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of service based on an average monthly compensation of $300, and a comparison of the combined benefits under private pension and social security plans for employees in certain major companies. I think there are 25 of them such as General Electric, Cities Service, Standard Oil of Indiana, Aluminum Co. of America, Firestone, Ford, General Motors, Amalgamated Clothing Workers, and others which I would like to submit to be copied into the record.

Senator MORSE. The data will be received and copied in the record at this point.

(The compilation follows:)

Examples of monthly amounts including OASI payable to workers retiring in

January 1959, at age 65 after 30 years of service based on $300 average monthly wage for selected private pension plans

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NOTE.-Amounts reflect provisions of plans as of February 1958, except for Ford Motor Co. and General Motors Corp.which reflect revised provision under new contracts negotiated in fall of 1958. OASI amounts are those payable under the Social Security Act, as amended Aug. 28, 1958, equal to $105 per month for employee, and $52.50 for wife.

Senator CLARK. Mr. Loomis, referring to your formal statement and table V, do I understand that the table you have just put in the record would characterize certain special other employers and take them out of this third column which appears in table V and give us comparable figures for these industries that you have just mentioned ?

Mr. LOOMIS. We are not able to show satisfactory figures as to these companies. We are able to compare the benefits. We are not able to get satisfactory figures as to the costs.

When you come to the private pension plans, the requirements of continuous service and things of that sort are very much different than they are for railroad retirement and social security. And we have not been able to get satisfactory figures on the cost to the companies. We are able to compare the benefits.

Senator CLARK. You don't think that there is any rough relationship between the benefits and the costs, because the conditions of employment are so greatly different that the committee would not be justified in making any basic assumption that the benefit to an automobile worker or steel worker under a pension plan would cost something like a similar benefit. Mr. LOOMIS. I simply don't know how to get it.

When it comes to the unemployment side I do offer some comment, but we do not have any basis for any complete comparison.

According to information supplied us, of our work force of 51 million in nonagricultural employment, only 2 million are covered by supplemental unemployment plans. The largest one that we know of that we can get anything on is General Motors and United States Steel. And both of those show in their contracts average cost of about 3 cents an hour above their payment under the State unemployment plan.

Senator CLARK. I am not sure that I understood it. It may not be relevant. Would it be of interest, Mr. Chairman, to have comparable figures for United States Steel and General Motors with respect both to benefits and costs? As I recall, the brotherhood made rather a point of the fact that in other industries sometimes there were pension plans and some with unemployment benefits which were more favorable to the employees than those in the railroads.

Senator MORSE. It would be helpful to have such figures, I think. Would the witness supply it?

Mr. LOOMIS. I would say that the figures on this statement can be readily verified with the Bureau of Labor Statistics. That is the source for it.

Senator MORSE. Let the record show that in the discussion with the staff the material that Senator Clark has asked for should be obtained by the committee and made a part of the record so that we will have it available.


BENEFITS UNDER THE SOCIAL SECURITY ACT (Prepared in connection with the hearings on proposed changes in the Railroad

Retirement System)

The magazine Business Week of January 31, 1959, contains, beginning on page 88, a special report on private pension plans supplementing monthly benefits under the Social Security Act. The following is quoted from pages 91 and 92:

New slant.-To the worker, private pensions have taken on new meaning. They're no longer considered a gift bestowed by an employer on his faithful employee, but rather a sort of deferred wage which a worker has earned by his sweat and labor. At the same time, pensions are losing some of their potency as a chain that locks workers to their jobs, and may well turn into a mechanism for giving employees greater job mobility.

“More than that, pension funds often represent for an employee the difference between dread of retirement and eager anticipation, the difference between looking forward to a retirement home in Florida, or scraping by on social security alone.

“Already 16.4 million workers, a quarter of the total work force, are covered by private plans; by 1970, the proportion will be close to one out of three. Ultimately, this means a big new class of retired workers, with potent purchasing power and political voice.

"The dazzling growth of pension plans is also evidence of a management turnabout. Management has accepted—sometimes gracefully, sometimes not—the concept that it is obligated to care for its employees, not only during their working careers, but ever after.

