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until the earlier of (a) the expiration of their current labor contracts, or (b) the time such contracts are re-negotiated. Under the committee amendment, the exception would be provided also for certain railway labor organizations which find themselves in the same position with regard to their labor contracts as the steel roads.

The third section would extend until December 31, 1974, the 15 percent increase in annuities which became effective in 1970, the 10 percent increase in annuities which became effective in 1971, and the 20 percent increase in annuities which became effective in 1972. This section is identical to a provision in House-passed H.R. 7200.

Sections 104, 105 and 106 of the bill provide automatic increases in railroad annuities if social security benefits are increased after June 1973 and before January 1975. If social security benefits are increased in this period, the increase in individual annuities will be the same dollar amount that would have been provided had the individual been receiving a social security benefit based on similar earnings covered under social security. These sections are identical to the provisions of House-passed H.R. 7200.

The House-passed bill would establish a joint labor-management group consisting of members representing the railway labor unions and the carriers to consider all matters relating to the restructuring af the Railroad Retirement System. This group would report its recommendations to the Senate Committee on Labor and Public Welfare and to the House of Representatives Committee on Interstate and Foreign Commerce not later than July 1, 1974.

In the view of the committee, the provision of the House-passed bill does not spell out in sufficient detail the composition and duties of the labor-management group. Moreover, if it did not submit its recommendation well before July 1, the Congress might not have adequate time to consider what is expected to be a major restructuring of the Railroad Retirement system involving coordination with the social security program. Therefore, the committee amendment revises this provision of the House-passed bill.

The committee amendment would call on representatives of employees and representatives of railroad employers to create a joint group to recommend changes in the railroad retirement program which will assure the long-range actuarial soundness of the program. The group would be expected to notify Congress within 30 days after the bill is enacted of the names and positions of its members. In preparing its report, the group would be expected to meet at least once a month, and to furnish Congress with interim progress reports. The interim reports would be submitted on September 1, 1973, November 1, 1973, and January 1, 1974. The final report would be submitted to Congress no later than March 1, 1974 (rather than July 1 as under the House bill). It is expected that the recommendations for restructuring the railroad retirement program will take into account the recommendations of the Commission on Railroad Retirement and that the recommendations will be specific and in a form suitable for legislative action.

Section 120 of the bill would provide that the temporary early retirement provision for men authorized by section 101 of the bill and the temporary benefit increases of 15, 10 and 20 percent—which section 103

the committee amendment provides a substitute for the provision which would create a labor-management committee to recommend a restructuring of the railroad retirement program.

In addition, the committee amendment adds a new part B which would make the benefit provisions of the House-passed bill permanent after 1974. Under the provisions of the new part B, the cost of the permanent extension of these benefits along with the current actuarial deficit would be financed by a 7.5 percent increase effective January 1, 1975, in the combined employee and employer tax rates. However, the provision of part B would become effective only after legislation is enacted providing for a division of the 7.5 percent increase in taxes between employees and employers.

The committee amendment also includes a revision of title II of the House-passed bill which amends the Interstate Commerce Act. No position is taken on this section of the bill, as it is beyond the jurisdiction of this Committee and is being considered separately by the Committee on Commerce.

The Committee on Finance subsequently considered those portions of the amendment in the nature of a substitute which fall within the jurisdiction of that committee and approved these provisions (sections 102 and 121) without change.

Following is a letter from Senator Russell Long, the chairman of the Senate Committee on Finance:

.U.S. SENATE, COMMITTEE ON FINANCE,

Washington, D.C., June 7, 1978. Hon. HARRISON A. WILLIAMB, Chairman, Committee on Labor and Public Welfare, U.S. Senate, Washington, D.O.

DEAR MR. CHAIRMAN : On May 23, 1973, H.R. 7200, a bill affecting persons covered under the Railroad Retirement Act, was referred to the Committee on Finance at the same time as it was referred to the Committee on Labor and Public Welfare. On June 5, the Committee on Labor and Public Welfare met and ordered the bill reported with an amendment striking the text of the House bill and substituting instead a committee amendment. On June 6, the Committee on Finance met in executive session to consider those two sections of the bill approved by the Labor and Public Welfare Committee which fall within the jurisdiction of the Committee on Finance.

