"with respect to compensation for services rendered after June 30, 1959," (2) by inserting after the word "fund" a comma and the words "such part thereof as equals 0.5 per centum of such total compensation to be deposited to the credit of the railroad sickness insurance account", and (3) by inserting before “account" the words "railroad unemployment insurance". SEC. 313. Effective July 1, 1959, section 12(g) of the Railroad Unemployment Insurance Act is amended by striking the language following the semicolon in the last sentence and by inserting the following: “such reimbursements for unemployment benefits shall be paid from the railroad unemployment insurance account and such reimbursements for sickness or maternity benefits shall be paid from the railroad sickness insurance account, and all such reimbursements are included within the meaning of the word 'benefits' as used in this Act." SEC. 314. The amendments made by this part shall become effective with respect to all benefits paid in benefit years beginning after June 30, 1959, except that (a) maternity benefits in a maternity period established before and extending beyond such date shall be paid pursuant to the law as in effect prior to the amendments made by this Act and (b) the calendar year 1958 shall be the base year for a benefit year beginning July 1, 1959, of any individual who thereby but not otherwise would be a qualified employee. The effective date of other provisions of this part except as otherwise specifically provided shall be the date of enactment of this Act. PART IV-AMENDMENTS TO THE SOCIAL SECURITY ACT SEC. 401. The Social Security Act, effective July 1, 1959, is amended as follows: (1) Section 904 (a) is amended by inserting "or to the credit of the railroad sickness insurance account" after "unemployment insurance account"; (2) Section 904 (e) is amended by inserting "and the railroad sickness insurance account" after "unemployment insurance account". (3) Section 904(f) is amended by striking out all the last sentence after "certify" and inserting in lieu thereof "for payment from the railroad unemployment insurance account or for payment from the railroad sickness insurance account not exceeding the amount standing to such account at the time of such payment." Hon. LISTER HILL, RAILROAD RETIREMENT Board, Chairman, Committee on Labor and Public Welfare, DEAR SENATOR HILL: This is a report of the Railroad Retirement Board on the bill S. 987 which was requested by your committee. The bill would amend the Railroad Retirement Act, the Railroad Retirement Tax Act, the Railroad Unemployment Insurance Act, and (in a more technical respect) the Social Security Act, and would add a new employment tax provision (the Railroad Sickness Benefit Tax Act) to the Internal Revenue Code, as follows: RAILROAD RETIREMENT ACT 1. Annuities (except those based on the social security minimum provision of the Railroad Retirement Act or on the regular minimum founded in the monthly compensation, widows' and widowers' annuities already awarded based on the spouse's annuity, and those spouses' annuities paid on the maximum basis, which would receive no increase at all or less than 5 percent), pensions, and the insurance lump-sum benefits, would be increased by, generally, 5 percent. 2. Compensation creditable in the computation of benefits under the Railroad Retirement Act would be increased to $400 a month effective respecting compensation paid for services rendered after June 1959. 3. The residual lump-sum benefit would be adjusted, in accordance with the bill's proposal for change in the tax rate and base, to include 72 percent of compensation up to $400 a month after June 1959. 4. The benefit increases would apply to monthly benefits accruing after June 1959 and to lump-sum benefits resulting from deaths after June 1959. 5. Recertifications to effect the changes in benefits provided would be made without application. RAILROAD RETIREMENT TAX ACT The taxable compensation base would be increased from a maximum of $350 a month for each employee to $400, and the tax rate for railroad employers and employees would be increased to 64 percent effective June 1959. The tax rate on employee representatives would be increased to 131⁄2 percent on $400 a month compensation, effective at the same time. RAILROAD UNEMPLOYMENT INSURANCE ACT 1. The "benefit year" (the year during which unemployment and sickness benefits are paid based on a particular qualification period) with respect to an employee would be changed so as to be a period of 365 consecutive days beginning with the first day of the first registration period after June 30, 1959, with respect to which the employee first files a valid claim for benefits, and thereafter the period of 365 days beginning with the first day of the first registration period with respect to which he next files a valid claim for benefits after the termination of his preceding benefit year. Any claim for benefits would be deemed to be a valid claim for the purposes of the definition of the "benefit year" if the employee who files a claim is, with respect to his base period, a "qualified" employee in accordance with the changed provisions for such status. The base year would be changed and would be the 12 completed months immediately preceding the first day of the employee's benefit year. Under present provisions of the Railroad Unemployment Insurance Act the base period is the calendar year, and the benefit period respecting such base period commences July 1 of the following calendar year. Consequently, the benefit period does not begin until 6 months after the qualifying period. Under the bill the benefit period would follow the base period immediately. 