"Burden.-For employers, the impact of this change is double-edged. On one side, the most obvious side, pension funds represent a big new bite out of the company till—anywhere from 5 percent to 10 percent of payroll—as well as a hefty long-term obligation for the future. On an individual company basis, the cost is steep. General Electric's pension contributions in 1957 were $73 million. Collectively, pension contributions in 1957 totaled $4.5 billion, with industry picking up close to 85 percent of the tab. By 1965, as Vito Natrella, of the Securities and Exchange Commission calculates it, the total annual figure will reach $6 billion. * * * American Telephone & Telegraph Co.'s pension kitty now totals $2.8 billion, bigger than the combined assets of a dozen mutual funds, more than the assets of all but a handful of American corporations. United States Steel's fund has over $1 billion."

The following table was prepared by the staff of the Chief Actuary of the Social Security Administration and was brought up to date by the Chief Actuary of the Railroad Retirement Board :

Amount of retirement income available to employees of certain selected com

panies (benefits to employees retiring in 1959 at age 65 after 30 years of service with a level wage of $350 a month)

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1 Exclusive of auxiliary benefits.

2 The railroad annuitant may, under certain conditions, also receive a separate social security old-age benefit which would increase his total retirement incon

As far as we have been able to determine, of the 16 companies listed above, the supplemental pension plans of the Cities Service Co. and the General Electric Co. are contributory; the plans of the remaining 14 companies are noncontributory. In 9 out of 16 companies listed the total monthly income from social security and the private pension plans exceeds the maximum railroad retirement annuity of $185.60 now payable. Of course, the maximum railroad retirement annuity of $185.60 would increase as more months of service are credited toward an annuity. In all 14 noncontributory plans the cost to the employee is now just the cost to him of the social security tax, that is, 212 percent of pay up to $4,800 a year (before 1959, $4,200). In the two contributory plans the cost to the employee would, of course, be above the social security cost. Under the railroad retirement system the cost to the employee is now 614 percent of payroll up to $350 a month. (In cases where the railroad retirement annuitant might receive an additional benefit under the social security system (for which he has paid the regular social security tax) the railroad company pays no part of the cost of this additional benefit.)

A study made and recently released by the U.S. Department of Labor (BLS) of 100 supplementary pension plans under collective bargaining, winter, 1957–58, was analyzed by the Bureau of Labor Statistics of the Department of Labor (see the “Monthly Labor Review,” August 1958, beginning on page 845, reprint No. 2288). This analysis shows, among other things, that 86 of these plans, covering almost 2.9 million workers, were noncontributory, that is, financed solely by the employer, while 14 were contributory, that is, financed by both the employer and employee.

In order to secure any additional information on this question, the following letter was sent to the Bureau of Labor Statistics, U.S. Department of Labor and to the Securities and Exchange Commission :

"The subcommittee of the Senate Committee on Labor and Public Welfare has under consideration proposed changes to the Railroad Retirement Act and the Railroad Retirement Tax Act. In considering these proposals, the subcommittee would appreciate your furnishing, no later than February 26, information pertaining to private pension plans in industries other than the railroad industry.

"What is the cost to the employer of employee private pension plans supplemental to social security monthly benefits in total and in terms of (a) percentage of gross payroll, (o) percentage of payroll used for pension crediting purposes, and (c) cost per employee? We would appreciate your furnishing these figures on the basis of (1) cost in 1958, and (2) long range or level cost. “Sincerely,

“WAYNE MORSE, Chairman, Subcommittee on Railroad Retirement.Mr. LOOMIS. Thank you.

Senator MORSE. Our next witness will be Mr. Roland Davis, vice president and general counsel, who appears for Mr. Perry Shoemaker, president of the Delaware, Lackawanna & Western Railroad.

We are glad to have you with us.

Mr. DAVIS. As the chairman has indicated, I am here for Mr. Shoemaker who because of an emergency could not be present to present his statement. And he has requested me to present his statement for him. And I appreciate the privilege of appearing before you.

