2. With respect to compensation paid after December 31, [1947] 1958, the rate shall be as follows: If the balance to the credit of the railroad unemployment insurance account as of the close of business on September 30 of any year, as determined by the Board, is: The rate with respect to compensation paid during the next succeeding calendar year shall be: 1/2 percent 1 percent 11⁄2 percent 2 percent 22 percent 3 percent] Percent 12 2 22 3 82 As soon as practicable following the enactment of this Act, the Board shall determine and proclaim the balance to the credit of the account as of the close of business on September 30, 1947, and on or before December 31 of 1948 and of each succeeding year, the Board shall determine and proclaim the balance to the credit of the account as of the close of business on September 30 of such year; and in determining such balance as of September 30 of any year, the balance to the credit of the railroad unemployment insurance administration fund as of the close of business on such date shall be deemed to be a part of the balance to the credit of such account. (b) Each employee representative_shall pay, with respect to his income, a contribution equal to [3 per centum] 31⁄2 per centum of so much of the compensation of such employee representative as is not in excess of $300 for any calendar month, paid to him for services performed as an employee representative after June 30, 1939, and before July 1, 1954, and as is not in excess of $350 paid to him for services rendered as an employee representative in any calendar month after June 30, 1954, and before January 1, 1959, and as is not in excess of $400 paid to him for services rendered as an employee representative in any calendar month after December 31, 1958. The compensation of an employee representative and the contribution with respect thereto shall be determined in the same manner and with the same effect as if the employee organization by which such employee representative is employed were an employer as defined in this Act. (The Bureau of the Budget report on S. 987 appears on p. 404 of the Appendix.) * Senator MORSE. The procedure to be followed by the chairman will be as follows: This morning we will hear the representatives of the Railroad Retirement Board, tomorrow morning we will hear the representatives of the brotherhoods, and February 18 we will hear the representatives of the carriers. And then I shall schedule what may be termed one rebuttal session, at which both the carriers and the brotherhoods and other interested parties will be given an opportunity to present the supplementary testimony in answer to the record that has been made up to that date. Following that, the subcommittee will proceed with executive sessions. And I want the record to show that we will be calling before us, if necessary, the representatives of the carriers and the representatives of the brotherhoods, the Board, and others, for any technical assistance that we may need in writing up the final bill, but with the understanding that whenever we call a representative of the carriers or the brotherhoods before us, the other party will be given full information as to what transpires. In fact, we will not have any executive session at which representatives of both sides will not be welcome, if a representative of one side has been officially called before the subcommittee. It is my hope that we can complete our hearings and our executive session work on this bill so that we can present it to the full committee not later than March 15. Before I call the first witness, I will insert in the record a letter that I have received from Mr. Guy F. Fain, of the National Association of Retired and Veteran Railway Employees, with a brief statement of Mr. Fain to the subcommittee, to be made a part of the record. (The letter and statement referred to follow :) NATIONAL ASSOCIATION OF RETIRED AND VETERAN RAILWAY EMPLOYEES, Washington, D.C., February 9, 1959. Hon. WAYNE MORSE, Chairman, Senate Subcommittee on Labor and Public Welfare. MY DEAR SENATOR: It is not my intention to appear before your committee, as a witness, during the hearings on bills presented to the Senate to amend the Railroad Retirement Act, however we do request the attached statement be made a part of the records of your committee. Very truly, GUY F. FAIN, Grand President. STATEMENT OF GUY F. FAIN, GRAND PRESIDENT, NATIONAL ASSOCIATION OF RETIRED AND VETERAN RAILWAY EMPLOYEES Mr. Chairman and members of your committee, my name is Guy F. Fain, my home is in Glendale, Ohio. The association I represent endorse Senate bill 226, presented by your able chairman and cosponsored by 24 additional Members of the Senate. This bill has the endorsement of the Railway Labor Executives' Association, and certainly provides only for such increases that are within the ability of the Retirement Board to meet, without effecting the stability of the retirement funds. Feeling that the interests of our members will be ably represented by those who will appear before your committee in behalf of the Railway Labor Executives' Association, we have not requested the privilege of appearing before your committee. Senator MORSE. I will order printed also a communication, dated February 4, 1959, from the Association of American Railroads. (The letter follows:) ASSOCIATION OF AMERICAN RAILROADS, Hon. LISTER HILL, Chairman, Committee