Republicans from the House and Senate unveiled their proposal last week for a “first step” toward the private accounts for Social Security advocated by the White House.
At a press conference in the Capitol, House Ways and Means Social Security subcommittee chairman Jim McCrery, R-La., explained his proposal, the Growing Real Ownership for Workers, or GROW Accounts Act, along with subcommittee members Clay Shaw, R-Fla., Sam Johnson, R-Texas, and Paul Ryan, R-Wis.
Shaw said that the bill likely would be folded into a broader retirement bill, which he said would “hopefully” be taken up by the House “before the July 4th recess, and almost certainly by the August recess.”
That is important for insurers, who want to use the Social Security bill as a vehicle for inclusion of provisions that would allow them to sell new products. These include something dubbed “the paycheck for life,” which would provide retirees up to $20,000 tax-free through an annuity that provided them with a monthly payout after retirement.
Another provision would allow for inside buildup in long term care products and allow owners of annuities to switch their inside buildup into an LTC, among other products. Another proposed provision calls for automatic signup in a 401(k) plan upon employment.
Under the bill as introduced by the four Republicans, Social Security private accounts would be created for all workers under the age of 55, unless they choose not to participate. The Social Security surplus then would be apportioned to these accounts, averaging to approximately 2% of payroll tax per individual, and invested in no-risk, marketable Treasury securities. These Treasury bonds, McCrery stressed, “will have their names on them,” and can be inherited should the workers die. Upon retirement, the account balance would be used to help fund the worker’s Social Security benefit. The accounts will be managed by an independent board established under the legislation, which also would be charged with submitting a plan to Congress in January 2009 that would allow workers to invest their accounts in other, low-risk options.
“This bill will provide future retirees with fully inheritable Social Security accounts that can’t be spent by Congress, ensuring that taxes paid into Social Security are used for Social Security,” said McCrery.
Additionally, Shaw challenged Democrats to support the measure, “if they have any desire at all to address the problems with Social Security,” a theme that was echoed by others.