Hon. J. PERCY PRIEST, EXECUTIVE OFFICE OF THE PRESIDENT, Washington 25, D. C. Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: This is in reply to your letter of February 4, 1955, requesting a report on H. R. 760, a bill "To amend the Railroad Retirement Act of 1937, as amended, and for other purposes." It is also in response to your requests for reports on the following related bills which would carry out the same objectives: H. R. 2573, H. R. 3087, H. R. 3209, H. R. 3590, H. R. 3612, and H. R. 3938. The proposed bills would increase annuities and pensions by 15 percent, liberalize eligibility requirements, revise the provisions affecting past service credits, and make other changes in the railroad retirement program. The Chairman of the Railroad Retirement Board advises that the proposed amendments would add approximately $235 million a year, on a level premium basis, to the cost of the program. It is estimated that this additional cost factor would increase the actuarial deficiency from about $51 million a year to more than $285 million a year. There is no provision in the bill for financing the increased cost. In the circumstances, the Bureau of the Budget recommends against enactment of H. R. 760 and the related bills, H. R. 2573, H. R. 3087, H. R. 3209, H. R. 3590, H. R. 3612, and H. R. 3938. Sincerely yours, DONALD R. BELCHER, Assistant Director. RAILROAD RETIREMENT BOARD, Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington 25, D. C. DEAR MR. PRIEST: This is a report on identical bills H. R. 2573, H. R. 3087, H. R. 3209, H. R. 3590, and H. R. 3612 which were introduced in the House of Representatives and which were referred to your committee for consideration. H. R. 2573 was introduced by Mr. Cunningham on January 20, 1955; H. R. 3087 by Mr. Bennett on January 26, 1955; H. R. 3209 by Mr. Dorn on January 27, 1955; H. R. 3590 by Mr. Friedel on February 3, 1955; and H. R. 3612 by Mr. Rogers also on February 3, 1955. Each of these identical bills would amend the Railroad Retirement Act of 1937, as amended, in the following manner: 1. Full annuities would be payable after 35 years of service regardless of age or at age 60 after the completion of 30 years of service. 2. In determining the average monthly compensation for service before 1937, the present computation based on the 1924-31 period would be replaced by a computation based on 5 calendar years (consecutive or otherwise) of highest earnings before 1937. We assume that this is the change intended by section 3 of the bills, the wording of which is not clear. 3. All employee annuities (as well as joint-and-survivor annuities and survivor annuities derived from them) and pensions would be increased by 15 percent. This would be in addition to other possible increases resulting from the application of any of the provisions of the bill. Furthermore, the changes in the method of computing the average monthly compensation (items 2 and 5 in particular) would result in increasing certain survivor insurance benefits payable under the Railroad Retirement Act. 4. A minimum would apply in cases of persons with 30 or more years of service. This minimum would equal 50 percent of the employee's average monthly compensation for 5 calendar years (consecutive or otherwise) of highest earnings during the total period of creditable service. We presume that this minimum would apply in addition to the present minima provided in section 3 (e) of the act. 5. The limit on creditable monthly compensation would be raised retroactively to $350. Under present law, the limit is $300 a month per employee on all service before July 1954 with a limit of $350 a month thereafter. 75199-56- -2 6. The provision in the present law that service after age 65 shall not be used in the computation of the monthly average compensation if it results in a lower annuity, would be eliminated. Except for the 15-percent increase in annuities on the rolls, the effective dates of the other changes are not clearly stated. The 15-percent increases would become effective the first of the month following the month in which the bill is enacted. The Board would be required to recertify all annuities and pensions which could be affected by any of the changes specified in the bill. The bill is technically defective in section 4 (b) which increases maximum pensions from $120 to $138 a month. Under present law (considering the transitional provisions for the amendments of 1948 and 1951), the maximum pensten is $165.60 a month. We presume that another 15-percent increase was prended so that the maximum pension would be $190.44 a month. Aside from any other consideration the amendments proposed in the bill would create administrative difficulties which would be almost insurmountable. Prest, it would be necessary to secure detailed earnings records for service before 1987, in order to find the 5 years of highest earnings as adjusted for the interessed monthly limit on creditable compensation. Second, new compensation reports would be required for the period January 1937-June 1954 in order to credit up to $50 a month of additional earnings which, in the overwhelmmg majority of cases were not previously reported. Third, the Board would be required to recertify practically all employee annuities and pensions in force on the date of the enactment of the bill. Rectification would also be required for large numbers of spouses, joint-and-survivor, and survivor insurance annuiAll this would impose enormous burdens not only upon the Board but also upon employers who would be required to search their payroll records for many years back and to submit new reports based on the additional information deVeloped. Of course, in a large number of cases, old payroll records may no lettger be available. There are a number of other important reasons why the Board believes that this bill should not be enacted. The very substantial additional cost is, of course, the most important one, particularly since the bill makes no provision for additrenal revenues. The combined employer-employee taxes for the support of the railroad retirement system amount to 12.5 percent of taxable payroll with a limit of $350 a onth per