Arbose the ruined recrELETT SOM is izended to be a fully financed STEEL È LA I TRENT DRETS The bear folly formed dessicce the serings to the RTKALL PATTINng from among the tins the trader f the ear des credits The CASI STSTEL. We bellene that it » moonar to the welfare of raimai eLTÜ TAAS ADĪ TO NEZ ANMOLy as a whole fiat de BÉ STIHL should be mentabel te i sifscpreting basis. 1n neoming farmely a HR CH 3 w Płot Law $85 - pour committee Ny of the gala that rearles † the descriicity of certain Branala be the then data off boets mader the 17. D. LLEDÂMerts to the law fondid he made the mod jerantine the fo sabess of the railAt the same time, bi merer, bating regard to past experiature in the light of chiring eroicie nohties par Namittee was inSweed by the bige then the estimated armaris dedit show by the fifth woara, valtatika mood be family ofered by the next evaluating (H. Rept. 1948 10 12 3. Tamarely, this bige is not borne our by the recently comwed er kund eine estimates that the present actuarial Gehalt la 1.6 percent of pagrOLL OF $SUBMU) a year, on a jerel cost basis, thus Indsting that an therese in the reveres is needed if the system is to be na stated on a wound reserve basis." The the contained in the endised staff memorandum (based on estimates obWaited from the Balrad Retirement Brand shows the additional cost to the munad reinsmen geen which ensirment of the ramas changes proposed by world entail. Together they would cause an additiotal annual and er det senry in the rallivad retirement fund of either 19 percent of pay15912 Ellen or 435 percent of payroll er $230 million, depending upon *set of 2 possible alternative interpretations is placed on the amendments disCised zder jan 1 of this report. These frares strikingly indicate the undeway of upward changes in benefits without such a ljustments in the conWord wisine as are required to restore the system to actuaria! balance. We are, therefore, compelled to recommend against the enactment of the bills anered by the report. The Breat of the Budget advises that it preceives no objection to the submiswon. A tha report to four committee. M. B. FOLSOM, Sceretary. WAPP MEMORANDUM SUPPLEMENTING REPORT ON BILLS TO AMEND RAILBOAD RETIREMENT ACT H. R. 738. H. R. 757, H. R. 3416, H. R. 3719, H. R. 5272, H. R. 1201. H. R. 63, H. R. 8230, H. R. $338, AND H. R. 8320 1. Five of the bills (H. R. 757, H. R. 3416, H. R. 5272. H. R. 6833, and H. R. Kthy would make substantial changes in the provisions of law under which benefits based on combined earnings records under the Railroad Retirement and 6501 systems are now payable to the survivors of railroad workers. Under existing law, where an individual is eligible for a section 5 survivor annuity, or a section 5 (f) (1) lump-sum payment, under the Railroad Retirement Act, with respect to a deceased railroad employee who has had 10 years of railroad service and a "current connection" with the railroad industry, survivor benefits are paid only under the Railroad Retirement Act, but they are computed on the basis of the combined earnings record derived from both the railroad retirement and OASI systems (see Railroad Retirement Act, section 5 (1) (9). Where a survivor cannot qualify under section 5 of the Railroad Retirement Act, benefits based on the combined earnings record are payable under, and only under, the OASI system. The two acts contain parallel dual-benefit prohibitions with respect to survivor benefits. Subsection (g) (1) of section 5 of the Railroad Retirement Act próvides that if an individual is eligible for a survivor annuity or lump sum under section 5 of that act with respect to the death of an employee, the individual shall not be entitled to a lump-sum death payment or monthly insurance benefits under the Social Security Act on the basis of the wages of the same employee. Similarly, section 202 (1) of the Social Security Act provides that, if a person is eligible for an annuity under section 5 of the Railroad Retirement Act of 1937 or to a lump-sum payment under subsection (f) (1) of that section, with respect to the death of an employee, no lump-sum death payment, and no monthly insurance benefis, under the Social Security Act shall be payable to any person on the basis of the OASI wages and self-employment income of such employee. These correlated provisions thus forestall the payment of duplicate benefits based on the same combined earnings record in cases in which there is eligibility for a railroad survivor benefit, notwithstanding section 5 (k) (1) of the Railroad Rteirement Act which, in death cases (and also life cases in the case of employees having less than 10 years of railroad service) in effect bring railroad earnings under OASI for benefit purposes. If, on the other hand, no one is eligible for a survivor annuity or lump-sum death payment with respect to a railroad employee under the Railroad Retirement Act, because the employee did not at the time of death have the necessary insured status under the Railroad Retirement Act even on the basis of the combined earnnigs record, the combined earnings are counted under OASI both in determining insured status and the amounts of benefits. (See Railroad Retirement Act, section 5 (k) (1); Social Security Act, section 205 (o).) Thus, the repeal of the dual-benefit prohibition of section 5 (g) (1) of the Railroad Retirement Act and of section 202 (1) of the Social Security Act, as proposed by the five bills above mentioned, would permit the survivor of a railroad worker, where the survivor is eligible for a railroad survivor benefit, to receive survivor benefits under both programs on the same worker's earnings record, and with the worker's OASI employment and self-employment, and possibly his railroad employment, being credited toward