2. The qualifying conditions for unemployment and sickness benefits likewise would he substantially revised. Under present provisions an employee becomes a "qualified" employee for such benefits if his compensation for the base year is not less than $400. Under the proposals an employee would be a "qualified" employee if his compensation with respect to his base year will have been not less than the amount equal to the product of 87 and the daily wage rate in employment for his last "employer" in a base year, if during his base year at least 6 calendar months have been months of service used in computing his years of service for purposes of the Railroad Retirement Act, and if at least two of such months of service have been in the last 6 months of such base year. An employee who has received 130 daily unemployment benefits or exhausted his unemployment benefit rights could not thereafter become qualified for unemployment benefits in a new benefit year unless he has again had "substantial compensation," that is, has earned in railroad and other covered employment an amount equal to 20 times his last daily benefit. This would require that employee to have these earnings, as well as being qualified for a new benefit year otherwise, before being eligible for benefits in a succeeding benefit year. Like provisions would apply to sickness benefits, but would apply separately to the two forms of benefit. 3. The waiting period respecting the first registration period for both unemployment and sickness benefits would be extended to 9 days with the result that the number of days in the first registration period for which benefits may be received would be reduced to 5 from the present 7. A new restriction on benefits would be added under which an employee would not be qualified for benefits unless he had at least 7 days of unemployment in a registration period or in the 14 days immediately preceding it. The bill would seem literally to make this restriction respecting days of unemployment a condition in the payment of sickness benefits also, but this effect may not have been intended because of the incongruity in making sickness benefits dependent on "days of unemployment." 4. The schedule based on total wages in the base year for the determination of benefits would be eliminated and the daily rate of benefits would be determined on the present alternative basis of the claimant's last daily pay in his base year. However, instead of the present 50 percent of gross daily pay the benefit would be 60 percent of daily pay after withholding taxes (ordinary income and railroad retirement and sickness benefit taxes). The maximum daily benefit would remain at $8.50. Specifically the employee's daily rate of compensation after withholding taxes would be such employee's daily rate after reduction by an amount equal to the sum of (1) the amount equal to the same percentage of such daily pay rate as shall be imposed by sections 3201 [providing for railroad retirement taxes], and 3251 [a new section of the bill would provide establishing a tax on employees only for sickness benefit purposes] of the Internal Revenue Code on compensation at the time of such last employment, and (2) the amount equal to one-fifth the amount which shall be required to be withheld at the time of such last employment by section 3402(c) [providing for withholding for income tax] of such Code on a weekly pay period basis, on wages paid in a weekly paid period in an amount equal to the product of five and such daily rate. By this method of calculating the amount of tax withholding this amount would normally be equal to the actual withholding. If the daily benefit rate is not otherwise a multiple of 10 cents it would be increased to the next higher multiple of 10 cents. 