93D CONGRESS 1ST SESSION

H. R. 7200

IN THE SENATE OF THE UNITED STATES

MAY 23, 1973

Read twice and, by unanimous-consent order of May 22, 1973, referred to the Committees on Labor and Public Welfare, Commerce, and Finance

AN ACT

To amend the Railroad Retirement Act of 1937 and the Railroad Retirement Tax Act to revise certain eligibility conditions for annuities; to change the railroad retirement tax rates; and to amend the Interstate Commerce Act in order to improve the procedures pertaining to certain rate adjustments for carriers subject to part I of the Act, and for other purposes.

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Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

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TITLE I-RAILROAD RETIREMENT ACT

AMENDMENTS

SEC. 101. Section 2 (a) of the Railroad Retirement Act

6 of 1937 is amended—

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(1) by striking out "Women" in paragraph 2 and

inserting in lieu thereof "individuals";

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(2) by striking out "Men who will have attained the age of sixty and will have completed thirty years of

service, or individuals" in paragraph 3 and inserting in

lieu thereof "Individuals"; and

(3) by striking out "such men or" in paragraph 3 thereof.

SEC. 102. (a) Section 3201 of the Internal Revenue 8 Code of 1954 (relating to the rate of tax on employees under 9 the Railroad Retirement Tax Act) is amended by striking 10 out all that appears therein and inserting in lieu thereof the 11 following:

12 "In addition to other taxes, there is hereby imposed on 13 the income of every employee a tax equal to the rate of the 14 tax imposed with respect to wages by section 3101 (a) of the 15 Internal Revenue Code of 1954 plus the rate imposed by 16 section 3101 (b) of such Code of so much of the compensa17 tion paid to such employee for services rendered by him 18 after September 30, 1973, as is not in excess of an amount 19 equal to one-twelfth of the current maximum annual taxable 20 'wages' as defined in section 3121 of the Internal Revenue

21 Code of 1954 for any month after September 30, 1973."

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(b) Section 3202 (a) of such Code is amended

(1) by striking out "1965" wherever it appears in

the second sentence thereof and inserting in lieu thereof

"1973";

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(2) by striking out "(i) $450, or (ii)" wherever

it appears in the second sentence thereof; and

(3) by striking out ", whichever is greater," wherever it appears in the second sentence thereof.

(c) Section 3211 (a) of such Code (relating to the 6 rate of tax on employee representatives under the Railroad 7 Retirement Tax Act) is amended by striking out all that 8 appears therein and inserting in lieu thereof the following: "In addition to other taxes, there is hereby imposed on the income of each employee representative a tax equal to 11 9.5 percent plus the sum of the rates of tax imposed with 12 respect to wages by sections 3101 (a), 3101 (b), 3111 13 (a), and 3111 (b) of the Internal Revenue Code of 1954 of so much of the compensation paid to such employee representative for services rendered by him after September 30,

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1973, as is not in excess of an amount equal to one-twelfth 17 of the current maximum annual taxable 'wages' as defined in section 3121 of the Internal Revenue Code of 1954 for 19 any month after September 30, 1973."

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(d) Section 3221 (a) of such Code (relating to the rate of tax on employers under the Railroad Retirement Tax 22 Act) is amended by striking out "In addition to other

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taxes" and all that follows to "except that" and inserting 24 in lieu thereof the following:

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"In addition to other taxes, there is hereby imposed on

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1 every employer an excise tax, with respect to having indi2 viduals in his employ, equal to 9.5 percent of so much of 3 the compensation paid by such employer for services ren4 dered to him after September 30, 1973, as is, with respect 5 to any employce for any calendar month, not in excess of 6 an amount equal to one-twelfth of the current maximum 7 annual taxable 'wages' as defined in section 3121 of the 8 Internal Revenue Code of 1954 for any month after Sep9 tember 30, 1973;”.

10 (e) Section 3221 (a) of such Code, as amended by 11 section 102 (d) of this Act is further amended—

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(1) by striking out "1965" wherever it appears in the first sentence thereof and inserting in lieu thereof "1973";

(2) by striking out "(i) $450, or (ii)" wherever

it appears in the first sentence thereof; and

(3) by striking out ", whichever is greater," wherever it appears in the first sentence thereof.

(f) Section 3221 (b) of such Code is amended by strik20 ing out all that appears therein and inserting in lieu thereof

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"The rate of tax imposed by subsection (a) shall be

23 increased with respect to compensation paid for services 24 rendered after September 30, 1973, by the rate of tax im

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Honorable Harrison A. Williams, Jr.

S. 1867

during that year. The experience with men (at least in respect to numbers eligible for early retirement) has been much larger but the rather severe actuarial reductions men had to take made this experience totally inapplicable to a situation where actuarial reductions would no longer be required.

It might be noted in this connection that the reduction for railroad men retiring on age and service before age 65 has been 1/180 for each month before age 65 and this amounts to a 20-percent reduction for retirement at age 62 and to as much as 33-1/3 percent for retirement at age 60. The elimination of these reductions, coupled with the much higher benefit levels now prevailing, would in all likelihood induce large numbers of long-service railroad men to start drawing an annuity from the Board at an early date. An added incentive would be the desire to acquire enough social security credits to qualify for a concurrent social security benefit. It should also be remembered that for retirement benefits, the work clause of the Railroad Retirement Act is very liberal since any employment other than work for a railroad or the last employer is permitted regardless of the amount of earnings.

The amendment would apply only to new retirements after June 1974. By June 1974, there will be between 45,000 and 50,000 nonretired male employees age 60 to 64 with 30 or more years of railroad service, and the initial rate of retirement among these employees could be as high as 20 percent. After the first year, the rates of early retirement would in all likelihood recede to significantly lower levels.

2. Extension of benefit increases. --The expiration of the 15-, 10- and 20-percent increases on June 30, 1973, would have resulted in substantial reductions in practically all benefits computed under the regular railroad retirement formulas. The maximum reduction would be 34 percent while for benefits now just slightly above the 110percent social security minimum, the reduction would be minimal since the benefit could not go below the minimum amount. In fact, large numbers of benefits in the employee and spouse annuity categories would change from regular formula to overall minimum amounts and this would significantly mitigate the extent of the reductions in railroad retirement benefits.

It is estimated that for all categories of benefits combined, the immediate average reduction would have been about 18 percent. When related to the current level of benefit disbursements, such a reduction would amount to $36.7 million per month or about $660 million