ANNUITY PROVISION INCLUDED

The plan provides for a minimum annuity for persons who have had at least 20 years of service, the minimum being related to the monthly compensation according to a graduated scale of percentages. In no event, however, can the annuity be less than the old-age benefit that the employee would receive under the Social Security Act if his service after December 31, 1936, were included in the term "employment" as defined in the Social Security Act.

The plan provides for a joint and survivor annuity under which, if the employee so elects, he will be paid a part of his normal annuity when he retires, the balance to be used to purchase an annuity for his wife, if she survives him.

Death benefits are provided for persons who were employees after December 31, 1936. Under this provision, if the employee dies, there will be paid to his heirs or estate 4 percent of all wages earned by him up to $300 in any one month after December 31, 1936.

The plan provides that, effective July 1, 1937, all persons on railroad pension rolls as of March 1, 1937, shall come under the retirement plan and thereafter be paid such pensions as the private pension plan of the carrier provided, not, however, in excess of $120 for any one month. Where a retired employee is now receiving a larger pension than $120 the railroad agrees to make up the difference.

The plan, just as the existing act, creates a retirement board of three members to be appointed by the President subject to confirmation of the Senate. Each member receives $10,000 per year and holds office for 5 years. One member shall be appointed by the President upon the nomination of employees and another upon the nomination of the railroads. The other member shall be appointed by the President without suggestions from any of the interested parties. The Retirement Board shall administer the act, pass upon pension applications, certify them to the Treasury, make rules and regulations for the administration of the act, and may call upon the railroads for information contained in railroad records.

All persons subject to the Railroad Retirement Act are excluded from the Federal old-age tax and benefit provisions of the Social Security Act.

The proposed substitute for the present Railway Tax Act would impose an income tax on the wages of employees earned subsequent to December 31, 1936, upon the following basis: 22 percent for the years 1937, 1938, and 1939; 24 percent for the years 1940, 1941, and 1942; 3 percent, for the years 1943, 1944, and 1945; 34 percent for the years 1946, 1947, and 1948; 31⁄2 percent after December 31, 1948.

In

The proposed act also provides for an excise tax on the employers payable on amounts paid to employees subsequent to December 31, 1936, upon the same percentages and with the same step-up as applies to the wages of employees. neither case is an amount in excess of $300 per month to be taken into consideration.

TO REPAY PREVIOUS DEDUCTIONS

The proposed substitute tax act would repeal the present Railway Tax Act, and under the agreement all money held by the railroads in the form of deductions from the wages of employees prior to January 1, 1937, would be returned to the employees and all amounts set aside in any way by the railroads for the payment of their excise taxes would be abated. As to the period subsequent to December 31, 1936, the railroads would retain and pay into the Treasury 221⁄2 percent on the pay roll, return 1 percent to the employees, and pay into the Treasury their own 21⁄2 percent excise tax upon the pay roll.

It was agreed that litigation originally instituted by the railroads now pending in the Circuit Court of Appeals for the District of Columbia involving the validity of the Railroad Retirement Act and the Railroad Tax Act shall, subject to the approval of the Attorney General, be disposed of in such manner as to carry out the purposes of this agreement.

The representatives of the railway labor organizations and the railroads who conducted the negotiations follow:

For the employees: B. M. Jewell, railway employees department, American Federation of Labor; J. A. Phillips, Order of Railway Conductors; E. J. Manion, Order of Railway Telegraphers; James J. Delaney, president, Masters, Mates, and Pilots of America; George M. Harrison, chairman, Railway Labor Executives' Association.

For the railroads: M. W. Clement, president, Pennsylvania Railroad; C. R. Gray, president, Union Pacific System; J. B. Hill, president, Louisville & Nashville Railroad; C. E. Denney, president, Erie Railroad; H. A. Scandrett, trustee, Chicago, Milwaukee, St. Paul & Pacific Railroad; L. A. Downs, president, Illinois Central System; J. J. Pelley, president, Association of American Railroads.