5. An employee would be disqualified for unemployment or sickness benefits (except for days when he is involuntarily unemployed due to lack of work) for any day with respect to which he meets the service and age or disability requirements for full annuity payments, pensions, or benefits under the Railroad Retirement Act or the Social Security Act, and could, if he applied therefor, receive them. Under present law only after applying and qualifying for such benefits would the employee be disqualified, and then, as to benefits under the Railroad Retirement Act, only for such benefits as would exceed apportioned annuity or pension payments for that day. The present provision for paying this excess would be eliminated. The provisions for disqualification of an employee for unemployment benefits for 30 days beginning with the day with respect to which he left work voluntarily and without good cause or with respect to which he failed without good cause to accept suitable work or to comply with instructions from the Board to apply for such work or to report to an employment office would be revised so that the disqualification would continue until such time as the employee obtained railroad employment in 4 calendar weeks with respect to each of which the employee had earnings of not less than $25. Two new disqualification provisions would be added. The first would provide that an employee found to have been discharged or suspended for misconduct connected with his work be disqualified for unemployment benefits until such time as he obtains thereafter railroad or other covered employment in at least 4 calendar weeks with earnings of $25 in each; and the second would eliminate as a day of unemployment any day which the Board finds is in a maternity period of an employee. 6. The same disqualification provision for sickness benefits respecting Sundays and holidays would be included as that which is now contained in the act respecting disqualification for such days for unemployment benefits. An employee would be disqualified for sickness benefits for any day with respect to which he would be disqualified for unemployment benefits for voluntarily leaving work, refusal to accept work, a discharge or suspension for misconduct, and for absence because of a strike. An employee could receive sickness benefits for no day which is in a maternity period unless the Board finds that her sickness on such day is unrelated to the normal consequence of pregnancy or childbirth. An employee would be disqualified for sickness benefits for any day which occurred more than 90 days after the last day with respect to which he earned compensation in the railroad industry, except that there would be excluded from such 90 days any day in which the Board finds that the employee was unemployed due to a stoppage of work as a result of a strike, and any day in such 90 days in a registration period which begins, or in continuous registration periods the first of which begins, before the expiration of such 90 days. For this purpose, a registration period would be deemed continuous with the preceding registration period if established within 10 days after the last day of such preceding period. To the definition of a "day of sickness" the phrase "but would otherwise be available for work" would be added. The consequence of this addition would be that an employee could not receive sickness benefits unless it could be found that with respect to such day he would have worked or been available for work but for his sickness. 7. From the definition of a "day of sickness" there would be excluded a day “which is included in a maternity period." The consequence of this together with the disqualification provision described in paragraph 6 respecting a day in a maternity period in which sickness is related to the normal consequences of pregnancy or childbirth would be to eliminate all maternity benefits. In furtherance of the elimination of maternity benefits certain sections of the Railroad Unemployment Insurance Act would be amended by deleting the provisions therein relative to maternity, maternity periods or maternity benefits. 8. A railroad sickness insurance account would be established, effective July 1, 1959, which would be maintained by the Secretary of the Treasury in the unemployment trust fund established pursuant to section 904 of the Social Security Act. The account would consist of such part of the contributions equal to 0.5 percent of the compensation on which such contributions were collected pursuant to section 8 of the Railroad Unemployment Insurance Act, all taxes collected pursuant to chapter 22(a) of the Internal Revenue Code (the proposed Railroad Sickness Benefit Tax Act described elsewhere in this report), together with all interest and penalties collected pursuant to such provisions and amounts creditable with respect to sickness benefits under provisions of the Railroad Unemployment Insurance Act for reimbursement or refunds. The funds so placed in the new account would be permanently appropriated to the Board, without further authorization, to be continuously available to the Board for the exclusive purpose of paying sickness benefits except insofar as refunds of taxes are to be made. Transfer of funds to the railroad sickness insurance account from the railroad unemployment insurance account would be authorized, on a reimbursable basis, when the need arises, with interest to be paid at a rate found equitable by the Board. 9. The bill would provide, effective July 1, 1959, for including, in determining pursuant to section 8(a) of the act the balance to the credit of the railroad unemployment insurance account as of September 30 of any year, (1) all unrepaid amounts transferred from that account on a reimbursable basis to the railroad sickness account (but not more than the amount actually contained in the latter account) and (2) such proportion of the balance in the sickness account as consists of contributions made by employers required to be appropriated to the sickness account. 