Legislation introduced today would require workers under age 55 to put aside a percentage of earnings into individual accounts. Three percent of an employee's payroll taxes would have to be put aside for the first $10,000 of their wages, and 2% of all earnings between $10,000 and the wage cap, currently $90,000 for 2005. That would be a maximum of $1,900 for workers earning $90,000 in 2005. Workers with income of up to $30,000 would receive a 50% match from the government for their contributions. The legislation intends to reduce Social Security cash shortfalls over the next 75 yeas to $3 trillion, from $22 trillion, without increasing payroll taxes or decreased benefits because of an expected increase in returns.
The legislation would index Social Security benefits to the consumer price index, instead of the growth in wages. Workers would be able to invest their individual accounts in a stock index fund, a bond index fund or a Treasury securities fund, along the lines of investments offered to federal workers participating in the Thrift Savings Plan. Workers who accumulate $7,500 in their individual accounts would be allowed to invest their balances with outside investment managers approved by the SEC to offer broad-based diversified investment funds.
Reps. Jim Kolbe, R-Ariz., and Allen Boyd, D-Fla., introduced the legislation.