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House Republicans Zero in On GROW Accounts for
Social Security
More details on this reform plan released by Ways &
Means subcommittee
June 30, 2005 - The Republican leadership in the
House of Representatives made it clear yesterday that they plan a vote
this fall on Social Security reform and they are pushing a bill from the
Ways and Means Committee's subcommittee on Social Security. Chairman Jim
McCrery (R-LA) on Tuesday released a few more details on their idea for
"GROW Accounts," a scaled back version of the private investment
accounts proposed by President Bush.
McCrery reissued the outline of the plan and added
a summary, which provides a few more details on how this investment
account would work. It will only be available to workers under the age
of 55.
Both of these releases are published below.
The Growing Real Ownership for Workers Act of
2005
Summary Released June 28, 2005
Creation of Personal Accounts
Personal accounts, called GROW accounts, would
be established for all workers under the age of 55, unless they choose
not to have an account.
An independent board would be appointed to manage
and administer GROW accounts. The board would have seven members serving
staggered, four-year terms.
Dedication of Social Security Surplus to GROW
Accounts
Each year, surplus Social Security taxes would
continue to be credited to the Social Security Trust Funds (as under
current law), thus holding the Trust Funds harmless.
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Committee on Ways and Means
Subcommittee on Social
Security
GROW Accounts
(Growing
Real Ownership for Workers)
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Outline of Plan - 6/28/05
PRINCIPLES
1. Social Security taxes should only be
used for Social Security.
2. The surplus should not be used to mask the
true size of the budget deficit.
WHAT THE BILL DOES
Protects the Social Security surplus.
GROW Accounts will be created for workers under
the age of 55, unless they choose not to participate.
The Social Security surplus will be dedicated
to individual GROW Accounts, where it will be invested in
guaranteed, marketable Treasury securities real assets that
workers own.
Upon retirement, account balances will be used
to help pay the workers Social Security benefit.
Account balances are inheritable.
An independent board of experts, legally
responsible for ensuring safe, responsible and appropriate
investments, will manage and administer GROW Accounts.
In January 2009, the board will submit a plan
to Congress providing for options to diversify GROW accounts
through broader investments. Workers can always choose to keep
their assets invested in Treasury bonds.
The bill does not impose investment risk on
workers and does not harm the Social Security Trust Funds. It
does protect the integrity of the Social Security program by
ensuring that Social Security taxes are only used for Social
Security.
Ways and Means Subcommittee
on Social Security, Chairman Jim McCrery (R-LA) 6/28/05 9:25PM |
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After crediting to the Trust Funds, the surplus
would be distributed to workers accounts. Annual account contributions
would equal a flat percentage of workers earnings subject to the
payroll tax.
For example, if the
surplus equals 2 percent of the taxable earnings of all account owners,
then each account owner would receive a contribution equal to 2 percent
of his or her taxable earnings.
Account contributions would be automatically
invested in a marketable, U.S. Treasury bond fund. These investments are
backed by the full faith and credit of the U.S. government.
In January 2009, the board would submit a plan to
Congress to offer workers other investment options. The boards plan
would also include recommendations regarding account distributions. The
plan would go into effect automatically, unless Congress disapproved it.
Use of Account Balances to Pay Social Security
Benefits
The goal of the proposal is to ensure that Social
Security surpluses are only used for Social Security. As a result,
account balances would be used to help pay Social Security benefits.
Upon retirement, the individual would receive a
benefit from his or her account and a benefit from the Social Security
Trust Funds. The benefit from each source is determined as follows:
The board would
calculate the monthly, inflation-adjusted lifetime payment that could be
provided from the account at retirement were it invested in the Treasury
bond fund. If the individual is married, this calculation would include
a monthly payment to the surviving spouse. This lifetime monthly payment
represents the portion of the individuals Social Security benefit that
is paid from the account.
The rest of the
individuals benefit would be paid from the Social Security Trust Funds.
This calculation
ensures that an individual who remains invested in the Treasury bond
fund is guaranteed the full Social Security benefit as payable under
current law at the time of his or her retirement.
Retirees would be required to annuitize enough of
the account balance to ensure a total Social Security benefit of at
least 100 percent of the poverty-level. Any remaining account balance
could be withdrawn as the retiree chooses.
No distributions would be permitted before the
individual collects Social Security benefits.
Inheritability
Upon death of an account owner, assets in the
account would be transferred to the account of an eligible spouse and
used to help pay widow(er)s Social Security benefits. If there is no
surviving spouse, the account would be transferred to the estate
tax-free.
Ways and Means Subcommittee on Social Security,
6/28/05 9:25PM
These releases and more information on Social
Security is available on the Ways & Means Committee's Website under the
Social Security Resource Kit -
click here
to visit.
Related Information on SeniorJournal.com
House Leaders Pledge Fall Vote on Personal Accounts
for Social Security - June 29, 2005
Latest Social Security Proposal Creates GROW
Accounts - June 23, 2005
Index to
stories on Social Security Reform
Index to
stories on Social Security Program
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