age annuity, then there would be no occasion for the recomputation, and that section should be stricken out. I am submitting a rewrite of sections 4 and 5, as suggested to the committee, for a simplification of those two sections. Also, Mr. Chairman, I submit for your record a statement by M. O. Lorenz, director of statistics, of the Interstate Commerce Commission, under date of May 11, 1937, which gives the average number of employees, steam-railway companies, the Pullman Co., and express companies; and the charges to operating-expense account 457 (pensions), class I steam railways, for periods indicated, being for the years 1920 to 1936, inclusive. It also gives the amount of charges to operating-expense account-pensions by express companies and charges to operating expenses for pensions and relief by the Pullman Co. for the years 1927 to 1936, inclusive. I offer that for the record. Senator WAGNER. Very well; we will receive it. (The statement referred to is as follows:) INTERSTATE COMMERCE COMMISSION, BUREAU OF STATISTICS, Mr. HERMAN L. EKERN, Hotel Dodge, Washington, D. C. DEAR SIR: In response to your letter of May 8, I am sending herewith a statement showing the average number of employees, steam-railway companies, the Pullman Co., and express companies; and the charges to operating expense account 457 (pensions) by class I steam railways for a series of years. I am also enclosing a statement which shows for the years 1927-36 the amount charged to operating expenses for pensions by express companies reporting to this Commission and the amount charged to operating expenses for pensions and relief by the Pullman Co. I am sending herewith a copy of this Bureau's summary of operating revenues and operating expenses of class I steam railways for the month of December and the 12 months ended with December 1936-35, and copies of wage statistics of class I steam railways for the month of December 1936 and the year 1936. Very truly yours, M. O. LORENZ, P. S.-Number of pensioners not available in the Commission's records. Average number of employees, steam railway companies, the Pullman Co., and express companies; and the charges to operating expense account 457 (pensions), class I steam railways, for periods indicated 1 Figures exclude switching and terminal companies of classes II and III. 2 Data not available. 3 Number of employees as of middle of month. Amount of charges to operating-expense account-Pensions by express companies; and charges to operating expenses for pensions and relief by the Pullman Co. for years 1927-36 Mr. EKERN. There has been submitted in the House, and I take it there will be submitted here, some data or calculations based upon an assumed continued total of annual wages. I just want to direct attention to the fact that that, of course, will not be a fact; the wages will fluctuate with business conditions, with a development or decline of the industry, and with a great many other conditions which may obtain; and it is purely arbitrary. I just wish to submit a statement here which was put into the record by Actuary William Breiby, who appeared for the railroads at the time of the hearing on one of the earlier bills. The print I have is from page 114 of the hearings before a subcommittee of the Interstate Commerce Committee of the United States Senate, Seventy-fourth Congress, first session, on S. 3151, July 11, 15, and 22, 1935. I wish to offer just that part of it beginning with the examples of possible railroad statistics for the years 1934 to 1961, presented on April 25, 1934, by Mr. William Breiby, in his statement before the subcommittee of the Senate Interstate Commerce Committee. I think the chairman is familiar with that statement. Senator WAGNER. Yes. (The statement referred to is as follows:) Examples of "possible" railroad "statistics" for years 1934-61 used as the basis of indicating the load on the railroads if Š. 3231 were to be enacted into law as presented Apr. 25, 1934 [By William Breiby in his statement at the hearings by the subcommittee of the Senate Interstate Com. merce Committee] FIRST EXAMPLE Reproducing class I railroads data reported by the Interstate Commerce Commission for the years 192033, in reverse order for 1934-47 and in the same order for 1948-61 (except for 1948, which are the means of the figures for 1920 and 1921); all adjusted to include data for the switching and terminal and the class II and III railroads $3, 123, 000, 000 4, 661, 000, 000 5,875, 000, 000 $1,479, 000, 000 1,593, 000, 000 2,207, 000, 000 2,687, 000, 000 3,051, 000, 000 2, 977, 000, 000 3,065, 000, 000 3, 103, 000, 000 3, 013, 000, 000 2, 976, 000, 000 3, 164, 000, 000 2,782, 000, 000 2, 913, 000, 000 3,878, 000, 000 3, 395, 000, 000 2,913, 000, 000 2,782, 000, 000 3, 164, 000, 000 2,976,000,000 3, 013, 000, 000 3, 103, 000, 000 3,065, 000, 000 2,977, 000, 000 3,051, 000, 000 2,687, 000, 000 2, 207, 000, 000 1,593, 000, 000 1,479, 000, 000 Mr. EKERN. Mr. Chairman, I think that is all, unless there are some questions. Senator WAGNER. Are there any questions by the members of the committee or by those representing the proponents of the legislation? (There was no response.) Senator WAGNER. Very well; thank you very much, Mr. Ekern. Mr. EKERN. Thank you, Mr. Chairman and members of the committee. And if I may, let me add this thought, please. Senator WAGNER. Yes. Mr. EKERN. I wish to express my gratification to the committee, in appreciation of your patience, and also wish to express the gratification of everybody, I am sure-myself included-for this development wherein we have the railroads now coming in, by their representatives, and agreeing that a pension system of this kind is a desirable and a practical thing and something that is to be supported. I think that such a step marks a great advance. Also, please let me say that the willingness to support this, constitutionally, is something that I appreciate, notwithstanding I am not so sure how effective it is. There is one point that I neglected to mention: The death-benefit provision in itself is a distinct improvement. It adopts the deathbenefit provision, in effect, from the Social Security Act, calculating it at 4 percent on the amount of wages, instead of at 31⁄2 percent, as under the Social Security Act. However, it is decreased by annuity payments; and in that respect it is the same as under the Social Security Act. It takes the place of the death benefit in the present act, which continues to the widow, for 1 year, one-half of the man's pension payments. That one-half of the man's pension