are worth about 8 times as much as the employees contributions with interest. When we are dealing with such relationships between benefits and contributions, the question of cost distribution among sub groups surely becomes academic.

3. Real nature of proposal.—The request for additional social security funds is presented in the form of an amendment to the financial interchange of the Railroad Retirement Act. The implication is that somehow we are here dealing with a financial interchange item which has hitherto been overlooked. Actually, there is no connection whatsoever between the funds asked for and the principle on which the financial interchange operates. The stated purpose of the interchange is to put social security in the same position as if railroad employment had always been covered under its program. Any transaction stemming from a different consideration is therefore not related to the financial interchange. Administratively it might be convenient to utilize the financial interchange records for some other projects but this does not make that project a part of the interchange. I submit that once the request for additional social security funds is removed from the domain of the financial interchange, it will become clear that we are really dealing here with a request for a subsidy. In this connection, it should be noted that the question of a subsidy for the railroad retirement system had been considered by the Commission on Railroad Retirement but answered in the negative.

CONCLUSION

As the former chief actuary of the Railroad Retirement Board, I am acutely aware of the financial difficulties of the railroad retirement system and of the need for prompt remedial action in the form of additional income or reduction in expenditures or a combination of the two. I also realize that the disapproval of the request for additional social security funds would remove one of the pillars of the joint labor-management plan for putting the railroad retirement system on a nearly sound actuarial basis. However, I am firmly convinced that there are other solutions to the problems the railroad retirement system is faced with. Perhaps the solution lies in a different approach which would be formulated by Congress itself pursuant to the tentative commitment contained in the railroad retirement amendments of 1973.

STATEMENT OF JOHN K. MASTEN, ELMHURST, N.Y.

My name is John K. Masten, single, recently retired from the railroad industry, having maintained a company connection since 1927. No work was performed under the Social Security Act. Accordingly, the viewpoint is more basic to the Railroader himself, the one to whom the Act was initially and primarily directed--the person who performed the work and footed the bill of railroad retirement taxes. It becomes imperative to reason how the career or long term worker and retiree has fared and will fare. Reconsider, for example,

The difference a day makes.

Beginning Jan. 1, 1975 about 1,000,000 Railroad Retirement beneficiaries will not receive an upward adjustment of between $23 and $47, nor will they receive any substitute markup in its place that can be determined, as I presently read the Bill, as I have discussed it with others and from what the hearings have developed.

Beginning that same date, new retirees will receive such an extra benefit, under sections 3(c) and 16 of the proposed Act even though they may retire with 5 less years of work and 5 less years of double taxation. ((These "after" but not "before" benefits will relate to a years-of-service relationship on the one hand and elimination of a reduction from the regular annuity (based on a calculated average) because of freezing the carried over supplementary annuity provided in Sec. 3 (e) of the Bill.)).

But no such compensating long service amounts or consideration has been found to those on the rolls the day before and thereon back, whether they be widows, survivors, the disabled, or just the plain old service employes who paid double taxes to age 65 or beyond. Neither have I found any parallel provision to halt the erosion of the regular annuity under the old 3(a) (2) reduction consistent with the new Sec. 16.

The newly proposed Act may be heralded by its proponents as the greatest milestone in the history of the Railroad Retirement Acts. But, to the best of my

knowledge, it will be the first time in the history of the Act that upward adjustments were keyed exclusively to the happenstance date of the future while being denied to beneficiaries already on the rolls. More than that, one's benefit amount hinges on that uncontrollable moment in time that represented a date of birth 65 years ago, in such a way that those who reached that age became boxed in, into situations of guaranteed loss of supplementary benefits no matter how they turned. It developed that it was predetermined in the Bill that the worker of age 65, having, for example, an early 1974 birthday, was slated to lose either the old supplementary annuity, if he overstaid his deadline date, or would lose the new supplementary annuity (in Sec. 3(c)) if he met the deadline and retired. Since the age 60 employe was not and is not confronted with a deadline for 5 years, he becomes guaranteed both supplemental annuities. Plainly, it is age discrimination not consistent with either the ideals or provisions of the older Act. Is it conceivable that it could be approved without amendment, or that it would be constitutional if it were?

The repression of comparable benefits to those on the rolls could become the new precedent, the new vogue to feed upon itself, the new Act to be studied and emulated, the new way to circumvent debt or responsibility, and when still another Act comes forth, the then new traditional way to defeat each successive generation in its turn, so that labor never really wins. It does not really have to be this way.

Beginning Jan. 1, 1975, the Railroad Retirement Board must surely become swamped with questions from beneficiaries on the rolls should such oversights remain. Ever greater segments of this million people will ask why they alone have been excluded from the receipt of upward adjustments. Like the average working person, the senior citizen thinks and reasons in terms of comparable amounts. Technical jargon neither satisfies nor subdues the one short changed. Only those who have been in a complaint receiving position can comprehend the extent to which people often vent their wrath upon the innocent in the line of fire, and the greater the plight, the greater the reaction and fury. Realistically, no answers can satisfy or suffice. At best, the Board may endeavor to explain, not to justify, the law, and it becomes their burden to carry it out.

The reference point to this million under the Railroad Retirement Act becomes not those who pieced it together, but the Senate and Congress should they approve its present form. Moral rather than legal persuasion is needed.