both benefits in determining eligibility (insured status) for, and the amounts of, benefits. The word "possibly" is used with respect to the question of whether the worker's railroad employment would also be credited in such cases on the OASI side, because, though such a result would seem to flow from section 5 (k) (1) of the Railroad Retirement Act, this is made doubtful by the fact that the bills would not expressly modify section 205 (o) of the Social Security Act which provides that railroad compensation shall be credited under the OASI system "if" no one is eligible for a survivor benefit under the Railroad Retirement system. There is some doubt that in the preparation of these bills the effect which they would have on the basic coordination provisions between the two systems was foreseen. The titles of these bills do not indicate that any such drastic change was intended. 2. The proposed deletion of set-off provisions discussed under point 2 of the Secretary's letter needs no elaboration here. 3. H. R. 8230 would, among other things, compute a railroad retirement annuity and spouse's annuity under that program on the basis of the monthly average of the five calendar years (whether or not consecutive) of the worker's highest earnings in railroad service up to a maximum of $350 per month. Under the present Railroad Retirement Act (section 3 (c)), the "monthly compensation" for such benefit computation purposes is the average of the worker's total creditable earnings during all of his railroad service, up to $300 a month before July 1, 1954, and up to $350 since that date, and with pre-1937 earnings computed with reference to a statutory 1924-31 base period to avoid administrative difficulties. (There is also a special rule for determining, with respect to service before September 1941, the compensation of redcaps whose remuneration was wholly or substantially in tips.) 4. Additional annual cost of bills on level-cost basis (from Railroad Retirement Board estimates): Provision Annual dollar cost (in millions) Level cost (percent of taxable payroll) 1. Repeal of sec. 5 (g) (1) of Railroad Act and sec. 202 (1) of Social Security Act(a) On assumption that only OASI credits would be duplicated.. 2. Repeal of setoff against spouse's annuity, etc.. 3. Change of monthly compensation formula Total (a) On first assumption with respect to item 1.. 4. Existing law (6th valuation), deficiency. 5. Annual level-cost deficiency under existing law plus bills- (b) On assumption that railroad earnings would also be credited, in deter- Hon. J. PERCY PRIEST, RAILROAD RETIREMENT BOARD, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington, D. C. DEAR MR. PRIEST: This is a report on H. R. 738 which was introduced in the House of Representatives by Mr. Williams on January 5, 1955, and which was referred to your committee for consideration. The bill would amend the Railroad Retirement Act of 1937 (as amended) in the following manner: 1. The present restriction in section 2 (e) of the act, requiring the reduction of the spouse's annuity by the amount of her insurance benefit under the Social Security Act, would be repealed. 2. The present restriction in section 5 (g) (2), requiring the reduction of survivor annuities by the amount of the insurance benefits under the Social Security Act, would be repealed. 3. The restoration of reductions for social security benefits would be retroactive to October 31, 1951. In effect, the bill would permit spouses and survivors to receive full benefits under the Railroad Retirement Act even though they may simultaneously be entitled to certain insurance benefits under the Social Security Act. At present, the railroad retirement benefits are reduced by the amounts of such social security benefits. 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 recent 1954 amendments to the Railroad Retirement Act, show that the level cost of the benefits under the act is 13.43 percent of payroll (assuming a level annual payroll of $5.45 billion), indicating a present deficiency of about $51 million a year. We estimate that the additional costs of the amendments proposed in H. R. 738 would come to approximately $19 million a year on a level basis. This would increase the deficiency from $51 million to $70 million a year. Although there are many other reasons why the Board believes that this bill should not be enacted, the fact that it would provide no additional revenue to meet the substantial increase in the cases 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. Sincerely yours, RAYMOND J. KELLY, Chairman. 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. 757 which was introduced in the House of Representatives by Mr. Cunningham on January 5, 1955, and which was referred to your committee for consideration. The bill would amend the Railroad Retirement Act of 1937 (as amended) in the following manner : 1. The present restriction in section 2 (e) requiring the reduction of spouses' annuities by old-age or parents' insurance benefits payable under the Social Security Act, would be repealed. 2. The present restriction in section 5 (g) (1) against the payment of survivor benefits under both the Railroad Retirement and the Social Security Acts on the basis of earnings of the same employee, would be repealed. The bill would also strike out section 202 (1) of the Social Security Act which in effect contains the same provision as the last sentence of section 5 (g) (1) of the Railroad Retirement Act. 3. The present restriction in section 5 (g) (2) requiring the reduction of survivor annuities by the amount of certain insurance benefits under the Social Security Act would be repealed. 