WASHINGTON-- President Bush's advisers have settled on a proposal for structuring the personal accounts they hope to create in Social Security, and the accounts would resemble those of many company-sponsored retirement plans, with just a handful of investment options.
Under a plan advisers said this week they had recommended to Bush, the personal accounts filled with funds diverted from Social Security would be specifically modeled on the Thrift Savings Plan for federal employees, which is similar to a 401(k) offered by private companies. Both defer taxes on retirement savings.
The idea would be to minimize risk for investors at the outset by offering as few as three to five diversified funds. Individuals who chose to set up the accounts would not be allowed to invest in single companies.
In the Thrift Savings Plan, federal employees have the option to invest in five kinds of mutual funds: government bonds, corporate bonds, large company stocks indexed to Standard & Poor's 500, smaller company stocks that are also indexed, and international stocks.
Under Social Security, workers would be enrolled by default in a ''life cycle" account, in which investments become more conservative as investors age, if they do not choose one of the other options, according to two officials speaking on condition of anonymity. It would begin with investments that have greater potential for both risk and reward, and shift to safer bonds as a worker ages.
The government would be responsible for keeping track of how much money is in each worker's account and transferring the lump sums to a financial services company to invest, a mechanism aimed at keeping administrative fees low, officials said.
Under this model, once a worker's account reached a certain amount, he or she could choose from a broader range of investment options. Any number of mutual funds could be approved for investment at that stage.
Bush hopes to let younger workers divert a portion of their Social Security taxes into personal retirement accounts that are expected, based on historic returns, to be more profitable than traditional government bonds because they could be invested in the stock market.
Bigger questions about changes in Social Security -- such as how large the private accounts should be and how guaranteed benefits would be affected -- have yet to be resolved, officials said. But to keep the system solvent, the personal accounts are nearly certain to be accompanied by significant cuts in the basic, guaranteed Social Security benefit. And it will cost as much as $2 trillion over a decade to move to the new system.
Meanwhile, Senate Democrats lashed out yesterday against Bush's plan and accused his administration of improperly using the Social Security Administration to promote it.
Two Social Security employees told the Democratic Policy Committee that they objected to internal agency documents that direct employees to talk about the system's problems and the need for overhauls.
''That is a political message, and it's not my job as an agency employee to project a political message," said Debbie Fredericksen of the Minneapolis field office, who is a union representative.
Later yesterday, Bush met privately with congressional Republicans at a retreat in West Virginia to discuss Social Security and other issues.
Most Senate Democrats have said they oppose carving private accounts out of the existing system. They held the session yesterday to underscore their opposition to the Bush plan and to what they say is the administration's improper use of a government agency.
''These messages serve no other purpose than to sear the idea of crisis into the public's mind," said Senator Frank Lautenberg, Democrat of New Jersey.
The agency's communications plan directs workers to spread this message: ''In order for Social Security to be there for future generations, necessary reforms must take place."
Talking points distributed internally reflect Bush's political messages about Social Security and the need for personal accounts. They include Bush's principles for overhauls, such as that ''modernization must include individually controlled, voluntary personal retirement accounts to augment Social Security."
Mailings to Americans detailing the benefits they can expect to receive also warn that ''the Social Security system is facing serious financial problems, and action is needed soon to make sure that the system is sound."
The agency's website and customer service telephone lines push the need to ''modernize and reform" the system, saying the future shortfall is ''massive and growing."
''We feel that this is a gross misuse and waste of government funds and government personnel," said Steve Kofahl, a claims representative from Seattle and also a union representative.
White House spokeswoman Claire Buchan responded that the agency's actions were appropriate. ''The Social Security Administration plays an important role in educating the public . . . and we would certainly expect they would continue to play that role," she said.
At the session yesterday, James Roosevelt Jr., grandson of Franklin D. Roosevelt, who signed the Social Security Act in 1935, objected to the plan. President Roosevelt ''was adamant that Social Security was an insurance program . . . not an investment plan," James Roosevelt said.