payments, continued to the widow, is not subject to any deduction because he has had pension payments; that is an absolute payment to the widow. In fact, that payment is more than the death-benefit payment that will be made under this new provision, for a little over 6 years, without taking into consideration that the payment, under the new proposal, may be reduced by the annuity payments which the employee has had. However, I think that the provision is a very desirable one. If the committee could see fit, it would not do any harm to let the provision in the present case remain in effect at least until the accumulation under the new proposal is greater, so as not to take away from these widows anything which is granted to them under the present act. It is not a very expensive provision, but it may be very disappointing to have it taken away. I think that nobody would seriously object to letting it stand, with that understanding. There are other provisions here, in the way of administrative corrections, which I think very desirable. And if amendments can be made along the lines I have suggested, then I think the legislation is desirable. Mr. Chairman, with your permission I should like to offer several additional articles for the record. The first is entitled "Management and Labor Agree on Rail Employee Pension Plan", appearing in the March 1937 issue of Railroad Data. Senator WAGNER. Very well. (The article referred to is as follows:) MANAGEMENT AND LABOR AGREE ON RAIL EMPLOYEE PENSION PLAN-PRESENT RETIREMENT ACT MUST BE AMENDED AND SUBSTITUTE TAX LAW ENACTED BEFORE PLAN CAN BE PUT INTO EFFECT [From Railroad Data, Mar. 19, 19004] George M. Harrison, chairman, Railway Labor Executives' Association, and J. J. Pelley, president, Association of American Railroads, authorize the following statement: After joint negotiations between representatives of the 21 standard railroad labor unions and railway managements, a complete agreement has been reached in respect to a retirement plan for employees. Before the plan becomes effective, however, it will be necessary for Vongress to pass two acts, one amending the present Railroad Retirement Act, and the other, a substitute for the Railway Tax Act, which was to have expired on February 28, last, but was extended recently until the end of the fiscal year 1938. The negotiations which resulted in the present agreement were inaugurated on January 7, 1937, as a result of a letter from President Roosevelt suggesting that railroad managements and their employees confer in an effort to work out a railroad employee pension plan that would take the place of the existing one and be mutually satisfactory. SUMMARY OF PLAN The principal points in the plan follow: 1. Provides for a total tax of 5 percent of the pay roll, not in excess of $300 for any one month for any employee, to be paid into the United States Treasury. This tax increases gradually to a maximum of 7 percent after 12 years. One-half of the tax will be paid by the railroads and the other half by the employees. The rate in the existing Railway Tax Act was 7 percent, equally divided. 2. All annuities are to be paid out of the United States Treasury. 3. Plan is to be administered by the Railroad Retirement Board as now provided. 4. Method of computing amount of annuity to be paid retired employees is the same under the plan as now incorporated in the Railroad Retirement Act. 5. An employee is eligible to retire voluntarily upon attaining the age of 65 years, but may retire at 60 years of age after completing 30 years of service with a reduction in the annuity at the rate of one-fifteenth for each year he is under 65. 6. An employee can continue to work after attaining 65 years of age, but must continue to pay the tax, although he will not be credited with any service earned by such employment after July 1, 1937. 7. Plan permits retirement of employees because of physical or mental disability after 30 years of service with full annuity privileges. 8. Present pension rolls of the railroads are taken over under the plan. 9. No annuity will be paid to any employee who retires and engages in "regular gainful employment" in some other line of work. 10. Provides for death benefits for a deceased employee's estate. 11. The plan affects approximately 1,500,000 employees of railroads, express companies, sleeping-car companies, and their subsidiaries. Employees of railroad associations and of railroad labor organizations are also included. PLAN IN DETAIL The plan provides for voluntary retirement at 65, this being at the election of the employee. There is no compulsory retirement age in the act, but any employee who continues to work beyond the age of 65 will receive no credit for service after 65. If a man has 30 years of service and has reached the age of 60 he may retire, but in that case there is a cut-back of one-fifteenth for each year the employee is under 65. Persons who are totally disabled are eligible to retire if they have completed 30 years of service. Any man who reaches 65 may retire and secure an annuity based on his years of service even though he is not in railroad service when he reaches the age of 65. No one is entitled to an annuity unless he was in an employment relation on or after August 29, 1935, the enactment date of the act to which the proposed act is amendatory. The amount of the annuity is determined by multiplying the years of service by a certain percentage of the monthly compensation up to $300. This percentage on the compensation, as in the present law, is 2 percent on the first $50; 11⁄2 percent on the next $100; 1 percent on all sums over $150, up to the $300 maxi mum. LENGTH OF SERVICE CONSIDERED The compensation is determined by the average monthly compensation earned by an employee so far as the service is rendered after January 1, 1937. However, the employee is entitled to have 30 years of service considered if he has worked that long. In the case of an employee who has less than 30 years of service after January 1, 1937, there is to be added the years of service in reverse order prior to January 1, 1937, in an amount sufficient to make 30. As to the years of service counted prior to January 1, 1937, the actual earnings are not necessarily taken, but the compensation is that of a test period, which includes the years 1924 to 1931, inclusive, with a provision, however, that if an employee did not work in the test period, or if for any reason that period proves to be unfair, the Railroad Retirement Board may adopt such a basis of compensation as is fair and equitable. |