10. The amendments would be effective with respect to all benefits paid in benefit years beginning after June 30, 1959, except the maternity benefits for a maternity period established before, and extending beyond, June 30, 1959, would be paid pursuant to the law as in effect before the amendments. The calendar year 1958 shall be the base year for a benefit year beginning July 1, 1959, in the case of any individual who would otherwise not be a qualified employee with respect to such year. Otherwise, except as specifically provided elsewhere in the bill, the effective date of the proposed amendments would be the date of enactment of the bill. RAILROAD SICKNESS BENEFIT TAX ACT The bill would provide as chapter 22(a) of the Internal Revenue Code for a "Railroad Sickness Benefit Tax Act." This act would provide for a new tax on employees, to be deducted from pay by the employer and collected by the Internal Revenue Service, of one-half percent of so much of the compensation paid to the employee after June 30, 1959, for services rendered after that time, as is not in excess of $350 for any month. The tax would not apply to employees of local lodges or divisions (which would not be "employers" for the purposes of the Tax Act) but would apply to all other "employees." It would not apply to "employee representatives." THE SOCIAL SECURITY ACT Section 904 of the Social Security Act would be amended, effective July 1, 1959, in a minor technical respect to effect establishment of the newly proposed "railroad sickness insurance account" described hereinbefore. IMMEDIATE EFFECT OF AMENDMENTS TO THE RAILROAD RETIREMENT ACT Employee annuities An estimated 364,000 employee annuities are expected to be in course of payment on July 1, 1959. Of these, about 320,000 would be increased by the full 5 percent, 4,000 by less than 5 percent, while 40,000 would be unaffected. Those which would be increased by less than 5 percent are (1) minimum annuities equal to $75.90 or to $4.55 multiplied by the years of service, in which a 5-percent increase would raise the annuity to an amount larger than the monthly compensation, and (2) annuities payable under the social security minimum' guarantee of the present act which would revert to the railroad formula. The 40,000 annuities which would not be increased include 33,000 which would remain payable under the social security guarantee and 7,000 already equal to the monthly compensation. The overall increase for the estimated 364,000 annuities in course of payment on July 1, 1959, would be 4.7 percent. An estimated 43,000 retirement annuity awards, averaging about $133, would be made in fiscal year 1959-60. The average award would be 4.6 percent greater than the average of $127.20 under the present law. Spouse annuities The average annuity of the estimated 133,000 spouses on the rolls on July 1, 1959, would rise from $51.60 to $52.50. The average increase would be only 1.7 percent because most spouses would receive no increase at all or an increase of less than 5 percent. Those who would receive no increase include about 75,000 spouses already receiving the maximum of $60.50 and 10,000 whose annuities are being paid under the social security guarantee or are based on an employee annuity which is limited to his monthly compensation. An estimated 22,000 spouses' annuities will be awarded in fiscal year 1959-60. The average annuity would rise from $52.50 under the present law to $53.20 under the proposed bill. (The average award in the fiscal year includes an adjustment for awards before February 1960 to allow for the increase to $63.50 in the maximum spouse annuity effective that month.) Pensions The estimated 1,200 pensioners on the rolls on July 1, 1959, would receive 5-percent increases, bringing their average benefit to $85.80, compared with the average of $81.70 under the present law. Survivor annuities An estimated 245,000 survivor annuities would be in course of payment on July 1, 1959. The average annuity to aged widows would rise from $57.50 under the present law to $58.40 under the proposed bill. Increases in other types of survivor insurance annuities would be almost negligible because well over nine-tenths are payable and would remain payable under the social security guarantee. Total benefit payments Total benefit payments under the provisions of the bill in fiscal year 1959-60 are estimated at about $860 million, or $30 million more than would otherwise be payable under the present law. Tabular summary The two attached tables illustrate the effect of the proposed amendments. Table 1 shows the effect on benefits in course of payment on July 1, 1959, and table 2 covers benefit awards in fiscal year 1959-60. TABLE 1.—Estimated number of monthly benefits in current-payment status on July 1, 1959, and estimated average monthly amount before and after increases under S. 987, by type of benefit After adjustment for increases under 1958 Social Security Act amendments. |