This is the report of the Railroad Retirement Board on the bill S. 1867, which was introduced by Mr. Hathaway on May 22, 1973. The bill consists of three titles, the first of which is divided into Section 101 of the bill would amend paragraphs (2) and (3) of section 2(a) of the Railroad Retirement Act to extend to male railroad employees the same eligibility conditions for unreduced age annuities as are now available for female employees, that is, eligibility for full retirement annuities at age 60 if they have completed 30 years of service. This provision for unreduced annuities for men would, in accordance with section 108(a) of the bill, be effective only with respect to annuities which first begin to accrue on or after July 1, 1974, and would cease to apply as of the close of December 31, 1974. The purpose of section 102 of the bill is to reduce the railroad retirement tax rate on employees under the Railroad Retirement Tax Act (10.6 percent of taxable compensation) to the tax rate paid by nonrailroad employees for social security purposes (5.85 percent of taxable earnings) and to increase the tax rate on employers under the Tax Act (from 10.6 percent of taxable payroll to 15.35 percent of taxable payroll) to compensate for the reduction in the employee tax rate. This purpose would be accomplished by amending section 3201 of the Internal Revenue Code of 1954 (which levies taxes on employees for railroad retirement purposes) to provide that, effective with respect to compensation paid for service rendered after September 1973, the tax rate on employees thereunder will be equal to the rate of the tax imposed with respect to wages by sections 3101(a) and 3101 (b) of the Code (which levy taxes on employees for social security benefit and medicare purposes, respectively). Section 3221 of the Internal Revenue Code (which levies taxes on employers for railroad retirement purposes) would also be amended so as, in effect, to increase the tax rate on employers, also effective with respect to compensation paid for services rendered after September 30, 1973, by the 4.75 percent by which the employees' railroad retirement tax rate would be reduced. Neither these amendments nor any of the other amendments made by section 102 -- these other amendments would make no substantive changes in the law; the amend ment to section 3211 would merely conform the language of that section, which levies taxes on employee representatives, to the amended language of section 3201 and 3221 -- make any change in the current combined tax rates under the Railroad Retirement Tax Act. The reduction in employee tax rates and the concurrent increase in employer tax rates would, for most employers and employees, be effective with respect to compensation paid for service rendered on or after October 1, 1973. The changes in the tax rates would not, however, become applicable to a limited number of railroads owned by steel companies and to certain dock companies until -3 Honorable Harrison A. Williams, Jr. S. 1867 such time as their current labor contracts expire, or at such earlier time as the parties to those labor contracts agree. Under present law, the 15 percent increase in railroad retirement benefits provided in 1970 by Public Law 91-377, the 10 percent benefit increases provided in 1971 by Public Law 92-46, and the 20 percent benefit increase provided in 1972 by Public Law 92-460 are all due to expire on June 30, 1973. These benefit increases were provided on a temporary basis because, due to the cost of permanent increases of this magnitude, it was believed further consideration had to be given to the nature and extent of the measures necessary to finance the desired benefit levels before such benefit increases could be provided on a permanent basis. Section 103 of the bill would amend the aforementioned public laws to extend the expiration date of the benefit increases to December 31, 1974. In this regard, in accordance with section 107 of the bill, representatives of employees and carriers would be selected within 30 days after the enactment of the bill and would be required to meet at least once a month to consider all matters relating to the restructuring of the railroad retirement system in a manner which will assure the long-term actuarial soundness of the system, taking into account the specific recommendations of the Commission on Railroad Retirement. This group would be required to keep minutes of their meetings, to submit progress reports to Congress every two months, and to submit a final report to Congress not later than March 1, 1974, setting forth their joint recommendations. The report submitted would have to include a draft of a bill suitable for introduction and a copy of the minutes of each meeting held by the group. Sections 104 and 105 of the bil, would provide for increases in railroad retirement benefits (other than annuities computed under the first proviso of Section 3(e) of the Railroad Retirement Act of 1937 which are automatically increased whenever social security benefits are increased) in the period July 1, 1973 through December 31, 1974, if social security benefits should be increased in that period. The amount of any such increase in railroad retirement benefits would be determined through computations made pursuant to the first proviso of Section 3(e) of the Railroad Retirement Act, which is generally referred to as the social security minimum guaranty provision. This provision guarantees that the combined monthly railroad retirement benefits which an individual and a dependent deriving benefits from him will receive under the Railroad Retirement Act and the Social Security Act (based on the individual's earnings record) would be no less than 110 percent of the amount which would have been payable to that family under the Social Security Act on the basis of the -4 Honorable Harrison A. Williams, Jr. S. 1867 individual's combined