Mr. EKERN. Also I should like to offer an editorial signed by J. A. Phillips, president of the Order of Railway Conductors of America. This editorial appeared in the May 1937 issue of the Railway Conductor, which is the official publication of the Order of Railway Conductors of America, and is entitled "Railroad Retirement Legislation." Senator WAGNER. Very well.

(The article referred to is as follows:)

RAILROAD RETIREMENT LEGISLATION

Many of our members are insisting upon amendments that will produce a perfect pension program. When the negotiations were started between the Railway Labor Executives' Association and the railroads early in 1937-at the suggestion of President Roosevelt-the subcommittee of labor executives proposed a program that embodied practically all of the desirable features now being asked for by our members, but when the actuaries analyzed our proposition they found that it would require a tax of 12 percent to produce necessary funds. To this the railroads objected. It then became necessary for the subcommittee to negotiate amendments which would come within the cost limitations which the railroads would be willing to meet, and the amendments which were agreed upon are the result of such negotiation. Subsequent consideration by actuaries caused the negotiating parties to agree to an increase of one-quarter of 1 percent for both the employers and employees.

Congress is now being flooded with letters from railroad employees protesting against the adoption of the agreed-upon amendments, and this is having the effect of so involving the program as to make it extremely difficult to accomplish anything at this session of Congress. It is our opinion that railroad employees would be best served by permitting the proposed legislation to go through and thereafter, year by year, make such improvements as time and experience suggest until an adequate and satisfactory retirement law is developed. It is certain that legislation that will involve the cost of 10 or 12 percent cannot be expected to receive favorable consideration at this time; in fact, the railroads have definitely stated their opposition to further increases in the tax percentages. It appears, therefore, that they will strenuously oppose any pension program involving higher tax percentages than those incorporated in the bill now before Congress.

J. A. PHILLIPS, President.

Mr. EKERN. And, finally, Senators, I leave with you for your consideration an article under the heading, "Here's What the New Railroad Retirement Bill Provides; 1,500,000 Workers Will Be Brought Into Pension System." This article appears in the issue of Tuesday, March 23, 1937, of Labor, a national weekly newspaper.

Senator WAGNER. Very well. And thank you very much, sir.

HERE'S WHAT THE NEW RAILROAD RETIREMENT BILL PROVIDES; 1,500,000 WORKERS WILL BE BROUGHT INTO PENSION SYSTEM

HOW FUNDS ARE RAISED, WHO WILL GET PENSIONS, HOW PAYMENTS ARE COMPUTED, BENEFITS TO DISABLED AND WIDOWS AND OTHER QUESTIONS VITALLY IMPORTANT TO EMPLOYEES EXPLAINED IN CAREFUL ANALYSIS OF PROPOSED LEGISLATION

Owing the the widespread interest in the railroad retirement question, Labor is publishing a summary of the new pension legislation which will be introduced in Congress within a few days. It is in two separate bills-one setting up the retirement system and the other providing for a tax upon railroad pay rolls and employees' wages.

Speedy passage is expected. The new legislation has been agreed to by the Railway Labor Executives' Association and the Association of American Railroads. The carriers have agreed not to contest the legislation in any court.

TAX STARTS AT 22 PERCENT

The new taxing provisions provide for a 21⁄2 percent assessment on employees' earnings and a similar amount on the carriers' pay rolls beginning January 1, 1937, for the first 3 years, 24 percent for the next 3, 3 percent for the next 3, 34 percent for the next 3, and 3%1⁄2 percent thereafter.

The United States Government will collect the tax, pay the pensions, and be treasurer of the retirement fund. This is a guarantee that the money will be available to the workers when they retire. Depressions may come and go, and banks may fail, but the railroad workers' pension money will be safe as long as the Government endures.

Administration of the pension system will be by a board of three, appointed by the President. One member is to be chosen from a list of names submitted by the standard railroad labor organizations. Another member will be picked from a list furnished by the carriers. The third member will represent the Government.

A board of this nature is now functioning under the present retirement law and is paying pensions to about 3,500 retired rail workers.