employee. The latest actuarial estimates made in connection with the 1904 amendments to the Railroad Retirement Act show that the level cost of Benefits under the act is 13.43 percent of payroll, indicating a present deficiency of $1 million a year. These bills here discussed are very similar to H. R. 5269, which was introduced in the House of Representatives by Mr. Cunningham on May 19, 1953, on which the Board submitted a report to your Committee under the date of July 14, 19. At that time the Board estimated the additional costs at $235 million a year on a level basis. The cost for the bills to which this report relates will not be substantially different. The enactment of these bills would, therefore, increase the deficiency from the present $51 million a year to a figure in the neighborhood of $290 million a year on a level basis. In view of the foregoing and particularly because of the extremely large additional cost which is not compensated by additional revenues, the Board is compelled to recommend that no favorable consideration be given these bills. This report has been cleared with the Bureau of the Budget, which informs us that there is no objection to its submission and that the Bureau itself also recommends against enactment of the proposed legislation. Sincerely yours, RAYMOND J. KELLY, Chairman. RAILROAD RETIREMENT BOARD, Chicago, Ill., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. PRIEST: This is a report on H. R. 3416 which was introduced in the House of Representatives by Mr. Cunningham on February 2, 1955, and which was referred to your committee for consideration. Except for the effective date, the bill is identical to H. R. 757, introduced also by Mr. Cunningham on January 5, 1955. The only difference is that H. R. 757 would be effective the first of the month following the month of its enactment, whereas H. R. 3416 would be effective retroactively to November 1951. The earlier effective date for H. R. 3416 would require a substantial additional single outlay but, when costs are considered on a level annual basis, the additional cost for this bill would not be much greater than for the earlier bill. Accordingly, for H. R. 3416, we refer to our report on the earlier bill previously mentioned. For the reasons stated in our report on H. R. 757, 84th Congress, the Board recommends that no favorable consideration be given to the practically identical bill H. R. 3416. The Bureau of the Budget advises that it has no objection to the Board's submission of this report. Sincerely yours, RAYMOND J. KELLY, Chairman. RAILROAD RETIREMENT BOARD, Chicago, Ill., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. PRIEST: This is a report on H. R. 856 which was introduced in the House of Representatives by Mr. Van Zandt on January 5, 1955, and which was referred to your committee for consideration. The bill which is identical to H. R. 149, H. R. 239, and H. R. 1738, 83d Congress, contains a number of technical defects which would require correction. For purposes of this report, we are interpreting the bill as amending the Railroad Retirement Act of 1937, as amended, in the following manner: 1. Full annuities would be payable at age 60 or after the completion of 35 years of service regardless of age. Under present law, full age annuities to men are not available until age 65. Women with 30 years of service may retire at age 60 without a reduction in their annuity. However, men with 30 years of service retiring for reasons other than disability between the ages of 60 and 65 have their annuities reduced by one one-hundred-and-eightieth for each calendar month they are under the age of 65 when their annuity begins to accrue. 2. A new minimum would apply in cases of persons age 60 or with 35 years of service. The minimum would equal one-half of the average creditable compensation during the 5 years of highest earnings. The new minimum would apply in addition to the present minima provided for in section 3 (e) of the act. 3. The age requirement for a spouse's annuity would still remain 65 even though the normal retirement age for employees would be lowered to 60, but the amounts of such annuities might be subject to an increase as a result of any of the proposed changes. 4. The changes would become effective the first of the month following the month of enactment of the bill. The combined employer-employee taxes for the support of the railroad retirement system amount to 12.5 percent of taxable payroll with a limit of $350 a month per employee. The latest actuarial estimates made in connection with the 1954 amendments to the Railroad Retirement Act show that the level cost of benefits under the act is 13.43 percent of taxable payroll, indicating a present deficiency of $51 million a year. We estimate that the additional cost of the amendments proposed in H. R. 856 would come to at least $150 million a year on a level basis. This would increase the deficiency from $51 million to more than $200 million a year. Although there are other important reasons why the Board believes that this bill should not be enacted, the fact that it would provide no additional revenue to meet the very large increase in the cost of benefits, compels the Board, for that reason alone, to recommend that no favorable consideration be given to the bill. The Bureau of the Budget advises that it has no objection to the Board's submission of this report and recommends against enactment of the bill. Sincerely yours, RAYMOND J. KELLY, Chairman. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington 25, D. C., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington 25, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your letter of February 4, 1955, requesting a report on H. R. 856, a bill to amend the Railroad Retirement Act of 1937, as amended, so as to provide full annuities, at compensation of half salary or wages based on the 5 highest years of earnings, for individuals who have completed 35 years of service or have attained the age of 60. The bill would liberalize the railroad retirement program by providing full annuities to employees who have completed 35 years of service or have attained the age of 60. It would also provide for a minimum benefit for such individuals, equal to one-half of average creditable compensation during the 5 years of highest earnings. The Chairman of the Railroad Retirement Board advises that enactment of this bill would increase greatly the present cost of paying benefits under the Railroad Retirement Act. Since the bill makes no provision for the additional revenue required to defray this cost, its enactment would leave the railroad retirement system in an unsound financial condition. In the circumstances, the Bureau of the Budget recommends against enactment of H. R. 856. Sincerely yours, DONALD R. BELCHER, Assistant Director. UNITED STATES OF AMERICA, RAILROAD RETIREMENT BOARD, Chicago, Ill., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington, D. C. DEAR MR. PRIEST: This is a report on H. R. 858 which was introduced in the House of Representatives by Mr. Van Zandt on January 5, 1955, and which was referred to your committee for consideration. The bill, which is identical to H. R. 594 and H. R. 1736, 83d Congress, contains a number of technical defects which would require correction. For purposes of this report, we are interpreting the bill as amending the Railroad Retirement Act of 1937, as amended, in the following manner : 1. Full annuities would be payable at age 60 or after 30 years of service regardless of age. Under present law, full age annuities to men are not available until age 65. Women with 30 years of service may retire at age 60 without a reduction in their annuities. However, men with 30 years of service, retiring for reasons other than disability between the ages of 60 and 65, have their annuities reduced by 1/180th for each calendar month they are under the age of 65 when their annuity begins to accrue. 2. A new minimum would apply in cases of persons retiring at age 60 after 30 years of service. This minimum would equal one-half of the creditable monthly compensation for 5 consecutive years of highest earnings. The new minimum would apply in addition to the present minima provided in section 3 (e) of the act. 3. The provisions of the present act, which are applicable to spouse's and survivor's annuities would remain unchanged. In particular, the age requirement for spouse's annuities would still remain 65 even though the normal retirement age for employees would be lowered to 60. 4. The changes would become effective the first of the month following the month in which 90 days would have elapsed since the enactment of the bill. The combined employer-employee taxes for the support of the railroad retirement system amount to 12.5 percent of taxable payroll with a limit of $350 a month per employee. The latest actuarial estimates made in connection with the 1954 amendments to the Railroad Retirement Act show that the level cost of benefits under the act is 13.43 percent of taxable payroll, indicating a present deficiency of $51 million a year. We estimate that the additional cost of the amendments proposed in H. R. 858 would come to at least $200 million a year on a level basis. This would increase the deficiency from $51 million to more than $250 million a year. Although there are other important reasons why the Board believes that this bill should not be enacted, the fact that it would provide no addtional revenue to meet the very large increase in the cost of benefits compels the Board, for that reason alone, to recommend that no favorable consideration be given to the bill. The Bureau of the Budget advises that it has no objection to the Board's submission of this report and concurs in recommending against enactment of this bill. Sincerely yours, RAYMOND J. KELLY, Chairman. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D. C., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: This is in reply to your letter of February 5, 1955, requesting a report on H. R. 859, a bill to provide for a 25 percent increase in the annuities and pensions payable to railroad employees and to their survivors. The proposed measure would provide for a 25 percent increase in the annuities and pensions payable to railroad employees and their survivors. The Chairman of the Railroad Retirement Board advises that this proposed measure would increase greatly the benefit disbursements under the program. Since no corresponding increase in revenues would be provided, the existing actuarial deficiency in the fund also would be substantially increased. In the circumstances, the Bureau of the Budget recommends against enactment of the proposed bill. Sincerely yours, DONALD R. BELCHER, Assistant Director. RAILROAD RETIREMENT BOard, Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington, D. C. DEAR MR. PRIEST: This is a report on H. R. 859 which was introduced in the House of Representatives by Mr. Van Zandt on January 5, 1955, and which was referred to your Committee for consideration. The stated purpose of the bill is to provide for a 25 percent increase in the annuities and pensions payable to railroad employees and to their survivors. The text of the bill seems to be inconsistent with this statement since the change in the retirement annuity formula would result in an increase of only somewhat less than 9 percent. Furthermore, the 25-percent increase in the factors used in the computation of the basic amount (the unit for survivor insurance benefits under the regular railroad retirement formulas) would not result in a 25-percent increase in benefits computed under the social security minimum guaranty provision. These inconsistencies are presumably technical defects which would require correction. For purpose of this report, we are interpreting the bill as amending the Railroad Retirement Act of 1937, as amended, in the following manner: 1. All annuities, whether employee or survivor, would be increased by 25 percent above the present levels. The same increase would also apply to insurance lump sums payable under the Railroad Retirement Act. 2. The increase would become effective the first of the month following the month of enactment of the bill. 3. The Board would be required to recertify without application all benefits in force on the date of enactment of the bill. |