The nearest parallel in the old Act, to that of the new Sec. 3 (c), (3(c) is sometimes referred to as the grandfather's clause, which is really a second supplementary annuity) was that of Public Law 89-699, under H.R. 17285, Oct. 30, 1966. In effect, it provided a 7% increase in the basic annuity, while at the same time reducing the generally same amount (by a 6.55% reciprocal) to those who would thereafter receive a supplementary annuity. In other words, the "before" people got the 7%, the "after" people from $45 to $70, less the reduction. The new "grandfather clause" would net about the same amount of money since there is no reduction from the regular annuity. But by circumventing the 1966 precedent to increase that basic annuity, it excludes the 1,000,000 beneficiaries on the rolls. This exclusion is not merely unprecedented, it is crucial.

So conscious of this type of situation were the authors, the Senate and the Congress in the 1966 Act that it is repeated not only in the introductory remarks of the Congressional Record, but elsewhere, that great care was being taken to prevent "discrimination against . . . annuitants who did not receive an increase, and . . . had the longest careers in the railroad industry." (e.g. 89th Congress, Vol. 3, 1966 of the U.S. Code).

But now it is proposed in the Bill that the opposite should become law, and not only that those with the lesser careers obtain equal consideration, but that they alone should reap the entire double supplementary harvest, to the exclusion of former beneficiaries. Have I misinterpreted the Bill? Is there something I've missed? My hopes became dimmed with each and every search and review.

Chairman James L. Cowan of the Railroad Retirement Board in his testimony before the House Committee on Interstate and Foreign Commerce in a July 23, 1974 statement, made merely in factual terms, said "Beneficiaries on the rolls would have the benefit amounts they currently receive . . ."

The new sections 201 and 202 should not be misconstrued. It is not seen that any long term service retiree having over 30 years of service since 1936 is helped one iota, due to exclusion under 3 (b) (1) and 3(b) (2) of the Act of 1937. Again, in large degree it protects the windfall provision of dual benefits and does not provide recompense or representation for the longer years of higher taxation, served by the railroad worker.

There is serious social significance to what the distinction, between the "before" and "after" people, may portend for the future. Practically every management/labor team in the nation will study this latest of Acts for the lessons and acceptable guidelines it may provide in order to chart their own course. Are these to reveal allowable methods for greater discrimination; or a greater sense of social responsibility? The Act is controlled SOCIAL legislation on top of negotiated agreement and its impact is national.

At the very time the government has embarked on a new Pension Benefit Guarantee Corp. to be formed under the law as a non-discriminatory and protective device for private pensions, the newly proposed 3(c) may fan the flames of discrimination (if not amended) beyond all previous scope, and beyond even the previous windfall provisions which have almost led the Act in the direction of destruction. It is not necessary, through discrimination, to encourage the railroad's most experienced employes to quit, or the union's dues payers to go. It is the mutual road to defeat. It is not necessary to pay Sec. 3(c) benefits to only the one's who least earned them.

What I am proposing is not a major overhall of a generally good Bill but a reworking of some of its sections. For example, the following proposed amendment would be more reasonable in solving the problem of equity, while the problem of cost would involve recomputing the stated benefits.

Proposed amendment to Sec. 3 (c), page 40, line 10, strike out "1974" and insert "1936"

Or, as an alternative, an across the board increase and reduction formula could again be employed parallel to that of the amendment of 1966, hereinbefore referred to. (Public Law 89-699)

I wish to thank many of those who gave me their time and particularly Mr. Menger on the Professional Staff of Congressman Staggers for acquainting me with certain hard facts to be wrestled with in the matter of obtaining added or corrective benefits for those discriminated against. Such amendments must be financed. Still, I feel that where an Act or an amendment or Bill discriminates, its financing was assumed and if the financing cannot be arranged to correct the matter, the the Act should be adjusted within the framework of its finances. I also wish to thank him for contacting the Railroad Retirement Board in Chicago and obtaining a favorable legal opinion from the Board with respect to the problem posed in my proposed Sec. 213 attached amendment, to prevent the combination of three benefits from becoming less than two, a situation to which the New York Board lacked a solution. Although this situation triggered research into the entire Act, I feel that the Sec. 3(a)(2) of the Act of 1937 was grossly unjust and unreasonable as written and that it should never be too late to amend it. I believe, in this respect, that the true and reasonable correction and remedy to the ever growing flaw involved, lies in the proposed amendment 1 submitted under Sec. 606 and that funding should somehow be negotiated.

I appreciate also, the interest of Mr. C. L. Dennis and Mr. Benjamin who agreed to review the initial nine proposed amendments, of which some were alternatives, and reply to them. I have included these, along with explanation as to why they are needed, in a second section of this submission.

I appreciate the urgency of the Bill and the difficult position of the Senate and Congress in its desire to represent railroad people.

I specially want to thank Congressman Rosenthal for the research materials so vital to any study of the RRR Act.

And most welcome was a word of encouragement from Senator Church. It is generally agreed that the Railroad Retirement Act was remarkable pioneer material. It needs special review to keep it on course. It seems inconceivable that the new Bill must stand or fall without amendment. Because of other flaws and inequities in the Act of 1937, which may otherwise become perpetuated in carryovers, it is my request that the additional nine proposed amendments and explanations attached, be made a part of this statement for consideration and re-working.

Senior citizens and retirees look to their representatives with appreciation for whatever can be accomplished in their behalf.

[Note: Attachments referred to may be found in the committee's files.]

[Whereupon, at 12:20 p.m., the committee adjourned.]