RETIREMENT PROVISIONS

Under the new bill, the right to retire on a pension is granted not only to actual railroad workers, but to employees of rail labor organizations and of business or service associations maintained by two or more carriers. The latter include railroad associations, traffic agencies, and tariff bureaus.

Persons 65 years of age or over can retire on full pensions, but if they continue working after that age their annuities will not be increased or decreased when they finally do leave the service. However, an employee who stays in service after his sixty-fifth birthday will be required to continue paying the tax as long as he keeps on working.

He will receive no credit, however, for years of service for such employment after July 1, 1937.

VOLUNTARY RETIREMENT AT 60

Employees with 30 or more years of service may retire voluntarily at 60 years of age, but the annuity due them will be decreased one-fifteenth for each year the employee is under 65 when he retires.

Total and permanently disabled employees, who have had 30 or more years of service, may be retired at any age.

Annuities will be computed by multiplying a person's years of service by 2 percent of the first $50 of his monthly earnings, 11⁄2 percent of the next $150, and 1 percent of the next $150. Three hundred dollars a month is the maximum on which pensions can be computed.

HOW TO COMPUTE PENSIONS

For instance, an employee 65 years of age and with 30 years' service who has been earning $170 a month can compute his pension in this manner:

Multiply this $2.70 by 30 and the result is $81-the monthly pension this employee will receive.

30 YEARS MAXIMUM

Where an employee computes his years of service by using the length of time worked both before and after January 1, 1937, service in excess of 30 years is not allowed in determining the amount of his pension. For example, a man who began railroading in 1900 and retires at 65 in 1940 will have had actually 40 years of service. But 30 years is, in his case, the maximum that can be used in computing his pension.

This 30-year limitation is eliminated for those who will put in more than 30 years of service after January 1, 1937.

In the case of a 20-year-old man starting his railroad career on January 1, 1937, and whose monthly wages would average $170, he would be allowed to use his entire service of 45 years in computing his pension when he retired at 65 years of age. This would give him a pension of $121.50 a month-$40.50 more than it would be under the 30-year limitation plan.

BENEFITS YOUNGER EMPLOYEES

Abolishing the 30-year limitation in figuring the years of service after January 1, 1937, will increase pensions which employees coming into the industry now will receive, if they have worked more than 30 years when they retire at 65.

The reason, of course, that larger pensions can be paid in those cases is because the pensioner will have paid the tax over a much longer period of years than the man who retires in 1938 or within the next few years.

In other words, the man earning $170 a month and with 45 years of service, who retires January 1, 1938, will be given credit for only 30 years, making his pension $81 a month. But all he will have paid in total tax will be $75. His first month's pension will be $6 more than the total of all that the tax cost him.

PAYS MORE, GETS MORE

The man earning the same wages who retires with 45 years of service dating from January 1, 1937, will get a pension of $121.50 a month, but by that time he will have paid $2,587.20 in taxes.

Under the new bill, men who were in railroad service August 29, 1935-including those on sick leave or furlough, but still on senority lists-can use both prior and future service, up to 30 years, in computing their pensions. But railroad men who have quit or had been discharged and were definitely out of the railroad industry on August 29, 1935, can get credit for service only after January 1, 1937, in cases where they are again working for a railroad, or if they come back into the industry at any future time.

BREAK FOR LOW PAID

The new bill will, for the first time, provide minimum pensions-an important "break" for those in the miserably paid class.

The minimum for an employee retiring at 65 with 20 years of service will be $40 a month if his monthly wages have averaged $50 or more. If less than $50, but not under $20, the pension shall be 80 percent of his average monthly earnings, but not less than $20. If his monthly earnings have been only $20 or less, he will be retired on full wages.

If any retired employee goes to work in "regular gainful employment", his pension is to be stopped as long as he continues receiving pay on that job. This provision is intended to prevent wage levels from being depressed by pensioners taking jobs under the prevailing rate. The Railroad Retirement Board will interpret what constitutes "regular gainful employment" and a liberal interpretation is expected.