Section 102 of the bill would reduce railroad retirement taxes paid by employees by 4.75%, from 10.6% of taxable earnings to 5.85%, the same rate as that paid by employees under the social security program in 1973 and 1974. Taxes on employers would be increased by 4.75%, from 10.6% to 15.35%. These new tax rates would generally be effective for wages paid from October 1973 through December 1974.

Section 121 of the bill as approved by the Committee on Labor and Public Welfare provides for a railroad retirement tax of 7.5% of taxable wages in addition to any other railroad retirement taxes, effective January 1, 1975. The committee bill does not allocate the liability for the additional tax between employers and employees, but leaves the allocation to further legislation should the employer and employee representatives be unable to agree on an alternative solution to the long-range funding problems of the railroad retirement program.

In its June 6 executive session, the Committee on Finance agreed to report favorably these tax provisions in the bill.

I would appreciate it if you would include this letter in the joint committee report that will be filed on H.R. 7200. With every good wish, I am Sincerely,

RUSSELL B. LONG,

Ohairman.

PRINCIPAL PURPOSE OF THE BILL The bill carries out the terms of an agreement reached through nationwide collective bargaining between representatives of most major railroads in the United States and unions representing their employees. The agreement was entered into on March 7, 1973, as a preliminary step in the resolution of the financial difficulties facing the railroad retirement fund.

The bill extends the present temporary increases in railroad retirement benefits enacted in 1970, 1971 and 1972 for 18 months (until December 31, 1974); liberalizes retirement eligibility for certain employees; transfers to railroads the liability for payment of taxes otherwise payable by employees to finance the railroad retirement system to the extent such taxes exceed the current social security tax rates; establishes an expedited rate-setting procedure before the Interstate Commerce Commission to assist the railroads in meeting the costs imposed on them by the bill; and provides for recommendations to be made by March 1, 1974, by the parties through collective bargaining for a final resolution of the problems involving the railroad retirement system.

The Committee has been informed that, because the present temporary benefit increases are scheduled by law to expire June 30, 1973, the Railroad Retirement Board is contemplating taking internal administrative action necessary to terminate these benefits at considerable administrative expense. The Committee feels that, in view of the agreement by all parties that these increases should not be terminated, these administrative expenditures are unwarranted at this time.

Section 6 of Public Law 92-460 clearly contemplates some final congressional action with respect to the financial problems facing the railroad retirement system. In the committee's view, the present bill represents practical legislation as a first step in the resolution of these difficult and complex long-range problems. Moreover, the committee, like the House committee, is encouraged to believe that despite the task ahead, railroad labor and management have evidenced every intention of continuing to work together so that a solution to the problems will be arrived at within a reasonable length of time. In this connection the committee notes the hopeful expressions of the parties in their joint letter of February 27, 1973, reasserted in their testimony before the committee, that they will in the near future return "with a plan that not only meets the policy expressed by the Congress but also can be fully supported by both railroad labor and management." The committee is hopeful that this will occur.

COMMITTEE CONSIDERATION; COSTS Hearings were held on May 30 and 31, 1973, with testimony being received from the Railroad Retirement Board, the National Railway Labor Conference, the Railway Labor Executives Association, the Congress of Railroad Unions, the International Association of Mahinists and Aerospace Workers, the Office of Management and Budget, the American Association of Retired Persons, and the National Railroad Pension Forum, Inc. The committee considered the bill in executive session on June 5, 1973, adopted the amendment set

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of the bill authorized through December 31, 1974-would become permanent on January 1, 1975, provided certain tax rate increases (see below) are made effective by further legislation.