on Labor and Public Welfare, DEAR SENATOR HILL: We, the Association of American Railroads and the Railway Labor Executives Association, are in agreement that the Board should have the authority to borrow from the railroad retirement account, for the payment of benefits under the Railroad Unemployment Insurance Act, under conditions set forth below. We propose that this authority be conferred upon the Board by substituting the following for subsection (d) of section 10 of the Railroad Unemployment Insurance Act: "(d) Whenever the Board finds at any time that the balance in the railroad unemployment insurance account will be insufficient to pay the benefits and refunds which it estimates are due, or will become due, under this Act, it shall request the Secretary of the Treasury to transfer from the Railroad Retirement Account to the credit of the railroad unemployment insurance account such monies as the Board estimates would be necessary for the payment of such benefits and refunds, and the Secretary shall make such transfer. Whenever the Board finds that the balance in the railroad unemployment insurance account, without regard to the amounts transferred pursuant to the next preceding sentence, is sufficient to pay such benefits and refunds, it shall request the Secretary of the Treasury to retransfer from the railroad unemployment insurance account to the credit of the Railroad Retirement Account such monies as in its judgment are not needed for the payment of such benefits and refunds, plus interest at the 37456-59-5 rate of 3 per centum per annum, and the Secretary shall make such retransfer. In determining the balance in the railroad unemployment insurance account as of September 30 of any year pursuant to section 8(a) (2) of this Act, any monies transferred from the Railroad Retirement Account to the credit of the railroad unemployment insurance account which have not been retransferred as of such date from the latter account to the credit of the former, plus the interest accrued thereon to that date, shall be disregarded." Sincerely yours, ASSOCIATION OF AMERICAN RAILROADS, By DANIEL P. LOOMIS. RAILWAY LABOR EXECUTIVES ASSOCIATION, By G. E. LEIGHTY. Senator MORSE. Our first witness will be the Chairman of the Railroad Retirement Board, Mr. Howard W. Habermeyer. I think, gentlemen, if all members of the Board will come up to the witness table we will save time. We will proceed with Mr. Habermeyer, Mr. Healy, and then Mr. Harper. Let the record show that the entire record that this subcommittee made in 1957 on this general subject matter will be incorporated by reference into the record of the hearings this year. And the subcommittee will consider itself free to refer to the record of 1957. I think you should know that so that, in the preparation of your material or your submission of evidence to the committee this year, you will have knowledge of the fact that members of this subcommittee will feel perfectly free to draw upon the 1957 record; that being only fair, I think, in view of the fact that one of these bills that I have introduced on behalf of the brotherhoods is the identical bill that we passed in the Senate. And it would be a great waste of money, in my judgment, for us to have to remake the same record that was made in 1957 in respect to that bill. So I will instruct the staff of my subcommittee to familiarize themselves with the 1957 record, which here and now by order of the chairman is incorporated by reference into the record of this year's hearings. Mr. Habermeyer, will you proceed? STATEMENT OF HOWARD W. HABERMEYER, CHAIRMAN, RAILROAD RETIREMENT BOARD Mr. HABERMEYER. Mr. Chairman and members of the committee, my name is Howard V. Habermeyer. I am the Chairman of the Railroad Retirement Board. It is a pleasure to again appear before this committee and discuss proposed amendments to the Railroad Retirement and Railroad Unemployment Insurance Acts. Included in the Board's report on S. 226, we gave the committee a very detailed analysis of the provisions of this bill. I would like for the record to summarize the major items of this proposal. A. AMENDMENTS TO THE RAILROAD RETIREMENT ACT 1. All retirement and survivor annuities (including spouses' annuities) computed under the regular railroad retirement formulas, including the minimum formulas, would be increased by 10 percent, effective with respect to annuities accruing for January 1959 and thereafter. 2. All retirement and survivor annuities (including spouses' annuities) computed under the overall social security minimum would be increased by 10 percent, effective with respect to annuities for January 1959 and thereafter. 3. All pensions payable under section 6 of the Railroad Retirement Act would be increased by 10 percent, effective with respect to pensions due on February 1, 1959, and thereafter. 4. The maximum amount of monthly compensation creditable for benefit purposes would be increased from $350 to $400, effective with respect to services rendered after 1958. 5. The formula for computing the "residual" lump sum would be amended (in conformity with amendments proposed to the Railroad Retirement Tax Act to increase the tax rate and to increase the maximum monthly tax base to $400) by increasing the percentage factor applicable to compensation after 1958 and before 1962 to 72 percent and to compensation after 1961 to 8 percent, and by increasing the maximum amount of compensation to which such factors are applicable from $350 to $400 for any month after 1958. 