundable tax credit of up to $300, to get his PRA quickly to $1,000 - the magic number for low admin. fees.

• Modest Structural Reforms

The bill would reduce benefits for the top 30% of lifetime wage earners by up to 7%, which would not be fully phased in until 2029. Also, it would reduce early retirement benefits by approximately 2% per year of early retirement. People could, however, access their accounts starting at age 62, with no penalty.