DEATH BENEFITS

The widow or estate of any employee who dies after he has started paying the tax, but before he has been retired, will receive a death benefit amounting to 4 percent of the total wages he received after January 1, 1937, up to $300 in any month.

An employee who wishes to provide for his wife in the event of his death after his retirement may, at least 5 years before he goes on the pension rolls, arrange for a survivor annuity. Under this arrangement, the pensioner would receive a reduced annuity while he lived, and upon his death the widow would get a monthly pension for the rest of her life. The amount she will receive depends upon how much her husband was willing to surrender of his pension while he lived.

WHAT WIDOW GETS

What the widow would get would depend upon the amount of reduction the husband agreed to take in his monthly pension while he lived.

The amounts which either the pensioner or his widow will receive under the survivor-annuity plan are to be governed by their respective ages and other actuarial factors as determined by the Retirement Board.

Under the new bill, persons on the pension rolls of carriers will be blanketed under the Railroad Retirement Act with benefits equal to those which had been granted by the employer. Pensions up to $120 a month will be paid out of Government funds. In the few cases where private pensioners are now getting more than $120 the carriers agree to make up the difference.

DEDUCTIONS RESTORED

An important feature of that clause provides that private pensioners who had their pensions cut by carriers during the depression are, when they are brought under the Railroad Retirement Act, to have this reduction restored to what it was when they retired.

The new bill takes the railroads and other employers subject to the retirement law completely out from the Federal Social Security Act, but provides that in no event shall a retired employe receive less than he would get if retired under the Security Act.

This provision will clear up much confusion which has existed as to whether or not railroad workers came under the Social Security Act and to what extent it covered them.

IMPORTANT CHANGES

The new bill contains a number of important changes from the present Railroad Retirement Act. Establishment of minimum pensions is a new and highly desirable feature. Wiping out the 30-year limitation in computing years of service performed after January 1, 1937, will have the effect of increasing pensions for those who work more than 30 years past that date. The death benefit provision is entirely new.

Under the present law the widow of a man dying a few days before his retirement would only receive one-half of his pension for 1 year. The new bill gives her 4 percent of all the wages he earned between January 1, 1937, and the time of his death.

Another change which will be of interest to many is the removal of any penalty for men not retiring when they reach 65.

PENALTY REMOVED

The present law provides that men who do not retire when they reach 65 shall have their pensions reduced one-fifteenth for each year they stay in service beyond then. The only exception is where a man makes a written agreement with the carrier to continue working until he is 70.

The new bill takes care of approximately 5,000 old employees who, while still on carriers' serniority lists, were out of service because of illness or disability when the present law was passed in August 1935.

Under the present law they cannot qualify for pensions unless they are "ready for service." And, of course, their sickness or disbaility makes it impossible for them to meet that condition. The new bill is phrased so they can, upon its passage immediately qualify for pensions.

STATEMENT OF W. W. ROYSTER, PRESIDENT OF THE RAILROAD EMPLOYEE'S PENSION ASSOCIATION, CHICAGO, ILL.

Senator WAGNER. Mr. Royster, we shall be glad to hear from you

now.

Mr. ROYSTER. Yes, sir. For the purpose of identifying myself for the record, I am W. W. Royster, president of the Railroad Employees' National Pension Association, Chicago, Ill. I was chairman of the Minnesota State Legislative Board of the Brotherhood of Locomotive Engineers for 20 years, 1913-32; and chairman of the Four Brotherhoods State Legislative Board of Minnesota, comprising the Order of Railway Conductors, Brotherhood of Railroad Trainmen, Brotherhood of Locomotive Firemen and Enginemen, and the Brotherhood of Locomotive Engineers, for 16 years, 1915–31. I am a member of the Brotherhood of Locomotive Engineers and have been for more than 30 years, and previously was a member of the Brotherhood of Locomotive Firemen. I do not appear here as a representative of any of the four brotherhoods.

During the first months of 1929, when I was an employee representative of the Brotherhood of Locomotive Engineers, I devised a plan of retirement pensions for railroad, express- and sleeping-car