6. The privilege (now available to a male employee with 30 years of service) of electing to receive a reduced annuity at age 60 would be available to women employees with 10 years of service at age 62. 7. Spouses of annuitants (age 65 or more) would have the right to elect to receive a reduced spouse's annuity at age 62. 8. The reduction in 6 and 7 would be by one one-hundred-andeightieth for each calendar month the beneficiary is under age 65, and both provisions would be effective for annuities for January 1959 and thereafter. 9. The earnings test now applicable to disability annuitants, under which such an annuitant under age 65 does not receive his annuity for any month in which he is paid more than $100 in earnings, would be modified by a proviso to the effect that if the annuitant's total earnings in any calendar year do not exceed $1,200, the annuity otherwise not payable because of his earnings in excess of $100 in any month in the year would become payable. Should the annuitant's earnings exceed $1,200 in any year, loss of annuity would not exceed 1 month's annuity for each $100 that the annuitant earned in excess of $1,200, treating any remainder of such excess of $50 or more as $100. This amendment would be effective beginning with the calendar year 1959. Earnings from employment with an "employer" as defined in the Railroad Retirement Act, and from employment with the disability annuitant's last employer before he retired (whether or not a railroad employer) would not count toward this $1,200 maximum, since no annuities are payable in any event under section 2(d) of the act for any month in which the disability annuitant had such employment, regardless of the amount of earnings in that employment. 10. The earnings test now applicable to survivor annuitants living outside the United States (no more than 6 days remunerative activity in a month) would be changed, effective with annuities accruing after 1958, to the yearly earnings test applicable to survivor annuitants who are U.S. residents. Senator MORSE. Does that cover any employees other than the Canadian system and the Panama system? Mr. HABERMEYER. Canadian employees only, we have no coverage in Panama. Senator MORSE. That has no connection with the short line into Panama? Mr. HABERMEYER. No; Canadian employees only. B. AMENDMENTS TO THE RAILROAD RETIREMENT TAX ACT 1. The bill would increase, effective January 1, 1959, the tax rate on employees and employers from 614 percent to 634 percent on the employee's compensation earned up to $400 in any month after 1958 and before 1962, and to 74 percent of the employee's compensation up to $400 earned in any month after 1961. This tax rate would be increased, with respect to compensation paid after December 31, 1964, by the same number of percentage points (or fractions of percentage points) by which the then current social security tax rate exceeds 234 percent (the social security tax rate scheduled to be in effect from 1960 through 1964 under the social security amendments of 1956). 2. The tax rate on employee representatives would be increased from 122 percent to 1312 percent, with respect to compensation earned up to $400 in any month after 1958 and before 1962, and to 1412 percent of compensation up to $400 earned in any month after 1961. This tax rate would also be increased with respect to compensation paid after December 31, 1964, just as in the case of the employer and employee tax rates, but this increase would be by twice the number of percentage points (or fractions of percentage points) by which the then current social security tax rate exceeds 234 percent. 3. The withholdings required of employers of the taxes imposed on their employees would be increased in accordance with the increase in tax rate and tax base. C. AMENDMENTS TO THE RAILROAD UNEMPLOYMENT INSURANCE ACT 1. The maximum number of days of unemployment in the first registration period in a benefit year for which benefits may be paid would be increased from 7 to 10 days, the same number as the law now provides with respect to all subsequent registration periods in the benefit year. 2. A new schedule of increased daily benefit rates would apply, ranging from a minimum daily benefit rate of $4.50 for compensation of $500 to $699.99 in a year to a maximum daily benefit rate of $10.20 for compensation of $4,000 or more in a year. The proposed daily benefit rates are from 50 cents to $1.70 higher than present rates. The alternative minimum daily rate payable would be increased from 50 to 60 percent of the daily rate of compensation (with a maximum of $10.20 per day) for the employee's last employment in which he was engaged for an employer during the base (calendar) year. 3. The minimum earnings in a base (calendar) year which would qualify an employee for benefits in a benefit year (year beginning July 1) would be increased from $400 to $500. 4. The provisions in 1 and 2 above would be effective with respect to benefits payable in the current benefit year which began on July 1, 1958, so that if the bill passes, the proposed increases in benefits would be payable retroactively. 5. The provision in 3 above will be effective beginning with the calendar year 1958, so that an employee with earnings in 1958 of less |