Senator MORSE. You may proceed.

STATEMENT OF PERRY M. SHOEMAKER, PRESIDENT OF THE DELAWARE, LACKAWANNA & WESTERN RAILROAD CO., PRESENTED BY ROLAND DAVIS, VICE PRESIDENT AND GENERAL COUNSEL, DELAWARE, LACKAWANNA & WESTERN RAILROAD CO. Mr. Davis. Mr. Chairman and gentlemen. My name is Perry M. Shoemaker and I am president of the Delaware, Lackawanna & Western Railroad Co., with headquarters at 140 Cédar Street, New York City. My railroad background goes back to 1926 summer vacation work as a track laborer with the Pennsylvania Railroad, while I was attending the University of Michigan, from which I received in 1928 a bachelor of science degree in mechanical engineering. I also attended Yale University under a Strathcona fellowship in transportation and received the degree of master of science in transportation engineering. I have worked for the Erie in various capacities from freight house laborer to general yardmaster, for the New Haven in several capacities including superintendent of freight transportation, and commencing in 1941 for the Lackawanna in various capacities in the operating department and since August 1, 1952, as president of the Lackawanna. Additionally, I served as chairman of the transportation subcommittee of the second Hoover Commis

sion on Organization of the Executive Branch of the Government, which entailed also being a member of the Task Force Committee on Subsistence Services, the Task Force Committee on Business Organization of the Department of Defense, the Subcommittee on Depot Utilization and the Subcommittee on Business Enterprises.

I thank this committee for the opportunity to appear before you today with regard to S. 226.

The Lackawanna Railroad is a freight and passenger railroad operating from Hoboken, N.J., to Buffalo, N.Y., together with several branch lines. Service is provided to New York City by means of ferries, carfloats, barges, and other marine equipment. .

During the year 1958 the Lackawanna sustained a deficit of nearly $4 million, even though its revenue included a $1,600,000 nonrecurring retroactive mail pay adjustment. This is the largest deficit sustained in the more than 100-year history of the Lackawanna Railroad and was incurred in spite of a minimum amount of maintenance-consistent with safety-salary cuts and other economies wherever possible.

Under the circumstances, it is appropriate to call your attention to certain changes which have occurred on the Lackawanna in a period of 10 years. | Anthracite coal revenue in 1958 was $4,210,000, less than one-third of what it was 10 years ago. In the same 10-year period merchandise revenue decreased from $56 million to $48 million, in spite of there having been nine general freight rate increases. · Passenger revenue from through and suburban service decreased from $10,800,000 in 1948 to $9,300,000 in 1958. Income available for fixed charges in 1948 was $11,800,000. In 1958 it was $979,000 against fixed charges of $4,447,000.

In December of 1948 the Lackawanna had 13,618 employees and its payroll, including payroll taxes, was $48,578,000 or 53 cents per révenue dollar. In December 1958 Lackawanna employees had been reduced to 7,331, with the payroll for the full year 1958, including taxes, of $50,746,000 or more than $2 million greater than 1948 and it took 67 cents of each revenue dollar.

At the end of 1958 we had a deficit in net working capital, not including materials and supplies, of just over $750,000. At the end of 1948 we had an excess of assets of over $7 million. On January 1, 1959, our cash balance was $3,261,000 and as I have previously indicated, we have a working capital deficit.

The situation which I have outlined is the culmination of various factors. To state it simply, we are seriously entrapped in a revenueexpense squeeze. Our revenues have declined, as I indicated above. The overall decline has been from gross revenues of $91,400,000 in 1948 to $76,280,000 in 1958, in spite of rate increases and the above mentioned retroactive mail pay adjustment.

Another factor of which many railway executives are convinced is that freight rates and passenger fares have about reached the point of diminishing return, namely, that we can no longer increase revenues by generally increasing rates and fares due to the fact that the volume of traffic that is diverted to competitive means of transportation more than offsets the additional revenue earned on the balance.

The survival of many railroads as private enterprises is therefore dependent upon decreasing expenses, or at least holding the line, both

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