- Individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.
- The remaining 6.2 percentage points of payroll taxes would be used to pay transition costs and to fund disability and survivors’ benefits.
- Workers who chose the individual account option would receive a "recognition bond" based on the accrued value of their lifetimeto- date benefits. Those bonds, redeemable at the worker’s retirement, would be fully tradable in secondary markets.
- Those who wished to remain in the traditional Social Security system would be free to do so, accepting a level of benefits payable with the current level of revenue.