railroad and nonrailroad earnings if his railroad service after 1936 had been covered under the Social Security Act. In accordance with this guaranty provision, annuities are computed under the social security formulas whenever they produce a higher rate than the regular railroad retirement formulas, and, therefore, annuities payable under the guaranty provision are automatically increased whenever social security benefits are increased. These sections would, with certain exceptions, provide individuals whose railroad retirement annuities are computed under the regular railroad retirement formulas with the same increase they would have received if their annuities had been computed under the guaranty provision with the differences noted in the next paragraph. In no case, however, would a spouse's annuity be increased to an amount in excess of the maximum spouse's annuity provided in the first sentence of Section 2(e) of the Railroad Retirement Act. The spouse maximum provision referred to specifies that the maximum annuity payable under the Railroad Retirement Act to a spouse cannot exceed 110 percent of the maximum possible wife's insurance benefit payable to any wife under the Social Security Act. - As has been noted, there are several exceptions to the general statement that individuals whose annuities are computed under the regular railroad retirement formulas would receive the same increase they would have received if their annuities had been computed under the guaranty provision. These exceptions are: (1) any increases provided by these sections 104 and 105 would be equal to 100 percent, rather than 110 percent, of the amount of the increase the individual would have received under the Social Security Act; (2) only the social security benefits which would have been payable to the annuitant himself if railroad service had been creditable under the Social Security Act are taken into account in determining the amount of any annuity increase generally, in determining the amount of an annuity under the guaranty provision, certain individuals, particularly children of living employees, who are not themselves eligible for railroad retirement benefits must be taken into account, and, therefore, the annuity payable to an employee (and, in some cases, to his spouse) under the guaranty provision may include the amount that would have been payable to his children under the Social Security Act; (3) any social security benefits which the annuitant may actually be receiving would be disregarded in computing the amount of any increase provided by this bill, and, therefore, his railroad retirement annuity increase would not be reduced by the increase he received in his social security benefit; and (4) certain railroad retirement beneficiaries who would not meet the eligibility requirements for benefits under the Social Security Act even if railroad service after 1936 were covered thereunder would be deemed to meet the social security benefit requirements in order to provide an increase in such cases. -5 Honorable Harrison A. Williams, Jr. S. 1867 In computing annuity increases provided by this bill, it would be assumed that the eligibility conditions for benefit entitlement and the proportions of the primary insurance amounts payable at the time of any social security benefit increase were also present in the law as in effect prior to July 1, 1973. Accordingly, the annuity increase in a particular case can be computed, on the basis of the eligibility conditions, etc., in effect at the time of a social security increase, by comparing the social security primary insurance amounts table (contained in section 215 of the Social Security Act) in effect immediately after the benefit increase with the tables in effect on June 30, 1973. The differences between the two primary insurance amounts applicable to a given case would, after any appropriate proportions of primary insurance amounts are applied, be the amount of the increase. This increase would then be reduced by any appropriate age reduction factors provided by the Railroad Retirement Act any social security age reduction factors which would otherwise be applied in making guaranty provision computations would be disregarded. In this regard, it may be noted that, since the Railroad Retirement Act contains no age reduction factors for age annuities payable to widows or widowers who are under age 65, the increases in the annuities of such widows or widowers would not be subject to age reductions under the provisions of this bill despite the fact that age annuities payable to widows and widowers under the Social Security Act are subject to reductions for age if the beneficiaries are under age 65. - Part B Permanent Provisions Subsection (a) of section 120 of the bill would make permanent the provisions of section 101 of the bill, which provide unreduced annuities for men at age 60 with 30 years of service. Section 108(a) of the bill would, without the amendment thereto by section 120 (a), terminate this liberalization in annuity eligibility conditions as of December 31, 1974. Subsections (b), (c), and (d) of section 120 would make permanent the temporary increases in railroad retirement benefits, the expiration date of which was extended to December 31, 1974, by section 103 of the bill. The provisions of the Railroad Retirement Tax Act which levy taxes for railroad retirement purposes on covered employers, employees and employee representatives, would be amended by section 121 of the bill to increase the tax rates by a total of 7-1/2 percent of taxable payroll, effective with respect to compensation paid for services rendered on or after January 1, 1975. The 7-1/2 percent increase would be equally divided between employers and employees 3.75 percent on each; the tax rate on employee representatives, who pay both the employer and the employee shares, would be increased by the full 7-1/2 percent. |