Section 121 provides for a railroad retirement tax increase to go into effect January 1, 1975 in the amount of 7.5% of taxable payroll above other retirement taxes already in the Internal Revenue Code. The burden of this tax is not allocated between employers and employees, but is left to further legislation. It is the Committee on Labor and Public Welfare's strong belief that the solution of the serious financial problems facing the Railroad Retirement Fund cannot be delayed beyond the 18-month extension of the temporary benefits increases provided in this bill. That is the reason the Committee included provisions imposing a 7.5 percent tax commencing January 1, 1975. Although further legislation would be required to allocate the tax before it could become legally effective, the Committee intends these provisions to serve as clear notice of its intention to take appropriate action to deal with the long-range financial problems of the Fund. The 7.5 percent figure is based on the Railroad Retirement Board's current estimate of the amount required to put the Railroad Retirement Fund on an actuarially sound basis, assuming that the temporary increases become permanent and the 30 year retirement provisions in this bill become effective. However, the Committee also wishes to point out that the 7.5 percent figure is not inflexible, and that should the parties agree on a restructuring of the system which reduces the actuarial deficit faced by the Fund-for example, by agreeing to eliminate dual benefits—the 7.5 percent figure can be reduced to whatever amount is appropriate. The Committee is confident that before this increase becomes effective the parties will be able to achieve a solution to the long-range funding problems through collective bargaining under section 107 of this bill. However, the Committee must also recognize the need to provide for funding in this bill, if the parties are unable to reach an agreement. The Committee hopes that this provision will act as an incentive to the parties to provide their own solution, which, of course, may include a reevaluation of the benefit structure as well as changes in the tax rate. The comments of the Office of Management and Budget are also relevant in this regard (see page 30 of this report) and it is hoped that the inclusion of this provision in the bill will forestall a possible veto.

COST ESTIMATES PURSUANT TO SECTION 252 OF THE LEGISLATIVE

REORGANIZATION ACT OF 1970

The following two tables show the income, outgo and year-end balances of the Railroad Retirement Account as estimated by the Railroad Retirement Board for fiscal years 1973 through 1978. Table 3 shows the figures under the present tax and benefit provisions while table 4 shows the figures as they would be following enactment of the committee bill.

TABULATION OF VOTES CAST IN COMMITTEE ON LABOR AND PUBLIC WELFARE

Pursuant to section 133(b) of the Legislative Reorganization Act of 1946, as amended, the following is a tabulation of votes in Committee:

Motion by Mr. Schweiker to strike Sec. 121 as ameneded. Rejected: 8 yeas, 8 nays.

Mr. Randolph
Mr. Pell
Mr. Nelson
Mr. Mondale

Yeas—8

Mr. Eagleton
Mr. Cranston
Mr. Schweiker
Mr. Stafford

Nays 8 Mr. Williams

Mr. Javits Mr. Kennedy

Mr. Dominick Mr. Hughes

Mr. Taft
Mr. Hathaway

Mr. Beall
The bill was ordered reported by unanimous voice vote.

TABLE 3.—PROJECTION OF RAILROAD RETIREMENT ACCOUNT TRANSACTIONS PRESENT LAW 1

(In millions of dollars)

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1 Law in effect on Apr. 25, 1973, except that the temporary increases are assumed to be extended until June 30, 1978. Includes effects of Public Law 92-603 (H.R. 1). Assumes cost of living increase for SSA of 5.1 percent on Jan. 1, 1975, and 5.5 percent on Jan. 1, 1977.

? Preliminary, partly estimated.
3 Includes transfers for military service.
• Does not allow for increase in building rental.
s Interest rate of 6.25 percent used for years 197374 through 197778.

Does nos transfers Festimated.

TABLE 4.- PROJECTION OF RAILROAD RETIREMENT ACCOUNT TRANSACTIONS LAW AFTER H.R. 7200. AS

REPORTED BY THE COMMITTEE ASSUMING NO INCREASE IN RAILROAD FORMULA ANNUITIES 1

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1 H.R. 7200 as reported out by Senate committee on June 5, 1973. Temporary increases made permanent. Also retirement at age 60 with 30 or more years of service made permanent. Permanent increase in tax rates of 772 percent effective Jan. 1, 1975. Calculations assume for any social security increase after Dec. 31, 1974, the increase will not be passed through to beneficiaries paid on the railroad formulas. Cost of living adjustments of 5.1 percent on Jan. 1, 1975, and 5.5 percent on Jan. 1, 1977, are assumed to take place under the provisions of Public Law 92-336 (H.R. 1). It is also assumed there would be no SSA adjustments prior to Jan. 1, 1975.

2 Preliminary, partly estimated.
3 Includes transfers for military service.
* Does not allow for increase in building rental.
* Interest rate of 6% percent used for fiscal years 1973–74 through 1977-78.

6 At this date-June 6, 1973—these figures are probably overstated. They have been retained in order to facilitate comparisons with an earlier projection.

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