4. The changes introduced by the bill would become effective the first of the month following the month of its enactment. The bill retains the present provisions of both the Railroad Retirement and Social Security Acts by virtue of which survivor benefits are computed on the basis of the deceased employee's railroad and social security earnings combined. There is, however, the anomaly that railroad compensation would be credited under the Social Security Act only when the survivors are not eligible for benefits under the Railroad Retirement Act, whereas social security wages would be credited under the Railroad Retirement Act even though survivor benefits based on the same wages would also be available under the Social Security Act. It is difficult to see why social security wages should be credited twice in cases when survivor benefits would be payable under both acts. In effect, the bill would permit spouses of railroad employees to receive full benefits under the Railroad Retirement Act even though they may simultaneously be entitled to an old-age or parents' insurance benefit under the Social Security Act. At present, railroad retirement spouses' annuities are reduced by the amounts of such social security benefits. The bill would also establish a system of unrestricted dual survivor benefits under both the Railroad Retirement and Social Security Acts which, in our opinion, is highly undesirable. Under present law, survivor benefits are paid by either the Railroad Retirement Board or by the Social Security Administration, but not by both at the same time. However, regardless of which agency pays the survivor benefit, the credits earned under both systems are combined. 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 in earnings 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 0.93 percent of payroll, or approximately $51 million a year. We estimate the additional cost of the amendments proposed in H. R. 757 would come to about 0.75 percent of payroll, or approximately $41 million a year on a level basis. This amount, when considered in addition to the present deficiency of 0.93 percent or $51 million a year, would result in a total deficiency of about 1.7 percent of payroll, or approximately $92 million a year. There are a number of reasons why the board believes that the bill should not be enacted. The considerable additional cost resulting in an increased deficiency is, of course, the most important one, particularly since the bill makes no provision for additional revenues to meet this additional cost. In view of the foregoing, the board recommends that no favorable consideration be given to the bill. The Bureau of Budget advises that it has no objection to the board's submission of this report. Sincerely yours, RAYMOND J. KELLY, Chairman. 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 H. R. 760 which was introduced in the House of Representatives by Mr. Cunningham on January 5, 1955, and which was referred to your committee for consideration. The bill is identical to H. R. 5269 introduced also by Mr. Cunningham on May 19, 1953, and on which the Board had submitted a report to your committee under the date of July 14, 1953. The present bill, H. R. 760, is therefore somewhat technically defective since it does not allow for the 1954 amendments to the Railroad Retirement Act. Disregarding the technical defects, H. R. 760 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 the computation of the average monthly compensation for service before 1937, the present 1924-31 base period would be replaced by the 5 calendar years before 1937, consecutive or otherwise, included in the employee's "years of service" and for which "he received aggregate compensation exceeding that received by him for any other such calendar year." 3. All employee annuities and pensions would be increased by 15 percent. 4. A new minimum provision would apply in the cases of persons with 30 years of service. This minimum would equal 50 percent of the employee's average monthly compensation for the 5 calendar years, consecutive or otherwise, included in his total "years of service" for which he "received aggregate compensation exceeding that received by him for any such calendar year." 5. The present restriction in section 2 (e) of the act requiring the reduction of the spouse's annuity by the amount of her insurance benefit under the Social Security Act would be repealed. The changes listed in items 1 to 4 above would become effective after the last day of the month of enactment of the bill into law; the change in item 5 would be retroactively effective as of October 31, 1951. The combined employer and 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 cost estimates, prepared 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 (assuming a level annual payroll of $5.45 billion), indicating a present deficiency of approximately $51 million a year. The latest cost estimates for amendments proposed in the bill were prepared in 1953 in connection with H. R. 5269, previously referred to. The additional cost was then estimated at approximately $235 million a year on a level basis. This cost figure does not allow for the 1954 amendments to the Railroad Retirement Act. It is believed, however, that a revised cost estimate for H. R. 760 would result in an additional cost figure not substantially different from the $235 million a year which was quoted in 1953. Thus, the enactment of H. R. 760 would increase the deficiency of the railroad retirement system from $51 million a year to a figure in the neighborhood of $290 million a year. Although there are many 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 substantial increase in the cost of benefits compels the Board, for that reason alone, to recommend that no favorable consideration be given to the bill. 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. |